"(1) Disputes between either Contracting Party and an investor of the other Contracting Party regarding investments shall, as far as possible, be settled amicably between the parties to the dispute.
(2) If the dispute cannot be settled within six months from the date on which it was officially raised by either party to the dispute, it shall, at the request of the investors (sic) of the other Contracting Party, be submitted for arbitration. In the absence of any other arrangement between the parties to the dispute, the provisions of article 9, paragraphs 3 to 5 [of the Treaty] shall apply mutatis mutandis, subject to the proviso that the members of the arbitral tribunal shall be appointed by the parties to the dispute in accordance with the provisions of article 9, paragraph 3, and that, if the time-limits provided for in article 9, paragraph 3, are not observed, either party to the dispute may, in the absence of any other arrangement, request the Chairman of the Arbitration Institute of the Stockholm Chamber of Commerce to make the necessary appointments. The award shall be recognized and enforced under the Convention of 10 June 1953 on the Recognition and Enforcement of Foreign Arbitral Awards.
(3) The Contracting Parly which is a party to the dispute shall not in the course of arbitration proceedings or the execution of the arbitral award raise an objection on the grounds that the investor who is the other party to the dispute has already received compensation for all or part of his losses un der an insurance policy."
Maitre Laurent Levy
3-5, rue du Conseil General,
P.O. box 552
CH-1211 Geneva 4
Tel:+41 22 809 6200
Fax: +41 22 809 6201
ICC international Court of Arbitration
38 cours Albert ler
Tel: +33 149 53 28 21
Fax: +33 1 49 53 29 29
"..... Each Contracting Party shall bear the costs of its own member [of the Tribunal] and of its legal representation in the arbitration. The costs -of the chairman and any other costs shall be shared equally between the two Contracting Parties. The tribunal may determine a different allocation of costs...."
Instead, the advances to be made in respect of fees and expenses of all three members of the Tribunal were to be shared equally between the Parties pending a determination by the Tribunal as to the final allocation of such fees and expenses.
- PV's full Statement of Claim, save for details of the quantum of any asserted claim for damages2, together with all of the documents and the statements of any witnesses of fact upon which he intended to rely: by 18 June 2010
- Supplementary Statement of Claim: 10 September 2010
- Answer to all of PV's liability and quantum claims, together with all documents, all statements of witnesses of fact and any expert's report upon which the Czech Republic relied, and to the extent that they had not already been the subject of a Request to Produce, a Request to Produce in conformity with Article 3(3) of the IBA Rules on the Taking of Evidence in International Commercial Arbitration ("the IBA Rules of Evidence") (actually described as "Statement of Defense"): 23 December 2010. (10 December 2010). (Resubmitted 30 March 2011)
- Reply, together with any further outstanding documents) responsive to a Request to Produce served by Respondent and any further documents upon which PV relied and together with any rebuttal statements of witnesses of fact and any rebuttal expert's report(s): 4 February 2011. (28 January 2011)
- Rejoinder, together with any further outstanding documents responsive to a Request to Produce served by PV and any further documents upon which the Czech Republic relied and together also with any expert report or statements of witnesses of fact, provided that they were strictly responsive to matters raised in any rebuttal statement(s) or report(s) served by PV; 25 March 2011 (11 March 2011). (Resubmitted 30 March 2011);
PV himself: 18 June 2010; 21 August 2010; 13 January 2011; and 26 January 2011
[REDACTED] 24 January 2011 and l0 February 2011
[REDACTED] 10 February 2011
Petr Sima (Quantum Expert): 9 September 2010 and (undated) Complementary Comments and Response to the Qureshi Report.
"[S]ave in exceptional circumstances, and then only with leave of the Tribunal, no new documentary or other material shall be introduced into the Arbitration record after 11 March 2011."
