MEMORIAL FOR THE CLAIMANT

Transcription

1 INTERNATIONAL COURT OF ARBITRATION INTERNATIONAL CHAMBER OF COMMERCE MEMORIAL FOR THE CLAIMANT TEAM QUINTANA PETER EXPLOSIVE Unicorn Valley, Fairyland Euroasia - CLAIMANT - vs. REPUBLIC OF OCEANIA Neatstreet, Valhalla Oceania - RESPONDENT -

2 INDEX TABLE OF ABBREVIATIONS... V LIST OF AUTHORITIES... VI STATEMENT OF FACTS I. ARGUMENTS ON JURISDICTION THE TRIBUNAL HAS JURISDICTION TO DECIDE ON MATTERS INVOLVING THE ANNEXATION (I) THE SUBJECT MATTER OF THE DISPUTE IS CAPABLE OF SETTLEMENT BY ARBITRATION THE PUBLIC STATUS OF FAIRYLAND THE ARBITRABILITY OF THE SUBJECT HEREIN CONCLUSION (II) CLAIMANT IS AN INVESTOR UNDER ARTICE 1.2 OF EURASIA BIT CLAIMANT S NATIONALITY THE TERM INVESTOR SHALL MEAN ANY NATURAL OR LEGAL PERSON OF ONE CONTRACTING PARTY WHO INVESTS IN THE TERRITORY OF THE OTHER CONTRACTING PARTY, AND FOR THE PURPOSE OF THIS DEFINITION: (A) THE TERM NATURAL PERSON SHALL MEAN ANY NATURAL PERSON HAVING THE NATIONALITY OF EITHER CONTRACTING PARTY IN ACCORDANCE WITH ITS LAWS; THE RELEVANT DATE TO DETERMINE JURISDICTION CONCLUSION (III) CLAIMANT MAY INVOKE ARTICLE 8 OF THE AGREEMENT FOR THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS BETWEEN THE REPUBLIC OF OCEANIA AND THE REPUBLIC OF EASTASIA DATED 1 JANUARY 1992 ( THE EASTASIA BIT ) PURSUANT TO ARTICLE 3 OF EUROASIA BIT THE MFN CLAUSE PROVIDES FOR THE MULTILATERALIZATION OF BITS, WHICH APPLIES TO JURISDICTIONAL ISSUES (IV) CLAIMANT WAS NOT REQUIRED TO COMPLY WITH THE PRE-ARBITRAL STEPS AS PROVIDED IN THE ARTICLE 9 OF THE EUROASIA BIT PRIOR TO BRINGING HIS CLAIMS BEFORE THE TRIBUNAL CLAIMANT COMPLIED WITH THE DISPUTE RESOLUTION AS PROVIDED BY ARTICLE 8 OF EASTASIA BIT ii

3 2. SUBSIDIARY, EVEN IF DISPUTE RESOLUTION SHALL BE CONSIDERED REGARDING ARTICLE 9 FROM EUROASIA BIT, CLAIMANT HAS TAKEN ALL THE MEASURES THAT WERE REQUIRED II. ARGUMENTS ON THE MERITS B) CLAIMANT MADE A PROTECTED INVESTMENT IN LIGHT OF THE CLEAN HANDS DOCTRINE THE RESPONDENT S SO-CALLED UNCLEAN HANDS THEORY IS WITHOUT MERIT C) CHD IS NOT AN INTERNATIONAL PRINCIPLE B) CHD - CONCEPT AND THE APPLICATION IN THE PRESENT CASE RESPONDENT HAD KNOWLEDGE OF THE ALLEGED CORRUPTION PRIOR TO ARBITRATION PROCEEDING RESPONDENT IS ESTOPPED OF INVOKING THE CHD BEFORE THIS COURT CONCLUSION B) CLAIMANT S PROPERTY WAS EXPROPRIATED CLAIMANTS PROPERTY WAS OBJECT OF AN INDIRECT EXPROPRIATION DUE TO HE IMPOSE OF SANCTION BY RESPONDENT DUE TO THE SANCTIONS CLAIMANT WAS UNABLE TO CONDUCT ITS OWN BUSINESS THE WRONGFULNESS OF THE SANCTION CANNOT BE PRECLUDED UNDER ALLEGATION OF RESPONDENTS SOVEREIGN POWERS THE ANNEXATION WAS LAWFUL EUROASIA INTERVENTION ON FAIRYLAND DID NOT CONSTITUTED A SERIOUS BREACH UNDER INTERNATIONAL PUBLIC LAW EVEN IF IT WAS RECOGNIZED THAT THE ANNEXATION WAS ILLEGAL AND THAT THE IMPOSE OF SANCTION WAS A COUNTERMEASURE IT DOES NOT PRECLUDE THE WRONGFULNESS OF RESPONDENTS ACT RESPONDENT HAD NO LEGITIMACY TO IMPOSE SANCTIONS AGAINST CLAIMANT THE WRONGFULNESS OF AN ACT TAKEN BY A STATE DOES NOT PRECLUDE AGAINST FOREIGN INVESTORS RESPONDENT CANNOT INVOKE ARTICLE 10 OF THE BIT TO PRECLUDE THE WRONGFULNESS OF ITS ACT CONCLUSION D) CLAIMANT DID NOT CONTRIBUTE TO THE DAMAGES IT SUFFERED CLAIMANT SHALL BE AWARDED COMPENSATION THERE SHALL BE NO LIMITATION OF CLAIMANTS DAMAGES BECAUSE IT DID NOT CONTRIBUTED TO THE DAMAGES IT SUFFERED iii

4 1.2 THE EXPROPRIATION WAS NOT LAWFUL AND CANNOT BE RECOGNIZED AS NON COMPENSABLE CONCLUSION RELIEF SOUGHT iv

5 TABLE OF ABBREVIATIONS ABBREVIATION Arts. BIT ILC FULL CITATION Articles Bilateral Investment Treaty International Law Commision ICSID International Center for Settlement of Investment Disputes Ltd. no. Limited number p. page para. UN UNCTAD paragraph United Nations United Nations Conference on Trade and Development v. versus Vol. volume v

