Arnold & Porter Kaye Scholer obtains ICSID victory for Republic of Costa Rica in Spanish investor’s emissions control dispute

Public Now | 31 January 2017

Arnold & Porter Kaye Scholer obtains ICSID victory for Republic of Costa Rica in Spanish investor’s emissions control dispute

Arnold & Porter Kaye Scholer LLP recently secured an important victory for its sovereign client, the Republic of Costa Rica, in the international arbitration Supervisión y Control S.A. v. Republic of Costa Rica (ICSID Case No. ARB/12/4), filed by a Spanish company under the Spain-Costa Rica bilateral investment treaty. The case was heard at ICSID, the World Bank’s investment arbitration center. On 18 January 2017, the Tribunal’s majority dismissed all claims, mainly on the basis of the inadmissibility defense raised by Arnold & Porter Kaye Scholer LLP on behalf of Costa Rica. This marks the 26 consecutive positive ruling obtained by the firm on behalf of sovereign States in investment arbitrations over a span of 15 years.

The dispute arose out of a concession contract between Costa Rica and a Costa Rican subsidiary of the Claimant, Riteve SyC S.A. (’Riteve’) for the mandatory safety inspection and emissions control of motor vehicles. The Spanish investor claimed that Costa Rica breached the contract with Riteve and its obligations under the Costa Rica-Spain bilateral investment treaty by failing to approve annual increases of the tariffs that Riteve is authorized to charge its customers for the inspection service. The investor sought USD 345 million in compensation for the alleged treaty breach.

In its award, the Tribunal’s majority (with the investor’s party-appointed arbitrator dissenting) dismissed the claims on the basis of Article XI.1 and XI.3 of the treaty, which require the investor to (1) choose between international arbitration and local proceedings to solve a dispute and (2) give a 6-month notice to the State before commencing international arbitration. The Tribunal’s majority accepted the evidence submitted by the firm that the investor, through Riteve, had submitted the dispute to the local courts but had failed to withdraw or discontinue the local judicial proceedings before commencing international arbitration. In so doing, the investor did not adhere to the forum selection or waiver clause in the treaty. In addition, the Tribunal’s majority dismissed certain claims that the investor raised for the first time in its Memorial without giving prior notice to Costa Rica. The majority noted that proper notice in accordance with the treaty is an important element of a State’s consent to international arbitration.

The Arnold & Porter Kaye Scholer attorneys that represented Costa Rica in the arbitration were partners Paolo Di Rosa (Washington, DC) and Patricio Grané Labat (London) and foreign attorney Natalia Giraldo-Carrillo (New York).

Arnold & Porter Kaye Scholer is currently representing Costa Rica in a separate ICSID arbitration, Infinito Gold Ltd. v Costa Rica (ICSID Case No. ARB/14/5), which is ongoing.

source: Public Now