Plama Consortium Limited v. Republic of Bulgaria: A Case Comment and the Analysis of the MFN Principle
Plama Consortium Limited v. Republic of Bulgaria: A Case Comment and the Analysis of the MFN Principle

Plama Consortium Limited v. Republic of Bulgaria: A Case Comment and the Analysis of the MFN Principle

This article has been written by Umika Sharma, B.B.A L.L.B (H) [GGSIPU] , LL.M. [Queen Mary University of London]

1. Factual Matrix

Plama AD, which was a 100% Bulgarian State-owned joint stock company was privatized, and its name was changed to Nova Plama AD (“Nova Plama”) in 1996. This company owned an oil refinery (“the Refinery”) in Bulgaria. Seventy-five percent of Nova Plama’s shares were sold to EuroEnergy Holding (“EEH”) under an agreement (“First Privatization Agreement”) at the time of the privatization. By the end of 1997, negotiations for the purchase of shares of Nova Plama were already underway after a Swiss multinational Company, Andre & Cie (“Andre”), had been approached on behalf of EEH, which was seeking trade financing facilities for their Refinery. Mr Jean-Christoph Vautrin, who was at the time working for Andre then approached Norwegian Oil Trading AS (“NOT”). Both Andre and NOT expressed interest in purchasing EEH’s shares in Nova Plama. Resultantly, Andre and NOT entered into a Memorandum of Agreement with the Bulgarian Privatization Agency (“Agency”). Consequently, the Agency gave consent[1] to Andre and NOT for the sale and transfer of all the shares of Nova Plama. The Agency gave its final consent on 23 November, 1998 to EEH and Plama Consortium Limited (“the Claimant”), on the meeting of all the conditions as stipulated by the Memorandum of Agreement. The Claimant then went on to purchase all of EEH’s shares through a share purchase agreement.

Meanwhile, Nova Plama had ceased operation in 1996 due to poor economic conditions.[2] It never resumed production under EEH’s ownership and re-commenced operations in 1999 after it was acquired by the Claimant; only to be shut down permanently the same year. Earlier, insolvency proceedings had been initiated against Nova Plama in 1998, which forced EEH to sell its shares to the Claimant. But in 2006, the Pleven District Court re-opened the bankruptcy proceedings. Resultantly, Nova Plama was liquidated, and all its assets were sold for approximately USD 30.6 million.

2. Procedural Background

The International Centre for Settlement of Investment Disputes received a Request for Arbitration on 6 January, 2003 by the Claimant, a Cypriot company against the Republic of Bulgaria (the “Respondent”). The Request invoked the ICSID Arbitration provisions of the Energy Charter Treaty (“the ECT”) and the Most Favored Provision (“MFN”) of the Bilateral Investment Treaty (“the BIT”) between Cyprus and Bulgaria. The Claimant also invoked the Bulgaria-Finland BIT to substantiate the MFN principle.

Pursuant to Article 36(3) of the ICSID Convention, the Request for Arbitration was registered by the Centre on 19 August, 2003. A three-member arbitral tribunal, consisting of Professor Albert van den Berg, V.V Veeder and Carl F. Salans as the President, was appointed. The first session of the Arbitral Tribunal was held in Paris on 25 March 2004, where it was agreed that the Respondent’s objections to the jurisdiction would be treated as a preliminary question. Paris was decided to be the place for the hearings on 20 and 21 September 2004. The Tribunal affirmatively found jurisdiction and held the following:

(I) that it had jurisdiction to decide on the merits of the Claimant’s claims under Article 26 of the ECT and the ICSID Convention as far as the breaches of Part III of the ECT were concerned.

(II) Article 17(1) was held to be irrelevant in determining the jurisdiction and instead left the issue to be decided at the merits stage after bifurcating it into two parts:

(A) the second limb of Article 17(1) concerning ‘substantial business activity’ was decided in favour of the Respondent

(B) the first limb of Article 17(1) regarding the ‘ownership’ and ‘control’ of the Claimant was left to be decided at the merits stage

            (III) The Tribunal also rejected the Claimant’s contention concerning the MFN principle and refused to use it for interpreting Bulgaria’s consent to ICSID arbitration under the Bulgaria-Cyprus BIT.

From 28 January to 1 February 2008, hearings on merits was held in Washington DC. Final oral arguments followed it in April 2008 and the proceedings were closed on 9 June 2008.

