Introduction
The full protection and security (FPS) standard is one of the essential protection standards of international investment treaties. It plays a significant role in ensuring the physical protection of foreign investments, with obligations imposed on host states to both refrain from causing harm to investors and protect them from third-party actions. In recent years, following events such as the Arab Spring and Russia’s aggression towards Ukraine, the FPS standard has regained prominence in international investor–state disputes. It has also been an important part of the case law involving Turkish parties, in particular with the cases against Libya. Considering the ongoing conflicts in the territories where Turkish investors are active, it seems that there may be an increase in cases involving FPS discussion in the coming years as well. This article examines the recent cases regarding Turkish investors that have an FPS component and looks ahead to the potential further use of the standard.
Resurgence of FPS Cases
The FPS standard primarily concerns the physical protection of the foreign investment. It imposes two main obligations on the host state: (i) to refrain from harming investors/investments through its own organs or actions attributable to it, and (ii) to protect the investors and/or investments against actions of private parties, for instance when there is an armed conflict.[1] Considering these two aspects, the FPS standard can be breached by both state actions and inaction.
The physical protection of investment was historically the key for the protection of foreigners having investment abroad. During the 19th and early 20th centuries, this was the main issue in most of the proceedings before various international adjudication mechanisms. After World War II, this aspect relatively lost its importance. However, since 2010, events such as the Arab Spring and Russia’s aggression towards Ukraine have revived the significance of the FPS standard; there have been increasingly more cases relating to the physical protection of investments as a result of these conflicts against states such as Egypt, Libya, Yemen, Syria, and Russia.[2]
FPS and the Turkish BIT
Similar to the general trend, the Turkish bilateral investment treaties (BITs) usually contain an FPS standard too. At present, there are 58 effective Turkish BITs that include an FPS clause, using varying language.[3] Of these, 20 BITs use phrases such as ‘full protection and security’ or ‘full security and protection,’ while 11 BITs use only ‘full protection.’ Some BITs further qualify the FPS standard with references to international law rules/standards or define its scope in other ways. Despite these differences, the relevant case law suggests that the phrasing of the FPS standard does not impact its application concerning the physical protection of the investments. [4] In short, apart from a few exceptions, most of the Turkish BITs provide for the physical protection of the investor and investments.
The application of these FPS standards in the cases involving Turkish investors has contributed to the abovementioned increase in the number of physical protection-related cases in the period following 2010. Before 2015, the majority of cases brought by Turkish investors under BITs were directed towards the Turkic states and centred on the host states’ administrative and judicial actions.[5] In 2015, Tekfen Insaat and TML, Turkish investors, filed an investment claim against the Libyan state under the Libya–Turkey BIT, focusing on the physical security of their investment.
Relevant Case Law Involving Turkish Investors
The Tekfen case was the first of a series of claims by Turkish investors against Libya, particularly relating to the period following the uprising against the Gaddafi regime. Additionally, there has been a case involving Syrian events that took place after the outbreak of hostilities in 2011.[6] In some of the concluded cases, the tribunals found that the standard was violated, while in other cases, the tribunals found that it was not. There are two further such public cases still pending. Regardless of the specific facts of each case, which will be detailed below, one common thread runs through them: the existence of a conflict situation does not absolve the host state of its obligation to ensure the physical protection of investments.
