Applicant 2012m- banking and investment law moot

8/12/2019 Applicant 2012m- banking and investment law moot

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1ST

INTERNATIONALBANKING AND INVESTMENT LAW MOOT COURT COMPETITION,2012

PERMANENT COURT OF ARBITRATION, THE HAGUE

CASE CONCERNING INVESTMENT IN TWO POWER PLANTS IN FEDERAL REPUBLIC OF

ASIANIA

(Docket No 2/2012)

EUROPA-GLOBAL TRACTION AND POWER CORPORATION PRIVATE

LIMITED (EGTPC)

(APPLICANT)

v.

THE FEDERAL REPUBLIC OF ASIANIA

(RESPONDENT)

MEMORIAL FOR THE APPLICANT

EUROPA-GLOBAL TRACTION AND POWER CORPORATION PVT.LTD.

Team 21A


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1stInternational Banking and Investment Law Moot Court Competition, 2012

ii

Memorialfor Applicant

TABLE OF CONTENTS

TABLE OF ABBREVIATIONS ........................................................................................................ i

INDEX OF AUTHORITIES ........................................................................................................... ii

STATEMENT OF JURISDICTION ................................................................................................ ix

FACT HIGHLIGHTS .................................................................................................................... x

QUESTIONS PRESENTED ......................................................................................................... xiii

SUMMARY OF ARGUMENTS .................................................................................................... xiv

ARGUMENTS ADVANCED ........................................................................................................... 1

[PART I:JURISDICTION] ............................................................................................................ 1

A. THAT THIS TRIBUNAL HAS JURISDICTION TO ARBITRATE OVER THIS DISPUTE. .......... 1

1. THAT THIS TRIBUNAL IS COMPETENT TO DECIDE UPON ITS JURISDICTION UNDER

WELL SETTLED RULES OF ARBITRATION LAW.............................................................. 1

1.1 That the doctr ine of Competence-Competence is appli cable in the instant case. 1

1.1.1 That the doctrine is expressly provided under Article 23 of UNCITRAL

Rules,1976 ...................................................................................................... 1

2. THAT THIS TRIBUNAL HAS JURISDICTION OVER BOTH TREATY CLAIMS AND

CONTRACT CLAIMS. ....................................................................................................... 2

2.1 That this Tribunal has jurisdiction ratione materiae over treaty claims........... 2

2.1.1 That the dispute involves an investment by the Applicant ...................... 2

2.1.2 That the change in equity holding of EGTPC does not bar the

jurisdiction of this Tribunal.......................................................................... 3

2.2 That the parties to the dispute sought resolution through negotiation and

consultation............................................................................................................ 5

2.3 That the local remedies have been exhausted....................................................... 7

2.3.1 That the decision of High Court was final................................................... 7


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2.3.2 Arguendo, exceptions to local remedies applies........................................... 8

3. THAT THIS TRIBUNAL HAS JURISDICTION RATIONE MATERIAE OVER CONTRACT

CLAIMS. .......................................................................................................................... 8

3.1 That this tri bunal has jur isdiction under Ar ticle I I (3) (c) of treaty..................... 8

3.2 That this Tr ibunal has ju ri sdiction under A rti cle VI (2)(a) of the Treaty and

Ar ticle II I of the Agreement................................................................................ 10

[PART II:MERITS] .................................................................................................................. 10

LAW APPLICABLE TO THE MERITS OF THE DISPUTE.......................................................... 10

A. THAT RESPONDENTS ACTIONS AMOUNT TO EXPROPRIATION. .................................... 10

1. THAT RESPONDENT EXPROPRIATED APPLICANTS ASSETS......................................... 11

1.1 That the order for attachment before judgement has substanti all y depri ved the

Appl icant of hi s use and enjoyment over i ts assets............................................. 12

1.2 That there was interference with applicants Treaty based Legitimate

Expectations......................................................................................................... 14

1.3 That the act of j udiciary is attr ibu table to the State............................................ 14

2. THE EXPROPRIATION OF APPLICANTSASSETS IS UNLAWFUL..................................... 15

2.1 That the mode of expropriation was not in accordance with the due process of

law......................................................................................................................... 16

2.2 That the Respondent has violated Fair and Equi table Treatment Clause of the

Treaty.................................................................................................................... 17

2.3 That the Respondents actions are Arbitrary and Disproportionate.................. 18

2.4 That no compensation has been of fered by the Respondent............................... 19

B. THAT THE RESPONDENT HAS COMMITTED AGRAVE BREACH OF THE CONTRACT. .. 19

1. THAT THE NON PAYMENT AMOUNTS TO BREACH OF THE CONTRACT....................... 20

1.1That the Consideration is the Essential Element of the Contract........................... 20

1.2 That breach of an essential element shal l be construed as grave breach of the

contract. ................................................................................................................ 21

1.2.1 That there should be Contextual Interpretation of the Agreement. ........ 21


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1.2.2 That according to English Law Principle- Fundamental Breach goes to

the root of the Contract. .............................................................................. 22

1.2.3 That there is Fundamental Non Performance according to the

UNI DROIT Principlesof Commercial Contracts...................................... 23

3. THAT COUNTER CLAIM SOUGHT BY RESPONDENT SHALL NOT BE ALLOWED............. 23

3.1 That the parti al Non-Performance does not amoun t to breach of the Agreement.

............................................................................................................................... 24

3.1.1 That there was no substantial Deprivation................................................ 24

3.2 Thatthe reasons for Non Performance attr ibutable to the Respondent............ 25

PRAYER................................................................................................................................... xix


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i


TABLE OF ABBREVIATIONS

[ ] Paragraph

Art. / Arts. Article / Articles

BIT Bilateral Investment Treaty

Co. Company

CUP Cambridge University Press

e.g. Exempli gratia

ed. Edition

eds. Editors

et al. Et alia (and others)

et seq. Et sequens (and the following ones)

FET Fair and equitable treatment

i.e. Id est (that is)

ibid. Ibidem

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Disputes

ILC International Law Commission

ILC International Law Reporter

OUP Oxford University Press

Para Paragraph

Sec. Section

UNO United Nations Organisation

UNTS United Nations Treaty Series

USD United States Dollar

v. Versus

VCLT Vienna Convention of the Law of Treaties

Vol. Volume


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INDEX OF AUTHORITIES

Cases

1. Bank of Credit and Commerce International SA v Ali [2002] 1 A.C. 251.................. 222. Bannerman v White[1861] 10 CB NS, 844 ................................................................. 203. Bannerman v White[1861] 10 CB NS, 844. ................................................................ 204. Bolton v. Mahadeva[1972] 1 W.L.R. 1009 ................................................................. 245. Bolton v. Mahadeva[1972] 1 W.L.R. 1009. ................................................................ 246. Boone v. Eyre[1779] 1 H Bl. 273;Broom v. Davis[1794] 7 East 480 ....................... 247.

Commonwealth v Verwayen (1990) 170 CLR 394,491 NSWSC 896 ......................... 24

8. CompareHoening v. Isaacs[1952] 2 All E.R. 176 ..................................................... 249. Downing v Al Tameer Establishment (2002] EWCA Civ 721 .................................... 2410.Investors Compensation Scheme Ltd. v. WestBromwich Building Society[1998] 1

W.L.R. 896 ................................................................................................................... 22

11.Mannai Investment Co Ltd. v. Eagle Star Assurance Co. Ltd[1997] 2 W.L.R. 945 ... 2212.Maple Flock CO. Ltd v. Universal Future Products (Wembley) Ltd [1934] 1 KB 148

...................................................................................................................................... 22

13.Mareva Compania Naviera SA v. International Bulkcarriers SA, [1975] 2 LloydsRep 509. ....................................................................................................................... 13

14.Nicaragua v United States of America and South West Africa, 27 June 1986 (I.C.JRep. 14). ......................................................................................................................... 5

15.Prenn v Simmonds[1971] 1 W.L.R. 1381. .................................................................. 2116.Reardon Smith Line v Hansen-Tangen, [1976] 1 W.L.R. 989 ..................................... 2117.Robert A Munro & Co. Ltd v. Meyer[1930] 2 KB 312. .............................................. 2218.Suisses Atlantique Societe d Armement MaritimeSA v. NV ROtterdamsche Kolen

Centrale[1967] 1 A.C. 361 ......................................................................................... 22

19.Tridon v Tridon Australia [2002] ................................................................................ 2420.Williams v. Roffey Bros. & Nicolls (Contractors) Ltd.[1991] 1 Q.B. 1. .................... 24


