applicant memorial 2012

7/29/2019 Applicant Memorial 2012

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TEAMX

D.M.HARISH MEMORIAL GOVERNMENT LAW COLLEGE INTERNATIONAL MOOT COURT

COMPETITION 2012

IN THE INTERNATIONAL COURT OF JUSTICE

PEACE PALACE,THE HAGUE

NETHERLANDS

CASECONCERNING THEECONOMIC AND TAXATIONPOLICIES

T H E R E P U B L I C O F A M I T I

APPLICANT

v.

T H E R E P U B L I C O F D A R S H I N I

RESPONDENT

ON SUBMISSION TO THE INTERNATIONAL COURT OF JUSTICE

MEMORIALfor the APPLICANT

REPUBLIC OF AMITI


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Table of Contents i

~Memorialfor the Applicant~

TABLE OF CONTENTS

TABLE OF CONTENTS ...................................................................................................................ITABLE OF AUTHORITIES..............................................................................................................IISTATEMENT OF JURISDICTION ................................................................................................... IXSTATEMENT OF FACTS ............................................................................................................... XQUESTIONS PRESENTED .......................................................................................................... XIIISUMMARY OF ARGUMENTS ..................................................................................................... XIVARGUMENTS ............................................................................................................................... 1

1. The repudiation of the Double Taxation Avoidance Agreement by Darshini is notjustified under international law. . ..................................................................................... 1

1.1. Darshini does not meet the grounds under Article 46 of the Vienna Convention forinvalidation of the treaty. ................................................................................................... 11.2. Darshini cannot validly terminate the DTAA under international law. .................. 21.3. Arguendo, Darshini has lost its right to end or suspend its obligations under thetreaty.. ................................................................................................................................ 6

2. Darshinis shift in its economic policy contravenes its international obligations. .. 82.1. The new economic policy of Darshini violates its obligations as a member of theVipulian Economic Union. ................................................................................................ 82.2. Darshinis unilateral policy changes amount to interference in Amitis internalaffairs.....................................................................................................................9

3. Amiti is not bound to disclose the information requested by Darshini. ................. 123.1. Under the Vipulian Economic Union Charter, Amiti is not bound to disclose theinformation sought by Darshini. ...................................................................................... 123.2. Amiti is not bound by the exchange of information clause in the DTAA. ......... 153.3. The Banking Regulation and Secrecy Act prohibits the disclosure of confidentialinformation. ...................................................................................................................... 16

SUBMISSIONS TO THE COURT ................................................................................................. XVII


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Table of Authorities ii


TABLE OF AUTHORITIES

Treaties

1. Council of Europe, Convention for the Protection of Individuals with regard toAutomatic Processing of Personal Data, ETS No. 108, (Jan 28, 1981) ....................... 13

2. European Union[EU], Charter of the Fundamental Rights of the European Union,2000 O.J. (C 364) 1, (Dec. 7, 2000) ............................................................................. 12

3. International Covenant on Civil and Political Rights, (Dec. 16, 1966) ................. 12, 134. Model Treaty on Mutual Assistance in Criminal Matters, G.A. 45/117, U.N. Doc.

A/RES/ 45/117 (Dec. 14, 1990) ................................................................................... 16

5. OECD Committee on Fiscal Affairs, Model Tax Convention on Income and onCapital, (Paris, July 2008) ............................................................................................ 15

6. United Nations, Econ & Social Council, Convention against Illicit Traffic in NarcoticDrugs and Psychotropic Substances (Dec. 19, 1988) .................................................. 16

7. Vienna Convention on the Law of Treaties, 1969 ................................... 1, 2, 3, 6, 8, 14ICJ Judgments

1. Case concerning Armed Activities on the Territory of Congo (Congo v. Uganda),Judgment, 2005 I.C.J. 168 (December 19) .................................................................... 9

2. Corfu Channel Case (United Kingdom v. Albania) Assessment ofCompensation, , 1949 ICJ 15 XII 49 (December 15) .................................................... 9

3. Dissenting Opinion by Judge Cancado Trindade, Jurisdictional Immunities of theState (Germany v. Italy) , (Order of 6 July 2010)ICJ .................................................. 14

4. Exchange of Greek and Turkish Populations, Advisory opinion, PCIJ series B no,ICGJ 277 (PCIJ 1925) .................................................................................................. 16

5. Fisheries Jurisdiction (U.K./Ice.), Merits, Judgment, 1973 I.C.J. ................................. 26. Gabcikovo-Nagymaros Project (Hung./ Slovk.), Judgment, 1997 I.C.J. 7, 95,

(Sep.25) ...................................................................................................................... 2, 3

7. Greco Bulgarian Communities, Advisory opinion, PCIJ series B no 17, ICGJ 284(PCIJ 1930) .................................................................................................................. 16

8. Kasikili/Sedudu Island (Bots./ Namib.), Judgment, 1999 I.C.J. (Dec. 13) .................. 14


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Table of Authorities iii


9. Military and Paramilitary Activities in and Against Nicaragua (Nicar. v. U.S.), 1986I.C.J. 14, (June 27) ................................................................................................... 9, 10

10.Territorial Dispute (Libya/Chad), Judgment, 1994 I.C.J. 6 (Feb. 3) ........................... 14Cases

1. Amann v. Switzerland, Eur. Ct. H.R. 47 (2000) ........................................................... 122. Case C-336/96) Gilly v. Directeur des Services Fiscaux de Bas-Rhin, 1998 E.C.R. I-

2793.............................................................................................................................. 15

3. Francesco Madafferi and Anna Maria Immacolata Madafferi v.Australia,CCPR/C/81/D/1011/2001, UN Human Rights Committee (HRC), 26 August 2004 .. 13

4. Hoge Raad, Rolno. 29.296, BNB 1994/259: DTCNetherlands/USA ........................... 55. Hoge Raad, Rolno. 29.531, BNB 1995/150: DTCNetherlands/Belgium .................... 56. Olmstead v. United States, 277 U.S. 438, 944 (1928) ................................................. 137. Peck v. The United Kingdom, Eur. Ct. H.R. 57 (2003) ................................................ 128. RackeGnbH& Co. v Hauptzollamt Mainz, E.C.R. (1998) ............................................. 39. Rolno. 28.734, BNB 1994/294: DTCNetherlands/Belgium ......................................... 510.S. and Marper v. the United Kingdom, Eur. Ct. H.R. 1581 (2008) ............................. 1211.Soo Ja Lim; Seon Hui Lim and Hyung Joo Scott Lim v.

Australia, CCPR/C/87/D/1175/2003, UN Human Rights Committee (HRC), 10

August 2006 ................................................................................................................. 13

12.Wheaton v. Peters, 33 U.S. 591, 634 (1834)................................................................ 1313.Yassin Abdullah Kadi and Al Barakaat International Foundation v. Council of

European Union and Commission of European Communities, [2008] 3 CMLR 41 ... 14

Treatises

1. ALEX CONTE, SCOTT DAVIDSON AND RICHARD BURCHILL, DEFINING CIVIL ANDPOLITICAL RIGHTS: THE JURISPRUDENCE OF THE UNITED NATIONS HUMAN RIGHTS

COMMITTEE (2004) ...................................................................................................... 13

2. I.R.JENNINGS AND A.WATTS, OPPENHEIMS INTERNATIONAL LAW,(9th edn, 1992) 2, 93. KLAUS VOGEL,KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONS ..................... 3, 54. MARKEVILLIGER,COMMENTARY ON THE 1968VIENNA CONVENTION ON THE LAW OF

TREATIES ................................................................................................................ 1, 2, 6

5. RICHARD K.GARDINER,TREATY INTERPRETATION, (2008) ......................................... 14


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Table of Authorities iv


6. T.M.COOLEY, ATREATISE ON THE LAW OF TORTS (2d ed. 1888) ............................... 13Publicists

1. Andre Nollkaemper, NATIONAL COURTS AND INTERNATIONAL RULE OF LAW (2011)................................................................................................................................ 14, 16

2. B. Balassa, THE THEORY OF ECONOMIC INTEGRATION (1961) ....................................... 83. C.M.Bassiouni and E.M. Wise, AUT DEDARE AUT JUDICARE: THE DUTY TO

EXTRADITE ORPROSECUTE IN INTERNATIONAL LAW (1995) ........................................ 17

4. Catherine Barnard, THE SUBSTANTIVE LAW OF THE EU (3rd edn, 2010) ....................... 85. European Commission, Directorate-General for Economic and Financial Affairs,

Economic Crisis in Europe: Causes, Consequences and Responses, European

Economy (7/2009) ....................................................................................................... 10

