Spoldzielnia Pracy Muszynianka v Slovak Republic - PCA Case No 2017-08 - Award - 7 October 2020
Country
Year
2020
Summary
(Document, does not apply to summary and/or TDM IACL Case Report below).
Case Report (free download)
Case Report by Alexandros-Cătălin Bakos, Editor Ignacio Torterola
Summary
In 2012, Muszynianka acquired a Slovak company (GFT Slovakia) that was involved in the production and selling of mineral water. It planned to extract, and process, mineral water from Slovakia, but to ship it to Poland, where it would be bottled. At that moment, GFT was involved in the process of obtaining an Exploitation Permit which would allow it to pursue the envisioned business activity. After the sale, this administrative process continued for a few years, but was never finalized because a Constitutional Amendment had taken place in Slovakia, essentially prohibiting the export of unbottled water. This prevented Muszynianka from pursuing its envisioned business plans (via GFT). It also determined the Slovakian administrative authorities to deny GFT's application for the Exploitation Permit. As a result of this chain of events, Muszynianka started the present arbitral proceedings challenging the Constitutional Amendment and the subsequent denial of the request to be granted the Exploitation Permit as contrary to the applicable bilateral investment treaty (BIT). While the Tribunal found the Constitutional Amendment to be justified and not to constitute any breach of the applicable treaty (especially since GFT had not obtained, and was not entitled to, the relevant Exploitation Permit), it did find several violations of the BIT. These were premised on the flawed manner in which the administrative proceedings were conducted (essentially in a manner which was not compliant with domestic administrative law). Nonetheless, it did not award any damages, as it considered that no causal link between the breach and any subsequent loss existed, given the impending Constitutional Amendment that would have led to a denial of the Permit anyway. The same facts were found to also determine a violation of the non-impairment (through unreasonable or discriminatory measures) standard, but the same reasoning concerning a lack of causality applied here.
Main issues
intra-EU investment arbitration objection; subsequent agreement to interpret a treaty; Constitutional Amendment affecting the investor's envisioned business plan; administrative proceedings conducted in breach of domestic law.
Case report provided by International Arbitration Case Law (IACL)
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