INTERNATIONAL COURT OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE UNDER THE ICC RULES OF ARBITRATION

Transcription

1 INTERNATIONAL COURT OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE UNDER THE ICC RULES OF ARBITRATION PETER EXPLOSIVE (CLAIMANT) v. REPUBLIC OF OCEANIA (RESPONDENT) ICC Arbitration No 28000/AC MEMORIAL FOR CLAIMANT

2 TABLE OF CONTENTS LIST OF ABBREVIATIONS... iii LIST OF AUTHORITIES... iv LIST OF LEGAL SOURCES... xvi STATEMENT OF FACTS SUMMARY OF ARGUMENTS ARGUMENTS I. The Claimant is an investor pursuant to Article 1(2) of the Euroasia BIT A. Mr. Explosive has nationality of Euroasia Mr. Explosive obtained nationality of Euroasia under its laws i. Only national laws of Euroasia are necessary to assess the issue of nationality.. 21 ii. The Claimant obtained nationality of Euroasia by virtue of national laws of Euroasia Alternatively, Peter Explosive obtained nationality in compliance with international law 22 i. The Tribunal cannot decide over the question of legality of territory acquisition 23 ii. The acquisition of territory was legal iii. Lawful territory acquisition results in transfer of nationality In any event the Claimant fulfilled the requirements of effective nationality test B. Mr. Explosive invested in the territory of Oceania II. The Claimant did not breach Article 9(2) of the Euroasia BIT A. The Claimant has fulfilled amicable negotiations requirement B. The obligation to pursue local courts was not binding for the Claimant C. Alternatively, recourse to Oceanian courts was futile The Oceanian Constitutional Tribunal has created practice adverse to the Claimant The exercise of the Oceanian Constitutional Powers would take too much time III. The Claimant may invoke Article 8 of the Eastasia BIT relying on MFN clause of the Euroasia BIT A. Implicit resort to the MFN clause is enough for the recourse to procedural matters B. Parties did not deliberately exclude access to procedural rights in the Euroasia BIT.. 32 C. Res inter alios acta and ejusdem generis requirements are satisfied IV. The Claimant made a protected investment A. The investment meets the requirements of the applicable BIT The Claimant s investment is not subject to legality requirement under the Eastasia BIT Alternatively, legality requirement of the Eastasia BIT is satisfied B. In any event, clean hands doctrine is not applicable to the present dispute i

3 1. Legality reqirement does not cover the investment operation In any event, alleged violations are not proved i. No clear evidence could prove the breach of domestic laws ii. The violation is not serious iii. Hudson s test for clean hands doctrine is not met V. The Claimant s investment was illegally expropriated A. The Claimant s property is indirectly expropriated The Claimant has lost control over the company because of the EO Rocket Bombs shares devalued The sanctions lasted sufficiently enough No compensation was paid for Mr. Explosive B. The Respondent s measures are beyond the scope of the police powers VI. ESI clause may not be invoked by the Respondent as a ground precluding wrongfulness A. If the Eastasia BIT provides special test, it is not met Article 9 of the Eastasia BIT concerns obligations under Article 24 of the UN Charter The nexus requirement is not present B. The Respondent s actions do not satisfy customary rule of necessity The peaceful events in Fairyland are not a grave and imminent peril for Oceania Other measures were possible for Oceania to react to alleged threat The Respondent contributed to the situation of necessity VII. In any event, the Respondent s actions do not amount to countermeasures A. Countermeasures cannot by applied against the Claimant possessing separate rights under the Euroasia BIT B. Oceania failed to satisfy procedural requirements C. Oceania as a non-injured state D. In any event, an alleged violation is not widely acknowledged E. The invoked sanctions were not aimed to induce Euroasia comply with its obligation 48 F. Countermeasure is disproportional VIII. Mr. Explosive is entitled to full compensation A. The Claimant did not contribute to the wrongdoing of Oceania The sanctions policy was not typical for Oceania Adoption of sanctions was beyond the Claimant s business control B. Even if the Claimant contributed to the wrongdoing of Oceania, the Respondent reacted disproportionate to the alleged Claimant s provocation C. The compensation should remain the same in light of clean hands doctrine PRAYER FOR RELIEF ii

4 ( ) Paragraph(s) ( ) Page(s) LIST OF ABBREVIATIONS BIT Eastasia BIT Euroasia BIT EU ESI Executive Order IBA ICC ICJ Bilateral Investment Treaty Agreement between the Republic of Oceania and the Republic of Eastasia for the Promotion and Reciprocal Protection of Investments 1995 Agreement between the Republic of Oceania and the Republic of Eurasia for the Promotion and Reciprocal Protection of Investments 1992 European Union Essential Security Interests EO International Bar Association International Chamber of Commerce International Court of Justice IEEPA International Emergency Economic Powers Act 1992 ILC MFN NEA VCLT VCSST UN UNCTAD UNCAC US WTO International Law Commission Most Favored Nation National Environment Authority of Oceania Vienna Convention on the Law of Treaties Vienna Convention on the Succession of States in Respect of Treaties United Nations United Nations Conference on Trade and Development United Nations Convention against Corruption United States of America World Trade Organization iii

