L.E.S.I. S.p.A. and ASTALDI S.p.A. v. République Algérienne Démocratique et Populaire
ICSID · Investment (ICSID and treaty) · Algeria · 12 Nov 2008
Why it matters
This case is notable for its detailed analysis of the fair and equitable treatment standard in the context of a long-delayed infrastructure project affected by security issues and a funder's veto. The Tribunal clarified that a state's failure to obtain a funder's approval for a contract amendment does not per se violate the BIT, and that a contract termination due to force majeure (here, the funder's refusal) may not be expropriatory. It also addressed attribution of acts of state entities.
Summary
In 1992, Algeria launched a tender for the Koudiat Acerdoune dam, financed partly by the African Development Bank (AfDB). A joint venture of Italian companies LESI and Dipenta (later ASTALDI) won the contract in 1993. Due to severe security problems from Islamist violence, work was delayed. In 1996, the parties agreed to change the construction method from rockfill to roller-compacted concrete (RCC) to reduce explosives use. This required a contract amendment (Avenant No. 3), which needed AfDB approval. The AfDB refused, considering the change too substantial and requiring a new tender. Algeria then terminated the contract in 2001, citing force majeure. The investors initiated ICSID arbitration under the Italy-Algeria BIT. The Tribunal first rejected jurisdiction over the original claim (filed by the consortium) but allowed a new claim by LESI and ASTALDI. On the merits, the Tribunal found that the acts of the National Agency of Dams (ANB) were attributable to Algeria. However, it held that the termination did not constitute expropriation because it was a legitimate exercise of contractual rights due to force majeure (the AfDB's refusal), not a taking of property. The fair and equitable treatment claim failed because Algeria acted reasonably and transparently, and the investors assumed the risk of the project's difficulties. The full protection and security claim also failed because Algeria provided adequate security measures given the circumstances. The Tribunal dismissed all claims and ordered each party to bear its own costs.
The detail
Parties: L.E.S.I. S.p.A. and ASTALDI S.p.A. v. République Algérienne Démocratique et Populaire
Case number: ICSID Case No. ARB/05/3
Outcome: The Tribunal dismissed all claims by the Claimants. It held that Algeria did not expropriate the investment, did not violate fair and equitable treatment, and did not fail to provide full protection and security. Each party bore its own legal costs, and ICSID costs were shared equally.
Applicable law: Italy-Algeria Bilateral Investment Treaty (BIT); ICSID Convention; Algerian Civil Code; contract governed by Algerian law.
Issues in play: The case involved the interpretation of the BIT's expropriation clause (whether the contract termination amounted to expropriation), the fair and equitable treatment standard, and the full protection and security obligation. The Tribunal also considered whether the acts of the state-owned entity (ANB) were attributable to the State under international law.
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