TEAM KRYLOV THE 2015 FOREIGN DIRECT INVESTMENT INTERNATIONAL ARBITRATION MOOT ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE LONDON COURT OF INTERNATIONAL ARBITRATION IN THE PROCEEDING BETWEEN VASIUKI LLC (Claimant) v. THE REPUBLIC OF BARANCASIA (Respondent) MEMORIAL FOR THE CLAIMANT 19 SEPTEMBER 2015
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TEAM KRYLOV
THE 2015 FOREIGN DIRECT INVESTMENT
INTERNATIONAL ARBITRATION MOOT
ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE
LONDON COURT OF INTERNATIONAL ARBITRATION
IN THE PROCEEDING BETWEEN
VASIUKI LLC
(Claimant)
v.
THE REPUBLIC OF BARANCASIA
(Respondent)
MEMORIAL FOR THE CLAIMANT
19 SEPTEMBER 2015
MEMORIAL FOR THE CLAIMANT
i
TABLE OF CONTENT
TABLE OF CONTENT ............................................................................................................ i LIST OF AUTHORITIES ...................................................................................................... iii LIST OF LEGAL SOURCES ............................................................................................... vii LIST OF ABBREVIATIONS ................................................................................................ xi STATEMENT OF FACTS ...................................................................................................... 1 SUMMARY OF ARGUMENTS ............................................................................................. 4 ARGUMENTS ......................................................................................................................... 6 ARGUMENTS ON JURISDICTION AND ADMISSIBILITY ........................................... 6 I. THE TRIBUNAL HAS JURISDICTION OVER THE PRESENT DISPUTE .................................. 6
A. The Tribunal Has Jurisdiction Ratione Materiae Under the CB-BIT ..................... 6 B. The Tribunal Has Jurisdiction Ratione Temporis as the CB-BIT Remains Valid
Despite Respondent’s Proposed Termination of the CB-BIT .................................. 8 1. Respondent’s proposed termination of the CB-BIT as of June 2008 was invalid
according to Article 54 VCLT ................................................................................. 8 a. Respondent’s unilateral termination of the CB-BIT was inconsistent with
Article 54(a) VCLT vis-à-vis Article 13(2) CB-BIT ........................................... 9 b. Absent Cogitatia’s consent, Respondent’s termination of the CB-BIT was
unlawful pursuant to Article 54(b) VCLT ........................................................ 10 2. Alternatively, Respondent’s EU accession did not render the CB-BIT obsolete
pursuant to Article 59 VCLT ................................................................................. 11 a. The CB-BIT and EU law do not cover the same subject matter ...................... 12 b. In any event, the CB-BIT and EU law can apply simultaneously .................... 14
3. Additionally, the CB-BIT remains applicable in accordance with Article 30(3) VCLT ..................................................................................................................... 15
4. As a matter of procedure, the termination of the CB-BIT was not effective as of 30 June 2008 ............................................................................................................... 16
II. CLAIMANT’S CLAIMS ARE ADMISSIBLE AS CJEU DOES NOT HAVE INTERPRETIVE
MONOPOLY OVER THE PRESENT CASE ............................................................................ 18 ARGUMENTS ON MERITS ................................................................................................ 19 III. RESPONDENT’S ADMINISTRATIVE AND REGULATORY MEASURES IN RESPECT OF THE
LRE BREACHED THE SUBSTANTIVE PROVISIONS OF THE CB-BIT ................................. 19 A. Respondent’s Measures Violated FET Standard of Article 2(2) CB-BIT ............ 19
1. Respondent’s premature revocation of the feed-in tariff violated Claimant’s legitimate expectations of regulatory stability ....................................................... 20
2. Respondent’s denial of Claimant’s license for Alfa and its blanket draconian tariff reduction were arbitrary ......................................................................................... 23
3. Respondent failed to accord Claimant due process when amending the LRE ...... 24 4. Respondent’s tariff reduction was discriminatory against Beta ............................ 25
