Republic of Korea v Elliott Associates LP – Jurisdictional Challenges in English-seated investment arbitrations

Republic of Korea v Elliott Associates LP – Jurisdictional Challenges in English-seated investment arbitrations

Introduction

Under s.67 of the Arbitration Act 1996 (the “1996 Act”), a party can challenge a London-seated award on grounds that the tribunal lacked substantive jurisdiction. Most of these challenges fail. However, in the case of Republic of Korea v Elliott Associates LP [2025] EWCA Civ 905, the English Court of Appeal (“CA”) allowed the appeal against a judgment that had rejected a s.67 challenge. By doing this, the CA kept the s.67 challenge alive and the award temporarily unenforceable in England.

The case concerned the interpretation of a free trade agreement between Korea and the United States (“FTA”). Alleging violations of the FTA, the US-fund Elliott Associates LP (“Elliott”) commenced arbitration against the Republic of Korea (“Korea”).

In the English High Court (“HC”) proceedings, Korea argued that the tribunal lacked jurisdiction because investment substantive requirements of the offer to arbitrate were not met. The HC rejected this challenge. Based on an interpretation of the treaty under the Vienna Convention on the Laws of Treaties of 1969 (“VCLT”), the CA overturned the HC’s judgment. The CA found that for Korea’s offer to arbitrate to be effective substantive investment requirements must be satisfied. If such requirements are not met, the offer is not valid and the tribunal lacks jurisdiction.

The CA thus could have opened the door for these investment issues to be resolved by the English Court before the tribunal issues its decision (s.32 of the Arbitration Acts of 1996 and 2025 (the “Acts”)) or after the tribunal has decided it (s.67 of the Acts). Whether a party should challenge the tribunal’s jurisdiction before or after the tribunal’s decision would depend on its litigation strategy.

In this piece, we first provide a summary of the dispute’s factual background, which we will use as a case study. We then summarize the HC’s decision and the CA’s grounds for granting the appeal. We finalise with a commentary about the lessons from this case and how jurisdictional challenges under s.32 and s.67 intertwine and when, and how, they can be available for a party. In such commentary, we consider the impact of the Arbitration Act 2025 (the “2025 Act”).

Factual Background

In April 2018, Elliott commenced an UNCITRAL arbitration against Korea. The arbitration was seated in London. Elliott claimed that Korea had breached the FTA. Elliott argued that Korean governmental authorities interfered to procure a merger involving a company in which Elliott had invested, Samsung C&T.1

Although Korea challenged the tribunal’s jurisdiction in the arbitration, in 2023 the tribunal found in Elliott’s favour. Korea filed a jurisdictional challenge under s.67 of the 1996 Act against the award before the HC. Korea argued that the FTA’s offer to arbitrate in FTA’s article 11.16 (the dispute resolution clause) contained the conditions of FTA’s article 11.1(1)2 (the “scope and coverage”

subparagraph of the investment section). As a result, such conditions had to be satisfied for the offer to be effective.

The HC rejected Korea’s challenge. As the CA summarized, the HC found that “the “States’ offer to investors to arbitrate in Article 11.16 of the Treaty was freestanding and not conditional on the requirements of Article 11.1(1) being met. It followed that Korea’s challenges did not go to the substantive jurisdiction of the Tribunal.”3 It followed that the tribunal had jurisdiction to determine whether such requirements had been met.

The HC granted permission to appeal before the CA on the grounds that the contrary argument had real prospect of success and that the point was important in the context of challenges against investment treaty awards.4

The Court of Appeal’s Decision

Toolkit to Interpret the FTA

The HC had held that in interpreting the FTA, the HC had to consider “national policy reasons.”5 One of such reasons was to avoid having a municipal court deciding de novo whether an investment complied with the requirements of the FTA as a first step for the offer to arbitrate to exist.

The CA disagreed. Since the FTA is an international treaty, the CA determined that it had to apply the VCLT’s interpretation tools (articles 31, 32 of the VCLT). The CA held that it is irrelevant whether a municipal court would resolve the issue de novo (in addition to the determination of the tribunal).6

The CA noted that English interpretation principles were irrelevant in interpreting the FTA. The FTA required an interpretation that was equal and uniform with the court of the signatory jurisdictions.7 In reaching its conclusion, the CA found that there was no suggestion that “Korea and the USA had in mind English domestic law as to jurisdictional challenges to arbitration awards, and there is therefore no basis for importing and applying “rules” of construction or presumptions drawn from a collection of first instance decisions of the English courts.”8

CA’s Interpretation of the FTA

As mentioned above, the main debate concerned whether the offer to arbitrate was conditional upon the requirements of article 11.1(1) being met. If they had to be met, a mere allegation that the requirements had been fulfilled was insufficient to confer jurisdiction on the tribunal.

The CA held that article 11.1(1) applied to article 11.16 “and impose[d] jurisdictional limitations on the offer to arbitrate”.9 The CA therefore granted the appeal and held that the HC would have to determine on the merits whether the requirements were met.

