INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C.

DEUTSCHE BANK AG

V.

DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA ICSID CASE NO. ARB/09/02

AWARD

Rendered by an Arbitral Tribunal composed of Mr. Makhdoom Ali Khan, Arbitrator

Professor David A.R. Williams QC, Arbitrator Professor Dr. Bernard Hanotiau, President

Secretaries of the Tribunal Ms. Frauke Nitschke Ms. Elose Obadia

DATE OF DISPATCH TO THE PARTIES: OCTOBER 31, 2012

REPRESENTATION OF THE PARTIES:

Representing the Claimant: Ms. Judith Gill QC Mr. Matthew Gearing Mr. Anthony Sinclair Mr. Andrew Battisson Mr. Matthew Hodgson Allen & Overy LLP and Ms. Dilumi de Alwis Mr. R. Senathi Rajah Julius and Creasy

Representing the Respondent: The Honorable Mohan Pieris, P.C. Former Attorney General (until Oct. 2011) The Honorable Eva Wanasundera, P.C. Former Attorney General (Nov. 2011 to July 2012) The Honorable Palitha Fernando, P.C. Attorney General (since July 2012)p Mr. Janak de Silva Mr. Milinda Gunetilleke Mr. Rajitha Perera Ms. Ruwanthi Herath-Gunaratne Attorney-Generals Department Democratic Socialist Republic of Sri Lanka and Professor James Crawford SC Matrix Chambers and Mr. Ali Malek QC Mr. Clive Freedman 3 Verulam Buildings and Mr. Simon Olleson Thirteen Old Square

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TABLE OF CONTENTS

CHAPTER I. THE PARTIES ................................................................................................... 1

CHAPTER II. THE PARTIES CLAIMS AND PRAYERS FOR RELIEF ............................ 2

CHAPTER III. SUMMARY OF THE MAIN FACTS ............................................................. 3

SECTION I. THE HEDGING AGREEMENT ............................................................ 3

Sub-Section I. The Regulatory Framework and Background of the Hedging Agreement ........................................................................ 3

I. The Study Group Recommendations and the Cabinet of Ministers Decision ............................................................................... 5

II. CPCs Board Resolutions of February and March 2007 ....................... 5

Sub-Section II. The 8 July 2008 Hedging Agreement and its Key Terms ............... 6

I. The Term Sheet ..................................................................................... 7 II. The Risk Disclosure Statement ............................................................. 7 III. The Confirmation .................................................................................. 7

Sub-Section III. Subsequent Events Related to the Hedging Agreement .................. 8

I. Payments under the Hedging Agreement .............................................. 8 II. Restructuring Discussions and Establishment of the Hedging

Risk Committee ..................................................................................... 9 III. Early Termination of the Hedging Agreement...................................... 9

SECTION II. THE SUPREME COURT PROCEEDINGS ........................................ 10

SECTION III. THE CENTRAL BANKS ACTIONS ................................................. 11

Sub-Section I. Requests for information ............................................................... 11 Sub-Section II. The Central Banks Assessment of Compliance of 5

December 2008 ............................................................................. 12 Sub-Section III. The Central Banks Directions of 16 December 2008 .................. 13 Sub-Section IV. The Central Banks Investigation Report ...................................... 13

CHAPTER IV. THE PROCEDURE ....................................................................................... 15

SECTION I. INSTITUTION OF THE PROCEEDINGS .......................................... 15

SECTION II. PROCEDURAL RULES AND AGENDA: MINUTES OF THE FIRST SESSION................................................................................... 16

SECTION III. THE ISSUE OF BIFURCATION ......................................................... 16

SECTION IV. CLAIMANTS REQUESTS FOR PRODUCTION OF DOCUMENTS: PROCEDURAL ORDER OF 9 APRIL 2010 AND DECISION OF 9 JUNE 2010 ............................................................... 17

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SECTION V. RESPONDENTS REQUESTS FOR PRODUCTION OF DOCUMENTS: PROCEDURAL ORDERS OF 23 JUNE AND 5 JULY 2010 ............................................................................................ 18