B. Respondent’s Premature Revocation of the Feed-in Tariff Constituted Indirect Expropriation in Violation of Article 5 CB-BIT ..................................................... 26 1. The effects of the LRE Amendment amount to indirect expropriation ............... 27
MEMORIAL FOR THE CLAIMANT
ii
2. Furthermore, Respondent’s tariff reduction was unlawful as no compensation was paid .............................................................................................................. 28
3. In any event, Respondent’s premature revocation of benefits falls beyond the “police powers” exception .................................................................................. 28
IV. RESPONDENT’S MEASURES ARE NOT EXEMPTED UNDER EITHER THE CB-BIT OR
CUSTOMARY INTERNATIONAL LAW ................................................................................. 30 A. Respondent’s Measures Are Not Exempted Under CB-BIT ................................. 30
1. Article 11 CB-BIT is not a self-judging clause absent an expressed provision ..... 30 2. Article 11 CB-BIT does not apply to Respondent’s domestic situation ................ 31
B. Respondent’s Measures Are Not Exempted Under Customary International Law.. ............................................................................................................................ 32
ARGUMENTS ON REMEDIES ........................................................................................... 34 V. RESPONDENT CAN BE ORDERED TO PERFORM RESTITUTION ........................................ 34
A. The Tribunal Can Order Specific Performance Pursuant to LCIA Rules and ARSIWA ..................................................................................................................... 34
B. Order of Specific Performance Is Enforceable as It Does Not Violate Respondent’s Sovereignty ......................................................................................... 35
VI. CLAIMANT’S BASIS FOR CLAIMING AND QUANTIFYING DAMAGES IS APPROPRIATE ... 37 A. Claimant Is Entitled to Full Reparation Given the Causal Link Between
Respondent’s Unlawful Acts and Claimant’s Damages ......................................... 37 1. There is sufficient certainty that Respondent’s unlawful acts caused Claimant’s
lost net income ....................................................................................................... 37 2. Respondent’s unlawful acts have also resulted in Claimant’s lost future net
income. ................................................................................................................... 38 a. Claimant had engaged in Solar PV projects and would have engaged in
further developments but for Respondent’s unlawful acts ............................... 38 b. Claimant would probably earn higher net income arising from its existing and
planned Solar PV operations but for Respondent’s unlawful acts .................. 39 B. Further, Claimant’s Quantification of Damages Is Proper ................................... 40
1. Preliminarily, the differential method with the discounted cash flow valuation is appropriate to quantify Claimant’s damages ......................................................... 40
2. Subsequently, damages awarded should be discounted at Claimant’s WACC to reflect its NPV ........................................................................................................ 41
3. Accordingly, Claimant has properly quantified each head of damages ................. 41 C. Damages Awarded to Claimant Should Carry Compound Interest Rate at The
Rate of Claimant’s WACC ........................................................................................ 42 D. The Cost of Arbitration Born by Claimant Should Be Proportional to the Success
or Failure of Its Claims Pursuant to Article 28(4) LCIA Rules ............................ 43 PRAYERS FOR RELIEF ..................................................................................................... 44
MEMORIAL FOR THE CLAIMANT
iii
LIST OF AUTHORITIES
BOOKS Bonnitcha Jonathan Bonnitcha, Substantive Protection under Investment Treaties: A
Legal and Economic Analysis, (Cambridge University Press, 2014). Cardwell Paul James Cardwell, EU External Relations Law and Policy in the Post-
Lisbon Era, (TMC Asser Press, 2011). Cheng Bin Cheng, General Principles of Law as Applied by International Courts
and Tribunals, (Cambridge University Press, 2006). Crawford James Crawford, The International Law Commission’s Articles on State
Responsibility: Introduction, Text and Commentaries (Cambridge University Press, 2002).
