THE INTERNATIONAL COURT OF ARBITRATION OF … · 01-200 Fairyland Treasury, Ministry of Finance...

TEAM MOSLER

THE INTERNATIONAL COURT OF ARBITRATION OF

THE INTERNATIONAL CHAMBER OF COMMERCE

PETER EXPLOSIVE

CLAIMANT

V.

REPUBLIC OF OCEANIA

RESPONDENT

MEMORIAL ON BEHALF OF RESPONDENT

26thTH SEPTEMEBR 2016

Claimant: Respondent:

Peter Explosive Republic of Oceania

Unicorn Valley 36 c/o Nicole Blue-Sea, Procurator of the

01-200 Fairyland Treasury, Ministry of Finance

Euroasia Neatstreet 10, 1200 Valhalla, Oceania

ii

TABLE OF CONTENTS

TABLE OF ABREVIATIONS.................................................................................................... V

INDEX OF AUTHORITIES ................................................................................................... VIII

TREATIES, CONVENTIONS AND LAWS........................................................................... viii

RESOLUTIONS....................................................................................................................... viii

CASE LAW................................................................................................................................ ix

CASES AND AWARDS FROM ARBITRATION TRIBUNALS ........................................ ix

CASES FROM THE INTERNATIONAL COURTS ............................................................ xi

CASES DECIDED BY NATIONAL COURTS. .................................................................. xii

BOOKS .................................................................................................................................... xiii

JOURNALS AND ARTICLES ................................................................................................ xiv

INTERNATIONAL REPORTS ............................................................................................. xviii

OTHER PUBLICATIONS ....................................................................................................... xix

STATEMENT OF FACTS ........................................................................................................... 1

JURISDICTION ........................................................................................................................... 3

1.0 THE CLAIMANT IS NOT AN INVESTOR UNDER ARTICLE 1.2 OF THE

EUROASIA BIT............................................................................................................................ 3

1.1 Nationality ........................................................................................................................ 3

1.2 Secession under Local and International Law.................................................................. 5

1.2.1 Self Determination .................................................................................................... 6

1.3 Annexation of Fairyland under International Law ........................................................... 9

1.3.1 Use of Force .............................................................................................................. 9

2.0 THE CLAIMANT’S FAILURE TO ABIDE BY PRE-ARBITRAL STEPS ACTS AS

A JURISDICTIONAL BAR....................................................................................................... 10

iii

2.1 Validity of the Pre Arbitral Steps ................................................................................... 11

2.2 Binding Nature of Pre-Arbitration Procedural ............................................................... 12

3.0 THE CLAIMANT MAY NOT INVOKE ARTICLE 8 OF THE EASTASIA BIT

PURSUANT TO ARTICLE 3 OF THE EUROASIA BIT ...................................................... 14

3.1 MFN Clause Application on Dispute Settlement Provisions ......................................... 15

3.2 MFN Application to Dispute Resolution has Effects on National Policy ...................... 17

3.3 Ambiguity of the MFN clause in the Euroasia BIT ....................................................... 18

ADMISIBILITY .......................................................................................................................... 18

4.0 CLAIMANT DID NOT MAKE A PROTECTED INVESTMENT, ESPECIALLY IN

THE LIGHT OF THE “CLEAN HANDS” DOCTRINE WITH REFERENCE TO

ARTICLE 1.1 OF THE EAST ASIA BIT; ............................................................................... 18

4.1 Eastasia BIT is the Applicable Law in Regards to the Making of the Investment ........ 18

4.2 The Claimant’s Investment is not Protected .................................................................. 20

4.3. In Alternative the Clean Hands Doctrine Need not be Provided Expressly in the BIT . 22

MERITS ....................................................................................................................................... 23

5.0 CLAIMANT’S INVESTMENT WAS NOT EXPROPRIATED BY THE

RESPONDENT ........................................................................................................................... 23

5.1. The Respondent did not Expropriate the Claimant’s Investment ...................................... 23

5.2 The Claimant has not met the Requirements for Indirect Expropriation ....................... 24

5.3 The Respondent Actions Were Within the Scope of Article 10 of Euroasian BIT and

Article 9 Eastasia BIT ............................................................................................................... 26

5.4 The Respondent Acted in Accordance with the Doctrine of Police Powers .................. 27

6.0 THE CLAIMANT CONTRIBUTED TO DAMAGE SUFFERED BY HIS

INVESTMENT ............................................................................................................................ 29

6.1 Claimant Indirectly Contributed to the Unauthorized Use of Force Against the State of

Eastasia ...................................................................................................................................... 29

iv

6.2 There is Causation between the Acts of the Claimant and Result to his Investment ..... 30

6.2.1 The effect of claimant’s contribution into the damage suffered ............................. 30

6.3 The Claimant is not entitled to Damages ....................................................................... 31

7.0 PRAYERS ......................................................................................................................... 33

v

TABLE OF ABREVIATIONS

¶ / ¶¶ paragraph / paragraphs

§ Section

AAA American Arbitration Association

ADR Alternative Dispute Resolution

ArbIntl Arbitration International

Art. / Arts. Article / Articles

BIT Bilateral Investment Treaty

Cf Compare

Cir. Circuit (U.S. Court of Appeals)

e.g. exemplum gratia (for example)

E.U. European Union

ed / eds editor / editors

ed. edition

et al. and others

et seq. et sequentia (and the following one)

FN footnote

FTA Free Trade Agreement

HL House of Lords

i.e. id est (that is)

ICC International Chamber of Commerce

ICCPR International Covenant on Civil and Political Rights

ICESCR International Covenant on Economic, Social and Cultural Rights

vi

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Disputes

IL International law

ILC International Law Commission

ILM International Legal Materials

ILR International Law Reports

Inc. Incorporated

Incoterm International commercial term

Ltd. Limited

MFN Most Favored Nation

Model Law UNCITRAL Model Law on International Commercial Arbitration

Model Law on Conciliation UNCITRAL Model Law on International Commercial Conciliation

OECD Organization for Economic Cooperation and Development

OTP Office of the Prosecutor

PCA Permanent Court of Arbitration

PO Procedural Order

SCC Stockholm Chamber of Commerce

U.C.C. Uniform Commercial Code

U.K. United Kingdom

U.S. A United States of America

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNGA United Nations General Assembly

v. versus (against)

vii

VCLT Vienna Convention on the Law of Treaties

WTO World Trade Organization

viii

INDEX OF AUTHORITIES

TREATIES, CONVENTIONS AND LAWS

1. ICC Rules on Arbitration 2012, Entered into force on 1st January 2012

2. International Covenant on Civil and Political Rights, 16 December, 1966, 999 UNTS 171

and 1057 UNTS 407 / [1980] ATS 23 / 6 ILM 368 (1967)

3. International Covenant on Economic, Social and Cultural Rights, 16 December 1966, 993

UNTS 3 / [1976] ATS 5 / 6 ILM 360 (1967)

4. UNCITRAL Arbitration Rules, 1976

5. UNCITRAL Conciliation Rules, 1980

6. UNCITRAL Model Law on International Commercial Arbitration, 1985

7. UNCITRAL Model Law on International Commercial Conciliation (2002), Adopted by

on 24 June 2002, 24 ILM 1302 (1985)

8. United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI

9. Vienna Convention on the Succession of States in Respect of Treaties (1978), 1946

U.N.T.S. 3, 993 UNTS 3 / [1976] ATS 5 / 6 ILM 360 (1967

10. Vienna Convention on the Succession of States in Respect of State Property, Archives

and Debts (1983), 22 ILM 306 (1983) / UN Doc A/CONF.117/14 (1983)

11. Vienna Convention on the Law of Treaties, 23 May 1969, UN Doc. A/Conf.39/27 / 1155

UNTS 331 / 8 ILM 679 (1969) / 63 AJIL 875 (1969)

RESOLUTIONS

1. Declaration on the Occasion of the Fiftieth Anniversary of the United Nations General

Assembly Resolution A/RES/50/6, October 1995. New York, NY

2. United Nations General Assembly Res 2625 (XXV) Declaration on Principles of

International Law concerning Friendly Relations and Co-operation among States in

accordance with the Charter of the United Nations, Adopted by the General Assembly on

24th October 1970, A/RES/25/2625

ix

3. United Nations General Assembly Resolution 1514 (XV), The Declaration on the

Granting of Independence to Colonial Countries and Peoples, Adopted by General

Assembly on 14 December 1960, A/RES/1514(XV)

4. United Nations General Assembly Resolution 3314 (XXIX), Definition of Aggression,

Adopted by the General Assembly on 14 December 1974, A/RES/3314

CASE LAW

CASES AND AWARDS FROM ARBITRATION TRIBUNALS

1. Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay ICSID Case

2. Agustin Maffezini v. Kingdom of Spain (ICSID No. Apr/97/7), 25 January 2000

3. A-Land Services v. Pepper Source Cite:941 F.2d 519 (7th Cir. 1991).

4. Alpha Projekt holding GmbH v. Ukraine, ICSID Case No. ARB/07/16

5. Ambiente Ufficio SpA v Argentine Republic, ICSID Case No ARB/08/9, Decision on

Jurisdiction and Admissibility (8 February 2013)

6. Berschader v. Russian Fed’n, SCC Case No. 080/2004, Award of Apr. 21, 2006, ¶ 179

7. Burlington Res Inc v Repub of Ecuador & Petro Ecuador, ICSID Case No ARB/08/5,

Decision on Jurisdiction (2 June 2010)

8. Case No. A/18, 5 IRAN-US C.T.R. 251 (1984

9. D Myers Incorporated v Canada, Order, 2004 FC 38, (2004) 244 FTR 161

10. Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No. ARB/05/17.

Award.

11. EDF International S.A., SAUR International S.A. and León Participaciones Argentinas

S.A. v.Argentine Republic, ICSID Case No. ARB/03/23.

12. Enron Corpn & Ponderosa Assets LP v Argentine Repub, ICSID Case No ARB/01/3,

Decision on Jurisdiction (14 January 2004)

13. Esphahanian v. Bank Tejarat (Case No. 157), Award No. 31-157-2 (29 March 1983),

reprinted in 2 IRAN-US C.T.R. 157 (1983).

x

14. Eudoro Armando Olguín v. Republic of Paraguay, ICSID Case No. ARB/98/5. Award. 26

Jul 2001.

15. Gustav F W Hamester GmbH & Co KG v Ghana, Award, ICSID Case No ARB/07/24,

IIC 456 (2010),

16. Hadley v Baxendale [1854] EWHC J70

17. Hochtief AG v Argentine Republic, ICSID Case No ARB/07/31, Decision on Jurisdiction

(24 October 2011)

18. ICC Case No 12739




22. Impregilo SpA v Argentine Republic, ICSID Case No ARB/07/17, Award (21 June

2011)

23. Inceysa Vallisoletana S.L. v. Republic of El Salvador. ICSID Case No. ARB/03/26. El

Salvador-Spain BIT. Aug 2, 2006. Award (English). Aug 2, 2006.

24. Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v Turkmenistan, ICSID

Case No ARB/10/1, Award (6 July 2013)

25. M.C.I. Power Grp., L.C. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Decision on

the Application for Annulment (July 31, 2007)

26. Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1.

27. MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7.

28. Murphy Exploration & Prod Co Int’l v Repub of Ecuador, ICSID Case No ARB/08/4,

Award on Jurisdiction (15 December 2010)

29. Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland)

xi

30. Plama Consortium Limited v. Republic of Bulgaria, Award. 27 Aug 2008. Plama

Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24. Award.

31. Pope & Talbot Inc. v. The Government of Canada, Interim Award. 26 Jun 2000.

32. Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan,

ICSID Case No. ARB/02/13, Decision on Jurisdiction, 29 November 2004.

33. Saluka Investments B.V. v. The Czech Republic, Partial Award. 17 Mar 2006

34. Técnicas Medioambientales Tecmed, S.A. v. United Mexican States [ICSID Case No.

ARB(AF)/00/2]

35. Telenor Mobile Commc’ns A.S. v. Republic of Hungary, ICSID Case No. ARB/04/15,

Award (Sept. 13, 2006), 21 IcsID r ev . 603 (2006).

36. Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction

and Competence (June 19, 2009)

37. Urbaser SA & Consorcio de Aguas Bilbao Biskaia, Bilbao Biskaia Ur Partzuergoa v

Argentine Repub, ICSID Case No ARB/07/26, Decision on Jurisdiction (19 December

2012)

38. William J. Levitt v. The Government of the Islamic Republic of Iran et al., Award No.

297-209-1 (22. April 1987), reprinted in 14 Iran-U.S. C.T.R. 19

39. Wintershall v Argentine Republic ICSID Case No. ARB/04/14

40. World Duty Free Company Limited v. Republic of Kenya (ICSID Case No. ARB/00/7).

CASES FROM THE INTERNATIONAL COURTS

1. Case Concerning the Aerial Incident of 10 August 1999 (Pakistan v. India), Jurisdiction

of the Court, Judgment of 21 June 2000, [2000] ICJ Reports

2. Case Concerning the Military and Paramilitary Activities in and Against Nicaragua

(Nicaragua v. United States of America) 27 June 1986, International Court of Justice

3. Case Concerning the Military and Paramilitary Activities in and Against Nicaragua

(Nicaragua v. United States of America) 27 June 1986, International Court of Justice

xii

4. Concerning Application of the International Convention on the Elimination of All Forms

of Racial Discrimination (Georgia v Russian Fed’n) (Preliminary Objections), Judgment

[2011] ICJ

5. East Timor, Portugal v Australia, Jurisdiction, Judgment, [1995] ICJ Rep 90, ICGJ 86

(ICJ 1995), 30th June 1995, International Court of Justice [ICJ]

6. International Court of Justice, Advisory Opinion of 21 June 1971: Legal Consequences

for States of the Continued Presence of South Africa in Namibia (South-West Africa) Not

Withstanding Security Council Resolution 276 (1970), I.C.J. Rep 16

7. International Court of Justice, Advisory Opinion of 9th July 2004: The Legal

Consequences of the Construction of a Wall in the Occupied Palestinian Territory [2004]

ICJ

8. International Court of Justice, Advisory Opinion: Accordance with International Law of

the Unilateral Declaration of Independence in respect of Kosovo, 22 July 2010

9. International Court of Justice, Advisory Opinion: Accordance with International Law of

the Unilateral Declaration of Independence in respect of Kosovo, 22 July 2010

10. The Nottebohm case (Liechtenstein v. Guatemala), 2nd phase, Judgment of 6 April 1955,

1955 ICJ Reports

CASES DECIDED BY NATIONAL COURTS.

1. Elizabeth Chong Pty Ltd v Brown [2011] FMCA (Australian Fed Mag Ct)

2. Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] WLR(D)

293, [2014] EWHC

3. Fluor Enters v Solutia, 147 F Supp (SD Tex 2001)

4. Fluor Enters v Solutia, 147 F Supp 2d 648, 651 (SD Tex 2001)

5. Holloway v Chancery Mead Ltd [2007] EWHC 2495 (TCC) (English High Ct)

6. Jillcy Film Enters v Home Box Office Inc, (SDNY 1984)

7. Mocca Lounge, Inc v Misak, 94 AD2d 761, 763 (NY App Div 1983)

8. Re Secession of Quebec [1998] 2 SCR 217

xiii

9. Richie Co LLP v Lyndon Ins Group Inc, 2001 WL 1640039

10. Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors [2012] EWHC

3198 (Ch)

BOOKS

1. Antonello Tancredi ‘ A Normative ‘due process’ in the Creation of States through

secession’ in James Crawford The Creation of States in International Law (Second

Edition, Oxford University Press, 2006).

2. Colin Warbrick, “States and Recognition in International Law” in International Law, ed.

by Malcolm D. Evans, First Edition (New York: Oxford University Press, 2003).

3. D Bowett, ‘The Use of Force for the Protection of Nationals Abroad’ in A Cassese (ed),

The Current Legal Regulation of the Use of Force (Martinus Nijhoff 1986).

4. D.P. O'Connell, The Law of State Succession 6-9 (H.C. Gutteridge et al. eds.,

Cambridge University Press 1956).

5. Dolzer, Rudolf, and Christoph Schreuer. Principles of international investment law.

Oxford University Press, 2012.

6. Douglas, Zachary. "Other specific regimes of responsibility: investment treaty arbitration

and ICSID." The law of international responsibility. Oxford University Press, Oxford

(2010)

7. Llamzon, Aloysius P. Corruption in International Investment Arbitration. Oxford

University Press, 2014.

8. Malcolm N. Shaw, International Law, Fifth Edition (Cambridge: Cambridge University

Press, 2003).

9. Marcelo Kohen, introduction to Secession: International Law Perspectives, ed. Marcelo

Kohen (Cambridge: Cambridge University Press, 2006), John Dugard and David Raic ;

The role of recognition in law and practice of secession’ in M Kohen, Secession:

International Law Perspectives ( Cambridge University Press: 2006).

10. Mathew G. Maloney, Succession of States in Respect of Treaties: The Vienna

Convention of 1978, 19 Va. J. Int’l L. 885, 911 (1979).

xiv

11. Michael Bühler and Thomas H Webster, Handbook of ICC Arbitration (Sweet &

Maxwell 2008)

12. Sornarajah, Muthucumaraswamy. The international law on foreign investment.

Cambridge University Press, 2010.

13. Todd Weiler, Good Faith and Regulatory Transparency: The Story of Metalclad v.

Mexico, in International Investment l AW And Arbitration: leading Cases From the

ICSID, NAFTA, Bilateral Treaties and Customary International law 701, 704 (Todd

Weiler ed., 2005

JOURNALS AND ARTICLES

1. “The Jurisdiction of the International Centre for Settlement of Investment Disputes”

(1979) 19 Indian Journal of International Law

2. Alvares, Jose, and Kathryn Khamsi. "The Argentine Crisis and Foreign Investors."

Institute for International Law and Justice (2008)

3. Anenson, T. Leigh, and Donald O. Mayer. "'Clean Hands' and the CEO: Equity as an

Antidote for Excessive Compensation." University of Pennsylvania Journal of Business

Law 12 (2010)

4. Bahls, Steven C. "Resolving Shareholder Dissension: Selection of the Appropriate

Equitable Remedy." J. Corp. L. 15 (1989)

5. Banifatemi, Yas. "The Law Applicable in Investment Treaty Arbitration." Arbitration

under international investment agreements: a guide to the key issues (2010)

6. Brower, Charles N, and Stephen W. Schill. "Is Arbitration a Threat or a Boom to the

Legitimacy of International Investment Law." Chi. J. Int'l L. 9 (2008)

7. Brown-John, C. Lloyd. "Self-Determination, Autonomy and State Secession in Federal

Constitutional and International Law." S. Tex. L. Rev. 40 (1999)

8. Cheng, Tai-Heng. "Power, Authority and International Investment Law." American

University International Law Review 20 (2005)

xv

9. Cheng, Tai-Heng. "Power, Authority and International Investment Law." American

University International Law Review 20 (2005)

10. Christian Tomuschat, “Secession and Self-Determination,” in Secession: International

Law Perspectives, ed. Marcelo Kohen (Cambridge: Cambridge University Press, 2006)

11. Claudia Solomon and Sandra Fredrich, ‘How Most Favoured Nation Clauses In Bilateral

Investment Treaties Affect Arbitration’,(2012) Practical Law Resources.

12. Clodfelter, Mark A. "The Adaptation of States to the Changing World of Investment

Protection through Model BITs." ICSID review 24, no. 1 (2009)

13. Cremades, Bernardo M. "Investment Protection and Compliance with Local Legislation."

ICSID review 24, no. 2 (2009)

14. D. Carreau, P. Juillard, Droit international économique (3 e édition, Dalloz, Paris, 2007)

15. De Alba Uribe, Mariano. "Drawing the Line: Addressing Allegations of Unclean Hands

in Investment Arbitration." Available at SSRN 2612402 (2015).

16. Dolzer, Rudolf, and Margrete Stevens. "Bilateral Investment Treaties." (1995).

17. Dolzer, Rudolf. "New Foundations of the Law of Expropriation of Alien Property." The

American Journal of International Law 75, no. 3 (1981) (ICSID AF 2014),

18. Dyalé Jiménez Figueres, ‘Multi-Tiered Dispute Resolution Clauses in ICC Arbitration’

(2003) 14(1) ICC Ct Bull

19. Ebegbulem, Joseph C. "The Failure of Collective Security in the Post World Wars I and

II International System." Journal of Humboldt-Universität zu Berlin 2, no. 2 (2011)

20. Edlin, Aaron S. "Cadillac contracts and up-front payments: Efficient investment under

expectation damages." Journal of Law, Economics, and Organization 12, no. 1 (1996)

21. Edsall, Rachel D. "Indirect Expropriation under NAFTA and DR-CAFTA: Potential

Inconsistencies in the Treatment of State Public Welfare Regulations." BUL Rev. 86

(2006)

xvi

22. Eduardo Palmer and Eliana Lopez, ‘The Use of Multi-Tiered Dispute Resolution Clauses

in Latin America: Questions of Enforceability’ (2003) 14 Am Rev Int’l Arb

23. Eiselen, Sieg. "Unresolved damages issues of the CISG: a comparative analysis."

Comparative and International Law Journal of Southern Africa 38, no. 1 (2005)

24. Farrand, James R. "Ancillary Remedies in SEC Civil Enforcement Suits." Harvard Law

Review (1976)

25. Fortier, L. Yves, and Stephen L. Drymer. "Indirect expropriation in the law of

international investment: I know it when I see it, or caveat investor." ICSID Review 19,

no. 2 (2004 Yannaca-Small, Catherine. " Indirect Expropriation" and the" right to

Regulate" in International Investment Law. OECD, 2004.

26. Franck, Susan D. "Foreign direct investment, investment treaty arbitration and the rule of

law." McGeorge Global Business and Development Law Journal 19 (2007)

27. Gann, Pamela B. "Compensation Standard for Expropriation." Colum. J. Transnat'l L. 23

(1984)

28. Georges Abi-Saab, “Conclusion,” in Secession: International Law Perspectives, ed.

Marcelo Kohen (Cambridge: Cambridge University Press, 2006)

29. Howard, Tracy Lee. "Compensating an Owner to the Full Extent of His Loss: A

Reevaluation of Compensable Damages in Louisiana Expropriation Cases." La. L. Rev.

51 (1990): 821.

30. Isakoff, Peter David. "Defining the scope of indirect expropriation for international

investments." Global Business Law Review 3, no. 2 (2013)

31. Klaus Peter Berger, ‘Law and Practice of Escalation Clauses’ (2006) 22 Arb Int’l

32. Kondoch, Boris. "The limits of economic sanctions under international law: The case of

Iraq." Journal of International Peacekeeping 7, no. 1 (2001)

33. Lee Buchheit, Secession: The Legitimacy of Self-Determination (New Haven: Yale

University Press, 1978)

xvii

34. Marlles, Justin R. "Public purpose, private losses: Regulatory expropriation and

environmental regulation in international investment law." J. Transnat'l L. & Pol'y 16

(2006)

35. McLean, R. David, Tianyu Zhang, and Mengxin Zhao. "Why does the law matter?

Investor protection and its effects on investment, finance, and growth." The Journal of

Finance 67, no. 1 (2012)

36. Michael Pryles, ‘Multi-Tiered Dispute Resolution Clauses’ (2001) 18 J Int’l Arb

37. Mostafa, Ben. "Sole Effects Doctrine, Police Powers and Indirect Expropriation under

International Law, The." Austl. Int'l LJ 15 (2008)

38. Nikièma, Suzy H. "Compensation for Expropriation." Winnipeg, Canada: The

International Institute for Sustainable Development (2013).

39. Rachel Jacobs, ‘Should Mediation Trigger Arbitration in A Multi-Step Alternative

Dispute Resolution Clause?’ (2004) 15 Am Rev Int’l Arb

40. Ruzza, Alice. "Indirect Expropriation in International Investment Law." PhD diss.,

University of Trento, 2013.

