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- Arbitration courts can divide questions of their jurisdiction into several phases and decide on some jurisdictional issues at a later stage of the arbitration proceedings
- It is difficult to expect a final award before 2025
- In the event that the state loses, it would have very far-reaching consequences for the reputation of the Republic of Croatia in the international investment community
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Attorney Dalibor Valinčić, after the media reported that the International Centre for Settlement of Investment Disputes in Washington (ICSID) declared itself competent to conduct the arbitration proceedings in which Ivica Todorić is suing the Republic of Croatia, told Lider that ‘the decision of the arbitration court on jurisdiction is not publicly available and will not be available to the public unless the parties agree to its publication’.
For this reason, we do not know exactly what the arbitration court decided regarding its jurisdiction, but regardless, the decision to accept jurisdiction ‘generally means that the arbitration court is convinced that it can proceed with the process of determining the potential liability of the Republic of Croatia for violations of its obligations under international law’.
– However, arbitration courts can divide questions of their jurisdiction into several phases and decide on some jurisdictional issues at a later stage of the arbitration proceedings. Therefore, it is possible that the arbitration court in this arbitration has not yet resolved all questions of its jurisdiction and that some issues are still left for discussion and decision at a later stage.
EU member states have frequently raised objections regarding the lack of jurisdiction of arbitration courts established under the ICSID convention in such arbitration proceedings against investors from other EU states due to the element that the entire dispute takes place within the EU. It is also possible that Croatia raised this objection and that the arbitration court’s current decision only addressed this objection. However, as I have already mentioned, the decision has not yet been publicly announced and its exact content is not known – says Valinčić.
Very complex dispute
Let us recall that Valinčić is an attorney with experience in arbitrations and a good interlocutor when discussing ICSID, as he represented MOL in proceedings against the Republic of Croatia, and last July, that arbitration court ruled in favor of the Hungarian company.
As for Todorić, he filed a lawsuit against Croatia in Washington in March 2020, but not as an individual; rather, it was done by his Dutch companies Adria Group B.V. and Adria Group Holding B.V., which were actually the owners of Agrokor.
According to the lawsuit, the Croatian government forced these two companies through its decisions to transfer control of Agrokor to the state, thereby unlawfully depriving them of their investment. When asked when a decision on the main issue (award) can be expected, Valinčić notes that this arbitration dispute is very complex for many reasons.
– Whether due to the factual context of the entire case, very interesting legal questions, or the amount of the claim made against the Republic of Croatia. I believe that the discussions in the proceedings will involve a large number of witnesses and experts, which will certainly require time for the arbitration court to discuss all this evidence. Depending on possible further decisions regarding its jurisdiction, as I mentioned earlier, I believe it is difficult to expect a final award before 2025 – he believes.
It is not possible to appeal against the award because, according to the ICSID convention, on the basis of which this arbitration court was established, the final award can only be challenged by a special request based on a very limited number of reasons.
– Therefore, if the party that loses the arbitration does not initiate proceedings to challenge the award, it will become final and enforceable immediately after its issuance. If either party initiates proceedings to challenge the award, a special commission will be established to consider the objections against the award. After the decision of the special commission, which is usually made very quickly, the arbitration award will be enforceable – says Valinčić.
Very far-reaching consequences
We asked him if he could assess what would happen if the judgment were in favor of Todorić, or the state. In the event that the state loses in this proceeding, or if it is confirmed that it violated its international legal obligations, this would, he believes, have ‘very far-reaching consequences for the reputation of the Republic of Croatia in the international investment community’.
– Of course, the issue of potential compensation payment is a specific issue that the Government of the Republic of Croatia and the Ministry of Finance will have to address, and which could have a relatively serious impact on the state budget. However, even if we exclude the issue of possible compensation payment, a decision determining the potential liability of the Republic of Croatia could significantly affect the international reputation of the Republic of Croatia among the investment community.
Furthermore, such a decision could put the decisions of national Croatian courts that have been made so far regarding the entire process of special administration over Agrokor and regarding Lex Agrokor in tension with the obligations of the Republic of Croatia under international law and the decisions of international courts – says Valinčić.
As we mentioned, some media report a figure of seven or eight billion euros in compensation that Todorić could receive if he wins in court in Washington. However, Valinčić did not want to speculate on this, stating only that in this case ‘it is not possible to say anything responsibly given the complexity of this matter’.
On the other hand, as he said, we still do not know what exactly ICSID accepted in Todorić’s lawsuit; the question is whether we will find out if the parties in the proceedings do not agree on this, and for this reason, it is also impossible to assess potential compensations. In any case, whatever it may be, the decision of the American court will be binding on all parties.