Dolzer & Schreuer R. Dolzer and Christoph H. Schreuer, Principle of International
Investment Law, (2008). Dolzer & Stevens R. Dolzer and M. Stevens, Bilateral Investment Treaties, (New York:
Kluwer Law International, 1995). Dörr Oliver Dörr et al., The Vienna Convention on the Law of Treaties: A
Commentary, (Springer, 2012). Douglas Zachary Douglas, The International Law of Investment Claims,
(Cambridge University Press, 2012). Dugan Christopher Dugan, Investor-State Arbitration, (Oxford University Press,
2008). Kantor Mark Kantor, Valuation for Arbitration: Compensation Standard,
Valuation Methods and Expert Evidence, (New York: Kluwer Law International, 2008).
Newcombe & Paradell Andrew Newcombe and Lluís Paradell, Law and Practice of Investment
Treaties: Standards of Treatment, (New York: Kluwer Law International, 2009)
Marboe Irmgard Marboe, Calculation of Compensation and Damages in
International Investment Law (Oxford University Press, 2009). McLachlan Campbell McLachlan et al., International Investment Arbitration:
Substantive Principles (Oxford University Press, 2007). !
MEMORIAL FOR THE CLAIMANT
iv
Oppenheim Lassa Oppenheim, International Law: A Treatise, Vol. I, (Longmans, Green & Co, 1912).
!Redfern 1 Alan Redfern et al., Law and Practice of International Commercial
Arbitration, 4th Ed., (Sweet & Maxwell, 2004). Redfern 2 Alan Redfern et al., Redfern & Hunter on International Arbitration,
(Oxford University Press: 5th Edition, 2009). Reinisch August Reinisch, Standards of Investment Protection, (Oxford University
Press, 2008). Ripinsky and Williams Sergey Ripinsky and Kevin Williams, Damages in International Law,
(BIICL 2009). Vandevelde Kenneth J. Vandevelde, United States Investment Treaties: Policy and
Practice, (Boston: Kluwer Law and Taxation, 1992). Villiger Mark E. Villiger, Commentary on the 1969 Vienna Convention on the Law
of Treaties, (Martinus Nijhoff, 2009). Vinuales Jorge E. Vinuales, Foreign Investment and the Environment in
International Law, (Cambridge University Press, 2015). Wälde & Sabahi Thomas W Wälde and Borzu Sabahi, Compensation, Damages, and
Valuation, in The Oxford Handbook of International Investment Law, (Oxford University Press, 2009).
ARTICLES Bjorklund Andrea K. Bjorklund, Reconciling State Sovereignty and Investor
Protection in Denial of Justice Claims, 45 VA. J. INT’L LAW 816-818 (2005).
Boute Anatole Baute, Challenging the Re-regulation of Liberalized Electricity
Prices Under Investment Arbitration, ENERGY L.J. 497-439. (2011). D’Amato Anthony D’Amato, Consent, Estoppel, and Reasonableness Three
Challenges to Universal International Law, 10 VIRGINIA J. OF INT’L LAW. 1-31 (1969).
Dimopoulos 1 Angelos Dimopoulos, The Treaty of Lisbon: Half Way Toward a Common
Investment Policy, 21 EUR. J. OF INT’L L. 1049 (2010). Dimopoulos 2 Angelos Dimopoulos, The Validity and Applicability of International
Investment Agreements Between EU Member States Under EU and International Law, 48 COMMON MKT. L. REV. 63, 64 (2011).
MEMORIAL FOR THE CLAIMANT
v
Malik Mahnaz Malik, Best Practices Series Bulletin #3 - Fair and Equitable Treatment, International Institute for Sustainable Development, Feb. 10, 2009.
Mann & Moltke Howard Mann & Konrad von Moltke, Protecting Investor Rights and the
Public Goods: Assessing NAFTA’s Chapter 11, International Institute for Sustainable Development, June 18, 2002.
Nathanson Rachel A. Nathanson, The Revocation of Clean-Energy Investment
Economic-Support Systems as Indirect Expropriation Post-Nykomb: A Spanish Case Analysis, 98 IOWA L. REV. 863 (2013).
