IN THE INTERNATIONAL COURT OF ARBITRATION OF … · in the international court of arbitration of the international chamber of commerce icc arbitration case no. 28000/ac ... temple

TEAM PINTO

FOREIGN DIRECT INVESTMENT INTERNATIONAL ARBITRATION

MOOT 2016

IN THE INTERNATIONAL COURT OF ARBITRATION

OF THE

INTERNATIONAL CHAMBER OF COMMERCE

ICC ARBITRATION CASE NO. 28000/AC

PETER EXPLOSIVE

(Claimant)

Versus

THE REPUBLIC OF OCEANIA

(Respondent)

MEMORIAL FOR THE CLAIMANT

-TABLE OF CONTENTS- TEAM PINTO

i

TABLE OF CONTENTS

LIST OF AUTHORITIES........................................................................................................ iii

LIST OF ABBREVIATIONS ................................................................................................. xiv

STATEMENT OF FACTS ........................................................................................................ 1

ARGUMENTS ........................................................................................................................... 4

I. THE TRIBUNAL HAS JURISDICTION RATIONAE PERSONAE AND

RATIONAE MATERIA OVER THE PRESENT MATTER ............................................... 4

A. Jurisdiction Rationae Personae.................................................................................... 4

B. Jurisdiction Rationae Materia...................................................................................... 9

II. Claimant was not required to comply with the pre-arbitral steps as provided in the

Article 9 of the Euroasia BIT prior to bringing his claims before the Tribunal; ................... 9

A. Article 9 of the Euroasia BIT does not preclude the Claimant from invoking the

Tribunal’s Jurisdiction. .......................................................................................................... 9

III. The Claimant may invoke Article 8 of the Eastasia BIT pursuant to Article 3 of the

Euroasia BIT. ....................................................................................................................... 12

A. The MFN clause extends to access to dispute settlement mechanisms. ................... 13

B. Access to international arbitration is treatment accorded within the Respondent

State’s territory. ................................................................................................................... 15

C. Respondent accords Eastasian investors more favourable dispute treatment than

Euroasian investors in its territory. ...................................................................................... 16

D. Application of MFN clause does not override any public policy considerations the

Contracting Parties may have had. ...................................................................................... 16

IV. The Claimant made a protected investment, especially in light of the “clean hands”

doctrine with reference to Article 1.1 of the Eastasia BIT. ................................................. 18

A. No clean hands requirement from the Eastasia BIT may be imported into the

Euroasia BIT. ....................................................................................................................... 18

-

B. No requirement of clean hands may be read into the Euroasia BIT. ........................ 19

C. The clean hands doctrine is not a general principle of international and therefore has

no application in the present case. ....................................................................................... 20

D. Even if the Tribunal is of the opinion that the clean hands doctrine is applicable in

the instant case, its applicability is restricted to the initiation of investment. ..................... 21

E. Even if the principle of clean hands extends to performance of investment, the

Respondent is estopped from invoking the same. ............................................................... 22

V. The Claimant’s investment was expropriated by the Respondent. ............................... 24

A. The Respondent has unlawfully expropriated the Claimant’s investment. ............... 24

B. The Respondent’s measure is not justified under Article 10 of the Euroasia BIT. ... 26

C. Full reparation must be made to the Claimant. ......................................................... 30

VI. The Claimant did not contribute to the damage suffered by his investment. ............ 31

PRAYER FOR RELIEF .......................................................................................................... 33

-LIST OF AUTHORITIES- TEAM PINTO

iii

LIST OF AUTHORITIES

ARBITRAL DECISIONS:

ABBREVIATION CASE NAME PAGE

NO.

Abaclat

Abaclat and Others v. Argentine Republic, ICSID Case

No. ARB/07/5 , (4 August 2011)

12

ADC

ADC Affiliate Limited and ADC & ADMC

Management Limited v. The Republic of Hungary,

ICSID Case No. ARB/03/16 Award, (2 October 2006).

25, 31

ADF ADF Group Inc. v. United States, ICSID Case No.

ARB(AF)/00/1 (NAFTA), Award (9 January 2003)

19

Alasdair Alasdair Ross Anderson et al v. Republic of Costa Rica,

ICSID Case No. ARB(AF)/07/3, Award (19 May 2010)

21

Alpha Projektholding Alpha Projektholding GmbH v. Ukraine, ICSID Case

No. ARB/07/16, Award, (8 November 2010).

15

Ambiente Ambiente Ufficio S.p.A. and others v. Argentine

Republic, ICSID Case No. ARB/08/9, Decision on

Jurisdiction and Admissibilty, (8 February 2013).

10, 11

Bank Mellat Bank Mellat v Council of the European Union

(T496/10), EU General Court, 29 January 2013

29

Bayindir Bayindir Insaat Turizm Ticaret ve Sanayi A v. Islamic

Republic of Pakistan, ICSID Case No. ARB/03/29,

Decision on Jurisdiction (14 Nov. 2005), ¶s. 195-96

(RL-61)

5

BG Group BG Group Plc. v. Argentina, Final Award, 24 December

2007

10


iv

Biwater Biwater Gauff (Tanzania), Ltd. v. Tanzania, ICSID Case

No. ARB/05/22, Award, (24 July 2008)

11

Chorzow Factory case Case Concerning the Factory At Chorzow, PCIJ

Judgement No. 13, ¶ 47, at http://www.icj-

cij.org/pcij/serie_A/A_17/54_Usine_de_Chorzow_Fond

_Arret.pdf, also published in PCIJ, Series A, No. 17, 13

September, 1928

31, 32

Chevron Corp. Chevron Corp. & Texaco Petroleum Corp. v. Ecuador,

Interim Award, Ad hoc – UNCITRAL Arbitration

Rules; IIC 355, ¶. 112 (1 Dec. 2008) (CL-75)

5, 26

CMS CMS Gas Transmission Company v. The Republic of

Argentina, ICSID Case No. ARB/01/8, Award, (12 May

2005),

29

Canfor Corp. Canfor Corporation v. United States Of America and

Terminal Forest Products Ltd. V. United States of

America, UNCITRAL (NAFTA), Decision on

Preliminary Question, (6 June 2006).

13

Daimler Daimler Financial Services AG v. Argentina, ICSID

Case No. ARB/05/1, Award, (22 August 2012)

10

Dual Nationality case Dual Nationality, Decision Concerning the Question of

Jurisdiction over Claims of Persons with Dual

Nationality, 6 April 1984, Case No. A/18, 5 Iran-U.S.

CTR

7

Enron Enron Corporation and Ponderosa Assets, L.P. v.

Argentine Republic, ICSID Case No. ARB/01/3, Award,

(22 May 2005).

29

ELSI Case Concerning Elettronica Sicula S.P.A. (ELSI), ICJ,

Elettronica Sicula S.p.A (ELSI) (United States of

America v. Italy), July 20, 1989.

12

Finnish Vessels in Finnish Vessels in Great Britain During the War 16


v

Great Britain During

the War

(Finland v. Great Britain), 7 ILR 231 (1934)

Gemplus Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de

C.V. v. The United Mexican States, ICSID Case No.

ARB(AF)/04/3 Award, (16 June, 2010).

32

Giovanni Alemanni Giovanni Alemanni v. Argentine Republic, Decision on

Jurisdiction and Admissibility,(17 November 2014)

10

Gustav v. Ghana Gustav F W Hamester GmbH & Co KG v. Republic of

Ghana, ICSID Case No. ARB/07/24, Award (18 June

2010).

21

Guyana Guyana v. Suriname, Permanent Court of Arbitration,

Award, ICGJ 370, (17 September 2007).

20

Hochtief Hochtief AG v. The Argentine Republic, ICSID Case

No. ARB/07/31, Decision on Jurisdiction. (24 October

2011)

14, 15,

16

Impregilo Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID

Case No. ARB/03/3, Decision on Jurisdiction, (22 Apr.

2005), ¶. 239, n.103 (CL-153).

5

Inceysa Inceysa Vallisoletana S.L. v. Republic of El Salvador,

ICSID Case No. ARB/03/26, (2 August 2006).

21

Interhandel Case Interhandel Case (Switzerland v. United States of

America), Preliminary Objections, (March 21 1959),

I.C. J. Reports 1959, p. 6.

11

Israeli Wall Advisory

Opinion

Legal Consequences of the Construction of a Wall in the

Occupied Palestinian Territory, Advisory Opinion of 9

July 2004, International Court of Justice.

28

James and Others James and Others, European Court of Human Rights,

(21 February 1986).

25

Maffezini Emilio Agustín Maffezini v. The Kingdom of Spain,

ICSID Case No. ARB/97/, Decision of the Tribunal on

11, 16,


vi

Objections to Jurisdictions, (25 January 2000). 17, 32

Matos e Silva Matos e Silva, Lda., and Others v. Portugal, European

Court of Human Rights, (16 September, 1996).

25

Micula Ioan Micula, Viorel Micula, S.C. European Food S.A,

S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v.

Romania, ICSID Case No. ARB/05/20, Decision on

Jurisdiction and Admissibility, (24 September 2008).

5

Khosrowshahi Khosrowshahi and Islamic Republic of Iran, Award, 24

Iran-US C.T.R. 40, 45.

5

LG&E LG&E Capital Corp., and LG&E International, Inc .v.

Argentine Republic, Decision on Liability, (3 October,

2006).

29

Loewen Loewen Group, Inc. and Raymond L. Loewen v. United

States of America, ICSID Case No. ARB(AF)/98/3,

Decision on Hearing of Respondent's Objection to

Competence and Jurisdiction, (5 January 2001).

12

MCI v. Ecuador MCI Power Group and New Turbine Inc v. Ecuador

ICSID Case No ARB/03/6, Award, (31 July 2007)

19

Metalclad Metalclad Corporation v. The United Mexican States,

ICSID Case No. ARB(AF)/97/1, Award, (30 August

2000)

22

Methanex Methanex Corporation v. United States of America,

UNCITRAL, Final Award, (3 Aug. 2005)

4

Namibia Advisory

Opinion

Legal Consequences for States of the continued

presence of South Africa in Namibia (South West

Africa) Notwithstanding Security Council Resolution

276 (1970), Advisory Opinion of 21 June 1971,

International Court of Justice.

8, 28

Nationality Decrees

Case

Nationality Decrees in Tunis and Morocco, Advisory

Opinion, 1923 P.C.I.J. (Ser. B) No. 4. (7 February

6


vii

1923).

Niko Resources Niko Resources (Bangladesh) Ltd. v. Bangladesh

Petroleum Exploration & Production Company Limited

(“Bapex”) and Bangladesh Oil Gas and Mineral

Corporation (“Petrobangla”), ICSID Case No.