6. FEIST,Kndigung ........................................................................................................... 37. H. Triepel, VLKERRECHT UND LANDESRECHT (Leipzig, Verlag von C.L. Hirschfeld

trans., (1899) ................................................................................................................ 16

8. I Roy Rohatgi, PRINCIPLES OF INTERNATIONAL TAX LAW, BASIC INTERNATIONALTAXATION................................................................................................................. 4, 15

9. INTERNATIONAL ECONOMIC POLICY COORDINATION (Willem H. Buiter & Richard C.Marston eds., 1985)...................................................................................................... 10

10.J.S. Mill, PRINCIPLES OF POLITICAL ECONOMY(D. Winch ed., 1970) .......................... 1311.Judith DeCew, Privacy, THE STANFORD ENCYCLOPEDIA OF PHILOSOPHY(2008) ....... 1312.KEARNEY,International Lawyer 4 (1969) ...................................................................... 213.KCK,Festschrift VEROSTA ........................................................................................... 314.Morten Ougaard, Richard A. Higgott, TOWARDS A GLOBAL POLITY, WARWICK

STUDIES IN GLOBALISATION, CENTRE FOR THE STUDY OF GLOBALISATION AND

REGIONALISATION, ECONOMIC AND SOCIAL RESEARCH COUNCIL (GREAT BRITAIN)

(2002) ........................................................................................................................... 10

15.Swann, THE ECONOMIES OF COMMON MARKET (7th edn, 1992) .................................... 816.Tofan Mihaela, INTEGRAREA ROMDNIEI IN STRUCTURILE UNIUNII MONETARE

EUROPENE(C.h. Beck. ed, 2008) ................................................................................... 8

17.W. Molle, THE ECONOMICS OF EUROPEAN INTEGRATION: THEORY, PRACTICE ANDPOLICY............................................................................................................................ 8


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Table of Authorities v


Articles

1. Bohringer Cristoph and Rutherford, Thomas F.,Decomposing General EquilibriumEffects of Policy Intervention in Multi-Regional Trade Models, Method and Sample

Application, Centre For European economic Research (ZEW), ZEW Discussion Paper

no. 99-36 (1999)........................................................................................................... 10

2. Cheshire Paul, Optimal Areas for Planning, Local Economic Development andTransportation, Technical University of Koice, Faculty of Economics, 2nd Central

European Conference in Regional Sciences (CERS), (2007) ...................................... 10

3. David. A. Funk, From International Laws to International Economic CommunityLaw, 4CASE W.RES.J.INT'L L.31971-1972 ................................................................ 9

4. Dinah Shelton,Hierarchy of Norms and Human Rights: Of Trumps and Winners, 65SASK.L.REV.301200at306....................................................................................... 14

5. Dinah Shelton, Normative Hierarchy in International Law, 100 (2) A.J.I.L. 291(2006) ........................................................................................................................... 14

6. F Morgenstern,Judicial Practice and the Supremacy of International Law, (1950) 27BRIT.Y.B.INTL.L42, 90 ........................................................................................... 16

7. Fernandez, Neville G, International Law And The Use of Force: Armed InterventionIn International Affairs, Journal of Singapore Armed Forces, Journal V 24-N1, (Jan-

Mar,1998)..................................................................................................................... 10

8.

Gabriela Bologa and Maria-Nicoleta Rosca, The Legislative Framework for the EUStates in the context of Economic and Monetary Integration, 2009 AGORA Int'l J.

Jurid. Sci. xviii 2009 ...................................................................................................... 8

9. Greenwood, Nicholas Onuf, The Principle of Non intervention, the United Nations,and the International System, International Organization, Vol. 25, No. 2 (1971) ......... 9

10.Hoffman, Stanley, International Systems and International Law, World Politics, Vol14, No. 1, (Oct 1961) ..................................................................................................... 9

11.John Funston, ASEAN and the Principle of Non Intervention Practice andProspects, Institute of South East Asian Studies, ISSN 0219-3213, No.5,(March,2000) ............................................................................................................ 10

12.Kitamura, Economic Theory and the Economic Integration of UnderdevelopedRegions, in LATIN AMERICAN ECONOMIC INTEGRATION (M. Wionczek ed. 1964) ....... 9


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Table of Authorities vi


13.Lori Fisler Damrosch, Politics across Borders: Non Intervention and Non ForcibleInfluence over Domestic Affairs, 83 AM.J.INTL L(1989) ........................................ 10

14.M. Cherif Bassiouni, Policy Considerations on Inter-State Cooperation in CriminalMatters, 4 PACE Y.B.INTL LAW 123(1992) .............................................................. 17

15.M. Fitzmaurice,The Gabcikovo- Nagymoros Case: The Law of Treaties, Leiden JIL11 (1998) 332 ................................................................................................................. 3

16.Maria Flavia Ambrosanio and Maria Serena Caroppo, Eliminating Harmful TaxPractices in Tax Havens: Defensive Measures by Major EU Countries and Tax Haven

Reforms, Canadian Tax Journal Vol. 53 No. 3, 690 (2005)........................................... 4

17.Martti Koskenniemi, Hierarchy in International Law: A Sketch, 8 EUR. J. INTL. L.566(1997) .................................................................................................................... 14

18.Michael Daly, The WTO and Direct Taxation, Discussion Paper No. 9, World TradeOrganisation (June,2005) ............................................................................................. 15

19.Morris Goldstein, Improving Economic Policy Coordination: Evaluating some newand some not-so-new Proposals, in THE INTERNATIONAL MONETARY SYSTEM (P.B.

Kenen, Francesco Papadia, Fabrizio Saccomanni eds., 1994) ..................................... 10

20.Rames A. Wessel, The Kadi Case: Towards a More Substantive Hierarchy inInternational Law?, 5INTL ORG.L.REV.3232008 ................................................... 14

21.Valery Shupilov, Legal Assistance in Criminal Matters and Some ImportantQuestions of Extradition, 15 CASE W.RES.J.INTL LAW 127(1983) ......................... 17

22.VerLoren Van Themaat, The Relations between the Concepts of a Common Market, aMonetary Union, an Economic Union, a Political Union and Sovereignty, (1991)28

CMLREV 291 ................................................................................................................ 8

23.Wexler, The Theory and Reality of Economic Integration, 14WORLD POL.553,559(1962) ............................................................................................................................. 9

United Nations Documents

1. Declaration of the Inadmissibility on Intervention and Interference in the InternalAffairs of States, G.A Res. 36/103, U.N Doc. A/RES/36/103 (9 December 1981) ... 10

2. Declaration on the Inadmissibility of Intervention in Domestic Affairs of States andProtection of Their Independence and Sovereignty, G.A Res. 2131(XX), U.N. Doc

A/RES/20/2131(Dec. 21,1965). ................................................................................... 10


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Table of Authorities vii


3. Declaration on the Principle of International Law concerning Friendly Relations andCooperation among the States in accordance with the Charter of the United Nations,

G.A. Res. 37/10, U.N. Doc. A/Res/37/10 (Oct. 24, 1970)........................................... 10

4. Fourth Waldock Report, Documents of the first part of the seventeenth sessionincluding the report of the Commission to the General Assembly [1965] ................ 2, 3

5. Human Rights as the Primary Objective of Trade, Investment and Financial Policy,UN Doc. E/CN.4/Sub.2/RES/1998/12 (1998) ............................................................. 14

6. ILC Report 1963, YBILC 1963 II 213........................................................................... 67. ILC Report 1966, Report of the of the International Law Commission on the work of

its 8th Session ............................................................................................................ 3, 6

8. Minutes of the first session, United Nations Conference on the Law of Treaties, 1968-69................................................................................................................................ 1, 3

9. Minutes of the second session, United Nations Conference on the Law of Treaties,1968-69 .......................................................................................................................... 3

10.Second Waldock Report, Documents of the fifteenth session including the report ofthe Commission to the General Assembly, [1963] ........................................................ 6

11.U.N. Commission on Economic, Social and Cultural Rights, Statement to the ThirdMinisterial Conference of the World Trade Organisation (Nov 26, 1999) UN Doc.

