Libananco Holdings Co. Limited v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 2 Sep 2011
Why it matters
This case is a landmark on the burden of proof for jurisdictional facts in investment arbitration. The Tribunal conducted a detailed factual inquiry into share ownership, applying a high standard of proof. It also addressed the 'denial of benefits' clause under ECT Article 17 and the requirement of physical delivery under Turkish law. The award is notable for its extensive forensic analysis and the significant costs awarded against the claimant.
Summary
Libananco Holdings, a Cypriot company, claimed that Turkey expropriated its shares in two Turkish electricity companies, ÇEAŞ and Kepez, by seizing them and cancelling concession agreements on 12 June 2003. Turkey objected to jurisdiction, arguing that Libananco did not own the shares at the relevant time. The Tribunal bifurcated proceedings to hear jurisdictional objections first. After extensive fact-finding, including forensic examination of share certificates and witness testimony, the Tribunal found that Libananco had not proved it acquired ownership of the shares before the critical date. Under Turkish law, transfer of shares in a company requires 'teslim' (physical delivery) of the share certificates. The Tribunal found the evidence of delivery unreliable and contradictory. It also noted that Libananco's corporate structure and the timing of its acquisition were suspicious. Consequently, the Tribunal held it lacked jurisdiction because Libananco was not an 'investor' with a protected investment. The Tribunal dismissed all claims and ordered Libananco to pay Turkey's legal costs and arbitration expenses, amounting to over US$ 15 million. The award is significant for its rigorous analysis of jurisdictional facts and the application of the 'denial of benefits' clause.
The detail
Parties: Libananco Holdings Co. Limited v. Republic of Turkey
Case number: ICSID Case No. ARB/06/8
Outcome: The Tribunal dismissed all claims for lack of jurisdiction because Libananco failed to prove it owned shares in ÇEAŞ and Kepez before 12 June 2003. Libananco was ordered to pay Turkey US$ 15,000,000 in legal fees and US$ 602,500 in arbitration costs.
Quantum: US$ 15,602,500 (costs and fees)
Applicable law: Energy Charter Treaty (ECT), ICSID Convention, Turkish law (for share transfer requirements), Cypriot law (for corporate matters)
Issues in play: The key issue was whether Libananco had made an 'investment' under the ECT and ICSID Convention. Turkish law required 'teslim' (physical delivery) for valid share transfer, which the Tribunal found was not proven.
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