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

The Judge’s judgment set out the issues and arguments fully and his decision was carefully and closely reasoned. For that reason it is both necessary and helpful to provide a fuller account of it than is usually required on an appeal principally concerned with an issue of interpretation.

The Judge noted at [17] that it was common ground that the KORUS FTA was to be interpreted in accordance with the principles set out in the Vienna Convention on the Law of Treaties 1969 (“the VCLT”). He summarised the relevant provisions as follows:

“18.

Article 31 of the VCLT, which reflects customary international law, provides:

“1.

A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

At [22]-[23] the Judge rejected the suggestion that jurisdictional provisions in investment treaties are to be interpreted narrowly, following the view of the Singapore Court of Appeal in Swissbourgh v Lesotho [2018] SGCA 81 at [61]-[63] that they are to be interpreted neither liberally (i.e. pro-investor) nor restrictively (i.e. pro-State). The Judge regarded that approach as consistent with the VCLT and even-handed.

The Judge next explained the “threshold question” as to whether the Award was amenable to challenge under section 67 of the 1996 Act as follows:

“24.

Section 67 of the 1996 Act provides a means of challenging any award of an arbitral tribunal seated in England and Wales “as to its substantive jurisdiction”, or to seek an order declaring that an award of a tribunal on the merits is of no effect “in whole or in part because the tribunal did not have substantive jurisdiction”. Such a challenge has been held to involve a de novo hearing rather than simply a review of the arbitral tribunal’s decision of the kind which the Court of Appeal might undertake of a first instance judgment.

25.

The concept of “substantive jurisdiction” has been held to be defined for the purposes of s.67 by s.30 of the 1996 Act, which, when recognising the power of the tribunal to rule on its substantive jurisdiction, defines that concept as embracing:

i)

“whether there is a valid arbitration agreement”;

ii)

“whether a tribunal is properly constituted”; and

iii)

“what matters have been submitted to arbitration in accordance with the arbitration agreement”.

(see Czech Republic v Diag Human SE and Mr Stava [2024] EWHC 503 (Comm), [131] – “Diag”).

26.

The threshold question which arises is whether the three issues raised by Korea are properly categorised as raising issues as to the tribunal’s jurisdiction for s.67 purposes. Unless that decision is resolved in Korea’s favour, its s.67 challenge must fail. For that reason I heard this issue as a preliminary issue at the hearing.”

The Judge recognised at [28] that it was common ground before the Tribunal that the objections raised by Korea, if valid, would deprive the Tribunal of jurisdiction to adjudicate on the merits of the dispute. He went on to say:

“However, it would be wrong to assume that the dividing line between issues of jurisdiction and the merits is drawn at the same point before an investor-state tribunal applying international law as it is before an English court applying an English statute. In particular, the most significant feature of establishing a s.30 issue of substantive jurisdiction – the ability to re-argue on a de novo basis before a municipal court issues relating to the application of an international law treaty, and to set aside or declare of no effect the determination of an international tribunal – raises distinct issues of national policy for the English court, which are not engaged in a meaningful way before the tribunal. To take one example, the significance of distinctions between issues of jurisdiction, standing and admissibility before an investment treaty arbitration (“ITA”) tribunal are minimal, and ITA tribunals will often refer to them compendiously. Before a court under s.67 of the 1996 Act, they are everything.”

From an examination of the English case law and of Swissbourgh v Lesotho, at [37] the Judge drew the following principles:

The Judge then turned to the interpretation of the KORUS FTA. After pointing out at [38] that Chapter 11 contains a combination of substantive provisions on the one hand and dispute resolution provisions (which would be described as procedural, at least in a municipal law context) on the other, the Judge stated at [40] that Section A of the Chapter “is principally concerned with the substantive protections afforded by the treaty”. Whilst recognising that Article 11.1(1) identifies what “this Chapter refers to…”, the Judge stated that:

“…the argument that Article 11.1(1) places limits on the scope of the offer to arbitrate is inherently less compelling than the position where reliance is placed on the express terms of the offer to arbitrate for the purposes of establishing a jurisdictional limitation.”

