|AGU||Agreement of Good Understanding|
|Annex Agreement||Annex Agreement to the AGU dated 28 March 2012|
|Application||Kosovo's Preliminary Objections under Rule 41(5) dated 18 December 2017|
|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings 2006|
|BIT||Agreement between the Swiss Confederation and the Republic of Kosovo on the Promotion and Reciprocal Protection of Investments, which entered into force on 13 June 2012|
|CL-[#]||Claimant's Legal Authority|
|Cl. post-hearing br.||Claimant's Post Hearing Brief dated 17 February 2020|
|Cl. Supp. to RfA||Claimant's letter supplementing the Request dated 16 June 2017|
|Commitment Agreement||Commitment agreement among Mr. Berisha on behalf of UTC, KTA on behalf of SOE Sloga and the Grand Hotel LLC attached to the Purchase Agreement|
|Counter-Memorial or Cl. Counter-Mem. on Jurisd.||Claimant's Counter-Memorial on Jurisdiction and Admissibility dated 14 May 2019|
|Grand Hotel||Grand Hotel L.L.C.|
|Hearing||Hearing on Jurisdiction and Admissibility held on 23 January 2020|
|ICSID Convention||Convention on the Settlement of Investment Disputes Between States and Nationals of Other States dated 18 March 1965|
|ICSID or the Centre||International Centre for Settlement of Investment Disputes|
|KTA||Kosovo Trust Agency|
|Mabetex||Mabetex Group Switzerland|
|Memorial or Resp. Mem. on Jurisd.||Respondent’s Memorial on Jurisdiction and Admissibility dated 5 April 2019|
|PAK||Kosovo Privatization Agency|
|Performance Guarantee||Performance guarantee dated 21 March 2012 issued by the National Commercial Bank Kosovo in the amount of EUR 20.2m in favor of Mabetex|
|Purchase Agreement||Agreement for the "Sale of Ordinary Shares in Grand Hotel" concluded on 10 August 2006|
|Rejoinder or Cl. Rejoinder on Jurisd.||Claimant’s Rejoinder on Jurisdiction and Admissibility dated 20 September 2019|
|Reply or Resp. Reply on Jurisd.||Respondent’s Reply on Jurisdiction and Admissibility dated 23 August 2019|
|Request or RfA||Claimant’s Request for Arbitration dated 15 May 217|
|Resp. post-hearing br.||Respondent’s Post-Hearing Brief dated 17 February 2020|
|RL-[#]||Respondent’s Legal Authority|
|SCSC||Supreme Court of Kosovo’s Special Chamber for Matters relating to the Privatization Agency|
|Tr. [page:line]||Transcript of the Hearing|
|Tribunal||Arbitral tribunal constituted on 20 November 2017|
|UNMIK||United Nations Interim Administration Mission in Kosovo|
|2005 Foreign Investment Law||Foreign Investment Law No. 02/L-33, enacted on 21 November 2005 and entering into force upon promulgation by the Special Representative of the United Nations Secretary-General in April 2006|
|2014 Foreign Investment Law||Foreign Investment Law No. 04/L-220, which entered into force on 24 January 2014|
Pursuant to Article 36(3) of the ICSID Convention, the Secretary-General shall register the Request unless she finds, on the basis of the information contained in the Request, that the dispute is manifestly outside the jurisdiction of ICSID. Therefore, the Secretary-General's power to consider any objections to a request for arbitration is limited.
1. Each party shall appoint one arbitrator;
2. The two party-appointed arbitrators shall, each in consultation with the party that nominated him/her, appoint the Chairperson of the Arbitral Tribunal within 90 days of the registration of the case;
3. None of the members of the Arbitral Tribunal shall be a national of Switzerland or the Republic of Kosovo;
4. In case the party-appointed arbitrators and the parties cannot agree on a Chairperson within the above-mentioned time limit, the Chairperson shall be appointed by the Chairman of the Administrative Council of ICSID.
On 7 February 2018, the Tribunal rendered its Decision on Respondent’s Preliminary Objections under Rule 41(5) of the Arbitration Rules. The Tribunal decided "that Respondent’s Application is untimely and declines to entertain the Application on the merits."2
In any case, if the Tribunal decides to keep the hearing dates, the Claimant in its preparation of the Rejoinder having severely been jeopardized by the Respondent's procedural conduct submitting an unfair and ambiguous procedural request to which the Respondent has to respond on a daily basis losing a significant amount of time, the Claimant requests to submit its Rejoinder on Friday 20, 2019. The Claimant, however, offers to submit its Witness Statements before that date, if the Tribunal so requires.