The abovementioned Tefken case involved Tekfen TML JV as the claimant. The tribunal’s decision in this case remains confidential; however, available information indicates that the tribunal did not conclude that Libya violated the FPS standard.[7]
In the Cengiz v Libya case, the tribunal found that Libya did breach the FPS standard, as it failed to take adequate measures to protect the construction project and investor’s personnel from the effects of the civil war. The tribunal found that the acts of the insurgents in 2011 were attributable to the Libyan state, as they subsequently became part of the government that toppled Gadhafi. Furthermore, the tribunal rejected the argument that the FPS standard is inapplicable during times of conflict.[8] The tribunal awarded Cengiz İnşaat compensation for the damages it suffered, including lost profits, costs and interest. The award amounted to approximately EUR 59 million.[9]
In the Güriş v Libya case, Güriş had argued that, as opposed to the state’s obligation to protect the investor from third parties, when the acts in question are those of the state itself, the FPS standard imposes an obligation of result. However, the tribunal rejected the claimant’s interpretation of the FPS standard, stating that there was no support for this interpretation in the case law. In rejecting the claimant’s approach, the tribunal stated that Cengiz v Libya, which endorsed the claimant’s argument, was only an exception.[10] The tribunal maintained that the state was obliged only to exercise due diligence in protecting investments, even from its own forces, particularly during times of major internal upheavals. After these findings, the tribunal found that, while it was difficult to establish a link of attribution for most of the acts that were allegedly a violation of the FPS, the attack by the police forces on the project site constituted a violation.[11] Once again, the tribunal rejected exclusion of the obligation based on the existence of a conflict.
In the Öztaş v Libya case, there was no conventional FPS claim. In that case, the claimant argued that Libya violated its FPS obligation (along with the fair and equitable treatment (FET) obligation) by inadequately responding to civil unrest, which later escalated into a civil war. The tribunal rejected this argument and stated there was no precedent for liability to be found based on the state’s failure to avoid revolution or civil war, and that international law considers such situations extraordinary.[12]
Currently, there are two other cases pending against Libya by Turkish investors: Nurol and Üstay.[13] In both cases, the respective tribunals are tasked with examining the potential violation of the FPS standard as one of the key issues. The tribunals have established jurisdiction, and the parties are awaiting the final award.
Finally, in the Güriş and others v Syria case, the FPS standard was pleaded by the parties. In that case, the tribunal did not delve into the assessment of the violation of the FPS obligation, as it found violation of the war clause in the Syria–Italy BIT, which it had imported by virtue of the most favoured nation (MFN) clause in the Turkey–Syria BIT.[14] This case could be another opportunity for examination of the FPS obligation during times of conflict, as well as the relationship of the standard with the war clauses, but the tribunal found it unnecessary to go through the investors’ claims under other causes of action.
The cases mentioned above represent the publicly known instances in which tribunals have interpreted, applied, or considered the FPS provisions in Turkish BITs. The conflicts in Libya since 2011 have given rise to the majority of these cases, with the exception of Güriş and others v Syria. Given the ongoing impact of the conflict on Turkish investors in Libya and the absence of any time limitation to bring such claims, it is possible that more cases involving FPS-related questions under this treaty may arise in the future.
On the Horizon: Potential for New FPS Cases
Apart from these concluded or pending cases, there is one additional potential case under a Turkish BIT involving an FPS claim. Nur-Ak, a Turkish construction company, served a notice of dispute on Yemen alleging the violation of the FPS standard, along with certain other claims for violation.[15] If this notice evolves into arbitration, it means that there will be another FPS claim under a Turkish BIT involving an internal conflict situation.
Further, as a result of the Russian occupation of certain Ukrainian territories, there may be more FPS cases. Article 2 of the Turkey–Russia BIT also provides for the FPS protection that has a traditional wording: ‘Investments of investors of one of the Contracting Parties made in the territory of the other Contracting Party shall be accorded fair and equitable treatment and shall enjoy full protection and security.’ Therefore, based on the case law that finds territorial jurisdiction in cases by investors having investments in Crimea, [16] Turkish investors present in Crimea or current conflicted territories may also consider bringing claims against Russia under the said BIT.
In conclusion, in parallel with the general trend in the investor–state disputes, there has been a rise of FPS-related cases since 2010 for Turkish investors. The majority of these cases stem from conflicts in Libya, with the exception of Güriş and others v Syria. The ongoing impact of these conflicts on Turkish investors suggests that there may be more cases involving FPS-related questions in the future.
