team palmer foreign direct investment ...bp bp exploration company (libya) limited v. government of...
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TEAM PALMER
FOREIGN DIRECT INVESTMENT
ARBITRATION MOOT COURT COMPETITION
8–11 NOVEMBER 2018
ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE
STOCKHOLM CHAMBER OF COMMERCE
Fenoscadia Limited (Claimant)
v.
The Republic of Kronos (Respondent)
MEMORIAL FOR RESPONDENT
23 September 2018
ii
TABLE OF CONTENTS
LIST OF LEGAL SOURCES .................................................................................................. i
LIST OF AUTHORITIES ................................................................................................... xvii
STATEMENT OF FACTS .......................................................................................................1
I - THE TRIBUNAL HAS NO JURISDICTION OVER CLAIMANT’S CLAIMS ..........4
(A) This Tribunal does not have jurisdiction ratione personae as Claimant is not a Ticadian
national ........................................................................................................................................4
(i) Claimant’s real seat is in Kronos ...........................................................................................6
(ii) Claimant is controlled by Kronian nationals.........................................................................6
(1) Kronian nationals have the controlling interest of Claimant.................................................7
(2) Claimant’s management structure is Kronian .......................................................................8
(iii) The place of incorporation criterion provides no evidence of a genuine link between
Claimant and Ticadia ..................................................................................................................9
(B) This Tribunal does not have jurisdiction ratione materiae, once Claimant’s claim is purely
contractual and, thus, not covered by the BIT ..........................................................................10
II - IN ANY EVENT, CLAIMANT'S CLAIMS ARE INADMISSIBLE BEFORE THIS
TRIBUNAL .............................................................................................................................11
(A)The BIT contains a fork in the road clause .........................................................................11
(B) The fork in the road provision was triggered by the Concession Agreement ....................11
(C) In any event, the filling of the Lawsuit before national courts, by itself, triggers the fork in
road provision ...........................................................................................................................12
III - RESPONDENT’S ACTIONS DID NOT AMOUNT TO AN EXPROPRIATION OF
CLAIMANT’S INVESTMENT .............................................................................................14
(A) Respondent’s actions fall within the regulatory power of the State ...................................14
(i) Respondent’s actions were taken for the protection of human health and the conservation of
natural resources .......................................................................................................................15
(ii) Respondent’s measures are not an arbitrary or unjustifiable discrimination between
investments or between investors .............................................................................................17
(iii) Respondent’s measures were not a disguised restriction on Claimant’s investment .........18
(iv) Respondents regulatory measures do not give rise to any obligation to compensate ........19
(B) Respondent has neither directly nor indirectly expropriated Claimant’s investment .........19
(C) In the alternative, Respondent has lawfully expropriated Claimant's investment under the
exception laid down in Art. 7 BIT ............................................................................................21
(iii) Respondent’s actions were taken in accordance with due process of law .........................21
(iv) Respondent’s lack of compensation does not render Respondent’s actions unlawful .......23
IV. RESPONDENT’S COUNTERCLAIMS ARE ADMISSIBLE BEFORE THE
TRIBUNAL .............................................................................................................................24
(A) The Tribunal has jurisdiction over the counterclaims ........................................................24
(i) Art. 11(1) BIT covers counterclaims ...................................................................................25
(ii) Art. 11(4) BIT further outlines the parties’ consent as to counterclaims ............................26
(iii) The applicability of the SCC Rules indicates consent over counterclaims .......................26
(iv) Respondent’s lack of standing has no bearing on the scope of consent.............................27
(B) The counterclaims are connected with the primary claims ................................................28
iii
(i) Respondent’s counterclaims are factually connected with Claimant’s claims ....................28
(ii) Alternatively, the counterclaims are also juridically connected with Claimant’s claims ...29
(C) Additionally, policy considerations speak in favor of admitting Respondent’s counterclaims
...................................................................................................................................................30
PRAYER FOR RELIEF.........................................................................................................31
i
LIST OF LEGAL SOURCES
ARBITRAL DECISIONS
AAPL AAPL v. Sri Lanka, Award 27 June 1990.
Abengoa Abengoa S.A. y COFIDES S.A. v. United Mexican States, ICSID Case
No. ARB(AF)/09/2, Award (18 April 2013).
Achmea Achmea B.V. (formerly Eureko B.V.) v. The Slovak Republic,
UNCITRAL, PCA Case No. 2008-13 (Award, 7 December 2012).
African Holding
African Holding Company of America and Société Africaine de
Construction au Congo S.A.R.L. v. Republic of Congo, ICSID Case
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ADC Affiliate Limited and ADC & ADMC Management Limited v. The
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AES Summit Generation Limited and AES-Tisza Erömü Kft v. The
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African Holding Company of America, Inc. and Société Africaine de
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Aguas del Tunari
Jurisdiction
Aguas del Tunari v Bolivia, Decision on Jurisdiction, 21 October
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Manufacturing
American Manufacturing & Trading, Inc. v. Zaire, ICSID Case No.
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AMINOIL Kuwait v. The American Independent Oil Company (AMINOIL),
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Archer Daniels Midland Company and Tate & Lyle Ingredients
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ii
Autopista Jurisdiction
Autopista Concesionada de Venezuela, C.A. (“Aucoven”) v.
Bolivarian Republic of Venezuela, ICSID Case No. ARB/00/5,
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L.J. 469
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Robert Azinian, Kenneth Davitian, & Ellen Baca v. The United
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Banro
Banro American Resources, Inc. and Société Aurifère du Kivu et du
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Bilcon
Bilcon of Delaware et al v. Government of Canada, UNCITRAL, PCA
Case No. 2009-04, Award on Jurisdiction and Liability (17 March
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Biloune
Biloune and Marine Drive Complex Ltd. v. Ghana Investments Centre
and the Government of Ghana, UNCITRAL, Award on Jurisdiction
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Biofarma
Les Laboratoires Servier, S.A.A., Biofarma, S.A.S., Arts et Techniques
du Progres S.A.S. v. Republic of Poland, UNCITRAL, Final Award
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Bischoff Bischoff Case (Germany v. Venezuela), 1903 X UNRIAA (7 May).
Biwater Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID
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Bogdanov Iurii Bogdanov, Agurdino-Invest Ltd. and Agurdino-Chimia JSC v.
Republic of Moldova, SCC Arbitral Award (22 September 2005).
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CEAC
CEAC Holdings Limited v Montenegro, Award, ICSID Case no
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ICSID;
Camuzzi Jurisdiction Camuzzi v. Argentina, Decision on Jurisdiction, 11 May 2005
iii
Cement Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic
of Egypt, ICSID Case No. ARB/99/6, Award (April 12, 2002).
Champion
Champion Trading Company, Ameritrade International, Inc.
(formerly Champion Trading Company, Ameritrade International,
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Republic of Egypt, ICSID Case No. ARB/02/9, Award (27 October
2006).
Chemtura Chemtura Corporation (formerly Crompton Corporation) v.
Government of Canada, UNCITRAL, Award (2 August 2010).
CME CME Czech Republic B.V. v. The Czech Republic, UNCITRAL,
Partial Award (13 September 2001).
CMS CMS Gas Transmission Company v. Republic of Argentina, ICSID
Case No. ARB/01/8, Award (12 May 2005).
CMS Jurisdiction CMS Gas Transmission Co. v. Argentina, ICSID Case No. ARB/01/08
(Decision on Objection to Jurisdiction of July 17, 2003)
ConocoPhillips
ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and
ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of
Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and
Merits (3 September 2013).
Consorzio Consorzio Groupement L.E.S.I.Dipenta v. People’s Democratic
Republic of Algeria, Jan. 10, 2005, Award in French
Continental Casualty Continental Casualty Company v. The Argentine Republic, ICSID
Case No. ARB/03/9, Award (5 September 2008).
Creek
Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No.
ARB/14/2, Award (30 November 2017).
CSOB CSOB. v. Slovak RepublicCeskoslovenska Obchodni Banka, a.s. v.
The Slovak Republic(ICSID Case No. ARB/97/4)
Crystallex Crystallex International Corporation v. Bolivarian Republic of
Venezuela, ICSID Case No. ARB(AF)/11/2, Award (4 April 2016).
Delagoa Delagoa Bay Railway (United States of America and Great Britain v.
Portugal), Award (29 March 1900).
Duke Energy Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of
Ecuador, ICSID Case No. ARB/04/19, Award (18 August 2008).
Eastern Sugar Eastern Sugar B.V. (Netherlands) v. The Czech Republic, SCC Case
No. 088/2004, Partial Award (27 March 2007).
EDF EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13,
Award (8 October 2009).
El Paso El Paso Energy International Company v. The Argentine Republic,
iv
ICSID Case No. ARB/03/15, Award (31 October 2011).
Enron
Enron Creditors Recovery Corporation (formerly Enron Corporation)
and Ponderosa Assets, L.P. v. The Argentine Republic, ICSID Case
No. ARB/01/3, Award (22 May 2007).
Enron Jurisdiction Enrom v. Argentina, Decision on Jurisdiction (Anc. Claim), 2 August
2004
Eureko Eureko B.V. v. Republic of Poland, Partial Award (19 August 2005).
Feldman Marvin Roy Feldman Karpa v. The United Mexican States, ICSID
Case No. ARB(AF)/99/1, Award (16 December 2002).
Fireman’s Fund Fireman’s Fund Insurance Company v. The United Mexican States,
ICSID Case No. ARB(AF)/02/1, Award (17 July 2006).
Fletcher
Walter Fletcher Smith v. The Compañia Urbanizadora Del Parque y
Playa de Marianao (United States of America v. Cuba), Arbitral
Award (2 May 1929).
Foresti Piero Foresti, Laura de Carli & Others v. The Republic of South
Africa, ICSID Case No. ARB(AF)/07/01, Award (4 August 2010).
Framatome Framatome S.A. v. Atomic Energy Organization of Iran (AEOI), ICC
Case No. 3896, Award (30 April 1982).
Gaëta Société Civile Immobilière de Gaëta v. Guinea, Award, 21 December
2015
GAMI GAMI Investments, Inc. v. The Government of the United Mexican
States, UNCITRAL (Final Award, 15 November 2004).
Gemplus
Gemplus S.A. SLP S.A, Gemplus Industrial S.A. de C.V. v. The United
Mexican States, ICSID Case Nos. ARB (AF)/04/3 & ARB (AF)/04/4,
Award (16 June 2010).
Generation Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9,
Award (16 September 2003).
Genin Alex Genin, Eastern Credit Limited, INC. and A.S. Baltoil v. Republic
of Estonia, ICSID Case No. ARB/99/2, Award (25 June 2001).
Goetz Antoine Goetz and Others v. Republic of Burundi, ICSID Case No.
ARB/95/3, Decision on Liability (2 September 1998).
GmbH ST-AD GmbH v. Republic of Bulgaria PCA Case No. 2011-06
Hamester Gustav W. F. Hamester GmbH & Co KG v. Republic of Ghana, ICSID
Case No. ARB/07/24, Award 18 June 2010.
HOCHTIEF HOCHTIEF Aktiengesellschaft v. Argentine Republic, ICSID Case
No. ARB/07/31, Decision on Jurisdiction (24 October 2011).
v
Hulley Hulley Enterprises Limited (Cyprus) v. The Russian Federation,
UNCITRAL, PCA Case No. AA 226, Final Award (18 July 2014).
Impregilo I Impregilo S.p.A. v. The Argentine Republic, ICSID Case No.
ARB/07/17, Award (June 21, 2011).
Impregilo II Impregilo S.p.A. v. Islamic Republic of Pakistan (ICSID Case No.
ARB/03/3), Decision on Jurisdiction (22 April 2005).
Inceysa Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No.
ARB/03/26, Award (2 August 2006).
Iron Rhine
Arbitration Regarding the Iron Rhine ("Ijzeren Rijn") Railway
(Kingdom of Belgium v. Kingdom of the Netherlands), PCA Case No.
2003-02, Award (24 May 2005).
Joy Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case
No. ARB/03/11
Kardassopoulos Ioannis Kardassopoulos v. Republic of Georgia, ICSID Case No.
ARB/05/18, Award (3 March 2010).
Kashenganga Indus Waters Kishenganga Arbitration (Pakistan v. India), PCA Case
No. 478, Partial Award (20 December 2013).
Lanco Lanco International Inc. v. The Argentine Republic, ICSID Case no.
ARB/97/6, Jurisdiction of the Arbitral Tribunal (8 December 1998).
Lauder Ronald S. Lauder v. The Czech Republic, UNCITRAL (Final Award,
3 September 2001).
Lemire Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18,
Award (28 March 2011).
LETCO Liberian Eastern Timber Corporation (LETCO) v. Republic of
Liberia, ICSID Case No. ARB/83/2, Award (31 March 1986).
LG&E
LG&E Energy Corp., LG&E Capital Corp., and LG&E International,
Inc. v. The Argentine Republic, ICSID Case No. ARB/02/1, Award
(25 July 2007).
Lucchetti Empresas Lucchetti S.A. v. Republic of Peru, ICSID Case No.
ARB/03/4, Award, (7 February 2005).
Lucchetti annulment Lucchetti v. Peru, ICSID Case No. ARB/03/4, Annulment Decision, 5
September 2007
Maffezini Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No.
ARB/97/7, Award (13 November 2000).
Mamidoil Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of
Albania, ICSID Case No. ARB/11/24, Award (30 March 2015).
