Case Overview

In *Rand Investments v. Serbia*, a group of Canadian and Cypriot investors initiated ICSID arbitration against Serbia under the Canada-Serbia and Cyprus-Serbia Bilateral Investment Treaties (BITs). The dispute centered on the claimants' investment in BD Agro, a major Serbian dairy farm acquired through a 2005 privatization. The claimants alleged that Serbia, through its Privatization Agency, unlawfully terminated the privatization agreement in 2015 and expropriated their investment. In a June 2023 Award, a majority of the Tribunal upheld the claim of a single claimant, Mr. William Rand, finding Serbia had breached the Fair and Equitable Treatment (FET) standard. It dismissed all claims brought by the other investors on jurisdictional grounds and awarded Mr. Rand approximately EUR 14.6 million in damages plus interest. The Award was subsequently challenged in annulment proceedings, which were dismissed in May 2026.

Procedural History

The arbitration was initiated in February 2018. The Tribunal, composed of Gabrielle Kaufmann-Kohler (President), Baiju S. Vasani (claimants' appointee), and Marcelo G. Kohen (respondent's appointee), was constituted in October 2018. After extensive written proceedings, a hearing on jurisdiction, merits, and quantum was held in July 2021 at the Permanent Court of Arbitration in The Hague. The Tribunal issued its Final Award on June 29, 2023, accompanied by a dissenting opinion from Professor Kohen. Subsequently, on October 27, 2023, the Tribunal issued a supplementary decision clarifying that the interest on the damages awarded to Mr. Rand was to accrue from the date of the breach, October 21, 2015. On February 24, 2024, the claimants filed an application for partial annulment of the Award, invoking manifest excess of powers and failure to state reasons. An *ad hoc* Committee, composed of Lawrence Boo (President), Claudia Annacker, and Colm Ó hOisín, was constituted to hear the application. In June 2024, five of the six original claimants withdrew from the proceeding, leaving Mr. William Rand as the sole applicant. On May 20, 2026, the Committee issued its decision, dismissing the application for annulment in its entirety.

Key Issues and Positions

Jurisdiction

The claimants argued that their collective beneficial ownership and control over BD Agro, structured through a nominal Serbian owner (Mr. Djura Obradović) and a Cypriot holding company (Sembi Investment Limited), constituted a protected investment for all of them under the respective BITs. Serbia raised multiple jurisdictional objections, contending that only Mr. Obradović, a Serbian national, was the true investor and that the claimants had made no qualifying contribution under the ICSID Convention. Serbia further argued that the investment structure was an abuse of process, tainted by illegality under Serbian law for circumventing privatization rules, and that the claims were time-barred and outside the BIT's temporal scope.

Merits

The claimants alleged that Serbia breached the FET standard and unlawfully expropriated their investment. The key wrongful acts were the Privatization Agency's refusal to release a share pledge after the purchase price was fully paid, the subsequent termination of the Privatization Agreement on pretextual grounds in September 2015, and the seizure of their shares in October 2015. They characterized these actions as arbitrary, disproportionate, and in bad faith. Serbia countered that its actions were legitimate exercises of its contractual rights under the Privatization Agreement and Serbian law. It argued that the termination was justified by the investor's unremedied contractual breaches and that the seizure of shares was an automatic legal consequence of termination, constituting acts of a commercial party (*acta iure gestionis*) rather than sovereign acts.

Tribunal/Court Reasoning and Holdings

Jurisdiction

A majority of the Tribunal found it only had jurisdiction over the claims of Mr. William Rand under the Canada-Serbia BIT, specifically concerning his interest in the shares of BD Agro. It dismissed all claims by the other Canadian claimants (Rand Investments Ltd. and Mr. Rand's children) and the Cypriot claimant (Sembi) for lack of a qualifying investment. The Tribunal reasoned that only Mr. Rand had made the actual economic contribution and that the other claimants could not rely on his contribution to establish their own separate investments. Sembi was deemed a mere conduit for Mr. Rand's funds. The Tribunal rejected Serbia's objections to Mr. Rand's claim based on illegality, abuse of process, and timeliness, finding that the key harmful acts occurred after the Canada-Serbia BIT had entered into force.

