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

The ordinary meaning of “This Chapter” in Article 11.1(1) is the whole of Chapter 11, not merely Section A, notwithstanding that the Article is located at the start of Section A. On its face, therefore, the “scope and coverage” provision applies straightforwardly to the whole of Chapter 11, including the offer to arbitrate in Section B. That is the interpretation that has been accepted and applied, uniformly, in each of the ITA awards referred to by the Judge in which Article 11.1(1) of the Treaty or Article 1101 of NAFTA were considered, there being no countervailing view expressed (until the SICC supported the Judge’s conclusion). Whilst there might be consequences which the Judge considered unfortunate in terms of Korea being able to re-litigate de novo whether Elliott’s arbitration claim falls within Chapter 11 by way of a section 67 challenge in this jurisdiction, there is nothing surprising or unworkable about the Contracting Parties to NAFTA and the Contracting Parties to the Treaty having limited the right of investors to arbitrate to circumstances in which the substantive protections under the Treaty were engaged, not merely when it was alleged that they were engaged.

As Korea points out, the Judge declined to give the phrase “This Chapter” its ordinary meaning, instead reading Article 11.1(1) as starting with “This Section”, effectively deciding that the former phrase had been included by mistake in both NAFTA and again, by different parties, in the Treaty. The Judge justified that reading because, in his view, there was a clear dividing line between what he regarded as the substantive provisions of Section A and the procedural dispute resolution provisions of Section B. In that context he considered that Section B should be read as an independent regime, with its own jurisdictional requirements, remote from and not governed by the scope and coverage wording in Article 11.1(1).

Apart from the inherent improbability that successive treaties used and have retained the wrong word (having expressly used the term “this Section” multiple times in Article 11.16 and once more in Article 11.17 when that was what was intended), the immediate difficulty with the Judge’s approach is that certain other provisions in Section A of Chapter 11 clearly apply to and potentially qualify the right to accept the offer to arbitrate in Section B. First, Article 11.11 provides for a State to deny the benefits of “this Chapter” to an investor in defined circumstances, which must include the benefit of the offer to arbitrate in Section B. Second, Article 11.14 provides for subrogation of the investor’s rights “under this Chapter” in certain circumstances where the investor has been paid under a guarantee or contract of insurance, and for the investor to be precluded from exercising those rights. Such subrogated rights must include the offer of arbitration. In the case of both Article 11.11 and Article 11.14 the provision is undoubtedly governed by Article 11.1(1), even on the Judge’s interpretation, but then it is unclear why the rights “under this Chapter” to which the provisions refer, including the right to accept the offer to arbitrate, are not also so governed. It is noteworthy that the Judge did not refer specifically to either of these provisions, let alone their potential impact on the “independence” of the offer to arbitrate and the clear division he saw between Section A and Section B of Chapter 11.

It is also noteworthy that there is nothing in Section B that makes it a condition of the right to arbitrate a claim for a breach of the obligations in Section A that the claim is in relation to an investment in the territory of Korea (or, in other cases, the USA), rather than that being an issue for potential determination in an investment dispute; no territorial restriction can be found, at least expressly, in the definition of “investment” or “investor of a Party”, and as the Judge noted the term “investment dispute” is undefined. Yet, given that the proviso to Article 11.16 in relation to claims for breach of an investment agreement expressly makes it a condition that the claim directly relates to a covered investment, it would be very surprising if the existence of an investment in the territory of a Contracting State was not a condition of the offer to arbitrate claims more generally. Such a condition can be found, but only found, through the application of the scope and coverage provision in Article 11.1(1) and its use of the concepts of “covered investment” and “in the territory of the Party”.