6 LIST OF AUTHORITIES CITED AS FULL CITATION A/RES/56/83 Aaken Beigbeder Berschander v. Russia Biwater Gauff v. Tanzania General Assembly Resolution 56/83 - Responsibility of States for internationally wrongful acts. A/RES/56/83 28 January 2002 Article 41 Aaken, Anne van. Columbia FDI Perspectives on topical foreign direct investment issues No. 164 January 4, 2016 International investment law and decentralized targeted sanctions: an uneasy relationship. Aaken-FINAL.pdf Beigbeder, Yves. REFERENDUM, Oxford Public International Law. Published under the auspices of the Max Planck Foundation for International Peace and the Rule of Law under the direction of Rüdiger Wolfrum, Vladimir Berschader and Moise Berschader v. The Russian Federation, Award, Arbitration Institute of the Stockholm Chamber of Commerce Case No 080/2004 (21 April, 2006). Biwater Gauff (Tanzania) Ltd. V. United Republic of Tanzania, Award, ICSID Case No. ARB/05/22 (24 July, 2008). Born/ Šćekić BORN, Gary; Šćekić, Marija. Pre-Arbitration Procedural Requirements A Dismal Swamp, pp. 228, Burke-White/Von Staden William W. Burke-White & Andreas Von Staden, Investment Protection in Extraordinary Times: The Interpretation and Application of Non-Precluded Measures Provisions in Bilateral Treaties, 48 Va. J. Int'I L. 307 (2008), p. 355; p. 387; p. 389 Cassese Cassese, Self-Determination A Legal Reappraisal, 1995, 332; Supreme Court of Canada, ReSecession of Québec (1998), 2 S.C.R. 217, 222. CME (Netherlands) v. Czech Republic CME (Netherlands) v. Czech Republic (Partial Award) (13 September, 2001) Collier/Vaughan COLLIER, John and VAUGHAN, Lowe. The Settlement of disputes in International Law. Oxford University Press vi

7 Crawford Crawford Declaration on Principles of International Law - 24 October 1970 Crawford, Second Report on State Responsibility, Yearbook of the International Law Commission, vol II (part 2) (1999), p. 83 Crawford, James. Brownlie s Principles of Public International Law, Oxford University Press, 2012, p (XXV). Declaration on Principles of International Law concerning Friendly Relations and Co-operation among States in accordance with the Charter of the United Nations - A/RES/25/ October 1970 Dolzer/Schreuer DOLZER, Rudolf; SCHREUER, Cristoph. Principles of International Investment Law. Oxford. Second Edition, pp. 94; 206; 41. Draft Articles Enron Corporation Ponderosa Assets, L.P. v. TheArgentineRepublic General Assembly Resolution 56/83 Happ/Wuschka I.C.J. Reports International Law Comission, ILC Kalderimis/Rubins Draft Articles on Responsibility of States for Internationally Wrongful Acts with commentaries, p ; p. 128; Enron Corporation Ponderosa Assets, L.P. v. TheArgentineRepublic, ICSID Case No. ARB/01/3, Award (22 May 2007) General Assembly Resolution 56/83 - Responsibility of States for internationally wrongful acts. A/RES/56/83 28 January 2002 Arts. 39, 56, 51, 52 HAPP, Richard and Wuschka, Sebastian. HORROR VACUI: Or Why Invesment Treaties Should Apply to Illegaly Annexed Territories. Journal of International Arbitration - Kluwer Law International, 2016, Volume 33, Issue 3 Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, I.C.J. Reports 2004, p. 136 at para. 63 UNITED STATES. Draft Articles on most-favored-nation clauses with commentaries. Yearbook of the International Law Comission, 1978, vol. II. Part Two, Article 4, p. 18; Article 20. p Daniel Kalderimis,Noah Rubins, et al., ICSID Convention,Chapter II, Article 25 [Jurisdiction of the Centre] in Loukas A. Mistelis (ed),concise International Arbitration (Second Edition), 2nd edition (Kluwer Law International; Kluwer Law International 2015) vii

8 Kantor Mark Kantor, Chapter 38: The Impact of Contributory Investor Conduct: Only with Difficulty Commensurable in Meg N. Kinnear, Geraldine R. Fischer, et al. (eds), Building International Investment Law: The First 50 Years of ICSID, (Kluwer Law International; Kluwer Law International 2015) pp Llamzon Aloysius Llamzon, Corruption in International Investment Arbitration, Oxford University Press, 2014; p and p Maffezini v. Spain Marxsen Mcrae Metal-Tech Methanex v. USA Mitchell/Sornarajah/ Tania Voon Mytilineos Case Niclinni/Palermo/Mila no Nikièma Niko Resources Emilio Augustín Maffezini v. The Kingdom of Spain, Award, ICSID Case No ARB/97/7 (November 13, 2000). Marxsen, Christian, The Crimea Crisis An International Law Perspective (November 7, 2014). Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (Heidelberg Journal of International Law) 74/2 (2014), Available at SSRN: Donald McRae, Chapter 35: Countermeasures and Investment Arbitration in Meg N. Kinnear, Geraldine R. Fischer, et al. (eds), Building International Investment Law: The First 50 Years of ICSID, (Kluwer Law International; Kluwer Law International 2015) pp Metal-Tech Ltd v. The Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award (4 October 2013); Methanex v. USA, Final Award, 3 August 2005, Part IV, Chapter D, para. 7. Andrew D. Mitchell, M. Sornarajah and Tania Voon, Good Faith and International Economic Law, Oxford University Press, 2015, p Mytilineos Holdings SA v Serbia and Montenegro and Serbia, UNCITRAL, Partial Award on Jurisdiction (8 September 2006). Niclinni, Matteo, Palermo, Francesco, Milano, Enrico. Law, territory and conflict resolution: law as a problem and law as a solution. Boston : Brill Nijhoff, 2016, p Nikièma, Suzy H. Best Practices Compensation for Expropriation, March 2013,The International Institute for Sustainable Development, p. 9 Niko Resources (Bangladesh) Ltd v Bangladesh (Decision on Jurisdiction)(ICSID Arbitral Tribunal, Case No ARB1011, ARB 10 18, 19 August 2013 paras viii

