i
TEAM JESSUP
INTERNATIONAL CHAMBER OF COMMERCE
PETER EXPLOSIVE
Claimant
v.
THE REPUBLIC OF OCEANIA
Respondent
MEMORIAL FOR RESPONDENT
Case No. 28000/AC
TABLE OF CONTENTS
TABLE OF CONTENTS ..........................................................................................................I
INDEX OF ABBREVIATIONS ............................................................................................III
INDEX OF AUTHORITIES .................................................................................................. V
INDEX OF ARBITRAL AWARDS.................................................................................... VII
INDEX OF CASES.................................................................................................................. X
INDEX OF LEGAL SOURCES............................................................................................ XI
STATEMENT OF FACTS ...................................................................................................... 1
SUMMARY OF ARGUMENT ............................................................................................... 3
ARGUMENT ON JURISDICTION ....................................................................................... 4
I. PARTIES DID NOT CONSENT TO ARBITRATION AS CLAIMANT ATTEMPTED
TO ACCEPT RESPONDENT’S OFFER TO ARBITRATE ON DIFFERENT TERMS 4
A. THIS TRIBUNAL LACKS JURISDICTION RATIONE PERSONAE............................................... 4
a. Claimant does not hold the nationality of Euroasia under its laws........................... 5
b. Claimant’s nationality of Euroasia is ineffective and thus does not bound this
Tribunal ............................................................................................................................... 5
B. RESPONDENT DID NOT OFFER TO ARBITRATE DISPUTE ARISING OUT OF ILLEGAL
INVESTMENTS........................................................................................................................... 7
a. Claimant was required to make an investment in accordance with the law.............. 7
b. Claimant's investment breached the 'clean hands' standard ..................................... 8
C. CLAIMANT DID NOT FULFILL CONDITIONS REQUIRED BY RESPONDENT’S OFFER TO
ARBITRATE ............................................................................................................................... 9
a. Respondent conditioned its consent on the investor’s satisfaction of consultation
and litigation requirements................................................................................................ 10
i. Consent may be conditioned on the fulfillment of pre-arbitral steps .................. 10
ii. Conditional consent stems from the language of Euroasia BIT .......................... 11
iii. Claimant’s actions cannot affect consent expressed by states ............................ 12
b. Claimant failed to fulfill preconditions necessary for this Tribunal’s jurisdiction . 13
c. In any case, claimant cannot be relieved from pre-arbitral requirements ................. 14
II. DEFECTS IN CONSENT CANNOT BE CURED BY AN MFN CLAUSE ................ 16
A. AN MFN CLAUSE CANNOT BE APPLIED TO CURE THE LACK OF CONSENT TO ARBITRATE
16
a. The MFN clause in Art. 3(1) Euroasia BIT does not cover Drafting Parties’
intention to arbitration....................................................................................................... 16
b. No purpose-oriented interpretation of Euroasia BIT can create this tribunal’s
jurisdiction ......................................................................................................................... 18
B. ALTERNATIVELY, THE SPECIFIC MFN CLAUSE FROM ART. 3(1) EUROASIA BIT CANNOT
EXTEND TO JURISDICTIONAL AGREEMENTS ............................................................................ 18
SUMMARY............................................................................................................................. 20
ii
ARGUMENT ON MERITS .................................................................................................. 21
III. RESPONDENT IS NOT IN BREACH OF ART. 4.1 EUROASIA BIT ..................... 21
A. EXECUTIVE ORDER FALLS UNDER THE SCOPE OF ART. 10 EUROASIA BIT.................... 21
B. ALTERNATIVELY, CLAIMANT’S INVESTMENT WAS NOT EXPROPRIATED INDIRECTLY ... 22
IV. CLAIMANT CONTRIBUTED TO DAMAGE SUFFERED....................................... 23
A. CLAIMANT CONTRIBUTED TO DAMAGE SUFFERED UNDER ARTICLE 39 ILC ARTICLES ON
RESPONSIBILITY OF STATES ................................................................................................... 23
a. Claimant contributed to damage by willful acts ...................................................... 23
b. Claimant contributed to damage by negligent business conduct ............................ 25
B. CLAIMANT IS NOT ENTITLED TO ANY COMPENSATION FOR HIS INVESTMENT ................ 26
SUMMARY............................................................................................................................. 27
PRAYER FOR RELIEF ........................................................................................................ 28
iii
INDEX OF ABBREVIATIONS
ARA
Answer to Request for Arbitration
Art.
Article
BIT/BITs
Bilateral Investment Treaty(ies)
Drafting/ Treaty Parties
Oceania and Euroasia
Eastasia BIT Agreement between the Republic of Oceania
and the Republic of Eastasia for the Promotion
and Reciprocal Protection of Investments,
January 1, 1995
e. g.
exempli gratia (for example)
Euroasia BIT Agreement between the Republic of Oceania
and the Republic of Euroasia for the Promotion
and Reciprocal Protection of Investments,
January 1, 1992
Executive Order, EO Executive Order of 1 May 2014 on Blocking
Property of Persons Contributing to the
Situation in the Republic of Eastasia
ICC
International Chamber of Commerce
ICC Rules Rules of Arbitration of the International
Chamber of Commerce
ICSID
i.a.
International Centre for Settlement of
Investment Disputes
inter alia
i.e.
id est (that is)
MFN Clause
Most Favored-Nation Clause
para., paras.
paragraph, paragraphs
Parties
Claimant and Respondent
iv
PO 2
PO 3
p./pp.
RA
Rocket Bombs
Procedural Order 2
Procedural Order 3
page(s)
Request for Arbitration
Rocket Bombs Ltd
Supra
Uncontested facts
Above
Set of uncontested facts established by this
Tribunal in Procedural Order 1
UNCITRAL United Nation Commission on International
Trade Law
U.N.T.S.
United Nations Treaty Series
VCLT
Vienna Convention on the Law of Treaties
Vol.
Volume
v.
Versus
v
INDEX OF AUTHORITIES
ABBREVATION FULL CITATION REFERENCE
I. Brownlie Ian Brownlie, “Principles of Public
International Law”, Oxford University
Press, 2003
Para. 30
W. Burke-White and A.
Staden
William W. Burke-White and Andreas
von Staden, “Investment Protection in
Extraordinary Times: The
Interpretation and Application of Non-
Precluded Measures Provisions in
Bilateral Investment Treaties”, 2008
Paras. 121, 122
Crawford/ Lee/
Lauterpacht
James Crawford, Karen Lee, Elihu
Lauterpacht, ICSID Reports, Vol. 9,
Cambridge University Press 2006
Para. 142
Dolzer/ Scheuer Rudolf Dolzer and Christoph
Schreuer, “Principles of International
Investment Law”, Oxford University
Press, 2008
Para. 126
Z. Douglas Zachary Douglas, “The International
Law of Investment Claims”,
Cambridge University Press, 2009
Paras. 20, 66
K. Hailbronner Kay Hailbronner, “Nationality in
Public International Law and
European Law” in Rainer Bauböck,
Eva Ersboll, Kees Groenendijk and
Haral Waldrauch (eds.), “Acquisition
and Loss of Nationality: Policies and
Trends in 15 European Countries”,
Amsterdam University Press, 2005
Para. 32
C. Miles Cameron A. Miles, “Corruption,
Jurisdiction and Admissibility in
International Investment Claims”,
Journal of International Oxford
University Press reference: IC-JA 076
(2012) Dispute Settlement, 3:2, 329–
36,2012
Paras. 39, 44
R. Moloo 2 Rahim Moloo, “A Comment on the
Clean Hands Doctrine in International
Law”, 2010, available at:
http://papers.ssrn.com/sol3/papers.cfm
?abstract_id=2358229
Para. 38
Jennings/ Watts Robert Jennings and Arthur Watts,
“Oppenheim's International Law:
Volume 1 Peace”, Oxford Public
International Law, 2008
Paras. 30, 31
J. Paulsson Jan Paulsson, “Jurisdiction and
Admissibility in Global Reflections on
International Law, Commerce and
Dispute Resolution”, ICC Publishing,
2005
Para. 64
vi
PCIJ, Acquisition of Polish
Nationality
Publication of the Permanent Court of
International Justice, “Acquisition of
Polish Nationality”, Advisory
Opinion, ser. B, No. 7, 1923
Para. 80
C. Schreuer Christoph Schreuer, Consent to
Arbitration, UNCTAD Course On
Dispute Settlement, International
Centre for The Settlement of
Investment Disputes
Para. 52
Sir Sinclair Sir Ian McTaggart Sinclair, The
Vienna Convention on the Law of
Treaties , Melland Schill monographs
in international law Remains,
Historical and Literary, Connected
with the Palatin The Melland Schill
lectures , Publisher Manchester
University Press, 1984
Para. 101
Sornajah Muthucumaraswamy Sornajah, “The
International Law on Foreign
Investment”, Third Edition,
Cambridge University Press, 2010
Para. 96
Thulasidhass P.R Thulasidhass, “Most-Favoured-
Nation Treatment in International
Investment Law: Ascertaining the
Limits through Interpretative
Principles”, Jawaharlal Nehru
University - Centre for International
Legal Studies (CILS), Amsterdam
Law Forum, Volume 7(1): 3-24, 2015
Para. 96
vii
INDEX OF ARBITRAL AWARDS
ABBREVATION FULL CITATION REFERENCE
Ambiente v. Argentina Ambiente Ufficio S.P.A. and Others
(case formerly known as Giordano
Alpi and Others ) v. The Argentine
Republic, ICSID Case no. arb/08/9,
Decision on Jurisdiction and
Admissibility (February 8, 2013)
Para. 81
Austrian Airlines v.
