Bilaga 1
| SVEA HOVRÄTT 020101 |
| INKOM: 2022-09-30 |
| MÅLNR: T 11278-22 |
| AKTBIL: 8 |
ARBITRATION INSTITUTE
OF THE STOCKHOLM CHAMBER OF COMMERCE
Box 16050, 103 21 Stockholm, Sweden
+46 8 555 100 00, [email protected], www.sccinstitute.com
in SCC Arbitration EA 2019/038
between
Mr Zaza Okuashvili
(United Kingdom)
Claimant
and
The Republic of Georgia
Respondent
made on 2 April 2019
in Stockholm, Sweden
Emergency Arbitrator:
Mr Fredrik Andersson
| Claimant | Mr Zaza Okuashvili 24 Lowndes Street, London SW1X 9JE UK |
|
| Counsel for Claimant | Mr Colin Gibson Mr Joshua Fellenbaum Fieldfisher LLP Riverbank House 2 Swan Lane London EC4R 3TT UK T: +44 020 7861 4000 [email protected] [email protected] |
Mr Lucas Bastin Ms Jackie McArthur Essex Court Chambers 24 Lincoln's Inn Fields London WC2A 3EG UK T: +44 020 7813 8000 [email protected] [email protected] |
| Respondent | Ministry of Justice The Minister of Justice Ms Thea Tsulukiani and Mrs. Mariam Gotsiridze 24 Gorgasali St. 4 Tbilisi Georgia 0114 [email protected], [email protected], [email protected] Ministry of Foreign Affairs 4 Sh. Chitadze Tbilisi Georgia 0118 |
|
| Counsel for Respondent | Prof. Emmanuel Gaillard Dr Yas Banifatemi Dr Paschalis Paschalidis Shearman & Sterling LLP 7, rue Jacques Bingen 75017 Paris France [email protected] [email protected] [email protected] |
|
| Emergency Arbitrator | Advokat Mr Fredrik Andersson Mannheimer Swartling Advokatbyrå AB Östra Hamngatan 16 Gothenburg Sweden +46 31 355 1639 [email protected] |
[Page 1]
1. This emergency decision on interim measures arises out of an application dated 22 March 2019 from Claimant to the Arbitration Institute of the Stockholm Chamber of Commerce (the “SCC") for the appointment of an Emergency Arbitrator (the “Application”).1 In its Application, Claimant requested the Emergency Arbitrator to rule upon a request for interim measures against Respondent.
2. On 23 March 2019, the undersigned was appointed by the Board of the SCC (the "SCC Board”) as the Emergency Arbitrator in accordance with the SCC Rules. The SCC also informed that the SCC Board had decided that the seat of the arbitration is Stockholm.
3. Pursuant to Appendix II, Article 8 (1) of the SCC Rules, the Emergency Arbitrator is to rule upon the request for interim measures no later than 5 days from the date the Application was referred to the Emergency Arbitrator.
4. The Application was referred to the Emergency Arbitrator on 24 March 2019. In the letter from the SCC (copied to the Parties) including the referral, the SCC thus advised the Emergency Arbitrator that “[t]he emergency decision shall be made by 29 March 2019."
5. At 12:28 pm CET on 24 March 2019, the Emergency Arbitrator issued Procedural Order No. 1, in order to establish a timetable under which the Parties were invited to present their respective views on the Application. Under this timetable, Respondent was given until 3 pm CET on 26 March 2019 to file its Reply to Claimant's Application (the "Reply"). Claimant was given an opportunity to comment on the
1 Along with the Application, Claimant filed the Witness Statement of Zaza Okuashvili, the Expert Report of Dr David Jandieri, factual exhibits CE-01 to CE-04, CE-06 to CE-15, CE-17 to CE-18, CE-20 to CE-63 and legal authorities CLA 01 to 35. Accompanying factual exhibits CE-05, CE-13A (a replacement of a previously submitted document), CE-19 and CE-64 were filed at 4:43 pm CET on 23 March 2019, and factual exhibit CE-16 was filed at 10:46 pm CET on 24 March 2019. ↩
[Page 2]
Reply no later than by 1 pm CET on 27 March 2019 (i.e. submit the “Claimant's Comments"). Respondent was given until 1 pm CET on 28 March 2019 to submit its comments on Claimant's Comments (i.e. submit the “Respondent's Comments”). Finally, the Emergency Arbitrator informed that, if deemed appropriate, a hearing by telephone or video conference would be held. The timing for any such hearing was to be notified separately.
6. On 24 March 2019, at 3:15 pm CET, counsel for Claimant referred to its request for an in-person hearing in London, previously made in the Application. Counsel for Claimant also requested that, at a minimum, a hearing by video conference was to be held.
7. By email at 4:07 pm CET, on 24 March 2019, the Emergency Arbitrator confirmed that Claimant's request for an in-person hearing, as well as the alternative request for a hearing by video conference, had been duly noted.
8. On 25 March 2019, at 6:40 pm CET, the Emergency Arbitrator received an email whereby Dr Yas Banifatemi of Shearman & Sterling LLP announced her firm's appointment as counsel for Respondent. In the same email, Respondent sought a one week extension of the time limit set forth in the provisional time table included in Procedural Order No. 1 for providing its Reply.
9. The Emergency Arbitrator confirmed receipt of Respondent's request for extension at 8:42 pm CET on 25 March 2019. On the same date, at 8:58 pm CET, counsel for Claimant confirmed receipt of Respondent's request and stated that Claimant intended to respond to said request. The Emergency Arbitrator responded at 10:53 pm CET on the same date, ordering Claimant to limit any comments to the request for extension as such, and to file said comments before midnight CET.
10. On 25 March 2019, at 11:17 pm CET, Claimant objected to Respondent's application for additional time and requested that the provisional time table in Procedural Order No. 1 be maintained.
11. On 26 March 2019, at 1:05 am CET, Respondent filed additional comments regarding its request for an extension of time.
12. On 26 March 2019, at 9:54 am CET, the Emergency Arbitrator requested the SCC Board to extend the deadline for rendering the decision until 2 April 2019. By letter
[Page 3]
dated the same date, and distributed by email at 10:15 am CET, the SCC informed the Emergency Arbitrator and the Parties that said request had been granted and that the emergency award was to be rendered by 2 April 2019.
13. At 10:43 am CET, on 26 March 2019, the Emergency Arbitrator issued Procedural Order No. 2, revising the previously decided timetable. Under this timetable, Respondent was given until 3 pm CET on 29 March 2019 to file its Reply. Claimant was given an opportunity to comment on the Reply no later than by 3 pm CET on 30 March 2019. Respondent was given until 3 pm CET on 31 March 2019 to submit its comments on Claimant's Comments. The Emergency Arbitrator also informed the Parties that, if deemed appropriate, a hearing by telephone or video conference may be arranged in the evening of 31 March 2019 or 1 April 2019. The Parties were asked to indicate their availability. Finally, it was provided that any submissions on costs were to be filed on 1 April 2019 at 10 pm CET.
