Asael Halevi v. Czech Republic

Case summary

At a glance

Parties: Mr. Asael Halevi (Israel) v. the Czech Republic
Case no.: PCA Case No. 2022-33 (PCA acting as fundholder only)
Forum and rules: Ad hoc arbitration under the UNCITRAL Arbitration Rules 2010; seat London, England
Treaty: Czech Republic–Israel BIT (in force 16 March 1999)
Tribunal: Ms. Lucy Reed (Chair), Mr. Klaus Reichert SC, Mr. Sam Wordsworth KC
Sector: Real estate; residential development; church land restitution
Outcome: All claims dismissed (12 December 2024).
Amount: Claimed: CZK 165 million plus interest. Awarded: nothing. The Claimant bears the full arbitration costs (USD 291,403.07), so he must reimburse the Czech Republic USD 145,701.54. He must also pay 75% of the Czech Republic's legal and other costs, CZK 8,657,596.

The dispute

Mr. Halevi, an Israeli national, held a 22 percent share in the Czech company Ďáblické rezidence s.r.o., which he acquired on 7 April 2010 for CZK 44,000. On 23 April 2010 the company bought four plots of land in Ďáblice, Prague, for a residential project. The land had belonged to the Knights of the Cross of the Red Star and was nationalized after 1948. In 1998 the Land Fund released it as replacement land to Mr. Maixner and Mr. Fidrmuc, although Section 29 of the 1991 Act on Land barred transfers of former church property. After four lawsuits in the Czech courts, a judgment of the Municipal Court in Prague of 10 January 2019, given under Section 18 of the 2012 Church Restitution Act, declared the State the owner, and the land was later registered to the Knights of the Cross. Mr. Halevi claimed expropriation (Article 5(1)), breach of fair and equitable treatment and of full protection and security (Article 2(2)). The Czech Republic argued that the company never owned the land because the 1998 transfers were void ex tunc, so there was nothing to expropriate. It did not object to jurisdiction.

Key holdings

The company never validly acquired the Land. Section 29 of the Act on Land blocked any transfer of former church property, so the 1998 Original Land Transfers were void ex tunc and ownership remained with the Czech Republic. The Tribunal made its own determination under Czech law rather than simply deferring to the Czech courts. ¶¶ 308, 314, 353
No good faith acquisition and no usucaption. Mr. Maixner lost any good faith once the Knights of the Cross sued him in Lawsuit One, and at the latest with the first-instance judgment of 13 January 2004. His knowledge is attributable to the company and to Mr. Halevi. The ten-year usucaption period therefore fell some four years short. Land Registry entries, State letters, taxation and the 2005 Settlement Agreement did not change this. ¶¶ 330–332, 337–347
No estoppel. Mr. Halevi showed no reliance on an unambiguous State representation. In any case, estoppel under international law cannot create property rights that do not otherwise exist (following Vestey v. Venezuela). ¶¶ 350–352
Expropriation claim dismissed. Mr. Halevi had no right capable of being expropriated, so the Tribunal did not examine the arguments on direct, indirect or judicial expropriation. Absent an international-law defect, the Tribunal will not review the January 2019 Judgment as a court of appeal. ¶¶ 396–400
No breach of fair and equitable treatment. The doubts about title arising from Lawsuit One meant that no expectation of valid ownership in 2010 could be legitimate or reasonable. The Church Restitution Act was foreseeable from Section 29 itself and from a nearly identical 2008 bill. The Act was neither arbitrary nor disproportionate, since Mr. Maixner could have sought other replacement land or compensation. The Czech court proceedings did not administer justice in a seriously inadequate way. ¶¶ 510–513, 517–518, 527, 529–535
The full protection and security claim fails because it was not developed. The Tribunal did not decide whether the standard extends to legal security. ¶¶ 540–545
Costs. The Claimant bears all the arbitration costs and 75% of the Czech Republic's legal and other costs (CZK 8,657,596). The reduction reflects that the Land Fund's mistake invited litigation and that the Czech Republic shared responsibility for the extensive pre-hearing proceedings. ¶¶ 570–571

Procedural history

3 February 2022Request for Arbitration under Article 7 of the BIT.
30 May 2022The Tribunal is constituted. Ms. Reed was selected as Chair through an agreed list procedure.
22 July 2022Procedural Order No. 1 applies the UNCITRAL Rules 2010 and fixes London as the place of arbitration.
15 August 2022Decision on Bifurcation: quantum issues are bifurcated in part.
24 July and 21 November 2023Procedural Orders Nos. 6 and 7: the Czech Republic's application for security for costs is denied. The Claimant is directed to give undertakings over his house in Israel.
20–21 February 2024Hearing at the PCA in The Hague.
8 October 2024The proceedings are closed.
12 December 2024Final Award: all claims dismissed and costs ordered against the Claimant.

Tribunal, counsel and experts

Decided by: Lucy Reed President — chosen by the co-arbitrators
Klaus Reichert Co-arbitrator — appointed by the claimant
Sam Wordsworth Co-arbitrator — appointed by the respondent
For the claimant: Bříza & Trubač
For the respondent: Zeiler Floyd Zadkovich · Ministry of Finance of the Czech Republic