5 Abbreviation LIST OF AUTHORITIES Citation INVESTMENT ARBITRAL AWARDS and DECISIONS Abaclat Abaclat (D.O.) ADC ADM AHC Al-Warraq Alpha Projektholding Ambiente AWG Azurix Abaclat and Others v. Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility, 4 Aug Abaclat and Others v. Argentine Republic, ICSID Case No. ARB/07/5, Dissenting Opinion, Georges Abi-Saab, 4 Aug ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No. ARB/03/16, Award, 2 Oct Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/5, Award, 21 Nov African Holding Company of America v. La République Démocratique Du Congo, ICSID Case No. ARB/05/21, Decision on Decline of Jurisdiction, 29 Jul HeshamTalaat M. Al-Warraq v. Republic of Indonesia, UNCITRAL, Final Award, 15 Dec Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, Award, 8 November 2010 Ambiente Ufficio S.p.A. v. Argentine Republic, ICSID case ARB/08/9, Decision on Jurisdiction and Admissibility, 8 Feb AWG Group Ltd. v. Argentina, UNCITRAL, Decision on Jurisdiction, 3 Aug Azurix Corp. v. The Argentine Republic, ICSID iv

6 Case No. ARB/01/12, 14 Jul Bayindir BayindirInsaatTurizmTicaretveSanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, of 27 Aug BG Group Cargill Cement Shipping Chemtura Chevron CME CMS Continental Casualty Corn Products EDF BG Group Plc. v. The Republic of Argentina, UNCITRAL, Judgment of the Supreme Court of the United States Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, 18 Sep Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award, 12 Apr Chemtura Corporation v. Government of Canada, UNCITRAL, 2 Aug Chevron Corporation and Texaco Petroleum Corporation v. The Republic of Ecuador, UNCITRAL, PCA Case No , Partial Award on Merits, 30 Mar CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award, 13 Sep CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award, 12 May 2005 Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9, Award, 5 Sep Corn Products International, Inc. v. United Mexican States, ICSID Case No. ARB (AF)/04/1, Decision on Responsibility, 15 Jan EDF (Services) Limited v. Romania, ICSID Case v

7 No. ARB/05/13, Award, 8 Oct El Paso El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Award, 3 Oct Enron Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007 Ethil Feldman Flughafen Fraport Gas Natural Ethyl Corporation v. The Government of Canada, UNCITRAL, Award on Jurisdiction, 24 Jun Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 Dec Flughafen Zürich A.G. and Gestión e Ingenería IDC S.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/19, Award, 18 Nov Fraport AG Frankfurt Airport Services Worldwide v. The Republic of the Philippines, ICSID Case No. ARB/03/25, Award, 16 Aug Gas Natural SDG, SA v. Argentina, ICSID Case No. ARB/03/10, Decision on Preliminary Questions on Jurisdiction, 17 Jun Gustav Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award, 18 Jun HICEE InceysaVallisoletana HICEE B.V. v. The Slovak Republic, UNCITRAL, PCA Case No , Partial Award, 23 May, 2011 InceysaVallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award, 2 Aug vi

8 Kılıç Le Cheque Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v Turkmenistan, ICSID Case No ARB/10/1, Decision on annulment, 14 Jul Le Che que De jeuner and C.D Holding Internationale v. Hungary, ICSID Case No. ARB/13/35, Decision on Preliminary Issues of Jurisdiction, 3 Mar LESI Consortium Groupement L.E.S.I.- DIPENTA v. République algérienne démocratique et populaire, ICSID Case No. ARB/03/08, Award, 10 Jan LG&E Liman Caspian Oil LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, Decision on Liability, 3 Oct Liman Caspian Oil BV and NCL Dutch Investment BV v. Kazakhstan, ICSID Case No. ARB/07/14, Award, 22 Jun Loewen Loewen Group, Inc. and Raymond L.Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 Jun Maffezini Malicorp Metaclad Metal-Tech Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction, 25 Jan Malicorp Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/08/18, Final Award, 7 Feb Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1,Award, 30 Aug Metal-Tech v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award, 4 Oct MTD MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, vii

9 Award, 25 May 2004 Muhammet Mytilneos Niko Resources Occidental Oil Interests Parkerings Plama Pope&Talbot PSEG Muhammet Çap and Sehil Insaat Endustri ve Ticaret Ltd Sti v Turkmenistan ICSID Case No ARB/12/6, Decision on Respondent's Objection to Jurisdiction under Article VII(2), 13 Feb Mytilineos Holdings SA v. The State Union of Serbia & Montenegro and Republic of Serbia, Partial Award on Jurisdiction, 8 Sep Niko Resources (Bangladesh) Ltd v. People s Republic of Bangladesh, BAPEX, and Petrobangla, ICSID Case Nos. ARB/10/11 and ARB/10/18, Decision on Jurisdiction, 19 Aug Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award, 5 Oct F-W Oil Interests, Inc. v. The Republic of Trinidad and Tobago, ICSID Case No. ARB/01/14, Award, 3 Mar Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, 11 Sep Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, 8 Feb Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Interim Award, 26 Jun PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, 19 Jan viii

10 RFCC Rosinvest Rumeli Saba Fakes SD Myers Sempra Consortium RFCC v. Royaume dumaroc, ICSID Case No. ARB/00/6, Award, 22 Dec RosInvestCo UK Ltd. v. The Russian Federation, Final Award, SCC Arbitration V (079/2005), 12 Sep Rumeli Telekom A.S. and Telsim Mobil TelekomikasyonHizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 Jul Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award, 14 Jul S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 Nov Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 28 Sep Siag Waguih Elie George Siag and Clorinda Vecchi v. the Arab Republic of Egypt, ICSID Case No. ARB/05/15, Decision on Jurisdiction, 11 Apr Siemens Soufraki Suez Tecmed Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, 3 Aug Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr Soufraki, 5 Jun Suez, Sociedad General de Aguas de Barcelona, S.A. and Interaguas Servicios Integrales de Agua, S.A. v. Argentina, ICSID Case No. ARB/03/17, Decision on Jurisdiction, 16 May 2006 TécnicasMedioambientalesTecmed, S.A. v. The United Mexican States, ICSID Case No. ARB ix

