in the international court of arbitration of … · in the international court of arbitration of...
TRANSCRIPT
TEAM PINTO
FOREIGN DIRECT INVESTMENT INTERNATIONAL ARBITRATION
MOOT 2016
IN THE INTERNATIONAL COURT OF ARBITRATION
OF THE
INTERNATIONAL CHAMBER OF COMMERCE
ICC ARBITRATION CASE NO. 28000/AC
PETER EXPLOSIVE
(Claimant)
Versus
THE REPUBLIC OF OCEANIA
(Respondent)
MEMORIAL FOR THE CLAIMANT
-TABLE OF CONTENTS- TEAM PINTO
i
TABLE OF CONTENTS
LIST OF AUTHORITIES........................................................................................................ iii
LIST OF ABBREVIATIONS ................................................................................................. xiv
STATEMENT OF FACTS ........................................................................................................ 1
ARGUMENTS ........................................................................................................................... 4
I. THE TRIBUNAL HAS JURISDICTION RATIONAE PERSONAE AND
RATIONAE MATERIA OVER THE PRESENT MATTER ............................................... 4
A. Jurisdiction Rationae Personae.................................................................................... 4
B. Jurisdiction Rationae Materia...................................................................................... 9
II. Claimant was not required to comply with the pre-arbitral steps as provided in the
Article 9 of the Euroasia BIT prior to bringing his claims before the Tribunal; ................... 9
A. Article 9 of the Euroasia BIT does not preclude the Claimant from invoking the
Tribunal’s Jurisdiction. .......................................................................................................... 9
III. The Claimant may invoke Article 8 of the Eastasia BIT pursuant to Article 3 of the
Euroasia BIT. ....................................................................................................................... 12
A. The MFN clause extends to access to dispute settlement mechanisms. ................... 13
B. Access to international arbitration is treatment accorded within the Respondent
State’s territory. ................................................................................................................... 15
C. Respondent accords Eastasian investors more favourable dispute treatment than
Euroasian investors in its territory. ...................................................................................... 16
D. Application of MFN clause does not override any public policy considerations the
Contracting Parties may have had. ...................................................................................... 16
IV. The Claimant made a protected investment, especially in light of the “clean hands”
doctrine with reference to Article 1.1 of the Eastasia BIT. ................................................. 18
A. No clean hands requirement from the Eastasia BIT may be imported into the
Euroasia BIT. ....................................................................................................................... 18
-
B. No requirement of clean hands may be read into the Euroasia BIT. ........................ 19
C. The clean hands doctrine is not a general principle of international and therefore has
no application in the present case. ....................................................................................... 20
D. Even if the Tribunal is of the opinion that the clean hands doctrine is applicable in
the instant case, its applicability is restricted to the initiation of investment. ..................... 21
E. Even if the principle of clean hands extends to performance of investment, the
Respondent is estopped from invoking the same. ............................................................... 22
V. The Claimant’s investment was expropriated by the Respondent. ............................... 24
A. The Respondent has unlawfully expropriated the Claimant’s investment. ............... 24
B. The Respondent’s measure is not justified under Article 10 of the Euroasia BIT. ... 26
C. Full reparation must be made to the Claimant. ......................................................... 30
VI. The Claimant did not contribute to the damage suffered by his investment. ............ 31
PRAYER FOR RELIEF .......................................................................................................... 33
-LIST OF AUTHORITIES- TEAM PINTO
iii
LIST OF AUTHORITIES
ARBITRAL DECISIONS:
ABBREVIATION CASE NAME PAGE
NO.
Abaclat
Abaclat and Others v. Argentine Republic, ICSID Case
No. ARB/07/5 , (4 August 2011)
12
ADC
ADC Affiliate Limited and ADC & ADMC
Management Limited v. The Republic of Hungary,
ICSID Case No. ARB/03/16 Award, (2 October 2006).
25, 31
ADF ADF Group Inc. v. United States, ICSID Case No.
ARB(AF)/00/1 (NAFTA), Award (9 January 2003)
19
Alasdair Alasdair Ross Anderson et al v. Republic of Costa Rica,
ICSID Case No. ARB(AF)/07/3, Award (19 May 2010)
21
Alpha Projektholding Alpha Projektholding GmbH v. Ukraine, ICSID Case
No. ARB/07/16, Award, (8 November 2010).
15
Ambiente Ambiente Ufficio S.p.A. and others v. Argentine
Republic, ICSID Case No. ARB/08/9, Decision on
Jurisdiction and Admissibilty, (8 February 2013).
10, 11
Bank Mellat Bank Mellat v Council of the European Union
(T496/10), EU General Court, 29 January 2013
29
Bayindir Bayindir Insaat Turizm Ticaret ve Sanayi A v. Islamic
Republic of Pakistan, ICSID Case No. ARB/03/29,
Decision on Jurisdiction (14 Nov. 2005), ¶s. 195-96
(RL-61)
5
BG Group BG Group Plc. v. Argentina, Final Award, 24 December
2007
10
-LIST OF AUTHORITIES- TEAM PINTO
iv
Biwater Biwater Gauff (Tanzania), Ltd. v. Tanzania, ICSID Case
No. ARB/05/22, Award, (24 July 2008)
11
Chorzow Factory case Case Concerning the Factory At Chorzow, PCIJ
Judgement No. 13, ¶ 47, at http://www.icj-
cij.org/pcij/serie_A/A_17/54_Usine_de_Chorzow_Fond
_Arret.pdf, also published in PCIJ, Series A, No. 17, 13
September, 1928
31, 32
Chevron Corp. Chevron Corp. & Texaco Petroleum Corp. v. Ecuador,
Interim Award, Ad hoc – UNCITRAL Arbitration
Rules; IIC 355, ¶. 112 (1 Dec. 2008) (CL-75)
5, 26
CMS CMS Gas Transmission Company v. The Republic of
Argentina, ICSID Case No. ARB/01/8, Award, (12 May
2005),
29
Canfor Corp. Canfor Corporation v. United States Of America and
Terminal Forest Products Ltd. V. United States of
America, UNCITRAL (NAFTA), Decision on
Preliminary Question, (6 June 2006).
13
Daimler Daimler Financial Services AG v. Argentina, ICSID
Case No. ARB/05/1, Award, (22 August 2012)
10
Dual Nationality case Dual Nationality, Decision Concerning the Question of
Jurisdiction over Claims of Persons with Dual
Nationality, 6 April 1984, Case No. A/18, 5 Iran-U.S.
CTR
7
Enron Enron Corporation and Ponderosa Assets, L.P. v.
Argentine Republic, ICSID Case No. ARB/01/3, Award,
(22 May 2005).
29
ELSI Case Concerning Elettronica Sicula S.P.A. (ELSI), ICJ,
Elettronica Sicula S.p.A (ELSI) (United States of
America v. Italy), July 20, 1989.
12
Finnish Vessels in Finnish Vessels in Great Britain During the War 16
-LIST OF AUTHORITIES- TEAM PINTO
v
Great Britain During
the War
(Finland v. Great Britain), 7 ILR 231 (1934)
Gemplus Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de
C.V. v. The United Mexican States, ICSID Case No.
ARB(AF)/04/3 Award, (16 June, 2010).
32
Giovanni Alemanni Giovanni Alemanni v. Argentine Republic, Decision on
Jurisdiction and Admissibility,(17 November 2014)
10
Gustav v. Ghana Gustav F W Hamester GmbH & Co KG v. Republic of
Ghana, ICSID Case No. ARB/07/24, Award (18 June
2010).
21
Guyana Guyana v. Suriname, Permanent Court of Arbitration,
Award, ICGJ 370, (17 September 2007).
20
Hochtief Hochtief AG v. The Argentine Republic, ICSID Case
No. ARB/07/31, Decision on Jurisdiction. (24 October
2011)
14, 15,
16
Impregilo Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID
Case No. ARB/03/3, Decision on Jurisdiction, (22 Apr.
2005), ¶. 239, n.103 (CL-153).
5
Inceysa Inceysa Vallisoletana S.L. v. Republic of El Salvador,
ICSID Case No. ARB/03/26, (2 August 2006).
21
Interhandel Case Interhandel Case (Switzerland v. United States of
America), Preliminary Objections, (March 21 1959),
I.C. J. Reports 1959, p. 6.
11
Israeli Wall Advisory
Opinion
Legal Consequences of the Construction of a Wall in the
Occupied Palestinian Territory, Advisory Opinion of 9
July 2004, International Court of Justice.
28
James and Others James and Others, European Court of Human Rights,
(21 February 1986).
25
Maffezini Emilio Agustín Maffezini v. The Kingdom of Spain,
ICSID Case No. ARB/97/, Decision of the Tribunal on
11, 16,
-LIST OF AUTHORITIES- TEAM PINTO
vi
Objections to Jurisdictions, (25 January 2000). 17, 32
Matos e Silva Matos e Silva, Lda., and Others v. Portugal, European
Court of Human Rights, (16 September, 1996).
25
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, Decision on
Jurisdiction and Admissibility, (24 September 2008).
5
Khosrowshahi Khosrowshahi and Islamic Republic of Iran, Award, 24
Iran-US C.T.R. 40, 45.
5
LG&E LG&E Capital Corp., and LG&E International, Inc .v.
Argentine Republic, Decision on Liability, (3 October,
2006).
29
Loewen Loewen Group, Inc. and Raymond L. Loewen v. United
States of America, ICSID Case No. ARB(AF)/98/3,
Decision on Hearing of Respondent's Objection to
Competence and Jurisdiction, (5 January 2001).
12
MCI v. Ecuador MCI Power Group and New Turbine Inc v. Ecuador
ICSID Case No ARB/03/6, Award, (31 July 2007)
19
Metalclad Metalclad Corporation v. The United Mexican States,
ICSID Case No. ARB(AF)/97/1, Award, (30 August
2000)
22
Methanex Methanex Corporation v. United States of America,
UNCITRAL, Final Award, (3 Aug. 2005)
4
Namibia Advisory
Opinion
Legal Consequences for States of the continued
presence of South Africa in Namibia (South West
Africa) Notwithstanding Security Council Resolution
276 (1970), Advisory Opinion of 21 June 1971,
International Court of Justice.
8, 28
Nationality Decrees
Case
Nationality Decrees in Tunis and Morocco, Advisory
Opinion, 1923 P.C.I.J. (Ser. B) No. 4. (7 February
6
-LIST OF AUTHORITIES- TEAM PINTO
vii
1923).
Niko Resources Niko Resources (Bangladesh) Ltd. v. Bangladesh
Petroleum Exploration & Production Company Limited
(“Bapex”) and Bangladesh Oil Gas and Mineral
Corporation (“Petrobangla”), ICSID Case No.
ARB/10/18.
