CYIL 2011

CZECH EXPERIENCE WITH BILATERAL INVESTMENT TREATIES: SOMEWHAT BITTER … and the number of foreign investors operating in the country. Statistics show that the substantial increase in investment disputes has been an overall trend observed worldwide in past few years, indicating that investors have “discovered” previously neglected investment arbitration as an effective tool for pursuing their claims against host states. It should also be borne in mind that the investment environment in the Czech Republic was impacted by the process of economic, political and legal transformation. This process, alongside with the inexperience and immaturity of officials and politicians and their individual failures, often produced results that were incompatible with the strict standards stipulated in investment treaties. This was apparently the case of the first “big” arbitrations in the cases of CME and Nomura, as well as some others. However, not all disputes can be attributed to the effects transformation, and today, more than 20 years after the change of regime, this factor seems to have little relevance while the number of investment claims against the state does not seem to be decreasing. Moreover, the factor of transformation does not give a satisfactory explanation for the higher number of arbitrations in comparison with other transition economies in the region, having been in similar position as the Czech Republic. It is submitted in this article that one of the decisive factors behind the relatively high number of investment disputes against the Czech Republic were the large cases of CME and Nomura and the way they had been presented to the public. The success of the claimants in these cases and the large amounts they were able to get from the state ultimately seem to have encouraged other claimants by showing them that investment arbitration can be an effective way to seek compensation from the state outside its jurisdiction, or a way to at least strengthen their negotiating position in order to achieve settlement. The number of arbitrations grew rapidly after the CME award. While some of these claimants were successful, the state has been able to achieve more favourable awards recently. It would not be appropriate to generalize and talk about a “trend”, as the circumstances of each case are specific. Nevertheless, the recent development indicates that regardless of the exceptional nature of investment arbitration, claimants feeling aggrieved by the state tend to increasingly approach investment tribunals with kinds of cases that are more or less speculative or unfounded under bilateral investment treaties. Anyway, there is no reason to expect a significant decrease in investment claims in the near future despite the fact that cases involving a manifest violation of investors’ rights are less likely to occur today. Investment arbitration in its current form seems to have developed in the eyes of investors from an exceptional mechanism into a regular, if not preferable alternative to the domestic judicial system. While ten years ago investment tribunals were solving exceptional cases of large enterprises involved in complicated relations with the state, today’s claims generally concern more ordinary situations, such as unsuccessful tender applications, administrative permits, course of bankruptcy proceedings or commercial relations with state institutions. In addition, investor-state dispute settlement mechanisms appears to be no longer accessible for large enterprises only, but may be attractive also for smaller claimants, as seen on

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