RSM Production Corporation v. Saint Lucia

Case summary

At a glance

Parties: RSM Production Corporation (Texas, U.S.A.) v. Saint Lucia
Case no.: ICSID Case No. ARB/12/10 (including Annulment Proceeding)
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006
Treaty: Contract claim: arbitration clause in Article 26.3 of the Agreement between the Government of Saint Lucia and RSM Production Corporation of 29 March 2000 (no investment treaty)
Tribunal: Prof. Siegfried H. Elsing (President), Dr. Gavan Griffith QC, Judge Edward W. Nottingham. Annulment ad hoc Committee: Prof. Donald M. McRae (President), Prof. Andreas Bucher, Mr. Alexis Mourre
Sector: Offshore oil exploration
Outcome: RSM did not post the security for costs it had been ordered to provide, and the Tribunal dismissed its claims on 15 July 2016. On 29 April 2019 the ad hoc Committee annulled the Award only to the extent that it dismissed the claims with prejudice.
Amount: Claimed: in the alternative, damages of at least USD 200 million. Security for costs ordered: USD 750,000. Award: RSM to bear all costs of the proceeding (USD 615,670.25) and to pay Saint Lucia's legal and other costs of USD 291,153.76, plus interest at 3-month LIBOR + 4%. Annulment: costs of the proceeding split two-thirds RSM and one-third Saint Lucia. RSM bears its own legal costs and one third of Saint Lucia's.

The dispute

Under an Agreement of 29 March 2000, Saint Lucia granted RSM, a Texas company, an exclusive licence to explore for oil off its coast. Boundary disputes with Martinique, Barbados and St. Vincent prevented exploration. The parties recorded a force majeure situation in September 2000 and extended the Agreement in March 2004. RSM said that in 2007 the Prime Minister signed a further three-year extension, but the signed copy was taken back and never returned. RSM sought a declaration that the Agreement remained in force and an order barring Saint Lucia from granting the area to third parties. In the alternative, it sought at least USD 200 million in damages for termination in breach of Article 27. Saint Lucia argued that the Agreement had expired or was unenforceable. The case was decided on procedure, not on the merits. Relying on RSM's failure to pay costs in earlier ICSID cases against Grenada, its admitted lack of funds and its undisclosed third-party funding, Saint Lucia obtained orders that RSM pay all cost advances and post security for costs. RSM did not post the security, and its claims were dismissed.

Key holdings

Advances on costs: the Tribunal found "good cause" to depart from equal sharing of advances. Its reasons were RSM's record of not paying advances and costs in two earlier ICSID proceedings against Grenada, its admitted impecuniousness and its third-party funding. RSM must pay all advances and refund the USD 100,000 Saint Lucia had paid. The request for security for costs was adjourned. Decision on Provisional Measures ¶¶ 49–50, 71–74 and Decision
By majority, the Tribunal held that it may order security for costs under Article 47 of the ICSID Convention and Rule 39. A contingent right to recover costs can be a right to be preserved. Exceptional circumstances existed: RSM's history of not complying with costs orders, its lack of funds and an unknown third-party funder. RSM was ordered to post an irrevocable bank guarantee of USD 750,000 within 30 days. Griffith gave assenting reasons that relied mainly on the third-party funding. Nottingham dissented: in his view Article 47 neither covers security for costs nor allows binding "orders". Security for Costs Decision ¶¶ 54, 73, 81–87, 90
Elsing and Nottingham rejected RSM's proposal to disqualify Griffith. They held the proposal timely, filed 28 days after the decision. They found that his language about funders ("gambler's Nirvana", "mercantile adventurers") was radical and perhaps extreme in tone, but did not show a manifest lack of impartiality. Challenge Decision ¶¶ 73, 84–86, 91
After RSM said it could not post the security, the Tribunal held that Article 44 (second sentence) of the Convention allowed it to sanction non-compliance. It vacated the hearing and stayed the proceeding for six months. If the security was still not posted, Saint Lucia could apply for a final award of dismissal. Vacatur Decision ¶¶ 36, 58, 65, 68
The ad hoc Committee rejected the grounds of improper constitution (Article 52(1)(a)) and serious departure from a fundamental rule of procedure (Article 52(1)(d)). It found no lack of impartiality by Griffith whether it reviewed the challenge de novo or under the tests applied in Azurix or EDF. Decision on Annulment ¶¶ 164–169
There was no manifest excess of powers in "ordering" a provisional measure, in ordering security for costs to protect a contingent right, or in suspending and then discontinuing the proceeding. Article 44 (second sentence) covers these procedural questions. Decision on Annulment ¶¶ 176, 179–182, 187–192
Dismissing the claims with prejudice was a manifest excess of powers. It was in effect a ruling on the merits without hearing them, and no basis for it exists in Article 44 or elsewhere in the Convention. Paragraph 184(i) of the Award was annulled to that extent. Decision on Annulment ¶¶ 196–201, 215
Annulment costs: RSM pays two-thirds of the Committee's fees and ICSID's costs and Saint Lucia pays one third. RSM bears its own legal costs and one third of Saint Lucia's. Decision on Annulment ¶¶ 213–215