Prof. Campbell McLachlan QC, President
The Hon. L. Yves Fortier QC
Dr. Laurent Lévy
Ms Jara Mínguez Almeida, Secretary of the Tribunal
Ms Penny Madden QC
Ms Lindsey Schmidt
Ms Besma Grifat-Spackman
Ms Rose Naing
Ms Sophy Helgesen
Ms Nadia Wahba
Ms Clementine Hollyer
Mr Robert Dickens, of Gibson, Dunn & Crutcher UK LLP
Mr Hamdi Akin İpek, Party Representative and Witness
Mr Ayhan Yurttaş, Witness
Sir Jeffrey Jowell, Expert witness
Mr Tom Sprange QC
Mr Viren Mascarenhas
Mr Sajid Ahmed
Mr Ben Williams
Ms Charity Kirby
Ms Lisa Wong
Mr Sadyant Sasiprabhu
Ms Olivia Currie, of King & Spalding
Mr Eyüp Kul
Mr Murat Erbilen
Mr Turgut Aycan Özcan
Ms Alya Yamakoğlu, of LEXIST
Mr İsmail Güler, of SDIF, Party Representative and Witness
Ms Atike Eda Manav Özdemir
Mr Güray Özsu, of The Presidency
Ms Melek Küreeminoğlu
Ms Sena Baldoğan
Mr Enis Güçlü Şirin, of SDIF
Ms Gönül Ekmekci, interpreter
(a) In Libananco v Turkey, the tribunal observed that:3
[I]t would only be in the most extreme case—one in which an essential interest of either Party stood in danger of irreparable damage—that the possibility of granting security for costs should be entertained at all.
(b) In RSM v Grenada the tribunal held that:4
It is difficult, in the abstract, to formulate a rule of general application against which to measure whether the making of an order for security for costs might be reasonable, but it seems clear to us that more should be required than a simple showing of the likely inability of a claimant to pay a possible costs award.
(c) In Lighthouse v Timor-Leste, the tribunal stated:5
[E]ven if it were assumed that the Claimants have insufficient assets, this would not be enough in and of itself. Something more is required.
(d) In South American Silver, the tribunal added:6
In relation to the necessity and the urgency of the measure, investment arbitration tribunals considering requests for security for costs have emphasized that they may only exercise this power where there are extreme and exceptional circumstances that prove a high real economic risk for the respondent and/or that there is bad faith on the part[y] from whom the security for costs is requested.
(a) Whether the Claimant has defaulted on financial obligations in the present or other proceedings;
(b) Whether the arbitration is funded by a third party and, if so, whether the terms of that funding cover adverse costs orders; and
(c) Whether the Claimant has taken steps to avoid enforcement of an adverse costs order.7
(a) There is no third-party funding arrangement with either Gibson Dunn or Encore Mining Ltd. Gibson Dunn has merely agreed to defer payments until the Claimant has resolved its funding arrangements. Encore Mining Ltd has advanced two loans to enable the Claimant to fund its costs. In neither case do these arrangements give the third party any stake in the success or failure of the arbitration and the Claimant’s obligation to pay is not contingent.9
(b) Mr Ipek is not obliged to disclose the extent and location of his personal assets and, given the conduct of the Respondent of which it makes complaint in the proceedings, he should not be required to do so.
(c) It has not defaulted on its payment obligations in the arbitration to date. On the contrary, it has taken active steps to put in place funding arrangements that would enable its costs obligations, including its potential liability for an adverse costs award, to be met, steps that the Respondent has sought to oppose.
(a) There is a dispute in the English High Court between Koza Ltd, an English company, and Mr Akin Ipek (one of its directors) as claimants and Koza Altin (the Turkish parent company) and its Turkish appointed trustees as defendants as to who is entitled to exercise corporate powers in respect of Koza Ltd.
