"I am instructed by the Minister to respond to your letter of 25 September 1996.
As indicated during the hearing held in London on 10 September 1996, the Ministry of Agriculture of the Republic of Albania considers that the dispute settlement rules applicable to the facts raised in Tradex's Request for ICSID arbitration, if any, are those set forth in Law No. 7594 of 4 August 1992.
Article 15 of the 1992 Law is therefore applicable. It provides for UNCITRAL arbitration and sets forth certain conditions and exclusions for such arbitration to be effective. Whether those conditions or exclusions have been satisfied or are applicable in respect of the matter brought by Tradex to ICSID raises questions of fact and law which would need to be considered further by the Ministry of Agriculture and eventually by any arbitral Tribunal that might be constituted pursuant to the 1992 Law. In the first place it will be a matter for Tradex whether to decide to make an application for arbitration under UNCITRAL rules in reliance on the 1992 Law."
a) On August 22, 1992, a most significant part of the farm was formally expropriated and transferred to villages by Albania, namely ha 140 amounting to 15% of the total farm and its most fertile area.
b) Crop production, cattle, and seed supplies were stolen by the villagers at an almost steady rate of 15% between March and October 1992 and work of the management of the joint venture was often impossible because of threats and acts of violence.
c) Beginning December 1992, the entrance of Tradex's personnel to the farm was completely impossible because of the seizure and occupation of the farm by villagers.
d) By letters in late 1992 and early 1993, Tradex requested in vain the intervention by Albania as a last effort to save the investment, but Tradex was obliged to hand over the 140 ha mentioned together with cultivations, cattle, and supplies.
a) The market value of Tradex's expropriated investment amounting to US $ 2,023,907;
b) interest on that amount mentioned at current banking interest rates, from December 1, 1992, until payment, and
c) fees and legal expenses of Tradex, to be calculated later.
– The facts presented by Tradex make it obvious that this is a "dispute" between Tradex and T.B. Torovitsa and not between Tradex and Albania;
– The 1993 Law does not apply retroactively and is therefore not applicable to this "dispute";
– Even if the 1993 Law does apply retroactively, Tradex was not a "foreign investor" within the meaning of the 1993 Law when the law came into force and cannot therefore rely on its provisions;
– Even if there is a "dispute" between Tradex and Albania and the 1993 Law is applicable, the "dispute" does not relate to an "expropriation" within the meaning of the 1993 Law; and
– Tradex made no good faith effort to resolve the "dispute" amicably before resorting to arbitration, as required by the 1993 Law and general principles of international law.
This law was further replaced by Albanian Law No. 7496 of August 4, 1992, which provided in particular:
Art. 9 "Foreign investments in Albania enjoy complete protection and guarantee. Foreign investments cannot be nationalized, expropriated, or be object of another measure equal to them including the special cases in the interest of public use and always with a legal procedure, with compensation and without discrimination. Compensation must be given immediately, be real and suitable.
Art. 15 "Disagreements between the foreign investor provided with authorization according to law and the Council of Ministers, Ministry or the Local power organs in connection to:
a) any question that has to do with discrimination or other question linked with compensation for reason foreseen in Art. 9 and 10 of this Law.
b) Legitimacy or the continuation of legitimacy of authorization will be presented for settling to an international arbitration in accordance to rules of Arbitration Committee of UNO for the International Rights in Trade, that are in force in the time of delivery of authorization, excluding the cases when between the person that releases the authorization and the foreign investor that takes the authorization, had been agreed otherwise and this is written in the authorization. Any decision of this arbitration is of a cut form and obliged for all sides."
Most relevant to the present case is Albanian Law No. 7764 of November 2, 1993 (the "1993 Law") which came into force on January 1, 1994, and which, in particular, contains the following provisions:
For the purpose of this Act
1. "Territory" means the territory under the sovereignty of the Republic of Albania, including the territorial waters, as well as the maritime area and the continental shelf over which the Republic Albania, in accordance with international law, exercises its sovereign and legal rights.
2. "Foreign investor" means:
a) any natural person who is a citizen of a foreign country, or
b) any natural person who is a citizen of the Republic of Albania with a permanent domicile in a foreign country, or
c) any legal person that is incorporated or constituted under the law of a foreign country that directly or indirectly seeks to make or is making an investment in the territory of the Republic of Albania under its laws or has made an investment under the laws regarding the period of time from July 31, 1990 and further on.
3. "Foreign investment" means every kind of investment in the territory of the Republic of Albania owned directly or indirectly by a foreign investor, consisting of:
a) moveable and immoveable, tangible and intangible property and any other property rights;
b) a company, shares in stock of a company and any form of participation in a company;
c) loans, claim to money or claim to performance having economic value; (handwritten addition: "and related with an investment")
d) intellectual property, including literary and artistic works, sound recordings, inventions, industrial designs, semiconductor mask works, know how, trademarks, service marks and trade names; and
e) any right conferred by law or contract, and any license or permit pursuant to law.
4. "Foreign investment dispute" means any controversy or claim arising out of or relating to a foreign investment.
