Malaysian Historical Salvors (SDN BRD and the Government of Malaysia)

In 1817 a British ship carrying a large cargo of Chinese porcelain sank in what are now the territorial waters of Malaysia (defendant). In the early 1990s, Malaysian Historical Salvors (MHS) (plaintiff), a Malaysian company owned by a British national, entered into a contract with Malaysia to recover the porcelain for Malaysia. Under the agreement, Malaysia was to pay MHS a certain portion of the proceeds obtained through auction of the recovered items and a portion of the appraised value of items retained for museum use. After many years of searching, MHS found the sunken porcelain. A portion of the porcelain was auctioned, and a portion was retained. MHS claimed that Malaysia failed to pay the amount owed to MHS under the contract, and it initiated arbitration proceedings before the International Centre for the Settlement of Investment Disputes (ICSID) based on the ICSID Convention and Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Malaysia for the Promotion and Protection of Investments (the bilateral investment treaty). The sole arbiter dismissed the case due to lack of jurisdiction over the dispute. The arbiter reasoned that the contract between the parties did not purport to make any major investment in the development of the infrastructure or economy of Malaysia and therefore did not constitute an investment under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). However, in rendering his decision, the arbiter did not consider the specific terms of the bilateral investment treaty between the countries, which contained a broader definition of the term investment. MHS sought to have the jurisdictional award annulled. An ad hoc annulment committee was formed to review the arbiter’s dismissal of the case.