9 North Sea decision North Sea decision 1102 Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador PCA Case Nos. AA 226, AA 227 and AA 228, 18 July 2014 Peter Tomka, Kluwer Law Plama Case Preah Vihear Rousseau Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012) Bo Ra Hoebeke and RichardHansen, Hulley Enterprises Limited (Cyprus) v. The Russian Federation; Yukos Universal Limited (Isle of Man) v. The Russian Federation; Veteran Petroleum Limited (Cyprus) v. The Russian Federation (Final Awards), PCA Case Nos. AA 226, AA 227 and AA 228, 18 July 2014 para 80 Peter Tomka, Chapter 34: Defenses Based on Necessity Under Customary International Law and on Emergency Clauses in Bilateral Investment Treaties in Meg N. Kinnear, Geraldine R. Fischer, et al. (eds), Building International Investment Law: The First 50 Years of ICSID, ( Kluwer Law International; Kluwer Law International 2015) pp Plama Consortium Ltd. v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27 August 2008). Temple of Preah Vihear (Cambodia v Thailand), Merits, Judgment [1962] ICJ Rep 6, Separate Opinion of Vice-President Alfaro, 40. Rousseau, Droit international public, tome V: les rapports conflictuels, (1983), p. 170 Saba Case Sachs/Sauvani Sakoff Mr Saba Fakes v. The Republic of Turkey, ICSID ARB/07/20, Award, 17 July SACHS, Lisa E; SAUVANI, Karl P. BITs, DTTs, and FDI flows: an overview. In: The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows. Oxford: Oxford University Press, p. 9. SAKOFF, Peter D. Defining the Scope of Indirect Expropriation, 2013, p. 202, &context=gblr, ix

10 Sauvignon Schill Schill SAUVIGNON. La clause de la nation la plus favorisee, Grenoble, Presses universitaires de Grenoble, 972, p. 21, note 1. Op. cit. UNITED STATES. Draft Articles on most-favored-nation clauses with commentaries. Yearbook of the International Law Comission, 1978, vol. II. Part Two, Article 20, p. 53. SCHILL, Stephan W. Multilateralizing Investment Treaties through Most-Favored-Nation Clauses. Berkeley Journal of International Law, v. 27, issue 2, Article 5, p. 98. SCHILL, Stephan W. Multilateralizing Investment Treaties through Most-Favored-Nation Clauses. Berkeley Journal of International Law, v. 27, issue 2, Article 5, p , , 520, , Schreuer SCHREUER, Christoph. At What Time Must Jurisdiction Exist? - pp Sempra Energy Case SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan Siemens v. Argentina Sempra Energy International v. TheArgentineRepublic, ICSID Case No. ARB/02/16, Award 28 September 2007 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13 (August 6, 2003) Siemens A.G. v. The Argentine Republic, ICSID Case No ARB/02/8 (February 6, 2007). Spyridon Roussalis v. Romania Spyridon Roussalis v. Romania,Award, ARB/06/1 (December 7, 2011) ICSID Case No. Starrett Housing International, Inc., v. The Government of the Islamic Republic of Iran Tippetts v. TAMS- AFFA Consulting Engineers of Iran Starrett Housing International, Inc., v. The Government of the Islamic Republic of Iran, Bank Omran, Bank Mellat (Case No. 24) Tippetts v. TAMS-AFFA Consulting Engineers of Iran, 6 Cl. Trib. 219 (1984). x

11 Tomka Tomka, Chapter 34: Defenses Based on Necessity Under Customary International Law and on Emergency Clauses in Bilateral Investment Treaties in Meg N. Kinnear, Geraldine R. Fischer, et al. (eds), Building International Investment Law: The First 50 Years of ICSID, ( Kluwer Law International; Kluwer Law International 2015) pp UNCTAD UNCTAD, Expropriation: A sequel (United Nations 2012), p. 7; p. 12; p. 79; p. 97 Ve, Sanayi AS v Islamic Repub of Pakistan Viena Convention on Succession of States Wisner/Gallus World Duty Free Case Yukos Ve, Sanayi AS v Islamic Repub of Pakistan, ICSID Case No ARB/03/29, Decision on Jurisdiction (14 November 2005) Vienna Convention on Succession of States in respect of Treaties, pdf WISNER, Robert and GALLUS, Nick. Nationality Requirments in Investor-State Arbitration World Duty Free Company Limited v. Republic of Kenya, ICSID Case No. ARB/00/7 (Guillaume, Rodgers and Veeder), Award of 4 October 2006 Yukos Universal Limited (Isle of Man) v. Russian Federation (See Hulley Enterprises Limited (Cyprus), Veteran Petroleum Limited (Cyprus) and Yukos Universal Limited (Cyprus) v. Russian Federation, PCA Case No. AA226-28, Final Awards (18 July 2014). xi

12 STATEMENT OF FACTS INVOLVED PARTIES: 1. Peter Explosive (CLAIMANT), owner of Rocket Bombs Ltd. 1. The Republic of Oceania (RESPONDENT) Transaction Summary: 2. In 1992, The Republic of Oceania and the Republic of Euroasia entered into an Agreement for the Promotion and Reciprocal Protection of Investment (EUROASIA BIT), which entered into force on October Also in 1992, the Republic of Oceania and the Republic of Eastasia entered into an Agreement for the Promotion and Reciprocal Protection of Investment (EASTASIA BIT), which entered into force on April In February 1998, CLAIMANT, an investor from Fairyland, purchased 100% of the shares from Rocket Bombs Ltd., a company specialized in arms production, becoming its president and sole member of its board of directors. 5. By the time CLAIMANT acquired Rocket Bombs, the Company lacked an environmental license from the Oceania National Environment Authority, becoming a decrepit enterprise, letting several workers from the local town of Valhalla without a job. 6. On July 1998, CLAIMANT obtained a license from the Oceania National Environmental Authority, which was revoked on August of the same year. 7. Nevertheless, CLAIMANT managed to obtain several arms production contracts, from which the most important of them was the contract with the Ministry of National Defense from the Republic of Euroasia, concluded on December CLAIMANT S investment improved, not only the Company, but also the life of the local community, which experienced the development of their town. 9. Fairyland region used to be part of Euroasia s territory until the outbreak of World War when it became part of the Eastasian territory. Despite this, Fairyland s population had 12

