Discovery Global LLC v Slovak Republic - ICSID Case No. ARB/21/51 - Request for Arbitration - 30 September 2021
Reproduced from www.worldbank.org/icsid with permission of ICSID.
REQUEST FOR ARBITRATION
TABLE OF CONTENTS
II. THE PARTIES
III. STATEMENT OF FACTS
A. The Licences
B. The Smilno Well on the Svidnik Licence
C. The Krivá Oka Well on the Medzilaborce Licence
D. The Preliminary EIA Process in relation to the Smilno, Ruská Poruba and Krivá Oka wells
E. The retrospective imposition of new conditions on the Svidník Licence
F. The attribution of actions to the State
G. Consequences of the Respondent's measures
B. Breach of fair and equitable treatment, full protection and security, non- discrimination and other related standards
C. Breach of requirement to observe obligations it had entered into
D. Breach of obligation to provide effective means of asserting claims
E. Claimant's claim for damages
V. ARBITRATION UNDER THE BIT
A. Existence of an "Investment Dispute"
B. Slovakia is a Party to the BIT and the ICSID Convention
C. Claimant is a "Company of the Other Party" to the BIT
D. The Parties have consented to the arbitration of this Dispute
E. Six months have elapsed since the Dispute arose
VI. ICSID JURISDICTION
A. Claimant and Slovakia have a legal dispute
B. The Dispute arises directly out of the Claimant's Investment
C. Slovakia is a Contracting State to the ICSID Convention
D. Claimant is a National of another Contracting State
E. Claimant and Slovakia have both consented to ICSID Jurisdiction
VII. AUTHORISATION OF THE REQUEST
VIII. NUMBER OF ARBITRATORS AND METHOD OF APPOINTMENT
X. REQUEST FOR RELIEF
1. This Request for Arbitration is submitted on behalf of Discovery Global LLC ("Discovery" or the "Claimant"), against the Slovak Republic ("Slovakia" or the "Respondent").
2. Pursuant to Article 36 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention" or the "Convention"), Discovery hereby submits its request to the Secretary-General of the International Centre for Settlement of Investment Disputes (the "Centre") to institute arbitration proceedings against the Slovak Republic. The claims of the Claimant in this arbitration arise under the Treaty Between The Czech And Slovak Federal Republic And The United States Of America Concerning The Reciprocal Encouragement And Protection Of Investment signed on the 22nd day of October 1991 (the "Bilateral Investment Treaty" or the "BIT")
3. Through its wholly owned subsidiary, Alpine Oil & Gas s.r.o. ("AOG"), Discovery is and/or was the owner of oil and gas exploration rights under various licences granted by the Respondent, which are more specifically described below. This dispute arises out of an unlawful, systematic and repeated pattern of behaviour which has resulted in AOG (and consequently Discovery) being unable to exploit its rights under the licences, depriving Discovery of its investment, and which amounts to breaches of Slovakia's treaty obligations under the BIT.
4. Discovery is a U.S. company experienced in the exploration and development of oil and gas resources. AOG is a privately-owned independent oil and gas exploration company, active in north-eastern Slovakia and which has been a wholly-owned subsidiary of Discovery since March 2014. In 2006, the legal predecessor companies to AOG acquired three licences in north- eastern Slovakia, extending across some 2,442 square kilometres. AOG subsequently carried out an extensive programme of data acquisition, including a 770 kilometre 2-D seismic survey and gravity, aeromagnetic and magneto-telluric surveys, which identified numerous potential drilling targets across the licence areas.
5. Commencing in late 2015, Discovery, through AOG, attempted to initiate a 3-well drilling program on its three licences, as more particularly described below. However, AOG's ability to conduct operations at all three planned well locations was blocked by protests and obstructions organised by a small group of local activists. When Discovery sought the assistance of the police and the courts, it found that the police were not willing to assist AOG against the local activists, in breach of their legal obligations, and the courts were willing to exercise their authority in a way that discriminated against AOG. In respect of one location, AOG applied for an order for compulsory access to enable it to carry out drilling operations, but its application was refused on arbitrary and unlawful grounds, and contrary to AOG's (and Discovery's) legitimate expectations of its rights under the licence.