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Articles

1. Andrew Newcombe,The Boundaries of Regulatory Expropriation in InternationalLaw, (2005) 20 FILJ ................................................................................................... 11

2. Christoph Schreuer, Travelling the BIT Routes: Of Waiting Periods, UmbrellaClauses and Fork s in the Road [2004] 5 JWIT 231 ..................................................... 6

3. David Capper, Worldwide Mareva Injunctions, (1991) 54 TMLR,............................ 134. Judith Gill, Contractual Claims and Bilateral Investment Treaties: A Comparative

Review of the SGS Cases(2004) 21 J. Int'l Arb. ....................................................... 9

5. K.A. Byrne, Regulatory Expropriation and State Intent (2000) 38 Canadian YBofInt'l L 89. .................................................................................................................. 19

6. Michael Prior, The Nature of the Mareva Injunction, (1991)6 Int'l Legal Prac. 122....................................................................................................................................... 16

7. S. Fietta, Expropriation and the Fair and Equitable Standard: The Developing Roleof Investors Expectations in International Investment Arbitration, (2006) 23 JIA

375................................................................................................................................ 13

8. Silvia D Ascoll and Katherin Maria Scherr, The Rule of Prior Exhaustion of LocalRemedies in the International Law doctrine(2007)...................................................... 7

9.

U Kriebaum, Regulatory Takings: Balancing the Interests of the Investor and theState (2007) 8 J World Investment & Trade............................................................... 15

10.WD Verwey and NJ Schrijver, The Taking of Foreign Property Under InternationalLaw: A New Legal Perspective? (1984) Netherlands Ybk Intl L 3........................... 12

Treatises

1. Commentaries on UNIDROIT Principles on International Commercial Contracts,International Institute for the Unification of Private Law (UNIDROIT), Rome, 2004.

...................................................................................................................................... 23

2. Emmanuel Gaillard and John Savage (eds.), Fouchard, Gaillard, Goldman onInternational Commercial Arbitration (Kluwer Law International, The Hague,

Boston, London: 1999) .................................................................................................. 1

3. Gary Born, International Commercial Arbitration: Commentary and Materials, 2ndedn. (Transnational Publishers, Ardsley, New York: 2001) .......................................... 1


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4. Howard M. Holtzmann and Joseph E. Neuhaus, A Guide to the UNCITRAL ModelLaw on International Commercial Arbitration: Legislative History and Commentary

(Boston: 1989) ............................................................................................................... 1

5. International Law Commission Articles on Responsibility of States for InternationallyWrongful Acts, 2001 .................................................................................................... 14

6. UNCITRAL Rules, 1976 (As revised in year 2010). .................................................... 17. Vienna Convention on Law of Treaties (adopted 23 May 1969,entered into force at

27 Jan. 1980) 1155 UNTS 331 ..................................................................................... 8

Arbitral Awards

1. ADC v. Hungary, Final Award, 2 October 2006, (ICSID Case No. ARB/03/16) ....... 162. Alps Finance and Trade AG v.Slovakia, Final Award, Mar. 5, 2011 (Ad hoc

UNCITRAL arbitration). ............................................................................................... 5

3. Amco Asia Corporation and Others v. Republic of Indonesia, Resubmitted Case,Final Award, 31 May 1990 (ICSID Case No. ARB/81/1) ........................................... 11

4. Amco Asia Corporation and others v. Republic of Indonesia, Resubmitted Case,Award, 31 May 1990 (ICSID Case No. ARB/81/1) ................................................... 16

5. Burlington Resources Inc. v. Republic of Ecuador, Decision on Jurisidction ,2 June2010 (ICSID Case No. ARB/08/5) ................................................................................ 6

6. CME Czech Republic B.V. v The Czech Republic, Partial Award, 13 September 2001(UNCITRAL) ............................................................................................................... 11

7. Consorzio Groupement LESI and ASTALDI v Algeria, Decision on Jurisdiction, 12July 2006 (ICSID Case No ARB/05/3; IIC 150 (2006). ................................................ 9

8. Continental Casualty Company v Argentina, Award, 5 September 2008 (ICSID CaseNo ARB/03/9) .............................................................................................................. 12

9. Corn Products v.United Mexican States, Decision on Responsibility, 15 January 2008,( ICSID Case No. ARB (AF)/04/01)............................................................................ 11

10.Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, Final Award,22 May 2007 (ICSID Case No. ARB/01/3) ............................................................... 18

11.Eureko v. Poland, Partial Award, 19 August 2005. ....................................................... 912.Generation Ukraine Inc. v. Ukraine, Final Award, 16 September 2003 (ICSID Case

No. ARB/00/9). .............................................................................................................. 2


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13.Generation Ukraine Inc. v. Ukraine, Final Award, Sept. 16, 2003 (ICSID Case No.ARB/00/9). ..................................................................................................................... 4

14.Lauder v Czech Republic, Final Award, 3 September 2001 (UNCITRAL ArbitrationSCC Rules).................................................................................................................. 5

15.LG&E Energy Corp and ors v Argentina, Decision on Liability, 3 October 2006(ICSID Case No ARB 02/1) (2007) ............................................................................. 18

16.Loewen v. United States, Award on the Merits, 26 June 2003 (ICSID Case No.ARB(AF)/98/3). ........................................................................................................... 15

17.Martini Case (Italy v Venezuela) (1930) 2 RIAA 974 ................................................. 1418.Marvin Feldman v. Mexico, Final Award, 16 December 2002, (ICSID ARB (AF)/99/1

...................................................................................................................................... 12

19.Metalclad Corp v. United Mexican States, Final Award, 30 August 2000(ICSID CaseNo. ARB (AF)/97/1), ................................................................................................... 11

20.Metalclad Corp v. United Mexican States, Final Award,30 August 2000 (ICSID CaseNo. ARB(AF)/97/1) ..................................................................................................... 11

21.Metalclad v Mexico, ICSID Case No.ARB(AF)/97/1, Award, 25 August 2000, IIC161 (2000), ................................................................................................................... 17

22.Methanex Corporation v. United States of America, , Final Award of the Tribunal, 7 thAugust 2005, (UNCITRAL Arbitration Rules). .......................................................... 15

23.Occidental Petroleum Corporation and Occidental Exploration and ProductionCompany v. Ecuador,Decision on Jurisdiction, 9 September 2008, (ICSID Case No

ARB/06/11) .................................................................................................................. 17

24.Occidental v Ecuador, Final Award, July 1 2004 (London Court of InternationalArbitration, Case No.UN3467) ...................................................................................... 5

25.Oil Field of Texas Inc v Iran (1986) 12 Iran-USCTR 308, 318-19 ............................. 1526.Plama Consortium Limited v. Republic of Bulgaria, Decision on Jurisdiction, 8

February 2005 (ICSID Case No. ARB/03/24). .............................................................. 3

27.Robert E. Brown case (United States v Great Britain) (1923) 6 RIAA 120 ............... 1428.Salini Costruttori S.p.A.and Italstrade S.P.A v. Kingdom of Morrocco, Final Award,

23 July 2001 (ICSID Case No. ARB/00/4) .................................................................... 6

29.Salini v Morocco, Final Award, 23 July 2001 (ICSID Case No. ARB/00/4); .............. 530.Saluka Investments BV v Czech Republic, Partial Award, 17 March 2006 (PCA-

UNCITRAL Arbitration Rules) ............................................................................ 14, 15


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31.SD Myers Inc v Canada, First Partial Award and Separate Opinion, 13 November2000 (Ad hocUNCITRAL Arbitration Rules).......................................................... 11

32.SGS S.A. v. Rep. of the Phil.,Objections to Jurisdiction, Jan. 29, 2004 (ICSID CaseNo. ARB/02/6). .............................................................................................................. 9

33.SGS v. Pakistan, Decision on Jurisdiction, 6 August 2003 ( ICSID Case No.ARB/01/13) .................................................................................................................... 5

34.Suez and Ors vArgentina , Final Award (ICSID Case No ARB/03/19) ..................... 1435.Tecmed v. Mexico, Final Award, 24 May 2003 (ICSID No. ARB(AF)/00/2) . .......... 1836.Tcnicas Medioambientales Tecmed, S.A. v. United Mexican States, Award, 29 May

2003 (ICSID Case No. ARB(AF)/00/2)....................................................................... 18

