These domestic measures may adversely affect foreign investors. International investment law may provide protection against these risks, both in the form of legal guarantees to banking and financial sector investors on their investments and recourse against governments through international arbitration under investment treaties. While arbitral institutions have so far declined to establish an institutional framework to deal with mass claims in arbitration, the decision on jurisdiction in Adamakopoulos v. Cyprus, February 7, 2020,1 reviews earlier arbitral decisions and offers some clarity on these types of cases.
The methods and procedures for addressing mass claims under public international law, where each claim is treated as separate, would not be practical for investment arbitration. Mass claims proceedings in investment treaty arbitration often involve a large number of claimants seeking speedy adjudication. In the last decade, investment treaty tribunals have commonly accepted jurisdiction over claims of multiple, unaffiliated parties.2 A recent case illuminates elements of a potential framework for addressing these types of cases, which includes ascertaining the pool of claimants early, bifurcation and practical considerations regarding documentation.
Adamakopoulos v Cyprus
In 2012-2013, two Cypriot banks, Laiki Bank and Bank of Cyprus, suffered losses due to their exposure to the Greek economic crisis. As an emergency measure, in March 2013, Cyprus entered into an agreement with the European Central Bank (“ECB”), the International Monetary Fund (“IMF”) and the European Commission to adopt an adjustment plan. The plan resulted in the merger of the two banks into the new Bank of Cyprus and the bail-in of the deposit holders, shareholders and bondholders of the Bank of Cyprus. The Claimants – 951 Greek nationals, six Greek companies and one Luxembourg company – brought claims against Cyprus before the International Centre for Settlement of Investment Disputes (“ICSID”) under the Greek-Cyprus bilateral investment treaty (“BIT”) and Luxembourg-Cyprus BIT. They alleged that the adjustment plan violated Cyprus’ obligations to them as investors under those BITs. The deposit holders alleged that they received a “haircut” reducing each Claimant’s deposits to US$ 100,000. Bondholders alleged that their bonds were rendered worthless, either because they were converted into Bank of Cyprus equity, or in the case of Laiki Bank, through the resolution measures for that bank.
Cyprus objected to the multi-party claims on several bases, framed as jurisdictional arguments. Cyprus’ main jurisdictional objections were that (i) multi-party claims were outside the Tribunal’s jurisdiction and inadmissible absent the state Respondent’s consent and (ii) consolidation of the claims was not permissible. For a tribunal to have jurisdiction over an investment claim, it must have authority to make a decision affecting the merits of the case. The concept of admissibility refers to the power of the tribunal to decide a case at a particular point in time, having regard to a possible temporary or permanent defect within the claim.
Jurisdiction
The Tribunal held that it had jurisdiction over both the individual claims and the mass claim. Relying on the Memorial on the Merits submitted by the Claimants,3 the Tribunal concluded that there was “substantial unity” in the claims made and the Respondent’s alleged liability was similar under both BITs.4 The Tribunal’s only concern about its jurisdiction was the ability to characterize the mass claim by 956 claimants as a single dispute, whereas the real and practical issue the Tribunal faced was the manageability of a mass claim with such a large number of claimants within the ICSID framework.5
The Tribunal distinguished earlier ICSID decisions in Allemani and Ambiente (90 and 74 claimants, respectively),6 as the number of claimants in the Adamakopoulos case was well above the number of claimants in those cases and neither of them proceeded to resolution. Nevertheless, the Tribunal followed the approach of the Tribunal in Allemani,7 asserting that there was no consequence from using the “mass claims” terminology. The majority termed the case a “mass claim” on the basis that it was brought by a large number of claimants within the scope of a single case, but Allemani was not a class action, nor a representative claim or consolidation of claims. The Tribunal disagreed with Cyprus’ position that the BITs did not allow for mass claims, as they used the singular instead of the plural when describing an “investor.”8 Furthermore, the Tribunal concluded that no separate consent was required for mass claims under the BITs and no such requirement could be implied.9
Admissibility
Cyprus’ concerns about the admissibility of mass claims related to two specific issues: (1) the conduct of the proceedings and (2) the post-award phase. The Tribunal considered several factors to assess the manageability issues during the conduct of the proceedings: balancing the rights of the claimants to have their claims heard, the capacity of the ICSID framework to manage the claim process, and safeguarding the due process rights of the Respondent.10
