WNC Factoring Limited v. The Czech Republic
PCA · Investment (ICSID and treaty) · Czech Republic · 22 Feb 2017
Why it matters
This case is notable for its detailed analysis of the intra-EU jurisdictional objection under the UK-Czech BIT, and for clarifying the scope of umbrella clauses in investment treaties. The tribunal held that the umbrella clause did not elevate contractual claims to treaty claims absent privity, and that the investor's expropriation claim failed because the state's actions were not attributable or did not substantially deprive the investment. It also applied the 'costs follow the event' principle fully.
Summary
WNC Factoring Ltd, a UK company, acquired shares in Skoda Export, a Czech state-owned enterprise, through a privatization tender in 2007. WNC alleged that the Czech Republic provided misleading information during the due diligence process, obstructed its efforts to restructure the company, and forced it into insolvency, violating the UK-Czech BIT. The tribunal, seated in Geneva under UNCITRAL Rules, first rejected the Respondent's intra-EU objection, finding the BIT remained in force. It then dismissed most claims for lack of jurisdiction: the umbrella clause (Article 2(3)) did not cover the share purchase agreement because there was no privity between WNC and the state, and the fair and equitable treatment claim was not properly pleaded. The only claim that survived was expropriation under Article 5. On the merits, the tribunal found no expropriation because the state's conduct, such as refusing to renegotiate debts or initiate insolvency, was not attributable to the Czech Republic or did not substantially deprive WNC of its investment. The claim was dismissed in its entirety, and WNC was ordered to pay all arbitration costs and the Respondent's legal fees.
The detail
Parties: WNC Factoring Limited v. The Czech Republic
Case number: PCA Case No. 2014-34
Outcome: All claims dismissed. Claimant ordered to pay Respondent USD 452,500 for arbitration costs and CZK 35,940,599.34 for legal costs.
Applicable law: UK-Czech Republic BIT (1990); UNCITRAL Rules (1976)
Issues in play: The tribunal considered whether the UK-Czech BIT applied despite both states being EU members (intra-EU objection), and whether the umbrella clause covered contractual obligations. It also examined expropriation and fair and equitable treatment standards.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.