3. Legal Issues

The legal issues can be broadly divided into two heads concerning jurisdictional issues and the merits of the case

3.1 Jurisdictional Issues

            3.1.1 Under the ECT

Denial of benefits argument

The Respondent contended that under Article 17 of the ECT, which provides for non-application of Part III in certain cases, that it has the right to deny benefits provided to the Claimant. The Respondent laid particular emphasis on the operation of Article 17(1) which was divided by the Tribunal into two “limbs”[3] or requirements. Article 17(1) provides a right to the State to deny the advantages of Part III based on, firstly, a legal entity’s ownership and control by a national or citizen of a third state and secondly, the absence of substantial business activities within the Contracting Party where the legal entity is organized. It was considered necessary by the Tribunal that both the conditions be met for the denial of benefits to operate. For the first limb, the Tribunal decided to deal with the question of the ultimate ownership “or” control of the Claimant. At this stage, Mr Vautrin provided written statements and testified in front of the Tribunal as to his French nationality[4] and ultimate ownership of the Claimant company. The Respondents pointed out to the unreliability and inconsistent documentation provided by the Claimant and the contradictory statements by Mr Vautrin. The Tribunal then went on to reserve its decision on the factual issue of the Claimant’s ownership as it considered it overlapping with the Respondent’s arguments on misrepresentation. The issue was left to be decided during the merits stage. As far as the second limb concerning “no substantial business activities” was concerned, the Claimant accepted that there were indeed no substantial business activities in Cyprus, which is the area of the Contracting Party in which it is organized.

The Tribunal further divided the issue of the operation of Article 17 into categories of jurisdiction and merits. Under the jurisdictional issue, the Respondent argued that once it was established that there was a denial of benefits under Article 17, which applies to Part III of the ECT, there would also be a denial of all the advantages associated with Part III. As per the Respondent, these advantages included Article 26, which provides for “unconditional consent”[5] for international arbitration. The Tribunal did not subscribe to this view and instead held that the denial only applies to Part III and not to Article 26 which was under Part V. The Tribunal then substantiated its stance by noting that under Article 17, there is a limited exclusion of the investor from Part III. This exclusion is dependent on certain specific criteria and to be able to determine these criteria; there is need of a dispute resolution procedure that helps ascertain the application of the exclusions to a particular case. Moreover, the Tribunal considered that the separate existence of Article 26 from Article 17(1) is a part of the object and purpose of the ECT.

On the request of the parties, the Tribunal proceeded to address Article 17 as an issue on the merits. Here, the Claimant asserted that for the Respondent to be able to deny the benefits successfully, it needs to, first, positively exercise its right of denial. Second, the operation of the right of denial will be prospective and will only operate after this denial is expressed through a positive action.[6] On the other hand, the Respondent contended that there was no action required on behalf of Bulgaria and further, the denial of benefits would apply retrospectively. The Tribunal agreed with the Claimant and held that the right to denial of benefits had to be specifically exercised by the Respondent. It also held that the operation of the denial of benefits would be prospective as the investor has legitimate expectations of enjoying the protection provided under Part III.

Thus, the Tribunal decided that it had jurisdiction to decide on the breaches of Part III of the ECT under Article 26 of the ECT and the ICSID Convention.[7]

3.1.2 Under the Bulgaria-Cyprus BIT

The Claimant put forth the argument that the Most Favored Nation (“MFN”) principle entails that the Tribunal has jurisdiction under the Bulgaria-Cyprus BIT (“the BIT”). The Claimant also pointed out that it was an investor under the BIT, which contains an MFN clause that encompasses aspects of “treatment” which covers dispute resolution provisions in other BITs. In this particular case, the Bulgaria-Finland BIT where Bulgaria has consented to ICSID arbitration. Based on this contention, the Tribunal interprets the MFN principle provided under the BIT. It notes that the dispute resolution provisions under the BIT only includes disputes related to expropriation. However, it holds that dispute resolution provisions are procedural, which cannot form a part of the MFN principle which only applies to substantive protection.[8] The Tribunal then analyses the Maffezini[9] case where it is observed that “dispute settlement arrangements are inextricably related to the protection of foreign investors, as they are also related to the protection of rights of traders under treaties of commerce.”[10]

The present Tribunal also observed the general nature of such statements and refused to rely on it for interpreting that the MFN principle under the BIT intended to include dispute resolution provisions. The Tribunal cast doubts over the consent of Bulgaria to bind itself with ICSID arbitration. It pointed out that consent of parties is a basic requirement for arbitration and it doesn’t seem to be the case for Bulgaria because it did not have any intention of incorporating the MFN principle to include such consent to dispute resolution provisions in some other BIT. Thus, the Tribunal held that it could not be presumed that a Contracting State consented to the extension of the MFN principle to treaties that were negotiated in a separate context. It refused to replace the dispute resolution provision in the basic treaty with that of a separate treaty. The Tribunal also agreed with the Maffezini Tribunal’s observation that it was essential to draw a line when it comes to “disruptive treaty shopping” [11] that would destroy the policy objectives of the underlying treaty.

