United States: Yes, We Can (Order A Country To Suspend Criminal Prosecution And Extradition): Hydro v. Albania Redux

An update, if not an epilogue, to the Hydro v. Albania saga. As described in our prior post, the ICSID arbitration tribunal in that case had imposed interim measures directing the Albanian government to suspend its prosecution of two of the individual claimants and its efforts to extradite them to Albania. A UK judge then enforced the tribunal's order, ruling that it was binding under international law and that the extradition could not proceed. In light of that ruling, the arbitration tribunal has modified its order slightly, dropping its demand that the Albanian criminal proceedings themselves be stopped, but maintaining that, indeed, it had the authority to require the suspension of those proceedings and associated extradition efforts, and was right to do so.

The scenario seems dramatic and exotic. But it may not prove entirely rare: As we have noted, another tribunal recently issued a similar order. As foreign investors facing what they believe are abusive or politically motivated criminal charges by host states increasingly turn to investment treaties and arbitration to push back, and as some states launch investigations or prosecutions after arbitrations have begun, investor-state arbitral tribunals may increasingly face such requests for interim measures. Courts, too, will have to decide how to respond.

To recap: Hydro involved a claim by Italian investors in a hydroelectric plant and two television stations in Albania, based on allegations of regulatory harassment and discrimination. While the arbitration was underway, the Albanian government froze the investors' assets in the country and pursued criminal forgery and money laundering proceedings against three of the claimants, including the owner of a London football club and his mother. These proceedings resulted in the issuance of arrest warrants and the initiation of extradition proceedings in the United Kingdom.

The claimants filed a request for interim measures with the arbitral tribunal, asking it to order the suspension of the criminal and extradition proceedings, and the unfreezing of their assets. Albania objected, arguing that the tribunal should not interfere with the state's sovereign right to enforce its criminal laws. On March 3, 2016, the tribunal largely sided with the claimants, finding that were the individual claimants extradited to Albania and jailed, they would be prevented from participating in the arbitration as witnesses or otherwise, thus undermining the integrity of the proceedings. It thus instructed Albania to suspend both the prosecution and the extradition until the arbitration was completed. It declined to order the return of the assets, instead instructing the parties to attempt a negotiated resolution on that issue.

Albania did not immediately comply with the order, and the criminal and extradition proceedings continued. The claimants thus asked the tribunal for a "partial award" allowing enforcement of its ruling; Albania responded by asking the tribunal to revoke its order as wrongly issued. While the matter was pending, a UK magistrate judge issued an order finding that, in light of the arbitral tribunal's March 2016 interim measures decision, the UK extradition proceedings could not go forward. Albania then dropped its extradition request, at least for the time being.

On September 1, 2016, the tribunal issued a new decision modifying its prior order. It found that, given the UK judge's decision, it was unnecessary to require the suspension of the Albanian criminal proceedings themselves or Albania's extradition efforts. However, it rebuffed Albania's argument that the original interim measures order was improper, thus reaffirming its core holding that maintaining the integrity of the arbitral process trumped the sanctity of the Albanian domestic criminal process, at least for the time being – a decision that the UK judge had essentially endorsed. And the tribunal continued to direct Albania not to resume efforts to extradite the claimants until after the arbitration.

In itself, the new decision is not a dramatic development. But the tribunal's commitment to its original holding once again highlights the potential tension between international treaty arbitration proceedings and domestic law enforcement action, a subject we (and several tribunals) have considered before. Investors may launch arbitration claims based on purportedly unfair criminal prosecutions; criminal prosecutions may interfere with arbitration proceedings; arbitrators may seek to intervene in such cases. Domestic judges in various jurisdictions may face real dilemmas: Do comity and extradition treaties require respect for foreign criminal proceedings? Do arbitration treaties require deference to tribunals' rulings? And what should a domestic court do outside the extradition context when it is asked to enforce an arbitral order to suspend a criminal case pending in that court?

In a U.S. court, the issues could certainly prove knotty. The scenario is in some ways reminiscent of the Medellin v. Texas case, in which the U.S. Supreme Court, in another criminal case, held that decisions of the International Court of Justice regarding application of a different treaty were not binding or enforceable under U.S. domestic law. But decisions by arbitration tribunals – particularly in ICSID cases – could be different. The ICSID and New York Conventions have been implemented directly in U.S. law through the ICSID Convention's implementing legislation and the Federal Arbitration Act, respectively, and thus arbitral awards are directly enforceable. In fact, ICSID decisions (unless annulled through the ICSID process) are enforceable in the same manner as a final judgment of a U.S. state court, without the usual grounds for challenge under the FAA and the New York Convention.

Another wrinkle: U.S. courts have divided as to whether an arbitral tribunal's interim measures order is enforceable. Some courts have found that they are not, as they cannot be considered "final" under the New York Convention and the FAA. Other courts have found the opposite. The situation is even murkier in the ICSID arbitration context; under the U.S. ICSID implementing statute, the FAA does not apply, and neither the statute nor the ICSID Convention addresses the issue. U.S. courts have apparently not yet reached it.

So what will happen when a U.S. court faces a foreign government's request to extradite an individual who is a party to an investor-state arbitration, in the face of an arbitral tribunal's order barring extradition? Or when a court considers a foreign government's request under a mutual legal assistance treaty to help collect testimony or evidence in the U.S. for use in a foreign criminal proceeding that is subject to a tribunal's interim measures order? Perhaps less likely, but more daunting: What if the U.S. government prosecutes a foreign national or company (e.g., under the Foreign Corrupt Practices Act), the foreign national brings an investment treaty claim against the United States, and the tribunal orders the U.S. government to suspend the prosecution? What would a U.S. district judge do then?

It may only be a matter of time before we find out.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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