In the Request for Arbitration (paragraphs 10, 11 and 15) as well as in the Additional Request of March 16, 1993, AMT in its final submission requests the Tribunal to adjudge and declare :-
(1) That the Republic of Zaire has violated the rights of AMT recognized and protected by the provisions of BIT of 1984;
(2) That the Republic of Zaire is thereby responsible for failing to fulfill its obligations of protection provided by the BIT, especially as regards the destructions caused by the elements of the armed forces of Zaire on 23-24 September 1991 and on 28-29 January 1993, in respect of damage to the properties and installations belonging to Société Industrielle Zaïroise (SINZA) Société privée à responsabilité limitée (SPRL) limited liability private company. 94 per cent of whose stocks are subscribed by AMT, including all losses suffered by SINZA as the result of the looting; and
(3) That the Republic of Zaire be condemned to pay to AMT, as a measure of compensation and as damages and interests, an indemnity equivalent to
a) The fair market value of all the losses suffered by the investment of AMT in Zaire;
b) The loss of profits(Lucrum Cessans) which AMT would have acquired on its own behalf; and
c) The interests on the amount of compensation under a) and b) at a commercial rate equal to the appropriate international rate of interest for transactions in dollars from 23 September 1991 until the final payment.
In its Request (paragraph 15), AMT asserts that in the report prepared by a branch office of Lloyds in Zaire on 14 November 1991, the direct losses were estimated at USS 10,524,023, without prejudice to the calculation of the total amount of compensation and interests that AMT will subsequently present. In its submission of additional claims of 16 March 1993 (paragraph 3), AMT adds that the value of the goods taken, destroyed or looted during the incidents of 28-29 January 1993 is estimated at USS 324,868.
Upon notification of the acceptance by Judge MBaye and Professor Sucharitkul, the Arbitral Tribunal of ICSID was thus constituted on 4 August 1993 in accordance with ICSID Arbitration Rule 6 (1). The establishment of the Tribunal and its composition were duly notified to the Parties on 4 August 1993. The Arbitral Tribunal is composed of :-
Mr. Sompong SUCHARITKUL President
Mr. Heribert GOLSONG Member
Mr. Kéba MBAYE Member
Mr. Nassib G. Ziadé, Counsel, ICSID, was designated as Secretary of the Tribunal by the Secretary-General of ICSID.
a) The Memorial by the Claimant on 9 December 1993;
b) The Counter-Memorial by the Respondent raising at the same time an objection to the jurisdiction of ICSID and of the Tribunal on 30 May 1994;
c) The Reply by the Claimant, replying and making observations on the objection to the jurisdiction of ICSID and of the the Tribunal on 17 June 1994;
d) The Rejoinder by the Respondent on 19 July 1994.
d) The Rejoinder, filed by the Republic of Zaire on 19 July 1994. reconfirmed the position of the Government of Zaire as reflected in the CounterMemorial and earlier documents, regarding lack of jurisdiction on the pan of ICSID and the inadmissibility of AMT's claim, rejecting all allegations put forward by AMT in support of its claim for compensation plus interests, which the Claimant alleged that the State of Zaire had the duty to pay.
a) Representation of the Parties : By letter dated 2 November 1994, AMT communicated to ICSID the names of the persons composing its representation :
1. Mr. Hassan YAHFOUFI. President of AMT; and
2. Mr. Daniel D. DINUR, Counsel and Advocate.
Apart from these representatives. the following witnesses would give evidence before the Tribunal ;
