CALDERWOOD & HARKNESS LLP 55 Bishopsgate London EC2N 3AH United Kingdom
HARCASTLE FENTON LLP 12 Essex Street London WC2R 3AA United Kingdom
June 17, 2022
The Secretary-General International Centre for Settlement of Investment Disputes 1818 H Street, N.W. Washington, D.C. 20433 United States of America
Re: Dunmore Energy Holdings Ltd. v. Republic of Valderia (ICSID Case No. ARB/22/11) — Joint Request for Suspension of Proceedings
Dear Madam/Mr. Secretary-General,
1. Introduction and Identification of Counsel
We write jointly on behalf of the Claimant and the Respondent in the above-referenced proceedings to submit a joint request for the suspension of proceedings, as further described below.
Calderwood & Harkness LLP writes on behalf of the Claimant, Dunmore Energy Holdings Ltd. ("DEH" or the "Claimant"), an exempted company duly incorporated and existing under the laws of the Cayman Islands, with its registered office at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands, and its principal business office at 27 Curzon Street, London W1J 5HT, United Kingdom. The contact partner for the Claimant in this matter is Vivienne St. Claire, Partner, Calderwood & Harkness LLP, 55 Bishopsgate, London EC2N 3AH, United Kingdom. DEH is also represented by its local Valderian counsel, Castaño Herrera & Asociados, with offices at Calle Bolívar 742, Torre Empresarial, Piso 8, Puerto Valdés, Valderia, led by Dr. Gabriel Castaño Herrera.
Harcastle Fenton LLP writes on behalf of the Respondent, the Republic of Valderia (the "Respondent" or "Valderia"), acting through the office of the Attorney General, Dr. Renata Villamizar Ochoa. The contact partner for the Respondent in this matter is Charles Winterbottom QC, Partner, Harcastle Fenton LLP, 12 Essex Street, London WC2R 3AA, United Kingdom. The Republic of Valderia is also represented by its local counsel, Ortega & Bernal, Abogados, with offices at Avenida de la Constitución 310, Edificio República, Puerto Valdés, Valderia, led by Dr. Alejandro Bernal Quiroga.
The Claimant and the Respondent are referred to collectively herein as the "Parties" and individually as a "Party."
2. Procedural Background
On March 15, 2022, DEH filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") pursuant to Article 36 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention"), asserting claims against the Republic of Valderia arising from the expropriation of DEH's investment in Concession No. HYD-2012-047 (Bloque Orinoco Sur), a thirty (30)-year oil and gas concession in the Valderian Orinoco Basin covering approximately 1,240 square kilometres. DEH's investment in the concession was held through its wholly-owned subsidiary, Dunmore Valderia upstream S.A. ("DVU"), a sociedad anónima duly incorporated and existing under the laws of the Republic of Valderia.
DEH's claims are brought under the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed on May 22, 2006 and entered into force on November 1, 2006 (the "UK-Valderia BIT" or the "Treaty"), and specifically under Articles 3 (Fair and Equitable Treatment), 5 (Expropriation and Compensation), and 8 (Settlement of Disputes between an Investor and a Host State) thereof. The Claimant notes that the UK-Valderia BIT was extended to the Cayman Islands, a British Overseas Territory, by virtue of the United Kingdom's territorial extension declaration dated February 14, 2007, thereby conferring upon DEH, as a Cayman Islands-incorporated entity, standing to invoke the protections of the Treaty.
On April 8, 2022, the Secretary-General of ICSID registered the Request for Arbitration in accordance with Article 36(3) of the ICSID Convention, and the case was assigned ICSID Case No. ARB/22/11. The Parties were duly notified of the registration on the same date.
As of the date of this letter, the Claimant has nominated Professor Ingrid Svensson (a national of Sweden and Professor of International Law at the University of Uppsala) as its party-appointed arbitrator. The Respondent has not yet nominated an arbitrator, and the Tribunal has not yet been constituted pursuant to Articles 37–40 of the ICSID Convention.
The dispute arises from a series of legislative, executive, and administrative measures taken by the Republic of Valderia during the period from April 2021 through September 2021, which cumulatively resulted in the deprivation of DEH's investment. These measures include, but are not limited to, the following:
(a) Presidential Decree No. 2021-0417, dated April 17, 2021, ordering the nationalization of strategic hydrocarbon assets within the Republic of Valderia and the reversion of designated concession rights to the State;
(b) the physical occupation of DEH's central processing facility (CPF Orinoco Sur) by units of the Valderian Armed Forces and personnel of the state-owned enterprise PetroValderia S.A. on May 3, 2021, effectively dispossessing DVU of operational control over the concession area;
(c) Presidential Decree No. 2021-0623, dated June 23, 2021, formally ordering the transfer of all rights, interests, and obligations under Concession No. HYD-2012-047 to PetroValderia S.A., the national oil company wholly owned by the Republic of Valderia;
(d) Ministerial Resolution No. MEN-2021-089, issued by the Ministry of Energy and Natural Resources on August 5, 2021, revoking all operating licences, environmental permits, and regulatory authorisations previously granted to DVU in connection with Bloque Orinoco Sur; and
(e) the freezing of DVU's bank accounts at Banco Nacional de Valderia on September 1, 2021, pursuant to an order of the Superintendency of Banks and Financial Institutions, which deprived DVU of access to its operating funds and rendered the company unable to meet its financial obligations within Valderia.
