TEAM MOSLER
THE INTERNATIONAL COURT OF ARBITRATION OF
THE INTERNATIONAL CHAMBER OF COMMERCE
PETER EXPLOSIVE
CLAIMANT
V.
REPUBLIC OF OCEANIA
RESPONDENT
MEMORIAL ON BEHALF OF CLAIMANT
19TH SEPTEMEBR 2016
Claimant: Respondent:
Peter Explosive Republic of Oceania
Unicorn Valley 36 c/o Nicole Blue-Sea, Procurator of the
01-200 Fairyland Treasury, Ministry of Finance
Euroasia Neatstreet 10, 1200 Valhalla, Oceania
i
TABLE OF ABREVIATIONS................................................................................................... IV
INDEX OF AUTHORITIES .................................................................................................... VII
TREATIES, CONVENTIONS AND LAWS ............................................................................ VII
RESOLUTIONS........................................................................................................................ VII
CASE LAW .............................................................................................................................. VIII
CASES AND AWARDS FROM ARBITRATION TRIBUNALS ............................................. viii
CASES FROM THE INTERNATIONAL COURTS ................................................................. ix
CASES DECIDED BY NATIONAL COURTS. ....................................................................... ix
BOOKS ....................................................................................................................................... X
JOURNALS AND ARTICLES .................................................................................................. XI
INTERNATIONAL REPORTS ................................................................................................ XV
OTHER PUBLICATIONS ........................................................................................................ XV
STATEMENT OF FACTS ...................................................................................................... XVI
CLAIMANT’S ARGUMENTS .................................................................................................... 1
JURISDICTION ........................................................................................................................... 1
1.0. THE CLAIMANT IS AN INVESTOR PURSUANT TO ARTICLE 1.2 OF THE
EUROASIA BIT............................................................................................................................ 1
1.1. NATIONALITY .................................................................................................................... 1
1.2. SECESSION ........................................................................................................................ 3
1.2.1. Self Determination .................................................................................................... 4
1.2.2. Use of Force .............................................................................................................. 5
1.2.3. Doctrine of Uti Possidentis ....................................................................................... 6
1.3. TREATY OBLIGATIONS ...................................................................................................... 8
2.0. THE CLAIMANT DID NOT HAVE TO ABIDE BY ALL THE PRE-ARBITRAL
STEPS IN THE EUROASIA BIT. .............................................................................................. 9
2.1. VALIDITY AND ENFORCEABILITY .................................................................................... 11
2.2. QUESTION OF JURISDICTION ............................................................................................ 13
ii
3.0. THE CLAIMANT MAY INVOKE ARTICLE 8 OF THE EASTASIA BIT
PURSUANT TO ARTICLE 3 OF THE EUROASIA BIT. ..................................................... 14
3.1. APPLICATION TO ARBITRATION ....................................................................................... 14
3.2. INTERPRETATION OF MFN .............................................................................................. 15
ADMISIBILITY .......................................................................................................................... 17
4.0. CLAIMANT MADE A PROTECTED INVESTMENT, ESPECIALLY IN THE
LIGHT OF THE “CLEAN HANDS” DOCTRINE WITH REFERENCE TO ARTICLE 1.1
OF THE EASTASIA BIT; .......................................................................................................... 17
4.1. INAPPLICABILITY OF DOCTRINE OF CLEAN HANDS UNDER ARTICLE 1 OF EASTASIA BIT 17
4.2. THE CLAIMANT MADE A PROTECTED INVESTMENT ......................................................... 18
4.3. THERE IS NO PROVISION FOR CLEAN HANDS IN THE EUROASIAN BIT ............................ 18
4.4. IN ALTERNATIVE CLEAN HANDS DOCTRINE APPLIES AT THE POINT OF MAKING OF THE
INVESTMENT .............................................................................................................................. 19
4.5 THE THRESHOLD OF DOCTRINE OF CLEAN HANDS HAS NOT BEEN MET .............................. 20
MERITS ....................................................................................................................................... 23
5.0. CLAIMANT’S INVESTMENT WAS EXPROPRIATED BY THE RESPONDENT;
AND 23
5.1. THE RESPONDENT STATE EXECUTIVE ORDER AMOUNTED TO INDIRECT EXPROPRIATION 23
5.2. THE CLAIMANT CLAIM MEETS THE REQUIREMENTS FOR INDIRECT EXPROPRIATION ....... 24
5.2.1. The Claimant was Substantially Deprived of Economic Value of his Investment ... 24
5.2.2. The Respondent is Culpable of Expropriation by Virtue of the Sole Effect Doctrine
26
5.3. THE RESPONDENT ACTIONS WERE BEYOND THE POLICE POWERS .................................. 27
5.4. ACTION OF THE STATE AMOUNTED TO ILLEGAL EXPROPRIATION .................................... 29
6.0. CLAIMANT DID NOT CONTRIBUTE TO THE DAMAGE SUFFERED BY HIS
INVESTMENT. ........................................................................................................................... 30
6.1. RESPONDENT WAS SOLELY RESPONSIBLE FOR THE DAMAGE CAUSED TO THE INVESTMENT
30
6.2. LACK OF CAUSATION BETWEEN THE EXPROPRIATION AND ACTIONS OF THE CLAIMANT . 30
iii
6.3. THE CLAIMANT IS ENTITLED TO DAMAGES ..................................................................... 30
7.0 PRAYERS .............................................................................................................................. 31
iv
TABLE OF ABREVIATIONS
¶ / ¶¶ paragraph / paragraphs
§ Section
AAA American Arbitration Association
ADR Alternative Dispute Resolution
ArbIntl Arbitration International
Art. / Arts. Article / Articles
BIT Bilateral Investment Treaty
Cf Compare
Cir. Circuit (U.S. Court of Appeals)
e.g. exemplum gratia (for example)
E.U. European Union
ed / eds editor / editors
ed. edition
et al. and others
et seq. et sequentia (and the following one)
FN footnote
FTA Free Trade Agreement
HL House of Lords
i.e. id est (that is)
ICC International Chamber of Commerce
ICCPR International Covenant on Civil and Political Rights
ICESCR International Covenant on Economic, Social and Cultural Rights
ICJ International Court of Justice
v
ICSID International Centre for Settlement of Investment Disputes
IL International law
ILC International Law Commission
ILM International Legal Materials
ILR International Law Reports
Inc. Incorporated
Incoterm International commercial term
Ltd. Limited
MFN Most Favored Nation
Model Law UNCITRAL Model Law on International Commercial Arbitration
Model Law on Conciliation UNCITRAL Model Law on International Commercial Conciliation
OECD Organization for Economic Cooperation and Development
OTP Office of the Prosecutor
PCA Permanent Court of Arbitration
PO Procedural Order
SCC Stockholm Chamber of Commerce
U.C.C. Uniform Commercial Code
U.K. United Kingdom
U.S. A United States of America
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
UNGA United Nations General Assembly
v. versus (against)
VCLT Vienna Convention on the Law of Treaties
vi
WTO World Trade Organization
vii
INDEX OF AUTHORITIES
TREATIES, CONVENTIONS AND LAWS
1. ICC Rules on Arbitration 2012, Entered into force on 1st January 2012
2. International Covenant on Civil and Political Rights, 16 December, 1966, 999 UNTS 171
and 1057 UNTS 407 / [1980] ATS 23 / 6 ILM 368 (1967)
3. International Covenant on Economic, Social and Cultural Rights, 16 December 1966, 993
UNTS 3 / [1976] ATS 5 / 6 ILM 360 (1967)
4. UNCITRAL Arbitration Rules, 1976
5. UNCITRAL Conciliation Rules, 1980
6. UNCITRAL Model Law on International Commercial Arbitration, 1985
7. UNCITRAL Model Law on International Commercial Conciliation (2002), Adopted by
on 24 June 2002, 24 ILM 1302 (1985)
8. United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI
9. Vienna Convention on the Succession of States in Respect of Treaties (1978), 1946
U.N.T.S. 3, 993 UNTS 3 / [1976] ATS 5 / 6 ILM 360 (1967
10. Vienna Convention on the Succession of States in Respect of State Property, Archives
and Debts (1983), 22 ILM 306 (1983) / UN Doc A/CONF.117/14 (1983)
11. Vienna Convention on the Law of Treaties, 23 May 1969, UN Doc. A/Conf.39/27 / 1155
UNTS 331 / 8 ILM 679 (1969) / 63 AJIL 875 (1969)
RESOLUTIONS
1. United Nations General Assembly Res 2625 (XXV) Declaration on Principles of
International Law concerning Friendly Relations and Co-operation among States in accordance
with the Charter of the United Nations, Adopted by the General Assembly on 24th October
1970, A/RES/25/2625
2. United Nations General Assembly Resolution 1514 (XV), The Declaration on the
Granting of Independence to Colonial Countries and Peoples, Adopted by General
Assembly on 14 December 1960, A/RES/1514(XV)
viii
3. United Nations General Assembly Resolution 3314 (XXIX), Definition of
Aggression, Adopted by the General Assembly on 14 December 1974, A/RES/3314
CASE LAW
CASES AND AWARDS FROM ARBITRATION TRIBUNALS
1. Agustin Maffezini v. Kingdom of Spain (ICSID No. Apr/97/7), 25 January 2000
2. Apotex, Inc. v. United States of America (ICSID Case No. ARB(AF) 12/1)
3. Award. 12 Apr 2002. Middle East Cement Shipping and Handling Co. S.A. v. Arab
Republic of Egypt, ICSID Case No. ARB/99/6. Award.
4. Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No.
ARB/05/22. 2008 Award
5. Cathay Pacific Airways, Ltd. v. Sps. Vazquez, 447 Phil. 306, 321 (2003).
6. EDF (Services) Ltd v Romania, Procedural Order No 2, ICSID Case No ARB/05/13, IIC
393 (2008),
7. Gas Natural SDGA SA V The Argentine Republic, ICSID Case no ARB/03/10,
8. Himpurna California Energy Ltd. v PT. (Persero) Perusahaan Listruik Negara,
UNCITRAL Ad Hoc-Award of 4 May 1999. Final award of 4 May 1999.
9. Hochtief AG v. The Argentine Republic, ICSID Case No. ARB/07/31
10. ICC Case No 10256, Interim Award (12 August 2000)
11. ICC Case No 11490, Final Award (2012) XXXVII
12. ICC Case No 8445, Final Award, (2001) XXVI YB Comm Arb 167;
13. ICC Case No 9977, Final Award (22 June 1999)
14. INA Corporation, Claimant v. The Government of the Islamic Republic of Iran,
Respondent (Case No. 161) Award No. 184-161
15. Iran-US Claims Tribunal, Starrett Housing Corp. v. Iran, 16 IRAN-U.S. C.T.R., at 112 et
seq. !987
16. Licensor and Buyer v Manufacturer, SCC, Interim Award (17 July 1992) (1997).
ix
17. Link-Trading Joint Stock Company v. Republic of Moldova, UNCITRAL (Final Award,
18 April 2002); (2002) IIC 154 399,
18. Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1
2002
19. Mr. Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7
20. Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and
Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay (ICSID Case No.
ARB/10/7)
21. Pope & Talbot v. Canada. In Pope & Talbot, 6 ICSID 567. Page of 172 interim Award.
26 Jun 2000
22. Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, 3 August 2004
23. Sporrong and Lonnroth v Sweden; ECHR 23 Sep 1982
24. Spyridon Roussalis v Romania, ICSID Case No ARB/06/1, Award (7 December 2011)
CASES FROM THE INTERNATIONAL COURTS
1. Case Concerning the Military and Paramilitary Activities in and Against Nicaragua
(Nicaragua v. United States of America) 27 June 1986, International Court of Justice
2. East Timor, Portugal v Australia, Jurisdiction, Judgment, [1995] ICJ Rep 90, ICGJ 86
(ICJ 1995), 30th June 1995, International Court of Justice [ICJ]
3. International Court of Justice, Advisory Opinion of 21 June 1971: Legal Consequences
for States of the Continued Presence of South Africa in Namibia (South-West Africa) Not
Withstanding Security Council Resolution 276 (1970), I.C.J. Rep 16
4. International Court of Justice, Advisory Opinion of 9th July 2004: The Legal
Consequences of the Construction of a Wall in the Occupied Palestinian Territory [2004]
ICJ
5. International Court of Justice, Advisory Opinion: Accordance with International Law of
the Unilateral Declaration of Independence in respect of Kosovo, 22 July 2010
CASES DECIDED BY NATIONAL COURTS.
