On 18 October 2023, the Court of Justice of the European Union (the “CJEU”) ordered the Syrian Arab Republic (“Syria”) to pay close to EUR 29 million plus interest to the European Union’s European Investment Bank (the “EIB”). The judgment arose out of Syria’s default on a pre-existing loan granted by the EIB. Of note, the CJEU determined that it could exercise jurisdiction over Syria, a non-EU State, on the basis of an arbitration clause contained in the loan agreement providing for disputes to be submitted to the CJEU. No arguments to the contrary were presented by Syria, which did not file a defence or otherwise participate in the litigation.
The underlying EIB loan had originally been concluded in 2001 to finance reinforcement of Syria’s electricity distribution system. Having already disbursed EUR 100,600,000 to Syria pursuant to the loan, the EIB announced the suspension of all loans with Syria in November 2011. The suspension followed restrictive measures imposed by the Council of the European Union, citing the continued repression and violation of human rights by Syria’s government. Syria thereafter failed to make repayments due under the loan agreement from December 2011 onwards.
The recent judgment of the CJEU follows the CJEU’s earlier judgment against Syria in June 2019. In that decision, the CJEU ordered Syria to repay to the EIB nearly EUR 53 million as well as default interest in connection with unpaid instalments due under the same loan between 2011 and 2017. The CJEU’s latest judgment of 18 October 2023 addresses Syria’s additional unpaid instalments due from 2017 to 2020.
Comment:
Around the world, central banks and banks acting on behalf of international organisations, such as the European Union, are increasingly engaging in court and arbitration proceedings. They do so both as claimants to protect their financial interests and as defendants targeted by creditors or other claimants in enforcement action. The CJEU’s recent decision highlights the complex intersection between international finance, public international law, sovereign immunities, human rights and recognition of governments in the context of regime change or civil war. It provides a timely reminder for States, central banks and international organisations alike to pay close attention to the structuring of loans, agreements to arbitrate and how to manage (or exploit) increasing risks that State-owned assets may be subject to seizure or attachment.
For a copy and a further information about the decision and its wider implications under Public International Law, please contact Robert Volterra (robert.volterra@volterrafietta.com), Ahmed Abdel-Hakam (ahmed.abdel-hakam@volterrafietta.com) or Angela Ha (angela.ha@volterrafietta.com).