6. In 2017, having lost 18 months during which it was unable to proceed due to obstruction by the activists, and having concluded that it could not count on any support from either the police, the courts or the Ministry of Environment, AOG engaged in dialogue with the activists opposed to its operations and eventually agreed, on a purely voluntary basis, to complete a preliminary Environmental Impact Assessment ("EIA") screening process in respect of the three proposed wells. AOG's licences were not subject to this requirement, since they had been originally issued before preliminary EIA screenings became mandatory for any wells deeper than metres in Slovakia, and consequently the authorities should not have accepted AOG's applications for preliminary EIA screening. The local district offices nonetheless processed the preliminary EIA applications but, in the two processes which were actually concluded, issued decisions ordering full-scope EIAs which were both unjustified by the environmental conditions and contained obvious defects. The full-scope EIA process could take a further 12-24 months to complete, if not longer, and involved considerably greater uncertainty, as well as expense, than the preliminary EIA screening process. Having already wasted over two years since first attempting to commence drilling operations, continuing with this process was not feasible.
7. During 2018, in order to reduce its annual licence fee costs (having still not been able to commence drilling operations), AOG relinquished three of its four licences (whilst retaining the preferential right to reapply for them in the event of successful drilling) and applied to reduce the licence area of its remaining licence, the Svidnik licence. However, when the Ministry of Environment published its decision confirming the reduction in size of the Svidnik licence in October 2018, it included an additional condition, namely that any future well to be drilled by AOG on the licence to a depth of greater than 600 metres was required to undergo the preliminary EIA process. This additional condition would make further drilling activity on the Svidnik licence open to interference by the activists and hence all but impossible. Moreover, this decision directly contradicted the previous public acknowledgement by the Minister of Environment that AOG's licences were not bound by the recent change in the law which had introduced the preliminary EIA screening procedure.
8. The result of all the circumstances described above is that Discovery, through AOG, has been unable to exercise the rights it had originally been granted under the licences due to the actions of individuals or entities which were either executive branches of the State, or were otherwise empowered to exercise State authority. These actions, which are therefore attributable to Slovakia, effectively prevented Discovery from reaping the benefits of its investment and reduced the commercial value of the licences to nothing. To date, Slovakia has refused to acknowledge its expropriation of Discovery's investment and has not paid Discovery prompt, adequate and effective compensation as required by the BIT. Slovakia also refuses to acknowledge its failure to accord Discovery's investment fair and equitable treatment or to account for its unjust enrichment.
X. REQUEST FOR RELIEF
109. For the foregoing reasons, the Claimant respectfully requests that a tribunal be constituted in accordance with the Convention and the Rules as proposed above to resolve the claims set forth in this Request for Arbitration (as may be amended in due course),46 and that the tribunal render an award in favour of the Claimants containing the following relief:
109.1 A declaration that the dispute is within the jurisdiction and competence of the Centre and the Tribunal;
109.2 A declaration that the Respondent has breached the BIT:
109.2.1 by expropriating the Claimant's investments without complying with the requirements of the BIT, including payment of prompt, adequate and effective compensation;
109.2.2 by failing to accord fair and equitable treatment and/or full protection and security to the Claimant's investments;
109.2.3 by taking unreasonable and/or discriminatory measures that impaired the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of the Claimant's investments;
109.2.4 by discriminating against the Claimant as a foreign investor; and
109.2.5 by failing to observe obligations entered into with respect to the Claimant's investments;
109.3 A declaration that the Respondent has breached customary international law:
109.3.1 by violating the minimum standard of treatment of foreign investors; and
109.3.2 by expropriating the Claimant's investments without observance of due process and payment of prompt, adequate and effective compensation;
109.4 An order directing the Respondent to pay to the Claimant full reparation in accordance with the BIT and customary international law, including compensation for damages sustained as a result of the aforesaid expropriation, in an amount to be established in the proceedings but which is presently estimated to be in the region of USD 2.11 billion and which amount may be further developed and quantified in the course of this proceeding, plus compound interest thereon in accordance with applicable law and grossed up for any taxes that may be imposed by the Respondent on or affecting such compensation;
109.5 An order directing the Respondent to pay all costs and expenses reasonably incurred by the Claimant in the course of this arbitration proceeding, including but not limited to the fees and expenses of the Centre and the arbitral tribunal and the costs and expenses of legal representation, plus interest thereon in accordance with applicable law;
109.6 An order granting pre-award compound interest on all compensatory damages from the date of each breach to the date of issuance of the award and post-award compound interest on all amounts awarded from the date of the award to the date of payment; and
109.7 Such other or additional relief as may be appropriate under the applicable law or may otherwise be just and proper.
Signature Litigation LLP
138 Fetter Lane
Counsel for the Claimants