3.2 Merits of the case


The Respondent presented a two-fold argument on the line of misrepresentations made by the Claimant to the Bulgarian Privatization Agency in violation of Bulgarian law as well as international law. It was asserted that to obtain the consent of the Privatization Agency; the Claimant represented itself as a consortium comprising of two large companies, namely, Andre and NOT. Mr Vautrin’s sole ownership was deliberately concealed by the Claimant.[12] The consent of the Agency was a vital legal prerequisite for two consequences. It was essential for Claimant’s purchase and also for the lawfulness of the Share Purchase Agreement between the Claimant and EEH that resulted in the Claimant’s investment in Nova Plama. Further, Article 5(1) of the Bulgarian Privatization Act provided that under the Act, if an acquisition were made with the aid of a fictitious party or an unidentified proxy, then it would be considered as null and void.[13]

Thus, the investment in Claimant was invalid since its inception which had the consequence of the investment not getting protection under Article 10, 13 and 26 of the ECT as these obligations apply only to lawful investments.  The Tribunal agreed with the Respondent’s argument and held that the Claimant misrepresented to the Bulgarian Government about its qualifications and the real identity of the Claimant’s owners.

The Tribunal then elaborated on the consequences of the misrepresentation made. It noted that it was persuaded that the consent for the transfer of shares to the Claimant would not have been given by Bulgaria if it was aware of the fact that the Claimant was a private individual with limited financial capacity.[14] The Tribunal categorically held that:

The investment in Nova Plama was, therefore, the result of a deliberate concealment amounting to fraud, calculated to induce the Bulgarian authorities to authorize the transfer of shares to an entity that did not have the financial and managerial capacities required to resume operation of the Refinery.

The Tribunal concluded that the agreement was thus unlawful because of the misrepresentation made by the Claimant. It further observed that the ECT could not apply to investments that were contrary to law and should be interpreted to strengthen the rule of law on energy issues. The tribunal found that the Claimant’s actions violated Bulgarian law and Article 26(6) of the ECT which provides for dispute resolution by tribunals based on principles of international law. Therefore, there is a clear breach of international public policy because the contract was obtained by wrongful means. Additionally, the Claimant has breached the principle of good faith because it was under an obligation to inform Bulgaria about the material changes in the shareholding of the investor but instead deliberately withheld this vital information. Therefore, the Tribunal held the Claimant guilty of fraudulent misrepresentation, and it led to the consequence of the Claimant not getting the protection of the ECT.

4. Costs

Following the “loser pays” principle, the Tribunal decided that the Claimant will bear all costs including ICSID’s administrative charges, fees and expenses of the Tribunal and all other costs incurred by the Respondent.[15]

5. Decision

On the basis of the foregoing, the Arbitral Tribunal made the following decisions:

1. Incorporated by reference its Decision on Jurisdiction of 8 February 2005;

2. Respondent could not rely on Article 17(1) of the Energy Charter Treaty to deny Claimant the benefits of Part III of the Treaty until 17 February 2003;

3. Claimant was held not entitled to any of the substantive protections afforded by the ECT;

4. Assuming that Claimant would have been entitled to substantive protections afforded by the ECT, the tribunal rejected all the contentions of the Claimant and held that the Respondent did not violate its obligations under the ECT to the Claimant with respect to all the issues contested by the Claimant.

 5. Claimant to bear all fees and expenses of the Arbitral Tribunal as well as ICSID’s administrative charges, being USD 919,985, which are paid out of the advances made by the Parties and was also ordered to pay Respondent USD 460,000 on account of advance on costs as well as USD 7,000,000 on account of legal fees and other costs.

6. Analysis of the impact of the case

The case has contributed to international investment law and has had a far-reaching influence on its jurisprudence. It has guided Tribunals in the interpretation of the MFN clause, especially concerning the dispute resolution provisions. Though the discussion of the MFN principle in the case may seem like a moot point as the Tribunal had already found jurisdiction under the ECT; nonetheless, it has had an extensive effect on the sphere of international investment law and deserves a detailed discussion. 

The MFN principle has vast connotations, mainly because it concerns international economic law.[16] Its broad application becomes all the more critical due to its impact on investors. It is possible to argue that the States themselves limit the application[17] of the MFN principle by express provisions that show their intent to keep dispute resolution out of the scope of the operation of the principle.[18] Therefore, the Tribunal’s stance over not accepting the argument that the Bulgaria-Cyprus BIT, had within its reach, dispute resolution provisions seems to be a contract law based approach[19] and doesn’t fit into the idea of employing wide interpretation to a widely worded MFN clause. It also goes against the ‘context-based’ intention of the parties.

