Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, 2005

AUTHORED BY:- Ujjwal Kumar

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Facts of the case

Waiguih Elie George Siag was Claimants Waguih Elie, George Siag, and Clorinda Vecchi made investments in a plan to build a resort on a piece of property in the Gulf of Aqaba that the Egyptian Ministry of Tourism had supported. Siag and Vecchi attempted to seek redress in the Egyptian legal system when Egypt seized the property in 1996, but their efforts were unsuccessful. They filed for international arbitration in 2005, claiming expropriation and other breaches of the BIT between Egypt by recognising themselves as Italian nationals.

Contentions raised

Mr Siag was born in Egypt to Egyptian parents and therefore was Egyptian by birth. In 1989, Mr Siag applied for Lebanese citizenship by submitting his application to Egypt under Article 10. Before applying, Mr Siag received a nationality certificate from the Lebanese Ministry of Interior on December 15, 1989, and a letter from the Cairo Consulate saying that he was "of Lebanese nationality and recorded in the mission registers." On March 5, 1990, the Egyptian Minister of Interior issued Decree acknowledging Mr Siag's Lebanese nationality and enabling him to keep his Egyptian citizenship. Due to his dual nationality, the Nationality Authority wrote to the Military Conscription Department on 8 March 1990 to exclude Mr Siag. He obtained Italian citizenship on 3 May 1993 under Article 5 of the Italian Nationality Act of 1992 on the basis of marriage to an Italian citizen. Mr Siag became an Italian citizen on July 12, 1995.

Siag's mother, Clorinda Vecchi. was born an Italian national. Mrs Vecchi married Mr Siag's father in 1954. Mrs Vecchi requested her husband's Egyptian citizenship from the Interior Ministry on April 19, 1955. Mrs Vecchi became Egyptian on 19 April 1957 without any notification from the Egyptian Minister of the Interior. She then lost her Italian citizenship upon the death of her husband in 1987, ending Mrs Vecchi's marriage. On September 14, 1993, Mrs Vecchi declared to regain her Italian citizenship under Article 17 of the Italian Nationality Act, 1992. Therefore, Ms Vecchi is Italian.

On the expropriation, claimants argued that the BIT agreements between Egypt and Italy were violated, and the Egypt state denied them justice by treating them differently.

Egypt agreed that both plaintiffs possessed Italian nationality. Still, it maintained that they also remained Egyptians and were thus jurisdictionally prohibited by the dual-nationality restriction in Article 25(2)(a) of the Convention as both didn’t adhere to the provisions of Article 10 paragraph 3, which required a declaration within the one year following the grant of permission.

Egypt further argued that Siag and Vecchi had utilised their nationalities to take advantage of international arbitration and the BIT's rights and investment protections and avoid having to suit in their states. The tribunal would be facilitating foreign investment abuse if it ignored the genuine link theory established in the Nottebohm case[1] and allowed Siag and Vecchi to seek jurisdiction under the ICSID Convention. The Convention was never meant to allow nationals to sue their own state.

Egypt further argued that the expropriation was in the national interest, they were heard in different courts of law, and they were not treated discriminately.

Tribunal’s Finding on Jurisdiction

The tribunal accepting the arguments and legality of the nationality of the claimants rejected the argument of Egypt on the limited premise that effective nationality requires a dual nationality as a matter of law. The tribunal found no dual nationality in Siag or Vecchi. Given the correct circumstances, its analysis suggests that the genuine link theory applies.

Tribunals finding on merits

The tribunal didn’t accept any of the arguments of Egypt as Egypt was not able to show any other company with a similar objective being expropriated in the same timeline. The tribunal further found that even after so many court decisions against the govt notification, the state went ahead with expropriation which amounts to a denial of justice.

Highlights of the case

Modern investor-state arbitration has been one of the more problematic areas of actual link theory implementation. The ICSID Convention's Article 25 grants jurisdiction based on nationality to most arbitrations.

AS STATED IN ITS PREAMBLE, the ICSID Convention's primary goal is to promote "international cooperation for economic development" by promoting "the role of private investment therein." The drafters chose diversity of nationality as the mechanism to ensure that arbitrations under its auspices would be international. Article 25 provides in part:

“The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.[2]”

Respondent (host) governments commonly object to jurisdiction based on nationality, which the ICSID Convention does not define. The ICSID Convention generally does not change the notion that subject to treaty constraints, governments identify their nationals. However, ICSID Convention arbitration follows general international law. ICSID does not define nationality. The problem that arises when suppose there is Imagine a Canadian investor wants to invest in India. Suppose India and Canada have no BIT. In the case of a disagreement, the investor feels that India’s internal judicial system would fail, either because its legislation provides no recourse to investors or because it is corrupt. Fortunately, India has a BIT with Australia, and the investor has high-ranking Australian acquaintances. The Canadian investor received Australian nationality a few weeks later. He invests in India as planned, knowing that if the government violates the BIT, he can vindicate his newfound treaty rights before an independent international tribunal under the ICSID Convention. He will also have strong rights and assurances in that arbitration, unlike a Canadian.

From the above, it might seem that genuine link theory will help, but conversely, many states will change their nationality law in order to prove the effective nationality according to its suitability.

Therefore, it would be wise to consider the function that nationality serves in the context of the ICSID Convention rather than applying an anachronistic and incongruous theory of nationality "instantly" in an effort to avert these kinds of situations.

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[1] Nottebohm (Liech. v. Guat.), 1955 I.C.J

[2] ICSID Convention, supra note 30, art. 25(1).