SECTION VI. EXCHANGE OF WRITTEN PLEADINGS ........................................ 19

SECTION VII. ADJOURNMENT OF THE HEARING ............................................... 19

SECTION VIII. CLAIMANTS ADDITIONAL REQUESTS FOR PRODUCTION OF DOCUMENTS: PROCEDURAL ORDER OF 22 DECEMBER 2010 ....................................................................................................... 20

SECTION IX. RESPONDENTS REQUEST FOR RECONSIDERATION OF THE TRIBUNALS PROCEDURAL ORDER: PROCEDURAL ORDER OF 9 FEBRUARY 2011 ....................................................................... 21

SECTION X. CLAIMANTS FURTHER APPLICATION FOR AN ORDER IN RELATION TO DOCUMENT PRODUCTION: PROCEDURAL ORDER OF 11 APRIL 2011 ................................................................ 21

SECTION XI. THE PARTIES FURTHER APPLICATIONS FOR INCLUSION OF EVIDENCE: DECISION OF 29 JULY 2011, PROCEDURAL ORDER OF 16 AUGUST 2011 AND PROCEDURAL ORDER OF 20 AUGUST 2011 ................................................................................ 21

SECTION XII. THE HEARING .................................................................................... 23

SECTION XIII. POST-HEARING SUBMISSIONS; SUBMISSIONS ON THE JUDICIAL COMMITTEES DECISION IN GCAMINES AND THE COURT OF APPEALS DECISION IN SCB; CLOSURE OF THE PROCEEDINGS .......................................................................... 24

CHAPTER V. JURISDICTION ............................................................................................. 25

SECTION I. CLAIMANTS POSITION ................................................................... 25

Sub-Section I. The Treaty ..................................................................................... 25

I. Investment under Article 1(1) of the Treaty ....................................... 25 II. Territorial nexus with Sri Lanka ......................................................... 26

Sub-Section II. Article 25(1) of the ICSID Convention ......................................... 28

I. Contribution ........................................................................................ 28 II. Duration............................................................................................... 31 III. Risk ..................................................................................................... 32 IV. Contribution to economic development .............................................. 32 V. Expectation of regular profit or return ................................................ 32 VI. There is no Ordinary commercial transaction test ........................... 32 VII. The Hedging Agreement is not a Contingent Liability ................... 34

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Sub-Section III. Is the Hedging Agreement valid? Did CPC have the capacity to enter into it? ................................................................ 35

I. Is Sri Lanka entitled to dispute the validity of the Hedging Agreement? ......................................................................................... 35

(A) Sri Lankas denial of the validity of the Hedging Agreement is unconscionable in light of its involvement and knowledge of CPCs hedging program ................................................................................... 35

1) The hedging program was initiated by Sri Lanka in the national interest ...................................... 35

2) Sri Lanka was kept fully informed of CPCs hedging program ......................................................... 36

3) Sri Lanka took public credit and financial benefits from the Hedging Agreements ...................... 37

4) Sri Lanka intervened only when payments by CPC were required ...................................................... 38

(B) Sri Lanka may not deny the validity of the Hedging Agreement as a matter of international law ............................ 39

1) The alleged illegality is attributable to CPC and not to Deutsche Bank .................................................. 39

2) Sri Lanka may not rely on a breach of domestic law by it is own State entity ........................................ 40

3) Sri Lanka is estopped from denying the validity of the Hedging Agreement .......................................... 40

II. Is the Hedging Agreement void because it was outside CPCs statutory authority?.............................................................................. 40

(A) The Hedging Agreement was both incidental and conducive to CPCs business ............................................... 41

(B) The Hedging Agreement was a real hedge and did not amount to speculation ............................................................. 43

SECTION II. RESPONDENTS POSITION .............................................................. 44

Sub-Section I. The Treaty ..................................................................................... 45

I. Investment under Article 1(1) of the Treaty ....................................... 45 II. Territorial nex