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Amco Asia Corp. v. Republic of Indonesia
Published online by Cambridge University Press: 27 February 2017
Extract
This decision is the latest of several by arbitral bodies of the International Centre for Settlement of Investment Disputes (ICSID) addressing a claim by Amco Asia Corporation (Amco Asia) against respondent Republic of Indonesia. An ICSID tribunal (First Tribunal) in 1984 rendered an award on the merits in favor of claimant Amco Asia. In 1986 an “ad hoc committee” (Ad Hoc Committee) convened on Indonesia’s request pursuant to Article 52 of the ICSID Convention annulled the 1984 award on the grounds that, with respect to a principal holding, the tribunal had “manifestly exceeded its powers” and “failed to state reasons,” both being grounds for annulment specified in Article 52(1) of the Convention. The Ad Hoc Committee did not disturb certain other holdings of the tribunal. Claimant then resubmitted the dispute, and a second tribunal (Second Tribunal) was constituted pursuant to Article 52(6) of the Convention. The first task of the new tribunal was to determine which holdings of the previous bodies were res judicata and therefore could not be relitigated. The three-member ICSID Second Tribunal held: (1) that holdings of the First Tribunal that had not been annulled by the Ad Hoc Committee were res judicata; (2) that issues as to which the First Tribunal’s holdings had been annulled could be relitigated; and (3) that the Ad Hoc Committee’s reasoning, as distinct from its actual decision of annulment, was not binding on the Second Tribunal.
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References
1 No. ARB/81/1: Award on the Merits, Nov. 20, 1984, reprinted in 1986 Intl Arb. Rep. 601, excerpted in 24 ILM 1022 (1985) [hereinafter First Award].
2 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, opened for signature Mar. 18, 1965, 17 UST 1270, TIAS No. 6090, 575 UNTS 159.
5 No. ARB/81/1: On the Application for Annulment Submitted by the Republic of Indonesia Against the Arbitral Award Rendered on November 20, 1984, May 16, 1986, reprinted in 25 ILM 1441 (1986), summarized in 81 AJIL 222 (1987) [hereinafter Annulment Decision].
4 First Award, supra note 1, paras. 147–48, 24 ILM at 1023.
5 Annulment Decision, supra note 3, paras, 93–94, 25 ILM at 1459–60.
6 Id., para. 95, 25 ILM at 1460. The Ad Hoc Committee opined that the First Tribunal’s failure to apply the correct rule of law was “the result of the basic rule on the matter … having been obscured by the lengthy arguments and counterarguments on accounting principles and problems on, e.g., deductible taxes, undistributed profits and depreciation.” Id., para. 96, 25 ILM at 1460.
7 Id., paras. 97–98, 25 ILM at 1460–61.
The First Tribunal recognized that, under Indonesian law, loan funds could not be included in equity capital. Nevertheless, it included a $1 million loan in its calculation of the amount of Amco Asia’s investment in the Kartika Plaza project. The First Tribunal’s reason for doing so was that “P.T. AMCO [the Indonesian subsidiary through which Amco Asia participated in the project] having been discharged from its liabilities under the … loan obtained in this way revenue which was capitalized over a period of time on a deferred basis. This revenue, fully capitalized, is considered as a portion of the investment … .” First Award, supra note 1, para. 236(i), 1986 Int’l Arb. Rep. at 637. The Ad Hoc Committee felt that this assertion did not “fully disprove[ ]” the “impression” that the First Tribunal had contradicted itself. Annulment Decision, supra note 3, para. 97, 25 ILM at 1461.
8 First Award, supra note 1, paras. 271–73, 1986 Intl Arb. Rep. at 645. Cf. Lena Gold-fields, Ltd. v. U.S.S.R. (1930), reprinted in 36 Cornell L.Q. 42, 51, para. 26 (1950) (compensation for expropriated enterprise is “the present value, if paid in cash now, of future profits which the company would have made”).