14. On 26 March 2019, at 12:46 pm CET, counsel for Claimant confirmed receipt of Procedural Order No. 2.
15. On 27 March 2019, at 3:00 pm CET, counsel for Claimant confirmed their availability for a telephone or video conference on Monday 1 April 2019, no earlier than 8 pm (UK time). Claimant also reiterated its request that the hearing was to be held by video conference.
16. On the same day, at 3:54 pm CET, the Emergency Arbitrator confirmed receipt of Claimant's above email and asked counsel for Respondent to indicate their availability for a hearing by phone or video at the time suggested by Claimant's counsel.
17. On 27 March 2019, at 5:29 pm CET, counsel for Respondent confirmed receipt of Procedural Order No. 2. Respondent's counsel also submitted that if the Emergency Arbitrator, “after having reviewed the Parties' submissions, deem that a hearing is appropriate, then the Respondent's preference is for a hearing by phone on the evening of Monday, 1 April 2019."
18. On 27 March 2019, at 10:34 pm CET, the Emergency Arbitrator informed the Parties as follows:
[Page 4]
"Considering that the Claimant has requested a hearing and that it seems possible to arrange this on Monday, the parties are asked to reserve time between 9-10 pm CET on Monday 1 April for a hearing.
The hearing will not be an evidentiary hearing. The purpose would be to offer the parties an opportunity to present closing arguments orally and to respond to any questions. In the Emergency Arbitrator's view, the hearing could therefore be done by phone."
19. On 28 March 2019, at 7:15 am CET, counsel for Respondent confirmed that it would attend the hearing on Monday 1 April 2019 as directed, but underlined that Respondent reserved its due process rights. In this regard, counsel for Respondent submitted the following:
"As mentioned in our email of 25 March, the Claimant has had ample time to prepare his Application (at the very least, based on the Claimant's reference, in Mr. Gibson's email of 25 March, to the date of 27 February 2019, the Claimant has spent the last month preparing for this action), whereas the Respondent has not had the benefit of even a properly drafted Notice of Dispute under the Georgia-UK BIT to understand the nature of the Claimant's complaints and will have had a total of 4 days to prepare its response to a 41-page Application and its accompanying exhibits, witness statement and expert report. As a result, the Respondent, who has not had time, and will not have time before the hearing, to conduct all of the necessary investigations into the Claimant's various allegations, is in the situation in which (1) it can only provide its preliminary answers in the Reply and the further comments that are due on 29 and 31 March respectively, and (2) may or may not be in a position to answer specific questions raised by the Emergency Arbitrator at the hearing of 1 April 2019. In addition, the Respondent respectfully reminds the Emergency Arbitrator that, unlike a private party, it is a State with numerous entities and bodies the coordination among which is inherently time-consuming and burdensome. The Respondent has tried its very best during the past few days to address the allegations made in the Application and to comply with the Emergency Arbitrator's directions, but the Claimant's abusive attempt to use SCC emergency proceedings where the Georgia-UK BIT does not even provide for SCC arbitration and the resulting process have been severely prejudicial to the Respondent and put its due process rights at serious risk. In the circumstances, counsel for the Respondent has no option but to proceed with the hearing with all of the Respondent's due process rights fully reserved."
20. At 9:09 am CET on the same day, the Emergency Arbitrator confirmed by email that Respondent's reservations had been duly noted.
21. On 29 March 2019, at 2:50 pm CET, Respondent filed its Reply.2 The Emergency Arbitrator confirmed receipt on the same day at 3:02 pm CET.
2 Along with its Reply, Respondent filed exhibits R-1 to R-20. ↩
[Page 5]
22. On 30 March 2019, at 2:28 pm CET, Claimant filed Claimant's Comments.3 The Emergency Arbitrator confirmed receipt on the same day at 3:19 pm CET.
23. On 31 March 2019, at 3:02 pm CET, Respondent filed Respondent's Comments.4 The Emergency Arbitrator confirmed receipt on the same day at 3:31 pm CET.
24. On 1 April 2019, at 3:53 pm CET, counsel for Claimant asked for confirmation that the telephone hearing would take place on the same day, between 9 and 10 pm CET. The Emergency Arbitrator confirmed on the same day at 4:07 pm CET that the hearing would take place the same evening. A hearing schedule and dial in details for the hearing were distributed by email by the Emergency Arbitrator at 4:38 pm CET on the same day.
25. On 1 April 2019, at 6:04 and 6:19 pm CET, counsel for Claimant submitted a copy of the CV of Dr David Jandieri, which had been omitted from the expert report.
26. On 1 April 2019, at 6:38 and 6:45 pm CET, counsel for Respondent referred to the above email from Claimant, and submitted the following:
"As the Respondent explained in its Comments of 31 March, Dr. Jandieri cannot be, within the extremely short deadlines of the present proceedings, tested by the Emergency Arbitrator or the Respondent on cross-examination. In this context, and recalling the Emergency Arbitrator's direction that tonight's hearing is not an evidentiary hearing, the Respondent would like to emphasize, as a matter of due process, that it will object to any reliance by the Claimant, in tonight's hearing, on Dr. Jandieri's expert report."
27. On 1 April 2019, between 9:00 and 10:07 pm CET, a hearing was held by phone. Both Parties were represented by their respective counsel during the hearing. Also Claimant (Mr Zaza Okuashvili) and the General Manager of LLC OGT (“OGT”)5 participated in the hearing. In summary, the following took place during the hearing:
3 Along with the submission, Claimant filed exhibits CE-64 to CE-66 and CLA-36 to CLA-39. ↩
4 Along with the submission, Respondent filed exhibits R-21 to R-24. ↩
5 See definition in para. 33 below. ↩
[Page 6]
28. On 1 April 2019, at 9:58 pm CET (i.e. during the hearing), Claimant filed its submission on cost.
29. On 1 April 2019, at 11:23 pm CET, Respondent filed its submission on cost.
30. In paragraph 89 of the Application, Claimant commented that he had “no objection to the seat of the emergency proceeding being Stockholm, Sweden". Claimant further requested that the language of the proceeding be English.
31. By its letter to the Parties on 23 March 2019, as noted above, the SCC informed that the SCC Board had decided that the seat of the arbitration is Stockholm.
32. Through Procedural Order No. 1, dated 24 March 2019, the Emergency Arbitrator informed the Parties that the proceedings would be conducted in the English language.
[Page 7]
33. According to the Application, Claimant, Mr Zaza Okuashvili, is a national of the United Kingdom and the Republic of Georgia. He is the ultimate beneficial owner of a group of companies (the “Omega Group”). Claimant indirectly owns four companies established under Georgian law:
34. Claimant also indirectly owns 70 per cent of the shares in Iberia TV ltd, which is a company established under Georgian law that operates a national TV network in Georgia.
