TEAM CASTRO
THE 2010 FOREIGN DIRECT INVESTMENT INTERNATIONAL
MOOT COMPETITION
22 – 24 OCTOBER, 2010
IN
THE INTERNATIONAL CENTRE FOR
SETTLEMENT OF INVESTMENT DISPUTES
AT
THE PEPPERDINE UNIVERSITY SCHOOL OF LAW, MALIBU, CALIFORNIA
ICSID CASE No.ARB/X/X
TELEVATIVE INC.
CLAIMANT
VERSUS
THE GOVERNMENT OF THE REPUBLIC OF BERISTAN
RESPONDENT
MEMORIAL FOR RESPONDENT
(As Submitted to the Tribunal on 18th
September, 2010)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
i
TABLE OF CONTENTS
TABLE OF CONTENTS…………………………………………………………………,……..i
LIST OF AUTHORITIES……………….………………………………………………...…….v
STATEMENT OF FACTS……………………………………………………….…………...…1
ARGUMENTS………………………………………………………………………………...…3
PRELIMINARY OBJECTIONS
I. The Opulentia-Beristan Bilateral Investment Treaty (“the BIT”) in any case does
not apply to the Joint-Venture Agreement (“JVA”)…………………...…….……3
A. The BIT is applicable to only those investments effected prior to 31st
December
2006………………………………………………………………………………………..4
B. Article 16(2) of the BIT categorically expels its scope with regard to investments
effected after 31st
December 2006……………………………………………………….5
PART ONE: JURISDICTION
I. That The Tribunal does not have jurisdiction over Claimant’s contract-based claims
arising under the JVA by virtue of Article 10 of the Beristan-Opulentia
BIT……………………………………………………………………………...…………5
A. ICSID cannot entertain Claimant’s purely commercial claims even by virtue of
Article 10 of the BIT ……………………………………………….……………………6
B. ICSID’s jurisdictional requirements under Article 25 haven’t been
fulfilled…………………………………………………………………………..………..7
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1. Beritech does not satisfy the ratione personae requirement due to lack of
designation…………………………………………………………………………….8
2. Claimant is not an “Investor” within the meaning of the term under Article 1(2) of the
BIT……………………………………………………………………………..…….10
3. The present dispute does not satisfy ratione materiae requirement of Article 25 of the
ICSID Convention…………………………………………………………...………10
a. JVA has no specific duration………………………………………………………12
b. Risks involved are merely commercial in nature……………………….………12
c. Contribution to Host-State’s development is doubtful………………….……..13
II. The Tribunal has no jurisdiction in view of Clause 17 (Dispute Settlement) of the
Joint Venture Agreement…………………………………………………………..13
A. Claimant’s claims are inadmissible at the ICSID as Clause 17 of the JVA is an
exclusive jurisdiction clause…………………………………………………..………..14
B. Claimant has itself given irrevocable consent to settle the present dispute in
accordance with Beristian laws…………………………………………………..…….16
C. Claimant has failed its duty regarding amicable settlement of dispute under Clause
17 of JVA………………………………………………………………………..………18
CONCLUSION ON JURISDICTION………………………………………………...………19
PART TWO: MERITS
III. Respondent has not materially breached the JVA by allegedly preventing
Claimant from completing its contractual duties and improperly invoking
Clause 8 (Buyout) of the JVA……………………………………..……………….20
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A. Actions Actions of Beritech and Sat-Connect are not attributable to the Respondent
in international law……………………………………………………………………..20
B. Clause 8 (Buyout) of the JVA has been properly invoked by Beritech and that does
not prevent the Claimant from performing its contractual duties……….………….22
1. Clause 8 of JVA has been lawfully invoked as Claimant committed a material breach
of JVA…………………………………………………………………..……………22
2. Beritech has complied with all procedural formalities under Beristian Laws while
invoking Clause 8 of the JVA………………………………………………………..25
C. In the alternative, even if arguendo Beritech has committed a breach of JVA, then
such breach cannot constitute a ‘material breach’…………………………..……….27
IV. Respondent’s actions or omissions do not amount to expropriation,
discrimination, a violation of fair and equitable treatment, or don’t otherwise
violate general international law or applicable treaties………………………….30
A. Respondent has not violated ‘Fair and equitable’ treatment standard under Article 2
of the BIT……………………………………………………………………………….30
1. Respondent’s conduct is not arbitrary…………………………………..…………..32
2. Respondent has not violated Good faith and Legitimate expectations of
Claimant……………………………………………………………………...………33
3. Respondent has not violated Due process of law……………………………………34
4. Respondent has maintained Transparency in its dealings……………………………36
5. Respondent has maintained ‘full protection and security’
standards………………………………………………………………………….….36
6. Respondent’s conduct was not discriminatory………………………………………37
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B. Respondent’s conduct has not amounted to breach of National treatment standards
under Article 4 of the BIT………………………………………………………..…….38
1. Claimant and Beritech were not in “like circumstances”……………….…………..38
2. There was a reasonable justification for Respondent’s conduct………….………….39
C. Respondent’s conduct has not amounted to breach of Article 4 of the
BIT……………………………………………………………………………………….39
V. Respondent is entitled to rely on Article 9 (Essential Security) of the BIT as a
defense to Claimant’s claims…………………………………………….…………42
A. Article 9 gives absolute unquestionable right to exercise its subjective discretion to
the Respondent with respect to matters concerning its essential security
interest……………………………………………………………………...……………43
B. In any case, burden of proof to establish Respondent’s wrongful reliance on Article
9 shall always lie upon the Claimant………………………………………..…………45
CONCLUSION ON MERITS…………………………………………….……………………47
PRAYER FOR RELIEF……………………………………………………………………….48
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LIST OF AUTHORITIES
TREATIES
Convention on the Settlement of Investment Disputes Between States and Nationals of Other
States, 575 UNTS 159 (1965)………………………………..……………….……..……...3, 7, 10
ICSID Convention, Regulations and Rules, ICSID/15/Rev.1 (January 2003)……….………..….9
International Covenant on Civil and Political Rights, 999 UNTS 171 (1966)…………………..37
UNIDROIT, ‘Principles of International Commercial Contracts’, [International Institute for the
Unification of Private Law (Unidroit), Rome 1994]…………………………………….16, 17, 28
Vienna Convention on the Law of Treaties, 1155 UNTS 331 (1969)…………………..……….32
ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts, with
commentaries, 2 YBILC Part-II (2001) (Report of the 53rd Session ILC, UNGA 56th Session,
Doc A/56/10)………………………………………………………………………..……….20, 21
Multilateral Agreement on Investment, Draft Consolidated Text, OECD Doc. DAFFE/MAI
(98)7/REV1 (http://www1.oecd.org/daf/mai/pdf/ng/ng987r1e.pdf) (Apr. 22,
1998)……………………………………………………………………………………….……44
NAFTA Free Trade Commission, ‘Notes of Interpretation of Certain Chapter 11 Provisions’,
(July 31, 2001) (http://www.international.gc.ca/trade-agreements-accords-commerciaux/disp-
diff/nafta-interpr.aspx?lang=en)...................................................................................................31
World Bank Guidelines, 31 ILM 1376 (1992)………………………………………..………….37
JUDICIAL DECISIONS
International Court of Justice
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Case concerning the Barcelona Traction Light and Power Company Limited (Belgium v Spain),
Second Phase, Judgment, 1970 ICJ Reports 7………………………………………………20, 21
Elettronica Sicula S.P.A. case, Judgment, 1989 ICJ Reports 15…………………………...36, 40
Interpretation of Peace Treaties with Bulgaria, Hungary and Romania, Advisory Opinion
(Second Phase), 1950 ICJ Reports 221………………………………………………..…………18
Military and Paramilitary Activities in and against Nicaragua, Merits, Judgment, 1986 ICJ
Reports 14….………………………………………………………………………….....21, 43, 44
Nuclear Tests Case (Australia v. France), 1974 ICJ Reports 253……………………………….10
Temple of Preah Vihar Case (Cambodia v. Thailand), 1962 ICJ Reports 6………………….…10
ICSID Tribunal
ADF Group Inc. v. USA, Award, ICSID Case No.ARB(AF)/00/1 (9 January 2003)……..……..34
Aguas del Tunari v Bolivia, Decision on Respondent’s Objections to Jurisdiction, ICSID Case
No.ARB/02/3 (21 October 2005)………………………………………………………….…….21
Autopista Concesionada de Venezuela CA (Aucoven) v Venezuela, Award, ICSID Case
No.ARB/00/5 (23 September 2003)…………………………………………..………..………..28
Azinian and ors v Mexico, Award on Jurisdiction and Merits, ICSID Case No.ARB(AF)/97/2 (1
November 1999)………………………………………………………………….……………..33
Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC BV v Paraguay,
Decision on Objection to Jurisdiction, ICSID Case No.ARB/07/9 (29 May
2009)………..................................................................................................................................15
Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Pakistan [hereinafter Bayindir], Decision on
Jurisdiction, ICSID Case No.ARB/03/29 (14 November 2005)……………..…………………..12
Bayindir Award (27 August 2009)………………………..……………………………………..21
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Biwater Gauff (Tanzania) Limited v Tanzania, Award, ICSID Case No.ARB/05/22 (24 July
2008)…………………………………………………………………………………..…………31
Burlington Resources Inc v Ecuador, Decision on Jurisdiction, ICSID Case No.ARB/08/5 (2
June 2010)………………………………………………………………………………….…….16
CMS Gas Transmission Company v Argentina [hereinafter CMS], Award, ICSID Case
No.ARB/01/8 (May 12 2005)………………………...………………………………..…….40, 43
CMS Decision on Application for Annulment (25 September 2007)……………………………42
Cable Television of Nevis Ltd and Cable Television of Nevis Holdings Limited v Federation of St
Kitts and Nevis, Award, ICSID Case No.ARB/95/2 (13 January 1997)…………………….……9
Compañía de Aguas del Aconquija SA and Vivendi Universal SA v Argentina, Decision on
Annulment, ICSID Case No.ARB/97/3 (3 July 2002)………………………………….….….7, 14
Consortium Groupement LESI - DIPENTA v Algeria, Award, ICSID Case No.ARB/03/8…..…..7
Consortium RFCC v Morocco [hereinafter RFCC], Decision on Jurisdiction, ICSID Case
No.ARB/00/6 (16 July 2001)………………………………………………………………...…..12
RFCC Award (22 December 2003)……………………………………..……………………….38
El Paso Energy International Company v Argentina, Decision on Jurisdiction, ICSID Case
No.ARB/03/15 (27 April 2006)…………………………………………………………….……..6
Enron Corporation and Ponderosa Assets LP v Argentina [hereinafter Enron], Decision on
Jurisdiction, ICSID Case No.ARB/01/3 (14 January 2004)…………………………..…………18
Enron Award (22 May 2007)…………………………………………………………...………..46
Fedax NV v Venezuela, Decision on Objections to Jurisdiction, ICSID Case No.ARB/96/3 (11
July 1997)…………………………………………………………………………….…………..11
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Feldman Karpa v Mexico, Award and Dissenting Opinion, ICSID Case No.ARB(AF)/99/1 (16
December 2002)……………………………………………………………………….…………40
Genin and ors v Estonia, Award, ICSID Case No.ARB/99/2 (25 June 2001)….…..……...……35
Goetz and Five Belgian shareholders of AFFIMET v Burundi, Award, ICSID Case No.ARB/95/3
(10 February 1999)…………………………………………………………...………….18, 34, 37
Government of the Province of East Kalimantan v. PT Kaltim Prima Coal and others, Award,
ICSID Case No.ARB/07/3 (December 28, 2009)…………………………………………………8
Impregilo SpA v Pakistan, Decision on Jurisdiction, ICSID Case No.ARB/03/3 (22 April
2005)……………………………………………………………………..……………………6, 18
Joy Mining Machinery Limited v Egypt, Award on Jurisdiction, ICSID Case No.ARB/03/11 (6
August 2004)………………………………………………………………….…………..6, 11, 12
LG&E Energy Corporation and ors v Argentina, ICSID Case No.ARB/02/1, Decision on
Liability (October 3, 2006)…………………………………………………...…….……………46
Lanco International Incorporated v Argentina, Preliminary Decision on Jurisdiction, ICSID Case
No.ARB/97/6 (8 December 1998)……………………………………………………………….14
Loewen Group Incorporated and Loewen v USA, Award, ICSID Case No.ARB(AF)/98/3 (26
June 2003)………………………………………………………………………………………..32
Malaysian Historical Salvors Sdn Bhd v Malaysia, Award on Jurisdiction, ICSID Case
No.ARB/05/10 (17 May 2007)…………………………………………………..………11, 12, 13
Maritime International Nominees Establishment v Guinea, Decision on Partial Annulment of the
