TEAM: ELIAS
IN THE MATTER OF AN ARBITRATION PURSUANT TO
AGREEMENT ON THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS BETWEEN
THE REPUBLIC OF TYREA AND THE FEDERATION OF NOVANDA
(“TYREA-NOVANDA BIT”)
AND
AGREEMENT ON THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS BETWEEN
THE REPUBLIC OF TYREA AND THE UNION OF KITOA
(“TYREA-KITOA BIT”)
AS WELL AS
ICSID RULES OF PROCEDURE FOR ARBITRATION PROCEEDINGS
(“ICSID ARBITRATION RULES”)
BETWEEN
FRIENDSLOOK PLC, SPEAKUP MEDIA INC., AND WHISTLER INC. CLAIMANTS
AND
THE REPUBLIC OF TYREA RESPONDENT
ICSID Case No. ARB/18/155
TRIBUNAL
Dr. Gabriella Utterson (President)
Dr. Henry Jekyll
Mr. Edward Hyde QC
MEMORIAL ON BEHALF OF RESPONDENT
i
TABLE OF CONTENTS
TABLE OF CONTENTS ____________________________________________________ I
INDEX OF AUTHORITIES ________________________________________________ IV
LIST OF ABBREVIATIONS _____________________________________________ XXVI
STATEMENT OF FACTS ___________________________________________________ 1
ARGUMENTS _____________________________________________________________ 4
PART I: PROVISIONAL MEASURES ________________________________________ 4
I. Respondent seeks rights susceptible to protection by provisional measures ________ 4
A. Claimants’ actions threaten the aggravation of this dispute ______________________ 4
B. Claimants’ actions threaten the integrity of this proceeding ______________________ 6
II. The RPM satisfies the threshold requirements for grant of provisional measures ___ 6
A. The Tribunal has prima facie jurisdiction to grant the requested measures __________ 7
B. Respondent has a prima facie case on the merits of the dispute ___________________ 7
C. The requested measures are urgent _________________________________________ 8
D. The requested measures are necessary _______________________________________ 9
E. The requested measures are proportionate to the anticipated harm ________________ 10
PART II: JURISDICTION _________________________________________________ 11
I. The Tribunal lacks ratione voluntatis jurisdiction _____________________________ 11
A. The Tribunal has no jurisdiction following Respondent’s Notice _________________ 11
1. Article 72 ICSID Convention regulates the effects of denunciation on Respondent’s
obligation to arbitrate ________________________________________________ 11
2. The critical date under Article 72 ICSID Convention is the date of receipt of a notice
of denunciation _____________________________________________________ 12
3. The requisite consent under Article 72 ICSID Convention was achieved after the
critical date ________________________________________________________ 13
ii
4. Registration of Claimants’ claim by ICSID Secretary General does not determine the
Tribunal’s jurisdiction ________________________________________________ 14
B. Claimants cannot claim a right to ICSID arbitration under Article 9(1) of the BITs __ 15
C. Claimants cannot claim a right to ICSID arbitration under Article 9(2) of the BITs __ 15
II. The Tribunal should decline jurisdiction over Claimants’ multi-party claim ______ 16
A. Respondent has not consented to multi-party arbitration _______________________ 16
1. The Tribunal must assess its jurisdiction to adjudicate a multi-party claim _______ 16
2. Respondent has not consented to multi-party arbitration under the ICSID Convention
or the BITs ________________________________________________________ 17
3. Exercise of inherent powers by the Tribunal does not extend to filling jurisdictional
requirements _______________________________________________________ 18
B. The claims are not closely connected ______________________________________ 19
1. The multi-party claim does not arise from a single dispute ___________________ 19
2. Claimants’ investments are not the same and were not made jointly ____________ 20
3. Claimants or their claims are not affiliated ________________________________ 20
PART III: MERITS _______________________________________________________ 22
I. Respondent’s measures constitute a legitimate exercise of its police powers _______ 22
A. Respondent has exercised its police powers for a public purpose _________________ 23
1. Respondent is afforded the ‘margin of appreciation’ to take measures in pursuit of a
public purpose ______________________________________________________ 23
2. In any event, Respondent’s actions were motivated by a ‘demonstrable’ public
purpose ___________________________________________________________ 24
B. Respondent exercised its police powers in good faith __________________________ 24
C. Respondent’s measures were non-discriminatory _____________________________ 25
D. Respondent’s measures were proportional to their aim _________________________ 26
II. Alternatively, Respondent did not breach its obligations under the BITs __________ 27
A. Respondent’s measures did not breach Article 6 of the BITs ____________________ 27
B. Respondent has not violated its FET obligation under Article 3(1) of the BITs ______ 28
1. Respondent’s conduct did not give rise to legitimate expectations _____________ 29
2. Claimants should have taken Respondent’s history of ethnic violence into account 30
3. Claimants deliberately decided to breach Amending Law 2018 _______________ 30
iii
PART IV: DAMAGES _____________________________________________________ 32
I. Claimants’ calculation of damages is erroneous and speculative ________________ 32
A. There is no causal link between Respondent’s measures and the alleged lost profits for
Claimants’ failed market expansion _______________________________________ 32
B. Claimants’ use of the DCF method of valuation is not appropriate _______________ 33
1. Claimants are not going concerns in Tyrea ________________________________ 34
2. Claimants have not furnished a business plan in support of their projections of future
cash flow __________________________________________________________ 34
3. The discount rate used in the Damages Report does not reflect the country risk in
Tyrea _____________________________________________________________ 35
4. Claimants operate in a sector with high regulatory pressure __________________ 36
C. Claimants cannot simultaneously use the DCF method and request “Direct Damages” 36
D. Damages Report does not take account of Claimants’ contributory fault ___________ 37
II. The appropriate method of valuation is the asset-based approach _______________ 38
PRAYER FOR RELIEF ____________________________________________________ 39
iv
INDEX OF AUTHORITIES
ARBITRAL DECISIONS
Citation Abbreviation
Abaclat and Others v. Argentina, ICSID Case No. ARB/07/5, Procedural
Order No. 3 (27.01.2010).
Abaclat (PO3)
Abaclat and Others v. Argentina, ICSID Case No. ARB/07/5, Decision on
Jurisdiction and Admissibility (04.08.2011).
Abaclat
(Jurisdiction)
Abaclat and Others v. Argentina, ICSID Case No. ARB/07/5, Dissenting
Opinion to Decision on Jurisdiction and Admissibility (Georges Abi-
Saab) (04.08.2011).
Abaclat (Abi-Saab)
ADC Affiliate Limited and ADC & ADMC Management Limited v.
Hungary, ICSID Case No. ARB/03/16, Award (02.10.2006).
ADC
ADF Group Inc. v. United States of America, ICSID Case No. ARB
(AF)/00/1, Award (09.01.2003).
ADF
AIG Capital Partners, Inc. and CJSC Tema Real Estate Company Ltd. v.
Kazakhstan, ICSID Case No. ARB/01/6, Award (07.10.2003).
AIG
Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16,
Award (08.11.2010).
Alpha-
Projektholding
Ambiente Ufficio S.p.A. and others v. Argentina, ICSID Case No.
ARB/08/9, Decision on Admissibility and Jurisdiction (08.02.2013).
Ambiente-Ufficio
(Jurisdiction)
Ambiente Ufficio S.P.A. and Others v. Argentina, ICSID Case No.
ARB/08/9, Dissenting Opinion of Santiago Torres Bernárdez (02.05.2013).
Ambiente-Ufficio
(Torres)
American Manufacturing & Trading, Inc. v. Republic of Zaire, ICSID Case
No. ARB/93/1, Award (21.02.1997).
AMT
Amoco International Finance Corporation v. Iran, National Iranian Oil
Company, Iran-US Claims Tribunal, Award No. 310-56-3 (14.07.1987).
Amoco-IUSCT
v
Antoine Goetz et consorts v. République du Burundi, ICSID Case No.
ARB/95/3, Award (10.02.1999).
Goetz
Asian Agricultural Products Ltd. v. Sri Lanka, ICSID Case No. ARB/87/3,
Final Award (27.06.1990).
AAPL
Autopista Concesionada de Venezuela, C.A v. Venezuela, ICSID Case No.
ARB/00/5, Award (23.09.2003).
Autopista-
Concesionada
Azurix Corp. v. Argentina, ICSID Case No. ARB/01/12, Award
(14.07.2006).
Azurix
Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of
Pakistan, ICSID Case No. ARB/03/29, Award (27.08.2009).
Bayindir
Bernhard von Pezold and others v. Zimbabwe, ICSID Case No. ARB/10/15,
Directions Concerning Claimants' Application for Provisional Measure of
12 June 2012 (13.06.2012).
Bernhard-Pezold
(PM)
Bernhard von Pezold and Others v. Zimbabwe, ICSID Case No.
ARB/10/15, Award (28.07.2015).
Bernhard-Pezold
BG Group Plc. v. Argentina, UNCITRAL, Award (24.12.2007). BG-Group
Biwater Gauff (Tanzania) Limited v. Tanzania, ICSID Case No.
ARB/05/22, Procedural Order No. 1 (31.03.2006).
Biwater (PO1)
Biwater Gauff (Tanzania) Limited v. Tanzania, ICSID Case No.
ARB/05/22, Procedural Order No. 2 (24.05.2006).
Biwater (PO2)
Biwater Gauff (Tanzania) Limited v. Tanzania, ICSID Case No.
ARB/05/22, Procedural Order No. 3 (29.09.2006).
Biwater (PO3)
BP Exploration v. Libya, 53 ILR 296 Award (10.10.1973). BP-Exploration
BSG Resources Limited (in administration), BSG Resources (Guinea)
Limited and BSG Resources (Guinea) SÀRL v. Guinea, ICSID Case No.
ARB/14/22, Procedural Order No. 3 (25.11.2015).
BSG-Resources
(PO3)
Burimi SRL and Eagle Games SHA v. Albania, ICSID Case No
ARB/11/18, Procedural Order No. 2 (03.05.2012).
Burimi (PO2)
vi
Burlington Resources Inc. v. Ecuador, ICSID Case No. ARB/08/5,
Procedural Order No. 1 (29.06.2009).
Burlington (PO1)
Cable Television of Nevis, Ltd. and Cable Television of Nevis Holdings,
Ltd. v. Federation of St. Kitts and Nevis, ICSID Case No. ARB/95/2, Award
(13.01.1997).
Cable-Television
Caratube International Oil Company LLP v. Kazakhstan, ICSID Case No.
ARB/08/12, Decision Regarding Claimant’s Application for Provisional
Measures (31.07.2009).
Caratube (PM)
CEMEX Caracas Investments B.V. and CEMEX Caracas II Investments
B.V. v. Venezuela, ICSID Case No. ARB/08/15, Decision on the Claimant's
Request for Provisional Measures (03.03.2010).
CEMEX (PM)
Champion Trading Company, Ameritrade International, Inc. v. Egypt,
ICSID Case No. ARB/02/9, Award (27.10.2006).
Champion-Trading
Charanne and Construction Investments v. Spain, SCC Case
No. V062/2012, Award (21.01.2016).
Charanne
Chemtura Corporation v. Canada, UNCITRAL, Award (02.08.2010). Chemtura
Churchill Mining and Planet Mining Pty Ltd v. Indonesia, ICSID Case No.
ARB/12/14, Procedural Order No. 3 (04.03.2013).
Churchill-Mining
(PO3)
City Oriente Limited v. Ecuador and Empresa Estatal Petróleos del Ecuador
(Petroecuador) I, ICSID Case No. ARB/06/21, Decision on Provisional
Measures (19.11.2007).
City-Oriente (PM)
CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Final Award
(14.03.2003).
CME (Final-
Award)
CMS Gas Transmission Company v. Argentina, ICSID Case No.
ARB/01/8, Award (12.05.2005).
CMS
Continental Casualty Company v. Argentina, ICSID Case No. ARB/03/9,
Award (05.09.2008).
Continental-
Casualty
Convial Callao S.A. and CCI - Compañía de Concesiones de Infraestructura
S.A. v. Peru, ICSID Case No. ARB/10/2, Decision on Application for
Provisional Measures (22.02.2011).
Convial (PM)
vii
Copper Mesa Mining Corporation v. Ecuador, PCA Case No. 2012-2,
Award (15.03.2016).
Copper-Mesa
Corn Products International, Inc. v. Mexico, ICSID Case No. ARB
(AF)/04/1, Decision on Responsibility (15.01.2008).
Corn-Products
(Responsibility)
Crystallex International Corporation v. Venezuela, ICSID Case No.
ARB(AF)/11/2, Award (04.04.2016).
Crystallex
Daimler Financial Services AG v. Argentina, ICSID Case No. ARB/05/1,
Award (22.08.2012).
Daimler
Duke Energy Electroquil Partners & Electroquil SA v. Ecuador, ICSID
Case No. ARB/04/19, Award (18.08.2008).
Duke-Energy
ECE Projektmanagement v. Czech Republic, UNCITRAL, PCA Case No.
2010-5, Award (19.09.2013).
ECE-
Projektmanagement
El Paso Energy International Company v. Argentina, ICSID Case No.
ARB/03/15, Award (31.10.2011).
El-Paso
Electrabel v. Hungary, ICSID Case No. ARB/07/19, Award (25.11.2015). Electrabel
Emilio Agustín Maffezini v. Spain, ICSID Case No. ARB/97/7, Decision
on Request for Provisional Measures (28.10.1999).
Maffezini (PM)
Emilio Agustín Maffezini v. Spain, ICSID Case No. ARB/97/7, Award
(13.11.2000).
Maffezini
Enron Corporation and Ponderosa Assets, L.P. v. Argentina, ICSID Case
No. ARB/01/3, Award (22.05.2007).