20
Occidental Occidental Petroleum Corporation and Occidental
Exploration and Production Company v. Ecuador,
ICSID Case No ARB/06/11, IIC 561, Award, (24
September 2012)
29, 31
Oil Platforms Case Case concerning Oil Platforms (Islamic Republic of
Iran v. United States of America), (separate opinion of
Judge Higgins) 1996 I.C.J. 803, 856 (12 December
1996)
5
Pac Rim Cayman Pac Rim Cayman LLC v. Republic of El Salvador,
ICSID Case No. ARB/09/12, Decision on the
Respondent’s Objections to Jurisdiction
7
Pan American Pan American Energy, LLC, et al. v. The Argentine
Republic, ICSID Case No. ARB/03/13, Decision on
Preliminary Objections (27 July 2006), ¶. 50 (RL-77)
5
Phoenix Action Phoenix Action, Ltd. v. The Czech Republic, ICSID
Case No. ARB/06/5, Award (15 April 2009)
6, 21,
30
Plama Plama Consortium Limited v. Republic of Bulgaria,
ICSID Case No. ARB/03/24 Award, (27 August 2008)
21
Malek Reza Said Malek v. The Government of the Islamic
Republic of Iran, Interlocutory Award No. ITL 68-193-
3, 23 June 1988, 19 Iran-U.S. CTR 48
7
Saba Fakes Saba Fakes v. Republic of Turkey, ICSID Case No.
ARB/07/20, Award, (14 July 2010)
21
Saipem Saipem S.p.A. v. Bangladesh, ICSID Case No. 10, 11
-LIST OF AUTHORITIES- TEAM PINTO
viii
ARB/05/7, Decision on Jurisdiction and
Recommendation on Provisional Measures, 21 March
2007
Sempra Sempra Energy International v. The Argentine Republic,
ICSID Case No. ARB/02/16 Award, (28 September,
2007)
27
Serafin Serafín García Armas and Karina García Gruber v. The
Bolivarian Republic of Venezuela, UNCITRAL,
Decision on Jurisdiction, (15 December 2014).
4, 7
Siemens Siemens A.G. v. The Argentine Republic, ICSID Case
No. ARB/02/8, Decision on Jurisdiction, (3 August
2003)
13, 14,
15, 21
Société Générale Société Générale v. Dominican Republic (LCIA Case
No UN 7927, Decision on Jurisdiction, (19 September
2008)
19
Starrett (Iran-US
Tribunals)
Starrett Housing Corporation, Starrett Systems, Inc.,
Starrett Housing International, Inc., v. The Government
of the Islamic Republic of Iran, Bank Omran, Bank
Mellat, Case No. 24, 4 Iran-U.S. CTR 122, Interlocutory
Award, (19 December 1983)
24
Suez Suez, Sociedad General de Aguas de Barcelona, S.A.
and Vivendi Universal, S.A. v. Argentine Republic,
ICSID Case No. ARB/03/19, Decision on Jurisdiction,
(3 August 2000)
9, 13,
15
Tecmed Tecnicas Medioambientales Tecmed SA v. Mexico
(ICSID Case No ARB(AF)/00/2, Award, 29 May 2003)
19, 25,
29
Teinver Teinver S.A., Transportes de Cercanías S.A. and
Autobuses Urbanos del Sur S.A. v. The Argentine
Republic, ICSID Case No. ARB/09/1, Decision on
Jurisdiction, (21 December 2012).
14
-LIST OF AUTHORITIES- TEAM PINTO
ix
Telenor v. Hungary Telenor Mobile Communications A.S. v. Republic of
Hungary, ICSID Case No. ARB/04/15, Award (13 Sept.
2006), ¶. 68 (CL-154).
5
Temple of Preah
Vihear
Temple of Preah Vihear, Cambodia v. Thailand, Merits,
Judgment, [1962] ICJ Rep 6, (15 June 1962).
22
Vanessa Ventures Ltd. Vannessa Ventures Ltd v. Venezuela (ICSID Case No
ARB(AF)/04/6, Award, (16 January 2013)
19
Vivendi Compañiá de Aguas del Aconquija S.A. and Vivendi
Universal S.A. v. Argentine Republic, ICSID Case No.
ARB/97/3, Award, (21 November 2000).
31
Wintershall Wintershall Aktiengesellschaft v. Argentine Republic,
ICSID Case No. ARB/04/14, Award, (8 December
2008)
4, 24
Yukos (Final Award) Yukos Universal Limited (Isle of Man) v. The Russian
Federation, UNCITRAL, PCA Case No. AA 227, Final
Award, (18 July 2014).
20, 21,
31
BOOKS:
ABBREVIATION NAME OF BOOK PAGE
NO.
DUGAN, ET.AL,
INVESTOR STATE
ARBITRATION
CHRISTOPHER DUGAN, DON WALLACE, JR., NOAH
RUBINS & BORZU SABAHI, INVESTOR STATE
ARBITRATION 365 (Oceana Tm, 2008)
11
DOUGLAS, ET. AL, THE
FOUNDATIONS OF
INTERNATIONAL
INVESTMENT LAW
ZACHARY DOUGLAS, JOOST PAUWELYN & JORGE E.
VIÑUALES, THE FOUNDATIONS OF INTERNATIONAL
INVESTMENT LAW: BRINGING THEORY INTO PRACTICE
286 (Oxford University Press, 2014)
19
LAUTERPACHT,
RECOGNITION
HERSCH LAUTERPACHT, RECOGNITION IN
INTERNATIONAL LAW 410 (Cambridge University Press,
28
-LIST OF AUTHORITIES- TEAM PINTO
x
2012).
LAUTERPACHT, THE
DEVELOPMENT OF
INTERNATIONAL LAW
HERSCH LAUTERPACHT, THE DEVELOPMENT OF
INTERNATIONAL LAW BY THE INTERNATIONAL COURT
170 (Stevens & Sons Ltd., 1958)
22
RONEN, TRANSITION
FROM ILLEGAL
REGIMES UNDER
INTERNATIONAL LAW
YAËL RONEN, TRANSITION FROM ILLEGAL REGIMES
UNDER INTERNATIONAL LAW (Cambridge University
Press, 2011)
8
ROUSSEAU, DROIT
INTERNATIONAL PUBLIC
ROUSSEAU, DROIT INTERNATIONAL PUBLIC, TOME V: LES
RAPPORTS CONFLICTUELS, 170 (1983)
20
ARTICLES:
ABBREVATION NAME OF ARTICLE PAGE
NO.
Alexandrov &
Robbins, Proximate
Causation in
International
Investment Disputes
Stanimir A. Alexandrov & Joshua M. Robbins,
Proximate Causation in International Investment
Disputes, YEARBOOK ON INTERNATIONAL INVESTMENT
LAW AND POLICY 317, 339 (2009)
31
Burke-White & von
Staden, Investment
Protection in
Extraordinary Times
William W. Burke-White & Andreas von Staden,
Investment Protection in Extraordinary Times: The
Interpretation and Application of Non-Precluded
Measures Provisions in Bilateral Investment Treaties,
48(2) VIRGINIA JOURNAL OF INTERNATIONAL LAW 307,
309 (2008)
27
Devine, Status of
Rhodesia
Dermott J Devine, The Status of Rhodesia in
International Law, 1 Acta Judicia 154 (1973)
28
Jacob, International
Investment
Agreements and
Marc Jacob, International Investment Agreements and
Human Rights, INEF RESEARCH PAPER SERIES 10
(2010)
19
-LIST OF AUTHORITIES- TEAM PINTO
xi
Human Rights
Mac Gibbon, Estoppel
in International Law
Iain C. MacGibbon, Estoppel in International Law, 7(3)
THE INTERNATIONAL AND COMPARATIVE LAW
QUARTERLY 468, 470 (1958)
22
Mann, International
Investment
Agreements
Howard Mann, International Investment Agreements,
Business and Human Rights: Key Issues and
Opportunities, INTERNATIONAL INSTITUTE OF
SUSTAINABLE DEVELOPMENT BULLETIN 10 (2008)
19
Mummery, Duty to
Exhaust Local Judicial
Remedies
David R. Mummery, The Content of Duty to Exhaust
Local Judicial Remedies, 58(2) AMERICAN JOURNAL OF
INTERNATIONAL LAW 389, 400-401 (1964)
12
Schreuer, Consent to
Arbitration
Christoph Schreuer, Consent to Arbitration, in THE
OXFORD HANDBOOK OF INTERNATIONAL INVESTMENT
LAW, (Peter Muchlinski, Federico Ortino, and Christoph
Schreuer, eds., 2008)
11
Schreuer, Nationality
of Investors
Christoph Schreuer, Nationality of Investors: Legitimate
Restrictions vs. Business Interests, 24 (2) ICSID
REVIEW - FOREIGN INVESTMENT LAW JOURNAL 521-527
(2009)
5
Schreuer, Travelling
the BIT Route
Christoph Schreuer, Travelling the BIT Route: Of
Waiting Periods, Umbrella Clauses and Forks in the
Road, 5(2) JOURNAL OF WORLD INVESTMENT & TRADE
231, 238 (2004)
10
Sinclair, Estoppel and
Acquiescence
Ian Sinclair, Estoppel and Acquiescence, in FIFTY
YEARS OF THE INTERNATIONAL COURT OF JUSTICE:
ESSAYS IN HONOUR OF SIR ROBERT JENNINGS (Vaughan
Lowe & Malgosia Fitzmaurice Eds., Cambridge
University Press, 1996)
22
Wirth, The Legacy of Jessica Wirth, ‘Effective Means’ Means? The Legacy of 11
-LIST OF AUTHORITIES- TEAM PINTO
xii
Chevron v. Ecuador Chevron v. Ecuador, 52(1) Columbia Journal of
Transnational Law 325, 356 (2013)
MISCELLANEOUS AUTHORITIES:
ABBREVIATION NAME OF AUTHORITY PAGE
NO.
ARSIWA Articles on the Responsibility of States for
Internationally Wrongful Acts, G.A. Res. 56/83, art 2,
U.N. GAOR, 56th Sess., Supp. No. 49, U.N. Doc.
A/RES/56/83
28, 31
Commentary to Article
39 of ARSIWA
Commentary to Article 39 of the Articles on the
Responsibility of States for Internationally Wrongful
Acts, G.A. Res. 56/83, art 2, U.N. GAOR, 56th Sess.,
Supp. No. 49, U.N. Doc. A/RES/56/83
32
EU Guidelines on
Sanctions
Council of the European Union, Guidelines on
Implementation and Evaluation of Restrictive Measures
(Sanctions) in the Framework of the EU Common
Foreign and Security Policy, 15114/05 PESC 1084 FIN
475 (2 December 2005)
29
Hague Convention on
Nationality Law, 1930
League of Nations, Convention on Certain Questions
Relating to the Conflict of Nationality Law, 13 April
1930, League of Nations, Treaty Series, vol. 179, p. 89,
No. 4137.
