Summary

Source: icsid.worldbank.org

TABLE OF CONTENTS

I. PROCEDURAL HISTORY
II. FACTUAL BACKGROUND
A. Central entities and individuals involved in the dispute
(1) Grand Hotel
(2) The Privatization Agency of Kosovo
(3) Mabco Constructions, S.A
(4) Mabetex Group Switzerland
(5) Mr. Behgjet Pacolli
(6) Mr. Selim Pacolli
(7) Unio Commerce - UTC
(8) Mr. Zelqif Berisha
(9) NTSH Eurokoha-Reisen
(10) Mr. Remzi Ejupi
(11) Mr. Ahmet Shala
(12) Mr. Shkelzen Lluka
(13) Mr. Naser Osmani
B. Privatization and the tender of shares in the Grand Hotel
C. Agreement among Co-Owners
D. Transfer of capital
E. Purchase Agreement
F. Agreement of Good Understanding
H. Legal proceedings in Kosovo
III. STATEMENT OF CLAIM
A. Claimant's investment under the BIT and the Foreign Investment Law
(1) "Investment" within the meaning of the BIT
(2) "Investment" within the meaning of the Kosovo Foreign Investment Law
B. Claimant's investment under the ICSID Convention
IV. STATEMENT OF DEFENSE
A. The claim does not arise out of or relate to an investment in Kosovo
(1) Claimant never held any assets relating to the Grand Hotel
(2) Claimant's payment of EUR 4m does not constitute evidence of an investment on Claimant's part
(3) Claimant did not become an owner of shares by virtue of the AGU
(4) Claimant did not become an owner of shares by virtue of the Annex Agreement B. Claimant is not a foreign investor
(1) Claimant is not an investor
(2) Even if Claimant were an investor, it was not a foreign investor
C. Even If Claimant had made an investment in Kosovo, it does not constitute a "Protected Investment"
(1) The alleged investment was not made in accordance with domestic law
(2) The alleged investment would not contribute to the economic development of Kosovo
D. Kosovo has not given its consent to arbitrate the present dispute
(1) Claimant failed to present an "investment dispute," as required by both the BIT and the Foreign Investment Law
(2) Claimant failed to comply with the BIT's and Foreign Investment Law's election of remedies clause
(3) Claimant failed to satisfy the BIT's and the Foreign Investment Law's requirement of prior consultation
E. The Tribunal lacks jurisdiction ratione temporis
(1) Respondent's Position
(2) Claimant's Position
(3) The Tribunal's Analysis and Findings
F. The claim falls outside the scope and purpose of the ICSID Convention
(1) The claim is at variance with the purposes of the ICSID Convention
(2) Mr. Pacolli's involvement in this proceeding constitutes double-hatting and is procedurally unfair
G. Claimant has failed to establish a prima facie cause of action
(1) Respondent's Position
(2) Claimant's Position
(3) The Tribunal's Analysis and Findings
V. CONCLUSION
VI. COSTS
A. Claimant's Cost Submissions
B. Respondent's Cost Submissions
C. The Tribunal's Decision on Costs
VII. DECISION

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VII. DECISION

514. For the reasons set forth above,

(1) the Tribunal decides that Respondent's jurisdictional objections ratione temporis to Claimant's expropriation and fair and equitable claims under the BIT are upheld, but its jurisdictional objections to Claimant's denial of justice claim under the BIT is rejected.

(2) the Tribunal decides that Respondent's jurisdictional objections ratione temporis to Claimant's expropriation, fair and equitable claim and denial of justice claims under the Foreign Investment Law are rejected.

(3) the Tribunal by majority rejects Respondent's jurisdictional objections ratione materiae and ratione personae.

(4) the Tribunal rejects all of the Respondent's other jurisdictional objections.

(5) defers decision on allocation of costs to a later date.

Mr. Gianrocco Ferraro
Professor Dr. August Reinisch, Subject to the attached dissenting opinion
Professor George A. Bermann

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DISSENT ON JURISDICTION Professor Dr. August Reinisch

INTRODUCTION

1. I am afraid but I am unable to concur with my co-arbitrators' view that this Tribunal would have jurisdiction over the present dispute.

