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International Arbitration Forum

Campos de Pesé, S.A. v. Republic of Panama

Case summary

At a glance

Parties
Campos de Pesé, S.A. (Panama) v. the Republic of Panama
Case no.
ICSID Case No. ARB/20/19
Forum and rules
ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding Washington, D.C.
Treaty
Italy–Panama BIT (signed in Venice on 6 February 2009)
Tribunal
Eduardo Zuleta (President), Horacio Grigera-Naón, Brigitte Stern
Sector
Bioethanol; sugar cane and alcohol production
Outcome
Jurisdiction declined (1 March 2024): the claimant was not controlled by Italian nationals, so it was not a protected investor. A later Decision on Rectification (12 September 2024) made minor corrections.
Amount
Claimed: about USD 100 million, according to Panama's press release. Awarded: nothing. The claimant bears its own costs (it claimed USD 2,286,692.10) and must pay USD 1,368,741.79 of Panama's legal fees and costs, plus all costs of the arbitration (USD 575,210.54).

The dispute

Campos de Pesé, a Panamanian company wholly owned by the Panamanian company Panama Sugar Estates (PSE), built a bioethanol plant in Panama after Law No. 42 of 2011 promoted a domestic biofuel industry. SER Holding Company Ltd, a company of the British Virgin Islands (BVI), held a majority of PSE. In June 2014 vinasse spilled into the La Villa River. Panama then imposed administrative and criminal sanctions totalling USD 1,608,930.44. On 19 August 2014 Cabinet Decree No. 29 abolished the fixed bioethanol price and the mandatory blending of bioethanol with gasoline. Campos de Pesé claimed expropriation, breach of fair and equitable treatment, discrimination and failure to give full legal protection under the Italy–Panama BIT. It relied on the BIT's definition of a local company "controlled directly or indirectly" by Italian nationals, saying that 26 Individuals of Italian nationality controlled it through SER. Panama objected that the claimant had not proved that these individuals were Italian or that they controlled or managed the company.

Key holdings

  1. Control is the first question. Article I(2)(b) of the BIT requires direct or indirect control exercised by Italian nationals. If there is no control, the question of nationality becomes moot. None of the 26 Individuals held a majority on their own, so the presumption of control from majority ownership did not apply to any one of them. ¶¶ 146–148
  2. Under BVI law, the fact that shareholders voted together ("in unison") does not by itself give them legal control of SER. Some agreement or record of alignment is needed, and none was proved. None of the alleged Italian holders had been reported as controlling beneficial owners under the BOSS Act, which points against control. ¶¶ 166–176
  3. There was no evidence that Carlos Pellas controlled the BVI company that held 20.7% of SER in August 2014 and 21.68% in May 2020. The share register contained serious inconsistencies: shares were recorded as allotted to an entity more than seven years before it existed. Without that stake, the other 25 individuals did not hold a majority of SER. ¶¶ 177–189
  4. The Italian nationality of SER's directors does not by itself prove foreign control. SER's guarantees of loans to Campos de Pesé were acts of managing the parent company, not acts controlling the subsidiary. Mr. Pellas's roles as a director were supervisory, not managerial, and voting as a proxy did not prove that he controlled the shares he voted. ¶¶ 193–214
  5. Mr. Pellas and Mr. Palazio refused, without justification, to appear for cross-examination, and their written testimony was excluded. This left key facts unproven. The Tribunal did not need to draw adverse inferences. It concluded that Campos de Pesé was not a protected investor and that it had no jurisdiction. ¶¶ 215–219, 236
  6. Costs follow the event, and the claimant's procedural conduct confirms that result: it delayed producing ownership documents and gave notice only five days before the hearing that the two witnesses would not attend. The claimant bears its own costs, USD 1,368,741.79 of Panama's costs, and the costs of the arbitration (USD 575,210.54). ¶¶ 229–235
  7. Rectification: the Tribunal corrected typographical errors, citations and clerical errors, and refused the other requests. Each party bears its own costs of the rectification, and the Tribunal's and ICSID's costs are shared equally. Decision on Rectification ¶¶ 11–15

Procedural history

  1. 4 May 2020ICSID receives the Request for Arbitration. ICSID registers it on 15 June 2020.
  2. 14 October 2020Tribunal constituted.
  3. 26 August 2021Procedural Order No. 2: the jurisdictional objection ratione personae is to be heard in a preliminary phase.
  4. 14 June 2023The Tribunal rejects the claimant's request for Mr. Pellas to testify virtually, and orders closed in-person sessions for the two witnesses. On 15 June 2023 the claimant states that they will not attend.
  5. 20–21 June 2023Hearing on jurisdiction in Washington, D.C.
  6. 1 March 2024Award: the Tribunal declines jurisdiction and orders the claimant to pay all costs.
  7. 11 March 2024Panama's Ministry of Economy and Finance issues a press release on the Award.
  8. 12 April 2024The claimant requests rectification of the Award. ICSID registers the request on 16 April 2024. The parties agree on redactions to the Award in July 2024.
  9. 12 September 2024Decision on Rectification: minor corrections; the other requests are denied.

Tribunal, counsel and experts

Decided by
For the claimant
Hughes Hubbard & Reed LLP
For the respondent
Ministry of Economy and Finance of Panama · Greenberg Traurig, LLP
Experts
Christopher Newton (claimant) · Jaime Mora (claimant) · Henry Mander (claimant) · Mark Olson (claimant) · Mark Forte (respondent) · Robert Lindley (respondent) · Luis Chalhoub (respondent) · Todd Flubacher (respondent) · Isabel S. Kunsman (respondent)

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Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
ICSID Case No. ARB/20/19
Country
Outcome
In favour of State
Treaty
Italy - Panama BIT (2009)
Section