INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. IN THE PROCEEDINGS BETWEEN IOANNIS KARDASSOPOULOS and RON FUCHS (Claimants) and THE REPUBLIC OF GEORGIA (Respondent) (ICSID Case Nos. ARB/05/18 and ARB/07/15) AWARD Arbitral Tribunal Mr. L. Yves Fortier, C.C., O.Q., Q.C., President Professor Francisco Orrego Vicuña Professor Vaughan Lowe, Q.C. Secretary of the Tribunal Ms. Aïssatou Diop Assistant to the Tribunal Ms. Alison G. FitzGerald Representing the Claimant Representing the Respondent Ms. Karyl Nairn Ms. Claudia T. Salomon Mr. Timothy G. Nelson Mr. Matthew Saunders Mr. David Herlihy Ms. Kate Knox Ms. Jennifer M. Cabrera Ms. Kiera Gans SKADDEN, ARPS, SLATE, MEAGHER AND FLOM Mr. Theodore C. Jonas (UK) LLP / SKADDEN, ARPS, SLATE, MEAGHER Mr. Nick Gvinadze AND FLOM LLP Mr. Avto Svanidze DLA PIPER UK LLP / DLA PIPER LLP (US) / DLA PIPER GVINADZE & PARTNERS LLP Date of dispatch to the parties: March 3, 2010 TABLE OF CONTENTS PART I. PROCEDURE ................................................................................................... - 1 - A. Overview ............................................................................................................ - 1 - B. Registration of the Requests for Arbitration.................................................. - 3 - C. Constitution of the Tribunal and Commencement of the Proceeding ......... - 3 - D. The Jurisdictional Phase .................................................................................. - 4 - E. The Liability and Quantum Phase .................................................................. - 5 - 1. The Written Procedure ............................................................................ - 5 - a) Procedural Order No. 1 ............................................................... - 5 - b) Request for Adjournment of the Hearing.................................... - 6 - c) Procedural Order No. 2 ............................................................... - 7 - d) Procedural Order No. 3 ............................................................... - 7 - e) Procedural Order No. 4 ............................................................... - 8 - 2. The Oral Procedure ................................................................................ - 9 - 3. The Post-Hearing Procedure ................................................................ - 11 - F. The ECT and the BITs ................................................................................... - 11 - 1. The Arbitration Clauses ........................................................................ - 12 - 2. The Substantive Clauses ....................................................................... - 16 - G. The Parties’ Respective Prayers for Relief ................................................... - 18 - PART II. FACTUAL BACKGROUND ......................................................................... - 19 - A. Introduction ..................................................................................................... - 20 - B. The Joint Venture Agreement ....................................................................... - 23 - C. The Deed of Concession .................................................................................. - 30 - D. Work Performed by GTI................................................................................ - 35 - E. The Proposed Partnership between Tramex and Brown & Root .............. - 36 - F. AIOC and Negotiation of the PCOA ............................................................. - 46 - a Kardassopoulos / Fuchs v. Georgia G. The Creation of GIOC .................................................................................... - 52 - H. The Cancellation of GTI’s Rights .................................................................. - 54 - I. The Compensation Commission Process ...................................................... - 56 - PART III. SUMMARY OF THE PARTIES’ SUBMISSIONS ...................................... - 70 - A. The Claimants’ Case ....................................................................................... - 70 - B. The Respondent’s Case................................................................................... - 70 - PART IV. ISSUES TO BE DETERMINED .................................................................... - 71 - PART V. ANALYSIS AND FINDINGS ........................................................................ - 72 - A. Preliminary Matters ....................................................................................... - 72 - 1. The Law Applicable to the Merits ......................................................... - 73 - 2. Burden of Proof..................................................................................... - 76 - B. Jurisdiction & Equitable Prescription .......................................................... - 78 - 1. Jurisdiction Ratione Temporis under the Georgia / Greece BIT .......... - 79 - a) The Respondent’s Position ....................................................... - 79 - b) The Claimants’ Position ............................................................ - 79 - c) The Tribunal’s Determination................................................... - 80 - 2. Jurisdiction Ratione Temporis under the Georgia / Israel BIT ............ - 81 - a) The Respondent’s Position ....................................................... - 81 - b) The Claimants’ Position ............................................................ - 81 - c) The Tribunal’s Determination................................................... - 82 - 3. Time-Bar for Equitable Prescription .................................................... - 82 - a) The Respondent’s Position ....................................................... - 82 - b) The Claimants’ Position ............................................................ - 83 - c) The Tribunal’s Determination................................................... - 84 - C. Liability ............................................................................................................ - 87 - b Kardassopoulos / Fuchs v. Georgia 1. Attribution of SakNavtobi and/or Transneft’s Acts/Omissions to Georgia . - 87 - a) The Claimants’ Position ............................................................ - 87 - b) The Respondent’s Position ....................................................... - 89 - c) The Tribunal’s Determination................................................... - 89 - 2. The Scope of GTI’s Rights .................................................................... - 93 - a) The Respondent’s Position ....................................................... - 93 - b) The Claimants’ Position ............................................................ - 99 - c) The Tribunal’s Determination................................................. - 103 - 3. Was Mr. Kardassopoulos’ Investment in GTI Expropriated? ............ - 114 - a) The Claimant’s Position .......................................................... - 114 - b) The Respondent’s Position ..................................................... - 118 - c) The Tribunal’s Determination................................................. - 124 - 4. Was Mr. Fuchs Treated Unfairly and Inequitably? ............................ - 133 - a) The Claimant’s Position .......................................................... - 133 - b) The Respondent’s Position ..................................................... - 135 - c) The Tribunal’s Determination................................................. - 139 - D. Causation ....................................................................................................... - 146 - 1. The Respondent’s Position .................................................................. - 146 - 2. The Claimants’ Position ..................................................................... - 148 - 3. The Tribunal’s Determination ............................................................ - 150 - E. Quantum ........................................................................................................ - 152 - 1. The Effect of the Stabilization Clauses on Damages .......................... - 152 - a) The Claimants’ Position .......................................................... - 152 - b) The Respondent’s Position ..................................................... - 153 - c) The Tribunal’s Determination................................................. - 154 - c Kardassopoulos / Fuchs v. Georgia 2. The Applicable Standard of Compensation for Expropriation ........... - 157 - a) The Claimant’s Position .......................................................... - 157 - b) The Respondent’s Position ..................................................... - 159 - c) The Tribunal’s Determination................................................. - 161 - 3. The Applicable Standard of Compensation for Fair and Equitable Treatment ............................................................................................ - 166 - a) The Claimant’s Position .......................................................... - 166 - b) The Respondent’s Position ..................................................... - 168 - c) The Tribunal’s Determination................................................. - 169 - 4. The Appropriate Methodology for Valuing the Claimants’ Claims .... - 171 - a) The Claimants’ Position .......................................................... - 171