The Judge continued his analysis of the nature of the provisions in Section A of Chapter 11 in [40] by noting that Article 11.2 addresses the relationship between substantive provisions of Chapter 11 and provisions in other Chapters, and concludes by noting that “The remainder of Section A sets out the substantive protections afforded by the Treaty in respect of investments.”

At [41] the Judge noted that Article 11.1(1) provides that “this Chapter applies to …”, not “this Section”, in contrast with other Articles of the Treaty, but he accepted Elliott’s submission that Article 11.1(1) (which is itself substantive in content) can be read as defining the scope of the substantive provisions in Chapter 11. The Judge supported that decision by further stating:

that so interpreted, the concepts of scope and coverage still make sense, defining the extent of the substantive protection given;

that although other Chapters of the Treaty contain a “scope and coverage” clause, Chapter 11 is the only Chapter where that clause appears under a particular Section heading, and the only Chapter “with such an apparently clear divide between substantive provisions (Section A) and procedural provisions (Section B)”;

that the use of “scope and coverage” clauses within the Treaty suggests that their principal role is to differentiate the subject-matter of the separate Chapters, which would be achieved by a reading of Article 11.1(1) as applying to the substantive investment protections offered;

that it was difficult to interpret “scope and coverage” provisions in certain of the other Chapters of the Treaty as creating a pre-condition for the application of every provision in the relevant Chapter.

At [42] the Judge stated that, in contrast to Section A, Section B of Chapter 11 has an avowedly “procedural” character. At [43] he noted that there was no definition of “investment dispute”, but expressed the view that, on the face of things an “investment dispute” would include a dispute as to whether the matters in Article 11.1(1) are satisfied.

The Judge described Article 11.16 as the crucial article for present purposes. At [45] he stated that the distinction between Section A (dealing with substantive protections) and Section B (dealing with dispute resolution) is reinforced by the language of that Article, referring to “arbitration under this Section” of a claim (inter alia) “for breach of an obligation under Section A”. The Judge then considered the definition of “claimant” and “investment”, concluding that their effect is to limit the offer to arbitrate to claimants who meet a nationality requirement and have made a qualifying investment. Article 11.16 therefore contains matters which, in many BITs, are jurisdictional, such that it cannot be said to be lacking in “jurisdictional fibre” such that it is necessary to look elsewhere in the Chapter. The Judge concluded:

“Subject to the possible argument on Article 11.17 to which I will shortly turn, there is nothing in Section B which suggests that there is a further limit in the scope of the offer to arbitrate (as opposed to the scope of the protection afforded by Chapter 11). On the contrary, the subject-matter limitation in Article 11.16 depends on what the claimant is asserting (“a claim that the respondent has breached ….” a relevant obligation in relation to its investment). As [Elliott] submitted, a claim for breach of an obligation under Section A will necessarily involve a claim that the requirements of Article 11.1(1) are satisfied.”

The Judge further regarded it as highly significant that the right to arbitrate is not limited to claims for breach of the obligations arising under Section A, but extended to claims for breach of an “investment authorization” or an “investment agreement”. At [46] the Judge pointed out that the effect of Korea’s arguments would be that, contrary to the ordinary meaning of Article 11.16, the States were not offering to arbitrate all claims for breach of such authorizations or agreements, but only those where the claimant could also satisfy Article 11.1(1). That would mean that disputes under the same investment agreement would be determined in two different fora, however closely those disputes might be related. The Judge also noted that, whereas Article 11.22 provides that claims submitted in relation to investment authorizations and agreements are to be decided by the law specified in the authorization or agreement, or otherwise as agreed, with a default choice of “the law of the respondent”, on Korea’s construction it would be necessary also to apply “this Agreement” and international law in determining whether Article 11.1(1) is satisfied.

