Embed Size (px)
Citation preview
TEAM BARROS
FOREIGN DIRECT INVESTMENT ARBITRATION MOOT
Facultad de Derecho, Universidad de Buenos Aires
3-6 November 2016
International Court of Arbitration of the International Chamber of Commerce
IN THE PROCEEDING BETWEEN
Peter Explosive
(Claimant)
v.
The Republic of Oceania
(Respondent)
MEMORIAL FOR CLAIMANT
i
TABLE OF CONTENT
TABLE OF CONTENT .............................................................................................................. i
LIST OF AUTHORITIES ......................................................................................................... iv
LIST OF LEGAL SOURCES ................................................................................................... xi
STATEMENT OF FACTS...................................................................................................... xxi
ARGUMENTS ........................................................................................................................... 1
1. The Tribunal has jurisdiction over the dispute under the Euroasia BIT. ............................... 1
1.1. The Tribunal has jurisdiction ratione materiae over the dispute. ....................................... 1
1.1.1. The shares in RB are assets invested by Claimant. .......................................................... 1
1.1.2. Environmental License received by RB is an asset invested by Сlaimant. ...... 2
1.1.3. The assets were invested in the territory of the Respondent. ........................... 2
1.2. The Tribunal has ratione personae jurisdiction over the dispute. ...................................... 2
2. Claimant is not bound by the requirements of pre-arbitral steps under Art. 9 of the
Euroasia BIT. ............................................................................................................................. 3
2.1. Requirements of taking pre-arbitral steps under Art. 9 of the Euroasia BIT are non-
mandatory. .................................................................................................................................. 3
2.2. Claimant can avoid requirement of pre-arbitral steps by virtue of most-favoured-nation
clause stipulated in Art. 3 of the Euroasia BIT. ......................................................................... 4
3. The Tribunal’s jurisdiction is not precluded by the “clean hands” requirement under
Article 1.1. of the Eastasia BIT. ................................................................................................. 5
3.1. Invoking of Art. 9 of Eastasia BIT by virtue of MFN clause does not automatically
require application of Art. 1. 1 of Eastasia BIT. ........................................................................ 5
3.2. Even if Claimant’s investments have to comply with the “clean hands” doctrine under
Article 1.1. of the Eastasia BIT, they comply. ........................................................................... 5
3.2.1 Claimant’s guilt for any “unclean hands” actions has not yet been proven. .... 5
3.2.2. Claimant has not violated the applicable law while making investments. ....................... 6
3.2.3. “Clean hands” doctrine is not a general principle of International Law. ......................... 7
3.2.4. In the case at hand the principle of estoppel is applied. ................................................... 7
3.2.5. In any event “clean hands” requirement should not be used to deprive tribunal of the
jurisdiction. ................................................................................................................................. 8
4. Respondent illegally expropriated Claimant’s investments. ............................................... 9
4.1. Imposition of Sanctions and introduction of Executive Order by Respondent meet the
legal threshold for indirect expropriation. .................................................................................. 9
ii
4.1.1. The economic impact on Claimant’s business of Sanctions and Executive
Order was intense. .................................................................................................................... 10
4.1.2. Sanctions and the Environmental Order interfered with reasonable and
legitimate expectations of Claimant. ........................................................................................ 11
4.1.3. Sanctions and the Environmental Order were not a non-compensable
governmental regulatory activity but a measure amounting to indirect, compensable
expropriation. 11
4.2. The expropriation does not meet the legality requirements under para. 1 of Art. 4 of the
Euroasia BIT. ........................................................................................................................... 12
4.2.1. The requirement of public purpose was not complied with. .......................... 12
4.2.2. Expropriation was not made in accordance with due process of law. ............ 14
4.2.3. Expropriation was not carried out on non-discriminatory basis. .................... 14
4.2.4. Claimant was not granted “prompt, adequate and effective compensation”. . 15
5. Respondent has violated its obligations with regard to the Claimant and investments
under Art. 2 of the Eurasia BIT and international law. ............................................................ 15
5.1. Respondent failed to provide FET to the Claimant’s investments. ................................... 16
5.1.1. By imposing sanctions Respondent violated fair and equitable Treatment
Standard under the Euroasia BIT. ............................................................................................ 16
5.2. Respondent failed to provide full protection and security to the Claimant’s investments.
17
5.3. Respondent impaired the activity of Claimant by discriminatory measures taken with
regard to the Claimant’s activity. ............................................................................................. 19
5.4. Respondent has committed internationally wrongful act by imposing sanctions through
implementation of Executive Order. ........................................................................................ 19
6. Respondent cannot justify its violation of Euroasia BIT and international law under
Article 10 of the Euroasia BIT. ................................................................................................ 21
6.1. People of Fairyland can exercise their right to self-determination. .................................. 22
6.2. People of Fairyland possessed of right to self-determination according to capability to
regain self-governance, historical long and strong connection with territory, and distinct
culture. ...................................................................................................................................... 22
6. 3. There was no unlawful intervention by Euroasia. ............................................................ 23
6.4. Even if annexation of Fairyland occurred, Respondent cannot refer to Art. 10 of the
Euroasia BIT for justification of its violations of international law. ....................................... 25
7. Claimant has the right for full compensation for the damage caused by the illegal
expropriation of Claimant’s investments and violation of Art. 2 of the Euroasia BIT and
international customary law with interest. ............................................................................... 27
7.1. Article 4 of Oceania-Euroasia BIT is lex specialis. .......................................................... 28
iii
7.2. Claimant did not contribute to the damages. ..................................................................... 29
7.2.1. Claimant did not contribute to the damages by acting negligently. ............................... 29
7.2.2. Claimant did not violate its duty to mitigate the damages. ............................................ 32
COMPENSATION ................................................................................................................... 34
REQUEST FOR RELIEF......................................................................................................... 35
iv
LIST OF AUTHORITIES
Books
A. Newcombe, L. Paradell, Law and Practice
of Investment Treaties: Standards of
Treatment
A. Newcombe, L. Paradell, Law and Practice
of Investment Treaties: Standards of
Treatment, (The Netherlands: Kluwer Law
International, 2009)
Arbitrating Foreign Investment Disputes:
Procedural and Substantive Legal Aspects
Arbitrating Foreign Investment Disputes:
Procedural and Substantive Legal Aspects
(The Netherlands: Kluwer Law International,
2004)
B. Cheng, General Principles of Law as
Applied by International Courts and
Tribunals
Bin Cheng, General Principles of Law as
Applied by International Courts and
Tribunals, (Cambridge: Cambridge
University Press, 1953)
Brownlie Brownlie, Principles of Public International
Law, Seventh Edition, (Oxford: Oxford
University Press, 2008)
H. Lauterpacht, The Development of
International Law by the International Court
H. Lauterpacht, The Development of
International Law by the International Court,
(London: Stevens and Sons Limited, 1958)
J. Crawford, The International Law
Commission’s Articles on State Responsibility
J. Crawford, The International Law
Commission's Articles on State
Responsibility: Introduction, Text and
Commentaries (Cambridge: Cambridge
v
University Press, 2002)
Salacuse J. W. Salacuse, The Law of Investment
Treaties, Second Edition, (Oxford: Oxford
International Law Library, 2015)
M. Dixon, Textbook on International Law M. Dixon, Textbook on International Law,
(New York: Oxford University Press, 2005)
M. Shaw, International Law M. Shaw, International Law, Fifth Edition,
(Cambridge: Cambridge University Press,
2003)
Marboe, Calculation of Compensation and
Damages
Marboe, Calculation of Compensation and
Damages in International Investment Law
(Oxford: Oxford International Arbitration,
2009)
N. Blackaby, C. Partasides, A. Redfern,
M.Hunter, Redfern and Hunter on
International Arbitration
N. Blackaby, C. Partasides, A. Redfern,
M.Hunter, Redfern and Hunter on
International Arbitration, Sixth Edition,
(Oxford: Oxford University Press, 2015)
Dolzer Rudolf Dolzer, Christoph Schreuer,
Principles of International Investment Law,
Second Edition, (Oxford:Oxford University
Press,2012)
S. Ripinsky, K. Williams, Damages in
International Investment Law
S. Ripinsky, K. Williams, Damages in
International Investment Law (Great Britain:
British Institute of International and
Comparative Law, 2015)
vi
The Kosovo Report The Kosovo Report: Conflict, International
Response, Lessons Learned (Oxford: Oxford
University Press, 2000)
Tudor I. Tudor, The fair and equitable Treatment
Standard in International Law of Foreign
Investment (Oxford: Oxford University Press,
2008)
U.N. Conference on Trade and Development,
BITs in the Mid-1990s
United Nations Conference on Trade and
Development, Bilateral investment treaties in
the mid-1990s, (New York: United Nations,
1998)
UNCTAD, Fair and Equitable Treatment United Nations Conference on Trade and
Development, Fair and equitable treatment.
Series on issues in international investment
agreements II, (New York and Geneva, 2012)
Law Journals
Ashworth, Four Threats to the Presumption
of Innocence
Ashworth, Four Threats to the Presumption
of Innocence, 10 International Journal of
Evidence and Proof 4 (2006)
C.S.Gibson, Yukos Universal Limited C.S.Gibson, Yukos Universal Limited (Isle of
Man) v The Russian Federation: A Classic
Case of Indirect Expropriation, Foreign
Investment Law Journal 2 (2015)
Ch. Gibson, A Look at the Compulsory
License in Investment Arbitration: The Case
Ch. Gibson, A Look at the Compulsory
License in Investment Arbitration: The Case
vii
of Indirect Expropriation of Indirect Expropriation, American
University International Law Review 25
(2010)
Ch. Schreuer, Fair and Equitable Treatment
in Arbitral Practice
Ch. Schreuer, Fair and Equitable Treatment
in Arbitral Practice, 6 Journal World
Investment & Trade (2005)
D.W. Bowett, Estoppel Before International
Tribunals and Its Relation to Acquiescence
D.W. Bowett, Estoppel Before International
Tribunals and Its Relation to Acquiescence,
33 Brittany yearbook international law (1957)
F. Jong, L. Lent, The Presumption of
Innocence as a Counterfactual Principle
F. Jong, L. Lent, The Presumption of
Innocence as a Counterfactual Principle,
Utrecht Law Review 12 (2016)
J. Day, The Remedial Right of Secession J. Day, The Remedial Right of Secession in
International Law, Potentia 2 (2012)
J. R. Marlles, Public purpose, private losses:
regulatory expropriation and environmental
regulation in International investment law
J. R. Marlles, Public purpose, private losses:
regulatory expropriation and environmental
regulation in International investment law,
Florida State University Journal of
Transnational Law & Policy (2007)
J. Stone, Arbitrariness, The Fair and
Equitable Treatment Standard, and the
International Law of Investment
J. Stone, Arbitrariness, The Fair and
Equitable Treatment Standard, and the
International Law of Investment, 25 Leiden
Journal International Law (2012)
K. McVay, Self-determination in New
Contexts
K. McVay, Self-determination in New
Contexts: The Self-determination of Refugees
viii
and Forced Migrants in International Law,
Utrecht Journal of International and European
Law 28 (2012)
M. Galván, Is the security council a
legislator for the entire international
community?
M. Galván, Is the security council a legislator
for the entire international community?,
Mexican Annuary International Law Journal,
(2011)
Schreuer, Nationality of Investors: Legitimate
Restrictions vs. Business Interests
M.C. Schreuer, Nationality of Investors:
Legitimate Restrictions vs. Business Interests,
ICSID Review (2009)
MacGibbon, Estoppel in international law MacGibbon, Estoppel in international law, 7
The International and Comparative Law
Quarterly 468 (1958)
M. Galván, Interpretation of article 39 of the
UN Charter
Mónica Lourdes de la Serna Galván,
Interpretation of article 39 of the UN Charter
(threat to the peace) by the security council.
Is the security council a legislator for the
entire international community?Anuario
mexicano de derecho internacional (2011)
A. Memeti, B. Nuhija, The concept of erga
omnes
A. Memeti, B. Nuhija, The concept of erga
omnes obligations in international law, 14
New Balkan Politics (2013)
R. Dolzer, F. Bloch, Indirect Expropriation:
Conceptual Realignment?