11 (AF)/00/2, Award, 29 May 2003 Teinver Telenor Tokios Tokeles Total Tza Yap Urbaser Vivendi Wena Hotels Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction, 21 Dec Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSlD Case N. ARB/04/15, Award, 13 Sep Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, 29 Apr Total S.A. v. The Argentine Republic, ICSID Case No. ARB/04/01, Award, 27 Nov Tza Yap Shum v. Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction and Competence, 19 Jun Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Decision on Jurisdiction, 19 Dec Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award, 20 Aug Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award, 8 Dec Westacre Investment Westacre v. Jugoimport, ICC Case No. 7047, Award, 28 Feb World Duty Free World Duty Free Company v. Republic of Kenya, ICSID Case No. Arb/00/7, Award, 4 Oct OTHER DECISIONS x

12 Ambatielos Ambatielos (Greece v. United Kingdom), ICJ, Judgment of 19 May 1953 Case of Removed Gold Monetary Gold Removed from Rome in 1943 (Italy v. France, United Kingdom of Great Britain and Northern Ireland and United States of America), ICJ, Judgment of 15 Jun Dadras Dadras International v. Islamic Republic of Iran, IUSCTR, Case Nos. 213/215, Award, 7 Nov.1995 East Timor East Timor (Portugal v. Australia), ICJ, Judgment of 30 Jun Gabčíkovo Nagymaros Case Concerning Gabčíkovo Nagymaros project, ICJ, Judgment of 25 Sep, 1997 ITT Industries ITT Industries v. The Islamic Republic of Iran, The Organization of Nationalized Industries of Iran, IUSCTR, Case No. 156, Award, 26 May 1983 North Sea Continental Shelf North Sea Continental Shelf Cases (Federal Republic of Germany/Denmark; Federal Republic of Germany/Netherlands), ICJ, Judgment of 20 Feb Nottebohm Nottebohm (Liechtenstein v. Guatemala), ICJ, Judgment of 6 April 1955 Opinion on Naturalization Advisory Opinion on Proposed Amendments to the Naturalization Provision of the Constitution of Costa Rica, OC-4/84, IACrtHR, 19 January 1984 Panel Report Panel Report, Thailand-Restrictions on Importation of and Internal Taxes on Cigarettes, WT/DS10/R, 5 Oct Quebec Reference re Secession of Quebec, Supreme Court of Canada, 2 S.C.R. 217 (1998) ARTICLES Charney Cop/Eymirlioglu Crawford(2) Fietta Jonathan Charney, Self-Determination: Chechnya, Kosovo and East Timor, 2001 Burak Cop and Dogan Eymirlioglu, Accordance with International Law of the Unilateral Declaration of Independence in Respect of Kosovo, Advisory Opinion, I.C.J. Reports 2010, 2005 James Crawford, The ILC s Articles on Responsibility of States for Internationally Wrongful Acts: A Retrospect, American Journal Of International Law, 2002 Stephen Fietta, Most Favoured Nation Treatment xi

13 Mummery Osadare Ranjan Sabahi/Duggal Schlemmer Uluc Vicuña Vidmar Waiber Wallace, Jr and Dispute Resolution under Bilateral Investment Treaties: Aturning Point? 2005 Mummery, The Content of the Duty to Exhaust Local Remedies,1964 Babatunde Osadare, Jurisdiction and Powers of Arbitral Tribunals: Who Decides, 2016 Prabhash Ranjan, Using the Public Law Concept of Proportionality to Balance Investment Protection with Regulation in International Investment Law: A Critical Reappraisal, 2014 Borzu Sabahi and Kabir Duggal, Case Comment Occidental Petroleum v Ecuador (2012) Observations on Proportionality, Assessment of Damages and Contributory Fault, 2013 Engela C. Schlemmer, Investment, Investor, Nationality, and Shareholders, 2008 Inan Uluc, Corruption in International Arbitration, 2016 Francisco Orrego Vicuña, Arbitrating Investment Disputes Jure Vidmar, Remedial Secession in International Law: Theory and (Lack of) Practice, 2010 Michael Waiber, Investment Arbitration: Jurisdiction and Admissibility, 2015 Don Wallace, Jr., Fair and Equitable Treatment and Denial of Justice: From Chattin v. Mexico and Loewen v. U.S., in International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties, and Customary International Law, 2006 BOOKS Bjorklund Andrea K. Bjorklund, Emergency Exceptions: State of Necessity and Force Majeure, 2008 xii

14 Bockstiegel Burke-White Crawford Crawford(3) Crawford/Pellet Dugan/Wallace Karl-Heinz Bockstiegel, Presenting Evidence in International Arbitration, 2001 William W. Burke-White and Andreas Von Staden, Investment Protection in Extraordinary Times: The Interpretation and Application of Non-Precluded Measures Provisions in Bilateral Investment Treaties James Crawford, The International Law Commission's Articles on State Responsibility: Introduction, Text and Commentaries, 2002 James Crawford, Brownlie s principles of Public International Law (8th ed., 2012) The Law of International Responsibility, James Crawford,Alain Pellet,Simon Olleson,Dr Kate Parlett, 2010 Dugan and Wallace, Investor-State Arbitration, 2008 Dupont Pierre Immanuel Dupont, 2012, Countermeasures and Collective security Herstein Hwang/Lim Iwasawa/Iwatsuki Kriebaum Miles Ripinsky/Williams Sadowski Schreuer Ori J. Herstein, A Normative Theory of the Clean Hands Defense, 2011 Michael Hwang S.C. and Kevin Lim, Corruption in Arbitration Law and Reality, 2008 Yuji Iwasawa and Naoki Iwatsuki, Procedural conditions in The Law of International Responsibility, 2010 Ursula Kriebaum, Regulatory Takings: Balancing the Interests of the Investor and the State, 2007 Cameron A. Miles, Corruption, Jurisdiction and Admissibility in International Investment Claims, 2012 Sergey Ripinsky and Kevin Williams, Damages in International Investment Law W. Sadowski, Yukos and Contributory Fault, 2015 Cristoph Schreuer, Calvo s Grandchildren: the Return of Local Remedies in Investment Arbitration, The Law and Practice of International Courts and Tribunals, 2005 xiii

