Woodside v. Mauritania: Investment Dispute at the Horizon?

The economy of the North African country of Mauritania is still largely dependent on farming and livestock. Iron ore has traditionally been the main natural ressource. Yet, worldwide demand for iron ore had been on the decline. The discovery of oil in 2001, thus, sparked hopes for a brighter economic future.

Production is scheduled to start in the upcoming weeks. Yet, the country has engaged in a passionate dispute with the principal exploring company, the Australian Woodside, over the participation contract. The current transitional government (which came into power following a military coup in August 2005) accuses the former minister of energy of signing an agreement amending the original participation contract in a way that is exclusively beneficial to Woodside. The government claims that large-scale bribery may have motivated the minister to 'adjust' the participation quota in favor of Woodside. News reports estimate the additional profit derived from the amendments for Woodside at US$ 200 Mio (calculated over the 10-year duration of the participation contract).

It is safe to predict that, if the parties fail to reach agreement at the political level, Woodside will initiate international arbitration. (News reports do not, however, reveal the precise jurisdictional basis for such arbitration.) If Mauritania's assertions are true, this case might be the first one in which an abitral tribunal would have to pronounce itself on the question whether an investor can enforce through international arbitration a benefit conferred to it through bribery.

Click here to read an article from The Australian. The principal Mauritanian paper's coverage can be accessed under http://www.akhbarnouakchott.com/.