Michael Ballantine and Lisa Ballantine (United States of America) v. Dominican Republic

At a glance

Parties

Michael Ballantine and Lisa Ballantine (United States) v. Dominican Republic

Case no.

PCA Case No. 2016-17

Forum and rules

UNCITRAL Arbitration Rules 2013; PCA as registry; place of arbitration Washington, D.C.

Treaty

DR-CAFTA (Dominican Republic–Central America–United States Free Trade Agreement), Chapter 10

Tribunal

Prof. Ricardo Ramírez Hernández (Presiding Arbitrator), Ms. Marney L. Cheek, Prof. Raúl Emilio Vinuesa

Sector

Real estate; luxury mountain residential development; environmental permitting

Outcome

Final Award of 3 September 2019: by majority, the Tribunal declined jurisdiction over all claims because the claimants' dominant and effective nationality was Dominican. Cheek dissented on jurisdiction; Vinuesa dissented on costs.

Amount

No damages awarded. Each party bears its own legal costs; the common costs of the arbitration are split equally.

The dispute

Michael and Lisa Ballantine are U.S. citizens who became naturalised Dominican citizens in 2010. From 2005 they 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 an environmental permit for the upper part of the project ("Phase 2"). It gave two reasons: slopes exceeded the 60% limit in Article 122 of the Environmental Law, and the area was environmentally fragile. The Ministry later also relied on the Baiguate National Park, created by Decree 571-09 in 2009. The Ballantines claimed breaches of national treatment and most-favoured-nation treatment (Articles 10.3 and 10.4), fair and equitable treatment, and the expropriation provision. They argued that comparable Dominican-owned mountain projects were allowed to build. The Dominican Republic objected that DR-CAFTA did not cover the claims because the claimants' dominant and effective nationality under Article 10.28 was Dominican. It also argued that the claims were time-barred under Article 10.18.1 and defended the merits.

Key holdings

1. By majority, the Tribunal declared that it lacks jurisdiction over any of the claimants' claims. Award ¶ 637(a)
2. Under Article 10.28 of DR-CAFTA, dual nationals can bring a claim against the Dominican Republic only if their dominant and effective nationality was that of the United States both on the date of the alleged breach and on the date the claim was submitted. Ms. Cheek agreed with this test. Award ¶ 527 (as cited in the Cheek dissent ¶ 2)
3. The majority took guidance from customary international law but gave the phrase 'dominant and effective nationality' a specific meaning within DR-CAFTA. It held that the investment, the person's status as an investor and related circumstances may be relevant factors. In its view, the Ballantines' Dominican nationality was effective and took precedence during the relevant period. They had permanent residence in the Dominican Republic, spent most of their days there from 2010 to 2014, and their investment kept them economically centred there. Award ¶¶ 530, 533, 554, 597–598 (as quoted in the Cheek dissent)
4. Costs: each party bears its own legal costs, and the common costs of the arbitration are borne in equal halves. The majority found that the claim was not frivolous and that the claimants had brought a credible case. Award ¶¶ 632–633, 637(b)
5. Dissent of Ms. Cheek on jurisdiction: Article 10.28 incorporates the customary international law test (Nottebohm, Mergé, Iran–U.S. Claims Tribunal Case No. A/18), which must be applied without giving extra weight to investment-related ties. Looking at their whole lives, both claimants were dominantly and effectively U.S. nationals on 12 September 2011 and 11 September 2014. She joined the Award on costs. Cheek dissent ¶¶ 4–14, 29–30
6. Dissent of Prof. Vinuesa on costs: he agreed that the Tribunal lacked jurisdiction. In his view, Article 42(1) of the UNCITRAL Rules makes 'the unsuccessful party pays' the starting point. The PCA costs and the Tribunal's fees and expenses should therefore have been borne entirely by the claimants, who had also opposed bifurcation. Vinuesa dissent ¶¶ 4–6, 29, 34–35
7. Earlier, in Procedural Order No. 2, the Tribunal had refused bifurcation by majority. It found the nationality objection substantial and apparently a question of first impression, but its facts intertwined with the merits. PO2 ¶¶ 21–22, 28–31

Procedural history

1. 12 June 2014The claimants deliver their Notice of Intent under Article 10.16 of DR-CAFTA.
2. 11 September 2014Notice of Arbitration and Statement of Claim; the claimants appoint Henry Burnett, who later withdraws and is replaced by Marney Cheek (8 October 2014).
3. 3 June 2016The Tribunal is fully constituted after the ICSID Secretary-General appoints Ricardo Ramírez Hernández as Presiding Arbitrator; the PCA acts as registry.
4. 21 October 2016Procedural Order No. 1 sets the procedural rules and fixes Washington, D.C. as the place of arbitration.
5. 21 April 2017Procedural Order No. 2: the request for bifurcation is rejected by majority.
6. 22 December 2017Procedural Order No. 7: the Tribunal defers its decision on the Respondent's time-bar (Article 10.18.1) objection.
7. March–August 2018Procedural Orders Nos. 8–10 and 13 deal with site visits to Jamaca de Dios and to comparator projects. Procedural Order No. 13 rejects, by majority, the claimants' late new expert report.
8. 3–7 September 2018Public hearing in Washington, D.C. Costa Rica and the United States had filed non-disputing party submissions in July 2018.
9. 2 October 2018Procedural Order No. 16 records the disclosure of the third-party funding agreement and finds no conflict of interest for the Tribunal.
10. 3 September 2019Final Award: no jurisdiction by majority; costs split; partial dissents by Cheek (jurisdiction) and Vinuesa (costs).

Tribunal, counsel and experts

Decided by

• Ricardo Ramírez Hernández President — appointed by the appointing authority (appointed by the ICSID Secretary-General under the parties' Joint Protocol)
• Marney L. Cheek Co-arbitrator — appointed by the claimant (replaced Henry Burnett (withdrew October 2014); dissented on jurisdiction)
• Raúl E. Vinuesa Co-arbitrator — appointed by the respondent (dissented in part on costs)

For the claimant

Baker & McKenzie

For the respondent

Ministry of Industry and Commerce · Ministry of the Environment and Natural Resources · Arnold & Porter Kaye Scholer LLP · Flavio Darío Espinal

Experts

James Farrell (claimant) · Eric Kay (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)

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Keywords

• DR-CAFTA
• dual nationality
• dominant and effective nationality
• Article 10.28
• Nottebohm
• Jamaca de Dios
• Baiguate National Park
• environmental permit
• slope restriction
• real estate
• bifurcation
• time bar Article 10.18.1
• third-party funding
• non-disputing party submissions
• costs allocation
• national treatment
• fair and equitable treatment
• site visit

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