Gabriel Resources Ltd and Gabriel Resources (Jersey) Ltd v Romania:<i>According Fair and Equitable Treatment to an Environmentally, Socially and Culturally Controversial Project</i>

This case comment analyzes the Award of 8 March 2024 in Gabriel Resources and Gabriel Resources (Jersey) v Romania, an ICSID case initiated on the basis of the Canada–Romania bilateral investment treaty (Canada BIT)3 and the United Kingdom (UK)–Romania BIT (UK BIT).4 It is one of several international investment law cases concerning disputes about regulatory approvals for mining operations.5 These cases typically emerge when there is significant public opposition to proposed new mining ventures as the location, scale and method of operations become better known. Host States may take measures to alleviate concerns of residents, such as imposing stricter regulatory controls or withholding development approval. The consequences for investors can range from disappointment about process because they had expected swift regulatory approval, through to significant effects on their operations, such as costly delays or even project abandonment. These cases bring to the fore critical and challenging questions about how international investment law is expected to resolve the tension that commonly exists between public and private rights. In Gabriel Resources v Romania, the Claimants alleged Romania had politicized and delayed approval for their controversial open-pit mining project (the Roşia Montană Project). The Claimants made a US$4.4 billion claim, asserting that Romania had violated various provisions under both BITs, including that Romania had failed to accord the investment ‘fair and equitable treatment’ (FET) and had indirectly expropriated the investment. The Tribunal was constituted in June 2016 following the filing of the ‘Request for Arbitration’ in July 2015.6 The complexity of the case is reflected in a nearly 400-page Award released after almost eight years, along with an extensive procedural history marked by 36 procedural orders.7 The Tribunal lamented the ‘overly voluminous’ and ‘unnecessarily complicated’ case record.8 The Tribunal unanimously rejected Romania’s claims that the Tribunal did not have jurisdiction over the Claimant’s claims and various arguments that the claims were otherwise inadmissible. It thus proceeded to merits determination.9 In a split 2:1 decision, the Tribunal found in favor of Romania on all substantive claims and awarded it approximately US$10 million in legal fees and expenses.10 The Tribunal considered the essence of the claims of five separate BIT breaches as being whether there had been a failure by Romania to accord the investment FET. Most of the Tribunal’s analysis focused on FET. This comment examines the Tribunal’s evaluation of the FET standard and its application to the large-scale mining project, which cut across an array of public interests, necessitating Romania’s multi-agency assessment, extensive deliberation and community consultation. The Claimants are two linked companies. Gabriel Resources Ltd is a publicly traded resource company listed on the Canadian stock exchange (Gabriel Canada) and is a 100 percent equity shareholder of Gabriel Resources (Jersey) Ltd (Gabriel Jersey), which is incorporated in Jersey. The Claimants alleged violations of the Canada BIT and UK BIT regarding their investment in the Roşia Montană Project through its Romanian subsidiary Roşia Montană Gold Corporation SA (RMGC).11 Roşia Montană is a culturally significant historic mining district in western central Romania. It boasts the world’s pre-eminent example of underground Roman gold mining with underground galleries and associated surface structures such as temples.12 Open-pit mining was conducted in the 1990s at Roşia Montană by a Romanian State-owned mining company, while the Romanian government also sought to attract foreign investment to expand mining operations. RMGC was granted an exploitation license in 1999 under the Mining Law 1998, intending to expand the two existing open-pit mines and commence two more open-pit mines. RMGC was partially Romanian State-owned, and thus the Roşia Montană Project was a joint venture with Romania.13 The case centered on the necessary environmental approval. A precondition for implementing the Roşia Montană Project was for RMGC to be granted an environmental permit after the completion of an environmental impact assessment (EIA) by the Ministry of Environment.14 RMGC applied for an environmental permit in 2004 to trigger the EIA process. The EIA was protracted because of the scale of the project, the amount of public interest and concern, and the need to convene a ‘Technical Assistance Commission’ composed of central authorities.15 The EIA process also required the Ministry of Culture’s endorsement. It presented its viewpoint in 2011 but over a period of more than one year refrained from giving explicit endorsement. This led the Ministry of Environment to explain in 2013 that ‘there were no obstacles for the Ministry [of Culture] to issue a favourable endorsement’16 when it proposed issuing the environmental permit following public consultations. Numerous other matters were also deliberated.17 Considerable attention was devoted to cultural heritage issues. RMGC adjusted the area of the Roşia Montană Project to avoid activities in the locations designated for on-site protection, which included the historic center of Roşia Montană.18 In 2013, the Prime Minister authorized and instructed the Minister of Economy to renegotiate with RMGC the economic terms of the project. A ‘Negotiation Commission’ was established, resulting in the