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CASE NO. ARB/00/4, 23 July 2001, 42 ILM 609
With regard to the Bilateral Treaty of the Parties, the Petitioner Italian companies consider that the
contract at issue is an investment within the meaning of Articles 1(c) and (e) in the said document. The
dispute arose out of the non-performance of the said contract by the Respondent Kingdom of Morocco. The
contract, therefore, gives the Italian companies a right of an economic nature and the right to damages. The
Kingdom of Morocco, in defense, alleges that, considered in isolation, these provisions dilute the notion of
investment into a broader notion of economic rights. Articles 1(c) and (e) should, therefore, be read in
conjunction with paragraph 1 of Article 1, which refers to the laws and regulations of the host State of the
investment. Therefore, it is Moroccan law that should define the notion of investment. According to them,
the transaction in question should be characterized as a contract for services.
Do the Italian companies satisfy the elements of investment within the meaning of the Bilateral
Treaty and the Washington Convention?
The contract concluded between ADM and the Italian companies is an investment within
the meaning of the Bilateral Treaty. The option of choosing the forum contained in Article 8.2 could
be exercised in favor of arbitral proceedings under the auspices of ICSID.
The protection of investments is the basis for the option of choosing the forum stipulated in Article
8.2 of the Bilateral Treaty. This article, therefore, seeks to define the investments that come under the
protection of the Bilateral Treaty, to wit:
Article 1 of the Bilateral Treaty provides that:
Pursuant to the present Agreement,
1. The term investment designates all categories of assets invested, after the coming into force of the
present agreement, by a natural or legal person, including the Government of a Contracting Party on the
territory of the other Contracting Party, in accordance with the laws and regulations of the
aforementioned party. In particular, but in no way exclusively, the term investment includes:

c.) capitalized debts, including reinvested income, as well as rights to any

contractual benefit having an economic value;
d.) copyright, trademark, patents, technical methods and other intellectual and
industrial property rights, know-how, commercial secrets, commercial brands and
e.) any right of an economic nature conferred by law or by contract, and any license
or concession granted in compliance with the laws and regulations in force,
including the right of prospecting, extraction and exploitation of natural resources.

g.) the elements mentioned in (c), (d) and (e) above must be the object of contracts
approved by the competent authority.
The parties, therefore, agreed upon a number of non-exhaustive hypotheses that they consider to be
The construction contract creates a right to a contractual benefit having an economic value for the
Contractor, mentioned in Article 1(c). The Contractor also benefits from a right of an economic nature conferred
[]by contract dealt with by Article 1(e). Moreover, the Respondent does not deny that the rights of the
Italian companies are of the same nature as those referred to in (c) and (e) of Article 1.
The tribunal cannot follow the Kingdom of Morocco in its view that paragraph 1 of Article 1 refers
to the law of the host State for the definition of investment. In focusing on the categories of invested assets ()
in accordance with the laws and regulations of the aforementioned party, this provision refers to the validity of the
investment and not to its definition. More specifically, it seeks to prevent the Bilateral Treaty from protecting
investments that should not be protected, particularly because they would be illegal. Yet, in the present case,
the Claimants took part in the tender process in conformity with the legal rules applicable to invitations to
tender. At the end of this procedure, they also won the bid and concluded the corresponding contract for
services in conformity with the laws in force at that time. Thus, whether one looks to the pre-contractual
stage or that corresponding to the performance of the contract for services, it has never been shown that the
Italian companies infringed the laws and regulations of the Kingdom of Morocco.
To be considered as investments, the rights enumerated under letters (c) and (e) must be the
object of contracts approved by the competent authority under the terms of Article 1(g). The Bilateral Treaty does not
indicate who the competent authority is, this being likely to vary according to the contract in question. The
competent authority is determined according to the laws and regulations of the State on the territory of which
the investments are made (cf. Article 1, paragraph 1). The Tribunal considers that the contract in question was
indeed the object of an authorization from the competent authority because: (1) the allocation of the contract
to the Italian companies occurred in accordance with the rules and procedure fixed by the President of ADM,
acting in virtue of the powers conferred on him by the Board of Directors of this company, and (2) the
different stages leading to the signature of the construction contract involved various interventions by the
authorities concerned.
As a result, the Tribunal considers the condition of Article 1 (g) is satisfied.
Insofar as the option of jurisdiction has been exercised in favor of ICSID, the rights in
dispute must also constitute an investment pursuant to Article 25 of the Washington Convention.
The Arbitral Tribunal, therefore, is of the opinion that its jurisdiction depends upon the existence of
an investment within the meaning of the Bilateral Treaty as well as that of the Convention, in
accordance with the case law, to wit:
The jurisdiction of the Centre shall extend to any legal dispute arising directly out of relation to an investment, between
a Contracting State (or any constituent subdivision or agency of a Contracting State designated to that Centre by that
State) and a national charter of another Contracting State, which the Parties to the dispute consent in writing to submit
to the Centre.
There is no definition given by the Convention. The two Parties recalled that such a definition had seemed
unnecessary to the representatives of the States that negotiated it. Indeed, as indicated in the Report of the
Executive Directors on the Convention:

No attempt was made to define the term investment given the essential requirement of consent by the parties, and the
mechanism through which the Contracting States can make known in advance , if they so desire, the classes of disputes
which they would or would not consider submitting to the Centre (article 25(4)).
The tribunal notes that there have been almost no cases where the notion of investment within the
meaning of Article 25 of the Convention was raised. However, it would be inaccurate to consider that the
requirement that a dispute be in direct relation to an investment is diluted by the consent of the Contracting
Parties. To the contrary, ICSID case law and legal authors agree that the investment requirement must be
respected as an objective condition of the jurisdiction of the Centre (cf. in particular, the commentary by E.
Gaillard, in JDI 1991, p. 278 et seq., who cites the award rendered in 1975 in the Alcoa Minerals vs. Jamaica case
as well as several other authors). The criteria for characterization are derived from cases in which the
transaction giving rise to the dispute was considered to be an investment without there ever being a real
discussion of the issue in almost all cases.
The doctrine generally considers that the investment infers: contributions, certain duration
of performance of the contract and a participation in the risks of the transaction. In reading the
Conventions preamble, one may add the contribution to the economic development of the host
State of the investment as an additional condition. In reality, these various elements may be
interdependent. Thus, the risks of the transaction may depend on the contributions and the duration
of performance of the contract. As a result, these various criteria should be assessed globally even if,
for the sake of reasoning, the Tribunal considers them individually here. The Italian companies have
satisfied the said elements since: (1) they made contributions in money, in kind, and in industry, as set out and
assessed in their written submissions, and (2) The transaction complies with the minimal length of time
upheld by the doctrine, which is from 2 to 5 years, when it extended its duration of work from 32 months to
36 months.
Consequently, the Tribunal considers that the contract concluded between ADM and the Italian
companies constitutes an investment pursuant to Articles 1 and 8 of the Bilateral Treaty concluded between
the Kingdom of Morocco and Italy, as well as Article 25 of the Washington Convention.
On 19 December 1995, two Contracts (the Contracts) were concluded between Impregilo (acting on behalf
of GBC) and the Pakistan Water and Power Development Authority (WAPDA or the Employer).
Construction began in early 1996 but completion was delayed due to obstacles created by the Respondent and
to unforeseen conditions discovered over the course of the work. The Engineer rejected most of GBCs
claims for extensions of time, as well as its claims for payment of additional costs. As a result, WAPDA
refused to compensate GBC for most of those costs.
According to Impregilos Request, jurisdiction over this dispute is established by Article 25 (1) of the ICSID
Convention and by Article 9 of the BIT between Italy and Pakistan signed on 19 July 1997, which entered
into force on 22 June 2001.
With respect to jurisdiction ratione personae, it is an investor of Italy for the purposes of the BIT. It is also
a national of another Contracting State for the purposes of the ICSID Convention. As Leader of the Joint
Venture, Impregilo is entitled to represent GBC in all matters relating to the Contracts.
WAPDA is an instrumentality of the Government of Pakistan and exercises governmental authority. It is
therefore part of the Government of Pakistan. The Islamic Republic of Pakistan is both a Contracting Party

to the BIT and a Contracting State under Article 25 (1) of the ICSID Convention. It is thus a proper
Respondent in this case.
On the merits, Impregilo claims that Pakistan has violated Article 2(2) of the BIT. Impregilo also claims that
Pakistan has violated Article 5(1) of the BIT
Aside from alleged breaches of the Treaty, Impregilo also complains of breaches of the Contracts. It submits
that the Tribunal has jurisdiction to consider such claims under Article 9 of the BIT which covers any
disputes without exception, between the Parties
Relief sought: As a result of these alleged breaches of the BIT and the Contracts, the Respondent has caused
damages of approximately US$ 450 million. Impregilo seeks compensation for the entirety of the damages,
including interest.

