International Arbitration Newsletter - May 2020 | Regional Overview: Europe

CZECH REPUBLIC

Former Czech Senator loses two proceedings against the Czech Republic  

The same UNCITRAL tribunal with seat in Zurich has issued two awards rejecting claims brought by German-Czech national Václav Fischer, former Czech senator and his German company Aircraftleasing Meier & Fischer (AM&F) against the Czech Republic.

The company filed the first of the proceedings in 2016 under the Germany-Czech BIT alleging irregularities in its insolvency proceedings which concluded with the seizure and auction of two of the company’s airplanes. The second arbitration concerned the Senator’s expulsion from his own travel agency, CK Fischer, as a result of allegedly incorrect official decisions.

Although the tribunal accepted its jurisdiction on both issues, it ultimately dismissed all the claims on the merits. Sources say that Mr. Fischer has commenced another arbitration against the Czech Republic, this time for the impact the allegedly irregular bankruptcy proceedings had on his investments.

POLAND

Poland defeats real estate BIT claim

Poland has announced that it has prevailed over the investor claimant, Griffin Financial Group (GFG), in a case that dealt with the government’s decision to terminate a perpetual usufruct agreement over real estate in the Polish capital. 

The real estate project allowed, Griffin says, for the demolition of a 1900 barracks. After the demolition, the Polish government said that the landmark building had been demolished without the necessary permits as the building was in the process of being registered as a protected monument.

Initially, a Warsaw court terminated Griffin’s usufruct arguing that the developer had failed to complete the works within the agreed time limits. After an appeal procedure, both the Warsaw Court of Appeal and the Polish Supreme Court confirmed the lower court’s decision.

Griffin brought the BIT claim and the tribunal concluded that it lacked jurisdiction to hear the claims for indirect expropriation and breach of the fair and equitable treatment standard. However, the English Commercial Court heard setting aside arguments filed by Griffin and found that the arbitral tribunal had jurisdiction over the indirect expropriation and fair and equitable treatment claims based on the BIT’s wording under the 1969 Vienna Convention. Following the English court’s decision, the arbitral tribunal issued an award on the merits dismissing Griffin’s claims and concluding that Poland had not breached any of its treaty obligations.

SPAIN

Panamanian subsidiary loses funded claim against Spain over a mining concession

The Canadian mining company Edgewater Exploration (EE) has recently announced that it has lost an arbitration proceeding against Spain. EE has also confirmed that an anonymous third party funded the claim, through a deal brokered by ClaimTrading. According to EE, an award was issued on 14 April 2020 upholding one of Spain’s four jurisdictional objections in a decision that was not unanimous.

In 2015, a Panamanian subsidiary of EE had already threatened to file a BIT claim against Spain when the regional government of Galicia had unilaterally terminated its mining concessions for the Corcoesto gold-mining project in the northwest of Spain.

EE has only specified that, although the arbitral tribunal –seated in Paris– had unanimously rejected four jurisdictional objections that Spain had raised during the proceedings, the tribunal accepted a fifth objection in a two to one decision. EE explains that the sole dissenter “opined that the majority’s decision erred in both law and fact” and that “the tribunal should have decided the merits of the claim”.

UK investor seeks to enforce award against Spain

Luxembourg-registered Watkins Holdings (WH) and another Dutch subsidiary of private equity firm Bridgepoint Advisers applied to the U.S. District Court for the District of Columbia on to enforce an Energy Charter Treaty (ECT) ICSID award against Spain worth € 77 million. 

This award is the result of one of the more than 50 arbitration proceedings filed against Spain in response to reforms to the economic incentives regime for renewable energy. By ae two to one majority the tribunal concluded that the claimants’ investment had been “destroyed” as a result of the measures adopted by the Spanish government in 2013 and that these measures had frustrated the investors’ legitimate expectations in violation of the ECT’s fair and equitable treatment standard, as Spain had “explicitly promised” in 2007 legislation that revisions to fixed tariffs and premiums would not affect existing installations.

The dissenting arbitrator accused the majority of “lack of clarity” and rejected the suggestion that the investment had been “destroyed”, observing that the investor had bought the sites for € 91 million and sold them for € 133 million in 2016 in less than six years, representing a return of more than 11%.

The tribunal was unanimous in concluding that it lacked jurisdiction over claims concerning a 7% levy on electricity production as these measures clearly fell within a carve-out for taxation measures in the ECT. In addition, the tribunal unanimously dismissed other jurisdictional objections by Spain, including one based on the ECJ’s recent Achmea ruling which forbids intra-EU investment arbitration under the EU treaty.

Spain now faces eight other enforcement actions from renewables investors before the DC courts.