ATTON BORO LIMITED V. THE REPUBLIC OF MERCURIA · Weeramantry Weeramantry, Treaty Interpretation in...

TEAM TANAKA

PERMANENT COURT OF ARBITRATION

PCA CASE NO. 2016-74

ATTON BORO LIMITED

V.

THE REPUBLIC OF MERCURIA

MEMORIAL FOR CLAIMANT

18th September 2017

TEAM TANAKA

II

TABLE OF CONTENTS

LIST OF AUTHORITIES IV

LIST OF ABBREVIATIONS XVI

STATEMENT OF FACTS 1

SUMMARY OF PLEADINGS 3

ARGUMENTS ON JURISDICTION 4

I. THE TRIBUNAL HAS THE JURISDICTION TO ADJUDICATE

THE CLAIMS IN RELATION TO THE ARBITRAL AWARD

A. The Arbitral Award is a crystallization of rights arising out of the LTA.

B. The LTA fulfils the Salini’s criteria of investment.

C. The Award falls within the ambit of the Umbrella Clause.

4

4

6

8

II. THE RESPONDENT CANNOT DENY THE CLAIMANT THE

BENEFITS UNDER THE MB-BIT

A. The Claimant is entitled to the benefits of BIT under the MB-BIT as

the Claimant is an investor under the MB-BIT.

B. The Respondent cannot invoke the Denial of Benefits clause.

a. The Claimant has substantial business activity.

b.This Tribunal should not pierce the corporate veil to determine the

ownership of the Claimant.

11

12

14

16

ARGUMENTS ON MERITS 17

III. THE RESPONDENT FAILED TO PROVIDE THE CLAIMANT’S

INVESTMENT WITH FAIR AND EQUITABLE TREATMENT IN

VIOLATION OF ART-3.2 OF THE MB-BIT

A. The Fair and Equitable Treatment standard is autonomous.

B. The enactment of the IP law is inconsistent with the TRIPS Agreement

C. The Respondent defeated the Claimant’s legitimate expectations.

17

17

20

22

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D. The measure adopted by the Respondent was arbitrary and

unreasonable.

E. The Respondent failed to act transparently.

25

27

IV. THE RESPONDENT IS LIABLE FOR THE CONDUCT OF ITS

JUDICIARY UNDER ART-3 OF THE MB-BIT

A. The Claimant suffered an undue delay of seven years which constitutes

a denial of justice.

B. The Respondent failed to provide the Claimant with effective means of

asserting claims and enforcing rights.

C. The MB-BIT is silent of the Exhaustion of Local Remedies rule.

28

28

30

32

V. THE TERMINATION OF THE LTA IS A VIOLATION OF THE

BIT BY VIRTUE OF ART-3.3 OF THE MB-BIT

A. The Respondent failed to observe its contractual obligation under the

MB-BIT.

B. The conduct of the NHA is attributable to the Respondent.

a. The NHA is a state organ.

b.The NHA had acted under the direction of the Respondent.

C. The NHA is exercising its sovereign authority and not merely acting in

a commercial capacity.

D. The termination of the LTA defeated the Claimant’s legitimate

expectations of a contractual stability.

33

33

33

34

35

36

37

PRAYERS FOR RELIEF 39

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IV

LIST OF AUTHORITIES

ABBREVIATION FULL CITATION

BOOKS

Amerasinghe Chittharanjan Felix Amerasinghe, Local

Remedies in Intemational Law (2nd edition

2004)

Benedetto Saverio Di Benedetto, International

Investment Law and the Environment

(Edward Elgar, 2013)

Dolzer/Schreuer Rudolf Dolzer & Christoph Schreuer,

Principles of International Investment Law

166 (2nd Ed. 2012)

Dolzer/Stevens Rudolf Dolzer and Margrete Stevens, Bilateral

investment treaties, Martinus Nijhoff

Publishers (1995)

Gaillard E.Gaillard, The Global Community Yearbook

of International Law and Jurispudence (2015)

Newcombe/Paradell Andrew Newcombe and Lluís Paradell, Law

and Practice of Investment Treaties: Standards

of Treatment (2009)

Sacerdoti G. Sacerdoti, Bilateral Treaties and

Multilateral Instruments on Investment

Protection, Receuil des Cours, Tome 269, at

341 (1997)

Salacuse (I) Jeswald W. Salacuse, The Law of Investment

Treaties (2010)

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Salacuse (II) Jeswald W. Salacuse, The Treatification of

International Investment Law, 13 L. & Bus.

REv. AM. 157 (2007)

Sauvant Karl P. Sauvant, ed., Yearbook on

International Investment Law and Policy,

2009-2010 (New York: Oxford University

Press, 2010)

Schreuer (I) Christoph Schreuer, Protection against

Arbitrary or Discriminatory Measures, in: The

Future of Investment Arbitration (C. A.

Rogers, R.P. Alford eds.) 183 (2009)

Schreuer (II) Christoph Schreuer, Fair and Equitable

Treatment in Arbitral Practice, 6 J. World

Investment & Trade 357 (2005)

Schill Stephan W. Schill International Investment

Law and Comparative Public Law, Oxford:

Oxford University Press, 2010

Sprankling John G. Sprankling, The International Law of

Property. Oxford, United Kingdom : Oxford

University Press, 2014

Wang Guiguo Wang, International investment law:

A Chinese perspective (Routledge, 2014)

JOURNALS ARTICLES

Ackner Claudia Ackner, Investment Treaty

Arbitration as a tool to enforce arbitral award,

The European, Middle Eastern and African

Review 2014

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Carreau/Flory/Juillard D. Carreau, Th. Flory, P. Juillard, Droit

International. Economique: 3rd ed., Paris,

LGDJ (1990)

Demirkol Berk Demirkol, The Notion of ‘Investment’ in

International Investment Law 1 Tur. Com. L.

Rev. 41 (2015)

Dolzer Rudolf Dolzer, Fair and Equitable Treatment:

Today's Contours, 12 Santa Clara J. Int'l L. 7

(2014)

Grabowski Alex Grabowski, The Definition of

Investment under the ICSID Convention: A

Defense of Salini, Chicago Journal of

International Law Vol. 15 No. 1. Article

13(2014)

Jonckheree Katherine Jonckheree, Practical Implication

from an expansive interpretation of umbrella

clause in International Investment Law, South

Carolina Journal of International Law and

Business 11

Mann F.A. Mann “British Treaties for the Promotion

and protection of Investments”, British

Yearbook of International law 241 (1981)

Mouward/Dulac Caline Mouward & Elodie Dulac, The

Protection offered by Umbrella Clause in

Korean Investment Treaties, Journal of

arbitration Studies, vol. 23 (2013)

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Nolan/Baldwin Michael D. Nolan and Edward G. Baldwin,

The Treatment Of Contract-Related Claims In

Treaty-Based Arbitration, MEALEY’S

International Arbitration Report Vol. 21, #6,

Lexis Nexis, June 2006.

Potestà Michele Potestà, Legitimate Expectations in

Investment Treaty Law: Understanding the

Roots and the Limits of a Controversial

Concept, 28 ICSID Rev. 88 (2013)

Quadir Riadh Quadir, Patent Stalemate: The WTO's

Essential Medicines Impasse between

Pharmas and Least Developed Countries, 61

RUTGERS L. REv. 437, 454 (2009)

Robbins Joshua Robbins, The Emergence of Positive

Obligations in Bilateral Investment Treaties,

13 U. MIAMI INT'L & CoMP. L. REv. 403,

425 (2006)

Schreuer (III) Schreuer (Commentary on the ICSID

Convention: ICSID Review, FILJ vol. 11,

1996)

Scott Gudgeon, K. Scott "United States Bilateral

Investment Treaties: Comments on Their

Origin, Purposes, and General Treatment

Standards." Int'l Tax & Bus. Law4 (1986)

Souza Raul Pereira de Souza Fleury; Umbrella

Clauses: a trend towards its elimination,

Arbitration International, Vol 31, Issue

4,(2015)

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Stone Jacob Stone, Arbitrariness, The Fair and

Equitable Treatment Standard, and the

International Law of Investment, 25 Leiden J.

Int’l L., 77 (2012)

Vasciannie Stephen Vasciannie, The Fair and Equitable

Treatment Standard in International

Investment Law and Practice, 70 Brit. Y.B.

Int’l L. 99 (1999)

Walker Herman Walker Jr., Provisions on Companies

in United States commercial Treaties, 50 AM.

J. INT’L. 373 (1956)

Weeramantry Weeramantry, Treaty Interpretation in

Investment Arbitration (2012)

Wissenfels Alex Wissenfels, Independent BIT Standard

or mere Affirmative Commitment? The

Umbrella Clause Interpreted, Austrian Review

of International and European Law

Wong Jarrod Wong, Umbrella Clauses in Bilateral

Investment Treaties: Of Breaches of Contract,

Treaty Violations, and the Divide Between

Developing and Developed Countries in

Foreign Investment Disputes, 14 Geo. Mason

L. Rev. 137 (2006).

ARBITRAL DECISIONS

AdT v Bolivia

Aguas del Tunari, S.A v. Republic of Bolivia,

ICSID Case No. ARB/02/3, Decision on

Respondent’s Objections to Jurisdiction

(October 21, 2005)

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Amto v. Ukraine

Limited Liability Company Amto v. Ukraine,

SCC Case No.080/2005, Final Award (March

26, 2008)

ATA v Jordan

ATA Construction, Industrial and Trading

Company v. The Hashemite Kingdom of

Jordan, ICSID Case No. ARB/08/2 (May 18,

2010)

Bayindir v Pakistan Bayindir Insaat Turizm Ticaret Ve Sanayi

A.S. v. Islamic Republic of Pakistan (ICSID

Case No. ARB/03/29) Award (August 27,

2009)

Chevron-Texaco v Ecuador Chevron Corporation and Texaco Petroleum

Company v. The Republic of Ecuador (I)

(PCA Case No. 34877) Final Award (August

31, 2011)

Chevron-Texaco v Ecuador (II) Chevron Corporation and Texaco Petroleum

Corporation v. The Republic of Ecuador,

UNCITRAL, PCA Case No. 2009-23, Third

Interim Award on Jurisdiction and

Admissibility (February 27, 2012)

CME v Czech Republic CME Czech Republic B.V. v. The Czech

Republic, UNCITRAL Final Award (March

14, 2003)

CMS v Argentina CMS Gas Transmission Company v. The

Argentine Republic (ICSID Case No.

