(DS)2, S.A., Peter de Sutter and Kristof De Sutter v. Republic of Madagascar (II)
ICSID · Investment (ICSID and treaty) · Madagascar · 17 Apr 2020
Why it matters
This award is significant for its detailed analysis of the full protection and security standard in the context of state failure to prevent private violence. It clarifies that FPS requires states to take reasonable preventive and punitive measures, and that causation can be established even if the state's omission is not the sole cause of the loss. The decision also addresses the calculation of damages for destroyed assets and the allocation of costs.
Summary
The case concerns an investment by Belgian nationals in a textile factory (PGM) in Madagascar. In January 2009, the factory was destroyed by arson during a period of political unrest. The claimants alleged that Madagascar failed to provide full protection and security (FPS) under the BIT, as the police did not respond to calls for help and the investigation was inadequate. The Tribunal found that Madagascar breached its FPS obligation because the authorities failed to take reasonable preventive measures despite known risks, and the subsequent investigation was ineffective. The Tribunal rejected other claims (fair and equitable treatment, expropriation, discrimination) as unnecessary to decide. It awarded damages based on the value of the destroyed assets (€6,451,113.24) plus conservation costs (€474,488), with compound interest. The Tribunal also ordered Madagascar to bear two-thirds of the arbitration costs.
The detail
Parties: (DS)2, S.A., Peter de Sutter and Kristof De Sutter v. Republic of Madagascar (II)
Case number: ICSID Case No. ARB/17/18
Outcome: The Tribunal found Madagascar violated the full protection and security obligation under the Belgium-Luxembourg-Madagascar BIT and awarded €6,451,113.24 in principal plus €474,488 in conservation costs, with interest.
Quantum: €6,925,601.24 (€6,451,113.24 principal + €474,488 conservation costs)
Applicable law: Belgium-Luxembourg Economic Union-Madagascar BIT (2005); ICSID Convention; ICSID Arbitration Rules
Issues in play: The case involved the interpretation of the full protection and security (FPS) standard under the BIT, and whether the host state's failure to prevent and punish destruction of an investment by third parties (arson) constituted a breach. The Tribunal also addressed the burden of proof for causation and the calculation of damages.
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