37.Tecnicas Medioambientes S.A. v The United Mexican States, Award, 29 May 2003,43 I.L.M. 133 (2004).................................................................................................... 17

38.The Interhandel case(Switzerland v. United States) (1959) ICJ Reports 6 .................. 739.Tippets, Abbet, McCarthy, Stratton v. TAMS AFFA Consulting Engineers of Iran,

(1984) 6 Iran-USCTR. 225 .......................................................................................... 11

40.Tippets, Abbet, McCarthy, Stratton v. TAMS AFFA Consulting Engineers of Iran,Final Award, 29 June 1984, 6 Iran-USCTR ............................................................... 12

41.Tokios Tokeles v. Ukraine, Decision on jurisdiction, 29 April 2004. ........................ 1442.Waste Management, Inc. v. United Mexican States, Final Award, 30 April 2004

(ICSID Case Nr. ARB(AF)/ 00/3) ............................................................................... 17

Books

1. A Newcombe and L Paradell, Law and Practice of Investment Treaties: Standards ofTreatment (Kluwer Law International 2009) ............................................................... 34

2. A Reinisch, Legality of Expropriations in A Reinisch, Standards of InvestmentProtection (OUP, Oxford 2008) ................................................................................. 31

3. A.Newcombe and L Paradell,Law and Practice of Investment Treaties: Standards ofTreatment (Kluwer Law International The Hague 2009) ............................................ 27

4. August Reinisch, Expropriation, inPeter Muchlinski, FedericoOrtino, and ChristophSchreurer, (eds), ........................................................................................................... 34


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22.Z.Douglas, The International Law of Investment Claims (Cambridge UniversityClaims 2009) ................................................................................................................ 17


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STATEMENT OF JURISDICTION

Europa Global Traction and Power Corporation Private Ltd. (EGTPC), the Applicant in the

instant case, has the honour to submit this Memorial before the Tribunal, in pursuance of

Article VI (2) of The Reciprocal Protection of Investment Treaty between state of Atlantis

and State of Asiania read with Article III(1) of Agreement Concerning the requirement of

Notice to cure defaults and Settlement of disputes.


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FACT HIGHLIGHTS

-I-

Background:The Federal Republic of Asiania is a developing country, which was colonised

by Erlandia in 1604 A.D. It got independence on 1st January, 1960. The newly independent

country soon adopted a constitution on 15th July, 1960, providing for a federal structure. For

almost three decades since independence, successive governments in Asiania followed

protectionist policies under the so-called Mixed Economy, resulting in the economy being

shackled by extensive regulation, protectionism and licensing system leading to corruption

and nurturing a lackadaisical pattern of economic growth. Faced with an acute balance of

payment crisis in 1995, the Asiania Government was forced to embark upon a programme

of economic liberalisation and expansion to be carried out in a significant part through

privatization of state owned enterprises and attraction of foreign direct investment.

-II-

Power Generation : Rebuilding its economy by opening it up to foreign direct investment

Asiania found that one of the stumbling blocks in attracting foreign investment was the

serious inadequacy of the infrastructure facilities in the country. One of the coreinfrastructure facilities is the stable supply of power, without which there was no hope of

ensuring productivity in all sectors, including agricultural. The state of power generation and

supply in Asiania at the turn of 1990s was abysmally low just 20 % of all demand. Coal

based thermal plants was not enough to generate power.

-III-

Europa Global Traction and Power Corporation(EGTPC) and Treaty: It was at this

juncture that the EGTPC began taking interest in investing in Asiania. It did have some

investments in an Antarctic country. However, a socialist government came to power and

expropriated the assets of this company. This forced the company to look elsewhere. EGTPC

was set up in 1971 in Morosova, the capital city of Atlantis. The majority of the share-holders

have for a long time been Atlantisians, with some 20% being held by Erlandians. During a

visit of the Prime Minister of Asiania to Morosova in March 1997, the Government of

Atlantis showed intense interest in concluding a reciprocal Investment Protection Treaty

and following this the treaty was negotiated which came on force on 27th December 1997.


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-IV-

The Proposal: The prime reason of the Atlantis interest in concluding the treaty was the

potential expansion of the business interest of EGTPC.A delegation of the company was sent

to Asiania. Soon after return, the Company made an investment proposal .According to the

proposal EGTPC, invest in setting up two power plants in Narnia, one at Nonbay and the

other at Domgiri and both these plants would produce power enough to meet the demands of

Narnia and four other Provinces of Asiania. The Nonbay plant would produce electricity

by using liquefied natural gas, the supply of which was to be contracted by the company

with certain OPECs The Narnia Electricity Supply Board (NESB) would then buy this

electricity at a stipulated rate (which was the double the rate for the current thermal power

generated electricity). However, in this arrangement, the plant would have joint ownership of

both EGTPC and NESB at the ratio of 60:40. The agreement would be in force for a period of

20 years, at the end of which period NESB could buy up the entire equity. The Domgiri

Project was to be tripartitebetween EGTPC, NESB and Nuclear Power Corporation of

Asiania (NPCA).Under this arrangement too, the nuclear power plant would have joint

ownership of EGTPC 60% and NPCA and NESB 40%.

-V-

Acceptance of Proposal and following criticism: After detailed discussion among the

delegation of the company, and the Governments of Asiania, Narnia and Atlantis, the

proposal was accepted. The World Bank evaluated the project proposal and concluded

that it was not economically viable, and thus could not be financed by the Bank.

Even as the deal with EGTPC was being considered, several NGOs began protesting

against it. They argued that the Nonbay and Domgiri projects were unacceptable in view of

its potential harm to the environment. But at its backdrop, MOU was signed and construction

began of the 2 plants.

-VI-

The Dispute: May 2010: when it became clear that because of some deficiency in the

working of the centrifuge, the Plant could only produce half of what it began producing as

soon as it became critical on 25thMarch 2010.

30

th

May 2010: NESB wrote a strongly worded letter to EGTPC on 30th of May, remindingthe company that the warranty as to fitness of the plant, and that this should be rectified


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within a period of one month. However, this did not happen,Nuclear Regulatory Commission

gave its considered view after its visit to the Plant in November that the Centrifuge did not

function or was not restored to the standards originally contracted and that the company had

breached its warranty as to fitness of the Plant. The company denied this and said that

the situation could soon be rectified.

December 2010: The supply of light water contracted by EGTPC with the Nuclear Power

Corporation of Atlantis was disrupted as a result of an earth quake as a consequence the

Domgiri Plant stopped supplying electricity to Narnia. Secondly, and more importantly,

there was an election in Narnia in March 2011 which brought the parties opposing the

EGTPC deal to power. Consequently, NESB began defaulting its payments to EGTPC

for the power supplied to it. Thirdly, there was a serious labour trouble in Nonbay Plant

with a violent clash of two powerful labour unions .Finally, there was also a change in

the equity holding of EGTPC 75% of the shares have now come to be acquired by

Erlandians.

-VII-

Proceedings: Not receiving the contracted supply of power from EGTPC, NESB went to

court seeking attachment before judgment, of all assets of the former. The attachment wasordered, the company went on appeal to the High Court which rejected the appeal.

EGTPC immediately complained of this to the Governments of Atlantis and Asiania as a

disguised attempt at expropriation without appropriate compensation. EGTPC, on its part,

described the defaults of payments by NESB as a serious breach of the various agreements,

and also demanded further compensation. It has now invoked the compromissory clause

in the agreement on dispute settlement for arbitration of the dispute before the Permanent

Court of Arbitration on the basis of the UNCITRAL Rules of Arbitration, and strictly

on the basis of application of the applicable law between the parties. Both the parties

appoint an arbitrator each, but fail to agree on the third arbitrator, and therefore, the

Secretary-General of Permanent Court of Arbitration (PCA) has nominated a third arbitrator

from the Kingdom of Hollandia. The Court of Arbitration, sitting in London taking into

account of the conv.enience of the Parties, is now ready to hear the parties.


