First Annual
Foreign Direct Investment International Moot Competition
31 October to 2 November 2008
Vanguard International,
Claimant
v.
Government of the Republic of Calpurnia,
Respondent
MEMORANDUM FOR CLAIMANT
Respectfully Submitted,
Parisa Elahi Anita Raman Gunjan Sharma
Counsel
Team Singh, Memorandum for Claimant
ii
TABLE OF CONTENTS
TABLE OF AUTHORITIES....................................................................................................................... v
TABLE OF LEGAL SOURCES ...............................................................................................................vii
STATEMENT OF FACTS .......................................................................................................................... 1
SUMMARY ARGUMENT.......................................................................................................................... 4
ARGUMENT ................................................................................................................................................ 5
PART ONE: JURISDICTION .................................................................................................................... 5
I. THE TRIBUNAL HAS JURISDICTION TO HEAR THIS DISPUTE............................................... 5
II. THIS DISPUTE IS NOT BARRED AS A CONTRACTUAL CLAIM.............................................. 5
A. This Dispute Involves Treaty-Based Obligations................................................................................ 5
B. Article 11 of the Calpurnia-Gaul BIT Also Applies to Contractual Disputes.................................... 5
III. FORK-IN-THE-ROAD PRECLUSION DOES NOT BAR THIS
TRIBUNAL’S JURISDICTION ................................................................................................................. 6
A. Pescara’s Suit and This Arbitration Do Not Satisfy the Triple Identity Test..................................... 6
1. There is No Identity of Parties....................................................................................................... 7
2. There is No Identity of Objects...................................................................................................... 8
3. There is No Identity of Causes of Action ...................................................................................... 8
B. Application of the Aguas II Standard Also Prevents Fork-in-Road Preclusion................................ 9
C. Pescara’s Suit Was Not A Voluntary Suit in Domestic Court............................................................ 9
IV. THE AMICABLE SETTLEMENT PROVISION DOES NOT BAR JURISDICTION ................. 9
A. As a Procedural Issue, Amicable Settlement Provisions Do Not Bar Jurisdiction.......................... 10
B. Having Rebuffed Amicable Settlement, Respondent Cannot Now Use an Amicable Settlement
Provision to Deny Jurisdiction............................................................................................................... 11
C. Alternatively, the MFN Clause of the Calpurnia-Gaul BIT Allows Claimants to Rely on the Shorter
Waiting Period of the Calpurnia-Flatland BIT..................................................................................... 12
1. The Calpurnia-Gaul BIT’s MFN Clause Entitles Claimant to the Shorter Waiting Period of
the Calpurnia-Flatland BIT............................................................................................................. 13
a. The Calpurnia-Gaul BIT’s MFN Clause Subsumes Dispute Resolution................................... 13
i. Persuasive Precedent Suggests that MFN Clauses Attract Disparate Resolution................. 13
ii. The Language of article 4 Places Dispute Resolution with the Article’s Scope................... 16
b. A Two-Month Waiting Period is More Favorable..................................................................... 17
c. An 18-Month Waiting Period is Not a “Question of Overriding Policy” .................................. 18
2. Claimant Is Entitled to Use the Two-Month Waiting Period of
the Calpurnia-Flatland BIT............................................................................................................. 19
a. Claimant Has Satisfied the Two-Month Waiting Period............................................................ 19
b. Flatland’s Denunciation of the Convention Does Not Affect Claimant’s Right to Rely on the
Two-Month Waiting Period........................................................................................................... 19
i. Flatland’s Denunciation of the Convention Does Void Its Consent to Jurisdiction in the
Calpurnia-Flatland BIT............................................................................................................ 19
ii.Claimant May Still Rely on the Two-Month Waiting Period of Article 7.............................. 20
(a) Flatland’s Denunciation of the Convention does not Preclude Reliance on
Article 7 ................................................................................................................................. 21
(b) Claimant Need Not “Pay the Price” of ICSID Jurisdiction to Rely on the Two-Month
Waiting Period....................................................................................................................... 21
CONCLUSION ON JURISDICTION...................................................................................................... 22
Team Singh, Memorandum for Claimant
iii
PART TWO: MERITS OF THE CLAIM..................................................................................................... 23
I. THE ACTS AND OMISSION OF SFCDC, THE CALPURNIAN POLICE AND THE
IMMIGRATION AUTHORITIES ARE ATTRIBUTABLE TO THE STATE........................................ 23
A. The Acts and Omissions of Calpurnia’s Police Forces and Immigration Authorities Rest Directly with
the Respondent .............................................................................................................................................. 23
B. The Acts and Omissions of SFCDC Are Attributable to RespondentI ................................................... 24
1. SFCDC is an Agent of the Respondent.............................................................................................. 24
2. It is of No Legal Consequence that SFCDC Acted in a Commercial Capacity.............................. 25
C. Ultra Vires Is Not a Defense to State Attribution................................................................................... 25
II. RESPONDENT EXPROPRIATED CLAIMANT’S PROPERTY ........................................................ 26
A. Expropriation Is Broadly Defined in the Calpurnia-Gaul BIT and under
Customary International Law....................................................................................................................... 26
1. The Calpurnia-Gaul BIT Protects Investors Against Direct, Indirect, and Creeping Expropriation
by Respondent ......................................................................................................................................... 26
2. The Definition of Investment in the Calpurnia-Gaul BIT Encompasses Monies, Shareholding, and
Intellectual Property ............................................................................................................................... 27
a. The Definition of Investment Protects Minority Shareholder Rights............................................... 28
b. The Definition of Expropriation Protects Monies............................................................................ 29
c. The Definition of Investment Protects Intellectual Property Rights and
Intangible Technical Assets.................................................................................................................. 29
B. Respondent Has Expropriated Claimant’s Investment ........................................................................... 29
1. Respondent Continues to Withhold Payments Due to Claimant .................................................... 30
2. Respondent Willfully Deprived Claimant of Effect Use and Enjoyment of Its Shareholding...... 32
3. Respondent Continues to Use Claimant’s Intellectual Property..................................................... 34
C. Respondent Has No Public Purpose for Expropriation, and Acted Discriminatorily without Due Process
of Law ............................................................................................................................................................ 34
III. RESPONDENT HAS BREACHED ITS OBLIGATION TO PROVIDE FAIR AND EQUITABLE
TREATMENT TO CLAIMANT’S INVESTMENTS.................................................................................. 35
A. Protection against Arbitrariness and Discrimination ............................................................................. 36
B. Protection of Legitimate Expectations..................................................................................................... 37
C. Stability, Predictability, Consistency........................................................................................................ 38
D. Malice or Bad Faith ................................................................................................................................. 38
IV. RESPONDENT DENIED CLAIMANT NATIONAL TREATMENT ................................................ 39
A. Gaulois and Calpurnian Shareholders Were in a Comparable Setting ................................................. 39
B. Claimant Was Subject to Differential Treatment Vis-à-vis Respondent’s Nationals............................. 40
C. There Was No Justification for the Differential Treatment.................................................................... 41
V. RESPONDENT FAILED TO PROVIDE FULL PROTECTION AND SECURITY TO CLAIMANT’S
INVESTMENTS.............................................................................................................................................. 42
A. Respondent Failed to Provide Claimant’s Investment with Full and Constant Protection of Its Physical,
Economic, and Legal Security...................................................................................................................... 43
1. Physical Protection.............................................................................................................................. 43
2. Economic Protection ........................................................................................................................... 44
3. Legal Rights ......................................................................................................................................... 44
B. Respondent Failed to Take Reasonable Measures to Protect Claimant’s Investment........................... 45
VI. RESPONDENT TREATED CLAIMANT IN AN ARBITRARY AND DISCRIMINATORY
MANNER......................................................................................................................................................... 46
A. Arbitrary Treatment.................................................................................................................................. 46
B. Discriminatory Treatment ........................................................................................................................ 47
VII. RESPONDENT HAS BREACHED ITS DUTY OF TRANSPARENCY........................................... 48
Team Singh, Memorandum for Claimant
iv
CONCLUSION ON MERITS OF THE CLAIM.......................................................................................... 49
PART THREE: RELIEF REQUESTED ...................................................................................................... 50
Team Singh, Memorandum for Claimant
v
TABLE OF AUTHORITIES
TREATISES AND BOOKS CITED IN ¶
Dolzer Rudolf Dolzer and Christoph Schreur, Principles of
International Investment Law (Oxford University Press,
2008)
Passim
Hoffman and Tams Rainer Hofmann and Christian J. Tams, eds., The
International Convention on the Settlement of Disputes
(ICSID): Taking Stock after 40 Years (2007)
150
Int’l Econ. Law Andreas F. Lowenfeld, International Economic Law:
Second Edition (2008)
63
Lowenfeld on
International
Arbitration
Andreas F. Lowenfeld, Lowenfeld on International
Arbitration (2008)
46
McLachlan et al. Campbell McLachlan, Laurence Shore, and Matthew
Weiniger, International Investment Arbitration:
Substantive Principles, (Oxford University Press, 2007)
72
McNair Sir Arnorld McNair, The Law of Treaties (Oxford, 1938) 89
Ortino et al. Federio Ortino, Lahra Liberti, Audley Sheppard and
Hugo Warner, eds., Investment Treaty Law: Current
Issues II (British Inst. of Int’l and Comp. Law, 2007)
151
The Oxford
Handbook
Peter Muchlinkski, Frederico Ortino, and Christoph
Schreur, eds., The Oxford Handbook of International
Investment Law (Oxford University Press, 2008)
23, 24, 62
ICSID Commentary Christoph Schreur, The ICSID Convention: A
Commentary (2001)
83, 84
ARTICLES CITED IN ¶
Acconci Pia Acconci, Most-Favored Nation Treatment in The
Oxford Handbook, 361 (2008)
62
Consent to
Arbitration
Christoph Schreur, Consent to Arbitration in The Oxford
Handbook, 830 (2008)
23
Cross-Jurisdiction
Forum Non
Conveniens
Cross-Jurisdictional Forum Non Conveniens Preclusion,
Note, 121 Harvard L. R. 2178 (2008)
35
Team Singh, Memorandum for Claimant
vi
Franck Susan D. Franck, The Legitimacy Crisis in Investment
Treaty Arbitration: Privatizing Public International Law
Through Inconsistent Decision, 73 Fordham L. R. 1521
(2005)
49, 63
McGibbon I.C. McGibbon, Estoppel in International Law, 7 Int’l &
Comp. L. Q. 468 (1958)
50
Nolan and Sourgens M.D. Nolan and F.G. Sourgens, The Interplay Between
State Consent to ICSID Arbitration the Denunciation of
ICSID Arbitration: The Possible Venezuela Case Study,
Transnational Dispute Management, Sept., 2007
83
Paradell Luis Paradell, The BIT Experience of Fair and Equitable
Treatment Standard in Ortino et al., 129 (2007)
151
Schill Stephan Schill, “Fair and Equitable Treatment” as an
Embodiment of the Rule of Law, in Hoffman and Tams, 31
(2007)
150
Schwarzenberger George Schwarzenberger, Most-Favored-Nation Standard
in British State Practice, 22 Brit. Y.B. Int’l L 96, 101
(1949)
88
Spiermann Ole Spiermann, Applicable Law in The Oxford Handbook,
89 (2008)
24
Wegen Gerhard Wegen, Dispute Settlement and Arbitration, in
International Investment Disputes: Avoidance and
Settlement, Christoph Schreur, ed., 59 (1984)
42
Wong Jarrod Wong, Umbrella Clauses in Bilateral Investment
Treaties: Of Breaches of Contract, Treaty Violations, and
the Divide Between Developing and Developed Countries
in Foreign Investment Disputes, 14 Geo. Mason L. Rev.
135 (2007)
61
SUBMISSIONS TO TRIBUNALS CITED IN ¶
Sinclair
Declaration
Opinion of Sir Ian Sinclair as Expert Supporting
Claimant, in Occidental
29
Team Singh, Memorandum for Claimant
vii
TABLE OF LEGAL SOURCES
ARBITRAL AND GOVERNMENTAL DECISIONS CITED IN ¶
AAPL AAPL v. Sri Lanka, Award, 27 June 1990, 4 ICSID
Reports 246
98, 176, 179
AGIP AGIP v. Congo, Award, 30 November 1979, 1 ICSID
Reports 306
128
Aguas I Compañía de Aguas del Aconquija S.A. & Compagnie
Générale des Eaux (Vivendi) v. Argentine Republic,
ICSID Case No. ARB/97/3, Award, November 21, 2000,
40 ILM 426 (2001), 5 ICSID Reports 296
28, 58
Aguas II Compañía de Aguas del Aconquija S.A. & Compagnie
Générale des Eaux (Vivendi) v. Argentine Republic,
ICSID Case No. ARB/97/3, Decision on Annulment, July
3, 2002, 41 ILM 1135 (2002), 6 ICSID Reports 340
28, 100
Aguas III Suez, Sociedad General de Aguas de Barcelona S.A. v.
Argentine Republic, ICSID Case No. Arb/03/19, Decision
on Jurisdiction, Aug. 3, 2006 (Salacuse, KaufmannKohler,
Nikken)
58
Ambatielos Ambatielos Claim (Greece v. United Kingdom), 12 U.N.
Reports of Int’l Arbitral Awards 83, 108 (1956)
57, 58, 65
Amco Asia Amco Asia Corp. v. The Republic of Indonesia, ICSID
Case No. ARJ318 111, Award on the Merits of 20
November 1984, 1 ICSID Reports 413
98, 105, 176,
177
American Mfg. American Mfg. & Trading, Inc. v. Republic of Zaire,
ICSID Case No. ARB19311 Award of 21 Feb. 1531
(1997)
189
Asian Agricultural Asian Agricultural Products Ltd. v. Republic of Sri Lanka,
Award of 27 June 1990, 4 ICSID Reports 246
190
Azurix Azurix Corp. v. Argentine Republic, ICSID Case No.
ARB/01/12, Decision on Jurisdiction, Dec. 8, 2003
28, 35, 37,
179, 184
Bayindir Bayindir Insaat Turizm Tecret Ve Sanayi v. Pakistan,
ICSID Case No. ARB/03/29, Nov, 14, 2005
46, 50
Biloune Biloune v. Ghana, Award on Damages and Costs, 30 June
1990, 1995 I.L.R. 95
111
C.M.E. C.M.E. v. Czech Republic, Partial Award, 9 ICSID
Reports 121, Sept. 13, 2001
187
Team Singh, Memorandum for Claimant
viii
C.M.S. Award CMS Gas Transmission Co. v. Republic of Argentina,
ICSID Case No. ARB/01/08, Award, 44 I.L.M. 1205
(2005), May 12, 2005
117, 158
C.M.S. Jurisdiction CMS Gas Transmission Co. v. Republic of Argentina,
ICSID Case No. ARB/01/08, Decision on Objections to
Jurisdiction, 42 ILM 788 (2003), July 17, 2003
28, 31, 115
Ceskoslovenska Ceskoslovenska Obchodni A.S. v. The Slovak Republic,
Award, Dec. 29, 2006
186
Champion Trading Champion Trading Co. v. Arab Republic of Egypt, ICSID
Case No. ARB/02/9, Decision on Jurisdiction, Oct. 21,
2003
31, 33
Corn Products Corn Products v. United Mexican States, ICSID Case No.
