THE STATE of LIBYA Respondent FINAL AWARD
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International Court of Arbitration of the International Chamber of Commerce Case No. 21537/ZF/AYZ Arbitration between CENGIZ IN$AAT SANAYI VE TICARET A.§. Claimant and THE STATE OF LIBYA Respondent FINAL AWARD The Arbitral Tribunal Juan Fernandez-Armesto (President) Pierre Mayer (Co-arbitrator) Georges Khairallah (Co-arbitrator) The Arbitral Secretary Krystle M. Baptista Serna ICC Case 21537/ZF/AYZ TNT)F.X INDEX 2 ABBREVIATIONS AND ACRONYMS 3 I. INTRODUCTION 7 II. PROCEDURAL HISTORY 11 III. RELIEF SOUGHT 23 IV. OVERVIEW 24 V. FACTS 27 VI. JURISDICTIONAL AND ADMISSIBILITY OBJECTIONS 49 VI.1. JURISDICTIONAL OBJECTIONS 49 VI.2. ADMISSIBILITY OBJECTIONS 64 VII. MERITS 69 VII.1. APPLICABLE LAW 70 VII.2. THE INTERPLAY BETWEEN ARTICLES 2 AND 5 OF THE BIT 71 VII.3. FULL PROTECTION AND SECURITY 76 VII.4. THE WAR CLAUSE 89 VII.5. FAIR AND EQUITABLE TREATMENT 93 VIII. COMPENSATION 108 IX. COSTS 120 X. SUMMARY 124 XI. DECISION 127 2 ICC Case 21537/ZF/AYZ ABBREVIATIONS AND ACRONYMS American project management firm served Aecom who as program manager for the Projects ACC Arab Contractors Company, an Egyptian construction company Arbitration Article 8 of the Turkey Libya BIT Agreement - Fees and expenses of the arbitrators and the ICC administrative Administrative Costs expenses fixed by the Court Arbitration Costs Administrative Costs and Legal Expenses Agreement between the Republic of Turkey and the Great Socialist People’s Libyan Arab Jamahiriya-the State of Libya’s BIT, Treaty legal predecessor - concerning the Reciprocal Promotion and Protection of Investments dated November 25, 2009, which entered into force on April 22, 2011 BP£ British Pound Claimant’s financial audit report prepared by Mr Ed Brook dated Brook I . December 2, 2016 Additional note to Claimant’s financial audit report prepared by Brook II Mr. Ed Brook dated October 14, 2017 Cl Claimant’s Statement of Claim dated December 2, 2016 CII Claimant’s Statement of Reply dated October 16, 2017 cm Claimant’s First Post-Hearing Brief dated March 29, 2018 CIV Claimant’s Second Post-Hearing Brief dated April 20, 2018 CV Claimant’s Statement on Costs dated May 4, 2018 Cengiz In§aat Sanayi Ve Ticaret A.§., in English, Cengiz Cengiz, Claimant Construction, Industry & Trade Company, a company duly organized and existing under the laws of the Republic of Turkey Cengiz Holding A.§., Claimant’s mother company, established in Cengiz Holding 1987, one of the leading construction companies in Turkey Cengiz Libya Construction and Investment Joint Stock Company, Cengiz Libya - Claimant’s Libyan subsidiary incorporated to invest in Libya Contracts The WAH and the Sebha Contracts Court International Court of Arbitration of the ICC Committee established by the Libyan Government to encourage the return of foreign investors to Libya, to handle negotiations 20th Committee with companies with ongoing governmental contracts, and to assess the damages caused by the Libyan Revolution Doc. BL-XX Exhibits attached to Mr. Legrand’s report Doc. C-XX Documentary evidence presented by the Claimant Doc. CL-XX Legal evidence presented by the Claimant Doc. FTI-XX Exhibits attached to Mr. Osborne’s reports Doc. H-XX Documentary evidence presented by the Parties during the Hearing Doc. JWC-XX Exhibits attached to Mr. Walker-Cousins Report 3 ICC Case 21537/ZF/AYZ Doc. MA-XX Exhibits to Mr. Ajaj’s witness statements Doc. PG-XX Exhibits attached to Mr. Garbutt’s report Documentary Doc. RE-XX evidence submitted with Respondent’s post-hearing briefs Doc. SDF-XX Documentary evidence presented by Respondent Doc. SD-XX Legal evidence presented by Respondent Draft Articles of the International Law Commission on Responsibility of States for Internationally Wrongful Acts adopted Draft ILC Articles by the International Law Commission at its fifty-third session, in 2001, and submitted to the General Assembly as a part of the Commission’s report covering the work of that session (A/56/10) EUR Euro FET Standard of fair and equitable treatment FPS Standard of full protection and security Garbutt I Claimant’s technical audit report prepared by Mr. Philip Garbutt, MIStructE, BEng, CEng, ENPC, MSOA dated December 2, 2016 Claimant’s second technical audit report prepared by Mr. Philip Garbutt II Garbutt, MIStructE, BEng, CEng, ENPC, MSOA dated October 16, 2017 Libyan Housing and Infrastructure Board, state entity, under the HIB Ministry of Housing and Utilities, in charge of large infrastructure and housing projects in Libya. Signatory of the Contracts and Protocols with Cengiz Libya Hearing Hearing held in Paris from January 15 to 19, 2018 HT Hearing transcript for the Hearing (days 1 to 5) ICC International Chamber of Commerce ICC Rules Arbitration Rules of the Court of the ICC, in force as of 1 January 2012 International Company for Development and Investment, ICDI Government entity with whom Claimant partnered to incorporate Cengiz Libya Legal Expenses Reasonable legal and other costs incurred by the Parties for the arbitration Legrand