35. According to Claimant, Respondent has exposed Claimant to several wrongdoings, namely by:
36. As a result of the aforementioned measures, OGT is said to have sustained heavy losses, resulting in OGT being unable to pay its tax liabilities. As of October 2018, OGT's outstanding tax liabilities amounted to 52,995,509.15 Georgian Lari
[Page 8]
("GEL"), which amounts to roughly USD 19,774,400. No detailed explanation with respect to how the outstanding tax liabilities arose, or how the aforementioned measures are connected to OGT's inability to fulfil its fiscal obligations, have been provided by Claimant. For the purpose of these proceedings, Claimant does not contest the amount of the initial tax liabilities, only the manner in which enforcement of such liabilities has occurred.6
37. On 24 March 2017, the Georgian Revenue Services (the “Revenue Services") issued an attachment order against OGT, in order to ensure payment for overdue tax liabilities. As Claimant had given a personal guarantee for OGT's tax liabilities, some real estate belonging to Claimant was also attached.7
38. On 25 April 2017, OGT filed an application with the Ministry of Finance for the deferral of its tax liability. Such application shall according to Georgian law be referred to a specialist commission for consideration. No such consideration of the application has occurred to date.8
39. On 25 April 2018, the Tbilisi City Court approved the attachment and ordered that the attached property could be compulsorily sold.9 Claimant appealed this decision to the Tbilisi Appeals Court. On 19 July 2018, the Tbilisi Appeals Court confirmed the previous ruling and again approved the attachment and a compulsory sale order.10 During the same proceedings OGT and Claimant allegedly requested the courts to intervene on the basis that the property that has been attached and that is subject to compulsory sale allegedly exceeds the value of the tax liability. No such intervention occurred.
40. In October 2018, Claimant contends that the Ministry of Finance proposed to write of parts of OGT's outstanding tax liabilities and to defer the remainder of the tax liabilities for two years.11 Claimant alleges that such proposal was contingent on Claimant publically revoking bribery allegations that Claimant had previously made
6 Claimant's Comments, para. 24. ↩
7 Exhibit CE-29. ↩
8 Exhibit CE-30. ↩
9 Witness Statement of Mr Zaza Okuashvili, para. 53. ↩
10 Exhibit CE-44. ↩
11 Exhibit CE-52. ↩
[Page 9]
against government figures.12 This proposal was subsequently reneged on by the Revenue Services according to Claimant.
41. On 29 November 2018, the Georgian Ombudsman concluded that Respondent's failure to refer OGT's application to a specialist commission amounted to a breach of OGT's rights and recommended that Respondent transfer OGT's application to such commission and that Respondent summon a meeting to discuss the application.13
42. On 13 December 2018, Claimant notified Respondent about a dispute under the BIT, thereby consenting to arbitration and offering to negotiate an amicable settlement.14
43. On 18 December 2018, the Revenue Services sent a letter to OGT where it offered to partially cancel the forced actions, provided that a partial payment of GEL 1,500,000 was made by OGT.15
44. On 21 February 2019, Claimant received a notice stating that the plot of land belonging to Claimant that had previously been attached had now been seized.16
45. On 22 February 2019, Claimant and OGT received notice from the National Enforcement Bureau (“NEB”) that unless the outstanding tax liability as well as additional charges were satisfied within seven days, the attached property would be subject to compulsory sale at auction.17 OGT did not comply with demand.18
46. On 27 February 2019, the director of OGT met with the bailiffs appointed by the NEB who informed him that the process of valuing OGT's property had already begun, in preparation for selling the property at a compulsory auction. OGT was further informed that it would not be given notice of the time and place of the compulsory auction.19
12 Witness Statement of Mr Zaza Okuashvili, para. 49. ↩
13 Exhibit CE-51. ↩
14 Exhibit CE-53. ↩
15 Exhibit CE-54. ↩
16 Witness Statement of Mr Zaza Okuashvili, para. 56. ↩
17 Exhibit CE-58. ↩
18 Witness Statement of Mr Zaza Okuashvili, para. 55. ↩
19 Witness Statement of Mr Zaza Okuashvili, paras. 57–59. ↩
[Page 10]
47. On 14 March 2019, another letter was sent by the NEB informing that OGT's transport vehicles had been seized, and instructed OGT to immediately present the seized vehicles to the bailiff.20 On 21 March 2019, OGT notified the Tbilisi Bureau of Enforcement that it would place the attached vehicles on a certain place on 22 March 2019.21 According to Respondent, OGT has failed to do so, and the vehicles are thus still in OGT's custody.22
48. Claimant initiated these emergency arbitration proceedings on 22 March 2019.
49. The Emergency Arbitrator will below set forth a summary of the Parties' respective positions. The intention is not to provide an exhaustive account of each submission made by the Parties. Rather, the summary is intended to provide the reader with an overview of the key issues in dispute.
50. Claimant requests that if interim measures are granted, they take the form of an award.23 Also Respondent requests that the decision take the form of an award.24
51. Claimant's position on jurisdiction may be summarised as follows.
52. An international tribunal should be reluctant to refuse interim measures on the basis that it does not have jurisdiction over the dispute. The test is a prima facie test only, and the threshold is low.25
20 Exhibit CE-60. ↩
21 Exhibit CE-62. ↩
22 Respondent's Comments, para. 33. ↩
23 The Application, para. 4. ↩
24 The Reply, para. 61. ↩
25 The Application, section V.A. ↩
[Page 11]
53. The dispute is to be settled under the following arbitration agreements:
54. Claimant has been a national of the United Kingdom since March 2011. The fact that Claimant is a dual national of both the UK and Georgia does not deprive him of the protection of the BIT. The BIT has no exceptions for dual nationals and there is no reason of language or principle why one should be grafted on.26
55. Claimant has an investment in Georgia, namely his indirect ownership of shares in Georgian companies that are part of the Omega Group. The fact that Claimant's ownership of the Georgian companies is by way of intermediate companies does not prevent it from being an investment under the BIT.27
56. Respondent has consented to have disputes decided under the SCC Rules, by way of the most favoured nation (“MFN”) clause in Article 3 of the BIT. Article 10(3) of the Belux-BIT gives investors a choice of referring disputes to arbitration before certain institutes, including the SCC. An arbitrating investor under the Belux-BIT thus receives more favourable treatment than an investor under the BIT. Therefore, the MFN clause in the BIT operates in a manner that means that Respondent has consented to an investor under the BIT electing to arbitrate at the SCC instead of at ICSID.28
26 The Application, section V.B. ↩
27 The Application, section V.C. The relevant companies, established under Georgian law, have been listed in items 33–34 above. ↩
28 The Application, section V.D. ↩
[Page 12]
57. The BIT was signed and entered into force on 15 February 1995. Everything which will be the subject of the forthcoming claim occurred after that date.29
58. Respondent's arguments on jurisdiction may be summarised as follows.
59. Claimant is precluded from pursuing any claim against Respondent under Article 8 of the BIT, as the ICSID Convention explicitly excludes ICSID jurisdiction where Claimant is a natural person having dual nationality, including the nationality of the State party to the dispute (cf. Article 25(1) and (2)(a) of the ICSID Convention).30
60. Claimant's reliance upon the MFN clause in Article 3 of the BIT disregards the preliminary question of whether individuals holding dual Georgian-UK nationality fall within the scope of application of the BIT.31 When properly interpreted pursuant to the rules of interpretation contained in Article 31 of the Vienna Convention, Articles 8(1) and 1(c) of the BIT expressly and irrevocably exclude dual Georgian-UK nationals from the BIT's personal scope of application:32
29 The Application, section V.E. ↩
30 The Reply, paras. 17–20. ↩
31 The Reply, para. 21. ↩
32 The Reply, para. 24. ↩
33 The Reply, para. 25. ↩
[Page 13]
of the other State". The Contracting States cannot have intended to grant the benefits of the BIT to their own nationals, especially not in cases like this where Claimant made his investment in Georgia long before his acquisition of UK nationality on 31 March 2011.34
61. The process of using MFN clauses in relation to investor-State dispute settlement provisions of a BIT is highly debated. The existence of this debate alone shows how complex and controversial the matter is, and that Claimant cannot show even a prima facie basis for the Emergency Arbitrator's jurisdiction.37