ARB (AF)/04/1 (2008)
120
ELSI Elettronica Sicula, SA (ELSI) Case (ICJ), Judgment of 20
July 1989
197, 199
Enron & Ponderosa Enron Corp. & Ponderosa Assets, L.P. v. Argentine
Republic, ICSID Case No. ARB/01/3, Decision on
Jurisdiction, Jan. 14, 2004
28, 40, 49,
118
Ethyl Corp. Ethyl Corporation v. Government of Canada,
UNICTRAL Arbitration, Award on Jurisdiction, June 24,
1998
46, 50
Eureko Eureko B.V. v. Poland, Partial Award, 19 August 2005, 12
ICSID Reports 335
117, 133
Feldman Marvin Feldman v. Mexico, ICSID Case No.
ARB(AF)/99/1, NAFTA Award of 16 December 2002
165
Genin Alex Genin and Others v. Republic of Estonia, ICSID
Case No. ARB/99/2, Award, June 25, 2001
28, 33, 40,
115
Goetz Antoine Goetz and Others v. Republic of Burundi, 6
ICSID Reports 5, ICSID Case No. ARB/95/3, Award,
Feb. 10, 1999
49, 111
Klockner I Klockner v. Cameroon, ICSID Case No. ARB/82/2, 10
Y.B. Com. Arb. 71 (1985)
100
Klockner II Klockner v. Cameroon, ICSID Annulment Decision, 11
Y.B. Com. Arb. 162 (1986)
100
Lauder v. Czech
Republic
Lauder v. Czech Republic, NAFTA-UNCITRAL
Arbitration, Final Award, Sept. 3, 2001
28, 46, 50,
168, 190, 197
LG&E LG&E v. Argentina, Decision on Liability, 3 October
2006, 46 ILM (2007) 36
116
Team Singh, Memorandum for Claimant
ix
Link-Trading Link-Trading Joint Stock Company v. Moldova, Ad Hoc
UNCITRAl Arbitration, Decision on Jurisdiction, Feb. 16,
2001
46
Maffezini Emilio Agustín Maffezini v. Kingdom of Spain, ICSID
Case No. ARB/97/7, Decision of the Tribunal on
Objections to Jurisdiction, Jan. 25, 2000 (2001) ICSID
Review – Foreign Inv. L. J. 212
58, 60, 61,
76, 100
Metalclad I Metalclad Corp. v. United Mexican States, ICSID Case
No. ARB (AF)/97/1 (2000)
100, 111, 205
Metalclad II Metalclad Corp. v. United Mexican States, Award, 30
August 2000, 5 ICSID Reports (2002)
112, 156
Middle East Cement Middle East Cement Shipping and Handling Co. S.A. v.
Arab Republic of Egypt, ICSID Case No. ARB/99/6,
Award, Apr. 12, 2002
28, 37
Motorola Motorola Inc. and Iran National Airlines Corp., et. al.,
Award No. 374-481-3 reprinted in 19 Iran-U.S. CTR 93
109
National Grid National Grid, P.L.C. v. The Argentine Republic,
UNCITRAL Arbitration, Decision on Jurisdiction, June
20, 2006
58
Noble Ventures Noble Ventures v. Romania, Award, ICSID Case No
ARB/01/11, Oct., 12, 2005
101, 102
Occidental Occidental Exploration and Production Co. v. Republic of
Ecuador, London Ct. of Int’l Arb. Case No. UN 3467,
Final Award, July 1, 2004 (Vicuña, Brower, Sweeney)
28, 30, 35,
37, 40, 153,
166
Olguin Olguín v. Paraguay, ICSID Case No. ARB/98/5, Decision
on Jurisdiction, Aug. 8, 2000, 18 ICSID R.-For’gn
Investment L. J. 133 (2003), 6 ICSID Reports 156
(Oreamuno, Rezek, Alvarado)
28
Pan American Pan American Energy L.L.C. and others v. Argentine
Republic, ICSID Case No. ARB/04/08, Decision on
Preliminary Objections, July 27, 2006 (Caflisch, Stern,
Jan van dan Berg)
28, 29, 50
Plama Plama Consortium Ltd. v. Republic of Bulgaria, ICSID
Case No. ARB/03/24, Decision on Jurisdiction, Feb. 8,
2005
59, 60, 62
Polish Nationality
Case
Affaire relative à l’acquisition de la nationalité polonaise,
UNRIAA, vol. I (Sales No. 1948.V.2), 401 (1924)
98
Pope & Talbot Pope & Talbot, Inc v. Canada, NAFTA-UNICTRAL,
Interim Award, June 26, 2000
50, 168, 171,
172
Team Singh, Memorandum for Claimant
x
Restatement American Law Institute, Restatement of the Law Third,
the Foreign Relations of the United States, Vol. 1 (1987)
110
Revere Revere Copper v. OPIC, Award, 24 August 1978, 56
I.L.R. 258 (1980)
111
S.D. Myers S.D. Myers, Inc. v. Canada, NAFTA Arbitration under
UNCITRAL Rules, Partial Award, Nov. 13, 2000
72, 151, 163,
165, 171
S.G.S. v. Pakistan S.G.S. Société Générale de Surveillance S.A. v. Islamic
Republic of Pakistan, ICSID Case No. ARB/01/13,
Decision on Objections to Jurisdiction, Aug. 6, 2003
46
S.G.S v. Philippines S.G.S. Société Générale de Surveillance S.A. v. Republic
of Philippines, ICSID Case No. ARB/02/6, Decision on
Objections to Jurisdiction, Jan. 29, 2004
23, 24
SAIC Claim Expropriation Claim of Science Applications
International Corporation, Overseas Private Investment
Corporation Memorandum of Determinations on OPIC
Contract of Insurance No. 822 (2004)
109, 144
Salini v. Jordan Salini Costruttori SpA v. Jordan, ICSID Case No.
ARB/02/13, Decision on Jurisdiction Nov. 15, 2004, IIC
2007 (2004)
42, 59, 60, 62
Salini v. Morocco Salini Costruttori S.P.A. and Italstrade S.P.A. v. Kingdom
of Morocco, ICSID Case No. ARB/00/4, Decision on
Jurisdiction, July 23, 2001
21, 23
Saluka Saluka Invests B.V. (The Netherlands) v. Czech Republic,
Partial Award, March 17, 2006
186
Sedelmayer Sedelmayer v. Russian Federation, Ad Hoc UNCITRAL
Arbitration, Award, July 8, 1998
46
Siemens Siemens v. The Argentine Republic, ICSID Case No.
ARB/02/8, Decision on Jurisdiction, Aug. 3, 2004
58, 67, 179
TAMS-AFFA Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA, 6
Iran-U.S. Claims Tribunal 219 (1984)
109
TECMED Tecnicas Medioambientales S.A. v. The United Mexican
States, Award, 43 I.L.M. 133 (2004), May 29, 2003
59, 60, 62,
116, 141,
153, 154, 206
Telenor Telenor Mobile Communications A.S. v. Republic of
Hungary, ICSID Case No. ARB/04/15, Award, Sept. 13,
2006
59, 60, 62
Texaco Texaco v. Libya, Preliminary Award, 53 I.L.R. 389, Nov.
27, 1965
98
Team Singh, Memorandum for Claimant
xi
U.P.S. v. Canada U.P.S. v. Canada, Award, May 24, 2002 148
Waste Mgmt. Waste Mgmt. Inc. v. United Mexican States, ICSID Case
No. ARB(AF)/98/2, Award of 2 June 2000, 40 I.L.M. 56,
73 (2001)
112, 149
Wena Hotels Wena Hotels v. Egypt, Award, 8 December 2002, 41 ILM
896 (2002)
98, 179, 180
Wintershall Wintershall, A.G. v. Gov't of Qatar, 28 I.L.M. 795, 809
(1989)
100
TREATIES AND OTHER INTERNATIONAL PUBLICATIONS CITED IN ¶
Articles on State
Responsibility
International Law Commission, Articles on Responsibility
of States for Internationally Wrongful Acts, Yearbook of
the International Law Commission, 2001, vol. II (Part
Two) (2001)
98, 100, 103,
104
CAFTA Draft Text Central American Free Trade Agreement (U.S.-D.R.)
(Draft Text), Jan. 28, 2004
68
Convention Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, March 18,
1965, 17 U.S.T. 1270, 575 U.N.T.S. 160 (1966)
Passim
Draft Articles on
MFN
Draft Articles on Most-Favored Nation Clauses With
Commentaries, International Law Commission, 2 Y.B.
Int’l L. C. (1978), U.N. Doc.A/CN.4/SER.A/1978/Add.1
(pt.2)
56, 80
ICJ Statute Statute of the International Court of Justice, June 26,
1945, 59 Stat. 1055, 3 Bevans 1179
60
ILC Addendum to
First Report
International Law Commission, Addendum to the First
report on State responsibility, A/CN.4/490/Add.5 (July
22, 1998)
95, 97
OECD MFN Report Most Favored Nation Treatment in International
Investment Law, OECD Directorate for Financial and
Enterprise Affairs, Working Papers on International
Investment, No. 2004/2, p. 9 (Sept. 2004)
56
OECD on Tax
Competition
OECD, Harmful Tax Competition: An Emerging Global
Issue (1998)
136
OECD Principles OECD, OECD Principles of Corporate Governance
(2004)
134, 137, 138
Vienna Conv. On
Law of Treaties
Vienna Convention on the Law of Treaties art. 31, May,
23, 1969, 1155 U.N.T.S. 331, 8 I.L.M. 679 (1969)
61, 64
Team Singh, Memorandum for Claimant
xii
JUDICIAL DECISIONS CITED IN ¶
First Sport Ltd. First Sport Ltd. v Barclays Bank plc [1993] 1 WLR 1229
(South Africa)
127
U.S. Embassy Case United States Diplomatic and Consular Staff in Tehran,
(1980) I.C.J. Reports 3 (Int’l Court of Justice)
98
Velásquez
Rodriguez
Velásquez Rodríguez v. Honduras, Inter-Am.Ct.H.R. (Ser.
C) No. 4 para. 170 (1988) (Inter-Am. Ct. of H.R.)
98
Team Singh, Memorandum for Claimant
1
STATEMENT OF FACTS
1. The Republic of Calpurnia (“Respondent”) and the Federated States of Gaul entered into an
Agreement on the Promotion and Protection of Investments on August 1, 1995. Respondent
and the State of Flatland entered into an Agreement on the Mutual Promotion and Protection
of Investments on February 8, 1992.
2. In 1997, Vanguard International (“Claimant”), a Gaulois corporation, participated in
establishing a joint venture company, VanCal, Inc. (“VanCal”), providing GSM/UMTS
services in Calpurnia, along with the State Fund for Commerce and Development in
Calpurnia (“SFCDC”). Benefitting from Claimant’s expertise and leadership, VanCal
expanded in the Calpurnian market through the provision of quality communications,
becoming the nation’s largest mobile telecommunications service provider.1
3. Since late 2004, Claimant has held 31% of VanCal’s common stock, with 1% of that 31%
held in trust by Pescara. Additionally, Claimant licenses its intellectual property and provides
technical assistance to VanCal.
4. SFCDC is a wholly State-owned entity.2
Respondent also appoints the directors of SFCDC’s
Board.3
Since late 2004, SFCDC has voted and controlled 52% of VanCal’s common stock.
5. In November 2003, a conservative party with a hostile view towards Gaul came to power in
Calpurnia; bilateral relations deteriorated rapidly thereafter.
6. Between January 1 and October 28, 2004, a key employee was harassed at length on five
occasions by organization protesting against Claimant’s participation in the investment, the
Calpurnian Conservative Coalition’s (“CCC”) Women’s League.4
Respondent failed to send
police protection despite repeated requests for support.
7. On December 8, 2003, June 4, 2004 and July 17, 2004, Calpurnian police conducted
warrantless searches of Claimant’s key employees’ homes, based on a justification not
1
Second Clarification, Q. 53.
2
Record at 3, ¶10.
3
Second Clarification, Q. 17.
4
Record at 4, ¶17.
Team Singh, Memorandum for Claimant
2
recognized under Calpurnian law. Respondent then promoted baseless charges of espionage
against Claimant and key employees through public press releases.5
8. In September 2004, Calpurnian immigration authorities arbitrarily denied a business visa for
a key employee appointed by Claimant.
9. On October 14, 2004, Respondent elected Dr. Swift, a government employee,6
and Mr.
Shelly, to the VanCal Board.7
As of November 15, 2004, half of VanCal’s directors were
representatives of the SFCDC.8
Dr. Swift stated that SFCDC did not “regard VanCal as really
being a private company.”9
10. On March 10, 2005, SFCDC-appointed directors declared that, “the payment of profits to the
foreign shareholders has been suspended”; the Board thereafter paid a dividend only to local
shareholders.10
Since May 2005, VanCal has not paid Claimant for use of Claimant’s
intellectual property, claiming payments could not be made to foreign shareholders.11
No
payments have been made to Claimant since March 10, 2005.
11. On November 16, 2005, SFCDC-appointed directors expelled Claimant’s representative from
the VanCal Board.12
12. On February 5, 2007, Claimant informed Respondent’s agent – Mr. Poe, the governmentappointed
Chair of SFCDC – that it sought compensation for an expropriation. Mr. Poe
refused to look into the matter, saying that the government “has no authority in any event”
and “[t]here is nothing we can do.” On July 31, 2007, Claimant initiated this arbitration.
5
Id.
6
Record, at 4, ¶16.
7
Record, at 6, 14 October 2004.
8
Second Clarification, Q. 1.
9
Record, at 6, 15 November 2004.
10
Record, at 7, 10 March 2005.
11
Record, at 4, ¶19.
12
Record, at 7-8, 16 November 2005.
Team Singh, Memorandum for Claimant
3
SUMMARY OF ARGUMENT
13. JURISDICTION. This dispute satisfies Article 25(1) of the Convention. Respondent’s three
objections are meritless. First, this dispute is not solely a contractual dispute, and even if it
was, this Tribunal also has jurisdiction over contractual disputes. Second, this arbitration is
not barred by fork-in-the-road preclusion. The prior domestic suit does not share an identity
of party, object, or cause of action with this arbitration. The prior domestic suit was also not a
voluntary election of remedy. Third, this arbitration is not barred by any amicable settlement
provision. Amicable settlement provisions are procedural matters that do not bar jurisdiction,
and Respondent is estopped from claiming amicable settlement as grounds to deny
jurisdiction. Alternatively, jurisdiction is established pursuant to a more favorable amicable
settlement provision which Claimant can rely on through an MFN clause in the CalpurniaGaul
BIT, despite a third country’s denunciation of the Convention.
14. MERITS OF THE CLAIM. The acts and omission of SFCDC, the Calpurnian Police and
Ministry of Interior, and immigration officials are attributable to the state. Respondent has
breached several provisions of the Calpurnia-Gaul BIT which has harmed Claimant’s
investment. First, Respondent has expropriated claimant’s property and must provide
compensation. Second, Respondent has denied Claimant national treatment. Third,
Respondent has failed to provide Claimant’s investment full protection and security. Fourth,
Respondent failed to provide fair and equitable treatment to Claimant’s investment. Fifth,
Respondent treated Claimant in an arbitrary and discriminatory treatment. Finally,
Respondent has breached its duty of transparency.
Team Singh, Memorandum for Claimant
4
ARGUMENT
PART ONE: JURISDICITION
I. THE TRIBUNAL HAS JURISDICTION TO HEAR THIS DISPUTE
15. Article 25(1) of the Convention provides for ICSID jurisdiction over
any legal dispute arising directly out of an investment, between a Contracting
State…and a national of another Contracting State, which the parties to the dispute
consent…to submit to the Centre.
16. This dispute concerns Respondent’s violations of its express obligations under the CalpurniaGaul
BIT towards Claimant’s investments in VanCal, a corporation incorporated in
Calpurnia.
17. Both parties satisfy the standing requirements of Article 25(1). Calpurnia and Gaul are
Contracting States to the Convention.13
Claimant, a corporation incorporated and based in
Gaul, owns 30% of VanCal.14
18. VanCal is an investment under the terms of the Calpurnia-Gaul BIT and Article 25 of the
Convention. VanCal meets Article 1 of the Calpurnia-Gaul BIT: it is an “Investment”
because it is an “asset established or acquired” by a Gaulois investor in Calpurnia. VanCal
also satisfies the Article 25 definition of an investment:15
VanCal is a joint venture
established by Claimant, satisfying transfer of capital; VanCal is intended to provide
telecommunications, and thus is a long-term project intended to create regular income;
Claimant retained participation in the project through a Technical Assistance Agreement; and
Claimant, as a shareholder, shares the project’s benefits and risks.16
19. In Article 11 of the Calpurnia-Gaul BIT, Respondent gives “irrevocable consent” to ICSID
arbitration over “any dispute” between itself and a Gaulois investor “concerning an
investment.” Respondent raises three objections to jurisdiction that essentially argue that the
consent in Article 11 does not encompass this dispute. Respondent’sscope of Respondent’s
13
Record, at 3, ¶5
14
Record, at 3, ¶9.
15
Dolzer, at 61.
16
Record, at 3, ¶6-14.
Team Singh, Memorandum for Claimant
5
objections are without merit because (II) this dispute is not barred as a contractual claim;
(III) there is no fork-in-the-road preclusion; (IV) and the 18-month waiting period does not
divest this Tribunal of jurisdiction.
II. THIS DISPUTE IS NOT BARRED AS A CONTRACTUAL CLAIM
20. Respondent asserts that this dispute is a shareholder dispute over which this Tribunal has no
jurisdiction. Respondent’s argument fails because (A) this dispute concerns treaty-based
obligations; and (B) Article 11 of the Calpurnia-Gaul BIT also applies to contractual
disputes.
A. This Dispute Involves Treaty-Based Obligations
21. Arbitral tribunals “retain[] jurisdiction [over] breaches of contract that…[also] constitute…a
violation of the Bilateral Treaty.”17
Respondent’s actions have violated several obligations of
the Calpurnia-Gaul BIT.18
That Respondent also violated domestic law is not surprising,
given the depravity of Respondent’s misconduct.
B. Article 11 of the Calpurnia-Gaul BIT Also Applies to Contractual Disputes
22. In any event, Article 11 of the Calpurnia-Gaul BIT covers “any dispute between a [Gaulois]
investor…[and Respondent].”
23. The phrase “any dispute” in Article 11 includes domestic claims.19
The phrase “tous les
différends ou divergences” (“all differences and disagreements”) has provided for
jurisdiction to contract claims.20
Interpreting “any dispute” to include contract disputes is
also common-sense. Finally, less expansive language, which does not include the word “any”
before “dispute,” has provided for jurisdiction over contract disputes.21
17
Salini v. Morocco, at ¶62.
18
Infra Part Two.
19
Id; accord Consent to Arbitration, at 838.
20
Salini v. Morocco, at ¶61.
21
E.g., S.G.S. v. Phillipines, at ¶131.
Team Singh, Memorandum for Claimant
6
object, and causes of a
24. While some tribunals who have interpreted “disputes with respect to investments” to refer
only to treaty-based violations concerning an investment,22
such an interpretation is
unconvincing. First, the modifier “any” expands “dispute” to cover domestic claims. Second,
compelling policy considerations caution against denying jurisdiction over contract claims.
ICSID tribunals can apply domestic law to domestic claims:23
allowing for jurisdiction over
both contractual and treaty-based obligations unites these claims under one forum, a benefit
to all parties.24
25. For these reasons, this claim is not barred as a contractual claim.
III.FORK-IN-THE-ROAD PRECLUSION DOES NOT BAR THIS TRIBUNAL’S
JURISDICTION
26. Respondent argues that a prior suit in a Calpurnian court bars jurisdiction.25
While Article 11
of the Calpurnia-Gaul BIT does contain a “fork-in-the-road” provision, i.e. a requirement that
an investor choose between arbitration and a domestic remedy, this dispute is not subject to
“fork-in the road” preclusion.
27. Before June 14, 2006, Pescara, as trustee of Claimant’s 1% holding in VanCal,26
sued
VanCal in Calpurnia court for payment of unlawfully withheld dividends.27
Respondent
argues that Pescara’s suit constitutes Claimant’s election of a domestic remedy. Respondent’s
argument fails because (A) Pescara’s suit and this arbitration do not share a common identity
of parties, objects, or causes of action; (B) the Aguas II standard is also not met; and (C)
Pescara’s suit does not constitute a voluntary election of remedy.
A. Pescara’s Suit and This Arbitration Do Not Satisfy the Triple Identity Test
28. A domestic suit precludes international arbitration only if there is a triple identity of parties,
ction. This triple identity rule (or a variation where only one failure of
22
E.g., S.G.S. v. Pakistan, at ¶161.
23
Convention, Art. 42; accord Spiermann, at 102-107.
24
SGS v. Phillipines, at ¶132(c).
25
Record, at 5, ¶5.
26
Record, at 3, ¶9.
27
Record, at 8, 14 June 2006.
Team Singh, Memorandum for Claimant
7
identity is given as a reason to disallow fork-in-the-road preclusion) is followed by most
arbitral tribunals.28
Some tribunals have ignored identity of object, and only looked to
identity of part and causes of action;29
however, because none of the identities is met here,
these tribunals would also find against fork-in-the-road preclusion.
29. The triple identity test satisfies compelling policy considerations.30
If tribunals “assume
lightly that choices of forum have been made…in favour of the host State’s judicial system,”
then “there [is] little use in setting up arbitral procedures for investment disputes.”31
Investors
routinely file domestic suits to protect their investments; oftentimes, domestic courts have no
jurisdiction over treaty breaches, and ICSID tribunals may not have jurisdiction over
domestic claims. To restrict a party’s ability to appear before an arbitral tribunal solely
because she brought domestic suit on similar facts forces a false choice between international
or domestic protection.32
Therefore, the strict formalism of the triple identity rule is
preferable to looser tests for fork-in-the-road preclusion.
30. Here, Pescara’s suit and this arbitration do not share an identity of (1) parties, (2) objects and
(3) causes of action.
1. There Is No Identity of Parties
31. Fork-in-the-road preclusion requires that both the domestic suit and the international
arbitration involve identical parties.33
The action of a subsidiary or a related party cannot,
under international standards, preclude suit by a “parent” or related claimant.34
Piercing the
corporate veil does not trigger fork-in-the-road preclusion.35
“[O]nly the investor can [choose
28
Aguas I, at ¶53 (discussing identity of causes of action), rev’d Aguas II, ¶55 (denying that identity of cause
of action was not a requirement); Olguín, at ¶30; Middle East Cement, at ¶71 (discussing identity of cause of
action); Azurix, at ¶88; Enron & Ponderosa, at ¶97; Occidental; Champion Trading,at §3.4.3.
29
Genin, at ¶330; Lauder v. Czech Republic, at ¶161; Pan American, at ¶155; C.M.S. Jurisdiction, at ¶¶77-82.
30
See generally Sinclair Declaration.
31
Pan American, at ¶¶155-156.
32
Occidental, at ¶53.
33
See, e.g., Lauder v. Czech Republic, at ¶161.
34
Id., at ¶162.
35
Champion Trading Co.,at § 3.4.3.
Team Singh, Memorandum for Claimant
8
to take] a claim to the local courts or to arbitration” and that choice cannot be inferred
through a third party’s suit.36
32. Pescara did not sue Respondent, she sued VanCal.37
Thus, there is no identity of parties.
33. Even if Pescara acted for Claimant’s benefit, her suit cannot be attributed to Claimant, just as
a corporation’s domestic suit could not be attributed to its owner filing for arbitral relief in
Champion Trading.38
Therefore, there is no identity of plaintiffs. That Calpurnian law might
preclude suit in these circumstances is moot: the standard is international, not domestic.
34. In contrast, the Genin tribunal allows veil piercing when related parties act in such a way that
the “election of remedy” can be attributed to the “group” as a whole.39
However, there is no
evidence that Pescara and Claimant made a group decision to file domestic suit, so there is no
“group…election.”
2. There is No Identity of Object
35. Fork-in-the-road preclusion only occurs when the international and domestic suits concern
the same underlying “object” or “material facts.”40
Preclusion does not occur simply because
the underlying facts of both suits overlap: the facts alleged to constitute a legal breach must
be identical in both suits.41
36. That is not the case here. Pescara’s suit involved a claim against a corporation for payment of
dividends.42
Claimant initiated this arbitration not just for a failure to pay dividends, but also
for Respondent’s failure to provide protection and security and Respondent’s failure to renew
the business visa of Claimant’s key employees. Different material facts support these claims,
and thus identity of objects cannot be met.
3. There Is No Identity of Causes of Action
36
C.M.S. Jurisdiction, at ¶78.
37
Record, at 8, 14 June 2006.
38
Champion Trading Co.,at §3.4.3.
39
Genin, at ¶330.
40
Azurix Corp, at ¶88; Cross-Jurisdictional Forum Non Conveniens, at 2188.
41
Occidental, at ¶58.
42
Record, at 8, ¶5.
Team Singh, Memorandum for Claimant
9
37. Even when the parties and material facts are identical, there is no fork-in-the-road preclusion
when the causes of action are not identical.43
Unless a treaty provides otherwise, contract
claims are not identical to treaty-based claims.44
Pescara’s suit was for a withholding of
dividends by a corporation. This dispute concerns Respondent’s violations of several treaty
obligations. None of these claims is a contract claim like Pescara’s claims. Therefore, no
identity of causes of action exists.
B. Application of the Aguas II Standard Also Prevents Fork-in-the-Road Preclusion
38. The Aguas II tribunal stated that a domestic suit “is prima facie…a ‘final’ choice of forum
and jurisdiction” as long as the materials facts in the domestic suit were “coextensive” with
treaty-based claims. This vague approach fails to account for the policy considerations that
argue for the triple identity rule.45
39. The instant treaty-based dispute concerns more than Pescara’s withheld dividends: it also
involves claims of inadequate protection and security; failure to be transparent;
discriminatory treatment; and unfair and inequitable treatment. These treaty-based claims are
more extensive than Ms. Pescara’s suit. Thus, the Aguas II test for fork-in-the-road
preclusion is not met.
C. Pescara’s Suit Was not a Voluntary Suit in Domestic Court
40. Fork-in-the-road preclusion requires that the choice to pursue domestic remedy is not made
under duress.46
Legal obligations – such as short statute of limitations for tax disputes47
or the
duty of a corporation to protect shareholder interests48
– are considered duress. Pescara’s suit
was filed pursuant to her fiduciary duty to the Claimant. Thus, she did not voluntarily elect a
domestic remedy.
41. For all these reasons, there is no fork-in-the-road preclusion.
43
See e.g., Middle East Cement, at ¶7
44
Among others, Azurix Corp., at ¶89; Occidental, at ¶51.
45
See infra Sec. III(A).
46
Occidental, at ¶59; Genin, at ¶330; Enron Corp., at ¶98.
47
Occidental, at ¶60-61.
48
Genin, at ¶332–333.
Team Singh, Memorandum for Claimant
10
prerequisite to jurisdic
IV.THE AMICABLE SETTLEMENT PROVISION DOES NOT BAR JURISDICTION
42. Article 11(2) of the Calpurnia-Gaul BIT allows for arbitration if a “dispute cannot be settled
amicably within 18 months from the date of request for amicable settlement.” Amicable
settlement requires no formal process.49
A request for amicable settlement is a statement to
that articulates “the existence of grounds for complaint and a desire to resolve these matters
out of court.”50
43. On February 5, 2007, Claimant informed Respondent’s agent – Mr. Poe, the governmentappointed
Chair of SFCDC – that it sought compensation for an expropriation.51
Thus,
Claimant articulated grounds for complaint and sought an out-of-court settlement. Therefore,
the letter to Poe constitutes a “date of request for amicable settlement.”52
44. Sixteen days later, Poe refused to discuss Claimant’s request.53
On July 31, 2007, nearly six
months after Claimant’s request for settlement but prior to the 18-month period of Article
11(2), Claimant sought arbitration.54
45. Respondent erroneously asserts that Claimant’s failure to wait 18 months bars jurisdiction.
But (A) amicable settlement provisions are a procedural, not jurisdictional, matter. Also, (B)
Respondent itself made amicable settlement impossible. Finally, (C) Claimant may also
invoke the Calpurnia-Gaul BIT’s most-favored-nation (MFN) clause of to rely on the shorter
waiting period Article 7 of the Calpurnia-Flatland BIT.