Slovakia
Austrian Airlines v. The Slovak
Republic, Final Award, UNCITRAL
Case (October, 9, 2009)
Para. 107
Dissent in Abaclat Abaclat and others (Case formerly
known as Giovanna A. Beccara and
Others) v. The Argentine Republic,
ICSID Case No. ARB/07/5,
Dissenting Opinion, Georges Abi-
Saab (August 4, 2011)
Paras. 64, 66
Berschader v. Russia Vladimir Berschader and Morse
Berschader v. The Russian Federation,
The Arbitration Institute of The
Stockholm Chamber of Commerce,
Case No. 080/2004, Award (April 21,
2006)
Para. 94
Burlington v. Ecuador Burlington Resources Inc. v. Republic
Of Ecuador Respondent, ICSID Case
No. Arb08/5, Decision on Jurisdiction
(June, 2 2010)
Paras. 52, 65, 74
Cayuga v. United States Cayuga Indians (Great Britain) v.
United States, Reports of International
Arbitral Awards, 22 January 1926
VOLUME VI pp. 173-190
Para. 59
Daimler v. Argentina Daimler Financial Services AG v. The
Argentine Republic ICSID Case No.
ARB/05/1, AWARD (August 22,
2012)
Paras. 52, 58, 65, 67,
102, 107, 108
Delagoa Bay Railway Delagoa Bay Railway case (Great
Britain/USA/Portugal), 29 March
1900
Para. 134
Fraport v. Philippines Fraport AG Frankfurt Airport Services
Worldwide v. The Republic of the
Philippines, ICSID Case No.
ARB/03/25, Award (August 16, 2007)
Para. 44
Generation Ukraine v.
Ukraine
Generation Ukraine, Inc. V. Ukraine,
Award, ICSID Case No. Arb/00/9
Para. 59
Hamester v. Ghana Gustav F W Hamester GmbH & Co
KG v. The Republic of Ghana, ICSID
Case No. ARB/07/24, Award (June
18, 2010)
Para. 40
viii
ICS v. Argentina ICS Inspection and Control Services
Limited (United Kingdom) v. The
Argentine Republic, Award On
Jurisdiction, PCA Case No. 2010-9
(February 10, 2012)
Para. 20, 52, 58, 79, 84,
94, 107
Impregilo v. Argentina Impregilo S.p.A. v. The Argentine
Republic, ICSID Case No.
ARB/07/17, Award (June 21, 2011)
Para. 52
Inceysa v. El Salvador Inceysa Vallisoletana S.L. v. Republic
of El Salvador, ICSID Case No.
ARB/03/26, Award (August 2, 2006)
Para. 44
Kilic v. Turkmenistan KiliçĬnşaat Ĭthalat Ĭhracat Sanayi Ve
Ticaret Anonim Şirketi v.
Turkmenistan, ICSID Case No.
ARB/10/1, Decision on Article VII.2
of the Turkey-Turkmenistan Bilateral
Investment Treaty (May 7, 2012)
Paras. 20, 52, 58
LG&E v Argentina LG&E Energy Corp., LG&E Capital
Corp., and LG&E International, Inc
.v. Argentine Republic, Decision on
Liability, Oct. 3 2006, ICSID Case
No. ARB/02/1
Para. 126
Mitchell v. Congo Mr. Patrick Mitchell v. Democratic
Republic of the Congo, ICSID Case
No. ARB/99/7, Award (February 9,
2004)
Para. 44
MTD v. Chile MTD Equity Sdn. Bhd. and MTD
Chile S.A. v. Republic of Chile,
ICSID Case No. ARB/01/7, Award
(May 25, 2004)
Para. 147
Murphy v. Ecuador Murphy Exploration and Production
Company International v. Republic Of
Ecuador, ICSID Case No. Arb/08/4,
Award On Jurisdiction, (December
15, 2010)
Paras. 52, 58, 65, 81, 84
Occidental Petroleum Occidental Petroleum Corporation and
Occidental Exploration and
Production Company v. The Republic
of Ecuador, ICSID Case No.
ARB/06/11, Award (October 5, 2012)
Para. 147
Philip Morris v. Uruguay Philip Morris Brands Sàrl, Philip
Morris Products S.A. and Abal
Hermanos S.A. v. Oriental Republic
Of Uruguay, ICSID Case No.
Arb/10/7, Decision On Jurisdiction
(July 2, 2013)
Paras. 58, 81, 83.
Phoenix Action, Ltd. v.
Czech Republic
Phoenix Action, Ltd. v. The Czech
Republic, ICSID Case No. ARB/06/5,
Award (April 15, 2009)
Para. 39
Plama v. Bulgaria Plama Consortium Limited v.
Republic of Bulgaria, ICSID Case No.
ARB/03/24, Decision on Jurisdiction
(February 8, 2005)
Para. 94
ix
Renta 4 v. Russia Renta 4 S.V.S.A., et al v. The Russian
Federation, Arbitration Institute of the
Stockholm Chamber of Commerce,
Arbitration V (02412007), Award on
Preliminary Objections (March 20,
2009)
Paras. 94, 95
Salini v. Morocco Salini Costruttori S.p.A v. Kingdom
of Morocco, ICSID Case No.
ARB/00/4, Decision on Jurisdiction
(July 23, 2001)
Para. 106
Siag v. Egypt Waguih Elie George Siag and
Clorinda Vecchi v. The Arab Republic
of Egypt, ICSID Case No.
ARB/05/15, Decision on Jurisdiction
and Partial Dissenting Opinion of
Professor Francisco Orrego Vicuña
(April 11, 2007)
Para. 32
Société Générale v. Dominican Republic
Societe Generale (In respect ofDR
Energy Holdings Limited and
Empresa Distribuidora de Electricidad
del Este, S. A.) v. The Dominican
Republic, UNCITRAL LCIA Case
No. UN 7927, Award onPreliminary
Objections to Jurisdiction (September
19, 2008)
Para. 96
Soufraki v. The United
Arab Emirates
Hussein Nuaman Soufraki v. The
United Arab Emirates, ICSID Case
No. ARB/02/7, Award, 7 July 2004
Paras. 25, 30
Tecmed v. Mexico Técnicas Medioambientales Tecmed,
S.A. v. The United Mexican, ICSID
Case No. ARB (AF)/00/2 Award,
(May 29, 2003)
Para. 96
Telenor v. Hungary Telenor Mobile Communications A.S.
v. The Republic of Hungary, ICSID
Case No. ARB/04/15, Award
(September 13, 2006)
Para. 102
Wintershall v. Argentina Wintershall Aktiengesellschaft v.
Argentine Republic, ICSID Case No.
ARB/04/14, Award (December 8,
2008 )
Paras. 20, 52, 58, 63,
64, 65, 82, 106
World Duty Free v. Kenya World Duty Free Company v
Republic of Kenya, ICSID Case No.
Arb/00/7, Award (October 4, 2006)
Para. 39
x
INDEX OF CASES
ABBREVATION FULL CITATION REFERENCE
Anglo-Iranian Oil case Anglo-Iranian Oil co. case (United
Kingdom v. Iran), Preliminary
Objection Judgment, ICJ, Reports of
Judgments, Advisory Opinions and
Orders (July 22, 1952)
Para. 106
Armed Activities case Armed Activities on the Territory of
Congo (New Application 2002)
(Democratic Republic of the Congo v.
Rwanda), Jurisdiction of the Court
and Admissibility of the Application,
Judgment, 2006 ICJ Reports
(February 3, 2006)
Paras. 65, 101
Factory at Chorzów Factory at Chorzów case (Germany v.
Poland), Judgment, PCIJ, Series A,
No. 9 (1927)
Para. 142
Georgia v. Russia Application of the International
Convention on the Elimination of all
Forms of Racial Discrimination
(Georgia v. Russia), Preliminary
Objections, Judgment (April 1, 2011)
Para. 66
Lotus case Lotus case, PCIJ, Series A, No. 10
(1927)
Paras. 20, 95
Nottebohm case Nottebohm case (Liechtenstein v.
Guatemala), 2nd phase, 1955 ICJ
Reports 4, Judgment (April 6, 1955)
Para. 31
Phosphates in Morocco Phosphates in Morocco (Italy v.
France), 1953 ICJ Reports, Judgment
(1938)
Para. 53
xi
INDEX OF LEGAL SOURCES
ABBREVATION FULL CITATION REFERENCE
Articles on Responsibility of
States
International Law Commission, Draft
Articles on Responsibility of States for
Internationally Wrongful Acts with
commentaries, in: Yearbook of the
International Law Commission, 2001,
vol. II, Part Two
Paras. 133, 154
Draft Articles on MFN
clauses
International Law Commission, Draft
Articles on most-favoured-nation
clauses with commentaries, in:
Yearbook of the International Law
Commission, 1978, vol. II, Part Two
Para. 106
United Nations Convention
against Corruption
United Nations Convention against
Corruption, New York, October 31,
2003, United Nations Treaty Series,
vol. 2349, p. 41; Doc. A/58/422
Paras. 38, 41
1
STATEMENT OF FACTS
Parties involved
1. Peter Explosive (“Claimant”) is a resident of Fairyland, who acquired shares in a
company located in Oceania - Rocket Bombs and who was subsequently involved in
affairs with corrupted Oceanian clerks.
2. Republic of Oceania (“Oceania”, “Respondent”) is a state against which CLAIMANT
brought his claims.
3. Other parties connected with the dispute are Republic of Euroasia (“Euroasia”) and
Republic of Eastasia (“Eastasia”). These states concluded BITs with Oceania. They
also disputed over Fairyland, a territory of Eastasia, annexed by Euroasia in March 2014
with the help of armed forces.
BIT agreements
4. On 1 January 1992 Euroasia and Oceania concluded the Agreement for the Promotion
and Reciprocal Protection of Investments (“Euroasia BIT”), which came into force on
23 October 1995. A similar agreement was concluded on 1 January 1992 between
Oceania and Eastasia (the Agreement for the Promotion and Reciprocal Protection of
Investments – “Eastasia BIT”) and came into force on 1 April 1993.
CLAIMANT’s actions
5. To begin production, Rocket Bombs had to adjust its produc tion line to the
requirements contained in the Environment Act 1996. For such a project significant
financial resources were necessary and CLAIMANT could not, in fact, have relied on any
public help.
6. Nonetheless in February 1998 CLAIMANT decided to acquire Rocket Bombs.
7. In July 1998, he had a private meeting with the President of the National Environment
Authority of Oceania.
8. In the very same month, the National Environment Authority issued an environmental
license approving the commencement of arms production by Rocket Bombs It did so
although Rocket Bombs’ production line did not comply with the requirements
contained in the Environment Act.
9. In the course of business, CLAIMANT developed profitable relations with the
Government of Euroasia. Euroasia has remained virtually the sole buyer of weapons
2
produced by CLAIMANT. This did not change even in November 2013 when it was clear
that Fairyland would be annexed by Euroasia, which would not be welcomed well by
Oceania. Most importantly, on 28 February 2014 CLAIMANT and Euroasia concluded
second contract for a supply of weapons.
Euroasian military intervention
10. On 1 March 2014, the armed forces of Euroasia entered the region of Fairyland, a
territory of Eastasia. On 28 March 2014, Eastasia declared annexation to be illegal.
11. The only reason why the annexation was bloodless was the peaceful approach of
Eastasia, which decided not to send troops to defend its own land.
Law passed by Oceania
12. Since Oceania had to fulfill its international obligations it reacted to the Fairyland's
annexation. On 1 May 2014 the President of Oceania issued the Executive Order on
Blocking Property of Persons Contributing to the Situation in the Republic of Eastasia
(“Executive Order”). It introduced sanctions blocking any transfer of possessions with
Euroasia. Executive Order’s goal was to hinder further military aggression of Euroasia,
which threatened international peace.
3
SUMMARY OF ARGUMENT
JURISDICTION
13. This Tribunal does not have jurisdiction to hear the present case.
14. Firstly, CLAIMANT is not an investor pursuant to Art. 1.2. Euroasia BIT. Even if this
Tribunal found otherwise, CLAIMANT did not to show any necessary genuine connection
between himself and Euroasia.
15. Secondly, CLAIMANT was required to make an investment in accordance with the law
but failed to comply with this requirement. Thus its investment is not protected.
16. Thirdly, Parties did not consent to arbitration as CLAIMANT did not fulfill the terms of
RESPONDENT’s offer. RESPONDENT conditioned its consent on the prior fulfilment of pre-
arbitral steps and CLAIMANT disregarded them. The potential futility of the court
proceedings has no significance because the result of proceedings does not affect the
mandatory character of pre-arbitral steps. Besides, CLAIMANT did not even try to initiate
litigation as required.
17. Finally, defects in consent cannot be cured by the application of the MFN clause
contained in Art. 3(1) Euroasia BIT. Art. 3(1) does not sufficiently demonstrate an
intention of Drafting Parties to extend the MFN clause to dispute settlement. Even under
lower standards, no such intention was and could have been shown.
MERITS
18. Executive Order implemented by RESPONDENT falls under the non-precluded measures
clause included in Art. 10 of Euroasia BIT. For this reason, Art. 4.1 regarding
expropriation cannot be applied to the consequences of Executive Order’s
implementation. Alternatively, even if Art. 10 of Euroasia BIT does not apply,
RESPONDENT did not expropriate CLAIMANT’s alleged investment. This is due to
temporary character of Executive Order.
19. CLAIMANT is not entitled to any compensation for his investment. This is because
CLAIMANT contributed to damage suffered by both willful act and negligent conduct. He
continued to supply weapon to Euroasia and failed to comply with basic law of
RESPONDENT. What is more, RESPONDENT’s actions were not illegal. Various
questionable acts of CLAIMANT constitute 100% contribution to loss suffered, therefore
he should not be awarded any damages.
4
ARGUMENT ON JURISDICTION
I. PARTIES DID NOT CONSENT TO ARBITRATION AS CLAIMANT
ATTEMPTED TO ACCEPT RESPONDENT’S OFFER TO ARBITRATE ON
DIFFERENT TERMS
20. Consent is a cornerstone of any arbitration1 and arbitration is a creature of consent2. The
agreement to arbitrate cannot be general and cannot be presumed.3 This is particularly
true for states which thereby give up a part of their sovereignty.4 In the investment
context, a host state makes an open offer to unidentified investors who may accept it as
made i.e. under its terms and conditions.5 Otherwise, no mutual consent is reached.
21. In the present case Parties did not reach an arbitration agreement. This is because
CLAIMANT failed to accept RESPONDENT’s offer under its conditions. Firstly, CLAIMANT
could not have accepted RESPONDENT’s offer as it was not an investor within the
meaning of Euroasia BIT [A.]. Secondly, RESPONDENT did not offer to arbitrate dispute
arising out of illegal investments [B.]. Finally, CLAIMANT failed to fulfill pre-arbitral
steps necessary for this Tribunal’s jurisdiction [C.].
A. THIS TRIBUNAL LACKS JURISDICTION RATIONE PERSONAE
22. This Tribunal lacks jurisdiction to decide the present case under Euroasia BIT as only
an investor in the meaning of Art. 1.2 of the treaty can be granted protection stemming
from the agreement. To be considered an investor under Euroasia BIT, CLAIMANT must
be a national of Euroasia. This condition is not met as CLAIMANT does not hold
Euroasian nationality as a matter of Euroasian law [a.]. However, even if this Tribunal
found to the contrary, in the absence of a genuine connection between CLAIMANT and
the state of Euroasia, the nationality claimed would have been ineffective [b.].
23. Therefore, this Tribunal cannot hear the present case.
1 Wintershall v. Argentina, para. 160.
2 Z. Douglas, para. 125, p. 74.
3 ICS v. Argentina, para. 280; Wintershall v. Argentina, para 160.
4 Lotus case, at p. 18.
5 Kilic v. Turkmenistan, para 6.2.1.; ICS v. Argentina, para 270.
5
a. CLAIMANT DOES NOT HOLD THE NATIONALITY OF EUROASIA UNDER ITS LAWS
24. As CLAIMANT’s nationality of Eastasia was effective, he could not acquire the
Euroasia’s citizenship lawfully. Therefore, CLAIMANT is not a Euroasian national for the
purpose of this Tribunal’s jurisdiction.
25. ‘[Domestic law] settles, by its own legislation, the rules relating to the acquisition (and
loss) of its nationality’6. Thus, loss of any nationality must be determined, in the first
place, pursuant to the law of the state in question. The same applies to the conditions of
the acquisition of the citizenship.
26. In order for CLAIMANT to renounce his Eastasian nationality, he must have fulfilled
some set conditions under the Eastasian Citizenship Law.7 In the first place, a
submission for such renunciation on the legally prescribed form is required.8 This
requirement has not been met as CLAIMANT sent merely an electronic e-mail declaring
the renunciation of the Eastasian citizenship. 9 Furthermore, such renunciation becomes
effective only upon the Eastasia’s President acknowledgement. 10 Therefore,
CLAIMANT’s mere declaration of his will to renounce the nationality has no legal effect
and, as a consequence, CLAIMANT retained the Eastasian citizenship.
27. In addition, pursuant to the Euroasia’s Citizenship Act, dual nationality is not allowed.11
Consequently, CLAIMANT, being still a Eastasian national, could not validly acquire the
Euroasian nationality. Recognition of CLAIMANT as a national of Euroasia was thus
unlawful and cannot have any legal consequences under international law.12
28. In light of the above, the alleged Euroasian nationality of CLAIMANT was unlawfully
recognized by the authorities of Euroasia. Hence, it cannot have any legal effect under
international law.
b. CLAIMANT’S NATIONALITY OF EUROASIA IS INEFFECTIVE AND THUS DOES NOT BOUND
THIS TRIBUNAL
29. In any case, this Tribunal is not bound to Euroasian citizenship law and should
determine the issue of nationality having regard to international consequences. Under
6 Soufraki v. The United Arab Emirates, para. 55.
7 PO 3, p. 59, para. 2.
8 PO 3, p. 59, para. 2.
9 PO 3, p. 59, para. 2.
10 PO 3, p. 59, para. 2.
11 PO 2, p. 56, para. 4.
12 PO 2, p. 56, para. 4.
6
those, CLAIMANT cannot be regarded as a national of Euroasia due to a lack of a genuine
link with the state.
