TEAM CRAWFORD

ARBITRATION PURSUANT TO THE ARBITRATION RULES OF THE

INTERNATIONAL CHAMBER OF COMMERCE

ICC Case No. 28000/AC

PETER EXPLOSIVE

(Claimant)

v.

THE REPUBLIC OF OCEANIA

(Respondent)

MEMORIAL FOR THE CLAIMANT

II

TABLE OF CONTENTS

LIST OF AUTHORITIES ........................................................................................................... V

LIST OF ABBREVIATIONS ............................................................................................... XVIII

SUMMARY OF ARGUMENTS ............................................................................................ XXV

ARGUMENTS............................................................................................................................... 1

PART I: JURISDICTION ............................................................................................................ 1

ISSUE-I: THIS TRIBUNAL HAS JURISDICTION TO HEAR THIS CASE ................... 1

A. CLAIMANT IS AN INVESTOR UNDER EUROASIA-BIT ............................................................ 2

1) The issue concerning Fairyland‘s reunification with Euroasia is separate from the

determination of Claimant‘s nationality ................................................................................. 2

2) The issue concerning application of rules of succession of States in treaty law is

irrelevant, as the only issue that matters is Euroasia-BIT‘s nationality test ........................... 4

3) Claimant has fulfilled Euroasia-BIT‘s nationality test .................................................... 5

a. Claimant has Euroasian nationality based on Euroasian laws .................................... 6

b. Euroasia has sovereignty to confer its nationality to Claimant ................................... 7

B. CLAIMANT CAN DISPENSE EUROASIA-BIT’S PRE-ARBITRAL STEPS BY VIRTUE OF THE

FUTILITY EXCEPTION............................................................................................................ 8

1) The futility exception is applicable under Euroasia-BIT ................................................. 9

2) Submission to Oceanian Courts would have been futile for Claimant .......................... 10

C. CLAIMANT CAN CIRCUMVENT EUROASIA-BIT’S PRE-ARBITRAL STEPS BY OPERATION

OF EUROASIA-BIT’S MFN CLAUSE .................................................................................... 11

1) MFN clauses cover not only substantive but also procedural protections ..................... 12

2) Euroasia-BIT‘s MFN Clause applies to dispute settlement provision ........................... 13

a. The ordinary meanings of Euroasia-BIT‟s MFN Clause demonstrate that its subject

matters cover dispute settlement provision ....................................................................... 14

III

b. The above interpretation is supported by the fact that dispute settlement provision is

never expressly excluded................................................................................................... 17

c. Euroasia-BIT MFN Clause‟s application to dispute resolution provision is not

against public policies ...................................................................................................... 18

3) Euroasia-BIT‘s dispute settlement provision is a less favorable treatment compared to

Eastasia-BIT‘s dispute settlement provision ......................................................................... 19

PART II: LIABILITIES AND REMEDIES ............................................................................. 21

ISSUE-II: RESPONDENT UNLAWFULLY EXPROPRIATED CLAIMANT’S

INVESTMENT ............................................................................................................................ 21

A. RESPONDENT’S EXECUTIVE ORDER WAS AN INDIRECT EXPROPRIATION ........................ 21

B. RESPONDENT’S EXECUTIVE ORDER WAS NOT A NON-COMPENSABLE REGULATORY

MEASURE ............................................................................................................................. 23

1) Respondent‘s Executive Order fell outside scope of regulatory power ......................... 23

a. Respondent‟s Executive Order was not done for public purpose ............................... 24

b. Respondent‟s Executive Order was discriminatory .................................................... 24

2) Respondent‘s Executive Order was expropriatory as it was disproportionate .............. 26

C. RESPONDENT’S UNLAWFUL EXPROPRIATION CANNOT BE EXEMPTED ............................. 27

1) Respondent‘s unlawful expropriation cannot be exempted through Article 10 Euroasia-

BIT ........................................................................................................................................ 27

a. Fairyland‟s situation did not call for „obligations with respect to the maintenance of

international peace or security‟ ........................................................................................ 28

b. Article 10 Euroasia-BIT is not a self-judging clause .................................................. 28

2) Respondent‘s unlawful expropriation cannot be exempted under the premise of

necessity defense ................................................................................................................... 29

a. Respondent‟s essential interest was not threatened by grave and imminent peril ..... 29

b. Respondent‟s Executive Order was not the sole means to remedy the situation ........ 30

c. Respondent‟s Executive Order impaired the essential interest another State ............ 31

IV

3) In any event, Respondent still has the obligation to compensate Claimant ................... 31

ISSUE-III: THERE WAS NOTHING IN CLAIMANT'S INVESTMENT THAT

WOULD INTERFERE WITH HIS RIGHT TO BIT PROTECTION ................................... 32

A. CLAIMANT’S INVESTMENT IS NOT BOUND TO ARTICLE 1(1) EASTASIA-BIT .................... 33

B. CLAIMANT’S INVESTMENT HAS COMPLIED WITH ARTICLE 1(1) EASTASIA-BIT ............. 34

C. RESPONDENT CANNOT PROVE CLAIMANT’S NON-COMPLIANCE WITH OCEANIAN LAWS

.............................................................................................................................................. 36

D. RESPONDENT IS STILL OBLIGED TO PROTECT CLAIMANT’S INVESTMENT ...................... 37

1) Respondent has misconstrued the use of clean hands doctrine...................................... 37

2) Respondent was equally involved in the bribery allegation .......................................... 38

ISSUE-IV: CLAIMANT DID NOT CONTRIBUTE TO THE DAMAGE SUFFERED

BY HIS INVESTMENT .............................................................................................................. 39

A. THE CONTRACT RENEWAL DOES NOT MANIFEST LACK OF DUE CARE .......................... 40

B. THE CONTRACT RENEWAL WAS A REASONABLE BUSINESS DECISION ............................. 41

C. CLAIMANT’S PURPORTED CONTRIBUTION WAS NOT MATERIAL ..................................... 42

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

V

LIST OF AUTHORITIES

LEGAL INSTRUMENTS

A/CN.4/SR.2639 Summary Record of the 2639th

Meeting, [2000] 1 Y.B. Int‘l

L. Comm‘n 210, ¶ 51, U.N. Doc. A/CN.4/SR.2639.

ARSIWA Int‟l Law Comm‟n, Draft Articles on Responsibility of

States for Internationally Wrongful Acts, with

Commentaries, 2 Y.B. OF THE INT‘L LAW COMM‘N 31

(2001).

ILC (Diplomatic) Draft articles on Diplomatic Protection 2006, Official

Records of the General Assembly, Sixty-first Session,

Supplement No.10 (A/61/10).

ILC (Diplomatic), Commentary Draft Articles on Diplomatic Protection with commentaries

2006, Yearbook of the International Law Commission, Vol.

II Part Two (2006).

ILC (MFN), Final Report Final Report of the Study Group, 67th Session of the

International Law Commission, A/CN.4/L.852, 2015.

ILC (MFN) Draft Articles on Most-Favored-Nation Clauses with

Commentaries, Yearbook of the International Law

Commission, Volume II Part Two (1978).

UN Charter Charter of the United Nations, 26 June 1945, 1 UNTS 16.

VI

UN Report of International

Arbitral Awards

UN Report of International Arbitral Awards, Vol. IV,

United Nations Publications, 1951. V. 1

UDHR UN General Assembly, Universal Declaration of Human

Rights, X 217 A (III), (December 10, 1948).

UNCITRAL Rules United Nations Commission on International Trade Law

Arbitration Rules (As Revised in 2010).

VCLT Vienna Convention on the Law of Treaties 23 May 1969,

Vol. 1155 No. 18232 UNTS (1980).

VCST UN General Assembly, Vienna Convention on Succession

of States in respect of Treaties, 6 November 1996

ARBITRAL AWARDS

Abaclat Abaclat and Others v. Argentine Republic, ICSID Case No.

ARB/07/5, Decision on Jurisdiction and Admissibility

(August 4, 2011).

ADC ADC Affiliate Limited and ADC & ADMC Management

Limited v. The Republic of Hungary, ICSID Case No.

ARB/03/16, Award (October 2, 2006).

Al-Warraq Hesham Talaat M. Al-Warraq v. Republic of Indonesia,

UNCITRAL, Final Award (December 15, 2014).

Alemanni Giovanni Alemanni and Others v. The Argentine Republic,

ICSID Case No. ARB/07/8, Decision on Jurisdiction and

Admissibility (November 17, 2014).

VII

Ambiente Ambiente Ufficio S.P.A and Others v. Argentine Republic,

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

Admissibility (February 8, 2013).

AWG AWG Group v. Argentine Republic, UNCITRAL, Decision

on Jurisdiction (August 3, 2006).

BP Explorations British Petroleum Explorations Co. Ltd. v. The Government

of the Libyan Arab Republic, Award (October 10, 1973), 53

ILR 297 (1979).

CME CME Czech Republic B.V. v. Czech Republic, UNCITRAL,

Partial Award (September 13, 2001).

CMS CMS Gas Transmission Company v The Argentine

Republic, ICSID Case No ARB/01/08, Award (May 12,

2005).

Continental Continental Casualty Company v. Argentina, ICSID Case

No. ARB/03/9, Award, (September 5, 2008).

Daimler Daimler Financial Services AG v. Argentine Republic,

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

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

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

Enron Enron Corporation and Ponderosa Assets, L.P. v.

Argentine Republic, ICSID Case No. ARB/01/3, Award

(May 22, 2007).

VIII

Feldman Marvin Roy Feldman Karpa v. United Mexican States,

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

2002).

Fraport Fraport AG Frankfurt Airport Services Worldwide v. The

Republic of the Philippines, ICSID Case No. ARB/03/25,

Award (August 16, 2007).

Gemplus Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v.

The United Mexican States, ICSID Case No. ARB

(AF)/04/3, Award (June 16, 2010).

Himpurna Himpurna California Energy Ltd (Bermuda) v. PT.

(Persero) Perusahaan Listrik Negara (Indonesia),

UNCITRAL, Award (May 4, 1999).

Hochtief Hochtief AG v. The Argentine Republic, ICSID Case No.

ARB/07/31, Decision on Jurisdiction (October 24, 2011).

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

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

ARB/02/1, Award (25 July, 2007).

Impregilo Impregilo S.p.A. v. Argentine Republic, ICSID Case No.

ARB/07/17, Award (June 11, 2011).

Maffezini Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID

Case No. ARB/97/7, Decision of the Tribunal on

Objections to Jurisdiction (January 25, 2000).

IX

Mamidoil Mamidoil Jetoil Greek Petroleum Products Societe S.A. v.

Republic of Albania, ICSID Case No. ARB/11/24, Award

(March 30, 2015).

Metalclad Metalclad Corporation v. The United Mexican States,

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

2000).

Micula Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C.

Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania,

ICSID Case No. ARB/05/20, Decision on Jurisdiction and

Admissibility (September 24, 2008).

National Grid National Grid PLC v. The Argentine Republic,

UNCITRAL, Decision on Jurisdiction (June 20, 2006).

Occidental Occidental Exploration and Production Company v. The

Republic of Ecuador, LCIA Case No. UN3467, Award

(October 5, 2012).

Renta4 Renta 4 S.V.S.A et al. v Russian Federation, SCC 24/2007,

Award on Preliminary Objections (March 20, 2009).

RosInvest RosInvest v. Russian Federation, SCC Case No.

V079/2005, Award on Jurisdiction, (October 1, 2007).

Saba-Fakes Saba Fakes v. Turkey, ICSID Case No. ARB/07/20, Award

(July 14, 2010).

Saluka Saluka Investments BV v. The Czech Republic, PCA, Partial

Award (March 17, 2006).

X

Sanum Sanum Investments Limited v. Lao People‟s Democratic

Republic, UNCITRAL, PCA Case No. 2013-13, Award on

Jurisdiction (December 13, 2013).

Sempra Sempra Energy International v. Argentine Republic, ICSID

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

Siag Waguih Elie George Siag and Clorinda Vecchi v. The Arab

Republic of Egypt, ICSID Case No. ARB/05/15), Award

(June 1, 2009).

Siemens Siemens v. Argentine Republic, ICSID Case No ARB/02/8,

Decision on Jurisdiction, (August 3, 2004).

ST-AD ST-AD GmbH v. Republic of Bulgaria, UNCITRAL, PCA

Case No. 2011-06, Award on Jurisdiction (July 18, 2013).

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

Inter Aguas Servicios Integrales del Aqua SA v. Argentina,

ICSID Case No ARB/03/17, Decision on Jurisdiction, (May

16, 2006).

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

Vivendi Universal S.A. v. The Argentine Republic, ICSID

Case No. ARB/03/19, Decision on Liability (July 30, 2010).

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

Mexican States, ICSID Case No. ARB (AF)/00/2, Award

(May 29, 2003).

XI

TSA TSA Spectrum de Argentina S.A. v. Argentine Republic,

ICSID Case No. ARB/05/5, Award (December 19, 2008).

Tza Yap Shum Tza Yap Shum v. The Republic of Peru, ICSID Case No.

ARB/07/6, Decision on Jurisdiction (June 29, 2009)

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

Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic,

ICSID Case No. ARB/07/26, Decision on Jurisdiction

(December 19, 2012).

Vannessa Vannessa Ventures Ltd v. The Bolivarian Republic of

Venezuela (ICSID Case No. ARB (AF)/04/6), Award

(January 16, 2013).

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

Federation, PCA Case No. AA 227, Final Award (July 18,

2014).

