SOURCE: PRACTICAL LAW ARBITRATION
In Gold Pool JV Ltd v Republic of Kazakhstan [2021] EWHC 3422 (Comm), the English Commercial Court upheld a challenge to an UNCITRAL award under section 67 of the English Arbitration Act 1996, finding that the tribunal was wrong to find that it did not have jurisdiction in an investment treaty claim against Kazakhstan.
In a recently reported case, the English Commercial Court upheld a jurisdictional challenge to an UNCITRAL investment treaty award made under section 67 of the English Arbitration Act 1996 (AA 1996), finding that the tribunal was wrong to find that it did not have jurisdiction.
The arbitration proceedings concerned a claim by the claimant (GP) against the defendant (Republic of Kazakhstan) under the Agreement for the Promotion and Reciprocal Protection of Investments between Canada and the USSR that came into force in 1991 (FIPA). Subsequently, on dissolution of the USSR, Kazakhstan became a successor state in respect of the territory of Kazakhstan. Canada and Kazakhstan did not conclude a succession treaty in respect of the FIPA.
The FIPA contained an arbitration agreement providing investors of either contracting state with a right to refer investment claims to arbitration under the UNCITRAL Arbitration Rules. In March 2016, GP commenced UNCITRAL arbitration proceedings, seated in England and Wales, against Kazakhstan in reliance on the FIPA arbitration clause, claiming that there had been an implied succession agreement between Canada and Kazakhstan in respect of the FIPA. By an award dated July 2020, following a full hearing on jurisdiction and merits, the tribunal found that it lacked jurisdiction ratione voluntatis (by consent of the parties) in respect of GP’s claim because, in its view, GP had failed to establish any such agreement.
GP challenged the award in the English Courts under Section 67 of the AA 1996. In support of its case on an implied succession agreement, GP relied on:
- A Declaration of Economic Co-operation between Canada and Kazakhstan, signed in July 1992 (1992 Declaration).
- An exchange of correspondence between the Canadian Embassy in Almaty to the Kazakhstan foreign ministry (1994 Exchange).
- A recital referring to the FIPA in a trade agreement between Canada and Kazakhstan signed in March 1995 and ratified by Kazakhstan in July 1996 (1995 Recital and Trade Agreement).
Baker J directed that the Section 67 hearing should take place in public. The existence, nature and outcome of the jurisdictional issue in the case was in the public domain and the issue was of public interest.
The Judge also noted that a Section 67 challenge involves a rehearing in which the arbitrators’ conclusions have no legal or evidential weight. This case depended on whether an implied succession agreement had been established. Baker J upheld the challenge.
Here, the applicable legal rule had been correctly formulated by the arbitrators, namely that states may agree to continue a pre-existing treaty relationship following the emergence of one of them as a new state. Further, such an agreement may be either explicit or tacit and may lack the ordinary formalities associated with the conclusion of a new treaty, but the existence of an agreement is paramount.
On the facts of this case, by the 1992 Declaration Canada and Kazakhstan impliedly confirmed that the FIPA applied between them. This constituted an implied succession agreement. The 1994 Exchange and the 1995 Recital were a reconfirmation of that position. Materials relied on by Kazakhstan came after the fact and were not part of any articulated consensus created by the earlier documents.
Baker J also noted that an award made by a tribunal in another arbitration, in which the same jurisdictional point had been raised but in relation to which the tribunal had found in favour of the investor and against Kazakhstan, on whose reasoning GP relied, could only be considered as arguments of GP and nothing more.
Subject to submissions from counsel, Baker J held that the award must be set aside and remitted to the tribunal, who must determine the substantive claims in the arbitration on that basis.
The decision is interesting both because of its subject matter and the firm view taken by the court in relation to the lack of evidential value of tribunal awards addressing the same issue, whether made in the same or different arbitration proceedings.
Case: Gold Pool JV Ltd v Republic of Kazakhstan [2021] EWHC 3422 (Comm) (15 December 2021) (Baker J).