A. As a Procedural Issue, Amicable Settlement Provisions Do Not Bar Jurisdiction
46. Failure to abide by an amicable settlement provision is a procedural failing that does not bar
jurisdiction. Many tribunals agree that a “notice requirement does not constitute a
tion”55
because it is a “procedural rule.”56
First, the only practical
49
See Wegen, at 73.
50
Salini v. Jordan, at ¶20.
51
Record, at 8, 5 February 2007.
52
Id.
53
Record, at 8, 21 February 2007.
54
Record at 9, 31 July 2007.
55
Bayindir, at ¶100.
Team Singh, Memorandum for Claimant
11
effect of enforcing an amicable settlement provision is to require Claimant to restart arbitral
proceedings.57
This increases the length of arbitration,58
without protecting the “legitimate
interests of” either party.59
Second, strictly enforcing amicable settlement provisions is an
“unnecessary… formalistic approach”60
that hinders flexibility and efficiency, two benefits
of international arbitration.61
47. In this case, the 18-month waiting period expired on August 5, 2008. No purpose is served in
requiring Claimant to re-file for arbitration and wait for proceedings to recommence.
48. Nor does strict enforcement of amicable settlement provisions create an ex ante incentive to
pursue amicable settlement. Amicable settlement, an inexpensive and informal means of
dispute avoidance, occurs naturally when parties wish to cooperate. But when there is no
desire to cooperate, amicable settlement provisions simply force parties to wait for
arbitration. If this wait is too long (like, say, 18 months), investor rights can be severely
impacted.62
49. The Enron & Ponderosa63
and Goetz64
tribunals suggested, in dicta, that amicable settlement
provisions are actually conditions for jurisdiction. Neither Tribunal explained itself. This
Tribunal should accept the more persuasive rule.65
Here, that rule is the above Ethyl Corp.
rule.
B. Having Rebuffed Amicable Settlement, Respondent Cannot Now Use an Amicable
Settlement Provision to Deny Jurisdiction
50. Investor-State tribunals have consistently held that a State’s failure to attempt amicable
settlement bars the State from using an amicable settlement provision to object to
56
Lauder v. Czech Republic, at ¶187; accord Ethyl Corp., at ¶¶77-85; Sedelmayer,at §2.6.2; S.G.S.. v.
Pakistan, at ¶184; Link-Trading, at §6.
57
E.g., Ethyl Corp., at ¶85.
58
S.G.S. v. Pakistan, at ¶184.
59
Lauder v. Czech Republic, at ¶190.
60
Id.
61
Lowenfeld on International Arbitration, at 557.
62
See infra Sec. IV(C)(1)(a)(ii)(b).
63
Enron & Ponderosa, at ¶88.
64
Goetz, at ¶¶91-93.
65
See Franck, at 1558.
Team Singh, Memorandum for Claimant
12
jurisdiction.66
The reason for this rule is multifold. First, waiting periods before arbitration
are intended to allow parties to seek amicable settlement. Where the State rebuffs settlement,
the waiting period is thus waived.67
Second, the rule that a negotiation period is void if
negotiation “is impossible…in the circumstances of the case”68
is analogized to the
“requirement of exhaustion of remedies, which is disregarded when it is demonstrated
that…any attempt at exhaustion would have been futile.”69
Finally, estoppel bars a State from
resisting amicable settlement and then using the failure to reach amicable settlement to deny
jurisdiction of an arbitral tribunal. Estoppel is a fundamental principle of law of civilized
nations rooted in equity and the need for stability in international law,70
and has been
“applied by many international tribunals.”71
51. This Tribunal should bar Respondent from benefitting from its recalcitrance. First, this would
incentivize Respondent to pursue amicable settlement in the future, rather than simply ignore
blighted investors. Second, it follows from the language of Article 11(2), which provides that
“if the dispute cannot be settled amicably within 18 months” then the investor may seek
arbitration. “Cannot” means something different than “[is] not”: “cannot” is satisfied at the
moment something becomes impossible, while “is not” requires a party to wait.”72
52. In this case, Claimant contacted Respondent’s agent, Mr. Poe, and asked for compensation
after expropriation.73
Poe refused to look into the matter, saying that the government “has no
authority in any event” and “[t]here is nothing we can do.74
” Claimant is entitled to rely on
the word of this government agent.75
Having relied on the statement that settlement was
impossible, Claimant initiated this arbitration.
66
See, e.g., Lauder v. Czech Republic, at ¶189.
67
E.g., Ethyl Corp., at ¶84.
68
Bayinder, at ¶99 (citations omitted).
69
Id.
70
See e.g., McGibbon, at 468-469.
71
Pan American, at ¶159; accord Pope & Talbot, at ¶¶39-41.
72
Id., at ¶98.
73
Record at 8, 5 February 2007.
74
Record at 8-9, 21 February 2007.
75
See infra Part Two, Sec. I.
Team Singh, Memorandum for Claimant
13
C. Alternatively, the MFN Clause of the Calpurnia-Gaul BIT Allows Claimant To Rely on
the Shorter Waiting Period of the Calpurnia-Flatland BIT
53. Even if this Tribunal accepts that the 18-month waiting period of the Calpurnia-Gaul BIT
bars jurisdiction, Claimant can still pursue arbitration because (1) the Calpurnia-Gaul BIT’s
MFN clause entitles Claimant to the two-month waiting period of Article 7 of the CalpurniaFlatland
BIT; and (2) Claimant has met the requirements for the application Article 7 of the
Calpurnia-Flatland BIT.
1. The Calpurnia-Gaul BIT’s MFN Clause Entitles Claimant to the Shorter
Waiting Period of the Calpurnia-Flatland BIT
54. Claimant may rely on Article 7 of the Calpurnia-Flatland BIT, because (a) the MFN clause of
the Calpurnia-Gaul BIT subsumes dispute resolution; (b) the two-month waiting period of
Article 7 of the Calpurnia-Flatland BIT is more favorable; and (c) the 18-month waiting
period of the Calpurnia-Gaul BIT is not a “question of overriding public policy.”
a. The Calpurnia-Gaul BIT’s MFN Clause Subsumes Dispute Resolution
55. The Calpurnia-Gaul BIT’s MFN clause attracts dispute resolution, pursuant to the principle
of ejusdem generis. First, (i) current arbitral precedent is that a “bare” MFN clause attracts
dispute resolution. Second, (ii) the language of the Calpurnia-Gaul BIT’s MFN clause
includes dispute resolution.
i. Persuasive Precedent Suggests that MFN Clauses Attract
Dispute Resolution
56. The correct rule is that an MFN clause, without restrictive language or drafting history,
incorporates dispute resolution as ejusdem generis. Ejusdem generis is the established
principle that MFN clauses attract provisions “belonging to the same subject matter
or…category…to which the clause relates.”76
76
OECD MFN Report, at 9;see also Articles 9 and 10, Draft Articles on MFN, at 27–29.
Team Singh, Memorandum for Claimant
14
used an MFN clause to
57. An MFN clause providing only for non-discriminatory treatment subsumes dispute
resolution. As early as 1956, in Ambatielos, it was established that the “administration of
justice” is part and parcel of international commercial rights.77
58. Relying on Ambatielos, the Maffezini78
tribunal, when interpreting the phrase “all matters
subject to this Agreement,” found that dispute resolution falls within the scope of an MFN
clause because dispute resolution is “essential for the adequate protection of the rights” of
traders and investors.79
The Siemens and National Grid tribunals later determined that an
MFN clause which referred only to an unqualified investment’s “treatment” also attracted
dispute resolution.80
Indeed, even when considering an expansive MFN provision relating to
“all matters” of the basic treaty, the Aguas I tribunal pointed out that the “ordinary meaning
of [the term ‘treatment’] within the context of investment includes the rights and
privileges…covered by the treaty [including dispute resolution].”81
59. Some tribunals have taken a radically different approach. The tribunals in Salini v. Jordan,82
Plama,83
and Telenor84
all said that claimants had to show specific intent on the part of a
BIT’s Contracting Parties before an MFN clause could attract dispute resolution. For a
variety of reasons, the finding of these tribunals should be rejected.
60. First, the facts of Maffezini and its progeny are closer to this dispute than those of Salini and
its progeny. Those tribunals applying Salini’s restrictive test all dealt with attempts to use
MFNs clause to invoke drastic changes in dispute resolution: the Salini claimant attempted to
sidestep a contractual dispute resolution scheme by attracting a third-party umbrella clause;
the Plama claimant attempted to substitute ICSID rules for UNCITRAL rules; and the
Telenor claimant attempted to arbitrate a claim excluded from arbitrability by the basic
treaty. In contrast, Maffezini et al. deal with more subtle changes: for example, Maffezini
sidestep an 18-month waiting period. Even the Plama tribunal found
77
See Ambatielos, at 108.
78
Maffezini, at ¶54.
79
Id., at ¶54.
80
Siemens, at ¶103; National Grid, at ¶93.
81
Aguas III, at ¶55.
82
Salini v. Jordan, at ¶118.
83
Plama, at ¶204.
84
Telenor,at ¶91.
Team Singh, Memorandum for Claimant
15
consistency of interna
that Maffezini “[was] perhaps understandable” as an 18-month waiting period requirement
was “nonsensical from a practical point of view.”85
Similarly, Professor Andreas Lowenfeld
has suggested that Salini and Maffezini can be reconciled because Salini required a “greater
leap” than Maffezini.86
Giving force to the well-considered rules of academic scholars
furthers the consistency of international arbitration.87
In this case, Claimant seeks to avoid a
discriminatory 18-month waiting period, a smaller procedural difference more akin to
Maffezini et al. than Salini et al..
61. Second, Maffezini squares betters with principles of treaty interpretation. Treaty
interpretation begins with language, interpreted in light of the treaty’s object and purpose.88
The Calpurnia-Gaul BIT was signed to “intensify economic-cooperation,” to “maintain fair
and equitable conditions for investments,” to “promot[e] and protect[]…investments,” and to
“stimulate business initiatives.”89
These purposes support more expansive MFN protections.
BITs also create “flexibility in the resolution of investment disputes;”90
and MFN clauses are
designed to prevent the discriminatory treatment of foreign investors. Finding that MFN
clauses attract dispute resolution serves all these purposes.
62. In contrast, the approach of Salini et al. overly relies on supplementary methods for treaty
interpretation. Salini, Telenor, and Plama all use history and treaty practice extensively to
establish the “intent” of the signatories. By doing so, they adopt an “absolutely negative
approach…[that] is not in line with the concept of the most-favored nation treatment standard
as a source of international law and with present trends in international investment law.”91
The methodology used by the Salini et al. fails because recourse to Article 32 methods of
interpretation should supplement, not override, purposive interpretation.92
63. Finally, finding that bare MFNs attract dispute resolution mechanisms furthers the
tional arbitration. When choosing between two disparate rules, the
85
Plama, at ¶224.
86
Int’l Econ. Law, at 576;accord Dolzer, at 256.
87
Franck, at 1613-1617;accord Art. 38(1)(C), ICJ Statute.
88
Art. 31, Vienna Conv. on the Law of Treaties.
89
Preamble of Calpurnia-Gaul BIT.
90
See Wong, at 135.
91
Acconci, at 402.
92
Art. 32, Vienna Conv. On the Law of Treaties.
Team Singh, Memorandum for Claimant
16
more popular rule is preferable because it creates consistency.93
As Lowenfeld notes
“[m]ost…cases raising the issue of whether an MFN clause can [attract dispute resolution]
have followed…Maffezini.”94
ii. The Language of Article 4 Places Dispute Resolution Within
the Article’s Scope
64. A treaty is read by its language, interpreted to further the treaty’s purpose.95
Here, the
language and purpose of Article 4 attracts dispute resolution.
65. Because Article 4(1) provides for the MFN treatment of “[i]nvestments,” and because dispute
resolution is commonly considered part of investment’s treatment, Article 4(1) applies to
dispute resolution. Article 4(1) provides for MFN treatment of “[i]nvestments made by
investors of one Contracting Party…or returns related thereto.” Since 1956, the common
understanding of international law is that the treatment of an “investment” includes the
“administration of justice” through arbitration.96
66. The Calpurnia-Gaul BIT also includes dispute resolution in its definition of “Investment.” In
Article 1, “Investment” includes “intellectual…property rights” and “claims to money or
rights to performance having an economic value.” Immaterial property rights do not exist
without formal mechanisms for their enforcement: by including property rights within the
definition of investment, Gaul and Calpurnia acknowledged that dispute resolution – a
necessary condition of these rights’ existence – was a subject matter of the treaty and of the
MFN clause.
67. This conclusion recurs in Article 4(2), which provides that investors shall be accorded MFN
treatment in regards to the “maintenance, use, enjoyment or disposal of their investments.”
The Siemens tribunal found that the “right to have recourse to international arbitration is very
much related to investors ‘management, maintenance, use, enjoyment, or disposal of their
93
See Franck, at 1558; accord Dolzer, at 35.
94
Int’l Econ. Law, at 573.
95
Art. 31, Vienna Convention on the Law of Treaties.
96
See Ambatielos,at 108.
Team Singh, Memorandum for Claimant
17
investment,’” especially as “‘maintenance’ of an investment…includes the protection of an
investment.”97
68. In a minority of cases, the effect of a listing like Article 4(2) constricts the scope of an MFN
clause. Thus, to prevent the application of MFN clauses to dispute resolution, the Central
American Free Trade Agreement (“CAFTA”) provided that both investors and investments
were entitled to MFN treatment “with respect to the establishment, acquisition, expansion,
management, conduct, operation, and sale or other disposition of investments.”98
69. But, unlike CAFTA, Article 4(2)’s scope is limited to investors, and does not include
investments. If the listing in Article 4(2) was meant to restrict the MFN clause’s slope, a
similar listing would have been included in Article 4(1). It was not.
70. Furthermore, Article 5 provides three exceptions to Article 4: customs unions; tax laws; and
multilateral conventions. Because expressio unius est exclusio alterius, the failure to exclude
dispute resolution from Article 4’s scope suggests that dispute resolution is within its scope.
71. That Article 4 subsumes dispute resolution also flows from the treaty’s purpose. As discussed
above, the purposes of the Calpurnia-Gaul BIT are best served by finding that dispute
resolution falls within the scope of Article 4.99
b. A Two-Month Waiting Period is More Favorable
72. For an investor to use MFN to attract more favorable treatment, the treatment sought must, in
fact, be more favorable.100
To determine whether a third-party treaty provides for more
favorable treatment the difference in treatment must be discriminatory.101
The test for
discriminatory treatment is whether “the practical effect of the measure is to create a
disproportionate benefit” for a third party over the protected investor.102
In this dispute, the
two-month waiting period of Article 7 of the Calpurnia-Flatland BIT is more favorable than
Article 11 of the Calpurnia-Gaul BIT.the 18-month period of
97
Siemens, at ¶57.
