R. Daujotas, ‘Foreign Investment Protection Regime of the Republic of Lithuania’ (2013) Eurasia Arbitration Journal, September Vol. 1
Lithuania, as other Baltic States, is a rather young economy dating back to 1990 when it regained its independence. Due to this circumstance Lithuania did not enjoy a vast net of historical commercial or investment treaties with its neighbors and rest of the world. Therefore, the year of 1990 marks a start of Lithuania’s transition to free market economy which also meant that Lithuania had become a member of international commercial market and, as a developing country, had to attract foreign investment fast.
Not surprisingly, the year of 1992-1993 marks a date of conclusion of many bilateral investment treaties (BITs) by the Republic of Lithuania. Since the BITs of the Republic of Lithuania were concluded fast and without any major negotiations, BITs of Lithuania are rather similar to the ones concluded by the rest of European states, thus they include all the basic provisions which can be found in a basic BIT concluded by any other European state.
However, as the present investment law and practice of the application of BIT’s has evolved dramatically, the specific wording of the BITs and conditions contained therein had become of major importance and are analyzed in much more detail as never before. Thus, one also needs to look more closely to the wording of Lithuania’s BITs and there are numerous distinguishing features one may observe. These distinguishing features will be analyzed in Part III of this article and will provide the reader with a basic notion of the provisions found in Lithuania’s BIT and comparison of all the BITs concluded by the Republic of Lithuania since the year of 1992 till the present – 2013.
However, before referring to the specific terms of Lithuania’s BITs, one needs to firstly refer to local Lithuanian legislation concerning investor-state disputes in Lithuanian courts and to understand the specifics of the Lithuanian legal system when faced with the breach of Lithuania’s obligations towards the foreign investors. Only one understanding Lithuania’s local legal provisions, competence of the courts may fruitfully facilitate a resolution of an investor-state dispute. These questions will be analyzed next, in Part II of this article.
II. BRINGING A BIT CLAIM IN THE COURTS OF THE REPUBLIC OF LITHUANIA
A. IMPLEMENTING LEGISLATION FOR THE BITS
Article 8(1) of the Law on Treaties of the Republic of Lithuania provides that treaties of the Republic of Lithuania shall be ratified by the Seimas (Parliament) of the Republic of Lithuania by a law.
For example, the Russia – Lithuania BIT[i] was ratified by Seimas under the Law regarding ratification of Agreement between the Government of the Russian Federation and the Government of the Republic of Lithuania on the Promotion and Reciprocal Protection of Investments. Such a procedure of ratification by Lithuanian Parliament is followed in merely in all cases regarding Lithuania’s BITs.
In addition, usually when ratifying a new BIT, the Lithuanian Parliament or any other competent institution would produce a report or other document in conjunction with the ratification of the BIT. Such a ratification report could specify certain terms or definitions of the BIT which means that such a report could become of major importance when there is a dispute regarding interpretation of the certain provisions of the BIT or when analyzing the intentions of the contracting parties when concluding the BIT.
As for the example of the Russia – Lithuania BIT, the Minister of Foreign affairs of the Republic of Lithuania had prepared an Explanatory Note regarding the Russia – Lithuania BIT which indicated reasons of signing the BIT, statistics and briefly discussed articles of the BIT.
It is also important to note that the Explanatory Note makes reference to the Protocol of the Russia – Lithuania BIT:
“Protocol is an integral part of this Agreement which provides that the investors whose investments are expropriated shall be entitled to an immediate examination of their case by a competent judicial or administrative body of the Contracting state where the expropriation is occurring.”
Therefore, Article 1 of the Russia – Lithuania BIT Protocol provides the investor with a basis to commence litigation regarding expropriation and respective compensation in a court of contracting state.
This provision brings the next important question which is important for a number of Lithuania’s BITs where the investor is entitled to bring an investment claim against the Republic of Lithuania in the competent court of Lithuania. Therefore, the next question in need of analysis is which Lithuanian courts are competent to decide claims for violation of the BIT by the State of Lithuania?
B. LITHUANIAN COURTS COMPETENT TO DECIDE CLAIMS FOR VIOLATION OF THE BIT
t must be noted first that none of the Lithuanian BITs indicate or provide any guidance as to which local court would be competent to hear claims arising under the BITs.
Thus, one must first refer to the Law on Investments of the Republic of Lithuania[ii]:
Article 6. Guarantees of Investors’ Rights
- State and local authorities and officers shall have no right to interfere with the management and use as well as disposal of by the investors of the object of investment according to the procedure established by law. Damage inflicted upon the investor by unlawful actions of state or local authorities and their officers shall be compensated according to the procedure established by the laws of the Republic of Lithuania.
- Disputes relating to infringement of the rights and lawful interests of the investor/investors shall be settled according to the procedure established by the laws of the Republic of Lithuania. Disputes between the foreign investor/investors and the Republic of Lithuania relating to infringement of their rights and lawful interests (investment disputes) shall be considered, upon agreement between the parties, by the courts of the Republic of Lithuania, international arbitration bodies or other institutions.
- Investment disputes shall also be settled with due regard being had to the provisions of international treaties. In case of investment disputes the foreign investor/investors shall have the right to apply directly to the International Centre for Settlement of Investment Disputes.
As it can be observed, the Law on Investments also does not indicate any specific court of Lithuania which would be purposed to examine investment disputes. It also provides that investment disputes may be heard either by the local courts, arbitration bodies and other institutions.
When referring to the Law on Courts of the Republic of Lithuania[iii], the latter also does not specify any competent court which would specialize in solving investment disputes. According to the Law on Courts and the Constitution of the Republic of Lithuania, a court system of Lithuania is composed of courts of general jurisdiction and courts of special jurisdiction. The Supreme Court of Lithuania[iv], the Court of Appeal of Lithuania[v], regional courts[vi] and district courts[vii] are courts of general jurisdiction dealing with civil and criminal cases. Courts of special jurisdiction include regional administrative courts[viii] and the Supreme Administrative Court of Lithuania[ix].
The Code of Civil Procedure also does not specify any court which would deal with claims arising out of the BITs. Similarly, the Law on Administrative procedure does not specify any court competent to examine investment disputes.
Therefore, the jurisdiction of a local court which could hear an investment claim brought against Lithuania under the BIT should be established according to the general jurisdiction rules provided in the Law on Courts, the Code of Civil Procedure and Law on Administrative procedure.
a) Jurisdictional rules
Generally, the first matter to consider when choosing the competent Lithuanian court is the type of the legal relationship in a dispute, i.e. civil or administrative. Courts of general jurisdiction hear criminal cases and consider disputes arising from civil, labour, family and other legal relations of the private nature. In addition, courts of general competence examine cases regarding violation of administrative law. Cases arising from administrative legal relationships are heard by specialized[x] courts – Administrative courts.
Administrative courts examine complaints (applications) concerning:
- lawfulness of legal acts passed and actions performed by the entities of public administration (e.g. ministries, departments, inspections, services, commissions), also the legality and validity of refusal by the said entities to perform the actions within the remit of their competence or delay in performing the said actions;
- compensation for material and moral damage inflicted on a natural person or organization by unlawful acts or omission in the sphere of public administration by state or municipal institutions, agencies, services and their employees;
- payment, repayment or exaction of taxes, other mandatory payments and levies, the application of financial sanctions and the tax disputes (disputes with the State Tax Inspectorate);
- office-related disputes, where one of the parties is a public or municipal servant possessing the powers of public administration;
- violation of the election laws and the Law on the Referendum;
- complaints by aliens about the refusal to issue permits for residence and work in Lithuania or withdrawal of such permits as well as complaints about the status of the refugee;
- complaints against the administrative sanctions;
- other cases provided for in the Article 15 of the Law on Administrative Procedure.
