In the underlying arbitration, which lasted seven years, the Chinese claimants had challenged Mongolia’s revocation of a license to mine one of the largest iron ore deposits in the mineral-rich country, claiming that such revocation constituted an impermissible expropriation under the bilateral investment treaty between Mongolia and China. In an unprecedented move, the arbitral tribunal, which was led by then-President of the International Court of Justice Peter Tomka, agreed with the positions advanced by Milbank that Mongolia’s consent to arbitrate in the treaty covers disputes limited to questions of determination of the amount of damages owed for a proclaimed expropriation, and not whether measures taken by the country constitute an expropriation. The arbitral tribunal thus declined to hear the merits of Chinese entities’ arbitration claims. In so ruling, the award parted ways with multiple precedents in which identical or similar language had been construed to vest tribunals with jurisdiction to adjudicate claims of treaty violations.

In late 2017, the Chinese entities filed a motion to vacate the award before the SDNY, arguing that the tribunal was not competent to decide whether their claims were “arbitrable” and that it had wrongfully declined jurisdiction, by reference to the arbitral precedents that had reached the opposite conclusion. On that basis, the Chinese entities petitioned the SDNY to vacate the award and compel arbitration of their claims on the merits. Judge Ramos vindicated Mongolia’s positions by agreeing that the Chinese entities had waived any argument that the tribunal was not competent to decide whether their claims were arbitrable, having “vigorously” prosecuted their claims for seven years, including through extensive pleadings regarding the scope of consent to arbitrate in the treaty (without ever challenging the authority of the tribunal to make that determination).

The Milbank team representing Mongolia was led by Litigation & Arbitration partner Michael Nolan and senior associate Kamel Aitelaj.