The case filed by former Pilatus Bank Chair Ali Sadr Hashemi Nejad against Malta in an international tribunal, disputing the decision to close the bank, is moving forward.

Ali Sadr used a company in Hong Kong, Alpene, to launch an international case against Malta before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).

On 25 September, the tribunal issued a decision allowing the case to proceed to the next stage.

Ali Sadr’s lawyers argue that Malta breached its bilateral investment treaty with China when the state withdrew Pilatus Bank’s banking authorisation following money-laundering investigations into the bank’s Chair in the USA and the EU.

The Shift reported on 20 August 2020 that Alpene had sent a letter through US law firm Steptoe & Johnson notifying Malta of a ‘dispute’ and its intention to eventually bring proceedings under the bilateral investment treaty between Malta and China.

An excerpt from the letter sent to Maltese authorities on 20 August 2020.

Among other things, the request was for Malta’s proceedings against Ali Sadr and other related parties, including criminal proceedings, to be immediately suspended.

Alpene, owned by Ali Sadr, is suing Malta for damages of millions of US dollars.

This extraordinary request forms part of a broader ongoing case in Malta.

Ali Sadr’s move to resort to the ICSID was described by lawyers consulted by The Shift as “particularly shrewd”.

The choice of using his Hong Kong company Alpene and dragging in Malta’s 2009 Bilateral Investment Treaty with China not only offers strong protections but also potentially places Malta at odds with China, a country Malta has been increasingly courting for large investments.

Alpene claimed that Pilatus Bank had been effectively expropriated and that Malta was “engaging in malicious investigations and harassment.”

Alpene Ltd claims Ali Sadr is being “harassed”.

Alpene also claimed that Malta’s actions against the shuttered Pilatus Bank, through the cancellation of its licence and the resulting winding down of the bank, effectively amounted to expropriation by Malta.

Despite several scandals related to the bank, as revealed by the press in Malta, the decision to shut down Pilatus Bank was not made by the Maltese authorities but by the European Central Bank.

Efforts by Malta’s Office of the State Advocate suffered as the ICSID rejected Malta’s request to get Alpene’s arbitration thrown out, concluding that Malta has a case to answer.

While the content of the tribunal’s decision remains undisclosed, the fact that this is a decision rather than an award indicates that the tribunal allowed at least some of the claims to move forward, according to Investment Arbitration Reporter.

The ICSID is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States, known as investor-state dispute settlement.

In the arbitration, the claimant is represented by Steptoe & Johnson in Washington DC.  Malta’s Office of the State Advocate is counselled by Alston & Bird in New York, together with Ganado Advocates in Valletta.