41. Schill, Stephan W. "International Investment Law and the Host State’s Power to Handle

Economic Crises–Comment on the ICSID Decision in LG&E v. Argentina." Journal of

International Arbitration 24, no. 3 (2007)

42. Simon Chapman, ‘Multi-Tiered Dispute Resolution Clauses: Enforcing Obligations to

Negotiate in Good Faith’ (2010) 27 J Int’l Arb

43. Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del

Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17 .2010

44. Subedi, Surya P. International investment law: reconciling policy and principle.

Bloomsbury Publishing, 2016.

45. The Adverse Consequences of Economic Sanctions on the Enjoyment of Human

xviii

46. Thomas Franck, “Opinion Directed at Question 2 of the Reference,” in Self-

Determination in International Law: Quebec and Lessons Learned, ed. Anne Bayefsky

(Cambridge: Kluwer Law International, 2000)

47. Veljanovski, Cento G. Economic principles of law. Cambridge University Press, 2007.

48. Waelde, Thomas, and Abba Kolo. "Environmental regulation, investment protection and

‘regulatory taking’in international law." International and Comparative Law Quarterly

50, no. 04 (2001)

49. Weiler, Todd. International investment law and arbitration: leading cases from the ICSID,

NAFTA, bilateral treaties and customary international law. Cameron May, 2005.

50. Yearbook of the international Law Commission, 1978, Vol. II, Part Two

INTERNATIONAL REPORTS

1. Draft Articles on the Responsibility of States for Internationally Wrongful Acts, Report

of the ILC on the Work of its Fifty-third Session, UN GAOR, 56th Session, Supp No 10,

p 43, UN Doc A/56/10 (2001)

2. ILC, “Report of the International Law Commission on the Work of its fifty-eighth

Session” (1 May-9 June and 3 July-11 August 2006) UN Doc A/61/10, Chapter IV,

3. Report of the International Law Commission to the General Assembly on the Work of Its

Thirtieth Session, [1978], Yearbook of the International Law Commission,

A/CN.4/SER.A/1978/Add.1 (Part 2) (“ILC Report”) and “Most-Favoured-Nation

Clause”, Yearbook of the International Law Commission, 1970, Vol. II.

4. Rights (The Bossuyt Report) E/ CN. 4/ Sub. 2/ 2000/ 33 of 21 June 2000

5. The Aaland Islands Question: Report Submitted to the Council of the League of Nations

by the Commission of Rapporteurs, League of Nations Doc. B7.21/68/106, at 28 (1921)

xix

OTHER PUBLICATIONS

1. B. Legum “Defining Investment and Investor: Who is Entitled to Claim?” presentation at

the Symposium “Making the Most of International Investment Agreements: A Common

Agenda” co-organised by ICSID, OECD and UNCTAD, 12 December 2005, Paris.

2. Black’s Law Dictionary Bryan A. Garner (ed), Black's Law Dictionary (7th ed., St. Paul

Minnesota, West Publishing Corporation: 1999)

3. Oxford Dictionary of Law, ed. by Elizabeth A. Martin (Oxford: Oxford University Press,

2003)

4. Retrieved from http://djilp.org/4964/critical-analysis-what-does-territory-annexation-and-

succession-look-like-in-the-modern-world/ on 18/9/2016

1

STATEMENT OF FACTS

1. The Respondent is a Republic recognized by the United Nations and other International

community members.

2. On 1 January 1992, the Respondent and the Republic of Euroasia (“Euroasia”)

concluded the Agreement for the Promotion and Reciprocal Protection of Investments

(the “Euroasia BIT”). The Euroasia BIT came into force on 23 October 1995.

3. On 1 January 1992 The Respondent and the Republic of Eastasia (“Eastasia”) concluded

the Agreement for the Promotion and Reciprocal Protection of Investments (the

“Eastasia BIT”). The Eastasia BIT came into force on 1 April 1993.

4. The Claimant invested in the Republic of Oceania in February 1998 by purchasing

100% of the shares in the company, “Rocket Bombs Ltd”, and subsequently became its

president and sole member of its board of directors. Rocket Bombs Ltd specialised in

arms production.

5. On 1 November 2013, the residents of Fairyland decided, in a referendum, that Fairyland

should be reunited with its homeland – the Republic of Euroasia.

6. On 1 March 2014, the armed forces of Euroasia entered the territory of Fairyland. The

annexation was bloodless and rather peaceful as Eastasia did not send any armed forces

to protect its territory. They further introduced an amendment to its Citizenship Act,

which allowed all residents of Fairyland to apply for Euroasian nationality. The

Citizenship Act does not allow Euroasian nationals to possess dual nationality.

7. On 2 March 2014, the claimant sent an electronic e-mail to the President of the Republic

of Eastasia in which he declared the renunciation of his Eastasian citizenship; however,

it did not comply with the described formal requirements of the Eastasian Citizenship

Law.

8. On 23 March 2014, Euroasia officially declared Fairyland a part of the Euroasian

territory.

9. A few days later, on 28 March 2014, Eastasia declared the annexation to be illegal and

in the light of the public international law, on 1 April 2014, it sent a notification to

Euroasia, breaking off diplomatic relations between the two countries.

2

10. On 1 March 2014 Euroasia On 23 March 2014, Euroasian authorities recognised the

claimant as a national of the Republic of Euroasia, and he was subsequently issued a

Euroasian identity card and passport.

11. The Respondent did not and does not accept the reunification of Fairyland to Euroasia. It

subsequently imposed sanctions on all entities operating within the territory of the

Republic of Oceania that had any contractual relationship with the Republic of

Euroasia. Sanctions were imposed on Rocket Bombs Ltd and Peter Explosive.

12. On 1 February 2015, the President of the National Environment Authority, along with

the other officials, was convicted of accepting bribes. The scandal heavily engaged the

media and the public of Oceania. Such pressure resulted in the commencement of

numerous investigations by the General Prosecutor’s Office. The interest of those

investigations focused on people who bribed the NEA President and other officials.

13. On 5 May 2015, Peter Explosive was informed that he was under investigation with

regard to the environmental license obtained on 23 July 1998 for Rocket Bombs. On 23

June 2015, the General Prosecutor’s Office officially initiated criminal proceedings

against Peter Explosive.

14. On 11th September 2015, the claimant made a Request for Arbitration to the

International Chamber of commerce pursuant to Article 8 of the Agreement between the

Respondent and the Republic of Eastasia for the Promotion and Reciprocal Protection

of Investments. This is after the Claimant had notified the respondent’s Ministry of

Foreign Affairs (with copies to the Ministry of Finance, Ministry of Defence and

Ministry of Environmental Protection) of his dispute with them and of his intention to

initiate arbitral proceedings against the Respondent if they fail to negotiate with the

Claimant. Hitherto no response has been given by the respondent.

15. On 30th of September the Respondent replied to the request declaring that it rejected all

claims and allegations made by the Claimant in the Request for Arbitration as false and

unsubstantiated. Furthermore, the Respondent denied that the Arbitral Tribunal has

jurisdiction over this case.

3

JURISDICTION

1.0 THE CLAIMANT IS NOT AN INVESTOR UNDER ARTICLE 1.2 OF THE

EUROASIA BIT

16. The respondent avers that the claimant is not an investor as per the Euroasian BIT. This

claim is based on several issues that the tribunal ought to consider in determining

whether the claimant is an investor. We submit that in order for the claimant to be

regarded as an investor under the Euroasian BIT, the tribunal should not only consider

the terms as elucidated in the article 1.2 of the BIT rather they should consider several

factors in accordance to the reading of the Article.

17. There is no single definition of what constitutes foreign investment. According to Juillard

and Carreau, the absence of a common legal definition is due to the fact that the

meaning of the term investment varies according to the object and purpose of different

investment instruments which contain it.1

18. The investors who are the beneficiaries of BITs are not specifically named. They are

merely identifiable. This means that the treaties stipulate a criterion which will allow,

when appropriate and on a case-by-case basis, identification of those investors who may

benefit from the protection of a treaty. The criterion in question is the nationality2 link

between an investor and a signatory State.

1.1 Nationality

19. There are two types of investors: natural and legal persons. For natural persons,

investment agreements generally base nationality exclusively on the law of the state of

claimed nationality. Therefore, defining whether an investor is protected by a BIT is

basically a question of defining that investor’s nationality. This nationality link is a

fundamental criterion for determining the scope of the protection afforded by an

investment treaty.3

1 D. Carreau, P. Juillard, Droit international économique (3 e édition, Dalloz, Paris, 2007), 403 2 B. Legum “Defining Investment and Investor: Who is Entitled to Claim?” presentation at the Symposium “Making

the Most of International Investment Agreements: A Common Agenda” co-organised by ICSID, OECD and

UNCTAD, 12 December 2005, Paris. 3 “The Jurisdiction of the International Centre for Settlement of Investment Disputes” (1979) 19 Indian Journal of

International Law 166, 203.

4

20. The claimant asserts that he is a citizen of Euroasia but which we would like to object to

this assertion. The claimant fails to make clear that Eastasian citizens may renounce

their citizenship following the required procedure. An Eastasian citizen, wishing to

renounce his or her citizenship, must submit a renunciation on the legally prescribed

form. The renunciation becomes effective upon the acknowledgement of the President

of the Republic of Eastasia.4 On 2 March 2014, Peter Explosive sent an electronic e-

mail to the President of the Republic of Eastasia in which he declared the renunciation

of his Eastasian citizenship; however, it did not comply with the described formal

requirements of the Eastasian Citizenship Law.5

21. The respondent therefore contends that the failure to abide with the renunciation of the

citizenship procedures in Eastasia make the claim of the claimant a nullity and thus

can’t be considered a citizen of Euroasia.

22. Under Customary international law, the right to grant and withdraw nationality of natural

persons remains part of the sovereign domain. The question before tribunals has been

whether and to what extent a state can refuse to recognize the nationality of a claimant.

International law practice on questions of nationality has developed primarily in the

context of diplomatic protection.

23. In the Nottebohm case,6 the ICJ held that even though a state may decide on its own

accord and in terms of its own legislation whether to grant nationality to a specific

person, there must be a real connection between the state and the national. The Court

made the following statement:

“Nationality is a legal bond having as its basis a social fact of attachment,

a genuine connection of existence, interests and sentiments, together with

the existence of reciprocal rights and duties. It may be said to constitute

the juridical expression of the fact that the individual upon whom it is

conferred, either directly by the law or as the result of an act of the

authorities, is in fact more closely connected with the population of the

State conferring nationality than with that of any other State.”

4 Procedural Order number 3 5 Ibid 6 The Nottebohm case (Liechtenstein v. Guatemala), 2nd phase, Judgment of 6 April 1955, 1955 ICJ Reports 4, at

23.

5

24. It is clear that there is no direct link between the claimant and the state of Euroasia to the

extent that the claim for citizenship would be valid to rely on the basis of the

relationship. Peter Explosive’s grandparents were born nationals of Euroasia, but after

Fairyland became a part of Eastasia in 1918, they became Eastasian nationals and

relinquished their Euroasian nationality. Peter Explosive’s parents were born on the

territory of Eastasia and remained Eastasian nationals until their deaths.7

25. In the case of dual nationality, Article 7 of the ILC Draft Articles on Diplomatic

Protection states:

“A State of nationality may not exercise diplomatic protection in respect

of a person against a State of which that person is also a national unless

the nationality of the former State is predominant, both at the time of the

injury and the date of the official presentation of the claim.”8

26. The Iran-United States Claims Tribunal had recourse to the test of dominant and effective

nationality in that it had to determine whether a claimant with dual US-Iranian

nationality was to be regarded as predominantly American or Iranian for purposes of

bringing a claim before the Tribunal. In Esphahanian v. Bank Tejarat, 9 Chamber

Two found that the claimant could claim before the Tribunal because his “dominant and

effective nationality at all relevant times [was] that of the United States and the funds at

issue in the present case related primarily to his American nationality, not his Iranian

nationality”. Therefore, even if the claimant was to claim dual nationality then this

claim would also fail.

