Procedural Posture

This document sets forth the Dissenting Opinion of Professor Brigitte Stern regarding the Tribunal’s Decision on Bifurcated Jurisdictional Objections in an ICSID arbitration brought by Fernando Paiz Andrade and Anabella Schloesser de León de Paiz against the Republic of Honduras under the CAFTA-DR. The core issue bifurcated for preliminary determination was whether the Tribunal possessed jurisdiction ratione materiae, specifically whether the Claimants owned or controlled their alleged investment, Pacific Solar, at the time the arbitration commenced.

Principal Legal Issues and Parties' Positions

The jurisdictional dispute centered on the legal effect of two Trust Agreements executed in 2018 to secure project finance loans from two European development banks. Under these agreements, the legal title to Pacific Solar’s shares and assets was transferred to a Honduran trustee. The Respondent argued that this transfer under Honduran law extinguished the Claimants' ownership and control, thereby depriving them of standing. Conversely, the Claimants asserted that international law recognizes and protects their continuing beneficial ownership in the enterprise.

The Majority's Findings and the Dissenting Analysis

The majority of the Tribunal concluded that while the Claimants lacked standing to bring claims on their own behalf—deeming their right to recoup the shares and assets as "too hypothetical"—they nevertheless retained sufficient indirect ownership as third-ranking beneficiaries to bring claims on behalf of the local enterprise under CAFTA-DR Article 10.16.1(b).

Professor Stern dissented vigorously from this bifurcated conclusion, characterizing it as legally contradictory. Relying on established international jurisprudence (including Barcelona Traction, Encana, and Apotex), she emphasized that while international law protects existing beneficial ownership, it does not protect rights that are merely contingent, speculative, or uncertain. Professor Stern conducted a detailed analysis of the Trust Agreements under Honduran law, demonstrating that the Claimants held only a conditional, future interest that would materialize solely if the underlying loans were fully repaid and no event of default occurred. Because the primary lenders held the existing, first-ranking beneficial rights, the Claimants possessed neither de jure nor de facto control over Pacific Solar.

Conclusion

Concluding that the Claimants held no present, vested ownership or control over the local enterprise, Professor Stern determined that the Tribunal lacked jurisdiction ratione materiae in its entirety. In her view, the Respondent’s preliminary objection should have been upheld in full, barring both the direct claims and the claims brought on behalf of the enterprise.

Procedural Posture

This document is the Final Award rendered in ICC Arbitration No. 22370/DDA between Divine Inspiration Group (Applicant) and the Democratic Republic of Congo (Respondent). The dispute arose from two production sharing contracts (the 2007 and 2008 Contracts) for the exploration and exploitation of hydrocarbon resources in the Central Basin and the Albertine Graben.

Principal Legal Issues

The primary legal issues addressed by the Tribunal included the admissibility of the Applicant's claims, the legal effect of the contracts in the absence of a Presidential Order of Approval, and whether the Respondent's reallocation of oil blocks to third parties constituted a compensable breach. The Tribunal was also tasked with determining the appropriate quantum of damages, including sunk costs and lost profits, in the event of a breach.

Parties' Positions

The Applicant argued that the Respondent breached its contractual obligations by failing to issue the requisite Presidential Orders within a reasonable time and by unlawfully terminating the 2008 Contract to reallocate the rights to a third-party consortium. The Applicant sought termination of the contracts and full compensation. The Respondent contended that the claims were premature and inadmissible, asserting that the contracts never entered into force without the Presidential Orders, which fell under the discretionary power of the Head of State. The Respondent further argued that the 2008 Contract had lapsed and that the Applicant's claims for lost profits were highly speculative.

Tribunal's Reasoning and Findings

The Tribunal dismissed the Respondent's preliminary objections, affirming its jurisdiction and the Applicant's standing. On the merits, the Tribunal held that while the 1981 General Legislation on Mines and Hydrocarbons required a Presidential Order for the contracts to become fully effective, the Respondent was bound by a good faith obligation to facilitate the issuance of such orders. The Tribunal found that the Respondent breached this obligation by failing to issue the order for the 2007 Contract within a reasonable time, which administrative practice indicated should be approximately two years and four months. Regarding the 2008 Contract, the Tribunal determined that the Respondent unlawfully dispossessed the Applicant of its exclusive rights by reallocating the block to a third party. In assessing quantum, the Tribunal accepted the discounted cash flow (DCF) methodology applied by the Applicant's experts, noting the Respondent's failure to submit countervailing expert evidence, and concluded that the loss of opportunity was sufficiently certain to warrant compensation.

Operative Directions

The Tribunal ordered the termination of both the 2007 and 2008 Contracts at the exclusive fault of the Respondent. The Democratic Republic of Congo was ordered to pay the Applicant USD 617,400,178 in damages, comprising lost profits and incurred expenses. The Tribunal further awarded pre-award and post-award interest calculated at the rate of return on 20-year US Treasury bonds plus 2%, and ordered the Respondent to bear the full costs of the arbitration.