Metalclad Metalclad Corporation v. The United Mexican States, ICSID Case No.
vi
ARB(AF)/97/1, Award (30 August 2000).
Metal-Tech Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No.
ARB/10/3, Award (4 October 2013).
Methanex
Methanex Corp. v. United States, Final Award of the Tribunal on
Jurisdiction and Merits, 44 I.L.M. 1345 (NAFTA Ch. 11 Arb. Trib.
2005), Part IV, Chapter D.
Michau Michau v. Germany (1922) 2 Trib. Arb. Mixtes 29.
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).
MTD MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile,
ICSID Case No. ARB/01/7, Award (25 May 2004).
MTD, Annulment MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile,
ICSID Case No. ARB/01/7, Annulment Proceeding (21 March 2007).
Muntz Muntz v. Germany (1927) 7 Trib Arb Mixtes 637.
Noble
Noble Energy Inc. and MachalaPower Cia. Ltd. v. Republic of
Ecuador and Consejo Nacional de Electricidad, ICSID Case No.
ARB/05/12, Decision on Jurisdiction (5 March 2008).
Nykomb Nykomb Synergetics Technology Holding AB v. The Republic of
Latvia, SCC Case No. 118/2001, Arbitral Award (16 December 2003).
Occidental
Occidental Petroleum Corporation and Occidental Exploration And
Production Company v. The Republic of Ecuador, ICSID Case No.
ARB/06/11, Award (5 October 2012).
Olguín Eudoro Armando Olguín v. Republic of Paraguay, ICSID Case No.
ARB/98/5, Award (26 July 2001).
Oxus Gold
Oxus Gold plc v. Republic of Uzbekistan, the State Committee of
Uzbekistan for Geology & Mineral Resources, and Navoi Mining &
Metallurgical Kombinat, UNCITRAL, Final Award, 17 December
2015.
Pac Rim Pac Rim Cayman LLC v El Salvador, Decision on the Respondent’s
Jurisdictional Objections, ICSID Case No ARB/09/12, 1 June 2012
Pantechniki Pantechniki SA Contractors & Engineers (Greece) v The Republic of
Albania, Award, ICSID Case No. ARB/07/21, IIC 383 (2009)
Parcel United Parcel Service of America Inc. v. Government of Canada,
ICSID Case No. UNCT/02/1, Award (24 May 2007).
Parkerings Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No.
ARB/05/8, Award (11 September 2007).
vii
Paushok Sergei Paushok et al v, The Government of Mongolia, UNCITRAL,
Award on Jurisdiction and Liability 28 April 2011.
Patrick Mitchell,
Annulment
Mr. Patrick Mitchell v. Democratic Republic of the Congo, ICSID
Case No. ARB/99/7, Decision on the Application for Annulment of
the Award (1 November 2006).
Philip Morris
Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal
Hermanos S.A. (formerly FTR Holding SA, Philip Morris Products
S.A. and Abal Hermanos S.A.) v. Oriental Republic of Uruguay, ICSID
Case No. ARB/10/7, Award (8 July 2016).
Plama Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No.
ARB/03/24, Award (27 August 2008).
Plama Jurisdiction Plama v. Bulgaria, Decision on Jurisdiction 8 February 2005
Phoenix Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No.
ARB/06/5
Pope & Talbot Pope & Talbot Inc. v. Government of Canada, UNCITRAL, Interim
Award (26 June 2006).
PSEG
PSEG Global, Inc., The North American Coal Corporation, and
Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of
Turkey, ICSID Case No. ARB/02/5, Award (19 January 2007).
Quiborax
Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v.
Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Award (16
September 2015).
Renée Renée Rose Levy de Levi v. Republic of Peru, ICSID Case No.
ARB/10/17, Award (26 February 2014).
Revere Copper Revere Copper v. OPIC, Award, 24 August 1978, 56 ILR (1980) 258.
RFCC Consortium RFCC v. Kingdom of Morocco, ICSID Case No.
ARB/00/6, Award (22 December 2003).
RosInvestCo RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No.
V079/2005, Final Award (12 September 2010).
Rumeli
Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri
A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award
(29 July 2008).
Saipem Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case
No. ARB/05/07, Decision on Jurisdiction (21 March 2007).
Salini
Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite
Kingdom of Jordan, ICSID Case No. ARB/02/13, Award (31 January
2006).
Salini Jurisdiction Salini v. Jordan, Decision on Jurisdiction, 29 November 2004
viii
Saluka Saluka Investment BV v. Czech Republic, UNCITRAL, Partial Award
(17 March 2006).
Saluka Counterclaim Saluka Investments B.V. v Czech Republic, UNCITRAL, Decision on
Jurisdiction Over the Czech Republic's Counterclaim 7 May 2004
Santa Elena Compañía del Desarrollo de Santa Elena S.A. v. Republic of Costa
Rica, ICSID Case No. ARB/96/1, Award (17 February 2000).
S.D. Myers S.D. Myers, Inc. v. Government of Canada, PCA Case No. 2013-13,
Partial Award (13 November 2000).
SGS Pakistan SGS Société Générale de Surveillance S.A. v. Islamic Republic of
Pakistan, ICSID Case No. ARB/01/13 (2005)
SGS Pakistan
Jurisdiction
SGS Société Générale de Surveillance S.A. v. Islamic Republic of
Pakistan, ICSID Case No. ARB/01/13 – Decision on Jurisdiction
(2003)
SGS Philippines SGS Société Générale de Surveillance S.A. v. Republic of the
Philippines, ICSID Case No. ARB/02/6
SGS Philippines
Jurisdiction
SGS Société Généralé de Surveillance S.A. v. Republic of the
Philippines, ICSID Case No. ARB/02/6, Decision on Jurisdiction (Jan.
29, 2004).
Siag Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of
Egypt, ICSID Case No. ARB/05/15, Award (11 April 2007).
Siemens Jurisdiction Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8,
Award (17 January 2007).
Sedelmayer Mr. Sedelmayer v. The Russian Federation, SCC
Sempre Jurisdiction
Sempre Energy Intl v. Argentina, Decision on Jurisdiction 11 May
2005
Souvlaki Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case
No. ARB/02/7, Award (7 July 2004).
SOABI Jurisdiction Société Ouest Africaine des Bétons Industriels v. Senegal, ICSID Case
No. ARB/82/1 - Decision on Jurisdiction (1984)
Spyridon Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (7
December 2011).
Stati
Anatolie Stati, Gaberiel Stati, Ascom Group, and Terra Raf Trans
Trading Ltd. v. Romania, SCC Arbitration V (116/2010), Award (19
December 2013).
Suez
Suez, Sociedad General de Aguas de Barcelona S.A. and InterAgua
Servicios Integrales del Agua S.A v. The Argentine Republic, ICSID
Case No. ARB/03/17, Decision on Liability (30 July 2010).
ix
Tecmed Técnicas Medioambientales Tecmed, S.A. v. The United Mexican
States, ICSID Case No. ARB (AF)/00/2, Award (29 May 2003).
Telenor Telenor Mobile Communications A.S. v. The Republic of Hungary,
ICSID Case No. ARB/04/15, Award (13 September 2006).
Tenaris
Tenaris SA and Talta-Trading E Marketing Sociedade Unipessoal
LDA v Venezuela, Award, ICSID Case No ARB/11/26, IIC 764
(2016), despatched 29th January 2016, World Bank; ICSID.
Texaco Texaco Overseas Petroleum and California Asiatic Oil Company v.
Libyan Arab Republic, Award on the Merits, 17 I.L.M. 1 (1978).
Thunderbird International Thunderbird Gaming Corporation v. United Mexican
States, UNCITRAL (Award, 26 January 2006).
Tidewater
Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., et
al. v. The Bolivarian Republic of Venezuela, ICSID Case No.
ARB/10/5, Award (13 March 2015).
Tokio Telės
Tokios Tokelės v. Ukraine, ICSID Case No. ARB/02/18, Award (26
July 2007).
Tradex Jurisdiction
Tradex Hellas S.A. v. Republic of Albania, ICSID Case no. ARB/94/2
– Decision on Jurisdiction
TSA
TSA Spectrum de Argentina S.A. v. Argentine Republic, ICSID Case
No. ARB/05/5
Urbaser
Urbaser SA & Consorcio de Aguas Bilbao Biskaia, Cilbao Biskaia Ur
Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26,
Decision on Jurisdiction (19 December 2012).
Vacuum Salt Vacuum Salt Products Ltd. v. Republic of Ghana, ICSID Case No.
ARB/92/1, Award, 16 February 1994
Venezuela Holdings
Venezuela Holdings, B.V., et al (formerly Mobil Corporation,
Venezuela Holdings, B.V., et al.) v. Bolivarian Republic of Venezuela,
ICSID Case No. ARB/07/27, Award (9 October 2014).
Vivendi
Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.
The Argentine Republic, ICSID Case No. ARB/97/3), Award (21
November 2000).
Vivendi Annulment
Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.
The Argentine Republic, ICSID Case No. ARB/97/3), Decision on
Annulment (3 July 2002)
Waste Management Waste Management, Inc. v. United Mexican States ("Number 2"),
ICSID Case No. ARB(AF)/00/3, Award (30 April 2004).
x
Wena Hotels Wena Hotels Limited v. Egypt, ICSID Case No. ARB/98/4, Decision
on Jurisdiction, 29 June 1999
Yukos Yukos Universal Limited (Isle of Man) v. The Russian Federation,
UNCITRAL, PCA Case No. AA 227, Final Award (18 July 2014).
Zhinvali Zhinvali Development Ltd. v. Republic of Georgia, ICSID Case No.
ARB/00/1
INTERNATIONAL COURT CASES
Admission of a State to
the UM
Competence of the General Assembly for the Admission of a State to
the United Nations, Advisory Opinion, 1950.
Alleged Violations Alleged Violations of Sovereign Rights and Maritime Spaces in the
Caribbean Sea (Nicaragua v Colombia), [2016] ICJ Rep 36.
Amoco Amoco Int’l Fin. Corp. v. Islamic Republic of Iran, Award No. 310-
56-3, Iran–U.S. Claims Tribunal (24 July 1987).
Arcuri Arcuri and Others v. Italy, ECtHR App. No. 52024/99, Judgment (5
July 2001).
Arbitral Award Case Concerning the Arbitral Award of 31 July 1989 (Guinea-Bissau
v. Senegal), Judgment, 1991 ICJ 53 (12 November).
Armed Activities
Case Concerning Armed Activities on the Territory of the Congo
(Democratic Republic of the Congo v. Rwanda), New Application:
2002, 2006 ICJ 6, Decision on Jurisdiction and Admissibility (3
February).
Armed Activities
(Order)
Armed Activities on the Territory of the Congo (Democratic
Republic of the Congo v. Uganda, Order of 29 November 2001, I.C.J.
Reports 2001, p. 660.
Arrest Warrant
Case Concerning the Arrest Warrant of 11 April 2000 (Democratic
Republic of the Congo v. Belgium), Judgment, 2002 ICJ 1 (14
February).
Electricity Company of
Sofia
Electricity Company of Sofia and Bulgaria Case, PCIJ Reports, Ser.
A/B, no. 77
Barcelona Traction
Case concerning the Barcelona Traction, Light and Power Company,
Limited (Belgium v. Spain), Judgment: Second Phase, 1970 ICJ 17 (5
February).
Bosnian Genocide
Application of the Convention on the Prevention and Punishment of
the Crime of Genocide (Bosnia and Herzegovina v. Serbia and
Montenegro), Order of 17 December, ICJ Reports 1997, 243.
Butler Butler v. the United Kingdom, ECtHR App. No. 41661/98, Judgment
(27 June 2002).
xi
Certain activities
carried out by
Nicaragua (Order)
Certain Activities Carried Out by Nicaragua in the Border Area
(Costa Rica v. Nicaragua); Construction of a Road in Costa Rica
along the San Juan River (Nicaragua v. Costa Rica), Counter-
Claims, Order of 18 April 2013, I.C.J. Reports 2013, p. 200.
Commission
Commission v. Italian Republic, ECJ Case C-531-06 (19 May 2009).
Corfu Channel Corfu Channel Case (United Kingdom of Great Britain and Northern
Ireland v. Albania), Merits, 1949 ICJ 4 (9 April).
Chorzów Factory Case Concerning the Factory at Chorzów (Germany v. Poland),
Decision on Jurisdiction, 1927 PCIJ (ser. A) No. 9 (26 July).
Daily Mail
The Queen and HM Treasury and Commissioners of Inland Revenue
ex parte Daily Mail and General Trust PLC (Case C-81/87) [1989]
ECR 5483
Dosier Gasus Dosier- und Fordertechnik GmbH v. The Netherlands,
ECmHR App. No. 15375/89, Report (21 October 1993).
Eastern Greenland Legal Status of Eastern Greenland (Denmark v. Norway), Judgment,
1933 PCIJ (ser. A/B) No. 53 (5 April).
Eastman Kodak Eastman Kodak Co. v. Islamic Republic of Iran, Award No. 514-227-
3, Iran–U.S. Claims Tribunal (1 July 1991).
Ebrahimi
Shahin Shaine Ebrahimi v. The Government of the Islamic Republic
of Iran, Award No. 569-44/46/47-3, Iran–U.S. Claims Tribunal (12
October 1994).