Enron
Eskosol S.p.A. in liquidazione v. Italy, ICSID Case No. ARB/15/50,
Procedural Order No. 3 (12.04.2017).
Eskosol (PO3)
Fábrica de Vidrios Los Andes, C.A. and Owens-Illinois de Venezuela, C.A.
v. Venezuela, ICSID Case No. ARB/12/21, Award (13.11.2017).
Fábrica-de-Vidrios
Fireman’s Fund Insurance Company v. Mexico, ICSID Case No.
ARB(AF)/02/1, Award (17.07.2006).
Fireman’s-Fund
viii
Fouad Alghanim & Sons Co. for General Trading & Contracting, W.L.L.
and Fouad Mohammed Thunyan Alghanim v. Jordan, ICSID Case No.
ARB/13/38, Procedural Order No. 2 (24.11.2014).
Fouad-Alghanim
(PO2)
Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Award
(12.11.2010).
Frontier-Petroleum
Gabriel Resources Ltd. and Gabriel Resources (Jersey) v. Romania, ICSID
Case No. ARB/15/31, Decision on Claimants Second Request for
Provisional Measures (22.11.2016).
Gabriel-Resources
(PM2)
Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v. Mexico,
ICSID Case No. ARB(AF)/04/3, Award (16.06.2010).
Gemplus
Giovanni Alemanni and Others v. Argentina, ICSID Case No. ARB/07/8,
Decision on Jurisdiction and Admissibility (17.11.2014).
Alemanni
(Jurisdiction)
Giovanni Alemanni and Others v. Argentina, ICSID Case No. ARB/07/8,
Concurring Opinion of Mr J Christopher Thomas (17.11.2014).
Alemanni
(Thomas)
Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award
(08.06.2009).
Glamis
Gold Reserve Inc. v. Venezuela, ICSID Case No. ARB(AF)/09/1, Award
(22.09.2014).
Gold-Reserve
Helnan International Hotels v. Egypt, ICSID Case No ARB/05/19, Decision
on Claimant’s Request for Provisional Measures (17.05.2006).
Helnan-
International (PM)
Hydro S.r.l. and others v. Albania, ICSID Case No. ARB/15/28, Order on
Provisional Measures (03.03.2016).
Hydro-SrL (PM)
Impregilo S.p.A. v. Argentina, ICSID Case No. ARB/07/17, Award
(21.06.2011).
Impregilo
International Quantum Resources Limited, Frontier SPRL and Compagnie
Minière de Sakania SPRL v. Congo, ICSID Case No. ARB/10/21,
Procedural Order No. 3 (28.11.2011).
IQRL (PO3)
Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L.
and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Final
Award (11.12.2013).
Micula
ix
Ioannis Kardassopoulos v. Georgia, ICSID Case No. ARB/05/18, Award
(03.03.2010).
Kardassopoulos
Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision
on Jurisdiction and Liability (14.01.2010).
Lemire
(Jurisdiction/Liability)
Khan Resources Inc., Khan Resources B.V., and Cauc Holding Company
Ltd. v. Mongolia, PCA Case No. 2011-09, Award (02.03.2015).
Khan-Resources
Lanco International Inc. v. Argentina, ICSID Case No. ARB/97/6,
Jurisdiction of the Arbitral Tribunal (08.12.1998).
Lanco
(Jurisdiction)
Lao Holdings N.V. v. Lao People's Democratic Republic, ICSID Case No.
ARB(AF)/12/6, Ruling on Motion to Amend the Provisional Measures
Order (30.05.2014).
Lao-Holdings (PM)
LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc.
v. Argentina, ICSID Case No. ARB/02/1, Decision on Liability
(03.10.2006).
LG&E (Liability)
Libananco Holdings Co Limited v. Turkey, ICSID Case No ARB/06/8,
Decision on Preliminary Issues (23.06.2008).
Libananco
(Preliminary-Issues)
Loewen Group, Inc. and Raymond L. Loewen v. United States of America,
ICSID Case No. ARB(AF)/98/3, Award (26.06.2003).
Loewen
Marfin Investment Group v. The Republic of Cyprus, ICSID Case No.
ARB/13/27, Award (26.06.2018).
Marfin
Marvin Roy Feldman Karpa v. Mexico, ICSID Case No. ARB(AF)/99/1,
Award (16.12.2002).
Marvin-Feldman
Metalclad Corporation v. Mexico, ICSID Case No. ARB(AF)/97/1,
Decision on a Request by the Respondent for an Order Prohibiting the
Claimant from Revealing Information (27.10.1997).
Metalclad (PM)
Metalclad Corporation v. Mexico, ICSID Case No. ARB(AF)/97/1, Award
(30.08.2000).
Metalclad
Methanex Corporation v. United States of America, UNCITRAL, Final
Award (03.08.2005).
Methanex
x
Middle East Cement Shipping and Handling Co. S.A. v. Egypt, ICSID Case
No. ARB/99/6, Award (12.04.2002).
Middle-East-
Cement
Millicom International Operations B.V. and Sentel GSM S.A. v. Senegal,
ICSID Case No. ARB/08/20, Decision on the Application of Provisional
Measures (09.12.2009).
Millicom (PM)
Mr Franck Charles Arif v. Moldova, ICSID Case No. ARB/11/23, Award
(08.04.2013).
Arif
National Grid plc v. Argentina, UNCITRAL, Award (03.11.2008). National-Grid
Noble Energy and Machala Power v. Ecuador and Conelec, ICSID
Case No. ARB/05/12, Decision on Jurisdiction (05.03.2008).
Noble-Energy
(Jurisdiction)
Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award
(12.10.2005). Noble-Ventures
Nova Group Investments, B.V. v. Romania, ICSID Case No. ARB/16/19,
Procedural Order No. 7 (29.03.2017).
Nova-Group (PO7)
Occidental Exploration and Production Company v. Ecuador, LCIA Case
No. UN3467, Award (01.07.2004).
Occidental
OI European Group B.V. v. Venezuela, ICSID Case No. ARB/11/25,
Award (10.03.2015).
OI-European-
Group
Oxus Gold v. Uzbekistan, UNCITRAL, Award (17.12.2015). Oxus
Parkerings-Compagniet AS v. Lithuania, ICSID Case No. ARB/05/8,
Award (11.09.2007).
Parkerings
Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos
S.A. v. Uruguay, ICSID Case No. ARB/10/7, Award (08.07.2016).
Philip-Morris
Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5,
Decision on Provisional Measures (06.04.2007).
Phoenix (PM)
Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24,
Decision on Jurisdiction (08.02.2005).
Plama
(Jurisdiction)
xi
Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, Order
(06.09.2005).
Plama (Order)
PNG Sustainable Development Program Ltd. v. Papua New Guinea, ICSID
Case No. ARB/13/33, Decision on Claimant Request for Provisional
Measures (21.01.2015).
PNG (PM)
Pope & Talbot Inc. v. Canada, UNCITRAL, Interim Award (26.06.2000). Pope-&-Talbot
(Interim-Award)
Pope & Talbot Inc. v. Canada, UNCITRAL, Award on the Merits of Phase
2 (10.04.2001).
Pope-&-Talbot
PSEG Global, Inc., The North American Coal Corporation, and Konya
Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Turkey, ICSID Case No.
ARB/02/5, Award (19.01.2007).
PSEG
Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v.
Bolivia, ICSID Case No. ARB/06/2, Decision on Provisional Measures
(26.02.2010).
Quiborax (PM)
Ronald S. Lauder v. Czech Republic, UNCITRAL, Final Award
(03.09.2001).
Lauder
RosInvestCo UK Ltd. v. Russia, SCC Case No. V079/2005, Final Award
(12.09.2010).
RosInvestCo
RSM Production Corporation v. Saint Lucia, ICSID Case No. ARB/12/10,
Assenting Reasons of Gavan Griffith (12.08.2014).
RSM (Griffith)
Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri
A.S. v. Kazakhstan, ICSID Case No. ARB/05/16, Award (29.07.2008).
Rumeli
Rusoro Mining Ltd. v. Venezuela, ICSID Case No. ARB(AF)/12/5, Award
(22.08.2016).
Rusoro
Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No.
ARB/05/07, Award (30.06.2009).
Saipem
Saluka Investments B.V. v. Czech Republic, UNCITRAL, Partial Award
(17.03.2006).
Saluka (Partial-
Award)
xii
S.D. Myers, Inc. v. Canada, UNCITRAL, Partial Award (13.11.2000). SD-Myers (Partial-
Award)
Sempra Energy International v. Argentina, ICSID Case No. ARB/02/16,
Award (28.09.2007).
Sempra
Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz
Company v. Mongolia, UNCITRAL, Award on Jurisdiction and Liability
(28.04.2011).
Paushok
(Jurisdiction/Liability)
SGS Société Générale de Surveillance S.A. v. Pakistan, ICSID Case No.
ARB/01/13, Procedural Order No. 2 (16.10.2002).
SGS (PO2)
SGS Société Générale de Surveillance S.A. v. The Philippines, ICSID Case
No. ARB/02/6, Decision on Objections to Jurisdiction (29.01.2004).
SGS (Jurisdiction)
Siemens A.G. v. Argentina, ICSID Case No. ARB/02/8, Award
(17.01.2007).
Siemens
Southern Pacific Properties (Middle East) Ltd. v. Egypt, ICSID Case No.
ARB/84/3, Award (20.05.1992).
SPP
Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award
(07.12.2011).
Roussalis
Starrett Housing Corporation et al v. Iran, Iran-US Claims Tribunal,
Interlocutory Award (19.12.1983).
Starrett-Housing
(Interlocutory-Award)
Starrett Housing Corporation et al v. Iran, Iran-US Claims Tribunal, Award
No. 314-24-1 (14.08.1987).
Starrett-Housing
Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi
Universal, S.A. v. Argentina, ICSID Case No. ARB/03/19, Order in
response to a Petition for Participation as Amicus Curiae (19.05.2005).
Suez (Order)
Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi
Universal, S.A. v. Argentina, ICSID Case No. ARB/03/19, Decision on
Liability (30.04.2010).
Suez (Liability)
Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi
Universal, S.A. v. Argentina, ICSID Case No. ARB/03/19, Award
(09.04.2015).
Suez
xiii
Técnicas Medioambientales Tecmed, S.A. v. Mexico, ICSID Case No.
ARB (AF)/00/2, Award (29.05.2003).
Tecmed
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del
Sur S.A. v. Argentina, ICSID Case No. ARB/09/1, Decision on Provisional
Measures (08.04.2016).
Teinver (PM)
Telenor Mobile Communications A.S. v. Hungary, ICSID Case No.
ARB/04/15, Award (13.09.2006).
Telenor
Tenaris S.A. and Talta- Trading e Marketing Sociedade Unipessoal Lda v.
Venezuela, ICSID Case No. ARB/11/26, Award (29.01.2016).
Tenaris
Tethyan Copper Company Pty Limited v. Pakistan, ICSID Case No.
ARB/12/1, Decision on Claimant Request for Provisional Measures
(13.12.2012).
Tethyan-Copper
(PM)
Tidewater Inc., v. Venezuela, ICSID Case No. ARB/10/5, Award
(13.03.2015).
Tidewater
Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Order No. 1
(01.07.2003).
Tokios-Tokelés
(PO1)
Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Order No. 3
(18.01.2005).
Tokios-Tokelés
(PO3)
Total S.A. v. Argentina, ICSID Case No. ARB/04/01, Decision on Liability
(27.12.2010).
Total (Liability)
Transglobal Green Energy, LLC and Transglobal Green Energy de Panama,
S.A. v. Panama, ICSID Case No. ARB/13/28, Decision on Provisional
Measures relating to Security for Costs (21.01.2016).
Transglobal (PM)
United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Estonia,
ICSID Case No. ARB/14/24, Decision on Respondent’s Application for
Provisional Measures (12.05.2016).
United-Utilities
(PM)
US v. Iran, Decision No. 130-A28-FT, 36 Iran-US Claims Tribunal Reports
5 (19.12.2000).
US/Iran
Valle Verde Sociedad Financiera SL v. Venezuela, ICSID Case No
ARB/12/18, Decision on Provisional Measures (25.01.2016).
Valle-Verde (PM)
xiv
Venezuela US, S.R.L. (Barbados) v. Venezuela, PCA Case No. 2013-34,
Interim Award on Jurisdiction (26.07.2016).
Venezuela-SrL
(Jurisdiction)
Víctor Pey Casado and President Allende Foundation v. Chile, ICSID Case
No. ARB/98/2, Decision on Provisional Measures (25.09.2001).
Pey-Casado (PM)
Victor Pey Casado and President Allende Foundation v. Chile, ICSID Case
No. ARB/98/2, Resubmission Award (13.09.2016).
Pey-Casado
(Resubmission-
Award)
Waste Management Inc. v. Mexico ("Number 2"), ICSID Case No.
ARB(AF)/00/3, Award (30.04.2004).
Waste-
Management
Wena Hotels Ltd. v. Egypt, ICSID Case No. ARB/98/4, Award
(08.12.2000).
Wena-Hotels
World Duty Free Company v. Kenya, ICSID Case No. ARB/00/7 Award
(04.10.2006).
World-Duty-Free
JUDGMENTS
Citation Abbreviation
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Turkey/Iraq-
Frontier
Aegean Sea Continental Shelf (Greece v. Turkey), Judgment (19.12.1978)
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Greece/Turkey
Ambatielos case (merits: obligation to arbitrate) (Greece v. UK), Judgment
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Greece/UK
Armed Activities on the Territory of the Congo (New Application: 2002)
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Congo/Rwanda
Border and Transborder Armed Actions (Nicaragua v. Honduras),
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p. 69.
