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Covington & Burling LLP
Contact: Kathy King
202.662.5110
klking@cov.com
May 20, 2010
FOR IMMEDIATE RELEASE
Jordan
Prevails in International Treaty Challenge to Jordanian
Court Decisions
WASHINGTON, DC, May 20, 2010 — Today, the
World Bank’s International Centre for the Settlement of
Investment Disputes (“ICSID”) published a unanimous
award by a three-member arbitral tribunal in favor of
the Jordanian Government, in the case of ATA
Construction, Industrial & Trading Co. v. The Hashemite
Kingdom of Jordan, ICSID Case No. ARB/08/2.
The case involves claims by a Turkish contractor, ATA,
that built a dike in the Dead Sea for Arab Potash
Company. Shortly after construction, while impoundment
was under way, the dike (Dike No. 19) partly collapsed.
In an ensuing commercial arbitration between ATA and
Arab Potash Company, a split tribunal found that,
because Arab Potash Company had “supervised”
construction of the dike, the contractor was not liable
under governing Jordanian law for the collapse and was
entitled to receive full payment for having built the
dike.
The Jordanian Court of Appeal and Court of Cassation
then annulled the arbitral award, under two independent
provisions of the Jordan Arbitration Law. The provisions
in question call for arbitral awards to be set aside
where they violate the mandatory “public order” of
Jordan or “exclude the application of the law agreed
upon by the parties to govern the subject matter of the
dispute.” The Jordanian courts found, in a pair of
judgments unanimously endorsed by eight judges, that
Jordan’s Civil Code imposes strict liability for a
period of 10 years on contractors who erect structures
that collapse, and that such decennial liability is a
fundamental public policy of Jordan that the arbitral
tribunal ignored (“estaba’ad” in Arabic).
The Turkish contractor, ATA, then sued the Jordanian
government itself, under the bilateral investment treaty
currently in force between Turkey and Jordan, alleging
that the Jordanian courts’ proceedings and judgments in
annulling the arbitral award constituted a “denial of
justice,” “expropriation,” and other violations of
international law.
In its unanimous award yesterday, the ICSID tribunal
rejected ATA’s challenge. The tribunal found that “all
claims of the Claimant in connection with the annulment
of the Final Award are inadmissible for lack of
jurisdiction” because the parties’ legal dispute in
regard to the annulment had been fully briefed and
submitted for decision to a Jordanian court years before
the Turkey-Jordan treaty entered into force.
In regard to the merits, the Tribunal noted:
| “[The Jordanian
courts’] actions could hardly be said to have
constituted abusive misconduct, bad faith or a
denial of justice. Notwithstanding its finding
of a lack of temporal jurisdiction, the Tribunal
would note that it was unconvinced that, even if
there had been jurisdiction, a claim of denial
of justice, whether substantive or procedural,
could have been sustained.” (Award, ¶ 123.) |
The tribunal declined to
credit one provision of Jordan’s Arbitration Law
(Article 51), which automatically “extinguishes” an
arbitration agreement whenever an arbitral award
rendered thereunder is annulled. On this point, the
tribunal ruled that ATA was entitled to “a restoration
of [its] right to arbitration” in connection with any
post-annulment reconsideration of the dispute—a remedy
which, the award noted, “Respondent has already
indicated its willingness to accept ... by offering ...
to submit the Dike No. 19 dispute to a new commercial
arbitration in lieu of proceeding in the Jordanian
courts.” ATA refused the offer of a second commercial
arbitration during the ICSID proceedings.
Prince Zeid Ra’ad Zeid al-Hussein, Jordan’s Ambassador
to the United States, where the ICSID proceeding took
place, praised the award, noting: “Having attended the
hearing in this matter, I am particularly gratified to
see the tribunal’s recognition that it could hardly be
said that there was any misconduct on the part of the
Jordanian courts. The Government takes such allegations
very seriously indeed, and it is important that an
esteemed international body has now apparently
recognized that there was no basis for these extravagant
accusations.”
Allan B. Moore, Jordan’s co-counsel and a partner with
the international law firm of Covington & Burling LLP,
observed: “In this case, an entire national legal system
and a longstanding doctrine of construction law in the
Arab Middle East, which dates back to the Napoleonic
Code and should not be controversial, were
misunderstood, wrongly impugned, and rather aggressively
challenged under a treaty that did not properly apply to
the facts of this case. So, this is a gratifying and
important result.”
The tribunal was composed of three highly regarded
experts of public international law: Yves Fortier
(Canadian), who served as President; Professor W.
Michael Reisman (American); and Dr. Ahmed El Kosheri
(Egyptian).
Rabie Hamzeh of Amman was counsel in the case with
Covington & Burling LLP.
The award is available on the ICSID website
here.
Covington & Burling LLP, an international law
firm, provides corporate, litigation, and regulatory
expertise to enable clients to achieve their goals.
Founded in 1919, the firm has more than 750 lawyers and
offices in Beijing, Brussels, London, New York, San
Diego, San Francisco, Silicon Valley, and Washington,
DC.
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