30. Although conferring nationality takes place according to municipal laws of states, ‘an
international tribunal is not bound by the national law (…) under all circumstances’.13
This is because there are some limits on the granting of citizenship under i nternational
law.14 A tribunal ‘will in the end decide for itself (…) on the facts and the law before
it’.15
31. A tribunal is not bound by a domestic law in the case of, i.a. ‘ineffective nationality
lacking a genuine link between the State and the individual’.16 Such link must be based
not only on ‘a legal bond’ but also on ‘a social fact of attachment, a genuine connection
of existence, interests and sentiments’.17
32. However, ‘a set of mutual rights and obligations’ granted to a potential citizen is
required.18 Also, the documents evidencing the nationality are not sufficient to establish
citizenship since they are ‘prima facie evidence only’.19
33. CLAIMANT was recognized as a national of Euroasia only on March 23, 2014. 20 Thus, it
was slightly over one month before the issuance of the Executive Order on May 1,
201421 which, as may be alleged by CLAIMANT, is to be regarded as a relevant date for
the nationality determination. Over such short period of time no legal status could be
established covering any set of mutual rights and obligations between CLAIMANT and
Euroasia. Further, the only demonstration of CLAIMANT’s link with Euroasia was the
issuance of an identity card and passport. This cannot be sufficient for the purpose of
the nationality establishment.22
34. On the other hand, Fairyland, CLAIMANT’s domicile, has been a part of Eastasia since
1918.23 Also, since that time his family has held the Eastasian nationality. His
grandparents themselves relinquished their Euroasian citizenship to become
Eastasians.24 CLAIMANT was also born to Eastasian parents.25 He was, therefore, a n
13
Jennings/ Watts, p. 267. 14
I. Brownlie, p. 377. 15
Soufraki v. The United Arab Emirates, para. 55; Jennings/ Watts, p. 853. 16
Jennings/ Watts,p. 267. 17
Nottebohm case, p. 22. 18
K. Hailbronner, p. 35. 19
Siag v. Egypt, p. 43, para. 153. 20
PO 2, p. 56, para. 4. 21
Uncontested facts, p. 36, para. 16. 22
PO 2, p. 56, para. 4. 23
PO 2, p. 56, para. 4. 24
PO 2, p. 56, para. 4. 25
PO 2, p. 56, para. 4.
7
Eastasian national from birth, holding the Eastasian nationality during his business
activities in Oceania.26
35. Concluding, CLAIMANT’s connection with Euroasia appears to be doubtful at best and
constitutes a mere show of the Euroasian nationality rather than any genuine connection
between the two. Thus, CLAIMANT cannot be considered a national of Euroasia.
B. RESPONDENT DID NOT OFFER TO ARBITRATE DISPUTE ARISING OUT OF ILLEGAL
INVESTMENTS
36. RESPONDENT consented to arbitration with regard to investments. Yet, as CLAIMANT
made its alleged investment as a result of corruption, this Tribunal does not have the
jurisdiction to hear this dispute. Firstly, CLAIMANT was required to make an investment
in accordance with the law [a.]. CLAIMANT’s investment does not meet this standard
[b.]. As a consequence, this Tribunal has no jurisdiction to hear the case.
a. CLAIMANT WAS REQUIRED TO MAKE AN INVESTMENT IN ACCORDANCE WITH THE LAW
37. Even though it was not explicitly expressed in the Euroasia BIT, CLAIMANT was
required to make its investment in accordance with the law.
38. It is a principle of international law that businesses should work against corruption in all
its forms, including extortion and bribery. This principle is clearly present in the United
Nations Convention against Corruption. And under this convention, no one can benefit
from its corrupted acts.27 In international investment law this principle is known as the
"clean hands" doctrine and it entails the simple rule that prohibits a party to protect a
result of its own wrongdoings28.
39. The above rule is also recognized as stemming from the good faith principle. 29 This is
because corruption has the ‘effect of undermining the governmental structures of the
host state and distorting the competitive conditions between investors’30. It is so, as it
endangers a host-state’s legal credibility and eliminates all of the guarantees for the
investors, as they can only secure their position by fraudulent conduct. This is why the
international community considers the prohibition of corruption to be an element of
26
Uncontested facts, p. 32, para. 2. 27
Art. 31 United Nations Convention against Corruption. 28
R. Moloo 2, p. 2. 29
World Duty Free v. Kenya, para. 147. 30
C. Miles, p. 329.
8
public policy31. And states cannot be deemed 'to offer access to the (…) dispute
settlement mechanism to investments not made in good faith.'32
40. The ‘clean hands’ doctrine is applied even if a relevant BIT is silent on this issue, as it
emerges from the general principles, independent of the treaty language.33
41. In the present case, the Euroasia BIT does not include an explicit reference to the
international principle of good faith. Yet, RESPONDENT is both a member of the United
Nations and a party to the United Nations Convention against Corruption.34 Therefore,
the Euroasia BIT is subject to the international principles recognized by the United
Nations. The clean hands doctrine is one of such principles. Alternatively, if the
Tribunal accepts CLAIMANT’s argument regarding the MFN clause35, CLAIMANT has to
be treated exactly as Eastasian investors are treated. They are expressly bound by the
legality requirement, so would be CLAIMANT.
42. Hence, for assets to be considered an investment in the meaning of the Euroasia BIT,
they must be in accordance not only with the terms of this BIT, but also in accordance
with the international principles. And the 'clean hands' doctrine is such an
internationally recognized principle. Therefore, CLAIMANT was required to comply with
it while investing.
b. CLAIMANT'S INVESTMENT BREACHED THE 'CLEAN HANDS' STANDARD
43. CLAIMANT’s investment has corruption charges at its very core. They are inseparable.
But for bribery, CLAIMANT’s business would not make any sense. The circumstances
surrounding the case are enough for this Tribunal to find that the claims made in this
arbitration are contaminated by illegality and deny protection to the investment.
44. The ‘clean hands’ doctrine ensures that the relevant investment is made legally and in
good faith. In general, such a requirement applies to the actions connected with the
making of an investment36. Art. 1.1 (e) Euroasia BIT classifies a license for production
as an element of an investment. However, it refers merely to legal investments . The
purchase of shares and obtaining of the license should be considered as a single
31
World Duty Free v. Kenya, para. 147. 32
Phoenix Action, Ltd. v. Czech Republic, para. 106. 33
Hamester v. Ghana, para. 124. 34
PO 3, para. 3. 35
RA, p. 3. 36
Fraport v. Philippines para. 345; Inceysa v. El Salvador, para. 237; C. Miles, p. 329.
9
commercial activity. It is because they are intertwined so that one of is pointless without
the other.37.
45. In the present case, CLAIMANT’s purchase of Rocket Bombs’ shares was not sufficient
for the investment to have its proper shape. An environmental license was required so
that the enterprise could commence production. The license was a necessary part of
CLAIMANT's investment.
46. Nevertheless, CLAIMANT obtained the license due to corruption. CLAIMANT could only
afford the purchase of shares. It had no money to modernize the enterprise so that
Rocket Bombs could lawfully obtain the necessary license. Instead of waiting for a
decision of National Environment Authority, CLAIMANT decided to take steps in order to
accelerate the process. He met the President of the National Environment Agency of
Oceania in person. This same President would be later convicted for corruption38.
47. After the meeting in question, the decision was issued in favor of CLAIMANT, against
impossible odds, even though CLAIMANT’s production line did not comply with the
requirements until 201439. However, this did not prevent CLAIMANT from commencing
production and obtaining profits. What is even more surprising, from 1998 to 2014,
there was no evidence of CLAIMANT being forced to stop production. This would have
happened if CLAIMANT would fail to comply in regular circumstances.40
48. In light of the above, it is clear that CLAIMANT's investment was tainted with corruption.
Therefore, CLAIMANT never made an investment in the meaning of the Euroasia BIT. As
a result, there is no investment and this Tribunal has no jurisdiction over the dispute.
C. CLAIMANT DID NOT FULFILL CONDITIONS REQUIRED BY RESPONDENT’S OFFER TO
ARBITRATE
49. In any case, CLAIMANT brought its claims before this Tribunal regardless of the
preconditions of the offer to arbitrate [a.]. CLAIMANT, due to its failure to fulfill these
conditions, could not have accepted RESPONDENT’s offer to arbitrate [b.]. Further,
CLAIMANT cannot be excused from the pre-arbitral requirements [c.]. Therefore, this
Tribunal has no jurisdiction over this dispute.
37
Mitchell v. Congo, para. 51. 38
Statement of Uncontested Facts, para. 19. 39
Statement of Uncontested Facts, para. 13. 40
PO 3, para. 1.
10
a. RESPONDENT CONDITIONED ITS CONSENT ON THE INVESTOR’S SATISFACTION OF
CONSULTATION AND LITIGATION REQUIREMENTS
50. RESPONDENT successfully conditioned its consent to arbitrate on the investor’s
satisfaction of consultation and litigation requirements. Firstly, such contingent consent
is acceptable and in accordance with general practice [i.]. Secondly, the language of
Euroasia BIT proves that the fulfillment of the pre-arbitral steps is mandatory [ii.].
Finally, non-fulfillment of the pre-arbitral steps results in the lack of jurisdiction of this
Tribunal [iii.].
i. Consent may be conditioned on the fulfillment of pre-arbitral steps
51. Consent to arbitrate, just as any other offer, may be conditional and it may be
conditioned upon satisfaction of pre-arbitral steps.