Award, ICSID Case No.ARB/84/4 (22 December 1989)………………………………….…….15
Mitchell v The Democratic Republic of the Congo, Decision on the Application for Annulment of
the Award, ICSID Case No.ARB/99/7 (1 November 2006)………………...……………….11, 13
Noble Ventures Incorporated v Romania, Award, ICSID Case No.ARB/01/11 (October 12,
2005)…………………………………………………………………………..…………………20
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Olguín v Paraguay, Award, ICSID Case No.ARB/98/5 (26 July 2001)…………..……………41
Pan American Energy LLC and BP Argentina Exploration Company v Argentina, Decision on
Preliminary Objections, ICSID Case No.ARB/03/13 (27 July 2006)……………………….……6
Parkerings-Compagniet AS v Lithuania, Award on jurisdiction and merits, ICSID Case
No.ARB/05/8 (11 September 2007)……………………………………………………………..38
SGS v Pakistan, Decision on Objections to Jurisdiction, ICSID Case No.ARB/01/13 (6 August
2003)…………………………………………………………………………...……….…6, 17, 18
SGS v Philippines, Decision on Objections to Jurisdiction and Separate Declaration, ICSID Case
No.ARB/02/6 (January 29, 2004)……………………………………………..…………….…..15
Saipem SpA v Bangladesh, Decision on jurisdiction and recommendation on provisional
measures, ICSID Case No.ARB/05/7 (21 March 2007)………………………………...……….12
Salini v Jordan, Decision on Jurisdiction, ICSID Case No.ARB/02/13 (29 November
2004)……………………………………………………………………..……………………6, 14
Salini v Morocco, Decision on Jurisdiction, ICSID Case No.ARB/00/4 (23 July
2001)………………………………………………..………………………………………..11, 12
Sempra Energy International v Argentina, Award, ICSID Case No.ARB/02/16 (28 September
2007)………………………………………………………………………….………………….46
Siemens AG v Argentina, Award and Separate Opinion, ICSID Case No.ARB/02/8 (6 February
2007)…………………………….………………………………………………………….……42
SPP (Middle East) Limited v Egypt, Decision on Jurisdiction and Dissenting Opinion, ICSID
Case No.ARB/84/3, 3 ICSID Reports 131 (1995)…………………………...………………..…15
Suez and ors v Argentina, Decision on Liability, ICSID Case No.ARB/03/17 (30 July
2010)………………………………………………………………………...……………….31, 34
Tanzania Electric Supply Company Limited v Independent Power Tanzania Limited, Final
Award, ICSID Case No.ARB/98/8 (12 July 2001)………………………………………………..8
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Tokios Tokel s v Ukraine, Decision on Jurisdiction and Dissenting Opinion, ICSID Case
No.ARB/02/18 (29 April 2004)……………………………………………………………...…..20
Toto Costruzioni Generali SpA v Lebanon, Decision on Jurisdiction, ICSID Case No.ARB/07/12
(11 September 2009)………………………………………………………………………………6
Vacuum Salt Products Limited v Ghana, Final Award, ICSID Case No.ARB/92/1 (16 February
1994)……………………………………………………………………………………………..21
Waste Management, Inc v. United Mexican States (II), Award, ICSID Case No.ARB(AF)/00/3
(30 April 2004)………………………………………………………………….……………….33
Wena Hotels Limited v Egypt, Award, ICSID Case No.ARB/98/4 (8 December
2000)……………………………………………………………………..………………………34
Zhinvali Development Limited v Republic of Georgia, Award, ICSID Case No.ARB/00/1 (24
January 2003)…………………………………………………………………………………….15
UNCITRAL
CME Czech Republic BV v Czech Republic, Final Award and Separate Opinion (14 March
2003)……………………….…………………………………………………………………….21
Eureko BV v Republic of Poland, Partial Award and Dissenting Opinion (19 August
2005)…………………………………………………………………………………………..…39
Glamis Gold Limited v United States, Award (8 June 2009)………………………...………32, 33
Lauder v The Czech Republic, Final Award (3 September 2001)……….…………...……..40, 41
Methanex Corporation v USA, Final Award on Jurisdiction and Merits (3 August
2005)………………………………………………………………………….….………………33
Pope & Talbot Incorporated v Canada, Award on the Merits of Phase 2 (10 April
2001)…………………………………………………………………………………………..…39
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SD Myers Incorporated v Canada, First Partial Award on the Merits and Separate Opinion (13
November 2000)………………………………………………..……………………..…38, 40, 42
Saluka Investments BV v. Czech Republic [hereinafter Saluka], Decision on Jurisdiction over the
Czech Republic’s counter-claim (7 May 2004)……………………………………………..…..15
Saluka Partial Award (March 17, 2006)……………………..…………………..31, 34, 36, 37, 42
United Parcel Service of America Incorporated v Canada, Award on Jurisdiction (22 November
2002)…………………………………………………………………….……………………….32
London Court of International Arbitration
Occidental Exploration and Production Company v Ecuador, Final Award, Case No.UN3467 (1
July 2004)…………………………………………………………………………………...……33
Iran-US Claims Tribunal
Amoco International Finance Corporation v Iran, Partial Award, 15 Iran-US CTR 189 (14 July
1987)…………………………………..…………………………………………………………37
Sea-Land Service Incorporated v Iran and Ports and Shipping Organization of Iran, 6 Iran-US
CTR 149 (1984)………………………………………………………………………………….40
Sedco Incorporated v National Iranian Oil Company, Interlocutory Award, 9 Iran-US CTR 248
(1985)……………………………………………………………………...……………………..42
Starrett Housing v Iran, Interlocutory Award, 4 Iran-US CTR 122 (19 December
1983)………………………………………………………………………………….………….41
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Domestic Cases
Attorney-General v. Mobil Oil NZ Ltd., High Court Wellington of 1 July 1987, 2 NZLR 649
(1989)………………………………………………………………………………………..…….9
Bridas SAPIC v Turkmenistan and ors., Appeal Judgment, 447 F.3d 411 (5th Cir. 2006) (21
April 2006)…………………………………………………………...…………….……….……21
Brokdorf Judgment, Bundesverfassungsgericht [BVerfG], Federal Constitutional Court of
Germany (F.R.G.), 69 BVerfGE 315 (May 14, 1985)……………………………….…………..44
Dombroski v. WellPoint, Inc., 895 N.E.2d 538 at p.545 (Ohio 2008)……….…………………..21
Gray v Admin Dir. of the Court, 31 P.2d 580 (1997)……………………………………..……..46
J.J. Ryan & Sons v. Rhone Poulenc Textile, 863 F.2d 315 (4th Cir.) (1988)…….……………..17
James v. U.K., 98 European Court of Human Rights, Series A, p.9 (1986)……………......……42
Lakshmanasami Gounder vs C.I.T. Selvamani and Ors, 1992 SCC (1) 91……...………………46
Mersey Steel and Iron Co. v. Naylor, Benzon & Co., (1884) 9 App Cas 434………...…………28
Miller v. Flume, 139 F.3d 1130 (7th Cir.) at p.1136 (1998)…………………………….………17
Nauru Phosphate Royalties, Inc v Drago Daic Interests Inc 138 F.3d 160 (5th Cir)
(1998)…………………………………………………………………………………………….17
Pacific Gas & Electric Co. v. Zuckerman, 189 Cal.App.3d 1113 (1987)………...……………..49
Prima Paint Corp., v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)…………………..…….17
State v Shannon, 185 P.3d 200 (Hawaii 2008)…………………………………………..………46
Voellmy v. Broderick, 980 P.2d 999 (App.1999)………………………………..………………46
Wallersteiner v Moir, 1 WLR 991 (1974)……………………………...………………………..21
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MISCELLANEOUS
BIS, US Department of Commerce, ‘Introduction to Commerce Department Export Controls’
(http://www.bis.doc.gov/licensing/exportingbasics.htm)...........................................................24
BRIDAS SAPIC v Turkmenistan, First Partial Award and Dissent, ICC Case No.9058/FMS/KGA
(24 June 1999)……………………………………………………………………………………28
Canadian Statement of Implementation for NAFTA, Canada Gazette, Part I, (Jan.1 1994) at
p.149
(http://www.naftaclaims.com/Papers/Canadian%20Stmt%20of%20Implementation.pdf)...............
........................................................................................................................................................31
JAMES CRAWFORD, ‘Second Report on State Responsibility: Addendum’, UN Doc.
A/CN.4/498/Add.2 (http://untreaty.un.org/ilc/guide/9_6.htm) (1999)……………………….….44
Japan-Taxes on Alcoholic Beverages, Appellate Body Report, WT/DS8/AB/R, WT/DS10/AB/R,
WT/DS11/AB/R [DSR 1996: I, 97] (1 November 1996)………………………………………..38
Nykomb Synergetics Technology Holding, AB, Stockholder v. Republic of Latvia, Riga, Award,
SCC (16 December 2003)………………………………………………………………….…….41
Oscar Chinn Case (United Kingdom v Belgium), Judgment of 12 December 1934, PCIJ Series
A/B No.63………………………………………………………………………………………..37
‘Restatement (Third) of the Foreign Relations Law of the United States’ [1 American Law
Institute (June 1986)]…………………………………………………..…………………….….37
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South Asian Strategic Stability Institute, London, ‘China's Export Control System and the Role
of MOFCOM’, Research Report 23, p.5 (January 2009) (http://www.sassi.org/pdfs/Report-
23.pdf)...........................................................................................................................................24
BOOKS
BIN CHENG, ‘General Principles of Law as Applied by International Courts and Tribunals’
[Cambridge University Press 2007]………………..……………………………………………32
CHRISTOPH SCHREUER, ‘The ICSID Convention: A Commentary’ [2nd
ed. Cambridge
University Press 2009]………………………………………..………………...…..8, 9, 10, 13, 15
Essential Security Interests under International Investment Law, ‘International Investment
Perspectives: Freedom of Investment in a Changing World’ [ed. OECD 2007]………….…….45
GEORG SCHWARZENBERGER, ‘International Law and Order’ [London, Stevens,
1971]………………………………………………………………………………………..……32
JAMES CRAWFORD, ‘The International Law Commission's Articles on State Responsibility:
Introduction, Text and Commentaries’ [Cambridge and New York, Cambridge University Press,
2002]……………………………………………………………………………………………..44
R.DOAK BISHOP, CRAWFORD, WILLIAM MICHAEL REISMAN, ‘Foreign investment
disputes: cases, materials, and commentary’ [Kluwer Law International 2005]………………..17
R.DOLZER & M.STEVENS, ‘Bilateral Investment Treaties’ [The Hague: Martinus Nijhoff
Publishers 1995]………………………………………………………………………..…..…….37
STEPHEN M. SCHWEBEL, ‘International Arbitration: Three Salient Problems’ [Cambridge
University Press 1987]…………………………………………………………………………….7
YANN AUBIN and ARNAUD IDIART, ‘Export Control Laws and Regulations Handbook: A
Practical Guide to Military and Dual-Use Goods, Trade Restrictions and Compliance’ [Kluwer
Law International 2007]…………………………………………………………….………..23, 24
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ARTICLES
C.F. AMERASINGHE, ‘The Jurisdiction of the International Centre for the Settlement of
Investment Disputes’, 19 Indian Journal of International Law 166 (1979)……………………….9
C. SCHREUER, ‘Travelling the BIT Route: Of Waiting Periods, Umbrella Clauses and Forks in
the Road’, 5 Journal of World Investment & Trade 231 (2004)………………..………………..7
C. TODD PICZAK, ‘The Helms-Burton Act: U.S. Foreign Policy toward Cuba, the National
Security Exception of the GATT and the Political Questions Doctrine’, 61 Univ. Pittsburg Law
Review 287 (1999–2000)………………………………………………………………...………45
CHRISTOPHER C. JOYNER, ‘Coercion’ [Max Planck Encyclopedia of Public International
Law (December 2006)]………………………………………………………..…………………25
DAPO AKANDE & SOPE WILLIAMS, ‘International Adjudication of Security Issues: What
Role for the WTO?’ 43 V.A. J. INT’L L. 365 (2003)……………………………………………45
GC CHRISTIE, ‘What Constitutes a Taking under International Law’, 33 BYIL 307
(1962)……………………………………………………………………………………………41
I.F.I. SHIHATA AND A. PARRA, ‘The Experience of the International Centre for Settlement of
Investment Disputes’, 14 ICSID Review—FILJ 299 (1999)………………….…………………12
ISABEL FEICHTNER, ‘Waiver’ [Max Planck Encyclopedia of Public International Law
(October 2006)]…………………………………………………………………………………..10
NEWCOMBE, ‘Regulatory Expropriation, Investment Protection and International Law: When
Is Government Regulation Expropriatory and When Should Compensation Be Paid’ (1999)
(ita.law.uvic.ca/documents/RegulatoryExpropriation.pdf)………………………………………41
OECD: WORKING PAPERS ON INTERNATIONAL INVESTMENT, ‘Fair and Equitable
Standard in International Investment Law’, Number 2004/3 (September 2004)………..….32, 36
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PIERRE LALIVE, ‘The First 'World Bank' Arbitration (Holiday Inns v. Morocco) - Some Legal
Problems’, 51 British Yearbook of International Law (BYbIL) 123
(1980)………………………………………………………………………………………...…..18
PETER LINDSAY, ‘The Ambiguity of GATT Article XXI: Subtle Success or Rampant Failure?’
