Arbitration News – Jurisdiction of arbitral tribunal in state contracts
(Article by Dr. A. Tsavdaridis, published in the Arbitration & ADR Newsletter of the ILO on May 12, 2016)
When a national legal provision is fixed by means of a stabilisation clause in a concession agreement,
it becomes a contractual term of the agreement. Thus, any dispute relating to the interpretation and
application of the provision will fall under the scope of the arbitration clause contained in the
agreement and the arbitral tribunal’s jurisdiction.
Facts
A concession agreement for the building and operation of the Athens International Airport was
entered into between the government and a consortium of contractors led by Hochtief on July 31
1995 (ratified by Law 2338/1995). Article 25.1.1 of the agreement provided that “the provisions of
Article 26 of Law 2093/1992 as in force at the date of this agreement shall apply to the Airport
Company until and including 31 December 2015 or as otherwise provided herein, irrespective of any
future repeal or modification”.
Article 26 of Law 2093/1992 provided for tax exemptions in favour of airport construction
companies, transposing EU law on value added tax (VAT). Article 43.1 of the agreement also
provided that:
“any dispute under, pursuant to or in connection with this Agreement which is not resolved
in accordance with Article 44.1 (Resolution) or 44.1 (Panel) shall be referred to arbitration
by three arbitrators in accordance with the rules for the time being in force of the London
Court of International Arbitration.”
Following a 2011 tax audit, the Greek tax authorities imposed on the airport company additional
VAT for various transactions and the corresponding fines for incorrect VAT declarations. The
airport company initiated London Court of International Arbitration (LCIA) proceedings against the
Greek state. In 2013 the LCIA decided that the VAT and fines that had been imposed by the tax
authorities had violated Greek legislation – in particular, Article 26 of Law 2093/1992.
The airport company also filed proceedings before the Greek administrative courts for the
annulment of the additional VAT and fines. The Athens Administrative Court of Appeal held that
Article 26 was not part of the airport concession agreement, and that the reference to the provisions
of Article 26 in Article 25.1.1 of the agreement did not make them part of it.(1) As a result, the court
held that the arbitral award should be disregarded as the arbitral tribunal had had no jurisdiction to
decide on the application of Article 26. The airport company appealed before the Supreme
Administrative Court.
Desicion
The Supreme Administrative Court upheld the airport company’s appeal.(2) It held that as the
parties in the concession agreement had expressly provided that Article 26 of Law 2093/1992 would
be applied for the tax treatment of the airport company – in particular, that it would be fixed as it
was in force at the date of the agreement – Article 26 was a contractual term. As a result, the court
held that a dispute arising from this matter fell under the scope of the concession agreement’s
arbitration clause and thus under the arbitral tribunal ‘s jurisdiction.
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