Content Join OGEMID
 
  • Linkedin
  • Twitter
  • Rss

Transnational Dispute Management

Skip navigation

Transnational Dispute Management

The network for international arbitration, mediation and ADR, international investment law and Transnational Dispute Management

Join OGEMID

Transnational Dispute Management

The network for international arbitration, mediation and ADR, international investment law and Transnational Dispute Management

  • Sign in
  • Subscribe
  • Home
  • Sign in
  • About About
    1. Home
    2. About
    3. About TDM
    4. About TDM
    5. Founding Editor T.W. Wälde
    6. T.W. Wälde
    7. Editorial team
    8. Editorial team
    9. Contributing Authors
    10. Contributing Authors
    11. Subscriptions
    12. Subscriptions
  • Journal Journal
    1. Home
    2. Journal
    3. Browse Issues
    4. Browse
    5. Articles by Category
    6. By Category
    7. Articles by Author
    8. By Author
    9. Advance publication
    10. Advance publication
    11. Specials
    12. Specials
    13. Search
    14. Search
    15. Book reviews
    16. Reviews
  • Legal & Regulatory docs. L & r docs
    1. Home
    2. Legal & Regulatory docs.
    3. L&R by Country
    4. L&R by Country
    5. L&R by Category
    6. L&R by Category
    7. L&R recent additions
    8. L&R recent additions
    9. Search
    10. Search
  • Audiovisual library AV library
    1. Home
    2. Audiovisual library
    3. Audiovisual Library
    4. Audiovisual Library
    5. TDM/OGEMID Interviews
    6. TDM/OGEMID Interviews
    7. Conference presentations
    8. Conference presentations
  • OGEMID OGEMID
    1. Home
    2. OGEMID
    3. About OGEMID
    4. About OGEMID
    5. Suggest a topic
    6. Suggest a topic
    7. Guest programme
    8. Guest programme
    9. Seminar programme
    10. Seminar programme
    11. Browse archive
    12. Browse archive
    13. Search
    14. Search
    15. Join
    16. Join
  • News & Events Events
    1. Home
    2. News & Events
    3. News
    4. News
    5. Events
    6. Events
  • Subscribe
Home > Legal & Regulatory docs.

Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v Republic of Kazakhstan - ICSID Case No. ARB/05/16 - Award - 29 July 2008

  • Sign in to download document
Country
  • Kazakhstan
  • Turkey
Year

2008

Summary

CHAPTER I. THE PARTIES AND THE BACKGROUND OF THE DISPUTE

1. Claimants in this arbitration are Rumeli Telekom A.S. ("Rumeli") and Telsim Mobil Telekomunikasyon Hizmetleri A.S. ("Telsim"), (collectively "Claimants"). Both Rumeli and Telsim are telecommunications companies, incorporated in Turkey as an "anonim sirket" (joint stock company). Both companies' address is. ... Claimants are represented in this arbitration by Mr. Hamid G. Gharavi and Ms. Brenda Horrigan, SALANS, 9 rue Boissy d'Anglas, 75008 Paris, France.

2. Respondent in this arbitration is the Republic of Kazakhstan ("Respondent," or the "Republic"). It is represented in this arbitration by Mr. Timur Issabekov, Director of the Department of International Law, Ministry of Justice of the Republic of Kazakhstan, and by Mr. David Warne, Mr. Gautam Bhattacharyya and Ms. Chloe J. Carswell, Reed Smith, Beaufort House, 15 St Botolph Street, London EC3A 7EE, United Kingdom. Respondent was initially represented by Mr. John Emmott, Michael Wilson & Partners, Ltd, 5th floor, 36 Samal-1 Almaty 050059, Republic of Kazakhstan and Ms. Azhar Kuzubayeva, Almira & Co LLP, 50 Long Acre, London WC2E 9JR, UK.

3. On May 16, 1998, Rumeli and Investel, a Kazakhstan closed joint stock company, entered into a Foundation Agreement for the creation of the joint venture KaR-Tel in the form of a Kazakhstan limited liability partnership, for the provision of mobile telecommunications services on the territory of the Republic.

4. At the creation of KaR-Tel, Rumeli owned 70% of KaR-Tel and Investel owned 30%.

The initial charter capital of KaR-Tel was 750,000 Tenge (equivalent to approximately USD 10,000 at the time).

5. Immediately after the execution of the Foundation Agreement, KaR-Tel prepared to participate in the auction for the second GSM 900 license issued in Kazakhstan (the "License"), held by the Ministry of Transportation and Telecommunications ("MTT") of the Republic.

