ARBITRATION INSTITUTE OF THE STOCKHOLM CHAMBER … · ARBITRATION INSTITUTE OF THE STOCKHOLM CHAMBER OF COMMERCE ... to Decide Breach of Contract Claims in SGS v. Pakistan ... Recommendation

Memorial for the Claimant Team Code - Visscher

i

ARBITRATION INSTITUTE OF THE

STOCKHOLM CHAMBER OF COMMERCE

CALRISSIAN AND CO., INC. Claimant

v.

FEDERAL REPUBLIC OF DAGOBAH Respondent

___________________________

MEMORIAL ON BEHALF OF THE CLAIMANT

20 SEPTEMBER 2014

__________________________


ii

INDEX

TABLE OF ABBREVIATIONS IV

LIST OF AUTHORITIES VI

STATEMENT OF FACTS 1

ARGUMENTS ON JURISDICTION 3

Issue 1. The Tribunal has jurisdiction over the claims submitted by Calrissian and Co. 3

I. THE CLAIMANTS SUBMIT THAT THEY SATISFY THE CRITERIA OF RATIONE PERSONAE

AND RATIONE VOLUNTATIS 3

II. THE REQUIREMENT OF RATIONE MATERIAE IS SATISFIED AS SOVERIGN BONDS FULFIL

THE CRITERIA OF INVESTMENT UNDER ARTICLE 1 3

III. THE REQUIREMENTS IMPOSED BY THE BILATERAL INVESTMENT TREATY (‘BIT’)

ARE THE SOLE CRITERIA TO BE SATISFIED, AS THE REQUIREMENTS IMPOSED BY THE

INTERNATIONAL CONVENTION FOR SETTLEMENT OF INVESTMENT DISPUTES (‘ICSID’) ARE

INAPPLICABLE. 4

IV. IN ARGUENDO, THE BONDS COME UNDER THE AMBIT OF ‘INVESTMENT’ AS THEY

HAVE NOT BEEN EXPLICITLY EXCLUDED 5

V. THERE EXISTS A TERRITORIAL NEXUS WITH RESPECT TO THE INVESTMENT 5

ISSUE 2. That the Permanent Court of Arbitration’s interpretation is binding on this

tribunal 7

I. THE PRACTICAL EFFECT OF ARTICLE 7 OF THE BIT WAS TO ENSURE THE DECISION

BINDS THE TRIBUNALS UNDER ARTICLE 8 7

II. THE BIT EXPLICITLY PROVIDES FOR THIS AWARD TO BE BINDING ON THIS TRIBUNAL

8

III. IN ARGUENDO, THIS PROVIDES FOR AN AUTHORITATIVE INTERPRETATION OF THE

TREATY AND WOULD BE OF EXTREMELY HIGH PERSUASIVE VALUE TO THIS TRIBUNAL 8

ISSUE 3: The Tribunal should rule on the claim asserted despite of the forum selection

clause contained in the sovereign bonds 10

I. THE CLAIMS SUBMITTED AMOUNTS TO TREATY CLAIMS. 10

II. IN ARGUENDO, THE TRIBUNAL HAS JURISDICTION OVER CONTRACTUAL CLAIMS. 11


iii

III. THE FORUM SELECTION CLAUSE IS INEFFECTIVE. 12

ARGUMENTS ON MERITS 13

ISSUE 4. The measures of the Respondent State violate its obligations to accord Fair

and Equitable Treatment under Article 2(2) of the Corellia-Dagobah BIT. 13

I. THE RESPONDENT HAS VIOLATED THE LEGITIMATE EXPECTATIONS OF THE CLAIMANT.

13

II. THE RESPONDENT HAS BLOCKED ACCESS TO ANY EFFECTIVE REMEDY WITHIN ITS

JURISDICTION, WHICH CONSTITUTES DENIAL OF ACCESS TO JUSTICE. 14

III. THE RESPONDENT STATE HAS BREACHED ITS OBLIGATION TO ACCORD FULL

PROTECTION AND SECURITY TO THE BONDS. 15

ISSUE 5. The Respondent’s debt restructuring measures are not exempted under Article

6(2) of the BIT. 17

I. THE BURDEN TO PROVE THAT REQUIREMENTS OF ARTICLE 6(2) WERE MET LIES ON THE

RESPONDENT. 17

II. ARTICLE 25 OF THE INTERNATIONAL LAW COMMISSION’S ARTICLES ON STATE

RESPONSIBILITY (‘ARTICLE 25’) IS TO BE APPLIED TO INTERPRET THE TREATY DEFENSE

UNDER ARTICLE 6 OF THE BIT. 18

III. RESPONDENT’S ACTIONS DO NOT SATISFY ANY OF THE CONDITIONS STIPULATED FOR

THE APPLICATION OF ARTICLE 25. 18

IV. ARGUENDO, IN CASE THERE WAS A SITUATION OF NECESSITY THAT PRECLUDES

WRONGFULNESS, DAGOBAH WOULD STILL BE LIABLE TO PAY COMPENSATION. 21

RELIEF SOUGHT 22


iv

TABLE OF ABBREVIATIONS

Sl. No. Abbreviation Full Form

1. ¶ Para No.

2. Art. Article

3. BIT Bilateral Investment Treaty

4. Chap. Chapter

5. Ed. Edition

6. Eds. Editors

7. FET Fair and Equitable Treatment

8. FTC Free Trade Commission

9. HRI Human Health Research Institute

10. ICCPR International Covenant on Civil and Political Rights.

11. ICJ International Court of Justice

12. ICSID International Centre for Settlement of Investment Disputes

13. ILC International Law Commission

14. J.W.I.T. Journal of World Investment and Trade

15. NAFTA North American Free Trade Agreement

16. No. Number

17. O.U.P. Oxford University Press

18. p. Page No.

19. PCA Permanent Court of Arbitration


v

20. PCIJ Permanent Court of International Justice

21. Rep. Reports

22. SRA Sovereign Restructuring Act

23. U.S.A. United States of America

24. UDHR The Universal Declaration of Human Rights.

25. UN United Nations

26. UNCITRAL United Nations Commission on International Trade Law

27. UNCTAD United Nations Conference on Trade and Development

28. v. Versus

29. VCLT Vienna Convention on the Law of Treaties

30. Vol. Volume

31. WIPO World Intellectual Property Organization

32. YBIL Yearbook of International Law


vi

LIST OF AUTHORITIES

ARTICLES

Sl.

No.

Abbreviation Full Citation

1. Anthea Roberts Anthea Roberts, “State-to-State Investment Treaty Arbitration:

A Hybrid Theory of Interdependent Rights and Shared

Interpretive Authority", 55 HARVARD INTERNATIONAL

LAW JOURNAL, 1 (2014).

