On 1 October 2018, Qatar based beIN Corporation (beIN) filed a Notice of Arbitration against the Kingdom of Saudi Arabia under the Agreement on Promotion, Protection and Guarantee of Investments among Member State of the Organization of the Islamic Conference (the OIC Agreement).
This claim is significant since it follows an established line of cases that have used the Most-Favored-Nation (MFN) treatment provision to import dispute resolution procedures afforded to other investors by the host Member State. Investors are requesting the Permanent Court of Arbitration rather than the OIC Secretary-General to act as appointing authority for claims brought under the OIC Agreement.
In this article, we will provide a summary of the OIC Agreement and the protections it provides to Emirati and Saudi investors, and how the OIC Agreement can be utilized to obtain compensation for any harm as a result of the political spat with Qatar. We will also discuss how this recent case solidifies the use of the MFN treatment provision contained in the OIC Agreement to import dispute resolution provisions from other investment treaties to overcome the concern by investors with the OIC Secretary General’s recent failure to make arbitrator nominations on behalf of the Respondent State.
The OIC Agreement
The OIC Agreement is a state-level treaty signed and ratified by 27 of the 57 Member States of the Organization of Islamic Cooperation. The main purpose of the treaty is to promote investment between the Member States. Some of the Members States who have signed and ratified the OIC Agreement include: Saudi Arabia, United Arab Emirates, Iran, Kuwait, Oman, Pakistan, Qatar, and Turkey.
The OIC Agreement contains several protections for investors, including: unlawful expropriation; MFN treatment; adequate protection and security for invested capital; and free transfer and movement of capital.
To benefit from the protections, an investor must meet the definition of investor, show that the investor’s activities in the host Member State qualifies as an investment, and identify the protection violated by the host Member State.
If a Member State violates one of the protections, an aggrieved investor can commence conciliation and arbitration proceedings under the OIC Agreement. The final award will be final and binding, and the Contracting State must implement the award as if it is a final and enforceable national court decision.
beIN Corporation v. The Kingdom of Saudi Arabia
beIN is a global sports and entertainment entity based in Qatar that provides media coverage to sporting events. In its Notice of Arbitration, beIN alleges that Saudi Arabia:
- Failed to act on beIN’s application for a new broadcasting license and blocked access to beIN’s website and its services,
- Blocked access to TV channels affiliated with the Al Jazeera network,
- Prohibited the import of beIN’s set-top boxes,
- Made official statements that indicated beIN was not licensed in Saudi Arabia and its operations were illegal,
- Prohibited beIN clients from making payments for services provided,
- Permitted and promoted the use of broadcasting piracy by an entity named “beoutQ”, and
- Harassed and pressured beIN employees to resign.
beIN also alleges the actions taken by Saudi Arabia have severely disrupted its operations which caused financial and reputational harm, and damages in the excess of US $1 billion.
Further, beIN alleges breaches under the OIC Agreement relating to adequate protection and security, expropriation, free transfer of capital and non-discrimination. beIN also relies on the MFN clause in the OIC Agreement to import other protections afforded under the Saudi Arabia-Austria Bilateral Investment Treaty (BIT) to alleged breaches of provisions on fair and equitable treatment, full protection and security, and arbitrary or discriminatory measures.
Importing Dispute Resolution Provision through the MFN Treatment Provision
beIN commenced ad hoc arbitration under the UNCITRAL Rules by importing the dispute resolution provisions of the Saudi Arabia-Austria BIT. beIN accomplished this by using the MFN treatment provision under the OIC Agreement.
Article 17 of the OIC Agreement (dispute resolution procedure) provides:
- Disputes between investors and host Member States are to be resolved through conciliation or arbitration. If the parties choose conciliation, and do not reach an agreement, or the conciliator is unable to issue his report within a prescribed period, or the parties do not accept the conciliator’s decision, then each party has the right to settle their dispute in arbitration.
- Conciliation is not a prerequisite to arbitration.
- When a party submits its request for arbitration, it will name and appoint its arbitrator. The other party will have 60 days from the date of submission to name and appoint its arbitrator. If the second party does not appoint an arbitrator, or if the two arbitrators do not agree on the appointment of an Umpire within the prescribed time, either party may request the OIC Secretary General to appoint the remainder of the tribunal.
- Article 17 does not provide for a remedy if the OIC Secretary General fails to appoint the remaining tribunal.
Article 8 of the OIC Agreement contains the MFN treatment provision and requires that a Member State must provide to investors treatment no less favorable than the treatment that the Member State provides to investors from other States that are not members of the OIC Agreement. In other words, if the host country provides better or other protections in another investment treaty, the investor may import the dispute resolution provision and arbitrate under that mechanism, and / or import the protection(s) into their arbitration and bring a claim for beach of that protection.
Under the present case, if Saudi Arabia offers a more favorable dispute resolution mechanism to investors from a third country, it must extend dispute resolution mechanism to investors covered by the OIC Agreement. The same would apply, if for example, a Saudi or Emirati investor brings a claim under the OIC Agreement against the State of Qatar. In which case, the Saudi or the Emirati investor can utilize the MFN treatment provision to find a more favorable dispute resolution mechanism offered by the State of Qatar to another investor under a different treaty.
beIN chose to import the dispute resolution mechanism under the Saudi Arabia-Austria BIT. The BIT dispute resolution provision permits the choice between ICSID arbitration, ad hoc arbitration under the UNCITRAL Rules, or any other agreed form of dispute settlement. beIN submitted its dispute to arbitration under the UNCITRAL Rules.
The beIN Arbitration is part of a line of recent cases brought under the OIC Agreement that have used the MFN treatment provision to overcome jurisdictional hurdles and import other protections. In the D.S. Construction FZCO v. Libya and in an undisclosed case against Oman in 2017, the investor used the MFN treatment provision contained in the OIC Agreement to import the dispute resolution mechanism contained in other treaties entered by the host Member State. In each case, the claimant has approached the Permanent Court of Arbitration to serve as the appointing authority. The issue has been with the OIC Secretary General previously failing to make default nominations which have left the arbitral tribunal’s composition of several arbitrations not fulfilled and therefore no longer active. This is expressed in beIN’s Notice of Arbitration which states that because of the OIC Secretary General’s failure to nominate an arbitrator on behalf of the Respondent State, this renders the dispute resolution provision less favorable than under the Saudi Arabia-Austria BIT.
The United Arab Emirates, the Kingdom of Saudi Arabia, and the State of Qatar have signed and ratified the OIC Agreement. It is only a matter of time when more Emirati and Saudi investors will bring claims under the OIC Agreement for any harm suffered because of the political spat with Qatar.
The use of the MFN provision gives investors from the United Arab Emirates and Saudi Arabia another tool to obtain compensation from such harm. These recent OIC Agreement arbitrations have demonstrated a way forward and a way to overcome any difficulties with the appointment of a Respondent State’s arbtrator. Emirati and Saudi investors should give careful consideration as to whether their claims can be pursued under the OIC Agreement.