E/C.12/1999/9 .............................................................................................................. 14

12.U.N. Sub-Commn on the Promotion and Protection of Human Rights, Globalisationand Its Impact on the Full Enjoyment of Human Rights, Preliminary Report submitted

by J. Oloka-Onyango and Deepika Udagama, UN Doc. E/CN.4/Sub.2/2000/13 ........ 14

13.United Nations, Econ. & Social Council, Comm. of Experts on InternationalCooperation in Tax Matters, Abuse of tax treaties and Treaty Shopping ...................... 5

14.Universal Declaration of Human Rights art. 12, G.A. Res 217 (III) A, U.N. Doc.A/RES/ 217(III) (Dec. 10, 1948) ........................................................................... 12, 13

Other Authorities

1. Chatham House (The Royal Institute for International Affairs) and Centre forInternational Governance Innovation, Paola Subacchi and Paul Jenkins, Preventing

Crises and Promoting Economic Growth: A Framework for International Policy

Cooperation (April 2011) ............................................................................................ 10


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Table of Authorities viii


2. Council of Economics and Finance Ministers, European Union Code of Conduct,(Dec. 1, 1997) ................................................................................................................ 4

3. European Parliament and Council, Directive on the protection of individuals withregard to the processing of personal data and on the free movement of such data,

95/46/EC, L281 (24th Oct., 1995) ............................................................................. 124. OECD Committee on Fiscal Affairs, Commentaries on the Articles of the Model Tax

Convention on Income and on Capital, (Paris, July 2008) ............................................ 5

5. OECDHarmful Tax Competition: An Emerging Global Issue (Paris, 1998) ................ 46. OECD, Guidelines on the Protection of Privacy and the Transborder flows of

Personal Data, (Sep. 23, 1980) ................................................................................... 12

7. OECD, The OECDs Project on Harmful Tax Practices: The 2001 Progress Report(Paris, 2001) ................................................................................................................... 4

8. OECD, The OECDs Project on Harmful Tax Practices: The 2004 Progress Report(Paris, 2004) ................................................................................................................... 4

9. OECD, Towards Global Tax Co-operation: Progress in Identifying and EliminatingHarmful Tax Practices (Paris, 2000) ............................................................................. 4

10.Organisation for Economic Co-operation and Development [OECD] Committee onFiscal Affairs,Report on Tax Treaty Override, (Paris, 1989) ....................................... 3

11.Yilmaz Akyz, Global Rules and Markets: Constraints over Policy Autonomy inDeveloping Countries (Intl Labour Office, Policy Integration and Statistics

Department), Working Paper No. 87, (2008) .............................................................. 10

Online Sources1. Oxford Dictionary, (OUP 2011), http://www.oxforddictionaries.com (last visited

Dec. 30, 2011) .......................................................................................................... 9, 15


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Statement of Jurisdiction ix


STATEMENT OF JURISDICTION

CASECONCERNINGTHEECONOMICAND TAXATIONPOLICIES

THE REPUBLIC OF AMITI ....Applicant

v.

THE REPUBLIC OF DARSHINI .....Respondent

Republic of Amiti and Republic of Darshini submit the following dispute to this Court by

Special Agreement for Resolution without reservations, pursuant to Article 40 (1) of the

Statute of the International Court of Justice and the Jurisdiction of this Court thus extends to

all matters referred to by the parties in accordance with Article 36(1) of the Statute of the

Court

IN THE INTERNATIONAL COURT OF JUSTICE

PEACE PALACE,THE HAGUE

NETHERLANDS


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Statement of Facts x


STATEMENT OF FACTS

I

The Vipulian Economic Union, formed in 2000, comprises of 12 nations including Darshini

and Amiti. The guiding principles of the Union include:

(a) respect for the universal rights of people around the world(b)mutual respect for the laws of member nations and the commitment to support

the implementation of each others laws and decisions of the courts

(c)movements towards full economic integration with respect to currency, fiscalpolicy, monetary policy, taxation and legal systems

(d)preservation of the unique social, cultural and religious history of eachindividual member and its people

(e)exchange of information on matters of importance to member nations and itspolicies.

Darshini is the leading economy within the VEU and the second largest in the world, whereas

Amiti is a developing country which recently opened its economy.

II

To establish itself as a top notch financial centre and to encourage investments, Amiti entered

into a number of investment and double tax avoidance agreements (largely based on the

OECD Model) with countries around the world. It entered into such a Double Tax Avoidance

agreement with Darshini also. Through the said treaty, which had no limited limitation of

benefits clause, it was agreed that capital gains would be taxed by the country of residence

and that exchange of information would be limited to matters under the treaty. Following this,

capital gains tax in Amiti was reduced to 1%, unlike Darshinis 20%. As a result, investment

corporations established themselves in Amiti and through such entities, invested into Darshini

and these structures were upheld by the courts in Darshini Thus, Amitian Corporations

technically contributed to 27% of foreign investment into Darshini.

III


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Statement of Facts xi


Amiti also encouraged the development of its banking system through a Banking Regulation

and Secrecy Act, which recognised individuals privacy and required banks to maintain

confidentiality and secrecy, unless the disclosures were required by law. Consequently,

people and corporations across the globe established legal entities and bank accounts in

Amiti. Though some commentators believed that Amiti was trying to be tax haven, Amiticlaimed that it was merely striving to be a world class financial centre.

IV

In 2008-09, following the global financial crisis, Darshinis economy was significantly

affected. The Darshini government to prevent its economy from slipping into a recession,

increased spending and passed stimulus packages to support the economy. Consequently,

even though the country fell into debt and borrowings constituted over 90% of its GDP,

economists believe that this protected Darshinis economy from the recession. In 2010

however, when the Democratic Party came into power in Darshini, it shifted its economic

policy to one of fiscal conservativeness in order to recover the economy in the medium to

long term, even though this would slow down the economy and might even slip it into

recession. As a result, by late 2010, Darshini slipped into recession. This caused a huge credit

crunch and had a devastating impact on Amiti and other countries in the VEU. The Amitian

Prime Minister made requests for a reversal of at least the key economic policies of Darshini

during this time.

V

In early 2011, a lower court in Darshini passed an order questioning the validity of its DTAA

with Amiti, after holding multiple hearings on the public policy dimensions of the

agreement. Legal experts unanimously agreed that the decision was a mistake and failed to

consider the rulings of the Supreme Court of Darshini. The government, however, using an

obscure constitutional provision passed a resolution advising the executive to implement the

said decision. Amiti expressed its dismay over the lower courts order and stated that the said

decision constituted a grave violation of international law. The Government of Darshini

responded by saying that in times of economic crisis and in light of global state practice viz.

tax havens, countries are entitled to make tough choices. This caused the stock markets of

both countries to fall and business confidence in the VEU to reduce.


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Statement of Facts xii


VI

Simultaneously, tax investigation authorities in Darshini submitted a report indicating

alleged violations by Darshini residents in maintaining undeclared income in Amitian Bank

accounts. The Supreme Court of Darshini, while hearing a public interest matter asked the

Government to determine if there had been any violations and to report back in 3 months.

Following this, the Government of Darshini requested Amiti for a disclosure of the identities

of Darshini based account holders. The Amiti Government refused disclosure on the ground

that it would violate the Banking Regulation and Secrecy Act. Further, no actual law had

proved to have been violated by Darshini residents. The Darshini Government stated that this

was a violation of the principles of the VEU Charter, to which Amiti responded by saying

that the VEU protected an individuals right to privacy.

VII

Thereafter, Amiti government issued a statement saying that Darshinis unilateral policy

decisions amounted to interference in its internal affairs and was a violation of the principles

of the VEU. The increased tension affected the economic mood of both nations detrimentally.

The Secretary General of the United Nations advised the governments to refer the matter to

the International Court of Justice since they were dealing with critical issues of international

significance faced by many other countries. He also stated that this issue had to be resolved in

a manner consistent with individuals rights. Thus, the governments of Darshini and Amitireferred their differences to the International Court of Justice.


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Questions Presented xiii


QUESTIONS PRESENTED

I. WHETHER THE INVALIDATION OF THE DOUBLE TAXATION AVOIDANCEAGREEMENT BY DARSHINI CONTRAVENES INTERNATIONAL LAW?

A. Whether Darshini meets the grounds under Article 46 of the Vienna Convention forinvalidation of the treaty?

B. Whether Darshini can validly terminate the DTAA under international law?C. Whether Darshini has lost its right to end or suspend its obligations under the treaty?

II. WHETHER DARSHINIS SHIFT IN ITS ECONOMIC POLICY CONTRAVENES ITSINTERNATIONAL OBLIGATIONS?

A. Whether the new economic policy of Darshini violates its obligations as a member ofthe Vipulian Economic Union?

B. Whether Darshinis unilateral policy changes amount to interference in Amitisinternal affairs?

III. WHETHER AMITI IS BOUND TO DISCLOSE THE INFORMATION REQUESTED BYDARSHINI?

A. Whether under the Vipulian Economic Union Charter, Amiti is bound to disclose theinformation sought by Darshini?

B. Whether Amiti is bound by the exchange of information clause in the DTAAgreement?

C. Whether the Banking Regulation and Secrecy Act prohibits the disclosure ofconfidential information?


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Summary of Arguments xiv


SUMMARY OF ARGUMENTS

1. THE INVALIDATION OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BYDARSHINI CONTRAVENES INTERNATIONAL LAW.

1.1.Darshini does not meet the grounds under Article 46 of the Vienna Convention for

invalidation of the treaty.

