As claimants lacked a protected investment and could not import consent to arbitration via MFN, UNCITRAL tribunal dismisses case against Mauritius on jurisdictional grounds
Professor Christian Doutremepuich and Antoine Doutremepuich v. Republic of Mauritius, PCA Case No. 2018-37
An UNCITRAL tribunal dismissed the claims of two French nationals against Mauritius on jurisdictional grounds, concluding that the claimants did not make a qualifying investment and that Mauritius did not consent to arbitration. The award was issued on August 23, 2019.
Background and claims
Christian Doutremepuich was the founder and director of Laboratoire d’Hématologie Médico-Légale, a laboratory of forensic hematology situated in Bordeaux, France. Antoine Doutremepuich was the laboratory’s manager and head of external relations.
In 2009, the two claimants initiated a project to establish a laboratory for genetic and DNA analysis, in the context of Mauritius seeking to enhance its forensic capability. Mauritius received their project proposal in 2013, and the Prime Minister stated in 2014 that there were no objections to it. After the claimants registered three project companies in Mauritius, the Prime Minister rejected their project in 2016 without providing reasons.
The claimants initiated arbitration based on the 1973 France–Mauritius BIT, arguing that the rejection of the project amounted to a breach of FET and requesting damages of EUR 11.6 million. In declining jurisdiction over the case, the tribunal addressed two issues: (i) whether the claimants made a qualifying investment under the BIT; and (ii) whether the claimants were entitled to apply the MFN clause in the BIT to invoke the arbitration agreement under the Finland–Mauritius BIT.
The standard to analyze whether the Doutremepuichs made an investment
The claimants argued that they planned several investment activities in Mauritius, which included purchasing land and equipment, building infrastructure, and hiring and training employees. However, the tribunal found no evidence that any of these activities happened. Thus, the claimants’ alleged investment consisted in the creation of three companies in Mauritius (to which they transferred funds of EUR 300,000) and in the contribution of know-how.
The arbitrators established three criteria to analyze the claimants’ alleged investment according to Art. 1(1) of the France–Mauritius BIT, determining that a protected investment needs to (i) provide a contribution to the development of the host state, (ii) be of a certain duration and (iii) entail participating in the risks of the operation. Finding that the claimants failed to meet all three criteria, the tribunal concluded that it did not have jurisdiction over the case.
The alleged investment did not provide a contribution to Mauritius
The tribunal held that contributions to the host state could take several forms, including non-financial inputs that have an economic value. In view of bank statements indicating that only Christian Doutremepuich transferred EUR 300,000 to the companies registered in Mauritius, it concluded that Antoine Doutremepuich did not make any financial contribution.
In addition, the arbitrators found that Christian Doutremepuich did not contribute to the host state since he had transferred the money to bank accounts controlled by himself. In 2016, after Mauritius rejected the project, Christian Doutremepuich repatriated almost EUR 224,000 back to his account in France. Consequently, the tribunal concluded that he never lost control over the money and was never dispossessed of it.
The claimants also alleged that they had transferred know-how, including the layout of the laboratory and the training of qualified personnel. However, the tribunal concluded that the claimants failed to provide evidence of any actual transfer or contribution of know-how of economic value.
The alleged investment did not have a minimum duration
The tribunal held that it could not establish in abstract the minimum duration required for protected investments, but that it had to assess the reasonable duration in light of all circumstances. In light of the facts of the case, the tribunal concluded that there was no duration at all since the alleged investments were one-off payments for goods or services that were incurred as part of the preparations for the project.
The arbitrators also pointed out that the time during which the funds were deposited in bank accounts in Mauritius was short—from May 2015 to May 2016. Although holding that such a duration did not in itself disqualify a contribution as an investment, they highlighted that projects of this kind would take “much more time to assimilate in a new environment” (para. 144).
The alleged investment did not entail risks
Although the project’s business plan described the laboratory’s commercial risks, the tribunal noted that the project never got off the ground. Hence, it could only consider the risks associated with the transfer of funds. Since the claimants always remained in control over the funds and could transfer or repatriate them whenever they wished, the tribunal held that they did not make a contribution that entailed participating in the risks of the operation.
The application of the MFN clause to dispute resolution
The parties did not dispute that the France–Mauritius BIT does not contain an arbitration agreement for investor–state disputes. All Article 9 of the BIT provides for is a contracting state’s obligation to include an arbitration agreement in investment contracts concluded with nationals of the other contracting state.
The claimants invoked the MFN clause in the France–Mauritius BIT, asking the tribunal to apply the investor–state arbitration agreement contained in Article 9 of the Finland–Mauritius BIT, which, according to the claimants, consisted in more favourable treatment granted to Finnish investors, since “it does not contain any obligation to settle the dispute amicably and offers the investor a choice between different arbitral institutions” (para. 181).
The tribunal held that MFN clauses may apply to dispute resolution provisions in other agreements, provided that this was the intention of the contracting states. According to the tribunal, the interpretation should follow the standards provided by VCLT Article 31 and the principle of ejusdem generis.
The tribunal found that the MFN clause applied only to matters governed by the France–Mauritius BIT other than those referred to in its Article 7, which deals with tax matters. Considering that investor–state arbitration was not a matter governed by the BIT, it concluded that the MFN clause could not extend to this matter. “Using the MFN clause to import such consent would create obligations Mauritius never undertook,” the tribunal indicated (para. 219).
Finally, the tribunal addressed the issue of post-treaty practice, as France and Mauritius signed a new BIT in 2010 but did not ratify it. As the tribunal noted, the draft bill requesting the French Parliament to ratify the 2010 BIT indicated that the treaty was important because it would allow the possibility of “resort[ing] to international arbitration on the basis of the consent expressed by the State.” (para. 232, note 342). For the tribunal, this indicated that France was not convinced that its nationals had access to arbitration against Mauritius via the MFN clause of the 1973 BIT.
Decision and costs
The tribunal decided it lacked jurisdiction over the case and ordered the claimants to bear the arbitration costs in full, each party bearing its own legal costs.
Notes: The tribunal was composed of Maxi Scherer (presiding arbitrator appointed by the co-arbitrators, British national), Olivier Caprasse (claimants’ appointee, Belgian national) and Jan Paulsson (respondent’s appointee, U.S. national). The award of August 23, 2019, is available at https://www.italaw.com/sites/default/files/case-documents/italaw10817.pdf
Pietro Benedetti Teixeira Webber is a lawyer at Judith Martins-Costa Advogados (Porto Alegre, Brazil). He is also the President of the Brazilian Association of Arbitration Students (ABEArb).