13 always identified themselves with Euroasia. CLAIMANT S grandparents were born nationals of Euroasia, but after Fairyland became part of Eastasia s territory, they acquired Eastasian nationality. 10. Therefore, on November 2013, the residents of Fairyland held a Referendum, on which they voted to separate from Eastasia, and reunite with Euroasia. Eastasia has not recognized the results. 11. The contract between Rocket Bombs and Euroasia s Ministry of National Defense was set to spire on January 2014, therefore negotiations started for a new contract, that was concluded on February On March 1 st, 2014, after the residents from Fairyland sent a letter for the Euroasian Government, the armed forces of that country peacefully entered Fairyland. 13. On 23 March 2014, Euroasia officially declared that Fairyland had become part of the Republic of Euroasia. At the same date, authorities recognized CLAIMANT as a national of Euroasia, and subsequently issued an Euroasian identity. 14. The annexation was not recognized by part of the International Community, such as the Republic of Oceania. On May 1 st, 2014 the President of the Republic of Oceania issued an Executive Order to Block the Property of Persons Contributing to the Situation in the Republic of Eastasia. 15. The order introduced sanctions to persons operating in the sector of arms production services in the Republic of Euroasia. Such sanctions had directly affected CLAIMANT S company, Rocket Bombs Ltd. 16. The consequences to the Company were appalling. Rocket Bombs Ltd. deteriorated and there was a rapid decrease in the value of its shares. 17. Furthermore, the Executive Order caused a complete standstill in arms production, since all suppliers of Rocket Bombs Ltd. operating within the territory of Oceania adhered to the sanctions, and the Company was not capable of fulfilling its contractual obligations. 18. CLAIMANT tried to settle the matter amicably, but received no answer from the competent authorities. Therefore, CLAIMANT decided to resort to arbitration, as settled in the EUROASIA BIT. CLAIMANT issued a notification to the Oceanian government informing of his dispute with the Republic of Oceania on 23 February

14 I. ARGUMENTS ON JURISDICTION 19. CLAIMANT submits that this Tribunal has jurisdiction to decide on the merits of the present controversy because: (i) The subject matter of the dispute is capable of settlement by arbitration (ii) CLAIMANT is an investor pursuant to Article 1.2 of the Euroasia BIT; (iii) CLAIMANT was not required to comply with the pre-arbitral steps as provided in the Article 9 of the Euroasia BIT prior to bringing his claims before the Tribunal and (iv) CLAIMANT may invoke Article 8 of the Agreement for the Promotion and Reciprocal Protection of Investments between the Republic of Oceania and the Republic of Eastasia dated 1 January 1992 ( the Eastasia BIT ) pursuant to Article 3 of Euroasia BIT. 1. THE TRIBUNAL HAS JURISDICTION TO DECIDE ON MATTERS INVOLVING THE ANNEXATION 20. CLAIMANT made a protected investment in the Republic of Oceania by purchasing the company Rocket Bombs Ltd. By that time, the company was missing the environmental license to produce arms, which caused unemployment and a decrease on the living quality in the country. [Case, p. 4, para. 3] After CLAIMANT s investment, the arm production restarted, bringing great advantages for all the local community. [Case, p. 4, para. 5] 21. Nevertheless, due to the sanctions imposed by RESPONDENT s non-acceptance of the reunification of Fairyland to Euroasia, CLAIMANT came to suffer the effects of an indirect expropriation [Case, p. 5, para. 2]. 22. That being considered, CLAIMANT entered with the present procedure in order to be compensated by the indirect expropriation committed by the Republic of Oceania. As a matter of the present dispute, CLAIMANT will first demonstrate that this Tribunal has jurisdiction to rule over the present controversy. 14

15 (I) THE SUBJECT MATTER OF THE DISPUTE IS CAPABLE OF SETTLEMENT BY ARBITRATION 23. Primarily, on the possibility the RESPONDENT argues the non-arbitrability of the subject matter of the dispute, CLAIMANT content that the present claim is capable of settlement by arbitration. 1. THE PUBLIC STATUS OF FAIRYLAND 24. The argument regarding the illegality of the annexation, as well as the statement that the intervention of Euroasia on the situation in Fairyland, falls into the scope of serious breach of International Law is unreasonable. The annexation of Fairyland into Euroasia was legal, since Fairyland population was merely exercising their rights of self-determination, as we will further address in this memorial. Therefore, Eastasia s decision of non-recognition of the annexation find an obstacle in such principle of equal rights and self-determination of people 1. The principle is foreseen in the UN Charter, as discussed at the General Assembly of 24 October 1970: By virtue of the principle of equal rights and self-determination of peoples enshrined in the Charter of the United Nations, all people have the right freely to determine, without external interference, their political status and to pursue their economic, social and cultural development, and every State has the duty to respect this right in accordance with the provisions of the Charter It is important to remember that Euroasia decided to intervene in Fairyland by request of Fairyland s population, after the Referendum was declared unlawful, and said to have no effect on the shape of Eastasian Territory [Case, p. 56, para. 2]. As such, Eastasia has not made its decision in conformity with the UN Charter and the Principle of Self-determination, therefore the annexation was legit, and the Tribunal has the competence to decide on matters regarding it. 26. Notwithstanding such argument, the remote possibility that the annexation may be looked upon as illegal by the UN and the International Community is not a matter for this Tribunal to consider. This Tribunal s decision does not constitute a precedent or an obligation to any other Court that may rule over the legality of the annexation. That is 1 Beigbeder, p.2, para Declaration on Principles of International Law, A/RES/25/2625 of

16 to say that, even though this Tribunal finds the annexation legal, the decision does not bind any other International Court, or International Organization, to such position. 27. Article 41 (2) of the ILC Articles on State Responsibility 3 specifically provides that the obligation of non-recognition is an international rule applicable specifically between States ( no State shall recognize as lawful a situation created by a serious breach of an obligation arising under a peremptory norm of general international law ). By these means, it is fair to state that this provision is binding between states, and that the decisions of International Courts cannot trigger any States responsibility THE ARBITRABILITY OF THE SUBJECT HEREIN 28. Also in this regard, it is important to remember that the subject discussed in this claim is the expropriation of Rocket Bombs, and not the legality of the annexation. Even though the annexation of Fairyland into Euroasia is considered illegal, which CLAIMANT sustains it is not, the subject of this arbitration is the fact that CLAIMANT has been indirectly expropriated, and, most important, not properly compensated. 29. Therefore, CLAIMANT sustains that the subject matter of this procedure is capable of settlement by arbitration, since it directly refers to matters of expropriation and compensation, subjects that are explicitly protected by the BIT between Euroasia and Oceania, in its 4th and 5th articles. 30. The act of stipulating sanctions for any company contracting with Euroasia, and, by doing so, completely preventing CLAIMANT to maintain its activities or to sell his shares, configures the act of expropriation, which is foreseen in article 4 of the BIT, which state that investments by investor of either Contracting Party may not directly or indirectly be expropriated ( ) The expropriation shall be carried out under due process of law, on a non-discriminatory basis and shall be accompanied by provisions for the payment of prompt, adequate and effective compensation. [Case, p. 42, para. 2] 3 A/RES/56/83, Article 41, page Happ/Wuschka, p. 5, para

17 3. CONCLUSION 31. Having said that, CLAIMANT contends that the annexation of Fairyland into Euroasia was legal, since it was an act of self-determination of its people, a principle of International Law, foreseen at the UN Charter. Furthermore, the subject matter of the dispute is the expropriation suffered by CLAIMANT, and not the legality of the annexation. As such, it is possible to settle this dispute by means of Arbitration, since the very BIT signed by Oceania foretells this institute. (II) CLAIMANT IS AN INVESTOR UNDER ARTICE 1.2 OF EURASIA BIT 32. CLAIMANT contends that this Tribunal has jurisdiction to hear the claim under article 1.2 of Euroasia BIT, since the relevant date to determine jurisdiction is the date the arbitral proceedings were instituted 5, and, by this date, CLAIMANT was uncontestably a national of Euroasia. 1. CLAIMANT S NATIONALITY 33. According to Sachs and Sauvani, BITs are agreements between two sovereing states that are made in order to attract foreign direct investments. On investors view, the BITs works as a way to protect investors from political risks and instability and, more generally, safeguard the investments made by its nationals in the territory of the other state That being considered, it must be noticed that BITs play a role in order to protect nationals who made a protected investment in another state when the sovereign states are signatory of the treaty, which is exactly what happens in the present case. 35. CLAIMANT s grandparents were born nationals of Euroasia, becoming Eastasian nationals only after Fairyland became a part of Eastasia in [Case, p. 56, para. 3] As the vast majority of Fairyland, CLAIMANT and his family had always identified themselves mostly with Euroasia [Case, p. 35, para. 3], therefore, after the referendum was held, and Fairyland became a part of Euroasia again, CLAIMANT requested to 5 Dolzer/Schreuer, p. 41, para Sachs/Sauvani, p

18 become a national of his Grandparents Country of birth. On 23 March 2014, the Euroasian authorities recognized CLAIMANT as a national of the Republic of Euroasia [Case, p. 56, para. 3]. 36. On this regard, article 1. 2 (a) of Euroasia BIT state that: 2. THE TERM INVESTOR SHALL MEAN ANY NATURAL OR LEGAL PERSON OF ONE CONTRACTING PARTY WHO INVESTS IN THE TERRITORY OF THE OTHER CONTRACTING PARTY, AND FOR THE PURPOSE OF THIS DEFINITION: (A) THE TERM NATURAL PERSON SHALL MEAN ANY NATURAL PERSON HAVING THE NATIONALITY OF EITHER CONTRACTING PARTY IN ACCORDANCE WITH ITS LAWS; 37. This said, it is important to remember that, even though investments treaties are governed by international law, international law will refer back to domestic law for the purpose of determining nationality. 7 It is a fact that it is left to each State to determine under its own laws which individuals are its nationals, a determination that other States are bound to accept. 8 It is also important to state that the applicable law regarding the determination of nationality is the national law of the granting State. 9 Having said that, prior to Fairyland s annexation, on 1 March 2014, Euroasia introduced an amendment to its Citizenship Act, which allowed all residents of Fairyland to apply for Euroasian nationality [case, p. 56, para.3]. 38. It is unquestionable, therefore, that CLAIMANT is an investor under article 1.2 of the Euroasian BIT, since it has the nationality of Euroasia. Additionally, on this regard, it is important to remind that CLAIMANT was obliged, under Euroasian Citizenship Act, to abdicate from the Eastasian nationality, since the Act does not allow any Euroasian national to possess dual nationality. CLAIMANT has renounced his Eastasian citizenship, as required by Euroasian Law, through an electronic sent to the President of the Republic of Oceania on 2 March Thus, CLAIMANT is a national of Euroasia, and must be treated as such. 7 Wisner/Gallus, p. 958, para Collier/Vaughan, p Kalderimis/Rubins, p. 75, para

