Friday, September 9, 2011

Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (ICSID Case No. ARB/84/3), Decision on Jurisdiction, 14 April 1988

Published in: Decision on Jurisdiction and Dissenting Opinion of April 14, 1988, 16 Y.B. Com. Arb. 28 (1991) (excerpts); 3 ICSID Rep. 131 (1995); French translation of English original in 121 Journal du droit international 220 (1994) (excerpts).

Decision on Jurisdiction, 27 November 1985
Decision on Jurisdiction, 14 April 1988
Arbitrators: Eduardo Jirnenez de Arechaga (Uruguay), chairman;
Mohamed Amin El Mahdi (Egypt) (dissenting, decisio
of 14 April 1988); Robert F. Pietrowski, Jr. (US)
Parties: Claimant: Souchern Pacific Properties (Middle East) L
and Southern Pacific Properties Ltd (Hong Kong)
Defendant: Areh Republic of Egypt
Place of arbitration: Washington, DC, US
Published in: Unpublished
Subject matters: - consent to icsro in investment law
-agreement in writing as prescribed by Washington
Convention, Am. 26
-applicable law to decision on jurisdiction
- relationship Washington Convention to investment
The facts of this case are set out in more detail in Yearbook IX (1984) pp. 11
On 23 September 1974, "Heads of Agreement" were executed concer
a tourist village on the Pyramids Plateau (the Pyramid Oasis project) a
16 ~ ~com~mA.& '" ~XVI (I b ~ ~ -- -
tourist resort at Ras-El-Hekma on the Mediterranean coast in Egypt.
parties to this agreement were SPP, the Government of Egypt - represented by
its Minister of Tourism - and ECOM (Egyptian Geneml Organization for
O U ~aSnd~ Ho tels), a public sector enterprise under the Minister of Tourism.
The Heads of Agreement, by its own terms, war entered into in accordance
h cenain Egyptian kws, including Law No. 43 of 1974 Concerning the
nvestment of Arab and Foreign Funds and the Free Zone.
The Heads of Agreement was followed on 12 December 1974 by an
reement for the Development of Two International Tourist Projects in
pt. This second agreement was concluded only between SPP and EGOTH.
awever, beneath the signatures of their representatives, the words *approved,
greed and ratified by the Minister of Tourism" appeared as did the signature
d the seal of the Minister.
The Heads of Agreement did not contain an arbitration clause. The
ecember Agreement contained an arbitration clause.
On 12 April 1975, the Board of Directors of the General Organization for
Investment of Arab Capital and Tax Free Zones approved the application for
the establishment of a combined tourist company by ECOTH and SPP for the
development of the tourist areas at the Pyramids and Ras-El-Hekma sites.
On 22 May 1975, the President of Egypt issued Decree No. 475 of 1975 "to
pecify the use of the lands on Pyramids Site and Ras-El-Hekma Site. . . for
Construction work began at the Pyramids site in July 1977. In late 1977,
position to the Pyramid Oasis project developed in the Egyptian Pcople's
ssembly on environmental and archeological grounds.
By a Decree of 27 May 1978, the Minister of Culture declared the Pyramids
area to be public propeq. On 28 May 1978, the General Organization for
Investments issued a resolution in which it decided "to drop its former issued
agreement . . . concerning the Pyramids plateau". On 19 June 1978, the
Presidential Decree No. 267 cancelled Decree No. 475, and the area was
eventually declared "area of public interest" by the Prime Minister of Egypt on
On 7 December 1978, SPP initiated ICC arbitration proceedings against both
the Egyptian State and E C O ~E.g ypt objected to the jurisdiction of the
arbitrators, argning that it was not a party to the December agreement which
contained the arbitration clause.
By an award dated 16 February 1983, made in Paris, the arbitrators held
that Egypt was a parry to the December ac,reement and ordered E g p t to pay
carbookcomm. Arb'n XVI(1991) 17
SPP US$12,500,000 as damages. This ICC award is reproduced in Yearbook
(1984) pp. 111-124.
On 28 March 1983, Egypt sought to have the award set aside. On 12 Jul
1984, the Coun of Appeal of Paris granted Egypt's petition and annulled t
award essentially on the ground that Egypt was not a party to the arbitrati
clause. This decision is reproduced in Yearbook X (1985) pp. 113-122. ,.
On its pan, SPP sought enforcement of the award, inter alia, in England an
the Netherlands. It failed in England where the coun refused to freeze th
assets of a friendly foreign State when enforcement proceedings were adjourne
as reported in the excerpt reported in Yearbook X (1985) pp. 504-508 (UK
17). SPP was more successful in the Netherlands, where the President of t
District Court of Amsterdam granted leave for enforcement, holding th
Egypt was a parry to the arbitration clause. The President's decision
reproduced in Yearbook X (1985) pp. 487-490 (Neth. no. 10). By she
coincidence, the enforcement decision was rendered on 12 July 1984, i.e., o
exactly the same day as the French annulment decision. SPP desisted fro
funher proceedings in the Netherlands.
On 6 January 1987, the French Supreme Coun rejected SPP'S recou
against the annulment decision of the Court of Appeal of Paris. This decis
is reported in Yearbook XI11 (1988) pp. 152-155.
By a letter to the Minister of Tourism dated 15 August 1983, i.e., after
ICC award had been rendered and before the annulment or the enforc
proceedings had led to a result, SPP affirmed its reliance on the i c c awar
'~]ecognizing that your Government has taken the position that the
award was rendered without a jurisdictional basis, we hereby notify
that we accept and reserve the oppormnity of availing ourselves of
uncontestable jurisdiction of [ICSID], which is open to us as a result of
No. 43 of 1974, An. 8 of which provides that investment disputes ma
settled by iCs1D arbitration."
On 24 August 1984, SPP filed a request for ICSID arbitation. Egypt conteste
the Centre's competence to hear the case. Hearings were held at The Ha
The Netherlands, while the seat of the arbitration was agreed to be Washing
On 27 November 1985, the arbitrators rendered a first decision on
preliminary question of the jurisdiction of ICSID. They rejected some of Egy
objections to their jurisdiction, and stayed the proceedings on Egy
remaining objections 'until the proceedings in the French courts have fin
18 ~ ~com~m~ ~.b 'm~, , (1 b ~
olved the question of whether the Parries agreed to submit their dispute to
e jurisdiction of [ice]".
~CSIDa rbitration was resumed on the preliminary question of jurisdiction
rthe French Supreme Court, on 6 January 1987, affirmed the decision of the
of Appeal of Paris, holding that the icc award of 16 February 1983 was
slid because Egypt had not consented to submit the dispute to ICC
By their second decision on jurisdiction, dated 14 April 1988, the
mtors rejected Egypt's further objections.
Excerpts of the two decisioxs are reported herebelow.
cision on Jurisdiction, 27No~embe1r9 85
The Tribunal will now proceed to the consideration of its competence
respect to the present dispute. The general rules which determine the
sdiction of the Centre, and hence the competence of the Tribunal, are laid
n in An. 25 of the Convention on the Settlement of Investment Disputes
een States and Nationals of Other States (hereinafter called 'the ICSID
ntion' or 'the Convention'). These rules prescribe three prerequisites far
risdicrion of the Centre: The parries to the dispute musr be, on the one
, a 'Contracting Stare', i.e., a parry to the Convention, or a constiruent
division or agency of a Contracting State which has been designated to the
re by the Contracting State, and, on the other hand, a national of another
tracring State. Art. 25 defines the term 'national of another Contracting
e' to include 'any juridical person which had the narionaliry of a
tracting State other than the State parry to the dispute on the date on which
parties consented to submit such dispute to conciliation or arbitration'.
dispute itself musr be a legal one 'arising directly out of an investment'.
ally, the parties musr have consented 'in writing' to submit the dispute to the
atre. Unless the Parties have conferred jurisdiction on the Centre in
ordance with An. 25, the Tribunal lacks competence to hear the present
IVhe Parries ... disagree ... on the question of whether they have
ented in writing to submit the present dispute to the jurisdiction of the
re. The Claimants contend that Egypt gave advance consent to the
re's jurisdiction when it enacted Law No. 43 in 1974, and that their own
Comm. Arb'n XVI (1991) 19
consent was expressed in the letter from SPP(ME)'MS anaging Director
Egypt's Minister of Tourism, dared 15 August 1983, and again by the act
filing their request in the present case.
[3] "The consent of the parties to the dispute is the fundamental condition
the jurisdiction of ICSID. The Preamble of the Convention declares that:
'. . . no Contracting State shall by the mere fact of its ratificati
acceptance or approval of this Convention and without its consent
deemed to be under any obligation to submit any parricular dispute t
conciliation or arbitration.'
In the same vein, the Report of the Executive Directors on the Conventio
asserts that 'consent of the parties is the cornerstone of the jurisdiction oft
[4] "The Convention does not prescribe any particular form for the conse
required to establish the Centre's jurisdiction, other than thar it bc 'in writi
The consent need not be contained in a single written instrument, as made c
in the Report of the Executive Direcrors, which states:
'Nor does the Convention require that consent of both parties
expressed in asingle instrument. Thus, a host State might in its invesm
promotion legislation offer to submit disputes arising our of certain cla
of investments to the jurisdiction of the Centre, and theinvestor might
his consent by accepting the offer in writing.'
[5] 'Ascertaining that consent exists is a task that this Tribunal must appr
with great care. In 2 consultation submitted by the Respondent, dated 1
1985, it was argued that in this case the investment law itself does not const,
a written consent within the meaning of Art. 25, and consequently that
Convention is not applicable. However, in the oral proceedings, Respond
stated that it did not deny the theoretical possibility that a Conrracring St
might incorporate an advance consent to the jurisdiction of the Centre in
investment promorion legislation.
[6] "Egypt's objections to the Centre's jurisdiction are based on th
grounds: first, that theclaimants themselves have not consented to the Cen
jurisdiction; second, that Law No. 43 is not applicable in the present case;
third, that, even if Law No. 43 were applicable, Art. 8 thereof would not su
to establish Egypt's consent to the Centre's jurisdiction. The Tribunal
now consider these objections seriatim.
171 'Egypt maintains as its first objection that the Claimants' pursuit of an
20 Yearbook Cornrn. Aib'n XVI (
dy has in effect rendered their alleged consent to ICSID jurisdiction
d on the language of Art. 26 of the ICSID
ntian, which provides, in pertinent part:
nsent of the parties to arbitration under this Convention shall, unless
erwisc stated, be deemed consent to such arbitration to the exclusion of
From a purely syntactical point of view, Art. 26 does not say that consent
e Centre's jurisdiction will be vitiated if the consenting party does not
ude all other remedies. Rather, it is the other way around: Art. 26 says that
sent to I a l D jurisdiction, unless otherwise stated, shall be deemed to
ude other remedies. Thus, failure to waive other remedies does not impair
sent to ICSlD jurisdiction. Further, the proviso 'unless otherwise stared'
ow a party to consent to icsln jurisdiction without waiving other
ethod of settlement agreed to by the parties
t to the terms of any applicable bilateral treaty
een Egypt and the State of which the investor is a nationd; and resolution
n the framework of the ICsiD Convention if the Convention is applicsble.
Law No. 43 does not by itself establish IcsID
e agreement, argues that the three remedies
of Law No. 43 are mutually exclusive.
agrees with this interprctatian of Law No. 43.
both an ICC remedy and an ICSID remedy. So
d in an effort to obtain that remedy. Therefore, the Tribunal finds that
kcomrn. ~ r b 'XnV I (1991) 21
the Claimants' pursuit of alternative remedies is not inconsistent with Law
[I21 "Egypt also contends that claimants' consent to ICSID jurisd
invalid because it contravenes general principles of inre
~rejudiceo f mother. According to Egypt, the self-contradiction in th
case results from the Claimants' concomitant pursuit of both an ICC remed
and an tcsio remedy; the damage results from the fact that Egypt must defen
itself in two different proceedings, and could he subject to duplicate awar
[I31 "It is true that international tribunals have on occasion applied rh
principle of estoppel. However, this principle has no application in the p
case to the of the Claimants' consent to jurisdiction. Thcrc is in
case no inconsistency in pursuing alternative remedies, nor does it appear to
Tribunal that the Claimants, in so doing, are in any way acting contrary to go
faith. The Claimants are [lying to find a competent forum in which
adjudicate their claim for compensation for the expropriation of
Egypt has argued that whatever rights may have been conferred upon
Claimants by Law No. 43 were extinguished when approval of the Py
Oasis project was withdrawn by the General Organization for Inves
No. 43 which provides:
approved by the Board of Directors of the General Authority fq
Investment and Free Zones.'