1.2 Secession under Local and International Law

27. It is clear that the Eastaisan constitution does not recognize the aspect of seceding. In as

much as the Eastasian Constitution allows each province to organize a regional

referendum pertaining to matters within the exclusive competence of that province. The

Constitution does not contain any provision regulating secession from the Republic.10

7 Procedural Order number 2 8 Draft Articles on Diplomatic Protection, ILC, “Report of the International Law Commission on the Work of its

fifty-eighth Session” (1 May-9 June and 3 July-11 August 2006) UN Doc A/61/10, Chapter IV, 33 9 Esphahanian v. Bank Tejarat (Case No. 157), Award No. 31-157-2 (29 March 1983), reprinted in 2 IRAN-US

C.T.R. 157 (1983). See also Case No. A/18, 5 IRAN-US C.T.R. 251 (1984) 10 Procedural order number 2

6

This therefore in turn means that for the secession to be accepted then it must conform

to the International standards on matters of secession.

28. The illegality of this secession is evidenced by the failure to adhere to the provisions in

the Vienna Convention on Succession of States.11 It establishes that, inter alia, a

seceding people are required to notify the head of state or minister of foreign affairs, of

the state from which they want to secede from, of their intent to secede.12 The people of

Fairyland failed to do so, and it is Euroasia, which did the notification by declaring

Fairyland as part of its territory, after an illegal annexation. Therefore, the respondent is

justified in questioning the validity of the secession, and subsequently, the legitimacy of

the claimant’s nationality. The claimant is therefore, not a citizen of Euroasia.

1.2.1 Self Determination

29. International law does not grant sub-state entities a general right to secede from their

parent states, nor does it prohibit secession.13 Exceptions to this supposed neutrality

arise from the international legal principles of territorial integrity and self-

determination.14

30. Christian Tomuschat opines that the principle of self- determination similarly lends itself

to restrictive or expansive interpretations.15 Further it is argued that self-determination

only allows for the creation of new states in the context of decolonization. The right of

self- determination legally entitles peoples subject to extreme persecution to remedy

their situation through secession.16

31. The Declaration on the Granting of Independence to Colonial Countries and Peoples

underpins the theoretical justification for decolonization with the principle of self-

determination. In language echoed by the International Covenant on Civil and Political

11 Vienna Convention on the Succession of States, 6 November 1996 U.N.T.S 3 article 22 12 Ibid 13 Thomas Franck, “Opinion Directed at Question 2 of the Reference,” in Self-Determination in International Law:

Quebec and Lessons Learned, ed. Anne Bayefsky (Cambridge: Kluwer Law International, 2000), 83; See also

Charter of the United Nations (1945) Article 2(1) and 2(4) 14 Marcelo Kohen, introduction to Secession: International Law Perspectives, ed. Marcelo Kohen (Cambridge:

Cambridge University Press, 2006), 6–9. 15 Christian Tomuschat, “Secession and Self-Determination,” in Secession: International Law Perspectives, ed.

Marcelo Kohen (Cambridge: Cambridge University Press, 2006), 25 16 Georges Abi-Saab, “Conclusion,” in Secession: International Law Perspectives, ed. Marcelo Kohen

(Cambridge: Cambridge University Press, 2006), 473

7

Rights (ICCPR) and the International Covenant on Economic, Social and Cultural

Rights (ICESCR), the Declaration asserts that:

“All peoples have the right of self-determination. By virtue of that right

they freely determine their political status and freely pursue their

economic, social and cultural development.”17

32. The right of self-determination did not cease to exist, however, with the effective

completion of decolonization. Many scholars insist that a right to “remedial secession”

exists. The notion of remedial secession assumes that international law provides a right

to secession for peoples subject to extreme persecution or unable to internally realize

their right to self-determination.18

33. This theory postulates that if groups fall victim to “serious breaches of fundamental

human and civil rights” through the “abuse of sovereign power,” then international law

recognizes the right of the afflicted group to secede from the offending state.19

34. The legal sources for this right derive primarily from UN General Assembly (GA)

resolutions, although earlier sources from the inter-war period exist also. For instance,

the Commission of Rapporteurs in the League of Nations’ Aaland Islands dispute found

that “separation of a minority from the state of which it forms part . . . may only be

considered as an altogether Exceptional solution, a last resort when the state lacks either

the will or the power to enact and apply just and effective guarantees.”20

35. Despite thoroughly discouraging secession, the Commission nevertheless provided legal

space for a group to secede under extraordinary circumstances—where the state lacks

the will or the power to protect the group at issue. Subsequent international legal

developments retained this space for secession, and may have widened it. The

Declaration on Friendly Relations among States contains a provision, referred to as a

“safeguard clause,” that reiterates the principle of the territorial integrity of states, but

places a number of conditions on that affirmation. The Declaration implicitly authorizes

17 G.A. Res. 1514, U.N. GAOR, 15th Sess., Supp. No. 16, at 66, 67, U.N. Doc A/4684 (1960) 18 Lee Buchheit, Secession: The Legitimacy of Self-Determination (New Haven: Yale University Press, 1978), 220–

223 19 Antonello Tancredi, “A Normative ‘Due Process’ in the Creation of States through Secession,” in Secession:

International Law Perspectives, ed. Marcelo Kohen (Cambridge: Cambridge University Press, 2006), 176. 20 The Aaland Islands Question: Report Submitted to the Council of the League of Nations by the Commission of

Rapporteurs, League of Nations Doc. B7.21/68/106, at 28 (1921)

8

the violation of territorial integrity if states are not “in compliance with the principle of

equal rights and self-determination of peoples as described [in the Declaration] and thus

possessed of a government representing the whole people belonging to the territory

without distinction as to race, creed or color.”21

36. The same language was adopted, without the qualifications of “race, creed, or colour,” by

the UN World Conference on Human Rights in 1993.22 The conference replaced the

words “race, creed, or color” with the inclusive phrase “any kind.” The UN General

Assembly affirmed the modified text in 1995.23 An expansive interpretation of this

provision suggests that if peoples cannot exercise their right to self-determination

internally because their government oppresses them or does not represent them, then

they may exercise that right externally through secession.

37. This shows that the claim for remedial secession cannot be applied to Fairyland since

they have no claim of being misused or abused by the regime in Eastasia. The supreme

court of Canada in its ruling on the matter concerning the case of secession of Quebec

gave the opinion that international law "does not specifically grant component parts of

sovereign states the legal right to secede unilaterally from their 'parent' state."24 The

Supreme Court of Canada's opinion stated that the right of a people to self-

determination was expected to be exercised within the framework of existing states, by

negotiation, for example. Such a right could only be exercised unilaterally under certain

circumstances, under current international law.25

38. The court stated in its opinion in the case concerning the Advisory Opinion on Kosovo

that under international law, the right to secede was meant for peoples under a colonial

rule or foreign occupation. Otherwise, so long as a people have the meaningful exercise

of its right to self-determination within an existing nation state, there is no right to

secede unilaterally. The referendum conducted by the people of Fairyland was thus

illegitimate as provided for in the constitution of Eastasia. The referendum was not a

21 G.A. Res. 2625, U.N. GAOR, 25 th Sess., Supp. No. 28, at 121, U.N. Doc. A/8018 (1970) 22 U.N. Doc. A/Conf.157/24 23 G.A. Res. 50/6 of 24 October 1995 24 Re Secession of Quebec [1998] 2 SCR 217 25 Declaration of Principles of International Law; Kosovo advisory Opinion; see also John Dugard and David Raic;

The role of recognition in law and practice of secession’ in Kohen above n 2, 102; Antonello Tancredi ‘A Normative

‘due process’ in the Creation of States through secession’ in kohen above n 2, 188; James Crawford The Creation of

States in International Law (Second Edition, Oxford University Press, 2006) 5

9

valid democratic means for the Fairyland people to re-unite with their original

homeland Euroasia.

39. This therefore negate the claim of the territory of Fairyland to secede and thus deems the

secession illegal.

1.3 Annexation of Fairyland under International Law

40. The respondent submits that the annexation of Fairyland by Euroasia was illegal as it did

not adhere to International law. On 1 March 2014, the armed forces of Euroasia entered

the territory of Fairyland.26 The annexation was bloodless and rather peaceful as

Eastasia did not send any armed forces to protect its territory.27

1.3.1 Use of Force

41. According to the principle concerning the non-use of force in international relations, as

elaborated in the United Nations General Assembly Res 2625 (XXV) (containing the

Declaration on Principles of International Law concerning Friendly Relations and Co-

operation among States in accordance with the Charter of the United Nations), ‘The

territory of a State shall not be the object of acquisition by another State resulting from

the threat or use of force’. In the same document, it is also emphasized that ‘No

territorial acquisition resulting from the threat or use of force shall be recognized as

legal’, corollary recognized by the International Court of Justice as reflecting customary

international law,28 as well as the remaining text of Resolution 2625 (XXV) concerning

the prohibition of the threat or use of force.29 According to Article 2 of the UN General

Assembly’s Definition of Aggression, aggression consists in the ‘use of armed force by

a State in contravention of the Charter’, while according to its Article 6, a military

action undertaken in self-defense under Article 51 of the UN Charter does not constitute

an act of aggression. And indeed, in the practice, there are cases in which military

intervention to protect nationals abroad has been classified as a form of self-defence

26 See Paragraph 14 of Uncontested Facts 27 Ibid 28 See the Advisory Opinion on the Legal Consequences of the Construction of a Wall in the Occupied Palestinian

Territory [2004] ICJ Rep 136, para 87. Also according to art 5(3) of the UN General Assembly’s Res 3314 (XXIX)

on the Definition of Aggression ‘No territorial acquisition… resulting from aggression is or shall be recognized as

lawful’ 29 Case Concerning Military and Paramilitary Activities in and against Nicaragua [1986] ICJ Rep 14, para 191.

10

pursuant to Article 51 of the UN Charter. According to some authors, in fact ‘it is

perfectly possible to treat an attack on a State’s nationals as an attack on the State, since

population is an essential ingredient of the State’.30 Moreover, it must be remembered

that to be validly given, consent must be issued by a competent body ‘authorized to do

so on behalf of the State’.31 Eastasia declared the annexation to be illegal and in the

light of the public international law, on 1 April 2014, it sent a notification to Euroasia,

breaking off diplomatic relations between the two countries.

42. It is clear that the intervention was by use of force by the Euroasian military. It is illegal

under international law to annex territory by coercion or force, but the possibility

remains that one country can annex the territory of another through “legal” means.

Russia’s actions in annexing Crimea have been declared illegal by the United Nations.

In its resolution, the UN General assembly noted that the annexation was not only

against international law, but contravened the Ukrainian constitution.32

43. The respondent submits that due to the invalid secession and annexation, the claimant

does not qualify to be an investor under the Euroasia BIT

2.0 THE CLAIMANT’S FAILURE TO ABIDE BY PRE-ARBITRAL STEPS ACTS AS A

JURISDICTIONAL BAR

44. The respondent submits that the three-fold dispute resolution system prior to

commencing arbitration is mandatory and reflects the intentions of the parties to first

exhaust alternative remedies and that arbitration would only be a last resort. In addition,

the principle of pact sunt servanda33 makes all the provisions of the BIT binding upon

the parties in good faith. Thus, the claimant is bound by the BIT to seek redress from

the domestic courts of Oceania, as that is what is expressly provided for in the BIT.

45. Article 9 of the Euroasia BIT provides for the settlement of disputes through amicable

consultations, submission to domestic courts of Oceania and a twenty-four month

30 D Bowett, ‘The Use of Force for the Protection of Nationals Abroad’ in A Cassese (ed), The Current Legal

Regulation of the Use of Force (Martinus Nijhoff 1986) 41. 31 International Law Commission’s commentary to art 20 ARSIWA (n 36) 175, para 4. 32 Retreived from http://djilp.org/4964/critical-analysis-what-does-territory-annexation-and-succession-look-like-in-

the-modern-world/ on 18/9/2016 33 Article 26 of the Vienna Convention on Law of Treaties

11

cooling off period before resorting to arbitration. The claimant has failed to comply

with the latter step prior to instituting arbitration, constituting a jurisdictional hurdle.

