Mobile Telesystems v. Turkmenistan (II), ARB(AF)/18/4
ICSID · Investment (ICSID and treaty) · Turkmenistan · 14 Jun 2023
Why it matters
This award is significant for its detailed analysis of the boundary between contractual and treaty claims in investment arbitration. The Tribunal held that the termination of a settlement agreement and related contracts did not constitute expropriation or unfair treatment under the BIT, reinforcing the principle that not every contractual breach by a state amounts to a treaty violation. It also addressed attribution of conduct by state-owned enterprises.
Summary
Mobile Telesystems (MTS), a Russian mobile phone operator, invested in Turkmenistan through a subsidiary, BCTI, which later became MTS-Turkmenistan (MTS-TM). After a series of disputes, the parties entered into a 2012 Settlement Agreement that governed MTS-TM's operations. In 2017, Turkmenistan refused to renew the 2012 Agreement and terminated related contracts, effectively shutting down MTS-TM's operations. MTS brought a claim under the Russia-Turkmenistan BIT, alleging expropriation, unfair treatment, and other violations. The Tribunal first upheld jurisdiction, rejecting Turkmenistan's argument that the claims were purely contractual. On the merits, the Tribunal found that the 2012 Agreement was a valid framework that had expired by its own terms, and that Turkmenistan's refusal to renew was not arbitrary or discriminatory. The Tribunal also dismissed MTS's historical claims regarding data channel capacity, tariffs, import permits, and other operational issues, finding no breach of the BIT. The award emphasizes that the state's conduct must be assessed under the treaty standard, not merely as contractual performance. The Tribunal ordered MTS to pay 80% of Turkmenistan's legal costs and all arbitration costs.
The detail
Parties: Mobile Telesystems v. Turkmenistan (II), ARB(AF)/18/4
Case number: italaw/cases/11031
Outcome: The Tribunal dismissed all of MTS's claims on the merits, finding no violation of the BIT. MTS was ordered to pay 80% of Turkmenistan's legal fees and expenses, plus the entire arbitration costs.
Applicable law: Agreement between the Government of the Russian Federation and the Government of Turkmenistan on the Promotion and Reciprocal Protection of Investments (BIT), entered into force 23 August 2010; ICSID Additional Facility Rules
Issues in play: The case involved the interplay between contractual obligations under a 2012 Settlement Agreement and treaty protections under the BIT. The Tribunal distinguished between breach of contract and breach of treaty, finding that the dispute was essentially contractual and did not rise to the level of a BIT violation.
Read the full decision at italaw ↗
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