1. Copeland v Baskin Robbins USA, 96 Cal App 4th 1251, 1257 (Cal Ct App 2002)
x
2. Courtney & Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 WLR 297, (English Ct
App)
3. Mocca Lounge, Inc v Misak, 94 AD2d 761, 763 (NY App Div 1983)
4. Re Secession of Quebec [1998] 2 SCR 217
5. Richie Co LLP v Lyndon ins Group Inc, 2001 WL 1640039
6. Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors [2012] EWHC
3198 (Ch)
BOOKS
1. Antonello Tancredi ‘A Normative ‘due process’ in the Creation of States through
secession’ in James Crawford the Creation of States in International Law (Second
Edition, Oxford University Press, 2006)
2. Colin Warbrick, “States and Recognition in International Law” in International Law, ed.
by Malcolm D. Evans, First Edition (New York: Oxford University Press, 2003)
3. D Bowett, ‘The Use of Force for the Protection of Nationals Abroad’ in A Cassese (ed),
The Current Legal Regulation of the Use of Force (Martinus Nijhoff 1986)
4. D.P. O'Connell, The Law of State Succession 6-9 (H.C. Gutteridge et al. eds.,
Cambridge University Press 1956).
5. Gary B Born, International Arbitration and Forum Selection Agreements: Drafting and
Enforcing (4th edn, Wolters Kluwer 2013)
6. Heather A. Wilson, International Law and the Use of Force by National Liberation
Movements (New York: Oxford University Press, 1988), pp. 58-59
7. John Dugard and David Raic; The role of recognition in law and practice of secession’ in
M Kohen, Secession: International Law Perspectives (Cambridge University Press: 2006)
8. Malcolm N. Shaw, International Law, Fifth Edition (Cambridge: Cambridge University
Press, 2003)
9. Mathew G. Maloney, Succession of States in Respect of Treaties: The Vienna
Convention of 1978, 19 Va. J. Int’l L. 885, 911 (1979).
10. S. Jagusch and A. Sinclair, “The Limits of Protection for Investments and Investors under
the Energy Charter Treaty” in C. Ribeiro (ed.), Investment Arbitration and the Energy
Charter Treaty (Juris Publishing, 2006)
xi
JOURNALS AND ARTICLES
1. “The Jurisdiction of the International Centre for Settlement of Investment Disputes”
(1979) 19 Indian Journal of International Law 166, 203
2. Abdala, Manuel A., and Pablo T. Spiller. "Damage valuation of indirect expropriation in
international arbitration cases." Am. Rev. Int'l Arb. 14 (2003): 447-571.
3. Beloof, Douglas E., and Joel Shapiro. "Let the truth be told: proposed hearsay
exceptions to admit domestic violence victims' out of court statements as substantive
evidence." Colum. J. Gender & L. 11 (2002): 1.
4. Christoph Schreuer with Loretta Malintoppi, August Reinisch et al, The ICSID
Convention: A Commentary (2nd edn, Cambridge University Press 2009) 406
5. Crawford, James, Jacqueline Peel, and Simon Olleson. "The ILC's Articles on
Responsibility of States for Internationally Wrongful Acts: Completion of the Second
Reading." European Journal of International Law 12, no. 5 (2001): 963-991.
6. Crawford, James, Pierre Bodeau, and Jacqueline Peel. "The ILC's draft articles on state
responsibility: toward completion of a second reading." The American Journal of
International Law 94, no. 4 (2000): 660-674.
7. Doig, Alan, and Stephanie McIvor. "The national integrity system: assessing corruption
and reform." Public Administration and Development 23, no. 4 (2003): 317-33
8. Dolzer, Rudolf, and Christoph Schreuer. Principles of international investment law.
Oxford University Press, 2012
9. Dolzer, Rudolf, and Christoph Schreuer. Principles of international investment law.
Oxford University Press, 2012.
10. Dolzer, Rudolf. "Indirect Expropriations: New Developments." NYU Envtl LJ 11
(2002): 64.
11. Dugan, Christopher, Don Wallace, Noah Rubins, and Borzu Sabahi. Investor-state
arbitration. Oxford University Press, 2011.
12. Elizabeth Whitsitt, ICSID Tribunal Confirms that Allegations of Corruption Must Be
Substantiated by “Clear and Convincing Evidence” available at
xii
https://www.iisd.org/itn/2009/11/01/icsid-tribunal-confirms-that-allegations-of-
corruption-must-be-substantiated-by-clear-and-convincing-evidence/
13. Fitzmaurice, Malgosia. "Third Parties and the Law of Treaties." Max Planck Yearbook
of United Nations Law Online 6, no. 1 (2002): 37-127.
14. Fortier & Drymer, above n1 at 299; Jason Gudofsky, ‘Shedding Light on Article 1110
of the North American Free Trade Agreement (NAFTA) Concerning Expropriations: An
Environmental Case Study’ (2000) 21 Northwestern Journal of International Law and
Business 243 at 287–88
15. Fortier, L. Yves, and Stephen L. Drymer. "Indirect expropriation in the law of
international investment: I know it when I see it, or caveat investor." ICSID Review 19,
no. 2 (2004): 293-327.
16. Gaja, Giorgio. "Should all references to international crimes disappear from the ILC
Draft Articles on State Responsibility?" European Journal of International Law 10, no. 2
(1999): 365-370.
17. Garcia-Bolivar, Omar E. "Teleology of International Investment Law: The Role of
Purpose in the Interpretation of International Investment Agreements, The." J. World
Investment & Trade 6 (2005): 751.
18. Griswold, Erwin N. "Renvoi Revisited." Harvard Law Review 51, no. 7 (1938): 1165-
1208.
19. Guzman, Andrew T. "Why LDCs sign treaties that hurt them: Explaining the popularity
of bilateral investment treaties." Va. j. Int'l L. 38 (1997): 639.
20. Habib, Mohsin, and Leon Zurawicki. "Corruption and foreign direct investment."
Journal of international business studies 33, no. 2 (2002): 291-307.
21. Herstein, Ori J., "A Normative Theory of the Clean Hands Defense" (2011). Cornell
Law Faculty Publications. Paper 210. http://scholarship.law.cornell.edu/facpub/210
22. House of Commons Library, Recognition of Kosovo, SN/IA/4690, 9 April 2008
23. Hwang, Michael, and Kevin Lim. "Corruption in Arbitration—Law and Reality." Asian
International Arbitration Journal 8.1 (2012): 1-119.
xiii
24. Isakoff, Peter David. "Defining the scope of indirect expropriation for international
investments." Global Business Law Review 3, no. 2 (2013).
25. Jason Gudofsky, ‘Shedding Light on Article 1110 of the North American Free Trade
Agreement (NAFTA) Concerning Expropriations: An Environmental Case Study’ (2000)
21 Northwestern Journal of International Law and Business 243 at 287–88.
26. Kaushal, Asha. "Revisiting history: how the past matters for the present backlash
against the foreign investment regime." Harv. Int'l LJ 50 (2009): 491.
27. Klaus Peter Berger, ‘Law and Practice of Escalation Clauses’ (2006)
28. Kolo, Abba, and Thomas W. Walde. "Renegotiation and Contract Adaptation in
International Investment Projects-Applicable Legal Principles and Industry Practices." J.
World Investment 1 (2000): 5.
29. Kriebaum, Ursula. "Regulatory Takings: Balancing the Interests of the Investor and the
State." The Journal of World Investment & Trade 8, no. 5 (2007): 717-744.
30. Law and Practice of Investment Treaties: Standards of Treatment
31. Leebron, David W. "Game Theoretic Approach to the Regulation of Foreign Direct
Investment and the Multinational Corporation, A." U. Cin. L. Rev. 60 (1991): 305.
32. Meshel, Tamar, The 2012 ICC Arbitration Rules – Enhanced Practices and New Features
(July 1, 2012). 21(1) Canadian Arbitration and Mediation Journal, Spring/Summer
33. Moloo, Rahim, and Alex Khachaturian. "The Compliance with the Law Requirement in
International Investment Law." Fordham International Law Journal 34 (2011): 1473.
34. Moore, Michael O. "Determinants of German manufacturing direct investment: 1980–
1988." Weltwirtschaftliches archiv 129, no. 1 (1993): 120-138.
35. Mortenson, Julian Davis. "The Meaning of ‘Investment': ICSID's Travaux and the
Domain of International Investment Law." Harvard International Law Journal 51.1
(2010).
36. Mostafa, Ben. "Sole Effects Doctrine, Police Powers and Indirect Expropriation under
International Law, The." Austl. Int'l LJ 15 (2008): 267.
xiv
37. Newcombe, Andrew Paul, and Lluis Paradell. Law and practice of investment treaties:
standards of treatment. Kluwer Law International, 2009.
38. OECD (2004), “"Indirect Expropriation" and the "Right to Regulate" in International
Investment Law”, OECD Working Papers on International Investment, 2004/04, OECD
Publishing. http://dx.doi.org/10.1787/780155872321
39. Petersmann, Ernst-Ulrich. "International rule of law and constitutional justice in
international investment law and arbitration." Indiana Journal of Global Legal Studies 16,
no. 2 (2009): 513-533.
40. Png, Ivan PL. "Optimal subsidies and damages in the presence of judicial error."
International Review of Law and Economics 6, no. 1 (1986): 101-105.
41. Ranjan, Prabhash, and Pushkar Anand. "Determination of Indirect Expropriation and
Doctrine of Police Power in International Investment Law: A Critical Appraisal."
Available at SSRN 2728839 (2016).
42. Ripinsky, Sergey, and Kevin Williams. Damages in international investment law.
BIICL, 2008.
43. Simon Chapman, ‘Multi-Tiered Dispute Resolution Clauses: Enforcing Obligations to
Negotiate in Good Faith’ (2010) 27J Int’l Arb
44. Sornarajah, Muthucumaraswamy. The international law on foreign investment.
Cambridge University Press, 2010.
45. Spinedi, Marina. "From one Codification to Another: Bilateralism and Multilateralism
in the Genesis of the Codification of the Law of Treaties and the Law of State
Responsibility." European Journal of International Law 13, no. 5 (2002): 1099-1125.
46. Uluc, Inan, "Corruption in International Arbitration" (2016). SJD Dissertations.Paper 1.
47. Wagner, above n6 at 536; Rudolf Dolzer & Felix Bloch, ‘Indirect Expropriation:
Conceptual Realignments?’ (2003) 5 International Law Forum 155 at 164;).
48. Wälde, Thomas W., and Borzu Sabahi. "Compensation, Damages and Valuation in
International Investment Law." Transnational Dispute Management (TDM) 4, no. 6
(2007).
xv
49. Weiler, Todd. International investment law and arbitration: leading cases from the
ICSID, NAFTA, bilateral treaties and customary international law. Cameron May, 2005.
50. Williams, John Fischer, and H. Lauterpacht, eds. International Law Reports. Vol. 1.
Cambridge University Press, 1932.
51. Yearbook of the international Law Commission, 1978, Vol. II, Part Two,
INTERNATIONAL REPORTS
1. Draft Articles on the Responsibility of States for Internationally Wrongful Acts, Report
of the ILC on the Work of its Fifty-third Session, UN GAOR, 56th Session, Supp No 10,
p 43, UN Doc A/56/10 (2001)
2. ILC, “Report of the International Law Commission on the Work of its fifty-eighth
Session” (1 May-9 June and 3 July-11 August 2006) UN Doc A/61/10, Chapter IV, 33.
