Friday, September 9, 2011

Kaiser Bauxite Company v. Jamaica (ICSID Case No. ARB/74/3), 6 July 1975

Decision on Jurisdiction and Competence of July 6, 1975, 1 ICSID Rep. 296 (1993); 114 I.L.R. 144 (1999).

(Arbitration Tribunal: Dr J@rgen Trolle, President; Sir Michael Kerrl a
Dr Fuad Rouhani, Members)
6 July 1975 *
SUMMARY: The facts: - In 1952 Kaiser Bauxite Company ("Kaiser"
company incorporated in the United States, commenced operation
Jamaica. In 1957 Kaiser entered into an agreement with the Governmen
Jamaica (the "Principal Agreement") relating to the ownership
operation of its bauxite mining facilities in Jamaica. The Princ
* A chronology of the proceedings in this case is set out at p, xxii. The Kairer case was
three proceedings brought against Jamaica by aluminum and bauxite producers.
Minerals ofJamaica Inc v . Jamaica (Case No. ARBi7412) and Reynolds Jamaica Mines L
and Reynolds Metah Company v. Jnmaica (C.ase No. ARBi7414) were re@
simultaneously with the Karrer case on 21 June 1974. Although the proceedings were
joined, the same tribunal heard all three cases. The decisions in the ACoa and Reynolds c
are not yet available for publication. However, they are in all material respects identical to
decision in the Kaiser case. Chronologies of the proceedings in the Alcoa and Reynolds c
are set out at p. xxi and p. xxii respectively.
' Appointed in February 1975 after the resignation of Mr Elihu Lauterpacht, QC, u
becoming Legal Adviser of the Department of Foreign Affairs, Australia, a member of
International Bauxite Association.
Agreement contained a "no further tax" clause pursuant to which Jamaica
undertook not to impose any additional royalties or taxes which had not
been specifically provided for and referred to in the Principal Agreement.
The Principal Agreement was amended by further agreements in 1969 (the
"1969 Agreement") and in 1972 (the "1972 Agreement"), both of which
provided for the submission of disputes arising under any of the agreements
In 1974 Jamaica enacted the Bauxite (Production Levy) Act (the "Act")
provided for an additional tax to be paid on all bauxite extracted in
ca on or after 1 January 1974. On 8 May 1974, Jamaica, which had
he ICSID Convention in 1968 without reservation. filed a notification
with I(.\IIp>u rsu:inl tc) ,\rticIc 3 ( 4 ) o i t l ~(~'01, 1 vci11io1piu rporti~~tog r cnic)vc
lating to minerals or other natural resources.
In June 1974 Kaiser initiatcd ICSID arbitration proceedings seeking a
claration that the Act did not apply to it and seeking the return of monies
aid to Jamaica pursuant to the Act. Jamaica refused to appoint an
bitrator and the tribunal was eventually established by the Chairman of
e Administrative Council pursuant to Article 38 of the Convention and
bitration Rule 4. The first meeting of the Tribunal took place on 2 April
975 and Jamaica failed to appear. In view of the non-appearance of Jamaica
nd its failure to appoint an arbitrator the Tribunal decided to deal with its
wn jurisdiction and competence as a preliminary issue in order to
ermine whether the dispute fell within the subject matter jurisdiction of
ID and whether Jamaica's notification of 8 May 1974 had had the effect of
I hdrawing the dispute from the scope of its prior agreement to arbitrate.
Held: - (1) The dispute was within the jurisdiction of ICSID. Article 25(1)
the Convention provided that the jurisdiction of the Centre extended "to
ny dispute arising out of an investment ...". The dispute concerned the
lleged rights and obligations stemming from particular provisions in the
reements between Kaiser and Jamaica and was therefore a legal dispute.
