Data

Date:: 22-03-2013
Country:: Arbitral Award
Number:
Court:: Ad hoc Arbitration (Cairo)
Parties:: Mohamed Abdulmohsen Al-Kharafi & Sons Co v Libya and other

Keywords

INVESTMENT AGREEMENT - BETWEEN AN EGYPTIAN COMPANY AND THE LIBYAN SERVICE FOR TOURISTIC DEVELOPMENT - TO BUILD AND OPERATE A TOURIST COMPLEX - DISPUTE SETTLED IN ACCORDANCE WITH THE UNIFIED AGREEMENT FOR THE INVESTMENT OF ARAB CAPITAL IN THE ARAB STATES AND LIBYAN LAW - REFERENCE TO UNIDROIT PRINCIPLES IN ORDER TO CONFIRM THE SOLUTION ADOPTED UNDER THE APPLICABLE DOMESTIC LAW

FULL COMPENSATION, INCLUDING LOST PROFITS - REFERENCE TO ART. 7.4.2 UNIDROIT PRINCIPLES TO CONFIRM THE SOLUTION ADOPTED UNDER LIBYAN LAW

ASSESSMENT OF DAMAGES - BROAD DISCRETION OF ARBITRAL TRIBUNAL IN QUANTIFYING DAMAGES WHERE PRECISE CALCULATION IS IMPOSSIBLE - AWARD OF INTEREST - REFERENCE TO ART. 7.4.3(3) UNIDROIT PRINCIPLES IN SUPPORT OF LIBYAN LAW

Abstract

On June 2006 Claimant, an Egyptian company, entered into an investment agreement with Respondent, the Libyan Service for Touristic Development. The agreement anticipated that Respondent would build and operate a five-star hotel, apartments, commercial centre, restaurants, and recreational areas. The lease was for a period of 90 years and was subject to an annual payment of 730,000 Libyan Dinars (LD). Construction was expected to last seven and a half years and to cost approximately USD $130 million. Under the agreement, if a dispute arose between the parties, it was to be settled in accordance with the Unified Agreement for the Investment of Arab Capital in the Arab States ("Unified Agreement") and would be governed by Libyan law.

Between 2006 and 2007 Claimant was confronted with third-party claims to the land by Libyan public entities, and was later requested to vacate the land, pending resolution of these issues. The Libyan Government proposed an alternative plot of land for the tourist development project, which was refused by Claimant. In 2010, the Government terminated the license for the project.

Therefore, on March 2011, Claimant initiated arbitration proceedings under the Unified Agreement against the Libyan State for breach of the obligations under the agreement, Libyan law, and the Treaty. Claimant requested, amongst other damages, millions of US dollars in sunk costs, moral damages, and lost profits. Libya raised various jurisdictional objections and denied responsibility for the Claimant’s losses, arguing in part that it had presented a feasible alternative which Claimant had refused.

On 22 March 2013, an award was rendered in favour of the Claimant. The Arbitral Tribunal ordered Libya to pay US$ 936 million plus 4% interest calculated from the date the award was issued.

In particular, the Arbitral Tribunal relied on Article 7.4.2. of the UNIDROIT Principles in support of its finding that the investor was entitled to full compensation under Libyan law for the damage suffered, including lost profit.

The Tribunal also relied on Article 7.4.3(3) UNIDROIT Principles in support of the broad discretion tribunals enjoy in assessing damages whenever it is impossible to do so with a sufficient degree of certainty.

In assessing lost profits, the Tribunal also referred to ICC arbitral practice, including ICC Case No. 10422, according to which lost profit should normally be calculated on the basis of net rather than gross profit. Faced with diverging expert assessments and the absence of complete data, the Tribunal relied on the flexibility recognized by Art. 7.4.3(3) of the UNIDROIT Principles and made an equitable assessment of the claimant’s loss.

Although expert reports estimated lost profits at more than USD 2 billion, the Tribunal reduced the amount to USD 900 million.

Fulltext

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Source

https://www.italaw.com/cases/2185}}