6. The auction for the License took place on July 31, 1998 and KaR-Tel won the License with a bid of USD 67,500,000. The License Agreement between KaR-Tel and the MTT was signed on August 10, 1998. It set forth the conditions for the sale by the MTT to KaR-Tel of "the right to use the radio-frequency spectrum for the creation and operation of a GSM-standard communications network in the Republic of Kazakhstan" for a period of 15 years.

7. Around October 1998, KaR-Tel started to negotiate with the State Committee on Investment an agreement granting KaR-Tel investment incentives. On May 20, 1999, KaR-Tel and the Investment Committee executed Contract N° 0123-05-99 (the "Investment Contract"). The Investment Contract characterized the object of the investment activity as "the creation and exploration of digital cellular radiotelephone connection of the GSM (900) standard on the territory of the Republic of Kazakhstan." It granted KaR-Tel tax and other benefits. The term of the Investment Contract was set to expire on July 31, 2009.

8. On December 31, 2000, Telsim acquired 15% of the partnership from Rumeli and was officially registered as a participant in KaR-Tel on July 27, 2001. During this same period, Investel's participatory interest - which had increased from 30% to 40% in the spring of 1999 - was transferred to Telecom Invest, a separate Kazakhstan limited liability partnership.

9. Claimants allege to have undertaken important "investments" on the territory of the Republic by means of establishment of KaR-Tel, by providing know-how and marketing services in the field of telecommunications, by establishing a national administrative and commercial network and by providing extensive financing and guarantees to KaR-Tel, with the consequence that KaR-Tel became one of the leading GSM operators in the Republic.

10. According to Claimants, once KaR-Tel's success was assured, the local partner's shareholders, themselves Kazakhstan officials and/or members of the empire of the President of Kazakhstan, devised a scheme to orchestrate Claimants' expulsion from KaR-Tel in a definitive manner and to keep all of KaR-Tel for their sole benefit. It is Claimants' allegation that:

- the local partners exploited their political and personal ties with Respondent to obtain from the Investment Committee the termination of the Investment Contract;

- the local partners then alleged that Claimants were responsible for this termination and that the latter caused significant damages to KaR-Tel;

- the local partners called a general meeting of the shareholders of KaR-Tel without sending a notice to Claimants;

- at this purported general meeting, where Claimants could not have been present, it was unilaterally decided by the local partners, that, because of the harm caused by Claimants to KaR-Tel, Claimants' shareholding had to be compulsorily transferred to KaR-Tel to the final benefit of its remaining shareholders, i.e., the local partners;

- this decision to sell Claimants' 60% stake in KaR-Tel was taken in violation of Kazakh law and was irregularly confirmed by the Kazakh Judiciary;

- the Kazakh Judiciary set the value of the shares at a mere USD 3,000, whereas, less than a year later, the local partners (and other parties in interest) sold 100% of KaR-Tel to another investor (VimpelCom) for the sum of USD 350 million.

11. Therefore, Claimants invoke Respondent's collusion with the local partners and a violation of international law, encompassing, inter alia, Respondent's wrongful termination of the Investment Contract, its resulting denial of Claimants' right to challenge the termination, its eviction of Claimants from KaR-Tel through the Judiciary and its failure to grant Claimants adequate compensation.

12. According to Claimants, these actions, together with further acts and omissions detailed below, constitute breaches of Respondent's obligations under international law, under the Agreement between the Republic of Kazakhstan and the Republic of Turkey concerning the Reciprocal Promotion and Protection of Investments, dated May 1, 1992 (the "Bilateral Investment Treaty," or "BIT"), and under the Law of the Republic of Kazakhstan on Foreign Investments dated December 27, 1994 (the "Foreign Investment Law" or "FIL").

13. Claimants' allegations are strongly denied and disputed by Respondent.

...

V. COSTS

819. Finally, the Tribunal turns to costs. To obtain justice, Claimants had no option but to bring this arbitration forward and to incur the related costs. Although they have prevailed on the substance of the dispute, they have failed on a number of their allegations and the amount of damages awarded is less than the one claimed. On this basis, the Tribunal considers fair that each party bear 50% of the costs of the arbitration proceeding (advances to ICSID) and that Respondent be condemned to pay 50% of Claimants' legal costs and fees as detailed in Claimants' letter of January 25, 2008 (with appendices under tab 1 to 5), with the exception of the costs of the arbitration (lodging fee and advances to ICSID).