agreed royalty on gross revenue increasing from four to six per cent and Romania increasing its shareholding in RMGC to 25 percent upon project authorization.19 Project approval was to be effected by the enactment of a project-specific law, known as the Roşia Montană Law, followed by the issuance of the environmental permit. The draft Roşia Montană Law declared the project of public utility and of ‘outstanding national public interest’.20 The project was then rejected comprehensively by the Parliament amid public protests and political shifts.21 The prospect that project approval could still be achieved was dimmed by subsequent events, including the further protection afforded to the entire locality of Roşia Montană in 2015 due to its inscription as a ‘Listed Historic Monument’ (LHM) by the Ministry of Culture in recognition of its significant archaeological value, a proposal for a moratorium on the use of cyanide for gold extraction, and Romania’s successful application to the United Nations Educational, Scientific and Cultural Organization (UNESCO) for World Heritage listing of the entire ‘Roşia Montană Mining Cultural Landscape’.22 The Claimants argued that Romania’s politicized and shifting approval process breached obligations under both BITs. They formulated their claims into a ‘principal claim’ and two ‘alternative claims’.23 Specifically, the principal claim was that the politicized treatment of RMGC’s application for the environmental permit, leading to the rejection of the Project and the termination of the State’s joint venture with Gabriel Canada, constituted a ‘composite act’ that breached both BITs on or about September 2013.24 If the Tribunal were not to find a ‘composite act’ on the part of Romania, the first alternative claim was that the same conduct identified in the principal claim breached the two BITs as of 9 September 2013.25 Alternatively, Romania’s conduct following the rejection of the Draft Law in September 2013 constituted a repudiation of the Project, which breached the two BITs.26 In essence, the Claimants asserted that Romania’s acts failed to accord its investments FET and ‘full protection and security’, were ‘unreasonable or discriminatory’, and resulted in impermissible expropriation of its investment.27 The complex case presented a challenge for the Tribunal in terms of how it would structure its determination of the claims. The Claimants’ refrain that the approval process was ‘politicized’ was not in itself an arguable breach of the BITs. It needed to be shaped to the required standards of host State conduct adopted in the BITs. The Tribunal characterized the central issue as whether ‘the allegedly politicized treatment’ of the Claimants’ application for approval of the Roşia Montană Project was ‘a measure’ that resulted in breaches of the two BITs.28 It was clear to the Tribunal that the various claimed breaches of the BITs were ‘predominantly features of the FET provision’.29 It concluded that the determination of this standard would almost be dispositive for the remaining claimed BIT breaches because the same factual matrix was in question and there was a degree of commonality in the standards.30 This section analyzes the Tribunal’s majority decision and the dissenting opinion regarding the FET standard, focusing on the differing criteria each applied in determining a violation. It then examines how the majority and the dissenting arbitrator diverged in their interpretation and application of the relevant facts to the legal standard. The Tribunal needed to clarify the standard for FET in both BITs in light of their differences in expression and determine whether they materially differed. Specifically, the UK BIT expresses the FET standard simply: Romania shall ‘at all times’ accord the investment ‘fair and equitable treatment’. No further elucidation is provided. The Canada BIT, however, provides that each party shall provide to investments ‘treatment in accordance with the customary international law (CIL) minimum standard of treatment (MST) of aliens including fair and equitable treatment’. Annex D of the Canada BIT further provides that FET includes ‘the obligation not to deny justice in criminal, civil or administrative adjudicatory proceedings’ in accordance with the MST in CIL. The Tribunal majority noted that the UK BIT contained an autonomous FET standard, emphasizing that its meaning must be determined by considering ‘its wording and the factors that are relevant to the case at hand’.31 It would focus on the ordinary meaning of the expression ‘fair and equitable treatment’.32 It observed that there was a consensus in investor–State arbitration that ‘fair’ and ‘equitable’ refer to concepts such as ‘justice, legitimacy, impartiality, and lack of arbitrariness, as well as treatment that is acceptable from an international perspective’. According to the majority, these concepts ‘presuppose elements’ of ‘good faith, due process, non-discrimination, and proportionality’.33 However, after identifying those four elements, it proceeded to assess whether Romania had breached the FET standard under the UK BIT in a different manner without explaining its reason for doing so. It applied only two of the FET criteria it had identified—‘due process’ and ‘non-discrimination’—while also adding three additional elements: ‘arbitrariness’, ‘legitimate expectation’ and ‘abuse of power’.34 The Tribunal majority then considered the FET standard in the Canada BIT. Romania argued that a breach of FET required ‘egregious’ conduct (the Neer formulation)35 due to the reference to MST under the Canada BIT. This stance is consistent with UNCTAD commentary.36 It