OTHER PUBLICATIONS
1. B. Legume “Defining Investment and Investor: Who is Entitled to Claim?” presentation
at the Symposium “Making the Most of International Investment Agreements: A
Common Agenda” co-organized by ICSID, OECD and UNCTAD, 12 December 2005,
Paris.
2. Black’s Law Dictionary Bryan A. Garner (ed), Black's Law Dictionary (7th ed., St. Paul
Minnesota, West Publishing Corporation: 1999)
3. http://www.haguejusticeportal.net/index.php?id=11906 Retrieved on 11/9/16
4. Oxford Dictionary of Law, ed. by Elizabeth A. Martin (Oxford: Oxford University Press,
2003)
xvi
STATEMENT OF FACTS
1. The Claimant is a national of Euroasia and resident of Fairyland, which is a province that
was formerly part of Eastasia and is now a region of Euroasia.
2. On 1 January 1992, the Respondent and the Republic of Euroasia (“Euroasia”)
concluded the Agreement for the Promotion and Reciprocal Protection of Investments
(the “Euroasia BIT”). The Euroasia BIT came into force on 23 October 1995.
3. On 1 January 1992 The Respondent and the Republic of Eastasia (“Eastasia”) concluded
the Agreement for the Promotion and Reciprocal Protection of Investments (the “Eastasia
BIT”). The Eastasia BIT came into force on 1 April 1993
4. The Claimant invested in the Republic of Oceania in February 1998 by purchasing
100% of the shares in the company, “Rocket Bombs Ltd”, and subsequently became its
president and sole member of its board of directors. Rocket Bombs Ltd specialised in
arms production.
5. The company was a decrepit enterprise as it had lost its environmental license necessary
for arms production operations. The suspension of arms production had also caused
massive redundancies, leaving a lot of workers from the local town of Valhalla without a
means to make a living.
6. The Claimant managed to improve Rocket Bombs Ltd from its state of operations at the
time of purchase. He started to modernise the production line to meet the requirements of
the Respondent’s Environment Act of 1996. On 23 July 1998, the claimant obtained an
environmental license from the Respondent’s National Environment Authority, which
allowed for the commencement of arms production at Rocket Bombs Ltd. Subsequently,
the Claimant managed to obtain a number of contracts for arms production. The most
crucial contract was concluded with the Ministry of National Defence acting on behalf of
the Republic of Euroasia on 23 December 1998, effective as of 1 January 1999.
7. On 28 February 2014, Rocket bombs limited and Ministry of National Defence acting
on behalf of the Republic of Euroasia concluded a contract, effective of 1 April 2014, for
a period of another six years.
8. Historically, the region of Fairyland had been part of the Republic of Euroasia. However,
due to multiple wars over the last 100 years, the province found itself within Eastasian
territory. On 1 November 2013, the residents of Fairyland decided, in a referendum, that
xvii
9. Fairyland should be reunited with its homeland – the Republic of Euroasia. On 1 March
2014, the region of Fairyland was peacefully re-united with the Republic of Euroasia. On
23 March 2014, the Republic of Euroasia officially declared that Fairyland had been
returned to the motherland and formed a Euroasian region.
10. On 1 March 2014 Euroasia introduced an amendment to its Citizenship Act, which
allowed all residents of Fairyland to apply for Euroasian nationality. The Citizenship Act
does not allow Euroasian nationals to possess dual nationality. On 23 March 2014,
Euroasian authorities recognised the claimant as a national of the Republic of Euroasia,
and he was subsequently issued a Euroasian identity card and passport.
11. The Respondent did not accept the reunification of Fairyland to Euroasia. It subsequently
imposed sanctions on all entities operating within the territory of the Republic of Oceania
that had any contractual relationship with the Republic of Euroasia, even though no
violation of international law by Euroasia in this regard has been adjudicated and the
people of Fairyland were merely exercising their right of self-determination. Sanctions
were imposed on Rocket Bombs Ltd and The Claimant.
12. Consequently, the claimant became unable to sell his shares in Rocket Bombs Ltd.
Furthermore, the value of shares was reduced almost to zero. All contracts with entities
operating in the territory of the Republic of Oceania were terminated by virtue of the
Executive Order of the President of the Republic of Oceania of 1 May 2014 on Blocking
Property of Persons Contributing to the Situation in the Republic of Eastasia. The
Executive Order caused a complete standstill in arms production, as all suppliers of
Rocket Bombs Ltd were operating within the territory of the Republic of Oceania.
13. On 11th September 2015, the claimant made a Request for Arbitration to the
International Chamber of commerce pursuant to Article 8 of the Eastasia BIT. This is
after the Claimant had notified the respondent’s Ministry of Foreign Affairs (with copies
to the Ministry of Finance, Ministry of Defence and Ministry of Environmental
Protection) of his dispute with them and of his intention to initiate arbitral proceedings
against the Respondent if they fail to negotiate with the Claimant. Hitherto no response
has been given by the respondent.
14. On 30th of September the Respondent replied to the request declaring that it rejected all
claims and allegations made by the Claimant in the Request for Arbitration as false and
xviii
unsubstantiated. Furthermore, the Respondent denied that the Arbitral Tribunal has
jurisdiction over this case.
1
CLAIMANT’S ARGUMENTS
JURISDICTION
1.0. THE CLAIMANT IS AN INVESTOR PURSUANT TO ARTICLE 1.2 OF THE
EUROASIA BIT.
15. The claimant avers that he is an investor as per Article 1.2 of the Euroasia BIT. The
Euroasia Bit expresses under this Article that an “investor” is any natural or legal person
of one Contracting Party who invests in the territory of the other Contracting Party.1 This
definition is central to the jurisdiction of the arbitral tribunal established pursuant to
investment agreements since the scope of application rationae personae may depend
directly on what “investor” means, i.e. being an investor of a state party to the treaty is a
necessary condition of eligibility to bring a claim. In addition, the scope of application
rationae materiae depends on the definition of investment and in particular with respect
to the jurisdiction of this tribunal, as it extends to any dispute arising out of an
investment.
16. In order to answer whether the claimant is an investor, this tribunal will have to establish
the following issues;
1.1. Nationality
17. There are two types of investors: natural and legal persons. For natural persons,
investment agreements generally base nationality exclusively on the law of the state of
claimed nationality. It is a firmly established principle in international law that the
nationality of the investor as a natural person is determined by the national law of the
state whose nationality is claimed. 2
18. The claimant’s nationality is safeguarded by the principle of nationality, which was
established in the Nottebohm case. This principle is the binding provision granting the
right of diplomatic protection. The claimant may invoke such protection as he possesses a
1 Procedural Order no 1 2 B. Legum “Defining Investment and Investor: Who is Entitled to Claim?” presentation at the Symposium “Making
the Most of International Investment Agreements: A Common Agenda” co-organised by ICSID, OECD and
UNCTAD,
12 December 2005, Paris.
2
national identification card and passport from Euroasia pursuant to their recognition of
him as a national of Euroasia.3
19. The right to grant and withdraw nationality of natural persons remains part of the
sovereign domain. The question before tribunals has been whether and to what extent a
state can refuse to recognize the nationality of a claimant. International law practice on
questions of nationality has developed primarily in the context of diplomatic protection.
20. In the Nottebohm case referred to earlier the ICJ held that even though a state may decide
on its own accord and in terms of its own legislation whether to grant nationality to a
specific person, there must be a real connection between the state and the national.
21. The claimant avers that his connection to the state of Euroasia is primarily denoted from
the roots that they have exerted before the annexation of the territory of Fairyland to
Eastasia in 19144 and that the vast majority of people living in Fairyland are of Euroasian
origin as historically it was a part of the territory of Euroasia. Further they do not identify
with Eastasia and preferred to be re-united with Euroasia.5
22. However, in today’s circumstances of the modern world it has been extremely difficult if
not impossible to demonstrate effective nationality following the Nottebohm, i.e. the
person’s attachment to the state through tradition, interests, activities or family ties.
Amerasinghe opines that:
“There is a distinction between diplomatic protection and jurisdiction for the
purposes of the [ICSID] Convention … [E]ven if the Nottebohm Case were to be
used as an applicable precedent, it is arguable that an effective link is relevant to
negating the existence of nationality only in the particular circumstances of that
case, or at any rate, in very limited circumstances”.6
23. The International Law Commission’s (ILC) Report on Diplomatic Protection also
recognised the limitations presented by the Nottebohm ruling in the context of modern
economic relations:
3 Procedural order no 2 4 Procedural Order no 3 5 Statement of uncontested facts at paragraph 14 6 “The Jurisdiction of the International Centre for Settlement of Investment Disputes” (1979) 19 Indian Journal of
International Law 166, 203
3
“[…] it is necessary to be mindful of the fact that if the genuine link
requirement proposed by Nottebohm was strictly applied it would exclude
millions of persons from the benefit of diplomatic protection as in today’s world
of economic globalisation and migration there are millions of persons who have
moved away from their State of nationality and made their lives in States whose
nationality they never acquire or have acquired nationality by birth or descent
from States with which they have a tenuous connection.”7
24. Therefore, this tends to show that the recognition of The Claimants by the Authorities of
Euroasia on 23rd March 2014 was legal and in accordance with International Law
Principles.
1.2. Secession
25. The claimant submits that the secession is a valid secession, which include: a
democratically exercised right of self-determination, lack of military coercion from
foreign states and adherence to the principle of Uti Possidentis. This principle states that
a territory remain with its possessors after a conflict, and thus justifies Euroasia’s
authority over Fairyland.8 The Eastasian constitution does not provide on secession and
thus this cannot be taken to mean that it is illegal.
26. The supreme court of Canada in its ruling on the matter concerning the case of secession
of Quebec gave the opinion that international law "does not specifically grant component
parts of sovereign states the legal right to secede unilaterally from their 'parent' state."9
27. The Supreme Court of Canada opinion stated that the right of a people to self-
determination was expected to be exercised within the framework of existing states, by
negotiation, for example. Such a right could only be exercised unilaterally under certain
circumstances, under current international law.10
7 ILC, “Report of the International Law Commission on the Work of its fifty-eighth Session” (1 May-9 June and 3
July-11 August 2006) UN Doc A/61/10, Chapter IV, 33. 8 Article 1, International Covenant on Civil and Political Rights, 16 December, 1966, U.N.T.S. vol. 999, page
171 [hereinafter ICCPR]; Article 1, International Covenant on Economic, Social and Cultural Rights, 16.
December 1966, U.N.T.S. 933, page 3. 9 Re Secession of Quebec [1998] 2 SCR 217 10 Declaration of Principles of International Law; Kosovo advisory Opinion; see also John Dugard and David Raic;
The role of recognition in law and practice of secession’ in Kohen above n 2, 102; Antonello Tancredi ‘A Normative
‘due process’ in the Creation of States through secession’ in Kohen above n 2, 188; James Crawford the Creation of
States in International Law (Second Edition, Oxford University Press, 2006) 5
4
28. The court stated in its opinion that under international law, the right to secede was meant
for peoples under a colonial rule or foreign occupation. Otherwise, so long as a people
have the meaningful exercise of its right to self-determination within an existing nation
state, there is no right to secede unilaterally.
29. The referendum conducted by the people of Fairyland was legitimate as provided for in
the constitution of Eastasia. The referendum was a valid and democratic means for the
Fairyland people to re-unite with their original homeland Euroasia.
30. The Claimant further submits that The Claimant is a national of Euroasia and can rely on
the Euroasia BIT pursuant to Article 15 of the Vienna Convention on Succession of
States to Treaties. Article 15 carries a proviso that the extension of those treaties should
only take place when such application would not be incompatible with the object and
purpose of the treaty or would radically change the conditions for its operation.
