After finding that there had been an illegal expropriation under a BIT, should arbitrators order compensation when the victim of the expropriation fails to provide sufficient evidence of its damages? The Paris Court of Appeal answered this question in a decision dated19 December 2023.
The State of Libya awarded several contracts to Güris, a Turkish construction company, in order to develop a public park in Tripoli. The project was later halted due to the civil war in Libya. In 2015, the State cancelled the contracts and reclaimed the land, and in 2016 an armed Libyan militia attacked Güris employees still on site.
Güris initiated arbitration proceedings under the 2009 Turkey-Libya BIT, alleging expropriation and seeking compensation of USD 190 million. The tribunal issued a partial award finding Güris’s claims to be partially meritorious and reserving its decision on the quantum. However, in its final award, the tribunal did not award any damages, citing insufficient evidence provided by Güris to quantify the damages.
Güris sought the annulment of the final award on the grounds that the arbitral tribunal (i) failed to fulfil its function by not ruling on its claim for compensation despite having found the expropriation to be unlawful, (ii) violated the principle of contradiction by rejecting its claim on the basis of an alleged lack of evidence to quantify the damage without seeking additional information or conducting the necessary investigations, and (iii) violated international public policy by failing to state reasons for its decision to deny compensation, by refusing to assess the amount of compensation and by disregarding the res judicata effect of the partial award.
The Paris Court of Appeal rejected these arguments. After recalling that “arbitrators are not required to respond to all of the parties’ arguments” (§31), the French Court noted that the arbitral tribunal had not refused to rule on the claims for damages in any event, but had rejected them for lack of evidence and had expressly stated its reasons for rejecting the claims.
The Court rejected Güris’ claim that the tribunal should have gone beyond the evidence presented, pointing out in particular that “the principle of contradiction does not require arbitrators to compensate for the failure of the parties to present evidence” (§41).
Finally, the Tribunal held that the Final Award was not inconsistent with the earlier Partial Award, noting that the latter, while acknowledging the existence of a harmful event, “did not oblige the Tribunal to order the State of Libya to pay a sum of money” (§50). Accordingly, Güris’ failure to actually prove that “it had actually suffered damage” did not violate the principle of res judicata of the Partial Award (§51).
The takeaways of this decision are twofold: it confirms the limits of the mission entrusted to arbitrators, which does not include an obligation to investigate, and it reinforces the autonomy of the requirement to prove damages.
Whether that limitation of the duty to investigate would apply in all circumstances certainly deserves a confirmation: would the Court have decided in the same manner had there been corruption or other violations of international public order that the arbitrators did not investigate?
Iurgium [previously Spain Arbitration Review]