TEAM KRYLOV THE 2015 FOREIGN DIRECT …...International Investment Law (Oxford University Press,...

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TEAM KRYLOV

THE 2015 FOREIGN DIRECT INVESTMENT

INTERNATIONAL ARBITRATION MOOT

ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE

LONDON COURT OF INTERNATIONAL ARBITRATION

IN THE PROCEEDING BETWEEN

VASIUKI LLC

(Claimant)

v.

THE REPUBLIC OF BARANCASIA

(Respondent)

MEMORIAL FOR THE CLAIMANT

19 SEPTEMBER 2015


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TABLE OF CONTENT

TABLE OF CONTENT ............................................................................................................ i LIST OF AUTHORITIES ...................................................................................................... iii LIST OF LEGAL SOURCES ............................................................................................... vii LIST OF ABBREVIATIONS ................................................................................................ xi STATEMENT OF FACTS ...................................................................................................... 1 SUMMARY OF ARGUMENTS ............................................................................................. 4 ARGUMENTS ......................................................................................................................... 6 ARGUMENTS ON JURISDICTION AND ADMISSIBILITY ........................................... 6 I. THE TRIBUNAL HAS JURISDICTION OVER THE PRESENT DISPUTE .................................. 6

A. The Tribunal Has Jurisdiction Ratione Materiae Under the CB-BIT ..................... 6 B. The Tribunal Has Jurisdiction Ratione Temporis as the CB-BIT Remains Valid

Despite Respondent’s Proposed Termination of the CB-BIT .................................. 8 1. Respondent’s proposed termination of the CB-BIT as of June 2008 was invalid

according to Article 54 VCLT ................................................................................. 8 a. Respondent’s unilateral termination of the CB-BIT was inconsistent with

Article 54(a) VCLT vis-à-vis Article 13(2) CB-BIT ........................................... 9 b. Absent Cogitatia’s consent, Respondent’s termination of the CB-BIT was

unlawful pursuant to Article 54(b) VCLT ........................................................ 10 2. Alternatively, Respondent’s EU accession did not render the CB-BIT obsolete

pursuant to Article 59 VCLT ................................................................................. 11 a. The CB-BIT and EU law do not cover the same subject matter ...................... 12 b. In any event, the CB-BIT and EU law can apply simultaneously .................... 14

3. Additionally, the CB-BIT remains applicable in accordance with Article 30(3) VCLT ..................................................................................................................... 15

4. As a matter of procedure, the termination of the CB-BIT was not effective as of 30 June 2008 ............................................................................................................... 16

II. CLAIMANT’S CLAIMS ARE ADMISSIBLE AS CJEU DOES NOT HAVE INTERPRETIVE

MONOPOLY OVER THE PRESENT CASE ............................................................................ 18 ARGUMENTS ON MERITS ................................................................................................ 19 III. RESPONDENT’S ADMINISTRATIVE AND REGULATORY MEASURES IN RESPECT OF THE

LRE BREACHED THE SUBSTANTIVE PROVISIONS OF THE CB-BIT ................................. 19 A. Respondent’s Measures Violated FET Standard of Article 2(2) CB-BIT ............ 19

1. Respondent’s premature revocation of the feed-in tariff violated Claimant’s legitimate expectations of regulatory stability ....................................................... 20

2. Respondent’s denial of Claimant’s license for Alfa and its blanket draconian tariff reduction were arbitrary ......................................................................................... 23

3. Respondent failed to accord Claimant due process when amending the LRE ...... 24 4. Respondent’s tariff reduction was discriminatory against Beta ............................ 25

B. Respondent’s Premature Revocation of the Feed-in Tariff Constituted Indirect Expropriation in Violation of Article 5 CB-BIT ..................................................... 26 1. The effects of the LRE Amendment amount to indirect expropriation ............... 27


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2. Furthermore, Respondent’s tariff reduction was unlawful as no compensation was paid .............................................................................................................. 28

3. In any event, Respondent’s premature revocation of benefits falls beyond the “police powers” exception .................................................................................. 28

IV. RESPONDENT’S MEASURES ARE NOT EXEMPTED UNDER EITHER THE CB-BIT OR

CUSTOMARY INTERNATIONAL LAW ................................................................................. 30 A. Respondent’s Measures Are Not Exempted Under CB-BIT ................................. 30

1. Article 11 CB-BIT is not a self-judging clause absent an expressed provision ..... 30 2. Article 11 CB-BIT does not apply to Respondent’s domestic situation ................ 31

B. Respondent’s Measures Are Not Exempted Under Customary International Law.. ............................................................................................................................ 32

ARGUMENTS ON REMEDIES ........................................................................................... 34 V. RESPONDENT CAN BE ORDERED TO PERFORM RESTITUTION ........................................ 34

A. The Tribunal Can Order Specific Performance Pursuant to LCIA Rules and ARSIWA ..................................................................................................................... 34

B. Order of Specific Performance Is Enforceable as It Does Not Violate Respondent’s Sovereignty ......................................................................................... 35

VI. CLAIMANT’S BASIS FOR CLAIMING AND QUANTIFYING DAMAGES IS APPROPRIATE ... 37 A. Claimant Is Entitled to Full Reparation Given the Causal Link Between

Respondent’s Unlawful Acts and Claimant’s Damages ......................................... 37 1. There is sufficient certainty that Respondent’s unlawful acts caused Claimant’s

lost net income ....................................................................................................... 37 2. Respondent’s unlawful acts have also resulted in Claimant’s lost future net

income. ................................................................................................................... 38 a. Claimant had engaged in Solar PV projects and would have engaged in

further developments but for Respondent’s unlawful acts ............................... 38 b. Claimant would probably earn higher net income arising from its existing and

planned Solar PV operations but for Respondent’s unlawful acts .................. 39 B. Further, Claimant’s Quantification of Damages Is Proper ................................... 40

1. Preliminarily, the differential method with the discounted cash flow valuation is appropriate to quantify Claimant’s damages ......................................................... 40

2. Subsequently, damages awarded should be discounted at Claimant’s WACC to reflect its NPV ........................................................................................................ 41

3. Accordingly, Claimant has properly quantified each head of damages ................. 41 C. Damages Awarded to Claimant Should Carry Compound Interest Rate at The

Rate of Claimant’s WACC ........................................................................................ 42 D. The Cost of Arbitration Born by Claimant Should Be Proportional to the Success

or Failure of Its Claims Pursuant to Article 28(4) LCIA Rules ............................ 43 PRAYERS FOR RELIEF ..................................................................................................... 44


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LIST OF AUTHORITIES

BOOKS Bonnitcha Jonathan Bonnitcha, Substantive Protection under Investment Treaties: A

Legal and Economic Analysis, (Cambridge University Press, 2014). Cardwell Paul James Cardwell, EU External Relations Law and Policy in the Post-

Lisbon Era, (TMC Asser Press, 2011). Cheng Bin Cheng, General Principles of Law as Applied by International Courts

and Tribunals, (Cambridge University Press, 2006). Crawford James Crawford, The International Law Commission’s Articles on State

Responsibility: Introduction, Text and Commentaries (Cambridge University Press, 2002).

Dolzer & Schreuer R. Dolzer and Christoph H. Schreuer, Principle of International

Investment Law, (2008). Dolzer & Stevens R. Dolzer and M. Stevens, Bilateral Investment Treaties, (New York:

Kluwer Law International, 1995). Dörr Oliver Dörr et al., The Vienna Convention on the Law of Treaties: A

Commentary, (Springer, 2012). Douglas Zachary Douglas, The International Law of Investment Claims,

(Cambridge University Press, 2012). Dugan Christopher Dugan, Investor-State Arbitration, (Oxford University Press,

2008). Kantor Mark Kantor, Valuation for Arbitration: Compensation Standard,

Valuation Methods and Expert Evidence, (New York: Kluwer Law International, 2008).

Newcombe & Paradell Andrew Newcombe and Lluís Paradell, Law and Practice of Investment

Treaties: Standards of Treatment, (New York: Kluwer Law International, 2009)

Marboe Irmgard Marboe, Calculation of Compensation and Damages in

International Investment Law (Oxford University Press, 2009). McLachlan Campbell McLachlan et al., International Investment Arbitration:

Substantive Principles (Oxford University Press, 2007). !


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Oppenheim Lassa Oppenheim, International Law: A Treatise, Vol. I, (Longmans, Green & Co, 1912).

!Redfern 1 Alan Redfern et al., Law and Practice of International Commercial

Arbitration, 4th Ed., (Sweet & Maxwell, 2004). Redfern 2 Alan Redfern et al., Redfern & Hunter on International Arbitration,

(Oxford University Press: 5th Edition, 2009). Reinisch August Reinisch, Standards of Investment Protection, (Oxford University

Press, 2008). Ripinsky and Williams Sergey Ripinsky and Kevin Williams, Damages in International Law,

(BIICL 2009). Vandevelde Kenneth J. Vandevelde, United States Investment Treaties: Policy and

Practice, (Boston: Kluwer Law and Taxation, 1992). Villiger Mark E. Villiger, Commentary on the 1969 Vienna Convention on the Law

of Treaties, (Martinus Nijhoff, 2009). Vinuales Jorge E. Vinuales, Foreign Investment and the Environment in

International Law, (Cambridge University Press, 2015). Wälde & Sabahi Thomas W Wälde and Borzu Sabahi, Compensation, Damages, and

Valuation, in The Oxford Handbook of International Investment Law, (Oxford University Press, 2009).

ARTICLES Bjorklund Andrea K. Bjorklund, Reconciling State Sovereignty and Investor

Protection in Denial of Justice Claims, 45 VA. J. INT’L LAW 816-818 (2005).

Boute Anatole Baute, Challenging the Re-regulation of Liberalized Electricity

Prices Under Investment Arbitration, ENERGY L.J. 497-439. (2011). D’Amato Anthony D’Amato, Consent, Estoppel, and Reasonableness Three

Challenges to Universal International Law, 10 VIRGINIA J. OF INT’L LAW. 1-31 (1969).

Dimopoulos 1 Angelos Dimopoulos, The Treaty of Lisbon: Half Way Toward a Common

Investment Policy, 21 EUR. J. OF INT’L L. 1049 (2010). Dimopoulos 2 Angelos Dimopoulos, The Validity and Applicability of International

Investment Agreements Between EU Member States Under EU and International Law, 48 COMMON MKT. L. REV. 63, 64 (2011).


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Malik Mahnaz Malik, Best Practices Series Bulletin #3 - Fair and Equitable Treatment, International Institute for Sustainable Development, Feb. 10, 2009.

Mann & Moltke Howard Mann & Konrad von Moltke, Protecting Investor Rights and the

Public Goods: Assessing NAFTA’s Chapter 11, International Institute for Sustainable Development, June 18, 2002.

Nathanson Rachel A. Nathanson, The Revocation of Clean-Energy Investment

Economic-Support Systems as Indirect Expropriation Post-Nykomb: A Spanish Case Analysis, 98 IOWA L. REV. 863 (2013).

Schill & Briese Stephan Schill and Robyn Briese, “If the State Considers”: Self-Judging

Clauses in International Dispute Settlement, MAX PLANCK YEARBOOK OF

U.N LAW, VOL. 13 (2009). Schreuer Christoph H. Schreuer, Fair and Equitable Treatment in Arbitral Practice,

6. J. WORLD INV. & TRADE 357 (2005). Shan & Zhang Wenhua Shan & Sheng Zhang, The Treaty of Lisbon: Half Way toward a

Common Investment Policy, 21 EUR. J. OF INT’L L. 1049 (2010). Stephens-Chu Gisele Stephens-Chu, Is it Always All About the Money? The

Appropriateness of Non-Pecuniary Remedies in Investment Treaty Arbitration, 51 OXFORD INT’L L.J. 30(4) (2014).

Olivet Cecilia Olivet, A test for European solidarity: The case of intra-EU

Bilateral Investment Treaties, Transnational Institute, January, 2013. Wehland Hanno Wehland, Intra-EU Investment Agreements and Arbitration: Is

European Community Law an Obstacle?, CAMBRIDGE INT’L L.J. (2009). White William Burke White, The Argentine Financial Crisis: State Liability

under BITs and the Legitimacy of the ICSID System, University of Pennsylvania, Inst. for Law & Econ Research Paper No. 08-01 (2008).