Prior to the filing of the Request for Arbitration, DEH served a formal Notice of Dispute on the Republic of Valderia on October 14, 2021, in accordance with Article 8 of the UK-Valderia BIT, thereby triggering the six (6)-month cooling-off period prescribed by the Treaty. The Parties engaged in limited correspondence during the cooling-off period, but were unable to achieve an amicable resolution of the dispute. The cooling-off period expired on April 14, 2022 without resolution.
DEH's total claim quantum, as set forth in the Request for Arbitration, is USD 867 million (eight hundred and sixty-seven million United States dollars), comprising the following categories of loss:
(i) USD 347 million in sunk capital expenditure, representing DEH's aggregate investment in exploration, development, and production infrastructure associated with Bloque Orinoco Sur over the life of the concession;
(ii) USD 312 million in lost future profits, calculated on a discounted cash flow ("DCF") basis reflecting the net present value of the cash flows that DEH would have reasonably expected to derive from the concession for the remainder of its thirty-year term; and
(iii) USD 208 million in consequential damages, including losses arising from the freezing of DVU's bank accounts, the disruption of DEH's broader commercial operations in the region, reputational harm, and the costs of mitigation.
The foregoing quantum is subject to further refinement and adjustment as the proceedings develop and as the Claimant's quantum experts complete their assessment. The Claimant expressly reserves the right to amend, supplement, or otherwise modify its claim quantum at any appropriate stage of the proceedings.
3. State-to-State Diplomatic Consultations
The Parties wish to inform the Secretary-General that, following the filing of the Request for Arbitration, the Government of the United Kingdom of Great Britain and Northern Ireland, acting through the Foreign, Commonwealth & Development Office ("FCDO"), and the Government of the Republic of Valderia, acting through the Ministry of Foreign Affairs (under the direction of Ambassador Diego Fuentes Castillo, Minister of Foreign Affairs of the Republic of Valderia), have commenced state-to-state diplomatic consultations concerning the measures underlying the present dispute.
The Parties understand that these consultations are being conducted at the inter-governmental level and extend beyond the specific circumstances of DEH's investment, encompassing the broader question of the treatment of foreign-held hydrocarbon concessions in the Republic of Valderia, the terms of any compensation framework that the Republic of Valderia may establish in connection with the nationalization programme initiated by Presidential Decree No. 2021-0417, and the future regulatory environment for foreign direct investment in Valderia's extractive sector.
While neither Party is directly a participant in these diplomatic consultations, both Parties have been informed by their respective governments that the consultations are ongoing and may provide a constructive framework for the amicable resolution of the dispute — or, at a minimum, for narrowing the issues in controversy — without the need for continued arbitral proceedings at this time. Both Parties consider it prudent and in the interests of the efficient administration of these proceedings to allow the diplomatic consultations a reasonable opportunity to progress before incurring the costs and procedural steps associated with the constitution of the Tribunal and the establishment of a procedural timetable.
4. Joint Request for Suspension
In light of the foregoing circumstances, and pursuant to ICSID Arbitration Rule 10(2), or, to the extent that this provision may be held to apply only after the constitution of the Tribunal, under the inherent powers of the Secretary-General to administer proceedings during the pre-constitution phase of a case, the Claimant and the Respondent hereby jointly and respectfully request that the proceedings in ICSID Case No. ARB/22/11 be suspended until further notice from either or both of the Parties.
Both Parties freely and unconditionally consent to this suspension. This joint request is submitted in good faith and reflects the shared view of the Parties that a temporary suspension will serve the interests of procedural efficiency and may facilitate the resolution of the dispute through the diplomatic channels described in Section 3 above.
The Parties propose that the suspension remain in effect for an initial period of six (6) months from the date of this letter, with a review date of December 15, 2022, at which time the Parties will jointly inform the Secretary-General in writing as to whether they wish to:
(a) seek a further renewal or extension of the suspension for such additional period as the Parties may agree;
(b) reactivate the proceedings and resume the process for the constitution of the Tribunal and the establishment of a procedural calendar; or
(c) discontinue the proceedings in the event that an amicable resolution has been achieved.
In the event that the Parties are unable to agree on a joint communication to the Secretary-General by December 15, 2022, either Party shall be entitled to notify the Secretary-General individually and request the reactivation of the proceedings.
