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SPP v.s. Egypt

Case summary
by

XUAN ZHENG

on 4 December 2012

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Transcript of SPP v.s. Egypt

Award of 1992 in ICSID case no.ARB/84/3 SPP v.s. Egypt Summary of Facts In 1974, SPP, a Hong Kong company, entered into agreements with Egypt to establish a joint venture (ETDC) with a view to develop an international tourist complex at the Pyramids Oasis in Egypt. SPP(Middle East) held 60% of shares in ETDC, with the remaining 40% owned by the Egyptian partner. Summary of Facts The project went ahead until 1978 when, as a result of parliamentary opposition, the government effectively cancelled the project placing ETDC in judicial trusteeship.

By that time, SPP had invested approximately US$5 million in the project (capital contributions and loans to ETDC, expenses for infrastructure design and development) and sold 286 building lots for a total of more than US$ 10 million. Procedural History 1. In 1978, pursuant to the contractual arbitration clause, SPP and SPP(ME) commenced an ICC arbitration , and obtained an award of US$ 12.5 million in damages.
However, this award was later annulled by French courts on jurisdictional grounds.

2. In 1984, the Claimants decided to take the same matter before an ICSID Tribunal, pursuant to Egyptian Law which contained an ICSID arbitration provision.

Main legal issues Award 1. In its 1992 award based on Egyptian and international law.

2. the Tribunal held that Egypt's actions constituted a lawful expropriation of the Claimants' investment

3. Egypt was therefore liable to pay "equitable compensation" for the value of the expropriated investment. In total, the Tribunal awarded US$ 27.6 million.

1. Applicable law


2. Expropriation


3. Compensation

QMUL LLM
Xuan Zheng (Joyce) Award 1. Applicable law The Tribunal held, pursuant to Art.42(1) of ICSID Convention, that in the absence of any specific agreement between the parties, the applicable law was the law of Egypt.
However, it also stated that where municipal law contained a blank space or violate international law, the Tribunal was bound to apply directly the relevant rules of international law.
(supplementary and corrective function of international law)
2. Lawfulness and legal nature of measures taken by Respondent to cancel the investment project. The Tribunal found that was a lawful expropriation for public purpose (preservation and protection of the antiquities).
However, the rules of both Egyptian law and International law imposed an obligation to indemnify parties whose rights had been affected by expropriation.
3. Quantum and basis for calculation of Compensation Quantum: 1. The Tribunal defines, as an object of expropriation, not the land or the right of usufruct held by ETDC, but SPP’s rights as a shareholder of ETDC. In the Tribunal’s view, those rights and interests were entitled to the protection of international law despite their contractual nature.
2. The Tribunal also held that the UNESCO Convention did not exclude the Claimants’ right to compensation, as the Convention became binding on Egypt in 1979, and only from that date Claimants’ activities became internationally wrongful.

Thus compensation was due.
Basis: 1. Three alternative claims of the Claimants :
1)The value of the investment in ETDC at the time the project was cancelled;
2)Calculated on the basis of Claimants’ out-of pocket expenses; 3)Compensation for loss of the chance or opportunity of making a commercial success of the project.

The Tribunal applied the standard of fair compensation recorded in Egyptian law and emphasized that the Claimants were entitled to receive fair compensation for the value of the expropriated investment rather than damages for breach of contract.
The Tribunal took the general principle that “the measure of compensation should reflect the claimant’s loss rather than the defendant’s gain.” The Claimants maintained that Egypt's actions violated the agreements and amounted to expropriation of the investment, and thus claimed compensation for the value of their investment in ETDC plus interest. The Tribunal decided that for out-of-pocket expenses and loss of opportunity was justified and an award on this basis would constitute fair compensation.

1. Tribunal emphasized that the Claimants were entitled to receive fair compensation for the value of the expropriated investment rather than damages for breach of contract.

2. Tribunal used the concept of “the loss of commercial opportunity”. The Tribunal admitted that a monetary assessment of the loss of opportunity “necessarily involves an element of subjectivism and some uncertainty.”


Full transcript