15 Shaw Shill Sicilianos Sornarajah Urdaneta Webster Malcolm N. Shaw, International Law 6th Edition, 2008 Stephan W. Shill, Maffezini v. Plama: Reflections on the Jurisprudential Schism in the Application of Most-Favored-Nation Clauses to Matters of Dispute Settlement in Building International Investment Law, 2016 Linos-Alexandre Sicilianos, The Implementation of International Responsibility, in The Law of International Responsibility, 2010 M. Sornarajah, The Interational Law on Foreign Investment, 2010 Felipe Merizalde Urdaneta, Proportionality, contributory negligence and other equity considerations, 2015 Thomas H. Webster,Dr Michael Buhler, Handbook of ICC Arbitration: Commentary, Precedents, Materials MISCELLANEOUS Ago Report Commentaries to ILC Articles Eighth report on State responsibility by Mr. Roberto Ago, Special Rapporteur - the internationally wrongful act of the State, source of international responsibility (part 1). A/CN.4/318/Add.5-7, 1980 Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries 2001 Draft Articles on Diplomatic Protection Draft Articles on MFN Expropriation UNCTAD Final Report on MFN Draft Articles on Diplomatic Protection with Commentaries, 2006 International Law Commission Draft Articles on most-favoured-nation clauses with commentaries, 1978 EXPROPRIATION UNCTAD Series on Issues in International Investment Agreements II, UN, New York and Geneva, 2012 Most-Favoured-Nation clause Final Report of the Study Group on the Most-Favoured-Nation xiv

16 Individual Opinion of Judge Hudson Kosovo Krakow Report clause, Report of the International Law Commission, Sixty-seventh session (4 May-5 June and 6 July-7 August 2015) Diversion of Waters from the Meuse (Netherlands vs Belgium) 1937 PCIJ (Ser A/B, No 70), Individual Opinion of Judge Hudson Accordance with international law of the unilateral declaration of independence in respect of Kosovo, ICJ, Advisory Opinion of 22 Jul Giorgio Gaja, First Report on Obligations and Rights Erga Omnes in International Law, 2005 Multilateral Agreement on Investment, (Commentary) OECD MFN Multilateral Agreement on Investment, Commentary to the Consolidated Text, DAFFE/MAI(98)7/REV1, 22 April 1998 OECD Most-Favoured-Nation Treatment in International Investment Law, OECD Working Papers on International Investment, 2004 Oxford Dictionary Oxford Dictionary of English Hardcover, 19 Aug 2010 Resolution 55/153 General Assembly Resolution 55/153, 12 Dec Russia-China declaration Submittal of the U.S.-Bahrain BIT Third Report on Diplomatic Protection UNCTAD(2009) The Declaration of the Russian Federation and the People's Republic of China on the Promotion of International Law, Done at Beijing, on 25th of June Letter of Submittal of the U.S.-Bahrain BIT, annexed to U.S.-Bahrain BIT, Washington, April 24, John Dugard, Special Rapporteur, International Law Commission, Third Report on Diplomatic Protection, U.N. Doc. A/CN.4/523, 2002 United Nations Conference on Trade and Development. The Protection of National Security IN IIAs, UNCTAD Series on International Investment Policies for Development, 2009 xv

17 Abbreviations EU-Egypt Association Agreement LIST OF LEGAL SOURCES Citation Euro-Mediterranean Agreement Establishing an Association Between The European Communities and Their Member States, of the one part, and The Arab Republic of Egypt, of the other part, 2001 German Model BIT 2005 ICC Rules ILC Articles OIC Agreement UK Model BIT 2005 Model Text (Draft) of Federal Republic of Germany Bilateral Investment Agreement, 2005 International Chamber of Commerce Arbitration Rules, 2015 Articles on Responsibility of States for Internationally Wrongful Acts (2005) Agreement on Promotion, Protection and Guarantee of Investments amongst the Member States of the Organization of the Islamic Conference, 1981 Model Text (Draft) of UK Bilateral Investment Agreement, 2005 UN Charter Charter of the United Nations, 1945 US-Argentina BIT U.S.-Argentina BIT (1991) US-Korea FTA US-Uruguay BIT Free trade agreement between the United States of America and the Republic of Korea, 2010 Treaty between The United States of America and The Oriental Republic of Uruguay Concerning the Encouragement and Teciprocal Protection of Investment, Nov.3, 2003 xvi