Nicaragua/Honduras
xv
Case concerning the Factory at Chorzów (Germany v. Poland), Merits
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Chorzów Factory
Certain Criminal Proceedings in France (Congo v. France), Provisional
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Congo/France
Electricity Company of Sofia and Bulgaria (Belgium v. Bulgaria),
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Belgium/Bulgaria
Elettronica Sicula S.P.A. (ELSI) (USA v. Italy), Judgment (20.07.1989)
I.C.J. Reports 1989, p. 15.
ELSI
Fisheries Jurisdiction (UK v. Iceland), Jurisdiction of the Court, Judgment
(02.02.1973) I.C.J. Reports 1973, p. 3.
UK/Iceland
Interpretation of Convention of 1919 concerning Employment of Women
during the Night, Advisory Opinion (15.11.1932) P.C.I.J. (ser. A) No. 50.
PCIJ 1919
Convention
James and others v. United Kingdom, [1986] ECHR 2. James
Interpretation of Peace Treaties with Bulgaria, Hungary and Romania
(Second phase), Advisory Opinion (18.07.1950) I.C.J. Reports 1950,
p. 221.
ICJ Peace-Treaties
LaGrand (Germany v. USA), Judgement (27.06.2001) I.C.J. Reports 2001,
p. 466.
LaGrand
Land and Maritime Boundary (Cameroon v. Nigeria; Equatorial Guinea
intervening), Judgement (10.10.2002) I.C.J. Reports 2002 p. 303.
Cameroon/Nigeria
Legal Consequences for States of the Continued Presence of South Africa
in Namibia (South West Africa) notwithstanding Security Council
Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971 p. 16.
ICJ Continued-
Presence
Legality of Use of Force (Serbia and Montenegro v. Belgium), Preliminary
Objections, Judgment, I.C.J. Reports 2004 p. 279.
ICJ Serbia/Belgium
Passage through the Great Belt (Finland v. Denmark), Order (29.07.1991),
I.C.J. Reports 1991, p. 12.
Finland/Denmark
xvi
Passage through the Great Belt (Finland v. Denmark), Order (29.07.1991),
I.C.J. Reports 1991, Separate Opinion of Judge Shahabuddeen, p. 28.
Finland/Denmark
(Shahabuddeen)
Pressos Compania Naviera S.A. and others v. Belgium [1995] ECHR 47. Pressos Compania
Rainbow Warrior (New Zealand v. France) (1990) 20 RIAA 226. Rainbow Warrior
Status of Eastern Carelia Case, Advisory Opinion (23.07.1923) P.C.I.J.
Series B. No. 5, p. 27.
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Crawford J, Brownlie’s Principles of Public International Law (OUP
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xvii
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xxvi
LIST OF ABBREVIATIONS
¶(¶¶) Paragraph/Paragraphs
Amending Law 2018 Law 0808-L of 12 January 2018 Amending the Law on
Media and Information
Blocking Ordinances Ordinances dated 28 February 2018, 1 March 2018, and 2
March 2018
Damages Report Expert Report on Damages submitted on 29 June 2018
DCF Discounted Cash Flow
Ex.C/Ex.R Claimants’ Exhibit/Respondent’s Exhibit
FET Fair and Equitable Treatment
ff Following pages/paragraphs
First Decree Decree No. 0578/201-D of 12 January 2018
ICSID Convention Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, 1968
ICJ International Court of Justice
ILC International Law Commission
Media Law 2013 Law on Media and Information No. 1125-L on 10
September 2013
Notice Respondent’s Notice denouncing the ICSID Convention
dated 5 January 2018
PO Procedural Order
Response Response to the Request for Arbitration dated 3 September
2018
RPM Respondent’s Request for Provisional Measures dated 21
December 2018
Second Decree Decree No. 0599/201-D of 11 February 2018
SOUF Statement of Uncontested Facts
the BITs Agreements on the Promotion and Reciprocal Protection of
Investments of Tyrea with Novanda (2000) and Kitoa
(2001)
UNCTAD United Nations Conference on Trade and Development
VCLT Vienna Convention on the Law of Treaties, 1969
1
STATEMENT OF FACTS
Parties to the dispute
1. Claimants: FriendsLook plc (“FriendsLook”) is a company incorporated under the laws of the
Federation of Novanda. Whistler Inc. (“Whistler”) and SpeakUp Media Inc. (“SpeakUp”) are
two companies incorporated under the laws of the Union of Kitoa.
2. Respondent: The Republic of Tyrea (“Tyrea”) is a transitioning economy, which recently
emerged from a civil war between the two major ethnicities in the country, Minyar and Tatyar,
in September 2012.
Background to the investments
3. Respondent entered into two BITs with Novanda in 2000 and Kitoa in 2001, the latter with a
different preamble. Novanda, Kitoa, and Tyrea acceded to the ICSID Convention in January
1995, October 1995, and December 2000 respectively.
4. Respondent enacted the Media Law 2013 on 10 September 2013 to liberalise the Internet and
to reduce control over media and press. This law was described as “the ground for the advent”
of foreign investors in Tyrea.
5. During an international conference in December 2014, Respondent promised its best efforts to
“facilitate the establishment and use of new internet possibilities for the people of Tyrea”.
6. Following deliberations in November 2017, Tyrea denounced the ICSID Convention on 5
January 2018 through a notice to the President of the World Bank.
Investments
7. Given Tyrea’s sizeable population and the lack of large competitors, FriendsLook invested in
Tyrea by opening a local office and launching a Tyrean version of its website in January 2015.
Shortly thereafter, in June 2015, Whistler and SpeakUp followed suit.
8. Claimants’ platforms became the most commonly used and influential social media networks
in Tyrea, considered synonymous with the Internet itself. The number of users engaging with
their platforms has been increasing exponentially since their launch, while popularity of
domestic platforms has simultaneously waned.
2
Events leading to the dispute
9. Due to their vast reach, Claimants’ social media networks were considered ideal by Tyrean
radical communities to make their views available to wide audiences. Since 2016, radical
groups have resorted to these networks for spreading hate speech and promoting ethnic violence
between Minyar and Tatyar using fake profiles and false information.
10. In 2017, violent altercations between Minyar and Tatyar groups were reported for the first time
in Tyrea since the civil war of 2012. In the beginning of 2018, ethnic violence promoted through
social media resulted in hundreds of casualties.
11. According to the survey of the Tyrean Communications Agency, by 1 January 2018 almost
every inhabitant of Tyrea over the age of 10 had an account on at least one of the social media
platforms available in the country.
Dispute
12. In order to tackle the increasing ethnic violence promoted through social media, Respondent
enacted Amending Law 2018 on 12 January 2018. This law established that every social media
platform must: first, develop an algorithm capable of filtering and blocking content against
Respondent’s public order and or/morality; second, collect the personal information of existing
and new users; and third, provide Tyrean authorities with users’ personal information and
private messaging.
13. On the same day, Respondent promulgated the First Decree setting a deadline of 60 days to
comply with the requirements of Amending Law 2018.
14. On 28 January 2018, a representative of SpeakUp, Ms. Parlante, met with the Tyrean Minister
of Telecommunications, Information Technology and Mass Media, and expressed concerns
about the user identification system and short time to develop a screening algorithm.
15. However, the situation in Tyrea deteriorated rapidly and the police was unable to control the
ethnic rampage. This prompted Respondent to issue the Second Decree on 11 February 2018,
reducing the deadline for compliance with Amending Law 2018 and moving it forward to 28
February 2018.
3
16. Although Claimants had in place certain generic filters, the algorithms developed were
defective. They did not screen hate speech posts and required lengthy human analysis.
Moreover, it took longer to flag fake accounts than it took for users to create them. Moreover,
although the user identification systems were in place, Claimants deliberately refused to block
unverified accounts.
17. Therefore, the Tyrean Communication Authority blocked Claimants’ platforms by means of
the Blocking Ordinances.
18. Amending Law 2018 prescribed penalties based on the gravity of transgressions. Given the lack
of popularity of Wink and TruthSeeker, which made them less convenient for radicalist groups,
these social media platforms were not blocked for their non-compliance with this law. Instead,
there are criminal proceedings regarding the imposition of fine pending against them.
Arbitration
19. Claimants filed a Request for Arbitration on 29 June 2018, registered by the ICSID Secretary
General on 16 July 2018. Claimants, inter alia, requested the Tribunal to find Tyrea liable for
the breach of the BITs and accordingly demanded USD 69,134,875.00, USD 26,760,460.00,
and USD 27,094,600.00 as damages.
20. Respondent filed its Response, denying all of Claimants’ claims and raising objections to the
jurisdiction of the Tribunal. It also contested Claimants’ calculation of damages.
21. On 21 December 2018, Respondent submitted a Request for Provisional Measures, asking the
Tribunal to order Claimants to refrain from “promoting, stimulating, or instigating the
publication of propaganda, presenting their case selectively outside this Tribunal, or otherwise
jeopardizing Tyrea’s rights in this dispute”.
4
ARGUMENTS
PART I: PROVISIONAL MEASURES
22. Claimants have launched an aggressive, one-sided media campaign against the Tyrean
Government parallel to this arbitration proceeding to “expedite bilateral resolution of the
disagreement with Tyrea”.1 They have also engaged a public relations firm in furtherance of
the same.2 To prevent the consequent aggravation of this dispute, Respondent filed a Request
for Provisional Measures on 21 December 2018 before the Tribunal (“RPM”). Its RPM evinces
rights susceptible to protection [I.] and meets the threshold conditions for grant of provisional
measures [II]. Consequently, it must be granted.
I. RESPONDENT SEEKS RIGHTS SUSCEPTIBLE TO PROTECTION BY PROVISIONAL
MEASURES
23. An investment dispute must be protected from damage during an arbitral process.3 Thus, Article
47 ICSID Convention gives tribunals the broad discretion to recommend binding provisional
measures to preserve the “rights of either party”.4 This includes all “rights relating to the
dispute”,5 whether substantive or procedural.6 In casu, the RPM intends to protect Respondent’s
right to non-aggravation of the dispute [A.] and its procedural integrity [B.], which are self-
standing procedural rights.7
A. CLAIMANTS’ ACTIONS THREATEN THE AGGRAVATION OF THIS DISPUTE
24. Disputing parties are bound by a good faith duty not to aggravate the dispute or its resolution,8
by eroding the trust and confidence between disputants, generating external pressure on the
opposing party, or attempting a trial by media.9 To maintain or restore peace between parties,10
their behaviour may be regulated or restricted through interim relief.11
1 SOUF, ¶25. 2 SOUF, ¶25. 3 Born, 871; Benz, 145. 4 Quiborax (PM), ¶105; PNG (PM), ¶103. 5 Plama (Order), ¶40; Churchill-Mining (PO3), ¶48. 6 Biwater (PO1), ¶71; Convial (PM), ¶82. 7 Burlington (PO1), ¶60; Kaufmann-Kohler/Antonietti, 516. 8 Belgium/Bulgaria, 199; Pey-Casado (PM), ¶¶67-76; Caratube (PM), ¶127. 9 Biwater (PO2), ¶135; Schreuer/(2011), 759. 10 Tokios-Tokelés (PO1), ¶2; Lao-Holdings (PM), ¶13. 11 Bernhard-Pezold (PM), ¶7.
5
25. This includes restrictions on the parties’ use of media.12 In this light, the Biwater Guaff and
World Duty Free tribunals restricted claimants from using public discussions to broadcast
inaccurate information about the case or antagonise the respondent.13 Further, the Abaclat and
United Utilities tribunals prevented claimants from publishing their pleadings and witness
statements, which carry the inherent risk of a biased portrayal of the dispute in media.14
26. Tyrea attributes the aggravation of the present dispute to a media campaign and lobbying by
Claimants. Respondent has identified digital media titles published globally from July 2018 to
August 2019 that critique its conduct vis-à-vis Claimants.15 This includes the publication of
Claimants’ Request for Arbitration and witness statement.16 Further, Tyrea’s Response was also
circulated and its context was distorted to suggest that Tyrea is opposed to the freedom of
expression.17 First, these publications paint a biased and inaccurate picture of the dispute, to
the prejudice of its peaceful resolution. Second, this media propaganda led to increased violence
among protestors in Tyrea,18 contrary to the very purpose of Respondent’s disputed social
media regulations. Additionally, the media campaign and Claimants’ lobbyists exert pressure
upon Respondent to revoke its measures in the interest of its international reputation and
political stability.
27. Claimants cannot dissociate themselves from these actions. They have accepted responsibility
for the publication of their Request for Arbitration and witness statement.19 Tyrea’s Response
was only dispatched to Claimants and the ICSID Secretariat.20 Moreover, it is known that
Claimants have engaged a public relations firm and employed “unofficial” measures to expedite
the resolution of this dispute.21 Finally, by their own admission, they have resorted to lobbying
in the past to secure their economic interests.22 Cumulatively, this demonstrates possible danger
to Respondent’s rights due to Claimants’ actions, sufficient to warrant provisional measures
against them.23
12 Teinver (PM), ¶210; Kinnear/Diop, 47. 13 Biwater (PO2), ¶137; World-Duty-Free, ¶13. 14 Abaclat (PO3), ¶¶102-104; United-Utilities (PM), ¶114. 15 PO3, ¶9; RPM, ¶¶3-5. 16 PO3, ¶7. 17 RPM, ¶3. 18 PO2, ¶5. 19 PO3, ¶7. 20 Response, 22. 21 SOUF, ¶25. 22 Request for Arbitration, ¶13. 23 Finland/Denmark (Shahabuddeen), 34; Thirlway, 24; Kazazi, 326-327.