(i) set the Claimant a deadline to comment on the Respondent’s email of September 24, 2019 as to whether "Claimant’s written witness testimony does not contain statements of sufficient precision to be tested by oral interrogation" before the Tribunal makes a decision on whether the Claimant’s witness statements contain statements of sufficient precision and
(ii) to inform the Parties whether the Tribunal wishes to question Mr. Lluka not called upon by the Claimant for cross-examination.
Professor George Bermann President
Mr. Gianrocco Ferraro Arbitrator
Professor August Reinisch Arbitrator
Mr. Francisco Abriani Secretary of the Tribunal
For the Claimant:
Dr. Christian Schmid Counsel for Claimant, Bratschi Ltd.
Ms. Sandra De Vito Bieri Counsel for Claimant, Bratschi Ltd.
Ms. Liv Bahner Counsel for Claimant, Bratschi Ltd.
Ms. Susanne Betz Assistant of the board of Mabco Constructions SA
Mr. Valon Lluka CEO of Mabetex Holding
Mr. Behgjet Pacolli Owner of the Mabetex Group
Mr. Remzi Ejupi Owner of Eurokoha Reisen NTSH
Ms. Lucina Maesani-Gaiatto CFO of Mabco Constructions SA
For the Respondent:
Dr. Philipp K. Wagner, LL.M. WAGNER Arbitration
Dr. Florian Dupuy, LL.M. WAGNER Arbitration
Mr. Petrit Elshani, LL.M. WAGNER Arbitration
Mr. Sami Istrefi General State Advocate, Ministry of Justice of the Republic of Kosovo
Mr. Qemajl Marmullakaj General Secretary, Ministry of Justice of the Republic of Kosovo
Ms. Fellenza Limani Legal Officer, Ministry of Justice of the Republic of Kosovo
Mr. Ahmet Shala Visiting Professor, James Madison University (Virginia, USA)
Mr. Trevor McGowan
Ms. Francisca Geddes-Mondino English/Italian
Ms. Monica Robiglio English/Italian
Mr. Genc Lamani English/Alb anian
Mr. Ragip Luta English/Alb anian
On behalf of the Claimant:
Mr. Behgjet Pacolli Owner of the Mabetex Group
Mr. Remzi Ejupi Owner of Eurokoha Reisen NTSH
Ms. Lucina Maesani-Gaiatto CFO of Mabco Constructions SA
On behalf of the Respondent:
Mr. Ahmet Shala Visiting Professor, James Madison
University (Virginia, USA)
1. The Tribunal asks what form did the investment take specifically, and when and how specifically was it made? The Tribunal wants references to particular documents that support the answer to that question.
2. The Tribunal welcomes an assessment of the significance of the violation of Kosovo law, if any, and any reason why any such violation, if it occurred, should be considered as having been overlooked. This includes the question of whether a violation of the tender rules, if any, constitutes a violation of Kosovo law within the meaning of the BIT and the Kosovo foreign investment law.
3. The Tribunal would welcome any observations on the temporal applicability of the BIT and the Kosovo foreign investment law to the present dispute.
With respect to expropriation, Claimant invokes Articles 5(1) and 5(2) of the BIT:
(1) Neither of the Parties shall take, either directly or indirectly, measures of expropriation, nationalization or any other measure having the same nature or the same effect against investments of investors of the other Contracting Party...
(2) [D]ue process of law includes the right of an investor of a Contracting Party, which claims to be affected by expropriation by the other Contracting Party, to prompt review of its case, including the valuation of its investment and the payment of compensation in accordance with the provisions of this Article, by a judicial authority or another competent and independent authority of the latter Contracting Party.
With respect to fair and equitable treatment, Claimant invokes Article 4(1) of the BIT:
(1) Each Contracting Party shall in its territory accord to investments and returns of investors of the other Contracting Party at all times fair and equitable treatment as well as full protection and security. Neither Contracting Party shall impair, by unreasonable or discriminatory measures, maintenance, use, enjoyment, extensions or disposal of such investments.
8.1. [An investment in Kosovo made by a foreign investor] shall... not be subject to any act of expropriation by or attributable to Kosovo.
8.2. Notwithstanding the prohibition contained in Article 8.1, Kosovo may take an act of expropriation affecting an asset of a foreign investor, foreign investment organization or foreign person, if the act of expropriation:
a. is for a clearly defined and legitimate public purpose;
b. is not inspired by any discriminatory objective;
c. is carried out in a non-discriminatory manner;
d. is carried out in accordance with due process of law; and
e. is accompanied by the prompt payment of adequate and effective compensation.