98
CAFTA Draft Text, arts.10.4(1),10.4(2) and 10.4 fn.1.
99
See infra Sec. IV(C)(1)(i).
100
See McLachlan et al., at §7.193,293.
101
See id.
102
S.D. Myers, at ¶102.
Team Singh, Memorandum for Claimant
18
73. Article 7(C) of the Calpurnia-Flatland BIT provides for ICSID jurisdiction “if the dispute can
not be settled friendly within two months of the dispute notification date.” In contrast, Article
11(2)(b) of the Calpurnia-Gaul BIT provides for ICSID jurisdiction if the dispute “cannot be
settled amicably within 18 months from the date of request for amicable settlement.” Flatland
investors are thus entitled to more expeditious dispute resolution than Gaulois investors.
74. This discriminatory treatment disproportionately benefits Flatland investors. The difference
between two and 18 months103
is a significant difference in investor protection. In the event
that the State makes amicable settlement impossible, as Respondent did here,104
requiring an
investor to wait two months before arbitration is far less burdensome than forcing her to wait
18 months.
75. In addition, Article 1 of both the Calpurnia-Gaul BIT and the Calpurnia-Flatland BIT define
“investments” to include “intellectual…property rights” and “good-will.” The treaties thus
touch upon such significant issues as trademark dilution, patent protection, and the poaching
of business contacts. In these matters, a year and four months makes all the difference: two
months of negotiation are a chance for parties to negotiate intellectual property differences
without prejudice; 18 months means that the party denied its intellectual property could
suffer great harm. In this dispute, Respondent continues to use Claimant’s brand, while
disallowing denying Claimant’s representative oversight of the brand’s quality,105
leading to
trademark dilution.
c. An 18-Month Waiting Period is Not a “Question of Overriding Public
Policy”
76. The Maffezini tribunal found that an MFN clause should not “override public policy
considerations that the contracting parties might have envisaged as fundamental conditions
for their acceptance” of the basic treaty.106
Allowing for arbitration after two months instead
of after 18 months cannot be “envisaged” as a “fundamental condition” for a treaty’s
acceptance.
103
See infra Sec. IV(C)(1)(b).
104
See infra Sec. IV(B).
105
Second Clarifications, Q. 15.
106
Maffezini, at ¶62.
Team Singh, Memorandum for Claimant
19
77. It is inconceivable that Gaul and Calpurnia would have failed to reach an investment treaty
unless there was an 18-month amicable settlement provision. For Calpurnia, a powerful
nation-state, negotiations of a year-and-a-half are not an essential condition of trade. In fact,
the Calpurnia-Flatland BIT provides for a two-month waiting period, thus demonstrating that
Respondent is not concerned with the length of any waiting period.
2. Claimant Is Entitled to Use the Two-Month Waiting Period of the CalpurniaFlatland
BIT
78. Claimant is entitled to use the two-month waiting period of the Calpurnia-Flatland BIT
because (a) Claimant has satisfied the two-month waiting period; and (b) Flatland’s
denunciation of the Convention does not affect Claimant’s right to rely on the two-month
waiting period.
a. Claimant Has Satisfied the Two-Month Waiting Period
79. Claimant attempted amicable settlement for over five months before initiating these
proceedings.107
Thus, Claimant has satisfied the two-month waiting period of Article 7.
b. Flatland’s Denunciation of the Convention Does Not Affect Claimant’s
Right to Rely on the Two-Month Waiting Period
80. MFN clauses can only attract favorable treatment from third-party treaty provisions that are
operational.108
Flatland denounced the Convention on May 2, 2003. On this basis,
Respondent argues that Article 7 of the Calpurnia-Flatland BIT is no longer operational and
therefore Claimant cannot rely on Article 7 to establish ICSID jurisdiction. Respondent’s
argument is without merit because (i) Flatland’s denunciation of the Convention does not
o ICSID arbitration under the Calpurnia-Flatland BIT; and (ii) even ifdenounce its consent t
107
See infra Sec. IV.
108
E.g., Article 21, Draft Articles on MFN, at 27–29.
Team Singh, Memorandum for Claimant
20
Article 7 no longer provides for ICSID jurisdiction, Claimant can still rely on the two-month
waiting period of Article 7 of the Calpurnia-Flatland BIT.
i. Flatland’s Denunciation of the Convention Does Not Void Its
Consent to Jurisdiction in the Calpurnia-Flatland BIT
81. Article 71 of the Convention allows Contracting Parties to denounce the Convention. Article
72, however, states that a notice of denunciation does not affect the “rights or
obligations…arising out of consent to the jurisdiction of the Centre.” The import of these
provisions, coupled with the drafting history of the Convention, suggests that Article 71
denunciation does not simultaneously abrogate consent to ICSID jurisdiction contained
within a BIT.
82. When co-drafting Article 72, Aaron Broches made two observations: pre-existing contractual
consent to ICSID arbitration survives denunciation; and an unaccepted offer for ICSID
arbitration expires upon denunciation.109
In other words, an obligation to pursue ICSID
arbitration survives denunciation, while an offer to do so does not.
83. The central question, then, is whether a BIT provision providing consent for ICSID
arbitration is an obligation or an offer. While some have suggested that such a provision is an
offer,110
the correct interpretation is that it is an international obligation.111
First, a treaty
“that unequivocally expresses an obligation of the signatory state…[cannot] in good faith be
interpreted to constitute an ‘offer’ only.”112
Second, to claim that an international treaty
obligation is equivalent to a contractual or legislative provision undermines pacta sunt
servanda. Finally, BITs, like the Calpurnia-Flatland BIT, generally contain specific
procedures outlining how the BIT might be denounced. A State should not be able to sidestep
these specifically negotiation BIT denunciation procedures by denouncing a third treaty.
109
Nolan and Sourgens, at 1008-1010.
110
ICSID Commentary, Article 72, ¶2.
111
Nolan and Sourgens, at 38.
112
Id.
Team Singh, Memorandum for Claimant
21
84. Article 7 of the Calpurnia-Flatland BIT provides for ICSID arbitration as one of many forms
of dispute resolution. This form of provision is considered consent to ICSID jurisdiction.113
Because BIT provisions consenting to ICSID are obligations, not offers, Flatland’s
denunciation of the Convention does not abrogate Article 7. Therefore, Article 7 remains
operational and may be relied upon by Claimant through an MFN clause.
ii. Claimant May Still Rely on the Two-Month Waiting Period of
Article 7
85. Even if this Tribunal finds that Flatland’s denunciation abrogates Flatland’s Article 7 consent
to ICSID arbitration, Claimant may still rely on the two-month waiting period of Article 7
because (a) Flatland’s denouncation of the Convention does not preclude reliance on Article
7; and (b) as an unconditional MFN clause, Article 4 of the Calpurnia-Gaul BIT does not
require that Claimant “pay the price” of ICSID jurisdiction for relying on the two-month
waiting period in the Calpurnia-Flatland BIT.
(a) Flatland’s Denunciation of the Convention Does Not
Preclude Reliance on Article 7
86. Even if this Tribunal finds that Flatland’s denunciation voided Article 7(C), that denunciation
does not affect the other provisions of Article 7. Article 7 consists of five provisions: a twomonth
waiting period, and four choices for dispute resolution. Even if this Tribunal found
that Flatland has taken the ICSID choice off the table, the rest of the Article’s provisions
continue in force. Claimant can still rely on any of these provisions, including the two-month
waiting period.
87. It cannot be said that recourse to ICSID arbitration was such an essential element of Article 7
that without it the entire Article is nonoperational. ICSID was only one of four dispute
resolution mechanisms listed in Article 7.
(b) Claimant Need Not “Pay the Price” of ICSID Jurisdiction
to Rely on the Two-Month Waiting Period
113
ICSID Commentary, Article 25, ¶261.
Team Singh, Memorandum for Claimant
22
88. Under an unconditional MFN clause, a beneficiary need not sacrifice one form of favorable
treatment in order to receive another.114
Article 4 of the Calpurnia-Gaul BIT provides only
that investors “shall be accorded treatment which is not less favourable than…accord[ed] to
[investors or investments of] any third State.” It neither says “provided that” nor is there any
other condition present; therefore, the MFN clause is unconditional.
89. As described by Sir Arnold McNair, an unconditional MFN clause lets a beneficiary “claim
the Boon without the Price” as long as the Price “is not an inherent element of the Boon.”115
90. Because Article 4 is an unconditional clause, there is no requirement that, in order to rely on
the two-month waiting period, Claimant must sacrifice his right to ICSID arbitration. We
have here the following situation. Flatland and Gaul have a treaty which provides for an 18month
waiting period and ICSID arbitration. Flatland and Calpurnia, now, have a treaty
which provides for a two-month waiting period and no ICSID arbitration. Obviously, the
Gaulois investor need not pay the Price of ICSID arbitration in order to have the Boon of the
two-month waiting period.
91. Nor is the lack of ICSID arbitration an “inherent element” of Article 7 of the CalpurniaFlatland
BIT. First, the negotiated Article 7 actually included ICSID arbitration. Second,
because the Calpurnia-Gaul BIT gives “irrevocable consent” to ICSID jurisdiction but the
Calpurnia-Flatland BIT does not, this suggests that ICSID arbitration was not a sin qua non
to Article 7’s adoption.
92. For all these reasons, this Tribunal has jurisdiction to hear this dispute.
CONCLUSION ON JURISDICTION
93. This Tribunal has jurisdiction to hear this dispute. Article 25(1) of the Convention is
satisfied. This dispute is not solely a contractual claim, and even if it was, this Tribunal
would still have jurisdiction to hear the dispute. No interpretation of a fork-in-the-road
provision divests this Tribunal of its jurisdiction over this dispute. The Calpurnia-Gaul BIT’s
114
Schwarzenberger, at 101.
115
McNair, at 287.
Team Singh, Memorandum for Claimant
23
amicable settlement provision is not a bar to jurisdiction. Even if it was, Claimant could rely
on the Calpurnia-Flatland BIT.
Team Singh, Memorandum for Claimant
24
PART TWO: MERITS OF THE CLAIM
94. Respondent, through its organs and agents, has breached a number of its obligations under
the Calpurnia-Gaul BIT.
I. THE ACTS AND OMISSIONS OF SFCDC, THE CALPURNIAN POLICE AND THE
IMMIGRATION AUTHORITIES ARE ATTRIBUTABLE TO THE STATE
95. “[T]he State can act only through individuals, whether those individuals are organs or agents
or are otherwise acting on behalf of the State.”116
All internationally wrongful actions alleged
in this dispute are attributable to the Respondent.
A. The Acts and Omissions of Calpurnia’s Police Forces and Immigration Authorities
Rest Directly with the Respondent
96. The failure to provide full protection and security by Respondent’s police forces and the
arbitrary and discriminatory treatment exercised by Respondent’s police forces and Ministry
of Interior set forth in Part II, Section IV, infra, necessarily rest with the Government of
Calpurnia itself.
97. Article 4 of the Articles on State Responsibility codifies the universal understanding of a
State’s responsibility for the conduct of its organs. Subsection 1 provides, in pertinent part
that:
[t]he conduct of any State organ shall be considered an act of that State under
international law […] whatever position it holds in the organization of the State, and
whatever its character as an organ of the central Government or of a territorial unit of
the State.117
98. Subsection 2 defines an organ as including “any person or entity which has that status in
accordance with the internal law of the State.”118
Few State entities that are more explicitly
organs of the State than its Ministries,119
as well as State forces and police.120
Calpurnia’s
igration authorities are lawfully empowered organs that exercise keypolice forces and imm
116
ILC Addendum to First Report, at ¶150.
117
Id., at ¶91.
118
Art. 4, Articles on State Responsibility.
119
Texaco, at ¶23.
120
Amco, at ¶¶155,170-172; AAPL.
Team Singh, Memorandum for Claimant
25
sovereign functions. Respondent’s assertion that the omissions of its authorities are not
actionable121
is disingenuous. State responsibility is implicated when authorities fail to take
clearly warranted and appropriate measures, particularly when inaction imperils the security
and freedom of movement of foreign personnel.122
“[U]nder international law a State is
responsible for the acts of its agents undertaken in their official capacity and for their
omissions.”123
For example, the decision rendered in Wena Hotels relied heavily on Egypt’s
failure to protect, given that “there is substantial evidence that Egypt was aware of [its
organ’s] intentions to seize the [investment] and took no actions to prevent [its organ] from
doing so.”124
B. The Acts and Omissions of SFCDC Are Attributable to Respondent
1. SFCDC is an Agent of the Respondent
99. SFCDC is a State agent under the classical and universally recognized definition of an agent,
notwithstanding Respondent’s attempts to cloak its wholly-owned and controlled fund as a
mere shareholder.
100.SFCDC is a wholly State-owned fund.125
Respondent also appoints the directors of SFCDC’s
board.126
An entity whose structure, function and control flow from governmental authority,
as well as conduct of persons empowered by the State to “exercise elements of governmental
authority,” are considered the conduct of the State “provided that the person or entity is
acting in that capacity in the particular instance.”127
Applying this standard, tribunals have
attributed actions by state-owned entities with weaker indicia of control to the State.128
Indeed, full State ownership of an entity together with appointment of its Board of Directors
by State organs has already led to the conclusion that the entity was the State’s agent.129
121
Record, at 6, ¶¶17-18.
122
U.S. Embassy Case, at 3, ¶¶63,67.
123
Velásquez Rodríguez, at ¶170; see also Polish Nationality Case, at ¶425.
124
Wena Hotels, at ¶76.
125
Record, at 3, ¶10.
126
Second Clarifications, Q. 17.
127
Art. 5, Articles on State Responsibility.
128
Klockner and Klockner II; Maffezini, at ¶¶31-33; cf. Aguas II; Metalclad I, at ¶73.
129
Wintershall, at 809.
Team Singh, Memorandum for Claimant
26
Respondent owned S
2. It Is of No Legal Consequence that SFCDC Acted in a Commercial
Capacity
101. Respondent is responsible for the acts of SFCDC irrespective of their characterization. That a
State entity acts in a commercial capacity is not dispositive in the matter of attribution, given
the frequency of state engagement in commercial ventures and privatization programs. In
Noble Ventures, the entity in question participated in board meetings, voted shares held by
the government and sold government-held shares.130
That tribunal stated that:
it is difficult to see why commercial acts, so called acta iure gestionis, should by
definition not be attributable. […] Apart from the fact that there is no reason why one
should not regard commercial acts as being in principle also attributable, it is difficult
to define whether a particular act is governmental.131
102. In light of their privatization activities, the Noble Ventures tribunal found that the agencies in
question had acted as “the empowered public institution.”132
The application of the
empowered public institution standard in this case would promote consistency, equity and
cost savings by dissuading state usage of complex webs of private companies to escape
liability.
