Lexology | April 12 2013
BIT claim brought against Turkmenistan following UN finding of human rights violations
Herbert Smith Freehills LLP
Matthew Weiniger, Dominic Roughton and Andrew Cannon
Following a decision of the United Nations Human Rights Committee (“UNHRC“) in 2010 that a Turkish businessman had suffered violations of his human rights after being illegally convicted of economic crimes, a claim for compensation is now being pursued under the Turkey-Turkmenistan bilateral investment treaty (“BIT“). This case therefore highlights the interesting interaction between the human rights and investment protection regimes.
Omar Faruk Bozbey, the owner and president of a construction company, moved to Turkmenistan in the late 1990s to construct an agro-industrial complex. Pursuant to a Presidential Decree, a contract was concluded between the company and the Turkmen President’s Foundation which exempted the company from taxes and customs duties.
It is alleged by Mr Bozbey that in 2003 he was requested to pay a bribe of US$200,000 and to construct a heliport for the President of Turkmenistan at the expense of the company. Following Mr Bozbey’s refusal, his office was searched and all the company’s documents seized, with the Turkmen tax authorities demanding US$1.3 million in taxes and fines.
Criminal proceedings were instituted against Mr Bozbey and were conducted in the Turkmen language without an interpreter. In April 2004 Mr Bozbey was found guilty of several economic crimes, including tax evasion, his property was confiscated and he was sentenced to 14 years imprisonment.
Whilst in prison, Mr Bozbey claimed that he was subject to degrading and humiliating conditions, including the size and conditions of his cell, the quantity of food and water and the treatment of other prisoners by prison guards. Mr Bozbey further claimed that he was tortured several times because he would not sign a confession. Mr Bozbey was eventually released in October 2005 following the intervention of the Turkish embassy and a presidential pardon.
Having unsuccessfully exhausted all available domestic remedies, Mr Bozbey brought a claim to the UNHRC alleging that Turkmenistan had violated the following of his rights under the International Covenant on Civil and Political Rights (“ICCPR“):
the right to non-discriminatory implementation of rights at the national level (Article 2);
the right to liberty and security of persons (Article 9);
the right to dignity and humane treatment (Article 10);
the right to a fair trial (Article 14); and
the right to equality before the law (Article 26).
In a communication adopted on 27 October 2010, the UNHRC concluded that the lack of an interpreter during the criminal proceedings amounted to a violation of Article 14 and that the conditions of Mr Bozbey’s confinement constituted “a violation of his right to be treated with humanity and with respect for the inherent dignity of the human person” in accordance with Article 10. Mr Bozbey’s claims under Articles 2, 9 and 26 were found to be inadmissible due to lack of evidence.
The UNHRC does not have the power to make binding orders on state parties to the ICCPR. However, the UNHRC made a recommendation that Turkmenistan provide Mr Bozbey with appropriate reparation (including compensation), take appropriate steps to institute criminal proceedings against the persons responsible for the treatment, and prevent similar violations in the future.
In the last week it has emerged that following the recommendation of the UNHRC, Mr Bozbey has also commenced a claim for compensation against Turkmenistan under the Turkey-Turkmenistan BIT.
Very few details regarding the exact nature of the claim are publically available. However, a tribunal has been appointed and oral hearings were originally scheduled to take place in July 2012. According to reports, the proceedings were suspended due to a failure to satisfy requests of the tribunal for advances on costs.
Although historically very few BITs referred directly to human rights obligations, reference is increasingly being made in BITs to international human rights and environmental standards. By way of example, under the 2012 US Model BIT parties reaffirm their commitments under the International Labour Organization Declaration and recognise the importance of multilateral environmental agreements. Moreover, parties to the European Free Trade Association–Singapore Free Trade Agreement and the Canada–Colombia Free Trade Agreement reaffirm their commitment to the principles set out in the Universal Declaration of Human Rights.
Human rights arguments are also being raised in a growing number of investor-state arbitrations. In some circumstances, human rights are invoked on behalf of investors or are used by arbitrators to help interpret investment treaty protections. However, human rights have also been invoked by governments as a defence, for example in the case of AWG Group v Argentina (UNCITRAL) in which Argentina argued that measures taken during and in the aftermath of its financial crisis were necessary to protect the human right to water. It is likely that similar arguments will be seen in arbitrations arising from the current global financial crisis. In the light of the corporate responsibility to respect human rights under the UN Guiding Principles on Business and Human Rights, it may also become increasingly difficult for investors to rely on investment protection under BITs if they face allegations of human rights abuse linked to their investments.
The interaction between human rights and investment treaty arbitration clearly raises a number of interesting issues. In particular, it is important to note that there is the potential for the human rights and investment protection regimes to generate different substantive outcomes. In relation to Mr Bozbey’s BIT claim, it will therefore be interesting to see whether the tribunal adopts a similar approach to substantive interpretation as the UNHRC, for example in relation to the denial of justice and due process, and how the protection afforded by these two regimes will overlap.