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Schoenherr Successful for Montenegro in Investment Arbitration

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Schoenherr has secured a win for Montenegro in the state's second investment arbitration, this time against CEAC, a Cypriot Holding Company represented by King & Spalding International.

According to Schoenherr, in 2005, the Russian energy-related company En+ acquired a majority stake in KAP, an aluminum plant near Montenegro's capital of Podgorica, through the Cypriot holding company CEAC. KAP was declared bankrupt in July 2013, and CEAC claimed "unlawful interference" by the Montenegrin government, which allegedly violated the bilateral investment treaty (BIT) protecting Cypriot investments in Montenegro. In March 2014, CEAC filed a claim against Montenegro with the International Centre for Settlement of Investment Disputes (ICSID) under that treaty. In the ensuing arbitration, CEAC sought compensation for an alleged expropriation, and direct and consequential damages for Montenegro's alleged unfair and inequitable treatment of CEAC's investment.   

On July 26, 2016, an ICSID tribunal composed of Bernard Hanotiau (President), Brigitte Stern (Montenegro's appointee), and William Park (Claimant's appointee) found that it lacked jurisdiction to hear the case. While at first dismissing Montenegro's preliminary objections on the grounds of not having been briefed to its satisfaction on certain issues, in particular on jurisdiction, the Tribunal nevertheless decided to have a specific phase of the proceedings dedicated to determining whether CEAC had a "seat" in Cyprus as required under Article 1(3)(b) of the Cyprus-Montenegro BIT. After hearing the parties' arguments, the Tribunal concluded that CEAC did not have a “seat" in Cyprus at the time of filing its request for arbitration, and was thus not a protected investor within the meaning of that BIT.  

Schoenherr’s team, representing Montenegro, consisted of Vienna-based Partners Christoph Lindinger and Anne-Karin Grill and Belgrade-based Partners Slaven Moravcevic and Jelena Bezarevic Pajic, along with Vienna-based Associate Michael Stimakovits and Belgrade-based Associate Tanja Sumar.

The London-based King & Spalding International team consisted of Partners Egishe Dzhazoyan and Tom Sprange, Counsel Sarah Vasani, and Associates Grigori Lazarev and Benjamin Burnham.

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