Akgun Insaat Makina Sanayii ve Dis Ticaret Ltd. Sti v. Federal Democratic Republic of Ethiopia

At a glance

Parties

Akgun Insaat Makina Sanayii ve Dis Ticaret Ltd. Sti. (Türkiye) v. the Federal Democratic Republic of Ethiopia

Case no.

PCA Case No. 2020-08

Forum and rules

UNCITRAL Arbitration Rules 2010 (as revised in 2013), administered by the PCA; seat The Hague, Netherlands

Treaty

Turkey–Ethiopia BIT signed 16 November 2000 (in force 10 March 2005)

Tribunal

Dr Michael Hwang S.C. (Presiding Arbitrator), Sir David A R Williams, Professor Philip J. McConnaughay

Sector

Construction; industrial zone development

Outcome

Ethiopia was held to have breached fair and equitable treatment. The expropriation and impairment claims, lost profits and loss of opportunity were rejected, and Ethiopia's counterclaims were dismissed for lack of jurisdiction.

Amount

Claimed: USD 241,515,079 in lost profits, plus loss-of-opportunity damages (or at least USD 7 million in sunk costs). Awarded: USD 4,955,131 in sunk costs, with simple interest at 6.625% from 17 June 2015 to 29 August 2025, then post-award interest at 6.625% compounded annually from 26 September 2025. Costs: Ethiopia pays 75% of the claimant's costs (USD 6,026,833.56) and bears its own. Ethiopia's counterclaim of USD 14,790,540.72 was dismissed.

The dispute

Akgun is a family-owned Turkish company. Under a 2012 agreement with Ethiopia's Ministry of Industry and Oromia Regional State, it was to develop the Ethio-Turkish Industrial Zone (ETIZ) on a 1,460 ha site at Sendafa, near Addis Ababa. Akgun paid ETB 14,717,476.15 in compensation for relocating farmers, received the first 100 ha in 2013 and began work. Ethiopian agencies then rejected its environmental impact assessments, citing risks to the Legedadi dam and the groundwater that supply Addis Ababa. Ethiopia suspended the project on 24 July 2014 and notified Akgun on 17 June 2015 that the zone would be relocated. Akgun claimed breach of fair and equitable treatment, impairment, expropriation, and an umbrella clause imported through the MFN clause. Ethiopia objected that there was no investment and that the claims were contract claims belonging to the contract's ICSID clause. On the merits it relied on the EIA requirement and its offers of alternative land, and it brought counterclaims.

Key holdings

1. Jurisdiction upheld. Akgun's right to develop the industrial zone, its lease, and the know-how and equipment it contributed are investments under Article I(2)(b), (c) and/or (d) of the BIT. The Salini criteria are not mandatory in a non-ICSID arbitration, and in any case they were met. Award ¶¶ 351–365
2. Ethiopia breached fair and equitable treatment in two ways: it created and then frustrated Akgun's legitimate expectations about the Sendafa site, and it acted inconsistently with its own economic development, regulatory and environmental objectives. The claims for bad faith, denial of justice, disproportionality and impairment failed. Award ¶¶ 755–781
3. No compensable expropriation. The suspension and relocation were a valid exercise of police powers: the measures served a public purpose (protecting Addis Ababa's water supply), applied regulation of general application, were not discriminatory and respected due process. The Tribunal rejected the sole effects doctrine and distinguished Santa Elena v. Costa Rica. Award ¶¶ 898–923
4. Lost profits and loss of opportunity were refused as speculative. The project was at a very early stage and the first of its kind in Ethiopia. Only 100 of the 1,460 ha had been handed over, no investor commitments were firm, and Ms Hardin's DCF report rested on flawed assumptions. Award ¶¶ 1091–1127
5. Akgun recovers its documented sunk costs of USD 4,955,131, but not the undocumented balance it claimed up to USD 7 million. Akgun did not fail to mitigate: Ethiopia never made a firm written offer of an alternative site with information showing it was comparable. Interest runs at 6.625%. Award ¶¶ 1128–1171
6. Ethiopia's counterclaims were dismissed for lack of jurisdiction. The umbrella clause claim did not need to be decided because it rested on breaches of the BIT itself. Award ¶¶ 1175, 1179
7. Akgun is the prevailing party, but costs are apportioned because its lost-profit and loss-of-opportunity claims were not credible. Neither side's conduct was found to be improper. Ethiopia bears 75% of Akgun's costs of USD 8,035,844.75, i.e. USD 6,026,833.56, plus its own costs, with post-award interest at 6.625% from 4 March 2026, compounded annually. Final Award on Costs ¶¶ 94–112

Procedural history

1. 27 March 2015Akgun gives Ethiopia written notice under the BIT and seeks amicable negotiations.
2. 19 June 2019Notice of Arbitration filed. Ethiopia's Response follows on 19 July 2019.
3. 2 March 2020Tribunal constituted when the co-arbitrators appoint Dr Michael Hwang as Presiding Arbitrator. The parties later agree on The Hague as the seat, with the PCA administering.
4. 4 December 2020Procedural Order No. 1 sets the procedure and the timetable.
5. 18 October 2021Procedural Order No. 2 allows limited redactions to the Kilinto Industrial Park EIA.
6. 3 May 2022Procedural Order No. 3 refuses to strike out a respondent expert report and orders witness conferencing of the experts.
7. 18–30 May 2022Evidentiary hearing at the Peace Palace, The Hague.
8. 19 October 2022Procedural Order No. 4 puts post-hearing questions to the parties on police powers, umbrella clauses, leaseholds, mitigation and costs.
9. 29 August 2025Final Award (Save as to Costs): FET breach found and USD 4,955,131 in sunk costs awarded with interest.
10. 24 October 2025Decision on Correction and Interpretation: the interest start date is corrected from 12 June to 17 June 2015. Pre-award interest is simple and runs to 29 August 2025, and no interest runs during the four-week grace period.
11. 4 February 2026Final Award on Costs: Ethiopia pays 75% of Akgun's costs (USD 6,026,833.56).

Tribunal, counsel and experts

Decided by

• Michael Hwang President — chosen by the co-arbitrators
• David A. R. Williams Co-arbitrator — appointed by the claimant
• Philip J. McConnaughay Co-arbitrator — appointed by the respondent

For the claimant

Jones, Swanson, Huddell & Daschbach LLC · Fishman Haygood L.L.P. · Ilhan & Yavuzturk Attorneys at Law · Verrill Advocacy, LLC

For the respondent

Addis Law Group LLP · Ministry of Justice of Ethiopia

Experts

Laura Hardin (claimant) · Dale Whittington (claimant) · Mekete Bekele Tekle (claimant) · Susan Murcott (respondent) · Mellese Damtie Dandi (respondent) · Ayale H. Anabo (respondent)

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Keywords

• Ethio-Turkish Industrial Zone
• ETIZ
• Turkey–Ethiopia BIT
• industrial zone
• environmental impact assessment
• Legedadi dam
• fair and equitable treatment
• legitimate expectations
• indirect expropriation
• police powers
• sole effects doctrine
• Salini test
• umbrella clause via MFN
• state counterclaims
• lost profits
• loss of chance
• sunk costs
• mitigation of damages
• costs apportionment
• PCA

Summary generated with AI from the published documents — refer to the award for the authoritative text.