Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan (I)
ICSID · Investment (ICSID and treaty) · Pakistan · 27 Aug 2009
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard, particularly the requirement to protect a foreign investor's legitimate expectations. The Tribunal set a high bar for proving a conspiracy to expel an investor and clarified that mere contractual breaches do not automatically amount to treaty violations. It also addressed the relationship between treaty and contract claims, rejecting a stay of proceedings in favor of parallel contractual arbitration.
Summary
Bayindir, a Turkish construction company, entered into a contract with Pakistan's National Highway Authority (NHA) in 1993 to build the Islamabad-Peshawar Motorway (M-1 Project). The contract was governed by Pakistani law and based on FIDIC conditions. After disputes arose, the parties revived the contract in 1997. However, in 1998, NHA terminated the contract, citing delays and poor performance. Bayindir claimed that Pakistan conspired to expel it due to political changes, financial difficulties, and pressure from local contractors. Bayindir initiated ICSID arbitration under the Turkey-Pakistan BIT, alleging violations of fair and equitable treatment (FET), national treatment, most-favored-nation (MFN) treatment, and expropriation. The Tribunal first upheld jurisdiction in a 2005 decision, rejecting Pakistan's argument that the dispute was contractual. On the merits, the Tribunal found that Bayindir had not proven a conspiracy or that its legitimate expectations were frustrated. The Tribunal noted that the contract was terminated for cause due to Bayindir's poor performance, including delays and failure to meet milestones. The Tribunal also rejected claims of denial of due process, coercion, and expropriation. It held that Pakistan's actions were reasonable and proportionate, and that Bayindir had not been treated less favorably than local contractors. The Tribunal dismissed all claims and ordered Bayindir to pay Pakistan's costs. The award is notable for its thorough analysis of the FET standard and the distinction between treaty and contract claims.
The detail
Parties: Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan (I)
Case number: ICSID Case No. ARB/03/29
Outcome: The Tribunal dismissed all of Bayindir's claims and ordered Bayindir to pay Pakistan's costs.
Applicable law: Agreement Between the Republic of Turkey and the Islamic Republic of Pakistan Concerning the Reciprocal Promotion and Protection of Investments (1995); ICSID Convention; Pakistani law as governing law of the contract; FIDIC General Conditions of Contract (1987)
Issues in play: The case involved the interplay between treaty claims under the Turkey-Pakistan BIT and contract claims under the FIDIC-based construction contract. The Tribunal had to determine whether Pakistan's actions breached the fair and equitable treatment standard, national treatment, MFN, and expropriation provisions of the BIT, or were merely contractual disputes.
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