International arbitration: jurisdiction of an arbitral tribunal seated in Geneva over an investment protection claim against a State arising from a settlement agreement; Kompetenz-Kompetenz, lis pendens, apparent authority and temporal applicability of the investment protection agreement

Facts

The respondent, a Turkish construction company (claimant in the arbitration), had been involved in more than 35 public construction projects in Libya since 1980. In the early 1990s it suspended work because of unpaid invoices. After unsuccessful debt collection efforts, it filed suit in 2012 before the court in Beida (Libya). That court ordered the appellant, the State of Libya (represented by the Litigation Department), on 29 October 2012 to pay LD 1'906'360.23 plus interest and damages of LD 1'000'000 (Beida judgment). The appellant did not take part in the proceedings but lodged an appeal; the appellate court set aside the judgment on 31 January 2018.

On 9 December 2013 the State, through its deputy finance minister, concluded a settlement agreement with the respondent, in which it undertook to pay LD 5'420'308.707 and had all court and other proceedings relating to the Beida judgment discontinued. The agreement contained no arbitration clause. On 25 March 2018 the State initiated the so-called Tripoli proceedings, seeking a declaration that the settlement agreement was invalid and void.

As early as 31 August 2016, the respondent had commenced arbitration before the International Chamber of Commerce (ICC) in Paris, based on the Turkish-Libyan Investment Protection Agreement of 25 November 2009 (IPA), with its seat in Geneva. On 22 July 2019 the arbitral tribunal issued a final award: it affirmed its jurisdiction, found a breach of Art. 2 para. 2 IPA (fair and equitable treatment), and awarded the respondent damages of USD 21'865'554 plus interest. The tribunal based its jurisdiction on the finding that the settlement agreement constituted a monetary claim in connection with an investment within the meaning of Art. 1 para. 2 lit. b IPA, and that the dispute had arisen only after the IPA entered into force on 22 April 2011.

On 16 September 2019 the appellant filed a civil law appeal with the Federal Supreme Court, requesting that the award be set aside at the respondent's cost and that the tribunal be declared to lack jurisdiction. The respondent requested dismissal. By presidential order of 25 March 2020, suspensive effect was granted to the appeal. An request for clarification and two applications for provisional measures filed by the appellant on 21 September 2020 became moot as a result of the present decision.

Considerations

The civil law appeal is admissible in the field of international arbitration under the conditions of Art. 190-192 PILA (Art. 77 para. 1 lit. a FSCA). The seat of arbitration is in Geneva, all parties had their domicile abroad (Art. 176 para. 1 PILA), and Chapter 12 of the PILA applies (Art. 176 para. 2 PILA). The award is a final decision (Art. 190 para. 2 PILA). The appeal is in principle cassatory; however, the Federal Supreme Court may itself decide on questions of jurisdiction. Only the objections exhaustively listed in Art. 190 para. 2 PILA are admissible; appellate-type criticism is inadmissible. The arbitral tribunal's findings of fact are binding unless challenged with admissible objections. The jurisdictional objection is examined freely, including preliminary questions of substantive law and foreign law.

As regards Kompetenz-Kompetenz and lis pendens, the Federal Supreme Court holds that an arbitral tribunal domiciled in Switzerland has priority as the court first seised and did not have to take account of the parallel Tripoli proceedings (initiated on 25 March 2018), since the arbitration had already been brought in 2016. The objection that the tribunal should have coordinated with the Libyan proceedings (international comity) fails on account of temporal priority and the lack of sufficient reasoning. The assertion that the State was necessarily required to have the validity of the settlement agreement examined by a state court is unfounded, since no apparent arbitration agreement was lacking.

The principle of res judicata fails because the Tripoli judgment was not known to the tribunal and was not introduced into the proceedings. Moreover, under Art. 27 para. 2 lit. c PILA the judgment would not be recognised, since the Swiss arbitration was commenced earlier. In addition, the enforceability of the Tripoli judgment was not proven.

With regard to subject-matter jurisdiction (Art. 1 para. 2 lit. b IPA), the Federal Supreme Court endorses the tribunal's view that the settlement agreement constitutes a monetary claim in connection with earlier investments. The appellant disputes the validity of the agreement on the ground that the deputy finance minister lacked authority to represent the State. The tribunal affirmed apparent authority (apparent authority) under Libyan law without deciding whether actual authority existed. The objections against Regulation No. 1 of 2012 and the judgment of the Libyan Supreme Court are unpersuasive, since it is not apparent why a lawyer for the respondent should have known the regulation better than the…