In a partial award rendered January 30, 2007, the operators of the Channel Tunnel — The Channel Tunnel Group Ltd. and France Manche S.A., known as "Eurotunnel" — were found entitled to damages in arbitration against the governments of France and the United Kingdom.1

Eurotunnel commenced arbitration in November 2003, pursuant to Article 40 of a Concession Agreement it signed March 14, 1986 with both governments (the "Concession Agreement"). Eurotunnel claimed that France and the UK had breached their obligations under the Concession Agreement and the Treaty of Canterbury (a treaty signed February 12, 1986 by France and England to provide a legal framework for the construction of the Channel Tunnel).

Eurotunnel presented two main arguments. First, Eurotunnel alleged that the governments had failed to take the necessary measures to protect the Channel Tunnel from multiple incursions by migrants living at the nearby Sangatte Hostel (a Red Cross refugee camp opened in 1999 near the entry of the tunnel in France), who tried to reach the UK through the tunnel, thus causing significant delays and disruptions to services, and consequential financial losses to Eurotunnel. Second, Eurotunnel argued that the governments granted subsidies to the SeaFrance ferry operator, which allowed SeaFrance to compete with Eurotunnel on an unfair basis.

The Tribunal was composed of five eminent arbitration practitioners: Professor James Crawford (Chairman), Yves Fortier, Jan Paulsson, Lord Millet and Judge Gilbert Guillaume. It noted at the outset of the award that its jurisdiction is limited to the rights and obligations laid out in the Concession Agreement and the Treaty of Canterbury. Eurotunnel had sought to extend the scope of the arbitration to legal obligations found outside the Concession Agreement and Treaty, such as rights arising under the European Convention on Human Rights or the rules protecting foreign investment. However, the Tribunal decided that these rules only provided a legal background for the interpretation and implementation of the Concession Agreement and the Treaty. All considerations pertaining to national, European or international law were thus to be referred to the competent court. Nonetheless, the Tribunal noted that it doubted whether the tunnel was a foreign investment in either country and that the problems encountered by Eurotunnel were unlikely to amount to expropriation, as Eurotunnel had alleged.

With regard to the merits of the Sangatte claim, the Tribunal held that the French and UK governments were liable for the loss suffered by Eurotunnel because they had failed to maintain conditions of normal security and public order around the Eurotunnel entrance.

The SeaFrance claim, to the contrary, was ultimately dismissed. Eurotunnel claimed that the governments had favored the ferry operator by granting it large subsidies, to Eurotunnel's detriment. With regard to France, however, the Tribunal considered that the assistance given to SeaFrance was not in breach of any of the stipulations of the Concession Agreement and that, should Eurotunnel consider that such subsidies amounted to unlawful competition, this is a matter for Eurotunnel to pursue before the relevant French or European courts. As far as the UK was concerned, the Tribunal ruled that it could not examine the merits of the claim because no dispute had arisen on this point between the parties before the commencement of the arbitration.

The total amount of the damages to be paid to Eurotunnel will be determined at a later stage of the proceedings, but according to Eurotunnel's estimations, the sum could be close to £50 million. Interestingly, this award would represent the first public funds ever paid with respect to the tunnel, as its construction was financed entirely through private investment.