52. For a tribunal to have jurisdiction, it must first establish whether parties consented to
such jurisdiction before commencing arbitration. As a general rule, parties may
condition their consent to arbitrate on the occurrence of any event they see fit. 41 If so,
only subject to such conditions ‘jurisdiction may be said to exist and be capable of
being exercised.’42 In particular they may condition consent on the prior satisfaction of
pre-arbitral steps.43 And the determination of whether a party fulfilled the pre-arbitral
steps included in the offer to arbitrate is necessary for finding jurisdiction.44
53. When treaty parties carefully craft a system of sequential steps, where one step depends
on the satisfaction of the previous one, ignoring the existence of such system violates
their express intent.45 And this written intent is the sole basis of the tribunal’s
jurisdiction.
54. In the present case, RESPONDENT’s conditioned its consent to arbitrate.
55. Firstly, Art. 9 Euroasia BIT provides for a fixed sequential process whose order must be
strictly observed. Focusing merely on the last sentence of Art. 9(3) Euroasia BIT, as
CLAIMANT suggests, is not justified. This is confirmed by the fact that each consecutive
step refers expressly back to the prior step. Art. 9(2) Euroasia BIT comes into play only
‘if the dispute cannot be settled amicably’. This means that litigation is contingent on
41
C. Schreuer, p. 30 42
Kilic v. Turkmenistan, para. 6.3.4. 43
Murphy v. Ecuador; Burlington v. Ecuador; Impregilo v. Argentina; Daimler v. Argentina; Kilic v.
Turkmenistan; ICS v. Argentina; Wintershall v. Argentina. 44
ICS v. Argentina, p. 270. 45
Phosphates in Morocco, para. 144.
11
prior amicable attempts. Further, Art. 9(3) Euroasia BIT (the possibility to refer the
dispute to arbitration) applies only ‘after twenty four months from the date of the notice
on the commencement of proceedings before the courts’. This means that arbitration is
contingent on prior litigation. Thus, it is clear that the Drafting Parties’ intention was to
make each step in the dispute settlement process contingent upon the fulfil lment of the
prior one.
56. Concluding, the consent to arbitrate may be conditioned upon the satisfaction of
sequential pre-arbitral steps. And RESPONDENT conditioned its consent making the
fulfillment of such steps mandatory.
ii. Conditional consent stems from the language of Euroasia BIT
57. Art. 9 Euroasia BIT provides a system of steps which have to be fulfilled to be able to
accept RESPONDENT’s offer to arbitrate.
58. When the language of a dispute resolution clause is imperative or conditional, the multi-
tiered clause is based on the premise of the binding nature of all provided steps.46 They
must be fulfilled if the investor wishes to resort to arbitration.47. This is so irrespective
of whether verbs “may” or “shall” are used48 as long as the language indicates a close
inter-relation.49 Such an inter-relation stems from the entire dispute resolution clause,
not just from its one subparagraph.50
59. Moreover, a different interpretation would be out of context and would contradict the
basic canons of interpretation.51 Treating preconditions to jurisdiction as non-mandatory
would disregard parties’ intention and constitute a clear violation of the rule that ‘a
clause must be so interpreted as to give it a meaning rather than so as to deprive it of
meaning’.52
60. Art. 9(1) Euroasia BIT, the starting point for the chain of remedies, uses the imperative
wording. By stipulating that investment dispute “shall” be settled amicably, the Drafting
Parties obliged the investors first to attempt to achieve an amicable solution of a
dispute. Only then, may follow the subsequent procedure, i.e. the litigation period. And
only afterwards arbitration may be commenced - as a remedy of the last resort.
46
ICS v. Argentina, paras 247, 251; Kilic v. Turkmenistan, paras.6.3.12, 9.3.; Murphy v. Ecuador, para.132. 47
Philip Morris v. Uruguay, para. 139. 48
Daimler v. Argentina, para. 181. 49
Kilic v.Turkenistan, para. 6.2.6. 50
Wintershall, para. 161. 51
Generation Ukraine v. Ukraine, para. 14.3. 52
Cayuga v. United States, p. 542.
12
61. Moreover, Art. 9 Euroasia BIT does not provide for any exceptions to the rule that
investors have to fulfill all pre-arbitral steps to have a right to commence arbitration.
62. To conclude, Art. 9 Euroasia BIT is unambiguous. It sets a rule that to obtain access to
international arbitration the pre-arbitral steps have to be fulfilled. With no exception.
iii. Claimant’s actions cannot affect consent expressed by states
63. It is true that RESPONDENT made an offer to arbitrate. What CLAIMANT, however, misses
is the condition to fulfill pre-arbitral steps53. Without their satisfaction an acceptance of
RESPONDENT’s is impossible.
64. If a tribunal allowed an investor to ‘choose at will to omit [one] step [when such a
possibility] is simply not envisaged by the BIT’, it would rule grossly beyond its
power.54 When parties did not provide for any exceptions to the fulfillment of the pre-
arbitral steps, the ‘inevitable legal sanction’ for omitting such steps is the dismissal of
the case.55‘This is because the Host state’s consent is premised on [disputes] being first
submitted to the courts.’56
65. Also, an attempt to classify the issue of conditional consent as referring to the
admissibility of claims must fail.57 This is because the problem in question is one of
jurisdiction58. As put in the Armed Activities case, ‘any conditions to which such
consent is subject must be regarded as limits [to consent to arbitrate]’ and thus, the
jurisdiction of the tribunal. 59
66. As opposed to the issue of admissibility, defects which completely bar a tribunal’s
power to hear a case relate to the matter of jurisdiction.60 It is so, because:
‘Labeling the issue as one of admissibility would have
avoided this result, but it is an inaccurate label:
admissibility goes to the suitability of the particular claim
for adjudication; whereas the failure to comply with [pre-
arbitral steps] had nothing to do with any defect in the
formulation of the claim’61
53
Art. 9(1) and 9(2) Euroasia BIT. 54
Wintershall v. Argentina, para. 160. 55
Dissent in Abaclat, para. 28. 56
Wintershall v. Argentina, para. 160. 57
Murphy v. Ecuador, para.149; Burlington v. Ecuador, para. 315; Daimler v. Argentina, para. 194 58
J. Paulsson, p. 616; Wintershall v. Argentina, para. 172. 59
Armed Activities case, p. 39, para. 88. 60
Dissent in Abaclat, para 21; Georgia v. Russia, para. 141. 61
Z. Douglas, para 329, p. 157.
13
67. And the result of the pre-arbitral steps, being an issue of jurisdiction, is that dispute
resolution providing for mandatory pre-arbitral steps does ‘not provide a menu of
dispute settlement options available to disputing parties on an a la carte basis’.62
68. In the present case, CLAIMANT seems to confuse international treaty with a restaurant
menu. CLAIMANT’s interpretation of Art. 9 Euroasia BIT simply ignores the existence of
provisions mandating the parties to have consultations and negotiations to resolve their
disputes. CLAIMANT believes that although there is an explicit treaty requirement,
CLAIMANT is to decide whether or not to comply with it.
69. The clear language, the context and object63 of Art. 9 Euroasia BIT does not allow for
any other conclusion than that the issue of the satisfaction of pre-arbitral steps is a
matter of jurisdiction.
70. Moreover, it is not a case where a claim is wrongly formulated. CLAIMANT’s claim is
not unsuitable for adjudication. It is simply presented before the wrong forum, as no
litigation with regard to this claim was ever commenced. Thus, as arbitration must be
preceded by arbitration, it is consent which is lacking. And no consent means no
jurisdiction.
71. Hence, RESPONDENT made it clear that it requires the prior satisfaction of pre-arbitral
steps. Without such fulfillment no consent necessary for this Tribunal’s jurisdiction,
was reached.
72. In light of the above, RESPONDENT successfully conditioned its consent to arbitrate on
the investor’s satisfaction of consultation and litigation requirements. The mandatory
character of these conditions stems from the Euroasia BIT. And the non-fulfillment of
these steps affects this Tribunal's jurisdiction, obliging this Tribunal to dismiss the case.
b. CLAIMANT FAILED TO FULFILL PRECONDITIONS NECESSARY FOR THIS TRIBUNAL’S
JURISDICTION
73. CLAIMANT disregarded both mandatory pre-arbitral steps. He neither attempted to
resolve the dispute amicably, nor did he refer the dispute to the competent courts in
Oceania.
74. To fulfill consultation requirement, at least good faith attempts to reach an amicable
solution is necessary.64
62
Daimler v. Argentina, para. 182. 63
Art. 31 VCLT 64
Burlington v. Ecuador, para. 315.
14
75. And such conduct cannot be ascribed to CLAIMANT. The only thing CLAIMANT did was
sending a letter which stated that CLAIMANT would start arbitration ‘if Oceania fails to
negotiate.’65 Such a warning not accompanied by even a smallest effort to begin
negotiations cannot be equal to amicable consultations required by Art. 9(1) Euroasia
BIT. CLAIMANT did not describe what kind of breach it alleged. CLAIMANT did not offer
to meet. CLAIMANT did not even communicate with RESPONDENT in any other way.
76. In any case, CLAIMANT did not fulfill its obligation to submit the dispute to
RESPONDENT’s courts. Consequently, CLAIMANT also did not satisfy the requirement to
wait for a period of 24 months from the date of the initiation of litigation before
commencing arbitration.
77. In light of the above, CLAIMANT did not fulfill the mandatory pre-arbitral steps. It is
undisputed that CLAIMANT failed to fulfill obligations from Art. 9(2) Euroasia BIT.
