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InterTrade Holding GmbH v. Czech Republic (PCA)

Why it matters

This case is significant for its detailed analysis of attribution of conduct of state-owned enterprises under international investment law. The Tribunal applied the ILC Articles on State Responsibility, particularly Article 5 (conduct of entities exercising governmental authority) and Article 8 (conduct directed or controlled by the State). The majority found that the forestry enterprise's actions in a tender process were not attributable to the Czech Republic, setting a precedent for similar disputes involving state-owned entities.

Summary

InterTrade Holding GmbH, a German company, invested in a Czech forestry company, CE Wood. In 2005, the Czech state enterprise Lesy České Republiky (LCR) held a tender to manage state forests. InterTrade alleged that the tender was manipulated to exclude CE Wood, violating the German-Czech BIT. The Tribunal first dismissed the Czech Republic's jurisdictional objections, finding that InterTrade had made a qualifying investment and that the dispute fell within the BIT's scope. On the merits, the Tribunal examined whether LCR's actions were attributable to the Czech State. Applying the ILC Articles on State Responsibility, the majority (Chairman Fortier and Professor Stern) held that LCR was not exercising governmental authority (Article 5) and that the Czech Ministry of Agriculture did not direct or control LCR's conduct (Article 8). Therefore, the acts were not attributable to the State, and all BIT claims failed. The Tribunal ordered each party to bear its own costs. A dissenting opinion by co-arbitrator Alvarez argued that LCR's conduct should be attributed to the State.

The detail

Parties: InterTrade Holding GmbH v. Czech Republic

Case number: PCA Case No. 2009-12

Outcome: The Tribunal dismissed all claims by the Claimant, finding that the acts complained of were not attributable to the Czech Republic. Each party bears its own costs.

Applicable law: Treaty between the Federal Republic of Germany and the Czech and Slovak Federal Republic Concerning the Promotion and Reciprocal Protection of Investments (German-Czech BIT); UNCITRAL Arbitration Rules (1976)

Issues in play: The case involved the collision between the investor's rights under the BIT (fair and equitable treatment, non-discrimination, full protection and security, and protection against expropriation) and the Czech Republic's defense that the acts of its state enterprise (Lesy České Republiky) were not attributable to the State under international law.

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