Kenyan Firm’s UAE Dispute Tests ICSID Investment Rules: What to Know

A Dispute Between a Kenyan Contractor and the UAE is testing the Boundaries of Investment Protection

In April 2024, a Kenyan engineering firm quietly filed an application that could reverberate well beyond the construction sites of Mogadishu or the courtrooms of Washington, DC.

Spentech Engineering Limited, the Kenyan-based engineering firm, asked the International Centre for Settlement of Investment Disputes (ICSID) to annul an arbitral award that had summarily dismissed its claims against the United Arab Emirates.

At stake is not only whether Spentech can revive its case, but also a deeper question confronting modern investment law. How should treaties apply to projects that are physically located in one country, legally anchored in another, and disrupted by geopolitics?

The answer could shape how states and contractors structure international projects, particularly those linked to embassies, aid missions, and security-sensitive environments.

A Project Spanning Borders

Between 2016 and 2020, Spentech entered into a series of construction and supply contracts with the UAE Embassy in Mogadishu. The projects were varied and substantial, they included an army barracks known as the Hodan Project, the Sheikh Zayed Hospital, roadworks and landscaping, embassy facilities, and the provision of hospital equipment.

While the construction sites were located in Somalia, the legal architecture of the projects pointed firmly to the Gulf. The contracts were governed by UAE law, designated UAE courts as the forum for disputes, and involved extensive activities in the Emirates.

According to Spentech, architectural and engineering design, procurement of materials, financial arrangements, and project management were conducted largely from the UAE. By 2020, the company’s chief executive officer, engineer Maurice Owiti, had acquired a property in Dubai to support operations.

Such arrangements are not uncommon in large cross-border projects. What made this one different was the political context in which it unfolded.

Diplomacy Intrudes

In 2018, relations between the UAE and Somalia deteriorated sharply. Amid the diplomatic rift, construction works were suspended. The UAE ambassador to Somalia was recalled to Abu Dhabi, and Somalia’s ambassador to the UAE returned to Mogadishu. Spentech remained on site, continuing only such work as it was instructed to carry out.

Years later, in November 2022, with the projects reportedly around 92 percent complete, Spentech’s CEO was invited to the UAE Embassy in Mogadishu to discuss outstanding payments. A reconciliation exercise by UAE officials concluded that approximately USD 6.79 million was owed. Spentech maintained that the true balance was closer to USD 8.64 million. The UAE side, for its part, alleged that Spentech had already received millions of dollars in cash, an assertion the company has consistently denied.

What followed lies at the heart of Spentech’s grievance. The company alleges that UAE officials seized its construction equipment, office property, and intellectual property, including architectural and technical drawings. It further claims that its CEO was detained for several months by UAE agents in Somalia and subjected to degrading treatment. The UAE has not admitted these allegations, and they were never substantively examined by an arbitral tribunal. Instead, the dispute took a procedural turn.

From Contract Dispute to Treaty Arbitration

After settlement discussions faltered in early 2023—talks Spentech says were conducted under coercive conditions—the company attempted domestic proceedings in Abu Dhabi. Those efforts were dismissed without a substantive hearing. Spentech then turned to international arbitration, filing a request at ICSID under the 2014 Kenya–UAE Bilateral Investment Treaty (BIT).

The claim was framed not as a simple payment dispute, but as a treaty case. Spentech alleged that the UAE’s conduct amounted to expropriation, denial of fair and equitable treatment, and other treaty breaches. Central to its case was the assertion that it had made a protected “investment” in the territory of the UAE, even though the physical construction took place in Somalia.

That argument would become decisive.

Rather than proceeding to a full jurisdictional or merits phase, the arbitral tribunal dismissed Spentech’s claims at a preliminary stage under Rule 41(5) of the ICSID Arbitration Rules. That rule allows tribunals to reject claims that are “manifestly without legal merit.”

