International Dispute Resolution Team Achieves Significant Victory for Turkmenistan

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Squire Patton Boggs’ International Dispute Resolution team has achieved a significant victory for Turkmenistan, obtaining complete dismissal of all claims on the merits, valued at $2 billion, and obtaining a cost award over $11 million in favor of Turkmenistan, in ICSID arbitration case Public Joint Stock Company Mobile TeleSystems (“MTS”) v. Turkmenistan (ICSID Case No. (AF)/18/4)

The team consisted of Ali Gursel, John Branson, Zeynep Gunday Sakarya, Carlos Guzman Plascencia, Isabel Manfredonia, Olha Martynevych and Hesel Toyjanova in New York; Bahar Charyyeva, Mekan Karayev and Selbi Hojaeva in Ashgabat; and Eva Dragunova in Bratislava.  Christian Dippon of NERA Economic Consulting acted as industry and quantum expert for Turkmenistan.

MTS, one of the largest Russian telecommunications companies, had been operating as a cellular services provider in Turkmenistan since 2005, under contracts and licenses issued by the government.  The dispute arose out of the expiration of MTS’ 2012 contract, which was not renewed when it expired in 2017.  MTS argued, inter alia, that Turkmenistan’s refusal to extend the contract constituted an expropriation of MTS’ operations in breach of the Russia-Turkmenistan BIT.  Alternatively, it argued that neither the operating contract nor its profit-sharing terms were required under Turkmen law in order to operate as a cellular services provider, and that the contract terms were therefore illegal and unenforceable.  MTS also claimed that Turkmenistan failed to afford fair and equitable treatment, non-discriminatory treatment, and full protection and security during the term of its 2012-2017 contract.  It alleged eleven individual measures that allegedly breached the BIT, including approvals for its operations, insufficient data capacity and quality for internet, discriminatory prices for data channels, and the profit-sharing terms.

The Tribunal unanimously rejected all of MTS’ claims on the merits, with a finding of no liability for any of the alleged complaints asserted.  The Tribunal held that the operating contract was a lawful, commercial contract under Turkmen law; that it had expired according to its terms at the end of its 5-year period; and that MTS did not have a right or legitimate expectation to renewal.  Accordingly, the Tribunal found that MTS did not have a right that could be expropriated, and MTS’ operations in Turkmenistan were therefore not expropriated as a result of the non-renewal of its contract and cessation of operations.

The tribunal also found that Turkmenistan had not engaged in any wrongful conduct with respect to MTS’ operations.  In particular, the Tribunal noted that MTS had been allocated proportionately more data capacity than its domestic competitor, Atlyn Asyr; that the evidence showed that any data quality issues had affected both operators equally, and was sometimes worse for Altyn Asyr than MTS; and that there was no evidence that the prices MTS paid for channels were exorbitant or discriminatory.  The tribunal likewise dismissed all other of the allegedly wrongful measures.

Given its decision dismissing all claims against Turkmenistan on the merits, the Tribunal awarded Turkmenistan over $11 million in legal fees and arbitration costs.

This Award is the culmination of a case that spanned almost 5 years, and a repeat of a nearly identical dispute between the parties that arose in 2010, when MTS’ prior contract was not renewed.  In the earlier dispute, MTS commenced four ICC and ICSID arbitrations against Turkmenistan and Turkmen entities, which were ultimately settled when the parties entered into the 2012 contract, which was the subject of this latest case.

The Tribunal was comprised of Professor Dr. Siegfried H. Elsing (President), Mr. John M. Townsend, and Dr. Paolo Michele Patocchi.

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