Article 46 of the Vienna Convention permits unconstitutionality as a ground for invalidation

of a treaty only when there is either a manifest violation of a rule of its internal law of

fundamental importance. The Double Tax Avoidance Agreement (DTAA) was invalidated

by Darshini on the grounds that the executive was not expressly permitted to enter into a tax

treaty giving up the countrys right to tax capital gains vide Darshinis income tax legislation.

Amiti contends that Darshinis invalidation of the DTAA agreement is not justified since the

violation of the law does not meet the prerequisites of Article 46.

1.2.Darshini cannot validly terminate the DTAA under international law.

Amiti contends that Darshini cannot validly terminate the treaty under the Vienna Convention

on account of a fundamental change in circumstances, since the essential object and purpose

of the treaty is unharmed by the change in circumstances. The change was in fact triggered by

Darshinis policy change. Further, Amiti contends that Darshini cannot override the treatyunder international taxation law on two grounds; first, that Amiti is not a tax haven and

therefore cannot be subject to any countermeasures prescribed to deal with tax havens and

second; the absence of a limitation of benefits clause in the DTA agreement precludes

Darshini from overriding the treaty on account of treaty shopping.

1.3.Arguendo, Darshini has lost its right to end or suspend its obligations under the treaty.

Article 45 of the Vienna Convention provides that a State party having a right to denounce or

avoid a treaty may disqualify itself from exercising the right due to its subsequent conduct. AStates tacit acceptance of a treaty may be inferred from its omission to raise an objection.

Darshini continued to execute the treaty even after Amiti reduced its capital gains tax to 1%.

Amiti contends that Darshinis tacit acceptance of the treaty and failure to raise any


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Summary of Arguments xv


objection, disqualifies it from denouncing or avoiding the treaty at a later stage on grounds of

unfair capital gains treatment.

2. DARSHINIS SHIFT IN ITS ECONOMIC POLICY CONTRAVENES ITS INTERNATIONALOBLIGATIONS.

2.1.The new economic policy of Darshini violates its obligations as a member of the

Vipulian Economic Union.

The VEU charter embodies the principle of movement towards full economic integration. A

basic feature of an economic union is the harmonisation of economic policy. Despite multiple

requests to reverse Darshinis policies and even though these polices had a devastating

impact on the entire VEU, they were not reversed. Amiti contends that this indicates a lack of

harmonisation. Moreover, Darshinis new policy practically acts as an impediment to the free

movement of goods and services and therefore, violates its obligations under the VEU

charter.

2.2.Darshinis unilateral policy changes amount to interference in Amitis internal affairs

Non-interference in the internal affairs of a State is an established principle of customary

international law. Amiti argues that Darshinis policy shift had a severe impact on Amitis

ability to manage its economy, resulting in social unrest in the region. This amounts to

interference in its economic and social affairs.

3. AMITI IS NOT BOUND TO DISCLOSE THE INFORMATION REQUESTED BY DARSHINI.3.1.Under the Vipulian Economic Union Charter, Amiti is not bound to disclose the

information sought by Darshini.

The VEU guarantees respect for an individuals right to privacy. Darshini requested the

disclosure of the identities of all Darshini based residents who had bank accounts in Amiti.

Amiti submits that disclosure of the information requested by Darshini amounts to an

unlawful and arbitrary interference of an individuals right to privacy. Additionally, Amiti

contends that this non-disclosure does not deviate from the principle of exchange of

information contained in the VEU. Since there exists a primacy of human rights over other

international law and States are under an obligation to protect human rights, the enforcement

of the exchange of information clause cannot be reconciled with the right to privacy.


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Summary of Arguments xvi


3.2.Amiti is not bound by the exchange of information clause in the DTA Agreement.

The DTAA restricts the exchange of information between Darshini and Amiti to matters

under the treaty. Matters under the treaty refers to the subject-matter or content of the

treaty i.e. provisions of the treaty. Since provisions under the treaty do not relate to tax

evasion or tax avoidance, the disclosure of information with regard to violations of Darshini

law is not a matter under the treaty. Therefore, Amiti is not bound to disclose the information

under the DTAA.

3.3.The Banking Regulation and Secrecy Act prohibits the disclosure of confidential

information.

The Banking Regulation and Secrecy Act prohibits disclosure of information unless

mandated by applicable law. International obligations constitute applicable law, however,

there exists no international obligation on Amiti to disclose the relevant information. Further,

the doctrine of mutual legal assistance does not bind a State to disclose information unless

contractually bound to do so. Amiti argues that it is prohibited from disclosing the requested

information under the Banking Regulation and Secrecy Act.


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Arguments 1


ARGUMENTS

1. THE REPUDIATION OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BYDARSHINI IS NOT JUSTIFIED UNDER INTERNATIONAL LAW..

Amiti contends that Darshinis grounds for repudiation under the Double Taxation Avoidance

Agreement (DTAA) do not comply with international law. First, the DTAA cannot be

invalidated under Article 46 of the Vienna Convention on the Law of Treaties1 (Vienna

Convention); Secondly, the termination of the DTAA is unjustified under the Vienna

Convention and international taxation law. Arguendo, even assuming that there exist valid

grounds for the termination or invalidation of the DTAA, Darshini is precluded from doing

so.

1.1. DARSHINI DOES NOT MEET THE GROUNDS UNDER ARTICLE 46 OF THE VIENNACONVENTION FOR INVALIDATION OF THE TREATY.

A States consent to a treaty in violation of a domestic law cannot be used as a ground for

invalidating the treaty unless the violation is manifest and concerned a rule of its internal

law of fundamental importance under Article 46 of the Vienna Convention on the Law of

Treaties2

The term manifest as defined in Para. 2. of the article states that a violation must beobjectively evident to any State conducting itself in the matter in accordance with normal

practice and good faith.3 A rule of fundamental importance is one which is directly

connected to the impugned violation and expressly regulates the competence to conclude a

treaty.4

1 Vienna Convention on the Law of Treaties (VCLT) art. 46, opened for signature 23 May 1969, 1155 UNTS331 (entered into force 27 January 1980) [hereinafter Vienna Convention]

2 See id.

3 See id.

4 MARKEVILLIGER,COMMENTARY ON THE 1968VIENNA CONVENTION ON THE LAW OF TREATIES592, (2009)[hereinafterVilliger]; See the statements in Vienna by the delegations of the UK(SINCLAIR), OR 1968 CoW240, para.19; andIraq (YASSEEN) ibid 245,para 74.


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Arguments 2


The exception, by its very nature must be construed narrowly.5 Article 46 is declaratory of

customary international law.6

The lower court of Darshini, in its 2011 decision, questioned whether the countrys income

tax legislation expressly permitted the executive to enter into tax treaties to give up the

countrys right to tax capital gains. Darshini fails to meet the conditions for invoking Article

46 since the courts decision is based on the lack of an express provision, while Article 46

mandates the existence of a fundamental rule which has been violated. Therefore, there

cannot be a manifest violation of any internal rule of law.

Therefore, in the instant case, the exception under Article 46 cannot be invoked by Darshini

to invalidate the DTAA.

1.2. DARSHINI CANNOT VALIDLY TERMINATE THEDTAA UNDER INTERNATIONAL LAW.Darshini cannot unilaterally terminate the DTAA under the provisions of the Vienna

Convention on the grounds of a fundamental change of circumstances. Further, the treaty

override is violative of international taxation law.

1.2.1. Darshini cannot invoke the ground of a fundamental change incircumstances to terminate the DTAA.

In exceptional cases, a fundamental change of circumstances may be invoked as grounds for

termination of a treaty.7

The change must be with regard to the circumstances existing at thetime of the conclusion of the treaty and unforeseeable by the parties. If the existence of those

circumstances constituted an essential basis of the consent of the parties to be bound by the

treaty8 and the effect of the change is to radically transform9 the extent of obligations to be

5 Fourth Waldock Report, 1, Documents of the first part of the seventeenth session including the report of theCommission to the General Assembly [1965] 2 Y.B.lnt'l L. Comm'n, UN Doc. A/CN.4/l.116/ADD.9[hereinafter Waldock Report IV].; KEARNEY,International Lawyer 4 (1969) 18 f.

6 Villigerat594, supra note 4. Seealso I. R. Jennings and A. Watts, OPPENHEIMS INTERNATIONAL LAW,(9thedn, 1992) [hereinafterOppenheim].

7 Vienna Convention, art. 62, supra note 1.

8 Gabcikovo-Nagymaros Project (Hung./ Slovk.), Judgment, 1997 I.C.J. 7, 95, (Sep.25) [hereinafterGabcikovo-Nagymaros Project]

9 Fisheries Jurisdiction (U.K./Ice.), Merits, Judgment, 1973 I.C.J. 3, 41, (July 25). [hereinafter FisheriesJurisdiction Case. ]


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Arguments 3


still performed under the treaty, the grounds for termination will be valid.10 The provision

must be narrowly construed to apply to only exceptional cases.11 Article 62 can be considered

as declaratory of customary international law.12

The ICJ held in the Gabcikovo-Nagymoros Project case that a change in the economicpolicies of a State was held by the ICJ to be insufficiently connected to the basis of consent of

the treaty and did not radically alter the extent of obligations still to be performed.13

In the instant case, the recession in Darshini cannot prevent it continuing the treaty as it was a

foreseeable consequence of its shift in economic policy.14 Moreover, the essential object and

purpose of the treaty i.e. to prevent double taxation is not harmed by the change in

circumstances. There are no exceptional circumstances in this situation to allow Darshini to

terminate the treaty under Article 62 of the Vienna Convention.1.2.2. Darshini cannot override the DTAA under international taxation law.

Darshinis justifications of overriding the treaty are not tenable in international law. First,

Amiti does not fall within the definition of a tax haven and cannot be subject to any

countermeasures taken in that regard; and Second, the DTAA does not contain a limitation

of benefits thereby allowing persons who are residents outside the Contracting States to

receive the benefits of the treaty legally and precluding Darshini from overriding the treaty.15

10 Vienna Convention, Art. 62, supra note 1; Gabcikovo-Nagymaros Project, supra note 8

11 Gabcikovo-Nagymaros Project, ibid, 104; Fisheries Jurisdiction Case, supra note 9; KCK, FestschriftVEROSTA 82;FEIST,Kndigung 165; ILC Report 1966, Report of the of the International Law Commission onthe work of its 8th Session, 9 (1966) 2 Y.B.lnt'l L. Comm'n, UN Doc A/6309/Rev.1;Statement in Vienna bythen USSR delegation, OR 1968 CoW 374, para. 46.

12 Fisheries Jurisdiction Case, supra note 9; Gabcikovo-Nagymaros Project, supra note 8 95; (Case C-162/96RackeGnbH& Co. v Hauptzollamt Mainz, E.C.R. I- 3700 (1998); Federal Republic of Germany, OR 1969Plenary 119 32; Observation by the Iraqi government to the I.L.CWaldock Report IV, supra note 5; Statementin Vienna by the UK delegation, OR 1968 CoW 369, 39.

13 Gabcikovo-Nagymoros Project, 95 and 104, supra note 8; M. Fitzmaurice, The Gabcikovo- NagymorosCase: The Law of Treaties, Leiden JIL 11 (1998) 332 ff.

14 Compromis, 8.

15 Organisation for Economic Co-operation and Development [OECD] Committee on Fiscal Affairs, Report onTax Treaty Override, (Paris, 1989), 2; KLAUS VOGEL,KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONSat119 (3rd ed., 2005)


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Arguments 4


1.2.2.1. Amiti is not a tax haven and is therefore not subject to sanctions meted byDarshini on this basis.

It is submitted that Amiti does not fulfil the international standards required to be categorised

as a tax haven.

The Organisation for Economic Co-operation and Development (OECD), the foremost

authority in international taxation policy16 lays down four cumulative parameters for the

identification of a tax haven.17 They are, a no or nominal tax rate, ineffective exchange of

information, lack of transparency and the absence of a requirement of substantial activity in

the bank accounts.18 The fourth criterion of substantial activity cannot be proved and is held

to be an impractical criterion for determining a tax haven.19 A low tax rate alone is not a

sufficient condition to identify a jurisdiction as a tax haven and this parameter must be

present with any one of the other parameters.

20

In the instant case, Amiti does not satisfy all the necessary OECD criteria. Amiti has

procedures to effectuate the effective exchange of information. The Banking Regulation and

Secrecy Act allows for the disclosure of information under the requirements of the

applicable law.21 Moreover, Amiti as a member of the Vipulian Economic Union (VEU) is

committed to exchange information on all matters of importance to other member countries.22

Under the DTA Agreement with Darshini, Amiti is also required to exchange information on

16 I ROY ROHATGI, PRINCIPLES OF INTERNATIONAL TAX LAW, BASIC INTERNATIONAL TAXATION 73 (2d ed.,2005.

17 Organisation for Economic Co-operation and Development [OECD],Harmful Tax Competition: An EmergingGlobal Issue (Paris, 1998); OECD, Towards Global Tax Co-operation: Progress in Identifying and Eliminating

Harmful Tax Practices (Paris, 2000); OECD, The OECDs Project on Harmful Tax Practices: The 2001Progress Report (Paris, 2001); OECD, The OECDs Project on Harmful Tax Practices: The 2004 Progress

Report(Paris, 2004)

18 See OECD, (Paris, 1998), 52; Council of Economics and Finance Ministers, European Union Code ofConduct, 1998 O.J. (C 2) 1 (Dec. 1, 1997).

19 Maria Flavia Ambrosanio and Maria Serena Caroppo, Eliminating Harmful Tax Practices in Tax Havens:

Defensive Measures by Major EU Countries and Tax Haven Reforms, Canadian Tax Journal Vol. 53 No. 3, 690(2005).

20 OECD, (Paris, 2000), supra note 17 7.

21 Compromis, 6.

22 Compromis, 1.


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Arguments 5


all matters under the treaty.23 Further, there is no factual basis for alleging a lack of

transparency on the part of Amiti.

Therefore, apart from a low taxation rate, Amiti does not meet any of the OECD criteria to be

classified as a tax haven. Consequently, Darshinis invalidation of the DTA Agreement is

unjustified.

1.2.2.2. Darshini is precluded from terminating the DTAA on grounds of treatyshopping.

Treaty shopping is the practice of persons taking advantage of the benefits of the tax treaty

through entities which are residents of the Contracting States.24 Limitation of benefits

clauses are a preventive measure against treaty shopping.25 The absence of such a clause

results in the validity of entities from a third State receiving benefits under the treaty.

Accepted countermeasures against treaty shopping do not include the termination of the

treaty.26 Further, States cannot apply domestic anti-avoidance rules to international treaties.27

In the present case, the DTAA does not contain a limitation of benefits clause,28 therefore it

does not specifically restrict the use of the tax structure implemented under it. Furthermore,

the courts of Darshini have upheld the structures of foreign corporations set up in Amiti and

investing in Darshini.

Darshinis termination of the DTAA is not a valid countermeasure against treaty shoppingand is a violation of international law.

23 Compromis, 4.

24 United Nations, Econ. & Social Council, Comm. of Experts on International Cooperation in Tax Matters,Abuse of tax treaties and Treaty Shopping, U.N. Doc. E/C.18/2005/2, (Dec. 5-9 2005); V OGEL at127,supranote 1.

25 OECD Committee on Fiscal Affairs, Commentaries on the Articles of the Model Tax Convention on Incomeand on Capital, (Paris, July 2008), 20.

26 VOGEL at111, supra note 15.

27 VOGEL at121, supra note 15; Hoge Raad, Rolno. 29.296, BNB 1994/259: DTC Netherlands/USA; Rolno.28.734, BNB 1994/294, concl. Verburg, and Rolno. 29.531, BNB 1995/150, concl. Van Soest: both

Netherlands/Belgium.

28 Compromis.


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Arguments 6


1.3. ARGUENDO,DARSHINI HAS LOST ITS RIGHT TO END OR SUSPEND ITS OBLIGATIONSUNDER THE TREATY.

Article 45 of the Vienna Convention on the Law of Treaties29 provides that a State party

having a right to denounce or avoid a treaty may disqualify itself from exercising the right

due to its subsequent conduct.30 A State is precluded from exercising its right if it has

expressly agreed that the treaty is valid or remains in force or continues in operation31 or

by reason of its conduct be considered as having acquiesced in the validity of the treaty or

its maintenance in force or in operation.32 Specifically, it cannot call into question the

validity of the treaty.33

A States tacit acceptance of a treaty can be inferred from its negative conduct, i.e. its

omission to raise an objection34orits positive conduct, i.e. if the State accepted benefits or

enforced its obligations under the treaty.35

In the instant case, Amiti and Darshini entered into a DTAA wherein the State of residence

taxes capital gains,36 a scheme proposed by Darshini to tax its own offshore corporations.37

The ensuing consequences of foreign companies taking residence in Amiti and investing in

Darshini began soon afterwhen Amiti reduced its capital gains tax to 1%.38 Darshini failed to

raise any objection to the DTAA with regards to treaty shopping or allege that Amiti was a

tax haven and continued the operation of the treaty.

29 Vienna Convention, supra note 1.

30 Vienna Convention, art. 45, supra note 1.

31 See id.

32 See id.

33ILC Report 1966, Y.B.lnt'l L. Comm'n 1966 II 239, 4; VILLIGERat578, supra note 4.

34Waldock Report, Documents of the fifteenth session including the report of the Commission to the GeneralAssembly, Art 4 (c), [1963] 2 Y.B.lnt'l L. Comm'n, UN Doc. A/CN.4/SER.A/1963/ADD.1 [hereinafter Waldock

Report II], 39f; ILC Report 1963, YBILC 1963 II 213, para. 5; VILLIGERat578, supra note 4.35WaldockReport II art. 4, para. (b), 38f, supra note 33; VILLIGERat578, supra note 4.

36 Compromis.

37 Compromis.

38 Compromis.


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Arguments 7


Furthermore, although the economic recession began in 2008-09, Darshini was able to

maintain its obligations under the DTAA. Only in 2011, after a lower court order, was the

treaty invalidated.

Darshinis knowledge of the facts, its legal interest in the consequences and its failure to act

accordingly over a long period of time, clearly indicate the States tacit acceptance of the

treaty. Darshini is therefore precluded from invalidating, terminating, withdrawing from or

terminating the treaty under the grounds it contends.


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Arguments 8


2. DARSHINIS SHIFT IN ITS ECONOMIC POLICY CONTRAVENES ITS INTERNATIONALOBLIGATIONS.

Darshinis radical policy shift had a detrimental impact on the entire Vipulian Economic

Union including Amiti.39 Amiti contends that this shift in policy violates the latters

obligations under the VEU Charter and amounts to interference in Amitis internal affairs.

2.1. THE NEW ECONOMIC POLICY OFDARSHINI VIOLATES ITS OBLIGATIONS AS A MEMBEROF THEVIPULIANECONOMICUNION.

One of the principles of the VEU Charter is movement towards full economic integration

with respect to currency, fiscal policy, monetary policy, taxation and legal systems.40 There

are various stages of economic integration and an economic union is one such stage.41 The

main feature of an economic union is linking the removal of restrictions on commodity and

factor movements by forming a single market with a degree of harmonization of economic,

monetary, fiscal, social and counter-cyclical policies.42 Full economic integration is

characterised by complete unification of the economies involved and their policies.43

The VEU is moving from harmonisation of economic policies to the complete unification of

the same. On interpreting the terms according to their ordinary meaning and context, 44

harmonisation of policy implies bringing into or being in agreement on the course of action

39 Compromis, 9.

40 Compromis, 1.

41 B. BALASSA, THE THEORY OF ECONOMIC INTEGRATION (1961); SWANN, THE ECONOMIES OF COMMONMARKET (7th edn, 1992); P. VerLoren Van Themaat, The Relations between the Concepts of a Common Market,a Monetary Union, an Economic Union, a Political Union and Sovereignty, (1991) 28 CML REV 291;TofanMihaela, INTEGRAREA ROMDNIEI IN STRUCTURILE UNIUNII MONETARE EUROPENE(C.h. Beck. ed, 2008) at179

42See Balassa; Swann; W. Molle, The Economics of European Integration: Theory, Practice and Policy (5 th edn,2006) at84; Catherine Barnard, The Substantive Law of the EU (3rd edn, 2010); Gabriela Bologa and Maria-Nicoleta Rosca, The Legislative Framework for the EU States in the context of Economic and MonetaryIntegration, 2009 AGORA Int'l J. Jurid. Sci. xviii 2009.

43SeeBALASSA, supra note 41;SWANN, supra note 41;Bologa and Rosca, supra note 42.

44 Vienna Convention, art. 31.1, supra note 1.


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Arguments 9


to be adopted by the government.45 Further, economic integration implies economic

planning46 and necessitates international cooperation.47

In the present case, Darshini unilaterally changed its economic policy from fiscal stimuli to

fiscal conservativeness.48 The devastating impact on the Vipulian subcontinent and Amitis

repeated requests to change or modify the policy49 is evidence of a lack of harmonisation of

Darshinis policy with those of the rest of the VEU States.

Further, Darshinis new policy caused investment money to freeze and ceased the supply of

goods and services from Darshini Corporations.50 The new policy practically acted as an

impediment to the free movement of goods and capital and is not in furtherance of the

Unions basic objectives. Therefore, the new economic policy violates Darshinis obligations

under the VEU Charter.

2.2. DARSHINIS UNILATERAL POLICY CHANGES AMOUNT TO INTERFERENCE INAMITISINTERNAL AFFAIRS

Non-interference in the internal affairs of a State is an established principle of customary

international law.51 Interference occurs when a State intervenes, either directly or indirectly

45 Oxford Dictionary, (OUP 2011) (defines harmonise as Bring into or be in harmony, harmonyas agreement, concord, policy as course of action adopted by thegovernment), http://www.oxforddictionaries.com (last visited Dec. 30, 2011).

46 Kitamura, Economic Theory and the Economic Integration of Underdeveloped Regions, in LATIN AMERICANECONOMIC INTEGRATION (M. Wionczek ed. 1964) at 63; David. A. Funk, From International Laws toInternational Economic Community Law, 4CASE W.RES.J.INT'L L.31971-1972.

47Wexler, The Theory and Reality of Economic Integration, 14 WORLD POL.553,559(1962);David. A. Funk,From International Laws to International Economic Community Law, 4CASE W.RES.J.INT'L L.31971-1972.

48 Compromis 8.

49 Compromis 9.

50 Compromis 9.

51Military and Paramilitary Activities in and Against Nicaragua (Nicar. v. U.S.), 1986 I.C.J. 14, 106 (June 27)[hereinafterNicaragua case]; Declaration on the Inadmissibility of Intervention and Interference in theDomestic Affairs of States, G.A. Res. 36/103, U.N. Doc A/Res/ 36/103(Dec. 9, 1981); Corfu Channel Case(United Kingdom v. Albania) Assessment of Compensation, , 1949 ICJ 15 XII 49 (December 15); Caseconcerning Armed Activities on the Territory of Congo (Congo v. Uganda), Judgment, 2005 I.C.J. 168(December 19); Greenwood, Nicholas Onuf, The Principle of Non intervention, the United Nations, and the

International System, International Organization, Vol. 25, No. 2 (1971); Hoffman, Stanley, InternationalSystems and International Law, World Politics, Vol 14, No. 1, (Oct 1961); OPPENHEIM, supra note 6 at 69;Declaration on the Principle of International Law concerning Friendly Relations and Cooperation among the


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Arguments 10


for any reason whatsoever, in the internal or external affairs of any other State.52 Any form of

interference, including attempted threats against the personality of the State or those against

its political, economic and cultural elements amounts to a violation of international law.53

A State can violate the principle of non-interference even without resorting to the use of

force.54 The economic policies of States can have significant spill-over effects which need to

be taken into account during the decision-making process by harmonising and adjusting their

economic policies.55 Global economic integration has resulted in tightened constraints over

independence in policy decisions,56 and resulted in greater interdependence amongst nations,

making the coordination of economic policies between States vital.57

States in accordance with the Charter of the United Nations, G.A. Res. 37/10, U.N. Doc. A/Res/37/10 (Oct. 24,

1970) [hereinafterFriendly Relations]; Declaration on the Inadmissibility of Intervention in Domestic Affairsof States and Protection of Their Independence and Sovereignty, G.A Res. 2131(XX), U.N. DocA/RES/20/2131(Dec. 21,1965) [hereinafter Domestic Affairs]. ; Declaration of the Inadmissibility onIntervention and Interference in the Internal Affairs of States, G.A Res. 36/103, U.N Doc. A/RES/36/103 (9December 1981).

52See Friendly Relations, ibid.

53 Nicaragua Case, supra note 51.

54 Lori Fisler Damrosch, Politics across Borders: Non Intervention and Non Forcible Influence over DomesticAffairs, 83 AM. J. INTL L (1989) 1; Fernandez, Neville G, International Law And The Use of Force: Armed

Intervention In International Affairs, Journal of Singapore Armed Forces, Journal V 24-N1, (Jan-Mar,1998);Domestic Affairs, supra note 51.

55 Morris Goldstein, Improving Economic Policy Coordination: Evaluating some new and some not-so-newProposals, in THE INTERNATIONAL MONETARY SYSTEM (P.B. Kenen, Francesco Papadia, Fabrizio Saccomannieds., 1994); Chatham House (The Royal Institute for International Affairs) and Centre for InternationalGovernance Innovation, Paola Subacchi and Paul Jenkins, Preventing Crises and Promoting Economic Growth:

A Framework for International Policy Cooperation (April 2011).

56 Yilmaz Akyz, Global Rules and Markets: Constraints over Policy Autonomy in Developing Countries (IntlLabour Office, Policy Integration and Statistics Department), Working Paper No. 87, (2008); MORTENOUGAARD,RICHARD A.HIGGOTT, TOWARDS A GLOBAL POLITY,WARWICKSTUDIES IN GLOBALISATION at50,CENTRE FOR THE STUDY OF GLOBALISATION AND REGIONALISATION , ECONOMIC AND SOCIAL RESEARCHCOUNCIL (GREAT BRITAIN)(2002);John Funston,ASEAN and the Principle of Non Intervention Practice andProspects, Institute of South East Asian Studies, ISSN 0219-3213, No. 5,(March,2000) [hereinafterFunston].

57 INTERNATIONAL ECONOMIC POLICY COORDINATION (Willem H. Buiter & Richard C. Marston eds., 1985);Bohringer Cristoph and Rutherford, Thomas F., Decomposing General Equilibrium Effects of Policy

Intervention in Multi-Regional Trade Models, Method and Sample Application, Centre For European economicResearch (ZEW), ZEW Discussion Paper no. 99-36 (1999); Cheshire Paul, Optimal Areas for Planning, Local

Economic Development and Transportation, Technical University of Koice, Faculty of Economics, 2nd CentralEuropean Conference in Regional Sciences (CERS), (2007); European Commission, Directorate-General forEconomic and Financial Affairs, Economic Crisis in Europe: Causes, Consequences and Responses, EuropeanEconomy (7/2009); Funston, ibid.


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Arguments 11


In the instant case, following the global financial crisis, Darshini made a radical change to its

economic policy by switching to a policy of fiscal conservativeness.58 The net effects of its

policies resulted in Darshini and the entire Vipulian Economic Union sliding into a

recession.59 Darshini had a free market economy and as the leading economy in the Vipulian

Union, the economies of other nations in the VEU were highly dependent on it. The state ofaffairs in the Vipulian sub-continent was comparatively worse than the rest of the global

economy.60 Darshinis policy shift had a direct impact on Amitis capabilities of managing its

economy and resulted in social unrest in the region.61 Such interference in the economic and

social affairs of Amiti is interference in its internal affairs and amounts to a violation of

international law.

58 Compromis, 8

59 Compromis, 8, 9.

60 Compromis, 9.

61 Compromis, 9.


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Arguments 12


3. AMITI IS NOT BOUND TO DISCLOSE THE INFORMATION REQUESTED BY DARSHINI.The State of Amiti is not obligated to disclose the information requested by Darshini on three

grounds;first, that the request violates an individuals right to privacy guaranteed under the

VEU Charter; second, that such a disclosure is not required under the DTAA and third, in the

absence of any international obligation to disclose this information, such a disclosure violates

the Banking Regulation and Secrecy Act (Act).

3.1. UNDER THE VIPULIAN ECONOMIC UNION CHARTER,AMITI IS NOT BOUND TODISCLOSE THE INFORMATION SOUGHT BYDARSHINI.

The Vipulian Economic Union Charter requires that members respect the universal rights of

people around the world.62 The information sought by Darshini is protected under an

individuals right to privacy and thus it cannot be disclosed. Furthermore, Amiti does not

violate any other provisions of the Charter by not disclosing the information.

3.1.1. The information requested by Darshini is protected under an individualsright to privacy and is therefore, violative of the VEU Charter

The right to privacy is a fundamental human right guaranteed under international law,63

where no individual shall be subjected to the arbitrary or unlawful interference with his

privacy, family or correspondence.64 The protection of personal data is of fundamental

importance to a persons enjoyment of his or her right to respect for private and family life. 65

Personal data includes any information which is about a living, identifiable individual and

62 Compromis, 1.

63 Universal Declaration of Human Rights art. 12, G.A. Res 217 (III) A, U.N. Doc. A/RES/ 217(III) (Dec. 10,1948) [hereinafter UDHR]; International Covenant on Civil and Political Rights art. 17, G.A. Res 2200A(XXI), U.N. Doc. A/6316 (Dec. 16, 1966)[hereinafterICCPR].

64 ICCPR, art. 17, ibid.

65 European Union[EU], Charter of the Fundamental Rights of the European Union art. 8, 2000 O.J. (C 364) 1,(Dec. 7, 2000); S. and Marper v. the United Kingdom, Eur. Ct. H.R. 1581 (2008); Amann v. Switzerland, Eur.Ct. H.R. 47 (2000); Peck v. The United Kingdom, Eur. Ct. H.R. 57 (2003);European Parliament and Council,Directive on the protection of individuals with regard to the processing of personal data and on the freemovement of such data, 95/46/EC, L281 (24th Oct., 1995); OECD Guidelines on the Protection of Privacy andthe Transborder flows of Personal Data, (Sep. 23, 1980) [hereinafterOECD, Protection of Privacy].


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Arguments 13


relates to the individual.66 Financial records of an individual would therefore classify as

personal data and is subject to protection under an individuals right to privacy.

Arbitrary interference in any individuals privacy and their personal information constitutes

an infringement of his fundamental human right to privacy.67 Interference is arbitrary when it

does not pass the test of reasonableness.68 Such interference amounts to a violation of the

universal rights guaranteed by the VEU Charter.

In the instant case, the information sought by the State of Darshini relates to the identities of

residents having bank accounts in Amiti.69 Financial records of the residents constitute

personal data and are protected under an individuals right to privacy.

Darshinis request for the personal data of individuals is based merely on alleged violations

and there is no proof of a crime having been committed. Further, the request is not targeted to

specific suspects, but is a broad-based request for information on all Darshini-based residents

who had bank accounts in Amiti.70 The request for the information is clearly arbitrary and

unreasonable and therefore, violates the VEU Charter. The non-disclosure of the requested

information does not derogate from other principles of the VEU Charter.

3.1.2. The non-disclosure of the requested information does not derogate fromother principles of the VEU Charter.

66 OECD, Protection of Privacy, ibid; Council of Europe, Convention for the Protection of Individuals withregard to Automatic Processing of Personal Data, ETS No. 108, (Jan 28, 1981).

67 UDHR, Art. 12, supra note 63; ICCPR, art. 17, supra note 64; J.S.MILL, PRINCIPLES OF POLITICAL ECONOMYat306 (D. Winch ed., 1970); Wheaton v. Peters, 33 U.S. 591, 634 (1834);Olmstead v. United States, 277 U.S.438, 944 (1928); Judith DeCew, Privacy, The Stanford Encyclopedia of Philosophy (2008);T.M. COOLEY, ATREATISE ON THE LAW OF TORTSat29 (2d ed. 1888).

68 ALEX CONTE, SCOTT DAVIDSON AND RICHARD BURCHILL, DEFINING CIVIL AND POLITICAL RIGHTS: THEJURISPRUDENCE OF THE UNITEDNATIONS HUMAN RIGHTS COMMITTEEat147 (2004). See alsoSoo Ja Lim; Seon

Hui Lim and Hyung Joo Scott Lim v. Australia, CCPR/C/87/D/1175/2003, UN Human Rights Committee

(HRC), 10 August 2006, available at: http://www.unhcr.org/refworld/docid/47975af7c.html [accessed 2 January2012]; Francesco Madafferi and Anna Maria Immacolata Madafferi v.Australia, CCPR/C/81/D/1011/2001, UNHuman Rights Committee (HRC), 26 August 2004, available at:http://www.unhcr.org/refworld/docid/4162a5a36.html [accessed 2 January 2012].

69 Compromis 14.

70 Compromis 14.


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Arguments 14


The VEU Charter also enshrines the principle of exchange of information on matters of

importance between States. However, the enforcement of this provision cannot be reconciled

with the protection of an individuals right to privacy.

