AHG Industry GmbH & Co. KG v. Republic of Iraq

Case summary

At a glance

Parties: AHG Industry GmbH & Co. KG (Germany) v. Republic of Iraq
Case no.: ICSID Case No. ARB/20/21
Forum and rules: ICSID Convention; ICSID Arbitration Rules 2006 (Rule 41(5) expedited objection); place of proceeding Paris
Treaty: Claimant invoked Iraq-Germany BIT (signed 4 December 2010, not in force), EU-Iraq Partnership and Cooperation Agreement with Iraq-France BIT, Iraqi Investment Law No. 13 of 2006, Kurdistan Law No. 4 of 2006, Law No. 64 of 2012, and the Kirkuk Cement Factory Rehabilitation Contract
Tribunal: Dr. Yas Banifatemi (President), Judge Awn Al-Khasawneh, Professor Lucy Reed
Sector: Cement manufacturing; PVC/HDPE pipe plant
Outcome: Claims dismissed under Rule 41(5) for manifest lack of jurisdiction (30 September 2022); the PCA/MFN ground was rejected by majority, with a minority view that it was not manifestly without merit.
Amount: The claimant's 2018 notice of dispute alleged losses of US$ 861,045,813.35 (Kirkuk Cement Plant) and over US$ 17 million (Erbil Pipe Plant). Nothing awarded. Each party bears its own representation costs; arbitration costs shared equally.

The dispute

AHG, a German company, signed the Kirkuk Cement Factory Rehabilitation and Operation Contract of 20 April 2008 with the Iraqi General Company for Cement (the Iraqi Cement State Company, ICSC), together with the Middle East Company and Salahaddin Holding Company. AHG alleged that Iraq terminated the contract in February 2009. It said the contract was revived by an Addendum of 5 January 2016, after which, from 2017, Iraq failed to provide security, expelled AHG and gave the plant to other operators in April 2018. AHG also complained of the takeover of its Erbil pipe plant in Kurdistan. AHG relied on several instruments to establish Iraq's consent to ICSID arbitration, on their own and in combination. Iraq filed an objection under ICSID Rule 41(5) arguing that none of these instruments contains its consent to ICSID arbitration.

Key holdings

The Iraq-Germany BIT never entered into force because Germany did not ratify it. Iraq's ratification law (Law No. 60 of 2012) is only a domestic procedure. It is not a unilateral declaration of consent to ICSID arbitration. This ground is manifestly without legal merit. ¶¶ 68–77
By majority, the Tribunal held that the MFN clause in Article 25(2) of the EU-Iraq PCA cannot import the ICSID consent in Article 8 of the Iraq-France BIT. Annex 4 (Ad Article 23(2)) excludes investment protection and investor-State dispute settlement. The PCA and the BIT do not cover the same subject matter (ejusdem generis). France, as a PCA party, is not a 'third country'. Article 27 is only a without-prejudice clause. The minority found that this argument was not manifestly without legal merit, given the ambiguity of Ad Article 23. ¶¶ 97–112
Even assuming Iraq is the real party to the Rehabilitation Contract, Article 26(2) refers to arbitration under the Iraqi law of civil procedure 'or any other substitutable law related to arbitration in Iraq'. Laws ratifying treaties set up no arbitration regime and contain no consent, so they are not such 'substitutable' laws. ¶¶ 125–133
Article 22 of Investment Law No. 13 of 2006 ('additional privileges' under international agreements) is not an offer to arbitrate. Article 27 refers to optional commercial arbitration by separate agreement. The Investor Guides that the Tribunal admitted late into the record do not change this. ¶¶ 155–177
Kurdistan Law No. 4 of 2006 applies only to the Kurdistan Region and cannot bind Iraq. Kurdistan is not a designated constituent subdivision under Article 25(1) and (3) of the ICSID Convention. Article 17 of that law contains no ICSID consent. The Tribunal decided this ground even though the claimant had asked to withdraw it. ¶¶ 185–196
Law No. 64 of 2012 is only the domestic formality for Iraq's accession to the ICSID Convention and contains no specific consent. Grounds that fail on their own cannot be combined to create consent. ¶¶ 203–223
The Tribunal did not apply the principle that costs follow the event. Each party bears its own representation costs, and the parties share the arbitration costs equally. ¶¶ 232–234

Procedural history

5 June 2020ICSID received the Request for Arbitration. It was registered on 26 June 2020.
8 March 2021The Tribunal was constituted.
6 April 2021Iraq filed its preliminary objections under ICSID Rule 41(5).
3 May 2021Procedural Order No. 1 was issued.
29 June 2021Hearing on the Rule 41(5) application, by video conference.
21 January 2022The claimant filed a notice of voluntary partial withdrawal, without prejudice, of the Erbil Pipe Plant claims.
30 September 2022Award: all claims dismissed under Rule 41(5) for manifest lack of jurisdiction.

Tribunal, counsel and experts

Decided by: Yas Banifatemi President — appointed by the parties jointly
Awn Al-Khasawneh Co-arbitrator — appointed by the respondent
Lucy Reed Co-arbitrator — appointed by the claimant
For the claimant: Bracewell LLP
For the respondent: Baker Botts LLP · Kadhims LLP