2. Anthea Roberts Anthea Roberts, “State-to-State Investment Treaty Arbitration:

A Hybrid Theory of Interdependent Rights and Shared

Interpretive Authority”, 55 HILJ 1 (2014).

3. Jan Paulsson Jan Paulsson, “Denial of Justice in International Law”,

Cambridge University press (2005).

4. Jeromin

Zettelmeyer

Jeromin Zettelmeyer, Christoph Trebesch, Mitu Gulati, “The

Greek Debt Restructuring: An Autopsy”, July 2013 available at

http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=534

3&context=faculty_scholarship.

5. Pauwelyn Joost Pauwelyn, “Role of Public International Law in the WTO:

How far can we go?”, 95 The American Journal of International

Law (2001).

6. Scheuer 2 Weiniger, Matthew and Scheuer, Conversations Across Cases -

Is there a Doctrine of Precedent in Investment Arbitration?

TDM 3 (2008).

7. Scheur 1 Christopher Scheuer, Towards Arbitral Path Coherence &

Judicial Borrowing: Persuasive Precedent in Investment


vii

Arbitration TDM 3 (2008).

8. Schreuer PIL Christoph Schreuer, The Relevance of Public International in

International Commercial Arbitration: Investment Disputes,

available at

http://www.univie.ac.at/intlaw/wordpress/pdf/81_csulpaper_1.p

df

9. Stanimir

Alexandrov

Stanimir Alexandrov, “Breaches of Contract and Breaches of

Treaty: The Jurisdiction of Treaty-based Arbitration Tribunals

to Decide Breach of Contract Claims in SGS v. Pakistan and

SGS v. Philippines”, 5 J. World Investment & Trade 555 (2004)

1

10.

Yuval Shany Yuval Shany, “Contract Claims vs. Treaty Claims: Mapping

Conflicts between ICSID Decisions on Multisourced Investment

Claims”, 99 The American Journal of International Law, No. 4

(2005)

BOOKS

Sl.

No.


1. - Brownlie, Brownlie's Principles of Public International Law,

Oxford University Press, (2012).

2. Muthucumaraswa

my

MUTHUCUMARASWAMY SORNARAJAH, THE

INTERNATIONAL LAW ON FOREIGN INVESTMENT, (3rd

ed. 2010).

3. - Villiger ME, Commentary on the 1969 Vienna Convention on


viii

the Law of Treaties (Martinus Ninjhof Publishers, 2009).

4. - Vienna Convention on the Law of Treaties a

Commentary (Oliver Dorr & Kirsten Schmalenbach eds.,

2012).

5. Crawford James Crawford, Brownlie’s Principles of Public International

Law, Oxford University Press (8th Ed. 2012)

6. Salacuse Jeswald W. Salacuse, The Law of Investment Treaties, (Oxford

University Press, 2010).

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

(Cambridge University Press, 2010).

8. James Crawford James Crawford, The International Law Commission’s Articles

on State Responsibility: Introduction, Text and Commentaries,

Cambridge University Press (2002).

9. Schreuer C Schreuer, The ICSID Convention: A Commentary

(Cambridge, Cambridge University Press, 2001)

ICSID CASES

Sl.

No.


1. AAPL v. Sri

Lanka

Asian Agricultural Products Limited v Sri Lanka, Final award

on merits and damages, ICSID Case No ARB/87/3 (21 June

1990).

2. Abaclat Abaclat and ors v Argentina, Decision on Jurisdiction and


ix

Jurisdiction Admissibility, ICSID Case No ARB/07/5 (04 August 2011)

3. ADF Group

Award

ADF Group Inc v. United States of America, ICSID Case No

ARB (AF)/00/1, Award, , (January 9, 2003).

4. Amco Asia

Jurisdiction

Amco Asia Corp Inc v The Republic of Indonesia , ICSID Case

No. ARB/81/1, Decision on Jurisdiction, 25 September 1983

5. Arif Award Arif v Moldova, Award, ICSID Case No ARB/11/23 (08 April

2013).

6. Azurix

Jurisdiction

Azurix Corp. v. The Argentine Republic, ICSID Case No.

ARB/01/12, Decision on Jurisdiction, (December 8, 2003)

7. CMS Annulment

committee

Decision

CMS Gas Transmission Company v Argentina, Decision on

Application for Annulment, ICSID Case No ARB/01/8 (25

September, 2007)

8. CMS award CMS Gas Transmission Company v. The Argentine Republic,

Award, ICSID Case No. ARB/01/8 (12 May, 2005)

9. Deutsche Bank

Award

Deutsche Bank AG v. Democratic Socialist Republic of Sri

Lanka, ICSID Case No. ARB/09/02, Award, (31 October 2012).

10. Duke Energy

Award

Duke Energy Electroquil Partners and Electroquil S.A. v.

Republic of Ecuador ICSID Case No. ARB/04/19, Award (18

August 2008).

11. Enron Award Enron Corporation Ponderosa Assets, L.P v. Argentine

Republic, Award, ICSID Case No. ARB/01/3 (22 March, 2007)

12. Impregilo

Jurisdiction

Impregilo S.P.A. v. Islamic Republic of Pakistan, Decision on

Jurisdiction, ICSID Case No. ARB/03/3 (22 April, 2005).


x

13. Lanco

Jurisdiction

Lanco International v. The Argentine Republic, Jurisdiction of

the Arbitral Tribunal, ICSID Case No. ARB/97/6 (8 December,

1998)

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

International, Inc. v. Argentine Republic, Award, ICSID Case

No. ARB/02/1 (25 July, 2007).

15. Lucchetti Award Empresas Lucchetti, S.A. v. Republic of Peru, ICSID Case No.

ARB/03/4, Award (Feb. 7, 2005)

16. National Grid

Award

National Grid Public Limited Company v Argentina, Award,

UNCITRAL, IIC 361 (2008) (03 November 2008).

17. Noble Ventures

Award

Noble Ventures, Inc. v. Romania, Award, ICSID Case No.

ARB/01/11 (12 October, 2005)

18. Pantechniki v.

Albania

Pantechniki SA Contractors and Engineers v Albania, Award,

ICSID Case No ARB/07/21 (28 July 2009).

19. Parkerings-

Compagniet

Award

Parkerings - Compagniet AS v. Republic of Lithuania, Award,

ICSID Case No. ARB/05/8 (11 September, 2007).

20. Saipem

Jurisdiction

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

Case No. ARB/05/07), Decision on Jurisdiction and

Recommendation on Provisional Measures of 21 March 2007.

21. Salini Jurisdiction Salini Costruttori S.p.A. and Italstrade S.p.A. v. Morocco,

ICSID- Case-No. ARB/00/4, Decision on Jurisdiction, (July 23,

2001).

22. Sempra Award Sempra Energy International v. Argentine Republic, Award,


xi

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

23. SGS v. Pakistan

Jurisdiction

SGS Société Générale de Surveillance S.A. v. Islamic Republic

of Pakistan, Decision of the Tribunal on Objections to

Jurisdiction, ICSID Case No. ARB/01/13 (6 August, 2003)

24. SGS v.

Philippines

Dissent

SGS Société Générale de Surveillance S.A. v. Republic of the

Philippines, ICSID Case No. ARB/02/6, Dissenting Opinion of

Professor A. Crivellaro.

25. SGS v.

Philippines

Jurisdiction

SGS Société Générale de Surveillance S.A. v. Republic of the

Philippines, Decision of the Tribunal on Objections to

Jurisdiction, ICSID Case No. ARB/02/6 (29 January, 2004).

26. Siemens Award Siemens AG v Argentina, Award and Separate Opinion, ICSID

Case No ARB/02/8 (06 February 2007)

27. Southern Pacific

Properties

Jurisdiction

Southern Pacific Properties (Middle East) Ltd. V. Arab

Republic of Egypt, ICSID Case No. REP 131, Decision on

Jurisdiction, (April 14, 1988).

28. Suez Award Suez and ors v Argentina, Decision on Liability, ICSID Case No

ARB/03/17 (03 August 2006).

29. Vivendi I

Annulment

Compañia De Aguas Del Aconquija S.A. and Vivendi Universal

v. Argentine Republic, Decision on Annulment, ICSID Case No.

ARB/97/3 (3 July, 2002)

30. Vivendi I Award Compañia De Aguas Del Aconquija S.A. and Vivendi Universal

v. Argentine Republic, Award, ICSID Case No. ARB/97/3 (21

November, 2000)

31. Vivendi II Award Compañia De Aguas Del Aconquija S.A. and Vivendi Universal


xii

v. Argentine Republic, Award, ICSID Case No. ARB/97/3 (21

November, 2004)

32. Zaire Award American Manufacturing & Trading, Incorporated v Zaire,

Award and separate opinion, ICSID Case No ARB/93/1 (11

February 1997).

OTHER CASES

Sl.

No.


1. Alps Award Alps Finance and Trade AG v. Slovak Republic, UNCITRAL

Investor-State Claim, Award (March 5, 2011).

2. East Timor The case concerning East Timor I.C.J. Reports 1995

3. Gabchikovo-

Nagymyros Project

Case

GabcikovoNagymaros Project (Hungary v

Slovakia) [1997] ICJ Rep. 7.

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

UNCITRAL, PCA Case No. AA280 (1976).

5. Saluka award Saluka Investments B.V. v. The Czech Republic, Partial Award,

UNCITRAL Arbitration Proceedings (17 March, 2006).

6. Soci n ale

Jurisdiction

Soci n ale v. ominican Republic, LCIA Case No. UN

7927, Decision on Jurisdiction (September 19, 2008).

7. Whaling case Whaling in the Antartic (Australia v. Japan) ICJ March 2014

available at http://www.icj-cij.org/docket/files/148/18136.pdf.


xiii

MISCELLANEOUS

Sl.

No.

Full Citation

1. Augustin Landier and Kenichi Ueda, “The Economics of Bank Restructuring:

Understanding the Options” available at

https://www.imf.org/external/np/seminars/eng/2012/fincrises/pdf/ch15.pdf.

2. Committee on Foreign & Comparative Law, New York Bar Association, “Governing

Law in Sovereign Debt –Lessons from the Greek Crisis and Argentina Dispute of

2012”, available at http://www2.nycbar.org/pdf/report/uploads/20072390-

GoverningLawinSovereignDebt.pdf.

3. IMF, “Collective Action Clauses in Sovereign Bond Contracts—Encouraging Greater

Use”, available at https://www.imf.org/external/np/psi/2002/eng/060602a.pdf.


1

STATEMENT OF FACTS

I. The Bilateral Investment Treaty

1. The Federal Republic of Dagobah (“Dagobah”) and the Corellian Republic (“Corellia”)

entered into the Agreement in 1992 for the Promotion and Protection of Investments

(“BIT”). The BIT provided for a definition of protected investments and contained

standard clauses of protection such as national treatment, fair and equitable treatment, full

protection and security and protection against expropriation

II. 2001 Financial Crisis and Proposed Sovereign Debt Restructuring

2. In 2001 Dagobah was faced with an unsustainable debt burden and descended into a two-

and-a-half year long economic crisis. Dagobah’s inability to meet its debt obligations led

its government to restructure its sovereign debt and launch an offer according to which

bondholders would be able to exchange their bonds for new ones which woul reduce the

bonds’ face value by 43%. Such proposed restructuring could cause losses to

bondholders, among which were several investors from Corellia. The IMF presented

certain recommendations for Dagobah to appropriately implement the sovereign debt

restructuring process.

III. The Permanent Court of Arbitration’s Award

3. Corellia decided to ensure the protection of Corellian bondholders by trying to clarify the

language of the BIT, which did not include an express reference to sovereign bonds under

the definition of investments. Despite Diplomatic relations the parties were not able to

agree on whether the treaty covered sovereign bonds or not. Pursuant to Article 7 of the

BIT, Corellia commenced arbitral proceedings against Dagobah, administered by the

Permanent Court of Arbitration (“PCA”), providing for State-to-State dispute settlement,

requesting a decision on the interpretation issue.

4. On 29 April 2003, the PCA Arbitral Tribunal finally decided, by majority, that sovereign

bonds were investments within the definition of the BIT and that bondholders of both

countries were entitled to its standards of protection and to resort to the investor-State

dispute settlement provision included therein. On 19 May 2003, the dissenting arbitrator

presented his opinion, in which he held that sovereign bonds could not constitute an


2

investment in accordance with the wording of the BIT. By then, Corellian bondholders

had already accepted a restructuring offer made by Dagobah, which only represented

losses of less than 20% of the net present value.

IV. Terms of the Sovereign Restructuring Act

5. At the beginning of 2010, a new recession hit Dagobah and on 14 September 2011, the

IMF issued a recommendation stating that “although Dagobah has for the most part

followed the IMF’s recommendations after the crisis of 2001, its debt, now estimated at

more than U$ 400 billion, is unsustainable”, and suggesting several measures which

included the implementation of a new sovereign debt restructuring

6. On 28 May 2012, Dagobah enacted the Sovereign Restructuring Act (“SRA”) applicable

to all bonds governed by Dagobah’s law, which provided that if a qualified majority of

the owners of 75% of the aggregate nominal value of all outstanding bonds governed by

domestic law agreed to modify the terms of the bonds, that decision would bind all the

remaining bondholders. Before the adoption of the SRA, the affected bonds did not allow

for amendment unless all bondholders agreed to it.

