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Spentech Engineering Limited v. United Arab Emirates (ICSID)

Why it matters

This award clarifies that investments made on diplomatic premises located in a third state do not qualify as investments 'in the territory' of the host state under a bilateral investment treaty. It reinforces the principle that embassy premises are not part of the sending state's territory for investment treaty purposes, and demonstrates the application of ICSID Rule 41 to dismiss manifestly unmeritorious claims at an early stage.

Summary

Spentech Engineering Limited, a Kenyan company, entered into construction contracts with the UAE Embassy in Mogadishu, Somalia, to build projects including an army barracks and a hospital. The contracts were signed in Somalia, governed by UAE law, and subject to UAE courts. After disputes arose, Spentech initiated ICSID arbitration under the UAE-Kenya bilateral investment treaty, claiming expropriation and unfair treatment. The UAE objected under ICSID Arbitration Rule 41 that the claims were manifestly without legal merit because the investment was not made 'in the territory' of the UAE. The Tribunal agreed, holding that diplomatic premises are not part of the sending state's territory under international law. It found that the situs of the investment was Somalia, not the UAE, and therefore the treaty's territorial requirement was not met. The Tribunal dismissed all claims and ordered Spentech to pay the UAE's costs and a portion of the arbitration advances, with simple interest at 4.37% per annum.

The detail

Parties: Spentech Engineering Limited v. United Arab Emirates

Case number: ICSID Case No. ARB/24/16

Outcome: The Tribunal dismissed all claims as manifestly without legal merit, finding it manifestly lacked jurisdiction. Claimant ordered to pay Respondent's legal costs of USD 12,137.46 and USD 122,019.16 for expended share of advances, plus simple interest at 4.37%.

Quantum: USD 134,156.62 (costs and advances) plus interest

Applicable law: Agreement between the UAE and Kenya on the Promotion and Protection of Investments (2014); ICSID Convention; ICSID Arbitration Rules 2022

Issues in play: The key issue was whether the Claimant's investment in construction projects at the UAE Embassy in Mogadishu, Somalia, was 'in the territory of' the UAE under the bilateral investment treaty. The Tribunal interpreted 'territory' to exclude diplomatic premises abroad, applying principles of international law on diplomatic missions.

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