Procedural Background

This document is the final Award in the ICSID arbitration between Toto Costruzioni Generali S.p.A., an Italian construction company, and the Republic of Lebanon, brought pursuant to the Italy-Lebanon Bilateral Investment Treaty (BIT). The dispute arose from a 1997 contract concluded between the Claimant and the Lebanese Conseil Exécutif des Grands Projets (CEPG) for the construction of the Saoufar-Mdeirej section of the Arab Highway. Following a prior Decision on Jurisdiction dated September 11, 2009, which bifurcated the proceedings and dismissed several contractual claims, the Tribunal proceeded to determine the merits of the Claimant's remaining treaty claims. The Tribunal was tasked with assessing whether the State's conduct in administering the infrastructure project amounted to breaches of international law.

Principal Legal Issues and Parties' Positions

The Claimant alleged that Lebanon breached its obligations to provide fair and equitable treatment (FET), full protection and security (FPS), and to promote and protect the investment under Articles 2, 3, and 4 of the BIT. Specifically, the Claimant sought over USD 10 million in compensation for cumulative delays and disruptions allegedly caused by the State's late expropriation of land parcels, failure to promptly remove Syrian troops and obstructing landowners from the construction site, imposition of faulty design standards, and adverse changes to the regulatory framework involving increased customs duties and taxes. The Respondent maintained that the delays were primarily caused by the Claimant's own substantial design variations—most notably altering a curved viaduct to a straight alignment—which necessitated entirely new expropriations. Lebanon further argued that the Claimant had expressly waived its right to claim compensation for delays in exchange for contractual extensions of time, and that the State's actions did not involve the exercise of sovereign authority (puissance publique) necessary to elevate contractual disputes to treaty breaches.

Tribunal's Reasoning and Findings

The Tribunal dismissed all of the Claimant's treaty claims on the merits, applying a strict distinction between contractual non-performance and sovereign treaty breaches. Regarding the expropriation delays, the Tribunal found that the timeline was largely attributable to the Claimant's own proposed variations to the project's alignment. The Tribunal held that Lebanon had completed the necessary expropriations within a reasonable twelve-month timeframe once the new designs were approved, and that the Claimant could not legitimately expect the State to expropriate land faster than the complex domestic legal procedures allowed.

In addressing the presence of Syrian troops and obstructing landowners, the Tribunal analyzed the FET and FPS standards, referencing jurisprudence such as ELSI and Noble Ventures. The Tribunal held that the FPS standard does not impose strict liability or guarantee a flawless expropriation process free from local resistance. It concluded that Lebanon had exercised due diligence and taken adequate, non-discriminatory measures to secure the site, including requesting police assistance to remove obstructing landowners. The Tribunal noted that the Claimant failed to prove that the State acted capriciously or negligently in managing these localized disruptions.

The Tribunal also rejected the regulatory framework claims. Relying on Parkerings v. Lithuania, the Tribunal emphasized that in the absence of a stabilization clause, a host State retains the sovereign right to modify its tax and customs laws. The general tax and customs increases enacted by Lebanon were found to be neither drastic nor discriminatory, and thus did not frustrate any legitimate expectations of the investor. Furthermore, the Tribunal observed that the Claimant's acceptance of time extensions, coupled with explicit waivers of liability, fundamentally undermined the factual and legal basis for its treaty claims regarding delay.

Decision

In its dispositive section, the Tribunal unanimously declared that the Respondent did not breach its obligations under Articles 2, 3, or 4 of the BIT, nor did it fail to comply with the full protection and security standard. Consequently, all substantive claims for compensation were dismissed. Exercising its discretion under Article 61(2) of the ICSID Convention, the Tribunal ordered that the costs of the arbitration be borne by the parties in equal shares, with each party responsible for its own legal fees and expenses.