18 STATEMENT OF FACTS Parties to the dispute 1. The Claimant, Peter Explosive, is a national of Euroasia and resident of Fairyland, a territory, lying adjacent to Euroasia and Eastasia. The Claimant invested in the Republic of Oceania in February 1998 by purchasing 100% of shares in the company Rocket Bombs Ltd. ( Rocket Bombs ). He subsequently became its president and sole member of the board of directors. Rocket Bombs specialises in arms production. 2. The Respondent is the Republic of Oceania. Investor 3. Mr. Explosive s grandparents were born nationals of Euroasia. 4. On 1 March 2014, Euroasia amended the Citizenship Act, authorizing residents of Fairyland to apply for Euroasian nationality. 5. On 23 March 2014, Peter Explosive became a national of Euroasia under the Citizenship Act and was issued a Euroasian identity card and passport. Historical background 6. Fairyland is a historic region of Euroasia. In 1914, during the World War, Eastasia annexed the territory of Fairyland. Under the Peace Treaty of 1918 Fairyland was confirmed to be part of Eastasia. With that nationality of the subsequent residents also changed to Eastasian. 7. On 1 November 2013, residents of Fairyland held a referendum on the questions: to leave Eastasia and to unite with Euroasia. Eastasia declared the referendum unlawful. The UN Security Council did not support such conclusion and remained neutral. 8. On 23 January 2014, Fairyland wrote a letter to Euroasian Government asking for assistance in confirming its status. It was broadcast on Euroasian public television. 9. On 1 March 2014, Euroasia entered its military to Fairyland with no objection of Eastasia. 10. On 23 March 2014, Euroasia officially declared Fairyland a part of its territory. 11. On 28 March 2014, Eastasia declared the annexation illegal in light of the public international law. On 1 April 2014, it sent a notification to Euroasia, breaking off diplomatic relations between the two countries. 12. Half of the international comminity recognised the annexation of Fairyland as a lawful one. Oceania belonged to the nonsupportive states. 17

19 Origins of the dispute 13. On 1 May 2014 the President of Oceania issued an Executive Order on Blocking Property of Persons Contributing to the Situation in the Republic of Eastasia. It introduced a system of sanctions against the persons engaged in certain sectors of the Euroasian economy, including arms production. A ban was imposed on business operations with such persons, suspending existing contracts and making future contracts with them illegal. Rocket Bombs and Peter Explosive were solely covered by sanctions in the designated sector. 14. When introducing sanctions the President acted on the basis of International Emergency Economic Powers Act Following the Executive Order shares of Mr. Explosive decreased rapidly almost to zero. The Executive Order caused a complete standstill in arms production, as all suppliers of Rocket Bombs were operating within Oceania. He was unable to meet any of his contractual obligations towards entities from outside Oceania. Investment operation 16. Rocket Bombs is located in the suburb of Valhalla, Oceania, and is the major employer in the town. In 1997 it s loss of the license and subsequent deterioration led to mass redundancies and decline of the town. 17. In 1998, when Mr. Explosive purchased Rocket Bombs it was a decrepit enterprise without environmental license necessary for arms production operations. The license is given to companies satisfying certain requirements under Environment Act Adjustment process of the production line takes very long time and considerable financial resources. 18. Mr. Explosive tried to receive a subsidy to cover initial expenses, but was rejected. The new application is only possible in 6 years. In July 1998, he had a private meeting with the President of the NEA of Oceania on the issue. On 23 July 1998, the NEA issued an environmental license approving the commencement of arms production by Rocket Bombs. 19. On 23 December 1998, Mr. Explosive managed to conclude a crucial contract with the Ministry of National Defence of Euroasia. It was set to expire on 1 January Yet, a new contract was concluded on 28 February 2014, effective as of 1 April The advance received under the initial contract guaranteed the company operation. He concluded supply contracts within Oceania and made the company prosper. For the 18

20 subsequent years Mr. Explosive opened several new factories, provided working places to local people and extensively contributed to the economy of Valhalla. 20. By 2014 Mr. Explosive managed to improve Rocket Bombs, modernised the production line to meet the requirements of the Oceanian Environment Act Corruption allegations 21. On 21 November 2013, investigation based on anonymous denunciation gave rise to the criminal proceedings on bribery in connection with issuance of an environmental license. On 1 February 2015, the President of the NEA of Oceania, along with the other officials, was convicted of accepting bribes. 22. On 5 May 2015, Peter Explosive was informed that he was under investigation with regard to the environmental license obtained on 23 July 1998 for Rocket Bombs. On 23 June 2015, the General Prosecutor s Office officially initiated criminal proceedings against Peter Explosive. 23. The convicted President of the NEA named a number of persons, including Peter Explosive, from whom he allegedly received bribes and against whom he is willing to testify. The General Prosecutor s Office of Oceania has concluded a non-prosecution agreement with the NEA President with respect to bribes he may have received from such persons. Arbitration 24. On 11 September 2015, relying on the BIT between Euroasia and Oceania Mr.Explosive filed the Request for Arbitration to the ICC. The place of arbitration is Braluft, with the arbitration law being a verbatim adoption of UNCITRAL Arbitration Law (as revised in 2006). 25. Mr.Explosive requested the Tribunal to find that Oceania has expropriated his investment by the implementation of the sanctions under the Executive Order, and requests for compensation in value no less than 120,000,000 USD, with interest as of the date of issuance of the award. 26. Eastasia, Euroasia and Oceania are members of the UN, parties to the VCLT, VCSST and UNCAC. 19