R. Dolzer, F. Bloch, Indirect Expropriation:
Conceptual Realignment?, International Law
Forum 5 (2003)
ix
R. Dolzer, Indirect Expropriation, New
Developments?
R. Dolzer, Indirect Expropriation, New
Developments?, Environmental Law Journal
11 (2002)
R. Pails, Self-Determination, the Use of
Force and International Law
R. Pails, Self-Determination, the Use of
Force and International Law: An Analytical
Framework, University of Tasmania Law
Review 70 (2001)
R. A. Duff, Who must Presume whom to be
Innocent of What
R. A. Duff, Who must Presume whom to be
Innocent of What, 42 Netherlands Journal of
Legal Philosophy 3 (2013)
S. Alexandrov, J. Robbins, Proximate
Causation in International Investment
Disputes
S. Alexandrov, J. Robbins, Proximate
Causation in International Investment
Disputes, Yearbook on International
Investment Law and Policy (2009)
S. Vasciannie, The Fair and Equitable
Treatment Standard in International
Investment Law and Practice
S. Vasciannie, The Fair and Equitable
Treatment Standard in International
Investment Law and Practice, 70 Brittany
yearbook international law (1999)
Sabahi, Compensation and Restitution Sabahi, Compensation and Restitution in
Investor-State Arbitration: Principles and
Practice, Mexican Annuary International
Law Journal, (2011)
Sh. Malcolm, International Law Shaw Malcolm, International Law
(Cambridge: Cambridge University Press,
2003)
x
T. Gazzini T. Gazzini, Drawing the Line between Non-
compensable Regulatory Powers and Indirect
Expropriation of Foreign Investment—An
Economic Analysis of Law Perspective,
Manchester Journal of International
Economic Law 7 (2010)
Thürer, T. Burri, Self-Determination Thürer, T. Burri, Self-Determination, Max
Planck Encyclopedia of Public International
Law [MPEPIL] (2008)
W. Sadowski, About TDM W. Sadowski, About TDM, Transnational
Dispute Management 11 (2014)
W. Sadowski, Yukos and Contributory Fault W. Sadowski, Yukos and Contributory Fault,
Transnational Dispute Management 11 (2014)
Y. Banifatemi, The Law Applicable in
Investment Treaty Arbitration
Y. Banifatemi, The Law Applicable in
Investment Treaty Arbitration, News Insights
(2010)
xi
LIST OF LEGAL SOURCES
List of cases
ADC ADC Affiliate Limited and ADC & ADMC
Management Limited v. The Republic of
Hungary, ICSID Case No. ARB/03/16,
Award, 2 October 2006
AMTI American Manufacturing and Trading, Inc
v. Republic of Zaire, ICSID Case No
ARB/93/1, Award, 21 February 1997.
AAPL Asian Agricultural Products Ltd v. Republic
of Sri Lanka, ICSID Case No. ARB/87/3,
Final Award, 27 June 1990
AWG Group Ltd. AWG Group Ltd. v. The Argentine Republic,
ICSID Case No. ARB/03/19, Decision on
Jurisdiction, 3 August 2006
Azurix Azurix Corp. v. The Argentina Republic,
ICSID Case No. ARB/01/12 , Award, 14 July
2014
Gabcikovo-Nagymaros Case Concerning the Gabcikovo-Nagymaros
Project, ICJ Reports 1997
Certain German Interests Certain German Interests in Polish Upper
Silesia ( Germany v Poland ), PCIJ Rep
Series A. No. 7, 25 May 1926
Factory at Chorzów Case concerning the Factory at Chorzów
xii
(Germany v. Poland), Jurisdiction, Judgment,
26 July 1927, P.C.I.J., Series A, No. 9
Chromalloy Chromalloy Aeroservices v. the Arab
Republic of Egypt, United States District
Court Case No. 94-2339, Award, 31 July
1996
CME CME Czech Republic B.V. v. Czech Republic,
UNCITRAL arbitration, Final Award, 14
March 2003
Santa Elena Compañia del Desarrollo de Santa Elena
S.A. v. Republic of Costa Rica,ICSID Case
No. ARB/96/1, Award, 17 February 2010
Continental Casualty Co. Continental Casualty Co. v The Argentina
Republic, ICSID Case No ARB/03/9, Award,
5 September 2008
Duke Energy Duke Energy Electroquil Partners &
Electroniquil S.A. v. The Republic of
Ecuador, ICSID Case No. ARB/04/19,
Award, 18 August 2008
EDF International S.A. and Ors EDF International S.A. and Ors v. Argentina
Republic, ICSID Case No. ARB/03/23,
Award, 11 June 2012
Mafezzini Emilio Augustin Mafezzini v. The Kingdom of
Spain, ICSID Case No. ARB/97/7, Decision
on Jurisdiction, 25 January 2000
xiii
Fedax Fedax N.V. v. The Republic of Venezuela,
ICSID Case No. ARB/96/3, Decision of the
Tribunal on Objections to Jurisdiction, 11
July 1997
Genin Alex Genin, Eastern Credit Limited, Inc. and
A.S. Baltoil v. the Republic of Estonia, ICSID
Case No. ARB/99/2, Award, 25 June 2001
Gillot et al Gillot et al v. France, United Nations Human
Rights Committee Case No. 932/2000 , 26
July 2002
Soufraki Hussein Nuaman Soufraki v. The United Arab
Emirates, ICSID Case No. ARB/02/7,
Award, 7 July 2004
ICS Inspection and Control Services
Limited
ICS Inspection and Control Services Limited
v. The Argentina Republic, Unsitral, PCA
Case No. 2010-9,Award on Jurisdiction, 10
February 2012
Lemire award Joseph Charles Lemire v. Ukraine, ICSID
Case No. ARB/06/18, Award, 28 March 2011
Lemire decision on jurisdiction Joseph Charles Lemire v. Ukraine, ICSID
Case NO. ARB/06/18, Decision on
Jurisdiction and Liability, 14 January 2010
Salvador v. Honduras Land, Island and Maritime Frontier Dispute
(El Salvador v. Honduras), ICJ Reports 1990
xiv
Wall in the Occupied Palestinian Territory Legal Consequences of the Construction of a
Wall in the Occupied Palestinian Territory,
ICJ, Advisory Opinion, 4 July 2004
Loewen Loewen Group Incorporated and Loewen
(Paymond L.) v. The United States, ICSID
Case No ARB(AF)/98/3, Decision on
Hearing of Respondent's Objection to
Competence and Jurisdiction, 5 January 2001
LG&E LG&E Energy Corp., LG&E Capital Corp.,
LG&E International Inc. v. Argentina
Republic, ICSID Case No. ARB/02/1 ,
Decision on Liability, 3 October 2006
Feldman Marvin Feldman v. Mexico, ICSID Case No.
ARB(AF)/99/1, Award, 16 December 2002
Metaclad Metalclad Corporation v. The United
Mexican States, ICSID Case No.
ARB(AF)/97/1, Award, 30 August 2000
Methanex Methanex Corporation v. United States,
UNCITRAL arbitration, Final Award, 3
August 2005
Middle East Cement Shipping
Middle East Cement Shipping and Handling
Co. S.A. v. Arab Republic of Egypt, ICSID
Case No. ARB/99/6, Award, 12 April 2002
Military and Paramilitary Activities in and Military and Paramilitary Activities in and
xv
Against Nicaragua Against Nicaragua (Nicaragua v. The
United States of America),ICJ, Judgment on
the Merits, 27 June 1986
MTD MTD Equity Sdn. Bhd. v. Republic of Chile,
ICSID Case No. ARB/01/7, Award, 25 May
2004
NSPI Nova Scotia Power Incorporated v.
República Bolivariana De Venezuela, ICSID
Case No. ARB(AF)/11/1, Laudo sobre
Jurisdicción, 22 de abril de 2010
Occidental Occidental Exploration and Production
Company v. The Republic of Ecuador, LCIA
Case No UN3467, Award, 1 July 2004
Olguín Olguín v. Paraguay, ICSID Case No.
ARB/98/5, Final Award, 26 July 2001
PAE LLC Pan American Energy LLC y BP Argentina
Exploration Company v. República de
Argentina, caso CIADI No. ARB/03/13,
Decisión sobre excepciones preliminares, 27
de julio de 2006
Foresti Piero Foresti and others v. The Republic of
South Africa, ICSID Case No ARB(AF)/07/1,
Award, 4 August 2010
xvi
Plama Plama Consortium Limited v. Bulgaria,
ICSID Case No. ARB/03/24, Award, 27
August 2008
PSEG PSEG Global, Inc., The North American Coal
Corporation and Konya Ingin Electrik
Uretim ve Ticaret Limited Sirketi v. Turkey,
ICSID Case No. ARB/02/5, Award, 19
January 2007
Rumeli Rumeli Telekom A.S. and Teslim Mobil
Telekomikasyon Hizmetleri A.S. v. Republic
of Kazakhstan, ICSID Case No. ARB/05/16,
Award, 29 July 2008
Salini Salini Costruttori S.p.A. and Italstrade S.p.A.
v. The Hashemite Kingdom of Jordan, ICSID
Case No. ARB/02/13, Decision on
Jurisdiction, 9 November 2004
Saluka Saluka Investments B.V. v. Czech Republic,
UNCITRAL Arbitration, Partial Award, 17
March 2006.
S.D. Myers Inc. S.D. Myers, Inc. v. Government of Canada,
NAFTA Arbitration, Partial Award, 13
November 2000
Siemens
Siemens A.G. v. Argentina Republic, ICSID
Case No. ARB/02/8, Award, 6 February 2007
xvii
Siemens, decision on jurisdiction Siemens A.G. v. Argentina Republic, ICSID
Case No. ARB/02/8, Decision on
Jurisdiction, 3 August 2004
Suez, award Suez, Sociedad General de Aguas de
Barcelona S.A., and Vivendi Universal S.A. v.
The Argentina Republic, ICSID Case No.
ARB/03/19, Award, 9 April 2015
Suez, decision on jurisdiction Suez, Sociedad General de Aguas de
Barcelona S.A., and Vivendi Universal S.A. v.
The Argentina Republic, ICSID Case No.
ARB/03/19, Decision on Jurisdiction, 3
August 2006
Suez, decision on liability Suez, Sociedad General de Aguas de
Barcelona S.A., and InterAgua Servicios
Integrales del Agua S.A. v. The Argentina
Republic, ICSID Case No. ARB/03/17,
Decision on Liability, 30 July 2010
Tecmed Technicac Mediombientales Tecmed S.A. v.
The United Mexican States, ICSID Case No.
ARB (AF)/00/2, Award, 29 May 2003
Telenor Telenor Mobile Communications A.S. v. The
Republic of Hungary, ICSID Case NO.
