|FREQUENTLY USED ABBREVIATIONS AND ACRONYMS|
|BIT||Bilateral Investment Treaty|
|Claimant’s Counter-Memorial||Counter-Memorial on the Objection to Jurisdiction for Lack of Consent of January 11, 2013|
|Decision||Decision of the Tribunal on the Objection to Jurisdiction for Lack of Consent|
|ECT||Energy Charter Treaty of 1994|
|Garanti Koza or the Claimant||Garanti Koza LLP|
|ICC Arbitration||Arbitration conducted under the Rules of the International Chamber of Commerce|
|ICSID or the Centre||International Centre for Settlement of Investment Disputes|
|ICSID Arbitration||Arbitration conducted under the ICSID Rules|
|ICSID Convention||Convention on the Settlement of Investment Disputes Between States and Nationals of Other States of March 18, 1965|
|ICSID Rules||ICSID Rules of Procedure for Arbitration Proceedings|
|MFN||Most Favored Nation|
|Request||Request for Arbitration of May 18, 2011|
|Respondent’s Memorial||Memorial on the Objection to Jurisdiction for Lack of Consent of November 30, 2012|
|Respondent’s Reply||Reply on the Objection to Jurisdiction for Lack of Consent of February 22, 2013|
|Switzerland-Turkmenistan BIT or Switzerland BIT||Accord entre le Conseil federal suisse et le Gouvernement du Turkménistan concernant la promotion et la protection réciproque des investissements|
|Turkmenistan or the Respondent||Turkmenistan|
|UK.-Turkmenistan BIT or UK. BIT or the BIT||Agreement for the Promotion and Protection of Investments concluded between the United Kingdom of Great Britain and Northern Ireland and the Government of Turkmenistan|
|UNCITRAL||United Nations Commission on International Trade Law|
|UNCITRAL Arbitration||Arbitration conducted under the UNCITRAL Rules|
|UNCITRAL Rules||Arbitration Rules of the United Nations Commission on International Trade Law|
|Vienna Convention||Vienna Convention on the Law of Treaties of 1969|
According to the Claimant’s Request for Arbitration:
The present dispute arises out of the investments on the 28 highway bridges and overpasses in Turkmenistan. A contract regarding the investments in Turkmenistan numbered 01/2008 and dated 18.03.2008 for the lump sum price of USD 100,000,000 ("Contract") was entered into by and between State Concern Turkmenautoyollari as the owner and Garanti Koza LLP as the contractor for the execution of the projection, construction, and installation works of 28 highway bridges and overpasses.
(1) In breach of its obligations, by using the state power, the Respondent has avoided to make the payments it has undertook to pay, tried to change the contract regarding the investment which is established as a lump sum price contract into unit price contract, made requests which contradict with its rights and obligations, tried to change the terms and conditions of the Contract to the favor of the Respondent and tried to prevent the continuation of the works in various ways, thus did not fulfill its obligations.
(2) Garanti Koza LLP suffered losses and damages as a consequence of the Respondent’s intention to confiscate the assets and investments of Garanti Koza LLP by not performing its related obligations and attempt to undermine the investment.1
Request for Arbitration, p. 3.
On March 18, 2008, Garanti Koza LLP, a U.K.-registered entity controlled by the Turkish company Garanti Koza Insaat Sanayi ve Tikaret A.S., and Turkmenavtoyollary, the highway authority, concluded a construction contract for the design and construction of 28 highway bridges and overpasses on the Mary-Turkmenabad highway in Turkmenistan (the "Contract"). In 2009, Garanti Koza LLP suspended all the works under the Contract with Turkmenavtoyollary. The parties to the Contract exchanged their views on the dispute related to the performance of the Contract by correspondence and in person, but this did not result in a resolution of the dispute. On February 22, 2010, Turkmenavtoyollary invoked termination of the Contract under Article 17 of the Contract Conditions, in view of the Contractor’s failure to complete the work on time and failure to resume works for a prolonged period of time.2
The Arbitral Tribunal was constituted in accordance with Articles 37(2)(b) and 38 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID Convention"):
• The Claimant appointed Mr. George Constantine Lambrou of Athens, Greece as an arbitrator on September 26, 2011. Mr. Lambrou accepted his appointment on October 7, 2011.
• The Respondent appointed Professor Laurence Boisson de Chazournes of Geneva, Switzerland as an arbitrator on October 18, 2011. Prof. Boisson de Chazournes accepted her appointment on October 26, 2011.
• The Chairman of the ICSID Administrative Council appointed Mr. John M. Townsend of Washington, D.C., U.S.A., as President of the Tribunal on April 10, 2012. Mr. Townsend accepted his appointment on April 13, 2012.
