Claims against Albania dismissed by ICSID tribunal as the Anglo-Adriatic Group did not have a protected investment

Anglo-Adriatic Group Limited v. Republic of Albania, ICSID Case No. ARB/17/6

An ICSID tribunal decided that it had no jurisdiction to rule on the claims brought against Albania by Anglo-Adriatic Group (AAG), a company incorporated in the British Virgin Islands. The arbitrators issued the award on February 7, 2019.

Background and claims

The company Anglo Adriatika Investment Fund (AAIF) was created in 1996 to participate in Albania’s post-Soviet privatization process. Half of its shares were owned by four non-Albanian shareholders, while an Albanian citizen owned the remaining half.

In the same year, AAG was registered in the British Virgin Islands with the main business purpose to hold shares in the AAIF. AAG maintained that it made two investments: first, the foreign shareholders had declared in 1996 to hold their shares in trust for AAG, providing it with the beneficial ownership in AAIF (First Investment); second, AAG had given loans to AAIF (Second Investment).

AAG alleged that Albania prevented AAIF from participating in the privatization process, indirectly expropriating AAIF’s value and treating it in a discriminatory manner compared to other foreign and domestic investors. In December 2016, AAG initiated the arbitration based on Albania’s Law No. 7764 (Law on Foreign Investments), which provides for ICSID arbitration.

In the award, the arbitrators addressed two issues: (1) whether AAG owned the First Investment and (2) whether the Second Investment qualified as a protected investment under the Law on Foreign Investments.

AAG did not own shares in AAIF

AAG argued that it had made a protected investment by receiving beneficial ownership of the shares held by the foreign shareholders in 1996.

The tribunal applied a three-step test to assess whether it had jurisdiction to hear the case: (1) whether a protected investment existed; (2) whether a protected investor existed; and (3) whether the protected investor owned the protected investment. The burden of proof of the compliance with these requirements lay with AAG, following the reasoning of Phoenix Action v. Czechia.

According to the arbitrators, AAG proved the existence of AAIF and its foreign-owned shares, as well as the capital contribution, thus fulfilling the first requirement. In addition, it concluded that AAG established that it was a legal person constituted in accordance with the laws of a foreign country, qualifying as a protected investor. However, it found that AAG did not comply with the last requirement, as it did not prove that it was the owner or titleholder of the foreign-owned shares.

AAG alleged that the shares had been transferred through four trust deeds governed by English law. The tribunal defined a common law trust as “a legal relationship created by a ‘settlor’ by which assets […] are placed in the ownership of a ‘trustee’ for the benefit of a ‘beneficiary’” (para. 226). When analyzing these documents, the arbitrators verified that AAG appeared both as settlors and beneficiaries. Thus, the trust deeds did not support AAG’s position that the foreign shareholders transferred beneficial ownership of their shares to AAG.

Furthermore, the tribunal considered that Albanian Law No. 7979 (Law on Investment Funds) required transfers of shares to be registered with the authorities within 10 days, and that the identity of the shareholders had to be reported every quarter. Even so, there was no evidence that either AAIF or AAG had informed the authorities of the alleged transfer of the foreign-owned shares.

Finally, the arbitrators found that there was no proof that AAG had paid the appropriate consideration to the foreign shareholders in exchange for the transfer. Relying on KT Asia v. Kazakhstan, they held that an investor who had not paid any consideration is not entitled to investment protection.

Therefore, the tribunal concluded that AAG failed to prove that the foreign shareholders transferred ownership of their shares or that AAG paid any consideration in exchange for the shares. Thus, it held that AAG did not own the First Investment and that the tribunal had no jurisdiction.

AAG did not make a protected investment

AAG also alleged it had made a protected investment, since it had loaned AAIF USD 5,334,133 in order to cover its operating expenses. To prove the existence of the loans, AAG produced a document named “Ongoing Funding Agreement” and a spreadsheet regarding AAIF’s operating expenses.

The tribunal revisited the three-step inquiry and concluded that AAG failed to prove the first requirement—the existence of a protected investment. The arbitrators found that the Ongoing Funding Agreement merely stated the possibility of supplying loans in the future; it did not prove that AAG actually provided money to AAIF. Moreover, according to the tribunal, the spreadsheet of operating expenses also did not prove how or when AAG covered the costs. Furthermore, the tribunal considered that it would be easy for a company that provides a loan of more than USD 5 million to produce convincing evidence of the money transfer.

Regardless of the failure to prove the loans’ existence, the tribunal held that only investments made in accordance with Albanian law qualify as protected foreign investments under the Law on Foreign Investments. However, it noted that Albanian law in force when the investment had allegedly been made prohibited investment funds such as AAIF from receiving any type of loans or borrowing money. Hence, the loans AAG allegedly made to AAIF would have been made in breach of Albania’s Law on Investment Funds.

The arbitrators concluded that AAG did not make a protected investment, because it did not prove the loans allegedly provided to AAIF and because, even if proved, the investment would have been made in breach of Albanian law.

Decision and costs

The tribunal concluded that AAG did not own shares in AAIF and did not otherwise make a protected investment under the Albanian Law on Foreign Investments. Hence, ICSID had no jurisdiction and the tribunal had no competence to rule on the claims submitted by AAG.

The arbitrators relied on ICSID Convention Article 61(2) and ordered AAG to bear all arbitration costs. However, considering that AAG’s claims were not unreasonable, it decided that each party should bear its own legal costs and expenses.

Notes: The arbitrators were Juan Fernández-Armesto (presiding arbitrator appointed by the co-arbitrators, Spanish national), Georg von Segesser (claimant’s appointee, Swiss national) and Brigitte Stern (respondent’s appointee, French national). The award of February 7, 2019 is available at

Pietro Benedetti Teixeira Webber is a lawyer at Judith Martins-Costa Advogados (Porto Alegre, Brazil). He is also the President of the Brazilian Association of Arbitration Students (ABEArb).