7. In contrast to the old bonds, which were governed by Dagobah’s law and contained a

forum selection clause granting exclusive jurisdiction to Dagobah’s courts over any

disputes arising therefrom, the new bonds were governed by the law of the Kingdom of

Yavin. The new bonds also included provisions regulating collective action (Collective

Action Clauses, ‘CACs’), which related both to the collective change of the bond terms as

well as to the enforcement of any of the current bonds’ contractual obligations. The CACs

provided that if bondholders wanted to initiate any legal action, they would need to gather

at least 20% of the nominal value of the issue in order to sue. Such a clause was absent in

the old bonds.

V. Submission before the tribunal constituted under the rules of the Arbitration

Institute of the Stockholm Chamber of Commerce

8. On 30 August 2013, Calrissian & Co., a Corellian hedge fund that holds a number of

sovereign bond, was among the holdout minority under the SRA, commenced arbitral

proceedings before the SCC pursuant Article 8 of the BIT on issues relating to

interpretation of “investments” and breach of Fair and Equitable Treatment.


3

ARGUMENTS ON JURISDICTION

ISSUE 1. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS SUBMITTED BY CALRISSIAN

AND CO.

9. The Claimant submits that

a. The claimant satisfy the criteria of ratione personae and ratione voluntatis.

b. The requirement of ratione materiae is satisfied as soverign bonds fulfil the criteria of

investment under Article 1.

c. The requirements imposed by the BIT are the sole criteria to be satisfied, as the

requirements imposed by the ICSID are inapplicable.

d. In arguendo, The bonds come under the ambit of ‘investment’ as they have not been

explicitly excluded.

e. There exists a territorial nexus with respect to the investment.

I. THE CLAIMANTS SUBMIT THAT THEY SATISFY THE CRITERIA OF RATIONE PERSONAE AND

RATIONE VOLUNTATIS

10. An ‘investor’ includes “a national of a Party” which is defined as any legal person

established in the Territory of one of the Parties in accordance with the respective

national legislation.1 The Claimant is a hedge fund incorporated in and in accordance with

the laws of, the Corellian Republic.2 Thus, the Claimants satisfy the criteria of ratione

personae. ‘Ratione voluntatis’ has been satisfied upon the submission of a request for

arbitration by the Claimant.3 This request was voluntarily done, satisfying the second

jurisdictional requirement.

II. THE REQUIREMENT OF RATIONE MATERIAE IS SATISFIED AS SOVERIGN BONDS FULFIL

THE CRITERIA OF INVESTMENT UNDER ARTICLE 1

11. Soverign Bonds are an investment as the three indicative requirements present in the

chapeau of the BIT has been fulfilled. There is the commitment of capital or other

1 Article 1, BIT.

2 Appendix 6, Para 2.

3 Appendix 6, Para 1.


4

resources, the expectation of gain or profit, or the assumption of risk.4 While this risk has

been quantified to be of a higher threshold for an investment, and the dissenting opinion

of the PCA Award stated that this ‘risk’ must have more than the risk of default,5 it is

submitted that Article 1 does not require that standard to be met. The laundry list includes

“mortgages, pledges and liens”6 where the only risk is that of default. In fact in

investments such as mortgages, there is the property as security which reduces the

quantum of risk. Thus the standard of risk contemplated within Article 1 is not a high

standard envisaged but a lower standard that must be read in light of the “context” of the

treaty, which is indicative in the laundry list.7

12. Further, it cannot be argued that “typical characteristics” such as ‘duration’ which have

been a requirement in general standard is applicable under Article 1. Portfolio

investments, which have a small duration such as “shares, stock”8, are included within the

ambit of the laundry list. Thus, it is indicative that the treaty does not seek to exclude

portfolio investments.

III. THE REQUIREMENTS IMPOSED BY THE BILATERAL INVESTMENT TREATY (‘BIT’) ARE

THE SOLE CRITERIA TO BE SATISFIED, AS THE REQUIREMENTS IMPOSED BY THE

INTERNATIONAL CONVENTION FOR SETTLEMENT OF INVESTMENT DISPUTES (‘ICSID’)

ARE INAPPLICABLE.

13. When the treaty elucidates a standard for an ‘investment’ that must be followed and not

the general standard which has laid down. This is due to treaty standards prevailing over

the general standard laid down for any definition.9 A requirement to conform to general

objective standards laid down while interpreting the scope of an ‘investment’ would

render the necessary of defining an ‘investment’ a nullity.10

Further, the decisions which

4 Article 1, BIT.

5 Appendix 3, ¶ 92-93.

6 Article 1, Illustration (vi).

7 Article 31, VCLT.

8 Article 1, Illustration (ii).

9 Brownlie, Brownlie's Principles of Public International Law, Oxford University Press, (2012).

10 Article 31, VCLT.


5

lay down these objective standards11

are requirements by tribunals under ICSID and

cannot bind this Tribunal12

which has been constituted under the SCC.

IV. IN ARGUENDO, THE BONDS COME UNDER THE AMBIT OF ‘INVESTMENT’ AS THEY HAVE

NOT BEEN EXPLICITLY EXCLUDED

14. Occidental v. Equador has laid down the principle that when a term requires to be

interpreted in favour of either party, it must be interpreted in the favour of the investor. In

that case, the held that unless the State had particularly exempted a certain item from the

protection of the treaty, it will be considered within the ambit of protection, if the

protection is uncertain and if it is in favour of the investor.13

There are many BITs which

have explicitly excluded sovereign bonds from the ambit of “investment” as defined

under their treaty.14

Further the broad principle of a treatment favourable to an investor

has been codified in the treaty, most notably under Article 10, where if any rule or

obligation provides a treatment more favourable to an investor, such a rule supersedes the

BIT.15

V. THERE EXISTS A TERRITORIAL NEXUS WITH RESPECT TO THE INVESTMENT

15. The bonds are governed under Dagobah’s laws and hence, Dagobah exercises requisite

control over them.16

This control can be seen by enacting the SRA17

or by the Haircut

offered after the first financial crisis.18

Further, the bonds were utilized for the benefit of

the Dagobah and their place of transfer is immaterial.19

The capital from bondholders is

indirectly made available within the territory of the host state as part of a larger economic

11

Salini Award; Romak Award.

