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High Standards: U.S. District Court for D. C. Confirms $85 Million Arbitration Award against Libya

Strabag SE, a large international construction company based in Austria was awarded construction contracts for two major road projects in Libya in 2003.  In 2006, after Libya began requiring foreign construction firms to carry out their contracts in conjunction with a Libyan partner, Strabag entered into a joint venture with the Libyan Investment and Development Company in 2007. The joint venture was called Al Hani General Construction Company. Strabag’s road project contracts were assigned to Al Hani, and Al Hani entered into several additional contracts with Libya.

During the Libyan Revolution, which began in 2011, Al Hani suffered significant losses when construction camps were overrun, and much of its equipment was stolen or destroyed.  After the revolution, Al Hani asked Libya about compensation for wartime damage, unpaid work prior to the uprising, and sought to resume work on uncompleted contracts. When the parties could not come to an agreement on these issues, Strabag brought the dispute to arbitration in accordance with the Austria-Libya Bilateral Investment Treaty in 2015.  The dispute was submitted to the International Centre for Settlement of Investment Disputes (“ICSID”), and in 2018 the Tribunal concluded that Libya had breached its obligations under the treaty and awarded Al Hani over 74 million euros (over $85 million)—in damages plus interest.  Libya then filed a petition with the U.S. District Court for the District of Columbia, seeking to vacate the award.

Libya argued three grounds for vacatur of the Tribunal’s award: (1) the award did not address alleged set-off payments owed to Libya and, thus, was not final; (2) the Tribunal lacked jurisdiction to hear the dispute, and (3) the Tribunal based its decision to grant the award on “good order and fundamental fairness” rather than the relevant provisions of the treaty or the contracts. The Court disagreed with all three arguments.

As to the first issue, the Court stated that the finality of an arbitration award does not require a tribunal to resolve every possible issue that could result in later litigation—rather, an award is final when the award is intended by the arbitrator(s) to be its complete determination of every issue submitted to it. In this case, the Tribunal heard Libya’s argument regarding the set-off payments but did not award the payments because it determined that it did not have the legal basis to grant an award with respect to that issue.  The Court found that, since the Tribunal addressed the issue, its award was sufficiently final. As to the second issue, the Court concluded that the Tribunal had jurisdiction over this matter since the ICSID granted the Tribunal the authority to determine its own jurisdiction regarding the dispute.  Finally, the Court held that the Tribunal had not denied the set-off payments to Libya based on a standard of “fairness” but, instead, relied on the relevant contracts, the treaty, and international law to make its determination.

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