ARB/04/15, Award, 13 September, 2006
Tza Yap Shum Tza Yap Shum v. Republic of Peru, ICSID
Case No. ARB/07/6, Award, 7 July 2011
xviii
Waguih Waguih Elie George Siag and Glorinda
Vecchi v. The Arab Republic of Egypt, ICSID
Case No. ARB/05/15, Award, 1 June 2009
Wena Hotels Ltd. Wena Hotels Limited v. Egypt, ICSID Case
No ARB/98/4, Award, 8 December 2000
Western Sahara Western Sahara, ICJ, Advisory Opinion, 16
October 1975
Yukos Yukos Universal Limited (Isle of man) v. The
Russian Federation, PCA, Case No. AA 227,
Final Award, 18 July 2014
Bogdanov Yury Bogdanov v. Republic of Moldova, SCC
Arbitration No. V (114/2009), Final Arbitral
Award, 30 March 2010
Treaties:
CETA Canada–EU Comprehensive Economic and
Trade Agreement, 2015
UN Charter Charter of the United Nations, 1945
NY Convention Convention on the Recognition and
Enforcement of Foreign Arbitral Awards,
1958
Declaration on Principles of International Law Declaration on Principles of International Law
concerning Friendly Relations and Co-
xix
operation among States in accordance with
the Charter of the United Nations, 1970
Cedeño’s Seventh Report Seventh report on unilateral acts of States, by
Mr. Víctor Rodríguez Cedeño, Special
Rapporteur, 2003
Environmental Licence Environmental License containing an
approval for arms production, 23 July 1998
Executive Order Executive Order on Blocking Property of
Persons Contributing to the Situation in the
Republic of Eastasia, 1 May 2014
ICCPR International Covenant on Civil and Political
Rights, 1966
ICESCR 1. International Covenant on Economic, Social
and Cultural Rights,1966
ILC Articles International Law Commission, Articles on
State Responsibility for Internationally
Wrongful Acts, 2001
ILC Articles, commentary International Law Commission, Articles on
State Responsibility for Internationally
Wrongful Acts (including official
Commentary), Yearbook of the International
Law Commission 2001, Vol. II (Part 2)
1. UNGA Resolution 1541 (XV) of 15 December
1960
UNGA Resolution 1541 (XV) of 15
December 1960
xx
Cedeño’s Seventh Report Seventh report on unilateral acts of States, by
Mr. Víctor Rodríguez Cedeño, Special
Rapporteur, 2003
Eastasia BIT The Agreement for the Promotion and
Reciprocal Protection of Investments between
the Republic of Oceania and the Republic of
Eastasia, 1 January 1992
UDHR The Universal Declaration of Human Rights,
1948
Euroasia BIT The Agreement for the Promotion and
Reciprocal Protection of Investments between
the Republic of Oceania and the Republic of
Euroasia, 1 January 1995
U.S. Model BIT United States Model Bilateral Investment
Treaty, 2012
UDHR The Universal Declaration of Human Rights,
1948
VCLT Vienna Convention on the Law of Treaties, 23
May 1969
MISCELLANEOUS
1. International Humanitarian Law- Resource Center. International law and self-
determination. [Electronic resource] - Mode of access
:https://www.diakonia.se/en/IHL/The-Law/International-Law1/IL--Self-
Determination. - Date of access : 04.09.2016.
xxi
2. Parker, K.,Understanding Self-Determination: The Basics[website],2000,
http://www.guidetoaction.org/parker/selfdet.html (accessed 27 july 2016).
3. Supplementary Expert Opinion on the Incidental Application of Philippine
Criminal Law by International Tribunals.
4. World Bank Guidelines. Procurement under IBRD Loans and IDA Credits, 2004.
xxi
STATEMENT OF FACTS
1. Claimant, Peter Explosive, recognised by the Euroasian authorities as a national of
Euroasia, invested in Oceania in February 1998 by purchasing 100% of the shares in RB Ltd.
(“RB”), operating in the arms industry.
2. Respondent is the Republic of Oceania.
3. In order to resume arms production, RB was obliged by the environmental law of
Oceania to obtain an Environmental License from the National Environment Authority of
Oceania (“NEA”) containing an environmental approval for the commencement of arms
production in accordance with the Environment Act 1996.
4. To gain the necessary financial resources, Claimant needed RB to resume production
quickly to generate income necessary to cover the initial expenses. He turned to the Ministry
of Environment of Oceania with a request for a subsidy, being possible, according to the
Environmental Act.
5. Clamant tried to expedite the decision of the Ministry of Environment on the subsidy
and in July 1998 he managed to meet with the President of NEA. On 23 July 1998, NEA
issued an environmental license approving the commencement of arms production by RB
(“Environmental License”).
6. On 3 August 1998, the Ministry of Environment of Oceania denied the request for
subsidy. And on 8 September 1998, Claimant approached his friend, who was now Minister
of National Defence (“Minister”) in the Republic of Euroasia (“Euroasia”). Minister
revealed to Claimant that the contract between the Ministry of National Defence acting on
behalf of Euroasia and Super Missiles Ltd. (“Super Missiles”) for the arms production would
soon expire. Euroasia was still in the process of modernising the equipment. Minister
promised that a new contract for the arms production will be concluded with RB. On 23
December 1998, Claimant met with representatives of the Ministry of the National Defence,
including the Minister himself. On that day, they concluded a contract for the arms
production.
7. Soon RB received the advance, its arms production commenced. Claimant concluded
a number of contracts with Oceanian companies for the delivery of the materials necessary for
the arms production. Later RB became very prosperous company and one of the largest arms
producers in Oceania. Claimant managed to conclude, on behalf of RB, a great number of
contracts for arms production and opened several new factories. As the business became
xxii
profitable, Claimant modernised the production and it fully complied with the legal
requirements in Oceania by 1 January 2014.
8. After annexation of Fairyland, Oceania declared that the annexation was unlawful and
on 1 May 2014 the President of Oceania issued an Executive Order. Executive Order
introduced a system of sanctions. Sanctions were applied to RB, which was the only
company designated by Sanctions. Claimant was unable to sell the shares in the company to a
third person; he could neither conduct the business, nor sell it.
9. Throughout 2013, the General Prosecutor’s Office of Oceania was conducting an
investigation regarding the corruption in the National Environment Authority of Oceania. On
21 November 2013, the investigation resulted in a formal initiation of criminal proceedings
against those officials, including the President of 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 scandal heavily engaged the
media and the public of Oceania. As a result, there were numerous investigations by the
General Prosecutor’s Office. Those investigations focused on people who bribed the NEA
President and other officials. On 5 May 2015, Claimant was informed that he was under
investigation with regard to Environmental License obtained on 23 July 1998 for RB. On 23
June 2015, the General Prosecutor’s Office officially initiated criminal proceedings against
Claimant.
1
ARGUMENTS
PART ONE: JURISDICTION AND ADMISSIBILITY
1. The Tribunal has jurisdiction over the dispute under the Euroasia BIT.
10. Under Art. 6.2 of the International Chamber of Commerce (“ICC”) Arbitration Rules
(“ICC Rules”) the parties accept that the arbitration shall be administered by the Tribunal by
agreeing to arbitration under the ICC Rules.
11. In the present case agreement to arbitration consists of (i) the standing offer of
Respondent to arbitrate under the ICC Rules stipulated in para. 5 (b) of Art. 9 of the Euroasia
BIT, and (ii) Claimant’s consent to arbitrate embodied in the request for arbitration filed
before the ICC on September 11, 2015. The filing verifies Claimant’s acceptance of
Respondent’s standing offer to arbitrate, which forms “agreeing to arbitration” under the ICC
Arbitration Rules.
12. In accordance with Art. 9 of the Euroasia BIT, Respondent’s consent to arbitrate is
limited to the disputes “regarding an investment between an investor of one of the Contracting
Parties and the other Party, arising out of or relating to this Agreement”.
13. Therefore, to fall under the Tribunal’s jurisdiction (i) the dispute must be a dispute
regarding investment (jurisdiction ratione materiae), and (ii) the parties of the dispute must be
a Contracting Party and an 'investor' of another Contracting Party (jurisdiction ratione
personae), as they as defined in Art. 1 of the Eurasia BIT.
1.1. The Tribunal has jurisdiction ratione materiae over the dispute.
14. Art. 1 of the Euroasia BIT defines “investment” as “every kind of asset directly or
indirectly invested by an investor of one Contracting Party in the territory of the other
Contracting Party”.1 The list of what constitutes an “investment” is stipulated in the Art. 1 of
Euroasia BIT and includes, without limitation, shares of companies or any other form of
participation in a company and licenses2.
15. Claimant submits that (i) the shares he purchased in RB, as well as (ii) Environmental
License, are the assets, invested by Claimant in the territory of Respondent.
1.1.1. The shares in RB are assets invested by Claimant.
16. In February 1998, Claimant acquired shares in RB and became its 100% shareholder.
1 Euroasia BIT, art 1.1.
2 Euroasia BIT, art 1.2. 2 Euroasia BIT, art 1.2.
2
17. Art. 1 of the Euroasia BIT explicitly names shares among the types of assets
considered to be investments under the Euroasia BIT. As it was noted in Genin, a bilateral
investment treaty (“BIT”) protects shareholding rights when shares are enumerated as a form
of investment.3
1.1.2. Environmental License received by RB is an asset invested by Сlaimant.
18. On 23 July 1998, the NEA issued an Environmental License approving the
commencement of arms production by RB.4
19. Art. 1 of the Euroasia BIT also mentions licenses among the types of assets considered
to be investments thereunder. In a similar situation in Middle East Cement Shipping, where
the BIT stated that “[I]nvestment means every kind of asset and in particular, though not
exclusively, includes […] business concessions conferred by law or under contract”, the
license was considered as qualifying for an investment.5
1.1.3. The assets were invested in the territory of the Respondent.
20. The Euroasia BIT requires a territorial reference between an investment and Oceania.
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.6
21. RB, in which Claimant acquired the shares and for which operation it obtained
Environmental License, is situated in the territory of Oceania7.
22. Therefore, the shares, acquired by Claimant in RB, as well as Environmental License
shall be considered as assets invested by Claimant; and the Tribunal has jurisdiction ratione
materiae over the dispute.
1.2. The Tribunal has ratione personae jurisdiction over the dispute.
23. Claimant and Respondent satisfy the standing requirement enshrined in in the Art. 9 of
the Euroasia BIT. Both Oceania and Euroasia are the parties to the Euroasia BIT, i.e. its
“Contracting Parties”8, while the Claimant is the “investor” under para. 2 of Art. 2 of the
Euroasia BIT.
24. Respondent challenges the ratione personae jurisdiction of the Tribunal by arguing
that Claimant is a national of Eastasia, and not of Euroasia. To support its argument
3 Genin, para. 324.
4 Uncontested Facts, para 7.
5 Middle East Cement Shipping, paras. 100-101.
6 Euroasia BIT, art.1.
7 Uncontested Facts, para. 2.
8 Preamble of Euroasia BIT.
3
Respondent alleges that Euroasia’s annexation of Fairyland was unlawful, and no rules on
succession of states in treaty law shall be applicable.9
25. Respondent’s challenge of the Tribunal’s ratione personae jurisdiction fails.
26. Under para. 2 of Art. 1 of the Euroasia BIT, Claimant for its qualification as an
“investor”, shall only prove that he has the nationality of Euroasia in accordance with the laws
of Euroasia. Existence of nationality of a state is strongly evidenced by a certificate of
nationality issued by the competent authorities of a state.10
27. The facts that (i) on 23 March 2014 Euroasian authorities recognized Claimant as a
national of the Republic of Euroasia, and (ii) he was subsequently issued a Euroasian identity
card and passport11
, suffice to evidence that Claimant is the investor under the Euroasia BIT.
28. The approach under which individual’s nationality is determined primarily by the law
of the country whose nationality is claimed is also supported in doctrine12
and case law: in
Soufraki the tribunal confirmed that fact, that States may decide who their nationals are. 13
29. Consequently, all the requirements of ratione personae jurisdiction are present.
2. Claimant is not bound by the requirements of pre-arbitral steps under Art. 9 of
the Euroasia BIT.
2.1. Requirements of taking pre-arbitral steps under Art. 9 of the Euroasia BIT are
non-mandatory.
30. Though Respondent alleges that Art. 9 of the Euroasia BIT requires a dispute “to be
submitted to competent domestic courts of the host state”14, making this step is not
obligatory for submission of the investment dispute to the Tribunal. In its allegations,
Respondent, apparently, invokes para. 3 of Art. 9 of the Euroasia BIT.
31. Para. 3 of Art. 9 of the Euroasia BIT follows para. 2 thereof, which stipulates that in
case of impossibility of the amicable settlement of the dispute, “it may be submitted to the
competent courts of the Contracting Party in whose territory the investment is made”.15
32. Para. 3 of Art. 9 of the Euroasia BIT explains the consequences of submitting a
dispute to the courts of the host state before starting international arbitration. Still, nothing in
9 Answer to Request for Arbitration.
10 Schreuer, Nationality of Investors: Legitimate Restrictions vs. Business Interests, p. 521-527.
11 Procedural Order No 2, para. 4.
12 Schreuer, Nationality of Investors: Legitimate Restrictions vs. Business Interests, p. 521-527.
13 Soufraki, para. 55.
14 Answer to request for Arbitration.
15 Euroasia BIT.
4
para. 2 and para. 3 of Art. 9 of the Eurasia BIT supposes that the investor must start local
proceedings.
