Mr. Franz Sedelmayer v. The Russian Federation - Chapter 1 - Investment Arbitration Decisions
About the Editor:
Noah Rubins is a Partner in the Paris office of Freshfields, where he is a member of the international arbitration and public international law groups. Mr. Rubins is a U.S. qualified lawyer and has advised and represented clients in arbitrations under ICSID, ICC, ICDR, SCC and UNCITRAL rules. He specializes in disputes in the former Soviet Union and investment treaty arbitration. In addition to advising clients, Mr. Rubins has served as arbitrator in a range of disputes, conducted under the ICC, ICSID, LCIA, SCC and UNCITRAL rules.
Walid Ben Hamida, Maître de Conférences at the University of Evry Val d’Essonne, France. Dr. Ben Hamida also served as expert and expert-counsel to States and investors. His practice focuses on Arab laws, international law, investor-state dispute settlement and arbitration
Dr. Stefan Kröll, LL.M., is a practicing lawyer and a senior research fellow at the Law Centre for European and International Cooperation, Cologne.
Dr. Jörn Griebel D.E.S. (HEI Geneva) is also a senior research fellow at the Law Centre.
Domenico di Pietro, J.D. LLM (London) Solicitor (England and Wales) and Avvocato (Italy). International Arbitration Group, Mayer, Brown, Rowe & Maw LLP, London. The views expressed in this article are the author’s only and should not be attributed to Mayer, Brown, Rowe & Maw LLP.
Hilmar Raeschke-Kessler, Rechtsanwalt beim Bundesgerichtshof, Karlsruhe, Germany. H. Raeschke Kessler is a lecturer of International Procedural Law at the University of Cologne.
Originally from Investment Arbitration Decisions
MR. FRANZ SEDELMAYER v. THE RUSSIAN FEDERATION
(1) FINAL ARBITRAL AWARD RENDERED IN 1998 IN AN AD HOC ARBITRATION IN STOCKHOLM, SWEDEN1
(2) JUDGMENT BY THE STOCKHOLM DISTRICT COURT RENDERED ON 18 DECEMBER 2002
(3) DECISION BY THE SVEA COURT OF APPEAL RENDERED ON 15 JUNE 2005
I. The Arbitration Subject Matters:
(1) Definition of “investor.”
(2) Scope of the definition of “investment.”
(3) The scope of expropriation provisions.
(4) Application of the principle of lis pendens.
(5) Propriety of State as respondent.
(6) Compliance with pre-arbitration procedures.
(7) Identification and valuation of investments subject to expropriation.
(1) Where German investor carried out activities in Russia through a U.S. corporation, his indirect control of the local operating company qualified him as an “investor” under the applicable bilateral investment treaty, which was silent on the issue of indirect ownership.
(2) “Investment” should be given a broad definition. Each particular asset must be examined to determine whether it was invested in accordance with Russian law before it can be considered an “investment.” Most of the assets in question qualify as legal investments.
(3) The actions carried out by the Russian authorities in sealing and taking over the investor’s premises must be regarded as “measures of expropriation or other measures with similar effects” mentioned in the Treaty. The legality of these measures under Russian law is not relevant to this conclusion.
(4) The Tribunal is not prevented from rendering an award under the applicable treaty as a result of pending Russian court proceedings related to the parties’ dispute.
(5) The Russian Federation is the proper respondent in the arbitration.
(6) While there are reasons to question whether the provisions of the Treaty concerning pre-arbitration procedure have been properly fulfilled, the Tribunal need not take any final decision on this issue. Even if these provisions have not been properly complied with, the consequence would be too far-reaching if, solely on this ground, the Tribunal would be prevented from examining the case.
(7) Lack of evidence of the propriety and value of investments made in the framework of the investment activity leads the Tribunal to allow some value and disallow other items. Most of the vehicles imported in the context of the investment activity were not confiscated as part of the seizure of the investor’s premises, and therefore cannot be considered compensable under the Treaty. Despite certain evidentiary problems, the investor is entitled to compensation for both improvements made to the premises seized by the government and for the right to use the premises.
I. Mr. Franz Sedelmayer v. The Russian Federation
(1) Final Arbitral Award Rendered in 1998 in An Ad Hoc Arbitration in Stockholm, Sweden
Observations by Walid Ben Hamida
Observations by Stefan Kröll and Jörn Griebel
(2) Judgment by The Stockholm District Court
Rendered on 18 December 2002
(3) Decision by The Svea Court of Appeal Rendered
on 15 June 2005
Observations by Domenico di Pietro
1) Definition of "investor"
2) Scope of the definition of "investment"
3) The scope of expropriation provisions
4) Application of the principle of lis pendens
5) Propriety of State as respondent
6) Compliance with pre-arbitration procedures
7) Identification and valuation of investments subject to expropriation
(4) Two Decisions by Germany's Supreme Court Rendered on 4 October 2005, VII ZB 08/05 and VII ZB 09/05
1) Can the Russian State's claims against the German State or a German company be attached to secure payment of a German private individual's award against Russia?
2) Does an arbitration clause in a bilateral investment treaty constitute a waiver by the State of its immunity from enforcement of the award?
Observations by Hilmar Raeschke-Kessler
(5) Developments from January 2008 to June 2010
a. German Federal Court of Justice IX 64/08
b. German Federal Court of Justice, VII 37/08
c. Cologne Higher Regional Court, 22 U 98/07
d. Berlin Higher Regional Court, 1 W 276/09
Execution of an arbitral award against the Russian Federation based on the 1989 Bilateral Investment Protection Treaty between the Federal Republic of Germany and the Union of Socialist Soviet Republics. Execution Immunity and States operating through State-owned corporations.
Observations by Friederike Stumpe