United Agencies Limited SA v. People’s Democratic Republic of Algeria (I)
ICSID · Investment (ICSID and treaty) · Algeria · 25 Jul 2022
Why it matters
This case clarifies the temporal scope of the legality requirement in investment treaty arbitration. The majority held that compliance with host state law at the time the investment is made is a jurisdictional condition, while illegality during the investment's operation goes to the merits. This distinction is crucial for tribunals assessing jurisdiction under BITs with similar 'in accordance with law' clauses.
Summary
United Agencies Limited SA (UAL), a Swiss company, initiated ICSID arbitration against Algeria under the Switzerland-Algeria Bilateral Investment Treaty (BIT) and the ICSID Convention. UAL claimed that Algeria violated the BIT by failing to allow transfer of funds related to an investment. Algeria objected to jurisdiction, arguing that UAL's investment was not made in accordance with Algerian laws, as required by Article 2 of the BIT. The Tribunal, by majority, upheld Algeria's objection and dismissed the claim for lack of jurisdiction. The majority reasoned that Article 2 of the BIT expressly limits the treaty's application to investments 'made in accordance with the laws and regulations' of the host state. This legality condition must be assessed at the time the investment is initiated, not during its subsequent operation. The Tribunal distinguished between legality at initiation (jurisdictional) and legality during performance (merits). Since UAL failed to demonstrate that its investment was made in compliance with Algerian law at the outset, the Tribunal lacked jurisdiction. The dissenting arbitrator disagreed, arguing that the legality requirement should not bar jurisdiction if the investment was made in good faith. The award was rendered on 25 July 2022.
The detail
Parties: United Agencies Limited SA v. People’s Democratic Republic of Algeria (I)
Case number: ICSID Case No. ARB/20/1
Outcome: The Tribunal dismissed the claim for lack of jurisdiction because the investment was not made in accordance with Algerian laws, as required by the Switzerland-Algeria BIT.
Applicable law: Switzerland-Algeria BIT (2004); ICSID Convention; Algerian law
Issues in play: The legality requirement under Article 2 of the BIT (investment must be made 'in accordance with the laws and regulations' of the host state) versus the investor's argument that the BIT protects investments made in good faith. The Tribunal held that legality at the initiation of the investment is a jurisdictional requirement.
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