Westwater Resources, Inc. v. Republic of Türkiye

At a glance

Parties

Westwater Resources, Inc. (USA) v. Republic of Türkiye

Case no.

ICSID Case No. ARB/18/46

Forum and rules

ICSID Convention; ICSID Arbitration Rules in force from 10 April 2006; place of proceeding Washington, D.C.

Treaty

Treaty between the United States of America and the Republic of Turkey Concerning the Reciprocal Encouragement and Protection of Investments (in force 18 May 1990)

Tribunal

Ian Binnie (President), Robert G. Volterra, Brigitte Stern

Sector

Uranium mining (in-situ recovery)

Outcome

Türkiye was held to have breached the BIT by cancelling the uranium licenses (unlawful expropriation and breach of fair and equitable treatment). The lost-profits claim failed on causation, and only investment costs were awarded.

Amount

Claimed: USD 30,512,139 plus interest (USD 267 million had been demanded in negotiations). Awarded: USD 1,283,000 in investment costs, plus interest at SOFR + 2%. Costs: USD 3,370,362.88 (50% of legal fees and expenses) and USD 341,563.33 for the expended part of Westwater's advances to ICSID.

The dispute

Westwater is a Delaware mining company. In November 2015 it acquired Anatolia Energy Limited (Australia) by a share swap, and through it the Turkish company Adur Madencilik Ltd. Adur held exploration and operating licenses for the Temrezli, Sefaatli and Sorgun-Cigdemli uranium deposits. In January 2018 the General Directorate of Mining Affairs (MIGEM) told Adur that the licenses had been issued in error, because Law No. 2840 of 1983 (as amended by Law No. 3971 of 1994) reserves uranium mining to the State. MIGEM cancelled the licenses by letters of 19/20 June 2018 and offered compensation for investment costs only, by analogy with Article 121 of the Mining Regulation. Westwater claimed unlawful expropriation (Article III) and breach of fair and equitable treatment (Article II(3)). Türkiye objected that there was no qualifying investment and that the BIT's one-year negotiation period had not been respected. On the merits it argued that the licenses were void ab initio, and that Westwater's own financial weakness and its decision to mothball the project caused any loss of profits.

Key holdings

1. Jurisdiction upheld. Westwater made an investment under Article I(1)(c) of the BIT and Article 25 of the ICSID Convention through its indirect ownership of Adur. The Tribunal expressed no view on whether the Salini test applies, but held that the investment would pass it in any case. ¶¶ 129–151, 191
2. The dispute crystallised only with the June 2018 cancellation letters, so Westwater cut short the one-year negotiation period when it filed in December 2018. The MFN clause cannot be used to import shorter periods from other BITs. The early filing was nonetheless justified because negotiations were futile: the parties were fixed on irreconcilable compensation methodologies. ¶¶ 170, 179–189
3. Adur's licenses were valid. The Mining Law of 1985 (Article 50), as the later law, prevails over Article 2 of Law No. 2840, and the 1994 amendment did not reinstate a State monopoly on uranium. In any event, any error in issuing the licenses was neither 'manifest' nor 'explicit'. The Tribunal was not satisfied that the reasons for cancellation were a pretext. ¶¶ 221–222, 230, 235
4. The cancellation was an indirect expropriation of Westwater's shares in Adur. It served a public purpose, was not discriminatory and did not breach due process. It was still unlawful, because Türkiye never offered fair market value, nor even full investment costs. Türkiye also breached fair and equitable treatment by frustrating legitimate expectations created by MIGEM's ongoing dealings, its encouragement of the project and its collection of fees. Arbitrariness and bad faith were not established. ¶¶ 253, 260, 264, 271, 274, 281, 291–293
5. Investment costs of USD 1,283,000 are awarded. The share-swap consideration for Anatolia (USD 21,039,892) was not an out-of-pocket investment cost and is disallowed. Türkiye's offer of about USD 190,000 was described as 'derisory'. ¶¶ 303, 308–310
6. Lost profits are rejected for lack of causation. Westwater had mothballed the project in 2016 pending a uranium price of USD 30/lb and had no plan to restart it. Its 2015 pre-feasibility study was inadequate, and it had no realistic prospect of financing before the licenses expired in 2023/2024, which were hard deadlines. Türkiye proved that the mine would in all probability never have reached production, whatever the cancellation. The market approach was also rejected. ¶¶ 335, 364, 415, 423–430
7. Interest runs at SOFR plus 2%, compounded, from the Valuation Date to payment. The body of the award says compounding is annual (¶ 433), but the dispositive says semi-annual (¶ 444(g)). Because success was divided, the Tribunal awarded Westwater 50% of its legal fees and expenses; the costs reasoning (¶ 439) is expressed as 'the majority view'. ¶¶ 433, 439–444

Procedural history

1. 13 December 2018Westwater files its Request for Arbitration.
2. 21 December 2018ICSID registers the Request.
3. 1 May 2019The Tribunal is constituted.
4. 28 April 2020Procedural Order No. 2 rejects Türkiye's request for bifurcation. The rejection of the investment objection is unanimous; the rejection of the negotiation-period objection is by majority, with Brigitte Stern dissenting.
5. 13–17 September 2021Hearing on the merits held by Zoom.
6. 5 November 2021The parties file simultaneous post-hearing briefs.
7. 18 November 2022The proceeding is closed.
8. 3 March 2023The Award is dispatched to the parties.

Tribunal, counsel and experts

Decided by

• Ian Binnie President — chosen by the co-arbitrators
• Robert Volterra Co-arbitrator — appointed by the claimant
• Brigitte Stern Co-arbitrator — appointed by the respondent (dissented in PO No. 2 on the negotiation-period objection to bifurcation)

For the claimant

Hughes Hubbard & Reed LLP · Hogan Lovells US LLP

For the respondent

King & Spalding LLP · Presidency of the Republic of Türkiye, Directorate-General of Law and Legislation · Ministry of Energy and Natural Resources

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Keywords

• uranium mining
• Temrezli
• Adur
• mining licenses
• license cancellation
• indirect expropriation
• fair and equitable treatment
• legitimate expectations
• US–Turkey BIT
• negotiation period
• futility
• MFN clause
• Salini test
• causation
• lost profits
• DCF
• sunk costs
• pre-feasibility study

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