International Centre for Settlement of Investment Disputes
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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES In the arbitration proceeding between GEORG GAVRILOVIĆ AND GAVRILOVIĆ D.O.O. Claimants and REPUBLIC OF CROATIA Respondent ICSID Case No ARB/12/39 AWARD Members of the Tribunal Dr Michael C. Pryles, President Dr Stanimir A. Alexandrov, Arbitrator Mr J. Christopher Thomas QC, Arbitrator Secretary of the Tribunal Ms Jara Mínguez Almeida Date of dispatch to the Parties: 26 July 2018 REPRESENTATION OF THE PARTIES Representing Georg Gavrilović and Gavrilović Representing Republic of Croatia: d.o.o.: Prof Emmanuel Gaillard Mr Grant Hanessian, Esq Dr Yas Banifatemi Mr Filip Boras, Esq Mr Rudolf Simone-Pont Mr Derek Soller, Esq Ms Arianna Rosato Dr Alexander Petsche Mr Andrew Riccio, Esq Shearman & Sterling LLP Mr Mark McCrone, Esq 7 rue Jacques Bingen Mr Thomas Obersteiner 75017 Paris Mr Jose Manuel Maza France Baker & McKenzie LLP and 452 Fifth Avenue New York, New York 10018 Dr Marc Jacob United States of America Shearman & Sterling LLP Schottenring 25 Bockenheimer Landstrasse 2-4 1010 Vienna D-60306 Frankfurt am Main Republic of Austria Federal Republic of Germany and and Mr Zvonimir Buterin Mr Boris Koketi Ms Jelena Lučić-Nothig Ms Ines Videnić Desović Mr Petar Ceronja State Attorney’s Office of the Buterin & Posavec Republic of Croatia Draškovićeva 82 Gajeva 30a 10000 Zagreb 10 000 Zagreb Republic of Croatia Republic of Croatia i TABLE OF CONTENTS INTRODUCTION ............................................................................................................ 1 PROCEDURAL HISTORY.............................................................................................. 1 FACTUAL OVERVIEW ................................................................................................ 17 The Gavrilović Enterprise .......................................................................................17 The First Claimant’s Alleged Purchase of the Gavrilović Enterprise from Bankruptcy ..............................................................................................................22 The Respondent Alleges the First Claimant Purchased the Gavrilović Enterprise Through a Corrupt Scheme .....................................................................................25 The Claimants Rebuild the Gavrilović Enterprise ..................................................27 The Claimants Allege the Respondent Failed to Protect and Promote Their Investment ...............................................................................................................28 The Claimants Allege That the Respondent Expropriated Their Purchase of the Gavrilović Enterprise ..............................................................................................35 THE PARTIES’ REQUESTS FOR RELIEF .................................................................. 39 The Claimants..........................................................................................................39 The Respondent .......................................................................................................40 QUESTIONS FOR DETERMINATION ....................................................................... 41 ISSUE 1: JURISDICTION ............................................................................................. 50 Issue 1.1: Is each of the Claimants an “investor” who has made an “investment” under the ICSID Convention and the BIT? .......................................................................51 Issue 1.2: Was the alleged investment made in accordance with host State law, so that the Tribunal would have jurisdiction over the Claimants’ claims? .........................66 ISSUE 2: ADMISSIBILITY ......................................................................................... 129 Issue 2.1: Does the ICSID Convention include the concept of “admissibility” as a type of preliminary objection? If not, are characterisations of admissibility otherwise relevant? ................................................................................................................130 Issue 2.2: Which party has the burden of proof regarding the Alleged Illegalities as they relate to the admissibility of the Claimants’ claims? ............................................132 Issue 2.3: Do any of the Alleged Illegalities render the Claimants’ claims inadmissible? .........................................................................................................132 Issue 2.4: Are any of the Claimants’ claims inadmissible due to the jurisdiction clause contained in the Purchase Agreement? .................................................................133 ISSUE 3: APPLICABLE LAW .................................................................................... 135 Issue 3.1: Having regard to Article 42 of the ICSID Convention and the BIT, what is the law applicable to the issues in dispute? .................................................................135 Issue 3.2: In particular, what law determines the Claimants’ alleged property rights? 136 Issue 3.3: Should the Tribunal apply one law to the whole of the dispute or does the applicable law vary on an issue by issue basis? ....................................................137 ii ISSUE 4: MERITS – GENERAL MATTERS ............................................................. 138 Issue 4.1: Is the Purchase Agreement unenforceable by reason of one, or more, of the Alleged Illegalities? ...............................................................................................139 Issue 4.2: Do the Claimants have a property interest in the claimed properties as a matter of Croatian law? .........................................................................................144 Issue 4.7: Are the actions of the following persons or entities attributable to the Respondent? ..........................................................................................................208 Issue 4.8: Is the Respondent a party to, or otherwise bound by, the Purchase Agreement? ...........................................................................................................229 Issue 4.9: Does an erroneous application of law, if any, by the Respondent give rise to a treaty violation? .....................................................................................................238 Issue 4.6: What is the effect of the Claimants’ failure, if any, to make use of available domestic remedies, including the commencement of contentious proceedings, on the merits of their claims under the BIT? ..............................................................242 ISSUE 6: MERITS – EXPROPRIATION .................................................................... 244 Issue 6.1: Has the Respondent expropriated the Claimants’ Plots? ..............................246 Issue 6.2: Has the Respondent directly or indirectly expropriated the Claimants’ contractual rights, if any, under the Purchase Agreement? ...................................256 Issue 6.3: If there has been an expropriation, is it in breach of Article 4(1) of the BIT? .......................................................................................................................256 ISSUE 5: MERITS – FAIR AND EQUITABLE TREATMENT ................................ 256 Issue 5.1: Is breach of a legitimate expectation a failure to accord “fair and equitable treatment”? ............................................................................................................257 Issue 5.2: Can there be a legitimate expectation in respect of property to which the Claimants have no property right or contractual right? .........................................259 Issue 5.3: Has the Respondent breached the obligation to afford the Claimants’ investments fair and equitable treatment under Article 2(1) of the BIT? .............261 Issue 5.4: If the Second Claimant does not have a property interest in the claimed properties under Croatian law, did the Claimants have a legitimate expectation that the companies purchased by Mr Gavrilović. would have such property interests, and would be able to register ownership over the claimed properties? .................310 ISSUE 7: MERITS – ARTICLE 8(2) OF THE BIT ..................................................... 311 Issue 7.1: Has the Respondent breached Article 8(2) of the BIT by failing to observe its obligations, if any, under the Purchase Agreement? .............................................311 ISSUE 8: MERITS – EQUAL TREATMENT ............................................................. 315 Issue 8.1: Has the Respondent breached Article 3(1) of the BIT? In particular, were the Claimants and Mr Imprić in like circumstances? Did the Respondent treat Mr Imprić—a Croatian national—more favourably than the Claimants?...................315 ISSUE 9: QUANTUM .................................................................................................. 330 Issue 9.1: Are the Claimants entitled to damages and, if so, in what amount? ............330 ISSUE 10: COSTS ........................................................................................................ 355 iii Issue 10.1: Should either Party bear some, or all, of the opposing Party’s costs?........355 AWARD ....................................................................................................................... 360 ANNEXURE 1......................................................................................................................