ARB/10/18.

20

Occidental Occidental Petroleum Corporation and Occidental

Exploration and Production Company v. Ecuador,

ICSID Case No ARB/06/11, IIC 561, Award, (24

September 2012)

29, 31

Oil Platforms Case Case concerning Oil Platforms (Islamic Republic of

Iran v. United States of America), (separate opinion of

Judge Higgins) 1996 I.C.J. 803, 856 (12 December

1996)

5

Pac Rim Cayman Pac Rim Cayman LLC v. Republic of El Salvador,

ICSID Case No. ARB/09/12, Decision on the

Respondent’s Objections to Jurisdiction

7

Pan American Pan American Energy, LLC, et al. v. The Argentine


Preliminary Objections (27 July 2006), ¶. 50 (RL-77)

5

Phoenix Action Phoenix Action, Ltd. v. The Czech Republic, ICSID

Case No. ARB/06/5, Award (15 April 2009)

6, 21,

30

Plama Plama Consortium Limited v. Republic of Bulgaria,

ICSID Case No. ARB/03/24 Award, (27 August 2008)

21

Malek Reza Said Malek v. The Government of the Islamic

Republic of Iran, Interlocutory Award No. ITL 68-193-

3, 23 June 1988, 19 Iran-U.S. CTR 48

7

Saba Fakes Saba Fakes v. Republic of Turkey, ICSID Case No.

ARB/07/20, Award, (14 July 2010)

21

Saipem Saipem S.p.A. v. Bangladesh, ICSID Case No. 10, 11


viii

ARB/05/7, Decision on Jurisdiction and

Recommendation on Provisional Measures, 21 March

2007

Sempra Sempra Energy International v. The Argentine Republic,

ICSID Case No. ARB/02/16 Award, (28 September,

2007)

27

Serafin Serafín García Armas and Karina García Gruber v. The

Bolivarian Republic of Venezuela, UNCITRAL,

Decision on Jurisdiction, (15 December 2014).

4, 7

Siemens Siemens A.G. v. The Argentine Republic, ICSID Case

No. ARB/02/8, Decision on Jurisdiction, (3 August

2003)

13, 14,

15, 21

Société Générale Société Générale v. Dominican Republic (LCIA Case

No UN 7927, Decision on Jurisdiction, (19 September

2008)

19

Starrett (Iran-US

Tribunals)

Starrett Housing Corporation, Starrett Systems, Inc.,

Starrett Housing International, Inc., v. The Government

of the Islamic Republic of Iran, Bank Omran, Bank

Mellat, Case No. 24, 4 Iran-U.S. CTR 122, Interlocutory

Award, (19 December 1983)

24

Suez Suez, Sociedad General de Aguas de Barcelona, S.A.

and Vivendi Universal, S.A. v. Argentine Republic,

ICSID Case No. ARB/03/19, Decision on Jurisdiction,

(3 August 2000)

9, 13,

15

Tecmed Tecnicas Medioambientales Tecmed SA v. Mexico

(ICSID Case No ARB(AF)/00/2, Award, 29 May 2003)

19, 25,

29

Teinver Teinver S.A., Transportes de Cercanías S.A. and

Autobuses Urbanos del Sur S.A. v. The Argentine


Jurisdiction, (21 December 2012).

14


ix

Telenor v. Hungary Telenor Mobile Communications A.S. v. Republic of

Hungary, ICSID Case No. ARB/04/15, Award (13 Sept.

2006), ¶. 68 (CL-154).

5

Temple of Preah

Vihear

Temple of Preah Vihear, Cambodia v. Thailand, Merits,

Judgment, [1962] ICJ Rep 6, (15 June 1962).

22

Vanessa Ventures Ltd. Vannessa Ventures Ltd v. Venezuela (ICSID Case No

ARB(AF)/04/6, Award, (16 January 2013)

19

Vivendi Compañiá de Aguas del Aconquija S.A. and Vivendi

Universal S.A. v. Argentine Republic, ICSID Case No.

ARB/97/3, Award, (21 November 2000).

31

Wintershall Wintershall Aktiengesellschaft v. Argentine Republic,

ICSID Case No. ARB/04/14, Award, (8 December

2008)

4, 24

Yukos (Final Award) Yukos Universal Limited (Isle of Man) v. The Russian

Federation, UNCITRAL, PCA Case No. AA 227, Final

Award, (18 July 2014).

20, 21,

31

BOOKS:

ABBREVIATION NAME OF BOOK PAGE

NO.

DUGAN, ET.AL,

INVESTOR STATE

ARBITRATION

CHRISTOPHER DUGAN, DON WALLACE, JR., NOAH

RUBINS & BORZU SABAHI, INVESTOR STATE

ARBITRATION 365 (Oceana Tm, 2008)

11

DOUGLAS, ET. AL, THE

FOUNDATIONS OF

INTERNATIONAL

INVESTMENT LAW

ZACHARY DOUGLAS, JOOST PAUWELYN & JORGE E.

VIÑUALES, THE FOUNDATIONS OF INTERNATIONAL

INVESTMENT LAW: BRINGING THEORY INTO PRACTICE

286 (Oxford University Press, 2014)

19

LAUTERPACHT,

RECOGNITION

HERSCH LAUTERPACHT, RECOGNITION IN

INTERNATIONAL LAW 410 (Cambridge University Press,

28


x

2012).

LAUTERPACHT, THE

DEVELOPMENT OF

INTERNATIONAL LAW

HERSCH LAUTERPACHT, THE DEVELOPMENT OF

INTERNATIONAL LAW BY THE INTERNATIONAL COURT

170 (Stevens & Sons Ltd., 1958)

22

RONEN, TRANSITION

FROM ILLEGAL

REGIMES UNDER

INTERNATIONAL LAW

YAËL RONEN, TRANSITION FROM ILLEGAL REGIMES

UNDER INTERNATIONAL LAW (Cambridge University

Press, 2011)

8

ROUSSEAU, DROIT

INTERNATIONAL PUBLIC

ROUSSEAU, DROIT INTERNATIONAL PUBLIC, TOME V: LES

RAPPORTS CONFLICTUELS, 170 (1983)

20

ARTICLES:

ABBREVATION NAME OF ARTICLE PAGE

NO.

Alexandrov &

Robbins, Proximate

Causation in

International

Investment Disputes

Stanimir A. Alexandrov & Joshua M. Robbins,

Proximate Causation in International Investment

Disputes, YEARBOOK ON INTERNATIONAL INVESTMENT

LAW AND POLICY 317, 339 (2009)

31

Burke-White & von

Staden, Investment

Protection in

Extraordinary Times

William W. Burke-White & Andreas von Staden,

Investment Protection in Extraordinary Times: The

Interpretation and Application of Non-Precluded

Measures Provisions in Bilateral Investment Treaties,

48(2) VIRGINIA JOURNAL OF INTERNATIONAL LAW 307,

309 (2008)

27

Devine, Status of

Rhodesia

Dermott J Devine, The Status of Rhodesia in

International Law, 1 Acta Judicia 154 (1973)

28

Jacob, International

Investment

Agreements and

Marc Jacob, International Investment Agreements and

Human Rights, INEF RESEARCH PAPER SERIES 10

(2010)

19


xi

Human Rights

Mac Gibbon, Estoppel

in International Law

Iain C. MacGibbon, Estoppel in International Law, 7(3)

THE INTERNATIONAL AND COMPARATIVE LAW

QUARTERLY 468, 470 (1958)

22

Mann, International

Investment

Agreements

Howard Mann, International Investment Agreements,

Business and Human Rights: Key Issues and

Opportunities, INTERNATIONAL INSTITUTE OF

SUSTAINABLE DEVELOPMENT BULLETIN 10 (2008)

19

Mummery, Duty to

Exhaust Local Judicial

Remedies

David R. Mummery, The Content of Duty to Exhaust

Local Judicial Remedies, 58(2) AMERICAN JOURNAL OF

INTERNATIONAL LAW 389, 400-401 (1964)

12

Schreuer, Consent to

Arbitration

Christoph Schreuer, Consent to Arbitration, in THE

OXFORD HANDBOOK OF INTERNATIONAL INVESTMENT

LAW, (Peter Muchlinski, Federico Ortino, and Christoph

Schreuer, eds., 2008)

11

Schreuer, Nationality

of Investors

Christoph Schreuer, Nationality of Investors: Legitimate

Restrictions vs. Business Interests, 24 (2) ICSID

REVIEW - FOREIGN INVESTMENT LAW JOURNAL 521-527

(2009)

5

Schreuer, Travelling

the BIT Route

Christoph Schreuer, Travelling the BIT Route: Of

Waiting Periods, Umbrella Clauses and Forks in the

Road, 5(2) JOURNAL OF WORLD INVESTMENT & TRADE

231, 238 (2004)

10

Sinclair, Estoppel and

Acquiescence

Ian Sinclair, Estoppel and Acquiescence, in FIFTY

YEARS OF THE INTERNATIONAL COURT OF JUSTICE:

ESSAYS IN HONOUR OF SIR ROBERT JENNINGS (Vaughan

Lowe & Malgosia Fitzmaurice Eds., Cambridge

University Press, 1996)

22

Wirth, The Legacy of Jessica Wirth, ‘Effective Means’ Means? The Legacy of 11


xii

Chevron v. Ecuador Chevron v. Ecuador, 52(1) Columbia Journal of

Transnational Law 325, 356 (2013)

MISCELLANEOUS AUTHORITIES:

ABBREVIATION NAME OF AUTHORITY PAGE

NO.

ARSIWA Articles on the Responsibility of States for

Internationally Wrongful Acts, G.A. Res. 56/83, art 2,

U.N. GAOR, 56th Sess., Supp. No. 49, U.N. Doc.

A/RES/56/83

28, 31

Commentary to Article

39 of ARSIWA

Commentary to Article 39 of the Articles on the

Responsibility of States for Internationally Wrongful

Acts, G.A. Res. 56/83, art 2, U.N. GAOR, 56th Sess.,

Supp. No. 49, U.N. Doc. A/RES/56/83

32

EU Guidelines on

Sanctions

Council of the European Union, Guidelines on

Implementation and Evaluation of Restrictive Measures

(Sanctions) in the Framework of the EU Common

Foreign and Security Policy, 15114/05 PESC 1084 FIN

475 (2 December 2005)

29

Hague Convention on

Nationality Law, 1930

League of Nations, Convention on Certain Questions

Relating to the Conflict of Nationality Law, 13 April

1930, League of Nations, Treaty Series, vol. 179, p. 89,

No. 4137.

6

John Dugard, Second

Report on Diplomatic

Protection (2001)

Special Rapporteur John Dugard, Second Report on

Diplomatic Protection, U.N. Doc. A/CN.4/514 (August

2001)

12

John Dugard, Second

Report on State

Responsibility

Special Rapporteur John Dugard, Second Report on

State Responsibility, U.N. Doc. A/CN.4/498 (July 1999)

20

John Dugard, Sixth Special Rapporteur John Dugard, Sixth Report on 20


xiii

Report on Diplomatic

Protection (2004)

Diplomatic Protection, U.N. Doc. A/CN.4/546 (August

2004)

OECD, Multilateral

Agreement on

Investment,

Commentary to the

Consolidated Text

Multilateral Agreement on Investment, Commentary to

the Consolidated Text, 41, OECD Doc.

DAFFE/MAI(98)8/REV1 (April 1998)

27

UNCTAD, The

Protection of National

Security in IIAs

The Protection of National Security in IIAs, UNCTAD

Series on International Investment Policies for

Development, UNCTAD/DIAE/IA/2008/5 (March

2009)

27

Williem Riphagen,

Third Report on the

Contents, Forms and

Degrees of State

Responsibility

Special Rapporteur Williem Riphagen, Third Report on

the Contents, Forms and Degrees of State

Responsibility, U.N. Doc. A/CN.4/354 (May 1982)

28

-LIST OF ABBREVIATIONS- TEAM PINTO

xiv

LIST OF ABBREVIATIONS

ABBREVIATION MEANING

ARSIWA Articles on State Responsibility for

Internationally Wrongful Acts

Eastasia BIT Agreement for the Promotion and Reciprocal

Protection of Investments between the

Republic of Oceania and the Republic of

Eastasia

Euroasia BIT The Agreement between the Republic of

Oceania and the Republic of Euroasia for the

Promotion and Reciprocal Protection of

Investments

ICJ International Court of Justice

ICSID International Center For Settlement Of

Investment Dispute

MFN Most Favoured Nation

OECD Organization for Economic Co-operation and

Development

PCA Permanent Court of Arbitration

PCIJ Permanent Court of International Justice

UN Charter Charter of the United Nations, 1945

UNCITRAL United Nations Commission on International

Trade Law

UNCTAD United Nations Conference on Trade and

Development

VCLT Vienna Convention on the Law of Treaties,

1969

-STATEMENT OF FACTS- TEAM PINTO

1

STATEMENT OF FACTS

1. On 1 January 1995, the Respondent, Republic of Oceania and the Republic of Euroasia

concluded the Agreement for the Promotion and Reciprocal Protection of Investments. On 1

January 1992, the Republic of Oceania and the Republic of Eastasia concluded the

Agreement for the Promotion and Reciprocal Protection of Investments.

THE INVESTMENT

2. In February 1998, the Claimant, Mr. Peter Explosive, a resident of Fairyland, who at the

time was a national of Eastasia, acquired shares in a decrepit company called Rocket Bombs

Ltd. located in Oceania and became its 100% shareholder. He also became the president and

sole member of the board of directors of the company. Rocket Bombs operated in the arms

industry and specialised in arms production. Before Peter Explosive acquired his shares,

Rocket Bombs had lost its environmental license containing an approval for arms

production.

THE ENVIRONMENTAL LICENSE AND GROWTH OF ROCKET BOMBS

3. In order to resume arms production, Rocket Bombs was obliged by the environmental law of

Oceania to obtain a license from the National Environment Authority of Oceania containing

an environmental approval for the commencement of arms production. To obtain such a

decision, Rocket Bombs was obliged to adjust its production line to the environmental

requirements contained in the Environment Act 1996. Peter Explosive met the President of

the National Environment Authority of Oceania. On 23 July 1998, the National Environment

Authority issued an environmental license approving the commencement of arms production

by Rocket Bombs.

4. Effective as of 1 January 1999, Peter Explosive entered into a contract with Euroasia for a

period of fifteen years with a possibility for renewal. Peter Explosive concluded numerous

contracts over the years. As the business became increasingly profitable, Peter Explosive

started to modernise the production line and to adjust it to the requirements set forth in the

Environment Act 1996.

THE REUNIFICATION AND PETER EXPLOSIVE’S NATIONALITY


2

5. The vast majority of people living in Fairyland are of Euroasian origin as historically it was

a part of the territory of Euroasia. The residents held a referendum and the majority decided

in favour of secession and reunification. Eastasia declared that the referendum was unlawful.

On 1 March 2014, the armed forces of Euroasia entered the territory of Fairyland. On 23

March 2014, Euroasia officially declared Fairyland a part of the Euroasian territory. A few

days later, on 28 March 2014, Eastasia declared the annexation to be illegal and in the light

of the public international law.

6. Prior to Fairyland’s annexation, on 1 March 2014 Euroasia introduced an amendment to its

Citizenship Act, which allowed all residents of Fairyland to apply for Euroasian nationality.

The Citizenship Act does not allow Euroasian nationals to possess dual nationality. On 23

March 2014, Euroasian authorities recognised Peter Explosive as a national of the Euroasia,

and he was subsequently issued a Euroasian identity card and passport. On 2 March 2014,

Peter Explosive sent an electronic e-mail to the President of the in which he declared the

renunciation of his Eastasian citizenship.

7. Before the Euroasian armed forces entered Fairyland, Peter Explosive on 28 February 2014,

concluded a fresh contract with Euroasia, effective of 1 April 2014, for a period of another

six years.

THE SANCTIONS

8. Oceania believed that the reunification of Fairyland with Euroasia was in contravention with

international law. On 1 May 2014 the President of the Republic of Oceania issued an

Executive Order on Blocking Property of Persons Contributing to the Situation in the

Republic of Eastasia. The Executive Order introduced a system of sanctions against the

persons engaged in certain sectors of the Euroasian economy. The sanctions were applied to

Rocket Bombs, as well as to Peter Explosive. The sanctions resulted in the deterioration of

Rocket Bombs’ business and in a rapid decrease in the value of its shares. Peter Explosive

was unable to sell the shares in the company to a third person. Simultaneously, all the

Oceanian companies that contracted with Rocket Bombs issued formal notices, declaring

that pursuant to the Executive Order they were no longer bound by the provisions of the

respective contracts and that they had no intention to perform them. Peter Explosive could

neither conduct the business, nor sell it.

CORRUPTION CHARGES


3

9. In 2013, the General Prosecutor’s Office of Oceania was conducting an investigation

regarding the corruption in the National Environment Authority of Oceania. On 1 February

2015, the President of the National Environment Authority, along with the other officials,

was convicted of accepting bribes. The President named a number of persons, including

Peter Explosive, from whom he allegedly received bribes. On 23 June 2015, the General

Prosecutor’s Office officially initiated criminal proceedings against Peter Explosive.

THE DISPUTE

10. Due to the effect of the sanctions imposed on Peter Explosive through the Executive Order,

Peter Explosive believes his investment has been expropriated. On 11 September 2015, he

filed a request for arbitration before the International Chamber of Commerce.

-ARGUMENTS- TEAM PINTO

4

ARGUMENTS

PART I- JURISDICTION & ADMISSIBILTY

I. THE TRIBUNAL HAS JURISDICTION RATIONAE PERSONAE AND RATIONAE

MATERIA OVER THE PRESENT MATTER

The Euroasia BIT is the lex specialis governing the relationship between the parties to the

dispute.1 Accordingly, it delimits the scope of the (A) Tribunal’s jurisdiction to claims

brought forward by persons who are investors under the Euroasia BIT, and (B) claims arising

out of investments under the Euroasia BIT.

A. Jurisdiction Rationae Personae

11. The Tribunal must exercise jurisdiction over the submitted claim because (i) the Claimant,

‘Peter Explosive’ is an investor pursuant to Article 1.2(a) of the Euroasia BIT. Further, the

Respondent’s objection that (ii) the Claimant’s Eastasian nationality must preclude the

claim, and (iii) recognition of the Claimant’s Euroasian nationality implies recognition of

the reunification of Fairyland with the Republic of Euroasia, is without merit.

i. The Claimant is an investor pursuant to Article 1.2(a) of the Euroasia BIT.

12. Article 1.2(a) of the Euroasia BIT provides:

“The term investor shall mean any natural or legal person of one Contracting Party who

invests in the territory of the other Contracting Party, and for the purpose of this

definition:

(a) the term natural person shall mean any natural person having the nationality of either

Contracting Party in accordance with its laws.”

The aforementioned article must be interpreted in a manner consistent with Article 31(1) of

the VCLT2 and Article 9(7) of the Euroasia BIT. Article 31(1) of the VCLT requires that the

terms of a treaty be given their ordinary meaning in light of its object and purpose. Article

9(7) requires that the Tribunal interpret the treaty in accordance with the applicable principles

of international law.

1 Serafín, ¶158.

2 Methanex, ¶22; Wintershall (Award), ¶¶78, 86–88.


5

13. In the present case, a plain reading of Article 1.2(a) of the Euroasia BIT requires the

application of substantive Euroasian laws to determine the Claimant’s nationality. This is

evidenced by the use of the phrase in accordance with its laws. In fact, Tribunals have

consistently held that where a treaty provides a clear definition of nationality the terms of

the BIT should prevail.3 Such an approach allows for greater certainty in the investment

climate. This is in furtherance of the object of the treaty, which is to promote investment by

ensuring a stable regulatory framework. Therefore, an interpretation consistent with Article

31(1) of the VCLT would require the Claimant to prove that he is a Euroasian national in

accordance with Euroasian laws.

14. The Claimant may prove his Euroasian nationality by satisfying the applicable standard of

proof. The standard governing burden of proof in the jurisdictional phase of investment

disputes requires that the Claimant establish a prima facie case of jurisdiction.4 The burden

of proof then shifts to the Respondent, who must conclusively disprove the Claimant’s

assertions.5 Where the Claimant’s assertions cannot be disproved, they are accepted pro tem

for the purposes of establishing jurisdiction.6

15. In the context of nationality claims, a certificate of nationality issued by the state is strong

evidence for the existence of the nationality of the state.7 Therefore, it should be sufficient to

establish a prima facie case of jurisdiction. This view is consistent with the holding of the

Plama Tribunal where the Claimant’s legal identity was used to prima facie establish his

nationality under Article 1(7) of the Energy Charter Treaty.

16. On 1 March 2014, the Republic of Euroasia introduced an amendment to its Citizenship

Act.8 The amendment allows for residents of Fairyland to apply for Euroasian nationality.

9

Subsequent to the amendment, the Claimant, a resident of Fairyland, applied to become a

Euroasian national. On 23 March 2014, Euroasian authorities processed his application and

3 Micula, ¶101.

4 Oil Platforms Case, ¶ 32-34; Impregilo, ¶239; Pan American, ¶; Bayindir, ¶195-196; Telenor, ¶68.

5 Chevron, ¶112; Khosrowshahi, ¶40, 45.

6 Chevron, ¶112.

7 Christoph Schreuer, Nationality of Investors.

8 Procedural Order No. 2, Page 56, ¶2.



6

recognized the Claimant as a national of the Republic of Euroasia.10

The authorities issued

him a Euroasian identity card and passport as proof of his nationality. The documents help

establish a prima facie case of jurisdiction. The burden on the Respondent is to conclusively

disprove the validity of the Claimant’s nationality.

17. In this regard, it is submitted that even if it is acceded that the Claimant is an Eastasian

national, there is still no conclusive proof that he is not a Euroasian national. This is because

the non recognition of dual nationality by the Republic of Euroasia11

does not necessarily

mean the automatic loss of his nationality. State practice indicates that renunciation

procedures vary from State to State.12

For instance, several States that do not permit dual

nationals don’t denationalize citizens having multiple passports.13

Instead, they simply don’t

recognize the second nationality.14

Therefore, the Respondent cannot conclusively discharge

his burden and the Claimant must be recognized as a Euroasian national.

18. With respect to the application of Article 9(7) of the Euroasia BIT, it is submitted that there

exist no substantive positive laws governing the grant of nationality by States. Nationality

laws fall within the sole competence of States. That is, apart from treaty limits, there are no

codification standards that these laws must adhere to.15

Therefore, Article 9(7) of the

Euroasia BIT does not introduce any requirements outside of those prescribed in Article

1.2(a) of the Euroasia BIT.

19. In any case, the only implied requirement that may be introduced is the requirement to act in

good faith. Tribunals have only ever held investors liable for having acquired nationality in

bad faith in the context of nationality planning. That is, if the (i) dispute was foreseeable16

,

10

Procedural Order No. 2, Page 56, ¶2.


12 Article 9 of the Constitution of India, 1950; Article 66 of the Turkish Constitution, Law 403 of the Turkish

Citizenship Law of 1964; Article 11 of the Nationality Act of May 4, 1950; Argentine Citizenship Law #346;

The Nationality Law of the People's Republic of China, 1980.

13Constitution of the Republic of Poland, 22 July 1952; Polish Citizenship Act, 15 Feb. 1962; Civil Code of the

Islamic Republic of Iran, 23 May 1928, Article 977;Law on the Citizenship of the Republic of Indonesia, Law

No. 62 of 1958.

14 Constitution of the Republic of Poland, 22 July 1952; Polish Citizenship Act, 15 Feb. 1962; Civil Code of the

Islamic Republic of Iran, 23 May 1928, Article 977;Law on the Citizenship of the Republic of Indonesia, Law

No. 62 of 1958.

15Hague Convention on Nationality Law, 1930; Nationality Decrees Case.

16 Phoenix Action, ¶¶136-139.


7

or (ii) the dispute had already arisen17

. In the present case, the Claimant acquired his

Euroasian nationality on 23 March 2014. The dispute has arisen as a consequence of the

promulgation of the Executive Order dated 1 May 2014. The dispute had not (i) arisen, and

(ii) promulgation of executive order by Respondent State was not foreseeable. Therefore, the

Claimant has acquired Euroasian nationality in good faith.

ii. The Claimant’s Eastasian Nationality doesn’t preclude the Tribunal’s jurisdiction.

20. The status of the Claimant’s Eastasian nationality is irrelevant so long as he acquired

Euroasian nationality in accordance with Euroasian laws. In this regard, the Claimant

submits that (i) the test of effective and dominant nationality does not apply of the present

claim. In Arguendo, it shall be submitted that (ii) the Claimant’s Euroasian nationality is his

effective and dominant nationality.

21. A reading in accordance with Article 31(1) of the VCLT does not envisage the application

of the effective and dominant nationality test to determine whether a dual national may bring

a claim against a Contracting Party. Where a treaty does not impose express limitation on

dual nationals, the Tribunal must not devoid of effect a nationality granted freely by a State

and accept as valid the nationality accorded by another.18

Further, the test of effective and

dominant nationality may be applied only if a plain reading of Article 1.2(a) leads to a

‘manifestly unreasonable result’19

. The Tribunal may not deprive the Claimant of his

Euroasian nationality because the terms of Article 1.2(a) of the Euroasia BIT do not restrict

dual nationals from bringing claims, and recognition of his Euroasian nationality does not

lead to a manifestly unreasonable result.

22. Arguendo, if it is found that the test of effective and dominant nationality applies to the

present claim, it is submitted that the Claimant’s effective and dominant nationality is

Euroasian. In arriving at this determination the Tribunal must consider all relevant factors

that are evidence of attachment.20

The period for making the determination is the time

between the date the claim arose and the signing of the BIT.21

In the present matter, the

17

Pac Rim Cayman, ¶2.96.

18 Serafín.

19 Serafin¶200.

20 Dual Nationality Case, ¶251; Malek, ¶14.

21 Dual Nationality Case.


8

Claimant’s (a) acquisition of Euroasian nationality on 23 March 2014, (b) cultural ties with

the Republic of Euroasia22

, (c) Euroasian descent23

, and (d) declaration of renunciation of

Eastasian nationality are all strong evidence of his attachment.24

Therefore, his effective and

dominant nationality is his Euroasian nationality.

iii. Recognition of the Claimant’s Euroasian nationality does not imply recognition of the

reunification of Fairyland with the Republic of Euroasia.

23. The obligation of non-recognition prevents States from validity the acts of an occupying

power.25

However, the Namibia exception allows recognition of such acts where it aims to

prevent detriment to the inhabitants of the occupied territory.26

If an act falls within the

scope of the Namibia exception, it must then be determined whether effect of the act would

survive transition into a legal regime.27

24. In this regard, the Claimant submits that (a) the obligation of non recognition does not

extend to situations wherein a State doesn’t act on behalf of the individual, (b) the non-

recognition of his nationality for the purposes of investment arbitration would amount to

investor detriment. And, (c) the grant of nationality by the Republic of Euroasia would

survive the transition from the alleged illegal regime to legal one.

25. For the purposes of investment arbitration, the Republic of Euroasia does not purport to act

on behalf on the Claimant. This is evidenced by the fact that, (a) the Claimant need not take

the Republic of Euroasia’s permission to proceed against the Respondent, (b) the

compensation claimed is not directed towards the Republic of Euroasia. Further, non-

recognition would adversely affect the Claimant’s right to redressal. It is in order to prevent

this specific detriment that his Euroasian nationality must be recognized by the Tribunal.

Finally, the grant of his Euroasian nationality would survive the transition of Fairyland from

being an Euroasian territory to an Eastasian territory. This is because the nationality grant

was made by way of application and not by reason of the occupation.

22

Statement of Uncontested Facts, Page 35, ¶14.

23 Statement of Uncontested Facts, Page 35, ¶ 14.


25 Judge Onyeama, Namibia Advisory Opinion.

26 RONEN, TRANSITION FROM ILLEGAL REGIMES UNDER INTERNATIONAL LAW, 188.

27 RONEN, TRANSITION FROM ILLEGAL REGIMES UNDER INTERNATIONAL LAW, 190.


9

Therefore, it is submitted that the Claimant is an investor pursuant to Article 1.2(a) of the

Euroasia BIT.

B. Jurisdiction Rationae Materia

26. The Tribunal must exercise jurisdiction over the submitted claim because it is a (i) dispute

arising out of an (ii) investment as prescribed in Article 1.1 of the Euroasia BIT.

27. A legal dispute is a disagreement about the legal rights or obligations that have arisen

between parties. 28

In the present case, the Claimant has based his claim on legal rights

granted to him under the Euroasia BIT. That is, the right to compensation pursuant to an

expropriatory measure taken under Article 4 of the Euroasia BIT. Hence, the submitted

claim is a legal dispute.

28. Article 1.1(b) of the Euroasia BIT classifies shares of companies as an investment protected

by the Euroasia BIT. The Claimant has alleged expropriation by virtue of devaluation of his

shares in ‘Rocket Bombs Ltd.’29

Therefore, the Tribunal has jurisdiction rationae materia in

the present matter.

II. Claimant was not required to comply with the pre-arbitral steps as provided in the

Article 9 of the Euroasia BIT prior to bringing his claims before the Tribunal;

A. Article 9 of the Euroasia BIT does not preclude the Claimant from invoking the

Tribunal’s Jurisdiction.

29. The Contracting States have consented to submit to the jurisdiction of the tribunal as per the

provisions of Article 9 of the Euroasia BIT. The provision prescribes two pre-conditions to

consent to arbitrate, (i) that disputes arising out of the Euroasia BIT “… shall, to the extent

possible, be settled in amicable consultations”30

; (ii) that if a dispute cannot be settled

amicably, it “...may be submitted to the competent judicial or administrative courts of the

Contracting Party” .31

28

Suez, ¶¶ 34,37.

29 Request for Arbitration, Page 5 of the Record.

30 Article 9(1) of the Euroasia BIT.

31 Article 9(2) of the Euroasia BIT.


10

30. (i) The obligation to amicably settle a dispute has been complied with if it is shown that, (a)

the opportunity to engage in consultation was offered32

, or (b) consultations were not

possible33

. The Claimant notified the relevant Oceanian authorities of his willingness to

engage in negotiation.34

The notification also stated the Claimant’s intention to initiate

arbitral proceedings if the Respondent failed to negotiate. As of the date of filing the

Request of Arbitration, the Respondent had not responded to the request for negotiation.35

Since (a) the opportunity to negotiate was offered, and (b) non-receipt of response made

consultations impossible, the first procedural requirement has been complied with.

31. (ii) Futility of local remedies is an exception to submitting a dispute to domestic courts.36

The exception finds support in both, case-law37

, and academia38

. Hence, Article 9(2) of the

Eurasia BIT need not be complied with if it is shown that recourse to domestic courts would

be futile. Accordingly, the Claimant shall (a) establish the appropriate threshold of futility,

and (b) apply the same to the facts of the present claim.

Threshold of Futility a.

32. The Ambiente Tribunal placed reliance on the standard articulated by Article 15(a) of the

2006 ILC Draft Articles on Diplomatic Protection.39

It provides that local remedies need not

be exhausted where i) they do not provide effective redress, or ii) they provide no reasonable

possibility of such redress.40

The Tribunal reasoned that the standard was justified because

alternative thresholds impose too heavy a burden, or are too generous towards Claimants.41

Additionally, it was stated that since the dispute settlement procedure prescribed was not a

32

Ambiente, ¶ 583.