- Procedural Order No,2, 18 August 2010, supplemented on 19 August 2010: (in respect of the Czech Republic's First Request for Information/Documents of 10 August 2010 and ancillary applications);
- Procedural Order No.3, 5 October 2010: (P.O.3 dealt, inter alia, with then outstanding disclosure issues arising out of the Czech Republic's First and Second Requests for Information and Documents; the translation into English of all documents to which the Tribunal's attention was to be drawn; documents to which reference was made in the Expert Report of Mr Sima);
- Procedural Order No,4, 2 November 2010. The Tribunal refused the Czech Republic's applications that it should at that stage draw any adverse inferences in respect of any asserted failure by PV to comply with the Czech Republic's First and Second Requests for Information/Documents; it afforded PV the opportunity to complete his submission of documents referred to or relied upon in the Sima report in support of PV's quantum claim by 25 October 2010, pursuant to PV's Counsel's application of 21 October 2010; the Tribunal extended time for service of the Czech Republic's Answer until 24 December 2010, with consequential adjustments to the dates of submission of PV's Reply and the Czech Republic's rejoinder to 4 February 2011 and 18 March 2011 respectively; it confirmed the hearing dates (4-8 April 2011); and it stated that: "the final date for admission of any new materials into the arbitration record pursuant to paragraph 17 of P.O. No.l shall be amended to Friday 18March 2011,"
- Procedural Order No.5, 26 March 2011. The Tribunal denied PV's application of 18 March 2011 to adduce additional direct testimony from Ms, [REDACTED] (a further application in respect of Mr [REDACTED] was withdrawn) and a similar application made on 24 March 2011 in respect of Dr [REDACTED] it further denied PV's application to admit into the evidentiaiy record Exhibits CE156-CE214 inclusive; it upheld the Czech Republic's objection to the appearance of Mr [REDACTED] to supplement the expert evidence of Mr Sima; and the Tribunal granted PV until 28 March 2011 to make any further application that he might be advised to make in respect of his First Request for Production of Information and Documents. Finally, the Tribunal confirmed arrangements for the Hearing and indicated its inclination, subject to further consultation with the Parties, to invite an exchange of Post-Hearing Briefs on 29 April 2011;
- Procedural Order No.6, 30 March 2011. The Tribunal denied Claimant's further submission,dated 28 March 2011 in respect of his First Request for Production of Information and Documents;
- Procedural Order No.7, 15 June 2011. The Tribunal excluded three additional Exhibits filed with Claimant's Post-Hearing Brief and invited Respondent's Counsel to submit a marked-up version of Claimant's Post-Hearing Brief to Claimant's Counsel, setting, out the revisions that Respondent required Claimant to make consequent upon those deletions. (Claimant made no comment upon the mark-up, which was subsequently submitted to the Tribunal on 24 June 2011).
(for Claimant) [REDACTED] Voecklinghaus (Days 1 and 2 and recalled Day 3); [REDACTED] (Day 2); [REDACTED] (Day 3); [REDACTED] (Days 3 and 4);
(for Respondent) [REDACTED] (Day 4) [REDACTED] Both quantum experts, Mr Sima, Expert for Claimant, and Mr Qureshi, Expert for Respondent, gave their evidence together on Day 5.
The eventual purchaser of the Golf Resort was Astoria Invest s.r.o. ("Astoria"). Astoria acquired the assets of KOMFORT for Cr. 61 million. PV maintained thatprior to the petition for the bankruptcy of KOMFORT, the owner of Astoria, Mr [REDACTED]7 had offered some DM3,400,000 (equivalent to some Cr. 61,155,800 at that time)8 for the Golf Resort. Mr was said by PV to be a client of a lawyer, Dr [REDACTED] who had drafted the petition for the bankruptcy of KOMFORT at the request of [REDACTED]9 According to PV, the Golf Resort is now owned by [REDACTED] and by a Mr [REDACTED].Mr [REDACTED] is the controlling owner of 3. Princova, the entity appointed as the Creditors' Representative in. the KOMFORT bankruptcy and likewise advised by Dr [REDACTED]10
"A textbook case of a claimant who made a bad business decision and is now looking to blame the State when he has only himself and his lawyers to blame, "13
For the purposes of this Treaty
(1) The term "investments" comprises all kinds of assets that are invested in accordance with domestic legislation, particularly:
(a) Movable and immovable property as well as any other rights in rem such as mortgages and liens;
(b) Shares and other kinds of participation in companies;
(c) Claims to money that has been used to create economic value or claims to services that'have economic value and are related to an investment;
(2) The term "returns" refers to amounts yielded by an investment such as profits, dividends, interest, royalties and other remuneration;
(3) The term "investor" refers to an individual having a permanent place of residence in the area covered by this Agreement, or a body corporate having its registered office therein, authorized to make investments.
