Mera Investment Fund Limited v. Republic of Serbia

Case summary

At a glance

Parties: Mera Investment Fund Limited (Cyprus) v. Republic of Serbia
Case no.: ICSID Case No. ARB/17/2
Forum and rules: ICSID Convention arbitration; place of arbitration Paris, France
Treaty: Serbia and Montenegro–Cyprus BIT of 21 July 2005
Tribunal: Dr. Georg von Segesser (President), Dr. Bernardo M. Cremades, L. Yves Fortier
Sector: Investment holding; construction, banking and other Serbian assets
Outcome: Decision on Jurisdiction of 30 November 2018: all of Serbia's jurisdictional objections dismissed; the case proceeds to the merits.
Amount: Costs claimed up to this stage: Serbia EUR 451,389.41 and USD 350,000; the claimant EUR 1,486,564.09 and USD 350,000. The decision on costs was deferred to the merits phase.

The dispute

Mera Investment Fund Limited was incorporated in Curaçao in 2006 and re-domiciled to Cyprus in 2009. It is ultimately owned by Marko Miskovic, a Serbian national. In 2006 it subscribed for 47.59% of the Serbian construction company PZP Nis and later contributed those shares to its wholly owned Serbian subsidiary, Mera Invest d.o.o. The claimant alleged that from early 2013 Serbia froze Mera Invest's assets, fabricated a tax claim against it and blocked its bank accounts and receivables, destroying its business. It claimed expropriation (Article 5(1)), breach of fair and equitable treatment and full protection and security (Article 2(2)), and more favourable treatment under domestic law (Article 10). Serbia objected to jurisdiction on four grounds: the claimant was not properly incorporated in Cyprus, had no seat there and did not make its investments as a Cypriot company; Mera Invest's assets were not the claimant's investments; and the claim was a Serbian round-trip investment contrary to the object and purpose of the BIT and the ICSID Convention.

Key holdings

The claimant is validly incorporated in Cyprus, as shown by its incorporation certificates, from 20 March 2009. Even if a registered office with a right of use were required, that requirement is met. The lease was not signed before two witnesses, but rent payments, invoices and the claimant's physical presence at the office establish a right to use the premises. There was no bad-faith manipulation: the lease dates from December 2013, well before the CEAC award. ¶¶ 70–75
'Seat' in Article 1(3)(b) does not mean place of effective management. International law gives the term no uniform meaning, so the Tribunal referred it to Cypriot law, under which it means the registered office. The Tribunal rejected the additional registered-office tests applied by the majority in CEAC v. Montenegro, but found that they would in any event be met. ¶¶ 87–97
'Making investments' includes holding and managing investments. The claimant remained the same legal entity after re-domiciliation, so it qualifies as an investor even though it made the 2006 and 2008 investments as a Netherlands Antilles company. ¶¶ 106–110
The BIT has a broad asset-based definition of investment and a clause on changes in the form of investment. Under it, the assets held by the wholly owned subsidiary Mera Invest are protected investments. The claimant may claim for the impairment both of its shares and of the subsidiary's assets. ¶¶ 118–135
Neither the BIT nor the ICSID Convention requires that the capital come from outside the host State or that the investment be under foreign effective control. There was no treaty shopping: the move to Cyprus in 2008–2009 came about four years before the measures complained of. Serbia could have included a denial-of-benefits or 'real economic activities' clause in the BIT, but did not. ¶¶ 146–154, 165–176
Serbia's jurisdictional objections are dismissed and the Tribunal has jurisdiction. The decision on costs is deferred to the merits phase. ¶ 185; Decision

Procedural history

3 January 2017Request for arbitration (dated 28 December 2016) filed with ICSID. ICSID registered it on 23 January 2017.
22 May 2017Tribunal constituted.
26 January 2018Serbia filed preliminary objections to jurisdiction, with a request for bifurcation.
16 May 2018Decision on Bifurcation: the objections on investor status and on the definition of investment were bifurcated. Bifurcation of the fork-in-the-road admissibility objection was refused.
5–6 September 2018Hearing on jurisdiction held in Paris.
30 November 2018Decision on Jurisdiction: all objections dismissed; costs deferred.