INTERNATIONAL COURT DECISIONS

Nicaragua Military and Paramilitary Activities in and Against

Nicaragua (Nicaragua v. United States), ICJ Rep. 14

(1986).

Temple of Preah Vihear Temple of Preah Vihear (Cambodia v. Thailand), (Merits)

ICJ Rep. 6 (1962).

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Allison Roy Allison, Russia, the West, and Military Intervention,

XII

Oxford University Press (2013).

Brownlie Ian Brownlie, Principles of Public International Law, 6th

ed.,

Oxford University Press (2003).

Crawford James Crawford, State Responsibility: The General Part,

Cambridge University Press (2013).

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

Investment Law, 2nd

ed. Oxford University Press (2012).

Dolzer/Stevens Rudolph Dolzer, Margrete Stevens, Bilateral Investment

Treaties, Kluwer Law International (1995).

Douglas Zachary Douglas, The International Law of Investment Claims,

Cambridge University Press (2009).

Gallagher/Shan Norah Gallagher, Wenhua Shan, Chinese Investment Treaties:

Policies and Practice, Oxford University Press (2009).

Linderfalk Ulf Linderfalk, On the Interpretation of Treaties: The Modern

International Law as Expressed in the 1969 Vienna

Convention on the Law of Treaties, Law and Philosophy

Library 83 Vol. 83 (2007).

Sauvant Karl P Sauvant, Yearbook on International Investment Law

and Policy 2008-2009, Oxford University Press (2009).

Sornarajah M. Sornarajah, The International Law on Foreign Investment,

3rd

ed., Cambridge University Press (2010).

XIII

Vattel Emer de Vattel, The Law of Nations: Or, Principles of the Law

of Nature Applied to the Conduct and Affairs of Nations and

Sovereigns, G.G. and J. Robinson (1797).

JOURNALS

Alfredsson/Eide Gudmundur Alfredsson, Asbjorn Eide, The Universal Declaration

of Human Rights: A Common Standard of Achievement, Martinus

Nijhoff Publishers (1999).

Bederman D. Bederman, Contributory Fault and State Responsibility,

Virginia Journal of International Law (1990).

Burke-White/VonStaden W. Burke-White, A. VonStaden, Investment Protection in

Extraordinary Times: The Interpretation and Application of Non-

Precluded Measures Provisions in Bilateral Investment Treaties,

Virginia Journal of International Law (2007).

Caron/Shirlow David D. Caron, Esme Shirlow, Most Favoured Nation Treatment

– Substantive Protection in Investment Law, 23 King’s College

London Dickson Poon School of Law Legal Studies Research

Paper Series (2015).

Chukwumerije Okezie Chukwumerije, Interpreting Most-Favoured-Nation

Clauses in Investment Treaty Arbitrations, 8 Journal of World

Investment and Trade 597 (2007).

Crivellaro Antonio Crivellaro, Arbitration Case Law on Bribery: Issues of

Arbitrability, Contract Validity, Merits and Evidence, in Kristine

XIV

Karsten and Andrew Berkeley, Arbitration, Money Laundering,

Corruption and Fraud, Dossiers- ICC Institute of World Business

Law 109 (2003).

Fitzmaurice Gerald G. Fitzmaurice, The Law and Procedure of the

International Court of Justice: Treaty Interpretation and Certain

Other Treaty Points, 28 BYIL (1951).

Green James Green, Passportization, Peacekeepers, and Proportionality:

The Russian Claim of the Protection of National in Self Defense, in

James A. Green, Christopher Waters, Conflict in the Caucasus:

Implications for International Legal Order, Palgrave Macmillan

UK (2010).

Johnson/Volkov Lise Johnson, Oleksandr Volkov, Investor-State Contracts, Host-

State “Commitments” and the Myth of Stability in International

Law, The American Review of International Arbitration, Vol.24

No. 3 (2013).

Lim Kevin Lim, Upholding Corrupt Investors‟ Claims Against

Complicit or Compliant Host States- Where Angels Should not

Fear to Tread, in Karl P. Sauvant, Yearbook on International

Investment Law & Policy 2011-2012, Oxford University Press

(2013).

Magaisa Alex Tawanda Magaisa,‖Clean Hands”? Thou Hath Blood on

Your Hands”: A Critique of Supreme Court Judgment in the ANZ

Case, 1 Int‘l J. Civ. SOC‘Y L. (2003).

Madalena/Pereira Ignacio Madalena, Diogo Pereira, Human Rights As a Defense in

Investor-State Arbitration, International Arbitration Group (2012).

XV

Miles Cameron A Miles, Corruption, Jurisdiction and Admissibility, 7

Journal of International Dispute Settlement (2012).

Moloo Rahim Moloo, A Comment on the Clean Hands Doctrine in

International Law‖, vol. 8. Issue 1 Transnational Dispute

Management, (2011).

Moore J.B. Moore, History and Digest of the International Arbitrations to

Which the United States Has Been a Party, Together with the

Appendices Containing the Treaties relating to Such Arbitrations,

and historical and Legal notes, Vol.5, United States Government

Printing Office (1898).

Natoli Kristopher Natoli, Weaponizing Nationality: An Analysis of

Russia‟s Passport Policy in Georgia, Vol 28:393 Boston

University International Law Journal, (2011).

Nelson Timothy G. Nelson, Passport, S‟il Vous Plait?: Investment Treaty

Protection and the Individual Investor‟s Citizenship, Suffolk

Transnational Law Review (2009).

Olha Olha Hrynkiv, The Relevance Of Most-Favored-Nation Clauses

For The Establishment Of The Jurisdiction Of Investment

Arbitration Tribunals, Central European University eTD

Collection (2016).

Olynyk Stephen Olynyk, Balanced Approach to Distinguishing between

Legitimate Regulation and Indirect Expropriation in Investor-State

Arbitration, 15 Trade Business Law Review (2012).

XVI

Repousis Odysseas G. Repousis, On Territoriality and International

Investment Law: Applying China‟s Investment Treaties to Hong

Kong and Macao, Vol. 37 Issue 1 Michigan Journal of

International Law (2015).

Ripinsky Sergey Ripinsky, Assessing Damages in investment Disputes:

Practice in Search of Perfect, Journal of World Investment and

Trade, Vol. 10, No. 1 (2009).

Ripinsky/Williams Sergey Ripinsky, Kevin Williams, Damages in International

Investment Law, BIICL (2008).

Rogers Catherine A. Rogers, Contemporary Issues in International

Arbitration and Mediation, The Fordham Papers (2010).

Sadowski W. Sadowski, Yukos and Contributory Fault, Transnational

Dispute Management (2014).

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Petroleum v. Ecuador (2012), Observations on Proportionality,

Assessment of Damages and Contributory Fault, ICSID Review,

Vol. 28, No. 2 (2013).

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Most-Favored-Nation Clauses, 27 Berkeley J. Int‘l Law (2009).

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Responsabilité Internationale, Paris: Éditions A. Pedone (1973).

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Investment Protection and „Regulatory Taking‟ in International

Law, 50(4) International and Comparative Law Quarterly (2001).

XVII

MISCELLANEOUS

Black‘s Law (4th

Ed.) Henry Campbell Black, M. A., Black‟s Law Dictionary:

Definitions Of The Terms And Phrases Of American And

English Jurisprudence, Ancient And Modern 4th Ed. Rev.,

West Publishing Co. (1968).

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Awards, 2008-2011

Jean-Jacques Arnaldez, Yves Derains, Dominique Hasche,

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Sentences Arbitrales de la CCI 2008-2011 (Volume VI),

Kluwer Law International (2013).

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Responsibility, A/CN.4/498/Add.2 (1999).

IF FMCG Council of the European Union, Independent International

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Report Volume I (2009).

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Investment Agreements II, New York and Geneva: United

Nations (2012).

XVIII

LIST OF ABBREVIATIONS

% Percent

& And

2nd Second

¶ / ¶¶ Paragraph / paragraphs

Art. Article

Answers Answers to Request for Arbitration

ARSIWA Articles on Responsibility of States for Internationally Wrongful

Acts

BIT Bilateral Investment Treaty

E.g. Exempli Gratia

Eastasia-BIT Agreement between the Republic of Oceania and the Republic of

Eastasia for the Promotion and Reciprocal Protection of

Investments

Euroasia-BIT Agreement between the Republic of Oceania and the Republic of

Euroasia for the Promotion and Reciprocal Protection of

Investments

Executive Order Executive Order of 1 May 2014 on Blocking Property of Persons

Contributing to the Situation in the Republic of Eastasia

XIX

Facts Uncontested Facts

I.e. Id est

ICC International Chamber of Commerce

ICJ International Court of Justice

ILC International Law Commission

MFN Most Favored Nation

NEA National Environmental Authority

No. Number

p/pp Page/pages

PO Procedural Order

Request Request for Arbitration

Records Foreign Direct Investment International Moot 2016 Case, List of

documents

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNSC United Nation Security Council

VCST Vienna Convention on Succession of States in respect of Treaties

VCLT Vienna Convention on the Law of Treaty

XX

STATEMENT OF FACTS

1 PO3, ¶9.

2 Id.

3 Facts, ¶1.

The parties to this arbitration are Peter Explosive (“Claimant”) and the Republic of

Oceania (“Respondent” or “Oceania”).

Claimant is an investor who owns 100% of the shares of Rocket Bombs Ltd. (―Rocket-

Bombs”), an arms production company situated in the region of Valhalla, Oceania. He is

a resident of Fairyland. He was born as an Eastasian, but underwent naturalization to

become a national of Euroasia in 2014.

Respondent is the host-State to Rocket-Bombs.

Before 1914 Fairyland was historically part of the Republic of Euroasia

(“Euroasia”).1

1914 During the World War, Fairyland was annexed by the Republic of

Eastasia (“Eastasia”) and subsequently became part of Eastasia.2

1 January 1992 The Agreement between the Republic of Oceania and the

Republic of Euroasia for the Promotion and Reciprocal Protection

of Investment (“Euroasia-BIT”) and the Agreement between the

Republic of Oceania and the Republic of Eastasia for the

Promotion and Reciprocal Protection of Investment (“Eastasia-

BIT”) were concluded.3

1997 Rocket-Bombs had its environmental license revoked, which

suspended its production – thereby incapacitating it and causing

mass redundancies in Valhalla, where majority of residents were

XXI

4 Facts, ¶3.

5 Facts, ¶4.

6 Id.

7 Facts, ¶7.

8 Facts, ¶¶8-9.

9 Facts, ¶12.

10 Facts, ¶14.

employed by Rocket-Bombs.4

1998 Claimant bought 100% shares of Rocket-Bombs and became its

President Director. Rocket-Bombs, however, could not yet

resume operations due to the absence of the environmental

license. Claimant needed to acquire a new license from Oceania‘s

National Environmental Authority (―NEA‖).5

23 July 1998 NEA issued a new environmental license for Rocket-Bombs.6

3 August 1998 Claimant, however, still lacked the financial resources to

commence production. He tried to apply for subsidies from

Oceanian Ministry of Environment but he was denied.7

23 September 1998 Claimant looked for alternative sources. Euroasian Minister of

National Defense offered Rocket-Bombs a contract with advances

payable and a possibility of renewal.8

1998-2013 Over the years, Rocket-Bombs prospered and became the main

source of income for the majority of Valhalla residents.9

August 2014 Fairyland‘s authorities planned to hold a referendum to secede

from Eastasia and reunite with Euroasia. Eastasia gave no

response towards Fairyland‘s plan.10

XXII

11

Facts, ¶14. 12

Facts, ¶9. 13

Facts, ¶14. 14

Records, p.5. 15

Facts, ¶14. 16

PO3, ¶2. 17

PO2, ¶4. 18

Facts, ¶14.

1 November 2013 Fairyland held the referendum. The result was to secede from

Eastasia and reunite with Euroasia. Eastasia declared the

referendum as unlawful.11

1 January 2014 The 1998 contract between Claimant and Euroasia expired.12

23 January 2014 Fairyland authorities requested Euroasia to intervene.13

28 February 2014 Euroasia offered to renew the contract with Claimant. Claimant

agreed due to the financial struggle Rocket-Bombs was

experiencing.14

1 March 2014 Euroasia amended its Citizenship Act allowing Fairyland‘s

residents to apply for Euroasian nationality.15

Euroasia, in

response to Fairyland‘s request, sent its forces to Fairyland.

2 March 2014 Claimant sent Eastasia a declaration of renouncement of his

Eastasian nationality.16

23 March 2014 Claimant applied for naturalization and was subsequently

recognized by Euroasia as its national.17

He was given a passport

and an identity card indicating his new Euroasian nationality.

After a peaceful and bloodless intervention, Euroasia officially

declared its reunification with Fairyland.18

XXIII

19

Id. 20

Records, Request, p.5. 21

Facts, p.16. 22

PO2, ¶3. 23

Facts, ¶17. 24

Facts, ¶17.