MISCELLANEOUS EEC 1 Council Regulation No 2913/92 of 12 October 1992 establishing the

Community Customs Code, Official Journal L 302, 19/10/1992. EEC 2 Council Directive No. 88/361 of 24 June 1988 for the implementation of

Article 67 of the 1988 Treaty OJ L 178/5. Expert Opinion of José E. Alvarez, Sempra Int’l v. Republic of Argentina, ICSID Case No. of José E. Alvarez ABR/02/16 and ARB/03/02, (Opinion of José Alvarez).


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DECC DECC, “Government response to the consultation on proposals for the levels of banded support under the Renewables Obligation for the period 2013-17 and the Renewables Obligation Order 2012”.

OECD: Indirect Expro. OECD, “Indirect Expropriation and the Right to Regulate in International

Investment Law”, OECD WORKING PAPERS ON INTERNATIONAL

INVESTMENT, Number 2004/04, September 2004. UNCTAD ICSID Dispute Settlement: 2.5 Requirement Rationae Materiae. UNCTAD: FET “Fair and Equitable Treatment, A Sequel (United Nations Conference on

Trade and Development, UNCTAD Series on International Investment Agreements II)” United Nations: Conference on Trade and Development, 2012.


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LIST OF LEGAL SOURCES

ARBITRAL DECISIONS ICSID AES AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of

Hungary, ICSID Case No. ARB/07/22, Award (23 September 2020). CMS, Award CMS Gas Transmission Company v. Argentine Republic, ICSID Case No.

ARB/01/8, Award (12 May 2005). CMS, Jurisdiction CMS Gas Transmission Company v. Argentine Republic, ICSID Case No.

ARB/01/8, Decision on Objection to Jurisdiction (17 July 2003). Corn Products Corn Products v. United Mexican States, ICSID Case No. ARB

(AF)/04/01, Decision on Responsibility (15 January 2008). Continental Continental Casualty Company v. The Argentine Republic, ICSID Case

No. ARB/03/9, Award (5 September 2008). EDF EDF International S.A., SAUR International S.A. and León

Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award (11 June 2012).

Enron, Award Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic,

ICSID Case No. ARB/01/3, Award (22 May 2007). Generation Ukraine Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award

(16 September 2003). LG&E, Award LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc.

v. Argentine Republic, ICSID Case No. ARB/02/1, Award (25 July 2007). LG&E, Liability LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc.

v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006).

Metalclad Metalclad Corporation v. The United Mexican States, ICSID Case No.

ARB(AF)/97/1, Award (30 August 2000). Micula, Award Ion Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L.,

and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Award (11 December 2013).


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Micula, Jurisdiction Ion Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L., and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility (24 September 2008).

MTD MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID

Case No. ARB/017, Award (25 May 2004). Occidental Occidental Petroleum Corporation and Occidental Exploration and

Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Provisional Measures (17 August 2007).

Parkerings Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No.

ARB/05/8, Award (11 September 2007). Perenco, Jurisdiction Perenco Ecuador Limited v. The Republic of Ecuador, ICSID Case No.

ARB/08/6, Decision on Remaining Issues of Jurisdiction and Liability (12 September 2014).

Sempra Sempra Energy International v. Argentine Republic, ICSID Case No.

ARB/02/16, Award (28 September 2007). Tecmed Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States,

ICSID Case No. ARB(AF)/00/2, Award (29 May 2003). Vivendi, Award Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.

Argentine Republic, ICSID Case No. ARB/97/3, Award (20 August 2007). Vivendi, Annulment Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v.

Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment (10 August 2010).

Waste Management II Waste Management, Inc. v. United Mexican States (“Number 2”), ICSID

Case No. ARB/01/3, Award (22 May 2007). UNCITRAL Bau Walter Bau v. The Kingdom of Thailand, UNCITRAL, Awards (1 July

2009). Binder Binder v. Czech Republic, UNCITRAL, Award on Jurisdiction (6 June

2007). Canfor Corp Canfor Corp v. United States of America, UNCITRAL, Decision on

Preliminary Question (6 June 2006). CME CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Final Award

(13 September 2001).


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Eureko Eureko B.V. v. The Slovak Republic, UNCITRAL, Award in Jurisdiction, Arbitrability and Suspension (26 October 2010).

Glamis Gold Glamis Gold Ltd v. United States of America, UNCITRAL, Awards (8

June 2009). Methanex Methanex Corporation v. United States of America, UNCITRAL, Final

Award on Jurisdiction and Merits (3 August 2005). Pope & Talbot Pope & Talbot Inc. v. Government of Canada, UNCITRAL, Award in

Respect of Damages (31 August 2000). Saluka Saluka Investment B.V. v. The Czech Republic, UNCITRAL, Partial Award

(17 March 2006). S.D. Myers S.D. Myers, Inc v. Government of Canada, UNCITRAL, Partial Award (13

November 2002). SCC Al-Bahloul Mohammad Ammar Al-Bahloul v. The Republic of Tajikistan, SCC Case

No. V (064/2008), Final Award (8 June 2010). Eastern Sugar Eastern Sugar B.V. v. The Czech Republic, SCC Case No. 088/2004,

Partial Award (27 March 2007). Nykomb Nykomb Synergetics Technology Holding AB v. The Republic of Latvia,

SCC, Arbitral Award (16 December 2003). INTERNATIONAL COURT CASES Chorźow Case Concerning the Factory at Chorźow (Germany v. Poland), [1927]

PCIJ (Ser. A) No. 9. ELSI Elettronica Sicula S.p.A (ELSI) (United States v. Italy), [1989] ICJ. Gulf of Maine Case Concerning Delimitation of the Maritime Boundary in the Gulf of

Maine Area (Canada v. United States), [1984] ICJ. Gabčikovo-Nagymaros Case Concerning Gabčíkovo-Nagymaros Project (Hungary v. Slovakia),

[1997] ICJ Rep 7. EUROPEAN COURT CASES Eco Swiss Eco Swiss China Time Ltd v. Benetton International NV [1999] ECR

13055.


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Nordsee Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co. KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co. KG [1982] ECR 1095.

STATE COURTS Parson Parsons Whittemore Overseas Co Inc v. Société Générale de l’Industrie du

Papier (RAKTA), U.S Court of Appeals for the Second Circuit - 508 F.2d 969 (2d Cir. 1974), December 23, 1974.

Texaco Texaco Overseas Petroleum Company and California Asiatic Oil

Company v. Government of the Libyan Arab Republic, YCA, Award on the Merits (19 January 1977).

TREATIES US-Argentina BIT Treaty Concerning the Encouragement and Reciprocal Protection of

Investment, United States-Argentina, 14 November 1991. US-Czech Republic BIT Treaty Concerning the Encouragement and Reciprocal Protection of

Investment, United States-Czech Republic, 27 August 1993. VCLT 1969 Vienna Convention on the Law of Treaties, 1155 UNTS 331 (entered

into force 27 January 1980). MISCELLANEOUS ARSIWA Commentary International Law Commission, Articles on Responsibility of States for

Internationally Wrongful Acts, with Commentaries, 2001. NY Convention The New York Convention on the Recognition and Enforcement of

Foreign Arbitral Awards, 1958. LCIA Rules The London Court of International Arbitration Rules, 1 October 2014. TFEU European Union, Treaty on the Functioning of the European Union, 26

October 2012.


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LIST OF ABBREVIATIONS

¶/¶¶ Paragraph(s)

ARSIWA Articles on Responsibility of States for Internationally Wrongful Acts

BEA Barancasia Energy Authority

CB-BIT Cogitatia-Barancasia Bilateral Investment Treaty

CCP Common Commercial Policy

CJEU Court of Justice of the European Union

COE Cost of Equity

EU European Union

EC European Commission

Facts Uncontested Facts

FET Fair and Equitable Treatment

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Disputes

ILC International Law Commission

LCIA London Court of International Arbitration

LRE Barancasia Law on Renewable Energy

LRE Amendment Law on the Amendment of Article 4 of the LRE

NPV Net Present Value

NPM Non-Precluded Measures

p. / pp. Page / Pages

PCA Permanent Court of Arbitration

PCIJ Permanent Court of International Justice

PO Procedural Order

Regulation Barancasia Regulation on the Support of Photovoltaic Sector

SCC Stockholm Chamber of Commerce

TFEU Treaty on the Functioning of the European Union

UNCITRAL United Nations Commission on International Trade Law

VCLT 1969 Vienna Convention on the Law of Treaties

WACC Weighted Average Capital Cost


1

STATEMENT OF FACTS

THE COGITATIA-BARANCASIA BIT

1.! In 1998, the Republic of Barancasia [“Barancasia” or “Respondent”] and the Federal

Republic of Cogitatia [“Cogitatia”] concluded the Cogitatia-Barancasia Agreement for

the Promotion and Reciprocal Protection of Investments [“CB-BIT”], which entered into

force on 1 August 2002.

CLAIMANT’S BUSINESS IN BARANCASIA

2.! In 2002, Vasiuki LLC [“Claimant”] was incorporated under the laws of Cogitatia.

Claimant initially engaged in small-scale fossil fuel and wind turbine installations in

several regions, including Cogitatia and Barancasia. In 2006, Claimant began to expand

through various “green power” subsidies offered by governments to promote the

development of renewable energy sources.

COGITATIA AND BARANCASIA’S ACCESSION TO EU

3.! On 1 May 2004, Cogitatia and Barancasia acceded to the European Union [“EU”].

Barancasia’s government subsequently reviewed its intra-EU BITs and claimed that they

had become obsolete. It proceeded to announce its intention to terminate all intra-EU

BITs and on 29 June 2007, sent a notification to Cogitatia outlining its intention to

terminate the CB-BIT by 30 June 2008. On 28 September 2007, Cogitatia confirmed

receipt of Barancasia’s notification, but did not otherwise reply.

BARANCASIA’S LAW ON RENEWABLE ENERGY

4.! In May 2010, Barancasia adopted the Law on Renewable Energy [“LRE”]. The LRE

provides that renewable energy production would be encouraged until the share of

electricity generated from renewable sources amounts to no less than 20 percent in

comparison to Barancasia’s gross consumption of energy. Such was to be done by fixing

feed-in tariffs given to investors that have received a license from the Barancasian

Energy Authority [“BEA”]. The LRE also provides that the feed-in tariff announced and

applicable at the time of the issuance of a license would apply for twelve years. On 1 July

2010, the BEA publicly announced that the feed-in tariff would be 0.44 EUR/kWh.


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CLAIMANT’S REQUESTS FOR LICENSE

5.! Upon announcement of the feed-in tariff, Claimant applied for licenses for its first

photovoltaic [“PV”] project Alfa, launched in 2009, as well as its second project Beta.

On 25 August 2010, the BEA only granted Claimant a license for Beta, claiming that the

feed-in tariff would only apply to new projects, and not existing ones like Alfa. This

condition itself was not stipulated in the LRE.

THE NEW COST OF MANUFACTURE

6.! In 2011, a groundbreaking technology made solar panels substantially cheaper to

manufacture, thereby reducing the costs of PV development. The decrease of

development costs enabled investors to garner more profit under the 0.44EUR/kWh tariff

provided by the Barancasian government. Subsequently, the BEA received over 7,000

new applications for licenses to develop PV plants, with Claimant launching twelve more

PV projects.

THE NEW COST’S IMPACT ON BARANCASIA

7.! In media interviews in early 2012, the Barancasian government claimed that the LRE was

a mistake as the 0.44EUR/kWh tariff applicable for twelve years enabled investors to

garner more profit. The government concluded that it could no longer accommodate such

tariff, given that it would require Barancasia to divert some of its state revenues to

finance the tariffs and to possibly exceed its EU-mandated borrowing limits for the

relevant years. The BEA proceeded to grant the licenses to as many as 6,000 of the new

applicants nonetheless.

BARANCASIA’S REDUCTION OF THE FEED-IN TARIFF

8.! In November 2012, the Barancasian Parliamentary Energy Committee conducted private

hearings with specially invited representatives of the renewable energy industry and

certain stakeholders, excluding inter alia Claimant, who was not made known of such.

On 3 January 2013, Barancasia adopted an Amendment to the LRE, which entered into

force on 5 January 2013 with retroactive effect as of 1 January 2013, requiring the feed-in

tariffs to be adjusted annually according to the costs of the best available technology. The

BEA also announced that the new feed-in tariff would be 0.15EUR/kWh, likewise

applicable from 1 January 2013. By that time, Claimant had already made considerable

investments for its twelve new PV projects, e.g. buying equipment to be shipped on 31


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January 2013. As a result of the Amendment, Claimant also encountered difficulties with

its financing of its projects.

REFERRAL TO ARBITRATION

9.! Upon failure to negotiate, Claimant submitted a request for arbitration to the London

Court of International Arbitration [“LCIA” or “the Tribunal”] dated 2 November 2014,

alleging violations of the CB-BIT’s standards of protection and requesting for remedies

for the considerable losses incurred from such violations.


4

SUMMARY OF ARGUMENTS

I. JURISDICTION AND ADMISSIBILITY

THE TRIBUNAL HAS JURISDICTION AND CLAIMANT’S CLAIMS ARE ADMISSIBLE

10.! The Tribunal has jurisdiction to hear the present case. Claimant’s business in the

renewable energy sector in Barancasia qualifies as an investment protected under the CB-

BIT, which was valid at the time of Respondent’s substantive violations thereof. The CB-

BIT was not terminated despite Respondent’s proposed termination as of June 2008 and

it was neither rendered wholly obsolete nor its provisions inapplicable following

Cogitatia and Barancasia’s accession to EU in 2004. Respondent also failed to fulfill the

procedural requirements of termination under VCLT (Section I). Moreover, Claimant’s

claims are admissible as the present case is not subject to the interpretative monopoly of

Court of Justice of the European Union [“CJEU”] (Section II).

II. MERITS

RESPONDENT’S BREACH OF THE SUBSTANTIVE PROVISIONS OF THE CB-BIT

11.! Respondent violated Article 2(2) CB-BIT by failing to accord Claimant fair and equitable

treatment [“FET”] through its denial of Claimant’s license for Alfa, its retroactive

application of the LRE Amendment, and its premature revocation of the licensed benefits

under the LRE that fundamentally altered the pricing regime set to attract PV

investments. Consequently, Respondent undermined Claimant’s legitimate expectation

that it would be entitled to the 0.44EUR/kWh for twelve years, arbitrarily denied Alfa’s

license, disregarded due process of law, and discriminated against Beta when it applied

blanket tariff reduction. Furthermore, Respondent indirectly expropriated Claimant’s

investment in violation of Article 5 CB-BIT when it deprived Claimant of its economic

benefit from the licensed tariff without compensation, unjustified by the “police powers”

exception (Section III).

NON-EXEMPTION OF RESPONDENT’S ACTIONS

12.! Respondent’s actions are not exempted under either the CB-BIT or the customary defense

of necessity pursuant to Article 25 ARSIWA. Respondent’s LRE Amendment was not


5

necessary to meet its economic and renewable energy objectives and to adhere to its EU

obligations. Furthermore, Respondent’s measures are not exempted under customary

international law since Respondent contributed to the situation of necessity and

Respondent’s LRE Amendment was not the “only way to safeguard its essential security

interest.” Thus, Respondent is obliged to compensate Claimant for losses it has suffered

due to Respondent’s breach of the CB-BIT.

III. REMEDIES

CLAIMANT’S ENTITLEMENT TO RESTITUTION FOR THE PRE-2013 FEED-IN TARIFF

13.! The Tribunal may and should order Respondent to continue paying the pre-2013

0.44EUR/kWh feed-in tariff to Claimant since it has the power to do so pursuant to 2014

LCIA Rules and Article 35 ARSIWA. Furthermore, the order would be enforceable since

Respondent is a party to the New York Convention and it has waived its right to

sovereign immunity by entering into the CB-BIT (Section IV).

CLAIMANT’S ENTITLEMENT TO COMPENSATION FOR LOSSES CAUSED BY RESPONDENT

14.! Alternatively, Claimant is entitled to compensation for the losses that it incurred as a

result of Respondent’s unlawful acts. Claimant suffered reduced its income due to

Respondent’s denial of Claimant’s license for Alfa and feed-in tariff reduction, which

affected Beta, the twelve projects, and the other future developments. The method of

valuation used by Claimant to quantify its damages is the Discounted Cash Flow

[“DCF”] method, applying Claimant’s Weighted Average Capital Cost [“WACC”]

rather than Cost of Equity [“COE”] as the Claimant financed its operations through both

debt and equity. In any event, Respondent should compensate Claimant for its out-of-

pocket expenses (Section V).


6

ARGUMENTS

ARGUMENTS ON JURISDICTION AND ADMISSIBILITY

I. THE TRIBUNAL HAS JURISDICTION OVER THE PRESENT DISPUTE

15.! Article 23(1) LCIA Rules provides that the Tribunal may determine its own jurisdiction

and authority over a dispute, which includes adjudication on the continuing validity,

effectiveness and scope of the Arbitration Agreement. In a BIT setting, an Arbitration

Agreement consists of the host State’s standing offer to arbitrate, presently embodied

under Article 8 CB-BIT,1 and the investor’s consent to arbitrate by submitting the case.2

16.! Upon Respondent’s rejection of Claimant’s offer to negotiate on 20 April 2014, 3

Claimant, as a Cogitatian investor owning Alfa,4 Beta5 and twelve other PV projects in

Barancasia,6 has properly invoked Article 8(2) CB-BIT as the arbitration clause. Bearing

the burden of proof,7 Claimant submits that the Tribunal retains the jurisdiction vested

by Article 8 CB-BIT since it has both jurisdiction [A] ratione materiae and [B] ratione

temporis.

A.! The Tribunal Has Jurisdiction Ratione Materiae Under the CB-BIT

17.! The Tribunal has jurisdiction over disputes within the protection of the CB-BIT. 8

Claimant’s claims concerning the feed-in tariffs fall within the protection of Article 8

CB-BIT as the Arbitration clause, which provides that the Tribunal has jurisdiction

over:

“any dispute which may arise between an investor of one Contracting Party and the other Contracting Party in connection with an investment in the territory of that other Contracting Party shall be settled, if possible, by negotiations between the parties to the dispute.”

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1 CB-BIT, Article 8(2)(d). 2 Redfern 1, p.66. 3 Request for Arbitration, p.3; CB-BIT, Article 8(2). 4 Facts, ¶12. 5 Facts, ¶23. 6 Facts, ¶27. 7 Canfor Corp, ¶176. 8 Generation Ukraine, ¶8.10.


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18.! In this vein, Claimant primarily relies on Article 1(e) CB-BIT, which defines

investments as “rights conferred by laws or under contract and any licenses and permits

pursuant to laws…to search for, extract, cultivate or exploit natural resources.” Based on

the ordinary meaning of the foregoing text,9 the rights of a qualifying renewable energy

operator to a PV license and to receive the announced feed-in tariff for twelve years are

investments as they are evidently conferred by law pursuant to Articles 3, 4, and 5 LRE.

19.! Even if the right to receive the feed-in tariff does not constitute an investment per se,

Article 8(1) CB-BIT does not require that the subject of the dispute be an investment.

The broad language of Article 8(1) CB-BIT entails a lower threshold conferring the

Tribunal’s jurisdiction ratione materiae inasmuch as there is (i) an investment and (ii) a

dispute between Claimant and Respondent that is (iii) “in connection with” Claimant’s

investment, all of which are fulfilled in this case.

20.! First, Article 1(a) CB-BIT includes “immovable and movable properties” as investments

protected under the CB-BIT. Claimant’s business undoubtedly encompasses a wide

range of immovable properties in Barancasia within the terms of Article 1(a) CB-BIT,

spanning from the small-scale fossil fuel to the renewable energy facilities, such as gas

and wind turbine installations, solar panels as well as land plots.10

21.! Second, a dispute occurs when there is disagreement on law and fact11 between the

Parties. There is a disagreement on law between Claimant and Respondent when the

BEA denied Claimant’s license for Alfa alleging that only new projects could obtain

license, 12 despite such limitation being absent in the LRE. 13 Additionally, factual

disagreement exists following Respondent’s arbitrary change of its renewable energy

laws,14 which effectively destroyed Claimant’s PV investments in Barancasia, infra.15

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!9 VCLT, Article 31. 10 Facts, ¶¶3,4,13,33,36. 11 UNCTAD, p.9. 12 Facts, ¶22. 13 LRE, Article 5. 14 Facts, ¶¶34,35. 15 Section III of this Memorial.


8

22.! Third, there is a nexus between the dispute and Claimant’s investments.16 The CB-BIT

attaches the phrase “in connection with the investment” to “any dispute,”17 requiring a

legally significant connection between the dispute and the investments. 18 Such

connection is established when Respondent’s measure in changing its renewable energy

framework effectively destroyed Claimant’s PV business in Barancasia and violated

Respondent’s obligations under the CB-BIT owed to Claimant as regards FET and

indirect expropriation.

23.! As a dispute concerning investments is established, the Tribunal retains its jurisdiction

ratione materiae over the case.

B.! The Tribunal Has Jurisdiction Ratione Temporis as the CB-BIT Remains Valid

Despite Respondent’s Proposed Termination of the CB-BIT

24.! Aside from the Tribunal’s jurisdiction ratione materiae, it also has jurisdiction ratione

temporis, which requires the obligation to be in force against the host State at the time

the breach occurs. 19 As the legal instrument regulating Respondent’s rights and

obligations, the CB-BIT must exist when Respondent violates Claimant’s rights under

the CB-BIT.

25.! Notwithstanding Respondent’s proposal of its termination, the CB-BIT remains valid, as

[1] it has not been terminated pursuant to VCLT. 20 Alternatively, Respondent’s

accession to EU [2] did not render the CB-BIT obsolete or [3] its provisions

inapplicable. Further, [4] Respondent did not fulfill procedural rules under VCLT.

1.! Respondent’s proposed termination of the CB-BIT as of June 2008 was invalid

according to Article 54 VCLT

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!16 Douglas, p.242, ¶463. 17 CB-BIT, Article 8(1). 18 Methanex, ¶147. 19 Douglas, p.329. 20 VCLT, Article 42(2).


9

26.! Although termination is recognized as an inherent right of every party to a treaty,21

VCLT limits its invocation to certain grounds, inter alia Article 54 VCLT, in that treaty

termination may take place “(a) in conformity with the provisions of the treaty or (b) at

any time by consent of all the parties after consultation with other contracting States.”

Presently, the CB-BIT has not been terminated since Respondent’s proposed

termination thereof by June 2008 did not comply with [a] Article 54(a) VCLT vis-à-vis

Article 13(2) CB-BIT, nor [b] Article 54(b) VCLT.

a.! Respondent’s unilateral termination of the CB-BIT was inconsistent with

Article 54(a) VCLT vis-à-vis Article 13(2) CB-BIT

27.! Article 13(2) CB-BIT provides that:

“This Agreement shall remain in force for a period of ten years. Thereafter, it shall remain in force until the expiration of a twelve month period from the date either Contracting Party notifies the other in writing of its intention to terminate the Agreement.”

28.! Interpreted in its ordinary meaning,22 Article 13(2) CB-BIT only permits one way to

terminate the CB-BIT, i.e. unilateral termination after the initial ten years period has

elapsed. By using the term ‘thereafter’, Cogitatia and Respondent effectively limited

their inherent right to terminate the CB-BIT only after its initial period. This is

corroborated by VCLT’s travaux préparatoires, which noted that when parties have

specified the treaty’s validity period, they link the power of denunciation specifically to

the treaty’s expiry date.23

29.! Since the CB-BIT only entered into force on 1 August 2002,24 the invocation of its

termination via the sending of notification is only available after 1 August 2012. Thus,

Respondent’s proposed termination by June 200825 was invalid as it was invoked in

June 2007.26 If the Tribunal were to accept Respondent’s invocation, it would certainly

run counter to the terms of the provision, thus the principle of pacta sunt servanda.27

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!21 Oppenheim, p.571. 22 VCLT, Article 31. 23 UN Doc. A/CN.4/156, p.63, ¶9. 24 PO2, ¶1. 25 Annex No. 7.1. 26 Facts, ¶9. 27 VCLT, Article 26.