(1) Each Contracting Party shall in its territory promote as far as possible investments by investors of the other Contracting Party, permitting such investments in accordance with its laws. It shall in all cases afford investments just and equitable treatment.
(2) No Contracting Party shall in any way impede the management, maintenance, use or enjoyment of investments in its territory by investors of the other Contracting Party by means of arbitrary or discriminatory measures.
(3) Investments and returns thereon together with returns on any investment shall enjoy full protection under this Treaty.
(1) Each Contracting Party shall accord in its territory, to investments by investors of the other Contracting Party or investments-in which investors of the other Contracting Party have a holding, treatment no less favourable than that accorded to investments by its own investors or to investmen ts by investors of third States.
(2) Each Contracting Party shall accord in its territory, to investors of the other Contracting Party, in respect of their activities in connection with such investments, treatment no less favourable than that accorded to its own investors or to investors of third States,
(1) Investments by investors of either Contracting Party shall enjoy full protection and full security in the territory of the other Contracting Party.
(2) Investments by investors of either Contacting Party may be expropriated, nationalized or subjected to other measures with effects equivalent to expropriation or nationalization only in the public interestand against compensation. Such compensation shall correspond to the value of the investment expropriated immediately before the date on which the actual or pending expropriation, nationalization or similar measure was made public. Compensation shall be paid without delay and shall bear interest at the norma! rate of bank interest; it shall be effectively convertible and freely transferable. Provision for the determination and payment of such compensation shall be made in an appropriate manner no later than the date of the expropriation, nationalization or similar measure. The legality of the expropriation, nationalization or similar measure and the amount of compensation may be subject to review in a properly constituted legal proceeding.
(4) In matters governed by this article, investors of either Contracting Party shall enjoy most-favoured-nation treatment In the territory of the other Contracting Party."
Ad Article 1:
"The claims to money referred to in article 1, paragraph (c), include claims arising from loans in connection with a shareholding which, in purpose and scope, have the character of a shareholding (shareholding-like loans). Credits from third parties, for example, bank credits subject to commercial conditions, shall not be included hereunder."
Ad Article 4:
"The investor shall also have a claim to compensation if measures within the meaning of article 4, paragraph 2, affect the enterprise in which he has shares and his investment suffers thereby,"
By his Statement of Claim dated 18 June 2010, PV maintained that following the acquisition of a 50% share in KOMFORT, he had: "provided money to [KOMFORT] through [his] German companies, especially.... MFT Engineering GmbH.... (by way of] informal 'ad hoc' loans".15 Thereafter, more formal arrangements were made in January 1995, whereby PV concluded a "general loan agreement" with KOMFORT for DM10 million (equivalent to Cr.200 million), the funds to be lent "through entities controlled by [PV],"PV's receivables were subsequently to be secured by way of a lien concluded between KOMFORT and MFT-K Engineering, MFT-Engineering's wholly owned Czech subsidiary, in December 1997.16 PV maintained that his total investment in the Czech Republic amounted to some Cr. 251,196,595.17 It is PV’s case that the receivables stemming from the repayment of these loans constitute a significant element of the investment which he contends was expropriated and otherwise damaged by reason of the alleged acts or omissions of the Czech Republic,