In its award, issued in July 2025, the tribunal concluded that Spentech’s alleged investment lacked the required territorial nexus to the UAE. It found that the “centre of gravity” of the projects lay in Somalia, where the buildings and infrastructure were physically constructed. Choice-of-law clauses, jurisdiction provisions, and preparatory activities in the UAE, the tribunal held, could not displace the geographic location of the investment

Because it viewed the territorial requirement as unmet, the tribunal did not examine Spentech’s allegations of expropriation, detention, or coercion.

For the UAE, the decision represented a firm affirmation of treaty limits. For Spentech, it was a procedural dead end, and one the company says was reached too quickly.

Spentech’s annulment application does not ask ICSID to declare the tribunal “wrong.” Under the ICSID Convention, annulment is not an appeal. Instead, an ad hoc committee may set aside an award only if it suffers from fundamental defects, such as a manifest excess of powers, a serious departure from basic procedural rules, or a failure to state reasons.

Spentech argues that all three are present

At the core of its application is the claim that the tribunal used Rule 41(5) to dispose of issues that were neither obvious nor purely legal.

According to Spentech, whether an investment consisting largely of contractual rights, claims to payment, and intellectual property—governed by UAE law and subject to UAE courts—can qualify as being “in the territory” of the UAE is a complex and evolving question in investment law. By treating that issue as manifestly unmeritorious, the tribunal, the company argues, declined jurisdiction it was required to examine.

Spentech also contends that the tribunal made factual determinations—about economic contribution, benefit to the UAE, and the location of activities—without allowing evidence to be presented or tested. That, it says, deprived it of a meaningful opportunity to be heard.

Finally, the company points to what it describes as gaps in the tribunal’s reasoning. While the award invokes concepts such as the “principle of unity” and the “centre of gravity” of an investment, Spentech argues that it fails to explain how competing factors were weighed, or why physical location alone proved decisive.

Beyond the specifics of the dispute lies a broader tension in international investment law. Many modern investments are no longer defined by factories or land alone. They consist of contracts, services, financing arrangements, and intellectual property that may be legally situated in one state while economically realized in another.

One of the more novel dimensions of the case was whether activities connected to embassy-commissioned projects could be treated as investments in the sending state’s territory. The tribunal’s answer was unambiguous. Diplomatic involvement, governing law clauses, and forum selection provisions could not transform construction works carried out abroad into an investment located within the UAE for treaty purposes.

That finding draws a clear line around embassy-related projects, which often operate at the intersection of sovereignty, diplomacy, and commerce.

Tribunals have struggled to articulate consistent approaches to such arrangements. Some have emphasized physical presence; others have looked to control, risk, or economic reality. The Kenya–UAE BIT, like many treaties, uses broad language—protecting “every kind of asset”—while also requiring that investments be made “in the territory” of the host state.

The Spentech case sits squarely at that intersection. For states, a restrictive approach to territoriality can limit exposure to claims arising from overseas activities. For investors and contractors, especially those working with embassies or foreign governments, such an approach may leave significant gaps in protection.

For international contractors, the ruling serves as a cautionary tale about the limits of treaty protection in multi-jurisdictional projects. Even where contracts are governed by the law of one state and administered largely from its territory, tribunals may still locate the investment and therefore the risk, where the physical works occur. Legal structuring alone, the decision suggests, may not be enough to secure access to investment arbitration.

With the construction investor having taken the step seeking to annul the Award on grounds that it was improperly dismissed as manifestly without legal merit, the outcome will be watched closely by governments, contractors, and lawyers alike.

Annulment proceedings are separate from the original arbitration and are focused on whether the tribunal complied with fundamental procedural standards and powers under the ICSID Convention, whether it exceeded its powers, failed to state reasons, or departed from fundamental procedural rules. The annulment committee will decide whether the Award should be upheld or set aside.

If the award is upheld, it may reinforce a more geographically anchored reading of investment treaties. If it is annulled, it could signal concern about the use of summary dismissal mechanisms in complex, fact-dependent disputes.

In a world where infrastructure, diplomacy, and commerce increasingly overlap, the question of when is an investment really “in the territory”, is unlikely to fade anytime soon.