C. Ultra Vires Is Not a Defense to State Attribution
103. As reaffirmed in the Articles on State Responsibility, a State remains liable for the ultra vires
acts and omissions of its agents and organs. Pursuant to Article 7:
[t]he conduct of an organ of a State or of a person or entity empowered to exercise
elements of the governmental authority shall be considered an act of the State under
international law if the organ, person or entity acts in that capacity, even if it exceeds
its authority or contravenes instructions.133
104. Respondent’s assertions that SFCDC’s staff and appointees acted outside of their official
capacity or contrary to express direction or policy134
are wholly irrelevant when determining
liability for such acts. Respondent formed SFCDC, Respondent controlled SFCDC, and
FCDC. Respondent generally enabled and empowered SFCDC to
130
Noble Ventures, at ¶134
131
Id., at ¶82.
132
Id., at ¶79.
133
Art. 7, Articles on State Responsibility.
134
Record, at 5, ¶16.
Team Singh, Memorandum for Claimant
27
participate in the management of Claimant’s Investment. In such instances, the International
Law Commission has made it clear that
the conduct of a State organ or an entity empowered to exercise elements of the
governmental authority, acting in its official capacity, is attributable to the State even
if the organ or entity acted in excess of authority or contrary to instructions.135
105. Even in instances of illegal self-help by state police, the State bears responsibility for ensuing
international wrongs.136
106. For these reasons, the actions of Respondent’s organs and agents are attributable to
Respondent.
II. RESPONDENT EXPROPRIATED CLAIMANT’S PROPERTY
A. Expropriation is Broadly Defined in the Calpurnia-Gaul BIT and under Customary
International Law
107. Article 6(1) of the Calpurnia-Gaul BIT provides:
Investments by investors of a Contracting Party in the territory of the other
Contracting Party shall not be expropriated, nationalised or subjected to any other
measures having the effect, either directly or indirectly, equivalent to
expropriation or nationalisation (hereinafter referred to as “expropriation”) except
for a public interest, on a non-discriminatory basis [emphasis added].
108. Respondent has expropriated Claimant’s investment and must furnish compensation.
1. The Calpurnia-Gaul BIT Protects Investors Against Direct, Indirect
and Creeping Expropriation by Respondent
109. A leading “eloquent” 137
definition of expropriation is found in TAMS-AFFA:138
135
Art. 7, Articles on State Responsibility (see also Comments to Article 7 ¶1).
136
Amco, at ¶178.
137
Motorola, at 95; see also SAIC Claim, at 17.
138
TAMS-AFFA, at 225.
Team Singh, Memorandum for Claimant
28
[An expropriation] may occur under international law through interference by a state
in the use of that property or with the enjoyment of its benefits, even where legal title
to the property is not affected.
110. The relevant metric is the extent of investor deprivation, not the state’s gain, from such
interference. Under the Restatement, a state is held responsible for expropriation which is
confiscatory or prevents, unreasonably interferes with, or unduly delays enjoyment of the
investment.139
111. Even without direct interference, the repudiation of official guarantees prevents effective
control over an investment, culminating in expropriation.140
These may include a broad range
of dispensations ranging from free zone certifications141
or development and operation
permits.142
Expropriation is not only outright seizure but “also covert or incidental
interference with the use of property” that “[deprives the owner] of the use or …economic
benefit of property even if not […] to the obvious benefit of the host state.”143
112. Expropriation may occur either in a single seizure, or through a pattern of acts constituting
“creeping expropriation.”144
Though application of creeping expropriation has been the
subject of considerable debate, such arguments are inapplicable where the treaty explicitly
speaks to acts of indirect expropriation.145
Article 6(1) of the Calpurnia-Gaul BIT does so.
2. The Definition of Investment in the Calpurnia-Gaul BIT Encompasses
Monies, Shareholding and Intellectual Property
113. Giving meaning to the Respondent’s commitment to refrain from expropriation of foreign
investment, Article 1(1) broadly defines Investment as “every kind of asset established or
acquired by” by a Gaulois investor in Calpurnia “including, in particular though not
exclusively [specified Investor assets]” [emphasis added].
139
Restatement,Section 712,Comment g.
140
Revere, at ¶292.
141
Goetz, at ¶124.
142
Metalclad I, at ¶132.
143
Id., at ¶103 (referring to Biloune, at ¶108).
144
Waste Mgmt., at ¶17.
145
Metalclad I, at ¶103.
Team Singh, Memorandum for Claimant
29
114. The expansive definition of Investment set forth in the Calpurnia-Gaul BIT indicates the
Contracting Parties’ clear intent to create a climate favorable to foreign investment. For that
intent to become a reality, investors must be constructively protected against expropriation.
a. The Definition of Investment Protects Minority Shareholder Rights
115. Shareholding is protected when a BIT defines it as investment.146
Article 1 of the CalpurniaGaul
BIT does so. Shareholder control rights relate not only to the shares themselves but also
other assets, such as know-how and managerial skills.147
For a shareholding to qualify as an
investment, a tribunal need not find that “shareholders control[] a company or own[] the
majority of its shares.”148
116. Through interference in control, a State may destroy an investor’s reasonable expectation of
“a long-term investment relying on the recovery of its investment and the estimated
return.”149
Loss of control neutralizes the benefit of the property, as ownership and
enjoyment are “‘neutralized’ where a party no longer is in control […], or where it cannot
direct the day-to-day operations.”150
117. In CMS Award, the absence of means through which a shareholder could reassert control
over its holdings led to the conclusion that:
[W]hat was touched…was the Claimant’s […] investment as protected by the treaty. What
was destroyed was the commercial value of the investment.”151
This protection of shareholder rights, including corporate governance rights, was
subsequently upheld in Eureko.152
118. The protection of minority shareholders under the CMS Award standard was made explicit in
Enron & Ponderosa, in which a broad definition of Investment and reference to shareholding
146
Genin., at ¶324.
147
Id.
148
CMS Jurisdiction, at ¶51.
149
TECMED, at ¶149.
150
LG&E, at ¶188.
151
CMS Award, at ¶67.
152
Eureko, at ¶145.
Team Singh, Memorandum for Claimant
30
led to the necessary conclusion that “[t]he definition of investment adopted in bilateral
investment treaties is a clear example of protection of minority shareholders.”153
b. The Definition of Investment Protects Monies
119. Article 1(1)(c) of the Calpurnia-Gaul BIT provides specific protection to “titles or claims of
money or rights to performance having economic value.” Cash and cash equivalents are an
evident and fundamental protected investor asset.
c. The Definition of Investment Protects Intellectual Property Rights and
Intangible Technical Assets
120. Article 1(d) of the Calpurnia-Gaul BIT specifically protects “intellectual property rights, such
as patents, copyrights, technical processes, trade marks, industrial designs, business names,
know-how and goodwill” as Investments. Intangible rights have been consistently found to
be investments protected against expropriation, so long as the taking is permanent or of
extended duration.154
B. Respondent Has Expropriated Claimant’s Investment
121. When Claimant entered the Calpurnian market, it did so pursuant to Respondent’s investor
protection commitments. Because of Claimant’s expertise and leadership, VanCal became
Calpurnia’s largest mobile telecommunications provider.155
122. In addition to the harassment and discrimination suffered by Claimant,156
Claimant began to
lose its investment in VanCal on October 14, 2004. On that date, Respondent elected Mr.
Swift, a government employee,157
and Mr. Shelly, Respondent’s agent, to the VanCal
Board.158
153
Id., at 39.
154
Corn Products, at ¶137.
155
Second Clarification, Q. 53.
156
Infra, Part II, Sections V,VI and VII.
157
Record, at 4, ¶16.
158
Record, at 6, 14 October 2004.
Team Singh, Memorandum for Claimant
31
123. As of November 15, 2004, half of VanCal’s directors were representatives of the
Respondent.159
Thereafter, Respondent explicitly stated that Respondent did not “regard
VanCal as really being a private company.”160
On November 16, 2005, when Respondent
expelled Claimant’s representative from the VanCal Board,161
Respondent’s expropriation
was complete.
124. Through interference with Claimant’s voting rights and control of its shares, Respondent has
assumed control not only of Claimant’s shareholder rights and benefits, but also of VanCal
itself. In the past four years, Respondent has taken:
• declared dividend payments due to Claimant, a “claim to money” specifically protected
under Article 1(1)(c) and unreasonably withheld from 10 March 2005 through to the present
time.
• Claimant’s “shares … or other forms of participation in a company” specifically protected
under Article 1(1)(b), through illegal nullification of Claimant’s representation on the Board
of directors of VanCal.
• Claimant’s intellectual property rights specifically protected under Article 1(1)(d), through
continued, unauthorized and unsupervised use of the lifeline of Claimant’s
telecommunications business – its intellectual property.
1. Respondent Continues to Withhold Payments Due to Claimant
125. It is conceded that VanCal declared dividends due to Claimant, but Claimant still has not
been paid. Respondent, however, asserts that VanCal distributed dividends to Claimant,162
through an unauthorized and illiquid credit.
159
Second Clarification, Q. 1.
160
Record at 6, 15 November 2004 (Statement of Dr. Jonathan Swift).
161
Record at 7-8, 16 November 2005.
162
Record at 5, ¶16.
Team Singh, Memorandum for Claimant
32
126. Willfully asserting a written instrument for payment of money drawn upon corporate
accounts through a corporate officer, while knowing that the corporation is not authorized to
make payment upon the instrument’s presentation, is a fraudulent payment.163
127. Respondent asserts here a fraudulent payment. The Articles of Association of VanCal do not
authorize a “credit on VanCal’s books to Claimant’s account” as a form of dividend
payment.164
128. In instances where the State’s defense is its own illegal act, “the declarations made by the
Government are so lacking in precision that […] the existence and persistence of the dispute
are not in doubt.”165
129. Respondent first expressed its intent to restrict dividend payments on February 17, 2005.166
Respondent sought to create an unnecessary severance fund, foreseeing a liquidation of the
investment inconsistent with Claimant’s commitment to VanCal.167
130. On March 10, 2005, Respondent declared that, although “shareholders have a right to
[company profits] in proportion to their capital investment, […] the payment of profits to the
foreign shareholders has been suspended for the time being” under a theory of dispute
between the nations of Calpurnia and Gaul.168
The Board declared a dividend payable only to
local shareholders.169
131. The generous stock-and-cash dividend later declared by VanCal would not be paid to
Claimant, per the instruction of a Respondent-dominated Board and confirmed by an
independent director of VanCal.170
Calpurnian law does not provide a basis to deny dividend
163
First Sport (South African court defining and enforcing compensation for a fraudulent payment made in
England under English law).
164
Record at 8, 28 September 2006.
165
AGIP, at ¶42.
166
Record, at 6, 17 February 2005.
167
Id.
168
Record at 7, 10 March 2005.
169
Id.
170
Record at 7, 27 May 2005.
Team Singh, Memorandum for Claimant
33
registration and incom
payments to selected shareholders.171
Further, the declared dividend included a considerable
shareholding component, not capable of compensation through a credit.172
132. After notification of the Claimant’s dispute to Respondent on June 5, 2005, months of silence
would follow, until September 28, 2006, when Respondent claimed that the aforementioned
unauthorized credit would suffice.173
To date, no lawful payment has been made to Claimant,
and Respondent continues to withhold Claimant’s shares and monies.
2. Respondent Willfully Deprived Claimant of Effective Use and Enjoyment
of Its Shareholding
133. Voting rights and board representation are key and distinct shareholder rights; these rights
are capable of independent taking and their loss dilutes the value of the overall investment.174
134. The right to “participate and vote in the general shareholder meetings; elect and remove
members of the Board; and share in the profits of the corporation” is fundamental to
shareholding.175
Respondent has willfully deprived Claimant of the right to participation.
135. Claimant has, since late 2003, maintained a 31% interest in VanCal,176
of which 1% is held
in trust for Claimant.177
Respondent holds 30% of VanCal stock directly.178
Respondent
controls another 22% block of shares,179
registered in a purely nominal capacity to several
hundred farmers and workers pursuant to a Purchase/Agency Agreement, leaving
Respondent with a controlling voting interest of 52%.180
136. Respondent’s control through the Purchase/Agency Agreement demonstrates Respondent’s
attempts to control VanCal. Respondent owns these shares, assigning only nominal
e rights to the natural persons while retaining all other ownership
171
Second Clarification, Q. 13.
172
Record at 7, 15 April 2005.
173
Record, at 8, 28 September 2006.
174
Eureko (holding that withdrawal of a minority shareholder’s right to acquire further shares pursuant to an
agreement related to the investment gave rise to expropriation).
175
Art. II(A), OECD Principles.
176
Record at 3, ¶13.
177
Record at 3, ¶9.
178
Record at 4, ¶20.
179
Id.
180
Record at 5, ¶8.
Team Singh, Memorandum for Claimant
34
dominated by Respo
rights.181
Respondent also imposes a withholding tax on dividend payments that is higher
than the prevailing tax rate on dividends paid to shareholders who do not assign their voting
rights to Respondent.182
Such withholding treatment is a form of taxation which frequently
proves coercive in application.183
137. Respondent, from a position of Board dominance, has moved to take the value of Claimant’s
investment in its entirety, violating internationally recognized maxims of corporate
governance. Respondent randomly invalidated Claimant’s proxies for board participation and
proceeded to hold a board meeting for which no proxies had been issued.184
Specifically,
“shareholders should be able to vote in person or in absentia, and equal effect should be
given to votes whether cast in person or in absentia.”185
The meeting at which Claimant’s
proxies were nullified had been arbitrarily delayed; Claimant, as a minority shareholder, had
no power to issue a valid proxy of its own initiative. Instead of adhering to the core principle
that “[m]inority shareholders should be protected from abusive actions by, or in the interest
of, controlling shareholders acting either directly or indirectly, and should have an effective
means of redress,” 186
Respondent continued on its course of coercion.
138. After unilaterally invalidating Claimant’s proxies, Respondent voted to remove Claimant’s
representative from VanCal’s Board.187
Respondent then assumed complete control after
VanCal’s one independent director resigned; Respondent replaced him with another agent of
the Respondent.188
Boards are obligated to “ensur[e] a formal and transparent Board
nomination and election process”189
; once dominated by Respondent, the Board proceeded
with complete impunity towards Respondent’s interest.
