VSR- 512
Professor V.S. Mani Memorial International Law Moot Court Competition – 2016 2016 (Banking and Investment Law)
Before
THE AD-HOC ARBITRAL TRIBUNAL SETUP IN ACCORDANCE WITH UNCITRAL IN JAIPUR NATIONAL UNIVERSITY, JAIPUR
I n th e matter matter of RURITANIAN TELECOMS LIMITED ……………………..…….…………
APPLICANT
V.
REPUBLIC OF AREANA ………………………….…………………….……RESPONDENT
M emori al on behalf behalf of the Res Respondent pondent
TABLE OF CONTENTS
STATEMENT OF JURISDICTION .................................................................................. ... XIII SUMMARY OF FACTS ............................................................................................... ........... XIV QUESTIONS PRESENTED .................................................... ................................................................................................. ............................................. XVII SUMMARY OF ARGUMENTS ......................................................................................... XVIII 1.
THAT THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF THE BIT
ARE NOT MAINTAINABLE. ................................................ ..................................................................................................... ..................................................... 1 1.1
CONCILIATION PROCEEDINGS U NDER ARTICLE 9(1) WERE NOT I NITIATED. ............................. 1
1.2.
EMEDIES HAVE NOT BEEN EXHAUSTED. ...................................................................... 3 LOCAL R EMEDIES
1.3.
ESPONDENT ......................................................... 7 THAT THERE WAS DENIAL OF JUSTICE BY R ESPONDENT
2
THAT THE DEPRIVATION OF PROPERTY BY THE ORDERS OF THE
SUPREME COURT AND THE HIGH COURT WERE NOT IN VIOLATION OF THE PRINCIPLE OF SOVEREIGN IMMUNITY. ........................................................... .... ....................................................................... ................ 8 2.1.
APPLICATION OF PRINCIPLE OF SOVEREIGN IMMUNITY ............................................................ 8
2.2. THE DEFINITION OF THE STATE A ND THE IMPORTANCE OF THE LEGAL STRUCTURE OF THE FOREIGN E NTITY ..................................................................................................................................... 9 2.3.
I NTERNATIONAL ACCEPTANCE OF A R ESTRICTIVE ESTRICTIVE APPROACH TO FOREIGN STATE IMMUNITY 11
2.3.1.
OMMERCIAL N ATURE O F T RANSACTIONS O F T HE A PPLICANT C OMPANY OMPANY . ......................... 13 C OMMERCIAL
2.3.2.
OMMERCIAL P URPOSE URPOSE O F RTL‟ S I NVESTMENTS . .............................................................. 15 C OMMERCIAL
EGULATORY POWERS OF 2.4. NON APPLICABILITY OF PRINCIPLE OF SOVEREIGN IMMUNITY O N R EGULATORY STATE. 16
3.
THAT THE RESPONDENT HAS AFFORDED FAIR AND EQUITABLE
TREATMENT TO THE APPLICANT. ................................................... .................................................................................... ................................. 18 3.1 THE STANDARD OF LIABILITY I N THE FET CLAUSE IS THE SAME AS THAT OF THE MINIMUM STANDARD OF TREATMENT U NDER I NTERNATIONAL LAW. ................................................................ 18 3.2 ASSUMING ARGUENDO, EVEN IF THIS TRIBUNAL WERE TO FIND THE FET AS A N AUTONOMOUS STANDARD OF TREATMENT, THE THRESHOLD OF LIABILITY STILL CANNOT BE ESTABLISHED. ....................................................................................................................................... 19 3.2.1. T HERE W AS N O V IOLATION O F A NY L EGITIMATE E XPECTATION O F T HE A PPLICANT . ............... 20
3.2.2. T HE ACTIONS O F T HE R ESPONDENTS W ERE G ROUNDED I N R ATIONALITY A ND W ERE N OT OT A RBITRARY .......................................................................................................................................... 23 II | P a g e
Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 3.3
4.
THE BURDEN OF PROOF IS O N APPLICANT TO PROVE THAT FET HAS BEEN VIOLATED. ....... 25
THAT THE FEBRUARY 2012 SUPREME COURT JUDGEMENT AND THE
JANUARY
2015
RULING
AMOUNT
TO
EXPROPRIATION
OF
APPLICANT’S
PROPERTY ................................................... ......................................................................................................... .............................................................................. ........................ 27 4.1 THE MEASURES OR ACTS OF THE STATE OF AREANA WERE NOT EXPROPRIATORY I N NATURE. ................................................................................................................................................ 27 4.2
THE R EVOCATION EVOCATION OF LICENSES WAS WITHIN THE R EGULATORY EGULATORY POWERS OF THE STATE ... 29
4.2.1
IDESPREAD ACCEPTANCE O F „P OLICE OLICE P OWERS OWERS ‟D W ‟DOCTRINE I N I NTERNATIONAL L AW ....... ...... . 30
THAT THE FEBRUARY 2012 SUPREME COURT JUDGEMENT A ND THE JANUARY 2015 R ULING ULING 4.3 OF THE STATE HIGH COURT CAN BE CLASSIFIED AS R EGULATORY EGULATORY MEASURES OF GENERAL APPLICATION. ........................................................................................................................................ 36 UBLIC P URPOSE URPOSE ON - D ISCRIMINATORY N ATURE A ND O BSERVATION O F DUE P ROCESS ........ 37 4.3.1 P 4.3.1 P UBLIC , N , N ON
4.3.2
L ACK O F P ROPORTIONALITY ............................................................................................... ............................................................................................... 39
4.3.3
L ACK O F F AIR A ND E QUITABLE QUITABLE T REATMENT ...................................................................... 40
4.3.4
A BUSE O F R IGHTS (A BUS D E D ROIT ) .................................................................................. 41
4.3.5
HE S TATE TATE ......................................................................................... 42 D IRECT B ENEFIT T O T
5.
THAT THE RESPONDENT ARE NOT OBLIGED TO MAKE REPARATION
FOR THE LOSSES. ............................................... .................................................................................................... ..................................................................... ................ 44 5.1.
THERE HAS BEEN NO BREACH OF BIT. .................................................................................... 44
5.2. THE APPLICANT CANNOT SEEK MORAL DAMAGES A ND ARE I NSTEAD BOUND TO ESPONDENT. ......................................................................................................... 45 COMPENSATE THE R ESPONDENT 5.2.1.
ORAL D AMAGES C ANNOT B E S OUGHT OUGHT . ............................................................................. 45 M ORAL
5.2.2.
R ESPONDENTS ESPONDENTS SEEK MORAL DAMAGES FROM THE APPLICANT. ..................................... 46
PRAYER ................................................................................................................................ ........................................................................... ....................................................... XXII
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) INDEX OF ABBREVIATIONS
S NO.
ABBREVIATION
FULL FORM
1.
¶
Paragraph
2.
Art.
Article
3.
BIT
Bilateral Investment Treaty
4.
Chap.
Chapter
5.
DoT
Department of Telecommunications
6.
Ed.
Edition
7.
Eds.
Editions
8.
FCFS
First Come First Serve
9.
FET
Fair And Equitable Treatment
10.
ICSID
International Center For Settlement of Investment Dispute
11.
ICJ
International Court of Justice
12.
IIAs
International Investment Agreements
13.
ILC
International Law Commission
14.
NAFTA
North-American Free Trade Agreement
15.
No.
Number
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law)
16.
O.U.P.
Oxford University Press
17.
P.
Page
18.
PCIJ
Permanent Court Of International Justice
19.
Rep.
Report
20.
R&D
Research and Development
21.
RTL
Ruritanian Telecoms Company
22.
RAAWL
Ruritania- Areana Air Waves Limited
23.
SC
Supreme Court
24.
TAAWL
Trans- Areana Air Waves Limited
25.
TRAA
Telecom Regulatory Authority of India
26.
UAS
Unified Access Services
27.
UN
United Nations
28.
UNGA
United Nations General Assembly
29.
UNCTAD
United Nations Conference on Trade and Development
30.
UNCITRAL
United Nations Commission on International Trade Law
31.
v.
Versus
32.
VCLT
Vienna Convention on the Law of Treaties
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) TABLE OF AUTHORITIES
ARTICLES
1.
Bernardo Sepulveda Amor, International Law and National Sovereignty: The NAFTA and the Claims of Mexican Jurisdiction, Jurisdiction, 19 House J. INT'L L. L. 565, 585 (1997)
2.
Dodge, Investor ‐ state state Dispute Settlement between Developed Countries: Reflections on the Australia‐United States Free Trade Agreement , 39 Vand. J. Transnat‟l L. 1, 29-30
(2006). 3.
F. G. Dawson and L. Head, International Law: National National Tribunals and the Rights of Aliens ( First published in 1971) [25] [291]
4.
Hazel Fox, The Law of State Immunity, (2d ed. 2008) (hereinafter Fox).
5.
Katia Yannaca-Small, “Fair and Equitable Treatment Standard: Recent Developments”, August Reinisch (ed.), Standards of Investment Protection. (Oxford University Press 2008)
6.
Ian Brownlie, “ Public International Law”, Law”, OXFORD U NIVERSITY PRESS 509, (6th Ed, 2003).
7.
Ioana Tudor, The Fair and Equitable Treatment Standard in the Law of Foreign Investment (2008).
8.
M. Sornarajah, “The “The International Law on Foreign Investment ” , Cambridge University Press 283, (1994).
9.
“Restatement of the Law Third, the Foreign Relations of the United States,” American
Law Institute, Vol. 1, 1987 10.
Suzi H. Nikiema, Best Practices:Indirect Expropriation, The International Institute for Sustainable Development, 17(Sept 3, 2016).
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) BOOKS
1
James Crawford, Brownlie‟s Principles of Public International Law, Oxford University Press (8th Ed. 2012, 1983
2
Jeswald W. SALACUSE, The Law of Investment Treaties,Oxford University Press (2nd Ed. 2015)
3
P. Mayer and V. Heuzé, Droit international privé (9th ed. 2007) CASE LAWS
1.
AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary, Award, ICSID Case No. ARB/07/22 (Sep. 23 2010)
2.
Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia,
Award, ICSID Case No. ARB/99/2 (Jun. 25, 2001) 3.
Ambatielos Claim (Greece v. U.K.), 1956 12 R.I.A.A. [91], [120]
4.
Azurix Corp. v. The Argentine Republic, Award, ICSID Case No. ARB/01/12 (Jul.
14, 2006) 5.
Banco Nacional de Cuba v. Sabbatino(1964) 376 U.S. 398
6.
Borri Loca v. Republic of Argentina, Cassazionecivile (sez. un.), Case No 11225; ILDC 296 (IT 2005)
7.
Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, Award, ICSID Case
No. ARB/05/22 (Jul. 24, 2008) 8.
Canadian Pacific Railway Co. v. Vancouver (City), (2006) 1 S.C.R. 227
9.
Case Concerning the Arrest Warrant of 11 April 2000 (Democratic Republic of Congo v Belgium), 2002 I.C.J. 3 (Feb. 14).
10.
Chemtura Corp. v. Government of Canada, Award, UNCTRAL (Aug. 2, 2010)
11.
CMS Gas Transmission Company v. The Argentine Republic, Award, ICSID Case
No. ARB/01/8 (May 12, 2005)
VII | P a g e
Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 12.
ARB/03/9(Sep. 5, 2008) Continental Casualty v. Argentina, Award, ICSID Case No. ARB/03/9(Sep.
13.
Duke Energy Electroquil Partners &Electroquil S.A. v. Republic of Ecuador,Award,
ICSID Case No. ARB/04/19 (Aug. 18, 2008) 14.
EDF (Services) Limited v. Romania, Award, ICSID Case No. ARB/05/13 (Oct. 8,
2009). 15.
Elettronica Sicula S.P.A. (U.S. v. Italy), 1989 ICJ 15, 42,50
16
Enron Corporation Ponderosa Assets, L.P v. Argentine Republic, Award, ICSID
Case No. ARB/01/3 (Mar. 22, 2007) 17.
Erkner & Hofauer v. Austria Au stria, European Court of Human Rights, Judgment (Apr. 23,
1987) 18.
Marvin Roy Feldman Karpa v. United Mexican States, Award, ICSID Case No.
ARB(AF)/99/1 (Jan. 11, 2005) 19.
Generation Ukraine v. Ukraine, Award, ICSID Case No. ARB/00/9 (Sep. 8, 2003).
20.
Glamis Gold v. United States, Award, UNICTRAL (Jun. 8, 2009)
21.
Grand River Enterprises v. United States, Award, ICSID Case No.ARB/1O/5 (Jan.
12, 2011) 22.
James and Others v. United Kingdom, Judgement, European Court of Human Rights,
(Feb. 21, 1986) 23.
Lauder v. Czech Republic,(UNCITRAL) (2001) 9 ICSID Reports 66
24.
EnCana v. Ecuador ,(UNCITRAL) (2006) 12 ICSID Reports 427
25.
LG & E Energy Corp., LG & E Capital Corp., and LG & E International, Inc. v. Argentine Republic, Award, ICSID Case No. ARB/02/1 (Jul. 25, 2007)
26.
Loewen Group Inc. & Raymond L. Loewen v. United States, Award on Merits, ICSID
Case No. ARB(AF)/98/3(Jun. 26, 2003) 27.
Ioan Micula, Viorel Micula and others v. Romania, Award, ICSID Case No.
ARB/05/20 (Dec. 5, 2013)
VIII | P a g e
Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 28.
Merrill & Ring Forestry L.P. v. The Government of Canada, Award, UNCITRAL
Proceedings (Mar. 31, 2010) 29.
Methanex Corporation v. United States of America, Final Award of the Tribunal on
Jurisdiction and Merits, NAFTA (Aug. 3, 2005), Chap. IV, D 30.
Milošević v. the Netherlands,(AppNo 77631/01) ECHR(19March,2002)
31.
Mondev International Ltd. v. United States of America, Award, ICSID Case No. ARB
(AF)/99/2 (Oct. 11, 2002) 32.
MPP Golub v. Ukraine, (App No. 6778/05) ECHR (Oct. 18,2005)
33.
Olguín v. Paraguay, Award, Case No. ARB/98/5 (Jul. 26, 2001)
34.
Panevezys-Saldutiskis Railway (Estonia v. Lithuania),1939 P.C.I.J. Ser. A/B, No.76
(Feb. 28) 35.
Parkerings-Compagniet AS v. Republic of Lithuania, Award, ICSID Case No.
ARB/05/8 (Sep. 11, 2008) 36.
Pellegrini v. Italy, (App No. 30882/96) ECHR (Jul. 20, 2001)
37.
Pope & Talbot Inc. v. The T he Government of Canada, Award on the Merits of Phase 2,
NAFTA (10 April, 2001) 38.
Rumeli Telecom A.S. &Telsim Mobil Telekomikasy on Hizmetleri A.S. v. Republic of Kazakhstan, Award, ICSID Case No. ARB/05/16 (Jul. 29, 2008).
39.
Saipem v. Bangladesh, Award, June 30, 2009
40.
Saluka Investments B.V. v. The Czech Republic, UNCITRAL Arbitration Proceedings
(Mar. 17, 2006) 41.