28 March 2014 Eastasia declared the reunification as unlawful and broke off

diplomatic relations with Euroasia.19

1 April 2014 The contract renewal concluded between Claimant and Euroasia

on 28 March 2014 became effective.20

March – May 2014 Fairyland‘s reunification with Euroasia divided the international

community into two camps: those recognizing the reunification

and those who opposed.21

The matter was discussed by United

Nations Security Council (“UNSC”), but no resolution could be

agreed upon.22

1 May 2014 Respondent disapproved the reunification and issued the

Executive Order of 1 May 2014 on Blocking Property of Persons

Contributing to the Situation in the Republic of Eastasia

(―Executive Order‖). It sanctioned certain persons operating

within Euroasia‘s economic sectors, including Claimant and

Rocket-Bombs, through the blocking of assets and the prohibition

of professional interactions with anyone in Oceania.23

After May 2014 Due to the sanctions, Rocket-Bombs was unable to operate

because its suppliers refused to continue their contractual

relationships. Rocket-Bombs‘ value rapidly decreased, and

Claimant could not transfer or sell any of his shares.24

XXIV

25

PO3, ¶4. 26

Id, ¶19. 27

PO2, ¶5. 28

Id. 29

Records, Request, p.3.

2 February 2015 Claimant sent notifications to Respondent‘s institutions,

requesting to conduct amicable consultation for the loss suffered

by him and Rocket-Bombs. Respondent never responded.25

5 May 2015 Claimant was investigated for a bribery allegation with regard to

the issuance of the environmental license.26

The NEA President

testified against Claimant in exchange for a non-prosecution

agreement with Oceanian General Prosecutor Office.27

23 June 2015 Oceanian General Prosecutor Office initiated criminal proceeding

against Claimant regarding a bribery allegation. It remains

pending until now.28

1 September 2015 Claimant submitted Request for Arbitration to International

Chamber of Commerce (―ICC‖) under Euroasia-BIT

(“Request”). Claimant relies on Article 8 Eastasia-BIT as the

dispute settlement provision that is applicable via Most Favored

Nation Treatment (“MFN”) Clause under Article 3 Euroasia-BIT

(“Euroasia-BIT’s MFN Clause”).29

30 September 2015 Respondent submitted its Answers to Request for Arbitration

(“Answers”).

XXV

SUMMARY OF ARGUMENTS

(PART I: JURISDICTION)

1. This Tribunal does have jurisdiction over this present dispute.

2. To begin with, Claimant is an investor under Euroasia-BIT. Claimant is a national of

Euroasia through naturalization – a process completely separate from the question of

lawfulness of Fairyland‘s reunification with Eurosia (Issue IA).

3. Moreover, this Tribunal‘s jurisdiction is not affected by Claimant‘s failure to comply with

the pre-arbitral steps— particularly the litigation requirement – under Euroasia-BIT by

virtue of the futility exception (Issue IB).

4. In any case, Euroasia-BIT‘s MFN Clause absolves Claimant‘s non-compliance with the

pre-arbitral steps by allowing him to rely on Eastasia-BIT‘s dispute settlement provision

that has no litigation requirement (Issue IC).

(PART II: LIABILITIES AND REMEDIES)

5. Respondent is liable for damages and must pay Claimant compensation.

6. To start, Respondent violated Article 4(1) Euroasia-BIT because the Executive Order

amounted to unlawful expropriation. Respondent‘s Executive Order is also not justified, as

it was purely political and it was not for the benefit of Oceania, let alone for the

maintenance of international peace or security (Issue II).

7. Further, Claimant‘s investment remains protected, unaffected by the clean hands doctrine.

In any case, Respondent‘s bribery allegation is unsubstantiated and in any event,

Respondent is still obliged to protect Claimant‘s investment (Issue III).

8. Lastly, Claimant‘s contract renewal with Euroasia does not amount to contributory fault as

none of its elements are met. Hence, Claimant is entitled to full compensation (Issue IV).

1

ARGUMENTS

PART I: JURISDICTION

ISSUE-I: THIS TRIBUNAL HAS JURISDICTION TO HEAR THIS CASE

9. When Claimant bought Rocket-Bombs in 1998, it was on the brink of insolvency.30

Over

the years, Claimant managed to turn Rocket-Bombs into one of the largest companies in

Oceania.31

However, all of Claimant‘s efforts to improve Rocket-Bombs were undone in

one-fell-swoop when Respondent issued the Executive Order that effectively reverted

Rocket-Bombs back to square one: again on the brink of insolvency.32

10. Claimant then, requested to negotiate with Respondent to amicably settle this dispute,

only to be completely ignored.33

Consequently, seeing no other remedies were available

for him,34

Claimant submitted this dispute before this Tribunal.

11. Then, for the first time, Respondent responded to Claimant; and it did so by objecting this

Tribunal‘s jurisdiction. Specifically, it now challenges Claimant‘s status as an investor

under Euroasia-BIT; contends that Claimant should have complied with Euroasia-BIT‘s

pre-arbitral steps; and contests the invocation of Euroasia-BIT‘s MFN Clause.35

12. As response, Claimant submits the otherwise: this Tribunal has jurisdiction because

Claimant is an investor under Euroasia-BIT (A); who can dispense Euroasia-BIT‘s pre-

arbitral steps by virtue of the futility exception (B); or alternatively, can circumvent

Euroasia-BIT‘s pre-arbitral steps by operation of Euroasia-BIT‘s MFN Clause (C).

30

Facts, ¶2. 31

Facts, ¶12. 32

Facts, ¶17. 33

Records, Request, p.3; PO2, ¶4. 34

Infra, ¶60. 35

Records, Answers, p.15-16

2

A. CLAIMANT IS AN INVESTOR UNDER EUROASIA-BIT

13. Respondent challenges Claimant‘s status as ‗investor‘ under Euroasia-BIT‘; arguing that

he is not a Euroasian national because ‗Euroasia‟s annexation of Fairyland was unlawful,

and therefore no rules on succession of States in treaty are applicable in this case‘.36

14. Claimant submits that Respondent‘s objection is misdirected. Prima facie, Euroasia-

BIT‘s definition of ‗investor‘ exclusively rests on the nationality test with regard to

natural person;37

where such nationality must be possessed when the investor submits its

claims and when the alleged host-State‘ breach occurs. 38

15. Claimant, a natural person, had been a national of Euroasia since 23 March 2014,39

long

before he submitted his claims before this Tribunal on 11 September 2015 and also

before Respondent‘s alleged breach on 1 May 2014.40

Accordingly, Claimant has

possessed the requisite nationality to rely on Euroasia-BIT at all the relevant times.

16. To further support this, Claimant sets forth three arguments. First, the issue concerning

Fairyland‘s reunification with Euroasia is separate from the determination of Claimant‘s

nationality (1). Second, the issue concerning the application of rules of succession of

States in treaty law is irrelevant, as the only issue that matters is Euroasia-BIT‘s

nationality test (2). Third, Claimant has fulfilled Euroasia-BIT‘s nationality test (3).

1) The issue concerning Fairyland’s reunification with Euroasia is separate from

the determination of Claimant’s nationality

17. Respondent‘s objection is based primarily on how Fairyland reunited with Euroasia back

in 2014, which according to Respondent was unlawful. Not only is Respondent‘s

objection misguided, but also irrelevant.

36

Records, Answers, p.15. 37

Euroasia-BIT, Art.1(2). 38

Douglas, p.290. 39

Id. 40

Facts, ¶16.

3

18. First, this Tribunal‘s mandate is limited to the determination of legal questions directly

relating to the foreign investor and the host-States,41

i.e. Claimant and Respondent.

Meanwhile, the issue concerning Fairyland‘s reunification is between Euroasia and

Eastasia, neither a party to this present dispute. Moreover, that issue concerned a

boundary dispute between two States, which is not exactly subjected to an investment

tribunal‘s jurisdiction.42

Hence, with all due respect, this is not the correct forum to

consider the lawfulness of Fairyland‘s reunification with Euroasia.

19. Further, the issue regarding Euroasia‘s right to confer its nationality to Claimant is also

separated from the nature of Fairyland‘s reunification with Euroasia. A State‘s right to

regulate its nationality law allowing foreigners to apply for that State‘s nationality is

detached from any other actions taken by that State towards the territory where those

foreigners originally reside.43

For example, while Russia‘s military intervention in South

Ossetia – part of Georgia‘s territory – were considered by many as unlawful,44

Russia‘s

nationality grants to the South Ossetians were nevertheless deemed as effective.45

20. Finally, Respondent‘s conclusion on the unlawfulness of Fairyland‘s reunification is

hasty at best. That issue has never been adjudicated at all, meaning no legal rulings have

actually rendered the reunification as unlawful.46

Moreover, not the whole international

community agrees with Respondent, as there are those who recognize the reunification.47

Even the UNSC, who has discussed the situation concerning Fairyland, also could not

agree that the reunification amounted to unlawful annexation.48

21. Therefore, there is no need for this Tribunal to further discuss the lawfulness of

Fairyland‘s reunification with Euroasia, as the real question in respect to this Tribunal‘s

jurisdiction lies on whether Claimant has the requisite nationality, as shown next.

41

Madalena/Pereira, p.2. 42

Rogers, p.184. 43

Natoli, p.413. 44

Allison, p.152; IF FMCG, p. 23. 45

Green, p.66-67; Natoli, p.413. 46

Records, Request, p.5. 47

Facts, ¶16. 48

PO2, ¶4.

4

2) The issue concerning application of rules of succession of States in treaty law is

irrelevant, as the only issue that matters is Euroasia-BIT’s nationality test

22. In light of Respondent‘s assertion, i.e. „no rules on succession of States in treaty law are

applicable in this case‟;49

Claimant submits that any recourse to analyze the application

of the rules on succession of States in treaty law is irrelevant in this case because

Claimant is a natural person.50

This will be elaborated next.

23. To start, bilateral investment treaties (―BIT‖) generally recognize two types of investors:

legal persons and natural persons. A distinction must be made between the two. With a

natural person, nationality is the only factor in determining an investor‘s eligibility for

BIT protection.51

Meanwhile, for a legal person, a territorial link is required in addition to

nationality requirement in determining the legal person‘s eligibility for a BIT

protection.52

This distinction is well reflected in Article 1(2) Euroasia-BIT:

Article 1(2)(a) Article 1(2)(b)

The term “Natural person” shall mean any

natural persons having the nationality of

either Contracting Party in accordance

with its laws.

The term “legal person” shall mean, with

respect to either Contracting Party, any

entity incorporated or constituted with, and

recognized as legal person by its laws,

having the seat in the territory of that

Contracting Party.

24. Now, turning to Respondent‘s assertion regarding the application of rules of succession

of States in treaty law, Respondent seems to try to draw this Tribunal‘s focus to the

Vienna Convention on Succession of States in Respect of Treaties (“VCST”), which

Respondent, Euroasia, and Eastasia are parties to.53

25. Particularly, Respondent might argue that the unlawfulness of Fairyland‘s reunification

will prevent the application of Article 15 VCST – which provides that when a territory

49

Records, Answers, p.15. 50

Records, Request, p.4. 51

Gallagher/Shan, p.72. 52

Repousis, p.157. 53

PO2, ¶4.

5

undergoes a change of sovereignty, the treaties of the new sovereign will automatically

apply to that territory.54

Claimant submits that such argument will be misguided.

26. This is because the rules of succession of States in treaty law only deal with the territorial

application of treaties;55

where such application is only relevant when it comes to a legal

person.56

For example, in Sanum, the tribunal held the relevant use of VCST to determine

the BIT‘s application because the investor was in form of a corporation (a legal person).57

27. Meanwhile, with a natural person, the determination of investors‘ eligibility under BITs

is detached from the notion of territory.58

In Tza-Yap-Shum, since the investor was a

natural person, the tribunal disregarded the use of VCST, and instead focused on the

BIT‘s nationality application. 59

The tribunal held, when it comes to a natural person, the

question of jurisdiction lies solely on whether the person holds the nationality of the State

claimed, but not on whether the territory where the person resides is part of the territory

of one of the Contracting Parties of the BIT.60

28. In other words, while the rules on succession of States in treaty law might be relevant in

determining a BIT‘s application to a legal person, it is not so relevant when it comes to a

natural person. Correspondingly, Respondent‘s suggestion regarding the need to analyze

the application of rules on succession of States in treaty law is incorrect.

29. In concurrent, the only question that must be answered is whether Claimant has fulfilled

the nationality test under Euroasia-BIT. As addressed next, Claimant submits that he has.

3) Claimant has fulfilled Euroasia-BIT’s nationality test

30. Under Article 1(2) Euroasia-BIT, for a natural person to qualify as investor, the investor

must possess ‗the nationality of either Contracting Party in accordance with its laws.‟

54

VCST, Art.15. 55

Id; VCLT, Art.29; Sanum, ¶224. 56

Repousis, p.157. 57

Sanum, ¶230. 58

Repousis, p.157. 59

Tza-Yap-Shum, ¶54-61. 60

Id.

6

31. The language used by Euroasia-BIT affirms that the investor‘s nationality must only be

determined based on the domestic laws of the State whose nationality is being claimed.61

In that regard, Claimant submits that he has Euroasian nationality based on Euroasian

laws (a). Moreover, Euroasia had sovereignty to confer its nationality to Claimant (b).

a. Claimant has Euroasian nationality based on Euroasian laws

32. On 1 March 2014, Euroasia amended its Citizenship Act, which allowed Fairyland‘s

residents to apply for Euroasian nationality.62

Claimant applied, and was subsequently

granted with Euroasian nationality on 23 March 2014.63

33. Claimant‘s Euroasian nationality is further affirmed by his possession of Euroasian

passport and identity card;64

such documents generally serve as sufficient evidence in

proving a natural person‘s nationality for jurisdictional purpose.65

34. Moreover, as mere precautionary, Claimant is aware that Euroasian Citizenship Act does

not allow Euroasian nationals to hold dual-citizenship;66

which is why Claimant

renounced his Eastasian nationality on 2 March 2014.67

The fact that Eastasia had not yet

effectuated Claimant‘s renunciation68

is well beyond Claimant‘s control, considering how

the effectuation requires acknowledgement from the Eastasian President.69

35. Instead, what mattered was that Euroasia knew about Claimant‘s renunciation of his

Eastasian nationality, and subsequently still agreed to grant him with Euroasian

nationality on 23 March 2014 pursuant to its own laws.70

61

Nelson, p.111. 62

PO2, ¶4. 63

Id. 64

Id. 65

Ambiente, ¶319; Dolzer/Schreuer, p.45. 66

PO2, ¶4. 67

PO3, ¶2. 68

Id. 69

Id. 70

PO2, ¶4.

