Republic of Kronos-LIST OF AUTHORITIES- TEAM ZOUREK Page iii of xviii LIST OF AUTHORITIES CASES:...

ARBITRATION INSTITUTE OF STOCKHOLM CHAMBER OF

COMMERCE

Claimant:

Fenoscadia Limited

v.

Respondent:

Republic of Kronos

MEMORIAL FOR CLAIMANTS

TEAM ZOUREK

-TABLE OF CONTENTS- TEAM ZOUREK

Page i of xviii

TABLE OF CONTENTS

List of Authorities .................................................................................................................... iii

List of Abbreviations ............................................................................................................. xvii

Statement of Facts ...................................................................................................................... 1

Arguments Advanced................................................................................................................. 4

I. THE TRIBUNAL HAS JURISDICTION OVER CLAIMS SUBMITTED BY

CLAIMANT. ......................................................................................................................... 4

A. Claimant satisfies the test of nationality provided in the BIT i.e. place of

incorporation test. .............................................................................................................. 4

B. Respondents incorrectly try to import alien tests of legal nationality into the BIT. 5

C. Even if the other tests were to be applied, Claimant would be an investor under the

BIT as: ................................................................................................................................ 6

II. CLAIMANT’S CLAIMS ARE ADMISSIBLE BEFORE THE ARBITRAL

TRIBUNAL IN VIEW OF THE LAWSUIT FILED BEFORE THE DOMESTIC COURTS

OF RESPONDENT. .............................................................................................................. 9

A. The Requirement of prior negotiation and consultation has not been fulfilled by

Respondent. ...................................................................................................................... 10

B. The Appeal before the Kronian Federal Court does not constitute choice under the

fork in the road provision. ................................................................................................ 10

C. Claimant’s national proceedings and this arbitration do Not Satisfy the Triple

Identity Test ..................................................................................................................... 11

D. Claimant’s legal recourse to Domestic Court was defensive in nature ................. 14

III. CLAIMANT’S INVESTMENTS WERE INDIRECTLY EXPROPRIATED BY THE

RESPONDENT.................................................................................................................... 15

A. The measures caused significant permanent damage to the Claimant .................. 16

B. The measures frustrated the legitimate expectations of the Claimant ................... 17

C. The measures were not a valid exercise of police powers ..................................... 20

D. Art. 10, General Exception Clause cannot be invoked .......................................... 24

-TABLE OF CONTENTS- TEAM ZOUREK

Page ii of xviii

IV. THE TRIBUNAL HAS NO JURISDICTION TO ADMIT THE RESPONDENT’S

COUNTERCLAIMS............................................................................................................ 26

A. Counterclaims Are Not Within the Scope Of Consent Of Parties. ........................ 26

B. Kronos Environmental Act obligations if any, do not arise from the investment. 29

C. Obligations under the concession agreement are inadmissible in the presence of a

forum selection clause in the agreement. ......................................................................... 31

Prayer for Relief Sought ...................................................................................................... xviii

-LIST OF AUTHORITIES- TEAM ZOUREK

Page iii of xviii

LIST OF AUTHORITIES

CASES:

Cited as Description Footnote No.

ADC ADC Affiliate Limited and ADC & ADMC

Management Limited v. The Republic of Hungary

ICSID Case No. ARB/03/16, Award,

2 October 2006.

12, 19, 124, 127,

129, 137, 138.

Aguas Del Tunari Aguas del Tunari S.A. v. Republic of Bolivia,

ICSID Case No. ARB/02/3, Decision on

Respondent's Objections to Jurisdiction,

21 October 2005.

14, 19, 30, 35

AMCO Asia Amco Asia Corporation, Pan American

Development Ltd. and PT Amco Indonesia v. The

Republic of Indonesia,

ICSID Case No ARB/81/1, Decision on

Jurisdiction,

25 December 1983.

8, 26, 27

AMCO

Asia(resubmitted)

Amco Asia Corporation, Pan American

Development Ltd. and PT Amco Indonesia v. The

Republic of Indonesia,

ICSID Case No ARB/81/1, Decision on

Jurisdiction (resubmitted case),

10 May 1998.

183

AMTO Limited Liability Company AMTO v. Urkaine,

SCC Case No. 080/2005 (ECT), Final Award,

26 March 2008.

177, 186

Armed activities case Case Concerning Armed Activities on The

Territory of Congo, Counter-Claims Order

(Democratic Republic of Congo/ Uganda)

187

Asian Agricultural Asian Agricultural Products Ltd. v. Republic of Sri

Lanka,


27 June 1990.

180

Autopista Autopista Concesionada de Venezuela, C.A. v.

Bolivarian Republic of Venezuela,


Jurisdiction,

27 September 2001.

2, 8, 28, 34

Azurix Azurix Corp. v. Argentina,

ICSID Case No. ARB/01/12, Award

14 July 2006.

109


Page iv of xviii

Azurix Jurisdiction Azurix Corp. v. Argentina,


Jurisdiction,

8 December 2003.

59, 109, 112

B.G. Group BG Group Plc. v. The Republic of Argentina,

UNCITRAL, Final Award,

24 December 2007.

111

Barcelona Traction Barcelona Traction, Light and Power Company,

Limited (Belgium v. Spain)

(New Application: 1962), Judgment (Second

Phase), [1970] I.C.J. Rep. 3, 39.

17

Benvenuti Benvenuti and Bonfant SRL v. the Government of

the People‟s Republic of the Congo


August 8, 1980.

57

Bilcon Bilcon of Delaware et al v. Government of Canada,

PCA Case No. 2009-04, Award on Jurisdiction and

Liability,

17 March 2015.

111

Biloune Biloune and Marine Drive Complex Ltd v. Ghana

Investments Centre and the Government of Ghana,

UNCITRAL, Award on Costs and Damages,

1990.

96

Champion Trading

Company

Champion Trading Co. v. Arab Republic of Egypt,

ICSID Case No. ARN/02/9, Decision on

Jurisdiction,

21 October 2003.

59

CMS Argentina CMS Gas Transmission Company v Argentine

Republic, ICSID Case No. ARB/01/8, Decision on

Objections to Jurisdiction

July 17, 2003.

53, 92, 95

Continental Casualty Continental Casualty Company v. The Argentine

Republic,


5 September 2008.

151

EC — Asbestos Canada v. European Communities,

Appellate Body Report, WTO,

12 March 2001.

154

Enron Jurisdiction Enron Corp. & Ponderosa Assets L.P. v. Argentine

Republic,


Jurisdiction,

14 January 2004.

59,72,81


Page v of xviii

Feldman Marvin Roy Feldman Karpa v. United Mexican

States, ICSID Case No. ARB (AF)/99/1, Award,

16 December 2002.

88

Gavezzi Marco Gavazzi and Stefano Gavazzi v. Romania,

ICSID Case No. Arb/12/25 Decision on

Jurisdiction, Admissibility and Liability,

April 21, 2015.

179

Genin Alex Genin and Others v. Republic of Estonia,


June 25, 2001.

51, 52, 68, 80

Glamis Gold Glamis Gold, Ltd. v. The United States of America,

UNCITRAL, Award,

8 June 2009.

94

Impregilo Impregilo S.p.A. v. Islamic Republic of Pakistan,


Jurisdiction,

22 April 2005.

70, 72

Joy Mining Joy Mining Machinery Limited v. Arab Republic of

Egypt,

ICSID Case No. ARB/03/11, Award on

Jurisdiction,

6 August 2004.

193

Kaiser Bauxite Kaiser Bauxite Company v. Jamaica,


Jurisdiction, July 6, 1975.

8

LETCO Liberian Eastern Timber Corporation v. Republic

of Liberia,


31 March 1986.

135

LG&E Energy LG&E Energy Corp., LG&E Capital Corp., and

LG&E International, Inc .v. Argentine Republic,

ICSID Case No. ARB/02/1, Decision on Liability,

3 October 2006.

95

M.C.I. Power M.C.I. Power Group L.C. and New Turbine, Inc. v.

Republic of Ecuador,


31 July 2007.

49

M.T.D. MTD Equity Sdn. Bhd. and MTD Chile S.A. v.

Republic of Chile,


25 May 2004.

111

Metalclad Metalclad Corporation v. The United Mexican

States, ICSID Case No. ARB (AF)/97/1, Award,

30 August 2000.

88, 96, 110, 147


Page vi of xviii

Metal-Tech Metal-Tech Ltd v. The Republic of Uzbekistan,


04 October 2013.

161

Methanex Methanex Corporation v. United States of America,


3 August 2005.

4,138, 141

Middle East Cement Middle East Cement Shipping and Handling Co.

S.A. v. Arab Republic of Egypt


12 April 2002.

56, 139

Murphy Exploration Murphy Exploration and Production Company

International v. Republic Of Ecuador,

ICSID Case No. ARB/08/4, Award on Jurisdiction,

December 15, 2010.

43

Occidental

Exploration

Occidental Exploration and Production Co. v.


London Court of International Arbitration, Case

No. UN3467, Final Award,

July 1, 2004.

53, 58

Occidental

Exploration

Occidental Exploration and Production Co. v.


London Court of International Arbitration, Case

No. UN3467, Final Award,

July 1, 2004.

53, 60, 67, 68, 88

Olguin Olguín v.Paraguay,

ICSID Case No.ARB/98/5, Decision on

Jurisdiction,

August 8, 2000.

56

Pantechniki Pantechniki S.A. Contractors & Engineers v.

Republic of Albania,


30 July 2009.

71,75,76,77

Paushok Paushok v. Government of Mongolia,

UNICTRAL, Award on Jurisdiction and Liability,

April 28, 2011.

191

Polish Upper Silesia “Certain German Interests in Polish Upper

Silesia(Merits)” ,

Judgment of May, 1926, PCIJ, Series A , No. 7, pg.

29.

165

Pope & Talbot Pope & Talbot Inc. v. The Government of Canada,

UNCITRAL, Interim Award,

26 June 2000.

146


Page vii of xviii

Rompetrol The Rompetrol Group N.V. v. Romania,


Respondent’s Preliminary Objections on

Jurisdiction and Admissibility,

18 April 2008.

12

Ronald S. Lauder Ronald S. Lauder v. Czech Republic,

UNCITRAL Arbitration, Stockholm Chamber of

Commerce Rules, Award,

3 September 2001.

70, 72

Roussalis Spydrion Roussalis v. Republic of Romania,


7 December 2011.

185

Rumeli Telekom Rumeli Telekom A.S. et al. v. Republic of

Kazakhstan, ICSID Case No. ARB/05/16, Award,

29 July 2008.

19

Rusoro Mining Rusoro Mining Ltd. v. Bolivarian Republic of

Venezuela,

ICSID Case No. ARB (AF)/12/5, Award,

22 August 2016.

164

S.D. Myers S.D. Myers, Inc. v. Government of Canada,


30 December 2002.

84, 151

S.D. Myers (Partial) S.D. Myers, Inc. v. Government of Canada,

UNCITRAL, First Partial Award,

13 November 2000.

102

Saluka Saluka Investments B.V. v. The Czech Republic,

UNCITRAL, Partial Award,

17 March 2006.

10, 12, 19

Saluka(counterclaim) Saluka Investments B.V. v. Czech Republic,

UNICTRAL, Decision On Jurisdiction Over Czech

Republic’s Counterclaim,

May 7, 2004.