EC - Asbestos
European Communities - Measures Affecting Asbestos and Asbestos-
Containing Products - AB-2000-11 - Report of the Appellate Body –
WTO (12 March 2001)
Elettronica Elettronica Sicula S.p.A. (ELSI) (United States of America v. Italy),
1989 ICJ 15 (20 July).
Fisheries Fisheries Jurisdiction Case (Spain v. Canada), Decision on
Jurisdiction, 1998 ICJ 432 (4 December).
Ford
Ford Aerospace & Communication Corp. v. Islamic Republic of Iran,
Partial Award No. 289-93-1, Iran–U.S. Claims Tribunal (24 January
1987).
Frontier Dispute Case Concerning the Frontier Dispute (Burkina Faso v. Republic of
Mali), Judgment, 1986 ICJ 554 (22 December).
Gabčíkovo-Nagymaros Case Concerning the Gabčíkovo-Nagymaros Project (Hungary v.
Slovakia), 1997 ICJ 7 (25 August).
German Interests Case Concerning Certain German Interests in Polish Upper Silesia
xii
(Germany v Poland), 1925 PCIJ (ser. A) No. 6 (25 August).
Gould Marketing Iran-U.S. Claims Tribunal, Gould Marketing, Inc. v. Ministry of
National Defence, 3 IRAN-U.S. C.T.R., at 147 et seq.
Handyside Handyside v. the United Kingdom, ECtHR App. No. 5493/72,
Judgment (7 December 1976).
Hans-Adam Prince Hans-Adam of Liechtenstein v. Germany, ECtHR App. No.
42527/98, Judgment (12 July 2001).
ICAO Council Appeal Relating to the Jurisdiction of the ICAO Council, Judgment,
I.C.J. Reports 1972, p. 46.
ITT Industries, Concur
ITT Industries, Inc. v. Islamic Republic of Iran, Concurring Opinion
of George H. Aldrich, Award No. 47-156-2, Iran–U.S. Claims
Tribunal (19 August 1983).
James James and Others v. the United Kingdom, ECtHR App. No. 8793/79,
Judgment (21 February 1986).
Jurisdictional
Immunities (Order)
Jurisdictional Immunities of the State (Germany v. Italy), Order of 6
July 2010, General List, No. 143.
Maritime Safety
Committee
Constitution of the Maritime Safety Cornmittee of the Inter-
Governmental Maritime Consultative Organization, Advisory
Opinion of 8 June 1960: I.C.J. Reeorts 1960, p. 150
LaGrand LaGrand (Germany v. United States of America), 2001 ICJ 466 (27
June).
Lisolette Hauer Lisolette Hauer v. Land Rheinland-Pfalz, ECJ Case C-531-06 (13
December 1979).
López Ostra López Ostra v. Spain, ECtHR App. No. 16798/90, Judgment (9
December 1994).
Matos e Silva Matos e Silva, Lda., and Others v. Portugal, ECtHR App. No.
15777/89, Judgment (16 September 1996).
Mutual Assistance in
Criminal Matters
Certain Questions of Mutual Assistance in Criminal Matters
(Djibouti v. France), Judgment, I.C.J. Reports 2008, p. 177.
Nicaragua
Case Concerning Military and Paramilitary Activities in and against
Nicaragua (Nicaragua v. United States of America), Decision on
Jurisdiction and Admissibility, 1984 ICJ 39 (26 November).
North Sea North Sea Continental Shelf (Germany v. Denmark; Germany v.
Netherlands) 1969 ICJ 3, 43
Nuclear Tests Nuclear Tests Case (Australia v. France), 1974 ICJ 253 (20
December).
Oil Platforms (Order) Case concerning Oil Platforms (Islamic Republic of Iran v. United
xiii
States of America), Order of 10 March 1998, ICJ Reports 1998.
Oscar Chinn The Oscar Chinn Case (United Kingdom v. Belgium), 1934 PCIJ (ser.
A/B) No. 63 (12 December).
Phelps Dodge Phelps Dodge International Corp. v. Islamic Republic of Iran, Award
No. 312-11135-3, Iran–U.S. Claims Tribunal (14 July 1987).
Phillips Phillips v. the United Kingdom, ECtHR App. No. 41087/98,
Judgment (5 July 2001).
Poiss Poiss v. Austria, ECtHR App. No. 9816/82, Judgment (23 April
1987).
Pulp Mills Pulp Mills on the River Uruguay (Argentina v. Uruguay), 14 ICJ
2010 (10 April).
Saghi James M. Saghi v. Islamic Republic of Iran, Award No. 544-298-2,
Iran–U.S. Claims Tribunal (22 January 1993).
Sedco Sedco, Inc. v. National Iranian Oil Co., Interlocutory Award No. ITL
55-129-3, Iran–U.S. Claims Tribunal (28 October 1985).
Shrimp-Turtle
The WTO Shrimp-Turtle Case (United States—Import Prohibition of
Certain Shrimp and Shrimp Products), WTO Case
WT/DS58/AB/RW (6 April 1998).
Starrett
Starrett Housing International, Inc., v. The Government of the
Islamic Republic of Iran, Bank Omran, Bank Mellat, Interlocutory
Award No. 32-24-1, Iran–U.S. Claims Tribunal (19 December 1983).
Tehran Foremost Tehran, Inc. v. Islamic Republic of Iran, Award No. 220-
37/231-1, Iran–U.S. Claims Tribunal (11 April 1986).
Territorial Dispute
(Libya v Chad)
Territorial Dispute (Libyun Aruh Jamahiriya/Chad), Judgment, 1. C.
J. Reports 1994, p. 6.
Tippetts
Tippetts v. TAMS-AFFA Consulting Engineers of Iran, Award No.
141-7-2, Iran–U.S. Claims Tribunal (29 June 1984).
Too
Emmanuel Too v. Greater Modesto lnsurance Associates and the
United States of America, Award No. 460-880-2, Iran–U.S. Claims
Tribunal (29 December 1989).
US – Canadian Tuna
United States - Prohibition of Imports of Tuna and Tuna Products
from Canada. Report of the Panel adopted on 22 February 1982 –
WTO - (L/5198 - 29S/91)
US - Gasoline
United States - Standards for Reformulated and Conventional
Gasoline - Appellate Body Report and Panel Report - Action by the
Dispute Settlement Bod WTO (20 May 1996)
US – Springs
Assemblies
United States - Imports of Certain Automotive Spring Assemblies.
Report of The Panel Adopted (26 May 1983) – WTO - (L/5333 -
xiv
30s/107)
Wall
Legal Consequences cf the Construction of a Wu11 in the Occupied
Palestinian Territory, Advisory Opinion, I. C. J. Reports 2004, p.
136.
Wimbledon Case of the S.S. "Wimbledon" (France, Great Britain, Italy and Japan
v. Germany), 1923 PCIJ (ser. A) No. 1 (17 August).
NATIONAL COURT CASES
Alaska Alaska Fish Salting & By-Products Co. v. Smith, 255 U.S. 44,
SCOTUS (1921).
Allied-General
Allied-General Nuclear Services, Allied Chemical Nuclear Products,
Inc. and Valley Pines Associates v. the United States, 488 U.S. 819,
SCOTUS (1988).
French Cour de
Cassation 88-15.744
French Cour de Cassation, Ass. plen., 88-15.744 (21 December
1990) (the nationality of a corporation is determined by its ‘real seat,
defined as the centre of effective management’ presumed to be the
registered office)
Chicago & Alton Chicago & Alton R. Co. v. Tranbarger, 238 U.S. 67, SCOTUS
(1915).
Hadachek Hadacheck v. Sebastian, 239 U.S. 394, SCOTUS (1915).
Lucas Lucas v. South Carolina Coastal Council, 505 U.S. 1003, SCOTUS
(1992).
Magnano A. Magnano Co. v. Hamilton, 292 U.S. 40, SCOTUS (1934).
Mazibuk Lindiwe Mazibuk, and Others v. Johannesburg Water and Others,
CCSA Case CCT 39/09, Judgment (2009).
Mugler Mugler v. Kansas, 123 U.S. 623, SCOTUS (1887).
Pennsylvania Coal Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, SCOTUS (1922).
TREATIES
ASEAN Treaty of Amity and Cooperation in Southeast Asia
BLEU–Colombia BIT
Agreement between the Governments of the Kingdom of Belgium
and the Grand Duchy of Luxembourg and the Government of the
Republic of Colombia for the Promotion and Protection of
Investments, signed (not in force) 2009.
Chad–Lebanon BIT Agreement between the Government of the Republic of Chad and the
Government of the Lebanese Republic for the Promotion and
xv
Protection of Investments, signed (not in force) 15 June 2004.
Colombia–India BIT
Agreement between the Government of the Republic of Colombia
and the Government of the Republic of India for the Promotion and
Protection of Investments, signed 2009, entered into force 2 July
2012.
COMESA Investment Agreement for the Common Investment Area of the
Common Market for Eastern and Southern Africa, signed 2007.
ECT Energy Charter Treaty, opened for signature 16 April 1998 (entered
into force 16 April 1998).
Egypt–Canada BIT
Agreement between the Government of the Arab Republic of Egypt
and the Government of Canada for the Promotion and Protection of
Investments, signed 1996, entered into force 3 November 1997.
Industrial Accidents
Convention
Convention on the Transboundary Effects of Industrial Accidents,
opened for signature 17 March 1992 (entered into force 19 April
2000).
Madagascar–South
Africa BIT
Agreement between the Government of the Republic of Madagascar
and the Government of the Republic of South Africa for the
Promotion and Protection of Investments, signed (not in force) 13
December 2006.
Mauritius–Benin BIT
Agreement between the Government of the Republic of Mauritius
and the Government of the Republic of Benin for the Promotion and
Protection of Investments, signed (not in force) 18 May 2001.
Mauritius–Burundi
BIT
Agreement between the Government of the Republic of Mauritius
and the Government of the Republic of Burundi for the Promotion
and Protection of Investments, signed 2001, entered into force 22
November 2009.
Mauritius–Cameroon
BIT
Agreement between the Government of the Republic of Mauritius
and the Government of the Republic of Cameroon for the Promotion
and Protection of Investments, signed (not in force) 3 August 2001.
Mauritius–Guinea BIT
Agreement between the Government of the Republic of Mauritius
and the Government of the Republic of Guinea for the Promotion and
Protection of Investments, signed (not in force) 18 May 2001.
Mexico–Switzerland
BIT
Agreement between the Government of the United Mexican States
and the Government of the Swiss Confederation for the Promotion
and Protection of Investments, signed 1995, entered into force 14
March 1996.
VCLT Vienna Convention on the Law of Treaties, opened for signature 23
May 1969 (entered into force 27 January 1980).
MIGA Multilateral Investment Guarantee Agency Convention
xvi
MISCELLANEOUS
Alcan The Management of Alcan Aluminium Ltd v Ircable Corp (Iran –
US Claim Tribunal)
CEU Framework
Council of the European Union, Council Framework Decision
2006/783/JHA on the Application of the Principle of Mutual
Recognition to Confiscation Orders (6 October 2006), Preamble.
CmPP Communication Commission of the European Communities, Communication From
the Commission on the Precautionary Principle (2002).
Contemporary Issues Contemporary Issues in International Arbitration and Mediation:
The Fordham Papers 2015
First Report
International Law Commission, First Report on Unilateral Acts of
States by Víctor Rodríguez Cendeño, UN Doc A/CN.4/486 (5 March
1998).
GATT General Agreement on Tariffs and Trade, signed 30 October 1947.
Guiding Principles
International Law Commission, Guiding Principles Applicable to
Unilateral Declarations of States Capable of Creating Legal
Obligations, with Commentaries, Yearbook of the International Law
Commission, 2006, vol. II, Part Two.
Harvard Convention Harvard Law School, Draft Convention on the International
Responsibility of States for Injuries to Aliens (published 1961).
ILC Articles
International Law Commission, Draft Articles on Responsibility of
States for Internationally Wrongful Acts, with Commentaries,
Yearbook of the International Law Commission, 2001, vol. II, Part
Two.
Third Restatement American Law Institute, Restatement of the Law Third, the Foreign
Relations of the United States, 1987, vol. I, Section 712.
TPP Trans-Pacific Partnership, signed 4 February 2016, Chapter 9,
Section A.
World Bank
Guidelines
World Bank Guidelines on the Treatment of Foreign Guidelines on
the Treatment of Foreign Direct Investment (published 1 January
1992), Section IV.
xvii
LIST OF AUTHORITIES
BOOKS
Brownlie Ian Brownlie, Public International Law (2003)
Browlie/Crawford Brownlie, Ian, and James Crawford. Brownlie's principles of public
international law. Oxford University Press (2012)
Badia Badia, Piercing the veil of state enterprises in international arbitration
(2014).
Crawford James Crawford, Alain Pellet and Simon Olleson, The Law of
International Responsibility (2010).
Davis Paul L Davies.The Board of Directors: Composition, Structure,
Duties and Powers. December 2000
Dolzer/Schreuer Rudolf Dolzer and Christoph Schreuer, Principles of International
Investment Law (2012).
Douglas Zachary Douglas - The international Law of Investment Claims
Freund Ernst Freund, Police power, public policy, and constitutional rights
(1904).
Newcombe/Paradell Andrew Newcombe and Lluís Paradell, Law and Practice of
Investment Treaties (2009).
Nikièma Suzy H. Nikièma, Best Practices Definition of Investor (2012).