7

36. Summing up, Claimant was effectively granted Euroasian nationality under Euroasian

Citizenship Act on 23 March 2014. And since then until now, Claimant still possesses

Euroasian nationality, thereby fulfilling the requirement under Article 1(2) Euroasia-BIT.

b. Euroasia has sovereignty to confer its nationality to Claimant

37. Finally, as an affirmation, Claimant‘s Euroasian nationality that was granted on the basis

of Euroasia‘s amended Citizenship Act should neither be disregarded nor questioned.

38. To begin with, it is a recognized principle of international law in which States have the

right to decide under its own domestic law on how and upon whom the State confers its

nationality.71

This right also extends to the conferral of nationality to individuals who are

not from the State‘s territory; such process is commonly known as naturalization.72

Indeed, naturalization is a common practice and is recognized as a sufficient method to

establish a juridical link in respect of fulfilling a BIT‘s nationality requirement.73

39. Moreover, as briefly discussed earlier,74

irrespective of the situation revolving

Fairyland‘s reunification, Euroasia retains the right to grant nationality to whomever it

desires – including Fairyland‘s residents – so long that such nationality is not imposed.75

40. In this regard, Euroasia did not impose its nationality upon Fairyland‘s residents. Instead,

Euroasia only provided them an option to change their nationality.76

In this vein, Article

15 Universal Declaration of Human Rights (“UDHR”) – which has become customary

international law – 77

should be considered. Under this rule, everyone has the right to

nationality, and along with it, the right to change nationality.78

Hence, it can be

understood that Claimant simply has made a personal decision to change his nationality

from Eastasian to Euroasian.

71

Green, p.67; Dolzer/Schreuer, p.45; Brownlie, p.373. 72

Micula, ¶94; Natoli, ¶420. 73

Micula, ¶94. 74

Supra, ¶19. 75

Natoli, p.416. 76

Id. 77

Alfreðsson/Eide, p.322. 78

UDHR, Art.15.

8

41. To conclude, Euroasia had the sovereign right to confer its nationality to Claimant.

Equally, it was also within Claimant‘s right to change his nationality to Euroasia.

Therefore, it is now Claimant‘s right to rely on Euroasia-BIT‘s protection.

B. CLAIMANT CAN DISPENSE EUROASIA-BIT’S PRE-ARBITRAL STEPS BY VIRTUE OF THE

FUTILITY EXCEPTION

42. Respondent contends that Claimant ‗has failed to abide by certain obligatory pre-arbitral

steps‟ under Article 9 Euroasia-BIT – the requirement to conduct amicable consultation

and submission to domestic courts.79

Claimant disagrees with this contention.

43. To start, Article 9(1) Euroasia-BIT provides that any disputes ‗shall, to the extent

possible, be settled in an amicable consultation.‟ As the record shows, Claimant has

attempted this first requirement;80

it was Respondent who had never responded at all.81

44. Next, Article 9(2) Euroasia-BIT provides that if consultation fails, the dispute „may be

submitted to the competent judicial or administrative courts‟ of the host-State. Article

9(3) Euroasia-BIT then stipulates: ‗When, after twenty-four months…the dispute…has not

been resolved, it may be referred to international arbitration.‘

45. Indeed, Claimant has not submitted this dispute to any of Oceanian domestic courts since

Claimant views that such submission was bound to be futile, whereby, tribunals have

held that investors can dispense such requirement under the futility exception.82

In this

vein, Claimant will show how the futility exception is applicable under Euroasia-BIT (1)

and that submission to Oceanian Courts would have been futile for Claimant (2).

79

Records, Answers, p.15. 80

PO3, ¶4. 81

Records, Request, p.3; Supra, ¶10. 82

Arthur, p.482; Abaclat, ¶588; Ambiente, ¶628; Alemanni, ¶317; Urbaser, ¶207.

9

1) The futility exception is applicable under Euroasia-BIT

46. The futility exception is a well-recognized and acceptable recourse to dispense a

litigation requirement before the host-State‘s domestic courts, when such litigation could

be established as ineffective or unavailing, or in other words futile.83

47. In this case, this exception is applicable by virtue of Article 9(7) Euroasia-BIT, which

mandates this Tribunal to decide this dispute in accordance with the principles of

international law. As shown next, the futility exception forms a part of those principles.

48. The futility exception is recognized as an extension of good faith principle embodied in

Article 31 Vienna Convention on Law of Treaties (―VCLT‖). In ST-AD, futility

exception was applied by the tribunal through good faith interpretation under Article 31

VCLT.84

Further, the tribunal in Ambiente even recognized the status of the futility

exception as customary international law and applied it through Article 31(3)(c) VCLT,

which mandates treaty interpretation to involve any relevant rules of international law.85

49. Likewise, as the Contracting Parties of Euroasia-BIT are also parties to VCLT,86

this

Tribunal too should apply the futility exception in the case at hand.

50. Moreover, any other interpretations against the application of the futility exception will

be against Euroasia-BIT‘s object and purpose, which recognizes the ‗importance of

providing effective means of asserting claims and enforcing rights with respect to

investments under national law.‘87

51. The rationale is if Respondent requires investors to litigate an investment dispute before

its courts, Respondent should at least ensure that those courts could provide an effective

remedy for those investors. As addressed next, Respondent has failed to do so.

83

Id. 84

ST-AD, ¶364. 85

Ambiente, ¶603. 86

PO2, ¶8. 87

Euroasia-BIT, Preamble.

10

2) Submission to Oceanian Courts would have been futile for Claimant

52. Host-State‘s courts are futile when they are reasonably unavailable for investors, or, if

they provide no reasonable possibility of redress for those investors.88

As discussed next,

at least one of those conditions is met here.

53. Recourse to domestic courts can be dispensed when the relevant courts have no

jurisdiction to adjudge the investor‘s claims.89

Pursuant to Article 9(2) Euroasia-BIT, the

relevant courts are either the judicial or administrative courts in Oceania.

54. In regard to Oceanian National Courts, these courts do not even have the competence to

adjudge any claims brought under international treaties.90

Ergo, since Claimant submitted

his claims under the premise of expropriation – which is regulated under Euroasia-BIT,

an international treaty – Claimant‘s claims would be inadmissible before those courts.

55. Moreover, in regard to Oceanian Administrative Courts, Claimant submits that he also

cannot submit his dispute there because the recourse available in regard to the Executive

Order is only the reconsideration proceeding before the Oceanian President.91

However,

since that recourse is outside the judicial branch,92

Claimant would still have been non-

compliant with Article 9(2) Euroasia-BIT even if he had attempted that recourse.

56. Consequently, this leaves Claimant with one last option: to recourse to Oceanian

Constitutional Tribunal in an attempt to set aside the Executive Order. However, this

remedy was equally unavailable, or at least, provided no reasonable possibility of redress.

57. This is because the Oceanian Constitutional Tribunal had a historic deference to

Oceania‘s executive branch in the conduct of foreign policy; meaning it was by fact

88

Ambiente, ¶608; ILC (Diplomatic), Art.15. 89

ILC (Diplomatic), Commentary, p.78. 90

PO3, ¶5. 91

PO3, ¶10. 92

PO3, ¶5.

11

unlikely that it would set aside the Executive Order.93

Hence, any effort to set aside the

Executive Order before the Constitution Tribunal was bound to fail from the start.94

58. Moreover, even in the remote event that the Constitutional Tribunal were to agree to

review the Executive Order, the process would take at least 3 to 4 years,95

well beyond

the 24-months period set out under Article 9 Euroasia-BIT. That is not a reasonable

possibility of redress. As held in TSA, recourse to host-State‘s court is futile if there is no

fair chance for the investor to obtain satisfaction within the time frame set by the BIT.96

59. Finally, Claimant relies on four different case laws as support: Abaclat, Ambiente,

Urbaser, and Alemanni. In those cases, all four tribunals accepted the investors‘ pleads of

the futility of the host-State‘s courts because there was a clear line of jurisprudence in the

host-State‘s judiciary system that it would not provide redress, let alone set aside, the

executive branch‘s measure which was the investor‘s basis for expropriation claims.97

60. In conclusion, based on the collaborated reasons above, submission before Oceanian

Courts would have been futile for Claimant, and for that reason, he should be allowed to

derogate from such requirement. In any case, Claimant can derogate from the requirement

by operation of Euroasia-BIT‘s MFN Clause, as addressed next.

C. CLAIMANT CAN CIRCUMVENT EUROASIA-BIT’S PRE-ARBITRAL STEPS BY OPERATION

OF EUROASIA-BIT’S MFN CLAUSE

61. Finally, Respondent argues that ‗Claimant may not invoke Article 3 Euroasia-BIT to

access and rely upon the dispute resolution provisions of Eastasia-BIT,‘98

without further

substantiating such argument. To recall, Article 1(C) ICC Rules – the procedural rule of

this arbitration – dictates that any objections should contain „the basis upon which the

claims are made‟, in which Respondent has neglected to do.

93

Id. 94

Id. 95

Id. 96

TSA, ¶110. 97

Abaclat, ¶581-588; Ambiente, ¶612-623; Alemanni, ¶308-16; Urbaser, ¶202. 98

Records, Answers, p.15.

12

62. In doing so, Respondent completely disregarded the decisions of various tribunals

allowing investors to access a third-party BIT‘s dispute settlement provision that is more

favorable than the dispute settlement provision in the basic BIT‘s via an MFN clause.99

63. Thus, if this Tribunal requires strict compliance with Euroasia-BIT‘s litigation

requirement despite its futility,100

Claimant submits that he is entitled to access Article 8

Eastasia-BIT – which allows access to arbitration without litigation requirement before

the host-State‘s courts – by operation of Euroasia-BIT‘s MFN Clause.

64. To prove this, Claimant will begin by showing how MFN clauses can cover not only

substantive but also procedural protections (1). Then, Claimant will demonstrate how

Euroasia-BIT‘s MFN Clause applies to dispute settlement provision (2). Finally,

Claimant will establish how Euroasia-BIT‘s dispute settlement provision is a less

favorable treatment compared to that of Eastasia-BIT‘s (3).

1) MFN clauses cover not only substantive but also procedural protections

65. An MFN clause is a promise made by a granting State that it would provide the MFN

clause‘s beneficiary, a treatment that is no less favorable as compared to the treatment

granted to third parties‘ beneficiaries.101

An MFN clause is neutral: it attracts nothing

more and nothing less than only the more favorable treatment.102

66. Relatedly, Claimant acknowledges the existing debate between two opposing sides

revolving around the scope of application of MFN clauses within BITs: the first

supporting MFN clause‘s application only to substantive protections; while the second

supporting MFN clause‘s application to both substantive and procedural protections.103

67. In this vein, although Claimant recognizes the distinction between BIT‘s substantive and

procedural protections – the former guarantees that investments will not be subject to

99

Maffezini, ¶64; Siemens, ¶103; Hochtief, ¶75; Suez, ¶68; National Grid, ¶93; Impregilo, ¶99. 100

Supra, ¶60. 101

ILC (MFN), Art.5. 102

Chukwumerije, p. 640. 103

ILC (MFN), Final Report, ¶8.

13

inappropriate risks104

and the latter ensures investors with an enforcement mechanism for

those substantive protections, i.e. dispute settlement provision – 105

what must however

be emphasized is that there is no certain legal ground affirming that MFN‘s treatment is

limited only to substantive protections.106

68. Instead, what is universally recognized in determining the scope of an MFN clause is the

ejusdem generis principle, which follows from the general principles of treaty

interpretation and have been regarded as being derived from the very nature of MFN

clause itself.107

This principle dictates that MFN clauses cover any treatments falling

under the same subject matters stipulated within the MFN clause itself.108

69. Having that in mind, pursuant to ejusdem generis principle, Euroasia-BIT‘s MFN Clause

covers procedural protection such as dispute settlement provision, as addressed next.

2) Euroasia-BIT’s MFN Clause applies to dispute settlement provision

70. Under the ejusdem generis principle, treatments invoked by MFN clause must fall within

the limits of the MFN clause‘s subject matter.109

It is unanimously recognized that an

interpretation through VCLT is required to comprehend the ordinary meanings of the

subject matters of an MFN clause.110

71. Here, Euroasia-BIT‘s MFN Clause, provides:

―Each Contracting Party shall, within its own territory, accord to investments made

by investors of the other Contracting Party, to the income and activities related to

such investments and to such other investment matters regulated by this Agreement, a

treatment that is no less favorable than that accorded to its own investors or investors

from third-party countries.‖

104

Id. 105

Id, p.343. 106

Maffezini, ¶54; Siemens, ¶102; AWG, ¶59. 107

ILC (MFN), Commentary, p.30. 108

Maffezini, ¶49; Impregilo, ¶56; ILC (MFN), Art.9. 109

ILC (MFN), Art.9. 110

ILC (MFN), Final Report, ¶149; Impregilo, ¶58.

