Cementos La Union S.A. and Aridos Jativa S.L.U v. Arab Republic of Egypt
ICSID · Investment (ICSID and treaty) · Egypt · 30 Oct 2020
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard in the context of regulatory changes in the cement industry. It clarifies the scope of legitimate expectations in investment treaty arbitration, particularly when a host state changes its licensing regime and imposes new fees. The case also addresses the state's responsibility for actions of its agencies and the interplay between administrative law and investment treaty protections.
Summary
The dispute arose from the investment of two Spanish companies, Cementos La Union S.A. and Aridos Jativa S.L.U., in the Arabian Cement Company (ACC), an Egyptian cement producer. The Claimants alleged that Egypt violated the Spain-Egypt BIT by requiring ACC to pay excessive licensing fees, failing to provide adequate natural gas and electricity, and denying justice. The Tribunal found that Egypt breached the fair and equitable treatment standard. Specifically, the Tribunal held that the imposition of retroactive licensing fees and the requirement to pay them as a condition for obtaining an industrial license violated the Claimants' legitimate expectations. The Tribunal also found that Egypt's failure to supply sufficient gas and electricity to ACC's plant was arbitrary and discriminatory. However, the Tribunal rejected claims of denial of justice. The award underscores the importance of stable regulatory frameworks for foreign investors and the limits of state sovereignty in changing regulations after investments have been made.
The detail
Parties: Cementos La Union S.A. and Aridos Jativa S.L.U v. Arab Republic of Egypt
Case number: ICSID Case No. ARB/13/29
Outcome: The Tribunal found that Egypt breached the fair and equitable treatment standard under the Spain-Egypt BIT by imposing excessive licensing fees and failing to provide adequate gas and electricity to the Claimants' investment. The Tribunal awarded damages to the Claimants.
Applicable law: Treaty for the Reciprocal Promotion and Protection of Investments between the Kingdom of Spain and the Arab Republic of Egypt (1992); ICSID Convention; international law
Issues in play: The case involved the fair and equitable treatment standard under the BIT, particularly the protection of legitimate expectations, and the prohibition of arbitrary and discriminatory measures. The Tribunal examined whether Egypt's regulatory changes and actions regarding licensing fees and utility supply breached these standards.
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