ARB/01/8) Award (May 12, 2005)

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Continental Casualty v Argentina Continental Casualty Company v. Argentine

Republic (ICSID Case No. ARB/03/9) Award

(September 5, 2008)

Deutsche Bank v Sri Lanka

Deutsche Bank AG v. Democratic Socialist

Republic of Sri Lanka, ICSID Case No.

ARB/09/2, Award (October 31, 2012)

El Paso v Argentina El Paso Energy International Company v.

Argentine Republic (ICSID Case No.

ARB/03/15) Award (October 31, 2011)

Eli Lilly v Canada

Eli Lilly and Company v. Canada (ICSID

Case No. UNCT/14/2) Final Award (March

16, 2017)

Enron v Argentina Enron Creditors Recovery Corporation

(formerly Enron Corporation) and Ponderosa

Assets, L.P. v. Argentine Republic (ICSID

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

Eureko v Poland Eureko B.V. v. Republic of Poland, Partial

Award (August 19, 2005)

GEA v Ukraine GEA Group Aktiengesellschaft v. Ukraine

(ICSID Case No. ARB/08/16) Award (March

31, 2011)

Impregilo v Pakistan Impregilo S.p.A v. Islamic Republic of

Pakistan, ICSID Case No. ARB/03/3,

Decision on Jurisdiction (April 22, 2005)

Inmaris Perestroika v Ukraine Inmaris Petrestroika Sailing Maritime

Services GmbH and others v. Ukraine,

Decision on Jurisdiction (March 8, 2010)

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Jan de Nul v Egypt Jan de Nul N.V. and Dredging International

N.V. v. Arab Republic of Egypt (ICSID Case

No. ARB/04/13) Award (November 6, 2008)

Lauder v Czech Republic Ronald S. Lauder v. The Czech Republic,

UNCITRAL Award (September 3, 2001)

LG&E v Argentina LG&E Energy Corp., LG&E Capital Corp.

and LG&E International Inc. v. Argentine

Republic (ICSID Case No. ARB/02/1) Award

(July 25, 2007)

Maffezini v Spain Emilio Agustín Maffezini v. The Kingdom of

Spain (ICSID Case No. ARB/97/7) Award

(November 13, 2000)

MHS v Gov of Malaysia Malaysian Historical Salvors SDN BHD v.

The Government of Malaysia, ICSID Case

No. ARB/05/10, Award on Jurisdiction (May

17, 2007)

Middle East Cement v Egypt Middle East Cement Shipping and Handling

Co. v. Arab Republic of Egypt (ICSID Case

No. ARB/99/6) Award (April 12, 2002)

Mondev v USA Mondev International Ltd. v. United States of

America (ICSID Case No. ARB(AF)/99/2)

Award (October 11, 2002)

MTD v Chile MTD Equity Sdn. Bhd. and MTD Chile S.A.

v. Chile (ICSID Case No. ARB/01/7) Award

(May 25, 2004)

Mytilineos v Serbia and Montenegro Mytilineos Holdings SA v. The State Union of

Serbia & Montenegro and Republic of Serbia,

UNCITRAL, (September 23, 2009)

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Noble Ventures v Romania Noble Ventures, Inc. v. Romania (ICSID Case

No. ARB/01/11) Award (October 12, 2005)

Occidental v Ecuador Occidental Exploration and Production

Company v. Republic of Ecuador (I) (LCIA

Case No. UN3467) Award (July 1, 2004)

Pan American Energy v. Argentina Pan American Energy LLC and BP Argentina

Exploration Company v. The Argentine

Republic, ICSID Case No. ARB/03/13,

Decision on Preliminary Objections (July 27,

2006)

Petrobart v Krygz Republic Petrobart Limited v. The Krygz Republic,

SCC case No. 126/2003, Arbitral Award

(March 29 2005)

Phillip Morris v Uruguay (I) Philip Morris Brand Sàrl (Switzerland), Philip

Morris Products S.A. (Switzerland) and Abal

Hermanos S.A. (Uruguay) v. Oriental

Republic of Uruguay (ICSID Case No.

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

Phillip Morris v Uruguay (II) Phillip Morris Brands Sarl, Phillip Morris

Products S.A. and Abal Hermanos S.A. v.

Oriental Republic of Uruguay, ICSID Case

No. ARB/10/7, Decision on Jurisdiction (July

2, 2013)

Plama v Bulgaria Plama Consortium Limited v. Republic of

Bulgaria, ICSID Case No. ARB/03/24,

Decision on Jurisdiction (February 8, 2005)

Pope & Talbot v Canada Pope & Talbot Inc. v. The Government of

Canada, UNCITRAL Award on the Merits of

Phase 2 (10 April 2001)

http://www.italaw.com/sites/default/files/case-documents/ita0678.pdf

http://www.italaw.com/sites/default/files/case-documents/ita0678.pdf

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Robert Azinian v Mexico Robert Azinian, Kenneth Davitian, & Ellen

Baca v. The United Mexican States (ICSID

Case No. ARB (AF)/97/2) Award (November

1, 1999)

Romak v Uzbekistan Romak S.A. (Switzerland) v. The Republic of

Uzbekistan, UNCITRAL, PCA Case No.

AA280, Award (November 26, 2009)

Rumeli v Kazakhstan Rumeli Telekom A.S. and Telsim Mobil

Telekomunikasyon Hizmetleri A.S. v.

Republic of Kazakhstan (ICSID Case No.

ARB/05/16) (July 29, 2008)

Saipem v Bangladesh Saipem s.p.A. v. The People’s Republic of

Bangladesh, ICSID Case No. ARB/05/07,

decision on Jurisdiction and Recommendation

on Provisional Measures (March 21, 2007)

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

Republic, UNCITRAL Partial Award (March

17, 2006)

Salini v Jordan Salini Construttori S.p.A and Italstrade S.p.A.

v. The Hashemite Kingdom of Jordan, ICSID

Case No. ARB/02/13), Decision on

Jurisdiction (November 9, 2004)

Salini v Morocco Salini Costruttori S.p.A and Italstrade S.p.A v.

Kigdom of Morocco, Decision on Jurisdiction

(July 31, 2001)

SGS v Pakistan SGS Société Générale de Surveillance S.A. v

Islamic Republc of Pakistan, ICSID Case No.

ARB/01/13, decision of the Tribunal on

Objection to Jurisdiction (December 19, 2002)

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SGS v Philippines SGS Société de Surveillance S.A. v. Republic

of the Philippines, ICSID Case No. ARB/02/6,

Decision of the Tribunal on Objections to

Jurisdiction (January 29, 2004)

Siemens v Argentina

Siemens A.G. v. The Argentine Republic

(ICSID Case No. ARB/02/8) Award (February

6, 2007)

Southern Pacific Properties v Egypt Southern Pacific Properties (Middle East)

Limited v. Arab Republic of Egypt, ICSID

Case No. ARB/84/3, Decision on Jurisdiction.

(April 14, 1988)

Tecmed v Mexico Técnicas Medioambientales Tecmed v. United

Mexican States (ICSID Case No.

ARB(AF)/00/2) Award (May 29, 2003)

Tokio Tokeles v Ukraine Tokio Tokelés v. Ukraine, ICSID Case No.

ARB/02/18, Decision on Jurisdiction (April

29, 2004)

Toto v Lebanon Toto Costruzioni Generali S.p.A. v. Republic

of Lebanon (ICSID Case No. ARB/07/12)

Award (June 7, 2012)

Victor Pey Casado v Chile Víctor Pey Casado and President Allende

Foundation v. Republic of Chile (ICSID Case

No. ARB/98/2) Award (May 8, 2008)

Vivendi v Argentina Compañía de Aguas del Aconquija S.A. and

Vivendi Universal S.A. (formerly Compañía

de Aguas del Aconquija, S.A. and Compagnie

Générale des Eaux) v. Argentine Republic (I)

(ICSID Case No. ARB/97/3) Award

(November 21, 2000)

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Waste Management v Mexico Waste Management, Inc. v. United Mexican

States (I) (ICSID Case No. ARB(AF)/98/2)

Arbitral Award (June 2, 2000)

White Industries v India White Industries Australia Limited v. The

Republic of India, UNCITRAL, Final Award

(November 30, 2011)

INTERNATIONAL COURT OF JUSTICE DECISIONS

Barcelona Traction

Barcelona Traction, Light, and power

Company, Ltd [1970] ICJ 3 (February 5,

1970)

ELSI

Elettronica Sicula S.p.A. (ELSI) (United

States of America v. Italy), 1987 I.C.J.

Judgment (July 20, 1989)

Nicaragua v United States

Military and Paramilitary Activities in and

against Nicaragua (Nicaragua v. United States

of America) ICJ Judgment (June 27, 1986)

STATUTES AND TREATIES

ICJ Statute United Nations, Statute of the International

Court of Justice, 18 April 1946

ILC Articles International Law Commission, Articles on

State Responsibility for Internationally

Wrongful Acts (including official

Commentary), Yearbook of the International

Law Commission 2001, Vol. II (Part 2)

VCLT Vienna Convention on the Law of treaties 23

May 1969 1155 U.N.T.S. 331

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TRIPS TRIPS: Agreement on Trade-Related Aspects

of Intellectual Property Rights, April 15, 1994,

Marrakesh Agreement Establishing the World

Trade Organization, Annex 1C, 1869 U.N.T.S.