31. International law defines a succession of States as "the replacement of one State
by another in the responsibility for the international relations of territory."11 More
simply, State succession involves the transfer of a territory from one State (the
predecessor State) to another State (the successor State). As such, State succession may
take different forms.
1.2.1. Self Determination
32. Article 1(2) of the UN Charter, which is a part of the Chapter I dealing with the principles
and purposes of the UN, refers to the concept of self-determination while laying down
one of the four purposes of the body. In addition, in the Article 55, the self-determination
of peoples is cited as a principle on which “peaceful and friendly relations among
nations” are conceived to be based.12
33. The Declaration on the Granting of Independence to Colonial Countries and Peoples13
adopted by the GA in 1960 by eighty-nine votes in favour, none against with nine
11 See article two, common to the Vienna Convention on the Succession of States in Respect of Treaties (1978),
1946 U.N.T.S. 3, and to the Vienna Convention on the Succession of States in Respect of State Property, Archives
and Debts (1983), UN Doc. A - CONF. 117-14. 12 Heather A. Wilson, International Law and the Use of Force by National Liberation Movements (New York:
Oxford University Press, 1988), pp. 58-59 13 United Nations General Assembly Resolution 1514 (XV)
5
abstentions14 , stated that; “all peoples have the right to self-determination; by virtue of
that right they freely determine their political status and freely pursue their economic,
social and cultural development”.15
34. There have also been numerous ICJ opinions which can be taken into consideration while
studying the implementation of self-determination. As H. Wilson notes; the ICJ
acknowledged the right to self-determination in its Namibia opinion (1971) as “a
principle in international law as enshrined in the Charter and its further development in
the Declaration on Colonialism (1514(XV)), which refers to a right to self
determination”. Moreover, the ICJ considered the principle of self-determination in the
Western Sahara case as “a legal one in the context of such territories”. As Shaw points
out; “the Court moved one step further in the East Timor (Portugal v. Australia) case”
by stating that Portugal’s allegation that the self-determination has an erga omnes nature,
is “irreproachable”. The Court also defined the right of self-determination as “one of the
essential principles of contemporary international law”. 16
35. Finally, it is worthy to note that the Additional Protocol I to the Geneva Conventions of
1949 (1977) clearly recognized the self-determination in its Article 1(4) as “a right in
international law”.17
1.2.2. Use of Force
36. According to the principle concerning the non-use of force in international relations, as
elaborated in the United Nations General Assembly Res 2625 (XXV), ‘The territory of a
State shall not be the object of acquisition by another State resulting from the threat or
use of force’. In the same document, it is also emphasized that ‘No territorial acquisition
resulting from the threat or use of force shall be recognized as legal’, corollary
recognized by the International Court of Justice as reflecting customary international
law,18 as well as the remaining text of Resolution 2625 (XXV) concerning the prohibition
of the threat or use of force.19
14 Abstaining states were Australia, Belgium, the Dominican Republic, France, Portugal, Spain, South Africa, the
UK, and the US (Wilson, p. 68). 15 Malcolm N. Shaw, International Law, Fifth Edition (Cambridge: Cambridge University Press, 2003), p. 227. 16 Malcolm N. Shaw, International Law, Fifth Edition (Cambridge: Cambridge University Press, 2003), p. 229. 17 Ibid. 18 See the Advisory Opinion on the Legal Consequences of the Construction of a Wall in the Occupied Palestinian
Territory [2004] ICJ Rep 136, para 87. Also according to art 5(3) of the UN General Assembly’s Res 3314 (XXIX)
6
37. According to Article 2 of the UN General Assembly’s Definition of Aggression,
aggression consists in the ‘use of armed force by a State in contravention of the Charter’,
while according to its Article 6, a military action undertaken in self-defense under Article
51 of the UN Charter does not constitute an act of aggression. And indeed, in the
practice, there are cases in which military intervention to protect nationals abroad has
been classified as a form of self-defense pursuant to Article 51 of the UN Charter. The
claimant avers that the officials in Fairyland acted from the responsibility to be protected
by the Euroasia military. Moreover, it must be remembered that to be validly given,
consent must be issued by a competent body ‘authorized to do so on behalf of the
State’.20
38. It is clear that the intervention was bloodless and no use of force by the Euroasian
military was reported thus negates the argument of aggression. Further the help had been
asked from the officials in Fairyland and thus it was a motive for the responsibility to
protect.
1.2.3. Doctrine of Uti Possidentis
39. Oxford Dictionary of Law defines uti possidetis, which means “as you possess” in Latin,
as follows: A principle usually applied in international law to the delineation of borders.
When a colony gains independence, the colonial boundaries are accepted as the
boundaries of the newly independent state...21
40. The ICJ described uti possidetis as “a general principle, which is logically connected with
the phenomenon of obtaining independence, wherever it occurs”.22
41. In no case, however, does the practice of States as a whole suggest that the act of
promulgating a declaration of independence or secession was regarded as contrary to
international law. On the contrary, State practice points clearly to the conclusion that
international law contained no prohibition of declarations of independence.23 A great
many new States have come into existence as a result of the exercise of this right. There
on the Definition of Aggression ‘No territorial acquisition… resulting from aggression is or shall be recognized as
lawful’ 19 Case Concerning Military and Paramilitary Activities in and against Nicaragua [1986] ICJ Rep 14, para 191. 20 International Law Commission’s commentary to art 20 ARSIWA (n 36) 175, para 4. 21 Oxford Dictionary of Law, ed. by Elizabeth A. Martin (Oxford: Oxford University Press, 2003), p. 521. 22 Colin Warbrick, “States and Recognition in International Law” in International Law, ed. by Malcolm D. Evans,
First Edition (New York: Oxford University Press, 2003), p. 215. 23Retrieved from http://www.haguejusticeportal.net/index.php?id=11906 on 11/9/16
7
were, however, also instances of declarations of independence outside this context. The
practice of States in these latter cases does not point to the emergence in international law
of a new rule prohibiting the making of a declaration of independence in such cases.
42. In the present proceedings the claimant submits that, in every instance only as a
secondary argument, that the population of Fairyland had the right to create an
independent State or join Euroasia either as a manifestation of a right to self-
determination or pursuant to what could be described as a right of “remedial secession” in
the face of the situation in Eastasia.
43. On 22 July 2010, the (ICJ) in gave its Advisory Opinion on the question of the
"Accordance with international law of the unilateral declaration of independence in
respect of Kosovo". Kosovo unilaterally declared its independence from Serbia on 17
February 2008. Since then, its statehood has been recognized by 75 countries. Serbia
sought international validation and support for its stance that the 2008 Kosovo
declaration of independence is "illegal" at the General Assembly.24 On 8 October 2008,
the General Assembly of the United Nations adopted resolution 63/3 in which, referring
to Article 65 of the Statute of the Court, it requested the Court to render an advisory
opinion on the following question: “Is the unilateral declaration of independence by the
Provisional Institutions of Self-Government of Kosovo in accordance with international
law?” 25
44. Initially, the ICJ considered the legality of declarations of independence under general
international law against the background of the prohibition of the use of force and the
principle of territorial integrity finding that ‘the scope of the principle of territorial
integrity is confined to the sphere of relations between States’.
45. The Court thus concluded by ten votes to four “that the adoption of the declaration of
independence of 17 February 2008 did not violate general international law, Security
Council resolution 1244 (1999) or the Constitutional Framework [adopted on behalf of
UNMIK by the Special Representative of the Secretary-General]”, and that
24 House of Commons Library, Recognition of Kosovo, SN/IA/4690, 9 April 2008 25 International Court of Justice, Advisory Opinion: Accordance with International Law of the Unilateral Declaration
of Independence in respect of Kosovo, 22 July 2010
8
“consequently the adoption of that declaration did not violate any applicable rule of
international law”.26
1.3. Treaty Obligations
46. From a theoretical standpoint, two doctrines must be distinguished:27 The doctrine
of "universal succession" (also known as doctrine of continuity) provides that the
rights and obligations of the predecessor State, relating to the territory transferred,
are transmitted to the successor State and that of clean slate. Thus, the successor State
inherits the treaty rights and obligations of the predecessor State relating to the territory
transferred. As well, the successor State inherits public property and debts belonging to
the predecessor State relating to the territory transferred. Indeed, the "universal
succession” doctrine provides that the successor State ensures the continuation of the
predecessor State's sovereignty over the territory transferred. In order to clarify some
of the rules relating to succession to treaties, the International Law Commission
drafted the Vienna Convention of the Succession of States in respect of Treaties.28
The Convention was concluded in 1978. It entered into force in 1996. The general
solution which is embodied in this convention is based on a distinction between State
succession arising out of colonial cases and State succession arising out of non-colonial
cases. According to this distinction, “newly independent States,” i.e. States born out of
the decolonization process, do not automatically inherit treaty rights and obligations
previously concluded on their behalf by colonial powers (art. 16). However, they may
unilaterally choose to succeed to multilateral treaties to which the predecessor State is a
party (art. 17). However, for those not newly born the application continues unless
formally terminated.
Therefore, if these principles are to apply it would automatically mean that the
annexation of Fairyland by Euroasia was legal and based on known principles of
International law.
26 Ibid 27 D.P. O’Connell, The Law of State Succession 6-9 (H.C. Gutteridge et al. eds., Cambridge University Press
1956). 28 Mathew G. Maloney, Succession of States in Respect of Treaties: The Vienna Convention of 1978, 19 Va. J.
Int’l L. 885, 911 (1979).
9
47. The claim by the Respondent that the annexation was unlawful is ill-founded. The
Claimant submits that Peter Explosive is a national of Euroasia and can therefore rely on
the Euroasia BIT as his private rights still subsist even after the cession of Fairyland to
Euroasia. The imposed sanctions by the Republic of Oceania violate his private rights
under the investment contrary to human rights principles and Article 2 of the Euroasia
BIT.
48. It is based on the principle of nationality and Fairyland’s valid secession that the claimant
submits he fits the description of an investor in article 1.2 of the Euroasia BIT.
2.0. THE CLAIMANT DID NOT HAVE TO ABIDE BY ALL THE PRE-ARBITRAL
STEPS IN THE EUROASIA BIT.
49. By dint of Article 9 of the Euroasia BIT disputes under it will be settled amicably to the
farthest extent possible, and should be submitted to domestic courts before resorting to
arbitration. As the claimant did not go to the domestic courts, the respondent contends
that the tribunal lacks jurisdiction, until this step is fulfilled. This assertion is mala fides
and against the rules on pacta sunt servanda.29
50. The claimant submits its claim on the basis of Art.6 of the ICC Arbitration rule of 2012
and the Euroasia BIT. Under the Euroasia BIT, there is no provision which requires the
claimant to submit the claim to other judicial bodies before bringing it to this tribunal.
Art.9 (1) provides that disputes between investors and contracting parties shall be settled
through amicable consultations to the extent possible. From the measures the government
of Oceania has taken, it’s clear that seeking amicable settlement is a futile pursuit.
Moreover, the submission of the dispute to judicial or administrative courts is only
optional.
51. The claimant submits that he complied with the pre-arbitral steps stipulated in the BIT to
the farthest extent possible. Prior to filing his request for arbitration, the claimant
informed the respondent of his intention to initiate arbitral proceedings against them if
they failed to negotiate with him but they failed to respond. The Claimant has attempted,
but Respondent denied, settling the dispute amicably. The Claimant has requested the
Respondent for amicable settlement of the dispute by issuing a letter to the Respondent’s
29 Article 26 on the Vienna Convention on law of treaties
10
Ministry of Foreign Affairs with copies to the Ministry of Finance, Ministry of Defense
and Ministry of Environmental Protection.
52. In any case the requirement was futile. The Apotex case, propositioned the “the ‘obvious
futility’ threshold which “requires an actual unavailability of recourse or recourse that is
proven to be ‘manifestly ineffective’.30 The executive order explicitly prohibited any
claims pursuant to its application. Section 9 of the order reads; “This order is not intended
to, and does not; create any right or benefit, substantive or procedural, enforceable at law
by any party against the Republic of Oceania.”