No. 43, the withdrawal of such approval necessarily entails inapplica
the law.
[I51 "According to Egyptian law, however, the decisions of the Ge
Organization for Investment concerning the approval of projects are final.
23 of the Decree No. 375, which implemented Law No. 43, provides:
22 Yearbook Comm. Aib'n XVI (I
he decision of the Board of Directors shall be considered final as to
plications submitted to the Authority.. . .'
are only mio exceptions to this rule of finality. Art. 27 of Law No. 43
. . Such approval shall lapse if the investor shall fail to take serious steps
carry out the project within six months of approval, unless the Board
all grant renewed approval for such further period as it shall deem fit.'
a. 24 of Decree No. 375 provides:
. Any failure of a project to abide by the conditions and objectives of
u approval shall be submitted to the Board of Directors.'
Consequently, the General Organization for Investment has no
erence to reconsider a previous approval of a project, unless one of the
ons provided for in Art. 23 of Law No. 43 or Art. 24 of Decree No. 375
icable. Nor does the General Organization for Investment have
tence to alter or infringe any acquired right that an approved projecr has
efit from Law No. 43. This conclusion is confirmed by the terms of Art.
aw No. 43, which provides:
espective of the nationality or domicile of their owners, projects in the
rab Republic of Egypt approved under the provisions of this Law shall
joy the guarantees and privileges set forth in this Law.. . .'
ecision of the General Organization for Investment of 25 May 1978,
ore exceeded the capacity of that authority and has no juridical effect, by
as to thelegal status of an approved projecr.
'In any event, the same conclusion results from general principles of law.
'rhour going into the question of the autonomy of an arbitration clause,
unal notes chat Egypt did not repeal Law No. 43 before the Claimants
y invoked 1cs1D jurisdiction, and indeed has still not repealed it. If Law
3 contained an offer by Egypt to accept ICSID jurisdiction prior to
ellation of the Pyramids Oasis projecr, that offer did not terminate as a
It of the withdrawal of the approval of the project. For cancellation of the
did not alter the fact that an investment had been made under Law No.
ccordingly, the Tribunal finds that Law No. 43 is applicable to the
tment dispute in the present case.
kComm. Arb'nXVI(1991) 23
[IS] "Another objection to the jurisdiction of the Centre re1
applicability of Law No. 43 which has been raised by Egypt is that Arr
Law No. 43, on which the Claimants rely to establish jurisdiction, is
applicable to the present dispute. An. 8 begins with the phrase:
'Investment disputes in respect of the implementation of the provision
this Law shall besenled.. . .'
Egypt construes this phrase to restrict the application of Art. 8 to
concerning the non-performance of obligations under Law No. 43, as
from disputes involving non-performance of obligations under a contrac
support of irs consmcuon of Art. 8, Egypt cites the 12 July 1984 Decis'
the Paris Court of Appeals, wherein the Court said that Art. 8 [origi
' . . only concerns disputes regarding the investment and
implementation of the provisions of the Law, not of this or that cant
[I91 "The Tribunal has some difficulty in accepting the above distinctio
applying to all contracts and agreements, even those entered into by
Government itself. However, it is not necessaly, for the purposes of the pres
decision, to address this question, since Egypt's objection may be simp,
answered by a recapitulation of certain facts, established earlier.. . ,namely:
(a) The Government of Egypt was a party to the Heads of Agreement
September 1974, the preamble of which stated that it was concluded
accordance with Law No. 43.
(b) The Heads of Agreement provided (i) for the incorporation of a jo
venture between EGOTH and SPP; (ii) that Egpt would secure the tideproperty
and possession of land required for the projects; and (iii) that
Government and EGom would transfer the right of usufruct to the j
(c) On ZZ May 1975, Presidential Decree No. 475 specified the use of
lands on Pyramids site for tourist purposes and authorized EGOTH either al
or with one of the companies in which it was in partnership to develop and
this site.
(d) The right of usufruct was later irrevocably transferred to the joint ve
incorporated between EGOTK and SPP(ME).
(e) This right of usufruct was expropriated by the Decree of the Minis
Culture, on 27 May 1978, for reasons of public utility.
24 ~ = . ~ cbn~mkm~ . ~ bX'V"I
19 June 1978, Presidential Decree No. 475 of 1975 was cancelled.
has bcen produced in the proceedings that monetary
ensation for the alleged expropriation of the Claimants' investment has
ffered or even suggested.
n view of these facts, it is the Tribunal's opinion that, in the present
alleged breach by the Government of Egypt of the contmctual
ns emanating from the Heads of Agreement constitutes at the same
rezch of a legal provision enunciated in Art. 7 of Law No. 43, which the
ent is bound to implement and respect. Art. 7 provides that:
rolects may not be nationalized or confiscated. The assets of such
ojects cannot be seized, blocked, confiscated or sequestered except by
this respect it is quite clear that expropriation, the legitimacy of
or being contested if not accompanied by fair compensation, amounts
iscation, which is prohibited by Law No. 43. The present dispute,
ithin the scope of An. 8, since it concerns 'the implementation of the
s of this law', namely, the protection from any measure of, or
g to, nationalization or confiscation.
gypt's third major objection to jurisdiction in this case focuses on the
effect of Law No. 43. Epypt argues that, even if Law No. 43 applies
esenr investment dispute, An. 8 is not self-executing and therefore
nfer a right to an ICSID remedy without a separate implementing
t between the Government of Egypt and the foreign investor. An. 8
tment disputes in respect of the implementation of the provisions of
aw shall be settled in a manner to be agreed upon with the investor,
ithin the framework of the agreements in force between the Arab
blic of Egypt and the investor's home country, or within the
work of the Convention for the Settlement of Investment Disputes
een the State and the nationals of other countries to which Egypt has
ered by virtue of Law No. 90 of 1971, where such Convention applies.
Disputes may be settled through arbitration. An arbitration board
be constiturcd, comprising a member on behalf of each disputing
and a third member acting as chairman to be jointly named by the
rwo members. Failing agreement on the nomination of the third
ember within thirty days of the appointment of the second member, the
&man shall be chosen, at the request of either pany, by the Supreme
mm. Arb'n XVI(1991) 25
Council of Judicial Bodies from among counsellors of the judiciary in
Arab Republic of Egypt.. . .'
(. . . .)
[23] "If, as the Claimants contend, Law No. 43 confers a right on forei
investors to invoke ICSID jurisdiction in cases where no other form of dispu
resolution has been agreed to, the Claimants are entitled to maintain their ca
on the merits against E g p t before this Tribunal. If, on the other hand, La
No. 43 does no more than specify the various options which are available
foreign invcstors foruse in investment agreements, as argued by Egypt, then t
Tribunal lacks competence to hear the present case.
[24] "Thus, the determinative question as to the Tribunal's competence in t
present case is the following: Does Law No. 43 constitute a self-executing of
by Egypt to accept the Centre's jurisdiction with respect to the present dispu
This question is an important one, but it is a question that the Tribunal does no
reach today, for at the threshold it encounters another question, to
Whether the Parties have agreed on some other form of dispute resolution
they did, then even on the Claimants' theory of the case, this Tribunal is
competent with respect to the present dispute.
[25] "As the Claimants, themselves, have recognized:
'. . . a prerequisite to the submission of an investment dispute between
Government and a foreign investor to ICSID arbiuation i5 that the par
failed to agree upon another means of dispute resolution.'
Consequently, the question of whether the Parties have agreed on anot
method of dispute resolution is a questionprealabie to a finding of jurisdictl
by this Tribunal. In other words, before pronouncing on whether or not th
is consent to tcslD jurisdiction in the present case it must be established that t
parties have not effectively agreed upon another 'manner' of setding th
investment dispute.
[26] "The existence or non-existence of a compromissory clause binding t
parties to rcc arbitration is a mixed question of fact and law that require
judicial decision. This type of question is described in continental legal syste
as one of 'qualifcarion juridique der fairs'. This qualification cannot be affec
by the Claimants'statements, made duringthe course of ~he~roceedingtso,
effect that, upon a finding by this Tribunal of jurisdiction, they are prepare
suspend their appeal to the Court of Cassation or stipulate that they
abandon any ICC remedy.
[27] "The question of whether the Parties have agreed on another method o
26 ~ ~comm.~ ~ ~ bX~'V"I ( 159b1 ~
resolution is one which this Tribunal, as judge of its own jurisdiction,
nainly has competence to resolve. However, the same question is also sub
dice in another forum, where the proceedings involve thesame Parties and the
e dispute. The ICC tribunal has already answered this question in the
marive, holding that Egypt and the Claimants agreed to resolve any
utes by ICC arbitration. The Paris Coun of Appeals disagreed, but its
sion has been appealed m the Court of Cassation, which will pronounce the
answer of the French judiciary on the matter.
-Thus, we are confronted with the possibility that the above-referenced
ion preaiable in the present case may be answered differently by two
ely separate and independent tribunals. In this connection, the Tribunal
s that both Parties arc advancing inconsistent contentions before this
unal and before the French courts. Thus, the possibility arises that
urrent jurisdiction might be exercised with respect to the same Parties, the
e facts and the same cause of action by two different arbitral tribunals.
"While the concurrent pursuit of a remedy in different jurisdictions
t be justified to protect legitimate interests of a claimant, it nevenhcless
s cenain practical problems of international judicial administration, since
nvites a clash between competing cxerciscs of jurisdiction. This may result,
t only in the concurrent exercise of jurisdiction by different tribunals, but
o in a tribunal declining jurisdiction on the assumption, which later proves
did, that another tribunal was thc competent one to deal with the case.
] 'When the jurisdictions of two unrelated and independent tribunals
nd to the same dispute, there is no of international law which prevents
er tribunal from exercising its jurisdiction. However, in the interest of
ernational judicial order, either of the tribunals in its discretion and as a
tter of comity, decides to stay the exercise of its jurisdiction pending a
cision by the other tribunal.
11 "The law and the couns of the country where a tribunal sits are gcneially
ognized as the proper law and the proper courts to pronounce on the
lidity and scope rarioneperronae of an arbitration clause. Thus, establishing
at arbitration should take place in Paris, those who concluded or approved
e December Agreement subjected themselves by their own accord to French
and French courts for the determination of the validity and the scope
nepersonae of the icc arbitration clause.
I "Moreover, if the present proceedings on jurisdiction were stayed until
ch time as the auestion of ICC iurisdiction has becn finally resolved bv the
ench courts, such a stay would not appear to seriously disadvantage either
"Every coun has inherent powers to stay proceedings when justice so

icipal law should be treated as a 'fact' is not helpful. The Parties are in
damental disagreement as to what Art. 8 means and the Tribunal therefore
interpret An. 8 and determineits legal effect in relation ro the Washington
] sNor can the Tribunal accept the Claimants' contention that An. 8
d be interpreted by application of rules of treaty interpretation. Unlike a
Law No. 43 is not the result of negotiations between two or more States,
thcr the result of a unilateral act by a single State.
"While Epypt's interpretation of its own legislation is unquestionably
tled to considerable weight, it cannot control the Tribunal's decision as to
competence. The jurisprudence of the Permanent Coun of
onal Justice and the International Coun of Justice makcs clear that a
Ign State's inrelpretarion of its own unilateral consent to the jurisdiction
an international tribunal is nor binding on the tribunal or determinative of
dictional issues. (The Electricity Company of S o f ~ and BulgaM
iminary Objection), P.C.1.J. Se& A/B, No. 77, p. 64 (1939); Aegean Sea
inental Shcif; Judgment, I.C.J. Reponr 1978, p. 3.) Indeed, to conclude
ise would contravene An. 41(1) of the Washington Convention, which
e Tribunal shall be the judge of its own competence.'