62. Claimant's rebuttal arguments may be summarised as follows.
63. A refusal of a request for interim relief by reference to consideration of jurisdiction is warranted only where “the absence of jurisdiction on the merits is manifest”.38
64. Article 1(c) of the BIT defines a “national” solely by reference to the internal laws of each separate State Party. There is no express exclusion of dual nationals from
34 The Reply, para. 26. ↩
35 The Reply, paras. 27–30. ↩
36 The Reply, paras. 31–36. ↩
37 The Reply, para. 37. ↩
38 Claimant's Comments, para. 2. ↩
[Page 14]
this definition.39 When Respondent wished to exclude dual nationals, it did so in clear and explicit terms (cf. Article 1(3)(a) of the Israel-Georgia BIT).40
65. Regarding the interpretation of the BIT, Claimant argues as follows:
66. The reasoning in Dawood Rawat v Mauritius is not applicable to the present case, because the treaty interpreted in that case included a mandatory reference to ICSID jurisdiction. By contrast, Article 8 of the BIT permits a claimant to commence arbitration before ICSID, but does not impose any requirements to do so. Consideration should instead be given to Armas v Venezuela, stating that dual
39 Claimant's Comments, para. 13. ↩
40 Claimant's Comments, para. 14. ↩
41 Claimant's Comments, para. 16 a. ↩
42 Claimant's Comments, para. 16 b. ↩
43 Claimant's Comments, para. 16 c. ↩
44 Claimant's Comments, para. 16d. ↩
[Page 15]
nationals are permitted to bring a claim unless the treaty explicitly excludes dual nationals from protection. At any rate, any existence of divergent opinions would be a reason to find that the low prima facie standard has been made out.45
67. It is broadly accepted that a MFN clause, such as the one in Article 3 of the BIT, allows importation of an arbitration provision from another treaty. The findings in Garanti Koza v Turkmenistan and Venezuela US v Venezuela are relevant for the case at hand. As regards the latter, the tribunal found that an MFN clause could not be used to import a consent to arbitration when the main treaty contained no such consent. However, it could be used to import different conditions under which arbitral proceedings were instituted – and the tribunal considered the choice of arbitral forum to be such a condition. Moreover, Respondent's reliance on the Maffezini case is misplaced, as the MFN clause in that treaty did not expressly apply to the dispute settlement clause. Even if the point was subject of divided opinion, the existence of such divided opinion is enough to make out a prima facie case on jurisdiction.46
68. Respondent's rebuttal arguments may be summarised as follows.
69. Dual Georgian-UK nationals do not fall within the personal scope of application of the BIT. In more detail, Respondent argues the following:
45 Claimant's Comments, paras. 17–19. ↩
46 Claimant's Comments, paras. 20–21. ↩
47 Respondent's Comments, para. 7. ↩
[Page 16]
70. The MFN clause of Article 3 of the BIT cannot be used to import Georgia's consent to SCC jurisdiction when the BIT provides exclusively for ICSID jurisdiction. The Contracting Parties have not consented to SCC jurisdiction in the basic BIT. If Claimant's allegations regarding the MFN clause were correct, the clause would be a carte blanche effectively allowing him to build his own “patchwork” BIT. That would render redundant the actual treaty that was the object of negotiations between Georgia and the UK.50
71. Claimant's position may be summarised as follows.
72. There is a prima facie case on the merits that Claimant's rights under the BIT have been violated by Respondent's mistreatment of Claimant's investment. There is also a reasonable possibility that an arbitral tribunal will find that Respondent intends to expropriate Claimant's property, contrary to Claimant's BIT rights.51
73. In more detail, Claimant holds that Respondent has acted unlawfully and unfairly by (a) failing to consider, using the processes established by law, OGT's application to defer the obligation to pay its tax liabilities (amounting to GEL 52,995,509.15 as of
48 Respondent's Comments, para. 10. ↩
49 Respondent's Comments, paras. 11–12. ↩
50 Respondent's Comments, paras. 14–20. ↩
51 The Application, para. 73. ↩
[Page 17]
October 2018); (b) using other processes, offering to defer OGT's tax liabilities, and subsequently reneging on that proposal; (c) attaching, and acting to compulsorily sell OGT's and Claimant's property on the basis of a tax liability that should have been deferred; and (d) attaching, and acting to compulsorily sell property at a value far greater than the amount of the tax liability.52 These actions by Respondent constitutes breaches of its obligations under Articles 2(2), 3(1)–(2) and 5(1)–(2) of the BIT.53
74. Claimant also argues that this is the culmination of a long campaign of wrongdoing against Claimant, including (a) extortion and theft by Respondent; (b) Respondent's failure to uphold the law and take action with respect to dumping by multinational cigarette companies; (c) Respondent's refusal to issue excise stamps, leading to curtailment and suspension of OGT's factory operations; and (d) Respondent's wrongful actions in 2004 and ongoing denial of justice in relation to them.54
75. An immediate and compulsory sale of Claimant's property would have the effect of destroying part of Claimant's investment in Georgia, and causing untold harm to the remainder of his investment. This is sufficiently grave harm to justify the grant of interim measures.55
76. The interim measures are urgently needed. The procedure for seizing and selling Claimant's property is under way and will continue. The sale could happen at any time. Respondent is not obliged under Georgian law to give any further notice to Claimant before his property is sold. This could be done at any time from 1 March 2019. If interim measures are refused now, Claimant will in practice be unable to obtain interim measures at a later point.56
77. The reparation to which Claimant is entitled under international law is restitution, and the primary relief he will seek in the arbitration is relief that will ensure that he retains his businesses. He will not be “made good" in the form of such relief if he
52 The Application, paras. 9 and 19. ↩
53 The Application, para. 20. ↩
54 The Application, section II.B. ↩
55 The Application, section VI. ↩
56 The Application, section VII. ↩
[Page 18]
receives only an order for monetary compensation (which is only an alternative remedy where restitution is unavailable).57
78. The interim relief requested is proportionate. If the property is sold, Claimant would likely lose entirely one of his main businesses in Georgia and he would also suffer significant losses to all of the rest of his investments in Georgia. By contrast, Respondent would suffer little or no prejudice. There has already been a delay of some months in enforcing repayment of OGT's debt; it us usual under Georgian law and practice for payments of tax debts to be deferred for extended periods; and the addition of appropriate interest will account for any delay in repayment if the claim in the main arbitration fails. Claimant has also repeatedly undertaken to repay OGT's tax liability over a period of time. Finally, there is also a likely harm to third Parties if the interim measures are not granted.58