52 Duke Law Journal 1277 (2003)………………………………………………………………44
STEPHEN VASCIANNIE, ‘The Fair and Equitable Treatment Standard in International
Investment Law and Practice’, 70 BYbIL 99 (1999)…………………………...……………….31
WILLIAM W. BURKE-WHITE & ANDREAS VON STADEN, ‘Investment Protection in
Extraordinary Times: The Interpretation and Application of Non-Precluded Measures
Provisions in Bilateral Investment Treaties’, 48:2 Virginia Journal of International Law 308
(2008)…………………………………………………………………………...………..43, 44, 45
TEAM CASTRO, MEMORIAL FOR RESPONDENT
1
STATEMENT OF FACTS
1. Televative Inc. (“Claimant”) is a privately held multinational enterprise incorporated in
The United Federation of Opulentia (hereinafter “Opulentia”) and specializes in satellite
communication technology and systems.
2. Beritech S.A. is a state owned company established by the Government of the Republic
of Beristan (hereinafter “the Respondent”) in March 2007.
3. On 18 October 2007, Beritech and Televative signed a Joint Venture agreement
(hereinafter “JVA”) to establish Sat-Connect S.A., a joint venture company, under the
Beristian laws. The Respondent had co-signed the JVA as a guarantor of Beritech’s
obligations.
4. Beritech owns a majority 60% share in Sat-connect while the remaining 40% is held by
the Claimant. The purpose of Sat-Connect is to develop and deploy satellite network
systems and communication technology in Euphonia, a vast region encompassing
Beristan and six other countries. This technology was also supposed to be used for
civilian and military purposes as well as by the Beristian armed forces. Beritech enjoys
the right to appoint 5 out of 9 Directors in Sat-Connect’s Board of Directors.
5. On 12 August 2009, a highly ranked Berisian government official’s article was published
in The Beristian Times. It raised national security concerns while believing that the
Claimant’s personnel had compromised the Sat-Connect project and was involved in
leaking extremely critical information from Sat-Connect project to the Government of
Opulentia.
6. On 21 August 2009, the Chairman of the Sat-Connect’s Board of Directors, Michael
Smithworth made a presentation to the Directors to discuss the allegations published in
The Beristian Times. Subsequently, six days later, majority of the Sat-Connect’s Board
TEAM CASTRO, MEMORIAL FOR RESPONDENT
2
of Directors invoked Clause 8 of the JVA that empowered Beritech to buyout Claimant’s
interest in Sat-Connect.
7. Beritech then served a notice upon the Claimant the very next day to vacate Beristan
within the following 14 days. On 11 September 2009, the Civil Works Force (hereinafter
“CWF”) - the civil engineering section of the Beristian Army- instructed the Claimant’s
personnel to leave the Sat-Connect project sites.
8. On 19 October 2009, Beritech filed a request for arbitration against the Claimant under
Clause 17 of JVA and even agreed to deposit US $47 million – an equivalent of the
Claimant’s total monetary investment in Sat-Connect project as on that date- in an escrow
account pending the decision of the arbitration. Claimant not only refused to entertain
Beritech’s request but instead, on 28 October 2009, it notified the Respondent to initiate
arbitration proceedings under the ICSID by invoking Article 11 of the Beristan-Opulentia
BIT (hereinafter “the BIT”).
9. On 1 November 2009, the ICSID Secretary General registered for arbitration the above
dispute between the Claimant and the Respondent. Both Beristan and Opulentia have
signed and ratified the ICSID Convention as well as the Vienna Convention on the Law
of Treaties.
TEAM CASTRO, MEMORIAL FOR RESPONDENT
3
ARGUMENTS
PRELIMINARY OBJECTIONS
I. The Opulentia-Beristan Bilateral Investment Treaty (“the BIT”) in any case
does not apply to the Joint-Venture Agreement (“JVA”)
10. Pursuant to Article 41(2) of the ICSID Convention,1
Respondent challenges the
jurisdiction or competence of this Tribunal for reasons submitted hereunder and it is
requested that the same may be dealt with as a preliminary question by the Tribunal. It is
requested that shall the Tribunal wish to proceed beyond this stage of the proceedings,
the preliminary question raised hereunder is without any prejudice to the usage of the
term “investment” for the purpose of the arguments advanced on behalf of the
Respondent in the following sections.
11. Articles 1-14 of the BIT respectively are subject to Article 16 of the BIT. Article 16 of
the BIT deals with the ‘duration and expiry date’ of the BIT.2
It is submitted that ICSID
jurisdiction cannot be established by virtue of Article 10 of the BIT because the BIT as a
whole does not apply to the JVA or Sat-Connect in any case. This is because (A) the BIT
is applicable to only those investments effected prior to 31st
December 2006 and (B)
Article 16(2) of the BIT categorically expels its scope with regard to investments effected
after 31st
December 2006.
1
Convention on the Settlement of Investment Disputes Between States and Nationals of Other
States, 575 UNTS 159 (1965) [hereinafter ICSID Convention], [Article 41(2)]
2
Treaty Between The Republic of Beristan and The United Federation of Opulentia concerning
the encouragement and reciprocal protection of Investments, Annex.1 [hereinafter the BIT],
[Article 14, Article 16]
TEAM CASTRO, MEMORIAL FOR RESPONDENT
4
A. The BIT is applicable to only those investments effected prior to 31st
December 2006
12. Article 16(1) of the BIT states that the BIT shall remain effective for 10 years from the
date of notification of the same by each Contracting Party to the other (sic). The BIT had
become effective on 1 January 1997.3
Thus, the BIT was meant to be effective for a
period of 10 years from this date onwards and was primarily supposed to come to end on
December 31, 2006.
13. It is not doubted that the BIT was to be ‘tacitly renewed’ for another 5 years after the
‘first expiry date’, i.e. December 31, 2006 unless either State intended to terminate it.
Such termination, if at all it did occur, would thereby render the BIT void and the date of
such termination by both the Contracting States shall be considered as the ‘final expiry
date’ of the BIT.
14. Article 16(2) further clarifies that there does exist a concept of ‘first expiry date’ because
of Article 16(1) by using the words ‘investments effected prior to the expiry dates of the
present Agreement, as provided in Article 16’.
15. Thus, both the Parties had full knowledge of and had consented to the fact that the
minimum time period for which the present BIT was intended to be in effect was 10 years
and there onwards, it was open for either party to terminate it. Thus, the only certainty
about an expiry date was 31st
December 2006 and the obligations taken under Article
16(2) with respect to investments were in context of this expiry date only. It is submitted
that neither of the Contracting States could have intended to take a chance or a risk
regarding the uncertainty involved with the concept of ‘expiry date’ of the BIT.
3
FDI Moot 2010 Clarification Requests (4 June) Responses [hereinafter Clarification(I)], #174
TEAM CASTRO, MEMORIAL FOR RESPONDENT
5
16. The JVA was signed on 18 October 2007, nearly 10 months after the ‘first expiry date’.
Article 16(2) states that provisions of Articles 1-14 of the BIT respectively shall remain
effective for those investments which were effected prior to ‘expiry date of the present
Agreement.’ Thus, the JVA in any case ceases to be covered by the present BIT.
B. Article 16(2) of the BIT categorically expels its scope with regard to investments
effected after 31st
December 2006
17. Article 16(2) of the BIT does not expressly or explicitly mention that the provisions of
Articles 1-14 of the BIT respectively will even apply to those investments which are
effected after the ‘expiry dates of the present Agreement.’ Had it been an intention of the
Contracting States to the BIT to do so, they should have expressed so and cleared all the
doubts whatsoever. It does make it clear that the JVA is well outside the purview of the
BIT.
PART ONE: JURISDICTION
I. The Tribunal does not have jurisdiction over Claimant’s contract-based claims
arising under the JVA by virtue of Article 10 of the Beristan-Opulentia BIT
(“the BIT”) because:
18. Article 10 of the BIT states that:
“Each Contracting Party shall constantly guarantee the observance of any
obligation […] with regard to investments in its territory by investors of the other
Contracting Party”4
4
The BIT, Article 10
TEAM CASTRO, MEMORIAL FOR RESPONDENT
6
19. ICSID Tribunal’s jurisdiction is precluded because (A) ICSID cannot entertain
Claimant’s purely commercial claims even by virtue of Article 10 of the BIT and (B)
ICSID’s jurisdictional requirements under Article 25(1) of the ICSID Convention are not
fulfilled.
A. ICSID cannot entertain Claimant’s purely commercial claims even by virtue of
Article 10 of the BIT
20. The threshold to establish that a breach of contract constitutes a breach of a treaty is a
very high one.5
ICSID Tribunals have held time and again that breaches of contract are
not automatically treated as breaches of international treaty by virtue of umbrella clauses
such as Article 10 of the BIT6
despite the breadth of these clauses.7
Such notion can be
quite destructive of the distinction between national and international legal order8
as,
every breach of contract does not necessarily amount to breach of treaty.9
5
Impregilo SpA v Pakistan, Decision on Jurisdiction, ICSID Case No.ARB/03/3 [hereinafter
Impregilo-Jurisdiction], paras.267 (22 April 2005)
6
Société Générale de Surveillance SA v Pakistan, Decision on Objections to Jurisdiction, ICSID
Case No.ARB/01/13 [hereinafter SGS/Pakistan-Jurisdiction], paras.165-166 (6 August 2003);
Joy Mining Machinery Limited v Egypt, Award on Jurisdiction, ICSID Case No.ARB/03/11
[hereinafter Joy-Mining-Jurisdiction], para.81 (6 August 2004); Toto Costruzioni Generali SpA v
Lebanon, Decision on Jurisdiction, ICSID Case No.ARB/07/12, paras.200-201 (11 September
2009)
7
El Paso Energy International Company v Argentina, Decision on Jurisdiction, ICSID Case
No.ARB/03/15 [hereinafter El Paso-Jurisdiction], paras.66-86 (27 April 2006); Pan American
Energy LLC and BP Argentina Exploration Company v Argentina, Decision on Preliminary
Objections, ICSID Case No.ARB/03/13, paras.92-115 (27 July 2006)
8
El Paso-Jurisdiction, para.82; Salini Costruttori SpA and Italstrade SpA v Jordan, Decision on
Jurisdiction, ICSID Case No.ARB/02/13 [hereinafter Salini/Jordan-Jurisdiction], para.126 (29
TEAM CASTRO, MEMORIAL FOR RESPONDENT
7
21. ICSID practice shows that the use of words “shall guarantee the observance”, as present
in Article 10, requires the narrowest of interpretations and doesn’t automatically elevate
contractual claims to treaty claims.
B. The ICSID’s jurisdictional requirements under Article 25 haven’t been fulfilled
22. Article 25(1) of the ICSID Convention categorically extends the Centre’s jurisdiction to
“[…] any legal dispute arising directly out of an investment, between a
Contracting State […] and a national of another Contracting State, which the
parties to the dispute consent in writing to submit to the Centre.”10
23. Thus, ICSID Tribunal’s jurisdiction is prima facie precluded because (1) Beritech does
not satisfy the ratione personae requirements (2) Claimant is not an “Investor” within the
meaning of the term under Article 1(2) of the BIT and (3) the present dispute does not
satisfy ratione materiae requirements.
November 2004); Compañía de Aguas del Aconquija SA and Vivendi Universal SA v Argentina,
Decision on Annulment, ICSID Case No.ARB/97/3 [hereinafter Vivendi-Annulment], para.96 (3
July 2002) STEPHEN M. SCHWEBEL, ‘International Arbitration: Three Salient Problems’
[Cambridge University Press 1987], p. 111
9
Consortium Groupement LESI - DIPENTA v Algeria , Award, ICSID Case No.ARB/03/8,
para.25 (10 January 2005); C. SCHREUER, ‘Travelling the BIT Route: Of Waiting Periods,
Umbrella Clauses and Forks in the Road’, 5 Journal of World Investment & Trade 231 at p.255
(2004)
10
ICSID Convention, [Article 25(1)]
TEAM CASTRO, MEMORIAL FOR RESPONDENT
8
1. Beritech does not satisfy the ratione personae requirement due to lack of designation
24. Beritech is certainly not a Contracting State and thus, lacks the capacity to sign and ratify
the ICSID Convention. Hence, this vitiates the absolute cardinal requirement of
establishing the ICSID jurisdiction in the first place.11
25. Respondent is a Contracting State to the ICSID Convention however; it is not a party to
the JVA per se. Only Claimant and Beritech have signed the JVA as parties to a
commercial contract. ICSID’s jurisdiction to arbitrate over a dispute arising out of JVA is
precluded because Beritech is neither a constituent subdivision nor an agency of Beristan
designated to the ICSID by the Respondent. There is nothing to suggest that Beritstan
even requested to register Beritech as its agency for fulfilling the requirements of Article
25 of the ICSID Convention or if ICSID registered Beritech in its Register of Designation
for that matter.12
Hence, Beritech’s actions cannot be attributed to Respondent for
purpose of initiating ICSID arbitration proceedings.
