Addiko Bank AG v. Montenegro
ICSID · Investment (ICSID and treaty) · Montenegro · 24 Nov 2021
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard in the context of retroactive legislation affecting foreign investments. The tribunal clarified that a state's regulatory response to a financial crisis, even if retroactive, may not breach the BIT if it is proportionate, non-discriminatory, and respects due process. The case also addressed the distinction between jurisdiction and admissibility, and the allocation of costs where a claimant succeeds on preliminary issues but loses on the merits.
Summary
Addiko Bank AG, an Austrian bank, brought an ICSID claim against Montenegro under the Austria-Yugoslavia BIT. The bank had issued Swiss Franc-indexed mortgage loans in Montenegro between 2006 and 2011. After the Swiss Franc sharply appreciated against the Euro in 2015, Montenegro enacted a law retroactively converting all Swiss Franc loans to Euros at the exchange rate on the date of the loan agreement, and fixed interest rates. The bank argued this violated the BIT's fair and equitable treatment (FET) and full protection and security (FPS) provisions. The tribunal first rejected Montenegro's objections to jurisdiction and admissibility, finding that Addiko was an investor and the dispute arose from an investment. On the merits, the tribunal applied the FET standard, considering whether the law was arbitrary, discriminatory, disproportionate, or frustrated legitimate expectations. It found that the law was a legitimate response to a financial crisis, was non-discriminatory, proportionate, and did not violate due process. The bank's legitimate expectations were not frustrated because the regulatory risk was foreseeable. The tribunal also dismissed the FPS claim and claims based on Montenegrin constitutional law and EU law. Since the bank failed to prove liability, the tribunal dismissed all damages claims and ordered Addiko to pay 70% of Montenegro's costs.
The detail
Parties: Addiko Bank AG v. Montenegro
Case number: ICSID Case No. ARB/17/35
Outcome: Tribunal found it had jurisdiction and claims were admissible, but dismissed all claims for damages on the merits. Claimant ordered to pay 70% of Respondent's arbitration and legal costs.
Applicable law: Agreement between the Government of the Republic of Austria and the Federal Government of the Federal Republic of Yugoslavia for the Reciprocal Promotion and Protection of Investments (2001); ICSID Convention; ICSID Arbitration Rules 2006
Issues in play: The case involved a collision between Montenegro's sovereign right to regulate (by retroactively converting Swiss Franc loans to Euros to protect borrowers) and the investor's right to fair and equitable treatment and full protection and security under the Austria-Yugoslavia BIT.
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