Optima Ventures LLC, Optima 7171 LLC and Optima 55 Public Square LLC v. United States of America

Case summary

At a glance

Parties: Optima Ventures LLC, Optima 7171 LLC and Optima 55 Public Square LLC (Delaware companies indirectly owned and controlled by Ukrainian nationals) v. United States of America
Case no.: ICSID Case No. ARB/21/11 (merged with ARB/21/12, which was discontinued)
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding The Hague
Treaty: United States–Ukraine BIT (signed 4 March 1994, in force 16 November 1996)
Tribunal: Prof. Mónica Pinto (President), Prof. Jan Paulsson, Mr. David Pawlak (replaced the disqualified arbitrator, named in the published decision only as "Mr. M.")
Sector: Real estate; civil asset forfeiture
Outcome: The respondent-appointed arbitrator was disqualified (20 December 2022). The United States' Rule 41(5) preliminary objections were dismissed (19 January 2024), and costs were reserved.
Amount: Claimed: about USD 23,250,000 (Texas Property) and USD 587,365.74 (Ohio Property), plus interest.

The dispute

The claimants are Delaware companies set up by Ukrainian nationals Ihor Kolomoisky and Gennadiy Boholiubov, the former owners of PrivatBank, together with US citizens Mordechai Korf and Uriel Laber. Through these companies they owned the CompuCom Campus in Dallas, Texas and 55 Public Square in Cleveland, Ohio. In 2020 the US Department of Justice brought civil forfeiture actions in rem against both properties. It alleged that they had been bought with funds misappropriated from PrivatBank. It also obtained an ex parte restraining order, filed a lis pendens and issued a press release. The properties were then sold under court order, with the proceeds held pending the litigation. The claimants allege that the measures breached fair and equitable treatment, the bar on arbitrary measures, the effective means clause and the expropriation clause of the BIT. They argue that the US exceeded the limits of prescriptive jurisdiction and comity in international law. The United States answers that the claims were filed before the six-month waiting period had run, that they are inchoate because the forfeiture cases are not final, and that comity and prescriptive jurisdiction cannot found a treaty breach.

Key holdings

The Chair of the ICSID Administrative Council upheld the proposal to disqualify the respondent-appointed arbitrator. The arbitrator sat on the US Homeland Security Advisory Council while serving on the Tribunal, so he was advising a disputing party. This created a manifest appearance of lack of impartiality. It did not matter that he was unpaid or that he offered to resign from the Council: the decision rests on the facts as they stood, and he still held two incompatible positions. Disqualification Decision ¶¶ 85–94, 109
The arbitrator's past government service, which ended in 2009 when his term as Secretary of Homeland Security ended, did not by itself show a manifest lack of impartiality. His US nationality was not a ground either, because the parties had agreed to set aside the nationality rule of Article 39. Nor were his academic statements, his past advocacy as a prosecutor, or the speculative claims that he had access to confidential information. The Chair found it moot to decide the ground of acquiescence in interrogation practices. Disqualification Decision ¶¶ 73–78, 100–107
Under Rule 41(5), a claim that is tenable, arguable or colourable on the facts asserted survives. The procedure applies only undisputed rules of law to uncontested facts. Rule 41(5) Decision ¶¶ 95–96
The waiting-period objection was dismissed. When the dispute arose, whether the six-month period in Article VI is mandatory and jurisdictional, and whether the MFN clause allows it to be bypassed, all require weighing facts and resolving debatable legal issues. Rule 41(5) Decision ¶¶ 102–104
The ripeness objection was dismissed. The claims under Articles II and III cannot be dismissed summarily. Whether judicial finality or exhaustion is required, what remedies US forfeiture law offers, how much loss an expropriation requires, and what the treaty standards mean all involve complex law and contested facts. Rule 41(5) Decision ¶¶ 105–110
The objection on comity and prescriptive jurisdiction was dismissed. It raises novel issues, apparently of first impression before an ICSID tribunal, and these cannot be resolved under Rule 41(5). Costs were reserved. Rule 41(5) Decision ¶¶ 99–101 (Section VIII.3), 112–113

Procedural history

8 and 25 February 2021Two Requests for Arbitration filed, one for the Texas Property and one for the Ohio Property. ICSID registered both on 16 March 2021 as ARB/21/11 and ARB/21/12.
11–16 June 2021The parties agreed to discontinue ARB/21/12 and to add all three claimants to ARB/21/11.
6 July 2022Tribunal constituted: Mónica Pinto (President, appointed by the Secretary-General), Jan Paulsson and the respondent-appointed arbitrator.
15 July 2022The claimants proposed the disqualification of the respondent-appointed arbitrator. The two other members could not agree, so the proposal went to the Chair of the Administrative Council.
20 December 2022Decision of the Chair of the ICSID Administrative Council upholding the disqualification.
24 January 2023Tribunal reconstituted with David Pawlak, appointed by the respondent.
14 February 2023The United States filed preliminary objections under Rule 41(5).
20 March 2023Procedural Order No. 1 issued. The place of proceeding is The Hague and the procedural language is English.
24 October 2023Hearing on the preliminary objections held by video conference.
19 January 2024Decision dismissing the Rule 41(5) preliminary objections; costs reserved.

Tribunal, counsel and experts

Decided by: Mónica Pinto President — appointed by the institution
Jan Paulsson Co-arbitrator — appointed by the claimant
David Pawlak Co-arbitrator — appointed by the respondent (replaced the disqualified arbitrator; accepted appointment on 23 January 2023)
David Malpass Chair of the ICSID Administrative Council, Chair of the ICSID Administrative Council (decided the disqualification proposal)
For the claimant: Black Srebnick P.A. · Roche Freedman LLP (later Freedman Normand Friedland LLP) · Kasowitz Benson Torres LLP
For the respondent: Office of International Claims and Investment Disputes (L/CID), US Department of State · Department of Justice