ICSID finds that corruption has no place in annulment proceedings
By Elizabeth Whitsitt
February 14, 2010
American businessman, Jack J. Grynberg, has suffered another setback in his company’s ongoing dispute with Grenada.
Commenced in 2005, the ICSID claim was one of a myriad of legal avenues pursued by Mr. Grynberg, the president and CEO of RSM Production Corporation (RSM), in an effort to gain an exploration license for oil and gas reserves thought to exist off the coast of Grenada.
Less than a year ago, an ICSID tribunal composed of Mr. V.V.Veeder (President), Professor Bernard Audit, and Dr David S. Berry dismissed RSM’s substantive claims.* Since that time RSM has sought to annul that award on grounds that the tribunal: (i) manifestly exceeded its powers, (ii) that there was a serious departure from a fundamental rule of procedure, and (iii) that the award failed to state the reasons on which it was based.
Before addressing the substantive grounds for annulment, the US firm asked the annulment committee, composed of Dr. Gavan Griffith QC (President), Dato’ Cecil W. M. Abraham, and Professor Campbell McLachlan QC, to investigate suspicions of corruption in the contract underlying the dispute. Specifically, RSM applied to the annulment committee for a finding that a key witness in the arbitral hearing (a cabinet minister in Grenada’s government) was bribed to ensure that the oil and gas exploration contract won by RSM would not be successfully performed.
Corruption allegations surfaced earlier during the merits hearing in the arbitral proceeding. However, counsel for RSM did not request that the tribunal make a finding of fact relating to those assertions. Instead, RSM asked the tribunal to consider evidence of the alleged corruption when considering the testimony of Grenada’s cabinet minister.
For its part, the tribunal did not accept any of the criticisms of Grenada’s key witness. Indeed the tribunal determined that whether or not Grenada’s witness acted corruptly was immaterial to its substantive findings.
Subsequently, RSM revitalized its corruption allegations while attempting to have the tribunals substantive findings annulled. Citing new evidence to support its bribery claims, RSM asserted that the annulment committee possessed inherent jurisdiction to evaluate its request.
In its decision dated December 7, 2009, but only recently made available to the public, the annulment committee flatly rejected RSM’s’ request. Finding that RSM’s request fell outside of its jurisdiction, the committee noted that annulment committees have a narrowly defined jurisdictional mandate exhaustively outlined in Article 52 of the ICSID Convention. As a result, the committee concluded that “it [did] not have the power to exercise an independent jurisdiction” to assess the corruption allegations raised by RSM.
The committee also observed that the ICSID Convention and its Arbitration Rules provided powers to the original tribunal to deal with the proceedings in the post-award phase, including the discovery of new evidence. In the annulment committee’s view, those avenues would have been more appropriate for addressing RSM’s request.
The committee will now move on to hear RSM’s substantive arguments on annulment. In that vein, RSM filed reply arguments in its annulment application on January 15, 2010.
* Award in RSM Production Corporation v. Grenada is available here:
http://ita.law.uvic.ca/documents/RSMvGrenadaAward.pdf
Sources:
Decision on RSM Production Corporation’s Application for a Preliminary Rule of 29 October 2009 is available here:
http://ita.law.uvic.ca/documents/RSMPrelim.pdf
ITN Reporting:
“ICSID tribunal dismisses RSM Production Corporation’s claim against Grenada,” By Damon Vis-Dunbar, Investment Treaty News, 26 March 2009, available here: