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Carlyle vs. Morocco: Here are the Kingdom’s arguments to ICSID

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EN24 | 24 February 2020

Here are the Kingdom’s arguments to ICSID

For the Kingdom, Carlyle did not justify the existence of investments in Morocco. The American group invokes the Morocco-United States free trade agreement while the contracts with Samir concern entities based in the Cayman Islands.

Morocco never or very rarely communicates on its international disputes. The same discretion is observed in the arbitration proceedings against the Carlyle group, heard by the International Center for Settlement of Investment Disputes, a body affiliated with the World Bank (Washington).

Of this conflict opened in August 2018, we especially know the version and the arguments of Carlyle. The US investment fund is the initiator – along with several of its subsidiaries – of the request for arbitration. What about the Moroccan part? The procedure has not yet started the debate on “the merits of the case”, stage suspended following a request for “bifurcation” initiated by Morocco. The content of this request, introduced in October 2019, nevertheless provides information on the defense strategy adopted by the Kingdom.

The Samir, a Moroccan refinery in liquidation, is the central element of the dispute. The Carlyle group and its entities claim “to have signed a contract” with the refiner, according to which “a certain number of companies financed the acquisition by SAMIR of hydrocarbons to be refined. “However, following the liquidation of SAMIR, Carlyle now alleges” that the hydrocarbons and / or the funds in which they allegedly hold an interest have been expropriated by Morocco “, recalls the Kingdom in its request for bifurcation.

In essence, the plaintiffs accuse the Moroccan government of having “surrendered”, “seized” and “collected” its crude oil and refined petroleum products stored in Samir tanks. According to the applicants, these actions constitute “violations of Moroccos obligations under the free trade treaty concluded between the Kingdom and the United States in 2006, which deprived the applicants of their investments” in Morocco. The American entity asserts this treaty which commits the two countries to protect their mutual investors. Recourse to ICSID in the event of a dispute is part of this protection.

“It is sadly obvious that the applicants did not provide Morocco or the Tribunal with a single document establishing that they owned or controlled, directly or indirectly, their alleged investments” on Moroccan territory, retorts the Kingdom. Reason why the competence of ICSID is disputed.

How does it support this postulate?

In this procedure, Morocco explains that there are “seven applicants”: The Carlyle Group LP; Carlyle Investment Management LLC (“CIM”); Carlyle Commodity Management LLC (“CCM”); TC Group LLC; TC Group Investment Holdings LP; Celadon Commodities Fund LP; and Celadon Partners LLC.

In fact, none of these entities “has invested directly in SAMIR”, and therefore in Morocco. “On the contrary, all the business with SAMIR seems to have been carried out via entities located in the Cayman Islands “. These are VMF Special Purchase Vehicle – VMF Q1 Segregated Portfolio16 (“VMF”) and Carlyle Global Market Strategies Commodities Funding 2014-1 Ltd.

If Carlyle and its entities claim that they directly or indirectly own or control “the Cayman entities”, “no real evidence of ownership or control (for example in the form of share certificates, trusts or partnership deeds) n ‘has been produced’, according to Morocco.

The same source added that none of the claimants domiciled in the United States “directly owns the investments claimed – that is, the investment agreements and petroleum products. ”

On the contrary, these assets seem to “belong to the Cayman-based entities”. For Morocco, these are the companies that have invested “directly” with Samir, by being “parties to investment agreements and individual transaction agreements, and who were responsible for paying the various suppliers for product shipments”.

Does the American group take advantage of its own turpitudes? This is what the defendant suggests. In its memorial, the Kingdom explains that the contractual agreements with SAMIR were concluded when the refinery “was insolvent”. Located between February and August 2015, the transactions concerned took place while the refiner was in default. A “high risk” approach that “has nothing to do with Morocco”.

Before ICSID, Carlyle also claims that the Moroccan government “expropriated its oil”. However, “in the context of a dispute before the American courts against their insurers”, the same group “blames SAMIR squarely” that it accuses of having “stolen” its oil. We find the same argument in actions to restore this oil, initiated by Carlyle before the Moroccan courts.

The applicants further allege that they were “informed by numerous sources” that Morocco did not negotiate “in good faith” with SAMIR. There is also an unsubstantiated allegation that SAMIR was “forced” into liquidation and that the government imposed “unreasonably restrictive” requests to purchase SAMIR by a third party.

For Morocco, these allegations are based on “unfounded rumors”, which moreover “relate to actions by Morocco against one of its own nationals (SAMIR) and in which the Claimants have no rights or interests and that they don’t control, ”retorts the Kingdom.

Indeed, “the Free Trade Agreement does not provide grounds for action to a creditor to claim damages for alleged ill-treatment of a third company which is a national of the host State”, decides the party defendant.

 source: EN24