Pinsent Masons advises Tepe on landmark state immunity case in Royal Court of Jersey

Tepe, a construction company based in Turkey, had entered into two contracts with crude oil transportation company Botas to assist in the construction of the Baku-Tbilisi-Ceyhan (BTC) transportation pipeline. The dispute arose when state owned entity Botas (“SOE”), which is wholly owned by the Republic of Turkey, terminated those contracts. Following referral to arbitration in Paris, Botas’ contractual terminations were found to be unlawful leading to several ICC arbitral awards in favour of Tepe for c. US$100M.

The Pinsent Masons team was led by International Construction partners Mark Roe, Adrian Elliott and senior associate Cecile Tangy.

The SOE refused to pay what it owed. Tepe, the claimant in the Jersey proceedings, then sought to enforce those arbitral awards against the SOE's assets in Jersey, namely, the SOE’s shares in two Jersey companies (the “Jersey Shares”).  As the 100% owner of the SOE, The Republic of Turkey had some form of indirect control of and/or an indirect interest in the Jersey Shares, as it did in all assets of the SOE.  The Jersey Royal court had to consider whether such indirect control and /or indirect interest in the Jersey Shares gave rise to state immunity.

The Royal Court had no hesitation in rejecting the claim of state immunity and ordered that the arrest of the Jersey Shares be confirmed. 

Commenting on the case, Mark Roe, said: “This is the first time that a Jersey, or English, court has considered whether state immunity may attach to the shares of an entity in which a state has an indirect interest or control under article 6(4) of the State Immunity Act. If a ‘general’ interest in or indirect level of control over these shares by the Republic of Turkey was  sufficient to invoke state immunity, this would open the doors to immunity claims in respect of any entity in which a state has some form of interest or control, however ‘general’ and   indirect. This would be entirely at odds with the underlying rationale of the restrictive immunity reflected in the State Immunity Act.

“Had Jersey’s Royal Court found that state immunity did apply to the Jersey Shares, the decision would have had serious implications for international companies doing business with state-owned companies around the world, particularly in the infrastructure and energy sectors.”