14

72. Subsequently, Claimant will show how pursuant to Article 31 VCLT, the ordinary

meanings of Euroasia-BIT‘s MFN Clause demonstrate that its subject matters cover

dispute settlement provision (a). Moreover, this interpretation is supported by the fact

that dispute settlement provision is never expressly excluded (b). Lastly, Euroasia-BIT‘s

MFN Clause‘s application to dispute resolution provision is not against public policy (c).

a. The ordinary meanings of Euroasia-BIT’s MFN Clause demonstrate that its

subject matters cover dispute settlement provision

73. The rules of treaty interpretation as prescribed under Article 31 VCLT provides:

„[a] Treaty shall be interpreted in good faith in accordance with the ordinary

meaning to be given to the terms of the treaty in their context and in the light

of its object and purpose‟

74. In that respect, the first step in treaty interpretation under Article 31 VCLT is to examine

the ordinary meanings.111

Claimant submits that the ordinary meaning of Euroasia-BIT‘s

MFN Clause is apparent and it does cover dispute settlement provision.

75. To start, the subject matters covered by Euroasia-BIT‘s MFN clause are „treatments‟

accorded to ‗investments,‟ „to the income and activities related to such investments‟, „and

to such other investment matters regulated by this agreement,‟ and granted within the

host-State‘s territory. Having that in mind, Claimant submits a three-layered argument.

76. First, the treatment accorded ‗to the income and activities related to investment‟ includes

dispute settlement provision. Second, and in the alternative, dispute settlement provision

is covered under the phrase ‗such other investment matters regulated under this

Agreement‘. Finally, as both affirmation and anticipation, dispute settlement provision is

a treatment accorded within the host-State‘s own territory.

111

VCLT, Art.31; ILC (MFN), Commentary, p.30.

15

77. First, Euroasia-BIT‘s MFN Clause‘s scope of treatment was narrowed down by the

phrase ‗to the income and activities related to such investments‟. Nevertheless, this scope

still includes dispute settlement provision.

78. To elaborate this, Claimant begins by delving deeper into what a procedural protection

such as dispute settlement provision really is. Procedural protection serves to enforce the

substantive protection; the former is meaningless without the latter and vice versa, i.e. it

is useless to possess a substantive protection without being able to enforce it.112

Indeed,

both procedural and substantive protections work in tandem as to create the legal concept

of investment protection. 113

79. On that account, ‗income‟ and „activities related to investments‘ refer to how investors

use and enjoy their investments.114

When a host-State‘s measure interferes with an

investor‘s use and enjoyment of its investment, a grant of procedural protection allowing

the investor to challenge such interference is part of the investor‘s corresponding

protection.115

Likewise, the treatment that will mostly protect Claimant from the

Executive Order – which interfered with Claimant‘s use and enjoyment of investment –

116 is the procedural protection. Thus, it is only rational that dispute settlement provision

falls within a treatment relating to ‗to the income and activities related to investment‘.

80. Second, in the event this Tribunal disagrees with the analysis above, Claimant submits

that procedural protection is definitely covered by the phrase ‗and such other investment

matters regulated by this Agreement.‘

81. For this, Claimant takes back this interpretation to how Euroasia-BIT‘s MFN Clause was

narrowed down by the phrase ‗to the income and activities related to the investment.‟

Assuming that this phrase covers only substantive protection, the scope of the MFN

Clause now is broadened: it now includes ‗such other investment matters regulated by

112

Hochtief, ¶67. 113

Hochtief, ¶66. 114

Siemens, ¶103. 115

RosInvest, ¶130; Suez, ¶57. 116

Infra, ¶113.

16

this Agreement‟. This broadened scope will include other protections under Euroasia-BIT

that is not related to substantive protection; that is procedural protection.

82. Any other interpretations as to limit Euroasia-BIT‘s MFN Clause only to substantive

protections in light of the phrase ‗such other investment matters regulated by this

Agreement‘ will be contrary to Article 31 VCLT, which requires that any redundant

interpretation must be rejected.117

The reason is, if Euroasia-BIT‘s drafters had intended

to limit Euroasia-BIT‘s MFN Clause‘s scope only to substantive protections, they would

not have incorporated the broadening language of ‗such other investment matters.‘

83. This conclusion is confirmed by the text of Article 4(2) and 5 Euroasia-BIT, which

according to Article 31(2) VCLT are the ‗context‘ for determining ordinary meanings of

Euroasia-BIT‘s MFN Clause. Article 4(2) and 5 Euroasia-BIT ensures ‗treatment no less

favorable‘ in terms of expropriation and compensation.118

Thus, it can be seen that even

some other substantive protections under Euroasia-BIT actually have their own MFN

treatments. Again, Euroasia-BIT‘s drafters would not have incorporated those other MFN

treatments if Euroasia-BIT‘s MFN Clause already covers all substantive protections.

84. Finally, the fact that treatment under Eurosia-BIT‘s MFN Clause only covers treatment

that is granted within the host-State‘s own territory confirms the application of Euroasia-

BIT‘s MFN Clause to procedural protection such as dispute settlement provision.

85. As affirmation, the ‗phrase within its own territory‟ shows how Euroasia-BIT‘s drafters

never distinguished between substantive and procedural protections; as such phrase can

be found in both provisions relating to substantive protections, i.e. Article 2,3,4,5

Euroasia-BIT, and procedural protection, i.e. Article 9 Eurosia-BIT. This proves that the

treatment related to procedural protection is also granted within the host-State‘s own

territory: exactly the kind of treatment contemplated under Eurosia-BIT‘s MFN Clause.

86. Moreover and as anticipation, Respondent cannot argue that the phrase „within its own

territory‟ excludes dispute settlement provision merely on the ground that international

117

Linderfalk, p.110. 118

Euroasia-BIT, Art.4(2),5.

17

arbitration is not accorded within a host-State‘s territory. Instead, what must be

understood is that the relevant treatment in ensuring MFN clause‘s application to dispute

settlement provision is the treatment where the host-State requires litigation within its

own territory.119

Indeed, the treatment in which Claimant claims as less favorable here is

the litigation requirement, which surely is accorded within Respondent‘s territory.120

87. Concluding, by examining the ordinary meanings of each subject matter, it is evident that

dispute settlement provision never falls outside the scope of Euroasia-BIT‘s MFN Clause.

b. The above interpretation is supported by the fact that dispute settlement

provision is never expressly excluded

88. The above interpretation in which Euroasia-BIT‘s MFN Clause applies to disputes

settlement provision is affirmed by Article 3(2) Euroasia-BIT, which provides:

“[Article 3(1) Euroasia-BIT]…shall not apply to Advantages and privileges

accorded by either Contracting Party to any third country by virtue of that

Party‟s binding obligations that derive from its membership in a customs or

economic union, common market, or free trade area, or as a result of regional or

sub-regional agreements, multilateral international agreements or double

taxation agreements, or any other tax-related arrangements or agreements to

facilitate cross-border trade.”

As can be seen, Article 3(2) Euroasia-BIT further limits the matters in which Euroasia-

BIT MFN Clause cannot apply to, and dispute settlement provision is not one of them.

89. In this regard, it is best to trace back to the nature of Euroasia-BIT‘s MFN Clause as

established previously: first, it was narrowed down by the phrase to the income and

activities related to investment; then, it was broadened by the phrase such other

investment matters regulated by this Agreement; and now it is once again further

narrowed by Article 3(2) Euroasia-BIT as to not apply to advantages and privileges

relating to any forms of multilateral agreements or tax-related agreements.

119

Hochtief, ¶86. 120

Euroasia-BIT, Art.9(3); Infra, ¶100.

18

90. Clearly, based on its own structure, Euroasia-BIT‘s drafters never intended to exclude

dispute settlement from the scope of Euroasia-BIT‘s MFN Clause.

91. On that account, under the rules of interpretation, when a clause has specific mentions on

matters that are excluded, matters that are not part of those exclusions are to be inferred

as included within the scope of the clause.121

Therefore, failure to refer dispute settlement

provision as part of the MFN clause‘s excluded matters reinforces the interpretation that

the MFN clause applies to dispute settlement provision.122

92. Likewise, Euroasia-BIT‘s drafters‘ failure to exclude dispute settlement provision

confirms how Euroasia-BIT‘s MFN Clause indeed covers dispute settlement provision.

c. Euroasia-BIT MFN Clause’s application to dispute resolution provision is not

against public policies

93. Further, Claimant submits that the invocation of Euroasia-BIT‘s MFN Clause does not

override any public policy as it was only done to circumvent a procedural hurdle – the

litigation requirement and its waiting period – that was futile to begin with.

94. Claimant acknowledges certain limitations of an MFN clause, as also recognized in

Maffezini, where the tribunal held that an MFN clause should not be invoked as to

override any public policies, such as overriding obligations to exhaust local remedies, a-

fork-in-the-road clauses, or if it is done to expand the consent of the host-State.123

95. All of these limitations are absent here: Article 9(2) Euroasia-BIT does not require

exhaustion of local remedies, but merely requires litigation for limited period of time. It

also contains no fork-in-the-road clause, as it does not provide an irrevocable choice

between litigation and arbitration but instead requiring litigation before arbitration.

121

National Grid, ¶82. 122

Suez, ¶58; RosInvest, ¶135. 123

Maffezini, ¶62.

19

96. Moreover, this invocation of Euroasia-BIT‘s MFN Clause also does not expand

Respondent‘s consent to arbitrate before this Tribunal. Article 6 ICC Rules dictates that

consent should be based on an arbitration agreement appointing to the use of ICC Rules,

which, under Euroasia-BIT, such consent has always been provided in Article 9(5)

Euroasia-BIT. Meanwhile, litigation requirement and waiting period are only procedural

issues that do not relate to creating or extending the host-State‘s consent to arbitrate.124

97. Indeed, this is the standing taken by various tribunals in allowing an MFN clause‘s

invocation to bypass procedural obstacles within a dispute resolution provision if a third-

party treaty contains a dispute resolution provision pointing to the same forum but

without such procedural obstacles.125

98. Likewise, this is exactly what Claimant is trying to invoke here; a way to circumvent

Euroasia-BIT‘s litigation requirements and waiting period; a treatment that, as shown

next, is less favorable compared to Eastasia-BIT‘s dispute resolution provision.

3) Euroasia-BIT’s dispute settlement provision is a less favorable treatment

compared to Eastasia-BIT’s dispute settlement provision

99. Finally, Claimant will show how Euroasia-BIT‘s dispute settlement provision is less

favorable when compared to Eastasia-BIT‘s dispute settlement provision; meaning it

should allow Claimant to replace the former with the latter.

100. In proving this, Claimant will first lay out the two dispute settlement provisions.

Euroasia-BIT requires investors to first conduct amicable consultation in case of dispute;

then litigate to host-State‘s courts when consultations fail; then wait for 24-months; and

finally, submission to arbitration is allowed.126

Meanwhile, Eastasia-BIT requires

amicable consultations; then after 6-months, submission to arbitration is allowed.127

124

Hochtief, ¶85. 125

Maffezini, ¶64; Siemens, ¶103; Hochtief, ¶75; Impregilo, ¶99. 126

Euroasia-BIT, Art.9. 127

Eastasia-BIT, Art.8.

20

101. In this regard, the treatment under Euroasia-BIT in which Claimant claims as less

favorable is the ‗requirement to litigate before host-State‘s courts for 24-months‘. While

investors under Euroasia-BIT are subject to this requirement, investors under Eastasia-

BIT are free to recourse to arbitration immediately after the failure of consultation.

102. On that account, investors under Euroasia-BIT are ‗required‘ to litigate before the host-

State courts, whereas in reality, Respondent‘s courts do not even have the competence to

adjudge any claims under international treaties.128

Given that, while investors under

Euroasia-BIT have to face such paradoxical procedural obstacle, investors under

Eastasia-BIT can simply submit their dispute directly to arbitration.

103. Moreover, it is recognized that arbitration is the preferred method of dispute resolution,

as it is not bound to any of the State‘s domestic policy, thereby more immune to any

potential partiality or dependency.129

Indeed, a massive volume of precedents agreed that

dispute settlement provisions containing litigation requirement and waiting period is less

favorable than dispute settlement provisions with direct access to arbitration.130

104. Likewise, Claimant urges this Tribunal to find that Euroasia-BIT‘s dispute settlement

provision, with its litigation requirement and 24-months waiting period, as less favorable

than Eastasia-BIT‘s dispute settlement provision containing no such requirement.131

105. And for that reason, since Claimant has already fulfilled Eastasia-BIT‘s pre-arbitral step

of 6 months of amicable consultation,132

this Tribunal should sustain jurisdiction.

CONCLUSION TO ISSUE-I:

This Tribunal is requested to find jurisdiction over this dispute. Claimant is an investor

under Euroasia-BIT, and he is not required to litigate first before Respondent‘s domestic

courts either by virtue of the futility exception or via Euroasia-BIT‘s MFN Clause.

128

PO3, ¶5. 129

Olha, p.24. 130

Mafezzini, ¶64; Hochtief, ¶88; AWG, ¶57; Renta4, ¶100. 131

Supra, ¶99. 132

PO3, ¶4.

21

PART II: LIABILITIES AND REMEDIES

ISSUE-II: RESPONDENT UNLAWFULLY EXPROPRIATED CLAIMANT’S

INVESTMENT

106. Under Article 4(1) Euroasia-BIT, when an investor‘s investment is expropriated by the

host-State, either directly or indirectly, even if it is for public purpose, with due process

of law, and done non-discriminatorily, the investor still deserves compensation.

