Agility for Public Warehousing Company K.S.C. v. Republic of Iraq

Case summary

At a glance

Parties: Agility Public Warehousing Company K.S.C. (Kuwait) v. Republic of Iraq
Case no.: ICSID Case No. ARB/17/7
Forum and rules: ICSID Convention; ICSID Arbitration Rules 2006
Treaty: Kuwait–Iraq BIT (in force 4 February 2015)
Tribunal: Cavinder Bull SC (President), John Beechey, Sean D. Murphy. Annulment Committee: Ricardo Ramírez (President), Jacomijn van Haersolte-van Hof, Hi-Taek Shin
Sector: Telecommunications (mobile operator Korek)
Outcome: The Award of 22 February 2021 dismissed all claims. On 8 February 2024 the ad hoc Committee, by majority, annulled the part of the Award on the claim that Iraq failed to implement the CMC Order (¶¶ 98–176 and the matching part of ¶ 279(1)); the dismissal of the denial of justice claim stands.
Amount: Claimed: USD 614.1 million (alternatives of USD 552.7 million, USD 652.1 million and USD 353.1 million). Awarded: nothing. Costs in the Award: Agility to pay USD 5,039,488.28 in fees and costs plus USD 136,116.36 in arbitration costs. Annulment: each side bears its own legal costs; Iraq to pay Agility USD 250,155.18 so that the proceeding's costs are shared equally.

The dispute

In 2007 Agility, through its subsidiary Alcazar, lent USD 250 million to the Iraqi mobile operator Korek under a convertible note. The loan was backed by a guarantee from the Kurdistan Regional Government (KRG). In 2011 Agility and Orange acquired an indirect 44% stake in Korek (the 2011 Equity Transaction), and Agility converted the note into equity as part of that deal. On 2 July 2014 Iraq's Communications and Media Commission (CMC) declared the partnership void and ordered the position as at 13 March 2011 restored. In March 2019 the Kurdistan companies registrar (KCR) put Korek's shares back in the names of the Iraqi shareholders. The Tribunal had already held that the lawfulness of the CMC Order itself was outside its temporal jurisdiction. Agility argued that Iraq's partial and improper implementation of the Order, in particular its failure to reinstate the KRG Guarantee, breached the BIT: expropriation, fair and equitable treatment (FET), impairment, full protection and security, national treatment, and an umbrella clause imported through the most-favoured-nation (MFN) clause. In the alternative, Agility claimed that Iraqi courts denied it justice by refusing to hear challenges to the CMC Order. Iraq answered that the matter was a shareholder dispute and that the KCR Decree did exactly what the CMC Order required.

Key holdings

The CMC Order must be read narrowly. It required only that the share transfer be unwound. It did not require Korek's debt position or the KRG Guarantee to be reinstated, the new shares to be cancelled, or the USD 162.5 million licence fee to be returned. Award ¶ 144
No expropriation. There was no material difference between what the CMC Order required and what the KCR Decree did. The Tribunal therefore treated the Decree as a faithful implementation of an Order whose lawfulness it could not review. Award ¶¶ 145–149
No breach of FET, and the MFN/umbrella clause claim failed. Iraq's failure to answer three letters did not breach FET. The KCR Decree did not violate due process. Agility had no legitimate expectation that the KRG Guarantee would be reinstated, because it had itself exchanged the convertible note for equity in 2011, which extinguished the Guarantee. For the same reason the KRG could not have repudiated the Guarantee. Award ¶¶ 164–173, 184–192
No denial of justice. Refusing IT Ltd leave to intervene, and declining jurisdiction over Korek's challenge because the CMC Appeals Board is the designated appellate authority, were not errors that no competent judge could have made. Iraqi law also gave Korek a route to the civil courts. Award ¶¶ 231, 242, 251
Costs follow the event. Agility pays Iraq's fees and costs of USD 5,039,488.28 and USD 136,116.36 towards the arbitration costs, with interest at 6-month USD LIBOR + 2%, compounded semi-annually, if it does not pay within 30 days. Award ¶ 279
Partial annulment, by majority. The Tribunal framed the question as whether Iraq's manner of implementing the CMC Order breached the BIT, but it never answered it. By equating the KCR Decree with the CMC Order, it extended its jurisdictional bar to a measure over which it had jurisdiction. That was a manifest excess of powers (Article 52(1)(b)) and a failure to state reasons (Article 52(1)(e)). Decision on Annulment ¶¶ 113–119, 150–154, 207
All other annulment grounds were dismissed unanimously. The Committee did not accept that the Tribunal's silence on the corruption allegations, its treatment of the denial of justice claim, or its refusal of document requests on corruption was a manifest excess of powers, a failure to state reasons or a serious departure from a fundamental rule of procedure. Decision on Annulment ¶¶ 127, 139, 159, 181, 194, 208

Procedural history

9 February 2017ICSID received the Request for Arbitration dated 8 February 2017 and registered it on 24 February 2017.
20 December 2017The Tribunal was constituted.
31 October 2018Procedural Order No. 2 granted Iraq's request to bifurcate its ratione temporis objections.
9 July 2019Decision on Jurisdiction: the Tribunal kept the denial of justice claim and the failure-to-implement claim and dismissed the other claims as outside its temporal jurisdiction.
12–16 October 2020Hearing on the merits, held by videoconference.
22 February 2021Award: all claims dismissed; costs awarded to Iraq.
28 May 2021Agility applied for annulment. ICSID registered the application on 4 June 2021, and the ad hoc Committee was constituted on 22 September 2021.
15–16 November 2022Hearing on annulment in London.
25 January 2024Partial dissent by Jacomijn J. van Haersolte-van Hof.
8 February 2024Decision on Annulment: the Committee, by majority, annulled the part of the Award on the implementation claim and dismissed the other grounds unanimously.