The investor[xi] may claim that a certain administrative act is unlawful and should be revoked (request for specific performance). The investor may also claim that a certain administrative act/action of the public administrative body caused damage to the investor (damage claim), or the investor may claim both (specific performance and damage).
Therefore, when considering which court – a court of general competence or an administrative court should hear a claim arising under the BIT, one should first analyze the relief sought by the aggrieved party.
In addition, it is noted that in case there is no clear distinction between the civil or administrative relationship in a dispute and, accordingly, it is not clear which court (administrative or the court of general competence) should examine the dispute, the decision is made by the “Jurisdictional collegium”[xii]. The Jurisdictional collegium also established a principle of “dominancy”, according to which, assignment of a certain case to the court of general competence or the administrative court depends on the kind of dominant relationship in the case, e.g. if the administrative legal relationship is dominant in a dispute, than the case should be heard by administrative courts and vice versa.
b) BIT claim for specific performance
First of all, when considering the BIT claim, it is important to note that 1) the dispute is arising under the BIT – it is not arising from a certain private investment contract (e.g. Klockner v Cameroon[xiii]), 2) the BIT is an integral part of Lithuanian legal system, thus it is considered as the law of the Republic of Lithuania[xiv] 3) the damage to the investor arises due to a certain legislation of the state or an administrative act/action in the sphere of public administration (not from the breach of a certain private contract).
However, as it was mentioned, a relief sought by the investor is of utmost importance and is a decisive circumstance when deciding which court – a court of general competence or an administrative court should hear the BIT claim. A second decisive circumstance is the kind of relationship in a dispute, i.e. civil or administrative. If the damage occurred due to actions of the state in the area of public administration, than the relationship is an administrative one. If the damage occurred due to state’s actions in private civil relationship, than it is private relationships which are dealt with in the courts of general competence.
If the investor solely claims that a certain administrative act[xv] is unlawful, i.e. contradicts the law (e.g. BIT[xvi]) and requests it to be declared as invalid[xvii], than it is a solely administrative claim. Thus, the latter should be heard by administrative courts (Article 15.1(1) of the Law on Administrative procedure[xviii]).
Having established the latter, the next step is to find out whether the disputed administrative act was issued by a regional[xix] or central administrative body[xx]. For example, the if the disputed act or order was issued by a central administrative body, then, the Vilnius Regional Administrative Court would have the competence to hear a BIT claim regarding unlawfulness of a certain administrative act (Article 19.1 of the Law on Administrative procedure). Subsequently, the Vilnius Regional Administrative Court (subject to appeal) would be entitled to revoke or annul the unlawful administrative act, i.e. order a specific performance.
Another circumstance which should be mentioned is the possibility for the investor to claim that it is not the administrative act which should be revoked as unlawful, but the law, which was the basis (cause) of such administrative act.
However, one could argue that administrative acts of the administrative bodies could be considered totally legitimate as they were based on the law – the law was the cause of such administrative acts.
However, administrative acts are adopted by the executive branch of the state – public authorities acting in the sphere of public administration[xxi]. The law is adopted by the legislative branch of the state – the Parliament (Seimas).
Therefore, an investor claiming specific performance (i.e. revocation of the law) based on provisions of a certain BIT has the only option – to have the Constitutional Court of Lithuania[xxii] declared the law in question as unconstitutional[xxiii]. The investor itself has no legal standing in the Constitutional Court of Lithuania[xxiv]. However, an example of the Pensions case[xxv] examined in the Supreme Administrative Court of Lithuania and in the Constitutional Court of Lithuania[xxvi] may be referred to.
The Pensions case concerned amendments to the Law on State Social Insurance Pensions and due to such amendments interested persons claimed damage from the Republic of Lithuania. What is important in this case is that claimants argued that „unlawful actions in the respective case concerns actions of the legislative and executive branches of the state which had caused the adoption of illegal law, contradictory to the Constitution of Lithuania”. Having examined the claimants’ arguments, the Supreme Administrative Court of Lithuania had referred to the Constitutional Court of Lithuania which had ruled that the respective amendments were contradictory to the Constitution of Lithuania. Subsequently, the disputed law was revoked[xxvii].
Therefore, it can be concluded that if the investor’s BIT claim concerns a specific performance – revocation of a certain administrative act or revocation of the law which had caused the adoption of such administrative act – competent courts to examine such kind of investors’ claims are the administrative courts of Lithuania.
c) BIT claim for damages
In cases of private legal relationships, i.e. in case of a claim for damages arising from a breach of private contractual obligations, or similar, a dispute is considered as a civil dispute of private nature. Thus, a respective claim should be filed to a court of general competence. Having established the latter, a place of incorporation of the defendant or a certain asset in dispute would direct the claimant to a certain court having the jurisdiction to hear the case.
However, as in the discussion regarding BIT claims concerning specific performance, BIT claims for damages can also be divided into two separate forms.
The first situation – if the investor claims damages due to certain unlawful actions of administrative bodies, than the dispute falls under Article 15.1(3) of the Law on Administrative procedure and should be also examined by administrative courts.
In this context, it is important to note that that disputes regarding damages are of civil nature, and according to a general rule, are assigned to the courts of general competence (Part 1 of Article 22, Article 25 of the Code of Civil Procedure). However, as it was mentioned, administrative courts examine disputes regarding damages, which are indicated in Article 15.1(3) of the Law on Administrative procedure, i.e. damages arising due to unlawful actions of the administrative bodies and the law specifically refers to Article 6.271 of the Civil Code[xxviii].
Article 6.271 of the Civil Code of the Republic of Lithuania provides for the following:
Article 6.271. Liability to compensation for damage caused by unlawful actions of institutions of public authority
- Damage caused by unlawful acts of institutions of public authority must be compensated by the state from the means of the state budget, irrespective of the fault of a certain public servant or other employee of public authority institutions. Damage caused by unlawful actions of municipal authority institutions must be redressed by the municipality from its own budget, irrespective of its employee’s fault.
- For the purposes of this Article, the notion “institution of public authority” means any subject of the public law (state or municipal institution, official, public servant or any other employee of these institutions, etc.), as well as a private person executing functions of public authority.
- For the purposes of this Article, the notion “action” means any action (active or passive actions) of an institution of public authority or its employees, that directly affects the rights, liberties and interests of persons (legal acts or individual acts adopted by the institutions of state and municipal authority, administrative acts, physical acts, etc., with the exception of court judgments – verdicts in criminal cases, decisions in civil and administrative cases and orders).
- Civil liability of the state or municipality, subject to this Article, shall arise where employees of public authority institutions fail to act in the manner prescribed by laws for these institutions and their employees.
When analyzing the notion of damage as the one indicated in Article 15.1(3) of the Law on Administrative procedure, the Supreme Administrative Court of Lithuania had established:
“In order to establish an unlawful action in accordance with Article 6.271 of the Civil Code, it needs to be established that officers of the public authority had not acted in a way as prescribed by law, had not performed their duties prescribed by law or even if they did perform such duties, they had acted negligently, violating a general duty to act prudently. When deciding whether there was an unlawful action by a certain public authority (or its officers) (in the context of Article 6.271 of the CC), in every case, it needs to be established which certain legal provisions regulating the activity in dispute were violated, how such violation had made an impact to a person claiming damages arising from such violation, and, to establish whether certain consequences (if established) had occurred due to unlawful actions of such public institutions, officers”[xxix]
As it can be observed, the unlawful action in the meaning of Article 15.1(3) of the Law on Administrative procedure is regarded as action of the executive branch of the state, i.e. action in the sphere of public administration[xxx]. Thus, damage arising from actions of the legislative branch of the state (Parliament), i.e. enactment of a certain law, would not fall under Article 15.1(3) of the Law on Administrative procedure.
Thus, having established the latter, in cases of claims for damage arising from actions of legislative branch of the state, theoretically, the investor would be entitled to bring its claim to the court of general competence and argue that a certain law had breached its rights contained in the BIT and the investor should be awarded adequate damages.
