Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya

Case summary

At a glance

Parties: Cortec Mining Kenya Limited (Kenya), Cortec (Pty) Limited and Stirling Capital Limited (England and Wales) v. Republic of Kenya
Case no.: ICSID Case No. ARB/15/29
Forum and rules: ICSID Convention; ICSID Arbitration Rules 2006; place of proceeding Dubai, UAE
Treaty: UK–Kenya BIT of 13 September 1999
Tribunal: Ian Binnie (President), Kanaga Dharmananda, Brigitte Stern
Sector: Mining (niobium and rare earths, Mrima Hill)
Outcome: Claims dismissed for lack of jurisdiction (22 October 2018): Special Mining Licence 351 was void and was not a protected investment. In the alternative, the claims failed on the merits. An annulment proceeding followed; the published documents do not show its outcome.
Amount: The claimants described their claim as damnum emergens above USD 50 million and lucrum cessans above USD 1 billion (quantum was deferred to a later phase). Nothing awarded. Kenya claimed costs of USD 6,452,858.42; the Tribunal halved this and awarded USD 3,226,429.21, plus USD 322,561.14 for Kenya's share of the ICSID costs.

The dispute

CMK, a Kenyan company 70% owned by the UK companies Cortec UK and Stirling (which were in turn owned by the Canadian company Pacific Wildcat), explored Mrima Hill in Kwale County for niobium and rare earths. It held Special Prospecting Licence 256 (4 April 2008). On 7 March 2013, three days after the general election, Commissioner Moses Masibo issued it Special Mining Licence 351 for 21 years. Mrima Hill was a forest reserve, a nature reserve and a national monument. On 5 August 2013 the new government's Cabinet Secretary, Najib Balala, announced the "revocation" of SML 351 as part of a review of licences issued during the "Transition Period"; Kenya says the licence was only suspended. The claimants alleged direct expropriation and breach of fair and equitable treatment under the BIT. Kenya argued that SML 351 was void ab initio for illegality, as the Kenyan High Court had held on 20 March 2015. It also argued that the licence was procured by corruption, that the investment failed the Salini criteria, that the claimants lacked standing as investors and that the cooling-off period had not been respected.

Key holdings

Jurisdiction ratione personae, voluntatis and temporis established. The UK companies' temporary removal from the UK Companies Register was cured when they were restored. Article 8(2) of the BIT, read with Article 25(2)(b) of the ICSID Convention, treats CMK as a UK national. The 'origin of funds' objection fails, and the cooling-off period was satisfied. ¶¶ 270–286
Kenya's corruption allegations against Commissioner Masibo and Jacob Juma are rejected as unproven. No bad faith by the claimants was established. Treating SML 351 as merely 'suspended' does not defeat the claim, because the claimants' activities were effectively ended on 5 August 2013. ¶¶ 244, 308, 312
The BIT protects only lawful investments, even without an express legality clause. An investment such as a licence, which is created by host-State law, must substantially comply with the significant legal requirements of the host State. The Tribunal applies the proportionality test of Kim v. Uzbekistan. ¶¶ 319–321, 343–344
SML 351 was void ab initio. The Commissioner had no power to issue it while Mrima Hill's protected status as a forest and nature reserve remained in place, and without an environmental impact assessment licence from NEMA (EIA Regulations 2003, reg. 4(2)). These were statutory conditions precedent of fundamental importance, so denying treaty protection is a proportionate response. The decision does not rely on the lack of approval from the National Museums of Kenya. ¶¶ 333, 345–365
SPL 256 expired on its own terms on 1 December 2014 without any government action, and it gave no protected entitlement to a mining licence. The exploration data was given freely to the government and is not protected intellectual property. ¶¶ 328–331
In the alternative, on the merits, Kenya proved that SML 351 is not a protected investment. Masibo claimed a discretion he did not have, ignored statutory requirements, and issued the licence under political pressure and out of fear of ICSID litigation. His theory that SML 351 was a 're-grant' of SPL 256 is not credible. ¶¶ 366–387
Costs follow the event, reduced because Kenya's claim was excessive and because it handled the corruption allegations unfairly: it did not put them to Masibo in cross-examination and produced his earlier statements late. Kenya recovers 50% of its costs (USD 3,226,429.21) plus USD 322,561.14 in ICSID costs. ¶¶ 389–405