CLAIMANT also failed to satisfy requirement from Art. 9(1) Euroasia BIT. Hence, this
Tribunal should dismiss all CLAIMANT’s claims, as it lacks jurisdiction over the dispute.
c. IN ANY CASE, CLAIMANT CANNOT BE RELIEVED FROM PRE-ARBITRAL REQUIREMENTS
78. If CLAIMANT wishes to make use of the protection under the treaty, it cannot be excused
from the preconditions expressed in the Euroasia BIT.
79. First of all, a tribunal should honor the language of a BIT as well as its context and
object.66 Consequently, a tribunal:
cannot create exceptions to treaty rules where these are
merely based upon an assessment of the wisdom of the
policy in question, having no basis in either the treaty text
or in any supplementary interpretive source.67
80. This would be ‘equivalent not to interpreting the treaty, but to reconstructing it’.68
81. Moreover, the requirement to submit disputes to local courts for a specified period of
time should be understood as an extended “cooling-off” period.69 Such a “cooling-off”
period gives parties more time for finding a solution for the dispute without involving
an international tribunal for a limited time. Consequently, such a clause requiring an
investor to refer the dispute to courts does not close the way to justice but merely gives
65
RA, p. 4 66
Art. 26, 31 VCLT 67
ICS v. Argentina, para. 267. 68
PCIJ, Acquisition of Polish Nationality, Advisory Opinion, p. 20. 69
Philip Morris v. Uruguay, para 142
15
the parties time to try to resolve the dispute.70 It is ‘hardly plausible to impute to such
clauses the purpose of resolving an investment dispute’.71
82. Also, when consent is contingent on the commencement of litigation, and not on the
resolution of a dispute, a potential futility of proceedings has no significance.72 This is
because the condition is submitting a dispute to a local court, not obtaining a judgment.
83. Additionally, it cannot be successfully claimed that litigation requirement is generally
unreasonable.73 It gives the state a chance to redress an alleged breaches of the
investor’s rights,74 and thus allows it to avoid potential international responsibility.
84. Even if the existence of futility exception was accepted, claimants often are unable to
meet its threshold. At least an attempt to submit dispute to a local court is required.75
This is because to ‘decide, a priori and unilaterally, not even to try to resolve the
dispute (…) constitutes a grave breach’ of a BIT.76
85. The current case does not give any grounds for establishing futility of pre-arbitral steps.
86. Firstly, Drafting Parties did not provide for any exception to the rule that investors have
to initiate first court proceedings and wait 24 months until obtaining an access to
international arbitration.
87. Secondly, there are no grounds to claim that referring the dispute to RESPONDENT’s local
courts would be futile. This is because Drafting Parties did not condition their consent
on the resolution of a dispute but on the commencement of litigation. The lapse of 24
months from the moment of the commencement of litigation is crucial. Not whether
Oceanian courts will resolve the dispute or not. Thus, there can be no “futility” as the
court’s participation was upfront anticipated to be aimed at extending a “cooling-off”
period and giving the parties an additional chance to resolve the dispute without
engaging an international tribunal.
88. Finally, CLAIMANT did not even attempt to examine the prospects of proceedings in
Oceania. The fact that he did not even file a suit is the best evidence of CLAIMANT’s
obvious disregard to the provisions of Euroasia BIT.
89. In conclusion, the circumstances of this case did not provide any ground for allowing
the CLAIMANT to disregard the pre-arbitral steps required under the Euroasia BIT.
70
Murphy v. Ecuador, para. 151. 71
Ambiente v. Argentina, para. 604. 72
Wintershall v. Argentina, para. 73
Philip Morris v. Uruguay, para. 137 74
Philip Morris v. Uruguay, para. 137 75
ICS v. Argentina, para 269. 76
Murphy v. Ecuador, para. 135.
16
CLAIMANT, just as other investors, was obliged to abide the Euroasia BIT terms. By
failing to do so, CLAIMANT deprived this Tribunal of jurisdiction over this dispute.
II. DEFECTS IN CONSENT CANNOT BE CURED BY AN MFN CLAUSE
90. CLAIMANT misreads the Euroasia BIT by assuming that Art. 3(1) Euroasia BIT gives
grounds to cure the lack of both the consent to arbitrate and the jurisdiction of this
Tribunal. Art. 3 (1) Euroasia gives no grounds for such assumptions, as it solely
provides that:
‘Each Contracting Party shall, within its own territory,
accord to investments made by investors of the other
Contracting Party, to the income and activities related to
such investments and to such other investment matters
regulated by this Agreement, a treatment that is no less
favourable than that accorded to its own investors or
investors from third-party countries.’
91. It is true that CLAIMANT was granted a great portion of rights by Euroasia BIT.
However, to enforce them in international arbitration, RESPONDENT’s consent to
arbitrate is necessary. And consent cannot be found in a generally worded MFN clause
[A.]. Alternatively, the applicable MFN clause present in Art. 3(1) Euroasia BIT cannot
be extended to issues of jurisdiction [B.].
A. AN MFN CLAUSE CANNOT BE APPLIED TO CURE THE LACK OF CONSENT TO ARBITRATE
92. CLAIMANT cannot invoke Art. 3(1) Euroasia BIT to create this Tribunal’s jurisdiction
under any circumstances. This is because this provision is not sufficiently clear in
demonstrating Drafting Parties’ intention to refer dispute to arbitration [a.]. Moreover,
no investor-friendly interpretation of Euroasia BIT can confer the jurisdiction on this
Tribunal [b.].
a. THE MFN CLAUSE IN ART. 3(1) EUROASIA BIT DOES NOT COVER DRAFTING PARTIES’
INTENTION TO ARBITRATION
93. The MFN clause in the Euroasia BIT cannot create grounds for this Tribunal’s
jurisdiction. This is because it cannot cure the lack of consent to arbitrate.
94. The goal of an investment treaty is to grant extra protection to investors by vesting in
them individual rights against a state. To enforce such rights in a forum other than a
host state’s court, an additional jurisdictional agreement is necessary. And the consent
17
to arbitrate cannot be replaced by an MFN clause alone,77 but has to be accompanied by
a clear ‘manifestation of consent to the arbitration of investment disputes’.78 Thus, ‘it is
well established principle that such an agreement should be clear and unambiguous .79
A generally worded MFN clause is not sufficient to recognize existence of parties’
intent to arbitrate.80
95. This high standard is justified by the fact that the acceptance of the jurisdiction by an
arbitral tribunal means interfering with the state’s sovereignty.81 And a wrong
conclusion may impose on a state obligations it never contemplated.82 If a blank
acceptance of an MFN clause’s applicability to the consent to arbitrate was given,
tribunals could invalidly undermine the parties’ intentions by groundlessly constructing
the alleged state’s consent to arbitrate. 83
96. The fact that a state has agreed to a specific dispute resolution mode should not be
overridden by an unlimited pro-investor approach.84 This is because ‘matters of
jurisdiction (…) go to the core of matters that must be deemed to be specifically
negotiated’.85
97. In the present case, the MFN clause contained in Art. 3(1) Euroasia BIT does not meet
the above standard and therefore cannot be extended to the dispute resolution clause.
98. The MFN clause in question has no indication of covering the dispute resolution clause,
whatsoever. It does not explicitly encompass dispute resolution matters. It also does not
mention provisions of Euroasia BIT concerning dispute resolution mechanism.
99. Thus, the MFN clause in Art. 3(1) Euroasia BIT is not sufficient to cure the lack of
consent to arbitrate. It is generally worded and as it does not refer explicitly to the
dispute resolution clause it does not apply to it.
77
ICS v. Argentina, para. 277. 78
Plama v. Bulgaria, paras. 198-199. 79
Plama v. Bulgaria, paras. 198-199. 80
Renta 4 v Russia, para. 93; Berschader v. Russia, para. 180. 81
Lotus case, p. 18. 82
Renta 4 v. Russia, para. 93 83
Sornajah, p. 322. 84
Thulasidhass, p.17; Société Générale v. Dominican Republic, para. 41. 85
Tecmed v. Mexico, para. 69.
18
b. NO PURPOSE-ORIENTED INTERPRETATION OF EUROASIA BIT CAN CREATE THIS
TRIBUNAL’S JURISDICTION
100. This Tribunal cannot extend the scope of the MFN clause contained in the Euroasia BIT
so as to include within it the dispute resolution mechanism. Such a pro-investor
interpretation would be simply unjustified.
101. A purpose of BIT is to grant additional protection to investor. Yet when interpreting a
BIT, ‘placing undue emphasis on the “object and purpose”[could] deny the relevance
of the intention of the parties.’86 The aim of a treaty cannot substitute the consent to
arbitrate.87
102. With regard to pre-arbitral steps, when treaty parties provide for the litigation
requirement they agree that such a requirement is ‘perfectly consistent with the objects
and purposes of the Treaty.’88 A tribunal which agrees to such terms of the parties
consent, does not disregard the aim of a BIT, but, in fact, embraces it.89
103. In the present case, Drafting Parties agreed that a dispute resolution mechanism, as
provided in Art. 9 Euroasia BIT, will advance purpose of ‘promot[ing] greater
economic cooperation’ and will guarantee ‘effective means of asserting claims.’90 Thus,
it is not for this Tribunal to reexamine the intent of the Drafting Parties. Thus, the MFN
clause cannot be extended so as to cross out of the dispute resolution mechanism the
mandatory pre-arbitral steps.
104. Therefore, there are no grounds for this Tribunal’s jurisdiction even under most-
investor-friendly interpretative approach.