The Respondent raised concerns relating to the post-award phase, such as how annulment procedures might work for such a large number of claimants and how to assess requests for the recovery of costs. The Tribunal held that these issues were not about admissibility and therefore had no bearing on the Tribunal’s jurisdiction. Rather, the Tribunal addressed these issues as raising the question whether the Respondent was entitled to security for costs in these circumstances.11 The Tribunal ordered the Respondent to file an application for security for costs within 30 days of its decision on jurisdiction.12
In relation to the Respondent’s case management concerns, the majority disagreed with the tribunal in Abaclat,13 which had decided that there was a mandate for the tribunal under the ICSID system to create a new procedural framework, outside the ICSID framework, to deal with the case. The Tribunal concluded that the case should and could be managed within the ICSID framework. The majority did not consider that the likelihood that the proceedings would last many years should automatically constitute a reason for finding the claim inadmissible.14
In order to proceed with the case, the Tribunal concluded certain conditions would have to be fulfilled. First, the pool of Claimants would have to be fixed because it would be unreasonable for the Respondent and would create general uncertainty for all parties involved if individual Claimants were permitted to exit from the mass claim at will.15 Second, the Tribunal held there was a good argument in favour of bifurcation between the liability and damages phases and therefore invited the parties to make submissions on bifurcation within 30 days of its decision on jurisdiction.16
Procedural challenges to be considered by counsel and claimants when considering mass claims
Certain procedural lessons can be learnt from Adamokopoulos and other cases to be implemented in future mass claims brought under investment treaties. Cases such as Abaclat, Ambiente and Adamakopoulos show that a general arbitral structure arises in mass claims proceedings, despite tribunals refusing to recognize a specific institutional framework for mass claims. In the initial phase, there are general jurisdictional issues common to all claimants. The respondent will raise objections as to the number of claimants. A tribunal order may be required, fixing the number of claimants and setting out the procedure for possible bifurcated proceedings. In the second phase, there will be general liability and damages issues that are common to all claimants. Counsel should also consider a third phase, to consider individualized jurisdictional, liability and damages issues. This phase may need to be run in parallel to the second phase and might involve independent verification of claimant data and documentation.
Mass claims will also bring some unique practical considerations. The volume of documentation and information which will need to be collected from each claimant will require careful organization and may involve liaising with local counsel, depending on where all the claimants are located. For each claimant, counsel will have to collect, inter alia, the originally signed consent, the power of attorney, the signed delegation of authority to an agent to coordinate with the claimants and counsel, the proof of ownership of investment, proof of nationality at relevant points in time, originally signed attestation that the claimant is not a dual national of the host state and the originally signed questionnaire covering all other relevant information.
The jurisdictional decision in Adamakopoulos may prompt other investors to consider investment treaty arbitration as a means of recourse against sovereign government economic decisions. The decision brings some clarity as to the practical hurdles faced by claimants in mass claims arbitrations, but it still lacks a conclusive decision on a mass claims framework in investment treaty arbitration.
1 Theodoros Adamakopoulos and others v. Republic of Cyprus, ICSID Case No. ARB/15/49, Decision on Jurisdiction (Feb. 7 2020).
2 See Antoine Goetz and others v. Republic of Burundi (ICSID Case No. ARB/95/3); Suez, et al. v. The Argentine Republic (ICSID Case No. ARB/03/17), or Urbaser S.A., et al. v, The Argentine Republic (ICSID Case No. ARB/07/26).
3 Supra note 1 at para. 206.
4 Id. at para. 210.
5 Id. at para. 214.
6 Giovanni Alemanni and others v. The Argentine Republic (ICSID Case No. ARB/07/8); Ambiente Ufficio S.p.A. and others v. Argentine Republic (ICSID Case No. ARB/08/9).
7 Giovanni Alemanni and Others v. The Argentine Republic, ICSID Case No. ARB/07/8, Decision on Jurisdiction and Admissibility, para. 267 (Nov. 17, 2014).
8 Supra note 1 at para. 197.
9 Id. at para. 201.
10 Id. at para. 224. Id. at para. 235.
12 Id. at para. 264.
13 See Abaclat and others v. The Argentine Republic, ICSID Case No. ARB/07/5 (formerly known as Giovanna Beccara and Others v Argentine Republic).
14 Supra note 1 at para. 233.
15 Id. at para. 260.
16 Id. at para. 262.