6
John Dugard, Second
Report on Diplomatic
Protection (2001)
Special Rapporteur John Dugard, Second Report on
Diplomatic Protection, U.N. Doc. A/CN.4/514 (August
2001)
12
John Dugard, Second
Report on State
Responsibility
Special Rapporteur John Dugard, Second Report on
State Responsibility, U.N. Doc. A/CN.4/498 (July 1999)
20
John Dugard, Sixth Special Rapporteur John Dugard, Sixth Report on 20
-LIST OF AUTHORITIES- TEAM PINTO
xiii
Report on Diplomatic
Protection (2004)
Diplomatic Protection, U.N. Doc. A/CN.4/546 (August
2004)
OECD, Multilateral
Agreement on
Investment,
Commentary to the
Consolidated Text
Multilateral Agreement on Investment, Commentary to
the Consolidated Text, 41, OECD Doc.
DAFFE/MAI(98)8/REV1 (April 1998)
27
UNCTAD, The
Protection of National
Security in IIAs
The Protection of National Security in IIAs, UNCTAD
Series on International Investment Policies for
Development, UNCTAD/DIAE/IA/2008/5 (March
2009)
27
Williem Riphagen,
Third Report on the
Contents, Forms and
Degrees of State
Responsibility
Special Rapporteur Williem Riphagen, Third Report on
the Contents, Forms and Degrees of State
Responsibility, U.N. Doc. A/CN.4/354 (May 1982)
28
-LIST OF ABBREVIATIONS- TEAM PINTO
xiv
LIST OF ABBREVIATIONS
ABBREVIATION MEANING
ARSIWA Articles on State Responsibility for
Internationally Wrongful Acts
Eastasia BIT Agreement for the Promotion and Reciprocal
Protection of Investments between the
Republic of Oceania and the Republic of
Eastasia
Euroasia BIT The Agreement between the Republic of
Oceania and the Republic of Euroasia for the
Promotion and Reciprocal Protection of
Investments
ICJ International Court of Justice
ICSID International Center For Settlement Of
Investment Dispute
MFN Most Favoured Nation
OECD Organization for Economic Co-operation and
Development
PCA Permanent Court of Arbitration
PCIJ Permanent Court of International Justice
UN Charter Charter of the United Nations, 1945
UNCITRAL United Nations Commission on International
Trade Law
UNCTAD United Nations Conference on Trade and
Development
VCLT Vienna Convention on the Law of Treaties,
1969
-STATEMENT OF FACTS- TEAM PINTO
1
STATEMENT OF FACTS
1. On 1 January 1995, the Respondent, Republic of Oceania and the Republic of Euroasia
concluded the Agreement for the Promotion and Reciprocal Protection of Investments. On 1
January 1992, the Republic of Oceania and the Republic of Eastasia concluded the
Agreement for the Promotion and Reciprocal Protection of Investments.
THE INVESTMENT
2. In February 1998, the Claimant, Mr. Peter Explosive, a resident of Fairyland, who at the
time was a national of Eastasia, acquired shares in a decrepit company called Rocket Bombs
Ltd. located in Oceania and became its 100% shareholder. He also became the president and
sole member of the board of directors of the company. Rocket Bombs operated in the arms
industry and specialised in arms production. Before Peter Explosive acquired his shares,
Rocket Bombs had lost its environmental license containing an approval for arms
production.
THE ENVIRONMENTAL LICENSE AND GROWTH OF ROCKET BOMBS
3. In order to resume arms production, Rocket Bombs was obliged by the environmental law of
Oceania to obtain a license from the National Environment Authority of Oceania containing
an environmental approval for the commencement of arms production. To obtain such a
decision, Rocket Bombs was obliged to adjust its production line to the environmental
requirements contained in the Environment Act 1996. Peter Explosive met the President of
the National Environment Authority of Oceania. On 23 July 1998, the National Environment
Authority issued an environmental license approving the commencement of arms production
by Rocket Bombs.
4. Effective as of 1 January 1999, Peter Explosive entered into a contract with Euroasia for a
period of fifteen years with a possibility for renewal. Peter Explosive concluded numerous
contracts over the years. As the business became increasingly profitable, Peter Explosive
started to modernise the production line and to adjust it to the requirements set forth in the
Environment Act 1996.
THE REUNIFICATION AND PETER EXPLOSIVE’S NATIONALITY
-STATEMENT OF FACTS- TEAM PINTO
2
5. The vast majority of people living in Fairyland are of Euroasian origin as historically it was
a part of the territory of Euroasia. The residents held a referendum and the majority decided
in favour of secession and reunification. Eastasia declared that the referendum was unlawful.
On 1 March 2014, the armed forces of Euroasia entered the territory of Fairyland. On 23
March 2014, Euroasia officially declared Fairyland a part of the Euroasian territory. A few
days later, on 28 March 2014, Eastasia declared the annexation to be illegal and in the light
of the public international law.
6. Prior to Fairyland’s annexation, on 1 March 2014 Euroasia introduced an amendment to its
Citizenship Act, which allowed all residents of Fairyland to apply for Euroasian nationality.
The Citizenship Act does not allow Euroasian nationals to possess dual nationality. On 23
March 2014, Euroasian authorities recognised Peter Explosive as a national of the Euroasia,
and he was subsequently issued a Euroasian identity card and passport. On 2 March 2014,
Peter Explosive sent an electronic e-mail to the President of the in which he declared the
renunciation of his Eastasian citizenship.
7. Before the Euroasian armed forces entered Fairyland, Peter Explosive on 28 February 2014,
concluded a fresh contract with Euroasia, effective of 1 April 2014, for a period of another
six years.
THE SANCTIONS
8. Oceania believed that the reunification of Fairyland with Euroasia was in contravention with
international law. On 1 May 2014 the President of the Republic of Oceania issued an
Executive Order on Blocking Property of Persons Contributing to the Situation in the
Republic of Eastasia. The Executive Order introduced a system of sanctions against the
persons engaged in certain sectors of the Euroasian economy. The sanctions were applied to
Rocket Bombs, as well as to Peter Explosive. The sanctions resulted in the deterioration of
Rocket Bombs’ business and in a rapid decrease in the value of its shares. Peter Explosive
was unable to sell the shares in the company to a third person. Simultaneously, all the
Oceanian companies that contracted with Rocket Bombs issued formal notices, declaring
that pursuant to the Executive Order they were no longer bound by the provisions of the
respective contracts and that they had no intention to perform them. Peter Explosive could
neither conduct the business, nor sell it.
CORRUPTION CHARGES
-STATEMENT OF FACTS- TEAM PINTO
3
9. In 2013, the General Prosecutor’s Office of Oceania was conducting an investigation
regarding the corruption in the National Environment Authority of Oceania. On 1 February
2015, the President of the National Environment Authority, along with the other officials,
was convicted of accepting bribes. The President named a number of persons, including
Peter Explosive, from whom he allegedly received bribes. On 23 June 2015, the General
Prosecutor’s Office officially initiated criminal proceedings against Peter Explosive.
THE DISPUTE
10. Due to the effect of the sanctions imposed on Peter Explosive through the Executive Order,
Peter Explosive believes his investment has been expropriated. On 11 September 2015, he
filed a request for arbitration before the International Chamber of Commerce.
-ARGUMENTS- TEAM PINTO
4
ARGUMENTS
PART I- JURISDICTION & ADMISSIBILTY
I. THE TRIBUNAL HAS JURISDICTION RATIONAE PERSONAE AND RATIONAE
MATERIA OVER THE PRESENT MATTER
The Euroasia BIT is the lex specialis governing the relationship between the parties to the
dispute.1 Accordingly, it delimits the scope of the (A) Tribunal’s jurisdiction to claims
brought forward by persons who are investors under the Euroasia BIT, and (B) claims arising
out of investments under the Euroasia BIT.
A. Jurisdiction Rationae Personae
11. The Tribunal must exercise jurisdiction over the submitted claim because (i) the Claimant,
‘Peter Explosive’ is an investor pursuant to Article 1.2(a) of the Euroasia BIT. Further, the
Respondent’s objection that (ii) the Claimant’s Eastasian nationality must preclude the
claim, and (iii) recognition of the Claimant’s Euroasian nationality implies recognition of
the reunification of Fairyland with the Republic of Euroasia, is without merit.
i. The Claimant is an investor pursuant to Article 1.2(a) of the Euroasia BIT.
12. Article 1.2(a) of the Euroasia BIT provides:
“The term investor shall mean any natural or legal person of one Contracting Party who
invests in the territory of the other Contracting Party, and for the purpose of this
definition:
(a) the term natural person shall mean any natural person having the nationality of either
Contracting Party in accordance with its laws.”
The aforementioned article must be interpreted in a manner consistent with Article 31(1) of
the VCLT2 and Article 9(7) of the Euroasia BIT. Article 31(1) of the VCLT requires that the
terms of a treaty be given their ordinary meaning in light of its object and purpose. Article
9(7) requires that the Tribunal interpret the treaty in accordance with the applicable principles
of international law.
1 Serafín, ¶158.
2 Methanex, ¶22; Wintershall (Award), ¶¶78, 86–88.
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5
13. In the present case, a plain reading of Article 1.2(a) of the Euroasia BIT requires the
application of substantive Euroasian laws to determine the Claimant’s nationality. This is
evidenced by the use of the phrase in accordance with its laws. In fact, Tribunals have
consistently held that where a treaty provides a clear definition of nationality the terms of
the BIT should prevail.3 Such an approach allows for greater certainty in the investment
climate. This is in furtherance of the object of the treaty, which is to promote investment by
ensuring a stable regulatory framework. Therefore, an interpretation consistent with Article
31(1) of the VCLT would require the Claimant to prove that he is a Euroasian national in
accordance with Euroasian laws.
14. The Claimant may prove his Euroasian nationality by satisfying the applicable standard of
proof. The standard governing burden of proof in the jurisdictional phase of investment
disputes requires that the Claimant establish a prima facie case of jurisdiction.4 The burden
of proof then shifts to the Respondent, who must conclusively disprove the Claimant’s
assertions.5 Where the Claimant’s assertions cannot be disproved, they are accepted pro tem
for the purposes of establishing jurisdiction.6
15. In the context of nationality claims, a certificate of nationality issued by the state is strong
evidence for the existence of the nationality of the state.7 Therefore, it should be sufficient to
establish a prima facie case of jurisdiction. This view is consistent with the holding of the
Plama Tribunal where the Claimant’s legal identity was used to prima facie establish his
nationality under Article 1(7) of the Energy Charter Treaty.
