Mining Arbitrations – A Perspective from Poland

This article examines the role of Bilateral Investment Treaties (BITs) in the mining sector, with particular focus on international arbitration as a desirable dispute resolution mechanism. We examine the implications of a recent case involving GreenX Metals v Poland for the practical operation of investment protection standards and identify key considerations relevant for the mining industry.

See GreenX Metals v Poland case.

The Framework of Bilateral Investment Treaties

Bilateral Investment Treaties represent cornerstone instruments in international investment law, providing crucial protections to foreign investors operating in host states. The network of BITs continues to evolve and expand between developed and developing countries, often triggering a regional cascade effect: when one country signs such agreements, neighboring states typically follow suit to maintain their competitive position in attracting foreign capital.

Modern BIT practice distinguishes "old generation" and "new generation" treaties. While traditional BITs focused primarily on investment protection (in particular against expropriation), newer agreements increasingly incorporate provisions addressing environmental concerns, sustainable development, and state regulatory powers. This evolution reflects a growing awareness that investor protections must be balanced with legitimate public policy objectives of the host state.

BIT frameworks typically guarantee investors several fundamental rights:

1. Protection against expropriation without prompt, adequate, and effective compensation;
2. Fair and Equitable Treatment (“FET”), ensuring a stable and predictable business environment;
3. National Treatment, guaranteeing foreign investors treatment no less favorable than domestic investors;
4. Most-Favored-Nation (“MFN”) treatment, ensuring equal treatment with investors from third countries;
5. Full Protection and Security (“FPS”) for investments;
6. Transparent and proportional administrative decision-making; and
7. Access to international arbitration for dispute resolution.

The right to international arbitration is a key component of the BIT framework, providing investors with a neutral forum for dispute resolution. Major arbitration forums include:

• The International Centre for Settlement of Investment Disputes (ICSID);
• Tribunals operating under UNCITRAL (United Nations Commission on International Trade Law) Arbitration Rules (2021); and
• The Permanent Court of Arbitration (PCA).

Arbitral awards are generally final and binding, with limited grounds for annulment typically restricted to jurisdictional issues or serious procedural violations. This finality promotes stability and predictability in international investment relations.

Mining Sector Risks and Investment Protection

1. Industry-Specific Challenges

The mining sector presents a complex array of challenges that make investment protection particularly crucial. Regulatory and legislative risks stand at the forefront of investor concerns. Mining companies must navigate constantly evolving environmental policies, often facing sudden changes in regulations and increasingly stringent energy transition requirements. The Polish mining sector exemplifies these challenges, as it grapples with European Union climate policies while managing its traditional dependence on hard coal.

Operational challenges further complicate the investment landscape. Mining projects require extensive, long-term infrastructure investments and careful management of labor relations. In many jurisdictions, including Poland, aging infrastructure necessitates significant capital expenditures, while strong mining unions and frequent labor actions can disrupt operations and impact the viability of an investment project.

Environmental, Social, and Governance (ESG) considerations have become increasingly important to mining operations in Poland. Companies must address carbon footprint reduction obligations while managing water resources and minimizing environmental damage. These challenges are particularly acute in densely populated regions where mining activities can have a meaningful impact on local communities, one that is often difficult to foresee and may span many years. The cross-border nature of environmental effects makes the mining business even more complex, as demonstrated by the recent Turów mine case between Poland and the Czech Republic.

Political and economic risks constitute another significant challenge for mining investors. Geopolitical tensions can affect access to resources, critical infrastructure, and markets, while domestic political changes may cause rapid and radical shifts in mining policy or attitudes toward foreign investment. The inherent volatility of commodity prices adds financial uncertainty, which is particularly important for long-term projects requiring substantial capital investment. Securing project financing has become another challenge as financial institutions reassess their exposure to traditional miners.

2. Case Study: GreenX Metals v. Republic of Poland

The dispute between GreenX Metals and Poland, concluded in October 2024, provides a compelling illustration of how these sector-specific risks can materialize and how investment treaties can protect foreign investors. The case centered on two significant coal mining projects: the Jan Karski project and the Dębieńsko mine.

The conflict emerged when GreenX Metals, after purchasing rights to both projects in 2016, encountered significant regulatory obstacles. The Polish Ministry of Environment declined to sign a concession agreement for the Jan Karski project, shortly after granting licenses to the state-owned company LW Bogdanka S.A. Meanwhile, authorities rejected GreenX's request to extend the deadline for beginning extraction at the Dębieńsko mine, effectively preventing the project from advancing.

The GreenX tribunal ruled partially in favor of the investor, and its nuanced award reflects the complexity of balancing investor rights with state regulatory powers. Regarding the Jan Karski project, the tribunal found that Poland had violated its obligations under both the Poland-Australia BIT (1991) and the Energy Charter Treaty (1994). The award granted the investor a substantial compensation: £252 million under the BIT and £183 million under the ECT, with ongoing interest accrual at SONIA plus one percent annually. However, the tribunal rejected claims related to the Dębieńsko mine, demonstrating its nuanced approach to evaluating Poland's distinct actions in different investment projects.

3. Post-Award Developments

The aftermath of the award illustrates the challenges of enforcing investment treaty decisions. Poland has initiated set-aside proceedings in multiple jurisdictions: challenging the BIT award in English courts and the ECT award in Singapore. These proceedings focus on jurisdictional questions and alleged procedural violations, reflecting the limited grounds available for challenging investment arbitration awards. Meanwhile, interest continues to accrue on the awarded amount, creating additional pressure for resolution and, perhaps, a late-stage settlement.

Conclusions and Implications

The GreenX case demonstrates several crucial lessons. For investors, it reaffirms the importance of BIT protection (where available) for mining projects, particularly against regulatory changes and administrative interference. The case shows that international arbitration remains an effective means of enforcement, provided that the investment is appropriately structured to ensure treaty protection.

Host states must recognize that regulatory changes require careful consideration of international investment obligations. The case emphasizes the importance of maintaining clear, consistent, and predictable administrative procedures when shaping new public policy.

As the global mining industry continues to adapt to changing environmental and social expectations, the role of BITs in providing stable investment conditions remains important. The challenge lies in balancing legitimate state regulatory powers with the protection of foreign investment, particularly in sectors as strategically important as mining. The GreenX case suggests that tribunals tend to approach this balancing act with caution and continue to appreciate the challenges posed by the dynamic regulatory environment of ESG-sensitive sectors.

Looking ahead, investment treaty practice and interpretation will likely continue to evolve as arbitrators navigate the complex relationship between traditional investment protections and growing environmental imperatives, seeking frameworks that serve both public and private interests.

This article was originally published on Daily Jus on Friday 29^th November, with thanks to Jus Mundi & Jus Connect, and is available here.