190

Santa Elena Compafiia del Desarrollo de Santa Elena S.A. v.

Republic of Costa Rica,


17 February 2000.

145, 148, 151

Siag & Vecchi Waguih Elie George Siag and Clorinda Vecchi v.

The Arab Republic of Egypt,


1 June 2009.

139

SOABI Société Ouest Africaine des Bétons Industriels v.

Senegal,


Jurisdiction,

1 August 1984.

2,8


Page viii of xviii

Starett Housing Starrett Housing Corp. v. Iran,

Iran-US Claims Tribunal, 16 IRAN-U.S. C.T.R., at

112 et seq.

88

Suez Suez, Sociedad General de Aguas de Barcelona,

S.A.and Vivendi Universal, S.A. v. Argentine

Republic,


9 April 2015.

85

Suez (DOL) Suez, Sociedad General de Aguas de Barcelona,

S.A.and Vivendi Universal, S.A. v. Argentine

Republic,

ICSID Case No. ARB/03/19, Decisions on

Liability,

30 July 2010.

103

Supervision Supervisión y Control S.A. v. Republic of Costa

Rica,

ICSID Case ARB/12/4, Award,

18 January 2017.

40

Tecmed Técnicas Medioambientales Tecmed, S.A. v. The

United Mexican States,


9 May 2003.

84, 97, 101

Telenor Telenor Mobile Communications A.S. v. The

Republic of Hungary,


13 September 2006.

93

Thunderbird Gaming International Thunderbird Gaming Corporation v.

The United Mexican States,

UNCITRAL, Award,

26 January 2006.

107

Tippets Tippetts, Abbett, McCarthy, Stratton v. TAMS-

AFFA, Iran-US Claims Tribunal, 6 IRAN-U.S.

C.T.R., at 219 et seq.

88, 90

Tokios Tokeles Tokios Tokeles v. Ukraine,


Jurisdiction, 29 April 2004.

11, 17, 20

Total S.A. Total S.A. v. The Argentine Republic,

ICSID Case No. ARB/04/01, Decision on Liability,

27 December 2010.

95

Toto Generali Toto Costruzioni Generali S.p.A. v. Republic of

Lebanon,


Jurisdiction,

11 September 2009.

59, 70


Page ix of xviii

US-Gasoline Bolvarian Republic of Venezuela v. United States

of America,

Appellate Body Report, WTO,

29 April 1996.

154

US-Shrimp India & Ors. v. United States,

Panel Report, WTO,

15 May 1998.

154

Victor Pey Casado Victor Pey Casado and President Allende

Foundation v. Republic of Chile,


13 September 2016.

26

Vivendi I Compañia de Aguas del Aconquija S.A &

Compagnie Générale des Eaux (Vivendi) v.

Argentine Republic,


November 21, 2000.

59

Vivendi II Compañia de Aguas del Aconquija S.A &

Compagnie Générale des Eaux (Vivendi) v.

Argentine Republic,


Annulment,

July 3, 2002.

59, 72,73

Waste Management Waste Management, Inc. v. United Mexican States

("Number 2"),


30 April 2004.

138

Wena Hotels Wena Hotels Ltd. v. Arab Republic of Egypt,


8 December 2002.

84

Wintershall Wintershall Aktiengesellschaft v. Argentine

Republic, ICSID Case No. ARB/04/14, Award,

8 December 2008.

4

Yukos Yukos Universal Limited (Isle of Man) v. The

Russian Federation,

UNCITRAL, PCA Case No. AA 227, Final Award,

18 July 2014.

87

Yukos Yukos Universal Limited (Isle of Man) v. The

Russian Federation,

UNCITRAL, PCA Case No. AA 227, Final Award,

18 July 2014.

11


Page x of xviii

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Brownlie Author: I. Brownlie,

Title: Principles of Public International Law 7th

ed

Year & Publisher: Oxford University Press,

(2008).

120

Dolzer &

Schreuer

Author: Rudolf Dozer and Christoph Schreuer

Title: Principles of International Investment

Law (2nd ed.)


(2012).

2,39, 53

Hege Elisabeth Author: Hege Elisabeth Kjos

Title: “The Scope of the Arbitration Agreement:

Claims and Counterclaims of a National and/or

International Nature” in Applicable Law in

Investor–State Arbitration -The Interplay

Between National and International Law,

Year & Publisher: 1st Edition Oxford University

Press Publication, (2013).

172

Hof & Hoffmann Author: Jacomijn J. van Haersolte-van Hof and

Anne K. Hoffman,

Title:“The Relationship Between International

Tribunals and Domestic Courts,” in Peter

Muchlinksi et al. eds.,

Year & Publisher: The Oxford Handbook of

International Investment Law, (2008).

39, 49

Lalive & Halonen Author: Pierre Lalive & Laura Halonen,

Title: On the Availability of Counterclaims in

Investment Treaty Arbitration” in Alexander J.

Bělohlávek and Naděžda Rozehnalová (eds)

Czech Yearbook of International Law: Rights

of Host States within the System of

International Investment Protection,

Year and Publisher: Juris Publishing Inc, New

York, (2011).

167

Muchlinski Author: D WILLIAMS QC,

Title: ‘Jurisdiction and Admissibility’ in P.

MUCHLINSKI, F. ORTINO, C. SHCREUER

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Investment Law, Oxford,

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Oppenhiem Author: Lauterpacht, Hersch

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Schreuer Author: Schreuer

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5, 8

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Title: Expropriation in Public International Law

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120

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Title: The International Law of Investment

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61

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Gabrielle Kaufmann-

Kohler

Author: Gabrielle Kaufmann-Kohler et al.,

Title: “Consolidation of Proceedings in

Investment Arbitration: How Can Multiple

Proceedings Arising from the Same or Related

Situations Be Handled Efficiently?” 21 ICSID

Review 59, 67 (2006).

38

Alison Author: Alison Dundes Renteln

Title: “Encountering Counterclaims”, Denver

journal of International Law and Policy 15

(1986): 380.

159

Andenæs/Zleptnig Author: Andenæs, M. and Zleptnig, S.,

Title: Proportionality: WTO Law in

Comparative Perspective chapter II section E

part 2.

150

Christoph Schreuer Author: Christoph Schreuer,

Title:“Travelling the BIT Route: Of Waiting

Periods, Umbrella Clauses and Forks in the

Road,” 5 Journal of World Investment and

Trade 231 (2004).

39, 50, 69,79,82

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Title: Parallel proceedings in international

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66


Page xii of xviii

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163, 175

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5

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89, 106, 108

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189

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Saluka Investments B.V. v. Czech Republic, 3

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167

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86

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160, 178


Page xiii of xviii

Kelsey Author: Farmer, Kelsey Brooke

Title: "The best defence is a good offense-

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161

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143

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171

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Title: ‘From Perpetual Respondent to Aspiring

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188

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Title: ‘The Question of Unilateral

Governmental Statements as Applicable Law

in Investment Disputes’ 19 ICSID Review-

FILJ 328, (2004).

108

Salacuse Author: Jeswald W. Salacuse

Title: ‘The Three Laws of International

Investment: National, Contractual, and

International Frameworks for Foreign

Capital’ 383–84, (2013).

166

Schreuer/Kriebaum Author: Schreuer, Christoph, and Ursula

Kriebaum

Title: "At what time must legitimate

expectations exist?." A liber amicorum:

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115


Page xiv of xviii

Staker Author: Christopher Staker

Title: Diplomatic Protection of Private

Business Companies: Determining Corporate

Personality for International Law Purposes,

61 Brit. Y.B. Int’l L. 155 (1991).

5

Wisner/Gallus Author: Robert Wisner, Nick Gallus,

Title: ‘Nationality Requirements in Investor-

State Arbitration’, 5(6) Journal of World

Investment & Trade 927 (December 2004).

1

Theodore Rave Author: Rave, D. Theodore

Title: “POLITICIANS AS FIDUCIARIES.”

Harvard Law Review, vol. 126, no. 3, (2013).

Yackee Author: Jason Webb Yackee

Title: Investment Treaties and Investor

Corruption: An Emerging Defense for Host

States? 52 Va. J. Int’l L. 723, 742, (2012).

166

TREATIES:


Austria-Armenia BIT Agreement between the Government of the

Republic of Austria and the Government of

the Republic of Armenia for the Promotion

and Protection of Investments came into force

on 01/02/2003.

6

Canada-China BIT Agreement Between the Government of

Canada and the Government of the People's

Republic of China for the Promotion and

Reciprocal Protection of Investments came

into force on 1/10/2014.

6

Canada-Jordan BIT Agreement between Canada and the

Hashemite Kingdom of Jordan for the

Promotion and Protection of Investments

came into force on 14/12/2009.

33

Canada-South Africa

BIT

Agreement between the Government of the

Republic of South Africa and the Government

of Canada for the Promotion and Protection of

Investments signed on 27/11/1995.

170

Colombia-

Switzerland BIT

Agreement Between the Republic of

Colombia and the Swiss Confederation on the

Promotion and Reciprocal Protection of

Investments came into force on 6/10/2009.

33

http://www.wernerpubl.com/frame_inves.htm

http://www.wernerpubl.com/frame_inves.htm


Page xv of xviii

ECT Energy Charter Treaty, 1991.

Israel-Japan BIT Agreement between Japan and the State of

Israel for the Liberlization, Promotion and

Protection of Investment came into force on

5/10/2017.

6

Japan-Cambodia BIT Agreement between Japan and The Kingdom

of Cambodia for the Liberlization, Promotion

and Protection of Investment came into force

on 31/07/2008.

6

Malaysia-Ghana BIT Agreement between the Government of the

Republic of Ghana and the Governement of

Malaysia for the Promotion and Protection of

Investments came into force on 18/04/1997.

170

NAFTA North American Free Trade Agreement,

Agreement signed by Canada, Mexico, and

the United States, creating a trilateral trade

bloc in North America came into force on

1/01/1994.

USA-Ecuador BIT Treaty between the United States of America

and the Republic of Ecuador concerning the

Encouragement and Reciprocal Protection of

Investment came into force on 11/05/1994.

42

VCLT Vienna Convention on Law of Treaties,

Conclude at Vienna on 23/05/1969.

MISCELLANEOUS:


UNCTAD Title: Expropriation

Publisher & Year: UNCTAD,

(2011).

85, 87, 93, 95, 121,

123, 128, 130

Genocide Convention Application of The Convention and

Punishments Of Crime Of

Genocide, Counter Claims Order,

Bosnia & Herzegovina/Yugoslavia,

came into force on 12/01/1951.

187

Oxford Oxford Dictionary, 2nd Edition,

Shorter Oxford English Dictionary,

6th ed. 2007, vol.2, p. (2016).

44

SCC Rules Arbitration Rules of the Arbitration

Institute of the Stockholm Chamber

of Commerce, came in force as on

1/01 2017.

https://en.wikipedia.org/wiki/Canada

https://en.wikipedia.org/wiki/Mexico

https://en.wikipedia.org/wiki/United_States

https://en.wikipedia.org/wiki/Trade_bloc

https://en.wikipedia.org/wiki/Trade_bloc

https://en.wikipedia.org/wiki/North_America


Page xvi of xviii

UNCTAD(Consent) Title: ‘Consent to arbitration’

Publisher & Year: UNCTAD,

(2003).

