One of the most instructive investment awards for contractors working on foreign infrastructure: Bayındır İnşaat, a construction company from Türkiye, took the termination of its Islamabad-Peshawar motorway contract to ICSID. The tribunal upheld jurisdiction but dismissed every claim on the merits.
Case details
- Case: Bayındır İnşaat Turizm Ticaret ve Sanayi A.Ş. v Islamic Republic of Pakistan, ICSID Case No. ARB/03/29
- Basis: Pakistan-Türkiye bilateral investment treaty and the ICSID Convention
- Decision on Jurisdiction: 14 November 2005 (jurisdiction upheld)
- Award: 27 August 2009 (claims dismissed on the merits)
- Tribunal: Gabrielle Kaufmann-Kohler (President), Sir Franklin Berman, Karl-Heinz Böckstiegel
- Project: Islamabad-Peshawar motorway (M1), employer Pakistan’s National Highway Authority (NHA)
The ruling in one sentence: the termination of a construction contract by a state entity can be examined as a possible treaty breach, but where the termination rests on well-founded concerns about the contractor’s performance and political motivation is not proven, there is no breach of the treaty.
What was the dispute?
Bayındır contracted with the NHA to build the Islamabad-Peshawar motorway. The project ran into delays and mutual allegations; the NHA terminated the contract and the site passed to the control of the Pakistani authorities. Rather than use the dispute resolution mechanism in the contract, Bayındır brought an ICSID claim under the investment treaty, arguing that the termination was politically motivated, unrelated to its performance, and a denial of fair and equitable treatment.
Key points from the decisions
- A construction contract can be an investment: in 2005 the tribunal found that Bayındır had made an investment under both the treaty and Article 25 of the ICSID Convention.
- Treaty claims and contract claims are distinct: the same facts may support both. A dispute resolution clause in the contract does not by itself bar a treaty claim before ICSID, but a treaty breach requires conduct in the exercise of sovereign authority.
- Merits: in 2009 the tribunal found that the NHA’s concerns about Bayındır’s performance were well founded and that it was entitled to terminate. The claim that the termination was driven by political motives unrelated to performance was not sufficiently supported by evidence, and the discrimination claims (national treatment, most-favoured-nation) based on the same facts also failed.
Why it matters
- Records decide the case: even in a treaty claim after termination, the real battle is about performance. Payment applications, delay records, programmes and correspondence with the employer matter more than proving political motive.
- Choice of forum: the contractual forum and the treaty forum protect different claims; which claim goes where should be planned from the start.
- Political motive needs strong proof: a change of government or press statements were not enough on their own.
The view from Türkiye
Türkiye is a party to the ICSID Convention and has signed a large number of bilateral investment treaties. Contractors from Türkiye working for public employers abroad can rely on treaty protection where the host state interferes in the exercise of sovereign authority, alongside their contractual remedies. Bayındır shows that this route is open, but that turning a commercial termination dispute into a treaty breach is difficult. The scope of the applicable treaty and its interaction with the contract’s dispute clause should be assessed together at the negotiation stage.
Frequently asked questions
Is an ordinary construction contract an investment? In Bayındır and in Salini, ICSID tribunals treated long-term construction projects involving substantial contribution and risk as investments. The answer depends on the definition in the relevant treaty and the features of the project.
Is termination by a public employer an expropriation? Not by itself. Tribunals usually ask whether the state acted as a contracting party or used sovereign power. In Bayındır the termination was contractual and justified.
For general information only; not legal advice. Sources: Bayındır İnşaat Turizm Ticaret ve Sanayi A.Ş. v Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Decision on Jurisdiction (14 November 2005) and Award (27 August 2009), italaw.com; ICSID Convention, Art. 25; case summaries in published legal commentary.