ΤΕΑΜ OWADA FOREIGN DIRECT INVESTMENT ...EDF EDF International S.A., SAUR International S.A. and...

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ΤΕΑΜ OWADA FOREIGN DIRECT INVESTMENT INTERNATIONAL ARBITRATION MOOT COMPETITION 8-11 NOVEMBER 2018 ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE STOCKHOLM CHAMBER OF COMMERCE Fenoscadia Limited (Claimant) v. The Republic of Kronos (Respondent) MEMORIAL FOR CLAIMANT 17 September 2018

Transcript of ΤΕΑΜ OWADA FOREIGN DIRECT INVESTMENT ...EDF EDF International S.A., SAUR International S.A. and...

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ΤΕΑΜ OWADA

FOREIGN DIRECT INVESTMENT

INTERNATIONAL ARBITRATION MOOT COMPETITION

8-11 NOVEMBER 2018

ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE

STOCKHOLM CHAMBER OF COMMERCE

Fenoscadia Limited (Claimant)

v.

The Republic of Kronos (Respondent)

MEMORIAL FOR CLAIMANT

17 September 2018

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TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................................... i

LIST OF AUTHORITIES ...................................................................................................... iii

LIST OF LEGAL SOURCES ............................................................................................... vii

LIST OF ABBREVIATIONS .............................................................................................. xvii

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

SUMMARY OF ARGUMENTS ............................................................................................. 4

ARGUMENTS .......................................................................................................................... 5

PART ONE: JURISDICTION AND ADMISSIBILITY ...................................................... 5

Ι. THIS TRIBUNAL HAS JURISDICTION OVER THE CLAIM SINCE

CLAIMANT IS A TICADIAN ENTERPRISE ................................................................. 6

A. Respondent Is Estopped from Challenging Claimant’s Ticadian Nationality ......... 7

B. Claimant’s Incorporation in Ticadia Renders It a Covered Investor Under Ticadia-

Kronos BIT ......................................................................................................................... 9

C. No General Rule of “Real and Effective Nationality” Applicable to Corporations

Exists Under International Law ........................................................................................ 11

D. Even if this Tribunal Decides to Consider Criteria Beyond Incorporation, Claimant

Retains its Protection Under the Ticadia-Kronos BIT ..................................................... 13

a. Claimant is controlled by Ticadian nationals ........................................................... 13

b. Claimant’s seat of management and financial control is located in Ticadia ............ 14

II. THIS TRIBUNAL SHOULD CONSIDER CLAIMANT’S CLAIMS

ADMISSIBLE ..................................................................................................................... 16

A. Claimant Withdrew from the Domestic Proceedings and No Decision Was Ever

Rendered ........................................................................................................................... 16

B. In any Event, the Domestic Proceedings and the Present Arbitral Proceedings Do

not Involve the Same Dispute .......................................................................................... 17

a. The causes of action are manifestly different ........................................................... 19

b. The reliefs sought are patently different .................................................................. 20

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III. RESPONDENT’S COUNTERCLAIM IS NOT ADMISSIBLE ............................ 21

Α. Respondent Is not Permitted to Submit Counterclaims Under the Ticadia-Kronos

BIT and Claimant Never Consented Respectively ........................................................... 22

B. Respondent’s Counterclaim Bears no Connection to the Principal Claim ............ 24

PART TWO: MERITS .......................................................................................................... 27

ΙV. CLAIMANT’S INVESTMENT WAS UNLAWFULLY EXPROPRIATED ....... 27

A. Respondent’s Measures Constitute a Creeping Ιndirect Expropriation Under Art.

7(1) of the Ticadia-Kronos BIT ....................................................................................... 27

a. Respondent’s measures incrementally expropriated Claimant’s investment ........... 28

b. Respondent substantially deprived Claimant of its investment ............................... 29

c. Respondent’s measures are of a permanent and definitive character ....................... 32

d. Respondent’s measures shattered Claimant’s investment-backed expectations ...... 33

B. Respondent Expropriated Claimant’s Investment in Breach of the Ticadia-Kronos

BIT… ............................................................................................................................... 34

a. No public interest was pursued by Respondent’s measures ..................................... 34

b. Respondent’s measures flagrantly disregarded due process of law ......................... 36

c. Respondent’s measures were discriminatory ........................................................... 37

C. Respondent’s Unlawful Expropriation Cannot Be Justified under the Ticadia-

Kronos BIT or Customary International Law .................................................................. 39

a. Respondent’s measures were not “necessary” ......................................................... 39

b. Respondent’s measures arbitrarily and unjustifiably discriminated against Claimant

...................................................................................................................................... 41

PRAYER FOR RELIEF ........................................................................................................ 45

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LIST OF AUTHORITIES

BOOKS

Dolzer/Schreuer Rudolf Dolzer, Christoph Schreuer, Principles of International Law

(2008).

Dolzer/Stevens Rudolf Dolzer, Margrete Stevens, Bilateral Investment Treaties

(1995).

Dörr/Schmalenbach Oliver Dörr, Kirsten Schmalenbach, Vienna Convention on the Law

of Treaties: A Commentary (2012).

Douglas 2 Zachary Douglas, The International Law of Investment Claims

(2009).

Newcombe/Paradell Andrew Newcombe, Lluís Paradell, Law and Practice of

Investment Treaties: Standards of Treatment (2009).

Reinisch August Reinisch, Standards of Investment Protection (2008).

Schreuer et al. Christoph Schreuer, Loretta Malintoppi, August Reinisch and

Anthony Sinlair, The ICSID Convention; A Commentary, 2nd

Edition (2009).

Shany Yuval Shany, Questions of Jurisdiction and Admissibility before

International Courts (2015).

Weeramantry Romesh Weeramantry, Treaty Interpretation in Investment

Arbitration (2012).

Yannaca-Small Katia Yannaca-Small (ed.), Arbitration Under International

Investment Agreements; A Guide to the Key Issues (2010).

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ARTICLES AND CHAPTERS

Cremades/Madalena Bernardo Cremades, Ignacio Madalena, ‘Parallel Proceedings in

International Arbitration, Arbitration International’, ICSID Review-

Foreign Investment Law Journal, Volume 24, Issue 4 (2008).

Cremades/Cairns

Bernardo M. Cremades, David J. A. Cairns, ‘Contract and Treaty

Claims and Choice of Forum in Foreign Investment Disputes’, in

Norbert Horn, Stefan Michael Kröll (eds), Arbitrating Foreign

Investment Disputes (2004).

Christie George C. Christie, ‘What Constitutes a Taking of Property Under

International Law?’, British Yearbook International Law, Volume

38 (1962).

Douglas 1 Zachary Douglas, ‘The Hybrid Foundations of Investment Treaty

Arbitration’, British Yearbook of International Law, Volume 74,

Issue 1 (2003).

Kaufmann/Kohler Gabrielle Kaufmann-Kohler, ‘Interpretation of Treaties: How Do

Arbitral Tribunals Interpret Dispute Settlement Provisions

Embodied in Investment Treaties?’, in Loukas A. Mistelis; Julian

D.M. Lew (Ed), Pervasive Problems in International Arbitration,

(2006).

Muchlinski Peter Muchlinski, ‘Corporations in International Law’, Max Planck

Encyclopedia of Public International Law (2012).

Newcombe Andrew Newcombe, General Exceptions in International

Investment Agreements, Draft Discussion Paper Prepared for BIICL

Eighth Annual Conference, (2008),

https://www.biicl.org/files/3866_andrew_newcombe.pdf

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Paulsson Jan Paulsson, ‘The ICSID Klöckner v. Cameroon Award: The

Duties of Partners in North-South Economic Development

Agreements’, Journal of International Arbitration, Volume 1, Issue

2, (1984).

Reisman/Sloane Michael Reisman, Robert Sloane, ‘Indirect Expropriation and its

Valuation in BITs Generation’, British Yearbook of International

Law, Volume 75 (2004).

Schreuer

Christoph Schreuer, ‘Travelling the BIT Route: Of Waiting Periods,

Umbrella Clauses and Forks in the Road’, The Journal World

Investment & Trade (2004).

Kjos Hege Elisabeth Veenstra-Kjos, ‘Counterclaims by Host-States in

Investment Treaty Arbitration’, Transnational Dispute

Management, Volume 4, Issue 4, (2007).

Wehland Hanno Wehland, ‘The Regulation of Parallel Proceedings in

Investor-State Disputes’, ICSID Review-Foreign Investment Law

Journal, Volume 31, Issue 3, (2016).

MISCELLANEOUS

Black’s Law Black’s Law, Bryan A. Garner (Ed.), Black’s Law Dictionary, 9th

Edition, (2009).

ILC ADP

Commentary

International Law Commission, Draft Articles on Diplomatic

Protection: with commentaries, (2006).

ILC ASR Commentary International Law Commission, Draft Articles on Responsibility of

States for Internationally Wrongful Acts: with commentaries,

(2001).

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OECD Model Tax

Convention

Organisation for Economic Co-operation and Development, Model

Tax Convention on Income and on Capital,

http://www.oecd.org/ctp/treaties/model-tax-convention-on-income-

and-on-capital-condensed-version-20745419.htm

OECD Multilateral

Tax Convention

Organisation for Economic Co-operation and Development,

Multilateral Convention to Implement Tax Treaty Related to

Prevent Base Erosion and Profit Shifting, opened for signature

November 24, 2016 (entered into force July 1, 2018),

http://www.oecd.org/tax/treaties/multilateral-convention-to-

implement-tax-treaty-related-measures-to-prevent-beps.htm

UN Model Tax

Convention

United Nations Model Double Taxation Convention between

Developed and Developing Countries (2017 update),

http://www.un.org/esa/ffd/documents/UN_Model_2011_Update.pdf

VCLT Vienna Convention on the Law of Treaties, opened for signature

May 23, 1969 (entered into force January 27, 1980).

WHO, CVDs – Key

facts

World Health Organisation, Cardiovascular diseases (CVDs) - Key

facts (May 17, 2017), http://www.who.int/en/news-room/fact-

sheets/detail/cardiovascular-diseases-(cvds)

WHO, Microcephaly –

Key facts

World Health Organisation, Microcephaly - Key facts (October 14,

2016), http://www.who.int/en/news-room/fact-

sheets/detail/microcephaly

WHO, Zika virus –

Key facts

World Health Organisation, Zika virus - Key facts (July 20, 2018),

http://www.who.int/news-room/fact-sheets/detail/zika-virus

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LIST OF LEGAL SOURCES

ARBITRAL DECISIONS

AAPL Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka,

ICSID Case No. ARB/87/3, Final Award (June 27, 1990).

ADC ADC Affiliate Limited and ADC & ADMC Management Limited v.

The Republic of Hungary, ICSID Case No. ARB/03/16, Award of

the Tribunal (October 2, 2006).

AdT Aguas del Tunari S.A. v. Republic of Bolivia, ICSID Case No.

ARB/02/3, Decision on Respondent’s Objections to Jurisdiction

(October 21, 2005).

AES AES Corporation And Tau Power B.V. v. Republic Of Kazakhstan,

ICSID Case No. ARB/10/16, Award (November 1, 2013).

AIG AIG Capital Partners, Inc. and CJSC Tema Real Estate Company

Ltd. v. The Republic of Kazakhstan, ICSID Case No. ARB/01/6,

Award, (October 7, 2003).

Alps Alps Finance and Trade AG v. The Slovak Republic, UNCITRAL,

Award (March 5, 2011).

Ambiente Ambiente Ufficio S.p.A. and Others v. The Argentine Republic,

ICSID Case No. ARB/08/9, Decision on Jurisdiction and

Admissibility (February 8, 2013).

Ammar Mohammad Ammar Al-Bahloul v. Republic of Tajikistan, SCC Case

No. 064/2008, Partial Award on Jurisdiction and Liability

(September 2, 2009).

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AMTO Limited Liability Company Amto v. Ukraine, SCC Case No.

080/2005, Final Award (March 26, 2008).

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

of Venezuela, ICSID Case No. ARB/00/5, Decision on Jurisdiction

(September 27, 2001).

Awdi Hassan Awdi, Enterprise Business Consultants, Inc. and Alfa El

Corporation v. Romania, ICSID Case No. ARB/10/13, Award

(March 2, 2015).

Azurix Azurix Corp. v. The Argentine Republic, ICSID Case No.

ARB/01/12, Decision on Jurisdiction (December 8, 2003).

Bear Creek Bear Creek Mining Corporation v. The Republic of Peru, ICSID

Case No. ARB/14/21, Award (November 30, 2017).

Bogdanov Yuri Bogdanov & Yulia Bogdanova v. The Republic of Moldova,

SCC Case No. 091/2012, Final Award (April 16, 2013).

BP British Petroleum Exploration Company Limited v. The

Government of the Libyan Arab Republic, Award (October 10,

1973), reprinted in 53 ILR 297 (1979).

Burlington Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No.

ARB/08/5, Decision on Counterclaims (February 7, 2017).

CEAC Central European Aluminium Company (CEAC) Holdings Limited

v. Montenegro, ICSID Case No. ARB/14/8, Award (July 26, 2016).

Charanne Charanne B.V. and Construction Investments S.A.R.L. v. The

Kingdom of Spain, SCC Case No. 062/2012, Final Award (January

21, 2016).

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Chevron Chevron Corporation and Texaco Petroleum Company v. The

Republic of Ecuador, PCA Case No. 2009-23, Third Interim Award

on Jurisdiction and Admissibility (February 27, 2012).

