CA-2024-002080 - [2025] EWCA Civ 905

Chapter 11 of the Treaty is headed “Investment”. It is divided into three sections. Section A is also entitled “Investment” and starts with the following provisions:

“ARTICLE 11.1: SCOPE AND COVERAGE

1.

This Chapter applies to measures adopted or maintained by a Party relating to:

(a)

investors of the other Party;

(b)

covered investments; and

(c)

with respect to Articles 11.8 and 11.10, all investments in the territory of the Party.

2.

For greater certainty, this Chapter does not bind either Party in relation to any act or fact that took place or any situation that ceased to exist before the date of entry into force of this Agreement.

3.

For purposes of this Chapter, measures adopted or maintained by a Party means measures adopted or maintained by:

(a)

central, regional, or local governments and authorities; and

(b)

non-governmental bodies in the exercise of powers delegated by central, regional, or local governments or authorities.

ARTICLE 11.2: RELATION TO OTHER CHAPTERS

1.

In the event of any inconsistency between this Chapter and another Chapter, the other Chapter shall prevail to the extent of the inconsistency.

2.

A requirement by a Party that a service supplier of the other Party post a bond or other form of financial security as a condition of the cross-border supply of a service does not of itself make this Chapter applicable to measures adopted or maintained by the Party relating to such cross-border supply of the service. This Chapter applies to measures adopted or maintained by the Party relating to the posted bond or financial security, to the extent that such bond or financial security is a covered investment.

3.

This Chapter does not apply to measures adopted or maintained by a Party to the extent that they are covered by Chapter Thirteen (Financial Services).”

In the same section, Articles 11.3 to 11.9 set out the substantive obligations on each State in relation to the treatment of investors and covered investments of the other State. These include the National Treatment standards in Article 11.3 and the Minimum Standard of Treatment in Article 11.5 referred to above, as well as Most-Favoured Nation treatment obligation in Article 11.4, prohibition on expropriation and nationalisation in Article 11.6, requirements to permit free transfers into and out of the State’s territory in Article 11.7 and prohibition on the imposition of performance requirements in Article 11.8.

Section A further provides as follows:

“ARTICLE 11.11: DENIAL OF BENEFITS

1.

A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if persons of a non-Party own or control the enterprise and the denying Party:

(a)

does not maintain normal economic relations with the non-Party; or

(b)

adopts or maintains measures with respect to the non-Party or a person of the non-Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments.

2.

A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no substantial business activities in the territory of the other Party and persons of a non-Party, or of the denying Party, own or control the enterprise….

….

ARTICLE 11.14: SUBROGATION

1.

If the Korea Export Insurance Corporation or the Overseas Private Investment Corporation makes a payment to an investor of the Party in which the respective Corporation is established under a guarantee or a contract of insurance it has entered into in respect of an investment, the Corporation shall be considered the subrogee of the investor and shall be entitled to the same rights that the investor would have possessed under this Chapter but for the subrogation, and the investor shall be precluded from pursuing such rights to the extent of the subrogation….”

Section B of Chapter 11 is headed “Investor-State Dispute Settlement”. Article 11.15 provides for an initial process of consultation and negotiation. The subsequent Articles provide for arbitration of disputes that cannot be settled in that way:

“ARTICLE 11.16: SUBMISSION OF A CLAIM TO ARBITRATION

1.

In the event that a disputing party considers that an investment dispute cannot be settled by consultation and negotiation:

(a)

the claimant, on its own behalf, may submit to arbitration under this Section a claim

(i)

that the respondent has breached

(A)

an obligation under Section A,

(B)

an investment authorization, or

(C)

an investment agreement;

and

(ii)

that the claimant has incurred loss or damage by reason of, or arising out of, that breach; and

(b)

the claimant, on behalf of an enterprise of the respondent that is a juridical person that the claimant owns or controls directly or indirectly, may submit to arbitration under this Section a claim

(i)

that the respondent has breached

(A)

an obligation under Section A,

(B)

an investment authorization, or

(C)

an investment agreement;

and

(ii)

that the enterprise has incurred loss or damage by reason of, or arising out of, that breach,

provided that a claimant may submit pursuant to subparagraph (a)(i)(C) or (b)(i)(C) a claim for breach of an investment agreement only if the subject matter of the claim and the claimed damages directly relate to the covered investment that was established or acquired, or sought to be established or acquired, in reliance on the relevant investment agreement.

….

ARTICLE 11.17: CONSENT OF EACH PARTY TO ARBITRATION

1.

Each Party consents to the submission of a claim to arbitration under this Section in accordance with this Agreement.

2.

The consent under paragraph 1 and the submission of a claim to arbitration under this Section shall satisfy the requirements of:

(a)

Chapter II (Jurisdiction of the Centre) of the ICSID Convention and the ICSID Additional Facility Rules for written consent of the parties to the dispute; and

(b)

Article II of the New York Convention for an “agreement in writing.””

Article 11.16(2) to (6) and Articles 11.18 to 11.21 make provision for commencement of and the procedure for an arbitration, including that a claim may be submitted (subject to time bar provisions) under the ICSID Convention or the UNCITRAL Rules.

Article 11.22(1) provides that claims alleging a breach of an obligation under Section A shall be decided in accordance with “this Agreement and applicable rules of international law”. However, by virtue of Article 11.22(2), claims in relation to breach of an investment authorization or an investment agreement are to be decided by the application of:

“(a)

the rules of law specified in the pertinent investment authorization or investment agreement, or as the disputing parties may otherwise agree; or

(b)

if the rules of law have not been specified or otherwise agreed,

(i)

the law of the respondent, including its rules on the conflict of laws; and

(ii)

such rules of international law as may be applicable.”

Section C of Chapter 11, consisting solely of Article 11.28, contains definitions for the purposes of that chapter, including the following:

“claimant means an investor of a Party that is a party to an investment dispute with the other Party;

investment means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. Forms that an investment may take include…

investor of a Party means a Party or state enterprise thereof, or a national or an enterprise of a Party, that attempts to make, is making, or has made an investment in the territory of the other Party; provided, however, that a natural person who is a dual national shall be deemed to be exclusively a national of the State of his or her dominant and effective nationality;”

“Investment agreement” and “investment authorization” are also defined in Article 11.28. The former covers certain agreements with a national authority in relation to natural resources, services or infrastructure relevant to a covered investment, and the latter is an authorization granted by the foreign investment authority of a Party in relation to a covered investment or investor of the other Party.

The definition of covered investment is to be found in the General Definitions in Article 1.4 as follows:

“covered investment means, with respect to a Party, an investment, as defined in Article 11.28 (Definitions), in its territory of an investor of the other party that is in existence as of the date of entry into force of this Agreement or established, acquired, or expanded thereafter.”

The General Definitions also provide that:

“measure includes any law, regulation, procedure, requirement or practice.”