GERMAN INSTITUTION OF ARBITRATION UNDER THE … · team tanaka german institution of arbitration under the uncitral artitration rules administered by the dis case no. xx sch xx/xx

TEAM TANAKA

GERMAN INSTITUTION OF ARBITRATION

UNDER THE UNCITRAL ARTITRATION RULES ADMINISTERED BY THE DIS

Case No. XX Sch XX/XX

CONTIFICA ASSET MANAGEMENT CORP. Claimant

v.

REPUBLIC OF RURITANIA Respondent

MEMORIAL FOR RESPONDENT

22 SEPTEMBER 2013

I

Table of Contents

LIST OF AUTHORITIES ................................................................................................................................. IV

STATEMENTS OF FACTS ................................................................................................................................ 1

ARGUMENTS ................................................................................................................................................. 3

I. THIS TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE CLAIMS SUBMITTED BY CAM .......... 3

A. AS NEITHER CAM IS A PROTECTED INVESTOR NOR DID IT MAKE A BONA FIDE INVESTMENT THE TRIBUNAL LACKS JURISDICTION OVER THE DISPUTE ........................................................... 3

1. CAM’s SHAREHOLDING IN FBI IS NO PROTECTED INVESTMENT ............................................. 3

2. CAM IS NOT A QUALIFIED INVESTOR ....................................................................................... 6

B. IN ANY EVENT, CAM’S CLAIMS ARE INADMISSIBLE ..................................................................... 7

1. THE INTRA-‐GROUP RESTRUCTURING HAPPENED WITH NO VALID BUSINESS PURPOSE ....... 7

2. IN ADDITION, CAM DID FORESEE THE DISPUTE AT THE TIME OF THE INTRA-‐GROUP RESTRUCTURING ....................................................................................................................... 9

II. THIS TRIBUNAL DOES NOT HAVE JURISDICTION OVER CAM’s CLAIMS BASED ON THE ALLEGED BREACH OF THE S.P.A. AND THESE CLAIMS ARE INADMISSIBLE ................................................ 10

A. THIS TRIBUNAL’S JURISDICTION DOES NOT ENCOMPASS THE ALLGED BREACH OF S.P.A ....... 11

1. THIS TRIBUNAL LACKS JURISDICTION RATIONE PERSONAE .................................................. 11

2. THE UMBRELLA CLAUSE IS NOT APPLICABLE AS THE S.P.A PROVISIONS DO NOT ENTAIL ACTIONABLE OBLIGATIONS ............................................................................................................ 13

B. IN ANY EVENT, THE EXCLUSIVE ARBITRATION CLAUSE IN THE S.P.A PRECLUDES THIS TRIBUNAL FROM HEARING THE CLAIMS .................................................................................... 14

III. RURITANIADID NOT VIOALTE ANY OF ITS OBLIGATIONS UNDER THE BIT TOWARDS CLAIMANT .. ................................................................................................................................................ 16

A. RURITANIA MEASURES ARE NOT EQUIVALENT TO EXPROPRIATION ........................................ 16

1. RETAINED CONTROL OVER FBI PRECLUDES THE POSSIBILITY TO CLAIM EXPROPRIATION . 16

II

2. IN ANY EVENT, THE MEASURES’ INTERFERENCE WITH CAM’S INVESTMENTS DOES NOT TANTAMOUNT TO EXPROPRIATION .............................................................................................. 17

i. THE LOSS OF REVENUES INCURRED BY FBI IS INSUFFICIENTLY SUBSTANTIAL ................... 17

ii. THE GOODWILL OF FBI HAS NOT BEEN IMPACTED PERMANENTLY ................................... 18

iii. INTELLECTUAL PROPERTY RIGHTS TO THE TRADEMARKS AND TRADE DRESSES ARE NOT EXPROPRIATED .................................................................................................................... 20

3. IN ANY EVENT, THE MEASURES ARE JUSTIFIED BY RURITANIAN POLICE POWERS .............. 21

i. THE PLAIN PACKAGING REQUIREMENT EFFECTIVELY PROMOTES A SUBSTANTIAL PUBLIC INTEREST ..................................................................................................................................... 22

ii. THE RESTRICTION OF CONTAINER SIZE IS PROPORTIONATE .............................................. 23

iii. THE 2011 ORDINANCE IS NON-‐DISCRIMINATORY ............................................................... 24

B. RESPONDENTDID NOT FAIL TO ACCORD CAM FAIR AND EQUITABLE TREATMENT ................. 25

1. THE ADOPTION OF THE 2011 ORDINANCE ABIDED BY STIPULATIONS OF DUE PROCESS ... 26

2. NO LEGITIMATE EXPECTATIONS HAVE BEEN FRUSTRATED ................................................... 27

i. CAM’S EXPECTATIONS OF UNCHANING LEGAL REGIMES WERE NOT LEGITIMATE ............ 27

ii. EXPECTATIONS AS EMANATING FROM THE S.P.A. ARE NOT OBJECTIVELY LEGITIMATE .... 29

IV. THIS TRIBUNAL MAY AWARD MORAL DAMAGES FOR THE ARREST OF MESSRS. GOODFELLOW AND STRAW ............................................................................................................................. 30

A. THE ARREST OF MESSRS. GOODFELLOW AND STRAW DID NOT CAUSE ANY NON-‐PECUNIARY HARM SUSCEPTIBLE TO COMPENSATION .................................................................................. 31

1. THE ARBITRATION CLAUSE IN ARTICLE 8 (1) BIT DOES NOT ENCOMPASS INDIVIDUALS’ SUFFERING .............................................................................................................................. 31

2. THE ARREST DID NOT CAUSE ANY NON-‐PECUNIARY HARM TO CLAIMANT’S INVESTMENT ... ................................................................................................................................................. 33

B. IN ANY EVENT, NEITHER RURITANIA’S CONDUCT NOR ITS EFFECT WAS GRAVE AND SUBSTANTIAL .............................................................................................................................. 35

1. THIS TRIBUNAL SHALL ADHERE TO THE TEST OF GRAVITY AND SUBSTANTIALITY .............. 35

III

2. NEITHER RESPONDENT’S ACTIONS NOR THEIR CONSEQUENCES MEET THE THRESHOLD OF GRAVITY AND SUBSTANTIALITY ............................................................................................. 36

V. THE LOSS OF SALES BY CLAIMANT’S SUBSIDIARIES DOES NOT CONSTITUTE A RECOVERABLE ITEM OF DAMAGES .................................................................................................................. 38

A. THIS TRIBUNAL LACKS JURISDICTION UNDER THE RURITANIA-‐CRONOS BIT TO AWARD DAMAGES FOR LOSSES INCURRED BY ENTITIES RESIDING OUTSIDE OF RURITANIA ............................................................................................................................................................. 38

B. IN ANY EVENT, THE CRITERION OF “INEXTRICABILITY” IS NOT MET, PREVENTING THIS TRIBUNAL TO AWARD DAMAGES ON THE BASIS OF THE CONCEPT OF UP-‐STREAM LOSSES ... 40

PRAYER FOR RELIEF .................................................................................................................................... 42

IV

LIST OF AUTHORITIES

ABBREVIATIONS FULL CITATION

AWARDS AND DECISIONS IN INVESTMENT ARBITRATIONS

Abaclat v. Argentina

Abaclat and Others v. Argentine Republic, (formerly Giovanna a Beccara and Others v. The Argentine Republic) ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility, 4 August 2011

Abaclat v. Argentina (Abi-Saab)

Abaclat and Others v. Argentine Republic, (formerly Giovanna a Beccara and Others v. The Argentine Republic), ICSID Case No. ARB/07/5, Dissenting Opinion, Georges Abi-Saab, 28 October 2011

ADF v. United States

ADF Group Inc. v. United States, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003

ADM v. Mexico Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/5, Award, 21 November 2007

ADM v. Mexico (Decision)

Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/5, Decision on the Requests for Correction, 10 July 2008

AES v. Hungary AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of Hungary, ICSID Case No. ARB/07/22, Award, 23 September 2010

Aguas del Tunari v. Bolivia (Alberro-Semerena)

Aguas del Tunari, S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, Declaration of José Luis Alberro-Semerena, 22 October 2005

AIG v. Kazakhstan

AIG Capital Partner, Inc. and CJSC Team Real Estate Company v. Republic of Kazakhstan, ICSID Case No. ARB/01/6, Award, 7 October 2003

V

Alpha v. Ukraine Alpha Projektholding GMBH v. Ukraine, ICSID Case No. ARB/07/16, Award, 8 November 2010

Amto v. Ukraine Limited Liability Company Amto v. Ukraine, Arbitration No. 080/2005, Final Award, 26 March 2008

Arif v. Moldova Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No ARB/11/23, Award, 8 April 2013

Azinian v. Mexico Robert Azinian, Kenneth Davitian, & Ellen Baca v. Mexico, ICSID Case No. ARB(AF)/97/2, Award, 1 November 1999

Azurix v. Argentina

Azurix Corp. v. Argentina, ICSID Case No. ARB/01/12, Award, 14 July 2006

Autopista v. Venezuela

Autopista v. Venezuela, ICSID Case No. ARB/00/5, Decision on Jurisdiction, 27 September 2001

Azurix v. Argentina

Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Decision on Jurisdiction, 8 December 2003

Bayindir v. Pakistan

Bayindir Insaat Turizm Ticaret Ve Sanayl A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009

Bayview v. Mexico

Bayview Irrigation District No 11 and ors v Mexico, Award, ICSID Case No ARB(AF)/05/1, 19 June 2007

Benvenuti v. Congo

S.A.R.L. Benvenuti & Bonfant v. People’s Republic of the Congo, ICSID Case No. ARB/77/2, Award, 8 August 1980.

BG v. Argentina BG Group Plc. v. Republic of Argentina, UNCITRAL, Final Award, 24 December 2007

Biloune v. Ghana Biloune and Marine Drive Complex Ltd. v. Ghana Investments Centre and The Government of Ghana, UNCITRAL, Award on Jurisdiction and Liability, 27 October 1989

Bosh v. Ukraine Bosh International, Inc. and B&P, LTD Foreign Investments Enterprise v. Ukraine, ICSID Case No. ARB/08/11, Award, 25 October 2012

VI

Bogdanov v. Moldova

Iurii Bogdanov, Agurdino-Invest Ltd. and Agurdino-Chimia JSC v. Republic of Moldova, Arbitral Award, 22 September 2005

Caratube v. Kazakhstan

Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award, 5 June 2012

Cargill v. Mexico Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, 18 September 2009

Cementownia v. Turkey

Cementownia "Nowa Huta" S.A. v. Republic of Turkey, ICSID Case No. ARB(AF)/06/2, Award, 17 September 2009

CME v. Czech Republic

CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Partial Award, 13 September 2001

CMS v. Argentina CMS Gas Transmission Company v Argentina, Award, ICSID Case No ARB/01/8, IIC 65 (2005), 25th April 2005, 12 May 2005

ConocoPhillips v. Venezuela

ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and Merits, 3 September 2013

Desert Line v. Yemen

Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No ARB/05/17, Award, 6 February 2008

Duke v. Ecuador Duke Energy Electroquil Partners and Electroquil SA v. Ecuador, ICSID Case No. ARB/04/19, Award, 12 August 2008

EDF v. Romania EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award, 8 October 2009

Electrabel v. Hungary

Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012

El Paso v. Argentina

El Paso Energy International Company v. Argentina, ICSID Case No. ARB/03/15, Award, 31 October 2011

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

VII

Argentina Case No. ARB/01/3

Feldman v. Mexico

Marvin Roy Feldman Karpa v. Mexico, ICSID Case No. ARB(AF)/99/1, 16 December 2002, para. 112

Frontier v. Czech Republic

Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Final Award, 12 November 2010

