Václav Fischer v. Czech Republic
PCA · Investment (ICSID and treaty) · Czech Republic · 6 May 2020
Why it matters
This case illustrates the consequences of a claimant's failure to pay its share of the advance on costs in investment arbitration. The tribunal applied the UNCITRAL Rules' 'unsuccessful party' principle and found the claimant acted in bad faith, ordering reimbursement of the respondent's deposit and legal costs. It clarifies that a BIT's cost provisions may not apply when proceedings end prematurely due to a party's non-compliance.
Summary
Václav Fischer, a German investor, initiated arbitration against the Czech Republic under the Germany-Czech Republic BIT and UNCITRAL Rules. After the tribunal was constituted, the PCA requested each party to deposit USD 125,000 for costs. The respondent paid, but the claimant did not, despite multiple reminders. The respondent then requested termination of proceedings. The claimant argued that the BIT required each party to bear its own costs and that the respondent's refusal to honor any award made enforcement impossible. The tribunal terminated the proceedings without prejudice due to the claimant's failure to pay. In the final award on costs, the tribunal fixed total arbitration costs at USD 76,975.45. It held that the BIT's cost allocation rules (each party bears its own arbitrator and legal costs) did not apply because the proceedings ended prematurely due to the claimant's breach. Applying the UNCITRAL Rules, the tribunal found the claimant to be the 'unsuccessful party' and ordered him to reimburse the respondent the full deposit (USD 76,975.45) and the respondent's legal costs (CZK 167,850.07). The tribunal emphasized the claimant's bad faith in initiating claims while refusing to advance fees.
The detail
Parties: Václav Fischer v. Czech Republic
Case number: PCA Case No. 2019-37
Outcome: Claimant ordered to reimburse Respondent USD 76,975.45 and CZK 167,850.07 for costs; proceedings terminated without prejudice.
Quantum: USD 76,975.45 and CZK 167,850.07
Applicable law: Germany-Czech Republic BIT (1990); UNCITRAL Arbitration Rules 2010
Issues in play: The BIT's cost allocation rules (Art. 9 and 10) collided with the UNCITRAL Rules' general principle that costs follow the event. The tribunal had to decide whether the BIT's default rule (each party bears its own costs) applied when proceedings terminated prematurely due to claimant's non-payment.
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