Washington, D.C. – February 26, 2006 – LAWFUEL – The Law News Network – Cypriot investment firm Libananco Holdings Company Ltd. announced today that it has filed a US$10 billion investment arbitration claim against the Republic of Turkey for its unlawful 2003 expropriation of the assets of Cukurova Elektrik Anonim Sirketi (CEAS) and Kepez Elektrik Turk Anonim Sirketi (Kepez), two of Turkey’s largest hydroelectric companies.
Libananco’s lead attorney Stuart H. Newberger, a senior partner of the international law firm Crowell & Moring LLP, announced that his firm had filed the US$10 billion claim at the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”) in Washington, D.C. The claim alleges that Turkey violated the Energy Charter Treaty, (“ECT”) which protects foreign investors in the Turkish energy sector from unlawful expropriation.
Libananco’s earlier efforts to resolve the dispute amicably were rejected by the Government of Turkey’s Prime Minister Erdogan. The refusal to reach an amicable resolution raises a serious question about Turkey’s willingness to comply with international law and investment treaties, one of the conditions for accession to the European Union. As Newberger stated today, Turkey reaffirmed its recognition of the Republic of Cyprus in 2001 when it ratified the Energy Charter Treaty. “By ratifying the Energy Charter Treaty Turkey expressly promised to protect Cypriot investors in the Turkish energy sector from these very acts of expropriation and to submit investment disputes like this for arbitration at the World Bank’s ICSID.”
Libananco’s co-counsel in Nicosia, Cyprus, Achilleas Demetriades, successfully waged a 17-year legal struggle against Turkey in the European Court of Human Rights (ECHR) in the precedent-setting Loizidou case, which arose from Turkey’s 1974 military invasion and occupation of northern Cyprus. Demetriades’ client, a Cypriot citizen, had been denied access to her property in Turkish-occupied northern Cyprus and the ECHR ruled that Turkey’s actions violated her human rights, ordering Turkey to pay substantial damages. In 2003 Turkey complied with the monetary part of the ECHR judgment and paid substantial compensation, including interest and legal costs.
“Turkey’s acts of expropriation of these utilities are not only contrary to the Energy Charter Treaty and international law, but clearly constitute a violation of the right to property which, in Europe, is a fundamental human right,” Demetriades said from Nicosia. “This lawsuit makes clear that Turkey has failed to come to terms with the criteria necessary to join the European Union, including respect for the rule of law and the rights of private investors.”
Under ICSID arbitration procedures, the arbitration will proceed before a three-member tribunal to assess Libananco’s damages resulting from Turkey’s unlawful expropriation of all of the assets of the two utilities. The Tribunal award to Libananco could amount to more than US$10 billion to be paid by Turkey in damages, interest and legal costs. In addition, the Tribunal could determine that Turkey’s adoption of the Energy Charter Treaty establishes that it has recognized the sovereignty of Cyprus, thus undermining Prime Minister Erdogan’s position of non-recognition of Cyprus, a major sticking point in the EU accession process. Finally, the tribunal could issue an injunction directing Turkey to return the assets and management of both utilities to the shareholders, including Libananco.
For further information regarding ICSID and ECT, visit their websites at www.encharter.org and www.worldbank.org/icsid. For further information regarding Crowell & Moring LLP and to obtain copies of the Request for Arbitration and supporting documents, visit www.crowell.com/libanancoholdings. For further information regarding Demetriades, visit www.ldlaw.com.cy. For more information regarding the Loizidou case at the ECHR, visit www.echr.coe.int/echr.