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Recent investment awards against Serbia – taking due notice

Recent investment awards against Serbia – taking due notice

In one of the latest AKT blog-posts we came in touch with some issues in the field of protection of foreign investments through processes of arbitration, more particularly where potential problems could arise from sudden changes of the laws that regulate incentive measures for renewable energy production (https://www.akt.rs/en/publication/changes-of-incentive-measures-for-renewable-energy-production-and-protection-of-foreign-investors---possible-problems).

Recent investment awards against Serbia – taking due notice

 

In one of the latest AKT blog-posts we came in touch with some issues in the field of protection of foreign investments through processes of arbitration, more particularly where potential problems could arise from sudden changes of the laws that regulate incentive measures for renewable energy production (https://www.akt.rs/en/publication/changes-of-incentive-measures-for-renewable-energy-production-and-protection-of-foreign-investors---possible-problems).

 

In connection to this, to further show the practical significance of international investment protection, in this blog-post we will take a short glance at four investment arbitration cases that Serbia was involved with in the last few years. The short glance is primarily because most of the awards in these cases have not been made public yet.

 

1. Mera Investment v Serbia (ICSID Case No. ARB/17/2)

 

In a November 30, 2018 decision an ICSID tribunal confirmed its jurisdiction over the claims of the Mera Investment Fund against Serbia. The tribunal rejected a series of objections by Serbia. These included that the investor did not qualify as a protected investor under the Cyprus-Serbia BIT, and also that it had not made a qualified investment under the treaty.

Serbia also claimed that the claimant is a shell company without a required seat in Cyprus, as well as that it was contrary to the object and purpose of the BIT and the ICSID Convention to assert jurisdiction over an effectively Serbian entity. The tribunal rejected both of these assertions.

The claimant is a holding company for a Serbian investment fund that invests in various assets in Serbia and is claiming that it has suffered from a retaliatory campaign by Serbian authorities due to the activities of the ultimate owners, Marko and Miroslav Misković. Specifically, the claimant complains of its local assets and bank accounts being frozen, and of bogus tax claims.

Claimant alleges that this caused the claimant’s investment fund to stop trading and destroyed its business. The case thus proceeds to the merits, and final outcome is to be seen.

 

2. Kunsttrans v Serbia (ICSID Case No. ARB/16/10)

 

On November 19, 2018, another ICSID tribunal found Serbia in breach of the fair and equitable treatment provision of the Austria-Serbia BIT. Serbia was sued by art storage company Kunsttrans Holding GmbH and its Serbian subsidiary Kunsttrans d.o.o. Beograd.

The case arose from Kunsttrans’ alleged agreement with the Serbian government to build and manage a storage facility for the National Museum in Belgrade, in order to store the museum’s collection during renovations.

According to the claimants, the Government declined to use the facility and did not fulfill the obligations from the rental agreement.

 

3. Zelena v Serbia (ICSID Case No. ARB/14/27)

 

A third ICSID tribunal found Serbia liable for breaching the BIT between Belgium/Luxembourg and Serbia. The award of November 9, 2018, found that Serbia had denied fair and equitable treatment to Belgian waste management company Zelena NV and its Serbian subsidiary Energo-Zelena doo Inđija.

The claimants operated a plant in Inđija that processed hazardous animal by-products and produced energy as an output. According to claimant statement, Serbia discriminated against them in favor of local competitors in a way that these competitors did not have to comply with the environmental laws and regulations, thus making their operations cheaper.

4. Mytilineos v Serbia (II) (PCA Case No. 2014-30)

 

In a somewhat less recent award in August 2017, an UNCITRAL tribunal found Serbia liable for breaching the BIT with Greece. The claimant, Greek conglomerate Mytilineos Holdings S.A., was awarded 40 million USD. This was a second claim by the same investor, after its first attempt was found premature in 2009.

The dispute arose out of Mytilineos’ investment in RTB Bor mining company in the late 1990s. After RTB Bor failed to comply with its obligations, Mytilineos claimed Serbia improperly shielded the company by instituting alleged restructuring for possible privatization. The Tribunal eventually found that this constituted indirect expropriation of the investment and a breach of the fair and equitable treatment.

Serbia started set-aside proceedings against the award before the Swiss Federal Tribunal, but these were discontinued after a settlement between the parties.

 

Iva Zivkovic

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