UNCITRAL tribunal takes purposive approach to negotiation clause but assignment not an investment

An UNCITRAL tribunal has considered an investor's obligation to explore settlement negotiations before commencing arbitration and the question of whether an assignment could amount to a qualifying investment. Alps Finance and Trade AG (Alps) alleged that the Slovak Republic had breached its obligations under the Switzerland-Slovak bilateral investment treaty (BIT) by failing to protect Alps' "investments" consisting of the acquisition, by way of assignment, of certain receivables from a private Slovak company. Alps was subsequently unable to enforce its claims arising under the assignment in the Slovak courts.

The tribunal adopted a purposive approach to the admissibility of the claim when considering whether Alps had complied with its obligation to attempt to settle the dispute before commencing arbitration proceedings. The tribunal considered a number of awards that illustrate that a "less formalistic view" is being taken to the interpretation of negotiation clauses and demonstrate a jurisprudential trend towards regarding these provisions as not being jurisdictional in nature. On the facts, the pre-arbitration correspondence from Alps "abundantly" fulfilled the requirements of the negotiation provision, which did not impose any specified formalities for the consultations. Further, Slovakia had unquestionably been given the opportunity to redress the matter before the start of the arbitration.

However, the tribunal went on to decline jurisdiction on the basis that Alps did not have a qualifying investment. The tribunal concluded that despite the very broad definition of "investment" in the BIT, the assignment could not be classified as an investment. The assignment had no "ongoing duration" and its effects took place immediately. These conclusions on the meaning of an investment under the BIT were sufficient for the tribunal to decline jurisdiction. However, the tribunal observed that the BIT definition of investment is not an entirely self-standing concept and it was therefore appropriate for it to interpret the BIT definition of investment consistently with the general international law criteria. The assignment was far from satisfying the established criteria (which include a capital contribution to the host state and a significant duration for the project). Furthermore, previous decisions on the issue demonstrate that there is a "prominent doctrine to exclude in categorical terms that a mere one-off sale transaction might qualify as an investment".

Case: Alps Finance and Trade AG v Slovak Republic (Switzerland/Slovak Republic BIT) Award (redacted version), 5 March 2011.