Skadden Arps Slate Meagher & Flom has secured a rare arbitration award annulment in investor-state proceedings for its client in a dispute with the Republic of Iraq.

An ad hoc committee of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington DC has upheld Agility Public Warehousing Company’s challenge to a first instance ICSID award against it, partially annulling the award. As a result, the claimant will now re-file its claims before a new arbitral tribunal, which will hear the case afresh. 

Skadden was acting as co-counsel alongside Kuwaiti firm Meysan Partners. Fellow New York firm Debevoise & Plimpton acted for Iraq, alongside the Iraq Ministry of Justice. 

The case is notable because annulment claims by investors against states rarely succeed. According to a recent study by the British Institute of International and Comparative Law, only 5% of all applications for annulment under the ICSID Convention have been annulled in whole or in part. This includes applications by states, which are typically more likely to prevail.

The claims arose from a regulatory agency’s decision to annul Agility’s acquisition of shares in Korek Telecom and the Iraqi government’s order to transfer these shares back to the original Iraqi shareholders.

Agility, advised at first instance by Gibson Dunn & Crutcher alongside co-counsel White & Case and Meysan, brought a claim before the ICSID alleging arbitrary expropriation of its rights under the 2015 Iraq-Kuwait bilateral investment treaty and international law.

The tribunal dismissed the $62m claim at the merits stage in 2021. With Skadden brought in as co-counsel with Meysan, an eminent panel heard the subsequent annulment proceedings. It was made of Mexican professor of trade law Ricardo Ramírez-Hernández; Twenty Essex’s professor Hi-Taek Shin, a full-time arbitrator based in Seoul, South Korea; and LCIA secretary-general, Jackie van Haersolte-Van Hof, in her arbitral capacity. 

By majority decision, the annulment committee agreed with Agility that the original tribunal had erroneously shielded Iraq from scrutiny, failing to examine whether Iraq’s actions and omissions violated the protections afforded to Agility under the BIT.

The tribunal added its findings were “reinforced by the fact that not exercising jurisdiction over the consistency with the BIT in terms of the expropriation claims also had rippling effects on the other claims raised by Agility, which ultimately rendered all of them unresolved”.

In so doing, and in failing to state the reasons on which its decision was based, the original tribunal committed an annullable error.

Agility said: “Three years ago, the ICSID tribunal clearly got it wrong. They shielded from review Iraqi conduct that plainly violated the basic assurances against expropriation and unfair and inequitable conduct enshrined in the bilateral investment treaty between Kuwait and Iraq: protections of which Agility was the beneficiary. We are incredibly thankful to Professor Ricardo Ramírez, as president, and Professor Hi-Tak Shin for their courage in annulling this patent travesty of justice.”

The Skadden team comprised London partner Daniel Gal KC, European counsel Devika Khopkar and associate Jessie Barnett-Cox in London and New York-based partner Timothy Nelson and associate Quinn Balliett. The Meysan team included partners Bader El-Jeaan and Abdulwahab Sadeq.