"Moreover, the jurisdictional issue in this case involves more than
rpretatian of municipal legislation. The issue is whether certain unilaterally
ted legislation has created an international obligation under a mulrilarcral
ry. Resolution of this issue involves both statutor). interpretation and
ty interpretation. Also, to the extent that An. 8 is alleged to be a unilateral
aration of acceptance by a national of another Contracting Stare, the
bunal must also consider certain aspects of international law governing
ateral juridical acts. This is a subject that has received considerable
ntion in the jurisprudence of both the Permanent Coun of International
rice and the International Coun of Justice in connection with declamtions
er the so-called 'Optional Clause' of the Courts' statures. As the
ernational Court of Justice observed in its judgment on jurisdiction in the
iary and P~mmiiirnryA ctivities in and Againrt Nicamgua case (quoting
its earlier judgment on jurisdiction in the Nudear Tests cases):
s well recognized that declarations made by way of unilateral acts,
cerning legal or factual situations, may have the effect of creating legal
lgations. Declarations of this kind may be, and often are, very specific.
When it is the intention of the State making the declaration that it sho
become bound according to its terms, that intention confers on
declaration the character of a legal underraking, the Sure being thenccf
legally required to follow a course of conduct consistent with
declaration.' (I.C.J. Reports 1984, p. 418.)
Thus, in deciding whether in the circumsunces of the present case Law No
constitutes consent to the Centre's jurisdiction, the Tribunal will apply gene
principles of statutory interpretation taking into consideration, wh
appropriate, relevant rules of treaty interpretation and principles
international law applicable to unilateral declarations."
II. Jurisdiction
[40] "The Tribunal will now turn to An. 8 of Law No. 43 concerning t
Investment of Arab and Foreign Funds and the Free Zones, which is t
instrument upon which the Claimants rely to establish Egypt's consent to t
Centre's jurisdiction in the present case.
[41] "The Convention does not prescribe the form of the consent required t
establish the Centre's jurisdiction except to say that it must bc 'in writing
However, the drafters of the Convention anticipated that a State might give i
consent to the Centre's jurisdiction in advance through investment legislatio
as explicitly noted in the Report of the Executive Directors that accompani
the Convention:
'. . . a host State might in irs investment promotion legislation offer
submit disputes arising out of cenain classes of investments to
jurisdiction of the Centre, and the investor might give his consent
accepting the offer in writing.' ( I ~ ~ I DD,o cuments Concerning rhe Origr
and rhe Fonnrriation of the Convention, vol. 11, part 2, p. 1069.)
[42] "Egypt does not deny that a State may consent to the Centre
jurisdiction in its investment legislation, and indeed acknowledges that cena'
other States have done so. Egypt contends, however, that Law No. 4
properly interpreted, does not have such an effect.
[43] "An. 8 has been translated into both of the procedural languages agr
upon by the Parties for use in theseproceedings. The English text published b
Egypt's Geneal Authority for Investment and Free Zones and submitted o
behalf of the Claimants . . . provides:
30 YenrbookComm. Arb'n XVl(199
vestment disputes in respect of the implementation of the provisions of
,s Law shall be settled in a manner to be agreed upon with the investor,
within the framework df the agreements in force between the Arab
blic of Egypt and the investor's home country, or within the
work of the Convention for the Settlement of Investment Disputes
ween the State and the nationals of other countries to which Egypt has
ered by virtue of law no. 90 of 1971, where it (i.e., the Convention)
'Dirprtter may be settled throrrgh arbitration. An Arbitration Board
all be constituted, comprising a member on behalf of each disputing
y and a third member acting as chairman to be jointly named by the
o said members. Failing agreement on the nomination of the third
mber within thirry days of the appointment of the second member, the
airman shall be chosen, at the request of either party, by the Supreme
ouncil of Judicial Bodies from among counsellors of the judiciary in the
ab Republic of Egypt.
'The Arbitration Board shall lay down its rules of procedure
estricted by the rules contained in the Civil and Commercial Codc of
rocedures, save the rules which relate to the basic guarantees and
nciples of litigation. The Board shall see to it that the dispute is
pediriausly resolved. Awards shall be rendered by majority vote and
11 be final and binding on both parties and enforceable as any other final
gment.' (Emphasis added.)
"The starring point in starurory interpretation, as in the interpretation of
es and unilateral declarations, is the ordinary or grammatical meaning of
rms used. The English text of Art. 8 provides explicitly that investment
putes 'shall be settled' by one of three methods, two of which are not
licable to the present dispute and the third of which involves the dispute
lement procedures prescribed in the Washington Convention. As the
rnarional Courr of Justice found in the Constitution of the Maritime Safety
mittee case, the words 'shall be'are on their face mandatory (I.C.J. Reporti
"Moreover, [in the English text] of Art. 8 there is a clear and significant
erence in the verbs used in the first and second paragraphs. While the first
graph provides in the English text that disputes 'shall be settled', the second
raph, which authorizes cerrain procedures for domestic arbitration if the
mk Comm. Arb'n XVI(1991) 31
uartzes a-g ree to use that method of d~sputere solution, prov~desth at disu
'may be settled'. . . ."
[46] The Arbitral Tribunal drew the same conclusion that "the us
contrasting verb forms in close proximity indicates the mandatory nature o
first paragraph of An. 8" from the French text of An. 8 which r
respectively sont r4gl4er and llpouna irrc conuenu que les concertationr
riglies. The arbitrators also examined the Arabic text of Art. 8 and held
"In view of the expen opinions concerning the Arabic text submitte
behalf of the Claimants, and of the translations into the procedural Iang
that have been submitted by both Parries, the Tribunal is satisfied th
Arabic text of the first paragraph of Art. 8 mandates the submission of dis
to the various methods prescribed therein where such methods are applica
[47] "With respect to the question of prioriry among the methods of disp
settlement prescribed in Art. 8, the panicular methods involved and the or
in which they are mentioned indicate a hierarchic relationship. Those meth
begin with the most specific - an agreement between the parties as to how
dispute shall be settled - and proceed to more general bilateral treaties betw
the investor's State and Egypt, and then finally to the most general method
dispute settlement - the multilateral Washington Convention. A sp
agreement between the panics to a dispute would naturally take preced
with respect to a bilateral treaty between the investor's State and Egypt, w
such a bilateral treary would in turn prevail with respect to a multilateral rr
such as the Washington Convention. Art. 8 thus reflects the maxim gene
speMlibur non derogant-a principle that has been endorsed by publicists s
Gratius (Bk. 11, Cap. XVI, sec. XXIX(I)) and appears in the jurispruden
the Permanent Coun of International Justice (Mavrommnrir Pales
Concerrionr uurisdicrion), Ser. A, No. 2, pp. 31-32 (1924)) and vari
international arbitral tribunals (e.g., Saudi Arabia v. Arabian Amerlcan
Company (Ararncoj. T.T..R., vol. 27, p. 117 (1963)).
[48] "The hierarchic relationship of the dispute resolution proced
prescribed in An. 8, as well as the mandatory nature of that article,
confirmed by Decree NO. 375 of 1977, which was issued in implementati
Law No. 43. The English text of Art. 45 of Decree No. 375 publish
Egypt's General Authority for Investment and Free Zones and submit
behalf of the Claimants provides:
'In accordance with the provisions oi An. 8 of Law 43, investment dispu
shall be settled pursuant to the rulcs and procedures agreed upon with
investor. In the absence of such agreement, such disputes shall bc resolv
according to rules established by agreements in force bctween the Ar
=rive list of dispute settlement methods that investors may seek to
of An. 8 ('. . . in a manner to be agreed upon. . .'). Hence, the second
of Art. 8 does not imply that the first paragraph is not mandatory;
it augments the first paragraph by specifying certain procedures that
used to implemenr one of the methods of dispute settlement pretcribed
eaty. In circumstances where a bilateral rreaty provides for
mandatory dispute resolution without further consent or agreement by
parues (as Egypt admirs its bilateral treaties with various countries do), A
can hardly be characterized as a mere list of alternatives to be negotiated. S
a construction of Art. 8 would in effect deny the investor the right to dis
settlement conferred by the bilateral treaty, in derogation of the princip
pa& runt rewanda. Clearly, the Government of Egypt cannot be presume
have intended such a result when it enacted Law No. 43.
[53] "Although the text of Art. 8 makes no mention of any separate ad
agreement or further manifestation of consent being required to estab
consent to the Centre's jurisdiction, Egypt contends that such a requiremen
implicit in the phrases 'within the framework of the Convention' and 'wher
[A,, the Convendon] applies'. Egypt maintains that the 'framework' of
Washington Convention includes the requirement of a separate, wri
consent to the Centre's jurisdiction and that the ?hrase 'where it app
reserves the conditions of applicahiliry of the Convention includin
requirement of a special agreement to submit to the Centre's jurisdictio
the Tribunal has already noted, Egypt also points out that rhe phrase 'w
[the Convention] applies' was erroneously omitted from the English
Art. 45 of Decree No. 375, although it appears in the French text.
[54] "A number of considerations make it impossible for the Tribuna
accept that the phrases 'within the framework of the Convention' and 'whe
applies' have the effect of introducing into An. 8 an implicit requirement
further expression of consent in order to establish the Centre's jurisdictio
[55] "First, examination of other parts of Law No. 43 reveals that, when
Egyptian Government intended to require separate ad hoc consent for dis
settlement it did so clearly and in explicit terns. An. 45 of Law No. 43, w
concerns projects established in 'free zones', provides:
'Dispures arising herween projects established in free zones, or a
between such projects and the Authority or any other authorities
administrative bodies connected with the business activities within
zone, may he submitted, by agreement, to arbitration.
'An Arbitration Board shall be constituted to decide on the disput
accordance with the rules and pursuant to the measures stipulated in
8 hereof.
'The Arbitration Board may also examine disputes arising betwe
projects existing in the free zone and natural or juridical persons, wheth
indigenous or alien, if such persons agree to refer the dispute to
Arbitration Board before or after it arises.' (Emphasis added.)
34 YcrrbookComm. Arb'nXVI(19
he drafters of Law No. 43 were careful to provide specifically in Art. 45
rate agreement to esrablish the jurisdiction of the Arbirration Board to
isputes involving projects in the free zones. Contrasted with the silence
8 with respect to any such separate ad hoc consent to lCslD jurisdiction,
age of Art. 45 of Law No. 43 militates against the conclusion that the
ithin the framework of the Convention' and 'where it applies' wcre
o imply a requirement of separate ad hoc consent to establish the
o interpret the phrases 'within the framework of the Convention' and
tapplies' to mean thar the partics to an investment dispute must execute
re agreement to establish consent to the Centre's jurisdiction would
troy the internal logic of Art. 8 and render much of that provision
uous. If such a separate agreement were required, ICSID arbitration in
would be subsumed in the first method of settlement prescribed by Art.
ely, 'a manner to be agreed upon with the investor'. Such an
ration of Art. 8 would render meaningless the entire phrase:
or within the framework of rhe Convention for the Settlement of
stment Disputes between the State and nationals of other countries to
ch Egypt has adhered by virtue of Law No. 90 of 1971, where it applies.'
o valid method of legal interpretation would warranr the conclusion
e express reference to the Convention in Art. 8 is meaningless or
ric. Under general principles of statutory interpretation, a legal text
be interpreted in such a way that a reason and a meaning can be
red to every word in the text.
Egypt argues that similar reasoning can be applied to the second
aph of Art. 8, since an agreement to submit a dispute to domestic
tion as provided for in that paragraph also falls within thc first method
Ute settlement mentioned in the first paragraph of Art. 8 ('in a manner to
reed upon'). However, as Egypt itself has acknowledged in these
dings, the second paragraph of Art. 11 derogates from the rules of
an law applicable to domestic arbitration. Thus, even though the first
aph of Art. 8 authorizes the parties to agree upon domestic arbitration as
ns of dispute setdement, the second paragraph is necessary to authorize
special procedures for domestic arbitration that would not orhenvise be
ble under Egyptian law.