19 2. THE RELEVANT DATE TO DETERMINE JURISDICTION 39. It is a well-known and accepted principle of international law adjudication that, in the absence of a specific provision on relevant dates, jurisdiction will be determined by reference to the date on which judicial proceedings are instituted 10. It is in this sense that the International Court of Justice has established its jurisprudence, as it can be proved by the award in the Arrest Warrant Case, where was held that the jurisdiction coming out that Court had to be determined at the time that the act instituting the proceeding was filled Similarly, in this line was the decision of the Tribunal in Compañia de Aguas del Aconquija & Vivendi Universal v Argentina, that states: it is generally recognized that the determination of whether a party has standing in an international judicial forum, for purpose of jurisdiction to institute proceedings, is made by reference to the date on which such proceedings are deemed to have been instituted This supports CLAIMANT s claim that the enforceable BIT is the Euroasia BIT, since, by the time the proceedings were instituted, on September 2015, CLAIMANT was already a national from Euroasia, as well as had already renounced his nationality from Eastasia. 42. Furthermore, regarding this matter, it is important to state that, in accordance with the rules of State Sucession, the treaties of the successor State became the treaty in force in respect to the territory that now belongs to it. As such, Euroasia BIT entered into force on Fairyland Territory with the annexation. Such is the view of the Vienna Convention on Succession of States is Respect of Treaties. 13 In this sense, Article 15: When part of the territory of a State, or when any territory for the international relations of which a State is responsible, not being part of the territory of that State, becomes part of the territory of another State: ( ) (b) treaties of the successor State are in force in respect of the territory to which the succession of States relates from the date of the succession of States, unless it appears from the treaty or is otherwise established that the application of the treaty to 10 Dolzer/Schreuer, p. 266, para Dolzer/Schreuer, p. 267, para Dolzer/Schreuer, p. 41, para Vienna Convention on Succession of States is Respect of Treaties. 19

20 that territory would be incompatible with the object and purpose of the treaty or would radically change the conditions for its operation 43. On this regard, it is only fair to state that the BIT in force in Fairyland territory, by the time the proceedings were institute, was the BIT between Oceania and Fairyland, which supports CLAIMANT s argument that, as a national of Euroasia, and as an investor from Fairyland, the claim must be made in accordance with such BIT. 3. CONCLUSION 44. CLAIMANT argues that, in regard of the principles stipulating the rules on nationality and citizenship, as well as the sovereignty of the right of the State to recognize its nationals, there is no doubt that CLAIMANT qualifies as an investor under Article 1.2 of Euroasia BIT, and, therefore, the only valid claim is under such Treaty. 45. Additionally, CLAIMANT sustains that, in conformity with the rules of State Succesion, the territory of Fairyland is under the rule of Euroasian laws and treaties, and, as such, an investment made by an investor of Fairyland can only rely on the BIT between Oceania and the country whose laws governed that region, in this case, Euroasia. (III) CLAIMANT MAY INVOKE ARTICLE 8 OF THE AGREEMENT FOR THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS BETWEEN THE REPUBLIC OF OCEANIA AND THE REPUBLIC OF EASTASIA DATED 1 JANUARY 1992 ( THE EASTASIA BIT ) PURSUANT TO ARTICLE 3 OF EUROASIA BIT 46. Thus, as already demonstrated, CLAIMANT nationality in the present case shall be considered as Euroasian, which determines the application of the Euroasia BIT. Considering that Euroasia BIT provides for the Most-Favored-Nation-Clause, CLAIMANT can import the most favorable provisions according to the ejusdem generis rule, as it will be demonstrated Claimant s Investment Is Protected By The Most-Favored-Nation Clause From Eastasia BIT 20

21 47. The BIT between Euroasia and the Republic of Oceania contains a National Treatment and Most-Favored Nation Clause in Article 3.1. Therefore, is it important to highlight that The International Law Commission describes the Most-Favored-Nation Clause as a treaty provision whereby a State undertakes an obligation towards another State to accord most-favored-nation treatment in an agreed sphere of relations In the present case, CLAIMANT submits that the MFN is fully applicable. Considering the scope of the Most-Favored-Nation Clause application, it is important to highlight that the right arise at the moment that the benefit is proposed to a third State and that the clause can only attract benefits when its matter is from the same category issue that the BIT clause, according to the ejusdem generis rule. 15 Further, regarding the ejusdem generis rule, it is also important to mention that both BITs have the provision regarding the issue of dispute resolution. 49. Regarding the temporal criteria, it must be clarified that despite the fact that Euroasia BIT came into force in 23 October 1995 and the Eastasia BIT in 1 April 1993, they were both concluded in the same date, 1 January 1992 [Case, Statement of Uncontested Facts, p. 32, para. 1]. According to ILC Rules Article 20.3, the right of a beneficiary State arises at the moment when the relevant treatment is extended by the granting State to a third State or to persons or things in the same relationship with that third State On the commentaries, the International Law Comission provides as a general rule the necessity of two elements in order to obtain the application of the MFN (a) a valid clause contained in a treaty in force, and (b) an extension of treatment by the granting State to a third State. 17 More than that, the Comission sustains that the scope includes benefits which were proposed to a third State both before and after the entry into force of the treaty containing the clause 18. In this sense: 51. Since the purpose of the clause is to put the beneficiary State on an equal footing with third States, it would be an act of bad faith to confine that equality to future legal 14 International Law Comission, ILC. Article 4, p Schill p International Law Comission, ILC. Article 20, p International Law Comission, ILC. Article 20, p International Law Comission, ILC. Article 20, p

