Commercial Dispute Resolution | 19 March 2020
Win for Mauritius in world heritage development dispute
Mauritius has secured the future of the Le Morne world heritage site following an investor-state arbitration victory over UK property developers in a case which highlighted the growing clash between national heritage and foreign investment.
The government of Mauritius last month triumphed in an investor-state arbitration against a group of United Kingdom property developers who wanted to develop property at a UNESCO World Heritage site on the island.
Thomas Gosling and others v Republic of Mauritius represented a victory for Boston-headquartered firm Foley Hoag, which represented the state, over fellow United States firm Latham & Watkins.
A group of investors consisting of Gosling, UK-registered Property Partnerships Development Managers and Mauritian companies TG Investments, Property Partnerships Holdings and Property Partnerships Development brought the claim against the state under the 1986 UK-Mauritius bilateral investment treaty (BIT).
They challenged a decision by the government to refuse them permission to build on a site at Le Morne, a peninsula home to an area of natural beauty which holds cultural significance as the reputed site of a slave rebellion during the 19th century. It has been on UNESCO’s World Heritage list since 2008.
The claim also challenged a separate decision to cancel a lease on another site at Pointe Jérôme. The investors argued that refusal of permission to develop the site was effectively an expropriation and qualified as unfair and inequitable treatment and asked for damages and compensation worth EUR 18 million for Le Morne and EUR 5.7 million for Pointe Jérôme.
Represented by a London-based Latham & Watkins team led by Sophie Lamb QC, who joined the firm from Debevoise & Plimpton in 2016, and included associate Samuel Pape, the claim was filed at the International Centre for the Settlement of Investment Disputes (ICSID) in September 2016.
The claimants appointed Bulgarian arbitrator Stanimir Alexandrov, while the respondents chose France’s Brigitte Stern and both in turn chose tribunal president Andrés Rigo Sureda from Spain.
Following hearings in Washington, DC, between 17 and 25 June 2019, the panel issued its award on 18 February this year, finding that the investors had never acquired the right to develop the site and had been given no assurances about that right, as a 2005 letter of intent from the Mauritian Board of Investment approving of the development before the site had received UNESCO status, did not qualify as such.
The panel also found that Mauritius was entitled to cancel the Pointe Jérôme lease following contractual breaches by the group.
It was a majority, rather than unanimous decision, with Alexandrov dissenting, with both sides to pay their own costs and split the tribunal fees and expenses 50-50.
Foley Hoag’s Washington, DC-based team was led by co-chair of international litigation and arbitration Paul Reichler, with head of the firm’s Africa group Tafadzwa Pasipanodya and fellow partner Constantinos Salonidis. They were joined by counsel Christina Beharry, associates Yuri Parkhomenko, Rebecca Gerome and Sudhanshu Roy, and Paris-based associate Antoine Lerosier.
They instructed Alison Macdonald QC of Essex Court Chambers in London and worked alongside Mauritian Attorney General Maneesh Gobin, Solicitor General Dheerendra Kumar Dabee SC, Assistant Solicitor General Mary Jane Lau Yuk Poon, Principal State Attorney Sureka Angad and Deputy Solicitor General Rajeshsharma Ramloll SC.
CLASH BETWEEN HERITAGE AND INVESTMENT
“Mauritius never promised or assured claimants that their proposed development project was compatible with Mauritius’ overriding policy objective of inscribing Le Morne as a UNESCO World Heritage Site. Since the tribunal found no documentary evidence of such alleged promised or assurances, it refused to accept claimants’ argument that they had the ‘legitimate expectation’ that they could proceed with their development project at Le Morne,” explains Pasipanodya.
The Pointe Jérôme cancellation meanwhile, “was a proper exercise of its right to do so under the term of the lease, not an arbitrary or discriminatory act”.
Pasipanodya contrasts the Gosling dispute with the 2000 case of Compañia del Desarrollo de Santa Elena v Costa Rica over expropriation of property to enlarge the Guanacaste Conservation Area, which was subsequently added to the World Heritage List, and 1985’s Southern Pacific Properties (Middle East) Limited v Egypt, in response to cancellation of a tourist project at the Giza pyramids after the unearthing of archaeological artefacts.
“In both those cases, the respondent states were asked to compensate the claimants for their decisions to protect their national heritage. What’s distinct about the Gosling v Mauritius case is that it provides insight into how states might protect their national heritage without violating an investor’s rights under international law,” she says.
Christophe Bondy, who joined US firm Steptoe & Johnson in February this year as a partner specialising in investor-state arbitration, trade policy and public international law, says “the case clearly demonstrates that investment tribunals will take seriously state interests in imposing heritage preservation restrictions. Indeed, there was no dispute here that Mauritius’ key intent for the area has been UNESCO World Heritage status, all along – the issue was what allegedly had been promised to the claimants notwithstanding that development”.
As deputy director of the Trade Law Bureau at Canada’s Department of Foreign Affairs and International Trade, Bondy defended Canada in investor-state claims at ICSID and under the North American Free Trade Agreement (NAFTA).
He notes that this award “reflects the general trend of investment tribunals when considering cases based upon state failure to respect investor ‘expectations’ – to consider the reasonableness of such expectations in all of the circumstances, to what extent they were based upon express promises, and to what extent the claimants had any firm right to expect any existing regulatory state of affairs would be maintained”.
Pasipanodya believes there will be more such cases in the future: “We are likely to see more [national heritage international arbitrations] as states increasingly seek to advance the two distinct policy goals of protecting their national heritage and pursuing foreign investment.”
“As more arbitrations address cultural heritage, we’ll likely see investment agreements seeking to address it more specifically,” she predicts.
A similar case, Gabriel Resources v Romania, is also ongoing at ICSID between a Canadian investor who alleges that the Romanian government expropriated a mine to apply for UNESCO World Heritage status for the Rosia Montana region.
In 2016, Latham & Watkins partners Charles Claypoole and Sebastian Seelmann-Eggebert successfully defended Croatia from an ICSID claim brought by Belgian investors who sought compensation for the lack of permission to build a tourist resort on a site they had purchased.