Cengiz İnşaat Sanayi ve Ticaret A.S v. Libya
ICC · Investment (ICSID and treaty) · France · 7 Nov 2018
Why it matters
This award clarifies the distinction between the full protection and security (FPS) standard and the war clause in investment treaties. The tribunal held that FPS imposes a positive obligation on the host state to protect investments from physical harm, including by state-controlled militias, and that this obligation is separate from the duty to compensate for war losses on a non-discriminatory basis. The case also addresses the standard of proof for establishing an investment and investor status under the BIT.
Summary
Cengiz, a Turkish construction company, invested in Libya through its subsidiary Cengiz Libya, which entered into two contracts with the Libyan Housing and Infrastructure Board (HIB) to design and build infrastructure in the WAH and Sebha regions. During the 2011 Libyan Revolution, Cengiz's construction camps were looted and occupied by the Libyan army and militias, causing total loss of the investment. Cengiz claimed Libya breached the Turkey-Libya BIT by failing to provide full protection and security (FPS), fair and equitable treatment (FET), and by discriminating in compensation for war losses (War Clause). The tribunal, seated in Paris under ICC Rules, first rejected Libya's jurisdictional objections, finding that Cengiz had made an investment as a 65% shareholder of Cengiz Libya, that Libya had effective control over its territory, and that Cengiz was an investor under the BIT. On the merits, the tribunal held that Article 2(2) (FPS) and Article 5 (War Clause) are independent obligations. It found Libya breached FPS because its army and militias caused physical harm to Cengiz's camps and Libya failed to provide any protection. However, the tribunal dismissed the FET claim, finding no discriminatory treatment or breach of legitimate expectations, and dismissed the War Clause claim because Cengiz did not prove it received less favourable treatment than other contractors. The tribunal awarded USD 51.2 million in compensation for the FPS breach, plus simple interest at LIBOR + 2% from September 1, 2011, and ordered Libya to release the bank guarantees. Costs were split equally, with Libya reimbursing Cengiz for its share of administrative costs and hearing expenses.
The detail
Parties: Cengiz İnşaat Sanayi ve Ticaret A.S v. Libya
Case number: ICC Case No. 21537/ZF/AYZ
Outcome: Libya breached Article 2(2) of the Turkey-Libya BIT by failing to provide full protection and security to Cengiz's investment. Libya ordered to pay USD 51,200,000 in compensation plus interest, and to release bank guarantees related to the WAH and Sebha projects. All other claims dismissed.
Quantum: USD 51,200,000
Applicable law: Turkey-Libya BIT (2009); ICC Rules (2012); international law
Issues in play: The case involved the interplay between Article 2(2) (full protection and security) and Article 5 (war clause) of the BIT. The tribunal held they are independent obligations: FPS requires positive protection, while the war clause requires non-discriminatory compensation for war losses.
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