12 Muthucumaraswamy, p. 306.

13 Occidental v. Equador

14 Mexico-India BIT; US-Baharain BIT; Croatia-Azerbaijan BIT; NAFTA.

15 Article 10, BIT.

16 Abaclat Jurisdiction.

17 Facts of the Case, ¶ 17.


19 Ambient Officio v. Argentina.


6

transaction.20

The identity of a bond holder is immaterial, as the bondholder, upon

maturity of the bond, would have to redeem the investment from Dagobah, hence

providing sufficient territorial link. Further, an investment need not be connected to a

specific enterprise or a specific economic venture located in the territory of either state to

quantify as an investment.21

Thus, the lack of a connection with a specific enterprise does

not bar a sovereign bond from being an investment made in the territory of the Republic

of Dagobah.

20

Abaclat Jurisdiction.

21 Deutsche Bank Award.


7

ISSUE 2. THAT THE PERMANENT COURT OF ARBITRATION’S INTERPRETATION IS BINDING

ON THIS TRIBUNAL


a. The practical effect of Article 7 of the BIT was to ensure this decision binds the

tribunals under Article 8.

b. The BIT explicitly provides for this award to be binding on this tribunal

c. In arguendo, this provides for an authoritative interpretation of the treaty and would

be of extremely high persuasive value to this Tribunal

I. THE PRACTICAL EFFECT OF ARTICLE 7 OF THE BIT WAS TO ENSURE THE DECISION BINDS

THE TRIBUNALS UNDER ARTICLE 8

17. In the regime of Investment Arbitration, disputes between two States have been a rarity,

and have never been successfully pursued.22 Standard dispute resolution clauses in BITs

are to address issues that arise between an investor and a State. In this context, Article 7

of the BIT was purely for the interpretation of the BIT and not for a concrete legal

dispute. The effect of the 2003 PCA decision was that “that sovereign bonds were

investments within the definition of the Corellia-Dagobah BIT and that bondholders of

both countries were entitled to its standards of protection and to resort to the investor-

State dispute settlement provision included therein”.

18. Thus, the effect in that case would be to ensure that there is an entitlement to the terms of

this treaty as investors and the right to access the forum for dispute resolution incase of a

breach. If this award not binding on any Tribunal constituted under Article 8, the purpose

of Article 7 would be nullified. The effect of discarding the PCA judgment would render

the purpose of inserting Article 7 useless in the bilateral investment treaty, if all the

arbitrations for interpretation are not of any use in the Investor-State treaty tribunal,

where the rights investors derive from treaty would be realised.

19. While this Tribunal can exercise mandate over “any legal dispute”23, the tribunal would

have to exercise its powers in accordance with this agreement and any relevant rules of

international law.24 The VCLT to which both states are parties too requires an agreement

22

Anthea Roberts. 23

Article 8 (1), BIT.

24 Article 8 (3), BIT.


8

to be interpreted in good faith25, and thus neither party would have intended to have a

useless provision, which they have undertaken as binding, in accordance with the

applicable rules of international law.26

II. THE BIT EXPLICITLY PROVIDES FOR THIS AWARD TO BE BINDING ON THIS TRIBUNAL

20. While there is no hierarchy between Tribunals and one Tribunal would not normally be

bound by the decision of the other, the BIT can restrict the scope of an arbitral tribunal.

Article 10 of the BIT allows for “obligations under international law” which are

“established hereafter between the Parties in addition to the present Agreement”,

“entitling investments by investors of the other Party to a treatment more favourable than

is provided for by the present Agreement, such rules shall to the extent that they are more

favourable prevail over the present Agreement.”27 An arbitration award, which the parties

have declared to be binding, is an ‘obligation under international law which has been

established between the Parties in addition to this Agreement’ and the obligation, as long

as it is favourable to investors will prevail over this agreement. Thus, this tribunal, which

is bound to decide based on the BIT would have to consider the Award binding on a

reading of Article 7(2), Article 8(3) and Article 10.

III. IN ARGUENDO, THIS PROVIDES FOR AN AUTHORITATIVE INTERPRETATION OF THE TREATY

AND WOULD BE OF EXTREMELY HIGH PERSUASIVE VALUE TO THIS TRIBUNAL

21. It is submitted that the decision of the Permanent Court of Arbitration, which is

considered the forum to resolve disputes regarding interpretation, is an authoritative

interpretation of the BIT.28 An authoritative interpretation can be by the Parties that

drafted the treaty, or can be authorized to interpret the treaty by the Parties.29 This

interpretation given by the PCA is an obligation by the Parties,30 and the authorization for

25

Article 31, VCLT.


27 Article 10, BIT.

28 Article 31 (3) (b), VCLT.

29 Villiger ME, COMMENTARY ON THE 1969 VIENNA CONVENTION ON THE LAW OF TREATIES (Martinus Ninjhof

Publishers, 2009).



9

the PCA to interpret arose from the provisions of the treaty itself.31 An authoritative

interpretation is considered to reflect the intent, context, purpose and meaning of the

treaty,32 and must be used to interpret the treaty.33

31

Article 7 (1), BIT.

32 VIENNA CONVENTION ON THE LAW OF TREATIES A COMMENTARY (Oliver Dorr & Kirsten Schmalenbach eds.,

2012).

33 ADF

Group Award, ¶177.


10

ISSUE 3: THE TRIBUNAL SHOULD RULE ON THE CLAIM ASSERTED DESPITE OF THE FORUM

SELECTION CLAUSE CONTAINED IN THE SOVEREIGN BONDS


a. That the claims submitted before this tribunal amounts to treaty claim.

b. In arguendo, this tribunal can exercise jurisdiction over contractual claims.

c. The contractual forum selection clause in ineffective.

I. THE CLAIMS SUBMITTED AMOUNTS TO TREATY CLAIMS.

23. Article 8 (2) (c) of the BIT vests ‘any legal dispute between an investor of one Party and

the other Party in connection with an investment’ in case of failure of negotiations to the

binding jurisdiction of this tribunal.

24. In the instant case, the existence of a legal dispute which is defined as ‘a disagreement on

a point of law or fact, a conflict of legal views or interests between parties’34 as well as

the status of nationality of claimants is not disputed. What is disputed is whether the

existence of a contractual forum selection clause could affect the jurisdiction over or the

admissibility of the claims presented.

25. It is submitted that the distinction between treaty and contract claims is well established.35

The breach of an investment contract can simultaneously give rise to independent claims

under a treaty as well as a contract as both claims requires different inquiries.36 Rights

asserted under a contract and those under a treaty are essentially different37 and both can

be claimed under their respective dispute resolution clause.38

26. If a breach of contract at the same time violates a treaty provision applicable between an

investor and the host state, it will give rise to the international responsibility of the host

state.39 The present claims are against the Republic of Dagobah for violation of BIT and

not for the violation of rights under the Sovereign bonds.

