Garanti Koza v. Turkmenistan: Has the ICSID Tribunal Usurped Jurisdiction?

Recently, the popular website, Investment Treaty Arbitration (www.italaw.com) has published the majority and the dissenting awards on objection to jurisdiction for lack of consent in the case of Garanti Koza v. Turkmenistan conducted under the aegis of the ICSID Rules. The facts in short are that Garanti Koza invoked arbitration under the aegis of the ICSID against Turkmenistan under the bilateral Investment Treaty between the United Kingdom and Turkmenistan. Turkmenistan objected to the jurisdiction of the ICSID Tribunal on the ground that Turkmenistan never consented to an ICSID Arbitration. The relevant provision in the Treaty dealing with dispute resolution reads: “1) Disputes between a national or company of one Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement in relation to an investment of the former which have not been amicably settled shall, after a period of four [months] from written notification of a claim, be submitted to international arbitration if the national or company concerned so wishes. (2) Where the dispute is referred to international arbitration, the national or company and the Contracting Party concerned in the dispute may agree to refer the dispute either to: (a) the International Centre for the Settlement of Investment Disputes (having regard to the provisions, where applicable, of the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington DC on 18 March 1965 and the Additional Facility for the Administration of Conciliation, Arbitration and Fact-Finding Proceedings); or (b) the Court of Arbitration of the International Chamber of Commerce; or (c) an international arbitrator or ad hoc arbitration tribunal to be appointed by a special agreement or established under the Arbitration Rules of the United Nations Commission on International Trade Law. If after a period of four months from written notification of the claim there is no agreement to one of the above alternative procedures, the dispute shall at the request in writing of the national or company concerned be submitted to arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law as then in force.” 

Two members of the the Tribunal constituting the majority relied on Maffezini v. Spain and CSOB v. Slovakia and held that the MFN clause would apply to the dispute resolution provisions as well. Since Turkmenistan had entered in a Bilateral Investment Treaty with Switzerland wherein the investor had the right to submit the disputes to the ICSID or a Tribunal constituted under the UNCITRAL Arbtiration Rules. The tribunal held that since this clause in the said BIT was more favourable considering that the Investor had the option to choose between these two Tribunals/ Rules and that since the Turkmenistan-UK BIT did not provide for any option, consent to the ICSID is deemed to have been granted. The MFN provisions (Article 3) were made appliable to even the dispute resolution provisions. Considering this, the tribunal held that consent was given to ICSID. The dissenting member, an appointee of Turkmenistan, held otherwise. The majority and the dissenting opinions can be downloaded from the bracketed link (http://www.italaw.com/cases/2176). This case presents an important development in Investor-State arbitration wherein consent is deemed to have been granted through an indirect means. 

On the face of it, this blawgger is of the view that such a development does not bode well for the legitimacy of Investor-State arbitration and ICSID Arbitration. Access the below links for further readings on the issue.

• Concurring and Dissenting Opinion of Professor Brigitte Stern in Impregilo v. Argentina on the issue.
• Zachary Douglas, The MFN Clause in Investment Arbitration: Treaty Interpretation Off the Rails [J Int. Disp. Settlement (2011) 2 (1): 97-113
• Stephanie L. Parker, A BIT at a Time: The Proper Extension of the MFN Clause to Dispute Settlement Provisions in Bilateral Investment Treaties (arguing in favour of the approach employed by the majority in the above case.