79. Respondent's position may be summarised as follows.
80. Respondent contests the account of facts given by Claimant in paragraphs 8-32 in the Application. Moreover, a number of the allegations made are irrelevant to the requested interim measures, as these are concerned solely with the payment of OGT's uncontested tax liabilities.59
81. The Application does not meet the degree of urgency required in order to avoid serious and irreparable harm to Claimant's interests. In more detail, Respondent holds that the alleged irreparable harm is Claimant's own doing as the case concerns recovery of uncontested tax liabilities arising out of taxes lawfully levied but unpaid over a number of years.60 The conduct of the NEB has been measured and proportionate.61 Claimant cannot seriously claim that he runs a risk of serious and irreparable harm when he appears to not have taken critical steps under Georgian law in preventing the sale of his assets, namely to reach an acceptable and
57 The Application, para. 83. ↩
58 The Application, section VIII. ↩
59 The Reply, para. 9–11. ↩
60 The Reply, paras. 41-44. ↩
61 The Reply, paras. 46-48. ↩
[Page 19]
reasonable agreement with the Revenue Services regarding the payment of OGT's uncontested tax liabilities and/or to apply to the Georgian courts for a deferral or rescheduling of the NEB's enforcement acts.62 Moreover, Claimant has been aware of its tax liability as well as his inability to pay since 2017, the attachment of OGT's assets was in place in March 2017 and the Georgian courts rendered decisions allowing relevant assets to be sold in April and July 2018. Claimant has known, for a long time, that the enforcement was only a matter of time.63 In summary, there is a lack of any serious urgency.
82. The granting of the requested interim measures would be manifestly dispro-portionate to Respondent's interests, as (a) the tax liabilities incurred by Claimant's companies are uncontested; (b) the Application has been lodged before a forum that manifestly lacks jurisdiction; (c) the interim measures would constitute an impermissible interference with Georgia's sovereign tax powers, as well as the public interest in the enforcement of final judgments; and (d) there is an effective legal remedy under Georgian law which Claimant has opted not to exercise.64
83. Claimant's arguments in rebuttal may be summarised as follows.
84. Refusal of a request for interim relief by reference to consideration of merits is warranted only where the merits of the claim are not “at least plausible”.65
85. Regarding the urgency criterion, Claimant holds the following:
62 The Reply, para. 50. ↩
63 The Reply, paras. 51-52. ↩
64 The Reply, paras. 54–60. ↩
65 Claimant's Comments, para. 2. ↩
66 Claimant's Comments, para. 23. ↩
[Page 20]
failure to consider an application to defer payment of that tax liability is contrary to Georgian law and to the BIT (with the result that fines have been and continue to be imposed inappropriately); and (ii) that the manner in which Respondent is enforcing the tax liability is contrary to Georgian law, contrary to the BIT, and in the absence of the interim relief sought an expropriation of Claimant's property.67
86. Regarding the issue of proportionality, and in addition to what has been set out above, Claimant argues that the interim measures sought are intended to prevent unlawful actions taken by Respondent from causing harm to Claimant's rights. They would therefore be consistent with a concern to uphold the rule of law.70
87. Respondent's rebuttal arguments may be summarised as follows.
88. Claimant conflates two separate requirements, that of urgency with that of serious and irreparable harm. In any event, Claimant fails on both requirements.71
67 Claimant's Comments, paras. 24-27. ↩
68 Claimant's Comments, para. 28. ↩
69 Claimant's Comments, para. 29. ↩
70 Claimant's Comments, paras. 31–33. ↩
71 Respondent's Comments, paras. 21–22. ↩
[Page 21]
89. Regarding the existence of a serious and irreparable harm, Respondent argues the following:
90. Regarding the issue of proportionality, Respondent has acted in accordance in accordance with Georgian law while Claimant has not. The requirement that the interim measures be proportionate to Respondent's interests is and cannot be met.75
72 Respondent's Comments, paras. 27–28. ↩
73 Respondent's Comments, paras. 29–34. ↩
74 Respondent's Comments, paras. 35–38. ↩
75 Respondent's Comments, paras. 40-43. ↩
[Page 22]
91. Claimant has requested that the Emergency Arbitrator grants the following relief:
"The Applicant seeks an order prohibiting Georgia (whether acting through the National Enforcement Bureau or otherwise) from transferring to itself title to property and/or selling property owned by the Applicant, including property owned by the following companies that are directly or indirectly owned by the Applicant:
"The prohibition is to remain in place until the resolution of the present dispute by way of a final award on the merits in the envisaged arbitration between the Parties, but in any event in accordance with the provisions of Article 9(4) of Appendix II to the SCC Arbitration Rules 2017." (Request 1)
[Page 23]
92. Respondent has requested that the Emergency Arbitrator grants the following relief:
93. In rendering this decision, the Emergency Arbitrator has considered the Parties' arguments set out in the Application, the Reply, the Claimant's Comments and Respondent's Comments, reviewing also the documentation filed together with those submissions. To the extent that the Parties' arguments are relevant but not expressly addressed in the reasons below, they must be considered subsumed thereby.
94. In order for the Emergency Arbitrator to be able to grant the interim relief requested by Claimant it is necessary first, as a threshold matter, to determine whether the Emergency Arbitrator has jurisdiction. As the SCC Rules do not define any test for assessing jurisdiction in emergency arbitration proceedings, the test will have to be defined by the Emergency Arbitrator as appropriate.
95. It is generally accepted, and uncontroversial in these proceedings, that jurisdiction cannot be conclusively assessed within the framework of emergency arbitration proceedings, and that the determination therefore must be made on a prima facie basis. It is well established that under international law the threshold for dismissing
[Page 24]
an application for interim measures with reference to lack of jurisdiction is high. The test applied by the International Court of Justice is that the lack of jurisdiction must be found to be manifest.76
96. It is not in dispute that Claimant has made an investment covered by the definition in the BIT and the Emergency Arbitrator finds no reason for not accepting Claimant's assertions in this respect. The dispute between the Parties as regards jurisdiction primarily concerns two other issues. First, the Parties disagree on whether Claimant, being a national of both the United Kingdom and the Republic of Georgia, qualifies as a "national” encompassed by the protection of the BIT. Secondly, the Parties disagree on whether Claimant may rely on the MFN clause in Article 3 of the BIT to gain access to the arbitration provision in the Belux-BIT referring to SCC arbitration.
97. With respect to the first issue, i.e. whether Claimant qualifies as a "national" under the BIT, Claimant has presented a copy of his United Kingdom passport, which is prima facie evidence of him being a national of United Kingdom.
98. It is clear from the wording of the BIT that Claimant is covered by the definition of a UK national contained in Article 1(c) of the BIT. Moreover, it is undisputed that the BIT does not explicitly exclude dual nationals from its scope. Thus, if the assessment were to be made on the basis of Article 1(c) and the explicit wording of the BIT alone, there can be no doubt that Claimant fulfills the nationality criteria under the BIT.
