B3 Croatian Courier Coöperatief U.A. v. Republic of Croatia

Case summary

At a glance

Parties: B3 Croatian Courier Coöperatief U.A. (Netherlands) v. Republic of Croatia
Case no.: ICSID Case No. ARB/15/5
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceedings Paris (Procedural Order No. 1)
Treaty: Croatia–Netherlands BIT (signed 28 April 1998, in force 1 June 1999)
Tribunal: Bernard Hanotiau (President), Stanimir Alexandrov, Brigitte Stern
Sector: Postal and courier services; regulation
Outcome: Croatia breached fair and equitable treatment (Article 3(1)), but the expropriation claim and the claim for damages were dismissed. Croatia was ordered to pay the claimant's costs.
Amount: Damages awarded: none. Costs: Croatia to pay USD 554,616.31 (the claimant's share of the arbitration costs) and EUR 3,659,607.49 (the claimant's legal costs).

The dispute

B3 Croatian Courier, a Dutch cooperative incorporated on 31 March 2011, indirectly acquired 100% of a private Croatian postal operator on 1 April 2011. The operator competed with the State-owned national postal operator; its name is redacted in the published excerpts. The claimant alleged that the Ministry of Transport, the postal regulator HAKOM and the Croatian Competition Agency (CCA) failed to apply the regulatory framework, favoured the national operator and tried to re-monopolise the postal market. The alleged measures included a restrictive reading of "value-added services", unchecked predatory discounts, denial of network access, exclusion from public tenders and a compensation fund for the universal service. The claimant argued that these measures breached fair and equitable treatment and the non-impairment clause (Article 3(1)) and, by destroying the investment, amounted to indirect expropriation (Article 6). Croatia raised four jurisdictional objections: after the CJEU's Achmea judgment, the intra-EU arbitration clause was inapplicable; the claimant was only a "passive" investor; there was no investment under Article 25 ICSID; and the Tribunal lacked jurisdiction over events before the investment. On the merits it denied every breach and disputed causation.

Key holdings

The Achmea objection is dismissed. The Tribunal is not bound by the CJEU. Any incompatibility with EU law is not a ground of invalidity under the VCLT (and in any case not 'manifest' under Article 46). The BIT had not been terminated under VCLT Articles 65–67. The arbitration agreement, perfected in good faith by the Request of 14 January 2015, would survive under VCLT Articles 69–70 and ICSID Article 25(1). The arguments based on VCLT Article 30 and Article 351 TFEU fail because the BIT and the EU treaties do not have the same subject matter. ¶¶ 515–567
The BIT does not require an 'active' investor: acquiring shares is 'making' an investment. The indirect shareholding is an investment under both the BIT and Article 25(1) ICSID, whether or not the Salini criteria are applied. The Tribunal has no jurisdiction over events before 1 April 2011, but it does have jurisdiction over continuing conduct that began earlier and continued after that date. ¶¶ 582, 608, 613–616
Breach of Article 3(1) through arbitrary conduct. In 2012 and 2013 HAKOM wholly abandoned its duty to supervise the national operator's prices and discounts and ignored or delayed the competitor's complaints. The Tribunal held that this conduct could only be explained by a desire to protect the national operator. ¶¶ 891, 940–941
A further breach of Article 3(1). In the first half of 2013 HAKOM and the Ministry of Transport made a bad-faith attempt to re-monopolise public procurement of universal postal services after liberalisation. This is a breach even though the attempt failed. The other public-tender complaints fail. ¶¶ 998–1004, 1014
No breach in the other measures: the treatment of value-added services (reasoned and consistent, though not transparent), separate cost accounting, network access and the compensation fund. The 2012 and 2015 CCA decisions contained errors but followed due process and were made in good faith, so they were not arbitrary. ¶¶ 856, 888, 945, 986, 997
No expropriation. Because the CCA decisions stand, the national operator's discounts were lawful, so the competitor's losses reflected normal competition. The measures were not expropriatory, either one by one or taken together. ¶¶ 1057–1062
The damages claim is dismissed. The claimant calculated only the combined effect of all the measures, did not isolate the losses caused by HAKOM's conduct, and did not prove causation separately from its own business decisions. Even so, because a Treaty breach was found, Croatia bears all the arbitration costs and reimburses the claimant's legal costs. ¶¶ 1120–1125, 1142–1147

Procedural history

14 January 2015ICSID receives the Request for Arbitration; it registers the case on 3 February 2015.
28 July 2015The Tribunal is constituted.
22 April 2016Decision on Bifurcation.
13–24 March 2017Hearing on jurisdiction and the merits at the World Bank Paris Office.
17 April 2018Croatia asks for leave to raise a new jurisdictional objection based on the Achmea judgment; Procedural Order No. 5 (3 May 2018) grants leave.
15 March 2019Procedural Order No. 6 dismisses the European Commission's application of 6 March 2019 to intervene as a non-disputing party. The proceedings are closed on 19 March 2019.
5 April 2019Award: breach of Article 3(1) found; the expropriation and damages claims are dismissed; Croatia is ordered to pay the costs. Only excerpts are published.