Öztaş Construction, Construction Materials Trading Inc. v. Libya

Case summary

At a glance

Parties: Öztaş Construction, Construction Materials Trading Inc. (Turkey) v. the State of Libya and Libyan Investment and Development Company (LIDCo)
Case no.: ICC Arbitration No. 21603/ZF/AYZ
Forum and rules: ICC arbitration under the 2012 ICC Rules; seat Paris, France
Treaty: Turkey–Libya BIT of 25 November 2009 (in force 22 April 2011)
Tribunal: Jacob Grierson (President), Mohamed S. Abdel Wahab, Tolga Ayoglu
Sector: Construction; water infrastructure
Outcome: Final Award of 14 June 2018: no jurisdiction over LIDCo (unanimous); jurisdiction over Libya (unanimous); all claims against Libya dismissed by majority. Tolga Ayoglu dissented on the merits and on costs.
Amount: Claimed: USD 2,883,975.06 (LYD 3,665,192 termination fee) plus interest. Awarded: nothing. The claimant bears the ICC costs of USD 236,900 and pays the respondents' legal costs of EUR 97,891.40.

The dispute

On 13 May 2008 Öztaş, a Turkish company, signed Contract Number 43 for the Year 2008 with LIDCo, a Libyan company, to build a water supply and transport system along the Great Man-Made River pipeline (Abuziyyan–Al Ruhaybat Section). After the 2011 Civil War the parties ended the contract by a Termination Agreement of 18 March 2013. Under it LIDCo was to pay LYD 3,665,192 in four instalments by cheque, but it never paid. Neither the contract nor the Termination Agreement contains an arbitration clause, so Öztaş relied on Article 8 of the Turkey–Libya BIT. It claimed that Libya was responsible for LIDCo's acts and for its own failure to give fair and equitable treatment and full protection, including a stable legal and business framework. The respondents argued that the claim was purely contractual, that no sovereign conduct was alleged, and that the BIT has no umbrella clause.

Key holdings

The 90-day cooling-off period was satisfied as to Libya. The claimant's ICC Request for Mediation of 19 February 2015 notified the dispute in writing and in detail, and sending it to the Libyan Embassy in Paris was adequate service. Award ¶¶ 84–89
No jurisdiction over LIDCo (unanimous). LIDCo is not a Contracting Party to the BIT, and no arbitration agreement binds it. Award ¶¶ 93–95
Jurisdiction over Libya upheld (unanimous). The claim under the Termination Agreement is a "claim to money" and so an investment under Article 1(2)(b). The legality requirement excludes illegal investments; it does not require the host State to approve investments in advance. A claimant does not have to show a prima facie breach to establish jurisdiction. Award ¶¶ 110–128
No breach by Libya through LIDCo (majority). A failure to pay under a contract does not, without more, breach Article 2.2. Following Toto v. Lebanon, the claimant had to show some form of State interference with the contract. A claim against Libya based on LIDCo's own non-payment is therefore a mere contract claim. Award ¶¶ 140–151
No breach by Libya's own conduct (majority). Failing to prevent the revolution is not a treaty breach, and the uprising ended two years before the Termination Agreement. Article 5 (losses from war) is the proper remedy for such losses, and there was no evidence that other investors were treated more favourably. The claimant never sued in the Libyan courts and did not prove that they do not function; the burden of proof does not shift to Libya. Award ¶¶ 159–172
The MFN clause in Article 3 does not import an umbrella clause (unanimous). The claimant pointed to no Libyan BIT that contains one. Award ¶ 177
Costs follow the event (majority). The claimant bears the ICC costs of USD 236,900 and pays the respondents' legal costs of EUR 97,891.40. Award ¶¶ 186–190
Dissent. Tolga Ayoglu found LIDCo's conduct attributable to Libya under Article 8 of the ILC Articles. In his view Libya breached fair and equitable treatment and full protection by failing to restore a stable framework. He also found breaches of Article 5 and of Article 4 (indirect expropriation of construction materials). He considered the choice-of-court clause in Article 51 of the contract irrelevant once the contract was terminated, and would have put the burden of proving functioning courts on Libya. The majority declined to address the expropriation and disclosure points because no party had raised them. Dissenting Opinion ¶¶ 17, 28, 32–33, 38–42; Award ¶ 133

Procedural history

13 May 2008Öztaş and LIDCo sign Contract Number 43 for the Year 2008.
18 March 2013Termination Agreement signed; LIDCo undertakes to pay LYD 3,665,192 in four instalments.
19 February 2015The claimant sends an ICC Request for Mediation to LIDCo and Libya; there is no response from the respondents.
20 January 2016Request for Arbitration filed.
10 November 2016The ICC Court appoints the President; the Tribunal is fully constituted.
6 December 2016At the case management conference, the Tribunal refuses to bifurcate jurisdiction and merits.
6 November 2017One-day hearing on jurisdiction and merits in Paris.
14 December 2017Proceedings closed.
14 June 2018Final Award: claims dismissed by majority.
14 June 2018Dissenting Opinion of Tolga Ayoglu.

Tribunal, counsel and experts

Decided by: Jacob Grierson President — appointed by the institution
Mohamed S. Abdel Wahab Co-arbitrator — appointed by the respondent
Tolga Ayoglu Co-arbitrator — appointed by the claimant (dissented on the merits against Libya and on costs)
For the claimant: Cekinmez Law Firm
For the respondent: Sefrioui Law Firm · Litigation Department of the State of Libya · Abdurazek Ballow