Further, the temporal restriction as to the matters in respect of which Chapter 11 is binding on the Contracting Parties in Article 11.1(2) and the disapplication of the Chapter in relation to Chapter 13 (Financial Services) that is provided for in Article 11.2(3) both plainly relate to the whole of Chapter 11 including Section B, and therefore further condition the offer to arbitrate. Article 11.2(1), which provides for other Chapters to prevail in the event of inconsistency, also must apply to the whole of Chapter 11, and the same must be the case for Article 11.2(2). The Judge did not suggest that each of those references to “this Chapter” should be read as “this Section”, and it would be difficult to so read them. But it makes it all the more difficult to make an exception just for the first usage of that phrase in Article 11.1(1).

Once it is recognised that matters outside Section B of Chapter 11 are capable of affecting the offer to arbitrate in Articles 11.16 and 11.17, the Judge’s further reading-down of the words “in accordance with this Agreement” in Article 11.17 becomes unsupportable, particularly where it follows and is plainly intended to qualify the consent of the States to the submission of a claim to arbitration under “this Section”. Korea points out that, in addition to Articles in Section A of Chapter 11, reference must also be had in determining the scope of the offer to arbitrate to the clarification in footnote 2 to Chapter 12 of the Treaty which states that nothing in that Chapter is subject to investor-state dispute settlement under Section B of Chapter 11.

The Judge regarded it as highly significant that the offer to arbitrate in Section B of Chapter 11 of the Treaty, in contrast with the position in NAFTA, extends beyond claims for breach of the obligations in Section A to include claims for breaches of investment authorizations and investment agreements. He regarded it as an unattractive aspect of Korea’s interpretation that it would entail that the latter type of claims could only be made if the requirements of Article 11.1(1) were satisfied, meaning that disputes airing under an investment agreement might have to be determined in different fora, however closely related, with difficult issues as to jurisdiction arising. I do not see the force of this point. If the wording of Chapter 11 is given its ordinary meaning, as in all ITA tribunal awards to date, it can be seen that the extension makes it possible to bring claims for breach of an investment authorization or agreement when matters giving rise to a claim under Section A also give rise to such claims. The provision enables claims which are based on the same alleged wrongdoing to be brought in the same arbitral forum rather than bifurcated because of their different nature. If there are further claims which do not fall within the scope and coverage of the obligations undertaken by the relevant State in the Treaty, it is neither surprising nor troubling that they are not included in the offer to arbitrate. I see no difficulty that applying Article 11.1(1) in determining whether claims for breach of an investment agreement fall within the offer to arbitrate might entail the application of a different governing law to that otherwise applicable to the investment agreement, pursuant to Article 11.22. Any consideration of whether a claim is within the provisions of the offer to arbitrate will engage the law applicable to the interpretation of the Treaty, whether or not Article 11.1(1) is engaged.

The Judge also placed weight, which he recognised must be limited, on the use of scope and coverage clauses in other chapters of the Treaty, pointing out that certain following provisions cannot sensibly be viewed as falling within the delineated scope of the Chapter. Those provisions, however, do not contain arbitration provisions and no question of “jurisdiction” arises, for example, in relation to the agreement in Article 8.3 to establish a committee on sanitary and phytosanitary matters, even though it does not strictly relate to a “measure” of one of the parties within Article 8.1. As the Judge recognised, Chapter 11 can be seen as a form of BIT, complete with arbitration provisions, and the Contracting Parties must be taken to have intended to define the scope of the offer to arbitrate with a precision which might not have been required in other contexts.

In my judgment the “scope and coverage” requirements of Article 11.1(1) do apply to Section B of Chapter 11 and impose jurisdictional limitations on the offer to arbitrate. The Judge was wrong to conclude otherwise. I recognise that his view was followed and supported by the SICC, and that its judgment must be given independent weight and considerable respect. But I am not persuaded by that judgment for the reasons set out above, to the extent that they are applicable to the SICC’s reasoning. If, as seems likely in the circumstances, that decision is also appealed, the Singapore Court of Appeal will have this judgment to consider as well as that of the Judge.

It follows that I would uphold Korea’s main ground of appeal.