Numerous scholars and practitioners have debated the fragmentation of international investment law. In particular, one question has been highlighted recently – whether the present investor-state dispute settlement mechanism is imbalanced and poses a threat to the host State’s regulatory power, or whether the current mechanism is able to strike a balance between investment protection and defending State’s right to regulate.

The State counsel play a role as necessary as associates in a law firm in the arena of investment arbitration. Jus Mundi is proud to present the special edition of the Arbitration Team of the Month featuring a government legal team. This month, we are delighted to present the Ministry of Finance of the Czech Republic along with an interview with Jaroslav Kudrna, who recently got promoted to the Head of International Arbitration and Investment Protection Unit of the State.

Recent victory cases analysis: AMF Aircraftleasing v. The Czech Republic

The Ministry of Finance of the Czech Republic has secured a major victory by the end of last year. In a decision rendered on December 8, 2020, the Swiss Federal Tribunal has declined the investors’ application to set aside the AMF Aircraftleasing v. the Czech Republic award rendered in 2020 by a Tribunal chaired by Pierre D. Tercier, which had dismissed the case on the merits.

The Czech Republic has seen off a pair of investment treaty claims initiated by businessman and former senator Václav Fischer and his company over investments in the travel sector. In both cases, the Czech Republic relied on ministry lawyers along with Dechert in AMF Aircraftleasing v. the Czech Republic and Zeiler Partners in Fischer v. the Czech Republic (I).

  • The first of these arbitrations was initiated in 2016 under the Czech Republic – Germany BIT by AMF Aircraftleasing Meier & Fischer GmbH & Co. KG, where Václav Fischer is a limited partner. The company claimed $375.3 million in damages for alleged misconduct in the 2005 and 2006 insolvency proceedings, which allegedly led to the insolvency register and the subsequent auction of the aircraft. An UNCITRAL tribunal composed of the presiding arbitrator Pierre D. Tercier and co-arbitrators Stanimir A. Alexandrov and Jean E. Kalicki by an award of May 11, 2020, ultimately dismissed all the claims on the merits and further ordered that each party to the dispute bear its own costs.
  • The second case was launched in 2018 under the same treaty by the former Czech Senator Václav Fischer. He claimed €60 million for the State’s allegedly incorrect official decisions and actions during his displacement from CK Fischer. The arbitration was terminated at an early stage due to Fischer’s failure to pay the required advances for costs. In an award issued on May 6, 2020, the same tribunal ruled in favor of the Czech Republic and granted the Czech Republic the right to reimbursement of the costs of the proceedings and the legal fees.


  • In 1996, Fischer Air bought two Boeing Model aircraft from Ansett Worldwide Aviation Limited. The purchase price of each aircraft amounted to USD$35.7million.
  • In 1997, AMF acquired two aircraft from Fischer Air and leased them back to Fischer Air.
  • In 2003, Mr. Fischer sold most of his interest in Fischer Air to a Czech investor Mr. Komárek, who renamed it Charter Air.
  • In 2005, Mr. Fischer initiated bankruptcy proceedings on his estate in Germany. Later, the Court of the first instance in Hamburg opened insolvency proceedings against Mr. Fischer. Meanwhile, Mr. Komárek’s company filed a petition for involuntary bankruptcy against Mr. Fischer in the Czech Republic. Mr. Fischer resisted the Czech proceedings and filed an appellate review with the Czech Supreme Court.
  • In 2006, Charter Air was declared bankrupt. Later, the Regional Court in Prague excluded the Aircraft from Charter Air’s bankruptcy estate.
  • In 2008, the Czech Supreme Court canceled the resolution of the lower courts, which declared bankruptcy against Mr. Fischer, as it had not been proven that Mr. Fischer had an establishment in the Czech Republic. In the same year, the aircraft had been included back into Charter Air’s bankruptcy estate.
  • In 2010, the High Court modified the Regional Court’s decision and declared that the Purchase Agreements were invalid. In the same year, the two aircraft were sold to AerSale Inc. for USD$2 million in an auction.
  • In 2013, the Supreme Court quashed the judgment of the High Court and concluded that AMF was the owner of the aircraft.
  • In 2016, AMF started arbitration proceedings against the Czech Republic under the Czech Republic – Germany BIT.

Tribunal constitution

Tribunal’s decision

  • The tribunal upheld jurisdiction but dismissed all the claims on the merits.
  • A majority of Pierre D. Tercier and Jean E. Kalicki held that bankruptcy proceedings could amount to expropriation only if they were carried out unlawfully or if contested assets were not returned to the owner. The FPS and FETclaims were also dismissed.
  • In a Separate Declaration, arbitrator Stanimir A. Alexandrov differed from the majority’s analysis on expropriation and the FET standard yet was unconvinced by the claimant’s case on valuation.

Legal rationale

  • On the merits, the tribunal first found the acts and omissions by the bankruptcy trustees and the courts were in compliance with Czech law. Notably, the legal requirement to err on the side of potential over-inclusion in the event of any doubts was subject to subsequent review by the courts in the context of exclusion proceedings.
  • The tribunal then turned to the expropriation It held that the bankruptcy proceedings were within the Czech Republic’s lawful regulatory power. The tribunal considered that in order to demonstrate expropriation, more is needed than the sequestration of the contested assets or their mere loss in value. It concluded that the temporary sequestration of disputed assets during bankruptcy proceedings could amount to expropriation only
    • if they were carried out unlawfully, in bad faith or with an expropriatory purpose, or
    • if the assets or their fair value at the time of determination are not returned to the owner.
  • With regard to the FPS claim, the tribunal agreed with the claimant on the “trend” to interpret the FPS standard as extending beyond mere physical protection to include elements of legal stability and security by the Azurix In particular, the tribunal cited the Parkerings award and the Frontier award, holding that the FPS standard encompasses legal security, in the sense of a duty of due diligence in maintaining a functioning judicial system that is available to foreign investors seeking redress.
  • The tribunal finally examined the FET It considered that “fairness” for the claimant under the FET standard consists not only of fairness in process (in the sense that the trustees and courts at all times complied with applicable law), but also fairness in effect (in the sense of ensuring claimant would be left in no worse position than before the proceedings). For the majority, the FET standard in the underlying BIT does not include an additional obligation to ensure a fully effective remedy against all harm. 

Interview with Jaroslav Kudrna

1. Congratulations on the AMF v. Czech Republic case, which marked the State’s 13th arbitration victory in a row! Can you share your understanding of the State’s right to regulate as a defense for expropriation claims?

This was a great success for the Republic and for my colleagues who worked on this case. Concerning your question, a legitimate exercise of the state’s police powers does not result in an obligation to compensate an investor. This well-recognized principle was raised by the Czech Republic in the AMF case in defense to the investor’s expropriation claim. The Czech Republic argued that carrying out bankruptcy proceedings is an exercise of the state’s police powers and does not amount to expropriation unless pursued unlawfully or with expropriatory purpose. The tribunal accepted the Czech Republic’s position and held that bankruptcy proceedings are in general within the state’s lawful regulatory powers. Therefore, to successfully claim expropriation, an investor has to establish a wrongful exercise of the state regulatory powers (here bankruptcy powers) such as a presence of expropriatory intent, unlawfulness or irregularity. None of these elements were present in the AMF case.

2. What do you think of the trend for interpretation of the FPS standard in covering more than mere physical security?

In recent years, the traditional interpretation of the FPS standard has been challenged and the decision in the AMFcase supports this trend. We have been following this development with great interest especially in regard to the underlying reasoning. Perhaps more attention could be given to the historical roots of the FPS standard and the scope, which has been attributed to it for over a century since it was first introduced in international treaties. In any case, in response to this trend, we have included a clarification in our model BIT that the FPS standard only relates to physical security. The EU and its Member States are adopting a similar approach in their free trade agreements such as CETA.

3. Congratulations on your recent promotion to Head of International Arbitration and Investment Protection Unit. What is your vision for this unit?

The primary goal remains winning cases for the Republic in a cost efficient manner. The key to that is to maintain and further develop a fine team of dedicated arbitration lawyers, which allows us to do more work in-house. A renegotiation of older BITs is also crucial in the mid to long term. The same applies to dispute prevention where we can take inspiration from other states that have a comprehensive system of investment dispute prevention. We also want to continue contributing to the arbitration community by hosting our annual Investment Treaty Arbitration Conference in Prague, which celebrated its 10th anniversary last year, and which we see as a place where state representatives can exchange views with other arbitration practitioners (lawyers, professors and arbitrators).

