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NERA Experts Contribute to Significant Victory for Turkmenistan in ICSID Telecom Contract Dispute
The Situation
In 2012, MobileTelesystems (MTS), a Russian telecom operator, signed a contract to operate as a cellular network provider in Turkmenistan. MTS held a license that was valid until July 2018. MTS negotiated with Turkmenistan’s regulatory authorities to extend permission to operate in the country, which was ultimately unsuccessful. As a result, MTS filed an International Centre for Settlement of Investment Disputes (ICSID) claim over alleged expropriation of its business in the country (Public Joint Stock Company Mobile TeleSystems v. Turkmenistan (ICSID Case No. ARB(AF)/18/4)). Initially, MTS sought US$1.5 billion in historical and future damages, which grew to over US$2 billion in a subsequent filing.
NERA's Role
Respondent Turkmenistan retained NERA, with Senior Managing Director Dr. Christian Dippon acting as industry and quantum expert. MTS alleged 11 individual measures breached the BIT and negatively affected its performance relative to its domestic competitor Atlyn Asyr. The claims included the profit sharing terms, import permits, and currency conversion. They also included claims of discrimination in the provision of data capacity, quality for internet and the sale of handsets, discriminatory prices for data channels, and a ban on data roaming. Dr. Dippon addressed all claimed measures as well as the three damages models introduced by MTS’s experts.
The Result
In its award, the Tribunal explicitly agreed with Dr. Dippon’s report and testimony several times, going so far as to call his explanations “convincing” and expressly concurring with the points he presented. The Tribunal found Turkmenistan had not engaged in any wrongful conduct with respect to MTS’s operations.
Dr. Dippon showed the profit-sharing terms under its operating contract were consistent with industry norms. Specifically, the Tribunal held in its award, “As convincingly explained by the Respondent’s expert, Dr. Dippon, profit-sharing or some kind of charge for granting a concession to operate in the telecommunication services industry is quite common in the global telecommunications world.”
Dr. Dippon also indicated that Turkmenistan’s denial of direct international data connectivity did not violate international norms. Indeed, relying on Dr. Dippon’s testimony, the Tribunal also found MTS had been allocated proportionately more data capacity than Atlyn Asyr. The evidence demonstrated—through such metrics as subscriber churn—that any data quality issues had affected both operators. Furthermore, there was no evidence the prices MTS paid for channels were exorbitant or discriminatory. Dr. Dippon established that MTS’s results were affected by its own actions, such as delays improving its network and its pricing policies. On the question of quantum, Dr. Dippon’s alternative damages model showed the amounts claimed by MTS were vastly overstated.