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30.! Nevertheless, even if notification could be made within the CB-BIT’s initial validity

period, the termination should only take effect in August 2012. In that case, Claimant’s

existing and future investments28 remain protected under the CB-BIT by virtue of the

‘survival clause’ embodied under Article 13(3) CB-BIT, extending protection beyond

termination of the CB-BIT.

b.! Absent Cogitatia’s consent, Respondent’s termination of the CB-BIT was

unlawful pursuant to Article 54(b) VCLT

31.! As Respondent’s invocation of unilateral termination fails, Article 54(b) VCLT provides

that only way the CB-BIT may be terminated is through (i) consultations resulting in (ii)

mutual consent to terminate,29 both of which are lacking in the present case.

32.! First, Respondent did not conduct consultations to obtain consent.30 Article 54(b) VCLT

expressly provides that to terminate a treaty, there must be “consent following

consultations.” To this end, although Respondent’s Resolution31 noted that meetings

would be conducted to discuss termination of intra-EU BITs, there is no evidence that

such meetings did in fact take place. Even if they did, the fact that the Resolution allows

Respondent to carry out the termination notwithstanding the results of such meetings,

i.e. notwithstanding mutual consent, is in itself contradictory to Article 54(b) VCLT.

33.! Second, even if prior consultations are not required in treaty termination, Cogitatia

never consented to terminate the CB-BIT. Irrespective of its form, consent must be

established beyond doubt. 32 While VCLT allows parties to express objection to

terminate within three months, 33 Cogitatia’s receipt of Respondent’s notification to

invoke termination 34 and subsequent silence 35 nevertheless fall short of ‘tacit

acquiescence’36 for Respondent to carry on with the termination.37

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!28 CB-BIT, Article 12. 29 Dörr, Article 54, ¶8, p.948. 30 Dörr, Article 54, ¶¶44,45, p.960. 31 Annex No. 6. 32 Dörr, Article 54, ¶38, p.958. 33 Villiger, Article 65, ¶15, p.808. 34 Facts, ¶10. 35 Facts, ¶¶24,31. 36 Villiger, Article 65, ¶15, p.809.


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34.! Cogitatia’s confirmation of receipt of Respondent’s notification on 28 September 200738

does not constitute acquiescence. In Gulf of Maine, the U.S. acted similarly when it

confirmed receipt of Canada’s proposals for an equidistance method yet subsequently

remained silent, for an even longer period of three years. Nevertheless, the ICJ ruled that

such absence of protest is not ipso facto consent and to regard it as so is “overstepping

the conditions required for invoking acquiescence.”39 The rationale underpinning such is

that governments are not obliged to raise protests against other governments,

particularly when the latter issue questionable unilateral declarations,40 as is the case at

hand.

35.! In fact, Respondent’s attempts to confirm the termination after its proposed termination

by June 2008 41 evinced its own hesitation on whether it had obtained Cogitatia’s

consent to terminate the CB-BIT. Had Respondent undoubtedly believed there was

mutual consent to terminate, particularly given its subsequent unilateral removal of the

CB-BIT from its Ministry of Finance website in 2008,42 it would not have continued to

reach Cogitatia for confirmation. Since Respondent’s act as the acknowledging party

should objectively be assessed to avoid Cogitatia’s subjective view on the termination,43

its hesitation is thus decisive to negate the termination’s effect.

36.! Having established that Cogitatia did not validly acquiesce to the termination of the CB-

BIT, the present case no longer constitutes a termination issue and Claimant is therefore

entitled to invoke responsibility from Barancasia due to its substantive violations of the

CB-BIT,44 infra.45

2. Alternatively, Respondent’s EU accession did not render the CB-BIT obsolete

pursuant to Article 59 VCLT

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!37 Villiger, Article 65, ¶16, p.809. 38 Annex No. 7.2. 39 Gulf of Maine, ¶142. 40 D’Amato, p.18. 41 Annex No. 7.1. 42 Facts, ¶11. 43 Dörr, Article 45, ¶17, p.772. 44 ARSIWA, Article 45. 45 Section III of this Memorial.


12

37.! In the alternative, Cogitatia and Respondent’s accession to EU in 200446 did not render

the CB-BIT obsolete pursuant to Article 59 VCLT. Although the accession

consequently bound both Parties to EU law,47 rendering EU law e.g. TFEU, as the later

treaty while intra-EU BITs prior to the accession as the earlier treaty, such does not

automatically terminate the CB-BIT.

38.! To invoke obsolescence under Article 59 VCLT, Respondent must prove two-leveled

tests:48 the objective test of whether the two treaties relate to the same subject matter,

and the subjective test of whether both Parties intended to terminate the CB-BIT or

whether the two treaties are “so far incompatible that they cannot be applied at the same

time.” Such approach has been adopted in Eastern Sugar,49 Binder50 and Eureko,51

where the tribunals unanimously ruled on the continuing validity of respective intra-EU

BITs.

39.! Claimant asserts that the CB-BIT is not obsolete, as [a] both treaties do not cover the

same subject matter and [b] they are not incompatible with each other.

a.! The CB-BIT and EU law do not cover the same subject matter

40.! Two treaties cover the same subject matter when a later treaty covers a certain subject

matter that an earlier treaty covers, but also encompasses one or more further matters.52

As Claimant’s claim was filed in 2014,53 assessment of sameness must be made in the

context of TFEU. After its entry into force in 2009, Article 207 vis-à-vis Article 3 TFEU

grants EU exclusive competence over FDI under the ambit of CCP.54 However, as CCP

was introduced in the context of EU’s external action concerning common customs

tariff and generalized tariff preferences,55 it excludes FDI within intra-EU setting, as is

our case.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!46 Facts, ¶5. 47 VCLT, Article 5. 48 Dörr, Article 59, ¶10, p.1014. 49 Eastern Sugar, ¶¶158-172. 50 Binder, ¶¶19,45,64. 51 Eureko, ¶242. 52 Dörr, Article 59, ¶11, p.1014. 53 Request for Arbitration, p.2. 54 TFEU, Article 3(e). 55 EEC 1, p.1-50.


13

41.! As the subject matter of the dispute, FDI regulated under both treaties differ

significantly in terms of the scope of investment and standards of protection, 56

particularly regarding the issue of renewable energy in this case. In fact, it is sufficient

that one claim made by Claimant does not lie within the scope of EU law’s protection to

conclude difference in subject matter.57 Presently, the CB-BIT and EU law do not cover

the same subject matter concerning the (i) scope of investment, (ii) standards of

protection and (iii) expropriation.

42.! As regards covered investments, notwithstanding its non-exhaustive nature, Article

64(2) TFEU solely covers ‘direct investments’, including real estate, securities, and

financial instruments. The emphasis on a ‘direct link’ between the investor and the

investment is understood to exclude indirect or portfolio investments outside FDI

covered under EU’s CCP.58 Conversely, Article 1 CB-BIT covers broader scope of

protection to include indirect investments, such as intellectual property rights under

Article 1(1)(d) CB-BIT.

43.! As regards standards of protection, the extent and scope of protection of both treaties

are different. As for the extent of protection, EU law embodied under Article 206 TFEU

only provides guarantee for ‘investment liberalization’ or ‘market access’, but does not

extend ‘investment protection’. 59 In contrast, Article 2 CB-BIT extends continuous

protection over investments, covering both pre- and post- establishment thereof,60 in

order to create favorable conditions for investors.

44.! As for the scope of protection, EU’s principle of non-discrimination in treatment

between Member States61 does not equate to the FET protection in the CB-BIT.62 While

assessment of the EU principle of non-discrimination is confined to the investor’s

nationality,63 the FET standard encompasses a broader assessment of an investor’s other

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!56 Eureko, ¶246. 57 Eureko, ¶259. 58 Shan & Zhang, p.1059. 59 Shan & Zhang, p.1061. 60 CB-BIT, Article 2(2). 61 TFEU, Article 18. 62 CB-BIT, Articles 2(2). 63 Eureko, ¶258.


14

distinguishing characteristics.64 Additionally, the Eureko tribunal upheld that the FET

standard entails protection of investors’ legitimate expectation, arbitrariness and

procedural fairness that remain outside the scope of EU law.65

45.! As regards expropriation, EU freedom of establishment under Article 345 TFEU is not

equivalent to protection against expropriation. This is due to the controversy of whether

EU has the power to take positive action and determine the conditions for lawful

expropriation,66 unlike the CB-BIT.

46.! Ultimately, even if solar energy is a ‘Community good’ belonging to Member States

collectively, Article 4 TFEU provides that EU only has shared competence over energy.

Under Article 2(2) TFEU and the subsidiarity principle, EU shall only exercise its

shared competence insofar as Member States cannot sufficiently do so. Here,

Respondent has evidently exercised its shared competence in its renewable energy

framework by enacting the LRE and subsequently, albeit unilaterally, changing its

provisions. Thus precisely the investment in dispute concerning Claimant’s protection

following Respondent’s change of its renewable energy framework falls outside EU’s

exclusive competence.67

b.! In any event, the CB-BIT and EU law can apply simultaneously

47.! Even if the two treaties cover the same subject matter, the earlier treaty would only

become obsolete if (i) there is mutual intention to terminate the treaty or (ii) the

provisions of the later treaty are “so far incompatible with those of the earlier one that

the two treaties are not capable of being applied at the same time.”68

48.! First, while Respondent’s intention to terminate the CB-BIT was well established,

Cogitatia did not share it. In Eastern Sugar, the tribunal ruled that implicit intention to

terminate could only be found if both Parties have removed intra-EU BITs from their

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!64 S.D. Myers, ¶259. 65 Eureko, ¶250. 66 Dimopoulos 1, p.112. 67 Cardwell, p.406. 68 Dörr, Article 59, ¶20, p.1017.


15

respective sites.69 Notwithstanding Respondent’s removal of BITs, nothing factually

indicates that Cogitatia has done the same.

49.! Second, there is no true incompatibility70 between the CB-BIT and EU law to the extent

that they cannot apply simultaneously. Compliance with the CB-BIT does not inherently

undermine the idea underlying the EU, which is to establish a single common market

where stakeholders from Member States would face the same opportunities and

obstacles.71 In fact, the Eureko tribunal has ruled that intra-EU BITs should not be

regarded to breach EU’s principle of non-discrimination under Article 18 TFEU72 solely

because they provide additional rights and obligations to investors of the Parties.

50.! Instead, most Member States prefer to maintain existing intra-EU agreements, shown by

the current validity of as many as over 190 intra-EU BITs. Netherlands, as seen in

Eureko,73 alongside Belgium, Germany and UK have been the most outspoken Member

States against EC’s proposal to phase out intra-EU BITs.74 Despite the pending EC

infringement proceedings against five Member States concerning intra-EU BITs, they

do not affect the present case, particularly given that there has not been an EC

intervention75 and the Tribunal’s power to assess the present dispute is limited to claims

brought by Claimant.

51.! As such, the CB-BIT remains valid despite Respondent’s accession to EU.

3.! Additionally, the CB-BIT remains applicable in accordance with Article 30(3)

VCLT

52.! Article 30(3) VCLT provides that absent conflict of law clause under the lex posterior

rule, an earlier treaty remains applicable to the extent that its provisions are compatible

with those of the later treaty governing the same subject matter.76 Despite subscription

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!69 Eastern Sugar, ¶155; Eureko, ¶100. 70 Eureko, ¶241. 71 Dimopoulos 2, p.63. 72 Eureko, ¶263. 73 Eureko, ¶161. 74 Olivet, p.5. 75 PO2, ¶4. 76 Dörr, Article 30, ¶22, p.514.


16

to EU law upon accession to the EU,77 Claimant submits that the Tribunal retains

jurisdiction since Article 8 CB-BIT remains applicable, absent incompatibility with EU

law.

53.! As endorsed in Eastern Sugar and Eureko, although EU law does not provide for a

possibility for an investor to directly sue a host State,78 it does not render the arbitration

clauses in both cases incompatible. In fact, EU itself recognizes investor-State dispute

settlement given its signatory to the Energy Charter Treaty, which provides for such

mechanism under Article 26 Energy Charter Treaty. Accordingly, the Tribunal retains

jurisdiction absent true incompatibility between ISDS mechanism and the EU regime.