"Egypt also argues that the requirement of a separate agreement to
lish the Centre's jurisdiction would not render part of Art. 8 superfluous
e the reference to the Washington Convention has the important legal
consequence of informing potential investors of the Egyptian Governm
willingness in appropriate circumstances to negotiate an agreement confe
Centre was expressed three years before the enactment of Law No. 43, w
Egypt enacted Law No. 90, by which Egypt ratified irs adherence to
Washington Convention. Moreover, the provision in Art. 8 for dispu
settlement 'in a manner to be agreed upon with the investor' is sufficient
authorize ad hoc consent to the Centre's jurisdiction. In thesc circumstanc
the Tribunal cannot accept the contention that Art. S offered only a promise
negotiate -apanum de contrahendo - by which the parties would undertake
the requirement of a specific consent. In suppon of this contention, Egypt
cited certain bilateral investment treaties to which it is a parry, such as
treaty of 15 July 1978, with Sweden. This treaty provides that:
'In the event of a dispute arising between a national or a company o
under the Washington Convcnrion on the Settlement of Inv
Disputes berween States and Nationals of other States, dated 18
1965.' (Emphasis added.)
[61] "Egypt argues that, just as Art. 8 of Law No. 43 cannot override
requirement of 'agreement by both parties' in the Swedish treaty, it ca
displace the Convention's requirement of 'consent in writing'. The ques
[62] "It is true that both the Convention and the Swedish treaty req
separate manifestations of consent to establish the Centre's jurisdiction.
the Convention and the Swedish treaty articulate this requirement differe
36 ~ e s r b o o k c~~.~b~bm. i I
Convention requires a 'consent in writing' whereas the Swedish treaty
quires 'the agreement by both parries'. Thus, the 'frameworks' of the
ish treaty and the Convention are different. As indicated by the Report of
xecutive Directors .. .,the drafters of the Convenrion, which entered into
eight years prior to the enactment of Art. S, anticipated that a State might
arerally give advance 'consenr in writing' to the Ccntre's jurisdiction
augh investment legislation. On the other hand, such unilateral legislation
ly could nor constitute thc 'agreement by both parties' required by the
dish treaty, which was entered into four years aftcr An. 8 was enacted. The
that Art. 8 of Law No. 43 is nor the kind of manifestation of consent
'sioned by the framework of the Swedish treaty does not mean that it is not
sent in writing' within the framework of the Convenrion.
'Obviously, when a dispute has to be settled 'within the framework' of
ry, dl of the conditions required by the treaty for its appiication must be
ed. However, the phrase 'within the framework' doer not import into a
additional rcquiremcnrs which the treaty does nor contain. Thc
ention makes no mention of a separate ad hoc consent. It says only that
must be 'consenr in writing'.
'Equally unacceptable is the argument that the phrase 'where it [i.e., the
ntion] applies' introduces a requiremenr of separate ad hocconsent into
The Convention may be invoked in any case involving a dispute
a Conrracting State and a national of another Contracting State. Of
, he Centre will not have jurisdiction wirh respect to 211 such disputrs.
iction will only exist if the dispute is a legal one thar arises directly from
estmenr and if the parties have consented in writing to the jurisdicrion of
e Centre. These jurisdictional requirements, however, are prescribed in the
vention itself. Thus, it is by application of the Convention thar a tribunal
mines whether it is comperent to hear 3 parricular case. Considered senru
o, then, the Convention - specifically, Art. 25 thereof - 'appiies' to any
e involving a Contracting State and a national of another Conrracting State
urposes of determining whcrher the Centre has jurisdiction wirh respect to
"For the dispute settlement of the Convention to apply, it is
e s s q that the jurisdictional prerequisites of Art. 25 be satisfied. Thus, the
nvention's dispute settlement provisions will nor apply if the investor is not
anal of another Contracting Stare. Nor will they apply if the dispute is
legal one or does nor arise directly from an investment. With respect to
onsent necessary to establish the Centre's jurisdiction, however, Art. 25
res only that it be 'in writing'. The Convention does nor prescribe any
cular form for the consent, nor does it require that consent be given on a
case-by-case basis. To the contrary, the drafters of the Convention inte
that consent could be given in advance through investment legisla
Accordingly, the Tribunal cannot zccept-the contention that the phrase 'whe'
it applies' in An. 8 of Law No. 43 requires a funher or ad hoc manifesrarion
consent to the Centre's jurisdiction.
[66] "Egypt also argues that Art. 8 of Law No. 43 is insufficient to expre
consent to arbitration because An. 8 does not refer expressly to 'arbitratio
but says only that disputes shall be settled 'within the framework of
Convention' - a phrase that embraces both arbitration and conciliati
Nowhere, however, does the Washington Convention say that consent to
Centre's jurisdiction must specify whether the consent is for purposes
arbitration or conciliation. Once consent has been given 'to the jurisdiction
the Centre', the Convention and its implementing regulations afford them
for making the choice between the two methods of dispute settlement.
Convention leaves that choice to the parry instituting the proceedings. In t
case, the Claimants have filed a request for arbitration and none of the Parti
has asked for conciliation. Consequently, the issue before the Tribunal
whether it is competent to entenain - within 'the jurisdiction of the Centre'
the Claimant's request for arbitation.
[67] "Certain bilateral treaties to which Egypt is a parry and which E
itself has cited as examples of its advance consent to the Centre's jurisdi
confirm that consent to the Centre's jurisdiction need not specify whether
far purposes of arbitration or conciliation. These treaties either make
reference to arbitation or conciliation, or mention both procedures witho
distinguishing between them."
[68] The Arbitial Tribunal examined two treaties relied upon by Egypt, i.e
the Treary of 22 December 1976, betwcen Egypt and France, and the Treaty o
11 June 1975, between Egypt and the United Kingdom, and held:
"Both of these treaties, which Egypt has admitted give advance consent
the Centre's jurisdiction, leave the choice of arbitration or conciliation to
determined by the pany instimting proceedings within the framework of t
Centre's procedural rules. Accordingly, the Tribunal is unable to accept t
contention that, because Law No. 43 does not specify whether it is arbitrati
or conciliation that is being consented to, a funher ad hoc consent is require
(. . . .)
[69] "On the basis of the foregoing considerations, the Tribunal finds th
An. 8 of Law No. 43 establishes a mandatory and hierarchic sequence
dispute settlement procedures, and constitutes an express 'consent in wririn
to the Centre's jurisdiction within the meaning of Art. 25(1) of the Washing
38 ~ ~ . ~A ~o~X' YO~I (Ik~ ~ ~
nvention in those cases where there is no other agreed-upon method of
"re settlement and no applicable bilateral treaty.
"In the present case, as a result of the decisions of the French courts
lifying the ICC award of 16 February 1983, it has been established that the
'es have not agreed on a method of dispute rcsolurion. Nor is there any
teral treaty in force that is applicable to ihe Parries' dispute. The dispute is
egal one arising directly out of an investment, and the Parties are a
nuacting State and a national of another Contracting State. In these
mstances, and in view of the findings made by the Tribunal in its decision
7 November 1985, the Tribunal finds that An. 8 of Law No. 13 operates to
er jurisdiction upon the Centre with respect to the Panies'dispute.
"It is true, as Egypt has emphasised in these proceedings, that consent by
tare to the jurisdiction of an international tribunal involves a waiver of
vereign immunity. The Tribunal would note, however, that the wsiver
ch results from An. 8 is illusory, in several respects. In the first place,
ause of the hierarchic naNre of the first paragraph of Art. 8, the
vernment of Epypt may avoid the Centre's jurisdiction by agreeing with the
esror on some other form of dispute settlement. Second, in those cases
re a bilateral treaty is applicable, that treaty will take precedence over ICSID
tration unless it provides for such arbitration, in which case Egypt has
dy waived its jurisdictional immunity and consented to the Centre's
diction. Finally, Art. 8 only becomes operative after the investment has
n approved by Egyptian authorities. Thus, even if all of the jurisdictional
requisites of An. 25 of the Washington Convention are satisfied, Art. 8 does
or effect a waiver of sovereign immunity unless and until Egypt approves the
stment in question without reaching agreement with the investor on some
er form of dispute settlement.
21 'Having found that Art. 8 of Law No. 43 in the circumstances of the
sent case constitutes 'consent in writing' to the Centre's jurisdiction within
meaning of An. ?5(1) of the Washington Convendon, rhe Tribunal must
w address the Claimant's submission that the Tribunal:
'...adopt and incorporate as its own the pertinent findings of fact made by
the ICC Arbitral Tribunal concerning SPP(ME)'S perfo~mance of its
obligations under its azrcements, the dismissal of EGOTH'S counterclaim
therein, and the acts bringing about termination of the investment project.'
"The Tribunal finds this submission to be unacceptable, both in principle
under the Centre's Arbitration Rules. In effect, the submission asks the
ookbmm, hrb'nXVl(1991) 39
Tribunal to abdicate its fact finding function and adopt as its own the find
of a tribunal that has been held to have acted in excess of the powers conf
upon it by the arbitration clause. Such in approach is hardly consistent
the basic function of evidence in the judicial process, which is to enabl
tribunal to determine the truth concerning the conflicting claims of the p
before it.
[74] 'Moreover, Rule 47 of the rcslD Arbitration Rules requires that I
tribunals make their own findings of fact:
'(1) The award shall be in writing and shall contain:
. . .
(g) a statement of the facts as found by the Tribunal . . .' (Emp
[75] "Accordingly, the Tribunal will proceed to make its own derermin
of the facts necessary to render an award in the present care."
Decision on application for annulment of 14 December 1989
Committee Sompong Sucharirkul (Thailand), chairman; Aron
Members: Broches (US); Keba Mbaye (Senegal)
Patties: Applicant: Government of Guinea
Respondent: Maritime International Nominees
Establishment - MINE (Liechtenstein)
Place of
arbitation: Washington, DC, US
Published in: 5 ICSID Review (1990) pp. 95-134
Subject matters: -annulment of ICSID arbitrai award
- no failure to apply applicable law
-failure to state reasons
Yc.rbrnk Comm. Arb'" m (
facts of this case are reported in more detail in Yearbook Vol. XIV (1989)
' h the ~ a n i e ses tablished a joint venture company, SOTRAMAR, for the
sporration of the half of the freight as provided under An. 9 of the Harvey
yages with cargoes of grain.
ite Receivers that they would temporarily have to make their own
petition with the US District Coun of
the American Arbitration Association
rding the conclusion of contracts of
red and on 9 June 1980, the AAA
s of US$ 27 million apinst Guinea.
the US District Court of Columbia but reversed by rhe US Court of Ap
for the District of Columbia on 12 November 1982, on grounds of lac
jurisdiction under the Foreign Sovereign-Immunities Act.
On 7 May 1984, MINE initiated ICSID arbitration proceedings. The p
each appointed an arbitrator and jointly chose the chairman.
In the meantime, MINE had initiated attachment proceedings in relatio
the AAA award against Guinea in Switzerland and Belgium.' These procee
were discontinued after the Arbitrd Tribunal directed MINE to do so fin
thar they were an "other remedy" within the meaning of Art. 26 of the
On 6 January 1988, the Arbitral Tribunal rendered a final award' in
following terms:
'Awarded to MINE as damages US$ 6,726,497
Interest on MINE'S damages
Costs of ICSID arbitration
Total awarded to MINE:
Awarded to Guinea toward its counterclaim:
Balance due to MINE:
On 28 March 1988, Guinez addressed an application to ICSID requesting
annulment of the award pursuant to An. 52(l)(b), (d) and (e) of the ICS
vention.' Guinea did nor request annulment of the decision on its counrercl
1. The Swirr procccdingr ire reposed in Yezrbook XI1 (19873 pp. 514-522; ihc B
proceedings are ieponed in YarbookXII(1987)pp. 181-183.
2. An. 26 of the rcrio Convcnrion reads:
.Consent of ihe pznirs ro arbirrarion under this Convention ~hlillu, nless o i h c ~ i s e~t lt
dccmed conrcnt to ruchlibirmrionto ihe~xciuriono f my orhcr remedy. A Conrncring
may require rhc exhnurrion of locd idminisrmrive or judickl remcdicr i r a condition
consent to arbirmrion under chis Convenrion."
3. Reponed in Ycarboak XN (1989) pp. 82-92,
4. An. 52 oithc ICSID Convention rods in relevant pa=
'(I) Eirherpmy mzy request annulment of the m u d by anapplication in wtiiing add
to the Secrerav-Gcncml .ion one or more of rhe foilowing grounds:
(b) rhlt ihe Ttihunzl hrr m;miferrly rxcccdcd irr powerr; ...