(b) In the course of that litigation, Koza Ltd and Mr Ipek made the Koza Funding Application. Its object is to vary an interim undertaking so as to permit inter alia the expenditure of up to GBP3 million in respect of costs in this arbitration up to the determination of jurisdiction, such costs to include a provision for GBP1.5 million to cover the risk of an adverse costs order.10
(c) The Koza Funding Application was opposed by the defendants inter alia on the ground that such expenditure would be improper because the arbitration is founded on an SPA which ‘is a sham,’ the expenditure of sums in support of which ‘cannot be a proper use of corporate funds.’11
(d) At first instance, Richard Spearman QC (sitting as a deputy judge) denied the claimants’ application. He found inter alia that, while funding the arbitration ‘would be of benefit to Koza Ltd, and thus in the ordinary and proper course of business’ the Court was entitled to take account of its doubts about the authenticity of the SPA and thus the attempt to invoke the jurisdiction of the arbitral tribunal on the basis of it.12
(e) The claimants appealed to the Court of Appeal, which allowed the appeal and discharged the negative declaration. Delivering the judgment of the Court on 23 May 2019, Floyd LJ observed:13
I think, however, that attempting to resolve the issue of the jurisdiction of the ICSID tribunal in the meticulous and detailed manner attempted by the deputy judge, and repeated by the submissions made to us, is to approach the problem from the wrong end. The issue was whether providing funding for this arbitration was in the ordinary and proper course of business of Koza Ltd. The decision to pursue the funding of the arbitration is taken before, not after, the ICSID tribunal has ruled on its jurisdiction. It is therefore a matter to be considered from the perspective of the board of Koza Ltd. deciding on whether to embark on the funding. In my judgment, therefore, unless the prospects of success in the arbitration are so manifestly poor that they throw doubt on the board's motives in pursuing it, those prospects do not have any relevance to the issue.
(f) The Court of Appeal concluded that Ipek Investment Limited had a case that the board of Koza Ltd ‘could properly support in good faith,’14 but that nevertheless, because the authenticity of the SPA remains in doubt, Koza Ltd proceeds at its own risk in pursuing the funding of the arbitration.15
(g) The Respondent sought leave to appeal to the Supreme Court. The Court of Appeal denied leave, but ordered that the claimant must not make the payments pending the resolution of the Respondents’ application to the Supreme Court for leave to appeal.16
(a) The Claimant has in fact been making reasonable efforts to make financial provision for the risk of an adverse costs order against it in the event that it is not successful at the jurisdictional stage; and
(b) It is the Respondent that has opposed, and continues to oppose, the making of such provision through the acts of its organ.
25. The Claimant has advanced a serious claim in its Request for Arbitration dated 9 May 2018, and has invoked an arguable basis for jurisdiction under the BIT. The Respondent has for its part advanced a substantial objection to the jurisdiction in its Memorial on Jurisdiction dated 12 April 2019, to which the Claimant has, since the hearing on provisional measures now filed its Defence on 5 September 2019.
26. At the heart of both the Claimant's claim to jurisdiction and the Respondent's objection is the validity of the Share Purchase Agreement ("SPA"), which the Claimant alleges it entered into on 7 June 2015. This forms the basis for the Claimant's claim to be a "company" incorporated in the United Kingdom that has made an "investment" in Turkey within the meaning of the BIT; and "national of another Contracting State" for the purpose of the ICSID Convention.
27. For its part, the Respondent alleges that the SPA is a sham, which provides no basis for the jurisdiction of the Tribunal and that the Claimant’s claim is an abuse of process, violating the universal requirement of good faith.
28. The validity vel non of that ground for jurisdiction will, by agreement of both Parties, fall to be determined next year on the hearing of all of the Respondent's objections to jurisdiction.
29. It would be inconsistent with this procedural posture and would prejudge the issues that both Parties have submitted for decision in the jurisdiction phase, for the Tribunal to make any further finding on jurisdiction or the merits at this stage.