By Damon Vis-Dunbar
2 September 2009
An ICSID tribunal has rendered a decision after finding itself in the unusual position of facing requests from both the Claimant and Respondent for a claim to be dismissed for lack of jurisdiction.
In its ruling* dated 13 August 2009, the Tribunal declined jurisdiction, albeit on a basis aligned with the request of the Republic of Turkey, the Respondent, rather than of the Polish Claimant, Europe Cement Investment & Trade S.A.
Europe Cement launched its case against Turkey for alleged breaches of the Energy Charter Treaty (ECT) in 2007. The Polish company claimed to hold stocks in two Turkish electricity corporations, Cukarova Elektrik Anonim Sirketi (CEAS) and Kepez Elektrik T.A.S. (Kepez), which saw their concession agreements with the Turkish Ministry of Energy terminated in 2003.
The critical question facing the Tribunal as it considered its jurisdiction was whether Europe Cement was in possession of stakes in CEAS and Kepez in 2003. According to Europe Cement, the shares in CEAS and Kepez were originally held by the businessman Kemal Uzan and transferred to Europe Cement in 2003 shortly before the concession agreements were terminated.
But despite repeated requests from the Tribunal, the Claimant failed to produce convincing evidence that it owned shares in CEAS and Kepez in 2003. Following a series of assurances that evidence was forthcoming, the Claimant changed tracks and called for the case to be dismissed “due to our company’s inability to show the shares legally acquired by our company.”
As such, both Europe Cement and Turkey called on the Tribunal to dismiss the claim for lack of jurisdiction yet differed on the basis for their respective dismissal requests.
Europe Cement called for its claim to be dismissed on the grounds that it was temporarily unable to prove its investment in CEAS and Kepez, and argued that the Tribunal was not obligated to consider further arguments.
Meanwhile, Turkey maintained that the claim rested on fraud, and as such it was in the “international public interest” that the Tribunal renders an award “that contains full and transparent findings on Europe Cement’s abuse of this process.” Turkey also asked that the Tribunal award monetary relief on the grounds that Europe Cement’s claim was fraudulent and caused damage to the country’s reputation.
The Tribunal granted Turkey’s request for a reasoned award, including consideration of its request for monetary damages, explaining that “the fact that the parties agree on the outcome – dismissal for lack of jurisdiction – does not mean that they must be deemed to have agreed on discontinuance or that there is no dispute between the Parties.”
After considering the arguments of both parties, the Tribunal concluded that the evidence “points strongly to the conclusion that Europe Cement did not hold shares in CEAS and Kepez at the relevant time”.
The Tribunal declined to award damages to Turkey, however, explaining that the conclusions reached in its award should remedy any damage inflicted on Turkey’s reputation.
But Europe Cement has been ordered to bear the full cost of the arbitration proceedings, including Turkey’s legal fees, which amounted to some US$3.9 million.
The claim by Europe Cement is one of a several claims** against Turkey which involve entities operated by the Uzan family, a wealthy clan whose members have been embroiled in multiple court cases around the world related to charges of fraud.
Counsel for Turkey, the law firm Freshfields Bruckhaus Deringer, claimed before the Tribunal in this case that the cumulative shares allegedly held by claimants in these cases amount to 130% of the shares of CEAS and 125% of the shares of Kepez.
“These multiple, overlapping and contradictory claims are, in the Respondent’s view, supporting evidence that the claim by Europe Cement to own shares in CEAS and Kepez is baseless and fraudulent,” observes the Tribunal.
*Award Europe Cement Investment & Trade S.A. v. Republic of Turkey is available at: http://ita.law.uvic.ca/documents/EuropeCementAward.PDF
**Cementownia « Nowa Huta » S.A. v. Republic of Turkey (ICSID Case No. ARB(AF)/06/2); Libananco Holdings Co. Limited v. Republic of Turkey (ICSID Case No. ARB/06/8); Polska Energetyka Holding SA v. Republic of Turkey (ad-hoc UNCITRAL arbitration)