The next step is determine a proper court of general competence which would be entitled to hear the investor’s claim arising from the damage caused due to enactment of the disputed law. Therefore, the latter depends on which state institution will be the defendant is such a case[xxxi].
Article 6.273 of the Civil Code provides for the following:
Article 6.273. Defendants in respect of obligation of the state or municipality to compensate for damage
- In civil cases regarding compensation of damage where the state is liable to compensation for the damage, it shall be represented by the Government or an institution authorised by the Government.
- In civil cases upon compensation of damage where a municipality is liable to compensation for the damage, it shall be represented by its institution through the fault of which the damage has occurred.
Consequently, it can be established that a proper defendant in a hypothetical BIT claim in Lithuanian courts is the Government of Lithuania[xxxii]. Since the official place of incorporation of the Government of Lithuania is in Vilnius. Then, the BIT claim, depending on the amount claimed, would be heard by one of the Vilnius courts of general competence[xxxiii].
Therefore, in this part of discussion, it can be concluded that a competent court entitled to examine investor’s damage claim depends on the basis of the claim itself 1) if the investor’s BIT claim for damages concerns certain unlawful actions of administrative bodies, then the dispute falls under Article 15.1(3) of the Law on Administrative procedure and should be filed to administrative courts, 2) if the investor claims damages due to enactment of a certain law which contradicts the BIT, than the competent court which would hear such kind of a claim would be one of the courts of Vilnius, depending on the sum claimed.
d) BIT claim for specific relief and damages
The case may be that the investor would file for revocation of a specific administrative act or the law and claim damages arising from 1) unlawful actions of administrative bodies, or 2) damages arising due to enactment of a specific law.
Therefore, two situations may evolve: in the first one, the investor files for revocation of administrative act and claims damages due to adoption of such administrative act. As it was observed from the discussion above, both of these cases fall under the competence of the Administrative courts.
In the second one, a more complex hypothetical situation, the investor may file for annulment[xxxiv] of a certain law and claim damages arising due to enactment of such law from the state. As it was discussed above, only the Constitutional Court of Lithuania is entitled to declare certain law as unconstitutional, thus it is entirely up to the court to decide to whether to refer to the Constitutional Court. However, as it was provided above, a claim like this should be brought to the courts of general competence as it does not fall under the competence of administrative courts specified in Article 15 of the Law on Administrative procedure.
Please refer to the chart annexed (Annex No. 2) to this article which summarizes the discussion of this chapter indicating the route of a BIT claim in Lithuanian courts depending on the relief sought by the investor.
e) Which Lithuanian Courts of Arbitration are competent to decide claims against Lithuania?
As it was discussed above, both the administrative courts and the courts of general competence are entitled to examine claims against the State of Lithuania.
When considering which specific court would decide claims against the State of Lithuania, the main emphasis should be made to the basis of the claim – the relief sought and whether the claim arises from private (civil) legal relationship or the administrative (public) legal relationship.
As regards courts of arbitration, the competence of the arbitration court may be established either by the agreement of the parties (including case when one of the parties is a State) or certain legislative acts. Therefore, any arbitration court of Lithuania, either institutional or ad hoc tribunal is potentially competent to hear claims against the State of Lithuania. However, there are no specialized arbitration courts which would be solely purposed to analyze disputes where one of the parties is a state.
As it was mentioned, international treaties ratified or enacted by the Republic of Lithuania are an integral part of the legal system of the country. Therefore, the Lithuanian law does not distinguish disputes regarding violation of local law or violation of international treaties. Thus, the main emphasis should be made to the basis of the claim – whether the claim arises from private (civil) legal relationship or the administrative (public, inter alia BIT) legal relationship.
f) The scope of jurisdiction of the Lithuanian administrative courts
The scope of jurisdiction of the Lithuanian administrative courts is established in Article 15 of the Law on administrative procedure The respective article provides for the following:
Article 15. Cases assigned to the competence of the administrative courts
1. Administrative courts examine cases concerning:
- lawfulness of legal acts adopted and actions performed by the entities of public administration, also the legality and validity of refusal by the said entities to perform the actions within the remit of their competence or delay in performing the said actions;
- lawfulness of legal acts adopted and actions performed by the public administrative bodies of municipality, also the legality and validity of refusal by the said entities to perform the actions within the remit of their competence or delay in performing the said actions;
- compensation for damage caused by unlawful acts or omission in the sphere of public administration by the bodies of public administration (Article 6.271 of the Civil Code);
- payment, repayment or exaction of taxes, other mandatory payments and levies, the application of financial sanctions and the tax disputes;
- office-related disputes, where one of the parties is a public or municipal servant possessing the powers of public administration (including officers and managers of entities);
- Decisions of the Chief Official Ethics Commission and such commissions’ references regarding cancelation of office-related relationships
- Applications (requests) of the Ombudsman regarding cancelation of office-related relationships;
- disputes regarding non-subordinate bodies of public administration regarding competence and violation of laws, except disputes assigned to the competence of the courts of general competence;
- violation of the election and Referendum laws;
- (no longer in force since 2011-01-01);
- lawfulness of decisions adopted and actions performed by the public institutions, having the mandate of public administration, also the legality and validity of refusal by the said entities to perform the actions within the remit of their competence or delay in performing the said actions;
- lawfulness of general acts of non-governmental organizations, partnerships, parties, political organizations and associations;
- complaints by aliens about the refusal to issue permits for residence and work in Lithuania or withdrawal of such permits as well as complaints about the status of the refugee;
2. The law may also prescribe other cases to the competence of the administrative courts
Chapter IV of the Law on Courts[xxxv] also regulates the competence of all the courts of Lithuania, including the competence of administrative courts:
Article 29 of the Law on Courts provides that the regional administrative court:
- shall be first instance for administrative cases assigned to its jurisdiction by law;
- shall perform other functions assigned to its jurisdiction
Article 31 of the Law on Courts regulates that the Supreme Administrative Court shall be:
- first and final instance for administrative cases assigned to its jurisdiction by law;
- appeal instance for cases from decisions, rulings and orders of regional administrative courts;
- an instance for hearing, in cases established by law, of petitions on the reopening of decided administrative cases.
In general, administrative courts of Lithuania consider disputes that arise in the sphere of public and internal administration. Definitions related with public or internal administration may be found in the Law of Public Administration[xxxvi].
Administrative courts consider disputes when at least one of the parties is a state, municipality or institution of the state or municipality, agency, office, officer and when these subjects are in disputes while implementing the functions of the executive authority. The regional administrative courts hear claims (petitions) in respect of administrative acts and acts of commission or omission (failure to perform duties) by entities of public and internal administration. Regional administrative courts hear disputes in the field of public administration, deal with issues relating to the lawfulness of regulatory administrative acts, tax disputes, etc. Before applying to an administrative court, individual legal acts or actions taken by entities of public administration provided by law may be disputed in the pre-trial procedure. In this case disputes are investigated by municipal public administrative dispute commissions, district administrative dispute commissions and the Chief Administrative Dispute Commission.
g) The definition of “administrative relations”
When one considers the jurisdiction of Lithuanian administrative courts to hear BIT disputes, one should analyze the definition of “administrative relations”
As it was mentioned, administrative courts consider disputes that arise in the sphere of public and internal administration.
The law does not provide a specific definition of “administrative relations”, but the Law on Public administration provides for the following definitions:
- Public administration shall mean activities of entities of public administration regulated by laws and other legal acts, which are intended for the implementation of laws and other legal acts: Adoption of administrative decisions, control of the implementation of laws and administrative decisions, provision of administrative services established by laws, administration of the provision of public services and internal administration of an entity of public administration.
- Administrative regulation shall mean activities of an entity of public administration comprising the adoption of administrative regulations for the implementation of laws and other legal acts.
- Administrative regulations shall mean legal acts establishing the rules of conduct and intended for an individual and unspecified group of persons.