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QUESTIONS PRESENTED

I. WHETHER THE PRESENT TRIBUNAL HAS JURISDICTION TO ARBITRATE OVERTHE DISPUTE?

II. WHETHER THE RESPONDENT HAS VIOLATED ITS OBLIGATIONS UNDER THEBIT ?

III. WHETHER THE VARIOUS AGREEMENTS BETWEEN THE TWO PARTIES HAVEBEEN BREACHED?


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SUMMARY OF ARGUMENTS

I. THIS TRIBUNAL HAS JURISDICTION TO ARBITRATE OVER THIS DISPUTE.It is humbly submitted that the Tribunal has jurisdiction over both the Treaty claims and

Contract claims of the Applicant. This tribunal has jurisdiction over treaty claims as all the

pre requisites given under Article VI of the treaty which includes negotiation and

consultation, exhaustion of local remedies have been fulfilled. Moreover, the Tribunal has

jurisdiction over Applicants contract claims arising under various Agreements by virtue of

Article II (3) (c)of Reciprocal Investment Treatywhich provides for an umbrella clause

andArticle IIIof The Agreement Concerning the Requirements of Notice to Cure Defaults

and Settlement of Disputes.

II. THAT RESPONDENTS ACTIONS AMOUNT TO EXPROPRIATION.It is contended that the Respondent has expropriated the Applicants assets indirectly, which

is prohibited by the General Principles of International Law and the Investment Protection

Treatysigned between the two countries.The Applicant submits that, one, the Respondent

expropriated its investments by substantially depriving the Applicant of its rights over its

investments and by not fulfilling the Treaty based legitimate expectations of the Applicant.

Two, the expropriation was unlawful since it does not fall under any of the exceptions

provided by the Treaty.

III. THAT RESPONDENT HAS COMMITTED AGRAVE BREACH OF THE CONTRACT.The Respondent failed to make the payments to the Applicant for the power supplied to it.

The Applicant submits before the Tribunal that this Default in payment amounts to grave

breach of the contract. The Applicant shall demonstrate this contention by dividing it into

two equal parts, one, the non payment amounts to a breach of the contract and

Consideration is an essential element of the Contract and secondly the violation of an

essential element of the agreement is a grave breach of the Contract.


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the jurisdiction of the arbitral tribunal and 23(1) states that, The arbitral tribunal shall have

the power to rule on its own jurisdiction, including any objections with respect to the

existence or validity of the arbitration agreement...

2. THAT THIS TRIBUNAL HAS JURISDICTION OVER BOTH TREATY CLAIMS AND CONTRACTCLAIMS.

The present matter is concerned with dispute between EGTPC and the Federal Republic of

Asiania. The Reciprocal Protection of Investment Treaty read along with the Agreement

Concerning the Requirement of Notice to Cure Defaults and Settlement of Disputes gives

this Tribunal jurisdiction to hear both the treaty and the contract claims.

2.1That this Tr ibunal hasjurisdiction ratione materiae3over treaty claimsThe Applicant submits that this Tribunals jurisdiction in the instant case is governed by the

scope of dispute resolution mechanism of the Treaty4. Article VI of Reciprocal Protection

Investment Treaty controls the scope of Tribunals jurisdiction in several respects. It provides

that in event of an investment dispute [Art VI (1)], the parties to the dispute should initially

and without delay seek resolution through consultation and negotiation. If the dispute

cannot be settled amicably, the national or the company concerned shall earnestly seek to

exhaust the local remedies available in the host Party. Upon exhaustion of local remedies, if

the dispute still remains unresolved, the applicant may choose to submit the dispute, under

one of the following alternatives, for resolution: (a)In accordance with any applicable,

previously agreed dispute settlement procedures; or (b) in accordance with the terms of

paragraph 3 [Art VI(2)].5

2.1.1 That the dispute involves an investment by the ApplicantArticle VI (1)of the Treaty defines investment dispute.

6

In view of the definition provided inthe Treaty, the Applicant asserts that in order to avail the jurisdiction of this Tribunal, it is

3 Elizabeth A. Martin (ed), Oxford Dictionary of law (7th edn, OUP London 2009) (Jurisdiction RationeMateriae, otherwise known as subject-matter jurisdiction refers to the court's authority to decide a particularcase).

4 Z.Douglas, The International Law of Investment Claims (Cambridge University Claims 2009); Generation

Ukraine Inc. v. Ukraine, Final Award, 16 September 2003 (ICSID Case No. ARB/00/9).

5 SeeAnnexure 1.

6 ibid.


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necessary that the dispute was over an investmentmade in the host party. Article I (b) of the

Treaty defines investment as every kind of investment in the territory of one party owned or

controlled directly or indirectly by nationals or companies of the other party, such as equity,

debt and investment contract; and includes, (ii) a company or shares of stock or other

interests in a company or interests in the assets thereof; and (v) any right conferred by law or

contract, and any licence and permits pursuant to law.

This dispute satisfies the aforementioned conditions. First, EGTPC made an investment

contract with the State of Asiania whereby it contributed US $3400 million for 60% of

ownership interest over the assets in the territory of Asiania where the Nonbay and Domgiri

Plants7 were established; and second, this control over the plant would be directly by the

nationals of the other party, as majority of the share holders of EGTPC were Atlantisians

(EGTPC was set up in Atlantis), with some meagre 20% being held by Erlandians. 8

Moreover, the present dispute also satisfies the conditions mentioned under Article VI (1)as

it is a dispute arising out of an agreement which was made in furtherance of the Treaty and

there was an alleged breach of various rights like expropriation and fair and equitable

treatment (discussed under merits of the case).

2.1.2

That the change in equity holding of EGTPC does not bar thejurisdiction of this Tribunal

Article I(2)of the Treaty provides that Each party reserves the right to deny to any company

the advantages of this Treaty if nationals of any third country control such company and ,in

the case of a company of the other party, that company has no substantial business activities

in the territory of the other Party or is controlled by nationals of a third country with which

denying Party does not maintain normal economic relations.9

The Applicant submits that in the case of Plama v. Bulgaria10, decision on the jurisdiction

rendered by an ICSID tribunal under the Energy Charter Treaty provides guidance for the

7 See Compromis, 10.

8 See Compromis, 7.

9 See Annexure 1.

10

Plama Consortium Limited v. Republic of Bulgaria, Decision on Jurisdiction, 8 February 2005 (ICSID CaseNo. ARB/03/24).


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interpretation of the meaning of the denial of benefits clauses under Art.17 (1) of ECT

11which is similar to the above clause. It was noted by the Tribunal that since both the

conditions are inclusive, both must be met before the Contracting Party can invokeArt. 17(1).

In the present case too, though equity shareholding of EGTPC was changed to include 75 %

of Erlandians, who were nationals of third country but the company still had substantial

business activities in Asiania. Alternatively, the second optional condition cannot be deduced

directly as the facts are silent on the point whether State of Asiania had normal economic

relations with Erland. Moreover, the burden of proof lies with the respondent State. The same

was held in the case of Generation Ukraine v.Ukraine.12

Arguendo, even assuming that State of Asiania did not have normal economic relations with

Erland even than this denial of benefit clause does not operate automatically and therefore,

requires a positive action by the host State.

The ICSID Tribunal inPlama v. Bulgaria13clarified that the existence of a right is distinct

from the exercise of that right It further held that:

The exercise would necessarily be associated with publicity or other notice so as to become

reasonably available to investors and their advisers. To this end, a general declaration in a

Contracting States official gazette could suffice; or a statutory provision in a Contracting

States investment or other laws; or even an exchange of letters with a particular investor or

class of investors.

In view of the above, the Applicant in the present case submits that this right was not

exercised by the State of Asiania and no publicity or other notice so as to become reasonably

available to the investors and their advisors. Moreover, presuming that the demand for

renegotiation be taken as a notice in the present case, this notice would be prospective in

11 Energy Charter Treaty, Art. 17 provides Each Contracting Party reserves the right to deny the advantages ofthis part (part III) to: (1) a legal entity if citizens or nationals of other state own or control such entity and ifthat entity has no substantial business activities in the area of the Contracting Party in which it isorganized.

12 Generation Ukraine Inc. v. Ukraine, Final Award, Sept. 16, 2003 (ICSID Case No. ARB/00/9).

13 Seesupra note 10, 155-165.


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nature and the Tribunal would have jurisdiction to hear all disputes which arose prior to the

notice.14

2.2That the parties to the dispute sought resolution through negotiation andconsultation

The second procedural requirement before approaching this Tribunal is that parties to the

dispute should have initially sought resolution through negotiation and consultation. The

substantive content of this step in dispute resolution may not be onerous, but the obligation is

real, for an investor must at least notify the host State of the grounds in the dispute in writing

and have the willingness to discuss and settle the dispute before arbitration or litigation. 15

In a very recent case ofAlps Finance Trade AG v. Slovak Republic,16

an UNCITRALTribunalhad to consider whether Alps had satisfied the obligation contained in Article 9 of the

Switzerland-Slovakia BIT which requires that consultations will take place and that they

do not result in a solution within six months before the matter can be referred to arbitration.

