Etrak Insaat Taahut ve Ticaret Anonim Sirketi v Libya

Case summary

At a glance

Parties: Etrak İnşaat Taahhüt ve Ticaret Anonim Şirketi (Turkey) v. the State of Libya
Case no.: ICC Case No. 22236/ZF/AYZ
Forum and rules: ICC arbitration under the ICC Arbitration Rules 2012; seat Geneva, Switzerland
Treaty: Turkey–Libya BIT, signed 25 November 2009 (in force 22 April 2011)
Tribunal: Prof. Dr. Kaj Hobér (President), John M. Townsend, Jean Kalicki
Sector: Construction; public works; state debt settlement
Outcome: Final Award of 22 July 2019: jurisdiction upheld and Libya held in breach of fair and equitable treatment. The Swiss Federal Tribunal dismissed Libya's challenge. Enforcement was refused in Germany and confirmed in the United States. In France, the Paris Court of Appeal upheld exequatur, but the Court of Cassation quashed that ruling and remanded the case.
Amount: Claimed: at least USD 20,080,549.71, plus moral damages of at least USD 3,000,000. Awarded: USD 21,865,554, including pre-award simple interest at 4%, plus post-award interest at LIBOR + 3% compounded annually. Moral damages were refused. Libya bears the ICC costs of USD 542,600, so it must reimburse USD 478,850 to Etrak. Each side bears its own costs.

The dispute

Etrak, a Turkish construction company, carried out public works projects in Libya in the 1980s and early 1990s and stopped work over unpaid invoices. In 2012 the Beida Court of First Instance ordered Libya to pay LD 1,906,360.23 plus interest and LD 1,000,000 in damages. On 9 December 2013 Etrak and Libya's Deputy Minister of Finance signed a Settlement Agreement for LD 5,420,308.707, payable in two instalments in 2014; both sides also agreed to abandon all litigation. Libya paid nothing, pursued its appeal (the Court Decision was overturned in January 2018), and in March 2018 sued in Tripoli to annul the Settlement Agreement. Etrak claimed breach of fair and equitable treatment, expropriation, an umbrella clause imported through the MFN clause, and breach of contract. Libya argued that the BIT was not in force, that there was no investment, that the dispute predated the BIT, that the fork-in-the-road clause applied, that the claims were purely contractual, and that the Deputy Minister lacked authority to sign.

Key holdings

The BIT entered into force on 22 April 2011. Turkey's notification to the authorities it then recognised as Libya's government was valid. The UN registration of the treaty and the 2014 Turkish–Libyan Political Declaration confirm this. Award ¶¶ 116–124
The Settlement Agreement is valid under Libyan law because the Deputy Minister of Finance had apparent authority to sign it. Etrak's representative acted with due diligence and in good faith, and the Ministry, with the Minister's acquiescence, created the appearance of authority. The pending Tripoli Proceedings did not change this finding. Award ¶¶ 131–152
The Settlement Agreement is a "claim to money related to an investment" under Article 1(2)(b), because it flows from Etrak's construction investments of the 1980s and 1990s. As a compromise under Article 548 of the Libyan Civil Code, it extinguished earlier disputes. Libya's non-performance therefore created a new dispute after the BIT's entry into force, so the objections ratione temporis and under the fork-in-the-road clause fail. Award ¶¶ 156–167, 184–192
Libya breached fair and equitable treatment (Article 2(2)) in three ways: it frustrated legitimate expectations created by specific representations made in and before the Settlement Agreement; it failed to perform an agreement that was non-commercial in purpose, by analogy with Teinver v. Argentina; and it acted arbitrarily and inconsistently by pursuing the Appeal and the Tripoli Proceedings. On grounds of judicial economy, the Tribunal did not decide the expropriation, umbrella clause and contract claims. Award ¶¶ 313–350
Damages equal the settlement sum of LD 5,420,308.707. Interest at 4% runs from each instalment's due date, and the contractual exchange rate also applies to the interest, giving USD 21,865,554. Moral damages were refused for lack of exceptional circumstances. Post-award interest is LIBOR + 3% compounded annually. Each side bears its own costs, and Libya bears the ICC costs. Award ¶¶ 424–449
The Swiss Federal Tribunal dismissed Libya's challenge. Because the arbitration was commenced first, the tribunal did not have to take account of the later Tripoli Proceedings. The Tripoli judgment, which the tribunal could not have known of, could not bind it. The apparent-authority finding stands, and the dispute arose after the BIT's entry into force. Swiss Federal Tribunal 4A_461/2019, E. 4–6
The French Court of Cassation quashed the Paris Court of Appeal's confirmation of exequatur. Its reasoning was that if the dispute over the settlement were autonomous enough to fall within the BIT's temporal scope, it would not arise directly from the investment under Articles 1(2)(b) and 8(4). The case was remanded to the Paris Court of Appeal. Separately, the US District Court for the District of Columbia refused a stay and confirmed the award, rejecting Libya's public-policy argument based on res judicata. Cass. civ. 1, 9 October 2024, ¶ 9; D.D.C. Memorandum Opinion, pp. 8–14