B. ALTERNATIVELY, THE SPECIFIC MFN CLAUSE FROM ART. 3(1) EUROASIA BIT
CANNOT EXTEND TO JURISDICTIONAL AGREEMENTS
105. Even if the Tribunal found that consent to arbitrate does not have to be explicitly stated
in a MFN clause, Art. 3(1) Euroasia BIT still does not apply to the dispute resolution
clause.
106. Nothing can override treaty parties’ understanding of the meaning of treaty provisions.
A MFN clause ‘can only operate in regard to the subject-matter which the States had in
86
Sir Sinclair, p. 130. 87
Armed Activities case, para. 125. 88
Daimler v. Argentina, para. 258. 89
Telenor v. Hungary, para. 96. 90
Euroasia BIT, preamble, p.40.
19
mind when they inserted the clause in their treaty’.91 Stipulating that “all matters” are
covered by a MFN clause might be proof of the specific extension of the clause’s
application.92 Yet, expressions such as “investment related activities” or “associated
activities” refer solely to activities of the investor for the conduct of his business, not to
the dispute settlement mechanism.93
107. Also, no mention of dispute resolution process among exceptions to an MFN clause
does not prove that the clause in fact applies to such matters.94 This is because such
exceptions almost always refer to direct treatment of a state and to matters that are
traditionally considered to be within the scope of a clause.95 In other words, ‘one cannot
prove the non-existence of apples based upon the existence of oranges.’96
108. Besides, to apply an MFN clause claimants have to show that the other treatment is
objectively more favorable.97 An investor, that may first submit the dispute to the local
courts, and only afterwards refer the dispute to arbitration,
‘receives two bites at the apple: once before the domestic
courts, and – if the investor is still not satisfied – again
before an international arbitral tribunal’.98
109. Thus, such a multi-tiered clause is objectively more favorable to the claimant, as it has
in fact two possibilities to receive a favorable ruling – first, before the local courts, and
second, before a tribunal.
110. In the present case, there was no specific intention of Drafting Parties to apply the MFN
clause to the dispute resolution mechanism.
111. Art. 3(1) Euroasia BIT does not provide for “treatment” covering “all matters regulated
by the agreement”, but it covers solely ‘the income and activities related to such
investments and to such other investment matters’ This indicates that Drafting Parties
decided to limit its applicability to substantive matters, like income and other
investment activities. This excludes the application of the MFN clause to the dispute
resolution mechanism.
112. Additionally, litigation as a pre-arbitral step is not discriminatory. If CLAIMANT submits
the dispute to RESPONDENT’s courts and does not obtain satisfactory outcome, it may
91
Draft Articles on MFN clauses., p. 27; Anglo-Iranian Oil case, p. 110. 92
Salini, paras. 117-119; Wintershall, para. 172. 93
Wintershall v. Argentina, para. 171. 94
Austrian Airlines v. Slovakia, paras. 130-131. 95
ICS v. Argentina, para 312. 96
Daimler v. Argentina, paras. 238-239. 97
Daimler v. Argentina, para. 243. 98
Daimler v. Argentina, para. 244.
20
still choose to initiate arbitration. Eastasian investors are not given such an opportunity.
They have only one path to go and if it is unsuccessful, no safety net is granted. Thus, it
cannot be said that Eastasian dispute settlement is objectively more favorable.
113. Concluding, the language of Euroasia BIT shows that RESPONDENT did not wish to
create other jurisdictional rules than those expressed in Art. 9 Euroasia BIT. Thus, the
MFN clause cannot cure the lack of this Tribunal’s jurisdiction.
SUMMARY
114. This Tribunal does not have jurisdiction to hear the present case.
115. First of all, CLAIMANT is not an investor within the meaning of Art. 1.2. Euroasia BIT.
However, even if this Tribunal found otherwise, CLAIMANT failed to demonstrate a
genuine connection between himself and Euroasia.
116. Secondly, CLAIMANT was required to make an investment in accordance with the law
and its investment failed to comply with this requirement. Thus, he did not make an
investment pursuant to Euroasia BIT at all.
117. Thirdly, CLAIMANT did not accept RESPONDENT’s offer to arbitrate investment disputes
as it failed to fulfill the offer’s terms. RESPONDENT conditioned its consent on the prior
fulfilment of pre-arbitral steps and CLAIMANT disregarded them. The potential futility of
the proceedings in Oceania has no significance because it is not the outcome of
proceedings but the lapse of time that matters. Besides, CLAIMANT did not even try to
initiate litigation as required.
118. Finally, defects in consent cannot be cured by the application of the MFN clause
contained in Art. 3(1) Euroasia BIT. It does not clearly demonstrate an intention of
Drafting Parties to extend the MFN clause to dispute settlement. Even under lower
standards, any such intention was not and could not have been shown.
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ARGUMENT ON MERITS
III. RESPONDENT IS NOT IN BREACH OF ART. 4.1 EUROASIA BIT
119. Executive Order falls under the scope of Art. 10 Euroasia BIT and thus Art. 4.1 of the
same treaty is not applicable [A]. Alternatively, even if Art. 10 Euroasia BIT does not
apply, CLAIMANT’s investment was not expropriated indirectly due to temporary nature
of Executive Order [B].
A. EXECUTIVE ORDER FALLS UNDER THE SCOPE OF ART. 10 EUROASIA BIT
120. Executive Order was implemented in response to annexation of Fairyland by Euroasia.
Actions of the latter were a violation of international peace and security. For these
reasons, provisions regarding expropriation cannot be applied to Executive Order.
121. Every non-precluded measures clause consists of three structural elements. 99 First, the
“nexus” - link between the clause and measure adopted by state. This link can feature
various intensity, also presented in a clause wording range from “necessary” to simple
“for”.100 Second, the “scope” – is the breadth of clause application against BIT’s other
regulations. It can be drafted to apply to an entire BIT or only to its certain
provisions.101 Third, the “permissible objectives” - define applicable measures based on
the substantive angle.102
122. In the case at hand the non-precluded measure clause is included in Euroasia BIT’s Art.
10, which reads:
‘Nothing in this Agreement shall be construed to prevent
either Contracting Party from taking measures to fulfill its
obligations with respect to the maintenance of
international peace or security.’103
123. The “nexus” of this clause creates the broadest possible link by using phrase “measures
to”. Additionally, the “scope” covers all provisions of Euroasia BIT, as indicated by
wording “nothing in this Agreement”. This means that any measure covered by
“permissible objective” of this clause must be excluded from Euroasia BIT’s Art. 4.1
provisions. The “permissible objective” refers to maintenance of international peace and
99
W. Burke-White and A. Staden, p. 329. 100
W. Burke-White and A. Staden, p. 342. 101
W. Burke-White and A. Staden, p. 331. 102
W. Burke-White and A. Staden, p. 332. 103
Euroasia BIT, Art. 10.
22
security. Executive Order was implemented by Oceania as a response to actions and
policies of the Republic of Euroasia, especially annexation of Fairyland.104 This
annexation took form of an invasion of Euroasian armed forces on the territory of
Eastasia.105 The possible open conflict was avoided only because Eastasia did not send
any armed forces on its own.106 Military intervention naturally endangers international
peace, especially if it is illegal. Situation was not any different in this case. Euroasia
annexed Fairyland which was not recognized by an international community. Moreover,
it was declared illegal by a significant part of the community and triggered breaking off
diplomatic relations with Euroasia and consequently divided the international
community.107 All this demonstrates that the Euroasian government’s actions violated
international peace.
124. In conclusion, Executive Order was implemented as an attempt to maintain international
peace and security. Hence, it falls under Art. 10 Euroasia BIT and, further, is excluded
from other provisions thereof.
B. ALTERNATIVELY, CLAIMANT’S INVESTMENT WAS NOT EXPROPRIATED INDIRECTLY
125. Alternatively, even if the Tribunal finds that Executive Order does not fall under Art. 10
Euroasia BIT, RESPONDENT submits that there was no indirect expropriation. This is due
to the fact that Executive Order and the effect it has on CLAIMANT’s investment has
temporary character.
126. When establishing occurrence of indirect expropriation, one of important factors to be
taken into account is duration of a measure affecting an investor.108 Only permanent
interference can lead to an expropriation.109
127. As mentioned above, Executive Order was implemented as a response to threat to
international peace posed by Euroasia.110 Due to its nature, it is a temporary measure
which will be revoked as soon as international situation stabilizes. Further, throughout
the process of Executive Order implementation, Rocket Bombs production capabilities
remained unhindered and CLAIMANT remained an owner of his alleged investment.
Although CLAIMANT’s contracts were terminated, once Executive Order is revoked,
104
Executive Order, Preamble; Uncontested Facts, para. 16. 105
Uncontested Facts, para 14. 106
Uncontested Facts, para 14. 107
Uncontested Facts, para 14. 108
Dolzer, page 112. 109
LG&E v Argentina, para. 193. 110
Supra, para. 123.
23
Rocket Bombs will be able to regain its position on the market. For these reasons, the
impact that Executive Order had on CLAIMANT’s investment is reversible.
128. Concluding, Executive Order has temporary character and its effect on Rocket Bombs is
reversible. Therefore, implementation of this measure cannot be considered an indirect
expropriation.
IV. CLAIMANT CONTRIBUTED TO DAMAGE SUFFERED
129. RESPONDENT did not expropriate CLAIMANT’s investment. Alternatively, shall this
Tribunal for any reason make different findings, CLAIMANT is not entitled to any
compensation for his investment as he contributed to damage suffered. This is because
he contributed to his loss by willful act of continued weapon supply and negligence in
conducting his business [A.]. Additionally, his contribution amounts to 100 % of the
loss suffered, thus excluding any compensation [B.].