The Tribunal held that the negotiation clause in the BIT was not an obstacle to its

jurisdiction17as all that was required was that consultations be at least attempted and that

six months had elapsed without any resulting solution. The rationale of the clause is to avoid

that a State be brought before an international investment tribunal all of a sudden, wit hout

being given the opportunity to discuss the matter with the other party.18

The general view is that, where the applicant has taken reasonable steps to bring the dispute

to the States attention and resolve the matter amicably, negotiations would have be

considered to have been taken. Accordingly, the only cases where tribunals have enforced the

14 ibid.

15 Norbert Horn and Stefan Kroll, Arbitrating foreign investment disputes (Kluwer Law International, The

Hague The Netherlands 2004).

16 Alps Financeand Trade AG v..Slovakia, Final Award, Mar. 5, 2011 (Ad hoc UNCITRAL arbitration).

17 Salini v. Morocco, Final Award, 23 July 2001 (ICSID Case No. ARB/00/4); Lauder v. Czech Republic,

Final Award, 3 September 2001 (UNCITRAL Arbitration SCC Rules); SGS v. Pakistan, Decision onJurisdiction, 6 August 2003 ( ICSID Case No. ARB/01/13);Occidental v. Ecuador, Final Award, July 1 2004(London Court of International Arbitration, Case No.UN3467) ;See generally,Nicaragua v. United States of

America and South West Africa, 27 June 1986 (I.C.J Rep. 14).

18 See supra note 17.


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negotiation clause were where the applicant did not give the State any notice at all, or only

very short notice, of its claim prior to commencement of the arbitration.19

InBurlington v. Ecuador,20where the applicant had only informed the State of the dispute by

submission of its request for arbitration, the ICSID Tribunal found that the applicant had

deprived the State of the opportunity to redress the problem before the investor submits the

dispute to arbitration and that, as a result, the Tribunal lacked jurisdiction over the

applicants claim (therefore holding that the duty to give proper notice of the claim was not

just a procedural but a jurisdictional requirement).In Salini v.Morroco,21 the host country

argued that the request to arbitrate was premature because the various documents relied upon

by the applicant as notifications of dispute were inadequate. The tribunal refused to adopt a

formalistic approach to the treaty and held that the attempt to reach settlement did not need to

be comprehensive or detailed.

But the Applicant submits that the present case is entirely different on facts. The

consultations between both the parties began in early 2010 when it was alleged by Asiania

that there were problems in the centrifuge and as soon as the conflict was brought in notice

efforts were made by EGTPC to resolve the matter amicably and for this purpose they

brought technical personnel from the manufacturing centre to examine the problem and they

were at work for a month. But in spite of this the NESB began defaulting its payments to

EGTPC for even the power supplied to it which amounted to US $39 million. Following this,

NESB got a decree passed for attachment before judgment EGTPC immediately complained

of this to Government of Asiania and Atlantis with the intention that the disguised attempt of

expropriation should be avoided thereby, took reasonable steps to bring the dispute to the

States notice. Moreover, with regard to the contract dispute, the NESB took the position that

payment default is curable if EGTPC pays up losses suffered by NESB and finds alternative

sources of power to resume, makes the position clear that sufficient steps were taken by

EGTPC to resolve the matter but such negotiations were unsuccessful. Moreover, it is clearly

mentioned in the facts that the State of Asiania gave its consent for starting the Arbitration

proceedings by taking positive steps by appointing an arbitrator. In light of the above

19 Christoph Schreuer, Travelling the BIT Routes:Of Waiting Periods, Umbrella Clauses and Fork s in the

Road [2004] 5 JWIT 231 accessed 14 October 2012.

20 Burlington Resources Inc. v.Republic of Ecuador, Decision on Jurisidction, 2 June 2010 (ICSID Case No.

ARB/08/5).

21 Salini Costruttori S.p.A.and Italstrade S.P.A v. Kingdom of Morrocco , Final Award, 23 July 2001 (ICSIDCase No. ARB/00/4).


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2.3.2 Arguendo, exceptions to local remedies appliesArticle VI (2)of the Treaty explicitly provides that the applicant should earnestly seek to

exhaust local remedies. Article 31of Vienna Convention26provides that terms in the treaty

must be given an ordinary meaning, therefore, it can be concluded that certain exceptions to

local remediescan be availed of by the Applicants.27One of the main exceptions is a pattern

in the defects in the administration of justice. An absence of adequate due process guarantees

as a basis for exception to the exhaustion rule. One of the prominent commentator on

exhaustion rule has suggested that although not all forms of denial of justice may have the

result of exempting the applicant from the exhaustion requirement, an absence of due

process would seem to have the effect of rendering remedies obviously futile...and fairness

cannot be expected to prevail.28

In the present case there were defects in the administration of justice as there was absence of

due process of law. The judicial actions taken by the State of Asiania were disproportionate

and uncalled for. Moreover, all the procedural safeguards which the Applicant was entitled to

were also denied.

3. THAT THIS TRIBUNAL HAS JURISDICTION RATIONE MATERIAE OVER CONTRACTCLAIMS.

It is submitted that this Tribunal has jurisdiction over Applicants contract claims arising

under various Agreements by virtue of Article II (3) (c) of Treaty and Article III of the

Agreement.

3.1That this tri bunal has ju ri sdiction under Arti cle I I (3) (c) of treatyArticle II (3) (c) of treaty contains what is commonly referred to as an umbrella clause. It

provides that Each Party shall observe any obligation it may have entered into with regard

to investments.

26 Vienna Convention on Law of Treaties (adopted 23 May 1969,entered into force at 27 Jan. 1980) 1155UNTS 331 (art. 3l) stipulates that: A treaty shall be interpreted in good faith in accordance with theordinary meaning to be given to the terms of the treaty in their context and in the light of its object and

purpose.

27 Chittharanjan Felix Amerasinghe, Local Remedies in International Law (2

nd edn, Grotius Publications,

Cambridge University 2004) 335-36.

28 ibid.


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An umbrella clause is a provision in a BIT that guarantees the observation of obligations

assumed by the host State vis--vis the investor.29They put contractual commitments under

the BITs protective umbrella.30 Found in many BITs, it implied that each Contracting State

must observe all investment obligations it has assumed with respect to investors from the

other Contracting State.31 The idea behind the metaphor is that umbrella clause brings

otherwise independent arrangements between a Contracting State and private investors from

the other Contracting State under the treats umbrella of protection to all breaches of relevant

investor State contract.

The Tribunal in SGS v. Philippines32decided that the umbrella clause applies to all breaches

of the relevant investor-State contract. The Tribunal, therefore, had jurisdiction over

contractual disputes arising under the Agreement, including any purely contractual claims

that were not also premised on the BITs substantive provisions.

Moreover, in an award rendered inEureko v. Poland,33the Tribunal stated: Any obligation

is capacious; it means not only obligations of a certain type, but any-that are to say, all-

obligations. It can be inferred that these obligations also take into account the performance of

contractual duties and responsibility which arise under the contract.The same was held by the

tribunal in Consorzio Groupement34where it stated that the effect of umbrella clauses is to

transform the violations of the States contractual commitmemts into violations of the treaty

umbrella clause and by this give jurisdiction to the Tribunal over the matter.

Therefore, the umbrella clause applies to all grave breach of contracts by the State of

Asiania (in its own behalf as well as on behalf of the Province of Narnia, National Nuclear

Power Corporation of Asiania and Narnia Electricity Board) thereby giving jurisdiction to the

29 R. Dolzer and C. Schreuer, Principles of International Investment Law (Oxford University Press Oxford

2008) 153.

30 See supra note 19.

31 Judith Gill, Contractual Claims and Bilateral Investment Treaties: A Comparative Review of the SGS Cases

(2004) 21 J. Int'l Arb.

32 SGS S.A. v. Rep. of the Phil., Objections to Jurisdiction, Jan. 29, 2004 (ICSID Case No. ARB/02/6).

33 Eureko v.Poland, Partial Award, 19 August 2005.

34

Consorzio Groupement LESI and ASTALDI v. Algeria, Decision on Jurisdiction, 12 July 2006 (ICSID CaseNo ARB/05/3; IIC 150 (2006).


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Tribunal over the Contractual claims of the parties. The breach of contract, violates the

umbrella clause of the treaty, which indirectly gives this tribunal to hear the dispute in hand.

