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Mohamed Abdulmohsen Al-Kharafi & Sons Co. v. Libya and others (Ad hoc (Arab League))

Why it matters

This is one of the largest awards ever rendered under the Unified Agreement for the Investment of Arab Capital, a regional investment treaty. The tribunal awarded USD 900 million in lost profits, setting a high benchmark for damages in Arab investment arbitration. It also affirmed the treaty's supremacy over domestic law and the enforceability of summary awards under the treaty's arbitration annex.

Summary

In 2006, a Kuwaiti company (Al-Kharafi) obtained a license and lease contract to develop a major tourism project on a 240,000 sqm plot in Tripoli, Libya. The contract contained an arbitration clause referring disputes to the Unified Agreement for the Investment of Arab Capital in the Arab States. After taking possession, the company faced repeated assaults by third parties claiming ownership and by police, forcing work stoppages. Despite requests, Libyan authorities failed to resolve the issues and eventually annulled the investment license in 2010. The company initiated ad hoc arbitration under the Arab League's auspices, seated in Cairo. The tribunal found that the project qualified as an investment under Libyan law and the Unified Agreement. It held the Libyan state and its entities jointly liable for breaching their contractual obligation to deliver the land free of encumbrances and for violating the treaty's fair and equitable treatment standard. The tribunal awarded USD 30 million for moral damages, USD 5 million for direct losses, and USD 900 million for lost profits, plus 4% interest and arbitration costs. The award was declared immediately enforceable under Article 2/8 of the treaty's arbitration annex. One arbitrator dissented by refusing to sign.

The detail

Parties: Mohamed Abdulmohsen Al-Kharafi & Sons Co. v. Libya and others

Case number: italaw/cases/2185

Outcome: Claimant won; Respondents ordered to pay USD 935 million plus interest and costs.

Quantum: USD 935,000,000

Applicable law: Unified Agreement for the Investment of Arab Capital in the Arab States (1980); Libyan Law No. 5/1997 and Law No. 9/2010 on Promotion of Foreign Capital Investment; Libyan Civil Code; CRCICA procedural rules (ad hoc).

Issues in play: The tribunal applied the Unified Agreement for the Investment of Arab Capital in the Arab States, which prevailed over conflicting Libyan domestic laws. It also considered Libyan investment promotion laws and the civil code on contractual and delictual liability.

Read the full decision at italaw ↗

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