kewise, where a mining company had invested substantial amounts in a
reign State in reliance upon an agreement with that State, the
nvestment" must be among those contemplated by the Convention. The
onvention had entered into force for both the United States and Jamaica at
e time of the 1969 and 1972 Agreements and, accordingly, Jamaica was a
ontracting State and Kaiser a national of another Contracting State for the
urposes of the application of the Convention. The arbitration clauses
ontained in the 1969 and 1972 Agreements constituted the parties' written
onsent to ICSID arbitration (pp. 303)
(2) The Jamaican notification did not affect the prior agreement to
rbitrate which was contained in the 1969 and 1972 Agreements. This
greement could not be unilaterally withdrawn by either party. The
otification given by Jamaica could only operate in respect of potential
ture investors. To find otherwise would be to deprive the Convention of
ny practical value for Contracting States and investors alike (pp. 304)
The following is the text of the decision of the Tribunal:
1. By letter of June 17,1974, Kaiser Bauxite Company (hereafter cal
"Kaiser") addressed a request for arbitration against the Governmen
Jamaica to the Secretary-General of the International Centre for Settlem
of Investment Disputes (hereafter called "Centre") pursuant to Ar
36(1) of the Convention on the Settlement of Investment Disputes betw
States and Nationals of Other States (hereafter called "Convention")
Rule 1 of the Centre's Institution Rules. In order to found the jurisdictio
the Centre the request relied on provisions expressing the consent of
parties to arbitration proceedings pursuant to the Convention containe
agreements dated December 30,1969 and February 24,1972, respectiv
between the Government of Jamaica, and Kaiser and Kaiser Aluminum
Chemical Corporation, of which certified copies had been duly depos
with the Centre.
2. The Secretary-General registered the request on June 21, 1974
promptly notified the parties thereof, pursuant to Article 36(3) of
Convention and Institution Rule 6(1).
3. The records of the Centre show the following relevant facts
respect to the constitution of the Tribunal. On June 27, 1974 Kaiser
proposals to the Government of Jamaica with respect to the constitutio
an Arbitral Tribunal. On September 19,1974 Kaiser, not having rece'
reply to its proposals, chose that the Tribunal be constituted in accor
with Article 37(2)(b) of the Convention, that is to say, that the Tribunal
to consist of three arbitrators, one arbitrator to be appointed by each
and the third, to be the President of the Tribunal, to he appoint
agreement of the parties. Kaiser appointed Elihu Lauterpacht (Britis
be an arbitrator. The Government of Jamaica did not appoint an arbit
The Tribunal not having been constituted within 90 days after noti
registration by the Secretary-General of the request for arbitration, K
on November 8, 1974 requested the Chairman of the Administr
Council, pursuant to Article 38 of the Convention and Arbitration Rule
appoint two arhitrators and to designate one of them as the President o
Tribunal. The Chairman, after consultations in accordance with Arhitr
Rule 2, on December 9,1974 appointed Mr J@rgen Trolle (Danish) an
Fuad Rouhani (Iranian) as arbitrators and designated Mr Trolle as
President of the Trihunal. As required by Article 40(1) of the Con
both Mr Trolle and Mr Rouhani were appointed from the P
Arbitration, Mr Trolle having been designated to the Panel by the K~ng
of Denmark pursuant to Article 13(1) of the Convention on August 20,
and Mr Rouhani having been designated by the Chairman pursua
Article 13(2) of the Convention on November 19,1974. All three arbitrat
having accepted their appointment, the Tribunal was constituted
December 16, 1974. Prior to the first session of the Tribunal,
Lauterpacht on January 20, 1975 submitted his resignation upon assum
is duties as Legal Adviser of the Department of Foreign Affairs of the
overnment of Australia. On February 3,1975 the remaining members of
e Tribunal consented to Mr Lauterpacht's resignation as required by
bitration Rule 8. Kaiser thereupon duly appointed Sir Michael Kerr
ritish) as arbitrator and upon the latter's acceptance of his appointment
heTribunal in its present composition was reconstituted on March 10,1975.
4. On the same day the parties were convened for a first meeting with the
ribunal to be held at the seat of the Centre at Washington, DC on April 2,
975, i.e. within the time limit fixed by Arbitration Rule 13.
5. At this session Kaiser appeared while the Government of Jamaica did
ot appear and was not represented. The President announced that the
ribunal had determined that it was ~-r o.~ e.r lcvo n stituted under the
onvention and the Arbitration Rules.
6. Although no formal objection to the jurisdiction of the Centre and the
comnetence of the Tribunal had been received from either side in this case,
'n view of the failure of the Government of Jamaica to appear and the notice,
dated May 8,1974, referring to Article 25 of the Convention, filed by it with
the Centre, the Tribunal decided that it was appropriate that the question of
the jurisdiction of the Centre and the competence of the Tribunal should be
dealt with as a preliminary issue. Furthermore, there was at this stage
nothing before the Tribunal except a request for registration of these
proceedings filed by the claimant, but it was pointed out by theTribunal that
it was necessary to consider the question of jurisdiction and competence on
the basis of the nature of the claimant's claim and the relief sought by it in
these proceedings.