PV contended that, from the outset, the purpose of the credits obtained from Sparkasse Essen, the "house bank"18 to PV's MFT Group, and advanced to KOMFORT through MFT Group entities, had been to build the Golf Resort and that "Sparkasse Essen continuously monitored [the utilization of the credits] for this purpose (on one hand by releasing the money only based on the presentation of invoices concerning the construction, on the other hand, by on-site monitoring." (Emphasis added).19
PV contended that the fact that the Czech Republic did not prevent the "illegal bankruptcy and composition proceedings22 [and] the illegal deletion of KOMFORT from the Commercial Register" and its alleged "failure to ensure an impartial and fair investigation" by the Czech Police "proved" that the Czech Republic had "impaired" PV’s investment as the "practical financier" of the Project and the owner of a 50% stake in KOMFORT.23 Moreover, it had failed to protect PV's investment and "subjected the investment to measures the results of which [were] identical with expropriation."24
PV sought the following relief:
- a declaration that by "conduct attributable to the Czech Republic", namely, the declaration of bankruptcy of KOMFORT and "other acts and omissions of the bankruptcy judge, Mr [REDACTED] the sale of the Golf Resort by the bankruptcy trustee, Dr [REDACTED] and the deletion of KOMFORT from the Commercial Registry, the Czech Republic had violated the fair and equitable treatment standard in Article 2(1) and the non-impairment standard of Article 2(2) of the Treaty
- a declaration that those same events, together with the failure of the Czech police and state attorneys to pursue criminal proceedings against the bankruptcy Trustee, Dr [REDACTED] Mr [REDACTED] Mr [REDACTED] Mr [REDACTED] Mr [REDACTED] and Mr [REDACTED] constituted violations attributable to the Czech Republic of the full protection and security standard in Article 4(1) of the Treaty
- a declaration that the bankruptcy of KOMFORT and "other acts and omissions of the bankruptcy judge, Mr [REDACTED] and the sale of the Golf Resort by the bankruptcy Trustee, Dr [REDACTED] constituted an expropriation in violation of Article 4(2) of the Treaty.
- PV also sought compensation for the damages that he alleged that he had suffered by reason of these alleged breaches of the Treaty: interest thereon; and an order for the costs of the arbitration and his legal and other costs on a full indemnity basis.29
‘‘[l]f Sparkasse Essen does not release [DM 150,000] today, I will send a question to the bank tomorrow as to why they are causing such losses to us by such procedure despite having found everything was alright, and why they are making such a mess in respect of the last DM400,000 to 500,000 which are missing to the completion..... "69 Subsequently, on 7 June 2000, [REDACTED] sought to blame Sparkasse for the breakdown of relations with suppliers, threats of court action and of the suspension of the works, because be had proceeded with the works on the promise of a payment of DM150,000, which had not been forthcoming. He continued:
"I suppose that if Sparkasse Essen is such an unreliable, and forme untrustworthy, partner, nobody can expect helpful actions either on my side."70
[REDACTED] criticised PV for being out of touch with the status of the works; for mistakes in the funding; and for 'drip-feeding' funds. In a particularly bad-tempered letter dated 20 June 2000, [REDACTED] told PV that:
"If you want to suspend the construction or to jeopardise its quality in any way through not well-thought steps, write it to me. I will discontinue dealing with the Ministry of Environment and in the case of failure to comply with the time-limits of the phases with respect to the returning of arable land, you bear all responsibility.... [D]o not think that if the funding is discontinued and the construction is suspended, I will discuss anything with anybody.