Schill & Briese Stephan Schill and Robyn Briese, “If the State Considers”: Self-Judging
Clauses in International Dispute Settlement, MAX PLANCK YEARBOOK OF
U.N LAW, VOL. 13 (2009). Schreuer Christoph H. Schreuer, Fair and Equitable Treatment in Arbitral Practice,
6. J. WORLD INV. & TRADE 357 (2005). Shan & Zhang Wenhua Shan & Sheng Zhang, The Treaty of Lisbon: Half Way toward a
Common Investment Policy, 21 EUR. J. OF INT’L L. 1049 (2010). Stephens-Chu Gisele Stephens-Chu, Is it Always All About the Money? The
Appropriateness of Non-Pecuniary Remedies in Investment Treaty Arbitration, 51 OXFORD INT’L L.J. 30(4) (2014).
Olivet Cecilia Olivet, A test for European solidarity: The case of intra-EU
Bilateral Investment Treaties, Transnational Institute, January, 2013. Wehland Hanno Wehland, Intra-EU Investment Agreements and Arbitration: Is
European Community Law an Obstacle?, CAMBRIDGE INT’L L.J. (2009). White William Burke White, The Argentine Financial Crisis: State Liability
under BITs and the Legitimacy of the ICSID System, University of Pennsylvania, Inst. for Law & Econ Research Paper No. 08-01 (2008).
MISCELLANEOUS EEC 1 Council Regulation No 2913/92 of 12 October 1992 establishing the
Community Customs Code, Official Journal L 302, 19/10/1992. EEC 2 Council Directive No. 88/361 of 24 June 1988 for the implementation of
Article 67 of the 1988 Treaty OJ L 178/5. Expert Opinion of José E. Alvarez, Sempra Int’l v. Republic of Argentina, ICSID Case No. of José E. Alvarez ABR/02/16 and ARB/03/02, (Opinion of José Alvarez).
MEMORIAL FOR THE CLAIMANT
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DECC DECC, “Government response to the consultation on proposals for the levels of banded support under the Renewables Obligation for the period 2013-17 and the Renewables Obligation Order 2012”.
OECD: Indirect Expro. OECD, “Indirect Expropriation and the Right to Regulate in International
Investment Law”, OECD WORKING PAPERS ON INTERNATIONAL
INVESTMENT, Number 2004/04, September 2004. UNCTAD ICSID Dispute Settlement: 2.5 Requirement Rationae Materiae. UNCTAD: FET “Fair and Equitable Treatment, A Sequel (United Nations Conference on
Trade and Development, UNCTAD Series on International Investment Agreements II)” United Nations: Conference on Trade and Development, 2012.
MEMORIAL FOR THE CLAIMANT
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LIST OF LEGAL SOURCES
ARBITRAL DECISIONS ICSID AES AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of
Hungary, ICSID Case No. ARB/07/22, Award (23 September 2020). CMS, Award CMS Gas Transmission Company v. Argentine Republic, ICSID Case No.
ARB/01/8, Award (12 May 2005). CMS, Jurisdiction CMS Gas Transmission Company v. Argentine Republic, ICSID Case No.
ARB/01/8, Decision on Objection to Jurisdiction (17 July 2003). Corn Products Corn Products v. United Mexican States, ICSID Case No. ARB
(AF)/04/01, Decision on Responsibility (15 January 2008). Continental Continental Casualty Company v. The Argentine Republic, ICSID Case
No. ARB/03/9, Award (5 September 2008). EDF EDF International S.A., SAUR International S.A. and León
Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award (11 June 2012).
Enron, Award Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic,
ICSID Case No. ARB/01/3, Award (22 May 2007). Generation Ukraine Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award
(16 September 2003). LG&E, Award LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc.
v. Argentine Republic, ICSID Case No. ARB/02/1, Award (25 July 2007). LG&E, Liability LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc.
v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006).