22 situations. A pro future clause or a clause directed towards the past cannot be deemed to exist unless it is worded unequivocal fashion. Otherwise, the clause must extend to the beneficiary all advantages granted both in the past and in the future That being considered, the Euroasia BIT shall be interpreted in order to ensure that the benefits provided by the protection under the Most-Favored-Nation Clause, which aims to ensure that the relevant parties treat each other in a manner at least as favorable as they treat third parties. 20 Thus, in order to guarantee the proper application of the MFN Clause, its CLAIMANT submission that the interpretation of said clause shall be considered in a broad and extensive way, which requires its application regarding dispute resolution issues. 53. Thus, there are no elements that would deny the application of the Most-Favored- Nation Clause in the present case as: (i) the Euroasia BIT and the Eastasia BIT were concluded in the same date, which means that both negotiations were finished together and (ii) as the MFN Clause provided in Article 3 from Euroasia BIT does not contain any express provision in order to consider only future benefits, the scope of application shall include previous and future benefits offered to third States. 54. That being considered, it is clear that in the present case there are no elements that would stand for the non-application of the Article 8 of the Eastasia BIT in order to ensure the appliance of the more favorable dispute resolution clause. 2. THE MFN CLAUSE PROVIDES FOR THE MULTILATERALIZATION OF BITS, WHICH APPLIES TO JURISDICTIONAL ISSUES 55. Schill proposes the multilateralization of BITs through the application of the MFN clause, which enables equal competition among investors by prohibiting the imposition of different transaction costs based on the national origin of investor, which allows an important structure for a competitive market based on an efficient allocation of resources. 21 The MFN multilateralizes the relationship between two States treaties giving the opportunity to invoke benefits which were granted to a thirdy-party nationals 19 Sauvignon. Article 20, p Dolzer/Schreuer p Schill p

23 in its own treaty. 22 In this sense, sustains Schill that MFN clauses thus prevent States from shielding future bilateral bargains from multilateralization and from making preferential concessions in order to achieve a desired counter-concession Based on the general idea and the principles which abide to this rule, CLAIMANT submits that the MFN clause application has to be broad and extensive, including the application to jurisdictional issues. 57. The use of MFN clauses in order to protect investor as far as possible in material issues is largely recognized. In the case Berschader v. Russia, it is expressly mentioned that It is universally agreed that the very essence of an MFN provision in a BIT is to afford to investos all material protection provided by subsequent treaties. 24 Regarding this question, Schill submits that importing more favorable substantive conditions granted in third-country BITs comports with the economic rationale of MFN clauses, as equal investment conditions and standards of treatment for investors of different nationalities are essential to equal competition and to an efficient allocation of resources Also, the general tendency of arbitral jurisprudence is to apply the MFN clause in order to allow the exportation of a more favorable treatment related to the admissibility of a claim from an investor-state claim, which is exactly what happens in the present case It is common that international investment agreements provide some requirements in order to start an arbitration proceeding, as, for example, the duty to negotiate and waiting periods, as a way to encourage amicable dispute resolution. However, it must be considered that in some cases these requirements can impede the enforcement of rights granted under a BIT and delay efficient dispute settlement Schill sustains that arbitral jurisprudence has rather consistently accepted that the investors may circumvent such admissibility-related requirements by relying of more 22 Schill p Schill p Berschander v. Russia. 25 Schill p Schill p Schill p

24 favorable access provisions regarding investor-state dispute settlement under the host State s third-country BITs In the case Maffezini v. Spain 29, the tribunal decided that the investor was not bound to comply with the requirement of an eighteen-months waiting period to start an arbitral proceeding. In this case, considering the existence of an MFN clause, the tribunal extended the application of the clause to procedural issues. In this case, some restrictions for the access to an arbitration proceeding were pointed, as for example: (i) the exhaustion of local remedies (as this constitutes a fundamental rule of international law); (ii) fork in the road clauses, which prevent investors from initiating international arbitration where the same cause of action already had been advanced in domestic proceedings or vice versa (as this would upset the finality of settled disputes); (iii) the consent to a particular arbitration forum and (iv) the establishment of a highly institutionalized system of arbitration It is also important to highlight that multilateralizing benefits does not imply on a duty to accept disadvantages. In the case Siemens v. Argentina, the tribunal allowed the investor to resort directly to arbitration, even considering that under the BIT was established a duty for the Parties toto litigate before the local courts for the eighteen months before starting an arbitral proceeding The two cases mentioned above are considered important precedents regarding the application of the MFN clause on procedural issues. It must be considered that even though the arbitral jurisprudence is not unanimous about the application of the MFN clause on dispute resolution, there are very solid decisions that points to a broad and extensive interpretation of the clause, allowing CLAIMANT to seek for a more favorable dispute resolution clause. 64. That being considered, it is CLAIMANT submission that the Most-Favored-Nation Clause provided by Article 3 of Euroasia BIT can be applied to procedural issues, which allows CLAIMANT to conduct the dispute resolution in the present case under the Article 8 from Eastasia BIT. 28 Schill p Maffezini v. Spain. 30 Schill p Siemens v. Argentina. 24

25 (IV) CLAIMANT WAS NOT REQUIRED TO COMPLY WITH THE PRE-ARBITRAL STEPS AS PROVIDED IN THE ARTICLE 9 OF THE EUROASIA BIT PRIOR TO BRINGING HIS CLAIMS BEFORE THE TRIBUNAL 65. CLAIMANT submits that it was not required to comply with the pre-arbitral steps provided in Article 9 of the Euroasia BIT, once the MFN clause allows the use of the measures for dispute resolution from Article 8 of Eastasia BIT as they are more favorable to CLAIMANT. Thus, CLAIMANT will demonstrate that all the requirements from Article 8 from Eastasia BIT were fulfilled. Subsidiary, even if this Arbitral Tribunal understands that there was a duty to comply with the steps provided in Article 9 of Euroasia BIT, and the pre-arbitral steps were not observed by CLAIMANT, those measures are not mandatory and shall be analyzed as procedural issues instead of admissibility requirements. 1. CLAIMANT COMPLIED WITH THE DISPUTE RESOLUTION AS PROVIDED BY ARTICLE 8 OF EASTASIA BIT 66. In the present case, Article 8 of Eastasia BIT provides for the dispute resolution method as follows: (a) as far as possible the disputes shall be settled amicably between the parties; (b) if the dispute cannot be settled amicably within six months, it shall, at the request of and investor of the other contracting party, be submitted to arbitration. 67. It is uncontroversial that CLAIMANT has complied with all these requirements as it notified the Oceanian Ministry of Foreign Affairs, sending copies to the Ministry of Finance, Ministry of Defense and Ministry of Environment on 23 February 2015, as expressly set in the case files. [Case, Procedural Order 3, p. 60, para. 4] Considering that the request for arbitration was filled in 11 September 2015 [Case, Request for Arbitration, p. 3], it is also uncontroversial that the period of six months for the amicable dispute resolution was also observed. 68. Thus, considering that the dispute resolution shall be conducted based on Article 8 of Eastasia BIT, it is uncontroversial that the pre arbitral steps were properly fulfilled in the present case. 25