4.! As a matter of procedure, the termination of the CB-BIT was not effective as of 30

June 2008

54.! Having established substantive termination grounds, Respondent’s purported

termination was not effective by June 2008, as the termination of the CB-BIT is

conditional upon observance of procedural rules,79 which Respondent failed to observe.

As parties to VCLT,80 invocation of the CB-BIT’s termination by either Cogitatia or

Barancasia must observe the procedural rules under Articles 65-68 VCLT,81 read in

light of one another.82

55.! Presently, Respondent’s notification does not fulfill such procedural obligation.

According to Article 65(1) vis-à-vis Article 67 VCLT, notification to terminate a treaty

must (i) be written,83 (ii) signed by the State’s representative84 and (iii) contain the

reasons therefor.85 Article 65(2) VCLT states that upon such notification to invoke

termination and absent objection within three-months, the party making the notification

may then carry out “in the manner provided in Article 67 the measure proposed,”

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!77 VCLT, Article 15. 78 Eastern Sugar, ¶180; Eureko, ¶274. 79 UN Doc. A/CONF.39/II/Add.1-2, p.79. 80 PO2, ¶5. 81 Dörr, Article 65, ¶1, p.1131. 82 Dörr, Article 65, ¶6, p.1133. 83 VCLT, Article 67(1). 84 Villiger, Article 67, ¶5, p.841. 85 Villiger, Article 65, ¶13, p.808.


17

thereby entailing a second diplomatic notification to effect termination that must also be

(i) written and (ii) signed.

56.! Although Respondent’s notification to invoke the CB-BIT’s termination was written and

signed by its Prime Minister, it does not provide the reason for such measure, falling

short of the third element. However, even if the Tribunal found that the attachment of

Respondent’s Resolution suffices,86 Respondent did not provide a second notification to

effect termination and merely removed the intra-EU BITs from its website,87 thereby

failing to comply with the second notice requirement under Article 67 VCLT. Absent

such second notification, the termination has no effect, as Cogitatia has not accepted the

termination explicitly or tacitly, 88 supra.89

57.! Therefore, the CB-BIT remains valid, legitimately conferring jurisdiction upon this

Tribunal over this case.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!86 Annex No. 6. 87 Facts, ¶11. 88 Dörr, Article 67, ¶15, p.1171. 89 Section I.B.1.b of this Memorial.


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II. CLAIMANT’S CLAIMS ARE ADMISSIBLE AS CJEU DOES NOT HAVE INTERPRETIVE

MONOPOLY OVER THE PRESENT CASE

58.! Having established the Tribunal’s jurisdiction, Claimant’s claims are also admissible.

Although CJEU is the judicial body under EU regime,90 it does not have exclusive right

to interpret the questions of EU law in the present dispute. Article 267 TFEU stipulates

that CJEU’s right to provide preliminary rulings is limited to cases submitted by a

“court or tribunal of a Member State.”

59.! Indisputably, this Tribunal does not constitute a tribunal of a Member State since LCIA

arbitration is consensual under well-established rules, in a neutral place and with a

neutral authority.91 In fact, CJEU’s precedence confirms that the court has constantly

denied commercial arbitral tribunals’ access to the preliminary reference procedure.92

Although factually different, the strict application of Article 267 TFEU is likewise

upheld in Nordsee, where CJEU also declined to give preliminary ruling as the case was

submitted by an international arbitral tribunal.93

60.! In conclusion, as the CB-BIT remains valid and applicable, it serves as legitimate basis

of Claimant’s claims and simultaneously confers protection of Claimant’s investments.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!90 Wehland, p.318. 91 Eureko, ¶264. 92 Eco Swiss, p.I-3055. 93 Nordsee, p.1095.


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ARGUMENTS ON MERITS

!III. RESPONDENT’S ADMINISTRATIVE AND REGULATORY MEASURES IN RESPECT OF THE

LRE BREACHED THE SUBSTANTIVE PROVISIONS OF THE CB-BIT

61.! Absent choice of law clause in the CB-BIT,94 Article 22(3) LCIA Rules allows the

Tribunal to apply laws or rules of law it considers appropriate to resolve specific issues

and claims raised by the Parties, e.g. the CB-BIT, Respondent’s domestic law, relevant

rules of international law, and EU law.95

62.! To this end, Claimant’s arguments on merits hinge on three actions done by

Respondent, first, its denial of Claimant’s license for Alfa under the LRE,96 second, its

premature revocation of the initial fixed feed-in tariff, 97 and third, its retroactive

application of the LRE Amendment.98 Such acts effectively constitute [A] a violation of

the FET standard and [B] unlawful indirect expropriation, which have severely

constrained Claimant’s PV business in Barancasia.

A.! Respondent’s Measures Violated FET Standard of Article 2(2) CB-BIT

63.! Respondent breached its obligation under Article 2(2) CB-BIT by failing to accord

Claimant “FET at all times in its territory.” As the Article makes no reference to the

minimum standard of treatment or customary international law, 99 the present FET

provision is thus autonomous100 and must be interpreted in accordance with “its ordinary

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

object and purpose.”101

64.! The term ‘fair’ and ‘equitable’ requires the host State to act in a manner that is ‘just’,

‘even-handed’, and ‘unbiased’.102 However, as this plain meaning does not provide

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!94 Annex No. 1; Micula, Award, ¶287. 95 Micula, Award, ¶287; Newcombe & Paradell, p.62. 96 Facts, ¶22. 97 Facts, ¶¶34,35. 98 PO3, ¶9. 99 Schreuer , p.360; Dolzer & Stevens, p.60. 100 Reinisch, p.111. 101 VCLT, Article 31(1); Tecmed, ¶155. 102 MTD, ¶113.


20

much assistance, the determination of FET must be studied through case laws. 103

Although there is no doctrine of binding precedent in international investment law,

decisions of past tribunals serve as persuasive and valuable guidance for subsequent

tribunals.104

65.! Past tribunals have interpreted FET clauses to require host States to conduct several

measures, e.g. to provide a stable and predictable legal and business framework for

investors’ business,105 to accord due process and transparency,106 and to refrain from

engaging in arbitrary and discriminatory acts.107

66.! Even if Article 2(2) CB-BIT is subject to the customary minimum standard of

treatment,108 the Tribunal is not barred from applying the aforementioned measures on a

case-by-case basis since the substantive factors of FET in both regimes may be the

same.109 Thus, Claimant submits that Respondent’s actions breached the FET standard

since Respondent [1] violated Claimant’s legitimate expectations, [2] engaged in

arbitrary conduct, [3] failed to accord Claimant due process, and [4] discriminated

against Claimant.

1.! Respondent’s premature revocation of the feed-in tariff violated Claimant’s

legitimate expectations of regulatory stability

67.! Respondent undermined Claimant’s legitimate expectations of regulatory stability for

Beta and its twelve projects when it enacted the LRE Amendment in 2013, which

prematurely revoked the fixed 0.44EUR/kWh tariff applicable for twelve years,

resulting in a reduced tariff of 0.15EUR/kWh subject to annual review.110

68.! Adopted in Micula,111 Saluka,112 and Parkerings,113 violation of legitimate expectation

occurs when the host State reneges on assurances it had made to induce investments,

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!103 Micula, Award, 11 December 2013, ¶507. 104 Corn Products, ¶77; Metalclad, ¶108. 105 Enron, ¶260; Saluka, ¶303. 106 Tecmed, ¶154; ELSI, ¶128. 107 Waste Management II, ¶98. 108 Waste Management II, ¶98; Metalclad, ¶76. 109 UNCTAD: FET, pg.90. 110 Annex No. 4; Facts, ¶¶34,35. 111 Micula, Award, ¶668.


21

which were reasonably relied on by the investors in making their investments. Having

the burden of proof,114 Claimant submits that Respondent failed to provide a stable and

predictable legal framework for Claimant’s investments in Barancasia despite (i)

assurances made, which (ii) were relied by Claimant (iii) reasonably.

69.! First, despite absence of stabilization clause, Respondent gave Claimant assurance of

regulatory stability for Claimant’s investments when it enacted the LRE,115 set to attract

investors in Barancasia’s PV sector. It subsequently reinforced such assurance by

issuing Claimant’s licenses for Beta and the twelve projects.116 In Micula, the tribunal

held that having specifically enacted the EGO 24 law to attract investments in the

disfavored regions and granted PIC licenses, Romania had created an assurance that

crystallized Micula’s legitimate expectations, thus it must stand by its statement and

conduct.117

70.! Similarly, Respondent’s LRE and its subsequent granting of the licenses despite events

calling for a regulatory change in Respondent’s renewable energy scheme amount to an

assurance sufficient to crystallize Claimant’s legitimate expectations of regulatory

stability. Article 4 LRE was set to induce PV investors by expressly guaranteeing that

the tariff applicable at the time of the issuance of the license would apply for twelve

years. 118 The 0.44EUR/kWh tariff announced 119 thus became applicable for twelve

years, which Respondent affirmed by subsequently issuing licenses to Claimant’s

twelve projects without any reservation that they may be subject to change.120 This was

conducted even after Respondent admitted the unsustainability of its renewable energy

support scheme121 and promised to review its legislation122 due to the discovery of a

groundbreaking technology in 2011,123 which reduced investors’ PV production costs

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!112 Saluka, ¶302. 113 Parkerings, ¶331. 114 Glamis Gold, ¶601. 115 Facts, ¶14. 116 Facts, ¶¶23,33. 117 Micula, Award, ¶¶686,687. 118 LRE, Article 4. 119 Facts, ¶21; Priemo, ¶8. 120 Facts, ¶33. 121 Facts, ¶29. 122 Facts, ¶32. 123 Facts, ¶25.


22

and led to a “solar bubble.”124 Thus, the enactment of the unqualified provision in the

LRE and Respondent’s subsequent conduct amount to an assurance of regulatory

stability of the scheme.

71.! Second, Claimant undoubtedly relied on the LRE incentives and the assurance of the

tariff’s stability respectively when it invested in Beta and the twelve projects. In fact,

Claimant waited to have its license approved by Respondent before it began

construction of Beta in 2010125 and the twelve projects in 2012.126 Further, had it not

been for Respondent’s conduct affirming the scheme’s normal operation without any

reservations despite evident operational and financial drawbacks and challenges,

Claimant would not have invested in the scale and manner that it did.127

72.! Third, it was reasonable for Claimant to rely on the stability of the LRE because the

only condition that the LRE can be modified is when the 20% renewable energy

production target has been met,128 which has not yet been met.129

73.! Moreover, it was all the more reasonable for Claimant to rely on such assurance due to

the long-term nature of the investment and the goals of renewable energy of Respondent

and EU.130 The Perenco tribunal held that it was reasonable for Perenco to rely on

Ecuador’s Law 42, even when there was a surge in oil price, because it was set to

promote long-term investments for capital-intensive project that requires substantial

‘up-front costs’.131 Claimant reasonably relied on Respondent’s assurance in the LRE

precisely because it was set to promote “the reduction of dependence on fossil energy

sources and energy imports”132 and to meet its 2020 EU renewable energy target.133

74.! In conclusion, Respondent’s LRE Amendment clearly breached Claimant’s legitimate

expectations when investing its PV projects in Barancasia.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!124 Facts, ¶28. 125 Facts, ¶23. 126 PO2, ¶9. 127 Micula, Award, ¶721. 128 LRE, Article 2. 129 PO2, ¶10. 130 Facts, ¶7. 131 Perenco, Jurisdiction, ¶564. 132 LRE, Article 1. 133 Facts, ¶7.


23

2.! Respondent’s denial of Claimant’s license for Alfa and its blanket draconian tariff

reduction were arbitrary

75.! A long array of tribunals has defined ‘arbitrariness’ as acts done with disregard for the

rule of law, affecting foreign investors “without engaging in a rational decision-making

process.” 134 The tribunals in Lauder 135 and CMS 136 have elaborated this notion,

describing arbitrary measures as actions that “depend on individual discretion and not

upon reason or fact.” Respondent engaged in the arbitrary manner when it (i) denied

Alfa’s license without rational justification, (ii) affected existing projects, and (iii)

retroactively applied the LRE Amendment.