139. Leaving the November 2005 meeting, Claimant had only one representative on the Board,190
ndent’s four representatives. Claimant’s remaining representative
181
Second Clarification, Q. 12.
182
Second Clarification, Q. 9.
183
OECD on Tax Competition, at ¶170.
184
Record at 7-8, 16 November 2005.
185
Art. II(C)(4), OECD Principles.
186
Art. III(A)(2), OECD Principles.
187
Record at 7-8,16 November 2005.
188
Id.
189
Art. VI(D)(5), OECD Principles.
190
Record at 8, 16 November 2005.
Team Singh, Memorandum for Claimant
35
resigned shortly thereafter.191
Claimant continued to pursue normal business relations within
the State-dominated VanCal in good faith, nominating two replacement Board members on
June 7, 2006.192
Nevertheless, Respondent continued to treat Claimant arbitrarily and
withhold payments.193
140. By October 23, 2006, Claimant recognized the futility of efforts at settlement, in light of
Respondent’s refusal to engage.194
Thereafter, Claimant withdrew its representation from the
VanCal Board.195
3. Respondent Continues To Use Claimant’s Intellectual Property
141. A wide range of intellectual property rights are involved in the execution of Claimant’s
Technical Assistance and Trademark Licensing Agreements with VanCal. Respondent, now
in charge of VanCal, continues to use and dilute the value of these assets without Claimant’s
participation in management.196
As of May 2005, Claimant has not been paid for use of its
intellectual property as required under the technical assistance agreement.197
Respondent has
further allowed its police to harass Claimant’s chief technical officer until he left the country
in fear.198
142. An action may be tantamount to expropriation, even though the legal ownership of the assets
in question is not affected;199
hence, it is irrelevant that Claimant retains ownership absent
control. Though Claimant retains formal ownership of its intellectual property,200
Respondent’s unauthorized use continues to radically erode these assets’ value.
C. Respondent’s Expropriation Was Discriminatory, Without Due Process of Law and
Without Public Purpose
191
Record at 8, 15 April 2006.
192
Record at 8, 5 June 2006.
193
Record at 8, 28 September 2006.
194
Record at 8, 23 October 2006.
195
Record at 8, 23 October 2006.
196
Second Clarification, Q. 34.
197
Record at 4, ¶19.
198
Record at 4, ¶17.
199
TECMED, at ¶116.
200
Second Clarification, Q. 15.
Team Singh, Memorandum for Claimant
36
EQUITABLE TREAT
143. Article 6(1) of the Calpurnia-Gaul BIT provides an exception for expropriation “for a public
interest, on a non-discriminatory basis, under due process of law and against prompt,
adequate and effective compensation.”
144. In similar circumstances, the Overseas Private Investment Corporation held that Venezuela
had expropriated a foreign investment in an arbitrary and discriminatory manner, without a
public interest justification and with neither due process nor compensation.201
Venezuelan
officials had publicly proclaimed their intent to restrict foreign investment,202
stating their
discriminatory motive.203
Venezuelan officials publicly denounced the investor, invoking
unsubstantiated charges of espionage.204
A general labor union protesting the investment was
found to be of the expropriating State’s making, due to extensive official participation, and
hence not relevant for public purpose exception.205
Cumulatively, these actions prevented a
finding of lawful expropriation.206
145. The CCC’s Women’s League, the organization protesting against Claimant’s participation in
the investment,207
acted in concert with platform of Respondent’s ruling party. Respondent
has denounced Claimant and promoted unsubstantiated charges of espionage against
Claimant through public press releases.208
Cumulatively, the facts of the case clearly show
that Respondent’s expropriation was not for a public interest, and was implemented in a fully
discriminatory manner without due process of law.
146. For these reasons, Respondent has illegally expropriated Claimant’s investment and must
furnish compensation.
III.RESPONDENT HAS BREACHED ITS OBLIGATION TO PROVIDE FAIR AND
MENT TO CLAIMANT’S INVESTMENT
201
SAIC Claim, at ¶¶15-19.
202
Id., at ¶7.
203
Id., at ¶16.
204
Id., at ¶9.
205
Id., at ¶5.
206
Id., at ¶¶20-21.
207
Record at 4.
208
Id.
Team Singh, Memorandum for Claimant
37
of a violation of fair an
147. Article 2(2) of the Calpurnia-Gaul BIT provides that investors of each party are entitled to
fair and equitable treatment. Also, the Preamble to the Calpurnia-Gaul BIT emphasizes that
both parties desire to “maintain fair and equitable conditions for investments by investors of
on Contracting Party in the territory of the other Contracting Party.”
148. Tribunals have used various approaches to define the fair and equitable treatment standard.
The most commonly used standards include factors such as: (A) arbitrariness and
discrimination; (B) failure to protect legitimate expectations; and (C) failure to provide a
stable, consistent, and predictable investment environment. The existence of malice and bad
faith can aggravate the analysis under any of these factors. No one factor is decisive and a
breach of any of these factors can give rise to a claim for a breach of fair and equitable
treatment. Under each standard, Respondent has violated fair and equitable treatment.
A. Protection against Arbitrariness and Discrimination
149. While some investment treaties have specific provisions on arbitrary and discriminatory
treatment, arbitral tribunals also place this element in the concept of fair and equitable
treatment. The tribunal in Waste Management states that fair and equitable treatment is
breached if:
the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes
the claimant to sectional or racial prejudice, or involves a lack of due process leading to an
outcome which offends judicial propriety-as might be the case with a manifest failure of
natural justice in judicial proceedings or a complete lack of transparency and candor in an
administrative process.209
150. The concepts of arbitrary treatment and fair and equitable treatment are interrelated because
arbitrariness is closely connected with the idea of the rule of law, foundational to the fair and
equitable treatment standard.210
The fair and equitable treatment standard can be understood
as “a rule of law standard that the legal systems of host states have to embrace as a standard
for the treatment of foreign investors.”211
Thus, arbitrary treatment is sufficient for a finding
d equitable treatment.212
209
See Waste Mgmt., at ¶98.
210
Schill, at 41.
211
Id.
212
Id., at 51.
Team Singh, Memorandum for Claimant
38
151. Certain forms of discrimination such as racial discrimination are recognized as giving rise to
a breach of fair and equitable treatment.213
It is less clear whether discrimination on the basis
of nationality already addressed in a national treatment claim gives rise to a breach.214
The
Myers tribunal found that “the breach of Article 1102 (National Treatment) in this case
essentially established a breach of Article 1105 (Fair and Equitable Treatment) as well.”215
152. Respondent’s conduct was both arbitrary and discriminatory. These actions were arbitrary
because sudden changes such as the ousting of Gaulois Board members, the cessation of the
flow of financial information and failure to pay foreign shareholders were sudden changes
which were not grounded in any rational policy. These actions were discriminatory because
domestic shareholders were not subject to the same restrictions.
B. Protection of Legitimate Expectations
153. A breach of legitimate expectations can also amount to a violation of fair and equitable
treatment. In TECMED, the tribunal established that actions that are contrary to an investor’s
expectations can be a violation of fair and equitable treatment.216
The tribunal in TECMED
found that if any part of the framework is changed ex post, the investor should be
protected.217
The Occidental decision differed from TECMED in that it stated that not every
expectation of the investor is protected under the fair and equitable standard, but rather that
there must be reasonable reliance and that only legitimate expectations will be protected.218
154. Under the TECMED approach, a breach of fair and equitable treatment would be found
because the imposition of administrative hurdles such as the refusal to pay dividends to
foreign shareholders, cessation of sending financial information to Gaulois citizens and
deprivation of representation on the Board following the CCC’s ascension to power were
contrary to Claimant’s expectations.219
213
Paradell, at 129.
214
Id.,at 129.
215
See S.D. Myers, at ¶237.
216
See TECMED, at ¶154.
217
See Id.
218
See, e.g., Occidental, at ¶181.
219 See TECMED, at ¶154
Team Singh, Memorandum for Claimant
39
aggravates Respondent
155. Respondent’s actions also violated the lower standard enunciated in Occidental. When
Claimant participated in the establishment of VanCal in Calpurnia, Claimant reasonably
expected that Gaulois shareholders would be treated similarly to Calpurnian shareholders and
Gaulois Board members would be able to participate and be represented in the company to
the same extent as Calpurnian Board members.
C. Stability, Predictability, Consistency
156. The Metalclad tribunal identified the requirement to provide a predictable, stable legal and
business framework as an element of fair and equitable treatment.220
The tribunal ultimately
found that a violation of article 1105(1), NAFTA’s provision on fair and equitable treatment,
was based upon Mexico’s failure to “ensure a…predictable framework for Metalclad's
business planning and investment.”221
157. Respondent failed to provide a predictable framework by changing the investment
environment upon the CCC’s rise to political power. The CCC targeted Gaul through
negative propaganda and altered foreign policy objectives. This changed the investment
environment from one where Claimant could participate meaningfully in VanCal
management to a subordinate role in the company. Shareholder and Board participation
rights were curtailed.222
This stark contrast between Claimant’s former and current role in
VanCal points to the unpredictable nature of the Calpurnian investment environment.
D. Malice or Bad Faith
158. While it is not a necessary element of the claim, evidence that the host state acted with
malice or bad faith can aggravate the analysis under each of the three standards articulated
above.223
159. Here, Respondent acted in bad faith. Respondent’s malicious disregard of Claimant’s rights
to be paid dividends, to receive financial information, and to representation on the Board
’s breach of the other elements of a fair and equitable treatment claim.
220
See Metalclad I, at ¶99.
221
See Metalclad I, at ¶99.
222
Record at 3, ¶14.
223
See C.M.S. Award, at ¶280.
Team Singh, Memorandum for Claimant
40
160. Therefore, Respondent breached their duty to provide fair and equitable treatment.
IV.RESPONDENT DENIED CLAIMANT NATIONAL TREATMENT
161. Articles 4(1) and 4(2) of the Calpurnia-Gaul BIT provides that investors and investments of a
Contracting Party should not be accorded treatment less favorable than a state would accord
to its own investors and investments. This national treatment requirement is a critical
element fulfilling the contract party’s desire “to intensify economic co-operation to the
mutual benefit of both countries” and to “promot[e] and protect[] investments on the basis of
[the] Agreement.”224
162. The purpose of this clause is to: “…promote the position of the foreign investor to the level
accorded to nationals.”225
The general contours of the inquiry are: whether the foreign and
domestic investors are in a comparable setting, the existence of differential treatment, and the
absence of a justification for such differential treatment.226
163. Claimant is not required to prove that Respondent intended to favor its nationals.227
The
impact of the allegedly discriminatory measure on the investment is the determining
factor.228
Additionally, Claimant is not required to prove that Respondent’s actions were a
result of nationality-based discrimination.229
164. Here, (A) Claimant was in a comparable position to Calpurnian shareholders, (B) Claimant
received different treatment vis-à-vis Calpurnian shareholders, and (C) Respondent cannot
articulate legitimate policy reasons that justify this differential treatment.
A. Gaulois and Calpurnian Shareholders Were in a Comparable Setting
224
Calpurnia-Gaul BIT at Preamble.
225
Dolzer, at 178
226
See Dolzer, at 180-183; U.P.S., at ¶83.
227
S.D. Myers, at ¶254.
228
Id., at ¶254.
229
Feldman, at ¶181.
Team Singh, Memorandum for Claimant
41
165. A denial of national treatment claim assesses whether the parties were in a comparable
setting.230
Investor-state tribunals have found that foreign and domestic investors are in a
comparable setting when they are in “like circumstances.”231
166. Tribunals have compared foreign and domestic investors who are in the same line of
business232
and even the same economic sector.233
167. Here, the investors were shareholders in the very same company.234
Thus, it is undisputable
that Gaulois and Calpurnian shareholders in VanCal were in a comparable setting.
B. Claimant was Subject to Differential Treatment vis-à-vis Respondent’s
Nationals
168. Simply stated, a discriminatory measure is one that does not provide national treatment.235
A
de jure denial of national treatment occurs when the discrimination is on the face of the
measure.236
A de facto denial of national treatment occurs when there is a facially neutral
measure but “the measure in question disproportionally disadvantages the foreign owned
investments or investors.”237
169. Respondent’s actions rise to the level of both de jure and de facto denials of national
treatment. There was a de jure denial of national treatment because there was a corporate
policy in place intended to discriminate against foreign shareholders. A March 2005 decision
by the VanCal Board of Directors established that money would not be paid to foreign
shareholders.238
VanCal paid dividends to Calpurnian stockholders but refused to pay
dividends to Gaulois stockholders. As discussed above239
these actions are attributable to
Respondent. The discrimination was on the face of the measure.
230
Dolzer, at 179.
231
See, e.g., S.D. Myers, at ¶243.
232
See Feldman v. Mexico, at ¶171.
233
See Occidental, at ¶173.
234
Record at 3, ¶9.
235
See e.g., Lauder, at ¶220.
236
See e.g., Pope & Talbot, at ¶43.
237
See Pope & Talbot, at ¶43.
238
Record at 3, ¶14.
239
See Part II, Sec.1.
Team Singh, Memorandum for Claimant
42
170. In addition, Respondent’s actions constituted a de facto denial of national treatment because
while some measures were facially neutral, they had the effect of disproportionately
disadvantaging the foreign-owned investment. Respondent states that all shareholders were
treated equally in the dissemination of corporate reports and notices.240
However, the
cessation of sending information to Gaulois citizens disproportionally disadvantaged Gaulois
investors because they could access information only by traveling to VanCal headquarters
whereas they previously had meaningful access.241
In addition, while Respondent claims that
Claimant’s removal from the Board was effected according to corporate protocol, Claimant
was actually ousted from a position of representation thus further diminishing their ability to
preserve the value of their investment.
C. There was no Justification for the Differential Treatment
171. Generally, differential treatment is considered justifiable if rational grounds can be
demonstrated.242
In S.D. Myers, the tribunal found that legitimate public policy measures
that were pursued in a reasonable manner could justify differential treatment.243
Similarly,
the Pope & Talbot tribunal found that differentiation in treatment could be justified by a
showing that the treatment bore a “reasonable relationship to rational policies not motivated
by preference of domestic over foreign-owned investments.”244
172. The differential treatment between Gaulois and Calpurnian shareholders was not justified by
rational policies and the means employed bore no rational relationship to these policies. The
differential treatment accorded to Gaulois citizens cannot be justified by the alleged security
threat posed by Gaulois efforts to destabilize the regime through political and industrial
espionage. Gaul does not pose a security threat to Calpurnia and the allegations of political
and industrial espionage are merely unsubstantiated allegations that stem from the
reactionary foreign policy of the CCC, a conservative regime that took power in November
of 2003.245
240
Record at 5, ¶15.