7. Having regard to this the Tribunal made the following order:
I. Kaiser to file with thecentre by May 4,1975, aMemorialdealingwith the
(i) a full statement of the nature of Kaiser's claim and the relief sought in
these proceedings (but without at this stage adducing evidence or
argument in support); and
(ii) full argument on any issue as to the jurisdiction of the Centre and the
competence of the Tribunal having regard to the notice, dated May 8,
1974, referring to Article 25 of the Convention for the Settlement of
Investment Disputes between States and Nationals of Other States,
filed by the Government of Jamaica with the Centre, and on any issue
that might arise' from the wording of the arbitration clause on which
Kaiser founds jurisdiction and competence or in any other connection.
11. The Government of Jamaica to file a Counter-Memorial by June 11,
1975, in reply to the aforesaid Memorial.
Secretary-General's note: the underscored [italicized] words had been inadvertcntly
omitted from the text signed by the arbitrators:
111. All further matters in the proceedings to be stood over for the tim
8. Kaiser filed a Memorial within the fixed time limit.
9. No Counter-Memorial has been filed by Jamaica.
10. The Tribunal regrets that Jamaica has failed to appear and to b
forward any objections to the jurisdiction of the Centre and the compete
of the Tribunal which it might entertain. TheTribunal nevertheless.
to examine its own jurisdictionproprio motu and in doing so to cons
objections which might be raised against its jurisdiction.
11. At the present stage and by virtue of Article41 of the Conventio
Arbitration Rules the Tribunal is concerned to pronounce upon this
The issue being thus limited, the Tribunal will avoid not only all expre
of opinion on matters of substance, but also any pronouncement w
might prejudge or appear to prejudge any eventual decision on the m
12. The facts relevant to the question of competence and jurisdiction
as alleged by Kaiser:
(a) Kaiser owns and operates bauxite mining facilities on the north coast
Jamaica, and has invested over $63 million in itsJamaicanfacilities. It has he
conducting operations in Jamaica since 1952, and in 1973 it was the larg
single taxpayer in the country, having paid $9,869,471 in royalties and incom
taxes to the Government of Jamaica (the 'Government'). Kaiser decided t
invest its capital and to conduct operations in Jamaica in reliance upo
particular contractual arrangements with the Government. These investmen
agreements with the Government are set forth in three documents. They are
(1) the Principal Agreement, executed on March 15, 1957 ('Principa
(2) an amendment to the Principal Agreement, executed on December 30
1969 ('1969 Agreement'); and
(3) a further amendment to the Principal Agreement, executed o
February 24,1972 ('1972 Agreement').
These agreements specifically define Kaiser's obligations to the
Government concerning taxes and royalties. The particular contractua
provisions are complex, and are set out at paragraphs 2-5 and 7-9 of th
Principal Agreement; paragraphs 1-5 of the 1969 Agreement; and paragraph
1-6 of the 1972 Agreement.
Paragraph 5 of the Principal Agreement was drafted to prevent the
imposition of additional royalties and taxes that were not specifically provided
for and referred to in the Agreement. This provision states:
5. FURTHER TAXES: No further taxes will be imposed on bauxite, bauxite
reserves or bauxite operations or any assets used in bauxite operations o
dividends on bauxite operations.
'Further Taxes' shall include all taxes, burdens, levies, excises and
imposts on bauxite operations and all assets used in connection therewith
in Jamaica or its territorial waters (including but not limited to an
additional royalty under the Mining Law and any other royalty, and an
tax, burden or impost on severance, transportation, storage, handling,
exportation, employment, sales, shipping, capital and reserves).
It is understood that taxes dealt with elsewhere in this agreement and
normal license duties of general application, such as licenses on motor
vehicles and harbour and light dues of general application and Rat local
service rates on land and import duties of general application (but not
any duty which would be a tax, burden or impost of the nature of any of
those enumerated in the above definition of 'further taxes') are excluded
from this clause.
Kaiser's claim is that this provision has been contravened by the
Government's enactment of legislation which does impose such a 'further tax'
on bauxite mined by Kaiser in Jamaica. This legislation, called the Bauxite
(Production Levy) Act, 1974 (the 'Act') provides in relevant part that:
'notwithstanding anything in any law, enactment or agreement, a tax to be
known as a Production Levy shall be paid on all bauxite ... extracted ... in
Jamaica on or after the 1st January, 1974 ...' Act, Paragraph 3(1).