76.! Respondent treated Claimant arbitrarily when it denied Claimant’s license for Alfa

solely because Alfa was an existing investment.137 The purpose of the LRE was to

incentivize renewable energy investments, thus it is to be interpreted liberally in that if

existing projects are connected to the national grid and generate electricity, such projects

that are being developed must be issued a license and entitled to the feed-in tariff.138 In

fact, Alfa’s improvement in capacity at a rate of 2.2% per year sufficiently fulfills such

criteria,139 considering that continued use of solar panels typically lead to a decrease in

generating capacity over time. As both Respondent140 and its expert141 failed to refer to

any basis in the LRE or alternatively, interpreted the LRE contrary to its object and

purpose, the denial of license is thus an arbitrary, ultra vires act.

77.! Such arbitrariness is further buttressed by Respondent’s lack of transparency in refusing

to disclose any criteria in the approval procedure, citing “confidentiality obligations.”142

Thus, Respondent’s denial of Claimant’s license for Alfa was conducted in disregard of

the rule of law and without rational justification.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!134 LG&E, Liability, ¶¶158,162. 135 Lauder, ¶221. 136 CMS, Award, ¶291. 137 Facts, ¶22; Kovič, ¶6. 138 LRE, Article 5; Regulation, Article 3. 139 Kovič, ¶6. 140 Facts, ¶22. 141 Priemo, ¶7. 142 PO2, ¶16.


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78.! Moreover, Respondent has treated Claimant arbitrarily when the LRE Amendment

affected existing investments incompatible with the new groundbreaking technology,

such as Beta.143 Respondent amended the LRE so as to prevent unfair windfall profits to

investors that benefitted from the “best available technology.”144 However, Respondent

applied the LRE Amendment even to existing investments that did not benefit from the

new technology,145 when it could have done so by grandfathering existing licensed

projects146 or by applying the LRE Amendment strictly to new applicants that benefit

from the new technology.

79.! Additionally, retroactive changes to support schemes are evidently arbitrary even when

it is only for a short period. 147 Retroactive changes run counter to the CB-BIT’s

objective to “create and maintain favorable conditions” for investments of investors of

either Contracting Parties, 148 consistent with the EU prohibition on retroactive scheme

changes as “investors’ legitimate expectations concerning the returns on existing

investments must be respected.”149 The retroactive application of the Amendment was

based on preference since denying Claimant benefits it was initially entitled to from 1

January 2013,150 four days before the LRE Amendment entered into force,151 did not

even address windfall profits.

80.! As Respondent’s measures were merely based on individual discretion and founded

neither on reason, fact nor the rule of law, Respondent has treated Claimant arbitrarily.

3.! Respondent failed to accord Claimant due process when amending the LRE

81.! In a FET context, an investor may be deprived of due process by the host State not only

with respect to denial of justice, but also as regards procedural fairness in legislative or

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!143 PO2, ¶30. 144 Problem, p.34 145 Facts, ¶35. 146 DECC, pg. 90. 147 Matter of Replan Dev. V. Department of Hous. Preserv. & Dev. Of City of N.Y., Court of Appeals of the State of New York, November 19, 1987. 148 Annex No. 1, pg. 24. 149 Memo/13/948, Memo on the Communication on “Delivering the internal electricity market. Making the most of public intervention”, 5 November 2013. 150 Facts, 35. 151 PO3, ¶9.


25

executive actions.152 In Waste Management, the tribunal found that a violation of due

process involves “a complete lack of transparency and candor in an administrative

process,”153 which entails host States’ failure to accord transparency through public

hearings,154 especially in case of regulatory changes affecting investors’ investment.155

82.! A State that fails to inform an investor of possible changes to its relevant laws would

perpetrate unfairness, material to the investor’s ability to operate its investments.156

Despite being a concerned stakeholder of the PV sector in Barancasia,157 Claimant was

not accorded the opportunity to be heard as there was not only lack of notice of the

hearings, but the hearings were conducted privately,158 in which only “specially invited”

representatives of industry and certain stakeholder groups were called to provide

testimony.159 Therefore, Respondent’s measure violated Claimant’s right of due process

since the private nature of such hearings rendered them wholly opaque and lacking

adequate justification and consultations with relevant affected stakeholders, including

Claimant.160

4.! Respondent’s tariff reduction was discriminatory against Beta

83.! Under international investment law, discrimination is generally established when

investments of comparable characteristics and subject to the same laws and regulations

are accorded differential treatment without reasonable justification.161 In Nykomb, the

tribunal found a breach of discrimination when Latvia refused to pay the agreed price

when it had in fact paid the higher price to two other electricity generation companies.162

Applying the same logic as regards reverse discrimination, according similar treatment

to investments of different character also amounts to a breach of non-discrimination

principle.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!152 Dolzer & Schreuer, pp.142,162; Vinuales, p.356; Schreuer, p.381. 153 Waste Management II, ¶98. 154 Malik, p.13. 155 Dugan, p.520. 156 Bonnitcha, p.205. 157 Facts, ¶4. 158 PO3, ¶6. 159 Facts, ¶34. 160 PO2, ¶15. 161 Saluka, ¶313. 162 Nykomb, p.99.


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84.! As the LRE Amendment affected all existing investments, including Beta that used an

older, more expensive technology, it consequently deprived Claimant of the 8% return

on investment for Beta.163 Even if such treatment is a permissible discrimination, it was

done without rational justification since calculation of profitability and computation of

return on investment are different determinations. As Respondent could have limited the

application of the Amendment to new investments, Respondent treated Claimant in a

discriminatory manner.

B.! Respondent’s Premature Revocation of the Feed-in Tariff Constituted Indirect

Expropriation in Violation of Article 5 CB-BIT

85.! Respondent’s premature revocation of the initial benefits conferred on Beta and the

twelve projects constituted indirect expropriation violating Article 5 CB-BIT. Absent

elaboration on elements to find expropriation in the CB-BIT, recourse to decisions of

past tribunals is necessary, given its valuable and persuasive authority to answer

questions of principles.164

86.! Expropriation formally means “a forcible taking by the government of tangible or

intangible property owned by private persons by means of administrative or legislative

to that effect.”165 Unlike direct expropriation, indirect expropriation is defined as the

taking or deprivation of the property of foreign investors by a host state, which may

occur even when the legal title remains with the owners and the property is not

seized, 166 justifiable only by virtue of legitimate police powers. 167 As practiced in

Tecmed168 and LG&E,169 the tribunals found that “measures having effect equivalent to

expropriation” are sufficient to qualify as ‘indirect expropriation’.

87.! Presently, the effects of the LRE Amendment170 that dismantled the initial renewable

energy support scheme171 on which Claimant pivoted its PV investments172 [1] amount

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!163 PO2, ¶27. 164 Metalclad, ¶108. 165 Tecmed, ¶113. 166 S.D. Myers, ¶283; McLachlan, ¶¶290-98. 167 Saluka, ¶255. 168 Tecmed, ¶114. 169 LG&E, Liability, ¶185. 170 Annex No. 4. 171 Facts, ¶29.


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to indirect expropriation in violation of Article 5 CB-BIT that [2] is unlawful and [3]

falls outside the scope of the “police powers” exception.

1.! The effects of the LRE Amendment amount to indirect expropriation

88.! Indirect expropriation occurs when host States’ measures (i) substantially affect

investors’ investments, (ii) deprive investor of the economic benefits of its investments,

and (iii) interfere with investors’ reasonable investment-backed expectations. 173

Presently, Respondent’s denial of license and its premature revocation of the licensed

benefits constitute indirect expropriation since all three elements are met.

89.! First, the substantial effect of an expropriatory act must be irreversible and permanent to

qualify as indirect expropriation. 174 As the PV industry was set to encourage the

innovation of technology, the PV production costs will gradually fall instead of increase.

Due to such fall, the effects of Respondent’s LRE Amendment are irreversible and

permanent since Claimant would no longer be qualified to receive the higher

0.44EUR/kWh tariff even if the new tariff will be reviewed annually.175 This all the

more affects Beta, which was not built using the new and much cheaper technology.176

90.! Second, Respondent’s measure significantly deprived Claimant of “the reasonably-to-

be-expected economic benefit of the property.”177 As an electricity producing company,

Claimant makes investment decisions based on long-term forecasts of risks and

returns,178 which Respondent has disrupted through the draconian tariff reduction that

deprived Claimant of its projected revenue sufficient to recoup capital in making PV

installations. While the rate of return remains 8%,179 the real and effective return is

much less as the assumptions used to calculate it are based on the new technology and

not on the old technology, which incurred greater costs of PV investment, thus the high

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!172 Facts, ¶¶23,27. 173 LG&E, Liability, ¶190; Metalclad, ¶103. 174 Tecmed, ¶116. 175 LRE Amendment, Article 4. 176 PO2, ¶30. 177 Metalclad, ¶103. 178 Boute, p.503. 179 Facts, ¶27.


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feed-in tariff. This is clearly evident when Claimant encountered financial difficulties in

financing its projects as a result of the disproportionate LRE Amendment.180

91.! Third, as discussed supra,181 Claimant expected that the investments in Respondent’s

PV sector to last for a long term and it took this into account to estimate the time and

business required to recover such investment and obtain the expected return upon

making its application.182 Thus, Respondent’s expropriatory curtailment of investment

rights evidently interfered with Claimant’s expectations when investing in Beta and the

twelve projects.

2.! Furthermore, Respondent’s tariff reduction was unlawful as no compensation was

paid

92.! Article 5 CB-BIT lays down four cumulative elements to determine whether an

expropriation is legitimate, namely (i) public purpose, (ii) due process of law, (iii) non-

discrimination, and (iv) payment of prompt, adequate and effective compensation. Here,

there is no indication that compensation has ever been paid to Claimant, subsequently

rendering the indirect expropriation unlawful.

3.! In any event, Respondent’s premature revocation of benefits falls beyond the

“police powers” exception

93.! Respondent is not exempted from compensating Claimant since its measures do not fall

within the “police powers” exception.183 The “police powers” exception exists in a very

limited ambit,184 strictly covering bona fide measures with a non-discriminatory manner

necessary for the maintenance of public order, e.g. environmental concerns.185 Such

threshold demands high compatibility in that general public interest must be served for

the maintenance of public order.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!180 PO3, ¶20. 181 Section III.A.1 of this Memorial. 182 Tecmed, ¶117. 183 Methanex, Part IV, Ch. D, p.7, ¶15; OECD: Indirect Expro., p.18. 184 Tecmed, ¶115. 185 Mann & Moltke, p.15.


29

94.! However, Respondent’s draconian tariff reduction did not satisfy such threshold, as its

political and economic situation at the time was stable. While there were teacher strikes,

there was no violence involved.186 Further, Respondent’s Prime Minister confirmed that

its economy is developing given that its FDI policy was “a tremendous success,”187

despite its economic concern of exceeding EU borrowing limit and 15% diversion of

state revenues.188 Thus, Respondent cannot hide behind the pretext of protecting public

order against the backdrop of the allegedly ‘unstable’ Barancasian economy.

95.! Additionally, the reduction destroyed investors’ confidence in Respondent’s PV sector,

thus discouraging low-carbon investments,189 precisely contrary to the LRE’s aim to

protect the environment.190 Moreover, as established supra,191 Respondent’s measures

discriminated Claimant’s Beta.

96.! Consequently, Respondent must still compensate Claimant as its measures fall beyond

the “police powers” exception.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!186 PO2, ¶17. 187 Annex No. 8, p.40. 188 Facts, ¶¶29,30. 189 Nathanson, p.902. 190 LRE, Article 1. 191 Section III.A.4 of this Memorial.


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IV. RESPONDENT’S MEASURES ARE NOT EXEMPTED UNDER EITHER THE CB-BIT OR

CUSTOMARY INTERNATIONAL LAW

97.! Respondent’s administrative and regulatory measures violating the substantive

provisions of the CB-BIT cannot be exempted under [A] Article 11 CB-BIT as an NPM

clause nor [B] the customary necessity defense under Article 25 ARSIWA.

A.! Respondent’s Measures Are Not Exempted Under CB-BIT

98.! Respondent’s measures are not exempted under Article 11 CB-BIT, which provides:

“Nothing in this Agreement shall be construed to prevent either Contracting Party from taking measures to fulfill its obligations with respect to the maintenance of international peace or security.”

99.! Although Article 11 CB-BIT was intended to serve as a safeguard clause that

contemplates ‘non-precluded’ measures to which either Contracting Party can resort

to,192 it does not exempt Respondent’s measures since [1] the provision is not self-

judging, [2] nor does it cover Respondent’s domestic situation.