174

UNCTAD(Handbook) Title: ‘International Investment

Agreements Negotiators

Handbook’, Publisher & Year:

UNCTAD (2012).

184

-LIST OF ABBREVIATIONS- TEAM ZOUREK

Page xvii of xviii

LIST OF ABBREVIATIONS

ABBREVIATION MEANING

BIT Bilateral Investment Treaty

ICJ International Court of Justice

ICSID International Centre for Settlement of

Investment Dispute

MFN Most Favoured Nation

PCA Permanent Court of Arbitration

UNCITRAL United Nations Commission on

International Trade Law

UNCTAD United Nations Conference on Trade and

Development

VCLT Vienna Convention on the Law of Treaties,

1969

SCC Stockholm Chamber of Commerce

Article Art.

Pg. Page No.

¶ Paragraph No.

-STATEMENT OF FACTS- TEAM ZOUREK

Page 1 of 32

STATEMENT OF FACTS

1. Fenoscadia Limited herein after ‘Claimant’ is a limited liability company incorporated

under the laws of Ticadia in 1993. It has a worldwide reputation for exploration and

exploitation During incorporation, Claimant had five Ticadian nationals as its

shareholders.

2. On 30 June 1995, the Republic of Ticadia (“Ticadia”) and the Republic of Kronos

hereinafter ‘Respondent’ concluded the Agreement for the Promotion and Reciprocal

Protection of Investments (the “Ticadia-Kronos BIT”).

DISCOVERY, AUCTION AND EXLOITATION OF LINDORO

3. In March 1997, the Kronian Federal University reported that a mineral reserve of a rare

metal had been discovered in the Northern region of Respondent’s territory.

Respondent confirmed the report labelling the mineral resource as a proved ore reserve

of lindoro, a high value rare earth metal.

4. Given that there were no national companies in Kronos with the required expertise to

extract the metal, in November 1998, Respondent invited foreign companies to

participate in public auction for the concession of the rights to extract lindoro. Three

competitors participated in the bidding. All demonstrated nearly identical technical

expertise, but Claimant offered the highest financial return and thus won the public

auction on 20 April 2000.

5. In 1998, 65% of the shares with voting rights of Claimant were acquired by a private

equity fund also organized under the law of Ticadia. On 1 June 2000, concession

agreement in relation to the extraction of lindoro was signed where Claimant was

granted a concession to exploit lindoro for eighty years and had to pay 22% of the

monthly gross revenue. Actual exploitation of lindoro started in August 2008.

6. Claimant effectively was the only company extracting lindoro in Respondent’s territory

ever since its discovery. In 2010, Claimant decided to transfer and concentrate almost

all its mining activities and resources in Kronos and effectively shut down its mining

operations in Ticadia. In 2012, three Kronian nationals acquired the remaining 35% of

Claimant’s shares.

CHANGE IN REGIME AND ENACTMENT OF KEA

7. In October 2014, Mr. Curat Bazings, a candidate of the Nationalist Party with a strong

environmentalist and nationalist political agenda won the Presidential election in

Kronos promising to significantly stimulate, through an incentive-oriented policy, the


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national industry. The Nationalist Party also emerged victorious the general elections

for the Kronian House of Representatives.

8. In March 2015, Mr. Bazings sent to the House a draft bill for regulating environmental-

sensitive activities in Respondent’s territory, including mining. There were oppositions

cited as to bill for being overly restrictive, unduly affecting mining activities in

Respondent’s territory, and negatively impacting the national economy.

9. On 12 June 2015, The House passed the “2015 Kronian Environmental Act” (“KEA”).

KEA was verbatim across the draft bill crafted by Mr. Bazings and mostly based on the

obligations and definitions set forth at the Protocol on Water and Health to the 1992

Convention on the Protection and Use of Transboundary Watercourses and

International Lakes. KEA dictated miners to protect the waters of the regions where the

extraction took place from toxic mine waste and laid down severe penalties from fines

to forfeiture of licences.

10. KEA was passed significantly quicker than the historical average period for the

consideration of draft bills in The House. Respondent’s Government also created the

Ministry for Environmental Matters, in charge of formulating and enforcing

Respondent’s environmental-related policies – including KEA itself. It also had to

supervise the Claimant’s activities.

11. In September 2015, the Ministry for Environmental Matters conducted its first

inspection and the Claimant was found in compliance. In October 2015, the Ministry

for Environmental Matters in Kronos released data indicating that the concentration of

toxic waste found in Respondent’s largest river, the Rhea River, had sharply increased

since 2010. The University was provided with the funds to research further on the report

in November 2015 and on 15 May 2016, it published a comprehensive study concluding

the contamination of the Rhea River as a direct consequence of the exploitation of

lindoro but failed to establish other links.

SANCTIONS

12. On 7 September 2016 the Presidential Decree No. 2424 was issued which prohibited,

with immediate effects, the exploitation of lindoro in all Respondent’s territory,

revoked Claimant’s license, and terminated the Agreement. On 8 September 2016,

Claimant applied to the Kronos federal court seeking to suspend the effects of the

Decree until negotiations with the Government took place. On 22 February 2017, the

Government spokesperson announced that the Decree would not be revoked. Claimant

withdrew its appeal to Kronos’ Circuit Court.


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THE DISPUTE

13. On 27 April 2017, Claimant notified Respondent’s Ministry for Foreign Affairs of the

dispute and of its intention to pursue legal remedies under the BIT if an agreement was

not reached through negotiations and on 10 November 2017, they filed the request for

arbitration before the Arbitration Institute of the Stockholm Chamber of Commerce

regarding expropriation of their investment whereas the Respondents made a

counterclaim for harms caused by activities of Claimants.

-ARGUMENTS ADVANCED- TEAM ZOUREK

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ARGUMENTS ADVANCED

I. THE TRIBUNAL HAS JURISDICTION OVER CLAIMS SUBMITTED BY

CLAIMANT.

1. A fundamental requirement of jurisdiction in all investor state arbitrations is that the

investor, whether an individual or a corporation, be a national of a specific foreign country

to be able to claim the protection of a particular BIT.1 BITs provide for a variety of tests

to determine the nationality of a corporation with the 3 tests being (i) place of incorporation

test (ii) siege social test and (iii) control/substantial business link test.2

2. Claimant argues that its claims are within the scope of the Tribunal’s jurisdiction because

Claimant is an ‘investor’ as per Art. 1(4) of the BIT because (A) Claimant satisfies the test

of nationality provided in the BIT i.e. the place of incorporation test; (B) Respondent

incorrectly tries to import alien tests of legal nationality into the BIT and (C) Even if these

tests were to be applied, Claimant would be an investor under the BIT as (i) Claimant

exerts full control over the enterprise and (ii) Ticadia is a Siege Social of the Claimant.

A. CLAIMANT SATISFIES THE TEST OF NATIONALITY PROVIDED IN THE BIT I.E. PLACE OF

INCORPORATION TEST.

3. Art. 1 of BIT defines an investor of a contracting party as “an enterprise of a Contracting

Party”3 This provision must be interpreted in a manner consistent with Art. 31(1) of the

VCLT4 as be given the ordinary meaning in light of its object and purpose which would

entail that the nationality of a legal person has be identified by its place of incorporation.5

4. Enterprise of a contracting party is identified with the place of its incorporation6 i.e. to

attribute a corporation to the state under the laws of which it has been incorporated and to

which it owes it legal existence.7 In such a scenario tribunals have uniformly adopted the

test of incorporation or seat rather than control when determining the nationality of a

juridical person.”8

1 Wisner/Gallus. 2 Dolzer & Schreuer, pg.49; Autopista, ¶107, SOABI, ¶29. 3 Pg.38, Art. 1, Moot Proposition. 4 Methanex; Wintershall. 5 Schreuer, pg.277; Oppenheim, pg. 859–64; Dinstein; Staker. 6 Canada-China BIT; Austria- Armenia BIT, Japan-Cambodia BIT; Israel-Japan BIT. 7 Oppenhiem. 8 Schreuer, pg. 279-80; Kaiser Bauxite; SOABI; Autopista, ¶108; Amco Asia, ¶396.


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5. The Claimant was a company incorporated in Ticadia in 1993, much before the BIT was

ratified by the states and the discovery of lindoro.9 Therefore, as the Claimant satisfies the

requirements of an ‘investor’ under Art. 1 of the BIT, the claims of the Claimant must be

admissible before this tribunal.

B. RESPONDENTS INCORRECTLY TRY TO IMPORT ALIEN TESTS OF LEGAL NATIONALITY INTO THE

BIT.

6. In cases where the BIT provides for a particular test for determination of nationality the

tribunals have refused to look beyond that. In Saluka v. Czech Republic it was held that

‘The tribunal cannot in effect impose upon the parties a definition of ‘investor other than

that which they themselves agreed… It is not open to the Tribunal to add other

requirements which the parties could themselves have added but which they omitted to

add.’10

7. The tribunals only use the other tests for determination in cases of presence of denial of

benefits clauses in BIT and the absence of a ‘denial of benefits’ further clarifies parties

intention to not import any other meaning to the term.11 In the instant case there is an

absence of the denial of benefits clause which signifies that there was never an intention

of the parties to put the further restrictions on nationality. Therefore, any other tests for the

determination of the nationality shall be an act of imposition of the clause, thus violating

the party autonomy.

8. Further subject to an express provision to the contrary in an investment treaty, a claimant

legal entity having the nationality of a contracting state party need not have substantial

connections with that contracting state party.12

9. In the instant case the BIT provides for the test of incorporation as the test for nationality.

Since the Claimant satisfies this test, being a legally incorporated enterprise of Ticadia it

is not imperative upon it to satisfy the test of substantial business connections i.e. the

control test. Therefore, the Respondent’s assertion of the Claimant fails to meet the

nationality test by failing to meet the requirement of substantial business connections is

misplaced because in absence of an express provision to this effect the Claimant satisfies

the test of nationality even without having to satisfy the control test.

9 Pg. 32, Uncontested Facts, Moot Proposition. 10 Saluka, ¶241. 11 Yukos, ¶90; Tokios Tokeles, ¶36. 12 Saluka, ¶¶240–241; ADC, ¶357; 359; Rompetrol, ¶83.


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C. EVEN IF THE OTHER TESTS WERE TO BE APPLIED, CLAIMANT WOULD BE AN INVESTOR UNDER

THE BIT AS:

i. Claimant exercise full control over the enterprise.

10. The Claimant asserts that in the instant case the control test if satisfied as (i) Ticadians

constitute the majority of Shareholders in the enterprise (ii) There should be no piercing

of corporate veil (ii) Ticadians have delegated and not transferred authority to Kronian

Nationals

(i) Ticadians constitute majority of Shareholders in the enterprise.