53. In as much as the Oceanian Constitutional Tribunal may set aside any legal act, including
an executive order, if it finds it unconstitutional, given the Tribunal’s historic deference
to the executive branch in the conduct of foreign policy, it seems rather unlikely that it
would set aside the Executive Order of 1 May 2014. Even if it did, it would be an
extremely lengthy process, taking up to 3 or 4 years.31
54. There are neither competent reliefs nor a genuine prospect of it offered by the domestic
courts. Furthermore, there is existing prejudice against the claimant in the form of
criminal proceeding against the claimant. Lastly any insistence that the claimant should
have pursued the local courts is unrealistic. Claims directly brought under international
treaties may not be adjudicated by the Oceanian national courts neither in accordance
with the international law nor in accordance with the Oceanian national law.
55. International arbitration provisions are frequently accompanied by or contained within
so-called ‘multi-tier dispute resolution clauses’ or ‘escalation clauses’32. Most commonly,
the arbitration clause, in a contract or investment treaty, will provide for the parties to
negotiate (sometimes for a specified period of time and sometimes with specified
company representatives) in order to resolve their differences before initiating an
arbitration33. Alternatively, in the context of investment arbitration, both bilateral
investment treaties and investment agreements often impose both these requirements and
additional requirements for the exhaustion of local remedies, by litigation in domestic
30 Apotex, Inc. v. United States of America (ICSID Case No. ARB(AF) 12/1) 31 Procedural Order no 3 32 BIT between China and Cote d’Ivoire (2002), Art 9(3), in Christoph Schreuer with Loretta Malintoppi, August
Reinisch et al, The ICSID Convention: A Commentary (2nd edn, Cambridge University Press 2009) 406 33 See ICC Case No 9977, Final Award (22 June 1999) in Figueres (n 2) 84; Gary B Born, International Arbitration
and Forum Selection Agreements: Drafting and Enforcing (4th edn, Wolters Kluwer 2013) 100–1; Chapman (n 2);
11
courts, for specified periods.34 The principal objective of most such pre-arbitration
procedural mechanisms is enhanced efficiency and avoidance of formal legal
proceedings: parties seek to encourage the amicable resolution of disputes through
informal negotiations or conciliation, thereby avoiding the expenses, delays, and
contention of actual arbitral proceedings35.
56. Alternatively, in the event that the tribunal finds that the claimant did not comply with the
pre-arbitral steps in article 9 of the BIT, the claimant contends that the multi-layered
dispute resolution clause is not mandatory hence cannot be a jurisdictional bar to this
tribunal. The tribunal in the Spyridon case opined that compliance with procedural
requirements in an arbitration agreement is not ordinarily a prerequisite to commencing
arbitral proceedings.36
2.1. Validity and Enforceability
57. There is substantial uncertainty regarding the validity and enforceability of one of the
central components of most pre-arbitration procedural mechanisms—namely, agreements
to negotiate (or mediate) disputes. In particular, disputes frequently arise regarding the
validity and enforceability of agreements requiring that parties attempt to resolve disputes
by negotiation, conciliation, or mediation prior to commencing arbitral (or other)
proceedings. Courts in a number of jurisdictions, both common law and civil law, hold
that agreements to negotiate the resolution of disputes are invalid and unenforceable, in
most circumstances on grounds of uncertainty. Whether pre-arbitration negotiation
requirements are valid and enforceable in such jurisdictions frequently depends in
substantial part on the specific wording and structure of the relevant clause.37 As one
national court observed;
‘even when called upon to construe a clause in a contract expressly providing that
the parties are to apply their best efforts to resolve their dispute amicably, a clear
34 See, eg, UK-Argentine BIT, Art 8(2) 35 see Klaus Peter Berger, ‘Law and Practice of Escalation Clauses’ (2006) 22 Arb Int’l 1; Simon Chapman, ‘Multi-
Tiered Dispute Resolution Clauses: Enforcing Obligations to Negotiate in Good Faith’ (2010) 27J Int’l Arb 89 36 Spyridon Roussalis v Romania, ICSID Case No ARB/06/1, Award (7 December 2011) 37 See, eg, Schoffman v Cent States Diversified, Inc, 69 F3d 215, 221 (8th Cir 1995); Richie Co LLP v Lyndon ins
Group Inc, 2001 WL 1640039, paras 1, 3 (D Minn) (agreement to negotiate in good faith is unenforceable);
Copeland v Baskin Robbins USA, 96 Cal App 4th 1251, 1257 (Cal Ct App 2002); Courtney & Fairbairn Ltd v
Tolaini Bros (Hotels) Ltd [1975] 1 WLR 297, 301–2 (English Ct App)
12
set of guidelines against which to measure a party’s best efforts is essential to the
enforcement of such a clause’38.
58. In the context of a positive obligation to attempt to resolve a dispute or difference
amicably before referring a matter to arbitration or bringing proceedings the test is
whether the provision prescribes, without the need for further agreement, (a) a
sufficiently certain and unequivocal commitment to commence a process (b) from which
may be discerned what steps each party is required to take to put the process in place and
which is (c) sufficiently clearly defined to enable the Court to determine objectively
(i) what under that process is the minimum required of the parties to the dispute in terms
of their participation in it and (ii) when or how the process will be exhausted or properly
terminable without breach.39 Nevertheless, the degree of detail or precision that is
necessary for an agreement to negotiate (or conciliate) to be valid is almost inevitably
uncertain.
59. Assuming that contractual pre-arbitration procedural requirements are valid, they present
questions of interpretation. In particular, a number of authorities have considered whether
such requirements are mandatory, on the one hand, or non-mandatory (that is, merely
aspirational), on the other.
60. A substantial body of decisions by international commercial arbitral tribunals holds that
violations of pre-arbitration procedural requirements (such as violations of waiting, or
‘cooling-off’, periods or requirements to negotiate the resolution of disputes) are not
violations of mandatory obligations. In one tribunal’s words, clauses requiring efforts to
reach an amicable settlement, before commencing arbitration, ‘are primarily
expressions[s] of intention’ and ‘should not be applied to oblige the parties to engage in
fruitless negotiations or to delay an orderly resolution of the dispute’40. Other awards are
to the same effect41. The typical rationale of these decisions is that pre-arbitration
procedures are, in significant part, aspirational, directional, or hortatory, and that a
38 Mocca Lounge, Inc v Misak, 94 AD2d 761, 763 (NY App Div 1983) 39 Wah v Grant Thornton Int’l Ltd paras 60–1 40 ICC Case No 10256, Interim Award (12 August 2000) in Figueres (n 2) 87. 41 See ICC Case No 11490, Final Award (2012) XXXVII YB Comm Arb 32 (‘The provision in the arbitration clause
that disputes “be settled in an amicable way” constituted no condition precedent to referral to arbitration but rather
underlined the parties’ intent not to litigate disputes in court’); ICC Case No 8445, Final Award, (2001) XXVI YB
Comm Arb 167; Licensor and Buyer V Manufacturer, SCC, Interim Award (17 July 1992) (1997) XXII YB Comm
Arb 197.
13
party’s failure to comply with such procedures causes no material damage to its counter-
party.
61. The same rationale is reflected in Article 13 of the UNCITRAL Model Law on
International Commercial Conciliation.42
62. Importantly, Article 13 provides that the parties’ agreement not to initiate arbitral
proceedings must be express (and requires a separate undertaking, in addition to the
underlying agreement to conciliate). Moreover, Article 13 also provides that agreements
not to commence arbitral proceedings need not be given effect ‘to the extent necessary
for a party, in its opinion, to preserve its rights’. This text again reflects the
fundamentally aspirational or hortatory character of agreements to conciliate ormediate
(and, necessarily, negotiate).
63. The question of whether the parties intended a pre-arbitration procedure to be mandatory,
or, alternatively, non-mandatory, has often turned on a case-by-case assessment of the
parties’ contractual language and intentions. For example, a study of ICC arbitral awards
concludes, ‘when a word expressing obligation [, such as “shall”,] is used in connection
with amicable dispute resolution techniques, arbitrators have found that this makes the
provision binding upon the parties’ and ‘compulsory, before taking jurisdiction’.43
64. This is evident also in the present Euroasia BIT that the claimant has tried to engage the
respondent but the answers have not been forthcoming, however more importantly the
word may as used in the multilayered clause of arbitration suggests that the process is not
mandatory rather it is optional.
2.2. Question of Jurisdiction
65. In any case, amicable settlement provisions are not jurisdictional in nature. The amicable
settlement provision provided under Article 9.1 of the Euroasia BIT must be treated as
directory and procedural rather than as mandatory and jurisdictional in nature. Some
42 UNCITRAL Model Law on International Commercial Conciliation (2002), Art 13, <http://www.
uncitral.org/uncitral/en/uncitral_texts/arbitration/2002Model_conciliation.html> accessed 15th August 2016. 43 See Philip Morris v Uruguay paras 140–1 (requirement for domestic litigation is ‘binding’ regardless ‘how Article
10(2)’s terms are characterized (i.e., as jurisdictional, admissibility or procedural … That is apparent from the use of
the term “shall” which is unmistakably mandatory and from the obvious intention of [the parties] that these
procedures be complied with, not ignored.’)).
14
authorities have held that such requirements involve issues of ‘admissibility’, rather than
‘jurisdiction’.44
66. The claimant therefore submits that failure to comply with pre-arbitral steps does not act
as a jurisdictional bar to this arbitral tribunal.
3.0. THE CLAIMANT MAY INVOKE ARTICLE 8 OF THE EASTASIA BIT
PURSUANT TO ARTICLE 3 OF THE EUROASIA BIT.
67. The clause that the claimant has invoked in the Euroasia BIT in order to rely on the
dispute resolution clause in the Eastasia BIT is the Most Favored Nation (MFN) Clause
under Article 3. Under this clause, he is able to seek the same treatment from the
respondent that it accords to other investors from other countries. The particular
treatment in question is the right to expeditious settlement of disputes through arbitration
without first exhausting domestic remedies.
3.1. Application to Arbitration
68. To provide MFN treatment under investment agreements is generally understood to mean
that an investor from a party to an agreement, or its investment, would be treated by the
other party “no less favorably” with respect to a given subject-matter than an investor
from any third country, or its investment.45 The International Law Commission (ILC) has
defined MFN treatment as follows:
“Most-favoured- nation treatment is a treatment accorded by the granting State to
the beneficiary State, or to persons or things in a determined relationship with that
State, not less favourable than treatment extended by the granting State or to a
third State or to persons or things in the same relationship with that third State”
69. Article 3 (1) of the Euroasia BIT, which refers to “…such investments and to such other
investment matters regulated by this Agreement…” extends to the dispute settlement of its
Article 9. The treatment accorded to Claimant with respect to dispute settlement under
Article Article 9 of the Euroasia BIT is a less favorable treatment.
44 See, eg, Hochtief AG v Argentina para 96 (‘[The Tribunal] regards the 18-month period as a condition relating to
the manner in which the right to have recourse to arbitration must be exercised—as a provision going to the
admissibility of the claim rather than the jurisdiction of the Tribunal’); 45 Article 5 of the Draft articles on most-favoured-nation clauses (ILC Draft), in Yearbook of the international Law
Commission, 1978, Vol. II, Part Two, p. 21.
15
70. The MFN provision entitles the Claimant to benefit from the procedural guarantees
contained in the Eastasia BIT. The claimant’s claim is based on the Eastasia BIT and the
Euroasia BIT. Hence, it pleads to the tribunal to apply the two BITs for this case as per
Article 9 of ICC Arbitration rule of 2012. Article 3(1) of the Euroasia BIT requires the
contracting parties to accord equal treatments to foreign investors wherever they come.