F-W Oil Interests v. Trinidad

F-W Oil Interests, Inc. v. Republic of Trinidad & Tobago, ICSID Case No. ARB/01/14, Award, 3 March 2006

Generation Ukraine v. Ukraine

Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003

Genin v. Estonia Alex Genin, Eastern Credit Limited, INC. and A.S. Baltoil v. Republic of Estonia, ICSID Case No. ARB/99/2, Award, 25 June 2001

Goetz v. Burundi [II]

Antoine Goetz and others v. Republic of Burundi [II], ICSID Case No. ARB/01/2, Award, 21 June 2012 [French]

Grand River v. United States

Grand River Enterprises Six Nations, Ltd., et al. v. United States of America, UNCITRAL, Award, 12 January 2011

Gustav v. Ghana Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award, 18 June 2010

Hochtief v. Argentine

Hochtief AG v. The Argentine Republic, ICSID Case No. ARB/07/31, Decision on Jurisdiction, 24 October 2011

Inmaris v. Ukraine

Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ICSID Case No. ARB/08/8, Award, 1 March 2012

International Bank of Washington

International Bank of Washington – Overseas Private Investment Corporation: Arbitration of Dispute Involving U.S. Investment Guaranty Program, ILM, Vol. 11, No. 6, November 1972, pp. 1216-1234 at 1227-1228

Jan de Nul v. Egypt

Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/04/13, Award, 6 November 2008

VIII

Joy Mining v. Egypt

Joy Mining Machinery Limited v Egypt, ICSID Case No. ARB/03/11, Award on Jurisdiction, 6 August 2004

Kardassopoulos v. Georgia

Ioannis Kardassopoulos v. Georgia, ICSID Case No. ARB/05/18, Award, 3 March 2010

Kilic v. Turkmenistan

Kilic Insaat Ithalat Ihracat Sanayi ve Ticaret Anonim Sirketi v. Turkmenistan, ICSID Case No. ARB/10/1, Award, 2 July 2013

Lemire v. Ukraine Joseph Charles Lemire v. Ukraine, ICSID Case No ARB/06/18, Award, 28 March 2011

LG&E v. Argentina

LG&E Energy Corp., LG&E Capital Corp., LG&E International Inc. v. Argentine, ICSID Case No. ARB/02/1 , Decision on Liability, 3 October 2006

Mafezzini v. Spain Emilio Agustin Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award (Merits), 13 November 2000

Methanex v. United States

Methanex v. United States, UNCITRAL, Final Award on Jurisdiction and Merits, 3 August 2005

Mobil v. Venezuela

Mobil v. Venezuela, ICSID Case No. ARB/07/27, Decision on Jurisdiction, 10 June 2010

Mytilineos v. Serbia (Mitrović)

Mytilineos Holdings SA v. The State Union of Serbia & Montenegro and Republic of Serbia, UNCITRAL, Dissenting Opinion from the Arbitral Award on Jurisdiction of Professor Dr. Dobrosav Mitrović, 6 September 2006

National Grid v. Argentina

National Grid P.L.C. v. Argentine Republic, UNCITRAL, Award, 3 November 2008

Niko v. Bangladesh

Niko Resources (Bangladesh) Limited v Bangladesh and ors, Decision on Jurisdiction, ICSID Case No ARB/10/11, ICSID Case No ARB/10/18, 19 August 2013

Noble Ventures v. Romania

Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, 12 October 2005

Occidental v. Occidental Exploration and Production Company v. The Republic of

IX

Ecuador Ecuador, LCIA Case No. UN3467, Award, 1 July 2004

Oostergetel v. Slovak Republic

Jan Oostergetel and Theodora Laurentlus v. Slovak Republic, UNCITRAL, Final Award, 23 April 2012

Pac Rim v. El Salvador

Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/09/12, Decision on the Respondent's Jurisdictional Objections, 1 June 2012

Parkerings v. Lithuania

Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, 11 September 2007

Paushok v. Mongolia

Sergei Paushok, CJSC Golden East Company and CJSC Golden East Company and CJSC Vostokneftegaz Company v. Government of Mongolia, Award on Jurisdiction and Liability, 28 April 2011

Phoenix v. Czech Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009

Pope & Talbot v. Canada

Canada Pope & Talbot Inc. v. Canada, UNCITRAL, Interim Award, 26 June 2000

PSEG v. Turkey

PSEG Global Inc. And Konya Ilgin Elektrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, 19 January 2007,

Quiborax v. Bolivia

Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012

RFCC v. Morocco Consortium RFCC v. Morocco, ICSID Case No. ARB/00/6, Award, 22 December 2003 [French]

Romak v. Uzbekistan

Romak S.A. v. Republic of Uzbekistan,UNCITRAL, PCA Case No. AA280, Award, 26 November 2009

Rompetrol v. Romania

The Rompetrol Group N.V. v. Romania, ICSID Case No ARB/06/3, Award, 6 May 2013

Rumeli v. Kazakhstan

Rumeli Telekom A.S. and Telsim Mobil Telekomikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award,

X

July 29, 2008

RSM v.Grenada RSM Production Corporation v Grenada, Award, ICSID Case No ARB/05/14, 11 March 2009

Saluka v. Czech Republic

Saluka Investments B.V. v. Czech Repulic, UNCITRAL, Partial Award, 17 March 2006

Santa Elena v. Costa Rica

Companía del Desarrallo de Santa Elena, S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1, Final Award, 17 February 2000

S.D. Myers v. Canada

S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 November 2000

S.D. Myers v. Canada (Dissenting Opinion)

S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Separate Opinion by Dr. Bryan Schwartz, Concurring Except with Respect to Performance Requirements, in the Partial Award of the Tribunal, 12 November 2000

Sempra v. Argentina

Sempra Energy International v. Argentina, ICSID Case No. ARB/02/16, Award, 28 September 2007

Spyridon v. Romania

Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award, 1 December 2011

Suez v. Argentina 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 July 2010

SGS v. Pakistan SGS v. Pakistan, Decision on Objections to Jurisdiction, ICSID Case No ARB/01/13, 6 August 2003

SGS v. Pakistan, (Procedural Order 2)

SGS Société Générale de Surveillance SA v Pakistan, ICSID Case No ARB/01/13, Procedural Order No 2, 16 October 2002

SGS v Philippines (Jurisdiction)

SGS Société Générale de Surveillance SA v Philippines, Decision on Objections to Jurisdiction and Separate Declaration, ICSID Case No ARB/02/6, 29 January 2004

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

XI

Argentina Award, 6 February 2007

Standard Chartered Bank v. Tanzania

Standard Chartered Bank v. The United Republic of Tanzania, ICSID Case No. ARB/10/12, Award, 2 November 2012

Tecmed v. Mexico Técnicas Medioambientales Tecmed SA v Mexico, ICSID Case No ARB(AF)/00/2, Award, 29 May 2003

Tidewater v. Venezuela

Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., Twenty Grand Offshore, L.L.C., Point Marine, L.L.C., Twenty Grand Marine Service, L.L.C., Jackson Marine, L.L.C. and Zapata Gulf Marine Operators, L.L.C. v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Jurisdiction, 8 Febuary 2013

Total v. Argentina Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, 27 December 2010

Toto v. Libanon Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, ICSID Case No. ARB/07/12, Award, 7 June 2012

Tza v. Peru Yap Shum Tza v Peru, ICSID Case No ARB/07/6, Final award, 7 July 2011

Vanessa v. Venezuela

Vanessa Ventures Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/04/6, Award, 16 January 2013

Vivendi v. Argentina

Compania de Aguas del Aconquija S.A. and Vivendi Universal (formerly Compagnie Generale des eaux v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on annulment, 3 July 2002

Walter Bau v. Thailand Walter Bau v. Thailand, UNCITRAL, Award, 1 July 2009

Waste Management v. Mexico (Highet)

Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/98/2, Dissenting Opinion (of Keith Highet), 8 May 2000

White Industries v. India

White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award, 30 November 2011

XII

Yaung v. Myanmar

White Industries Australia Ltd v India, IIC 529 (2011), UNCITRAL, Final award, 30 November 2011

DECISIONS AND AWARDS OF OTHER INTERNATIONAL COURTS AND TRIBUNALS

Abestos Case WTO Appellate Body Report, European Communities-Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, 12 March 2001

Bischoff Bischoff Case (Germany v. Venezuela), RIAA, Vol. X, 1903, pp. 420-421

Clove Cigarettes United States – Measures Affecting the Production and Sale of Clove Cigarettes, WTO, Report of Panel, WT/DS406/R, 2 September 2011

Gabcikovo-Nagymaros

Gabcikovo-Nagymaros Project, Hungary v Slovakia, 1997 ICJ 7, September 25.

Mexico v. Cargill (Appeal)

Mexico v. Cargill Inc., Appeal of Ontario Superior Court decision, 2011 ONCA 622, IIC 510 (2011), Court of Appeal [ONCA], 15 March 2011

Oscar Chinn Affaire Oscar Chinn, PCIJ, Series A/B, 1934

Shrimps Case WTO Appellate Body Report, United States-Import Prohibition of Certain Shrimp and Shrimp Products: Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, 22 October 2001.

Starrett Starrett Housing Corp v. The Government of the Islamic Republic of Iran et al., 16 Iran-U.S. C.T.R. 112, Final Award No. 314-24-1 of 14 August 1987

JOURNAL ARTICLES AND CONTRIBUTIONS IN COLLECTIVE WORKS

Appleton, B. Appleton, Regulatory Takings: The International Law Perspective,

XIII

International Regulation

N.Y.U. Environmental Law Journal, Vol. 11, 2002, pp. 35-48

Fortier/Drymer, Caveat Investor

L. Yves Fortier, Stephen L. Drymer, Indirect Expropriation in the Law of International Investment: I Know It When I See IT, or Caveat Investor, ICSID Review, Vol. 19 (2), 2004, pp. 293-327

Glivanos, Investor Protection v. State Regulation

I. Glivanos, Investor Protection v. State Regulatory Discretion Definitions of Expropriation and Shrinking Regulatory Competence, European Journal of Law Reform, Vol. 13(1), 2011, pp. 97-114

Kriebaum: Regulatory Takings

Ursula Kriebaum, Regulatory Takings: Balancing the Interests of the Investor and the State, The Journal of World Investment & Trade, Vol. 8, 2007, pp. 717-744

Kriebaum: Partial Expropriation

Ursila Kriebaum, Partial Expropriation, The Journal of World Investment & Trade, Vol. 8, No. 1, February 2007, pp. 69-84

Newcombe Andrew Newcombe, The Boundaries of Regulatory Expropriation in International Law, (http://ssrn.com/abstract=703244, Last visit: September 22, 2013)

Onlynyk, A Balanced Aproach

Stephen Onlynyk, A Balanced Aproach to Distinguishing between Legitimate Regulation and Indirect Expropriation in Investor-State Arbitration, International Trade and Business Law Review, Vol. 15, pp. 254-295

Potesta Michel Potesta, Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept, ICSID Revew, 2013, pp. 72-104

Ranjan, Medical Patents and Expropriation

Ranjan, Medical Patents and Expropriation in International Investment Law – with Special Reference to India, Manchester Journal of International Economic Law, Vol. 5, Issue 3, 2008, pp. 72-104

Schwenzer & Hachem

Ingeborg Schwenzer & Pascal Hachem, Moral Damages in International Investment Arbitrations; in Kröll, L.A. Mistelis, P. Perales Viscasillas & V. Rogers (eds), Liber Amicorum Eric Bergsten, International Arbitration and International Commercial Law: Synergy,

XIV

Convergence and Evolution, (2011)Kluwer

Shany Yuval Shany, Contract Claims vs. Treaty Claims: Mapping Conflicts between ICSID Decisions on Multisourced Investment Claims, AJIL, Vol. 99, 2005, pp. 835-851

Voon & Mitchell Tania Voon, Andrew Mitchell, Time to Quit? Assessing International Investment Claims against Plain Tobacco Packaging in Australia, Journal if International Economic Law, September 2011, 14:3, pp.515-552

TREATISES

Brown/ Miles Brown, Chester; Miles, Kate. Evolution in Investment Treaty Law and Arbitration, Cambridge University Press, 2011

Ripinsky Sergey Ripinsky and Kevin Williams, Damages in International Investment Law, (2008) BIICL.