Merits

The majority found that Serbia had breached the FET standard under Article 6(1) of the Canada-Serbia BIT. The central finding was that the termination of the Privatization Agreement in 2015 was unlawful. The Tribunal determined that the contractual obligation that Serbia cited as the basis for termination had, by its own terms, expired in April 2011 upon the full payment of the purchase price. Therefore, the Agency had no legal basis to terminate the agreement for a breach of an expired obligation four years later. The subsequent seizure of the shares, being a direct consequence of the unlawful termination, was also wrongful and constituted an exercise of sovereign power that culminated in the FET breach. Having found a breach of FET that deprived the claimant of his entire investment, the Tribunal exercised judicial economy and did not make a separate finding on the expropriation claim.

Quantum/Damages

The Tribunal awarded damages based on the fair market value of BD Agro as of the date of the seizure of the shares (October 21, 2015). It rejected a Discounted Cash Flow (DCF) valuation due to the company's history of losses and instead adopted an asset-based valuation. After making several adjustments to the parties' expert valuations, the Tribunal calculated the net asset value of BD Agro to be EUR 19.7 million. Based on Mr. Rand's 75.87% indirect ownership, the final damages awarded were EUR 14,572,730, plus pre- and post-award interest at EURIBOR + 2%.

Costs

The Tribunal ordered each party to bear its own legal fees and 50% of the arbitration costs. It justified this decision by noting the complexity of the case, the fact that jurisdiction was upheld for only one of several claimants, and that the damages awarded were less than 20% of the amount originally claimed.

Annulment

Mr. Rand sought partial annulment of the Award on grounds of manifest excess of powers and failure to state reasons. The application challenged the Tribunal's decision to decline jurisdiction over his indirect shareholding and certain payments made on behalf of BD Agro. It also challenged the Tribunal's reasoning on several aspects of the quantum valuation, including the rejection of certain evidence, the application of a 30% discount to land value, and the valuation of other assets and liabilities. The *ad hoc* Committee addressed each ground and found that the Tribunal's reasoning was tenable and its conclusions were not the result of a manifest excess of power. The Committee concluded that the applicant's challenges amounted to a disagreement with the Tribunal's assessment of the evidence and application of the law, which falls outside the scope of annulment review. The application was therefore dismissed in its entirety.

Dissenting Opinion

Professor Marcelo Kohen issued a dissenting opinion, disagreeing with the majority on jurisdiction, merits, and damages. He argued that the investment should not have received treaty protection because it was structured to circumvent Serbian law, specifically the rules of the privatization auction that granted advantages (payment by installments) only to Serbian nationals. Professor Kohen found that the claimant, Mr. Rand, had deliberately concealed his role as the "real" investor behind a Serbian national, Mr. Obradović, which constituted an abuse of process and violated the principle of transparency. He further opined that Mr. Rand had failed to provide conclusive proof of his ownership or control over the investment, and that the majority had improperly relied on informal evidence while disregarding formal communications that contradicted the claim. Consequently, he concluded that the termination of the Privatization Agreement by Serbia was a lawful act and that the claimant's entire case should have been dismissed.

Disposition / Relief

The Tribunal declared it had jurisdiction over Mr. William Rand's claims and found them admissible, while denying jurisdiction over all other claims. It declared that Serbia had breached Article 6(1) of the Canada-Serbia BIT and ordered it to pay Mr. Rand EUR 14,572,730 plus compound interest. In a subsequent supplementary decision, the Tribunal clarified that interest would run from the date of the breach, October 21, 2015. All other claims and requests for relief were dismissed. The subsequent application for partial annulment of the Award was dismissed in its entirety, with the applicant ordered to bear all costs of the annulment proceedings.