S.D. Myers, Inc. v. Government of Canada, Partial Award, NAFTA (Nov. 13, 2000).
42.
Sedco, Inc. v. National Iranian Oil Co., Interlocutory Award No. ITL 55-129-3, Oct.
28 1985, 9 the Iran-United States Claims Tribunal Reports 248 43.
Sempra Energy International v. Argentine Republic, Award, ICSID Case No.
ARB/02/16 (Sep. 28, 2007)
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 44.
Suez et al. v. Argentina, Decision on Liability(Jul. 30, 2010)
45.
Sporrong and Lönnroth v. Sweden, European Court of Human Rights, Judgment,
(Sept. 23, 1982) 46.
Telenor Mobile Communications A.S. v he Republic of Hungary, Award, ICSID Case
No. ARB/04/15(Sep. 13, 2006) 47.
Compañia de Aguas del Aconquija SA and Vivendi Universal v. Argentine Republic,
Award, ICSID Case no. ARB/97/3(Aug. 20, 2007) 48.
Waste Management, Inc. v. United Mexican States, Award, ICSID Case No.
ARB(AF)/00/3 (Apr. 30, 2004) MUNICIPAL 1.
Abbott v. South Africa, Spanish Constitutional Court, 113 ILR 411 (1992)
2.
Condor and Filvem v. Minister of Justice, Italian Constitutional Court, 101 ILR 394
(1992) 3.
Dole Food Co. v. Patrickson, 538 US 468 (2003)
4.
Empire of Iran case, German Federal Constitutional Court (Apr. 30 1963), 45 ILR 57.
5.
Government of Canada v Employment Appeals Tribunal and Burke (1992) ILRM 325.
6.
Governor of Pitcairn v Sutton(1995) INZLR 426
7.
I Congreso del Partido, UK House of Lords, [1983] 1 AC 244, 64 ILR 307
8.
JarkerMcCormac (Private) Ltd v Government of Kenya [1986] CR Comm (Const) 21
9.
Jones v. Ministry of Interior of Saudi Arabia,[2006] UKHL 26 (Lord Bingham)
10.
Kramer v Government of Kingdom of Belgium; Embassy of Belgium(1989) 1 CLRQ 126;
103 ILR 299 11.
Ministry of Defence of Government of UK v Ndegna, Kenya Court of Appeal, (Mar. 17
1983) 103 ILR 235 12.
Powerex Corp. v. Reliant Energy Servs.,127S.Ct. 1144 (2007)
X|Page
Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 13.
République démocratique du Congo, French Cour de Cassation, (1ere ch. Civ. Jan 25
2005) 14.
Sarrió SA v. Kuwait Investment Authority, [1996] EWCA Civ 575, revd, [1997] UKHL
49 15.
Société Sonatrach v. Migeon,French Court of Cassation (1Oct. 1 1985), 77 ILR 525
16.
The Philippine Embassy case, 65 ILR 146 (1977)
REPORTS 1.
OECD (2004), “"Indirect Expropriation" and the "Right to Regulate" in International Investment Law”, OECD Working Papers on International Investment, 2004/04,
OECD Publishing. http://dx.doi.org/10.1787/780155872321 2.
OECD Working Papers on International Investment 2010/02 Foreign State Immunity and Foreign Government Controlled Investors
3.
Reports of International Arbitral Awards,Vol. V
4.
United Nations Code of Conduct on Transnational Corporations” UNCTC Current
Studies, Series A, Number I (1986) 5.
United National Conference on Trade and Development, “FAIR AND EQUITABLE TREATMENT”, UNCTAD series on Issues in International Investment Agreements
II, 2012. 6.
UNCTAD, Expropriation, UNCTAD Series On Issues In International Investment Agreements
II‟,
5
(
Sep.
03,
2016)
http://unctad.org/en/Docs/unctaddiaeia2011d7_en.pdf
STATUTES & TREATIES
INTERNATIONAL 1
Areana-Ruritania Bilateral Investment Treaty
2
Convention Establishing the Multilateral Investment Guarantee Agency(1985) XI | P a g e
Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 3
European Convention on State Immunity
4
Harvard Draft Convention on International Responsibility of States for Injuries to Aliens(1961)
5
OECD Draft Convention on the Protection of Foreign Property, 1967
6
OECD Draft Convention on Taking of Foreign Property
7
Statute of the International Court Of Justice, I.C.J
8
The Multilateral Agreement on Investment (Report by the Chairman of the Negotiating Group) DAFFE/MAI(98) 17, May 4, 1998.
9
UNCITRAL Arbitration Rules
10 UNCITRAL Conciliation Rules 11 United National Convention on Jurisdictional Immunity of State and their Property 12 United Nations, Draft articles on Diplomatic Protection, 2006 MUNICIPAL 1.
Canadian State Immunity Act 1982
2.
Foreign Sovereign Immunities Act 1976 (USA)
3.
Foreign States Immunities Act 1985 (Australia)
4.
Immunities and Privileges Act 1984 (Malaysia)
5.
Malawi Immunities and Privileges Act 1984 (No 16 of 1984) 198 4)
6.
Singapore State Immunity Act 1979
7.
State Immunity Act 1978 (UK)
8.
The Pakistan State Immunity Ordinance 1981
9.
The South African Foreign States Immunities Act 1981
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) STATEMENT OF JURISDICTION
The Applicant has approached the International Arbitration Tribunal under Article 9(2) of the Bilateral Investment Treaty (BIT) between the Government of Republic of Areana and the Government of Republic of Ruritania. The Respondent has filed its reply in response to the same. The UNCITRAL Rules for Arbitration shall be the governing law for the dispute.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) SUMMARY OF FACTS
I Areana and Ruritania are two friendly neighbouring countries which have forged strong economic and commercial relations since 1990's. They have entered into a Bilateral Agreement for the Promotion and Mutual Protection of investments on 23rd December, 1994 (Annexure I). The Agreement came into force on 1 January, 1995. Due to very cordial relationship between these two countries, although the initial period of validity of this agreement was 10 years, the agreement continues to be in force since neither party has served notice of termination on the other and investments from either country in the other have proliferated over time. II In 1999 there was the introduction of 2-G mobile cell technology on a massive scale in the state of Areana the 2-G mobile cell technology came to be widely introduced in Areana. 2G is the short form for second-generation wireless telephone technology. Second generation 2G cellular telecom networks being much more efficient and better than its predecessors quickly became the need of the hour. At the same time Ruritarian government was encouraging advancement and development in the telecom sector by subsidizing Research and development through directly subscribing to the equity of the new telecom companies. As a result RTL was formed with 20% stakes of Ruritanian Government in it. By the end of 1990's, the Ruritanian Telecoms became a name to reckon with in the world of advanced telecoms technology. III The Areana Department of Telecommunications (DoT) followed the simple first-come-firstserved (FCFS) policy in allocating spectrum licences to eligible applicant firms, in order to encourage more operators to venture in this arena for the benefit of the consumers, from 200307. IV In 2008, the Areana Minister for DoT deviated from FCFS policy without consulting the Cabinet. This resulted in a number of flaws of both substantial and procedural nature. As a result of which many corporations which were in eligible were given licenses and favoritism
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) and inconsistency prevailed. Furthermore, despite the warnings from the Areana Ministry of Finance expressing strong procedural concerns to the DoT, these were ignored, and the cut-off date was moved backwards from 1st October 2007 to 25th September. (The reason for this backdating could probably be that by 1st October, 2007 DoT received 575 applications for UAS licences from 46 companies.). On 25th September, the DOT announced on its website that applicants filing between 3:30 and 4:30 pm that day would be granted licenses, and 122 licenses were shown to have been granted that day, according to a 10th January, 2008 DoT notification. V As a result of diversification in Ruritanian investment, after the allocation of spectrum, RTL entered into a 51:49 joint venture agreement with TAAWL, which was granted 17 licenses under the Areana Dot notification of 25th September 2007. the January 2008 allocation and formed RAAWL which entered the market of both the countries in March 2008. VI As a result of all these defections and inconsistencies the Supreme Court of Areana in Airtel Infotech Co. Ltd. v. Government of Areana and Others decided on 2nd February, 2012, quashed all the 122 licenses issued by Dot, calling the procedure arbitrary and unconstitutional. Furthermore, it directed TRAA to make fresh recommendations for grant of license and allocation of spectrum in 2G band by auction. The Court also imposed a fine of US $ 50 million on two licensee companies, and US $ 5 million on four other licensee companies which included RAAWL. VII Reacting to the Areana Supreme Court's judgment, RTL invoked its right under Article 9.1 of the Ruritania-Areana bilateral investment treaty by filing a notice of dispute against Areana and called for conciliation proccedings. However, the Government of Areana drew the attention of the Ruritanian parties to Para 81 (iv) of the Supreme Court Ruling, and asked them to await the outcome of the public auction. Also, one of the companies penalized with US $ 50 million fine had preferred a review of the on 2nd February, 2012 Judgment of the Areana Supreme Court on 10 December, 2012 and this review was pending decision. For these reasons, the Government requested RTL to postpone the conciliation proceedings. For the moment RTL, upon a little
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) persuasion from the Ruritanian Government, decided to suspend the conciliation proceeding. Following RTL's notice. VIII However, subsequent developments proved un-favourable to RTL as the auction that took place on 15th November 2012, proved too expensive for RAAWL which had to pay US $ 1400/= million per licenses. The review petition was dismissed by the Areana Supreme Court in June 2013. Furthermore, Areana State High Court in Airwaves Holding v. the Areana Department of Telecoms declared the 15th November, 2012 auction illegal and banned the fined companies from participating in future auctions, without serving notices on the said companies, on 30th January, 2015. The Areana Department of Telecoms' appealed against this ruling ruling before the Supreme Court which is pending. The Supreme Court refused to implead any interveners as there were none before the High Court. Co urt. IX In the meantime, the Government of Areana did propose to RTL other lucrative areas of investment, such as manufacturing of mobile cells and I-Pads. However, taking the view that no useful purpose would be served either by resorting to any further grievance redressal mechanism or to waiting any longer for the conciliation procedure, RTL has now invoked the arbitration procedure vide Article 9 (2) of the Bilateral Treaty. Areana Government has accepted the notice of arbitration under protest. p rotest.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) QUESTIONS PRESENTED
The following questions have been raised before b efore this Honorable Tribunal to consider: I.
WHETHER THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF THE BIT ARE MAINTAINABLE?
II.
WHETHER BOTH THE DEPRIVATIONS WERE TANTAMOUNT TO DEPRIVATION OF SOVEREIGN WEALTH OF THE RURITANIAN REPUBLIC IN VIOLATION OF THE PRINCIPLES OF SOVEREIGN IMMUNITY?
III.
WHETHER THE GOVERNMENT OF REPUBLIC OF AREANA HAS VIOLATED ARTICLE 2(2) OF THE BIT BY NOT CONFORMING TO THE PRINCIPLES OF FAIR AND EQUITABLE TREATMENT AND FULL PROTECTION AND SECURITY?
IV.
WHETHER THE WHETHER THE FEBRUARY 2012 SUPREME COURT JUDGEMENT AND THE JANUARY 2015 RULING OF THE STATE HIGH COURT AMOUNTS TO EXPROPRIATION?
V.
WHETHER THE RESPONDENT IS OBLIGED TO MAKE REPARATION FOR THE FOR THE LOSSES?
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) SUMMARY OF ARGUMENTS
I.
THAT THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF THE BIT ARE NOT MAINTAINABLE.
The arbitral proceedings under Article 9(2) of the BIT are not maintainable. RTL do not possess the right to go for arbitration proceedings because bec ause the conditions which were prerequisite for the commencement of arbitration proceedings were not fulfilled by the applicant company. The BIT between Areana and Ruritania specifically mentioned for resolution of disputes in an amicable manner. It provided for resolution of disputes through conciliation prior to going for arbitration. The RTL however without entering into any conciliation proceedings directly went for arbitration which is not maintainable. Under customary international law all local remedies must be pursued within the state allegedly responsible an international claim is admissible. The Applicant failed to meet this obligation before instituting its arbitral claims. II.
THAT THE DEPRIVATION OF PROPERTY BY THE ORDERS OF THE SUPREME COURT AND THE HIGH COURT WERE NOT IN VIOLATION OF THE PRINCIPLE OF SOVEREIGN IMMUNITY.
The rules of state immunity address the extent to which a foreign state is protected from being sued in the courts of other countries. Immunity can extend to legal proceedings against the foreign state itself, its organs and enterprises, and its agents. Under the restrictive law of immunity, which is adopted by majority of countries, the courts recognize immunity for acts carried out by a State in the exercise of its sovereign authority but will deny immunity for acts of a commercial or private law nature. The principle of Sovereign Immunity is not applicable in this case as the Applicant company, RTL, is a separate legal entity operating independently of State of Ruritania and its transactions were of commercial nature and the State of Areana cannot be held responsible for the violation of the same. The acts or measures taken by the state of Areana were within the regulatory powers of the state and the applicants assertion that the measures or acts of the Judiciary led to the deprivation of the sovereign wealth of the Ruritanian Republic and violated the principle of sovereign immunity is not valid as the applicant company, RTL, is a separate legal entity operating independently of the state and the nature of
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) its transactions is commercial. Thus the principle of sovereign immunity is not applicable to RTL. III.
THAT THE RESPONDENT HAS AFFORDED FAIR AND EQUITABLE TREATMENT TO THE APPLICANT.
The fair and equitable treatment (FET) standard is a key element in contemporary international investment agreements (IIAs). The Respondent also maintained this standard of fair and equitable treatment. The international minimum standard of treatment is to be applied when applying the FET. Deviation from this interpretation would create obligations which were not intended by the Parties in the Areana-Ruritania BIT. Under the standard of minimum treatment the Respondent has not done anything which can be treated as a violation of the minimum standard treatment. In arguendo, the threshold to establish violation of the fair and equitable treatment is very high which cannot be established by the Applicant. The violation of FET is said to occur when there is violation of legitimate expectations of the investor, actions are arbitrary and irrational, abusive treatment is accorded to the investor , the host state does not act in good faith. In the instant case none of the above elements of FET have been violated. IV.
THAT THE FEBRUARY 2012 SUPREME COURT JUDGEMENT AND THE JANUARY 2015 RULING OF THE STATE HIGH COURT DO NOT AMOUNT TO EXPROPRIATION
It is humbly submitted that the February 2012 Supreme Court judgment and the January 2015 ruling of the state high court were within the policing powers of the state and did not amount to expropriation either direct or indirect. The revocation of licenses were non-discriminatory regulatory measures, i.e. acts taken by States in the Exercise of their right to regulate in the public interest that may lead to effects similar to indirect expropriation but at the same time are not classified as expropriation and do not give rise to the obligation to compensate those affected. In the course of the argument the validity of Regulatory acts of the state is established through state practice, case laws and other documents of International law. The order of Supreme Court cancelling the licenses granted on or or after 10.1.2008 and the State High Court order disqualifying certain companies from the re-auction were non-
discriminatory measure of general application that seeks to attain a legitimate welfare objective of protecting the rights rights of the consumer and ensure a fair and equitable setup and enacted in XIX | P a g e
Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) observation of due process and were proportional to the public interest presumably protected thereby and to the protection legally granted to investments. The acts and measures of the state of Areana were fair and equitable and were not directed to inflict harm, economically or otherwise, on any particular or specific individual or organization as the licenses of all the companies were quashed and equal opportunity was given to all the bidding companies who were eligible and fulfilled the requirements prescribed by the telecom department. The actions of the state of Areana did not result in any benefit direct or indirect benefit to any state body or organ. The revocation of licenses was done to protect consumer rights and all the companies were given an equal chance at the re-auction subject to that they meet the eligibility requirements and the state received no benefit from the whole process. The measures taken by the State of Areana were for the benefit of the society as a whole and there is no appropriation of assets of any identifiable entity. Thus the State of Areana cannot be held responsible for expropriation of the investments of the applicant.
