Alverley Investments Limited and Germen Properties Ltd v. Romania
ICSID · Investment (ICSID and treaty) · Romania · 16 Mar 2022
Why it matters
This case clarifies the 'real seat' requirement under the Cyprus-Romania BIT, holding that a company incorporated in Cyprus but controlled from Romania does not qualify as a protected investor. It also reinforces the abuse of rights doctrine, barring claims where a dispute was foreseeable before the investment was structured to gain treaty protection. The award is notable for its detailed analysis of when a dispute becomes foreseeable and the consequences of failing to disclose the ultimate beneficial owner.
Summary
The case involved two Cypriot companies, Alverley Investments Limited and Germen Properties Ltd, claiming that Romania violated the Cyprus-Romania Bilateral Investment Treaty (BIT) in connection with a real estate development project. The claimants alleged that Romania's criminal and civil proceedings against the project amounted to expropriation and unfair treatment. Romania objected to jurisdiction on two grounds: first, that the claimants did not have their 'real seat' in Cyprus as required by the BIT, and second, that the claims were an abuse of rights because the dispute was foreseeable before the claimants acquired their investments. The Tribunal first examined the 'real seat' requirement. It interpreted Article 1(2)(b) of the BIT, which defines 'investors' as companies having their 'seat' in the territory of the contracting party. The Tribunal held that 'seat' means the real and effective seat of management, not just the registered office. Applying this test, the Tribunal found that Germen Properties Ltd had its real seat in Romania, not Cyprus, because its management and control were exercised from Romania. Therefore, the Tribunal lacked jurisdiction over Germen. For Alverley, the Tribunal found that it did have its real seat in Cyprus, so jurisdiction was established. However, the Tribunal then considered Romania's abuse of rights objection. It applied the test from Philip Morris v. Australia and other cases: a claim is an abuse of rights if the dispute was foreseeable at the time the claimant acquired or restructured its investment to gain treaty protection. The Tribunal found that the dispute was foreseeable by early 2014, when the Romanian authorities began investigating the land transaction. Alverley acquired its shares in the project after that date, specifically to gain access to ICSID arbitration. Therefore, Alverley's claims were inadmissible. The Tribunal also addressed procedural issues, including the claimants' failure to disclose their ultimate beneficial owner (UBO) despite multiple orders. The Tribunal found that the UBO was a Romanian national, which further supported the abuse of rights finding. On costs, the Tribunal ordered the claimants to pay the respondent's legal costs for the jurisdictional phase (USD 4,140,779.24), reduced by USD 54,000 to account for Romania's refusal to pay its share of the advance on costs. The award was rendered on March 16, 2022.
The detail
Parties: Alverley Investments Limited and Germen Properties Ltd v. Romania
Case number: ICSID Case No. ARB/18/30
Outcome: The Tribunal lacked jurisdiction over Germen and declared Alverley's claims inadmissible; the case was dismissed. Claimants ordered to pay Respondent USD 4,140,779.24 in costs.
Quantum: USD 4,140,779.24
Applicable law: Cyprus-Romania BIT (1993); ICSID Convention; ICSID Arbitration Rules 2006
Issues in play: The BIT's requirement that a claimant have its 'real seat' in Cyprus conflicted with the fact that the claimants' ultimate beneficial owner was a Romanian national, raising issues of corporate nationality and abuse of rights.
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