Commentary

Uniformity on the Interpretation of Treaties

The CA’s decision provides clarity on the interpretation tools that the English Court will apply in interpreting international treaties. By the English Court holding that English interpretation principles are not relevant, it sought to use international tools to interpret international treaties. This seems to follow the same principle of the English Court in Enka Insaat Ve Sanayi AS (Respondent) v OOO Insurance Company Chubb (Appellant) [2020] UKSC 38 where the Court held that the New York Convention requires a uniform approach instead of a local one.10 As a result, both the English courts and investment arbitral tribunals would apply the same interpretation toolkit, the VCLT.

Litigation de novo of s.67 challenges

It appears that the HC was concerned that the matter would be relitigated de novo and would have to determine whether the offer to arbitrate was effective. As a result of the CA’s decision, the HC will have to decide such dispute applying the VCLT principles.

Under the prior version of the English Arbitration Act, the 1996 Act, s.67 provided that issues of jurisdiction would be determined de novo before the English Court. This act applied to the Elliott v Korea dispute since the arbitration was commenced before the 2025 Act became effective on 1 August 2025 [see s.17 of the 2025 Act].

The 2025 Act modified s.67 of the 1996 Act. For arbitrations commenced on or after 1 August 2025, jurisdictional issues resolved by the tribunal or arguments/exhibits that could have been put before the tribunal by a party that participated in the arbitration cannot be relitigated de novo before the English Court. Under the 2025 Act, a s.67 challenge is limited to grounds or evidence that the applicant did not know or could not have discovered during the arbitration.

Until a s.67 challenge is resolved, an English award cannot be enforced in England11 and most likely will be considered an award under challenge at the seat for purposes of the New York Convention, therefore its enforceability may be affected.

Preliminary Issues of Jurisdiction under s.32

Another point to consider is the application of s.32 of the Acts. This point did not arise in Elliott v Korea. Under s.32 of either act, the English Court can decide a preliminary issue of jurisdiction. For a s.32 application under the 1996 Act to be brought before the English Court, it requires one of two events to take place: (1) the parties’ agreement or (2) that the tribunal gives permission and the Court is satisfied the application was brought without delay, would save costs, and there is good reason for the Court resolve such point. On the other hand, the 2025 Act only requires (1) the parties’ agreement or (2) the tribunal’s permission.

Following the CA’s decision that conditions need to be met for a treaty’s offer to arbitrate to be effective, it is possible that a state — that receives a claim under an investment treaty with the arbitral seat in England — could request with the investor’s consent the English Court to resolve the jurisdictional issue before the tribunal does so.

If the investor does not consent, the state may unilaterally request the tribunal to grant permission for the jurisdictional issue to be decided by the English Court.12 Whether the tribunal may do so would depend on the circumstances of the case. Here, we note that under paragraph 4 of s.32 (of either act), the tribunal may continue with the arbitration and reach a decision while the s.32 proceedings are ongoing. The tribunal may also allow a stay of the arbitration if the jurisdictional issue is bound up with the substantive issues for determination.

In the absence of a stay, the tribunal and the English Court could be in a race to decide the jurisdictional issue. After the CA’s decision, it appears that the tribunal and the English Court would use the same interpretation principles based on the VCLT. A decision from the English Court may be useful for the tribunal since it could prevent an after-the-award jurisdictional challenge in England (if England is the seat). However, it would not necessarily shield the award from a jurisdictional challenge in a jurisdiction (other than England) where enforcement is sought.

S.32 of the 2025 Act states that: “An application under this section must not be considered to the extent that it is in respect of a question on which the tribunal has already ruled.” This means that if the tribunal already decided on the same jurisdictional issue, a party cannot apply under s.32 to have the same issue be resolved by the English Court. A party seeking to challenge jurisdiction under s.32 could thus be best placed seeking a stay of the arbitration (whether by consent or on application to the tribunal), simultaneously with the s.32 application.

The Review of the Arbitration Act 1996, Summary of Final Report reflected that the idea behind such reform was for jurisdictional challenge have two possible avenues: (1) the tribunal rules on jurisdiction and such decision can be challenged under s.67, but not with a full relitigation; or (2) the issue is preliminary decided by the English Court via s.32.13 In the circumstances, it would be difficult to see the English Court entertaining a s.67 challenge arising out of the tribunal award, when such tribunal’s jurisdiction has been subject to a s.32 jurisdictional challenge.

These changes narrow the scope for jurisdiction challenges. Such challenges now need to pass through either the ‘tribunal permission’ route under s.32 (assuming the other party does not agree) or a challenge under s.67 without full relitigation. This is pro-tribunal change. It also incentivises jurisdictional challenges earlier in the process via s.32. It will be interesting to see if the tribunal’s grounds for dismissing a request for permission under s.32 could be challenged under s.67 or otherwise.

Final Conclusions

1. The CA clarified that to interpret a treaty, English courts must apply the VCLT and not English principles of interpretation.

2. The CA found that for Korea’s offer to arbitrate to be effective, the substantive requirements regarding the investment must be satisfied. As such, s.32 and s.67 of the 1996 Act and 2025 Act could apply to such issues under other investment treaties.

3. If the arbitration commenced before 1 August 2025, parties can still obtain a de novo review of a jurisdictional challenge under s.67 of the 1996 Act.

4. Whether a party should apply to the English Court to resolve the jurisdictional issue (1) before the tribunal has resolved the jurisdictional challenge (s.32) or (2) after the tribunal has reached its decision (s.67) would depend on the litigation strategy of such party. There are important considerations for either option.