Case Summary No. 1

In a series of blog posts, we will provide summaries of ISDS cases. The summaries are based on the facts as described in the award.

Our first case is Wena Hotels Ltd v. Arab Republic of Egypt and the final award was rendered in 2000.

The dispute arose out of two long-term agreements between Wena Hotels Limited (“Wena”), a British investor to lease, operate and manage two hotels in Egypt, and the Egyptian Hotels Company (“EHC”). EHC was wholly-owned by the Egyptian government. Shortly after the signing of the agreement, Wena alleged the condition of the hotels to be far below that agreed in the lease. Wena therefore withheld part of the rent under the terms of the lease.

Due to this non-payment, EHC threatened to repossess the hotels through force. Wena informed the Egyptian Minister of Tourism about this situation however there was no solution. One night witnesses reported that more than one hundred EHC personnel stormed the two hotels, threatened and physically attacked the hotels’ employees and guests. They were also reported to having removed a number of belongings of the hotels.

The Chief Prosecutor of Egypt ruled that seizures of the hotels were illegal and that Wena was entitled to repossess the hotels. The hotels were subsequently returned but in a vandalized condition.

Wena brought an ISDS claim against Egypt under the ICSID Convention, claiming violation of investment protection in the UK-Egypt investment treaty.

The tribunal found a breach of the investment treaty since, according to the tribunal, there was substantial evidence that Egyptian authorities were aware of EHC’s intentions to seize the hotels but took no action to prevent the seizures. After the seizures, Egypt took no action to immediately restore Wena’s control over the hotels.

The tribunal also found that an expropriation had taken place since Egypt allowed EHC to seize the hotels, to possess them illegally for nearly a year and to return the hotels stripped much of their furniture and fixtures. In the opinion of the tribunal, Egypt did not provide a fair, prompt and adequate compensation to Wena for the expropriation.