6
28. Alternatively, given the widespread media scrutiny of this case,24 both the peaceful resolution
of this dispute and Respondent’s underlying right to regulate its affairs are at risk. In such
situations, tribunals grant preventive provisional measures to restrict claimants from
contributing to media discourse, even if there is no direct link between such media scrutiny and
claimants.25 Similarly, the RPM must be granted to avoid further aggravation of this dispute.
B. CLAIMANTS’ ACTIONS THREATEN THE INTEGRITY OF THIS PROCEEDING
29. To ensure the integrity of the proceedings, a party must be afforded the opportunity to present
its position without any external influence.26 Thus, a tribunal may recommend any provisional
measure to preserve a party’s right of defence,27 prevent the frustration of the effectiveness of
an award,28 and to prevent one party from taking justice in its own hands.29 For instance, the
ADC tribunal ordered the confidentiality of all documents produced in the arbitration to
preserve the integrity of the arbitral process.30
30. In the present case, Claimants have attempted to unilaterally secure their interests through the
aforementioned media campaign and lobbying. Their biased criticism of Respondent has
provoked violent clashes among Tyreans discontent with the governmental measures in
dispute.31 This threatens to defeat Amending Law 2018’s objective to secure peace and stability
in Tyrea.32 External influence from the media and lobbyists to roll back Amending Law 2018
may also render an award in recognition of Tyrea’s right to regulate, as requested in its
Response,33 meaningless – consequently frustrating the integrity of the proceeding.
II. THE RPM SATISFIES THE THRESHOLD REQUIREMENTS FOR GRANT OF PROVISIONAL
MEASURES
31. Article 47 ICSID Convention does not reveal the pre-conditions for granting provisional
measures. However, jurisprudence constante directs this Tribunal to consider its prima facie
jurisdiction [A.], the requesting party’s prima facie case on merits [B.], as well as the
24 PO2, ¶13; PO3, ¶2. 25 United-Utilities (PM), ¶102; Biwater (PO2), ¶146. 26 Nova-Group (PO7), ¶235; Libananco (Preliminary-Issues), ¶78. 27 Hydro-SrL (PM), ¶3.32; Sinclair/Repousis, 433. 28 Eskosol (PO3), ¶33; Millicom (PM), ¶42. 29 City-Oriente (PM), ¶55. 30 ADC, ¶68. 31 PO2, ¶5. 32 SOUF, ¶15. 33 Response, ¶16.
7
urgency [C.], necessity [D.], and proportionality [E.] of the measures before granting a request
for provisional measures.34 Tyrea’s RPM meets these five criteria.
A. THE TRIBUNAL HAS PRIMA FACIE JURISDICTION TO GRANT THE REQUESTED MEASURES
32. Admittedly, the competence of a Tribunal to grant provisional measures depends upon its prima
facie jurisdiction over the dispute.35 At the outset, it must be noted that the party requesting
provisional measures in this case is a Respondent state. To compel a respondent to establish
jurisdiction would force it to act against its own interests,36 in serious departure from
fundamental rules of procedure.37 Thus, Tyrea must not be compelled to demonstrate this
Tribunal’s jurisdiction.
33. In any event, a finding of prima facie jurisdiction must be confined to an initial analysis, i.e.
“at first sight”.38 When the parties agree that a tribunal has prima facie jurisdiction, the tribunal
can confirm the same based on parties’ consent.39 In the present case, Claimants assert that:
first, they are investors from states that have concluded BITs offering ICSID arbitration with
Tyrea; and second, the present dispute concerns their ‘investments’ in Tyrea.40 Respondent does
not dispute the foregoing. Thus, this Tribunal has the requisite prima facie jurisdiction.
34. Pertinently, an assessment of a tribunal’s jurisdiction at this stage is preliminary and does not
finally pre-judge its jurisdiction.41 Hence, Tyrea’s RPM does not preclude it from challenging
this Tribunal’s jurisdiction subsequently.42
B. RESPONDENT HAS A PRIMA FACIE CASE ON THE MERITS OF THE DISPUTE
35. The party requesting the provisional measures must demonstrate that it has a prima facie
credible case on the merits,43 in order to prevent vexatious claims for interim relief.44 This
analysis should not judge the merits of the case before its final resolution, but be restricted to
an assessment of the possibility of success on the merits.45 The Paushok tribunal accordingly
34 IQRL (PO3), ¶40; Fouad-Alghanim (PO2), ¶¶49-50; Gazzini/Kolb, 171. 35 Tokios-Tokelés (PO3), ¶11; Luttrell, 398-400. 36 Miles, 161. 37 RSM (Griffith), ¶¶4-6. 38 Millicom (PM), ¶42. 39 BSG-Resources (PO3), ¶74; United-Utilities (PM), ¶114. 40 Request for Arbitration, ¶¶2-3. 41 SGS (PO2), ¶¶20-21; Transglobal (PM), ¶26; PNG (PM), ¶104. 42 Valle-Verde (PM), ¶¶75-78; Phoenix (PM), ¶29; Fouad-Alghanim (PO2), ¶70. 43 PNG (PM), ¶¶120-121; Tethyan-Copper (PM), ¶117. 44 Collins, 225; Caron, 237-238. 45 Pey-Casado (PM), ¶48; Congo/France, 122; Maffezini (PM), ¶13.
8
limited itself to evaluating whether the requesting party had made a reasonable case, which, if
the facts alleged were proven, might lead the tribunal to render an award in its favour.46
36. It is improper to burden respondents to proffer their prima facie defence on the merits of the
case in advance of claimants pleading their case.47 In any event, Respondent enacted Amending
Law 2018 to prevent online hate speech and curb ethnic violence,48 in exercise of its regulatory
powers. The Blocking Ordinances against Claimants’ social media platforms are an outcome
of their wilful disregard of the requirements of this law,49 despite being forewarned of the
consequences of non-compliance.50 In any case, Claimants retain their physical assets in Tyrea
as well as, admittedly, the ability to derive profits from the same.51 If the foregoing is
established as true, Respondent’s actions cannot be characterised as breaches of Articles 3 and
6(1) of the BITs. Thus, it has a prima facie case on the merits.
C. THE REQUESTED MEASURES ARE URGENT
37. Article 47 ICSID Convention deliberately omits any reference to “imminent danger” to the
requesting party’s rights.52 Thus, a relief claimed is sufficiently urgent when the underlying
right cannot await the outcome on the merits.53 However, the desired level of urgency depends
upon the type of provisional measure requested.54 When the requested measure seeks to protect
the integrity of the proceedings or ensure the effectiveness of the final award, it is deemed
urgent ipso facto.55 This is because such rights exist only for the duration of the proceedings.56
In this light:
The Burlington tribunal found that when the measures are intended to protect against
the aggravation of a dispute during the proceedings, the urgency requirement is fulfilled
by definition.57
46 Paushok (Jurisdiction/Liability), ¶55. 47 RSM (Griffith), ¶¶7-9. 48 SOUF, ¶13-15. 49 SOUF, ¶20. 50 Ex.C6, ¶7. 51 Ex.C7, 18. 52 ICSID-History (2), 815. 53 Tokios-Tokelés (PO3), ¶8; Eskosol (PO3), ¶36. 54 Biwater (PO1), ¶76; Quiborax (PM), ¶153. 55 Teinver (PM); ¶235; Hydro-SrL (PM), ¶3.29. 56 Miles, 269. 57 Burlington (PO1), ¶74.
9
The City Oriente tribunal deemed the grant of provisional measures urgent to restrain a
pressuring mechanism intended to defeat the very rights that the requesting party sought
to protect vide treaty arbitration.58
38. Through its RPM, Tyrea seeks the protection of similar procedural rights – the non-aggravation
of the dispute and its procedural integrity.59 These are threatened by Claimants’ efforts to
exercise media and political pressure against it. The protection of these rights is only material
during the course of these proceedings and cannot await the Tribunal’s final award.
Accordingly, the interim relief sought is urgent.
D. THE REQUESTED MEASURES ARE NECESSARY
39. Evaluating the necessity of interim relief entails an assessment of ‘substantial harm’ that a
requesting party seeks to avoid through the interim measures.60 Notably, if the anticipated harm
cannot be fully remedied with a subsequent award for damages or compensation, it is
considered sufficiently significant to warrant the award of provisional measures.61 In case of
procedural rights such as the confidentiality of proceedings,62 which Tyrea seeks to protect, the
grant of provisional measures is always necessary since a subsequent award of damages cannot
repair procedural unfairness.63
40. Additionally, a tribunal’s mandate under Article 47 ICSID Convention extends to preventing
risk of harm in proceedings,64 which involves an assessment of probabilities.65 Thus,
manifestation of significant harm need not be demonstrated with certainty - it must be more
likely than not to occur if provisional measures are not taken.66 The media campaign by
Claimants has already impacted the political stability in Tyrea.67 Further discussion of the
dispute is likely to inflame these tensions, causing significant harm.
58 City-Oriente (PM), ¶69. 59 RPM, ¶9. 60 Convial (PM) ¶86; Lalive, 134; Waincymer, 696. 61 Metalclad (PM), ¶8; Helnan-International (PM), ¶34; CEMEX (PM), ¶49. 62 PNG (PM), ¶113. 63 Nova-Group (PO7), ¶¶239-240; Miles, 259; Petrochilos, 106. 64 Gabriel-Resources (PM2), ¶72. 65 Finland/Denmark, 17. 66 Biwater (PO3), ¶¶ 144-145. 67 PO2, ¶5.
10
E. THE REQUESTED MEASURES ARE PROPORTIONATE TO THE ANTICIPATED HARM
41. In assessing proportionality, a tribunal should check whether one party’s need for provisional
measures outweighs the hardships to which the other party would be subjected, if the measures
were granted.68 In the context of discussions and publications relating to a dispute, it must
balance any general interest in transparency against specific interests in confidentiality of
certain information or documents.69
42. In Tyrea’s view, the balance of inconvenience tilts in its favour. The requisite transparency in
this case can be guaranteed by the publication of the Tribunal’s procedural orders and awards,
which offer a balanced and objective picture of the dispute. Beyond this, Claimants have no
right to publish the any material under an alleged general rule of transparency,70 are under no
legal obligation to publish the arbitration documents, and thus, will suffer no harm if the
requested measures are granted.
43. Conversely, Tyrea stands to lose its bid for the World Expo 2030,71 suffer from aggravated
volatility among its population,72 bear an increased cost for the proposed issuance of sovereign
bonds,73 and succumb to increased political pressure even if an award is rendered in its favour.
In fact, a biased media campaign would thwart the primary objective of transparency in
investor-state arbitration: dissemination of accurate information concerning governmental
affairs.74 Thus, the RPM must be granted.
68 Burimi (PO2), ¶35; Eskosol (PO3) ¶36. 69 Abaclat (PO3), ¶79; Biwater (PO3), ¶112. 70 Ortino, 121; Malatesta/Sali, 110. 71 RPM, ¶¶3,8. 72 PO2, ¶5. 73 RPM, ¶10. 74 Plagakis, 94; Malatesta/Sali, 110.
11
PART II: JURISDICTION
I. THE TRIBUNAL LACKS RATIONE VOLUNTATIS JURISDICTION
44. Respondent ratified the ICSID Convention on 15 December 2000.75 However, on 5 January
2018, it notified the President of the World Bank Group of its intention to denounce the
Convention.76 This Notice precludes the Tribunal’s jurisdiction over claims filed after its
receipt [A.]. The continued operation of Articles 9(1) [B.] or 9(2) [C.] of the BITs cannot
override Respondent’s denunciation. Accordingly, the Tribunal must decline jurisdiction over
the claims filed on 29 June 2018.
A. THE TRIBUNAL HAS NO JURISDICTION FOLLOWING RESPONDENT’S NOTICE
45. Article 72 ICSID Convention governs the effect of Respondent’s denunciation of the
Convention on its obligation to submit to ICSID arbitration [1.]. Under this Article, Respondent
must submit to ICSID arbitration only if the consent to arbitrate was achieved before its notice
of denunciation was received by the Centre [2.]. Since the requisite consent in the present case
was achieved after 5 January 2018 [3.], this Tribunal lacks jurisdiction, despite the registration
of Claimants’ Request for Arbitration by the ICSID Secretary General [4.].
1. Article 72 ICSID Convention regulates the effects of denunciation on
Respondent’s obligation to arbitrate
46. ICSID Convention contains two types of provisions: first, provisions that address states in their
capacity as Contracting States to this Convention;77 and second, provisions that address states
as parties in ICSID arbitration proceedings following their consent.78 This is because
ratification of the ICSID Convention does not imply consent to ICSID Arbitration.79 The latter
is only achieved through an express subsequent agreement between a host state and an
investor.80
47. Articles 71 and 72 ICSID Convention demonstrate a similar division of responsibilities: Article
71 addresses denouncing states in their capacity as former Contracting States to the
75 SOUF, ¶2. 76 Ex.R1. 77 Articles 4-7, 14, and 18-24 ICSID Convention. 78 Article 26, 27, 36, 37, 41-44, 49(2), 50, 51, 52, and 53 ICSID Convention. 79 Preamble ¶7 ICSID Convention; Mezgravis/González, 8; Alvarez, 651. 80 Article 25(1) ICSID Convention; Durney; 241; Cable-Television, ¶¶4.02-4.17.
