Metal-Tech Ltd. v. Republic of Uzbekistan

PDF - for LibraryIn 2000, Metal-Tech, an Israeli public company manufacturing molybdenum products, formed a joint venture with two state-owned companies in Uzbekistan to build and operate a plant for the production of molybdenum products.
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Metal-Tech was to contribute its technology, know-how, and access to international markets, as well as part of the financing needed for a new plant, while the Uzbek companies were to contribute buildings, constructions, machines, equipment, and raw molybdenum for the plant to process.

A month later, Uzbekistan’s Cabinet of Ministers adopted a resolution that abrogated the joint venture’s exclusive right to purchase raw materials required for the production of molybdenum products and to export such products.

As a result, the Uzbek companies terminated their contracts with the joint venture and bankruptcy proceedings were initiated against it.
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Despite Metal-Tech’s objections before the Uzbek courts, the joint venture was liquidated and delisted from the state registry of legal entities in 2009.

Metal-Tech filed Request for Arbitration contending  that Uzbekistan had breached its obligations under its domestic laws and the Israel-Uzbekistan BIT.

In the award, the tribunal found that it lacked jurisdiction to hear the parties’ claims and counterclaims brought under the Israel-Uzbekistan BIT and Uzbek law due to corruption related to Metal-Tech’s investment in Uzbekistan.
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In particular, the tribunal found that payments of approximately USD 4 million made by Metal-Tech to several individuals, including an Uzbek government official and the brother of the then Prime Minister of Uzbekistan, while presented as remuneration for various consultancy services, in fact constituted corruption and were illegal under Uzbek law.

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