21 SUMMARY OF ARGUMENTS 28. Jurisdiction Firstly, the Claimant obtained nationality by virtue of Euroasian laws or, in any event, international law on nationality. Additionally, Mr. Explosive fits conditions of effective nationality test. Secondly, the Claimant never breached domestic litigation requirement under Article 9 of the Euroasia BIT. It was not binding for the Claimant and could not influence the claim admissibility as it is just a sequential step in dispute resolution procedure. Alternatively, application to Oceanian courts is futile due to extreme length of proceedings and the adverse practice of the Oceanian Constitutional Tribunal. Thirdly, and alternatively, the Claimant may invoke MFN clause of the Euroasia BIT to get access to procedural requirements under Eastasia BIT. Implicit resort in the BIT is enough to cover procedural issues, parties did not intend to exclude such possibility. 29. Merits Firstly, the Claimant lawfully invested in the territory of Oceanian and should enjoy full protection. Allegations in violation of domestic laws do not meet necessary requirements. Secondly, the Respondent s actions resulted in unlawful expropriation of Mr. Explosive s investment. This measure is beyond the police powers of the state. The Respondent cannot be exempted from liability either under Article 9 of the Eastasian BIT, or the customary necessity defense. Countermeasures defense also cannot excuse the violation. Finally, the Tribunal should not reduce compensation as sanctions were beyond the Claimant s business control and Respondent s policy was not typical. Moreover, the compensation should remain the same in light of the clean hands doctrine. 20

22 ARGUMENTS I. THE CLAIMANT IS AN INVESTOR PURSUANT TO ARTICLE 1(2) OF THE EUROASIA BIT 1. This Tribunal has jurisdiction to hear Claimant s claims because the Claimant is an investor in the sense of the Euroasia BIT. Firstly, Mr. Explosive has nationality of Euroasia under its laws or, alternatively, has to be considered Euroasian national under international law. Secondly, Mr. Explosive invested in the territory of Oceania. A. MR. EXPLOSIVE HAS NATIONALITY OF EUROASIA 2. The Claimant has obtained Euroasian nationality. Firstly, [1] only national laws of Euroasia are relevant to solve this issue. Alternatively, [2] Mr. Explosive obtained Euroasian nationality thanks to Fairyland transfer. In any event, [3] the Claimant is a Euroasian national under the effective nationality test. 1. Mr. Explosive obtained nationality of Euroasia under its laws 3. The Respondent may argue the territory acquisition if found illegal can be an obstacle for the determination of Mr. Explosive s nationality. Yet, the Claimant obtained Euroasian nationality regardless of the legality of Fairyland transference to Euroasia. Firstly, [i] Euroasian laws are sufficient to recognize Mr. Explosive s nationality. Secondly, [ii] the Claimant did obtain this nationality under Euroasian laws. i. Only national laws of Euroasia are necessary to assess the issue of nationality 4. The Claimant submits the nationality acquisition should be evaluated through the prism of national laws of Euroasia only. 5. Under Article 1(2) of the Euroasia BIT the term investor shall mean any natural person having the nationality of either Contracting Party in accordance with its laws On the similar BIT provision the Tribunal in Siag stated: Application of international law principles requires an application of... nationality laws... [as] the only means of determining Egyptian nationality Other states should accept the law of the State on individual s nationality as long as the law is consistent with international law on nationality. 3 The right of the state to decide on conferral and regulation of nationality is only restricted by human rights observations. 4 In 1 Record, Siag, Schlemmer, Opinion on Naturalization,

23 Nottebohm case the Court held: International law leaves it to each State to lay down the rules governing the grant of its own nationality The Euroasian Citizenship Act conferred nationality to applicants residing in Fairyland. The law was adopted before Fairyland became part of Euroasia. 6 Thus, it is not connected to Fairyland acquisition, but is just an exercise of sovereign power of a state to grant nationality to certain people. Nothing indicates the Citizenship Act is incompatible with international law. 9. Thus, the scope of international law does not override operation of Euroasian laws on nationality. To state otherwise would result in illegitimate revision of the terms of the BIT and the Citizenship Act by the Tribunal. 7 ii. The Claimant obtained nationality of Euroasia by virtue of national laws of Euroasia 10. Mr. Explosive became Euroasian national in full compliance with the laws of Euroasia. 11. Amendments to the Citizenship Act enabled all the residents of Fairyland to apply for Euroasia nationality Euroasian authorities recognized Peter Explosive as a national of Euroasia and issued Euroasian identity card and passport for him. Consequently he was recognized to comply with the requirements of the Citizenship Act, in particular with the restriction of dual nationality. 9 Thus Euroasian authorities deemed he surrendered nationality of Eastasia at the moment. Failure to comply with prescribed form for renunciation of Eastasian citizenship 10 does not discredit Mr. Explosive's acquisition of Euroasian nationality. He expressed direct will to escape from Eastasian nationality. 13. To conclude, Mr. Explosive is a national of Euroasia thus should be deemed investor under Article 1(2) of the Euroasia BIT. 2. Alternatively, Peter Explosive obtained nationality in compliance with international law 14. If the Tribunal finds that consistency of national laws of Euroasia with international law is linked to the question of the legality of territory acquisition, Mr. Explosive is still a 5 Nottebohm, Record, 56, 4. 7 Siag, Record, 56, 4. 9 Ibid. 10 Record, 60, 2. 22