2.1 Validity of the Pre Arbitral Steps

46. International arbitration agreements and investment treaties frequently impose pre-

arbitration procedural requirements that apply prior to commencement of arbitral

proceedings. The principal objective of most such pre-arbitration procedural

mechanisms is enhanced efficiency and avoidance of formal legal proceedings: parties

seek to encourage the amicable resolution of disputes through informal negotiations or

conciliation, thereby avoiding the expenses, delays, and contention of actual arbitral

proceedings.34

47. Courts have generally upheld the validity of agreements to negotiate only where there is a

reasonably specific and precise set of substantive and procedural guidelines against

which the parties’ negotiating efforts can be measured.35As one national court observed,

‘even when called upon to construe a clause in a contract expressly providing that

the parties are to apply their best efforts to resolve their dispute amicably, a clear

set of guidelines against which to measure a party’s best efforts is essential to

the enforcement of such a clause’.36

48. In this context, courts usually emphasize the definiteness of the negotiation (or

mediation) procedures set forth by the contract. For example, the English High Court

held that an agreement to ‘seek to resolve the dispute or claim by friendly discussion’

for four weeks prior to referring the claim to arbitration is enforceable.37

34 Klaus Peter Berger, ‘Law and Practice of Escalation Clauses’ (2006) 22 Arb Int’l 1; Simon Chapman, ‘Multi-

Tiered Dispute Resolution Clauses: Enforcing Obligations to Negotiate in Good Faith’ (2010) 27 J Int’l Arb 89;

Dyalé Jiménez Figueres, ‘Multi-Tiered Dispute Resolution Clauses in ICC Arbitration’ (2003) 14(1) ICC Ct Bull

82; Rachel Jacobs, ‘Should Mediation Trigger Arbitration in A Multi-Step Alternative Dispute Resolution Clause?’

(2004) 15 Am Rev Int’l Arb 161, 179 n 77; Eduardo Palmer and Eliana Lopez, ‘The Use of Multi-Tiered Dispute

Resolution Clauses in Latin America: Questions of Enforceability’ (2003) 14 Am Rev Int’l Arb 285; Michael Pryles,

‘Multi-Tiered Dispute Resolution Clauses’ (2001) 18 J Int’l Arb 159. 35 See, eg, Fluor Enters v Solutia, 147 F Supp 2d 648, 651 (SD Tex 2001); Jillcy Film Enters v Home Box Office

Inc, 593 F Supp 515, 520–1 (SDNY 1984); Elizabeth Chong Pty Ltd v Brown [2011] FMCA 565 para 23

(Australian Fed Mag Ct) 36 Mocca Lounge, Inc v Misak, 94 AD2d 761, 763 (NY App Div 1983) 37 Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] WLR(D) 293, [2014] EWHC 2104,

para 27 (Comm)

12

2.2 Binding Nature of Pre-Arbitration Procedural

49. If dispute resolution clauses unequivocally provide that negotiations or other procedural

steps are a mandatory obligation like in the present case, which must objectively be

complied with in order to proceed with arbitration, then some arbitral tribunals and

national courts have given effect to such language. In one case, for example, the arbitral

tribunal held that a Request for Arbitration was premature, and dismissed the

arbitration, because of the claimant’s failure to complete pre-arbitral dispute resolution

steps.38 Similarly, another tribunal concluded that the pre-arbitration procedures were

‘strictly binding upon the parties and govern their conduct before resorting to

arbitration’.39

50. Some investment arbitration tribunals have reached similar conclusions. Where they are

sufficiently certain to be valid, and where the applicable agreement or treaty contains

explicitly mandatory language, these tribunals have held that both cooling-off periods40

and, even more frequently, domestic litigation requirements41 must be complied with.

These decisions reason that particular pre-arbitration procedural requirements are

mandatory obligations and, in some cases (as discussed further below), jurisdictional

requirements whose violation requires dismissal of arbitral proceedings. More

generally, International Court of Justice authority also supports the mandatory (and

jurisdictional) character of at least some treaty requirements to negotiate the resolution

of disputes before commencing judicial proceedings.42

38 ICC Case No 12739, Award, cited in Michael Bühler and Thomas H Webster, Handbook of ICC Arbitration

(Sweet & Maxwell 2008) 67. See also ICC Case No 9977 (n 3). 39 ICC Case No 6276 (n 4). See also ICC Case No 9812, Final Award (2009) 20(2) ICC Ct Bull 69, 73. 40 See, eg, Ambiente Ufficio SpA v Argentine Repub, ICSID Case No ARB/08/9, Decision on Jurisdiction and

Admissibility (8 February 2013) paras 577–82; Murphy Exploration & Prod Co Int’l v Repub of Ecuador, ICSID

Case No ARB/08/4, Award on Jurisdiction (15 December 2010) para 108; Burlington Res Inc v Repub of Ecuador

& Petro Ecuador, ICSID Case No ARB/08/5, Decision on Jurisdiction (2 June 2010) paras 311–12; Salini

Costruttori v Morocco, ICSID Case No ARB/00/4, Decision on Jurisdiction (23 July 2001) (2003) 42 ILM 609, 612;

Enron Corpn & Ponderosa Assets LP v Argentine Repub, ICSID Case No ARB/01/3, Decision on Jurisdiction (14

January 2004) para 88 41 See, eg, Ambiente Ufficio v Argentina (n 33) paras 595–607; Urbaser SA & Consorcio de Aguas Bilbao Biskaia,

Bilbao Biskaia Ur Partzuergoa v Argentine Repub, ICSID Case No ARB/07/26, Decision on Jurisdiction (19

December 2012) paras 106–50; Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v Turkmenistan, ICSID

Case No ARB/10/1, Award (6 July 2013) paras 6.3.12–6.3.14; Hochtief AG v Argentine Republic, ICSID Case No

ARB/07/31, Decision on Jurisdiction (24 October 2011) para 55 42 See Case Concerning Application of the International Convention on the Elimination of All Forms of Racial

Discrimination (Georgia v Russian Fed’n) (Preliminary Objections), Judgment [2011] ICJ Rep 70, paras 115 et seq

(d

13

51. The question of whether the parties intended a pre-arbitration procedure to be mandatory,

or, alternatively, non-mandatory, has often turned on a case-by-case assessment of the

parties’ contractual language and intentions. As in other contexts, the use of imperative

terms, such as ‘shall’ or ‘must’, has sometimes been held to be consistent with a

mandatory obligation; in contrast, terms such as ‘can’, ‘may’, or ‘should’ are typically

non-mandatory.

52. In the words of one recent award, the requirement of a bilateral investment treaty for

initial resort to domestic litigation is ‘binding’:

‘That is apparent from the use of the term ‘shall’ which is unmistakably

mandatory and from the obvious intention of [the parties] that these

procedures be complied with, not ignored.’43

53. The respondent submits that Article 9(1), (2), (3), (4) and (5) of the Eurosia BIT parties

should be read conjunctively to respect the spirit and intent of the Euroasia BIT of

settling International arbitration as the last recourse of parties in an investment dispute.

54. Should the tribunal decide that the Eurosia BIT is applicable we aver that the Claimant

failed to strive towards peaceful resolution of the conflict save for the notification of the

existing dispute by way of writing to the Oceanian Ministry of Foreign Affairs and

subsequent intention to initiate arbitral proceedings. This exposes the fact that the

claimant considered arbitration as the first solution to the dispute and not as a last resort

having considered ‘amicable consultations.’

55. Additionally, Article 9(2) and 9(3) of the Euroasia BIT provide the submission of a

dispute to arbitration after the lapse of twenty-four months of the lodging of a

commercial dispute with the courts without reaching a conclusion. In this case, the

claimant did not proceed to lodge a case before the courts.

56. Some investment arbitration tribunals have treated provisions in bilateral investment

treaties (BITs) or investment agreements requiring the exhaustion of local remedies as

mandatory, jurisdictional requirements, holding that such requirements are essential

43 Philip Morris v Uruguay (n 8) paras 140–1 ICSID Case No ARB/10/7, Decision on Jurisdiction (2 July 2013)

14

preconditions to arbitration which are ‘an essential preliminary step to the institution of

ICSID arbitration’.44

57. The respondent thus avers that the failure of the claimant to abide to these procedural

mechanisms is a jurisdictional bar. The respondent insists that the claimant was required

to abide by pre-arbitral steps, and that the tribunal has no jurisdiction, until these steps

have been fulfilled.

3.0 THE CLAIMANT MAY NOT INVOKE ARTICLE 8 OF THE EASTASIA BIT

PURSUANT TO ARTICLE 3 OF THE EUROASIA BIT

58. The clause that the claimant has invoked in the Euroasia BIT in order to rely on the

dispute resolution clause in the Eastasia BIT is the Most Favored Nation (MFN) Clause.

Under this clause, the claimant is able to seek the same treatment from the respondent

that it accords to other investors from other countries.

59. Other than the fact that the claimant is not a national of Euroasia, and should therefore,

not benefit from the Euroasia BIT, the intention behind relying on the MFN clause is

utterly despicable. It can be correctly inferred that the reason behind the claimant

invoking the MFN clause is to entirely evade the requisite pre-arbitral steps in the

Euroasia BIT. This action has been dubbed by various tribunals as treaty shopping,45

and therefore, can be inferred to be the interpretation of BITs in either bad faith, or

contrary to the intentions of the drafters of the treaty.46 This text must be interpreted in

accordance with the principles of treaty interpretation, as codified in the Vienna

Convention.

60. In 1964 the International Law Commission (ILC) embarked on a multi-year project to

prepare a set of draft articles on the MFN clause.47 The idea for the project originally

arose in the context of the ILC’s work on the law of treaties, and, as noted in the

44 Wintershall v Argentina (n 58) paras 114–18; see also Impregilo SpA v Argentine Republic, ICSID Case No

ARB/07/17, Award (21 June 2011) paras 79–94. 45 Claudia Solomon and Sandra Fredrich, ‘How Most Favoured Nation Clauses in Bilateral Investment Treaties

Affect Arbitration’, (2012) Practical Law Resources. 46 Vienna Convention on The Law of Treaties, May 23 1969 1155 U.N.T.S. 331, article 31 and 32 47 Report of the International Law Commission to the General Assembly on the Work of Its Thirtieth Session,

[1978], Yearbook of the International Law Commission, A/CN.4/SER.A/1978/Add.1 (Part 2) (“ILC Report”) and

“Most-Favoured-Nation Clause”, Yearbook of the International Law Commission, 1970, Vol. II, pp 201-213.

15

introduction to the draft articles, they should be interpreted in light of the Vienna

Convention on the Law of Treaties (Vienna Convention).48

3.1 MFN Clause Application on Dispute Settlement Provisions

61. The ejusdem generis principle is the rule according to which a MFN clause can only

attract matters belonging to the same subject matter or the same category of subject as

to which the clause relates.

62. Article 9 of the ILC Draft Articles provides that the beneficiary State of a MFN clause

should acquire, for itself or for the benefit of persons or things in a determined

relationship with it, only those rights which fall within the limits of the subject matter of

the MFN clause, and only with respect to persons or things which are specified in the

clause or implied from its subject matter to benefit from it.

63. Draft Article 10 goes on to suggest that the rights acquired should be those that the

granting State extends to a third State within the limits of the subject matter of the MFN

clause and only if the beneficiary persons or things belong to same category of persons

or things which benefit from the treatment extended to the third party and have the same

relationship with that State.

64. This approach was taken in the Tecmed v. Mexico where it was stated interalia that;

“If the provisions of law of one of the Contracting Parties or obligations

under international law at the margins of the present Agreement, current or

future, between the Contracting Parties, result in a general or specific

regulation according to which it should be given to investments of investor

of the other Contracting Party, a treatment more favourable than that it is

envisaged in the present Agreement, such regulation shall prevail over the

present Agreement, to the extent that it is more favourable.”49

65. The ICSID Tribunal in Salini v. Jordan50 has explained the situation in the following

words:

48 Ibid paragraph 59 49 Técnicas Medioambientales Tecmed, S.A. v. United Mexican States [ICSID Case No. ARB(AF)/00/2] 50 Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13,

Decision on Jurisdiction, 29 November 2004.