If you are not able to immediately obtain DM250,000 in the whole of Germany to complete the project and send them immediately, than (sic) I, before proceeding to deal with Sparkasse Essen, want all documents from 1995/contracts, account statements, transfer orders etc. for consulting, and 1 do not believe that it will be possible within a month."72
"they would jointly file a bankruptcy petition with respect to [KOMFORT] with a court in Pilsen in the week from 3 July 2000 to 7 July 2000."73
"The... amount [of Cr.217,919,595] represents the loan granted under agreement of 23 November 1994 to [KOMFORT] by [MFT-K] to purchase lands and develop a golf course in Cihelny.... The originally arranged loan was increased to Cr.200 [million] that was to be paid either directly from the account of [MFT-K] or through [MFT-E] or [MFT-VA] or through other entities. As of this day, the amounts granted to [KOMFORT] total at Cr.217,919,959. These amounts are shown in the books of [KOMFORT] and have been either credited with the account of this company or have been used to pay invoices on behalf of [KOMFORT]. The receivable falls due in 31 December 2002 and bears an 8% interest rate."79
"[Y]ou and your company must sign agreements associated with the Czech case in the 6^ calendar week at the latest... if the agreements are not signed by that date, we shall withdraw our current waiver of payments of interest and principal, we shall also terminate our business relations and we will launch a process aimed to realize the collateral we have been provided."84That threat was to be carried out by Sparkasse Essen in April 2001.85
"The creditors of the debtor are invited to register (in two counterparts) all their claims within 30 days of the declaration of bankruptcy. The registration must separately specify the grounds and the amount of each registered claim. Copies of documents that gave rise to each claim must be attached to the claim registration. If claims are quoted in a foreign currency, they must be converted on the basis of the exchange rate published by the Czech National Bank on the day on which the bankruptcy was declared. The enforceability of enforceable claims must be proved by a document that features a confirmation of enforceability no later than the review hearing; otherwise the claim shall be deemed unenforceable, Claims registered later than within two months of the first review hearing shall be ignored."95
"in August 2000, Dr [REDACTED] presented a planned fraud against Sparkasse Essen to [PV] in the presence of Dr [REDACTED] [PV's] daughter and Dr [REDACTED]. The aim of the fraud was to strip Sparkasse Essen of its return from loans it had granted for the purposes of the Golf Resort, and thus to free the Golf Resort of debts...." (Emphasis added)157
(i) PV was seeking new investors in late 2000;
(ii) in October 2000, the lack of funds had obliged KOMFORT to apply to the Building Office in Karlovy Vary for a two year extension of time until 31 December 2002 to complete the Golf Club facilities;
(iii) in November 2000, Sparkasse Essen bad been prepared to grant a discharge of all claims against KOMFORT for an immediate payment by a third party representing a two thirds discount against the book value of its loans to the MFT Group, together with an assignment of some insurance policies from PV and his immediate family;
(iv) although it seems that in December 2000, SOLITAER had been prepared to match any such payment to Sparkasse Essen, that proposal came to nothing. Instead, in February 2001, Sparkasse had warned PV that his failure to keep it informed of the transfer of ownership in MFT-K to SOLITAER and any subsequent failure to "sign agreements associated with the Czech case" by mid February 2001 would result in the cessation of the waiver of principal and interest payments afforded by Sparkasse Essen, a termination of business dealings and moves by the bank to realize its collateral;
(v) subsequently, Sparkasse Essen had indeed terminated its relationship with PV and his business interests in April 2001, thereby depriving him of his principal source of funding; and
(vi) in the context of PV's German interests, MFT-VA had gone bankrupt in June 2001,159
For its part, the Czech Republic has contended that:
"Even two years before any alleged wrongdoing by the Czech Republic, [PV's] own failure to secure sufficient funds for the development of the Cihelny Golf Course and a complete lack of planning and foresight, placed KOMFORT on an irreversible trajectory towards bankruptcy."167
That is a submission, which, having regard to the evidence in the record and PV's own concessions, the Tribunal finds compelling, it is difficult to see on what basis the losses which PV maintains he sustained in connection with his involvement in the Cihelny Golf Course project can be laid at the door of the Czech Republic, whether by reason of any failure on its part to honour its obligations under the Treaty or, indeed, at all. Beyond the unhappy fact that PV was, to a considerable degree, the author of his own misfortune, he might have grounds for redress against a number of third parties, including his contractual counterparty, [REDACTED] his advisers and others, but those are not matters with which this Tribunal has to concern itself.
"The claims to money referred to in article 1, paragraph (c), include claims arising from loans in connection with a shareholding which, in purpose and scope, have the character of a shareholding (shareholding-like loans). Credits from third parties, for example, bank credits subject to commercial conditions, shall not be included hereunder." (Emphasis added)
That being the case, they did not constitute an investment within the terms of Article 1 of the Treaty.
"The transfer of the [MFT-E] ownership interests in MFT-K to SOLITAER dated 27 December 2000 did not interrupt [PV's] ownership interests in MFT-K, as the transfer was effected under a previous Treuhand agreement concluded by and between [PV] and Mr [REDACTED] prior to the transfer of the ownership interests in MFT-K."182
"III... the legal consequence of the cancellation of the [Transfer Agreement] will rest (sic) in the restoration of the legal relationships to their status before the time of its conclusion, ie, including, without ¡imitation, the fact that SOLITAER has never become a member of MFT-K Engineering."
Further, MFT-E and SOLITAER undertook, pursuant to Article IV of the Cancellation Agreement: "to provide their coordination necessary to delete SOLITAER from, and to register [MFT-E] in, the section regarding members of [MFT-K]."
(i) the acknowledgment by PV that as of 8 March 2001, months before the alleged breaches of the Treaty by the Czech Republic, he had no legal ownership in MFT-E or MFT-K.186 Instead, PV maintained that he had retained a beneficial ownership interest in MFT-K thereafter by way of the two asserted 'Treuhand' agreements;
(ii) the clear terms of the 27 December 2000 Transfer Agreement, pursuant to Article 1 of which: "[MFT-E] transfers its entire ownership interest of 11,658,000 Czech crowns, representing 100per cent of the registered capital of (MFT-K]-...to SOLITAER, which takes it over.";
(iii) PV’s concession that no other written agreement had been made after the conclusion of the Transfer Agreement, changing its terms;187
(iv) a complete absence of any written or notarised document or any other form of documentary evidence to support the existence of either of the alleged 'Treuhandl agreements, notwithstanding numerous references in the course of the oral evidence of PV and Mr [REDACTED] to such an agreement being drawn up in the context of the Transfer Agreement. (See, for example, paragraph 148 above and PV's statement that there was a manuscript document recording the terms of the 'Treuhand' agreement between PV and Mr [REDACTED]188). Indeed, beyond PV's own evidence, there was nothing to support the existence of the second 'Treuhand' by which the four third parties who took assignments of MFT-VA's ownership interest in MFT-E were said to have held those interests on trust for PV. In short, in the absence of proof of the existence of either of the 'Treuhand' agreements, PV could demonstrate neither a legal nor a beneficial interest in MFT-K at the time of the alleged breaches of the Treaty by the Czech Republic;
(v) the fact that the second alleged oral 'Treuhand' agreement between PV, his daughter and three other third parties was said to have been concluded on 16 March 2001, eight days after the operative transfer by MFT-VA of its interest in MFT-E;189
(vi) no evidence had been adduced to support the assertion that the MFT-K shares remained on MFT-E's books; and
(vii) the fact that by virtue of the 8 March 2001 transfer by MFT-VA of its entire interest in MFT-E, there remained nothing to connect MFT-K to MFT-VA, through which company, PV maintained his entitlement to pursue a claim in respect of the MFT-K receivables.
"Parties may agree that an outstanding obligation or its part shall be cancelled, without establishing a new obligation at the same time. Unless agreed otherwise, the cancelled obligation ceases to exist when the offer of its cancellation is accepted by the other parly." (Emphasis added).
"effective as of the execution hereof." (ie on 2 February 2007). Third, the Parties undertook to amend the register-to reflect the re-registration of MFT-E. (To date, it seems that that has yet to be done).
"to finance the construction of the Cihelny Golf Course by direct loans from Sparkasse Essen. However, Sparkasse Essen refused such an arrangement and instead loans were extended to [PV's] German companies.201 As a result, it was [PV's] German companies that extended loans to KOMFORT, not Sparkasse Essen... The loans from Sparkasse Essen were secured by liens over real estate of [PV] located in Germany and by [PV's] personal guarantee, not by KOMFORT's assets... [PV] settled his obligations vis-à-vis Sparkasse Essen in the meantime even without proceeds from the operation of the golf course Cihelny, This further shows the separate nature of the loans provided by Sparkasse Essen to [PV's] group on the one hand and the loans provided by [PV's] companies to KOMFORT on the other hand, in summary, the loans to KOMFORT came from the MFT Group, not from Sparkasse, and, as such, they are protected by the [Treaty]."202(Emphasis added). Accordingly, it was submitted, the loans drawn from Sparkasse and the loans made to KOMFORT were not identical - a "fact [that] had not been disproved at the hearing".203
On a careful analysis of the materials in the record, however, the Tribunal concludes that the distinction that PV sought to draw is a distinction without a difference: While Sparkasse Essen funds may well have been channelled through PV and his MFT Group of companies, there is no room for doubt that those funds. were applied directly to KOMFORT and the Cihelny project. As PV's expert Mr Sima noted, the loans obtained from Sparkasse Essen had been for the special purpose of financing the development of the Cihelny Golf Course.204 Sparkasse Essen itself said as much in a letter written to PV in February 2011.205 PV's own Statement of Claim recorded that the purpose of the credits was: "from the beginning, to build a Golf Resort; Sparkasse Essen continuously monitored their utilization for this purpose (on the one hand by releasing the money only based upon the presentation of invoices concerning the construction, on the other hand, by on-site monitoring)." (Emphasis added).206And in evidence to the Tribunal, PV himself confirmed that he had told Sparkasse Essen that the money that he was borrowing would be invested in the Czech Republic.207
The purpose of the Treaty Protocol is to avoid investments by under capitalized investors, who have to resort to significant external funding in order to develop and sustain their investment. This is such a case: Sparkasse Essen was the source of over 90% of the financing for the Cihelny Project. Accordingly, that financing does not qualify as a protected investment under the terms of the Treaty.
(i) Judge [REDACTED] declaration that KOMFORT was bankrupt;
(ii) the subsequent decision of the bankruptcy Trustee to proceed to a sale of KOMFORT's assets by public auction: and
(iii) the deletion thereafter of KOMFORT from the Commercial Register,
he had been denied;
(i) his rights to fair and equitable treatment pursuant to Article 2(1) of the Treaty:
(ii) his rights to non-impairment pursuant to Article 2(2) of the Treaty; and
(iii) his investment had been expropriated pursuant to Article 4(2) of the Treaty; and, further,
(iv) the failure of the Czech authorities properly to pursue PV's criminal complaints constituted a breach of the Czech Republic’s obligation to afford an investor full protection and security pursuant to Article 4(1) of the Treaty,
(i) to accept MFT-K's application to be appointed the Creditors' Representative;
(ii) his "wrongful frustration of composition with creditors"; and
(iii) his failure to supervise the bankruptcy Trustee, Dr [REDACTED]216
There is no support either for PV's position in ILC Articles 4 and 5. Decisions of international tribunals confirm that acts of a 'state organ' (the status of which is to be determined first pursuant to domestic law) are attributable to a state pursuant to Article 4 only in circumstances where there is clear evidence that the entity acts as the state and not as a commercial or private entity.227 it is not in dispute that pursuant to S.7 of the Bankruptcy Act, a bankruptcy trustee does not represent, and is independent of, the Czech Republic and that the trustee has an independent position in the bankruptcy process. Pursuant to S.8 of the Act, the Trustee has personal liability for her actions (for which she must carry insurance] and she does not benefit from any sovereign immunity attaching to the Czech Republic. There is no requirement that she should be a government employee and, indeed, her remuneration is not in the form of a state salary, but is derived from the proceeds of sale of the assets. Her duties are not legislative, executive, judicial or regulatory in nature (S.18(l&2); S.30(l); and S.4(4) of the Act) and she does not exercise governmental functions or sit within the governmental hierarchy (S.28(l)). Her acts are akin to commercial acts of managers or accountants of private corporations. (S.14a; S.18(l&2); S.27; S.30(l); and S.44(4)).
On the basis of its analysis, the Tribunal concludes that the conduct of Judge [REDACTED] the bankruptcy Trustee and that of the Czech courts and criminal investigation authorities could not be said to have fallen short of the criteria enunciated by the Tribunal in the Saluka case241, namely:
"A foreign investor protected by the Treaty may in any case properly expect that the Czech Republic implements its policies bona fide by conduct that is, so far as it affects the investor's investment, reasonably justifiable by public policies and that such conduct does not manifestly violate the requirements of consistency, transparency, even-handedness and nondiscrimination."
'This is simply a case alleging that the Czech Republic failed to fulfil its obligation of law, There [is] no proof of that and the faithful application of [a] host state's law will not ground a claim. [PV] cannot point to any authority to suggest that he could have had an expectation that he would be treated in any way other than as the law provides. This also is not a case in which there is a change of law about which he is complaining. It is simply a question of the application of the host state's law and the faithful application of the host state's law will not ground a claim... [PV's] legitimate expectations Were met because the Czech Republic faithfully applied Czech law by declaring KOMFORT bankrupt, approving 3 Princova as the Creditors' Representative, approving the public tender, rejecting [PV's] application for mandatory composition and deleting KOMFORT from the Commercial Register."242
No impairment of PV's Investment Through Arbitrary Measures
PV’s case, asserting a breach of Article 2(2) of the Treaty, was put on the basis that he would show that the conduct of the Czech Republic had "certainly [been] arbitrary243". He cited the decisions in the Noble Ventures case244 and in Genin245 the former, which followed the decision of the International Court of Justice in ELSI, holding that 'arbitrary' conduct amounted to;
"a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of judicial propriety."
In Genin, the Tribunal held that in order to constitute arbitrary conduct:
"any procedural irregularity that may have been present would have to amount to bad faith, a willful disregard for due process of law, or an extreme insufficiency of action."
In the words of the Tribunal in the Loewen case, a party seeking to establish a substantive denial of justice must show "manifest injustice" or 'gross unfairness', a "flagrant and inexcusable violation" in which "bad faith, not judicial error, seems to be the heart-of the /patter"247 and that there has been a failure of the judicial system as a whole, such that:
""[the] investor that fails to exercise his rights within a legal system, or exercises his rights unwisely"248 cannot be heard to complain that he. has suffered a denial of justice at the hands of the state in question.
The Tribunal has considered PV's allegations of a denial of justice with great care, It has done so, not least, with the conclusion of the Tribunal in the Mondev case in mind, namely:
"The test is not whether a particular result is surprising, but whether the shock or surprise occasioned to an impartial tribunal leads, on refection, to justified concerns as to the judicial propriety of the outcome bearing in mind on the one hand that international tribunals are not courts of appeal and on the other... [treaties for the protection of investments are] intended to provide a real measure of protection. In the end, the question is whether at an international level, and having regard to generally accepted standards of the administration of justice a tribunal can conclude in the light of ail the available facts that the impugned decision was clearly improper and discreditable."249
(1) PV's request for a Declaration that:
(i) the declaration of bankruptcy of KOMFORT and other acts and omissions of the bankruptcy judge Mr [REDACTED]
(ii) the sale of the Golf Resort by the bankruptcy trustee Dr [REDACTED]
(iii) the deletion of KOMFORT from the Commercial Registry were acts and omissions attributable to the Czech Republic, which constituted violations of the fair and equitable treatment standard in Article 2(1) of the Treaty and the non-impairment standard in Article 2(2) of the Treaty is denied;
(2) PV’s request for a Declaration that:
(i) the declaration of bankruptcy of KOMFORT and other acts and. omissions of the bankruptcy judge Mr [REDACTED]
(ii) the sale of the Golf Resort by the bankruptcy trustee Dr [REDACTED]
(iii) the deletion of KOMFORT from the Commercial Registry:
(iv) the failure of the Czech police and state attorneys to carry out the criminal proceedings against bankruptcy trustee Dr [REDACTED] and Dr [REDACTED] Mr [REDACTED] Mr [REDACTED] and Mr [REDACTED] were acts and omissions attributable to the Czech Republic, which constituted violations of the full protection and security standard in Article 4(1) of the Treaty is denied;
(3) PV's request for a Declaration that:-
(i) the declaration of bankruptcy of KOMFORT and other acts and omissions of the bankruptcy judge M [REDACTED]
(ii) the sale of the Golf Course by the bankruptcy trustee, Dr [REDACTED] were acts and omissions attributable to the Czech Republic, which constituted an expropriation in violation of Article 4(2) of the Treaty is denied;
(4) PV's requests for Orders that the Czech Republic pay PV compensation for the damages allegedly suffered as a result of the said alleged breaches of the Treaty, together with interest thereon are denied;
(5) PV shall pay the costs of these arbitration proceedings, including the costs and expenses of the Tribunal, in the amount of Euros 254,595,75, together with the legal costs and expenses of the Czech Republic in the amount of Cr.80,817,757.15.
(6) All and any other claims are dismissed.
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