{"id":16821,"date":"2026-01-19T15:29:49","date_gmt":"2026-01-19T14:29:49","guid":{"rendered":"https:\/\/www.iisd.org\/itn\/?p=16821"},"modified":"2026-04-21T19:14:46","modified_gmt":"2026-04-21T17:14:46","slug":"qatar-pharma-al-sulaiti-vs-kingdom-saudi-arabia-abhishree-manikantan","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2026\/01\/19\/qatar-pharma-al-sulaiti-vs-kingdom-saudi-arabia-abhishree-manikantan\/","title":{"rendered":"Qatar Pharma and Al Sulaiti vs. Kingdom of Saudi Arabia, ICC Case No. 25830\/AYZ\/ELU"},"content":{"rendered":"

Qatar Pharma and Al Sulaiti vs. Kingdom of Saudi Arabia<\/em>, ICC<\/span> Case No. 25830\/AYZ\/ELU<\/strong><\/h2>\n

A recent ICC arbitral tribunal interpreted the Agreement for Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference [OIC Agreement]<\/strong> to hold, inter alia<\/em>, that conciliation is not a prerequisite to commencing arbitration.<\/p>\n

The case concerned the investment consequences of the Kingdom of Saudi Arabia\u2019s [respondent, the Kingdom, or Saudi Arabia]<\/strong> decision to sever consular and diplomatic relations with the State of Qatar [2017 Measures]<\/strong>. In this discussion, the tribunal also notably found that the Kingdom is owed a high degree of deference by the tribunal in its assessment of its security interests. (para 594)<\/strong><\/p>\n

Brief facts<\/strong><\/h3>\n

Qatar Pharma, a pharmaceutical company founded in Doha, Qatar, in 2006 by Dr. Al Sulaiti (chairman and majority owner of Qatar Pharma) [jointly, claimants<\/strong>], expanded its sales to Saudi Arabia in 2010. Initially, this was through a commercial agency contract with Banaja & Partners, a Saudi import company, which was terminated in 2013. Qatar Pharma then set up its own distribution system in the Kingdom through its Saudi-registered branch, Qatar Establishment for Medical Solution [QEMS]<\/strong> and established a scientific office in 2013, as per Saudi law. The pharmaceuticals were manufactured in Doha and transported to Riyadh for storage in a leased warehouse.<\/p>\n

In 2014, QEMS was converted into an independent local establishment registered with the Saudi Ministry of Commerce and Industry after the Kingdom adopted the 2014 Foreign Investment Law, which permitted Gulf Cooperation Council [GCC] residents to own 100% of a local Saudi company. Operations were expanded in 2016 and 2017 by leasing two additional warehouses in Dammam and Jeddah, respectively. Qatar Pharma won several tenders between 2011 and 2015 and entered into annual contracts for supply of pharmaceutical products to the Saudi Ministry of Health.<\/p>\n

On June 5, 2017, following a diplomatic rupture between Saudi Arabia and Qatar, Saudi Arabia recalled its ambassador to Qatar and issued a press release announcing that it had, inter alia<\/em>, severed diplomatic and consular relations with Qatar, closed all land, sea, and air communication to and from Qatar, and prohibited Saudi citizens from travelling to Qatar. All Qatari citizens were required to leave Saudi territory within 14 days.<\/p>\n

The immediate consequence of the 2017 Measures was that the land border crossing between Qatar and Saudi Arabia was shut, disrupting Qatar Pharma\u2019s business. On April 5, 2018, less than a year after the 2017 Measures were adopted, Qatar Pharma sent the Saudi Ministry of Foreign Affairs a notice informing them of the existence of an investment dispute under the OIC Agreement. Receiving no response, the Notice of Arbitration was filed on March 28, 2019.<\/p>\n

Challenge to jurisdiction<\/strong><\/h3>\n

Resolution of disputes under the OIC Agreement is governed by its Articles 16 and 17. Both the claimants and the Kingdom agree that Article 16 contains a \u201cfork-in-the-road\u201d provision, granting an option between pursuing litigation in national courts and having recourse to arbitration. (para. 176)<\/strong><\/p>\n

Saudi Arabia made two preliminary challenges against the tribunal: firstly, that the tribunal lacks jurisdiction rationae voluntatis<\/em> because the claimants failed to comply with Article 17 of the OIC Agreement (which contains a tiered dispute settlement procedure) and that recourse to arbitration under the OIC Agreement is permitted only after conciliation has failed. Secondly, Saudi Arabia maintained that the claims are not admissible because the claimants breached the clean hands principle recognized in Article 9 of the OIC Agreement by acting fraudulently in their dealings with the Kingdom.<\/p>\n