3.1. Kosovo shall accord fair and equitable treatment to foreign investors and their investments in Kosovo. Kosovo shall also provide foreign investors and their investments with full and constant protection and security. In no case shall the treatment, protection or security required by this Article 3.1 be less favorable than that required by international law or any provision of the present law.
3.2. Kosovo shall not impair by any unreasonable or discriminatory action or inaction, the operation, management, maintenance, use enjoyment or disposal of a foreign investment organization or other investment by a foreign investor in Kosovo. Kosovo shall in particular not interfere with the lawful activities, rights and legally recognized interests of a foreign investor.
3.3. Any public authority that violates or otherwise fails to respect the rights and guarantees provided by the present law to foreign investors and their investments shall be liable to pay compensation... for losses and expenses incurred as a consequence of such violation or failure..
1. Republic of Kosovo shall accord fair and equitable treatment to foreign investors and their investments in Kosovo with any local investors and local investments.
2. Republic of Kosovo shall also provide foreign investors and their investments with full and constant protection and security in accordance with the applicable legislation.
3. In no case shall the treatment, protection or security required by this paragraph be less favorable than that required by generally accepted norms of international law or any provision of the present law.
4. Republic of Kosovo shall not impair by any unreasonable or discriminatory action or inaction, the operation, management, maintenance, use, enjoyment or disposal of a foreign investment organization or other investment by a foreign investor in the Republic of Kosovo. Republic of Kosovo shall not interfere with the lawful activities, rights and legally recognized interests of a foreign investor.
5. Any public authority that violates or otherwise fails to respect the rights and guarantees provided by the present law to foreign investors and their investments shall be liable to pay compensation, in accordance with Article 8 paragraph 2 of this law, for losses and expenses incurred as a consequence of such violation or failure. No type of legal immunity shall serve as bar to the liability created by this Article.
According to Article 2 of the BIT, its provisions apply to investments in the territory of one Contracting Party established in accordance with its laws and regulations by investors of the other Contracting Party, "whether [made] prior to or after the entry into force of [the BIT]." However, the BIT does not apply "to claims and disputes arising out of events which occurred prior to its entry into force."
Article 1(1) of the BIT defines an investment as "every kind of asset established or acquired by an investor of one Contracting Party in the territory of the other Contracting Party that has such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk." Such an asset may take the form of:
(a) movable and immovable property as well as any related rights, such as servitudes, mortgages, liens and pledges;
(b) a company, or shares, parts or any other kind of participation in a company;
(c) claims to money or to any performance having an economic value, except claims to money arising solely out of commercial contracts for the sale of goods and services;... [and]
(e) rights conferred pursuant to law, contract or decision of an authority such as concessions, licences, authorizations and permits.
Article 1(2) defines "investor" to include "(b) a legal entity, including companies, corporations, business associations and other organisations, which are constituted or otherwise duly organized under the law of that Contracting party and have their seat, together with real economic activities, in the territory of the same Contracting Party."
Article 11 of the BIT contemplates the arbitration of disputes "between an investor of a Contracting Party and the other Contracting Party regarding an investment of the former made in the territory of the latter... based on an alleged breach of obligations under [the BIT]."
Claimant maintains that it has established all the requirements under the foregoing provisions of the BIT that must be met in order to qualify as a foreign investor that has made an investment in Kosovo. It maintains that both its shares in the Grand Hotel and its claims to performance of Kosovo’s undertaking to transfer ownership of those shares are assets that constitute investments within the meaning of Article 1(1) of the BIT.146 Claimant specifically argues that legal title to shares is not required to constitute an investment and that beneficial ownership suffices. Its ownership interest consisted of the right to registration of the Grand Hotel shares, thereby formally acquiring ownership of those shares. Thus, the fact that Claimant’s share ownership was not yet registered in Kosovo does not prevent it from constituting an investment.147
An "investment dispute" includes, but is not limited to, such a dispute that relates to:
a. any alleged inconsistency of an action or inaction of a public authority with any international agreement that is binding on Kosovo, the present law or any other law, regulation or normative or sub normative act of Kosovo;
c. the making or attempt to make an investment in Kosovo.
[A]ny asset that has (i) been contributed to a Kosovo business organization in return for an ownership interest in that business organization;...
The term "asset" is in turn defined in part as:
[A]ny item of value, whether tangible or intangible, and includes, but is not limited to, the following and similar items:
a. movable and immovable property, including rights in and to such property such as a mortgage, lien, pledge, lease or servitude;... [and]
d. claims or rights to money, goods, services, and performance under contract;...
