GPF GP S.à.r.l. v THE REPUBLIC OF POLAND

A challenge under section 67 of the Arbitration Act 1996 is a rehearing. The court determines jurisdiction independently and is not bound by the tribunal’s factual findings or legal reasoning.

An investment treaty arbitration clause covering disputes relating to expropriation or similar measures may extend to indirect and creeping expropriation. A separate clause concerning deprivation or restriction of property rights which causes consequences similar to expropriation may also cover fair and equitable treatment claims, even where the measures are not themselves expropriatory.

At the jurisdictional stage, the court should apply the pro tem test and avoid deciding merits issues or excluding prior measures that may form part of a composite or creeping expropriation.

GPF GP S.à.r.l. applied under section 67 of the Arbitration Act 1996 to challenge an arbitral tribunal’s jurisdictional award arising from an investment treaty arbitration seated in London.

The tribunal had accepted jurisdiction only over whether a Polish court judgment terminating the claimant’s usufruct rights constituted an expropriatory measure. It had excluded the claimant’s fair and equitable treatment claim and prior measures relied upon in support of a creeping expropriation claim.

The central issues were the construction of Article 9(1)(b) of the bilateral investment treaty, the nature of a section 67 hearing, and the proper treatment of alleged prior measures at the jurisdictional stage.

1. The application was allowed. Paragraphs 187(ii) and (iii) of the arbitral award were set aside, with consequential amendments. The tribunal was declared to have jurisdiction over the claimant’s expropriation and fair and equitable treatment claims, including all factual matters and prior measures relied upon. The proceedings were to continue to the liability phase.

2. Under section 67 of the Arbitration Act 1996, the court conducts a rehearing and independently determines whether jurisdiction exists. This applies to jurisdiction ratione personae and ratione materiae. The tribunal’s conclusions may assist, but have no legal or evidential weight that binds the court. New arguments and evidence may be admitted subject to the court’s control and any question of waiver or prejudice.

3. Article 9(1)(b) was to be interpreted under Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969). Its first clause covers direct, indirect and creeping expropriation. The reference to expropriation and similar measures is sufficiently broad to include a series of measures which cumulatively produce an expropriatory effect.

4. The second clause of Article 9(1)(b) is a distinct additional category. It covers deprivation or restriction of property rights by State measures which cause consequences similar to expropriation. It is not confined to measures which are themselves expropriatory. On that construction, a fair and equitable treatment claim based on regulatory measures affecting property rights and causing consequences similar to expropriation fell within the tribunal’s jurisdiction.

5. The principle of effective interpretation supported giving the second clause independent meaning. Article 32 could not be used to contradict the clear ordinary meaning reached under Article 31. The drafting history did not alter that conclusion.

6. A claim for creeping expropriation is not precluded merely because a later event in the sequence may itself amount to direct or indirect expropriation. The relevant question is whether the measures, viewed in aggregate, are capable of establishing the alleged treaty breach. Prior measures may be relevant even if they were not independently expropriatory or immediately perceptible in effect.

7. At the jurisdictional stage, the pro tem test asks whether the facts alleged, if established, could constitute a treaty violation within the tribunal’s jurisdiction. The tribunal had wrongly converted factual allegations into legal conclusions and had prematurely assumed that the later Polish court judgment was expropriatory. The merits tribunal should determine the aggregate effect of the measures.

8. Over-analysis of the elements of a creeping expropriation claim at the jurisdictional stage was inappropriate. The claimant had pleaded a sufficient prima facie case, and the question whether the measures in fact amounted to creeping expropriation was remitted to the merits phase.

The application challenged an arbitral award on jurisdiction dated 15 February 2017. The High Court set aside the relevant jurisdictional conclusions and substituted declarations confirming the tribunal’s jurisdiction over the relevant claims and measures.