Moreover, Para 33 (8) of the Memorandum of Undertaking clearly provides that The

Memorandum of Undertaking and all actions and documentation there under shall be deemed

in furtherance of and to give effect to the Treaty. Therefore, this tribunal clearly has

jurisdiction to adjudicate the matter.

3.2That this Tr ibunal has ju r isdiction under Article VI (2)(a) of the Treaty andAr ticle I I I of the Agreement.

It is provided underArticle VI (2)35It is submitted before this honble Tribunal that the treaty

expressly provides that if even after complying with all the procedural requirements of thistreaty, the dispute still remains unresolved; the parties to this dispute can submit the dispute

according to previously agreed dispute settlement procedure.

In this present case Article III36 of the Agreementprovides for the procedure resolution of

Dispute under the auspices of Permanent Court of Arbitration in accordance with the

UNCITRAL Rules. Therefore, it can be concluded that there is no conflict between the treaty

and the contract between the parties, the ultimate jurisdiction to preside over the matter lies

with the present Tribunal.

[PART II:MERITS]

LAW APPLICABLE TO THE MERITS OF THE DISPUTE

According toArticle 35of UNCITRALRules, when there is absence of choice of law clause,

the general principles of conflict of law supplemented by principles recognised by

International Law is applicable. The treaty claims should be decided in accordance with the

provisions of the BIT and of International Law as the BITs governing law.

A. THAT RESPONDENTS ACTIONS AMOUNT TO EXPROPRIATION.It is contended that the Respondent has expropriated the Applicants assets indirectly, which

is prohibited by the General Principles of International Law and also by the Investment

Protection Treaty signed between the two countries. The Applicant submits that, one, the

35

See Annexure 1.

36 See Annexure 2.


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Respondent expropriated its investments by substantially depriving the Applicant of its rights

over its investments and by not fulfilling the Treaty based legitimate expectations of the

Applicant. Two, the expropriation was unlawful since it does not fall under any of the

exceptions provided by the Treaty.

1. THAT RESPONDENT EXPROPRIATED APPLICANTS ASSETS.The Treaty37 prohibits Expropriation directly or indirectly unless it is for a public purpose

done in a non discriminatory manner upon payment of appropriate compensation with due

process of law and general principles of treatment provided under Article II(3).38

Expropriation is the taking or deprivation of the property of foreign investors by a host

state.39

Indirect Expropriation may occur even when the legal title remains with the owners,40

where the host state adopts certain measures that deprive the owners of the possibility of

utilizing their investment.41There may be no discernible intent to expropriate, even though

expropriation is an inevitable result of the government measure. 42

Although there is no doctrine of binding precedent in International Law, the decisions of

previous Tribunals on questions of principle are valuable and persuasive for subsequent

Tribunals.43 In the past confiscatory taxation, denial of access to infrastructure or necessary

37 See Annexure 1.

38 SeeAnnexure 1, Article 3 (1).

39 C. McLachlan, L.Shore and M. Weiniger, International Investment Arbitration: Substantive Principles

(Oxford University Press London 2000 ) 290-298.

40 Amco Asia Corporation and Others v. Republic of Indonesia, Resubmitted Case, Final Award, 31 May 1990

(ICSID Case No. ARB/81/1) 220; SD Myers Inc v. Canada, First Partial Award and Separate Opinion, 13

November 2000 (Ad hocUNCITRAL Arbitration Rules) 281,283; Tippets, Abbet, McCarthy, Stratton v.TAMS AFFA Consulting Engineers of Iran, (1984) 6 Iran-USCTR. 225;R. Dolzer and C. Schreuer,

Principles of International Investment Law (Oxford University Press, 2008) 92; A.Newcombe and LParadell,Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International TheHague 2009) 327.

41 CME Czech Republic B.V. v. The Czech Republic, Partial Award, 13 September 2001 (UNCITRAL) 608;

Metalclad Corp v. United Mexican States, Final Award,30 August 2000 (ICSID Case No. ARB(AF)/97/1) 103.

42 Andrew Newcombe, The Boundaries of Regulatory Expropriation in International Law, (2005) 20 FILJ274.

43

Corn Products v. United Mexican States, Decision on Responsibility, 15 January 2008, ( ICSID Case No.ARB (AF)/04/01), 77; Metalclad Corp v. United Mexican States, Final Award, 30 August 2000(ICSIDCase No. ARB (AF)/97/1), 108.


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raw materials, imposition of unreasonable regulatory regimes, among others have been

considered to be expropriatory actions.44

In the instant case, the Respondent filed a suit in the domestic court and sought attachment

before judgment,45of all the assets of the Applicant. The attachment was ordered and then the

Applicant went to the High Court in Appeal which was rejected.46 It is submitted by the

Applicant that this was a disguised attempt by the Respondent to expropriate the assets of the

Applicant.

1.1That the order f or attachment before judgement has substanti all y depri ved theAppl icant of hi s use and enjoyment over its assets

A deprivation or taking of property may occur under International Law through interferenceby the State in the use of the property or with the enjoyment of its benefits, even where legal

title to the property is not affected.47

In the present case, even though the legal title of the property is not affected, but the order

deprives the Applicant of its rights, intangible assets. Under the traditional expropriation

standard the terms deprivation and expropriation were often used interchangeably.48The

impact a governmental measure on the Applicants ability to use and enjoy its investment, or

in other words the fact of deprivation, has come to be regarded as a primary condition for

establishing a breach of the expropriation standard.49In Continental Casualty v Argentina,50

the Tribunal similarly pointed to impact as a criterion in determining the expropriatory

character of a governments conduct:

44 Marvin Feldman v. Mexico, Final Award, 16 December 2002, (ICSID ARB (AF)/99/1) 103.

45 Attachment is the seizing of a persons property to secure a judgment or to be sold in satisfaction of a

judgment. Also termed (in Civil Law) as provisional seizure. [Bryan A. garner, Blacks Law Dictionary

(8th

edn, Thomson West Publication 2004)].46

See Compromis, 24.

47 Tippets, Abbet, McCarthy, Stratton v. TAMS AFFA Consulting Engineers of Iran, Final Award, 29 June

1984, 6 Iran-USCTR 225.

48 WD Verwey and NJ Schrijver, The Taking of Foreign Property Under International Law: A New LegalPerspective? (1984) Netherlands Ybk Intl L3. More recently, similar findings were made in UNCTAD,

Bilateral Investment Treaties 1995-2006: Trends in Investment Rule-Making (United Nations, New York2007) 45-6.

49 C Schreuer, The Concept of Expropriation under the ECT and other Investment Protection Treaties in C

Ribeiro,Investment Arbitration and the Energy Charter Treaty (JurisNet, Huntington NY 2006) 145.

50 Continental Casualty Company v. Argentina, Award, 5 September 2008 (ICSID Case No ARB/03/9) 276.


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One may distinguish between: (a) outright suppression or deprivation of the right of

ownership, usually by its forced transfer to public entities; (b) limitations and hampering with

property, short of outright suppression or deprivation, interfering with one or more key

features, such as management, enjoyment, transferability, which are considered as tantamount

to expropriation, because of their substantial impact on the effective right of property. Both

these types of measures entail indemnification under relevant international treaties51.

The Applicant asserts that the order for attachment effectively, is equivalent to a freezing

injunction which is used in order to freeze assets and monies, pending the outcome of the

claim.52 It is usually made without notice, and often before the claim has been issued

provided, the party seeking it has a good arguable case, there is a real risk of dissipation of

the assets before a judgment could be enforced and it is just and convenient for the court to

do so.53 The rights in property are described as a bundle of rights and, in terms of real

property, usually include the right to occupy the land, put it to reasonable use and alienate it.

Owing to the order allowing for attachment before judgment, the Applicant lost all its powers

of control, in specific context of the right to dissipate all its assets.

The Applicant is deprived of an essential right over all of its assets. Since the attachment was

ordered against all of the assets, the term assets is inclusive of cash, inventory, real estate,

accounts receivable and goodwill owned by a party54 in and outside a particular country.

Therefore, it is undisputable that there has been a substantial deprivation from the ownership

of the Applicants assets.

51 ibid.

52 Mareva Compania Naviera SA v.. International Bulkcarriers SA, [1975] 2 Lloyds Rep 509.(Based on theCommon Law remedy Mareva Injunction).