5. "Return" means an amount derived from or associated with an investment, including profit, dividend, interest, capital gain, royalty payment, management fee, technical assistance fee or other fee, or returns in kind."
Expropriation and Nationalization
Foreign investments shall not be expropriated or nationalized either directly or indirectly or subject to any measure of tantamount effect, except for a public purpose determined on law; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation and in accordance with due process of law.
Compensation for Expropriation and Nationalization
1. Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or become known, whichever is earlier.
2. Compensation shall be paid without delay and include interest at a commercially reasonable rate from the date of the expropriation, be fully transferable and convertible at the market rate of exchange on the date of the expropriation.
3. In cases in which a foreign investor asserts that all or part of its foreign investment has been expropriated or considers the compensation therefor to be unsatisfactory, the foreign investor shall have the right to prompt review by the appropriate judicial or administrative bodies in accordance with the provisions of Article 8 of this Act."
1. If a foreign investment dispute arises between a foreign investor and either an Albanian private party or an Albanian state enterprise, and it cannot be settled amicably, then the foreign investor may choose to submit the dispute for resolution to any applicable, previously agreed upon dispute-settlement procedure. If no dispute settlement procedure has been agreed upon, then the foreign investor may submit the dispute for resolution to a competent court or administrative tribunal of the Republic of Albania in accordance with its laws.
2. If a foreign investment dispute arises between a foreign investor and the Republic of Albania and it cannot be settled amicably, then the foreign investor may choose to submit the dispute for resolution to a competent court or administrative tribunal of the Republic of Albania in accordance with its laws. In addition, if the dispute arises out of or relates to expropriation, compensation for expropriation, or discrimination and also for the transfers in accordance with Article 7, then the foreign investor may submit the dispute for resolution and the Republic of Albania hereby consents to the submission thereof, to the International Centre for Settlement of Investment Disputes ("Centre") established by the Convention on the Settlement of Investment Disputes between States and National of Other States, done at Washington, March 18, 1965 ("ICSID Convention").
3. Any arbitral award rendered in accordance with this article shall be final and binding on the parties to the dispute. The Republic of Albania shall carry out without delay the provisions of any such award and provide for its enforcement in its territory."
Status of this Act
1. Law No. 7594 of August 4, 1992, and any other provisions within laws or decisions of the Government of Albania that conflict with this Act are hereby abrogated.
2. In the event that the provisions of the Act are not in conformity with any other international agreement or treaty ratified by the Parliament, to which the Republic of Albania or the Government of Albania is a party, the latter shall prevail to the extent they provide greater rights or protection to the foreign investor than those provided in this Act."
In addition, Tradex claims that the jurisdiction of this Tribunal is also based on the Bilateral Agreement between Greece and Albania for the Encouragement and Reciprocal Protection of Investments signed on August 1, 1991, and notified to be in force as of January 4, 1995 (the "Bilateral Treaty"). In particular, this Bilateral Treaty contains the following provisions:
For the purposes of this Agreement:
1. "Investment" means every kind of asset and in particular, though not exclusively, includes:
a) movable and immovable property and any other property rights such as mortgages, liens or pledges,
b) shares in and stock and debentures of a company and any other form of participation in a company,
c) loans, claims to money or to any performance under contract having a financial value,
d) intellectual and industrial property rights, including rights with respect to copyrights, trademarks, trade names, patents, technological processes, know-how, and goodwill,
e) rights conferred by law or under contract with a Contracting Party, including the right to search for, cultivate, extract or exploit natural resources.
2. "Returns" means the amounts yielded by an investment and in particular, though not exclusively, includes profits, interest, capital gains, dividends, royalties and other fees.
3. "Investor" shall comprise with regard to either Contracting Party:
a) natural persons having the nationality of that Contracting Party in accordance with its law,
b) legal persons constituted in accordance with the law of that Contracting Party and having their seat within its territory.
4. "Territory" means in respect of either Contracting Party the territory under its sovereignty as well as the territorial sea and submarine areas, over which the Contracting Party exercises, in conformity with international law, sovereign rights or jurisdiction."
1. Investments by investors of either Contracting Party shall enjoy full protection and security in the territory of the other Contracting Party.
2. Investments by investors of either Contracting Party shall not be expropriated, nationalized or subjected to any other measure the effects of which would be tantamount to expropriation or nationalization in the territory of the other Contracting Party except for the public benefit and against prompt, adequate and effective compensation. Such compensation shall be equivalent to the market value of the expropriated investment before the date on which the actual or threatened expropriation, nationalization or comparable measure has become publicly known. The compensation shall be paid without delay and shall carry the current bank interest until the time of payment; it shall be effectively realizable and freely transferable. Provision shall have been made in an appropriate manner at or prior to the time of expropriation, nationalization or comparable measure for the determination and payment of such compensation. The legality of any such expropriation, nationalization or comparable measure and the amount of compensation shall be subject to review by due process of law.
3. Investors of either Contracting Party shall enjoy most-favored nation treatment in the territory of the other Contracting party in respect of the matters provided for in this Article."