71. The MFN is equally applicable to dispute settlement. The objective of the incorporation
of the MFN clause is to avoid discriminatory treatment of investors. The respondent state
has agreed to accord equal treatment with respect to investment matters regulated by the
Euroasia BIT. One of these matters is settlement of dispute. Thus, the claimant can resort
to ICC Arbitration which is available under the Eastasia BIT.
72. Such a situation came before the ICSID Tribunal in Siemens v. Argentina,46Where the
court stated this concerning application of MFN clauses as substantive and not procedural
matters:
‘This understanding of the operation of the MFN clause would defeat the intended
result of the clause which is to harmonise the benefits agreed with a party with
those considered more favourable granted to another party… It would oblige the
party claiming a benefit under a treaty to consider the advantages and
disadvantages of that treaty as a whole rather than just the benefits.”
3.2. Interpretation of MFN
73. In taking all this into consideration, Article 31 of the Vienna Convention on law of
treaties should be given regard as concerns matter of interpretation of treaties in that ‘A
treaty shall be interpreted in good faith in accordance with the ordinary meaning’47 given
to the terms of the treaty in their context and in light of its object and purpose.
74. Among the numerous cases brought to ICSID in recent years, two cases, Maffezini v.
Kingdom of Spain and Tecnicas MedioAmbientales Tecmed S.A. v. the United
Mexican States stand out as raising issues concerning the MFN clause.
75. Maffezini v. Kingdom of Spain (2000) was the first case to hold that an investor could
import a favourable dispute settlement provisions from a third-party treaty through MFN
clause in the basic treaty concerned a dispute arising from the treatment allegedly
46 Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, 3 August 2004 47 Article 31 of Vienna Convention on law of Treaties
16
received by the Argentine investor Emilio Agustin Maffezini from Spanish entities, in
connection with his investment in an enterprise for the production and distribution of
chemical products in the Spanish region of Galicia. Spain (the Respondent) objected to
the tribunal’s jurisdiction since Mr. Maffezini (the Claimant) had failed to comply with
an exhaustion of local remedies requirements set forth in the Argentine-Spain BIT. Mr.
Maffezini admitted that the dispute had not been referred to the Spanish courts prior to its
submission to ICSID, but he argued that the MFN clause in the Argentine-Spain BIT
would allow him to invoke Spain’s acceptance of ICSID arbitration contained in the
Chile-Spain BIT and that none of the exceptions from MFN in the Argentine-Spain BIT
applied to the dispute settlement provisions at issue in the case.48
76. The Tribunal decided that,49 by virtue of the MFN clause of the 1991 Argentine-Spain
Bilateral Investment Treaty, the claimant had the right to import the more favourable
jurisdictional provisions of the 1991 Chile-Spain Agreement and, as a result, to resort to
international arbitration without being obliged to submit its dispute to Spanish courts for
a period of eighteen months beforehand. Paragraph 2 of Article IV of the Argentina/Spain
BIT provides that after guaranteeing a fair and equitable treatment for investors
(paragraph 1):
“In all matters subject to this Agreement, this treatment shall be no less
favourable than that extended by each Party to the investments made in its
territory by investors of a third country.” 50
77. In this connection, the Tribunal referred to the ejusdem generis principle51 and the
reasoning found in the Ambatielos case (namely that the MFN clause can apply to
provisions concerning the “administration of justice”). The Tribunal also stated that
today’s dispute settlement arrangements are “inextricably related” to the protection of
foreign investors. The Tribunal concluded that:
48 Emilio Agustin Maffezini v. Kingdom of Spain (ICSID No. Apr/97/7), Decision on Jurisdiction of
25 January 2000 and Award of the Tribunal of 13 November 2000 49 Ibid 50 Ibid at pg 38; see also Gas Natural SDGA SA V the Argentine Republic, ICSID Case no ARB/03/10, Decision on
Jurisdiction of June 17, 2005 51 Ibid at 56
17
“…if a third-party treaty contains provisions for the settlement of disputes that are
more favourable to the protection of the investor’s rights and interests than those
in the basic treaty, such provisions may be extended to the beneficiary of the most
favoured nation clause as they are fully compatible with the ejusdem generis
principle…” 61
78. It is clear that tribunals have considered the term other matters in the ejusdem generis
rule and thus as is used under Article 3 of the Euroasia BIT it should also include dispute
resolution
79. The claimant submits that he may invoke article 8 of the Eastasia BIT pursuant to article
3 of the Euroasia BIT. This is in order for the claimant to be accorded the same
expeditious treatment Eastasian investors would be accorded for the settlement of
disputes between them and the respondent.
ADMISIBILITY
4.0. CLAIMANT MADE A PROTECTED INVESTMENT, ESPECIALLY IN THE
LIGHT OF THE “CLEAN HANDS” DOCTRINE WITH REFERENCE TO ARTICLE
1.1 OF THE EASTASIA BIT;
4.1. Inapplicability of Doctrine of Clean Hands Under Article 1 of Eastasia BIT
80. The Claimant submits that the Eastasia and Oceania BIT is not applicable to a citizen of
Euroasia.52Mr. The Claimant is a citizen of Euroasia therefore the only BIT that binds him
in this case is the Euroasia and Oceania BIT. Euroasia BIT does not have a requirement
similar to Article 1.1 of Eastasia BIT. Further even if it had such a requirement the
Respondent have solely premised their claim under Eastasia BIT. The claim on violation
of Article 1.1 of Eastasia BIT ought not to be sustained since it relies on inapplicable
law.53
81. Treaties only bind persons who are party to it.54 This is the doctrine of privity treaties.55
52 Rahim, Munroe. "International Treaties and Third Parties." [17] OPINIO JURIS: JURNAL HUKUM DAN
PERJANJIAN INTERNASIONAL 1 (2010). 53 Williams, John Fischer, and H. Lauterpacht, eds. International Law Reports. Vol. 1. Cambridge University Press,
1932. 54 Fitzmaurice, Malgosia. "Third Parties and the Law of Treaties." Max Planck Yearbook of United Nations Law
Online 6, no. 1 (2002): 37-127.
18
Mr. Peter explosive is a subject of the state of Euroasia after a successful secession as we
have established above. He is not subject to obligations set out in Eastasia BIT. 56
82. We further submit that the MFN clause is only applicable to dispute resolution clauses.
Article 3 of Euroasian BIT is only applicable to Article 8 of Eastasia BIT therefore this
means Article 1.1 of Eastasia BIT is not applicable.
4.2. The Claimant Made a Protected Investment
83. The Claimant made a protected investment. In order for an investment to be protected it
has to be made in accordance with the laws of the host state. 57The Claimant has complied
with the laws of host state in the following ways: Paragraph four of uncontested facts
states that The Claimant had to comply with the costly requirements under Environment
Act of 1996. He later decided to request for subsidies, but he was not given. He was
issued with the license as required under the laws of host state. The Claimant has done all
that is required by the laws of the host state. He has complied with both substantive and
procedural requirements.58 Therefore we humbly submits that this amounts to
compliance. As advanced in Plama Consortium Limited v. Republic of Bulgaria,
59Where the tribunal held that an investment that adheres to the law will be protected.
4.3. There is No Provision for Clean Hands in the Euroasian BIT
84. The Claimants submits that the Euroasian BIT does not contain a provision on clean
hands doctrine. Only provisions contained in the treaty bind the state parties. A treaty is
an agreement between parties who design the content.
85. The “in accordance with the law of the host state” provision ensures that an investment is
made in adherence to the law of the host sate. 60 This is used in examining the legality of
the investments and in establishing whether the investment is protected.61 Therefore the
claimant investment does not fall in this category of investment that ought to be
55 Ibid 56 Ibid 57 Petersmann, Ernst-Ulrich. "International rule of law and constitutional justice in international investment law and
arbitration." Indiana Journal of Global Legal Studies 16, no. 2 (2009): 513-533. 58 Kaushal, Asha. "Revisiting history: how the past matters for the present backlash against the foreign investment
regime." Harv. Int'l LJ 50 (2009): 491. 59 ICSID Case No. ARB/03/24 60 Kolo, Abba, and Thomas W. Walde. "Renegotiation and Contract Adaptation in International Investment Projects-
Applicable Legal Principles and Industry Practices." J. World Investment 1 (2000): 5. 61 Ibid
19
examined in reference to law of host state. 62The doctrine of Renvoi makes reference to
examination of municipal law of host state which in this case no such reference can be
made as illustrated in the case of Fraport AG Frankfurt Airport Services Worldwide v.
The Republic of the Philippines, 63where the tribunal stated that "in accordance with the
law" brings the effect to doctrine of renvoi and ensures theirs compliance on law of host
state.
86. The will of the states is always expressed in the text of the treaty. If the state of Euroasia
and Oceania wished to include such a provision they could do so. The two states did not
express such an intention this is despite the fact that most of modern treaties contain such
provisions. As illustrated by Tribunal in Tokios Tokelés v. Ukraine64stated that,
"l[t] he requirement in Article 1(1) of the Ukraine-Lithuania BIT that
investments be made in compliance with the laws and regulations of the
host state is a common requirement in modern BITs."
87. The tribunal is required by such provisions to consider the law of the host state.65 The
Respondent has not pleaded which specific law among it is body of laws should be
considered in deciding in accordance with the law of host state clause.66 The tribunal
cannot presume a law of the host state but the law must be pleaded directly. This is a
position that was advanced in the case of Desert Line Projects LLC v. The Republic of
Yemen, 67the treaty ought to define the investment to be carried out in accordance with
law of host state. The investment can be contained in the treaty.
4.4. In Alternative Clean Hands Doctrine Applies at the Point of Making of the
Investment
88. The doctrine of clean hands applies only at the making of the investment.68 Most of BIT
provisions provide for investment made in accordance with the law of host state.69 The
62 Griswold, Erwin N. "Renvoi Revisited." Harvard Law Review 51, no. 7 (1938): 1165-1208. 63 ICSID Case No. ARB/03/25. 64 ICSID Case No. ARB/02/18. 65 Uluc, Inan, "Corruption in International Arbitration" (2016). SJD Dissertations.Paper 1. 66 Sornarajah, Muthucumaraswamy. The international law on foreign investment. Cambridge University Press, 2010. 67 ICSID Case No. ARB/05/17 68 Herstein, Ori J., "A Normative Theory of the Clean Hands Defense" (2011). Cornell Law Faculty Publications.
Paper 210. http://scholarship.law.cornell.edu/facpub/210 69 Ibid
20
claim alleged by the Respondent happened after The Claimant made the investment. The
clean hands doctrine does not apply in carrying out of the investment since the
investment has already been made.70 The Claimant acquired 100%of the shares in 1998
by March; In July 1998 he applied for the license which was issued in the same year.
This is illustrated by case of Metal-Tech Ltd. v. Republic of Uzbekistan71Where the
tribunal found that the legality requirement that investment be made in accordance with
law of host state at the time of making the investment. The Tribunal further found at the
time establishing the investment the respondent was involved in corruption
4.5 The Threshold of Doctrine of Clean Hands Has Not Been Met
89. The applicant submits that the doctrine of unclean hands is not applicable in this case.72
The doctrine states that an investor who has being involved in corruption and other illegal
acts in coming up with the investment ought not to be protected.73 The prosecution has
opened investigation against The Claimant. The issue then does opening of investigation
prove wrong doing on part of The Claimant.
90. The Claimant had a meeting with the president of National Environmental Authority
which is tasked with issuing of licenses for company to operate.74 The meeting was
necessitated by long and tedious process that an investor had to take in order to get a
license. In fact, the law does not prohibit consultations and meeting between the investor
and government officials. The claims against the claimants are mere unsubstantiated
allegations
91. It is a fundamental principle of law that a person is innocent until proven guilty by a
court of law or a competent tribunal. In light of lack of a finding of guilt and lack of any
evidence on record the doctrine of clean hands cannot apply. The tribunal has no
jurisdiction to hold on corruption matter since another competent court is ceased of the
matter. This is a public policy principle that is meant to avoid conflicting decisions.