The Plama and Maffezi[20] cases serve as ideal examples of the judicial split when it comes to the interpretation of the MFN principle in international investment law.[21] Such understanding has vast consequences for both investors and States because they have competing interests. Investors seek a more extensive application of the MFN principle to include dispute resolution provisions to able to get access to the remedies available through the host States’ other treaties. Whereas States endeavour to limit it; to ensure that they are beyond the scope of an arbitration Tribunal to minimise their risks.[22] The clear contrast in these two cases brings forth a fundamental conflict concerning the jurisdictional scope of investment Tribunals. Plama endorses the view that the consent of the parties[23] is at the centre of the MFN principle’s extension.[24] Whereas, Maffezini puts forth the idea that an investor can rely on an MFN principle to invoke dispute resolution provisions that are more favourable to the investor and its rights and interests[25] and are present in a third treaty.[26] Moreover, interpreting the MFN clause solely from the perspective of the investor seems to be misplaced. Such an investor, who is not even a party at the time of the treaty negotiation should not be assumed to be the focal point. Rather, the intention of the States should be the foremost consideration.[27]

In the true sense of the word, such a scenario should not be regarded as a ‘conflict’, but perhaps these divergent views towards the MFN principle are prevalent because every BIT is unique and negotiated under specific circumstances. It doesn’t seem sensible to afford the same interpretation and the same consequence from BITs that have a vast scope of application as far as dispute resolution provisions are concerned. Despite it, the Plama case has managed to kick up a hornet’s nest by shaking up the position established by cases like Maffezini.[28]

7. Concluding Remarks

Subsequent Tribunals have subscribed to the Plama Tribunal by pointing out that the enlargement of the Treaty by incorporating dispute resolution provisions from treaties that have been negotiated in different contexts is a wrong presumption.[29] Professor Kohen went as far as to say that consent should not be imported where it doesn’t exist and has lead to consequences that could not be predicted by the Contracting States.[30] But there have been Tribunals that have gone the Meffezini way. For instance, the Tribunal in Siemens v Argentina[31] subscribed to the view that the MFN principle could be widened to include within its scope a more favourable dispute resolution mechanism of a separate treaty to bypass approaching the local courts. In essence, the Tribunals have equated the substantive rights given by a treaty to the dispute resolution rights and have thus excluded the procedural rights from the scope of the MFN clause. A broad brushstroke has been used to include dispute resolution rights into the realm of substantive rights provided under a Treaty.

Therefore, it can be said that the development of jurisprudence gives no universally adequate guidance to the question of whether an MFN principle would also extend to the dispute resolution mechanism. The controversy still remains at large and largely depends on the interpretation of the Tribunals and the authorities that they rely on. Though the Plama case has acted as the ideal opportunity to challenge the previous views[32] adopted by Tribunals that seemed to favour the investor’s choice of the forum over the State’s consent. 

[1] Which was a requirement as per Article 22 of the First Privatization Agreement.

[2] While it was still a State-owned entity.

[3] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, ¶ 143(8 February 2005),

[4] France being an ECT signatory State.

[5] Article 26(3)(a) of the ECT.

[6] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, ¶ 153(8 February 2005),

[7] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, ¶ 179 (8 February 2005),

[8] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, ¶ 191 (8 February 2005),

[9] Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award (13 November 2000),

[10] As quoted by the Tribunal in Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Decision on Jurisdiction ¶ 54 (13 November 2000),

[11] The term was used by the tribunal in Maffezini v Spain.

[12] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, ¶ 99 (27 August 2008),

[13] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, ¶ 102 (27 August 2008),

[14] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, ¶ 133 (27 August 2008),

[15] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, ¶ 323 (27 August 2008),

[16] Separate opinion of Todd Weiler, Berschader v. Russian Federation, SCC Case No. 080/2004, Award ¶ 20 (April 21, 2006),

[17] Through the use of restrictive language or reservations.

[18] ibid.

[19] Due to the reliance on concepts like unequivocal consent of the parties for an arbitration agreement in Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, ¶ 198 (8 February 2005),

[20] Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award (13 November 2000),


[22] ibid.

[23] By consent of the parties, the consent for including the dispute resolution provisions in the treaty by the States is of utmost importance

[24] Paragraph 198 of the jurisdiction award

[25] Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award ¶ 56 (13 November 2000),


[27] The view has also been endorsed by the Tribunal in Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award ¶ 95 (13 September 2006),

[28] Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award (13 November 2000),

[29] Beijing Urban Construction Group Co. Ltd. v Republic of Yemen, ICSID Case No. ARB/14/30, Decision on Jurisdiction ¶ 113 (31 May 2017),  

[30] Venezuela US, S.R.L. (Barbados) ​v. Bolivarian Republic of Venezuela, PCA Case No. 2013-34, Dissenting Opinion of Professor Marcelo G. Kohen ¶ 54 & 57 (26 July 2016),

[31] Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction (3 August 2004),

[32] As held in theMaffezini case (n 9) as well as the Siemens case (n 31).

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