1.! Article 11 CB-BIT is not a self-judging clause absent an expressed provision

100.! Respondent cannot unilaterally determine whether its acts remain legitimate despite

deviating from its treaty obligations,193 as Article 11 CB-BIT is not self-judging. For

such Article to be self-judging, in which the State adopting the measures in question

may determine its application,194 the self-judging nature must be expressly stated and

not merely assumed.195 In CMS, the tribunal ruled that, “when States intend to create a

right to determine unilaterally the legitimacy of extraordinary measure importing non-

compliance with obligations in a treaty, they do so expressly.”196

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!192 Continental, ¶164; Vandevelde, p.220. 193 CMS, Award, ¶370. 194 CMS, Award, ¶366. 195 Expert Opinion of José E. Alvarez, ¶¶13-15; Schill & Briese, p.69; CMS, Award, ¶370; Sempra, ¶379. 196 CMS, Award, ¶339.


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101.! However, Article 11 CB-BIT only speaks of ‘measures’, contrary to self-judging

clauses, which explicitly state “measures that [it] considers necessary.”197 Consequently,

absent such language, application of Article 11 CB-BIT is subject to judicial review.198

2.! Article 11 CB-BIT does not apply to Respondent’s domestic situation

102.! Furthermore, Respondent’s domestic situation falls beyond the scope of Article 11 CB-

BIT, as it does not amount to an event concerning ‘the maintenance of international

peace or security’. Unlike most NPM clauses that preclude acts done for ‘the

maintenance of public order’ 199 or the host State’s ‘own national interests’, 200 the

Contracting Parties have clearly limited the application of the Article strictly to

“measures to fulfill their obligations with respect to the maintenance of international

peace or security.”201

103.! The Sempra tribunal found the phrase ‘maintenance of international peace and security’

to strictly refer to State obligations under the United Nations Charter.202 The CMS

tribunal likewise noted that circumstances falling under such ambit of an NPM would

normally include military events.203 Conversely, nothing of such nature occurred that

threatened Respondent’s essential security interest, thus falling outside the scope of the

NPM clause.

104.! Even if Article 11 CB-BIT could apply to economic emergencies as an essential security

issue, Respondent’s mere financial restraints did not qualify as such. In Continental

Casualty, the tribunal established that financial restraints could only qualify as essential

security interest in circumstances entailing “poverty of more than half of the population,

immediate threats to the health of the most vulnerable members of the population, or

widespread unrest and disorders.”204 In fact, tribunals in CMS, Enron, and Sempra have

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!197 1998 US-Mozambique BIT, Article 14(1); GATT, Article XXI. 198 CMS, Award, ¶366. 199 US-Argentina BIT, Article 11. 200 US-Czech BIT, Article X. 201 CB-BIT, Article 11. 202 Sempra, ¶372. 203 CMS, Award, ¶¶359,373. 204 Continental, Award, ¶180.


32

rejected Argentina’s arguments on the same note rendering Argentina liable for its

breach of the US-Argentina BIT.205

105.! Conversely, Respondent has yet to divert its 15% state budget to finance solar feed-in

tariffs and to exceed its EU-mandated borrowing limit to affect its essential security

interests or to place it in a situation of necessity.206 In fact, even after knowing the

unsustainability of the scheme due to the groundbreaking technology, Respondent

nonetheless granted 6,000 licenses out of 7,000 applications. 207 Additionally, no

violence occurred during the national strikes in 2012.208 Moreover, Respondent was

undergoing an economic growth.209

106.! Consequently, Respondent’s actions to address its essential security concerns are not

exempted under Article 11 CB-BIT.

B.! Respondent’s Measures Are Not Exempted Under Customary International Law

107.! Respondent’s measures are not exempted under the customary international law, as it

failed to fulfill four cumulative elements of the defense of necessity under Article 25

ARSIWA. To be precluded from wrongfulness, a State must meet the high threshold of

the customary defense of necessity as the secondary rule of exception to liability210 so as

to prevent States from eluding compliance with international obligations.211

108.! To this end, Respondent fails to satisfy the cumulative elements as it (i) had in fact

contributed to the situation of necessity. 212 Even if the situation was caused by

exogenous factors, Respondent (ii) was not threatened by a grave and imminent peril to

the extent that (iii) its measure was the ‘only way’ to safeguard its essential interests.213

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!205 CMS, Award, ¶97; Enron, ¶77; Sempra, ¶326. 206 Facts, ¶¶29,30. 207 PO2, ¶13; PO3; ¶22. 208 PO2, ¶17. 209 Annex No. 8, p.40. 210 ARSIWA Commentary, ¶21. 211 Gabčíkovo-Nagymaros, ¶51; White, p.5. 212 ARSIWA Commentary, Article 25(2)(b); CMS, Award, ¶294; Sempra, ¶353. 213 Sempra, ¶353; Gabčíkovo-Nagymaros, ¶54.


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109.! First, Respondent had contributed to the purported state of necessity, which may be “in

one way or another, intentionally or by negligence.”214 Respondent’s financial restraint

was caused by its injudicious economic policies and decisions. Despite knowing the

unsustainability of its renewable energy scheme due to the groundbreaking

technology, 215 Respondent nonetheless granted licenses to 6,000 applicants, 216

unnecessarily imposing great burden to it.

110.! Second, Respondent was evidently not exposed to any grave and imminent peril, as

there was no crisis.217 The threat to divert 15% of Respondent’s state revenue and to

exceed EU mandated borrowing limit,218 the public pressure in highlighting investors’

windfall profits after the groundbreaking technology,219 and orderly national teacher

strikes demanding salary increase and educational funding in Barancasia220 pale in

comparison to the Argentine crisis, where there was deep recession, deflation,

unemployment, and the urgency of enacting Emergency Law within a week.221

111.! Third, Respondent’s options to safeguard its interests were not limited to enacting the

Amendment that prematurely revoked the initial fixed tariff.222 This assessment does not

require a hindsight analysis of which way would have been more successful or less

costly,223 inasmuch as it can be proven that the host State had other options to take.224

Instead of amending the law with retroactive effect to all existing investments,

Respondent could have alleviated its financial difficulties through other means, e.g.

limiting the applicability of the Amendment to new investments, as the scheme was only

unsustainable in the future.225

112.! As such, Respondent’s actions are not exempted under Article 25 ARSIWA.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!214 Report of the ILC, UN Doc. A/35/10 (1980); Cheng, p.73. 215 Facts, ¶¶25,29. 216 PO2, ¶13. 217 Enron, ¶306. 218 Facts, ¶¶29,30. 219 Facts, ¶¶28,32. 220 Facts, ¶32. 221 Continental, ¶180; LG&E, Liability, ¶¶234,240. 222 Annex No. 4, p.34. 223 CMS, Award, ¶323; Crawford, p.184. 224 CMS, Award, ¶324. 225 Facts, ¶29.


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ARGUMENTS ON REMEDIES

!V. RESPONDENT CAN BE ORDERED TO PERFORM RESTITUTION

113.! As Respondent’s violation of the CB-BIT cannot be exempted, Claimant may therefore

request the Tribunal to order specific performance for Respondent to continue paying

the previous 0.44EUR/kWh feed-in tariff to Claimant.

114.! Under customary international law, an order of specific performance as a form of

restitution prevails over compensation, as the latter is only to be awarded insofar as

“damage is not yet made good by restitution.”226 In this vein, [A] the Tribunal has the

power to order specific performance pursuant to Article 22(1)(vii) LCIA Rules vis-à-vis

Article 35 ARSIWA, which [B] would not violate Respondent’s sovereignty, therefore

enforceable.

A.! The Tribunal Can Order Specific Performance Pursuant to LCIA Rules and

ARSIWA

115.! Absent a provision concerning remedies in the relevant BIT, arbitral tribunals generally

turn to the parties’ consent to the applicable rules of arbitration.227 In this regard, Article

22(1)(vii) LCIA Rules expressly confers this Tribunal the power “to order compliance

with any legal obligation…and specific performance of any agreement.”228 Such is

corroborated in Al Bahloul and Nykomb, in that tribunals may order for specific

performance pursuant to Article 35 ARSIWA, 229 which provides that parties must

comply with a tribunal’s order of specific performance for restitution inasmuch as it is

(i) materially possible and, (ii) proportionate to the benefit deriving from restitution

instead of compensation.230

116.! First, Claimant submits that ordering Respondent to continue paying the previous

0.44EUR/kWh feed-in tariff is materially possible. Under ARSIWA, mere legal or

practical difficulties such as administrative constraints do not constitute material !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!226 ARSIWA Commentary, Article 36(1); Chorzow, p.47; Texaco, p.508; Occidental, ¶34. 227 Stephens-Chu, p.890. 228 LCIA Rules, Article 22.1(7). 229 Al Bahloul, ¶47; Nykomb, p.39. 230 Crawford, ¶143.


35

impossibility.231 Thus, while Respondent may argue that specific performance would

require it to exceed its EU-mandated borrowing limits for the relevant years, such

administrative constraint only constitutes legal or practical difficulty, falling short of the

standard of impossibility.

117.! Second, ordering Respondent to continue paying the previous 0.44EUR/kWh feed-in

tariff is proportionate to an order for compensation. The amount of money due to the

Claimant if the Respondent were to continue paying the previous 0.44EUR/kWh is

equivalent to the losses incurred by the Claimant as a result of the tariff reduction. The

order for specific performance would not bestow on Claimant more than what it was

originally entitled to.

118.! Thus, the Tribunal can order Respondent to continue paying the previous 0.44EUR/kWh

feed-in tariff to Claimant.

B.! Order of Specific Performance Is Enforceable as It Does Not Violate

Respondent’s Sovereignty

119.! Claimant’s request for specific performance is enforceable since (i) Respondent has

waived its sovereign immunity by entering into the CB-BIT and (ii) such order is

enforceable pursuant to Article 8(3) CB-BIT vis-à-vis the NY Convention.

120.! First, by entering into the CB-BIT, Respondent has waived its immunity from the

jurisdiction of national courts for proceedings concerned with the arbitral process.232

Thus, both Parties have already waived their sovereign immunity in respect of the LCIA

tribunal’s power to order for specific performance as provided by Article 22 LCIA

Rules.

121.! Second, the order for specific performance would be enforceable under Article 8(3) CB-

BIT since the arbitral award shall be “final and binding on both parties” and

enforceable. Similarly, a State bound by the NY Convention is obliged to respect the

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!231 Crawford, p.185. 232 Bjorklund, pp.816-818.


36

binding effect of arbitral awards,233 and both Cogitatia and Barancasia are parties to the

NY Convention.234

122.! Respondent might object to enforcement on the ground that under Article 8(3) CB-BIT,

arbitral awards are enforceable only if they are in accordance with the domestic

legislation. Similarly, under the NY Convention, an award cannot be enforced if it were

contrary to the “public policy” of that State.235 However, as the New York District Court

ruled, the public policy defense to enforcement should be narrowly construed, and

enforcement should only be denied when it “violates the Forum State’s most basic

notions of morality and justice.”236 In this case, ordering Respondent to continue paying

the previous feed-in tariff would not violate justice and morality since Respondent will

merely be paying what is due under the LRE to Claimant. Hence, Respondent cannot

invoke the public policy defense to enforcement.

123.! Therefore, the Tribunal should first consider ordering the Respondent to continue

paying the previous 0.44EUR/kWh feed-in tariff as a form of remedy.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!233 Redfern 2, ¶11.53. 234 PO2, ¶6 235 NY Convention, Art V(2)(b) 236 Parsons, ¶973.


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VI. CLAIMANT’S BASIS FOR CLAIMING AND QUANTIFYING DAMAGES IS APPROPRIATE

124.! Should the Tribunal find that an award for restitution is not possible, Claimant

alternatively requests for damages, which is Claimant’s loss of net income resulting

from Respondent’s denial of Claimant’s license for Alfa and its feed-in tariff reduction

that affected Beta, the twelve projects, and the remaining future developments.

125.!While the CB-BIT does not provide any standard of damages except for lawful

expropriation, 237 Claimant is nonetheless [A] entitled to full reparation pursuant to

Article 36 ARSIWA given the causal link between Respondent’s unlawful acts and

Claimant’s damages, which [B] it has properly quantified. Subsequently, [C] damages

awarded to Claimant should carry compound interest rate and [D] the cost of arbitration

born by the Claimant should be proportional to the success or failure of its claims.

