Icsid Case No Arb/05/15
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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. IN THE PROCEEDING BETWEEN: WAGUIH ELIE GEORGE SlAG AND CLORINDA VECCHI (CLAIMANTS) AND THE ARAB REPUBLIC OF EGYPT (RESPONDENT) (ICSID Case No. ARB/05/15) AWARD Members of the Tribunal Mr David A R Williams ac, President Prof Michael Pryles, Arbitrator Prof Francisco Orrego Vicuna, Arbitrator Secretary of the Tribunal Ms Milanka Kostadinova Representing the Claimants Representing the Respondent Dr Ahmed Kamal Aboulmagd Mr Reginald R Smith Mr Hazim A Rizkana Mr Craig SMiles Helmy, Hamza & Partners Mr Kenneth R Fleuriet Baker & McKenzie International - Cairo King & Spalding LLP Mr Lawrence W Newman Baker & McKenzie LLP - New York H E Counsellor Milad Sidhom Boutros Mr Hussein M F Mostafa Mr Asser M A Harb State Law Suites Authority, Egypt Date of Dispatch to the Parties: June 1, 2009 TABLE OF CONTENTS Page I. INTRODUCTION – THE NATURE OF THE CLAIM 1 The Italy – Egypt BIT 2 Convention on the Settlement of Investment Disputes between States and 3 Nationals of Other States (“the ICSID Convention”) Egyptian Nationality Law 4 II. SUMMARY OF FACTS 5 Mr Waguih Elie George Siag – Background 5 Mrs Clorinda Vecchi – Background 6 The Property and the Project 6 The First Threat of Seizure by Egypt 7 Egypt’s Expropriation of the Property by Ministerial Decree 8 The First Court Decision 10 The Second Seizure of the Property by Egypt 11 The Second Court Decision 11 The Supreme Administrative Court’s Decision on the Merits 12 The Minister of Tourism’s New Resolution and the Administrative Court’s 13 Decision Egypt’s Unsuccessful Appeal to the Supreme Administrative Court 15 Seizures of the Property by the President and Prime Minister of Egypt 16 and the Transfer of the Property to Al-Sharq Gas Company A New Decision of the Administrative Court 16 Prime Ministerial Resolution No 799 17 The Sinai Litigation 17 III. PROCEDURAL HISTORY UP TO SEPTEMBER 2007 INCLUDING THE 17 DECISION ON JURISDICTION OF 11 APRIL 2007 Registration of the Request for Arbitration 17 Constitution of the Arbitral Tribunal and Commencement of the 18 Page Proceeding Written and Oral Procedure 19 Egypt’s Application for Bifurcation of the Merits Phase by First Hearing 21 Egypt’s Estoppel Arguments IV. EGYPT’S SEPTEMBER 2007 OBJECTION TO JURISDICTION BASED 23 ON MR SIAG’S ALLEGED BANKRUPTCY The Parties’ Submissions on Egypt’s Bankruptcy Application 23 Egypt’s Initial Application 23 Claimants’ Response 24 Egypt’s Further Submissions 25 Claimants’ Further Submissions 25 Procedural Order No. 5 25 Egypt’s Formal Application 27 Claimants’ Answer 28 Egypt’s Reply 29 Claimants’ Rejoinder 31 Claimants’ Reply on the Merits (as to the Bankruptcy Application) 33 Egypt’s Rejoinder on the Merits (as to the Bankruptcy Application) 34 Procedural Order No. 6 34 Egypt’s Further Submissions 35 Claimants’ Further Submissions 36 Egypt’s Further Submissions on the eve of the Hearing and Claimants’ Motion 36 to Strike The Hearing on 10 March 2008 Pursuant to Procedural Order No. 6 37 Egypt’s Oral Submissions as to Bankruptcy (on 10 March 2008) 37 Claimants’ Oral Submissions as to Bankruptcy (on 10 March 2008) 38 Procedural Order No. 7 39 Procedural Order No. 8 40 iii Page Egypt’s Post-Hearing Submissions (as to Bankruptcy) 40 Claimants’ Post-Hearing Submissions (as to Bankruptcy) 41 Discussion of Egypt’s Bankruptcy Application 41 Did (and Could) Egypt Contravene ICSID Rule 41? 