11. The international understanding is that control over an entity should be determined in

objectivity by taking into consideration the nationality of shareholders that actually

exercise control over the investment through the holding of equity shares in the company,

and therefore have the necessary voting power to affect the decision-making processes.13

The quality of control does not matter but the legal structure does.14

12. In the instant case 65% of the shares are held by a private equity fund organized under the

law of Ticadia and the rest 35% with three Kronian nationals.15 Thus the objective control

over the investment lies with a Ticadian entity since the appointment of board of directors

who take all major decisions of the entity lay with shareholders of the company where the

majority shareholding is Ticadian.16

(ii) There should be no piercing of the corporate veil

13. The Respondents have relied upon the corporate practices of the Claimant to substantiate

their objection to the nationality of the Claimant. However, any argument delving into the

practices or the structure of private equity of the entity would lead into piercing of the

corporate veil. The Claimant argues that in the instant case the corporate veil cannot be

lifted as suggested by the Respondent because (a) There is no improper purpose (b)

Arguendo even if corporate veil is to be pierced, only single layer can be pierced.

(a) There is no improper purpose in the instant case

13 Muchlinski, pg. 868-932. 14 Aguas del Tunari. 15 Pg. 32, Uncontested Facts, Moot Proposition. 16 Line 350, Pg. 13, Respondents Denial of Claims, Moot Proposition.


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14. The jurisprudence to pierce the corporate veil has been developed in Barcelona Traction

where ICJ held that the veil is lifted, for instance, to prevent the misuse of the privileges

of legal personality, as in certain cases of fraud or malfeasance.17 This was followed by

the Tribunal in Tokios Tokeles v. Ukraine, where it was noted that the corporate veil may

be lifted when “the Claimant used its formal legal nationality for an improper purpose.”18

In Saluka v. Czech Republic, the tribunal similarly observed the need to pierce the veil in

cases of where corporate structures had been utilized to perpetrate fraud or other

malfeasance.”19

15. Improper purpose has been defined as the creation of entity for the purpose of gaining

access to arbitration under the BIT or an attempt to conceal the nationality.20

16. In the instant case there has been no instance of fraud or malfeasance from the side of the

Claimant. They obtained the rights to mine lawfully through a process of auction21 with

respondent fully aware of the Claimant’s operations and structure. The duties and

obligation of both the parties defined in the agreement.22

17. Further the incorporation of the Claimant in Ticadia was done in 199323, two years before

the BIT was even ratified24 and four years before lindoro was discovered in Kronos25.

Therefore, there is no iota of fraud, malfeasance or any case of treaty shopping by the

claimant. In such a scenario allowing the piercing of corporate veil will run contrary to the

established principles of law. Practice of arbitration tribunals has revealed that they have

refrained from lifting the corporate in cases where there is a want of improper purpose.26

(iii) Arguendo, even if the Tribunal pierces the corporate veil, there should be only single layer

pierced.

18. In Amco27, in instances of doubt the tribunals only pierced single layer and refused to

pierce further. It was stated:

17 Barcelona Traction, ¶56. 18 Tokios Tokeles, ¶56. 19 Saluka, ¶230; Aguas del Tunari, ¶245; ADC, ¶358; Rumeli, ¶328. 20 Tokios Tokeles, ¶56. 21 ¶890, Pg. 32, Uncontested Facts, Moot Proposition. 22 Pg. 47, Exhibit 2, Moot Proposition. 23 ¶895, Pg. 32, Uncontested Facts, Moot Proposition. 24 ¶870, Pg. 32, Uncontested Facts, Moot Proposition. 25 ¶880, Pg. 32, Uncontested Facts, Moot Proposition. 26 Victor; AMCO Asia. 27 AMCO Asia.


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“In so doing, it declined to pierce additional layers, adopting the view that the proper

inquiry should focus on the nationality of the foreign legal personality directly controlling

the host state entity rather than the nationality of those entities controlling the foreign

legal entity itself.” The tribunal in Aucoven28 had an identical ruling.

19. Upon piercing, the equity structure of the Claimant will be 65% shares with voting rights

with a private equity fund also organized under the law of Ticadia and the remaining 35%

of the shares with Kronian nationals. The tribunal should not pierce any additional layer

of the veil.

20. The relationship between an individual or legal entity (the claimant) and its investment

(property or assets) pertaining to the control is a question of law.29 But the claims of the

respondent are that about their nationals controlling the enterprise is an internal board room

situation of a company is a pure question of fact. It is a result of strategic planning of the

claimant since the mining operations are in Kronos. The respondents have agreed that

private equity fund from Ticadia holds the majority of voting shares but has delegated the

business judgement.30 As lawfully, its Ticadian private entity controlling 65% of the

company.

21. The board of governor meetings of the enterprise takes place in Ticadia and the CEO of

the enterprise is a resident of Ticadia.31 In the present case, the claimant is incorporated

under the laws of Ticadia with majority shareholding of the Ticadian natioality. The

majority shareholders of the claimant are a private equity fund organized in Ticadia.32

Thus, the objective control over the investment lies with a Ticadian entity enabling

claimant to be the investor under BIT. The legal control of appointment of board of

directors is still with the Ticadian’s and therefore effective control still lies with Ticadia.

ii. Ticadia is a Seige Social of the Claimant.

22. Siege social or the real seat has been determined by reference to the place where the

company has its effective head office, i.e. where its management is located or the place

from where it is managed. Usually this is the place where the company's management

28 Autopista. 29 Aguas Del Tunari, ¶264. 30 ¶350, Pg. 13, Denial of All Claims, Moot Proposition. 31 Pg. 34, Uncontested Facts, Moot Proposition. 32 Line 895, Pg. 32, Uncontested Facts, Moot Proposition.


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convenes and takes decisions.33 Further, the tribunal in Aucoven34 and Aguas35 founded

compliance of tax obligations as an effective business link to the state of incorporation.

23. Since the board of governor meetings take place in Ticadia, it is the seat or the place where

company’s management convenes and takes decisions.36 Kronos is merely the location of

technical execution. Further, the Claimant fulfills the tax obligations of Ticadia.37

Therefore, the siege social lies in Ticadia and not in Kronos thereby implying that the

claimant are investors under the BIT.

II. CLAIMANT’S CLAIMS ARE ADMISSIBLE BEFORE THE ARBITRAL TRIBUNAL

IN VIEW OF THE LAWSUIT FILED BEFORE THE DOMESTIC COURTS OF

RESPONDENT.

24. Fork in the road clause in a treaty requires to make an irrevocable choice of forum.38 The

ordinary meaning ascribed to fork in the road provisions is one of an irrevocable choice

between domestic remedies and international arbitration; as it limits the investor’s choices

among arbitral venues.39 This provision implies that once one of the routes is selected, the

possibility of choosing the other is excluded.40 Art. 11(2)41 of the BIT provides for the fork

in the road provision.

25. Respondent argues that by virtue of the fork-in-the-road provision in Art. 11 of the BIT,

this instant claim is inadmissible on the grounds that the same claims had been made before

the Federal Court. However Claimant will demonstrate that fork in the road provision has

not been triggered as-: A) The Requirement of prior negotiation and consultation has not

been fulfilled by Respondent; B) The Appeal before the Kronian Federal Court does not

constitute choice under the fork in the road provision; C) Claimant’s national proceedings

and this arbitration do Not Satisfy the Triple Identity Test; D) Claimant’s legal recourse

to Domestic Court was defensive in nature.

33 Colombia-Switzerland BIT; Canada-Jordan BIT. 34 Autopista, ¶¶123-26. 35 Aguas del Tunari, ¶¶321–22. 36 Pg. 33, Uncontested Facts, Moot Proposition. 37 Pg. 56, Procedural Order 2, Moot Proposition. 38 Gabrielle Kaufmann-Kohler. 39 Dolzer & Schreuer; Christoph Schreuer; Hof & Hoffman. 40 Supervisión, ¶294. 41 Pg. 44, Art. 11, Moot Proposition.


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A. THE REQUIREMENT OF PRIOR NEGOTIATION AND CONSULTATION HAS NOT BEEN FULFILLED

BY RESPONDENT.

26. Art. 6 of the US Ecuador BIT42 incorporates the dispute resolution clause similar to our

BIT and provides for the prior negotiation and consultation requirement before submission

of the dispute. The requirement of six months period for prior consultation and negotiation

before the submission of the investment dispute is a mandatory requirement under the

BIT.43 The word “should’’ means an obligation or a duty.44

27. In the present case Art. 11.245 provides for a pre-condition of consultation and negotiation

before submission of the investment dispute. The use of word “should” read with parties

under clause of Art. 11.2 implies that the host state is under an obligation to engage in the

negotiations and consultations. Claimant filed appeal only to sustain its contractual

obligation and constantly tried to engage in negotiation with Respondent.46 Also appeal

was withdrawn as government spokesperson refused to negotiate and told that decree will

not be revoked.47 Further Respondent again declined to negotiate on 27th April when the

Claimant notified its intention to pursue arbitration.48 Therefore it is submitted that no

effective choice has been made by Claimant as Respondent has not fulfilled the negotiation

requirement.

B. THE APPEAL BEFORE THE KRONIAN FEDERAL COURT DOES NOT CONSTITUTE CHOICE UNDER

THE FORK IN THE ROAD PROVISION.

28. The ‘fork-in-the-road’ rule refers to an option, expressed as a right to choose irrevocably

between different jurisdictional systems and once the choice has been made there is no

possibility of resorting to any other option.49 Not every appearance before a court or

tribunal of the host State will constitute a choice under a fork in the road provision.50. In

Genin v. Estonia,51 the tribunal held that the domestic proceedings is not a bar to tribunal’s

jurisdiction, if it cannot be litigated elsewhere.52

42 USA- Ecuador BIT. 43 Murphy Exploration, ¶130. 44 Oxford. 45 Pg. 44, Art. 11, Moot Proposition. 46 Pg. 36, Uncontested Facts, Moot Proposition. 47 Pg. 36, Uncontested Facts, Moot Proposition. 48 Pg. 36, Uncontested Facts, Moot Proposition. 49 M.C.I. Power, ¶181; Hof & Hoffman. 50 Christoph Schreuer, ¶¶231-256, p. 241. 51 Genin. 52 Genin, ¶332.


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29. Consequently, to bar the tribunal from exercising jurisdiction based on the presentation of

a national claim when the cause of action in both the proceedings is different forces an

erred finding of choice under the BIT’s provision on Investor-State dispute settlement.53

30. Art. 11 (2) and Art. 11(3) provides for the fork in the road mechanism in the BIT.54 In the

present case the Claimant’s appeal does not constitute choice as the dispute has not been

submitted to the domestic court. Further, Art. 11(3) provides that if the dispute has not

been submitted under options (a) and (b) of Art. 11(2) then the investor can submit the

dispute for resolution to the arbitration tribunal. The Appeal was made against the

presidential decree and its unconstitutionality55 as domestic Courts of Kronos had the

exclusive jurisdiction on the matter. Therefore, it is submitted that the Claimant’s appeal

before the domestic court was the only resort available; it cannot constitute the choice

under the fork in the road provision for the investment dispute and not a bar to jurisdiction

of tribunal.