——
[1] Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration: Substantive Principles (2nd edn, OUP 2017) para 7242 330.
[2] Jure Zrilič, The Protection of Foreign Investment in Times of Armed Conflict (OUP 2019) 2–4; Suzanne Spears and Maria Fogdestam Agius, ‘Protection of Investments in War-Torn States: A Practitioner’s Perspective on War Clauses in Bilateral Investment Treaties’ in Katia Fach Gómez, Anastasios Gourgourinis and Catharine Titi (eds) International Investment Law and the Law of Armed Conflict, (Springer 2019) 283–317.
[3] UNCTAD Investment Policy Hub, International Investment Agreements Navigator, Türkiye Country Profile, <https://investmentpolicy.unctad.org/international-investment-agreements/countries/214/t-rkiye> accessed 11 May 2023.
[4] Addiko Bank AG v Montenegro, ICSID Case No. ARB/17/35, Award dated 24 November 2021, para 775; Infinito Gold Ltd. v Republic of Costa Rica, ICSID Case No. ARB/14/5, Award dated 3 June 2021, paras 623-624.
[5] UNCTAD Investment Policy Hub, International Dispute Settlement Navigator, Türkiye Country Profile, Cases as home state of the investor < https://investmentpolicy.unctad.org/investment-dispute-settlement/country/214/t-rkiye> accessed 11 May 2023.
[6] Güriş İnşaat ve Mühendislik Anonim Şirketi (Güris Construction and Engineering Inc) and others v Syrian Arab Republic, ICC Case No. 21845/ZF/AYZ, Award dated 31 August 2020.
[7] Luke Eric Peterson, ‘Libya Round-up: New Investment Treaty Claims, New Rulings and Updates on Arbitrator Appointments’ (2019) IAReporter <https://www.iareporter.com/articles/libya-round-up-new-investment-treaty-claims-new-rulings-new-set-aside-petitions-and-updates-on-arbitrator-appointments/> accessed 11 May 2023.
[8] Cengiz İnşaat Sanayi ve Ticaret A.S v Libya, ICC Case No. 21537/ZF/AYZ, Award dated 7 November 2018, paras 353-370, 413-434.
[9] ibid 693.
[10] Damien Charlotin, ‘Analysis: Tribunal in Guris v. Libya award draws contrast with Cengiz Award on FPS interpretation and sides with majority of prior Libya awards with respect to war losses clause’ (IAReporter, 5 May 2020) <https://www.iareporter.com/articles/analysis-tribunal-in-guris-v-libya-award-draws-contrast-with-cengiz-award-on-fps-interpretation-and-sides-with-majority-of-prior-libya-awards-with-respect-to-war-losses-clause/> accessed 11 May 2023.
[11] ibid
[12] Öztaş Construction, Construction Materials Trading Inc. v State of Libya, ICC Case No. 21603/ZF/AYZ, Award dated 14 June 2018, paras 161-162.
[13] Damien Charlotin, ‘Libya Round-Up: An update on arbitration cases against the state’ (IAReporter, 26 April 2023) <https://www.iareporter.com/articles/libya-round-up-an-update-on-arbitration-cases-against-the-state/> accessed 11 May 2023.
[14] Güriş and others v Syrian Arab Republic, supra note 7, paras 249–251, 326–328.
[15] Nur-Ak İnşaat Ticaret Limited Şirketi v Yemen, Notice of Dispute dated 22 August 2022.
[16] Athina Fouchard Papaefstratiou, ‘Crimea as Russian Territory for the Purposes of the Russia-Ukraine BIT: Consent v. International Law?’ (Kluwer Arbitration Blog, 5 February 2023) <https://arbitrationblog.kluwerarbitration.com/2023/02/05/crimea-as-russian-territory-for-the-purposes-of-the-russia-ukraine-bit-consent-v-international-law/> accessed 11 May 2023.