4. What are the advantages for the State for having its own arbitration team? Is this going to be a trend for more States? How does your team operate once there is an arbitration?

Concerning state representation in arbitrations, a one size fits all approach does not work. The Czech Republic has developed a model adjusted to our circumstances. We have a dedicated team of lawyers who have a good understanding of the field and necessary linguistic capabilities. We are able to work directly with an experienced foreign counsel and in most cases we can completely ensure the role of local counsel. This being said, we cannot replace foreign counsel entirely without incurring significant risks. We maximize the benefits of an in-house counsel model while mitigating some of the risks. In general, we need external counsel because of capacity issues. Furthermore, we want to have on our side someone with a lot of experience to prepare the case and conduct oral advocacy. We believe that teaming up with experienced external counsel allows us to achieve the best results. At the same time, taking on the role of local counsel makes us very involved in each case. We can thus engage with the lead counsel when the case strategy and brief outlines are being prepared. We also set internal deadlines to have sufficient time to comment on the briefs. Our model also allows us to both save significant costs and better monitor the remaining costs because we know what is being done on the case at any given moment.

5. Can you share what makes working in a government arbitration team appealing? Why should others consider it as a career option?

This might to some extent differ from state to state. The Czech Republic has been for better or worse a frequent subject of investment arbitrations for some time (in fact, it is the fifth most frequent respondent state in the world). When I joined the arbitration team, there were multiple new cases starting, including a multibillion dollar one. So I knew there was very interesting and challenging work ahead, which definitely motivated me. Given the experience I brought I also had the opportunity to manage the case teams early on. You also have the opportunity to work with different counsel, which allows you to see different ways of doing things. Moreover, you also experience the client perspective. As public officials, we still work hard, but there is definitely a better work-life balance compared to working in private practice. Last but not least, I am proud to use the experience and skills gained abroad to defend my country in investment disputes.

6. What is your understanding of leadership? Can you define some of the values that have helped your career?

I see leadership as steering the boat towards a common goal while bringing out the best of each person in the team. I believe that success comes from people working together, and the members of the team should feel valued and be recognized for their contributions. It is also essential to build trust within the team, as there is no great team without trust. Concerning the values that I’ve held during my own career, I would name perseverance, hard work and continuous self-improvement. To give just one example, as an LLM student, I used to hear from all directions that it was “impossible to land a job in the US”. Despite this, I persevered and focused on what was under my control: I worked extremely hard to achieve excellent academic results, published an article and dedicated myself to the job search. I also had the fortune of meeting someone extraordinary like Paul Friedland, who gave me an opportunity to launch my career. I have lived my American dream and I am grateful for it.

7. Do you have any other talents apart from being an amazing legal counsel to the State?

Dancing has a special place in my heart given that it was at a dance class in Paris where I met my wonderful wife more than ten years ago. Though as a disclaimer, I am not claiming that I have any special talent for it. Concerning other hobbies, I love spending time outdoors, which is something you can easily do from Prague. I enjoy skiing and in the summer hiking, cycling and swimming. In addition to arbitration practice, I am also interested in international arbitration from the academic perspective so I devote some of my free time to publications and speaking at conferences, as I enjoy this aspect as well.

Track-record highlights

According to the Ministry of Finance website, the Czech Republic has been involved in 40 investment arbitrations. Among these cases, the Czech Republic has obtained favorable results in 27 cases (including the Czech Republic prevailing and discontinued cases. See table of cases below).

In addition to the above-mentioned victories over Mr. Fischer and his company, the Czech Republic has prevailed in six of seven cases regarding the measures enacted in the solar power sector:

The Czech Republic also has a strong record of wins over cases brought under the Czech Republic – United Kingdom BIT:

  • In 2018, the Czech Republic prevailed in a US$25 million claim brought by British company A11Y. The tribunal found that the claimant had failed to meet its burden of proof to prove that the government’s actions had resulted in an expropriation.
  • In 2017, the Czech Republic prevailed in two related cases at the SCC brought by British Investors Anglia and Busta. The tribunal stated that in order to demonstrate expropriation, a permanent and irreversible deprivation must be evidenced.
  • In 2017, the Czech Republic prevailed in a US$90 million claim brought by the UK’s WNC Factoring. The tribunal rejected the claimant’s conspiracy claim, which led to the expropriation of its investment.