16. On 1 March 2014, the Republic of Euroasia introduced an amendment to its Citizenship
Act.8 The amendment allows for residents of Fairyland to apply for Euroasian nationality.
9
Subsequent to the amendment, the Claimant, a resident of Fairyland, applied to become a
Euroasian national. On 23 March 2014, Euroasian authorities processed his application and
3 Micula, ¶101.
4 Oil Platforms Case, ¶ 32-34; Impregilo, ¶239; Pan American, ¶; Bayindir, ¶195-196; Telenor, ¶68.
5 Chevron, ¶112; Khosrowshahi, ¶40, 45.
6 Chevron, ¶112.
7 Christoph Schreuer, Nationality of Investors.
8 Procedural Order No. 2, Page 56, ¶2.
9 Procedural Order No. 2, Page 56, ¶2.
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6
recognized the Claimant as a national of the Republic of Euroasia.10
The authorities issued
him a Euroasian identity card and passport as proof of his nationality. The documents help
establish a prima facie case of jurisdiction. The burden on the Respondent is to conclusively
disprove the validity of the Claimant’s nationality.
17. In this regard, it is submitted that even if it is acceded that the Claimant is an Eastasian
national, there is still no conclusive proof that he is not a Euroasian national. This is because
the non recognition of dual nationality by the Republic of Euroasia11
does not necessarily
mean the automatic loss of his nationality. State practice indicates that renunciation
procedures vary from State to State.12
For instance, several States that do not permit dual
nationals don’t denationalize citizens having multiple passports.13
Instead, they simply don’t
recognize the second nationality.14
Therefore, the Respondent cannot conclusively discharge
his burden and the Claimant must be recognized as a Euroasian national.
18. With respect to the application of Article 9(7) of the Euroasia BIT, it is submitted that there
exist no substantive positive laws governing the grant of nationality by States. Nationality
laws fall within the sole competence of States. That is, apart from treaty limits, there are no
codification standards that these laws must adhere to.15
Therefore, Article 9(7) of the
Euroasia BIT does not introduce any requirements outside of those prescribed in Article
1.2(a) of the Euroasia BIT.
19. In any case, the only implied requirement that may be introduced is the requirement to act in
good faith. Tribunals have only ever held investors liable for having acquired nationality in
bad faith in the context of nationality planning. That is, if the (i) dispute was foreseeable16
,
10
Procedural Order No. 2, Page 56, ¶2.
11 Procedural Order No. 2, Page 56, ¶4.
12 Article 9 of the Constitution of India, 1950; Article 66 of the Turkish Constitution, Law 403 of the Turkish
Citizenship Law of 1964; Article 11 of the Nationality Act of May 4, 1950; Argentine Citizenship Law #346;
The Nationality Law of the People's Republic of China, 1980.
13Constitution of the Republic of Poland, 22 July 1952; Polish Citizenship Act, 15 Feb. 1962; Civil Code of the
Islamic Republic of Iran, 23 May 1928, Article 977;Law on the Citizenship of the Republic of Indonesia, Law
No. 62 of 1958.
14 Constitution of the Republic of Poland, 22 July 1952; Polish Citizenship Act, 15 Feb. 1962; Civil Code of the
Islamic Republic of Iran, 23 May 1928, Article 977;Law on the Citizenship of the Republic of Indonesia, Law
No. 62 of 1958.
15Hague Convention on Nationality Law, 1930; Nationality Decrees Case.
16 Phoenix Action, ¶¶136-139.
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7
or (ii) the dispute had already arisen17
. In the present case, the Claimant acquired his
Euroasian nationality on 23 March 2014. The dispute has arisen as a consequence of the
promulgation of the Executive Order dated 1 May 2014. The dispute had not (i) arisen, and
(ii) promulgation of executive order by Respondent State was not foreseeable. Therefore, the
Claimant has acquired Euroasian nationality in good faith.
ii. The Claimant’s Eastasian Nationality doesn’t preclude the Tribunal’s jurisdiction.
20. The status of the Claimant’s Eastasian nationality is irrelevant so long as he acquired
Euroasian nationality in accordance with Euroasian laws. In this regard, the Claimant
submits that (i) the test of effective and dominant nationality does not apply of the present
claim. In Arguendo, it shall be submitted that (ii) the Claimant’s Euroasian nationality is his
effective and dominant nationality.
21. A reading in accordance with Article 31(1) of the VCLT does not envisage the application
of the effective and dominant nationality test to determine whether a dual national may bring
a claim against a Contracting Party. Where a treaty does not impose express limitation on
dual nationals, the Tribunal must not devoid of effect a nationality granted freely by a State
and accept as valid the nationality accorded by another.18
Further, the test of effective and
dominant nationality may be applied only if a plain reading of Article 1.2(a) leads to a
‘manifestly unreasonable result’19
. The Tribunal may not deprive the Claimant of his
Euroasian nationality because the terms of Article 1.2(a) of the Euroasia BIT do not restrict
dual nationals from bringing claims, and recognition of his Euroasian nationality does not
lead to a manifestly unreasonable result.
22. Arguendo, if it is found that the test of effective and dominant nationality applies to the
present claim, it is submitted that the Claimant’s effective and dominant nationality is
Euroasian. In arriving at this determination the Tribunal must consider all relevant factors
that are evidence of attachment.20
The period for making the determination is the time
between the date the claim arose and the signing of the BIT.21
In the present matter, the
17
Pac Rim Cayman, ¶2.96.
18 Serafín.
19 Serafin¶200.
20 Dual Nationality Case, ¶251; Malek, ¶14.
21 Dual Nationality Case.
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8
Claimant’s (a) acquisition of Euroasian nationality on 23 March 2014, (b) cultural ties with
the Republic of Euroasia22
, (c) Euroasian descent23
, and (d) declaration of renunciation of
Eastasian nationality are all strong evidence of his attachment.24
Therefore, his effective and
dominant nationality is his Euroasian nationality.
iii. Recognition of the Claimant’s Euroasian nationality does not imply recognition of the
reunification of Fairyland with the Republic of Euroasia.
23. The obligation of non-recognition prevents States from validity the acts of an occupying
power.25
However, the Namibia exception allows recognition of such acts where it aims to
prevent detriment to the inhabitants of the occupied territory.26
If an act falls within the
scope of the Namibia exception, it must then be determined whether effect of the act would
survive transition into a legal regime.27
24. In this regard, the Claimant submits that (a) the obligation of non recognition does not
extend to situations wherein a State doesn’t act on behalf of the individual, (b) the non-
recognition of his nationality for the purposes of investment arbitration would amount to
investor detriment. And, (c) the grant of nationality by the Republic of Euroasia would
survive the transition from the alleged illegal regime to legal one.
25. For the purposes of investment arbitration, the Republic of Euroasia does not purport to act
on behalf on the Claimant. This is evidenced by the fact that, (a) the Claimant need not take
the Republic of Euroasia’s permission to proceed against the Respondent, (b) the
compensation claimed is not directed towards the Republic of Euroasia. Further, non-
recognition would adversely affect the Claimant’s right to redressal. It is in order to prevent
this specific detriment that his Euroasian nationality must be recognized by the Tribunal.
Finally, the grant of his Euroasian nationality would survive the transition of Fairyland from
being an Euroasian territory to an Eastasian territory. This is because the nationality grant
was made by way of application and not by reason of the occupation.
22
Statement of Uncontested Facts, Page 35, ¶14.
23 Statement of Uncontested Facts, Page 35, ¶ 14.
24 Procedural Order No. 3, Page 59, ¶2.
25 Judge Onyeama, Namibia Advisory Opinion.
26 RONEN, TRANSITION FROM ILLEGAL REGIMES UNDER INTERNATIONAL LAW, 188.
27 RONEN, TRANSITION FROM ILLEGAL REGIMES UNDER INTERNATIONAL LAW, 190.
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9
Therefore, it is submitted that the Claimant is an investor pursuant to Article 1.2(a) of the
Euroasia BIT.
B. Jurisdiction Rationae Materia
26. The Tribunal must exercise jurisdiction over the submitted claim because it is a (i) dispute
arising out of an (ii) investment as prescribed in Article 1.1 of the Euroasia BIT.
27. A legal dispute is a disagreement about the legal rights or obligations that have arisen
between parties. 28
In the present case, the Claimant has based his claim on legal rights
granted to him under the Euroasia BIT. That is, the right to compensation pursuant to an
expropriatory measure taken under Article 4 of the Euroasia BIT. Hence, the submitted
claim is a legal dispute.
28. Article 1.1(b) of the Euroasia BIT classifies shares of companies as an investment protected
by the Euroasia BIT. The Claimant has alleged expropriation by virtue of devaluation of his
shares in ‘Rocket Bombs Ltd.’29
Therefore, the Tribunal has jurisdiction rationae materia in
the present matter.
II. Claimant was not required to comply with the pre-arbitral steps as provided in the
Article 9 of the Euroasia BIT prior to bringing his claims before the Tribunal;
A. Article 9 of the Euroasia BIT does not preclude the Claimant from invoking the
Tribunal’s Jurisdiction.
29. The Contracting States have consented to submit to the jurisdiction of the tribunal as per the
provisions of Article 9 of the Euroasia BIT. The provision prescribes two pre-conditions to
consent to arbitrate, (i) that disputes arising out of the Euroasia BIT “… shall, to the extent
possible, be settled in amicable consultations”30
; (ii) that if a dispute cannot be settled
amicably, it “...may be submitted to the competent judicial or administrative courts of the
Contracting Party” .31
28
Suez, ¶¶ 34,37.
29 Request for Arbitration, Page 5 of the Record.
30 Article 9(1) of the Euroasia BIT.
31 Article 9(2) of the Euroasia BIT.
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10
30. (i) The obligation to amicably settle a dispute has been complied with if it is shown that, (a)
the opportunity to engage in consultation was offered32
, or (b) consultations were not
possible33
. The Claimant notified the relevant Oceanian authorities of his willingness to
engage in negotiation.34
The notification also stated the Claimant’s intention to initiate
arbitral proceedings if the Respondent failed to negotiate. As of the date of filing the
Request of Arbitration, the Respondent had not responded to the request for negotiation.35
Since (a) the opportunity to negotiate was offered, and (b) non-receipt of response made
consultations impossible, the first procedural requirement has been complied with.
31. (ii) Futility of local remedies is an exception to submitting a dispute to domestic courts.36
The exception finds support in both, case-law37
, and academia38
. Hence, Article 9(2) of the
Eurasia BIT need not be complied with if it is shown that recourse to domestic courts would
be futile. Accordingly, the Claimant shall (a) establish the appropriate threshold of futility,
and (b) apply the same to the facts of the present claim.