99. The Respondent argues that the BIT must be interpreted to exclude dual nationals and relies on the apparent inconsistency between the definition of "national" in Article 1(c) of the BIT and the definition of “national” incorporated into the BIT by the reference to the ICSID Convention in Article 8 which undisputedly excludes
76 Fisheries Jurisdiction case (United Kingdom of Great Britain and Northern Ireland v. Iceland), Request for the Indication of Interim Measures of Protection, Order of 17 August 1972, I.C.J. Reports 1972, p. 16, at para. 15. See also Nuclear Tests case (Australia v. France), Request for the Indication of Interim Measures of Protection, Order of 22 June 1973, I.C.J. Reports 1973, p. 101, at para. 13. ↩
[Page 25]
dual nationals. The Respondent relies, inter alia, on the award on jurisdiction in Dawood v. Mauritius in support of its position.77
100. The Emergency Arbitrator acknowledges the logical force and rationale of what Respondent is arguing, and finds the outcome in Dawood reasonable and relevant for the assessment of jurisdiction. The Emergency Arbitrator also notes, however, that Claimant has raised a number of counter arguments and contends that Dawood could be distinguished and that there are other decisions supporting its position.
101. The Emergency Arbitrator need not, and indeed should not, make a conclusive determination of the Parties' arguments on jurisdiction at this stage. The Emergency Arbitrator shall only assess whether it is clear even prima facie that the BIT is not applicable to Claimant. The Emergency Arbitrator finds himself unable to conclude that this is the case.
102. The second issue, whether Claimant may rely on the MFN clause in Article 3 of the BIT to gain access to dispute resolution provisions from the Belux-BIT, depends on how the BIT is to be interpreted.
103. The Emergency Arbitrator notes here that the MFN provision through Article 3(3) of the BIT explicitly covers the dispute resolution provision contained in Article 8, which suggests that the BIT does allow a claimant to rely on the MFN provision also in relation to treatment pertaining to dispute resolution. The Emergency Arbitrator also takes note of cases referred to by Claimant supporting an application of Article 3(3) in line with Claimant's arguments.78
104. The Emergency Arbitrator is mindful of the complexity and controversy relating to the use of MFN provisions to incorporate non-substantive rights into treaties. However, whether the conditions for applying the MFN provision as suggested by Claimant will be accepted by the arbitral tribunal need not to be determined by the Emergency Arbitrator. Again, the Emergency Arbitrator only needs to be satisfied
77 Dawood Rawat v. The Republic of Mauritius (UNCITRAL), PCA Case 2016-20, Award on Jurisdiction, 6 April 2018. ↩
78 Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20, Decision on the Objection to Jurisdiction for Lack of Consent, 3 July 2018 and Venezuela US, S.R.L. (Barbados) v. Bolivarian Republic of Venezuela, PCA Case No. 2013-34, Interim Award on Jurisdiction, 26 July 2016. ↩
[Page 26]
that what Claimant is arguing in this respect is not prima facie without merit. In the view of the Emergency Arbitrator, this is not the case.
105. The Emergency Arbitrator thus finds that Claimant has demonstrated at least prima facie that the Emergency Arbitrator has jurisdiction.
106. The next step in the assessment is to define the standards to be met by Claimant in order for the requested interim relief to be granted.
107. Article 1(2) of Appendix II to the SCC Rules provides as follows:
"The powers of the Emergency Arbitrator shall be those set out in Article 37 (1)-(3) of the Arbitration Rules. Such powers terminate on referral of the case to an Arbitral Tribunal pursuant to Article 22 of the Arbitration Rules, or when an emergency decision ceases to be binding according to Article 9 (4) of this Appendix."
108. Article 37 (1)-(3) in turn reads as follows:
"(1) The Arbitral Tribunal may, at the request of a party, grant any interim measures it deems appropriate.
(2) The Arbitral Tribunal may order the party requesting an interim measure to provide appropriate security in connection with the measure.
(3) An interim measure shall take the form of an order or an award."
109. It follows that an Emergency Arbitrator has wide discretion to “grant any interim measures it deems appropriate”.
110. When exercising this broad discretion in respect of a request for interim relief in an international arbitration proceeding,79 the Emergency Arbitrator takes the view that the requirements set forth in Article 17(A)(1)(a) and (b) of the UNCITRAL Model Law on International Commercial Arbitration, as amended in 2006
79 In a formal sense, on the basis of its seat, this emergency arbitration is a Swedish arbitration, however with international connections. Generally, however, SCC is often referred to as an international arbitration. ↩
[Page 27]
(the “UNCITRAL Model Law”), represent an appropriate starting point. Article 17A(1)(a) and (b) provide as follows:
"The party requesting an interim measure under article 17(2)(a), (b) and (c) shall satisfy the arbitral tribunal that:
(a) Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and
(b) There is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination on this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination."
111. It follows that under Article 17 A of the UNCITRAL Model Law, the requesting party must establish: (i) harm not adequately reparable by an award of damages, (ii) proportionality, and (iii) a reasonable possibility to succeed on the merits.
112. However, Article 17 A of the UNCITRAL Model Law primarily addresses interim measures in general, and not explicitly pre-arbitral emergency interim relief. It is therefore appropriate to consider also the specific focus on urgency inherent in the Emergency Arbitrator procedure under the SCC Rules.
113. As the urgency test has not been defined in the SCC Rules, it lies within the discretion of the Emergency Arbitrator to define this requirement as it deems appropriate. The Emergency Arbitrator takes the view that, when defining the urgency requirement, regard must be taken to the fact that the emergency arbitration is a pre-arbitral procedure. The purpose of the emergency proceedings is to provide a possibility to obtain interim relief before such relief can be obtained from the arbitral tribunal. The emergency arbitrator's mandate ceases when the arbitral tribunal is constituted and a party can thereafter direct any requests for interim measures to the arbitral tribunal. Considering the pre-arbitral structure and the overall purpose of the emergency procedure, the Emergency Arbitrator deems it appropriate to formulate the urgency test such that it needs to be established prima facie that, unless the order for interim relief is granted before such relief can be obtained from the arbitral tribunal, irreparable harm is likely to be caused to the requesting party.
114. As the criteria of urgency and irreparable harm to a large extent are intertwined, it is appropriate to treat these components together. Adding the urgency criterion to the
[Page 28]
aforementioned test as defined in Article 17 A of the UNCITRAL Model Law would thus require the requesting party to satisfy the following prima facie test:
115. The Emergency Arbitrator will now proceed to assess whether Claimant's request for interim measures fulfils the test as defined. The analysis will follow the order outlined above.
116. Claimant's primary request is for an order prohibiting Respondent from transferring to itself title to property and/or selling property owned by Claimant and eleven companies directly or indirectly owned by Claimant.80 However, it follows from the Application that the measures, which are alleged to be imminent and having the potential to cause irreparable harm, are the impending sale of certain property belonging to OGT and Claimant himself.81 Claimant has not alleged, and there is no evidence on the record indicating, that Respondent is in the process of taking any measures towards the other companies covered by Claimant's Request 1.
117. It lies in the nature of interim relief that a restrictive approach as to the scope of any order must be adopted. Insofar as the request seeks to prevent non-specified, hypothetical measures in addition to the impending sale or transfer of property belonging to OGT and Claimant, it clearly does not fulfil the requirements for granting interim relief. Claimant's Request 1 can therefore not be granted. The
80 The Application para. 33. ↩
81 See, for instance, the Application paras. 18 and 77. ↩
[Page 29]
Emergency Arbitrator denies Claimant's Request 1 and will proceed to assess Request 2.
