ICSID Tribunal Confirms Jurisdiction to Hear Multiparty Arbitration by International Investors

June 03, 2020

An International Centre for Settlement of Investment Disputes (ICSID) tribunal has recently dismissed the jurisdictional challenges of the Republic of Cyprus and is pushing ahead with a multiparty arbitration commenced by former depositors and bondholders of Laiki Bank and the Bank of Cyprus.

The decision to allow a multiparty ICSID arbitration supports an earlier decision of an ICSID tribunal in a claim by 60,000 claimants against Argentina.

ICSID Tribunal Decision

On 7 February 2020, an ICSID tribunal (the Tribunal) released its decision, following a jurisdictional challenge in proceedings brought by more than 900 former depositors and bondholders of Laiki Bank and the Bank of Cyprus (the Claimants) against the Republic of Cyprus (Cyprus) in relation to losses suffered following the restructuring of Laiki Bank and the Bank of Cyprus during the financial crisis in Cyprus of 2013 (Adamakopoulos). The Claimants claim that the restructuring of the banks violated Cyprus’s obligations under two bilateral investment treaties (BITs) entered into by Cyprus.

Following the decision of the Court of Justice of the European Union (CJEU) in Achmea, in which the CJEU held that the Treaty on the Functioning of the European Union was to be interpreted as precluding the operation of investor-state dispute settlement provisions in BITs, Cyprus objected to the Tribunal’s jurisdiction under the relevant BITs. It further argued that the Tribunal lacked jurisdiction over claims brought by numerous investors. By a 2–1 majority, the Tribunal rejected Cyprus’s challenges to its jurisdiction and held that it has jurisdiction to hear the multiparty claim.

Impact on Former Depositors, Bondholders in Laiki Bank and Bank of Cyprus

Recourse for Lost Investments

The Adamakopoulos decision paves the way for former depositors and bondholders to seek nondomestic recourse against Cyprus. A string of unsuccessful claims pursued by former depositors and bondholders of Laiki Bank and the Bank of Cyprus in the CJEU will have likely discouraged many former depositors and bondholders from considering legal action against Cyprus under EU law (see judgments in Joined Cases C-8/15 P to C-10/15 P, Joined Cases C-105/15 P to C-109/15 P, Case T-680/13, and Case T-786/14).

Bringing a claim for breach of the protections granted to foreign investors under one of Cyprus’s BITs presents an attractive alternative, albeit one that was rendered uncertain by the Achmea decision. With the Tribunal’s rejection of Cyprus’s arguments that EU law supersedes the BITs in question and that EU law overrides the applicable international law, the uncertainty created by Achmea is dispelled.

The Tribunal held that its jurisdiction arises out of international law, rather than EU law, and that as such, it is not subject to the judgements of the CJEU. The prospect of pursuing legal recourse by way of an ICSID arbitration may therefore now be an attractive option for former depositors and bondholders who suffered losses following the restructuring of Laiki Bank and the Bank of Cyprus, particularly where claims brought before the CJEU are being routinely denied.


At present, there are 24 BITs still in force to which Cyprus is a party. Following the Adamakopoulos decision, whether a former depositor or bondholder of Laiki Bank or the Bank of Cyprus under the protection of one of these 24 BITs can bring a claim by way of international arbitration, will depend, among other things, on the following:

  • Whether each investor, either as an individual or a legal entity, is a national of a contracting party to the BIT
  • Whether the language of the BIT covers the type of investor bringing the action and the type of investment involved
  • Whether the BIT expressly requires consent by a state to a multiparty action, or prohibits multiparty claims entirely, if a multiparty claim is being pursued

The above considerations must be considered by any potential claimant.

Intra-EU BITs

International investors under the protection of an intra-EU BIT will need to further consider the implications of the recent Agreement for the Termination of Bilateral Investment Treaties between the member states of the European Union, signed by 23 member states on 5 May 2020. The agreement purports to terminate all intra-EU BITs between those member states and to revoke any sunset clauses allowing for the extension of protection following termination.

Whether the agreement will have the legal effects desired by the member states under international law, however, remains unclear. As a matter of international law, it is uncertain whether the contracting parties to the relevant intra-EU BITs can retrospectively nullify the effect of the sunset clauses with respect to investment made prior to the termination of the BITs.

As such, former depositors and bondholders in Laiki Bank or the Bank of Cyprus who wish to pursue international arbitration under an intra-EU BIT should be mindful of, but not necessarily deterred by, the potential implications of the agreement prior to initiating a claim.

What Does the Decision Mean for International Investors at a Wider Level?

Multiparty Claims

The fruits of the ICSID Tribunal’s decision extend to all international investors who have suffered loss as a result of a breach of a BIT.

The decision in Adamakopoulos has reaffirmed the position regarding an ICSID Tribunal’s jurisdiction over multiparty claims arising out of alleged violations of international investment law taken by previous tribunals. In 2011, in the case of Abaclat and Others v Argentina ICSID Case No. ARB/07/S (Abaclat), an ICSID tribunal similarly held that it had jurisdiction to hear a claim by 60,000 claimants brought under the Italy-Argentina BIT.

In confirming that the ICSID Tribunal does have the jurisdiction to hear multiparty claims within its current framework, the Adamakopoulos decision has clarified any uncertainty that remained after Abaclat. International investors will not be limited to pursuing arbitration on an individual basis, but now evidently have the option to pursue arbitration through a multiparty claim. The benefits (especially to claimants with smaller investments) are obvious: they have a cost-effective way to seek recourse.

Implications of COVID-19

The clarity on the ICSID Tribunal’s jurisdiction on multiparty claims has come in the wake of the coronavirus (COVID-19) pandemic, and at a time when economic activity has slowed down considerably. It is possible that many financial institutions will face extreme financial difficulty and risk collapse as a result.

As evidenced throughout past financial crises, some favoured approaches to stabilizing the financial sector amongst governments in such situations include the restructuring or nationalisation of certain financial institutions, restrictive regulations, and the “bailing in” or “bailing out” of certain institutions (see Cyprus’s approach to its 2013 financial crisis, Sweden’s approach to its 1990 financial crisis, and Argentina’s response to its 2000 financial crisis).

Successful recourse against such government measures before domestic courts is often difficult. However, the Adamakopoulos decision has confirmed the availability of recourse against measures of this type by way of an ICSID arbitration, also for foreign interest holders with smaller investments, when such government measures prejudice foreign investors or violate other provisions of a BIT by which the investors in question are protected. Whether such measures do in fact prejudice investors or violate a BIT will depend on a number of things, including the manner and scope of the measures taken by the government, and the nature of the investment and investor involved.

Where the number of investors impacted by such government actions is sizeable, the ability for investors to pursue legal recourse through a multiparty claim could be beneficial, both as to case management and costs.

For a summary of the restructuring of Laiki Bank and the Bank of Cyprus during the Cyprus financial crisis of 2013, and international arbitration arising out of international investment law, see our LawFlash of 12 April 2013.

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Trainee solicitor Suera Hajzeri contributed to this LawFlash.


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