C. CLAIMANT’S NATIONAL PROCEEDINGS AND THIS ARBITRATION DO NOT SATISFY THE TRIPLE

IDENTITY TEST

31. A number of arbitral tribunals have decided that in order for the fork in the road to be

triggered, there must be an identity of the dispute pending before a national court and the

arbitral tribunal.56The triple identity test was established to assess whether the disputes are

identical.57 If a dispute involves the same parties, same object and same cause of action, it

is considered as the same dispute, and the fork-in-the-road clause would preclude its

submission to international arbitration tribunals.58 Further while applying the triple

identity rule, failure to comply with even one of the requirements is given as a reason to

disallow fork-in-the road preclusion.59

32. In the present case, this Tribunal should rule against fork-in-the-road, given that two of

these identities are not satisfied. Claimant’s lawsuit before Kronian court and this

arbitration do not share an identity of (i) objects and (ii) cause of action.

53 Occidental Exploration, ¶53; CMS Argentine, ¶80; Dolzer & Schreuer, Pg. 216. 54 Pg. 44, Art. 11, Moot Proposition. 55 ¶3, Pg. 56, Procedural Order 2, Moot Proposition. 56 Olguín, ¶30; Middle East Cement, ¶70. 57 Benvenuti, ¶1.14. 58 Occidental Exploration, ¶52. 59 Vivendi I, ¶53; Vivendi II, ¶55; Azurix Jurisdiction, ¶88; Enron Jurisdiction, ¶97; Champion Trading Company,

¶3.4.3; Toto Generali , ¶211.


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i. Identity of Object

33. Identity of object denotes the relief sought from a claim and to the extent that the national

and international disputes involve the same “object” or “relief”, the fork-in-the-road

mechanism would preclude its submission to concurrent tribunals.60 However the fork-in-

the-road provision cannot prevent an investor from bringing a treaty claim in respect of a

grievance unrelated to a different grievance that was previously submitted to a domestic

court, even if it relates to the same investment.61

34. In present case the object of the court proceedings before the Kronos Federal Court differs

from the object of the present proceedings. Claimant’s proceedings before Kronos Federal

Court were commenced with the purpose of suspending the effects of Presidential Decree62

and unconstitutionality of the decree63; such proceedings do not contemplate any order for

compensation.64 Whereas the relief sought before this tribunal is the declaration of

Respondent’s liability arising from breach of the BIT and consequent compensation.65

While the object behind the domestic suit was clearly for continuation of business, the

object of the current proceedings is the relief of compensation due to breach of treaty

obligations by the Respondent with no further intent of continuing business. Since the

reliefs sought in both the proceedings are different it can be concluded that there is not

identity of objects.

ii. Identity of Causes of Action

35. Cause of action concerns the grounds or set of facts alleged that constitute the basis of the

claim.66 The facts alleged to constitute a legal breach must be identical in both suits.67

There is no fork in the road clause preclusion when the causes of action are not identical.68

The doctrine of international investment law states that: If the claim before international

tribunal alleges a breach of the BIT, and the dispute before domestic courts concerns a

60 Occidental Exploration, ¶52. 61 Zachary Douglas, p. 155, ¶324. 62 ¶25, Pg. 36, Uncontested Facts, Moot Proposition. 63 ¶3, Pg. 56, Procedural Order 2, Moot Proposition. 64 Pg. 59, Procedural Order 3, Moot Proposition. 65 Pg. 8, Request for Arbitration, Moot Proposition. 66Cremades/Madalen, p. 509. 67Occidental Exploration, ¶58. 68 Genin, ¶¶331-332; Occidental Exploration, ¶52.


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different claim, such as an appeal against a decision by a regulatory authority, the fork in

the road provision will not be applied.69

36. The identity of cause of action is determined by two approaches (i) the approach of

differentiation between treaty and contractual cause of action70 and (ii) The test of

fundamental basis of claims.71 The Claimant submits that cause of actions is different in

both the proceedings as both the criterion are satisfied.

(i) The approach of differentiation between treaty and contractual cause of action.

37. In Vivendi v. Argentina the Committee established that the treaty cause of action is not

same as a contractual cause of action and established that contract and treaty claims can

be distinguished on the fundamental basis of the claim. 72 In the case of treaty claims the

basis is a treaty, whereas in the case of a contract claim, it is the proper law of the

contract.73

38. In the present case, the cause of action in national proceeding is different from the cause

of action in the international arbitration proceedings. The cause of action for Claimant’s

Court proceedings before the Kronos Federal Court is the Presidential Decree which

revoked Claimant’s license and terminated the Agreement74, and this is the contractual

cause of action. The Dispute submitted to SCC arbitration, on the other hand, is essentially

based on Respondent’s violation of its treaty obligations, which is a treaty cause of action.

Thus, the cause of action is different in both the cases.

(ii) The test of fundamental basis of claims.

39. In Pantechniki,75 the tribunal determined that the relevant test to determine the identity of

cause of action is whether the “fundamental basis of a claim sought to be before the inter

forum is autonomous of claims to be heard elsewhere.”76 The Tribunal further established

that what is “necessary is to determine whether claimed entitlements have the same

69 Christoph Schreuer, Pg. 248. 70 Impregilo, ¶210; Toto Generali, ¶¶208- 211; Ronald S. Lauder, ¶¶162-163. 71 Pantechniki, ¶61. 72 Vivendi II, ¶113; Enron Jurisdiction, ¶89;94; Impregilo, ¶210; Ronald S. Lauder, ¶¶162-163. 73 Vivendi II, ¶98; 101. 74 ¶ 23, Pg. 36, Uncontested Facts, Moot Proposition. 75 Pantechniki. 76 Pantechniki, ¶61.


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normative source” and “whether a claim truly does have an autonomous existence outside

the contract.”77

40. In the present case, the claims before the Kronos Federal Court and ones raised in this

tribunal have a different fundamental basis. The claimed entitlements in the proceedings

before the Kronos Federal Court are rooted in the fact that Claimant’s license has been

revoked and Agreement terminated.78 On the other hand, the fundamental basis of the

claims before this Tribunal is a treaty laying down independent standards by which the

conduct of the parties is to be judged. Consequently, it is submitted that the fundamental

basis of the claims before this tribunal has an autonomous existence outside the contract.

Thus, it is concluded that two criteria of the triple identity test are not fulfilled and therefore

the fork-in-the-road preclusion has not been triggered.

D. CLAIMANT’S LEGAL RECOURSE TO DOMESTIC COURT WAS DEFENSIVE IN NATURE

41. Defensive steps to contest administrative action cannot tantamount to submitting “the

dispute” to the courts or administrative tribunals of the host State.79 Tribunals have

considered whether the actions of the claimant, in the domestic setting, were affirmative

or reactive.80 In Enron v. Argentina81, the tribunal noted that the locally incorporated

entity’s actions were defensive, in opposition of tax measures imposed upon it, and no fork

in the road provision had been triggered.

42. Claimant argues that legal actions, particularly defensive action taken by a locally

incorporated company, in order to resist executive actions of the host State, do not trigger

the fork in the road provision, as it does not amount to submitting a dispute to an

adjudication on merits and hence cannot be equated with submission of the dispute to

courts or administrative tribunals of the host State.82

43. Claimant instituted proceedings before the Kronian courts seeking a suspension of the

presidential decree and approached the courts only as a resistive measure. Furthermore,

Claimant approached the Kronian Federal Court only to resist the effects of decree for the

breach of its obligations under the concession agreement. As Claimant took recourse to

77 Pantechniki, ¶61. 78 ¶23, Pg. 36, Uncontested Facts, Moot Proposition. 79 Christoph Schreuer, Pg. 249. 80 Genin, ¶332. 81 Enron Jurisdiction, ¶¶95-98. 82 Christoph Schreuer, Pg.21, ¶¶231-256.


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the Kronian courts only to resist the actions of Respondent, it does not trigger the fork in

the road provision.

III. CLAIMANT’S INVESTMENTS WERE INDIRECTLY EXPROPRIATED BY THE

RESPONDENT.

44. The enactment of Presidential Decree No. 2424, its implementation and other related acts

of Respondent amount to indirect expropriation of Claimant’s investments. The said acts

violate Art.7 of the Ticadia- Kronos BIT which provides as follows –

‘Neither Contracting Party shall nationalize or expropriate a covered

investment either directly or indirectly through measures having an effect

equivalent to nationalization or expropriation except for a public purpose,

in accordance with due process of law, in a non-discriminatory manner

and on payment of due compensation.’83

45. Expropriation is a forcible taking by a state of tangible or intangible property owned by

private persons.84 Indirect expropriation refers to situations in which host states invoke

their legislative and regulatory powers to enact measures that reduce the benefits investors

derive from their investments without actually changing or cancelling investors’ legal title

to their assets or diminishing their control over them.85

46. While there exists no mechanical formula for determination of a measure as indirect

expropriation86 , numerous tribunals have relied on the 3-criterion test for determination

of indirect expropriation87. This test involves an assessment of (a) a degree/ intensity of

harm to investment of investor (b) degree of interference with legitimate expectations of

the investor and (c) character of government measure.

47. The Claimant asserts that the regulatory measures taken by the Respondent are tantamount

to expropriation as the said measures cause significant, permanent damage to the Claimant

(i), frustated the legitimate expectations of the Claimant (ii) and are not a valid exercise of

police power (iii)

83 Pg. 42, Art. 7, Moot Proposition. 84 Tecmed, ¶ 161, S.D. Myers, ¶280, Wena Hotels. 85 Suez v Argentina; Salacuse pg. 325, UNCTAD, pg. 7. 86 Gibson, pg, 378; Horn, pg. 145-146. 87 Yukos; UNCTAD, pg. 63.


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A. THE MEASURES CAUSED SIGNIFICANT PERMANENT DAMAGE TO THE CLAIMANT

48. Several tribunals have held that the effect of the governmental measures upon the

investment is the most crucial factor to be assessed while distinguishing indirect

expropriation from a regulatory taking.88 Tribunals have gone to the extent of treating

adverse effects as the ‘sole factor’ in determining whether or not a taking has occurred89

explicitly rejecting all other conceivable criteria before concluding that the damage

suffered by the investor alone was relevant.90The Ticadia- Kronos BIT incorporates this

requirement by usage of the phrase ‘measures having an effect equivalent to

nationalization or expropriation’91

49. The crucial moment when a governmental regulation becomes an expropriation is when

substantial deprivation takes place even if for the public benefit of the host state.92In

considering whether a deprivation has occurred the factors to be taken into account are (a)

whether the measure has resulted in total or near-total destruction of the investment’s

economic value and whether the effects of the measure are permanent.93

i. The measure resulted in substantial economic loss to the Claimant

50. The first factor in any expropriation analysis is that the complained measures caused

sufficient economic impact to the Claimant’s investment.94 It is required that the negative

economic impact of the measures has been such as to deprive the investment of all or

substantially all its value.95 Deprivation of reasonably- to-be –expected benefit of the

investment constitutes significant deprivation.96 Revocation of licenses has also been held

as an instance of substantial deprivation to the investor.97

51. The Claimant asserts that the measures taken by the Respondents caused substantial

deprivation in the value of its investments. All of the Claimant’s activities in Respondent’s

territory were strictly connected to the exploitation of lindoro.98 Issuance of Presidential

Decree No. 2424 by the Respondent resulted in claimant’s licenses being revoked, the

88 Metalclad; Tecmed, ¶121 ; Strarret Housing; Occidental Exploration; Tippets, ¶77 ; Feldman. 89 Dolzer, pg. 65; Newcombe, pg. 392. 90 Tippetts pg. 225-226 91 Pg. 42, Art. 7, Moot Proposition. 92 CMS Argentina ¶262. 93 UNCTAD, pg.65; Telenor, ¶70. 94 Glamis Gold, ¶536. 95 Total S.A., ¶196; UNCTAD, pg. 65; LG&E, ¶191, CMS Argentina, ¶262. 96 Metalclad, ¶104, Biloune, ¶300. 97 Tecmed, ¶151. 98 Pg. 5, Moot Proposition.