1. Mr. David W. NICHOLAS, a U.S. national;
2. Mr. Madioko Julian MUTSHUNU, a Zairian national; and
3. Mr. Firas Mohammad YAHFOUFI. a Lebanese national.
1. Attorney Manzila Lundum SAL'ASAL, Advocate of the Government in this case; and
2. His Excellency Mr. Ramazani BAYA, ambassador of the Republic of Zaire to France.
In the course of the hearing on 5 December 1994 at the offices of the World Bank in Paris, the Tribunal adopted a Procedural Order No. II. of which the relevant Paragraphs read as follows :
Having noted that the Respondent failed to present its case at the oral hearing, and Having duly deliberated thereon,
GRANTS the Respondent a period of grace in accordance with Article 45 (2) of the ICSID Convention and ICSID Arbitration Rule 42, and in the present case
DECIDES to hold a supplemental hearing in Paris on 13 and 14 February 1995, provided that
a) The Republic of Zaire informs the Arbitral Tribunal that it agrees to cover the fees and expenses of the Arbitrators as well as the administrative fees related to such hearing, and
b) The Republic of Zaire deposits not later than 25 January 1995 the funds requested by the Secretary of the Tribunal in his letter of today’s date to cover the fees and expenses referred to above.
- Lack of status;
- Incompetence of ICSID to consider the proceeding instituted before it by AMT;
- Non-compliance by AMT with Article VIII of Zaire-U.S. Treaty (BIT); and
- Violations of Articles II, IV and IX of the same Treaty.
Zaire further concludes that AMT's claim was inadmissible by reason of its violations of Articles 45 and 46 of the Zairian Investments Code.
The core defense of Zaire consists in the argument that the Zairo-United States Treaty may well relate to the natural and juridical persons of the United States or Zairian nationality; and although AMT is clearly a U.S. company, it has never made any direct investment in its name in the Republic of Zaire. According to Zaire, AMT has furnished no proof whatsoever of its direct investment. Zaire indicates that AMT has merely participated, as a stockholder, in the investment made by SINZA, a Zairian company. Zaire thereupon concludes that SINZA, being a Zairian company, cannot benefit from the Zaire-U.S. Treaty. Deducing consequences from this observation. Zaire contends that the Centre is without competence, considering that the dispute in question is between a State and a national that same State, such a dispute has never entered into the scope of application of the Convention.
After having carefully examined the different arguments raised by Zaire to persuade the Tribunal to declare itself incompetent, the Tribunal has decided to join the preliminary objections to the merits of the case. On the other hand, the Tribunal deems it its duty to ascertain whether it is properly seized of the case and that it shall, in all cases, examine the question of its own competence before embarking upon consideration of the merits of the case.
A. REGISTRATION OF THE REQUEST FOR ARBITRATION
The competence of the Tribunal is obviously derived from that of the Centre. One may presume that by registering the Request for Arbitration of AMT, the Secretary General of ICSID does not consider, "on the basis of the information contained" in the Request "that the dispute is manifestly outside the jurisdiction of the Centre In reality, the Secretary-General would not have registered this Request if, in accordance with Article 36 (3) of the Convention on the Settlement of Investment Disputes between States and Nationals of other States, it was otherwise. Nevertheless, this fact does not prevent the Tribunal from examining the competence of ICSID, because, evidently Article 36 (3) does not confer upon the Secretary-General of ICSID, responsible for the registration of Request, notably as concerns verification of the competence of the Centre, the task other than a mere obligation of an extremely light control which in the execution does not, in any sense, bind the Tribunal in any way in the latter’s appreciation of its own competence or lack thereof. The Tribunal will still have a number of questions to raise and also to find answers thereto.
In the first place, the Tribunal must respond to the question whether ICSID is competent in the present case. The problem of competence of the Centre is treated in Article 25 of the Convention. For this purpose, three conditions are required :
a) There must be a legal dispute arising out of an investment;
b) The dispute must have arisen between a Contracting State and a national of another Contracting State; and
c) The parties must have consented to submit their dispute to the Centre.
Is it a legal dispute?
Under Article 25 of the Convention, "The jurisdiction of the Centre shall extend to any legal dispute..."
In this regard, there does not seem to be the least discrepancy between the Parties and the Tribunal is of the view that there is clearly a legal dispute and not a dispute of another nature, the dispute requiring the application of rules of law and calling for legal solutions.
Is it a dispute between a Contracting State and a national of another Contracting State?