Metalclad Metalclad Corporation v. The United Mexican States, ICSID Case No.
ARB(AF)/97/1, Award (30 August 2000). Micula, Award Ion Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L.,
and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Award (11 December 2013).
MEMORIAL FOR THE CLAIMANT
viii
Micula, Jurisdiction Ion Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L., and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility (24 September 2008).
MTD MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID
Case No. ARB/017, Award (25 May 2004). Occidental Occidental Petroleum Corporation and Occidental Exploration and
Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Provisional Measures (17 August 2007).
Parkerings Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No.
ARB/05/8, Award (11 September 2007). Perenco, Jurisdiction Perenco Ecuador Limited v. The Republic of Ecuador, ICSID Case No.
ARB/08/6, Decision on Remaining Issues of Jurisdiction and Liability (12 September 2014).
Sempra Sempra Energy International v. Argentine Republic, ICSID Case No.
ARB/02/16, Award (28 September 2007). Tecmed Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States,
ICSID Case No. ARB(AF)/00/2, Award (29 May 2003). Vivendi, Award Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.
Argentine Republic, ICSID Case No. ARB/97/3, Award (20 August 2007). Vivendi, Annulment Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.
Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment (10 August 2010).
Waste Management II Waste Management, Inc. v. United Mexican States (“Number 2”), ICSID
Case No. ARB/01/3, Award (22 May 2007). UNCITRAL Bau Walter Bau v. The Kingdom of Thailand, UNCITRAL, Awards (1 July
2009). Binder Binder v. Czech Republic, UNCITRAL, Award on Jurisdiction (6 June
2007). Canfor Corp Canfor Corp v. United States of America, UNCITRAL, Decision on
Preliminary Question (6 June 2006). CME CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Final Award
(13 September 2001).
MEMORIAL FOR THE CLAIMANT
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Eureko Eureko B.V. v. The Slovak Republic, UNCITRAL, Award in Jurisdiction, Arbitrability and Suspension (26 October 2010).
Glamis Gold Glamis Gold Ltd v. United States of America, UNCITRAL, Awards (8
June 2009). Methanex Methanex Corporation v. United States of America, UNCITRAL, Final
Award on Jurisdiction and Merits (3 August 2005). Pope & Talbot Pope & Talbot Inc. v. Government of Canada, UNCITRAL, Award in
Respect of Damages (31 August 2000). Saluka Saluka Investment B.V. v. The Czech Republic, UNCITRAL, Partial Award
(17 March 2006). S.D. Myers S.D. Myers, Inc v. Government of Canada, UNCITRAL, Partial Award (13
November 2002). SCC Al-Bahloul Mohammad Ammar Al-Bahloul v. The Republic of Tajikistan, SCC Case
No. V (064/2008), Final Award (8 June 2010). Eastern Sugar Eastern Sugar B.V. v. The Czech Republic, SCC Case No. 088/2004,
Partial Award (27 March 2007). Nykomb Nykomb Synergetics Technology Holding AB v. The Republic of Latvia,
SCC, Arbitral Award (16 December 2003). INTERNATIONAL COURT CASES Chorźow Case Concerning the Factory at Chorźow (Germany v. Poland), [1927]
PCIJ (Ser. A) No. 9. ELSI Elettronica Sicula S.p.A (ELSI) (United States v. Italy), [1989] ICJ. Gulf of Maine Case Concerning Delimitation of the Maritime Boundary in the Gulf of
Maine Area (Canada v. United States), [1984] ICJ. Gabčikovo-Nagymaros Case Concerning Gabčíkovo-Nagymaros Project (Hungary v. Slovakia),
[1997] ICJ Rep 7. EUROPEAN COURT CASES Eco Swiss Eco Swiss China Time Ltd v. Benetton International NV [1999] ECR
13055.
MEMORIAL FOR THE CLAIMANT
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Nordsee Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co. KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co. KG [1982] ECR 1095.