70 Moloo, Rahim, and Alex Khachaturian. "The Compliance with the Law Requirement in International Investment
Law." Fordham International Law Journal 34 (2011): 1473. 71 , ICSID Case No. ARB/10/3. 72 Standard of proof not met 73 Mortenson, Julian Davis. "The Meaning of ‘Investment': ICSID's Travaux and the Domain of International
Investment Law." Harvard International Law Journal 51.1 (2010). 74 Habib, Mohsin, and Leon Zurawicki. "Corruption and foreign direct investment." Journal of international business
studies 33, no. 2 (2002): 291-307.
21
92. However, even in corruption cases the tribunal should only proceed to deny protection to
an investment after been sufficiently satisfied of the investor’s wrongdoing. The host
state should at all times provide evidence to show that there were unclean hands on the
part of the investor. The evidence on record and which we highly dispute it is veracity is
an offer to testify against various corrupt company officials. An offer does not amount to
a testimony; in fact there is no testimony on record against Peter Explosive.75
93. In most cases when a state is confronted with a dispute in a tribunal it will use all
measures to avoid liability as observed in Mytilineos Holdings SA v Serbia and
Montenegro and Serbia, 76We submit that this is diversionary measure which has no
merit. The respondent is using corruption cases as diversionary tactic.
94. The tribunal does not rely on hearsay evidence. In fact, hearsay evidence is inadmissible
in this case. This position was furthered in case of S & M Rotogravure Service v. Baer,
77"it must clearly appear that the things from which the plaintiff seeks relief are the fruit
of its own wrongful or unlawful course of conduct."
95. It is a rule of evidence that the burden of proof lies with the one who alleges. This would
mean that each party bears a burden of proving the facts relied upon to prove the defence
or the claim. 78The Respondent intends to rely on a matter that it has not proved in his
defence. This is illustrated in EDF (Services) Ltd v Romania, Procedural Order No
79‘the seriousness of the accusation of corruption.... demands clear and convincing
evidence “Further the tribunal held mere allegations of corruption are “far from being
clear and convincing.”
75 Doig, Alan, and Stephanie McIvor. "The national integrity system: assessing corruption and reform." Public
Administration and Development 23, no. 4 (2003): 317-332. 76 UNCITRAL, Partial Award on Jurisdiction (8 September 2006); 77 77 Wis.2d 454, 252 N.W.2d 913 (1977) 78 Elizabeth Whitsitt, ICSID Tribunal Confirms that Allegations of Corruption Must Be Substantiated by “Clear and
Convincing Evidence” 79 2, ICSID Case No ARB/05/13, IIC 393 (2008),
22
96. The standard of proof is not just on mere balance of probabilities. 80 Even if it was
balance of probability the Respondent has failed to meet that bare minimum standard of
proof.81 Tribunals and scholars alike have insisted that accusations of corruptions are
subjected to higher standard of proof and arbitral tribunal have being using words such
as certainty, clear proof, direct, convincing and conclusive evidence.82
This was illustrated in the case of Himpurna California Energy Ltd. v PT. (Persero)
Perusahaan Listruik Negara, 83
` “But such grave accusations must be proven. There is in fact no evidence
of corruption in this case. Rumours or innuendo will not do. Nor
obviously may a conviction that some foreign investors have been
unscrupulous justify the arbitrary designation of a particular investor as a
scapegoat.”
97. The issue before this tribunal is what is certain, clear proof, convincing evidence and
conclusive evidence and does the evidence on record amount to such evidence.84 The
meaning of the evidence that is clear was considered in Cathay Pacific Airways, Ltd. v.
Sps. Vazquez, 85 it was stated, clear evidence is evidence which is substantiated by the
parties alleging. The Tribunal insisted on substantiation in order for evidence to be clear
and convincing. This means that such evidence must be direct evidence which is well
collaborated and meets the standards of convincing.86We submit that hearsay evidence is
not admissible in this case.87 In order for such evidence to be admissible it must be direct
evidence of the person who says saw, heard, felt or held an opinion.
80 Moore, Michael O. "Determinants of German manufacturing direct investment: 1980–1988." Weltwirtschaftliches
archiv 129, no. 1 (1993): 120-138. 81 Png, Ivan PL. "Optimal subsidies and damages in the presence of judicial error." International Review of Law and
Economics 6, no. 1 (1986): 101-105. 82 Hwang, Michael, and Kevin Lim. "Corruption in Arbitration—Law and Reality." Asian International Arbitration
Journal 8.1 (2012): 1-119. 83 UNCITRAL Ad Hoc-Award of 4 May 1999. Final award of 4 May 1999. 84 By Andrew Paul Newcombe, Lluís Paradel Law and Practice of Investment Treaties: Standards of Treatment
Kluwer Law International 85 447 Phil. 306, 321 (2003) 86 Weiler, Todd. International investment law and arbitration: leading cases from the ICSID, NAFTA, bilateral
treaties and customary international law. Cameron May, 2005. 87 Beloof, Douglas E., and Joel Shapiro. "Let the truth be told: proposed hearsay exceptions to admit domestic
violence victims' out of court statements as substantive evidence." Colum. J. Gender & L. 11 (2002): 1.
23
MERITS
5.0. CLAIMANT’S INVESTMENT WAS EXPROPRIATED BY THE RESPONDENT;
AND
5.1. The Respondent State Executive Order Amounted to Indirect expropriation
98. The Claimant submits that the Respondent expropriated it is investments contrary to
Article 4 of the Euroasia BIT, which states that either of the contracting states may not
indirectly or directly expropriate investments by investor of either country.88 The
Article further prohibits acts which would amount to expropriation though not directly.
89This position was advanced in Middle East Cement Shipping and Handling Co.
S.A. v. Arab Republic of Egypt,90 where the tribunal described indirect expropriation
as “measures taken by a state the effect of which is to deprive the investor of the use and
benefit of his investment even though he may retain nominal ownership of the respective
rights”. In this particular case Peter explosive has been deprived the use and benefit of
his investment. Paragraph 17 of unconsented facts states as result of sanctions “It
resulted in the deterioration of Rocket Bombs’ business and in a rapid decrease in the
value of its shares”. In fact, the company could not sell shares to third party. This
deprived Rocket bombs of its economic benefits and therefore amounting to indirect
expropriation.91
99. The executive order is attributable to the state of Oceania. Only actions of state can be
said to amount to expropriation. The president acted in his official capacity with the
authority bestowed by laws of Oceania. These are actions that are attributable to the
state through it is agent. Article 2 of ILC Articles on state responsibility provides for
elements of international wrongful acts. The acts of the state must be attributable to the
State under international law; and Constitutes a breach of an international obligation
of the State. The actions of the president were in breach of international obligation in
Article of Euroasia BIT.
88 Dolzer, Rudolf, and Christoph Schreuer. Principles of international investment law. Oxford University Press,
2012. 89 Ibid 90 ICSID Case No. ARB/99/6. Award. 12 Apr 2002. 91 Gaja, Giorgio. "Should all references to international crimes disappear from the ILC Draft Articles on State
Responsibility?" European Journal of International Law 10, no. 2 (1999): 365-370.
24
100. The ILC Articles have gained the status of customary international law therefore they
are binding to all states.92 Exhibit C, the first paragraph indicates that the president is
acting as the head of state of Oceania. The sanctions are furthermore being implemented
by the state of Oceania and it is government. The president and the government have the
power to act as agents of the state in general. Article 4 of ILC Articles, further provide
that conduct of state organ shall be considered as acts of the state. 93In this case the
conduct of the President who exercises powers of the Executive organ of the state
amount to actions of the state.
101. We submit that the action of the state amount to breach of an international obligation.
Article 12 of ILC Articles provides that there is a breach of international obligation, if
the actions of the state are not in conformity with international obligation. The Euroasia
BIT provides that state shall not expropriate investment of investors.94 The Respondent
proceeded to expropriate the investment of The Claimant, which is in breach of
international obligation.
5.2. The Claimant Claim meets the Requirements for Indirect Expropriation
5.2.1. The Claimant was Substantially Deprived of Economic Value of his
Investment
102. The Respondent indirectly expropriated the investment of The Claimant. It amounts to
indirect expropriation because the state took actions that have substantially deprived
The Claimant of profitability of the investment and further the actions of the state were
not reasonably predictable by the investor.95 The respondent acted in a manner that
violates it is treaty obligation and customary international law obligations.96 The
executive order issued did not take into account the plight of investors. The state acted
in a manner that was not in good faith.
92 Crawford, James, Jacqueline Peel, and Simon Olleson. "The ILC's Articles on Responsibility of States for
Internationally Wrongful Acts: Completion of the Second Reading." European Journal of International Law 12, no.
5 (2001): 963-991. 93 Crawford, James, Pierre Bodeau, and Jacqueline Peel. "The ILC's draft articles on state responsibility: toward
completion of a second reading." The American Journal of International Law 94, no. 4 (2000): 660-674. 94 Spinedi, Marina. "From one Codification to Another: Bilateralism and Multilateralism in the Genesis of the
Codification of the Law of Treaties and the Law of State Responsibility." European Journal of International Law 13,
no. 5 (2002): 1099-1125. 95 Fortier, L. Yves, and Stephen L. Drymer. "Indirect expropriation in the law of international investment: I know it
when I see it, or caveat investor." ICSID Review 19, no. 2 (2004): 293-327. 96 Ibid
25
103. The state has acted in a manner that is detrimental to the investment of The Claimant.97
In examining whether an act amounts to indirect expropriation the concern is always
with substance of the conduct of state and it is effect to the investor rather than form a
held in Sporrong and Lonnroth v Sweden; 98“The substance of the measure and not
its form,” This is furthered by a criteria drawn by tribunals and OECD guidelines
which is; i) the degree of interference with the property right, ii) the interference of the
measure with reasonable and investment-backed expectations. (iii) Does the
interference deprive the investor of economic benefits?99
104. In assessing the degree of interference, the interference has to be substantial.100 It is
considered substantial if it substantially impairs the investor’s economic rights as stated
in Starret Housing Corp v. Iran, 4 Iran-United States101
“[I]t is recognised by international law that measures taken by a
State can interfere with property rights to such an extent that these
rights are rendered so useless that they must be deemed to have
been expropriated,”.
The investment by peter explosive was interfered with by the state to extent of being
rendered economically unviable.
105. The Claimant had a reasonable expectation that there will be no such interference with
the investment. The Iran-U.S. Claims Tribunal in Starett Housing Corp. case stated that
investors have an expectation that the investment will not be interfered with
unjustifiably. The issue is whether the risks suffered were one that flows in the nature of
business. Peter explosive had legitimate expectation that his investment will not be
interfered with and this has been breached by the Respondent.
106. Peter explosive is a protected investor in the definition of the Euroasia BIT and the state
ought to accord protection to his investment not injure it. In this case the state was in
violation of its obligation to protect investors in guise of international security and
97 Dolzer, Rudolf. "Indirect Expropriations: New Developments." NYU Envtl LJ 11 (2002): 64. 98 ECHR 23 Sep 1982 99 OECD (2004), “"Indirect Expropriation" and the "Right to Regulate" in International Investment Law”, OECD
Working Papers on International Investment, 2004/04, OECD Publishing. http://dx.doi.org/10.1787/780155872321 100 Isakoff, Peter David. "Defining the scope of indirect expropriation for international investments." Global
Business Law Review 3, no. 2 (2013). 101 Cl. Trib. Rep. 122, 154 (1983).
26
public interest. The state more often than not opts to hide its intention of expropriation
by taking measures that infringe rights of investors in guise of public interest.102 It is not
a must for the state to take the investment of an investor but it can conduct itself in a
manner that has the same effect as taking away of the investment.103This is the test of
substantive deprivation. Mr. explosive has no investment other than nominal title.
107. The Claimant is left with a nominal title of the investment. Paragraph seventeen state “It
resulted in the deterioration of Rocket Bombs’ business and in a rapid decrease in the
value of its shares". Eventually due to the Executive Order the paragraph states that
"Peter Explosive was unable to sell the shares in the company to a third person". The
investment is not useful any more since there is no trading that is going on.