33. Ordinary meaning of the phrase “may be”, used in para. 2 of Art. 9 of the Euroasia
BIT is the possibility to do something or the allowance to do something. Such wording
makes the provisions where they are used non-binding.
34. The alike wording of Art. 5 of the NY Convention, which begins with the phrase
“recognition and enforcement of the award may be refused...”,16
is considered to be
permissive and non-obligatory, as the English language version of the NY Convention says
that “the enforcing court may refuse recognition and enforcement – not that it must do so”.1718
35. Claimant, therefore, has the right to submit this dispute before the Tribunal regardless
of compliance with any pre-arbitral step.
2.2. Claimant can avoid requirement of pre-arbitral steps by virtue of most-favoured-
nation clause stipulated in Art. 3 of the Euroasia BIT.
36. Even if the Tribunal decides that Art. 9 of the Euroasia BIT preconditions Claimant’s
right to submit the dispute to the Tribunal upon prior starting proceedings before judicial or
administrative courts of Oceania, Claimant can still submit the dispute to the Tribunal.
37. Such possibility accrues from Art. 3 of the Euroasia BIT, containing most-favoured-
nation (“MFN”) clause,19
used in conjunction with Art. 9 of the Eastasia BIT which does not
include the local remedies requirement.
38. As ICS Inspection and Control Services Limited, being the claimant in ICS Inspection
and Control Services Limited, reasonably notes, states have used MFN clauses in BITs “to
ensure that they obtain any advantages, privileges, and concessions that the granting State has
accorded or accords in the future to third States”.20
39. In contrast to Art. 8 of the Euroasia BIT, Art. 9 of Eastasia BIT does not require prior
submission of the dispute to local courts. For that reason, treatment of the investors from
Eastasia is more favourable that of those from Eurasia.
40. Tribunals have regularly allowed investors to bypass unfavourable procedural
requirements. In AWG Group Ltd., where the tribunal let the claimant avoid the requirement
16
NY Convention, art. 5. 17
N. Blackaby, C. Partasides, A. Redfern, M.Hunter, Redfern and Hunter on International Arbitration, para.
11.93. 18
Chromalloy, para. 909–910. 19
Euroasia BIT. 20
ICS Inspection and Control Services Limited, para. 113.
5
to first resort to local courts, due to the MFN clause in Art. 3 of the UK-Argentina BIT. 21
Later the use of MFN clause was proved by many cases.22
23
41. Considering that (i) in Art. 9 of the Euroasia BIT Oceania accords Euroasian investors
with less favourable treatment compared to the treatment granted to the investors of Eastasia
under Art. 8 of Eastasia BIT, and (ii) Art. 4 of Euroasia BIT requires Oceania to treat
Euroasian investors not less favourably than investors from third parties, the pre-arbitral steps
requirement of Art. 9 of the Euroasia BIT shall not prevent Claimant from submitting the
dispute to the Tribunal.
3. The Tribunal’s jurisdiction is not precluded by the “clean hands” requirement
under Article 1.1. of the Eastasia BIT.
3.1. Invoking of Art. 9 of Eastasia BIT by virtue of MFN clause does not
automatically require application of Art. 1. 1 of Eastasia BIT.
42. Invoking of Art. 9 of Eastasia BIT by virtue of MFN clause does not automatically
require application of Art. 1. 1 of Eastasia BIT.
43. In Siemens, the Tribunal ruled, that “claiming a benefit by the operation of an MFN
clause does not carry with it the acceptance of all the terms of the treaty”.24
It further held that
an investor could “pick and choose”, i.e. that claiming a benefit by the operation of the MFN
clause did not trigger the application of all provisions of the treaty invoked.
44. Then, Claimant is not bound by provisions of using clean hands under Eastasia BIT.
3.2. Even if Claimant’s investments have to comply with the “clean hands” doctrine
under Article 1.1. of the Eastasia BIT, they comply.
3.2.1 Claimant’s guilt for any “unclean hands” actions has not yet been proven.
45. Under Art. 1 of the Eastasia BIT “investment” should be invested in accordance with
the laws and regulations of the latter.25
46. “Clean hands” or “unclean hands” doctrine is a concept that a claimant’s claims may
be barred due to its illegal conduct in relation to the claims he brings26
, but in the case at hand
it is not applied, because illegality of Claimant’s conduct is not established by the court.
21
AWG Group Ltd., para. 68. 22
Siemens, para. 68. 23
Suez, decision on jurisdiction, para. 65. 24
Siemens, decision on jurisdiction, para. 110. 25
Eastasia BIT, art. 1.1. 26
B. Cheng, General Principles of Law as Applied by International Courts and Tribunals, p. 155; Brownlie, p.
503.
6
According to Art. 11 of the Universal Declaration of Human Rights everyone shall be
presumed innocent until proved guilty before the court in accordance with the applicable
law.27
This general principle sets a standard with regard to the threshold of required proof: the
presumption of innocence must be defeated by proof of guilt beyond a reasonable doubt
before guilt can be regarded as established and a conviction can take place.28
47. Claimant is blamed for obtaining of Environmental License on 23 July 1998 for RB
and bribing the NEA President. The criminal proceedings against Claimant were initiated on
23 June 201529
and have not terminated yet, i.e. Claimant’s guilt has not been proven.
48. This fact in conjunction with presumption of innocence principle means that
Respondent’s allegations that Claimant invested with “unclean hands” are without ground.
3.2.2. Claimant has not violated the applicable law while making investments.
49. Even if the Tribunal finds that Claimant has committed any “unclean hands” actions,
Claimant complies with the requirements to “investments” under Art. 1 of the Eastasia BIT,
since the alleged violations took place after the investments were actually made. In its
definition of “investments”, Art. 1 requires that investments are “[…] invested […] in the
territory of the other Contracting Party in accordance with the laws and regulations of the
latter […]”.
50. In accordance with the principles set out in Art. 31 of the VCLT the Eastasia BIT’s
definition of “investment” must be “interpreted in good faith in accordance with the ordinary
meaning” to be given to the terms of the Eastasia BIT, in its context, and “in the light of its
object and purpose”.30
51. Respondent cannot claim that for Claimant’s investments to qualify as “investments”
under the Eastasia BIT, Claimant needs to comply with Respondent’s laws at any moment
after the investments are actually invested, namely, after Claimant’s acquisition of shares in
RB.
52. The alleged violations, however, i.e., corrupted obtainment of Environmental License
and concluding the contract with the Ministry of the National Defence of Euroasia, took place
only in July and December, 1998 respectively, while Claimant invested in RB almost half a
year earlier, i.e. in February 1998.
27
UDHR, art. 11.1. 28
R. A. Duff, Who must Presume whom to be Innocent of What, p. 170. 29
Uncontested Facts, para 19; Procedural Order No. 2, para. 5. 30
VCLT, art. 31.1.
7
53. As Claimant did not violate Respondent’s laws while acquiring the shares in RB,
Claimant did not violate Art. 1 of Eastasia BIT in their regard, and the shares fall under the
definition of “investments” under the Eastasia BIT.
3.2.3. “Clean hands” doctrine is not a general principle of International Law.
54. Claimant agrees that should there exist a general principle of law under which
“collateral illegalities” could bar investors from protection of their investments, the alleged
violations could potentially deprive Claimant’s shares in RB from protection. However, as it
was noted in Yukos:
“[g]eneral principles of law require a certain level of recognition
and consensus. However, on the basis of the cases cited by the
Parties, the Tribunal has formed the view that there is a
significant amount of controversy as to the existence of an
“unclean hands” principle in international law”.31
55. Referring to the decision of the tribunal in Yukos, namely, that “unclean hands” do not
exist as a general principle of international law32
, Claimant submits that its investments may
not be denied protection under International Law.
3.2.4. In the case at hand the principle of estoppel is applied.
56. Even if the Tribunal finds that Claimant’s investments can be deprived of protection
under the Eastasia BIT because of Claimants illegal actions, estoppel shall be invoked as:
“[r]ecognition, acquiescence, and estoppel are considered to be
part of the corpus of general principles of law recognised by
civilized nations (Art. 38 (1) (c) ICJ Statute”)”.33
57. The idea of estoppel is that a party which has made or consented to a particular
statement upon which another party relies in subsequent activity to its detriment or the other’s
benefit cannot thereupon change its position.34
One of the distinguishing features of estoppel
is that it does not denote any particular form of unilateral state conduct.35
58. Two elements constituting estoppel are established: (1) a declaration or representation
made by one party concerning another; and (2) trust of the opposite side during behaviour of
31
Yukos, para. 1359. 32
Ib., para. 1363. 33
M. Dixon, Textbook on International Law, p. 39–40; H. Lauterpacht, The Development of International Law
by the International Court, p. 170; MacGibbon, Estoppel in international law, p. 470. 34
Sh. Malcolm, International Law, p. 437; D.W. Bowett, Estoppel Before International Tribunals and Its
Relation to Acquiescence, p. 183-84; NSPI, para 142. 35
Cedeño’s Seventh Report, p. 196.
8
other party, at the same time operating on understanding that other party did not refuse the
initial situation.36
59. In the present case Respondent, as represented by the NEA acting within its
capacity37
, stated that RB’ activity complies with Oceanian laws by issuing Environmental
License. Taking into account the obtained license, Claimant sought to renew and develop
production of RB, thereby expressing trust to Respondent’s declaration. Claimant got an
Environmental License approving the commencement of arms production by RB on 23 July
1998.38
60. The circumstances in which Claimant obtained the license were qualified as a bribe
for the purposes of criminal proceeding in 2013 only. For 13 years Respondent was not taking
any measures against Claimant, hereby allowing it to trust that its activity is legal and to
continue further development of its business.
61. Therefore, in accordance with the estoppel principle Respondent cannot accuse
Claimant and the Oceanian officials the NEA of corruption.
3.2.5. In any event “clean hands” requirement should not be used to deprive tribunal of
the jurisdiction.
62. Even if “clean hands” doctrine is applied in the case at hand, then it does not impact of
the Tribunal’s jurisdiction. In this case “clean hands” doctrine should be considered in the
merits in a part of legality of investments.
63. The tribunal in Yukos considered a similar question about application of “clean hands”
doctrine in the merits and not in the jurisdiction part of the proceedings.39
The same approach
was chosen in Plama, where the tribunal considered and rejected an argument that the
illegality of the investment could affect its capacity to hear the dispute.40
64. Considering that, Claimant has the right to submit the dispute to the Tribunal, the
Tribunal has jurisdiction over the dispute and the dispute is admissible to the Tribunal.
36
Salvador v. Honduras, para. 118; PAE LLC, para. 159. 37
Uncontested Facts, para 4. 38
Ib., para 7. 39
Yukos, para. 1373. 40
Plama, para 90.
9
PART TWO: MERITS
4. Respondent illegally expropriated Claimant’s investments.
65. As a result of Respondent’s issuance of Executive Order Claimant was deprived of the
stream of the dividends, arising from its shareholdings, and effectiveness of Environmental
License. Such deprivation constitutes expropriation under Art. 4 of the Euroasia BIT and is
unlawful as: (a) the taking was not in the public interest; (b) it did not comply with due
process, in particular, Claimants was denied of “fair and equitable treatment” specified in Art.
2 (2) of the Euroasia BIT and Respondent failed to provide “full security and protection” to
Claimants' investment under Art. 2 (2) of the Euroasia BIT; (c) the taking was discriminatory;
and (d) the taking was not accompanied by the payment of prompt, adequate and effective
compensation to the investor.41
4.1. Imposition of Sanctions and introduction of Executive Order by Respondent
meet the legal threshold for indirect expropriation.
66. Investments of Claimant have been expropriated as a result of the imposition of
Respondents’ sanctions, namely, a ban on business operations with persons engaged in certain
sectors of the Euroasian economy, suspending existing contracts, making future contracts
with them illegal (“Sanctions”) and a rapid decrease in the value of RB’ shares42
and
introduction of Executive Order.