- Administrative service shall mean activities of an entity of public administration comprising the issuing of authorisations, licences or documents confirming particular legal facts, the acceptance and processing of persons’ declarations, the provision of consultations to persons on issues regarding the competences of the entity of public administration, the provision to persons of information of the entity of public administration as defined by the law, the performing of administrative procedure.
- Public service shall mean activities of legal persons controlled by the State or municipalities when providing social services for persons, as well as services in the spheres of education, science, culture, sports and other services provided for by laws. Other persons may also provide public services in the cases and in the manner provided for by laws.
Therefore, based on the definitions found both in the Law on Public Administration, the Law on Administrative procedure and other relevant regulations, it can be stated that “administrative relations” include legal relations concerning formation of executive authorities and their interaction; public service; legislation of administrative acts, administrative control and supervision and other forms of administrative activities; internal administration; administrative reaction to violations of law; administrative responsibility; competence of administrative courts, pre-trial dispute settlement institutions and other entities of public administration considering the applications and other administrative legal relations.
Therefore, as for the competence of Lithuanian administrative courts to hear BIT disputes, it must be emphasized that the BIT claim must be filed by the investor, and the investor itself should prove that he is an investor according to the provisions of BIT. Therefore, if the BIT claim is not filed by the investor (in accordance with the definition found in the BIT), than none of the courts (i.e. administrative or the court of general competence) have jurisdiction to hear the BIT claim.
In addition, the investor’s claim must be based on the BIT, e.g. claiming that a certain administrative act is contradictory to the legal act of higher force (Article 89.1(1) of the Law on Administrative procedure).
C. PRACTICE OF THE BIT CLAIMS IN THE COURTS OF THE REPUBLIC OF LITHUANIA
Firstly, it must be noted that to date there are no precedents when foreign investors themselves brought claims for violation of the BIT against the State of Lithuania in Lithuanian courts.
However, there were a few cases where the alleged violations of the BIT were used as an argument by the parties.
On December 03, 2002 the Court of Appeals of Lithuania decided a case (case number 2A-348/2002) in which the creditors (Lithuanian sugar production and trading companies Panevezio cukrus AB and Kedainiu cukrus AB) of the Lithuanian company Marijampoles cukrus AB, 49,13 % shares of which was property of the foreign Danish company Danisco sugar A/S actually challenged the legality of the decision by the Lithuanian tax inspection which was favorable to Marijampoles cukrus AB. Claimants argued that such favorable decision to Marijampoles cukrus AB was contradictory to the Lithuanian-Danish BIT in that such decision distorted economic conditions on the market and breached the equality of the investors (equal treatment clause). The court went on to dismiss the arguments by the claimants on the grounds that they were not investors in AB Marijampoles cukrus. However, the court specified that the arguments based on the BIT could in principle be heard in the court if these arguments were raised by the investor[xxxvii]. Thus, this was the acknowledgment by the court that BIT claims can in principle be heard by the Lithuanian courts.
In another case the argument based on the BIT was brought by the foreign investor itself – Latvian company AirBaltic and Riga International Airport[xxxviii] challenged the ruling of Vilnius district court by which interim measures (arrest of property and funds) were applied towards the assets of both AirBaltic and Riga International Airport in the case of private enforcement of the competition law. Investor invoked the provisions of the Lithuanian-Latvian BIT in arguing that the fact that investors were not notified about the hearing was a breach of bona fide treatment of investors under the BIT. The Lithuanian Court of Appeals accepted the argument and agreed with the investors that absence of notification could have meant the breach of Lithuania’s international obligations under the BIT, but held that other circumstances of the case showed that the challenged decision of the Vilnius district court did not come into force and the investors were actually granted the full and equal right to challenge it. Therefore, the Court of Appeals (in a ruling dated 31 December 2008, case No 2-949/2008) held that Vilnius district court committed a procedural breach by adopting the decision on interim measures without informing the investors about the hearing, but in the light of other circumstances (that investors actually were granted rights to present arguments and they did so as is apparent from their appeals) this procedural breach did not amount to constitute grounds for annulment of the decision of the Vilnius district court. Therefore, this was yet another acknowledgment that national courts may hear the BIT arguments by the foreign investors.
D. DISTINCTION BETWEEN SEEKING ANNULMENT OF A REGULATION FOR VIOLATION OF A TREATY AND BRINGING A CLAIM UNDER THE TREATY
The only consequence of such distinction under Lithuanian law is the type of the national court which is entitled to hear the claim. E.g. as mentioned above, administrative courts are the courts of special jurisdiction hearing disputes arising from the administrative legal relations. Consequently, if the legal relations constituting the object of the claim are administrative (e.g. request to annul the administrative act of the state or municipal institutions on the basis of the breach of BIT), then administrative courts would usually hear the dispute.
If the object of the claim is the recovery of damages for the breach of the BIT caused by actions of the municipal or state’s institutions, then it depends on the nature of such actions – if these actions were of civil nature then such claim would be heard by the courts of general competence. If, however, actions were of administrative nature, the claim would be heard by administrative courts.
Therefore, in cases which could not be clearly defined as the ones indicated above, there is no clear distinction. Therefore, situation should be assessed on a case-by-case basis.
Moreover, it must be mentioned that notwithstanding the type of the court faced with a BIT claim, the court may only examine BIT claims if they are filed by the investor. However, the administrative court has a duty to analyze all the claims/arguments filed by the claimant[xxxix]. According to this duty, in case the BIT claim is not brought by an investor, the court should establish that a specific claimant is not an investor, therefore, the court should have state that all the claims/arguments regarding the BIT are irrelevant in the respective case, i.e. irrelevant while analyzing the actual formal claim filed.
On the other hand, the court has a duty to establish the breach of law based on concrete provisions of law[xl]. Thus, it is necessary to raise a concrete claim that the BIT was violated.
Furthermore, the Law on Administrative procedure provides (Article 5) that one of the preconditions to apply to and to have the hearing of the case in the administrative court is that the claimant must have the material interest in the case (standing) – i.e. the claimant must show that its rights or interests were breached.
The Law on Administrative procedure does not contain the rule that the administrative courts may not decide claims if the claimant has no standing. To the contrary, the rules governing the rights of administrative courts to terminate the proceedings or to leave the claim untried do not include the ground related with the lack of standing. This means that in case the claimant lacks standing, the courts should hear the substance of the case and should dismiss the claim for the lack of standing by decision on the substance of the case (on the basis of Article 88 part 1 of the Law on Administrative procedure[xli].
Therefore, in this part of the discussion, it is also important to distinguish the notion of a “claim” and “argumentation”. If the claimant’s claim regarding the breach of the BIT is only a part of its argumentation and there is no formal claims raised regarding violation of BIT – these are only co-arguments. The “legal standing”[xlii] in its sense depends on the formal claims raised.
This means that the administrative courts of Lithuania have the jurisdiction to rule on the claimants claim regarding certain administrative act. However, in the part where it was based on the BIT breach, the court would rule that arguments regarding the breach of BIT are irrelevant – for the reason that the claimant was not a foreign investor formally claiming the breach of BIT.
Consequently, in such a situation the administrative courts of Lithuania do not have jurisdiction to decide the claimant’s BIT arguments declaring no violation of the BIT – meaning that the courts would limit themselves on the analysis of the main claim – the annulment of a certain administrative act. Obviously the latter is of utmost importance when considering the fork in the road provision.
E. EXHAUSTION OF POSSIBILITIES OF NATIONAL LAW
One considering the BIT claim should also bear in mind the rule of exhaustion of all possibilities provided in national law and it may be the case in certain BITs.
Thus, it must be mentioned that the Supreme Administrative Court of Lithuania is the court of last resort in the Lithuanian administrative court system. Its decisions cannot be appealed either to Supreme Court of Lithuania or to the Constitutional court. Thus, decisions of the Supreme Administrative Court are final and binding.