advocates a narrow interpretation of MST that conforms with historical articulation of the concept under CIL. The majority rejected this argument. It noted the dynamic nature of CIL and the explicit inclusion of the FET standard within the MST in Article II(2)(a) of the Canada BIT.37 It determined that the ‘correct approach’ was to recognize the evolving content of CIL instead of interpreting the reference to the MST rigidly.38 Ultimately, the majority considered that ‘the FET standard is the same in both BITs’.39 Professor Grigera Naón in his dissenting opinion confined his determination to claimed breaches of FET. He first noted the difference in wording on the FET standard in both BITs and agreed with the Tribunal majority that the Neer formulation no longer reflects the standard, nor is it adapted to the special circumstances of the present case.40 He then outlined key components of FET, identifying elements of ‘transparency and the protection of the investor’s legitimate expectations; freedom from coercion and harassment; procedural propriety and due process; and good faith’.41 The Tribunal majority could have exercised greater diligence and rigor in navigating its task of identifying the applicable elements of FET. While it is not feasible to expect any tribunal to examine all relevant previous cases, the majority relied on only two awards to assert a consensus that ‘fair’ and ‘equitable’ encompass notions of justice, legitimacy, impartiality, and freedom from arbitrariness—grounded in elements of good faith, due process, non-discrimination and proportionality. It is questionable whether there is consensus in arbitral practice regarding the interpretation of FET as encompassing those four presupposed elements. According to a comprehensive examination of the application of the FET standard in arbitral practice conducted by Chen,42 16 elements have been identified as frequently referred-to terminologies in numerous tribunals’ interpretation of FET.43 The top four elements are legitimate expectation, arbitrariness, discrimination and transparency,44 of which only one—non-discrimination—is reflected in the Tribunal majority’s presupposed elements. Its identification of proportionality as an FET element is surprising because tribunals tend not to accept this concept as an integral part of the FET standard.45 As demonstrated in Chen’s study, proportionality is one of the least frequently cited elements in arbitral decisions.46 Further, the coherence and logic of the majority’s reasoning is undermined by its mismatch with the presupposed FET elements derived from the claimed consensus in interpreting the standard and the specific components identified as relevant to the case. Compared with the Tribunal majority’s presupposed elements on FET, Grigera Naón’s articulation aligns more closely with the top-ranked elements identified in Chen’s study47 as the most frequently referred-to components in arbitral practice. This is a more consistent and empirically grounded framework for the interpretation and application of the FET standard in investor–State arbitration. Yet it should be noted that even if the elements of the FET standard are clarified, the ultimate interpretation and application of these elements remain in the hands of arbitrators. The same set of facts can lead to vastly different outcomes, depending on how the to the legal terms and the This in interpretation is by the in this the of and the on the and of tribunals in investor–State arbitration. The reference to MST in the FET standard in the Canada BIT a because the terms are not the interpretation of MST determine the for of If the through the Neer is that the for is ‘egregious’ host State This protection to foreign investors and all but the ‘fair’ and ‘equitable’ and the standard for breach that would if there were to their ordinary should the MST concept be considered as an evolving standard that must be with FET, both terms are have the of the of MST with FET. argued that the inclusion of the MST concept in FET provisions no substantive and because it can the and autonomous nature of the FET are also that for the FET standard on the of treatment under Further, there is in arbitral practice on whether a FET standard to MST conduct that could be by such as or It is to that the Tribunal in Gabriel v Romania unanimously the of considering MST as an evolving standard that aligns with FET. This is because it reflects the increasing recognition that the reasoning in the claimed of justice for a foreign by an allegedly be to the investment law there is in the ‘fair’ and ‘equitable’ that the need for Further, the expression of the FET standard in the BIT could have been more explicit if it was that it be to the CIL The majority’s of its reasoning however, and A that the reference to the standard [of the of any was without any A and more would have been to recognize that MST to concepts that in of ‘fair’ and ‘equitable’ this the for FET is a breach not conduct but instead on the substantive content of ‘fair’ and the of the Tribunal’s aligns with the dynamic nature of CIL and that MST a in the interpretation and application of the FET standard. The in determining the FET standard is the use of in BITs. The only a tribunal can with its task of a is to to further explain terms such as ‘fair’ and whether their meaning is by any in the relevant BIT and the of previous Yet this process is and only to expand the of tribunal be identified in the they of a or set of criteria for determining FET This case it is necessary for investment to provide more content for the FET standard. investment have achieved greater in and interpreting