42 ~ ~comm~~. ~ bx~'n" b ~
nad hoc Committee was appointed by rcsio. Pending its decision on the
, rhe Committee stayed enforcement of the award by an Interim Order
he Committee reached an unanimous decision on the merits of Guinea's
ation. It rejected the request for annulment of the portion of the award
h holds that Guinea breached the SOTRAMAR agreement, and granted
lment for the pan of the award awarding MINE damages, including interest
mages. The reasoning of the Committee is reproduced herebelow in its
iIure to Stare Reasons
An. 45(3) of the Convention provides:
e award shall deal with every question submitted to the Tribunal, and
I state the reasons upon which it is based.'
e to comply with the last pan of the above sentence is made an explicit
d for annulment by paragraph (I)(e) of An. 52.' Failure to comply with
st pan of the sentence is not in so many words made a ground for
Imenr. The Committee will consider below whether and in what
tances failure to deal with every question submirred to the tribunal may
less he a ground for annulment as a species of failure to state reasons.
he Commiitec is of rhe opinion that the requirement ihat an award has
motivated implies that it must enable the reader to fallow the reasoning of
ribunal on points of fact and law. It implies that, and only that. The
acy of the reasoning is not an appropriate standard of review under
aph (l)(e), because it almost inevitably draws an ad hoc Commiuce into
minarion of the substance of the tribunal's decision, in disregard of the
eic has been3 serious depxrruic from 3 fundamental wlc of procedure: or
) that the awrd hnr failcd to rurc the resronr an which iris bsred.
kcornrn. Arb'nXV1 (1991)
exclusion of the remedy of appeal by Art. 53 of the Convention." A Commi
might be tempted to annul an award because that examination disclos
manifestly incorrect applications of the Law, which, however, is not a gro
for annulment.
[j] "In the Committee's view, the requirement to starc reasons is satisfi
long as the award enables one to follow how the tribunal proceeded from P
A. to Point B. and eventually to its conclusion, even if it made an error o f f
or of law. This minimum requirement is in particular not satisfied by eit
contradictory or frivolous reasons.
[4] "A statement of reasons is a valuable element of the arbitration proce
The Committee has noted that the Committee of Legal Experts, which was
advise the Executive Directors of the World Bank on the draft Convention,
a vote of 28 to 3 rejected a proposal which would allow the parties to dispe
with the requirement of a reasoned award (History of the Convention, Vol.
p. 816). A waiver of the requirement in an arbitration agreement w
therefore not bar a parry from seeking an annulment for failure of an awar ,
state reasons.
151 *In the form in which it was submitted to the Legal Committee the dr
of what became An. 48(3) only required thar the award state the reasons
which it was based. The requirement that the award should den1 wirh ev
question submitted to the tribunal was added by the Legal Committee but,
already stared, failure to comply with thar provision dealing wirh the subj
which was added to the draft of the Convention was An. 49(2) which provid
among other things, thar upon the timely request of aparty a tribunal may aft
notice of the ocher pany 'decide any which it had omitted to decide
the award'. (See for the discussion leading to this result, History of t
Convention, Vol. 11, pp. 848-849).
[6] "The Committee has considered whether Art. 49(2) constitutes the on
remedy for non-compliance wirh the obligation to deal with every questio
submitted to the tribunal. It has concluded that Art. 49(?) provides
satisfactory remedy for the case of a tribunal having failed to exercise i
jurisdiction in full. For example, in the present case the Tribunal failed to
6. Art. 53 of rhe ICSID Convenrion rcadr:
-(I) Theiwird rhxll be bindingonihe panics and shall not besubjrcr toany appealart
orhcr icrnedy exccpr rhore providcd for in ihi Convenrion. Each parry rhdl abide b
comply wirh rhc remr ofrhe award cxccpr ro ihc exrcnrrh=r cnforccmentrhdl have been r
purrulinr to rhc rclevanr provisions of this Convention.
(2) For rhc purposes of this Section. 'hvard'shoil inclvdc any decision inrerprcring, m
or annulling such award pursuant ro Aniclcr 50.51 or 52."
44 Ycarbook Comm. Arb'n XVI (I
M I ~ ~cla' ism to be reimbursed for the costs and expenses incurred in the
d States District Court and in arbitration before the American Arbitration
'ation in earlier stages of its conflict with Guinea. Art. 49(2) would have
ed a specific remedy and, nor having invoked it, MINE could not have
on that failure for purposes of annulment.
Guinea's complaint against the Award falls into a different category.
9(2) would not have provided a remedy for the Award's failure to deal
uestions submitred by Guinea to rheTribuna1. The defect complained of
inea could not have been cured by supplementing the Award, but would
equiied in effect that it be reconsidered in the light of the Tribunal's
n on the 'omitted' question. The Committee accepts that in such a case
to deal with a question may render the award unintelligible and thus
to annulment for failure to state reasons.
he Committee will now consider Guinea's argument that the portion of
ward relating to the breach of contract must be annulled because the
nal 'failed to apply any law whatsoever, much less the correct law -
law, based on French law' . . . and 'the dearth of stated reasons for
portant conclusions'. . . ."
hefirjt paragraph of Art. XI11 of the [SOTRAMARA]g reement reads as
he law applicable to the present agreement shall be the law of the
public of Guinea in force at the date of signature, without prejudice to
e provisions of this Art. XIII.'
,the applicable law is Guinean law in force on 19 August 1971.
"The second paragraph records the parties' recognition that the
isions of the Agreement 'conform to the law and regulations and to the
policy of the Republic of Guinea or derogate from them intentionally,
present and for the future' [original in French]. Thc third paragraph
that the Agreement will thus be binding on the parties 'notwithstanding
onal provisions pertaining to public, administrative or private law which
be subsequently enacted in Guinea, with no exception or reservation'
[original in French]. Thus, Guinean legislation subsequent to 19 August
cannot affect the Agreement. The ,for~rth and final paragraph of Art.
states that accordingly 'Guinean law shall only apply to the interpretation
execution of the present Agreement subsidiarily and when a difficulty can
be solved by applying the Agreement's provisions' [original in French] . . . .
[Ill 'The Committee is aware of the fact that Guinean law is independent
French law, although derived from it. Before Guinea became independent
1958, French law was applicable under certain conditions in the colony (whi
became an 'overseas territory' in 1946) as in all other French-governed colon
in West Africa. It must be recalled that local custom was applied side by ai
with the so-called 'modern' law, depending on the subject-matter. In civil
commercial matters, modern law rapidly replaced custom. Neverthele
French laws and regulations were not automatically applicable in the coloni
in these matters. They had to be introduced in accordance with the principl
spicialiri ligislarive. In this matter the Code Civil was introduced, and
modifications locally enacted were not necessarily the same as those applica
in France. Consequently, certain discrepancies may be found between Fren
law as applied in France, and local Guinean law. As will be seen [infra], this
not the case as far as An. 1134 of the Code Civil' is concerned. In 1971, w
the Agreement was concluded, Guinean law consisted both of pre-1958 I
and regulations that the Guinean legislative power had kcpt in force
measures adopted after 1958. Both constituted Guinean law.
[l?] "Thus, pursuant to Art. XI11 of the Agreement Guinean law as defi
above is to be applied to disputes if the Agreement provides no solution for
difficulty that has arisen in the course of its execution. In other words, the I
to be applied between the parties is the Agreement. Nevertheless, whe
Agreement is silent or incomplete, recourse must be had to Guinean law
entirety, subject to the qualification that the only rules of Guinean law (pu
or private) that are applicable are those that were in existence at the date of
Agreement. Thus, the Agreement can be said to have 'frozen' the applicab
law at that date.
[I31 "The Agreement was concluded by the Republic of Guinea and it wou
be possible to argue that the applicable Guinean law was public law, hut bo
parties were agreed that the applicable law was private law. In this context,
7. Arc. 1134 of rhc French Civil Code reads:
*L>wfully concluded contracts hzuc thc cffecr of lavan rhosc who concludc rhem.
"They m=y be revoked by rnuruzl conrenr oi on grounds provided by law.
-They must bcpcrformed in good fiirh."
46 Y C ~ ~ ~ OcO~L ~ ~ . A ~ ~ ' ~ x v I (
"ant Guinean law is the law of contract which is contained in [Book 111,
Union Franqai5e1, referred to by MINE as 'Union
an examination of Guinea's allegation rhar the
ny law, let alone the correct law', constituting a
er, the Committee notes that Guinea has expressed itself
tcs [in its Application]:
'Most notable is the total lack of citation to legal authorities. The single
legal reference is contained in one footnote, citing an anicle of the French
Civil Code as it appears in Louisiana law.'"
"[In the arbitration proceedings], MINE based its case specifically on Art.
of the 'Union Civil Code'. There was no disagreement between the
g nature of agreements lawfully entered into and the
rh in the carrying our of their contractual obligations.
t between the parries concerned the application of the
ement, which pursuant to its An. XI11 was binding on them. Each party
ed its view of the facrs and their effect under the Agreement and the
d, rightly or wrongly, that MINE had nor failed to perform its
he Agreement, so as to be in breach thereof; that Guinea was
ment to dispose of its cargo-carrying rights which
re to SOTRAMAR; and that by transferring these rights
erween it and an international shipping group Guinea had
lated its obligation of good faith imposed by Art. 11% of the 'French Civil
"There is thus no basis for saying rhat the Tribunal failed to apply any
ihunal erred in citing Art. 1134 of the French Civil
es, however, rhar the relevant provision of the
ontaincd in the Code Civil de /'Union Frunqaise
he same contents as An. 1131 of the French Civil
de. For this reason, the Committee does not consider rhat this error
hc rccond renrcnce of rhir rr~rcmenr is incorrect. [In rhe] Award. rhc Tribunal srrrcd that
uinea had violared 'thc principle of good frirh rcr forth in the French Civil Code: quoting
. 1134 in full in French."
[IS] "[In its] Application, Guinea further complains that the Tribunal f
to conduct an inquiry on its own into the 'grounds provided by law' for
unilateral termination of the Agreement bhich consrimre an crccprion to
rule of Art. 1134 that agreements may be cancelled only by mumal consent.
[19] 'The Committee notes that Guinea did not plead before the Tribun
that such an exception applied. In the Committee's view, the annulm
proceeding is not an occasion to present arguments and submissions whic
p a q failed to make in the underlying proceedings. Besides, the argum
based on the words 'grounds provided by law' is untenable.
[ZO] 'The Committee concludes accordingly that the Tribunal has not fa
to apply the 'correct' law and has nor manifestly exceeded its power.
[?I] "Guinea alleges that a number of important decisions of the tribu
were 'unreasoned and unsupported', and that the Tribunal had failed to add
and resolve certain issues raised by Guinea. The Award on breach of con1
should therefore be annulled pursuant to Art 52(l)(e) of the Convention
violation of Art. 48(3) which requires that 'the Award shall deal wirh eve
question submitted to the Tribunal, and shall state the reasons upon which it
[2?] '[In its] Application, Guinea asserts as an example of the trib
failure to respect An. 4S(3) thar the Tribunal's statement that the ch
commercial circumstances brought about by the Middle Eaa War in 197
not make it 'legally impossible for either side to perform' the Agreement. . :
'unreasoned and unsupported', and that it is moreover inconsistent wirh
tribunal's finding 'that neither short-term nor long-term contracts
affreightmenr were available, through no fault of the parties' . . . . The Aw
should therefore be annulled because of failure to state reasons and
statement of contradictory reasons.
[23] "Guinea's assertions are not well-founded. Neither party had argu
thar it was legally impossible for it to perform the Agreement and there
nothing in the record that suggests that there might have been a le
impediment. There was no necessity for theTribunal to $ve reasons for sra
an obvious truth from which it drew no conclusions. The Committee's readi
of the Award indicates thar the statement served merely as a transition to
Tribunal's discussion of the commercial, as opposed to legal difficulties. T
finding thar there were such difficulties is of course in no sense inconsiste
with the finding that there was no legal impediment to performance of
48 YearbookComm. Arb'nXYI (I
"The Tribunal was aware of Guinea's arguments on these points. (. . . .)