41 What Sanctions Are Appropriate for Egypt’s Breach of Rule 41(1)? 48 The Merits of Egypt’s Bankruptcy Application 50 Is (or Was) Mr Siag Bankrupt? 50 V. EGYPT’S OCTOBER 2007 OBJECTION TO JURISDICTION BASED ON 53 MR SIAG’S LEBANESE NATIONALITY The Parties’ Submissions on Egypt’s “Lebanese Nationality” Application 53 Egypt’s Application 53 Egypt’s Counter-Memorial on the Merits (as to the Lebanese Nationality 54 Application) Claimants’ Answer (in Respect of Bankruptcy) 55 Claimants’ Response 55 Egypt’s Further Submissions Following Egypt’s “Further Enquiries” 56 Egypt’s Rejoinder on the Merits (as to the Lebanese Nationality Issue) 58 Procedural Order No. 6 (as to Application No. 2 – the Lebanese Nationality 59 Issue) Claimants’ Rejoinder 59 Egypt’s Further Submissions 61 Egypt’s Second Application to Bifurcate the Merits Phase 61 Claimants’ Response to the Second Application for Bifurcation 62 Claimants’ Further Submissions of 29 February 2008 as to Egypt’s 62 “Bankruptcy” and “Lebanese Nationality” Objections The Tribunal’s Ruling on Egypt’s Second Application for Bifurcation 66 Egypt’s Further Submissions on its Applications (in Breach of Procedural Order 66 No. 6) Further Evidence and Submissions on Egypt’s Further Jurisdictional Objections 67 iv Page at the Hearing on 10 March 2008 Egypt’s Oral Submissions on Lebanese Nationality 67 Claimants’ Oral Submissions on Lebanese Nationality 68 Procedural Order No. 7 70 Egypt’s Application to Add an Exhibit 71 Egypt’s Oral Closing Submissions 71 Procedural Order No. 8 72 Egypt’s Post-Hearing Submissions 72 Claimants’ Post-Hearing Submissions 73 Discussion of Egypt’s Lebanese Nationality Application 73 Was Egypt’s Application Capable of Being Waived? 73 Has Egypt Waived its Objection? 74 i) Egypt’s Alleged Lack of Access to Official Lebanese Files 75 ii) Egypt Only Made Enquiries in Lebanon in Preparation for the Merits Phase 77 iii) Egypt’s Post-Hearing Submissions 79 iv) The Tribunal’s Decision on Waiver in Respect of the Lebanese Nationality 80 Issue The Merits of Egypt’s “Lebanese Nationality” Application 81 The Burden of Proof 81 What Does Egypt Have to Prove? 82 The Standard of Proof 85 Did Mr Siag Obtain Lebanese Nationality by Fraud? 86 i) Lack of Signatures on Mr Siag’s Individual Record 87 ii) No Record of Mr Siag in Lebanon 88 iii) Mr Siag’s Intention Was to Avoid Military Service 93 iv) Mr Siag paid $5,000 to Mr Khouly to Help Obtain Lebanese Nationality 94 v) Mr Siag’s Individual Record Bears the False Inscription “Lebanese for More 95 v Page Than 10 Years” The Tribunal’s Decision on Fraud and the Lebanese Nationality Objection 96 Summary of the Tribunal’s Determinations on Jurisdiction 97 Why the Tribunal Did Not Suspend Proceedings 97 VI. LIABILITY 100 The Parties’ Submissions on Liability 100 Claimants’ Memorial on the Merits 100 Egypt’s Counter-Memorial on the Merits 103 Claimants’ Reply Memorial on the Merits 106 Egypt’s Rejoinder on the Merits 109 Claimants’ Oral Submissions on Liability at the Merits Hearing 112 Egypt’s Oral Submissions on Liability 113 