16

“The Tribunal will observe that in [Ambatielos] case, Greece invoked the

most favoured-nation clause with a view to securing, for one of its

nationals, not the application of a dispute settlement clause, but the

application of substantive provisions in treaties between the United

Kingdom and several other countries under which their nationals were to

be treated ‘in accordance with “justice”, “right” and “equity”’. The

solution adopted by the Arbitration Commission, cannot there be directly

transposed in this specific instance.”51

66. The respondent thus contends that the MFN clause should not be advanced to the use on

dispute resolution as it does not expressly have those provisions.

67. This understanding as to the opinion of the Commission has also been reiterated by the

ICSID Tribunal in Plama v. Bulgaria where it held that “[the Ambatielos] ruling

relates to provisions concerning substantive protection in the sense of denial of justice

in the domestic It does not relate to the import of dispute resolution provisions of

another treaty into the basic treaty.”52

68. Recognizing the application of MFN clause to dispute settlement provisions may lead to

greater anomaly against the established principles of general international law. The

anomalies may include, ignoring or rejecting the courts and tribunals of the host states

as not reliable institutions for settlement of disputes; replacing the jurisdiction of one

tribunal with that of the other or replacing the intended applicable rules; or constituting

an international tribunal in the absence of any such mechanism provided under the basic

treaty. 26 In brief, the consent of the contracting parties will be replaced at the instance

of the interests of private commercial investors.

69. In certain cases, countries do not recognise the jurisdiction of international courts and

tribunal to settle disputes with certain countries for different reasons. India’s reservation

to the jurisdiction of the International Court of Justice to settle dispute with

51 Ibid paragraph 112 52 Plama Consortium Ltd v. Republic of Bulgaria, decision on jurisdiction, 8 Feb. 2005, ICSID Case No.

ARB/03/24, available at: paragraphs pg 215

17

Commonwealth Countries and subsequent reference by Pakistan in the Aerial Incident

of 10 August 1999.53

70. Many other cases have denied a claimant the ability to import more favorable dispute

settlement provisions through a most-favored- nation clause. Examples of such cases

include: using the MFN clause to import the entry into the force date of another treaty,54

bringing a claim for breach of fair-and-equitable treatment as provided by other bilateral

investment treaties concluded by one of the States party to the basic treaty,55 expansion

of the types of claims that could be submitted to arbitration,56 and broadening the

subject matter scope of a tribunal’s jurisdiction.57

3.2 MFN Application to Dispute Resolution has Effects on National Policy

71. It is an established principle in international law that consent to jurisdiction of both

parties to the dispute is a prerequisite for any court or tribunal to intervene in disputes

between the parties. In Plama v. Bulgaria the ICSID Tribunal followed such an

approach.58

72. Further, dispute resolution provisions in a specific treaty have been negotiated with a

view to resolving disputes under that treaty. Contracting States cannot be presumed to

have agreed that those provisions can be enlarged by incorporating dispute resolution

provisions from other treaties negotiated in an entirely different context.59

53 Case Concerning the Aerial Incident of 10 August 1999 (Pakistan v. India), Jurisdiction of the Court, Judgment of

21 June 2000, [2000] ICJ Reports, p. 12. 54 M.C.I. Power Grp., L.C. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Decision on the Application for

Annulment (July 31, 2007) 55 Telenor Mobile Commc’ns A.S. v. Republic of Hungary, ICSID Case No. ARB/04/15, Award (Sept. 13, 2006),

21 ICSID r ev . 603 (2006). 56 See Berschader v. Russian Fed’n, SCC Case No. 080/2004, Award of Apr. 21, 2006, ¶ 179 (Arbitration Inst. of

the Stockholm Chamber of Commerce) (limiting possible claims to determining the proper amount and mode paid in

expropriation claims). 57 Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction and Competence (June

19, 2009) 58 Plama Consortium Ltd v. Republic of Bulgaria, decision on jurisdiction, 8 Feb. 2005, ICSID Case No.

ARB/03/24, available at: paragraphs. 198-99 59 Ibid paragraph 207

18

3.3 Ambiguity of the MFN clause in the Euroasia BIT

73. The respondent avers that the MFN clause under article 3 of the Euroasia BIT is vague

and thus cannot be used to interpret expressly that it was designed to apply to the alter

BIT’s jurisdiction.

74. It is first necessary to look to the ordinary meaning of the term “treatment” to determine

the scope of application of the MFN clause.60 If treatment is deemed to include dispute

settlement, then the MFN clause also encompasses dispute settlement provisions.

75. Treatment is defined as “the act or manner of treating, as conduct or behavior towards

another party.”61 Specifically in BITs, treatment is “a broad term which . . . refers to the

legal regime that applies to investments once they have been admitted by the host

State.”62 The tribunal in the Plama case stated that it was “not clear whether the

ordinary meaning of the term ‘treatment’ . . . includes or excludes dispute settlement”63

and ultimately denied the claimant’s request to import a more favorable dispute

settlement provision from a third party treaty.

76. The respondent thus contends that the term treatment as used in this instance is not clear

and thus cannot be interpreted to mean that it was to confer such treatments as to

dispute resolution mechanisms.

ADMISIBILITY

4.0 CLAIMANT DID NOT MAKE A PROTECTED INVESTMENT, ESPECIALLY IN

THE LIGHT OF THE “CLEAN HANDS” DOCTRINE WITH REFERENCE TO

ARTICLE 1.1 OF THE EAST ASIA BIT;

4.1 Eastasia BIT is the Applicable Law in Regards to the Making of the Investment

77. The Respondent submits that the Eastasia BIT is the applicable law in this case.64 The

claimant is a citizen of Eastasia and therefore bound by the treaties that the state of

60 See Vienna Convention, art. 31(1) 61 Webster’ s new International Dictionary 2435 (3d ed. unabridged 2002) 62 Rudolf Dolzer & Margret Stevens, bilateral investment treaties 58 (1995) (citations omitted) 63 Plama, 20 ICSID rev 62 64 Banifatemi, Yas. "The Law Applicable in Investment Treaty Arbitration." Arbitration under international

investment agreements: a guide to the key issues (2010): 191-210.

19

Eastasia concludes. As we have submitted above the annexation was illegal and it has

no effect in international law. Therefore, the Claimant being a citizen of Eastasia ought

to abide by the Eastasia BIT.

78. In Alternative, the Respondent submits that the applicable law at the time of making the

investment was the Eastasia BIT. Obligations and rights accrue basing on the law that

was in operation when a particular action was done.65 The law that was in operation at

making of the investment is the Eastasia BIT, since the illegal secession had not

occurred. 66 The annexation occurred on 28 of March 2014 and the investment was

made in the year 1998, therefore assuming it was a proper annexation it cannot operate

retrospectively. Article 11 of Euroasia BIT provides that the Euroasia BIT shall not

apply to events that occurred prior to coming into operation of the treaty The treaty had

not come in to force when the investment was done.

79. We submit that although the claim of corruption concerns how the claimant obtained a

license which was obtained after he bought share, the claim still involves the making of

an investment. The determinative factor in the clean hands doctrine is how the

investment was made.67 We submit that the Claimant bought shares before applying for

the license and that buying of shares alone is not a conclusive event that marks the

making of an investment. The test in making of an investment is legal and factual; it is

legal in the sense that an investment will be deemed to have being made when the legal

requirements are met. It is factual because the investment ought to be made as matter of

fact and in reality. This means that both requirements are essential and cannot be devoid

of each other. We submit basing on both legal and factual requirement, the investor

started to make the investment by buying shares and it was concluded by obtaining a

license. This position was advanced by the tribunal in Desert Line v. Yemen68"in

accordance with the law" provisions, maintaining that they exclude investments “made

in breach of fundamental principles of the host State's law.

65 Douglas, Zachary. "Other specific regimes of responsibility: investment treaty arbitration and ICSID." The law of

international responsibility. Oxford University Press, Oxford (2010): 815-842. 66Brown-John, C. Lloyd. "Self-Determination, Autonomy and State Secession in Federal Constitutional and

International Law." S. Tex. L. Rev. 40 (1999): 567. 67McLean, R. David, Tianyu Zhang, and Mengxin Zhao. "Why does the law matter? Investor protection and its

effects on investment, finance, and growth." The Journal of Finance 67, no. 1 (2012): 313-350. 68Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No. ARB/05/17.Award.

20

4.2 The Claimant’s Investment is not Protected

80. The Respondent submits that the claimant’s investment is not protected. In order for an

investment to be protected, it must comply with the legal requirements of the host

country. 69 This is a position retaliated in both treaties and customary international law.

A claimant who has being involved in corrupt dealings is not a protected investor.70

81. The Respondent submits that the claimant has being involved in the following illegal

dealings; he has given a bribe in order to procure a license which is contrary to the laws

of the respondent state. The Claimant has further supplied arms to a state that intends to

invade another state which threatens international peace. The acts of the claimant are in

violation of both local and international law.71 The violation of law can lead to an

investor losing the status of protected as stated in the case of World Duty Free

Company Limited v. The Republic of Kenya,72 the tribunal found that the claimant’s

admission of paying a bribe to the President of the host State was a violation of

international public policy and law. This led to the investment not protected.

82. There is evidence that the Claimant gave bribes contrary to clean hands doctrine. The

President of the National Environmental Authority offered to give evidence against the

claimant. This is further corroborated by the initial investigation which led to institution

of criminal proceedings against the Respondent. Generally, in order for the prosecution

to make a decision of opening criminal proceedings, even after evaluation of evidence it

shows that there is a strong case against the Claimant. It is for this reason that the

respondent submits that the claimant is not a protected investor as opined in in Gustav

F W Hamester GmbH & Co KG v. Ghana,73 the Tribunal summarized the situation

as follows:

“An investment will not be protected if it has been created in violation of national

or international principles of good faith; by way of corruption, fraud, or deceitful

conduct; or if its creation itself constitutes a misuse of the system of international

69Dolzer, Rudolf, and Christoph Schreuer. Principles of international investment law. Oxford University Press, 2012. 70 Sornarajah, Muthucumaraswamy. The international law on foreign investment. Cambridge University Press, 2010. 71Brower, Charles N., and Stephen W. Schill. "Is Arbitration a Threat or a Boom to the Legitimacy of International

Investment Law." Chi. J. Int'l L. 9 (2008): 471. 72World Duty Free Company Limited v. Republic of Kenya (ICSID Case No. ARB/00/7). 73Gustav F W Hamester GmbH & Co KG v Ghana, Award, ICSID Case No ARB/07/24, IIC 456 (2010),

21

investment protection under the ICSID Convention. It will also not be protected if

it is made in violation of the host State’s law.”

83. A claimant who comes to court with unclean hands should not be accorded any

protection. A person cannot benefit from his own wrong doing.74It is both against the

law and public policy. This is illustrated by the case of Inceysa v. El Salvador,75 where

the tribunal found that Inceysa a company which obtained a contract through

fraudulently misrepresentation against the El Salvador-Spain BIT which required each

contracting State to protect investments made “in accordance with its legislation,” it

found that it had no jurisdiction because Inceysa’s investment did not meet the BIT’s

requirement of legality.

84. The Respondent relies on the principle of ex turpi causa non oritur action. This is

illustrated by the case of Plama v. Bulgaria “granting the ECT’s protections to

Claimant’s investment would be contrary to the principle nemo auditor propriam turpi

dunem allegans.” No man shall benefit from his wrong doing. The Claimant wants to

benefit from an investment he made illegally.