CMS CMS Gas Transmission Company v. The Argentine Republic,

ICSID Case No. ARB/01/8, Award (May 12, 2005).

CMS Jurisdiction CMS Gas Transmission Company v. The Republic of Argentina,

ICSID Case No. ARB/01/8, Decision of the Tribunal on Objections

to Jurisdiction (July 17, 2003).

CSOB Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic,

ICSID Case No. ARB/97/4, Decision of the Tribunal on Objections

to Jurisdiction (May 24, 1999).

Copper Mesa Copper Mesa Mining Corporation v. The Republic of Ecuador,

UNCITRAL PCA Case No. 2012-2, Award (Redacted)

(March 15, 2016).

Daimler Daimler Financial Services AG v. Argentine Republic, ICSID Case

No. ARB/05/1, Award (August 22, 2012).

Desert Line Desert Line Projects LLC v. The Republic of Yemen, ICSID, ICSID

Case No. ARB/05/17, Award (February 6, 2008).

Eastern Sugar Eastern Sugar B.V. (Netherlands) v. The Czech Republic, SCC Case

No. 088/2004, Partial Award (March 27, 2007).

EDF EDF International S.A., SAUR International S.A. and León

Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case

No. ARB/03/23, Award (June 11, 2012).

El Paso El Paso Energy International Company v. The Argentine Republic,

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ICSID Case No. ARB/03/15, Award (October 31, 2011).

Enron Enron Corporation Ponderosa Assets, L.P. v. Argentine Republic,

ICSID Case No. ARB/01/3, Award (May 22, 2007).

Feldman Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case

No. ARB(AF)/99/1, Award (December 16, 2002).

Gavazzi Marco Gavazzi and Stefano Gavazzi v. Romania, ICSID Case No.

ARB/12/25, Decision on Jurisdiction, Admissibility and Liability

(April 21, 2015).

Generation Ukraine Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9,

Award (September 16, 2003).

Genin Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The

Republic of Estonia, ICSID Case No. ARB/99/2, Award (June 25,

2001).

Glamis Glamis Gold, Ltd v. United States of America, UNCITRAL, Award

(June 8, 2009).

Gruslin Philippe Gruslin v. Malaysia, ICSID Case No. ARB/99/3, Award

(November 27, 2000).

H&H H&H Enterprises Investments, Inc. v. Arab Republic of Egypt,

ICSID Case No. ARB/09/15, Excerpts of the Award (May 6, 2014).

Hulley Hulley Enterprises Limited (Cyprus) v. The Russian Federation,

UNCITRAL, PCA Case No. AA 226, Interim Award On

Jurisdiction and Admissibility (November 30, 2009).

Joy Mining Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID

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Case No. ARB/03/11, Award on Jurisdiction (August 6, 2004).

Kardassopoulos Ioannis Kardassopoulos v. The Republic of Georgia, ICSID Case

No. ARB/05/18, Decision on Jurisdiction (March 3, 2010).

Karkey Karkey Karadeniz Elektrik Uretim A.S. v. Islamic Republic of

Pakistan, ICSID Case No. ARB/13/1, Award (August 22, 2017).

Khan Khan Resources Inc., Khan Resources B.V. and CAUC Holding

Company Ltd. v. The Government of Mongolia MonAtom LLC,

UNCITRAL, PCA Case No. 2011-09, Award on the Merits (March

2, 2015).

Khan Jurisdiction Khan Resources Inc., Khan Resources B.V. and CAUC Holding

Company Ltd. v. The Government of Mongolia MonAtom LLC,

UNCITRAL, PCA Case No. 2011-09, Decision on Jurisdiction

(July 25, 2012).

KT Asia KT Asia Investment Group B.V. v. Republic of Kazakhstan, ICSID

Case No. ARB/09/8, Award (October 17, 2013).

Lauder Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award

(September 3, 2001).

LETCO Liberian Eastern Timber Corporation v. Republic of Liberia, ICSID

Case No. ARB/83/2, Award (March 31, 1986).

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

International, Inc. v. Argentine Republic, ICSID Case No.

ARB/02/1, Decision on liability (October 3, 2006).

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

Ecuador, ICSID Case No. ARB/03/6, Award (July 31, 2007).

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Metalclad Metalclad Corporation v. The United Mexican States, ICSID Case

No. ARB(AF)/97/1, Award (August 30, 2000).

Middle East Middle East Cement Shipping and Handling Co. S.A. v. Arab

Republic of Egypt, ICSID Case No. ARB/99/6, Award (April 12,

2002).

National Grid National Grid P.L.C. v. The Argentine Republic, UNCITRAL,

Award (November 3, 2008).

Noble Ventures Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11,

Award (October 12, 2005).

Occidental Occidental Exploration and Production Company v. The Republic

of Ecuador, UNCITRAL, Case No. UN 3467, Final Award (July

15, 2004).

Oxus Oxus Gold v. The Republic of Uzbekistan, UNCITRAL, Final

Award (December 17, 2015).

Pantechniki Pantechniki S.A. Contractors & Engineers (Greece) v. The

Republic of Albania, ICSID Case No. ARB/07/21, Award (July 30,

2009).

Pezold Bernhard von Pezold and Others v. Republic of Zimbabwe, ICSID

Case No. ARB/10/15, Award (July 28, 2015).

Philip Morris Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal

Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No.

ARB/10/7, Award (July 8, 2016).

PSEG PSEG Global, Inc., The North American Coal Corporation, and

Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic

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of Turkey, ICSID Case No. ARB/02/5, Award (January 19, 2007).

Quiborax Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún

v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2,

Award (September 16, 2015).

Quiborax

Jurisdiction

Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún

v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2,

Decision on Jurisdiction (September 27, 2012).

Rompetrol The Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/06/3,

Decision on Respondent’s Preliminary Objections on Jurisdiction

and Admissibility (April 18, 2008).

Roussalis Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award

(December 7, 2011).

Rusoro Rusoro Mining Ltd v. Bolivarian Republic of Venezuela, ICSID

Case No. ARB(AF)/12/5, Award (August 22, 2016).

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

Award (November 13, 2000).

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

Partial Award (March 17, 2006).

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

Decision on Jurisdiction over the Czech Republic’s Counterclaim

(May 7, 2004).

Sempra Sempra Energy International v. The Argentine Republic, ICSID

Case No. ARB/02/16, Award (September 28, 2007).

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SGS SGS Société Générale de Surveillance S.A. v. Islamic Republic of

Pakistan, ICSID Case No. ARB/01/13, Decision of the Tribunal on

Objections to Jurisdiction (August 6, 2003).

Siemens Siemens A.G. v. The Argentine Republic, ICSID Case No.

ARB/02/8, Award (January 17, 2007).

Standard Chartered Standard Chartered Bank v. The United Republic of Tanzania,

ICSID Case No. ARB/10/12, Award (November 2, 2012).

Suez Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi

Universal S.A. v. The Argentine Republic, ICSID Case No.

ARB/03/19, Decision on Liability (July 30, 2010).

Supervision Supervision y Control, S.A. v. The Republic of Costa Rica, ICSID

Case No. ARB/12/4, Award (January 18, 2017).

Swisslion Swisslion DOO Skopje v. The Former Yugoslav Republic of

Macedonia, ICSID Case No. ARB/09/16, Award (July 6, 2012).

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

States, ICSID Case No. ARB (AF)/00/2, Award (May 29, 2003).

Telenor Telenor Mobile Communications A.S. v. The Republic of Hungary,

ICSID Case No. ARB/04/15, Award (September 13, 2006).

Tenaris Tenaris S.A. And Talta-Trading e Marketing Sociedade Unipessoal

Lda v. Bolivarian Republic of Venezuela, ICSID Case No.

ARB/11/26, Award (January 29, 2016).

Total Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1,

Decision on Liability (December 27, 2010).

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Toto Toto Costruzioni Generali S.p.A. v. The Republic of Lebanon,

ICSID Case No. ARB/07112, Decision on Jurisdiction (September

11, 2009).

Urbaser Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao

Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case

No. ARB/07/26, Award (December 8, 2016).

Venezuela Holdings Venezuela Holdings and Others (case formerly known as Mobil

Corporation, Venezuela Holdings, B.V. and Others) v. Bolivarian

Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on

Jurisdiction (June 10, 2010).

Venoklim Venoklim Holding B.V. v. Bolivarian Republic of Venezuela, ICSID

Case No. ARB/12/22, Award (April 3, 2015).

Vivendi Annulment Compañia De Aguas Del Aconquija S.A. And Vivendi Universal

S.A. (Formerly Compañía de Aguas del Aconquija, S.A. and

Compagnie Générale Des Eaux) v. Argentine Republic, ICSID Case

No. ARB/97/3, Decision on Annulment (July 3, 2002).

Vivendi I Compañia De Aguas Del Aconquija S.A. And Vivendi Universal

S.A. (Formerly Compañía de Aguas del Aconquija, S.A. and

Compagnie Générale Des Eaux) v. Argentine Republic, ICSID Case

No. ARB/97/3, Award (November 21, 2000).

Vivendi II Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A.

v. Argentine Republic, ICSID Case No. ARB/97/3, Award (August

20, 2007).

Wena Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No.

ARB/98/4, Award (December 8, 2000).

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Yukos Yukos Universal Limited (Isle of Man) v. The Russian Federation,

UNCITRAL, PCA Case No. AA 227, Interim Award On

Jurisdiction and Admissibility (November 30, 2009).

INTERNATIONAL COURT OF JUSTICE CASES

Barcelona Traction Case concerning the Barcelona Traction, Light and Power Company,

Limited (Belgium v. Spain), ICJ, Judgment (February 5, 1970).

ELSI Case Concerning the Elettronica Sicula S.p.A. (ELSI) (United States

of America v. Italy), ICJ, Judgment (July 20, 1989).

Nottebohm The Nottebohm Case (Liechtenstein v. Guatemala), ICJ, Judgment

(April 6, 1955).

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LIST OF ABBREVIATIONS

¶/¶¶ Paragraph(s)

% Percent

Agreement Republic of Kronos-Fenoscadia Limited Concession Agreement

Answer Answer to Request for arbitration

Art(s). Article(s)

BIT(s) Bilateral Investment Treaty(ies)

BoD

CEO

Board of Directors

Chief Executive Officer

Claimant Fenoscadia Limited

Contracting Parties Republic of Ticadia/Republic of Kronos

CVD(s) Cardiovascular disease(s)

Decree Presidential Decree No. 2424

Disputing parties Fenoscadia Limited/Republic of Kronos

et al. Et alii

Facts Statement of uncontested facts

i.e. In other words

Ibid. Ibidem

ICJ International Court of Justice

ILC International Law Commission

KEA Kronian Environmental Act

KFC Kronian Federal Court

MAFL Ministry for Agriculture, Forestry and Land

MEM Ministry for Environmental Matters

Nationalist Party A Kronian center-left political party

No. Number

p./pp. Page(s)

PO1 Procedural Order 1

PO2 Procedural Order 2

PO3 Procedural Order 3

Request Request for Arbitration

Respondent Republic of Kronos

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SCC Stockholm Chamber of Commerce Arbitration Institute

SCC Rules Stockholm Chamber of Commerce Arbitration Rules

Site An area of 1,071,000 m2 nestled in Respondent’s inner territory

Speaker Speaker of the Kronian House of Representatives

Study Study on exploitation of lindoro in Kronos’ territory

Ticadia-Kronos

BIT

Republic of Ticadia-Republic of Kronos Bilateral Investment Treaty

University Kronian Federal University

VCLT

WHO

Vienna Convention on the Law of Treaties

World Health Organisation

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STATEMENT OF FACTS

1. Claimant is a Limited Liability Company, incorporated under the laws of the Republic

of Ticadia since 1993 and enjoys a worldwide reputation for the exploration and exploitation

of rare earth metals.1 Since 1998, its majority shareholder has been a Ticadian equity fund;2

the voting rights attributed to each shareholder are proportionate to the shares owned.3

Claimant's administration and tax residency are located in Ticadia,4 while all formal meetings

are also conducted there.5

2. In 1997, a rare earth metal, lindoro, was discovered in the Site.6 Due to the total

absence of domestic technical expertise in the mining field, Respondent invited foreign

companies to participate in a public auction for the concession of the right to extract lindoro

in the Site.7 By offering the best financial return, Claimant won the auction on April 20,

20008 and became the only company extracting lindoro in Respondent’s territory.9

3. On June 1, 2000 the disputing parties executed the Agreement, which granted the

rights to exploit the Site for eighty years.10 Claimant agreed in return to pass to Respondent

22% of the monthly gross revenue arising out of the exploitation.11 Claimant’s operations in

Kronos were protected under the provisions of the Ticadia-Kronos BIT, which entered into

force on June 30, 1995.12

4. The exploitation was exclusively regulated by the Agreement, which provided for

biennial inspections,13 in order to ensure that the mining activities bore no harmful

environmental impact. Since the actual exploitation began in 2008, for eight consecutive

years, Claimant has been found in full compliance with its environmental obligations.14

1 Facts, ¶6. 2 Ibid. 3 PO2, ¶2. 4 Facts, ¶7; Ibid. 5 Facts, ¶12. 6 Facts, ¶3. 7 Facts, ¶4. 8 Facts, ¶5. 9 Facts, ¶11. 10 Facts, ¶8. 11 Ibid. 12 Facts, ¶1. 13 Facts, ¶9. 14 Facts, ¶19.