Claimant’s security report prepared by Mr. Franck Legrand dated October 16, 2017 The period Libyan Revolution between February and October 2011 and the events that took place therein Militia established by the NTC, which reported to the Libyan army Libya Shield Force and was composed of revolutionaries who had participated in the Libyan Revolution LYD • Libyan Dinar M Millions MFN Most-favoured nation treatment standard Witness Statement of Mr. Ajaj’s WSI Mr. Mahmoud Bashir Ajaj dated June 14, 2017 Mr. Ajaj’s WSHI Witness Statement of Mr. Mahmoud Bashir Ajaj dated February 4 ICC Case 21537/ZF/AYZ 28, 2017 Mr. Cetin’s WS Witness Statement of Mr. Nahit Qetin dated December 1, 2016 Mr. Cevik’s WS Witness Statement of Mr. Mert Qevik dated December 1, 2016 Mr. Ermurat’s WS Witness Statement of Mr. Ertan Ermurat dated October 12, 2017 Mr. Mafa’s WS Witness Statement of Mr. Omer Mafa dated December 1, 2016 NATO North Atlantic Treaty Organization Note on the appointment, duties and remuneration of Note administrative secretaries issued by the ICC on August 1,2012 NTC Libyan National Transitional Council Claimant’s report quantifying Cengiz’ losses prepared by Mr. Osborne I Chris Osborne from FTI Consulting dated December 2, 2016 Claimant’s second report quantifying Cengiz’ losses prepared by Osborne H Mr. Chris Osborne from FTI Consulting dated October 16, 2017 Para. Paragraph Parties Claimant and Respondent PO Procedural Order Projects WAH and Sebha Projects Contracts signed between Cengiz Libya and HIB on June 13, 2013 Protocols, 2013 in order to resume the Projects (Doc. C-16 and C-17, Doc. C-84, Protocols Doc. C-85) RI Respondent’s Statement of Defense dated August 22, 2017 RII Respondent’s Statement of Reply dated December 6, 2017 Rin Respondent’s First Post-Hearing Brief dated March 29, 2018 RIV Respondent’s Second Post-Hearing dated Brief April 20, 2018 RV Respondent’s Statement on Costs dated May 4, 2018 Respondent, Libya The State of Libya Supreme Security Committee, a security institution established by SSC decree of the Libyan Ministry of Interior Sebha Oasis capital city of the Sebha District in southwestern Libya Advance payment bond for the Sebha Project valued at EUR 26.3 Bond Sebha AP M Contract to design and construct infrastructure, entered into by Sebha Contract Cengiz Libya and HIB on November 8, 2009 Sebha Performance Letter of performance bond for the Sebha Project valued at EUR 4 Bond M Project derived from the Sebha Contract for the construction of Sebha Project infrastructure within an area of approximately 1,200 hectares in Sebha Respondent’s financial expert report prepared by Mr. Matthew D. I Shopp Shopp dated August 21, 2017 Respondent’s second financial expert report prepared by Mr. Shopp II Matthew D. Shopp dated December 6, 2017 Tunisian design firm, who acted as HIB’s representative on-site Studi and as technical consultant engineer for the WAH Project 5 ICC Case 21537/ZF/AYZ UPA Libyan Urban Planning Authority USD United States dollar WACC Weighted average cost of capital WAH District of Wadi-al-Hayat in Libya WAH AP Bond Advance payment bond for the WAH Project valued at EUR 42 M Contract to design and construct integrated facilities entered into WAH Contract by Cengiz Libya and HIB on December 30, 2008 WAH Performance Letter of performance bond for the WAH Project valued at EUR Bond 5,65 M Project derived from the WAH Contract for the construction of WAH Project infrastructure on an area of approximately 1,850 hectares in WAH Respondent’s security expert report prepared by Mr. Joseph Walker- Cousins Walker-Cousins dated December 6, 2017 Clause 5 of the BIT regarding compensation for losses in case of Clause War war, insurrection, civil disturbance or other similar events 6 ICC Case 21537/ZF/AYZ I. INTRODUCTION 1. GENERAL SUMMARY OF THE CASE 1. This is an investment arbitration dispute subject to the Rules of Arbitration of the International Chamber of Commerce, in force as from January 1, 2012 [“ICC Rules”]. The proceeding involves various alleged breaches by the State of Libya under the Agreement between the Republic of Turkey and the Great Socialist People’s Libyan Arab Jamahiriya - the State of Libya’s legal predecessor - concerning the Reciprocal Promotion and Protection of Investments dated November 25, 2009, which entered into force on April 22, 2011 [the “Treaty” or the “BIT”]. 2. Claimant, a Turkish construction company, through its Libyan subsidiary, entered into two contracts with the Libyan Housing and Infrastructure Board [“HIB”], which required Claimant to master plan, design and build integrated infrastructure in an area of more than 3,000 hectares in the Southern region of Libya. 3. Claimant alleges that it held an investment in Libya, protected under the Treaty, and that due to Libya’s breach of its obligations to provide full protection and security [“FPS”] and fair and equitable treatment [“FET”], and due to the State of Libya’s discriminatory measures regarding compensation of losses in times of war [“War Clause”], Claimant’s investment was completely destroyed and rendered worthless.