International Centre for Settlement of Investment Disputes (ICSID)
ICSID, established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965, is the main institution devoted to settlement of international investment disputes. The ICSID Convention is specifically designed for the settlement of investment disputes between host states and foreign investors.1 ICSID is also available for state-state disputes under investment treaties and free trade agreements.2 Bangladesh became party to the Convention in 1980. The country has also concluded numerous bilateral investment treaties (BITs), which accept the jurisdiction of ICSID on investment disputes arising from those treaties. Bangladesh has so far engaged with ICSID in the following four investment disputes, three of which involved petroleum contracts while the other was on a gas pipeline construction project. Due to the involvement of significant investment and state entities, most disputes arising out of petroleum agreements partake of the nature of investment dispute rather than a purely commercial one. Therefore, many petroleum disputes are resolved by investment arbitration under bilateral investment treaties. The ICSID is the most used forum for settlement of such investment disputes. The four ICSID cases involving Bangladesh are discussed below.
Chevron Bangladesh Blocks Twelve, Thirteen and Fourteen Ltd. v. Bangladesh
This dispute arose when Petrobangla, the state-owned oil and gas corporation of Bangladesh, imposed a wheeling charge on Chevron, an international oil company operating in Bangladesh. The wheeling charge amounted to 4 percent of Petrobangla’s payment to Chevron for the purchase of natural gas from the Jalalabad, Bibiyana, and Moulavibazar gas fields operated by Chevron. This charge was imposed as Chevron used Petrobangla’s pipelines to transmit gas from the gas fields under their control into the state-owned national gas network. It was argued by Petrobangla that the Production Sharing Contract and the Gas Purchase Sales Agreement (GPSA) with Chevron stipulated that the company is required to pay the wheeling or transmission charge for supplying gas to the domestic market. However, in 2006, Chevron made a claim of USD 240 million against the government of Bangladesh before the ICSID arguing that the deductions, which had been made by Petrobangla, were only applicable to the sale of the gas to third parties. The three-member tribunal of the ICSID, in its award, unanimously rejected Chevron’s claim “on the merits” and held that the contract between Petrobangla and Chevron allowed these deductions. The ICSID ruling also cleared the way to continue deduction of wheeling charges at 4 percent from Chevron’s future gas supply. This decision is a good example of how developing countries like Bangladesh can efficiently use international judicial forums to safeguard their economic interests; it is also a useful reminder that multinational corporations should operate within the bounds set by contractual obligations.