Muhammet Çap & Sehil In_aat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan

Case summary

At a glance

Parties: Muhammet Çap (Turkey) and Sehil İnşaat Endüstri ve Ticaret Ltd. Şti. (Turkey; later in bankruptcy, styled "Bankrupt Sehil") v. Turkmenistan
Case no.: ICSID Case No. ARB/12/6
Forum and rules: ICSID Convention; ICSID Arbitration Rules in effect from 10 April 2006; place of proceedings Washington, D.C. (hearings held in Paris)
Treaty: Turkey–Turkmenistan BIT of 2 May 1992
Tribunal: Julian D.M. Lew (President), Laurence Boisson de Chazournes, Bernard Hanotiau
Sector: Construction
Outcome: Jurisdictional objection under Article VII(2) dismissed (13 February 2015). An Award dated 4 May 2021 was issued, but the published extract does not include its findings or operative part.
Amount: Request for Arbitration: no less than USD 300 million. Later claims by Sehil: outstanding receivables USD 121,770,424, confiscated assets USD 10,758,373, reduced margin USD 92,115,092 and loss of enterprise value USD 188,368,000. Moral damages of USD 35 million were claimed, of which Mr Çap claimed USD 30 million for himself. The amount awarded is not shown in the published extract.

The dispute

Sehil is a Turkish construction company majority-owned by Mr Çap. From 2000 it built government and commercial buildings in Turkmenistan, many of them under presidential decrees or orders. The claimants alleged that after a new President took office in 2007, the Turkmen authorities ordered extra work without paying for it, withheld interim payments, terminated or withdrew projects, and harassed Mr Çap, his sons and his staff, so that they had to leave the country in 2010. They also alleged that the authorities took control of equipment worth over USD 10 million and sealed Sehil's site and office in November 2010. The claimants relied on the BIT's provisions on expropriation, fair and equitable treatment, protection and security, and most-favoured-nation treatment. Turkmenistan argued that the claims were contractual disputes for its local courts. It first objected that Article VII(2) required the claimants to go to the Turkmen courts before arbitrating. It later raised further jurisdictional objections and counterclaims.

Key holdings

Only the English and Russian texts are authentic. The Turkish text was prepared later, only for ratification by the Turkish Parliament, and the reference in the Russian text to Turkish and Turkmen versions has no basis. Decision on Jurisdiction ¶¶ 134–138
The proviso in Article VII(2) is ambiguous in both authentic texts. The Russian text is a translation of the English original prepared by Turkey and carries the same ambiguity in the phrase "pri uslovii, esli". Being the original gives the English text no prevailing value. Decision on Jurisdiction ¶¶ 207, 220–234
Read in context and in light of the BIT's object and purpose, recourse to local courts is optional. The chapeau lets the investor choose arbitration once the six-month cooling-off period has passed. Only an investor who chooses the local courts must wait one year for a decision before arbitrating. A mandatory reading would be illogical and would undermine the preamble's 'stable framework for investment'. Decision on Jurisdiction ¶¶ 238–247
Turkey's other BITs and the Turkish translation are translated inconsistently and do not help to interpret the provision. The Tribunal departed from the Kılıç v. Turkmenistan decision because it had fresh evidence, including Mrs Özbilgiç's testimony, and because it found that the English text was the original. Decision on Jurisdiction ¶¶ 262–275
Jurisdiction upheld. The claimants gave written notice, waited six months and chose ICSID arbitration. The Tribunal therefore did not need to decide the alternative MFN and futility arguments. Costs were reserved. Decision on Jurisdiction ¶¶ 280–287
In Procedural Order No. 3 the Tribunal ordered the claimants to disclose whether a third party funds their claims and, if so, the funder's identity and the terms of the funding. The reasons were the integrity of the proceedings and possible arbitrator conflicts, Turkmenistan's planned request for security for costs, and the unpaid costs award in Kılıç. PO No. 3 ¶¶ 8–13

Procedural history

23 February 2012ICSID receives the Request for Arbitration dated 21 February 2012. It registers the case on 26 March 2012.
22 October 2012Tribunal constituted.
23 June 2014Procedural Order No. 2 rejects Turkmenistan's first request for disclosure of third-party funding.
13 February 2015Decision on Jurisdiction under Article VII(2): objection dismissed.
12 June 2015Procedural Order No. 3 orders disclosure of third-party funding. The claimants disclose La Française IC Fund Sicav-Fis as their funder.
3 August 2015Tribunal rejects Turkmenistan's application for reconsideration of the Decision on Jurisdiction.
9 February 2016Procedural Order No. 6 rejects Turkmenistan's request for USD 4 million in security for costs.
13–21 February 2017Hearing on jurisdiction and the merits in Paris.
16 March 2018The two unchallenged members reject Turkmenistan's proposal to disqualify Bernard Hanotiau. Sehil's bankruptcy in Turkey then leads to new counsel for Sehil.
13 December 2018Decision on the parties' requests for provisional measures: the specific requests are refused, and the Tribunal makes recommendations to protect the integrity of the arbitration.
4 May 2021Award issued. The published extract does not show its findings.