Tribunal did nor have to address these specific conflicting contentions of
pnies because it did address and resolved Guinea's principal arpment to
eeffect that aftcr thc July 1973 agreement.. . with the bauxite receivers, MINE,
rhe tribunal's paraphrase, 'demonstrated its lack of will and competence to
r SOTRAMAR in operation, thereby breaching its obli~ations under the
onvention [Agreement], because MINE failed to conclude contracts of
freightment and charter-in tonnage'. . . .
51 "The Tribunal rejected Guinea's argument, which it said 'miscontmes
facts'. . ..and stated its rcasons . . . . m h e Tribunal's finding. . . that 'MINE
not breach thc Convention [Agreement] in failing to conclude contracts of
eighrment and to charter-in covering vesscls' following the 1973 meeting is
ported by reasons which can be followed without great difficulty. Their
stance is not subject to review by the Committce.
"As the Committee already stated, in the context of its rejection of
inea's allegation that the Tribunal had manifestly exceeded its powers, the
bunal's decision on the breach of Agreement was based on the provisions of
t Agreement itself and an Art. 1134 of the Code Civil de /'Union Franqaise,
e applicable law according to Guinea.
71 "After concluding that MINE had not breached the Agreement. the
ibunal noted the fact which was nor disputed that Guinea had surreptitiously
gotiarcd with third parties and had entered into an agreement with Afrobulk
which it had disposed of a right exercisable by SOTRAMAR without MINE'S
nsent, and arrived at the conclusion that Guinea had breached the A,o reement
violated its duty of good faith.
'Guinea complains thar rheTribuna1 failed to deal with its arguments on
e limits of good faith and on its right to conclude the agreement with
frobuik in rcsponse to MINE'S prior refusal to go forward without Guinea's
linquishing [of] its contractual rights. This complaint is based an the
umption, contrary to the Tribunal's finding, that MINE was in breach of the
greement. It is in effect an appealhgainsr theTribunai's decision on breach of
ntract, but appeal is excluded by the Convention.
91 "The Committee concludes accordingly that the Tribunal has not
lated An. 45(3) of the Convention and has not failed to state the reasons on
ich its decision on breach of contract was based."
III. Damages
[30] *Guinea advances three grounds for annulment of the portion o
Award awarding damages to MINE following the Tribunal's finding that Gu
has breached the Agreement. Guinea contends thar the Tribunal's decisid
must be annulled, first, because the Tribunal failed to state the reasons on wh
that decision was based, second, because in reaching its decision it manifes
exceeded its powers and third, because it seriously departed from a fundame
of procedure.
(. . . .)"
[31] "The Committee has first examined the numerous instances of a1
violations of Art. 480) of the Convention advanced by Guinea in support
Application for annulment of the damages portion of the Award.. . . Seve
these appear to the Committee singly to justify, and collectively to co
annulment of thar portion.
[32] "The Committee will first mention rwo instances in which the Tri
failed to deal with questions raised by Guinea the answer to which migh
affected the Tribunal's conclusion. Failure to address these ques
constituted a failure to state the rearons on which that conclusion was base
[33] "In opposing MINE'S damages claim, Guinea argued that pursuant to
XVI of the SOntAMAR agreement, all MINE would be entirled to if Guinea
breached that agreement (which it denied) war damages for one year. I
argued that in any event the award of interest (whose justification it denie
the amount of damages arrived at by one or the other formula (whose val
it contested) should be reduced by the interest on the sum of US$ 1,0?
capital contribution which MINE had withdrawn in 1975. Both arguments
briefed by the parties and evidence was presented.
[34] "If Guinea's argument on An. XVI had been accepted, it would h
meant a radical reduction of the damages claim which was based alternativ
on a 20-year and a 10-year period. Acceptance of the argument on
withdrawal by MINE of its cash capital contribution would have subsrantia
reduced the interest element of the damages award. They raised thereto
important issues. TheTribunal either failed to consider them, or it did consid
them but thought thar Guinea's arguments should be rejected. But that did
free the Tribunal from its dury to give reasons for its rejection as
indispensable component of the statement of reasons on which irs conclu
was based.
50 Y I . , ~ ~coo~m m~,b. '"X VI (
51 "Guinea further submits rhar the award of damages for lost must
for failure to stare reasons for awarding interest on the damages
particularly in the face of Guinea's challenge of MINE'S entitlement to
Ierest on the ground thar MINE waited nine years to go to ICSID arbitration.
61 "In objecting to the award of interesx on the ground that many United
es jurisdictioils 'do nor permit recovery of the pre-judgment interest on
iquidated damages', Guinea disregards the =pp!icable law. It is, on the other
d, not open to doubt rhar the Tribunal should have stared rhc reason why it
=red Guinea's argument based an MINE'S delay in starting ICSID proceedings.
Guinea advances a separate objection to the Tribunal's failure to give
s for the award of interest at thc US bank rate. In the light of the fact that
dollar was the currency of the contract, the justification of rhat currency
ank rate of interest is a.p.p a rent. An express statement to that effect is
81 "While the violations of the requirements of the Convention mentioned
the foregoing paragraphs affect particular aspects of the Tribunal's damages
aiculations, Guinez's principal complaint is addressed to its very basis . . . .
Committee finds rhat to the extent rhar the Tribunal purported to stare the
ons for its decision, they were inconsistent and in contradiction with its
ysis of [MINE'Sd]a mages theories.
=MINE'S [theory] and the damages calculation by the Tribunal have in
ommon rhar they do not purport to estimate profits that SOTRAMAR would
ave made, hut rather rake as a base either the actual or hypothesized profits
er the substitute [Afrobulk] arrangement. The theory underlying this
oach, which was nor articulated either by the parries or by the Tribunal,
ay have been that for Guinea to keep the fruits of the substitute arran,a ements,
hich according to rheTribunai's ruling on breach of contract it had concluded
violation of thc Agreement, would have constirurcd unjust enrichment, and
at MINE should therefore be awarded the same share of those profits as it was
'[led to receive if they had been SOTRAMAR profits.
"Guinea had supplied information to theTribunal concerning the profits
ad received under the substitute arrangements for a 10-year period. MINE
rued that these were understated. The Tribunal did not decide the issue. It
however, for its own damages calcul~tiana ssume, without explanation and
ontrary to what really happened, that arrangements yielding 50 cents per ton
he royalty rate of the Afrobulk agreement) could have been concluded for a
riod of 10 years. Having concluded thar [MINE'Sth eories] were unusable
cause of their speculative character, the Tribunal could not, without
ntradicring itself, adopt a 'damages theory' which disregarded the real
Nation and relied on hyporhescs which the Tribunal itself had rejected as a
basis for the calculation of damages. As the Committee stated [supra],
requirement that the Award must state the reasons on which it is based is
particular not satisfied by contradictory reasons.
[41] "For all these reasons, the Committee finds rhat the portion of
Tribunal's Award relating to damages must be annulled for failure to state
reasons on which it is based."?
[42] 'Having reached the Conclusion that the Award on damages musr
annulled for failure to state reasons, the Committee sees no need to examine t
alternative grounds for annulment advanced by Guinea."
IV. costs
[43] "Guinea requests that the Tribunal's decision on costs be annull
because it has failed to state the reasons on which its award of US$?75,000 i
costs of the ICSID arbitration was based.
[44] "The award of costs is not pax of the award of damages on account
profits foregone. The amount of costs claimed by MINE was contested
Guinea on the ground rhat it included costs incurred in the attempted measu
of constraint in execution of the MA award. The Tribunal apparently took t
argument into account and awarded a lower amount. Art. 61(2) of t
Con~entionp'~ro vides that the Tribunal shall decide how and by whom t
costs of proceedings including the expenses incurred by the parries, the fees
expenses of the members of the Tribunal and the charge for the use of
facilities of the Centre shall be paid. The Article confers a discretionary pow
on the Tribunal which was in particular under no obligation to state reasons f
9. "The pnnirs exchanged lengthy aigumcnrr in rhcii piesenrarionr to ihe Tribund znd r
Commirrceananorhcrconrenrion ofGuinco'r,viz..rhnr MINE hnd fziicd to mirigcciirdamag
when ir refused Guinea's offer ro let MlNe sharc half rhc hfrobuik agreement. In view of
Commioer'r decision to annul rhc damrger ponion ofrhc Awzid. it docs nor find it ncc
to dcii wirh rhc question wherher rhe Tribund'r dirporirian of Guinn's conrcnrion rnigh
furnished an indepcndcnr ground ior annulmenr."
10. An. 61 of the lcsl~C onvcnrion rezdr in relevant pair:
"(2) In the case of arbirrzrion proceedings the Tribunal shall, exccpr si rhe oihc
rgiec,jsrcsr rhc expenses incurrcd by rhc p i n i n in connecrion wirh rhc pioc~edingrz, nd
decidc how and by whomrhoseexpenser, the fecr md erpcnrcr oi the membersoirheTrib
2nd rhc ~ h l r g tfro rth< UIC of rheiacilirier of ihc centre rhdl be p i d . Such decision ~ h df l
p ~ofn rh c =ward."
52 ~ ~ ~~ ~ bX~'V"I( I b ~
warding costs against the losing party. Guinea his not alleged that the
ribuna! abused its discretion.
"The award of costs can nevertheless nor remain in existence since its
is, viz., char Guinea was the losing p a q , has disappeared as a result of the
ulment of the portion of the Award relating to damages. The award of costs
nor survive the annulment of that portion of the Award with which it is
tricably linked. The Committee rhcrcfore finds rhm the award of costs
st be annulled in consequence of the annulment of the damages portion of
k Comrn. ~ r b ' nX Y~(1 991)

Adriano Gardella S.p.A. v. Côte d'Ivoire (ICSID Case No. ARB/74/1), Award, 29 August 1977

Published in: English translation of French original in 1 ICSID Reports, (ICSID Rep.) 283 (1993) (excerpts).

29 August 1977*
(Arbitration Tribunal: Mr Pierre Cavinl, President;
r Jacques Michel GrossenZ and Mr Dominique Poncet, Members)
MARY: The facts: - On 25 April 1967 Adriano Gardella SpA
"), an Italian company, entered into an agreement ("the 1967
")with the Government of the Republic of the Ivory Coast (the
ernment") for the conversion and cultivation of 20,000 hectares of
and for the construction of a textile factory. Part of the hemp was to be
ed to the factory for manufacture into finished goods for export and
ronology of the proceedings in this case is set out at p. xi.
inted in April 1976 after fhc death of Mr Andre Panchaud.
inted in August 1975 after the death of Mr Edouard Zellweger.
the rest of the hemp was to be sold externally as raw fibre. The
Agreement provided for the formation of a jointly owned limited I
company through which the farming and industrial business wo
realized. Gardella was to supply the technical and commercial expertls
undertook to negotiate the loans necessary for the capitalization
project with Italian financial institutions. The loans were to be gudr
by the Government. The 1967 Agreement also provided for an exper
phase in which studies would be conducted to ascertain the profita
the proposed farming and industrial venture and to assess
A codicil to the 1967 Agreement was entercd into on 10 August 19
Codicil") which provided, inter alia, that the company to he formed
upon receiving Government approval, proceed to order the ne
equipment and materials for the project from Gardella once the stud
been completed and showed the possibility of profit.
On30 October 1967, pursuant to the 1967 Agreement and the Cod
Soci6t6 Ivoirienne Agricole et Industriel du Kbnaf ("SIVAK'
incorporated by the parties at Abidjan as the company through whi
project was to be realized. The production studies were commenced a
clearing of the land began.
In a supplementary agreement dated 6 August 1970 ("the
Agreement") Gardella acknowledged that the necessary financing had
obtained, that the cultivation trials had been successful and that SIVA
therefore ready t o proceed with the project. The 1970 Agrecm
provided for certain amendments to the structure of the parties' asso
Article IX of the 1970 Agreement provided for the submission of dis
relating to the project to ICSID arbitration.
