Georg Gavrilovic and Gavrilovic d.o.o. v. Republic of Croatia
ICSID · Investment (ICSID and treaty) · Croatia · 25 Jul 2018
Why it matters
This award is significant for its detailed analysis of the 'in accordance with host state law' requirement for jurisdiction under the ICSID Convention and BITs. The Tribunal held that investments made through corruption or illegality cannot benefit from treaty protection, reinforcing the principle that investors must comply with domestic law. It also addressed the burden of proof for allegations of illegality and the distinction between jurisdiction and admissibility.
Summary
The case concerns a dispute between Austrian investors (Georg Gavrilovic and his company Gavrilovic d.o.o.) and the Republic of Croatia under the Austria-Croatia BIT. The investors claimed that Croatia expropriated their investment in a meat processing company and related properties, and violated fair and equitable treatment, among other protections. The investment originated from a 1991 bankruptcy purchase of five companies formerly part of the socially-owned Gavrilovic enterprise. Croatia argued that the purchase was tainted by corruption and illegalities, including bribery of the bankruptcy judge and liquidator, and that the investors failed to acquire valid title to the properties. The Tribunal first addressed jurisdiction, finding that it had jurisdiction ratione personae and ratione materiae, but then considered whether the investment was made 'in accordance with host state law' as required by the BIT. After extensive factual analysis, the Tribunal concluded that the purchase agreement was procured through corruption (bribery of the bankruptcy judge) and therefore the investment was not made in accordance with Croatian law. Consequently, the Tribunal declined jurisdiction over the claims. Alternatively, the Tribunal found that even if it had jurisdiction, the claims would be inadmissible due to the illegality. The Tribunal also rejected the claims on the merits, finding no expropriation or FET violation because the investors had no valid property rights under Croatian law. The award was dispatched to the parties on 26 July 2018.
The detail
Parties: Georg Gavrilovic and Gavrilovic d.o.o. v. Republic of Croatia
Case number: ICSID Case No. ARB/12/39
Outcome: The Tribunal dismissed all claims. No damages awarded.
Applicable law: ICSID Convention; 1997 Austria-Croatia BIT; Croatian law
Issues in play: The case involved the legality of the investment under host state law (Croatian law) and whether the purchase of assets in bankruptcy was tainted by corruption, affecting jurisdiction and admissibility.
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