International Arbitration in Investment Disputes


The Situation

In 1999 PSEG Global (PSEGG) signed a concession contract to build the Konya-Ilgin power plant and associated coal mine in central Turkey. In subsequent negotiations the Ministry of Power imposed additional conditions on the terms of the purchased power agreement, which ultimately led to the cancellation of the project. PSEGG filed a claim before the International Centre for the Settlement of Investment Disputes (ICSID) alleging that Turkey had breached the contract and the result was the expropriation of PSEGG’s investment. The case was bi-furcated into a jurisdictional phase and a liability and damages phase.

NERA's Role

NERA filed expert statements in both phases of the case. NERA first explained the characteristics and implementation process for Build-Operate-Transfer (BOT) power projects and then analyzed the steps taken to implement the project over the seven-year period. NERA opined that the funds expended by the sponsors of the Konya Ilgin project were consistently incurred against the framework and work program established by the project’s authorizing documents. NERA then demonstrated that due to a change in policy regarding BOT projects, the Turkish Government took an escalating series of positions that were inconsistent with good-faith commercial practice and destructive of the financial feasibility of the project.

The Result

Based largely on NERA's expert testimony, PSEGG won the jurisdictional phase of the dispute. NERA went on to perform similar work in disputes before ICSID and the International Chamber of Commerce over investments in regulated industries involving a distribution company in India and an airport in the Philippines.