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Tribunal orders Zimbabwe to pay £7,3m to Dutch farmers
By Luke
Eric Peterson
Posted
to the web: 28/04/2009 11:07:04
IN A landmark decision,
an arbitral tribunal at the World Bank's International Center for Settlement
of Investment Disputes (ICSID) has declared that the Zimbabwean Government
breached international treaty protections owed to 13 Dutch farmers who
were forcibly evicted from their land earlier this decade.
A tribunal chaired by a former President of the International Court of Justice, Gilbert Guillaume, has held that Zimbabwe breached a requirement of the Netherlands-Zimbabwe investment protection treaty to provide just compensation in case of expropriation.*
In their decision dated April 22, 2009, the arbitrators ordered Zimbabwe to pay some £7,3 million to the affected landowners for their lost property, other moveable assets (such as tractors and vehicles), and for the "disturbance" suffered as a result of the dispossessions.
The ICSID ruling opens the way for similar international claims to be filed by other victims of land seizures in Zimbabwe. The Zimbabwe government has concluded investment protection treaties with several other European countries, including Germany, Switzerland, and Denmark.
The Dutch claimants in the Funnekotter, et.al. v. Zimbabwe case turned to ICSID in 2003, alleging that they had been forcibly dispossessed of their properties thanks to violent land invasions by so-called War Veterans, as well as various acts and omissions of the Zimbabwean authorities.
The claimants also accused Zimbabwe of breaching the "full protection & security" and "fair and equitable treatment" treaty standards, particularly insofar as the police and authorities were alleged to have encouraged and condoned the land invasions.
Notably, Zimbabwe did not contest jurisdiction in the ICSID case. What's more the government acknowledged that dispossessions had taken place without compensation - contrary to the demands of the Zimbabwe-Netherlands BIT.
However, Zimbabwe initially contended that it was prepared to offer restitution to the affected Dutch landowners. At a later stage of the ICSID proceeding, it rescinded this offer, and insisted that the claimants were obliged to apply for valuation of their property according to prescribed Zimbabwean laws.
For their part, the claimants countered that full compensation was owing under the treaty without any further need for domestic formalities. Moreover, the unlawful and chaotic nature of the expropriations warranted an additional sum of 37,440 Euros to be paid to each claimant for the disturbance and dislocation suffered.
The tribunal's work was made considerably easier by the Zimbabwean Government's failure to contest the expropriation claims of the claimants.
At the outset of its reasoning, the tribunal noted that it "was not disputed" that the claimants were deprived of their large commercial farms sometime between 2001 and 2003, as a result of land invasions and/or "various orders taken by the Government of Zimbabwe under the Land Acquisition Act of 1992." The tribunal further observed that these expropriations were formalized by amendment to the Zimbabwe Constitution in 2005.
The tribunal began its analysis of the merits of the case by observing that it "will first consider the submissions of the Claimants based on Article 6 (expropriation) of the BIT".
In particular, the tribunal would examine whether any of the conditions set forth in Article 6 had been breached, these included strictures that expropriations should be undertaken in a non-discriminatory fashion, and be accompanied by the provision of just compensation.
If the tribunal found a breach of any of these conditions, it held that it would be unnecessary to examine other alleged breaches of that article, or of other treaty provisions (such as fair and equitable treatment or full protection and security).
The tribunal began by considering whether just compensation had been provided.
Zimbabwe contended that this particular treaty obligation had not been breached because the claimants failed to pursue certain valuation exercises under domestic law.
The tribunal dismissed this first argument by Zimbabwe, and noted that the domestic law provided only for partial compensation (i.e. for improvements to land) and that there was no requirement for the claimants to have exhausted domestic remedies before claiming for full compensation under the treaty.
The tribunal also rejected a second defence raised by Zimbabwe: that the claimants needed to have their losses certified by an independent firm of auditors before they could be fully compensated. In rejecting this argument, the tribunal held that Zimbabwe had only offered to fully honour its obligations under the BIT once the ICSID arbitration had been initiated. As such, this did not justify the delay in paying compensation pursuant to the treaty.
As a third defence, Zimbabwe also raised a so-called "emergency" or "necessity" defence. Here, the government argued that a state of necessity prevailed in the country from March 20, 2000, until September 13, 2005, thereby relieving Zimbabwe of the responsibility of complying with the Netherlands-Zimbabwe BIT.
The government adverted to domestic law, Article 7 of the BIT, and customary international law, in an effort to make out this defence.
However, none of these arguments persuaded the tribunal. Glancing at domestic law, the arbitrators noted that no state of emergency had been declared in Zimbabwe during that time period. Moreover, it was international law, not domestic law, which would determine whether a state of necessity prevailed.
In turning to the Netherlands-Zimbabwe BIT, the tribunal noted that Article 7, cited by the claimants, was not a general exception to the BIT, but rather a provision which mandated that treatment of foreigners during times of national emergency, revolt, insurrection (or several other types of instability) should be at least as favourable as the treatment meted out to nationals of Zimbabwe.
Thus, turning to customary international law, the tribunal acknowledged that there is a defence of necessity available to Zimbabwe, but as per a judgment of the International Court of Justice, it "can only be invoked under certain strictly defined conditions which must be cumulatively satisfied". Moreover, the state concerned will not be the sole judge of whether those conditions have been met.
Ultimately, the tribunal had little difficulty finding that this necessity defence did not excuse Zimbabwe's failure to compensate the Dutch claimants. Indeed, Zimbabwe's case faltered at the outset because the government had never explained "why such a state of necessity prevented it from calculating and paying the compensation due to the farmers in conformity with the BIT".
After rejecting all three defences raised by Zimbabwe, the tribunal held that the government had breached its obligation under Article 6 (c) to provide just compensation.
In view of this failing, the tribunal held that it was unnecessary to examine other breaches of Article 6, much less other alleged breaches of the treaty.
An explanation of the tribunal's approach to calculating compensation is contained in the next item. Of particular note, the tribunal rejected an argument by Zimbabwe that less than market-value compensation may be appropriate in cases of large-scale expropriations undertaken by governments.
* Other members
of the tribunal in theFunnekotter v. Zimbabwecase were Dean Ronald Cass
of Boston University Law School, and H.E. Mr. Mohammad Wasi Zafar, a
former Minister in the Pakistani government
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