SPP(ME) respectfully requests ICSID to establish an arbitral tribunal to:
1. determine that the ARE has undertaken obligations and incurred duties in respect to SPP(ME) both according to the terms of Law No. 43 and according to the Heads of Agreement of September 1974 specifically entered into by a Member of its Government, as well as by a Supplemental Agreement "approved, agreed and ratified" by the same Member of its Government.
2. determine that the ARE violated its obligations thereunder,
3. adopt and incorporate as its own the pertinent findings of fact made by the ICC Arbitral Tribunal concerning SPP(ME)'s performance of its obligations under its agreements, the dismissal of EGOTH's counterclaim therein, and the acts bringing about termination of the investment project,
4. determine the liability of the ARE to compensate SPP(ME) for the termination of its investment agreements and to award the full measure of indemnification to SPP(ME) on account of the destruction of its investment, increased by the additional costs, including all direct and indirect costs of the present proceedings, occasioned by ARE's wrongful refusal to honor the ICC award of February 16, 1983, or otherwise compensate SPP(ME), as well as interest at commercial rates.
... THE ARABIC TEXT OF ARTICLE 8 OF LAW NO. 43 OF 1974 REFERS TO THE SETTLEMENT OF DISPUTES WITHIN THE FRAMEWORK OF THE ICSID CONVENTION IN THE CASES WHERE IT (I.E., THE CONVENTION) APPLIES, AND NOT, AS ERRONEOUSLY MENTIONED IN THE ENGLISH TRANSLATION, WHERE LAW NO. 90 OF 1971 RATIFYING THE CONVENTION APPLIES. I HAVE, THUS, REGISTERED THE REQUEST OF SPP WITHOUT PREJUDICE TO THE QUESTION WHETHER SAID ARTICLE EIGHT CONSTITUTES CONSENT FOR THE PURPOSES OF THE ICSID CONVENTION OR MERELY INCLUDES A REFERENCE TO THIS CONVENTION IN THE CASES WHERE CONSENT FOR ICSID JURISDICTION IS ISSUED SEPARATELY. THIS MATTER, IF RAISED, WILL BE FOR THE ARBITRAL TRIBUNAL TO DECIDE.
... the Tribunal has been properly constituted in accordance with Section 2 of the ICSID Convention and Chapter 1 of the Arbitration Rules.
In accordance with Arbitration Rule 20 it was decided that the Arbitration Rules in effect up to September 26, 1984, would apply; that the procedural languages would be English and French; and that the seat of the arbitration would be Washington.
(a) Egypt's observations to be filed by May 8, 1985; and
(b) SPP(ME)'s observations to be filed by June 19, 1985.
Egypt, in its observations, submitted that the Tribunal should :
... for all of the grounds explained above... declare itself incompetent to hear the claims presented by SPP(ME).
The observations of SPP(ME) submitted that the Tribunal should ;
... reject Respondent's objections to the Centre's jurisdiction over this dispute between SPP(ME) and the Government of Egypt regarding the State's failure to compensate this foreign investor for the losses it suffered as a result of the State's cancellation of the Pyramids Oasis Project.
THE TRIBUNAL UNANIMOUSLY DECIDES:
A. To reject the objections to its jurisdiction raised by the Respondent alleging that Article 26 of the ICSID Convention, as well as the pursuit by the Claimants of alternative remedies, bar the claim in the present case;
B. To reject the objection to its jurisdiction raised by the Respondent alleging the withdrawal from the Claimant of the benefits of Law No. 43;
C. To reject the objection to its jurisdiction raised by the Respondent contending that the provisions of Article 8 of Law No. 43 do not apply to this investment dispute; and
D. To stay the present proceedings on the Respondent’s remaining objections to the Centre’s jurisdiction until the proceedings in the French Courts have finally resolved the question of whether the parties agreed to submit their dispute to the jurisdiction of the International Chamber of Commerce.
... determine in favor of the Claimants the remaining jurisdictional issue, to rule that the Arab Republic of Egypt ("A.R.E.") has consented to ICSID arbitration in conformity with the requirement of Article 25(1) of the ICSID Convention, and to take jurisdiction over the investment dispute between the parties.
On September 23, 1974, a contract entitled "Heads of Agreement" was entered into by the Government of Egypt (represented by the Minister of Tourism), the Egyptian General Organization for Tourism and Hotels (hereinafter called "EGOTH"), and SPP, a company engaged in the development of tourist and resort facilities. EGOTH was at the time a public sector enterprise under the Minister of Tourism, organized under Egyptian Law No. 60 of 1971.
Whereas the Ministry of Tourism approved granting both 2nd and 3rd party [i.e. EGOTH and SPP] the right to develop the areas as shown in the attached maps in the Pyramid's area and Pas El Hekma Zone.