Threshold of Futility a.
32. The Ambiente Tribunal placed reliance on the standard articulated by Article 15(a) of the
2006 ILC Draft Articles on Diplomatic Protection.39
It provides that local remedies need not
be exhausted where i) they do not provide effective redress, or ii) they provide no reasonable
possibility of such redress.40
The Tribunal reasoned that the standard was justified because
alternative thresholds impose too heavy a burden, or are too generous towards Claimants.41
Additionally, it was stated that since the dispute settlement procedure prescribed was not a
32
Ambiente, ¶ 583.
33 Ambiente, ¶ 583.
34 Request for Arbitration, Page 4 of the Record.
35 Request for Arbitration, Page 4 of the Record.
36 Giovanni, ¶ 311.
37 Daimler, ¶ 198; BG Group, ¶ 146; Saipem v. Bangladesh, ¶ 153.
38 Schreuer, Travelling the BIT Route.
39 Ambiente, ¶ 599.
40 Ambiente, ¶ 599.
41 ILC Draft Articles on Diplomatic Protection, Commentary, Art. 15, nr. 3.
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11
traditional exhaustion of local remedies requirement, the threshold could not be higher than
in the context of diplomatic protection.42
33. The Claimant submits that the aforementioned test is the appropriate threshold because, i)
the reasoning of the Tribunal finds support in multiple case-law43
, and ii) similar to the
dispute settlement procedure in the Ambiente case, Article 9 of the Euroasia BIT is not an
exhaustion of local remedies provision. Unlike traditional exhaustion of local remedies
provisions it provides only for temporary recourse to domestic courts, and allows parties to
refer a case to arbitration whether or not a domestic court decision has been rendered.44
Moreover, the approach is entirely consistent with the central purpose of investment
treaties.45
Application of Threshold b.
No Effective Redress
34. The Interhandel46
Tribunal reasoned that the rule requiring an exhaustion of domestic
remedies is founded on the principle that the Respondent State must have an opportunity to
redress an alleged wrong within the framework of its own legal system. Where there exists
no framework for the redressal of grievance, the Respondent’s insistence that the dispute be
submitted to domestic courts cannot be reasoned. Insofar as i) the executive order creates no
substantive or procedural rights in favour of the blocked person47
, and ii) domestic courts do
not have the jurisdiction to hear treaty based claims48
, there exists no framework to
effectively redress the Claimant’s grievance.
35. Additionally, it is submitted that a challenge to the constitutional validity of the Executive
Order is not an effective remedy.49
No Reasonable Possibility of Redress
42
Ambiente, ¶ 611.
43 Biwater, ¶ 343; Saipem v. Bangladesh, ¶ 153.
44 Maffezini (Decision on Jurisdiction), ¶ 57; Schreuer, Consent to Arbitration, Page 847.
45 DUGAN, ET.AL, INVESTOR STATE ARBITRATION.
46 Interhandel Case, ¶ 27.
47 Section 9 of the Executive Order.
48 Procedural Order No. 3, Page 60, ¶ ¶ 5-6.
49 Wirth, The Legacy of Chevron v. Ecuador
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12
36. The reasonability of a remedy is affected by any conditions relating to the exercise of the
local remedy. 50
This requires the Tribunal to take a realistic view of domestic judicial
systems.51
There must be a real chance in practice that domestic courts can address the
issue.52
Accordingly, where there is an adverse line of precedence against the investor, it
cannot be said that there is a reasonable possibility of redress.53
The Respondent State’s
historic deference to the executive branch, and extreme length of the process, make it
unlikely that there is a reasonable possibility of redress in the present dispute.54
Therefore, a
challenge to the constitutional validity of the Executive Order is not a reasonably available
remedy.
37. Additionally, it is submitted that as per Article 9(2) of the Euroasia BIT, the remedies to be
exhausted are limited to remedies provided by judicial or administrative courts. It does
require an investor to exhaust an administrative remedy. Requests for reconsideration of
blocked status are made to the President of the Republic of Oceania. Therefore, it is an
administrative remedy not falling within the ambit of Article 9(2) of the Euroasia BIT.
38. In view of the above submissions, the Tribunal must hold that the Claimant may access the
dispute settlement mechanism of the Euroasia BIT.
III. The Claimant may invoke Article 8 of the Eastasia BIT pursuant to Article 3 of the
Euroasia BIT.
39. Article 9 of the Euroasia BIT allows the Respondent's domestic courts to try a dispute for a
period of twenty four months before it is submitted to arbitration. However, Article 8 of the
Eastasia BIT imposes no such condition. It merely provides that an investor may opt for
arbitration after the six month period prescribed for amicable consultation has expired. The
requirement of having to submit a claim before a domestic court leads to Euroasian investors
being treated less favourably than Eastasian investors in the Respondent State.
50
Loewen, ¶ 169.
51 ELSI, ¶ ¶ 42-48; David R. Mummery, The Content of Duty to Exhaust Local Judicial Remedies, 58(2)
American Journal of International Law 389, 400-401 (1964).
52 Abaclat, ¶ ¶ 581-582.
53 John Dugard, Second Report on Diplomatic Protection (2001).
54 Procedural Order No. 3, Page 60, ¶ 6.
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13
40. In this regard, it is contended that Article 3(1) of the Euroasia BIT is a commitment by the
Respondent to extend MFN treatment to Euroasian investors. Hence, the Tribunal must
extend procedural protections provided under Article 8 of the Eastasia BIT to the Claimant.
41. The criteria to determine whether the dispute settlement procedure prescribed under Article
8 of the Eastasia BIT prompts the application of the MFN clause is found in Article 3(1) of
the Euroasia BIT. Article 3(1) of the MFN clause promises to:
“… within its own territory, accord to investments made by investors of [Euroasia], 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.”55
42. A plain reading of Article 3(1) suggests four pre-conditions for the application of the MFN
clause: (A) Application of the MFN clause must extend to dispute settlement mechanisms;
(B)Application of the MFN clause must extend to treatment within Oceanian territory;(C)
Less favourable treatment must be accorded to Euroasian investors as opposed to investors
from third party countries; and (D)Application must not override any public policy
considerations the Republic of Euroasia and Respondent’s may have had.
A. The MFN clause extends to access to dispute settlement mechanisms.
43. Notwithstanding the fact that Article 3 of the Euroasia BIT does not make explicit reference
to dispute settlement, the Tribunal must conclude the same if it is shown that, access to
dispute settlement mechanisms is an investment related activity (i), and the term treatment
refers to both, substantive and procedural treatment (ii). In arriving at these conclusions, the
Claimant shall interpret the ordinary meaning of the words of the MFN clause, and be
guided by the purpose of the Treaty as expressed in its title and preamble.56
That is, the
promotion and protection of investments. 57
44. (i) Article 2(3) of the Euroasia BIT defines activities related to investment as “activity of
investors...with regard to investments, such as in particular management, maintenance, use,
enjoyment or disposal of such investments.” Further, Tribunals have also held that the
ordinary meaning of the term “activities related to investment” in the context of investment
55
Article 3(1) of the Euroasia BIT.
56 Suez, ¶ 54.
57 Siemens, ¶ 81.
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14
arbitration is, “the management, utilization, use and enjoyment of an investment.”58
The
management of investment includes the exercise of an investor’s right of action to solve an
investment claim.59
Accordingly, recourse to dispute settlement is an aspect of management
of the investment.
45. In fact, Tribunals have consistently found that “activities related to the investments” is a
term of wide import and includes dispute settlement.60
They have reasoned that the
procedural right to enforce a substantive right is essential to the enjoyment of the investment
.61
Therefore, Article 3(1) of the Euroasia BIT extends to access to dispute settlement
mechanisms.
46. In any case, Article 3(1) includes within its ambit, “such other investment matters regulated
by this Agreement.” Because the term “such” is preceded by “activities related to
investments” it is unambiguously inclusive of matters corollary to investment related
activities. The term “matters,” is broad and general.62
This indicates that the application of
the MFN treatment extends to a larger category of activities than just “investment related
activities.” The only qualification prescribed is that the matter must be regulated by the BIT.
47. Dispute settlement is a matter regulated by the Euroasia BIT. Not only does Article 9 of the
Euroasia BIT prescribe the procedure for the settlement of disputes, the preamble
categorically recognizes the importance of enforcing rights through international
arbitration.63
Therefore, MFN treatment under Article 3(1) may be extended to access to
dispute settlement mechanisms.
48. (ii) The ordinary meaning of the term “treatment” in the context of investment is, “the rights
and privileges granted, and the obligations and burdens imposed by a Contracting State on
58
Hochtief, ¶ 66.
59 Hochtief, ¶ 66.
60 Siemens, ¶ 103.
61 Hochtief, ¶ 66.
62 Teinver, ¶ 160.
63 Preamble, Euroasia BIT.
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15
investments made by investors covered by the treaty.”64
The definition is illustrative of the
wide import of the term and necessarily covers substantive and procedural treatment.65
49. Indeed, there can be no basis for distinguishing dispute settlement matters from any other
matters covered by the Euroasia BIT. From the point of view of the promotion and
protection of investments, the stated purposes of the Euroasia BIT, dispute settlement is as
important as other matters governed by the BIT.66
In fact, Tribunals have often recognized
international arbitration as closely linked to the material aspects of the treatment
accorded.”67
Therefore, so long as access to dispute settlement mechanisms is part of the
protection offered under the BIT, it is “treatment” as envisaged under Article 3(1) of the
Euroasia BIT.68
50. In the alternative that the Tribunal finds that the term “treatment” covers only substantive
rights, it is submitted that a right to remedy is a substantive right.69
Hence, it falls within the
definition of treatment as per Article 3(1) of the Euroasia BIT.
B. Access to international arbitration is treatment accorded within the Respondent State’s
territory.
51. Article 3(1) of the Euroasia BIT prescribes that the MFN clause applies to treatment
accorded within the Respondent State’s territory. Tribunals have interpreted the term “within
its own territory” to imply the location of the consequences or the effects of the treatment.70
Access to international arbitration has a direct bearing on the Claimant’s investment in the
Respondent State. Accordingly, the phrase “in its territory” does not impose a territorial
limitation on the applicability of the MFN clause.
52. Arguendo, the treatment of which the Claimant complains is the 24 month waiting period
prescribed under Article 9(3) of the Euroasia BIT. The Claimant seeks to invoke Article 8 of
the Eastasia BIT to avoid being subjected to the jurisdiction of Oceanian domestic courts.
64
Suez, ¶ 55.
65 Alpha Projektholding, ¶
66 Suez, ¶ 57; Hochtief, ¶ 67.
67 Suez, ¶ 60.
68 Siemens, ¶102.
69 Concurring opinion of Arthur W. Rovine. Issues of Independent Investor Rights, Diplomatic Protection and
Countermeasures, paras 5, 49, 82.