V.
THAT THE RESPONDENT ARE NOT OBLIGED TO MAKE REPARATION FOR THE LOSSES.
The Respondent are not obliged to make any reparation for the losses. There has been no violation of the BIT on the part of the Respondent. It has conformed to the principles laid down in the BIT. Also, the Applicant cannot seek moral damages as firstly it was not mentioned in the BIT signed between the two countries; secondly, the standard of proving for moral damages is very high which could not be proved by the Respondent. The Respondent seek compensation from the Applicant for the damage it caused to it. The allegations made by it have created suspicions in the mind of the investors regarding the investor climate of the country. It has resulted in loss of reputation and social position of the country in the world community.
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ARGUMENTS ADVANCED
1.
THAT THE ARBITRAL PROCEEDINGS UNDER ARTICLE UNDER ARTICLE 9(2) OF THE BIT ARE NOT MAINTAINABLE.
1. The respondents humbly submit that the arbitral proceedings invoked under Article 9(2) is not maintainable because the conditions which were prerequisite for the commencement of arbitration proceedings were not fulfilled by the applicant company. This submission is twofold; firstly, the conciliation proceedings under Article 9(1)1 were not initiated. Secondly, the available local remedies to the applicant company were not exhausted. 1.1
CONCILIATION PROCEEDINGS U NDER ARTICLE 9(1) WERE NOT I NITIATED.
2. According to Article 9(1) of the Bilateral Investment treaty between the Republic of Areana and Republic of Ruritania , „The dispute between an investor of either contracting party and the other contracting party, arising in relation to investment made in the state of the latter, concerning obligation under this Agreement shall as far as possible be settled amicably including resort to, upon mutual agreement of the parties to the dispute, conciliation procedures under the Conciliation Rules of the United Nation Commission on International Trade Law(UNCITRAL).‟ Law(UNCITRAL).‟2
3. Article 9(2) states that if the dispute is not settled in such a manner then, the investor concerned may submit the dispute to an international ad-hoc tribunal set up in accordance with the arbitration rules of the UNCITRAL. U NCITRAL.3 Thus, the approach to arbitration is subject to completion or termination of Conciliation proceedings. However, in the instant case the arbitration proceedings were neither terminated nor completed but were suspended by RTL.4 4. According to Article 2(2) of the UNCITRAL Conciliation rules-
1
BIT, Art. 9(1). Ibid. 3 Ibid Art. 9(2). 4 Factsheet, ¶ 12 . 2
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) “Conciliation proceedings commence when the other party accepts the invitation to conciliate. If the acceptance is made orally, the it is advisable that it be confirmed in writing.” writing.”
5. Following RTL‟s notice, the Govt. of Areana entered into negotiations with RTL and Ruritanian government. The Govt. of Areana convinced RTL and Ruritanian govt. to temporarily suspend the conciliation proceedings and wait for the SC decision regarding review petition filed against the order passed dated 2nd February, 2012 and the outcome of the public auction. RTL on a little persuasion from Ruritanian govt. consented to such a suspension.5 However after the results of the auction and SC decision dismissing the review petition, the applicant directly invoked its rights under Article 9(2) of the bit and moved for arbitration proceedings. Thus, the applicant approached this tribunal without having completed the conciliation proceedings and as such the same is not maintainable because it violates Article 9(1) of the BIT which provides for conciliation proceedings prior to approaching for arbitration under Article 9(2). 6. Also, article 15 of the UNICTRAL Conciliation rules6 states that the conciliation is terminated when, a. By signing of the settlement agreement by the parties, on the date of agreement; or b. By a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or c. By a written declaration by the parties addressed to the conciliator to the effect that conciliation proceedings are terminated, on the date of the declaration; or d. By a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration.
5
Factsheet, ¶ 12 UNCITRAL Conciliation Rules.
6
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 7. It is submitted that any of the conditions mentioned above for the termination of the conciliation proceedings is not fulfilled. So the Applicant‟s invoking its rights under Article 9(2) of the BIT is not maintainable. 1.2.
LOCAL R EMEDIES EMEDIES HAVE NOT BEEN EXHAUSTED.
8. The ILC, Articles on Diplomatic Protection (2006) define local remedies in Article 14(2) as a legal remedy which is open to an injured person before the judicial or administrative courts or bodies, whether ordinary or special, of the State alleged to be responsible for causing the injury.7In BancoNacional de Cuba v. Sabbatino8 , the U.S. Supreme Court held that before resort
can be made to international law, applicants are required to first seek local remedies or show that such remedies are unavailable. The remedies required to be exhausted may be judicial, administrative, or legislative. 9. Furthermore, the role of domestic courts is rendered prominent by the fact that the international legal order remains basically a horizontal rather than vertical one in the sense that state behaviour conforming with international duties has been promoted not so much by a vertical hierarchy of international tribunals but rather by a process of interaction with national courts constructed around the rule of exhaustion of local remedies. Hence the greater responsibility placed upon national courts, in a way exposing their inadequacies and shortcomings in the course of their administration of justice. Thus, a uniform application of the local remedies rule can be expected notwithstanding variations in the several domestic legal systems.9Also the provision for exhaustion of local remedies prior to approaching the arbitration tribunal is provided in the BIT.10 10. The particular motif of exhaustion of local remedies rule is to protect against outside intervention the right of the territorial State to apply its own municipal laws and jurisdiction to all persons within its boundaries. This is especially of great import where the applicant is an influential foreign investor backed by the superior might of a powerful home State. The local remedies rule
7
United Nations, Draft articles on Diplomatic Protection, 2006, Art 14(2). Banco Nacional de Cuba v. Sabbatino, (1964) 376 U.S. 398. 9 F. G. Dawson and L. Head, International Law: National Tribunals and the Rights of Aliens (First published in 1971) [25] [291]. 10 BIT, Art 9(2) 8
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) becomes of immense utility to a host State that is keenly interested in resisting such intrusion and insisting on an assertion of its sovereignty.11 11. Also it has been held, observing the Local Remedies Rule gives the best advantage to the host state of the preservation of the sovereignty.12 Sovereignty, in its context, does not mean complete freedom to do as a state wishes because such freedom would be totally inconsistent with the rationale of investment treaty arbitration.13 It means rather respect for the states‟ internal process and assumption that the states are capable of doing justice.14 12. It was acknowledged by the arbitrators in the R. J. Lynch (Great Britain) v. Mexico Case (1929) that any legal relationship concerning matters of international law involves rights and corresponding duties upon both (parties) - on the part of the citizen no less than on the part of the State.15 Thus, in pursuance of protection of his rights at inter-national level the individual applicant has the duty to exhaust previously local remedies; and the respondent State has the right to insist on that exhaustion just as it has the corresponding duty to provide effective local remedies. 13. The local remedies rule requires that before an international intercession can be made on behalf of a national, there must be an exhaustion of all available legal remedies, effective and sufficient to provide adequate redress, relief, or reparation to the applicant. The onus is on the applicant to exhaust remedies16. In the Panevezys-Saldutskis Railway case17 , the court held that the legal burden of persuading the court that local remedies were exhausted lay upon the applicant. The violation of the international standard of protection would not have occurred until at least an attempt had been made to obtain redress through domestic courts.18
11
Bernardo Sepulveda Amor, International Law and National Sovereignty: The NAFTA and the Claims of Mexican Jurisdiction, 19 House J. INT'L L. 565, 585 (1997) 12 Dodge, Investor - state state Dispute Settlement between Developed Countries: Reflections on the Australia-United States Free Trade Agreement , 39 Vand. J. Transnat‟l L. 1, 29 -30 (2006). 13 Ibid. 14 Ibid. 15 Reports Of International Arbitral Awards,Vol. V, p. 18 16 Ambatielos Claim (Greece v. U.K.), 1956 12 R.I.A.A. [91], [120] 17 Panevezys-Saldutiskis Railway (Estonia v. Lithuania) 1939 P.C.I.J. Ser. A/B, No.76 (Feb. 28) 18 Feldman v. Mexico, (2002) 7 ICSID Reports 341, [114], [134]; Loewen v. U.S.A, (2003) 7 ICSID Reports 442 [168]
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 14. This principle was further asserted in Generation Ukraine v. Ukraine19 where the Applicant had complained of an indirect expropriation. The Tribunal found that the Applicant should at least have attempted to bring its claim before the domestic courts and explained its reasoning as follows: “An international tribunal may deem that the failure to seek redress from national authorities disqualifies the international claim, not because there is a requirement of exhaustion of local remedies but because the very reality of conduct tantamount to expropriation is doubtful in the absence of a reasonable — not not necessarily exhaustive — effort by the investor to obtain correction.”20
15. A requirement of exhaustion of local remedies as a condition of implementation of an obligation to arbitrate is not admissible unless the arbitration agreement provides otherwise. 21 In the Article 9(2) of the agreement signed between both the contracting parties exhaustion of local remedies was explicitly provided. 16. Article 26 of the ICSID Convention makes it clear that a State may make the exhaustion of local remedies a condition of consent to arbitration. 22 Parties may exclude the application of the exhaustion rule by agreement or treaty.23 But in the instant case the consent of both the parties, as to exhaustion of local remedies, was specifically mentioned in the BIT.24 17. The respondents humbly submits that the initiation of arbitration proceedings is not maintainable as the local remedies were available and the same were not exhausted. Firstly, the applicant did not wait for the SC decision on review petition filed by Areana Dot against the HC decision in Airwaves Holding v. Areana Dot dated 30th January, 2015, prohibiting the participation of companies fined by the SC in its 2nd February, 2012 decision.25Secondly, the applicants could
19
Generation Ukraine v. Ukraine, (2003) 10 ICSID Reports 240, ¶ ¶20.30, ¶ ¶ 20.33. Lauder v. Czech Republic (UNCITRAL) (2001) 9 ICSID Reports 66, para.[204]; EnCana v. Ecuador ¶194. (UNCITRAL) (2006) 12 ICSID Reports 427, ¶ 21 The printed text of the resolution will be published in 63 Institut de Droit International, Annuaire part II (1989). 22 ICSID Convention, Article 26: “A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention.” 23 Elettronica Sicula S.P.A. (U.S. v. Italy), 1989 ICJ 15, 42,50 24 BIT Art (2). 25 Factsheet ¶ 13. 20
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) have filed a fresh case against the alleged violation of the rights ensured by the BIT in the municipal courts of Areana. 18. It is a settled principal of international law that the municipal courts have jurisdiction over matters concerning international obligations. An attempt of municipal courts (or other State organs) properly to interpret the State's international obligations may be examined by an international organ for determination of international responsibility, but this does not take away the right of municipal courts (or other State organs) to interpret matters of international international law and treaty rights. 19. It is submitted that the decision of the SC in the case, AirtelInfotech v. Govt. of AreanaandOrs. decided on 2nd February,2012 , quashing 122 spectrum licenses26 was of a general nature. It would have no bearing on the subject matter of the fresh case if it is instituted. The fresh case concerns itself with violation of rights of Applicant Company under the BIT, whereas the decision of the SC in the above mentioned case did not considered the same. Also the decision of the SC was against the irregularities in allocation of 2G spectrum made between September 2007 and March 2008 calling it wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality. This shows that the decision of the SC specifically dealt only with the procedural aspect of allocation. 20. Further it is submitted that the decision appealed by dot, which is presently subjudice before the Hon‟ble SC of Areana, is regarding the participation of companies fined by SC order 2nd
February, 2012. It again does not deal with the issue of violation of bilateral agreement between Areana and Ruritania. The applicant company in the fresh case could have invoked their rights under Article 3 of BIT which seeks to protect the investments made in the territory of the state of other contracting party. 21. The argument of the applicant company that the remedies available not being effective is not admissible as mere doubts on the part of the applicant regarding the effectiveness of a particular remedy will not absolve him or her from the obligation to try it 27 and as such the condition of
26
Factsheet ¶ 9 Milošević v. the Netherlands (AppNo 77631/01) ECHR (Mar. 19, 2002); Pellegrini v. Italy (AppNo. 30882/96) ECHR (Jul. 20, 2001); MPP Golub v. Ukraine (AppNo. 6778/05) ECHR (Oct. 18, 2005).
27
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) prior exhaustion of local remedies before approaching the arbitration tribunal, as provided in the Areana- Ruritania Bilateral Investment Treaty is breached. 1.3.
THAT THERE WAS DENIAL OF JUSTICE BY R ESPONDENT ESPONDENT
22. The Applicant humbly submits that there was no denial of justice by the Respondent as the standard as to be used to demonstrate the denial of justice is relatively high: what is required is “gross unfairness”,28 “manifest injustice; flagrant and inexcusable violation”.29 The denial of justice may also mean “an improper administration of civil or criminal criminal justice as regards an alien.
However in the instant case The pertinent case law demonstrates that the due process requirement is generally violated by virtue of the denial of justice.30 23. Also, denial of justice generally deals with the administrative decision-making process and the judicial system, and is not applicable to the th e facts present here. For instance, denial of o f justice may include: (a) Denial of access to justice and the refusal of courts to decide; (b) Unreasonable delay in proceedings; (c) Lack of a court‟s independence from the legislative and the executive
branches of the State; (d) Failure to execute final judgments or arbitral awards; (e) Corruption Corrupti on of a judge; (f) Discrimination against the foreign litigant. 31 However, none of the above conditions is met as, the fact that RTL had the option of filing a fresh case against the alleged violation of BIT proves that they had access to to justice also unreasonable delay cannot be said to happen in the instant case. Furthermore, court‟s lack of independence or corruption of judges also cannot
be established. Also from the fact that the decision of Supreme Court Co urt quashing the 122 12 2 licenses was of a general Nature affecting the domestic as well as foreign companies equally establishes that there has been no discrimination on the part of Areana against RTL. Thus, there has been no denial of justice against RTL.
28
J.W. Garner, International Responsibility of States for Judgements of Courts and Verdicts of Juries Amounting to NTERNATIONAL LAW (1929). Denial of Justice , BRITISH YEARBOOK OF I NTERNATIONAL 29 E.J.de Arechaga, International Law in the past Third of a Century , R ECUEIL ECUEIL DES COURS 194 (1978). 30 S.D. Myers Inc. v. Government Government of Canada, Partial Award, NAFTA (Nov. 13, 2000). 31 UNCTAD, Fair and Equitable Treatment, UNCTAD Series On Issues In International Investment Agreements II‟, 81 ( Sep. 07, 2016) http://unctad.org/en/Docs/unctaddiaeia2011d7_en.pdf
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 2
THAT THE DEPRIVATION OF PROPERTY BY THE ORDERS OF THE SUPREME COURT AND THE HIGH COURT WERE NOT IN VIOLATION OF THE PRINCIPLE OF SOVEREIGN IMMUNITY.