33 Ambiente, ¶ 583.



36 Giovanni, ¶ 311.

37 Daimler, ¶ 198; BG Group, ¶ 146; Saipem v. Bangladesh, ¶ 153.

38 Schreuer, Travelling the BIT Route.



41 ILC Draft Articles on Diplomatic Protection, Commentary, Art. 15, nr. 3.


11

traditional exhaustion of local remedies requirement, the threshold could not be higher than

in the context of diplomatic protection.42

33. The Claimant submits that the aforementioned test is the appropriate threshold because, i)

the reasoning of the Tribunal finds support in multiple case-law43

, and ii) similar to the

dispute settlement procedure in the Ambiente case, Article 9 of the Euroasia BIT is not an

exhaustion of local remedies provision. Unlike traditional exhaustion of local remedies

provisions it provides only for temporary recourse to domestic courts, and allows parties to

refer a case to arbitration whether or not a domestic court decision has been rendered.44

Moreover, the approach is entirely consistent with the central purpose of investment

treaties.45

Application of Threshold b.

No Effective Redress

34. The Interhandel46

Tribunal reasoned that the rule requiring an exhaustion of domestic

remedies is founded on the principle that the Respondent State must have an opportunity to

redress an alleged wrong within the framework of its own legal system. Where there exists

no framework for the redressal of grievance, the Respondent’s insistence that the dispute be

submitted to domestic courts cannot be reasoned. Insofar as i) the executive order creates no

substantive or procedural rights in favour of the blocked person47

, and ii) domestic courts do

not have the jurisdiction to hear treaty based claims48

, there exists no framework to

effectively redress the Claimant’s grievance.

35. Additionally, it is submitted that a challenge to the constitutional validity of the Executive

Order is not an effective remedy.49

No Reasonable Possibility of Redress

42

Ambiente, ¶ 611.

43 Biwater, ¶ 343; Saipem v. Bangladesh, ¶ 153.

44 Maffezini (Decision on Jurisdiction), ¶ 57; Schreuer, Consent to Arbitration, Page 847.

45 DUGAN, ET.AL, INVESTOR STATE ARBITRATION.

46 Interhandel Case, ¶ 27.

47 Section 9 of the Executive Order.

48 Procedural Order No. 3, Page 60, ¶ ¶ 5-6.

49 Wirth, The Legacy of Chevron v. Ecuador


12

36. The reasonability of a remedy is affected by any conditions relating to the exercise of the

local remedy. 50

This requires the Tribunal to take a realistic view of domestic judicial

systems.51

There must be a real chance in practice that domestic courts can address the

issue.52

Accordingly, where there is an adverse line of precedence against the investor, it

cannot be said that there is a reasonable possibility of redress.53

The Respondent State’s

historic deference to the executive branch, and extreme length of the process, make it

unlikely that there is a reasonable possibility of redress in the present dispute.54

Therefore, a

challenge to the constitutional validity of the Executive Order is not a reasonably available

remedy.

37. Additionally, it is submitted that as per Article 9(2) of the Euroasia BIT, the remedies to be

exhausted are limited to remedies provided by judicial or administrative courts. It does

require an investor to exhaust an administrative remedy. Requests for reconsideration of

blocked status are made to the President of the Republic of Oceania. Therefore, it is an

administrative remedy not falling within the ambit of Article 9(2) of the Euroasia BIT.

38. In view of the above submissions, the Tribunal must hold that the Claimant may access the

dispute settlement mechanism of the Euroasia BIT.

III. The Claimant may invoke Article 8 of the Eastasia BIT pursuant to Article 3 of the

Euroasia BIT.

39. Article 9 of the Euroasia BIT allows the Respondent's domestic courts to try a dispute for a

period of twenty four months before it is submitted to arbitration. However, Article 8 of the

Eastasia BIT imposes no such condition. It merely provides that an investor may opt for

arbitration after the six month period prescribed for amicable consultation has expired. The

requirement of having to submit a claim before a domestic court leads to Euroasian investors

being treated less favourably than Eastasian investors in the Respondent State.

50

Loewen, ¶ 169.

51 ELSI, ¶ ¶ 42-48; David R. Mummery, The Content of Duty to Exhaust Local Judicial Remedies, 58(2)

American Journal of International Law 389, 400-401 (1964).

52 Abaclat, ¶ ¶ 581-582.

53 John Dugard, Second Report on Diplomatic Protection (2001).

54 Procedural Order No. 3, Page 60, ¶ 6.


13

40. In this regard, it is contended that Article 3(1) of the Euroasia BIT is a commitment by the

Respondent to extend MFN treatment to Euroasian investors. Hence, the Tribunal must

extend procedural protections provided under Article 8 of the Eastasia BIT to the Claimant.

41. The criteria to determine whether the dispute settlement procedure prescribed under Article

8 of the Eastasia BIT prompts the application of the MFN clause is found in Article 3(1) of

the Euroasia BIT. Article 3(1) of the MFN clause promises to:

“… within its own territory, accord to investments made by investors of [Euroasia], to

the income and activities related to such investments and to such other investment

matters regulated by this Agreement, a treatment that is no less favourable than that

accorded to its own investors or investors from third-party countries.”55

42. A plain reading of Article 3(1) suggests four pre-conditions for the application of the MFN

clause: (A) Application of the MFN clause must extend to dispute settlement mechanisms;

(B)Application of the MFN clause must extend to treatment within Oceanian territory;(C)

Less favourable treatment must be accorded to Euroasian investors as opposed to investors

from third party countries; and (D)Application must not override any public policy

considerations the Republic of Euroasia and Respondent’s may have had.

A. The MFN clause extends to access to dispute settlement mechanisms.

43. Notwithstanding the fact that Article 3 of the Euroasia BIT does not make explicit reference

to dispute settlement, the Tribunal must conclude the same if it is shown that, access to

dispute settlement mechanisms is an investment related activity (i), and the term treatment

refers to both, substantive and procedural treatment (ii). In arriving at these conclusions, the

Claimant shall interpret the ordinary meaning of the words of the MFN clause, and be

guided by the purpose of the Treaty as expressed in its title and preamble.56

That is, the

promotion and protection of investments. 57

44. (i) Article 2(3) of the Euroasia BIT defines activities related to investment as “activity of

investors...with regard to investments, such as in particular management, maintenance, use,

enjoyment or disposal of such investments.” Further, Tribunals have also held that the

ordinary meaning of the term “activities related to investment” in the context of investment

55

Article 3(1) of the Euroasia BIT.

56 Suez, ¶ 54.

57 Siemens, ¶ 81.


14

arbitration is, “the management, utilization, use and enjoyment of an investment.”58

The

management of investment includes the exercise of an investor’s right of action to solve an

investment claim.59

Accordingly, recourse to dispute settlement is an aspect of management

of the investment.

45. In fact, Tribunals have consistently found that “activities related to the investments” is a

term of wide import and includes dispute settlement.60

They have reasoned that the

procedural right to enforce a substantive right is essential to the enjoyment of the investment

.61

Therefore, Article 3(1) of the Euroasia BIT extends to access to dispute settlement

mechanisms.

46. In any case, Article 3(1) includes within its ambit, “such other investment matters regulated

by this Agreement.” Because the term “such” is preceded by “activities related to

investments” it is unambiguously inclusive of matters corollary to investment related

activities. The term “matters,” is broad and general.62

This indicates that the application of

the MFN treatment extends to a larger category of activities than just “investment related

activities.” The only qualification prescribed is that the matter must be regulated by the BIT.

47. Dispute settlement is a matter regulated by the Euroasia BIT. Not only does Article 9 of the

Euroasia BIT prescribe the procedure for the settlement of disputes, the preamble

categorically recognizes the importance of enforcing rights through international

arbitration.63

Therefore, MFN treatment under Article 3(1) may be extended to access to

dispute settlement mechanisms.

48. (ii) The ordinary meaning of the term “treatment” in the context of investment is, “the rights

and privileges granted, and the obligations and burdens imposed by a Contracting State on

58

Hochtief, ¶ 66.

59 Hochtief, ¶ 66.

60 Siemens, ¶ 103.

61 Hochtief, ¶ 66.

62 Teinver, ¶ 160.

63 Preamble, Euroasia BIT.


15

investments made by investors covered by the treaty.”64

The definition is illustrative of the

wide import of the term and necessarily covers substantive and procedural treatment.65

49. Indeed, there can be no basis for distinguishing dispute settlement matters from any other

matters covered by the Euroasia BIT. From the point of view of the promotion and

protection of investments, the stated purposes of the Euroasia BIT, dispute settlement is as

important as other matters governed by the BIT.66

In fact, Tribunals have often recognized

international arbitration as closely linked to the material aspects of the treatment

accorded.”67

Therefore, so long as access to dispute settlement mechanisms is part of the

protection offered under the BIT, it is “treatment” as envisaged under Article 3(1) of the

Euroasia BIT.68

50. In the alternative that the Tribunal finds that the term “treatment” covers only substantive

rights, it is submitted that a right to remedy is a substantive right.69

Hence, it falls within the

definition of treatment as per Article 3(1) of the Euroasia BIT.

B. Access to international arbitration is treatment accorded within the Respondent State’s

territory.

51. Article 3(1) of the Euroasia BIT prescribes that the MFN clause applies to treatment

accorded within the Respondent State’s territory. Tribunals have interpreted the term “within

its own territory” to imply the location of the consequences or the effects of the treatment.70

Access to international arbitration has a direct bearing on the Claimant’s investment in the

Respondent State. Accordingly, the phrase “in its territory” does not impose a territorial

limitation on the applicability of the MFN clause.

52. Arguendo, the treatment of which the Claimant complains is the 24 month waiting period

prescribed under Article 9(3) of the Euroasia BIT. The Claimant seeks to invoke Article 8 of

the Eastasia BIT to avoid being subjected to the jurisdiction of Oceanian domestic courts.

64

Suez, ¶ 55.

65 Alpha Projektholding, ¶

66 Suez, ¶ 57; Hochtief, ¶ 67.

67 Suez, ¶ 60.

68 Siemens, ¶102.

69 Concurring opinion of Arthur W. Rovine. Issues of Independent Investor Rights, Diplomatic Protection and

Countermeasures, paras 5, 49, 82.

70 Hochtief, ¶ 109.


16

Since requirement of reference to domestic courts is treatment accorded within the

Respondent’s territory, the MFN clause does not have the effect of limiting access to dispute

settlement mechanisms.