(Memorial, pp. 1-3)
(b) Para. 6 of the 1969 Agreement referred to above provides as follows:
6. (1) Each of the parties hereto hereby Agrees and Consents to any legal
dispute arising under the Principal Agreement or this Agreement being
submitted to the International Centre for Settlement of Investment
Disputes established by the Convention set out in the Schedule to the
Investment Disputes Awards (Enforcement) Act, 1966 of Jamaica.
(2) The foregoing constitutes a consent both to conciliation proceedings
and to arbitration proceeding sunder the saidconvention but the consent
to arbitration proceedings shall not be to the exclusion of any other
remedy which may be open to either party.
(3) In determining any dispute submitted to arbitration as aforesaid, the
Arbitration Tribunal shall apply the law of Jamaica and such rules of
international law as may be applicable excluding however any
enactments passed or brought into force in Jamaica subsequent to the
date of this agreement whichmay modify or affect the rights of the parties
under the Principal Agreement or this Agreement and excluding also any
law or rule which could throw doubt upon the authority or ability of the
Government to enter into the Principal Agreemrnt and this Agreement.
(c) Para. 7 of the 1972 Agreement referred to above provides as follows:
7. (1) Each of the Parties hereto hereby Agrees and Consents to any legal
dispute arising under the Principal Agreement, the 1969 Agrcement or
this Agreement being submitted to the International Centre for
Settlement of Investment Disputes established by the Convention set out
in the Schedule to the Investment Disputes Awards (Enforcement) Act,
1966 of Jamaica. 61
61 Subparagraphs 7(2) and 7(3) of the 1972 Agreement are identical to
subparagraphs 6(2) and 6(3) of the 1969 Agreement.
(Memorial, p. 8)
(d) The relief sought by Kaiser in this arbitration is that the Tribunal:
A. State that the Government is legally bound to respect its undertaking, as
set forth in Paragraph 5 of the Principal Agreement, not to impose
'further taxes' on Kaiser, including imposition of the Bauxit
(Production Levy) Act.
B. Declure that Kaiseris not legally obliged topayany furthermonies to th
Government pursuant to the requirements of the Bauxite (Productio
Levy) Act, and
C. Award Kaiser an amount equal to all monies paid by Kaiser pursuant
the Bauxite (Production Levy) Act up to and including the date o f t
Tribunal's award, together with interest thereon computed at the rate
six per cent per annum.
13. The jurisdiction of the Centre is established under the Convent'
accordance with Article 25 which in its material parts provides as fol
(1) The jurisdiction of the Centre shall extend to any legal dispute aris
State) and a national of another Contracting State, which the parties to t
dispute consent inwriting to submit to the Centre. When the parties have giv
their consent, no party may withdraw its consent unilaterally.
(2) 'National of another Contracting State' means:
(a) . . . . .
(b) any juridical person which had thenationality of a Contracting St
other than the State party to the dispute on the date on which
parties consented to submit such dispute to conciliation
arbitration and any juridical person which had the nationality oft
because of foreign control, the parties have agreed should
treated as a national of another Contracting State for the purpo
of this Convention.
(3) . . . . .
(4) Any Contracting State may, at the time of ratification, acceptance
approval of this Convention or at any time thereafter, notify the Centre oft
class or classes of disputes which it would or would not consider submitting
the jurisdiction of the Centre. The Secretary-General shall forthwith trans
such notification to all Contracting States. Such notification shall no
constitute the consent required by paragraph (1).
14. On May 8, 1974 the Government of Jamaica sent the follo
notification to the Centre:
In accordance with Article 25 of the Convention establishing t
International Centre for the Settlement of Investment Disputes, t
Government of Jamaica hereby notifies the Centre that the following class
dispute at any time arisingshall notbe subject to the jurisdiction of the Centr
[ ' There appears to be no Section IV in the decision.]
Class of Dispute
Legal Dispute arising directly out of an investment relating to minerals or
other natural resources.
15. The Tribunal therefore has to consider:
- whether there is a legal dispute between the parties;
-whether such dispute arises directly out of an investment,
- whether Jamaica is a Contracting State under the Convention;
- whether Kaiser is a national of another Contracting State;
-whether Kaiser and Jamaica each consented in writing to submit the
dispute to the Centre; and
- whether Jamaica's notification, dated May 8, 1974, submitted under
Article 25 to the effect that disputes regarding minerals or other
natural resources shall not be subject to the jurisdiction of the Centre,
operates to deprive the Centre of jurisdiction.
