A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG v. Czech Republic
PCA · Investment (ICSID and treaty) · Czech Republic · 11 May 2020
Why it matters
This award is significant for its detailed analysis of the Achmea decision's impact on intra-EU BIT arbitration, concluding that the arbitration agreement was invalid due to EU law primacy. It also addresses the attribution of bankruptcy trustees' acts to the state and the standard for expropriation in the context of bankruptcy proceedings, providing guidance on the interplay between domestic insolvency law and international investment protection.
Summary
The dispute arose from the bankruptcy proceedings of Mr. Václav Fischer in the Czech Republic, during which two aircraft owned by the German claimant, AMF, were included in the bankruptcy estates of Mr. Fischer and Charter Air (a company formerly owned by Mr. Fischer). The aircraft were eventually sold, and AMF received the sale proceeds. AMF claimed that the Czech Republic, through its bankruptcy trustees and courts, violated the Germany-Czech Republic BIT by expropriating its investment without compensation, failing to provide full protection and security, and denying fair and equitable treatment. The Tribunal first addressed jurisdiction, considering the Czech Republic's objection based on the CJEU's Achmea decision, which held that investor-state arbitration clauses in intra-EU BITs are incompatible with EU law. The Tribunal agreed, finding that the arbitration agreement was invalid because the BIT's arbitration clause violated Articles 267 and 344 TFEU, and that EU law prevailed over the BIT. Consequently, the Tribunal declined jurisdiction. Alternatively, the Tribunal examined the merits and found no violation of the BIT. It held that the bankruptcy trustees' actions were attributable to the state but were lawful under Czech law and did not amount to expropriation because the seizure was temporary and the sale proceeds were returned. The Tribunal also found no denial of justice or arbitrary conduct, as the Czech courts eventually vindicated AMF's ownership rights, albeit too late to regain possession. The Tribunal concluded that the FET standard did not require a fully effective remedy. The award includes a dissenting opinion by co-arbitrator Stanimir Alexandrov, who argued that the Tribunal should have found jurisdiction and that the Czech Republic's conduct, taken as a whole, violated the BIT's fair and equitable treatment standard.
The detail
Parties: A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG v. Czech Republic
Case number: PCA Case No. 2017-15
Outcome: The Tribunal dismissed all claims. Claimant was ordered to bear the costs of the arbitration and to reimburse Respondent's costs.
Applicable law: Germany-Czech Republic BIT (1990); UNCITRAL Arbitration Rules; Czech bankruptcy law
Issues in play: The case involved a collision between the investor's property rights under the BIT and the host state's bankruptcy proceedings, raising issues of expropriation, fair and equitable treatment, and the effect of EU law (Achmea) on intra-EU BIT arbitration.
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