International Centre for Settlement of Investment Disputes AWARD
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International Centre for Settlement of Investment Disputes ICSID Case No. ARB/05/16 RUMELI TELEKOM A.S. AND TELSIM MOBIL TELEKOMIKASYON HIZMETLERI A.S., CLAIMANTS V. REPUBLIC OF KAZAKHSTAN, RESPONDENT AWARD RENDERED BY AN ARBITRAL TRIBUNAL COMPOSED OF STEWART BOYD, ARBITRATOR MARC LALONDE, ARBITRATOR BERNARD HANOTIAU, PRESIDENT Date of dispatch to the parties: July 29, 2008 TABLE OF CONTENTS PAGE CHAPTER I. THE PARTIES AND THE BACKGROUND OF THE DISPUTE ...........1 CHAPTER II. THE PROCEDURE....................................................................................5 I. INSTITUTION OF THE PROCEEDINGS .................................................................................5 II. PROCEDURAL RULES AND AGENDA: MINUTES OF THE FIRST SESSION..............................7 III. FIRST REQUESTS FOR PRODUCTION OF DOCUMENTS: PROCEDURAL ORDER NO. 1............8 IV. CLAIMANTS’ SUBSTANTIATED REQUESTS FOR PRODUCTION OF DOCUMENTS: PROCEDURAL ORDER NO. 2 .........................................................................................9 V. CLAIMANTS’ REQUEST FOR FURTHER PRODUCTION OF DOCUMENTS: PROCEDURAL ORDER NO. 3 .............................................................................................................10 VI. SECOND REQUESTS FOR PRODUCTION OF DOCUMENTS: PROCEDURAL ORDER NO. 4 .........................................................................................................................12 VII. EXCHANGE OF WRITTEN PLEADINGS ..............................................................................12 VIII. ORAL PLEADINGS...........................................................................................................14 IX. POST HEARING SUBMISSIONS ........................................................................................17 X. CLOSING OF THE PROCEEDINGS......................................................................................17 CHAPTER III. THE FACTS .............................................................................................18 I. UP TO THE TERMINATION OF THE INVESTMENT CONTRACT .........................................18 A. The foundation of KaR-Tel.......................................................................................18 B. The GSM license.......................................................................................................20 C. The Motorola loan.....................................................................................................21 D. The alteration of the participations in KaR-Tel ........................................................23 E. The Investment Contract...........................................................................................23 F. The foundation of Telecom Invest and the introduction of Telsim ..........................24 G. The development of KaR-Tel’s Business .................................................................25 II. THE TERMINATION OF THE INVESTMENT CONTRACT AND ITS REPERCUSSIONS ...........26 A. The termination of the Investment Contract .............................................................26 B. The Extraordinary General Meeting of Shareholders of KaR-Tel............................26 C. The proceedings issued in Almaty City Courts ........................................................28 1. The Telecom Invest Claim....................................................................................28 2. The KaR-Tel Claim...............................................................................................29 3. The Consolidation of Telecom and KaR-Tel cases ..............................................30 4. The forensic examination of KaR-Tel ..................................................................30 D. The attempts to sell Telecom Invest’s participation in KaR-Tel ..............................31 E. Mr. Seysembayev’s offer to purchase Claimants’ participation in KaR-Tel............32 F. Claimants’ complaints to Respondent ......................................................................32 G. The judgment of the Almaty City Court on June 6, 2003.........................................33 H. The appointment of a Working Group......................................................................34 I. Criminal investigation...............................................................................................35 J. The judgment of the Supreme Court of July 23, 2003..............................................36 i K. The judgment of the Supreme Court Presidium of October 30, 2003 - The following restructuring of KaR-Tel – and the purchase of KaR-Tel by VimpelCom...........................................................................................................36 1. The judgment of the Supreme Court Presidium ...................................................36 2. The restructuring of KaR-Tel................................................................................37 3. The sale of KaR-Tel to VimpelCom.....................................................................37 III. CLAIMANTS SEIZED BY TSDIF .......................................................................................37 CHAPTER IV. THE JURISDICTION OF THE ARBITRAL TRIBUNAL .....................38 I. CLAIMANTS’ POSITION ..................................................................................................38 A. Respondent consented to ICSID jurisdiction over this dispute ................................39 1. Claimants’ investments were fully legal...............................................................39 2. Claimants’ investments did not violate the principle of good faith, the principle “nemo auditur propriam turpitudinem allegans,” or international public policy .................................................................................43 B. Claimants have standing to bring this arbitration .....................................................44 1. Rumeli and Telsim are the proper Claimants in this arbitration...........................44 2. There was no assignment of Claimants’ claim to the TSDIF ...............................49 3. The TSDIF was not subrogated to Claimants’ claims ..........................................49 4. There is no reason to pierce the corporate veil .....................................................49 5. Respondent’s allegation that Article 25 of the Convention imposes a control test must fail ..........................................................................................50 6. TSDIF would satisfy the jurisdictional requirements of ICSID in any event.......52 C. Claimants have gone far beyond establishing a prima facie case on the merits.......53 D. Respondent is a proper party to this dispute .............................................................54 E. Claimants have standing to challenge the cancellation of the Investment Contract.................................................................................................................54 F. The Foreign Investment Law is a valid secondary basis for establishing jurisdiction ............................................................................................................55 II. RESPONDENT’S POSITION...............................................................................................56 A. Respondent did not consent to ICSID jurisdiction over this dispute........................56 1. Claimants’ investments were not legal .................................................................57 2. Claimants’ investments violated the principle of good faith, the principle nemo auditur propriam turpitudinem allegans and international public policy .................................................................................................................59 B. Claimants do not have standing to bring this arbitration ..........................................61 1. The Turkish State is the real party in interest in this arbitration...........................61 2. The assignment of Claimants’ cause of action .....................................................67 3. The TSDIF was subrogated in Claimants’ claim..................................................67 4. Alter ego and piercing the corporate veil..............................................................69 5. “Control” and “incorporation” ...........................................................................69 6. The claim brought by TSDIF does not satisfy the jurisdictional requirements of ICSID.......................................................................................72 C. No prima facie case ..................................................................................................76 D. Respondent is not a proper party to the dispute........................................................76 ii E. Claimants do not have standing to challenge the termination of the Investment Contract..............................................................................................77 F. The Foreign Investment Law is not applicable.........................................................77 G. Admissibility.............................................................................................................78 III. DECISION OF THE ARBITRAL TRIBUNAL........................................................................78 CHAPTER V. THE CLAIMS...........................................................................................86 I. OVERVIEW OF THE CLAIMS...........................................................................................86