Koza Limited & Ors v. Koza Altin Işletmeleri As & Ors

This litigation concerns a battle for control over the English subsidiary of a Turkish mining company. It raises a number of interesting issues, including whether the English court should refuse to recognise the authority of officers of the Turkish company that owe their position as such to orders of the Turkish courts.

The latest skirmish in the litigation concerned an application by the English subsidiary for either a determination that certain expenditures were not prohibited by an undertaking pursuant to which it was limited to dealing with its funds only in the ordinary and proper course of business, alternatively a variation of the undertaking so as to permit the expenditures to be made. One of the proposed items of expenditure was a loan of up to £3m to fund an ICSID arbitration that a related company intended to bring against the Turkish state under the UK-Turkey Bilateral Investment Treaty and the ICSID Convention.

The matter came before Mr Richard Spearman QC, sitting as a Deputy Judge in the Chancery Division of the High Court, and resulted in a judgment that was handed down on 16 November 2017.

Much of the judgment is fact specific, but it does contain two points of general interest.

The first is a detailed consideration of the principles to be applied in order to determine what does and does not constitute expenditure in the ordinary and proper course of business, and whether expenditure which does not might nonetheless be permitted (paragraphs 30-55).

The second is a consideration of the jurisdictional requirements for a claim to be submitted to ICSID arbitration, and in particular the meaning of the requirement that there be an “investment” in a contracting state (paragraphs 102-122). On this point, it was held that the proposed £3m funding should not be permitted because (amongst other reasons) there was no qualifying investment upon which jurisdiction could be founded for the proposed ICSID arbitration. This part of the judgment represents perhaps the most detailed consideration given by the English courts to date on the question of ICSID jurisdiction.

Please find the judgment here