Michael, Lisa and Rachel Ballantine v. Dominican Republic

Case summary

At a glance

Parties: Michael Ballantine and Lisa Ballantine (United States) v. the Dominican Republic
Case no.: PCA Case No. 2016-17; U.S. District Court for the District of Columbia, Civil Action No. 19-cv-3598 (TJK)
Forum and rules: UNCITRAL Arbitration Rules (2013), PCA as registry; seat Washington, D.C.
Treaty: Dominican Republic–Central America–United States Free Trade Agreement (DR-CAFTA), Chapter 10
Tribunal: Prof. Ricardo Ramírez Hernández (Presiding), Ms. Marney L. Cheek, Prof. Raúl Emilio Vinuesa
Court: U.S. District Court for the District of Columbia (Judge Timothy J. Kelly)
Sector: Real estate; luxury residential development; environmental permitting
Outcome: By majority, the Tribunal declined jurisdiction because the claimants' dominant and effective nationality was Dominican (3 September 2019). Cheek dissented on jurisdiction and Vinuesa on costs. The U.S. District Court denied the petition to vacate as untimely (11 August 2020).
Amount: Nothing awarded. Each party bears its own legal costs and half of the arbitration costs. Each side had advanced USD 450,000 to the PCA. The Respondent owes the Claimants USD 5,000, half of the USD 10,000 appointing-authority (ICSID) fee.

The dispute

Michael and Lisa Ballantine, U.S.-born citizens who naturalised as Dominicans in 2010, developed Jamaca de Dios, a luxury residential project in Jarabacoa, through two Dominican companies, Jamaca de Dios S.R.L. and Aroma de la Montaña, E.I.R.L. On 12 September 2011 the Ministry of the Environment and Natural Resources (MMA) refused a permit for the Phase 2 expansion. It cited slopes above the 60% limit in Article 122 of the Environmental Law and the area's environmental fragility. A later reconsideration denial also relied on the Baiguate National Park created by Decree 571-09. The claimants alleged breaches of national treatment and most-favoured-nation treatment (Articles 10.3 and 10.4), fair and equitable treatment, and the expropriation provision. They said Dominican-owned mountain projects nearby had been allowed to build on similar terrain. The Dominican Republic objected that, as dual nationals whose dominant and effective nationality was Dominican, the claimants were not investors of another Party under Article 10.28. It also argued that some claims were time-barred under Article 10.18.1, and it defended the merits.

Key holdings

The majority rejected the request to bifurcate. It found the nationality objection substantial and a question of first impression, but its facts were intertwined with the discrimination claims on the merits. PO No. 2, ¶¶ 21–22, 28–31
Under Article 10.28, a dual national is treated as a national only of the State of his or her dominant and effective nationality. That nationality is assessed at the date of the alleged breach and at the date the claim was submitted. The majority took guidance from customary international law but read the test in the specific context of DR-CAFTA. It treated the investment and the investor's status as relevant factors. Award ¶¶ 527, 530, 533, 554–557 (as cited in the Cheek dissent)
The majority found the claimants' dominant and effective nationality to be Dominican during the relevant period. Their permanent residence was in the Dominican Republic and they spent most of their days there from 2010 to 2014. Their investment kept them economically centred there. They acquired Dominican nationality for economic and commercial reasons tied to the investment. The Tribunal therefore declared that it lacks jurisdiction over all claims. Award ¶¶ 583–584, 597–599, 637(a)
Costs: the Respondent prevailed on jurisdiction, but the majority found the claim bona fide and not 'frivolous' under DR-CAFTA. It ordered each party to bear its own legal costs and to share the arbitration costs equally. Award ¶¶ 633–637
Marney Cheek dissented on jurisdiction. In her view, Article 10.28 incorporates the customary test from Nottebohm, Mergé and the Iran–U.S. Claims Tribunal, applied over the person's whole life. Under that test both claimants were dominantly U.S. nationals on 12 September 2011 and 11 September 2014. She joined the Award on costs. Cheek dissent ¶¶ 3–4, 14–15, 29–30
Raúl Emilio Vinuesa dissented on costs. He argued that the 'unsuccessful party pays' principle in Article 42 of the UNCITRAL Rules remains the starting point even when a claim is not frivolous. He would have ordered the claimants to bear all PCA costs and the Tribunal's fees and expenses. Vinuesa dissent ¶¶ 4–8, 34–35
The District Court denied the petition to vacate as untimely. Section 12 of the Federal Arbitration Act required the claimants to serve notice on the Dominican Republic under the FSIA, 28 U.S.C. § 1608(a)(3), within three months of the award, that is by 3 December 2019. They did not request foreign mailing by the Clerk until 8 January 2020. Actual notice was not enough, and equitable tolling was unavailable or in any event unjustified. Memorandum Opinion, pp. 4–8

Procedural history

12 June 2014The claimants deliver a Notice of Intent under Article 10.16 of DR-CAFTA.
11 September 2014Notice of Arbitration and Statement of Claim submitted under the UNCITRAL Rules.
3 June 2016Tribunal fully constituted. On 16 June 2016 the parties agree on the PCA as registry.
21 April 2017Procedural Order No. 2: the majority denies bifurcation of the nationality objection.
22 December 2017Procedural Order No. 7: the Tribunal postpones its decision on the Respondent's Article 10.18.1 time-bar objection.
March–August 2018Procedural Orders Nos. 8–10 and 13 deal with site visits. Under Procedural Order No. 13 (30 August 2018), the majority refuses leave for the claimants' late new expert report.
3–7 September 2018Hearing in Washington, D.C. Third-party funding is disclosed during the hearing and addressed in Procedural Order No. 16 of 2 October 2018.
3 September 2019Final Award: the majority declines jurisdiction. Cheek dissents in part on jurisdiction and Vinuesa in part on costs.
3 December 2019The claimants petition the U.S. District Court for the District of Columbia to vacate the award.
11 August 2020The District Court denies the petition as untimely for failure to serve within the FAA's three-month deadline.

Tribunal, counsel and experts

Decided by: Ricardo Ramírez Hernández President — appointed by the appointing authority (Appointed by the Secretary-General of ICSID under the parties' Joint Protocol)
Marney L. Cheek Co-arbitrator — appointed by the claimant (Replaced Henry Burnett, who withdrew his acceptance (letter of 8 October 2014); dissented in part on jurisdiction)
Raúl E. Vinuesa Co-arbitrator — appointed by the respondent (Dissented in part on costs)
Timothy J. Kelly Judge, U.S. District Court for the District of Columbia
For the claimant: Baker & McKenzie · Steptoe & Johnson LLP · Moore Law
For the respondent: Arnold & Porter Kaye Scholer LLP · Ministry of Industry and Commerce · Ministry of the Environment and Natural Resources · Office of the President
Experts: Eric Kay (claimant) · James Farrell (claimant) · Graviel Peña (claimant) · Jose La Paz Lantigua Balbuena (claimant) · Luis Fernando Potes (claimant) · Jens Richter (claimant) · Timothy Hart (respondent) · Peter W. Deming (respondent) · Pieter N. Booth (respondent) · Sixto Inchaustegui (respondent)