Ipek Investment Limited v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 8 Dec 2022
Why it matters
This case is significant for its detailed analysis of the abuse of process doctrine in investment arbitration, particularly the requirement that a claimant must not restructure its investment to gain ICSID jurisdiction when a dispute is reasonably foreseeable. The Tribunal applied a strict test, examining the timing and foreseeability of the dispute, and ultimately dismissed the claim as inadmissible, reinforcing the principle that tribunals must guard against jurisdictional manipulation.
Summary
Ipek Investment Limited, a UK company incorporated in May 2015, claimed that Turkey expropriated its investment in the Koza Group, a Turkish conglomerate, by appointing trustees and transferring control to the state. The investment was allegedly made through a Share Purchase Agreement (SPA) dated 7 June 2015, under which Ipek purchased shares in Koza-Ipek Holding from the Ipek family. Turkey objected to jurisdiction on three grounds: (1) the SPA was a sham; (2) the investment violated Turkish law; (3) the Claimant did not make a qualifying investment under the ICSID Convention and the BIT. Additionally, Turkey argued the claim was an abuse of process because the restructuring occurred after a dispute was reasonably foreseeable. The Tribunal focused on the abuse of process objection. It applied the legal test from Philip Morris v. Australia and other cases: whether the dispute was reasonably foreseeable at the time of the restructuring. The Tribunal examined evidence from December 2013 to August 2015, including Turkish investigations into the Koza Group, criminal proceedings against the Ipek family, and media reports. It found that by June 2015, when the SPA was signed, a dispute with Turkey was reasonably foreseeable due to escalating state actions against the Koza Group. The Tribunal concluded that the sole purpose of the SPA was to gain ICSID jurisdiction, making the claim an abuse of process. Consequently, the claims were declared inadmissible, and the Tribunal declined jurisdiction. The Tribunal also ordered each party to bear its own costs and half of the arbitration costs, noting that the Claimant had substantially prevailed in the initial phase on provisional measures and security for costs.
The detail
Parties: Ipek Investment Limited v. Republic of Turkey
Case number: ICSID Case No. ARB/18/18
Outcome: The Tribunal found the claims inadmissible and declined jurisdiction; each party bears its own costs and half of the tribunal costs.
Applicable law: UK-Turkey BIT (1996); ICSID Convention; Turkish law (for investment validity)
Issues in play: The dispute involved whether the Claimant's acquisition of shares in a Turkish holding company via a Share Purchase Agreement (SPA) constituted a qualifying 'investment' under the ICSID Convention and the BIT, and whether the claim was an abuse of process because the SPA was allegedly structured to gain ICSID jurisdiction after a dispute was foreseeable.
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