Yury Bogdanov v. Republic of Moldova
SCC · Investment (ICSID and treaty) · Sweden · 30 Mar 2010
Why it matters
This case illustrates the application of stabilization clauses in investment treaties, protecting investors from adverse changes in customs regimes. It also addresses the scope of fair and equitable treatment and non-discrimination, finding that a fee structure targeting only one investor violated these standards. The award demonstrates that administrative charges can be considered customs duties if they are designed to generate state revenue, and that stabilization clauses must be interpreted broadly to have practical effect.
Summary
Yury Bogdanov, a Russian citizen residing in Moldova, founded GRAND TORG LLC, a company registered in the Free Enterprise Zone (FEZ) Expo-Business-Chisinau. Under Moldovan law, FEZ residents were guaranteed stability of customs and tax regimes for 10 years. GRAND TORG imported chemicals into the FEZ, processed them outside the zone, and re-exported finished goods. In 2005, Moldova enacted Law 156/2005, which introduced a fee of EUR 200 per customs declaration for goods exported from a free economic zone for processing. Previously, GRAND TORG obtained a single annual permit for a lower fee. The new fee resulted in charges totaling over 440,000 lei for 2005, 2006, and 2008. Bogdanov initiated SCC arbitration under the Russia-Moldova BIT, claiming violations of the BIT's protection and fair treatment provisions. The sole arbitrator found that the fees were customs duties in substance, despite being labeled administrative charges, and that applying them to GRAND TORG violated the stabilization clauses in the FEZ laws, which in turn breached Article 2.2 of the BIT (guaranteeing legal protection). The arbitrator also found a violation of Article 3.1 (fair and equitable treatment and non-discrimination), as no other company was shown to have been subjected to the EUR 200 fee. However, claims for 2005 were time-barred under Moldovan law (3-year limitation), and damages were reduced by 15% to account for potential tax on dividends. Moral damages were denied. Moldova was ordered to pay 475,386.41 lei plus interest, and to bear 2/3 of arbitration costs.
The detail
Parties: Yury Bogdanov v. Republic of Moldova
Case number: SCC Arbitration
Outcome: Moldova ordered to pay 475,386.41 lei to Bogdanov; other claims denied.
Quantum: 475,386.41 lei
Applicable law: Russia-Moldova BIT (1998); Moldovan Law on Foreign Investments No. 998/1992; Law on Free Enterprise Zones No. 625/1995; Law 440/2001; Law on Customs Tariffs 1380; Law 156/2005; SCC Rules
Issues in play: Stabilization clauses in Moldovan FEZ laws vs. new customs fees under Law 156/2005; fair and equitable treatment and non-discrimination under BIT Articles 2.2 and 3.1.
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