70 Hochtief, ¶ 109.
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16
Since requirement of reference to domestic courts is treatment accorded within the
Respondent’s territory, the MFN clause does not have the effect of limiting access to dispute
settlement mechanisms.
C. Respondent accords Eastasian investors more favourable dispute treatment than
Euroasian investors in its territory.
53. The Claimant submits that Article 9(3) of the Euroasia BIT is a less favourable dispute
settlement mechanism for the following reasons, it deprives Euroasian investors of the
choice to approach an international arbitral tribunal (i), and it only serves to delay the
submission of a dispute to an arbitral tribunal (ii).
54. (i) Tribunals have held that regardless of the substantive merits of litigation, the choice to
approach an arbitral tribunal is more favourable than not having that choice.71
The Claimant
submits that insofar as Article 9(3) of the Euroasia BIT deprives Euroasian investors of the
option to approach international arbitral Tribunal it accords less favourable treatment than
that accorded to Eastasian investors.
55. (ii) Tribunals have consistently rejected objections to jurisdiction demanding application to
domestic courts when reference can be shown to be futile.72
Such a reference would only
serve to delay arbitral proceedings and impose unnecessary expenses on investors. In the
present case, findings under the Executive Order that the Claimant is aggrieved by may not
be challenged in domestic courts. Therefore, insistence on reference to domestic courts is
evidently futile, and amounts to according less favourable treatment to Euroasian investors
by the Respondent State.
D. Application of MFN clause does not override any public policy considerations the
Contracting Parties may have had.
56. As a matter of principle, investors should not be able to override public policy
considerations that contracting parties might have envisioned as fundamental to their
acceptance of the agreement.73
Such policy considerations serve to limit the application of
71
Hochtief, ¶ 100.
72 Finnish Vessels in Great Britain During the War.
73 Maffezini (Decision on Jurisdiction), ¶ 62.
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17
an MFN clause. The Maffezini Tribunal recognizes one such limitation as the application of
an MFN clause to expand jurisdiction rationae materia.74
57. Reliance on Article 3(1) of the Euroasia BIT to bypass procedural requirements prescribed
under Article 9 of the Euroasia BIT has no effect on the scope of the Tribunal’s jurisdiction.
This is because reference to domestic courts does not give rise to a new right to arbitrate. It
simply prescribes the manner in which an existing right to arbitrate may be exercised.75
Therefore, extending MFN treatment to dispute settlement does not bring cases that could
not eventually be brought before the Tribunal within its jurisdiction.
58. This holds true because Article 9(3) permits the reference of a case to international
arbitration (i) whether or not a domestic court decision has been rendered, and (ii) regardless
of its outcome.
59. To explain this further, Article 9(3) of the Euroasia BIT provides that:
“Where, after twenty four months from the date of the notice on the commencement
of proceedings before the courts mentioned in ¶graph 2 above, the dispute between
an investor and one of the Contracting Parties has not been resolved, it may be
referred to international arbitration.”
60. A plain reading of the clause indicates that regardless of an adjudication by domestic courts,
the case may be referred to arbitration provided a dispute has not been resolved. The clause
prescribes no guidelines for deciding under what circumstances a dispute may be deemed
not resolved. Tribunals have opined that the absence of objective criteria for such
determination leaves parties free to decide whether they wish to submit their claim to
international arbitration.76
Clearly, it is not an exhaustion of remedies provision in the
“traditional sense” and bypassing it has no effect on the scope of the Tribunal’s jurisdiction.
Accordingly, the application of Article 3 of the Euroasia BIT does not override any public
policy consideration the Contracting Parties may have had.
61. Therefore, the Tribunal must extend dispute settlement mechanism prescribed in Article 8 of
the Eastasia BIT to the Claimant.
74
Maffezini (Decision on Jurisdiction), ¶ 63.
75 Hochtief, ¶ 90.
76 Maffezini (Decision on Jurisdiction), ¶ 32.
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18
IV. The Claimant made a protected investment, especially in light of the “clean hands”
doctrine with reference to Article 1.1 of the Eastasia BIT.
62. The Respondent has alleged that the Claimant has behaved in a manner inconsistent with its
laws while acquiring the environmental license necessary to commence arms production.77
In light of this allegation, the Respondent has contended that the ‘clean hands’ clause
present in the Eastasia BIT will operate to deprive the Claimant of the protection granted to
him under the Euroasia BIT.78
63. The Claimant submits that he made a protected investment under the Euroasia BIT. He may
not be deprived of the protection of the treaty on allegations of unclean hands because, (A)
There is no clean hands requirement present in the Euroasia BIT, and such requirement may
not be imported from the Eastasia BIT, (B) No such requirement can be read into the treaty,
(C) The clean hands doctrine is not a general principle of international law and therefore
may not be applied in the present case, (D) Even if the doctrine is held to be applicable to
the present case, such application is restricted to the initiation of investment, and (E) Even if
the principle of clean hands extends to performance of investment, the Respondent is
estopped from invoking the same.
A. No clean hands requirement from the Eastasia BIT may be imported into the Euroasia
BIT.
64. Article 1.1 of the Eastasia BIT provides that for an investment to be protected under the BIT,
it has to be made ‘in accordance with the laws and regulations’ of the host state. It seems to
be the Respondent’s contention that in order to be able to access the dispute resolution
clause in the Eastasia BIT via the MFN clause, the investment must adhere to the definition
of investment in the Eastasia BIT itself.
65. The Claimant contends that the invocation of the MFN clause in the Euroasia BIT to access
the dispute resolution clause in the Eastasia BIT does not attract the definition of investment
as present in the Eastasia BIT. In order for an investment to be protected, the only criterion it
must fulfil is that of being considered as a protected investment under the basic treaty
(Euroasia BIT) and not the comparator treaty ( Eastasia BIT). Article 1.1 of the Euroasia
77
Answer to Request for Arbitration, Page 15-16.
78 Answer to Request for Arbitration, Page 15.
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BIT merely states that “the term investment comprises every kind of asset directly or
indirectly invested by an investor of one Contracting Party in the territory of the other
Contracting Party.” It is evident that there is no requirement for an investment to be made in
accordance with the laws of the host state. Each treaty defines what it considers a protected
investment and who is entitled to that protection, and definitions can change from treaty to
treaty.79
The MFN clause applies only to the treatment accorded to such defined investment,
but not to the definition of ‘investment’ itself.80
66. Therefore, no ‘in accordance with laws’ provision in the Eastasia BIT may be imported and
considered as a pre-requisite for successfully invoking the MFN clause in the Euroasia BIT.
B. No requirement of clean hands may be read into the Euroasia BIT.
i. The preamble cannot create a substantive obligation
67. The Euroasia BIT does not contain any specific provision requiring an investment to be
made in accordance with the laws of the host state. Further, no such obligation may be
inferred from the text of the treaty. The statement in the preamble ‘Desiring to achieve these
objectives in a manner consistent with the protection of health, safety and the environment’
cannot be construed as an obligation on the investor to make an investment in accordance
with the laws of the host state. Since it cannot be construed as an obligation, it does not
operate as a precondition for an investment to be protected under the BIT.
68. The preamble does not have the same weight as a substantive provision.81
Reference in the
preamble may be relevant for matters of treaty interpretation, but will not create any
substantive obligations for the investors.82
As stated by the NAFTA ADF Tribunal, such
general provisions stating the object and purpose of a treaty may frequently cast light on a
specific interpretive issue. They are however not to be regarded as being able to override and
supersede the text.83
79
Vannessa Ventures, ¶125.
80 Société Générale, ¶ 41; MCI ¶40; Tecmed, ¶ 53.
81 Jacob, International Investment Agreements and Human Rights.
82 Mann, International Investment Agreements.
83 ADF, ¶147.
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69. In the present case, reading in a clean hands requirement in the preamble would mean
deriving a substantive obligation on the investor to make his investment in a particular
manner in order to avail the protection guaranteed by the treaty. Further, since no
requirement of clean hands is contained in the definition of investment itself, interpreting the
preamble so as to restrict the application of the treaty itself would be to interpret it in a
manner that would allow it to supersede the text of the treaty. Therefore, no clean hands
requirement may be read into the treaty.
ii. In the alternative, the preamble only imposes obligations on the Contracting-Parties,
and not on the investors.
70. The wording of the preamble is such that all aspects outlined therein are reciprocal
acknowledgments of obligations of the Contracting Parties as host states. The preamble
begins with- “The Republic of Oceania and the Republic of Euroasia…”and then goes on to
highlight the objectives of the treaty that the Contracting Parties aim to further. It places
emphasis on the necessity of cooperation between the States in furtherance of protection of
investor interests and not on investor conduct or investor obligations. Therefore, no
obligation on the investor can be derived from the preamble.
C. The clean hands doctrine is not a general principle of international and therefore has no
application in the present case.
71. Neither the PCIJ nor the ICJ has ever endorsed clean hands as a general principle of
international law in a majority opinion. Majority of the scholars in international law reject
clean hands as being a general principle.84
In the case of Guyana v. Suriname, the Tribunal
held “The ICJ has on numerous occasions declined to consider the application of the
doctrine, and has never relied on it to bar admissibility of a claim or recovery.” 85
In the
field of investment arbitration, the Tribunals in Niko Resources and Yukos (Final Award)
have refused to recognize clean hands as a general principle. 86
Moreover, investment
tribunals that have stated that clean hands is a part of general principles of international law
84
John Dugard, Sixth Report on Diplomatic Protection (2004); ROUSSEAU, DROIT INTERNATIONAL PUBLIC; John
Dugard, Second Report on State Responsibility.
85 Guyana ¶120.
86 Yukos (Final Award) ¶157.
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have all done so in obiter and have always relied on express provisions in the concerned
BITs to impose a clean hands requirement. 87
72. Therefore, since the application of the clean hands doctrine has been sparse and inconsistent,
it cannot be considered as a general principle of international law. Since it is not a general
principle of international law, it finds no application in the present case.
D. Even if the Tribunal is of the opinion that the clean hands doctrine is applicable in the
instant case, its applicability is restricted to the initiation of investment.
73. The Claimant contends that the scope of application of the clean hands doctrine is restricted
to the initiation of investment. This is reflected in the opinions of tribunals in cases where
treaty provisions expressly require compliance with host state laws, 88
and cases where such
requirement has been read into a treaty. 89
The rationale for such a view was expounded in
the Yukos (Final Award) case where the Tribunal opined -
“There is no compelling reason to deny altogether the right to invoke the Energy
Charter Treaty to any investor who has breached the law of the host State in the
course of its investment. If the investor acts illegally, the host state can request it to
correct its behavior and impose upon it sanctions available under domestic law.”90
74. In the present case, if the Claimant is found guilty as per the Respondent’s laws, fines or
penalties as is seen fit may be imposed. The innocence or guilt of the accused should have
no bearing on determining if the Claimant can make his case before this Tribunal on merits.