However, the Law on the administrative procedure (section IV, Articles 153-162) provides for the institute of re-opening of the proceedings.
Persons which can use the opportunity to file the request to re-open the proceedings are those listed in Article 154 – these are the parties and other participants of the case (their representatives), also third persons which were not participants of the case but the decision or ruling affects their rights or interests. Also a prosecutor and other subjects of public administration in defense of the public interest or interests of the state or persons. In exceptional cases the chair of the Supreme Administrative court can file the request for re-opening.
However, notwithstanding the latter, it must be emphasized that the Ruling of the Supreme Administrative Court of Lithuania is final and binding. Procedure of re-opening of the proceedings should not be regarded as another appeal procedure. Both the Supreme Court of Lithuania and the Supreme Administrative Court of Lithuania were always in position that “A final ruling in the case means that the dispute is solved completely, and it cannot be revisited in accordance with the usual procedural means … procedure for re-opening of the proceedings should be used in extra-ordinary circumstances, in cases where there are significant mistakes[xliii]”.
As the notion of “exhaustion of possibilities of national law” is a term of international law, not surprisingly, the Lithuanian courts had not analyzed the meaning and extent of the latter. Thus, it is difficult to say whether under Lithuanian law the meaning of “exhaustion of local remedies” would also include the re-opening procedure[xliv]. Based on the practice of the European Court of Human Rights (ECHR) it is doubtful whether the possibility to request reopening of the proceedings would be regarded as an “effective remedy” of exhaustion of local remedies[xlv]. The ECHR explicitly states that it does not require applicants to have applied for the reopening of proceedings or to have used similar extraordinary remedies[xlvi].
Therefore, it can be concluded, that the procedure of re-opening of the proceedings, although formally possible, should not preclude one to state that all the remedies provided in the national law were exhausted.
III. DISTINGUISHING FEATURES OF THE LITHUANIAN BILATERAL INVESTMENT TREATIES
A. FEATURES OF THE DEFINITION OF “INVESTOR”
a) Seat of the investor and the place of business
Most of Lithuanian investment treaties[xlvii] provide that a juridical person incorporated or duly organized according to the laws of a Contracting Party (i.e. a country that is a party to the treaty) is an “investor”. However, there are treaties which require that such entities have their “substantive business operations” (e.g. Lithuania – Bosnia and Herzegovina/India/Poland/Mongolia/Portugal BIT) or/and their “seat” (e.g. Lithuania – Argentine/Czech Republic/ Spain/China/Latvia BIT) or/and “place of effective management” (e.g. Lithuania – Sweden/ BIT) within the territory of a Contracting Party.
There are also treaties with denial of benefits clauses, for example, Lithuania – Australia BIT provides that where a company of a Contracting party is owned or controlled by a citizen or a company of any third country, the Parties may decide jointly in consultation not to extend the rights and benefits of the agreement to such company.
b) Notion of Control
It is also notable that some of the Lithuanian investment treaties do not require that a juridical person be incorporated in a Contracting state. However, such a juridical person should be controlled by a national of contracting state (Lithuania – Australia BIT). Similarly, as in the latter example, Lithuania – Austria BIT requires that the extent of control of such person should be dominant or as it is the case in Lithuania – Kazakhstan BIT, such extent of control must provide for substantial part of ownership right. However, the Lithuania – Israel BIT explicitly provides that it would not extent protection to juridical persons incorporated in Lithuania which are controlled directly or indirectly by the Israeli nationals.
c) Natural persons
In respect of natural persons, “investor” is normally defined to include both citizens/nationals and permanent residents of a Contracting party. However, under the Lithuania – Bosnia and Herzegovina BIT, person investing in Lithuania should not only have nationality of Bosnia and Herzegovina, but also a permanent place of residence or main business activity in Bosnia and Herzegovina.
d) Dual nationals
Most of Lithuanian investment treaties are silent on the issue of dual nationality. However, the Lithuania – Israel BIT requires that natural persons should be nationals of a Contracting state, but they should not also have nationality of another contracting state. Thus a dual national having both Lithuanian and Israel nationality would not be protected by the Lithuania- Israel treaty.
e) Right to invest
It should be noted that some of Lithuanian investment treaties require that an investor should not only have the nationality of a contracting state, but also a right to invest. For example, Lithuania – Russia BIT provides that an investor shall mean any natural person who is a national of the state of this Contracting party according to the legislation of this Contracting party and “authorized to invest” in the territory of the other Contracting party according to the legislation of the latter Contracting party.
B. DISTINGUISHING FEATURES OF THE DEFINITION OF “INVESTMENT”
a) Eligible assets
Most Lithuanian investment treaties define “investment” to include “every kind of asset invested country by an investor of other contracting party in accordance with the laws of the host state”.
However, there are treaties which contain a more extensive definition. For example, the Lithuania – Australia BIT requires that asset invested must be “owned or controlled” by an investor.
Similarly, Lithuania – USA/Kuwait BITs provide that an investment must be “owned or controlled directly or indirectly” by an investor.
b) Economic activity
Some Lithuanian treaties require that an investment must be related to “economic activity”. For example, Lithuania – Czech Republic BIT provides that the definition of investment would include every kind of asset related to economic activity. Similar definitions can be found also in Lithuania – Denmark BIT, Lithuania – Estonia BIT, Lithuania – Iceland BIT, Lithuania – Ukraine BIT, Lithuania – Hungary BIT.
c) Existing and new investments
It is noted that Lithuania – Portugal BIT includes a separate protocol which stipulates that protection provided by the treaty is also extended to investors when they had already invested in the Contracting party and want to extend their activity or to pursue their investment activity in other areas. Such investments are regarded as new investments under the treaty.
d) Commencement of coverage
Some Lithuanian investment treaties protect all existing investments (e.g. Lithuania – Albania/Hungary/Tajikistan BITs), whereas others only protect investments made after a specific date (e.g. Lithuania – Germany/Vietnam/ BITs).
e) Accordance with local laws
Most Lithuanian investment treaties explicitly require investments to have been made in accordance with Contracting party’s laws. However, The Lithuania – Vietnam BIT stipulates that protection is only afforded to those investments made in Vietnam which were approved by the Vietnamese Government.
C. FAIR AND EQUITABLE TREATMENT
a) Illustrations of the FET standard
Most Lithuanian investment treaties simply provide that each Contracting party shall ensure fair and equitable treatment to investments (e.g. Lithuania – Iceland/Kyrgyzstan, Russian Federation BITs).
The Lithuania – Kuwait BIT on the other hand, indicates that the treaty does not obligate the Contracting party to provide any tax exemptions to foreign investors although such privileges could be provided for local nationals or other investors having their permanent place of residence in a Contracting party. In addition, Lithuania – Russian Federation BIT provides a reservation that Contracting parties have a right to deny or limit certain activity of investors in accordance with local laws of the host state.
b) Customary international law
Some Lithuanian investment treaties expressly equate the obligation to provide fair and equitable treatment with the concept of fair and equitable treatment under the customary international law (e.g. Lithuania – Finland/Venezuela/France BITs).
D. THE PROTECTION AGAINST EXPROPRIATION STANDARD
a) Indirect expropriation
Some of Lithuanian investment treaties expressly protect against direct as well as indirect (or so-called “creeping”) expropriation (e.g. Lithuania – Argentine/Armenia/Belarus/Georgia BITs).
b) Recourse to local courts
The Lithuania – Russian Federation BIT additionally provides that notwithstanding investor’s right to initiate arbitration, additional protocol of the Lithuania – Russian Federation BIT provides for a right of immediate recourse to local courts of the country performing expropriation where the dispute “relates to the amount of compensation payable” as a result of an expropriation of property.
c) Interpretation of expropriation
The Lithuania – India BIT provides that when establishing that expropriation actually occurred, a separate investigation should be performed, taking into account that 1) it does not mean that expropriation occurred if a certain economical measure which has a negative economic impact on investment had occurred, 2) it must be established what is the extent of such negative economical measure on the investor or a company, 3) it must be established what is the extent of such negative economical measure having due regard to rational and legitimate expectations, 4) a direct link between the measure and public interest should be established. In addition, the Lithuania – India BIT provides that there is no expropriation in rare cases when public interests regarding health, security or environment are at stake.