STATE COURTS Parson Parsons Whittemore Overseas Co Inc v. Société Générale de l’Industrie du
Papier (RAKTA), U.S Court of Appeals for the Second Circuit - 508 F.2d 969 (2d Cir. 1974), December 23, 1974.
Texaco Texaco Overseas Petroleum Company and California Asiatic Oil
Company v. Government of the Libyan Arab Republic, YCA, Award on the Merits (19 January 1977).
TREATIES US-Argentina BIT Treaty Concerning the Encouragement and Reciprocal Protection of
Investment, United States-Argentina, 14 November 1991. US-Czech Republic BIT Treaty Concerning the Encouragement and Reciprocal Protection of
Investment, United States-Czech Republic, 27 August 1993. VCLT 1969 Vienna Convention on the Law of Treaties, 1155 UNTS 331 (entered
into force 27 January 1980). MISCELLANEOUS ARSIWA Commentary International Law Commission, Articles on Responsibility of States for
Internationally Wrongful Acts, with Commentaries, 2001. NY Convention The New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 1958. LCIA Rules The London Court of International Arbitration Rules, 1 October 2014. TFEU European Union, Treaty on the Functioning of the European Union, 26
October 2012.
MEMORIAL FOR THE CLAIMANT
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LIST OF ABBREVIATIONS
¶/¶¶ Paragraph(s)
ARSIWA Articles on Responsibility of States for Internationally Wrongful Acts
investment in violation of Article 5 CB-BIT when it deprived Claimant of its economic
benefit from the licensed tariff without compensation, unjustified by the “police powers”
exception (Section III).
NON-EXEMPTION OF RESPONDENT’S ACTIONS
12.! Respondent’s actions are not exempted under either the CB-BIT or the customary defense
of necessity pursuant to Article 25 ARSIWA. Respondent’s LRE Amendment was not
MEMORIAL FOR THE CLAIMANT
5
necessary to meet its economic and renewable energy objectives and to adhere to its EU
obligations. Furthermore, Respondent’s measures are not exempted under customary
international law since Respondent contributed to the situation of necessity and
Respondent’s LRE Amendment was not the “only way to safeguard its essential security
interest.” Thus, Respondent is obliged to compensate Claimant for losses it has suffered
due to Respondent’s breach of the CB-BIT.
III. REMEDIES
CLAIMANT’S ENTITLEMENT TO RESTITUTION FOR THE PRE-2013 FEED-IN TARIFF
13.! The Tribunal may and should order Respondent to continue paying the pre-2013
0.44EUR/kWh feed-in tariff to Claimant since it has the power to do so pursuant to 2014
LCIA Rules and Article 35 ARSIWA. Furthermore, the order would be enforceable since
Respondent is a party to the New York Convention and it has waived its right to
sovereign immunity by entering into the CB-BIT (Section IV).
CLAIMANT’S ENTITLEMENT TO COMPENSATION FOR LOSSES CAUSED BY RESPONDENT
14.! Alternatively, Claimant is entitled to compensation for the losses that it incurred as a
result of Respondent’s unlawful acts. Claimant suffered reduced its income due to
Respondent’s denial of Claimant’s license for Alfa and feed-in tariff reduction, which
affected Beta, the twelve projects, and the other future developments. The method of
valuation used by Claimant to quantify its damages is the Discounted Cash Flow
[“DCF”] method, applying Claimant’s Weighted Average Capital Cost [“WACC”]
rather than Cost of Equity [“COE”] as the Claimant financed its operations through both
debt and equity. In any event, Respondent should compensate Claimant for its out-of-
pocket expenses (Section V).