5. Reservation of Rights
Each Party expressly and unequivocally reserves all of its rights, claims, defenses, and arguments under the ICSID Convention, the ICSID Arbitration Rules, the UK-Valderia BIT, general international law, and any other applicable law or instrument.
Nothing in this joint request, the fact of the suspension of proceedings, or any communications between the Parties in connection therewith shall constitute, or shall be construed as constituting, a waiver, admission, or concession by either Party with respect to any aspect of the dispute, including but not limited to:
(a) matters of jurisdiction, including the jurisdiction of ICSID and the jurisdiction of any tribunal constituted in these proceedings;
(b) matters of admissibility, including any requirements of the UK-Valderia BIT or applicable law that may bear on the admissibility of the Claimant's claims;
(c) the merits of the dispute, including the characterisation and legality of the measures at issue;
(d) the quantum of damages claimed by the Claimant; or
(e) any procedural matter.
Without limiting the generality of the foregoing, the Claimant expressly reserves its right to reactivate these proceedings at any time during the period of suspension, including by requesting that the Tribunal constitution process resume forthwith. The Respondent expressly reserves all rights to raise jurisdictional objections, objections to admissibility, and any other preliminary objections in due course, and nothing in this letter shall be construed as a submission to the jurisdiction of the Centre or of any tribunal constituted hereunder.
6. Constitution of the Tribunal
Given the nature and purpose of this joint request for suspension, the Parties respectfully suggest that the process for the constitution of the Tribunal — including, without limitation, the nomination by the Respondent of its party-appointed arbitrator and the appointment of the presiding arbitrator by agreement of the Parties or, failing such agreement, by the Chairman of the ICSID Administrative Council — be held in abeyance for the full duration of the suspension. The Parties consider that this approach will avoid unnecessary expenditure and administrative burden during a period in which the proceedings are not actively advancing.
For the avoidance of doubt, the Claimant's nomination of Professor Ingrid Svensson as its party-appointed arbitrator shall remain in full force and effect and shall not be affected, withdrawn, or otherwise prejudiced by the suspension of proceedings. Upon reactivation of the proceedings, the Respondent shall be afforded the time period prescribed by the ICSID Convention and the Arbitration Rules (or such time as the Parties may agree) to nominate its party-appointed arbitrator, and the process for the appointment of the presiding arbitrator shall proceed thereafter in accordance with the applicable rules.
7. Correspondence and Notices
The Parties request that all correspondence, notifications, and other communications from the Centre in connection with ICSID Case No. ARB/22/11 continue to be directed to the following representatives:
For the Claimant:
Vivienne St. Claire Partner Calderwood & Harkness LLP 55 Bishopsgate London EC2N 3AH United Kingdom
With copies to:
Dr. Gabriel Castaño Herrera Castaño Herrera & Asociados Calle Bolívar 742 Torre Empresarial, Piso 8 Puerto Valdés, Valderia
For the Respondent:
Charles Winterbottom QC Partner Harcastle Fenton LLP 12 Essex Street London WC2R 3AA United Kingdom
With copies to:
Dr. Alejandro Bernal Quiroga Ortega & Bernal, Abogados Avenida de la Constitución 310 Edificio República Puerto Valdés, Valderia
The Parties will notify the Secretary-General promptly in the event of any change to the above contact details.
8. Closing
The Parties respectfully request that the Secretary-General confirm receipt of this joint request and the suspension of proceedings in ICSID Case No. ARB/22/11 at her or his earliest convenience. The Parties further request that any written acknowledgement or order issued by the Centre in connection with this request be communicated to both Parties simultaneously through the contact details set forth in Section 7 above.
The Parties are grateful to the Secretary-General and to the staff of the Centre for their continued assistance in the administration of these proceedings, and remain at the Centre's disposal should any further information or clarification be required in connection with this joint request.
We thank you for your kind attention to this matter.
Yours faithfully,
For the Claimant, Dunmore Energy Holdings Ltd.:
CALDERWOOD & HARKNESS LLP
By: ________
Name: Vivienne St. Claire
Title: Partner
Date: June 17, 2022
For the Respondent, the Republic of Valderia:
HARCASTLE FENTON LLP
By: ________
Name: Charles Winterbottom QC
Title: Partner
Date: June 17, 2022
cc:
Sir Malcolm Dunmore, KBE, Chairman, Dunmore Energy Holdings Ltd.
Priya Nandakumar, Chief Executive Officer, Dunmore Energy Holdings Ltd.
Dr. Renata Villamizar Ochoa, Attorney General, Republic of Valderia
Ambassador Diego Fuentes Castillo, Minister of Foreign Affairs, Republic of Valderia
Dr. Gabriel Castaño Herrera, Castaño Herrera & Asociados, Puerto Valdés, Valderia
Dr. Alejandro Bernal Quiroga, Ortega & Bernal, Abogados, Puerto Valdés, Valderia