Manchester Securities Corp. v. Republic of Poland
PCA · Investment (ICSID and treaty) · Poland · 7 Dec 2018
Why it matters
This case is a landmark investor-state arbitration where the tribunal found that a host state's judicial and legislative actions, including inconsistent court rulings and a retroactive apartment buyer protection law, amounted to a denial of justice and breach of fair and equitable treatment. It underscores the limits of state sovereignty when domestic measures egregiously harm foreign investments, and clarifies that tribunals can review domestic court decisions for denial of justice without acting as an appellate court.
Summary
Manchester Securities Corp., a US investment firm, acquired bonds issued by a Polish real estate developer, secured by mortgages on properties in Poland. After the developer defaulted, Manchester sought to enforce its mortgages but faced a series of obstacles: Polish courts issued conflicting rulings on the validity of the mortgages, a prosecutor seized the property, and Parliament passed the Apartment Buyer Protection Act, which allowed apartment buyers to acquire units free of Manchester's mortgages. The bankruptcy trustee transferred the apartments to buyers. Manchester initiated arbitration under the US-Poland BIT, claiming Poland violated fair and equitable treatment (FET), full protection and security, and expropriation. The tribunal (PCA, UNCITRAL Rules) found jurisdiction, rejecting Poland's objections that Manchester's investment was made in bad faith. On liability, the tribunal held that the cumulative effect of arbitrary and discriminatory actions by Polish courts, the prosecutor, and the legislature constituted a denial of justice, breaching the FET standard. The tribunal awarded Manchester PLN 37,603,654.12 in damages (the value of its claim) plus pre-award interest at 3.88% from 27 June 2014, and post-award interest at the same rate. It ordered Manchester to withdraw its claims in Polish bankruptcy proceedings up to the awarded amount to avoid double recovery. Each party bore its own legal costs and 50% of arbitration costs.
The detail
Parties: Manchester Securities Corp. v. Republic of Poland
Case number: italaw/cases/8611
Outcome: Poland held liable for breach of fair and equitable treatment; awarded claimant PLN 37,603,654.12 plus pre-award interest at 3.88% from 27 June 2014 and post-award interest at same rate.
Quantum: PLN 37,603,654.12
Applicable law: US-Poland BIT (1990); UNCITRAL Rules 1976
Issues in play: Fair and equitable treatment standard under the BIT versus Poland's domestic court decisions and legislative actions that allegedly frustrated enforcement of mortgages.
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