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5. Respondent’s previous Government has praised Claimant’s investment on multiple

occasions, highlighting its crucial role in the improvement of the country’s economy.15

6. Claimant’s problems began with the change of the political scenery in 2014. The

newly-elected Government held a strong nationalist agenda, focusing on the promotion of the

national industry.16 In June 2015, Respondent’s Parliament, comprised of a majority of

Nationalist Party members,17 passed KEA,18 a highly restrictive environmental bill,19 with

abnormal speed, violating Art. 59 of the Kronian Constitution, as the Speaker -and member of

the Nationalist Party- denied the conduct of public hearings.20

7. Respondent founded the MEM, on the day of KEA’s enactment. The MEM undertook

the inspections of Claimant’s operations in September 2015, Claimant successfully passed

MEM’s inspections, as it had all others. In October 2015, based on inspections conducted

since 2011 the MEM released data,21 which indicated an increased concentration of graspel in

Rhea River.22 Graspel is a toxic component released during multiple mining activities,

operating in Respondent’s territory.23

8. Based on this data on May 15, 2016, the University published a Study, funded by

Respondent. The Study not only failed to establish the correlation between Rhea River’s

pollution and the exploitation of lindoro, but also that a causal link between the exploitation

and the increase of specific diseases near the Site exists.24 These findings are criticised by the

vast majority of the scientific community,25 while more than a year after Claimant’s

investment was shut down, the levels of microcephaly and CVD have not decreased.26

15 Exhibit No.3. 16 Facts, ¶14. 17 Ibid. 18 Facts, ¶16. 19 Facts, ¶15. 20 Facts, ¶17. 21 Facts, ¶20. 22 Facts, ¶22. 23 PO2, ¶4. 24 Facts, ¶22. 25 Ibid. 26 PO3, ¶1.

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9. Respondent did not permit Claimant to produce evidence to contradict the findings of

the Study.27 Only four months later, on September 7, 2016, Respondent’s President issued

the Decree, which prohibited the exploitation of lindoro, revoked Claimant’s licenses and

terminated the Agreement.28 Respondent also demanded compensation from Claimant due to

the environmental and health damages29 and forced the latter to dismiss all of its employees.30

10. One day after the issuance of the Decree, Claimant applied to the KFC, seeking to

suspend the effects of the Decree on the grounds of unconstitutionality,31 until negotiations

with Respondent were conducted;32 However, Respondent declined negotiations, setting as

prerequisite that Claimant acknowledge its alleged liability for the environmental and health

damage caused. After the Government’s spokesperson’s declaration that the Decree would not

be revoked, Claimant withdrew its motion.33

11. In August 2017, the scientific Global Mining magazine reported that a new company

will restart the extraction of lindoro in Respondent’s territory by 2019. This company would

be the result of a joint venture between a Kronian state-owned company and an enterprise

from the Republic of Ibi,34 whose government is sympathetic to the Nationalist Party’s

ideology.35

27 Request, ¶13. 28 Facts, ¶23. 29 Exhibit No.5. 30 Facts, ¶¶23,27. 31 Facts, ¶25. 32 Ibid. 33 Facts, ¶26. 34 Exhibit No.7. 35 Facts, ¶28.

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SUMMARY OF ARGUMENTS

12. PART ONE: This Tribunal has the competence to adjudicate upon the dispute arisen

between Claimant and Respondent, contrary to Respondent’s unmeritorious allegations.

Claimant qualifies as a covered investor under Art. 1(4) of the Ticadia-Kronos BIT, due to its

place of incorporation. In any event, even if this Tribunal were to consider criteria beyond

incorporation, Claimant would still be protected under the Ticadia-Kronos BIT. (I)

13. Claimant’s submission before this Tribunal is admissible, contrary to Respondent’s

objections, as Claimant’s lawsuit before the KFC has not triggered the fork-in-the-road clause

in Art. 11(2) of the Ticadia-Kronos BIT. (II)

14. In addition, this Tribunal should not exercise jurisdiction over Respondent’s

counterclaim, since it is neither permitted to submit counterclaims pursuant to the provisions

of the Ticadia-Kronos BIT, nor do the SCC Rules offer sufficient legal basis for them.

Moreover, Respondent’s counterclaim ought to not be admitted on the grounds that it bears no

connection to the principal claim. (III).

15. PART TWO: Finally, Respondent’s adopted measures constitute a creeping indirect

expropriation under Art. 7(1) of the Ticadia-Kronos BIT. This taking led to the unlawful

expropriation of Claimant’s investment, from which Respondent cannot be exempted either

under the Ticadia-Kronos BIT or customary international law.

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ARGUMENTS

PART ONE: JURISDICTION AND ADMISSIBILITY

16. Claimant started its investment operations in Kronos, by concluding the Agreement

with Respondent in relation to the extraction of lindoro in the Site on June 1, 2000,36 i.e. well

after the conclusion of the 1995 Ticadia-Kronos BIT.37 Claimant has made a protected

investment covered under the Ticadia-Kronos BIT, since its overall mining operations in

Kronos squarely fall under Article 1(1) of the BIT.

17. Even after Respondent’s series of measures, which destructively targeted Claimant’s

investment, the culminating act being the Decree issued on September 7, 2016, Claimant still

demonstrated a genuine willingness for an amicable settlement. In a media press conference,

Claimant clearly and immediately stated its intention for a negotiated solution with

Respondent.38 In fact, Respondent never truly intended to negotiate, but rather attempted to

elicit a recorded assumption of responsibility from Claimant for unfounded environment-

related allegations, as a pretextual requirement for negotiations.39 Respondent, realising that

Claimant fully opposed responsibility for such extraneous allegations, launched a public

attack against Claimant announcing that the Decree would not be revoked.40

18. Faced with this situation, Claimant notified Respondent’s Ministry for Foreign Affairs

of its intent to initiate arbitration, offering to negotiate for a friendly settlement, on April 27,

2017; alas, Respondent again “declined to negotiate and has not communicated with Claimant

since”.41 Moreover, Claimant filed its Request,42 in full accordance with the six-month period

provided for in Art. 11(3) of the Ticadia-Kronos BIT.

19. The Tribunal should take note of the fact that Respondent has not raised any

preliminary objections regarding the above. In particular, Respondent’s sole objection

regarding this Tribunal’s jurisdiction and the admissibility of claims comes down to

36 Facts, ¶8. 37 Facts, ¶1. 38 Facts, ¶24. 39 PO2, ¶6; PO3, ¶3. 40 Facts, ¶26; Exhibit No.6. 41 Facts, ¶27. 42 Facts, ¶29.

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unfounded allegations regarding Claimant’s nationality and the alleged triggering of the fork-

in-the-road clause included in Art. 11(2) of the Ticadia-Kronos BIT.43

20. That said, Respondent bears the burden of proving the objections that it actually raised

to the expense of this Tribunal's time and resources, in accordance with the maxim actori

incumbit onus probandi.44 Equally, Respondent also bears the burden of establishing that its

counterclaims are admissible.

21. Be that as it may, Claimant will assist the Tribunal in fruitfully resolving the present

dispute, by demonstrating, first, that this Tribunal has jurisdiction, since Claimant is an

enterprise of Ticadia (I); second, that the Tribunal should exercise jurisdiction, since the fork-

in-the-road clause in Art. 11(2) of the Ticadia-Kronos BIT has not been triggered (II), and,

third, that the Tribunal should not exercise jurisdiction over Respondent’s baseless

counterclaims (III).

Ι. THIS TRIBUNAL HAS JURISDICTION OVER THE CLAIM SINCE

CLAIMANT IS A TICADIAN ENTERPRISE

22. Claimant respectfully submits that this Tribunal, duly constituted under the SCC Rules

and Art. 11(3) of the Ticadia-Kronos BIT, should dismiss Respondent’s ratione personae

objection, since Claimant, an enterprise duly incorporated in Ticadia in 1993,45 is a protected

investor, in accordance with Art. 1(4) of the said BIT, which dictates:

“The term “investor of a Contracting Party” means a Contracting Party, or a

person or an enterprise of a Contracting Party, that seeks to make, is making,

or has made an investment in the other Contracting Party's territory.”

23. Claimant will establish that Respondent has consistently maintained that Claimant is a

Ticadian enterprise, and is, hence, now estopped from arguing the opposite (A). In addition,

by virtue of the place of its incorporation alone, Claimant indeed qualifies as an “enterprise of

a Contracting Party” under Art. 1(4) of the Ticadia-Kronos BIT (B), especially since no

general rule of “real and effective nationality” applicable to corporations exists under

international law (C). Moreover, and even in the unlikely scenario that this Tribunal would

43 Answer, ¶¶2-7. 44 AMTO, ¶64; Ambiente, ¶309. 45 Facts, ¶6.

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choose to consider criteria other than the place of incorporation so as to determine Claimant’s

nationality, Claimant would still qualify as a protected foreign investor under the Ticadia-

Kronos BIT (D).

A. Respondent Is Estopped from Challenging Claimant’s Ticadian Nationality

24. Claimant responded in 2000 to Respondent’s call to “foreign companies”, due to the

lack of domestic know-how, to invest in its, totally undeveloped at the time, lindoro mining

sector.46 Claimant, won the public auction by offering Respondent the highest financial return

and, thus, the Agreement was concluded.47

25. Claimant first became aware of Respondent’s allegation that it is not an enterprise of

Ticadia, allegedly because its nationality “factually became Kronian”, on January 29, 2018,

when Respondent filed its Answer to Claimant’s Request.48 This Tribunal should note that it

is not only upon the initiation of the present arbitral proceedings, but in fact it is only for the

purposes of the present proceedings that Claimant’s status as a Ticadian enterprise is

challenged by Respondent.

26. To elaborate, the factual matrix in the present matter evidences the impact of

Respondent’s new protectionist policies on Claimant’s mining operation, dictated by a

nationalist political agenda to protect Kronos’ national industry over foreign enterprises.49

The very passing of KEA in Respondent’s Parliament with abnormal speed was justified by

the Speaker, as falling under Art. 59 of the Kronian Constitution, which waives the public

hearing requirement, if a draft bill “may directly affect the national industry of Kronos”.50

Even the opposition in the Respondent’s Parliament read this as a “clear signal” of

Respondent’s “coordinated scheme to replace Claimant for a domestic enterprise”.51

27. This is all the more evident if one considers how Respondent’s own President in its

annual speech of February 22, 2017, i.e. only less than a year before Respondent’s Answer,

46 Facts, ¶4. 47 Facts, ¶5. 48 Answer, ¶4. 49 Facts, ¶14. 50 Facts, ¶17. 51 Ibid.

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referred to the “negligent conduct of foreigners” when targeting Claimant with meritless

accusations.52

28. The above are further corroborated by Respondent’s own futile attempt to bring

allegations regarding Claimant’s management, control, economic interest and business

decisions into the discussion regarding Claimant’s nationality.53 If any of these allegations

regarding Claimant’s alleged de facto Kronian nationality had any merit whatsoever, one

might have expected Respondent to have imposed Claimant with tax obligations in Kronos.

This is so, insofar as the “place of effective management” is universally acknowledged as a

key criterion in determining the tax residence of legal persons in the regulation of

international taxation matters.54

29. Nevertheless, the record in the present dispute clearly indicates that Claimant has

always had its tax residence in Ticadia. Since Respondent never treated Claimant as a

Kronian tax resident, this also shows how Respondent’s challenge to Claimant’s Ticadian

nationality is self-servingly designed for the present proceedings alone.

30. That said, this Tribunal should not tolerate Respondent conveniently blowing hot and

cold regarding Claimant’s nationality. The principle of estoppel, requiring a statement made

by one party and reliance upon it by the other party to his detriment or to the advantage of the

party making it,55 may indeed bar jurisdictional objections.

31. For instance, the Tribunal in Pezold considered that, as a result of merely informal

statements and other factors, Zimbabwe was estopped from denying that the investment at

issue had been approved;56 Similarly, the Tribunal in Karkey found that Pakistan could not

avoid jurisdiction, since it had consistently maintained that the investment was established in

accordance with Pakistani laws;57 and, the Quiborax Tribunal was ready to accept that Bolivia

52 Exhibit No.6. 53 Answer, ¶¶3-4. 54 UN Model Double Taxation Convention, Art. 4(3); OECD Multilateral Tax Convention, Art. 4(1); OECD

Model Tax Convention, Art. 4(3). 55 CSOB, ¶47; Gruslin, ¶20.2. 56 Pezold, ¶411. 57 Karkey, ¶628.

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was estopped from contesting the legality of the investment on account of its previous

conduct, if specific evidence were to be furnished.58

32. In the matter at bar, ample specific evidence exists that Respondent never regarded

that Claimant’s nationality “factually became Kronian”. Respondent’s statements to this end

were unambiguous and unequivocal, and Claimant has always relied in good faith upon them

(and actually endured much, when being politically targeted as a foreign enterprise), to the

advantage of Respondent who attempts to change its position so as to avoid jurisdiction. This

Tribunal should thus find that Respondent is estopped from challenging Claimant’s Ticadian

nationality, and find that it has jurisdiction.

B. Claimant’s Incorporation in Ticadia Renders It a Covered Investor Under

Ticadia-Kronos BIT

33. Even apart from Respondent’s relevant longstanding position, Claimant squarely

qualifies as a covered investor under the Ticadia-Kronos BIT, as it is incorporated in Ticadia.

34. Art. 1(4) of the BIT, by referring to an “enterprise of a Contracting Party”, requires a

connection between the legal person and the State so as to for the former to qualify as a

covered investor. However, in stark contrast with the vast majority of other BITs in force, Art.