24 national of Euroasia. Firstly, [i] the Tribunal cannot decide over the question of legality of territory acquisition, thus only effective nationality test may be applicable here; 11 Secondly, [ii] Fairyland acquisition was legal. Thirdly, [iii] lawful territory transfer leads to nationality acquisition as well. i. The Tribunal cannot decide over the question of legality of territory acquisition 15. The Claimant affirms the lack of the Tribunal s jurisdiction over the question of legality of territory acquisition. 16. The principle of Kompetenz-Kompetenz does not vest the Tribunal an absolute competence to decide the scope of jurisdiction. The Tribunal should only exercise its power over issues which concern the parties to the dispute. 17. As the ICJ stated in East Timor case the decision over the jurisdiction should not predetermine or anyhow influence the rights and freedoms of the subjects who are not parties in the dispute. 12 The Tribunal should not rule on the lawfulness of the conduct of a State when its judgment would imply an evaluation of the lawfulness of the conduct of another State or entity which is not a party to the case. 13 Such a judgment would run directly counter to the well-established principle of international law that the Court can only exercise jurisdiction over a State with its consent Should the Tribunal decide to evaluate the legality of the territory acquisition it will implicitly evaluate the lawfulness of the Euroasia's conduct in relation the annexation and the lawfulness of an exercise of a right for self-determination by Fairyland residents. Neither Euroasia nor Fairyland people expressed a consent for the Tribunal to adjudicate the claim. Apparently, rendered decision will affect legal interests of Euroasia and people of Fairyland. This affection is incompatible with the principle the Tribunal can only exercise jurisdiction over a State with its consent. For instance, if the Tribunal holds a decision ascertaining Peter Explosive remains a national of Eastasia then it will implicitly evaluate as unlawful the actions of Euroasia granting nationality to Peter Explosive due to Fairyland annexation. 19. Therefore, the Tribunal cannot decide over the question of legality of territory acquisition because the adjudication of this question will implicitly affect the rights and legal interests of the subjects who are not parties to the dispute. 11 Section I.A.3 below. 12 East Timor, Ibid., Case of Removed Gold,

25 ii. The acquisition of territory was legal 20. Legally held referendum in Fairyland and the following acceptance from Euroasia resulted in secession of Fairyland from Eastasia and reuniting with Euroasia. 21. The concept of self-determination is not limited to the colonial context 15 and right to remedial secession 16 anymore. De facto secession is to be viewed as a new means for obtaining nationality by people invoking a right for self-determination. The ultimate success of such a secession would be dependent on effective control over a territory and recognition by the international community The Tribunal in the Quebec case held that unconstitutional declaration of secession leading to a de facto secession is possible and depend on recognition by international community. 18 In turn recognition by international community is likely to depend on the legality and legitimacy of secession with regard to the conduct of parent and putative states. 19 The ICJ in Kosovo Advisory Opinion stated that Security Council has never made a determination about the illegality of unilateral declarations of independence as such, but only if they are connected with the unlawful use of force or other egregious violations of norms of general international law, in particular those of a peremptory character Thus such declarations are legal unless violation jus cogens norms occurred. Moreover, the ICJ notes that state practice during this period points clearly that international law contained no prohibition of declarations of independence In the present case on 1 November 2013, the majority of Fairyland decided in favour of secession. On 1 March 2014, the armed forces of Euroasia entered the territory of Fairyland. It did not violate peremptory norm as was done in accordance with the will of the people of Fairyland after negotiations on unification. 22 Armed forces entered an independent state with direct consent of the latter. Therefore, people of Fairyland invoked their right for self-determination to secede from Eastasia and unify with Euroasia. Subsequent recognition of annexation by sizable portion of international community 23 demonstrates states acknowledgement of legitimacy and legality of referendum. Indeed, the referendum was legal for the purposes of recognition because no violation of jus cogens norms occurred. 15 Cop/Eymirlioglu. 16 Vidmar, Cop/Eymirlioglu. 18 Quebec, Id. 20 Kosovo, Id Record, 56, Record, 36, 16.

26 24. Therefore, Fairyland legally and legitimately became a part of Euroasia with resort to de facto secession concept. iii. Lawful territory acquisition results in transfer of nationality 25. Mr. Explosive obtained nationality of Euroasia as lawful Fairyland acquisition eliminates any doubts to the Citizenship act compatibility with international law. 26. Under Article 5 of the General Assembly Resolution 55/ persons having their habitual residence in the territory affected by the succession of States are presumed to acquire the nationality of the successor State on the date of such succession. 27. Thus in case of legal succession between two states there is a presumption in international law that people of affected territory obtain nationality of successor state. However, this presumption does not absolve the successor state from the duty to enact legislation on nationality. 25 Therefore, some amendments or acts should be implemented in domestic legislation of successor state. 28. In the present case Fairyland was legally acquired by Euroasia. Thus, Peter Explosive is presumed to acquire nationality of Euroasia. Moreover, Euroasia coped with the obligation under Article 6 of the Resolution introducing amendments to the Citizenship Act on March 1, Peter Explosive expressed his direct will to become a citizen of Euroasia and subsequently was recognized by Euroasian authorities as a national To conclude, Mr. Explosive acquired nationality of Euroasia by virtue of Fairyland acquisition. 3. In any event the Claimant fulfilled the requirements of effective nationality test 30. If the Tribunal finds national laws of Euroasia are not enough to manifest Mr. Explosive's nationality, while the issue of territory acquisition can not be addressed by the Tribunal or is decided to the negative, the Claimant submits effective nationality test should be applied to confirm his nationality. 31. Effective nationality test elaborated by the ICJ in Nottebohm case is appropriate for assessment of nationality alleged by individual. 24 Resolution 55/ Resolution 55/153, Article Record, 56, Record, 56, 4. 25

