Annex VII Arbitration Report (Part Three) – Argentina/Ghana

In its Statement of Claim, Argentina requested the arbitral tribunal, inter alia, to declare that Ghana had violated the immunity from jurisdiction and execution of the warship Libertad “pursuant to Article 32 of UNCLOS” by detaining it by order of the Ghanaian Commercial Court. As discussed previously on this blog, following the initiation of arbitration with Ghana, Argentina applied to ITLOS for provisional measures seeking the release of the vessel Libertad from the Ghanaian port of Tema.  ITLOS handed down an Order on Provisional Measures on 15 December 2012 ordering the release of the ship. As noted here, the standard required for ITLOS to grant provisional measures was that the Annex VII tribunal constituted to hear the dispute would have prima facie jurisdiction over the case. In the December 2012 Order, ITLOS framed the dispute as a dispute as to the applicability of Article 32 of UNCLOS, which refers to the immunity of warships. ITLOS held that an arbitral tribunal would have prima facie jurisdiction on these grounds. That is, ITLOS was satisfied that the dispute fell within the jurisdiction of the Annex VII tribunal as it considered that a dispute existed over the applicability of Article 32.

However, the ITLOS Order will not prevent the Annex VII Tribunal from considering for itself the issue of jurisdiction.  The standard of prima facie jurisdiction will not be relevant for an Annex VII Tribunal deciding on the merits of the case. It will not be sufficient that a plausible case is made that the Tribunal “might” have jurisdiction over the dispute; the Tribunal will have to be satisfied that it does, in fact, have jurisdiction. A central question in this regard will be whether the interpretation of a waiver of immunity from jurisdiction and enforcement contained in the conditions governing FAA bonds issued by Argentina can be classified as a dispute concerning the application and interpretation of UNCLOS.

The case also raises interesting questions on the relationship between provisional measures and finding on the merits. If the Tribunal were to find that it did not have jurisdiction, Argentina would nevertheless have already succeeded in securing the release of the ship. However, although the Libertad has been released, the eventual finding of the Annex VII tribunal (in the event that it decides it has jurisdiction over the case) would not be without purpose. NML Capital has an outstanding judgment against Argentina in the amount of $284,184,632.30 plus interest, awarded by the US District Court for the Southern District of New York and recognised and declared enforceable by the UK Supreme Court. If the Arbitral Tribunal proceeds to interpret the conditions set out in the FAA bonds underlying this judgement, an interesting precedent could be set for the situation of other Argentinian assets located abroad. The Tribunal could hold that the bond conditions amounted to a waiver of immunity, even of warship immunity. After all, it is not up to the Tribunal to rectify the incredibly loose drafting of the Argentinian bond conditions.

So far, the arbitration initiated by Argentina has gone according to plan. In convincing ITLOS to squeeze a bond condition-shaped dispute into an UNCLOS-shaped box, Argentina secured the release of the Libertad, and was able to welcome her home with great ceremony. However, if the Arbitral Tribunal were to find that Argentina had in fact waived immunity from jurisdiction and execution over all classes of asset, Argentina might rue the day they ever had recourse to the dispute settlement procedures of UNCLOS.

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