85. The Standard of proof for clean hands doctrine is the same as for all other equitable

principles. Equity demands a beyond reproach standard.76 This would mean, that even

the meeting with the president of National Environment, and afterwards getting the

license contrary to normal procedures shows the claimant acted inequitably. He who

comes to equity must come with clean hands. This tribunal is not a criminal court but a

civil tribunal therefore the standards of proof applicable is the balance of probabilities.77

It is our humble submission that we have discharged the standard of proof as required

by law. We have fulfilled by proving by the claimant own admission, that he met the

president of environmental agency, he got unfair advantage from the meeting and the

74Weiler, Todd. International investment law and arbitration: leading cases from the ICSID, NAFTA, bilateral

treaties and customary international law. Cameron May, 2005. 75Nceysa Vallisoletana S.L. v. Republic of El Salvador. ICSID Case No.ARB/03/26. El Salvador-Spain BIT. Aug 2,

2006. Award (English). Aug 2, 2006. 76Bahls, Steven C. "Resolving Shareholder Dissension: Selection of the Appropriate Equitable Remedy." J. Corp. L.

15 (1989): 285. 77 Farrand, James R. "Ancillary Remedies in SEC Civil Enforcement Suits." Harvard Law Review (1976): 1779-

1814.

22

president claims that he receives a bribe from the Claimant. Such an investor ought not

to be protected by this tribunal.78

4.3. In Alternative the Clean Hands Doctrine Need not be Provided Expressly in the

BIT

86. The Respondent submits that in the unlikely event that the tribunal will find that the

Euroasia BIT is applicable, the clean hand doctrine need not be provided for expressly.

79The clean hand doctrine is an inherent requirement of all investments including the

Claimant’s. Every investor must make their investment in accordance with law of host

state. This is despite the fact there is a provision that sanctions the investment or not.80

87. Tribunals guard against being used to sanction illegality. There is nothing legal that can

emanate from an illegality. The Claimant made is investment by way of giving bribes.

This principle is based on the fact the law will not allow unjust enrichment.81 The law

cannot sanction the illegality. As illustrated in case of Plama Consortium Ltd. v.

Republic of Bulgaria, 82The treaty did not have a provision calling for the investment’s

conformity with a given law. The tribunal held that this did not mean it protects “all

kinds of investments, including those contrary to domestic or international law. “

88. The Respondent submits that clean hands doctrine is a general principle of international

law. It is principle that exists independent of the treaty.83 The Claimant are bound by

the doctrine despite lack of an express provision in the Euroasia BIT. This is a position

that was advanced in the case of Gustav F W Hamester GmbH &Co KG v Republic

of Ghana, the tribunal found that,

“independent of the text of the treaty: [A]n investment will not be

protected if it has been created in violation of national or international

78 Franck, Susan D. "Foreign direct investment, investment treaty arbitration and the rule of law." McGeorge Global

Business and Development Law Journal 19 (2007): 337. 79Anenson, T. Leigh, and Donald O. Mayer."'Clean Hands' and the CEO: Equity as an Antidote for Excessive

Compensation." University of Pennsylvania Journal of Business Law 12 (2010): 101-165. 80 Llamzon, Aloysius P. Corruption in International Investment Arbitration. Oxford University Press, 2014. 81 Cremades, Bernardo M. "Investment Protection and Compliance with Local Legislation." ICSID review 24, no. 2

(2009): 557-564. 82Plama Consortium Limited v. Republic of Bulgaria, Award. 27 Aug 2008. Plama Consortium Limited v. Republic

of Bulgaria, ICSID Case No.ARB/03/24.Award. 83De Alba Uribe, Mariano. "Drawing the Line: Addressing Allegations of Unclean Hands in Investment

Arbitration." Available at SSRN 2612402 (2015).

23

principles of good faith; by way of corruption, fraud, or deceitful conduct;

if its creation itself constitutes a misuse of the system of international

investment protection under the ICSID [International Centre for the

Settlement of Investment Disputes] Convention [;] [or] if it is made in

violation of the host State's law.”

MERITS

5.0 CLAIMANT’S INVESTMENT WAS NOT EXPROPRIATED BY THE

RESPONDENT

5.1. The Respondent did not Expropriate the Claimant’s Investment

89. The Respondent did not expropriate the investment of the claimant. This is because

sanctions issued do not meet the threshold of expropriation under the Eastasia and

Euroasia BIT. 84 The treaty makes reference to taking the property directly or indirectly.

The Respondent did not take the property directly or indirectly. 85 The Claimant has his

investment, it is not possible for the investment to be taken and still remain with the

Claimant This is illustrated by case of Sea-Land case86 one of the issues was alleged

expropriation of a bank account. The Tribunal did not find any substantial deprivation

of or interference with the claimant’s rights to his account and rejected the claim by

noting that the “account remains in existence and available in reals, at Sea-Land’s

disposal”.

90. In alternative we submit that the Respondent did not indirectly expropriate the property

of the Claimant. The respondent only acted in international interest to avert

international crisis which threatened international security. 87 Such acts that are in

public interest cannot be said to be expropriation. This is illustrated by the case of in

the James,88 the Court said that:

84 Subedi, Surya P. International investment law: reconciling policy and principle. Bloomsbury Publishing, 2016. 85Marlles, Justin R. "Public purpose, private losses: Regulatory expropriation and environmental regulation in

international investment law." J. Transnat'l L. & Pol'y 16 (2006): 275. 86A-Land Services v. Pepper Source Cite:941 F.2d 519 (7th Cir. 1991). 87Cheng, Tai-Heng."Power, Authority and International Investment Law." American University International Law

Review 20 (2005): 465. 88ECtHR (the James case).

24

91. “The taking of property in pursuance of a policy calculated to enhance social justice

within the community can properly be described as being ‘in the public interest cannot

amount to expropriation”.

92. We submit that there was no less restrictive measure to achieving international peace.89

The Respondent used the only available option to maintain international peace and

remedy breach of various international law principles. This was the position in SD

Myers v. Canada90

93. We submit that expropriation is a factual and a legal issue. The Claimant does not have

facts to prove that there was any expropriation. The Respondent only exercised the

power authorized by law91. This is consonance with the principle established in n Gold

Reserve Inc. v. Venezuela 92

94. The claimant investment was not indirect expropriated. In order for an investment to be

expropriated, there must be an irreversible damage caused to the investment.93 The

claimant investment was not expropriated since he did not lose all his economic interest.

The Claimant can trade with other states and denounce the actions of the state of

Euroasia. What befell the investment of the claimant cannot be deemed to have

rendered the investment useless since he had available options. This is position

advanced in the Starrett Housing case, the tribunal was of the view of rights “rendered

so useless that they must be deemed to have been expropriated.”

5.2 The Claimant has not met the Requirements for Indirect Expropriation

95. The Respondent submits that the claimant has not met the requirements for indirect

expropriation. These requirements are; state actions substantially deprive a foreign

investor of the economic use and enjoyment of its investment; and the state

actions were not reasonably predictable to the investor.94On the first issue of

89Cheng, Tai-Heng."Power, Authority and International Investment Law." American University International Law

Review 20 (2005): 465. 90D Myers Incorporated v Canada, Order, 2004 FC 38, (2004) 244 FTR 161 91 Dolzer, Rudolf. "New Foundations of the Law of Expropriation of Alien Property." The American Journal of

International Law 75, no. 3 (1981): 553-589. 92(ICSID AF 2014), 93Dolzer, Rudolf, and Margrete Stevens. "Bilateral Investment Treaties* s." (1995). 94 Ruzza, Alice. "Indirect Expropriation in International Investment Law. "PhD diss., University of Trento, 2013.

25

substantially depriving a foreign investor of enjoyment and use of its investment.95The

Respondent submits that the claimant can enjoy the investment after fulfilling certain

requirements. The conditions only prohibit association with the state of Euroasia that

cannot be deemed as substantially depriving economic benefit.96 We submit that there is

a difference between deprivation and conditions. In order for the claimant, to establish

that their investment has been deprived, he must prove that the actions of state left him

with no other viable options. We submit that the Claimant has several viable options

including denouncing the dual citizenship of Euroasia and remaining in Eastasia and

trading with other states. In support of this preposition the case of Pope & Talbot v.

Canada97 the tribunal provided that; “The test is whether that interference is

sufficiently restrictive to support a conclusion that the property has been ‘taken’ from

its owner.”

96. On the second issue, Respondent actions were reasonably predictable. The claimant could

reasonably foresee the results that befell it, since both Euroasia and Eastasia BIT gives

state parties rights to take measures to restore international peace. Such measures are

anticipated by International Emergency Economic Powers Act 1992 and the BIT. The

Claimant ought to know any actions that breach international peace will lead to

sanctions. The Claimant concluded a second contract even after the Parliament of

Euroasia authorized intervention, the statement of facts provides that “The deliberations

of the Euroasia Parliament on the Government’s proposal to intervene included

discussion of the Fairyland letter of 23 January 2014”98 On 28 February 2014, they

concluded a contract, effective of 1 April 2014, for a period of another six years.99The

Claimant ought to have assessed the situation and know the conclusion of arms contract

will lead to breach of international peace as stated in Metalclad Corp. v. United

Mexican States100Foreign investors who engage in little or no due diligence

95Fortier, L. Yves, and Stephen L. Drymer. "Indirect expropriation in the law of international investment: I know it

when I see it, or caveat investor." ICSID Review 19, no. 2 (2004): 293-327. 96 Yannaca-Small, Catherine. " Indirect Expropriation" and the" right to Regulate" in International Investment Law.

OECD, 2004. 97Pope & Talbot Inc. v. The Government of Canada, Interim Award. 26 Jun 2000. 98 Compromise page 56 paragra [ph 3 99 Ibid page 36 first line 100Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1.

26

should not receive compensation when reasonable due diligence would have

exposed a risk of indirect expropriation.101

97. Finally another test is that the Tribunal examines whether the purpose of the state actions

was to enrich itself.102 We submit that the respondent has not benefitted in any way

from Claimants investment. In Eudoro A.Olguín v Republic of Paraguay103 the

tribunal was of the view that it has to examine whether the purpose of the alleged

expropriation was the enrichment of the host state so as to amount to expropriation.

5.3 The Respondent Actions Were Within the Scope of Article 10 of Euroasian BIT and

Article 9 Eastasia BIT

98. The Respondent acted in accordance with the obligation to maintain international peace

as stated under Article 9 and 10 of both Eastasia and Euroasia BIT respectively. We

submit that, under international law every state has an obligation to maintain internal

peace and security. The actions of the Claimant contribute to disruption of international

peace.

99. States are only allowed to intervene and use force against others in limited circumstances.

States can only intervene in cases of self defence and in cases authorized by the UN-

Security Council. Article 1 of UN Charter provides that “The Purposes of the United

Nations are: To maintain international peace and security, and to that end: to take

effective collective measures for the prevention and removal of threats to the peace,”

The respondent being a member of UN is obliged to assist in maintaining international

peace. Members of the UN are obliged by Article 1(5) of UN Charter to assistance in

any action it takes in accordance with the present Charter “The nature of the obligations

under Article 1(1) and 1(5) places various duties.

100. The Respondent was justified in issuing sanctions104. The sanctions are authorized if

they adhere to the criteria of pursuing a well-defined purpose (es), a stipulated time

101 Isakoff, Peter David. "Defining the scope of indirect expropriation for international investments. "Global

Business Law Review 3, no. 2 (2013).) 102 Edsall, Rachel D. "Indirect Expropriation under NAFTA and DR-CAFTA: Potential Inconsistencies in the

Treatment of State Public Welfare Regulations." BUL Rev. 86 (2006): 931. 103Award. 26 Jul 2001. Eudoro Armando Olguín v. Republic of Paraguay, ICSID Case No. ARB/98/5. 104Kondoch, Boris. "The limits of economic sanctions under international law: The case of Iraq." Journal of

International Peacekeeping 7, no. 1 (2001): 267-294.)

27

frame, be subject to regular review, provide clearly stipulated conditions for their

determination, and not be politically motivated.105

101. The above criteria are further supported by the Bossuyt Report, which provides for the

test for validity of sanctions. The report provides for the following tests; the first is

whether the sanctions are being imposed for a valid reason, meaning there must be a

threat of or an actual breach of international peace and security. We submit that the state

of Euroasia has intervene into the territory of the state of Eastasia, which is an act that

threatens international peace since that can result into war.

