The First Published ICSID Case in which China was the Respondent
The ICSID has published the first case in which China is the Respondent. The Tribunal found they lacked the jurisdiction because the claim was time-barred.
On 13 March 2017, the International Centre for Settlement of Investment Dispute (ICSID) published the first case, Ansung Housing Co., LTD v. People’s Republic of China, in which China was the Respondent. The Ansung case is the second registered case and the first published ICSID case where China is the Respondent. Prior to the Ansung case, the other ICSID case against China is the Ekran Berhad case, the proceedings of which were suspended upon the parties’ agreement one month after registration and which was discontinued after two years’ registration. The Ekran case was never published.
The Claimant, Ansung Housing Co Ltd, was a privately-owned company incorporated under the laws of South Korea. It invested in a golf course and condominium development project in Sheyang-Xian, China. On 12 December 2006, Ansung entered into an investment agreement with the Sheyang Harbor Industrial Zone Administration Committee (“Committee”). Due to the failure to transfer all the land needed for the construction of the project under the investment agreement, after several contacts between Ansung and the Committee, Ansung was unable to start its construction work. Consequently, on October 2011, Ansung had no alternative but to dispose of all its assets in the golf business and on 17 December 2011, Ansung finally made an agreement on transferring the shares. Due to the serious financial losses and damages, Ansung filed a claim against China on the basis of the China-South Korea BIT on 7 October 2014.
The Respondent (China) raised several objections concerning jurisdiction and the issue of the limitation period formed the core and also the most debated dispute in this case. The Respondent’s objection on jurisdiction was based on Article 9(7) of the China-South Korea BIT which stressed a limitation period clause: the start date for such a temporal limitation period is known as dies a quo, while the end date as dies ad quem.
Article 9(7) of the China-South Korea BIT : An investor may not make a claim pursuant to paragraph 3 of this Article if more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge that the investor had incurred loss or damage.
The Respondent asserted that the Claimant “necessarily knew of the fact that it had incurred loss or damage on the same date prior to the disposal of its investment in October 2011,” the date on which the Claimant sold its investment “in order to avoid further losses” . The Respondent stated that the three-year period commenced when the Claimant knew “of the fact that some loss has occurred, not upon its full realization”. Turning to the dies ad quem for the three-year limitation period, the Respondent argued that the end date must be 4 November 2014, the date on which ICSID registered the Claimant’s Request for Arbitration.
The Claimant argued that it could ascertain its loss or damage only after its expectations and plan for the construction had been completely frustrated. The Claimant stated that the continuing loss was a consequence of government inaction and that it had tried to resolve the problem with the government. Therefore, the Claimant explained that the dies a quo must be 17 December 2011, when the circumstances leading to the losses became unavoidable for the purposes of Article 9(7). The Claimant also contended that the dies ad quem should be 19 May 2014 when it sent a “notice of intent” to the Respondent and the latest date can be 7 October 2014 when the Claimant filed a claim with the ICSID. Therefore, the Claimant submitted that it had met the limitation period under the BIT.
The Tribunal could not accept the Claimant’s arguments by listing all the facts as pleaded by Claimant. From the perspective of the Tribunal, the Claimant ignored the plain meaning of the words “first” and “loss or damage” in Article 9(7). The limitation period began with the investor’s first knowledge of the fact that it had incurred loss or damage, not at the date on which it gained knowledge of the quantum of that loss or damage. The Claimant’s actual sale of its shares on 17 December 2011, marked the date on which it could finalise or liquidate its damage, not the first date on which it had to know it was incurring damage. The Tribunal also acknowledged that the Claimant’s legal argument that a continuing omission by a host State and damages for such a continuing breach may be measured from different times after the first incident of that omission. But this could not change the date which was before October 2011, when the Claimant first knew it had incurred damage.
Turning to the dies ad quem for the applicable three-year limitation period, the Tribunal found that, on the basis of the plain language in Article 9(7) of the China-Korea BIT, the end date was the date on which an investor deposited its request for arbitration with the ICSID which was electronically 7 October 2014 and physically on 8 October 2014. The Tribunal held that the “notice of intent” was not submitted to the ICSID and it was also not reasonable to fix the date as the uncertain date of registration of a request for arbitration. Consequently, the Claimant had submitted its dispute to the ICSID and made its claim for the purposes of the Article 9(3) and (7) of the Treaty more than three years after the date on which the Claimant first acquired knowledge of loss or damage.
The claim was time-barred and, as such, was manifestly without legal merit. In general, the Tribunal found that it lacked jurisdiction and dismissed the case.
What can we learn?
The Survey of OECD, Dispute settlement provisions in international investment agreements: a large sample survey, indicates that slightly more than 100 treaties -7% of the sample of treaties with Investor-State Dispute Settlement (ISDS) sections - contain statutes of limitation that bar access to international arbitration if a claim has not been brought within a specified period of time. Many Multilateral agreements set a limitation period, including CAFTA (2004), NAFTA (1992), the Investment Agreement for the COMESA (2007) and the ASEAN Comprehensive Investment Agreement (2009). Some investment agreements involving countries such as Australia, Canada, France, Germany, Japan and Thailand also set this limitation period. But this clause is not really common in China’s investment agreements.
The limitation period clause in this case is a reminder that investors should be active in exercising their rights. It might also be interesting to consider whether the limitation period in this case has the same concept or jurisprudence as the statutes of limitations under civil law. And if this is the case, whether the Tribunal always does not have jurisdiction over the case, when the Claimant files after the limitation period. Or whether a claim can still be filed and the Tribunal still retains jurisdiction in order to determine the issue, but the Respondent may obtain the rights of defence to enforce the awards.