Data

Date:: 04-06-2014
Country:: Arbitral Award
Number:: PCA Case No. 2010-17
Court:: Permanent Court of Arbitration
Parties:: European American Investment Bank AG (EURAM) v. Slovak Republic

Keywords

DISPUTE BETWEEN AN AUSTRIAN COMPANY AND THE SLOVAKIAN GOVERNMENT - CONCERNING MEASURES ADOPTED BY THE LATTER NEGATIVELY AFFECTING FOREIGN INVESTMENTS IN THE HEALTH INSURANCE SECTOR - ALLEGED VIOLATION BY SLOVAKIA OF BILATERAL INVESTMENT TREATIES - REFERENCE TO UNIDROIT PRINCIPLES TO SUPPLEMENT APPLICABLE LAW (INTERNATIONAL LAW)

JURISDICTION OF ARBITRAL TRIBUNAL CHALLENGED ON THE GROUND THAT CLAIMANT INITIATED COURT PROCEEDINGS IN THE SLOVAK REPUBLIC THAT WERE PREDICATED ON THE SAME FACTS AND LEGAL BASIS AND SOUGHT THE SAME RELIEF AS IN THE ARBITRAL PROCEEDING

IMPLIED AGREEMENT BETWEEN THE PARTIES THAT THE CASE SHOULD BE RESOLVED IN THE NATIONAL COURTS, NOT IN THE ARBITRATION PROCEEDINGS – REFERENCE BY BOTH PARTIES TO UNIDROIT PRINCIPLES (ARTS. 1.2, 2.1.2, 2.1.11, 3.2.12, 4.1 AND 4.2) – ARBITRAL TRIBUNAL AGREES WITH CLAIMANT THAT NO SUCH AGREEMENT WAS CONCLUDED

WAIVER OF THE RIGHT TO ARBITRATE – REFERENCE BY BOTH PARTIES TO UNIDROIT PRINCIPLES – ARBITRAL TRIBUNAL CONFIRMS THAT CLAIMANT HAS WAIVED ITS RIGHT TO ARBITRATE SINCE THE PROCEEDING BEFORE NATIONAL COURTS COULD NOT BE CONSIDERED ONLY AS A PRECAUTIONARY MEASURE

Abstract

Claimant, an Austrian company, owned a 51% shareholding in a Slovak health insurance company. After a two-year period of liberalisation in the health insurance sector, in 2006 there was a change of government in the Slovak Republic (Respondent) and the new government introduced restrictive amendments to the law on health insurance companies, requiring all private health insurance companies to refrain from paying dividends to their shareholders and instead to reinvest any profits back into the health care system.

On 23 November 2009 Claimant commenced arbitration proceedings against Respondent pursuant to UNCITRAL Arbitration Rules and the BIT between the Republic of Austria and the Czech and Slovak Federal Republic, claiming that changes in the law on health insurance in the Slovak Republic, adopted in 2007 and entered into force in 2008, had destroyed the value of its investment in a Slovak health insurance company. According to Claimant, this action amounted to an indirect expropriation, as well as to a violation of the requirement of fair and equitable treatment.

On 22 November 2010 Claimant filed a petition for the commencement of proceedings against the Government of the Slovak Republic before Bratislava District Court. This petition referred to the same developments in the law on health insurance which form the factual basis for the claim in the arbitration, as well to provision of the BIT relied upon by the Claimant in the arbitration proceedings. Also the sum claimed in the petition was the same as the sum claimed in the arbitration. Lastly the petition made clear that the Claimant had also brought arbitration proceedings regarding the same facts.

In a Partial Award on Jurisdiction, dated 22 October 2012, the Arbitral Tribunal held that it lacked jurisdiction over all aspects of the Claimant’s claim other than the claim that Respondent breached its right to free transfer of capital under the BIT.

However, before the Tribunal issued its First Partial Award on Jurisdiction, Respondent raised two jurisdictional objections, which the Tribunal agreed to hear in a second phase of jurisdictional arguments.

First, Respondent affirmed that Claimant's act of commencing the proceedings in the Bratislava District Court and Respondent's filing of its substantive defence in that case gave rise to an agreement between the Parties that the case should henceforth be resolved in the Slovak courts, not in the arbitration proceedings. Respondent alleged, among others, that the notion that agreements can be concluded implicitly (or via documents, oral statements, or conduct) forms a general principle of law, as evinced by Articles 1.2, 2.1.11, and 3.2.12 UNIDROIT Principles.

On its turn, Claimant asserted that its Petition before Slovak national courts could not be considered as an offer to agree to litigate rather than arbitrate, and in support of its arguments referred to Articles 2.1.2, 4.1 and 4.2 UNIDROIT Principles.

Secondly, Respondent contended that, irrespective of whether any agreement was concluded between the Parties, Claimant’s acts constitute a waiver of the right to arbitrate. In Respondent’s opinion, Claimant could not justify its commencement of the Bratislava Court proceedings by reference to an alleged conservatory purpose, since its claim was not in danger of being prescribed. In this respect, Respondent invoked Art. 10.6(1) UNlDROIT Principles, which it claimed could be used to interpret and supplement Slovak law.

Claimant argued in response that its Petition before Slovak national courts did not constitute a waiver of the right to arbitration and in support of its arguments invoked Art. 4.2 UNIDROIT Principles. Claimant also dismissed Respondent’s suggestion that the UNIDROIT Principles could be used to interpret and supplement the provisions of the Slovak law on limitation period.

In the Second Award on Jurisdiction, dated 4 June 2014, the Arbitral Tribunal, without referring to the UNIDROIT Principles, affirmed that no agreement was concluded between the Parties to determine the dispute otherwise than by arbitration, but the procedural steps taken by Claimant in the Slovak courts went beyond what was necessary to protect Claimant's position pending the outcome of the arbitration proceedings. Considered the above, the Arbitral Tribunal concluded that this conduct amounted to a waiver of the right to arbitrate and consequently the Tribunal lacked jurisdiction also in respect of the only claim outstanding after the Award of 22 October 2012.

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Source

See http://www.italaw.com/sites/default/files/case-documents/italaw4227.pdf}}