An international arbitration tribunal handed long-time Squire Patton Boggs client, the Slovak Republic, one of the year’s largest investment treaty arbitration victories by fully dismissing a €128.4 million claim brought by a Polish mineral water producer. The tribunal’s decision concludes a four-year effort involving lawyers from 10 different Squire Patton Boggs offices.
The claim, which was originally for €166.3 million and was later reduced, was brought by Spółdzielnia Pracy “Muszynianka”, which bought the shares of a Slovak company, GFT Slovakia, with the intent to extract natural mineral water from Slovakia and pipe the water under the river demarcating the Slovak-Polish border, and then bottle the water in Poland. In 2014, the Slovakian parliament passed a Constitutional Amendment prohibiting the export of water sourced within the state by pipeline to protect its drinking water in an age of climate change.
Muszynianka brought the claim under the Polish-Slovak BIT and the UNCITRAL Arbitration Rules. The tribunal seated the arbitration in Switzerland and held a full merits hearing at the Peace Palace in The Hague in January 2019.
In its decision, the tribunal found that the Constitutional Amendment bears a reasonable relationship with the legitimate public policy objectives of water preservation, public health and regulation of the use of natural resources. It further held that the Constitutional Amendment was not discriminatory, was not targeted at Muszynianka and was proportional. Consequently, the tribunal found that any breach was inconsequential because it did not cause any loss to GFT Slovakia or Muszynianka, as further permits would have been required that could not have been obtained before the issuance of the Constitutional Amendment and would have been prohibited by the Constitutional Amendment after its enactment.
The tribunal, therefore, held there was no causation and rejected Muszynianka’s claim for damages in its entirety.
The cross-office team was led by partner Stephen Anway (New York) and consisted of partners Rostislav Pekař, Mária Poláková (Prague), David Alexander (Columbus), Tatiana Prokopová (Bratislava), Brian Hartnett, Will Sparks (Brussels), Alexis Martinez (Perth), Raúl Mañón (Miami) and Mark Stadnyk (Houston), as well as associates Eva Cibulková, Jakub Kamenicky, Katarina Ottova (Bratislava), Bernie Maier, Aleksandra Dziki (London), Matej Pustay and David Seidl (Prague).
This is Squire Patton Boggs’ third investment treaty arbitration (and third win) for the Slovak Republic. The other two were Eurogas v. Slovakia and Achmea II.