Turning to Article 11.17, at [48] the Judge recognised that the consent of the States to the submission of a claim to arbitration “under this Section and in accordance with this Agreement” provides some support for the argument that the limitation for that consent is not only to be found in Section B. But he considered the weight carried by those words to be limited, due to their generality, because they “can readily be interpreted as a reference to the procedural restrictions on submitting a claim” in Article 11.16, and due to the absence of any reference in Article 11.17 to Article 11.1(1), Section A or even Chapter 11.

At [49] the Judge further relied on the fact that Article 11.18 sets out “conditions and limitations of consent”, including a time limit, but does not refer to Article 11.1(1).

The Judge next considered the nature of issues which the supervisory court might be required to determine on the competing constructions of Chapter 11. At [50] the Judge accepted Korea’s submission that that cannot be determinative of whether a particular issue is jurisdictional, but he was persuaded that “if a particular issue is integrated to a significant extent into the merits of a dispute, that weighs to some extent against according it a jurisdictional characterisation”. At [51] the Judge examined how the three issues raised by Article 11.1(1) were engaged in the dispute between Elliott and Korea, concluding in [52] that “these issues engage questions which are closely connected with the merits of [Elliott’s] complaints”.

The Judge next considered decisions of ITA tribunals sitting under the arbitration regime established by the North American Free Trade Agreement (“NAFTA”). NAFTA contains at Article 1101(1) a provision equivalent to Article 11.1(1) in the KORUS FTA (including its position at the start of Section A). As the Judge recognised at [53], a number of ITA awards have treated that provision as jurisdictional. The Judge first set out extracts from the Partial Award in Methanex Corporation v United States of America 7 August 2002 (Rowley, Christopher, Veeder), where the tribunal had to consider challenges of jurisdiction and admissibility:

“54… At [106], the tribunal found that its “power to rule on the USA’s challenges necessarily derives from Chapter 11” the scheme of which was described as follows:

“(i)

Article 1101(1): This is the gateway leading to the dispute resolution provisions of Chapter 11. Hence the powers of the Tribunal can only come into legal existence if the requirements of Article 1101(1) are met;

(ii)

Articles 1116-1117: If Chapter 11 applies, an investor of a NAFTA Party has the right to submit a claim to arbitration in accordance with Articles 1116- 1117.”

55.

At [120], the tribunal stated that “in order to establish the necessary consent to arbitration, it is sufficient to show (i) that Chapter 11 applies in the first place, i.e. that the requirements of Article 1101 are met; and (ii) that a claim has been brought by a claimant investor in accordance with Articles 1116 or 1117 …. Where these requirements are met by claimant, Article 1122 is satisfied and the NAFTA Party’s consent to arbitration is established” (emphasis added).

56.

At [121], the tribunal continued: “in order to establish its jurisdiction, a tribunal must be satisfied that Chapter 11 does indeed apply … This means that it must, interpret, definitively, Article 1101(1) and decide whether, on the facts alleged by the claimant, Chapter 11 applies.”

The Judge accepted at [57] that this highly respected tribunal adopted an interpretation of NAFTA which analysed the requirements of Article 1101(1), the equivalent of Article 11.1(1) of the KORUS FTA, as conditions of the States’ consent to arbitrate. But he noted that it was common ground that at the jurisdiction phase Methanexwas not obliged to prove its factual case, merely to make credible allegations, a different concept of “jurisdiction” than that contained in section 30 of the 1996 Act and at issue in a section 67 challenge.

However, the Judge noted at [58] that there was a second jurisdictional award in Methanex following an amendment to Methenex’s claim and a rolled-up jurisdiction and merits hearing. The tribunal made a finding on the evidential record on the balance of probabilities that the “relating to” requirement of Article 1101 was not met in relation to the amended case, with the result that the USA succeeded on its jurisdictional challenge, and would have succeeded on the merits. Although the Judge does not say so expressly, this indicates that the tribunal did ultimately regard Article 1101 as jurisdictional as that concept is recognised in section 30 of the 1996 Act. Its approach in the Partial Award, by consent, was only partially to determine that issue of jurisdiction.