E. DISTINGUISHING FEATURES OF THE NATIONAL TREATMENT/MOST FAVOURED NATION TREATMENT STANDARD
a) Common limitations
Lithuanian BITs explicitly provide that the provision of “most favoured nation” and/or “national” treatment does not extend to the benefits of membership of a customs union, monetary union or free trade area, nor to taxation agreements and/or taxation legislation.
Generally the “most favoured nation” protection contained within Lithuania’s BITs applies to “investments”, “returns on investments” and activities associated with investments (e.g. Lithuania – Argentine/Australia/China BITs).
However, some Lithuanian BITs do not expressly extend protection to activities associated with investments (e.g. Lithuania – Albania/Austria/Latvia BITs). One of the most extensive scope of the MFN treatment is found in Lithuania – Kuwait BIT which extends the MFN treatment to compensations, transfers, income, management of investments, support and possession of the latter, and any other associated activity.
c) Exceptions on national treatment and most favoured nation standard
Some of Lithuania’s BIT provide for limitations on the national treatment and most favoured nation standard. For example, Lithuania – Belarus BIT provides that contracting parties shall have a right to establish certain exceptions regarding investors of contracting party and investors of third parties in certain economic areas where activity of foreign investors is prohibited. Similar clause is found also in Lithuania – Bulgaria BIT.
In addition, the Lithuania – Kuwait BIT provides that measures which are needed to take because of the security, welfare and health of society and public order are not regarded as a “less favourable” treatment.
F. THE OBLIGATION TO PROVIDE PROTECTION AND SECURITY TO QUALIFYING INVESTMENTS
a) Extent of obligation
The formulation of the obligation to provide “protection and security” in Lithuanian investment treaties is not uniform. Some provide for “full protection and security” (e.g. Lithuania – Albania/Jordan/Macedonia/Georgia BITs). However, other treaties just provide that the host country would “protect” investments (Lithuania – Mongolia/Switzerland BITs).
Lithuania – France BIT provides that the host state would “seek” that rights of investors could be executed juridically and factually. Lithuania – Germany BIT provides that contracting parties would ensure “protection and guarantees” to the investments of nationals or companies of other contracting party.
Lithuania – Italy BIT provides that contracting parties would maintain the legal system which guarantees the continuity of legal protection to investors.
G. THE UMBRELLA CLAUSE
As compared with the majority of Lithuanian treaties, a rather small number of them contain a typical umbrella clause (Lithuania – Austria/Belarus/Belgium-Luxembourg/ Denmark/ Finland/ Germany/ Greece/ Italy/ Israel/ Kyrgyzstan/ Kuwait/ Moldova/ Mongolia/Netherlands/Romania/Switzerland/Tajikistan/Turkey/United Kingdom/USA BITs).
b) Qualification of the obligation
Although Lithuania’s investment treaties which include the umbrella clause extend the obligation to honor “any” commitments related to investments, Lithuania – Austria BIT provides that the obligation to honor commitments (i.e. the umbrella clause) is limited to commitments related to investment contract.
The Lithuania – Italy BIT requires a Contracting party to maintain a legal system which would guarantee continuity of legal treatment of investors, including execution of all obligations towards any certain investor in bona fide manner.
H. OTHER SUBSTANTIVE PROTECTIONS
a) Free transfer of payments
All Lithuanian investment treaties contain a provision which requires the Contracting parties to permit investors to freely transfer investments and investment returns. Whilst the expression of the right is not uniform, it is subject in some respect to the laws and policies of the host state. Majority of treaties establish that payments should be made in the same currency as the investment itself.
Most of Lithuania’s BITs impose upon Contracting parties an obligation not to impair the management, maintenance, use, enjoyment or disposal of investments. Some treaties impose an obligation to ensure provision of necessary permits, licenses needed for the investment (e.g. Lithuania – Mongolia BIT).
c) Armed conflict/civil unrest
Majority of Lithuania’s investment treaties guarantee investors of Contracting parties “most favoured nation” treatment in regards to compensation paid to other investors of other states in the case of armed conflict or civil unrest.
Some treaties also provide for “national” treatment in such circumstances (e.g. Lithuania – Germany/Hungary/Uzbekistan).
I. PROCEDURAL RIGHTS IN LITHUANIA’S INVESTMENT TREATIES
Some of Lithuanian investment treaties contain fork-in-the-road provisions (e.g. Lithuania – Argentine/Greece/Iceland BITs). Under these treaties, investors must elect either to pursue their claim through the local courts or by international arbitration. They cannot do both. However, some of these treaties expressly provide that the election to submit a dispute to arbitration may not preclude an investor commencing proceedings in local courts (e.g. Lithuania – Bosnia-Hercegovina BIT).
b) Waiver of local remedies
Some of the fork-in-the-road provisions are accompanied by provisions which provide that the right to commence arbitration is conditional on the investor waiving its rights to pursue any other cause of action said to arise from the same circumstances giving rise to the alleged breach of the treaty in either of the Contracting party’s courts or tribunals (e.g. Lithuania – Belgium-Luxembourg BIT). Similarly, Lithuania- Austria BIT provides that when an investor initiates ICSID arbitration, the investor also waives its right to exhaust any local remedies.
c) Exhaustion of local remedies
The right to commence arbitration under some Lithuanian investment treaties is contingent on the exhaustion of local remedies. For example, Lithuania – Armenia/ Azerbaijan BIT provides that arbitration proceedings can be commenced after all local remedies have been exhausted.
d) ICSID or ad-hoc arbitration
Most Lithuanian investment treaties provide a right of recourse to ICSID (e.g. Lithuania – Korea/Latvia BITs). It is noted that Lithuania – Israel BIT provides only and solely for ICSID arbitration.
Most of the treaties also allow investors to pursue an arbitration claim through: (a) an ad hoc tribunal applying the rules contained within the Washington Convention (e.g. Lithuania – Poland/Jordan BITs); (b) an ad hoc tribunal constituted in accordance with the UNCITRAL rules (e.g. Lithuania – Vietnam/Hungary/Slovenia BITs); and/or (c) any other tribunal acting in accordance with any other arbitration rules as is mutually agreed by the parties (e.g. Lithuania – USA BIT). Some of Lithuania’s investment treaties also refer to the use of a commercial arbitral institution, i.e. ICC arbitration in Paris (e.g. Lithuania – Spain BIT) or SCC Stockholm arbitration (e.g. Lithuania – Russian Federation BIT).
e) Diplomatic negotiations
Lithuania – Italy BIT provides that both contracting parties shall refrain from negotiations through diplomatic channels regarding any questions regarding the investment arbitration or litigation commenced until it is concluded. Similarly, the Lithuania – Israel BIT provides that contracting parties shall refrain from diplomatic negotiations regarding the dispute unless the arbitral tribunal finds that is does not have jurisdiction or if one Contracting party does not comply with the award.
f) Applicable law
Lithuanian investment treaties which provide a right to refer a dispute to ICSID (or to an ad hoc tribunal applying the rules contained within the ICSID Convention) are generally silent as to what law or laws are to govern the parties’ dispute (e.g. Lithuania – Spain BIT provides that the tribunal shall decide the dispute in accordance with the treaty and the applicable rules and principles of international law). Where such treaties are silent as to governing law the applicable law is likely to be determined in accordance with Article 42 of the ICSID Convention. Article 42 provides that in the absence of an agreement between the parties, the tribunal shall apply the law of the Contracting state party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable (similar formulation is found in Lithuania – Macedonia BIT).
