Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya
ICSID · Investment (ICSID and treaty) · Kenya · 22 Oct 2018
Why it matters
This case is a landmark on the 'legality requirement' in investment treaty arbitration. The Tribunal held that the BIT protects only lawful investments, and that a mining licence issued in disregard of explicit statutory requirements (including environmental impact assessment and protected area prohibitions) is void ab initio and cannot qualify for treaty protection. It also addressed the standard of proof for jurisdictional objections and the consequences of procedural misconduct by the respondent state.
Summary
The case concerns a dispute over a mining licence for Mrima Hill in Kenya, which contains large niobium and rare earth deposits. The Claimants, three companies ultimately owned by UK nationals, obtained a Special Prospecting Licence (SPL 256) in 2008 and later a Special Mining Licence (SML 351) in March 2013, just before a new government took office. The new government suspended SML 351 in August 2013 as part of a review of licences issued during the transition period. The Claimants challenged the suspension in Kenyan courts, which declared SML 351 void ab initio. They then brought an ICSID arbitration under the UK-Kenya BIT, alleging expropriation. The Tribunal found that the BIT contains an implicit requirement that investments be made in accordance with host state law. It held that SML 351 was void because it was issued without the required Environmental Impact Assessment licence and in violation of statutory protections for Mrima Hill as a forest reserve, nature reserve, and national monument. The Mining Commissioner acted ultra vires and under political pressure. Therefore, the Claimants had no protected investment, and the Tribunal lacked jurisdiction. The claim was dismissed, and the Claimants were ordered to pay reduced costs due to the Government's mishandling of corruption allegations.
The detail
Parties: Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya
Case number: ICSID Case No. ARB/15/29
Outcome: The Tribunal dismissed the claims and ordered Claimants to pay Respondent US$3,226,429.21 in costs plus US$322,561.14 in ICSID costs.
Quantum: US$3,548,990.35 (costs)
Applicable law: UK-Kenya BIT (1999); ICSID Convention; Kenyan Mining Act Cap 360; Environmental (Impact Assessment and Audit) Regulations 2003
Issues in play: The BIT's requirement that investments be made in accordance with host state law collided with Kenya's mining and environmental laws. The Tribunal had to decide whether a mining licence issued in violation of statutory conditions precedent could constitute a protected investment.
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