Case report (free download)
Case Report by Puneeth Ganapathy, Editor Diego Luis Alonso Massa
The ICSID Tribunal dealt with claims made under the US-Egypt BIT relating to expropriation of investments, breach of fair & equitable treatment (‘FET’), breach of the full protection and security clause (‘FPS’) & breach of a Gas Supply Contract (‘GSPA’) (claimed as a breach of the treaty standards of Expropriation & FET and the Umbrella Clause). The GSPA was entered into between a company (EGM), of which Claimants were shareholders and an Egyptian public sector company (EGPC), comprising Officials of the Respondent State. EGM & EGPC had entered into the GSPA contract for the supply of Gas to EGM for onward sale primarily to Israeli customers. For this purpose, EGM had also made considerable tangible investments in the construction and establishment of a 192-kilometre-long Gas Pipeline.
Between 2008 and 2011, the Respondents engaged in certain measures that were alleged as breaches of the BIT by EGM, including revocation of a tax-free zone license and failure to protect the Gas Pipelines against 13 attacks by insurgents in the wake of the Arab Spring revolution. Further, the claimants also alleged that there were delays in supplies made to EGM by EGPC, in breach of the GSPA and this amounted to a breach of the Umbrella Clause and other obligations under the BIT. For this purpose alone, the Tribunal concluded that the actions of EGPC were attributable to the Respondent State under either of Articles 4,8 or 11 of the ILC Articles on the Responsibility of States. The tribunal held that it did have jurisdiction to consider the breach of the GSPA in so far as its breach rose to a breach of the BIT, by expropriation of the property interest created by the contract or breach of any legitimate expectations created by the contract. The remaining breaches of the BIT were directly in relation to the Respondent State and no issue on attribution arose.
With respect to the revocation of the tax-free zone license, the tribunal agreed with Claimants’ argument that the license itself amounted to an investment under the BIT. The tribunal also considered the importance of the tax-free zone status to the economic structure of EGM’s investments and activities. The tribunal thereafter found that the revocation of the license by the Respondent amounted to an expropriation of the same. With respect to the attacks on the Gas pipelines, the Tribunal found that the Respondent had failed to comply with the FPS obligations from the 5th attack, until the last attack, since the Respondent had a duty to take protective measures after the first few unforeseen attacks. Finally, with respect to the delays in supply under GSPA, the Tribunal found that only for a particular period from 2012 (following the termination of the GSPA), could the breach of the GSPA rise to the level of an international delict or breach of the treaty. It found, being persuaded by an ICC tribunal’s award on the same facts on a separate claim filed under GSPA that the GSPA had been unlawfully terminated by the EGPC (whose actions had already been attributed to the Respondent State). Therefore, the tribunal concluded that there was an expropriation of the contractual/property rights under the GSPA. Accordingly, the Tribunal found the Respondent liable for first, an expropriation of (i) the tax-free zone license (only up to the year 2025) & (ii) the rights under the GSPA (only from the unlawful termination of the GSPA) and second, for the failure to protect and secure the investment of the Claimants (from the 5th to the 13th Attack on the pipelines).
Attribution, Expropriation, Breach of Full Protection and Security Obligation.
Case report provided by International Arbitration Case Law (IACL)