At [59] the Judge referred to another ITA award as follows:

“The same analysis of Article 1101 was adopted by another distinguished tribunal in Bayview Irrigation District et al v United Mexican States ICSID Case No ARB(AF)/05/01, Award of 19 June 2007 (Lowe, Gomez-Palacio, Meese). At [84], the tribunal quoted Article 1101 of NAFTA, before stating at [85]:

“The role of Article 1101 in determining the scope of the jurisdiction of tribunals established to hear Chapter Eleven claims is clear from the title of the Article. It defines the 'scope and coverage' of the entirety of Chapter Eleven, including both the scope and coverage of the substantive protections accorded to investors and investments by Chapter Eleven Section A and the scope of the rights to submit disputes to arbitration under Chapter Eleven Section B.””

At [60] to [63] the Judge referred to The Canadian Cattlemen for Fair Trade v USA Award on Jurisdiction, 28 January 2008 (Böckstiegel, Bacchus, Low), Grand River Enterprises v USA Award, 12 January 2011 (Nariman, Anaya, Crook) and Apotex Inc v USA Award on Jurisdiction and Admissibility, 14 June 2013 (Smith, Davidson, Landau), each an ITA award on jurisdiction under Chapter 11 of NAFTA and each following the approach in Methanex.

The Judge accepted at [63] that these decisions adopted the same interpretation of Article 1101 of NAFTA which Korea asked him to adopt for Article 11.1(1) of the Treaty, and he recognised the force of the consistent views of distinguished international arbitral tribunals. He was nonetheless not persuaded to adopt the same interpretation, noting that there did not appear to have been any argument on the point before the tribunals, that there were other routes to the same jurisdictional result and that NAFTA did not provide for arbitration in relation to breaches of investment authorizations and investment agreements as provided for in Article 11.16(1)(a)(i)(B) and (C) and (b)(i)(B) and (C) of the Treaty. Nor does NAFTA contain equivalent provisions to Article 11.22 of the Treaty.

At [64] the Judge recognised that the same points could not be made in relation to two awards under the Treaty, the first being Mason Capital LP v Republic of Korea Final Award, 11 April 2024 (Sachs, Gloster, Mayer) and the Award in the present case. However, whilst both the tribunal in Mason and the Tribunal in this case treated Article 11.1(1) as creating a “jurisdictional filter”, the Judge noted that there was no argument on the point, which was without practical consequence. He therefore viewed them as of little assistance. This aspect of the Award in Mason was, in any event, recently reviewed by the Singapore International Commercial Court (“the SICC”), a decision I consider below.

The Judge further rejected Korea’s argument that the NAFTA awards (and a 2006 commentary probably referencing the decisions in Methenex) were not merely persuasive but constituted “supplementary means of interpretation” including as part of “the circumstances of [the Treaty’s] conclusion” within the meaning of Article 32 of the VCLT. At [68] the Judge explained his view that the only decision which was in public circulation and available to inform the drafting process of the Treaty was Methenex. He considered that the interpretation adopted by one tribunal in a dispute involving one State relating to a different treaty, where there does not appear to have been argument on the issue, cannot realistically be said to establish a “meaning generally ascribed to [a] term by the broader international community of States” or represent a “surrounding circumstance” of a kind which can meaningfully inform the interpretation of the Treaty or be said to reveal the parties’ shared understanding of its terms.

In the light of the above reasoning, the Judge came to the clear view, summarised at [69], that the requirements in Article 11.1(1) do not constitute a limitation to the offer to arbitrate in Article 11.16, and, accordingly, that the issues which Korea seeks to raise by reference to Article 11.1(1) are not jurisdictional for the purposes of sections 30(1) and 67 of the 1996 Act.

The Judge considered whether to rule on the merits of Korea’s challenge on a contingent basis but decided at [79] that it was inappropriate to do so and simply dismissed the section 67 application.