75. There is nothing in international law, or practice in investment arbitration to indicate that
clean hands as a principle must extend to performance of the investment. In the present case,
the Claimant’s conduct is being questioned with regards to the acquisition of the
environmental license.91
That act is distinct from the initial investment made by the
Claimant. The initiation of the investment was at the time when the Claimant purchased
shares in Rocket Bombs Ltd.92
87
Plama, ¶120; Phoenix Action, ¶140; Gustav v. Ghana, ¶87; Inceysa, ¶90.
88 Saba Fakes, ¶38 ;Alasdair, ¶50 ;Inceysa, ¶75 .
89 Plama, ¶56; Yukos (Final Award), ¶¶ 1354-1352.
90 Yukos (Final Award), ¶ 1355.
91 Answer to Request for Arbitration, Page 15.
92 Statement of Uncontested Facts, Page 32 of the Record.
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76. In the absence of apposite authority to indicate that clean hands doctrine extends to
performance of investment, the Claimant’s alleged illegal conduct is irrelevant to determine
if his investment is protected under the BIT. Since the only relevant consideration for
applicability of clean hands is conduct at the time of investment and there is no question of
illegality at that time, the clean hands doctrine has no role to play in the present case.
E. Even if the principle of clean hands extends to performance of investment, the
Respondent is estopped from invoking the same.
77. Estoppel is a general principle of international law.93
The principle’s essence is that a State
must not be permitted to benefit from its own inconsistency to the prejudice of another
State.94
The same principle may be extended to investors. In the present case, the President
of the National Environmental Authority himself was involved in the corruption that the
Claimant is being accused of.95
78. Further, from the date of issue of the license to the date of initiation of prosecution against
the Claimant, fifteen years have lapsed.96
During this period, the Environmental Authority
had the power to unexpectedly and randomly visit the arms production site in order to verify
whether it complies with the requirements set under the Environment Act 1996. If the arms
production site did not comply with the requirements, the environmental license is
revoked.97
This implies one of two things: one, the Authority willfully did not go on checks
or, two, they went on checks and did not report the violation. In both the scenarios, the
Respondent may be deemed to have acted in a manner so as to condone the act of the
Claimant. Further, it is pertinent to note that the Claimant is being prosecuted in Oceania on
corruption charges.98
79. The Respondent must not be allowed to take advantage of its own wrong and invoke the
clean hands doctrine against the Claimant to deprive him of protection under the Euroasia
BIT.
93
LAUTERPACHT, THE DEVELOPMENT OF INTERNATIONAL LAW; MacGibbon, Estoppel in International Law;
Sinclair, Estoppel and Acquiescence.
94 Temple of Preah Vihear, ¶ ¶ 39–40
95 Statement of Uncontested Facts, Page 36 of the Record.
96 Statement of Uncontested Facts, Page 33 of the Record.
97 Procedural Order No. 3, Page 59 of the Record.
98 Statement of Uncontested Facts, Page 36 of the Record.
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80. In light of the above arguments, the Claimant’s investment is a protected investment under
the Euroasia BIT. The Tribunal must thus go on to consider the issue of expropriation of the
investment.
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24
PART II - MERITS
V. The Claimant’s investment was expropriated by the Respondent.
81. The Respondent unlawfully expropriated the Claimant’s investment by imposing sanctions
against the Claimant and the Claimant’s company, Rocket Bombs Ltd.99
In this regard, the
Claimant contends that, (A) His investment has been expropriated for no discernible public
purpose and it is therefore unlawful. Further, (B) The Respondent’s measure is not justified
under Article 10 of the Euroasia BIT, and (C) Full reparation must be made to the Claimant
for losses suffered.
A. The Respondent has unlawfully expropriated the Claimant’s investment.
82. The Claimant submits that, (i) The Respondent’s measure has resulted in the indirect
expropriation of his investment, and (ii) The measure cannot be justified on the ground that
it was carried out for a public purpose.
i. The Claimant’s investment was indirectly expropriated.
83. Article 4 of the Euroasia BIT covers direct and indirect expropriation. It states, “Investments
by investors of either Contracting Party may not directly or indirectly be expropriated…”
Indirect expropriation includes a situation wherein the host state interferes with the usage of
property which has the effect of depriving the owner in whole or in significant part, of the
use or economic benefit of such property.100
84. In the present case, the Executive Order resulted in the reduction in the value of shares of
Rocket Bombs to almost nil. The Claimant was also unable to sell his shares in the company.
All contracts with entities operating in the territory of the Respondent State were terminated.
The sanctions caused a complete standstill in arms production, as all suppliers of Rocket
Bombs Ltd were operating within the territory of the Respondent state. As a result, Rocket
Bombs Ltd has been unable to meet any of its contractual obligations towards entities from
outside of the Respondent state.101
.
99
Statement of Uncontested Facts, Page 36 of the Record;
100 Starrett (Iran-US Tribunals), ¶ 103.
101 Request for Arbitration, Page 5 of the Record.
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85. Therefore, the measure undertaken by the Respondent has resulted in the indirect
expropriation of the Claimant’s investment.
ii. The sanction may not be justified on the ground that it was given effect in furtherance
of a public purpose.
86. Article 4 of the Euroasia BIT provides, “Investments by investors of either Contracting Party
may not directly or indirectly be expropriated,…except for public purpose” [emphasis
supplied].
87. A treaty requirement for ‘public interest’ requires some genuine interest of the public.102
The
preamble of the Executive Order provides that the sanctions were being brought into place in
light of the extraordinary threat to national security of the Respondent.103
Thus it is evident
that the Respondent sought to justify the sanction on the basis of national security being its
public purpose objective. However, the Claimant contends that there is no evidence to show
that the peaceful reunification of Fairyland with Euroasia constituted extraordinary threat to
national security of the Respondent whatsoever.
88. Further arbitral tribunals must consider whether such actions or measures undertaken by the
government are proportional to the public interest presumably protected. 104
Not only must a
measure depriving a person of his property pursue a legitimate aim, but there must also be a
reasonable relationship of proportionality between the means employed and the aim sought
to be realized.105
89. In the present case, even if it were to be accepted that national security is a genuine public
interest question, the Claimant’s connection to the Republic of Euroasia is (a) through his
company, and (b) to the extent of supplying arms. The sanction however has been imposed
on the Claimant in an individual capacity106
and extends to the prohibition to engage with
him professionally in any way. It also suspends existing contracts with him. Moreover, any
person who engages in business dealings with him, even in an unrelated matter will also be
102
ADC,¶432.
103 Preamble, Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the Situation in
the Republic of Eastasia, Page 52 of the Record.
104 Tecmed, ¶122.
105 James and Others, ¶19-20, Matos e Silva, ¶92.
106 Statement of Uncontested Facts, Page 36 of the Record, ¶17.
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treated as a blocked person.107
Such a measure is clearly disproportionate in view of any
public purpose presumably sought to be protected. Therefore, no justification of public
purpose may be used in the present case.
90. In the absence of a public purpose justification, the expropriation of the investment is
unlawful in nature and reparation as explained in (C) must be made to the Claimant.
B. The Respondent’s measure is not justified under Article 10 of the Euroasia BIT.
91. Article 10 of the Euroasia BIT states, “Nothing in this Agreement shall be construed to
prevent either Contracting Party from taking measures to fulfil its obligations with
respect to the maintenance of international peace or security” [emphasis supplied].
92. The Respondent has contended that it introduced sanctions against investors from Euroasia
as part of an international response to condemn an illegal act of annexation of Fairyland by
Euroasia. It claimed that it was obliged under the principles of public international law not to
recognize the effects of unlawful actions, and to take active steps to wipe out the
consequences of such unlawful behavior.108
93. The Claimant submits that, (i) Article 10 is restricted to obligations that arise out of the
United Nations Charter only, (ii) In the alternative, the Respondent was under no obligation
under customary international law not to recognize the consequence of an illegal act or to
take active steps to wipe out the consequences of such unlawful behavior, and (ii) In the
alternative that the Tribunal deems that the Respondent was under an obligation, the
measures taken by the Respondent are unlawful.
i. The obligations referred to in Article 10 are restricted to obligations that arise out of the
UN Charter.
94. Exceptions to treaty obligations provided in international instruments are to be interpreted
narrowly.109
In the present case, obligations with respect to maintenance of international
peace or security must be restricted to obligations arising out of the UN Charter. Article 24
of the UN Charter clearly provides,
107
Section 4 of the Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the
Situation in the Republic of Eastasia, Page 52 of the Record.
108 Answer to Request for Arbitration, Page 15 of the Record.
109 Chevron Corp.,¶187.
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“in order to ensure prompt and effective action by the United Nations, its Members confer
on the Security Council primary responsibility for the maintenance of international peace
and security, and agree that in carrying out its duties under this responsibility the Security
Council acts on their behalf.”
95. Further as per Chapter VII of the UN Charter at Article 39 provides,
“The Security Council shall determine the existence of any threat to the peace, breach of
the peace, or act of aggression and shall make recommendations, or decide what measures
shall be taken in accordance with Articles 41 and 42, to maintain or restore international
peace and security.”
Scholars are of the opinion that using a phrase in the treaty which is almost verbatim lifted
from the UN Charter seems to be a reference to the obligations in the Charter itself.
96. The OECD Draft Multilateral Agreement on Investment is instructive in this regard.
According to the commentaries to a similar clause in that instrument, the negotiating parties
understood the language to “refer specifically to obligations under the Charter.”110
The
UNCTAD in its deliberations on BITs, dealt with obligations with respect to maintenance of
international peace and security only in the context of Charter obligations.111
Further, some
U.S. BITs which have similar clauses in them have clarified the meaning of this clause in
their protocols by stating, ‘obligations with respect to the maintenance or restoration of
international peace or security’ means obligations under m the UN Charter.’112
Further,
scholars have opined that unilateral action or actions outside the framework of the UN
would not appear to fall within the general consensus as to the meaning of obligations with
respect to maintenance of international peace and security.113
97. Thus, using the phrase ‘obligations with respect to the maintenance of international peace
and security’ seems to be a clear reference to Charter obligations. If the Respondent were to
contend that obligations outside the Charter is indeed a part of Article 10, it would have to
prove that the State parties intended to give special meaning to the clause.114
However, there
is nothing in the record to suggest that such special meaning was envisaged. Thus, since no
110
OECD, Multilateral Agreement on Investment, Commentary to the Consolidated Text.