26 2. SUBSIDIARY, EVEN IF DISPUTE RESOLUTION SHALL BE CONSIDERED REGARDING ARTICLE 9 FROM EUROASIA BIT, CLAIMANT HAS TAKEN ALL THE MEASURES THAT WERE REQUIRED 69. Subsidiary, if this Tribunal understands that the dispute resolution shall be conducted based on Article 9 of the Euroasia BIT, CLAIMANT sustains that the requirements were fulfilled. According to Article 9 of Euroasia BIT, dispute resolution should be conducted as follows: (a) to the extent possible, the disputes shall be settled in an amicable consultations between the parties; (b) if the dispute cannot be settled amicably, it may be submitted to the competent judicial or administrative courts of the Contracting Party in whose territory the investment is made; (c) if the dispute has not been resolved after twenty four months from the date of the notice on the commencement of the proceedings before the courts mentioned in paragraph b, it may be referred to international arbitration. 70. Regarding these requirements, it must be observed that, as mentioned above, Claimant complied with the requirement to resolve the dispute amicably as he notified the competent authorities. [Case, Procedural Order 3, p. 60, para. 4] 71. Respondent may argue that Claimant has not submitted the dispute before the courts of Oceania. However, in the present case, it would not be effective to submit the dispute to the competent judicial or administrative court in the Republic of Oceania. According to international law and the Oceanian national law, claims regarding international treatment may not be adjudicated by the Oceanian national courts. [Case, Procedural Order 3, p. 60, para. 5] More than that, considering that the Oceanian Constitutional Tribunal has a tendency to annul legal acts if they consider them unconstitutional, according to the Tribunal s history in foreign policy, it would be unlikely that it would annul the Executive Order of 1 May 2014, which imposes sanctions to persons contributing to the situation of the Republic of Eastasia. Also, the process would probably take up to 3 or 4 years. [Case, Procedural Order 3, p. 60, para. 6]. That being considered, it would not be reasonable to impose the duty to comply with this requirement, once it would be extremely harmful and probably would be without any practical effect. 26

27 72. It must be considered that Claimant made an extremely important investment in Republic of Oceania, restarting the arms production and bringing development to the local economy. Thus, to impose a duty to start proceedings before judicial or administrative courts that would be not effective as a way to avoid compensate Peter Explosive from the expropriation it suffered would discourage future investors, affecting the local economy. 73. Subsidiary, even if this Arbitral Tribunal understands that the pre arbitral steps were not complied, it must be considered that those requirements shall be interpreted as nonmandatory. According to Born and Šćekić, even issues concerning the validity and the effects of pre-arbitral steps in principle shall be analyzed by the Arbitral Tribunal as questions of admissibility or procedure. In this sense: and that even valid, mandatory pre-arbitration procedural requirements should not ordinarily constitute jurisdictional bars to the initiation of arbitral proceedings, but should instead be regarded as matters of admissibility or procedure, that are capable of cure and whose breach does not ordinarily preclude resort to arbitration. For many of the same reasons, disputes about the validity and effects of pre-arbitration procedural requirements should, in principle, be matters for the arbitral tribunal to decide, like other procedural aspects of the arbitration, subject to only very limited judicial review in subsequent annulment proceedings Born and Šćekić sustain that those steps are directional and play a role as a guideline, thus if the party does not comply with its duty there would be no material damages, once the typical rationale of these decisions is that pre-arbitration procedures are, in significant part, aspirational, directional, or hortatory, and that a party s failure to comply with such procedures causes no material damage to its counter-party Also, Born submits that numerous arbitral awards considered that the compliance with pre arbitral steps is not a perquisite to commencing arbitral proceedings in disputes state-investor.34 In this sense, Spyridon Roussalis v. Romania35, SGS Société 32 Born/Šćekić p Born/Šćekić p Born/Šćekić p Spyridon Roussalis v. Romania. 27

28 Générale de Surveillance S.A. v. Islamic Republic of Pakistan 36 and Ve, Sanayi AS v Islamic Repub of Pakistan In the ICSID case Biwater Gauff v Tanzania38, the Arbitral Tribunal has decided that the six-months periods that were established between the Parties as previous to the arbitral jurisdiction shall be considered as procedural and directory in nature, instead of jurisdictional or mandatory. According to the Tribunal analysis, the purpose of this provision is to promote the amicable settlement of the dispute. More than that, it was decided in this case that this provision does not represent a barrier for the Arbitral Tribunal as it would be a way to oblige Claimant to do nothing during this period if the negotiations were not possible or efficient, which is exactly what happens in the present case. Claimant has complied with its duties and made all the efforts that were possible in order to solve the dispute amicably. Nevertheless, Respondent did not even answer the notifications that were sent, which demonstrates that further negotiations would be useless[case, Procedural Order 3, p. 60, para. 4]. 77. Finally, according to the Arbitral Tribunal in the case mentioned above, considering that, when the Request for Arbitration was filed all the negotiations had failed was therefore entirely reasonable for BGT to proceed to arbitration, rather than seeking to resolve the dispute through local remedies or otherwise. 78. Considering all the mentioned above, even if this Tribunal understands that the dispute resolution shall be conducted according to Article 9 from Euroasia BIT, Claimant submits that the pre arbitral steps are not jurisdictional or mandatory. Subsidiary, even if it was, Claimant sustains that it had taken all the measures that were expected in order to solve the dispute amicably, so it would be extremely harmful, and ineffective, to impose the duty to litigate before the local or administrative courts. 36 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan. 37 Ve, Sanayi AS v Islamic Repub of Pakistan. 38 Biwater Gauff v Tanzania. 28