107. On that account, Claimant submits that Respondent has violated Article 4(1) Euroasia-

BIT when it imposed the Executive Order because it indirectly expropriated Claimant‘s

investment, yet Respondent did not provide Claimant with any compensation. For that

reason alone, Respondent‘s expropriation is unlawful.133

108. To prove this, Claimant will begin by showing how the Executive Order was an indirect

expropriation (A); and concurrently, was not a non-compensable regulatory measure (B).

Further, Respondent‘s unlawful expropriation cannot be exempted (C).

A. RESPONDENT’S EXECUTIVE ORDER WAS AN INDIRECT EXPROPRIATION

109. In its Answers, Respondent attempts to justify its Executive Order as being intended to

‗condemn an illegal act of annexation of Fairyland by Euroasia.‘134

Nevertheless,

pursuant to the well-recognized ‗sole effect‘ doctrine,135

indirect expropriation is

determined not based on the intention behind the host-State‘s measure but instead based

on the overall effect of that measure on the investor‘s investment.136

As shown next, the

Executive Order did have an equivalent effect of indirect expropriation.

133

Euroasia-BIT, Art.4(1); Dolzer/Schreuer, pp.90-91. 134

Records, Answers, p.15. 135

LG&E, ¶188-191; Enron, ¶ 245; Dolzer/Schreuer, p.101. 136

UNCTAD (Expropriation), p.70.

22

110. Indirect expropriation occurs when a host-State‘s measure renders an investment‘s

economic value as essentially useless or if it causes the investor to lose control over its

investment. 137

Here, not only the Executive Order has rendered useless the economic

value of Rocket-Bombs, but it also caused Claimant to lose control over Rocket-Bombs.

111. First, when a host-State‘s measure results in a total or near-total destruction of an

investment‘s value, that measure amounts to indirect expropriation.138

Here, due to the

Executive Order, Rocket-Bombs‘ value immediately plummeted to almost non-existent.

112. This is because the Executive Order had declared Claimant and Rocket-Bombs as

blocked persons; 139

the consequence of such is that no persons in Oceania were allowed

to continue any contractual relationship with Claimant or Rocket-Bombs.140

This led to

all of Rocket-Bombs‘ suppliers to terminate their contracts.141

Without these supply

contracts, Rocket-Bombs were unable to resume any business operation, and as result,

Rocket-Bombs‘ economic value deteriorated rapidly to almost zero.142

113. Second, due to the Executive Order, Claimant also lost control over Rocket-Bombs. Loss

of control is demonstrated when an investor is prevented from using, enjoying or

disposing its investment.143

Such loss of control is particularly important when the

investment is in form of shareholding in a company.144

114. In this case, Claimant‘s investment is in form of shareholding in Rocket-Bombs.

Following the Executive Order, Claimant could not withdraw any returns from Rocket-

Bombs, could not continue Rocket-Bombs‘ business operation, and could not even sell

the shares he owns in Rocket-Bombs.145

Effectively, Claimant could not anymore use,

enjoy, or even dispose of his investment; he essentially lost all control over his

investment.

137

CME, ¶604; Feldman, ¶100; Metalclad, ¶103. 138

UNCTAD (Expropriation), p.65. 139

Facts, ¶17. 140

Id. 141

Id. 142

Records, Request, p.5. 143

UNCTAD (Expropriation), p.67; Sempra, ¶285. 144

Id. 145

Executive Order, Section 1; Facts, ¶17.

23

115. Concluding, the Executive Order was an indirect expropriation. Thus, pursuant to Article

4(1) Euroasia-BIT Respondent must provide Claimant compensation. Having not done

so, Respondent‘s expropriation is unlawful as it violated Article 4(1) Euroasia-BIT.

B. RESPONDENT’S EXECUTIVE ORDER WAS NOT A NON-COMPENSABLE REGULATORY

MEASURE

116. Claimant submits that Respondent‘s obligation to compensate cannot be exempted by

arguing that the Executive Order amounted to a non-compensable regulatory measure.

117. Claimant admits that host-States have sovereign rights to regulate any commercial or

business activities within its territory under the premise of regulatory power, 146

which if

established properly may release the host-State from the obligation to compensate.147

118. However, as demonstrated next, Respondent‘s Executive Order fell outside the scope of

regulatory power (1). Alternatively, the Executive Order was still expropriatory as it was

disproportionate (2).

1) Respondent’s Executive Order fell outside scope of regulatory power

119. Host-States‘ regulatory power is limited; it must be taken for the public purpose and must

be done non-discriminatorily.148

Meanwhile, Respondent‘s Executive Order was not done

for a public purpose (a) and was discriminatory (b).

146

Olynyk, p. 265. 147

Saluka, ¶262. 148

Olynyk, p.265; Sornarajah, p.283.

24

a. Respondent’s Executive Order was not done for public purpose

120. To be considered as a non-compensable regulatory measure, a host-State must prove that

a measure is done for public purpose – that is the genuine interest of the people of the

host-State.149

Respondent‘s Executive Order, meanwhile, was not done for the genuine

interest of its people as it was instead done for political reasons.

121. In BP Explorations, the tribunal held that an expropriation done as an act of political

retaliation does not qualify as being done for public purpose.150

The tribunal further

concluded that the expropriation clearly violated public international law as it was done

for ‗purely extraneous political reasons‘.151

122. In this case, in Respondent‘s own words, the Executive Order was done to condemn the

allegedly unlawful Fairyland‘s reunification with Euroasia.152

However, as established

earlier, the matter in Fairyland has never been adjudicated and even the UNSC has not

made any resolutions with regard to that matter.153

Therefore, it is evident that the

Executive Order was not issued pursuant to any legal obligations, but instead was merely

motivated by the political climate in Fairyland.

123. Therefore, Respondent‘s Executive Order was only done for a purely extraneous political

reason; and not for a public purpose, as there were no imminent threats arising from the

situation in Fairyland towards Respondent and its nationals.

b. Respondent’s Executive Order was discriminatory

124. Moreover, a measure must be carried out in a non-discriminatory manner to be

considered as non-compensable.154

149

Sornarajah, p.283. 150

BP Explorations, p.329. 151

Id. 152

Records, Answers, p.16. 153

Records, Request, p.5; PO2, ¶3. 154

Saluka, ¶307.

25

125. A measure can be discriminatory in two ways: first, if it is done with the intention to

specifically harm an investor; or second, if it nevertheless results in a discrimination to

the investor.155

Respondent‘s Executive Order falls into at least one of those ways.

126. First, in issuing the Executive Order, Respondent showed an intention to discriminate

Claimant. This is evinced by the wording of the Executive Order itself, which states that

it applies to „persons operating in such sectors of the Euroasian economy such

as…defense, in particular, arms production services‟.

127. The additional phrase ‗in particular‟ shows that Respondent specifically targeted

Claimant‘s investment, bearing in mind that Respondent must have known that Rocket-

Bombs was the only company involved in arms productions service with Euroasia at the

time.156

Clearly, this is against the nature of executive orders, which should not include

any specifically-targeted clauses.157

128. Second, alternatively, the Executive Order had a discriminatory effect on Claimant. As

held in ADC, discrimination looks also on the effect of the measure and not only the

intent.158

In examining whether a measure has a discriminatory effect, the purported

effect suffered by the investor must be compared broadly with the other foreign investors

as a whole.159

Moreover, a measure can also have discriminatory effect when the host-

State fails to provide any reasonable justification.160

129. Here, in effect, the Executive Order still put Claimant in a dissimilar position when

compared to other investors who were active in Euroasian economic sectors but not in the

sectors of financial services, energy, metal and mining, engineering, and defense.161

Thus, since Respondent also failed to explain why those particular sectors are specifically

sanctioned while other sectors were not, the Executive Order was in effect

discriminatory.

155

Dolzer /Stevens, p.62. 156

PO2, ¶6. 157

Black‘s Law (4th

Ed.), p. 43. 158

ADC, ¶441. 159

Id, ¶442. 160

Saluka, ¶313. 161

Executive Order, Section 1.

26

130. Therefore, either based on intent or effect, Respondent‘s Executive Order was

discriminatory towards Claimant. For that, the Executive Order cannot be considered as a

non-compensable regulatory measure.

2) Respondent’s Executive Order was expropriatory as it was disproportionate

131. Another limitation upon a State‘s regulatory power is that a measure needs to be

proportional, or else, it would turn into an expropriatory measure.162

A measure is

proportional if the measure is not more severe than it is needed to be in achieving the

State‘s desired objective. 163

As shown next, the Executive Order was not proportional.

132. To start, Respondent claimed that the Executive Order was done ‗in view of maintaining

international peace or security.‘164

While this particular claim of Respondent would be

further addressed below,165

for now Claimant notes that when it comes to maintaining

international peace or security, the UN Charter has laid down a detailed procedure to

settle any disputes involving maintenance of international peace or security through

peaceful methods, i.e. mediation, conciliation, negotiation or other judicial settlements.166

Instead of pursuing any of those methods, Respondent took the most drastic measure by

imposing a unilateral sanction that effectively destroyed Claimant‘s investment.

133. Moreover, Respondent‘s Executive Order was imposed in its own assumption that

Fairyland‘s reunification with Euroasia was ‗an illegal act of annexation‟ and that

Euroasia had conducted an unlawful behavior.167

However, as discussed earlier, the

illegality of Euroasia‘s action is still well debatable.168

162

Tecmed, ¶117-119. 163

Waelde/Kolo, p.828. 164

Records, Answers, p. 15. 165

Infra, ¶137. 166

UN Charter, Art. 33(1). 167

Records, Answers, p. 15. 168

Supra, ¶20; PO2, ¶3; Facts, ¶15.

27

134. Therefore, what Respondent did by imposing the Executive Order was clearly the most

drastic measure Respondent could have done without even a hint of any proportionality.

For that, Respondent‘s Executive Order is expropriatory rather than regulatory.

C. RESPONDENT’S UNLAWFUL EXPROPRIATION CANNOT BE EXEMPTED

135. Finally, Claimant submits that Respondent‘s unlawful expropriation cannot be exempted

either through Article 10 Euroasia-BIT (1) or the necessity defense (2). In any event,

Respondent still has the obligation to compensate Claimant (3).

1) Respondent’s unlawful expropriation cannot be exempted through Article 10

Euroasia-BIT

136. In its Answers, Respondent declared that the Executive Order was done ‗in view of

maintaining international peace or security.‘169

Respondent seems to refer to Article 10

Euroasia-BIT, which provides:

“Nothing in this Agreement shall be construed to prevent either Contracting Parties

from taking measures to fulfill its obligations with respect to the maintenance of

international peace or security.”

137. In this vein, Claimant will establish that Respondent cannot invoke Article 10 Euroasia-

BIT because the situation in Fairyland did not call for „obligations with respect to the

maintenance of international peace or security‟ (a) and Article 10 Euroasia-BIT is not a

self-judging clause (b).

169

Records, Answers, p.15.

28

a. Fairyland’s situation did not call for ‘obligations with respect to the

maintenance of international peace or security’

138. Article 10 Euroasia-BIT can only be invoked in the situation in which the host-State is

acting for the purpose of safeguarding ‗international peace or security‟. The situation in

Fairyland did not call for such situation.

139. The particular phrase of ‗international peace or security‟ has an uncontested

interpretation; it allows host-States only to take actions mandated by the UNSC in

furtherance of the UN‘s ―primary responsibility for the maintenance of international

peace or security.‖170

140. Here, since the UNSC has not agreed on any resolution for the situation in Fairyland,171

Respondent‘s Executive Order was done without following any mandate from the UN;

which is neither contemplated nor exempted under Article 10 Euroasia-BIT.

b. Article 10 Euroasia-BIT is not a self-judging clause

141. Moreover, Respondent cannot unilaterally decide that the situation in Fairyland called for

a measure to maintain „international peace or security‟ because Article 10 Euroasia-BIT

is not self-judging.

142. To show this, pursuant to Article 31 VCLT, treaties must be first be interpreted in

accordance with its ordinary meaning.172

For a clause to be self-judging, it must expressly

and clearly provide that the Contracting States, or at least one of them, have the

discretion to unilaterally determine the scope and applicability of the clause.173

For

example, a clause is self-judging if it includes language such as ‗if the State considers,‘

‗in the State‟s opinion,‘ or ‗if the State determines.‘174

170

Burke-White/VonStaden, p.355. 171

PO2, ¶3. 172

VCLT, Art.31. 173

CMS, ¶370; Sempra, ¶379; Burke-White/VonStaden, p.366. 174

Nicaragua, ¶222.

29

143. Contrastingly, Article 10 Euroasia-BIT does not contain such language or any language

being equivalent to it. This demonstrates that the ordinary meaning of Article 10

Euroasia-BIT indicates that Article 10 Euroasia-BIT is not self-judging.

144. As consequence, Respondent cannot unilaterally decide what situation called for a

measure to maintain ‗international peace or security‘.

2) Respondent’s unlawful expropriation cannot be exempted under the premise of

necessity defense

145. Further, Respondent cannot rely on the necessity defense provided under customary

international law – particularly under Article 25 ARSIWA – as to exempt its unlawful

expropriation. To begin, the necessity defense requires an exceptionally high threshold

for its invocation; and all of its prerequisites must be met cumulatively.175

146. In this line, none of the prerequisites under Article 25 ARSIWA are met here because

Respondent‘s essential interest was not threatened by grave and imminent peril (a); the

Executive Order was not the sole means to remedy the situation (b); and lastly, the

Executive Order impaired the essential interest another State (c).

a. Respondent’s essential interest was not threatened by grave and imminent peril

147. The first prerequisite to invoke Article 25 ARSIWA‘s necessity defense is that the State

invoking it must face a grave and imminent peril.

