Judgment Name: Olin Holdings Ltd. v. State of Libya

Citation: 21-cv-4150 (JGK)

Court: United States District Court for the Southern District of New York

Coram: John G. Koeltl, J.

Date: 14th April 2022.

Keywords: Investor-State Arbitration, Arbitrability, Jurisdiction, ICC Rules, International Arbitration

Facts:

Olin Holdings Ltd. (“Olin”), a company incorporated in Cyprus, was a foreign investor in the State of Libya, investing in a dairy and juice factory, and was governed by the Cyprus-Libya BIT. In 2006, soon after Olin had completed the construction of its factory in Libya, it was served with an eviction notice, and the Libyan Government expropriated and demolished a large part of Olin’s factory site. In the same year, Olin initiated judicial proceedings before the domestic Libyan courts, which extended to 2014. Olin instituted arbitration proceedings against Libya before the International Chamber of Commerce (“ICC”) in 2014, with the partial award on jurisdiction and the final award being rendered in 2016 and 2018, respectively. Libya contested the Tribunal’s jurisdiction, but the Tribunal held that Olin’s domestic lawsuits in Libya did not preclude it from invoking arbitration. The Tribunal concluded that Article 9(2) of the Cyprus-Libya BIT was not a fork-in-the-road clause, and thus arbitration and litigation would not be mutually exclusive. Olin moved the Supreme Court of the State of New York in 2020 to confirm the 2018 Final Award, and Libya moved to oppose Olin’s petition before this present Court.

Issue:

Whether the Tribunal’s Jurisdiction Award was valid?

Analysis:

The Court held for the Claimants, upholding the validity of the award. Firstly, it considered whether the Jurisdictional Award was a decision on the substantive arbitrability of the parties’ dispute or a resolution of a procedural gateway issue to arbitration. It was decided that the Jurisdictional Award fell in the latter category, as the presumption that the arbitrability of the dispute is to be decided by the arbitral tribunal would apply here.

The Court further went on to hold that even if the Award were a decision on the substantive arbitrability of the dispute, it would be valid. Relying on Schneider v. Thailand, the Court held that when there are explicit rules (within an investment treaty in this case) to empower an arbitral tribunal to decide issues of arbitrability, the provision serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator. The Court held that certain contractual provisions governing Olin and Libya provided clear and unmistakable evidence of the parties’ intent to arbitrate arbitrability. Olin and Libya’s Terms of Reference provided that dispute resolution would take place through arbitration under the ICC Rules. As per Article 6, Section 3 of the ICC Rules, an arbitral tribunal decides the arbitrability of the dispute. Thus, the Court held that the Tribunal was correct in its decision on arbitrability.

Lastly, the Court decided to give a ‘deferential review’ of the Award. If such a deferential review is granted, an award is held to be valid if the arbitrators “explain their conclusions in terms that offer even a barely colourable justification for the outcome reached”. As per the Court’s review, the Tribunal gave sufficient explanations for the outcome, and the award would therefore be valid. The Court held that since the parties are governed by the New York Convention, Libya would have the burden to prove one of the seven defences under Article V of the New York Convention to prevent the award. As Libya failed to prove the same, the Award was held to be valid as per the New York Convention.

Conclusion:

Holding for the Claimant, the Court allowed Olin to enforce the arbitral award. In this decision, the Court rendered two important analyses. First, if the parties have arbitrated arbitrability, jurisdiction challenges can be quashed. Second, while conducting a deferential review, a Court needs to satisfy itself with the existence of justifications for the outcomes of an award.

[ This case note has been authored by Aryan Tulsyan, a junior editor at Mapping ADR.]