1(4) of the Ticadia-Kronos BIT does not make reference to specific criteria regarding

corporate nationality. Consequently, the interpretation of the term “enterprise of a

Contracting Party” is necessary, employing Art. 31 VCLT, since the VCLT has been ratified

by both Kronos and Ticadia,59 and, in any case, reflects customary international law on treaty

interpretation.60

35. To begin with, Art. 31 VCLT requires that the term “enterprise of a Contracting

Party” must be interpreted in good faith, in accordance with the ordinary meaning to be given

to it, in its context and in light of the object and purpose of the Ticadia-Kronos BIT. As the

Standard Chartered Tribunal found, the preposition “of” may indicate a contributory

58 Quiborax Jurisdiction, ¶257. 59 Facts, ¶2. 60 KT Asia, ¶86; Noble Ventures, ¶50; Daimler, ¶46; Saluka, ¶296.

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relationship or define ownership.61 In the case at hand, it can be readily concluded that the

preposition “of” in the term “enterprise of a Contracting Party” has a possessive rather than a

contributory connotation. Hence, Claimant’s incorporation in Ticadia suffices to render it a

Ticadian enterprise under Art. 1(4) of the Ticadia-Kronos BIT.

36. In corroboration, it can be recalled that the ordinary meaning of a term is equivalent to

its “common use”,62 and, as such, treaty interpretation must not deviate from a term’s

“common use”, unless there is strong reasoning to do so.63 This Tribunal should note, that

other BITs, which also utilise the term “enterprise of a Contracting Party” for the definition

of covered investors, use the place of incorporation as the sole sufficient criterion to define

nationality of legal persons.64

37. This is not surprising, since the place of incorporation is considered the most

commonly used criterion when it comes to defining the required affiliation between an

enterprise and a State.65 For instance, the Autopista Tribunal stated that, although there are

different potential criteria for the purpose of determining the nationality of a juridical person,

the most common, and obvious, remains the place of incorporation.66 Hence, by virtue of its

incorporation alone, Claimant qualifies as an enterprise of Ticadia for the purposes of Art.

1(4) of the Ticadia-Kronos BIT.

38. Taking into account that the interpretation of Art. 31 is a holistic exercise,67 one must

also turn to the object and purpose of the Ticadia-Kronos BIT. Universally, BITs are

concluded so as to attract foreign investors by intensifying bilateral economic cooperation.68

It is in this spirit that the Tribunals in KT Asia69 and Saluka70 clearly stated that, had the

contracting parties intended to limit the scope of the provision under a BIT, they would have

explicitly done so in the text itself.

61 Standard Chartered, ¶216. 62 Weeramantry, ¶3.33. 63 AAPL, ¶40. 64 Canada-Ukraine BIT 1994 Art.1(g)(ii); Canada-Philippines BIT 1995 Art.1(g)(ii); Canada-Ecuador BIT 1996

Art.1(h)(ii); Barbados-Canada BIT 1996 Art.1(g)(ii); Japan-Uzbekistan BIT 2008 Art 1(4); Japan-Peru BIT 2008

Art.1(4); Canada-Latvia BIT 2009 Art.1(h)(ii); Canada-China BIT 2012 Art.1(2)(b); Japan-Oman BIT 2015

Art.1(c). 65 Yannaca-Small, p.222; Muchlinski, p.5. 66 Autopista, ¶107. 67 Dörr/Schmalenbach, p.523. 68 Dolzer/Schreuer, p.20. 69 KT Asia, ¶123. 70 Saluka, ¶241.

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39. Therefore, any criteria additional to the place of incorporation for determining

corporate nationality, would contradict the object and purpose of the Ticadia-Kronos BIT as

reflected in its preamble, explicitly referring to “the promotion and the protection of

investments of investors”. The negotiators of the Ticadia-Kronos BIT made a policy decision,

in the context of strengthening and promoting bilateral economic cooperation, and opted for a

less restrictive approach as to the class of legal persons that each Contracting State wished to

attract as foreign investors. Thus, the object and purpose of the Ticadia-Kronos BIT verifies

that Claimant, incorporated in Ticadia, plainly qualifies as a Ticadian enterprise.

C. No General Rule of “Real and Effective Nationality” Applicable to Corporations

Exists Under International Law

40. It is Claimant’s further submission that this Tribunal should reject any reliance by

Respondent on the Nottebohm case “real and effective nationality” analysis,71 or the

Barcelona Traction case before the ICJ, so as to support its extraneous allegation that

Claimant’s nationality “factually became Kronian”.72

41. Indeed, the ICJ in Barcelona Traction was quick to dismiss the pertinence of its

judgment in Nottebohm when it comes to corporate nationality under international law: “there

can be no analogy with the issues raised or the decision given in the Nottebohm case.”73 In

fact, as the Court expressed in so many words with respect to corporate nationality, “no

absolute test of the "genuine connection" has found general acceptance” so as to replace the

criterion of the place of incorporation.74

42. Indeed, this is how and why the investment Tribunal in Rompetrol rejected Romania’s

argument to the effect that there allegedly exists in international law a general rule of “real

and effective nationality” for determining the nationality of legal persons.75

43. This Tribunal should attribute much importance to the default rule under general

international law that corporate nationality depends upon of the place and law of

71 Nottebohm, p. 22. 72 Answer, ¶4. 73 Barcelona Traction, ¶70. 74 Ibid. 75 Rompetrol, ¶92.

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incorporation. For, this being the position under general international law, it must follow that

Kronos and Ticadia indeed acted well within the default parameters of international law when

they employed the term “enterprise of a Contracting Party” in Art. 1(4) of the Ticadia-

Kronos BIT, i.e. clearly intending for the place of incorporation to determine the nationality

of legal persons. This is all the more so, insofar as the ICJ itself in the ELSI case was

“unable to accept that an important principle of customary international law

should be held to have been tacitly dispensed with, in the absence of any words

[in the treaty] making clear an intention to do so.”76

44. In addition, any attempt by Respondent to somehow argue that the default rule under

general international law regarding corporate nationality has changed since the Barcelona

Traction judgment and now elements of a real and effective nationality test, would plainly

fail. To be sure, the, heavy indeed, burden of proving such an alleged change in customary

international law would clearly fall upon Respondent as the party asserting the change.77

45. Nor would it be sufficient for Respondent to simply invoke Art. 9 of the 2006 ILC

Draft Arts. on Diplomatic Protection, themselves not legally bind: this provision establishes

the place of incorporation as the primary element for the determination of corporate

nationality, to be discarded only if, cumulatively, a corporation is controlled by nationals of

another State and the seat of management and the financial control of the corporation are both

located in another State.78 Nevertheless, Art. 9 of the 2006 ILC Draft Arts. on Diplomatic

Protection does not reflect customary international law.

46. Ergo, the ILC’s commentary to Art. 9 of the 2006 Draft Arts. on Diplomatic

Protection does not state that the provision reflects custom, nor does it refer to any state

practice or international case-law; rather, the ILC itself makes sure to clarify that in fact

“policy and fairness dictate such a solution”,79 rather than current international law. It is for

Respondent to persuasively prove otherwise.

47. All in all, Art. 9 of the 2006 ILC Draft Arts. on Diplomatic Protection, if invoked by

Respondent, should, in any case, be treated by this Tribunal as a product of a progressive

76 ELSI, ¶50. 77 Glamis, ¶¶601-605. 78 ILC ADP Commentary, p.38, ¶5. 79 Ibid., p.38, ¶4.

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development exercise, of de lege ferenda character, undertaken by the ILC, in accordance

with its mandate, rather than a codification of existing general international law.

48. As a result, none of the criteria invoked by Respondent in its Answer have any part to

play in the ascertainment of nationality under the BIT. Claimant qualifies as an investor,

entitled to invoke the jurisdiction of this Tribunal by virtue of Art. 1(4) of the BIT.

D. Even if this Tribunal Decides to Consider Criteria Beyond Incorporation,

Claimant Retains its Protection Under the Ticadia-Kronos BIT

49. But even in the remote case that this Tribunal is persuaded by Respondent that

allegedly Art. 9 of the 2006 ILC Draft Arts. on Diplomatic Protection reflects customary

international law, Claimant would still qualify as a Ticadian enterprise. It may be recalled that

even under this test, the place of incorporation of a legal person determines its nationality,

unless it is cumulatively controlled by nationals of another State and its seat of management

and the financial control of the corporation are both located in another State.80

50. As Claimant will demonstrate, it qualifies as a covered investor under Art. 1(4) of the

Ticadia-Kronos BIT, since it is controlled by Ticadian nationals (a), and, in addition, both its

seat of management and financial control are located in Ticadia (b).

a. Claimant is controlled by Ticadian nationals

51. It is Claimant’s submission that this Tribunal should turn to the percentage of

ownership and voting power as the definitive criteria to establish control over a legal person.

Arbitral jurisprudence fully supports this position;81 for instance, the Tribunal in AdT defined

“control” by exclusively placing emphasis on the legal capacity and the percentage of shares

held.82

52. In the present dispute, Claimant professes that it is subject to Ticadian control given

that its majority shareholder is a Ticadian equity fund. For the last 20 years, 65% of shares

80 ILC ADP Commentary, p.38, ¶5. 81 Venoklim, ¶¶145,148-149; Venezuela Holdings, ¶¶153,160. 82 AdT, ¶264.

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has been in the possession of said fund.83 Majority shareholding should be considered as a

sufficient criterion to determine a corporation’s control. This argument is further strengthened

by the Swisslion Tribunal, which found that more than 50% of shares is sufficient to provide

for the legal direction of an entity’s action and that, there is absolutely no need to proceed to

an examination of the nationality of said ultimate owner.84

53. It must also be recalled that the Tribunal in Autopista found that direct shareholding is

a proper test for control, since it provides the possibility to enter into the decision-making

process of a company.85 Thus, any reservation regarding the ownership shares and the

relevant control ought to be waived by this Tribunal, considering that the majority stake also

possesses the majority of voting rights: since the voting rights held by each shareholder are

proportionate to the shares held by them,86 control must be deemed to have been established.

54. This view was further adopted by the Tribunal in Klöckner, where only 51% of shares

were owned by Klöckner, and 49% by the Government of Cameroon, heeded the structure of

management in the company, stating that it was comprised “almost exclusively of individuals

recommended by Klöckner”.87 In the matter at hand, the fact that the Claimant’s shareholders

are responsible for electing the BoD, and that the BoD itself appoints the CEO, displays the

significant role the Ticadian shareholding majority has in the structure of management of the

company.88

55. Thus, Claimant is indeed controlled by Ticadian nationals and as a result there is no

reason to look beyond its place of incorporation so as to determine its Ticadian nationality.

b. Claimant’s seat of management and financial control is located in Ticadia

56. A place of effective management will generally be where key management and

commercial decisions necessary for the conduct of a business are in substance made.

83 Facts, ¶6. 84 Swisslion, ¶132. 85 Autopista, ¶121. 86 PO2, ¶2. 87 Paulsson, pp.145-146. 88 Facts, ¶7.

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57. Various factors have been considered by arbitral jurisprudence in past cases, in order

to define the attached meaning to the phrase “seat of management”. The CEAC Tribunal,

stated that a company’s registered office must, among others, consist of physical premises and

that the company must be permitted to use the property.89 Moreover, the Tribunal in Alps

found that the location of effective management ought to be equated to the place where the

board of directors or the shareholders meet. The same Tribunal stated that the residence of the

company’s top manager must be located in the respective host-State and that an address with

phone and fax numbers must be openly available to third parties.90

58. It should also be recalled that the Tribunal in Tenaris, even despite its finding that the

test of actual or effective management is a flexible one which takes into account “the precise

nature of the company in question and its actual activities”, still considered Venezuela’s

focus upon the extent of activity and the net sales generated by Tenaris’ subsidiaries outside

Luxembourg, as not crucial; it was Tenaris’ operation in Luxembourg that was to be

examined for the purposes of jurisdiction.91

59. In light of the above, and despite Claimant’s activities in Kronos, its seat of

management is beyond doubt located in Ticadia and it is Claimant’s operation in Ticadia that

should be examined, as per the Tenaris Tribunal. Apart from its undisputed place of

incorporation, Claimant’s central, registered office is also located in Ticadia. Furthermore,

Claimant bears Ticadian tax residency,92 while its BoD’s meetings are held in Ticadia, where

all significant management decisions are made;93 all of its corporate documents refer to

Ticadia, as conceded by Respondent.94 Finally, even Claimant’s CEO, namely the person at

the highest tier of the company, resides permanently in Ticadia.95

60. Having its seat of management and financial control in Ticadia, while also being

subject to Ticadian control, Claimant is ostensibly a Ticadian investor.

89 CEAC, ¶171. 90 Alps, ¶217. 91 Tenaris, ¶¶200, 204. 92 PO2, ¶2. 93 Facts, ¶12. 94 Answer, ¶4. 95 Facts, ¶7.

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61. Consequently, this Tribunal ought to assert its jurisdiction over the present dispute on

the grounds that Claimant is an investor within the terms of the Ticadia-Kronos BIT and,

eventually, dismiss Respondent’s objections.

II. THIS TRIBUNAL SHOULD CONSIDER CLAIMANT’S CLAIMS

ADMISSIBLE

62. In a further attempt to avoid responsibility for its illegalities, Respondent alleges that

Claimant’s lawsuit to KFC evidences a choice for the agreed dispute settlement procedures

under the fork-in-the-road clause in Art. 11(2) of the Ticadia-Kronos BIT. This Art. provides

that the disputing parties may choose to submit an investment dispute to domestic courts, or

pursuant to any agreed dispute-settlement procedures before an arbitral Tribunal under the

auspices of SCC and in accordance with the SCC Rules.

