WCV World Capital Ventures Cyprus Ltd. & Channel Crossings Ltd. v. Czech Republic
PCA · Investment (ICSID and treaty) · Czech Republic · 25 Apr 2018
Why it matters
This interim award clarifies several jurisdictional issues under the Cyprus-Czech Republic BIT. It confirms that a company incorporated in Cyprus but controlled from elsewhere may still have its 'permanent seat' there for BIT purposes. It rejects a bad faith objection based on corporate restructuring before the dispute arose. It also affirms that a fork-in-the-road clause does not bar claims where the local proceedings were brought by a different entity. Finally, it permits multi-party arbitration by related investors with a shared investment, following the trend in investment treaty arbitration.
Summary
Two Cypriot companies, WCV and CCL, brought an UNCITRAL arbitration against the Czech Republic under the Cyprus-Czech Republic BIT, alleging that the Czech Republic's regulatory changes and termination of permits for their lottery terminals violated the BIT. The Czech Republic raised four jurisdictional objections. First, it argued that the claimants did not have their 'permanent seat' in Cyprus as required by the BIT, because their ultimate owners were Czech nationals and the companies were managed from the Czech Republic. The Tribunal, applying the VCLT, held that 'permanent seat' refers to the registered office under Cypriot law, which both claimants had, and rejected the objection. Second, the Czech Republic argued that the claimants brought the arbitration in bad faith because they restructured their investments to gain BIT protection after the dispute had arisen. The Tribunal found that the restructuring occurred before the dispute was foreseeable and that the investment was not circular, so the objection failed. Third, the Czech Republic invoked the fork-in-the-road clause, arguing that the claims had already been litigated in Czech courts by a related company, Synot TIP. The Tribunal held that the claims in this arbitration were not identical to those in the municipal proceedings, and that the fork-in-the-road clause only applies if the same claimant brings the same claim, which was not the case. Fourth, the Czech Republic objected that the BIT did not permit multi-party arbitration. The Tribunal found that the BIT's consent to arbitration was not limited to single claimants and that multi-party arbitration was permissible, especially where the claimants were related and the dispute arose from the same measures. The Tribunal dismissed all objections and allowed the case to proceed to the merits. Arbitrator Clodfelter dissented on the permanent seat and bad faith objections.
The detail
Parties: WCV World Capital Ventures Cyprus Ltd. & Channel Crossings Ltd. v. Czech Republic
Case number: PCA Case No. 2016-12
Outcome: The Tribunal dismissed all four of Respondent's jurisdictional objections (Permanent Seat, Bad Faith, Fork-in-the-Road, and Multi-party Arbitration) and reserved costs for future determination.
Applicable law: Cyprus-Czech Republic BIT (2001); UNCITRAL Arbitration Rules (1976); Vienna Convention on the Law of Treaties
Issues in play: The case involved interpretation of the BIT's definition of 'investor' requiring a 'permanent seat' in Cyprus, the doctrine of abuse of rights (bad faith), the fork-in-the-road clause, and the permissibility of multi-party arbitration under the BIT.
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