Case Digest: Republic of Korea v Elliott Associates, LP

<center><span class="news-text_italic-underline">Judgment Date: 17 July 2025</span></center>

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Elliott Associates, a US investment fund, brought a claim under the US-Korea Free Trade Agreement (“<span class="news-text_medium">FTA</span>”), alleging that the Republic of Korea had breached the agreement by interfering with a vote on the merger of two Samsung entities. The dispute was referred to a London-seated arbitral tribunal, which concluded that it had jurisdiction under the FTA and awarded damages to Elliott.

Korea challenged the award under section 67 of the <span class="news-text_italic-underline">Arbitration Act 1996</span> (“<span class="news-text_medium">AA 1996</span>”), arguing that its consent to arbitration was conditional upon certain requirements being met under Article 11.1 of the FTA. Specifically, Korea contended that there had been no “measure” adopted by Korea relating to Elliott’s investment, which would trigger arbitration under Article 11.16 of the FTA. The first instance court (<span class="news-text_italic-underline">Republic of Korea v Elliott Associates LP [2024] EWHC 2037 (Comm)</span>) dismissed Korea’s challenge, ruling that Korea’s consent to arbitration was unconditional.

Korea appealed, with permission from the judge, to the English Court of Appeal.

Issue(s):

• Whether the English court should allow Korea’s jurisdictional challenge under section 67 of the AA 1996.
• Whether the proper interpretation of Article 11.1 of the FTA conditions Korea’s consent to arbitration.
• Whether the English court can determine issues of substantive jurisdiction under the FTA when they engage with national policy considerations and international law principles.

Decision:

The English Court of Appeal allowed Korea’s appeal and remitted the challenge to the Commercial Court for determination. The Court of Appeal held that:

• The interpretation of Article 11.1 of the FTA was central to determining whether Korea’s consent to arbitration was conditional. The court found that the judge had incorrectly interpreted the phrase “this Chapter” in Article 11.1 as limited to Section A of Chapter 11, which dealt with substantive investment protections. Instead, the court ruled that Article 11.1 applied to the entire Chapter 11, including the procedural arbitration provisions in Article 11.16.
• The court disagreed with the first instance judge’s approach, which had distanced the substantive provisions from the procedural ones and rejected the view that provisions in Section A could affect the offer to arbitrate in Section B.
• The issue of whether Article 11.1 conditioned Korea's consent to arbitration was an issue of international law, to be approached using the principles of treaty interpretation under the Vienna Convention on the Law of Treaties (“<span class="news-text_medium">VCLT</span>”), rather than relying on English case law or presumptions drawn from national policy considerations.
• As the judge at first instance had failed to properly address the merits of Korea’s jurisdictional challenge, the Court of Appeal remitted the matter to the Commercial Court for a complete determination of the jurisdictional issue.

Reasoning:

The Court of Appeal emphasised that the primary question was the interpretation of the FTA, specifically Article 11.1, under the principles of international law as set out in the VCLT. The court rejected the first instance judge's reasoning, which involved applying English case law and policy considerations to the interpretation of the treaty. Instead, the Court of Appeal ruled that whether Korea’s consent to arbitration was conditioned by Article 11.1 should be made through the proper application of international treaty law, not influenced by English law presumptions.

The court’s decision to remit the case underscores the importance of treating international treaties following their ordinary meaning, as understood by the VCLT, rather than through a domestic lens. This ruling also reinforces the principle that national courts must respect the interpretation of international treaties as the signatory states intended it.

Significance:

This decision is significant because it highlights the interplay between national arbitration laws and international treaty obligations. By emphasising the need to interpret treaties in line with international law principles, the Court of Appeal underscores the role of courts in ensuring that international agreements, such as investment treaties, are applied as intended.

Moreover, the decision clarifies the interpretation of provisions in investment treaties, especially regarding the conditions under which a state consents to arbitration. The ruling may have wider implications for other jurisdictions engaging with similar jurisdictional challenges under investment treaties.

This case also serves as an important reminder for practitioners in the field of investment treaty arbitration about the importance of properly interpreting treaty provisions governing arbitration, particularly when national policy concerns or domestic legal presumptions might influence the interpretation.

Conclusion:

The Court of Appeal’s decision in <span class="news-text_italic-underline">Republic of Korea v Elliott Associates, LP</span> provides crucial guidance on the interpretation of investment treaties, particularly in the context of jurisdictional challenges to arbitral awards. The case reinforces the principle that the interpretation of international treaties should be grounded in the VCLT and not influenced by national policy considerations or English case law. The remittal of the jurisdictional challenge to the Commercial Court for further determination ensures that the substantive issue regarding Korea’s consent to arbitration will be properly addressed in line with international law.