Bernhard von Pezold and Others v. Republic of Zimbabwe
ICSID · Investment (ICSID and treaty) · Zimbabwe · 28 Jul 2015
Why it matters
This award is a landmark in investment treaty arbitration for its detailed analysis of expropriation in the context of a state's land reform program. It reaffirmed that non-discriminatory regulatory measures for a public purpose still require prompt, adequate, and effective compensation under the BITs. The tribunal also addressed issues of attribution, necessity, and the calculation of compensation for agricultural estates, setting important precedents for similar cases involving state-led land redistribution.
Summary
The case concerns claims by German and Swiss nationals (the von Pezold family) and Zimbabwean companies (Border Timbers group) against Zimbabwe for the expropriation of their agricultural estates under Zimbabwe's Fast Track Land Reform Programme (FTLRP). The claimants owned three large estates: Forrester Estate (tobacco), Border Estate (timber), and Makandi Estate (tea and coffee). Starting in 2000, war veterans and settlers invaded the properties, and the government issued acquisition notices under the Land Acquisition Act. In 2005, a constitutional amendment vested title to the acquired land in the state without compensation. The claimants initiated ICSID arbitration under the Germany-Zimbabwe and Switzerland-Zimbabwe BITs. The tribunal found that Zimbabwe's actions constituted an unlawful expropriation because the acquisitions were not for a public purpose (the land was given to political allies), were discriminatory, and no compensation was paid. It also found breaches of fair and equitable treatment, full protection and security, and the free transfer of funds. The tribunal rejected Zimbabwe's defense of necessity and proportionality. It awarded compensation based on the fair market value of the properties as of the date of expropriation, plus interest. The award is significant for its rejection of the state's argument that land reform justified non-compensation, and for its detailed valuation methodology.
The detail
Parties: Bernhard von Pezold and Others v. Republic of Zimbabwe
Case number: ICSID Case No. ARB/10/15
Outcome: The Tribunal found that Zimbabwe expropriated the claimants' properties without compensation, breaching the German and Swiss BITs. It ordered Zimbabwe to pay compensation of approximately €100 million plus interest to the von Pezold claimants, and US$60 million plus interest to the Border claimants.
Quantum: Approximately €100 million (von Pezold) and US$60 million (Border)
Applicable law: ICSID Convention, German-Zimbabwe BIT (1995), Swiss-Zimbabwe BIT (1996), Zimbabwean law, international law
Issues in play: The case involved a collision between Zimbabwe's land reform program (including constitutional amendments) and the protection of foreign investment under bilateral investment treaties. The key legal issue was whether the expropriation was lawful and whether compensation was required.
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