INTERNATIONAL TREATIES

Germany-Zimbabwe BIT

Agreement between the Federal Republic of Germany and the Republic of Zimbabwe concerning the Encouragement and Reciprocal Protection of Investments, BGBl II 1997, 1839, signed on September 19, 1995

Germany – Uruguay BIT

Agreement between the Federal Republic of Germany and the Eastern Republic of Uruguay on the Promotion and Reciprocal Protection of Investments, BGBl II 1988, 272, UNTS Reg No 27692, signed on May 4, 1987.

ICCPR International Covenant on Civil and Political Rights (1966) (http://www1.umn.edu/humanrts/instree/b3ccpr.htm Last visit: September 20, 2013)

Russia-Portugal BIT

Agreement between the Government of the Russian Federation and the Government of the Republic of Portugal for the Promotion and Mutual Protection of Investments; IC-BT 206 (1994), signed on July 21, 1994.

XV

UK-China BIT

Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People's Republic of China Concerning the Promotion and Reciprocal Protection of Investments, 1462 UNTS 255, signed on May 15, 1986.

US-Poland BIT Treaty between the United States of America and the Republic of Poland Concerning Business and Economic Relations, S Treaty Doc No 101-18 (1990), signed: March 21, 1990.

VCLT Vienna Convention on the Law of Treaties, 1155 U.N.T.S 331

MISCELLANEOUS

Articles on State Responsibility

Responsibility of States for Internationally Wrongful Acts, G.A. Res. 56/83, U.N. Doc.A/RES/56/83 (2001)

Black’s Law Dictionary Black’s Law Dictionary, 9th Edition (2009) West Publishing Co.

Plain packaging, Council Victoria

Plain packaging of tobacco products: a review of the evidence, Quit Victoria, Cancer Council Victoria, May 2011

Restatement American Law Institute, Restatement of the Law Third—The Foreign Relations Law of the United States, vol. 2 (1987)

TPPA 2011, TMAA 2011

Tobacco Plain Packaging Act 2011 and Trade Marks Amendment (Tobacco Plain Packaging) Act 2011

UNCTAD FET Fair and Equitable Treatment, UNCTAD Series on Issues in International Investment Agreement II, New York and Geneva, 2012, p. 81.

Uruguayan Ordinance 514 and Decree 287/009

Ordinance 514 of 18 August 2008 by Urguayan Ministry of Public Health and Decree 287/009 of 15 June 2009.

Wälde, Liber Amicorum

A Liber Amicorum: Thomas Wälde. Law Beyond Conventional Thought (2009) 265

STATEMENTS OF FACTS

1. Claimant, Contifica Asset Management Corporation (“Claimant”, “CAM”)a member of major international conglomerate - Contifica Group, incorporated in Prosperia, launched the present arbitration against the Republic of Ruritania (“Respondent”)alleging that measures adopted by it to address the problem of alcohol addiction and exposure of the youth to alcohol are inconsistent with Respondents obligations towards CAM under the Treaty of Mutual Promotion and Protection of Foreign Investment between Respondent and the State of Cronos, 1997 (“BIT”).

CLAIMANT’S ACQUISITION OF SHARES IN FBI

2. Freecity Brewery Inc. (“FBI”) is a Ruritanianbrewery founded in 1928. Until 2008 it was owned by the State Property Fund of Ruritania (“S.P.F.”).In the beginning of 2008the S.P.F. decided to sellFBI and announced an international tender to disposeits shares to a private investor. Contifica Spirits, a fully owned subsidiary within the Contifica Group, incorporated in Prosperiana,was declared the winner of the tender and acquired the entirety of shares in FBI. 3. In January 2010 the New Way party secured the majority in Ruritanian parliament. Its hard stance towards marketing and sale of alcohol was one of the widely publicized part of the party’s election manifesto. 4. Two months later, on 17 March 2010in the course of a purported “intra-group restructuring”,the shares in FBI was transferred to Claimant, incorporated under the law of the State of Cronos that, unlike Prosperia and Prosperiana,had concluded a BIT with Ruritania.

REGULATIONS ADOPTED TO ADDRESS ALCOHOL ADDICTION AND YOUTH PROTECTION

5. On 20 November 2010, the Ruritanian government adopted the Regulation of Sale and Marketing of Alcoholic Beverages Act (“MAB Act”),which provided a legal framework for

2

selling and marketing of all types of alcohol in Ruritania. The MAB Act,inter alia, prohibited advertisement and sale of alcoholic beverages at professional sport establishments; selling and serving of alcohol between 9 a.m. and 9 p.m.; and outlawed to serve alcohol to a person who is reasonably believed to be intoxicated. The MAB Act also prohibited sale of alcohol in containers exceeding 0,5l and imposed certain requirements on labeling.

6. On 30 June 2011 the Ministry of Health and Social Security of Ruritania adopted an ordinance (“the Ordinance”) requiring any products containing Reyhan concentrate to be labelled with awarning on a potential danger of Reyhan concentrate. The measure was based on a scientific report released by the Human Health Research Institute’s (“HRI”)that based on analysis of data gathered from a controlled clinical study, providingthat an active chemical ingredient found in Reyhan exposed its consumers to a higher risk of cardiac complications.

7. FBI’s competitors took certain advantage of the situation and sponsored several programs on Ruritanian TV channelspropagating the danger of Reyhan concentrate also used in FREEBREW, a beer brand produced and marketed by FBI.

ARREST AND DETENTION OF MESSRS. GOODFELLOW AND STRAW

8. On 1 December 2011, the Prosecutor Office of Ruritania commenced investigations against Messrs. Goodfellow and Staw, executives of FBI and Contifica Group. The investigation was based on information received by the Office that those individuals were involved in bribing of the officials of the S.P.F. in connection with the acquisition of the FBI shares.

9. In the course of the investigation, Messrs. Goodfellow and Straw were arrested in the International Airport of the Ruritanian capital, when boarding their flight to Prosperia.

10. The criminal investigation against those individuals was terminated due to insufficient evidence.

3

ARGUMENTS

I. THIS TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE CLAIMS

SUBMITTED BY CAM

1. This Tribunal lacks jurisdiction to adjudicate upon the claims submitted by Contifica Management

Corp. (“Claimant”, “CAM”), as CAM’s shareholding in FBI is not a protected investment by an investor

of “[an]other Contracting State” [A]. In any event, the facts surrounding acquisition of the shares in FBI

by CAM constitute an abuse of process and, therefore, the claims are inadmissible [B].

A. AS NEITHER CAM IS A PROTECTED INVESTOR NOR DID IT MAKE A

BONA FIDE INVESTMENT THE TRIBUNAL LACKS JURISDICTION

OVER THE DISPUTE

2. Pursuant to the applicable arbitration clause in Article 8 of the Ruritania-Cronos BIT (“BIT”),

this Tribunal does only have jurisdiction over disputes concerning protected “Investments” arising

between an “Investor” and a Contracting State. Respondent submits that neither CAM’s shareholding in

FBI qualifies as an investment entitled to protection, nor does CAM represent a qualified investor; this

Tribunal consequently lacks both jurisdiction ratione marteriae [1] and ratione personae [2].

1. CAM’s SHAREHOLDING IN FBI IS NO PROTECTED

INVESTMENT

3. The existence of a protected “Investment” should not be analyzed “in a narrow technical way, but

rather in the context of the intention animating the BIT and in the light of its terms”.1

4. In the first place, the definition of “Investment” in Article 1 (1) BIT requires assets to have been

“invested”. Based on customary international law rules of treaty interpretation reflected in the Vienna

Convention on the Law of Treaties, this provision ought to be interpreted “in good faith, in accordance

with the original meaning to be given to the terms in their context, and in light of its object and purpose”.2

1F-W Oil Interests v. Trinidad, para.124; RSM v. Grenada, para.240

2 VCLT, Art.31(1); Romak v. Uzbekistan, para.169; Parkerings v. Lithuania, para.275; Kilic v. Turkmenistan, paras.5.2.3-5.2.6.

4

5. In its general sense the term “to invest” refers to “the placing of capital or laying out of money in

a way intended to secure income or profit from its employment.”3 This meaning is to be distinguished

from the definition of “to own”: “to have a good legal title, to hold as property”.4 Thus, the BIT by using

the word “invested” requires the “existence of a contribution over a period of time”.5

6. Following this line of reasoning, arbitrator Mitrović in Mytilineos v. Serbia and Montenegro

concluded that by using the term “invested” in the BIT “the Contracting Parties wished to guarantee only

for those assets that are really invested in their territory”.6

7. Moreover, the Preamble to the BIT as well as its substantial provisions specify that by a qualified

“Investment” an “Investment by the Investor” is envisaged.7 This expression, used in UK-Tanzania BIT,

was subject to interpretation in Standard Chartered Bank v. Tanzania.8 In that case the tribunal rejected

the presence of a qualified investment, as the claimant only held title to the property, as opposed to

actively controlling it.9 By reference to this BIT’s Preamble it further concluded that in order to enjoy

protection, the claimant should by proving “active contribution” demonstrate that the “investment” is

indeed an “investment by the investor”:10

“Some activity of investing is needed, which implicates the claimant’s control

over the Investment or an action of transferring something of value (money,

know-how, contracts, or expertise) from one treaty-country to the other.”11

3Black’s Law Dictionary, p.741.

4Black’s Law Dictionary, p.996.

5 Caratube v. Kazakhstan, para.360.

6 Mytilineos v. Serbia (Mitrović), para.7.2.

7 Ruritania-Cronos BIT, Art.2(1)(a), 4(1).

8Standard Chartered Bank v. Tanzania, paras.214-232.

9Standard Chartered Bank v. Tanzania, paras.231-232.

10Standard Chartered Bank v. Tanzania, para.225; See also: Yaung v. Myanmar, para.53.

11Standard Chartered Bank v. Tanzania, para.230.

5

8. Based on the similarity of the provisions, this stipulation shall be equally accepted in the present

case. Additionally, such interpretation aligns with the purpose of the Ruritania-Cronos BIT, stipulated in

the Preamble. Accordingly, the BIT shall contribute to the “prosperity” and “welfare” of both Contracting

States. The furtherance of prosperity and welfare, however, may only be achieved through active

economic engagement.

9. As to the case at hand, “significant investments in the technology, design and equipment of the

brewery transforming it into a state of art facility” were only made by Contifica Group.12 The one and

only economic effort that CAM did undertake was the – strikingly low – payment of 5,000 USD when

acquiring the entirety of shares in FBI via “intra-group restructuring” on 17 March 2010.13 Yet, as this was

no more than just a small fraction of FBI’s actual value14 it cannot be deemed a display of active economic

engagement worthy of protection under this BIT.

10. The tribunal in Caratube v. Kazakhstan prominently corroborates this notion:

“Indeed, payment of only a nominal price and lack of any other contribution by

the purported investor must be seen as an indication that the investment was not

an economic arrangement, is not covered by the term ‘investment’ as used in the

BIT, and thus is an arrangement not protected by the BIT”.15

11. Similarly, this Tribunal shall find that FBI has not been “invested” in by CAM. Hence, the

relationship between the claimant and FBI is insufficient to satisfy the requirement of jurisdiction ratione

personae under the Ruritania-Cronos BIT.

