Claimant fails to comply with three-year limitation period under CAFTA-DR

Corona Materials, LLC v. Dominican Republic, ICSID Case No. ARB(AF)/14/3

A tribunal at the International Centre for Settlement of Investment Disputes (ICSID) declared that it lacked jurisdiction in the case of Corona Materials LLC (a U.S. company) against the Dominican Republic. In an award dated May 31, 2016, the tribunal held that Corona’s request for arbitration was time-barred, as it failed to comply with the three-year limitation period under the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR).

Factual background and claims

The case concerns a mining project to build and operate a mine in the Dominican Republic from which Corona would export construction aggregate materials.

In 2007 Corona submitted an application to operate a concession and a few months later applied for an environmental license. Corona, argued that there were delays in the proceeding, and the Dominican Republic objected that Corona itself delayed the process by omitting documents and changing the scope of the project several times.

In August 2010 the Environmental Ministry informed Corona that it denied the licence as Corona’s project was “not environmentally viable” (para. 43). Corona asserted that the negative was ill founded, while the respondent argued that the communication informed both the decision and the reasons. In October 2010 Corona submitted a request for reconsideration to which it had no formal response. According to the Dominican Republic, the deadline to seek reconsideration had expired.

Corona initiated arbitration against the Dominican Republic on July 30, 2014, challenging the following measures: (i) the denial of the environmental license application, which, in Corona’s view, breached the CAFTA-DR articles on national treatment and minimum standard of treatment (including fair and equitable treatment and full protection and security) and constituted an indirect expropriation, and (ii) the absence of response to the request for reconsideration, which would amount to denial of justice.

The Dominican Republic denied all claims and objected to the tribunal’s jurisdiction, maintaining that the alleged measures took place after the three-year period required under CAFTA-DR Article 10.18(1). The provision states that “[n]o claim may be submitted to arbitration under this Section if more than three years have elapsed from the date on which the claimant first acquired, or should have first acquired, knowledge of the breach alleged […] and knowledge that the claimant […] or the enterprise […] has incurred loss or damage.”

Tribunal focuses analysis on whether claimant complied with three-year limitation period 

The tribunal pointed out the similar wording between the limitation period provision in CAFTA-DR and the corresponding provision in Articles 1116(2) and 1117(2) of the North American Free Trade Agreement (NAFTA). Following NAFTA tribunals such as Grand River v. United States and Feldman v. Mexico, the tribunal concluded that the time period shall not be subject to any “suspension, prolongation or other qualification” (para. 192).

First, the tribunal determined the earliest possible date on which Corona could have had actual or constructive knowledge of the breach or damage—the “critical date” (para. 199). Since the request for arbitration was dated June 10, 2014, the tribunal established the critical date three years earlier, on June 10, 2011, and set out to determinate whether Corona had knowledge before the critical date.

When did the claimant acquire actual or constructive knowledge?

The tribunal considered that the central measure adopted by the Dominican Republic was the Environment Ministry’s refusal to grant the environmental license, which was notified to Corona by a letter dated August 18, 2010, expressly setting out the final character of the decision.

It considered further evidence showing that, in early 2011, Corona already contemplated the possibility of initiating arbitration under CAFTA-DR, as stated in correspondence exchanged by Corona and local officials. As regards the knowledge of the loss or damage, a letter of the same period proves that Corona was not only conscious of it but also able to estimate the amount (US$342 million).

In the tribunal’s view, as Corona manifested its opinion in February 2011 by sending a letter to the Environment Ministry to reconsider the decision of August 18, 2010, therefore it explicitly acknowledged its awareness of the damage. Given that this occurred before the critical date, the tribunal concluded that Corona failed to comply with the time limit set out in DR-CAFTA Article 10.18(1).

Tribunal addresses the issue of denial of justice

Corona asserted that the alleged denial of justice was a separate breach from the non-issuance of the environmental license. The tribunal, before its analysis of when Corona acquired knowledge of the damage, had already concluded that there was no valid basis for this claim, as the failure of the Dominican Republic to reconsider the refusal to grant the license implicitly confirmed its previous decision.

Although recognizing that it could end its task with the conclusion that Corona’s claim was time barred, the tribunal considered appropriate to address the issue of the denial of justice, to which Corona had given important weight as the proceeding unfolded. In particular, Corona had stated that, for over five and a half years, the Dominican Republic has failed to respond to its motion for reconsideration.

First, the tribunal disagreed with Corona and held that an administrative act at the level of a first-instance decision-maker cannot constitute a denial of justice under customary international law. Furthermore, it noted that the CAFTA-DR is not drafted in broad terms, but focuses on different forms of “adjudicatory proceedings,” accordingly, not all criminal, civil or administrative matters, acts or procedures fall within its scope. The tribunal noted that no administrative adjudicatory proceedings existed when Corona submitted its motion for reconsideration.

In addition, the tribunal indicated that, even if the motion could be considered to have triggered an administrative adjudicatory proceeding, the tribunal would have to analyze whether local remedies had been exhausted in that particular case, as local remedies must be exhausted for a denial of justice to be upheld. Recalling that denial of justice rests upon a systemic failure of the state’s justice system, the tribunal concluded that Corona failed to prove that taking a further step in the domestic legal system of the Dominican Republic would have been futile.

As a final point, the tribunal rejected Corona’s argument under the waiver requirement in Article 10.18(2), which first requires the claimant to waive “any right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceeding with respect to any measure alleged to constitute a breach,” and then establishes the possibility of an action regarding an interim injunctive relief not involving the payment of damages while pursuing a DR-CAFTA claim for damages.

Corona argued that the waiver required in order to submit the claim for damages barred it from initiating proceedings before the domestic courts of the Dominican Republic. However, the tribunal disagreed, considering that the DR-CAFTA is clear in its terms. Also, the tribunal indicated that the DR-CAFTA sets out a fork-in-the-road provision that did not prevent Corona from resorting to local remedies, but prohibited it from submitting a claim for the same alleged breach to local courts and international arbitration.

In conclusion, the tribunal decided that, under the CAFTA-DR, it could not make an award in favour of Corona for its denial of justice claim. 

Decision and costs

The tribunal decided that the request for arbitration was time-barred and that it had no jurisdiction over the claims. It also ordered each of the parties to pay half of the arbitration costs and to bear its own legal fees and expenses. 

Notes: The ICSID tribunal was composed by Pierre-Marie Dupuy (President proposed by the Chairman of the Administrative Council and agreed to by the parties, French national), Fernando Mantilla-Serrano (claimant’s appointee, Colombian national), and J. Cristopher Thomas (respondent’s appointee, Canadian national). The award is available in English only at http://www.italaw.com/sites/default/files/case-documents/italaw7314.pdf.

Maria Florencia Sarmiento is a teaching and research assistant at the Catholic University of Argentina.