Wena Hotels Ltd. v. Arab Republic of Egypt
ICSID · Investment (ICSID and treaty) · Egypt · 8 Dec 2000
Why it matters
Wena Hotels v. Egypt is a landmark ICSID case that clarified the scope of 'full protection and security' under investment treaties, holding that states must actively protect foreign investments from seizure by state entities. It also established that expropriation includes indirect takings through state-sponsored seizures, and that compensation must be based on fair market value. The case is frequently cited for its analysis of state responsibility for acts of state-owned enterprises and the standard of compensation for unlawful expropriation.
Summary
Wena Hotels Ltd., a UK company, entered into long-term leases to develop and operate two hotels in Egypt (Luxor and Nile Hotels) with the Egyptian Hotels Company (EHC), a state-owned enterprise. Disputes arose over rent and repairs, leading to arbitration between Wena and EHC. In April 1991, EHC, with the knowledge and support of Egyptian government officials, forcibly seized both hotels, evicting Wena's staff. Wena initiated ICSID arbitration under the UK-Egypt Bilateral Investment Treaty (IPPA), claiming expropriation without compensation and failure to provide fair and equitable treatment and full protection and security. Egypt argued that the seizure was a legitimate response to Wena's breach of contract and that Wena's claims were time-barred. The tribunal rejected Egypt's jurisdictional objections and found that Egypt had violated Article 2(2) (fair and equitable treatment and full protection and security) and Article 5 (expropriation) of the IPPA. It held that Egypt failed to protect Wena's investment from seizure by EHC, which was acting under the authority of the state. The tribunal awarded Wena USD 20,598,462 as compensation for the fair market value of the hotels, plus interest at 9% compounded quarterly, and ordered Egypt to pay Wena's legal costs and ICSID fees. The award was subsequently annulled in part on procedural grounds but upheld on liability and damages.
The detail
Parties: Wena Hotels Ltd. v. Arab Republic of Egypt
Case number: ICSID Case No. ARB/98/4
Outcome: Egypt was held liable for expropriation and failure to provide fair and equitable treatment and full protection and security; Wena was awarded USD 20,598,462 plus interest and costs.
Quantum: USD 20,598,462 plus interest and costs
Applicable law: UK-Egypt Agreement for the Promotion and Protection of Investments (IPPA); ICSID Convention; Egyptian law
Issues in play: The IPPA's expropriation clause (Article 5) requiring prompt, adequate and effective compensation collided with Egypt's defense that the seizure was a legitimate exercise of police powers or a contractual dispute. The tribunal also considered whether Egypt's failure to protect the investment violated the fair and equitable treatment and full protection and security standard (Article 2(2)).
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