12 Statement of Claim, para.8.

13 Statement of Claim, para.9; Statement of Defense, para.7.

14 Statement of Defense, para.7.

15 Caratube v. Kazakhstan, para.435.

6

2. CAM IS NOT A QUALIFIED INVESTOR

12. Respondent acknowledges that CAM is a company incorporated in the State of Cronos16 and thus,

may formally satisfy the definition of “Investor” in Article 1(3)(b) of the BIT. Yet, when determining its

jurisdiction, this Tribunal shall not be confined to consider the satisfaction of formal criteria.17

13. As noted in a recent caseConocophillips v. Venezuela:

“The principal reason that tribunals have given for not treating compliance with formal or technical requirements as being sufficient is to avoid the misuse of power conferred by law.”18

14. In order to effectively avoid such misuse, it is recognized that tribunals in examining their

competence should “rather review of the circumstances surrounding the case, and, in particular, the actual

relationships among the companies involved”.19

15. In the case at hand, Claimant is a member of a Group of companies, with its parent company

incorporated in Prosperia.20 As described above, investment it is not made by Claimant but by the Group

itself. Claimant, as follows from its initial name “Business Holding XVII Corp”,21 absence of indication of

any real economic activities, and the fact that FBI’s key executive officers are employees of other

subsidiaries and the parent company of Contifica Group,22 may legitimately be presumed to be a shell

company.

16. With respect to the similar instance, the tribunal in Phoenix v Czech indicated:


17Aguas del Tunari v. Bolivia (Alberro-Semerena), para.34;

18ConocoPhillips v. Venezuela, para.273.

19ConocoPhillips v. Venezuela, para.275; Mobil v. Venezuela, para.191; Pac Rim v. El Salvador, para.2.43.


21 Procedural Order No.2, para.24.


7

“the BIT system is not deemed to protect economic transactions undertaken and performed with the sole purpose of taking advantage of the rights contained in such instruments, without any significant economic activity, which is the fundamental prerequisite of any investor’s protection.”23

17. Launching the present proceedings, Claimant seeks to invoke the right of an investor protected by

the BIT without holding a protected investment and actually conducing to the very objective of the Treaty.

In the words of the tribunal in Cementownia v. Turkey, the Claimant “purports to be an investor when it

[knows] that this was not the case”,24 which represents a dishonest behavior violating good faith.25

18. In sum, this Tribunal shall look beyond a formal definition of an investor, uncover Claimant as

merely “stepping in investor shoes”, and refuse jurisdiction ratione personae.

B. IN ANY EVENT, CAM’S CLAIMS ARE INADMISSIBLE

19. Even if this Tribunal was to assume jurisdiction over the present matter, it should find CAM’s

submissions inadmissible, for the absence of a real business intent underlying the intra-group restructuring

[1] and the fact the CAM foresaw the dispute when the restructuring was executed [2] renders this

transaction an example of bad faith “retrospective gaming of the system”.

1. THE INTRA-GROUP RESTRUCTURING HAPPENED WITH NO VALID

BUSINESS PURPOSE

20. The question of admissibility concerns the appropriateness of a tribunal hearing the claims

advanced.26 An instance deserving a tribunal’s particular consideration is the unfair behavior in trying to

invoke BIT protection for disputes, which were not intended to be covered by the Contracting States.27

21. Generally speaking, the Tribunal in Phoenix v. Czech noted in this respect:

23 Phoenix v. Czech, para.93.

24 Cementownia v. Turkey, para.159. 25Niko v. Bangladesh, para.468.

26Waste Management v. Mexican (Highet), para.58; Hochtief v. Argentine, para.90; Abaclat v. Argentina (Abi-Saab), para.18; Newcombe, p.193.

27Quiborax v. Bolivia, para.298; Vannessa v. Venezuela, para.113; Abaclat v. Argentine, para.648, Phoenix v. Czech, paras.106-113.

8

“The principle of good faith requires parties “to deal honestly and fairly with each other, to represent their motives and purposes truthfully, and to refrain from taking unfair advantage”…Nobody shall abuse the rights granted by treaties, and more generally, every rule of law includes an implied clause that it should not be abused.”28

22. International investment jurisprudence recognizes that the change of nationality done with the

intent to receive protection under a BIT that otherwise would be unavailable, does constitute an abuse of

process.29 The legitimacy of the restructuring needs to be analyzed on the basis of the particular

circumstances of the case, based on available evidence.30 However, valid business purpose31 and real

economic activity of a company having acquired shares32 are established and commonly accepted criteria.

23. An analysis of the facts of the case indicates that despite the fact that Contifica Spirits is

responsible for the management of the alcoholic beverages production assets of the Contifica Group, the

shares were transferred to CAM.33 This seems particularly pointless, since at the time of restructuring, FBI

was a successfully operating business.34 Secondly, Claimant sought a swift execution of the transfer.

Corresponding evidence may be found in the internal memorandum between FBI General Counsel, Mr.

Straw, and FBI CEO, Mr. Goodfellow:

“The factor of presence of a Contifica group company in the respective jurisdiction is important, since we may need to implement the restructuring quite quickly and hence would prefer to use an existing group company.“35

24. In fact, first consultations took place in February 2010.36 The memorandum was sent on 1 March

201037 and restructuring ensued already on 17 March 2010.38 Such extraordinarily swift transfer of shares

28Phoenix v. Czech, para.107.

29Phoenix v. Czech, paras.142-144.

30 Tidewater v. Venezuela, para.147.

31Phoenix v. Czech, paras.140,142; Autopista v. Venezuela, para.119.

32Mobil v. Venezuela, para.197


34 Statement of Claim, paras.6,8.

35 Statement of Defense, Exhibit RX1.


9

valuing some 300.000.000 US dollars allows for the assumption that the restructuring was no prospective

planning but driven by fear of adverse impacts on FBI operations and the strive to obtain BIT protection.

25. This holds particularly true given that neither Contifica Enterprises Plc, incorporated in

Prosperia39 nor its fully owned subsidiary Contifica Spirits S.p.A., incorporated in Posteriana40 would have

had access to BITs with Ruritania.

26. Based on above, it can hardly be asserted that the transfer of shares from Contifica Spirits to CAM

simply abided by a business strategy within the Group. Given the therefore implied bad faith, this Tribunal

shall find CAM’s submissions inadmissible.

2. IN ADDITION, CAM DID FORESEE THE DISPUTE AT THE TIME OF

THE INTRA-GROUP RESTRUCTURING

27. Foreseeability of the future dispute is a strong indicator of an abuse of process.41 The Tribunal of

Pac Rim v. El Salvador provided that if a change of nationality occurs at a time when the claimant party

can foresee a future dispute, this claimant party is an abuse of process, rendering respective submissions

inadmissible.42 With this respect, the tribunal further clarified that foreseeability is only to exclude when

the transfer took place “before the occurrence of any event or measure giving rise to a later dispute”.43

28. The present dispute arose on the basis of legitimate though disadvantageous changes in Ruritanian

legal regimes of the sale and marketing of alcoholic beverages. Those changes are inextricably connected





41Mobil v. Venezuela, paras.204-205; Pac Rim v. El Salvador, para.2.43; Autopista v. Venezuela, para.123. Tidewater v. Venezuela, para.184.

42Pac Rim v. El Salvador, para.2.100, See also: Phoenix v. Czech, paras.94-95.

43Pac Rim v. El Salvador, para.2.47.

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with the New Way Party’s rise to power only two months before the restructuring.44 Its hard stance

towards marketing and sale of alcohol was a widely publicized feature of the Party’s election manifesto.45

29. In Tidewater v. Venezuela46, which likewise concerned a change of nationality of the claimant

corporation, the tribunal determined that foreseeability is established when:

“the objective purpose of the restructuring was to facilitate access to an investment treaty tribunal with respect to a claim that was within the reasonable contemplation of the investor”.47

30. In the light of the facts described above, the “root of the dispute”48 was already known to CAM at

the time the restructure. Thus, the dispute was foreseeable and the restructuring – especially taken into

account its aforementioned urgency – was nothing but an attempt to “facilitate access to an investment

treaty tribunal”.

31. In conclusion, the absence of legitimate reasons justifying the restructuring and the foreseeability

of the present dispute at that time, provide this Tribunal with sufficient ground upon which to hold an

abuse of process and declare CAM’s submissions inadmissible.

II. THIS TRIBUNAL DOES NOT HAVE JURISDICTION OVER CAM’s CLAIMS

BASED ON THE ALLEGED BREACH OF THE S.P.A. AND THESE CLAIMS

ARE INADMISSIBLE

32. This Tribunal does not have jurisdiction over claims advanced on the basis of an alleged breach of

the S.P.A. (A.). In any event, this Tribunal should declare the claims inadmissible due to the prevailing

arbitration clause contained in the S.P.A. (B.).


45 Statement of Defense, para.6; Procedural Order No.2, para.9.

46Tidewater v. Venezuela, paras.193-194.

47Tidewater v. Venezuela, para.150.

48Pac Rim v. El Salvador, para.2.96.

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A. THIS TRIBUNAL’S JURISDICTION DOES NOT ENCOMPASS THE

ALLGED BREACH OF S.P.A

33. This Tribunal lacks jurisdiction ratione personae, as the conclusion of the S.P.A. by the State

Property Fund (“the Fund”) is not attributable to Ruritania (1.); and it lacks jurisdiction ratione marteriae

because the present umbrella clause proves inapplicable (2.).

1. THIS TRIBUNAL LACKS JURISDICTION RATIONE PERSONAE

34. Arbitral tribunals may adjudicate only upon disputes arising between a Contracting State and an

investor.49 In this respect, actions covered by a tribunal’s jurisdiction are those, which are attributable to a

State.50 The ILC Articles on State Responsibility – reflective of international customary law51 - specify

instances of presumed attribution under narrow conditions.

35. Whereas States are held responsible “for acts of their bodies or agencies that carry out State

functions”52, actions of separate legal entities qualify as attributable to a State only in exceptional

circumstances, when such entities manifestly exercise governmental functions under effective State

control.53 “Private or commercial” activities, conversely, do not eventuate in the attribution of conduct.54

36. International investment tribunals in various instances decided that separate legal entities cannot

be regarded as organs of the State.55 Under the Act adopted by the Ruritanian Parliament, the Fund

49 Ruritania-Cronos BIT, Art.8(1).

50 Articles on State Responsibility, Art.2(a).

51Bayindir v. Pakistan, para.113; F-W Oil Interests v. Trinidad, para.202.

52 Articles on State Responsibility, Art.4; Bogdanov v. Moldova, para.2.2.2.1.

53 Articles on State Responsibility, Art.5; Noble Ventures v. Romania, para.70.

54Bosh v. Ukraine, para.176; Mafezzini v. Spain, para.52; Paushok v. Mongolia, para.584; Articles on State Responsibility, Art.5.

55Bayindir v. Pakistan, para.119 ; EDF v. Romania, para.190; Amto v. Ukraine, para.101; Noble Ventures v. Romania, para.69.

12

possesses a separate legal status 56 and the Republic of Ruritania bears no liability for the debts of the

Fund.57 Thus, the Fund is not an organ of Ruritania for which it bears international responsibility.

37. Claimant may further assert attribution on the notion that the Fund’s conclusion of the S.P.A.

displayed an exercise of governmental authority. In order assume governmental activity, however, it is

necessary to demonstrate “effective State control” throughout the entire operation.58 In this respect, the

burden of proof lies with Claimant.59

38. The mere fact that the Respondent government appoints managing bodies of the Fund60 does not

in itself allow a conclusion that the Fund exercise governmental authority under the State control.

