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On July 31, 2020, the English Court of Appeal handed down a further judgment in the long-running dispute involving entities of the Koza Group, the Turkish mining and media conglomerate owned by the Ipek family.

The judgment in Koza Ltd. & Hamdi Akin Ipek v. Koza Altin Isletmeleri AS [2020] EWCA Civ 1018 addresses the question of the validity of an injunction granted against the use of Koza Ltd.’s assets for the funding of an ICSID arbitration claim brought by another group company against the Republic of Turkey. The judgment also includes important clarifications regarding the jurisdiction of the English court to prevent misuse of the litigation procedure.

Background of the dispute and the ICSID arbitration

The dispute started with a clash over the control of the first claimant, Koza Ltd., an English corporation whose sole director is the second claimant, Mr. Ipek. The respondent, Koza Altin, a Turkish company, is Koza Ltd.’s immediate parent company and its primary provider of capital for mining operations outside of Turkey. Although partly owned by Mr. Ipek and his family, Koza Altin is not controlled by Mr. Ipek but by the Turkish government. The shift in control allegedly occurred through the government’s concerted campaign of harassment and oppression against the Koza Group, which included the illegal expropriation of the group’s assets for political reasons.

An arbitration was initiated against Turkey by Ipek Investments Ltd. (ILL) under the auspices of the International Centre for Settlement of Investment Disputes (ICSID). ILL, an English investment firm, became the holding company of the Koza Group following the execution of a share purchase agreement (SPA) under which the members of the Ipek family sold their shares in the former holding company of the Koza Group to ILL. In return, ILL issued shares to the Ipek family, thus interposing an English holding company between the Ipek family and the Koza Group.

This international link gave rise to the jurisdiction of the ICSID tribunal under the UK-Turkey bilateral investment treaty. Turkey challenged the tribunal’s jurisdiction on the basis that the SPA was a sham, a backdated document fraudulently created for the purpose of establishing ICSID jurisdiction. Without the SPA, the dispute would have proceeded solely between the Turkish government and the Turkish entities. The jurisdictional challenge is due to be heard by the ICSID tribunal in September 2020.