67. Expropriation is a forcible taking by a state of tangible and intangible property
owned by private persons.43
Salacuse qualifies the situations in which host states invoke
their legislative and regulatory powers to enact measures that reduce the benefits investors
derive from their investments without actually changing or cancelling investors’ legal title to
their assets or diminishing their control over them as “indirect expropriation”.44
68. Art. 4 of the Euroasia BIT explicitly forbids indirect expropriation: “[i]nvestments by
investors of either Contracting Party may not directly or indirectly be expropriated”.
69. Investment tribunals recognize that
“[t]here is no “mechanical formula” for determining whether
one or more state acts may amount to an indirect expropriation”,
and it has been observed accordingly that the state measures that
41
Euroasia BIT, art. 4.1. 42
Uncontested Facts, paras. 16-17. 43
Tecmed, para. 161; S.D. Myer Inc., para. 280; Wena Hotels Ltd., para. 98. 44
Salacuse, p. 325.
10
can potentially impact upon an investor’s rights in its investment
are too varied to fit into a neat formula”.45
70. In one of the most recent cases dealing with indirect expropriation, i.e. Yukos, the
tribunal considered three elements of an alleged indirect expropriation are as follows: (a)
degree/intensity of harm to the investment which was expressed in Yukos’ liquidation and
striking off the Russian companies register, with its assets acquired by the State-owned oil
company, Rosneft46
; (b) investor’s legitimate expectations that were protect against
confiscation of investment and preferential taxation;47
(с) character of the government
measures that included such measures as “taken only under the guise of taxation, but in reality
aimed to achieve an entirely unrelated purpose”.48
71. All the three criteria are met by imposing Sanctions and introduction of the
Environmental Order.
4.1.1. The economic impact on Claimant’s business of Sanctions and Executive Order
was intense.
72. After entry into force of Executive Order, which provided imposing of sanctions
against certain persons, Claimant sustained huge losses in its RB business and as a result a
rapid decrease in the value of its shares. Claimant was unable to sell the shares in the
company to a third person. Simultaneously, all the Oceanian companies that contracted with
Claimant’s company issued formal notices, declaring that pursuant to Executive Order they
were no longer bound by the provisions of the respective contracts and that they had no
intention to perform them.49
73. Revocation of Environmental License was detrimental. In order to adjust arms
production to the environmental requirements contained in the Environment Act 1996,
Claimant had to go through the time and expense of it. The presence of the license and RB’
compliance with all requirements of the Environment Act 1996 creates essential competitive
advantage for Claimant’s business, because it is only company having in this sector in the
territory of Oceania.50
74. Middle East Cement Shipping case concerned the revocation of a free-zone licence
through the prohibition on the import of cement into Egyptian territory. The prohibition
45
Ch. Gibson, A Look at the Compulsory License in Investment Arbitration: The Case of Indirect Expropriation,
p. 378; Arbitrating Foreign Investment Disputes: Procedural and Substantive Legal Aspects p. 145-146. 46
Yukos, paras. 1696, 1704. 47
Ib., para. 1578. 48
Ib., para. 1407; C.S.Gibson, Yukos Universal Limited, p. 308. 49
Uncontested Facts, paras.16-17. 50
Uncontested Facts, para.5.
11
resulted in a paralysis of the investor’s business, which essentially consisted of importing,
storing, and dispatching cement within Egypt. The Arbitral Tribunal found that the import
prohibition resulted in an indirect expropriation of the claimant’s investment.51
75. So, Claimant lost an opportunity to operate his investments that demonstrates negative
impact on them on Respondent’s behalf.
4.1.2. Sanctions and the Environmental Order interfered with reasonable and
legitimate expectations of Claimant.
76. Legitimate expectations play a key role in the interpretation of the fair and equitable
treatment standard, but they have also entered the law governing indirect expropriations.52
77. In Metalclad, the investor had acted in reliance on assurances to the effect that he had
all necessary permits. Nevertheless, the project was foiled by the refusal of the municipality to
grant a construction permit. The Tribunal considered the breach of investor’s expectations as
an indirect expropriation.53
78. Claimant had no reason to foresee that any sanctions restraining its business appear at
all, not to mention such extraordinary sanctions as proclaiming any business with RB to be
illegal, or relieving the contractors of RB from their obligations to the company.
4.1.3. Sanctions and the Environmental Order were not a non-compensable
governmental regulatory activity but a measure amounting to indirect, compensable
expropriation.
79. A question of prime importance, both for the host state and for the foreign investor, is
the role of the general regulatory measures of the host country under the rules of indirect
expropriation. Emphasis on the host state’s sovereignty supports the argument that the
investor should not expect compensation for a measure of general application.54
Indeed, one
way to identify a taking may be to clarify whether the measure in question was taken in the
exercise of functions that are generally considered part of a government’s powers to regulate
the general welfare.55
51
Middle East Cement Shipping, para. 107. 52
Dolzer, pp. 115; 145. 53
Metaclad, para. 107. 54
Rumeli, para. 702. 55
Telenor, para. 78.
12
80. As it was stated in LG&E, in order to establish whether state measures constitute
expropriation the tribunal was to balance two competing interests: the degree of the measure’s
interference with the right of ownership and the power of the state to adopt its policies.56
81. Regulatory activity of government includes some measures of the states, but not in the
present case. In Yukos it was ruled that:
“[f]eatured an apparent conflict of legitimate interests and
values: the right of the investor to be protected against wilful
and arbitrary confiscation of its investment by the host state
acting for political reasons, and the right of the state to enforce
its tax laws and combat tax abuse”.57
82. In the case at hand Respondent’s political objectives take place which have not any
relation to maintenance of an order in Oceania.
4.2. The expropriation does not meet the legality requirements under para. 1 of Art. 4
of the Euroasia BIT.
83. The legality of a measure of expropriation is conditioned on four requirements, which
are also seen to be part of customary international law, and are to be fulfilled cumulatively.58
Art. 4 (1) of the Euroasia BIT establishes the same requirements of legality expropriation: (i)
the measure must serve a public purpose, (ii) the expropriation shall be carried out under due
process of law, (iii) on a non-discriminatory basis and (iv) shall be accompanied by
provisions for the payment of prompt, adequate and effective compensation.59
Under the
practice of investment dispute adjudication the lack of even one of these requirements leads to
the conclusion that the expropriation was unlawful.60
84. Claimant submits that the expropriation of Respondent’s investments does not meet
any or at least some of the criteria and, therefore, is illegal.
4.2.1. The requirement of public purpose was not complied with.
85. One of the elements of legal expropriation is “public purpose” or “public interest”61
which is provided in many BITs between a state and investors. This fact is confirmed by the
practice of investment tribunals.62
56
LG&E; paras. 189, 195. 57
W. Sadowski, Yukos and Contributory Fault, p. 6. 58
Dolzer, p, 99-100. 59
Euroasia BIT, art 4.1. 60
Waguih, para. 433. 61
ADC, paras 432-433. 62
ADC; Azurix; Methanex; Feldman; Metaclad; Santa Elena.
13
86. Respondent may contend that a state is free to judge which actions are made for public
purpose, however, the contemporary case law stipulates that public purpose requirement is not
completely self-judging.63
The exercise of the right to expropriate depends on genuine public
need and the exercise of good faith.64
Public need may comprise of serious public demands in
the field of economy, political or military security related to foreign relations.65
87. However, there was no public need in Sanctions and Executive Order.
88. In the Tribunal’s opinion in the ADC, “a treaty requirement for “public interest”
requires some genuine interest of the public”. As this requirement did not take a place, the
Tribunal did not find public purpose being served by Respondent’s depriving Claimants of
their investments in the Airport Project.66
89. As to the arguments on whether public purpose existed, the attention can be paid to
Yukos67
, the relevant facts in which were similar. While deciding whether destruction of
Russia’s leading oilcompany and largest taxpayer was in the public interest, the Tribunal
indicated that it was, instead, in the interest of the largest State-owned oil company, Rosneft,
which took over the principal assets of Yukos virtually cost-free. However, this was not the
same as being in the public interest of the economy, polity and population of the Russian
Federation.68
90. Claimant’s activity did not constitute any danger to Oceania and to its citizens by the
arms production carried out by RB. Also Claimant achieved to develop RB into a very
prosperous company and one of the largest arms producers in Oceania, that benefited the local
community and Valhalla itself.69
When RB’ business was so well developed and complied
with all legal requirements of the Environmental Act 1996, Respondent decided to interfere
with Claimant’s activity for political reasons. This intervention can be caused by Oceania’s
foreign policy ambitions and beliefs by means of imposing of sanctions against the investor.
91. Thus, there are not any arguments to believe that acts on the part of Respondent
express interests of the population.
63
ADC, para. 432; Siemens, para. 273; A.Newcombe, L. Paradell, Law and Practice of Investment Treaties:
Standards of Treatment, p.372. 64
ADC, para. 432. 65
A.Newcombe, L. Paradell, Law and Practice of Investment Treaties: Standards of Treatment, p.370. 66
ADC, paras. 429, 432. 67
Yukos. 68
Ib., para. 1581; C.S.Gibson, Yukos Universal Limited, p. 312. 69
Uncontested Facts, para. 12.
14
4.2.2. Expropriation was not made in accordance with due process of law.
92. Euroasia BIT explicitly requires that the procedure of expropriation must follow
principles of due process.70
Due process is an expression of the minimum standard under
customary international law and of the requirement of fair and equitable treatment.71
93. Citing ADC, “due process of law” requires an actual and substantive legal procedure,
providing for certain basic procedural mechanisms such as advance notice and a fair hearing,
in which the investor has a reasonable chance to claim its rights and be heard. As noticed by
the tribunal in that case “due process of law”, in the expropriation context, demands an actual
and substantive legal procedure for a foreign investor to raise its claims against the depriving
actions already taken or about to be taken against it. 72
94. Similarly, in Yukos, Russia claimed that the seizure of the assets and treatment of the
investors had been done according to law, the tribunal concluded that it had not been “carried
out under due process of law”, as required by Art. 13 (1) (c) of the ECT.73
95. In any event Claimant argues that Executive Order was not issued in according with
law.
4.2.3. Expropriation was not carried out on non-discriminatory basis.
96. In accordance with Art. 4 (1) of the Euroasia BIT the host state can take foreign
investment on a non-discriminatory basis.74
97. The ADC award serves as a helpful guide to the non-discrimination prongs.75
In this
case the Claimants reasonably argued that because all foreign investors were prohibited from
operating the airport under the provisions of the Ministry of Transport’s regulatory directive,
the antidiscrimination standard in the Art. 4 of the Cyprus-Hungary BIT was violated.76
98. In the present case RB was the only company involved in arms trade with the
Republic of Euroasia and designated by Sanctions on side of Respondent.77
Claimant suffered
from these actions led to the аctual losses of RB’ shares.
99. Hence, Respondent has violated requirement of a non-discriminatory basis as a
minimum standard of international law.
70
Euroasia BIT, art. 4.1. 71
Dolzer, p. 99. 72
ADC, para. 435. 73
Yukos, para. 1583. 74
Euroasia BIT, art. 4.1. 75
J. R. Marlles, Public purpose, private losses: regulatory expropriation and environmental regulation in
International investment law, p.314. 76
ADC, paras. 295, 411. 77
Uncontested Facts, para. 17, Procedural Order No 2, para 6.
15
4.2.4. Claimant was not granted “prompt, adequate and effective compensation”.
100. Under international law, states are obliged to pay compensation for expropriated
property, even if it was conducted in accordance with the international law.78
101. The Euroasia BIT prescribes that the investor should receive the prompt, adequate and
effective compensation for the expropriated property.79
This formula reflects the Hull
standard of compensation.80
Adequate compensation is generally understood today to be
equivalent to the market value of the expropriated investment.81
Many awards have rendered
effective compensation to foreign investors based on the “fair market value” of the property
prior to the date of expropriation.82
102. Art. 4 (1) of the Euroasia BIT prescribes that compensation must be equivalent to the
value of the expropriated before the date on which the actual or threatened expropriation
became publicly known.83
This provision reflects the principle of international law -
restitution in integrum84
, which establishes that the compensation should meet the real market
value of the expropriated property and the future profit.85
103. In the case at hand the Respondent has not paid any compensation to the Claimant,
consequently, “prompt, adequate and effective compensation” was not provided, and, thus,
Respondent has violated the provision concerning the compensation.
