Lenz & Staehelin successfully represented an estate in setting aside proceedings before the Swiss Federal Supreme Court

Lenz & Staehelin successfully represented an estate composed of 19 heirs of former shareholders of a Libyan company active in various economic sectors, such as import-export, agriculture, and real estate as defendant in proceedings before the Swiss Federal Supreme Court, in which Libya was seeking to set aside an arbitral award rendered in a Geneva-seated arbitration conducted under the UNCITRAL Arbitration Rules. The arbitral tribunal found in a decision dated 22 December 2023 that it had jurisdiction over the dispute and that Libya breached its obligations under the France-Libya Bilateral Investment Treaty (BIT).

In a decision 4A_78/2024 dated 3 June 2025, notified to the Parties with reasons on 12 June 2025, the Swiss Federal Supreme Court upheld the award and dismissed Libya's application.

By way of background, the dispute arose from the nationalisation of a Libyan company in the context of a global nationalisation program started by Colonel Muammar Gaddafi in 1970. Although the shareholders were entitled to compensation for the nationalisation of their assets, decades of domestic administrative and judicial efforts proved fruitless.

In 2018, the 19 members of the estate of the former shareholders of the nationalised company initiated arbitration proceedings against Libya under the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference (OIC Agreement). Each party designated an arbitrator, and the estate requested the OIC Secretary-General to designate the president of the tribunal in accordance with Article 17(2)(b) of the OIC Agreement. When the Secretary-General failed to respond, the estate turned to the Secretary-General of the Permanent Court of Arbitration (PCA), requesting the appointment of the president pursuant to the France–Libya BIT, by invoking the Most Favored Nation (MFN) clause in Article 8(1) of the OIC Agreement. The Secretary-General of the PCA proceeded to the appointment of the president.

In its award, the arbitral tribunal found that Libya had violated the France–Libya BIT, which it deemed applicable by virtue of the MFN clause. Libya was consequently ordered to pay over USD 73 million in compensation to the estate.

Libya challenged the award before the Swiss Federal Supreme Court, arguing that the arbitral tribunal was improperly constituted and lacked jurisdiction.

The Swiss Federal Supreme Court agreed with the estate's view and confirmed that the arbitral tribunal had been regularly constituted: the Swiss Federal Supreme Court endorsed the arbitral tribunal's reliance on Article 7(3) of the France-Libya BIT, via the MFN clause, to apply the UNCITRAL Arbitration Rules allowing the Secretary-General of the PCA to appoint the arbitral tribunal president when the OIC Secretary-General failed to do so.

The Swiss Federal Supreme Court further upheld the arbitral tribunal's jurisdiction, affirming that the OIC Agreement contained a valid offer to arbitrate. It held that earlier domestic proceedings before national courts of Libya concerned distinct legal issues and did therefore not preclude the recourse to arbitration. The Swiss Federal Supreme Court also found that the estate complied with the required pre-arbitration conciliation procedure, and that Libya's failure to respond to the estate's attempt to conciliate the dispute for seven months justified the initiation of arbitration. The Swiss Federal Supreme Court confirmed that the members of the estate inherited a right to compensation in relation to the original investment expropriated by Libya. As the OIC Agreement also applies to investments made prior to its entry into force, it also protected the right transmitted ex lege from the original investors to their heirs.

Libya had to bear all costs of the proceedings and was ordered to pay the defendant's legal costs.

The Lenz & Staehelin team included partner Xavier Favre-Bulle, associate Clara Samson and former counsel Hanno Wehland.