12
Convention.81 Conversely, Article 72 specifically regulates rights and obligations of a state
arising from its consent to the Centre’s jurisdiction.82 International law recognises the hierarchy
of such a saving clause,83 over a general rule on treaty termination.84 Thus, only Article 72
applies as lex specialis to the effect of a state’s denunciation on its obligation to submit to ICSID
arbitration. 85
2. The critical date under Article 72 ICSID Convention is the date of receipt of a
notice of denunciation
48. Article 72 sets the critical date as the date of receipt of notice of denunciation – a state is only
bound by obligations arising from consent achieved before this date.86 As per the customary
principle of ordinary interpretation,87 the plain meaning of this Article is that a state is not
obligated to submit to ICSID arbitration if consent for the same was achieved after its notice of
denunciation.88 This reference to the date of the notice, instead of the effective date of
denunciation as under Article 71 ICSID Convention, was deliberately introduced89 in the First
Preliminary Draft of the Convention:
“[t]he denunciation shall take effect [twelve] months after receipt by the Bank of
such notice; provided that the obligations of the State concerned arising out of
undertakings given prior to the date of such notice shall remain in full force and
effect.”90
49. In the present case, Tyrea’s Notice was sent to the World Bank and made public on 5 January
2018.91 Thus, it only has an obligation to arbitrate disputes for which the requisite consent given
before this date.
81 Wychera/Mimnagh, 414. 82 Castro-Figueiredo, 14; Schreuer/(2010), 355. 83 ILC (Fragmentation), 78; ILC Draft-VCLT, 265. 84 Villiger, 873; UK/Iceland, 18; Rainbow Warrior, ¶106. 85 Parra/(2010), 383. 86 Fábrica-de-Vidrios, ¶269; Voon/Mitchell, 417. 87 LaGrand, 501; Crawford, 28-29. 88 Schreuer/(2011), 1280-1281; Tejera, 432; Montanes, 970. 89 Castro-Figueiredo, 17. 90 ICSID-History (1), 172-173. 91 Ex.R1; PO2, ¶7.
13
3. The requisite consent under Article 72 ICSID Convention was achieved after the
critical date
50. Article 72 ICSID Convention compels former Contracting States to adhere to
“obligations....arising out of consent to the jurisdiction of the Centre.” However, all provisions
in the Convention pertaining to the Centre’s jurisdiction are only triggered by reciprocal
consent between the host state and the investor92 – for example, Articles 25, 26, 36, and 46.
Moreover, the drafting history of the ICSID Convention,93 the comments to the 1969 ICSID
Model Clauses,94 and decisions of ICSID tribunals,95 all emphasise that an “obligation” to
arbitrate only arises once a state’s offer to arbitrate has been accepted by the investor. Thus,
“consent” in Article 72 must be understood to mean mutual or perfected consent.96 An
interpretation that accepts a unilateral offer as ‘‘consent’’ for the purposes of Article 72 would
lead to the absurd result that consent can exist before the ‘date of consent’ as defined in
Institution Rules 2(3).97
51. This interpretation can be confirmed by reference to customary rules of treaty interpretation,
which direct that treaties must be interpreted as a whole.98 The general rule99 in Article 25(1)
ICSID Convention prevents one disputing party from unilaterally withdrawing its consent, only
after mutual consent of the disputants has been achieved.100 Thus, the Convention’s provisions
on the “Jurisdiction of the Centre” do not prohibit withdrawal of consent if it has not been
perfected.101 Article 72 ICSID Convention, which was intended to protect irrevocability of
“consents to arbitration already given”,102 must be similarly interpreted to preserve states’
obligations once “mutual consent” has been achieved.103
52. Customary rules of treaty interpretation also allow recourse to the circumstances prevailing
during a treaty’s conclusion.104 While consent given through BITs was not envisaged at the
time of drafting the ICSID Convention,105 offers of arbitration were not deemed to create
92 Schreuer/(2010), 356; Parra/(2012), 158. 93 ICSID-History (1), 274–275; Broches/(1972), 353. 94 Model Clauses (1969), Comment 20. 95 AMT, ¶5.23; SGS (Jurisdiction), ¶31. 96 Fábrica-de-Vidrios, ¶¶274-282; Manciaux/(2012), 222. 97 Schreuer/(2010), 361. 98 Fitzmaurice/Merkouris, 155; Sinclair, 130-131. 99 Mezgravis/González, 15. 100 Vannieuwenhuyse, 126; Plama (Jurisdiction), ¶140. 101 Wick, 261; IBRD: Executive Director’s Report, Article V, Section 23. 102 Fouret, 73-75; ICSID-History (2), 1009. 103 Tzanakopoulos, 82; Hirsch, 50. 104 Greece/Turkey, 32-33; Dörr, 579. 105 Sourgens, 68; Manciaux/(2004), 122.
14
international obligations unless they were accepted.106 In this regard, the drafting history
clarifies the following:
“...a general statement [in favor of submission of claims to the Centre] would not
be binding on the State which had made it until it had been accepted by an
investor. If the State withdraws its unilateral statement by denouncing the
Convention before it has been accepted by any investor, no investor could later
bring a claim before the Centre.”107
53. Based on the foregoing, the term “consent” under Article 72 must be interpreted as mutual or
reciprocal consent. In the present case, Respondent made a standing offer to arbitrate in Article
9(1) of the BITs; such offers becomes binding upon subsequent acceptance.108 Claimants only
accepted this offer on 29 June 2018, nearly six months following Respondent’s notice of
denunciation. However, as explained in Section [I.][A.][2.] of Part II above, such consent
should have been perfected before the notice of denunciation was received by the Centre.
Accordingly, this Tribunal has no jurisdiction.
4. Registration of Claimants’ claim by ICSID Secretary General does not determine
the Tribunal’s jurisdiction
54. The ICSID Secretary General registered Claimants’ Request for Arbitration on 16 July 2018.
Article 36(3) of the Convention compels the Secretary General to register a request unless it is
manifestly outside the Centre’s jurisdiction. This implies that the determination of jurisdiction
by the Secretary General is not final, but only a screening procedure to prevent abuse of the
ICSID Convention.109 It is not an exercise of jurisdictional authority,110 and consequently does
not bind a tribunal in its determination of its own competence.111 This is confirmed by Article
41(1) ICSID Convention, which designates the Tribunal as the sole judge of its competence.112
Thus, the registration of Claimants’ Request for Arbitration does not pre-judge the Tribunal’s
jurisdiction.
106 IBRD: Executive Director’s Report 28; ICSID-History (1), 274–275. 107 ICSID-History (2), 1010. 108 Dolzer/Stevens, 131-132; Lanco (Jurisdiction), ¶33; Broches/(1972), 67. 109 Reed/Paulsson/Blackaby, 76; de-Luca/Sacerdoti, 216. 110 ICSID-History(2), 774; IBRD: Executive Director’s Report ¶20. 111 AMT, ¶5.01. 112 Amerasinghe/(2009), 441.
15
B. CLAIMANTS CANNOT CLAIM A RIGHT TO ICSID ARBITRATION UNDER ARTICLE 9(1) OF
THE BITS
55. Article 9(1) offers investors the option to invoke the Centre’s jurisdiction under the ICSID
Convention. In respect of such clauses, the tribunal in Fábrica de Vidrios noted that:
“ICSID arbitration is only available if the conditions for access to ICSID
arbitration in the investment treaty and the ICSID Convention have been
satisfied.....It is a proposition that follows inexorably from the fact that the BIT
and the ICSID Convention are two separate legal instruments in international
law”.113
56. This is a consequence of the bifurcated or dual consent required for ICSID arbitration.114 Hence,
once a state has withdrawn its consent with immediate effect under Article 72 ICSID
Convention, it cannot be compelled to submit to ICSID Arbitration pursuant to a BIT alone.115
A state’s right to revoke its unilateral consent under Article 72 ICSID Convention cannot be
withdrawn or modified by means of a different treaty.116 To do so would limit Article 72 to a
rather minimal effect, contrary to the express intention of parties under the ICSID
Convention.117 Thus, after the critical date under Article 72 ICSID Convention, Claimants
cannot resort to ICSID arbitration under Article 9(1) of the BITs.
C. CLAIMANTS CANNOT CLAIM A RIGHT TO ICSID ARBITRATION UNDER ARTICLE 9(2) OF
THE BITS
57. Article 9(2) of the BITs preserved Claimants’ right to arbitrate under the ICSID’s Additional
Facility Rules as long as Tyrea did not accede to the ICSID Convention. Interpreted according
to its ordinary meaning,118 the provision ceased to operate upon Tyrea’s ratification of the
Convention on 15 December 2000.119 This interpretation can be confirmed by the circumstances
prevailing at the time of the BITs’ conclusion,120 i.e. 2000-2001. At the time, Tyrea was in the
process of ratifying the ICSID Convention. Thus, Article 9(2) was only intended to provide a
113 Fábrica-de-Vidrios, ¶261. 114 Alexandrov, 36. 115 Voon/Mitchell, 420. 116 Article 43 VCLT. 117 Kownacki, 547; Vannieuwenhuyse, 130. 118 ICJ Serbia/Belgium, 318 ; ICJ Libya/Chad, 22. 119 SOUF, ¶2. 120 ICJ Continued-Presence; 31; Turkey/Iraq-Frontier, 24.
16
transitory dispute settlement mechanism until such ratification was complete. The Venezuela
SRL tribunal gave a similar interpretation to an identical clause in the Venezuela-Barbados
BIT.121
58. Admittedly, Tyrea’s denunciation of the ICSID Convention prevents the arbitration of this
dispute before an international arbitral forum. However, as confirmed by the ICJ in the
Interpretation of Peace Treaties case, policy considerations cannot justify attributing a meaning
to a treaty provision contrary to its letter and spirit.122 A treaty’s object and purpose, the
principle of effet utile, or good faith cannot be used as a source of obligation where none would
otherwise exist.123 Thus, Article 9(2) of the BITs cannot compel Respondent to arbitrate under
the ICSID’s Additional Facility Rules in contravention of the limited undertaking provided
therein.
II. THE TRIBUNAL SHOULD DECLINE JURISDICTION OVER CLAIMANTS’ MULTI-PARTY
CLAIM
59. Claimants have submitted their respective claims as a multi-party dispute arising from two
different BITs. However, the Tribunal has no jurisdiction over this multi-party claim because
Respondent did not consent to multi-party arbitration [A.]. Additionally, the multi-party claim
is inadmissible since there is no linkage between its constituent claims [B.].
A. RESPONDENT HAS NOT CONSENTED TO MULTI-PARTY ARBITRATION
60. Respondent submits that the adjudication of multi-party claim necessitates an assessment of the
Tribunal’s jurisdiction to do so [1.]. Respondent did not consent to multi-party arbitration
through the ICSID Convention or the BITs [2.], and the exercise of inherent powers by the
Tribunal does not allow it to fill jurisdictional gaps [3.]. Thus, the Tribunal must decline its
jurisdiction in the present case.
1. The Tribunal must assess its jurisdiction to adjudicate a multi-party claim
61. Jurisdiction is the legal power of courts or tribunals, defined in their governing agreements, to
take cognizance of and to deal with matters before them.124 Due to the consensual nature of
121 Venezuela-SrL (Jurisdiction), ¶¶83-90. 122 ICJ Peace-Treaties, 229. 123 Cameroon/Nigeria, 297-304; Nicaragua/Honduras, 105-106; US/Iran, ¶58. 124 Steinberger, 49.
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jurisdiction in international law,125 no state can be obliged to submit disputes to international
arbitration without its consent.126 In the case of institutional dispute settlement, the scope of a
state’s consent is analysed at two different levels:
“a) “general jurisdiction” which defines the objective range and outer limits of the ambit
for all cases, according to the constitutive instrument of the organ (e.g. the ICJ Statute),
or the framework convention (e.g. the ICSID Convention;
b) “special jurisdiction” which defines the subjective range and limits of the ambit of
jurisdiction of the organ in a particular case, according to the specific jurisdictional title
bearing the consent of the parties, on the basis of which the case is brought before the
organ”.127
62. Any question of the scope of disputing parties’ consent pertains to the ambit of “special
jurisdiction” of a tribunal.128 Consequently, whether there exists consent to multi-party
arbitration must be decided as a jurisdictional issue.129 The arbitral tribunal has the final
authority to decide this issue in exercise of its Kompetenz-Kompetenz,130 irrespective of the
ICSID Secretary General’s preliminary determination under Article 36(3) ICSID
Convention.131
2. Respondent has not consented to multi-party arbitration under the ICSID
Convention or the BITs
63. A state’s consent must be established through definitive evidence with regard to its existence
and its scope.132 Thus, consent “must always be manifest and unequivocal.”133 Silence or non-
exclusion in the applicable legal instruments cannot be interpreted as the consent of parties,134
by resorting to interpretative tools. 135
125 Eastern-Carelia, p. 27; Congo/Rwanda, ¶88. 126 Williams/Kirk, 87; Greece/UK, 19. 127 Abaclat (Abi-Saab), ¶12. 128 Abaclat (Abi-Saab), ¶126; Shany (2014), 787; Hanquin, 186. 129 Demirkol, 619; Ambiente-Ufficio (Jurisdiction), ¶112; Szczudlik, 83. 130 Delaume, 224. 131 ICSID-Rules (WP2018), 834. 132 Daimler, ¶175; McCarl, 192. 133 Ambiente-Ufficio (Torres), ¶82. 134 Gazzini, 140; Nolan/Sourgens/Carlson, 514. 135 Szczudlik, 96 ; ICJ 1919 Convention, 377.
18
64. The ICSID Convention did not envisage multi-party claims,136 since collective proceedings
were almost non-existent at the time of its conclusion.137 Instead, Article 25 ICSID Convention
contemplates the Centre’s jurisdiction over disputes between a Contracting State and a national
of another Contracting State, without any explicit mention of multi-party proceedings. Pursuant
to Article 31(1) VCLT, a treaty must be interpreted primarily according to “the ordinary
meaning to be given to the terms.”138 The language of Article 25 only demonstrates unequivocal
consent for claims brought by an investor from one Contracting State.