MEMORIAL FOR THE CLAIMANT
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ARGUMENTS
ARGUMENTS ON JURISDICTION AND ADMISSIBILITY
I. THE TRIBUNAL HAS JURISDICTION OVER THE PRESENT DISPUTE
15.! Article 23(1) LCIA Rules provides that the Tribunal may determine its own jurisdiction
and authority over a dispute, which includes adjudication on the continuing validity,
effectiveness and scope of the Arbitration Agreement. In a BIT setting, an Arbitration
Agreement consists of the host State’s standing offer to arbitrate, presently embodied
under Article 8 CB-BIT,1 and the investor’s consent to arbitrate by submitting the case.2
16.! Upon Respondent’s rejection of Claimant’s offer to negotiate on 20 April 2014, 3
Claimant, as a Cogitatian investor owning Alfa,4 Beta5 and twelve other PV projects in
Barancasia,6 has properly invoked Article 8(2) CB-BIT as the arbitration clause. Bearing
the burden of proof,7 Claimant submits that the Tribunal retains the jurisdiction vested
by Article 8 CB-BIT since it has both jurisdiction [A] ratione materiae and [B] ratione
temporis.
A.! The Tribunal Has Jurisdiction Ratione Materiae Under the CB-BIT
17.! The Tribunal has jurisdiction over disputes within the protection of the CB-BIT. 8
Claimant’s claims concerning the feed-in tariffs fall within the protection of Article 8
CB-BIT as the Arbitration clause, which provides that the Tribunal has jurisdiction
over:
“any dispute which may arise between an investor of one Contracting Party and the other Contracting Party in connection with an investment in the territory of that other Contracting Party shall be settled, if possible, by negotiations between the parties to the dispute.”
26.! Although termination is recognized as an inherent right of every party to a treaty,21
VCLT limits its invocation to certain grounds, inter alia Article 54 VCLT, in that treaty
termination may take place “(a) in conformity with the provisions of the treaty or (b) at
any time by consent of all the parties after consultation with other contracting States.”
Presently, the CB-BIT has not been terminated since Respondent’s proposed
termination thereof by June 2008 did not comply with [a] Article 54(a) VCLT vis-à-vis
Article 13(2) CB-BIT, nor [b] Article 54(b) VCLT.
a.! Respondent’s unilateral termination of the CB-BIT was inconsistent with
Article 54(a) VCLT vis-à-vis Article 13(2) CB-BIT
27.! Article 13(2) CB-BIT provides that:
“This Agreement shall remain in force for a period of ten years. Thereafter, it shall remain in force until the expiration of a twelve month period from the date either Contracting Party notifies the other in writing of its intention to terminate the Agreement.”
28.! Interpreted in its ordinary meaning,22 Article 13(2) CB-BIT only permits one way to
terminate the CB-BIT, i.e. unilateral termination after the initial ten years period has
elapsed. By using the term ‘thereafter’, Cogitatia and Respondent effectively limited
their inherent right to terminate the CB-BIT only after its initial period. This is
corroborated by VCLT’s travaux préparatoires, which noted that when parties have
specified the treaty’s validity period, they link the power of denunciation specifically to
the treaty’s expiry date.23
29.! Since the CB-BIT only entered into force on 1 August 2002,24 the invocation of its
termination via the sending of notification is only available after 1 August 2012. Thus,
Respondent’s proposed termination by June 200825 was invalid as it was invoked in
June 2007.26 If the Tribunal were to accept Respondent’s invocation, it would certainly
run counter to the terms of the provision, thus the principle of pacta sunt servanda.27
78.! Moreover, Respondent has treated Claimant arbitrarily when the LRE Amendment
affected existing investments incompatible with the new groundbreaking technology,
such as Beta.143 Respondent amended the LRE so as to prevent unfair windfall profits to
investors that benefitted from the “best available technology.”144 However, Respondent
applied the LRE Amendment even to existing investments that did not benefit from the
new technology,145 when it could have done so by grandfathering existing licensed
projects146 or by applying the LRE Amendment strictly to new applicants that benefit
from the new technology.