With respect to ad hoc arbitration (not governed by the ICSID Convention) Lithuanian investment treaties generally do not contain provisions on applicable law and just provide that arbitral tribunals would be formed pursuant to the dispute resolution mechanism of an investment treaty.
As for UNCITRAL arbitration, majority of treaties enable parties to modify the arbitration rules under mutual agreement of the parties (e.g. Lithuania – Finland BIT).
J. PRACTICALITIES OF COMMENCING AN INVESTMENT TREATY CLAIM
If the treaty does not stipulate upon whom a dispute notice is to be served, the notice should be addressed to the Prime Minister of Lithuania or the Office of the Prime Minister of the Republic of Lithuania.
Usually the Ministry of Justice or the Ministry of Finance manages investment treaty arbitrations on behalf of the Government of Lithuania. The Ministry responsible for management of the investment arbitration would be appointed after the receipt of notices or claims by foreign investors.
Arrangements for the defense of investor-State arbitration are determined by the Lithuanian Government on a claim by claim basis. As it was indicated above, then the claim is received, than the Government would appoint the responsible Ministry to manage the dispute on behalf of the Government. The appointed Ministry would then announce a formal public procurement process to hire lawyers and law firms. Potentially any law firm could represent the Government of Lithuania after winning the public procurement process on legal representation.
K. PRACTICALITIES OF ENFORCING AN INVESTMENT TREATY CLAIM
a) New York Convention implementing legislation
The New York Convention came in force in Lithuania in 1995-02-02. The Implementing act – Resolution of the Parliament of the Republic of Lithuania regarding ratification of 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1995-01-17 No. I-760
b) Legislation governing non-ICSID arbitrations
Lithuania does not have any specific law governing investment arbitrations seated in the territory of Lithuania.
As for substantive investment protection standards reference could be to the Law on Investments of the Republic of Lithuania.
c) Compliance with adverse awards
To date, no publically available awards have been rendered against Lithuania under its investment treaties.
There were only few investment treaty arbitration cases against Lithuania. Thus, no substantive conclusions could be made on this matter. So far, the Government had always complied with its commitments under its investment treaties and was willing to refer investment disputes to international tribunals in accordance with the provisions of its bilateral investment treaties.
Similarly, Lithuanian courts have never been called upon to enforce an investment treaty award against Lithuania.
Lithuanian courts, however, have demonstrated a pro-international arbitration approach so far. For example, a Cyprus company enforced a 2004 LCIA award rendered against the Region of Kaliningrad (Russian Federation) for its failure to reimburse a loan. The award was enforced in Lithuania against two buildings that the Region of Kaliningrad owned there. In 2006, the Government of the Region of Kaliningrad (Russian Federation) commenced ICC arbitration proceedings against the Republic of Lithuania based on the bilateral investment treaty between the Russian Federation and Lithuania where it claimed compensation for the expropriation of its assets further to the enforcement of the 2004 LCIA award. The ICC arbitral tribunal found that it did not have jurisdiction over the dispute and that the application was unfounded. Government of the Region of Kaliningrad v the Republic of Lithuania (Paris Court of Appeal, Pôle 1, Chambre 1, 18 November 2010 no 09/19535)
As it was observed in this article, when it comes to investment treaty claims against the Republic of Lithuania, one needs to analyze and understand the complex nature of the courts system of Lithuania, as well as the provisions of administrative law, administrative procedure and its interrelation with the provisions of the BITs. Understanding the concepts and specific regulations of both, the administrative law, its procedure and the civil of the Republic of Lithuania is crucial when considering possible violation of investor’s rights and their defence either in the courts of Lithuania or international tribunals.
It was also observed that Lithuanian bilateral investment treaties contain all the classical elements and provisions of international investment law and are no different as compared with BITs of other countries. However, almost every BIT concluded by the Republic of Lithuania also has some specific differences or provisions which are needed to be taken into account. Thus every bilateral investment treaty must be assessed on a case-by-case basis.
Finally, it can be stated that over the short period of time, Lithuania has developed a reliable and modern foreign investment protection regime and, as compared with other developing countries in the region, Lithuania’s foreign investor protection regime contains all the modern characteristics possessed by the developed countries. It can be stated that analysis of the BITs concluded by Lithuania evidence that Lithuania is fully ready to become a reliable partner and a secure host state for foreign investors and their investments.
[i] Agreement between the Government of the Russian Federation and the Government of the Republic of Lithuania on the Promotion and Reciprocal Protection of Investments of 29 June 1999
[ii] http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=252663 [please note that it is not the up to date English translation of the law]
[iv] The Supreme Court of Lithuania is the only court of cassation instance for reviewing effective judgements, decisions, rulings and orders of the courts of general jurisdiction. It develops a uniform court practice in the interpretation and application of laws and other legal acts.
[v] The Court of Appeal is appeal instance for cases heard by regional courts as courts of first instance. It also hears requests for the recognition of decisions of foreign or international courts and foreign or international arbitration awards and their enforcement in the Republic of Lithuania, as well as performs other functions assigned to the jurisdiction of this court by law.
[vi] A regional court is first instance for criminal and civil cases assigned to its jurisdiction by law, and appeal instance for judgements, decisions, rulings and orders of district courts.
[vii] A district court is first instance for criminal, civil cases and cases of administrative offences (assigned to its jurisdiction by law), cases assigned to the jurisdiction of mortgage judges, as well as cases relating to the enforcement of decisions and sentences.
[viii] Regional administrative courts hear disputes in the field of public administration, deal with issues relating to the lawfulness of regulatory administrative acts, tax disputes, etc.
[ix] The Supreme Administrative Court is first and final instance for administrative cases assigned to its jurisdiction by law. It is appeal instance for cases concerning decisions, rulings and orders of regional administrative courts, as well as for cases involving administrative offences from decisions of district courts
[x] Article 111 of the Constitution provides for the possibility of establishment of specialized courts for the consideration of administrative, labour, family and other categories of cases. Specialized Administrative courts started to function in Lithuania from the 1st of May 1999, according to the Law on the Establishment of Administrative Courts. The system of administrative courts of Lithuania consists of 5 regional administrative courts (in Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys) and the Supreme Administrative Court of Lithuania. Rulings of the Supreme Administrative Court of Lithuania are final and not subject to appeal.
[xi] It should be noted that the Law on Investments also provides for a definition of investor: “Investors” mean the Republic of Lithuania and foreign states, international organizations, legal and natural persons of the Republic of Lithuania and foreign states, who invest, according to the procedure set forth in the laws of the Republic of Lithuania, own or borrowed assets or assets held and used on trust (Article 2(3) of the Law on Investments)
[xii] “Jurisdictional collegium” decides matters regarding assignment of cases either to the court of general competence or an administrative court. The collegium is established in accordance with Article 36 of the Code of Civil Procedure and Article 21 of the Law on administrative procedure. The members of “Jurisdictional collegium” are as follows: Chairman of the Civil Division of the Supreme Court of Lithuania, Deputy of the Chairman of the Supreme Administrative Court and two judges appointed by the latter
[xiii] Klockner v Cameroon I (ICSID Case No ARB/81/2)
[xiv] “International treaties ratified by the Seimas of the Republic of Lithuania shall be a constituent part of the legal system of the Republic of Lithuania” (Article 138 of the Constitution of Lithuania), see also Ruling of the Constitutional Court of Lithuania of 17 October 1995 http://www.lrkt.lt/dokumentai/1995/n5a1017a.htm
[xv] Administrative act shall mean activities of an entity of public administration comprising the adoption of administrative regulations for the implementation of laws and other legal acts (Article 2 of the Law on Public Administration)
[xvi] Full security and protection, FET, expropriation and etc.
