International Dispute Resolution Team Secures Victory for Turkmenistan in ICSID Arbitration

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    An international arbitration tribunal has handed Squire Patton Boggs client, the State of Turkmenistan, one of the year’s largest investment treaty arbitration victories by fully dismissing a claim of nearly US$500 million brought before the International Centre for Settlement of Investment Disputes (ICSID) by a Turkish construction company.

    The case, Muhammet Çap and Sehil v. Turkmenistan, was registered nine years ago by a Turkish company and its majority shareholder under the Turkey-Turkmenistan bilateral investment treaty. The dispute concerned 32 construction projects in Turkmenistan, including water and waste treatment plants, an iron and steel plant, schools and government buildings.

    The claimants alleged they were impeded by delays and defaults by their contractual counterparties and by regulatory procedures, that they were entitled to additional compensation for works outside the scope of the contracts, and that they were unfairly subject to delay penalties, tax audits and court orders terminating the contracts.  Their contractual counterparties argued that terminations and penalties were justified due to Sehil’s failure to perform its contractual obligations, defective works and non-completion.

    The tribunal rejected all claims against Turkmenistan and held that Sehil’s contractual counterparties acted in the legitimate exercise of their contractual rights and in a commercial capacity, that the Turkmenistan courts, tax authorities and prosecutors acted in accordance with Turkmenistan law and procedures and did not violate due process.

    The Squire Patton Boggs team representing Turkmenistan was led by New York partners Ali Gursel, Miriam Harwood and Zeynep Gunday Sakarya, and included Bahar Charyyeva, Carlos Guzman and Hesel Toyjanova.

    Mr. Gursel commented: “This case was complex not only due to the fact that it involved 32 different construction projects – each of which could have been a free-standing arbitration in its own right – but also due to the intervening bankruptcy of the claimant company in Turkey while the arbitration was in progress.”

    “This was a long and hard-fought arbitration,” added Ms. Harwood. “The tribunal’s decision is remarkable not only for its unanimous rejection of all claims against Turkmenistan on the merits, but also for its decisive acceptance of the State’s legal arguments on important and cutting-edge issues of treaty law and interpretation.”

    This is Squire Patton Boggs’ second complete victory for Turkmenistan in the last year. The other was Lotus Holding Anonim Sirketi v. Turkmenistan, in which another ICSID tribunal dismissed all claims against the State in April 2020.

    Squire Patton Boggs was named “International Arbitration Practice of the Year” by Law360 in 2020. The firm is also recognized as a GAR 30 firm in Global Arbitration Review’s prestigious annual ranking of the top 30 international arbitration practices in the world.

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