241
Record at 4, ¶16.
242
Dolzer, at 181.
243
S.D. Myers, at ¶246.
244
Pope & Talbot,at ¶79.
245
Id.
Team Singh, Memorandum for Claimant
43
173. Even if the CCC’s policies of ensuring national security against Gaulois threats were viewed
as rational policies, constricting the financial control and rights of Gaulois shareholders is not
a reasonable way to achieve these policies. Thus, these actions were not motivated by
rational policies but rather by a preference for domestic over foreign owned investments.
174. Therefore, Respondent has failed to provide Claimant with national treatment.
V. RESPONDENT FAILED TO PROVIDE FULL PROTECTION AND SECURITY TO
CLAIMANT’S INVESTMENT
175. Article 2(2) of the Calpurnia-Gaul BIT provides that Calpurnia shall “accord in its territory to
investments of investors of [Gaul]. . . full and constant protection and security.”
176. This obligation extends to actions taken by state organs.246
Respondent is also responsible to
provide full and constant protection and security against actions undertaken by private
citizens.247
177. Thus, it is clear that even when there is ambiguity in the relationship between the state and
the actor, the duty to provide full protection and security endures.248
In this case, VanCal’s
actions were attributable to Respondent.249
However, even if this Tribunal were to find that
the actions of VanCal are not attributed to Respondent, Respondent would nevertheless
remain liable for various violations of Article 2(2) of the Calpurnia-Gaul BIT.
178. As described below, Respondent did not (A) protect Claimant from physical, economic, and
legal harm and (B) failed to even take reasonable measures to protect Claimant’s investment
from these forms of harm.
246
AAPL, at ¶45.
247
Amco Asia, at ¶172.
248
Id.
249
See Part II, Sec.1.
Team Singh, Memorandum for Claimant
44
A. Respondent Failed to Provide Claimant’s Investment with Full and Constant
Protection of Its Physical, Economic and Legal Security
179. Full protection and security encompasses physical protection,250
economic protection251
and
legal protection.252
1. Physical Protection
180. Full protection and security provides that the state must protect a foreign investor from
physical harm.253
The duty to provide protection against physical harm applies to action by
state organs as well as private acts.254
In Wena Hotels, the tribunal found Egypt liable when
employees of a state entity had seized a hotel and police authorities failed to intervene to
protect the investor despite notice of the seizure.255
181. Here, the police invaded Pescara and Mr. Kolowenko’s privacy by engaging in three
unsubstantiated searches of their homes. On three different occasions in 2003 and 2004 state
agents, the police force, entered into the private homes of Pescara and Mr. Kolowenko solely
upon the basis of “anonymous tips” and seized private property, including two laptop
computers.256
182. Respondent is also responsible for the acts of private individual’s actions against Claimant.
Like in Wena Hotels, Respondent failed to send police protection despite Pescara’s
notification that angry protestors were surrounding her home. Pescara was subjected to
public protests on her property on several occasions in 2004; these protests lasted for a
number of days. The protestors harbored animosity towards Pescara and Gaulois nationals
by using “threatening chants”257
like “a woman’s place is in the home-go home!” and “spy in
250
See, e.g., AAPL, at ¶45; Wena Hotels, at ¶84.
251
Azurix, at ¶172 (stating that full protection and security “is not only a matter of physical security; the
stability afforded by a secure investment environment is as important form an investor’s point of view.”)
252
See Siemens, at ¶303 (stating that “the obligation to provide full protection and security is wider than
‘physical’ protection and security. It is difficult to understand how the physical security of an intangible asset
would be achieved.”).
253
Dolzer, at 15.
254
Dolzer, at 150.
255
Wena Hotels, at ¶84.
256
Record at 6, 8 December 2003.
257
First Clarification, Q. 19.
Team Singh, Memorandum for Claimant
45
your own backyard.” Despite this recurring and hostile environment, the police failed to
intervene despite Pescara’s repeated demands for help.
183. In these instances, Claimant’s key employees were subject to harassment and the threat of
physical violence.
2. Economic Protection
184. The Azurix tribunal established that the obligation to provide full protection and security
extends not only to physical protection but also to economic protection.258
The tribunal
reasoned that “when the terms ‘protection and security’ are qualified by ‘full’…they extend,
in their ordinary meaning, the content of this standard beyond physical security.”259
185. Here, Respondent failed to provide Claimant’s investment with economic protection by
failing to ensure that VanCal’s dividends were paid to Gaulois shareholders, that
representation was provided as guaranteed by the cumulative voting provision of the
Calpurnian Commercial Code, and that financial information was shared with Gaulois
shareholders.
3. Legal Rights
186. The requirement that a state provide full protection and security “reaches beyond physical
violence and requires legal protection for the investor.”260
187. The tribunal’s decision in CME v. Czech Republic illustrates the principle that full protection
and security requires that a state “provide[] protection against infringements of the investor’s
rights.”261
The tribunal in that case held that:
The host State is obligated to ensure that neither by amendment of its laws nor
by actions of its administrative bodies is the agreed and approved security and
protection of the foreign investor’s investment withdrawn or devalued.262
258
Azurix, at ¶408.
259
Azurix, at ¶408
260
See Saluka, at ¶¶483,484; Ceskoslovenska, at ¶170.
261
Dolzer, at 151.
262
CME v. Czech Republic, at ¶613.
Team Singh, Memorandum for Claimant
46
Claimant’s physical se
188. Respondent has not met this obligation. Respondent did not provide legal protection to
Claimant when it failed to pay license fees for the use of the Claimant’s trademark and for
the Technical Assistance Agreement, despite the fact that VanCal continues to illegitimately
use Claimant’s trademark.263
B. Respondent Failed to take Reasonable Measures to Protect Claimant’s Investment
189. Investor-state tribunals have differing interpretations regarding the appropriate standard of
care for a full protection and security claim. A strict liability standard would require that a
state take “all measures of precaution to protect…investments… on its territory.”264
190. However, tribunals are converging upon a “reasonableness” or “due diligence” standard. The
tribunal in Lauder v. The Czech Republic defined the reasonableness standard as requiring a
state to do what is “reasonable under the circumstances” in order to protect foreign
investment.265
The reasonableness standard is objective, not a sliding scale depending on
state capacity. A sliding scale standard would lower the requirement for developing
countries. The tribunal in Asian Agricultural defined reasonableness as an objective standard
that would be judged as “the reasonable measures of prevention which a well-administered
government would be expected to exercise under similar circumstances.”266
191. The standard of care in the Calpurnia-Gaul BIT likely provides a heightened level of
protection to the due diligence standard. This is because the full protection and security
clause in the BIT uses the phrase “full and constant protection and security.” The inclusion of
the word “constant” serves to strengthen the required standard of “protection and security”
and indicates the Parties’ intention to establish in their BIT a standard of “due diligence” that
is higher than the “minimum standard” of general international law.267
192. Respondent failed to provide Claimant’s investment with full protection and security
pursuant to this higher standard. Respondent failed to take reasonable measures to protect
curity. Respondent did not dispatch police despite notice of picketing
263
Second Clarifications, Q. 31.
264
American Mfg., at ¶6.05.
265
Lauder v. Czech Republic, at ¶308.
266
Asian Agricultural, at ¶77.
267
Id., at ¶50.
Team Singh, Memorandum for Claimant
47
near Pescara’s home, nor did Respondent take any measures to prevent or correct the
unwarranted police searches conducted in Pescara and Mr. Kolowenko’s homes. Respondent
did not inquire into VanCal’s non-conforming treatment of Gaulois shareholders and
VanCal’s failure to pay license fees for trademarks. Therefore, Respondent failed to take
reasonable measures, much less the measures required under the elevated standard
established in Article 2(2) of the BIT.
193. For the above reasons, Respondent has failed to provide Claimant’s investment with full
protection and security.
VI.RESPONDENT TREATED CLAIMANT IN AN ARBITRARY AND
DISCRIMINATORY MANNER
194. Article 2(3) of the Calpurnia-Gaul BIT provides that investor shall not be subjected to
“arbitrary or discriminatory measures in [their] investments.” While tribunals have assumed
that arbitrary and discriminatory are identical standards, the separate listing of these two
standards, “suggests that each must be accorded its own significance and scope.”268
195. In this case, Respondent failed to pay dividends to Gaulois stockholders, ceased to send
account investment-related information to Gaulois citizens, and ousted Gaulois citizens from
the Board. Respondent’s failure to renew Ms. Pescara’s business visa constitutes a violation
of Article 2(3) as well as Article 2(5), which guarantees “a sympathetic consideration to
applications for necessary permits.”
196. By these actions, Respondent has (A) subjected Claimant to both arbitrary treatment and (B)
discriminatory treatment. Accordingly, Respondent has violated Article 2(3) of the
Calpurnia-Gaul BIT.
A. Arbitrary Treatment
268
Dolzer, at 173.
Team Singh, Memorandum for Claimant
48
197. Some tribunals have defined arbitrary by using the definition provided in Black’s Law
Dictionary.269
In Lauder v. Czech Republic, the tribunal relied on this definition which
provides that arbitrary actions are those that are “founded on prejudice or preference rather
than on reason of fact.”270
Other tribunals choose to define arbitrary by referring to the
concept of the rule of law.271
The ELSI tribunal defined arbitrary as “a willful disregard of
due process of law, an act which shocks, or at least surprises a sense of juridical
propriety.”272
198. Under either analytic approach, Respondent’s actions should be considered arbitrary. Under
the Lauder v. Czech Republic standard, the reason that Respondent took these actions were
not grounded in reason, but were motivated by preference or prejudice. Like in Lauder v.
Czech Republic, the sudden change in policy towards Gaulois shareholders was not
motivated by any rational policy but rather by prejudice against foreigners as exemplified by
the xenophobic platform of the newly-elected CCC.273
Additionally, the 2005 decision by
the VanCal Board of Directors, which included SFCDC representatives, not to pay money to
foreign shareholders together with decisions made by government representatives to oust
members of the Board and to cease sending important financial information fits squarely
within the alternate definition provided in ELSI.
199. Respondent’s actions cannot be justified. This case is unlike ELSI, where the tribunal found
that the Italian government’s order to reacquisition an American company was necessitated
by the politically charged context of a worker’s strike.274
Here, Respondent’s actions were
not justified by concerns regarding political and industrial espionage by foreign states. Such
claims are unsubstantiated because they merely represent the paranoid rhetoric of the CCC
rather than any legitimate policy grounded in fact.
B. Discriminatory Treatment
269
See Lauder v. Czech Republic, at ¶221.
270
See Lauder v. Czech Republic, at ¶221.
271
Dolzer, at 173.
272
See ELSI, at ¶128.
273
Record at 3, ¶12.
274
ELSI, at ¶129.
Team Singh, Memorandum for Claimant
49
200. Respondent’s policies were discriminatory on their face. Measures such as 2005 decision to
cease paying dividends to foreign shareholders, failing to send documents to Gaulois
shareholders, and ousting Galois Board members while similar actions were not taken against
Calpurnian shareholders makes these formally discriminatory measures.
201. Alternatively, even if Respondent’s policies are found to be formally non-discriminatory,
Respondent has the burden of proof to show that their actions were not prejudiced towards
Gaulois shareholders. Respondent would fail to meet this burden of proof because
Respondent’s actions towards Gaulois shareholders were prejudiced.
202. Therefore, Respondent treated Claimant in an arbitrary and discriminatory manner.
VII. RESPONDENT HAS BREACHED ITS DUTY OF TRANSPARENCY
203. An affirmative obligation of official transparency is specifically provided for in Article 3 of
the Calpurnia-Gaul BIT, which provides:
Each Contracting Party shall ensure that, its laws, regulations, procedures,
administrative rulings and judicial decisions of general application…which may
affect the investments of investors…are promptly published, or otherwise made
publicly available.
204. Through transparency, a host State commits to improving the public availability of laws and
information exchange, promoting public responsiveness to investment policy-making, and
ensuring accountability and good governance.275
205. In Metalclad I, an opaque administrative decision-making process constituted a failure by the
state to “ensure a transparent and predictable framework for [investor’s] business planning
and investment.”276
In Metalclad I, the tribunal set forth the following comprehensive
definition of “transparency”:
[Transparency includes] the idea that all relevant legal requirements for the purpose
of initiating, completing and successfully operating investments made… should be
capable of being readily known to all affected investors of another Party.
275
Id.
276
Metalclad I, at ¶142.
Team Singh, Memorandum for Claimant
50
206. Metalclad I formed the foundation for the tribunal’s transparency holding in TECMED,
which found that investors may rely on certain expectations of consistency, including
freedom from ambiguity and transparency.277
These transparency analyses provide
meaningful substance for independent claims which emerge from specific transparency
undertakings.278
207. Contrary to its treaty commitments, Respondent assumed an informal approach to foreign
investment and dispute resolution replete with unexplained inconsistencies. Respondent’s
police conduct searches at will, with few avenues for judicial review.279
Respondent’s legal
and regulatory frameworks are silent on matters essential to investment promotion and
protection of dividend rights.280
Respondent’s Commercial Code fails to protect minority
shareholders.281
Respondent may declare an unofficial state of emergency at will,282
simply
to justify its coercion of foreign nationals. Respondent also refuses to publicly disseminate
key information regarding its operations,283
as well as holdings managed by the State.
208. For the reasons stated above, Respondent has breached Article 3 of the Calpurnia-Gaul BIT.
CONCLUSION ON MERITS OF THE CLAIM
209. Respondent, through its agents and organs, has breached its international obligations with
respect to restraint from expropriation, national treatment, fair and equitable treatment, full
protection and security, arbitrary and discriminatory treatment, and transparency.
277
TECMED, at ¶¶78, 154.
278
Champion Trading at ¶164.
279
First Clarification, Q. 17.
280
Second Clarification, Q. 13.
281
First Clarification, Q. 26.
282
Record at 7, 10 March 2005.
283
Record at 4, ¶16; First Clarification, Q. 10.
Team Singh, Memorandum for Claimant
51
PART THREE: RELIEF REQUESTED
210. In light of the submission made above, Claimant respectfully asks this Tribunal to find:
(1) that this Tribunal has jurisdiction over this dispute;
(2) that Respondent violated its obligations under Article 2, Article 3, Article 4, and Article 6 of
the Calpurnia-Gaul BIT;
(3) and that this arbitration should proceed to the Quantification of Damages Phase.
RESPECTFULLY SUBMITTED ON SEPTEMBER 12, 2008 BY
-------/s/--------------
Parisa Elahi, Anita Raman, and Gunjan Sharma
New York University School of Law
on behalf of Claimant
VANGUARD INTERNATIONAL