On 12 June 2019, Ayat Nizar Raja Sumrain (the "First Claimant"), Eshraka Nizar Raja Sumrain (the "Second Claimant"), Alaa Nizar Raja Sumrain (the "Third Claimant"), and Mohamed Nizar Raja Sumrain (the "Fourth Claimant") (together, the "Claimants"), filed with the International Centre for Settlement of Investment Disputes ("ICSID") a Request for Arbitration against the State of Kuwait ("Kuwait" or the "Respondent") on the basis of the Agreement for the Promotion and Reciprocal Protection of Investments between the Government of the Arab Republic of Egypt and the Government of the State of Kuwait (the "Kuwait-Egypt BIT"). The ICSID Secretary-General registered the Request for Arbitration on 30 June 2019.
Those five objections, as formulated by the Respondent in its Request, are as follows:
a. The Tribunal does not have jurisdiction ratione personae because the Claimants have failed to discharge their burden of proving that they validly hold Egyptian nationality ("First Objection");
b. The Tribunal does not have jurisdiction ratione materiae because the Claimants have failed to demonstrate that they have made an investment under the Kuwait-Egypt BIT and the ICSID Convention ("Second Objection");
c. The Tribunal does not have jurisdiction ratione temporis and/or the Claimants have committed an abuse of process because the Claimants made their alleged investments after their claims and/or the dispute arose ("Third Objection");
d. The Claimants' claims are inadmissible because as shareholders of Heritage Village Real Estate Company ("HVREC") they have no rights to the Heritage Village Project ("Project") or rights under the Build Operate and Transfer contract entered into between HVREC and the Ministry of Finance of Kuwait dated 24 November 2004 ("Contract") and/or the claims are purely contractual and/or there is an exclusive jurisdiction clause in the Contract in favour of the Kuwaiti courts ("Fourth Objection"); and
e. The Claimants have failed to comply with the pre-conditions to jurisdiction in Article 10 of the Kuwait-Egypt BIT (written notification and six-month period to pursue amicable settlement) ("Fifth Objection").
1) Is the objection prima facie serious and substantial?
2) Can the objection be examined without prejudging or entering the merits?
3) Could the objection, if successful, dispose of all or an essential part of the claims raised?1
The first limb of the test—"whether the objection is prima facie serious and substantial" — may be problematic. What exactly is the threshold that is envisaged by such a formulation? It is not helpful in this respect that the Philip Morris tribunal went on to apply a different standard to the one it had formulated at the outset ("The Tribunal cannot prima facie exclude that this Objection might be successful."2) Nor is it helpful that some subsequent tribunals have interpreted "prima facie serious and substantial" to mean "not frivolous or vexatious",3 whereas others have nailed their colours to the notion that "a higher threshold must be applied than merely requiring that the objection is not frivolous or vexatious".4
a. Does the objection raise a serious issue to be determined on the basis of the materials currently before the Tribunal?
b. Does the objection raise an issue of jurisdiction as opposed to admissibility, liability or quantum?
c. If the objection is upheld, will this lead to the termination of the proceedings in their entirety or in significant part?
d. In ruling upon the objection, will it be necessary to consider issues that are intertwined with liability and/or quantum such that any potential savings in time and costs will not be consequential?
If the Respondent were to succeed in demonstrating that the Claimants were not Egyptian nationals at the relevant points in time, then that would put an end to these proceedings as the Tribunal would be without jurisdiction ratione personae under the Kuwait-Egypt BIT. Moreover, questions of nationality are separate from issues relating to the merits and hence there would be no difficulty in determining this objection in a preliminary and bifurcated phase. The question is whether the Respondent has demonstrated that there is a serious issue to be determined in respect of this objection based on the materials available at this stage.
The Respondent argues that the Claimants have not made an investment in accordance with the terms of Article 1 of the BIT or Article 25 of the ICSID Convention. The Respondent's principal argument is that the Claimants have not paid consideration for their shares in HVREC and/or Thimar Kuwait Holding Company ("Thimar") and thus cannot demonstrate that they have made a contribution or have assumed any risk, which the Respondent maintains are essential elements for a qualifying investment under the treaties. The Respondent highlights the fact that the share acquisitions by the Claimants were made on the basis of loans provided by the Claimants' mother or the First Claimant, which are payable only on demand and do not envisage the payment of interest.14 The Claimants maintain that direct contibutions were made15 and, in any event, as a matter of law, it is not necessary for the Claimants to make personal contributions in order to have a qualifying investment under the BIT or the ICSID Convention.16
[T]he Claimants first invested in Kuwait when Ayat Sumrain acquired a first tranche of shares in HVREC on 15 April 2013. The Claimants acquired further shares in HVREC between 2013-2017. The dispute, which relates to Kuwait’s treatment of these investments, particularly following the Addendum (concluded in December 2014), therefore falls within the jurisdiction of the Tribunal ratione temporis.31
The Claimants’ claims are plainly claims for breaches of contract.
While the Claimants attempt to shoehorn their contractual claims into treaty claims by alleging breach of legitimate expectations, breach of an umbrella clause and even expropriation, they fail to point to any conduct by the Respondent that affected their shareholding.34
The Respondent submits that the Claimants have failed to comply with the requirements for the submission of this dispute to arbitration under Article 10 of the BIT, which reads in relevant part:
1. Disputes which arise between a Contracting State and an investor of the other Contracting State, in relation to an investment of the latter in the territory of the first State, shall be settled, as far as possible, by amicable means.
2. If such dispute cannot be settled within six months of the date on which either of the two parties to the dispute requested an amicable settlement by notifying the other party in writing, then the dispute shall be referred for resolution by one of the following means, to be chosen by the investor who is a party to the dispute...37
Therefore, due to the damages incurred by the investment, the Investors are forced to resort to the international arbitration authorities before the investors’ disputes settlement committee under the auspices of the World Bank in order to present their case and to seek compensation for the damage incurred due to the governmental authorities’ arbitrary actions as to the ongoing obstacles to date. This is in case the existing and regularly emerging obstacles and problems facing the Project are not removed, so that we are able to implement the Project.41
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