118. Claimant's case on urgency and irreparable harm in the context of Request 2 is that Respondent is in the process of seizing and selling all of OGT's property and certain real estate belonging to Claimant, that the sale is unlawful and, if allowed to proceed, will destroy OGT and Claimant's investment in Georgia.82
119. In order for Claimant to meet the urgency component of the test, Claimant must establish prima facie that, unless the requested interim relief is granted before such relief can be obtained from the arbitral tribunal, the sale of the property will proceed and cause irreparable harm to Claimant.
120. The Emergency Arbitrator notes in this respect that the court order providing for the compulsory sale of the property was confirmed by the Tbilisi Court of Appeal on 19 July 2018.83 The decision states that it cannot be appealed. The record further shows that on 20 February 2019, a notice was sent to OGT and Claimant by the NEB. According to the notice, the attached property would be made subject of a compulsory sale unless payment of the outstanding tax liabilities was made within 7 days.84 The Emergency Arbitrator also notes that on the 18 March 2019, the NEB sent a letter to OGT and Claimant in which it informed that a number of OGT's transport vehicles had been seized.85
121. In the view of the Emergency Arbitrator, even if the actual auction procedure has not yet been formally announced, the evidence invoked by Claimant strongly suggest that the compulsory sale process is well underway and that a sale could take place before interim relief could be obtained from an arbitral tribunal.
82 The Application, paras. 13 and 18. ↩
83 Order Of The Administrative Cases Chamber Of The Tbilisi Court Of Appeal In Case No. 3303222170019225257, 19 July 2018, Exhibit CE-44. ↩
84 National Enforcement Bureau Of Georgia Offer On Executing A Decision, 20 February 2018, Exhibit CE-58. ↩
85 Letter From The NEB To OGT, 14 March 2018, Exhibit CE-60. ↩
[Page 30]
122. The Emergency Arbitrator notes in this context that Claimant has not sought to avail himself of the possibilities under Georgian law to defer enforcement measures.86 The Emergency Arbitrator finds it difficult to understand why Claimant has not done so. The Emergency Arbitrator is not in a position to make an assessment as to the likelihood that any application for deferment would succeed and, if so, whether a decision would be rendered in time. In the view of the Emergency Arbitrator, Claimant's omission to seek deferment under local law does, thus, not justify a conclusion that there is no urgency.
123. Moreover, to the Emergency Arbitrators understanding, the possibility to apply for a deferment ceases the moment an auction is announced. The Emergency Arbitrator accepts the evidence presented by Claimant that this could happen any day.
124. The Emergency Arbitrator is therefore satisfied that Claimant has established prima facie that the urgency requirement has been fulfilled.
125. As to the issue of irreparable harm, Claimant needs to establish prima facie that a continuation of the compulsory sale procedure, until relief can be issued by the arbitral tribunal, is likely to cause harm not adequately reparable by an award of damages.
126. It appears to be clear that a compulsory sale of the assets used in an ongoing business at an auction is likely to cause harm. The critical question here is whether the harm should be regarded as irreparable within the meaning of the test defined above.
127. In the view of the Emergency Arbitrator, the meaning of “harm not adequately reparable by an award of damages” (or irreparable harm) cannot be defined with precision, and it follows from the preparatory works to the 2006 version of the Model Law that the intention was not to establish a precise test.87
128. It is clear from a number of other cases that tribunals have generally accepted that the irreparable harm criteria would be met also in situations where the harm, although
86 The Reply para. 49 and Claimant's Comment para. 29. ↩
87 Binder, “International Commercial Arbitration and Conciliation In Uncitral Model Law Jurisdictions”, Third Edition, Sweet & Maxwell, 2010, p. 248. ↩
[Page 31]
capable of financial compensation, cannot be adequately repaired by an award of damages.88
129. Examples of irreparable harm alluded to by the UNCITRAL Model Law Working Group include "the loss of a priceless or unique work of art, a business becoming insolvent, essential evidence being lost, an essential business opportunity (such as the conclusion of a large contract) being lost or harm caused to the reputation of a business as a result of trademark infringement.”89 Also these examples include situations where the harm clearly would be capable of financial compensation, but include an element that is not directly measurable in money.
130. In this case, the question is whether the harm that could be caused to Claimant by the compulsory sale of OGT's assets and Claimant's real estate can be regarded as irreparable. Claimant argues that the sale of the attached property will “effectively destroy OGT", as it will strip the company of all of its assets, including those used in the business.90 The Emergency Arbitrator finds no reason to doubt that a forced sale of OGT's assets likely will result the destruction of the company and its business as such. Although the harm suffered as a result of the consequences of the forced sale would at least in part be capable of financial compensation, a business becoming insolvent and forced to shut down would also result in harm which is not purely financial.91
131. Based on the foregoing, the Emergency Arbitrator finds that Claimant, as regards the sale of assets belonging to OGT, has established prima facie the irreparable harm component of the test.
88 See, for instance, Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v Government of Mongolia, UNCITRAL, Order on Interim Measures, 2 September 2008 and Perenco Ecuador Ltd. v. The Republic of Ecuador and Empresa Estatal de Petróleos del Ecuador (Petroecuador) (ICSID Case No. ARB/08/06), Decision on Provisional Measures of 8 May 2009. ↩
89 Binder, “International Commercial Arbitration and Conciliation In Uncitral Model Law Jurisdictions”, Third Edition, Sweet & Maxwell, 2010, p 247. ↩
90 The Application, para. 18 and Witness Statement of Zaza Okuashvili, paras. 63–65. ↩
91 See for example Ioan Micula, Viorel Micula, SC European Food SA, SC Starmill SRL and SC Multipack SRL v. Romania, (ICSID Case No. ARB/05/20), Decision on Claimants' Application for Provisional Measures of 2 March 2011, para 68, as referred to in Miles, “Provisional Measures Before International Courts and Tribunals", Cambridge University Press, 2017, at p. 262 and Perenco Ecuador Ltd. v. The Republic of Ecuador and Empresa Estatal de Petróleos del Ecuador (Petroecuador) (ICSID Case No. ARB/08/06), Decision on Provisional Measures of 8 May 2009, para. 46. ↩
[Page 32]
132. As regards the real estate belonging to Claimant, however, the assessment must be different. The harm that Claimant may suffer here would be confined and limited to a specific piece of property. It has not been suggested that the sale of the property would economically ruin Claimant. The Emergency Arbitrator sees no reason why that harm could not be adequately restored by an award of damages. Claimant's request relating to the sale of real estate must therefore be denied.
133. Claimant must establish prima facie that the harm it is likely to suffer substantially outweighs the harm that is likely to result to Respondent if the interim measure is granted.
134. As concluded above, the harm that Claimant is likely to suffer if its request for interim relief is denied is potentially significant and irreparable. The interim measure sought is temporary. A decision in Claimant's favour would be limited to provisionally staying the seizure and compulsory sale of OGT's assets until the decision ceases to be binding pursuant to Appendix II, Article 9 of the SCC Rules.
