Wednesday, November 5, 2014

Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of Estonia, Award


In OKO Pankki v. Estonia[1] a Loan and a Loan Agreement were the original investments. The question arose whether the invalidation of a Payment Agreement for the repayment of the Loan had also invalidated the legality of the Loan and the Loan Agreement. Only investments in accordance with the laws and regulations of the host country were protected by the applicable BITs.[2] The
 
Tribunal denied that an invalidation of the Payment Agreement would invalidate the original investment and deprive it of its jurisdiction. It found that it is not disputed that both [the Loan and the Loan Agreement] were made in accordance with the law and regulations then prevailing in Estonian territory. … [T]he fact that the Payment Agreement was eventually declared invalid by the Estonian Supreme Court cannot here decide the Tribunal's jurisdiction. That decision, …, leaves intact the Bank's investment, i.e. the Loan Agreement and the Loan as originally made … [3]

Source:
Ursula Kriebaum, Chapter  V: Investment artbitration – Illegal Investment in Christian Klausegger , Peter Klein , et al. (eds), Austrian Arbitration Yearbook 2010, (C.H. Beck, Stämpfli & Manz 2010) pp. 307 – 335, available at http://www.law.yale.edu/documents/pdf/sela/Kriebaum_Illegal_Investments.pdf



[1] OKO Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. Estonia, ICSID Case No. ARB/04/6, Award, 19 November 2007, 22 ICSID Review – FILJ 466–501 (2007).
[2] Article 2 of the Estonia – Finland BIT: Applicability of this Agreement
(1) This Agreement shall only apply to investments made in accordance with the laws, regulations and procedures of the host country.
Article 2 of the Estonia – Germany BIT:
(1) Jede Vertragspartei wird in ihrem Hoheitsgebiet Kapitalanlagen von Staatsangehörigen oder Gesellschaften der anderen Vertragspartei nach Möglichkeit fördern und diese Kapitalanlagen in Übereinstimmung mit ihren Rechtsvorschriften zulassen. Sie wird Kapitalanlagen in jedem Fall gerecht und billig behandeln.
[3] Id. at paras. 189–190

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