At the end of September 1970 Gardella presented to the Governm
document entitled the "Brown Dossier" which contained, inter a
description of the equipment and materials necessary for the realiz
of the project. The Brown Dossier was initialled by the Ministe
Economics and Finance ("the Minister") and returned to the Gar
On 13 November 1971 the parties signed a further suppleme
agreement ("the 1971 Agreement") in which the Government underto
send the necessary letters to ensure that the Italian financing was in p
the beginning of January 1972. The clearing and cultivation of the la
to commence in accordance with the following schedule:
1. Delivery by August 1972 of materials required for production of 3
T of fibres for export;
2. 3,000 T of fibre for export to be produced by May 1973 and deliv
materials required for production of 8,000 T to be complet
August 1973;
3. 8,000 T of fibres for export to be produced by May 1974 and delive
materials required for production of 16,000 T to be complete
August 1974;
4. Construction of the factory to be carried out from June 1975 to
If, after two years the envisioned tonnages had not been met, the
Government reserved the right to terminate the rest of the supply
1971 Agreement provided that failure to adhere to the schedule would
ult in a shift in the timetable until the results provided for had been
n 10 December 1971 Gardella submitted invoices to SIVAK for the cost of
ials supplied under the agreements. The invoices were endorsed by the
mment's representative and returned to Gardella with the notation
Id authorize payment. However, problems arose
delay by the Government in transmitting for signature the
s relating to the interbank financing agreement between the
utonome d'Amortissement ("the CAA") and the Instituto Mobiliare
o ("the IMI"), the relevant lvoirian and Italian banking institutions.
13 July 1973 Gardella presented an expert report, the "Yellow
ern, to the Government. This report set out changes which had
ed in the international circumstances which warrantedmodification of
greement, revised certain data relating to the exportable portion of the
e cost of the project, and proposed a reduced
me compared to that provided for in the
y 40% of the production of this project
be of exportable quality. It was therefore necessary to use the
in order to accomplish this the factory would
o be constructed immediately.
13 September 1973 the Board of Directors of SIVAK met and Mr
Ila, acting on behalf of Gardella, presented the findings of the Yellow
er stating that if the Government did not accept the renewed
ediate commissioning of the factory then his
a partner in SIVAK but would continue
pplier only. The representatives of the
ese proposals, considering further reflection
as asked to put his company's position in
ardella wrote via SIVAK to the Minister attaching ten
r amounts covering the balance which Gardella alleged to be owing to
erials for the first portion of the project. Gardella
e authorized and endorsed by the Government for
tation to the IMI for payment. The letter referred to Gardella's
tion as technical expertladvisor but did not specifically reiterate the
ken at the meeting of the Board of Directors.
della's further request for action on the part of the Government of 20
ember and 13 December 1973 went unheeded. On 30 January 1974
della wrote to the Minister advising him that if the bills were not
with the CAA for transmission to the IMI by 15
would proceed to initiate arbitration
submitted an application for arbitration to
overnment had terminated the agreements
between the parties by failing to pay Gardella for the services and materi
supplied and by delaying the completion of the necessary formalit1
between the IMI and the CAA for the signature of the interbank agreeme
thereby breaching its obligations under the agreements. Gardella sou
payment of the amounts outstanding, damages for lost profits due to
failure of the project and interest thereon, damages for injury to
reputation and credit rating and costs and expenses. It requested t
appointment of an expert to determine the amount of lost profits and
determine the amount of profits which SIVAK would have made had
project been realized, 50% of which would have gone to Gardella. Gard
also claimed reimbursement of all expenses and loans which it incu
relating to the establishment of SIVAK.
The Government rejected Gardella's arguments on the basis that
were ill-founded and inadmissible and filed a counterclaim against Gar
for damages arising from Gardella's termination of the agreement.
Government also raised a preliminary objection to the jurisdiction of
Tribunal arguing that Gardella's action was against SIVAK and not
Government which was therefore erroneously before the Tribunal.
Held: -TheTribunal had jurisdiction over the dispute and both the cl
and the counterclaim were rejected.
(1) The objection raised by the Government did not relate to
competence of the Tribunal but was, rather, a dispute relating to the rig
of SIVAK and to whether the Government or SIVAK would be responsible
the debts. This argument related to the merits of the case and
interpretation of the 1970 and 1971 Agreements. It was therefore not a
to the jurisdiction of the Tribunal (pp. 287).
(2) It had not been established that either party had failed to perfor
obligations incumbent on them prior to the autumn of 1973. Furthermor
no time until the opening of the arbitration proceedings had Gard
availed itself of the delays of the Government as a ground for terminati
the agreement. Rather, it had continued to express a desire to carry on
project as modified. Gardella was therefore estopped from claim
damages for non-performance by the Government (pp. 288-9).
(3) The Government was under no obligation to give effect to Garde
letter of 3 October requesting the authorization and endorsement of
bills. Gardella had repudiated the agreements binding on the parties a
meeting of the Board of Directors and the letter, while not confirming
repudiation, had in no way weakened it. Gardella could not, therefore, r
on agreements whichit had already renounced to hold the Government t
obligations thereunder (pp. 289-92).
(4) The Government had made no attempt to hold Gardella acconnta
to perform its contractual obligations and had itself, shown little alacrit
carrying out the project. It had thereby manifested its own willingne
renounce the continuation of the joint venture and could not hold Gar
responsible for any damages arising therefrom (pp. 293).
(5) The Tribunal had no jurisdiction to order the dissolution or win
was therefore unable to calculate or divide up the assets of
VAK between the parties (pp. 294).
(6) The parties would each bear all their own costs of the proceedings and
e half of the costs and expenses of the Tribunal and the Centre
is a translation from the French of that portion of the Award
ich has been released for publication:
As to the Objection to the Jurisdiction of the Tribunal Raised by the
ant to Article 9, paragraph 4 of the Protocol of Agreement of 6
ust 1970, Gardella is entitled to take action, in the present arbitration
against the Government of the Ivory Coast and to formulate
on the aforesaid agreement. The submissions put forward by
ella have all been directed against the Government of the Ivory Coast;
are based on the supplementary agreement of 6 August 1970 as
the supplementary agreement of 13 November 1971. These
issions thus fall within the framework of the dispute submitted,
gh the common will of the parties, to the present arbitration.
lity, the argument raised by the respondent does not deal with
mpetence of the Tribunal to give a ruling on those submissions. It is
better characterized as a dispute over an active or passive justification
parties, of rights which, according to the respondent were given to
K as of right or of debts for which that company would be solely
untahle, to the exclusion of the Government of the Ivory Coast. This
es to disputing the rights to which the claimant would not be
contesting that the Government should be responsible for the
s of which the only debtor would be SIVAK. This argument relates to the
se. It will be examined with the meritsif necessary. Therefore
bjection to the competence of the Tribunal is rejected.
s to the Merits:
. Both parties admit that their agreement is governed by the law of the
Coast. Gardella has pleaded, it is true, that the law of the Ivory Coast
to apply, in this case, within the framework and in the context of
ional law. However, Gardella has not drawn any other
lusion from that argument than that it is necessary to have regard to the
"pact sunt servanda" and to the principle of good faith, principles which
qually recognized by the law of the Ivory Coast as well as by French law.
4.4. By their agreements of 25 April and 10 August 1967 and o
August 1970, the parties agreed to pool their resources and their ski1
with a view to sharing the profits resulting from their cooperation.
agreement qualifies as a contract of partnership according to Article
of the Civil Code of the Ivory Coast. Such a contract implies, by its natu
and its object, a collaboration between the parties, consistent with t
goal which they have assigned themselves and in conformity with t
means which they have mutually agreed upon. An essential element
this agreement was the formation of a joint-stock limited li
company organized under the law of the Ivory Coast, S~VAKIvoirian
Agricolc et Industriel du Kenaf at Abidjan, as the instrument
the realization of their joint venture.
It is important to specify, in this regard, that the contract of partner
concluded by the parties could not be assimilated to an agreement bet
two shareholders on the exercise of their ri-rh t to vote in a ioint-st
company, any more than SIVAK could be considered as a "comm
4.5. Despite the grievances put forward by each party, it has not b
established that, up to the beginning of autumn of 1973, any of the pa
had failed to fulfil their obligations.
Without doubt, on severa~occasionsb, efore the autumn of 1973, Ga
had complained of the dilatoriness of its partner. Gardella raises the '
attributing the delays which it blames on the Government of the Ivory
to the influences of representatives of interests opposed to the enterpr
Whether these grievances do not appear devoid of all appearanc
foundation and whether the Tribunal holds that the authorities of the I
Coast showed little alacrity in their cooperation with Gardella, the clai
has not supplied proof of either deliberate delays or of an indisputable
of diligence.
Moreover, and this is decisive, at no moment until the opening o
present proceedings, did Gardella avail itself of the delays of
Government of the Ivory Coast as a ground for termination of the contr
The agreement of 13 November 1971, which instituted a new timeta
did not contain any such reservation.
Without doubt, the timetable provided for in that agreement wa
respected, but, in the terms of the agreement itself, the non-respect o
anticipated schedule involved a simple modification in the timetable.
Moreover, it has not been established that the delay suhsequen
November 1971 could be attributable to the fault of the Government.
financing agreement, a condition precedent to the bringing into operati
the agreement, was signed on 17 November 1972 without the delay i
signing of the loan being imputable to the Government of the Ivory C
except for the period running from the end of August to November 1972
IMr having transmitted the text of the contract to the CAA on 24 Au
Moreover, and this is also determinative, in September and October 1
while certainly complaining of the slowness of its partner, Gardella
avail itself o i a delay by its partner as a ground-for termination. On
contrary, still at the end of September 1973, Gardelfa made manifes
resolve to carry on the joint venture according to the terms which had been
modified as a result of the changes in the economic conditions.
The Tribunal therefore does not find any complaint prior to September
973 which justifies the claim by Gardella to damages for the nonvernment
of the Ivory Coast of its obligations.
entially avails itself of the refusal of the Government
e effect to its letter of 3 October 1973 in which the
vernment was invited to endorse ten bills of exchange in the amount of
986,070,000 Italian Lira and to authorize SIVAK to accept those hills.
rdella maintains that this refusal constitutes a faulty non-performance of
agreements binding upon the parties. Accordingly, it claims full
mpensation for the damage which it says it has suffered because of the
hat damage comprising the
instance, on the claimant to
ahlish that in regard to the obligations assumed by the Government, it
rcise thereof that the Government give effect to
s, based on the conclusions of a
e Government (the "Brown
sier"), had as their object the cultivation of 20,000 hectares of hemp, the
hlishment of a factory with the annual production capacity of 6,000
rticles, the commercialization on the foreign
rkets of processed goods, as well as that of fibre not processed on the spot
otocol of 25 April 1967, Article I). Article IV(4) of the agreement of 6
gust 1970, confirms that the production of the factory was conceived to be
entially for export. The study carried out by Gardella predicted that the
e plant ought to produce:
during a first period, 4,000 tonnes of fibres for export;
during a second period, 8,000 tonnes of fibres for export;
during a third period, 16,000 tonnes of fibres, part of which was
destined for export and the rest for use in the textile factory, which
ought, in 1975-76 (3rd period) to have produced around 6 million bags
per year ("Brown Dossier", annexe 115 of the economic sub-dossier).
alculated at around US $450,000.
lements of the agreement between the parties,
h were not affected by the supplementary agreemcnt of 13 November
73, Gardella communicated to its partner a
cia1 study dated July 1973 (called the "Yellow
arried out on its bchalf by experts whose
this report confirms, in the essential elements, the previous technical
ancial conclusions are, on the other hand,
om this new study that the economic conditions had
riorated. It was proposed to reduce from 20,000 to 12,000 hectares the
of the plantations, in order to produce 9,600 tonnes per year, of which
approximately 3,500 tonnes would be exportable at advantag
conditions; the balance "which does not have the possibility of profi
sale", would have to be converted into manufactured products, that
"approximately 6 millions bags per year, of which the market in the I
Coast has a need" (Yellow Dossier, Exh. XI1 of Gardella, p. 19).
production of other products (string, rope, etc.) was eliminated due to t
competition of synthetic fibres. The consequence was the necessity
proceed without delay with the construction of the factory.
The conclusions of this study led Gardella to present new proposals t
partners, consisting, essentially, of limiting the production to 8,000
10,000 hectares and to constructing the textile factory immediately.
On this last point, among others, the proposal differed from t
agreement of 1971, which provided for the commencement of the operat
of the textile factory as from September 1974, in parallel with a produc
of 16,000 tonnes of fibres - even though in 1973 the area under cultivat
was still at a level of 600 hectares.