24. The respondents humbly submit before the Hon‟ble Tribunal that the acts or measures taken by the state of Areana were within the regulatory powers of the state and the applicants assertion that the rulings of the Judiciary led to the deprivation of the sovereign wealth of the Ruritanian Republic and thus resulted in violation of the principle of sovereign immunity is not valid as the applicant company, RTL, is a separate legal entity operating independently of the state and the nature of its transactions is commercial. Thus the principle of sovereign immunity is not applicable to RTL. 2.1.
APPLICATION OF PRINCIPLE OF SOVEREIGN IMMUNITY
25. The rules of state immunity address the extent to which a foreign state is protected from being sued in the courts of other countries. Immunity prevents a foreign state being made a party to proceedings in the forum state and/or will protect its property from being seized to satisfy a judgment. Immunity can extend to legal proceedings against the foreign state itself, its organs and enterprises, and its agents. 26. International law determines the general rules of whether or not a foreign state should be accorded immunity by the courts of the forum and for foreign investment purposes, this is likely to be the courts of the host country. Under the doctrine doct rine of foreign state immunity, one State is not subject to the full range of rules applicable in the other State; the doctrine bars a national court from adjudicating or enforcing certain claims against foreign States. 27. The United Nations Convention on Jurisdictional Immunities of States and their Property and the European Convention on State Immunity are the only sources of international jurisprudence which formulate the rules and the exceptions to the principle of sovereign immunity 32. State practice in the form of national n ational legislation and decisions of national courts therefore provides the
32
Democratic Republic of Congo v Belgium, 2002 I.C.J. 3 (Feb 14)
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) most compelling evidence of international custom and 'general principles of law', the sources of law referred to in Article 38(l)(b) and (c) 33 of the ICJ Statute.34
2.2.
THE DEFINITION OF THE STATE A ND THE IMPORTANCE OF THE LEGAL STRUCTURE OF THE FOREIGN E NTITY
28. As a preliminary matter, it should be noted that the restrictive theory of sovereign immunity focuses primarily on the nature of the transaction at issue, not on the status or structure of the foreign entity. An entity carrying out a sovereign act is immune regardless of its public or private status; even a State is not immune if the transaction is commercial. Given this general approach, the modern focus is rather on whether the transaction at issue is a sovereign or commercial act rather than focusing on the structural relationship between the foreign entity and the foreign state.35 For a number of reasons, however, structure is likely still of great importance with regard to SWFs.36 29. The principle of state immunity applies to those entities in which are owned and controlled by the state. In this regard it becomes important to differentiate between two types of structures:
Separate State-owned legal entity such as a State-owned enterprise (SOE);
A structure that is part of the State without separate legal p ersonality.
30. Under the ECSI and in the UK, Australia and most civil law States, the separate state owned legal entities are placed outside the State providing they operate independently from the State. The ECSI uses separate legal personality and the capacity to sue and be sued as the factors to determine whether an entity or company operates independently of the State. The article 27 of ECSI distinguishes agencies of the State from its organs by excluding from the expression “Contracting State” any legal entity of a Contracting State which is distinct there from and is
capable or suing and being sued. Such distinct entities are not part of the State even if they have been entrusted with public functions and under Article 27(2), proceedings may be brought
33
Statute of the International Court Of Justice, I.C.J. Art. 38 CRAWFORD, J., BROWNLIE‟S PRINCIPLES OF PUBLIC I NTERNATIONAL 2012). NTERNATIONAL LAW 77 (8th ed.Oxford 2012). 35 Hazel Fox. The Law Law of State Immunity 436 (2d ed. Oxford International International Law Library 2008). 36 Ibid. 34
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) against such entities “in the same manner as a private person” except in respect of sovereign acts.
In general, separate entities are not entitled to immunity from adjudication or execution. 31. The Sarrió proceedings against the Kuwait Investment Office and Kuwait Investment Authority illustrate some aspects of the ECSI-type approach in a context involving an SWF. The cases were filed bySarrió, a Spanish company, against the Kuwait Investment Office (KIO) (KIO) and Kuwait Investment Authority (KIA). In this case the court found that K IA/KIO were independent entities from the State and that Kuwait was was not the proper party to invoke immunity for them. In rejecting Kuwait‟s argument that KIA/KIO formed part from the State, the court noted that the 1982 law creating KIA provided that KIA had an autonomous status and that Kuwait had recognised that it was an independent public authority. The government‟s economic dominance over KIA, including Kuwaiti ministers sitting on its council board, and that the fact that KIAs
investments were made to benefit the State were found fou nd to be of no relevance37. 32. The US FSIA applies a broader approach than the ECSI to defining the overall foreign State. 33. Generally, a State-owned company will be an agency or instrumentality of the state under the US FSIA if it has separate legal personality, the foreign State directly holds a majority interest, and the company is incorporated in the foreign State38. Where the State-owned company is engaged in commercial activities immunity is removed when FSIA requirements are met and it is treated in many respects like a private party, p arty, as in other jurisdictions. 34. The 2003 decision of the US Supreme Court in Dole has clarified the number of State-owned companies considered to be agencies and instrumentalities of the foreign State under US law39. The Supreme Court found in Dole that the requirement, for an entity to be an agency or instrumentality, that a “majority of [the] shares [be] owned by a foreign state” was satisfied neither by indirectly-held companies nor by companies privatized as of the date of the complaint. Companies held by the State indirectly or that have been privatized as of the date of the complaint are now more likely to be treated like private Companies.40
37
Sarrió SA v. Kuwait Investment Authority, Authority, [1996] EWCA Civ 575, revd, [1997] UKHL 49 Foreign Sovereign Immunities Act, § 1603(b); Dole Food Co. v. Patrickson, 538 US 468 (2003). 39 Dole , supra note 39. 40 Powerex Corp. v. Reliant Energy Servs.,127S.Ct. 1144 (2007). 38
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 35. In general, it appears that for an independent SOE with the power to sue and be sued, immunity from jurisdiction in civil cases would likely depend primarily on whether its investment activities at issue are considered to be commercial or sovereign acts. If they are considered to be commercial, the SOE would generally be treated similarly to a private company in most jurisdictions that apply the th e restrictive theory. In the US, it would be treated largely largel y like a private company and would not be immune, but, if directly owned by the State, would benefit from certain additional protections. If the activities at issue are considered to be sovereign acts, the enterprise would generally benefit from immunity from adjudication in all jurisdictions unless immunity is waived. 36. In general, it appears that for an independent SOE with the power to sue and be sued, immunity from jurisdiction in civil cases would likely depend primarily on whether its investment activities at issue are considered to be commercial or sovereign acts. If they are considered to be commercial, the SOE would generally be treated similarly to a private company in most jurisdictions that apply the th e restrictive theory. In the US, it would be treated largely like a private company and would not be immune.41 37. In the given case RTL is a separate legal entity which is capable of suing and being sued and thus as per the laws of ECSI, UK, UK, Australia and several several other civil law countries is should be placed outside the State and operating independently indep endently from the State. Therefore the principle of state immunity cannot be applied to RTL. Also RTL cannot be considered as an agency or instrumentality of the foreign State under US law as it fails to fulfill the requirement stated by the Supreme Court of USA as enumerated in the case of Dole that , for an entity to be an agency or instrumentality, that a “majority of [the] shares [be] owned by a foreign state. The government
of Ruritania only has a minority stake of 20 per cent in RTL42, thus it cannot be classified as a public enterprise. 2.3.
I NTERNATIONAL ACCEPTANCE OF A R ESTRICTIVE ESTRICTIVE APPROACH TO FOREIGN STATE IMMUNITY.
41
D. Gaukrodrger, Foreign State Immunity and Foreign Government Controlled Investors, OECD Working Papers on International Investments18 (2010). 42 Factsheet ¶ 3.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 38. International law imposes a general requirement that foreign states should not be subject to suit or to execution. But there are important exceptions to this rule, exceptions that have been growing over the years. At one time, States had absolute immunity however as States became involved in commercial activities, the national courts of several countries began to apply a more restrictive law of immunity by reference to the type of activity carried out by the State. Under the restrictive law of immunity, courts recognize immunity for acts carried out by a State in the exercise of its sovereign authority but will deny immunity for acts of a commercial or private law nature. 39. The general trend toward the acceptance of a restrictive theory – which which provides for exceptions to immunity for transactions of a “commercial” nature – with regard to private law cases is
noted, along with some continuing uncertainties. The United States, the United Kingdom, Australia, Canada, Malaysia, Pakistan, South Africa, and Singapore have all enacted legislation on State immunity adopting a restrictive approach43. Kenya, Ireland, New Zealand, Nigeria, and Zimbabwe have no legislation, but their courts have accepted that the restrictive doctrine is applicable44. The civil law systems of France and other western or central European countries countries apply a restrictive doctrine in their courts. it can be accepted, as stated by the ILC's second Special Rapporteur MotooOgiso, that 'there is a clear and unmistakable trend towards recognition of the principle that the jurisdictional immunity of States is not unlimited'45. 40. It has long been the custom to refer to a “trend” toward an increasing number of States adopting restrictive immunity. immunity. That notion both recognises movement towards general adoption of the restrictive theory and the existence of residual resistance. Reviews of state practice prior to adoption of the UNCSI generally concluded that the restrictive doctrine is widely though not universally recognized. For instance, a major Council of Europe project to review state practice
43
Foreign Sovereign Immunities Act 1976 (USA) (cited as FSIA); State Immunity Act 1978 (UK) (cited as SIA); Foreign States Immunities Act 1985 (Australia); Canadian State Immunity Act 1982; Immunities and Privileges Act 1984 (Malaysia); The Pakistan State Immunity Ordinance 1981; Singapore State Immunity Act 1979; The South African Foreign States Immunities Act 1981; Malawi Immunities and Privileges Act 1984 (No 16 of 1984). 44 Ministry of Defence of Government of UK v Ndegna , Kenya Court of Appeal, 1983, 103 ILR 235; Government of Canada v Employment Appeals Tribunal and Burke (1992) ILRM 325, Irish Supreme Court; New Zealand, Governor of Pitcairn v Sutton (1995) INZLR 426; Zimbabwe, Jarker Mc Cormac (Private) Ltd v Government of Kenya[1986] CR Comm (Const) 21;Kramer v Government of Kingdom of Belgium; Embassy of Belgium(1989) 1 CLRQ 126; 103 ILR 299. 45 Second report, YEILC (1989), vol I, P 59, at para 14, quoting Sinclair, 1980, P 196. See also Brownlie, 1998, p 332.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) on state immunity involved the collection of materials from 28 member or observer States of the Council of Europe. The survey demonstrates a fairly consistent preference for the application of a restrictive rule 46. 41. However, since the last major review of state practice, agreement was reached on the text of UNCSI, which sets forth a restrictive doctrine. A very wide range of countries spoke in support of the adoption of the draft Convention during its consideration by the Sixth Committee of the UN General Assembly in 2004. These included a number of countries, such as China, India and Iran that have previously been associated with the absolute doctrine47. 42. The Convention was a significant factor in the 2006 decision of the Japanese Supreme Court to overturn the long-standing absolute approach in Japan and adopt the restrictive theory Japan signed UNCSI in January 2007 shortly after the the decision was rendered. The UNCSI has been cited in a number of other othe r cases, as a recent expression ex pression of international consensus48. 43. State immunity is governed by the law of the forum. Where it is well-established in the forum state that restrictive immunity applies, the particular foreign state‟s views on immunity will not
countries affect the court‟s approach. The fact that UNSCI and ECSI and a large number of countries have adopted the restrictive theory approach becomes a compelling evidence of international custom and 'general principles of law', which are the sources of international law as referred referred to in Article 38(l)(b) and (c) of the ICJ Statute 49 OMMERCIAL N ATURE O F T RANSACTIONS O F T HE A PPLICANT C OMPANY OMPANY . 2.3.1. C OMMERCIAL
44. A commercial or private law exception to immunity is the hallmark of the restrictive approach. When a State is engaged in a commercial transaction, it acts as a trader, not as an independent sovereign state. Because it has ceased to act in a public capacity, it has no immunity for the commercial transactions.50 The distinction between the two types of acts is frequently addressed, especially in civil law jurisdictions, using the Latin terms, acts jure imperiiand acts jure
46
Fox, supra note 36, at 232. Fox, supra note 36, at 169, 235. 48 Jones v. Ministry of Interior of Saudi Arabia, [2006] UKHL 26. 49 Statute of the International Court of Justice art. 38(l)(b) and (c), Oct. 24, 1945, 3 Bevans Bevans 1179 (1945). 50 Gaukrodrger, supra supra note 42, at 18. 47
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) gestionis. UNCSI Art. 2(c) defines “commercial transactions” to cover a wide range of contracts
and transactions: i.
Any commercial contract or transaction for the sale of goods or supply of services;
ii.
Any contract for a loan or other transaction of a financial nature, including any obligation of guarantee or of indemnity in respect of any such loan or transaction;
iii.
Any other contract or transaction of a commercial, industrial or trading or professional nature, but not including a contract of employment of persons.
45. UNCSI, which, in addition to the transactions defined in Art. 2 as quoted above, contains a series of specific exceptions in Articles 11 (employment contracts), 14 (intellectual property), 15 (companies), 16 (shipping) and 17 (arbitration agreements) regarding the grant of immunity. 46. In the present case, the company RTL is engaged in providing telecommunications services and formed a joint venture with a company of Areana (TAAWL) to form RAAWL whereby RTL Pledged its latest technology and an undertaking not to sell its brand of cells in Ruritania and TAAWL in lieu of its 49% shares transferred it 2G spectrum licenses in favour of RAAWL. Thus the transactions of RTL are commercial in nature and can be categorized as sale of services as given under Article 2(C)(i) of United Nations Convention on Jurisdictional Immunities ofStates and Their Property. The main purpose of RTL is profit making, and thus it acts as a trader and not as a sovereign state. 47. In several cases including the well known The Empire of Iran case51 of Germany, The I Congreso del Partidocase52 of United Kingdom and various French cases53 it has been held that
both the nature and the purpose of the acts at issue must be considered in making the determination; in order to grant immunity. The provisions of UNCSI provides for primary consideration of the nature of the act, but notably allows consideration of the purpose if that is the practice in the State of the forum as article 2.2 of UNCSI states “In determining whether a
contract or transactions is a commercial transaction under paragraph 1(c), reference should be 51
Empire of Iran case, case, German Federal Constitutional Court (30 April 1963), 45 ILR 57. I Congreso del Partido, UK House of Lords, [1983] 1 AC 244, 64 ILR 307 53 P. Mayer and V. Heuzé, Heuzé, Droit international privé (9th ed. 2007) sec. 325. 52
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) made primarily to the nature of the contract or transaction, but its purpose should also be taken into account if the parties to the contract or transaction have so so agreed, or if in the practice of the State of the Forum, that purpose is relevant to determining the non-commercial character of the contract or transaction”.