148. For a peril to be considered ‗grave‘, the very existence of the State and its independence

must be at stake.176

As for being imminent, a peril must have certain immediacy or

proximity instead of being merely ‗possible‘.177

To illustrate the high threshold for

establishing a ‗grave and imminent peril‘, even during the Argentine crisis where half of

175

CMS, ¶317; Continental ¶167; Enron, ¶3131; Sempra, ¶355. 176

CMS, ¶ 354-355; Enron, ¶ 306; Sempra, ¶ 348. 177

ARSIWA, Art.25 Commentary.

30

the Argentine population had to live below the poverty line and the unemployment rate

had reached above 25%, tribunals still rejected Argentina‘s defense of necessity. 178

149. Meanwhile, in the present case, there was no record at all of any existing threat directed

to Respondent arising from the situation in Fairyland, since Respondent was not even part

of the conflict between Euroasia and Eastasia to begin with.

150. For that reason, Respondent cannot invoke the necessity defense as to justify its violation

of Article 4 Euroasia-BIT, as Respondent‘s essential interest was never threatened by any

peril, let alone a peril that is grave and imminent.

b. Respondent’s Executive Order was not the sole means to remedy the situation

151. Moreover, for the Executive Order to be considered necessary, it must be the only means

available to remedy the purported state of necessity.179

152. If there are other means available – even if those means are more difficult or costly for

the State – then necessity defense cannot be invoked.180

For example, in CMS, the

tribunal held that when there are other steps to respond to the situation causing the State‘s

violation of its international obligations, the necessity defense could not be invoked. 181

153. Here, as previously established, Respondent actually had other ways to deal with the

situation in Fairyland – either through UN Charter‘s various peaceful dispute

resolutions182

– or even by imposing a less severe sanction to Claimant, e.g. by merely

prohibiting transaction to Euroasia.183

154. Instead, Respondent took the most drastic measure in responding to the situation in

Fairyland. For that, Respondent‘s Executive Order falls short of fulfilling Article 25

ARSIWA‘s prerequisite of ‗being the sole means to remedy the situation.‘

178

CMS, ¶ 354-355; Enron, ¶ 306; Sempra, ¶ 348. 179

ARSIWA, Art.25(1)(a). 180

Id. 181

CMS, ¶324. 182

Supra, ¶131. 183

Infra, ¶212.

31

c. Respondent’s Executive Order impaired the essential interest another State

155. Lastly, necessity defense can only be invoked if the State‘s measure does not impair the

essential interest of another State. In this case, Respondent‘s Executive Order actually

impaired Euroasia‘s essential interest through Euroasia‘s nationals.

156. Under customary international law concerning treatment on aliens, „whoever uses a

citizen ill, indirectly offends the State.‘ 184

In other words, acts against nationals of a State

may be also deemed as injuries towards the State.185

As suggested in Enron and Sempra,

when it comes to a host-State‘s investment obligations towards another State under a

BIT, the essential interest of the other State is substituted with the foreign investors‘

interests whom are nationals of that other State.186

157. Correspondingly, Respondent‘s Executive Order has impaired Euroasia‘s essential

interest – which in this circumstance is substituted by Claimant‘s essential interest as a

national of Euroasia. Summing up, since none of the prerequisites under Article 25

ARSIWA are met here, Respondent cannot invoke the necessity defense.

3) In any event, Respondent still has the obligation to compensate Claimant

158. Finally, even in the remote event that Respondent‘s unlawful expropriation is exempted

under either Article 10 Euroasia-BIT or the necessity defense, Respondent still owes

Claimant compensation.

159. Firstly, Article 10 Euroasia-BIT is worded only as to allow a Contracting Party to take

actions necessary ‗to fulfill its obligations with respect to the maintenance of

international peace or security.‘ However, it is not worded as to negate Contracting

Party‘s obligation under Article 4(1), namely the obligation to provide compensation in

case of expropriation. Indeed, if the BIT‘s Contracting Parties really intended that all of

184

Vattel, p.298. 185

Crawford, p.19. 186

Enron, ¶342; Sempra, ¶391.

32

its obligations under the BIT would not apply in times of war, civil disturbance, or

national emergency, they certainly would have stated so specifically.187

160. Second, as with to the necessity defense, Article 27 ARSIWA specifically states that its

invocation „is without prejudice to the question of compensation for any material loss

caused by the act in question‟.188

Specifically, despite a state of necessity, Article 27

ARSIWA refers the question of compensation back to the relevant BIT; 189

which as

discussed, obliges any acts of expropriation to be accompanied with compensation.190

161. In conclusion, irrespective of whether Respondent‘s unlawful expropriation can be

exempted either through Article 10 Euroasia-BIT or the necessity defense, Claimant still

deserves compensation from Respondent.

CONCLUSION TO ISSUE-II:

Respondent has violated Article 4(1) Euroasia-BIT since its Executive Order amounts to

indirect expropriation, and not a non-compensable regulatory measure. Moreover,

Respondent cannot be exempted either through Article 10 Euroasia-BIT or the State

defense necessity. In any event, Respondent must compensate Claimant for its violation.

ISSUE-III: THERE WAS NOTHING IN CLAIMANT'S INVESTMENT THAT

WOULD INTERFERE WITH HIS RIGHT TO BIT PROTECTION

162. In its first attempt to escape from liabilities, Respondent argues that ‗Claimant‟s

investment may not enjoy protection, since Claimant breached Oceanian domestic

laws.‘191

Respondent asserted that due to the invocation of Euroasia-BIT‘s MFN Clause,

Claimant now is bound to comply with Article 1(1) Eastasia-BIT, which according to

187

Suez Vivendi, ¶270. 188

ARSIWA, Art.27; Crawford Report, p.83. 189

CMS, ¶¶386-388. 190

Supra, ¶¶105 & 208. 191

Records, Answers, p.15.

33

Respondent contains a ‗clean hands doctrine‘ that will bar Claimant‘s investment from

protection because Claimant has allegedly conduct bribery in obtaining Rocket-Bombs‘

environmental license.192

163. Claimant submits that Respondent‘s argument is mistaken for four reasons. First,

Claimant‘s investment is not bound to Article 1(1) Eastasia-BIT (A). Second, Claimant‘s

investment has actually complied with Article 1(1) Eastasia-BIT (B). Third, Respondent

cannot prove Claimant‘s non-compliance with Oceanian domestic law (C). Finally,

Respondent is still obliged to protect Claimant‘s investment (D).

A. CLAIMANT’S INVESTMENT IS NOT BOUND TO ARTICLE 1(1) EASTASIA-BIT

164. Respondent argues that if Claimant can access Eastasia-BIT‘s dispute settlement

provision via Euroasia-BIT‘s MFN Clause, his investment would be bound to Article

1(1) Eastasia-BIT, which, according to Respondent, contains the clean hands doctrine193

– a doctrine that bars illegally made investments from any treaty protections.194

165. As a preliminary, it is safe to presume that Respondent itself concedes how Euroasia-BIT

does not contain the clean hands doctrine; otherwise, Respondent in its Answers would

have tried to apply the doctrine straight from Euroasia-BIT instead of Eastasia-BIT.

166. On that account, Claimant submits that his reliance on Eastasia-BIT‘s dispute settlement

provision will not cause his investment being subject to Article 1(1) Eastasia-BIT.

167. This is because the treatment invoked from a comparator treaty via an MFN clause must

be incorporated into the basic treaty without any additional acts or transformations.195

In

other words, MFN clause imports certain benefits from the comparator treaty without

192

Id. 193

Records, Answers, p.15. 194

Vannessa, ¶167; Moloo, p.8; Fitzmaurice, p.119. 195

Schill, p.507.

34

necessarily importing any of the comparator treaty‘s disadvantages.196

This notion traces

back to basic nature of an MFN clause; it attracts only the more favorable treatment.197

168. For example, in Siemens and Maffezini, both tribunals granted the investors a more

favorable treatment from the comparator treaty without binding the investors with the less

favorable conditions under the comparator treaties.198

Similarly, the tribunal in Daimler

emphasized that an investor can import provisions from the comparator treaty without

being subjected to any of the comparator treaty‘s more restrictive provisions.199

169. Accordingly, since the clean hands doctrine is a more restrictive provision as it limits the

application and protection of a BIT,200

it cannot now be established that Claimant‘s

investment is bound to comply with such a more restrictive provision that is Article 1(1)

Eastasia-BIT following the invocation of Euroasia-BIT‘s MFN Clause.

B. CLAIMANT’S INVESTMENT HAS COMPLIED WITH ARTICLE 1(1) EASTASIA-BIT

170. If this Tribunal disagrees with the above analysis and finds that Claimant‘s investment

must comply with Article 1(1) Eastasia-BIT, Claimant submits that his investment has

actually complied with Article 1(1) Eastasia-BIT.

171. Article 1(1) Eastasia-BIT stipulates that investment must ‗be invested […]in accordance

with the laws and regulations‟ of the host-State.‘ Indeed, Claimant‘s investment was

invested in accordance with Oceania‘s laws and regulations.

172. To start, Article 1(1) Eastasia-BIT, as Respondent had also agreed,201

only bars

protections to investments that are made illegally. Precisely, the clean hands doctrine

only applies to the situation of illegality when an investment is made.202

For example, in

Yukos, the tribunal held that it is unpersuasive to measure illegality based on the

196

Schill, p.159. 197

Supra, ¶65; Chukwumerije, p.640. 198

Maffezini, ¶45; Siemens, ¶68. 199

Daimler, ¶93; Caron/Shirlow, p.12. 200

Desert Line, ¶¶104-105; Moloo, p.8. 201

Records, Answers, p.15. 202

Vannessa, ¶167.

35

performance of an investment, instead of only the making of investment.203

Similarly, the

tribunal in Mamidoil held that bribery could only lead to the illegality of investment if it

was conducted during the acquisition of the investment.204

173. Having that in mind, Claimant made his investment when he purchased 100% of the

shares of Rocket-Bombs in 1998, pursuant to Article 1(b) Eastasia-BIT that provides

‗shares of companies‟ as one of the forms of investment. This acquisition of investment

was never disputed by Respondent with regard to its legality thereof. From this fact

alone, Claimant‘s investment has already complied with Article 1(1) Eastasia-BIT.

174. On the other hand, the illegality in which Respondent is disputing is related to Claimant‘s

obtainment of environmental license, which according to Respondent such obtainment

involved bribery.205

Assuming Respondent is right on this one – which as shown later,

Respondent‘s bribery allegation is actually unproven206

– Claimant maintains that his

investment is still in compliance with Article 1(1) Eastasia-BIT.

175. This is because the obtainment of environmental license is not part of Claimant‘s

acquisition of investment. Even without the license, Claimant would still have an

investment in form of his shares in a company, and that investment would still deserve

BIT protection. In this line, what must be understood is that any other misconduct of

investors other than the acquisition of investment falls outside the legality requirement,207

and this too includes any obtainment of licenses after the acquisition of investment.

176. Thus, since Claimant‘s purported illegality is not related to investment making, Article

1(1) Eastasia-BIT will not operate as to bar Claimant‘s investment from BIT protections.

In any case, as shown next, the bribery allegation against Claimant is actually unproven.

203

Yukos, ¶1354. 204

Mamidoil, ¶306. 205

Id. 206

Infra, ¶179. 207

Miles, p.343.

36

C. RESPONDENT CANNOT PROVE CLAIMANT’S NON-COMPLIANCE WITH OCEANIAN LAWS

177. As briefly discussed, Respondent‘s claim with respect to Claimant‘s breach of Oceanian

domestic law relates to his obtainment of environmental license, which Respondent has

alleged as to involve bribery. In that respect, Claimant submits that Respondent has failed

to prove its bribery allegation against Claimant.

178. First and foremost, as upheld in UNCITRAL Rules – the law of the seat of this arbitration

– as well as several ICC awards, each party bears the burden of proving its own claim.208

As addressed next, Respondent falls short of fulfilling such burden of proof.

179. The burden of proving bribery allegation is of the highest standard;209

it requires clear

and convincing evidence;210

and such evidence must be greater than mere innuendo on

the alleged party‘s wrongful conduct.211

For example, in both Al-Warraq and TSA, the

tribunals only concluded the existence of bribery based on the domestic court decision

affirming the existence of the bribery on the part of the investors. 212

180. Here, distinctively, there has been no court decision affirming Claimant‘s alleged

bribery.213

In fact, the whole allegation against Claimant is only based on the ill-fated

testimony of Respondent‘ own officials – the NEA President– who agreed to give the

Oceanian General Prosecutor several names in exchange for his own freedom.214

That

evidence, coming from Respondent‘s own official, is neither clear nor convincing.

181. Therefore, since Respondent fails to fulfill the burden of proving the bribery allegations

against Claimant, this Tribunal should remain unimpressed of Respondent‘s allegation.

208

UNCITRAL Rules, Art.27(1); Collection of ICC Arbitral Awards, 2008-2011, p.831. 209

Crivellaro, pp.115-117. 210

Siag, ¶¶325-326; Himpurna, ¶¶219-20. 211

Id. 212

Al-Warraq, ¶¶161-164; TSA, ¶¶174-75. 213

PO2, ¶5. 214

PO2, ¶3.

