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Arnold & Porter Obtains Victory for Republic of Chile in 15-Year Arbitration

February 4, 2013

Washington, D.C., February 4, 2013 -- In a recently issued decision, Arnold & Porter LLP succeeded on behalf of its client, the Republic of Chile, in obtaining the annulment of an award of damages of US$ 10 million that had been imposed on Chile in an arbitral award issued in May 2008. In the case of Victor Pey Casado and President Allende Foundation v. Republic of Chile, which commenced in 1997 at the World Bank-affiliated International Centre for Settlement of Investment Disputes ("ICSID"), the claimants had sought damages of up to US$797 million, but had been granted only US$10 million in the 2008 Award. This award of damages has now been annulled by an ICSID panel of arbitrators, in a decision issued on December 18, 2012. 

This epic arbitration was the longest in ICSID history, spanning more than 15 years from the filing of the request for arbitration until the recent annulment decision. The case is also one of the most unusual and complex in ICSID history, and was heavily tinged by political and ideological considerations, relating to the Chilean military coup of 1973 that brought General Augusto Pinochet to power. The arbitration, which was brought  pursuant to the bilateral investment treaty ("BIT") between Chile and Spain, involved claims for the confiscation and eventual expropriation in the 1970's of a newspaper called El Clarín, of which Victor Pey Casado and the President Allende Foundation claimed ownership. 

Despite the low amount of damages granted to the claimants in the 2008 award, Chile had sought annulment due to the multiple substantive and procedural irregularities that had plagued the arbitration and the award itself. A new ICSID panel of arbitrators was constituted to hear the annulment claim, and in its December 18, 2012 decision, such panel accepted two of Chile's annulment claims, thereby annulling the portion of the 2008 award that had ordered Chile to pay US$10 million in damages. The panel cited as the grounds for its decision a "serious departure from a fundamental rule of procedure" (resulting from the denial of an adequate opportunity by Chile to be heard on damages issues), and a "failure to state reasons" (due to contradictory reasons in the Award). In addition, the annulment panel awarded 50% of the costs of the annulment proceeding to Chile. 

The Arnold & Porter legal team case was headed by Paolo Di Rosa, and included Jean Kalicki, Samuel Witten, and Mallory Silberman. The relevant citation is Victor Pey Casado and President Allende Foundation v. Republic of Chile (ICSID Case No. ARB/98/2), Decision on Annulment, December 18, 2012.

Arnold & Porter also successfully represented Chile in an earlier ICSID arbitration, Sociedad Anónima Eduardo Vieira v. Republic of Chile, in which all claims were dismissed in 2007. Notably, the recent decision constitutes the fifteenth consecutive positive result obtained by Arnold & Porter on behalf of sovereign states in investor-State arbitrations. Click here to read about previous decisions.

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