Monday, October 8, 2018

Oman Applies for Enforcement of an ICSID Costs Award in Massachusetts

On 20 June 2018 the Omani government made an application to a Massachusetts Federal Court to enforce a US$5.7 million award.

This is a significant development for Oman in light of the fact that this award was rendered in the first-ever investor treaty claim brought against Oman.  The award, which was issued under the International Centre for Settlement of Investment Dispute Rules, was a big win for the government of Oman.

Oman and bilateral investment treaties

The International Centre for Settlement of Investment Disputes (ICSID) Convention is a treaty ratified by 153 contracting states, including Oman.  The ICSID Convention provides a mechanism for investors from signatory states to make a claim against a government of another signatory state.  The aim of the ICSID Convention is to encourage cross-border investment by providing a means of enforcing contractual rights.

In addition to the ICSID Convention, Oman is a party to 38 bilateral investment treaties and numerous multilateral investment treaties with other countries, all of which include investment protection mechanisms with arbitration in accordance with the ICSID Rules as the means to resolve any disputes that arise under such treaties.

The case

The award for which enforcement is being sought in Massachusetts Federal Court is an award for costs that was issued against Adel Hamadi Al Tamimi.  In 2011 Mr. Tamimi filed a claim for US$273 million against the government of Oman under a 2008 US-Oman free trade agreement (FTA).  In his claim Mr. Tamimi alleged that the government of Oman improperly ended leases that permitted his company to mine for limestone and, in doing so, the ending of these leases violated his rights under the US-Oman FTA.  In alleging that his rights had been violated, he made three claims:  (i) a claim that his rights had been expropriated in accordance with the US-Oman FTA; (ii) a claim for failure of the Omani government to treat his investment in accordance with the minimum standard of treatment under the US-Oman FTA; and (iii) a claim for breach of the national treatment standard in accordance with Article 10.3 of the US-Oman FTA.  Virtually all investment treaties provide that they will treat investors of the other country no worse than its own nationals.

An ICSID tribunal found that the claim was entirely without merit, dismissed the claim, and rendered an award for costs of US$5.7 million in favour of the government of Oman, which the government is now seeking to enforce.

This is not the only instance in which the Omani government and Omani nationals have been involved in investor-state arbitration.  The remainder of this article will summarise the other cases in which either the government of Oman or private Omani investors have been involved in investor-state arbitration.

Oman and investor-state arbitration

From an Omani perspective, the Tamimi case is particularly notable as it was the first ICSID case ever filed against Oman and the first case filed under the US-Oman FTA.  Since the filing of this case against Oman, there have been two other ICSID cases filed against Oman.  The first was a claim filed by Samsung in 2015 under the 2003 South Korea-Oman bilateral investment treaty in relation to a US$2 billion contract for the upgrade of an oil refinery.  This case settled in January 2018.  The second case against Oman was brought by a Turkish company, Attila Do─čan Construction & Installation Co. Inc., over an oil project run by Petroleum Development of Oman.  This case was filed in 2016 under the 2007 Turkey-Oman bilateral investment treaty and is ongoing.

On the other side of the coin, there have been two investment treaty arbitrations filed by Omani investors.  The first was filed by Desert Line Projects LLC in 2005 against the government of Yemen under the 1998 Oman-Yemen bilateral investment treaty.  In this case, Desert Line Projects claimed OMR 40,000,000 against the government of Yemen for moral damages which included loss of reputation as a result of the respondent’s breaches of its obligations under the bilateral investment treaty, namely that the claimant’s executives suffered the stress and anxiety of being harassed, threatened and detained by the respondent as well as by armed tribes.  In 2008, the tribunal awarded Desert Line Projects US$1,000,000, 70% of the arbitration costs and US$400,000 towards the claimant’s legal fees.

The second case commenced by an Omani entity was filed by the State General Reserve Fund of the Sultanate of Oman against Bulgaria in 2015 under the 2007 Bulgaria-Oman bilateral investment treaty.  This case is currently ongoing and relates to the collapse of Corporate Commercial Bank (Corpbank).  Oman’s State General Reserve Fund owned a 30 percent stake in Corpbank, which had its licence withdrawn by the government of Bulgaria, went bankrupt and was shut down by the Bulgarian central bank.

Remarks

While Oman has been involved in relatively few investment treaty cases, the summaries above shed light on the disputes that are arising under the various bilateral investment treaties into which Oman has entered.  Being a party to such treaties is important for Oman as these treaties encourage investors to invest in Oman by providing investors with safeguards and a mechanism to make claims to protect their investments in Oman.