Award

Peter Franz Vocklinghaus v. Czech Republic

UNCITRAL · Investment (ICSID and treaty) · Czech Republic · 19 Sep 2011

Why it matters

This case illustrates the high threshold for establishing denial of justice and arbitrary conduct in investment treaty arbitration. The tribunal rejected claims that a bankruptcy declaration, asset sale, and deletion from commercial register violated the BIT, emphasizing that faithful application of host state law does not ground a claim. It also clarified that mere judicial error does not amount to denial of justice.

Summary

The dispute arose from a golf resort project in the Czech Republic. Claimant Voecklinghaus, a German citizen, invested in KOMFORT, the project company. After financial difficulties, KOMFORT was declared bankrupt in 2001, its assets sold, and later deleted from the commercial register. Claimant alleged that these acts, along with failures in criminal investigations, violated the Germany-Czech Republic BIT. The tribunal found no breach: the bankruptcy was lawful under Czech law, the sale was at a public tender, and Claimant failed to exhaust local remedies. The tribunal applied the BIT's FET standard, noting that arbitrary conduct requires bad faith or willful disregard of due process, which was absent. Denial of justice requires manifest injustice or gross unfairness, not shown here. All claims were dismissed, and Claimant was ordered to pay costs.

The detail

Parties: Peter Franz Vocklinghaus v. Czech Republic

Case number: italaw/cases/1445

Outcome: All claims dismissed; Claimant ordered to pay arbitration costs (EUR 254,595.75) and Respondent's legal costs (CZK 80,817,757.15).

Applicable law: Germany-Czech Republic BIT (1990); UNCITRAL Rules; Czech law

Issues in play: Fair and equitable treatment (FET), full protection and security, non-impairment, expropriation under the BIT vs. Czech bankruptcy and criminal procedure laws.

Read the full decision at italaw

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