5. Respondent has violated its obligations with regard to the Claimant and
investments under Art. 2 of the Eurasia BIT and international law.
104. Respondent violated the fair and equitable treatment (“FET”) standard provided in
Art. 2 of the Euroasia BIT. The FET standard helps to ensure that the investor will receive a
minimum level of protection based on notions of fairness and equity86
and is contained in
NAFTA as a general principle. Respondent did so by suspending existing contracts between
RB and other companies, making future contracts with them illegal and taking discriminatory
measures.
78
Feldman, para. 98. 79
Euroasia BIT, art. 4.1. 80
Foresti, para. 58. 81
Dolzer, p. 100. 82
Azurix, para. 438; ADC, para. 501. 83
Euroasia BIT, art. 4.1. 84
ILC Articles, arts. 31, 34, 35; J. Crawford, The International Law Commission’s Articles on State
Responsibility, p. 194, 211, 213. 85
World Bank Guidelines. Procurement under IBRD Loans and IDA Credits, (2004)., Guideline IV, Art. 5. 86
UNCTAD, Fair and Equitable Treatment, p. 20.
16
5.1. Respondent failed to provide FET to the Claimant’s investments.
5.1.1. By imposing sanctions Respondent violated fair and equitable Treatment
Standard under the Euroasia BIT.
105. Art. 2 (2) of the Euroasia BIT provides a host state’s obligation to grant at all times the
FET to foreign investments.Art. 2 (2) of the Euroasia BIT contains the FET standard, which
is considered by the prominent scholars in the field of international investment law to be the
most important standard of investment protection. 87
106. Respondent breached the FET clause found in Art. 2 of the Euroasia BIT which
provides that
“[e]ach Contracting Party shall in its territory accord
investments by investor of the other Contracting Party fair and
equitable treatment. Neither Contracting Party shall in its
territory impair by arbitrary or discriminatory the management,
maintenance, use, enjoyment or disposal of such investments”.88
107. FET is an absolute standard of investments’ protection in order to prevent states from
taking improper measures.
108. Respondent violated three elements of the FET standard: (1) breach of due process, (2)
act in a non-discriminatory manner, (3) protection of investors’ legitimate expectations.
A. Oceania breached Claimant’s right to have a due process.
109. The President of Oceania was competent to introduce Executive Order but the
notification of the investor about this act was a necessary condition to enter it into force.89
Sanctions against Claimant became unexpected.
110. In Tecmed, the Tribunal found a violation of the standard, due to the fact that the
authority failed to report in clear and express terms its intentions to revoke a license, thereby
depriving the claimant of the opportunity to express its position.90
111. Procedural fairness by governmental and judicial authorities when dealing with
nationals or foreigners is a basic requirement of the rule of law and a vital element of FET.91
112. Thus, Respondent exceeded administrative authority related to Claimant thereby
breaking a due process.
87
Tudor, p. 250. 88
Euroasia BIT, art. 2.2, 2.3. 89
Procedural Order No 2, para. 7. 90
Tecmed, para. 162. 91
Salacuse, p.264.
17
B. Respondent failed to respect Claimant’s legitimate expectations.
113. Investor expectations are fundamental to the investment process.92
In Saluka they are
considered to be the “dominant element of the standard”.93
114. Determining what expectations are “legitimate” is a fact-intensive inquiry, looking
backwards in time to also examine the political, economic, and social environment in which
the investment was made.94
115. The tribunal in Tecmed described the concept of fair and equitable treatment as
follows:
“[t]he investor also expects the state to use the legal instruments
that govern the actions of the investor or the investment in
conformity with the function usually assigned to such
instruments, and not to deprive the investor of its
investment without the required compensation”.95
116. A number of tribunals have come to the similar conclusion that any legitimate
expectations, in order to be protected by the FET standard, must have existed at the time the
investment was made.96
117. In the case at hand Claimant has practically lost all its investments and has been
suffering losses that still have not been compensated by Respondent. Respondent guaranteed
compensation in the event of expropriation of investor’s property creating the legitimate
expectation by Claimant.
118. Thus, Respondent violated the FET standard, in particular, by failure to protect the
investor’s legitimate expectations.
5.2. Respondent failed to provide full protection and security to the Claimant’s
investments.
119. One of the main principles of investment law is full protection and security. This
principle it is provided in Art. 2 (2) of the Euroasia BIT.97
120. This standard requires host countries to take steps to protect investors against physical
injury to their persons or properties, whether by government agents or third persons.
However, this provision does not make the host state a guarantor of the safety of the investor
92
Ib., p.253. 93
Saluka, para. 302. 94
Lemire, decision on jurisdiction, para 266. 95
Tecmed, para. 154. 96
Ib; Duke Energy, para. 340; Continental Casualty Co., para. 259. 97
Euroasia BIT, art. 2.2.
18
or its property. It requires only that the host state exercise due diligence in carrying out its
obligations under the treaty.98
121. In CME, the tribunal found that the Media Council’s conduct was aimed at removing
the security and legal protection from the investor’s investment and so violated the standard
of full protection and security. The tribunal stated:
“[T]he host State is obligated to ensure that neither by
amendment of its laws nor by actions of its administrative
bodies is the agreed and approved security and protection of the
foreign investor’s investment withdrawn or devalued”.99
122. In Azurix relying on AAPL100
, AMT101
, Wena Hotels102
, and Occidental 103
, the tribunal
concluded that the interrelation between the “fair and equitable treatment” and “full protection
and security” “indicates that full protection and security may be breached even if no physical
violence or damage occurs”.104
123. In the present case, President of the Host state Oceania on 1 May 2014 issued an
Executive Order on Blocking Property of Persons Contributing to the Situation in the
Republic of Eastasia.
124. The Executive Order introduced a system of Sanctions.105
Sanctions were applied
to RB and Claimant also. In fact, in the arms production sector, it was the only company
designated by the sanctions. It resulted in the deterioration of RB’ business and in a rapid
decrease in the value of its shares. Claimant was unable to sell the shares in the company to a
third person. Simultaneously, all the Oceanian companies that contracted with RB issued
formal notices, declaring that pursuant to Executive Order they were no longer bound by the
provisions of the respective contracts and that they had no intention to perform them.
Claimant could neither conduct the business, nor sell it.106
125. Consequently, Respondent violated the standard of full protection and security of
Claimant’s investment. The Respondent has also breached Euroasia BIT, and, therefore, has
committed an internationally wrongful act in accordance with Art. 2 of ILC Articles.
98
Salacuse. 99
CME. 100
AAPL, para. 170. 101
AMTI, para, 6.05. 102
Wena Hotels Ltd. 103
Occidental. 104
Azurix, para. 406. 105
Uncontested Facts, para. 16. 106
Ib., para. 17.
19
5.3. Respondent impaired the activity of Claimant by discriminatory measures taken
with regard to the Claimant’s activity.
126. According to the Article 2 (3) of the Euroasia BIT neither Contracting Party shall in
its territory impair by arbitrary or discriminatory the management, maintenance, use,
enjoyment or disposal of investments.107
127. In this particular case RB was the only company in the territory of Oceania in the arms
production sector that designated by Sanctions.
128. In similar case Bogdanov Claimant’s company GRAND TORG was the only entity
which had been subjected to the EUR 200 fees under Law, where the Tribunal decided that
Mr. Bogdanov had not received fair, equitable and non-discriminatory treatment.108
129. Host government actions that are discriminatory towards an investor or an investment
covered by an investment treaty also violate the FET standard.109
The plain meaning of “fair
and equitable treatment” indicates that if there is discrimination on arbitrary grounds or the
investment is subject to arbitrary or capricious treatment by the host state, then the fair and
equitable standard has been violated. This conclusion flows from the idea that fair and
equitable treatment inherently precludes arbitrary actions against investors.110
130. Consequently, Claimant alleges that Respondent’s conduct on imposing Sanctions and
introduction of the Execute Order was also discriminatory in violation of Art. 2 of the
Euroasia BIT.
5.4. Respondent has committed internationally wrongful act by imposing sanctions
through implementation of Executive Order.
131. Sanctions, which were applied by Oceania through the instrumentality of Executive
Order, were unlawfully imposed according to international law and should be considered as
internationally wrongful act under Art. 2, 4 of ILC Articles.
132. Under Art. 2 of ILC Articles elements of an internationally wrongful act of a State are:
“[T]here is an internationally wrongful act of a State when
conduct consisting of an action or omission:
(a) is attributable to the State under international law; and
107
Euroasia BIT, art. 2.2, 2.3. 108
Bogdanov, paras. 86, 90. 109
Salacuse, p.261. 110
S Vasciannie, The Fair and Equitable Treatment Standard in International Investment Law and Practice, p.
100, 133.
20
(b) constitutes a breach of an international obligation of the
State”.111
133. The President of Oceania within the scope of his competence under the International
Emergency Economic Powers Act 1992, which authorises him to declare the existence of an
unusual and extraordinary threat to, among others, national and / or international security
which in whole or substantial part originates outside the Republic of Oceania, promulgated
Executive Order, which imposed sanctions on property of persons contributing to the situation
in the Republic of Eastasia and as a result which caused expropriation of Claimant’s
investment.112
A. Attribution of the conduct of the President of Oceania.
134. Under Art. 4 of ILC Articles :
“[1]. The conduct of any State organ shall be considered an
act of that State under international law, whether the organ
exercises legislative, executive, judicial or any other functions,
whatever position it holds in the organization of the State, and
whatever its character as an organ of the central Government or
of a territorial unit of the State.
2. An organ includes any person or entity which has that status
in accordance with the internal law of the State”.113
135. Therefore, the conduct of the president of Oceania attributed to the conduct of the
State.
B. Breach of an international obligation.
136. Imposing sanctions by promulgation of Executive Order and expropriation as the
consequence of this Executive Order should be described as violation of the Euroasia BIT114
,
particularly, violation of the Art.4, concerning illegal expropriation and Art. 2.2, videlicet,
FET as well as full protection and security.115
137. Therefore, Respondent has committed internationally wrongful act by implementation
of Executive Order, which imposed sanctions.
111
ILC Articles, art. 2. 112
Procedural Order No 2, para. 7. 113
ILC Articles, art. 4. 114
ILC Articles, art. 12. 115
Euroasia BIT, art. 2.2.
21
6. Respondent cannot justify its violation of Euroasia BIT and international law
under Article 10 of the Euroasia BIT.
138. Respondent could not justify its violation of Euroasia BIT and international law under
Article 10 of Euroasia BIT because there was no threat to international peace and security as
there was no annexation of Fairyland by Euroasia.
139. The right of all peoples to self-determination is one of the core principles of
international law and, by virtue of its erga omnes status116
, it is the responsibility of all states
to ensure that this right is realised.
140. Factors of a people that give rise to possession of right to self-determination are a
history of independence or self-rule in an identifiable territory, a distinct culture, and a will
and capability to regain self-governance117
and also the important issue is historical
connection with territory.118
141. The most essential criteria is not which people had the first claim to a territory, but
how long a people have been present within a territory and the strength of their connection to
it. This test was applied in Gillot et al119
by France in its determination of the peoples of New
Caledonia, which was subsequently supported by the Human Rights Committee.120
142. People exercise their right to self-determination when they express the free will. The
will of a people could be formed through government decision or parliamentary resolution,
possibly supported by a plebiscite or through a referendum.121
143. A people have realized its right to self-determination when they have either (1)
established a sovereign and independent state; (2) freely associated with another state or (3)
integrated with another state after freely having expressed their will to do so.122
144. Under Principle IX UNGA Resolution 1541 (XV) of 15 December 1960 states that:
“[T]he integration should be the result of the freely expressed
wishes of the territory’s peoples acting with full knowledge of
the change in their status, their wishes having been expressed
116
UN Charter, art.1; Declaration on Principles of International Law; ICCPR, art. 1.; ICESCR, art. 1.; Wall in
the Occupied Palestinian Territory, para. 155. 117
K. Parker, Understanding Self-Determination: The Basics. 118
K. McVay, Self-determination in New Contexts. 119
Gillot et al, para. 2.6. 120
K. McVay, Self-determination in New Contexts. 121
Thürer and T. Burri, Self-Determination, para. 22. 122
International Humanitarian Law - Resource Centre. International law and self-determination.