A treaty with differing obligations must be interpreted through balancing their interests in

good faith using the test of reasonableness.71 The principle of good faith in interpreting a

treaty is recognised as a part of customary international law.72 The mode of legal reasoning

applied in practice is hierarchal.73

There exists a priority of human rights guarantees in general over other international law, 74

without it necessarily constituting jus cogens.75 The primacy of fundamental human rights

was restated in the Kadi case76, where the European Court of Justice refrained from giving

effect to a Security Council obligation on the ground that performance of the same would

conflict with fundamental rights guaranteed under internal law as well as international law.77

It is a States first responsibility to promote and protect human rights.78

In the present case, Darshinis request for confidential information from Amiti is in

furtherance of the principle of exchange of information under the VEU Charter. However,

71Vienna Convention, art. 31, supra note 1; RICHARD K.GARDINER,TREATY INTERPRETATION, (2008).

72 Territorial Dispute (Libya/Chad), Judgment, 1994 I.C.J. 6, 21 (Feb. 3); Kasikili/Sedudu Island (Bots./Namib.), Judgment, 1999 I.C.J. 1045, 1059, (Dec. 13); Vienna Convention, Art. 31, supra note 14.

73 Martti Koskenniemi,Hierarchy in International Law: A Sketch, 8 EUR.J.INTL.L.566(1997);Dinah Shelton,Normative Hierarchy in International Law, 100 (2) A.J.I.L.291(2006)[hereinafterShelton].

74 Dissenting Opinion by Judge Cancado Trindade, Jurisdictional Immunities of the State (Germany v. Italy) ,(Order of 6 July 2010)ICJ; U.N. Sub-Commn on the Promotion and Protection of Human Rights, Globalisationand Its Impact on the Full Enjoyment of Human Rights, Preliminary Report submitted by J. Oloka-Onyango andDeepika Udagama, UN Doc. E/CN.4/Sub.2/2000/13, para.63. See also, Human Rights as the Primary Objectiveof Trade, Investment and Financial Policy, UN Doc. E/CN.4/Sub.2/RES/1998/12 (1998);

75 Shelton, supra note 73 at 294; Dinah Shelton, Hierarchy of Norms and Human Rights: Of Trumps andWinners, 65SASK.L.REV.301200at306.

76 Yassin Abdullah Kadi and Al Barakaat International Foundation v. Council of European Union and

Commission of European Communities, [2008] 3 CMLR 41.

77 See id, Kadi case; ANDRENOLLKAEMPER,NATIONAL COURTS AND INTERNATIONAL RULE OF LAW at 281(2011); Rames A. Wessel, The Kadi Case: Towards a More Substantive Hierarchy in International Law?, 5INTL ORG.L.REV.3232008.

78 U.N. Commission on Economic, Social and Cultural Rights, Statement to the Third Ministerial Conference ofthe World Trade Organisation (Nov 26, 1999) UN Doc. E/C.12/1999/9, 6.


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the disclosure of this information violates an individuals right to privacy, a fundamental

human right guaranteed under the Charter and recognised in international law. Further, the

Secretary-General of the United Nations, while advising the reference of the dispute to this

Court, maintained that the dispute must be resolved in a manner consistent with the rights of

individuals.79

Thus, the requested information can be denied on the ground that doing soderogates from human rights obligations guaranteed under domestic and international law.

Therefore, the non-disclosure of the information does not violate the VEU Charter.

3.2. AMITI IS NOT BOUND BY THEEXCHANGE OF INFORMATION CLAUSE IN THEDTAA.The DTAA entered into by Darshini and Amiti is largely based on the OECD Model Tax

Convention on Income and Capital.80 However, the DTAA limits the exchange of

information to matters under the treaty.81 Matters under the treaty refers to the substance of

the treaty or the treaty provisions.82 The provisions of the DTAA pertain to the division of

taxes between contracting states and the elimination of double taxation.83 Therefore,

information exchanged under the exchange of information clause is limited to the same.

In the instant case, the information requested by Darshini relates to the identities of Darshini

based residents having bank accounts in Amiti in furtherance of investigating alleged

violations of Darshini law.84 The information is unconnected with the application of the

provisions of the DTAA and is a question of internal law, exempted from the treaty.

Therefore, the information sought is not mandated under the DTAA and Amiti is not boundto disclose the same to Darshini.

79 Compromis, 17.

80 OECD Committee on Fiscal Affairs, Model Tax Convention on Income and on Capital, (Paris, July 2008).

81 Compromis, 4.

82 Oxford Dictionary, (OUP 2011) (defines 'matter' as substance or content of atext), http://www.oxforddictionaries.com (last visited Dec. 30, 2011).

83 I ROHATGI at23 supra note 16; (Case C-336/96) Gilly v. Directeur des Services Fiscaux de Bas-Rhin, 1998E.C.R. I-2793; Michael Daly, The WTO and Direct Taxation, Discussion Paper No. 9, World TradeOrganisation (June,2005).

84 Compromis, 14.


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Arguments 16


3.3. THEBANKING REGULATION AND SECRECYACT PROHIBITS THE DISCLOSURE OFCONFIDENTIAL INFORMATION.

Under the provisions of the Banking Regulation and Security Act, disclosure of confidential

information by banks and financial institutions is strictly prohibited unless forced to do so by

the applicable law.85

3.3.1. The existence of an international obligation is required for disclosure ofinformation under the Act.

States are obligated to uphold the principles of international law in the creation and exercise

of its domestic law.86 They must comply with their international obligations and should

organise their national legal order in such a manner as to allow for an effective performance

of international obligations.87 Indeed, international law and domestic laws are complementary

in nature.88.

The term applicable law in the Act includes a States international obligations, since States

must comply with international law while exercising its domestic provisions. Therefore, in

order for disclosure under the Banking Regulation and Secrecy Act to be permissible, there

must exist an international obligation to provide the requested information.

3.3.2. International Law does not warrant the disclosure of the informationrequested by Darshini.

The doctrine of mutual legal assistance between States encourages States to cooperate with

each other to obtain evidence and other forms of legal assistance necessary for criminal

investigations and prosecutions in relation to offences.89 The basis of mutual legal assistance

85 Compromis, 6.

86 H.TRIEPEL,VLKERRECHT UND LANDESRECHT at289(Leipzig, Verlag von C.L. Hirschfeld trans.,(1899).

87Exchange of Greek and Turkish Populations, Advisory opinion, PCIJ series B no, ICGJ 277 (PCIJ 1925). Seealso Greco Bulgarian Communities, Advisory opinion, PCIJ series B no 17, ICGJ 284 (PCIJ 1930) [84];

NOLLKAEMPERat11 supra note 77.

88 F Morgenstern,Judicial Practice and the Supremacy of International Law, (1950) 27 BRIT.Y.B.INTL.L42,90; NOLLKAEMPERat11 supra note 77.

89 Model Treaty on Mutual Assistance in Criminal Matters art 1, para. 2, G.A. 45/117, U.N. Doc. A/RES/45/117 (Dec. 14, 1990); United Nations, Econ & Social Council, Convention against Illicit Traffic in NarcoticDrugs and Psychotropic Substances art 7 (Dec. 19, 1988).


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Arguments 17


is reciprocity.90 Indeed, mutual legal assistance is rendered only in accordance with bilateral

or multilateral treaties between States.91 A State is under no obligation to assist another State

unless contractually bound to do so.92

In the instant case, Amiti and Darshini have not entered into a mutual legal assistance treaty.

Furthermore, as contended in Arguments 3.1. and 3.2of theMemorial,both the VEU Charter

and the DTAA between Amiti and Darshini do not enforce any obligation to make such a

disclosure. Since, there are no international obligations on Amiti to make such disclosures,

the applicable law exception will not apply. Therefore, Amiti is prohibited from disclosing

the information requested by Darshini under the Banking Regulation and Secrecy Act.

90 C.M.Bassiouni and E.M. Wise, Aut Dedare Aut Judicare: The Duty to Extradite or Prosecute in InternationalLaw 26 46 (1995).

91 Valery Shupilov, Legal Assistance in Criminal Matters and Some Important Questions of Extradition, 15CASE W.RES.J.INTL LAW 127(1983).

92 M. Cherif Bassiouni, Policy Considerations on Inter-State Cooperation in Criminal Matters, 4 PACE Y.B.INTL LAW 123(1992)at 131.


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Submissions to the Court xvii

SUBMISSIONS TO THE COURT

For the foregoing reasons, the Republic of Amiti, Applicant, respectfully requests the Court

to adjudge and declare that:

1) Darshinis repudiation of the Double Tax Avoidance Agreement contravenesinternational law.

2) Darshinis shift in its economic policies adopted contravenes its internationalobligations and must be reversed.

3) Amiti is under no obligation to disclose the confidential information sought byDarshini.