A11Y LTD. v. Czech Republic, ICSID Case No. UNCT/15/1, ICSID Case No. UNCT/15/1, ICSID Case No. UNCT/15/1, ICSID Case No. UNCT/15/1
ICSID · Investment (ICSID and treaty) · Czech Republic · 29 Jun 2018
Why it matters
This case is notable for its detailed analysis of indirect expropriation in the context of a social welfare regulatory change. The Tribunal held that a legislative amendment (the July 2013 Statement) that eliminated a subsidy for assistive technology did not constitute expropriation, as it was a non-discriminatory, bona fide regulatory measure. The case also addressed the burden of proof on the claimant to show that the state's conduct, rather than the regulatory change, caused the investment's failure.
Summary
A11Y LTD., a UK company, acquired the business of BRAILCOM, a Czech provider of assistive technology for visually impaired persons. A11Y's business model relied heavily on a state subsidy (Act on Allowances) that reimbursed visually impaired customers for purchasing assistive devices. In July 2013, the Czech Republic amended the Act, changing the reimbursement system from a direct subsidy to a voucher system, which drastically reduced A11Y's sales. A11Y alleged that the Czech Republic also engaged in a campaign to pressure its customers, denounce it on television, leak confidential pricing to competitors, and rig independent assessments. The Tribunal had previously upheld jurisdiction over the expropriation claim but dismissed other claims. On the merits, the Tribunal found that the July 2013 Statement was a legitimate regulatory change, not an expropriation. It also found that A11Y failed to prove that the other alleged measures (pressure on customers, TV denunciation, etc.) caused the demise of its business independently of the regulatory change. The Tribunal emphasized that the burden was on A11Y to show that the state's conduct was the proximate cause of the loss, which it did not meet. The claim was dismissed, and A11Y was ordered to pay part of the arbitration costs.
The detail
Parties: A11Y LTD. v. Czech Republic, ICSID Case No. UNCT/15/1, ICSID Case No. UNCT/15/1, ICSID Case No. UNCT/15/1, ICSID Case No. UNCT/15/1
Case number: italaw/cases/5183
Outcome: The Tribunal dismissed all of Claimant's claims on the merits, finding no indirect expropriation. Claimant was ordered to pay Respondent's share of arbitration costs (USD 373,932.02).
Applicable law: UK-Czech Republic BIT (1990), UNCITRAL Arbitration Rules (1976)
Issues in play: The case involved the definition of 'investment' under the BIT and the standard for indirect expropriation under Article 5, particularly whether regulatory measures (a legislative change and alleged harassment) amounted to expropriation.
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