C. Respondent accords Eastasian investors more favourable dispute treatment than

Euroasian investors in its territory.

53. The Claimant submits that Article 9(3) of the Euroasia BIT is a less favourable dispute

settlement mechanism for the following reasons, it deprives Euroasian investors of the

choice to approach an international arbitral tribunal (i), and it only serves to delay the

submission of a dispute to an arbitral tribunal (ii).

54. (i) Tribunals have held that regardless of the substantive merits of litigation, the choice to

approach an arbitral tribunal is more favourable than not having that choice.71

The Claimant

submits that insofar as Article 9(3) of the Euroasia BIT deprives Euroasian investors of the

option to approach international arbitral Tribunal it accords less favourable treatment than

that accorded to Eastasian investors.

55. (ii) Tribunals have consistently rejected objections to jurisdiction demanding application to

domestic courts when reference can be shown to be futile.72

Such a reference would only

serve to delay arbitral proceedings and impose unnecessary expenses on investors. In the

present case, findings under the Executive Order that the Claimant is aggrieved by may not

be challenged in domestic courts. Therefore, insistence on reference to domestic courts is

evidently futile, and amounts to according less favourable treatment to Euroasian investors

by the Respondent State.

D. Application of MFN clause does not override any public policy considerations the

Contracting Parties may have had.

56. As a matter of principle, investors should not be able to override public policy

considerations that contracting parties might have envisioned as fundamental to their

acceptance of the agreement.73

Such policy considerations serve to limit the application of

71

Hochtief, ¶ 100.

72 Finnish Vessels in Great Britain During the War.

73 Maffezini (Decision on Jurisdiction), ¶ 62.


17

an MFN clause. The Maffezini Tribunal recognizes one such limitation as the application of

an MFN clause to expand jurisdiction rationae materia.74

57. Reliance on Article 3(1) of the Euroasia BIT to bypass procedural requirements prescribed

under Article 9 of the Euroasia BIT has no effect on the scope of the Tribunal’s jurisdiction.

This is because reference to domestic courts does not give rise to a new right to arbitrate. It

simply prescribes the manner in which an existing right to arbitrate may be exercised.75

Therefore, extending MFN treatment to dispute settlement does not bring cases that could

not eventually be brought before the Tribunal within its jurisdiction.

58. This holds true because Article 9(3) permits the reference of a case to international

arbitration (i) whether or not a domestic court decision has been rendered, and (ii) regardless

of its outcome.

59. To explain this further, Article 9(3) of the Euroasia BIT provides that:

“Where, after twenty four months from the date of the notice on the commencement

of proceedings before the courts mentioned in ¶graph 2 above, the dispute between

an investor and one of the Contracting Parties has not been resolved, it may be

referred to international arbitration.”

60. A plain reading of the clause indicates that regardless of an adjudication by domestic courts,

the case may be referred to arbitration provided a dispute has not been resolved. The clause

prescribes no guidelines for deciding under what circumstances a dispute may be deemed

not resolved. Tribunals have opined that the absence of objective criteria for such

determination leaves parties free to decide whether they wish to submit their claim to

international arbitration.76

Clearly, it is not an exhaustion of remedies provision in the

“traditional sense” and bypassing it has no effect on the scope of the Tribunal’s jurisdiction.

Accordingly, the application of Article 3 of the Euroasia BIT does not override any public

policy consideration the Contracting Parties may have had.

61. Therefore, the Tribunal must extend dispute settlement mechanism prescribed in Article 8 of

the Eastasia BIT to the Claimant.

74

Maffezini (Decision on Jurisdiction), ¶ 63.

75 Hochtief, ¶ 90.

76 Maffezini (Decision on Jurisdiction), ¶ 32.


18

IV. The Claimant made a protected investment, especially in light of the “clean hands”

doctrine with reference to Article 1.1 of the Eastasia BIT.

62. The Respondent has alleged that the Claimant has behaved in a manner inconsistent with its

laws while acquiring the environmental license necessary to commence arms production.77

In light of this allegation, the Respondent has contended that the ‘clean hands’ clause

present in the Eastasia BIT will operate to deprive the Claimant of the protection granted to

him under the Euroasia BIT.78

63. The Claimant submits that he made a protected investment under the Euroasia BIT. He may

not be deprived of the protection of the treaty on allegations of unclean hands because, (A)

There is no clean hands requirement present in the Euroasia BIT, and such requirement may

not be imported from the Eastasia BIT, (B) No such requirement can be read into the treaty,

(C) The clean hands doctrine is not a general principle of international law and therefore

may not be applied in the present case, (D) Even if the doctrine is held to be applicable to

the present case, such application is restricted to the initiation of investment, and (E) Even if

the principle of clean hands extends to performance of investment, the Respondent is

estopped from invoking the same.

A. No clean hands requirement from the Eastasia BIT may be imported into the Euroasia

BIT.

64. Article 1.1 of the Eastasia BIT provides that for an investment to be protected under the BIT,

it has to be made ‘in accordance with the laws and regulations’ of the host state. It seems to

be the Respondent’s contention that in order to be able to access the dispute resolution

clause in the Eastasia BIT via the MFN clause, the investment must adhere to the definition

of investment in the Eastasia BIT itself.

65. The Claimant contends that the invocation of the MFN clause in the Euroasia BIT to access

the dispute resolution clause in the Eastasia BIT does not attract the definition of investment

as present in the Eastasia BIT. In order for an investment to be protected, the only criterion it

must fulfil is that of being considered as a protected investment under the basic treaty

(Euroasia BIT) and not the comparator treaty ( Eastasia BIT). Article 1.1 of the Euroasia

77

Answer to Request for Arbitration, Page 15-16.

78 Answer to Request for Arbitration, Page 15.


19

BIT merely states that “the term investment comprises every kind of asset directly or

indirectly invested by an investor of one Contracting Party in the territory of the other

Contracting Party.” It is evident that there is no requirement for an investment to be made in

accordance with the laws of the host state. Each treaty defines what it considers a protected

investment and who is entitled to that protection, and definitions can change from treaty to

treaty.79

The MFN clause applies only to the treatment accorded to such defined investment,

but not to the definition of ‘investment’ itself.80

66. Therefore, no ‘in accordance with laws’ provision in the Eastasia BIT may be imported and

considered as a pre-requisite for successfully invoking the MFN clause in the Euroasia BIT.

B. No requirement of clean hands may be read into the Euroasia BIT.

i. The preamble cannot create a substantive obligation

67. The Euroasia BIT does not contain any specific provision requiring an investment to be

made in accordance with the laws of the host state. Further, no such obligation may be

inferred from the text of the treaty. The statement in the preamble ‘Desiring to achieve these

objectives in a manner consistent with the protection of health, safety and the environment’

cannot be construed as an obligation on the investor to make an investment in accordance

with the laws of the host state. Since it cannot be construed as an obligation, it does not

operate as a precondition for an investment to be protected under the BIT.

68. The preamble does not have the same weight as a substantive provision.81

Reference in the

preamble may be relevant for matters of treaty interpretation, but will not create any

substantive obligations for the investors.82

As stated by the NAFTA ADF Tribunal, such

general provisions stating the object and purpose of a treaty may frequently cast light on a

specific interpretive issue. They are however not to be regarded as being able to override and

supersede the text.83

79

Vannessa Ventures, ¶125.

80 Société Générale, ¶ 41; MCI ¶40; Tecmed, ¶ 53.

81 Jacob, International Investment Agreements and Human Rights.

82 Mann, International Investment Agreements.

83 ADF, ¶147.


20

69. In the present case, reading in a clean hands requirement in the preamble would mean

deriving a substantive obligation on the investor to make his investment in a particular

manner in order to avail the protection guaranteed by the treaty. Further, since no

requirement of clean hands is contained in the definition of investment itself, interpreting the

preamble so as to restrict the application of the treaty itself would be to interpret it in a

manner that would allow it to supersede the text of the treaty. Therefore, no clean hands

requirement may be read into the treaty.

ii. In the alternative, the preamble only imposes obligations on the Contracting-Parties,

and not on the investors.

70. The wording of the preamble is such that all aspects outlined therein are reciprocal

acknowledgments of obligations of the Contracting Parties as host states. The preamble

begins with- “The Republic of Oceania and the Republic of Euroasia…”and then goes on to

highlight the objectives of the treaty that the Contracting Parties aim to further. It places

emphasis on the necessity of cooperation between the States in furtherance of protection of

investor interests and not on investor conduct or investor obligations. Therefore, no

obligation on the investor can be derived from the preamble.

C. The clean hands doctrine is not a general principle of international and therefore has no

application in the present case.

71. Neither the PCIJ nor the ICJ has ever endorsed clean hands as a general principle of

international law in a majority opinion. Majority of the scholars in international law reject

clean hands as being a general principle.84

In the case of Guyana v. Suriname, the Tribunal

held “The ICJ has on numerous occasions declined to consider the application of the

doctrine, and has never relied on it to bar admissibility of a claim or recovery.” 85

In the

field of investment arbitration, the Tribunals in Niko Resources and Yukos (Final Award)

have refused to recognize clean hands as a general principle. 86

Moreover, investment

tribunals that have stated that clean hands is a part of general principles of international law

84

John Dugard, Sixth Report on Diplomatic Protection (2004); ROUSSEAU, DROIT INTERNATIONAL PUBLIC; John

Dugard, Second Report on State Responsibility.

85 Guyana ¶120.

86 Yukos (Final Award) ¶157.


21

have all done so in obiter and have always relied on express provisions in the concerned

BITs to impose a clean hands requirement. 87

72. Therefore, since the application of the clean hands doctrine has been sparse and inconsistent,

it cannot be considered as a general principle of international law. Since it is not a general

principle of international law, it finds no application in the present case.

D. Even if the Tribunal is of the opinion that the clean hands doctrine is applicable in the

instant case, its applicability is restricted to the initiation of investment.

73. The Claimant contends that the scope of application of the clean hands doctrine is restricted

to the initiation of investment. This is reflected in the opinions of tribunals in cases where

treaty provisions expressly require compliance with host state laws, 88

and cases where such

requirement has been read into a treaty. 89

The rationale for such a view was expounded in

the Yukos (Final Award) case where the Tribunal opined -

“There is no compelling reason to deny altogether the right to invoke the Energy

Charter Treaty to any investor who has breached the law of the host State in the

course of its investment. If the investor acts illegally, the host state can request it to

correct its behavior and impose upon it sanctions available under domestic law.”90

74. In the present case, if the Claimant is found guilty as per the Respondent’s laws, fines or

penalties as is seen fit may be imposed. The innocence or guilt of the accused should have

no bearing on determining if the Claimant can make his case before this Tribunal on merits.

