Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon
ICSID · Investment (ICSID and treaty) · Lebanon · 7 Jun 2012
Why it matters
This case clarifies that contractual breaches by a host state do not automatically amount to BIT violations. The tribunal distinguished between ordinary contractual performance issues and treaty protections, emphasizing that FET requires a drastic or discriminatory change in the essential features of the transaction. It also held that post-civil war instability limits legitimate expectations of regulatory stability.
Summary
Toto Costruzioni Generali S.p.A., an Italian company, contracted with Lebanon's CEGP (later CDR) in 1997 to build a section of the Arab Highway. Toto alleged that Lebanon breached the Italy-Lebanon BIT by delaying expropriations, failing to remove Syrian troops from the site, providing faulty design standards, and changing taxes and customs duties. Toto claimed over USD 11 million in damages plus interest and moral damages. The tribunal, after a bifurcated proceeding, found it had jurisdiction over claims under Articles 2, 3, and 4 of the BIT. On the merits, the tribunal held that Lebanon did not breach the BIT. Regarding expropriation delays, the tribunal found that Toto had waived its right to claim by signing extensions without reservation. The failure to remove Syrian troops was not a treaty breach because Lebanon had no obligation under the BIT to remove them, and Toto could have worked around them. Design changes were contractual matters, not treaty violations. Tax and customs duty increases were not discriminatory or drastic enough to violate FET, especially given Lebanon's post-civil war context. The tribunal dismissed all claims and ordered each party to bear its own costs and share arbitration costs equally.
The detail
Parties: Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon
Case number: ICSID Case No. ARB/07/12
Outcome: All of Toto's claims dismissed; no compensation awarded; each party bears its own costs and shares arbitration costs equally.
Applicable law: Italy-Lebanon BIT (1997); ICSID Convention; Lebanese law
Issues in play: Fair and equitable treatment (FET) and full protection and security standards under the BIT vs. Lebanon's sovereign acts (expropriation delays, failure to remove Syrian troops, design changes, tax increases).
Read the full decision at italaw ↗
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