58156458_thumbnailOn July 7, 2016, a UK judge said yes, suspending the extradition of two men to Albania in compliance with an order of a tribunal in an international arbitration those men had brought against the Albanian government. The Albanian government quickly relented, dropping its extradition request and effectively accepting the arbitrators’ dictate.

Hydro S.r.L. v. Albania is an international treaty arbitration brought before the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID). In that case, two Italian companies and their individual owners claim that Albania violated the Italy-Albania bilateral investment treaty by launching various abusive tax investigations and criminal proceedings against them. As with other ICSID arbitrations, the case is being heard by a tribunal of three international arbitrators – prominent international lawyers chosen by the parties and by ICSID. The tribunal’s jurisdiction is based on international treaties, in particular the investment treaty and the ICSID Convention, a multinational agreement of which Italy, Albania, and many other countries are members.

Article 47 of the ICSID Convention and Rule 39(1) of ICSID’s Arbitration Rules allow for a party to request, and an ICSID tribunal to order, that “provisional measures” be taken to preserve the rights of the parties to the arbitration. Provisional measures are akin to an injunction, ordering that one or both of the parties must or must not take some action to avoid prejudicing the other party while the arbitration is underway. Thus, a tribunal can order a sovereign government to cease certain activity, and under the ICSID convention and international law, that government would be obligated to obey.

In Hydro, the Albanian government sought to extradite from the United Kingdom, and likely to jail, two of the individual claimants in the arbitration, whom Albania had accused of money laundering and tax evasion, and for whom Albania had issued arrest warrants. The claimants then filed a request for provisional measures under the ICSID Convention and Arbitration Rules. On March 3, 2016, the tribunal granted the request, finding that the extradition and criminal proceedings were related to the arbitration and that the possible incarceration of the two claimants would affect the claimants’ ability to fairly participate in the arbitration. It thus “recommended” that Albania suspend the criminal case and extradition proceedings under the arbitration was completed, and “invited” it to negotiate with the claimants regarding the disposition of the claimants’ assets that the Albanian government had frozen. As tribunals in other cases have noted, such “recommendations” are essentially orders, with binding effect under international law.

Despite the arbitration tribunal’s decision, Albania proceeded with its prosecution and the UK extradition proceedings, and the UK government continued advocating extradition on Albania’s behalf. But in the July 7 order, District Judge Nina Tempia of the Westminster Magistrate’s Court in Central London ordered that the extradition proceeding be stayed. In particular, Judge Tempia found that the UK court “cannot continue with the proceedings at this stage given the [tribunal’s provisional measures order] is binding on the [UK] Government. It would be in breach of an international law obligation. It would also prejudice the [claimants’] rights to be allowed to continue with their business interests and engage with the arbitral proceedings.” Accordingly, she found that continuation of the extradition proceedings was “an abuse of this court’s process,” and the proceedings had to be stayed.

Several weeks later, on July 20, 2016, the Albanian government announced that it was abandoning the extradition proceedings.

To summarize, a domestic court of a major developed country with a well-respected legal system has suspended a criminal proceeding in deference to the order of an international arbitration tribunal in an investment treaty arbitration. It did so even though the tribunal’s order was directed at a different country, not the country to which that court belonged. And the country pursuing the criminal proceedings relented. That is no small development. In principle, there is no reason such deference must be limited to extradition proceedings. If the claimants had been arrested in Albania, the same international legal rules would have required compliance with the tribunal’s order, meaning the claimants would have to be released and their prosecution suspended. The same would be true if the UK itself – or the United States, or any other country – were subject to an investment treaty arbitration claim by individuals it was prosecuting, and the tribunal ordered provisional measures suspending or curtailing the prosecution.

How a court in the United States and other countries would respond remains to be seen. But to those skeptical of the relevance or efficacy of international law or international legal dispute resolution in day-to-day activity, or who believe that treaties function on separate plane removed from national law, the UK judge’s decision suggests a re-thinking. The existing international legal framework – and particularly the system of investment treaty arbitration developed over the last few decades – gives arbitration and international law real teeth.