MAKAE Europe SARL v. Kingdom of Saudi Arabia
ICSID · Investment (ICSID and treaty) · Saudi Arabia · 30 Aug 2021
Why it matters
This case is significant for its detailed analysis of the 'control' requirement for corporate investors under investment treaties. The Tribunal set a high bar for proving de facto control, requiring concrete evidence of actual decision-making power, not merely formal ownership structures. It clarifies that a foreign company must demonstrate genuine operational control over the local investment to qualify as an investor, impacting how multinational groups structure their investments.
Summary
MAKAE Europe SARL, a French company, brought an ICSID arbitration against Saudi Arabia under the France-Saudi Arabia BIT, alleging that Saudi measures destroyed its investment in retail and restaurant businesses. The investment was held through MAKAE Trading Establishment, a Saudi company wholly owned by Mr. Alenezi, who also owned 49% of MAKAE Europe. Saudi Arabia objected to jurisdiction, arguing that MAKAE Europe did not 'control' the investment as required by the BIT's definition of 'investor'. The Tribunal bifurcated the proceedings to address jurisdiction first. After a hearing, the Tribunal upheld the objection. It held that 'control' under Article 1(2)(c) of the BIT requires de facto control, not just formal ownership. The Tribunal examined evidence of MAKAE Europe's role in managing the Saudi business, including board meetings, financial decisions, and operational oversight. It found that MAKAE Europe failed to prove it actually controlled MAKAE Trading Establishment; instead, Mr. Alenezi personally controlled the investment. The Tribunal emphasized that the claimant bore the burden of proof and that the evidence showed Mr. Alenezi, not MAKAE Europe, made key decisions. Consequently, the Tribunal declined jurisdiction and dismissed the claim. It also ordered MAKAE Europe to pay Saudi Arabia's costs, totaling over USD 9.5 million, including adjustments for certain procedural motions. The award is notable for its rigorous application of the control test and its rejection of jurisdictional claims based on indirect ownership without demonstrated operational control.
The detail
Parties: MAKAE Europe SARL v. Kingdom of Saudi Arabia
Case number: ICSID Case No. ARB/17/42
Outcome: The Tribunal upheld Saudi Arabia's jurisdictional objection, finding it lacked jurisdiction because MAKAE Europe did not control an investment in Saudi Arabia. The claim was dismissed, and MAKAE was ordered to pay USD 9,578,343.91 in costs and expenses.
Quantum: USD 9,578,343.91 (costs awarded to Respondent)
Applicable law: France-Saudi Arabia BIT (2004); ICSID Convention
Issues in play: The key issue was whether MAKAE Europe, a French company, could be considered an 'investor' under the BIT by controlling an investment in Saudi Arabia. The Tribunal applied the BIT's definition of 'investor' and examined de facto control, requiring proof that MAKAE Europe actually controlled the local Saudi entity.
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