The same Article 25 of the Convention expressly provides that the dispute must be between "a Contracting State (or any constituent subdivision or agency of a Contracting State) and a national of another Contracting State". In this case, the Contracting State is the Republic of Zaire. The dispute is with AMT. Is AMT truly, in accordance with Article 25, "a national of another Contracting State"? Zaire admits that AMT is clearly a national of another Contracting State, the United States of America. The Tribunal, in turn, reaches the same conclusion. Article 25 (2) defines what is regarded as a national of a Contracting State, as follows :
(a) "Any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as welt as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute; and
(b) "Any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention."
The Tribunal finds that the dispute is brought before the Centre by AMT. It does not consider it possible to contest that AMT is not a juridical person with United States nationality. Besides, an appropriate document has been filed with the Tribunal which clearly proves this fact. It suffices for this purpose to refer to the developments contained in paragraphs 4.03 to 4.05 above. Furthermore, it should be recalled, Zaire also recognizes this fact.
This reasoning has not convinced the Tribunal. For the Tribunal, the Zaire-United States Treaty concerning the Reciprocal Encouragement and Protection of Investments (BIT) states, in its preamble, that 'The two States parties, desiring to promote greater economic cooperation between themselves", particularly "with respect to investment by nationals and companies of each Party in the territory of the other Party."
And in Article I on definitions, it is provided in paragraph (a) that "Company means any kind of juridical entity, including any corporation, company, association, or other organization, that is duly incorporated, constituted, or otherwise duty organized, regardless of whether or not the entity is organized for pecuniary gain, privately or governmentally owned, or organized with limited or unlimited liability."
Is there absence of consent of the Parties?
The Tribunal will now examine, as earlier stated, whether the Parties have consented to submit the dispute to the Centre. Such a question is directly linked to the first ground already examined.
The first question that comes to mind is this ; Is it necessary, in the present case, that there must be consent between the State (Zaire) and the national (AMT) of another State (U.S.A.), to submit the dispute to the Centre? The bilateral Treaty does not suffice since it provides that the disputes of the type to be considered by the Tribunal must be justiceable before ICSID.
In other words, does the consent of the United States creates an obligation for its national? Should there not be, in addition to that consent, also the consent by AMT itself relating to a specific dispute? Can the United States impose upon its national the passage of consent to ICSID? Or, better still, in the absence of AMT’s consent, will the Treaty signed by the United States of America and Zaire suffice to take its place?
The Tribunal holds that this question must be answered in the negative. The requirement of the consent of the parties does not disappear with the existence of the Treaty. The Convention envisages an exchange of consents between the Parties. When Article 25 states in paragraph 1 that "the parties" must have consented in writing to submit the dispute to the Centre, it does not speak of the States or more precisely, it speaks of a State and a national of another State. It appears therefore that the two States cannot, by virtue of Article 25 of the Convention, compel any of their nationals to appear before the Centre; this is a power that the Convention has not granted to the States.
By the same token, reference should be made to Article VII, paragraph 2 of the Treaty, which provides : 'Each Party hereby consents to submit investment disputes to the International Centre for the Settlement of Investment Disputes (Centre) for settlement by conciliation or binding arbitration." This provision is further clarified by paragraph 3, in fine, of the same Article VII which reads : "If the dispute cannot be resolved through consultation and negotiation, then the dispute shall be submitted for settlement in accordance with the applicable dispute-settlement procedures upon which the Parries to the dispute may have previously agreed."
On the other hand, to be more convinced, it is enough to read paragraph 4 of Article VII of which sub-paragraph (b) is thus worded ; "Once the national or company concerned has so consented, either party to the dispute may institute proceedings before the Centre or Additional Facility at any time after six months from the date upon which the dispute arose", provided the "dispute has not, for any reason, been submitted by the national or company for resolution in accordance with atty applicable dispute settlement procedures previously approved by the parties to the dispute", and "the national or company concerned has not brought the dispute before the courts of justice or administrative tribunals or agencies of competent jurisdiction of the Party that is a party to the dispute."