53 David Capper, Worldwide Mareva Injunctions, (1991) 54TMLR, accessed on 04October 2010.

54 Bryan A. garner,Blacks Law Dictionary (8thedn, Thomson West Publication 2004).


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1.2That there was interference with applicants Treaty based LegitimateExpectations

The investment-backed expectations of an investor are crucial in assessing whether the host

state has expropriated the investment.55On the basis of the Tribunals decision in Suez and

Ors v. Argentina,56 and Saluka Investments B.V v. The Czech Republic,57 Applicant as an

investor investing in Respondent State had certain expectations about the nature of the

treatment which had been created by the Respondent States laws, regulations, declared

policies, and statements. But Respondent through its actions subsequently frustrated and

thwarted those legitimate expectations by attempting to expropriate the Applicants

investment in such manner. In Tokios Tokeles v.. Ukraine,58 the Tribunal held that the

Respondents obligations with respect to investmentrelate not only to the physical property

of investors but also of the business operations associated with that physical property. 59

In the present case, it is submitted that irresponsible behaviour of the Respondent towards the

Applicant failed to fulfil the basic obligations legitimately expected by the investor on the

basis of their Treaty.

1.3That the act of judiciary is attr ibutable to the StateIt is submitted by the Applicant that the act of judiciary is attributable to the State. According

to the ILCs Articles on Responsibility of States for Internationally Wrongful Acts, the

conduct of a State is considered an act of that State under International Law whether the

organ exercises legislative, executive, judicial or any other functions, whatever position it

55 S. Fietta, Expropriation and the Fair and Equitable Standard: The Developing Role of Investors

Expectations in International Investment Arbitration, (2006) 23 JIA 375; S. Schill, Fair and EquitableTreatment as an Embodiment of the Rule of Law, in R. Hofman and C. J. Tams (eds.),ICSID: Taking Stockafter 40 Years, (OUP London 2007) 11.

56 Suez and Ors vArgentina, Final Award (ICSID Case No ARB/03/19)

57 Saluka Investments BV v. Czech Republic, Partial Award, 17 March 2006 (PCA-UNCITRAL Arbitration

Rules) 262.

58 Tokios Tokeles v. Ukraine, Decision on jurisdiction, 29 April 2004.

59 ibid, 92.


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holds in the organization of the State, and whatever its characterization as an organ of the

central Government or of a territorial unit of the State,60

Another principle which has been laid down by various arbitral awards is that a denial of

justice may also amount to an expropriation.61Judicial expropriation has been recognised in

arbitral awards likeLoewen v.. United States62etc.

which As observed by the Iran-US Claims tribunal in Oil Field of Texas v. Iran,63it is well

established in International Law that the decision of a court depriving an owner of the use and

benefit of its property may amount to expropriation of such property that is attributable to the

state of that court.

1. THE EXPROPRIATION OF APPLICANTSASSETS IS UNLAWFUL.It is contended before the Tribunal, that the indirect expropriation of the Applicants

investment was unlawful. It fails to fulfil the requisites of a legal expropriation as laid down

in the Investment Protection Treaty of the two States.64 The expropriation was unlawful

because, one, the order for attachment of Applicants assets before judgment was not for

public purpose and not in accordance with the due process of law [2.1]. Two, it violates the

Fair and Equitable Treatment clause of the Treaty [2.2], three, it was disproportionate in

context of the dispute between the two parties and thus completely unnecessary, [2.3] and

four, that no compensation has been given to the Applicant [2.4].

Methanex v. United States65 and Saluka v. Czech Republic66 awards are notable for their

departure from the classical method under the assessment of the legality of the conduct of the

60 International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, 2001,Article 4.

61

See Robert E. Brown case (United States v. Great Britain) (1923) 6 RIAA 120; Martini Case (Italy v.Venezuela) (1930) 2 RIAA 974. (Early international decisions inRobert E. Brown andMartini illustrate anoverlap between denial of justice and expropriation)

62 Loewen v. United States,Award on the Merits, 26 June 2003 (ICSID Case No. ARB(AF)/98/3).

63 Oil Field of Texas Inc v. Iran (1986) 12 Iran-USCTR 308, 318-19 (Concerning a dispute over Italian

property in Tunisia).

64 See Annexure 1, Article III.

65Methanex Corporation v. United States of America, , Final Award of the Tribunal, 7

th August 2005,

(UNCITRAL Arbitration Rules).

66 Saluka Investments BV v. Czech Republic, Partial Award, 17 March 2006 (PCA-UNCITRAL ArbitrationRules).


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host state was undertaken as part of establishing whether an expropriation was lawful and not

as part of establishing whether an expropriation had occurred. 67

1.1That the mode of expropr iation was not in accordance with the due process oflaw

Due process is regarded as one of the conduct requirements that must be satisfied for an

expropriation to be lawful.68The existence of methods for review of the expropriation under

national law is not relevant.69 There must be methods to satisfy the requirement of due

process of law in thecontext of the particular case.70

In practice, such injunctions are generally passed ex-parte, where the party seeking it presents

an arguable claim over a certain sumprovided that the court has a jurisdiction over theproperty, and most importantly, wherein there is a substantial risk of dissipation is involved.71

It is contended that this act of allowing attachment is arbitrary since this order goes against

the general principles of International Law and also Principles of natural justice. The

Respondent had also committed a breach by defaulting on payment for the Power supplied to

them. If the claim is regarding the contractual rights and obligations, EGTPC was not the sole

party at fault. The judgment given by the local court of the country is not fair and impartial,

because of the fact that it is based on the account given by one side that is the host

government against a foreign investor i.e. the applicant in the present appeal.

In Amco v. Republic of Indonesia72 the tribunal concluded that in order to comply with due

process, any sanction for an investors failure to fulfil its investment obligations should have

been preceded by a warning.73It held that the purpose and function of the warnings was

67 U Kriebaum, Regulatory Takings: Balancing the Interests of the Investor and the State (2007) 8 J World

Investment & Trade 717, 726.

68 A Reinisch, Legality of Expropriationsin A Reinisch, Standards of Investment Protection (OUP, Oxford

2008) 171.

69 ADC v. Hungary, Final Award, 2 October 2006, (ICSID Case No. ARB/03/16).

70 ibid.

71 Michael Prior, The Nature of the Mareva Injunction, (1991)6 Int'l Legal Prac. 122.

72

Amco Asia Corporation and others v. Republic of Indonesia, Resubmitted Case, Award, 31 May 1990(ICSID Case No. ARB/81/1) 98.


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to give the addressee of the warnings the opportunity to remedy the failures (if any)

mentioned therein; and even in cases where such remedy could not be offered or made, in

fact or in law , to give him the opportunity to discuss the administrations grievances and

to defend himself against the same.74

The facts in the present case suggest that there was no warning given to the Applicant by the

Respondent prior to taking any such action against the Applicant which had the impact of

depriving the Applicant from a substantial use and enjoyment of its property.

1.2That the Respondent has violated Fair and Equitable Treatment Clause of theTreaty

Article II (3) (a) of the BIT between the two States imposes an obligation of Fair andEquitable Standard to be accorded to the investments and shall in no case be less than

required by international Law.75

There are two theories which govern the standards of Fair and Equitable Treatment Clause

(FET) in the practice of International Law, enhanced FET and a unified FET. Enhanced Fair

and Equitable Treatment clause would be in line with the object and purpose of the BIT,

namely to establish favourable conditions for investment. In this case FET guarantees

investors expectations and legal certainty.76 In Occidental, the tribunal stressed that the

stability of the legal and business framework are essential elements of FET.77

A unified theory of FET which harmonizes the four distinct inquiries of past tribunals, 781)

whether the conduct was arbitrary, grossly unfair, unjust, or idiosyncratic; 2) whether the

73 ibid., 198. (The tribunal held that such requirement was not only established in Indonesian law, but alsoformed part of general principles of law.).

74

ibid.75

Annexure 1, Article III (3) (a) - Investment shall at all times be accorded fair and equitable treatment; shallenjoy full protection and security and shall in no case be accorded treatment less than that required byInternational Law.

76 Tecnicas Medioambientes S.A. v. The United Mexican States, Award, 29 May 2003, 43 I.L.M. 133 (2004)

154.

77 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Ecuador,

Decision on Jurisdiction, 9 September 2008, (ICSID Case No ARB/06/11) 83;Metalclad v. Mexico, ICSIDCase No.ARB(AF)/97/1, Award, 25 August 2000, IIC 161 (2000), 99.

