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Saipem S.p.A. v. The People's Republic of Bangladesh (ICSID)

Why it matters

This award is a landmark in investment arbitration for establishing that judicial interference by a host state's courts can amount to expropriation of an investor's right to arbitrate. It set the standard for when court actions that frustrate arbitration violate the fair and equitable treatment and expropriation protections of a BIT, and clarified that the value of the expropriated right is the amount of the underlying arbitral award.

Summary

Saipem, an Italian company, contracted with Petrobangla (a Bangladeshi state entity) to build a pipeline. Disputes arose over delays and compensation. Saipem initiated ICC arbitration in Dhaka, Bangladesh, as per the contract. During the arbitration, Petrobangla challenged the tribunal's jurisdiction and later obtained a court order in Bangladesh revoking the arbitrators' authority. The ICC tribunal continued and issued an award in favor of Saipem. However, the Bangladeshi courts declared the award 'non-existent' and unenforceable. Saipem then brought an ICSID claim under the Italy-Bangladesh BIT, arguing that the court actions expropriated its investment (the right to arbitrate and the ICC award). The ICSID tribunal found that the Bangladeshi courts' intervention was illegal and amounted to expropriation under Article 5 of the BIT. It held that the expropriation was not for a public purpose, was discriminatory, and violated due process. The tribunal awarded Saipem the amount of the ICC award plus interest, applying the Chorzów Factory standard for reparation of illegal expropriation. The case is significant for establishing that a state's judicial branch can expropriate an investor's rights through court decisions that undermine arbitration.

The detail

Parties: Saipem S.p.A. v. The People's Republic of Bangladesh

Case number: ICSID Case No. ARB/05/07

Outcome: Bangladesh ordered to pay Saipem USD 5,883,770.80, USD 265,000.00, and € 110,995.92 plus interest at 3.375% per annum from 7 June 1993.

Quantum: USD 5,883,770.80, USD 265,000.00, and € 110,995.92 plus interest

Applicable law: Italy-Bangladesh BIT (1990); ICSID Convention; ICC Rules; Bangladesh law (contract)

Issues in play: The BIT's expropriation provision (Article 5) versus Bangladesh's domestic court decisions revoking the ICC tribunal's authority and declaring the ICC award non-existent.

Read the full decision at italaw ↗

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