299, 33 I.L.M. 1197 (1994) [hereinafter

TRIPS Agreement]

MISCELLANEOUS

UNCTAD FET United Nations Conference on Trade and

Development, Fair and Equitable Treatment,

U.N. Sales No. E.11.II.D.15 (2012)

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LIST OF ABBREVIATIONS

Art. Article(s)

BIT Bilateral Investment Treaty

FDC Fixed-Dose Combinations

FET Fair and Equitable Treatment

MB-BIT Mercuria-Basheera BIT

NYC New York Convention

ICC International Chamber of Commerce

ICJ International Court of Justice

ICSID International Centre for the Settlement of Investment Disputes

ILC International Law Commission

IP Intellectual Property

IPR Intellectual Property Rights

LTA Long Term Agreement

NHA National Health Authority

Para(s). Paragraph(s)

Pg(s). Page(s)

PCA Permanent Court of Arbitration

UN United Nations

VCLT Vienna Convention on the Law of Treaties

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STATEMENT OF FACTS

1. The Claimant was set up in April 1998 by Atton Boro & Company as a vehicle

company for carrying on business in South American and African countries. It was

assigned several patents including the Mercurian patent for Valtervite, a compound

which could treat greyscale.

2. In 2003, the NHA’s annual report highlighted that the incidence of greyscale was an

imminent public health concern.

3. In response, the NHA of Mercuria entered into an LTA with the Claimant to supply

FDC greyscale medicine named Sanior in 2004. The Claimant set up its manufacturing

unit and started delivering consignments in 2005.

4. In early 2008, with the rising number of cases of greyscale patients, the NHA asked for

a discount for the remaining period of the LTA. The offer was rejected by the Claimant

and the LTA was subsequently unilaterally terminated by the NHA for “unsatisfactory

performance” on 10 June 2008.

5. Arbitration was invoked against the NHA under the LTA. The Tribunal in Reef decided

in favour of the Claimant in January 2009. The Claimant then attempted to enforce the

Award in the High Court of Mercuria on 3 March 2009 but has been unsuccessful thus

far due to Mercuria’s delay tactic.

6. On 10 October 2009, the President of Mercuria promulgated National Legislation for its

Intellectal Property Law (Law No. 8458/09) which allowed the use of patented

inventions without the authorization of the owner.

7. On 17 April 2010, HG Pharma, a Mercurian generic drug manufacturer, was granted a

license through a fast track process by the High Court to manufacture Valtervite until

the greyscale threat was no longer a public health concern.

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8. Several distributors the Claimant had dealings with indicated their intention to switch to

the more cost-effective alternative. By 2014, the Claimant had lost nearly two-thirds of

its market share to the generic FDC pill.

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SUMMARY OF PLEADINGS

JURISDICTION The tribunal has jurisdiction over the present dispute. Firstly, the award

arises out of an investment as the award is a crystallization of Claimant’s right under the

original investment. Secondly, the Award falls within the ambit of the Umbrella Clause as the

Umbrella Clause extends its arm towards the arbitral award giving rise to jurisdiction.

(Section I) Furthermore, the Respondent cannot deny the Claimant of the benefits under the

BIT as the Claimant is an investor pursuant to the MB-BIT. Lastly, the Denial of Benefits

clause cannot be invoked to deny the Claimant of their benefits because the Claimant has

substantial business activity. (Section II)

MERITS If the Tribunal finds that it has jurisdiction and rules on the merits of the case, the

Claimant submits that firstly, the Respondent failed to provide the Claimant’s investment

with Fair and Equitable Treatment in violation of Art-3.2 of the MB-BIT. This is because the

Respondent defeated the Claimant’s legitimate expectations by the inconsistent enactment of

IP law with the TRIPS Agreement. The measure adopted by the Respondent was arbitrary

and unreasonable and the Respondent failed to act transparently. (Section III) Secondly, the

Respondent is liable for the conduct of its judiciary under Art-3 of the MB-BIT. The

Claimant has suffered an undue delay of seven years which constitutes a denial of justice and

even if it is not denial of justice, the Respondent failed to provide effective means of

asserting claims and enforcing rights. Thus, the Claimant does not need to prove that it has

exhausted the local remedies. (Section IV) Lastly, the termination of the LTA is a violation

of the Art-3.3 of the MB-BIT as the Respondent failed to observe its contractual obligation

under the BIT. Furthermore, the conduct of NHA is attributable to the Respondent as the

NHA is exercising in its sovereign authority and not merely acting in a commercial capacity.

Thus, the Respondent defeated the Claimant’s legitimate expectations of a contractual

stability. (Section V)

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ARGUMENTS ON JURISDICTION

I. THE TRIBUNAL HAS THE JURISDICTION TO ADJUDICATE THE CLAIMS

IN RELATION TO THE ARBITRAL AWARD

9. The tribunal has jurisdiction to settle disputes between an investor of one Contracting

State and the other Contracting State “arising out of or in relation to” the BIT by virtue

of Art-8.1.

10. The non-enforcement of the Arbitral Award in Reef is a dispute arising out of or in

relation to the BIT. This is because the Award is a crystallization of rights arising out of

the LTA (A). In addition, it has also fulfilled the Salini criteria of investment (B).

Furthermore, the Award falls within the ambit of the Umbrella Clause (C).

A. The Arbitral Award is a crystallization of rights arising out of the LTA.

11. The arbitral award is a crystallization of investor’s rights under the original

investment.1 In Saipem, the tribunal held that in determining whether a dispute

regarding arbitral award arises out of an investment the entire or overall operation must

be considered and found that the ICC Award crystallized Saipem’s rights under the

construction contract.2

12. The Award in itself is not an investment, but rather the Award is part of the original

investment, as found by the tribunal in Saipem:

“The rights embodied in the ICC Award were not created by the Award but

arise out of the Contract. The ICC Award crystallized the parties’ rights and

obligations under the original contract.”3

1 Saipem v. Bangladesh; White Industries v. India.

2 Ackner; Saipem v. Bangladesh, para. 102.

3 Saipem v. Bangladesh, para. 126

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13. Moreover, the tribunal in Chevron characterized an arbitral award is a continuation an

investment under a contract.4 Thus, the award is a continuation or transformation of the

original investment.

14. In this present dispute, the investment is the LTA entered into by the Claimant and the

NHA for the supply of Sanior drugs to treat greyscale. The LTA is an investment under

Art-1(c) and 1(e) of the BIT.

15. Art.-1.1 of the BIT provides for a broad definition of the term “investment” as a series

of rights such as:5

“(a) Movable and immovable property and any related property rights, such

as mortgages, liens or pledges;

(b) Shares, stocks, bonds and debentures or any other form of participation

in a company, business enterprise or joint venture;

(c) Claims to money, and claims to performance under contract having a

financial value;

(d) Intellectual property rights, including rights with respect to copyrights,

patents, trademarks as well as trade names, industrial designs, good will,

trade secrets and know how; or

(e) Rights, conferred by law or under contract, to undertake any economic

and commercial activity, including any rights to search for, cultivate,

extract or exploit natural resources”

16. The plain meaning of the words used in the MB-BIT encompasses its right under the

LTA. The LTA creates a right to claims to money or performance having a financial

value and right to undertake economy and commercial activity.6

4 Chevron-Texaco v. Ecuador (II), pg 2; White Industries v. India.

5 Dermirkol; Romak v Uzbekistan, para. 347.

6 White industries v India para 4.1.8; Deutsche Bank v. Sri Lanka; MHS v Gov. of Malaysia; Salini v Morocco,

para. 45.

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17. The rights under the LTA are now represented in the Award. Art-1.1(c) of the MB-BIT

expressly includes “investment” a “right to money or any performance having a

financial value”.

18. It is well established that rights arising from contracts may amount to investment for

the purposes of many BITs.

19. In this present dispute, the definition of “investment” in MB-BIT clearly includes the

Claimant’s rights under the LTA. It is also evident from the Contracting Parties

definition of “investment” that they intended that the BIT would capture investments in

the broadest sense.7

20. Furthermore, Art-8.1 which confers this tribunal the jurisdiction to settle the dispute

states that any dispute arising out of or in relation to this Agreement shall be settled by

arbitration. This means that the tribunal has jurisdiction even though the subject matter

itself is an investment. It is sufficient that the dispute arises out of an investment.

21. Thus, since the award arises out of an investment under the MB-BIT,8 this tribunal has

the jurisdiction to hear the dispute regarding the Award.

B. The LTA fulfils the Salini’s criteria of investment

22. The tribunal should not adopt the Salini test to determine what constitutes an

investment. This test was developed in order to determine whether an investment had

been made for the purpose of the ICSID convention.9

23. In Salini v Morocco, the tribunal held that the criteria to be used for the definition of an

investment are contributions, a certain duration of performance of the contract and a

participation in the risks of transaction.10

7 White Industries v. India, para. 7.4.5.

8 Chevron v Ecuador, para. 3.66; ATA Construction v Jordan, pg. 26; Southern Pacific Properties v Egypt, pg.

30; Tokio Tokeles v Ukraine, para. 20; Impregilo v Pakistan, para. 57; 9 White Industries v India para. 7.4.8,

10Gaillard pg. 292; Salini v Morocco.

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7

24. However, if the tribunal insist that the “Salini test”11

is applicable, the Claimant

submits that the Salini’s elements of investment exist in this present case.

25. First, it is beyond doubt that the Claimant made a substantial commitment in Mercuria

pursuant to the LTA. The Claimant financed its own performance of the project. Not

only did the Claimant set up its manufacturing unit in Mercuria12

but the Claimant also

purchased land and machinery to bolster its production setup,13

thus committing its own

working capital, subject to payments by NHA.14

The Claimant also used their know-

how for the accomplishments of the production of Sanior. Therefore, the Claimant

made contributions in money, in kind and in industry.