48. A number of civil law jurisdictions have adopted the principle that a State enjoys immunity from execution for property in use for sovereign purposes, but not for property in use for commercial purposes. The purpose for which RTL entered into the telecommunications sector of Areana was profit making by providing services and by pledging its technical expertise in lieu of spectrum licenses purchased by other companies. The acts at the beginning of a transaction may be of one nature, but courts may find that the relevant acts for immunity purposes are later acts of a different nature as observed in the BoriLoca case54. The purpose of the RTL may have been sovereign in nature at the time when it was formed to promote Research and Development in the sector but the purpose for which it entered the cell market in Areana was commercial and not sovereign in nature. OMMERCIAL P URPOSE URPOSE O F RTL‟ S I NVESTMENTS . 2.3.2. C OMMERCIAL
49. This approach was adopted in the German Constitutional Court‟s 1977 decision in the Philippine the Philippine Embassy case,55 and in subsequent cases in Italy and Spain.56 The Australian, Canadian and UK
statutes generally allow for execution against foreign state property in use or intended for use in commercial purposes. 50. French and US law also distinguish between property used for sovereign as opposed to private purposes. However, for execution against State property, they generally require a link between the property and the original claim57. Both France and the US eliminate this special requirement of a link between the property and the underlying claim in cases involving property of an SOE rather than the foreign State itself. Thus, in Sonatrach, the Cour de Cassation expressly distinguished between foreign State and State agencies, finding that “the assets of public entities,
distinct from the foreign State, whether or not enjoying legal personality, which are part of a 54
BorriLoca v. Republic of Argentina, Cassazionecivile (sez. un.), Case No. 11225; ILDC 296 ( IT 2005). The Philippine Embassy case, 65 ILR 146 (1977). 56 Abbott v. South Africa, Spanish Constitutional Court, 113 ILR 411 (1992); Condor and Filvem v. Minister of Justice, Italian Constitutional Court, 101 ILR 394 (1992). 57 République démocratique du Congo, French Cour de Cassation, (1erech. Civ. 25 January 2005). 55
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) group of assets ( patrimoine patrimoine) which been dedicated to activities in the private law sector, may be seized by all creditors of the public entity” 58.It is humbly submitted that the applicant company
RTL used the spectrum for for commercial purposes, thus execution against the same is is valid and legal. 2.4.
NON APPLICABILITY OF PRINCIPLE OF SOVEREIGN IMMUNITY O N R EGULATORY EGULATORY POWERS OF STATE.
51. International law principles including extensive State practice as well as arbitral awards and academic literature all acknowledge the right of States to engage in regulatory activity, which should not be undermined or restricted by investment treaties. According to the overwhelming majority of doctrinal opinions, the regulatory conduct of States must carry a presumption of validity59. “The persistence of the regulatory powers of the host State … is an essential element of the permanent sovereignty of each State over its economy… Nothing in the language of bilateral investment treaties purports to undermine the permanent sovereignty of States over their economies.” economies.”60 Regulatory functions are a matter of sovereign right of the host State and there could be no right in international law to compensation or diplomatic protection in respect of such interference.61”
52. The ECSI does directly exclude certain regulatory proceedings from its scope. The Explanatory Report to the ECSI (§ 12) notes that “[t]he Convention does not cover the problem of immu nity in proceedings before administrative authorities of another State”62.
53. It is humbly submitted that the 2012 Supreme Court and the 2015 State High Court rulings were within the policing powers of the state of Areana and the measures were taken to protect the rights and interests of the consumers and the public at large. Thus the courts were well within their power to give the aforementioned decisions. The measures of the state of Areana did not lead to deprivation of sovereign wealth of the Ruritanian Republic as the Ruritanian Government 58
Société Sonatrach v. Migeon, French Court of Cassation (1 October 1985), 77 ILR 525. UNCTAD, supra note 32. 60 Loewen Group Inc. v United States, Award on Merits, ICSID Case No.ARB(AF)/98/3 (Jun. 26, 2003). 61 M. SORNARAJAH, THE I NTERNATIONAL NTERNATIONAL LAW ON FOREIGN I NVESTMENT 357 (Cambridge University Press 2004). 62 European Convention on State Immunity Sec 12, Jun. 11, 1976, CETS No. 074. 59
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) had only a minority stake of 20 percent63 in RTL and the regulatory measures did not lead to total or substantial destruction of the investments of RTL. Thus the principle of Sovereign Immunity is not violated. Also as per the Bilateral Investment Treaty it is mandatory for all foreign investor companies to exhaust all local remedies before applying for arbitration 64, thus the state owned companies have waived off their rights of immunity and the BIT empowers the courts of Areana to hear cases relating to such companies and to give decisions in this regard.
63
Factsheet ¶5 Annexure I to the fact sheet, art 9(2).
64
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 3.
THAT THE RESPONDENT HAS AFFORDED FAIR AND FAIR AND EQUITABLE TREATMENT TO THE APPLICANT.
54. It is most humbly submitted that the respondent has accorded fair and equitable treatment to the applicant. The submission is threefold. Firstly, the Standard of liability in the FET Clause is the same as that of the Minimum standard of treatment under International Law. Secondly, assuming arguendo, even if this Tribunal were to find the FET as an autonomous standard of treatment, the threshold of liability still cannot be established. Thirdly, the burden of proof that the FET has not been accorded to the Applicant is on the Applicant itself. 3.1
THE STANDARD OF LIABILITY I N THE FET CLAUSE IS THE SAME AS THAT OF THE MINIMUM STANDARD OF TREATMENT U NDER I NTERNATIONAL LAW.
55. The Respondent submits that considering Article 3(2) of the BIT, the tribunal must apply the international minimum standard of treatment when applying the FET. Deviation from this interpretation would create obligations which were not intended by the Parties in the AreanaRuritaniaBIT. Article 3(2) of the BIT reads as follows: Investments of each Party or of nationals of each Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Party.
56. The commentary to the 1967 OECD Draft Convention on the Protection of Foreign Property, which included an unqualified FET formulation, equated FET to the minimum standard.65 This understanding was further confirmed in 1984 when the OECD Committee on International Investment and Multinational Enterprises reported that fair and equitable treatment introduced a substantive legal standard referring to general principles of international law even if this is not explicitly stated.”66
65
Notes and Comments on Art 1,OECD Draft Convention on Taking of Property 7, p. 6 66 OECD Draft Convention on the Protection of Foreign Property, 1967 12, ¶ 36.
Foreign
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 57. The FET treatment has been read as an example of the International Minimum standard, a fact reported during the negotiations on the Article 48 of the Draft United National Code of Conduct on Transnational Corporations.67 58. Recent decisions by Arbitral tribunals have also equated the FET standard to that of the Minimum Standard of Treatment under International Law.68 The tribunal in Biwater stated that the context and standard of the MST provision (as found in NAFTA Art 1105) is appropriate to describe the standard of conduct for violation of the FET standard.69 59. In light of all these evidences the Respondent submits that it is obligated to provide only the Minimum Standard Treatment which it has already provided. 3.2
ASSUMING ARGUENDO, EVEN IF THIS TRIBUNAL WERE TO FIND THE FET AS A N AUTONOMOUS STANDARD OF TREATMENT, THE THRESHOLD OF LIABILITY STILL CANNOT BE ESTABLISHED. 60. In their ordinary meaning, the terms “fair” and “equitable” used in Article 3(1 ) of the BIT mean just, even-handed, unbiased, legitimate.70 The Tribunal in AES v Hungary71 requires manifestly unfair or unreasonable conduct to establish violation of the FET standard. These words yet afford a high threshold of proof upon the Applicants. The Respondents actions have thus not violated any of the aspects of FET. In order to prove this, the respondent relies on the findings of UNCTAD72, according to which the following five main concepts have emerged as relevant in the context of fair and equitable treatment: (a) Prohibition of manifest arbitrariness in decision-making, that is, measures taken purely on the basis of prejudice or bias without a legitimate purpose or rational explanation;
67
United Nations Code of Conduct on Transnational Corporations” UNCTC Current Studies, Series A, Number I (1986), p. 2. 68 CMS Gas Transmission Company v.The Argentine Republic, Award, ICSID Case No. ARB/01/8 (May 12, 2005), ¶ 263;Award Merrill & Ring Forestry L.P. v. The Government of Canada, Award, UNCITRAL Arbitration Proceedings (March 31, 2010), ¶ 211. 69 BiwaterGauff (Tanzania) Ltd. v. United Republic of Tanzania, Award, ICSID Case No. ARB/05/22 (Jul. 24, 2008), ¶ 599. 70 Azurix Corp. v.The Argentine Republic, Award, ICSID Case No. ARB/01/12 (Jul 14, 2006), ¶ 360 71 AES Summit Generation Ltd. VThe Republic of Hungary, ICSID Sept. 2010, ¶ 9.3.40. 72 UNCTAD, supra supra note 32.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) (b) Prohibition of the denial of justice and disregard of the fundamental principles of due process; (c) Prohibition of targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; (d) Prohibition of abusive treatment of investors, including coercion, duress and harassment; (e) Protection of the legitimate expectations of investors arising from a government‟s
specific representations or investment inducing measures, although balanced with the host State‟s right to regulate in the public interest.
61. It is to be shown not only that one element of fair and equitable treatment may have been violated, but that the standard has been breached as a whole when looking at all the facts and elements in order to prove the breach of principle of fair and equitable treatment. 62. The violation of FET is said to occur when there is violation of legitimate expectations of the investor, actions are arbitrary and irrational, abusive treatment is accorded to the investor, the host state does not act in good faith. In the instant case none of the above elements of FET have been violated. AS N O V IOLATION O F A NY L EGITIMATE E XPECTATION O F T HE A PPLICANT . 3.2.1. T HERE W
63. The concept of Legitimate expectation is connected with the process of “change.”73It is not uncommon that changes of host country policies follow changes in the political landscape within the State.74 It is incorrect to assume that the regulatory environment at the time of the investment would remain unchanged.75 64. The Respondent argues that violation of the legitimate expectation standard should also focus on whether there were any explicit assurances that were given to the investor at the time of the
73
UNCTAD, supra note 32, at 63. Ibid. 75 Saluka Investments B.V. v. The Czech Republic, Partial Award, UNCITRAL Arbitration Proceedings, ¶ 305, (Mar 17, 2006). 74
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) investment.76 Absence of this condition, there will be a tremendous burden on the host state to fulfil all obligations which the Applicants views as legitimate, thereby restricting the sovereign rights of the State. Akin to the decision rendered in the Methanex tribunal 77, the Government of Ruritania made no explicit representations regarding regulatory changes on which the Applicants could have reasonably relied upon. The need for specific representations was stressed in Methanex v. United States, a NAFTA dispute.78 The tribunal attached particular importance to the fact that Methanex had not been given any representations by the United States that it could reasonably have relied upon to conclude that such regulatory changes would not occur.79 65. In Saluka v. Czech Republic,80 the tribunal held that FET protection cannot solely rely on foreign investors‟ motivations and considerations because it must be weighed also against the State‟s
legitimate interests. It suggests that the FET obligation does not prevent host States from acting in public interest even if such acts adversely affect investments. This is an important qualification to the legitimate expectations approach. It was held, “[Legitimate] expectations, in order for them to be protected, must rise to the level of legitimacy legitimacy and reasonableness in light of the circumstances. […] No investor may reasonably expect that the circumstances prevailing at the time the investment is made remain totally unchanged. In order to determine whether frustration of the foreign investor‟s expectations was justified and reasonable, the host State‟s legitimate right subsequently to regulate domestic matters in the public interest must be taken into consideration as well.”
66. The tribunal thus recognized the host State‟s right to enact public-interest legislation, even if the changes negatively affect a foreign investor 81. Such conduct will not be considered as defeating the investors‟ legitimate expectations and violating the FET standard, as long it is implemented
by the government in a bona fide manner. As has been seen in the instant case where the de cision
76
EDF (Services) Limited v. Romania, Award, ICSID, Award, Case No. ARB/05/13 (Oct 8, 2009), ¶ 217; Duke Energy Electroquil Partners &Electroquil S.A. v. Republic of Ecuador, Award, ICSID Case No.ARB/04/19 ¶ 340 (Aug. 18, 2008); AUGUST R EINISCH EINISCH (ED.), STANDARDS OF I NVESTMENT PROTECTION , ¶111, 126.(Oxford University Press 2008). 77 Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, NAFTA, ¶ 7 (3 August, 2005). 78 Ibid. 79 Ibid. 80 Saluka , supra supra note 77. 81 Ibid.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) of the Supreme Court to quash the Licenses was in the interest of the public. The respondent therefore submit that the Areana government did not violate any legitimate expectations of the applicant. 67. In Parkerings v. Lithuania, the State has a right and privilege to exercise its sovereign legislative power to enact, modify, or cancel laws at its own discretion. An investor must anticipate that the circumstances could change, and must thus structure its investment in order to adapt to the potential changes in the legal environment. The tribunal rejected the FET claim, concluding that the Republic of Lithuania had not given any explicit or implicit promise that the legal framework of the investment would remain unchanged.82 The award stated in particular: “It is each State‟s undeniable right and privilege to exercise its sovereign legislative power. A State has the right to enact, modify or cancel a law at its own discretion. Save for the existence of an agreement, in the form of a stabilisation clause or otherwise, there is nothing objectionable about the amendment brought to the regulatory framework existing at the time an investor made its investment. As a matter of fact, any businessman or investor knows that laws will evolve over time. What is prohibited however is for a State to act unfairly, unreasonably or inequitably in the .”83 exercise of its legislative power .”
68. In EDF v. Romania,84 the tribunal held that , , “The idea that legitimate expectations , and therefore FET, imply the stability of the legal and business framework, may not be correct if stated in an overly-broad and unqualified formulation. The FET might then mean the virtual freezing of the legal regulation of economic activities, in contr ast ast with the State‟s normal regulatory power and the evolutionary character of economic life. Except where specific promises or representations are made by the State to the investor, the latter may not rely on a bilateral investment treaty as a kind of insurance insurance policy against the risk of any changes in the host State‟s legal and economic framework. Such expectation would be neither legitimate nor reasonable.”