26. The requirements of designation and consent as under Articles 25(1) and (3), of the
ICSID Convention, respectively need to be strictly met.13
The ICSID Tribunals have
11
Analysis of Documents Concerning the Origin and the Formulation of the [ICSID] Convention
(1970) [hereinafter History Vol.I], pp.110-118; CHRISTOPH H. SCHREUER, ‘The ICSID
Convention: A Commentary’ [2nd
ed. Cambridge University Press 2009] [hereinafter
SCHREUER], p.144 paras.211-212
12
SCHREUR, p.156 para.253; Document ICSID/8-C, ‘Contracting States And Measures Taken
By Them
for the Purpose of The Convention’ (April 2008) at
(http://icsid.worldbank.org/ICSID/ICSID/DocumentsMain.jsp#)
13
Tanzania Electric Supply Company Limited v Independent Power Tanzania Limited, Final
Award, ICSID Case No.ARB/98/8, para.13 (12 July 2001); Government of the Province of East
TEAM CASTRO, MEMORIAL FOR RESPONDENT
9
declared that they lack jurisdiction in the absence of the formal designation required by
Article 25(1) of the ICSID Convention.14
There must be at least some form of
communication by the Contracting State to the ICSID regarding designation of a State
entity to the ICSID even if such designation is ad-hoc.15
27. Beritech doesn’t have the capacity to designate itself to the ICSID16
and Respondent has
never intended to do such act of designation in the future either. Respondent has merely
co-signed the JVA as the guarantor of Beritech’s obligations arising out of JVA.
Respondent would assume the obligations of Beritech under the JVA only upon latter’s
default.17
Since Beritech has not defaulted yet, there arises no question of Respondent
being party to a dispute which solely arises between Claimant and Beritech.
Kalimantan v. PT Kaltim Prima Coal and others, Award, ICSID Case No.ARB/07/3 (December
28, 2009)
14
Cable Television of Nevis Ltd and Cable Television of Nevis Holdings Limited v Federation of
St Kitts and Nevis, Award of 13 January 1997, ICSID Case No.ARB/95/2, 13 ICSID Review–
FILJ 328 at pp.345-352,363-365,391 (1998); Liberian Eastern Timber Corp. v. Government of
the Republic of Liberia, Decision on Jurisdiction of 24 October 1984, 2 ICSID Reports 354ff.
15
ICSID Convention, Regulations and Rules, ‘Rules of Procedure for the Institution of
Conciliation and Arbitration Proceedings’ [hereinafter Institution Rules], ICSID/15/Rev.1, p.73
(January 2003), [Rule 2 p.76]; C.F. AMERASINGHE, ‘The Jurisdiction of the International
Centre for the Settlement of Investment Disputes’, 19 Indian Journal of International Law 166 at
pp.187-189 (1979); SCHREUER, para.252 p.156, para.255 p.157; Attorney-General v. Mobil Oil
NZ Ltd., High Court Wellington of 1 July 1987, 2 NZLR 649 at p.655 (1989)
16
SCHREUR, para.252 p.156
17
Clarification(I), #152
TEAM CASTRO, MEMORIAL FOR RESPONDENT
10
2. Claimant is not an “Investor” within the meaning of the term under Article 1(2)
of the BIT
28. The term “Investor” as defined in Article 1(2) of the BIT is subject to that Investor’s own
conduct only. Claimant couldn’t be assumed to be protected under the BIT since it has
knowingly and expressly waived off its right to seek BIT’s protection by entering into a
subsequent and specific legal instrument, such as the JVA. The form of waiver is not
relevant as long as the intention to do so clearly results from the act of Claimant.18
Article
26 of the ICSID Convention incorporates the words “unless otherwise stated” for
typically these kind of situations only.19
3. The present dispute does not satisfy ratione materiae requirement of Article 25 of
the ICSID Convention
29. According to Article 14(1) of the BIT, when there exists an issue which is governed both
by the BIT as well as by another International Agreement to which both Beristan and
Opulentia are parties (such as the ICSID Convention) or by general international law,
then the ‘most favorable provisions, case by case’ shall be applied to the Contracting
Parties and their investors. As a result, the present issue shall be governed by the ICSID
Convention as well as principles of general international law because there is no express
supremacy of BIT as the applicable law in this case.
18
Temple of Preah Vihar Case (Cambodia v. Thailand), ICJ Reports 6 at pp.17,31 (1962);
Nuclear Tests Case (Australia v. France), ICJ Reports 253 at paras.45-46 (1974); ISABEL
FEICHTNER, ‘Waiver’ [Max Planck Encyclopedia of Public International Law (October 2006)]
19
ICSID Convention, [Article 26]; SCHREUR, p.355 para.17
TEAM CASTRO, MEMORIAL FOR RESPONDENT
11
30. The present commercial dispute doesn’t satisfy ‘ratione materiae’ requirement because
even if it is conceded that JVA is an ‘investment’ under the BIT, yet it doesn’t
particularly satisfy the essentials required by Article 25(1) of the ICSID Convention.20
Hence, the present dispute cannot be said to be ‘arising directly out of investment’.
31. According to Article 1(1) of the BIT, “investment” means one effected “before or after
entry into force” of the BIT. However, JVA was signed in 2007 when the BIT itself had
ceased to be in force. The “investments” as defined in the BIT were limited to the extent
of only those investments which were invested either before 1st
January 1997 or till 31st
December 2006.
32. Alternatively, ICSID’s jurisdiction is precluded due to non-fulfillment of mandatory
requirements regarding “investments”21
because (a) JVA has no specific duration; (b)
Risks involved in the JVA are merely commercial and not substantial for purpose of
international investments and (c) its contribution to Host State’s development is
doubtful.22
20
Mitchell v The Democratic Republic of the Congo, Decision on the Application for Annulment
of the Award, ICSID Case No.ARB/99/7 [hereinafter Mitchell/Congo-Annulment], para.31 (1
November 2006)
21
Joy-Mining-Jurisdiction, para.53; Malaysian Historical Salvors Sdn Bhd v Malaysia, Award
on Jurisdiction, ICSID Case No.ARB/05/10 [hereinafter MHS-Jurisdiction], paras.69-72,105 (17
May 2007)
22
Salini Costruttori SpA and Italstrade SpA v Morocco, Decision on Jurisdiction, ICSID Case
No.ARB/00/4 [hereinafter Salini/Morocco-Jurisdiction], paras.39,52 (23 July 2001); Fedax NV v
Venezuela, Decision on Objections to Jurisdiction, ICSID Case No.ARB/96/3 [hereinafter
Fedax/Venezuela-Jurisdiction], para.43 (11 July 1997)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
12
a. JVA has no specific duration
33. Duration for at least a certain period of time, ranging from 2-5 years, has been considered
a quintessential pre-requisite by Tribunals while deciding the question of an activity
qualifying as an “investment.”23
There is no indication in the present case about the
duration of the JVA and Sat-Connect project whatsoever.
b. Risks involved are merely commercial in nature
34. Risk criterion must be met in qualitative sense rather than quantitative and shall involve
risks other than “mere ordinary or normal commercial risks.”24
A risk which is ordinarily
inherent in a commercial transaction such as the JVA and not a special feature of the
project that may affect the investor’s decision to invest is nothing but a mere “superficial
satisfaction” of the risk requirement. Risks arising out of JVA were part of the
commercial transaction only, to which Claimant had knowingly consented to. As a result,
the dispute became one arising out of an ordinary commercial contract and thus, beyond
ICSID’s jurisdiction.25
23
Salini/Morocco-Jurisdiction, para.54; Consortium RFCC v Morocco, Decision on Jurisdiction,
ICSID Case No.ARB/00/6 [hereinafter RFCC/Morocco-Jurisdiction], para.62 (16 July 2001);
Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Pakistan, Decision on Jurisdiction, ICSID Case
No.ARB/03/29 [hereinafter Bayindir-Jurisdiction], paras.132-133 (14 November 2005); Saipem
SpA v Bangladesh, Decision on jurisdiction and recommendation on provisional measures,
ICSID Case No.ARB/05/7, paras.101-110 (21 March 2007)
24
MHS-Jurisdiction, para.112
25
I.F.I. SHIHATA AND A. PARRA, ‘The Experience of the International Centre for Settlement
of Investment Disputes’, 14 ICSID Review—FILJ 299 (1999) at p.308; Joy-Mining-Jurisdiction,
paras.58-60
TEAM CASTRO, MEMORIAL FOR RESPONDENT
13
c. Contribution to Host-State’s development is doubtful
35. The requirement of contribution to Respondent’s development is the most controversial
one26
as many investments have been found lacking on this touchstone when it comes to
contributing to the Host-State’s economic development.27
36. Claimant’s investment is not capable of surviving the test of holistic approach of ICSID
as what Claimant is trying to prove is that such test is a mere formality. Every foreign
investment is after all effected so as to derive certain benefits for the Host-State but only
a few of those investments having a significant impact on State’s economy pass the test
of ‘contribution to Host-State’s economic development’. There is no indication in the
facts if the economic development or GDP of Beristan was intended to or significantly
going to benefit from Claimant’s commercial activities.
II. The Tribunal has no jurisdiction in view of Clause 17 (Dispute Settlement) of the
Joint Venture Agreement (“JVA”)
37. JVA was signed on 18 October 2007 between the Claimant and Beritech in order to
establish Sat-Connect under the Beristian laws. ICSID’s jurisdiction is precluded in view
of Clause 17 of the JVA because (A) Claimant’s claims are inadmissible at the ICSID as
Clause 17 of the JVA is an exclusive jurisdiction clause, (B) Claimant itself has given
irrevocable consent to settle the present dispute in accordance with Beristian laws and (C)
26
SCHREUR para.164 p.131
27
Mitchell/Congo-Annulment, paras.23,39; MHS-Jurisdiction, paras.125,131-132
TEAM CASTRO, MEMORIAL FOR RESPONDENT
14
Claimant has failed its duty regarding amicable settlement of dispute under Clause 17 of
JVA.
A. Claimant’s claims are inadmissible at the ICSID as Clause 17 of the JVA is an
exclusive jurisdiction clause
38. Clause 17 of the JVA categorically states that:
“The Agreement shall be governed in all respects by the laws of the Republic of
Beristan. In the case of any dispute arising out of or relating to this Agreement,
any party may give notice to the other party of its intention to commence
arbitration. The parties must then attempt to settle the dispute amicably […] the
dispute shall then be resolved only by arbitration under […] the 1959 Arbitration
Act of Beristan […] each party waives any objection which it may have now or
hereafter […] and irrevocably submits to jurisdiction of the arbitral Tribunal
constituted for any such dispute.”28
39. The irrevocable and absolute consent given by Claimant under Clause 17 of JVA is wide
and binding enough to encompass the present dispute. The present case must be
distinguished from Vivendi annulment decision29
, LANCO30
and Salini decisions31
,
respectively where jurisdiction was established on the basis of very narrowly constructed
28
Excerpt from Joint Venture Agreement between Beritech S.A. and Televative Inc. (18 October
2007), Annex.3 [hereinafter JVA], [Clause 17]
29
Vivendi-Annulment, para.119
30
Lanco International Incorporated v Argentina, Preliminary Decision on Jurisdiction, ICSID
Case No.ARB/97/6 [hereinafter LANCO-Jurisdiction], para.49 (8 December 1998)
31
Salini/Jordan-Jurisdiction, para.179
TEAM CASTRO, MEMORIAL FOR RESPONDENT
15
dispute settlement clauses in respective concession contracts which stated: “for purposes
of interpretation and application of this Contract the parties submit themselves to the
[local courts].” Those clauses are in contrast with the broad wordings of Clause 17 in
JVA because it is not limited to mere “interpretation and application” of JVA but
extends to any and all claims “arising out of or relating” to JVA.