102. The second test is that the sanctions must target the proper parties who are responsible

for the threat or breach of the peace and not the innocent civilians. The Claimant is not

an innocent party since he is the supplier of the arm that are used to intervene into

territory of another state. Third, only proper goods or objects -not humanitarian goods –

may be targeted. The Claimant investment is not humanitarian goods this is a profitable

venture. Fourth and fifth, sanctions must be reasonably limited by time and

effectiveness. The Sanction are limited the time when the state of Euroasia will cease to

interfere with territorial integrity of Eastasia Sixth, the protest of governments,

NGOs, inter-governmental bodies, scholars, and the general public must be taken into

account” The International bodies have not being affected by the sanctions.106

5.4 The Respondent Acted in Accordance with the Doctrine of Police Powers

103. The respondent submits that the doctrine of police power is applicable in this case. The

doctrine authorizes the state to exercise sovereign power.107 This includes taking certain

actions which a sovereign is expected to take. The Respondent passed a law stating that

it could issue sanctions in certain cases. The International Emergency Economic Powers

Act 1992 authorizes the President to declare the existence of an unusual and

extraordinary threat to, international security which in whole or substantial part

105. (UN Doc. A/AC182/L100 (1998), para. 41-47.) 106The Adverse Consequences of Economic Sanctions on the Enjoyment of Human Rights (The Bossuyt Report)

, E/ CN. 4/ Sub. 2/ 2000/ 33 of 21 June 2000 107 Mostafa, Ben. "Sole Effects Doctrine, Police Powers and Indirect Expropriation under International Law, The."

Austl. Int'l LJ 15 (2008): 267.

28

originates outside the Republic of Oceania.108Such an act is carried out in exercise of

state sovereignty.

104. We submit that the doctrine of police powers is a recognized principle of international

law, provided the actions in consideration are done in a non-discriminative manner.109

The claimant was not discriminated since the sanctions applied to all other sectors, and

it only happened that the claimant was the only arm producer.110 The Claimant was not

afforded a different treatment from the one which was generally accorded to other

persons. This position was opined in Too V. Greater Modesto Insurance

Associates111award, in which the tribunal stated:

[A] State is not responsible for loss of Property or for other economic

disadvantage resulting from bona fide general taxation or any other action that is

commonly accepted as within the police power of States, provided it is not

discriminatory and is not designed to cause the alien to abandon the property to

the State or to sell it at a distress price (...)

105. The following are the requirements that must be fulfilled for the doctrine police power

to apply; the state is exercising its power in good faith, for greater purpose and in non-

discriminative manner. 112The Respondent was exercising his power in good faith and

was not motivated by any political or ulterior motives. The respondent acted only for

the purpose of restoring international peace. The respondent acted for public welfare

namely restoration of international peace. This position was advanced in the case of

Suez InterAgua v. Argentina113

106. The Respondent acted in non-discriminative manner. The Respondent did not target a

particular investor or sector. The sanctioned were applied across the boards. There was

no isolation on any basis, except the investor trading with state of Euroasia even if they

108 Compromise page 56 last paragraph 109Alvares, Jose, and Kathryn Khamsi."The Argentine Crisis and Foreign Investors." Institute for International Law

and Justice (2008). 110Clodfelter, Mark A. "The Adaptation of States to the Changing World of Investment Protection through Model

BITs." ICSID review 24, no. 1 (2009): 165-175.

112Waelde, Thomas, and Abba Kolo."Environmental regulation, investment protection and ‘regulatory taking’in

international law." International and Comparative Law Quarterly 50, no. 04 (2001): 811-848. 113Sociedad General de Aguas de Barcelona S.A., and Inter Aguas Servicios Integralesdel Agua S.A. v.

The Argentine Republic, ICSID Case No. ARB/03/17 .2010

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are from the Respondent state. This position is illustrated in the Saluka v. Czech

Republic114

107. It is for the above reasons that we submit that the state acted within the doctrine of

police powers.

6.0 THE CLAIMANT CONTRIBUTED TO DAMAGE SUFFERED BY HIS

INVESTMENT

6.1 Claimant Indirectly Contributed to the Unauthorized Use of Force Against the

State of Eastasia

108. The UN Charter authorizes only two circumstances in which force may be used against

a state as stated in Article 42 and 51.115 Article 42 provides that the Security Council

may consider use of force if measure in Article 41 fails.116 On the other hand Article 51

recognizes the inherent right of self-defense.117 The Claimant knows or ought to have

known by virtue of his friendship with minister of defence that the use of force by state

of Euroasia does not fall within the authorized instances.

109. The claimant contributed into the unjustified intervention and use of force contrary to

the UN Charter this is a position that was discussed in the case of Nicaragua v. United

States of America (merits)118 Where ICJ held that the support given by the United

States to the military and paramilitary activities of the contras in Nicaragua, by

financial support, training, supply of weapons, intelligence and logistic support,

constitutes a clear breach of the principle of non-intervention. Although the Respondent

recognizes that an individual cannot be said to intervene into another state but can assist

in intervention.

114Saluka Investments B.V. v. The Czech Republic, Partial Award. 17 Mar 2006 115Ruwanthika Gunaratne and Public International Law at https://ruwanthikagunaratne.wordpress.com, 2008 116 United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI, 117 Ebegbulem, Joseph C. "The Failure of Collective Security in the Post World Wars I and II International System."

Journal of Humboldt-Universität zu Berlin 2, no. 2 (2011): 1. 118Military and Paramilitary Activities in and against Nicaragua. (Nicaragua v. United States of America). Merits,

Judgment. I.C.J. Reports 1986,

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6.2 There is Causation between the Acts of the Claimant and Result to his

Investment

110. The respondent relies on the principle of causation. As it was stated in Monarch

Steamship Co. v. Karlshamns Oljefabriker,119” Causation is a mental concept,

generally based on inference or induction from uniformity of sequence as between two

events that there is a causal connection between them”

111. The respondent submits that both proximate cause and factual cause has been

established. The test for causation to exist is always in two fold, the foreseeability of the

result and a direct link between the action and the result.

112. The claimant was in a position to know that his actions will cause breach of

international peace. The claimant was further in position to know that Article 10 of

Euroasia BIT and Article 1 of UN Charter grants the state parties the responsibility to

maintain international peace. Consequently, any action that is a threat to international

peace will be sanctioned by member states to the Charter and BIT. Therefore, there is a

direct link between the actions of the claimants and what befell his investment.

6.2.1 The effect of claimant’s contribution into the damage suffered

113. The claimant contributed fully to the damage suffered. 120The Claimant is a major

contributor to the loss that his investment has suffered. The Claimant sold weapon

knowing very well that they will be used to intervene into another nation without caring

about the effect of his actions. It is the weapon that helped to intervene into the territory

of the state of Eastasia. In fact, the state of Euroasia intended to modernize their arms in

order to intervene. The Claimant assisted them in achieving their desired goal. This

amounts to material and significant contribution therefore it is the sole cause of the

sanctions and consequent loss.121This is apposition advanced in Occidental Petroleum

119[1949] A.C. 196 (H.L.) 228 (Eng. 120Schill, Stephan W. "International Investment Law and the Host State’s Power to Handle Economic Crises–

Comment on the ICSID Decision in LG&E v. Argentina." Journal of International Arbitration 24, no. 3 (2007): 265-

286. 121Veljanovski, Cento G. Economic principles of law. Cambridge University Press, 2007.

31

Corporation and Occidental Exploration and Production Company v. The

Republic of Ecuador,122

114. The Respondent further relies on the authority of MTD v. Chile,123 the tribunal found

that the investors

6.3 The Claimant is not entitled to Damages

115. The Respondents submits that the Claimant is not entitled to compensation. In order for

the Respondent to be responsible for the compensation, the loss must flow from the

Respondent actions; this is supported by the case of Too V. Greater Modesto

Insurance Associates,124 where the claimant sought compensation for the seizure of his

liquor license by the United States Internal Revenue Service. The Tribunal said:

“…A State is not responsible for loss of property or for other economic

disadvantage resulting from bona fide general taxation or any other action

that is commonly accepted as within the police power of States, provided

it is not discriminatory and is not designed to cause the alien to abandon

the property to the State or to sell it at a distress price…”]

116. The state was only exercising control and authority that is authorized by the law. The

law authorizes the president of Oceania to make orders in public interest and for the

sake of national and international security. This position is supported by the holding in

Tecnicas Medioambientales Tecmed S.A, v. The United Mexican States,125 although

the Tribunal found an expropriation.

117. The rules of damages states that the damage must be expressly proved and flow

directly.126 The Claimant is making a general claim that is not supported in law. There

is no evidence to show the loss suffered.127 There is a need for concrete evidence such

122ICSID Case No. ARB/06/11 123MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7. 124Greater Modesto Insurance Associates and the United States of America, award of December 29, 1989, ... 125Técnicas Medioambientales Tecmed SA v Mexico, Award, ARB(AF)/00/2, 10 ICSID Rep 130, (2004) 43 ILM

133, IIC 247 (2003), 29th May 2003, 126 Howard, Tracy Lee. "Compensating an Owner to the Full Extent of His Loss: A Reevaluation of Compensable

Damages in Louisiana Expropriation Cases." La. L. Rev. 51 (1990): 821. 127 Gann, Pamela B. "Compensation Standard for Expropriation." Colum. J. Transnat'l L. 23 (1984): 615.

32

as books of accounts, receipts and value of cancelled contracts to prove damage.128

Damages cannot be presumed as stated by Alderson B in the famous case of Hadley v

Baxendale:129

"[w]here two parties have made a contract which one of them has broken,

the damages which the other party ought to receive in respect of such

breach of contract should be such as may fairly and reasonably be

considered either arising naturally, i.e., according to the usual course of

things, from such breach of contract itself, or such as may be reasonably

be supposed to have been in the contemplation of both parties, at the time

they made the contract, as the probable result of the breach of it."

118. The claimant ought to prove that the market value of the investment, assets (adjusted

book value, net book value, liquidation value), and revenue (discounted cash flow,

capitalized cash flow, adjusted present value). 130The claimant has failed to prove the

above points therefore he is not entitling to that which he cannot prove.

119. The respondent relies on the case of Amoco International Finance Corp. v. Iran,

131that “one of the most established rules in the law of the international responsibility of

states is that no reparation for speculative or uncertain damage can be awarded.”

120. The tribunals have emphasized on proof and proof. 132We ask this tribunal to insist on

the proof of the matters as stated in the case of Levitt v Islamic Republic of Iran133 the

Tribunal stated that:

"[I]n principle, loss of profits constitutes a proper head of damages

for breach of contract provided the Claimant can establish to the

Tribunal's satisfaction that such profits would have accrued if the

contract had proceeded to completion."

128 Eiselen, Sieg. "Unresolved damages issues of the CISG: a comparative analysis." Comparative and International

Law Journal of Southern Africa 38, no. 1 (2005): 32. 129Hadley v Baxendale [1854] EWHC J70 130Nikièma, Suzy H. "Compensation for Expropriation." Winnipeg, Canada: The International Institute for

Sustainable Development (2013). 131Partial Award of July 14, 1987, Iran–US CTR, (1987), § 238. 132Edlin, Aaron S. "Cadillac contracts and up-front payments: Efficient investment under expectation damages."

Journal of Law, Economics, and Organization 12, no. 1 (1996): 98-118. 1333 William J. Levitt v. The Government of the Islamic Republic of Iran et al., Award No. 297-209-1 (22. April

1987), reprinted in 14 Iran-U.S. C.T.R. 19

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121. The Claimant has not proved that they mitigated the damage as stated in EDFI v.

Argentina,134 the tribunal stated that “the duty to mitigate damages is a well-established

principle in investment arbitration”.

7.0 PRAYERS

The Respondent prays that this Tribunal finds that;

(a) It does not have Jurisdiction to entertain this matter;

(b)The Claimant is not a protected Investor;

(c) The Claimant’s investment was not expropriated by the Respondent;

(d) The Claimant contributed to the damage suffered by his investment and

(e) The Claimant is not entitled to damages.

134EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v.

Argentine Republic, ICSID Case No. ARB/03/23.

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