27. It is submitted that the task of the Tribunal at this stage consists only in determining

whether the facts alleged by the claimant, if established, are capable of constituting a

34

East Timor, pp. 89, 99.

35 SGS v. Uruguay Jurisdiction ¶ 128.

36Impregilo Jurisdiction, ¶ 258.

37 Azurix Award, ¶54.

38 Vivendi I Award, ¶ 102; Lanco Jurisdiction, ¶ 28; Azurix Award, ¶ 79.

39 Noble Ventures Award, ¶ 53.


11

breach of the provisions of the BIT which have been invoked,40 as for this tribunal to

assume jurisdiction, there has to be a breach of a substantive treaty provision,41 which in

the present case is Article 2 (2) of the BIT.

28. A prima facie violation of Article 2 (2) is established by the failure of Republic of

Dagobah in providing fair and equitable treatment to its investors by ignoring any concept

of proportionality in responding to its temporary financial crisis and imposing arbitrary

regulatory and legislative measures and therefore the claims in the instant case constitute

treaty claims.42

29. Moreover, when in exercise of sovereign power, the equilibrium of the contract and the

provisions contained therein are unilaterally altered by a Host State; the origin and nature

of such power are totally foreign to the contract.43 In other words, the present dispute does

not derive from the mere fact that Dagobah failed to perform its payment obligations

under the bonds but from the fact that it intervened as a sovereign by virtue of its State

power44 to modify its payment obligations towards its creditors in general, encompassing

but not limited to the Claimants and therefore this dispute cannot be considered a mere

contractual dispute.

II. IN ARGUENDO, THE TRIBUNAL HAS JURISDICTION OVER CONTRACTUAL CLAIMS.

30. It is submitted that the wording of Article 8 of BIT i.e. ‘any dispute’ is wide enough to

include both treaty claims as well as contractual claims with respect to an investment

under its ambit and therefore even if the tribunal holds that the present dispute represent a

contractual claim, the tribunal still possess the jurisdiction.45 Interpreting the said phrase

in light of Article 31 of VCLT also justifies such an interpretation.46

31. Moreover, the difference between respective wording of Article 7 and Article 8 of BIT

also justifies a broader interpretation of Article 8. Article 7 restricts the nature of disputes

40

Saipem Jurisdiction §§ 84.

41 SGS v. Pakistan Jurisdiction, ¶ 162.

42 Abaclat Jurisdiction ¶ 314.

43 Abaclat Jurisdiction ¶ 321.

44 SGS v. Pakistan Jurisdiction, ¶ 260.

45 SGS v. Philippines Jurisdiction.

46 Stanimir Alexandrov pp. 573


12

to ‘issues concerning the interpretation or application of this Agreement’ whereas Article

8 includes ‘any legal dispute in connection with an investment’. Such difference in

wording clearly indicates the intent of the Parties to the BIT to include disputes not based

on treaty within the ambit of Article 8.

III. THE FORUM SELECTION CLAUSE IS INEFFECTIVE.

32. When there exist a possibility of treaty claim based on treaty violation, then the treaty

tribunal will have exclusive jurisdiction over such claims regardless of the existence of a

contractual forum selection clause or simultaneous contract claim.47 The contractual

forum cannot oust the jurisdiction of this tribunal over treaty claims.48

33. Moreover, mere incorporation of an exclusive forum selection clause in a contract

without an express waiver of the rights of remedy under the treaty is insufficient to

amount as an implied waiver and cannot prevent this tribunal from exercising its

jurisdiction.49

34. Alternatively, the remedy under Article 8 and the forum selection clause in sovereign

bonds ‘survive and coexist’. They function as simultaneous remedies available to an

investor and thus the forum selection clause ceases to be an “exclusive” forum from the

investor’s perspective.50

47

SGS v. Pakistan Jurisdiction; SGS v. Philippines Jurisdiction; Yuval Shany pp. 842

48 Azurix Jurisdiction ¶262.

49 Aguas del Tunari v. Bolivia Jurisdiction ¶ 119, SGS v. Uruguay Jurisdiction ¶ 179.

50 SGS v. Philippines Dissent ¶ 2.


13

ARGUMENTS ON MERITS

ISSUE 4. THE MEASURES OF THE RESPONDENT STATE VIOLATE ITS OBLIGATIONS TO

ACCORD FAIR AND EQUITABLE TREATMENT UNDER ARTICLE 2(2) OF THE CORELLIA-

DAGOBAH BIT.


a. The debt restructuring measures of the Respondent violated the legitimate

expectations of the Claimant.

b. The Respondent State had blocked access to any effective remedy within this

jurisdiction, which constitutes denial of access to justice.

c. The Respondent State has breached its obligation to accord full protection and

security to the bonds.

I. THE RESPONDENT HAS VIOLATED THE LEGITIMATE EXPECTATIONS OF THE CLAIMANT.

36. The protection of a foreign investor’s legitimate expectations has been repeatedly

identified as the dominant element of the FET standard51. To be protected, the investor’s

expectations must be reasonable and justified based on the conditions and representations

offered by the host State. The concept includes not just explicit affirmations given by the

government but also the reasonable and basic expectations taken into account by the

investor52.

37. The arbitral tribunal in Suez stated it is the aggregate of the existence of expectations

created in a foreign investor by host country’s laws, coupled with the act of investing

capital in reliance on them and a subsequent, sudden change in that legislative framework

that constitutes a violation of the FET standard53.

38. It is in light of these views that the Claimant submits that the actions of the Respondent

have not adhered to the legitimate expectations requirement on two occasions:

i. The Respondent’s restructuring measures and subsequent partial default on the

sovereign bonds;

51

Saluka Award; Bayindir v. Pakistan Award.

52 Azurix Award; Parkerings-Compagniet Award.

53 Suez Award.


14

ii. Retrofit application of the Collective Action Mechanism [CAM] contained in the

SRA.

39. The investment by the Claimant into sovereign bonds, thus entering into a long-term

contractual relationship with the Respondent State, shows that it was acting upon the

basic premise of a stable legal investment environment. Stability and predictability of the

regulatory framework is quintessential to the FET standard54, and has also been

recognized as an important objective by the State parties in the Preamble of the Corellia-

Dagobah BIT55.