40. The principle of ‘generalia specialibus non derogant’ (“general words do not derogate
from special words”) makes specific agreement take precedence over any general
agreement.32
An instrument with a dispute settlement clause which is more specific to the
nature of dispute should be given precedence over a document of more general
application such as the BIT.33
41. Clearly, Claimant and Beritech very well knowingly and intentionally irrevocably
consented to the provisions of Clause 17. There was a clear understanding how such a
broad meaning of provisions therein will prevent the Claimant’s commercial claims not
32
Saluka Investments BV v. Czech Republic, UNCITRAL, Decision on Jurisdiction over the
Czech Republic’s counter-claim [hereinafter Saluka-Jurisdiction], paras.47-48,52,54-58 (7 May
2004); SGS Société Générale de Surveillance SA v Philippines, Decision on Objections to
Jurisdiction and Separate Declaration, ICSID Case No.ARB/02/6 [hereinafter SGS/PhilippinesJurisdiction],
paras.137,139-148 (January 29, 2004)
33
SCHREUER, p.582 paras.100-103; Southern Pacific Properties (Middle East) Limited v
Egypt, Decision on Jurisdiction and Dissenting Opinion of 14 April 1988, ICSID Case
No.ARB/84/3 [hereinafter SPP/Egypt-Jurisdiction], 3 ICSID Reports 131 at pp.149-150 para.83
(1995); Zhinvali Development Limited v Republic of Georgia, Award, ICSID Case
No.ARB/00/1, paras.335-342 (24 January 2003); Maritime International Nominees
Establishment v Guinea, Decision on Partial Annulment of the Award, ICSID Case
No.ARB/84/4, paras.6.3--6.4 (22 December 1989)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
16
only from being admissible at the ICSID under the BIT but also not falling under
ICSID’s jurisdiction.34
42. Thus, an explicit waiver of its rights with respect to settlement of ‘any dispute arising out
of or relating to’ the JVA by the Claimant clearly precludes it from pursuing ICSID
proceedings while attempting to re-assert its position as an “investor” under the BIT.
B. Claimant has itself given irrevocable consent to settle the present dispute in
accordance with Beristian laws
43. When the dispute arose on 11 September 2009, Beritech served a notice upon Claimant
and expressed its intention to arbitrate under Clause 17 of the JVA. Beritech also filed a
request for arbitration under Beristian arbitration rules on 19 October 2009 but Claimant
refused to accept it.
44. Both Claimant and Beritech have agreed that the JVA shall be governed in ‘all respects’
by Beristian law which further shows that the intention of the parties in this context was
undoubtedly crystal clear.35
Beristian law incorporates UNIDROIT or other commonly
accepted principles of contract law.36
Clause 17 of JVA puts a limitation on party
34
Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC BV v Paraguay,
Decision on Objection to Jurisdiction, ICSID Case No.ARB/07/9, paras.143-160 (29 May 2009);
Burlington Resources Inc v Ecuador, Decision on Jurisdiction, ICSID Case No.ARB/08/5,
para.340 (2 June 2010)
35
UNIDROIT, ‘Principles of International Commercial Contracts’, [International Institute for
the Unification of Private Law (Unidroit), Rome 1994] [hereinafter UNIDROIT], [Article 4.1(1)
p.90]
36
Clarification(I), #136
TEAM CASTRO, MEMORIAL FOR RESPONDENT
17
autonomy, i.e. once the parties indicate the law to which their contract is subject to, a
mandatory rule then applicable to that contract cannot be evaded by resorting to a choice
of law technique.37
Such an obligation is binding upon the Claimant (pacta sunt
servanda) 38
as a mandatory obligation and as a fundamental principle of international
commercial law.39
45. An exclusive jurisdiction clause in an agreement that is worded such as “any dispute
arising out of or relating to [that Agreement]” must be broadly construed to encompass
every dispute that has a significant relationship to the contract regardless of the label
attached to the dispute.40
The use of words “arising out of” as well as “relating to”
together in Clause 17 of the JVA embraces all disputes between the parties having a
37
R. DOAK BISHOP, JAMES CRAWFORD, WILLIAM MICHAEL REISMAN, ‘Foreign
investment disputes: cases, materials, and commentary’ [Kluwer Law International 2005], p.257;
cf. SORNARAJAH, ‘The Settlement of Foreign Investment Disputes’ [Kluwer Law International
2000], Chapter 2-3.1
38
UNIDROIT, [Article 1.3 p.9]
39
UNIDROIT, [Article 1.7 para.3 p.19]
40
SGS/Pakistan-Jurisdiction, para.66; Prima Paint Corp., v. Flood & Conklin Mfg. Co., 388
U.S. 395 at pp.397-398 (1967); Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc.,
138 F.3d 160 (5th Cir.) at pp.164-165 (1998)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
18
significant relationship to the contract regardless of the label attached to the dispute.41
The present dispute has clearly arisen out of “or” is, at the least, relating to the JVA and
the Sat-Connect Project. Adjudicatory bodies, in line with the principle of ‘ut res magis
valeat quam pereat’, have interpreted contract provisions, in particular, arbitration
clauses to give them effective meaning rather that to render the clauses totally ineffective
or violative of “common sense”.42
C. Claimant has failed its duty regarding amicable settlement of dispute under Clause
17 of JVA
46. A requirement for amicable settlement has been interpreted as being a jurisdictional one
by various Tribunals.43
The only time Tribunals have considered such a requirement as
41
J.J. Ryan & Sons v. Rhone Poulenc Textile, 863 F.2d 315 (4th Cir.) at p.321 (1988);  Miller v.
Flume, 139 F.3d 1130 (7th Cir.) at p.1136 (1998); Pennzoil Exploration And Production
Company V. Ramco Energy Limited, No.96-20497 of May 13, 1998 (5th
Cir.) available at
(http://caselaw.findlaw.com/us-5th-circuit/1285984.html)
42
PIERRE LALIVE, ‘The First 'World Bank' Arbitration (Holiday Inns v. Morocco) - Some
Legal Problems’, 51 BYBIL 123ff. (1980); Interpretation of Peace Treaties with Bulgaria,
Hungary and Romania, Advisory Opinion (Second Phase), ICJ Reports 221 at p.229 (18 July
1950); Acquisition of Polish Nationality, Advisory Opinion, PCIJ Series-B No.7, pp.16-17
(1923)
43
Goetz and Five Belgian shareholders of AFFIMET v Burundi, Award, ICSID Case
No.ARB/95/3 [hereinafter Goetz-Award], paras.90-93 (10 February 1999); Enron Corporation
and Ponderosa Assets LP v Argentina, Decision on Jurisdiction, ICSID Case No.ARB/01/3
[hereinafter Enron-Jurisdiction], para.88 (14 January 2004)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
19
directory rather than mandatory is when the negotiations or the attempt to settle the
dispute amicably would have been totally futile.44
47. In the present case, Claimant has failed to settle the dispute amicably with Beritech under
the JVA. Instead, it has served a notice upon the Respondent in an attempt to
internationalize a commercial dispute. There is no indication how an amicable settlement
of dispute with Beritech would have been futile provided that Beritech had itself served a
notice upon Claimant and was willing to settle the dispute amicably.45
CONCLUSION ON JURISDICTION
48. In light of the foregoing submissions and arguments advanced, it is humbly submitted
that the ICSID Tribunal lacks jurisdiction in view of Clause 17 of the JVA as well as by
virtue of Article 10 of the BIT to hear the Claimant’s claims.
44
SGS/Pakistan-Jurisdiction, para.184
45
Clarification(I), #175
TEAM CASTRO, MEMORIAL FOR RESPONDENT
20
PART TWO: MERITS
III. Respondent has not materially breached the JVA by allegedly preventing the
Claimant from completing its contractual duties and invoking Clause 8 (Buyout)
of the JVA
49. The present dispute is with regard to the JVA and Sat-Connect project and hence,
Claimant’s claims are against Beritech only. Claimant cannot enforce its claims against
the Respondent directly under the BIT because (A) Actions of Beritech and Sat-Connect
are not attributable to the Respondent in international law, (B) Clause 8 (Buyout) of the
JVA has been properly invoked by Beritech and that does not prevent the Claimant from
performing its contractual obligations under the JVA and (C) in the alternative, even if
arguendo, Beritech has committed a breach of JVA, then such breach cannot constitute a
‘material breach’.
A. Actions of Beritech and Sat-Connect are not attributable to the Respondent in
international law
50. Beritech and Sat-Connect are separate legal entities from their respective shareholders in
international law.46
Merely because Beritech is State-owned doesn’t ipso facto mean that
it is abusing its separate legal personality as a cloak of formality which can be removed
any time for the purpose of attribution of its commercial conduct to Beristan.47
Unless
46
Case concerning the Barcelona Traction Light and Power Company Limited (Belgium v
Spain), Second Phase, Judgment, ICJ Reports, p.7 [hereinafter Barcelona-Traction] paras.38-41
(1970)
47
Noble Ventures Incorporated v Romania, Award, ICSID Case No.ARB/01/11 [hereinafter
Noble-Ventures-Award], para.82 (12 October 2005); Tokios Tokel s v Ukraine, Decision on
Jurisdiction and Dissenting Opinion, ICSID Case No.ARB/02/18, paras.54-56 (29 April 2004);
ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts, with
TEAM CASTRO, MEMORIAL FOR RESPONDENT
21
there is concrete proof to show that Beritech was used as a “puppet or vehicle” by the
Respondent to purposely commit fraud against Claimant48
and that too under
“exceptional circumstances”49
, such “corporate veil” shall not be lifted.
51. The degree of control which must be exercised by the State is the key to establish State
attribution.50
Respondent doesn’t really exercise effective control over Beritech’s
activities merely by the virtue of owning majority shares therein.51
Beritech’s dependence
on Respondent for planning, direction and support is absent as there is no evidence that it
sought support from Respondent to discharge essential duties under the JVA.52
commentaries, 2 YBILC Part-II (2001) (Report of the 53rd Session ILC, UNGA 56th Session,
Doc A/56/10) [hereinafter State-Responsibility-Articles], [Article 5 para.(3)]
48
Wallersteiner v Moir, 1 WLR 991 at p.1013 (1974); Bridas SAPIC and ors v Turkmenistan
and ors., Appeal Judgment, 447 F.3d 411 (5th Cir. 2006), paras.10-15 (21 April 2006)
49
Barcelona-Traction, paras.56-58; CME Czech Republic BV v Czech Republic, Final Award on
Damages and Separate Opinion, UNCITRAL, para.436 (14 March 2003); Dombroski v.
WellPoint, Inc., 895 N.E.2d 538 at p.545 (Ohio 2008); Calvert v. Huckins, 875 F.Supp.674 at
p.678 (E.D. Cal. 1995)
50
State-Responsibility-Articles, [Article 8 para.(4)]; Bayindir Insaat Turizm Ticaret ve Sanayi A
Ş v Pakistan, Award, ICSID Case No.ARB/03/29 [hereinafter Bayindir-Award], paras.119-123
(27 August 2009)
51
Aguas del Tunari v Bolivia, Decision on Respondent’s Objections to Jurisdiction, ICSID Case
No.ARB/02/3, para.40 (21 October 2005); Vacuum Salt Products Limited v Ghana, Final Award,
ICSID Case No.ARB/92/1, para.43 (16 February 1994)
52
Military and Paramilitary Activities in and against Nicaragua (Nicaragua/USA), Merits,
Judgment, ICJ Reports p.14 [hereinafter Nicaragua-Merits] at paras.86,109,115 (1986)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
22
52. Sat-Connect lacks any involvement whatsoever from the Respondent directly. None of its
BOD member is elected by the Respondent.53
B. Clause 8 (Buyout) of the JVA has been properly invoked by Beritech and that des
not prevent the Claimant from performing its contractual duties
53. Clause 8 of the JVA states inter alia that if at any time,
“[…] Televative (the Claimant) commits a material breach of any provision of
this Agreement; Beritech shall be entitled to purchase all of Televative’s interest
in this Agreement […]”54
54. The Claimant has not been prevented from performing its contractual duties because (1)
Clause 8 of JVA has been lawfully invoked as Claimant committed a material breach of
JVA, (2) Beritech has complied with all procedural formalities under Beristian Laws
while invoking Clause 8 of the JVA and (3)
1. Clause 8 of JVA has been lawfully invoked as Claimant committed a material
breach of JVA
55. In order to lawfully invoke the Clause 8 (Buyout) of the JVA, all that Beritech requires is
to establish that the Claimant did commit a breach of Clause 4 (Confidentiality) of the
53
FDI Moot 2010 Clarification Requests (23 August) Responses [hereinafter Clarification(II)],
#268
54
JVA, [Clause 8]
TEAM CASTRO, MEMORIAL FOR RESPONDENT
23
JVA. Such breach would per se constitute a material breach of the Agreement by virtue
of Clause 4(4) of the JVA which categorically states so.55
56. Opulentia has export control laws that require Opulentian companies to obtain licenses
from the Opulentian government in order to export and re-export certain technologies,
goods, and/or services to Beristan.56
In international investment law, since the Claimant
is contributing in military or dual-use sectors in Beristan, it must conform to and
understand the constraints of Beristian Laws relating to such goods/technologies.57
In
consonance with the practice adopted by China58
, the EU59
, France60
, India, the UK61
and
55
JVA, [Clause 4(4)]
56
Clarification(I), #145
57
YANN AUBIN and ARNAUD IDIART, ‘Export Control Laws and Regulations Handbook: A
Practical Guide to Military and Dual-Use Goods, Trade Restrictions and Compliance’ [Kluwer
Law International 2007] [hereinafter Export-Control Handbook], p.14
58
Decree No.346 of the State’s Council of the People’s Republic of China on February 11, 2002
and effective as of April 1, 2002 (http://www.gov.cn/english/laws/2005-
07/25/content_16873.htm)
59
Council Regulation (EC) No 1334/2000 of 22 June 2000 setting up a Community regime for
the control of exports of dual-use items and technology, Official Journal L 159 , 30/06/2000
P.0001 – 0215
60
Monetary and Financial Code [Part V (FINANCIAL DEALING WITH FOREIGN
COUNTRIES)], [Articles L 151-1 to 153-1] (March 20,
2006)(http://195.83.177.9/upl/pdf/code_25.pdf)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
24
the USA62
, the Export control laws of Opulentia regarding such goods/technologies
cannot be considered paramount when relatively compared to the danger caused by them
to the national security of Beristan.63
57. By virtue of Clause 4(1) of the JVA, “all matters relating to” the JVA and Sat-Connect
project are to be treated as “Confidential”. Licensing systems involve the approving of ‘to
be’ exported technologies/goods by the designated department of the Government dealing
in such functions.64
However, such exported goods by Claimant include technologies,
trade secrets, data and know-how inter alia which are listed under Clause 4(2) of the JVA
as “Confidential Information”. Furthermore, the additional requirement of Export
licenses for “Re-Exporting” the goods/technologies as mentioned in Clause 4(2) of JVA,
per se proves that Claimant was bound to disclose “other information developed during
Sat-Connect project” to Opulentia.65
This is contrary to Clause 4(1) of the JVA according
61
Enterprise Act of 2002 [Sections 23, 42 and 59]
(http://www.legislation.gov.uk/ukpga/2002/40/contents)
62
Defense Production Act of 1950 [Section 721], 50 USC App 2170 (d) and (e)
63
EXPORT-CONTROL HANDBOOK, pp.14-17
64
South Asian Strategic Stability Institute, London, ‘China's Export Control System and the Role
of MOFCOM’, Research Report 23, p.5 (January 2009) (http://www.sassi.org/pdfs/Report-
23.pdf); BIS, US Department of Commerce, ‘Introduction to Commerce Department Export
Controls’ (http://www.bis.doc.gov/licensing/exportingbasics.htm)
65
JVA, Clause 4(2)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
25
to which the Claimant will neither directly disclose “any matter relating to the JVA” nor
allows such act to be done indirectly.66
58. Thus, the Export Control Regime of Opulentia (hereinafter “ECR”) is a misused state
measure that forces the Claimant to disclose critical information “relating to” SatConnect
project, in some form or the other, to the Government of Opulentia. ECR is an
alternative to the otherwise unsuccessful attempts made by Opulentia to “coerce”67
the
Claimant in providing unlawful access to civilian encryption keys and Intellectual
Property of the Sat-Connect project. Such approaches by Opulentian Government have
been made on several occasions to various Opulentian technology firms and even the
Claimant fully agrees with this fact.68
59. Such conduct by Opulentia is more than sufficient to establish that Claimant did leak
confidential information relating to the JVA and Sat-Connect project to it. The concern
raised by high ranking Beristian Government official only adds weight to such deduction.