37

D. RESPONDENT IS STILL OBLIGED TO PROTECT CLAIMANT’S INVESTMENT

182. Finally, in the remote event this Tribunal finds that Respondent has a case on its bribery

allegation, Claimant submits that his investment still deserves protection because of two

reasons: first, Respondent has misconstrued the use of clean hands doctrine (1) and

second, Respondent was equally involved in the bribery allegation (2).

1) Respondent has misconstrued the use of clean hands doctrine

183. As seen in its Answers, Respondent raised the clean hands doctrine only in the situation

this Tribunal‘s jurisdiction had already been established.215

Therefore, it is indisputable

that Respondent only raised the doctrine on the merits stage. When clean hands doctrine

is not raised in the jurisdictional phase; the doctrine can only be used for mitigation of the

reparation due, but not to limit an entire investment protection.216

184. In Yukos, the tribunal held that the clean hands doctrine, when raised in merits phase, will

not serve to deny altogether the investor‘s right to protections, but it will merely serve as

a legal basis to ‗correct the investor‟s behavior and to impose any other sanctions

available.‘217

This is because a host-State should not rely on its domestic legislation to

escape its treaty-based obligations. 218

The reason being, an investor‘s fault should not

automatically cause the investor to lose its entire protection; as such fault should instead

be dealt within the framework of the host-State‘s domestic laws.219

185. Therefore, even if the bribery allegation against Claimant were to be proven, the

consequence of that finding would come from elsewhere, i.e. sanctions under the

framework of Oceanian laws. For certain, however, the consequence would not be the

deprivation of Claimant‘s entire investment protection.

215

Records, Answers, p.15. 216

A/CN.4/SR.2639, ¶51. 217

Yukos, ¶1355. 218

Saba-Fakes, ¶118. 219

Magaisa, p.94.

38

2) Respondent was equally involved in the bribery allegation

186. Lastly, Claimant submits that his investment cannot be deprived of BIT protection when

Respondent itself was equally involved in the bribery allegation.

187. When a State participates in an illegal event, it cannot rely on the clean hands doctrine to

bar an investment from protections while at the same time escaping all liabilities.220

In fact,

barring an investor from protections for bribery when the State equally participates in such

bribery will fortify the State‘s culture of corruption and undermine the rule of law.221

188. As demonstrated in Fraport, the principle of fairness will prevent a host-State from

invoking any illegality done by the investor, when the State had knowingly overlooked the

violations and actually had endorsed the investor‘s investment.222

In other words, host-

States must be precluded from contesting a situation involving illegality before a tribunal

when the host-State itself secured benefits from the illegal situation.223

189. In this case, the bribery allegation against Claimant involved the obtainment of

environmental license from the Oceania NEA President.224

In that situation, the NEA

President, as part of Respondent‘s officials, was acting in Respondent‘s sovereign capacity

and thereby any of his actions were also attributable to Respondent.225

Consequentially, as

discussed next, Respondent indeed equally participated in the bribery allegations.

190. First of all, Respondent knowingly issued the environmental license to Claimant back in

1998, even in the face of the purported bribery.226

Moreover, in the last 16 years where

Rocket-Bombs relied on this environmental license, Respondent never disputed the

illegality of the license barring the single the investigation in 2015.227

In fact, Respondent

actually had opportunities to visit Rocket-Bombs over the years as to verify whether

220

Lim, p.676. 221

Sauvant, p.678. 222

Fraport, ¶346. 223

Temple of Preah Vihear, ¶¶143-44. 224

Records, Answers, p.15. 225

Johnson/Volkov, p.367; ARSIWA, Art.5 226

Facts, ¶6. 227

Facts, ¶19.

39

Rocket-Bombs‘ production line was still worthy of the environmental license, yet

Respondent never at all disputed Rocket-Bombs‘ environmental license.228

191. In conclusion, Respondent had a lot of chances to revoke or dispute Rocket-Bombs‘

environmental license – if it was really obtained through bribery – yet Respondent never

chose to do so. Now, Respondent cannot ignorantly blame Claimant for the obtainment of

environmental license, as that would stand in contrast with the principle of fairness.

CONCLUSION TO ISSUE-III:

192. Claimant‘s investment is entitled to BIT protection. The clean hands doctrine cannot

operate to bar Claimant‘s investment from protection because: it is not bound to Article

1(1) Eastasia-BIT; alternatively, it has complied with Article 1(1) Eastasia-BIT; and in any

case, Respondent falls short in proving that Claimant has breached Oceanian law; and

nevertheless, Respondent is still obliged to protect Claimant‘s investment.

ISSUE-IV: CLAIMANT DID NOT CONTRIBUTE TO THE DAMAGE SUFFERED

BY HIS INVESTMENT

193. Finally, as its last defense, Respondent asserts that Claimant contributed to the damage

suffered by his investment by virtue of his own conduct, the conduct being Claimant‘s

contract renewal with Euroasia on 28 February 2014.229

Claimant submits that, once

again, Respondent‘s assertion is misguided and unsubstantiated.

194. To start, Respondent seems to rely on contributory fault – a concept derived from public

international law where reparation to an injured party should take into account the injured

party‘s own contribution.230

However, this concept has a subjective nature, as it tends to

228

PO3, ¶1. 229

Records, Answers, p.15. 230

ARSIWA, Art.39.

40

defy mathematical precision.231

For that reason, Claimant requests this Tribunal to at least

reconsider the application of contributory fault.

195. In any case, even if contributory fault is applied, none of its elements are met here.

Article 39 ARSIWA have set out the elements of establishing contributory fault, in

which: there must be an action or omission done by the claimant; manifesting a lack a

due care; and of which it materially contributed to the claimant‘s injury.232

196. On that account, Claimant will establish that the contract renewal with Euroasia did not

manifest lack of due care (A). Rather, it was actually a reasonable business decision at

that time (B). In any case, Claimant‘s purported contribution was not material (C).

A. THE CONTRACT RENEWAL DOES NOT MANIFEST LACK OF DUE CARE

197. A lack of due care occurs when the injured party shows an understanding of a dangerous

situation, yet still voluntarily encountered it.233

Respondent suggested that Claimant had

understood the dangerous situation since he ‗should have known of Euroasia‟s intention

to incorporate Fairyland.‘234

Respondent‘s assertion is fundamentally misdirected.

198. When it comes to establishing lack of due care, the ‗dangerous situation‘ must be the

situation which turns out to injure the investor.235

In this case, that situation was the

imposition of the Executive Order, not Euroasia‘s intervention in Fairyland. Therefore,

the right question should be whether Claimant knew that his contract renewal would lead

to the imposition of the Executive Order. The answer to that is in the negative.

199. When Claimant concluded the contract renewal on 28 February 2014, it was impossible

for him to predict that Respondent was going to issue the Executive Order on 1 May

2014. This is because, not the whole international community has condemned Euroasia in

231

Sabahi/Duggal, p.289. 232

ARSIWA, Art.39 233

Bederman, p.355; Ripinsky/Williams, p.315. 234

Records, Answers, p.15. 235

Gemplus, Part. XI, ¶11.14; Yukos, ¶1539.

41

light of the situation in Fairyland,236

including the UNSC.237

Therefore, there was no

chance for Claimant to know beforehand that Respondent was going to condemn

Euroasia by imposing the Executive Order.

200. Alternatively, if the ‗dangerous situation‘ is ‗Euroasia‟s intention to incorporate

Fairyland…by direct military intervention‟, Claimant submits that Respondent‘s

assertion that Claimant could have known about Euroasia‘s intention beforehand is

assumptive at best. The contract renewal was on 28 February 2014, whereas the actual

intervention only occurred on 23 March 2014. Thus, since the date when Euroasia

actually decided to intervene in Fairyland is unknown,238

it could not be concluded with

certainty that Claimant actually knew about the intervention before it actually happened.

201. As held in Gemplus, the tribunal found no contributory fault because the investor could

not have reasonably known that its action would have led to the eventual measure

imposed by the host-State.239

The same rationale applies here.

202. Since Claimant could not have known that the contract renewal would somehow led him

and Rocket-Bombs being sanctioned by Respondent, no contributory fault should be

found on Claimant‘s part.

B. THE CONTRACT RENEWAL WAS A REASONABLE BUSINESS DECISION

203. Moreover, the test of reasonableness has often been employed in determining whether an

investor‘s conduct actually amounts to contributory fault.240

204. In Enron, although the tribunal agreed that the investor‘s conduct led to the investment‘s

vulnerability and eventually negatively impacted the investor‘s investment, the tribunal

236

Facts, ¶16. 237

PO2, ¶3. 238

Id. 239

Gemplus, Part XI, ¶11.14. 240

Ripinsky, p.16.

42

nonetheless found no contributory fault on the investor‘s part because the investor‘s

conduct was a reasonable business decision to be taken at the time.241

205. Here, the contract renewal was actually a reasonable business decision done by Claimant.

206. First, tracing back to 1998, Claimant concluded a contract with Euroasia that allowed

Rocket-Bombs to commence productions.242

That contract expired in January 2014, with

a possibility of a renewal.243

When Euroasia on February 2014 offered Claimant for a

contract renewal,244

Claimant, as a reasonable businessman, accepted the offer.

207. Moreover, prior to the offer of the contract renewal, Rocket-Bombs had already faced

financial struggle in early 2014. Rocket-Bombs was on the verge of shutting down

partially and potentially forced to dismiss many of its workers.245

Thus, when Euroasia‘s

offer of contract renewal was on the table, it was only reasonable that Claimant accepted

it. Not only was it an act of respect toward a long-standing client,246

the contract renewal

also allowed Rocket-Bombs to maintain its financial stability – something that would

have still been maintained had it not for Respondent‘s Executive Order.

208. In sum, concluding the contract renewal did not contribute to Claimant‘s damage. Rather,

the contrary is true: had Claimant not concluded the contract renewal, the financial

stability of Rocket-Bombs would certainly be jeopardized; then he would have definitely

contributed to the loss of his investment.

C. CLAIMANT’S PURPORTED CONTRIBUTION WAS NOT MATERIAL

209. Finally, only contribution that is material can amount to contributory fault.247

In that

respect, even if Claimant contributed to his own damage, his contribution is not material.

241

Enron, ¶¶371-373. 242

Facts, ¶9. 243

Id. 244

Facts, ¶15. 245

Records, Request, p.4. 246

Facts, ¶9. 247

ARSIWA, Art. 39.

43

210. A contribution is only material when there is a clear causal link between the claimant‘s

conduct and the extent of its injury.248

With that in mind, Claimant submits that any

causal link between his conduct and the extent of his injury should be disregarded

because Respondent‘s Executive Order was disproportional.

211. When there is a lack of proportionality in the host-State‘s conduct, such

disproportionality will break any causal link between the potentially blameable conduct

of the injured party and its injury.249

This approach is consistent with the customary

international law where a State‘s reaction is clearly disproportionate to the individual‘s

blamable conduct; that State‘s reaction becomes the exclusive cause of the injury.250

212. For example, in Tecmed, the tribunal emphasized that proportionality must exist between

the public purpose aimed by a host-State‘s regulation and its interference with the

investor‘s property rights.251

Moreover, the tribunal in Yukos affirmed the importance of

proportionality between the investors‘ contribution and the host-State‘s measure. 252

213. Here, Respondent‘s Executive Order is far too disproportionate when compared to

Claimant‘s purported contribution. Claimant‘s purported contribution was only in form of

the contract renewal, without actually having the chance to perform it.253

Meanwhile,

Respondent‘s Executive Order effectively destroyed Claimant‘s investment.254

Easily,

Respondent could have imposed a more proportionate sanction, i.e. by only prohibiting

transactions to Euroasia. That way, although Claimant‘s investment would perhaps be

affected, at least it would not have been effectively destroyed.

214. Conclusively, as the causal link is broken by the disproportionality of the Executive

Order, any of Claimant‘s contribution to his damage is not material. Consequently, his

contribution will not reach the threshold of contributory fault under Article 39 ARSIWA.

248

Occidental, ¶678, Yukos ¶1633. 249

Sadowski, p.5. 250

Stern, p.322; UN Report of International Arbitral Awards, p.177; Moore, p.2117. 251

Tecmed ¶¶19-23. 252

Yukos, ¶¶1635-1637. 253

Facts, ¶15; Supra, ¶192. 254

Supra, ¶109.

44

CONCLUSION TO ISSUE-IV:

215. Claimant urges this Tribunal to refuse the application of contributory fault in this present

case, as none of its elements are met. Therefore, Claimant pleads this Tribunal to order

Respondent to pay Claimant a compensation amounting no less than 120, 000,000 USD

for the loss of his investment in the sole hands of Respondent.

45

PRAYER FOR RELIEF

1. For the foregoing reasons, Claimant respectfully requests this Tribunal to render an

award in favor of Claimant, as follows:

(1) To declare that it has jurisdiction over the present dispute;

(2) To declare that Respondent violated Article 4(1) Euroasia-BIT;

(3) To declare that Claimant‘s investment is entitled to protections;

(4) To declare that Claimant did not contribute to his own damages;

(5) To award to Claimant, and order Respondent to pay to Claimant, forthwith, the

full amount of compensation no less than 120,000,000 USD with interest as of the

date of the issuance of the award;

(6) To order Respondent to bear all the costs of this arbitration.

Respectfully Submitted on September 19, 2016

By:

Team Crawford

On Behalf of Claimant

Peter Explosive