Pantechniki S.A. Contractors & Engineers v. The Republic of Albania: Fork-in-the-road provision partially bars claim by Greek investor

By Damon Vis-Dunbar
2 September 2009

A Greek company’s decision to litigate in Albania’s domestic courts has prevented it from arbitrating a similar claim under the Albania-Greece bilateral investment treaty.

The Claimant, Pantechniki S.A. Contractors & Engineers, sought to recoup losses sustained during the wide-spread civil strife that shook Albania in 1997 when some two-thirds of the population lost their savings in Ponzi schemes. The Greek investor, which was under contract to construct roads in Albania, had its work site overtaken by rioters.

The Ministry of Public Works had committed to compensating the Claimant for its losses, but both the Public Works Ministry and the Finance Ministry claimed to be prevented from doing so. According to the Claimant, the Finance Minister at the time recommended bringing a case to court, on the grounds that a court order would allow his ministry to provide compensation.

Following a series of unfavourable court decisions, however, Pantechniki abandoned its efforts before Albania’s judiciary and filed a claim under the Albania-Greece BIT in 2007.

As it is, the Claimant’s decision to turn first to Albania’s courts proved fatal to its efforts to arbitrate a similar claim under the Albania-Greece BIT. The BIT’s so-called fork-in-road provision requires that investors elect either courts or an international arbitration tribunal to settle disputes.

“The Claimant chose to take this matter to the Albanian courts”, writes the sole arbitrator, Jan Paulsson, in the 30 July 2009 award. “It cannot now adopt the same fundamental basis as the foundation of a Treaty claim. Having made the election to seize the national jurisdiction the Claimant is no longer permitted to raise the same contention before ICSID.”

While Pantechniki was prevented from arbitrating a dispute which had already been brought before Albanian courts, Paulsson held that several other causes of action were not disbarred. These are the claims that Albania failed to offer the Claimant “full protection and security” and “fair and equitable treatment” and that the Albanian courts had committed a denial of justice. Ultimately, Paulsson ruled that these further causes of action failed on their merits.

In determining whether Albania violated its duty to provide the Claimant “full protection and security”, Paulsson prefaced his decision by noting that a host country’s level of development required consideration.  Given the “environment of desolation and lawlessness” in Albania at the time that the Claimant established its investment, Paulsson determined that it was unreasonable to expect high standards of police protection.

Paulsson noted that his assessment of the claim may have been different if police had refused to intervene. But having determined that Albanian police were powerless to protect the Claimant’s investment, Paulsson concluded that Albania had not breached its duty to provide full protection and security.

Paulsson also went on to reject the denial of justice claim, despite taking a dim view of the courts’ treatment of the Claimant.

The Claimant argued before Albania’s courts that the General Road Directorate had assumed responsibility for losses due to civil disturbances under contract. Yet the courts ruled that the relevant contractual clause could not be upheld under Albanian law.

Paulsson confessed to being “troubled” by the courts’ decision, noting that the clause deemed null by the courts is a common one, appearing “in myriad international construction contracts.”

Nonetheless, Paulsson stressed that a denial of justice does not arise until “a reasonable opportunity to correct aberrant judicial conduct has been given to the system as a whole.” By electing not to try its case before Albania’s Supreme Court, Paulsson found that the Claimant had not given the Albanian legal system an adequate opportunity to address the failures of its lower courts.

While rejecting all of Pantechniki’s claims, Paulsson nonetheless ordered that the parties split the cost of the proceedings, noting that the Greek investor appears to have a valid contractual complaint, even if it could not seek refuge under the Albania-Greece BIT due to its fork-in-the-road clause. He also praised the lawyers representing Albania and Pantechniki, noting that the legal fees (EUR 154,523 in the case of Pantechniki and EUR 269,657 in the case of Albania) “are but fractions of the cost claims submitted in other ICSID cases. Yet the written and oral presentations were highly competent.”

The award, Pantechniki S.A. Contractors & Engineers v. The Republic of Albania (ICSID Case No. Arb/07/21) is available here: