CYIL 2011

TOMÁŠ FECÁK CYIL 2 ȍ2011Ȏ used the opportunity to sue the Czech Republic for the actions of the Media Council, which allegedly deprived CME of its investment, such legal actions being initiated under two different bilateral investment treaties. One arbitration was initiated by the Dutch company CME Czech Republic B.V. under the BIT with the Netherlands. Another arbitration was initiated by Mr. Lauder, the indirect controlling stakeholder of CME Czech Republic B.V., under the BIT with the USA. Both arbitrations were based on the same factual basis. Multiple investment proceedings were formally possible as the U.S. BIT additionally provides for protection of “indirect” investors controlling the investment through entities based in third states. 13 Such already strange situation, with two different investment tribunals dealing with de facto the same case, was crowned by the tribunals themselves. On the 3 rd of September 2001, the tribunal in Lauder case issued its award. It observed that the Czech Republic took a discriminatory and arbitrary measure against Mr. Lauder at the initial stage of the investment, by not allowing direct participation in the license by a company with foreign shareholding. 14 However, this breach was considered by the tribunal as too remote to the alleged damage incurred by the claimant, which was primarily caused by acts of CET 21 and Mr. Železný. Subsequently, the tribunal rejected the argument that any further action of the Media Council constituted a breach of the Treaty. The real surprise then came 10 days later, when an award in the CME case under the Dutch BIT was rendered. Under the same factual background, the tribunal (with the strong dissent of the arbitrator appointed by the respondent) decided that the Czech Republic had violated all provisions of the Netherlands BIT alleged by the claimant. 15 The basic breach was perceived in the amendment of the legal framework of the joint venture in 1996, which had been in the view of the tribunal coerced by the actions of the Media Council. The Council’s actions and omissions in 1999 compounded and completed the Council’s part in the destruction of CME’s investment. 16 In the final award issued later, the Czech Republic was ordered to pay to CME compensation in the amount of USD 269 814 000. 17 13 Article I. of the BIT between Czechoslovakia and USA provides: “ For the purposes of this Treaty, investment means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party… ”. 14 Ronald S. Lauder v. Czech Republic , UNCITRAL Arbitration. Final award (2001), para 222. It is worth noting that the tribunal may have observed such a breach of the Treaty because, unlike most other Czech BITs, the BIT with the USA contains binding regulation of market access. 15 According to the tribunal, the Czech Republic had breached namely the following obligations: a. The obligation of fair and equitable treatment; b. the obligation not to impair investments by unreasonable or discriminatory measures; c. the obligation of full security and protection; d. the obligation to treat foreign investments in conformity with principles of international law, and e. the obligation not to deprive Claimant of its investment. 16 CME Czech Republic B.V. v. Czech Republic , UNCITRAL Arbitration. Partial Award (2001), para. 601. 17 CME Czech Republic B.V. v. Czech Republic , UNCITRAL Arbitration. Final Award (2003), The Arbitral Tribunal’s Decision.

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