Addiko Bank AG v. Montenegro

Case summary

At a glance

Parties: Addiko Bank AG (Austria) v. Montenegro
Case no.: ICSID Case No. ARB/17/35
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceedings Washington, D.C.; hearing held in Paris
Treaty: Austria–Federal Republic of Yugoslavia BIT, signed 12 October 2001, in force 1 August 2002
Tribunal: Prof. Bernard Hanotiau (President), Mr. Pierre-Yves Tschanz, Prof. Brigitte Stern
Sector: Banking; Swiss franc-indexed mortgage loans
Outcome: Award of 24 November 2021: jurisdiction upheld and claims admissible, but no breach of the BIT found; all claims dismissed.
Amount: Amount claimed is redacted in the published excerpts. Nothing awarded. The Claimant must reimburse 70% of the Respondent's costs: USD 261,240.18 of arbitration costs and EUR 1,116,681.26 of legal costs, with no interest.

The dispute

Addiko Bank AG is an Austrian bank. It owned a Montenegrin bank that issued Swiss franc-indexed mortgage loans between 2006 and 2011. Under these loans, borrowers repaid in euros at the CHF rate on the date of payment. The Swiss franc rose sharply after the Swiss National Bank dropped its ceiling exchange rate in 2015. Montenegro's Parliament then adopted the Law on Conversion (31 July 2015) and an Amendment (1 September 2016). Together they converted all CHF loans into euros, retroactively, at the exchange rate on the date of each loan agreement, fixed interest at 8.2% a year, and required repayment of any excess payments. The Claimant argued that these retroactive and mandatory measures breached fair and equitable treatment and full protection and security under Article 2(2) of the BIT, as well as Montenegrin constitutional guarantees and EU law principles. Montenegro objected to jurisdiction (no "active" investment, no protected investor), argued that the claims were inadmissible under the fork-in-the-road clause because the Bank had already brought a case in the Montenegrin Constitutional Court, and denied any breach.

Key holdings

Jurisdiction upheld. The Claimant's shares in the Bank are a qualifying investment under Article 1(1) of the BIT and Article 25(1) of the ICSID Convention, whether a subjective or an objective (Salini) test is applied. The 2015–2016 capital contributions and the subordinated loan form part of the same investment. The Claimant acquired the shares when the transfer was registered on 26 March 2014, not on the earlier contractual Effective Date. ¶¶ 316–347
The Claimant is a protected investor. "Making an investment" in Article 1(2) means acquiring title or control; it does not require an "active" investment or an exchange of value. ¶¶ 351–361
The claims are admissible. The fork-in-the-road clause in Article 9(2)–(3) applies only to the same dispute. The Constitutional Court case, which concerned constitutionality under Montenegrin law, had a different object and cause of action from the BIT claims. One member reached the same result by applying the fundamental basis of the claims test. ¶¶ 400–410
Fair and equitable treatment in Article 2(2) is an autonomous standard, but the threshold is high and the State keeps its right to regulate. There was no breach of due process or good faith: the abbreviated parliamentary procedure was justified, and the Law served a genuine public purpose, namely relieving distressed CHF borrowers. There were no legitimate expectations: Montenegro gave no specific or implied assurances, the Claimant did no due diligence, and Article 2(1) is aspirational, not a stabilisation clause. ¶¶ 543–666
The measures were not discriminatory, because euro-denominated loans are not a valid comparator. They were not disproportionate: the retroactivity was justified, the burden was offset by the 8.2% rate, and no excessive burden was shown. They were not unreasonable or arbitrary. ¶¶ 677–757
Full protection and security covers only physical protection against acts of third parties. Even if it covered legal security, it would not be breached. The Tribunal declined to review Montenegrin constitutional law or EU law claims already decided by the Constitutional Court. The damages claim was dismissed. ¶¶ 778–828
Costs follow the event, adjusted for the Claimant's success on jurisdiction and admissibility. The Claimant bears its own costs and reimburses 70% of the Respondent's share of the arbitration costs (USD 261,240.18) and 70% of its legal costs (EUR 1,116,681.26) within 30 days. No interest is awarded. Total arbitration costs were USD 746,400.52. ¶¶ 859–867

Procedural history

5 September 2017Request for Arbitration filed (received by ICSID on 6 September 2017).
19 September 2017Request registered by the ICSID Secretary-General.
7 May 2018Tribunal constituted.
6 July 2018Procedural Order No. 1 issued after the first session of 2 July 2018.
18 July 2019Procedural Order No. 3 partly grants Montenegro's request for unredacted documents, including the due diligence report.
16–19 December 2019Hearing held in Paris.
18 April 2020Post-hearing briefs filed; costs submissions follow on 27 April and 12 May 2020.
30 September 2021Proceeding declared closed.
24 November 2021Award: jurisdiction and admissibility upheld, no breach of the BIT, claims dismissed, 70% costs order against the Claimant.