Gardella laid stress on the evolution of the situation, only about 40Y
the hemp being exportable, the rest would have to be processed; it no
that the 1971 timetable had been overrun, that the evolution of the mar
was such that one could no longer take account of that timetable, that
factory ought to be completed simultaneously with the first availabilit
raw material - and not with the last period.
These proposals, were presented by MI Adriano Gardella, actin
behalf of Gardella, at the meeting of the Board of Directors of SIVAK o
September 1973, which was attended by, in particular, Messrs Aka An
and Lazare Y&bou&, the Government's representatives on the Boar
The representatives of the Government of the Ivory Coast on the Boar
Directors were unable to accept these new proposals, in particular, as
the immediate construction of the factory was concerned.
Nevertheless, Mr Gardella persisted in his opinion, presentin
submissions as "final", excluding all other solutions, declaring, accor
the minutes of the meeting, the accuracy of which he admitted du
testimony, that if these proposals were not accepted "his group will no
any longer as a partner, but in the capacity of an expert. It will be nec
to consider its role as that of supplier and no longer as that of a par
SIVAK" (Minutes, p. 16).
As for the Government of the Ivory Coast, the proposal was
envisage the construction of the factory as soon as the plantation ha
of 3,000 hectares, whereas the timetable established by the agreement o
November 1971 provided for this construction once production had rea
16,000 tonnes of fibres.
This compromise proposal was not accepted by Mr Gardella, who cle
and repeatedly argued that the decision to immediately construct the fa
was a condition of maintaining his cooperation as a partner.
At the end of the meeting, Mr Gardella was asked to clarify the positio
his group in writing, to which he did not object.
One would have expected that after this meeting Mr Gardella would
larified his position, whether he confirmed it, or whether he envisaged an
termediate solution, such as his partners had suggested.
Instead, his letter of 3 October 1973 to the Minister of Economics and
inance, cited in paragraph 2.19,1'1 which referred paradoxically "to the
reements made at the last meetings of the Board of Directors of SIVAK",
not make any mention of the fundamental disagreement which had
anifested itself at that meeting and addressed, as though nothing had
ppened, the issue of the endorsement of the bills by the Government and
be signed by SIVAK.
That letter does not weaken the categorical declarations presented as the
pression of an irrevocable decision, declarations according to which if the
overnment did not accept his proposal, Gardella would cease to be a
tner and its role would become simply one of supplier. The letter is
biguous in that the bills presented for endorsement by the Government
responded to the costs of clearing the land foreseen for the second
iod, 8,000 hectares, the area of which, in its last proposals, Gardella had
ited its partner to limit the exploitation of. These indications could have
the Government to believe that Gardella was maintaining the position
ich it had taken at the meeting of the Board of Directors of 13 September
.7. Gardella was not entitled, under the agreements, to demand of its
tner a complete change of the agreed conditions of exploitation. It did
constitute, in fact, a simple "updating", provided for in the agreement as
adjustments relating to execution deadlines and prices and
itated by the evolution of the economic conditions, but an essential
cation of the fundamental bases of the agreement: the areas to be
'ted were reduced by a half; the intended destination of the products,
'ally for export under the terms of the agreement, was totally
ed; the processing of the fibres became the primary goal and was to
cide with "the first availability of raw material", while according to the
ement the processing would not occur until the last period which was to
at the end of the programme. Moreover, under the terms of the
ement of 6 August 1970, the readjustments relating to the factory had to
pproved by the Government.
ardella could only obtain such a modification to the basic terms of the
nership agreement with the consent of its partner. But it could not
ose this. Without doubt, in view of the conclusions of the Yellow
sier, it was entitled, in the absence of any agreement, having regard to
tides 1865(5) and 1869 of the Civil Code, to put an end to the partnership
eement. Such renunciation could not amount to bad faith: the execution
he project had singularly dragged on and, in the meantime, the economic
nditions had deteriorated. Gardella was especially entitled to avail itself
his fact as, by the agreement of 6 August 1970, it had assumed rather
vy responsibilities and had accepted considerable risks, in particular by
ranteeing the total disposal of the production for a long period of time,
ontracting to cover all losses, and by givingits shares in SIVAK as security.
his part of the decision has not been not released for publication.]
The Government did not have the right to demand that, in spite of the
economic conditions, Gardella should persevere in its cooperation in
particularly heavy conditions to which it had agreed in August 1970.
Gardella appears to have been aware of this situation. Its position at
meeting of 13 September was perfectly clear and explicit: if its partner
not agree to its proposals, Gardella would cease to be a partner and wo
remain as a supplier only. As the representatives of the Government refu
to accept those proposals and, in particular, firmly declared that it was o
the question to commission the immediate construction of the factor
particular, it can only be concluded that Gardella renounced the partners
agreement. Its position could be interpreted as a renunciation of
partnership agreement, addressed to the representatives of the Governm
of the Ivory Coast, validly putting an end to the partnership agreemen
It is, however, not necessary to decide this issue. It is sufficient, i
to establish, for the purposes of Gardella's claims to damages,
position taken by Gardella, on 13 September 1973, which was
contradicted by its letter of 3 October, deprives such claims
foundation. Gardella could not pretend, by relying on the agreem
1967 and 1970, that the Government should carry out obligations arls
from agreements which Gardella had announced, a few days previ
that if its proposals were not accepted - and they were not -, would ce
be binding upon it, that Gardella would no longer act as a partner.
Certainly, Gardella had declared that it would continue its role as su
and expert. But it could not disassociate its obligations towa
Government, which was bound by the partnership agreement which
whole and is not divisible. At no time had the Government envis
assuming sole responsibility for the venture and to act as manager o
factory, reducing Gardella's role to that of entrepreneur and tech
consultant, as witnessed by a reading of the aforementioned clauses
agreement of August 1970, according to which Gardella guaranteed t
of the products and took under its charge the eventual losses.
In short, by refusing to abide by the contract, Gardella could not, u
the terms of the same contract, demand of the Government
endorsement of the bills of exchange and its agreement to their accepta
The claimant therefore cannot invoke the non-performance by its pa
of its obligations and, accordingly, cannot claim damages.
It is unnecessary, therefore, to examine whether its claim won
doomed to failure for other reasons, argued at length by the par '
particular, the validity of the orders with regard to Article 40
Companies Act of 20 July 1867, the regularity of the summons, and
conformity of the amount of the bills with the parties' agreement.
Finally, one cannot isolate the letter of 3 October 1973 and consid
without taking the declaration of Gardella at the meeting of 13 Septem
into account. If the claimant, by that letter, had intended to go back
declarations of 13 September, if it intended to place its demand to ha
bills signed and endorsed within the scope of the agreement, with whlc
had the intention of strictly complying, it was incumbent on i
quivocally retract its remarks of 13 September. The Tribunal is,
ever, convinced that that was not the intention of Gardella.
.8. The Government of the Ivory Coast, for its part, appears to have
pted well to the situation created by Gardella.
did not respond to the letter of 3 October and remained in a state of
ectancy. It did not express any objection or the least reservation. It left
nswered Gardella's communications of 13 December 1973 and 30
uary 1974, which insisted that effect should be given to its letter of 3
ober. It did not deem it necessary to clarify the situation. Finally, at no
, did the Government put Gardella on notice to perform its obligations
onformity with the agreements of 1967,1970 and 1971.
o useful deduction can be drawn from the copy of a letter, whose
atory is unknown, written on SIVAK letterhead and addressed to the
ector of SIVAK (Exh. 76 of the respondent).
n attempt to reconcile the parties made in 1974- at the time the present
ton was started - by the former ambassador of Italy to Abidjan, Mr
lasco, was cut short. Mr A. Gardella, who hadcome expressly to Abidjan
he request of Mr Bolasco, was informed, upon his arrival, that the
uncil of Ministers had decided not to pursue that matter any further.
he Government, which in the course of the preceding years had already
little eagerness in carrying out the project, had, therefore,
sted its willingness to renounce, on its part, the continuation of the
ccordingly, the Government cannot claim damages for the nonormance
by its partner of a partnership agreement, which, moreover,
osing that it had not done so on 13 September 1973, Gardella was
led in law to renounce.
inally there is no reason to hold the annulment of the contract against
of the parties to an agreement, the performance of which neither party
nded to carry on, each party having expressed its will to renounce the
uit, on the agreed conditions, of the joint venture. The company
stituted by these agreements between the parties was, therefore,
olved in any event, by the will of both parties from March 1974 at the
.9. The counterclaim (2) presented by the Government of the Ivory
st in its Counter-Memorial seeks a declaration "that the provisions of
cle VIII of the Protocol dated 24 April 1967 relating to the recovery of
goods F.O.B. by Gardella are applicable".
clause aims at the hypothesis in which the results of the trials would
themselves to be inferior to the predictions. Now it has not been
by the arguments that the results of the trials, by which the
derstands the cultivation trials, were lower than the expectations
ies. The counterclaim must therefore be rejected.
Tribunal has considered whether some of the claims submitted
each side could be awarded not as damages for the non-performance of
agreement, the conditions for which were not, in its opinion, fulfilled,
rather in respect of the settlement of the partner's accounts. Could one
ermine the amount of the respective contributions to be brought into the
liquidation account of the company formed by the parties, would that, in t
application of the rules of the company, allow the Tribunal to order one
the parties to restore the equality of the contributions, in conformity w~t
the Protocol of 6 August 1970?
However, the company having been dissolved, these are transactio
which must take place within the framework of the division of the prope
insofar as the assets, after payment of debts, do not permit the restoration
the equality of the contributions.
This would lead, therefore, to the liquidation of the company, that is
the division between the partners within the meaning of Article 1872 oft
Civil Code, a matter with which the Tribunal is not seized. Furthermore, t
settlement between the partners assumes that what should first be dissolve
and liquidated is SIVAK, the organization in which the two partn
combined their resources and skills. It is through the intermediary of srv
that the transactions involved in the execution of the agreements betwe
the parties occurred, to the exclusion of any direct contributions
payments between the partners.
Moreover, unless the parties reach an agreement on the fate of SIVAKt,
issue of whether one partner will remain the debtor of the other will res
from the liquidation of SIVAK.
Now the Tribunal does not have the jurisdiction either to order
dissolution or to originate the liquidation of SIVAK.
4.11. It is fitting, therefore, to reject all the submissions of the parti
C. Cost of the Arbitration
4.12. Article 61(2), of the Convention for the Settlement of Investm
Disputes provides that, in the absence of an agreement between the parti
the Tribunal shall assess the expenses incurred by the parties in connect'
with the proceedings and shall decide the methods of division and
payment of the said expenses, the costs and expenses of the members of
Tribunal and the amounts due for the use of the facilities of the Centre. T
decision is an integral part of the award.
Neither the above mentioned Convention, nor the Arbitration Rul
impose any rules on arbitrators as to the distribution of costs.
The distribution is therefore left to the discretion of the arbitrators.
The submissions of the two parties are entirely rejected.
Without doubt, the submissions of the claimant appear more substan
than the counterclaim - the latter not having been examined at this st
the proceedings - and have given rise to the greater part of the argu
Nevertheless, in view of the circumstances of the case, the Tr'
considers it equitable that each party should bear its own costs and expen
incurred in connection with the proceedings and that the costs and expen
of the Tribunal, as well as the charges for the use of the facilities of
Centre should he divided equally between the parties.
It is therefore not necessary to assess the expenses incurred by the part
in connection with the proceedings.
- ~ ~ ~ ~ -~~ -ppp-~~ ~~ ~~ ~~ ..
The costs and expenses of the members of the Tribunal and the sums due
for the use of the facilities of the Centre, including the cost of transcription of
he arguments, are calculated at SF 246,865.96.
For these reasons,
The Arbitration Tribunal, having deliberated fully and behind closed
doors, deciding unanimously,
As to the Objection to Jurisdiction:
The objection to jurisdiction raised by the respondent is rejected.
As to the Merits:
All the submissions of the parties, including the counterclaim, are
. As to the Costs of the Arbitration and the Costs of the Parties:
1. Each party will bear its own costs of the proceedings.
2. Each party will bear one half of the costs and expenses of the Tribunal
and the dues due for the use of the facilities of the Centre, assessed at
246,865.96 Swiss Francs.