Schreuer Christoph H. Schreuer, The ICSID Convention: A Commentary
(2001).
Schreuer (2006) Schreuer, Christoph. Diverty and Harmonization of Treaty
Interpretation in Investment Arbitration, 7 February 2006
Sornarajah Muthucumaraswamy Sornarajah, The International Law on Foreign
Investment (1994).
Uchkunova Inna Uchkunova , World Court Practice Guide: Summaries and
Index of PCIJ and ICJ Cases (2016).
Villiger Mark Villiger, Commentary on the 1969 Vienna Convention on the
Law of Treaties (2009).
Waibel (2010) Michael Waibel et al., The Backlash Against Investment Arbitration:
Perceptions and Reality 6 (2010)
Waibel (2014)
Waibel Michael, Investment Arbitration: Jurisdiction and
Admissibility (January 31, 2014). University of Cambridge Faculty of
Law Research Paper No. 9/2014
xviii
Jennings/Watts Jennings/ Watts, Oppenheim’s International Law, Vol. 1: Peace.
Wortley B.A. Wortley, Expropriation in Public International Law (1959).
Sauvé Pierre Sauvé, Trade and Investment Rules: Latin American
Perspectives (United Nations 2006) (pag 22)
ARTICLES & CHAPTERS
Acconci
Pia Acconci, Determining the Internationally Relevant Link Between
State and Corporate Investor: Recent Trends Concerning the
Application of the "genuine Link" Test, JOURNAL OF WORLD
INVESTMENT & TRADE (2004)
Atanasova/Benoit/Ostr
anský
Dafina Atanasova Carlos, Adrián Martínez, Benoit Josef Ostřanský.
Counterclaims in Investor-State Dispute Settlement (ISDS) under
International Investment Agreements (IIAs), The Graduate Institute,
Geneva, Trade and Investment Law Clinic Papers 2012.
Badia Badia, Piercing the Veil of Investors in Nationality Claims, Piercing
the veil of state enterprises in international arbitration (2014).
Christie
George Christie, What Constitutes a Taking of Property under
International Law?, BRITISH YEARBOOK OF INTERNATIONAL
LAW (1962).
Astorga
Astorga, Ricardo Letelier. The Nationality of Juridical Persons in the
ICSID Convention in Light of its Jurisprudence. University of
Heidelberg, Max Planck Institute for Comparative Public Law and
International Law and the University of Chile, March 2006
Dugan
XII The Nationality of the Investor. Christopher F. Dugan, Don
Wallace, Jr., Noah D Rubins, Borzu Sabahi From: Investor-State
Arbitration, p. 312
Broches A Broches, ‘The Convention on the Settlement of Investment
Disputes between States and Nationals of Other States’(1972-II)
Mabry
L.A. Mabry, “Multinational Corporations and U.S. Technology
Policy: Rethinking the Concept of Corporate Nationality”, (1999) 87
Geo. L.J. (Georgetown Law Journal)
Fabri
Hélène Ruiz Fabri, The Approach Taken by the European Court of
Human Rights to the Assessment of Compensation for ‘Regulatory
Expropriations of the Property of Foreign Investors, NYU
ENVIRONMENTAL LAW JOURNAL (2000).
Fillers Aleksandrs Fillers, Corporate Nationality in International Investment
Law, European Scientific Journal (2014)
xix
Geiger
Rainer Geiger, Regulatory Expropriations in International Law:
Lessons from the Multilateral Agreement on Investment, NYU
ENVIRONMENTAL LAW JOURNAL (2002).
Hamida
W. Ben Hamida, L’arbitrage Transnational Unilateral: Réflexions
Sur une Procédure Réservée à l’initiative d’une Personne Privé
contre une Personne Publique (Doctoral Thesis –Panthéon-Assas
(Paris II), June 24, 2003).
Heiskanen
Veijo Heiskanen, The Doctrine of Indirect Expropriation in Light of
the Practice of the Iran-United States Claims Tribunal, CZECH
YEARBOOK OF INTERNATIONAL LAW (2007).
Lalive/Halonen
Pierre Lalive, Laura Halonen, On the Availability of Counterclaims
in Investment Treaty Aritration, Czech Yearbook of Int'l L Vol. II
(2011) 141.
Mostafa
Ben Mostafa, The Sole Effects Doctrine, Police Powers and Indirect
Expropriation Under International Law, AUSTRALIAN
INTERNATIONAL LAW JOURNAL (2008).
Newcombe
Andrew Newcombe, The Boundaries of Regulatory Expropriation in
International Law, in NEW ASPECTS OF INTERNATIONAL INVESTMENT
LAW (P. Kahn and T.W. Wälde, 2007).
Paulsson
Jurisdiction and Admissibility, Global Reflections on International
Law, Commerce and Dispute Resolution, Liber Amicorum in honour
of Robert Briner (2005), ICC Publishing, Publication 693.
UNCTAD
United Nations Conference on Trade and Development,
Expropriation, UNCTAD SERIES ON ISSUES IN INTERNATIONAL
INVESTMENT AGREEMENTS II (2012).
UNCTAD Scope and
Definition
UNCTAD Series on Issues in International Investment Agreements
II, 2011 (Scope and Definition), at 83
Wagner
J.M. Wagner, International Investment, Expropriation and
Environmental Protection, GOLDEN GATE UNIVERSITY LAW REVIEW
(1999).
Weston
Burns Weston, Constructive Takings’ Under International Law: A
Modest Foray Into the Problem of ‘Creeping Expropriation’,
VIRGINIA JOURNAL OF INTERNATIONAL LAW (1975).
Wiltse
Jessica Wiltse, An Investor-State Dispute Mechanism in the Free
Trade Area of the Americas: Lessons from NAFTA Chapter Eleven,
BUFFALO LAW REVIEW (2003).
Sinclair
Sinclair, A.C. The Substance of Nationality Requirements in
Investment treaty Arbitration, 20(2) ICSID Review – Foreign
Investment Law Journal, 2005, 357
xx
Schlemmer
E. Schlemmer, Investment, Investor, Nationality, and Shareholders,
in Muchlinsky/Ortino/Schreuer (Eds), International Investment Law
(2008)
Veenstra-Kjos Hege Elisabeth Veenstra-Kjos, Counterclaims by Host States in
Investment Treaty Arbitration 4 (4) TDM 1 (2007) 12.
Yusuf/Peat Abdulqawi A. Yusuf & Daniel Peat, A Contrario Interpretation of the
ICJ (2017) 3(1) CJCCL.
1
STATEMENT OF FACTS
1. The Republic of Kronos (“Kronos” or “Respondent”) is an underdeveloped country,
according to OECD standards1, home of a reserve of rare and high value earth metal lindoro.2
2. The discovery of the lindoro reserve was a result of a series of researches developed by
the Kronian Federal University, a public and state-founded institution. The first research report
was published in March of 1997 and indicated that a mineral reserve of lindoro had been found
within Respondent’s territory. Subsequent research confirmed the lindoro reserve.3
3. Due to the lack of national companies with the proper expertise to exploit such reserves,
Respondent’s Government held, on November of 1998, an international public auction for the
concession of the rights to extract lindoro in an area comprising 1,071,000 m² (the “Site”),4 the
only portion of the Kronian territory where lindoro could be extracted5.
4. One of the three participants of the bidding procedure was Fenoscadia Limited
(“Fenoscadia” or “Claimant”), a limited liability company renowned for its vast experience in
the exploration of rare earth metals. Claimant was incorporated under the laws of the Republic
of Ticadia (“Ticadia”) in 1993.
5. The promotion and reciprocal protection of investments between Ticadia and Kronos is
the object of a Bilateral Investment Treaty (“BIT”), concluded on June 30th, 1995 and later
ratified by both States.6
6. Fenoscadia offered the highest financial return for the concession rights and, on April
4th, 2000, Claimant won the public auction.
7. On June 1st, 2000, Claimant was granted with a 80 year-term7 Concession Agreement
(the “Concession Agreement”) which set forth the grounds of the extraction of lindoro. The
Concession Agreement, entered into by Claimant and Respondent, stated that, throughout its
performance, the parties were bound to any laws and regulations enacted by the Kronian
Government8.
8. In August 2008, Claimant started the exploration and exploitation of lindoro on the Site.
1 Facts, ¶¶1-2 2 Facts, ¶3 3 Facts, ¶3 4 Facts,¶4 5 Facts, ¶11 6 Facts, ¶1 7 Exhibit 2, p. 48 8 Exhibit 2, p. 47
2
9. In March 2015, the first attempt to regulate the environmental aspects of potentially
hazardous activities, such as mining, was sought by the Kronian President, Mr. Curat Bazings.
Elected in October 2014 for a 5 year term, the President sent to the Kronian House of
Representatives (“The House”) a draft bill establishing measures for the protection of the
Kronian environment.9
10. On 12 June 2015, the Kronial Environmental Act (“KEA”) was passed10, in addition to
the creation of the Ministry for Environmental Matters11.
11. In September 2015, the last inspection pursuant to the Concession Agreement was
conducted by the Ministry for Environmental Matters for the first time.12
12. In the following month, the Ministry for Environmental Matters released data
announcing that the volume of toxic wastes found in Respondent’s largest river, the Rhea River,
had sharply increased since 2010. The sources of the data were, to a large extent, the inspections
carried out since 2011, both by the Ministry for Agriculture, Forestry and Land and by the
newly created Ministry for Environmental Matters.13
13. With the intention of further investigating the above-mentioned data, the Kronian
Federal University submitted a funding request, which was granted in November 2015. 14
14. On 15 May 2016, The University published a study (“Study”) stating that the
contamination of the Rhea River was undoubtedly a direct consequence of lindoro’s
exploitation. The Study acknowledges the presence of graspel, a toxic component released
during the exploitation of lindoro, in the waters of Respondent’s river. Such component has
been studied by top-tier universities and independent researchers around the world over the last
5 years, and has resulted in at least 10 different studies demonstrating a connection between
water contamination by graspel and an increase in coronary heart diseases in the population
surrounded by contaminated waters.15
15. On 7 September 2016, the Presidential Decree No. 2424 (“Decree”) was issued,
prohibiting the exploitations of lindoro in all of Respondent’s territory as well as revoking
Claimant’s license and terminating the Concession Agreement.16
16. On 8 September 2016, Claimant applied to the Kronian federal court seeking to suspend
the effects of the Decree.17
9 Facts, ¶14 10 Facts, ¶16 11 Facts, ¶18 12 Facts, ¶19 13 Facts, ¶20 14 Facts, ¶21 15 Facts, ¶22 16 Facts, ¶23 17 Facts, ¶25
3
17. On 22 February 2017, the Government spokesperson announced that the Decree would
not be revoked, and Claimant withdrew its appeal to Kronos’ Circuit Court18, even though no
decision had been rendered at the time of the withdrawal.
18. On 10 November 2017, Claimant filed the request for arbitration before the Arbitration
Institute of the Stockholm Chamber of Commerce19 and on 29 January 2018, Respondent filed
its counterclaims.
18 Facts, ¶26 19 Facts, ¶29
4
I - THE TRIBUNAL HAS NO JURISDICTION OVER CLAIMANT’S CLAIMS
19. Respondent will demonstrate that the Tribunal lacks jurisdiction (A) ratione personae and
(B) ratione materiae.
(A) This Tribunal does not have jurisdiction ratione personae as Claimant is not a Ticadian
national
20. In international dispute resolution, the general rule is that jurisdiction needs to exist at the
time of the request for arbitration.20 As affirmed by the ICJ21 and widely endorsed by
investment arbitration tribunals,22 jurisdiction must be determined at the time that the act
instituting proceedings was filed. Thus, the date when the putative investor’s request for
arbitration is registered is decisive for the arbitral tribunal’s assessment of its jurisdiction.23
In this sense, Claimant had to be duly registered in Ticadia at the time of the filing of the
request for arbitration in order for this Tribunal to have jurisdiction.
21. Prior to proceeding to the merits, both parties have to meet the requirements of jurisdiction
ratione personae of the BIT.24 In this regard, an investor must pass a positive and negative
nationality test. To bring a claim before an arbitral tribunal one must prove, positively, that
it is a national of a contracting state and negatively prove that it is not a national of a host
state.25 In the case at hand, Claimant has to prove that it is a national from Ticadia and not
Kronos.
22. In order to assess Claimant’s nationality, this Tribunal should rely on Article 31(1) of the
VCLT to interpret the BIT, as both States ratified the convention26 and Tribunals almost
invariably invoke Article 31 of the VCLT when interpreting treaties.27 According to the
20 Waibel (2014), page 13; Article 1122, NAFTA, ANNEX D, ECT, Article 25, ICSID 21 Arrest Warrant, ICJ report page 211 22American Manufacturing ¶¶ 5.17–5.23; Lanco ¶¶8, 28–33, 43, 44; Goetz ¶¶67, 81; CSOB ¶¶37–38; Wena
Hotels report p. 888 ; Salini ¶65. 23 Goetz ¶72; Zhinvali ¶407; Bayindir ¶178; Lucchetti Annulment ¶¶ 34–44; SGS Philippines ¶¶ 165–168;
Generation ¶¶11.1–11.4; Salini ¶¶167–177; Kardassopoulos ¶¶ 71–98,199–259; 24 Ambiente Jurisdiction ¶ 435 25 Broches, p. 351–364 26Facts, ¶2 27 Schreuer (2006) p. 1; AAPL ¶¶38-42; MTD ¶112; Enrom Jurisdiction ¶32; Salini Jurisdiction, ¶75; Plama
Jurisdiction ¶¶117, 147-165; Sempre Jurisdiction ¶141; Camuzzi Jurisdiction, ¶133; Methanex ¶¶15-23, Eureko
¶247; Aguas del Tunari Jurisdiction, ¶¶88-93, 226, 230, 239; Siemens Jurisdiction, ¶80
5
general rule of interpretation of treaties provided by Article 31(1) VCLT, a treaty shall be
interpreted in good faith in accordance with the ordinary meaning to be given to the terms
of the treaty in their context and in the light of its object and purpose.28
23. It is indisputable that the object and purpose of the BIT and, by the same token, of the
procedures therein provided for are not the settlement of investment disputes between a
State and its own nationals. It is only the international investment that the BIT governs, that
is to say, an investment implying a transborder flux of capital. 29
24. This appears from the BIT’s Preamble which refers to the “stimulation of mutually
beneficial business activity”. Additionally, the scope of the BIT also express that the “Treaty
shall apply to measures adopted or maintained by a Party relating to an investor of the
other Contracting Party”. Thus, both the preamble and the scope of the BIT demonstrate
that the treaty does not aim to settle disputes between a State and its own nationals.
25. The BIT shall be interpreted by reference of the application of rules of general international
law only30 and, therefore, solid standards that do not collide with the object and purpose of
the BIT shall be used to find Claimant’s nationally. When BITs establish for a broad
definition of “investor”, tribunals have shown a willingness to look for criteria for
determining the nationality of the investor.31 Respondent relies particularly on the ICJ's
judgment in the Nottebohm Case32. Despite having first arisen in the field of diplomatic
protection, the genuine link standard has gained significant acceptance by arbitral tribunals
and international investment law scholars as an appropriate standard for corporate
nationality. For instance, the Iran–United States Claims Tribunal famously adopted the
dominant (or real) and effective nationality rule endorsed by the Court in Nottebohm in its
celebrated decision in Case No A/18.33
28 Article 31(1) VCLT; 29 Astorga, p 466; Article 31(1) VCLT. 30 Jennings/ Watts, p. 583 31 TSA ¶162, African Holding ¶103, CMS ¶44, LETCO ¶4, Sedelmayer ¶¶ 219,220,224, Amco ¶¶392–397;
Schlemmer, p.79; Azurix ¶ 71; GAMI ¶ 30; SOABI Jurisdiction ¶31; Aguas del Tunari Jurisdiction ¶¶ 244-248. 32 Nottebohm Case 33 Case No A/18 (6 April 1984) 5 Iran–US CTR 251
6
26. There are certain criteria that represent a genuine connection between the investor and the
State, granting its nationality.34 In this sense, the definition of investors relies on the
following criteria: (i) real seat and (ii) control.35 In addition, Tribunals had initially applied
another criterion to assess an investor's nationality: the place of incorporation. However,
(iii) this criterion cannot be used by this Arbitral Tribunal, as it provides no evidence of a
genuine link between Claimant and Ticadia.
(i) Claimant’s real seat is in Kronos
27. According to the ‘real seat theory’, the nationality of a legal person is defined by the place
of its effective business (i.e., the place where the administrative and economic centre of
control of the company is located).36 In order to apply the real seat theory, investment
arbitration tribunals rely on a range of indicators, such as ‘real connection’, ‘effective
management’ and ‘real presence’.37 All these indicators point out to the need of a genuine
link between the legal entity and the State, that is, a more significant economic relationship
between the company and the country of nationality, the place where effective management
or business activities occur.38
28. In the case at hand, all of those indicators evidence that Claimant is Kronian. Claimant’s
economic interest is solely based on its activities in Kronos and has strong ties with
Kronians.39 Additionally, the decisions of the board of directors were favoring Kronian
interests40. On top of that, Claimant transferred and concentrated all its operations in Kronos
almost ten years ago, keeping merely formal ties with Ticadia. Such action clearly
constituted an attempt to maintain Claimant under the protection of the BIT. However,
considering the above mentioned facts, Claimant’s effective seat is in Kronos and thus, it
has Kronian nationality.
(ii) Claimant is controlled by Kronian nationals
34 Waibel (2010) p. 6; Mabry, ¶¶593-594 35 Waibel (2010), p. 6 36 French Cour de Cassation, 88-15.744; Badia pp. 136-137; Daily Mail. 37 CEA ¶¶164-169; Tenaris ¶154; Sauvé, p.22); Schlemmer, p. 79; Gaëta ¶¶144, 155, 165, 179. 38 UNCTAD Scope and Definition, p. 83 39 Facts, ¶12 40 Facts, ¶7
7
29. The relevant test for foreign control and, consequently, a company’s nationality, is whether
the investor exercises a controlling interest.41 Investment Arbitral Tribunals consider the
nationality of the controlling interest as an indicative of a company's nationality.42 In this
sense, international law43 has shown a favorable stance towards the control criterion in
investment arbitration cases44, having the ICJ45 ruled favorably to its applicability.
30. Relevant case law46 establishes different criteria in order to assess the controlling interest
of a company besides the mere corporate capital control. In Vacuum Salt v Ghana,47 the
tribunal upheld that participation in the company’s capital stock or share ownership is not
the only indicator of control. The tribunal deemed the existence of foreign control as a
complex question, requiring the examination of equity participation, voting rights, and
management. In this sense, the tribunal finds that it lacks jurisdiction, once there was no
indications of foreign control of Vacuum Sal.48 Therefore, the existence of control is
verified through controlling interest and management structure.
31. In the case at hand, Kronian nationals own 35% of Claimant’s shares and, since 2013, the
majority of its management board is comprised of Kronian nationals. Therefore, Kronian
nationals have the (1) controlling interest and (2) management structure of Claimant’s
enterprise.
(1) Kronian nationals have the controlling interest of Claimant
32. Controlling interest is, by definition, owning at least 50% plus one of the outstanding shares
of a given company.49 Nonetheless, a group can achieve controlling interest with less than
50% ownership of a company if that group owns a significant proportion of its voting
shares.50 This proportion can be, for instance, 35% of voting shares, if the remaining shares
41 Douglas p. 597; Autopista Jurisdiction ¶110-116; Alcan, ¶297 42 TSA ¶162, African Holding ¶103, CMS ¶44, SOABI ¶31, LETCO ¶4, Sedelmayer ¶¶ 219,220,224, Amco
¶¶392–397; Schlemmer, p.79; Azurix ¶71; GAMI ¶30. 43 Dugan, p. 312; Article 6.2, The LCIA Rules; Acconci pp. 169–71. 44 TSA ¶162; African Holding ¶103, SOABI ¶31), LETCO ¶4, Sedelmayer ¶¶ 219,220,224, Amco ¶¶392–397;
Schlemmer,p. 79; CMS Jurisdiction, ¶ 44; Azurix Jurisdiction ¶ 71; GAMI ¶ 30. 45 ELSI, p. 15 46 Vacuum Salt ¶43-53; Aguas del Tunari Jurisdiction ¶¶ 225–48, 264–32 47 Vacuum Salt ¶43-53 48 Vacuum Salt ¶55 49 World Investment Report 2016, Investor Nationality: Policy Challenges, ¶135 50 Bebchuk, Kraakman, and Triantis ‘Stock Pyramids’ (n 72).
8
are diluted. Therefore, the controlling interest of a company cannot be assessed by merely
analyzing its corporate structure.
33. For instance, companies that have a private equity fund as a shareholder tend to have most
of its shares diluted among the fund’s several shareholders. Private equity funds are formed
by multiple quotaholders which do not have any control and influence in the company's
decision-making process.51 Thus, the controlling interest of a company that has the majority
of its shares controlled by a private equity fund can very well rest with another private party
controlling the remaining (or most of the remaining) shares and, consequently, the decision-
making process.
34. In the present case, the Ticadian private equity fund is composed of nationals from different
countries including Ticadia and Kronos.52 Although the private equity fund holds 65% of
Claimant’s voting shares, it clearly does not hold any influence in the company’s control.53
This is highlighted by the fact that the board of directors, which is elected by the voting
right held by each shareholder in proportion to its shares,54 is composed by a majority of
Kronian nationals. On top of that, Kronian nationals directly own the remaining 35% of
Claimant’s shares. Hence, Kronian nationals hold the controlling interest of Claimant.
(2) Claimant’s management structure is Kronian
35. The management of a company is assessed through the composition of its board of directors.
According to the management theory, the influence over the company's decision-making
process and its management structure shall be recognized as indicatives of effective
control.55 Thus, the control of a company can be verified through its management. In the
present case, for the past five years, Claimant’s board of directors has been comprised of a
majority of Kronian nationals.56 Consequently, Claimant’s management is Kronian.
51Davies p.2 52 PO 2.2 53 Facts, ¶ 7 54 Clarifications, ¶2 55 LETCO ¶ 6; Autopitsta ¶116 56 Facts, ¶7
9
(iii) The place of incorporation criterion provides no evidence of a genuine link between
Claimant and Ticadia
36. According to the place of incorporation standard, a company is deemed to have the
nationality of the State where it was incorporated.57 Although used by some tribunals, this
criterion is not tenable as it lacks a ‘genuine link’58, that is, the criterion is not able to prove
an effective connection between the company and the state in which it is incorporated.59
This criterion is based on a very tenuous, not to say artificial, attachment as the link between
the company and the State is limited to registration of articles of incorporation and the
existence of a postal address. 60 Following this rationale, Arbitral Tribunals must be careful
as investors may abuse of the rights granted throughout the BITs,61 creating companies with
the sole purpose of benefiting from treaty protection.62
37. This is exactly what Claimant intended in the case at hand. As mentioned above, Claimant
transferred and concentrated all its operations in Kronos 8 years ago,63 keeping merely
formal ties with Ticadia. Therefore, the place of incorporation criterion provides no
evidence of a genuine link between Claimant and Ticadia and shall not prevail before this
Tribunal.
38. Additionally, the place of incorporation criterion shall not be used alone. This criterion
together with real seat and foreign control, have formed a set of cumulative criteria in inter-
state litigation practice,64 as well as in modern treaties.65 As mentioned above, both the real
seat and the test for foreign control criteria demonstrate that Claimant is a Kronian national.
The only criterion that would justify Claimant’s Ticadian nationality would be the place of
incorporation. However, considering that the application of this criterion by itself in order
57 Shaw, p. 816-18; Sornarajah (2000), p.87, 198.; Turner p. 451 58 Barcelona Traction, ¶33 (Separate opinion judge Fitz Maurice); Brownlie, pp. 482-483; Sinclair, p. 362. 59 Badia p. 136; Lucius Caflisch p. 177 - 178; North Sea ¶74. Pac Rim ¶¶ 2.41-2.111; Fillers, p. 53 60 Nikièma, p. 8 61 Fillers, p. 53 62 Phoenix ¶¶106, 147; GmbH42; Banro ¶¶23,26; 63 Facts ¶12 64 Wimbledon; Losinger Case PCIJ Reports, Ser. C, no. 78, p. 14; Electricity Company of Sofia, 77. 65 Article 1117(1) NAFTA, Article 13 MIGA; Article 19 ASEAN
10
to assess the nationality of corporate investors cannot prevail, Claimant’s nationality can
only be Kronian.
(B) This Tribunal does not have jurisdiction ratione materiae, once Claimant’s claim is purely
contractual and, thus, not covered by the BIT
39. Many investment treaties include a narrow jurisdictional clause that provides for the
settlement of any disputes arising between a Contracting Party and the investor of the other
Contracting Party.66 The plain meaning of the clause may suggest that disputes arising from
contract breaches fall within its scope. However, when interpreting similar provisions
tribunals came to opposite conclusion.67 In both SGS cases, the tribunal found that there
was no jurisdiction, once the “essential basis” of the claims was breach of contract, and that
the contract with claimant required those claims to be arbitrated under the contractual
dispute resolution clause. Further, it explained that “where the essential basis of a claim is
a breach of contract, the tribunal will give effect to any valid choice of forum clause in the
contract.”68 In SGS v. Philippines the tribunal decided that its jurisdiction should not be
exercised over a contractual claim when the parties have already agreed on how such a
claim is to be resolved, and have done so exclusively and that a contractual compromissory
clause constitutes lex specialis and overrides interstate jurisdictional arrangements.69 In
SGS v. Pakistan, the tribunal admitted that the phrase "dispute with respect to investment",
in principle, was able to encompass dispute grounded on treaty violations as well as disputes
arising from contract violations. However, the tribunal upheld that this is not enough to
cover purely contractual claims.70
40. The present dispute derived exclusively from an alleged breach of the Concession
Agreement. Thus, as Claimant’s claim arises from an alleged breach of contract, and not
from the breach of the BIT, one may not say that this dispute should be resolved within the
scope of such Treaty.
66 Contemporary Issues p. 30 67 SGS Pakistan Jurisdiction ¶148; SGS Philippines Jurisdiction ¶36; Urbaser ¶252 68 SGS Pakistan Jurisdiction ¶148; SGS Philippines Jurisdiction ¶36 69 SGS Philippines ¶¶ 139–43 70 Consorzio ¶ 25
11
II - IN ANY EVENT, CLAIMANT'S CLAIMS ARE INADMISSIBLE BEFORE THIS
TRIBUNAL
41. Respondent aims to prove that (A) the BIT contains a fork in the road provision, (B) which
was triggered by means of Article 7 of the Concession Agreement. In any event, (C) the
filling of the Lawsuit before the national courts triggers, by itself, the fork in the road
provision of the BIT.