Comparable to the case at hand, in Noble Ventures v. Romania61 as well as in Amto v. Ukraine,62

executives were likewise appointed by the respective governments. Yet, neither tribunal recognized the

conduct of those entities attributable to the State based merely on this ground.

39. Even if the Fund occasionally engages in some sort of governmental activities, in the case at hand

– by concluding the S.P.A - it has not. Although the sale of the brewery in 2008 occurred during the time

of the financial crisis,63 there is no indication that the State of Ruritania was anyhow involved in either its

initiation or realization64, let alone exerted effective control over it. In absence of such indications, there

is no discretionary leeway to consider this disposal a governmental activity.



58Gustav v. Ghana, para.198; Jan de Nul v. Egypt, para.173; White Industries v. India, paras.8.1.15-8.1.17.

59Amto v. Ukraine, para.64.


61Noble Ventures v. Romania, para.79.

62Amto v. Ukraine, paras.101-102.



13

40. On the contrary, there are compelling indications to assume the S.P.A.’s commercial character.

For, similar to Bosh v. Ukraine, the Fund “entered into the contract in its own right”65 and the wording of

the agreement further supports this conclusion: no mentioning of the State of Ruritania whatsoever; a

provision prohibiting the Fund to assign rights attained under this agreement;66 and a commercial

arbitration clause67 all militate in favor of Respondent’s submission that, in this particular instance, the

Fund has not acted on behalf of the State of Ruritania.

41. Based on the above, this Tribunal should decide that the S.P.A. as concluded by the Fund – an

independent entity engaging in a commercial activity – is not attributable to the State of Ruritania and

consequently refuse its jurisdiction ratione personae.

2. THE UMBRELLA CLAUSE IS NOT APPLICABLE AS THE S.P.A

PROVISIONS DO NOT ENTAIL ACTIONABLE OBLIGATIONS

42. Uncontestably, Article 6 (2) of the BIT contains an umbrella clause that converts “contractual

undertakings into obligations under a BIT.” 68 Yet, the present umbrella clause presupposes an

“obligation” on the side of Respondent. As identified in SGS v. Philippines, this precisely involves

“binding obligations.”69 Yet, the scope of eligible “obligations” is limited. In this vein, the tribunal in Joy

Mining v Egypt held:

“It could not be held that an umbrella clause inserted in the Treaty, and not very prominently, could have the effect of transforming all contract disputes into investment disputes under the Treaty, unless of course there would be a clear violation of the Treaty rights and obligations or a violation of contract rights of such a magnitude as to trigger the Treaty protection.”70

65Bosh v. Ukraine, para.177.

66Share Purchase Agreement, Art.11.1.

67Share Purchase Agreement, Art.14.2.

68Noble Ventures v. Romania, para.46.

69SGS v. Philippines, para.117.

70Joy Mining v. Egypt; para.81. See also: CMS v. Argentina, para.299.

14

43. In addition, it is established that “obligations must originate in a contract between the State party

and the foreign investor.”71 By bringing the claim based on the S.P.A. to these proceedings, Claimant

relies on the warranty provided in Appendix 7 to the S.P.A. with the following wording:

“To the best of its knowledge the products of the Brewery do not pose any risks to the consumers, other than those which are ordinary for similar alcoholic beverages”

44. Firstly, as elaborated above, the S.P.A. was not concluded on behalf of a State of Ruritania. By

mere virtue of this fact, the Section does not include any governmental promise for actions or omissions

and thus does not constitute an obligation capable of “triggering Treaty protection”.72

45. The wording of the Section does not illuminate which precise obligation is entailed. It contains no

mandatory terms such as “shall”, “must” or the like, and it is not constructed in a way indicating what act

or omission is required in order to comply with the provision either.

46. From a taxonomic point of view, the location of the provision also supports the conclusion of an

absence of binding legal obligation. Should the drafters of the S.P.A. had considered the provision as

providing essential obligations, they would have incorporated it within the main part concerning rights and

obligations of the parties to the contract and not in Appendix 7.

47. For all the above, as the umbrella clause is not applicable, this Tribunal does not have jurisdiction

over the subject matter of claims based on the S.P.A..

B. IN ANY EVENT, THE EXCLUSIVE ARBITRATION CLAUSE IN THE S.P.A

PRECLUDES THIS TRIBUNAL FROM HEARING THE CLAIMS

48. It is well-settled practice, that if contracts contain mandatory arbitration clauses, parties must

abide by them, “unless [they are] overridden by another valid provision.”73

49. Article 14.2 of the S.P.A contains an arbitration clause, providing that

71Siemens v. Argentina, para.205.

72Joy Mining v. Egypt; para.81


15

“All disputes arising out of or in connection with the present Agreement shall be finally settled under the Rule of Arbitration of the International Chamber of Commerce […]”74

50. Thus, for claims based on the alleged breach of the S.P.A. a binding and valid arbitration clause is

available for Claimant.

51. To conclude that a valid arbitration clause may be overridden, this Tribunal must either be

provided with an express provision stating that the BIT arbitration clause shall prevail75, or be convinced

that the nature of claims justifies recourse to treaty arbitration.76

52. In the present instance, the BIT arbitration clause obviously does not entail any valid indications

that under certain circumstances it should take precedence over any contractual arbitration clause.

53. Further, this Tribunal shall dismiss Claimant’s contention that the nature of the claims allows this

Tribunal to consider claims under the S.P.A. Although CAM may attempt to connect the alleged violation

of the S.P.A. with its rights under the BIT, the core essence of this claim remains the alleged violation of

the Fund’s supposed obligation under the S.P.A. Hence, the S.P.A. arbitration clause as lex specialis

prevails and cannot be overridden by a more general BIT arbitration clause. A similar conclusion can be

found in the SGS v. Philippines where the tribunal made clear that, under general principle of law,

arbitration clauses within general frameworks such as a BIT may not supersede contractual arbitration

clauses.77 Consequently, regardless of which dispute settlement forum the exclusive contractual clause

refers to,78 a claimant has to follow it.79

54. In sum, the BIT arbitration clause is no valid provision to legitimately override the S.P.A.

arbitration clause and based thereupon the claims based on the alleged breach of the S.P.A. are

inadmissible.

74 Share Purchase Agreement, Art.14.2.

75SGS v. Pakistan, para.173.

76Vivendi v. Argentina, para.102.

77SGS v. Philippines, para.141; Shany, p.842.


79Bosh v. Ukraine, para.252.

16

III. RURITANIADID NOT VIOALTE ANY OF ITS OBLIGATIONS UNDER THE

BIT TOWARDS CLAIMANT

55. Respondent submits that both the 2010 MAB-Act and the 2011 Ordinance (“the measures”)

represent legitimate governmental regulations safeguarding public health and protecting Ruritanian youth.

Therefore, Respondent’s measures neither expropriated CAM (A.)nor treated CAM unfairly and

inequitably (B.).

A. RURITANIA MEASURES ARE NOT EQUIVALENT TO EXPROPRIATION

56. As a general rule, regulations interfering with an investor’s investment are not deemed

expropriatory per se.80 Rather, a substantial deprivation of an investment caused by a measure of an

objectionable character are the two relevant criteria to be considered.81 In the course thereof, tribunals

shall analyse the situation on “a case-by-case basis, in light of all attending circumstances.”82

57. From the very outset, Claimant’s alleged expropriation is precluded by virtue of its indisputably

retained control over FBI (1.) In any event, Respondent will demonstrate that CAM has not been

substantially deprived of any investment associated with FBI (2.). Even if this Tribunal should disagree,

the deprivation constitutes no compensable expropriation, as the responsible measures were covered by

Ruritanian police powers (3.).

1. RETAINED CONTROL OVER FBI PRECLUDES THE POSSIBILITY TO

CLAIM EXPROPRIATION

58. Claims of expropriation cannot be substantiated if “the investor is in control of the investment, the

Government does not manage the day-to-day operations of the company […] and the investor has full

ownership and control of the investment.”83 Various tribunals have subscribed to this approach.84

80Methanex v. United States, para.15.

81Fortier/Drymer, Caveat Investor, p.300.

82Fortier/Drymer, Caveat Investor, p.314.

83CMS v. Argentina, paras.259, 263, 264; Pope & Talbot v. Canada, para.100.

84PSEG v. Turkey, paras.278-280; Walter Bau v. Thailand, para.10.16; Goetz v. Burundi [II], para.194.

17

59. Whereas Respondent concedes that legislation restricting sale and marketing of products may

have a bearing on how to conduct business, narrowing an investor’s leeway does not equal deprivation of

overall its control. In fact, CAM is still in possession of the entirety of shares in FBI. Likewise, there

exist no indications as to CAM’s control over FBI has indeed been lost, let alone Ruritanian authorities

have seized control over the brewery’s day-to-day operations.

60. For those reasons, a claim of compensable expropriation shall be dismissed ab inito.

2. IN ANY EVENT, THE MEASURES’ INTERFERENCE WITH CAM’S

INVESTMENTS DOES NOT TANTAMOUNT TO EXPROPRIATION

61. For a measure to be expropriatory it must have caused a substantial85 and permanent86 deprivation

of an investor’s investment; a mere economical interference in the investor’s activities is not enough to

amount to expropriation.87

62. Claimant’s investments at issue comprise the economic benefits in the form of revenues by FBI

(i), the brewery’s goodwill (ii), and the intellectual property rights to the trademarks and trade dresses (iii),

neither one of which has been substantially and permanently interfered with.

i. THE LOSS OF REVENUES INCURRED BY FBI IS

INSUFFICIENTLY SUBSTANTIAL

63. It is well established that “not every business problem experienced by a foreign investor is an

indirect or creeping expropriation.”88 Pursuant to Tecmed v. Mexico, an investor is required to be

“radically deprived of the economical use and enjoyment of its investments, as if the rights related thereto

[…] had ceased to exist”.89 This view is shared in extensive jurisprudence.90

85Pope & Talbot v. Canada, para. 102; See also: Newcombe, p.1; Kriebaum: Partial Expropriation, p.70.

86Tecmed v. Mexico, para.116.

87Azinian v. Mexico, para.83.

88Feldman v. Mexico, para.112; Generation Ukraine v. Ukraine, para.20.34.

89Tecmed v. Mexico, para115.

90Pope & Talbot v. Canada, para.102; LG&E v. Argentina, para.192.

18

64. Though FBI incurred admittedly considerable of sales it can hardly be held that they ceased to

exist. In fact, FBI has successfully managed to adapt itself to changes in Ruritanian legal regimes and

continues to operate to the present day. Diminished revenues, however, are not in and of themselves

sufficient to substantiate a claim of expropriation. Under similar circumstances, the tribunal in BG v.

Argentina refused to qualify a measure as equivalent to expropriation if the investment continued to

operated – even though profits where diminished.91 The tribunal in Grand River Enterprises v. United

States concurred, stating that “it is not sufficient that the State action impaired only a limited portion of the

an otherwise on-going investment.”92 Most succinctly in this regard, the tribunal in Feldman v. Mexico

proclaimed:

“Governments in their exercise of regulatory power, frequently change their laws and regulations in response to changing […] circumstances or changing political, economic or social considerations. Those changes may well make it difficult or impossible for an investor to carry out a particular business, rendering certain activities less profitable or even uneconomic to continue without eventuating in expropriation.”93

65. Accordingly, Claimant would have to condone, the unprofitability of its business is still not in and

of itself sufficient to substantiate a deprivation tantamount to expropriation.

66. Based on the above, lost revenues of FBI at issue do not entitle CAM to compensation for

expropriation.

ii. THE GOODWILL OF FBI HAS NOT BEEN IMPACTED

PERMANENTLY

67. “Goodwill” means the intangible saleable asset arising largely out of two components: the

reputation of a business and its relations with its costumers.94

68. Drawing once again on Tecmed v. Mexico, a measure constitutes indirect de facto expropriation

“only if [it is] irreversible and permanent”.95Generation Ukraine, Inc. v. Ukraine further clarified that

91BG. v. Argentina, para.268.