Finally, it is convenient to cite the end of paragraph 4, which reads : "If the parties to the dispute disagree over whether conciliation or binding arbitration is the more appropriate procedure to be employed, the procedure desired by the national or company concerned shall be followed." A right of option is thus recognized for the national of the other contracting Suu.
In the third place. Zaire has raised a ground based upon AMT’s failure to apply Article VIII of the Zaire-U.S. Treaty before instituting arbitral proceedings.
This Article provides that "Any dispute between the Parties concerning the interpretation or application of this Treaty should, if possible, be resolved through consultations between representatives of the two Parties, and if this should fail, through other diplomatic channels."
The fifth ground presented by Zaire is founded on the alleged violation of Article IX of the Zaire-U.S. Treaty. Article IX, entitled "Preservation of Rights", runs :
"This Treaty shall not supersede, prejudice, or otherwise derogate from :
(a) laws and regulations, administrative practices or procedures, or adjudicatory decisions of either Party;
(b) international legal obligations; or
(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization,
whether extant at the time of entry into force of this Treaty or thereafter, that entitle investments, or associated activities, of nationals or companies of the other Party to treatment more favorable than that accorded by this Treaty in like situations."
Zaire deduces from these provision that "Ordinance-Law No. 69-044 of 1 October 1966 relating to losses and injuries caused by the disturbances, declaring inadmissible any action based on ordinary law in matters of civil liability and seeking to condemn the State to compensate for the damage caused either by riots or insurrections...", AMT’s claim is inadmissible. This Treaty cannot derogate from the prescription of the above-cited ordinance-Law in public policy matters.
Certainly, the manner in which Article IX of the Treaty is formatted could mislead any reader and could entail an interpretation not in conformity with the object and purpose of the provisions in question. Such an interpretation would lead to an absurd result and an unacceptable fact. A careful reading, consistent with the title of the Article, clearly shows that a typographical error has tempted us to join the part of the Article starting with "Whether extant at the time of entry into force of this Treaty or thereafter, that entitle Investments....." to paragraph (c) only, whereas, although the French word "donne" does not end with "ent" in French, and does not take a plural form, the end of paragraph (c) concerns points (a), (b), and (c), and has no other object but to preserve the treatments which would remain more favorable than those resulting from the Treaty. The format in the English version of Article IX reaffirms this method of viewing the provision.
The sixth and final ground presented by Zaire is based in essence on its first ground, (that is to say, it is SINZA that has the capacity to act) and rests on the provisions of Article 45 of the Zairian Investments Code which provides for an arbitral proceeding organized by Articles 159 to 174 of Titles III and IV of the Code of Procedure of Zaire.
Under paragraph 3 of Article VII of the Treaty, the parties to the dispute shall initially seek to resolve the dispute by consultation and negotiation. And it is only when the parties have failed to settle their dispute by these two means of settlement that they have to resort to another method of settlement.
When Article VII is carefully read, it will become clear that the efforts of negotiation and consultation have not been slight. There have been serious endeavors. In fact, by way of illustration the Parties can agree on any of the third-party dispute settlement procedures, of which the decisions are non-binding, such as the machinery of enquiry available under the ICSID Additional Facility.
In the case on hand, there have been incontestably serious negotiation attempts undertaken by AMT. These endeavors are recalled in paragraphs 12 and 13 of the Request for Arbitration filed by AMT on 20 January 1993. They result profusely from the documents filed. Unfortunately, they have been without any success.
b) Obligation to prevent tosses resulting from the event envisaged In Article IV paragraph 1 (b)
The engagement of the responsibility of the State of Zaire is more specifically reinforced by the provisions of Article IV paragraph I (b) of the BIT : titled ; Compensation for Damages due to War and Similar Events", covering, in part the cases in which :
"1. Nationals or companies of either Party whose investments in the territory of the other Party suffer.....
(b) damages due to revolution, state of national emergency revolt, insurrection, riot or act of violence in the territory of such other Party..."