135. The Emergency Arbitrator recognises the general concerns as regards proportionality raised by Respondent in its submissions. However, the proportionality assessment must reasonably focus on the concrete specific harm, which can be caused to Respondent as a result of a decision in favour of Claimant. The Emergency Arbitrator finds it difficult to conclude that Respondent would suffer any significant harm by provisionally postponing the seizure and sale of OGT's assets for a limited time. The Emergency Arbitrator finally notes that Respondent argues that a similar possibility to defer enforcement exists under Georgian law. The Emergency Arbitrator thus finds prima facie that the proportionality requirement is fulfilled.
136. The final component of the test for interim relief requires Claimant to establish prima facie that there is a reasonable possibility that Claimant will succeed on the merits of the claim.
[Page 33]
137. The claim that is relevant to consider here is Claimant's claim under the BIT, which Claimant seeks to protect by the interim measure. This is the claim described by Claimant under section A in the Application.
138. In support of this claim, Claimant argues, inter alia, that Respondent, in violation of Georgian law, has failed to consider OGT's application to defer the obligation to pay tax liabilities. According to Claimant, the attachment and impending compulsory sale of OGT's assets is therefore based on tax liabilities that should have been deferred. Claimant also argues that Respondent acted unfairly and unlawfully by attaching and acting to compulsory sell property at a value far greater than the amount of the tax liability.
139. Claimant submits that the actions by Respondent constitute breaches of Respondent's obligations under the BIT and has referred to several different protection standards under the BIT.
140. Respondent points out that the execution proceedings concern uncontested tax liabilities and are carried out in full compliance with Georgian law as confirmed by the Georgian courts.92
141. It is not the task of the Emergency Arbitrator to pre-determine the merits of the dispute or to second guess the Georgian courts. The Emergency Arbitrator need only be satisfied that there is a reasonable possibility that Claimant's claim will succeed on the merits in a future arbitration proceeding under the BIT. This is a low threshold.
142. A preliminary review of the facts and evidence invoked by Claimant indicates that Claimant was not provided the opportunity to have its request to defer payment of the tax liabilities considered in accordance with the law.93 The record also suggests that the recent developments with respect to the attachment and seizure of OGT's assets were preceded by a long line of controversies between Claimant and his companies and Respondent. Claimant alleges that the imminent measures relating to the compulsory sale of OGT's assets "represents the culmination of a long campaign
92 The Reply, paras. 42 and 58. ↩
93 Recommendation By The Public Defender Sent To The Ministry Of Finance Of Georgia, 29 November 2018, Exhibit CE-51. ↩
[Page 34]
of wrongdoing against the Applicant and his investments by the Respondent, all with the purpose of weakening the Omega Group financially so that it could be subject to extortion, theft of money, property and shares, and pressure to silence criticism of government wrongdoing voiced by Iberia TV”.94
143. There are aspects of Claimant's case on the merits, as presented in these emergency proceedings, which seem less convincing. It is also clear that the relief that Claimant suggests that it will be seeking is rarely granted. However, the Emergency Arbitrator finds himself unable to conclude that the claims lack any credible basis, or that there is not even a reasonable possibility for Claimant to succeed on the merits. The Emergency Arbitrator consequently finds that Claimant has satisfied also this part of the test.
144. As Claimant has satisfied all components of the test, interim relief shall be granted. The order shall however be limited to OGT's assets as further set forth in paragraph 132 above.
145. Pursuant to Article 1 (2) of Appendix II to the SCC Rules and Article 37 (3) of the SCC Rules, the Emergency Arbitrator decision shall take the form or an order or an award. Both Parties have in the present case requested that the Emergency Arbitrator's decision should take the form of an award. In light of the Parties' requests, the Emergency Arbitrator's decision will take the form of an award.
146. In accordance with Article 10 (5) of Appendix II to the SCC Rules, at the request of a party, the Emergency Arbitrator shall in the emergency decision apportion the costs of the emergency proceedings between the parties.
147. According to Article 10 (6) of Appendix II to the SCC Rules, when apportioning the costs of the emergency proceedings, the Emergency Arbitrator shall apply the principles of Articles 49 (6) and 50 of the SCC Rules.
94 The Application, para. 8 and Witness Statement of Zaza Okuashvili, paras. 12–16. ↩
[Page 35]
148. The reference to Article 49 (6) means that the Emergency Arbitrator shall, at the request of a party, apportion the costs of the emergency arbitration between the parties, having regard to the outcome, each party's contribution to the efficiency and expeditiousness of the emergency arbitration and any other relevant circumstances. By virtue of Article 50, the Emergency Arbitrator shall, at the request of a party, order one party to pay any reasonable costs incurred by another party, including costs for legal representation, having regard to the outcome, each party's contribution to the efficiency and expeditiousness of the emergency arbitration and any other relevant circumstances.
149. In their submissions, both Claimant and Respondent have requested the Emergency Arbitrator to make a ruling to the effect that the opposing party must (i) bear the costs for the fees of the Emergency Arbitrator (EUR 16,000 plus VAT) and the application fee (EUR 4,000 plus VAT) and (ii) be ordered to pay compensation for costs for legal representation, as specified by each party.95
150. Consequently, the Emergency Arbitrator has the task to apportion the costs of the emergency proceedings between the parties.
151. Both Parties have contributed equally to the efficiency and expeditiousness of the emergency arbitration. As to the outcome, Claimant must be regarded as the prevailing party. However, the outcome of these proceedings is largely a result of the application of low prima facie standards and says little about the actual merits of Claimant's case. The Emergency Arbitrator further observes that most of the work carried out by Claimant for these proceedings must reasonably be useful for the upcoming arbitration proceedings. Considering the above, and also taking into account that Claimant's requests for interim measures are only partially granted, the Emergency Arbitrator does not find it appropriate to order Respondent to bear Claimant's full costs for legal representation (including disbursements). The Emergency Arbitrator finds it reasonable to limit the compensation to GBP 60,000, and that Respondent is ordered to pay the fees of the Emergency Arbitrator and the application fee (amounting in total to EUR 20,000 plus VAT).
95 See the Application, para. 36, Reply, para. 61(c) and the Parties' respective cost submissions. ↩
[Page 36]
152. The Emergency Arbitrator notes that Claimant has also requested an order requiring Respondent to pay “interest on the costs awarded, calculated from the date of the award of costs, at a rate of 2% above LIBOR with semi-annual compounding." Claimant's submission on costs includes no explanation as to how semi-annual compounding is justified. The Emergency Arbitrator sees no reason to award a compounding interest. The interest rate a such is reasonable.
153. In conclusion, the Emergency Arbitrator finds that Respondent should be ordered to compensate Claimant for legal costs in an amount of GBP 60,000 and alone to bear the cost due to the Emergency Arbitrator and the SCC, together with interest calculated from the date of the award at a rate of 2% above LIBOR.
154. For the reasons stated above, the Emergency Arbitrator:
[Page 37]
Place of arbitration: Stockholm, Sweden
Date: 2 April 2019
Signature
Fredrik Andersson
Emergency Arbitrator