82
Parkerings-Compagniet AS v. Republic of Lithuania, Award, ICSID Case No. ARB/05/8 (Sep. 11, 2008). Ibid. 84 EDF(Services) Limited v. Republic of Romania, Award, ICSID Case No. ARB/05/13 (Oct. 8, 2009). 83
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 69. Further, there is an onus on the Investors to conduct their due diligence with regards to the regulatory environment of the Host State.85 Various tribunals have held that the legitimate exercise of sovereign power in a reasonable and fair manner shall not be considered as violating the investor‟s legitimate expectation and the FET standard in general. 86 All actions of the
Respondent were undertaken according to the due process of law in a fair and reasonable manner. 70. The decision of SD Myers is crucial at this point since it stated that the Applicant does not have an open ended mandate to second guess government decision making. The ordinary remedy was through internal political and legal measures.87 The argument falling from such a finding is that the content of a national law and the reasoning that may exist behind it are part of a certain political choice of the host state government and that may ma y not be discussed in front of an arbitral tribunal. Thus, the domestic courts of Ruritania would have been better suited to hear the claims of the Applicant. 3.2.2. T HE ACTIONS O F T HE R ESPONDENTS W ERE G ROUNDED I N R ATIONALITY A ND W ERE N OT OT A RBITRARY . 71. Tribunals have defined arbitrariness as actions that are not grounded in sufficient reasons or that are unduly oppressive.88In Genin v. Estonia, an objective, however inconclusive or poorly reasoned, was sufficient to show full FET compliance.89 The Tribunal in Enron stated that the only aspect to be observed was whether the State believed and understood that the action was the best response to the situation. 90 A similar conclusion was arrived at by the Tribunal in LG and E v. Argentina.91
85
Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, Award, ICSID Case No. ARB/05/22, ¶ 601 (Jul. 24, 2008). 86 EDF, supra note 86, ¶ 217; Saluka, supra note 77, ¶ 304-308; Parkerings, supra note 84, ¶ 332. 87 S.D. Myers, supra note 31, ¶ 261. 88 Elettronica Sicula S.P.A. (ELSI) (United States of America America V Republic of Italy) 1989 ICJ 15, 42, 42, 50, ¶ 77 (Jul. 20, 1989). 89 Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v.The Republic of Estonia, Award, ICSID Case No. ARB/99/2, ¶ 298-299 (Jun. 25, 2001). 90 Enron Corporation Ponderosa Assets, L.P v. Argentine Republic, Award, ICSID Case No. ARB/01/3, ¶ 281 (Mar. 22, 2007),. 91 LG & E Energy Corp., LG & E Capital Corp., and LG & E International, Inc. v. Argentine Republic, Award, ICSID Case No. ARB/02/1, ¶ 162 (25 July, 2007).
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 72. The actions of the Respondent were grounded in rational objectives taking into consideration the public interest. Scholars agree that investor expectations drawn from assurances, contract provisions and the State's legal frame work must include enough flexibility for the State to react in the public's interest to changing circumstances.92 73. It is submitted that the Applicant were not subject to any abusive behavior or discrimination. Tribunals have held that the FET standard prohibits discriminatory treatment of foreign investors and their investments.93 The non-discrimination standard that forms part of the FET standard should not be confused with the treaty obligation to grant the most favourable treatment to the investor and its investment (UNCTAD, 2010a, pp.15 – 16). 16). While the national treatment and MFN standards deal with nationality-based discrimination, the non-discrimination requirement as part of the FET standard appears to prohibit discrimination in the sense of specific targeting of a foreign investor on other manifestly wrongful grounds such as gender, race or religious belief, or the types of conduct that amount to a “deliberate conspiracy […] to destroy or frustrate the investment”.94 A measure is likely to be found to violate the FET standard if it evidently singles
out (de jure or de facto) the applicant and there is no legitimate justification for the measure. In the light of these holdings it cannot be said that the acts of the State of Areana were in any way discriminatory in nature as the decision of the Supreme Court or the High Court was not specifically targeted against RTL. 74. Also, the measures taken by the Supreme Court and the State High Court cannot be termed as abusive treatment. Abusive conduct includes coercion, duress and harassment that involve unwarranted and improper pressure, abuse of power, persecution, threats, intimidation and use of force. Abusive conduct can potentially take many forms, such as arresting or jailing of executives or personnel; threats of or initiation of criminal proceedings; deliberate imposition of unfounded tax assessments, criminal or other fines; arresting or seizing of physical assets, bank accounts and equity; interfering with, obstructing or preventing daily business operations; and deportation from the host State or refusal to extend documents that allow a foreigner to live and
92
MCLACHLAN, C. ET AL, INTERNATIONAL INVESTMENT ARBITRATION: SUBSTANTIVE PRINCIPLES 239 ¶ 7. (Oxford (Oxford 2008). 93 Saluka, supra supra note 77, ¶ 461; Loewen, supra note 62, ¶123; Waste Management, Inc. v. Mexico,Award, ICSID Case No. ARB(AF)/00/3,¶ 98 (Apr. 30, 2004),; and CMS v. Argentina, Award, 12 May 2005, para. 287 94 Glamis Gold v. United States, Award, UNCITRAL (Jun. 8, 2009).
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) work in the host State. 95 The standards of discrimination and abusive treatment has also not been violated by the state so the Applicants cannot argue that fair and equitable treatment was not accorded to them. 75. The Respondent also submit that its actions were not arbitrary and were based on proper rational. Further, due process was followed while dealing with the Applicant. The Applicant was provided proper recourse to raise his objections against the actions of the Areana government. The actions of the Respondent cannot be said as arbitrary, lacking rational and thus the Applicants‟ argument of Respondent not providing it fair and equitable eq uitable treatment does not stand.
3.3
THE BURDEN OF PROOF IS O N APPLICANT TO PROVE THAT FET HAS BEEN VIOLATED.
76. It is submitted that the Applicant has the burden of “bringing sufficient proof that he did not receive treatment amounting to FET.”96 A judgment of fair and equitable treatment “cannot be reached in the abstract; it must depend on the facts of the particular case.”97 Moreover, “the fair and equitable treatment standard is not a laundry list of potential acts of misconduct.”98 Thus, the
burden falls on the applicant to show not only that one element of fair and equitable treatment may have been violated, but that the standard has been breached as a whole when looking at all the facts and elements. 77. The Applicant has the burden of proof that a violation of FET took place. He must also establish that the negative impact on investment was in a clear link of causation with the State´s acts or omissions. 78. Respondent notes that whether the phrase “fair and equitable treatment” takes an autonomous meaning or a meaning under customary international law, the substantive elements required to be satisfied by the Respondent may be the same. For instance, “the Treaty standard is not different
bunal may ma y even if it pleases is not from that required under international law.” Therefore, the Tri bunal obligated to enter into a discussion of the distinction between the minimum standard of treatment
95
Grand River Enterprises v. v. United States, Award, ICSID Case No.ARB/10/5, ¶ 209 (Jan. 12, 2011). Ioana Tudor, The Fair and Equitable Treatment Standard in the Law of Foreign Investment (2008)., p.138 97 Mondev International Ltd. v. United States of America, ICSID Case No. ARB (AF)/99/2, Award (11 October 2002)., ¶118 98 IoanMicula, Viorel Micula and others v. Romania,Award, ICSID Case No. ARB/05/20,¶517 (Dec. 11 2013), 96
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) and an autonomous treaty standard because as the Respondent has discharged itself itself regardless of whichever standard is adopted.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 4.
THAT THE FEBRUARY 2012 SUPREME COURT JUDGEMENT AND THE JANUARY 2015 RULING AMOUNT TO EXPROPRIATION OF APPLICANT’S PROPERTY
79. It is humbly submitted that the February 2012 Supreme Court judgment and the January 2015 ruling of the state high court were within the policing powers of the state and did not amount to expropriation either direct or indirect. The revocation of licenses were nondiscriminatory regulatory measures, i.e. acts taken by States in the Exercise of their right to regulate in the public interest that may lead to effects similar to indirect expropriation but at the same time are not classified as expropriation and do not give rise to the obligation to compensate those affected. 80. A bona fide regulatory act (or its application to an individual investor) that genuinely pursues a legitimate public-policy objective (such as the protection of the environment and public health and safety) and complies with the requirements of non-discrimination, due process and proportionality may not be designated as expropriatory, despite an adverse economic impact. This follows from the doctrine of police powers of States which, in its contemporary meaning, goes well beyond the fundamental functions of custody, security and protection and encompasses the full regulatory dimension of States. It effectively places the risks arising from bona fide regulation on economic actors99. 4.1
THE MEASURES OR ACTS OF THE STATE OF AREANA WERE NOT EXPROPRIATORY I N NATURE.
81. Expropriations generally refer to property-specific or enterprise-specific takings where the property rights remain with the State or are transferred by the State to other oth er economic operators. Expropriations may consist of a large-scale taking of land by the State, made with the purpose of redistributing it, or specific takings where the target is a specific foreign firm (for example, a firm dominating a market or industry) or a specific plot of land (for example, to build a highway).100
99
" Indirect Expropriation" and the "Right to Regulate" in International Investment Law , OECD WORKING PAPERS 2004). 100 UNCTAD, supra note 32.
ON I NTERNATIONAL NTERNATIONAL I NVESTMENT (
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 82. There was no direct expropriation as the control of the investor company over their investments were intact and there was no total or substantial deprivation of the applicant‟s property and there was no violation of the expectations of the state. In a valid claim for expropriation the destruction of the economic value of the investment must be total or close to total. In Pope & Talbot v. Canada, the test used by the arbitral tribunal to establish indirect expropriation was “whether the interference is sufficiently restrictive to support a conclusion that the property has been taken from the owner ”101. This approach has been followed in other cases. In Vivendi v. Argentina II , the tribunal observed that the “weight “weight of authority … appears to draw a distinction between only a partial deprivation of value (not an expropriation) and a complete or near complete deprivation of value (expropriation) (expropriation)””102. The LG&E v. Argentina tribunal recalled that “in many arbitral decisions, compensation has been denied when it [the State‟s measure] has not affected all or almost all the investment‟s economic value value””103. In Sempra v. Argentina, the tribunal explained that the value of the business had to be “virtually “virtually annihilated ”104. In CMS v. Argentina, Argentina, the tribunal opined that the relevant test was “whether “whether the enjoyment of the property has been effectively neutralized ”105.
83. Regarding the issue of expectations of investor as a factor of expropriation, specific commitments given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation regulation””106. This approach is to be
preferred; implicit assurances in most circumstances would not provide a sufficient basis for legitimate expectations, especially if the assurances are unofficial or unspecific107. Generally, for purposes of expropriation claims, investment tribunals have used a high threshold concerning investor expectations.108 This means that a legitimate expectation may arise primarily from a State‟s specific representations or commitments made to the investor concerned, on which the
latter has relied 109.
101
Pope & Talbot Inc. v. Government of Canada , Award on Merits of Phase 2, NAFTA,¶102(Jun. 26, 2001). Vivendi Universal v. Argentine Republic , Award, ICSID No. ARB/97/3 ¶ 7.5.11 (Aug. 20 2007). 103 25, 2007). LG&E International Inc. v. Argentine Republic , Award, ICSID Case No. ARB/02/1, ¶ 191 (Jul. 25, 104 Sempra Energy v. Argentina , Award, ICSID Case No. ARB/02/16,¶285 (Sep. 28, 2007). 105 CMS v. Argentina , Award, 12 May 2005,.¶ 262. 106 LG & E, supra note 108 , ¶ 189 , 194. 107 UNCTAD, supra note 32. 108 Reinisch, supra note 78, at 448. 109 Grand River Enterprises v. USA Award, ICSID Case No. ARB/10/5, ¶ 141 (Jan. 12, 2011). 102
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 84. Investors – be be they foreign or domestic – remain remain exposed to the variety of risks in the country they operate, including the risk of changes in the regulatory environment. As the Waste Management v. Mexico tribunal put it, “it “it is not the function of the international law of expropriation to eliminate the normal commercial risks of a foreign investor ”110. Or as noted in
the Continental Casualty v. Argentina decision, any reliance by a foreign investor that the legislation is not to be changed would be misplaced.111 85. Thus, while the severity of the impact and the degree of interference will be a central factor in determining whether a measure is tantamount to a taking, it is not the decisive or exclusive one and the nature and character of the measure are equally important112. The SD Myers v. Canada tribunal noted that “[t]he “[t]he general body of precedent usually does not treat regulatory action as amounting to expropriation” expropriation” and added that a finding of expropriation requires a look “at “at the real interests involved and the purpose and effect of the government measure”. measure”.113
86. It is humbly submitted that RTL‟s claim of expropriation is groundless as the measures of the state of Areana were of regulatory nature and within the policing powers of the state.
4.2
THE R EVOCATION EVOCATION OF LICENSES WAS WITHIN THE R EGULATORY EGULATORY POWERS OF THE STATE
87. A bonafide regulation made by the State in public interest, by adhering to the due process standard is not liable for compensation.114 This is the doctrine of Police Powers, which the Black‟s Law Dictionary defines as “the inherent and plenary power of a sovereign to make all laws necessary and proper to preserve the public security, order, health, morality, and justice.”115
Every state has the right to adopt measures for general welfare purpose and such should be accepted without imposition of liability, unless where the action is obviously disproportionate to the objective.116
110
Waste Management v. Mexico , Award, ICSID Case No.ARB(AF)/00/3, ¶ 159 (Apr. 30, 2004). Continental Casualty v. Argentina, Award, ICSID Case No.ARB/03/9, ¶. 258 (Sep. 5, 2008). 112 UNCTAD, supra note 32. 113 Myers, supra note 31. 114 Suzi H. Nikiema, Best Practices: Indirect Expropriation , THE I NTERNATIONAL NTERNATIONAL I NSTITUTE FOR SUSTAINABLE DEVELOPMENT 17 (2016). 115 BRIAN A. GARNER (ED), BLACK LAW‟S DICTIONARY (8thEdn.West Publishing Co. 2004). 116 Nikiema, supra note 119, at 18. 111
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 88. Under international law, not all state measures interfering with property are expropriation. As Brownlie has stated, “state measures, prima facie a lawful exercise of powers of governments,
may affect foreign interests considerably without amounting to expropriation. Thus, foreign assets and their use may be subjected to taxation, trade restrictions involving licenses and quotas, or measures of devaluation. While special facts may alter cases, in principle such measures are 117
not unlawful and do not constitute expropriation”
. Similarly, according to Sornarajah118 , non-
discriminatory measures10 related to anti-trust, consumer protection, securities, environmental protection, land planning are non-compensable takings since they are regarded as essential to the efficient functioning of the state. 4.2.1
IDESPREAD ACCEPTANCE O F „P OLICE OLICE P OWERS OWERS ‟ N I NTERNATIONAL L AW W ‟ D DOCTRINE I
89. It has long been accepted in international law that State acts are in principle not subject to compensation when they are an expression of the police powers of the State119. According to the doctrine of police powers, certain acts of States are not subject to compensation under the international law of expropriation. Although there is no universally accepted definition, in a narrow sense, this doctrine covers State acts such as (a) Forfeiture or a fine to punish or suppress crime; (b) Seizure of property by way of taxation; (c) Legislation restricting the use of property, including planning, environment, safety, health and the concomitant restrictions to property rights; and (d) Defense against external threats, destruction of property of neutrals as a consequence of military operations and the taking of enemy property as part payment of reparation for the consequences of an illegal war 120. 90. In present times, the police powers must be understood as encompassing a State‟s f ull ull regulatory dimension. Modern States go well beyond the fundamental functions of custody, security and protection. They intervene in the economy through regulation in a variety of ways: 117
BROWNLIE, supra note 35, at 509. SORNARAJAH , supranote 63, at 283. 119 OECD, supra note 104, at 6. 120 BROWNLIE, supra note 35, at 532. 118
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law)
Preventing and prosecuting monopolistic and anticompetitive practices;
Protecting the rights of consumers; implementing control regimes through licenses, concessions, registers, permits and authorizations;
Protecting the environment and public health; regulating the conduct of corporations; and others.121
91. An exercise of police powers by a State may manifest itself in adopting new regulations or enforcing existing regulations in relation to a particular investor. Investment tribunals have also made pronouncements regarding the uninhibited power of States to regulate in the public interest. In Sedco, Inc. v. National Iranian Oil. Co., the Iran-United States Claims Tribunal referred to “an “an accepted principle of international law that a State is not liable for economic injury which is a consequence of bona fide „regulation‟ within the accepted police power of States”. States”.122
92. In Feldman v. Mexico, Mexico, the tribunal noted that “government must be free to act in the broader public interest through protection of the environment, new or modified tax regimes, the granting or withdrawal of government subsidies, reductions or increases in tariff levels, imposition of zoning restrictions and the like”, adding that “reasonable governmental regulation of this type cannot be achieved if any business that is adversely affected may seek compensation, and it is safe to say that customary international law recognizes this”.123 93. In Saluka Investments v. Czech Republic, Republic, the tribunal stated that “[i]t “[i]t is now established in international law that States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt in a non-discriminatory manner bona fide regulations that are aimed at the general welfare.” welfare.”124 “The principle that a State does not commit an expropriation and is thus not liable to pay compensation to a dispossessed alien investor when it adopts general regulations that are
121
UNCTAD, supra note 32. Sedco, Inc. v. National Iranian Oil Co., Interlocutory Award No. ITL 55-129-3, the Iran-United States Claims Tribunal Reports 248, 275 (Oct. 28 1985). 123 Feldman, supra note 18, ¶ 83. 124 Saluka, supra note 77, ¶ 255. 122
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) „commonly accepted as within the police power of States‟ forms part of customary international 125
law today.”