It is by the process of this two-fold reasoning based on the double legal foundation of the bilateral Treaty, either Article II (4), or Article IV (1)(b), or the combination of both provisions that the Tribunal arrived at the conclusion that the Republic of Zaire is inevitably responsible for the losses and damages resulting from the events of 23-24 September 1991 and of 28-29 January 1993, without having to determine by whom these losses were caused. And this falls directly within the scope of Article IV paragraph (1)(b) of the said Treaty, which serves at the same time to reinforce further the engagement of the responsibility of the State of Zaire for ensuring the protection and security of the investment made by AMT on the Zairian territory in accordance with Article II paragraph 4 of the BIT, as well as the obligation to prevent the occurrence of any act of violence on its territory. It is the duty or obligation to prevent the occurrence of a given event that is at issue.
c) Obligation to make restitution or to pay compensation for the destruction of property "by the forces or authorities of the other Party which was not caused in combat action"
Furthermore, AMT alleges in its Request for Arbitration and in its Memorial that the losses and damages suffered by SINZA resulted from "the destruction of property by the forces or the authorities of the other Party which was not caused in combat action".
Zaire contends in its Rejoinder of 19 July 1994 that "The Republic of Zaire has never claimed that the property of SINZA was never damaged. SINZA has been subjected to the same plight as all those who were victims of the looting in 1991 and 1993." "But", adds Zaire, "the question of compensation is something else, because none of these victims has been accorded a treatment more favorable than SINZA."
The question of the amount of compensation should be considered separately from the question of responsibility which has been definitively determined. Zaire has claimed that it has now fulfilled all the obligations it was bound to perform if only no one could provide any proof that Zaire had accorded a treatment in regard to indemnification or compensation more favorable than that it has accorded to SINZA or to AMT, the Claimant in the present instance. Zaire adds that, having offered no one any compensation, it has in this sense not violated the principle of equality and of nondiscrimination of treatment.
The argument as presented above by the Republic of Zaire could only be appreciated by the Tribunal to the extent that Zaire had accorded a favorable treatment to one of its own nationals or companies or to one of the nationals or companies of any third State whatsoever. In the absence of such a treatment, there would not be any possible comparison to ascertain the level or even the type of the treatment, whether by means of restitution, compensation or indemnification, or else precisely Zaire has not accorded any indemnity, any compensation. Accordingly, the Tribunal does not find such an argument sustainable. The contention of the Republic of Zaire is untenable. It is therefore rejected by the Tribunal. The only remaining issue is that envisioned in /Article II of the BIT, that is to say the treatment, the protection and security at least equivalent to "those recognized by international law." It is therefore upon this basis that the Tribunal will proceed to assess the compensation due to AMT.
It has never been alleged that the destructions in question, neither that of 23-24 September 1991 nor that of 28-29 January 1993, were caused in combat actions. It is necessary to ascertain further whether there was "destruction of property by the forces or the authorities" of the Republic of Zaire.
Moreover, an armistice or such a pardon to persons who acted in 1991 and in 1993 does not entail in international law the effect of exculpating for those receiving pardon save to the extent and from the point of view of Zairian law, and does not produce the result of exoneration for the responsibility of the State of Zaire in respect of the destruction of property belonging to nationals or companies and forming integral part of the investment made by them in Zaire.
The Tribunal does not consider it necessary to insist on this question beyond measure. In effect, its relevance is not here discussed as a foundation of the responsibility of Zaire. That is why the Tribunal prefers at this stage to concern itself with the method of calculation of the amount of compensation to which AMT is entitled because of the injury sustained.
As between the two methods of assessment of the amount of compensation to be paid to AMT by the Republic of Zaire, the Tribunal does not see any substantial difference in practice. In principle, it is necessary to asses the true value or the actual market value of the properties destroyed or the losses suffered by AMT. Is it necessary to add on top of that also the current interest to the total sum of compensation from the date of each destruction occurring in the territory of Zaire? The answer of the Tribunal will have to take into account the existing conditions of the country and not by making abstraction based on a criterion for the assessment which does not correspond at all to the reality, nor to the current happenings in Zaire, nor indeed to the commercial and industrial activities of the Claimant.