26. Second, with regards to the duration, the duration of the LTA is 10 years15

but due to

the untimely termination of the LTA, the Claimant only performed its part of the

contract for four years which is from 20 July 200416

until the date it was terminated by

the Respondent, 10 June 2008.17

Regardless, this still exceeds the minimum

requirement of two years.18

27. Thirdly, regarding the consideration of risk, there has been attempts by tribunals to

distinguish between a mere commercial risk and an investment risk, in which a

commercial contract carries the risk of non-performance while an investment risk is

when the investor cannot be sure on his return on investment.19

11

Salini v Morocco, para. 52.; Grabowski, pg. 290. 12

Uncontested Facts, para. 11. 13


White Industries v India, para. 7.4.11. 15


Procedural Order No. 2, para. 6. 17


Salini v Morocco, para. 54 ; Carreau, pg(s). 558-578; Schreuer, pg(s). 318-493 19

Romak v Uzbekistan, para. 230; Joy Mining para. 56.

TEAM TANAKA

8

28. In this case, the Claimant is only entitled to payment stipulated under the LTA, which is

at a 25% discounted rate regardless of the expense it incurred over the term of the

LTA.20

Should the project’s cost have ballooned, the Claimant would have been

substantially out of pocket. In addition, the order was also periodically placed, meaning

that there is no fixed amount number of orders over the period of the LTA.21

29. Fourthly, with regards to the element of contribution, not only has the Claimant

provided job opportunity at its manufacturing plant for Mercuria’s citizen but it has also

used to treat the greyscale symptoms among the national Mercuria and was of direct

benefit to the Host State’s development.22

30. Thus, it is clear from the Claimant’s operation under the LTA as a whole that it has

made an investment in Mercuria for the purposes of the Salini Test. The substantial

financial commitments, along with the duration of those commitments, the high risk it

assumed and the indisputable contribution to Mercuria’s development as a result of

those commitments, comprehensively satisfied any ratione materiae test that may be

said to exist under the BIT.

31. Therefore, since the Award arises out of the premature termination of the LTA, which

has satisfied the definition of investment under the BIT and the Salini test, this tribunal

has the jurisdiction to settle this dispute.

C. The Umbrella Clause extends its protection to the Arbitral Award

32. An umbrella clause is a provision that requires the host state to observe the

commitments that it has undertaken toward the foreign investor or its investment.23

33. Art-3.3 which reads ‘Each contracting Party shall observe any obligation it may have

entered into with regards to investment of investors’ is an umbrella clause.24

20


Ibid. 22

Annex No. 3, pg. 42. 23

Mouward, pg. 103. 24

Annex No. 1, pg. 33.

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9

34. Art-3.3 should be interpreted in accordance with Art-31 of the VCLT which is through

its plain and ordinary meaning. Therefore, the term any obligation means what it says

which is ‘all obligation’.25

35. An umbrella clause transforms breach of contractual undertakings and other

international law obligations into a breach of BIT. On this basis, the Tribunal in any

event have jurisdiction to consider the Claimant’s contractual claim.26

36. The ordinary meaning of the term “shall observe” is imperative and categorical while

“any” obligations is capacious; it means not only obligations of a certain type, but

“any” -that is to say all obligations.27

37. The BIT object and purpose located in the preamble must be read together with the

umbrella clause.28

The MB-BIT object and purpose is to promote greater economic

cooperation. Therefore, the umbrella clause should be interpreted in favour of

encouraging investments.29

38. It is also a cardinal rule of the interpretation of treaties that each and every operative

clause of a treaty is to be interpreted as meaningful rather than meaningless.30

Hence,

the umbrella clauses in the MB-BIT must be interpreted so as to render them effective

rather than ineffective.31

39. In SGS v Philippines, the umbrella clause was formulated so as to assimilate the host

state’s contractual obligations to its treaty obligations by saying that each Party “shall

observe any obligation it has assumed” with regard to investments.32

25

Eureko v Poland, para. 260. 26

Weissenfels; Mann, pg. 241-254; Noble Ventures v Romania para. 62 27


Ibid 29

Ibid, para. 248. 30

Jonckheree, pg. 235. 31

Eureko v Poland, para. 250 ; Noble Ventures v Romania, para. 54. 32

Noble Ventures v Romania, para. 59.

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40. The umbrella clause provided in SGS v Philippines is as follows;

“Each contracting party shall observe any obligation it has assumed with

regard to specific investments in this territory by investors of the other

Contracting Party.”33

41. In this present case, the wording used in Art-3.3 is even more general and

straightforward than that in the BIT that fell to be considered in SGS v Philippines,

clearly falls into the category of the most general and direct formulations tending to an

assimilation of contractual obligations to treaty ones. Not only does it use the term

“shall observe” but it refers in the most general terms to “any” obligations that either

Party may have entered into with regard to investments.34

42. The interpretation of the umbrella clause might be too broad.35

However, Umbrella

Clause addresses not the scope of the commitments entered into with regard to

investments but the performance of these obligations.36

Therefore, violations of

commitments regarding investment by the host country would be redressible through

the dispute-settlements procedures of a BIT.

43. In Noble Ventures v Romania, the tribunals held that the umbrella clause applies to

obligations arising under independent investment contracts between the investor and

host state.37

44. The significance of this is that the international arbitration tribunal constituted under

the BIT would thereby have jurisdiction over breach of contract claims since a breach

of the investment contract is also a breach of the umbrella clause.38

33

SGS v Phillipines, para. 128. 34

Noble Ventures v Romania, para. 60. 35

SGS v Pakistan, para. 135. 36

SGS v Philippines; Souza, pg(s) 679-691. 37


Wong, pg. 137.

TEAM TANAKA

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45. In this present dispute, the Respondent has the obligation to observe the performance of

all investments entered into with the Claimant. The Respondent has the obligation to

observe their commitments under the LTA including paying the compensation for the

premature termination of the LTA.39

46. Furthermore, the Respondent is also a party to the New York Convention.40

Thus, they

have the obligation to enforce an arbitral award by virtue of Art-3 of the NYC.

Therefore, failure to enforce the Award not only equates to failure to observe the

obligations under the LTA but also international law obligation under the NYC.41

47. In Philip Morris v Uruguay, Uruguay is obliged to respect its commitments made under

the TRIPS Agreement and the Paris Convention as these two treaties provide some

standards that states should carry out in order to protect intellectual property rights.42

48. Thus, the failure to enforce the award falls within the arm of the umbrella clause

because an arbitral tribunal retains jurisdiction in relation to breaches of contract that

would constitute, at the same time, a violation of the BIT by the State.43

II THE RESPONDENT CANNOT DENY THE CLAIMANT THE BENEFITS

UNDER THE BIT

49. The Claimant is entitled to the benefits of the BIT as it has satisfied the requirement of

investors (D), the Respondent cannot invoke the denial of benefit clause because,

firstly, the Claimant has substantial business activity (E) and, secondly, this tribunal

should not pierce the corporate veil to determine the ownership of the claimant. (F)

Lastly, this tribunal should not pierce the corporate veil as the nationality is determined

through the incorporation test.

39


Notice of Arbitration, para. 10. 41

Saipem v Bangladesh, para. 141. 42

Phillips Morris v Uruguay (II), para. 108. 43

Salini v Morocco, para. 62.

TEAM TANAKA

12

D. The Claimant is entitled to the benefits of bit under MB-BIT as the Claimant is a

national of Basheera

50. The nationality of a Claimant determines whether it is entitled to take the benefits of the

treaty protections and which, in turn, determines the jurisdiction rationae personae. In

any event the Respondent invokes Art-2 of the MB-BIT to deny the Claimant benefit

under the MB-BIT, it is important to note that the Claimant may override the object of

the said clause.

51. The status of the Claimant as an investor can be determined through Art.-1.2(b) of the

MB-BIT which provides the definition of investor for the purpose of the BIT.44

52. Art.-1.2(b) provides that:

“Any corporation, partnership, trust, joint venture, organization,

association or that enterprise incorporated or duly constituted in

accordance with the applicable laws of that contracting Party.”45

53. Pursuant to Art.-1.2(b), the Claimant is an investor for the purpose of the BIT if the

Claimant is a national of Basheera. It was agreed by Schreuer, that any reasonable

determination of the nationality of juridical persons treaty should be accepted by the

tribunal. 46

54. Art-31 of the VCLT requires that:

“[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”47

44

Tokio Tokeles v Ukraine, para. 29. 45

Annex. No. 1, pg. 33. 46

Tokio Tokeles v Ukraine, para. 26 47

VCLT, Art-31.

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13

55. This provision has been accepted as reflecting customary international law on the

interpretation of treaties, including by investment treaty tribunals. It requires

consideration of a treaty’s object and purpose-a phrase that has been understood as

broadly equivalent to a treaty’s aims or objectives.48

56. Through the literal interpretation, the Claimant is an investor if it is a corporation that

was established in accordance with the laws in Basheera.49

The Claimant was

incorporated in Basheera on April 1998 and complies with its tax obligation in

Basheera.50

Therefore, the Claimant is an investor of Mercuria.

57. The object and purpose of the MB-BIT likewise confirm that the control-test should not

be used to restrict the scope of investors in Art-1.2(b). The preamble express desire to

promote greater economic cooperation. The tribunal in SGS v Philippines interpreted

nearly identical preambular language in the Philippines-Switzerland BIT as indicative

of the treaty’s broad scope of investment protection.51

58. Pursuant to Art-1.2(b), the Claimant is a corporation duly constituted according to the

law of Basheera.52

Thus, the Claimant is an investor for the purpose of this BIT and is

entitled to the benefits under the BIT.53

59. Therefore, the tribunal should not impede the Claimant’s rights to initiate the investor-

state arbitration by applying a requirement which is not incorporated in the MB-BIT.