This case note focuses on the first preliminary challenge. As to the latter, the tribunal dismissed the objection, holding that though Article 9 requires the investor to respect municipal law in both the establishment and post-investment phases, the respondent has not adduced any evidence proving a serious breach of municipal law by the claimants. (paras. 477-479)<\/strong><\/p>\n

Consent to arbitration<\/strong><\/h3>\n

The parties disputed the interpretation of Article 17 of the OIC Agreement. In the Kingdom\u2019s interpretation, the clause provides for a tiered dispute settlement mechanism and does not include ex ante consent by the state to conciliation or arbitration. Thus, based on the ordinary meaning of the terms per Article 31 of the VCLT<\/span><\/strong>, the Kingdom argued that conciliation is a jurisdictional prerequisite to arbitration. The respondent emphasized the use of \u201cif \u2026 then\u201d language used in Article 17(2)(a) and the phrasing \u201cin case the parties to the dispute agree\u201d in the context of conciliation in Article 17(1)(a). Saudi Arabia also relied on the treaty practice of OIC member states and on Itisaluna Iraq LLC v. Republic of Iraq<\/a><\/em>, where the tribunal had held that resort to arbitration is conditional on the prior resort to conciliation.<\/p>\n

On the other hand, the claimants argued that Article 17 must be read as a whole, rather than focusing narrowly on the \u201cif \u2026 then\u201d language in Article 17(2)(a). Taking the ordinary meaning of the terms in Article 17, the claimants emphasized the phrasing \u201cshall\u201d be resolved either \u201cthrough conciliation or arbitration.\u201d The subsequent wording in clauses (1) and (2) of Article 17 is aimed at regulating the chosen conciliation or arbitration procedure and cannot be construed as a restriction on the choice. Moreover, the claimants argued that the Kingdom\u2019s interpretation would contravene the OIC Agreement\u2019s objective of creating an environment favourable to investors, as states could deny the right to arbitration by simply ignoring invitations to conciliate.
\nThe claimants placed reliance on Al-Warraq v. Indonesia<\/a><\/em> and Navodaya Trading DMCC v. Gabon<\/a><\/em>, where the tribunals denied that conciliation is a precondition to arbitration in Article 17.<\/p>\n

Character of conciliation: Jurisdictional or procedural?<\/strong><\/h4>\n

The Kingdom argued that the requirement for conciliation is jurisdictional in nature because an attempt at arbitration cannot exist without a prior, failed conciliation attempt. Similar negotiation and cooling-off period requirements have previously been deemed jurisdictional prerequisites to arbitral proceedings. As the claimants never made a genuine attempt to conciliate, and the Kingdom, in any case, did not consent to the procedure, the tribunal cannot have jurisdiction over the dispute.<\/p>\n

Conversely, the claimants argued that even if conciliation is deemed to be a precondition to arbitration, the requirement is merely procedural. The investors relied on decisions, including Abaclat v. Argentina<\/em>, where the negotiation and 18-month litigation requirements were found to be procedural. In any event, the claimants submitted that they had satisfied the precondition through their Notice of Dispute, where they expressly asked the Kingdom to engage in a good-faith attempt to amicably resolve the dispute.<\/p>\n

Tribunal majority\u2019s decision<\/strong><\/h3>\n

The tribunal found in favour of the claimants. Interpreting Article 17, they held that the \u201cBasic Rule\u201d requires that disputes \u201cshall\u201d be settled through conciliation or<\/strong> arbitration, at the claimant\u2019s option. This literal interpretation of the provision leads to the conclusion that the state\u2019s unequivocal consent to arbitration is contained in the Basic Rule. The tribunal also pointed to Article 16\u2019s fork-in-the-road provision as a source of the claimants\u2019 right to choose arbitration. (paras. 255\u2013259)<\/strong><\/p>\n

The tribunal further clarified that the regulation of consent in conciliation is different from that in arbitration, as conciliation is an amicable procedure and requires the parties to agree on the description of the dispute, the claims, and the conciliator. Thus, though Article 17(1)(a) requires specific bilateral consent for conciliation, such specific consent is not required for arbitration because it is already contained in the Basic Rule. (paras. 265\u2013270)<\/strong><\/p>\n