A. CLAIMANT CONTRIBUTED TO DAMAGE SUFFERED UNDER ARTICLE 39 ILC ARTICLES ON
RESPONSIBILITY OF STATES
130. Art. 39 ILC Articles on Responsibility of States provides a fundamental rule of
contribution to damage that this Tribunal shall also apply in this proceeding. It stipulates
that:
‘In determination of reparation, account shall be taken of
the contribution to the injury by willful or negligent action
of omission of the injured State or any person or entity in
relation to whom reparation is sought.’
131. Therefore, it provides a general rule for assessing reparation in international law, even if
Euroasia BIT does not provide any special provision regarding that matter. And
CLAIMANT has contributed to damage both by his willful acts [a.] and negligence [b.].
a. CLAIMANT CONTRIBUTED TO DAMAGE BY WILLFUL ACTS
132. Art. 39 ILC Articles on Responsibility of States stipulates that ‘account shall be taken
of the contribution to the injury by willful or negligent action of omission’. Thus, firstly,
when assessing compensation, behavior of a person who seeks it should always be taken
into consideration as a relevant factor in measuring the amount of damages. Secondly, it
sets a very wide scope for a form of action that may be considered a contribution to
damage suffered.
24
133. This approach is not a novelty in international disputes 111, as such scope of
responsibility for contribution was proposed long before ILC Articles on Responsibility
of States :
‘[a]ll the circumstances that can be adduced against the
concessionaire company and for the Portuguese
Government mitigate the latter’s liability and warrant ... a
reduction in reparation.’112
134. Therefore, any behavior of CLAIMANT that contributed to the loss suffered may result in
reduction of reparation. And such contribution is, above all, continued weapon supply to
Euroasia after it has planned annexation of Fairyland.
135. It is not an overly sophisticated concept that if a country violates an international
territorial order and intrudes other country’s province with armed forces and intention of
annexation, such action will be considered reprehensible by the international
community. Such state constitutes a threat to long-established peace and order and its
actions misbalance power and interests in whole region. If not faced with a firm answer,
such actions may encourage other countries, who will always have their particular
interests, to execute their claims in alike manner. This outcome cannot be allowed.
136. Supply of weapon to a country which chooses abovementioned way of conducting its
“international policy” is obviously non-consistent with reason and justified expectations
of the international community.
137. Firstly, supporting development of military forces of the instigator simply enhances a
threat to peace.
138. Secondly, acts like those of Euroasia in Fairyland should not be granted any support or
acceptation, even from private parties, especially if they are influential. Continued
weapon supply in light of the above, equals “acting like nothing happened”.
139. In this regard, requiring from CLAIMANT that he should have known about planned
annexation and therefore stop immediately the weapon supply is nothing but reasonable
for two reasons. Firstly, a significant part of political dispute in this respect was made
public. Secondly, it would be counterfactual to assume that despite the fact long-term
business relationship with Ministry of National Defense of Euroasia and personal
relationship with John Defenseless, CLAIMANT was not in possession of any more
detailed information.
111
Articles on Responsibility of States, pp.109, 110. 112
Delagoa Bay Railway, footnote 625.
25
140. Thirdly, operating in controversial business like arms production, CLAIMANT should be
even more alert than the rest of society to the meaning of his actions when the difficult
political times come.
141. In light of the above, such actions of CLAIMANT could not be accepted by RESPONDENT
and CLAIMANT should have expected means that were introduced to deal with the
situation. Therefore, CLAIMANT did contribute to damage by the weapon supply.
142. It must be also emphasized that an obligation of reparation arises from an illegal act.
The case that is considered to lay foundation for understanding the content of the
obligation of reparation as to its scope and effects 113, Factory at Chorzów, requires
compensation to wipe-out all consequences of illegal act, as it is essential principle
contained in the actual notion of the reparation.
143. However, not coincidentally, it is illegal act that gives rise to an obligation of
reparation. In the case at hand, President of the Republic of Oceania issued Executive
Order within the scope of his discretion and competence and its formal legality is not
questionable. Executive Order was also issued for valid reasons and was a typical and
not superstitious instrument of international policy, as well as general act. Therefore, it
did not trigger any responsibility of reparation of losses as a wrongful act, nor did it
give rise to justified compensation claim under the Euroasia BIT, as it did not
expropriated CLAIMANT.
144. Summarizing, CLAIMANT is not entitled to compensation for his loss, as he contributed
to the damage suffered. Further, there was no wrongful act that would trigger a
responsibility of compensation towards CLAIMANT and thus his investment was not
expropriated.
b. CLAIMANT CONTRIBUTED TO DAMAGE BY NEGLIGENT BUSINESS CONDUCT
145. Not only weapon supply can be considered a contribution to damage, but also other acts
of CLAIMANT gave only more reasons for Executive Order, that prevented CLAIMANT
from concluding business, to be justified.
146. CLAIMANT as an investor acted with gross negligence that established his contribution
do the damage suffered. Firstly, he obtained an environmental license by means of
corruption. Secondly, for years he did not abide Environment Act of 1996 by not having
his production lines adjusted to its requirements.
113
Crawford/ Lee/ Lauterpacht, p. 239.
26
147. An investor is obliged to act with diligence, especially concerning compliance with law
of a host state. In Occidental Petroleum114, tribunal found that failure to obtain
ministerial authorization was a contribution to damage caused by negligence of
applicant. In MTD v. Chile,115 a failure to take into consideration important construction
and administrative regulations, along with bad business decision assuming realization of
non-compliant project, led the Tribunal to finding 50% contribution to damage suffered
by investor.
148. These cases are an accurate reflection of situation of CLAIMANT in the case at hand.
149. Firstly, CLAIMANT acted negligently by obtaining in by means of corruption the
environmental license, which allowed him to commence production, even if his
production line did not fulfill the law requirements.116
150. Secondly, he acted as negligently businessman, disregarding the political surrounding of
his business. This was even though, as a resident of Fairyland, he has the best possible
insight to the political tension in this region.
151. Finally, he took upon himself additional business risk not diversifying both his supply
and demand side - contracting only Oceanian companies as his suppliers and concluding
only one, crucial for the existence of Rocket Bombs agreement, so that one act targeted
at putting an end to arms supply resulted in decrepitating CLAIMANT’s investment.
152. Concluding, CLAIMANT acted negligently, giving one more basis for this Tribunal to
find compensation for CLAIMANT not due.
B. CLAIMANT IS NOT ENTITLED TO ANY COMPENSATION FOR HIS INVESTMENT
153. Compensation for CLAIMANT not only shall be reduced, but also it should be denied in
the entire amount, as CLAIMANT's contribution covers almost the whole injury he
suffered.
154. Although contribution to damage is an instrument to measure damages accordingly to
injured party share in causing the loss, a situation when contribution of injured equals
almost 100 % of loss is imaginable. Therefore, in such circumstances an investor should
not be awarded any damages. 117
155. CLAIMANT concluded new contracts on weapon supply with Euroasia just before he
military annexation of Fairyland. Considering that he was a resident of the annexed
114
Occidental Petroleum, paras. 679,680. 115
MTD v. Chile, paras. 239-244. 116
Supra paras. 45-48. 117
Articles on Responsibility of States, p. 110.
27
Fairyland, he must have been fully aware of the tension in the region, and of the result
that arms dealing with Euroasia would cause. Additionally, even if his investment
would have not suffered from issuing Executive Order, for years he has been exposing it
to high risk of losing a license in case of control of authorities118. CLAIMANT failed to
comply with the basic laws of RESPONDENT. He also obtained his environmental license
in questionable circumstances and there has been initiated a criminal proceeding against
him concerning bribery.
156. In light of case law presented above119, a sole fact of non compliance and bad business
decision can equal 50 % of damage. In the case at hand, list of CLAIMANT’S acts, that
contributed to damage is much longer and in fact it equals to 100 % of loss incurred.
157. To conclude, CLAIMANT is not entitled to any compensation, as his actions contributed
to damage suffered not partially, but entirely.
SUMMARY
158. Provisions regarding expropriation cannot be applied to Executive Order as it excluded
by Art. 10 of Euroasia BIT. Alternatively, even if Art. 10 of Euroasia BIT cannot be
applied RESPONDENT did not expropriate CLAIMANT’s investment due to temporary
character of Executive Order.
159. CLAIMANT is not entitled to any compensation for his investment. He contributed to loss
incurred through willful acts and negligent conduct. As his various actions equal entire
damage suffered, no compensation for his investment is due.
118
PO 3. 119
Supra paras. 137, 143.
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PRAYER FOR RELIEF
RESPONDENT respectfully requests the Tribunal to find that:
I. CLAIMANT is not an investor pursuant to Article 1.2 Euroasia BIT;
II. CLAIMANT was required to comply with the pre-arbitral steps as provided in the Article
9 Euroasia BIT prior to bringing his claims before the Tribunal;
III. CLAIMANT may not invoke Article 8 Eastasia BIT by the operation of the Article 3
Euroasia BIT;
IV. CLAIMANT did not make a protected investment, especially in the light of the “clean
hands” doctrine with reference to Article 1.1 Eastasia BIT;
V. RESPONDENT did not expropriate CLAIMANT’s investment by the implementation of
sanctions and introduction of Executive Order of 1 May 2014;
VI. CLAIMANT contributed to the damage suffered by his investment.
Counsels for RESPONDENT
TEAM JESSUP
September 26, 2016