## Facts

- A British ship, the *Diana*, sank off Malacca in 1817 carrying Chinese porcelain.
- Malaysian Historical Salvors Sdn Bhd (MHS), a Malaysian company owned/controlled by a British national, contracted with Malaysia in 1991 to locate, salvage, clean, restore, catalogue, and arrange auction of recovered items.
- Compensation was structured as a share of auction proceeds plus a share of the appraised value of items retained by Malaysia for museum use.
- A payment dispute arose; MHS alleged Malaysia failed to pay sums owed under the contract.
- MHS commenced ICSID arbitration in 2005 under the ICSID Convention and the UK–Malaysia bilateral investment treaty (BIT).
- In 2007, the tribunal (sole arbitrator) issued an award declining jurisdiction, finding the salvage operation was not an “investment” under ICSID Convention Article 25(1).
- MHS sought annulment under ICSID Convention Article 52, asserting the tribunal manifestly exceeded its powers by wrongly declining jurisdiction.
- In 2009, an ad hoc committee annulled the jurisdictional award and remitted the matter for further proceedings.

## Issues

1. Whether MHS’s salvage contract and performance qualified as an “investment” under ICSID Convention Article 25(1), such that ICSID had subject-matter jurisdiction.
2. Whether the tribunal manifestly exceeded its powers under ICSID Convention Article 52(1)(b) by adopting an unduly restrictive Article 25(1) conception of “investment.”
3. Whether the tribunal manifestly exceeded its powers by failing to give appropriate consideration to the BIT’s broad definition of “investment” when determining Article 25(1) jurisdiction.

## Decision

- The tribunal declined jurisdiction, holding the salvage operation was not an “investment” under Article 25(1) because it did not involve a “major” contribution to Malaysia’s infrastructure or economy and was closer to a short-term commercial services contract.
- The ad hoc committee annulled the jurisdictional award for manifest excess of powers under Article 52(1)(b).
- The committee found the tribunal had been endowed with jurisdiction by the Convention and BIT but failed to exercise it by applying an overly narrow and inflexible “investment” test and by not properly engaging the BIT definition.
- The annulment did not resolve the merits; it reopened the possibility of further ICSID proceedings.

## Legal Principles

- Annulment for “manifest excess of powers” is exceptional; “manifest” requires an excess that is obvious or plain, including where a tribunal wrongfully declines jurisdiction it possesses.
- Article 25(1) sets an outer limit for ICSID jurisdiction, but tribunal analysis must give significant weight to the contracting states’ definition of “investment” in the applicable treaty expressing consent to arbitration.
- “Contribution to economic development” may be relevant to characterizing an investment, but it is not a rigid jurisdictional condition that can be applied to override a broadly drafted treaty definition.
- A tribunal’s failure to give appropriate consideration to a controlling jurisdictional instrument (such as a BIT’s investment definition) can constitute a failure to exercise jurisdiction amounting to a manifest excess of powers.

## Conclusion

The annulment committee set aside a jurisdictional award after concluding the tribunal applied an impermissibly restrictive Article 25 “investment” test and failed to give adequate effect to the BIT’s broad investment definition, thereby plainly declining jurisdiction it was empowered to exercise.


Malaysian Historical Salvors Sdn. Bhd. v. Gov’t of Malay., ICSID Case No. ARB/05/10 (Annulment Decision Apr. 16, 2009)