Case Summary No. 6

Image of blurred store for backgroundOur sixth example of an ISDS case is Franck Charles Arif v. Moldova, a case filed with the International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C. The summary is based on the facts as described in the award rendered in April 2013.

The claimant, Mr. Franck Arif, a French national, was the sole owner of a company that had won a state tender to operate a series of duty-free stores at five locations along the Romanian border. The company had also secured the exclusive right to operate a duty-free store at the country’s main airport. In filing for arbitration, Mr. Arif argued that the success of his investments had been obstructed by a series of government delays, unnecessary inspections, and domestic judicial decisions that invalidated both the tender for the border-stores and the lease agreement for the airport store. Mr. Arif argued that the Moldovan state’s actions had violated several provisions of the bilateral investment treaty (BIT) between France and Moldova.

The arbitral tribunal rejected most of the claimant’s claims (e.g. expropriation, denial of justice, discrimination), but granted one of his claims based on the fair and equitable treatment standard set forth in the BIT. In short, the tribunal found that the state’s actions had frustrated the investor’s legitimate expectation of a secure legal framework in which to operate the airport store. For this breach, the investor was awarded USD 2.8 million in damages, significantly less than the USD 44 million he had requested. The tribunal also gave Moldova the option of further reducing the damages owed to Mr. Arif by offering restitution instead—in effect allowing him to re-open the store at issue.

Mr. Franck Arif also sued Moldova at the European Court of Human Rights in Strasbourg, on the grounds that the Moldovan government’s actions breached the European Convention on Human Rights. Disputes before European Court last many years; no verdict has yet been reached in the case filed by Mr. Arif.