Westwater Resources, Inc. v. Republic of Turkey
ICSID · Investment (ICSID and treaty) · Turkey · 3 Mar 2023
Why it matters
This case is significant for its detailed analysis of causation in investment arbitration, particularly the 'but for' test for lost profits. The tribunal held that even though Turkey breached the BIT by unlawfully expropriating Westwater's licenses, the investor failed to prove that the breach caused its loss of future profits because the project was not commercially viable regardless. The award also clarifies the standard for awarding sunk costs and the burden of proof on causation.
Summary
Westwater Resources, a US mining company, acquired Turkish subsidiary Adur Madencilik which held licenses to explore and mine uranium deposits in Turkey. In June 2018, Turkey's mining authority MIGEM cancelled the licenses, claiming they were issued in error under Turkish mining law. Westwater initiated ICSID arbitration under the US-Turkey BIT, alleging expropriation and violation of fair and equitable treatment. The tribunal found that Turkey had breached the BIT: the licenses were valid and their cancellation was not justified by any legal error, nor was it for a public purpose or in accordance with due process. However, on compensation, the tribunal applied a strict causation analysis. It found that Westwater had not proven that, but for the cancellation, the project would have become profitable. The evidence showed that the uranium price was too low, the project faced insurmountable regulatory hurdles (land acquisition, EIA, nuclear permits), and Westwater lacked financing. Therefore, the tribunal awarded only the sunk costs (USD 1,283,000) that Westwater had invested in the project, plus interest and partial costs. The award demonstrates that a breach of treaty does not automatically entitle the investor to lost profits; the investor must prove that the breach caused the loss.
The detail
Parties: Westwater Resources, Inc. v. Republic of Turkey
Case number: ICSID Case No. ARB/18/46
Outcome: Westwater awarded USD 1,283,000 for investment costs, plus 50% of legal fees and expenses (USD 3,370,362.88) and 50% of ICSID advances (USD 341,563.33), with interest at SOFR+2% compounded semi-annually.
Quantum: USD 1,283,000
Applicable law: Treaty Between the United States of America and the Republic of Turkey Concerning the Reciprocal Encouragement and Protection of Investments (1990); ICSID Convention; Turkish Mining Law
Issues in play: The case involved the collision between Turkey's sovereign right to cancel mining licenses for alleged legal errors and the investor's right to protection against expropriation and fair and equitable treatment under the US-Turkey BIT. The tribunal had to determine whether the cancellation was a lawful exercise of regulatory power or a compensable expropriation.
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