CEAC loses arbitration against Montenegro, has to bear costs of trial

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    Investment arbitration proceedings between CEAC Holdings Limited and Montenegro ended on 26 July 2016, as the arbitral tribunal declined its jurisdiction to decide on this dispute…

    Investment arbitration proceedings between CEAC Holdings Limited and Montenegro ended on 26 July 2016, as the arbitral tribunal declined its jurisdiction to decide on this dispute. The arbitral tribunal of the International Centre for Settlement of Investment Disputes (ICSID) in Paris, in part of the proceedings devoted exclusively to the consideration of questions of jurisdiction, found out that the CEAC has no seat on the territory of Cyprus, and, therefore, does not represent foreign investor in line with the terms of the applicable international agreements on the protection of foreign investments, which is required in order to be authorised to initiate this type of arbitration proceedings against Montenegro. In addition, taking into account all the circumstances of the case and the fact that the CEAC has initiated a proceedings in which it could not prove that it has the appropriate qualifications, the arbitral tribunal decided that the CEAC has to bear the costs of the arbitration proceedings and legal representation in the amount of approximately EUR 900,000, including the compensation of Montenegro’s costs in these proceedings.

    CEAC initiated the arbitration proceedings in March 2014 on the basis of the bilateral agreement on protection of investments between Cyprus and Montenegro. CEAC argued that Montenegro violated several obligations set out in the agreement and, although it did not announce the exact value of the dispute, it claimed that they will demand compensation in the amount of over EUR 600 million.

    Within the special proceedings for the settlement of preliminary objections, Montenegro challenged the right of the CEAC to initiate the arbitration proceedings due to lack of foreign investor capacity required by the aforementioned bilateral agreement. The arbitral tribunal has decided to focus exclusively on the question of the CEAC qualification as a foreign investor and requested execution of further evidence.

    Thereafter, convinced of defects in CEAC’s claims and accompanying evidence, the arbitral tribunal decided to adopt Montenegro’s request and decline itself jurisdiction.

    The arbitration tribunal consisted of Chairman Bernard Hanotiau, and co-arbitrators, Brigitte Stern and William Park.

    Prosecutor in this case was represented by the King&Spalding International LLP London, whereas Montenegro was represented by Christoph Lindinger and Slaven Moravčević, partners of Schoenherr.

    We recall that in May this year, the International Centre for Settlement of International Disputes in Paris also decided in favour of Montenegro in connection with the arbitration proceedings initiated by MNSS and Recupero, the former owners of Željezara Nikšić, seeking damages of over EUR 100 million.

    MINISTRY OF ECONOMY OF MONTENEGRO

    Source: Government of Montenegro