Further, the tribunal should take cognisance of MB-BIT’s purpose as a tool to assert

foreign investors’ claims and rights under international law.54

48

Weeramantry, para. 3.78 49

Tokio Tokeles v Ukraine, para. 28. 50


Tokio Tokeles v Ukraine, page 13, para. 31; SGS v Phillippines para. 116. 52


Annex No. 1, pg. 34. 54

Annex No. 1 pg. 32.

TEAM TANAKA

14

E. The Claimant has substantial business activity

60. According to Walker Jr, denial of benefit clause provides a safeguard against nationals

of third countries who would gain interests despite the fact that the contracting states to

the treaty did not wish to accord them those benefits.55

61. Pursuant to Art-2.1 of the Denial of Benefits clause there are two pre-requisites that

need to be fulfilled before the clause can be invoked. Firstly, there must be foreign

control and secondly, there must be no substantial business activities.56

62. The tribunal in Pan American Energy rejected the application of the denial of benefits

under Art-(2) of the US-Argentina BIT as Pan American Energy had substantial

business activity in the US.57

63. The reference to substantial business activities in Art-2.1 of the MB-BIT is intended to

exclude so called mailbox companies from protection under the BIT.58

However, the

Claimant is not such company. The Claimant has a registered office in Basheera and

maintains office premises with full-time employees. Further, the Claimant also has

bank relations in Basheera.

64. In Amto v Ukraine, the tribunal found that AMTO’s rental of an office in Latvia,

maintenance of a bank account, and payment of Latvian taxes amounted to business

activities of substance and not merely of form.59

65. In Petrobart v the Republic of Krygz, Petrobart is a company managed a company

registered in England with its principal office in London which is handling many of

Petrobart’s strategic and administrative matters. The tribunal found that Petrobart

indeed has substantial business activities in United Kingdom.60

55

Walker, pg. 373. 56

Plama v Bulgaria, para. 143. 57

Pan American Energy v. Argentina, para. 205. 58

Amto v Ukraine, pg. 17. 59

Ibid, paras. 68-69. 60

Petrobart v Krygz Republic, pg. 63.

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15

66. In this present dispute, the Claimant has substantial business activity as it had rented

out an office space, opened a bank account, and hired a manager and an accountant.61

On top of that, the Claimant also has manager, accountant, commercial lawyer, and

patent attorney working in Basheera managing its portfolio of patents as well as legal,

accounting and tax services.62

67. Furthermore, the Claimant’s lawyers are involved in the negotiation and conclusion

with agreement between the Claimant and other State entities. The lawyers had also

been involved in a seven years long court procedure to enforce the arbitral award due to

the termination of the LTA.63

68. Thus, the Claimant clearly has a substantial business activity. This prevents the

Respondent from denying Claimant the benefit provided under the BIT since the

Article needs to be fulfilled cumulatively by virtue of the word “and”. This shows that

both of the limbs need to be satisfied conjunctively.

“A legal entity, if citizens or nationals of a third state own or control and if

that entity has no substantial business activities in the territory of the

contracting Party in which it is organized”

69. Even if the Respondent can establish that the Claimant is owned or controlled by a third

state, the present claim will not be affected as the BIT requires for both of the pre-

requisites to be fulfilled before the benefit can be successfully denied.64

61



Notice of Arbitration, Exhibit 1 pg. 7. 64

Plama v Bulgaria, para. 143.

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F. Alternatively, the tribunal should not pierce the corporate veil

70. Under international law, piercing the corporate veil is only allowed in exceptional

circumstances such as to prevent the misuse of privileges of legal personality as in

certain cases of fraud or malfeasance, to protect third persons such as creditor or

purchaser, or to prevent the evasion of legal requirements or obligations.65

71. The Respondent has not made a prima facie case, much less demonstrated, that the

Claimant has engaged in any of the types of conduct described in Barcelona Traction

that might support a piercing of the Claimant’s corporate veil.

72. Further, structuring investments through the establishments of corporations in different

jurisdiction does not constitute a wrongdoing and is not a basis for the doctrine of veil

piercing.66

73. The Claimant did not change its nationality simply for the reason of bringing the

dispute to arbitration. The Claimant was established in Basheera in 1998 while the

arbitration was invoked in 2016.67

74. In conclusion, since the situation in the present dispute does not fall within any of the

exceptional circumstances allowed to pierce the corporate veil, the tribunal should not

pierce the corporate veil and determined the control or ownership of the Claimant.

65

Barcelona Traction, pg(s). 43-44. 66

AdT v Bolivia para. 332; Pacific Rim v El Salvador, para. 2.21. 67

Uncontested Facts, para. 1.

TEAM TANAKA

17

ARGUMENTS ON MERITS

III. THE RESPONDENT FAILED TO PROVIDE THE CLAIMANT’S

INVESTMENT WITH FAIR AND EQUITABLE TREATMENT IN

VIOLATION OF ART-3.2 OF THE MB-BIT

75. The Respondent breached the Fair and Equitable Treatment (FET) standard under Art-

3.2 of the MB-BIT by enacting the Intellectual Property Law No 8458/09 (IP Law).

This provision is an autonomous standard (A). The Respondent’s violation of Art-3.2

had four dimensions: The enactment of the IP Law is inconsistent with the TRIPS

Agreement (B), the Respondent defeated the Claimant’s legitimate expectations (C),

the measure adopted by the Respondent was arbitrary and unreasonable (D) and the

Respondent failed to act transparently. (E)

A. Fair and Equitable Treatment is an autonomous standard

76. The Respondent breached the FET clause found in Art-3.2 of the Mercuria-Basheera

BIT (MB-BIT). The clause reads as follows:

“Investments and returns of investors of each Contracting Party shall at all

times be accorded fair and equitable treatment and shall enjoy full

protection and security in the territory of the other Contracting Party.

Neither Contracting Party shall, without prejudice to its laws, in any way

impair by unreasonable or discriminatory measures the management,

maintenance, use, enjoyment or disposal of investments in its territory of

investors of the other Contracting Party.”

77. The protection that a BIT can provide to investors does not limit itself to the principles

of customary international law.68

Thus, the FET term offers protection to a greater

extent since the term covers conduct which goes far beyond the minimum standard.

Hence, the terms are to be understood and applied independently and autonomously.69

68

Salacuse (II), pg. 230 ; Occidental v Ecuador, paras. 189-190 ; Enron v Argentina, para. 258. 69

Mann, pg. 241, pg. 244; Dolzer/Stevens, pg. 59; Scott, pg. 125.

TEAM TANAKA

18

78. The wording of the clause does not refer to international law or the minimum standard,

and therefore does not apply. If the parties intended for standards other than

autonomous to apply in the FET standard, then the contracting parties could have made

it clear in the BIT.70

79. The tribunal must also follow the general rule of interpretation of Art-31(1) of the

VCLT to interpret the MB-BIT. This rule provides that:

“[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.”

80. For this reason, the FET term will have to be interpreted and given its ordinary meaning

in the context of the MB-BIT. The BIT does not refer to customary international law or

any other international standard, thus the autonomous FET standard must be applied.

81. Since the autonomous FET standard is to be applied, it must be interpreted broadly

enough to convey a widespread protection that would encourage investors to participate

in the economy of the host state.71

82. As highlighted in the case of Pope & Talbot v Canada, guarantees similar to those

contained in Art-3.2 of the MB-BIT are meant to ensure “the kind of hospitable climate

that would insulate them from political risks or incidents or unfair treatment” and does

not only protect foreign investors against conduct that is “egregiously unfair”.72

70

Newcombe/Paradell, pg. 226; Vasciannie, pg. 105. 71

Saluka v Czech Republic, para. 287. 72

Pope & Talbot v Canada, para. 116; Lauder v Czech Republic, para. 292; CME v Czech Republic, para. 611.

TEAM TANAKA

19

83. This tribunal has to interpret the FET standard within the boundaries of the provision of

Art-3.2 itself. This particular method of interpretation serves to implement FET

standards which ensure protection for foreign investors. Art-3.2 omits any express

reference to the customary minimum standard which is in contrast to NAFTA which

expressly link the FET standard to the customary minimum standard.73

The fact that the

BIT avoids these difficulties proves the very purpose of the lack of a reference to an

international standard in the BIT.74

84. Thus, the absence of a link to an express standard clearly shows the autonomous feature

of the FET standard as provided in Art-3.2. Even though the autonomous FET standard

does not have one definite interpretation, Salacuse stated that tribunals have developed

specific criteria, norms, and principles to determine whether investors are being treated

fairly and equitably by the host states.75

85. A foreign investor whose interests are protected under the Treaty is entitled to expect

that the host state will; (1) act in good faith, (2) act in a non-discriminatory manner, (3)

act transparently, (4) not act arbitrarily, (5) not deny access to justice to investors (i.e.

provide due process), (6) provide freedom from coercion and harassment, and lastly,

(7) protect investors’ legitimate expectations.76

86. In the present case, the Respondent violated three elements of the FET standard where;

(1) the Respondent defeated the Claimant’s legitimate expectations, (2) the measure

adopted by the Respondent was arbitrary and unreasonable, and (3) the Respondent

failed to act transparently.

73

Saluka, para. 294. 74

Sacerdoti, pg. 341; Dolzer/Stevens pg. 42; UNCTAD FET, pg. 71. 75

Salacuse (I), p. 230. 76

Stone, paras. 83-84; Schreuer, paras. 374-385; Vasciannie, paras. 103,133.