1.4.3. cash, securities, commercial paper, guarantees, shares of stock or other types of owner ship interests in the Republic of Kosovo or foreign business organization; bonds, debentures, other debt instruments
1.4.4. claims or rights to money, goods, services, and performance under contract...
Article 25(1) defines the jurisdiction of ICSID as follows:
The jurisdiction of the Centre shall extend to any dispute arising directly out of an investment, between a Contracting State... and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.
Claimant maintains that it satisfies the jurisdictional requirements set out in Article 25(1) since:
a. the dispute is a legal one arising directly out of an investment (condition ratione materiae);
b. the dispute is between a Contracting State and a national of the other Contracting State (condition ratione personae); and
c. the parties consented to settlement of the dispute through ICSID arbitration (condition ratione voluntatis).149
According to Claimant, Respondent gave its consent to arbitration under both the BIT and the Foreign Investment Law.150
Fourth, because Respondent did not consent to arbitrate the present dispute, the Tribunal also lacks jurisdiction ratione voluntatis. Respondent’s consent to arbitrate was subject under Article 11(2) of the BIT and Article 16(2) of both the 2005 and 2014 Foreign Investment Laws to an "election of remedies" requirement.160 Under those provisions, because Claimant first brought litigation over its claims in the courts of Kosovo, it could no longer resort to arbitration over them. Also, under Article 11(1) of the BIT (although not under the Foreign Investment Law), Respondent’s consent to arbitrate was conditional upon Claimant’s engaging with the Respondent in an effort to settle their dispute "amicably through consultations," which Claimant failed to do.
Fifth, Respondent argues that, even if all of the BIT conditions were otherwise met, the tribunal lacks jurisdiction ratione temporis. According to Article 2, while the BIT applies to investments made prior to the BIT's entry into force, it does not apply "to claims and disputes arising out of events which occurred prior to its entry into force." (Neither the 2005 nor the 2014 Foreign Investment Law contains such a limitation. On the contrary, the 2014 Law specifically states that "[t]he present law - and the rights, guarantees, privileges and protections established by the present law - shall apply equally to foreign investors that invested in the Republic of Kosovo prior to the effective date of this law."161) According to Respondent, the events giving rise to the dispute occurred on 16 December 2011, which is when the PAK decided to withdraw the shares of Grand Hotel or, at the latest 31 May 2012, which is when the PAK made the decision to execute the withdrawal of shares. Both dates precede the BIT's entry into force on 13 June 2012.162
A. The claim does not arise out of or relate to an investment in Kosovo.
B. Claimant is not a foreign investor.
C. Claimant's alleged ownership interest in shares of Grand Hotel LLC is not a "protected investment".
D. Respondent did not give its consent to arbitrate the present dispute.
E. The Tribunal lacks jurisdiction ratione temporis.
F. Claim falls outside the scope and purpose of the ICSID Convention.
G. Claimant has failed to establish a prima facie cause of action.
Each of these challenges is taken up in turn below.
(1) Claimant never held any assets relating to the Grand Hotel.
(2) Claimant’s payment of EUR 4m does not constitute evidence of an investment on Claimant’s part.
(3) Claimant did not become an owner of shares by virtue of the AGU.
(4) Claimant did not become an owner of shares by virtue of the Annex Agreement.
The Tribunal examines each of these propositions in turn.
[T]he Buyer is purchasing the Shares for its own use and not as an agent for a third party and during the tender for this Company, the Buyer has not formed any informal or formal undisclosed agreements or consortiums between two or more bidders or with any undisclosed third party.
According to Respondent, whether the alleged investor was Mr. Pacolli or Claimant, it would have been a secret investor in violation of the Tender Rules and the above-quoted provision of the Purchase Agreement.164
You have a luxury hotel. The hotels are in privatization now, Grand Hotel and Iliria Hotel. You have all the opportunity, because you have money, you have the hotel management, you have the experience, and I - we need investments, and I would ask you to invest in this sector.252
In reply to this assertion, Mr. Shala stated that, while he met with Mr. Pacolli in 1999, he did not recall meeting with him at all in 2005, and that, in any event, he never requested that Mr. Pacolli invest in the Grand Hotel.253 If he were ever to make such a request, it would only be before the bidding process had begun.254 Mr. Shala stated that it is significant that Mr. Pacolli never followed up on the alleged meeting with any correspondence, and did not participate in the tender process.255 He described the tender process as "100% bulletproof [from] manipulation."256
a. Claimant never held any assets relating to the Grand Hotel.
b. Claimant’s payment of EUR 4m does not constitute evidence of an investment on Claimant’s part.
c. Claimant did not become an owner of shares by virtue of the AGU.
d. Claimant did not become an owner of shares by virtue of the Annex Agreement.
