Republic of Korea v Elliott Associates, LP

For the purposes of a challenge under section 67 of the Arbitration Act 1996, treaty requirements forming part of the substantive protection afforded by an investment treaty do not necessarily limit the state’s offer to arbitrate. The court must construe the treaty as a whole, applying Articles 31 and 32 of the Vienna Convention on the Law of Treaties 1969.

Where the treaty’s arbitration provisions define the claimant, the investment dispute and the claims capable of submission, a further limitation should not be implied from a scope-and-coverage provision located in the substantive section. Issues which are highly fact-sensitive and closely integrated with the merits are less likely to constitute substantive jurisdiction under section 30. The court declined to make contingent merits findings after dismissing the jurisdictional challenge.

The claimant applied under section 67 of the Arbitration Act 1996 to set aside a final investment-treaty award rendered in favour of Elliott Associates, LP under the USA-Korea Free Trade Agreement.

The arbitral tribunal had rejected objections concerning whether there was a relevant measure, whether it had been adopted or maintained by Korea, and whether it related to Elliott’s investment. Korea argued that those requirements in Article 11.1(1) limited the tribunal’s substantive jurisdiction. The central issue was whether the objections fell within sections 30 and 67 of the 1996 Act.

1. The application was dismissed. The court held that Korea’s objections under Article 11.1(1) were not issues of substantive jurisdiction for the purposes of sections 30(1) and 67 of the Arbitration Act 1996.
2. Section 67 permits a de novo challenge concerning the existence, scope or subject matter of the arbitration agreement. In investment-treaty arbitration, requirements defining the recipients of the offer to arbitrate, or expressly limiting the disputes capable of submission, are ordinarily jurisdictional. The classification depends on the treaty’s proper construction and not on the terminology used by an arbitral tribunal.
3. Applying Articles 31 and 32 of the Vienna Convention on the Law of Treaties 1969, Article 11.1(1) was more naturally read as defining the substantive scope of the investment protections. Section B separately identified the arbitration offer, including its definitions, the requirement for an investment dispute, the claims capable of submission and the conditions and limitations of consent.
4. The wording and structure of Article 11.16 did not support treating Article 11.1(1) as an additional condition of consent. That conclusion was reinforced by the fact that Article 11.16 also covered investment authorisations and investment agreements, which did not naturally depend on satisfaction of Article 11.1(1).
5. The issues concerning the existence of a measure, state adoption or maintenance, attribution and the required connection with the investment were highly fact-sensitive and substantially integrated with the merits. That consideration supported, although did not determine, their non-jurisdictional character.
6. The court declined to make contingent findings on the Article 11.1(1) issues. Doing so would risk an advisory opinion on complex and sensitive questions which the court had concluded could not properly be reopened under section 67. Permission to appeal was granted under section 67(4).

First-instance decision. The court granted permission to appeal under section 67(4) of the Arbitration Act 1996.