111 UNCTAD, The Protection of National Security in IIAs.
112 U.S.-Argentina BIT, Protocol, ¶ 6
; Protocol to US- Honduras BIT
113 Burke-White & von Staden, Investment Protection in Extraordinary Times.
114 VCLT, Article 31(4).
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determination has been made by the Security Council as to the existence of an obligation,
the Respondent’s sanction is not saved under Article 10.
ii. The Respondent was under no obligation under international law not to recognize the
consequence of an illegal act or to take active steps to wipe out the consequences of such
unlawful behavior.
98. Article 41 of the Articles on the State Responsibility for Internationally Wrongful Acts115
provides that no State shall recognize as lawful a situation created by a serious breach of a
peremptory norm and that States shall cooperate to bring to an end through lawful means
any such serious breach. It is the Claimant’s contention that the abovementioned provisions
are not obligations that exist in customary international law. In order for the provisions to
become obligations, there first has to be a determination to that effect by a United Nations
body such as the Security Council or the International Court of Justice.
99. This is evidenced by practice over the years. In the 1970s the obligations in question were
characterized as something that States could be bound by if they entered into specific
conventions providing for the same.116
Further, specifically with regard to the duty on states
to cooperate, the International Court of Justice in the Namibia Advisory Opinion117
was of
the view that only once a binding determination was made by a competent organization of
the United Nations to the effect that a situation is illegal, would an obligation lie upon
Members of the United Nations, to bring that situation to an end. In 1982, in the Report of
the International Law Commission, the Special Rapporteur’s introduction and commentary
to the provision on non-recognition clearly assumed that the obligation would be preceded
by a finding by a competent United Nations organ, embodying “the international community
as a whole”, that an international crime had been committed.118
Lastly in the year 2004, the
International Court of Justice in its Advisory opinion on the Construction of Wall in
Occupied Palestine119
held that the duty of non-recognition flowed from a binding decision
of a competent organ of the United Nations and only after such determination were third
115
ARSIWA.
116 LAUTERPACHT, RECOGNITION.
117 Namibia Advisory Opinion.
118 Williem Riphagen, Third Report on the Contents, Forms and Degrees of State Responsibility.
119 Israeli Wall Advisory Opinion.
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states under an obligation to cooperate to bring an end to serious breaches of obligations
erga omnes.
100. In light of this, it is evident that the measures undertaken by the Respondent was not in
furtherance of any obligation existing in international law.
iii. Even if the Tribunal is of the view that the Respondent was indeed under an obligation,
the measures taken by it are unlawful.
101. The Claimant contends that (a) Article 10 is not a self-judging provision, and therefore
measures taken under the Article are amenable to review, and (b) The sanctions imposed do
not fulfil the test of nexus and proportionality.
Measures taken under Article 10 may be reviewed by the Tribunal. a.
102. Article 10 cannot be interpreted in a manner so as to allow a State absolute discretion with
regard to the measures it may take. In interpreting Non Precluded Measures provisions such
as Article 10, Tribunals have held that if such clauses were to be interpreted as being self-
judging, they must have been expressly worded in such manner.120
Even though the
decisions referred to are in relation to the determination of the existence of a crisis situation
and not a measure, it elucidates the principle that a state’s complete discretion has to be
explicitly provided for.
103. Article 10 uses the phrase “may take measures” as opposed to ‘any measure’ or ‘any
measure it deems necessary’. Therefore, the language of the treaty is not such that review of
the measures undertaken is barred.
The sanctions imposed do not fulfil the test of nexus and proportionality. b.
104. Sanction imposing countries follow a framework whereby measures undertaken have to be
proportional and have some nexus to the object sought to be achieved.121
Further, Tribunals
have also acknowledged that proportionality is a necessary consideration while determining
the validity of a sanction.122
120
CMS, ¶ 370; Enron, ¶¶ 335-336; LG&E, ¶ 212.
121 EU Guidelines on Sanctions.
122 Occidental, ¶ ¶ 417,427; Tecmed, ¶ 122.
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105. The object of sanctions is to bring about change in behavior.123
Therefore, the scope of
review exercised by the Tribunal is to determine if the measure in question is proportional to
the object of bringing about a desired change in behavior.
106. The preamble of the Executive order states,
“I hereby find that the actions and policies of the Government of the Republic of Eurasia,
including its annexation of Fairyland and its use of force in the Republic of Eastasia,
continue to undermine democratic processes and institutions in the Republic of Eastasia;
threaten its peace, security, stability, sovereignty, and territorial integrity…”124
It is evident that the measures taken by the Respondent are to exert pressure on Euroasia. As
explained previously the Claimant’s connection to the Republic of Euroasia is (a) through his
company, and (b) to the extent of supplying arms. The sanction however has been imposed
on the Claimant in an individual capacity125
and extends to the prohibition to engage with
him professionally in any way. It also suspends existing contracts with him. Moreover, any
person who engages in business dealings with him, even in an unrelated matter will also be
treated as a blocked person.126
Further, a blanket sanction on persons operating in critical
sectors also subverts the nexus requirement. Unless there is something to prove that the
Claimant’s arms had in fact played some sort of a role in the reunification or would
contribute to the situation in Fairyland, there is no reason to impose sanctions on him.
107. All the sanction does is to isolate the Claimant. It is disproportionate and lacks nexus to the
extent that it plays no role in coercing Euroasia into rectifying its behavior.
C. Full reparation must be made to the Claimant.
108. Article 4 of the Euroasia BIT only caters to situations where compensation is to be paid in
cases of lawful expropriation. The Claimant contends that compensation at market value as
stated in Article 4 is envisaged only for expropriation within the limits of the BIT and since
the Respondent’s measure amounts to unlawful expropriation, full reparation must be made
to the Claimant. This principle of full reparation in cases of unlawful expropriation is
123
Phoenix Action, ¶¶136-139.
124 Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the Situation in the
Republic of Eastasia, Page 52 of the Record.
125 Statement of Uncontested Facts, ¶16-17, Page 36 of the Record.
126 Section 1(b) of the Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the
Situation in the Republic of Eastasia, Page 51 of the Record.
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31
derived from the Chorzow Factory case, where the PCIJ opined that reparation must insofar
as possible extinguish the result of an unlawful act and restore a situation which would have
existed had no violation been committed.127
109. This principle has been applied in the case of ADC v. Hungary128
wherein the Tribunal held
that since the BIT did not contain any lex specialis rules regarding unlawful expropriation,
standards in customary international law would apply. It thereby imported the standard laid
down in the Chorzow Factory case. 129
The Tribunal further opined that the date of valuation
of assets must be as on the date of the award and not as on the date of expropriation.130
110. Lastly, full reparation includes payment of interest.131
The Claimant thus contends that such
full reparation must be made to him in light of the sanctions imposed by the Respondent.
VI. The Claimant did not contribute to the damage suffered by his investment.
111. The Respondent has contended that the Claimant contributed to the damage suffered by his
investment by virtue of his own conduct. As the basis of this contention, the Respondent has
alleged that the Claimant’s continued supply of weapons to Euroasia led to the imposition of
sanctions on him and his company.132
The Claimant submits that the Respondent’s sanction
is solely responsible for the damage he suffered since the threshold for contributory fault is
not met.
112. Article 39 of the ARSIWA provides that while determining the quantum of reparation,
account shall be taken of the contribution to the injury by willful or negligent action or
omission. The standard of contributory fault as expounded in the ARSIWA has been widely
adopted in cases of investor-state disputes.133
As per the ARSIWA standard of contributory
fault, not every action or omission which contributes to the damage suffered is relevant for
127
Chorzow Factory Case, ¶ 47.
128 ADC ¶ 478.
129 Id at ¶ ¶ 481,482.
130Chorzow Factory Case, ¶ 47.
131 Vivendi, ¶; ADC, ¶ ; Siemens, ¶¶ 395-396.
132 Answer to Request for Arbitration, Page 17 of the Record.
133 Yukos (Final Award), ¶¶ 1601-1606; Occidental, ¶ 665; Alexandrov & Robbins, Proximate Causation in
International Investment Disputes.
-ARGUMENTS- TEAM PINTO
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this purpose, but only those actions or omissions which exhibit a manifest lack of due care
on the part of the victim of the breach for his or her own property or rights.134
In order to
hold that an act or omission is willful or negligent, it must be established that the person
alleged to have contributed knew or should have reasonably known the consequence of his
act.135
113. In the present case, there is no evidence to say that the Claimant acted willfully or
negligently. Even if the Claimant knew that Euroasia was contemplating an intervention in
Fairyland, his act cannot be considered negligent. It is not reasonable to say that the
Claimant should have foreseen the reaction of the Respondent, a third party country, to the
reunification of Fairyland with Euroasia, let alone its attitude towards investors operating in
certain sectors of the Euroasian economy. Further, it is seen that the Claimant entered into
this contract with the best interest of his business in mind. His contract with Euroasia had
expired and without a new contract, a part of his production line would have to be closed
leaving a large number of people unemployed.136
Further, there is also nothing in the record
to suggest that the act of the Claimant is willful, in that, he carried out the act knowing fully
well that these consequences would ensue.
114. BITs are not insurance policies against bad business judgments.137
However, they are
instruments that primarily seek to protect the interest of the investors.138
Thereby it would be
going against the purpose of the BIT if it is held that political situations can obliterate all
protection guaranteed, even in a situation where the investor was acting in a manner that best
served his investment. Therefore, it is seen that there has been no lack of due care on part of
the Claimant, in fact, he was acting in the best interest of his company. In the absence of
there being proof of a negligent or willful act on part of the Claimant, the Respondent’s
action is solely responsible for the Claimant’s loss.
134
Commentary to Article 39 of ARSIWA.
135 Gemplus, ¶11.12-11.15.
136 Request for Arbitration, Page 5 of the Record.
137 Maffezini (Award), ¶ 64.
138 Preamble, Euroasia BIT.
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PRAYER FOR RELIEF
IN LIGHT OF THE ABOVE SUBMISSIONS, THE COUNSEL FOR CLAIMANT RESPECTFULLY REQUESTS
THE TRIBUNAL TO FIND THAT:
The Claimant is an investor pursuant to Article 1.2 of the Euroasia BIT;
The pre-arbitral steps provided in Article 9 of the Euroasia BIT need not be complied with
before submitting a dispute to international arbitration;
The MFN clause in the Euroasia BIT extends to dispute resolution provisions;
The clean hands doctrine is not applicable in the present case and therefore may not operate
to deprive the investor of the protection guaranteed under the Euroasia BIT;
The Respondent unlawfully expropriated the Claimant’s investment;
The Claimant has not contributed to the damage suffered by his investment
FOR CLAIMANT, PETER EXPLOSIVE
SIGNED,
19 SEPTEMBER 2016