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Blogs - Arbitration Case Digest

Jurisdiction of Arbitral Tribunal Upheld in Investor-State Arbitration (Deutsche Telekom vs. Republic of India)

29.01.2019 – Case Number: 4A_65/2018 (11 December 2018)

In a decision dated 11 December 2018 and published on 27 December 2018, the Swiss Supreme Court rejected a request by the Republic of India to set aside an arbitral tribunal's interim award rendered under the UNCITRAL rules and seated in Geneva affirming its own jurisdiction over claims by the German Deutsche Telekom entity brought pursuant to the bilateral investment treaty between Germany and India (the "Germany-India BIT" or the "BIT").

India unsuccessfully asserted that the arbitral tribunal lacked jurisdiction over the German entity's claim under the Germany-India BIT because: (a) the claimant was an indirect investor making an indirect investment, (b) the claimant's activities were non-protectable "pre-investments"; and (c) India's conduct was protected by the national security exception, which, India asserted, functions as a jurisdictional prerequisite. In reaching its decision to reject India's appeal, the Court interpreted the terms "investment" and "investor," as used in the BIT; considered India's proposed distinction between protected investment activity and unprotected "pre-investments"; and evaluated the arbitral tribunal's consideration of India's invocation of the national security exception.

The Court held as to (a) that regarding indirect investment India's desired construction of the terms of the BIT was too narrow and not supported by the BIT; (b) that there exists no foundation for a distinction between establishment BITs, which protect investments from the time they are established, including "pre-investments," and admission BITs, which do not; and (c) that India's claim to the protection of the national security exception pertained to the merits of the case but were, in any event, not only procedurally foreclosed but also factually unsupported. (Decision 4A_65/2018.)