108. The level of interference in this case went beyond the accepted conduct of state action
as considered in case of Pope & Talbot v. Canada. In Pope & Talbot104In which the
state of Canada adopted export control regime that led to reduce in profit. The Tribunal
was of the view that this did not amount to “substantial deprivation” of Pope & Talbot’s
business interests a mere reduction in profits does not rise to the level of expropriation
5.2.2. The Respondent is Culpable of Expropriation by Virtue of the Sole
Effect Doctrine
109. The claimant submits that the sole effect doctrine is applicable in this case. The sole
effect doctrine states that the actions of the state should be considered from the effect
that they have on the investment.105 This doctrine further states that in order for actions
to amount to expropriation they must be the sole effect of the substantive deprivation of
property.
110. The degree of the effects on the investments has a considerable role in deciding whether
expropriation has occurred. Scholars argue that in fact a certain threshold of interference
with investment has been reached their can be no finding other than indirect
102 Kriebaum, Ursula. "Regulatory Takings: Balancing the Interests of the Investor and the State." The Journal of
World Investment & Trade 8, no. 5 (2007): 717-744. 103 Ibid 104 6 ICSID 567. Page of 172 interim Award. 26 Jun 2000 105 Mostafa, Ben. "Sole Effects Doctrine, Police Powers and Indirect Expropriation under International Law, The."
Austl. Int'l LJ 15 (2008): 267.
27
expropriation.106 Such a threshold is one which ‘removes all benefits of ownership’ or
renders investment valueless.107 Once the above threshold is met there can be no
finding other than that of expropriation. The state cannot give any excuse that can
preclude liability. The fate of The Claimant investment was occasioned by the actions of
the Respondent.
111. The authorities of Starret and trippet support the doctrine of sole effect. In Tippetts, the
Tribunal opined that
‘[t]he intent of the government is less important than the effects of
the measures on the owner, and the form of the measures of control
or interferences is less important than the reality of their impact’.
In Starret the tribunal was adamant that such a finding is a must in cases of rendering
the investment useless. The shares of Mr Peter explosive have been rendered useless,
they cannot be traded and all this is as a result of respondent sanctions.
112. In Mr. Patrick Mitchell v. Democratic Republic of the Congo, 108 the Tribunal stated
that Biwater recognised and implicitly accepted the approach whereby ‘many tribunals
in other cases have tested governmental conduct in the context of indirect expropriation
claims by reference to the effect of relevant acts, rather than the intention behind them’
5.3. The Respondent Actions Were Beyond the Police Powers
113. The Claimant submits that the actions of the state of Oceania were beyond the accepted
scope of police powers. The actions cannot be sanctioned by any claim of exercise of
state duty (powers). The state had many other options that would accommodate the
rights of an investor. The doctrine of police power applies in cases where actions are
done(a) in good faith (ii) for public interest (iii) on basis of fairness and equitable (iv)
in accordance with due process of the law.109
114. Where a state has acted inequitably police powers cannot be claimed. The state of
Oceania acted in manner that is abusive to rights of Mr Peter explosive. This amounts to
106 (Wagner, above n6 at 536; Rudolf Dolzer & Felix Bloch, ‘Indirect Expropriation: Conceptual Realignments?’
(2003) 5 International Law Forum 155 at 164;). 107 Jason Gudofsky, ‘Shedding Light on Article 1110 of the North American Free Trade Agreement (NAFTA)
Concerning Expropriations: An Environmental Case Study’ (2000) 21 Northwestern Journal of International Law
and Business 243 at 287–88. 108 ICSID Case No. ARB/99/ 109 Ranjan, Prabhash, and Pushkar Anand. "Determination of Indirect Expropriation and Doctrine of Police Power in
International Investment Law: A Critical Appraisal." Available at SSRN 2728839 (2016).
28
expropriation as illustrated in Link-Trading Joint Stock Company v. Republic of
Moldova, 110
“become expropriatory when they are found to be an
abusive taking. Abuse rises where it is demonstrated that
the state has acted unfairly or inequitably toward the
investment, where it has adopted measures that are
arbitrary or discriminatory in character or in their manner
of implementation, or where the measures taken violate an
obligation undertaken by the state in regard to the
investment.”
115. The action of state to be claimed to be in exercise of police powers must be reasonable
government regulations. In order for actions to be reasonable government regulation
must be for protection of greater good and in public interest. This was a position stated
in Marvin Roy Feldman Karpa v. United Mexican States, 111where the tribunal was
of the view certain actions of the state done in good faith and in public interest can be
said to be in executed in exercise of police powers.
116. Some scholars argue that police power is ambiguous doctrine which in light of indirect
expropriation is scope is not known in law. 112 The Doctrine of police power should be
applied restrictively and only clearly straightforward matters. In this case we submit the
doctrine is not applicable, further it does not excuse indirect expropriation.
117. It is not in contention whether state has the right to regulate but does the actions
conducted by the state fall in scope of the right to regulate. In the Sedco Inc v National
Iranian Oil Co 113the Iran-US Claims Tribunal stated that it is
‘an accepted principle of international law that a State is not liable
for economic injury which is a consequence of bona fide
“regulation” within the accepted police power of states.’
In this case the state did not act in good faith. It did not give the investor right to be
110 UNCITRAL (Final Award, 18 April 2002); (2002) IIC 154 399, 111 ICSID Case No. ARB(AF)/99/1 2002 112 (Fortier & Drymer, above n1 at 299; Jason Gudofsky, ‘Shedding Light on Article 1110 of the North American
Free Trade Agreement (NAFTA) Concerning Expropriations: An Environmental Case Study’ (2000) 21
Northwestern Journal of International Law and Business 243 at 287–88 113 (1985) 9 Iran-US CTR 248 at 275 (‘Sedco’).,
29
heard. In fact, the executive order gave a bracket discharge of contractual obligations.
118. The claimant submits that the action of the respondent were arbitrary. This is because
the state did not seek to explore less harmful means to achieving international peace.
This is illustrated by case of Methanex v. United States ‘Non-discriminatory and non-
arbitrary regulation for a public purpose’ amounts to police powers. The tribunals have
been of the view that more limited approach should be adopted in defining police
powers. The doctrine of police power can only be pleaded as a matter of necessity. We
submit that the executive order was not issued as matter of necessity. Even if it had it
would not preclude the investor from being compensated as stated by Article 27 of ILC
article on state responsibility.
5.4. Action of the State Amounted to Illegal Expropriation
119. We submit that the actions of state amounted to expropriation and that the state violated
the protection of investors.114 The sanctions were issued by the president with full
powers to make such orders and they deprived Peter Explosive of his economic rights as
set out in case of Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, 115(1)
acting through exercise of its sovereign authority (unreasonably deprived an investor of
its rights116
120. The state violated Article 4 of BIT with Euroasia by failing to comply with it is
obligation therein. 117The only expropriation that is legally acceptable is the one that
strictly complies with the requirements under Article 4 (1) of Euroasian BIT which are
due process of the law. On nondiscriminatory basis, prompt payment and adequate and
sufficient compensation. The state did not pay a prompt and adequate compensation.
The state did not follow the due process of the law. This amounts to illegal
expropriation.
114 Guzman, Andrew T. "Why LDCs sign treaties that hurt them: Explaining the popularity of bilateral investment
treaties." Va. j. Int'l L. 38 (1997): 639. 115 ICSID Case No. ARB/05/22. 2008 Award 116 as opposed to acting merely as a contractual party) (paras. 457–458), (2) (para. 463). 117 Newcombe, Andrew Paul, and Lluis Paradell. Law and practice of investment treaties: standards of treatment.
Kluwer Law International, 2009.
30
6.0. CLAIMANT DID NOT CONTRIBUTE TO THE DAMAGE SUFFERED BY HIS
INVESTMENT.
6.1. Respondent was solely Responsible for the Damage caused to the Investment
121. The Claimant submits that he did not contribute to the harm suffered by him rather the
Respondent is the sole author of the claimant’s misfortunes. The claimant though was
supplying arms to the state of Euroasia the harms were not the source of the annexation
of Fairland. There was a referendum and the weapons did not facilitate the referendum.
122. The claimant was supplying weapons to Euroasian even before annexations started. The
general rule of liability is that a party must have contributed in a matter in order to be
liable. In this case The Claimant was not involved in any way with making of the
executive order or circumstances that necessitated the executive order.
6.2. Lack of Causation Between the Expropriation and Actions of the Claimant
123. The issue of causal link is key to liability. 118We submit that there was no link between
the actions of the claimant and the issuing of executive order. In fact, the last contract
with the state of Euroasia was concluded one day to the military intervention. There was
no way the claimant would have known the use of the arms. 119
124. States have a right to buy arms. States in protection of their territorial integrity use
military force. It was not possible for the claimant to determine and even sanction the
sale. This is because states have unlimited rights to buy arms.
6.3. The Claimant is Entitled to Damages
125. We submit that the claimant is entitled to compensation for the damage occasioned by
expropriation of its investment.120 The general rule of awarding damages is that an
investor is entitled to the amount of setting up the business and ensuring compliance,
the loss of revenue as result of the executive order and future profits.121
126. The compensation that the claimant is claiming is in accordance with the fair market
118 Dugan, Christopher, Don Wallace, Noah Rubins, and Borzu Sabahi. Investor-state arbitration. Oxford University
Press, 2011. 119 Leebron, David W. "Game Theoretic Approach to the Regulation of Foreign Direct Investment and the
Multinational Corporation, A." U. Cin. L. Rev. 60 (1991): 305. 120 Dolzer, Rudolf, and Christoph Schreuer. Principles of international investment law. Oxford University Press,
2012. 121 Abdala, Manuel A., and Pablo T. Spiller. "Damage valuation of indirect expropriation in international arbitration
cases." Am. Rev. Int'l Arb. 14 (2003): 447-571.
31
value.122 We rely on the case of INA Corporation, Claimant v. The Government of the
Islamic Republic of Iran, 123-defined fair market value as:
‘the amount which a willing buyer would have paid to a willing seller for
the shares of a going concern, disregarding any diminution of value due to
the nationalization itself or the anticipation thereof, and excluding
consideration of events thereafter that might have increased or decreased
the value of the shares.’
127. The claimant submits that he is entitled to compensation of the amount he used in
setting up the business as stated in case of Karaha Bodas decision.” There is no doubt
in the Arbitral Tribunal's opinion that the Claimant is entitled to obtain the benefit of its
bargain in addition to recovering the expenditures it has incurred."
128. Karaha Bodas Co v Perusahaan Pertambangan Minyak das Gas Bumi Negara124This
case was discussed above in section 2. The arbitral tribunal granted the claimant,
Karaha Bodas Co, damages of US $111.1 million for investment expenses and US $150
million for lost profits.
129. Finally, we submit that the loss is as result of the wrong doing of the Respondent and it
should shoulder consequences of it is wrong doing. Under customary international law,
a fundamental principle of reparation is to “wipe out all the consequences of the illegal
act.”125
7.0 PRAYERS
130. The claimant prays that the tribunal find that
a. It has Jurisdiction to decide on the claims brought by the Claimant and
subsequently award reliefs;
b. The Claimant made a protected investment;
c. The Claimant’s investment was expropriated by the Respondent;
d. The Claimant did not contribute to the damage suffered by his investment and
e. The Claimant is entitled to damages amounting to 120,000,000 USD.
122 Wälde, Thomas W., and Borzu Sabahi. "Compensation, Damages and Valuation in International Investment
Law." Transnational Dispute Management (TDM) 4, no. 6 (2007). 123 Respondent (Case No. 161) Award No. 184-161 124 364 F.3d 274 (5th Cir. 2004). 125 Ripinsky, Sergey, and Kevin Williams. Damages in international investment law. BIICL, 2008.
