Telenor’s legal notice through the eyes of int’l investment law

Daily Star | 31 December 2019

Telenor’s legal notice through the eyes of int’l investment law

by Sanjana Hoque Mifta

Recently, Telenor, the principal investor of Bangladesh’s leading mobile phone operator Grameen Phone, has served a legal notice to the President of Bangladesh seeking arbitration regarding the dues of Tk 125.79 billion of Bangladesh Telecommunication Regulatory Commission (BTRC) to Grameenphone. The service of notice by a foreign company to the head of a sovereign state stimulates a debate regarding the legality of the notice.

The legal basis of the notice served by Telenor to Bangladesh is Bangladesh-Singapore Bilateral Investment Treaty (BIT) signed between the countries in 2004 for the promotion and protection of investments. BITs are treaties between two countries that protect the foreign investment made by the investors of both the countries.

Bangladesh and Norway do not have any BIT. Telenor is a Norwegian Company which has a subsidiary company in Singapore, named Telenor Asia which is the primary investor of Grameen Phone. Thus Telenor brings the claim under Bangladesh-Singapore BIT. Both Bangladesh and Singapore are members of the ICSID (International Centre for Settlement of Investment Disputes), which is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors.

The statement of Telenor is that the process of the realisation of the claimed amount by the Bangladesh government without following due process amounts to unlawful expropriation, which is a breach of the said BIT under Article 5. Now under Article 7.1 of the BIT, any dispute between the investor and the State shall be settled through negotiation initiated by one party after giving written notice to the other party. The legal action against any State is to be initiated against the Head of the State, i.e. the President. Thus serving the legal notice to the President is a part of the legal proceeding.

If the dispute cannot be resolved through negotiation within six months from the date of the service of the notice, under Article 7.2, the investor can initiate arbitration proceeding in the forum of ICSID. Under Article 7.3 of the BIT, both parties give their consent to the jurisdiction of ICSID, and any arbitral award shall be final and binding upon the parties to the dispute. Like the said BIT, the majority of ICSID clauses in modern BITs express consent on the part of the two Contracting States to submit to ICSID’s jurisdiction, for the benefit of nationals of the other State party to the treaty. An investor may accept an offer of consent of the State contained in a BIT by instituting ICSID proceedings.

It is to be noted that some BITs have the clause of the exhaustion of local remedies or fork-in-the-road clause (i.e., electing one procedure is forfeiting the other procedure). But Bangladesh-Singapore BIT does not have any such requirement for the exhaustion of local remedy or fork-in-the-road clause. Thus the ongoing case between BTRC and GP is not in any way related to the mechanism of the settlement of investment dispute sought by Telenor. If the parties fail to resolve the dispute within six months, nothing prevents Telenor to drag Bangladesh to the ICSID forum as it has given its consent to the jurisdiction of ICSID and according to the ISDS (investor-state dispute settlement) mechanism, the consent becomes perfect the moment the investor files a written notice of arbitration.

According to Articles 53 and 54.1 of the ICSID Convention, ICSID awards have to be recognised as binding, and their monetary content (namely compensation and damages) has to be enforced in a manner equivalent to a last-instance decision of its own State courts by all (currently 163) parties to ICSID Convention.

Bangladesh has the precedent of the case Saipem v Bangladesh (2004), where ICSID holds the country responsible for expropriation based on the illegal interference by its judiciary in the arbitration proceeding. The amount of compensation was 6 million USD. On the other hand, in another arbitration dispute, Chevron v Bangladesh, ICSID turned down the US oil giant Chevron’s age-old claim of around $240 million from Petrobangla.

In the given scenario, the settlement of this case is possible through negotiations between the parties or the ICSID tribunal. Now the wise move of Bangladesh would be to resolve the dispute through the negotiation between the parties as per the requirement of the said BIT.

source: Daily Star