In The Kyrgyz Republic v (1) Stans Energy Corporation and (2) Kutisay Mining LLC  EWHC 2539 (Comm) the English High Court rejected a challenge to an award based on a lack of jurisdiction on the part of the Tribunal. The challenge was brought under Section 67 of the Arbitration Act 1996, which applies to all London seated arbitrations.
Although the claim concerned the investment protection legislation of Kyrgyzstan, and the application of Kyrgyz law, the Court’s ruling is instructive in the process that the English courts will follow in interpreting the meaning of foreign laws in general (including investment/investor protection legislation).
The background to the dispute
In 2009, investors acquired licenses to develop mineral deposits in Kyrgyzstan. Following the Kyrgyz revolution of 2010 and further governmental changes in 2011, the licenses were then annulled by alleged actions of the Kyrgyz state.
the Court’s ruling is instructive in the process that the English courts will follow in interpreting the meaning of foreign laws
The investors sought compensation under the 2003 Investment Law of Kyrgyzstan. The Preamble to the 2003 Investment Law stated that the law was aimed at “improving the investment climate in the republic and promoting the flow of local and foreign investment by providing investors with a fair and equitable legal regime and guaranteeing protection of their investments made into the economy of the Kyrgyz Republic”, to an extent mirroring the protection commonly present in bilateral investment treaties.
The 2003 Investment Law provided for “investment disputes” to be resolved by ad hoc arbitration under the UNCITRAL Rules 1976. Following an earlier arbitration in Russia (in respect of which the award had been set aside) the parties had agreed to conduct another arbitration, concerning the alleged breach of the ‘fair and equitable’ treatment standard and the expropriation of the licenses, this time seated in London.
The crux of the challenge
In that arbitration, the Tribunal had rendered an award rejecting the Republic’s objections to its jurisdiction. The Republic, accordingly, sought to challenge that award under Section 67 of the Arbitration Act 1996 (which is a mandatory provision, applicable to all arbitrations with seat in England and which enables a party to challenge an award on the basis that the tribunal lacked substantive jurisdiction). The outcome of this challenge hinged on the meaning of an “investment dispute”. At its most basic, the question before the Court was whether that term should be interpreted literally or contextually.
The Republic argued that there was a discrepancy between the “state” language (Kyrgyz) and the “official” language (Russian) of the 2003 Investment Law, such that under the Kyrgyz version only disputes arising out of the sale of an investment were arbitrable, meaning that the present dispute (not arising out of the sale of an investment) was outside the scope of the Tribunal’s jurisdiction.
The investors argued that the proper interpretation of “investment dispute” extended to disputes arising in the course of implementation, or in the process of, investments (without being limited to their sale). It was accepted by the parties that the Russian version of the law contained the latter (wider) definition of “investment dispute” advocated by the investors.
Literal interpretation rejected, jurisdiction upheld
Having reviewed the parties’ arguments, the High Court reiterated the established principle that issues of foreign law (including issues of interpretation of the provisions of foreign law) are to be determined in accordance with that law on the basis of expert evidence put before the Court – it is not appropriate to apply English principles of interpretation when interpreting provisions of foreign law. This case involved the interpretation of a Kyrgyz statute, and so fell to be determined in accordance with Kyrgyz law principles. The Court did not consider that reliance on judgments delivered in bilateral investment treaty claims or claims concerning international conventions to be of assistance, as this case concerned the interpretation of a foreign law.
it is not appropriate to apply English principles of interpretation when interpreting provisions of foreign law
Having reviewed the evidence of the parties’ Kyrgyz law experts, the Court found that both experts’ findings supported the proposition that, as a matter of Kyrgyz law on statutory interpretation, a word is not to be construed in isolation but as part of the sentence, article and the law in which it appears. Furthermore, the Court also preferred the expert evidence submitted by the investors which showed that the purpose of statutory interpretation in Kyrgyz law is to identify the statutory intention of the draftsman, which took into account the statutory context and purpose. The Court did so as “first and foremost” it saw it as being “consistent with the universal principle, as a matter of language, that the meaning of words cannot be ascertained divorced from their context…” (which could be taken as an indication that, although the matter ultimately fell to be determined by the applicable foreign law, an English court may be more inclined towards views which correlate with such an approach).
The Court therefore upheld the Tribunal’s jurisdiction on the basis that the term “investment dispute” was not limited to disputes arising on the sale of an investment, in light of: (i) the preamble of the 2003 Investment Law; (ii) the Russian version of the law; and (iii) the other provisions of the 2003 Investment Law, which demonstrated that the “archetypal protection” (arbitration) available to foreign investors is not limited to disputes arising on the sale of an investment, but extends to all disputes arising during the course of the investment. Furthermore, the Republic had not made out its case as to the meaning of the disputed wording by failing to adduce expert linguistic evidence supporting the interpretation which it advocated for.
The above findings may be of interest not only to cases concerning interpretation of investor protection legislation akin to the 2003 Investment Law, but also to cases dealing with the interpretation of foreign laws generally.
Editors’ Note: This post previously appeared on Arbitration Links by Linklaters, and is reproduced with permission and thanks.