PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 19 Jan 2007
Why it matters
This case is a landmark for its detailed analysis of fair and equitable treatment in the context of BOT projects, particularly regarding the stability of the legal framework and the obligation to negotiate in good faith. It also clarified the standing of project companies and the treatment of minority shareholders under the BIT. The award is frequently cited for its discussion of the 'umbrella clause' and the standard for indirect expropriation.
Summary
The case arose from a dispute over a Build-Operate-Transfer (BOT) power plant project in Konya Ilgin, Turkey. PSEG Global and its affiliates invested in a lignite-fired thermal power plant. After the project was approved and a concession contract signed, the parties disagreed on the tariff structure following a revised mine plan that increased fuel costs. The Turkish Ministry of Energy and Natural Resources (MENR) refused to approve the revised tariff, and negotiations broke down. The claimants alleged that Turkey breached the US-Turkey BIT by failing to provide fair and equitable treatment, full protection and security, and by expropriating their investment. The Tribunal found that Turkey's conduct, including delays, inconsistent positions on the tariff, and failure to negotiate in good faith, violated the fair and equitable treatment standard. However, it rejected claims of expropriation and discrimination. The Tribunal awarded compensation for the investment expenses incurred, but not for lost profits, as the project was not sufficiently established. The award also addressed jurisdictional issues, finding that the project company (Konya Ilgin Ltd.) had standing but the North American Coal Corporation did not. The case is notable for its application of the BIT's fair and equitable treatment standard to the conduct of negotiations and the stability of the legal framework.
The detail
Parties: PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey
Case number: ICSID Case No. ARB/02/5
Outcome: The Tribunal found Turkey breached fair and equitable treatment and awarded compensation of approximately US$9 million plus interest and costs.
Quantum: US$9,061,479 plus interest and costs
Applicable law: US-Turkey Bilateral Investment Treaty (1985); Turkish Law No. 3096, 3996, 4501; ICSID Convention
Issues in play: The dispute involved the interaction between Turkish administrative law (concession contracts) and private law (implementation contracts), and the BIT's fair and equitable treatment standard. The key collision was over the tariff revision mechanism and the government's refusal to approve revised tariffs after a revised mine plan increased costs.
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