TEAM TANAKA

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B. The enactment of the Intellectual Property Law No 8458/09 is inconsistent with

the TRIPS Agreements

87. The Respondent has to observe their international law obligation in relation to

investment which captured their obligation under the TRIPS Agreement by virtue of

Art-3.3 of the BIT. The clause reads:

“Each Contracting Party shall observe any obligation it may have entered

into with regard to investments of investors of the other Contracting Party”

88. Art-3.3 of the BIT is an umbrella clause which would allow any obligation of the

parties under the investment to be observed.77

89. As similarly highlighted in the case of Philip Morris v Uruguay, Mercuria is obliged to

respect its commitments made under the TRIPS Agreement as this treaty provides some

standards that Mercuria should carry out in order to protect the intellectual property

rights of an investor.78

This is because a failure to observe these obligations would

trigger State responsibility.79

90. Both Mercuria and Basheera are contracting parties to the TRIPS Agreement.80

It has

been stated in Art-8.1 of TRIPS that a host state is bound to only enact laws in regards

to IP if it is consistent with the provisions of the agreement. Therefore, the Claimant is

justified in having a legitimate expectation that the Respondent will not violate such

agreements.81

91. Thus, the fact that Art-31(b) of TRIPS has been incorporated into the national

legislation proves that TRIPS is the law governing the IPR regime in Mercuria.

77


Philip Morris v Uruguay, para. 207. 79

Enron v Argentina, para. 302. 80

Procedural Order No 2, para. 2. 81

Eli Lilly v Canada, para. 22.

TEAM TANAKA

21

92. In the present case, the enactment of the IP law had caused instability to the legal

framework in Mercuria as it has defeated the Claimant’s legitimate expectation of a

stable legal framework.82

This is because the legal framework has no longer protects

the Claimant’s patent rights.

93. Compulsory licensing under the TRIPS83

requires the applicant to make a reasonable

attempt to negotiate with the patent holder in order to obtain authorization on

reasonable commercial terms and conditions within a reasonable amount of time. The

IP law in Mercuria stated that the reasonable period of negotiation would be within six

months.84

94. However, there has been no evidence to show that there was any negotiation made

between HG Pharma and the Claimant. Despite the absence of negotiation, the High

Court of Mercuria still granted the license to HG Pharma which proves that there is

arbitrariness or disregard of proper procedures by the court.

95. Furthermore, the court’s conduct of granting the license through a fast-tracked process

shows that it is open to abuse as it deprives the Claimant of any opportunity to raise

claim.85

96. Under compulsory licensing, it is stated that the negotiation process with the patent

holder will be waived in situations of national emergency and public non-commercial

use.86

97. However, the evidence does not allow the Respondent to avail to the exceptions of

compulsory licensing as firstly, the situations in Mercuria had not yet escalated to a

national emergency as the government did not even declare a state of emergency.87

Secondly, even though the facts show that some drugs were used for humanitarian aid88

but this does not negate the fact that the primary consideration for granting the license

82

Occidental v Ecuador, para. 191. 83

Art-31 para (b) of TRIPS. 84

Annex No 4, line 1420. 85



Quadir, pg. 437, pg. 454. 88


TEAM TANAKA

22

to a third party was for commercial use. Thus, the Respondent cannot rely on the

exceptions to the compulsory licensing.

98. Therefore, the Respondent has disregarded their international law obligation as

embedded in their national legislation and the TRIPS Agreement by the enactment of

the IP law.

C. The Respondent defeated the Claimant’s legitimate expectations

99. The Respondent has treated the Claimant unfairly and inequitably by defeating

legitimate expectations of having a stable legal framework in Mercuria so as to the

result that it has affected the Claimant’s patent rights.

100. The tribunal in Occidental v Ecuador provided that the stability of the legal and

business framework is an essential element of FET. Hence, the Respondent has an

obligation not to alter the legal and business environment in which the investment has

been made.89

101. The Claimant does not doubt the Respondent’s sovereignty to enact or amend laws;

however the alteration of the legal framework in manner that does not reasonably

protect the patent rights promoted by the Respondent had defeated the Claimant’s

legitimate expectations.90

102. A balance should be established between the legitimate expectations of a foreign

investor and the right of a host state to enact laws. Thus, the tribunal in El Paso v

Argentina stated that an investor’s expectations shall be legitimate if there is an

assurance that the state will not modify the legal framework in contradiction with a

specific commitment not to do so.91

This was supported by the tribunal in Saluka92

and

Continental.93

89


El Paso v Argentina, para. 351 ; Saluka, para. 305. 91

Ibid, para. 364. 92

Saluka v Czech Republic, para. 304. 93

Continental Casualty v Argentina, para. 254.

TEAM TANAKA

23

103. Hence, the Respondent is subjected to a specific assurance not to modify the legal

framework as can be evident by the LTA itself which is provided in Clause 6 of the

LTA, where the Agreement shall be valid for a period of 10 years.94

104. Moreover, the tribunal provided that a reasonable general regulation can be considered

a violation of the FET standard if it violates a specific commitment towards the

investor. A repetition of the same type of commitment in different types of general

statements can be taken into consideration as a specific commitment.95

This is because

it could constitute a specific behavior of the state, where “the object and purpose is to

give the investor a guarantee on which it can justifiably rely.”96

105. In the present case, there are two specific assurances made by the Respondent and also

an invitation to enter into an investment which should be looked at cumulatively as a

series of actions in which the Claimant relied upon as a basis of legitimate expectations.

106. Firstly, the Minister for Health made a press statement praising the success of the

partnership between the Claimant and the NHA which provides that:

“A stable, progressive IPR regime is essential to such endeavours…

Mercuria reaffirms its commitment to empower and engage right holders in

order to pave the way forward and secure access to healthcare for all."97

107. Secondly, in response to the statement made by the Minister, the President of Mercuria

shared a statement on Twitter the following day with the words:

“Mercuria will do away with red tape and roll out the red carpet for

investors.”98

94


Sauvant, pg. 86; Wang, pg. 305. 96

Continental Casualty v Argentina, paras. 375 & 377. 97

Annex No. 2, para. 4. 98


TEAM TANAKA

24

108. The statement made by the President on Twitter is a valid source of the Claimant’s

legitimate expectations as the verified Twitter account is followed by over 40 million

users, and has come to be regarded by many as a primary source of information

regarding government activity. In addition, the President typically uses the platform to

announce or comment on new government policies.99

Thus, this proves that Mercuria,

by way of the President, will reduce excessive bureaucracy and welcome foreign

investors, especially the Claimant, to invest in Mercuria.

109. Statements of a more general nature by politicians in varying contexts or general

encouraging policies directed towards investors have also been invoked as a basis of

legitimate expectations.100

The tribunal in MTD v Chile supported the view that even if

government’s assurances were ambiguous, the foreign investor’s legitimate

expectations should be protected as the government still owes a duty of consistency.101

Thus, the two specific assurances made by the Respondent can be invoked as a basis of

legitimate expectations as they were made by two political figures in their official

capacities.

110. Finally, four months after the Respondent made the assurances; the NHA invited the

Claimant to enter into the LTA which proves that there is inducement on the part of the

Respondent and that the Claimant relied upon those assurances to make an investment

in Mercuria once they have entered into the LTA.102

This also verifies the fact that the

two specific assurances made by the Respondent were intended for the Claimant.

111. The Claimant has a legitimate expectation that the laws in Mercuria would be stable in

order to protect the Claimant’s patent rights. This is by virtue of the two specific

assurances and the invitation which creates the Claimant’s legitimate expectations.

However, the new IP law defeated the Claimant’s legitimate expectations by allowing a

third party to acquire the license to Claimant’s patent without authorization.103

Thus,

the Claimant no longer has protection of the patent and as a result, no longer has the

exclusive rights to manufacture and sell the Sanior drugs at the price it wants. Hence,

99

Procedural Order No 3, line 1567. 100

Potesta`, pg. 107. 101

MTD v Chile, para. 163. 102



TEAM TANAKA

25

the Claimant ended up losing near two-thirds of its market share due to this enactment

of law.104

D. The measure adopted by the Respondent was arbitrary and unreasonable

112. Therefore, the Respondent’s conduct of adopting the measure was arbitrary and

unreasonable as the compulsory licensing was enacted purely for the benefit of the

Respondent. This is in breach of an essential element of the FET standard which was

laid down in the case of Waste Management v Mexico.105

113. Therefore, it amounts to a contravention of the basic principle of FET as illustrated in

the case of CMS.106

In other words, if there is discrimination on arbitrary grounds, or if

the investment has been subject to arbitrary or capricious treatment by the host state,

then the FET standard has been violated.107

114. The Respondent’s conduct falls under the definition of arbitrary under ELSI which is

“an act which shocks, or at least surprises, a sense of juridical propriety”108

, which

was agreed by the tribunal in Siemens v Argentina.109

115. In addition, the Tribunal in Occidental v Ecuador concluded that even if a decision was

not "founded on prejudice or preference rather than on reason and fact" but led to

"confusion and lack of clarity," it could be classified as an arbitrary measure.110

Hence,

the Claimant does not have the burden of establishing the Respondent’s intent.

116. Furthermore, the measures were disproportionate as the Claimant was only given a

mere 1% royalty of the total revenues which is grossly inadequate.111

104


Waste Management v Mexico, para. 98. 106

CMS v Argentina, para. 290. 107

Vasciannie, pg. 99; Schreuer (I), pg. 189 108

ELSI, para. 128. 109

Siemens v Argentina, para. 318. 110


Notice of Arbitration, para. 12.

TEAM TANAKA

26

117. The 1% royalty is inadequate and disproportionate as the Respondent was initially

prepared to purchase the Sanior drugs at 25% of its original price but instead, had

rejected the offer and demanded an unreasonable additional discount of 40% or it

would be compelled to terminate the agreement if its terms were not met. 112

118. This fact shows that the Respondent had not only demanded unreasonably, but also that

its conduct was arbitrary as the measure adopted by the Respondent was enacted so that

the Respondent are able to get the drugs at a much cheaper price, once the Claimant no

longer has exclusive right to its patent.

119. Now, not only that the Claimant has no exclusive right to its patent, but the Claimant

will only receive a mere 1% royalty when the Atton Boro Group has bend over

backwards to expand well over USD1-billion to develop Valtervite and bring it to the

market.113

Thus, this proves that the measure adopted by the Respondent is clearly

unreasonable as it completely disregards the Claimant’s effort in the development of

Valtervite.

