US court ruled secretive ICSID tribunal not ‘imbued with governmental authority’

The American lawyer representing Elizabeth McCaul, the MFSA-appointed controller for the now-shuttered Pilatus Bank, has highlighted a US court ruling that decisions by the ICSID tribunal do not possess governmental authority.

This emerges from court documents filed in January by McCaul’s counsel, Attorney Michael C. Keats, in which he asked the U.S. District Court of the Eastern District of New York to quash a request by Alpene Ltd, which is in turn, owned by Ali Sadr Hasheminejad, Pilatus’ chairman.

Alpene had applied to the court, asking to be allowed to question McCaul, who had assisted in the bank’s controllership when it was shut down by the European Central Bank in February 2018.

Alpene’s owner Ali Sadr Hasheminejad claims that controller Lawrence Connell, who was appointed by the MFSA to take over the bank after Hasheminejad’s arrest in the United States, had a conflict of interest, by engaging a law firm founded by incoming MFSA chairman Prof. John Mamo to represent him.

Alpene has accused Connell of having “drained the bank of its assets and funnel substantial portions of those assets into Mamo TCV.”

Alpene’s lawyers had insisted that they needed to question McCaul for its arbitration case against Malta in the World Bank’s International Centre for the Settlement of Investor Disputes (ICSID), about a bilateral investment treaty between the People’s Republic of China and Malta.

Alpene argued that ICSID tribunals are “clothed in governmental authority” being run by States to act 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 courts.

In August 2021, Alpene had filed an application to the U.S. District Court Eastern District of New York, requesting an expedited order that would authorise it to subpoena documents and testimony from McCaul in aid of the proceedings before ICSID.

On September 9, 2021, the court referred the application to Magistrate Judge Robert M. Levy, who granted the application on September 20. The following November, McCaul had filed a motion to overturn the granting of Alpene’s application, and having analysed a recent decision by the US Supreme Court, Magistrate Judge Levy had upheld McCaul’s motion on October 27, 2022.

In January 2023, while that court was dealing with Alpene’s objection to the October 27 order, McCaul’s lawyer wrote to the court, to inform it that a month before, on 19 December 2022, U.S. District Judge Lewis A. Kaplan of the Southern District of New York had issued a Memorandum Opinion stating that an ICSID tribunal “does not qualify as a ‘foreign or international tribunal,’ imbued with ‘governmental authority,’” within the meaning of the same section of the law being cited by Alpene, in a similar case between Panama and Italy, .

In that decision, Judge Kaplan had concluded that that “Italy and Panama did not intend to imbue the ICSID Panel with governmental authority, and therefore [the ICSID Panel] does not constitute a ‘foreign or international tribunal,’ upholding the motion to vacate and quashing the subpoena in question, closing the case. McCaul’s lawyer asked the court to do the same in the case filed by Alpene.

US court ruling may have bearing in Malta

The decision may have a bearing on Constitutional proceedings filed in Malta by Repubblika who are alleging that Attorney General Victoria Buttigieg had issued a nolle prosequi – an order not to prosecute – in respect of Ali Sadr Hasheminejad, Pilatus Bank’s operations supervisor Luis Rivera, the bank’s director Ghambari Hamidreza and bank official Mehmet Tasli.

When ordered to testify about the order, Buttigieg and FCID police inspector Pauline D’Amato both said they were unable to comply with the order, citing amongst other things, the confidentiality of the pending ICSID proceedings.

The court had rejected that argument, but allowed the two witnesses to testify behind closed doors in view of the “privileged” nature of the ICSID arbitration proceedings.