This Agreement shall also apply to investments made prior to its entry into force by investors of either Contracting Party in the territory of the other Contracting Party consistent with the latter's legislation."
Settlement of Disputes between an Investor and a Host State
1. Any dispute between either Contracting Party and an investor of the other Contracting Party concerning investments or the expropriation or nationalization of an investment shall, as far as possible, be settled by the disputing parties in an amicable way.
2. If such disputes cannot be settled within six months from the date either party requested amicable settlement, the investor or the Contracting Party concerned may submit the dispute either to the competent court of the Contracting Party, or to an international arbitration tribunal. Each Contracting Party herewith declares its acceptance of such an arbitration procedure. In the latter case, the provisions of article 9, para 3–9, shall be applied mutatis mutandis. Nevertheless, the President of the Court of the International Arbitration of the International Chamber of Commerce in Paris shall be invited to make the necessary appointments whereas the arbitration shall determine its procedure by applying the UNCITRAL Arbitration Rules, as then in force. The award shall be binding and enforced in accordance with domestic law.
3. During arbitration or the enforcement of an award the Contracting Party involved in the dispute shall not raise the objection that the investor of the other Contracting Party has received compensation under an insurance contract in respect of all or part of the damage.
4. In case both Contracting Parties have become members of the Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of the Other States, disputes between either Contracting Party and the investor of the other Contracting Party under the first paragraph of this Article shall be submitted for settlement by conciliation or arbitration to the International Centre for the Settlement of Investment Disputes."
Entry into Force—Duration—Termination
1. This Agreement shall enter into force thirty days after the date on which the Contracting Parties have informed each other, through diplomatic channels, of its ratification or approval according to their respective legislation.
2. Unless notice of termination has been given by either Contracting Party at least six months before the date of expiry of its validity, this Agreement shall be extended tacitly for the period of 10 years, each Contracting Party reserving the right to terminate the Agreement upon notice of at least six months before the date of expiry of the current period of validity.
3. In respect of investments made prior to the date of the termination of this Agreement the foregoing Articles shall continue to be effective for a further period of 10 years from that date."
The Tribunal feels it can get sufficient guidance in this matter by the wording of the 1993 Law. Art. 1 (Definitions) of the Law expressly says, in its paragraph 2:
"Foreign investor" means:
c) any legal person that is incorporated or constituted under the law of a foreign country that... has made an investment under the laws regarding the period of time from July 31, 1990 and further on."
"In addition, if the dispute arises out of or relates to expropriation,..., then the foreign investor may submit the dispute for resolution and the Republic of Albania hereby consents to the submission therefor, to the International Centre for Settlement of Investment Disputes... "
The second letter of December 12, 1992 reported further to the first letter to the same Ministry, and in particular that the community of Mali-Kolej detached 15 hectares of land without notice or any other decision communicated and continued:
"6. We enclose an itemized memorandum of evaluation of the positive damage, which runs to 195,851$ while the loss of future income is in the order of 717,615 $.
7. After that we kindly request your interference to both following directions:
a. Help to the normalization of our proceedings.
b. Help to the arrangements of our compensation."
"... we consider that as necessary, to bring to your notice the problem taking into account the law Nr. 7496/4.8.1992 concerning "Law on Foreign Investments" as it is provided for in the article Nr. 9 which appoints: ‘The foreign investment in Albania stand under full protection and guarantee.'
For all the abovementioned we hope for your sincere support."
"... only you could give as soon as possible the right solution. We would not like to put in force the terms of the contract concerning commitments."
"... we feel the need to apply to you through this Memorandum to thinking out a solution."
Tradex made its investments starting in 1992;
the conduct of Albania alleged to be an expropriation occurred in 1992 and 1993;
the Albanian investment laws in force during that period were those of August 10, 1991 and August 4, 1992;
the liquidation of the joint venture was completed on December 16, 1993;
Tradex's five letters to the Ministry of Agriculture were dated between October 31, 1992 and February 25, 1993;
the 1993 Law entered into force on January 1, 1994; and
the Request for Arbitration was received by ICSID on November 2, 1994.
The conclusion reached by the Tribunal is supported by the similar conclusion reached by another ICSID arbitral tribunal in the case Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, Decisions on jurisdiction dated 27 November 1985 (3 ICSID Reports, at 112 et seq.) and April 14, 1988 (3 ICSID Reports, at 131 et seq.), where the consent of Egypt to ICSID arbitration and, consequently, the jurisdiction of the arbitral tribunal was based on Art. 8 of the Egyptian law n. 43 of 1974. That Tribunal considered that such piece of legislation constituted, on the side of Egypt, the "consent in writing" required by Art. 25 of the Washington Convention. The Tribunal based its conclusion on the interpretation offered in the Report to the Executive Directors, accompanying the Convention, which explains that "a host State might in its investment promotion legislation offer to submit disputes... to the jurisdiction of the Centre, and the investor might give its consent by accepting the offer in writing (ICSID Docments concerning the Origin and the Formulation of the Convention, Vol. II, P.2, at 1069).
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