On the Kingdom\u2019s argument that contemporaneous treaty practice shows OIC member states\u2019 aversion to giving ex ante<\/em> consent to arbitration, the tribunal held that treaty practice is relevant only if it concerns subsequent practice in the application of the treaty by the contracting parties. (para. 289)<\/strong><\/p>\n

Discussing the three cases interpreting the OIC Agreement cited by the parties, the tribunal first stated that it is not bound by precedent. It then distinguished the facts in Itisaluna<\/em>, which involved using the MFN<\/span> provision to incorporate the Iraq\u2013Japan BIT<\/span>\u2019s ICSID<\/span> clause into the OIC Agreement. Though the Itisaluna<\/em> tribunal interpreted Article 17, the present tribunal found that the analysis focused narrowly on the \u201cif \u2026 then\u201d language rather than the Basic Rule. On this premise, the tribunal found its own interpretation more convincing and in line with the awards in Al-Warraq<\/em> and Navodaya Trading<\/em>. (paras. 299\u2013306)<\/strong><\/p>\n

Interestingly, though the tribunal found that arbitration was not subject to ex post<\/em> consent by the state, it did not materially address the parties\u2019 rival contentions on the character of conciliation in Article 17. It merely decided that, in conclusion, conciliation is not a prerequisite to arbitration. (para. 307)<\/strong><\/p>\n

Dissenting opinion<\/strong><\/h3>\n

In footnote 387, Prof. Ziade disagreed with the majority\u2019s interpretation of Article 17. He argued that the majority\u2019s conclusion on ex post<\/em> consent is manifestly absurd as it requires an investor to obtain the state\u2019s specific consent for a non-binding conciliation but not for a binding arbitration. He also found merit in the Kingdom\u2019s stance that conciliation is a precondition to arbitration, for several reasons.<\/p>\n

First, he argued that conciliation is highly valued in Arab and Islamic traditions, and the OIC Agreement would reflect this preference.<\/p>\n

Second, he concurred with the finding in Itisaluna<\/em> that greater focus should be placed on the \u201cif \u2026 then\u201d language in Article 17(2)(a) because the provision gives the right to each party (and not only the investor) to pursue arbitration if conciliation fails, which makes sense only if consent was given at the stage of conciliation.<\/p>\n

Third, he argued that Article 16 is a fork-in-the-road provision that allows recourse to a national court or arbitration by precluding the other, but does not prevent conciliation in either case. Article 17(2)(a) specifically makes conciliation a prerequisite to arbitration. Thus, Article 16 cannot be read to deprive Article 17(2)(a) of its effet utile<\/em>.<\/p>\n

Finally, he asserted that the use of \u201cor\u201d in the Basic Rule in Article 17 is merely a reference to the available modalities of dispute settlement.<\/p>\n

Conclusion<\/strong><\/h3>\n

The majority decision rendered here is in line with two of the three prior decisions interpreting Article 17 of the OIC Agreement. It is interesting that the tribunal acknowledges that while it is not bound by precedent, adherence to past interpretations enhances legal certainty.<\/p>\n

That said, the tribunal\u2019s reasoning for departing from Itisaluna<\/em> leaves much to be desired. The phrasing in para. 304 suggests that the tribunal in Itisaluna<\/em> did not engage with a discussion on Article 17. This is immediately contradicted in para. 305 when the majority in passing refers to the said interpretation of Article 17. This passing remark also encompasses the tribunal\u2019s decision (or lack thereof) on the character of conciliation, whether jurisdictional or procedural.<\/p>\n

In sum, the award evidently advances a pro-arbitration reading of Article 17 of the OIC Agreement. However, its analysis, while coherent, is somewhat incomplete and leaves room for a more thorough engagement in future cases.<\/p>\n

Note<\/em><\/h3>\n

The case was decided by a tribunal comprising Prof. Juan Fernandez-Armesto (a national of Spain, the presiding arbitrator), Dr. Charles Poncet (a national of Switzerland, appointed by the claimant), and Prof Nassib G. Ziade (a national of the Kingdom of Bahrain, appointed by the respondent).<\/p>\n

Author<\/em><\/h3>\n

Abhishree Manikantan is a dual-qualified lawyer (India and New York) and a former Fellow with IISD<\/span>\u2019s Sustainable Investment team. She holds an LL.M. in international arbitration from New York University and a bachelor\u2019s degree in law from Symbiosis Law School, Pune, India.<\/p>\n