THE BOTTOM LINE
- Investment treaties create powerful, independent rights. A Bilateral Investment Treaty (BIT) can grant an investor the right to arbitrate against a state, even if a pre-existing commercial contract between them appears to limit or exclude arbitration for certain disputes.
- Dutch courts maintain a high bar for annulling arbitral awards. A party seeking to set aside an award in the Netherlands must demonstrate serious procedural flaws, not just dissatisfaction with the outcome. The courts will not re-evaluate the merits of the case.
- Arbitral tribunals have flexibility in crafting remedies. Tribunals can devise “practical solutions” to procedural issues. If a claimant includes a broad request for “any other appropriate remedy,” it gives the tribunal significant leeway to fashion an award that may differ from the specific relief requested.
THE DETAILS
This case provides a crucial lesson for companies operating internationally and for the states that host them. At its heart is a dispute between Spanish banking giant BBVA and the state of Bolivia over the nationalization of Bolivia’s pension system, which BBVA’s subsidiary managed. When negotiations over the transfer stalled, BBVA launched an investment arbitration under the Spain-Bolivia Bilateral Investment Treaty (BIT), seated in The Hague. The tribunal awarded BBVA approximately $95 million plus interest. Bolivia challenged this award in the Dutch courts, arguing primarily that a 1997 contract with BBVA explicitly excluded this type of dispute from arbitration. The Advocate General of the Dutch Supreme Court has now advised dismissing Bolivia’s final appeal, effectively cementing the award.
The core legal question was whether the 1997 contract’s dispute resolution clause could prevent arbitration under the 2001 BIT. The Advocate General affirmed the lower court’s reasoning: it could not. The BIT, enacted years after the contract, constituted a separate and independent “standing offer” from Bolivia to arbitrate investment disputes with Spanish investors. BBVA accepted this offer by initiating the arbitration, thereby creating a valid arbitration agreement. The court reasoned that the earlier contract could not waive a right to investment arbitration that did not yet exist. This serves as a powerful reminder that a company’s rights are not solely defined by its contracts but also by the broader international treaty landscape.
Bolivia also attempted to annul the award on the grounds that it was poorly reasoned and that the tribunal had overstepped its authority. For instance, Bolivia argued the award lacked a coherent explanation for how the delayed nationalization caused BBVA’s damages. The court rejected this, underscoring the Dutch judiciary’s pro-arbitration stance. The court’s role is not to rehear the case but to ensure fundamental procedural rules were followed. As long as the tribunal provides a cogent explanation for its decision—even one the losing party disagrees with—the award will stand. This reinforces the finality of arbitral awards seated in the Netherlands, a key consideration for businesses choosing an arbitration venue.
Finally, the case highlights the flexibility tribunals have in structuring awards. Bolivia complained that the tribunal awarded interest from a date earlier than BBVA had explicitly requested, thereby exceeding its mandate. The court characterized the tribunal’s action as a “practical solution.” The valuation of BBVA’s damages was based on a 2020 date, while the award was issued in 2022. Instead of ordering a costly and time-consuming updated valuation, the tribunal used pre-award interest to compensate for the time lag. The court found this was acceptable, particularly because BBVA had included a catch-all request for “any additional or other remedy” the tribunal deemed appropriate. This signals to businesses that while specific claims are crucial, broad remedial clauses can provide tribunals with the necessary room to deliver a fair and pragmatic outcome.
SOURCE
Source: Parket bij de Hoge Raad (Office of the Prosecutor General at the Supreme Court of the Netherlands)
