Mr. Franz Sedelmayer v The Russian Federation

Year of the award: 1998
Forum/Rules: Arbitration Institute of the Stockholm Chamber of Commerce
Applicable investment treaty: Federal Republic of Germany - USSR BIT (1989)

Arbitrators:
Mr Staffan Magnusson - Chairman
Mr Jan Peter Wachler
Mr Ivan S. Zykin

Executive summary

Mr. Sedelmayer was a German citizen and sole owner of SGC, an American company. In 1990 SGC entered into an agreement with the Police Department in St Petersburg concerning the delivery of law enforcement equipment and relevant training. For this purpose the parties decided to establish the joint stock company KOC, each holding a share of 50%. The Police Department's contribution to KOC's charter capital was a designated set of premises to be used for the company's operations. Approximately four years later, pursuant to a directive issued by the then Russian president, KOC was deprived of these Premises.

Mr Sedelmayerfiled a request for arbitration under the BIT concluded between the Federal Republic of Germany and the USSR (1989). He claimed compensation for investments in KOC, including the value of seized materials, loss of the right to use the Premises and the value of renovation works of the Premises. The Tribunal held, by a 2-1 majority, that an expropriation had indeed taken place, and that Russia was therefore liable to pay damages in the amount of US$ 2,35 million plus interest.