Cascade Investments NV v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 20 Sep 2021
Why it matters
This award is significant because it extends the abuse of process doctrine beyond corporate restructurings to arm's-length acquisitions, holding that if an investor acquires an investment when a dispute is reasonably foreseeable, the acquisition may not be a bona fide foreign investment entitled to treaty protection. The Tribunal set out a detailed framework for assessing foreseeability, including that the investor need only foresee a measure that could give rise to a treaty claim, not the specific measure eventually adopted. This decision clarifies the limits of treaty shopping and reinforces the requirement of good faith in investment arbitration.
Summary
Cascade Investments NV, a Belgian company, acquired shares in a Turkish company (the investment) in 2015-2016. At that time, the Turkish government had already taken actions against the company's previous owners, including placing the company under the Savings Deposit Insurance Fund (TMSF) and initiating investigations. Cascade claimed that Turkey later expropriated its investment and violated the Belgium-Turkey BIT. Turkey objected to jurisdiction, arguing that Cascade's acquisition was an abuse of process because the dispute was foreseeable when Cascade bought the shares. The Tribunal agreed, finding that Cascade's acquisition was not a bona fide foreign investment but part of a scheme to repackage a domestic investment under a foreign flag to gain BIT protection. The Tribunal applied an objective test: whether a reasonable investor in Cascade's position would have foreseen a dispute with Turkey at the time of acquisition. It concluded that the adverse actions by Turkey against the investment were reasonably foreseeable, and Cascade's acquisition was therefore an abuse of process. The Tribunal dismissed all claims for lack of jurisdiction and ordered Cascade to pay a portion of Turkey's legal costs.
The detail
Parties: Cascade Investments NV v. Republic of Turkey
Case number: ICSID Case No. ARB/18/4
Outcome: The Tribunal dismissed Cascade's claims for lack of jurisdiction, finding that Cascade's acquisition of shares in a Turkish company was an abuse of process because it was made when a dispute with Turkey was reasonably foreseeable, and ordered Cascade to pay Turkey USD 5,000,000 towards legal fees and USD 1,000,000 for advances to ICSID.
Quantum: USD 6,000,000 (USD 5,000,000 legal fees + USD 1,000,000 advances)
Applicable law: Agreement between the Belgo-Luxembourg Economic Union and the Government of the Republic of Turkey for Promotion and Protection of Mutual Investments (1986 BIT); ICSID Convention
Issues in play: The case involved the principle of abuse of process in investment treaty arbitration, specifically whether a foreign investor's acquisition of an existing domestic investment at a time when a dispute with the host state was reasonably foreseeable constitutes an abuse of process, even if the acquisition is not a restructuring within a corporate group.
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