Mobil v NZ 4 ICSID 140 Attorney General v Mobil, 1982 4 ICSID 117

In response to the oil crisis of the 1970’s on 1982 New Zealand entered into an Agreement with Mobil to participate in the erection of a synthetic gasoline. The agreement referred to ICSID arbitration. The plant was owned by the New Zealand Synthetic Fuel Co, 75% NZ & 25% Mobil. Art 11 of the agreement had the ‘most favoured purchaser’ MFP clause, which provided that in the event of sales to other purchasers being at prices lower than those paid by Mobil, a refund might be payable to Mobil 1986 NZ issued an act making unenforceable contracts which had the effect of lessening competition in a market. 1987 NZ said that article 11 was contrary to the Act and therefore, NZ suspended the MFP 1987 Mobil instituted proceedings under ICSID NZ commenced interim injunction in NZ courts to restrain Mobil from continuing ICSID on the basis that any inquire of the application of the Act was not a dispute that had arisen under the Agreement Mobil applied for a stay of proceedings under Arbitration (International Investment Disputes) Act

Heron J, Judge NZ: The court has the discretion to stay proceedings [as it was done in the case, pending the determination of ICSID tribunal jurisdiction] where there was a relevant relationship or nexus between the domestic proceedings and the issues raised therein and the proceedings under the ICSID convention and the issues raised therein. [This is not an] enquiry of what was agreed [to refer to ICSID] in this case the inquiry is only whether the proceedings pursuant to the convention relate to the legal proceedings brought in the domestic courts The issues raised in the domestic court were whether the dispute had arisen under the terms of the Agreement and whether article 11 had become unenforceable by virtue of the new Act. The court proceedings were undoubtedly in respect of a matter to which the proceedings pursuant to the UCSID convention related Mobil was an international company dealing with a sovereign state. An objective assessment of the agreement showed there was a deliberate design by the parties to constrain the domestic court’s jurisdiction and to include all disputes, including those relating to the application of later legislation, within the jurisdiction of ICSID. The system of dispute resolution adopted by the parties was arguably instituted in order to prevent subsequent hostile legislation affecting the relationship between the parties. It was an almost indispensable precondition to the achievement of orderliness and predictability essential to any international business transaction that a contract specify in advance the forum in which disputes would be litigated and the law to be applied ICISD: sustained jurisdiction and said that there was not evidence that the MFP clause lessened competition within the meaning of the Act