63. On the other hand, Claimant will demonstrate that its initial motion to KFC cannot

operate as a bar to the present proceeding, since Claimant withdrew its lawsuit and, thus, no

decision was ever rendered (A). In any event, the domestic proceedings and the present

arbitral proceedings do not involve the same dispute (B).

A. Claimant Withdrew from the Domestic Proceedings and No Decision Was Ever

Rendered

64. To begin with, the fork-in-the-road clause functions as a tool to avoid double recovery

and parallel proceedings.96 Pursuant to this clause, an investor is prohibited from resorting to

international arbitration under the BIT, when initially it had already instigated proceedings

before a domestic court,97 in order to increase its chances of obtaining the requested relief.98

65. However, this is not what has occurred in the present dispute. With respect to the

findings of the Awdi Tribunal, when a domestic claim has not actually been proceeded before

a court, there can be no room for the application of a fork-in-the-road clause to preclude

parallel litigation. In particular, in Awdi - where the applicable BIT included a fork-in-the-

96 Cremades/Madalena, p.509. 97 Lauder, ¶161. 98 Wehland, p.578.

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road clause identical with Art. 11(2) of the Ticadia-Kronos BIT, the Tribunal stated that the

provision aims at the avoidance of duplication of proceedings. This duplication would occur

in the event that an investor, dissatisfied with the first ruling, attempts to tries its case a

second time.99 Despite the investor having filed an appeal before Romanian domestic

litigation, since the case never proceeded, it was deemed that the fork-in-the-road had not

been triggered, hence there was never an issue regarding parallel proceedings.100 With respect

to these findings, the Tribunal discerned no need to apply either the triple-identity test or the

normative source one.

66. In the case at hand, Claimant challenged the Decree in Respondent’s domestic

litigation, aiming at its suspension.101 Following the filing of Claimant’s lawsuit before the

KFC, the case did not proceed any further, since Claimant withdrew it before it reached the

merits phase, considering that the Government’s spokesperson announced that the Decree

would not be revoked.102

67. In this wavelength, the fork-in-the road clause was not triggered. The KFC rendered

no decision upon Claimant’s motion; the traditional requirements regarding the principles of

res judicata or lis pendens, i.e. identity of the parties and cause of action and relief, when

assessing whether fork-in-the-road clauses have been triggered or not must be applied.103

Only if the claims before both domestic and international litigation are identical it becomes

possible to exclude an international Tribunal’s jurisdiction.104

B. In any Event, the Domestic Proceedings and the Present Arbitral Proceedings Do

not Involve the Same Dispute

68. Claimant maintains that it lawfully initiated the arbitration proceedings before this

Tribunal by accepting Respondent’s consent to arbitrate the investment dispute, enshrined in

Art. 11(4) of the Ticadia-Kronos BIT. The sole fact that another motion had been filed by

99 Awdi, ¶203. 100 Ibid., ¶204. 101 PO2, ¶3. 102 Facts, ¶26. 103 Kaufmann/Kohler, p. 265. 104 Schreuer, p.245.

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Claimant to the KFC, aiming at the suspension of the Decree,105 cannot deprive Claimant

from pursuing its treaty claims before this Tribunal.

69. To begin with, when a dispute involves the same parties, object and cause of action is

to be considered an identical dispute, thus triggering the fork-in-the-road clause and

precluding submission before an international arbitral court. This triple-identity rule, where

failure of only one of the requirements is a reason to disallow fork-in-the-road preclusion, is

endorsed by most arbitral tribunals.106

70. The triple-identity test is favoured over the fundamental basis test; this has been

upheld by the Khan Tribunal, which dismissed Mongolia’s argument of applying the

fundamental basis test, opting instead for the triple-identity one;107 the same was true with the

Tribunals in Chevron108 and Hulley.109

71. It is noteworthy that the fundamental basis test has been applied by Tribunals that

faced allegations based on the identity of the parties, which is not questioned in the present

case. In particular, the H&H Tribunal focused on the subject-matter of the dispute rather than

whether the parties were strictly the same, since local court proceedings are often initiated not

against the State itself, but State instrumentalities.110 The Tribunal in Vivendi I dealt with acts

or omissions of the government and acts of authorities that should be attributed to the central

government;111 while the Tribunal in Supervision also examined whether the international and

local proceedings were initiated by the same party.112

72. These Tribunals, while determining the identity of the submitted disputes through the

fundamental basis test, examined factors, which are also examined through the triple-identity

test. For instance, both the Pantechniki113 and H&H114 Tribunals investigated the cause of

action of the submitted disputes, namely whether it was of treaty or contractual nature.

105 Facts, ¶25. 106 Total, ¶443; Toto, ¶¶211-212; Desert Line, ¶¶135-138; Yukos, ¶598; Occidental, ¶52; Azurix, ¶¶88-90. 107 Khan Jurisdiction, ¶392. 108 Chevron, ¶¶4.74-4.75. 109 Hulley, ¶¶598-599. 110 H&H, ¶367. 111 Vivendi I, ¶53. 112 Supervision, ¶329. 113 Pantechniki, ¶64. 114 H&H, ¶382.

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73. On the other hand, concerning the triple-identity test, access to international

arbitration shall be prohibited only if its criteria are cumulatively fulfilled. For this reason, the

SCC Tribunal in Charanne considered it unnecessary to examine the arguments of the parties

as to the subject identity and identity of legal basis, when it concluded that the requirement of

identity of parties in those proceedings was not met.115 Therefore, the submitted claims are

admissible since not all of the required criteria have been satisfied. It is undisputed that the

first criterion concerning the identity of the parties is present. Nevertheless, the remaining two

criteria are undoubtedly not fulfilled and must necessarily be further examined.

74. Claimant thereby submits that its recourse to Respondent’s courts concerning the

suspension of the Decree and the arbitration before the SCC do not share the same cause of

action (a). In addition, the remedies sought before domestic courts and this Tribunal are

inherently different (b).

a. The causes of action are manifestly different

75. Cause of action is defined as the legal basis which offers claimant the right to raise a

claim before a litigation forum.116 As the Tribunal in Khan found, there is a distinct difference

between the cause of action of a domestic law violation, regarding the invalidation of mining

licences, and a breach derived from the BIT.117 Similarly, the claim submitted before KFC,

seeking to suspend the effects of the Decree and the Request filed for arbitration before this

Tribunal are of entirely different legal basis. The former is derived from a contractual breach,

since the Decree provides for its termination,118 while the latter stems from the Ticadia-

Kronos BIT and refers to a treaty breach pursuant to Art. 7(1) of the Ticadia-Kronos BIT.119

76. Regarding the contractual breach, the disputing parties have included a dispute

resolution clause in the Agreement, as Art. 7 provides for the exclusive jurisdiction of

domestic courts.120 Multiple Tribunals, including Joy Mining and Vivendi Annulment, clearly

displayed that, when the basis of a claim brought before international litigation is a

115 Charanne, ¶410. 116 Cremades/Cairns, p.327. 117 Khan Jurisdiction, ¶394. 118 Exhibit No.5. 119 Request, ¶21. 120 Exhibit No.2.

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consequence of a contractual breach, the choice of forum indicated in the contract is valid.121

Hence, it is evident, that Claimant could not pursue a claim arising from its contract, while

counteracting the provisions laid out in it.

77. Between these contract and treaty claims a difference is detected, which is obvious

and well established in both theory122 and arbitral practice.123 For instance, the Tribunal in

MCI confirmed that statement, clarifying that certain facts in that case constituted contractual

breaches, while others were considered breaches of the BIT.124 In this line, the Tribunal in

Vivendi Annulment stated that there is a difference between a treaty and a contractual cause of

action and, in any case, a State can breach a treaty without breaching a contract by the same

means, and vice versa.125

78. In the case at hand, the Ticadia-Kronos BIT is governed by international law and

includes provisions agreed between Respondent and Ticadia, while the Agreement between

Claimant and Respondent is governed by Kronian laws.126 Claimant filed its claim before

KFC when seeking to suspend the Decree, since the latter breached the Agreement, which is,

in turn, reliant on the laws of Kronos. On the contrary, Claimant sought to arbitrate an

investment dispute when there was a breach of Art. 7(1) of the Ticadia-Kronos BIT.

79. All the above are in agreement with the Genin Tribunal, where it was stated that the

dispute submitted to the arbitral court related to losses arising from breaches of the BIT and

was, therefore, different than the one submitted to the domestic courts. The fact that some

correlation existed, does not bar the investor from its submission before arbitration.127

b. The reliefs sought are patently different

80. To the extent that national and international disputes involve the same object or relief,

the fork-in-the-road clause would preclude their submission to concurrent Tribunals.

Nevertheless, two claims can be considered as separate disputes under the fork-in-the-road

121 Joy Mining, ¶90; Vivendi Annulment, ¶98. 122 Douglas 1, pp.154-155. 123 SGS, ¶162; Vivendi Annulment, ¶113; CMS Jurisdiction, ¶80; Ammar, ¶¶158-159. 124 MCI, ¶188. 125 Vivendi Annulment, ¶95. 126 Exhibit No.2. 127 Genin, ¶332.

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provision when their object is also different.128 As pointed out by the AES Tribunal, despite

the fact that both proceedings share the same factual background, “they present important

differences which do not justify considering these claims as having fundamentally the same

normative basis”.129 It is, thus, ostensible that the object of the two claims filed by Claimant

ought to be seen as distinct as well.

81. In a similar vein, in its recourse to KFC, Claimant sought the suspension of the

Decree, until negotiations between the disputing parties had been concluded.130 On the

contrary, Claimant’s object before this Tribunal is to obtain compensation, owed due to the

unlawful expropriation of its covered investment by Respondent.131 Claimant could not have

received compensation, even in the scenario where the KFC would have ruled in its favour;

proceedings for setting aside a presidential decree cannot lead to any order for compensation

under Kronian law, they can only be relied upon by a separate appeal to compensation due to

a contractual breach.132

82. The present proceedings are of compensatory nature, whereas the purpose of the

domestic motion sought the suspension of an administrative action and declaration of it as

unconstitutional.133 For these reasons, the object of both national proceedings is not identical -

not even similar- to the object of arbitration under the Ticadia-Kronos BIT.

83. To conclude, Claimant’s recourse to international arbitration is legal and in

accordance with the consent previously offered by Respondent in Art. 11(2) of the Ticadia-

Kronos BIT. Therefore, Claimant respectfully asks this Tribunal to proceed unburdened to the

inspection of the merits of the current case.

III. RESPONDENT’S COUNTERCLAIM IS NOT ADMISSIBLE

84. Claimant submits that the counterclaim presented by Respondent does not fall under

this Tribunal’s jurisdiction. The party seeking to bring a counterclaim before the Tribunal,

128 Douglas 2, pp.155-156. 129 AES, ¶227. 130 Facts, ¶25. 131 Facts, ¶23. 132 PO3, ¶2 133 PO2, ¶3.

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carries the burden of establishing whether jurisdiction exists.134 However, Respondent, in its

Answer, has not sufficiently established that the submission of counterclaims by host-States is

permitted by the Ticadia-Kronos BIT,135 and thus fails to discharge its relevant burden of

proof.

85. Claimant will demonstrate that this counterclaim cannot be heard by this Tribunal,

since the Ticadia-Kronos BIT does not provide for the submission of counterclaims by the

host States and Claimant never consented to the submission of counterclaims (A). In any

event, no nexus exists between the principal claim and the counterclaim (B).

Α. Respondent Is not Permitted to Submit Counterclaims Under the Ticadia-Kronos

BIT and Claimant Never Consented Respectively

86. In order for a counterclaim to be admissible before arbitration, consent must have been

provided by both disputing parties.136 However, in the present dispute, the Contracting Parties

never consented to permit counterclaims under Art. 11 of the the Ticadia-Kronos BIT.

87. In order to establish whether consent has been provided for counterclaims, one must

first look to the dispute resolution clause contained in a treaty.137 In that regard, the Gavazzi

Tribunal decided that, if the phrasing of a BIT does not explicitly entitle the State to raise a

counterclaim, no jurisdiction may be inferred merely from the spirit of the BIT.138 Moreover,

the Tribunal in Rusoro adopted a purely literal approach to the dispute resolution clause and

concluded that it provided only for investors to file a claim in arbitration, not vice versa.139

88. Whenever investment Tribunals have asserted jurisdiction upon counterclaims, they

relied on a clause expressly allowing Respondent to bring such counterclaims. For instance, in

the Burlington case the Tribunal’s jurisdiction upon Ecuador’s counterclaims was not

contested since Burlington did not even argue this point, and counterclaims were specifically

provided for in an agreement concluded between the parties.140 The present dispute is not

134 Saluka Counterclaim, ¶34; Roussalis, ¶860. 135 Answer, ¶¶22-24. 136 Kjos, pp.9-10; Schreuer et al., p.754. 137 Roussalis, ¶866. 138 Gavazzi, ¶154. 139 Rusoro, ¶¶627-628. 140 Burlington, ¶¶60-62.

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even comparable to the Burlington case, as the dispute resolution clause in the Agreement

refers only to litigation before domestic courts.141 What is more, the Urbaser Tribunal

concluded it had jurisdiction to hear the counterclaim, based on Art. X of the Argentina-Spain

BIT, which expressly allowed a State to bring a counterclaim before an arbitral Tribunal,142

thus, relying on a provision diametrically different than the one included in the Ticadia-

Kronos BIT.