Respondent’s basic position is that Claimant made no investment within the meaning of the ICSID Convention, the BIT or the Foreign Investment Law, and that if any investment was made, it was made only by Mr. Behgjet Pacolli in his individual capacity and not on behalf of Claimant. In addressing the question whether Claimant made an investment, within the meaning of the BIT, Foreign Investment Law and the ICSID Convention, each of these instruments, due to their distinctive language, must be considered on its own terms.
Nor does the Tribunal’s finding of an investment in the present case by any means signify that every trans-border capital movement suffices to qualify as an investment. The Tribunal agrees with Counsel for Respondent in oral argument that "an investment is not just a transfer of money,"299 but rather "an asset acquired by the investor as a result of [a] contribution."300 However, this case cannot be reduced to a mere "transfer of money" or characterized as "any claim to obtain whatever has been contractually stipulated," as the Dissent suggests (paras. 20, 29). This was no "garden-variety" contract, much less the paradigmatic "one-off’ sale transaction that all would agree cannot qualify as an investment.301 The relationship between Claimant, on the one hand, and KTA and PAK, on the other, represented vastly more than that. What resulted from the relationships in this case was nothing less than a joint venture entailing all the characteristics of an investment: a contribution of capital in contemplation of gain or profit, an assumption of risk, a significant duration and even, if necessary, a contribution to the economic development of Kosovo. The Tribunal thus cannot agree with the Dissent’s suggestion (para. 41) that finding as we do "render[s] the distinction between a contract obligation and an investment largely meaningless."
The Tribunal agrees that only starting in June 2012, after the BIT had come into force, did the correspondence plainly come in Mabco’s name as such. Notably, in the 20 June 2012 letter to PAK,310 Mr. Pacolli is referred to as "a legal representative of MABETEX GROUP — working unit MABCO CONSTRUCTION S.A. headquartered in Lugano, Switzerland." Respondent suggests, and the Dissent agrees (para. 52), that this was done in order to make what was Mr. Pacolli’s investment appear to be Mabco’s investment so as to take advantage of the BIT which had only just entered into force. The Tribunal agrees that that is no coincidence. But it is not a suspicious one. The 20 June communication appears to be the very first correspondence with the KTA or PAK that came from counsel for Claimant, rather than Mr. Pacolli individually. According to Claimant, Mr. Pacolli engaged counsel at that point in time because the PAK had then just announced its decision to execute withdrawal of the shares.311 It should come as no surprise that counsel appreciated, far better than Mr. Pacolli in the past had, that in order for the action to be maintained, the claim had to be presented in Claimant's name. Therefore, in the Tribunal's view, it does not follow from the appearance of a reference to Mabco on 20 June 2012 that the claim was not Mabco's claim before that date and that it became Mabco's claim only then. The Tribunal cannot conclude that, in that correspondence, Mr. Pacolli and counsel were suddenly "converting" a claim belonging at all times to Mr. Pacolli into a claim belonging to Mabco.
(3) Claimant did not become an owner of shares by virtue of the AGU
(4) Claimant did not become an owner of shares by virtue of the Annex Agreement
The Tribunal does not linger over the 28 March 2012 Annex Agreement as a basis of Mabco’s claim of entitlement to ownership of the Grand Hotel shares because Claimant does not principally rely on that instrument. Also, by its terms, the Annex Agreement required the PAK’s approval, which appears not to have been given.397 Notably, however, appended to the Annex Agreement were (a) a business plan setting out the contemplated capital investments and increase in the number of employees over the following two years and (b) the required performance guarantee dated 21 March 2012 issued by the National Commercial Bank Kosovo in the amount of Eur 20.2m.398 Both submissions substantially corresponded to the items in the PAK’s 19 March 2012 request for documentation.399 It appears that the PAK at no time suggested that the submissions were inadequate. Claimant states that in reply to a letter that it sent to the PAK in late June 2012, the PAK acknowledged that the submissions were satisfactory, but justified its refusal to register the shares on the ground that UTC had told it that its co-owners showed a "lack of seriousness.400
(1) Claimant is not an investor
The Tribunal notes at the outset its disagreement with Claimant’s assertion that whether Mr. Pacolli validly represented the Claimant is a substantive rather than jurisdictional issue. Although Respondent claims that Mr. Pacolli lacked legal authority to represent Claimant, neither Party has adduced evidence of either Swiss or Kosovan law on the subject, and the matter was not pursued.