Alois Schönberger v. Republic of Tajikistan
ICSID · Investment (ICSID and treaty) · Tajikistan · 5 Jun 2024
Why it matters
This case illustrates the boundary between ordinary commercial contracts and protected investments under investment treaties. The Tribunal's detailed analysis of the BIT's investment definition, including the three criteria, provides guidance on when advance-payment sale-of-goods transactions may or may not qualify as investments. The dissent highlights a procedural disagreement on whether the Tribunal should have raised jurisdiction sua sponte.
Summary
Alois Schönberger, an Austrian national, entered into contracts with a Tajik state-owned entity to purchase cotton. He made advance payments to secure the goods and obtained guarantees from the Republic of Tajikistan. When the entity failed to deliver and the guarantees were not honored, Schönberger initiated ICSID arbitration under the Austria-Tajikistan BIT. Tajikistan did not participate in the proceedings. The Tribunal had to determine whether the transaction constituted an 'investment' under the BIT. Article 1(2) of the BIT defines investment broadly but requires specific characteristics: commitment of capital, expectation of profit, and assumption of risk. The Tribunal found that the contracts were ordinary sale-of-goods transactions: the advance payments were pre-payments for goods, not capital committed to an enterprise; the profit expectation came from price discounts, not from the success of an investment; and the risk was simply the risk of non-delivery. Therefore, the Tribunal lacked jurisdiction ratione materiae. However, the Tribunal noted that had it had jurisdiction, it would have found Tajikistan's conduct (failure to honor guarantees and refusal to enforce a prior Swiss Chambers award) arbitrary and unreasonable. The Tribunal dismissed the claims but ordered Tajikistan to reimburse half the arbitration costs due to its non-participation and the merits of the claim. Arbitrator Thomas Webster dissented, arguing that the Tribunal should have applied the BIT's criteria more directly and that the transaction met the definition of investment.
The detail
Parties: Alois Schönberger v. Republic of Tajikistan
Case number: ICSID Case No. ARB(AF)/19/1
Outcome: The Tribunal lacked jurisdiction because the transaction was a sale of goods, not an investment under the BIT. Claims dismissed. Respondent ordered to reimburse half the arbitration costs.
Applicable law: Austria-Tajikistan BIT (2012); ICSID Additional Facility Rules
Issues in play: The definition of 'investment' under Article 1(2) of the BIT versus the characterization of a sale-of-goods contract with advance payments. The Tribunal applied the BIT's criteria (commitment of capital, expectation of profit, assumption of risk) and found the transaction was not an investment.
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