89. In the present dispute, the clear wording of the Ticadia-Kronos BIT displays the

Contracting Parties’ intention not to permit host-States to initiate arbitral proceedings and

therefore, submit any claims -let alone counterclaims- before this Tribunal; Claimant draws

this Tribunal’s attention to Art. 11, which states that: “[...] the national or company

concerned may choose to submit the dispute [...]” and “provided that the national or company

concerned has not submitted the dispute for resolution”. The Urbaser Tribunal also employed

the phrasing of the relevant BIT provision to establish whether a host-State had a right to raise

a counterclaim, ruling in favour of Argentina. Its findings indicated that the relevant provision

in the Argentina-Spain BIT “is completely neutral as to the identity of the claimant or

respondent in an investment dispute arising between the parties”.143 In casu, Art. 11 can be

characterized as anything but neutral in this respect; it follows, therefore, that Respondent is

not entitled to submit a counterclaim to an arbitral Tribunal.

90. What is more, Respondent attempted to establish jurisdiction by invoking Art. 5(1)(iii)

of the 2015 SCC Rules, whereas the appropriate rules, governing these proceedings, are the

2017 SCC Rules.144 While the SCC Rules Art. 9(1)(iii) state that “the Answer shall include:

[...] a preliminary statement of any counterclaims or setoffs, including an estimate of the

monetary value thereof”, the Ticadia-Kronos BIT does not itself permit the submission of

counterclaims by a Contracting Party, as has already been analysed.

91. As pointed out in Oxus, the arbitration rules, which govern a dispute, do not create

jurisdiction where there is none; their scope is limited to consider whether counterclaims are

permissible to the extent that they already fall under the jurisdiction of the arbitral Tribunal,

141 Exhibit No.2. 142 Urbaser, ¶¶1153-1155. 143 Ibid., ¶1143. 144 PO1, ¶2.

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according to the relevant BIT.145 In this line, the SCC Tribunal in the AMTO case, dismissed

the counterclaim considering primarily the conditions of the treaty in force.146 Therefore,

since Respondent’s counterclaims are not permissible pursuant to the Ticadia-Kronos BIT, the

fact that the SCC Rules provide for their submission is insignificant.

92. Respondent’s consent is enshrined in its open-offer for arbitral settlement, pursuant to

Art. 11(4), which provides that the consent to the submission of an investment dispute must

be “in accordance with the choice specified in the written consent of the national or

company”. On the contrary, Claimant’s consent is realised through its acceptance of

Respondent’s offer for arbitration, subsequent to the former choice of forum.

93. The clear statement of consent equals the most significant prerequisite for the

admission of a counterclaim; consequently, the threshold to establish the existence of consent

is very high, rendering an explicit expression necessary.147 The mere consent to arbitration

does not amount to consent to arbitrate counterclaims.148 As clarified by the Tribunal in

Roussalis, an investor’s consent to the scope of the arbitration, and subsequently to the

admission of counterclaims depends on the extent of the State’s offer to arbitration, which is

also expressed in the BIT clause.149

94. Conclusively, since the Ticadia-Kronos BIT clearly left no room to counterclaims, and

the investor has consented only to the State’s offer as expressed in the BIT, counterclaims do

not fall within the scope of this Tribunal’s jurisdiction.

B. Respondent’s Counterclaim Bears no Connection to the Principal Claim

95. A necessary prerequisite for the admission of a counterclaim is for it to bear a real

connection to the principal claim. The general principle of close connection is so essential

that, in the absence of it, there is no jurisdiction over counterclaims, regardless of whether

jurisdiction upon the primary claim has already been established.150

145 Oxus, ¶944. 146 AMTO, ¶118. 147 Shany, p.36. 148 Rusoro, ¶631. 149 Roussalis, ¶866. 150 Saluka Counterclaim, ¶76; Oxus, ¶952.

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96. Similarly, the SCC Tribunal in AMTO concluded that the jurisdiction over a

counterclaim shall be decided with regard to “the relationship of the counterclaims with the

claims in the arbitration”.151 In Saluka, the Tribunal pointed out that in order for a

counterclaim to be admissible, it must bear a close nexus with the primary claim152 and

eventually, following the structure in Klockner, constitute an “indivisible whole”.153 In that

spirit, Claimant also refers to the findings in Gavazzi where the Tribunal deemed the

counterclaim introduced by Romania as “an entirely independent claim based upon Romanian

law and unrelated to the Claimants’ claim based upon breaches of the BIT”.154

97. In a similar vein, Respondent’s counterclaim relates to obligations supposedly

generates from its municipal laws, not provisions laid out in the Ticadia-Kronos BIT.

Respondent’s Decree was executed in response to Claimant’s supposed harmful impact on the

Kronian environment and generates a compensatory obligation for Claimant.

98. The Gavazzi Tribunal also focused on the fact that Romania had already initiated

domestic proceedings, the subject-matter of which overlapped with the counterclaim

introduced in arbitration. As a result, the counterclaim was dismissed, since it was considered

a “free-standing counterclaim, not operating merely as a defence to the Claimants’ claim”.155

99. In the present case, Respondent seeks compensation emerging from the Decree

through domestic procedures, the subject-matter of which overlaps with the compensation

requested before this Tribunal. It is evident that the confiscation of the already extracted

lindoro “by way of security for such compensation”, as declared by the Decree,156 refers to the

same compensation pursued before this Tribunal. Respondent’s actions are clearly an attempt

to safeguard its interests, regardless of the ruling of this Tribunal, by pursuing the same

compensation, relying on arbitral proceedings as well as domestic ones.

100. The principle of close connection also requires a factual nexus, both the principal and

the counterclaim must be of the “same nature”.157 In the case at hand, the presented claims are

151 AMTO, ¶118. 152 Saluka Counterclaim, ¶61. 153 Ibid., ¶79. 154 Gavazzi, ¶154. 155 Ibid. 156 Exhibit No.4. 157 Kjos, p.32.

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clearly unrelated. Claimant’s Request occurred as a result of Respondent’s decision to

unlawfully expropriate Claimant’s investment and shut down all of its mining activities. It is

clear that the Request is based on the violation of Claimant’s financial rights, since the

damage inflicted on the investment may very likely lead the enterprise to bankruptcy.

101. On the other hand, Respondent alleges that Claimant harmed the environment and

bears liability for the increase of CVD and microcephaly. Respondent invokes the protection

of the environment and the public health as a basis for its counterclaim, alleging that the

compensation is going to be used for the decontamination of the Rhea River and other health

costs.158

102. Considering the aforementioned analysis, it is obvious that no connection exists

between the principal claim and Respondent’s counterclaim, which is hence inadmissible.

158 Answer, ¶23.

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PART TWO: MERITS

ΙV. CLAIMANT’S INVESTMENT WAS UNLAWFULLY EXPROPRIATED

103. From the very beginning of its investment operation in Kronos’ territory in 2000,

Claimant acted dutifully in all matters and substantially contributed to the economic

development of the country.159 Claimant has created hundreds of jobs for the local

communities, has passed all environment-related inspections, paid Respondent a hefty 22% of

its monthly gross revenue arising out of its mining activities, and brought mining know-how

and expertise to the country.160 Nevertheless, a series of politically motivated measures by

Respondent, coloured by protectionist agendas, unlawfully smashed Claimant’s business to

smithereens by indirectly expropriating it, in manifest breach of Art. 7 of the Ticadia-Kronos

BIT.

104. Expropriation may take place indirectly and through a series of acts, omissions or

course of conduct;161 such expropriations constitute composite acts.162 The Ticadia-Kronos

BIT ostensibly provides that measures, which have an “effect equivalent to nationalization or

expropriation”, must be accompanied by the same restrictions, which apply to direct takings

and, thus, also entail the obligation inter alia to compensate.

105. In this regard, Claimant’s argument will be analysed in three parts. Respondent’s

conduct amounts to creeping indirect expropriation (A), in breach of the Ticadia-Kronos BIT

(B). Additionally, the doctrine of sovereign police powers is not a defence against an unlawful

expropriation under the terms of the Ticadia-Kronos BIT (C).

A. Respondent’s Measures Constitute a Creeping Ιndirect Expropriation Under Art.

7(1) of the Ticadia-Kronos BIT

106. It is Claimant’s submission that its covered investment was illegally expropriated

through a sequence of Respondent’s acts. Multiple Tribunals have stated that an expropriation

159 Answer, ¶12. 160 Facts, ¶¶11,8,4. 161 Newcombe/Paradell, ¶7.15. 162 ILC ASR Commentary, p.62, ¶1.

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can happen incrementally over time.163 It is not necessary for each separate measure to

constitute an expropriatory act; it is the effect considered in the aggregate, which must be

examined. Therefore, Claimant will proceed by establishing that Respondent’s series of acts

beginning in March 2015 (a), ultimately resulted in the substantial deprivation of Claimant’s

investment (b), with permanent effect (c), crushing Claimant’s investment-backed

expectations (d).

a. Respondent’s measures incrementally expropriated Claimant’s investment

107. A wide variety of measures may cumulatively result in expropriation; this might

become obvious in hindsight.164 In the present case, shortly after the election of the

Nationalist Party, the new President introduced a draft bill for the regulation of environmental

matters, including mining.165 This bill received the strong criticism of the opposition Party for

its overly restrictive character regarding mining activities in Respondent’s territory and the

negative impact on the national economy.166

108. Three months later, the draft bill was passed, disguised as KEA, with unprecedented

haste, since the Speaker -also a Nationalist Party member- waived the required public hearing,

violating the Kronian Constitution.167 This prompted the fierce outcry of the opposition Party,

characterising the decision as a “clear signal that Respondent’s Government had put in

motion a coordinated scheme to replace Claimant for a domestic enterprise”.168 On the very

same day, Respondent founded the MEM, a new Ministry, specifically tailored to Claimant’s

activities, taking over the conduct of the biennial inspections of Claimant’s operation carried

out hitherto by the MAFL.169

109. Nevertheless, Claimant successfully passed the inspection conducted by the MEM in

September 2015, as it had all the previous ones.170 Shockingly, one month later, the MEM

released data, based on the last three inspections, which indicated an increase in toxic mine

163 Siemens, ¶263; Generation Ukraine, ¶20.22; Vivendi II, ¶7.5.31. 164 Reisman/Sloane, p.123. 165 Facts, ¶15. 166 Ibid. 167 Facts, ¶17. 168 Ibid. 169 Facts, ¶18. 170 Facts, ¶19.

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waste in Rhea River.171 A month later, Respondent funded the University to conduct a

research to further investigate the MEM’s findings.172 On May 15, 2016, the Study emerged

as the result of this investigation, failing to appoint lindoro as the direct cause for the

aforementioned contamination. Moreover, no causal link was established between the

incidence of microcephaly and CVD and Claimant’s conduct.173 The absence of such link is

further strengthened by the fact that, two years after the ceasement of Claimant’s operations in

Kronos, the levels of microcephaly and CVD have not decreased.174

110. Respondent issued the Decree on September 7, 2016,175 relying on the Study's results.

Between the Study and the issuance of the Decree, only four months had elapsed, a period

clearly insufficient to properly analyse the Study's findings. To add insult to injury, Claimant

was never given the opportunity to provide evidence and dispute its findings. The Decree

prohibited the exploitation of lindoro in Kronos, revoked Claimant’s licences and terminated

the Agreement, rendering its facilities completely useless.176 Additionally, Claimant was

demanded to provide compensation for an unproven damage. The Decree was implemented

just five days after its issuance, while Respondent, a year later, went as far as to confiscate the

already extracted lindoro stored by Claimant, on September 14, 2017.177

b. Respondent substantially deprived Claimant of its investment

111. Expropriation is generally defined as the dispossession, taking or deprivation of the

property of foreign investors by the host-State.178 Expropriation under the provision in

question of the Ticadia-Kronos BIT may also be indirect, in the event that the measures in

question have an effect equivalent to nationalization or expropriation, despite the legal title of

the investment remaining with the investor.179

112. Accordingly, in order to determine whether a taking constitutes an indirect

expropriation, the first step is to examine the effects that such taking had on an investor’s

171 Facts, ¶20. 172 Facts, ¶21. 173 Facts, ¶22. 174 PO3, ¶1. 175 Facts, ¶23. 176 Ibid. 177 PO2, ¶9. 178 Dolzer/Stevens, p.98. 179 Dolzer/Schreuer, p.101.

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claimed rights.180 In particular, the rights and interests under licenses or contracts are

expropriated when a State uses its governmental authority, even by indirect interference, to

deprive a foreign investor of the use, enjoyment or value of such rights.181

113. Certain elements are necessary to determine whether measures tantamount to

expropriation -namely a de facto expropriation- has commenced. According to the findings in

Glamis182 and Philip Morris,183 the severity of the economic impact on the investor’s

property, in combination with the duration of said impact, proves that the measures adopted

by a State amount to expropriation. In a similar vein, Claimant affirms that the direct effects

of Respondent’s aforementioned acts indeed amount to a substantial deprivation of the

former’s investment.

114. Arbitral practice has applauded the substantial deprivation test as the most appropriate

to identify whether an indirect expropriation has occurred.184 Ιt is not the State’s intention but

the degree to which a governmental measure affects the investor’s property that determines

whether an investment has been expropriated.185 Presently, one need not delve deep into

Respondent’s motivations to conclude that its conduct unquestionably resulted in the

irreparable and total loss of Claimant’s investment, amounting to expropriation.