65. Similarly, Article 9 of the BITs refers to disputes between one Contracting Party and a national
of the other Contracting Party concerning obligations “under this Agreement”. A plain reading
of these clauses demonstrates that Tyrea has not consented to joint claims submitted by
investors from different nations arising under multiple agreements. Tyrea’s domestic legislation
on collective claims cannot overcome this limitation, since “decision on jurisdiction within the
ICSID framework is a question to be answered on the basis of international law.”139
66. Thus, the ICSID Convention and the BITs do not demonstrate Respondent’s consent to multi-
party arbitration. In the absence of such manifest consent in the governing instruments,
respondent states must provide another consent or “secondary consent” for these specific kind
of proceedings.140 In the present case, Respondent has not done so and consequently, the
Tribunal must decline jurisdiction.
3. Exercise of inherent powers by the Tribunal does not extend to filling
jurisdictional requirements
67. Article 44 ICSID Convention empowers an arbitral tribunal to decide procedural questions not
covered by the Convention, the Arbitration Rules, or the parties’ agreement. This “inherent
power” must only be exercised “to close any apparent gaps” in a specific proceeding.141 This
power was not granted to allow tribunals to adopt a full set of procedural rules governing a
specific kind of proceeding or fill jurisdictional requirements such as the lack of consent.142
Consequently, it is sparingly exercised by ICSID tribunals in matters such as admission of
136 Giroud/Moss, 499. 137 Gazzini, 138; Szczudlik, 95. 138 ICJ Serbia/Belgium, 318 ; ICJ Libya/Chad, 22. 139 Ambiente-Ufficio (Jurisdiction), ¶153. 140 Abaclat (Abi-Saab), ¶177. 141 Schreuer/(2011), 688. 142 Bjorklund/(2019), 23.
19
amicus curia briefs143 or granting a stay on proceedings in recognition of a forum selection
clause.144
68. Thus, Claimants cannot rely on Article 44 ICSID Convention to overcome Tyrea’s lack of
consent to multi-party arbitration. In any case, even if the Tribunal were to use its inherent
powers to conduct a multi-party proceeding, the consequent introduction of new rules of
procedure145 in existing arbitration rules for this purpose requires further consent of both
parties,146 which Respondent does not give.
B. THE CLAIMS ARE NOT CLOSELY CONNECTED
69. Respondent states cannot be placed under undue burden to defend against claims that differ
materially in a single proceeding.147 Furthermore, multi-party claims are only admitted when
the joint adjudication of like claims would lead to procedural efficiency.148 Thus, the
admissibility of a multi-party claim requires homogeneity in the constituent claims.149 This
primarily depends on whether a single dispute exists [1.]. Additionally, the tribunal should
assess whether the investment is the same or was made jointly by the claimants [2.]; and
whether the investors or the claims are affiliated [3.].150 The present multi-party claim does not
meet these criteria.
1. The multi-party claim does not arise from a single dispute
70. Under the ICSID Convention,151 Arbitration Rules,152 and Institution Rules,153 an ICSID
tribunal only has jurisdiction over “a” dispute. Thus, the existence of a single dispute is essential
before any claim for a multi-party arbitration is accepted.154 For a single dispute to exist, “the
interest represented on each side of the dispute has to be in all essential respects identical for
143 Suez (Order), ¶¶10, 16. 144 SGS (Jurisdiction), ¶173. 145 Radovic, 17; Szczudlik, 98. 146 Abaclat (Jurisdiction), ¶522; Abaclat (Abi-Saab), ¶194; Radovic, 14. 147 IDI (Equality-of-Parties), 484; Martinez/Pekar, 362. 148 Ambiente-Ufficio (Jurisdiction), ¶80. 149 Abaclat (Jurisdiction), ¶¶540-543. 150 ICSID-Rules (WP2018), 834; Ambiente-Ufficio (Jurisdiction), ¶161. 151 Article 25 ICSID Convention. 152 Rule 1 ICSID Arbitration Rules. 153 Rule 2 ICSID Institution Rules. 154 Alemanni (Jurisdiction), ¶292; Alemanni (Thomas), ¶13.
20
all of those involved on that side of the dispute.”155 This necessitates that the dispute must arise
from identical standards of protection afforded to investors in the underlying BITs.156
71. These standards of protection must be interpreted according to their object and purpose,
reflected in the preambles of the BITs.157 In this light, the Lauder tribunal used the preamble of
the BIT to determine the context of the FET standard.158 Moreover, the CME tribunal
recognised that the rights protected by two treaties with similar or identical provisions may be
different and not yield the same results as they may have different contexts, object and purpose,
and travaux préparatoires.159
72. In the present case, both BITs contain distinct preambles. Pertinently, only the Tyrea-Kitoa BIT
links the subject matter of the investments, i.e. technology, with the FET standard. This will
occasion differing interpretations of the FET standard, a standard in dispute, under the two
BITs. Hence, a single dispute contemplating identical rights does not exist.
2. Claimants’ investments are not the same and were not made jointly
73. The investments in the present dispute were made by Friendslook, Whistler, and SpeakUp, each
of whom operates a distinct social media network and separate local offices in Tyrea.160 Further,
they did not make these investments jointly: FriendsLook established its operations in Tyrea in
January 2015, whereas Whistler and SpeakUp did so in summer 2015.161 Thus, the investments
were not the same or made jointly by Claimants.
3. Claimants or their claims are not affiliated
74. Arbitral tribunals may proceed with a multi-party claim in the event of investors affiliated
through family ties,162 joint corporate structures,163 unrelated joint venture partners,164 or as
shareholders in the same local company.165 However, the present claim does not envisage an
analogous situation. The three investors are distinct legal entities incorporated in different
155 Alemanni (Jurisdiction), ¶292; IDI (Equality-of-Parties), 484. 156 Kabra, 453. 157 Bayindir, ¶155. 158 Lauder, ¶292. 159 CME (Final-Award), ¶433 160 SOUF, ¶¶7-9. 161 SOUF, ¶6. 162 Bernhard-Pezold, ¶¶118ff. 163 Noble-Energy (Jurisdiction), ¶¶188ff. 164 Suez (Liability), ¶¶1ff. 165 Goetz, ¶89.
21
countries,166 with their own businesses and customers.167 Additionally, they do not have a
common parent company,168 or a common majority shareholding.169 Hence, they cannot be
considered affiliated.
166 SOUF, ¶¶7-9. 167 SOUF, ¶¶7-9. 168 Ex.C7. 169 PO2, ¶9.
22
PART III: MERITS
75. Claimants commenced their operations in Tyrea in 2015,170 soon after the country emerged
from a civil war.171 However, ethnic tensions between communities continued to plague Tyrea
in the years to come.172 Respondent promulgated Amending Law 2018 in this context to compel
social media platforms in its territory to employ content filtering algorithms and collect user
data.173 Given the worsening situation, it was forced to move forward the deadline for
compliance with this law.174 Claimants failed to comply with the aforesaid requirements within
the stipulated deadline – prompting the Blocking Ordinances against their platforms.175
76. Respondent submits that its “measures” – cumulatively, the promulgation of Amending Law
2018, the shortening of the deadline for its compliance, and the Blocking Ordinances – are a
legitimate exercise of its regulatory powers [I.]. Alternatively, its measures do not entail a
breach of Articles 6 or 3(1) of the BITs [II.].
I. RESPONDENT’S MEASURES CONSTITUTE A LEGITIMATE EXERCISE OF ITS POLICE
POWERS
77. Unless expressly stipulated by contracting parties, bilateral investment treaties do not modify
rights of a state arising from customary international law,176 such as its regulatory power to
adapt its legal order as necessary.177 Thus, states may lawfully exercise regulatory powers, even
if it affects the investor’s interests.178 This is known as the “police powers” doctrine.179
78. An exercise of police powers must be aimed at securing a public purpose [A.], constitute a bona
fide exercise of a state’s sovereign power [B.], and be non-discriminatory [C.].180 Moreover,
the means employed to achieve the public purpose must be proportionate to their purported
170 SOUF, ¶6. 171 SOUF, ¶1. 172 SOUF, ¶¶13-14. 173 Ex.C2. 174 Ex.C3. 175 Ex.C4. 176 El-Hage, 459: Montt, 232. 177 Total (Liability), ¶115. 178 Brownlie, 532. 179 Chemtura, ¶266: Marfin, ¶838. 180 Saluka (Partial-Award), ¶255; Methanex, ¶7; Continental-Casualty, ¶276; Marvin-Feldman, ¶103; Philip-
Morris, ¶307; SD-Myers (Partial-Award), ¶281.
23
aim [D.].181 Respondent’s measures meet the aforesaid criteria and are consequently allow a
derogation from Articles 3(1) and 6 of the BITs.
A. RESPONDENT HAS EXERCISED ITS POLICE POWERS FOR A PUBLIC PURPOSE
79. Contrary to Claimants’ allegations,182 Tyrea’s measures were not intended to block content that
is opposed to its perception of morality, but rather to put an end to the rampant violence
spreading across the country.183 International law accords Tyrea the margin of appreciation to
take such regulatory measures [1.]. Alternatively, the balance of probabilities in this regard is
also in Tyrea’s favour [2.].
1. Respondent is afforded the ‘margin of appreciation’ to take measures in pursuit
of a public purpose
80. Regulatory measures are designed to pursue the general welfare of a state,184 including political,
economic, or social ends.185 Since the state is best equipped to secure public welfare in its
territory,186 it is afforded the right to determine what constitutes a legitimate public interest
warranting regulatory action.187 Thus, a state may reasonably exercise its margin of appreciation
in this regard.188 The actions of a state premised on a public purpose are prima facie valid in
international law.189
81. In the present case, extremist groups saw Claimants’ platforms as ideal for dissemination of
hate speech and promotion of ethnic violence in Tyrea,190 using fake profiles and spreading
false information.191 These actions have aggravated tensions in Tyrea.192 Thus, Tyrea must be
afforded the margin of appreciation to determine the measures necessary to prevent the same in
public interest. This Tribunal should defer to its reasonable judgment and refrain from
reviewing the same.
181 Tecmed, ¶122. 182 Request for Arbitration, ¶13. 183 SOUF, ¶19. 184 Saluka (Partial-Award), ¶255. 185 Saluka (Partial-Award), ¶259; OECD: Protection of Property, 18. 186 Benvenisti, 843; Shany (2005), 907. 187 Maffezini, ¶67; Higgins, 331. 188 Glamis, ¶¶625, 803–805; Saluka (Partial-Award), ¶272. 189 James, ¶47; Pressos Compania, ¶37. 190 SOUF, ¶12; Ex.R3. 191 SOUF, ¶13. 192 SOUF, ¶13.
24
2. In any event, Respondent’s actions were motivated by a ‘demonstrable’ public
purpose
82. Arguably, an arbitral tribunal may evaluate whether a host state’s actions were set to achieve a
genuine public interest,193 independent of private gain194 and political ambitions.195 Here, the
veracity of a fact, including the genuineness of a public interest,196 must be assessed through a
balance of probabilities.197 The evidence adduced by both parties on the issue is evaluated to
determine the assertion that is more likely to be true.198
83. Starting in 2016, extremist groups used Claimants’ platforms to promote ethnic violence in
Tyrea,199 through fake profiles and false information.200 Given the history of violence between
Tyrea’s Minyar and Tatyar communities,201 the situation escalated rapidly.202 In 2017, violent
altercations between these communities were reported for the first time since the 2012 Civil
war.203 By January 2018, the casualties ran into hundreds.204 Respondent acted in this context
to compel social media platforms operating in its territory to employ content filtering algorithms
and collect user data.205 Even following the promulgation of Amending Law 2018, Tyrean
police was unable to control the increasing rampage,206 necessitating the shortened deadline for
compliance with this law.
84. Thus, Respondent’s measures were prompted by a demonstrable need to secure public safety
and welfare in Tyrea. Its exhibits confirm and corroborate the facts asserted in its Response,
tilting the balance of probabilities in its favour.
B. RESPONDENT EXERCISED ITS POLICE POWERS IN GOOD FAITH
85. Any authority exercising its discretionary sovereign power must not abuse its rights in the
process.207 Thus, sovereign actions must be taken in good faith to constitute a legitimate
193 ADC, ¶432. 194 UNCTAD: Expropriation, 34. 195 BP-Exploration, 317. 196 Methanex, ¶20. 197 Kardassopoulos, ¶229; Bernhard-Pezold, ¶177; Amerasinghe/(2005), 242. 198 Sourgens/Duggal/Laird, 80; O’Malley, 208. 199 SOUF, ¶12; Ex.R3. 200 SOUF, ¶13. 201 SOUF, ¶1. 202 Ex.R2. 203 SOUF, ¶14. 204 SOUF, ¶14. 205 Ex.C2. 206 SOUF, ¶19. 207 Saipem, ¶160.
25
exercise of police powers.208 In this regard, the Occidental tribunal assessed whether the host
state’s actions were based on objective reasons and facts.209
86. In violation of the aforesaid requirements of Amending Law 2018, Claimants implemented a
defective algorithm incapable of screening hate speech on social media.210 Further, they also
refused to block unverified user accounts solely due to the anticipated unpopularity of this
measure, despite having the means to do so.211 In light of these violations, Respondent was
forced to block Claimants’ platforms in its territory by means of the Blocking Ordinances.212
The foregoing indicates that Respondent’s measures were taken in good faith, based on
objective and reasoned welfare concerns.