[xvii] Claiming for specific performance or injunctive relief in investment disputes is rather unusual (as the main claims are directed to damages), however, it is not novel. As for examples, disputes regarding restrictions on tobacco marketing may be referred to, i.e. Philip Morris v. Uruguay http://www.smoke-free.ca/eng_home/2010/PMIvsUruguay/PMI-Uruguay%20complaint0001.pdf or Philip Morris Asia v. Australia http://www.italaw.com/sites/default/files/case-documents/ita0664.pdf see also Christoph Schreuer, Non-Pecuniary Remedies in ICSID Arbitration, 20 Arb. Int’l 325, 326 (2004) http://www.univie.ac.at/intlaw/wordpress/pdf/71_cspubl_71.pdf
[xviii] i.e. lawfulness of legal acts passed and actions performed by the entities of public administration (e.g. ministries, departments, inspections, services, commissions), also the legality and validity of refusal by the said entities to perform the actions within the remit of their competence or delay in performing the said actions
[xix] Regional public administration bodies – public administration bodies, which have an established part of the state territory as area of their activity (Article 2(8) of the Law on Administrative procedure)
[xx] Central public administration bodies – public administration bodies, which have all state territory as area of their activity (Article 2(7) of the Law on Administrative procedure)
[xxi] Public administration shall mean activities of entities of public administration regulated by laws and other legal acts, which are intended for the implementation of laws and other legal acts: Adoption of administrative decisions, control of the implementation of laws and administrative decisions, provision of administrative services established by laws, administration of the provision of public services and internal administration of an entity of public administration (Article 2 of the Law on Public Administration of the Republic of Lithuania)
[xxii] It is noted that the Constitutional Court of Lithuania is an independent court of the Republic of Lithuania. It is not regarded as a part of judicial system of Lithuania.
[xxiii] Arguing that the disputed law contradicts investors’ rights established in the BIT (Article 135, Article 138 of the Constitution of Lithuania)
[xxiv] The Government, not less than 1/5 of all the Members of the Seimas, and the courts, shall have the right to apply to the Constitutional Court requesting the Constitutional Court to establish whether the laws of the Republic of Lithuania and other acts adopted by the Seimas are not in conflict with the Constitution of the Republic of Lithuania. It is also noted that if the claimant (applicant) believes that a certain law is contradictory to the Constitution of Lithuania, it may request the court to refer to the Constitutional court with a request to analyze whether a specific provision of law is unconstitutional.
[xxv] The Ruling of the Supreme Administrative Court of Lithuania of 2003-06-27 in case No. A-05-264-03
[xxvii] A law (or part thereof) of the Republic of Lithuania or other act (or part thereof) of the Seimas, act of the President of the Republic, act (or part thereof) of the Government may not be applied from the day of official promulgation of the decision of the Constitutional Court that the act in question (or part thereof) is in conflict with the Constitution of the Republic of Lithuania (Article 107 of the Constitution of Lithuania, Article 77 of the Law on Constitutional Court of Lithuania)
[xxviii] Similar rule is found in the 2012-07-17 Ruling of the Jurisdictional collegium No. T-XX-42-12
[xxix] Ruling of the Supreme Administrative Court of the Republic of Lithuania of 2013-01-02, No. A-492-2917-12
[xxx] Public administration shall mean activities of entities of public administration regulated by laws and other legal acts, which are intended for the implementation of laws and other legal acts: Adoption of administrative decisions, control of the implementation of laws and administrative decisions, provision of administrative services established by laws, administration of the provision of public services and internal administration of an entity of public administration (Article 2 of the Law on Public Administration of the Republic of Lithuania)
[xxxi] According to Article 29 of the Code of Civil Procedure, in cases where the defendant is a state or a municipality, the claim shall be filed in accordance with the place of incorporation of the institution acting on behalf of the state of municipality
[xxxii] In certain ad hoc situations, the Government would adopt a resolution indicating a certain institution which would represent the state in affairs regarding claims for damage against the Republic of Lithuania (as it was the case in the Pensions case). In addition, Government’s Resolution No. 932 of 2001-07-26 indicates that State institutions (public administration bodies) due to actions of which the damage was caused shall represent the state in cases regarding claims for damage; in cases regarding claims for damage arising from unlawful actions of a court or a judge – the Ministry of Justice shall act on behalf of Lithuania. As it may be observed, Resolution No. 932 only indicates representation institutions of the executive and judicial branch, but does not mention institutions of legislative nature. Therefore, it should be referred to Article 6.273 of the Civil Code of the Republic of Lithuania.
[xxxiii] According to Article 27(1) of the Code of Civil Procedure, claims higher than 150,000 Litas are examined by the Regional courts. According to Article 28 of the Code of Civil Procedure, Vilnius regional court is also assigned with special jurisdiction hearing cases concerning patents, trademarks, adoption and ect.
[xxxiv] As it was mentioned above, in order to claim damages arising from the enactment of law, the law in question must be declared as unconstitutional, i.e. the applicant may request damages due to the fact that the law was unconstitutional. So the applicant must also request the court to apply to the Constitutional court with a request to declare a certain provision of law as unconstitutional (Article 3 of the Code of Civil Procedure, Article 4 of the Law on Administrative procedure)
[xxxv] http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=441300 [please note that the translation provided is out of date]
[xxxvi] http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_e?p_id=403417 [please note that the translation provided is out of date]
[xxxvii] “Appellant’s claims regarding violations of the Law on Investments and the Agreement between the Republic of Lithuania and the Kingdom of Denmark regarding promotion of investments and security could be examined in case such claims would be raised by the investor”;
[xxxviii] In this case, the investor was the Latvian company AirBaltic, however, the Riga International Airport was not an investor
[xxxix] Article 86(3) of the Law on Administrative procedure states that the court has a duty to analyze all the main claims filed by the claimant and to examine them in the court’s ruling
[xl] Article 87.4(4) of the Law on Administrative procedure states that a ruling of the court must specifically indicate the provision of law applied. Similar rule is found in Article 270.4(4) of the Code of Civil Procedure.
[xli] See also decisions of the Supreme Administrative court of Lithuania in cases No A143-443/2005, A502-906/2008, A502-304/2009).
[xlii] It is also noted that, the Law on Administrative procedure (Article 54) contains rules, according to which, in case the court finds during the hearing that the claim was filed by the person which lacks standing, the court has a right to change the claimant (upon claimant’s consent) with the person which has the standing. In case the claimant disagrees to be changed the court hears the dispute and the persons summoned by the court (which in court’s opinion have the standing) participate as third persons. This shows that the court upon the discovery of the lack of standing by the claimant has two options – either to suggest to the claimant to be changed by the person which has standing (and in case of refusal by the claimant – to hear the dispute after including into the case the person which has standing as a third person) or to hear the claim by the claimant lacking standing. In the latter case the courts should dismiss the claim for the lack of standing.
[xliii] Ruling of the Supreme Administrative Court of Lithuania No.P858-123/2012, Ruling of the Supreme Court of Lithuania, No. 3K-3-303/2007,
[xliv] For example, Article 26 of the ICSID Convention provides that consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy;
[xlv] See relevant rulings of the ECHR in Hartman v. The Czech Republic, App. No. 53341/99, 10 July 2003, Kudla v. Poland, App. No. 30210/96, 26 October 2000, Ivanka and Franc Belinger v. Slovenia, App. No. 42320/98, 2 October 2001,Horvat v. Croatia, App. No. 51585/99, 26 July 2001, See also tribunal‘s discussion in Parkerings v Lithuania, paras 448-454http://italaw.com/documents/Pakerings.pdf ;
[xlvi] See ECHR Admissibility guide, para 74, http://www.echr.coe.int/NR/rdonlyres/B5358231-79EF-4767-975F-524E0DCF2FBA/0/ENG_Guide_pratique.pdf
[xlvii] The full list of the bilateral investment treaties concluded by the Republic of Lithuania is attached as Annex No. 1 of this Article.