120. The need for such arbitrary and unreasonable regulatory flexibility cannot be justified

as the acts were wholly disproportionate to the minor upsurge of greyscale, whereby the

number of confirmed cases only increased minimally by 0.37% in 2003-2006.114

121. This enactment of IP law puts the Claimant in a depraved position as it nearly lost two-

thirds of its market share to the generic FDC pill,115

thus proving that the measure

adopted by the Respondent was indeed arbitrary and unreasonable.

112





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27

E. The Respondent failed to act transparently

122. The Respondent’s conduct of failing to notify the Claimant of the compulsory licensing

under TRIPS is in contravention of the FET standard under the BIT. The tribunal in

Tecmed v Mexico provides that:

“A host state should act consistently, without ambiguity and transparently,

making sure the investor knows in advance the regulatory and

administrative policies and practices to which it will be subject, so that it

may comply.”116

123. In Middle East Cement v Egypt, the Tribunal found a violation of FET when the host

state failed to notify the claimant of an upcoming seizure and auctioning of its ship.

This is because a matter as important as the seizure and auctioning of a ship belonging

to the claimant should have been notified by direct communication.117

124. In the present case, the Respondent failed to act transparently by failing to notify the

Claimant of its intention to adopt the measures that would affect the Claimant’s rights,

thereby denying the Claimant the opportunity to express its position. This is because

the Claimant as a foreign investor must know beforehand the relevant policies that

apply to its investments and comply with such accordingly.118

However, the Claimant

was not informed or notified of the Respondent’s intention.

125. In conclusion, the Respondent has treated the Claimant unfairly and inequitably by

subjecting the Claimant to a transparent act which has defeated the Claimant’s

legitimate expectations.

116

Tecmed v Mexico, para. 154. 117

Middle East Cement v Egypt, para. 143. 118

Benedetto, pg. 109; Sprankling, pg. 285; Schill, pg. 160.

TEAM TANAKA

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IV. THE RESPONDENT IS LIABLE FOR THE CONDUCT OF ITS JUDICIARY

UNDER ART-3 OF THE MB-BIT

126. The Respondent has treated the Claimant in an unfair and inequitable manner when the

Claimant suffered an undue delay of over seven years which constitutes a denial of

justice (F). In any case, even if it is not denial of justice, the Respondent failed to

provide effective means for the Claimant to assert claims and enforce rights (G). Thus,

to allege a breach of the BIT, the Claimant does not need to prove that it has exhausted

the local remedies (H).

F. The Respondent has obstructed the Claimant’s access to justice for the

unreasonable delay of over seven years

127. A state’s failure to enforce an award may constitute a denial of justice. To establish a

denial of justice, the tribunal in GEA v Ukraine stated that investment treaty tribunals

generally require a showing that the host state’s courts acted in a way that is ‘clearly

improper and discreditable’, giving rise to ‘justified concerns as to the judicial

propriety of the outcome’ in view of ‘generally accepted standards of the

administration of justice’.119

128. Based on the tribunal’s decision in Robert Azinian v. Mexico, when the Claimant

suffers undue delay of over seven years in disposing of enforcement proceedings of the

Award, then the element of denial of justice is established.120

129. For the length of the delay to constitute as a denial of justice, it must be looked at

through a case-by-case basis. For example, the tribunal in the case of Jan de Nul v

Egypt decided that 10 years do not amount to a denial of justice. However, the tribunal

is mindful that the issues were complex and highly technical as the parties were

especially productive in terms of submissions and filed an extensive expert report.121

119

GEA v Ukraine, para. 319; Mondev v USA, para. 127. 120

Robert Azinian v Mexico, para. 102. 121

Jan de Nul v Egypt, para. 204.

TEAM TANAKA

29

130. However, in Victor Pey Casado v Chile, the tribunal decided that seven years had to be

adjudged a denial of justice as there was an extraordinary long protraction in court

procedure.122

131. The case of Chevron-Texaco v Ecuador highlighted factors that inform the

determination of denial of justice which are; the complexity of the case, the behavior of

the litigants involved, the significance of the interests at stake in the case and the

behavior of the courts themselves.123

132. Firstly, one of the contributing factors of denial of justice which can be found in the

present case is that there is no complex characteristic arises in enforcing an arbitral

award.124

Enforcement of award should be relatively faster and easier as the decisions

were already made by the tribunal in Reef. The courts are not faced with complexity of

the questions of facts; hence it is unreasonable for the claimant to wait for seven years

just to be heard.

133. Secondly, the absence of the NHA that was tolerated by the court of Mercuria.125

The

court had condoned to NHA’s absence for over seven times as the Claimant had

objected to the conducts of the NHA for breaching Mercurian procedural law, but the

court remained silent and did not adopt any measure. Therefore, the delay was clearly

not caused by the complexity of the issues but was due to the conduct of the

Respondent itself.

134. Thus, the fact that the enforcement proceeding is not complex and the absence of the

NHA that was condoned by the High Court of Mercuria both had contributed to the

undue delay which constitute a denial of justice.

122

Victor Pey Casado v Chile, para. 659. 123

Chevron-Texaco v Ecuador, para. 169. 124

Ibid, para. 254. 125

Ibid, para. 256.

TEAM TANAKA

30

G. The Respondent failed to provide the Claimant with effective means of asserting

claims and enforcing rights

135. In any case, if the delay does not amount to a denial of justice, however the Respondent

still violated the FET standard by failing to provide effective means for the Claimant to

assert claims and enforce rights. Effective means standard is a system of law in which a

party is able to redress their grievances in an objectively effective and proper manner

which matches the international standards when the dispute arises or when any

redressal is sought.126

136. The presence of an effective means clause inflicts an additional positive obligation on

the parties which goes far beyond the denial of justice threshold by providing access to

local courts for investors.127

137. Under denial of justice, the Claimant is required to prove a serious shortcoming on the

part of the host state, egregious conduct that shocks, or at least surprises, a sense of

judicial propriety. This is because denial of justice is determined by an objective

standard. However, the tribunal in Chevron-Texaco v Ecuador stated that "a distinct

and potentially less demanding test is applicable under the effective means clause."128

Then, the tribunal also asserted that the effective means clause is lex specialis, where it

is “an independent treaty obligation rather than a mere restatement of the principle of

denial of justice”129

Thus, conducts that would not be sufficiently egregious to amount

to a denial of justice may nonetheless violate the effective means standard.

138. The preamble of the BIT provides that:

“Recognizing the importance of providing effective means of asserting

claims and enforcing rights with respect to investment under national law

as well as through international arbitration.”

126


Robbins, paras. 403, 425. 128


Ibid, para. 242.

TEAM TANAKA

31

139. A host state must establish judicial systems and laws that work effectively in a given

case and allow investor’s claims to be adjudged without “indefinite or undue delay”.130

Therefore, the courts of Mercuria must provide foreign investors, particularly the

Claimant, with means of enforcing legitimate rights within a reasonable amount of

time. “Reasonable” here should be determined by looking back to the factors that

contribute to the determination of denial of justice.131

140. In the present case, the fact that there is no complex characteristic in enforcing the

Award and also the absence of the NHA that was condoned by the High Court of

Mercuria contribute to the unreasonable delay that was suffered by the Claimant.

141. On the other hand, the Claimant must adequately utilize the means available to it to

assert claims and enforce rights. It will be up to the Respondent to prove that local

remedies are available and the Claimant to show that those remedies were ineffective or

futile.132

In the present case, the seven years delay in the enforcement proceeding in the

Mercurian court system itself is evident that other remedies would be futile.133

142. Relying on the case of White Industries v India, it is understandable that the delay in

regards to the enforcement proceeding was not considered to be a breach of the

effective means standard. This is because the tribunal accepted that the three and a half

year enforcement proceedings were “less than ideal” but also noted that “India is a

developing country with a population of over 1.2 billion people with a seriously

overstretched judiciary“.134

Thus, the delays in the national court system are endemic,

with extended timelines causing considerable difficulties for international parties.

143. However, the situation in Mercuria should not be held to the same standard as India as

the number of population is vastly different. Mercuria is a developing country with a

judicial system catering to a population of 67 million people,135

which is about 1.1

billion short from India. Thus, the tribunal in Chevron-Texaco v Ecuador

acknowledged that regular delays could evidence a systematic problem with the court

130


Ibid, para. 175. 132

White Industries v India, para. 11.3.2(g). 133



Response to the Notice of Arbitration, para. 9.

TEAM TANAKA

32

system which would amount a breach of the effective means standard as court

congestion and backlogs are not a complete defence to a delay. 136

H. The MB-BIT is silent on the Exhaustion of Local Remedies rule

144. To allege a breach of the BIT, the Claimant does not need to prove that it has exhausted

local remedies. However, as explained by the tribunal in White Industries v India, the

Claimant must adequately utilize the means available to it to assert claims and enforces

rights.137

This is due to the lex specialis nature of the effective means standard.138

145. In addition, Amerasinghe was of the opinion that undue delay in the administration of

justice is considered as a denial of justice and it is certainly one which does not require

any further exhaustion of local remedies.139

146. Furthermore, the MB-BIT itself is silent on the Exhaustion of Local Remedies rule.

Therefore, had the local remedies rule be so significant, and then it should have been

included in the BIT itself in order to achieve its purpose. This is because the exhaustion

of local remedies should not defeat the purpose of a BIT of having to resort to

international arbitration.

147. This is further supported by the case of Mytilineos v. Serbia and Montenegro, where the

tribunal decided that local remedies do not need to be exhausted in a situation which

involves BITs granting foreign investors direct access to international arbitration as “it

would seriously undermine the effectiveness of this form of dispute settlement”.140

148. In conclusion, the Claimant does not need to prove that it has exhausted the local

remedies in Mercuria due to the fact that it should not be a basis to stop the Claimant

from enforcing rights and asserting claims under the BIT.

