AS PNB Banka and others v. Republic of Latvia

Case summary

At a glance

Parties: AS PNB Banka (formerly AS Norvik Banka) (Latvia), Grigory Guselnikov, Yulia Guselnikova, Alexander Guselnikov, Aglaya Guselnikova and Pyotr Guselnikov (United Kingdom) v. Republic of Latvia
Case no.: ICSID Case No. ARB/17/47 (earlier styled AS Norvik Banka and others v. Republic of Latvia)
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules
Treaty: UK–Latvia BIT (signed 24 January 1994, in force 15 February 1995)
Tribunal: James Spigelman (President), Peter Tomka, John M. Townsend (replaced Stanimir Alexandrov, who resigned on 26 September 2018)
Sector: Banking
Outcome: Latvia's intra-EU (Achmea) objection to jurisdiction rejected on 14 May 2021 and the case sent to the merits. The published documents do not show the outcome on the merits.
Amount: No amounts stated in the published documents. Costs reserved to the final award.

The dispute

The claimants are a Latvian bank, AS PNB Banka (formerly AS Norvik Banka), and members of the Guselnikov family. The family members are UK nationals who controlled the Bank, and on that basis the Bank was treated as a UK national under Article 25(2)(b) of the ICSID Convention. They filed claims against Latvia under the UK–Latvia BIT. Their Memorial on the Merits alleges a scheme by Latvia to destroy the Bank and deprive it of its assets, including the harassment and attempted extortion of Mr Guselnikov by Mr Rimšēvičs. After the case was filed, the ECB found on 15 August 2019 that the Bank was "failing or likely to fail". The Riga City Vidzeme District Court then declared the Bank insolvent on 12 September 2019 and appointed Vigo Krastiņš as administrator. The shareholder claimants notified an ancillary claim challenging that insolvency. Latvia's main preliminary objection was that, after the CJEU's Achmea judgment, the investor-State arbitration clause in an intra-EU BIT is unavailable. The insolvency also led to a contest over who could represent the Bank in the arbitration, and to challenges to the whole Tribunal.

Key holdings

While a challenge to an arbitrator is pending, the proceeding is suspended under ICSID Arbitration Rule 9(6). The two unchallenged arbitrators therefore had no power to recommend provisional measures, and ICSID tribunals have no inherent or implied power that overrides that express rule. Ruling of 24 September 2018, ¶¶ 7–11
The European Commission was granted leave to file a written non-disputing party submission on whether the BIT's investor-State arbitration mechanism remains available. It was refused access to the record and the right to make oral submissions. Procedural Order No. 3, ¶¶ 52–61
The Chair of the ICSID Administrative Council decided as follows. Who represents a party is for the Tribunal, and the Chair defers to the Tribunal's decision in Procedural Order No. 8 recognising the administrator. Mr Behrends, acting for the former board, therefore had no standing to propose disqualification on behalf of the Bank. The shareholder claimants' proposal to disqualify all three arbitrators was also rejected: complaints about the Tribunal's reasoning did not show an evident appearance of lack of independence or impartiality. Decision on Disqualification, ¶¶ 137, 144–149, 166, 203
EU law is not the law applicable to jurisdiction, and Article 42 of the ICSID Convention governs only the merits. CJEU decisions are not "rules" of international law under VCLT Article 31(3)(c). The 15 January 2019 Declaration and the Termination Agreement do not interpret or apply the BIT, so they do not remove Latvia's consent. The UK is not a party to the Termination Agreement, and the BIT has not been terminated. Decision on the Intra-EU Objection, pp. 139–145
No conflict rule makes EU law prevail over Article 8 of the BIT. Primacy is not a conflict rule of international law. The BIT was not suspended under VCLT Article 59(2), because the notification procedure was not followed and no intention to suspend was shown. Under Article 30 there is no actual incompatibility. Achmea is EU constitutional law, so it is internal law that VCLT Article 27 bars Latvia from invoking. Latvia's consent was not suspended, superseded or vitiated, and the claimants accepted it by filing the Request for Arbitration. Decision on the Intra-EU Objection, pp. 153–167
Only the jurisdictional objection was bifurcated. Latvia's applicable-law admissibility objection repeated the jurisdictional objection under another label. All other admissibility objections were reserved to the merits, and costs were reserved to the award. Decision on the Intra-EU Objection, pp. 172–176
Representation of a deemed-foreign corporate claimant is a matter of international law, decided under the Tribunal's procedural powers. The real issue is conflict of interest, not authority. The administrator is not shown to be dependent on Latvia, so he represents the Bank on all issues except the shareholders' Ancillary Claim on the insolvency. On that claim the former Directors represent the Bank. Mr Behrends, the former Council members and the new shareholders have no authority. Procedural Order No. 9, ¶¶ 204, 227–231