92Grand River v. United States, para.147.

93Feldman v. Mexico, para112.

94S.D. Myers v. Canada (Dissenting Opinion), para.218.

95Tecmed v. Mexico, para.116; Alpha v. Ukraine, para.410; Glivanos, Investor Protection v. State Regulation, p.102; Kriebaum, Regulatory Takings, p.723;

19

measures should create a “persistent […] obstacle to the claimant’s use, enjoyment or disposal of its

investment”.96

69. A regulation, which imposes limitations, does not have a permanent effect, if a possibility to

recover from the interference exists. For instance, in LG&E v. Argentina, the tribunal did not find

expropriation, emphasizing that the claimant’s assets’ value “has rebounded since the economic crisis”

after four years.97

70. Although Respondent restricted marketing venues98, hours of sales99 and packaging of products100

it did not plainly prohibit it. In respect of FBI’s relation to its costumers, Respondent contends that such

are unlikely to fully abandon a once iconic beverage. It is rather to be expected, that the relation will only

be affected during a period of transition in which costumers adapt to newly one-color fond and uniform

container sizes before eventually “rebounding”.

71. With respect to FBI’s overall reputation, this concerns only the 2011 Ordinance. Yet, as Claimant

concedes that – if at all – only the cumulative effect of Respondent’s measures arguably resulted in

expropriation, then it must also be demonstrated how the ordinance contributed to a substantial

deprivation of goodwill.

72. Expropriation may be established only if the responsible act is attributable to the host State.101

Attribution is contingent on, for instance, an act being directed by a State organ102 or somehow controlled

by it103.

73. In case at hand, the Ordinance merely stipulated a warning label on products containing dangerous

Reyhan concentrate.104 The principal reason of consumers’ negative reaction, however, were FBI

96Generation Ukraine v. Ukraine, para.20.32; Onlynyk, A Balanced Aproach, p.287.

97LG&E v. Argentina, para.198.

98Statement of Claim, para.11.


100 Statement of Claim, para.11,12.

101Generation Ukraine v. Ukraine, para.20.22.

102Articles on State Responsibility, Art.4.

103Articles on State Responsibility, Art.8.


20

competitors taking full advantage of the situation105, launching campaigns on TV channels106 exploiting

the danger emanating from Reyhan containing products and labelling their own products “Reyhan-

free”.107

74. Such actions of entirely private actors clearly were beyond Ruritania’s authoritative control. They

may therefore not be attributed to it and consequently absolve Ruritania to bear any liability.

iii. INTELLECTUAL PROPERTY RIGHTS TO THE TRADEMARKS

AND TRADE DRESSES ARE NOT EXPROPRIATED

75. The PPR restricts the use of Claimant’s trademarks and trade dress rights. However, intellectual

property rights are negative in nature.108 That is to say, respective ownership entitles only to excluding

third parties but not to actively use them.109 This entitlement is not affected, for, according to the record

of the Ruritanian Trademarks Office, Claimant remains the registered owner of the trademarks and trade

dresses at issue and retains the exclusive right thereto.110

76. Yet, Claimant is likely to introduce the famous findings of the Iran-US Tribunal in Starrett:

“It is recognized in international law that measures taken by a State can interfere with property to such an extent that these rights are rendered so useless that they must be deemed to have been expropriated, even though the State does not purport to have expropriated them and the legal title to the property formally remains with the original owner.”111

77. In some instances, arbitral tribunals have adhered to this notion of uselessness as a sufficient

criterion to determine indirect expropriation. If this Tribunal were to align with this approach, it would

indeed have to hold that a prohibition to actively use trademarks and trade dresses renders their retained

formal ownership virtually useless. Yet, it is imperative to draw a sharp distinction with Starrett,




108Voon & Mitchell, p.551.

109Voon& Mitchell, p.551.


111Starrett, p.154.

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AIG,112Santa Elena,113RFCC,114 and the like. The reason is that ownership of housing complexes,115

soil,116 and concession contracts117 is inherently different from ownership of IPRs. Whereas the former

does indeed comprise active usage, the latter does not, as elaborated above.

78. In sum, since any case law in the tradition of Starrett does not sufficiently account for the special

nature of IPRs, this Tribunal shall recognize that those cases provide no appropriate guideline in the

context of alleged expropriation. Hence, no expropriation on the basis of shall be found.

3. IN ANY EVENT, THE MEASURES ARE JUSTIFIED BY RURITANIAN

POLICE POWERS

79. As an undisputed general rule of international customary law, a State may exercise its sovereign

regulatory powers to adjust its policy to current needs.118 Measures constitute a lawful regulation, unless

transcending the scope of sovereign police power.119 This hold true even if measures significantly deprive

an investor of its ownership rights.120 A regulation is justified by a State’s police power, if it is

“proportional to the public interest presumably protected thereby and to the protection legally granted to

investments”.121 Consistent arbitral jurisprudence reaffirms this well-settled police power test.122

80. In the case at hand, both Ruritanian measures under examination do pass this test, as the

contentious provisions of the 2010 MAB-Act promote public interest (i) and are proportionate (ii). The

112AIG v. Kazakhstan, para.10.3.3

113Santa Elena v. Costa Rica, para.81;

114RFCC v. Marocco, para.69.

115 AIG v. Kazakhstan, para.3.2. B.

116 Santa Elena v. Costa Rica, para.15.

117 RFCC v. Morocco, para.4.

118Oscar Chinn, p.88; Feldman v. Mexico, para.103.

119Kardassopoulos v. Georgia, para.387.

120LG&E v. Argentina, para.194; Fortier/Drymer, Caveat Investor, p.300.



22

2011 Ordinance proves non-discriminatory (iii) and is therefore likewise covered by Respondent’s police

powers.

i. THE PLAIN PACKAGING REQUIREMENT EFFECTIVELY

PROMOTES A SUBSTANTIAL PUBLIC INTEREST

81. It is an inherent State’s right under customary law “to act in the broader public interest.”123

Arbitral tribunals recognized, inter alia, environmental124 and public health125 concerns as legitimate

public interests. Should such regulation interfere with the investor’s rights and in the meantime be

“commonly accepted as within the police powers of States”, no expropriation shall be found. 126

Otherwise, reasonable governmental regulation cannot be achieved if any business that is adversely

affected may seek compensation, and it is safe to say that customary international law recognizes this.127

82. The 2010 MAB-Act provides in Section 8 a Plain Packaging Requirement (“PPR”):

“The [labels] should be plain white and all the text on the label should be the same colour and in the same font. No technique should be used to highlight the “brand” of the beverage.”

83. Its main objective is to reduce attractiveness of alcoholic products for consumers, especially for

the youth.128 Such aim is recognized as a legitimate public purpose.129 As research for comparable

dangerous products shows, not only do “current pack colours and imagery” create “false beliefs about

harmfulness of [products]”, but also “affect young’s people’s perceptions about the characteristics and the

status of the people” consuming the certain product.130 The same applies for both labels and packaging

123Feldman v. Mexico, para.103.

124International Bank of Washington, para.1227-1228.

125Bischoff, para.420.

126Saluka v. Czech Republic, para.262; Restatement, p.201.

127Feldman v. Mexico, para.103.


129Clove Cigarettes, para.7.347.

130 Plain Packaging, Council Victoria, p.3.

23

itself if a container differs considerably from most others as the special 0.8 bottle of FREEBREW does.131

Thus, Respondent’s legislation forms an effective, democratically legitimized integral contribution to

pursue the legitimate public purpose of tackling a prevalent public health issue.

84. The PPR was, therefore, reasonable and consequently covered by Ruritanian police powers.

ii. THE RESTRICTION OF CONTAINER SIZE IS

PROPORTIONATE

85. Individual affection does not in and of itself entitle an investor to compensation. In proposition of

this notion the tribunal in Continental Casualty v. Argentina posited:

“Limitations to the use of property in the public interest that [nonetheless] fall within typical government regulations of property entailing mostly inevitable limitations imposed in order to ensure the rights of others or of the general public (being ultimately beneficial also to the property affected). These restrictions do not impose an unreasonable burden on the owner as compared with other similar situated property owners.”132

86. In the first place, the 2010 MAB-Act affects alcohol producers and retailers across the board,

including those of wine and spirituous beverages.133 Secondly, the fact that besides FREEBREW Claimant

likewise produces and markets other brands such as RURILITE and HILLMAGORE STOUT134 both

unaffected by the legislation,135 detracts from the assumption that FBI indeed bears an unreasonable

individual burden.

87. The manageable degree of the legislation’s interference with Claimant’s business must then be

weight against Respondent’s competing legitimate public interest of the preserving public health.136

88. The plain packaging requirement was devised to erase all differences between alcohol brands to

the legitimate end elaborated above.137 If Respondent had exempted the regulation of container size, those


132Continental Casualty v. Argentina, para.276.




136LG&E v. Argentina, para.189; Azurix v. Argentina, para.311.

24

containers would have simply replaced labels and trade dresses as the basis of differentiability. Such

outcome, in turn, would have impeded the very purpose of the legislation, voiding all efforts geared

towards the diminution of beers’ and the like’s attractiveness. Against this backdrop, stipulations

regarding container size occur as an imperative adjunct in the absence of which FBI would have attained

an inadmissible competitive advantage, for FREEBREW is the only beer produced in Ruritania in

containers larger the 0.5 l.138

89. Hence, the stipulation regarding maximum container size is proportional to Respondent’s interest

of public health and youth protection. It consequently resides within the scope of Ruritanian regulatory

powers and precludes claims of expropriation based thereupon.

iii. THE 2011 ORDINANCE IS NON-DISCRIMINATORY

90. Non-differential treatment breaches the BIT’s standard only in the event of a different factual and

legal situation.139 The pivotal question is to what extend different factual and legal situations have to be

considered and whether non-differentiation occurred as “capricious, irrational or absurd.”140

91. The 2011 Ordinance is a blanket imposition; applying and being implemented with respect to all

products containing Reyhan concentrate ranging from bread and meat products to soft drinks and

spirits.141

92. The narrow approach, in favour of Claimant, would disregard Respondent’s preliminary objection

and point to the incomparability of different sectors of the economy.142 Its application shall be rejected in

137Statement of Claim, para.12; MAB Act, section 1; Continental Casualty v. Argentina, para.276.

138Procedural Order No.3, para.16.

139El Paso v. Argentina, para.315.

140Enron v. Argentina, Award, 22 May 2007, para.282; Sempra v. Argentina, Award, 28 September 2007, para.319.

141Statement of Defense, para.15.

142CMS v. Argentina, Award, 12 May 2005, para.293; National Grid v. Argentina, para.201.

25

the case at hand, for the practice is not merely inconsistent as the dictum in S.D. Myers indicates143 but

also developed within GATT/TWO and therefore not specifically pertinent anyway.144

93. Respondent’s blanket imposition neither proves to be absurd, given wide spread public exposure

to Reyhan concentrate and the practical impossibility to fully account for every single possible minor

difference in the levels of concentration.

94. In fact, it can be justified because it served to protect a public interest.145 Since, for instance, in

GAMI v. Mexico, the tribunal found the even solvency of the local sugar industry a legitimate policy goal,

this Tribunal, a fortiori should approve the preservation of public health as legitimate ground to tolerate

non-differential treatment.

95. In any event, a discriminatory intent is a necessary prerequisite for a finding of discrimination146,

which is to be proven by Claimant.147

96. In sum, given its justifiability the uniformly applied and implemented 2011 Ordinance is an

instance of non-discriminatory bona fide regulation.

