Nadia BERNAZ
In the past weeks I have been doing some research and writing in the field of international investment law and its interplay with human rights. To put it bluntly, my conclusion, as well as many other scholars’, is that there is little (i.e. not enough) consideration for human rights in arbitral awards and that re-balancing in this area would be a welcome move.
The case
The BCB case was about whether an arbitral award
delivered by the London Court of International Arbitration (LCIA) was
enforceable in Belize. The Court noted that, “there is universal consensus that
courts will decline to enforce foreign arbitral Awards only in exceptional
circumstances” and that “only where enforcement would violate the forum state’s
most basic notions of morality and justice would a court be justified in
declining to enforce a foreign Award based on public policy grounds” [para.
26]. Having established this high threshold, it went on to say that in the
circumstances of the case, the award was indeed unenforceable on public policy
grounds.
In this case, the companies and state of Belize had
entered into a Tax Deed which created a favourable tax regime for the
companies, “at variance with the tax laws of Belize”. The Deed was never
approved by Parliament and following a change of administration in Belize, the
new government simply terminated it. The companies went before the LCIA and,
controversially, Belize never appeared before the arbitral tribunal. The
arbitral tribunal held that Belize was in breach of its obligations and awarded
the companies $44 million plus interest. The companies sought to enforce the
award before the domestic courts of Belize. The trial judge ruled in their
favour but the State successfully appealed to the Court of Appeal of Belize.
The companies in turn appealed to the highest Court of Belize, the Caribbean
Court of Justice.
In reaching its conclusion of unenforceability, which
goes against the pro-enforcement bias that domestic courts ought to have with
regards to arbitral awards, the Court based its reasoning on public policy,
which according to the Court “must in the first instance be assessed with
reference to the values, aspirations, mores, institutions and conception of
cardinal principles of law of the people of Belize” [para 23].
However, the Court continued: “Where enforcement of a
foreign or Convention award is being considered, courts should apply the public
policy exception in a more restrictive manner than in instances where public
policy is being considered in a purely domestic scenario. This is because, as a
matter of international comity, the courts of one State should lean in favour
of demonstrating faith in and respect for the judgments of foreign tribunals.
In an increasingly globalised and mutually inter-dependent world, it is in the
interest of the promotion of international trade and commerce that courts
should eschew a uniquely nationalistic approach to the recognition of foreign
awards” [para. 24].
The public policy argument must be carefully handled
and the Court refers to the “international public policy” exception that should
be applied in cases where foreign or international judgements, as was the case
in that instance, are at stake [para. 27].
Upon analysing the legality of the Deed, the Court
concludes that the executive did not possess the power to enter what was
essentially “a whole new tax policy for the benefit of the Companies” [para.
51]. Relying heavily on the principle of the separation of powers, they further
state: “In our judgment, implementation of the provisions of the Deed,
without legislative approval and without the intention on the part of its
makers to seek such approval, is indeed repugnant to the established legal
order of Belize” [para. 53]. Moreover, “the public policy contravened in this
case falls well within the definition of ‘international public policy’” [para. 61].
The possible “business and human rights” implications
This is a carefully drafted decision that will
nonetheless appear bold in a context where business interests are often
over-protected in arbitration awards. More importantly for our purposes, I
believe it may have implications in the business and human rights area in the
future for two main reasons.
First, while the Deed in this case was about tax cuts,
we can imagine a state entering into similar agreements purporting to shield a
company from the health and safety, environmental or labour law regulations
otherwise in force in the country. Indeed this scenario is far from exceptional
in the context of foreign direct investment. In such a case, the decision of
the CCJ would allow the state, or victims of corporate abuse, to claim that
such decisions ought to be approved by Parliament, allowing some degree of
transparency, and not negotiated behind closed doors in a Minister’s office.
Second, and more fundamentally, it is interesting to
see a Supreme Court such as the CCJ consider public policy arguments with
regards to the enforceability of arbitral awards. Having looked into such
arguments with regards to that issue, one can hope that for instance if a case
on indigenous peoples rights in the context of mining or logging concessions
comes before the Court, they will also look at the wider context, “basic
notions of morality and justice” to the benefit of the companies, but also to
the benefit of local populations in a clear and balanced way. As the CCJ has
made clear in the BCB decision, public policy arguments will not always work
against business interests. The threshold for the exception to work is so high
that in fact it is quite the contrary and it is in the interest of
predictability that it remains that way. However, a careful use of this
exception can help re-balancing otherwise profoundly unequal relationships.
- Retrouvez cet article sur le blog de l'auteur : Rights as Usual.
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