Mr. Marco Tulio Montañés-Rumayor, Legal Counsel to ICSID, was appointed to act as Secretary to the Tribunal.
Respondent hereby informs the Tribunal that it intends to assert jurisdictional objections on the following grounds: (i) Turkmenistan did not consent to ICSID jurisdiction under the Agreement between the United Kingdom and Turkmenistan for the Protection and Promotion of Investments ("U.K.-Turkmenistan BIT") and (ii) most of the claims brought by Claimant are contractual in nature and therefore not within the jurisdiction of this Tribunal.
First, the Tribunal does not have jurisdiction to decide the merits of this dispute due to the lack of Turkmenistan’s consent to ICSID arbitration under Article 8 of the UK-Turkmenistan BIT. The BIT specifically requires that in order for a dispute to be submitted to ICSID, an agreement to ICSID arbitration between the investor and the BIT’s Contracting Party must exist. Respondent respectfully submits that in the absence of Turkmenistan’s consent to submit this dispute to ICSID, this Tribunal does not have jurisdiction over the claims brought by Claimant.
Claimant has attempted to import into the UK-Turkmenistan BIT an alleged consent by Turkmenistan to ICSID arbitration contained in another BIT. Claimant’s reliance on Article 3 of the UK-Turkmenistan BIT to bypass the essential requirement of the State’s consent to ICSID arbitration is to no avail. That consent cannot be imported from a different BIT when Turkmenistan manifestly did not give such consent in the basic BIT. As is clear from the wording of Article 8 of the UK Turkmenistan BIT, the Contracting Parties expressly agreed that there could be no ICSID arbitration of a dispute in the absence of a specific agreement between the investor and the Contracting Party to submit the dispute to ICSID.
Secondly, it is clear that most of Claimant’s claims are contractual in nature. They arise under the Contract concluded between Garanti Koza LLP and Turkmenavtoyollary, by which the Claimant agreed to resolve disputes "of any kind" pursuant to the dispute-resolution mechanism of Article 21 of the Contract Conditions. The dispute-resolution mechanism agreed to by the Claimant provided for the jurisdiction of the Arbitration Court of Turkmenistan, with a possibility of subsequent submission of the dispute to an arbitral tribunal in The Hague. The Claimant has invoked the mechanism under the BIT in order to avoid the dispute resolution mechanism provided for in the Contract, as Turkmenistan will show.6
On March 11, 2013, a hearing was held at the seat of the Centre in Washington, D.C., to hear argument on the Respondent’s Objection to Jurisdiction for Lack of Consent. The following persons attended that hearing:
For the Claimant:
Mr. John Savage, King & Spalding LLP
Ms. Elodie Dulac, King & Spalding LLP
Mr. Serkan Yildrim, GUR Law Firm
Ms. Gülcin Kôker, GUR Law Firm
Mr. Murat Isikustun, Vice President Finance and Administration, Garanti Koza LLP
For the Respondent:
Mr. Peter M. Wolrich, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Ali R. Gursel, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Claudia Frutos-Peterson, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Sabrina A. Ainouz, Curtis, Mallet-Prevost, Colt & Mosle LLP
Mr. Ali Topalogu, Curtis, Mallet-Prevost, Colt & Mosle LLP
Ms. Gülperi Yôrüker, Yurttutan Gurel Yôrüker
Ms. Berin Hikmet, Yurttutan Gurel Yôrüker
Mr. John M. Townsend, President
Professor Laurence Boisson de Chazournes, Arbitrator
Mr. George Constantine Lambrou, Arbitrator
Mr. Marco Tulio Montañés-Rumayor, Secretary of the Tribunal
Mr. William Prewett, court reporter, also attended the hearing and made a transcript of the proceedings.10
That transcript is cited in this Decision as "Hearing Tr._."
The Respondent’s second objection to the jurisdiction of this Tribunal was expressly reserved. Respondent’s Memorial, ¶¶1, 72.
See Respondent’s Memorial, ¶¶6-7.
The U.K.-Turkmenistan BIT provides for the application of the UNCITRAL Rules "as then in force." BIT, Art. 8(2). The current UNCITRAL Rules came into effect on August 15, 2010, after the date of the Claimant’s notification of the dispute to Turkmenistan, but before the date of the Request for Arbitration.