16. The Tribunal finds that the dispute concerning the alleged legal rights
d obligations stemming from particular provisions in Kaiser's agreements
th the Government is a legal dispute.
17. The Tribunal finds that the dispute arises directly out of an
estment. It is said in the Report of the Executive Directors of the
ernational Bank for Reconstruction and Development accompanying the
onvention when submitted to Governments (hereafter called ED Report),
a. 27, that no attempt was made to define the term "investment" given
essential requirement of consent by the parties. It follows that the
ention of the Convention was that the consent of the parties should be
ntitled to great weight in any determination of the Centre's jurisdiction.
oreover, it seems clear to theTribunal that a case like the present, in which
mining company has invested substantial amounts in a foreign State in
eliance upon an agreement with that State, is among those contemplated by
he Convention.
18. Jamaica signed the Convention on June 21, 1965, and deposited its
nstrument of Ratification on September 9,1966. Pursuant to Article 68(2)
the Convention, it entered into force with respect to Jamaica on October
19. Kaiser is a private corporation organized under the laws of the State
Nevada in the United States of America. The United States signed the
onvention on August 27,1965, and depositedits Instrument of Ratification
n June 10,1966. Pursuant to Article 68(2) of the Convention it entered into
orce with respect to the United States on October 14, 1966.
20. Accordingly, at the time of the 1969 and 1972 Agreements, Jamaica
as a Contracting State and Kaiser was a national of another Contracting
21. The Tribunal considers that paras 6 and 7, respectively, of the 1969
and 1972 Agreements constitute written consent by the parties as required
y Article %(I) of the Convention to submit to the Centre disputes s"ch as
the present dispute. In this connection the Tribunal agrees with the
expressed in para. 24 of the ED Report that consent may be given in
included in an investment agreement providing for the submission to t
Centre of future disputes arising out of that agreement. It follows from t
foregoing and from Article 25(1) of the Convention that, written conse
the jurisdiction of the Centre having been given in this case by both par
neither party could unilaterally withdraw such consent and deprive t
Centre or the Tribunal of jurisdiction.
22. The Government of Jamaica appears to contend that its notificat
to the Centre on May 8, 1974 deprives the Centre and consequently t
Tribunal of jurisdiction. The Tribunal cannot accept this view.
23. In the present case the written consent was contained in t
arbitration clauses between the Government and Kaiser which have alr
been quoted. This consent having been given could not be withdrawn.
notification under Article 25 only operates for the future by
information to the. Centre and potential future investors in undert
concerning minerals and other natural resources of Jamaica. This v
Article 25 is shared by the ED Report which states the following:
31. While no conciliation or arbitration proceedings could be brough
against a Contracting State without its consent and while no Contracting Sta
is under any obligation to give its consent to such proceedings, it
nevertheless felt that adherence to the Convention might be interprete
holding out an expectation that Contracting States would give favora
consideration to requests by investors for the submission of a dispute to
Centre. It was pointed out in that connection that there might be classes o
investment disputes which governments would consider unsuitable fo
submission to the Centre or which, under their own law, they were no
permitted to submit to the Centre. In order to avoid any risk
misunderstanding on this score, Article 25(4) expressly permits Contracti
States to make known to the Centre in advance, if they so desire, the classes o
disputes which they would or wouldnot consider submitting to the Centre.
provision makes clear that a statement by a Contracting State that it wo
consider submitting a certain class of dispute to the Centre would serve
purposes of information only and would not constitute the consent required
give the Centre jurisdiction. Of course, a statement excluding certain classes o
disoutes from consideration would not constitute a reservation to th
24. The Tribunal accordingly finds that the Government could
withdraw, and did not by its notification of May 8,1974 validly withdra
consent to arbitration given in the 1969 and 1972 Agreements. In additi
the reasons already given, the Tribunal considers that any ot
interpretation would very largely, if not wholly, deprive the Conventi
any practical value for Contracting States and investors and this cannot
been intended
25. For the foregoing reasons the Tribunal concludes that the present
'spute is within the jurisdiction of the Centre and the competence of the
ihunal. The Tribunal has, accordingly, made the necessary Order for the
ntinuation of the procedure pursuant to Arbitration Rule 41(4).
ource: The text of this decision was supplied by, and is reproduced with the
rmission of, Kaiser Bauxite Company.]
NOTE: - A settlement was eventually reached by the parties and the
oceedings were discontinued at the request of Kaiser. An Order taking
te of the discontinuance was issued by the Tribunal on 27 February, 1977
rsuant to Arbitration Rule 44.

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