40. The enactment of the SRA was an abuse of sovereign power by the Respondent to

exercise coercion and unilaterally modify its contractual obligations, which could not

have been reasonably anticipated by the Claimant. Furthermore, the Claimant contends

that the incorporation of the retroactive Collective Action Mechanism [CAM] through the

SRA, unilaterally modified not only the contractual terms of the bonds by way of

legislation but also the legal framework governing the contractual obligations of the

parties56.

41. The bonds were issued in 2003, after the Respondent has already encountered a sovereign

debt crisis. During the bond issuance or any period before or after it, the Respondent had

not shown the slightest inclination to consider the incorporation of CAMs in its bonds.

Since a CAM did not originally exist in the bond terms, the Claimant had a legitimate

expectation that its investment will not be subject to a debt restructuring process unless it

had expressly consented to it.

42. The Arif tribunal reached the conclusion that over time, legitimate expectations grow and

strengthen insofar as the investment is cultivated57. Thus, the acts of the Respondent have

frustrated the legitimate expectations of the Claimant and this in itself constitutes a

violation of the FET standard.

II. THE RESPONDENT HAS BLOCKED ACCESS TO ANY EFFECTIVE REMEDY WITHIN ITS

JURISDICTION, WHICH CONSTITUTES DENIAL OF ACCESS TO JUSTICE.

54

Enron Award, ¶260, 267- 268.

55 Preamble, the BIT

56 SRA, Article 2 (8).

57 Arif Award.


15

43. Within the Preamble of the BIT, the State parties have been careful to recognize the

“importance of providing effective means of asserting claims and enforcing rights with

respect to investment under national law as well as through international arbitration”58.

44. The bonds that had been purchased by the Claimant were governed by Dagobahian law

and were subject to the exclusive jurisdiction of the courts of Dagobah59. But the SRA

provides that in the event of a successful bond exchange, all rights and obligations under

the old bonds will be extinguished60. Moreover, as the SRA has already been deemed

constitutional in a review prior to its enactment, there are no means available under

national law to challenge the validity of the SRA within the jurisdiction of Dagobah61.

45. Therefore, there is no effective remedy available to the Claimant under national law to

enforce its contractual rights derived from the old bonds or challenge the validity of the

SRA.

III. THE RESPONDENT STATE HAS BREACHED ITS OBLIGATION TO ACCORD FULL PROTECTION

AND SECURITY TO THE BONDS.

46. It is emphasized that the terms “protection” and “security” are qualified by the term “full”

in Article 2(2) of the BIT. It cannot be reasonably construed to be limited to merely

physical security of an investment because the term “investment” as defined in Article 1

includes not only tangible assets but also intangible assets such as intellectual property

rights62.

47. While interpreting a similar provision as Article 2(2), the arbitral tribunal in Biwater

Gauff opined that the clause implies “a State’s guarantee of stability in a secure

environment, both physical, commercial and legal”, a view that has been accepted by

several arbitral tribunals63. The content of the obligation incumbent on the host State

extends to ensuring that the agreed and approved security of the foreign investor’s

58

Preamble, the BIT.


60 SRA, Article 2 (8).

61 Procedural Order No. 2, ¶ 22.

62 Article 1, the BIT.

63 Siemens Award; Vivendi Award, National Grid Award.


16

investment is withdrawn or devalued by the amendment of its laws or the actions of its

administrative bodies64.

48. The Claimant contends that first, by the retrofit application of CAM through the SRA, the

Respondent has withdrawn the previously agreed security of the Unanimous Action

Clause [UAC] in the bonds bought by the Claimant. Before the SRA, any amendment of

the bonds, even a restructuring process, required the express consent of all the

bondholders65. Second, the bond exchange offer on 29 November 2012 issued by the

Ministerial Council, an administrative authority under the SRA, devalued the value of the

bonds held by the Claimant. The offer is the sine qua non for the devaluation of the bonds

as all the terms and conditions of the bond exchange were fixed by the Ministerial

Council and the participation of the investors was restricted to “whether they accept…”

the offer66.

49. In light of these circumstances, it is submitted the Respondent’s actions have breached the

obligation to accord full protection and security to the investment of the Claimant.

64

CME Award.


66 Article 2(1), SRA.


17

ISSUE 5. THE RESPONDENT’S DEBT RESTRUCTURING MEASURES ARE NOT EXEMPTED

UNDER ARTICLE 6(2) OF THE BIT.


a. The burden to prove that requirements of Article 6(2) were met lies on the

Respondent.

b. Article 25 of the International Law Commission’s Articles on State Responsibility

(‘Article 25’) is to be applied to interpret the treaty defense under Article 6 of the

BIT.

c. Respondent’s actions do not satisfy any of the conditions stipulated for the application

of Article 25.

d. Arguendo, in case there was a situation of necessity that precludes wrongfulness,

Dagobah would still be liable to pay compensation.

I. THE BURDEN TO PROVE THAT REQUIREMENTS OF ARTICLE 6(2) WERE MET LIES ON THE

RESPONDENT.

51. Article 6 (2) of the BIT reads as follows:

52. “Nothing in this Treaty shall be construed: (2) to preclude a Party from applying measures

that are necessary for the fulfilment of its obligations with respect to the maintenance or

restoration of international peace or security, or the protection of its own essential

security interests.”67

Article 6(2) is a Not-Precluded Measures (NPM) clause which, if

applicable, would preclude liability of the host State for breach of substantive obligations

under the BIT. The intention behind such a provision in the BIT is to preserve some legal

flexibility for the State to able to take the necessary measures in exceptional

circumstances.

53. Since Article 6(2) operates as an exception to the other provisions and obligations

contained in the BIT, the burden to prove that all the requirements of Article 6(2) are

satisfied and it is applicable in the present case rests on the Respondent.

67

Article 6 (2), BIT.


18

II. ARTICLE 25 OF THE INTERNATIONAL LAW COMMISSION’S ARTICLES ON STATE

RESPONSIBILITY (‘ARTICLE 25’) IS TO BE APPLIED TO INTERPRET THE TREATY DEFENSE

UNDER ARTICLE 6 OF THE BIT.

54. A plain reading of Article 6 of the BIT shows that the provision does not lay down any

standards or criteria to adjudge the necessity of measures or what constitutes ‘essential

security interests’. Therefore, since the BIT itself does not offer any guidance, the content

of this exceptional provision must be found in customary international law. This approach

has been favoured by arbitral tribunals68, especially while interpreting Article XI of the

U.S.-Argentina BIT which is couched in similar language as Article 6 of the Corellia-

Dagobah. Further, Article 8(2) mandates that the arbitral tribunal shall decide the disputes

in accordance with any ‘ elevan ules of in e na ional law’69.