75. There is nothing in international law, or practice in investment arbitration to indicate that

clean hands as a principle must extend to performance of the investment. In the present case,

the Claimant’s conduct is being questioned with regards to the acquisition of the

environmental license.91

That act is distinct from the initial investment made by the

Claimant. The initiation of the investment was at the time when the Claimant purchased

shares in Rocket Bombs Ltd.92

87

Plama, ¶120; Phoenix Action, ¶140; Gustav v. Ghana, ¶87; Inceysa, ¶90.

88 Saba Fakes, ¶38 ;Alasdair, ¶50 ;Inceysa, ¶75 .

89 Plama, ¶56; Yukos (Final Award), ¶¶ 1354-1352.

90 Yukos (Final Award), ¶ 1355.

91 Answer to Request for Arbitration, Page 15.

92 Statement of Uncontested Facts, Page 32 of the Record.


22

76. In the absence of apposite authority to indicate that clean hands doctrine extends to

performance of investment, the Claimant’s alleged illegal conduct is irrelevant to determine

if his investment is protected under the BIT. Since the only relevant consideration for

applicability of clean hands is conduct at the time of investment and there is no question of

illegality at that time, the clean hands doctrine has no role to play in the present case.

E. Even if the principle of clean hands extends to performance of investment, the

Respondent is estopped from invoking the same.

77. Estoppel is a general principle of international law.93

The principle’s essence is that a State

must not be permitted to benefit from its own inconsistency to the prejudice of another

State.94

The same principle may be extended to investors. In the present case, the President

of the National Environmental Authority himself was involved in the corruption that the

Claimant is being accused of.95

78. Further, from the date of issue of the license to the date of initiation of prosecution against

the Claimant, fifteen years have lapsed.96

During this period, the Environmental Authority

had the power to unexpectedly and randomly visit the arms production site in order to verify

whether it complies with the requirements set under the Environment Act 1996. If the arms

production site did not comply with the requirements, the environmental license is

revoked.97

This implies one of two things: one, the Authority willfully did not go on checks

or, two, they went on checks and did not report the violation. In both the scenarios, the

Respondent may be deemed to have acted in a manner so as to condone the act of the

Claimant. Further, it is pertinent to note that the Claimant is being prosecuted in Oceania on

corruption charges.98

79. The Respondent must not be allowed to take advantage of its own wrong and invoke the

clean hands doctrine against the Claimant to deprive him of protection under the Euroasia

BIT.

93

LAUTERPACHT, THE DEVELOPMENT OF INTERNATIONAL LAW; MacGibbon, Estoppel in International Law;

Sinclair, Estoppel and Acquiescence.

94 Temple of Preah Vihear, ¶ ¶ 39–40



97 Procedural Order No. 3, Page 59 of the Record.



23

80. In light of the above arguments, the Claimant’s investment is a protected investment under

the Euroasia BIT. The Tribunal must thus go on to consider the issue of expropriation of the

investment.


24

PART II - MERITS

V. The Claimant’s investment was expropriated by the Respondent.

81. The Respondent unlawfully expropriated the Claimant’s investment by imposing sanctions

against the Claimant and the Claimant’s company, Rocket Bombs Ltd.99

In this regard, the

Claimant contends that, (A) His investment has been expropriated for no discernible public

purpose and it is therefore unlawful. Further, (B) The Respondent’s measure is not justified

under Article 10 of the Euroasia BIT, and (C) Full reparation must be made to the Claimant

for losses suffered.

A. The Respondent has unlawfully expropriated the Claimant’s investment.

82. The Claimant submits that, (i) The Respondent’s measure has resulted in the indirect

expropriation of his investment, and (ii) The measure cannot be justified on the ground that

it was carried out for a public purpose.

i. The Claimant’s investment was indirectly expropriated.

83. Article 4 of the Euroasia BIT covers direct and indirect expropriation. It states, “Investments

by investors of either Contracting Party may not directly or indirectly be expropriated…”

Indirect expropriation includes a situation wherein the host state interferes with the usage of

property which has the effect of depriving the owner in whole or in significant part, of the

use or economic benefit of such property.100

84. In the present case, the Executive Order resulted in the reduction in the value of shares of

Rocket Bombs to almost nil. The Claimant was also unable to sell his shares in the company.

All contracts with entities operating in the territory of the Respondent State were terminated.

The sanctions caused a complete standstill in arms production, as all suppliers of Rocket

Bombs Ltd were operating within the territory of the Respondent state. As a result, Rocket

Bombs Ltd has been unable to meet any of its contractual obligations towards entities from

outside of the Respondent state.101

.

99

Statement of Uncontested Facts, Page 36 of the Record;

100 Starrett (Iran-US Tribunals), ¶ 103.



25

85. Therefore, the measure undertaken by the Respondent has resulted in the indirect

expropriation of the Claimant’s investment.

ii. The sanction may not be justified on the ground that it was given effect in furtherance

of a public purpose.

86. Article 4 of the Euroasia BIT provides, “Investments by investors of either Contracting Party

may not directly or indirectly be expropriated,…except for public purpose” [emphasis

supplied].

87. A treaty requirement for ‘public interest’ requires some genuine interest of the public.102

The

preamble of the Executive Order provides that the sanctions were being brought into place in

light of the extraordinary threat to national security of the Respondent.103

Thus it is evident

that the Respondent sought to justify the sanction on the basis of national security being its

public purpose objective. However, the Claimant contends that there is no evidence to show

that the peaceful reunification of Fairyland with Euroasia constituted extraordinary threat to

national security of the Respondent whatsoever.

88. Further arbitral tribunals must consider whether such actions or measures undertaken by the

government are proportional to the public interest presumably protected. 104

Not only must a

measure depriving a person of his property pursue a legitimate aim, but there must also be a

reasonable relationship of proportionality between the means employed and the aim sought

to be realized.105

89. In the present case, even if it were to be accepted that national security is a genuine public

interest question, the Claimant’s connection to the Republic of Euroasia is (a) through his

company, and (b) to the extent of supplying arms. The sanction however has been imposed

on the Claimant in an individual capacity106

and extends to the prohibition to engage with

him professionally in any way. It also suspends existing contracts with him. Moreover, any

person who engages in business dealings with him, even in an unrelated matter will also be

102

ADC,¶432.

103 Preamble, Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the Situation in

the Republic of Eastasia, Page 52 of the Record.

104 Tecmed, ¶122.

105 James and Others, ¶19-20, Matos e Silva, ¶92.

106 Statement of Uncontested Facts, Page 36 of the Record, ¶17.


26

treated as a blocked person.107

Such a measure is clearly disproportionate in view of any

public purpose presumably sought to be protected. Therefore, no justification of public

purpose may be used in the present case.

90. In the absence of a public purpose justification, the expropriation of the investment is

unlawful in nature and reparation as explained in (C) must be made to the Claimant.

B. The Respondent’s measure is not justified under Article 10 of the Euroasia BIT.

91. Article 10 of the Euroasia BIT states, “Nothing in this Agreement shall be construed to

prevent either Contracting Party from taking measures to fulfil its obligations with

respect to the maintenance of international peace or security” [emphasis supplied].

92. The Respondent has contended that it introduced sanctions against investors from Euroasia

as part of an international response to condemn an illegal act of annexation of Fairyland by

Euroasia. It claimed that it was obliged under the principles of public international law not to

recognize the effects of unlawful actions, and to take active steps to wipe out the

consequences of such unlawful behavior.108

93. The Claimant submits that, (i) Article 10 is restricted to obligations that arise out of the

United Nations Charter only, (ii) In the alternative, the Respondent was under no obligation

under customary international law not to recognize the consequence of an illegal act or to

take active steps to wipe out the consequences of such unlawful behavior, and (ii) In the

alternative that the Tribunal deems that the Respondent was under an obligation, the

measures taken by the Respondent are unlawful.

i. The obligations referred to in Article 10 are restricted to obligations that arise out of the

UN Charter.

94. Exceptions to treaty obligations provided in international instruments are to be interpreted

narrowly.109

In the present case, obligations with respect to maintenance of international

peace or security must be restricted to obligations arising out of the UN Charter. Article 24

of the UN Charter clearly provides,

107

Section 4 of the Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the

Situation in the Republic of Eastasia, Page 52 of the Record.

108 Answer to Request for Arbitration, Page 15 of the Record.

109 Chevron Corp.,¶187.


27

“in order to ensure prompt and effective action by the United Nations, its Members confer

on the Security Council primary responsibility for the maintenance of international peace

and security, and agree that in carrying out its duties under this responsibility the Security

Council acts on their behalf.”

95. Further as per Chapter VII of the UN Charter at Article 39 provides,

“The Security Council shall determine the existence of any threat to the peace, breach of

the peace, or act of aggression and shall make recommendations, or decide what measures

shall be taken in accordance with Articles 41 and 42, to maintain or restore international

peace and security.”

Scholars are of the opinion that using a phrase in the treaty which is almost verbatim lifted

from the UN Charter seems to be a reference to the obligations in the Charter itself.

96. The OECD Draft Multilateral Agreement on Investment is instructive in this regard.

According to the commentaries to a similar clause in that instrument, the negotiating parties

understood the language to “refer specifically to obligations under the Charter.”110

The

UNCTAD in its deliberations on BITs, dealt with obligations with respect to maintenance of

international peace and security only in the context of Charter obligations.111

Further, some

U.S. BITs which have similar clauses in them have clarified the meaning of this clause in

their protocols by stating, ‘obligations with respect to the maintenance or restoration of

international peace or security’ means obligations under m the UN Charter.’112

Further,

scholars have opined that unilateral action or actions outside the framework of the UN

would not appear to fall within the general consensus as to the meaning of obligations with

respect to maintenance of international peace and security.113

97. Thus, using the phrase ‘obligations with respect to the maintenance of international peace

and security’ seems to be a clear reference to Charter obligations. If the Respondent were to

contend that obligations outside the Charter is indeed a part of Article 10, it would have to

prove that the State parties intended to give special meaning to the clause.114

However, there

is nothing in the record to suggest that such special meaning was envisaged. Thus, since no

110

OECD, Multilateral Agreement on Investment, Commentary to the Consolidated Text.

111 UNCTAD, The Protection of National Security in IIAs.

112 U.S.-Argentina BIT, Protocol, ¶ 6

; Protocol to US- Honduras BIT

113 Burke-White & von Staden, Investment Protection in Extraordinary Times.

114 VCLT, Article 31(4).


28

determination has been made by the Security Council as to the existence of an obligation,

the Respondent’s sanction is not saved under Article 10.

ii. The Respondent was under no obligation under international law not to recognize the

consequence of an illegal act or to take active steps to wipe out the consequences of such

unlawful behavior.

