Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan
ICSID · Investment (ICSID and treaty) · Jordan · 31 Jan 2006
Why it matters
Salini v. Jordan is a landmark case on the distinction between contractual and treaty claims in investment arbitration. It established that a breach of contract does not automatically amount to a BIT violation, and that an investor must prove a separate treaty breach. The case also clarified the burden of proof for establishing an oral agreement between states, and the importance of the 'Salini test' for defining investment under ICSID, though the merits award focused on the failure to prove the alleged arbitration agreement.
Summary
Salini Costruttori S.p.A. and Italstrade S.p.A., two Italian construction companies, entered into a contract with the Jordan Valley Authority (JVA) to build a dam in Jordan. The contract contained a dispute resolution clause (Article 67.3) that allowed arbitration only if both parties agreed and the Jordanian Council of Ministers approved. A dispute arose over payment, and the companies sought arbitration, but the Council of Ministers refused. The companies then invoked the Italy-Jordan BIT, claiming that Jordan's refusal breached the fair and equitable treatment standard (Article 2(3)) and the obligation to observe undertakings (Article 2(4)). They alleged that during a February 2000 meeting between the Italian and Jordanian Prime Ministers, an oral agreement was reached to refer the dispute to arbitration. The Tribunal first issued a Decision on Jurisdiction in 2004, finding it had jurisdiction only over the claim that Jordan breached the BIT by refusing to arbitrate, but not over other claims. On the merits, the Tribunal examined the evidence of the alleged oral agreement. The Claimants relied on declarations from Italian officials and letters from the Italian Ambassador, while Jordan denied any binding agreement. The Tribunal found that the evidence did not establish that a binding agreement was reached. The Jordanian Prime Minister's statement indicated he only undertook to assist in amicable settlement and, if that failed, to present the matter to the Council of Ministers. The Council subsequently rejected arbitration. The Tribunal concluded that Jordan did not breach Articles 2(3) or 2(4) of the BIT, as there was no binding commitment to arbitrate. All claims were dismissed, and each party bore its own costs. The award is notable for its strict approach to proving oral agreements between states and for reinforcing that BIT claims require a distinct treaty violation beyond a mere contractual dispute.
The detail
Parties: Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan
Case number: ICSID Case No. ARB/02/13
Outcome: The Tribunal dismissed all claims on the merits. It found that Jordan did not breach the Italy-Jordan BIT by refusing to refer the dispute to contractual arbitration, as no binding agreement to arbitrate was proven.
Applicable law: Italy-Jordan Bilateral Investment Treaty (BIT) signed 21 July 1996, entered into force 17 January 2000; ICSID Convention; Jordanian law; Contract between Claimants and Jordan Valley Authority (JVA).
Issues in play: The case involved the interpretation of fair and equitable treatment (FET) under Article 2(3) of the BIT and the obligation to observe undertakings under Article 2(4). The central issue was whether an alleged oral agreement between the Italian and Jordanian Prime Ministers to refer the dispute to arbitration created a binding international commitment that Jordan breached.
Read the full decision at italaw ↗
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