Three years ago, an international arbitration tribunal constituted under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID) denied claims filed by Agility that Iraqi officials had expropriated more than $380 million invested by Agility in an Iraqi telecom company. On Thursday (8 February 2024), an annulment committee of ICSID upheld Agility’s challenge to the original award and partially annulled it. The annulment committee agreed with Agility that the original Tribunal had erroneously shielded Iraq’s actions from scrutiny, thereby failing to examine whether Iraq’s actions and omissions violated the protections afforded to Agility under the BIT.
As a result of this award, Agility will now re-file its claims before a freshly-constituted arbitral tribunal who will be able to determine Agility’s claims.
Background to the Case
In February 2017, Agility filed its claims with ICSID, a World Bank organization that serves as a forum for investor-state dispute resolution. Iraq expropriated its investment in Korek Telecom, and denied it due process and fair and equitable treatment in breach of the Kuwait-Iraq bilateral investment treaty.
Agility’s indirect investment in Korek had been approved by Iraq’s Communications and Media Commission in 2011 but, after many hundreds of dollars had been invested (including by way of license fees paid to the CMC), three years later in 2014 the CMC unilaterally decided to annul its own prior approval and declare Agility’s transactions as null and void. That decision of the
CMC was then forcibly implemented in 2019 by Iraq stripping Agility’s indirect shareholding in Korek and transferring its stake to Iraqi shareholders including Sirwan Saber Barzani.
The original ICSID tribunal was comprised of Chairman Cavinder Bull and members John and Sean Murphy.
In the original ruling, the tribunal failed to exercise jurisdiction over Iraq’s implementation of the CMC decision despite clearly having jurisdiction and it failed to answer whether the manner in which Iraq implemented the CMC decision violated the Kuwait-Iraq bilateral investment treaty. The original decision was obviously flawed.
As a result of the self-evident error in the original ruling, Agility applied for annulment before an ad hoc committee constituted by ICSID. The members of the annulment committee comprised
Annulment of the Original Ruling
On 8 February, 2024, the Annulment Committee (by majority) upheld Agility’s challenge to the original award and partially annulled it. The Annulment Committee agreed with Agility that the original Tribunal had erroneously shielded Iraq’s actions from scrutiny, thereby failing to examine whether Iraq’s actions and omissions violated the protections afforded to Agility under the BIT. In so doing, and in failing to state the reasons on which its decision was based, the original Tribunal committed an annullable error pursuant to Article 52(1)(b), as well as Article 52(1)(e), of the ICSID Convention.
The committee stated, “By focusing solely on the ‘expropriation claims that arise solely as a result of the faithful implementation of the CMC Order,’ the Tribunal failed to address or scrutinize the way in which the CMC Order was implemented by Iraq and, thus, committed an excess of powers.”
The Committee went further to state, “The Committee considers that this finding is reinforced by the fact that, not exercising jurisdiction over the consistency with the BIT in terms of the expropriation claims had also rippling effects on the other claims raised by Agility, which ultimately rendered all of them unresolved.”
As a result of this award, Agility will now have the opportunity to re-file its claims before a freshly-constituted arbitral tribunal at ICSID who will be able to determine Agility’s claims relating to Iraq’s expropriation of Agility’s investment, its failure to treat Agility fairly and equitably, and its failure to accord Agility with full protection and security as required by the BIT.
Following the recent annulment decision, Agility said: “Three years ago, the ICSID tribunal clearly got it wrong. They shielded from review Iraqi conduct that plainly violated the basic assurances against expropriation and unfair and inequitable conduct enshrined in the bilateral investment treaty between Kuwait and Iraq: protections of which Agility was the beneficiary. We are cognizant that less than 5% of BIT awards are annulled, and are incredibly thankful to Professor Ricardo Ramirez (President) and Professor Hi-Tak Shin for their courage in annulling this patent travesty of justice.”
To date, there have been four claims against Iraq filed with the ICSID. Three of those claims have been in connection with the actions of the CMC, and three stem from investments in companies based in the semi-autonomous Kurdish area of northern Iraq.
Separately, Agility is also moving expeditiously to enforce its arbitral award of more than US$1.6 billions directly against Korek, Sirwan Barzani and others.