provisions on expropriation with the FET of in the FET standard have to a more and articulation of FET can be observed in the 2016 It provides an of circumstances under which the FET standard is This a framework that tribunals avoid in of the standard. The and greater for both investors and States by for a violation. can be in the Canada which a further by key terms such as These are and to a for FET violation. The Tribunal majority the approval process for the project and concluded there was no or conduct by Romania, no breach of It key by the including delays in issuing the environmental permit, of economic additional administrative the draft project approval law and its rejection due to the of and public and measures to cultural The majority, for found no between environmental and in of the nature and the need for due to its scale and Specifically, the inclusion of and economic in the EIA process was the of the project, such as of The majority that it would have been and for Romania to to a decision the and The majority to the same when it considered other it found in the Romanian decision to to Parliament the ultimate decision to the project enactment of the Roşia Montană Law because it is the of approval as well as the most and approval process for a project national the draft Roşia Montană Law was to the project and it from legal and the Claimants had in its the cultural heritage of the the majority found no that Romania’s of the for World Heritage was to the The three after the rejection of the draft law, when it was that the Claimants not the project, and it was not that listing would be with RMGC’s mining The majority considered the proposal for listing was its to international for archaeological Ultimately, the majority found no to that Romania’s or that the were with or in any from the of international Grigera however, concluded that Romania had violated the Claimants’ FET standard under the two BITs by to the process for the environmental permit, considering this failure to have been by political He the same factual matrix and concluded that the Romanian government had breached the FET standard because it had considered the issuance of the environmental permit from an political A key was the decision to the question and for approval to Parliament than on the existing approval process by which an environmental permit can be He concluded that the that the existing process was for this project and treatment because it a new legal on the there was no legal to the existing Grigera Naón further considered it was for there to be a of government to the The of the economic terms between the could have been but the Romanian government to the public with political or This on the Claimants in circumstances there was no on the environmental approval. were found the including the between the Ministry of Environment and the Ministry of Culture regarding the failure to be clear about whether it was the According to Grigera the of the was ‘the of political with the to renegotiate the economic of the The economic and political could not failure to with BIT Gabriel Resources v Romania the in foreign investment with public interests, such as environmental protection and cultural heritage It the investors when host States their on large-scale due to public opposition and environmental The majority’s more to host States because it the Claimants’ of BIT breaches in recognition of the administrative and regulatory by Romania for a project of complexity and to national The majority the Romania to and a legal framework on which the foreign investors relied in circumstances it was that project approval would be on a comprehensive assessment and of the and cultural The Award aligns with a of giving to host State in of public and Grigera Naón argued that Romania a new legal on the in the of any legal to the the investor’s legitimate While this reasoning concerns over regulatory and legal it also a significant it the hands of the host State to an approval process and it more to or regulatory over of the scale and complexity of proposed procedural with this could regulatory and and the legitimate of at public the majority Romania’s that it should be afforded under the of concept in determining that the Roşia Montană Project had not the for the issuance of the environmental In this relied on the of the which is the environmental that the of environmental protection Romania argued that the is with the of that it can expect to in the of environmental The majority the that the of not it from international law standards to the facts of the case. This was that it that are with the to and it would not determine whether the lack of issuance of the environmental permit was in law or It also that its be as a of or FET a in international investment as demonstrated by Gabriel Resources v Romania. This case the by tribunals in interpreting and the FET standard, in disputes complex and public and private interests, along with the challenge of treaty of are the between the FET standard and MST under and the identification and consistent application of the specific elements that FET. further to and the FET standard in investment are to and fair and the same the of in these elements be This is because their the of cases and the and of the FET standard. Ultimately, it is through a of treaty and arbitral reasoning that investor–State arbitration can the and needed to a better between investment protection and the State’s to in the public

Fetched live from OpenAlex and de-inverted. Abstracts are not stored in this database: the inverted indexes are 8.6 GB of the frame’s 9.3 GB of text, and the host has 13 GB free.