27 32. There must be a real connection between the state providing the protection and the national in need of protection by the state. 28 Factors to establish such connection are: the habitual residence of the individual, the center of his interests, his family ties, his participation in public life, attachment shown by him for a given country. Thus in order to be national of any state a person should demonstrate that he/she is in fact more closely connected with the population of the State conferring nationality than with that of any other State. 29 The residency of the person is not a crucial factor for determination of his nationality and the factual connection should prevail. 33. The Respondent may argue Mr. Explosive is a national of Eastasia as he never lost that nationality, while failed to acquire nationality of Euroasia. Yet, nationality valid under domestic law may be disregarded as a matter of international law only in situations of ineffective nationality lacking a genuine link between the State and the individual. 30 This is not the case. 34. The vast majority of people living in Fairyland are of Euroasian origin and speak Euroasian language. The family of Peter Explosive also has its roots in Euroasia. 31 He does not identify himself with Eastasia as all the other people living in Fairyland. 32 Furthermore, he expressed strong will to be national of Euroasia applying to its nationality and renouncing Eastasian nationality. Thus he is strongly tied with Euroasia. 35. Euroasia has the effective control over Fairyland while Eastasia did not take any attempts to forcefully protect the territory of Fairyland. Moreover, people of Fairyland are satisfied with the Euroasian authorities as authorities exercising effective control over the Fairyland for more than two years. Even if Fairyland still belongs to Eastasia, Eastasia lost control over the territory and people do not identify themselves with Eastasia. The people lost any social fact of attachment, a genuine connection of existence, interests and sentiments towards Eastasia. Thus Peter Explosive is more closely connected with Euroasia than Eastasia. 36. To conclude, the Claimant should be regarded Euroasian national by virtue of effective nationality test. 28 Schlemmer, Nottebohm, Siag, Record, 61, Record, 61, 7. 26

28 B. MR. EXPLOSIVE INVESTED IN THE TERRITORY OF OCEANIA 37. Mr. Explosive invested in the territory of Oceania when purchased the shares of Rocket Bombs in Transfer of nationality does not affect the territorial requirement of Article 1(3) and subsequently, Article 1(1) of the Eurasia BIT. 34 In any event, protections granted to Mr. Explosive under Eastasia BIT should be extended to him under Euroasia BIT, under Article 15 of the VCSST, applied due to the lawful secession of Fairyland. 35 The latter should be read together with the general rule the natural persons can not be deprived of the acquired rights as a result of succession of states. 36 II. THE CLAIMANT DID NOT BREACH ARTICLE 9(2) OF THE EUROASIA BIT 38. The Tribunal has jurisdiction to hear the case because Mr. Explosive did not have to comply with the pre-arbitral steps in Article 9(2) of the Euroasia BIT and complied with those from Article 9(1). 39. Firstly, [A] the Claimant made a good faith attempt to negotiate with Oceania. Secondly, [B] the domestic litigation is not binding for the Claimant. Alternatively, [C] application to Oceanian local judicial bodies was futile and thus not obligatory. A. THE CLAIMANT HAS FULFILLED AMICABLE NEGOTIATIONS REQUIREMENT 40. Article 9(1) of the Euroasia BIT provides for amicable settlement of all disputes between investors and Contracting Parties. 37 The standard of fulfillment of this requirement is a good faith attempt to negotiate. 38 The attempt had been made by the Claimant on February 23, 2015, 39 almost six month before he filed the Request for Arbitration. 40 Therefore, the Claimant has complied with amicable consultations requirement. B. THE OBLIGATION TO PURSUE LOCAL COURTS WAS NOT BINDING FOR THE CLAIMANT 41. Article 9(2) of the Euroasia states that the dispute may be submitted to competent Oceanian judicial authorities. 41 Article 9(3) provides for a period of 24 months of proceedings before the investor gets access to international arbitration. 42 This requirement 33 Record, Siag, Section I.A.2.ii above. 36 Crawford(3), Record, Sornarajah, Record, 60, Record, Record, Record,

29 represents the domestic litigation requirement and not the exhaustion of local remedies requirement Absence of recourse to the domestic litigation does not bar the Tribunal s jurisdiction. 43. The requirement in Article 9(2) of the Euroasia BIT to address local courts before the international arbitration is only a procedural one. Provisions like in the BIT at hand provide integrated dispute resolution mechanism built upon a certain hierarchy or order of three interconnected. 44 These are sequential steps for the Claimant to follow prior to bring a claim, rather then prerequisites of Oceania s consent to arbitration. 45 Failure to pursue the steps does not preclude access to international arbitration as a consequence. 46 Any other conclusion though reached by certain Tribunals 47 contradicts parties intentions Even if viewed as a prerequisite to arbitration, parties interests analysis shows local remedy pursue was not obligatory in the present case. The major interest of the Claimant is to be compensated for illegal act of Oceania. 49 The Respondent s major interest in the prearbitral steps lies in the opportunity to deal with the dispute locally 50 and correct its low-rank officials. 51 Oceania could not adequately address the present dispute within the framework of its domestic legal system 52 due to extreme length of proceedings 53 concerning the Executive order unconstitutionality. 54 Neither was this remedy useful for correcting decisions of lowrank officials as the President is an official of the highest rank. Thus the Respondent s interest to have a theoretical chance to solve the dispute at domestic level can not be the only reason to deprive the Claimant of the right to resort to arbitration. 55 This issue is without prejudice to the separate law concept of local remedies futility To sum up, the express wording of the BIT does not indicate application to Oceanian courts was mandatory, thus the Tribunal should exercise jurisdiction over the case Schreuer, Abaclat, US-Korea FTA, Article 11.18; NAFTA, Articles BG Group, Giovanni, 305; Abaclat (D.O.), BG Group, Record, 5, Abaclat, 581; BG Group, Helnan, Abaclat, Record, Abaclat, Abaclat, Abaclat, Muhammet,