55. The very object of conclusion of the BIT was to apply in situations of economic difficulty

to guarantee the rights of investors of both States70. Since Article 6 allows a State to

override all of the substantive protections guaranteed to investors, it must be subject to a

stringent threshold, which the Claimant submits, may be found in Article 25.

56. Article 25 reflects the defense of necessity as it exists in customary international law71. It

has been held to be a “most exceptional remedy subject to very strict conditions because

otherwise it would open the door to elude any international obligation”72. Therefore,

Article 25 must be used to interpret the treaty defense under Article 6 of the BIT.

III. RESPONDENT’S ACTIONS DO NOT SATISFY ANY OF THE CONDITIONS STIPULATED FOR

THE APPLICATION OF ARTICLE 25.

57. Article 25 lays down the following conditions for the operation of the defense of

necessity:

i. The measure adopted by the State must be to protect itself from a grave and

imminent peril;

68

Sempra Award; Enron award; CMS Award.

69 Article 8(2), BIT.

70 Suez Award.

71 Gabchikovo- Nagymyros Project Case.

72 Ibid.


19

ii. It must be the only way available to the State;

iii. The State must not have contributed to the situation of necessity.

58. It is emphasized that for successful invocation of the defense of necessity, the Respondent

must prove that all of these conditions are met. The Claimant only needs to show that any

one of these is not satisfied.

i. Grave and imminent peril

59. The only ‘peril’ that the Respondent may claim in the present case is the debt burden that

the IMF has recognized as “unsustainable”73. But the threshold requires the peril to be

‘grave and imminent’, that is, gravity of the peril must be such that it will lead to

complete political and social collapse and compromise the very existence of the State74.

60. There is no evidence that the political and social framework of the State was on the brink

of collapse. The demonstrations and social unrest was triggered by the impact of the 2008

financial crisis on the economy of Dagobah75 and had not acquired such proportions that

the Respondent could not have reasonably controlled the state of affairs through the

exercise of its legitimate police powers and adequate structural reforms.

61. The arbitral tribunals in Enron and Sempra, when faced with similar circumstances of

economic distress cited by the Argentine Republic, acknowledged the severity of the

crisis but determined that it had not compromised “the very existence of the State and its

independence.”76 They further noted that the dangers presented by social unrest and

political stability could be, and in fact were, handled under the constitutional

arrangements in force77.

62. Thus, it is submitted that the economic distress of the Respondent does not meet the

threshold of ‘grave and imminent peril’.

ii. Only way available to the State

73

Facts of the Case, ¶ 15.

74 CMS Award.

75 Procedural Order no. 3, ¶ 38.

76 Enron award, ¶ 306.

77 Enron Award, ¶ 306; Sempra Award, ¶ 348.


20

63. According to Article 25, a State, in order to invoke the necessity doctrine, must have no

means to guard its vital interest other than breaching its international obligation. If it was

possible for the State to take recourse to other alternative measures, even if they were

more difficult or costly, could safeguard the interest of the State, those alternative steps

should be taken78.

64. The Claimant submits that debt restructuring and partial default on the bonds cannot be

reasonably presumed as the only means open to the Respondent. The State of Dagobah

could have taken recourse to options such as privatization of public services to reduce the

unsustainable debt burden79. Other States such as Chile have used debt-for-equity swaps

for privatization of government assets and simultaneous reduction of debt80.

65. It is not the intention of the Claimant to substitute its judgment for the judgment of the

government of the Respondent. The only burden incumbent on the Claimant is to show

that alternative measures were available to the Respondent, which is satisfied in the

present case.

iii. No contribution of the State to the situation of necessity

66. Article 25 prohibits the invocation of the necessity defense by a State if the State has

contributed to the situation of necessity, in a way that is “sufficiently substantial and not

merely incidental or peripheral”81.

67. The Claimant contends that the Respondent has substantially contributed to the financial

crisis. Flawed government policies and shortcomings exacerbated the impact of the 2008

financial crisis on the economy of Dagobah. The government of Dagobah has had a long

history of negligent policies; in 2001, it had already encountered a state of financial crisis

because of its heavy borrowing from international markets and a conscious failure on its

part to check massive tax evasion. Even subsequently, it chose to not change its expansive

borrowing policy or adopt structural reforms to increase revenue82. The government of

78

James Crawford, pp. 160–86.

79 Augustin Landier and Kenichi Ueda, “The Economics of Bank Restructuring: Understanding the Options”

available at https://www.imf.org/external/np/seminars/eng/2012/fincrises/pdf/ch15.pdf.

80 Ibid.

81 James Crawford, pp. 160–86.

82 Appendix 4.


21

Dagobah continued to ignore the prevalence of massive tax evasion within the country

even asit adopted austerity measures after the 2008 crisis but the combination of the two

only led to the crisis becoming “even more pronounced and amplified the government’s

revenue crisis”83.

68. Thus, the Respondent has contributed to the financial crisis and should not be allowed to

take advantage of its own wrong.

IV. ARGUENDO, IN CASE THERE WAS A SITUATION OF NECESSITY THAT PRECLUDES

WRONGFULNESS, DAGOBAH WOULD STILL BE LIABLE TO PAY COMPENSATION.

69. Article 27 of the Articles on State Responsibility reads:

70. “The invocation of a circumstance precluding wrongfulness in accordance with this

chapter is without prejudice to:

(a) Compliance with the obligation in question, if and to the extent that the circumstance

precluding wrongfulness no longer exists;

(b) The question of compensation for any material loss caused by the act in question.”

71. In the event that the Respondent prevails and is able to successfully invoke the defense of

necessity, the Claimant contends that that does not mean that the Claimant is not entitled

to compensation for the material loss that it has suffered to its investment. Therefore, the

defense of necessity in itself does not negate the claim for compensation.

72. In the instant case, the Claimant contends that the Respondent must compensate it for the

thirty percent haircut on the net value of the sovereign bonds that it holds. Thus, the State

of Dagobah may not have incurred responsibility for violation of an international

obligation but it is still liable for compensation.

83

Ibid.


22

RELIEF SOUGHT

The Claimant respectfully prays to the Tribunal for the following relief-

Declare that the Tribunal has jurisdiction over this dispute.

Declare that the retroactive effects of Respondent’s Sovereign Restructuring Act, as

well as other measures conducted by that state as part of its sovereign debt

restructuring, violated Respondent’s obligations under Art. 2 of the Corellia-Dagobah

BIT.

Declare that Claimant is entitled to full compensation for the losses it incurred as a

result of Dagobah’s violations, including interest.

Declare that Claimant is entitled to the restitution by Respondent of all costs related to

these proceedings.

Counsels for the Respondent

Team Visscher

20 September 2014

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