The Czech Republic is currently involved in seven arbitrations:

Table of investor-State arbitration cases involving the Czech Republic (recent victories/pending cases)*

To see all types of cases involving the Czech Republic available on Jus Mundi, please click here. We selected a few recent victories and ongoing cases of the Czech Republic in the table below.

CaseTypeInstitutionYear of introLatest UpdateStatus
JCDecaux SA v. Czech RepublicInvestor-StateICSID2020 SeptemberNot AvailablePending
A.M.F. Aircraftleasing Meier & Fischer GmbH & Co. KG v. Czech RepublicInvestor-StatePCA2016 November2020 DecemberDecided in favor of State
Václav Fischer v. The Czech Republic (I)Investor-StatePCA2018 October2020 MayDecided in favor of State
Alcor Holdings Ltd. v. The Czech RepublicInvestor-StatePCA2018 SeptemberNot AvailablePending
Diag Human SE and Mr. Josef Stava v. The Czech RepublicInvestor-StatePCA2018Not AvailablePending
Natland Investment Group NV, Natland Group Limited, G.I.H.G. Limited, and Radiance Energy Holding S.A.R.L. v. The Czech RepublicInvestor-StatePCA2013 May2020 FebruaryPending
Pawlowski AG and Project Sever s.r.o. v. Czech RepublicInvestor-StateICSID2017 May2020 JanuaryPending
Fynerdale Holdings BV v. The Czech RepublicInvestor-StatePCA2017 DecembweNot AvailablePending
Voltaic Network GmbH v. The Czech RepublicInvestor-StatePCA2014 April2019 MayDecided in favor of State
Photovoltaik Knopf Betriebs-GmbH v. The Czech RepublicInvestor-StatePCA2014 April2019 MayDecided in favor of State
WA Investments-Europa Nova Limited v. The Czech RepublicInvestor-StatePCA2014 April2019 MayDecided in favor of State
I.C.W. Europe Investments Limited v. The Czech RepublicInvestor-StatePCA2014 April2019 MayDecided in favor of State
A11Y LTD. v. Czech RepublicInvestor-StateICSID2014 October2018 DecemberDecided in favor of State
Antaris Solar GmbH and Dr. Michael Göde v. The Czech RepublicInvestor-StatePCA2013 May2018 MayDecided in favor of State
WCV Capital Ventures Cyprus Limited and Channel Crossings Limited v. The Czech RepublicInvestor-StatePCA20152018 MayPending
Mr. Jürgen Wirtgen, Mr. Stefan Wirtgen, and JSW Solar (zwei) GmbH & Co.KG v. Czech RepublicInvestor-StatePCA2013 June2017 OctoberDecided in favor of State
Anglia Auto Accessories Limited v. The Czech RepublicInvestor-StateSCC2015 January2017 MarchDecided in favor of State
J.P. Busta and I.P. Busta v. The Czech RepublicInvestor-StateSCC2015 January2017 MarchDecided in favor of State
WNC Factoring Ltd (WNC) v. The Czech RepublicInvestor-StatePCA2014 September2017 FebruaryDecided in favor of State
Forminster Enterprises Limited v. The Czech Republic,Investor-StateAd Hoc2017 January2014 DecemberDiscontinued
Anglia Auto Accessories, Ivan Peter Busta and Jan Peter Busta v. The Czech RepublicInvestor-StateSCC20142014 OctoberDiscontinued
ECE Projektmanagement International GmbH and Kommanditgesellschaft PANTA Achtungsechzigste Grundstücksgesellschaft mbH & Co v. The Czech RepublicInvestor-StatePCA20092013 SeptemberDecided in favor of State
InterTrade Holding GmbH v. The Czech RepublicInvestor-StatePCA2008 October2012 MayDecided in favor of State
Konsortium Oeconomicus v. The Czech RepublicInvestor-StateAd Hoc20082012 FebruaryDiscontinued
Peter Franz Vöcklinghaus v. Czech RepublicInvestor-StateAd Hoc20092011 SeptemberDecided in favor of State
Rupert Joseph Binder v. Czech RepublicInvestor-StateAd Hoc2005 March2011 JulyDecided in favor of State
Frontier Petroleum Services Ltd. v. The Czech RepublicInvestor-StatePCA2007 December2010 NovemberDecided in favor of State
Georg Nepolsky v. Czech RepublicInvestor-StateAd Hoc20082010 RebruaryDiscontinued
European Media Ventures SA v. The Czech RepublicInvestor-StateAd Hoc20052010 JanuaryDecided in favor of State
Invesmart v. Czech RepublicInvestor-StateAd Hoc20072009 JuneDecided in favor of State
Phoenix Action Ltd v. Czech RepublicInvestor-StateICSID2006 March2009 AprilDecided in favor of State
K+ Venture Partners v. Czech RepublicInvestor-StateAd Hoc20052006 DecSettled
ArcelorMittal Steel Company N.V. v. Czech RepublicInvestor-StateAd Hoc2005Not AvailableSettled
Saluka Investments BV v. The Czech RepublicInvestor-StatePCA2001 July2006 NovemberSettled
William Nagel v. The Czech RepublicInvestor-StateSCC2002 May2005 AugustDecided in favor of State