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Concession Agreement being terminated rendering the claimant’s investment useless.99

Further due to the sudden cessation of revenues from its sole activity, the Claimant has

been forced to shut down its state of art facilities and has not been able to honor its

contractual obligations with purchasers and suppliers, accumulating significant losses over

the period.100

ii. The measure was permanent and irreversible in nature

52. In order to constitute an expropriation, the measure should be definitive and permanent.

As noted by Tecmed v. Mexico tribunal, ‘it is understood that the measures adopted by the

state, whether regulatory or not are an indirect de facto expropriation if they are irreversible

and permanent’.101

53. Where the measure is temporary in its effect the tribunals have dismissed claims for

expropriation as is evinced by the reasoning of the tribunals in SD Myers v. Canada102 and

Suez v. Argentina.103

54. The Claimant contends that measures taken by the Respondent are permanent and

irreversible in nature. The licenses and contracts with the government have been

irrevocably terminated.104 Moreover the KEA makes no mention to the possibility or

conditions under which the revoked licenses could be re-issued to sanctioned operators105

making the measure irreversible.

B. THE MEASURES FRUSTRATED THE LEGITIMATE EXPECTATIONS OF THE CLAIMANT

55. The issue of legitimate expectations which plays a key role in the interpretation of fair and

equitable expectations has also found entry into the law governing indirect

expropriations.106In Thunderbird v. Mexico the tribunal gave a general definition of

legitimate expectations, ‘The concept of legitimate expectations relates to a situation

where a Contracting Party’s conduct creates reasonable and justifiable expectations on the

99 Pg. 36, Uncontested Facts, Moot Proposition. 100 Pg. 7, Moot Proposition. 101 Tecmed, ¶116. 102 SD Myers, ¶¶287-288. 103 Suez, ¶129. 104 Pg. 52, Exhibit 5, Moot Proposition. 105 Pg. 57, Procedural Order No. 2, Moot Proposition. 106 Dolzer, pg.104.


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part of an investor to act in reliance on said conduct, such that a failure by the other party

to honor those expectations could cause investor to suffer damages’107.

56. The investor’s legitimate expectations can be based on the legal framework and on any

undertakings and representations made explicitly or implicitly by the host state which

could consist of legislations, treaties, assurances contained in decrees, licenses, similar

executive assurances as well as contractual undertakings.108 The Claimant contends that in

the present case there has been a violation of legitimate expectations of the Claimant on 2

counts (i) Repeated political assurances by the Respondent’s government and (ii) the

finding of compliance of the Claimant with its environmental obligations in the inspection

carried out post-KEA, both of which created legitimate expectations in the minds of the

Claimant which were later breached by expropriation of its investment.

i. Repeated political assurances by the Respondent’s government

57. The international understanding is that legitimate expectations may be created not only by

explicit undertakings on the part of the host state in contracts but also by undertakings of

a general kind.109 Representations by government officials have been identified as a basis

for creating legitimate expectations.110 Statements issued by politicians on varying

contexts and general investing-encouraging policy directed towards investor have been

invoked as basis of legitimate expectations.111Tribunals have held that implicit assurances,

coupled with the investor’s assumptions would be sufficient for an analysis regarding an

alleged violation of legitimate expectations.112

58. In the present case repeated assurances were given by the Respondent government through

Presidential statements that the Claimant’s investment was welcome and that a lack of

regulatory framework for mining activities was not a risk for the Claimant’s activities113

These statements not only applauded the Claimant for its contribution to the economy of

Kronos but also alluded to the fact that the activities of Claimant were “transforming the

quality of life of the local communities surrounding the Claimant’s activities”.114 The

Respondent’s assertion that since 2011 they were aware of the significant potential of

107 Thunderbird Gaming. 108 Dolzer; Reisman/Arsanjani. 109 Azurix Jurisdiction, ¶¶316-322. 110 Metalclad, ¶107 111 BG Group, ¶300; MTD v. Chile, ¶¶63; 125; 155-157, Bilcon, ¶471. 112 Azurix Jurisdiction, ¶¶316-322. 113 Pg. 5; Pg. 49, Exhibit No. 3, Moot Proposition. 114 Pg. 49, Exhibit No.3, Moot Proposition.


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Claimant’s activities to cause environmental damage is misleading in the light of the fact

that as late as 2013 the statement made during the Presidential annual address held the

Claimant’s activities for being in line with sustainability.

59. Such repeated political assurances left Claimant with no reason to foresee that its activities

would be banned.

ii. Finding of Compliance of Claimant with its environmental obligations post-KEA

60. Several scholars have opined that “Investment is a complex process …. it is necessary to

identify the diverse transactions that constitute the investment and to examine whether

they are based on contemporary legitimate expectations. In cases where specific

assurances are given after the inception and the investor adapted its subsequent investment

decisions accordingly, the assurances create expectations which deserve protection”.115

61. In the present case, at the time the Claimant entered into Respondent’s territory there was

an absence of any regulatory framework for mining industry and a comprehensive

environmental regulation. Consequently, the concession agreement formed the regulatory

basis of Claimant’s activities.116 By virtue of the Concession Agreement, the Claimant was

granted a concession to exploit lindoro in the site for eighty years. Inter alia Art.2.2.2 of

the Agreement provided that “Every two years … agents from the Ministry of

Environmental Matters shall inspect the activities at the Site and related disposal activities.

Should the inspection result in the approval of the activities undertaken the Ministry of

Environmental matters shall issue a certificate valid for another 2 years”.117 Further

Art.2.2.1 provided that the Concession Agreement would be modified in the light of new

laws which would be considered as automatic amendments to the Agreement.118

62. The KEA was passed on 12 June, 2015, whereas the last inspection was carried out by the

Respondent in September, 2015 wherein the Claimant like all former inspections was

found in full compliance with its environment-related obligations.119 Given that the

Claimant was found be complaint in the last inspection carried out in September 2015,

post passing of KEA in June, 2015 when any additional obligations created by the KEA

would have formed a part of the Concession Agreement as amendments left the Claimant

with no reason to foresee that that its activities would be banned on grounds of non-

115 Schreuer/ Kriebaum, pg.6. 116 Pg. 33, Uncontested facts, Moot Proposition. 117 Pg. 48, Exhibit 2, Moot Proposition. 118 Pg. 47, Exhibit 2, Moot Proposition. 119 Pg. 35, Uncontested facts, Moot Proposition.


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compliance. Therefore, the measures taken by the Respondent frustrated the legitimate

expectations of the Claimant.

C. THE MEASURES WERE NOT A VALID EXERCISE OF POLICE POWERS

63. The doctrine of police powers entails that certain acts of States such as forfeiture or fine

to punish or suppress crime, legislation restricting the use of property, including planning,

environment, safety, health among other things, are not subject to compensation under

international law of expropriation.120 However the exercise of police power by a state is

not unfettered as a valid exercise of police power would require the measure to be bona

fide and well within the regulatory power of the state i.e. public purpose, non-

discrimination and due process serve as conditions for the legality of expropriation.121

64. The Claimant argues that the measures taken by the Respondent do not amount to valid

exercise of its police powers as (i) the requirements of Art.7 of the BIT are not met and

(ii) Art. 10 i.e. the General Exceptions clause cannot be invoked.

i. Requirements of Art.7 of the BIT are not met

65. Art. 7 of the BIT gives effect to this wherein it identifies measures having ‘effect

equivalent to nationalization or expropriation as indirect expropriation except when such

measures are for a public purpose, in accordance with due process of law, applied in a non-

discriminatory manner with payment of due compensation’. 122. In the instant case the

requirements of Art. 7 are not met as the measures (i) were not taken for a public purpose,

(ii) were discriminatory (iii) violate due process norms and (iv) there is no payment of due

compensation

(i) No public purpose

66. The requirement of public purpose entails that ‘the taking of property must be motivated

by the pursuance of a legitimate welfare objective as opposed to a purely private gain or

illicit end.123 It has been held that it is not enough to merely state that an expropriation is

motivated by public purpose.

120 Brownlie, 2008, pg. 532; Wortley, pg. 39. 121 UNCTAD, pg. 95. 122 Pg 42, Art. 7, Moot Proposition. 123 UNCTAD, pg. 29.


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67. In ADC v. Hungary the tribunal held that ‘a treaty requirement for public purpose requires

some genuine interest of the public… if mere reference can magically put such interest

into existence then requirement would be rendered meaningless since the tribunal cannot

imagine any situation where it would not be met.’124

68. In the instant case the Respondent’s state the measures taken against the Claimant

including Presidential Decree 2424 aim exclusively at preserving human life and health in

Respondent’s territory against Claimant’s intolerable activity.125 The Respondent’s offer

permitting the Claimant to re-instate the exploitation of lindoro with mere

acknowledgment of responsibility126clearly indicates that the ban was devoid of any

genuine public purpose.

(ii) Discriminatory

69. In order for a discrimination to exist, particularly in an expropriation scenario, there must

be different treatments to different parties.127 While it primarily concerns nationality-based

differentiation but it also seems to cover racial, ethinic and other types of discrimination

prohibited under international law. A non-discriminatory regulation enforced in a

discriminatory manner will also fit the descripition. 128

70. The position that the claimants were not in a position to raise any claims of being treated

discriminately as they were the only foreign parties affected by the measure was found to

be incorrect by the tribunal in the case of ADC v. Hungary.129 Infact where a formally non-

discriminatory regulation has been designed in a way to cover only certain investor or

investors, other indicators need to be examined whether the measure is bona fide or not.130

71. In the present case the Claimant maintains that the measures undertaken by the government

are discriminatory. The Respondent claims that the measures taken by it were pursuant to

the findings of the ‘Study’ conducted by the Krononian Federal University . The very

manner in which the study was conducted and its findings are indicative of bias. The

exploitation of lindoro is not the only mining industry in the

124 ADC, ¶432. 125 Pg. 16, Denial of Claims, Moot Proposition. 126 Pg. 59, Procedural Order No.3, Moot Proposition. 127 ADC, ¶442. 128 UNCTAD, pg. 96. 129 ADC, ¶443. 130 UNCTAD, pg. 96.


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72. Respondent’s territory and the findings of graspel which caused concern to the Respondent

is not exclusively found in lindoro mine tails.131 Neither is the Claimant the only enterprise

making use of open pit mining technique.132 Inspite of these considerations the ‘study’ was

limited to the activities of the Claimant and without studying other industries, found it

solely responsible for the rise in pollution in the Rhea River.133

73. In addition to this the fiercly protectionist attitude of the Respodent’s government as

evinced by their statements and practice of targetting the Claimant strengthens the claim

that the Decree was a targetted meaure.134

74. Situations where areas of concession taken away from the expropriated invetsment were

granted to other foreign-owned companies run by people who were ‘good friends of the

authorities have been held as discriminatory takings.135 Another fact that creates doubts

over the non-discriminatory nature of the measures taken by the Respondent is the news

that the exploitation of lindoro presently banned would be restarted by a new company

resluting in a joint-venture between the Kronian state-owned company and an enterprise

from Republic of Ibi , whose government has been known to be linked to the Kronian

Nationalist party due to their ideological affinities.136 Therefore it can be said that the

meaures undertaken by the Repsondents are discriminatory in nature.