22
through informed and democratic processes, impartially
conducted and based on universal adult suffrage”.123
145. It was reaffirmed by the ICJ in the Western Sahara.124
146. External self-determination in the course of secession can be a remedial exercise if a
population is denied internal self-determination.125
6.1. People of Fairyland can exercise their right to self-determination.
147. Under international law there is no definition of people, but the ICJ in Legal
Consequences of the Construction of a Wall in the Occupied Palestinian Territory “observes
that the existence of a “Palestinian people” is no longer in issue and that the rights of the
Palestinian people “include the right to self-determination”.126
148. Likewise, the Independent International Commission on Kosovo, having created one
of the most authoritative documents on Kosovo, assumed without much discussion that there
is a people of Kosovo: arguably, the strong moral and political duty on the part of the
international community “extends to the realization of the right of self-determination for the
people of Kosovo” and “[t]he people of Kosovo must take over the running of their
affairs”127
.128
149. Therefore, people of Fairyland exist as community and enable to exercise the right of
self-determination.
6.2. People of Fairyland possessed of right to self-determination according to capability
to regain self-governance, historical long and strong connection with territory, and
distinct culture.
150. The vast majority of people living in Fairyland are of Euroasian origin as historically
it was a part of the territory of Euroasia. At the outbreak of the World War in 1914, Eastasia
annexed the territory of Fairyland. They do not identify with Eastasia and preferred to be re-
united with Euroasia. So that, the people of Fairyland had a long historical connection with
Euroasia. Most of the residents of Fairyland are of Euroasian origin and may speak the
Euroasian language. 129
123
UNGA Resolution 1541 (XV) of 15 December 1960, principle 9. 124
Western Sahara, para. 57. 125
J. Day, The Remedial Right of Secession in International Law. 126
Wall in the Occupied Palestinian Territory, para. 118. 127
The Kosovo Report, paras. 186 and 287. 128
Thürer, T. Burri, Self-Determination, para. 19. 129
Procedural Order No 3, para. 9.
23
151. Therefore, people of Fairyland had a distinct culture to Eastasia culture. There were
independent authorities of Fairyland.130
152. Under Declaration of principles:
“[t]he establishment of a sovereign and independent State, the
free association or integration with an independent State or the
emergence into any other political status freely determined by a
people constitute modes of implementing the right of self-
determination by that people”.131
153. Under international law, people of Fairyland had realized the right of self-
determination by expressing the free will through a referendum on 1 November 2013, where
the majority decided in favour of secession.132
The referendum of 1 November 2013 held in
Fairyland was in favour of both, namely, leaving the Republic of Eastasia and reuniting with
the Republic of Euroasia.133
154. According to the Constitution of Eastasia, each province may organize a regional
referendum pertaining to matters within the exclusive competence of that province. The
Constitution does not contain any provision regulating secession from the Republic.134
But
even if the Constitution of Eastasia does not contain any provision about secession of a
region, there is the principle of equal rights and self-determination of peoples, which is
allocated in the UN Chapter135
, Declaration on Principles of International Law136
, ICCPR137
and in ICESCR.138
155. Therefore, people, who lived in Fairyland, had a right to self-determination by the
means of referendum. The referendum was lawful as people of Fairyland exercised their right
to self-determination. And after the results of the referendum they became the sovereign state
and joined Euroasia as part of the Euroasian territory.
6. 3. There was no unlawful intervention by Euroasia.
A. There was no intervention by Eurasia.
156. Under Declaration on Principles of International Law:
130
Uncontested Facts, para. 14. 131
Declaration on Principles of International Law. 132
Uncontested Facts, para. 14. 133
Procedural Order No 3, para. 7. 134
Procedural Order No 2, para. 2. 135
UN Charter, art. 1. 136
Declaration on Principles of International Law. 137
ICCPR, art. 1. 138
ICESCR, art. 1.
24
“[e]very State has the duty to promote, through joint and
separate action, realization of the principle of equal rights and
self-determination of peoples, in accordance with the provisions
of the Charter, and to render assistance to the United Nations in
carrying out the responsibilities…”139
157. On 1 November 2013, the referendum was held and the majority decided in
favour of secession. The national government of Eastasia declared that the referendum
was unlawful and had no effect on the shape of the Eastasian territory. In this situation, the
authorities of Fairyland wrote an official letter to the Minister of Foreign Affairs of
Euroasia, asking for an intervention. After a long debate, the government of Euroasia decided
to intervene and annex Fairyland to Euroasia. On 1 March 2014, the armed forces of Euroasia
entered the territory of Fairyland. The annexation was bloodless and rather peaceful as
Eastasia did not send any armed forces to protect its territory. On 23 March 2014, Euroasia
officially declared Fairyland a part of the Euroasian territory.140
158. According to the Declaration of principles proclaimed above Euroasia was entitled to
interfere in Eastasia to promote the right of self-determination of Fairyland people.
159. Therefore, the intervention of Euroasia was lawful, because authorities of Fairyland
wrote an official letter to the Minister of Foreign Affairs of Euroasia, asking for an
intervention. Also, the annexation was bloodless and rather peaceful as Eastasia did not send
any armed forces to protect its territory.141
B. Even if there was intervention by Eurasia, it was legal.
160. Even if the Tribunal finds there was intervention and annexation, therefore,
occupation of the territory, Euroasia justifies legality of its intervention by pleading the
“'consent-by-the-victim-to-intervention” excuse.142
161. For such justification to be effective, the occupier needs to demonstrate that voluntary
consent to the occupation was given by the lawful government in effective control of the
invaded state.143
162. In the present case, after the majority of people of Fairyland decided in favour of
secession and reunion with Euroasia and Eastasia declared that the referendum was unlawful
and had no effect on the shape of the Eastasian territory, authorities of Fairyland wrote an
139
Declaration on principles of international law. 140
Uncontested Facts, para 14. 141
Ib. 142
R. Pails, Self-Determination, the Use of Force and International Law. 143
Ib.
25
official letter to the Minister of Foreign Affairs of Euroasia, asking for an intervention.144
Therefore, authorities of Fairyland demonstrated the free will of people of Fairyland to
exercise the right of self-determination.
163. There was no annexation, there was the realization of the principle of equal rights and
self-determination of peoples as it proclaims in the Declaration on Principles of International
Law concerning Friendly Relations and Co-operation among States in accordance with the
Charter of the United Nations.145
164. Consequently, the right of self-determination was realized as people of Fairyland
freely expressed their will through the referendum with the intention to integrate with
Euroasia. Respondent violated international law by imposing sanctions without legal
foundation146
.
6.4. Even if annexation of Fairyland occurred, Respondent cannot refer to Art. 10 of the
Euroasia BIT for justification of its violations of international law.
165. Under UN Charter Art. 1.1, the purpose of the United Nations is:
“[T]o maintain international peace and security, and to that end:
to take effective collective measures for the prevention and
removal of threats to the peace, and for the suppression of acts
of aggression or other breaches of the peace, and to bring about
by peaceful means, and in conformity with the principles of
justice and international law, adjustment or settlement of
international disputes or situations which might lead to a breach
of the peace”.147
166. Under UN Charter Security Council is the sole body, which is responsible for
maintenance of international peace and security.
167. The only one who can impose military and non-military measures is the Security
Council.148
However, in order to impose those measures the Security Council has to
determine if an act is a threat or breach to the peace or an act of aggression in accordance with
144
Uncontested Facts, para. 14. 145
Declaration on Principles of International Law. 146
Section 5.4 of Memorandum. 147
UN Charter, art. 1.1. 148
M. Galván, Interpretation of article 39 of the UN Charter, p.151.
26
article 39.149
Without this determination the Security Council cannot impose military or non-
military measures.150
168. Eastasia, Euroasia and Oceania are all members of the United Nations.151
169. On 1 May 2014 the President of the Republic of Oceania issued an Executive Order.
The Executive Order introduced a system of sanctions. Sanctions were introduced against
the persons engaged in certain sectors of the Euroasian economy, including those producing
arms for Euroasia. Sanctions also included a ban on business operations with such persons,
suspending existing contracts and making future contracts with them illegal.152
Sanctions
were applied to RB, as well as to Peter Explosive.153
170. Similar sanctions to the ones imposed by means of Executive Order of 1 May 2014
were also imposed by some other countries which were against the annexation of Fairyland by
Euroasia.154
171. After annexation of Fairyland the UN Security Council has discussed the situation in
Fairyland, but it has not been able to agree on any Resolution with respect to its status.155
172. Security Council did not state threat to the peace, breach of the peace, or act of
aggression under Art. 39 of UN Charter and so Security Council could not authorize Members
to invoke measures not involving the use of armed force in accordance with Art. 41 of the
Charter.156
173. Therefore, Members of United Nations, including Oceania, were not entitled to
impose sanctions as collective measures with respect to international peace and security.
174. Alternatively, if there were no sanctions in the respect of international peace and
security as collective measures allowed by Security Council under UN Charter, so that there
were sanctions as countermeasures according to Art. 22, 48(1b), 54 of ILC Articles.157
175. Respondent could invoke the responsibility of Euroasia as principle of international
law such as “refrain in their international relations from the threat or use of force against the
territorial integrity or political independence of any State”158
through the form of aggression
had been breached. This principle of international law is jus cogens159
. Therefore, from the
149
UN Charter, art. 39. 150
M. Galván, Interpretation of article 39 of the UN Charter, p.151. 151
Procedural Order No 2, para. 8. 152
Uncontested Facts, para. 16. 153
Ib., para. 17. 154
Procedural Order No 3, para. 11. 155
Procedural Order No 2, para. 3. 156
UN Charter, art. 41. 157
ILC Articles, arts. 22, 48(1), 54. 158
UN Charter, art. 2.4. 159
Military and Paramilitary Activities in and Against Nicaragua, para. 14, 190.
27
character of the prohibition of use of force, which is widely recognized as a jus cogens norm
it is incontrovertible that the prohibition of aggression is valid erga omnes.160
176. Therefore, Respondent under Art. 22, 48(1b), 54 of ILC Articles imposed sanctions as
countermeasures, but this countermeasures should be reduced after the purpose of
countermeasures was reached as internationally wrongful act was terminated161
.
7. Claimant has the right for full compensation for the damage caused by the illegal
expropriation of Claimant’s investments and violation of Art. 2 of the Euroasia BIT and
international customary law with interest.
177. Illegal expropriation of Claimant’s investments, as well as failure to ensure Claimant’s
fair and equitable and non-discriminatory treatment, as well as full protection and security, as
illustrated in Sections 5 and 6 here of, make Respondent liable for breach of the Euroasia BIT
and international customary law.
178. Under Art. 31 of the ILC Articles (“Reparation”): “the responsible State is under an
obligation to make full reparation for the injury caused by the internationally wrongful
act”162
; and the ILC Articles, Art. 36 (“Compensation”): “the State responsible for an
internationally wrongful act is under an obligation to compensate for the damage caused
thereby […]”.163
179. The PCIJ in the Factory at Chorzów noted that:
“[I]t is a principle of international law that the breach of
an engagement involves an obligation to make reparation in
an adequate form. Reparation therefore is the indispensable
complement of a failure to apply a convention and there is no
necessity for this to be stated in the convention itself”.164
180. The Claimant request for the classic standard165
enounced by the PCJ in the Factory at
Chorzów: reparation must, so far as possible, “wipe out all the consequences of the
illegal act and re-establish the situation which would, in all probability, have existed if that
had not been committed”.166
160
A. Memeti, B. Nuhija, The concept of erga omnes. 161
ILC Articles, commentary, art. 49, para. 7. 162
ILC Articles, art. 31. 163
Ib. art. 36. 164
Factory at Chorzów, p. 21. 165
ILC Articles, art. 31. 166
Ib.