AWARD

1. Respondent breached its obligation to accord the investor the fair and equitable treatment imposed on Respondent by virtue of the Most Favourable Nation Clause contained in Article II(1) of the Bilateral Investment Treaty;

2. Respondent has expropriated Claimants' investment without complying with the conditions set forth in Article III(1) of the Bilateral Investment Treaty;

3. Respondent shall pay Claimants compensation in the amount of USD 125 million;

4. Respondent shall pay Claimants compound interest at a rate of 6-month average Libor plus 2 percent per year, compounded semi-annually, on the amount of USD 125 million from 30 October 2003 until the date of the payment of the Award;

5. Respondent shall pay 50% of Claimants' legal fees and costs as detailed in Claimants' letter of January 25, 2008 with details under tab 1 to 6;

6. Respondent shall pay Claimants compound interest on the Claimants' legal fees and as awarded under No. 5 at the rate indicated above at No. 4, from the date of this Award until the date of full payment;

7. All other claims are dismissed.

Stewart Boyd, Arbitrator
Marc Lalonde, Arbitrator
Bernard Hanotiau, President

To download this document you need to be a subscriber

Sign in

Forgot password?

Sign in

Subscribe

Fill in the registration form and answer a few simple questions to receive a quote.

Subscribe now

Documents missing? Documents to share? Let us know!

If you know of documents which are currently missing from our Legal & Regulatory database do let us know. You can send them directly to us for inclusion in the database, anonymously or otherwise.
Learn more here

Call for contributions

TDM Call for Papers: Sanctions and International Arbitration: Impact on Substantive and Procedural Issues

Ali Burney, Rinat Gareev, Kiran Nasir Gore, Dini Sejko, Prof. Joel Slawotsky, May Tai

  • Ali Burney
  • Rinat Gareev
  • Kiran Gore
  • Dr Dini Sejko
  • Prof. Joel Slawotsky
  • May Tai

TDM Call for Papers: National Courts as a Forum for the Resolution of Disputes under Article 26 Energy Charter Treaty

John P. Gaffney, Dr. iur Richard Happ,
Lucia Raimanova, Anna-Maria Tamminen, Dr. Catharine Titi

  • John P. Gaffney
  • Dr. iur Ricard Happ
  • Lucia Raimanova
  • Anna-Maria Tamminen
  • Dr. Catharine Titi

TDM Call for Papers: International Investment Arbitration - Environmental Protection and Climate Change Issues

Professor Dr A F M Maniruzzaman, Wendy J. Miles QC, Carla Lewis, Dr Stephen Minas

  • Professor Dr A F M Maniruzzaman
  • Wendy J. Miles QC
  • Carla Lewis
  • Dr Stephen Minas

TDM Call for Papers: The African Continental Free Trade Agreement (AfCFTA)

J. Chaisse, J. Górski, E. Laryea, M.M. Mbengue, and K. Olaoye

  • Prof. Julien Chaisse
  • Dr. Jedrzej Gorski
  • Prof. Emmanuel Laryea
  • Prof. Makane Moïse Mbengue
  • Kehinde Olaoye
  • More
  • Contribute

Advance publication

Consequences of Not Regulating Third-Party Funding in Commercial Arbitration in Ecuador

24 Mar 2023

D.F. Ibarra Villacís

  • D.F. Ibarra Villacís

Transnational Investment State Arbitration: A New Game-Changer for Global Climate Change Goals

20 Mar 2023

I.D. Valones

  • I.D. Valones

Summary of Young-OGEMID Symposium No. 14: "International Arbitration and International Commercial Courts: Competitive or Complementary?" (March 2022)

3 Mar 2023

E.S. Delgado

  • E.S. Delgado
  • More
  • Contribute

Stay connected

Sign up for our email alerts.

  • Issues
  • Advance publication
  • News
  • Linkedin
  • Twitter
  • RSS

Join the debate

Want to join OGEMID, the leading on-line discussion platform for international dispute resolution?

Simply fill in the registration form to start your trial membership.

Download the app

  1. App store
  2. Google play

The Transnational Dispute Management Journal (TDM, ISSN 1875-4120) and OGEMID listserv focus on recent developments in the area of (investment) arbitration and dispute management, regulation, treaties, judicial and arbitral cases, voluntary guidelines, tax and contracting. Read our Terms & Conditions here, and our Privacy Policy here.

About TDM

  • Terms & Conditions
  • Contribute
  • Subscriptions
  • Contact
  • Help

Other publications

  • Oil, Gas & Energy Law Intelligence (OGEL)

© 2004 - 2023. Published by MARIS.

  • Home
  • Contribute
  • Subscriptions
  • Contact
  • Help