94. Also, in Methanex v. USA126 , the tribunal acknowledged that: “ As a matter of general international law, a nondiscriminatory regulation for a public purpose, p urpose, which is enacted in accordance with due process and, which affects, inter alias [ sic sic] , , a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation.” regulation.”
95. In Suez v. Argentina, the tribunal also acknowledged that: “…States have a legitimate right to exercise their police powers to protect the public interest and that the doctrine of police powers … has been particularly pertinent in cases of expropriation where tribunals have had to balance an investor‟s property rights with the legitimate and reasonable need for the State to 127
regulate.”
96. In Chemtura v. Canada, a manufacturer of a lindane-based pesticide challenged the ban on lindane introduced by Canada. The tribunal found – in in addition to the fact that the measures did not amount to a substantial deprivation of the applicant‟s investment – that: – that: “[The “[The relevant State agency] took measures within its mandate, in a non-discriminatory manner, motivated by the increasing awareness of the dangers presented by lindane for human health and the environment. A measure adopted under such circumstances is a valid exercise of the State‟s police powers and, as a result, does not constitute an expropriation” expropriation”128.
97. Several tribunals have chosen to view the whole business enterprise as an investment, and not its constituent parts129. These tribunals have denied the existence of an expropriation in cases where the investor was deprived of some rights but retained control over the overall investment. For instance, the Telenor Mobile v. Hungary tribunal stated:
125
¶ 262. Id., ¶ Methanex, supra note 79, ¶ 7. 127 Suez et al. v. Argentina, Decision on Liability, ¶ 147 (Jul. 30, 2010). 128 Chemtura Corp. v. Government of Canada, UNCITRAL Award, ¶ 266 (Aug 2, 2010). 129 „UNCTAD, supra supra note 32, at 85. 126
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) “The tribunal considers that, in the present case at least, the investment must be viewed as a whole and that the test the Tribunal has to apply is whether, viewed as a whole, the investment has suffered substantial erosion of value.” value.”130
98. On applying this doctrine in the present case, the company RTL entered into a joint venture with TAAWL and thus made investments in the company RAAWL. One of the assets of RAAWL included the seventeen 2G licenses transferred by TAAWL. Thus for a valid claim of expropriation there must be total deprivation of RAAWL‟s assets and RTL must lose effective
control over RAAWL. However only the licenses which were one of the assets of RAAWL were affected by Supreme Court and the State High Court ruling and the investing company RTL retained control over RAAWL. Thus the act of the state did not amount to expropriation. 99. The regulatory role of States in the modern economy is vital. As stated by Geiger, “[r]etreating as an actor in the management of economic economic activities, [the State‟s] role needs to be affirmed as a regulator in order to provide an equitable and stable framework within which markets can develop in a competitive manner. The regulatory authority of governments needs to be safeguarded if the State is to continue to fulfil its essential functions to protect the public interest in areas like the environment, health and safety, market integrity and social policies” policies”
100.
Extensive State practice as well as arbitral awards and academic literature all acknowledge the right of States to engage in regulatory activity, which should not be undermined or restricted by investment treaties131. According to the overwhelming majority of doctrinal opinions, the regulatory conduct of States must carry a presumption of validity. The following excerpts are illustrative:
Lowe - “The persistence of the regulatory powers of the host State … is an essential element of the permanent sovereignty of each State over its economy… Nothing in the
130
Telenor Mobile Communications v The Republic of Hungary, Award, ICSID Case No. ARB/04/15 (Sep. 13, 2006). 131 UNCTAD, supra note 32, at 80.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) language of bilateral investment treaties purports to undermine the permanent sovereignty of States over their economies.” economies.”132
Sornarajah - “ It has always been recognized that ordinary measures of taxation, or the imposition of criminal penalties or export controls do not constitute taking that is compensable. Legislation creating regulatory regimes in areas such as antitrust, consumer protection, securities, environmental protection, planning and land use are more common in developed States. It is well recognised that interference on the basis of such legislation does not constitute compensable taking in situations in which public harm has already resulted or is anticipated …These regulatory takings are regarded as essential to the efficient functioning of the State… State… Regulatory functions are a re a matter of of sovereign right of the host State and there could be no right in international law to compensation or diplomatic protection in respect of such interference.” interference.” 133
Newscombe - “ International authorities have regularly concluded that no right to compensate arises for reasonable necessary regulations passed for the protection of public health, safety, morals or welfare” welfare”134
Weston - “… It is serious business to dispute a State‟s claim to regulation. International law traditionally has granted States broad competence in the definition and management of their economies…” economies…”
101.
As regards State practice, numerous international texts and instruments can be referred to:
In the context of the negotiations on the draft Multilateral Agreement on Investment (MAI), the OECD Ministers issued the following Statement: “ Ministers confirm that the MAI must be consistent with the sovereign responsibility of governments to conduct domestic policies. The MAI would establish mutually beneficial international rules which would not inhibit the normal non-discriminatory exercise of regulatory powers by
132
Loewen, supra supra note 62 . SORNARAJAH, supranote 63, at 357. 134 A. N A. NEWCOMBE AND L. PARADELL, LAW AND PRACTICE OF I NVESTMENT NVESTMENT TREATIES : STANDARDS OF TREATMENT23, (Kluwer Law International 2005). 133
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) governments and such exercise of regulatory powers would not amount to expropriation.”135
102.
The commentary to the American Law Institute‟s Restatement Third of Foreign Relations Law
of the United States, was designed to assist in determining, inter alia, how to distinguish between an indirect expropriation and valid government regulation: “... A State is not responsible for the loss of property or for other economic disadvantages resulting from bona fide taxation, regulation, forfeiture for crime, or other action of the kind that is commonly accepted as within the police power of State, if it is not discriminatory, and is not designed to cause the alien to abandon the property to the State or sell it at a distress price.” price .” 136
In 1961, the Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens, drafted by Sohn and Baxter, recognized the existence of a category of non-compensable takings: “ An uncompensated taking of a property of an alien or a deprivation of the use or enjoyment of property of an alien which results from the execution of tax laws; from a general change in the value of currency; from the action of the competent authorities of the State in the maintenance of public order, health, or morality; or from the valid exercise of belligerent rights or otherwise incidental to the normal operation of the laws of the State shall not be considered wrongful, provided… it is not a clear and discriminatory violation violation of the law of the State concerned… and it is not an unreasonable departure from the principles of justice recognized by the principal legal systems of the world .” .”137
Article 5 of the draft MAI “Expropriation and Compensation states that “…the “…the Article on Article on Expropriation and Compensation is intended to incorporate into the MAI existing international legal norms. The reference… to … „measures tantamount to expropriation or nationalisation‟ …does not establish a new requirement that Parties pay compensation for losses which an investor or investment may incur through regulation,
135
The Multilateral Agreement on Investment, May 4, 1998, DAFFE/MAI(98)17. R ESTATEMENT ESTATEMENT OF THE LAW THIRD, THE FOREIGN R ELATIONS ELATIONS OF THE U NITED STATES, vol 1, § 712(American Law Institute 1987). 137 Draft Convention on International Responsibility of States for Injuries to Aliens art. 10(5), 1961. 136
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) revenue raising and other normal activity in the public interest undertaken by governments.” governments.”
Convention Establishing the Multilateral Investment Guarantee Agency, states “…any “…any legislative action or administrative action or omission attributable to the host government which has the effect of depriving the holder of a guarantee gua rantee of his ownership or control of, or a substantial benefit from, his investment, with the exception of nondiscriminatory measures of general application which the governments normally take for 138
the purpose of regulating economic activity in their territories.”
THAT THE FEBRUARY 2012 SUPREME COURT JUDGMENT A ND THE JANUARY 2015 R ULING 4.3 ULING OF THE STATE HIGH COURT CAN BE CLASSIFIED AS R EGULATORY EGULATORY MEASURES OF GENERAL APPLICATION. 103.
Public purpose, non-discrimination and due process also serve as conditions for the legality of an expropriation139. As stated in the Saluka Investments case, “States “States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt in a non-discriminatory manner bona fide regulations that are aimed at the general 140
welfare”
. Thus for an act to be considered as regulatory in nature it must fulfill the above
stated conditions. 104.
It is humbly submitted that the measures taken by the Applicant did not violate any provisions of the BIT between Ruritania and Areana. The Supreme Court Order declaring the spectrum auction as void and ordering a re-auction was within the policing powers of the state to implement policies on a non-discriminatory basis for the welfare of the public of Areana and protect the interests of the consumers and the order of the State High Court cannot be termed as expropriatory as the matter is currently being heard by the Supreme Court and decision of the High Court has not yet come into force. The acts followed due procedure as the judgement was given only after complete investigation and analysis.
138
Convention Establishing the Multilateral Investment Guarantee Agency art. 11(a)(ii), Oct. 11, 1985, 1508 UNTS 99 (I-26012). 139 UNCTAD, supra note 32, at 95. 140 Saluka, supra note 77,¶ 255.
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) UBLIC P URPOSE URPOSE ON - D ISCRIMINATORY N ATURE A ND O BSERVATION O F DUE P ROCESS 4.3.1 P 4.3.1 P UBLIC , N , N ON
105.
A non-discriminatory measure of general application that seeks to attain a legitimate welfare objective and enacted in accordance with due process is prima facie non-compensable. These considerations served as a basis for the decision of the tribunal in the Methanex case: “…the California ban was made f or or a public purpose, was non-discriminatory and was accomplished with due process. ... From the standpoint of international law, the Californian ban was a lawful regulation and not an expropriation expropriation””141. To a similar effect, the Saluka tribunal referred to “nondiscriminatory “nondiscriminatory manner bona fide regulations that are aimed at the general welfare” welfare”142.
106.
Determination of what is in the public interest of a particular State as well as what measures are suitable to achieve the public purpose are matters in which States enjoy considerable latitude143. This has been recognized by arbitral tribunals. For example, in Tecmed v. Mexico, the tribunal emphasized the “due “due deference” deference” that must be afforded to States in the matter of “defining “defining the issues that affect its public policy or the interests of society as a whole, as well as the actions that will be implemented to protect such values” values”144.
107.
Regarding the discrimination element, the Methanex tribunal stated that “an “an intentionally discriminatory regulation against a foreign investor fulfils a key requirement for establishing expropriation” expropriation”145. The non-discrimination requirement implies the diffusiveness of the impact on
different actors and constituencies and serves to prevent singling out or targeting a foreign investor. It primarily concerns nationality-based differentiation but it also seems to cover racial, religious, ethnic and other types of discrimination prohibited under customary international law146. 108.
The due process requirement – when when applied to regulatory measures of general application – is meant to ensure that the measure is not adopted with serious procedural violations, i.e. that it was 141
Methanex, supra note 79, ¶ 7 & 15. Saluka, supra note 77, ¶ 255. 143 OECD, supra note note 104, at18. 144 Tecnicas Medioambientales Tecmed S.A. v. Unite states of Mexico, Award, ICSID Case No. ARB(AF)/ 00/2 ¶ 122, (May 29, 2003). 145 Methanex, supra note 79. 146 UNCTAD, supra note 32, at 96. 142
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) passed by a competent State body, supported by the requisite number of votes (e.g. if a parliamentary act is at issue) and an d so forth. Minor procedural irregularities should not affect the non-compensable nature of the measure147. 109.
In EDF v. Romania148 , the applicant participated in a joint venture formed with a Romanian entity owned by the Government, engaged in commercial and retail outlet activities at the Otopeni Airport. Following the issuance of new duty-free regulations, the license of the company was revoked. The company was later declared bankrupt after the Financial Guard imposed a fine and ordered the sequestration of enterprise‟s assets. The tribunal noted that the confiscation
sanction was within the legal power of the Financial Guard and that it was applied in good faith. 110.
In the present case the act of revocation of 2G licenses by the Supreme Court was in the interest of public welfare as it aimed to prevent anti-competitive practices and protect the rights of consumers by prohibiting such companies who had acquired the licenses through unfair means and those who failed to meet the eligibility criteria. The state High Court ruling barring the fined companies from taking part part in the re-auction. re-auction. The acts of the state of Ruritania Ruritania were so as to provide an equitable and stable framework in the telecom sector where the markets can develop in a competitive manner. Telecommunications, in today‟s world world possesses an integral part in man‟s life. It is an essential infrastructure for economic development and hence fo r the
improvement of the quality of human life and the telecom services have become a basic and essential human need for development. Also regarding the state High court judgement in the Case Airwaves Holding vs the Areana Department of Telecoms the matter is currently sub judice
before the Supreme Court and hence henc e cannot be claimed as expropriatory ex propriatory in nature. Regarding the issue of Supreme Court refusing to implead any interveners, it was the Applicant‟s fault at they failed to do the same when the case was being heard by the High Court and furthermore regarless of whether or not the Applicant was party to case would have had no bearing on the decision of court as the issue would have remained the same. Thus the actions of the state state of Ruritania genuinely pursued a legitimate public policy objective of ensuring and protecting the rights of the consumers.
147
Ibid. EDF, supra note 86,¶ 313.
148
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) ROPORTIONALITY 4.3.2 L ACK O F P
111.
A major factor in determining whether the acts or measures of the state can be deemed to be expropriatory in nature is ascertaining whether such actions or measures are a re proportional to the public interest presumably protected thereby and to the protection legally granted to investments. Thus there must be a reasonable relationship of proportionality between the charge or weight imposed to the foreign investor and the aim sought to be realized by any expropriatory measure.149
112.
