Capital Financial Holdings Luxembourg S.A. v. Republic of Cameroon

Case summary

At a glance

Parties: Capital Financial Holdings Luxembourg S.A. (CFHL) v. Republic of Cameroon
Case no.: ICSID Case No. ARB/15/18
Forum and rules: ICSID Convention and ICSID Arbitration Rules; annulment under Article 52 of the ICSID Convention
Treaty: Belgium-Luxembourg Economic Union (BLEU)–Cameroon BIT, in force 1 November 1981
Tribunal: Pierre Tercier (President), Alexis Mourre (dissenting), Alain Pellet
Committee: Loretta Malintoppi (President), Lucinda Low, Karim Hafez
Sector: Banking (Commercial Bank Cameroon)
Outcome: The majority declined jurisdiction (22 June 2017), with Alexis Mourre dissenting. The ad hoc Committee rejected CFHL's application for annulment in full (25 October 2019).
Amount: Award: CFHL bears all arbitration costs (USD 484,197.96) and must reimburse Cameroon USD 242,098.98; each side bears its own counsel costs (claimed: CFHL EUR 1,484,711.23; Cameroon EUR 2,170,973.34). Annulment: CFHL bears the Committee's fees and ICSID's charges (USD 326,295.21); each side bears its own counsel costs.

The dispute

CFHL is a Luxembourg holding company incorporated in 2005. It is 99.8% owned by Fotso Group Holdings Limited (FGH), a Cypriot company 90% held by the Cameroonian businessman Yves-Michel Fotso. CFHL claimed to hold 46.57% of Commercial Bank Cameroon (CBC) and to have made two shareholder loans to the bank in 2007. The banking regulator COBAC placed CBC under provisional administration in 2009. In December 2013 the Douala-Bonanjo court sequestered CFHL's shares at the request of the Minister of Finance, and a CBC shareholders' meeting held without the sequestered shareholders cut the share capital to zero and then raised it. CFHL claimed that these measures expropriated its investment in breach of the BLEU–Cameroon BIT. Cameroon objected to jurisdiction ratione voluntatis (no diplomatic conciliation had taken place), ratione personae (CFHL had no real seat in Luxembourg) and ratione materiae (no investment, and illegality under the CEMAC exchange regulations), and it also alleged abuse of rights.

Key holdings

Objection ratione voluntatis rejected. Article 10 of the BIT imposes an obligation of means to seek amicable settlement, but the investor cannot force the two States to open diplomatic conciliation. CFHL had done all that could reasonably be expected of it by notifying the dispute and copying the Belgian ambassador acting for Luxembourg. Cameroon never replied. Award ¶¶ 160–169
No jurisdiction ratione personae (majority). "Siège social" in Article 1(2) of the BIT means the real seat, i.e. the place of central administration, whether read under Luxembourg law or as an autonomous concept of international law. CFHL had held no shareholders' or board meetings and had no validly appointed directors from late 2010 to late 2014. It filed its accounts and tax returns for those years only in 2015. On an overall assessment, CFHL's real seat was not in Luxembourg at the critical date of 15 April 2015. Award ¶¶ 355–357
In addition, CFHL committed an abuse of rights. It was not created to obtain treaty protection, but it was 'woken up' after years of dormancy, once the dispute had arisen, to create the appearance of a Luxembourg seat. Award ¶¶ 362–366
Also no jurisdiction ratione materiae (held in addition). CFHL proved payment only for 101,575 CBC shares bought from Yves-Michel Fotso for EUR 3,871,589.00, and that purchase was circular, because the money came from FGH and went back to Fotso. CFHL showed no payment for the other shares, and its EUR 4,300,000 in shareholder loans was funded by FGH loans that CFHL never repaid. CFHL therefore made no substantial contribution of its own and bore no risk, under either the ICSID Convention or Article 1(3) of the BIT. Award ¶¶ 453–463
The legality objection was rejected. Under Article 2(1) of the BIT, the words 'in accordance with its legislation' do not make compliance with host-State law a condition of jurisdiction. Any breach of Cameroonian law would matter only on the merits. Award ¶¶ 465–468
Annulment refused. Reading 'siège social' as the real seat was a tenable interpretation of an ambiguous treaty term, supported by the principle of effectiveness (effet utile). The Tribunal added no condition to the BIT, so it did not manifestly exceed its powers. The origin of the funds served only to test contribution and risk; it was not a new criterion. The reasoning on both objections can be followed and is not contradictory. Decision on Annulment ¶¶ 186–190, 220, 234–237, 244
Costs of the annulment: CFHL bears all the Committee's fees and expenses and ICSID's charges; each party bears its own counsel costs. Decision on Annulment ¶¶ 260–261

Procedural history

21 July 2014CFHL sends its notice of dispute to Cameroon's Prime Minister.
15 April 2015Request for Arbitration filed. ICSID registers it on 20 May 2015.
16 September 2015Tribunal constituted.
28 December 2015Procedural Order No. 2 grants Cameroon's request to bifurcate jurisdiction from the merits.
6–7 October 2016Hearing on jurisdiction at the ICC Hearing Centre in Paris.
22 June 2017Award: the majority declines jurisdiction; Alexis Mourre dissents.
19 October 2017CFHL applies for annulment. ICSID registers the application on 31 October 2017, and the ad hoc Committee is constituted on 11 January 2018.
17 May 2018The Committee rejects CFHL's request that Gaston Kenfack Douajni stand down as a representative of Cameroon.
7 February 2019Annulment hearing in Paris.
25 October 2019Decision on Annulment: the application is rejected in full.