Kiliç Ĭnşaat Ĭthalat Ĭhracat Sanayi Ve Ticaret Anonim Şirketi v. Turkmenistan
ICSID · Investment (ICSID and treaty) · Turkmenistan · 2 Jul 2013
Why it matters
This case is a landmark on the interpretation of fork-in-the-road and prior recourse clauses in investment treaties. It clarifies that an MFN clause does not automatically extend to dispute resolution provisions, especially where the treaty structure distinguishes substantive rights from procedural remedies. The Tribunal's detailed analysis of authentic treaty texts and its application of VCLT Article 33(4) to reconcile conflicting language versions set an important precedent for similar BIT disputes.
Summary
Kiliç, a Turkish construction company, invested in Turkmenistan and later alleged breaches of the Turkey-Turkmenistan BIT. It initiated ICSID arbitration without first suing in Turkmen courts. The BIT's Article VII.2 required an investor to submit the dispute to local courts and wait one year before arbitrating. The English text was ambiguous ("may" vs "shall"), but the Russian authentic text was mandatory. The Tribunal, applying VCLT Articles 31-32 and 33(4), found that the mandatory meaning best reconciled the texts and reflected the parties' intent. It also rejected Kiliç's argument that the BIT's MFN clause (Article II.2) allowed it to bypass Article VII.2 by importing more favorable dispute resolution terms from other treaties. The Tribunal held that the MFN clause covered only substantive treatment, not procedural remedies, and that importing such terms would undermine the treaty's structure and reciprocity. Since Kiliç had not complied with the mandatory prior recourse requirement, the Tribunal lacked jurisdiction and dismissed the claim. The decision on costs was deferred.
The detail
Parties: Kiliç Ĭnşaat Ĭthalat Ĭhracat Sanayi Ve Ticaret Anonim Şirketi v. Turkmenistan
Case number: ICSID Case No. ARB/10/1
Outcome: The Tribunal declined jurisdiction because Claimant failed to comply with the mandatory requirement under Article VII.2 of the Turkey-Turkmenistan BIT to first submit the dispute to Turkmenistan's courts before initiating ICSID arbitration.
Applicable law: Turkey-Turkmenistan BIT (1997); ICSID Convention; VCLT Articles 31, 32, 33(4)
Issues in play: The collision was between the investor's right to arbitrate under the BIT's MFN clause (Article II.2) and the host state's requirement of prior recourse to local courts (Article VII.2). The Tribunal held that the MFN clause did not override the mandatory local litigation requirement.
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