ICSID Tribunal Upholds The Recoverability Of Success Fees For Counsel In BSG Resources v Guinea

• Published date: 05 October 2022
• Subject Matter: Litigation, Mediation & Arbitration, Energy and Natural Resources, Mining, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr Craig Tevendale and Louise Barber

On 18 May 2022, an arbitral tribunal rendered its award in BSG Resources Limited (in Administration), BSG Resources (Guinea) Limited, BSG Resources (Guinea) Sàrl v Republic of Guinea (ICSID Case No. ARB/14/22) in favour of the Republic of Guinea ("Guinea"). Notably, in awarding costs, the tribunal treated as recoverable Guinea's success fees under a private fee arrangement with counsel.

The decision on the recoverability of success fees is a significant development in the arbitration community and in particular for arbitrations under the auspices of the International Centre for Settlement of Investment Disputes ("ICSID"). The tribunal offered its interpretation of 'costs reasonably incurred' under Rule 52(2) of the amended ICSID Arbitration Rules, viewing success fees as a category of recoverable costs to the extent that such fees are part of a total costs figure that resembles the unsuccessful party's expenditure. The decision prompts several unresolved questions, leaving it open to future tribunals (ICSID or otherwise) to follow suit, qualify the decision, or disregard it altogether.

Background

BSG Resources Limited (in Administration) and later BSG Resources (Guinea) Limited and BSG Resources (Guinea) Sàrl (together "BSG") collectively commenced two ICSID arbitration proceedings against Guinea relating to two iron ore mining areas in the south-eastern part of Guinea, Zogota and Simandou. The two arbitrations were subsequently consolidated. The dispute arose under the 1995 Investment Code of Guinea, 1995 Mining Code of Guinea, the 1998 BOT Act and the 2009 Base Convention ("Invoked Instruments").

BSG claimed that (i) Guinea unlawfully expropriated its investment by revoking its mining rights over the two iron ore mining areas in 2014 and (ii) BSG suffered discriminatory treatment from a 2012 governmental review of mining rights which specifically targeted BSG and favoured those who had funded the President's 2010 presidential election. BSG claimed these acts were in breach of its rights under the Invoked Instruments and international law and sought around USD 5 billion in compensation.

In turn, Guinea requested that the tribunal find that (i) the tribunal lacked jurisdiction to hear BSG's claims under the 1995 Mining Code and the BOT Act and (ii) BSG's claims were inadmissible because the mining rights were obtained through bribery of public officials and corruption. Guinea also made counterclaims seeking reparations for the economic and moral damages...