115. Based on the award rendered in National Grid, the measures taken, in order to be

deemed expropriatory, must result in “neutralisation, radical deprivation, irretrievable loss,

inability of use, enjoy or dispose of the property”.186 Moreover, absence of control over the

investment is significant to determine whether substantial deprivation exists.187 It must, thus,

be established whether the measures in question have resulted in a total or near-total

destruction of the investment’s economic value, which led to the deprivation of Claimant’s

control over the investment.

180 Dolzer/Stevens, p.100. 181 Christie, pp.318-319. 182 Glamis, ¶356. 183 Philip Morris, ¶192. 184 Metalclad, ¶103; Telenor, ¶65; Copper Mesa, ¶6.122; Tecmed, ¶115; Enron, ¶245; Vivendi II, ¶7.5.11; CMS,

¶262. 185 Siemens, ¶270; Vivendi II, ¶7.5.20. 186 National Grid, ¶149. 187 Enron, ¶245; PSEG, ¶278.

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116. Revocation of the investor’s licenses was deemed sufficient by the Middle East

Tribunal to establish that an expropriation had occurred.188 The ruling in Sempra supports this

argument, expressing that the provided licenses are a key factor for the success of an

investment, inasmuch they incorporate the rights conferred to the investor.189 In the present

dispute, Claimant’s licenses were, according to the Agreement, the legal basis for the

exploitation of lindoro.190 Without them, Claimant cannot, in any manner, continue its

operations, which were entirely focused on the mining of lindoro.191 As a result, Claimant

became a mere “shell” of a company, unable to conduct any business, especially since

Respondent stated that the licenses would not be reinstated.192

117. In the present dispute, Respondent not only revoked Claimant’s licenses, but also

terminated the Agreement, in the absence of which no lawful exploitation can take place.193

The Quiborax Tribunal, under similar circumstances, considered the termination of the

concession agreement through Bolivian law as an unlawful expropriatory act.194 Concerning,

also, the eighty-year duration of the Agreement and the long-term profitability of Claimant’s

mining activities, it had prepared a long-term economic plan and, thus, the premature

termination can prove destructive for Claimant’s future.

118. Despite the fact that the investment’s legal title is not affected and the investor still

owns its facilities, the measures in question make it impossible for Claimant to continue its

day-to-day operations. Claimant’s rights of ownership and management are insignificant

when the investor is forbidden from every possible action and was practically and financially

forced to fire all its employees.195 Thus, Respondent’s actions resulted in Claimant’s full loss

of control of its investment.

119. Respondent also confiscated all of the already extracted lindoro, including the tons

already prepared for export.196 Claimant was, thus, rendered unable to honour its contractual

188 Middle East, ¶107. 189 Sempra, ¶279. 190 Exhibit No.2. 191 Facts, ¶12. 192 Facts, ¶26. 193 Facts, ¶23. 194 Quiborax, ¶214. 195 Facts, ¶¶23,27. 196 PO2, ¶9.

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obligations and is incapable of sale.197 Its suppliers must be compensated, while all annually

planned turnovers and profits of the company will be significantly reduced. All these factors,

not only justify Claimant’s fears for its imminent bankruptcy, but also prove that Claimant’s

investment underwent substantial deprivation.

c. Respondent’s measures are of a permanent and definitive character

120. In order for a governmental measure to be considered expropriatory, it must also have

an irreversible, or otherwise long-lasting effect on the investment in dispute;198 in fact, a

measure can be considered expropriatory when it is equated to permanent. In this line, the

Wena Tribunal deemed that a measure lasting for nearly a year constitutes a permanent

measure.199 The Middle East Tribunal considered a four-month measure in duration

permanent, due to its irreparable effects in the investment.200 Arguendo, the Tribunal in

LG&E concluded that specific measures adopted by the host-State were of a temporary nature

and, as a result, no expropriation was deemed to have taken place.201 In this manner, if there is

no indicator for halting the measure, it should be considered permanent.

121. In the dispute at hand, Respondent’s deprivation is not ephemeral. The issuance of the

Decree terminates the Agreement and revokes Claimant’s licences, concerning the

exploitation of lindoro, and its force is direct and permanent.202 Not only is there no provision

in its clauses for a timeline or a time-bar under some circumstances, the governmental

spokesperson203 and Respondent’s President, have also publicly declared that the Decree is

not to be revoked.204 Hence, with regard to the arguments analysed above, Claimant’s public

image has been endangered and its existence as a company is currently in jeopardy.

197 Facts, ¶24. 198 Dolzer/Schreuer, p.124. 199 Wena, ¶99. 200 Middle East, ¶107. 201 LG&E, ¶¶193,200. 202 Exhibit No.5. 203 Facts ¶26. 204 Exhibit No.6.

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d. Respondent’s measures shattered Claimant’s investment-backed expectations

122. Finally, the doctrine of investment-backed expectations of an investor plays a crucial

part when assessing whether an expropriation by the host-State has occurred.205 The investor

evaluates the investment-backed expectations at the time when the investment was made,

even if the host-State had offered no representation.206 This is all the more true in the present

case, where Respondent had gone to great lengths to reassure Claimant on many occasions.

123. Claimant rightfully had a legitimate expectation that it would generate a long and

fruitful relationship with Respondent,207 paired with a long-term profit, from its license to

exploit lindoro, free from any notion of expropriation. Respondent repeatedly, for almost a

decade, encouraged Claimant, with its President publicly stating that “the coming years of this

partnership with Fenoscadia will be of great importance to the development of Kronos and

the well-being of its people”.208 It also provided assurances that its investment was in no risk

due to the absence of a specific regulatory framework, and thus, the terms set in the

Agreement would suffice.209

124. Respondent had agreed to provide these licenses on the condition that Claimant

successfully passed the biennial inspections. If this condition was met, Respondent pledged to

renew them for a duration of two years.210 Additionally, the ongoing nature of mining

enterprises requires the continuous and undisturbed operation under the license; therefore, it is

essential that Claimant’s conduct is uninterrupted, since any interruption could lead to

significant losses.

125. Although, there is undoubtedly always some risk involved during the operation,

Claimant still retained its legitimate expectations that its operation would continue, so long as

it had duly performed according to its safety obligations under the Agreement. Nevertheless,

in the present dispute, Respondent arbitrarily revoked the mining licenses, terminating the

Agreement, despite Claimant fully having upheld its own obligations.211 This behaviour is

205 Glamis, ¶356. 206 Tecmed, ¶113. 207 Exhibit No.1. 208 Ibid. 209 Facts, ¶13. 210 Exhibit No.2. 211 Facts, ¶19.

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unacceptable and wholly betrays Claimant’s reasonable expectations, solidifying the

argument that Respondent indirectly and unlawfully expropriated Claimant’s investment.

B. Respondent Expropriated Claimant’s Investment in Breach of the Ticadia-

Kronos BIT

126. Respondent’s treatment of Claimant’s investment constituted an expropriation. While

Art. 7(1) of the Ticadia-Kronos BIT recognises Respondent’s authority to expropriate an

investor’s property, an expropriation can only be lawful pursuant to specific criteria,

considered cumulatively.212 Therefore, the absence of compensation, stated categorically by

Respondent in the Decree,213 is sufficient to render the expropriation unlawful.

127. Nevertheless, in order to present a more complete inspection of the matter, Claimant

will demonstrate that none of the remaining conditions are met in the present dispute. In

particular, Respondent’s measures were not carried out for a public purpose (a), they

disregarded due process of law (b) and were discriminatory (c).

a. No public interest was pursued by Respondent’s measures

128. Claimant reiterates that Respondent acts served no public interest; in fact, its true

motive was political and thus, there is no basis to support the argument of a non-compensable

expropriation. According to the ruling in ADC, in order for a regulatory act to be considered

as non-compensable, the host-State must prove that this measure serves a genuine public

interest. In particular, it was stated that:

“If mere reference to ‘public interest’ can magically put such interest into

existence and therefore satisfy this requirement, then this requirement would

be rendered meaningless since the Tribunal can imagine no situation where

this requirement would not have been met”.214

129. Respondent’s assertions that its measures were taken for a public purpose ring hollow.

Not only has Respondent not provided adequate proof to substantiate its claims, it has instead

offered ample indications to the contrary. In this line, the findings of the Tribunal in LETCO

must also be taken into account. In that case, it was deemed that no sufficient evidence had

212 Dolzer/Schreuer, p.99. 213 Exhibit No.5. 214 ADC, ¶432.

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been presented by the State, to ascertain that its actions were taken for the public good; the

Tribunal was instead satisfied by the investor’s proof that the areas of concession, taken away

from it, were granted subsequently to other foreign companies.215

130. In the case at hand, the expropriation of Claimant’s investment was not for a

legitimate public purpose. Despite invoking environmental issues, Respondent abused its

power to extract a more convenient and profitable deal for itself, which does not constitute a

genuine public purpose.

131. Similarly, in BP, the tribunal held that an expropriation, which has occurred as an act

of political retaliation, does not qualify as being conducted for a public purpose; particularly,

Libya had nationalised its petroleum industry, specifically BP’s concession, as an act of

retaliation against Great Britain, with regard to its affinities with Iran. It was further

concluded that the expropriation clearly violated public international law as it took place

purely on political grounds.216

132. Respectively, Respondent’s political motor is displayed through the following

evidence. The Decree’s issuance was in absolute sequence to Respondent’s President’s public

statements, who held true to his pre-election Party line and promised the favouring of national

investments over foreign ones; not only was the Decree targeting Claimant issued under his

administration, he went on the record, specifically announcing the ousting of Claimant.217

Consequently, the Study seems to have functioned as laying down the convenient conditions

so as to subsequently enact a discriminatory Decree, masqueraded under the guise of public

purpose.

133. However, this is not the end of the matter. Shortly after the expropriation of

Claimant’s investment, it became common knowledge that a joint-venture of a Respondent’s

State-owned company and an enterprise from a politically-friendly country will restart the

extraction of lindoro in Respondent’s territory.218 Global Mining, a respected scientific

magazine, which had also reported the accurate rumours of Claimant’s and Respondent’s

215 LETCO, ¶338. 216 BP, p.329. 217 Exhibit No.6. 218 Facts, ¶28; Exhibit No.7.

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collaboration,219 released this information. In Khan, it was similarly concluded that the

mongolian Government had attempted to drive out the company, in order to establish a

different investment with Russia, at more profitable rates. In that case, the Tribunal looked to

the press releases -including commentary from the mining industry- to reach its conclusion.220

Claimant, therefore, urges the Tribunal to consider these media releases to carry great gravity.

b. Respondent’s measures flagrantly disregarded due process of law

134. Due process requires that the investor has a right to advance notification and a fair

hearing before the commencement of expropriation and that the decision rendered is made by

an unbiased official, after reasonable time has passed.221 Respondent, from the very

beginning, legislated in a rapid and covert manner. As the Tribunal in ADC pointed out, due

process of law requires an actual and substantive legal procedure, providing for certain basic

procedural mechanisms, such as advance notice and fair hearing, in which the investor has a

reasonable chance to claim its rights and be heard.222 The same ruling was adopted by the

Tribunal in Quiborax, concerning the legitimate exercise of a revocation decree applicable in

the mining field,223 as well as in Bear Creek, where the Tribunal found that Peru ought to

have made an effort to contact and hear the investor, even in the face of the undergoing

political pressure.224

135. It is Claimant’s submission that the availability of a court system to review a State’s

expropriatory conduct is insufficient to establish that due process has been adhered to. As

Newcombe and Paradell observe, the “better view is that due process is properly viewed as an

obligation of conduct,” which means that “any defect in process, even if reviewable or

correctable, amounts to a breach of due process”.225

136. Likewise, Respondent failed to notify Claimant in advance for the revocation of its

operating licences.226 The Middle East Tribunal expressed that in the event that a State fails to

provide prior notice of an expropriation, as provided for in the relevant legal instrument, its

219 Exhibit No.1. 220 Khan, ¶341. 221 Dolzer/Stevens, p.106. 222 ADC, ¶435. 223 Quiborax, ¶221. 224 Bear Creek, ¶446. 225 Newcombe/Paradell, ¶7.34. 226 Request, ¶13.

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conduct would breach due process, regardless if the investor found out through alternate

means.227 Since the Decree was published immediately and entered into force only five days

later, there was no room left for Claimant’s claims to be heard. This was in direct breach of

Art. 8 of the Ticadia-Kronos BIT, which requires that:

“[...] should such a measure impact a covered investment, the concerned

Contracting Party shall endeavour its best efforts to provide interested persons

and enterprises a fair opportunity to discuss the proposed measure prior to its

entry in force”.

137. Claimant was never informed in advance or given the opportunity to comment or

discuss this measure prior to its entry into force. Besides, even when Claimant attempted the

suspension of the Decree, in order to reach an amicable solution, Respondent never

essentially joined Claimant on the negotiations table228 and announced through its spokesman

that the Decree would not be revoked.229

138. This Tribunal’s attention must also be shifted to the fact that Respondent’s behaviour

regarding the due process of law was not unexpected, since it was not the first time it had

breached it. For instance, on June 12, 2015, Respondent’s Parliament passed KEA with

abnormal speed, while denying the right to conduct public hearings to discuss the bill, in

violation of the Kronian Constitution, raising objections even by prominent Kronian

politicians.230

c. Respondent’s measures were discriminatory

139. With respect to the majority of Tribunals, discriminatory intent is considered less

significant than discriminatory effect.231 In the present dispute, Claimant adheres to that view;

both intent and effect were present, since Claimant was the only party affected by

Respondent’s conduct. Claimant further asserts that a discriminatory taking is one that singles

out an investor of his investment without a reasonable basis.232 A specific act may be

227 Middle East, ¶143. 228 PO2, ¶6; PO3, ¶3. 229 Facts, ¶23. 230 Facts, ¶17. 231 S.D. Myers, ¶254; Siemens, ¶321; Eastern Sugar, ¶338. 232 Reinisch, p.186.