The bracketed word "[months]" does not appear in the text of Article 8(1) of the U.K.-Turkmenistan BIT published by the United Kingdom in its Treaty Series No. 47 (2003), which was submitted by the Claimant (with its Request for Arbitration) and also by the Respondent (with its Memorial on Jurisdiction) as Exhibits C-4, and R-4, respectively, and used by both parties. The Tribunal has supplied the word, because the text makes no sense without it and it appears to have been inadvertently omitted. The context in which Article 8(1) appears also supports that reading, because of the appearance of the phrase "four months" in the final sentence of Article 8(2). The signature page of the BIT states that it was done in the English and Russian languages, with a text in the Turkmen language to be certified in due course, and that the English text would prevail in case of divergence. No other version of the BIT was submitted by either party.
Christopher F. Dugan, et al., Investor-State Arbitration, 208 (2008).
Ambatielos Case (Greece v. United Kingdom) Merits: Obligation to Arbitrate, Judgment of May 19, 1953 (I. C. J. Reports 1953) p. 19; See also, Status of Eastern Carelia, Advisory Opinion of July 23, 1923 (P.C.I.J. Series B, No. 5) p. 27 ("Il est bien établi en droit international qu’aucun Etat ne saurait être obligé de soumettre ses différends avec les autres Etats soit à la médiation, soit à l’arbitrage, soit enfin à n’importe quel procédé de solution pacifique, sans son consentement").
Teinver SA., Transportes de Cercanías SM. and Autobuses Urbanos del Sur SM. v. Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction of December 21, 2012 (hereinafter "Teinver v. Argentina") ¶176.
Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction of February 8, 2005 (hereinafter "Plama v. Bulgaria") ¶198. The tribunal in Plama v. Bulgaria cited no authority for this proposition, although it called it a "well-established principle." Id. See also Telenor Mobile Communications A.S. v. Republic of Hungary, ICSID Case No. ARB/04/15, Award of September 13, 2006 (hereinafter "Telenor v. Hungary") ¶90; Vladimir Berschader and Moïse Berschader v. The Russian Federation, SCC Case No. 080/2004, Award of August 21, 2006 (hereinafter "Berschader v. Russia") ¶181; Wintershall Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/04/14, Award of December 8, 2008 (hereinafter "Wintershall v. Argentina") ¶167.
As noted above, the parties are in agreement that the Tribunal should interpret the U.K.-Turkmenistan BIT in accordance with the Vienna Convention.
Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrales del Agua SA. v. Argentine Republic, ICSID Case No. ARB/03/17 (formerly Aguas Provinciales de Santa Fe SA, Suez, Sociedad General de Aguas de Barcelona,.S.A and Interagua Servicios Integrales del Agua,.S.A), Decision on Jurisdiction of May 16, 2006 (hereinafter "Suez and Interagua v. Argentina") ¶64. See Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award of October 11, 2002 ¶43; Suez, Sociedad General de Aguas de Barcelona SA. y Vivendi Universal S.A v. Argentine Republic, ICSID Case No. ARB/03/19 and AWG Group Ltd. v. Argentine Republic, UNCITRAL Case, Decision on Jurisdiction of August 3, 2006 (hereinafter "Suez and Vivendi v. Argentina") ¶65; Austrian Airlines v. The Slovak Republic, UNCITRAL Case, Award of October 9, 2009 (hereinafter "Austrian Airlines v. Slovakia") ¶120. See also Hearing Tr. 102.
Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objections, Judgment of December 12, 1996, Separate Opinion of Judge Higgins (I.C.J. Reports, 1996), p. 857, ¶ 35.
C. Schreuer, UNCTAD Course on Dispute Settlement - International Centre for Settlement of Investment Dispute, 2.3 Consent to Arbitration (United Nations, 2003) p. 5 ("Under the Convention, consent must be in writing. But there is no particular form in which this must be done"); Renta 4 S. USA, Ahorro Corporación Emergentes F.I., Ahorro Corporación Eurofondo F.I., Rovime Inversiones SICAV S.A., Quasar de Valors SICAV S.A., Orgor de Valores SICAV SA., GB 9000 SICAV SM. v. The Russian Federation, SCC No. 24/2007, Award on Preliminary Objections of March 20, 2009 (hereinafter "Renta 4 v. Russia") ¶82 ("There is no rule that the entirety of arbitration agreements must be contained in a single article of an instrument.").
Letter from Counsel for the Respondent to the Tribunal, September 5, 2012.
Procedural Order No. 1, ¶12.2.
U.K.-Turkmenistan BIT Art. 8(1) (emphasis added).
Winter shall v. Argentina ¶119 (emphasis in original).
