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

Chapter 11 of the free trade agreement between the appellant (“Korea”) and the United States of America (“the USA”) signed on 30 June 2007 (“the KORUS FTA” or “the Treaty”) provides protections for nationals of one of those States when investing in the other, the Chapter amounting in effect to a bilateral investment treaty (“BIT”). Article 11.1(1) provides that the protections, including National Treatment standards and Minimum Standards of Treatment as specified in Articles 11.3 and 11.5 respectively, relate to “measures adopted or maintained” by the State “relating to” investors of the other State or their investments (defined as “covered investments”).

Article 11.16 of the Treaty provides that an investor of one State may submit to arbitration claims that the other State has breached one of the protection obligations, by reason of which the investor has suffered damage. By Article 11.17 that other State consents to the submission of such a claim to arbitration in accordance with the Treaty.

In April 2018 the respondent (“Elliott”), a USA investment fund, purported to commence an UNCITRAL arbitration against Korea pursuant to the above provisions. The claim was, in outline, that the office of the President of Korea (referred to as “the Blue House”) and the Korean Ministry of Health and Welfare had improperly interfered, through the National Pension Service of Korea (“the NPS”), to procure a merger involving a Korean company in which Elliott had invested, Samsung C&T Corporation, contrary to Elliott’s interests and wishes. Elliott alleged that Korea had thereby breached the National Treatment standards and Minimum Standards of Treatment obligations in the Treaty, causing Elliott damage.

Korea objected to the jurisdiction of the UNCITRAL tribunal (“the Tribunal”), asserting that the claim did not fall within Chapter 11, including its dispute resolution provisions, because (i) there was no relevant “measure”, (ii) there was no measure “adopted or maintained” by Korea and/or (iii) any measure did not “relate to” Elliott or its investment.

On 20 June 2023 the Tribunal issued its award (“the Award”), determining that the conduct of the Blue House and the Ministry of Health and Welfare in influencing NPS’s merger vote was State conduct which fell within the term “measure” as used in the Treaty, despite being neither regulatory nor administrative action. The Tribunal further held that the measure had been adopted or maintained by Korea and related to Elliott. The Tribunal went on to find a breach of the Minimum Standard of Treatment obligation and awarded Elliott damages in the sum of US$53,586,931, subsequently corrected by the Tribunal to US$48,490,438.

On 17 July 2023 Korea issued an Arbitration claim form seeking to set aside the Award pursuant to section 67 of the 1996 Act on the grounds that the Tribunal acted outside its substantive jurisdiction, challenging each aspect of the Tribunal’s decision in that regard. A contingent challenge under section 68 of the 1996 Act was resolved when the Tribunal corrected the quantum of the Award.

By his order dated 1 August 2024 Foxton J (“the Judge”) dismissed Korea’s section 67 claim. In a reserved judgment of the same date the Judge held that the States’ offer to investors to arbitrate in Article 11.16 of the Treaty was freestanding and not conditional on the requirements of Article 11.1(1) being met. It followed that Korea’s challenges did not go to the substantive jurisdiction of the Tribunal, the Tribunal having jurisdiction to determine disputes between States and investors, including as to whether the requirements of Article 11.1(1) were satisfied. Recognising that the contrary argument had a real prospect of success, however, and also that the point was of some importance in the context of challenges to investment treaty awards, the Judge granted permission to appeal.

In the light of the Judge’s decision, on 29 October 2024 the United States Department of State wrote to the Ministry of Justice in Korea enclosing a diplomatic note confirming “the United States’ view that Article 11.1 of the KORUS FTA defines the scope of KORUS FTA Chapter 11 in its entirety” and that “a tribunal constituted under Chapter 11 has no jurisdiction unless Article 11.1(1)’s requirements are satisfied”. On 15 November 2024 the Ministry of Justice replied, stating that Korea “shares the [USA’s] understanding set out in the Diplomatic Note and agrees with it”. Korea applies to adduce that diplomatic exchange as fresh evidence in support of its appeal, contending that it is admissible as to the proper interpretation of the Treaty which was not in existence at the time of the hearing before the Judge.