Data

Date:
03-03-2010
Country:
International Centre for Settlement of Investment Disputes (ICSID)
Number:
ARB/05/18; ARB/07/15
Court:
International Centre for Settlement of Investment Disputes (ICSID)
Parties:
Ioannis Kardassopoulos & others v. Republic of Georgia

Keywords

STATE CONTRACTS - LONG-TERM CONTRACTS - CONCESSION AGREEMENT -BETWEEN GREEK AND ISRAELI INVESTORS AND THE GEORGIAN GOVERNMENT - CONCERNING THE CONSTRUCTION AND OPERATION OF OIL PIPELINES - REFERENCE TO UNIDROIT PRINCIPLES TO INTERPRET APPLICABLE LAW (INTERNATIONAL LAW)

DISPUTE BETWEEN PARTIES AS TO SCOPE OF THE CONCESSION - WHETHER EXTRINSIC EVIDENCE ADMISSIBLE FOR THE PURPOSE OF CONSTRUING THE CONCESSION AGREEMENT - REFERENCE BY ONE OF THE PARTIES TO UNIDROIT PRINCIPLES IN SUPPORT OF ADMISSIBILITY - ARBITRAL TRIBUNAL, THOUGH WITHOUT EXPRESSLY REFERRING TO UNIDROIT PRINCIPLES, BASICALLY CONCURRED

Abstract

A Greek citizen and an Israeli citizen (Claimants) were granted by the Georgian Government (Respondent) a 30-year concession for the reconstruction of energy pipelines and infrastructure in Georgia. A few years later Respondent terminated the concession and turned over some of the rights previously granted to Claimants to a consortium of transnational oil companies.

A governmental commission first considered compensating Claimants, but a new governmental commission subsequently established finally concluded that the investors were not entitled to any compensation.

Claimants submitted a request for arbitration to the International Centre for Settlement of Investment Disputes (ICSID), arguing that Respondent had violated the expropriation and fair and equitable treatment provisions of the Energy Charter Treaty, the Greece-Georgia BIT and the Israel-Georgia BIT.

One of the objections raised by Respondent concerned the scope and validity of the contractual rights arising from the concession ganted to Claimants, especially those regarding future oil and gas projects in Georgia. Respondent argued that some contemporaneous written documents (e.g. preliminary note of advice of a London barrister) precluded the interpretation of the concession as conferring rights with respect to future pipelines, and in support of the use of extrinsic evidence to interpret the concession agreement, it referred to the UNIDROIT Principles.

The Arbitral Tribunal, though without making a reference to the UNIDROIT Principles, admitted oral testimony on how the parties may have understood the relevant provisions in the concession agreement and concluded that the provisions had to be interpreted somewhere between the opposing meanings attached to them by the parties. Ultimately, the Arbitral Tribunal ordered Respondent to pay compensation in the amount of USD 15.1 million to each Claimant, plus interest and arbitration costs, for unlawful expropriation of Claimants’ investment and breach of the fair and equitable treatment standard.

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