98. Article 41 of the Articles on the State Responsibility for Internationally Wrongful Acts115

provides that no State shall recognize as lawful a situation created by a serious breach of a

peremptory norm and that States shall cooperate to bring to an end through lawful means

any such serious breach. It is the Claimant’s contention that the abovementioned provisions

are not obligations that exist in customary international law. In order for the provisions to

become obligations, there first has to be a determination to that effect by a United Nations

body such as the Security Council or the International Court of Justice.

99. This is evidenced by practice over the years. In the 1970s the obligations in question were

characterized as something that States could be bound by if they entered into specific

conventions providing for the same.116

Further, specifically with regard to the duty on states

to cooperate, the International Court of Justice in the Namibia Advisory Opinion117

was of

the view that only once a binding determination was made by a competent organization of

the United Nations to the effect that a situation is illegal, would an obligation lie upon

Members of the United Nations, to bring that situation to an end. In 1982, in the Report of

the International Law Commission, the Special Rapporteur’s introduction and commentary

to the provision on non-recognition clearly assumed that the obligation would be preceded

by a finding by a competent United Nations organ, embodying “the international community

as a whole”, that an international crime had been committed.118

Lastly in the year 2004, the

International Court of Justice in its Advisory opinion on the Construction of Wall in

Occupied Palestine119

held that the duty of non-recognition flowed from a binding decision

of a competent organ of the United Nations and only after such determination were third

115

ARSIWA.

116 LAUTERPACHT, RECOGNITION.

117 Namibia Advisory Opinion.

118 Williem Riphagen, Third Report on the Contents, Forms and Degrees of State Responsibility.

119 Israeli Wall Advisory Opinion.


29

states under an obligation to cooperate to bring an end to serious breaches of obligations

erga omnes.

100. In light of this, it is evident that the measures undertaken by the Respondent was not in

furtherance of any obligation existing in international law.

iii. Even if the Tribunal is of the view that the Respondent was indeed under an obligation,

the measures taken by it are unlawful.

101. The Claimant contends that (a) Article 10 is not a self-judging provision, and therefore

measures taken under the Article are amenable to review, and (b) The sanctions imposed do

not fulfil the test of nexus and proportionality.

Measures taken under Article 10 may be reviewed by the Tribunal. a.

102. Article 10 cannot be interpreted in a manner so as to allow a State absolute discretion with

regard to the measures it may take. In interpreting Non Precluded Measures provisions such

as Article 10, Tribunals have held that if such clauses were to be interpreted as being self-

judging, they must have been expressly worded in such manner.120

Even though the

decisions referred to are in relation to the determination of the existence of a crisis situation

and not a measure, it elucidates the principle that a state’s complete discretion has to be

explicitly provided for.

103. Article 10 uses the phrase “may take measures” as opposed to ‘any measure’ or ‘any

measure it deems necessary’. Therefore, the language of the treaty is not such that review of

the measures undertaken is barred.

The sanctions imposed do not fulfil the test of nexus and proportionality. b.

104. Sanction imposing countries follow a framework whereby measures undertaken have to be

proportional and have some nexus to the object sought to be achieved.121

Further, Tribunals

have also acknowledged that proportionality is a necessary consideration while determining

the validity of a sanction.122

120

CMS, ¶ 370; Enron, ¶¶ 335-336; LG&E, ¶ 212.

121 EU Guidelines on Sanctions.

122 Occidental, ¶ ¶ 417,427; Tecmed, ¶ 122.


30

105. The object of sanctions is to bring about change in behavior.123

Therefore, the scope of

review exercised by the Tribunal is to determine if the measure in question is proportional to

the object of bringing about a desired change in behavior.

106. The preamble of the Executive order states,

“I hereby find that the actions and policies of the Government of the Republic of Eurasia,

including its annexation of Fairyland and its use of force in the Republic of Eastasia,

continue to undermine democratic processes and institutions in the Republic of Eastasia;

threaten its peace, security, stability, sovereignty, and territorial integrity…”124

It is evident that the measures taken by the Respondent are to exert pressure on Euroasia. As

explained previously the Claimant’s connection to the Republic of Euroasia is (a) through his

company, and (b) to the extent of supplying arms. The sanction however has been imposed

on the Claimant in an individual capacity125

and extends to the prohibition to engage with

him professionally in any way. It also suspends existing contracts with him. Moreover, any

person who engages in business dealings with him, even in an unrelated matter will also be

treated as a blocked person.126

Further, a blanket sanction on persons operating in critical

sectors also subverts the nexus requirement. Unless there is something to prove that the

Claimant’s arms had in fact played some sort of a role in the reunification or would

contribute to the situation in Fairyland, there is no reason to impose sanctions on him.

107. All the sanction does is to isolate the Claimant. It is disproportionate and lacks nexus to the

extent that it plays no role in coercing Euroasia into rectifying its behavior.

C. Full reparation must be made to the Claimant.

108. Article 4 of the Euroasia BIT only caters to situations where compensation is to be paid in

cases of lawful expropriation. The Claimant contends that compensation at market value as

stated in Article 4 is envisaged only for expropriation within the limits of the BIT and since

the Respondent’s measure amounts to unlawful expropriation, full reparation must be made

to the Claimant. This principle of full reparation in cases of unlawful expropriation is

123

Phoenix Action, ¶¶136-139.

124 Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the Situation in the

Republic of Eastasia, Page 52 of the Record.

125 Statement of Uncontested Facts, ¶16-17, Page 36 of the Record.

126 Section 1(b) of the Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the

Situation in the Republic of Eastasia, Page 51 of the Record.


31

derived from the Chorzow Factory case, where the PCIJ opined that reparation must insofar

as possible extinguish the result of an unlawful act and restore a situation which would have

existed had no violation been committed.127

109. This principle has been applied in the case of ADC v. Hungary128

wherein the Tribunal held

that since the BIT did not contain any lex specialis rules regarding unlawful expropriation,

standards in customary international law would apply. It thereby imported the standard laid

down in the Chorzow Factory case. 129

The Tribunal further opined that the date of valuation

of assets must be as on the date of the award and not as on the date of expropriation.130

110. Lastly, full reparation includes payment of interest.131

The Claimant thus contends that such

full reparation must be made to him in light of the sanctions imposed by the Respondent.

VI. The Claimant did not contribute to the damage suffered by his investment.

111. The Respondent has contended that the Claimant contributed to the damage suffered by his

investment by virtue of his own conduct. As the basis of this contention, the Respondent has

alleged that the Claimant’s continued supply of weapons to Euroasia led to the imposition of

sanctions on him and his company.132

The Claimant submits that the Respondent’s sanction

is solely responsible for the damage he suffered since the threshold for contributory fault is

not met.

112. Article 39 of the ARSIWA provides that while determining the quantum of reparation,

account shall be taken of the contribution to the injury by willful or negligent action or

omission. The standard of contributory fault as expounded in the ARSIWA has been widely

adopted in cases of investor-state disputes.133

As per the ARSIWA standard of contributory

fault, not every action or omission which contributes to the damage suffered is relevant for

127

Chorzow Factory Case, ¶ 47.

128 ADC ¶ 478.

129 Id at ¶ ¶ 481,482.

130Chorzow Factory Case, ¶ 47.

131 Vivendi, ¶; ADC, ¶ ; Siemens, ¶¶ 395-396.

132 Answer to Request for Arbitration, Page 17 of the Record.

133 Yukos (Final Award), ¶¶ 1601-1606; Occidental, ¶ 665; Alexandrov & Robbins, Proximate Causation in

International Investment Disputes.


32

this purpose, but only those actions or omissions which exhibit a manifest lack of due care

on the part of the victim of the breach for his or her own property or rights.134

In order to

hold that an act or omission is willful or negligent, it must be established that the person

alleged to have contributed knew or should have reasonably known the consequence of his

act.135

113. In the present case, there is no evidence to say that the Claimant acted willfully or

negligently. Even if the Claimant knew that Euroasia was contemplating an intervention in

Fairyland, his act cannot be considered negligent. It is not reasonable to say that the

Claimant should have foreseen the reaction of the Respondent, a third party country, to the

reunification of Fairyland with Euroasia, let alone its attitude towards investors operating in

certain sectors of the Euroasian economy. Further, it is seen that the Claimant entered into

this contract with the best interest of his business in mind. His contract with Euroasia had

expired and without a new contract, a part of his production line would have to be closed

leaving a large number of people unemployed.136

Further, there is also nothing in the record

to suggest that the act of the Claimant is willful, in that, he carried out the act knowing fully

well that these consequences would ensue.

114. BITs are not insurance policies against bad business judgments.137

However, they are

instruments that primarily seek to protect the interest of the investors.138

Thereby it would be

going against the purpose of the BIT if it is held that political situations can obliterate all

protection guaranteed, even in a situation where the investor was acting in a manner that best

served his investment. Therefore, it is seen that there has been no lack of due care on part of

the Claimant, in fact, he was acting in the best interest of his company. In the absence of

there being proof of a negligent or willful act on part of the Claimant, the Respondent’s

action is solely responsible for the Claimant’s loss.

134

Commentary to Article 39 of ARSIWA.

135 Gemplus, ¶11.12-11.15.


137 Maffezini (Award), ¶ 64.

138 Preamble, Euroasia BIT.

-PRAYER FOR RELIEF- TEAM PINTO

33

PRAYER FOR RELIEF

IN LIGHT OF THE ABOVE SUBMISSIONS, THE COUNSEL FOR CLAIMANT RESPECTFULLY REQUESTS

THE TRIBUNAL TO FIND THAT:

The Claimant is an investor pursuant to Article 1.2 of the Euroasia BIT;

The pre-arbitral steps provided in Article 9 of the Euroasia BIT need not be complied with

before submitting a dispute to international arbitration;

The MFN clause in the Euroasia BIT extends to dispute resolution provisions;

The clean hands doctrine is not applicable in the present case and therefore may not operate

to deprive the investor of the protection guaranteed under the Euroasia BIT;

The Respondent unlawfully expropriated the Claimant’s investment;

The Claimant has not contributed to the damage suffered by his investment

FOR CLAIMANT, PETER EXPLOSIVE

SIGNED,

19 SEPTEMBER 2016

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IN THE INTERNATIONAL COURT OF ARBITRATION OF … · in the international court of arbitration of the international chamber of commerce icc arbitration case no. 28000/ac ... temple