79.! Additionally, retroactive changes to support schemes are evidently arbitrary even when
it is only for a short period. 147 Retroactive changes run counter to the CB-BIT’s
objective to “create and maintain favorable conditions” for investments of investors of
either Contracting Parties, 148 consistent with the EU prohibition on retroactive scheme
changes as “investors’ legitimate expectations concerning the returns on existing
investments must be respected.”149 The retroactive application of the Amendment was
based on preference since denying Claimant benefits it was initially entitled to from 1
January 2013,150 four days before the LRE Amendment entered into force,151 did not
even address windfall profits.
80.! As Respondent’s measures were merely based on individual discretion and founded
neither on reason, fact nor the rule of law, Respondent has treated Claimant arbitrarily.
3.! Respondent failed to accord Claimant due process when amending the LRE
81.! In a FET context, an investor may be deprived of due process by the host State not only
with respect to denial of justice, but also as regards procedural fairness in legislative or
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!143 PO2, ¶30. 144 Problem, p.34 145 Facts, ¶35. 146 DECC, pg. 90. 147 Matter of Replan Dev. V. Department of Hous. Preserv. & Dev. Of City of N.Y., Court of Appeals of the State of New York, November 19, 1987. 148 Annex No. 1, pg. 24. 149 Memo/13/948, Memo on the Communication on “Delivering the internal electricity market. Making the most of public intervention”, 5 November 2013. 150 Facts, 35. 151 PO3, ¶9.
MEMORIAL FOR THE CLAIMANT
25
executive actions.152 In Waste Management, the tribunal found that a violation of due
process involves “a complete lack of transparency and candor in an administrative
process,”153 which entails host States’ failure to accord transparency through public
hearings,154 especially in case of regulatory changes affecting investors’ investment.155
82.! A State that fails to inform an investor of possible changes to its relevant laws would
perpetrate unfairness, material to the investor’s ability to operate its investments.156
Despite being a concerned stakeholder of the PV sector in Barancasia,157 Claimant was
not accorded the opportunity to be heard as there was not only lack of notice of the
hearings, but the hearings were conducted privately,158 in which only “specially invited”
representatives of industry and certain stakeholder groups were called to provide
testimony.159 Therefore, Respondent’s measure violated Claimant’s right of due process
since the private nature of such hearings rendered them wholly opaque and lacking
adequate justification and consultations with relevant affected stakeholders, including
Claimant.160
4.! Respondent’s tariff reduction was discriminatory against Beta
83.! Under international investment law, discrimination is generally established when
investments of comparable characteristics and subject to the same laws and regulations
are accorded differential treatment without reasonable justification.161 In Nykomb, the
tribunal found a breach of discrimination when Latvia refused to pay the agreed price
when it had in fact paid the higher price to two other electricity generation companies.162
Applying the same logic as regards reverse discrimination, according similar treatment
to investments of different character also amounts to a breach of non-discrimination
IV. RESPONDENT’S MEASURES ARE NOT EXEMPTED UNDER EITHER THE CB-BIT OR
CUSTOMARY INTERNATIONAL LAW
97.! Respondent’s administrative and regulatory measures violating the substantive
provisions of the CB-BIT cannot be exempted under [A] Article 11 CB-BIT as an NPM
clause nor [B] the customary necessity defense under Article 25 ARSIWA.
A.! Respondent’s Measures Are Not Exempted Under CB-BIT
98.! Respondent’s measures are not exempted under Article 11 CB-BIT, which provides:
“Nothing in this Agreement shall be construed to prevent either Contracting Party from taking measures to fulfill its obligations with respect to the maintenance of international peace or security.”
99.! Although Article 11 CB-BIT was intended to serve as a safeguard clause that
contemplates ‘non-precluded’ measures to which either Contracting Party can resort
to,192 it does not exempt Respondent’s measures since [1] the provision is not self-
judging, [2] nor does it cover Respondent’s domestic situation.
1.! Article 11 CB-BIT is not a self-judging clause absent an expressed provision