2. This is indeed a highly complex story of an attempt to make an investment in the tourism sector of the Kosovo through participating in the privatization of the Grand Hotel Prishtina. However, to consider that it actually amounted to an "investment" made by the Claimant in order to fall under the ratione materiae and ratione personae jurisdiction of an ICSID tribunal would just require too many leaps of faith.

3. While the story is indeed perplexingly strange and full of factual difficulties, as outlined in the majority's factual background,1 it is also a relatively simple contractual dispute concerning a share purchase agreed upon between private parties.

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WAS AN INVESTMENT MADE BY THE CLAIMANT?

42. I also have to part ways with the Tribunal's majority in regard to its conclusion "that, notwithstanding Mr. Pacolli's having very often used his own name rather than Mabco's, the investment was in fact Mabco's."64

43. Rather, the "doubt in the Tribunal's thinking that he was acting on these occasions in the name of Mabco"65 leads me to believe that it would be wrong to disregard all the documentary evidence we have before us and to rely on after-the-fact testimony of Claimant's witnesses, stating that everyone knew that "when Mr. Pacolli negotiated and signed agreements, he did so on behalf of the relevant entity within the Mabetex group, which in the construction and engineering sector would have been Mabco"66 and that such had been common practice in Kosovo.67

44. Therefore, I cannot follow the majority's determination "that, factually, Mr. Pacolli acted in his dealings with the KTA and the PAK, as well as with UTC and NTSH, in a representative capacity."68

45. In my view, looking at the documentary evidence on record there is not much that would support the assumption that "Mr. Pacolli acted in a representative capacity."

46. As already outlined above,69 in all contemporaneous documents it was Mr. Behgjet Pacolli and not Mabco, who acted in the attempt to participate in the Grand Hotel privatization. Had it really been Mabco that entered into the Agreement of Good Understanding70 it seems curious that it was nowhere mentioned and when court proceedings were brought it is strange that Mabco did not appear as plaintiff. Equally, it is surprising that when engaged in protracted communications with the PAK, trying to avert the impending withdrawal of shares, it was always Mr. Behgjet Pacolli and not Mabco who acted.

47. Given that Mr. Behgjet Pacolli is an experienced businessman one would expect him to be clear in his dealings when he is acting in his own name and when in the name of one of his companies.

48. To rely on an alleged practice in the Kosovo according to which everyone knew that "when Mr. Pacolli negotiated and signed agreements, he was understood as doing so on behalf of [one of his companies]"71 cannot suffice to absolve the Claimant of its burden of proof to establish that Mr. Pacolli actually negotiated and acted on its behalf.

49. We can all speculate about different business practices. It may equally well be that Mr.

Pacolli acted in his personal capacity because he was a well-known and successful businessman with whom an agreement was sought to invest in the Grand Hotel privatization, rather than with Mabco, S.A., a Swiss société anonyme with a share capital of 100.000,00 CHF.72

50. Such speculations cannot overcome Claimant's failure to establish that Mr. Pacolli's activities should in fact be attributed to Mabco.

51. That Mabco enters the scene in June 2012 is less surprising. The entry-into-force of the Kosovo-Switzerland BIT on 13 June 2012 certainly did not go unnoticed in legal circles.

52. It thus made strategic sense for Mr. Pacolli's lawyer to refer to Mr. Pacolli as "a legal representative of MABETEX GROUP -- working unit MABCO CONSTRUCTION S.A. headquartered in Lugano, Switzerland" and to threaten in regard to the PAK's decision on the withdrawal of shares "legal steps for the implementation of rights under legal procedures, the latter as provided for in international law, agreement on protection of foreign investments signed by Government of the Republic of Kosovo and Swiss Government."73

53. However, such re-interpretation of the factual record should be viewed as what it is: an impermissible attempt to overcome the jurisdictional obstacle for Mr. Pacolli, as a Swiss-Kosovo dual national, to have an ICSID tribunal hear his claims. Of course, also this is speculation.

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Footnotes omitted