Is an Arbitral Award an “Investment”?

On 31 March 2011, an ICSID Tribunal handed down its decision in GEA Group Aktiengesellschaft v. Ukraine (ICSID Case No ARB/08/16). The Tribunal, consisting of Professor Albert Jan van den Berg (President), Mr Toby Landau QC and Professor Brigitte Stern, rejected all of GEA’s claims.


The case concerned a supply contract entered into between the German company GEA and Oriana, a Ukrainian state-owned petrochemicals plant. GEA discovered that 125,000 tons of fuel supplied to Oriana had been misappropriated and alleged that Ukraine was responsible. The Parties entered into a repayment agreement pursuant to which GEA obtained an arbitral award from the International Chamber of Commerce (“ICC”) worth US $30 million. However, GEA’s attempts to enforce the award in the Ukrainian domestic courts failed because the repayment agreement was not enforceable under Ukrainian law. GEA alleged that Ukraine had committed several breaches of the bilateral investment treaty (“BIT”) entered into between Germany and Ukraine and claimed almost US $80 million in compensation.

The Tribunal dismissed all of GEA’s claims. The Tribunal found that GEA had failed to prove that Ukraine was responsible for the disappearance of the fuel and that GEA had failed to make any criminal complaint prior to making its BIT claim. GEA was also unable to prove that Ukraine had made assurances to make repayment. Rejecting a denial of justice claim, the Tribunal held that Ukraine’s courts had not acted in an “egregious” fashion but had properly considered but simply rejected GEA’s arguments.

Is an arbitral award an “investment”?

The Tribunal made a number of important statements on matters of jurisdiction and substance in international investment law. In particular, the Tribunal concluded that the unpaid arbitral award “in and of itself” could not constitute a protected “investment” under the BIT. The Tribunal reasoned that even if the award determined the rights and obligations arising out of an “investment”, it remained “analytically distinct”. Additionally, the award itself involved “no contribution to, or relevant economic activity within, Ukraine” as required by the definition of investment contained within the BIT.

In reaching this conclusion, the Tribunal may appear at first sight to have departed from several earlier investment arbitration decisions on this issue, including Saipem S.p.a v. Bangladesh, ATA Construction, Industrial and Trading Company v. Jordan and Frontier Petroleum Services Ltd v. Czech Republic. However, it should be noted that the Saipem tribunal explicitly refrained from deciding whether an award constitutes an “investment”. Moreover, the ATA and Frontier Petroleum tribunals both expressly found that the relevant award fell within the specific definition of investment in the BIT. Ultimately, GAE actually reinforces the orthodox understanding: whether an arbitral award constitutes an “investment” will largely depend on a case-by-case analysis of the definition of “investment” contained within the relevant BIT.

The Tribunal did not consider it necessary to decide the separate question of whether the ICC award constituted an “investment” for the purposes of the ICSID Convention, which itself contains no definition of that term. This is perhaps unsurprising; two members of the GEA Tribunal (arbitrators Landau and Stern) had previously sat on different ICSID tribunals which disagreed as to whether there are “objective” limits to the definition of investment in the ICSID Convention.

The GEA Decision is unlikely to have any decisive impact

The Tribunal’s decision in GEA must be understood in the narrow context of the definition of “investment” contained in the Germany-Ukraine BIT. It is thus crucial to carefully scrutinise the specific language contained within the treaty in question. The far more wide-ranging question of whether an arbitral award constitutes an “investment” for the purposes of the ICSID Convention remains open and hotly debated.

Robert Volterra successfully represented Ukraine. The Tribunal ordered GEA to pay all of Ukraine’s costs.