AMF Aircraftleasing Meier & Fischer GmbH & Co. KG v. the Czech Republic

Case summary

At a glance

Parties: A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG (Germany) v. the Czech Republic
Case no.: PCA Case No. 2017-15
Forum and rules: UNCITRAL Arbitration Rules 2010; PCA as registry. PO 1 and PO 2 fixed the seat in Zurich, Switzerland. The award's cover and signature page give the place of arbitration as Paris, France.
Treaty: Germany–Czech Republic BIT (signed 2 October 1990; in force 2 August 1992)
Tribunal: Prof Pierre Tercier (President), Prof Stanimir A. Alexandrov, Ms Jean E. Kalicki
Sector: Aviation; aircraft leasing; bankruptcy proceedings
Outcome: Final Award of 11 May 2020: jurisdiction upheld, including over the intra-EU (Achmea) objection, but all claims dismissed on the merits. Alexandrov attached a Separate Declaration.
Amount: Claimed: USD 375,328,861.00 (principal USD 190,752,000.00 plus interest). Awarded: nothing. Costs of the proceedings (USD 800,000) split equally, USD 400,000 per party. Each party bears its own legal costs. Respondent's USD 30,000 supplementary deposit is returned to it.

The dispute

AMF is a Hamburg limited partnership whose limited partners are Václav Fischer and Stephan Meier. In 1997 it bought two Boeing 737-33A aircraft from Fischer Air for USD 35,700,000.00 each (one through AVF, which later merged into AMF) and leased them back to Fischer Air, later renamed Charter Air. In October 2005 the trustee in Mr Fischer's Czech bankruptcy put the aircraft into his bankruptcy estate. In 2006 the trustee of Charter Air put them into Charter Air's estate as well. While exclusion proceedings went on in the Czech courts, the parked and uninsured aircraft deteriorated. They were auctioned on 28 January 2010 to AerSale Inc. for USD 2,188,750.00. The Czech courts later confirmed that AMF was the owner and excluded the sale proceeds from the estate. AMF claimed creeping expropriation and breaches of fair and equitable treatment, full protection and security, and the bar on arbitrary and discriminatory measures. The Czech Republic objected to jurisdiction (Achmea and intra-EU BITs, investor status, the existence of an investment, abuse of right). On the merits it argued that the trustees' acts were not attributable to it and that the bankruptcy proceedings were a lawful exercise of police powers.

Key holdings

Achmea objection rejected. Article 10 of the BIT is a valid standing offer to arbitrate under international law. The January 2019 declarations of the Member States do not fall under Article 31(2) or (3) VCLT and cannot apply retroactively. Articles 30 and 59 VCLT do not apply because the BIT and the EU treaties do not relate to the same subject matter. The CJEU's Achmea judgment does not bind a tribunal on the international plane, and the BIT has no clause making EU law the applicable law. The dispute is arbitrable under Article 177(1) of the Swiss PILA, and comity does not justify declining jurisdiction. ¶¶ 330–414
AMF is a protected investor. 'Sitz'/'sídlo' in the authentic texts means 'seat', in the sense of the effective place of management, and AMF's seat is in Germany. AMF also invested actively, because it bought the aircraft itself. The aircraft and the 30-year leases are an investment: they involved a contribution, duration and a risk beyond ordinary commercial risk. Bringing parallel Czech court proceedings was not an abuse of right. ¶¶ 441–490
The acts of the bankruptcy trustees are attributable to the Czech Republic under Article 5 ARSIWA, because trustees exercise powers entrusted to them by law. The Tribunal left open whether trustees are de jure State organs under Article 4. Article 8 does not apply. ¶¶ 546–552
No expropriation. Temporary sequestration of disputed assets in bankruptcy can amount to expropriation only if it is unlawful, in bad faith or carried out with an expropriatory purpose, or if the asset (or its value) is not returned once ownership is decided. Here the trustees and courts acted in accordance with Czech law and in good faith. Efforts to lease, insure or sell the aircraft were blocked partly by AMF and HSH, and the sale value was returned to AMF. ¶¶ 624–628
No breach of full protection and security. The standard includes legal security, meaning a duty of due diligence to keep a functioning judicial system available. AMF had full access to the Czech courts and received timely, and ultimately favourable, rulings. AMF did not show that the Czech insolvency framework falls below international standards. ¶ 661
No breach of fair and equitable treatment, and no denial of justice. Even viewed cumulatively, the treatment was not unfair. The FET clause in this BIT does not impose a duty to provide a fully effective remedy that preserves contested assets until ownership is decided; the BIT has no 'effective means' clause like Article 10(12) of the ECT. The Tribunal noted significant problems with AMF's case on causation and quantum. ¶¶ 704–709
Costs split. AMF lost on the merits, but the Czech Republic lost on all its jurisdictional objections, and the case was complex. Each party bears half of the costs of the proceedings (USD 400,000 each) and its own legal costs. ¶¶ 731–739
Separate Declaration of Alexandrov. He disagreed with the majority on expropriation and FET. In his view the question is the effect of the measures, not intent. He found that the overall treatment, in which AMF was vindicated only after the aircraft had been lost, was not just and equitable, and that the Czech Republic was liable. He doubted, however, that AMF had proved and quantified its loss. Separate Declaration

Procedural history

1 February 2016AMF delivers its notice of the dispute to the Czech Minister of Finance.
30 November 2016Request for Arbitration filed.
7 April 2017Tribunal constituted after both parties confirm Pierre Tercier as President.
14 June 2017Procedural Order No. 1: seat in Zurich, UNCITRAL Rules 2010 apply.
28 March 2018Procedural Order No. 4 denies the Czech Republic's application for security for costs.
24 May 2018Procedural Order No. 5 rejects the request to bifurcate the intra-EU objection.
16 January 2019 – 13 March 2019Proceedings suspended for non-payment of AMF's share of the supplementary deposit (PO 8), then resumed after AMF paid (PO 9).
5 April 2019Procedural Order No. 10 grants the European Commission leave to intervene as a non-disputing party. Its amicus brief follows on 29 April 2019.
27 August 2019Hearing at the Peace Palace in The Hague.
11 May 2020Final Award: jurisdiction upheld, all claims dismissed, costs shared equally. Alexandrov attaches a Separate Declaration.

Tribunal, counsel and experts

Decided by: Pierre Tercier President — chosen by the co-arbitrators
Stanimir A. Alexandrov Co-arbitrator — appointed by the claimant (Separate Declaration disagreeing on expropriation and FET)
Jean E. Kalicki Co-arbitrator — appointed by the respondent
For the respondent: Ministry of Finance of the Czech Republic · Dechert LLP