ICSID arbitration proceeds despite interception of privileged communications

In Libananco Holdings Co Ltd v Republic of Turkey (ICSID Case No ARB/06/9), an ICSID tribunal rejected Libananco's request that a claim should be "summarily" determined in its favour, without receiving any further evidence, on the grounds that the fair conduct of the arbitration had been irrevocably prejudiced by Turkey's conduct. Turkey had intercepted privileged materials in the course of a separate court-ordered money laundering investigation.

The tribunal concluded that, although the allegations struck at principles which lay at the very heart of the ICSID arbitral process, the question of possible prejudice caused by Turkey's conduct had not been proved or disproved. However, in order to ensure Libananco's future protection against possible prejudice, the tribunal ordered Turkey to undertake a series of steps to ensure that the "rule of separation" was effectively implemented, between those responsible for the arbitration and those responsible for the criminal investigation. It was essential that justice was not only done, but was also manifestly seen to be done.

The tribunal rejected Turkey's application for security for costs. The possibility of such an order should only be entertained in the most extreme cases, where an essential interest of either party was in danger of irreparable damage. Turkey's request for the production and examination of Libananco's bearer share certificates, which were crucial to the admissibility of Libanaco's claims, was granted, subject to stringent parameters, involving the use of an escrow agent who would take instructions exclusively from the tribunal.