A.! Claimant Is Entitled to Full Reparation Given the Causal Link Between

Respondent’s Unlawful Acts and Claimant’s Damages

126.! ARSIWA provides that a State is under the obligation to make full reparation only for

injury caused by its wrongful act.238 Past tribunals have concurred that such obligation

arises when there is a proximate causal link that is “not too remote” between the

damages and the State’s unlawful acts.239 The causal link is established when Claimant

would not have suffered damages but for Respondent’s unlawful acts.240 In this case,

there is sufficient certainty that Respondent’s unlawful acts have caused Claimant’s [1]

historical and [2] future profits.

1.! There is sufficient certainty that Respondent’s unlawful acts caused Claimant’s

lost net income

127.! Historical damages refer to accrued losses resulting from the alleged breach. 241 In

Micula, the claimants were entitled to such damage since they incurred loss of net

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!237 CB-BIT, Article 5 (1). 238 Crawford, p.492; ARSIWA Commentary, Article 31(10). 239 Micula, Award, ¶923; CME, ¶921. 240 Micula, Award, ¶917. 241 LG&E, Award, ¶¶50,51.


38

income immediately after Romania’s unlawful revocation of incentives.242 Similarly,

Claimant is entitled to Alfa’s reduced net income from that of August 2010 to that of the

date of the award since it resulted immediately from Respondent’s denial of Alfa’s

license, which disentitled Claimant from the 0.44 EUR/kWh tariff.

128.! Furthermore, Claimant is also entitled to loss of Beta’s net income since it would have

been higher had Respondent maintained the feed-in tariff guarantee rather than reducing

it from 0.44EUR/kWh to 0.15EUR/kWh, a reduction of nearly 65%. 243 This is

consistent with the tribunal’s finding in LG&E, where the claimant was entitled to

damages since it would have received higher level of dividends had the respondent

maintained “the basic guarantees” of the “gas regulatory framework.”244

2.! Respondent’s unlawful acts have also resulted in Claimant’s lost future net income

129.! The ILC Commentary to Article 36 ARSIWA held that damage for lost future net

income is only to be awarded when the anticipated income comprises of “legally

protected interests of sufficient certainty to be compensable.” 245 Such sufficient

certainty is established when the claimant would have continued or started to engage in

a profit-making activity but for the respondent’s unlawful acts. 246 The tribunal

elaborated in Micula that it is sufficient for the activity’s profitability to be probable.247

130.! In this case, [a] Claimant had engaged in Solar PV projects and, if not for Respondent’s

unlawful acts, would have engaged in further developments, [b] both of which probably

would earn higher net income arising therefrom.

a.! Claimant had engaged in Solar PV projects and would have engaged in

further developments but for Respondent’s unlawful acts

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!242 Micula, Award, ¶953. 243 Facts, ¶35 244 LG&E, Award, ¶48. 245 ARSIWA Commentary, Article 36(27); LG&E, Award, ¶51. 246 Micula, Award, ¶1009. 247 Micula, Award, ¶1009.


39

131.! Aside from existing Solar PV projects that Claimant had been engaged in such as Alfa

since 2010,248 Beta since 2011249 and the twelve projects since 2012,250 Claimant would

also have constructed the remaining future development but for the Respondent’s tariff

reduction.

132.! The tribunal in Micula ruled that in giving award for lost opportunity, it must first be

proven that there is “contemporaneous evidence” whether in the form of “feasibility

plan, budget, memos or correspondence” evincing claimant’s intention for its future

development.251 Presently, Claimant's business plan clearly indicates its plan to develop

sixty solar panel installations by the end of 2023 at the rate of building 6 projects every

year from 2014 until 2023.252 In fact, such intention was affirmed by its construction of

the initial 12 projects. Had the Respondent maintained the pre-2013 feed-in tariff rate,

Claimant would have continued to accomplish its business plan by 2023.

b.! Claimant would probably earn higher net income arising from its existing and

planned Solar PV operations but for Respondent’s unlawful acts

133.! The tribunal in Vivendi ruled that probable future profitability can be established by

presenting the projects’ “proven record of profitability.”253 With respect to Alfa, had it

been granted the license, it would have received more net income as it would be entitled

to the EUR0.44/kWh feed in tariff until 2023 when the license expires, instead of the

market rate of EUR0.19 to EUR 0.22.254 Furthermore, the record shows that Alfa’s

productivity has improved consistently at a rate of 2.2% year-on-year from 2010 to

2012.255 As for Beta, it had operated for two years with a track record of profitability

between 2011 and 2013 before Respondent reduced the feed-in tariff.256

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!248 Facts, ¶¶12,22. 249 Facts, ¶23 250 Facts, ¶36. 251 Micula, Award, ¶1073. 252 Kovič, ¶11; Kovič Annex 4. 253 Vivendi, Award, ¶8.3.4; Vivendi, Annulment, p.65. 254 Kovič, Annex 1(A). 255 Kovič, Annex 1(A). 256 Kovič, ¶8; Facts, ¶23.


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134.! In the case of projects with no past track record, such as the twelve projects,257 the

tribunal in Vivendi ruled that profitability can still be proven through evidence of

expertise and record of profitability of other projects it had operated in “similar

circumstances.”258 Such evidence of profitability could be adduced by a “concession

that guaranteed a certain level of profits.”259 The profitability of the twelve projects is

probable given Claimant’s success in developing Alfa and Beta as well as the

subsequent tremendous know-how on the Solar PV sector it obtained. 260 Finally,

Respondent’s initial grant of license for EUR0.44/kWh feed-in tariff guarantees that

Claimant will have a certain level of profits.261

135.!Moreover, Claimant would further engage in future developments as set forth in its 2023

business plan despite the absence of construction and licensing,262 as it has legitimately

relied on Respondent’s grant of license for its initial twelve projects.

B.! Further, Claimant’s Quantification of Damages Is Proper

136.! Having established Claimant’s claim for damages, Claimant submits that its

quantification of damages [1] by using the differential method with the discounted cash

flow valuation is appropriate. Subsequently, [2] damages awarded should be discounted

at Claimant’s WACC to reflect its NPV. Finally, [3] Claimant properly quantified each

of its head of damages.

1.! Preliminarily, the differential method with the discounted cash flow valuation is

appropriate to quantify Claimant’s damages

137.! In various jurisprudences involving international law violations, tribunals have resorted

to the “differential method” to evaluate damages,263 which compares the claimant’s

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!257 PO2, ¶26. 258 Vivendi, Award, ¶8.3.4; Vivendi, Annulment, p.65. 259 Micula, Award, ¶1010. 260 Facts, ¶23. 261 Facts, ¶33. 262 Kovič, ¶11; Kovič Annex 4, p.1-2. 263 Marboe, p.3.122; Wälde & Sabahi, p.1057.


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financial position in the actual situation to the hypothetical situation where the unlawful

act had not been committed by the State.264

138.! The “differential method” should also be applied vis-à-vis the DCF valuation, which is

the most well accepted method for valuations,265 whereby the present value of both

future expected and past net cash flows is calculated using the same discount rate to

avoid an “Invalid Round Trip.”266 Therefore, Claimant’s damages are to be quantified

by comparing its DCF in the actual situation to its DCF in the hypothetical situation

where Respondent had not committed the unlawful act.

2.! Subsequently, damages awarded should be discounted at Claimant’s WACC to

reflect its NPV

139.! All awards on lost past and future net income must be discounted at an appropriate rate

in order to calculate its NPV.267 The tribunal in CMS established that “analysts have

tended to favor” discounting such awards at claimant’s WACC rather than its COE,268

since WACC discount factor represents “the cost of raising funds from shareholders and

lenders in a company,”269 and “blends equity holders and lenders requirements.”270 In

contrast, COE discount factor only represents the “value of equity” and does not account

for the value of debt.271

140.! In this regard, the damages should be calculated using Claimant’s 8% WACC discount

rate,272 rather than its 12% COE discount rate,273 thus taking into account Claimant’s

financing of its projects, which was 50% by debt and 50% by equity.274

3.! Accordingly, Claimant has properly quantified each head of damages

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!264 Marboe, p.3.122. 265 Kantor, p.131. 266 Kantor, p.131. 267 Marboe, p.5.193. 268 CMS, Award, ¶430. 269 EDF, Award, ¶1285. 270 Bau, Award, ¶14.35. 271 CMS, Award, ¶215. 272 Kovič, ¶12; Priemo, ¶9. 273 Priemo, ¶9. 274 Annex No. 9.


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141.! In sum, Claimant is entitled to EUR 2,437,217, which comprises Alfa (EUR 120,621),

Beta (EUR 123,261), the twelve projects (EUR 1,427,500) and the other future

developments (EUR 765,835).275

142.! Alternatively, should the Tribunal not award lost future income for the twelve projects

and the future developments, Respondent should at least be ordered to pay EUR

933,938 to Claimant, constituting Alfa (EUR 120,621), Beta (EUR 123,261), and the

twelve projects’ out-of-pocket-expenses (EUR 690,056).

143.! Even assuming that lost future income is not possible due to uncertainty of future

profitability, past tribunals concurred that damages for wasted out-of-pocket expenses

should be awarded.276 Such “out-of-pocket” expenses include costs of particular assets

contributed to the investment.277 Claimant is thus entitled to the EUR 690,056 out-of-

pocket expenses for the twelve projects,278 which includes the amount of money that

Claimant had spent on land, PV panels, deposit on remaining PV panels as well as labor,

and bank interest.279

144.! Additionally, Respondent may argue that Claimant is not entitled to the full amount of

damages because it failed to mitigate damages by continuing the construction of the

twelve projects even after the tariff reduction in 2013.280 The duty to mitigate damages

has been defined as the duty of the wronged party to mitigate its losses.281 However,

Claimant’s continued construction of the twelve projects cannot be construed as a

failure to mitigate damages since Respondent had given a legal permit for Claimant to

construct the twelve projects by granting licenses in 2012.282

C.! Damages Awarded to Claimant Should Carry Compound Interest Rate at The

Rate of Claimant’s WACC

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!275 Kovič, ¶¶7-11. 276 Pope & Talbot, ¶81; MTD, ¶253. 277 Ripinsky & Williams, p.294. 278 Kovič, ¶9. 279 Kovič, Annex 2. 280 PO2, ¶26. 281 Marboe, p.3.240. 282 Facts, ¶33.


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145.! Past tribunals as recently affirmed by the tribunal in Micula, held that award of damage

should be given with compound interest,283 so as to restore Claimant to the position it

would have been had the breach not occurred. 284 Thus, the damages awarded to

Claimant should be given with compound interest, at the 8% rate of its WACC so as to

avoid an “Invalid Round Trip.”285

D.! The Cost of Arbitration Born by Claimant Should Be Proportional to the Success

or Failure of Its Claims Pursuant to Article 28(4) LCIA Rules

146.! Article 28(4) LCIA Rules stipulates that the tribunal’s decisions on both arbitration

costs and legal costs should reflect the parties’ relative success and failure in the

award.286 Hence, the cost of the arbitral proceedings that should be born by Claimant

should be proportional to the success or failure of its claims.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!283 Micula, Award, ¶1266. 284 Micula, Award, ¶1265. 285 Kovič, ¶12. 286 LCIA Rules, Article 28(4).


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PRAYERS FOR RELIEF

Claimant respectfully asks the Tribunal to find that:

I.! It has jurisdiction over the present dispute and Claimant’s claims are admissible;

II.! Respondent breached its substantive obligations stipulated under the CB-BIT;

III.! Respondent is not exempted under either the CB-BIT or the customary defense of

necessity;

IV.!Respondent should be ordered to do specific performance for restitution by continuing

to pay the pre-2013 0.44EUR/kWh feed-in tariff to Claimant;

V.! Alternatively, Respondent should pay EUR 2,437,217 as compensation to Claimant

because Claimant’s basis for claiming and quantifying compensation is appropriate.

TEAM KRYLOV

On behalf of Claimant

19 September 2015

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TEAM KRYLOV THE 2015 FOREIGN DIRECT …...International Investment Law (Oxford University Press,...

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