C. RESPONDENT’S MEASURES WERE NON-DISCRIMINATORY
87. To establish discrimination, the investor must prove that it was subjected to a different treatment
in comparable circumstances without reasonable justification, typically based on its nationality
or similar characteristics.213 Here, a comparable enterprise must be used to contrast the
treatment meted out to the foreign investor.214 Differential treatment must be assessed between
“directly competing” investors,215 even if they broadly operate in the same markets.216
88. In their Request for Arbitration,217 Claimants refer to the continued operation of domestic social
media platforms, namely TruthSeeker and Wink, in Tyrea. However, the different treatment of
these websites cannot be considered discriminatory. The point of comparison between different
social media platforms can only be their functions and popularity. Claimants’ websites operate
as multi-functional global social networks.218 Conversely, both Wink and TruthSeeker offer
limited functions to their users: while Wink is merely a local messenger application,
TruthSeeker is solely intended to dispel the spread of false information.219
208 Fireman’s-Fund ¶¶176-177. 209 Occidental, ¶¶162–163. 210 SOUF, ¶19. 211 SOUF, ¶20. 212 Ex.C4. 213 Crystallex, ¶715; Pope-&-Talbot, ¶75. 214 Crystallex, ¶715. 215 Bjorklund/(2018), ¶¶21.22ff; Pope-&-Talbot, ¶¶77ff. 216 ADF, ¶¶155-156; Loewen, ¶139; Champion-Trading, ¶¶154ff. 217 Request for Arbitration, ¶12. 218 SOUF, ¶¶7-9. 219 SOUF, ¶13.
26
89. Moreover, Claimants’ platforms were the most influential in Tyrea,220 their reach ranging from
27-30 million people.221 In fact, FriendsLook has almost five time more users than
TruthSeeker.222 Neither TruthSeeker nor Wink is popularly used for spreading hate speech and
promoting violence.223 Even after Claimants’ platforms were blocked, the popularity of these
domestic websites did not increase substantially.224
90. Therefore, the domestic platforms in Tyrea cannot be considered comparable to Claimants in
their functions or popularity. In any case, despite the difference in these platforms, Respondent
has also initiated criminal proceedings concerning the imposition of fine on Tyrean
platforms,225 in accordance with Amending Law 2018.226 Consequently, its measures cannot be
catalogued as discriminatory.
D. RESPONDENT’S MEASURES WERE PROPORTIONAL TO THEIR AIM
91. To be proportionate, a measure must achieve a balance or a reasonable relationship between the
means employed by the host state and the aim sought,227 even if the investor’s assets are
incidentally affected in the process.228 In ascertaining the reasonable relationship, the need to
diffuse a serious emergency, social crisis or public unrest must be taken into account.229
92. In casu, Respondent tried to control the outbreak of hate speech and communal violence by
implementing Amending Law 2018.230 This attempt did not succeed, since Claimants did not
comply with the requirements set therein.231 Given that the violence across Tyrea was
worsening and the police was not able to respond to the rampage,232 Respondent had to block
the means used by extremist groups to effectively disseminate their ideas. This necessitated the
blocking of Claimants’ platforms, which were the most commonly used and influential
platforms in Tyrea,233 synonymous to the Internet itself.234 Therefore, there is clear relationship
220 Ex.R2. 221 Ex.R3. 222 SOUF, ¶22. 223 SOUF, ¶22. 224 PO2, ¶16. 225 PO3, ¶11. 226 Ex.C2. 227 Azurix, ¶311; LG&E (Liability), ¶195. 228 Tecmed, ¶139; ELSI, 21-22, 40-41. 229 Tecmed, ¶133. 230 Ex.C2. 231 SOUF, ¶¶19-20. 232 SOUF, ¶19. 233 Ex.R2. 234 SOUF, ¶10.
27
between Respondent’s measures and their intended objective to secure internal peace. Any
effect on Claimants investments and revenues in the process is purely incidental.
II. ALTERNATIVELY, RESPONDENT DID NOT BREACH ITS OBLIGATIONS UNDER THE BITS
93. Articles 6 and 3(1) of the BITs prescribe the standards of treatment that Tyrea affords to covered
investors and their investments. Should the Tribunal find that Respondent’s measures do not
constitute a valid exercise of its police powers, its measures did not breach Article 6 [A.] or
Article 3(1) [B.].
A. RESPONDENT’S MEASURES DID NOT BREACH ARTICLE 6 OF THE BITS
94. In Article 6 of the BITs, Tyrea undertakes to refrain from directly or indirectly expropriating
covered investments, unless the requirements in the Article are met. In the present case, it has
acted consistently with this undertaking.
95. Direct expropriation entails an actual transfer of property, especially ownership rights,235 to the
host state of an investment.236 However, the blocking of Claimants’ websites does not entail
any transfer of tangible or intangible property rights to Respondent. Hence, it does not amount
to a direct expropriation.
96. Indirect expropriation refers to measures that have the effect of substantially depriving
investors of the economic value of their property, approaching total impairment.237 Thus, the
loss of benefits or expected profits alone does not amount to an expropriation,238 especially if
the investor remains in control of its investments.239 Expropriatory measures, which destroy the
investment in question,240 must be distinguished from a mere restriction or regulation of the
right to use an investment.241 Interference with an investment’s expected benefits must be
equivalent in intensity, seriousness, and duration of effects to an outright seizure of property.242
97. In the present case, the restriction on Claimants’ social media platforms does not entail a
complete erosion of their investments. The Blocking Ordinances do not permanently restrict
235 National-Grid, ¶145; El-Paso, ¶265. 236 Enron, ¶243; Sempra, ¶280; BG-Group, ¶259. 237 Metalclad, ¶103; Lauder, ¶200; Fireman’s-Fund ¶176; Occidental, ¶89; Telenor, ¶¶64-65; Waste-Management,
¶160. 238 Waste-Management, ¶159; LG&E (Liability), ¶191. 239 Pope-&-Talbot (Interim-Award), ¶102; Chemtura, ¶247; Enron, ¶245; BG-Group, ¶271; Roussalis, ¶¶355-357. 240 Corn-Products (Responsibility), ¶93. 241 SD-Myers (Partial-Award), ¶¶283-287; Pope-&-Talbot, ¶93; BG-Group, ¶268; Impregilo, ¶270. 242 ECE-Projektmanagement, ¶4.813.
28
market access to Claimants.243 In fact, Amending Law 2018 specifies that non-compliance with
this law may entail a permanent or temporary blocking “depending on the gravity of, and
possibility to, cure the particular transgression”. 244 The continued blocking of Claimants’
platforms is attributable to their own negligence, since they decided to cease their efforts to
comply with this law.245
98. Further, the investment must have suffered substantial economic erosion as a whole to
constitute expropriation, especially when rights arising from the investment cannot be
dissociated from it,246 or a significant part of it.247 Here, Claimants’ investments in Tyrea
encompass their social media networks as well as their physical infrastructure, which includes
their offices and equipment.248 By their own admission, these may be used as regional head
offices to expand their operations to neighbouring countries and earn profits.249 Thus, Claimants
retain control over a significant part of their investments.
B. RESPONDENT HAS NOT VIOLATED ITS FET OBLIGATION UNDER ARTICLE 3(1) OF THE BITS
99. Under both customary and autonomous interpretations of the FET standard,250 a breach of FET
depends on the reasonableness and proportionality of a state’s measures in the specific
circumstances of the case.251 Therefore, the tribunal must balance the legal interests of an
investor against countervailing factors such as:
“- the State’s sovereign right to pass legislation and to adopt decisions for the
protection of its public interests, especially if they do not provoke a
disproportionate impact on foreign investors;
- the legitimate expectations of the investor, at the time he made his investment;
- the investor’s duty to perform an investigation before effecting the investment;
243 Ex.C4. 244 Ex.C2. 245 PO2 ¶4; SOUF, ¶20. 246 Telenor, ¶67; LG&E (Liability), ¶198. 247 Noble-Ventures, ¶216. 248 Ex.C7, 15. 249 Ex.C7, 18. 250 El-Paso, ¶¶330ff; Saluka (Partial-Award), ¶291; Rumeli, ¶611; Duke-Energy, ¶337. 251 Noble-Ventures, ¶181; Waste-Management, ¶99; Continental-Casualty, ¶255. Oxus, ¶313: El-Paso, ¶373;
Electrabel, ¶7.77.
29
- the investor’s conduct in the host country.”252
100. As discussed in Section [I.] of Part III, Respondent exercised its right to regulate its internal
affairs in a non-discriminatory and proportionate manner. Additionally, there was no violation
of legitimate expectations [1.]; Claimants were aware or should have been aware of the ethnic
tensions in Tyrea [2.]; and deliberately decided to breach Amending Law 2018 [3.].
1. Respondent’s conduct did not give rise to legitimate expectations
101. Admittedly, the inherent guarantee in the FET standard to ensure transparency in a legal
framework compels the respect for investors’ legitimate expectations.253 However, as held by
the Parkerings tribunal, investors cannot expect domestic laws to remain stagnant over time.254
Therefore, FET, or its “legitimate expectations” component, does not imply that the legal order
of a host state will remain unchanged.255 Immutability of a legal order or similar protections are
granted through express stabilisation clauses, not by means of FET.256
102. On the contrary, legitimate expectations only arise from specific assurances or representations
made by a state, which the investor takes into account to make its investment.257 These refer to
explicit promises to potential investors,258 intended to confer legal rights.259 However, policy
statements, for instances from a political representative of the host state, to promote and
encourage investment do not constitute “specific assurances”.260
103. In the present case, Claimants cannot demonstrate the existence of such specific
representations: first, the official statement by the Tyrean Parliament in 2013 only sought to
highlight Tyrea’s new legal framework liberalising the Internet for prominent international
players, including but not limited to Claimants.261 Second, at a 2014 Conference, Respondent
committed itself to provide new Internet possibilities to the Tyrean people, not to Claimants.262
Third, no stabilisation clause is contemplated in the BITs. Therefore, Respondent submits that
it never made specific assurances giving rise to any expectations of stagnation in its legal
252 Lemire (Jurisdiction/Liability), ¶285. 253 El-Paso, ¶348; Saluka (Partial-Award), ¶302. 254 Parkerings, ¶332. 255 El-Paso, ¶368; Continental-Casualty, ¶258. 256 Impregilo, ¶¶290-291; Micula, ¶529; Charanne, ¶490; Total (Liability), ¶¶117, 429. 257 Glamis, ¶¶621-622; Parkerings, ¶331; Methanex, ¶10. 258 Parkerings, ¶331. 259 Frontier-Petroleum, ¶468. 260 PSEG, ¶241; Continental-Casualty, ¶395; El-Paso, ¶392. 261 SOUF, ¶3. 262 SOUF, ¶5.
30
framework. Its general statements concerning freedom of the Internet did not intend to confer
any legal rights upon Claimants.
104. Further, under Article 2 of the BITs, Respondent has undertaken to protect foreign investments
“within the framework of its laws and regulations”. Article 17 of Tyrea’s President Act allows
the President to amend operative decrees in the country.263 Thus, the shortening of the deadline
for compliance with Amending Law 2018 vide the Second Decree is not a breach of Claimants’
rights under the BIT.
2. Claimants should have taken Respondent’s history of ethnic violence into account
105. An investor’s legitimate expectations from investing in a developed economy would differ from
those arising from an economy in transition.264 Therefore, investors must assess the different
risks or potential pitfalls of investing in a certain country before making their investments.265
Moreover, they must assume risks such as disturbances, strikes or even revolutions associated
with such countries, which might affect their property rights.266
106. Claimants were aware or should have been aware of the ethnic violence that has tainted
Respondent’s history. Tyrea emerged from a civil war in 2012, caused by tensions between the
major ethnicities in the country.267 It has been known to restrict the freedom of media in the
face of political unrest.268 By investing in this transitioning economy, Claimants assumed the
economic and political risks associated with the same.
3. Claimants deliberately decided to breach Amending Law 2018
107. A claim for a breach of FET should not arise from harm suffered by the investor due to its own
conduct.269 Accordingly, the investor’s conduct must be analysed to determine the
responsibility of the state and, eventually, the magnitude of its wrongdoing.270 In this regard,
the Maffezini tribunal frowned upon the investor’s wilful disregard of national law to avoid
263 Ex.C3. 264 El-Paso, ¶¶359ff. 265 Muchlinski, 542. 266 Starrett-Housing (Interlocutory-Award), ¶73. 267 SOUF, ¶1. 268 SOUF, ¶12. 269 Muchlinski, 547. 270 McLachlan/Shore/Weiniger, ¶7.239.
31
additional costs or technical difficulties.271 This notion has also been crystallised in Article 39
of the ILC’s Articles on State Responsibility.
108. In casu, Claimants did not comply with the requirements of Amending Law 2018. Their
algorithm failed to screen and block the promotion of hate speech or ethnic violence.272 No
attempts were made to rectify the same.273 Further, despite having a user identification
mechanism in place, Claimants refused to block unverified accounts due to the perceived
unpopularity of this action.274 Thus, their wilful disregard of Amending Law 2018 cannot entail
Tyrea’s responsibility for a breach of Article 3(1) of the BITs.
271 Maffezini, ¶¶70-71. 272 SOUF, ¶19. 273 PO2, ¶4. 274 SOUF, ¶20.
32
PART IV: DAMAGES
109. Should the Tribunal find that Respondent has breached its obligations under the BITs,
Respondent disputes the Damages Report submitted by Claimants.275 The report contains a
calculation of direct damages, lost profits in Tyrea, and lost profits from the loss of opportunity
for market expansion. This is calculated using the DCF method, with a discount rate of 5%.
However, such calculation is erroneous and speculative [I.]. The only appropriate method for
the calculation of damages in this case is the asset-based approach [II.].