Preferably, the Tribunal will opt for a method that is most plausible add realistic in the circumstances of the case, while rejecting all other methods of assessment which would serve unjustly to enrich an investor who, rightly or wrongly, has chosen to invest in a country such as Zaire, believing that by so doing the investor is constructing a castle in Spain or a Swiss chalet in Germany without any risk, political or even economic or financial or any risk whatsoever.
For practical reasons founded on equitable principles, the Tribunal finds that the Republic of Zaire which is responsible in international law, is under a duty to compensate AMT for the very losses which have been caused by the acts of violence and looting occurring in September 1991 and in January 1993.
In effect, the Republic of Zaire has pleaded in its Rejoinder that "No one on earth could ignore the fact that for the past four years, the Republic of Zaire has been going through a most painful and unfortunate period in its history." Zaire continues, "This requires a benevolent and compassionate attention on the part of all our partners, even those who have encountered unfortunate and disastrous consequences, for there was a time when these same persons' were enjoying the benefit of the good situation of the State of Zaire."
The Tribunal has never denied the Republic of Zaire any opportunity to defend itself for the sake of good administration of justice. The Tribunal has never forsaken the principle of the right to be heard. Even without the Republic of Zaire entering an appearance to present its case, the Tribunal fully takes into account the situation in Zaire.
The Tribunal appointed Mr. Bernard Decaux, of French nationality, former civil servant of the World Bank, as independent expert for the purpose of evaluating the damages and losses suffered by Société SINZA (Zaire) in 1991/1993. Having assumed his functions to this end on 26 June 1996, the expert prepared and submitted his report on 5 September 1996 on the evaluation of the damages and losses suffered. According to the expert, the evaluation of the damages and losses suffered by Société SINZA (Zaire) in 1991/1993 is as follows :-
1. Damages to the equipments of the production line USS (dry cell and car battery)
- Dry cell production line 1,750,000
- Car baterry production line 1,465,000
- Factory repair shop 72,500
2. Damages to the building belonging to AMT
- Factory building 311,000
- Office building 28,500
- Living quarters 86,600
3. Value of goods damaged
- In offices (furnitures and equipment) 22,500
- In living quarters (furnitures and equipment) 25,900
4. Losses suffered by AMT (looting)
- Factory inventory 670,000
- Vehicles 20,500
- Merchandise and cash in the retail store
- Accounts receivable
- Appraisal fees
5. TOTAL (1+2+3+4) 4,452,500
FOR REASONS STATED IN THE PRECEDING PARTS OF THE PRESENT AWARD,
THE TRIBUNAL UNANIMOUSLY DECIDES
(1) On the competence
- that the Tribunal is competent to adjudicate the dispute between the Parties which is within the jurisdiction of the Centre, being a legal dispute arising out of an investment between a Contracting State and a national of another Contracting State in accordance with Articles 25 and 41 of the said Convention;
(2) On the admissibility of the Request for Arbitration
- that the Request for Arbitration made in writing in the Request of 25 January 1993 is admissible;
(3) On the responsibility of the State of Zaire
- that the responsibility of the Republic of Zaire as the Respondent is constituted for all the damage caused by the events of 23-24 September 1991 and of 28-29 January 1993, the object of the claim for compensation by AMT;
(4) On the claim for compensation
- that the Republic of Zaire is condemned to pay to AMT for the injuries sustained by the latter (inclusive of the principal, interests and all other claims) an all-inclusive total sum of U.S. Dollars 9,000,000 (nine million), carrying an overdue interest of 7.5 percent per annum from the date of this Award, if this amount is not paid within sixty days of the notification of the Award;
(5) On the expenses between the Parties to the arbitral proceedings
- that each of the Parties shall bear an equal share of the expenses incurred in the present arbitral proceedings, including the fees- and expenses of the Tribunal, and the entirety of its own expenses and fees for its own counsel and others.
- that the Republic of Zaire shall in addition pay to AMT the sum of U.S. Dollars 104,828.96 representing one half of the costs of the proceedings for which advance payments have been made by AMT.