ICSID tribunal finds Yemen in breach of Yemen - Oman BIT

In Desert Line Projects LLC v The Republic of Yemen (ICSID Case No ARB/05/17) an ICSID tribunal found Yemen (R) in breach of the Yemen-Oman BIT in respect of a dispute with an Omani construction company (C).

C had agreed to undertake a road construction project in the Yemen but following non payment by R, the parties agreed to an arbitration in Yemen pursuant to which C was awarded a substantial sum. However, R failed to pay the sums due, and effectively coerced C through physical duress into signing a settlement agreement for a much lower sum.

The ICSID tribunal found that it had jurisdiction over the dispute, despite the fact C did not have an "investment certificate" - a jurisdictional requirement under the BIT, and notwithstanding the "fork in the road" provisions contained in the BIT. It held that the Yemen arbitral award should stand and was final and binding on the parties. In addition, it awarded moral damages to C of $1 million.

The case demonstrates that countries will not be able to escape the requirements laid down in their BITs by using excuses relating to formalistic requirements to challenge jurisdiction. In addition, attempts by a country to subvert a party's rights by using coercion may well be met with an award against them for moral damages.