It is not very fashionable in investment arbitration circles to suggest that investment treaty arbitration could learn a thing or two from court proceedings, but two recent judgments of the English High Court, PAO Tatneft v Ukraine and GPF GP S.à.r.l. v Republic of Poland, give some credence to the suggestion. In particular, the judges’ decisions provided a rigorous analysis of two doctrines of international investment law which merit reflection.
GPF v Poland and “creeping expropriation”
In GPF v Poland, the tribunal declined jurisdiction over all of the claims advanced by GPF other than in relation to one allegedly expropriatory act, which GPF had argued was part of an indirect, or creeping, expropriation comprising multiple measures. This resulted in GPF seeking an order from the English courts to overturn the tribunal’s award on two grounds:
- That the tribunal erred in finding that the offer to arbitrate in the Poland-Belgium-Luxembourg bilateral investment treaty (BIT) did not include claims for breach of the fair and equitable treatment (FET) standard.
- That the tribunal erred in limiting its jurisdiction to assessing the allegedly expropriatory nature of a single act out of the series of events which GPF alleged comprised a creeping expropriation.
In his judgment, Bryan J found in favour of GPF on both issues, determining that the tribunal did have jurisdiction over all of GPF’s claims. While much has been written about the first of these grounds, less attention has been paid to Bryan J’s comments regarding creeping expropriation, which are highly instructive.
In relation to the second ground, Poland argued that there could be no claim for creeping expropriation where a specific event in the chain of events comprising such alleged creeping expropriation might, on a standalone basis, be a form of expropriation. The tribunal agreed with Poland, relying on the previous decision in Burlington Resources v Republic of Ecuador which stated that “creeping expropriation only exists when “none” of the challenged measures separately constitutes expropriation”.
Bryan J rejected this contention, correctly pointing out that:
- There were several investment treaty decisions which contradicted the decision in Burlington.
- The authorities relied on by GPF v Poland tribunal were either inapposite or themselves unsupported.
- The conclusion of the Burlington tribunal on this point is wrong as a matter of principle.
While each of these points has merit, and Bryan J’s critical analysis should be welcomed, his final point is worth further consideration. In particular, as he explained, the purpose of a finding of creeping expropriation is to assist an investor whose investment is expropriated via a series of measures. It makes no sense to deny such assistance to an investor purely because one specific act in that series is, by itself, an act of expropriation.
Tatneft v Ukraine and “abuse of rights”
In Tafneft v Ukraine, Ukraine claimed it was entitled to state immunity against Tatneft’s claims in relation to a refinery in Ukraine on the basis that the arbitration agreement in the Russia-Ukraine BIT did not give the tribunal jurisdiction to decide the issues in dispute. In particular, Ukraine argued that:
- The BIT did not permit claims for breach of the FET standard.
- Tatneft’s attempt to arbitrate that dispute was an “abuse of rights”, as Tatneft had only made its investment when a dispute was foreseeable.
Butcher J decided both of these points against Ukraine, but in a similar vein to the decision in GPF v Poland, Butcher J’s comments regarding “abuse of rights” have been largely ignored despite being a well-reasoned dissection of this doctrine.
In relation to “abuse of rights”, Butcher J rejected Ukraine’s argument on the basis that, properly construed, this was not an issue going to the tribunal’s jurisdiction but to admissibility. As a starting point for his analysis, he highlighted that there was no provision in the wording of the Russia-Ukraine BIT which would permit the “reading in” of a requirement that the offer to arbitrate does not extend to an “abusive” claim.
He also emphasised that, notwithstanding the decisions relied upon by Ukraine, several other tribunals had in fact classified “abuse of rights” as an issue of admissibility rather than jurisdiction. In particular, he correctly noted that a careful reading of the decision in Phoenix Action v Czech Republic revealed that the tribunal’s reasoning did not support the notion that “abuse of rights” was a jurisdictional issue. Given that Phoenix Action has often been cited as the foundation of the “abuse of rights” doctrine in investment treaty arbitration, it is hoped that the judge’s approach in this case will be given due consideration by any future tribunals tasked with assessing this issue.
These two cases demonstrate how some investment treaty tribunals apply the decisions of previous tribunals seemingly without considering if those previous tribunals necessarily decided certain issues correctly. The two cases discussed here highlight the importance of conducting a close analysis of the relevant BITs, carefully scrutinising the underlying reasoning of previous decisions, and comprehensively considering conflicting authorities. Such an approach will result in courts and tribunals alike arriving at principled decisions that withstand proper scrutiny, which can only be a good thing for any legal system, including investment treaty arbitration.