The tribunal in Biwater reached a similar conclusion interpreting a similarly-phrased treaty provision. Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award of July 24, 2008 (hereinafter "Biwater v. Tanzania") ¶331. The Biwater tribunal relied in part on the statement of Dolzer & Stevens that:
"A handful of BITs provide... that investment disputes "shall" be submitted to ICSID arbitration but only if there is a subsequent agreement to that effect between the disputing parties.... Under none of these provisions, however, would the investor have an immediate right to resort to ICSID arbitration. Such right would in each case depend upon the granting by the host State of the required "assent" or consent."
Dolzer & Stevens, Bilateral Investment Treaties, pp. 132-134. See Respondent’s Memorial, ¶¶37-40.
Claimant’s Counter-Memorial, ¶¶61-63; Hearing Tr. 109.
Claimant’s Counter-Memorial, p. 13.
Tribunals applying an MFN clause for this purpose include those in: Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the Tribunal on Objection to Jurisdiction of January 25, 2000 (hereinafter "Maffezini v. Spain") ¶¶54-64; MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award of May 25, 2004 (hereinafter "MTD Chile S.A. v. Chile") ¶¶100-104; Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction of August 3, 2004 (hereinafter "Siemens v. Argentina") ¶¶102-105; Camuzzi International S.A. v. Argentine Republic, ICSID Case No. ARB/03/7, Decision del Tribunal de Arbitraje sobre Excepciones a la Jurisdicción of June 10, 2005 (hereinafter "Camuzzi v. Argentina") ¶¶16-17; Gas Natural SDG, S.A. v. Argentine Republic, ICSID Case No. ARB/03/10, Decision of the Tribunal on Preliminary Questions on Jurisdiction of June 17, 2005 (hereinafter "Gas Natural v. Argentina") ¶¶29-31; Suez and Interagua v. Argentina ¶¶52-66; National Grid v. Argentina ¶¶79-94; Suez and Vivendi v. Argentina ¶¶52-68; RosInvestCo U.K. Ltd. v. The Russian Federation, SCC Case No. V079/2005, Award on Jurisdiction of October 1, 2007 (hereinafter "RosInvestCo v. Russia") ¶¶124-139; Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Award of June 21, 2011 (hereinafter "Impregilo v. Argentina") ¶¶79-108; Hochtief AG v. Argentine Republic, ICSID Case No. ARB/07/31, Decision on Jurisdiction of October 24, 2011 (hereinafter "Hochtief v. Argentina") ¶¶59-75; Teinver v. Argentina ¶¶59-186.
Tribunals refusing to apply an MFN clause for this purpose include those in: Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award of May 29, 2003 (hereinafter "Tecmed v. Mexico") ¶¶69-74; Salini Costruttori S.p.A, and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction of November 9, 2004 (hereinafter "Salini v. Jordan") ¶¶103-119; Plama v. Bulgaria ¶¶183-227; Berschader v. Russia ¶¶159-206; Telenor v. Hungary ¶¶90-101; Wintershall v. Argentina ¶¶160-167; Renta 4 v. Russia ¶¶77-119; Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction and Competence of June 19, 2009 ¶¶199-216; Austrian Airlines v. Slovakia ¶¶92-140; ICS Inspection and Control Services Limited (United Kingdom) v. The Republic of Argentina, UNCITRAL, PCA Case No. 2010-9, Award on Jurisdiction of February 10, 2012 (hereinafter "ICS v. Argentina") ¶¶274-313; Daimler v. Argentina ¶¶205-278.
See Renta 4 v. Russia ¶94 ("What can be said with confidence is that a jurisprudence constante of general applicability is not yet firmly established.").
R. Dolzer and C. Schreuer, Principles of International Investment Law, p. 257 (Oxford 2008).
U.K.-Turkmenistan BIT Art. 3(3) (emphasis added).
Plama v. Bulgaria ¶204; to the same effect see Berschader v. Russia ¶179. See also E. Gaillard, "Establishing Jurisdiction through a Most-Favored-Nation Clause," New York Law Journal, July 2, 2005, p. 9, Exhibit CL-22 ("Equally, when the contracting parties have expressly included dispute settlement arrangements in the scope of an MFN clause, such intention must be given effect.").
Claimant’s Counter-Memorial, ¶38.
See C. Schreuer et al., The ICSID Convention - A Commentary, Cambridge University Press, 2nded., 2009, p. 248 (Exhibit C-19)(emphasis added); Claimant’s Counter-Memorial, ¶38.
UNCTAD, Most-Favoured-Nation Treatment (UNCTAD Series on Issues in International Investment Agreements II 2010) ("UNCTAD MFN Paper"), p. 16.