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discriminatory in two ways: first, if it is carried out with the intention to specifically harm an

investor; or second, if it nevertheless results in a discrimination against the investor.233

140. In the present dispute, taking into account that the Site is the only area in

Respondent’s territory where lindoro is known to be present,234 Claimant was the only

company authorised to exploit lindoro in Respondent’s territory. Despite Respondent’s futile

attempts to disguise its actions as bona fide regulations,235 it is apparent that the measures in

question were implemented as a targeted attack on Claimant. The fact that they were

motivated by discriminatory intent is also apparent through Respondent’s President's annual

speech, where he aggressively announced his intention to eradicate the presence of foreign

investors, referring specifically to Claimant and its “harmful” actions.236

141. To set the record straight, the environmental and public health motive is merely a

facade. Respondent even goes as far as to accuse Claimant of impacting the local economy

harmfully. Claimant was astonished to hear of such allegations, especially while taking into

account statements made by previous administrations, praising Claimant’s contribution to the

creation a State of thriving financial improvement in Respondent’s territory.237 Claimant did

not just assist on the financial growth of the State, but also offered hundred of jobs to Kronian

nationals.238

142. In fact, as the SCC Tribunal in the Bogdanov case found that one of the most frequent

forms of discrimination is the one based on nationality.239 Respectively, Respondent’s clear

protectionism in favour of domestic investors creates an unacceptable inequity between them

and foreign investors, such as Claimant; existence of discrimination based on Claimant’s

foreign nationality is manifest.

143. Hence, this Tribunal ought to find Respondent’s conduct wanting and unlawful.

233 Dolzer/Stevens, p.62. 234 Facts, ¶11. 235 Answer, ¶¶19-20. 236 Exhibit No.6. 237 Facts, ¶13; Exhibit No.3. 238 Facts, ¶11. 239 Bogdanov, ¶215.

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C. Respondent’s Unlawful Expropriation Cannot Be Justified under the Ticadia-

Kronos BIT or Customary International Law

144. Respondent alleges that the issuance of the Decree does not amount to an

expropriatory act, since it is justified by the customary police powers doctrine.240 Claimant,

on the other hand, will demonstrate that Claimant’s illegalities cannot be justified under the

Ticadia-Kronos BIT or customary international law.

145. As the Bear Creek Tribunal highlighted, there is no need to enter into a discussion

concerning the customary police powers doctrine, when the BIT in question includes a

general exceptions clause.241 This is in conformity with arbitral practice, where the police

power doctrine has been examined in cases where such clause was not included in the

applicable BIT.242

146. Moreover, when a general exceptions clause is included in a BIT, and it is not phrased

in order to be understood as only exemplary, no other exceptions from general international

law or otherwise can be considered applicable.243 In this spirit, since the wording of Art. 10 of

the Ticadia-Kronos BIT appears as an exhaustive list, the police powers doctrine or any other

general international law defences may come into play only for the purposes of interpretation.

147. Nevertheless, Claimant will move to demonstrate that Respondent’s measures cannot

be justified under Art. 10 of the Ticadia-Kronos BIT, since they were not necessary (a) and

they arbitrarily and unjustifiably discriminated against Claimant (b).

a. Respondent’s measures were not “necessary”

148. Art. 10(1) states that “For the purpose of this Agreement, each of the Contracting

Parties may adopt or enforce a measure necessary [...]”. The term “necessary” used here is

the key factor to be interpreted, in order to examine whether this clause is to be applied.

Therefore, this Tribunal ought to interpret the aforementioned term by implementing “any

relevant rules of international law applicable in the relations between the parties”, in

240 Answer, ¶¶19-20. 241 Bear Creek, ¶474. 242 Philip Morris, ¶305; Feldman, ¶106; Suez, ¶139; Saluka, ¶245. 243 Bear Creek, ¶473.

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accordance with Art. 31(3)(c) of the VCLT rules. The Tribunal in El Paso interpreted such

clause, in accordance with this interpretative tool, considering Art. 25 of the ILC Draft Arts.

on State Responsibility the most relevant provision.244

149. Specifically, Art. 25 declares that the host-State must prove that its essential interest,

which is the author of the act, conflicts with one of its obligations; moreover, this interest

must have been threatened by a grave and imminent peril; In addition, the act in dispute must

have been the only means of safeguarding that interest; however, this act must not have

seriously impaired an essential interest of the State towards which the obligation existed.

Finally, the host-State in question must not have contributed to the occurrence of the state of

necessity.

150. Pursuant to EDF Tribunal’s findings, “necessity” must be interpreted with strict

objectivity; it is not to be constructed as an “easy escape hatch”, so that host-States might find

a convenient way to avoid their treaty obligations towards investors.245 Therefore, the

necessity defence requires an exceptionally high threshold for its invocation and all of its

prerequisites must be met cumulatively.246 In this line, Claimant will demonstrate that

Respondent has clearly failed to meet its burden to demonstrate the crucial elements of the

“necessity” requirement under Art. 10(1) of the Ticadia-Kronos BIT.

151. First and foremost, Respondent did not act in order to protect an essential interest of

the State; on the contrary, the measures undertaken had acquired a vibrant political hue. It

could even be argued that Respondent’s violent expropriation acted against one of its own

essential security interests, namely its economic stability, by endangering and effectively

terminating the operation of a company, which has had a significant role in the country’s

financial development.247

152. Secondly, Respondent has not provided adequate proof that the alleged danger was

even existent, much less “grave” or “imminent”. Tribunals, during the dire Argentine

financial crisis, have set a high threshold for establishing a “grave and imminent peril”, by

244 El Paso, ¶¶616,621,624. 245 EDF, ¶1171. 246 Sempra, ¶355; CMS, ¶331; Enron, ¶313. 247 Exhibit No.3.

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rejecting Argentina’s defence of “necessity”, even when half of the population lived under

perilous conditions and the unemployment rate had reached above 25%.248

153. Additionally, any conduct going beyond what is strictly necessary for the aimed

purpose will not be covered.249 The indirect and unlawful expropriation cannot in any event

be said to have been the sole solution to Respondent’s environmental and health issues;

surely, other much less cumbersome and abusive actions could have been adopted. For

instance, the Tribunal in CMS held that when there are other steps to respond to the situation

leading to the State‘s violation of its international obligations, the necessity defence could not

be invoked.250 In casu, the measures taken were overly severe, considering the uncertainty

governing the evidential basis invoked by Respondent. This is why they must be deemed as

disproportionate to the harm caused to Claimant.

154. Finally, regarding the contribution of the State, Claimant cannot take a stance as to

whether Respondent was at fault or not at this time. However, if the environmental and health

problems invoked are true, Respondent’s omission to regulate environmentally related issues

for decades is likely to have fortified the situation. Despite the existence of a multiple mining

operations in Kronos,251 Respondent, to this day, has never legislated regarding management

of mining wastes.252

155. It is, thus, apparent that Respondent has failed to fulfil any of the criteria required to

render its measures “necessary”. Therefore, its actions cannot be justified under the mantle of

the term “necessary”. Respondent ought to be found responsible for violating its international

obligations.

b. Respondent’s measures arbitrarily and unjustifiably discriminated against

Claimant

156. Justification of Respondent’s actions under Art. 10(1) of the Ticadia-Kronos BIT is,

also, subject to the negative requirements provided for in Art. 10(2). This provision demands

248 CMS, ¶¶354-355; Enron, ¶306; Sempra, ¶348. 249 ILC ASR Commentary, p.83, ¶15. 250 CMS, ¶324. 251 PO2, ¶4. 252 Ibid.

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that the regulatory measures are “applied in a manner that constitutes arbitrary or

unjustifiable discrimination between investments or between investors”.

157. Following the interpretative rules of Art. 31(1) VCLT, the ordinary meaning of the

term “arbitrary” is defined in Black’s Law dictionary as “not supported by fair, solid, and

substantial cause, and without reason given”.253 Presently, it is abundantly clear that

Respondent’s expropriatory measures were applied so as to constitute arbitrary

discrimination.

158. The discriminatory nature of Respondent’s actions has already been analysed. The

arbitrariness and unjustified nature of said discrimination is based on the fact that, despite the

Study, having failed to establish a causal link between Claimant’s operations and the

environmental damages,254 Respondent used it as stepping stone for the issuance of the

Decree. Even in its own text, the Study establishes that it cannot guarantee that there actually

exists a direct causal link between lindoro’s extraction and the environmental and health

issues.255

159. Moreover, graspel, the heavy metal allegedly responsible for the contamination of

Rhea River, is not found exclusively in lindoro mine tailings.256 Taking into consideration that

the exploitation of lindoro is not the only mining industry in Respondent’s territory,257 it

appears that only Claimant’s activities were targeted and no other measures were taken

towards the other mining companies, especially when the evidence is so inconclusive.

160. The lack of effectiveness of Respondent’s measures, also, proves that the

environmental and health problems invoked bear no connection with Claimant’s activities in

Kronos. In Philip Morris, the Tribunal examined the effectiveness of the adopted measures in

order to characterise them as “public health measures”; since the smoking rates in Uruguay

had notably declined, the Tribunal was satisfied that the measures had been directed towards

that goal and had been contributory to its achievement.258 In the present case, however,

despite almost two years from the issuance of the Decree and the subsequent termination of

253 Black's Law. 254 Facts, ¶22. 255 Exhibit No.4. 256 PO2, ¶4. 257 Ibid. 258 Philip Morris, ¶306.

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Claimant’s activities having passed, the levels of microcephaly and CVD among

Respondent’s population have not decreased.259

161. This confirms Claimant’s arguments that its mining activities are not responsible for

the health issues in Kronos territory. Microcephaly and CVD can be caused by a variety of

factors, wholly irrelevant to the mining industry, which the Study fails to mention.260

According to the WHO, CVD’s main causes are “unhealthy diet, physical inactivity, tobacco

use and harmful use of alcohol”. What is more, WHO does not even mention mining

activities as a potential cause of CVD.261

162. Concerning microcephaly, WHO states that the most common cause are infections

during pregnancy and that five different factors can be considered as possible causes.262 The

Study fails to address or include any other factor apart from the exploitation of lindoro.

Moreover, it displays major inaccuracies (i.e. 88% of the 80 infants examined amount to 70,4

infants), betray its amateurish execution.263 To add insult to injury, the Study was based on

data and investigations conducted during 2011-2016. During this period, there was an

outbreak of Zika, a global virus that is reportedly associated to microcephaly.264 In spite of the

above, and even though the Study states that it did not establish a causal link between

Claimant’s activities and the contamination and the diseases, Respondent did not hesitate to

shut down Claimant’s investment.

163. Claimant also draws attention to the definition of “arbitrary” presented by the ICJ in

ELSI, placing emphasis on the wilful disregard of the rule of law itself.265 Correlation between

the arbitrariness of the measure and disregard of the due process of law has also been

highlighted by the AIG Tribunal.266 In the present dispute, Respondent’s disregard of the due

process of law has already been analysed.

164. As a result, Claimant submits that Respondent’s actions were indeed unjustified, since

they were based on the loosely connected results of an inconclusive Study. It becomes readily

259 PO3, ¶1. 260 Facts, ¶22. 261 WHO, CVDs-Key facts. 262 WHO, Microcephaly-Key facts. 263 Exhibit No.4. 264 WHO, Zika virus-Key facts. 265 ELSI, ¶128. 266 AIG, ¶10.5.1.

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apparent that Respondent meets the negative requirements laid out in Art. 10(2)(a); therefore,

Respondent may not in any way invoke the general exceptions clause or use it to justify its

violation of its paramount treaty obligations.

165. In the far-fetched event that the Tribunal deems that Respondent’s measures fall

within the scope of Art. 10 of the BIT, Respondent is still not liberated from the obligation to

pay compensation. Bearing in mind that the BIT was signed “for the promotion and

protection of investment”, it would be contrary to its primary aim to accord less protection to

foreign investors than that provided under customary international law. Even when

expropriation is necessary for the protection of human, animal or plant life or health, “the

state may take the measure, but still must pay compensation”.267 In this vein, the CMS

Tribunal emphasised that the duty to pay compensation would not be excused even if the

requirement of necessity in customary international law or the standards of a general

exception clause were met.268 Therefore, Respondent can be exempted, in any manner, from

the obligation to compensation.

267 Newcombe, pp.11-12. 268 CMS, ¶¶388,394.

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PRAYER FOR RELIEF

166. Claimant respectfully requests this Tribunal to find that:

(1) Claimant is a covered investor under Art. 1(4) of the Ticadia-Kronos BIT;

(2) The claim submitted by Claimant is admissible;

(3) Respondent’s counterclaim is inadmissible;

(4) Respondent’s measures amount to a creeping indirect expropriation, in

violation of Art. 7 of the Ticadia-Kronos BIT, and cannot be justified;

(5) Respondent, in any event, cannot be exempted from its liability to pay

compensation.

Respectfully Submitted on September 17, 2018

By

Team Owada

On behalf of Claimant

Fenoscadia Limited