B. RESPONDENTDID NOT FAIL TO ACCORD CAM FAIR AND EQUITABLE

TREATMENT

97. Art. 2 (1) (b) of the BIT obliges Respondent to accord Claimant fair and equitable treatment

(“FET”). This standard enshrines a number of principles including

“transparency, good faith, conduct that cannot be arbitrary, grossly unfair, unjust, idiosyncratic, discriminatory, lacking in due process or procedural propriety, and respect of the investor’s reasonable and legitimate expectations.”148

143S.D. Myers v. Canada, para.250.

144Occidental v. Ecuador, para.175.

145S.D. Myers, para.250.

146Genin v. Estonia, para.369; Methanex v. United States, para.12.

147ADF Group Inc. v. United States, para.156.

148Paushok v. Mongolia, para.253; Rumeli v. Kazakhstan, para.609.

26

Respective violations should be deduced by assessing State behaviour only in the light of the specific

circumstance of the case.149

98. Ruritania’s conduct fully abided by the standard fair and equitable, for notably the measures at

issue were adopted in accordance with stipulations of due process (1) and the measures did not impinge on

Claimant’s legitimate expectations (2).

1. THE ADOPTION OF THE 2011 ORDINANCE ABIDED BY

STIPULATIONS OF DUE PROCESS

99. Under international investment law the fair and equitable treatment necessitates State actions to

abide by due process.150 However, actions or omissions must cross a high threshold to assume a violation

of this standard151 and “not every process failing or imperfection will amount to failure to provide fair and

equitable treatment.”152 Rather, only those State acts constitute a violation, which are “manifestly unfair or

unreasonable”153 or represent “a willful disregard of due process of law, an act which shocks, or at least

surprises, a sense of judicial propriety.”154

100. Applying this standard, the tribunal in Alex Genin recognized that despite numerous procedural

flaws in the course of revoking the EIM’s bank license – i.e. lack of formal notice to EIB; no invitations of

the EIB representative to the meeting of the Bank of Estonia’s Council rendering the decision; no

possibility for claimant to argue its case – no violation of the due process requirement was upheld.155

101. Similar to Alex Genin, alleged imperfection in the case at bar does not constitute a violation of due

process. As Claimant even acknowledged, “the Ministry of Health followed the proscribed procedures for

adopting the [2011] Ordinance.”156 Thus, claims impugn the measure’s reasonableness.

149Oostergetel v. Slovak Republic, para.221.

150Frontier v. Czech Republic, para.328; Jan de Nul v. Egypt, para.187.

151Vanessa v. Venezuela, para.227.

152AES v. Hungary, para.9.3.40.

153Supra; UNCTAD FET, p.81.


155Genin, v. Estonia, paras.364, 371.

156 Procedural Order No.3; para.10.

27

102. Accordingly, the pertinent threshold is one of aforementioned “manifest unreasonableness”;157

that is to say, acts must lack any basis whatsoever.158 In the case at hand, the report by the Human Health

Research Institute of 15 June 2011 (“HRI”) has corroborated the interim report of 2005159 and thus

conclusively proven an existing “higher risk of cardiac complications”160 caused by the consumption of

Reyhan concentrate and its prime chemical ingredient161 Methyldioxidebenzovat162 (“MDB”). The

measure consequently rests upon a comprehensible basis.

103. In sum, the 2011 Ordinance did have a sufficiently sound basis, hence was not manifestly

unreasonable and, therefore, did not violate stipulations of due process.

2. NO LEGITIMATE EXPECTATIONS HAVE BEEN FRUSTRATED

104. Ruritania acknowledges that protection of legitimate expectations is a core element163 of its

obligation toprovide fair and equitable treatment to foreign investors in its territory. Still, tribunals “must

not look single-mindedly at the Claimant’s subjective expectations” but rather examine them from an

objective and reasonable point of view,164

105. Any subjective expectations on the side of CAM of unchanging relevant legal regimes (i), or as

emanating from the S.P.A. (ii) were objectively not legitimate and therefore not protected under the BIT.

i. CAM’S EXPECTATIONS OF UNCHANING LEGAL REGIMES

WERE NOT LEGITIMATE

106. Claimant may content that the adopted 2010 MAB-Act encroached upon its legitimate

expectations. However, it is widely accepted that the implied requirement of stability does not affect a







163El Paso v. Argentina, para.348; Bogdanov v. Moldova, para.4.2.4.4; Saluka v. Czech Republic, para.302.

164Suez v. Argentina, para.209.

28

State’s inherent right to exercise its sovereign power to legislate and to adapt its legal system to changing

circumstances.165 Accordingly, arbitral jurisprudence displays profound consistency in assuming narrow

conditions under which legitimate expectations can be substantiated.166

107. For instance, the tribunal in LG&E v. Argentina stipulated that an investor’s legitimate

expectations must, inter alia, possess the following characteristics: “not established unilaterally by one of

the parties; exist[ing] and enforceable by law”167; neither one of which CAM is able to demonstrate.

108. Given such absence of specific stabilisation promises in the case at hand, the tribunal in Total v.

Argentina would have held that, under this premise, general legislation reflects a legitimate exercise of a

host State’s governmental powers.168

109. Even if a less strict test were applied, CAM’s allegations would still fail. For, in any event,

expectations must not merely be grounded in the legal order as it stands at the time the investor acquires

the investment 169, but also be assessed on the basis of “all circumstances, including political, socio-

economical, cultural and historical conditions prevailing in the host State.”170

110. Although at the time of CAM’s investment pertinent regulatory regimes were not yet amended,

political conditions prevailing in Ruritania in March 2010 unequivocally foreboded legislative

reorientation. As elaborated in submission (I.) the New Way Party with its widely publicised hard stance

towards sale and marketing of alcoholic beverages seized power and left no doubt about the seriousness of

its determination. Under such circumstances – a legal framework is in apparent flux – objectively

legitimate expectations cannot have been instilled into Claimant.

111. The same holds true if CAM will point to that measures to reduce consumption of alcohol were

discussed in merely general terms, apart from specifications as to eliminating any association between

sport and alcohol,171 and that therefore, at best, less intrusive means could have been anticipated.

165BG Group v. Argentina, para.298; Saluka v. Czech Republic, para.304; Feldman v. Mexico, para.112.

166Total v. Argentina, para.120.


168Total v. Argentina, para.164.

169Wälde, Liber Amicorum, p.265.

170Duke v. Ecuador, para.340; Toto v. Lebanon, para.159.


29

112. Respondent conversely maintains that expectations, which may have been legitimate (say) fifty

years ago may have less weight today, when objective conditions and social priorities have changed.172

This notion has been prominently explicated in Gabcikovo-Nagymaros173 in the context of environmental

concerns and is likewise perceivable in WTO dispute settlement instances. 174 Moreover, similar

considerations underpinned the dictum in Methanex v. United State in which the arbitral tribunal held new

Californian environmental regulations foreseeable and dismissed the claims therefore.175

113. After decades of indulgence in accessible equally affordable soft drugs, civilized nations

have meanwhile been captured by social awareness and political currencies gearing social

priorities towards protection from the negative impacts of those substances. In particular, young

people have proved susceptible to industrial enticements. Respondent’s measures align with this

international tendency to embrace ever more stern regulations, with most recent examples in

Uruguay176 and Australia.177 CAM should not have been oblivious to this evident shift in

zeitgeist and adapted its expectations in accordance thereto.

ii. EXPECTATIONS AS EMANATING FROM THE S.P.A. ARE

NOT OBJECTIVELY LEGITIMATE

114. CAM may invoke the warranty contained in the S.P.A.178 as a source of legitimate expectations

not to be subjected to measures such as the 2011 Ordinance. Respondent indeed accepts, as a general rule,

that a State must not affect “the arrangements in reliance upon with the foreign investor was induced to

172 Saluka v. Czech Republic, para. 305; Parkering v. Lithuania, para.333, Potesta, p.113.

173 Gabcikovo-Nagymaros, para.104.

174Asbestos Case, para.3.9-3.448; Shrimps Case, para.185.

175Methanex v. United States, para.15.

176 Uruguayan Ordinance 514 and Decree 287/009.

177 TPPA 2011, TAA 2011.

178Share Purchase Agreement, Art.9.2.1.

30

invest.”179 Yet, even if a State deviates from explicit or implicit assurances, this does not eo ipso frustrate

legitimate expectations, in particular not if changes prove to be “fair, reasonable or equitable.”180

115. In the first place, plenty of arbitral tribunals have emphasized that to create legitimate

expectations the governmental assurances and representations must “exhibit a level of specificity”.181

Without specific promises,

“an investor may not rely on a bilateral investment treaty as a kind of insurance policy against the risk of any changes in the host State’s legal and economic framework.”182

116. The aforementioned warranty provides that “to the best of [the State Property Fund’s]

knowledge” FBI products – including the Reyhan ingredient – do not pose any risks other than those,

which are ordinary for similar alcoholic beverages.183 As this vague part remains entirely silent as to

clear-cut duties of the warrantor, let alone consequences for respective non-observance, not even a

minimum level of specificity can be upheld. Hence, as the representation in the S.P.A. lack an obligatory

character, no objectively legitimate expectations could have derived from it.

117. Even if this Tribunal was to deduce a reliable assurance from the S.P.A., the above proven

reasonableness of the adoption of the 2011 Ordinance precludes a finding of frustrated legitimate

expectations.

IV. THIS TRIBUNAL MAY AWARD MORAL DAMAGES FOR THE ARREST OF

MESSRS. GOODFELLOW AND STRAW

118. Respondent submits that the claim of compensation for moral damages shall be dismissed sincethe

arrest of Messrs. Goodfellow and Straw did not result in any non-pecuniary harm to Claimant [A] and, in

any event, the requirement of gravity and substantiality of a Respondent’s actions and their consequences

to justify compensation for moral damages is not fulfilled [B].

179CME v. Czech Republic, para.611.

180Parkering v. Lithuania, para.332.

181Frontier v. Czech Republic, para.468; White Industries v. India, para.10.3.17; Electrabel v. Hungary, para.9.10.

182EDF v. Romania, para.217.

183Share Purchase Agreement, Art.9.2.1.

31

A. THE ARREST OF MESSRS. GOODFELLOW AND STRAW DID NOT

CAUSE ANY NON-PECUNIARY HARM SUSCEPTIBLE TO

COMPENSATION

119. Notwithstanding its acknowledged violation of full protection and security, Respondent stresses

that the arrest of FBI executives Goodfellow and Straw184 did not result in any non-pecuniary harm

susceptible to compensation, as any suffering possibly caused to the executives individually is not covered

by the arbitration clause of the Ruritania-Cronos BIT [1]; and no distinguishable non-pecuniary harm was

caused to Claimant’s investment [2].

1. THE ARBITRATION CLAUSE IN ARTICLE 8 (1) BIT DOES NOT

ENCOMPASS INDIVIDUALS’ SUFFERING

120. Protection of investor’s individual rights is not covered by the applicable arbitration clause.

Article 8 para. 1 of the BIT sets this limit for “dispute[s] concerning investments”. Disputes concerning

investments are to be understood as arising out of obligations owed under the BIT by a host State to an

investor with respect to its investment activity.185

121. As follows from the concept of BITs in general186, as well as from the Preamble of the Ruritania-

Cronos BIT, the primary obligation owed by a host State is to protect respective invested assets.187

Conversely, the assurance of individual human rights, in absence of indications to the contrary, does not

reside within the ambit of the protection granted by the BIT.

122. The sole indication of the Ruritania-Cronos BIT with respect to the protection of individual rights

is Article 3(4), which guarantees a facilitated entrance to the territory of the Contracting States. Apart

from this, other substantial provisions of the Ruritania-Cronos BIT encompass protection of an invested

184 Statement of Defense, para.17; Procedural Order No.1, para.5.

185Azurix v. Argentina, para.76.