Tribunal unanimously decides:
That it has no jurisdiction ratione materiae over Impregilos claims based on the alleged breaches of the
That with respect to the other Treaty Claims, including the Treaty Claims relating to the frustration of the
dispute resolution mechanism, the Tribunal will determine its jurisdiction when considering the merits.
That the provisions of the BIT do not bind Pakistan in relation to any act that took place, or any situation
that ceased to exist, before 22 June 2001 and the jurisdiction of the Tribunal ratione temporis is limited
Methanex vs US
Methanex sued the United States government because of the law in California that bans methanol as one of
the components of gas. Methanex is one of the largest supplier of methanol thus the said law was inflicting
damage on the future profits of Methanex. California banned the said substance because it merges easily in
water, moves rapidly upon it and cannot be removed easily. Methanex argued that California had these
problems even before, the complainant further stated that the government is doing a restrictive measure
rather than having alternate solutions for its problems.
One of the issues that was put forward in this case was that NAFTAs Chapter 11 secretive arbitral
proceedings. Wherein some of its clauses are subjected to several different interpretations thus not making
the intention of the United States as a party in the NAFTA known or clear. The articles in question 1101,
1102, 1105 and 2101 of the NAFTA all pertain to the jurisdiction of US to the materials used by foreign
corporations that have branches within the United States territory.
Ruling on the said issue:

Methanex sought the disclosure from the USA of the negotiating history of Articles 1101, 1102, 1105 and
2101 of NAFTA in order to resolve the issues of their interpretation. The Arbitral Tribunal of NAFTA ruled
that the text of the treaty is deemed to be the authentic expression of the intentions of the parties and its
elucidation rather than searching of wide-ranging definitions for the supposed intentions of the parties is the
proper object of interpretation
USA vs. Italy
On July 20, 1989, the International Court of Justice delivered its judgment in the case concerning Elettronica
Sicula S.p.A. (ELSI) between the United States of America and Italy.

Raytheon-ELSI S.p.A. (ELSI), an Italian corporation wholly owned by the United States corporations
Raytheon Company (Raytheon), which held 99.16 per cent of the shares, and its subsidiary The Machlett
Laboratories (Machlett), which held the remaining 0.83 per cent, was established in Palermo, Italy, where it
produced electronic components.

ELSI had been in economic trouble since the 1960s. In 1967, representatives of ELSI and Raytheon held
numerous meetings with officials of the Italian Government and of the Sicilian region in an attempt to secure
governmental support for ELSI. When it became apparent that these discussions were unlikely to be
successful, Raytheon prepared to close the plant. The balance sheet for the end of September 1967 showed
that under Italian law and accounting principles the book value of ELSI's assets still exceeded its liabilities.
However, internal accounting adjustments in accordance with Rayhteon's accounting policy showed ELSI
insolvent. Raytheon therefore formally declared that it would not subscribe to any additional loans made to
ELSI. It was, however, ready to financially support an orderly liquidation. The Italian authorities pressed
ELSI not to close the plant and promised help. The final decision to close the plant was taken in March 1968.

On April 1, 1968, the Mayor of Palermo issued an order, effective immediately, requisitioning ELSI's plant
and related assets for six months. An administrative appeal brought against the order was not decided by the
Prefect of Palermo until August 22, 1969. It was then held that the Mayor had exceeded his powers and that
the requisition had been unlawful. In the meantime, the plant had been occupied and production had ceased.
On April 26, 1968, ELSI filed petition in bankruptcy. A trustee was appointed. In July 1969, ELSI was
purchased for far less than book value by a subsidiary of the State-controlled IRI. An action for damages
resulting from the requisition was dismissed by the Court of Palermo. On appeal, the Court of Appeal of
Palermo granted a small portion of the claims. This decision was upheld by the Court of Cassation in 1975. In
1974, the United States transmitted a note to Italy enclosing a claim on behalf of Raytheon, based on several
alleged violations of the Treaty of Friendship, Commerce and Navigation concluded between Italy and the
United States (FCN Treaty).

The United States application before the International Court of Justice was filed in 1987. According to the
wishes of the parties, the case was submitted to and decided by a Chamber of the Court under Article 26(2)
of the Statute of the Court.