28
181. Normally, full reparation consists of restitution as the primary form of reparation, if
restitution is impossible, then compensation or combination of restitution and compensation
and then satisfaction167
, moreover, full reparation also can provide interest.168
182. In investment treaty arbitration, interest must be awarded both in case of lawful
expropriation as well as unlawful acts.169
183. Indeed, international customary law acknowledges that the amount of damages to be
compensated in similar cases can sometimes be reduced. The two possible grounds for such
decrease are contributory negligence170
and violation of the duty to mitigate damages.171
While neither of these grounds exists in the case at hand, even if they did, decrease in the
amount of compensation to be paid to Claimant is impossible by virtue of Art. 4 of Eurasia
BIT.
7.1. Article 4 of Oceania-Euroasia BIT is lex specialis.
184. In accordance with Art. 4 of the Euroasia BIT the compensation for expropriation
shall be “equivalent to the value of the expropriated investment”, and does not provide for any
exceptions, inter alia, does not allow any decrease in compensation for the expropriation.
185. With regard to international customary law, i.e. contribution to the injury and
mitigation of damages,172
Euroasia BIT is lex specialis.
186. In the AAPL173
tribunal concluded that the parties to the arbitration had agreed to the
applicability of the Sri Lanka-United Kingdom bilateral investment treaty as lex specialis and
applicability of the international or domestic legal relevant rules “as a supplementary source”
by virtue of the provisions of the treaty itself.
187. Even if the Tribunal finds that regardless of the lex specialis status of Art. 4 of the
Euroasia BIT, compensation for Respondent’s internationally wrongful acts can potentially be
decreased, the grounds for the decrease are absent.
188. Vide international law Euroasia BIT is lex specialis and, therefore, Art. 39 of the ILC
Articles and customary law including mitigation of damages do not apply.174
189. Alternatively, Claimant did not contribute to the damages.
167
ILC Articles, commentary, art. 34, para. 2. 168
Ib., art. 38, para. 1. 169
Sabahi, Compensation and Restitution. 170
Contribution to the injury, contributory negligence and contributory fault are used interchangeably; ILC
Articles, commentary, art.39, para.1. 171
Marboe, Calculation of Compensation and Damages. 172
ILC Articles, art. 55. 173
AAPL, paras.19-20. 174
ILC Articles, art. 55.
29
7.2. Claimant did not contribute to the damages.
7.2.1. Claimant did not contribute to the damages by acting negligently.
190. The concept of contributory fault in international law has been developed to address
the consequences of blameable conduct of a party injured by an internationally wrongful
act.175
191. Under Art. 39 of the ILC Articles for determining the reparation only wilful or
negligent conduct matter, i.e., the conduct showing manifest lack of care.176
192. It is recognized in recent case law177
and literature178
that the essential requirements
for contributory fault in the cases on compensation of damages for existing internationally
wrongful acts under Art. 39 of the ILC Articles are blameable conduct179
of the injured party
and the causal link180
between that blameable conduct and the injury suffered by that party.181
A. Respondent has committed an internationally wrongful act.
193. Under Art. 2 of the ILC Articles an internationally wrongful act is the conduct which
(a) is attributable to the State under international law; and (b) constitutes a breach of an
international obligation of the State.182
194. As illustrated in Sections 5 of this Memorandum,183
imposing of sanctions constituted
violation of Respondent’s international obligations, i.e. Art. 2 and 4 of the Eurasia BIT and
the obligations under international customary law.
195. Sanctions were introduced in Executive Order, being adopted by the President of
Oceania within his competence under the International Emergency Economic Powers Act
1992. Such act of the President of Oceania is attributable to the Respondent as the President
of Oceania under Art. 4 of the ILC Articles on State Responsibility, since it was committed in
the course of performance of the President’s executive and legislative functions, i.e. directly
as Art. 4 of the ILC Articles on State Responsibility requires.
B. There was no Claimant’s blameable conduct.
a) There was no wilful or negligent action or omission of Claimant’s side.
175
S. Ripinsky, K. Williams, Damages in International Investment Law, p. 315-318. 176
Sabahi, Compensation and Restitution. 177
Yukos. 178
W. Sadowski, Yukos and Contributory Fault 179
ILC Articles, art. 39; Yukos, para. 1596. 180
ILC Articles, art. 31; Yukos, para. 1598. 181
W. Sadowski, Yukos and Contributory Fault. 182
ILC Articles, art. 2. 183
Section 5 of Memorandum.
30
196. As stated above, Art. 39 of the ILC Articles on State Responsibility provides for
taking into account for the purposes of determination of the reparations only those actions or
omissions of the injured party which can be considered as wilful or negligent, i.e. which
demonstrate manifest a lack of due care on the part of the victim of the breach for his or her
own property or rights.184
197. While the notion of a “negligent action or omission” is not expressly determined, e.g.
by a requirement that the negligence should have reached the level of being “serious” or
“gross”, the relevance of any negligence to reparation will depend upon the degree to which it
has contributed to the damage as well as the other circumstances of the case.185
198. There was no wilful or negligent action or omission by Claimant, that can be
described as manifest a lack of due care on the part of Claimant’s breach for his or her own
property or rights.
199. First, Claimant did not contribute to the annexation of Fairyland, on 1 November
2013. People of Fairyland decided in favour of secession at referendum. The national
government of Eastasia declared that the referendum was unlawful and had no effect on
the shape of the Eastasian territory. In this situation, the authorities of Fairyland wrote an
official letter to the Minister of Foreign Affairs of Euroasia, asking for an intervention.186
200. Second, Claimant did not contribute to the intervention. The partnership between RB
and Ministry of Foreign Affairs of Euroasia started on 1 January 1999 when contract came
into effect. After that Claimant conducted in a good faith.187
Claimant executed the contract:
his company produced arm weapons, but the responsibility for use these weapons lied on
Euroasia. The date of the Euroasian Government’s decision to intervene militarily in
Fairyland is unknown, but Euroasia has long advocated for the self-determination of the
inhabitants of Fairyland. The deliberations of the Euroasian Parliament on the Government’s
proposal to intervene included discussion of the Fairyland letter of 23 January 2014
requesting Euroasia’s assistance and were broadcast on Euroasian public television.188
Therefore Claimant could not foresee the intervention in Fairyland in 2014, as he was not
initiated into the plan of intervention.
201. Consequently, there was no wilful or negligent action or any omission by Claimant.
b) Claimant acted as “wise investor”.
184
ILC Articles, commentary, art. 39. 185
Ib. 186
Uncontested Facts, para.14. 187
Ib. para. 12. 188
Procedural Order No 2, para. 3.
31
202. In MTD189
the Tribunal brought supplementary test of “wise investor”, which helped
to disclose bad business judgment and blamebale conduct of Claimant. Under the Tribunal’s
decision a wise investor, unlike MTD, would not have paid full price up-front for land valued
on the assumption of the realization of the project; but would at least have staged future
payments to project progress, including the issuance of the required development permits.190
Claimants in MTD had demonstrated bad business judgment and failed to conduct reasonable
due diligence before investing substantial amounts of money into the project.191
203. There was not Claimant’s bad diligence because his investment was well-weighed and
after getting a license for RB in 1998 his business was with bona fide intention.
204. Claimant managed to conclude, on behalf of RB, a great number of contracts for
arms production and opened several new factories. Moreover, the prosperity of the
company benefited the local community and Valhalla itself. More people from Valhalla
than ever before were working for RB.192
C. There was no causal link between Claimant’s conduct and his losses.
205. In any BIT arbitration, damages may only be awarded to the extent that there is
sufficient causal link between the breach and the loss sustained by the investor. Claimant is
not entitled to assume causation, but must prove it.193
206. The Olguín194
tribunal addressed the need to identify a “suitable causal link” between
Paraguay’s actions and Olguín’s losses, and determined that Olguín had contributed
substantially to his own losses by taking undue risk. A key aspect of this risk was Olguín’s
decision to invest notwithstanding his awareness of the tenuous status of the Paraguayan
regulatory system.
207. In the present case, there was no causal link between Claimant’s actions and
publishing of Executive Order, which imposed sanctions, and also there was no causality
between Claimant’s conduct and expropriation of his investment.
189
MTD, para. 242. 190
MTD. para. 242. 191
Sabahi, Compensation and Restitution. 192
Uncontested Facts, para. 12. 193
Lemire award, para. 133. 194
Olguín, para. 70.
32
7.2.2. Claimant did not violate its duty to mitigate the damages.
208. The principle of loss mitigation is regarded as a general principle of law.195
The
Commentary 11 to Art. 31 of the ILC Articles recognizes this principle as a “duty to
mitigate”.196
209. In Middle East Cement Shipping,197
Egypt issued a decree banning importation of all
sorts of Portland cement. This ban halted claimant’s operations in Egypt, which focused on
packing imported cement and distributing it within Egypt. The tribunal ultimately held that
Egypt’s ban constituted expropriation. As to mitigation, Egypt argued, inter alia, that although
importation of Portland cement was banned, the claimant could have imported other types of
cement to mitigate its losses. Claimant argued in reply that this was not economically feasible.
The tribunal, under the circumstances, accepted the claimant’s view.198
210. In the CME,199
Czech Republic argued that CME had failed to mitigate its losses. The
tribunal, while acknowledging that this principle is “one of the established legal principles in
arbitral case law”, rejected this contention based on the fact that the investors, under the
circumstances, had in fact done their utmost to overcome the consequences of the
government’s acts.200
211. In all cases stated above there was opportunity to mitigate damages. However, in
present case Claimant could not mitigate damages suffered by his investment because there
was no opportunity to mitigate his losses.
212. Claimant’ losses were caused by carrying into effect of Executive Order. The
Executive Order introduced a system of sanctions, which were introduced against the
persons engaged in certain sectors of the Euroasian economy, including those producing arms
for Euroasia. Sanctions also included a ban on business operations with such persons,
suspending existing contracts and making future contracts with them illegal.201
213. Imposing Sanctions on Claimant and RB made his hands tied: there was no
opportunity to reduce damages suffered by his investment. resulted in the deterioration of
RB’s business and in a rapid decrease in the value of its shares.202
195
Middle East Cement Shipping, para. 167. 196
ILC Articles, commentary, art. 31, para. 11. 197
Middle East Cement Shipping. 198
Sabahi, Compensation and Restitution. 199
CME. 200
Sabahi, Compensation and Restitution. 201
Uncontested Facts, para. 16. 202
Uncontested Facts, para. 17.
33
214. Therefore, Claimant could not mitigate damages because these damages were caused
by sanctions of Respondent, which were reply to the situation in Eastasia and annexation of
Fairyland, what was in fact not annexation, but self-determination of Fairyland people and
reunification territory, which was historically the part of Euroasia, with Eurasia.
34
COMPENSATION
215. Claimant requires for full reparation in the form of restitution as the primary form of
full reparation.
216. Claimant requests for compensate for the illegal expropriation of Claimant’s
investments and violation of Respondent’s obligations of FET, full protection and security,
and non-discriminatory treatment in value no less than 120,000,000 USD, with interest as of
the date of issuance of the award by Respondent state.
35
REQUEST FOR RELIEF
217. In the light of the submission as presented above, Claimant respectfully asks this
Tribunal to adjudge and declare:
(a) that the Tribunal has jurisdiction over this dispute in a view of the Art. 8 of the
Eastasia BIT;
(b) that it is not obligatory to follow the requirements of pre-arbitral steps under Art. 8 of
the Euroasia BIT;
(c) that Respondent has expropriated Claimant’s investments;
(d) that Respondent has breached the Fair and Equitable Treatment guaranteed in Art.
2(2) of the Euroasia BIT;
(e) that Respondent has violated the Art. 4 of the Euroasia BIT by not paying due
compensation for expropriation the Claimant’s investment and has a right to receive damages;
as well as to:
(f) award Claimants all of their fees and expenses, including attorney’s fees, incurred in
connection with this arbitration;
(g) award such other relief as the Tribunal deems just and appropriate.
![The International Maritime Law Arbitration Moot ... · The prestigious International Maritime Law Arbitration Moot Competition [IMLAM] is a competition for all law students worldwide](https://img.pdfslide.net/doc/110x75/5f65606b76b70e5bdb4e95c0/the-international-maritime-law-arbitration-moot-the-prestigious-international.jpg)
