Procedural Background

This judgment was rendered by the Swedish Supreme Court (Högsta domstolen) in a proceeding concerning a challenge to an arbitral tribunal's jurisdiction. The appellant, an investor, had initiated arbitration against Georgia at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). Georgia challenged the tribunal's jurisdiction, and the matter was brought before the Swedish courts. The Svea Court of Appeal had previously ruled that the arbitral tribunal lacked jurisdiction. The Supreme Court granted leave to appeal on the specific question of whether the tribunal had jurisdiction based on the interaction between two bilateral investment treaties (BITs).

The Supreme Court's Analysis on Jurisdiction

The central legal issue was whether the Most-Favoured-Nation (MFN) clause in the Bilateral Investment Treaty between Georgia and the United Kingdom could be invoked to import the more favourable dispute resolution provisions of the BIT between Georgia and the Belgo-Luxemburg Economic Union (BLEU). The UK-Georgia BIT provided exclusively for ICSID arbitration, a forum unavailable to the appellant due to his dual Georgian nationality. The BLEU-Georgia BIT, however, offered investors a choice of arbitral fora, including the SCC.

Applying the principles of treaty interpretation under the Vienna Convention on the Law of Treaties, the Supreme Court conducted a de novo review. It found that Article 3(3) of the UK-Georgia BIT explicitly extended the MFN treatment to all provisions in Articles 1 to 11, which includes Article 8 on dispute settlement. The Court held that this clear textual language demonstrated the contracting parties' intent to apply the MFN clause to dispute resolution mechanisms.

The Court further reasoned that a state provides its consent to arbitration through the combined effect of an MFN clause and the dispute resolution clause of a third-party treaty. By agreeing to the MFN clause, Georgia had consented to offer treatment no less favourable than that offered to investors under its other treaties. The Court determined that the option to choose between multiple arbitral institutions, as provided in the BLEU-Georgia BIT, was objectively more favourable than the single, unavailable forum stipulated in the UK-Georgia BIT. Consequently, the MFN clause could be used to establish the SCC tribunal's jurisdiction.

Decision and Operative Orders

The Supreme Court declared that Article 3 of the UK-Georgia BIT, in conjunction with Article 10 of the BLEU-Georgia BIT, provides a valid basis for the arbitral tribunal's jurisdiction over the dispute. However, the Court noted that this jurisdiction is contingent upon the appellant's compliance with the procedural pre-conditions set forth in Article 10 of the BLEU-Georgia BIT, such as requirements for a detailed written notification of the dispute and a cooling-off period.

As the Court of Appeal had not examined whether these procedural requirements were met, the Supreme Court set aside the lower court's judgment and remanded the case to the Svea Court of Appeal for a determination of these outstanding issues. The Supreme Court also granted leave to appeal for the remainder of the case and ordered that the issue of costs be decided by the Court of Appeal upon its final disposition of the matter.