Siemens v. Argentina ¶106. See RosInvestCo v. Russia ¶131 ("While indeed the application of the MFN clause of Article 3 widens the scope of Article 8 and thus is in conflict to its limitation, this is a normal result of the application of MFN clauses, the very character and intention of which is that protection not accepted in one treaty is widened by transferring the protection accorded in another treaty.").
See Draft Articles on Most-Favoured-Nation Clauses, with Commentaries, text adopted by the International Law Commission at its thirtieth session, Yearbook of the International Law Commission, 1978, vol. II, Part Two, p. 30, ¶¶10-11 (hereinafter "ILC Draft Articles on MFN Clauses'").
See Renta 4 v. Russia ¶118 ("The Treaty must be taken as it is written.").
Dissenting Opinion ¶40 (emphasis in original).
Indeed, the BIT provides that "the term ‘investment’ includes all investments, whether made before or after the date of entry into force of this Agreement." U.K.-Turkmenistan BIT Art. 1(a).
ILC Draft Articles on MFN Clauses, Article 20(1) (2005). The Switzerland-Turkmenistan BIT entered into force in April 2009.
R. Dolzer and C. Schreuer, Principles of International Investment Law, p. 186 (Oxford 2008) (emphasis added).
See Vienna Convention, Art. 31.1.
U.K.-Turkmenistan BIT, Preamble.
RosInvestCo v. Russia ¶130 (emphasis in original). The RosInvestCo case was brought under the rules of the Stockholm Chamber.
Claimant’s Counter-Memorial, ¶59; Exhibit CL-24 (Unofficial translation). The French original of Article 8 reads: "(1) Afin de trouver une solution aux différends relatifs à des investissements entre une Partie Contractante et un investisseur de l’autre Partie Contractante, des consultations auront lieu entre les parties concernées. (2) Si ces consultations n ’apportent pas de solution dans les six mois à compter de la demande de les engager, l’investisseur pourra soumettre le différend pour règlement: (a) au Centre international pour le règlement des différends relatifs aux investissements (CIRDI), institué par la Convention pour le règlement des différends relatifs aux investissements entre Etats et ressortissants d’autres Etats ouverte à la signature à Washington le 18 mars 1965, ou (b) à un tribunal arbitral ad hoc qui, à moins que les parties au différend n ’en disposent autrement, sera constitué conformément au règlement d’arbitrage de la Commission des Nations Unies pour le droit commercial international (CNUDCl). (3) Chaque Partie Contractante donne son consentement à la soumission à la conciliation ou à l’arbitrage internationaux de tout différend relatif à un investissement").
Respondent’s Reply, ¶¶76-81; Hearing Tr. 73. The Respondent informed the Tribunal that, of five currently pending cases against Turkmenistan brought under BITs that provide the claimant with a choice between ICSID Arbitration and UNCITRAL Arbitration, three were brought at ICSID and two under the UNCITRAL Rules. Hearing Tr. 169. These figures would appear to weigh against describing either system as inherently and objectively more favorable to an investor than the other.
Respondent’s Reply, ¶¶82-84; Hearing Tr. 74; See Freya Baetens, Enforcement of Arbitral Awards: "To ICSID or Not to ICSID" Is Not the Question, in I.A. Laird, T.J. Weiler, eds., Investment Treaty Arbitration and International Law, Vol. 5, (Juris 2012) (), p. 212; Gaétan Verhoosel, Annulment and Enforcement Review of Treaty Awards: To ICSID or Not to ICSID, in Albert Jan van den Berg, ed., 50 Years of the New York Convention: ICCA International Arbitration Conference, ICCA Congress Series, 2009 Dublin Vol. 14 (Kluwer Law International 2009) ("Verhoosel, Annulment and Enforcement Review of Treaty Awards)', Stephen Jagusch and Jeffrey Sullivan, A Comparison of ICSID and UNCITRAL Arbitration: Areas of Divergence and Concern in THE BACKLASH AGAINST INVESTMENT ARBITRATION (Michael Waibel, Asha Kaushal, et al., eds., 2010, p. 109 ("These systems are similar on many levels, but they also diverge in certain fundamental areas. Neither system is perfect, particularly in relation to transparency and the review of awards."), p. 314 ("Jagusch & Sullivan, A Comparison of ICSID and UNCITRAL Arbitration")', Respondent’s Reply, ¶¶78-84.
Respondent’s Memorial, ¶71.
Claimant’s Counter-Memorial, ¶105(ii).
a. The Respondent’s Objection to Jurisdiction for Lack of Consent is rejected.
b. The Tribunal will proceed to a consideration of the merits of the Claimant’s claim, to which it will join the Respondent’s second objection to jurisdiction, on a schedule to be established after consultation with the parties.
c. All questions of costs are reserved.