9 Annulment Decision, supra note 3, para. 110, 25 ILM at 1463.
10 No. ARB/81/1: Decision on Jurisdiction, slip op. at 26, para. 43 (approval for an appeal procedure was considered when the Convention was drafted and was rejected), reprinted in 27 ILM 1281 (1988).
11 Id. at 60–64, paras. 128–36. The Second Tribunal also held that the tax fraud counter claim was not within the jurisdiction of an ICSID tribunal, because it did not “aris[e] directly out of [the] investment” as required by Article 25(1) of the Convention; rather, it arose out of the application of “general law” to “persons who are within the reach of the host State’s jurisdiction.” Id. at 58–60, paras. 122–27.
12 Klöckner Industrie-Anlagen GmbH v. United Republic of Cameroon, No. ARB/81/2 (1983), excerpted in Paulsson, The ICSID Klöckner v. Cameroon Award: The Duties of Partners in North-South Economic Development Agreements, 1 J. Int’l Arb. 145 (1984), annulled, 1 Foreign Inv. L.J. 90 (1986).
15 See, e.g., Feldman, The Annulment Proceedings and the Finality of ICSID Arbitral Awards, 2 Foreign Inv. LJ. 85 (1987); Gaillard, Introductory Note, 25 ILM 1439 (1986).
14 Report of the Secretary General to the Administrative Council at its Twentieth Annual Meeting 2 (Oct. 2, 1986), reprinted in Intl Arb. Rep., February 1987, at 126, 127.
15 Id. at 3, Intl Arb. Rep., February 1987, at 128.
16 For an argument that failure to apply the proper law cannot constitute a “manifest excess of powers” under Article 52(1), see Feldman, supra note 13, at 99–105.
17 First Award, supra note 1, para. 221, 1986 Int Arb. Rep. at 635.
18 Similarly, although the Ad Hoc Committee annulled, for failure to state reasons, the First Tribunal’s calculation of the amount of capital invested because it included a $1 million loan, the First Tribunal in fact stated a reason. The problem was that it was a reason that the Ad Hoc Committee either could not understand or did not accept. See note 7 supra.
Elsewhere in its decision as well, the Ad Hoc Committee revealed differences of opinion with the First Tribunal over the content of the applicable law. The First Tribunal held that the assistance of the Indonesian military to P.T. Wisma’s takeover of the hotel violated not only Indonesian law but also Indonesia’s duty under international law to protect aliens and their investments. First Award, supra note 1, paras. 171–72, 1986 Int’l Arb. Rep. at 624. The Ad Hoc Committee questioned whether there was such a duty under international law, citing the Charter of Economic Rights and Duties of States adopted by the UN General Assembly in 1974 (GA Res. 3281 (XXIX)). Annulment Decision, supra note 3, para. 60, 25 ILM at 1453.
Contrast First Award, supra, para. 248, 24 ILM at 1033–35 (Indonesia’s unjustified revocation of Amco Asia’s investment license violated the international law rule pacta sunt servanda), with Giardina, State Contracts: National Versus International Law?, 5 Italian Y.B. Int’l L. 147, 164–65 (1980–81) (asserting that, under the principle of permanent sovereignty, state breach of contract with a foreign investor cannot be internationally wrongful). Giardina was a member of the Amco Asia Ad Hoc Committee.
19 Slip op. at 43, para. 88.
20 Id. at 46, para. 94.
21 For example, “manifest excess of power” was principally intended to cover the situation in which an arbitral tribunal decides issues that have not been submitted to it. See Feldman, supra note 13, at 99–101.
22 There have been no further annulments of ICSID awards. In two cases, applications for annulment have recently been registered; these are Maritime International Nominees Establishment v. Republic of Guinea (No. ARB/84/4, award rendered Jan. 6, 1988, reprinted in Int’l Arb. Rep., January 1988, at A, summarized in 82 AJIL 598 (1988)) and the Klöckner case itself, after rendition of a second award. In three other cases, ICSID officials report, no application for annulment was registered within the time frame for doing so.
23 See text at note 14 supra,
24 ICSID Convention, supra note 2, Preamble, cl. 1.