2. Beritech has complied with all procedural formalities under Beristian Laws while
invoking Clause 8 of the JVA
60. Beritech was well aware of the existing ECR of Opulentia and did not ever raise the issue
of leak of Confidential Information prior to the BOD meeting held on August 21, 2009.
The rationale behind such a practice adopted by Beritech is that there existed no concrete
66
JVA, Clause 4(1)
67
CHRISTOPHER C. JOYNER, ‘Coercion’ [Max Planck Encyclopedia of Public International
Law (December 2006)]
68
Clarification(I), #178
TEAM CASTRO, MEMORIAL FOR RESPONDENT
26
proof of such leak prior to August 21, 2009 and it could not possibly give a reasonable
justification of invoking Clause 8 of the JVA unless the chain of events, as shown above,
could establish that the Claimant did actually commit a material breach of JVA. Thus,
Beritech has sincerely and lawfully performed all its contractual obligations under the
JVA with bona fide intentions and in good faith.
61. As a further evidence of good faith on the part of Beritech, it did not immediately jump
to conclusions after The Beristan Times Article was published. In fact, during the August
21, 2009 BOD meeting, Chairman of the Sat-Connect’s BOD discussed the allegations
appearing in the Newspaper Article69
in presence of all the 9 Directors70
wherein one of
the Directors raised the potential relevance of Clause 8 of the JVA71
.
62. All the 9 Directors present during August 21, 2009 BOD meeting were informed about
the August 27, 2009 BOD meeting. Some directors appointed by Televative speculated
that the buyout would be discussed therein and henceforth, they decided not to attend the
meeting and thus deprive it of the necessary quorum.72
Upon being lucidly asked the
question whether an official agenda of such meeting was also supposed to be provided
subsequently, the answer that the clarification provided is that Beristan Law requires 24
hours prior notice for all board meetings.73
The disregard of the importance of ‘agenda’
69
Uncontested Facts, para.9
70
Clarification(I), #127
71
Clarification(I), #169
72
Clarification(II), #208
73
Clarification(I), #176
TEAM CASTRO, MEMORIAL FOR RESPONDENT
27
in the Clarification per se shows that no procedural requirement existed regarding the
same. Furthermore, the fact that Chairman of Sat-Connect enjoyed the privilege to set the
agenda for a meeting and in the absence of any such agenda, could be possibly believed
to have done exactly so during the August 21, 2009 BOD meeting, itself shows that there
was no requirement of annexing the agenda of the meeting along with the Notice of the
same.
63. The quorum is required at the moment of voting,74
which means no more no less. Neither
Beristan law not Sat Connect’s bylaws regulate the loss of quorum once established.75
The quorum was established when the voting began since Alice Sharpeton only refused
to take part in the voting and left it before its end.76
This means, the quorum as required
by Sat-Connect’s by laws did stand established “at the moment of voting”. Majority of the
BOD (5 out of 9) voted to invoke Clause 8 (Buyout) of the JVA in conformity with SatConnect’s
procedural requirements and by laws.
C. In the alternative, even if arguendo Beritech has committed a breach of JVA, then
such breach cannot constitute a ‘material breach’
74
Clarification(II), #200
75
Clarification(II), #255
76
Uncontested Facts, para.10
TEAM CASTRO, MEMORIAL FOR RESPONDENT
28
64. A breach is said to be material if it frustrates the very object & purpose of an agreement77
or if it jeopardizes one party’s ability to comply with the terms of the contract to such an
extent that it cannot be reasonably required of that party to continue the contractual
relationship.78
65. Clause 8 (Buyout) of the JVA is not such a fundamental clause the breach of which
would devoid the whole Agreement of its object & purpose or which if improperly
invoked will jeopardize Claimant’s ability to perform its obligations under the JVA. This
is because of two reasons.
66. Firstly, the object & purpose of the JVA is to establish the JV Company named SatConnect
which shall develop and deploy satellite communication technology inter alia in
the region of Euphonia. Invoking Clause 8 of the JVA merely “entitles” Beritech to
purchase Claimant’s entire share in Sat-Connect and only provides a mechanism to
evaluate such share of the Claimant.79
It does nothing more than granting a legal right to
Beritech which it may or may not exercise.80
Thus, to assume or anticipate a fundamental
77
Autopista Concesionada de Venezuela CA (Aucoven) v Venezuela, Award, ICSID Case
No.ARB/00/5, para.317 (23 September 2003)
78
BRIDAS SAPIC and ors v Turkmenistan, First Partial Award and Dissent, ICC Case
No.9058/FMS/KGA (Dissenting Opinion of Hans Smit, Arbitrator), para.35 (24 June 1999);
Mersey Steel and Iron Co. v. Naylor, Benzon & Co., (1884) 9 App Cas 434 at p.443;
UNIDROIT, [Article 7.3.1.(1), p.182]
79
JVA, [Clause 8]
80
BLACK’S LAW DICTIONARY, p.612
TEAM CASTRO, MEMORIAL FOR RESPONDENT
29
breach based on an improper invocation of Clause 8 would be contrary to the object &
purpose of the JVA itself.
67. Secondly, and most importantly, an improper invocation of Clause 8 of the JVA neither
frustrates the object & purpose of the Agreement nor does it jeopardize Claimant’s
position. This is by virtue of Clause 17 (Dispute Settlement) of the JVA. Clause 17 of the
JVA provides a mechanism for the settlement of ‘any dispute arising out of or relating
to’ the JVA in accordance with Beristian Laws.81
Thus, if at all, Claimant were to believe
that Beritech has improperly invoked Clause 8 (Buyout) of the JVA, it shall have the
legal right to commence arbitration against Beritech in accordance with the mechanism
provided under Clause 17 of the JVA.
68. In order to understand why improperly invoking Clause 8 of the JVA in any case does not
constitute a ‘material breach’ per se, it is important to understand and analyze what do
the Claimant and Beritech consider a ‘material breach’ as. A breach of Clause 4
(Confidentiality) of the JVA is an example of ‘material breach’ because it frustrates the
very spirit of the Agreement and it would simply render the whole purpose of SatConnect
useless if the Confidential Information was leaked even for once. That is the
reason why the JVA contains explicit details of and explanations to the relevant terms of
Clause 4 and even mentions that any breach of that Clause shall constitute a material
breach of JVA.
69. However, it is difficult to find such a strictness or stringency present in the provisions of
Clause 8 of the JVA. Improper invocation of Clause 8 of the JVA, at the most, gives
Claimant a legal right to settle the dispute against Beritech in accordance with the
procedure as provided under Clause 17 of the JVA. However, what Claimant has
“strategically” chosen to do is to internationalize its claims by demanding a ‘material
81
JVA, [Clause 17]
TEAM CASTRO, MEMORIAL FOR RESPONDENT
30
breach’ of the JVA82
so that it may terminate it and claim damages, including loss of
profit.83
The strategic move is inspired by the fear that under the JVA, Claimant’s interest
in Sat-Connect only evaluates Claimant’s monetary investments till date, viz. US $ 47
million whereas by internationalizing its claims, the Claimant ends up ‘with a chance’ to
receive US $ 100 million as compensation.
IV. Respondent’s actions or omissions do not amount to expropriation,
discrimination, a violation of fair and equitable treatment, or don’t otherwise
violate general international law or applicable treaties
70. Claimant’s contends that provided attribution to the Respondent is admitted, the conduct
complained of shall constitute an internationally wrongful act to hold Respondent liable.
In reply and for that matter, in any case arguendo, Respondent has not violated any of its
obligations which it has undertaken under Articles 2, 3 and 4 of the BIT by virtue of
Article 10 of the BIT.
A. Respondent has not violated ‘Fair and equitable’ treatment standard under Article 2
of the BIT
71. Under Article 2(2) of the BIT, Respondent “shall at all times ensure treatment in
accordance with customary international law, including fair and equitable treatment and
full protection and security of the [Claimant’s] investments”.