(A)The BIT contains a fork in the road clause
42. A fork in the road provision is a clause that provides the parties with the possibility to
choose between different fora for conflict resolution in detriment of the others. Thus, once
this decision is made, that fora is the only one before which the claims are admissible.71
43. Article 11(2) BIT regulates the different options for conflict resolution. It brings three
different options separated by the world “or”; the domestic courts of the Contracting party,
any applicable previously agreed dispute-settlement procedure or international arbitration.
44. As stated by Article 31(1) VCLT a treaty shall be interpreted in good faith in accordance
with the ordinary meaning to be given to the terms of the treaty in their context and in the
light of its object and purpose. By using the determinations of Article 31(1) VCLT to
interpret Article 11(2) BIT, its is clear the parties cannot opt for more than one of the conflict
resolution methods, once the term "or" used in such Article is presenting a choice that must
be made by the parties.
45. By presenting such final choice of forum, Article 11(2) BIT falls into the definition of a
fork in the road provision. Hence, one could only conclude that Article 11 contains a fork
in the road clause.
(B) The fork in the road provision was triggered by the Concession Agreement
71 Waibel (2014), p. 74
12
46. As mentioned by Judge Jessup, rights under international law that pertain to an individual
can be waived.72 In this sense, investment arbitration tribunals affirm that the existence of
a valid forum selection clause in a contract precludes the Tribunal constituted under a BIT's
dispute resolution clause from deciding disputes arising under such contract.73 Furthermore,
scholar Christoph Schreuer confirms this understanding, stating that a document that
contains a dispute settlement clause more specific in relation to the parties and the dispute
itself should be given precedence over a document of general application 74.
47. According to the fork in the road provision, investors must make a choice between pursuing
its claims against the state either through local courts, previously agreed methods or
international arbitration. In this sense, by signing the Concession Agreement,75 which
submitted any dispute to the national courts of Kronos,76 Claimant waived its right to pursue
its claims under any other dispute resolution methods provided by Article 11(2) BIT. This
action only reaffirms that it was agreed and clear to all parties involved that the national
courts were the chosen fora. Thus, when Claimant signed the Concession Agreement, it
manifested its consent in using the Kronian courts for the settlement of any dispute arising
from such agreement in detriment of the other mechanisms contained in the BIT, triggering
the fork in the road provision.
(C) In any event, the filling of the Lawsuit before national courts, by itself, triggers the fork in
road provision
48. Even if this Tribunal does not understand that the signing of the Concession Agreement
triggered the fork in the road, the submission of claims to Kronos' national courts represents
a choice of fora.
49. In Pantechniki S.A Contractors & Engineers vs. Albania, the tribunal decided that, by
pursuing two remedies simultaneously, that is, national courts and international arbitration,
claimant has disqualified itself for the latter. In this regard, the tribunal concluded that the
72 Woodruff v. Venezuela, RIAA, volume IX, Hague ICJ Register, p. 213; North American Dredging Company
of Texas v. United Mexican States, RIAA, volume IV, Hague ICJ Register, p. 26.ica 73 Joy ¶¶89 - 91; Vivendi Annulment ¶98. SGS Philippines ¶141 74 Ibid. ¶141; Schreuer, p. 362 75 Facts, ¶ 8 76 Article 7 Concession Agreement
13
claims became inadmissible once claimant had disregarded the fork in the road provision
of the Treaty.77
50. The same situation can be observed in the present case. Article 11(2) BIT establishes a fork
in the road provision, which brings three different options for conflict resolution (i.e.
domestics courts, international arbitration or any previously agreed methods). In this sense,
when confronted with a conflict, Claimant still opted for the national courts upon filing the
Lawsuit. Claimant chose its forum for dispute resolution when it presented its claims before
Kronos’ national courts.78 Therefore, by presenting its request for arbitration, Claimant
pursued two different remedies simultaneously, triggering the fork in the road provision and
making its claims inadmissible before this Tribunal.
77 Pantechniki ¶32 78 Facts ¶25
14
III - RESPONDENT’S ACTIONS DID NOT AMOUNT TO AN EXPROPRIATION OF
CLAIMANT’S INVESTMENT
51. Respondent did not expropriate Claimant’s investments in violation of Art. 7 BIT primarily
because (A) Respondent’s actions fall within the regulatory power of the State. Either way,
(B) Respondent has neither directly nor indirectly expropriated Claimant’s investment. In
the alternative, (C) Respondent has lawfully expropriated Claimant’s investment under the
exception laid down in Art. 7 BIT.
(A) Respondent’s actions fall within the regulatory power of the State
52. Respondent’s actions were the legitimate exercise of its police power and cannot thereby
be seen as the expropriation of Claimant’s investment, as Respondent fulfilled the general
exceptions for regulatory measures enshrined on Art. 10 BIT.
53. Customarily79 embedded in international law80 and patronized by several BITs,81 the police
power doctrine is first and foremost an attribute of State sovereignty82, which authorizes the
enactment of regulation with no duty to provide compensation in the event of an adverse
economic impact on alien investment,83 as they are not expropriatory in nature.84 In the
present case, Respondent’s police powers are cushioned by the general exceptions laid
down on Art. 10 BIT, which authorizes Respondent to undertake any measure necessary,
inter alia, to protect human life and health and the conservation of natural resources, as
foreseen by Arts. 10(1)(a) and (c) BIT. However, such measures cannot constitute an
arbitrary or unjustifiable discrimination between investments or between investors, in
accordance with Art. 10(2)(a); or a disguised restriction on an investment, in per Art.
10(2)(b). Thus, the cumulative compliance of all above criterion exempts Respondent from
the payment of compensation.
79 Feldman ¶83; Saluka ¶¶255, 262; Vivendi ¶63; Sedco ¶275; Methanex ¶7; Heiskanen, pp.215, 218. 80 Biofarma ¶276; Renée ¶476; Philip Morris ¶295. 81 Chad–Lebanon BIT, Art. 8; Madagascar–South Africa BIT, Art. 3; Mexico–Switzerland BIT, Art. 3; Egypt–
Canada BIT, Art. 17; Mauritius–Burundi BIT, Art. 12; Mauritius–Cameroon BIT, Art. 11; Mauritius–Guinea BIT,
Art. 12; Mauritius–Benin BIT, Art. 11. 82 Wimbledon, p.25; Framatome ¶58; Chicago & Alton ¶238. 83 El Paso, ¶ 234; Feldman, ¶ 198; Tecmed, ¶119, Sornarajah, 374. 84 Telenor ¶64.
15
54. Applying these criteria to the instant case, Respondent’s actions fall within the regulatory
power of the State, because they (i) were taken for the protection of Kronian people’s health
and of the Rhea River, (ii) were not an arbitrary or unjustifiable discrimination on
Claimant’s investment, and (iii) were not a disguised restriction on Claimant’s investment,
meaning that (iv) there has been no obligation to compensate.
(i) Respondent’s actions were taken for the protection of human health and the conservation of
natural resources
55. Respondent’s actions are regulatory measures because they (1) were necessary to the
protection of human health and life and the environment, whereas (2) within the state’s
discretion to enact regulatory measures and (3) duly justified by the Studies.
56. Respondent acted (1) in the pursuit of the protection of human health and the environment,
both matters are widely embedded in international law as legitimate basis for State
regulations.85 In the instant dispute, Respondent’s measures were necessary to prevent
Claimant’s hazard mining activities from further damaging Kronian public health and
environment. Studies carried out by the Kronian Federal University indicate that the
exploitation of lindoro, of which Respondent held exclusive rights,86 are potentially
harmful to the environment and human health. In this sense, the Studies demonstrate that
the contamination of Rhea River is undoubtedly a direct consequence of the exploitation of
lindoro.87 In regards to the human health endangerment, the Study indicated a probable link
to the rise of Cardiovascular disease88 and Microcephaly89 among Kronian nationals to the
exploitation of lindoro. Thus, it is clear that Claimant’s activities had damaging
consequences to the Kronian population’s health and to the national environment, which
motivated Respondent’s measures.
57. Any attempt from Claimant to disqualify the public purposes underlying Respondent’s
measures should not prevail, as (2) Respondent acted within its discretion to enact
regulations. In this sense, it is recognized that State’s are awarded discretionary evaluation
85 Chemtura ¶266; Feldman, ¶ 103; Sornarajah, 385. 86 Facts ¶ 11; Exh.2, Att.1(2). 87 Exh. 4, Contamination of Rhea River because of the exploitation of lindoro. 88 Exh. 4, Cardiovascular disease. 89 Exh. 4, Microcephaly.
16
as to the regulation goals and level of protection. Accordingly, Respondent should be also
awarded the extensive discretion granted to States when defining the public purposes
underlying their regulatory objectives90 and the standard of protection of the regulations,91
considering that “it is not the Tribunal’s role to substitute its own judgment for the discretion
of the Government of what are ‘imperatives of public need . . . or of national interest’.”92
Thus, accounting Claimant’s hazardous activities, Respondent was entitled, to enact the
regulatory measures it understood fit for the public health and environmental protection.
58. Additionally, (3) Respondent’s measures were duly substantiated by the Study, given that
they (a) were sufficiently certain as to allow Respondent to take preventative measures and
(b) were conducted in good-faith.
59. If yet unconvinced, this Tribunal should consider that Respondent’s actions (a) were
sufficiently certain allowing the State to take preventative action under the precautionary
principle,93 enheartened in Art. 9(2) BIT. In light of the precautionary principle, states are
authorized to take preventive measures to protect the human health and the environment
even when upon the lack of conclusive scientific evidence on the harm actually caused.94
As stated, the only topic on which the Study fails to establish a conclusive causal link is the
effects of the graspel found in the Rhea River to its riparian people.95 After examining
inhabitants of the surrounding areas of the lindoro exploitation, the Study found that the
incidence of CVD among them had risen by 45% since 201196 and that 88% of the newborns
examined had shown early symptoms of microcephaly, which was virtually non-existent in
Kronos until 2012.97 The 2011–2012 interim coincides with the climax of Claimant’s
mining activities, occurring from 2010 to 2013.98 The Study clearly stated that only the
exploitation of lindoro could be linked to such sudden increase in CVD and microcephaly,99
which was also massively supported by “[a]t least 10 different studies conducted by top-
90 Amoco ¶233; Feldman ¶103; US – Gasoline, ¶ ¶ 6.22; 7.1. 91 EC – Asbestos, ¶168; Bilcon ¶738. 92 Goetz ¶126; 93 Crawford p.532. 94 Brownlie/Crawford p. 352. 95 Facts ¶22. 96 Exh.4, CVD. 97 Exh.4, Microcephaly. 98 Exh.3, 2010 and 2013 Statements. 99 Facts ¶22; Exh.4, CVD, Microcephaly.
17
tier universities and independent researchers across the globe over the last 5 years”100 (the
“Global Studies”; together with the Study, the “Studies”). Therefore, if this Tribunal
accounts this lack of causal link, it should however recognize, in light of the precautionary
principle, that there was enough scientific evidence as to empower Respondent to the
measures it undertook, further considering that Claimant bared exclusive rights to exploit
lindoro101 and that Claimant’s activities were found to be the only ones releasing and
infiltrating graspel in the environment in Kronos.102
60. Further, the Study should also be considered a reliable ground for Respondent’s actions, as
they were (b) conducted in good-faith. Similarly challenged about the scientific grounds for
regulatory measures, the tribunals in Methanex and Chemtura decided that the expert
studies questioned by the claimants were reliable as they were conducted in good-faith by
accredited institutions,103 akin to the present situation. Thus, this Tribunal should consider
that the Study could have reasonably substantiated Respondent’s actions.
61. Therefore, Respondent’s actions were necessary for the protection of human health and the
environment, within the scope of its regulatory discretion and grounded on sufficient and
reliable scientific evidence.
(ii) Respondent’s measures are not an arbitrary or unjustifiable discrimination between
investments or between investors
62. State measures must be carried out non-discriminatorily for it to correspond to a regulatory
measure enacted in accordance to Art. 10(2)(a). As noted in Champion, the purpose of this
standard is:
“[...] to promote foreign investment and to guarantee the foreign investor that his
investment will not, because of his foreign nationality, be accorded a treatment
less favourable than that accorded to others in like situations."104
100 Facts ¶22. 101 Facts 11¶; Exh.2, Att.1(2). 102 PO2 ¶4. 103 Methanex ¶101; Chemtura ¶134. 104 Champion ¶126.
18
63. Accordingly, a State action that affects a foreign investor is not discriminatory per se: it
must be based on, linked to or taken for reasons of, the investor’s nationality or other
characteristics particular to the investor.105 In this sense, measures aimed at nationals and
aliens alike cannot be considered discriminatory.106 Regardless, such comparison should be
carried among investments submitted to the same conditions.107 In the present dispute,
however, Claimant was the only company enrighted to lindoro exploitation,108 hence being
the only company possibly affected by Respondent’s measures. Even if that was not the
case, the Decree effectively prohibited the exploitation of lindoro in all Kronian territory,109
thus any investor, regardless of its nationality, would have been affected by Respondent’s
measures. Therefore, they cannot be considered discriminatory.
