Senior Communications Manager
Wiley Rein Assists Dutch Farmers Secure Landmark Award from Republic of Zimbabwe
On Wednesday April 22, 2009, Wiley Rein, working with Steptoe & Johnson, obtained a landmark award from a panel of international arbitrators for thirteen Dutch clients against the Republic of Zimbabwe for breaches of the Netherlands-Zimbabwe bilateral investment treaty (the Treaty). The arbitrators found that Zimbabwe had expropriated farms belonging to the Dutch clients without compensation, an action which violated the Treaty. Among other things, the case establishes the legal principle that there is no rule in public international law that allows damages to be discounted below the market value in circumstances where the expropriations are part of a “large scale nationalization,” and that the aim and scope of the expropriations are not relevant.
The damages awarded to claimants were €8,220,000 plus interest of 10 percent compounded every six months from the date of breach. Therefore, the total due today equates to approximately €16 million.
The case was jointly pleaded and argued before the Tribunal—including three hearing days in Paris—by Wiley Rein’s International Trade Practice chair Chuck Verrill and Matthew Coleman of Steptoe’s London office. The unanimous award was issued by a three-member tribunal constituted under the arbitration rules of the International Centre for the Settlement of Investment Disputes (ICSID, an affiliate of the World Bank). The panel was chaired by a former president of the International Court of Justice.
Beginning in 2000, the Zimbabwean government encouraged invasions of commercial farms, including some of those owned by the Dutch claimants, by veterans of the 1980 War of Independence. All of the claimants’ commercial farms were later seized by the Government of Zimbabwe pursuant to its land reform program. Many of the land invasions were violent and were supported by the Zimbabwean army and police.
The Tribunal made several key findings:
- Zimbabwe had admitted that it had expropriated the farms concerned and had not paid compensation. Therefore the Treaty had been breached.
- The applicable law governing the dispute under the Treaty was public international law, not, as Zimbabwe argued, Zimbabwean law (which did not provide for compensation for land expropriated).
- The date of expropriation, and therefore the breach of the Treaty, was held to be the date the statutory expropriation orders were issued by the Government, or in cases where no such order was issued and the farm was invaded, the date of the enactment of legislation which prevented the removal of invaders.
- The level of compensation payable was that as determined by public international law, which is the market value of the properties at the time of expropriation and all other losses arising from the expropriation.
All of Zimbabwe’s defenses for not paying compensation were rejected by the Tribunal. In particular the claimants were not required under the Treaty to exhaust their local remedies by first complying with Zimbabwean legal procedures for compensation. The Tribunal also found that there was no requirement for an independent auditor to certify the net asset value of the properties because under public international law the market value was payable. Finally, the Tribunal concluded that Zimbabwe had not factually or legally established a defense of necessity, as no state of emergency was ever declared by President Mugabe.
Mr. Verrill commented on the decision, “The claimants hope that the new unity government realizes that in order to rebuild confidence with investors and donor governments—many of whose nationals have had land confiscated without compensation—they must honor their international obligations. Prompt payment of the award will be indispensable in convincing the international community that Zimbabwe is a reliable partner for business and investment.”