Saba Fakes v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 14 Jul 2010
Why it matters
This case is a landmark for its detailed analysis of the objective criteria for an 'investment' under the ICSID Convention, particularly the requirements of contribution, duration, and risk. The tribunal's finding that a sham transaction lacking genuine transfer of rights does not constitute an investment has been influential in subsequent cases. It also illustrates the consequences of bringing a frivolous claim, with the claimant ordered to bear all costs.
Summary
Mr. Saba Fakes, a dual Dutch and Jordanian national, claimed to have acquired 66.96% of shares in Telsim, a Turkish mobile phone company, on July 3, 2003. He alleged that Turkey expropriated his investment by putting Telsim into receivership and selling its assets, violating the Netherlands-Turkey BIT. Turkey objected to jurisdiction, arguing that Fakes did not have Dutch nationality effective for the BIT, and that he had not made a genuine investment. The tribunal first addressed nationality, finding that Fakes' Dutch nationality was effective under the BIT and ICSID Convention. However, on the investment issue, the tribunal applied the objective criteria for an investment under Article 25(1) of the ICSID Convention: contribution, duration, and risk. It examined the 'arrangement' between Fakes, Masoud (a Jordanian), and the Uzan family (Turkish nationals who could not bring a claim). The tribunal found that the share transfer was a sham: Fakes never received original share certificates, the transfer was not recorded in Telsim's register, and Telsim itself denied any change in ownership to Turkish authorities. The tribunal concluded that no genuine contribution, duration, or risk existed, as the arrangement was never intended to have legal effect. Therefore, there was no investment under the ICSID Convention or the BIT, and the tribunal lacked jurisdiction. The tribunal also ordered Fakes to pay all arbitration costs and Turkey's legal fees, totaling over US$ 1.6 million, due to the frivolous nature of the claim.
The detail
Parties: Saba Fakes v. Republic of Turkey
Case number: ICSID Case No. ARB/07/20
Outcome: The Tribunal declined jurisdiction; Claimant's claims dismissed. Claimant ordered to pay Respondent's costs and legal fees totaling US$ 1,678,748.49.
Applicable law: ICSID Convention; Netherlands-Turkey BIT (1986); Turkish law
Issues in play: The definition of 'investment' under Article 25(1) of the ICSID Convention and Article 1(b) of the BIT; the legality requirement under Article 2(2) of the BIT; and the nationality requirement under Article 25(2)(a) of the ICSID Convention and Article 1(a)(i) of the BIT.
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