09 Aug, 2012

For the first time, an arbitration tribunal has ruled that investors can sue States that have ratified the Investment Agreement of the Organisation of the Islamic Conference. 


The law firm, Salans LLP, is representing Saudi businessman, Hesham al-Warraq. He claims his rights under the OIC Investment Agreement were breached when, in November 2008, the Republic of Indonesia nationalised PT Bank Century tbk (now called PT Bank Mutiara tbk), in which he held a substantial shareholding. His associate, UK businessman Rafat A. Rizvi, is bringing a parallel compensation claim against Indonesia at the International Centre for Settlement of Investment Disputes (ICSID) under the UK-Indonesian Bilateral Investment Treaty.


The tribunal’s ruling on jurisdiction is a ground-breaking decision.  Up until now, the OIC Investment Agreement has had a low profile amongst investors, governments and lawyers.  This decision confirms that citizens and companies from the 27 OIC Member-States that have ratified the Investment Agreement can claim protection for their investments from mistreatment by host-States.  Crucially, aggrieved investors can bring direct arbitration in their own name to enforce the promises made by the Member States in question.


As a result, investors, including those from Indonesia, can proceed with greater confidence when considering making cross-border investments.  This can only encourage the flow of investment capital amongst States that have ratified the OIC Investment Agreement. 


The OIC is the second largest inter-governmental organization after the United Nations.  The Member-States which have ratified the OIC Investment Agreement have an aggregate population of almost one billion people, and include countries such as Indonesia, Egypt, Morocco, Turkey, Saudi Arabia, the United Arab Emirates, Pakistan, Cameroon, Senegal and Iran.


Indonesia has played a full and active part in the arbitration brought by Mr. al-Warraq.  The tribunal heard detailed arguments from the lawyers on both sides, and then ruled that it had jurisdiction to determine Mr. al-Warraq’s claims.


For Mr. al-Warraq, the tribunal’s decision means he will have the opportunity to be heard before an international, independent tribunal on the issues relating to the collapse of Bank Century.  He is delighted that he will have the chance finally to set the record straight, to clear his name and recover compensation for his very substantial losses.


George Burn, International Arbitration Partner in Salans’ London office, leads the team on the case and is the advocate who argued the matter before the arbitration tribunal.  He said: “Of course, we are first and foremost pleased that the tribunal’s confirmation of jurisdiction means that we will be able to present Mr. al-Warraq’s claims for determination, because Mr. al-Warraq will finally have the chance to present his side of the story to an independent tribunal.  But beyond this case, the tribunal’s ruling on jurisdiction is an important development for the protection of cross-border investments made within the Islamic world.  It means that the promises made by the Member States that ratified the OIC Investment Agreement can, by way of international arbitration, be enforced directly by investors, and therefore those promises can be counted on by citizens and companies from each of the OIC Member States in question, including citizens and companies from Indonesia.” 


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