(iii) Violation of due process norms

75. The most comprehensive understsnding of due process requirments in context of

expropriation comes from the case of ADC v. Hungary wherein the tribunal stated that due

process of law demands an actual and substantive legal procedure for foreign investor to

raise claims against action taken by the state. Some basic legal mechanisms such as a

reasonable advance notice, a fair hearing and unbaised and impartial adjudicator are

expected to be provided to make the legal procedure meaningful. In general the legal

procedure must be of a nature to grant an affected investor a reasonable chance within a

reasonable time to claim its legtimate rights and have its claims heard. 137

131 Pg. 56, Procedural Order No. 2, Moot Proposition. 132 Pg. 59, Procedural Order No.3, Moot Proposition. 133 Pg. 50, Exhibit 4, Moot Proposition. 134 Pg. 53, Exhibit No. 6, Moot Proposition. 135 LETCO. 136 Pg. 54, Exhibit No. 7, Moot Proposition. 137 ADC, ¶435.


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76. The arbitral tribunals have determined due process of law to consist of three essential

elements : (1) reasonable access to legislative information, (2) fair opportunity to review

and (3) formal notice in advance of expropriation. 138 Instances where the Claimants

received no advance notice of expropriation and were not afforded the opportunity until

after the fact to be heard on the matter have been held to violate due process of law and

have amounted to procedural abuse.139

77. In the present case the Respondent has violated due process of law as they did not provide

the Claimant with a reaonable advance notice of expropriation. Art. 5 of the Decree giving

effect to the ban states that it would come into force five days after its publication140, a

time frame highly insufficient for the Claimant to respond or comply with the measure.

78. Depending on the context there might be other indicators of due process. For example in

Methanex v. USA , while assesing whether the scientific report relied upon had complied

with due process requirements the tribunal noted that since the report was subject to public

hearings , testimony and peer review it was an example of a serious scientific work

emerging from open and informed debate and not a product of political sham.141

79. This observation is particularly pertinent in the instant case as there are several indicators

to show that the report did not comply with due process requirments . The study was

entirely state funded and only after four months of its publication a time period clearly

insufficient to analyze the Study the Respondent acted upon it. The Claimants were given

no opportunity to produce evidence contradicting the study prior to the issuance of the

Decree. 142

(iv) No payment of compensation

80. Payment of compensation is a condition for lawfulness of an expropriation.143 Art. 7 of the

BIT, while listing conditions for lawful expropriation identifies payment of compensation

due as per fair market value as one of the conditions for lawful expropriation.144

81. When a state effects a total or substantial deprivation, compensation must be paid even if

compelling public intrests had justified adopting the measure at stake as has been held in

138 ADC, ¶¶376; 443-56; Waste Management; Methanex. 139 Middle East Cement, ¶143, Siag &Vecchi, ¶441. 140 Pg. 52, Exhibit 5, Moot Proposition. 141 Methanex, ¶101. 142 Pg. 7, Moot Proposition. 143 Kriebaum, pg. 720. 144 Pg. 42, Art. 7, Moot Proposition.


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a number of cases including Santa Elena v. Costa Rica145, Pope Talbott v. Canada146 and

Metalclad v. USA147. In the Santa Elena case the tribunal noted that ,‘the purpose of

protecting the environment for which the property was taken does not alter the legal

character of the taking for which adequate compensation must be paid. 148

82. In the light of the above , the Claimant argues that there was a requirement on the part of

the Respondent to pay due compensation in accordance with Art.7 of the BIT which it did

not149 rendering the measures taken as unlawful expropriation.

D. ART. 10, GENERAL EXCEPTION CLAUSE CANNOT BE INVOKED

83. Art. 10 of the BIT allows Contracting states to adopt or enforce any meaure in pursuance

of a list of identifiedwelfare meausures provided that they are (i) neceassary, (ii) do not

constitute arbitrary or unjustifiable discrimination bewteen investment or investors and

(iii) a disguised restriction on international trade. In the instant case these essentials of

Art.10 are not and therefore Art.10 cannot be invoked

i. The measures were not necessary

84. To assess a measure’s necessity , it is required that the objective upon which the measure

is based cannot be achieved by alternative means that are less restrictive than the meaures

adopted.150 Investment tribunals have taken recourse to the WTO jurisprudence of

necessity stating that a measure is not necessary if another treaty-consistent or less

inconsistent alternative measure that the concerned member state could reasonably be

expected to employ is available. 151

85. The Claimant argues that in the present case the Respondent’s measures were not

necessary in the sense that there existed less restrictive measures to deal with the situation.

This is evinced by the fact that facing pressure of international demand of lindoro the

Respondent has assumed international obligations to make the exploitation of lindoro

sustainable and is itself venturing to do so implying there exist less restrictive alternatives

to deal with the said situation.152

145 Santa Elena, ¶72. 146 Pope & Talbot, ¶96. 147 Metalclad Corporation, ¶¶85; 89; 103; 106-107; 111. 148 Santa Elena, ¶71. 149 Pg. 6, Moot Proposition. 150 Andenæs/Zleptnig, pg.389. 151 S.D. Myers, ¶¶ 215; 221; 255; Continental Casualty, ¶¶ 191-195. 152 Pg. 54, Exhibit 7, Moot Proposition.


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86. In such a situation the Respondent opted for the most destructive and detrimental option

by imposing a complete ban on the activities of the Claimant. Less restrictive alternative

to deal with the said situation would have been, allowing the claimant to alter their mining

techniques. One such option could be a shift from open pit mining to in-situ leaching

mining which is scientifically proven to reduce emissions to the surface to the minimum.

153 Therefore, the measures taken by the Respondent were not necessary.

ii. Measures constitute disguised restriction on international trade

87. ‘A measure will be considered to constitute a disguised restriction on international trade if

the design, architecture or structure of the measure at issue reveals that this measure does

not pursue the legitimate policy objective but in fact pursues trade-restrictiveness i.e.

protectionist, objectives.154

88. In the instant case the measures taken by the Respondent constitute a disguised restriction

on trade as they were not pursuant a genuine welfare object and were targeted at putting

the Claimant out of business. The reported joint venture between the Respondent and the

Republid of Ibi155 is in line with the protectionist agenda of the host state and could start

only by taking the Claimant off business since the Claimant had exclusive exploitation

rights of lindoro for 80 years under the Concession Agreement.156

89. This is compounded by the fact that the Respondent in the name of implementing on 14

September 2017 confiscated tons of lindoro stored in Claimant’s facilities including those

that were already prepared for export.157 The trade-restricitive effects of this measure were

immediate as due to the sudden cessation of revenue the Claimant were unable to honor

their contractual obligations and due to accumulated losses were forced to shut down their

state of art facilities.158

153 Nuclear Association. 154 US-Gasoline, ¶176; EC-Asbestos, ¶8.236; US-Shrimp, ¶¶5.138-5.144. 155 Pg. 54, Exhibit No. 7, Moot Proposition. 156 Pg. 47, Exhibit 2, Moot Proposition. 157 Pg. 57, Procedural Order No.2, Moot Proposition. 158 Pg. 36, Uncontested Facts, Moot Proposition.


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IV. THE TRIBUNAL HAS NO JURISDICTION TO ADMIT THE RESPONDENT’S

COUNTERCLAIMS

90. The Claimant submits that this Tribunal has no jurisdiction to hear and admit Respondent’s

counterclaims. A counter-claim is a retaliatory claim asserted by a respondent against a

claimant different from a statement of defense. 159 In investment context a counterclaim

constitutes a separate and independent claim by virtue of which the host state may be

awarded a remedy vis-à-vis the investor.160

91. The practice of arbitration tribunals shows that for counterclaims to be admitted it is

required that (i) fall under the disputing parties’ consent and (ii) they must have close

connection with the primary claim.161

92. Respondent has alleged that the Claimant by way of its operations has caused

environmental damage in the Respondent’s territory especially by discharge of wastes to

the Rhea River resulting in health complications to the nearby population, breaching Art

9.2 of the BIT. Further the Respondent submits that pursuant to Art.11 of the BIT and

Art.51 (iii) of the SCC Rules, these counterclaims are admissible.162

93. The counterclaims under the BIT are inadmissible as (i) Counterclaims are not within the

scope of consent of parties; (ii) Kronos Environmental Act obligations if any do not arise

from the investment; (iii) Obligations under the concession agreement are inadmissible in

the presence of a forum selection clause in the agreement.

A. COUNTERCLAIMS ARE NOT WITHIN THE SCOPE OF CONSENT OF PARTIES.

94. For counterclaims to be admissible the general understanding is that they must fall within

the jurisdiction of the particular tribunal i.e. within the consent of parties to arbitrate.163

The scope of consent of parties is gauged from their arbitration agreement.164

95. Art. 11 of the BIT serves as the dispute settlement clause between the parties and is

instrumental for the determination of scope of consent. The Claimant asserts that the said

counterclaims do not fall within the scope of consent of parties as (a) Claimant has no

obligations under the BIT and therefore the said counterclaims do not satisfy the

requirements of Art. 11(1), (b) Respondent lacks jurisdiction to present counterclaims

159 Alison. 160 Kamran. 161 Kelsey. 162 ¶24, Pg. 17, Denial of Claims, Moot Proposition. 163 Metal-Tech ¶¶ 407-408; Dafina/Carlos/Josef. 164 Rusoro Mining ¶¶ 619-620.


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under Art.11 (2), (c) SCC rules in themselves cannot enlarge the scope of consent of parties

and (d) There is no express inclusion of Counterclaims in the BIT.

i. The Claimant has no obligations under the BIT therefore the said counterclaims do not

satisfy the requirements of Art.11 (1).

96. Generally, under international law, treaties do not create obligations for third parties. As

per Art.35 and Art.36 of the VCLT “treaties bind the parties to them i.e. parties that have

agreed to be bound by their provisions”165. With the operation of pacta tertiis nec nocent

nec prosunt, a third party is not required to fulfill a treaty obligation to which it has not

been a party.

97. Under the BITs foreign investors are accorded substantive rights under treaties without

being subject to any specific obligation.166 As a result, investors can submit claims against

states, but states cannot submit counterclaims against investors when the substance of the

dispute is a violation of an IIA.167

98. In the instant case the Respondent has invoked Art.9.2 of the BIT which enshrines the

‘polluter pays principle’ as a source of obligation of the Claimant to compensate. However,

Art.2.2 of the BIT states that “The obligations in Art.s 4 to 9 apply to a person of a

Contracting Party when it exercises a regulatory, administrative or other governmental

authority delegated to it by that Contracting Party.”168 The Claimant argues that being a

private entity can be subjected to the requirements of Art.9.2 in absence of the provision

creating any liability upon it.