The principle of proportionality is one of the pillars of the European Court of Human Rights when it comes to its practice on the dispossession of property. In the leading case Sporrong and Lönnroth, Lönnroth, the Court stated that a “ fair balance” balance” has to be struck “between “between the demands of the general interest of the community and the requirements of the protection of the individual‟s fundamental rights” rights”150. Accordingly, the Court will inquire into the means chosen to achieve the legitimate aim pursued: “a “a measure must be both appropriate for achieving its aim and not
will be upset when the person concerned has disproportionate thereto” thereto”151. The requisite balance will had to bear “an “an individual and excessive burden burden””152 or one that is “disproportionate “disproportionate””153. The relevant factors of the assessment include “the “the severity of the interference, legitimate expectations of the complainant, the suitability of the interference to reach the public purpose, the priority of the public purpose and a special public interest to pay less than full compensation”. compensation”. It must be kept in mind that international law has traditionally afforded States a
wide margin of discretion with respect to questions such as priority of the public purpose or suitability of the measure154. 113.
In investor-State arbitration, the Tecmed v. Mexico case was the first one where the tribunal relied on the proportionality analysis. The dispute arose out of the decision of the environmental authority to deny renewal of a permit to operate a landfill of hazardous waste. The Tribunal held that:
149
JESWALD W. SALACUSE, THE LAW OF I NVESTMENT TREATIES (2d ed. Oxford University Press 2010) Sporrong and Lönnroth v. Sweden , European Court of Human Rights, Judgment,¶ 69(Sep. 23, 1982), 151 James and Others v. United Kingdom , European Court of Human Rights, Judgment, ¶. 50 (Feb. 21, 1986). 152 Sporrong, supra note 158, ¶ 73. 153 Erkner & Hofauer v. Austria , European Court of Human Rights, Judgment, ¶. 79 (Apr. 23, 1987). 154 UNCTAD, supra note 32, at 98. 150
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) “...the “...the Arbitral Tribunal will consider, in order to determine if they are to be characterized as expropriatory, whether such actions or measures are proportional to the public interest presumably protected thereby and to the protection legally granted to investments, taking into account that the significance of such impact has a key role upon deciding the proportionality. … There must be a reasonable relationship of proportionality between the charge or weight imposed to the foreign investor and the aim sought to be realized by any expropriatory measure.” measure.”155
114.
This approach has been followed in some subsequent cases. The Azurix v. Argentina tribunal, referring to the practice of the European Court of Human Rights and the Tecmed decision, found the proportionality princi ple ple to provide “useful guidance for purposes of determining whether regulatory actions would be expropriatory and give rise to compensation compensation””156.
In LG&E v.
Argentina, Argentina, the tribunal stated that “it “it can generally be said that the State has the right to adopt measures having a social or general welfare purpose. In such a case, the measure must be accepted without any imposition of liability, except in cases where the State‟ State‟ s s action is obviously disproportionate to the need being addressed ”157.
115.
It is humbly submitted that that the rulings of the Supreme Court and the State High Court declaring the allocation of licenses as illegal, ordering for fresh licenses to be granted and imposing restrictions on the eligibility of companies for the re-auction were proportional to the public interest being protected and to the protection legally granted to the investments as the Judiciary took the decisions only after establishing that the allocation procedure violated the principle of equality and that several companies compan ies had unfair advantage in the auctioning process and the only way to protect the interest of the general consumers was by a fresh election whereby the most competent and deserving entities can acquire the licenses in a fair and equitable manner. AIR A ND E QUITABLE QUITABLE T REATMENT 4.3.3 L ACK O F F
116.
An FET claim involves an assessment of a given governmental measure against the criteria of due process, interference with legitimate expectations, non-discrimination, arbitrariness and
155
Tecmed, supra note 151,¶ 122. Azurix, supra note 72, ¶ 312. 157 LG&E, supra note 108,¶ 195. 156
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) abusiveness towards the investor 158. State conduct that is found to be FET-inconsistent becomes internationally unlawful and triggers the obligation of the State to provide reparation159. 117.
It is humbly submitted before the Hon‟ble Tribunal that the acts and measures of the state of
Areana were fair and equitable and were not directed to inflict harm, economically or otherwise, on any particular or specific individual or organization. The state of Areana acted in nondiscriminatory manner and the 2012 Supreme Court ruling affected all the telecom companies in equal measure and there was no prejudice or bias against the applicant. The licenses of all the companies were quashed and equal opportunity was given to all the bidding companies who were eligible and fulfilled the requirements prescribed by the telecom department. There was no bias towards the national companies as other than RAAWL, fines were imposed on five other companies as well. Also regarding the case Airwaves Holding v. the Areana Department of Telecoms, the matter is currently sub judice before the Supreme Court of Areana and in this matter also there was no discrimination towards the applicant company as they had the chance to become a party to the case but they failed to do so and the decision of the Supreme Court not to implead any interveners was not to inflict harm particularly on the Applicant company as it affected the other fined companies as well. 4.3.4 A BUSE O F R IGHTS (A BUS D E D ROIT )
118.
Under the theory of “abuse of rights”, the exercise of a right for the sole purpose of causing an
injury to another is prohibited. It is a corollary of the principle of good faith which governs the exercise of rights by States. 119.
In Saipem v. Bangladesh, a dispute arose out of a contract for the construction of a pipeline between Saipem and a public company. The International Centre for Settlement of Disputes (ICSID) tribunal while deciding the case held that “ It is generally acknowledged acknowl edged in international law that a State exercising a right for a purpose that is different from that for which that right was created commits an abuse of rights…” rights…”160
158
UNCTAD, supra supra note 32. OECD, supra note 104, at 23. 160 Saipem v. Bangladesh , Award, ¶ 160 (June 30, 2009). 159
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) 120.
The doctrine that precludes State authorities from exercising their rights for an end different from that for which the right has been created, with the result that injury is caused, is also known in some domestic systems as détournement de pouvoir . Its essential element lies in the establishment of the motives or intent behind the State‟s conduct at issue as well as its practical
results. In the context of the police powers, if it is established that the true intention is not consistent with the alleged public purpose, the measure can be found to constitute an “abuse of rights”161.
121.
It is humbly submitted that it is clear from the moot proposition that the true intention or motive behind the rulings of the Supreme Court and the State High Court was to protect the interests of the general public and ensure that there is a fair and equitable setup within which the telecom sector can operate. Through the act there was no benefit to the state nor was there any discrimination towards any particular individual or organization. Thus it is clear that there was no abuse of its rights to regulate by b y the state of Areana. HE S TATE TATE 4.3.5 D IRECT B ENEFIT T O T
122.
In several domestic legal systems, the absence or presence of a benefit to the State is a factor that helps determine whether an indirect expropriation has occurred. Thus, whether a constructive acquisition has occurred (whether the measure resulted in a direct benefit to the State) is given significant weight by Canadian courts. In 2006, the Supreme Court of Canada heard a claim concerning the expropriation of land owned by a railway company. Under the facts of the case, the City of Vancouver had adopted a development plan that restricted the use of the land to noneconomic uses and effectively froze the development of a parcel of land by the railway company. The company argued that the city‟s conduct amounted to an effective taking. The Court rejected
the claim on the grounds that city had not acquired a beneficial interest relating to the land in question162. It was also noted that the development plan did not remove all reasonable uses of the property. 123.
In the IIA context, several tribunals have used this factor. For instance, in Olguín v. Paraguay, the tribunal stated that “[f]or “[f]or an expropriation to occur, there must be actions … depriving the
161
UNCTAD, supra note 32, at 102. Canadian Pacific Railway Co. v. Vancouver (City) , (2006) 1 S.C.R. 227.
162
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) affected party of the property it owns, in such a way that whoever performs those actions will acquire, directly or indirectly, control, or at least the fruits of the expropriated property property””163. In
other circumstances, the direct-benefit factor may be of relevance. For example, if an economic activity is banned for environmental reasons, this is unlikely to be viewed as a taking; however, if an economic activity is banned for private actors because the government is assuming monopoly over it, there is direct benefit to the State and, therefore, there would be stronger arguments for a finding of expropriation. 124.
There can be circumstances when the benefit goes not to the expropriating State but to a private person or company that seeks to neutralize a (foreign) competitor. The Rumeli tribunal noted, with respect to judicial expropriation, that “it “it is usually instigated by a private party for his own benefit, and not that of the State State””164. In such cases, the State is used as an instrument for private
gain (there is no public purpose) and the question of benefit is irrelevant. Finally, when a certain measure benefits the society as a whole, such as general environmental or public-health legislation, there is no appropriation of assets or benefits by an identifiable entity (it is widely dispersed), and thus no expropriation165. 125.
It is humbly submitted before the Hon‟ble tribunal that the actions of the state of Areana did not
result in any benefit direct or indirect benefit to any state body or organ. The revocation of licenses was done to protect consumer rights and all the companies were given an equal chance at the re-auction subject to that they meet the eligibility requirements and the state received no benefit from the whole process. p rocess. The measures taken by the th e State of Areana were for the benefit b enefit of the society as a whole and there is no appropriation of assets of any identifiable entity. Also there was no bias towards any private player and the court judgments affected them in equal manner. Thus the acts of the state cannot be deemed as expropriatory in nature and were within the regulatory powers of the State of Areana.
163
Olguín v. Paraguay , Award, Case No. ARB/98/5, ¶ 84(Jul. 26, 2001). Rumeli Telecom AS v Republic of Kazakhstan , Award, ICSID Case No. ARB/05/16,¶ 704 (Jul. 29, 2008). 165 UNCTAD, supra note 32. 164
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5.
THAT THE RESPONDENT ARE NOT OBLIGED TO MAKE REPARATION FOR THE LOSSES.
126.
The Respondent submits that it has not violated any of the obligations laid down by the BIT. Further, the expropriation claims of the Applicant do not stand as the actions of Areana comes under non-discriminatory regulatory measures which were taken to promote public interest and followed due process of law. 5.1.
127.
THERE HAS BEEN NO BREACH OF BIT.
The Respondent submits that there has been no breach of conditions laid down in the BIT. The actions taken by the Respondent come under the regulatory framework of the state and same cannot be termed as expropriatory. A bona fide regulatory act (or its application to an individual investor) that genuinely pursues a legitimate public-policy objective (such as the protection of the environment and public health and safety) and complies with the requirements of nondiscrimination, due process and proportionality may not be designated as expropriatory, despite an adverse economic impact. This follows from the doctrine of police powers of States which, in its contemporary meaning, goes well beyond the fundamental functions of custody, security and protection and encompasses the full regulatory dimension of States. It effectively places the risks arising from bona fide regulation on economic actors166. The principle of non-compensability for policing acts of state has been endorsed by the domestic laws of several countries and international agreements as shown by Newscombe who wrote “ International authorities have regularly concluded that no right to compensate arises for reasonable necessary regulations passed for the protection of public health, safety, morals or welfare” welfare”167
128.
In this regard several arbitrations have reaffirmed this principle:
129.
ar bitration tribunal recognized that: In the Saluka v. Czech Republic award, an arbitration
[i]t is now established in international law that States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt
166
OECD, supra note 104. NEWCOMBE, supra note 139, at 23.
167
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) in a non-discriminatory manner bona fide regulations that are aimed at the general welfare.168 130.
In the Suez InterAgua v. Argentina award, the tribunal ruled that:
… in evaluating a claim of expropriation it is important to recognize a State‟s legitimate right to
regulate and to exercise its police power in the interests of public welfare and not to confuse measures of that nature with expropriation.169 131.
In Sedco, Inc. v. National Iranian Oil. Co., the Iran-United States Claims Tribunal referred to “an “an
accepted principle of international law that a State is not liable for economic injury which is a consequence of bona fide „regulation‟ within within the accepted police power of States”. States”.170
132.
Thus the respondents are not obliged to provide compensation for any economic loss incurred by
the Applicant. 5.2.
133.
THE APPLICANT CANNOT SEEK MORAL DAMAGES A ND ARE I NSTEAD BOUND TO COMPENSATE THE R ESPONDENT ESPONDENT.
The Respondent humbly submits that the Applicants cannot seek moral damages. They are instead bound to compensate the Respondent for the losses caused to him. 5.2.1. M ORAL ORAL D AMAGES C ANNOT B E S OUGHT OUGHT .
134.
It is submitted that there is no provision of moral damages in the BIT signed between b etween Areana and Ruritania. This Tribunal has been set up to look at the violations of the provisions of this BIT. It is the lexspecialis of the tribunal and prescribes the substantive law of the proceedings. The provision for the issue of moral damages cannot be brought about by this Treaty.
135.
In the absence of any claim under BIT, the Tribunal does not have the power to decide on the issue and any remedy (if any) should be sought in another forum.171A tribunal cannot be vested
168
Saluka, supra note 77, ¶ 255. Suez, supra note 132. 170 Sedco, supra note 127, at 275. 171 Saluka, supra note 77, ¶ 284. 169
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law) with unlimited jurisdiction and must necessarily be bound by the confines of the substantive law of the contract.172 136.
Arguendo, even if the tribunal decides that the Applicant can claim for moral damages, the
actions of the Respondent do not warrant the payment of moral damages. Moral Damages have been widely accepted acc epted as exceptional remedies which cannot be resorted to in order to justify any hardships faced by the investor.173 It is only under grave level of physical duress that moral damages are awarded. 5.2.2. R ESPONDENTS ESPONDENTS SEEK MORAL DAMAGES FROM THE APPLICANT. 137.
It is submitted that the irrational actions of the Applicant greatly affected the Respondent. The expropriation claims tainted the image of the Respondent country. It affected its investment climate. Its claims led to suspicion in the mind of prospective investors regarding the investment climate of the country. This resulted in considerable economic losses to the country. The social status of the country in the world community was also tainted as a result of these allegations.
172
United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules art.28(4) (2010). Mr frank Charles Arif v. Republic of Moldova, Award,ICSID Case No. ARB/11/23, ¶ 591 (Apr. 8, 2013).
173
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Prof. V.S. Mani Memorial International Law Moot Court Competition – 2016 (Banking and Investment Law)
PRAYER
Wherefore, in the light of the facts stated arguments advanced and authorities cited, it is most humbly prayed and implored before this arbitration tribunal, that it may be graciously pleased to adjudge and declare that: I.
The Tribunal has no jurisdiction and the claims put forth by the Applicant are not admissible.
II.
The act of State of Areana does not amount to deprivation of sovereign wealth of Ruritanian Republic.
III.
The State of Areana has not violated Article 2(2) of the BIT requiring it to conform to the principles of Fair and Equitable Treatment and an d full protection and security.
IV.
The February 2012 Supreme Court judgement and the January 2015 ruling of the State High Court do not amount amou nt to Expropriation of investments made by RTL. RT L.
V.
The respondent state is not obliged to make any reparation for the losses claimed by RTL.
Also, pass any other order that it may ma y deem fit in the favour of the Respondent Respond ent to meet the ends of equity, justice, and good conscience. For this act of Kindness, the Respondent shall duty bound forever pray.
s/d Counsel for Respondent
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