Data
- Date:
- 18-04-2017
- Country:
- International Centre for Settlement of Investment Disputes (ICSID)
- Number:
- ARB/12/25
- Court:
- International Centre for Settlement of Investment Disputes (ICSID)
- Parties:
- Marco Gavazzi and Stefano Gavazzi v. Romania
Keywords
STATE CONTRACTS – SHARE PURCHASE AGREEMENT - BETWEEN TWO ITALIAN NATIONALS AND THE ROMANIAN GOVERNMENT - ALLEGED VIOLATION BY THE LATTER OF BILATERAL INVESTMENT TREATY - REFERENCE TO UNIDROIT PRINCIPLES TO INTERPRET APPLICABLE LAW (INTERNATIONAL LAW)
COMPENSATION FOR LOSS OF OPPORTUNITY - CAN BE AWARDED ON THE BASIS OF INTERNATIONAL LAW - REFERENCE TO ART. 7.4.3 UNIDROIT PRINCIPLES
DETERMINATION OF EXTENT OF HARM - DISCRETIONARY POWER OF COURTS WHERE AMOUNT CANNOT BE ESTABLISHED WITH SUFFICIENT DEGREE OF CERTAINTY - IN CASE OF LOSS OF OPPORTUNITY MUST BE TAKEN IN CONSIDERATION THE PROBABILITY OF THE CHANCE COMING TO FRUITION - REFERENCE TO THE EXAMPLE IN COMMENT 2 TO ART. 7.4.3 UNIDROIT PRINCIPLES
Abstract
In 1999, Claimants, two Italian nationals, invested in a Romanian steel company, undergoing privatization. Claimants agreed to acquire 70% of the company’s shares, provided that its existing debts would be rescheduled or forgiven. But the company’s debts were not restructured and the Romanian Government froze its bank accounts in order to cover the debt. This act and the resulting insolvency prevented Claimants from reviving the company, which was subsequently subject to a judicial reorganization under Romanian Law.
Prior to the ICSID arbitration, the Romanian entity that entered into the Contract (Authority for Privatization and Management of State Ownership) initiated commercial arbitration proceedings against the Claimants alleging breach of contract. In 2007, the Arbitral Tribunal in that case decided in favor of the Claimants, granting their counterclaims in full. That award was challenged before the Bucharest Court of Appeals, which annulled the award in 2009.
Subsequently, Claimants filed a request for arbitration with ICSID in 2012. In a partial decision of 21 April 2015, the Tribunal unanimously held that it had jurisdiction over the Claimants’ claim and, by majority, that it lacked jurisdiction over the Respondent’s counterclaims. It further held by majority that the Respondent had breached the fair and equitable treatment standard under the Italy-Romania BIT and that the acts and omissions of the Respondent also constituted an expropriation in breach of the BIT.
On 18 April 2017, the Tribunal rendered its Award ordering the Respondent to pay compensation to the Claimants, including loss of opportunity. In doing so, the Tribunal quoted Art. 7.4.3 of the UNIDROIT Principles and its commentaries in order to justify and quantify compensation for the loss of opportunity suffered by the Claimants caused by the Respondent’s breaches of the BIT. It also referred to the previous ICSID decision Lemire v. Ukraine (ICSID Case No. ARB/06/18 of 28 March 2011 - see UNILEX) which affirmed that "compensation for a lost chance is admissible, and is normally calculated as the hypothetical maximum loss, multiplied by the probability of the chance coming to fruition" by referring to the example given in the Official Comment 2 to Art. 7.4.3 of the UNIDROIT Principles.
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