(iii) Respondent’s measures were not a disguised restriction on Claimant’s investment
64. In order to assess if a state measure amounts to a disguised restriction on foreign trade or
investments, Tribunals have consistently relied on the publicity test.110 In such cases, state-
imposed restrictions that comply with the other criterion for legitimate regulations “will
constitute an abuse if such compliance is in fact only a disguise to conceal the pursuit of a
trade restrictive objectives.”111.
65. In the present dispute, however, whereas Respondent, as above stated,112 enacted its
measures in full compliance to the criterion enshrined on Arts. 10 (1) and 10 (2)(a) BIT, it
also provided full publicity to the restriction imposed on the exploitation of lindoro. In fact,
Respondent’s publicized its restrictions by means of the Decree, which was immediately
published in the Official Gazette of the Republic of Kronos upon its issuance on September
7th, 2016.113 Thus, given that Respondent’s measures were duly publicized, Claimant
cannot contend that they were in anyway a disguised restriction on its investments.
105 Parcel ¶118. 106 Eureko ¶242. 107 EC – Asbestos, ¶ 8.226; S.D. Myers ¶248; Nykomb ¶4.3.2. 108 Facts ¶ 11; Exh.2, Att. 1(2). 109 Facts ¶23; Exh.5, Art. 1. 110 US – Canadian Tuna, ¶ 4.8; US – Springs Assemblies, ¶ 56; EC – Asbestos, ¶ 8.234. 111 EC – Asbestos, ¶ 8.233. 112 Section III, A., (i) and (ii). 113 Exh. 5. Article 5.
19
(iv) Respondents regulatory measures do not give rise to any obligation to compensate
66. In the present case, no obligation to compensate Claimant ever arose from Respondent’s
actions. As explained above,114 a host State is not responsible for loss of property or for
other economic disadvantages resulting from actions that fall within its police power.115 In
other words, police power measures are non-compensable.116 It has been already established
that Respondent’s actions fall within its police power as they were taken in compliance with
the criteria embedded on Art. 10 BIT for the enactment of general regulatory measures,
thus, Respondent was never bound to compensate Claimant.
67. Therefore, Respondent’s measures were not expropriatory as it acted within its regulatory
powers enshrined on Art. 10 BIT, thus, exempting itself for the payment of compensation.
(B) Respondent has neither directly nor indirectly expropriated Claimant’s investment
68. Art. 7 BIT hinders the Contracting Parties of expropriating a covered investment “either
directly or indirectly”,117 but none of these forms of expropriation has actually taken place
in the instant dispute.
69. Firstly, direct expropriation entails an “open, deliberate and unequivocal intent . . . to
deprive the owner of his property through transfer of title or outright seizure.”118 Here, no
such transfer occurred, as Claimant remains in the legal title of its assets, given that the
Decree merely confiscated the lindoro exploited by Claimant,119 as a guarantee that
Claimant would bear the costs of its own pollution.120 Additionally, Respondent’s measures
towards Claimant’s property shows no open, deliberate or unequivocal intent on
Respondent’s part to diminish Claimant’s ownership of the investment, as they were
motivated by the importance of the protection of the environment and by the harmful
114.Section III, (A), (iv). 115 CME ¶603; Feldman ¶103; Azurix ¶310. 116 Quiborax ¶202; Methanex ¶7; Sedco ¶275; Too p.378. 117 BIT, Art.7. 118 UNCTAD p.7 (emphasis added); S.D. Myers ¶280. 119 PO2 ¶9. 120 Exh. 5. Art. 4.
20
consequences of the exploitation of lindoro, as per the consideranda of the Decree.121 As
such, no direct expropriation has occurred.
70. Further, the most commonly agreed upon standard for indirect expropriation is whether or
not the investment was substantially deprived of its value and if this substantial deprivation
is permanent.122 In the present case, Respondent’s actions were neither (i) significantly
damaging to Claimant, nor (ii) permanent. Therefore, they cannot be considered an
expropriation.
71. On the one hand, expropriation relies on (i) provoking an irreversible economic impact to
an investment123 in a way that its management is significantly compromised.124
Accordingly, the State measure must devoid the company of control, interfere directly in its
internal operations, or displace its shareholders.125 Expropriation claims are unfounded
where the investor is otherwise able to pursue other continuing lines of business activity.126
72. In the present dispute, Respondent’s actions did not trigger any changings on Claimant’s
shareholders or management. Moreover, Claimant’s industrial activities are neither
dependant of the exploitation of lindoro127, nor circumscribed to Respondent’s territory,128
despite its “concentration” there,129 hence it would be free to pursue other lines of business
activity. Thus, Claimant’s investment was not substantially impaired.
73. On the other hand, an expropriatory measure (ii) must also be permanent.130 Contrariwise,
as mentioned, Respondent here confiscated the lindoro stored in Claimant’s facilities,131
and confiscation is in its concept a temporary measure132 that States have discretion to carry
121 Exh. 5. Consideranda. 122 Plama ¶193; AES ¶¶14.3.1–14.3.3; Mamidoil ¶¶568–569; LG&E ¶191; Tecmed ¶115; Brownlie, p.509;
Newcombe/Paradell, p.357; Wagner, pp.465–538; Mostafa, p.267. 123 Mamidoil ¶¶568-569; Creek ¶374; Plama ¶193; CME ¶591; Handyside ¶29; Poiss ¶108; Fabri pp. 148–173. 124 Pope & Talbot ¶100; Matos e Silva ¶¶600–601; Starrett ¶154; Nykomb ¶4.3.1; PSEG ¶278. 125 Archer Daniels ¶¶235, 242; Pope & Talbot ¶¶100–102; Feldman ¶59; Azurix ¶322; Eastman Kodak ¶54; ITT
Industries, Concur ¶121; PSEG ¶278. 126 Feldman ¶59; LG&E ¶189. 127 Facts ¶¶6, 12, 27. 128 Facts ¶¶12, 27. 129 Facts ¶12. 130 S.D. Myers ¶287; LG&E ¶193; Tippetts ¶225; Phelps Dodge ¶110; Saghi ¶83; RFCC ¶68. 131 PO2 ¶9. 132 Fletcher ¶139; Siag ¶372; CEU Framework ¶7.
21
out.133 Actually, such confiscation pursued Art. 4 Decree as guarantee that Claimant would
bear the costs of its own pollution. Regardless, the temporary character of Respondent’s
actions is further highlighted by the fact that it would be willing to revoke the Decree.134
Thus, Respondent’s actions were temporary in nature.
74. Therefore, Respondent’s actions did not amount to expropriation of Claimant’s investment.
(C) In the alternative, Respondent has lawfully expropriated Claimant's investment under the
exception laid down in Art. 7 BIT
75. Assuming, arguendo, that Respondent’s actions were expropriatory, Respondent would still
be in compliance with the BIT as it would be the case of a lawful expropriation. Mirroring
an international standard,135 Art. 7 BIT excludes any lawful expropriation from its scope by
allowing States to expropriate investments provided that they do so for a public purpose, in
a non-discriminatory manner, in accordance with due process of law, and upon payment of
compensation. Since Respondent’s actions honored all four criteria autonomously, no
breach of Art. 7 BIT can be raised.
76. In the instant dispute, while It has been already demonstrated that Respondent’s actions
were (i) taken for a public purpose,136 as they aimed at the protection of human health and
the environment, and (ii) in a non-discriminatory manner.137 The measures additionally
complied with (iii) due process of law. In any case, (iv) Respondent’s lack of compensation
cannot raise the conclusion that it’s measures were unlawful.
(iii) Respondent’s actions were taken in accordance with due process of law
77. Accordance with due process of law requires (1) that the measure comply with procedures
established in domestic legislation138 and (2) that the affected investor have an opportunity
133 Dosier ¶63; Amoco ¶264; Phillips ¶51–53; Butler ¶54; Arcuri ¶31; Magnano ¶78; Alaska ¶65; Brownlie, p.532;
Wortley, p.39. 134 Facts ¶¶23, 28. 135 Texaco ¶59; LETCO passim. 136 Section III, A., (i). 137 Section III, A., (ii). 138 Texaco ¶59; LETCO passim.
22
to have the case reviewed before an independent and impartial courts.139 In this sense,
tribunals should observe a state’s laws when deciding if its actions violate due process,140
as “[a] State has the [sovereign] right to enact, modify or cancel a law at its own
discretion.”141 In the case at hand, Respondent complied with such criteria and thus
accorded due process to Claimant.
78. Respondent’s actions encountered (1) legal basis in its domestic legislation, as it was (i)
based on lawfully enacted legislation, (ii) to which Claimant was contractually bound to
observe.
79. Firstly, (i) Respondent’s measures were based on KEA, which was regularly passed with
the purpose of minimizing the externalities of sensitive activities in Respondent’s
territory.142 KEA was lawfully enacted pursuant to Art. 59 KC, which grants the Speaker of
the House full discretion when deciding on the necessity of a public hearing.143 Further,
KEA imposed miners the obligation to implement protection measures to prevent
contamination of waters. The non-compliance of this obligation subjected the miners to
penalties, fines, the immediate withdrawal of environmental licences, forfeiture of facilities
and the obligation to compensate.144 Secondly, Claimant cannot submit that its activities
were not submitted to Respondent’s domestic legislation, (ii) as it contractually consented
to it, as it is a Party to the Concession Agreement. Claimant, conforming to Art.2(2)
Concession Agreement,145 thereby “commits to comply with good practices for the
sustainable exploitation of lindoro, including the disposal of any waste resulting from [its
mining activities].” Forward under Art.2(1) Claimant also committed to “observe the laws
in force in the Republic of Kronos”, and Art.2(2)(1) later prescribes that “new laws and
regulations . . . will be considered as automatic amendments to this Agreement.”146
Accordingly, Claimant yields to the KEA by means of the Agreement, thus being subject
also to the health and environmental protection obligations enshrined in Respondent’s
domestic legislation.
139 ADC ¶435. 140 Saluka ¶298. 141 Parkerings ¶332. 142 Facts, ¶15. 143 Facts ¶17. 144 Facts, ¶16. 145 Exh, 2. Art. 2(2). 146 Exh.2. Art. 2(1).
23
80. Additionally, (2) Claimant had the opportunity to submit its case to revision before an
independent and impartial body. In fact, Claimant not only had the opportunity, but it did
apply to Kronos’ Circuit Court seeking to suspend the Decree,147 thus, Claimant cannot
contend that Respondent prevented the review of its case.
81. Therefore, all measures carried out by Respondent were taken in accordance with due
process of law standards.
(iv) Respondent’s lack of compensation does not render Respondent’s actions unlawful
82. The lack of compensation received from Respondent does not render its actions unlawful
as Respondent acted in its right not to immediately compensate Claimant. It has been
recognized that states are granted a margin of delay for providing compensation, due to the
uncertainty of whether or not their actions will be found expropriatory at the end of the
proceedings. In such cases, the non-payment of compensation at the moment of an
expropriation is not itself enough to make it unlawful, given that it would be cured upon the
engagement in negotiations for the payment of later adequate compensation and interest.148
Hence, the lack of an instant payment on Respondent’s part cannot raise the conclusion that
Respondent unlawfully expropriated Claimant’s investments.
83. Therefore, none of Respondent’s actions can be said to have violated the BIT.
147 Facts, ¶ 25. 148 ConocoPhillips ¶394; Tidewater ¶141.
24
IV. RESPONDENT’S COUNTERCLAIMS ARE ADMISSIBLE BEFORE THE
TRIBUNAL
84. According to general international law, a court or tribunal should entertain counterclaims if
they come within the tribunal’s jurisdiction and if they are connected with the primary
claims149. Furthermore, case law and commentary have often been mindful of the policy
considerations involved in admitting counterclaims150.
85. The Tribunal should declare Respondent’s counterclaims admissible as it has jurisdiction
over them (A) and as the counterclaims are connected with Claimant’s claims (B).
Furthermore, policy considerations speak in favor of admitting Respondent’s counterclaims
(C).
(A) The Tribunal has jurisdiction over the counterclaims
86. According to the general position in international dispute settlement, jurisdiction and
admissibility are different legal terms of art151. Whereas an adjudicator may rule on its own
jurisdiction proprio motu152, it may not do so as to admissibility issues153.
87. PO1 was adopted in the wake of the case management conference, where both Parties and
the Tribunal consulted with a view to organize the conduct of the arbitration154. Whereas
¶5(a) mentions “jurisdiction over the dispute”, PO1 reads on ¶5(d) that the instant issue
concerns “whether Respondent’s counterclaims are admissible before the tribunal”.
88. The contrast makes clear that the Parties and the Tribunal were not only aware of the
conceptual difference between these legal terms of art, but also that they chose to focus on
149 Saluka Counterclaim, ¶¶61, 76, 81; Paushok, ¶689; Spyridon, ¶¶865-869; Hamester, ¶¶353-354; Bosnian
Genocide, ¶31; Oil Platforms (Order), ¶33; Armed Activities (Order), ¶35; Armed Activities, ¶273; Jurisdictional
Immunities (Order), ¶15; Atanasova/Benoit/Ostranský, p. 11; Veenstra-Kjos, pp. 6-7; art. 80 Rules of the Court;
art. 46 ICSID Convention; art. II(1) Claims Settlement Declaration. 150 Spyridon Roussalis, Declaration of arbitrator Michael Reisman; Bosnian Genocide (Order), ¶¶30-31; Oil
Platforms (Order), Sep. Op. Judge Oda, ¶8; Atanasova/Benoite/Ostranský, p. 38; Lalive/Halonen, pp. 153-154;
Veenstra-Kjos, pp. 47-48. 151 Methanex, ¶139; SGS v Philippines, ¶¶153-155; HOCHTIEF, ¶90; Mutual Assistance in Criminal Mattes, ¶48;
Paulsson, p. 617. 152 ICAO Council, ¶13. 153 Uchkunova, p. 813. 154 PO1, p. 29.
