Ortiz Construcciones y Proyectos S.A. v. People's Democratic Republic of Algeria
ICSID · Investment (ICSID and treaty) · Algeria · 29 Apr 2020
Why it matters
This case clarifies the limits of state responsibility for the actions of state-owned enterprises (SOEs) in the context of investment treaty arbitration. The Tribunal held that mere participation in a joint venture with an SOE does not automatically attribute the SOE's conduct to the State. It also narrowly interpreted the umbrella clause, requiring a contractual obligation, not unilateral promises. The decision underscores the high bar for establishing FET violations based on legitimate expectations when no specific commitments are made.
Summary
Ortiz Construcciones y Proyectos S.A., a Spanish construction company, invested in Algeria through a joint venture with Algerian state-owned enterprises (SOEs) to build prefabricated housing using its Indagsa system. Ortiz claimed that Algeria breached the Algeria-Spain BIT by failing to award contracts to the joint venture, thereby frustrating its investment. The Tribunal first upheld jurisdiction under the BIT. On the merits, it analyzed attribution of the SOEs' conduct to Algeria under the ILC Articles. It found that the SOEs were not acting as state organs (Article 4) nor under state instructions or control (Article 8), and that the joint venture agreement did not empower the SOEs to exercise governmental authority (Article 5). Therefore, the SOEs' failure to award contracts was not attributable to Algeria. On the FET claim, the Tribunal held that Ortiz did not have a legitimate expectation of receiving contracts because no specific promise was made by the State; the joint venture was a commercial risk. The umbrella clause claim failed because there was no contractual obligation between Ortiz and Algeria. All claims were dismissed, and costs were split equally.
The detail
Parties: Ortiz Construcciones y Proyectos S.A. v. People's Democratic Republic of Algeria
Case number: ICSID Case No. ARB/17/1
Outcome: The Tribunal dismissed all claims by Ortiz and ordered each party to bear its own costs and share ICSID costs equally.
Applicable law: Algeria-Spain BIT (1994); ICSID Convention; Vienna Convention on the Law of Treaties; international law
Issues in play: Attribution of conduct of state-owned enterprises to the State under Articles 4, 5, and 8 of the ILC Articles on State Responsibility; interpretation of fair and equitable treatment (FET) and umbrella clause under the BIT.
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