(Note*: This table is not exhaustive.)

Spotlight on the International Arbitration and Investment Protection Unit Team

Jaroslav Kudrna (Head of Unit)

Dr. Jaroslav Kudrna is the Head of the International Arbitration and Investment Protection Unit at the Ministry of Finance of the Czech Republic. He defends the Republic in investment arbitrations, negotiates BITs on its behalf and represents it in international forums, including UNCITRAL (WG III) and ECT Modernization Group. Prior to joining the Ministry in August 2017, Dr. Kudrna worked several years as an associate in the International Arbitration group of White & Case in New York where he focused on investment and commercial arbitration. He previously trained in leading law firms in Paris and Prague. Dr. Kudrna obtained a PhD in public international law at Charles University in Prague, an LLM in International Business Regulation, Litigation and Arbitration at New York University and Masters of Laws at the University of Strasbourg and Sciences Po Paris. Dr. Kudrna has passed the New York Bar and Paris Bar exams.

Anna Bilanová (Deputy Head of Unit)

Since joining the Ministry in 2014, Anna Bilanová has been involved in the representation of the Czech Republic in investment arbitration cases (including in the AMF case), negotiation of the BITs, representation of the Republic in the EU institutions (Trade Policy Committee S+I and expert groups relating to the intra-EU investments, including the preparation of the termination treaty) and international organizations, notably UNCITRAL (WG II and III) and ICSID (rule amendments process). She is a graduate of the Master of International Dispute Settlement (MIDS) in Geneva and the Faculty of Law of Masaryk University in Brno (including an exchange at the University of Fribourg).

Martin Nováček (Legal Advisor)

Martin Nováček’s practice focuses mainly on investment protection and international arbitration. A member of the arbitration team at the Ministry since 2015, he has participated in proceedings under the rules of ICSID and UNCITRAL and investment treaty negotiations on behalf of the Czech Republic.

Lucie Ostrá (Legal Advisor)

Lucie Ostrá is a legal advisor at the International Arbitration and Investment Protection Unit. Since joining the unit in 2019, she has worked on the defense of the Czech Republic in investment arbitrations conducted under the UNCITRAL Arbitration Rules, including the AMF case. She also represents the Republic in EU institutions in relation to investment protection issues.

Filip Černý (Legal Advisor)

Filip Černý is a legal advisor at the Ministry of Finance and a member of the investment arbitration team. Since joining the team in 2018, he has participated in several investor-state arbitration proceedings under the ICSID and UNCITRAL arbitration rules.

Vendulka Bátorová (Legal Advisor)

Dr. Vendulka Bátorová is a legal advisor at the International Arbitration and Investment Protection Unit. Since joining the unit in 2017, her practice focuses on the defense of the Czech Republic in investment arbitrations, enforcement of arbitral awards and preparation of asset sharing agreements.

Magdaléna Vodičková (Legal Advisor)

A member of the unit since 2007, Magdaléna Vodičková focuses on the negotiation of the BITs on behalf of the Czech Republic and on its representation in EU institutions in relation to the investment protection agenda, notably at the Trade Policy Committee S+I and in various expert groups.

The International Arbitration and Investment Protection Unit also comprises two economists responsible for economic and financial matters related to investment disputes.

For more information on the Czech Republic’s investment arbitration practice, click here.

Congratulations to the team again, and Jus Mundi wishes them good luck for the future!