136


White Industries v India, para. 11.3.2(g). 138


Amerasinghe, para. 210. 140

Mytilineos v Serbia and Montenegro, para. 222.

TEAM TANAKA

33

V. THE TERMINATION OF THE LTA IS A VIOLATION OF THE BIT BY

VIRTUE OF ART-3.3 OF THE MB-BIT

149. The unilateral and premature termination of the Long-Term-Agreement (LTA) by the

NHA is a violation of the BIT as the Respondent failed to observe its contractual

obligation under the BIT (I). This is because the conduct of the NHA is attributable as

the NHA is a state organ and acted under the direction of the Respondent (J).

Furthermore, the NHA is exercising its sovereign authority and not merely acting in a

commercial capacity (K). Therefore, the contract breached by the Respondent defeated

the Claimant’s legitimate expectations of a contractual stability (L).

I. The Respondent failed to observe its contractual obligation under the MB-BIT

150. The purpose of the umbrella clause is to elevate contractual breaches into a breach of

the BIT.141

The word “any obligation” provided in Art-3.3 of the MB-BIT includes

contractual obligations, thus any breach of the contractual obligation by the Respondent

would be a violation of the MB-BIT.142

151. The tribunal in LG&E v Argentina characterized the umbrella clause as one which

creates a requirement by the host state to observe its obligations towards foreign

investors, including those that arise out of a contract; hence such obligations receive

extra protection by virtue of their consideration under the bilateral treaty.143

152. Therefore, the LTA itself is an obligation which gives rise to liability under the

umbrella clause of the BIT and thus, a breach of the LTA amounts to a violation of the

MB-BIT.

J. The conduct of the NHA is attributable to the Respondent

153. The termination of the LTA is attributable to the Respondent because of two reasons;

(i) the NHA is a state organ and (ii) the NHA had acted under the direction of the

Respondent.

141


Nolan/Baldwin, pg. 4. 143

LG&E v Argentina, paras. 169-175.

TEAM TANAKA

34

(i) The NHA is a state organ

154. The conduct of the NHA is attributable to the Respondent because the NHA is a state

organ by virtue of Art-4 of the ILC Articles which provides that:

“The conduct of any State organ shall be consider.ed an act of that State

under international law, whether the organ exercises legislative, executive,

judicial or any other functions, whatever position it holds in the

organization of the State, and whatever its character as an organ of the

central Government or of a territorial unit of the State.”

155. Thus, the NHA is a state organ because the NHA were set up by the Republic of

Mercuria and they have to report annually to the Ministry of Health of Mercuria.144

156. Even if the NHA is not a state organ, the conduct of the NHA is still attributable to the

Respondent by virtue of Art-5 of the ILC Articles which reads:

“The conduct of a person or entity which is not an organ of the State under

article 4 but which is empowered by the law of that State to exercise

elements of the governmental authority shall be considered an act of the

State under international law, provided the person or entity is acting in that

capacity in the particular instance.”

157. Therefore, the conduct of NHA is empowered by the Respondent to exercise its

governmental authority and hence, is attributable to the Respondent.

144

Uncontested Facts, paras. 5 & 6.

TEAM TANAKA

35

(ii) The NHA had acted under the direction of the Respondent

158. The conduct of NHA can be attributable to the Respondent if they were acting under

the direction of the Respondent. According to Art-8 of the ILC Articles:

“The conduct of a person or group of persons shall be considered an act of

a State under international law if the person or group of persons is in fact

acting on the instructions of, or under the direction or control of that State

in carrying out the conduct.”

159. The tribunal in the case of Vivendi v Argentina provides that to hold a state responsible,

it was necessary to ask whether it was acting under the direction, instigation or control

of an organ of government, which is as an agent of the state.145

160. In the present case, the fact that NHA is acting under the direction of the Respondent

can be seen firstly, when the Minister of Health directed the NHA to estimate the

requirement in Mercuria and invited offers from pharmaceutical companies for long

term strategic supply of FDC greyscale medicines.146

This proves that the Respondent

is the reason why the NHA invited the Claimant to enter into the LTA as the Minister

of Health had directed them to do so.

161. Secondly, the termination of the LTA was under the direction of the Respondent since

it occurred less than a month after there was a private meeting between the Minister and

the President of Mercuria, together with the Director of the NHA as the purpose of the

meeting was to resolve budgetary problems.147

162. This is important because prior to the meeting, there was a negotiation made between

the Claimant and the NHA for the price reduction of the Sanior drugs.148

However, the

Claimant refused to succumb to their demands as the Claimant’s profit would reduce to

virtually nothing. Now it can be reasonably assumed that the Respondent had instructed

145

Vivendi v Argentina, para. 6.8.2. 146


Uncontested Facts, paras. 16 & 17. 148


TEAM TANAKA

36

the termination of the LTA since it was done a month after the private meeting, and not

directly after the negotiation.

163. This proves that there is a causal link between the termination of the LTA and the

government’s control, thus attributing the state to an internationally wrongful act.

K. The NHA is exercising its sovereign authority and not merely acting in a

commercial capacity

164. To impute liability on the Respondent, not only that the Claimant has to prove that the

conduct of the NHA is attributable to the Respondent, but also that the NHA is

exercising its sovereign authority and not merely acting in a commercial capacity.

165. A termination of the contract brought about through the employment of sovereign

prerogative would lead to a violation of the FET standard.149

This means that the breach

of FET requires conduct of the state in the exercise of sovereign powers.150

166. It is essential to refer to the case of Maffezini v Spain in order to find elements which

constitute the exercise of governmental authority for the issue of attribution where the

tribunal clearly pointed out functional and structural test. According to the findings of

the tribunal, under the functional element of the attribution test, it is vital to look into

the nature of the conduct, whether it is governmental or commercial in nature. As for

the structural element of such test, the question of effective control should be

determined.151

167. In the present case, all prerequisites of functional test presented were fulfilled. The

conduct of the NHA in relation to the LTA is a sovereign act which amounts to a

violation of the FET standard. This is because the Sanior drugs that were developed

under the LTA are for the benefit of the people of Mercuria. The nature of the contract

proves the motive for the state to exercise its sovereign authority and not merely acting

in a commercial capacity.

149

Rumeli v Kazakhstan, para. 615. 150

Bayindir v Pakistan, para. 377. 151

Maffezini v Spain, para. 52.

TEAM TANAKA

37

168. It is also stated that the NHA is funded mostly by national taxation, and some private

contributions. Hence, this shows that the NHA is politically accountable to the

government.152

169. Furthermore, the structural element has to be analyzed. The degree of control was

addressed in the Nicaragua v United States, where it was held by the Court that even

though USA was responsible for the planning, direction and support of contrast, general

control is not enough to attribute the conduct of certain group of individuals, but that is

effective control which is required.153

170. Here, the NHA was set up by the Central Government of Mercuria and envisioned by

the Constitution of Mercuria154

and organized by NHA trusts, which are established by

the National Health Authorities Act,155

which means that it was incorporated under the

Mercurian law. This clearly shows that the Respondent had an effective control over

the NHA, and thus by virtue of Art-4 of the ILC Articles, the NHA is an organ whose

conduct has to be qualified as attributable to the Respondent.

L. The termination of the LTA defeated the Claimant’s legitimate expectations of a

contractual stability

171. Contractual stability is only guaranteed in the presence of an umbrella clause. 156

The

legitimate expectations of the foreign investor will have to be identified within the wide

parameters governing contractual disputes between a host state and an investor.157

Therefore, the termination of the LTA defeated the Claimant’s legitimate expectations

of a contractual stability.158

152


Nicaragua v United States, para. 86. 154

Annex No 2, para. 2. 155


Dolzer/Schreuer, pg. 25. 157

Dolzer, pg. 25. 158

Rumeli v Kazakhstan, para. 615.

TEAM TANAKA

38

172. The tribunal in the case of Toto v Lebanon provided that legitimate expectations may

follow from explicit or implicit representations by the host state, or from its contractual

commitments.159

173. In the present case, the legitimate expectation that the LTA would not be breached

arises from the contract itself which constitutes a promise in where the Claimant relied

on by setting up a robust manufacturing base and eventually expanded into other

verticals in the pharmaceutical sector in Mercuria.160

174. Furthermore, Clause 6 of the LTA stated that it shall be valid for a period of 10 years

subject to the supplier’s satisfactory performance.161

The problem here lies with the fact

that during the period, the Claimant never failed to provide supplies to NHA. The

conduct of NHA by putting pressure to the Claimant by wanting their unreasonable

demands to be met or else the agreement would be terminated, does not fall under the

ambit of Clause 6 of the LTA.

175. Therefore, since the conduct of the NHA in relation to the LTA is attributable to the

Respondent, then the Respondent has disrespected their obligation of a contractual

stability. This is due to the premature and unilateral termination of the LTA which has

defeated the Claimant’s legitimate expectations.

159

Toto v Lebanon, para. 159. 160



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PRAYERS FOR RELIEF

The Claimant respectfully asks the Tribunal to find that:

1. The Tribunal has the jurisdiction to adjudicate the claims in relation to the Arbitral

Award;

2. The Respondent cannot deny the Claimant the benefits under the MB-BIT;

3. The Respondent breached the Fair and Equitable Treatment standard as provided under

Art-3.2 of the MB-BIT;

4. The Respondent is liable for the conduct of its judiciary under Art-3 of the MB-BIT;

5. The termination of the LTA is a violation of the Fair and Equitable Treatment standard

by virtue of Art-3.3 of the MB-BIT.

TEAM TANAKA

On behalf of Atton Boro Limited

ATTON BORO LIMITED V. THE REPUBLIC OF MERCURIA · Weeramantry Weeramantry, Treaty Interpretation in...

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