This agreement is issued in accordance with laws No. 1 for the year 197 3 relating to Hotels Installations and Tourism, and law No. 2 for the year 1973 relating to the supervision by the Ministry of Tourism on touristic sites and the development of such areas, and law 43 for the year 1974 relating to Arab and foreign funds invested in the A.R.E. with particular reference to government guarantees, long term tax holidays, exemptions from import custom duties, etc.
Article 2 of the Heads of Agreement provided:
Both 2nd and 3rd parties undertake to incorporate promptly an Egyptian joint venture company of which 40 percent would be subscribed by E.G.O.T.H. and 60 percent by S.P.P. (for the Pyramid area) and 30 percent by E.G.O.T.H. and 70 percent by S.P.P. (for Ras El Hekma).
Article 4 provided:
FIRST Party will secure the title of property and possession of land and both First and second party undertake to transfer the right of usufruct to the joint company as its part of the capital investment. Both M.T. and E.G.O.T.H. undertake to transfer such right to the joint company immediately upon incorporation, any balance being transferred not later than 90 days thereafter.
Following execution of the Heads of Agreement dated 23rd September, 1974,... and subsequent negotiations between the above parties, the following are agreed....
Article 1 of the December Agreement then provided that a joint venture company with registered shares would be incorporated in Egypt for a renewable period of fifty years. This company, called the "Egyptian Tourist Development Company" (hereinafter referred to as "ETDC"), was to be responsible for the development and operation of the projects. The nominal capital of ETDC was initially set at two million United States dollars, to be increased to ten million dollars at the end of the fifth year. Sixty percent of this capital was to be subscribed by SPP, and the remaining forty percent by EGOTH. On the fiftieth anniversary of the incorporation of ETDC, EGOTH was to be entitled to increase its shareholding at no cost to fifty percent of the total capital. The participation of EGOTH in the capital of ETDC was represented by the rights of usufruct referred to in Articles 5 and 6 of the agreement. Article 5 of the December Agreement stipulated that EGOTH would:
... use its best efforts to secure all the necessary Government approvals to enable ETDC the immediate possession of the land in both sites, and to ensure the transfer of the rights of usufruct to ETDC for its duration....
It is understood that SPP will be incorporating a holding company to own its shareholding in ETDC and it is agreed that SPP shall have the right to assign its rights, privileges, duties and obligations under this Agreement to this company in which SPP will have a controlling, but not necessarily majority, interest and in which it controls and directs management, provided the company satisfies EGOTH.
Such an assignment was subsequently made to SPP(ME), a wholly-owned subsidiary of SPP formed in 1974 to undertake the execution of the projects at the Pyramids Oasis and Ras El Hekma sites.
It is understood between contracting parties (EGOTH) and (S.P.P.) in concern of the agreement signed on the 12th of December 197 4, that obligations which lie on EGOTH are subject to the approval of the competent governmental authorities and that the feasibility study proves the profitability of the projects.
The Ministry of Tourism approves the master planning for the tourist Pyramids Plateau Area, as well as the detailed planning of the first phase regarding the implementation of villages nos. 1, 3 and 21 of the project of exploiting the tourist Giza Pyramids Plateau....
The FIRST and SECOND DEFENDANTS wish to make it clear that their submission of an ANSWER and COUNTER-CLAIM does not constitute in any way an acceptance of the initiation of this arbitration proceedings. Their refusal of the arbitration proceedings is to remain firm until the Arbitrators render their final decision on the matter of jurisdiction. In case the Arbitrators affirm their jurisdiction over the subject matter at issue, the COUNTER-CLAIM shall be comprised within the said jurisdiction.
1. That the first Defendant, the Arab Republic of Egypt, pay to the First Claimant, Southern Pacific Properties (Middle East), Limited the sum of US$12,500,000 (twelve million five hundred thousand) together with interest thereof at the rate of 5% per annum from the date in which the request for arbitration was received by the Secretary of the ICC Court of Arbitration (i.e. 1st December 1978) until payment.
2. That the claim by both Claimants against the second Defendant, the Egyptian General Company for Tourism and Hotels, be dismissed.
3. That the counterclaim by the said second Defendant against the Claimants be dismissed.
In dismissing the claim against EGOTH, the ICC tribunal added :
Different considerations might well apply if the Government had not been a party to the December, 1974 Agreement,
By submitting the dispute to arbitration by the International Chamber of Commerce, the parties shall be deemed to have undertaken to carry out the resulting award without delay and to have waived their right to any form of appeal insofar as such waiver can validly be made.
At the same time, SPP(ME) added in its letter of August 15, 1983, that:
...recognizing that your Government has taken the position that the ICC award was rendered without a jurisdictional basis, we hereby notify you that we accept and reserve the opportunity of availing ourselves of the uncontestable jurisdiction of the International Centre for the Settlement of Investment Disputes, under the auspices of the World Bank, which is open to us as a result of Law no. 43 of 1974, Article 8 of which provides that investment disputes may be settled by ICSID arbitration.
