Pilatus case for arbitration could put spokes in wheel for prosecution

Arbitration proceedings brought against the Maltese government by Pilatus Bank’s owners, Alpene, could be holding up the investigation and prosecution of the bank’s directors over money laundering allegations.

The legal wrangle unfolding before both the World Bank arbitration tribunal (ICSID) as well as the American and Maltese courts, concerns a decision by ICSID that could have ‘halted’ criminal proceedings brought against the bank by Malta, until a decision on Alpene’s case is delivered by ICSID.

Alpene, the Hong-Kong based company that owns Pilatus Bank, is insisting that the two MFSA consultants who wound up the bank, testify in its case against Malta at ICSID.

The arbitration proceedings filed by Alpene, which is also owned by Pilatus Bank head Ali Sadr Hasheminejad, gave rise to two requests for disclosure of evidence before the American courts.

Alpene’s requests are directed at the US residents whom the MFSA appointed to control Pilatus Bank when it was shut down after the arrest of Hasheminejad in 2018. He has since been acquitted of breaching American sanctions against Iran.

Pilatus could use ICSID to spike prosecution

The first request, directed at former Pilatus controller Lawrence Connell, was dismissed in May 2021 by a US court.

Meanwhile, the second request concerning Connell’s replacement, Elizabeth McCaul, who had originally selected Connell on behalf of the Maltese authorities, continues.

Pilatus’s lawyers insist this type of discovery request is necessary for its arbitration case against Malta in the World Bank’s International Centre for the Settlement of Investor Disputes (ICSID).

In September 2022, Alpene filed a request to the ICSID for provisional measures, prompting the tribunal to issue a decision in this regard on 14 September, 2022.

But while the contents of this decision remain undisclosed, they are understood to have “recommended” the halting of all related criminal proceedings brought against the bank by Malta, until a decision on Alpene’s case against Malta is delivered by ICSID.

So Alpene filed a renewed request for provisional measures on 3 November, and in its latest submission to the US courts asked that its case for a motion of discovery on Connell, be heard afresh.

Significantly, it argued that ICSID tribunals are “clothed in governmental authority” being run by States to acts as a “permanent, State-backed institution for the resolution of investor-State disputes”, and that its decisions could not be ignored by a member state’s domestic court.

But how does this affect Maltese proceedings? The NGO Repubblika, through its lawyer Jason Azzopardi, had filed Constitutional proceedings, alleging that Attorney General Victoria Buttigieg had issued what is known as a nolle prosequi – an order not to prosecute – for Pilatus Bank owner Ali Sadr Hasheminejad, its operations supervisor Luis Rivera, the bank’s director Ghambari Hamidreza and bank official Mehmet Tasli.

Buttigieg and FCID police inspector Pauline D’Amato had been ordered to testify about this, but both witnesses told the court they could not comply with the order... citing amongst other things, the confidentiality of the pending ICSID proceedings.

Mr. Justice Christian Falzon Scerri had rejected this argument, and noted that no order or decision was brought to prevent his court from continuing with the case.

The two witnesses subsequently appeared before the judge on 8 November, but requested to testify behind closed doors and that any documents be kept confidential, invoking the “privileged” nature of the ICSID arbitration proceedings.

That case continues in January.