An Israel-based business that claimed the Czech Republic violated the bilateral investment treaty (BIT) between the two countries abused the system of international arbitration, according to a recent decision by the International Centre for Settlement of Investment Disputes (ICSID). Lawyers with Squire, Sanders & Dempsey L.L.P. successfully represented the Czech Republic in high-stakes arbitration that involved claims in excess of US$100 million.
“This case represents a significant legal decision in public international law because it illustrates how important it is for claimant parties to maintain transparency in tribunal matters,” said George M. von Mehren, head of Squire Sanders’ international dispute resolution (IDR) and non-US litigation practice. Von Mehren was lead lawyer on the case, working with Squire Sanders lawyers Rostislav Pekař (Prague) and Stephen P. Anway (Cleveland). The case was argued at the World Bank in September 2008.
The dispute stemmed from claims made by Israel-based Phoenix Action, which had purchased two metal trading businesses based in the Czech Republic. One business was involved in criminal proceedings relating to alleged custom duties evasion, and the other was involved in ownership disputes before Czech Republic courts. Phoenix Action claimed the litigation represented unfair and inequitable treatment by the Czech government, arguing it was denied justice due to the lengthy civil litigation and that the government acted unlawfully when it froze the bank accounts of the business involved in the criminal proceedings.
The international tribunal, however, ruled that the claimant’s acquisitions - which involved deals with family members - were part of a scheme to exploit the BIT between Israel and the Czech Republic. The tribunal added that the BIT violation claim constituted an abuse of the international investment protection regime. The tribunal dismissed all claims and ordered Phoenix Action to pay the Czech Republic’s legal costs.
This case marks the third recent instance when the Czech Republic has tapped Squire Sanders to represent it in major IDR matters. The firm represented the government in Nagel v Czech Republic, an investment dispute that also resulted in all claims being dismissed and the claimant ordered to pay most of the Czech Republic’s legal costs. Squire Sanders twice represented the government in major disputes with Nomura Investment Fund, S.A. and its affiliates. Those disputes, which involved claims totaling more than US$4 billion, were ultimately resolved in an amicable settlement.
The Squire Sanders IDR and non-US litigation practice has received distinctions including recognition by the Guide to the World’s Leading Experts in Commercial Arbitration, the 2008 GAR 100 and the biennial Arbitration Scorecard published by The American Lawyer, which has listed Squire Sanders among law firms handling the world’s largest and most significant IDR matters. To find out more, visit the firm’s IDR practice webpage.
About Squire Sanders: Founded in 1890, Squire, Sanders & Dempsey L.L.P. has lawyers in 32 offices and 15 countries around the world. With one of the strongest integrated global platforms and a longstanding one-firm philosophy, Squire Sanders provides seamless legal counsel worldwide.
Media Relations Manager
Squire, Sanders & Dempsey L.L.P.