Claimants’ Post-Hearing Submissions 114 Egypt’s Post-Hearing Submissions 115 Discussion on Liability 116 Expropriation 116 i) Public Purpose in the National Interest of the State 117 ii) Adequate and Fair Compensation 118 iii) According to Legal Principles 119 iv) A Non-Discriminatory Basis 120 v) Due Process of Law 120 Failure to Provide Full Protection 122 Fair and Equitable Treatment 123 i) Lack of Due Process / Denial of Justice 124 Unreasonable or Discriminatory Measures 125 Most Favoured Nation Treatment 126 vi Page Summary of Findings on Liability 127 Defences to Liability 127 Claimants Do Not Have Genuine Links to Italy 128 Claimants May Not Oppose Their Italian Nationality to Egypt 130 Estoppel 132 Claimants Illegally Owned Land in Taba 134 Summary of Tribunal’s Findings on Egypt’s Defences 135 VII. EGYPT’S CHALLENGE TO MRS VECCHI’S CLAIM 135 The Parties’ Early Submissions Regarding Mrs Vecchi’s Claim 135 Egypt’s Application for Discontinuance of Ms Vecchi’s Claim (in its 136 Rejoinder on the Merits) Procedural Order No. 6 136 Further Submissions of the Parties and the Decision of the Tribunal on 136 Egypt’s Request for the Discontinuance of Mrs Vecchi’s Claim The Parties’ Post-Hearing Submissions in Respect of Mrs Vecchi’s Claim 139 Findings of the Tribunal in Respect of Mrs Vecchi’s Claim 139 VIII. DAMAGES 139 Introduction 139 The Investment 140 The Parties’ Submissions on Damages 142 Claimants 142 Egypt 144 Principles Relevant to an Award of Compensation 146 The Basis to be Adopted by the Tribunal 148 The Expert Evidence on Quantum 150 The Evidence for the Claimants 150 Egypt’s Criticisms of the Claimants’ Calculation of Damages 151 vii Page Discussion 153 Discrete Damages – Construction Costs 159 Salaries and Benefits 160 Bank Loans 160 Legal Expenses 161 Interest 161 IX. COSTS 163 The Tribunal’s Directions as to Costs 163 The Claimants’ Submissions on Costs 164 Egypt’s Submissions on Costs 166 Relevant Principles as to Costs 168 Discussion 170 X. THE AWARD 172 Appendix 1: Chronology of the Primary Facts 177 (Separate Dissenting Opinion of Professor Francisco Orrego Vicuña pagination) viii I. INTRODUCTION – THE NATURE OF THE CLAIM 1. This case involves an investment dispute between Claimants, Mr Waguih Elie George Siag and Mrs Clorinda Vecchi, and Respondent, the Arab Republic of Egypt (“Egypt”). Mr Siag and his mother Ms Vecchi are natural citizens of Italy. As Claimants they bring this case under the ICSID Convention and the Agreement for the Promotion and Protection of Investments between the Republic of Italy and the Arab Republic of Egypt dated March 2, 1989 (hereinafter the “Italy – Egypt BIT” or “BIT”). Mrs Vecchi died on 16 October 2007. Her claim is now advanced by the executors of her estate.1 2. The Claimants are the principal investors in Touristic Investments and Hotels Management Company (SIAG) S.A.E. and Siag Taba Company (together “Siag”), companies incorporated under the laws of Egypt. In 1989, the Government of Egypt (the “Government” or “GOE”), acting through its Ministry of Tourism, sold a large parcel of oceanfront land on the Gulf of Aqaba on the Red Sea (the “Property”) to Touristic Investments and Hotels Management Company (SIAG) for the purpose of developing a tourist resort (the “Project”).