Cementownia "Nowa Huta" S.A. v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 17 Sep 2009
Why it matters
This case is a landmark for its strict scrutiny of jurisdictional requirements under the Energy Charter Treaty. The tribunal dismissed the claim after finding that the claimant failed to prove it owned the shares at the relevant time and that the claim was fraudulent. It set a precedent for tribunals to examine the bona fides of an investment and to sanction abusive claims with costs and declarations of fraud.
Summary
Cementownia 'Nowa Huta' S.A., a Polish company, claimed that Turkey expropriated its shares in two Turkish electricity companies, CEAS and Kepez, in violation of the Energy Charter Treaty (ECT). Cementownia alleged it acquired 12.23% of CEAS and 10.74% of Kepez on May 30, 2003, just days before Turkey terminated the companies' concession agreements and seized their assets on June 12, 2003. Turkey challenged the tribunal's jurisdiction, arguing that Cementownia did not own the shares at the relevant time and that the claim was fraudulent. The tribunal, applying the ECT's definition of 'investment' (Articles 1(6), 1(7), and 26(1)), found that Cementownia failed to prove it owned or controlled the shares. The tribunal noted inconsistencies in the evidence, including the absence of the share purchase in Cementownia's financial statements for 2003 and 2004, and the suspicious timing of the alleged acquisition just before the expropriation. The tribunal concluded that the claim was fraudulent and brought in bad faith. Consequently, it dismissed the claim entirely and ordered Cementownia to pay Turkey's legal fees and costs totaling USD 5,304,822.06, plus interest. The tribunal also declared the claim fraudulent but declined to award moral damages to Turkey, finding that the costs sanction was sufficient.
The detail
Parties: Cementownia "Nowa Huta" S.A. v. Republic of Turkey
Case number: ICSID Case No. ARB(AF)/06/2
Outcome: Claim dismissed in its entirety; Claimant ordered to pay Respondent USD 5,304,822.06 in legal fees, expenses, and costs.
Quantum: USD 5,304,822.06
Applicable law: Energy Charter Treaty (ECT); ICSID Additional Facility Rules
Issues in play: The tribunal examined whether the claimant had made an 'investment' under the ECT, focusing on the timing and validity of share acquisition. The key issue was whether the claimant owned or controlled the shares at the time of the alleged expropriation.
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