78

Vandevelde, K., J., A Unified Theory of Fair and Equitable Treatmen, (2010) 43 N.Y.U. Journal ofInternational Law & Politics 376.


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conduct involved a lack of due process leading to an outcome which offends judicial

propriety;793) whether the conduct substantially changed the legal and business framework

under which the investment was decided; and 4) whether the conduct was in breach of

representations made by the host State which were reasonably relied on by the applicant.80

Whether assessed under the enhanced or unified FET theory, Respondents actions would

violate both standards. The enhanced FET theory emphasizes on stability of the legal

framework in the host state. On the basis of the arguments on the indirect expropriation of

Applicants property, it is clear that Respondent has failed to ensure FET to the investment of

applicant.

1.3That theRespondents actions areArbitrary and DisproportionateThe Investment Protection Treaty, under its Article II (3)(a)81prohibits either of the parties to

impair or impede by arbitrary or discriminatory measures the management, operation,

maintenance, use, enjoyment, acquisition, expansion or disposal of investments.

The Applicant submits that the order in the present case goes beyond the normal procedure of

the law. Therefore, Respondent violated its obligation provided under this Article also.

For an act of a party to be proportionate there has to be a reasonable nexus between the actand the purpose.82The disadvantages caused by the measure must not be disproportionate to

the aims used.83 In accordance with this test, any loss can be weighed against the aims

pursued by the measure at issue.84

79 Waste Management, Inc. v. United Mexican States, Final Award, 30 April 2004 (ICSID Case Nr. ARB(AF)/

00/3) 98.

80

Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, Final Award, 22 May 2007 (ICSIDCase No. ARB/01/3) 264.

81 See Annexure I.

82 August Reinisch, Expropriation, inPeter Muchlinski, FedericoOrtino, and Christoph Schreurer, (eds),

The Oxford Handbook of International Investment Law(OUP Oxford 2008) 450.

83 A Newcombe and L Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer

Law International 2009) 363-6. See Tcnicas Medioambientales Tecmed, S.A. v. United Mexican States,Award, 29 May 2003 (ICSID Case No. ARB(AF)/00/2) (there must be a reasonable relationship of

proportionality between the charge or weight imposed to the foreign investor and the aim sought to berealized by any expropriatory measure...) and LG&E Energy Corp and ors v. Argentina, Decision on

Liability, 3 October 2006 (ICSID Case No ARB 02/1) (2007) 195.

84 Tecmed v. Mexico, Final Award, 24 May 2003 (ICSID No. ARB (AF)/00/2).


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In the case at hand, no causal link can be established between the act of the Respondent and

their claimed objective. It is further contended that there is no justification provided by the

Respondent for taking such an action which had a drastic impact of substantially depriving

the applicant from using its assts. Moreover, the reputation of Applicant in the international

market has been badly affected which has reduced its future opportunities of getting into any

investment project with any other party.

1.4That no compensation has been of fered by the RespondentIt is further contended that Respondent had a mala fide intent of expropriating the Applicants

property. If all the circumstances point towards a plan to deprive the investor of its

investment, an underlying motive to expropriate can be construed.85In the case of a de facto

expropriation, the intent is latent, yet can be determined from an examination of all the

circumstances, in particular, the result of government measures.86

In the present case, the whole process of going to the court directly, by skipping the stage of

negotiation and consultation for such breach of the contract and seeking attachment before

judgment was undertaken to evade the compensation which Respondent would have paid to

the applicant had it expropriated the assets directly.

Thus Applicant requests the Tribunal that the Injunction order be cancelled and just and

proper compensation shall be given to the Applicant for the losses incurred in that duration

along with the damages due to opportunity costs.

B. THAT THE RESPONDENT HAS COMMITTED AGRAVE BREACH OF THE CONTRACT.The Respondent failed to make the payments to the Applicant for the power supplied to it.87

The Applicant submits before the Tribunal that this Default in payment amounts to grave

breach of the contract. The Applicant shall demonstrate this contention by dividing it into two

equal parts, one, the non payment amounts to a breach of the contract and Consideration is an

essential element of the Contract [1] and secondly the violation of an essential element of the

agreement is a grave breach of the Contract [2]. In furtherance to that, the Respondent shall

not be allowed to seek counter-claim [3].

85 Christopher Schreuer, The Concept of Expropriation under the ETC and other Investemnt ProtectionTreaties (2005) accessed on 1 October, 2012.

86

K.A.Byrne,Regulatory Expropriation and State Intent (2000) 38 Canadian YB ofInt'l L 89.

http://www.transnational-dispute-management.com/http://www.transnational-dispute-management.com/http://www.transnational-dispute-management.com/


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1. THAT THE NON PAYMENT AMOUNTS TO BREACH OF THE CONTRACT.Agreement88between the two parties in the present dispute define the expression breach or

default of an obligation for the purpose of any agreement between EGTPC and the

Government which shall include, without limitation, default in respect of any payments by

any party specified in any such agreement.89

In March 2011, an election in Narnia brought the parties opposing the EGTPC deal to power.

They began clamouring for renegotiation of the entire arrangement. Consequently, NESB

began defaulting its payments to EGTPC for the power supplied to it. Its two defaults

amounted to US $ 39 million.90The facts of the present case clearly suggest that Respondent

failed to make payments for consecutively two times on purpose in order to give effect to

their intentions. This is a violation of the obligation undertaken by the Government in the

Investment agreements, underwritten by Government of Asiania and Narnia, where NESB

was to purchase power solely from these two Plants at a specified rate. 91Therefore, this shall

fall in the provision under Article I (1) (b), according to which default in payment shall

amount to breach of the contract.

1.1That the Consideration is the Essenti al Element of the ContractEssential element of a contract is that primary obligation which goes to the root of the

agreement without which the agreement would not have existed. It serves as the basis of the

agreement. The party would not have contracted if the assurance had not been given. 92 In the

present case, money provided by NESB in return of the power provided by EGTPC is the

consideration of the agreement. A consideration, in the sense of the law, may consist in some

right, interest, profit or benefit accruing to one party for some forbearance, detriment, loss or

responsibility given, suffered, or undertaken by the other.93In English Law, a consideration is

88 See Annexure II.

89 See Annexure II, Article I.



92 Bannerman v. White[1861] 10 CB NS, 844.

93 Thomas v. Thomas (1842) 2 Q.B. 851 at p. 859; Bolton v. Madden (1873) L.R. 9 Q.B. 55, at 56.


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necessary for the formation of every simple contract; a promise made without consideration

is not actionable as a claim.94

1.2That breach of an essent ial element shal l be construed as grave breach of thecontract.

The Agreement Concerning the Requirements of Notice to Cure Defaults and Settlement of

Disputes95defines failure to make any payment as breach of the obligation for the purposes

of a specific agreement.96 It is contended that even though the failure to make payment is

termed as simple breach in the agreement, but in this case the non payment falls under the

grave breach clause97. This contention can stand the test of all the three laws applicable in

contractual claims, one, the contextual interpretation of the agreement between EGTPC and

Asiania reflects this as a serious default [1.2.1],two, according to the English Law failure to

fulfil a primary obligation goes to the root of the contract which amounts to a fundamental

Breach of the Contract [1.2.2], three, according to the UNIDROIT Principles of Commercial

Contracts such failure to perform an obligation amounts to a fundamental non-performance

[1.2.3].

1.2.1That there should be Contextual Interpretation of the Agreement.The written Agreement between the two parties explicitly mentions that to understand the

term default or breach in respect of any obligation under or arising out of any such

agreement shall be interpreted both literally and contextually, taking into account the whole

agreement in question. The same rule applies mutatis mutandis, to serious default or grave

breach.98

The Common Law has laid down the Principle of interpretation of Contracts that in order for

the agreement to be understood, it must be placed in context. 99 In a landmark judgment100

94 J. Beatson,Ansons Law of Contract(28thedn, Oxford University Press 2006) p. 91.

95 See Annexure II.

96 Article I (1) (c).

97 See Annexure II, Article I (2).

98 Annexure II , Article I (3).

99

Prenn v. Simmonds[1971] 1 W.L.R. 1381.

100Reardon Smith Line v. Hansen-Tangen, [1976] 1 W.L.R. 989, 995-997.


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House of Lords observed that in a commercial contract it is certainly right to know the

commercial purpose of the contract and this in turn presupposes knowledge of the genesis of

the transaction, the background, the context, the market in which the parties are operating...

What the court must do, must be to place itself in

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