## Facts

- A United Kingdom company entered long-term lease and development agreements with a state-owned Egyptian company to renovate and operate two hotels in Luxor and Cairo.
- Contract disputes arose regarding hotel condition and rent; the investor withheld part of the rent under asserted contractual rights, while the state-owned company treated this as breach and liquidated security.
- In April 1991, employees of the state-owned company forcibly seized both hotels, evicting staff and guests and taking control; Egyptian authorities were found to have known in advance and not intervened.
- Egyptian prosecutorial authorities later declared the seizures unlawful and ordered return; the hotels were returned in early 1992, after significant damage, including severe damage to the Cairo hotel.
- Around the return period, tourism authorities withdrew or limited operating licenses, impairing the investor’s ability to operate.
- The investor pursued domestic arbitration against the state-owned company and initially won, but appellate courts annulled those awards in 1995.
- In 1997, the investor was again evicted from one hotel.
- The investor commenced ICSID arbitration under the Egypt–U.K. investment treaty; the tribunal upheld jurisdiction, found treaty breaches, and awarded damages significantly below the amount claimed.
- Egypt sought annulment under ICSID Convention Article 52; an ad hoc committee rejected annulment and left the award in force.

## Issues

1. Whether the state was responsible under the investment treaty for the conduct of a wholly state-owned company and for state acts/omissions surrounding the seizures and subsequent measures.
2. Whether the seizures and related conduct constituted indirect (creeping) expropriation without compensation in breach of the treaty.
3. Whether the state breached the treaty’s fair and equitable treatment obligation, including through alleged denial of justice linked to regulatory actions and domestic proceedings.
4. Whether the state failed to provide full protection and security by not preventing the seizures or providing effective remedial protection.
5. What measure of damages was recoverable where the investor claimed substantial lost profits and future opportunities.
6. On annulment, whether the award was annulable for manifest excess of powers, serious procedural departure, improper constitution, or failure to state reasons under ICSID Convention Article 52.

## Decision

- The tribunal held the state internationally responsible for treaty breaches tied to the hotel seizures and the state’s failure to prevent or promptly remedy the deprivation.
- The tribunal found an indirect expropriation based on substantial deprivation of use and enjoyment of the investment through forcible seizure, prolonged loss of control, damage, and later regulatory/judicial interference.
- The tribunal found breaches of fair and equitable treatment, including denial-of-justice-type concerns considered in light of the overall pattern of conduct affecting the investment.
- The tribunal found a breach of full protection and security, treating the obligation as extending beyond physical protection to include reasonable legal and administrative protection, especially where authorities had prior knowledge of threatened harm.
- On quantum, the tribunal rejected significant portions of the investor’s lost-profits case as speculative and awarded approximately USD 8 million plus interest (far less than claimed).
- The ad hoc committee denied annulment, holding that the tribunal did not manifestly exceed its powers, did not commit a serious procedural departure, and stated sufficient reasons; annulment was not available as a merits review.

## Legal Principles

- A state may incur treaty responsibility for acts connected to a state-owned entity where state ownership and state knowledge are coupled with failure to prevent unlawful interference or to take timely corrective action.
- Indirect expropriation may be found where cumulative conduct substantially deprives the investor of the use, enjoyment, or benefit of the investment, even absent permanent formal transfer of title, and compensation must meet treaty requirements.
- Fair and equitable treatment protects an investor against arbitrary or inconsistent state conduct and may be violated by a course of actions that defeats legitimate expectations and results in ineffective remedies.
- Full protection and security can require due diligence and effective legal/administrative protection, not only physical security, particularly when authorities are aware of impending harm to the investment.
- Damages in investment arbitration may be limited where projected profits and future opportunities are not established with reasonable certainty.
- ICSID annulment is confined to the specific grounds in Article 52 and is not an appeal; disagreement with a tribunal’s factfinding or legal conclusions does not, by itself, establish manifest excess of powers or failure to state reasons.

## Conclusion

The tribunal held Egypt liable under the Egypt–U.K. investment treaty for indirect expropriation and violations of fair and equitable treatment and full protection and security arising from the unlawful hotel seizures and insufficient state response, while limiting damages due to speculative projections; the annulment committee confirmed the award and emphasized the strictly limited, non-appellate nature of ICSID annulment.


Wena Hotels, Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, 41 I.L.M. 896 (2002)