25
admissibility upon addressing counterclaims. The Tribunal should thus focus on
requirements pertaining strictly to the admissibility of counterclaims. However, since the
Tribunal may wish to examine its jurisdiction proprio motu, Respondent shall also make
submissions to this effect.
89. The Tribunal has jurisdiction over Respondent’s counterclaims as the scope of consent
enshrined in art. 11(1) BIT covers counterclaims (i). Further, the mention to counterclaims
in art. 11(4) BIT (ii) and the applicability of the SCC Rules (iii) also prove such consent.
On the other hand, Respondent’s lack of standing is irrelevant for the purpose of
determining consent (iv).
(i) Art. 11(1) BIT covers counterclaims
90. When an international investment agreement contains a standing offer to arbitrate, the
investor needs only accept it under the conditions laid thereby to form the necessary consent
for arbitration155. Upon conveying its acceptance, the investor may not alter the material
scope of the arbitration agreement156. Thus, if the agreement encompasses counterclaims,
the tribunal shall have jurisdiction to entertain them157.
91. In relation to covering counterclaims, the language of arbitration agreements may be either
broad158 or narrow159, the former extending consent over counterclaims160 and the latter
depriving it over them161. A broad material scope may be conveyed by defining an
investment dispute as “any dispute arising out of the agreement” or as a dispute pertaining
to an investment agreement or authorization or an alleged breach of a treaty-based right162.
92. Respondent’s standing offer to arbitrate163 was accepted by Claimant when the latter
submitted its Request for Arbitration164. Since Claimant could not have altered the material
155 AAPL, ¶2; CSOB, ¶57. 156 Urbaser, ¶1146. 157 Metal-Tech, ¶410; Saluka Counterclaims, ¶39; Urbaser, ¶1147. 158 Art. 28 COMESA Investment Agreement (2007). 159 Art. 26 ECT. 160 Metal-Tech, ¶410; Saluka Counterclaims, ¶39; Urbaser, ¶1147. 161 Oxus Gold, ¶945; Spyridon, ¶866. 162 Atanasova/Benoit/Ostranský, pp. 14-15. 163 Art. 11 BIT. 164 Request for Arbitration, ¶2.
26
scope of the standing offer, it falls upon the language of art. 11 BIT to determine whether
the Tribunal has jurisdiction ratione materiae over the counterclaims.
93. Art. 11(1) BIT reads that “an investment dispute is a dispute (…) arising out of or relating
to” an investment agreement or authorization or an alleged breach of any right stemming
from the BIT. This definition, which is conspicuously broad, matches that mentioned by
scholars as authorizing counterclaims. Accordingly, the Tribunal should find that it has
jurisdiction ratione materiae over Respondent’s counterclaims.
(ii) Art. 11(4) BIT further outlines the parties’ consent as to counterclaims
94. A contrario interpretation retains validity as a means of treaty interpretation unless and to
the extent that it contradicts the meaning arising from the context and the treaty’s object
and purpose165. As applied to counterclaims in international investment agreements, this
means that where the treaty mentions counterclaims only by presenting grounds upon which
the state may not rely166, counterclaims are otherwise allowed167.
95. The BIT provides that a Contracting Party may not assert as a counterclaim that the
aggrieved national or company has received or will receive monies out of insurance or a
guarantee contract168. By mentioning counterclaims, the Contracting Parties demonstrated
they acknowledged their existence and, at the same time, decided to regulate them only
insofar as to circumscribe their material scope. Accordingly, the Tribunal should find that
there is consent in relation to the counterclaims.
(iii) The applicability of the SCC Rules indicates consent over counterclaims
96. Several arbitration rules provide a procedural framework for bringing counterclaims169.
Reference to arbitration rules which in their turn allow counterclaims may be seen as
additional evidence that parties consented to counterclaims170. In his dissenting opinion in
165 Alleged Violations, ¶37; Yusuf/Peat, p. 16. 166 Art. 1136(2) NAFTA. 167 Atanasova/Benoit/Ostranský, p.18; Hamida, pp. 177-178. 168 Art. 11(5) BIT. 169 Art. 21(3) UNCITRAL Rules; Rule 40 ICSID Arbitration Rules; art. 29(2)(iv) SCC Rules; art. 19(3) PCA Rules
for Disputes between Two Parties of Which Only One is a State. 170 Spyridon, Declaration of arbitrator Michael Reisman.
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Spyridon, Prof. Michael Reisman explained that if parties consented to ICSID jurisdiction,
owing to art. 46 of the ICSID Convention, there is ipso facto consent in relation to
counterclaims171.
97. The BIT calls for the dispute to be resolved under the SCC Rules, which allow
counterclaims. The Tribunal should thus find that the choice of having the SCC Rules apply
to the instant proceedings signals consent over counterclaims.
(iv) Respondent’s lack of standing has no bearing on the scope of consent
98. Investment treaties may either extend172 or deny173 States standing in relation to a dispute
settlement provision, i.e., the power to bring claims or counterclaims.
99. A limited locus standi to directly bring claims may serve to convey the states’ unmistakable
agreement to arbitrate but does not in and of itself exclude recourse to counterclaims174, as,
owning to the equality of parties in arbitration, one should be slow to presume a party does
not have the right to bring a counterclaim175.
100. For instance, the Claims Settlement Declaration of the Iran-US Claims Tribunal
simultaneously confers standing only upon nationals and authorizes counterclaims by the
respondent states176, thus reconciling standing and consent over counterclaims177.
101. At most, in determining party consent, limited standing should be weighed alongside,
inter alia, the material scope of the arbitration agreement and any possible mentions to
counterclaim therein178.
102. The BIT explicitly grants standing only to the aggrieved national or company179.
However, such limited locus standi does not prove that the Contracting Parties wished to
171 Ibid. 172 Art. 28 COMESA Investment Agreement (2007). 173 Art .26 ECT. 174 Veesnta-Kjos, pp.21-22; 175 Atanasova/Benoit/Ostranský, pp. 15-17. 176 Art. II.1 Claims Settlement Declaration. 177 Gould Marketing, pp. 151-152. 178 Veenstra-Kjos, p. 21; Atanasova/Benoit/Ostranský, pp.16-17. 179 Art. 10(2)-(3) BIT.
28
exclude counterclaims nor is a presumption to that effect appropriate. The Tribunal should
thus refuse to attach definitive importance thereto, or, at most, it should counterbalance such
limited standing with the other elements presented above.
(B) The counterclaims are connected with the primary claims
103. In addition to coming within the jurisdiction of the tribunal, to be admissible,
counterclaims must be connected with their corresponding primary claims180. The Tribunal
should consider that the appropriate threshold for connection is factual connectedness, with
which the counterclaims squarely comply (i). Alternatively, at any rate, the counterclaims
are also juridically connected with Claimant’s claims (ii).
(i) Respondent’s counterclaims are factually connected with Claimant’s claims
104. In order to be connected with the primary claims, the counterclaims must arise from the
same “factual complex”, i.e., the parties must rely on similar facts which have taken place
in the same geographical area during the same time period181. Case law and commentators
have rejected the view that counterclaims must arise out of the same legal instrument182,
regarding it as excessively narrow183.
105. Respondent’s counterclaims are based upon wrongs committed by Claimant against
Respondent’s environment and the local population184. These wrongs arise out of
Claimant’s operations in Respondent’s territory, which also form the primary factual
cornerstone for Claimant’s claims185. Since all the events unfolded in Respondent’s territory
during period of time in which Claimant was active therein, Respondent’s counterclaims
meet the necessary factual connectedness requirement and should thus be declared
admissible.
180 Art. 46 ICSID Convention; art. 40, ICSID Rules; art. II(1), Claims Settlement Declaration; art. 23(1) (2010)
UNCITRAL Rules; art. 80 Rules of the Court; Chorzów Factory, p. 38; Jurisdictional Immunities (Order), ¶15. 181 Bosnian Genocide (Order), ¶¶34-35; Oil Platforms (Order), ¶38; Cameroon v Nigeria (Order), pp. 985-986;
Certain activities carried out by Nicaragua (Order), ¶32; Genocide case (Merits), ¶123. 182 An exacting standard was applied, e.g., in Saluka Counterclaims, ¶49, and in Paushok, ¶694. 183 Lalive/Halonen, p. 154; Douglas (2009), pp. 260-262; Atanasova/Benoit/Ostranský, p. 38. 184 Answer to the Request for Arbitration, ¶¶22-23. 185 Request for Arbitration, ¶21.
29
(ii) Alternatively, the counterclaims are also juridically connected with Claimant’s claims
106. Even if the Tribunal finds that Respondent’s counterclaims must also be juridically
connected with the primary claims, Respondent still prevails on this issue.
107. Juridical connectedness entails that the counterclaims draw their basis from the same
legal instrument giving rise to the primary claims186. In the instant case, Claimant alleges a
breach of art. 7 BIT187 and Respondent, in its turn, argues Claimant has breached art. 9(2)
BIT188. Thus, counterclaims and claims arise from the same instrument and, as such, are
juridically connected.
108. Notwithstanding the above, Respondent acknowledges that the Tribunal may wish to
reassess the legal basis for the counterclaims but nonetheless sustains that the Tribunal
should likewise conclude that the BIT is the proper basis thereto.
109. A tribunal may objectively reassess the legal basis for an argument brought by a party189.
If the argument is based on a treaty, the tribunal should apply the general rule of
interpretation, according to which a treaty provision should be interpreted with regards to
the contextualised ordinary meaning of its terms and against the backdrop of the treaty’s
object and purpose190.
110. Art. 9(2) BIT reads that the Contracting Parties are agreed that “the polluter should, in
principle, bear the cost of pollution”. This provision comes immediately after another
reprehending encouragements for investments which fail to take into account environmental
concerns and immediately before another provision promoting corporate social
responsibility standards. Further art. 10 BIT enshrines the states’ right to regulate as to the
186 Saluka Counterclaims, ¶61; Paushok, ¶694. 187 Request for Arbitration, ¶21. 188 Answer to the Request for Arbitration, ¶24. 189 SGS v Philippines, ¶157; El Paso, ¶60; Joy, ¶71; Impregilo, ¶255; Salini, ¶136; Vivendi, ¶98; Veenstra-Kjos,
p. 33. 190 Art. 31(1), VCLT; Maritime Safety Committee, pp. 159-60; Admission of a State to the UN, p. 8; Territorial
Dispute (Libya v Chad), ¶41; Wall, ¶94; Veenstra-Kjos, p. 9.
30
environment191 and protection of human life or health192, and the very preamble of the BIT
emphasizes the “promotion of sustainable devolpment”193.
111. This set of provisions makes clear that the BIT’s aim is not only to spur foreign direct
investment – but to spur environmentally and socially responsible investment. In this sense,
considering the context and the treaty’s object and purpose, art. 9(2) should be perceived as
the operational part of the BIT’s environmental concerns, as it enshrines the polluter-pays
principle. Accordingly, the Tribunal should find that the counterclaims are juridically
connected with Claimant’s claims.
(C) Additionally, policy considerations speak in favor of admitting Respondent’s counterclaims
112. Upon analyzing the admissibility of counterclaims, case law and commentary usually
take into account the policy reasons relevant thereto194. These include promoting efficiency
and fairness, as the most prominent disagreements on the issue are solved in one single
forum195. Adjudicators should take note of such considerations alongside the other
requirements (consent and connectedness) in order to make their final decisions196.
113. In the instant case, admission of the counterclaims is in order not only due to the
requirements thereto being met, but also due to policy considerations speaking in favor
thereof. By entertaining Respondent’s counterclaims, the Tribunal’s decision will be
efficient and fair, as it will enable all the Parties’ grievances to be fully addressed in one
single forum. Accordingly, the Tribunal should admit Respondent’s counterclaims.
191 Art. 10(1)(a) BIT. 192 Art. 10(1)(c) BIT. 193 BIT, Preamble, second consideranda. 194 Spyridon, Declaration of arbitrator Michael Reisman; Bosnian Genocide (Order), ¶¶30-31; Oil Platforms
(Order), Sep. Op. Judge Oda, ¶8; Atanasova/Benoite/Ostranský, p. 38; Lalive/Halonen, pp. 153-154; Veenstra-
Kjos, pp. 47-48. 195 Oil Platforms (Order), Sep. Op. Judge Oda, ¶8. 196 Spyridon, Declaration of arbitrator Michael Reisman.
31
PRAYER FOR RELIEF
114. In view of the foregoing, Respondent respectfully requests the Tribunal to acknowledge
and declare that: first, it lacks jurisdiction over the dispute; second, Claimant’s claims are
inadmissible before the tribunal, due to filing of the Lawsuit; third, the enactment of the
Decree, its implementation and other related acts of Respondent did not amount to
expropriation of Claimant’s investment in violation of the BIT; and fourth, Respondent’s
counterclaims are admissible before the Tribunal.