GPF GP SARL v The Republic of Poland

Factual and Procedural Background

The parties appeared before the Court concerning an application by Company A under section 67 of the Arbitration Act 1996 challenging on jurisdictional grounds an Award on Jurisdiction dated 15 February 2017 in an arbitration seated in London pursuant to a bilateral investment treaty ("BIT") between the Government of The State A and the Governments of The State B and The State C. The arbitration was conducted by a three-member Tribunal. The dispute concerned claims by Company A relating to alleged breaches of the BIT, including claims for breach of the Fair and Equitable Treatment (FET) standard and indirect expropriation in respect of investments connected to a property development project in The City.

Company A's factual case involved a series of administrative and judicial decisions by The City authorities and related entities that allegedly frustrated its investment in a property located at a specified address in The City. This included delays, refusals of permits, and ultimately termination of a Perpetual Usufruct Agreement (PUA) by a court decision, which Company A contended amounted to expropriation and breaches of the BIT.

The Tribunal had found jurisdiction only over the claim concerning whether the court judgment terminating the PUA constituted expropriation, but declined jurisdiction over other claims including the FET claim and prior measures alleged by Company A. Company A challenged this jurisdictional ruling before the Court under section 67 of the Arbitration Act 1996.

Legal Issues Presented

1. Whether the Tribunal had jurisdiction to hear Company A's claim for breach of the Fair and Equitable Treatment standard under Article 3.1 of the BIT.
2. Whether the Tribunal had jurisdiction to consider the entirety of Company A's indirect expropriation claim, including prior measures leading to the final court decision, or was limited to the court decision alone.
3. How Article 9(1)(b) of the BIT, defining the scope of disputes subject to arbitration, should be properly interpreted under international law and the Vienna Convention on the Law of Treaties.
4. The nature and scope of a section 67 hearing under the Arbitration Act 1996, including the extent to which new arguments and evidence may be admitted.

Arguments of the Parties

Appellant's Arguments

• The Tribunal erred in interpreting the arbitration agreement narrowly, excluding the FET claim and prior measures from jurisdiction.
• The proper interpretation of Article 9(1)(b) includes jurisdiction over all forms of expropriation, including indirect and creeping expropriation, and also covers claims based on measures that lead to consequences similar to expropriation, such as breaches of the FET standard affecting property rights.
• The Tribunal wrongly limited the indirect expropriation claim to the final court decision, excluding prior measures that cumulatively constituted creeping expropriation.
• The section 67 hearing is a rehearing allowing new arguments and evidence, and Company A should be permitted to present its full case.
• Company A has pleaded a prima facie case of jurisdiction based on the aggregate effect of the prior measures and the final court decision.

Respondent's Arguments

• The Tribunal correctly limited its jurisdiction to claims concerning expropriation and did not extend to FET claims.
• A claim for creeping expropriation is precluded if a specific act in the chain is itself an expropriation, here the court decision.
• Company A failed to identify precisely which acts amount to expropriation, undermining its jurisdictional claim.
• The section 67 hearing should not be a full rehearing allowing new evidence or arguments not presented to the Tribunal.
• The agreed translation of the BIT provisions should be strictly applied, with certain linguistic nuances limiting the scope of arbitration.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court undertook a detailed textual and contextual interpretation of Article 9(1)(b) of the BIT under the principles of the Vienna Convention on the Law of Treaties, applying Articles 31 and 32. It found that the arbitration clause comprises two distinct parts: a first clause covering disputes relating to expropriation, nationalisation or similar measures affecting investments (which includes all forms of expropriation, direct and indirect, including creeping expropriation), and a second clause covering any other deprivation or restriction of property rights by state measures that lead to consequences similar to expropriation.

The Court rejected the Tribunal's narrow interpretation that excluded FET claims and prior measures from jurisdiction, holding that the second clause confers jurisdiction over claims based on breaches of the FET standard that affect property rights and lead to consequences similar to expropriation. The Tribunal's interpretation failed to give effect to all the words and phrases in Article 9(1)(b), including the "as well as" connector and the distinction between "investments" and "property rights".

Regarding the indirect (creeping) expropriation claim, the Court held that international law does not preclude a claim for creeping expropriation simply because there is a specific act in the chain that may itself constitute expropriation. The Court cited multiple arbitral decisions illustrating that creeping expropriation involves a series of acts cumulatively resulting in deprivation, and that the final act does not negate the relevance of prior measures.

The Court found that the Tribunal misapplied the pro tem test by assuming Company A would establish that the final court decision alone was expropriatory and thereby excluded prior measures. The Court emphasized that at the jurisdictional stage, the question is whether Company A’s claims, taken as pleaded, could fall within the Tribunal's jurisdiction, not whether they will ultimately succeed.

On the nature of a section 67 application, the Court confirmed it constitutes a rehearing of jurisdictional issues, allowing new arguments and evidence, subject to the Court’s discretion and absence of prejudice to the Respondent. The Court granted permission to Company A to advance arguments not previously presented to the Tribunal.

The Court reviewed Company A's pleaded case and found it sufficient to establish a prima facie case for jurisdiction over both the FET and indirect expropriation claims, including the prior measures. The Court cautioned against over-analysis of merits issues at the jurisdictional stage, emphasizing that detailed factual and legal determinations belong to the merits phase of the arbitration.

Holding and Implications

The Court's final decision is to SET ASIDE paragraphs 187(ii) and (iii) of the Tribunal's Award and substitute them with a declaration that:

• The Tribunal has jurisdiction over all factual matters, actions, allegations, and measures relied upon by Company A in support of its claims for direct and indirect expropriation under Article 4.1 of the BIT.
• The Tribunal has jurisdiction over all factual matters, actions, allegations, and measures relied upon by Company A in support of its claim for breach of the Fair and Equitable Treatment standard under Article 3.1 of the BIT.
• The Tribunal shall proceed with the arbitration towards the liability phase considering the full scope of these claims.

The direct effect of this decision is to broaden the scope of the Tribunal's jurisdiction to include Company A's FET claim and the full indirect expropriation claim encompassing prior measures. No new legal precedent beyond the application of established principles of treaty interpretation and international investment law is set. The parties are expected to agree on consequential orders, including costs, with costs prima facie following the event.