In the first decision of its kind, an ICSID Tribunal ("the Tribunal") recently interpreted the meaning of a previously-issued arbitration award pursuant to Article 50(1) of the ICSID Convention. Wena Hotels, Ltd. v. Arab Republic of Egypt, CASE No. ARB/98/4 (October 31, 2005). This case should be of interest to investors/potential investors in foreign countries, as it sets out a potential basis on which an investor can seek to "police" an ICSID award that is being disregarded in part by the losing party.
In 1998, an ICSID Tribunal heard a dispute between Wena Hotels Limited ("Wena") and the Arab Republic of Egypt ("Egypt"). The proceedings concerned the seizure by Egyptian officials of two luxury hotels operated by Wena in Cairo and Luxor. Wena contended that Egypt's actions violated a bilateral investment treaty (the "BIT") between Egypt and the United Kingdom, by failing to accord Wena's investments in Egypt "fair and equitable treatment" and "full protection and security." Wena also claimed that Egypt's actions amounted to an expropriation without prompt, adequate and effective compensation. On December 8, 2000, the Tribunal issued an award ("the Original Award") holding that the seizure and Egypt's subsequent actions "amounted to an expropriation," and finding that Egypt had deprived Wena of its "fundamental rights of ownership. The Tribunal awarded Wena some US$ 20 million in damages.
Egypt paid the amount due and owing under the Original Award. However, Wena claimed that Egypt subsequently engaged in conduct designed to discredit Wena in the marketplace. For instance, Wena alleged that the hotels ran an advertising campaign which used Wena's name; an Egyptian state-controlled company also filed suit against Wena for rent purportedly due under the leases which had accrued after the time of the expropriation. Wena argued that such actions were prohibited by the terms of the Original Award, which had determined that Wena no longer held an interest in the hotels/leases
Wena, therefore, brought an action pursuant to Article 50(1) of the ICSID Convention, seeking an interpretation of the Original Award. It specifically asked the Tribunal to address whether the previous decision on expropriation "constituted a total, permanent deprivation of Wena's rights in the … lease, such as to preclude subsequent legal actions by Egypt that presume to the contrary."Egypt responded that the application was baseless because Wena was seeking to "subvert the interpretation process" provided in Article 50(1) of the ICSID in an attempt to resolve a commercial dispute, and further, that the application "[fell] outside of the domain of what is permissible in ‘interpreting' an arbitration award." According to Egypt, interpretation of an award was "permitted solely for the purpose of clarifying ambiguous phrasing in the operative section of the award" and "does not entail a review of the merits of the award.
The Tribunal explained that in order for the Application to be sustained under Article 50, two conditions must be satisfied: first, there must be a dispute between the original parties as to the meaning or scope of the award; and, second, the purpose of the application must be to obtain an interpretation of the award. In satisfaction of the first condition, the Tribunal found that a dispute existed as to whether (i) the expropriation was total and permanent; (ii) whether the expropriation took effect on April 1, 1991; and (iii) whether Egypt is precluded from taking actions that presume that the expropriation was not total and permanent The Tribunal emphasized that when considering the second condition, the Tribunal must be mindful that the admissibility of an application for arbitration must be balanced against the principle that an ICSID award is final and binding on the parties. Therefore, the purpose of the interpretation must be to clarify points which have been settled with binding force in the award; the Tribunal cannot decide new issues which go beyond the limits of the award.
The Tribunal held that Wena had satisfied this element.
The Tribunal then considered the facts known by the Original Tribunal in 2000. The Tribunal held that the expropriation was total and permanent, and that the expropriation occurred as of April 1, 1991. However, the Tribunal declined to rule on the issue of the "further consequences of the expropriation" (for instance, the relationships between Wena and third parties) as it found that this issue had not been put to the Tribunal in the original proceedings, and was not considered in the Original Award.