Metal-Tech Ltd. v. Republic of Uzbekistan
ICSID · Investment (ICSID and treaty) · Uzbekistan · 4 Oct 2013
Why it matters
Metal-Tech v. Uzbekistan is a landmark investment treaty case where the tribunal declined jurisdiction because the investor procured the investment through corruption. It established that investments tainted by bribery violate the legality requirement implicit in BITs and the ICSID Convention, and that tribunals have no jurisdiction over such claims. The case sets a strong precedent that corruption can bar investor protection entirely, even if the host state also participated in the corrupt acts.
Summary
Metal-Tech Ltd., an Israeli company, invested in a joint venture in Uzbekistan to process molybdenum. The joint venture was formed with state-owned entities. Metal-Tech claimed that Uzbekistan breached the Israel-Uzbekistan BIT by expropriating its investment and treating it unfairly. Uzbekistan objected to jurisdiction, arguing that Metal-Tech's investment was illegal because it had paid bribes to Uzbek officials to obtain the investment. The tribunal found that Metal-Tech had entered into sham consulting contracts with individuals connected to government officials, paying them over USD 4 million for no genuine services. Applying Uzbek anti-bribery laws, the tribunal concluded that the investment was procured through corruption. The BIT required investments to be made in accordance with host state law, and the ICSID Convention requires investments to be legal. Because the investment was tainted by corruption, the tribunal lacked jurisdiction over Metal-Tech's claims. The tribunal also dismissed Uzbekistan's counterclaims for lack of jurisdiction, as the BIT's consent did not extend to counterclaims. The case is significant for its clear holding that corruption can strip an investor of treaty protection, and for its detailed analysis of evidence of corruption.
The detail
Parties: Metal-Tech Ltd. v. Republic of Uzbekistan
Case number: ICSID Case No. ARB/10/3
Outcome: The Tribunal lacked jurisdiction over the claims and counterclaims; each party bears its own costs and shares ICSID costs equally.
Applicable law: Israel-Uzbekistan BIT (1994); ICSID Convention; Uzbek law on bribery
Issues in play: The legality requirement under the BIT (whether investment must be made in accordance with host state law) and the definition of investment under the ICSID Convention. The tribunal examined whether corruption in making the investment violated Uzbek law and thus deprived the tribunal of jurisdiction.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.