An ICSID tribunal has held that an ICC award was not an investment for the purposes of an ICSID arbitration. The claimant alleged a breach of the Germany-Ukraine bilateral investment treaty (BIT) arising from its alleged investment in a former state-owned entity. Further to a dispute relating to a conversion contract for the provision of fuel, a settlement agreement and a repayment agreement were entered into providing for ICC arbitration. An ICC award was rendered, but attempts to enforce it in the Ukraine against the state-owned entity failed. The claimant brought ICSID proceedings under the BIT, claiming that the Ukraine had breached its treaty obligations.

One of the issues to be determined was whether the claimant had made an "investment" in the Ukraine within the scope of the BIT and Article 25 of the ICSID Convention. While concluding that the underlying conversion contract did constitute an investment, neither the settlement agreement nor repayment agreement did. As legal acts, they were not the same as an investment in the Ukraine itself.

Of particular interest was the tribunal's consideration of whether the ICC award itself could constitute an investment. The tribunal noted the decision on jurisdiction in Saipem SpA v The People's Republic of Bangladesh (ICSID Case No ARB/05/7). In that case, the tribunal had found that the rights in an award made under a contract which was an investment could themselves constitute an investment, although it left open the question whether an award itself could be an investment (see Legal update, ICSID tribunal holds that national courts' interference with arbitration was expropriation). However, the tribunal in this case considered that an ICC award, in and of itself, whether tested against the BIT or Article 25 of the ICSID Convention could not constitute an "investment". This was because, properly analysed, it was a "legal instrument, which provides for the disposition of rights and obligations arising out of the Settlement and Repayment Agreement" (paragraph 161, award).

The decision contains an interesting discussion of the jurisdictional issues arising from the term "investment" and the tension between objective guidelines for the definition of the term (as enunciated by the Salini guidelines), and the definition of the term within a BIT (see Salini Costruttori SpA and Italstrade SpA v The Hashemite Kingdom of Jordan (ICSID Case No ARB/02/13)). In some cases, tribunals have confirmed that the wording of a BIT cannot contradict the ICSID Convention, whereas in others, because there is no definition of investment in the Convention itself, tribunals have found that the concept is susceptible to a subjective definition by state parties in the relevant BITs or national laws. However, in this case, the tribunal declined to give its view on this area of controversy. For further information on the definition of investment, see Practice note, The definition of investment in international investment law.

The other interesting point to note is the tribunal's decision on costs. Having rejected the claimant's claims on the merits, unlike many ICSID decisions where each party bears its own costs, the tribunal granted the successful respondent its costs, exercising its discretion under Article 61(2) of the Convention, reasoning that, where no part of the claimant's endeavour was successful, the respondent ought to recover its reasonable costs.

Case: GEA Group Aktiengesellschaft v Ukraine (ICSID Case No ARB/08/16).