USD 12 billion dispute decided in Tunisia’s favour

CDR | 5th January 2024

By Robert Harkavy

A wrangle over a shareholding in a Tunisian bank which dates back to the 1980s has finally been resolved in arbitration.

After an arduous and undeniably tortuous decades-long legal wrangle, the international investment dispute between the Republic of Tunisia and ABCI, an investment company, appears to have finally reached its conclusion. A Washington, DC-seated arbitral tribunal, which, following several resignations, was reconstituted in 2018 under Bernard Hanotiau (President), sitting with Yves Fortier KC and Pierre Tercier, delivered its final award on 22 December. What has now become the record holder for the longest-running International Centre for Settlement of Investment Disputes (ICSID) dispute, ended with ABCI being awarded a nominal sum of around USD 350,000, just 0.003% of the USD 12 billion claimed.

The roots of the dispute can be traced back to 1982 when ABCI, keen to make a mark in the Tunisian banking sector, transferred TND 2.5 million (USD 808,000 at today’s exchange rate) to acquire a 50% stake in the Banque Franco Tunisienne (BFT), the North African republic’s smallest bank. However, the investment journey was far from smooth, with ABCI’s struggles with Tunisian banking regulations resulting in a two-year delay in accessing its capital, a significant and frustrating setback for any investment venture.

The Tunisian authorities, clearly vexed by ABCI’s apparent disregard for local regulations, raised concerns about ABCI’s actions. These concerns eventually transmogrified into legal proceedings against ABCI and its director, Majid Bouden, firing the starting pistol on what developed into a lengthy and complex legal battle covering courts and tribunals in several jurisdictions. In the first instance, ABCI instigated ICC International Court of Arbitration proceedings which eventually took place in July 1987 and led to an award in ABCI’s favour in the sum of USD 1,366,110 with interest of USD 1,088,606, calculated from July 1982. The award was not paid by BFT: it was registered as a judgment by the Court of First Instance in Paris, and the registration was subsequently upheld in the French Cour de cassation. Bouden remains the subject of criminal proceedings in Tunisia.

In 1989, in an attempt to resolve the increasingly fraught situation, ABCI entered into settlement agreements with Tunisian authorities to exit BFT. However, its commitment to closing this unhappy chapter proved to be short lived and it subsequently launched several challenges to the agreements themselves, alleging that Bouden was put under intense pressure to sign them against his will. With this allegation of duress in mind, ABCI brought three actions in England: one to enforce the arbitration award, one to claim damages for fraud and one to set aside the settlement agreements. The respondents challenged the jurisdiction of the English court and applied to set aside the proceedings; the judge at first instance, Nicholas Chambers QC, agreed with the respondents and ordered ABCI to pay indemnity costs plus interest.

However, in February 2003 ABCI escalated its case to the Court of Appeal in London, where Lord Justice Mance (sitting with Lord Justice Tuckey and Mrs Justice Black) sided with the Commercial Court and dismissed the appeal.

Undeterred by the setbacks, ABCI launched arbitration proceedings against Tunisia in 2003 under the auspices of ICSID, arming itself with various bilateral investment treaties and the now-superseded Tunisian Foreign Investment Law of 1969 (FIL).

The initial tribunal, established in 2007, was divided on jurisdiction, and in 2011 ruled that it lacked jurisdiction over all ABCI’s claims save for one – Tunisia’s longstanding FIL. But despite efforts to resolve the dispute without external legal representation, the proceedings recommenced in 2016.

A year later, the tribunal determined on a majority that there had been an expropriation, a denial of justice, and a breach of the Fair and Equitable Treatment (FET) standard at the time of the settlement agreements. This decision was seemingly based chiefly on a political statement issued by the Tunisian Court of Cassation amid the transitional period following Tunisia’s “Jasmine Revolution” and the subsequent removal of former President Zine El Abidine Ben Ali. However, although the tribunal found that Tunisia had been in breach of its obligations in respect of expropriation and fair treatment, it was unable to reach a consensus on quantum. As Tunisia’s legal representative Isabelle Michou of Quinn Emanuel Urquhart & Sullivan tells CDR: “The key fact in [ABCI’s] position was that the settlement agreement in 1989 was signed under duress and the transfer of its shares to the various Tunisian authorities was illegitimate, illegal basically, and it was expropriated of its shareholding”.

Following the Tribunal’s decision but with the question of quantum still unresolved, an emboldened ABCI vastly increased its claim for damages from the initial USD 900 million stated in the Request for Arbitration, to the rather larger sum of USD 12 billion. Following the as-yet-unexplained resignations of all three arbitrators in 2018 – Francisco Orrego Vicuña, Piero Bernardini and Brigitte Stern – the tribunal was reconstituted with new members. A fresh perspective led to a thorough re-evaluation of the case. The new-look tribunal looked again at ABCI’s claims and found no causal link between the identified breaches and any alleged harm suffered by ABCI. And given that much of the claim comprised interest calculated from the very start of the transaction in the 1980s, and that many of the delays had been caused by ABCI itself, including designating its nominee for the tribunal, the decision to calculate interest only from 2007 played a huge part in reducing the value of the claim.

As Michou pithily summarises: “You may have a fault or a wrongdoing, but you need to prove that you do have a damage that can be compensated for; and you need a link – a causal link – and that’s the basic principle.”

The final award of approximately USD 350,000 (with ABCI’s claim for legals fees and costs dismissed), announced on 22 December, represents an end to what by any measure can be described as a seriously protracted dispute, but some questions remain. The reconstituted tribunal’s decision did not address the technical question as to whether ABCI had standing to bring the claim under the 1969 FIL. Additionally, and somewhat intriguingly, the reasons for the original tribunal members’ resignations remain undisclosed, adding a layer of mystery to an already complex saga which has taken in courts and tribunals in several territories and, in the case of Bouden, criminal prosecutions.

But now that the award has finally been made, it is fair to conclude that it sets an important precedent for future investment disputes; it certainly emphasises the significance of responsible investment practices and the need for integrity in international arbitration. The case could also be said to serve as a warning against issuing inflated claims; as Michou puts it: “If you have a fanciful claim, you can’t transform or turn it into a real claim.”

With arbitration continuing to rival litigation as a preferred means of dispute resolution, especially in investor-state disputes, this case shines a spotlight on the crucial role of tribunals in thoroughly scrutinising evidence and upholding fair legal processes, underscoring the importance of due diligence and the adherence to local regulations in international investments.

In ABCI Investments v Republic of Tunisia, ABCI was represented by its own in-house counsel, Jorma Ryynänen and by sole practitioner Geneviève Bastid-Burdeau of Paris. The Quinn Emanuel Paris legal team representing Tunisia and led by Michou also comprised associates Obioma Ofoego and Ivan-Axel Doubrava, with additional representation by Amal Bouchenaki and Lynn Moubarak of Herbert Smith Freehills in New York.

Also on 22 December, the Republic of Ecuador successfully beat off an arbitration claim from an Australian engineering company.