Naftiran Intertrade Co. (NICO) Limited v. Kingdom of Bahrain

Case summary

At a glance

Parties: Naftiran Intertrade Co. (NICO) Limited (Malaysia, Labuan-registered) v. Kingdom of Bahrain
Case no.: ICSID Case No. ARB/22/34
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules in force from 1 July 2022; place of proceeding Paris
Treaty: Malaysia–Bahrain BIT of 15 June 1999 (in force 28 January 2011)
Tribunal: Dr. Claus von Wobeser (President), Prof. Bernard Hanotiau, Prof. Maxi Scherer
Sector: Banking; frozen bank deposits
Outcome: Procedural only in the published texts. Bifurcation was granted in part: the abuse of process objection and certain legal questions on timing and nationality go to a preliminary phase (12 August 2024). Document production was then ruled on (21 February 2025). The Decision on Preliminary Objections is listed but its text is not included.
Amount: Deposits at issue: EUR 248,548,972.24 (as of 2009). The amount claimed is not stated in the published texts. ICSID initial advance: US$300,000, paid in equal shares.

The dispute

NICO is a company ultimately owned by Iranian shareholders; its parent is NIOC. It placed funds totalling EUR 248,548,972.24 (as of 2009) in accounts at two Bahraini banks, Ithmaar Bank and Gulf Finance House. NICO says that, under a 2010 Central Bank of Bahrain (CBB) directive and later conduct, the banks repeatedly refused to release the funds: the "First Refusals" (2010–2011), the "Second Refusals" (2012) and the "Third Refusals" (from January 2015). It claims that Bahrain is responsible under the Malaysia–Bahrain BIT, including for a lack of transparency. NICO was a Jersey company until it re-domiciled to Labuan, Malaysia on 4 January 2012. It later attempted moves to The Gambia (December 2014) and Nevis (August 2016), and obtained a Malaysian court order of 7 March 2018 on its reinstatement in Labuan. Bahrain raised four preliminary objections: no protected investment (ratione materiae); the Treaty does not reach acts before its entry into force or before NICO became Malaysian (ratione temporis); NICO lacked Malaysian nationality from December 2014 to March 2018 (ratione personae); and abuse of process through nationality changes made once the dispute was foreseeable.

Key holdings

There is no presumption for or against bifurcation and no "high threshold" for ordering it. The Tribunal decides case by case under ICSID Arbitration Rule 44(2), and it exercised that discretion with caution. PO4 ¶¶ 42–45
The ratione materiae objection is not bifurcated and is joined to the merits. On a prima facie view, the bank deposits are likely to qualify as investments. Bahrain gave no legal support for its argument that NICO had to be Malaysian when it made the investment. PO4 ¶¶ 50–51
The abuse of process objection is bifurcated. It is prima facie serious and substantial, it would dispose of the whole dispute if upheld, and it is a discrete issue not inextricably linked to the merits. PO4 ¶¶ 74–76
Two legal questions from the ratione temporis objection are also heard in the preliminary phase: how far the Treaty applies to acts before its entry into force, and how far NICO must have had Treaty nationality at the time of the alleged breach. Whether the Second and Third Refusals are only continuing effects of the CBB Directive is too intertwined with the merits and is joined to them. PO4 ¶¶ 57–61
From the ratione personae objection, the preliminary phase covers two questions: whether NICO was incorporated in Malaysia and protected by the Treaty from December 2014 to March 2018, and what effect the 2018 Malaysian court decision has on its standing. Which claims survive if NICO was not Malaysian in that period is joined to the merits. Costs are reserved. PO4 ¶¶ 64–67, 77
Given the narrow bifurcated issues, the Tribunal rejected all of NICO's requests for documents from Bahrain (on the CBB directives, Saudi and US influence, and Bahrain's reaction to NICO's letters) as not prima facie relevant or material, and some also as overly broad. It granted several of Bahrain's requests, in full or in part: documents of NICO's board and advisers on the move to Labuan, contacts with the Labuan authorities, Nevis law advice, the bundle of exhibits filed with the Nevis High Court affidavit, and NICO's financial statements for 2010–2012, 2017 and 2018. Legal advice from counsel was excluded. Production was due by 10 March 2025. PO5 ¶¶ 15–17 and Annexes A–B
Transparency regime: hearings are closed to the public. ICSID will not publish the written submissions, supporting documents or transcripts. Orders and decisions may be published under ICSID Arbitration Rules 62–63, after a procedure for redacting confidential or protected information. PO2 ¶¶ 12–24