I. CLAIMANTS’ CALCULATION OF DAMAGES IS ERRONEOUS AND SPECULATIVE
110. First, the lost profits for the failed market expansion claimed in the Damages Report are not a
consequence of Respondent’s measures [A.]; second, the use of the DCF method is not
appropriate in the present case [B.]; third, Claimants’ request for both DCF valuation and direct
damages leads to double recovery [C.]; and fourth, the Damages Report does not take account
of Claimants’ contributory fault [D.]. Thus, the Damages Report is erroneous and speculative.
A. THERE IS NO CAUSAL LINK BETWEEN RESPONDENT’S MEASURES AND THE ALLEGED LOST
PROFITS FOR CLAIMANTS’ FAILED MARKET EXPANSION
111. Pursuant to Article 31 ILC Articles on State Responsibility, the obligation to tender full
reparation arises from injury caused by the illegal act of a state. A state’s obligation to
compensate is not an automatic consequence of finding a breach of international law,276 but is
conditional upon the existence of a causal link between the wrongful act and the injury
suffered.277
112. In the context of investor-state relations, a state bears responsibility for injuries traceable to a
breach of the applicable BIT, rather than actions of third parties..278 In the Damages Report,
Claimants request lost profits for their failure to expand into Alcadia and Larnacia,279 attributing
this loss to Respondent’s Blocking Ordinances. However, their Request does not adduce any
evidence in furtherance of this allegation. Thus, the lost opportunity for market expansion
cannot be traced back to Respondent’s alleged breach of the BITs. In fact, given that Alcadia
275 Ex.C7. 276 Pearsall/Heath, 89. 277 Ripinsky/Williams, 135; Pey-Casado (Resubmission-Award), ¶¶217-218. 278 Okongwu/McHugh, 265; Pearsall/Heath, 90. 279 Ex.C7.
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and Larnacia have the same ethnic population as Tyrea,280 it is likely that Claimants were
stopped by these countries from expanding into their territories to prevent the misuse of social
media for the promotion of ethnic violence. Given the absence of any direct or proximate link
between the lost profits and the breach of a BIT,281 Claimants’ request for lost profits should be
dismissed.
B. CLAIMANTS’ USE OF THE DCF METHOD OF VALUATION IS NOT APPROPRIATE
113. The DCF method involves a calculation of projected future cash flows with the application of
a discount rate that accounts for certain risk factors.282 Even with the calculation of a discount
rate, such projection is at best speculative, since future profits are more vulnerable to
commercial and political risks than tangible assets.283
114. In this light, arbitral tribunals are reluctant to award damages based on the DCF method, given
its inherent uncertainty.284 However, if this Tribunal decides otherwise, Claimants must satisfy
most or all the pre-conditions for application of the DCF method,285 which they have failed to
do. These pre-conditions are as follows:
- The enterprise must be a going concern [1.];
- There must be reliable projections of its future cash flow in the form of a
business plan [2.];
- The price at which the enterprise will be able to sell its products or services can
be determined with reasonable certainty:
- The business plan can be financed with self-generated cash;
- It should be possible to calculate a meaningful discount rate including a
reasonable country risk premium that represents the political risk in the host
state [3.];
280 SOUF, ¶1. 281 Bjorklund/(2009), 449; Wälde/Sabahi, 1094. 282 Rubins/Sinha/Roberts, 186. 283 Article 36, Commentary 27 DARSIWA; Amoco-IUSCT, ¶238; Wälde/Sabahi, 1074. 284 Khan-Resources, ¶¶392-393; Metalclad, ¶120; Autopista-Concesionada, ¶362. 285 Rusoro, ¶¶758-760; OI-European-Group, ¶660; Khan-Resources, ¶392.
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- The enterprise is active in a sector with low regulatory pressure, or if the
regulatory pressure is high, its scope and effects must be predictable [4.].286
1. Claimants are not going concerns in Tyrea
115. The World Bank describes a going concern as an enterprise with income-producing assets that
has been in operation for a sufficient period to generate the data required for the calculation of
future income.287 Without an established performance record of several years, its financial
expectations cannot be capitalised,288 rendering projections of future cash flows uncertain and
speculative.289 In this light, tribunals do not consider enterprises with less than three years of
financial performance as going concerns.290
116. In the present case, Claimants only have evidence of income revenues for the year 2016 and
2017.291 This cannot constitute the requisite historical record of financial performance to
characterise Claimants as going concerns.
2. Claimants have not furnished a business plan in support of their projections of future
cash flow
117. To prove reliable projections, there should be a detailed business plan prepared in tempore
insuspecto, i.e. at a time without suspicion, by the company officers and verified by an impartial
expert.292 This constitutes the necessary evidence for a Tribunal to assess the accuracy of an
investor’s forecast of its future performance.293 In this light, the CMS tribunal noted that while
internal business plans relied in a claimant’s expert report could be a starting point of valuation,
these business plans must be checked for assumptions.294
118. In the present case, Claimants have not submitted any business plans produced by their
company officers to support their projected cash flow.295 Moreover, the Damages Report also
relies exclusively on the internal documents of Claimants,296 without giving this Tribunal an
286 Rusoro, ¶759. 287 World Bank Guidelines, Guideline IV(6). 288 Wälde/Sabahi, 1079; Wena-Hotels, ¶123. 289 Tenaris, ¶527; Metalclad, ¶120; Autopista-Concesionada, ¶362. 290 Tecmed, ¶186; SPP, ¶188; Tenaris, ¶524. 291 Ex.C7. 292 Rusoro, ¶759; AAPL, ¶106. 293 Marboe, ¶5.10. 294 CMS, ¶¶422, 439ff. 295 PO2, ¶2. 296 Ex.C7.
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opportunity to evaluate the same. Consequently, the reliability of their projections is speculative
at best.
119. The calculations in the Damages Report also reflect the unreliability of Claimants’ projections.
In their revenue projections for 2018, Claimants only consider the costs incurred by their
operations for the two months before the blocking of their platforms.297 Thus, their profits for
2018 have been inflated by subtracting the costs for two months from the projected revenues
for the entire year.298 This calculation is unfounded, since the projected profits for 2018 must
account for the corresponding operating costs for the full year.
3. The discount rate used in the Damages Report does not reflect the country risk in
Tyrea
120. The DCF method determines the value of a business by projecting future net cash flows and
discounting them to their present value.299 The discount rate used for this purpose must account
for several variables such as: the expected rate of inflation; the “real rate of interest” that reflects
the value of money in hand as compared to receipts in the future; and the rate of risk involved
in the transaction in light of all relevant circumstances such as market risk and country risk,
amongst others.300 Claimants’ Damages Report applies a discount rate of 5%,301 to account for
these variables.302
121. In the calculation of a discount rate, “country risk” refers to the risk associated with investing
in a country, especially developing or emerging economies.303 The risk of doing business in
such economies is elevated due to increased political, economic, and social concerns.304
Accordingly, the Tidewater tribunal noted that in determining the value of an investment, due
consideration must be given to the risk associated with investing in a specific country since it
might affect the prospects of the likely cash flow of the business going forward.305 This country
risk “includes all possible damaging actions or factors for the business of foreign firms that
297 Ex.C7. 298 Ex.C7. 299 Gotanda, 91. 300 Starrett-Housing, ¶336; Ciupagea, 246. 301 Ex.C7. 302 PO3, ¶1. 303 Marboe, ¶25.53. 304 Schumacher/Klönne, 222. 305 Tidewater, ¶¶186-190; Damodaran, 3ff.
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emanate from any social group, political authority, or governmental body in the host
country.”306
122. In the present case, Tyrea is a country that recently emerged from a civil war and is still
recovering from its political and economic aftermath.307 In the past, its temporary shift to a
more liberal economy had suffered due to tensions within its territory.308 Thus, it is a
transitioning economy that is experimenting with its shift to democratic governance. Investing
in this country entails high political and economic risks for any potential investor. Tribunals
have applied a minimum discount rate ranging from 10%-15%, given the inherent risk of
investing in unstable developing economies,309 even when faced with country risk premiums as
low as 4%.310 This is to prevent the unjust enrichment of investors in developing countries by
treating them like investors in stable, developed economies.311 Thus, the discount rate of 5%
used by Claimants is too low.
4. Claimants operate in a sector with high regulatory pressure
123. To justify the use of the DCF method, an enterprise should be operating in a sector with low
regulatory pressure.312 In the present case, Respondent first attempted the liberalisation of its
media laws in 2013, in the immediate aftermath of a civil war in 2012. It has recently moved
from a military dictatorship to a democracy, slowly loosening its control over freedom of
expression.313 Further, it has been known to restrict the freedom of media in the face of political
unrest in the past.314 With tensions between two major ethnicities in its territory still existing,315
it can be reasonably expected that Internet in Tyrea would be subject to high regulatory
pressure. In such volatile situations, the use of the DCF method is not appropriate.
C. CLAIMANTS CANNOT SIMULTANEOUSLY USE THE DCF METHOD AND REQUEST “DIRECT
DAMAGES”
124. Along with lost profits calculated using the DCF method, Claimants request the entire cost
incurred for investing in Tyrea as “Direct Damages”. However, the DCF method calculates the
306 Bouchet/Clark/Groslambert, 17. 307 SOUF, ¶1. 308 SOUF, ¶2. 309 CMS, ¶411; Alpha-Projektholding, ¶483. 310 Gold-Reserve, ¶842. 311 AMT, ¶7.15. 312 Rusoro, ¶¶758-760 313 SOUF, ¶¶1, 3. 314 SOUF, ¶12. 315 SOUF, ¶1.
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net profit that an investor would receive in the future, after recovering its invested capital and
operational expenses.316 Thus, “sunk costs” cannot be claimed while using the DCF method
because it would lead to double counting of invested capital.317 By requesting both lost profits
and sunk costs, Claimants are attempting double recovery for the value of their investments,
which is prohibited under customary international law.318
D. DAMAGES REPORT DOES NOT TAKE ACCOUNT OF CLAIMANTS’ CONTRIBUTORY FAULT
125. Customary international law provides that in the assessment of reparation, a claimant’s
contribution to the injury, whether deliberate or negligent, must be taken into consideration in
the calculation of the quantum of damages.319 The tribunal in Occidental held that although the
cancellation of the claimant’s exploration rights by Ecuador was an unlawful expropriation, this
cancellation was provoked by the claimant’s failure to obtain necessary governmental
approvals; therefore, the award was reduced by 25%.320
126. In the present case, Claimants knowingly failed to comply fully with Amending Law 2018 by
refusing to block unverified user accounts, although the user identification mechanism was
implemented in due time.321 This amounts to a wilful contribution to the alleged injury suffered.
127. Moreover, after the occurrence of an alleged injury, the injured party must take reasonable steps
to reduce its losses.322 Where such steps have not been taken even if it is reasonable to do so,
the injured party cannot expect to receive full compensation for its losses.323 This customary
principle is applicable in the calculation of compensation, irrespective of whether it is expressly
provided in the treaty.324
128. In casu, Claimants made no efforts to comply with Amending Law 2018 after their sites were
blocked.325 This reasonable step could have been taken to mitigate its losses, since curing the
possible transgression could have led to the reinstatement of its operational rights under
316 Kantor, 198-199; Macgregor/Maclay, 264; Siemens, ¶355; Suez, ¶104; Christie/Ogut/Turtoi, 239-240. 317 Macgregor/Maclay, 262; Articler 36, Commentary 26 DARSIWA. 318 Chorzów Factory, 59; Sabahi/Duggal/Birch, 343. 319 Article 39 DARSIWA; Gemplus, ¶11.12, RosInvestCo, ¶¶634-635. 320 Occidental, ¶679. 321 SOUF, ¶20. 322 Article 31, Commentary 11 DARSIWA; AIG, ¶10.6.4. 323 CME (Final-Award), ¶482. 324 Middle-East-Cement, ¶167. 325 PO2, ¶4.
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Amending Law 2018.326 However, the Damages Report fails to take account of Claimants’
contributory fault and is consequently erroneous.
II. THE APPROPRIATE METHOD OF VALUATION IS THE ASSET-BASED APPROACH
129. Under this approach, the difference between current values of the assets and the liabilities
represents the value of investments.327 This approach is preferred by tribunals in situations
where the enterprise is not a going concern, has no established record of profitability, or has no
prospect of being profitable irrespective of the state’s measures.328 This method is especially
recommended for businesses in early stages where future profits and/or cash flows cannot be
reliably determined,329 because this method does not require speculations, projections, or
assumptions.330
130. As discussed in Section [I.][B.] of Part IV above, Claimants are not going concerns in Tyrea
and have not based their future cash flow projections on reliable calculations or a detailed
business plan. Therefore, any valuation of their future profits would be speculative and
uncertain. The asset-based method is best suited in these circumstances.
326 Ex.C2. 327 Marboe, ¶4.134. 328 Copper-Mesa, ¶¶7.24-7.26; Arif, ¶576. 329 Marboe, ¶¶4.136-4.137; Rusoro, ¶¶775-789; Siemens, ¶¶355, 362-389; Metalclad, ¶¶120ff. 330 Rubins/Sinha/Roberts, 195.
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PRAYER FOR RELIEF
In light of the foregoing submissions, Respondent respectfully requests this tribunal to find that:
(i) The provisional measures requested by Respondent should be granted;
(ii) It does not have ratione voluntatis jurisdiction over the present dispute;
(iii) It has no jurisdiction over the multi-party claim;
(iv) Respondent did not breach its obligations under Articles 3(1) or 6 of the BITs and its
actions were a lawful exercise of its regulatory powers;
(v) Claimants are not entitled to damages as requested;
(vi) Respondent is entitled to all fees and costs associated with these proceedings.
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