99. Further Art.11 of the BIT defines an investment dispute as a dispute arising out of or

relating to (a) an investment agreement between that Contracting Party and such person or

enterprise; (b) an investment authorization granted by that Contracting Party's foreign

investment authority to such person or enterprise; or (c) an alleged breach of any right

conferred or created by this Agreement with respect to an investment.169 In absence of the

applicability of Art. 11(1) (a) or Art.11 (1) (b), the Respondent’s assertion of CC should

be interpreted with respect to Art. 11(1) (c). Since Art.9.2 of the BIT does not create any

rights or obligations upon the investor, Respondent’s counterclaim would not satisfy the

165 Art. 35 & 36, VCLT; Polish Upper Silesia. 166 Dumberry/Aubin; Salacuse; Yackee. 167 Lalive & Halonen pg.141 – 156; Hoffmann. 168 Pg. 40, Art. 2, Moot Proposition. 169 Pg.44, Art. 11, Moot Proposition.


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requirements of Art.11 of the BIT. Therefore, the tribunal should render these

counterclaims inadmissible as they are beyond the scope of consent of parties.

ii. Respondent lacks jurisdiction to present counterclaims under Art.11 (2).

100. Several investment instruments are worded in a manner to limit the right to institute

proceedings to the investor solely reading as the investor party to the dispute may choose

to submit it for resolution.170 For instruments such as these which do not envisage claims

being brought by the host state, more express language in favour of counterclaims appears

to be necessary.171 While limited locus standi in itself would not render the counterclaims

inadmissible but limited jurisdiction rationae materia along with limited locus standi

would have the effect of rendering the counterclaims inadmissible.172

101. In the instant case Art. 11.2 of the BIT clearly states that ‘If the dispute cannot be settled

amicably, the national or company concerned may choose to submit the dispute for

resolution’173. Since the BIT does not explicitly provide for counterclaims and there is

limited locus standi the counterclaims should be inadmissible.

iii. SCC rules in themselves cannot enlarge the scope of consent of parties

102. Consent of parties typically incorporates by reference a certain set of arbitration rules

which the parties agree to apply in full.174 Scholars have opined that ‘Inclusion of

counterclaims in the scope of the parties’ consent in investment treaty arbitration cannot

be presumed only by reference in the arbitration agreement to a particular set of arbitration

rules.175 Therefore, despite being a part of consent procedural rules would only serve as a

supplementary means of assertion of jurisdiction and may not in themselves enlarge the

scope of consent of parties.176

103. The reasoning of the tribunal in AMTO v. Ukraine177 seems to extend support to this

reasoning in the SCC forum. In that case decided under the SCC Rules (1999) the Claimant

stressed that ECT did not permit the Respondent to advance a counterclaim. The

170 Art. 26 ECT, Arts 1116–1117, NAFTA. Malaysia-Ghana BIT, art. 7(3); Canada-South Africa BIT, Art. XIII

(2). 171 Paulsson, pg. 422, 422–3. 172 Hege Elisabeth pg. 140. 173 Pg. 44, Art. 11, Moot Proposition. 174 UNCTAD(Consent). 175 Dafina/Carlos/Josef. 176 Ibid. 177 AMTO ¶117.


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Respondent in turn stated that Art. 21 of the SCC Rules was applicable thereby permitting

counterclaims. The tribunal held the position that priority must be given to the treaty

provision over arbitration rules in case of their conflict with regards to consent to

counterclaims.178

104. In the instant case since the counterclaims do not fall within the scope of arbitration

agreement the mere incorporation of SCC rules in Art. 11 would not render the

counterclaims admissible.

iv. There is no express inclusion of Counterclaims in the BIT.

105. It is the letter of the BIT, interpreted under international law, which binds the Parties, and

where no jurisdiction is provided by the wording of the BIT in relation to a counterclaim,

no jurisdiction can be inferred merely from the “spirit” of the BIT. 179 In the absence of

agreement with regard to the applicable law, the international law instrument granting

rights to the investor, serving as basis of its claim, is the lex specialis.180 Further this

tribunal has the power to determine the appropriate law only to decide the merits of the

dispute not with respect to procedural aspects of the case.181

106. The Claimant submits that the counterclaims are not admissible as there is no express

inclusion of counterclaims in the BIT. In the instant case BIT is the lex specialis and

wording of the BIT does not allow the possibility of counterclaims under Art. 9 and 11.

Thus no right has been conferred upon the host state by the BIT to bring counterclaims

and there is no express inclusion of jurisdiction over counterclaims. Therefore, it is

concluded that the counterclaims are not within the scope of consent of parties.

B. KRONOS ENVIRONMENTAL ACT OBLIGATIONS IF ANY, DO NOT ARISE FROM THE

INVESTMENT.

107. The Claimant maintains that there has been a mischaracterization on the part of the

Respondent in bringing its counterclaims as a consequence of breach of Art 9.2 of the BIT.

The Claimant maintains that by way of counterclaims the Respondent is essentially

seeking costs which the Respondent holds the Claimant liable for non-compliance with

KEA. However, the claimant argues that the alleged violation of KEA, 2015 characterized

178 Kamran. 179 Gavazzi ¶154. 180 Asian Agricultural ¶24; Art. 31, VCLT. 181 Art. 27(1) SCC Rules.


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erroneously as a breach of BIT still leaves the counterclaims inadmissible as (a)

Requirements of Art.11 are not satisfied (b) host state law does not form the applicable

law

i. Claims arising out of KEA would not meet the rationae materia jurisdiction of the tribunal

108. Art. 11 of the Ticadia- Kronos BIT specifies the contours of rationae materia jurisdiction

of the tribunal as it defines investment disputes covered within the two includes, ‘a) an

investment agreement between that Contracting Party and such person or enterprise; (b)

an investment authorization granted by that Contracting Party's foreign investment

authority (if any such authorization exists) to such person or enterprise; or (c) an alleged

breach of any right conferred or created by this Agreement with respect to an

investment.’182 Clearly it does not include within its scope violation of national law. Host

state law does not form a source of applicable law.

ii. Host state does not form the applicable law

109. Tribunals have distinguished between ‘rights and obligations that are applicable to legal

or natural persons who are within the reach of the host state’s jurisdiction, as a matter of

general law; and rights and obligations that are applicable to an investor as a consequence

of an investment agreement entered into with that host state. 183

110. BITs which do not make specific reference to law of host state as applicable law and do

not include specific obligations on the investor are deemed to be ‘not conducive to the

State’s counterclaims arising out of alleged violations by investor of the host state’s

domestic law or investment contract. 184 In fact, a number of state counterclaims premised

on investor’s non-compliance with the host State’s general laws have failed to pass the

jurisdictional test where the treaty did not provide for the host state’s law to apply such as

the Roussalis case185 and the Amto v Ukraine186 case.

111. An analysis the BIT makes it clear that the BIT does not include host state i.e. Kronos

national law as a source of applicable law. Therefore, the breach of obligations created by

KEA cannot amount to a breach of BIT as obligations under national law cannot equal to

obligations under BIT in absence of an explicit mention of host state law as applicable law.

182 Pg. 44, Art. 11, Moot Proposition. 183 AMCO Asia (resubmitted case). 184 UNCTAD (handbook) pg.164. 185 Roussalis ¶ 871. 186 AMTO ¶¶ 116-18.


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iii. Counterclaims related to general law of host do not fulfil judicial connexity requirement

and are therefore inadmissible.

112. One of the main essentials for admissibility of a counterclaim is its connexity or

relatedness with the initial claim. As a general rule, existence of a direct connection

between counter-claims and the principal claim must be assessed both in fact and law.187

In pursuance of this tribunals have analyzed the source of law on which the counter-claim

is based in order to determine whether it is sufficiently connected to be admissible.188.

Judicial connexity is to be interpreted by reference to the same—national—legal order,

which would govern the contract as a whole.189

113. Tribunals have relied on the connection requirement to decline jurisdiction over state

counterclaims arising out of domestic law. In Saluka190, the tribunal declared that it did

not have jurisdiction over counterclaims involving ‘non-compliance with the general law

of the Czech republic’ or ‘rights and obligations which are applicable, as a matter of the

general law of th Czech Republic, to persons subject to the Czech Republic’s jurisdiction’.

This point was further reitered in Paushok v Mongolia191 where the tribunal reffered to

Saluka and Amco in juxtaposing counterclaims that have ‘close connection’ with the

primary claim, on the one hand and those regarding ‘matters that otherwise covered by

general law of the Respondent on another the tribunal not having jurisdiction over the

latter.

114. If the counter-claims in the instant case are to arise from KEA,2015 which infact forms

their fundamental basis then they are to be declared inadmissible by the tribunal as they

arise from the general law of Kronos and not the investment and therefore are inadmissible.

C. OBLIGATIONS UNDER THE CONCESSION AGREEMENT ARE INADMISSIBLE IN THE PRESENCE OF

A FORUM SELECTION CLAUSE IN THE AGREEMENT.

115. Alternate to Art 9.2 and KEA, if the international obligations of investor are to arise from

any source which would also satisfy the requirements of investment dispute given under

Art.11 of the BIT then it is the Concession Agreement between the Claimant and

Respondent.

187Armed activities case ¶ 36; Genocide Convention¶¶ 35, 38. 188 Popova/Poon pg. 226. 189 Heath pg. 417. 190 Saluka (Counterclaim) ¶¶ 76, 78-79. 191 Paushok ¶ 693.


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116. However, the Claimant submits that the presence of a forum selection clause in the

Concession Agreement renders the counterclaims inadmissible before the tribunal as the

Dispute Resolution Clause of the Concession Agreement grants ‘exclusive jurisdiction to

the courts of Republic of Kronos over any dispute arising out of the agreement’.192

117. In such a situation by the operation of the maxim generalia specialibus non derogant, a

dispute settlement clause in the contract should take precedence over general consent to

arbitration given in the BIT193 and would render the counterclaims inadmissible.

192 ¶7, Pg. 48, Exhibit 2, Moot Proposition. 193 Joy mining ¶ 141.

-PRAYER FOR RELIEF SOUGHT- TEAM ZOUREK

Page xviii of xviii

PRAYER FOR RELIEF SOUGHT

IN LIGHT OF THE ABOVE SUBMISSIONS, THE COUNSELS FOR THE RESPONDENT RESPECTFULLY

REQUEST THE TRIBUNAL TO FIND THAT:

1. The Claimant is an investor under Art. 1 of the BIT;

2. The Claims of the Claimant are admissible in view of the lawsuit filed before the

domestic courts of the Respondent;

3. Declare that Respondent is liable for violation of the BIT for Expropriation and-

a) Order Respondent to pay damages to Claimant for the losses caused as a consequence

of the violation valued at no less than USD 450,000,000;

b) Find that Claimant is entitled to all costs associated with these proceedings, including

all legal and other professional fees and disbursements;

c) Order payment of pre-award interest and post-award interest at a rate to be fixed by the

Tribunal;

4. The Counter Claims filed by the Respondent as in-admissible.

Grant such further relief as counsel may advise and that the Tribunal deems appropriate.

FOR THE CLAIMANT,

FENOSCADIA LIMITED

SIGNED,

17 SEPTEMBER 2018

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