arbitration pursuant to the rules of arbitration of … · iv bosh bosh international, inc and...
TRANSCRIPT
Team DILLARD
ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE
ARBITRATION INSTITUTE
OF THE
STOCKHOLM CHAMBER OF COMMERCE
CALRISSIAN & CO., INC.
Claimant
V.
THE FEDERAL REPUBLIC OF DAGOBAH
Respondent
CASE SCC NO 00/2013
MEMORIAL FOR RESPONDENT
i
TABLE OF CONTENTS
LIST OF AUTHORITIES ............................................................................................................ iii
TABLE OF ABBREVIATIONS ............................................................................................ xviii
STATEMENT OF FACTS ............................................................................................................. 1
ARGUMENTS ............................................................................................................................... 5
PART ONE: JURISDICTION AND ADMISSIBILITY .......................................................... 5
I. THE TRIBUNAL LACKS JURISDICTION OVER THE DISPUTE .............................. 5
A. Setting the record straight: Claimant is a mere holder of security entitlements ......... 5
B. Claimant has not made a protected “investment” under the BIT ................................ 6
1. Claimant’s security entitlements fall squarely outside of Article 1(1) BIT ............ 6
2. No territorial link can be established between the security entitlements and
Dagobah ..................................................................................................................... 11
C. Claimant is not a protected investor under the BIT ................................................... 14
II. THE PCA DECISION MAY NOT BE USED TO CIRCUMVENT THIS
TRIBUNAL’S LACK OF JURISDICTION ....................................................................... 14
A. This Tribunal cannot be bound by the PCA Award .................................................. 15
1. Claimant relies on an alleged stare decisis effect contrary to accepted principles
of international investment law ................................................................................. 15
2. The BIT prohibits the extension of the PCA Award’s effects to an investor-state
tribunal ....................................................................................................................... 16
B. The PCA Award cannot be used to amend the BIT .................................................. 18
C. The PCA Award is not even persuasive in the present context ................................. 20
III. IN ANY EVENT, THE SUBMITTED CLAIMS ARE INADMISSIBLE IN VIEW OF
THE FORUM SELECTION CLAUSE CONTAINED IN THE SOVEREIGN BONDS .. 21
A. The Tribunal should give precedence to the exclusive forum selection clause of the
bond contracts ................................................................................................................ 22
1. Claimant cannot avoid its obligations under the bond contract ............................ 22
2. The forum selection clause provides for the exclusive jurisdiction of Dagobah’s
courts ......................................................................................................................... 23
3. The exclusive jurisdiction of Dagobah’s courts must prevail under a careful
balancing of the BIT parties’ interests....................................................................... 24
ii
B. Claimant irrevocably waived the right to arbitrate claims related to its titles under
the BIT ........................................................................................................................... 25
C. The exercise of jurisdiction by the Tribunal would render Respondent exposed to
Claimant’s double recovery ........................................................................................... 26
PART TWO: MERITS ............................................................................................................ 27
IV. RESPONDENT GRANTED FAIR AND EQUITABLE TREATMENT .................... 27
A. Claimant is a Caveat Businessman........................................................................... 28
B. Claimant’s mere hopes do not constitute protected legitimate expectations ............. 29
1. Claimant consciously acquired titles governed by Dagobah’s law ....................... 31
2. Respondent never warrantied the immutability of its legal framework ................ 32
3. The imposition of CACs was not an unforeseeable regulatory change ................. 33
C. Respondent did not force the titles’ exchange ........................................................... 34
D. Respondent’s measures were reasonable and proportionate to the pursued aims ..... 35
E. Respondent acted as a good faith debtor ................................................................... 37
V. RESPONDENT’S ACTIONS ARE, IN ANY EVENT, JUSTIFIED UNDER
ARTICLE 6(2) OF THE CORELLIA-DAGOBAH BIT.................................................... 39
A. Respondent’s economic breakdown constituted an essential security interest ......... 40
B. Respondent’s measures were necessary .................................................................... 41
1. Respondent’s measures directly and effectively addressed its debt unsustainability
................................................................................................................................... 42
2. No reasonable alternatives were available to Respondent at the time the
challenged measures were taken ............................................................................... 43
C. Respondent did not contribute to its economic meltdown ....................................... 45
EPILOGUE .............................................................................................................................. 46
PRAYER FOR RELIEF ............................................................................................................... 47
iii
LIST OF AUTHORITIES
INTERNATIONAL INVESTMENT ARBITRAL AWARDS & DECISIONS
Cited as Reference
Abaclat Abaclat and others v. Argentina, ICSID Case No. ARB/07/5,
Decision on Jurisdiction and Admissibility (4.8.2011) & Dissenting
Opinion by Georges Abi-Saab (28.10.2011).
AES AES Summit Generation Limited and AES-Tisza Erömü Kft v.
Hungary, ICSID Case No. ARB/07/22, Award (23.9.2010).
Aguas del Tunari Aguas del Tunari, S.A. v. Bolivia, ICSID Case No. ARB/02/3,
Decision on Objections to Jurisdiction (21.10.2005).
Alpha Projektholding Alpha Projektholding GmbH v. Ukraine, ICSID Case No.
ARB/07/16, Award (8.9.2010).
Ambiente Ambiente Ufficio S.p.A. and others v. Argentina, ICSID Case No.
ARB/08/9, Decision on Jurisdiction and Admissibility (8.2.2013) &
Dissenting Opinion of Santiago Torres Bernárdez (2.5.2013).
Apotex Apotex Holdings Inc. and Apotex Inc. v. USA, UNCITRAL, Award
on Jurisdiction and Admissibility (14.6.2003).
Arif Mr. Franck Charles Arif v. Moldova, ICSID Case No. ARB/11/23,
Award (8.4.2013).
Azurix Azurix v. Argentina, ICSID Case No. ARB/01/12, Award
(14.7.2006).
Bayindir Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Pakistan, ICSID
Case No. ARB/03/29, Decision on Jurisdiction (14.11.2005).
BIVAC Bureau Veritas, Inspection, Valuation, Assessment and Control,
BIVAC B.V. v. Paraguay, ICSID Case No. ARB/07/9, Decision on
Objections to Jurisdiction, (29.5.2009).
Biwater Gauff Biwater Gauff (Tanzania) Limited v. Tanzania, ICSID Case No.
ARB/05/22, Award (24.7.2008).
iv
Bosh Bosh International, Inc and B&P Ltd Foreign Investments Enterprise
v. Ukraine, ICSID Case No. ARB/08/11, Award (25.10.2012).
Chevron Chevron Corporation (USA) and Texaco Petroleum Corporation
(USA) v. Ecuador, UNCITRAL, PCA Case No. 2009-23, Partial
Award on the Merits (30.3.2010).
CME CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Final
Award (14.3.2003).
CMS CMS Gas Transmission Company v. Argentina, ICSID Case No.
ARB/01/8, Award (12.5.2005) & Decision on the Application of
Annulment (25.9.2007).
Continental Continental Casualty Company v. Argentina, ICSID Case No.
ARB/03/9, Award (5.9.2008) & Decision on the Application for the
Partial Annulment (16.9.2011).
CPI Corn Products Inc. v. Mexico, ICSID Case No. ARB(AF)/04/01,
Decision on Responsibility (15.1.2008).
Československa Obchodní Banká, A.S. v. Slovakia, ICSID Case No.
ARB/97/4, Decision on Objections to Jurisdiction (24.5.1999).
Daimler Daimler Financial Services AG v. Argentina, ICSID Case No.
ARB/05/1, Award (22.8.2012).
Deutsche Bank Deutsche Bank Deutsche Bank AG v. Sri Lanka, ICSID Case No.
ARB/09/02, Final Award (31.10.2012).
Duke Energy Duke Energy Electroquil Partners & Electroquil S.A. v. Ecuador,
ICSID Case No. ARB/04/19, Award (18.8.2008).
El Paso El Paso Energy International Company v. Argentina, ICSID Case
No. ARB/03/15, Award (31.10.2011).
Enron
Award/Annulment
Enron Corporation Ponderosa Assets L.P. v. Argentina, ICSID Case
No. ARB/01/3, Award (22.5.2007) & Decision on the Application for
Annulment (30.7.2010).
Eureko Eureko v. Poland, Partial Award (19.8.2005) & Dissenting Opinion
of Jerzy Rajski (19.8.2005).
v
Fedax Fedax N.V. v. Venezuela, ICSID Case No. ARB/96/3, Decision on
Objections to Jurisdiction (11.7.1997).
Generation Ukraine Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9,
Award (16.9.2003)
Glamis Glamis Gold Ltd v. USA, UNCITRAL, Award (8.6. 2009).
Genin Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. Estonia,
ICSID Case No. ARB/99/2, Award (25.6.2001).
Impregilo Impregilo SPA v Argentina, ICSID Case No. ARB/07/17, Award
(21.6.2011).
Joy Mining Joy Mining Machinery Limited v. Egypt, ICSID Case No.
ARB/03/11, Award on Jurisdiction (6.8.2004).
Lauder Lauder v. Czech Republic, UNCITRAL, Final Award (3.9.2001).
Lemire Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18,
Decision on Jurisdiction and Liability (14.1.2010).
LG&E LG&E Energy Corp., LG&E Capital Corp., and LG&E
International, Inc. v. Argentina, ICSID Case No. ARB/02/1, Decision
on Liability (3.10.2006).
Lucchetti Empresas Lucchetti, S.A. & Lucchetti Peru, S.A. v. Peru, ICSID Case
No. ARI3/03/04, Award (7.2.2005).
Maffezini Emilio Agustín Maffezini v. Spain, ICSID Case No. ARB/97/7,
Award (13.9.2000).
Malicorp Malicorp Limited v. Egypt, ICSID Case No. ARB/08/18, Award
(7.2.2011).
Micula Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill
S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No.
ARB/05/20, Final Award (11.12.2013).
MTD Equity Sdn. Bhd. And MDT Chile S.A. v. Chile, ICSID Case No.
ARB/01/7, Award (25.3.2004).
National Grid National Grid plc v. Argentina, UNCITRAL, Award (3.9.2008).
Nova Scotia Nova Scotia Power Incorporated v. Venezuela, ICSID Case No.
vi
ARB(AF)/11/1, Excerpts of the Award (30.4.2014).
lguín Eudoro Armando Olguín v. Paraguay, ICSID Case No. ARB/98/5,
Award (26 July 2001).
Oostergetel Jan Oostergetel and Theodora Laurentius v. The Slovak Republic,
UNCITRAL, Final Award (23.4.2012).
Parkerings Parkerings Compagniet AS v. Lithuania, ICSID Case No. ARB/05/8,
Award (11.9.2007).
Pope & Talbot Pope & Talbot Inc. v. Canada, UNCITRAL, Award in Respect of
Damages (31.5.2002).
Romak Romak v. Uzbekistan, PCA Case No. AA280, Award (26.9.2009).
Roussalis Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award
(7.12.2011).
Rumeli Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri
A.S. v. Kazakhstan, ICSID Case No. ARB/05/16, Award (29.7.2008).
Saluka Saluka Investments B.V. v. Czech Republic, UNCITRAL, Partial
Award (17.3.2006).
Sempra Sempra Energy International v. Argentina, ICSID Case No.
ARB/02/16, Award (28.9.2007) & Decision on the Application for
Annulment (29.6.2010).
SGS v. Pakistan SGS Société Générale de Surveillance S.A. v. Pakistan, ICSID Case
No. ARB/01/13, Decision on Objections to Jurisdiction (6.8.2003).
SGS v. Paraguay SGS Société Générale de Surveillance S.A. v. Paraguay, ICSID Case
No. ARB/07/29, Decision on jurisdiction (12.2.2010) & Award
(10.2.2012).
SGS v. Philippines SGS Société Générale de Surveillance S.A. v. Philippines, ICSID
Case No. ARB/02/6, Decision on Objections to Jurisdiction
(29.1.2004).
Standard Chartered
Bank
Standard Chartered Bank v. Tanzania, ICSID Case No. ARB/10/12,
Award (2.9.2012).
Suez Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi
vii
Universal, S.A. v. Argentina, ICSID Case No. ARB/03/19, Decision
on Liability (30.7.2010).
Tecmed Tecnicas Medioambientales Tecmed S.A. v. United Mexican States,
ICSID Case No. ARB (AF)/00/2, Award (29.5.2003).
Total Total S.A. v. Argentina, ICSID Case No. ARB/04/01, Decision on
Liability (27.12.2010).
Toto Toto Costruzioni Generali S.p.A. v. Lebanon, ICSID Case No.
ARB/07/12, Decision on Jurisdiction (11.9.2009).
Ulysseas Ulysseas Inc. v. Ecuador, UNCITRAL, Interim Award (28.9.2010).
Unglaube Reinhard Unglaube v. Costa Rica, ICSID Case No. ARB/09/20,
Award (16.5.2012).
Vivendi Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.
Argentina, ICSID Case No. ARB/97/3, Decision on Annulment
(3.7.2002).
Waste Management I Waste Management, Inc. v. United Mexican States, ICSID Case No.
ARB(AF)/98/2, Arbitral Award (2.6.2000).
Waste Management II Waste Management, Inc. v. United Mexican States (“Number 2”),
ICSID Case No. ARB(AF)/00/3, Award (30.4.2004).
viii
PERMANENT COURT OF INTERNATIONAL JUSTICE (PCIJ) JUDGMENTS
Cited as Reference
Oscar
Chinn
The Oscar Chinn Case (Britain v. Belgium), PCIJ, Ser. A/B, No.63, Judgment,
(12.12.1934).
WORLD TRADE ORGANIZATION (WTO) REPORTS
Cited as Reference
Brazil-Tyres
(AB)
Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded
Tyres, WT/DS332/AB/R, adopted 17.12.2007, DSR 2007:IV, 1527.
Korea-Beef
(AB)
Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled
and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10.1.2001, DSR
2001:I, 5.
US-
Gambling
(AB)
Appellate Body Report, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted in
20.4.2005, DSR 2005:XII, 5663.
DOMESTIC COURTS JUDGMENTS & DECISIONS
Cited as Reference
Occidental Occidental Exploration & Prod Co v. Ecuador, Case No. A3/2006/1116, Non-
justiciability of Challenge to Arbitral Award (Appeal Court) (9.9.2005).
ix
LITERATURE
Cited as Reference
Billington David Billington, ‘European Collective Action Clauses’, in: Lee
Buchheit & Rosa Lastra, Sovereign Debt Management, OUP (2014),
pp.399-416.
Bjorklund Andrea Bjorklund, ‘Emergency Exceptions: State of Necessity and
Force Majeure’, in: Peter Muchlinski, Federico Ortino & Christoph
Schreuer (eds.), The Oxford Handbook of International Investment
Law, OUP (2008), pp. 459-523.
Borchard Edwin Borchard, ‘Contractual Claims in International Law’, 13
Colum.L.Rev. (1913), pp.457-499.
Borensztein/Panizza Eduardo Borensztein & Ugo Panizza, ‘The Costs of Sovereign
Default’, IMF Working Paper WP/08/238 (2008),
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Braun Tillmann Rudolf Braun, ‘Globalization-driven Innovation: The
Investor as a Partial Subject in Public International Law: An Inquiry
into the Nature and Limits of Investor Rights’, 15 JWIT (2014),
pp.73-116.
Buchheit/Daly I Lee Buchheit & Elena Daly, ‘Minimizing Holdout Creditors:
Carrots’, in: Lee Buchheit & Rosa Lastra (eds.), Sovereign Debt
Management, OUP (2014), pp.3-14.
Buchheit/Daly II Lee Buchheit & Elena Daly, ‘Minimizing Holdout Creditors: Sticks’,
in: Lee Buchheit & Rosa Lastra (eds.), Sovereign Debt Management,
OUP (2014), pp.15-23.
Buchheit/Gulati Lee Buchheit & Mitu Gulati, ‘Sovereign Contingent Liabilities’, in:
Lee Buchheit & Rosa Lastra (eds.), Sovereign Debt Management,
OUP (2014), pp.241-254.
Burke-White/Staden William Burke-White & Andreas von Staden, ‘Investment Protection
in Extraordinary Times: The Interpretation and Application of Non-
x
Precluded Measures Provisions in Bilateral Investment Treaties’, 48
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Crawford (2013) James Crawford, State Responsibility: The General Part, CUP
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Cremades/Cairns Bernardo Cremades & David Cairns, ‘Contract and Treaty Claims
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Das/Papaioannou/Treb
esch
Udaibir Das, Michael Papaioannou & Christoph Trebesch,
‘Sovereign debt restructurings 1950-2010: Concepts, literature
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Dekastros Michail Dekastros, ‘Portfolio Investment: Reconceptualising the
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Investment Law, Oxford University Press (2008).
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xi
(2009).
Douglas (2010) Zachary Douglas, ‘Can A Doctrine of Precedent be justified in
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commission and the rule of law’, in: Fifteen years of NAFTA
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Kent/Harrington Avidan Kent & Alexandra Harrington, ‘The plea of necessity under
customary international law: A critical review in light of the
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Investment Treaty Law and Arbitration, CUP (2011), pp.246-270.
Metallinos Alexandros Metallinos, ‘The Greek Sovereign Debt Restructuring’,
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Mishkin Frederic Mishkin, The Economics of Money, Banking and Financial
Markets, Pearson (2013).
Mitchell/Henckels Andrew Mitchell & Caroline Henckels, ‘Variations on a Theme:
Comparing the Concept of ‘Necessity’ in International Investment
xii
Law and WTO Law’, 14 Chi.J.Int'lL. (2013-2014), pp.93-164.
Muchlinski Peter Muchlinski, ‘“Caveat Investor?” The Relevance of the Conduct
of the Investor Under the FET Standard’, 55 ICLQ (2006), pp.527-
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xiii
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xiv
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Gulati
Jeronim Zettelmeyer, Christoph Trebesch & Mitu Gulati, ‘Managing
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MISCELLANEOUS
Cited as Reference
2001 ILC
Responsibility Articles
2001 ILC Articles on Responsibility of States for Internationally
Wrongful Acts, U.N. Doc. A/56/10
Allen & Overy Allen & Overy, How The Greek Debt Reorganisation Of 2012
Changed The Rules Of Sovereign Insolvency, Global Law
Intelligence Unit (2012).
Amerasinghe Expert
Opinion
Ecuador v. USA, PCA Case No. 2012-5, Expert Opinion of C.F.
Amerasinghe (23.5.2012).
ASC 350 Accounting Standards Codification, Topic 350 Intangibles-
Goodwill and others, Financial Accounting Standards Board
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Bl c ’ L w Black’s Law Dictionary, 9th edition, West (2009)
Bloomberg (2012) Bloomberg, PDVSA May Pay Debt to Oil Service Provider with
Bonds (7.9.2012), http://www.bloomberg.com/news/2012-09-
xv
07/pdvsa-may-pay-debt-to-oil-service-providers-with-bonds-1-.html.
Economy Watch http://www.economywatch.com/economic-statistics/economic-
indicators/General_Government_Net_Debt_Percentage_GDP/2011/.
IAS 38 International Accounting Standards Board 38, Intangible Assets
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Implications For The Fund’s Legal And Policy Framework,
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the Greek Crisis and Argentina Dispute in 2012 (February 2013),
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GoverningLawinSovereignDebt.pdf.
Pellet Expert Opinion Ecuador v. USA, PCA Case No. 2012-5, Expert Opinion of Prof.
Alain Pellet (23.5.2012).
Reisman Expert
Opinion
Ecuador v. USA, PCA Case No. 2012-5, Expert Opinion with
Respect to Jurisdiction, by Prof. W. Michael Reisman (24.4.2012).
Reuters (2010) Greece says to pay hospital supplier debt mostly with bonds
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http://www.reuters.com/article/2013/10/18/argentina-worldbank-
payment-idUSL1N0I81XS20131018.
S d rd & Poor’ Standard and Poor’s, Standard & Poor's Ratings Definitions, Global
Credit Portal (2012),
xvi
http://www.standardandpoors.com/spf/general/RatingsDirect_Comm
entary_979212_06_22_2012_12_42_54.pdf.
Tomuschat Expert
Opinion
Ecuador v. USA, PCA Case No. 2012-5, Expert Opinion on the
Construction of Article VII, Prof. Christian Tomuschat (24.4.2012).
UN GA resolution
68/305
United Nations General Assembly resolution 68/304, Towards the
establishment of a multilateral legal framework for sovereign debt
restructuring processes, A/RES/68/304 (9.9.2014).
UNCITRAL Insolvency
Guide
UNCITRAL Legislative Guide on Insolvency Law (2005).
UNCTAD (2011) Scope and Definition (A sequel) - UNCTAD Series on Issues in
International Investment Agreements II, UNCTAD/DIAE/IA/2010/2
(1.3.2011)
UNCTAD (2012) UNCTAD, Consolidated Principles on Promoting Responsible
Sovereign Lending and Borrowing (Amended and Restated as of 10
January 2012),
http://www.unctad.info/upload/Debt%20Portal/Principles%20drafts/
SLB_Principles_English_Doha_22-04-2012.pdf
xvii
CONVENTIONS, TREATIES & OTHER INSTRUMENTS
Cited as Reference
Austria Model BIT 2010 Austria Model Bilateral Investment Treaty,
http://investmentpolicyhub.unctad.org/Download/TreatyFile/2849
GATT 1994 General Agreement on Tariffs and Trade, 33 ILM 1153
ICSID 1965 Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States, 575 UNTS 159
Italy-Argentina BIT 1990 Italy-Argentina Bilateral Investment Treaty,
http: investmentpolicyhub.unctad.org Download TreatyFile 99
Italy-Cuba BIT 1993 Italy-Cuba Bilateral Investment Treaty,
http://investmentpolicyhub.unctad.org/Download/TreatyFile/907
Canada Model BIT 2004 Canada Model Bilateral Investment Treaty,
http://italaw.com/documents/Canadian2004-FIPA-model-en.pdf
NAFTA 1992 North American Free Trade Agreement, 32 ILM 289
TFEU 2007 Treaty on the Functioning of the European Union,
http://www.eudemocrats.org/fileadmin/user_upload/Documents/D-
Reader_friendly_latest%20version.pdf
US Model BIT 2012 U.S. Model Bilateral Investment Treaty,
http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIE
P%20Meeting.pdf
US-Rwanda BIT 2008 US-Rwanda Bilateral Investment Treaty,
http://investmentpolicyhub.unctad.org/Download/TreatyFile/2723
VCLT 1969 Vienna Convention on the Law of Treaties, 8 ILM 679
xviii
TABLE OF ABBREVIATIONS
Abbreviation Meaning
¶(¶) Paragraph(s)
ARA Answer to the Request for Arbitration
Art(s). Article(s)
BIT 1992 Agreement between the Corellian Republic and the Federal
Republic of Dagobah for the Promotion and Protection of
Investments
CACs Collective Action Clauses
FET Fair and Equitable Treatment
Id./Ibid. Idem/Ibidem
ILC International Law Commission
IMF International Monetary Fund
NPV Net Present Value
PCA Permanent Court of Arbitration
PCA Dissenting Opinion The Corellian Republic v. The Federal Republic of Dagobah,
PCA Case No. 000-00, Dissenting Opinion by Professor
Andreas Jeger (19.5.2003)
PO 1,2,3 Procedural Order 1,2,3
RA Request for Arbitration
SCC Stockholm Chamber of Commerce
SDR Sovereign Debt Restructuring
SRA Dagobah’s Sovereign Restructuring Act No. 45 12
UF Uncontested Facts
UNCTAD United Nations Conference on Trade and Development
1
STATEMENT OF FACTS
Parties to the Dispute: a hedge fund and a state
1. The Claimant in these proceedings is Calrissian Inc. (“Calrissian” or “Claimant”), a
sophisticated hedge fund incorporated in Corellia,1 a state with an advanced financial and
banking system.2
2. The Respondent is the Federal Republic of Dagobah (“Dagobah” or “Respondent”), a state
with a recently restored democracy and emerging economy, which is struggling for its
socioeconomic stabilization since the 1980s.3
3. Corellia and Dagobah entered into a BIT in 1992, in context of their close diplomatic
relationships.4
The first turmoil
4. Respondent’s first struggle for economic stabilization is traced back in early 2001.5 Dagobah
experienced a heavy liquidity crisis and had to proceed in a debt restructuring in order to
encounter it.6 On 7 May 2001, Respondent implemented a SDR in accordance with the
IMF’s recommendations,7 which resulted in a minor reduction of the titles’ NPV.
8
5. Ever since, Respondent had been battling to restore its economy, and prevent future crises by
all means available. By implementing painful austerity measures, it attempted to generate
revenues and primary surpluses, and reduce public spending.9 Its continuous efforts were
patronizingly supported by the IMF.10
1 UF, ¶22.
2 UF, ¶2.
3 UF, ¶1.
4 UF, ¶2.
5 UF, ¶3
6 UF, ¶3; Appendix 4.
7 UF, ¶4.
8 UF, ¶13.
9 UF, ¶4; Appendix 4.
10 UF, ¶5; Appendix 4.
2
Cl im ’ i le
6. In August 2003, having survived from its previous crisis, Dagobah re-accessed the global
financial markets and issued new series of sovereign bonds.11
The ill rating of its sovereign
debt indicated that Dagobah had a long distance yet to cover for its economic rehab.12
Despite the fact that Dagobah was through a transitional period, in 2005 Calrissian acquired
Dagobah’s security entitlements from the secondary market,13
without even leaving the
convenience of its home state.
Bail out of the sinking ship
7. In 2010, Dagobah experienced another harsh economic recession, as a result of the 2008
global financial crisis.14
The high levels of unemployment and inflation caused several
demonstrations, which flooded the roads of Dagobah.15
Even more, on 14 September 2011
the IMF found that Dagobah’s debt was unsustainable, estimated at more than US$400.16
8. Uncontestably, Dagobah had only two options at its disposal: restructuring or defaulting.17
To ensure the interests of the international community, the IMF did not merely provide
helpful directions, but in fact offered Dagobah a salutary bailout of US$150 billion,
providing that it would implement a second SDR.18
9. On 28 May 2012, Respondent enacted the SRA in order to set the grounds for an orderly
restructuring.19
This law was in full accordance with Dagobah’s Constitution,20
and was
11
PO2, ¶11.
12 PO3, ¶31.
13 PO2, ¶11.
14 UF, ¶14.
15 PO3, ¶38.
16 UF, ¶15.
17 PO2, ¶20.
18 UF, ¶16.
19 PO2, ¶21; PO3, ¶34.
20 PO2, ¶22.
3
published in official websites before its enactment.21
The SRA provided for a collective
action mechanism that would facilitate the exchange of the old titles with new ones, only in
case the holders of 75% of the aggregate nominal value of all outstanding bonds accepted
Dagobah’s exchange offer.
10. It is evident that restabilization was a pressing necessity.
A voluntary exchange
11. After having carefully consulted a representative portion of the “bondholders” (as defined
under the SRA),22
Dagobah presented an offer for the exchange of their titles on 29
November 2012.23
The exchange offer was not directed only to holders of securities under
Dagobah’s domestic law, but also to owners of foreign-law securities.24
The offer was
extremely beneficial for its creditors’ interests, as it included a minor NPV reduction, and an
alteration of the titles’ governing law and forum selection clause.25
Albeit under pressure,
Dagobah left three months for the “bondholders” to consider their response to the proposal.26
12. Οn 12 February 2013, a supermajority higher than 85% accepted the offer and exchanged the
old titles with new ones.27
Dagobah’s proposal was almost unanimously accepted by its
private creditors,28
as well as by the creditor countries, which agreed to delete a portion of
the state’s official debt.29
Almost everyone, Claimant excluded, empathized with Respondent
and understood the gravity of the situation.
13. On 30 August 2013, Calrissian’s time had come. Claimant ignored the overriding public
interest of the exchange, as much as it ignored Dagobah’s invitation to the negotiating
table,30
and the bonds’ forum selection clause. Eventually, on 30 August 2013 Claimant
21
PO2, ¶21.
22 PO2, ¶21.
23 UF, ¶18.
24 UF, ¶19.
25 UF, ¶¶18, 20.
26 UF, ¶18-9.
27 UF, ¶19.
28 UF, ¶19.
29 PO2, ¶19.
30 PO3, ¶35.
4
commenced arbitral proceedings claiming against the consequences of Dagobah’s
insolvency policy.31
31
UF, ¶22.
5
ARGUMENTS
PART ONE: JURISDICTION AND ADMISSIBILITY
I. THE TRIBUNAL LACKS JURISDICTION OVER THE DISPUTE
14. Respondent’s consent to arbitration under the Corellia-Dagobah BIT is conditioned upon
certain jurisdictional requirements. Calrissian erroneously characterizes itself as a
“bondholder” (A) in its attempt to cure its failure to satisfy these prerequisites (B) and its
qualification as a protected investor (C).
A. Setting the record straight: Claimant is a mere holder of security entitlements
15. Even though Calrissian keeps mischaracterizing itself as a bondholder,32
so as to fulfill the
treaty’s jurisdictional requirements unscathed, this Tribunal should clarify Claimant’s real
status from the very beginning of these proceedings.
16. In principle, sovereign bonds are issued by states and purchased by “underwriters” or other
“intermediaries” in the primary market.33
On the other side, security entitlements are
divisions of the initial bonds, traded in the secondary market without any involvement by the
state. Drawing a line between the two markets is not against the reality of the bonds’
issuance process. They virtually constitute realities distinct, on both economic and legal
accounts, as they encompass the interplay of different actors, factors and financial
products.34
17. Calrissian is a mere holder of security entitlements, bought in 2005 in the secondary
market,35
and as such should be treated by this Tribunal.
32
RA, ¶2.
33 Ostřanský, p.6.
34 Ambiente Dissenting, ¶153.
35 PO2, ¶11.
6
B. Cl im h o m de pro ec ed “i ve me ” u der he BIT
18. The notion of investment under the Corellia-Dagobah BIT is clearly different from the use of
investment in the financial markets.36
Claimant has not made a protected “investment” in
accordance with the BIT, since its sovereign debt instruments fall squarely outside Article
1(1) (1) and lack the required territorial link with Dagobah (2).
1. Cl im ’ ecuri y e i leme f ll qu rely ou ide of Ar icle 1(1) BIT
19. The definition of investment in Article 1(1) BIT is construed by a chapeau encompassing
characteristics that a protected investment should satisfy, followed by a list of different types
of assets covered. The listed assets are not self-standing; they are subjected to the general
definition of the chapeau. Claimant bears the burden to prove that its alleged investment
fulfills the jurisdictional prerequisites set in Art.1 BIT.37
20. Be that as it may, Respondent submits that sovereign bonds, let alone security entitlements,
may not be read into the list of assets in Art.1. The selection of the currently included assets
evinces the parties’ intention not to protect sovereign debt instruments (a), and any attempt
to “implant” them into an existing clause would be vain (b). Moreover, Claimant’s securities
do not fulfill the inherent characteristics of an investment (c).
a. The non-exhaustive list is of no avail to Claimant
21. Even if the list of Art.1 BIT is considered to be non-exhaustive, it cannot be deemed
limitless.38
In this regard, Art.1 provides a list of forms that an “investment” may take,
36
Ostřanský, p.33; Abaclat, ¶26; Abaclat Dissenting, ¶41.
37Unglaube, ¶33; SGS v. Paraguay Award, ¶79.
38 Nova Scotia, ¶77.
7
which, albeit illustrative, only prima facie includes “every asset”.39
The indicative list of
assets does not render the “investment” definition a “black hole”, but rather constitutes a
genuine indication of the Parties’ intentions.
22. In particular, the six clauses of Art.1 bespeak the Parties’ agreement for an “enterprise-
oriented” definition of investment.40
According to the record, the conclusion of the BIT was
part of a privatization and internationalization plan undertaken by Respondent.41
This
justifies why all the enlisted assets are specifically connected with a company or project in
Dagobah. There is no room for sovereign debt instruments in this definition.
23. Sovereign bonds constitute an asset-category on their own.42
They are special financial
instruments, connected with the state’s public debt.43
One should not lightly presume their
coverage under the BIT without specific evidence.44
Indeed, BITs with otherwise identical
“investment” definitions include an additional clause explicitly referring to sovereign bonds
as investments covered under their protective veil.45
24. The definition of “investment” is unique in each and every BIT and it should not be
expanded or modified against the parties’ will.46
In casu, the lack of any reference to debt
instruments, let alone the complete absence of any general clause like “claims titles to
money” or “any right under law or contract”, is hardly incidental.
25. Thus, the acceptance of sovereign debt instruments on the grounds of the list’s non-
exhaustive nature would run counter to the Parties’ consent and extend beyond their
“horizon of foreseeability”.47
26. Further bolstering the foregoing, each and every Tribunal that has accepted financial assets,
such as bonds, loans or promissory notes as protected “investments” has initially founded its
decision on their classification under a clause flatly pertaining to titles or claims to money.48
Such terms are missing in the case at hand. It is exactly in this sense that Claimant cannot
39
BIT, Art.1.
40 Ostřanský, p.46; US-Bahrain BIT, Art.1(d)(2).
41 UF, ¶2.
42 Ambiente Dissenting, ¶184.
43 Borchard, p. 477.
44 UNCTAD, p.9; Waibel (2007), pp.733-4; Joy Mining, ¶59.
45 Austria Model BIT, Art.1(2)(c); US Model BIT, Art.1(c); US-Rwanda BIT, Art.1(c).
46 Waste Management II, ¶85.
47 Abaclat Dissenting, ¶16.
48 Fedax, ¶29; ČSOB, ¶¶89-90; Deutsche Bank, ¶¶284-5; Alpha Projektholding, ¶303.
8
persuasively rely on the findings of the Abaclat and Ambiente Tribunals, which subsumed
sovereign bonds under a clause explicitly referring to “obligations” and “public titles”,49
a
clause that is succinctly lacking from the Corellia-Dagobah BIT. This difference is not a
minor one, albeit for Claimant’s inconvenience.
27. Therefore, the Tribunal should read this Treaty’s terms through the lenses of the state-
Parties’ will and refrain from extrapolating other Tribunals’ findings, legally grounded on
different BITs.50
b. Sovereig bo d , le lo e ecuri y e i leme , c o be “impl ed” i o y
category of Article 1 of the BIT
28. In addition, security entitlements do not fall within any of the enlisted forms of assets. Even
if Claimant alleges that sovereign bonds ostensibly constitute “intangible assets”,51
this
interpretation is completely opposed to the ordinary meaning of the term as defined by the
legal and financial vocabulary.52
Both the International Accounting Standards Board
(IASB)53
and the Financial Accounting Standards Board (FASB)54
define an intangible asset
as an asset lacking physical substance, other than a financial asset. The Black’s Law
Dictionary reaffirms this definition, stating that “intangible assets” include “patents,
goodwill, and computer programs [etc.]”.55
29. Finally, the fact that shares are protected under the BIT does not indicate that portfolio
investments are protected per se, since bonds establish debt, and not equity participation.56
49
Abaclat, ¶355; Ambiente, ¶¶402-403; Italy-Argentina BIT, Art.1(c).
50 Weeramantry (2012), p.130.
51 BIT, Art.1(vi).
52 Sherman/Power, p.477.
53 IAS 38.
54 ASC 350.
55 Black’s Law, pp.162, 1364.
56 Ostřanský, p.45; Sornarajah (2009), p.516; Waibel (2007), p.728.
9
c. Cl im ’ ecuri ie do o fulfill he i here ch r c eri ic of i vestment
30. Looking beyond the mere labelling of assets, the ordinary meaning of the word
“investment” must serve as a guideline throughout its interpretation.57
In this regard, the
Romak Tribunal,58
as well as other tribunals,59
required the existence of certain
characteristics, inherent to the definition of investment, before assuming jurisdiction. In
casu, two out of the three “objective”60
and “uncontentious”61
required characteristics, also
specified in the chapeau of Art.1 BIT,62
are absent. These are the assumption of risk (i) and
the commitment of capital (ii) by the alleged investor.
i. Claimant’s “bonds” do not involve the required risk
31. Regarding the risk requirement, the findings of several tribunals, along with the very reality
of commercial transactions, lead to the conclusion that the existence of a mere commercial
risk is inadequate.63
32. The commercial risk, also known as risk of non-performance, is solely the risk of default,
bankruptcy, or non-fulfilling the undertaken contractual obligations;64
it is a risk intrinsic in
every commercial transaction.65
On the other hand, investment risk entails the possibility of
57
Douglas (2009), p.342; Nova Scotia ¶76.
58 Romak, ¶207.
59 Nova Scotia, ¶¶78-80; Abaclat, ¶270.
60 Douglas (2009), p.191; Ostřanský, p.33.
61 Waibel (2011), p.231.
62 UNCTAD (2011), pp. 29, 41.
63 Joy Mining, ¶58; Nova Scotia, ¶105; Romak, ¶ 230.
64 Faerber, p.26; Ostřanský, pp.41-42.
65 Romak, ¶229; Joy Mining, ¶57; Nova Scotia, ¶105; Maffezini, ¶64.
10
earning an actual return different than the expected one,66
an element plainly missing from
Claimant’s “investment”.67
33. The sovereign bond indenture provides for a fixed interest rate, fixed interest payment
periods, and a fixed par value payable on maturity.68
The holder of the titles knows
beforehand the securities’ return, meaning the amount of the future interest payments and the
sum payable on maturity, which remains unaffected by external factors.69
Thus, by acquiring
them and waiting until maturity, the holders of securities undertake only the “default risk”. It
is exactly this risk that Calrissian undertook, as it purchased the securities in question in
2005 and holds them since then.70
34. Moreover, the “political” risk that Claimant might attempt to attach to its titles is but the risk
inherent in every single transaction in which a state is counterparty. If such risk is considered
sufficient, any commercial transaction with the state would qualify as an investment under
the BIT. Yet, in the present scenario, the state’s obligation to pay the interests and principal
is pre-determined and independent from the success of any economic project or the ultimate
use of funds by the state.71
Political risk influences the bonds’ rating and solely affects the
probability of non-performance.72
Hence, this is not the required risk for the purposes of the
BIT and does not amount to an investment risk.73
35. In any case, the Tribunal is invited to examine, in accordance with the wording of Art.1, not
the mere existence of risk, but rather the assumption of risk,74
as perceived by the investor at
the exact time the investment was made.75
The record shows no such assumption, especially
considering that Claimant purchased the security entitlements in 2005. At that time, the risk
66
Romak, ¶230; Nova Scotia, ¶94.
67 Ambiente Dissenting, ¶180.
68 Mishkin, p.70.
69 Abaclat, ¶11.
70 PO2, ¶11.
71 Ostřanský, pp.41-42.
72 Abaclat, ¶ 28.
73 Ambiente Dissenting, ¶180.
74 BIT, Art.1(1).
75 Deutsche Bank, ¶295.
11
assumed by Calrissian was non-existent, as the latter deemed Dagobah’s economy to be
stable.76
36. Beyond that, sovereign bonds are frequently used as a means of payment by the issuer state
to creditors, even by countries that have suffered severe economic crises before.77
If they
were considered risk-bearing investments they would not be used, let alone accepted, to
satisfy pre-existing debts.
37. Consequently, Claimant’s titles fail to fulfill the risk requirement, precluding their
protection under the BIT.
ii. Claimant has not committed capital or other resources in Dagobah
38. Risk aside, Claimant’s acquisition of security entitlements does not entail a commitment of
funds to Dagobah. Claimant’s capital was committed to the previous holders of the security
entitlements on acquisition and not to Dagobah’s coffers, since the titles were purchased in
Corellia, in the secondary market.78
39. Respondent made a single bond issuance, corresponding to the global amount that the
country was willing to borrow, and accordingly received money only from the initial
purchasers, in principle the underwriters.79
This transaction took place long before Claimant
purchased its security entitlements in 2005.80
Evidently, there was no payment by Claimant
or any other trader in the secondary market to Respondent at any point of time.
2. No territorial link can be established between the security entitlements and Dagobah
40. The Preamble and generally the context of the BIT, alongside the physical definition of the
word “territory” in Art.1(5), reflect the Parties’ intention to permit only the coverage of
76
PO2, ¶11.
77 Reuters (2010); Reuters (2013); Bloomberg (2012).
78 PO2, ¶11; see similarly Abaclat, ¶26.
79 Ostřanský, p.6.
80 PO2, ¶11.
12
investments physically related to their territory.81
In the case at hand, Claimant’s security
entitlements do not satisfy the required territorial link and thus their protection would be
alien to the Treaty’s text and context.
41. First of all, the security entitlements are traded and purchased in international financial
markets, and registered in accounts plainly outside the territory of Dagobah. Notably,
Corellia is where Claimant purchased the securities in question,82
and Yavin is their place of
payment.83
Dagobah is missing from the entire picture.
42. Moreover, the bonds’ “division”84
and transition to the secondary market irreversibly
disrupts the territorial link between the titles and the issuing state; it constitutes the “cut-off
point” beyond which the link of these debt instruments with Dagobah becomes too remote.85
The state is completely unaware of the identity of the “bondholders”, and cannot control
neither the titles’ circulation nor the operation of the secondary market.86
43. In fact, the payment of the lump sum price by the underwriters to Dagobah and Claimant’s
purchase of the bonds’ securities are two separate and distinct transactions.87
There is no
flow of resources whatsoever in the territory of the issuing state when the titles are
purchased in the secondary market.88
It is groundless to assume that the foregoing procedure
constitutes one and only transaction, since such an acceptance would imply an automatic and
certain passage from the primary to the secondary market.89
Yet, the sale of the titles by the
underwriters in the secondary market cannot be taken for granted; for, the underwriters
might not attract enough demand or keep the titles in their own portfolio.90
44. Indeed, there are cogent reasons for this Tribunal not to follow the findings of the Abaclat
and Ambiente tribunals vis-à-vis the territorial link. Wholly aside from the criticism that the
81
BIT, Preamble (2), Arts. 1, 2, 3, 9.
82 PO2, ¶11.
83 PO3, ¶33; See similarly Abaclat Dissenting, ¶80.
84 PCA Dissenting, ¶122.
85 Ambiente Dissenting, ¶152.
86 PCA Dissenting, ¶122.
87 Abaclat, Dissenting, ¶¶70-1; Ambiente Dissenting, ¶¶151, 311.
88 Waibel (2007), p.727; Ostřanský, p.37.
89 Abaclat Dissenting, ¶¶71-72.
90 Abaclat Dissenting, ¶71.
13
adopted “unity theory” has received,91
the aforementioned tribunals used the express
inclusion of purely financial assets in the pertinent list as a presumption that these assets
satisfied the required territoriality; thus, as the basis of their interpretation of territorial
link.92
Yet, the Corellia-Dagobah BIT does not include such clauses that could “justify” such
a perception of territoriality. Having the language of the present BIT as the point of its
departure, Respondent submits that it is where the investment was made and not for the
benefit of whom that matters. 93
45. However, even if the Tribunal were to delve into the “benefit criterion”,94
Claimant’s
security entitlements do not virtually benefit the economic development of Dagobah. From
an economic perspective, the repurchase of security entitlements is not even measured in the
“investment component” of the state’s GDP.95
They may play a role in capital markets, but
this does not entail any positive impact in the state’s economic growth.96
46. Even the funds generated from the bonds’ issuance are solely a part of Dagobah’s general
state budget97
and are not connected with any investment operation, an element considered
decisive by tribunals.98
“Neither personnel, nor ideas nor productive facilities are associated
with the bonds.”99
47. In light of the above, Claimant’s security entitlements cannot, either way, be protected under
the BIT. They are titles constantly changing hands in the secondary markets, exactly what
the Fedax Tribunal called “volatile capital”.100
91
Waibel (2011), p.247; Dolzer, p.261; Abaclat Dissenting, ¶107; Ambiente Dissenting, ¶151.
92 Abaclat, ¶375; Deutsche Bank, ¶289.
93 Abaclat Dissenting, ¶99.
94 Abaclat, ¶374; Nova Scotia, ¶130.
95 Waibel (2007), p.719.
96 Ambiente Dissenting, ¶255.
97 PO3, ¶30; Ostřanský, p.39.
98 Apotex, ¶522; SGS v. Philippines, ¶99.
99 Waibel (2007), p. 728.
100 Fedax, ¶43.
14
C. Claimant is not a protected investor under the BIT
48. Pursuant to Art.1 BIT,
“investor of a Party” means a Party or a national of a Party that attempts to
make, is making, or has made an investment in the territory of the other
Party”.101
49. Accordingly, the Tribunal should not confine itself to the verification of the nationality
requirement, but also examine in detail the other prerequisites stipulated in the “investor”
definition.102
50. In line with the above argumentation on the absence of the territorial requirement, Claimant
lacks locus standi. Claimant, in order to be entitled to the BIT’s protection, should have an
“active relationship” with the investment, namely to “actively control” the investment in its
totality.103
Yet, Claimant merely acquired security entitlements in the secondary market, a
purchase that bears no link with the first sale of the bonds by Respondent.
51. Hence, this Tribunal should decline jurisdiction, also due to the non-fulfillment of the
ratione personae condition.
II. THE PCA DECISION MAY NOT BE USED TO CIRCUMVENT THIS
TRIBUNAL’S LACK F JURISDICTI N
52. According to Claimant, due to the issuance of the PCA Award in 2003, “there is no question
that [it] is an investor as defined by the BIT and that [this investor-state Tribunal] will have
jurisdiction”.104
Claimant virtually argues its case based on the alleged binding effects of a
previous arbitral decision, in contravention of both international investment law and the BIT
(A). Further, Claimant attempts to use the PCA Award as a means for an inappropriate
101
BIT, Art.1(2) [emphasis added].
102 Ambiente Dissenting, ¶122.
103 Standard Chartered Bank, ¶230.
104 RA, ¶10 [emphasis added].
15
amendment of the BIT (B), despite the fact that this Award is not even persuasive in the
present context (C).
A. This Tribunal cannot be bound by the PCA Award
53. Respondent submits that extending the effect of the PCA Award to the present case would be
in stark contradiction with the accepted principles of international investment law (1), as
well as with the very language of the BIT (2).
1. Claimant relies on an alleged stare decisis effect contrary to accepted principles of
international investment law
54. Respondent submits that the bestowal of binding effect to the PCA Award upon this case
would be tantamount to accepting the application of a stare decisis doctrine in investment
arbitration. Yet, this doctrine is undeniably of no effect in international investment law.105
55. In fact, this Tribunal has “its own mandate and competence”106
and is not obliged to “stand
by things decided”.107
Each tribunal bases its analysis on a unique factual matrix108
and is
not bound by previous decisions, even when similar points are to be determined.109
A
different understanding would imply an artificial hierarchy between arbitral Tribunals, and
would be unacceptable and incompatible with international investment law.110
105
Bosh, ¶210; Oostergetel, ¶145; Total, ¶176; Gill, p.88; Roberts (2014), p.62; Trevino, p.15; Shany, p.4.
106 SGS v. Paraguay Decision, ¶41.
107 Gill, p.88.
108 Reisman Expert Opinion, ¶38.
109 Bayindir, ¶76; Glamis, ¶8; Abaclat, ¶292.
110 Waibel (2014), pp.500, 529; SGS v. Philippines, ¶97.
16
2. The BIT prohibi he ex e io of he PCA Aw rd’ effec o an investor-state
tribunal
56. Respondent submits that the PCA Award’s effects cannot extend to the present case. The
BIT establishes a system of two independent dispute resolution provisions (a) and contains
no indication that the state-Parties delegated to a Tribunal the power to render authoritative
interpretations binding on subsequent investor-state tribunals (b).
a. The BIT establishes two different and autonomous dispute settlement mechanisms
57. Claimant invokes a putative binding effect of the PCA Award to subsequent investor-State
tribunals,111
disregarding the very language of the applicable BIT.
58. The BIT establishes two separate dispute settlement mechanisms in Articles 7 and 8
concerning the “Settlement of Disputes between the Parties” and the “Settlement of Disputes
between Investors of One Party and the Other Party” respectively. The clear separation of
these Articles confirms the existence of a “two-track system” of dispute settlement under the
BIT. These two independent tracks pertain to different subject-matter and parties.112
Thus,
the tribunals constituted thereunder cannot influence, let alone bind, each other.
59. The autonomy of these two mechanisms was also reaffirmed by the leading experts that were
requested to comment upon the US v. Ecuador case, regardless of their overall stance in the
dispute.113
Likewise, the Tribunal in Lucchetti v. Peru recognized that “inter-state disputes
should not infringe on investor-state disputes”114
by refusing to follow Peru’s request to
suspend its proceedings, pending interstate litigation on the same issue.115
Had the interstate
111
RA, ¶¶7-10.
112 Reisman Expert Opinion, ¶57(b).
113 Pellet Expert Opinion, ¶24; Reisman Expert Opinion, ¶¶29-30; Amerasinghe Expert Opinion, ¶27.
114 Reisman Expert Opinion, ¶34.
115 Lucchetti, ¶¶7,9.
17
tribunal been able to bind, or affect in any way, the investor-state one, the latter would have
accepted Peru’s claim.116
60. Furthermore, when the Treaty Parties agree on the correlation or potential overlap between
the two mechanisms, they make it clear-cut. For instance, the Italy-Cuba BIT includes a
single article -and procedure- for settling disputes through arbitration and articulates the
national state’s intervention to its investors’ claims.117
In stark contrast to that formulation,
the Parties to the present BIT stipulated two separate dispute resolution mechanisms in
different Articles, delimiting thus the effect of each Article to the specific dispute and
parties.
61. Claimant’s attempt to “conflat[e] the two tracks which the BIT was at pains to separate”,
except for voiding the authentic consent of the Parties, also negates its direct rights accrued
under the BIT.118
Investors resort to arbitral tribunals on their own behalf, on their own
initiative and for their own benefit, not for the restoration of their allegedly injured state.119
Thus, it seems that Claimant requests to be bound by an inter-state award merely because it
favors its interests. The inherent contradiction of this request would be obvious if the home
state asserted its investor’s claim before the Tribunal.120
b. The BIT says nothing about a state-to-state arbitral decision being binding on
subsequently constituted investor-state tribunals.
62. Respondent highlights that Art.7 BIT says nothing about a state-to-state decision being
binding on subsequently constituted investor-state tribunals.
63. In fact, in cases where the State-Parties intend to provide an authoritative pro futuro
interpretation, they state so explicitly.121
Several IITs explicitly provide for a process so as to
116
Reisman Expert Opinion, ¶35.
117 Reisman Expert Opinion, ¶¶36-37; Italy-Cuba BIT, Arts.9, 10.
118 Reisman Expert Opinion, ¶32, 35.
119 CPI, ¶167; Occidental, ¶¶19-20; Douglas (2009), p.38; Braun, p.26; Paparinskis, p.335.
120 Douglas (2003), p.170.
121 Reisman Expert Opinion, ¶19; Potestà, p.762.
18
reach mutually agreed binding interpretations.122
For example, Art.40(2) of the Canada
Model BIT reads as follows:
“An interpretation by the Commission of a provision of this Agreement shall
be binding on a Tribunal established under this Section [Settlement of
Disputes between an Investor and the Host Party], and any award under this
Section shall be consistent with such interpretation.”[emphasis added]
64. Even more, when states have intended to provide for a binding interpretation they have
entrusted this task to a political, non-judicial body, created for that purpose.123
This is the
case of the Free Trade Commission (FTC) in NAFTA, comprised of “cabinet level
representatives” of the three NAFTA Parties.124
Nevertheless, even in that case, the
legitimacy of such binding interpretations has occasionally been rejected.125
65. Thus, absent any indication whatsoever in the BIT, an interpretative arbitral award under
Art.7(2) can only be binding between the specific disputing parties, namely Corellia and
Dagobah, and to the context in which it is rendered.126
B. The PCA Award cannot be used to amend the BIT
66. Respondent submits that Claimant attempts to covertly force an amendment into the BIT by
requesting the binding effect of the PCA Award upon this Tribunal.
67. The PCA Award was but a clarification given by the Tribunal regarding the 2003 bonds and
was based on a specific temporal and factual context, beyond which its effect cannot
extend.127
The PCA Tribunal cannot permanently alter the Treaty’s protective by regarding
sovereign bonds as an integral part of it. An eventual application of this ad hoc interpretation
122
NAFTA, Art.1131(2); US Model BIT, Art.30(3); Canada Model BIT, Art.40(2).
123 Potestà, p.762.
124 Kaufmann-Kohler, pp.175–194.
125 Pope & Talbot, ¶¶23, 47; Trevino, p.25; Roberts (2010), p.183.
126 Reisman Expert Opinion, ¶19; Schreuer Weiniger, p.1193.
127 Trevino, p.27.
19
to all future bonds, as well as their titles, would constitute an invalid amendment of the BIT
“via the back door”.128
68. Besides, Claimant’s request to consider the PCA award binding entails a second amendment
of the BIT. In fact, Claimant attempts to import a mechanism, not contemplated in the BIT,
by using Art.7 as a tool to unilaterally amend the treaty and issue authoritative
interpretations.
69. By contrast, an amendment of the BIT requires a strictly formal procedure. Pursuant to
Art.39 VCLT, all Contracting Parties should grant their consent, through an express or tacit
agreement, to a specific amendment of the BIT.129
70. Upon signing the BIT, Dagobah and the Corellia did not mutually agree on protecting
“sovereign bonds”. Beyond that, the very recourse to the PCA Tribunal reveals the existence
of a dispute between the parties. Thus, a certain interpretation rendered by the Tribunal and
accompanied by a strong dissenting opinion,130
cannot be regarded as agreed by the
Parties.131
71. What is more, after the publication of the PCA Award, Dagobah’s representatives publicly
voiced their disagreement with the majority’s decision.132
This disagreement cannot by any
means be construed as an agreement with regard to the PCA interpretation, much less as a
consent for an amendment of the BIT.
72. In the CME case, for example, even a joint interpretive statement of the parties (‘agreed
minutes’) was not considered binding by the tribunal, not even a “subsequent agreement”,133
but merely an additional evidence.134
Thus, it goes without saying that an interpretive award,
which actually involves at its very core a disagreement between the treaty parties,135
should
not be, in any case, binding.
128
UF, ¶ 25; ARA, ¶7; Roberts (2014), p.53.
129 Shaw, pp.930-931; Tomuschat, ¶29.
130 UF, ¶12; PCA, Dissenting Opinion of A. Jeger.
131 Roberts (2013), p.3.
132 PO2, ¶10.
133 VCLT, Art.31(3)(a).
134 CME, ¶¶87–93; See also Aguas del Tunari, ¶260.
135 Roberts (2014), p.63.
20
73. Lastly, should the Tribunal consider itself bound by the PCA Award, it will seriously impair
the investment treaty arbitration regime.136
Notably, it would pave the way for Corellia or
any other party to a BIT to renegotiate and amend the entire Treaty through state-to-state
arbitration. It would also void the VCLT attainment of a transparent treaty modification and
amendment procedure.137
In this vein, Claimant’s request for a binding interpretation cannot
take the form of a claim in the present dispute, as this would result in an unacceptable
amendment of the BIT contrary to Respondent’s will.
C. The PCA Award is not even persuasive in the present context
74. Notwithstanding the strong dissenting opinion accompanying the PCA Award138
and
reducing its persuasive effect,139
the two cases should not be decided alike, since there are at
least three cogent reasons that distinguish them.140
75. Firstly, the disputing parties are distinct. The PCA interpretive decision, invoked by
Claimant, concerns an interstate dispute,141
whereas this SCC Arbitration pertains to an
investor-state dispute.142
Secondly, the subject-matter of the two cases is completely
different. The sovereign bonds were issued at different points of time and under different
terms.143
Depending on the series of bonds at stake,144
the investment characteristics145
may
vary and affect the jurisdiction under Art.1 BIT. Thirdly, the reasoning of the PCA award
cannot but be based on the factual context of the 2001 economic crisis, whereas the current
dispute emerged from the 2008 global financial crisis.
136
Reisman’s Expert Opinion, ¶55.
137 Reisman’s Expert Opinion, ¶53.
138 UF, ¶12; PCA Dissenting.
139 Guillaume, p.10.
140 Suez, ¶189; Daimler, ¶52.
141 UF, ¶8.
142 UF, ¶22.
143 PO2, ¶11; UF, ¶13.
144 PCA Dissenting, ¶93.
145 BIT, Art.1.
21
76. Nonetheless, even in cases based on the very same factual background, arbitral practice has
shown that diametrically opposed awards can be rendered.146
Thus, even if this Tribunal
finds some similarities between the two cases, it should not blindly follow the PCA Award
under the pretext of consistency, since it would be unreasonable to decide similar cases in
the same incorrect and unjust way. This would constitute a consistent deprivation of
justice.147
77. Thus, this Tribunal, which is undoubtedly the arbiter of its own jurisdiction,148
should
recognize the compelling differences between the two cases and adjudicate independently
the present dispute.
III. IN ANY EVENT, THE SUBMITTED CLAIMS ARE INADMISSIBLE IN VIEW
OF THE FORUM SELECTION CLAUSE CONTAINED IN THE SOVEREIGN
BONDS
78. Pursuant to Art.19 SCC Rules, the Tribunal is accorded ample discretion in the conduct of
the proceedings, as long as it respects any existing agreement between the parties. In this
case the forum selection clause of the bond documents explicitly provides that:
“Any dispute arising from or relating to this contract will be
exclusively resolved before the Courts of Dagobah.”149
79. It follows that regardless of the nature of Claimant’s claims as contractual or treaty-based,
they are undoubtedly related to the sovereign bond contracts. Thus, they inescapably fall
within the exclusive jurisdiction of Dagobah’s courts.
80. Generally, Claimant cannot invoke the breach of the FET standard, when it has not even
attempted to seek remedy in Dagobah’s courts. In principle, tribunals should decide “over
146
CME, ¶434; Lauder, ¶171; Douglas (2010), p.109.
147 Weeramantry (2010), p.120; Douglas (2010), p.109.
148 Aguas del Tunari, ¶263.
149 PO2, ¶16.
22
the ‘treatment’ that the alleged breach of contract has received in the domestic context,
rather than over the existence of a breach as such”.150
81. Be that as it may, the Tribunal should give precedence to the exclusive forum selection
clause of the titles (A); and, in any case, Claimant has waived its right to international
arbitration (B). Otherwise, Respondent would be susceptible to Claimant’s double recovery
(C).
A. The Tribunal should give precedence to the exclusive forum selection clause of the
bond contracts
82. Respondent asserts that the Tribunal should give precedence to the forum selection clause of
the sovereign bonds, by acknowledging the Claimant’s relevant contractual obligation (1), as
well as its succinctly exclusive nature (2). In any case, the exclusive jurisdiction of
Dagobah’s courts must prevail in view of a careful balancing of the parties’ interests (3).
1. Claimant cannot avoid its obligations under the bond contract
83. In case a contract, such as Claimant’s titles, is the fundamental basis for a claim, the
jurisdictional forum agreed therein must prevail.151
It is, as recognized,152
irrational for
Claimant to void the freely agreed dispute settlement clause in the contract.
84. Claimant should not deny the applicability of the titles’ exclusive forum, and at the same
time invoke a violation based on the very same instruments.153
Claimant cannot “approbate
and reprobate in respect of the same contract”,154
as this would undermine the contractual
150
Parkerings ¶317; Generation Ukraine, ¶20.30.
151 Cremades/Cairns, p.2; Vivendi Annulment, ¶98; SGS v. Philippines, ¶153.
152 SGS v. Pakistan, ¶168.
153 Douglas (2009), p.682; Voss, p. 311; SGS v. Philippines, ¶154-5; Bosh ¶ 253.
154 SGS v. Philippines, ¶155.
23
autonomy,155
as well as the integrity of the contractual bargain, upon which its claims are
premised.156
Pacta sunt servanda runs both ways, and is not a unilateral obligation.157
85. Even more, Claimant receives a higher yield in exchange for the fact that its titles are
governed by Dagobah’s law and for the exclusive jurisdiction of Dagobah’s courts over
them.158
Thus, Claimant, having already enjoyed rights under the contract, should also pay
deference to its contractual obligations.
86. Lastly, the purpose of the BIT is not to substitute the specific agreements made between the
investor and the state, but rather to support them.159
Hence, the Tribunal should give
precedence to the specific forum provided in the bond contracts.
2. The forum selection clause provides for the exclusive juri dic io of D gob h’
courts
87. The sovereign bond contracts explicitly provide for an exclusive dispute settlement
mechanism. Arbitral practice has established that contractual wording is decisive.160
In this
regard, SGS v. Paraguay,161
Abaclat,162
and similar case law163
is of no avail to Claimant,
since the relevant forum selection clause did not explicitly establish the exclusive
jurisdiction of a domestic forum. Thus, the Tribunal has the obligation to recognize the
exclusive character of the forum selection clause.164
88. Moreover, there is nothing in the wording of Art.8(2) providing for exclusive dispute
settlement fora.165
It is only Art.26 ICSID that “establishes a presumption of exclusivity in
155
BIVAC, ¶148.
156 Douglas (2009), p.682.
157 Crawford (2008), p.13.
158 Clare/Schmidlin, p.5; Schill, p.20; Shany, p.150.
159 SGS v. Philippines, ¶141; Malicorp ¶103(c).
160 Aguas del Tunari, ¶115.
161 SGS v. Paraguay, Decision ¶126.
162 Abaclat, ¶340.
163 Aguas den Tunari, ¶112.
164 Waibel (2007), p.735.
165 Shookman, p.361.
24
favor of ICSID arbitration”.166
However, Dagobah is not even a signatory of ICSID
Convention.167
Arguably, this indicates its intention to provide for a non-exclusive
arbitration clause in the BIT. Therefore, to ignore an exclusive provision, in favor of a non-
exclusive one, would constitute a breach of a valid jurisdictional arrangement vesting
exclusive competence in Dagobah’s courts.
89. By neglecting the exclusive forum selection clause Claimant jeopardizes the legal certainty
and frustrates the investor’s long-term expectations in the bond’s market, as well as the
inflow of foreign investments in the long-term.168
In this sense, the circumvention of the
contractual forum is even more contradictory to Claimant’s plea for a stable legal
framework.169
Thus, Claimant must resort to Dagobah’s domestic courts as required by the
exclusive forum selection clause of the bond contract.
90. In any event, the Tribunal should at the very least stay its proceedings, in view of this
exclusive arrangement of the parties.170
This would also eliminate the possibility of
inconsistent judgments.171
Accordingly, a final decision should be firstly rendered by
Dagobah’s courts, which are at all times available to Claimant.
3. The exclu ive juri dic io of D gob h’ cour mu prev il under a careful
balancing of the BIT p r ie ’ i ere
91. Even if the two jurisdictional fora are deemed as concurrently available, the Tribunal should
proceed to a weighting of the parties’ interests, as the Abaclat Tribunal did before,172
so as to
determine the most efficient and fair dispute settlement mechanism for both of them.
92. Claimant’s ability to comfortably circumvent the contractually agreed forum would seriously
impair Respondent’s right to manage paramount sovereign issues. Beyond the high
166
Wehland, p.48.
167 PO2, ¶7.
168 Douglas (2009), pp.365-366, Waibel (2007) p.734; Eureko Dissenting, ¶11.
169 RA, ¶13.
170 SGS v. Philippines, ¶¶141-143, 177(c); Douglas (2009), p.388.
171 Shany, p.158.
172 Abaclat, ¶582.
25
arbitration costs that a state hurt by a financial crisis is forced to undertake,173
continual
sovereign debt litigation through investment arbitration would open Pandora's box and
undermine the workability of future SDRs.174
93. Thus, it should not be lightly permitted to holdout creditors, like Calrissian, to bypass the
exclusive jurisdiction of domestic courts in view of the detrimental effects to the state
undergoing the restructuring.
B. Claimant irrevocably waived the right to arbitrate claims related to its titles under
the BIT
94. Given that BITs convey individual rights to foreign investors,175
Claimant is prima facie
entitled to waive these rights.176
Indeed, Claimant did waive its right to resort to investment
arbitration for disputes related to its titles under Art.8 BIT, by consenting to their exclusively
designated forum.
95. The BIT entered into force in 1992, eleven years before the issuance of the concerned
sovereign bonds in 2003.177
The parties to the bond contract, including Claimant, knew
beforehand the BIT’s existence, but instead they did not indicate in any way in the bond
contracts that there was also the option to resort to investment arbitration for disputes arising
thereof.
96. This fact is not negligible. The BIVAC Tribunal, dealing with a contract that post-dated the
respective BIT and contained an exclusive forum selection clause, as in our case, held that:
“[This] indicates, at the very least, that the parties to
the Contract including [Claimant], intended the
exclusive contractual jurisdiction of the Tribunals of
[the host state] to be absolute and without exception,
and for it to mean what it says.”178
173
Dolzer/Schreuer, p.298
174 Waibel (2007), p.712; Ostřanský, p.19-20
175 Occidental, ¶20.
176 Spiermann, p.208; Ulysseas, ¶¶148-149.
177 UF, ¶2; PO2, ¶11.
178 BIVAC, ¶146.
26
97. In light of the aforementioned, Respondent invites this Tribunal to consider that the
exclusive forum selection clause in the bond contract expresses a valid waiver of the arbitral
litigation with regard to claims arising thereof.
C. The exercise of jurisdiction by the Tribunal would render Respondent exposed to
Cl im ’ double recovery
98. Absent any provision in the BIT that could prevent Claimant’s double recovery, there is even
a higher risk that it will seek compensation for its claims, based on the very same
measures179
enacted by Respondent, in both fora.
99. In the Chevron case this risk was duly acknowledged, but was prevented due to the explicit
affirmation by Chevron that no recourse would be sought to another forum.180
On the
contrary, in our case, Claimant has not given any guarantee that it will not resort afterwards
to the local courts.
100. Hence, Respondent invites the Tribunal to dismiss the submitted claims as inadmissible,
until Claimant provides the necessary reassurances that it will not seek additional redress
before Dagobah’s courts.
179
Waste Management I, ¶27; Shany, p.150.
180 Chevron, ¶557.
27
PART TWO: MERITS
101. Not only should Claimant’s case fail due to the aforementioned jurisdictional and
admissibility flaws, but Claimant’s claim of a FET breach is also unmeritorious.
102. Respondent respectfully invites this Tribunal to consider that its emergency measures did not
violate the FET standard of Art.2(2) BIT (IV). More importantly, any emergency measure is
excusable by virtue of Art.6(2) BIT (V).
IV. RESPONDENT GRANTED FAIR AND EQUITABLE TREATMENT
103. Claimant’s provocative allegations that Respondent violated its obligations under Art.2(2)
BIT lack any foundation. The enactment of the SRA and the other SDR measures did abide
by Respondent’s Treaty obligations for fairness and equitability.
104. Many tribunals have opined that the FET standard is equivalent to the minimum standard of
treatment in customary international law.181
According to Art.31 VCLT, the ordinary
meaning of the terms “fair” and “equitable” is “just”, “evenhanded”, “unbiased” and
“legitimate”.182
A wider perception would lead to an arbitrary misinterpretation of the
Parties’ authentic volition.
105. Should this Tribunal consider FET to be an autonomous standard, the threshold for finding a
violation remains significantly high. A breach can only be established if the host-state’s
conduct was grossly unfair and shocking.183
106. For the purposes of the case, Respondent specifically recalls the National Grid Tribunal’s
reasoning, which interpreted an identical FET clause and held that what is unfair and
inequitable in normal conditions may not be so in times of socioeconomic distress.184
181
Azurix, ¶361; Biwater Gauff, ¶592; CMS Award, ¶284; Deutsche Bank, ¶419; Duke Energy, ¶333–7; El
Paso, ¶336; Lemire, ¶247-255; Rumeli, ¶611.
182 Azurix, ¶360; MTD, ¶113.
183 Genin, ¶367.
184 National Grid, ¶180.
28
107. Regardless of the Tribunal’s perception of the standard, Respondent fully complied with its
requirements. The Tribunal should reject Claimant’s submissions, and find that:
A. Claimant is a caveat businessman;
B. Claimant’s hopes are not protected legitimate expectations;
C. Respondent’s measures were not coercive;
D. Respondent’s measures were reasonable; and
E. Respondent acted as a good faith debtor.
A. Claimant is a Caveat Businessman
108. Claimant seeks protection under the BIT and refuses to take responsibility for its vicious
business undertakings. However, Treaties do not serve as a safeguard for bad business
decisions.185
Claiming against the materialization of its undertaken commercial risk, as
Professor Muchlinski notes, renders Claimant a “caveat” businessman and should be taken
into consideration by the Tribunal when examining a possible FET violation.186
109. It is rational that, before taking a decision, every businessman must make a balancing of the
probability of gain against the danger of losses.187
The host-state cannot be held liable for a
businessman’s ill decision-making.188
As boldly highlighted by the Biwater Gauff Tribunal,
having utopian expectations from a transitional economy is unrealistic and any losses
incurred due to a false risk assessment are borne by the businessmakers.189
110. In casu, Claimant not only chose to a fragile economy, which was still recovering from the
wreckages of its previous crisis, but also made the most dubious acquisition possible. In
2005, four years after the previous SDR,190
Claimant acquired a huge volume of 12-year
185
Maffezini, ¶64; Olguin, ¶75.
186 Muchlinski, p.527.
187 Muchlinski, p.542; Waibel (2007), p.754; .
188 Genin. ¶380; MTD, ¶167; Parkerings, ¶308; Oscar Chinn, p.86.
189 Biwater Gauff, ¶376.
190 UF, ¶¶4, 13.
29
security entitlements governed by domestic law, which were rated at B+,191
meaning that
they were highly speculative, and vulnerable to non-repayment and adverse economic
conditions.192
Such choice was, according to the Rating Agencies, anything but safe.
111. When the omens for the country’s weak economic situation materialized in 2011,193
Claimant suddenly forgot the risk that its decision was carrying. Provocatively, Claimant
now requests from the Tribunal to find that Respondent’s measures were “unreasonable”.
But, was it Respondent’s conduct regarding the crisis that was unreasonable?
112. There is no room to make a showing that Respondent’s measures came upon Claimant
unawares. Claimant is not a pensioner that acquired a title, but a qualified hedge fund,194
which is known to attract only highly sophisticated professionals.195
Claimant must have
correctly translated Dagobah’s socioeconomic conditions. The reduction of Dagobah’s
sovereign debt rating in 2008 at B-,196
along with the unfavorable circumstances, could be
seen as anything-but-promising signs.197
Claimant’s choice not to resell its titles when
everything was pointing towards the opposite direction was, albeit dubious, still its choice.
113. Thus, Respondent respectfully invites this Tribunal to refrain from protecting Claimant’s
unprofessional, or rather professional and questionable, negligence of mitigating its losses.
The BIT is not a gambler’s subterfuge and should not compensate for choices that have
failed to yield the desired profits due to business mismanagement.
B. Cl im ’ mere hope do o co i u e protected legitimate expectations
114. Host-states bear the obligation to maintain a stable and predictable legal framework for
foreign investments.198
Claimant alleges that Respondent violated the above obligation by
191
PO2, ¶31.
192 Standard & Poor’s, p.5.
193 Appendix 4; UF, ¶14.
194 UF, ¶22.
195 Stowell, p.200.
196 PO3, ¶31.
197 PO3, ¶38.
198 Impregilo v. Argentina, ¶290-1; Parkerings, ¶322.
30
enacting a retroactive law, which breached its previous warranties for the maintenance of a
stable investment environment.
115. Ergo, Arbitral tribunals usually refer to the stability and predictability of the host state’s
legal system in connection with the protection of the investor’s legitimate expectations.199
The latter constitute the grounds, upon which the investors relied in order to choose the state,
at the time was made.200
116. However, the protection of such expectations is not limitless. The investor is not entitled to
seek protection for expectations subjective, unreasonable and unjustifiable.201
That was
precisely the point raised by the Suez Tribunal when dealing with an identical FET clause.202
Mere hopes, contractual expectations and business ambitions do not amount to legitimate
expectations protected under the BIT.203
117. Moreover, it would be unreasonable for a country to relinquish its sovereign powers by
promising absolute legal stability.204
No investor can legitimately anticipate that the host-
state’s regulatory framework will remain frozen and unchanged.205
It is the state’s
undeniable right to pursue its legitimate regulatory objectives by enacting, cancelling, or
altering its legislation,206
especially in times of crisis.207
118. As will be shown below, Claimant’s “expectations” in fact lack the required “objective
basis”, and are rather “the result of misplaced optimism”, to quote the Arif Tribunal.208
For,
Respondent has not deprived Claimant of any legitimate expectation. To the contrary,
Claimant could legitimately expect Respondent’s measures, as its titles were governed by
Dagobah’s law (1), it received no specific promises as to the stabilization of the legal
199
AES, ¶9.3.11; Duke Energy, ¶340; LG&E, ¶127; Saluka, ¶303; Total, ¶114.
200 Schreuer/Kriebaum, p.273; Duke Energy, ¶340; Tecmed, ¶154.
201 Duke Energy, ¶340; El Paso, ¶356; MTD, ¶114; Tecmed, ¶154; Ulysseas, ¶249.
202 Suez, ¶228.
203 Oostergetel, ¶224; Parkerings, ¶344.
204 Continental, ¶258; Total, ¶115.
205 CMS, ¶277; Enron Award, ¶261; Oostergetel, ¶224; Roussalis ¶317.
206 Vandevelde, footnote 283; El Paso, ¶368; Impregilo v. Argentina, ¶290; Parkerings, ¶332.
207 El Paso, ¶358; Impregilo v. Argentina, ¶291; Oostergetel, ¶224; Parkerings, ¶335-6; Saluka, ¶305; Total,
¶121.
208 Arif, , ¶532.
31
framework (2), and the retroactive inclusion of CACs was in accordance with municipal law
and international practice (3).
1. Cl im co ciou ly cquired i le gover ed by D gob h’ l w
119. The governing law of the sovereign bond contract is of significant importance when it comes
to the determination of their holders’ expectations. When the titles are issued under the
borrower state’s domestic law, the state is vested with the right to unilaterally alter their legal
regime.209
This is their key difference with securities governed under foreign laws, whose
terms are shielded against changes in domestic legislation.210
120. To put it otherwise, lenders under domestic law accept and expect that the law is “from time
to time”.211
An investor that subjects itself under domestic law intentionally undertakes the
risk of future legislative alterations.212
121. The aforementioned apply in the case at hand, as Claimant acquired titles issued under
Dagobah’s domestic law.213
Although foreign-law securities issued by Dagobah were also
available in the capital markets,214
Claimant preferred domestic-law titles, probably because
the latter are associated with higher returns due to their higher credit risk.215
122. In short, Claimant purposely undertook the risk of legislative alterations in the name of
profitability, and should bear the consequences of this business undertaking.
123. Therefore, the titles’ governing law made it unquestionable that Respondent could legislate
upon them, especially in favor of its public interests. It is preposterous to allege that the
titles’ legal regime should have remained unaltered, frozen in time and immune to change.
Claimant was never promised that its titles would remain untouched, forever entrapped in a
legal vacuum.
209
NYC Bar Association, p.2.
210 Clare/Schmidlin, p.9.
211 Allen & Overy, p.31.
212 Muchlinski, p.551.
213 UF, ¶20.
214 UF, ¶19.
215 Clare & Schmidlin, p.5.
32
2. Respondent never warrantied the immutability of its legal framework
124. It is commonly accepted in jurisprudence that only specific guarantees directed to specific
investors generate legitimate expectations.216
Absent the undertaking of an explicit legal
obligation by the host-state through contracts, concessions, or stabilization clauses, the
investors cannot claim to have expectations that the state’s legal order will remain
unchanged.217
125. Here, such guarantees were never granted to Claimant. Respondent never made any specific
commitments directly to Claimant through a contract or by any other means regarding the
stability of its legal environment.218
The titles did not incorporate any stabilization clause,
which would prevent the application of any legislation with adverse effects.219
The Corellia -
Dagobah BIT cannot be perceived as a specific guarantee, since it was not directly addressed
towards Claiman. To use the words of the Micula Tribunal, FET “is not an unqualified
guarantee that regulations will never change.”220
126. Moreover, the Tribunal should dismiss Claimant’s predictable assertion that the political
statements by the Dagobah Government constituted warranties of any kind. The Government
did not guarantee the non-implementation of a second SDR, but merely expressed its
political vision to restore Dagobah’s economy and financial sector.221
As also noted by the
Continental Tribunal, it is an unfortunate, and yet inescapable, reality that political
statements will never constitute binding and official guarantees.222
127. In sum, no investor can rely on the FET standard and demand the standstill of the legal and
business universe.223
In lack of specific contractual promises and guarantees for the
216
Azurix, ¶318; Bosh, ¶212; Continental Award, ¶¶260-1; El Paso, ¶376; LG&E, ¶133; Oostergetel, ¶236;
Total, ¶¶119, 309(e); Ulysseas, ¶249.
217 Total, ¶117.
218 PO3, ¶32.
219 Diehl, p.258; Impregilo v. Argentina, ¶290; LG&E, ¶98; Parkerings, ¶322.
220 Micula, ¶529.
221 PO2, ¶18.
222 Continental Award, ¶261.
223 El Paso, ¶368.
33
inducement of the foreign investors,224
the Tribunal should reject Claimant’s submissions as
manifestly unfounded.
3. The imposition of CACs was not an unforeseeable regulatory change
128. Respondent submits that it did perturb the predictability of the titles’ framework, as the
inclusion of CACs and their non-genuinely retroactive implementation was not an
unforeseeable legislative alteration. Claimant, as a sophisticated hedge fund, is deemed to be
familiar with the financial markets’ trends and with the environment it chooses for its
transactions, and not so easily be taken aback.
129. First, Claimant should not pretend to be surprised with the inclusion of CACs. The
international practice reaffirms that CACs are included in the majority of sovereign bonds
around the globe. Almost 99% of the aggregate value of New York-law bonds issued after
January 2005, including Argentina’s 2005 and 2010 bonds, contain CACs.225
Furthermore,
the European authorities made the inclusion of CACs mandatory for all bonds issued by the
EU area member-states from June 2013.226
Also, CACs are commonplace in corporate
bonds.227
Therefore, it is rational that Respondent would follow the international practice and
include CACs in its legal system.
130. Second, Claimant could foresee the SRA’s retroactivity. The fact that the SRA was
preemptively deemed constitutional indicates that retroactivity is compatible with Dagobah’s
Constitution.228
In our case, the SRA was not even genuinely retroactive, otherwise it would
demand for a return of the already paid interest payments from the date of issuance.
Contrary, the SRA simply permitted for a modification of the titles terms for the future.229
224
Glamis, ¶766.
225 NML, p.27.
226 Billington, p.399.
227 Hofmann, p.394. .
228 PO2, ¶22.
229 UF, ¶17.
34
131. After all, Greece has already adopted identical measures in order to restructure its sovereign
debt, only months before the Respondent’s SDR.230
Taking into consideration that Greece
introduced an identical aggregate CACs mechanism that strongly resembles cram-down
procedures in domestic bankruptcy law systems,231
and that most domestic insolvency laws
worldwide apply retroactively to existing legal relationships,232
the retroactive application of
CACs was not erratic, and, thus, not unpredictable.
132. For the reasons above, Claimant’s argumentation as to the law’s unpredictability is void. The
imposition of CACs is anything-but-unforeseeable for Claimant, a connoisseur of
international legal and financial practice.
C. Re po de did o force he i le ’ exch ge
133. Claimant’s allegations that Respondent’s measures were coercive are patently unfounded.
The cases in which the Tribunals found a violation of the FET standard due to the state’s
coercive conduct, involved extreme levels of state aggression and malice. Respondent did
not employ any explicit “threats”, as was the case in Pope & Talbot,233
nor did it apply
“armed interference”, as was the case in Desert Line,234
in order to compel the creditors to
participate in the SDR.
134. Not only did Respondent not exercise compulsion, but it also managed to implement the less
coercive SDR possible. Indeed, other states have adopted various measures in order to
frighten or deter their private creditors to participate in their SDR, such as exit consents and
asset immunization.235
Unlike Argentina, which enacted a law that preemptively prohibited
any payments for the holdouts,236
Respondent did not employ duress in order to achieve
creditor participation in the SDR.
230
Metallinos, p.22.
231 Yanying, p.12.
232 UNCITRAL Insolvency Guide, p.135.
233 Pope & Talbot, ¶181.
234 Desert Line, ¶179.
235 Buchheit/Daly II, p.17-21.
236 Buchheit/Daly II, p.17.
35
135. In terms of debtor coerciveness, Dagobah’s SDR would rank even lower than the 2012
Greek SDR, which is deemed one of the less coercive restructurings in record. The mere
reason Greece was accused of debtor coerciveness is the menacing political statement by its
Minister of Finance, explicitly stating that holdouts would not be paid at all.237
In our case,
even such informal threats were absent.
136. Even more, it was not even Respondent’s acts that eventually led to the titles’ exchange.
Respondent’s sole contribution was the enactment of a law,238
which did not cause any
losses to its private creditors, but rather allowed them to decide for their titles’ future based
on their own interests and free will. The action that actually led to the titles’ exchange was
the voluntary acceptance of the “Bondholders” (as defined under the SRA),239
which
constitutes a usual commercial action of an ordinary contractual party. Thus, as also noted by
Professor Crawford, an act that was conducted in absence of the exercise of governmental
authority cannot be attributed to the state and give rise to a treaty violation.240
137. In sum, the act that directly led to the haircut was a voluntary decision exclusively attributed
to private parties. The grand participation in the SDR was not a result of coercive pressure,
but of reasonable persuasion and justification by Respondent.
D. Re po de ’ me ure were re o ble d propor io e o he pur ued im
138. Claimant alleges a violation of the FET standard due to Respondent’s unreasonable
measures. However, in international jurisprudence, the non-impairment differs from the FET
standard, albeit being closely associated to it.241
Should this Tribunal examine the standard
under the prism of FET, Respondent contends that its measures were entirely reasonable,
merely aiming at the protection of a “supreme public interest”.242
237
Zettelmeyer/Trebesch/Gulati, p.27.
238 UF, ¶17.
239 UF, ¶19.
240 Crawford (2013), p.129.
241 CMS Award, ¶290; Roussalis, ¶324.
242 SRA, Art. 2(10).
36
139. State measures are deemed reasonable when they bear a rational and proportionate
connection to a justifiable policy.243
The tribunals should respect the Government’s
consideration concerning the best policy in order to tackle unfolding crises.244
Specifically,
the Tribunal in AES held that a state is entitled to pass legislation affecting the investors’
contractual rights in the name of its public interests.245
140. Respondent’s SDR was a rational measure, completely correspondent to Dagobah’s public
interest of healing its wounded economy. In 2011, Dagobah descended into an insolvency
crisis246
and its 124% net debt-to-GDP ratio247
ranked amongst the five gravest worldwide.248
The high levels of inflation and unemployment led to social outbursts, as riots and
demonstrations swarmed the capital and cities of Dagobah.249
Respondent’s only options
were defaulting or restructuring.250
Rationally, Respondent opted for the latter.
141. Apart from the decision of the SDR, its way of implementation was also characterized by
prudence and proportionality. Respondent adopted a CACs mechanism, which is
characterized as the most voluntary approach to achieve an orderly SDR.251
142. Furthermore, Respondent’s the drafting of the SRA and the exchange offer were made in
full compliance with IMF’s instructions,252
and resulted to a petty reduction of the titles’s
NPV by only 30%,253
while the country’s debt was estimated at more than USD $400
billion.254
143. In addition, Respondent submits that it treated all private creditors equally. Claimant was by
no means exposed to sectional or racial prejudice and its assets were not specifically aimed
243
Roussalis, ¶324; Saluka, ¶460.
244 Enron Award, ¶281.
245 AES, ¶10.3.13.
246 Appendix 4.
247 PO3, ¶37.
248 Economy Watch.
249 PO3, ¶38.
250 PO2, ¶20.
251 Gray, p.695.
252 UF, ¶18; PO2, ¶21.
253 UF, ¶18.
254 UF, ¶15.
37
with such intention. The SRA applied to all titles governed by Dagobah’s law, regardless of
their holders’ nationality or any other criterion.255
144. Moreover, the exchange offer granted the same chances and treatment to all creditors, even
those owning titles governed by foreign laws.256
Finally, the SDR was not only limited to the
private sector, as the creditor states also consented to write off a part of Respondent’s official
outstanding debt.257
145. Admittedly, Respondent chose to act as balanced as possible and adopted suitable measures,
succinctly proportional to the pursued objectives and the private investors’ interests.
Unreasonable would solely be Respondent’s inertia to rapidly encounter its debt
unsustainability, impairing the interests of its citizens, of its creditors, and of the global
economy.
E. Respondent acted as a good faith debtor
146. Numerous tribunals have recognized the importance of good faith, when pronouncing upon
the finding of a violation of the FET standard.258
The principle of good faith is associated
with the obligation of the state to provide procedural fairness and engage in fair business
dealing with the foreign investors.259
147. As a matter of fact, Respondent acted bona fide, even though that did not ease its position.
148. To elaborate, the SRA was enacted in a fully transparent manner, and in accordance with
Dagobah’s law. Respondent perpetually informed its creditors on the drafting of the SRA, by
posting relevant details on official agencies’ websites accessible to them.260
Shortly after the
activation of the SRA, Respondent prompted for a preemptive constitutional review,261
in
255
UF, ¶17.
256 UF, ¶19.
257 PO2, ¶19.
258 Abaclat, ¶648(ii); Roussalis, ¶314; Rumeli, ¶583; Saluka, ¶307; Tecmed, ¶153; Total, ¶111.
259 Genin, ¶371; Burke-White/Staden, p.379.
260 PO2, ¶21; PO3, ¶34.
261 PO2, ¶22.
38
order to ensure that its provisions were fair, legitimate and proportionate to the creditors’
interests.
149. Post-SRA, Respondent left a waiting period of five months until announcing the respective
exchange offer, and three months for its acceptance.262
The offer was not unilaterally drafted,
as Respondent took into consideration the consultations by a representative portion of the
titles’ owners.263
Although invited to be heard, Claimant never participated in the negotiating
procedures.264
150. Moreover, Respondent provided to its creditors a package-deal that totally corresponded to
their interests. With the SRA, Respondent added value recovery rights to the new titles by
linking their return with Dagobah’s GDP.265
Such rights are highly beneficial, since a
potential increase to the issuer’s GDP leads to higher yields.266
151. Additionally, Respondent changed the governing law of the new titles to Yavinian.267
Changing the governing law from domestic to foreign weakens the titles’ management by
the issuing state, but at the same time it shields the creditors’ securities against any future
legislative alteration.268
Finally, competent for any dispute arising out of the new titles will
be the Yavinian courts, a more neutral forum in a country generally preferred for financial
transactions.269
152. It thus becomes apparent that Respondent engaged in good debtor conduct. Not only did
Respondent not exploit its position of power, but also chose to make the restructuring a more
bearable process for all parties involved. Such commendable conduct is in full compliance
with the respective IMF and UNCTAD Principles,270
and the recent UN Resolution
regarding SDRs.271
262
UF, ¶¶17-9.
263 PO2, ¶21.
264 PO3, ¶35.
265 SRA, Art.1(1)(e).
266 Buchheit & Daly I, p.10-1.
267 UF, ¶20.
268 Buchheit/Daly I, p.8.
269 UF, ¶20.
270 IMF (2002); UNCTAD, Principles on Promoting Responsible Sovereign Lending and Borrowing.
271 UN GA resolution 68/304.
39
V. RESP NDENT’S ACTI NS ARE, IN ANY EVENT, JUSTIFIED UNDER
ARTICLE 6(2) OF THE CORELLIA-DAGOBAH BIT
153. It is Respondent's final submission that it is, in any case, entitled to rely on the exception
clause of the BIT, which grants it the right to apply measures necessary to protect its
essential security interests.
154. Art.6(2) constitutes an exception clause and thus excludes any breach of the substantial BIT
obligations.272
Due to the ambiguity of its text, the Tribunal should seek for any “relevant
rules of international law”,273
in order to discern the provision’s ordinary meaning.
According to Professor Villiger, two rules are relevant when their subject matter is
similar.274
155. In terms of relevance, Art.6 reflects the subject matter of XX-XXI GATT more consistently
than of Art.25 ILC.275
XX-XXI GATT constitute universally recognized model provisions
and have been incorporated in many Treaties, such as NAFTA and TFEU.276
In fact, Art.6
BIT is almost a replica of the first part of Art.XXI GATT, which provides that:
“Nothing in this Agreement shall be construed:
(a) to require any contracting party to furnish any information the disclosure
of which it considers contrary to its essential security interests; or
(b) to prevent any contracting party from taking any action which it considers
necessary for the protection of its essential security interests.”
156. On the other hand, Art.6 BIT reads as follows:
“Nothing in this Treaty shall be construed:
1. to require a Party to furnish or allow access to any information the
disclosure of which it determines to be contrary to its essential security
interests; or
2. to preclude a Party from applying measures that are necessary for the
fulfillment of its obligations with respect to the maintenance or restoration of
international peace or security, or the protection of its own essential security
interests.”
272
Bjorklund, p.495; CMS Annulment, ¶129; Continental Award, ¶164; Sempra Annulment, ¶115.
273 VCLT, Art. 31(3)(c).
274 Villiger, p.433.
275 2001 ILC Responsibility Articles, Art.25.
276 NAFTA, Art.2102; TFEU, Art.346.
40
157. Evidently, Art.6 BIT reproduces the wording of the U.S. FCN treaties, and so do the
provisions of GATT.277
They both constitute primary rules and provide for exceptions from
particular obligations within the framework of the Treaty they are contained.278
Moreover,
Corellia and Dagobah accept and respect the GATT provisions and goals, being both WTO
members.279
158. Therefore, the Tribunal should follow the syllogism in Continental, which interpreted the
BIT’s emergency clause under the light of the GATT provisions.280
Claimant invites the
Tribunal to find that Respondent was protecting its essential security interests (A), by
applying necessary measures (B). Finally, Respondent did not contribute to its economic
meltdown (C).
A. Re po de ’ eco omic bre dow co i u ed e e i l ecuri y i ere
159. Respondent adopted the SDR measures aiming to protect its own essential security interests.
To this end, it is Respondent firm standing that this Tribunal must not follow an unduly
formalistic approach; it must rather recognize the Government’s margin of appreciation
regarding the characterization of its “own” state interests as essential, especially in times of
crises.281
It does not fall within the Tribunal’s mandate to examine the necessity of the state’s
objective, but solely its legitimacy.282
160. Numerous tribunals, which interpreted similar clauses, held that the essential security
interests do not solely refer to situations in connection with armed conflict, but also to
circumstances of economic emergency.283
Taking for example the case of Argentina, an
277
Continental Award, ¶192.
278 Continental Award, ¶167; Sempra Annulment, ¶115.
279 PO2, ¶7.
280 Continental Award, ¶192.
281 Sornarajah (2010), p.463; Continental Award, ¶181.
282 Mitchell/Henckels, p.146.
283 CMS Award, ¶354; Continental Award, ¶175; Enron Award, ¶332; Impregilo v. Argentina, ¶346; LG&E,
¶237; Sempra Award, ¶374; Total, ¶223.
41
economic crisis does not merely affect the state’s balance sheet, but also leads to social
turbulence and chaos.284
161. Unfortunately, Dagobah was at the edge of a cliff. This was officially reaffirmed by the
IMF’s report, which found that the US$400 billion debt was unsustainable.285
Its 124% debt-
to-GDP286
ranked among the highest worldwide in 2011.287
Dagobah’s inflation reached
extremely high levels and its unemployment rates increased up to 10.9%.288
Had Respondent
continued servicing its debts, it would seriously impair its social services289
and would
completely undermine its citizens’ living standards. Inevitably, the 2008 riots and
dismissals290
would proliferate, ending up in social chaos.
162. After all, as acknowledged in Continental, Respondent need not prove that it had already
experienced a “total collapse”, as there is no point in invoking an emergency clause, “if there
is nothing left to protect”.291
163. Undeniably, Dagobah’s social and economic crisis reached their apex. The erroneous
premise that Respondent’s necessary measures did not serve an essential purpose follows an
untenable line of reasoning, as it neglects the influence economy has upon every aspect of
everyday life.
B. Re po de ’ me ure were necessary
164. Respondent submits that the adopted measures need to be “necessary” in order to be justified
under Art.6 BIT. Following the findings in Continental, the word “necessary”, in lack of a
specific Treaty definition, should be interpreted in light of WTO case law.292
In particular,
284
Continental Award, ¶180.
285 UF, ¶15.
286 UF, ¶15; PO3, ¶37.
287 Economy Watch.
288 PO3, ¶38
289 PO2, ¶20.
290 PO3, ¶38.
291 Continental Award, ¶180.
292 Continental Award, ¶192.
42
the determination of a measure as necessary is based on a weighing of factors, and does not
require the measure to be “indispensable”.293
165. In our case, the adopted measures were indeed “necessary”, as they were apt to, and
eventually did contribute to the realization of the ends pursued (1); and the least restrictive
among other available alternatives (2).
1. Re po de ’ me ure direc ly d effec ively ddre ed i deb u u i bili y
166. A measure that is apt to protect the state’s essential security interests satisfies the necessity
under Art.6 BIT.294
Even if the thrust is on the achievement of a “material or decisive
contribution” to the pursued end,295
it is submitted that the measures at hand were, again,
“necessary”.
167. Admittedly, a timely SDR is crucial both for the state and its creditors.296
This was further
confirmed by the IMF, which instructed that the reduction of the outstanding debt was the
most appropriate measure to effectively overcome the crisis.297
168. Moreover, the inclusion of CACs in the titles is the most prevalent way for achieving a swift
and orderly SDR, as it resolves the problem of collective action, also known as game theory.
298 As expressed by Professor Olson, when the members of a large group attempt to
maximize their individual prosperity, they will not seek to act in favor of common goals,
unless they are forced or incentivized to do so.299
169. In casu, without the use of CACs, each holder of security entitlements would abstain from
the SDR. Every single creditor would decline Respondent’s offer opting for receiving full
repayment, knowing that its rejection would have little effect on the outcome of the SDR,
293
Brazil-Tyres, ¶150; Korea-Beef, ¶161; US-Gambling, ¶305-6.
294 Continental Annulment, ¶137; Brazil-Tyres, ¶150.
295 Continental Award, ¶196; Korea-Beef, ¶163; US-Gambling, ¶306.
296 IMF (2013), p.20.
297 UF, ¶15-6.
298 Metallinos, p.21.
299 Olson, p.2.
43
and hoping that the supermajority would accept the offer in order to guarantee the avoidance
of Dagobah’s default.
170. In order to avoid this type of free-riding behavior, Respondent adopted a solution that
involved both approaches of game theory. First, Respondent legislatively introduced CACs,
which provided that, in case the creditors’ supermajority agreed to participate in the SDR,
their decision would bind the holdout minority. Second, as mentioned above, Respondent
provided incentives for creditor participation, by linking the titles’ return with Dagobah’s
GDP, and changing the titles’ governing law and dispute resolution forum.
171. Finally, not only did Respondent achieve the minimization of its debt obligations, but it also
succeeded in fulfilling the prerequisites for receiving a US$150 billion bailout package from
the IMF.300
With this generous support, Respondent could restore its external viability and
debt sustainability.
172. Therefore, Respondent submits that its SDR was not only an apt measure, but also the most
effective for the achievement of its pursued goal, namely Dagobah’s economic
restabilization.
2. No reasonable alternatives were available to Respondent at the time the challenged
measures were taken
173. It is rational that a state’s measures cannot be considered “necessary” in case alternative
means were reasonably available for the confrontation of its emergency.301
Moreover, it is a
bright line rule that only if the alternative measures did not impose an undue burden on the
state,302
and were equally effective with the undertaken,303
would the latter fail to be justified
under the exception clause.304
300
UF, ¶16.
301 Continental Award, ¶195; Brazil-Tyres, ¶156; US-Gambling, ¶5.26.
302 Continental Award, ¶195.
303 US-Gambling, ¶308.
304 Mitchell/Henckels, p.100.
44
174. Respondent invites the Tribunal not to content itself to the mere existence of alternative
measures, but rather assess whether they truly were available to the state, given the pressure
of the circumstances. It is natural that, when a state faces a harrowing emergency, there is no
room for examining each and every possible option of confrontation. On the other hand, the
Tribunal scrutinizes the available alternatives soberly and retrospectively,305
without being
into the state’s shoes at the critical moment it took the decision.
175. In the present case, there is no doubt that Respondent embraced the only effective means
available for the protection of its own essential interests and the interests of its creditors. Any
other alternative would devastate, rather than reinstate, the critical situation.
176. The alleged alternative scenario of debt default306
would be unduly burdensome for
Respondent. Indeed, sovereign defaults lead to high reputational costs, trade exclusion costs,
banking crises, and political costs.307
It would also be catastrophic for the creditors’ interests,
as Respondent would be completely incapable of continuing servicing its debts.
177. Moreover, Respondent could by no means implement a SDR in a different, yet equally
effective manner. Had Respondent required the consent of every private creditor for the
SDR, it would have entered into a deadlock. In absence of CACs, every creditor would be
capable of blocking the restructuring, by initiating legal action before the conclusion of the
negotiations between the state and the remaining creditors.308
Such consensual approach
would be unbearably time-consuming, causing additional costs to the issuing state.309
178. The aforementioned alternative scenarios would be incapable of responding to the gravity
and imminence of the situation. This evinces that Respondent’s SDR was uniquely effective,
in that it created a steady equilibrium, which satisfied both Respondent’s needs and its
lenders’ interests.
305
Kent/Harrington p.253; Continental Award, ¶181.
306 PO2, ¶20.
307 Borensztein/Panizza, p.5.
308 Billington, p.400.
309 Das/Papaioannou/Trebesch, p.65
45
C. Respondent did not contribute to its economic meltdown
179. It is a bona fide assumption that the characterization of measures as “necessary” cannot stand
if the state itself has contributed to the endangering of its essential interests.310
However, the
state’s contribution must be substantial311
and not a mere involvement in its own fiscal
policy.
180. Respondent submits that, not only did it not contribute to its crisis, but it also paid serious
efforts at an earlier time in order to prevent it. After the 2001 default, Respondent adopted
several measures to shield its economy. The Government implemented many austerity
measures, such as diminishing investments in infrastructure,312
in order to reduce public
spending and stimulate revenue generation.313
Nevertheless, none of the above measures was
adequate enough.
181. What is more, Respondent should by no means be held liable for the escalation of its crisis,
as for over a decade it has been devotedly complying with the IMF’s instructions. The IMF
kept supporting the implementation of its instructions by Respondent, even after they proved
far from flawless.314
In a similar case, the Continental Tribunal recognized that Argentina
did not contribute to the deterioration of its financial crisis, as its economic policies were
strongly encouraged by the IMF.315
182. In reality, Dagobah’s economic meltdown is in its entirety attributed to exogenous factors.
Incontestably, the 2011 recession that hit Dagobah was an outcome of the 2008 financial
crisis that affected many nations.316
Dagobah’s economic stability was further deteriorated
by a sudden increase in the price of oil after 2001.317
Claimant’s possible allegations that
Respondent is the only responsible for its crisis are ungrounded and ignore main contributing
factors worldwide.
310
Continental Award, ¶234; LG&E, ¶256.
311 CMS Award, ¶328; Enron Award, ¶312; Sempra Award, ¶354.
312 PO2, ¶20.
313 Appendix 4.
314 UF, ¶¶5, 15-6; Appendix 4.
315 Continental Award, ¶224.
316 UF, ¶14.
317 Appendix 4.
46
In any case, Claimant is burdened to prove such contribution, as Respondent cannot prove a
negative.318
In fact, Claimants must grapple with the fact that a specific and substantial
contribution to the crisis must be proven. Be that as it may, Respondent invites this Tribunal
to consider that not every macroeconomic handling amounts to a catastrophic contribution.
EPILOGUE
183. Time has come to examine Claimant’s moves holistically and call a spade a spade. Claimant
is a hedge fund with a plan. It carefully synthesized its case of commercial frustration so that
this Tribunal has jurisdiction upon it, neglected to appear before Respondent’s domestic
courts, and disguised its compensation claim under the veil of the FET standard. However,
efforts for business speculation should not be tolerated, and especially when they meddle
with the policy of a state in despair.
184. No one can dispute Respondent’s cul-de-sac, and even an effort towards this direction would
end up in vain. The Federal Republic of Dagobah is a state whose concern is not merely its
public budget, but also its political, social, and ethical stability, for the benefit of its people.
Avoidance of the crisis’ contagious effects and the economy’s restabilization were, by any
means, not a distant dream, but a pressing necessity and fundamental obligation.
185. Global and national financial stability should not hide in the shadow of profiteering
corporate practices. This Tribunal is respectfully invited to discard Claimant’s efforts of
unfairly benefiting on the shoulders of an entire nation.
318
LG&E, ¶256.
47
PRAYER FOR RELIEF
186. Respondent respectfully requests the Tribunal to find that:
(1) the Tribunal lacks jurisdiction over the submitted claims; and,
(2) that in any event, the submitted claims are inadmissible.
187. Alternatively, should the Tribunal assert jurisdiction over the claims, and find them
admissible, it should:
(3) dismiss each and every claim submitted by Claimant in their entirety, and;
(4) order Claimant to reimburse Respondent for all costs of these arbitration proceedings.
Respectfully Submitted on 20 September 2014
by
Team DILLARD
on Behalf of Respondent
THE GOVERNMENT OF THE FEDERAL REPUBLIC OF DAGOBAH