82
Clarification(II), #256
83
Clarification(II), #215
TEAM CASTRO, MEMORIAL FOR RESPONDENT
31
72. The standard of “fair and equitable treatment” has to be evaluated on the threshold set by
a specific treaty (lex specialis) which contains such clause.84
The clear use of the words
‘customary international law’ and nothing else means the Parties didn’t require treatment
in addition to or beyond that which is required by the customary international law.85
The
precise intention of the Parties is apparent in the present BIT unlike many others cases
adjudged by former Arbitral Tribunals.86
Such intention is further substantiated by
appending the word “including” in the same provision. “Including” shall be given its
84
Suez and ors v Argentina, Decision on Liability, ICSID Case No.ARB/03/17 [hereinafter
Suez/Argentina-Liability], paras.148,177-178 (30 July 2010); Saluka Investments BV v. Czech
Republic, UNCITRAL Partial Award [hereinafter Saluka-Award], paras.286-295 (March 17,
2006); Biwater Gauff (Tanzania) Limited v Tanzania, Award, ICSID Case No.ARB/05/22
[hereinafter Biwater Gauff-Award], paras.586-593 (24 July 2008); STEPHEN VASCIANNIE,
‘The Fair and Equitable Treatment Standard in International Investment Law and Practice’, 70
BYBIL 99 (1999)
85
NAFTA Free Trade Commission, ‘Notes of Interpretation of Certain Chapter 11 Provisions’,
[Minimum Standard of Treatment in Accordance with International Law: para.2(2)] (July 31,
2001) (http://www.international.gc.ca/trade-agreements-accords-commerciaux/disp-diff/naftainterpr.aspx?lang=en);
Canadian Statement of Implementation for NAFTA, Canada Gazette, Part
I, (Jan.1 1994) at p.149
(http://www.naftaclaims.com/Papers/Canadian%20Stmt%20of%20Implementation.pdf)
86
Biwater Gauff-Award, para.593
TEAM CASTRO, MEMORIAL FOR RESPONDENT
32
ordinary meaning, viz. ‘containing’ or ‘comprising’87
rather than an additive
interpretation.88
73. Moreover, while disregarding all earlier decisions in Metalclad, S.D. Myers and Pope &
Talbott, the Loewen Tribunal held that Host-State’s obligations exist only to the extent
they are recognized by and consistent with customary international law and not as freestanding
obligations under the BIT.89
1. Respondent’s conduct is not arbitrary
74. Conduct is arbitrary if there is an abuse of discretionary authority (abuse de droit) for the
sole purpose of causing injury to another,90
and such conduct is based upon prejudice or
87
WHARTON’S LAW LEXICON [15th ed. Universal Publishers 2009], p.841; Vienna
Convention on the Law of Treaties, 1155 UNTS 331 (1969) [hereinafter VCLOT], [Article 31]
88
United Parcel Service of America Incorporated v Canada, Award on Jurisdiction,
UNCITRAL, para.96 (22 November 2002); Glamis Gold Limited v United States, Award,
UNCITRAL [hereinafter Glamis-Award], para.617 (8 June 2009)
89
Loewen Group Incorporated and Loewen v United States, Award, ICSID Case
No.ARB(AF)/98/3, para.128 (26 June 2003); OECD: WORKING PAPERS ON
INTERNATIONAL INVESTMENT, ‘Fair and Equitable Standard in International Investment
Law’, Number 2004/3 [hereinafter OECD-Fair and Equitable], p.23 (September 2004)
90
BIN CHENG, ‘General Principles of Law as Applied by International Courts and Tribunals’
[Cambridge University Press 2007], pp.122,132-134; GEORG SCHWARZENBERGER,
‘International Law and Order’ [London, Stevens, 1971] pp.89–90,99–100
TEAM CASTRO, MEMORIAL FOR RESPONDENT
33
preference rather than reason or fact.91
An arbitrary action by any organ of the Host-State
shocks or at least surprises a sense of juridical propriety on part of foreign investor.92
75. On the contrary, Executive order has been passed by Respondent in pursuance of
Beritech’s notice served upon the Claimant on August 28, 2009. After 14 days of such
notice, Respondent directed the CWF to peacefully expel only those Televativeemployees
who hadn’t yet left Beristan.93
There is no arbitrariness as the legal basis for
passing such order was Claimant’s material breach of JVA by leaking confidential
information related to Sat-Connect project and protection of Respondent’s essential
security interests.
2. Respondent has not violated Good faith and Legitimate expectations of Claimant
76. Contractual breaches, in any case, have been held to be non-violative of the legitimate
expectations of a foreign investor.94
Still, however, the legitimate expectations are
91
Occidental Exploration and Production Company v Ecuador, Final Award, LCIA Case
No.UN3467 [hereinafter Occidental-Award], paras.162-163 (1 July 2004)
92
Waste Management, Inc v. United Mexican States (II), Award, ICSID Case No.ARB(AF)/00/3
[hereinafter Waste-Management(II)-Award], para.98 (30 April 2004)
93
Clarification(II), #248
94
Glamis-Award, para.620; Azinian and ors v Mexico, Award on Jurisdiction and Merits, ICSID
Case No.ARB(AF)/97/2, para.87 (1 November 1999); Methanex Corporation v USA, Final
Award on Jurisdiction and Merits, UNCITRAL [hereinafter Methanex-Award], Part IV Chapter
D para.7 (3 August 2005)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
34
breached only when Investor relies on misleading representations or false assurances
made by Host-State regarding protection of its investments.95
77. Respondent had never made any assurances to the Claimant regarding the latter’s
investments.96
Claimant’s own actions had compelled the Respondent to act in a
legitimate way so as to protect its essential security interests and by no means can the
Claimant be allowed to take the benefit of its own wrong.97
78. Clause 8 of JVA was an onerous and one-sided obligation Claimant ‘knowingly and
willingly’ undertook wherein only Beritech had the right to buyout Claimant’s interest in
Sat-Connect an not vice-versa. Hence, Claimant was well aware of what may arise out of
its own illegal actions and by no means can the Claimant complain now that the
Respondent failed to provide a stable business framework all of a sudden after nearly 2
years since the signing of JVA.
3. Respondent has not violated Due process of law
95
ADF Group Inc. v. USA, Award, ICSID Case No.ARB(AF)/00/1 [hereinafter ADF/USAAward],
para.189 (9 January 2003); Wena Hotels Limited v Egypt, Award, ICSID Case
No.ARB/98/4, paras.85-87 (8 December 2000)
96
Clarification(II), #253
97
Suez/Argentina-Liability, para.207; Saluka-Award, paras.301-306; Goetz-Award, para.126
TEAM CASTRO, MEMORIAL FOR RESPONDENT
35
79. Tribunals have interpreted the concept of ‘denial of justice’ as one where the acts of
Host-State amount to procedural irregularity, willful neglect of its duty, bad faith or an
extreme insufficiency of action.98
80. None of the actions on part of Respondent show that any procedural aspect of law was
violated when Clause 8 of JVA was invoked. Respondent not only requested for amicable
settlement of dispute which the Claimant vehemently rejected but also made sure it
submitted such dispute in accordance with Beristian laws to arbitration under Clause 17
of JVA.
81. Further, Respondent never acted in bad faith since the meeting wherein Clause 8 was
invoked, the presence of Alice Sharpton is strongly indicative of the fact that Claimant
did know about the agenda of the meeting. The only requirement under Beristian laws
was 24 hours prior notice for all board meetings and there is nothing to suggest if such
notice should have bore a specific agenda.99
82. In any case, Michael Smithworth, the Chairman of Sat-Connect’s BoD, enjoyed the
privilege of setting the agenda of any meeting which the Claimant’s Directors in the
Board certainly knew of.100
As a matter of fact, there is nothing to suggest that the agenda
for the August 21, 2009 BOD meeting was discussed prior to the meeting yet all the
Claimant’s four Directors attended it. Had the Claimant wished to act sincerely, which it
98
Genin and ors v Estonia, Award, ICSID Case No.ARB/99/2 [hereinafter Genin-Award],
para.367 (25 June 2001)
99
Clarification(I), #176
100
Clarification(I), #180-181
TEAM CASTRO, MEMORIAL FOR RESPONDENT
36
purposely refrained from doing,101
all their Directors would have attended the meeting
and shown their objection. Instead, their only Director present decided to absent herself
from voting so as to later claim that such resolution was unlawful.
4. Respondent has maintained Transparency in its dealings
83. Respondent has operated in an open transparent manner; be it the free mode of expression
of its high-rank official whose article was published in the newspaper or the notice to
vacate Sat-Connect sites served upon the Claimant pursuant to the buyout.
5. Respondent has maintained ‘full protection and security’ standards
84. ‘Full protection and security’ standard is however assumed in customary law to be
violated when the foreign investment has been affected by civil strife and physical
violence.102
Also, full protection and security of property doesn’t mean that property shall
never in any circumstances be occupied or disturbed.103
85. There is no extreme situation such as a strife or violence from which Claimant ought to
claim protection and security. Claimant’s own wrongful acts resulted in Respondent to
101
Clarification(II), #208
102
Saluka-Award, paras.483-484; OECD-Fair and Equitable, p.26
103
Elettronica Sicula S.P.A. case (USA/Italy), Judgment, ICJ Reports p.15 [hereinafter ELSI] at
para.108 (1989)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
37
use measures ‘according to a legal procedure’ by duly issuing Executive Orders so as to
expel them from Beristan.104
6. Respondent’s conduct was not discriminatory
86. Discrimination in customary international law results in an intentionally caused injury to
the alien. 105
A state action is non-discriminatory if there is a reasonable justification for
any seemingly differential treatment.106
Respondent’s actions are non-discriminatory as
there is a reasonable nexus between the regulatory powers inherent to Respondent as a
sovereign State to protect its own essential security interests and the use of such powers
by Respondent owing to Claimant’s unlawful conduct.
87. Further, Respondent has expelled all of the Claimant’s personnel irrespective of their
nationality107
which shows lack of discriminatory intent.
104
Goetz-Award, para.127
105
Amoco International Finance Corporation v Iran and ors, Partial Award, Award No 310-56-
3, (1987) 15 Iran-US CTR 189 [hereinafter AMOCO-Award], para.140 (14 July 1987); R.
DOLZER & M. STEVENS, ‘Bilateral Investment Treaties’ [The Hague: Martinus Nijhoff
Publishers 1995] [hereinafter Dolzer/Stevens], p.98; World Bank Guidelines, 31 ILM 1376
(1992) [hereinafter World Bank Guidelines], [Section IV(I)]
106
Saluka-Award, para.313; Oscar Chinn Case (United Kingdom v Belgium), Judgment of 12
December 1934, PCIJ Series A/B No.63, p.92 (DISSENTING OPINION OF JUDGE
ALTAMIRA); ‘Restatement (Third) of the Foreign Relations Law of the United States’ [1
American Law Institute (June 1986)] [hereinafter Third-Restatement], §711; International
Covenant on Civil and Political Rights, 999 UNTS 171 (1966), [Article 26]
107
Clarification(II), #236
TEAM CASTRO, MEMORIAL FOR RESPONDENT
38
B. Respondent’s conduct has not amounted to breach of National treatment standards
under Article 4 of the BIT
88. Host-State’s conduct is discriminatory in the sense of breaching national treatment
standards when “similar cases are treated differently and without reasonable
justification.” Thus, a breach of national treatment has not occurred because (1) Claimant
and Beritech weren’t in “like circumstances” and (2) in any case, there was a reasonable
justification for Respondent’s conduct.
1. Claimant and Beritech were not in “like circumstances”
89. The interpretation and application of “like” has to be done in context and circumstances
of a given case as it is neither precise nor absolute in definition.108
Thus, “likeness” test is
bound to fail when there is an imbalance between the Claimant and Beritech in context of
offers or rights in a given venture.109
For instance, difference in the degree of risk
involved in a particular transaction itself shows that there was a difference in objectives
which Claimant and Beritech had set out to achieve from JVA.
90. Claimant’s risks were clearly more under JVA to which they had knowingly agreed.
Further, Claimant and Beritech were not competitors but were instead working under a
JVA with a motive of mutual benefit and prosperity. While Beritech’s objectives were to
108
SD Myers Incorporated v Canada, First Partial Award on the Merits and Separate Opinion,
UNCITRAL [hereinafter SD Myers-Award], para.244 (13 November 2000); Japan-Taxes on
Alcoholic Beverages, Appellate Body Report, WT/DS8/AB/R, WT/DS10/AB/R,
WT/DS11/AB/R [DSR 1996: I, 97], pp.20-22 paras.8.5—8.6 (1 November 1996)
109
Consortium RFCC v Morocco, Award, ICSID Case No.ARB/00/6, para.75 (22 December
2003); Parkerings-Compagniet AS v Lithuania, Award on jurisdiction and merits, ICSID Case
No.ARB/05/8, para.396 (11 September 2007)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
39
deploy the technology provided by Claimant, Claimant’s interest in the JVA was purely
fiscal. Hence, circumstances were not even close to being “like” as far as the dispute is
concerned.
2. There was a reasonable justification for Respondent’s conduct
91. Respondent’s actions were motivated by its essential security concerns. The presence of a
reasonable and justified nexus between the measures taken and the non-discriminatory
regulatory policy of Respondent establishes prima facie that it didn’t violate its
obligations with regard to national treatment.110
Even if “like circumstances” existed ex
hypothesis, the reasonable nexus still justified the Respondent’s actions because of
Claimant’s own wrongful acts which left Respondent with no other choice but to pass
those Executive Orders.
C. Respondent’s conduct has not amounted to breach of Article 4 of the BIT
92. Claimant’s claims under Article 4 of the BIT are primarily based on the allegation that
Respondent has illegally expropriated its interest in Sat-Connect through invoking the
Buyout (Clause 17) in the JVA. ICSID Tribunals have openly rejected the idea that an
expropriation may take place via omissions so an allegation of having ‘not acted’ on the
part of Respondent, no matter how egregious it may be, is ruled out of contention to
constitute expropriation and need not be pursued.111
110
Pope & Talbot Incorporated v Canada, Award on the Merits of Phase 2, UNCITRAL
[hereinafter Pope-Talbot-Award], paras.77-79 (10 April 2001)
111
Eureko BV v Republic of Poland, Partial Award and Dissenting Opinion, para.186 (19 August
2005)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
40
93. It is submitted that there is a difference between “invoking” a Buyout Clause and “giving
effect” to it. According to the eye-opening clarification,112
“on August 27, 2009, SatConnect’s
BOD upon approving the buyout, voted to ‘suspend’ [emphasis added]
Claimant’s shares in the Sat-Connect JV.” Such a suspension is an obvious result of a
bona fide action taken by Sat-Connect’s BOD after having simply “invoked” Clause 8 of
JVA. Subsequently, these suspended shares were submitted to be held in an escrow,
along with the $47 million submitted by Beritech, pending the decision of the arbitral
tribunal which had been constituted for settlement of present dispute pursuant to
Beritech’s exercise of its contractual rights under Clause 17 of JVA.