SPP(ME) also affirmed that:
...This notification does not affect our reliance on the ICC Award, nor does it constitute a waiver of any rights to have the ICC Award immediately recognized and enforced by judicial procedure.
The Tribunal will now proceed to the consideration of Egypt's remaining objections to the Centre's jurisdiction with respect to the present dispute. According to Article 25, paragraph 1, of the Washington Convention, the jurisdiction of the Centre, and hence the competence of the Tribunal, extends to:
...any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre....
The Claimants contend that Egypt's Law No. 43 Concerning the Investment of Arab and Foreign Funds and the Free Zones, enacted in 1974, and specifically Article 8 thereof, constitutes consent to the Centre's jurisdiction in the circumstances of the present case. Egypt, on the other hand, maintains that it has not consented to submit its dispute with the Claimants to the jurisdiction of the Centre, and that the reference to the Washington Convention in Article 8 of Law No. 43 was intended only to inform potential investors that ICSID arbitration is one of a variety of dispute settlement methods that investors may seek to negotiate with Egyptian authorities in appropriate circumstances.
The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.
On the basis of Article 2 of Law No. 43, which provides that any matter not dealt with specifically by that law "is governed by the laws and regulations in force," Egypt argues that the validity of any compromissory clause, as well as the arbitral competence deriving from it, are governed by sections 501 and 502 of the Egyptian Code of Civil Procedure which require a specific and independent compromis or special agreement defining the object of the dispute and naming the arbitrators.
From the standpoint of International Law and of the Court which is its organ, municipal laws are merely facts which express the will and constitute the activities of States, in the same manner as to legal decisions or administrative measures. (P.C.I.J., Series A, No. 7, p.19 (1926).)
The Claimants also contend that, because the issue in this case is whether Article 8 of Law No. 43 constitutes "consent in writing" within the meaning of the Washington Convention -- an international treaty -- Article 8 must be considered in international terms rather than vice versa. On this basis, the Claimants argue that Article 8 should be construed using the rules of interpretation that have been codified in the Vienna Convention on the Law of Treaties.
The issue before the Paris Court of Appeals was not whether Article 8. of Law No. 43 is mandatory or hierarchic, but whether the ICC arbitration clause in the December Agreement between EGOTH and SPP was binding upon Egypt. The possibility of ICSID arbitration had not even been raised at the time. While the court made a passing reference to the Washington Convention, it did not purport to interpret the provision in Article 8 of Law No, 43 concerning the jurisdiction of the Centre. Indeed, what the court said was:
Que l'article 8 de cette loi prévoit en effet C.I.R.D.I., centre de règlement créé par la convention de Washington de 1965; que l'article 8, alinéa 2, aménage en outre une procédure facultative d'arbitrage interne dans laquelle la désignation du tiers arbitre est confiée aux instances judiciaires égyptiennes...
This statement hardly suggests that Article 8 is not mandatory or that the sequence of dispute resolution procedures set forth therein is not hierarchic.
As to the court's observations concerning sovereign immunity, these were made in the course of a discussion of the Heads of Agreement, which did not contain an arbitration clause, and with specific reference to the December Agreement between SPP and EGOTH, to which Egypt was not a party. The court said:
Qu'il ne peut donc s'en déduire une quelconque présomption de la renonciation de l'Etat égyptien à son immunité de juridiction et de son acceptation de se soumettre à la clause compromissoire insérée dans le contrat passé entre la société S.P.P. et EGOTH...
Thus, no conclusion as to the effect of Law No. 43 on the Centre's jurisdiction can be reasonably inferred from the the judgment of the Paris Court of Appeals.
...adopt and incorporate as its own the pertinent findings of fact made by the ICC Arbitral Tribunal concerning SPP(ME)'s performance of its obligations under its agreements, the dismissal of EGOTH's counterclaim therein, and the acts bringing about termination of the investment project.
The Tribunal finds this submission to be unacceptable, both in principle and under the Centre’s Arbitration Rules. In effect, the submission asks the Tribunal to abdicate its fact finding function and adopt as its own the findings of a tribunal that has been held to have acted in excess of the powers conferred upon it by the arbitration clause. Such an approach is hardly consistent with the basic function of evidence in the judicial process, which is to enable the tribunal to determine the truth concerning the conflicting claims of the parties before it.
(1) The award shall be in writing and shall contain :
(g) a statement of the facts as found by the Tribunal... (Emphasis added.)
Accordingly, the Tribunal will proceed to make its own determination of the facts necessary to render an award in the present case.
THE TRIBUNAL DECIDES
(A) To reject the objection to its jurisdiction raised by the Respondent alleging that Article 8 of Law No. 43 does not suffice to establish Egypt’s consent to the Centre’s jurisdiction;
(B) To reject the submission of the Claimants that the Tribunal adopt and incorporate as its own the pertinent findings- of fact made by the ICC tribunal; and
(C) Consequently, and in accordance with Rules 25 and 41, to instruct the President to fix the time limits for further proceedings on the merits in consultation with the Parties.