Malicorp Limited v. The Arab Republic of Egypt
ICSID · Investment (ICSID and treaty) · Egypt · 7 Feb 2011
Why it matters
This case is notable for its discussion of what constitutes an 'investment' under ICSID, particularly in the context of a BOT contract. The Tribunal held that a contract signed but not yet performed could still be an investment if it involves a contribution, duration, and risk. However, it also clarified that termination for serious contractual breaches by the investor does not amount to expropriation. The case illustrates the importance of good faith and due diligence in investment treaty arbitration.
Summary
Malicorp Limited, a UK company, entered into a BOT concession contract with Egypt to build and operate the Ras Sudr International Airport. The contract required Malicorp to set up an Egyptian company and provide guarantees. Malicorp failed to meet these obligations within the stipulated time, leading Egypt to rescind the contract. Malicorp initiated ICSID arbitration under the UK-Egypt BIT, claiming expropriation. The Tribunal first addressed jurisdiction, finding that the BOT contract constituted an 'investment' under the ICSID Convention and the BIT, rejecting Egypt's objection. On the merits, the Tribunal examined whether Egypt's termination was expropriatory. It found that Malicorp had misrepresented its financial capacity and failed to perform its obligations, and that Egypt's reasons for termination were serious and adequate. The Tribunal concluded that the termination was a justified contractual measure, not expropriation, and dismissed Malicorp's claim. The costs were split equally. The case highlights that a contract can be an investment even before performance, but that breach of contract by the investor can justify termination without compensation.
The detail
Parties: Malicorp Limited v. The Arab Republic of Egypt
Case number: ICSID Case No. ARB/08/18
Outcome: The Tribunal dismissed Malicorp's claim for compensation for expropriation, finding that Egypt's termination of the concession contract was justified. Each party bore half the arbitration costs and its own legal fees.
Applicable law: Egyptian Law No. 8 of 1997 on Investment Incentives; UK-Egypt BIT (1999); ICSID Convention; BOT Concession Contract
Issues in play: The case involved the definition of 'investment' under the ICSID Convention and the UK-Egypt BIT, and whether a BOT contract could constitute an investment. Also at issue was whether Egypt's termination of the contract amounted to expropriation or was a justified contractual rescission.
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