94. Alternatively, Respondent already owns 65% majority shareholding interest in SatConnect
and there’s no reason why it would ‘deliberately’ discriminate against
Claimant.113
Respondent from the very inception of JVA had an upper hand as far as its
financial interest in JVA was concerned and all this was done through legitimate,
peaceful, transparent and consensual dealings with Claimant.
95. In any case, no expropriation ever took place since merely ‘invoking’ a Buyout Clause
didn’t amount to significant interference with Claimant’s interest in Sat-Connect.114
Claimant’s interest remained very much in existence and under its ownership only.115
112
Clarification(I), #138
113
Lauder v The Czech Republic, Final Award, UNCITRAL [hereinafter Lauder-Award],
para.198 (3 September 2001); SD Myers-Award, para.285
114
Feldman Karpa v Mexico, Award and Dissenting Opinion, ICSID Case No.ARB(AF)/99/1,
paras.100,152(16 December 2002); ELSI, para.119
115
CMS Gas Transmission Company v Argentina, Award, ICSID Case No.ARB/01/8
[hereinafter CMS-Award], para.263 (May 12 2005); Sea-Land Service Incorporated v Iran and
TEAM CASTRO, MEMORIAL FOR RESPONDENT
41
There are no signs of unjust enrichment on part of Respondent or any indication whether
Respondent has suddenly assumed control or started reaping the fruits of Claimant’s
property.116
96. The regulatory action was merely ephemeral and was supposed to remain in effect only
till the outcome of arbitral proceedings under Clause 17 of JVA was reached.117
Claimant
itself had consented to arbitration under Beristian laws by virtue of Clause 17 and it’ll be
a scapegoat tactic or an absurd defence rather for it to take at this crucial juncture
pleading that there are chances such proceedings may be biased against its interest or will
take time immemorial to conclude.
97. There is, in any case, a widespread practice that legitimate Regulatory measures or police
powers are outside the scope of expropriation and when adopted by Host-State in bona
fide manner directed at general welfare, don’t give rise to the liability of compensation in
Ports and Shipping Organization of Iran, Final Award No.135-33-1, 6 Iran-US CTR 149 at
p.167 (1984)
116
Olguín v Paraguay, Award, ICSID Case No.ARB/98/5, para.84 (26 July 2001); LauderAward,
para.203; Nykomb Synergetics Technology Holding, AB, Stockholder v. Republic of
Latvia, Riga, Award, SCC [hereinafter Nykomb], para.4.3.1 (16 December 2003)
117
Starrett Housing v Iran, Interlocutory Award, Award No.ITL 32-24-1, 4 Iran-US CTR 122 at
p.154 (19 December 1983); NEWCOMBE, ‘Regulatory Expropriation, Investment Protection
and International Law: When Is Government Regulation Expropriatory and When Should
Compensation Be Paid’ (1999) (ita.law.uvic.ca/documents/RegulatoryExpropriation.pdf), p.60;
GC CHRISTIE, ‘What Constitutes a Taking Under International Law’, 33 BYIL 307 at pp.333-
334,337 (1962)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
42
international law.118
Breach of Clause 4 of JVA didn’t just amount to a material breach of
JVA but was in fact a clear danger to ‘national interest’ of Beristan.
98. Even Article 4(1)(1) of the BIT very clearly authorized the Respondent to take regulatory
measures with respect to Claimant’s investments while protecting its national interest.
National authorities are better placed than international Tribunals to appreciate what is in
their public interest119
and Respondent’s actions must thereby be respected, especially by
virtue of the Article 9 of the BIT.
V. Respondent is entitled to rely on Article 9 (Essential Security) of the BIT as a
defense to Claimant’s claims
99. Article 9 of the BIT is an Essential Security clause and drafted very vociferously in a
negative language. “Nothing in this Treaty shall be construed” in its simplest
interpretation yields that the provisions under the following clauses (1) and (2)
respectively of Article 9 are strictly preventive, over-riding and moreover, expressly
absolute in nature as compared to any other provision in the BIT. ICSID Tribunals have
held that such BIT provision acts as a treaty-based defense and if it applies, the
substantive obligations under the BIT don’t apply.120
Tribunals have even acknowledged
118
Saluka-Award, paras.255,262-263; SD Myers-Award, para.281; Sedco Incorporated v
National Iranian Oil Company, Interlocutory Award No.ITL 55-129-3, 9 Iran-US CTR 248 at
p.275 (1985)
119
James v. U.K., 98 ECHR Series A, p.9 at p.32 (1986); Siemens AG v Argentina, Award and
Separate Opinion, ICSID Case No.ARB/02/8 [hereinafter Siemens-Award], para.273 (6
February 2007)
120
CMS Gas Transmission Company v Argentina, Decision on Application for Annulment,
ICSID Case No.ARB/01/8 [hereinafter CMS-Annulment], para.129 (25 September 2007)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
43
the growing use of such explicitly self-judging clauses by the USA and are convinced
that once the parties have intended to include them expressly in their agreements, then the
actions taken under the defense of such clauses were beyond judicial review.121
100. Thus the defense to Claimant’s claims is undoubtedly available to the Respondent
under Article 9 of the BIT because (A) Article 9 gives absolute unquestionable right to
exercise its subjective discretion to the Respondent with respect to matters concerning its
essential security interest and (B) in any case, burden of proof to establish Respondent’s
wrongful reliance on Article 9 lies upon the Claimant.
A. Article 9 gives absolute unquestionable right to exercise its subjective discretion to
the Respondent with respect to matters concerning its essential security interest
101. Article 9 limits the applicability of Investor protection under the BIT in certain
circumstances122
such as “for the protection of its essential security interests” by any
Contracting Party. Though the the term “essential security” hasn’t been defined in the
121
CMS-Award, para.370; Nicaragua-Merits, para.222
122
WILLIAM W. BURKE-WHITE & ANDREAS VON STADEN, ‘Investment Protection in
Extraordinary Times: The Interpretation and Application of Non-Precluded Measures
Provisions in Bilateral Investment Treaties’, 48:2 Virginia Journal of International Law 308
[hereinafter Burke-White/Von Staden] at p.318
TEAM CASTRO, MEMORIAL FOR RESPONDENT
44
present BIT yet it depends on the specific facts of each case123
and bears a relatively wide
interpretation.124
102. The Sat-Connect’s technology was to be used for civilian and military purposes.
Any abuse of responsibility undertaken by Claimant with regards to the Sat-Connect
project would not only be contrary to the spirit of the JVA and particularly, Clause 4
(Confidentiality) therein but shall also ultimately cause a threat to “public security &
order” and “economic & military interests” of Respondent .125
Since general public and
military were end-users of Sat-Connect’s technology and Beritech had made substantial
contributions to the project, thus abuse of its position by Claimant was an indubitable
threat to Respondent’s security interests.
103. In order to remove beyond doubt any discrepancy relating to the interpretation of
the term “essential security interests” under Article 9 of the BIT, the words “it considers
123
JAMES CRAWFORD, ‘Second Report on State Responsibility: Addendum’, UN Doc.
A/CN.4/498/Add.2 (http://untreaty.un.org/ilc/guide/9_6.htm) at para.281 (1999); JAMES
CRAWFORD, ‘The International Law Commission's Articles on State Responsibility:
Introduction, Text and Commentaries’ [Cambridge and New York, Cambridge University Press,
2002], p.183; PETER LINDSAY, ‘The Ambiguity of GATT Article XXI: Subtle Success or
Rampant Failure?’, 52 Duke Law Journal 1277 at p.1278 (2003)
124
Nicaragua-Merits, para.224
125
Brokdorf Judgment, Bundesverfassungsgericht [BVerfG], Federal Constitutional Court of
Germany (F.R.G.), 69 BVerfGE 315 at p.352 (May 14, 1985); Multilateral Agreement on
Investment, Draft Consolidated Text, OECD Doc. DAFFE/MAI(98)7/REV1, [Chapter VI:
EXCEPTIONS AND SAFEGUARDS p.76 footnote-2]
(http://www1.oecd.org/daf/mai/pdf/ng/ng987r1e.pdf) (Apr. 22, 1998); BURKE-WHITE/VON
STADEN, pp.359-360
TEAM CASTRO, MEMORIAL FOR RESPONDENT
45
necessary” have been appended in clause (2) of the same Article. It bears an explicitly
self-judging character126
and provides an absolute bar to judicial or arbitral review.127
104. Respondent has taken measures in pursuance of protecting its own essential
security interest which ‘it considered necessary’ pursuant to Claimant’s conduct. Article
9(1) further clearly states that nothing in the BIT shall require the Respondent to even
furnish or allow access to ‘any’ information, disclosure of which ‘it determines’ to be
contrary to its essential security interest.128
Hence, the critical details relating to the
identity of the Government Defense Analyst who has been cited in the August 12, 2009
Beristan Times article as well as the related information based on which the high-rank
Government official based his security concerns need not be disclosed.
B. In any case, burden of proof to establish Respondent’s wrongful reliance on Article
9 shall always lie upon the Claimant
105. The words “it considers necessary” in Article 9(2) followed by the strict language
of Article 9(1) make it apparently crystal-clear that it is the subjective discretion of either
Contracting Party to the BIT upon which it may apply measures to protect its own
essential security interests.
126
Essential Security Interests under International Investment Law, ‘International Investment
Perspectives: Freedom of Investment in a Changing World’ [ed. OECD 2007], p.94
127
BURKE-WHITE/VON STADEN, p.376; C. TODD PICZAK, ‘The Helms-Burton Act: U.S.
Foreign Policy toward Cuba, the National Security Exception of the GATT and the Political
Questions Doctrine’, 61 Univ. Pittsburg Law Review 287 at pp.318–326 (1999–2000); DAPO
AKANDE & SOPE WILLIAMS, ‘International Adjudication of Security Issues: What Role for
the WTO?’, 43 VA. J. INT’L L. 365 (2003) at pp.298,381-382
128
The BIT, [Article 9(1)]
TEAM CASTRO, MEMORIAL FOR RESPONDENT
46
106. Furthermore, the opening words of Article 9 are “Nothing in this Treaty shall be
construed”. The word “shall” has a mandatory, obligatory and compulsory character129
and coupled with the negative drafting of Article 9 of the BIT, it absolutely prohibits or
prevents a dispute resolution forum (such as ICSID) from applying other principles of
construction or interpretation of Article 9 of the BIT. Article 9 is an example of ‘lex
specialis’ and adjudicatory bodies including ICSID have, as a practice, let such
specialized set of rules in a Treaty prevail over general and otherwise customary
principles of international law.130
107. As a result, even if assuming arguendo that the Tribunal deems it appropriate to
apply other principles of international law such as ‘good faith’ while adjudicating
whether the Respondent has wrongfully invoked Article 9 of the BIT or not, the heavy
onus to prove such wrongfulness shall still lie upon the Claimant.131
129
State v Shannon, 185 P.3d 200 (Hawaii 2008); Gray v Admin Dir. of the Court, 31 P.2d 580,
592 n. 17 (1997); Voellmy v. Broderick, 980 P.2d 999, 1003-04 (App.1999); BLACK’S LAW
DICTIONARY [9th ed. West Publisher 2009], p.1499; Lakshmanasami Gounder vs C.I.T.
Selvamani And Ors, 1992 SCC (1) 91
130
Sempra Energy International v Argentina, Award, ICSID Case No.ARB/02/16, para.378 (28
September 2007); Enron Corporation and Ponderosa Assets, LP v Argentina, Award, ICSID
Case No.ARB/01/3, para.334 (22 May 2007)
131
LG&E Energy Corporation and ors v Argentina, Decision on Liability, ICSID Case
No.ARB/02/1, para.242 (October 3, 2006)
TEAM CASTRO, MEMORIAL FOR RESPONDENT
47
CONCLUSION ON MERITS
108. In light of the foregoing submissions and arguments advanced, it is humbly
submitted that Respondent has not materially breached the JVA and its conduct does not
violate any of its substantive obligations taken under the BIT. Respondent is also further
entitled to rely on Article 9 (Essential Security) of the BIT as a valid defense to
Claimant’s claims.
TEAM CASTRO, MEMORIAL FOR RESPONDENT
48
PRAYER FOR RELIEF
109. In light of the submissions made above, the Respondent respectfully asks this
Tribunal to find:
(1) That this Tribunal does not have the jurisdiction to hear the present dispute;
(2) That the Respondent has not materially breached the JVA and Respondent’s conduct does
not amount to a violation of its obligations under the BIT; and
(3) That the Respondent is entitled to rely on Article 9 of the BIT as a defense to the
Claimant’s claims
RESPECTFULLY SUBMITTED ON SEPTEMBER 18, 2010 BY
----------/s/----------
TEAM CASTRO
ON BEHALF OF THE RESPONDENT
WÄLDE ASSOCIATES LLP