JSC Tashkent and others v. Kyrgyzstan, ARB(AF)/16/4
ICSID · Investment (ICSID and treaty) · Kyrgyzstan · 17 May 2023
Why it matters
This award is significant for its treatment of pre-independence investments under a bilateral investment treaty, confirming that investments made before the BIT's entry into force can be protected if they continue after. It also addresses the valuation of expropriated assets in a post-Soviet context, applying a gross-up for taxation and awarding compound interest. The case illustrates the challenges of state succession and property rights in former Soviet republics.
Summary
Four Uzbek state-owned entities (Claimants) owned and operated four resorts on Lake Issyk-Kul in Kyrgyzstan, originally built in the Soviet era. After the USSR dissolved, a 1992 agreement between Uzbekistan and Kyrgyzstan preserved their property rights. Despite this, in April 2016, the Kyrgyz government nationalized the resorts without compensation, citing public interest. The Claimants brought an ICSID arbitration under the Uzbekistan-Kyrgyzstan BIT and the Kyrgyz Foreign Investment Law. The Tribunal found that the Claimants had made investments protected under the BIT, rejecting Kyrgyzstan's argument that pre-1991 investments were excluded. On liability, the Tribunal held that the nationalization was unlawful because it was not accompanied by prompt, adequate, and effective compensation, and it violated due process. The Tribunal awarded damages based on the fair market value of the resorts, calculated by an expert, with a gross-up for taxes and compound interest from the date of expropriation. The Tribunal also ordered Kyrgyzstan to pay 70% of the Claimants' legal fees. A partial dissenting opinion by Prof. Zachary Douglas KC disagreed on certain jurisdictional and quantum issues.
The detail
Parties: JSC Tashkent and others v. Kyrgyzstan, ARB(AF)/16/4
Case number: italaw/cases/10802
Outcome: The Tribunal declared that the Kyrgyz Republic unlawfully expropriated the Claimants' investments and ordered payment of damages totaling approximately USD 32.8 million plus interest and costs.
Quantum: USD 32,846,159.60 (total for four resorts) plus interest and USD 7,144,584.90 in costs
Applicable law: BIT between Uzbekistan and Kyrgyz Republic (1996), Kyrgyz Foreign Investment Law (FIL), ICSID Additional Facility Rules
Issues in play: The case involved the interplay between Soviet-era property rights, state succession after the USSR dissolution, and the protections of the BIT and FIL against unlawful expropriation without compensation.
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