186 For instance: Germany-Zimbabwe BIT, Art.2(1); Germany-Uruguay BIT, Art.2(1); UK-China BIT, Preamble; Russia-Portugal BIT, Preamble; US-Poland BIT, Preamble; SGS v. Philippines (Jurisdiction), para.50; Ripinsky, p.311.

187 Ruritania-Cronos BIT, Preamble, Art.1(1).

32

“asset”188 and only certain protection of an investor “as regards [to its] activity in connection with

investment” 189 . The guarantee of full protection and security is enshrined only with respect to

“Investments by Investors”,190 and not with respect to any individual human rights.

123. In the case at hand, the request of moral damages is based upon the allegedly illegal arrest of

individuals, Messrs. Goodfellow and Straw. The accordingly pertinent right is one of personal liberty,

which, as explicated above, is not covered by the BIT. In fact, human rights are guaranteed and protected

by the special system of Human Rights Law with its well-established protection mechanisms and

remedies. 191 As Ruritania has both signed and ratified the relevant international treaties 192 , those

mechanisms and remedies are accordingly available to the allegedly affected individuals.

124. Dealing with a similar issue, the Tribunal in Biloune v. Ghana, via interpretation of an arbitration

clause, providing for jurisdiction “in respect of an approved enterprise” established a lack of jurisdiction

to consider a stand-alone claim on damages due to the thirteen days’ arrest of a Syrian investor, Mr.

Biloune.193 A concurring reasoning and conclusion can be found in the recent instance of Rompetrol v.

Romania, wherein the Tribunal declined to consider arguments arisen out of an alleged infringement of

human rights.194

125. Thus, based on the above, any individual sufferings possibly caused to Messrs.

Goodfellow and Straw are not covered by the arbitration clause, and thus, this Tribunal has no

capacity to award any compensation for them.

188 Ruritania-Cronos BIT, Art.1(1).

189 Ruritania-Cronos BIT, Art.3(1)(b).

190 Ruritania-Cronos BIT, Art.2(1)(b).

191Rompetrol v. Romania, para.170; ICCPR.


193Biloune v. Ghana, para.285.

194Rompetrol v. Romania, para.172.

33

2. THE ARREST DID NOT CAUSE ANY NON-PECUNIARY HARM TO

CLAIMANT’S INVESTMENT

126. In order to be granted compensation for moral damages, a legal entity needs to demonstrate the

existence of a distinguishable non-pecuniary harm directly caused to it.195 As a general principle of law, a

legal entity can only suffer non-pecuniary harm in the form of damages to its credit and reputation.196 In

the case that a request for compensation for moral damages is based upon actions directed against an

entity’s officers, there should be a sufficient link between those actions and the protected investment197.

The link is considered sufficient when States’ actions directly influence normal business operation of an

investment, thereby resulting in “threats and attacks the physical integrity of an investment”198, or when

causing tangible harm to corporate reputation199.

127. There are only two cases200 in which the investment Tribunal concluded that a corporate entity

indeed suffered “substantial” 201 non-pecuniary harm and eventually awarded moral damages. In

Benvenuti v. Congo the Congolese military occupied the investor’s property and forced investors’

employees to leave the country. As a result, an investor lost business opportunities and was prevented

from getting a credit from a bank.202 Based on that, the Tribunal held, that State’s actions “have certainly

disturbed the activities” of an investor.203 In Desert Line v. Yemen, the more recent case on compensation

for moral damages in investment arbitration, the investor’s employees who were working in the

construction sites in the host State of Yemen were continuously harassed by the Yemeni army and armed

tribes, which led to continuous interruptions of works, disturbances of business activity, arrests and

195Schwenzer & Hachem, p.422-423.

196Desert Line v. Yemen, paras.289-290.

197Schwenzer & Hachem, p.423; Duke v. Ecuador, para.468.

198Desert Line v. Yemen, para.185.


200Desert Line v. Yemen, Benvenuti v. Congo.


202Benvenuti v. Congo.

203Benvenuti v. Congo, para.4.96.

34

threats. A series of these measures ultimately resulted in the conclusion of a Settlement Agreement on

terms unfavorable for the investor.204

128. The factual background of the present case, however, is not congruent with the one in Desert Line

v. Yemen and Benvenuti v. Congo: Messrs. Goodfellow and Straw were arrested in the course of a formal

investigation. This investigation was initiated upon well-founded suspicion that both executives were

involved in the bribery of officials of the State Fund of Ruritania prior to the eventual acquisition of

FBI.205 Hence, unlike in the above mentioned cases, measures adopted by Respondent were not directed

towards the present business operation but addressed the legitimate authoritative interest of criminal

justice.

129. Moreover, the arrest occurred during the holiday season206 when a regular conduct of business is

usually suspended anyway. The facts of the case therefore do not indicate any perceptible disturbance of

FBI’s business activity.

130. Furthermore, the arrest of the executives did not yield any reputational harm to either Claimant or

FBI. In this regard, the only fact that Claimant can rely upon is the interview of a spokesman for the

Prosecutor’s Office, who merely stated that “[the law enforcement agencies of Ruritania] will not let

people responsible for corruption escape investigation”.207 The plea did not accuse Messrs. Goodfellow

and Staw, but simply informed the public about pending “investigations”, let alone the fact that neither

FBI nor CAM has even been mentioned.

131. In this respect, the Tribunal in Tza v. Peru confirmed that TV-messages of mere informative

character couldn’t give rise to claims of moral damages.208 Similarly, the Tribunal in Rompetrol v.

Romania concluded that information provided in good faith by a State about ongoing investigation does

not provide sufficient ground to substantiate non-pecuniary sufferings of an investment’s reputation

either.209

204Desert Line v. Yemen, paras.3-49.


206 Statement of Claim, paras.22-23.


208Tza v. Peru, para.285.


35

132. Nothing in the case at hand allows for the inference, that the aired TV message can be considered

a part of a mal fide orchestrated campaign or premeditated harassment to the detriment of Claimant’s

investment and reputation.

133. In the absence of concrete and convincing evidence, however, this Tribunal cannot assume any

non-pecuniary harm caused to Claimant’s investment. In Rompetrol v. Romania it was accordingly stated

that any damage to reputation must be substantiated on the basis of concrete evidence,210 satisfying both

the burden and standard of proof. In concurrence, Tecmed v. Mexico denied a claim on moral damages

given the absence of provided evidence.211

134. Presently, the TV message did not cause any tangible negative reaction to FBI’s creditors or

customers. In fact, ''on 15 September 2012, lenders agreed not to declare default''212, which would unlikely

have happened if FBI had indeed suffered substantial reputational loss.

135. Thus, while conceding that the arrest of the individuals may have not entirely been in compliance

with applicable standards, this does not detract from the fact that no non-pecuniary harm was caused to

either to Claimant or FBI. Accordingly, moral damages may not be awarded.

B. IN ANY EVENT, NEITHER RURITANIA’S CONDUCT NOR ITS EFFECT

WAS GRAVE AND SUBSTANTIAL

136. Respondent argues, in the first place, that the gravity requirement does apply to awarding

compensation for moral damages in international investment law [1]; and furthermore that none of the

requirements are met because neither the State’s conduct during the investigation [2] nor the consequence

of the arrest of Messrs. Goodfellow and Straw [3]were grave and substantial.

1. THIS TRIBUNAL SHALL ADHERE TO THE TEST OF GRAVITY AND

SUBSTANTIALITY

137. Moral damages in international investment law are recognized to be an “exceptionalremedy”213

that may only be awarded in situations when both conduct of State that caused moral injuries and the




36

effect emanating from it are grave and substantial214. The gravity-test has been established by the Lemire

v. Ukraine Tribunal215 and hitherto consistently applied by Tribunals in the subsequent international

investment jurisprudence on the matter of compensation for moral damages.216 Most recently, for instance,

the Arif v. MoldovaTribunal carried out a review of such jurisprudence and concluded that:

“[in] aligning itself to the majority of arbitral decisions and holds that compensation

for moral damages can only be awarded in exceptional cases, when both the conduct

of the violator and the prejudice of the victim are grave and substantial.”217

138. In that case, the Tribunal, after having concluded that the respondent's actions caused the claimant

“stress and anxiety”,218 rejected pecuniary compensation for moral damages, as it did not cross the gravity

threshold. A similar reasoning led the Tribunal in Inmaris v. Ukraine to decline a compensation for moral

damages.219

139. Therefore,this Tribunal, in order to be in line with this well-established standard, shall apply the

test of gravity and substantiality of Respondent’s conduct and the non-pecuniary sufferings of FBI, when

determining Claimant’s entitlement to compensation for moral damages.

2. NEITHER RESPONDENT’S ACTIONS NOR THEIR CONSEQUENCES

MEET THE THRESHOLD OF GRAVITY AND SUBSTANTIALITY

140. Gravity and substantiality need to be analyzed and examined on a case-by-case basis.220 However,

this Tribunal shall take into consideration a summarized standard that has been elaborated in the available


214Lemire v. Ukraine, para.333.

215Lemire v. Ukraine, para.333.

216Tza v. Peru; Arif v. Moldova.

217Arif v. Moldova, para.592.


219Inmaris v. Ukraine, para.428.


37

case law. This standard covers “physical violence, armed threats”221, “threats and attacks on the physical

integrity of investment”222, or “witnessing of death”223. Translated into more general terms, to meet this

standard one needs to demonstrate measures “exceptional in commercial life”224 that caused large-scale

consequences.

141. It is a State’s duty to combat criminal activities and to take all affirmatives steps necessary to

prevent them.225 Fulfilling this duty, the State of Ruritania, in order to prevent collusion and suppression

of evidence of corruption, took appropriate steps when suspects of bribery were trying to leave the country

several days after an investigation against them had commenced. The investigation carried out by

Ruritanian authorities was legitimate and bona fide. The fact that the investigation did not eventually yield

“sufficient evidence”,226 and that it was terminated on that basis, is an exhibition of fairness and absence

of arbitrariness or political motives rather than evidence of grave and substantial mistreatment.

142. With respect to the consequences, as established in Tza v. Peru, the reaction of creditors and

contractors serves as an adequate indicator to measure gravity and substantiality of reputational harm.227

No evidence of any negative reaction in the aftermath of the broadcasted message can be gleaned in the

case at hand. As mentioned above, FBI’s lenders agreed not to declare default228, which proves an absence

of grave and substantial consequences to FBI’s reputation and credibility.

143. Thus, a State embarking on legitimate criminal investigations and informing its citizens thereof,

without inducing perceivable public discontent cannot be recognized as exceptional enough to

demonstrate required level of gravity. In consequence thereof, moral damages may not be awarded.



223Lemire v. Ukraine, para.339; Arif v. Moldova, para.588.


225Rompetrol v. Romania, para.152; SGS v. Pakistan (Procedural Order No.2), para.36; Gustav v. Ghana, para.297.


227Tza v. Peru, para.285.


38

V. THE LOSS OF SALES BY CLAIMANT’S SUBSIDIARIES DOES NOT

CONSTITUTE A RECOVERABLE ITEM OF DAMAGES

144. The loss of sales at issue cannot be recovered because this Tribunal lacks jurisdiction to award

compensation for losses incurred by entities residing outside the host State of Ruritania [A]. In any event,

the criterion of “inextricability” required for qualifying the loss as a recoverable “up-stream loss” is not

satisfied [B].

A. THIS TRIBUNAL LACKS JURISDICTION UNDER THE RURITANIA-

CRONOS BIT TO AWARD DAMAGES FOR LOSSES INCURRED BY ENTITIES

RESIDING OUTSIDE OF RURITANIA

145. Claimant seeks compensation for losses incurred by legally independent companies residing

outside of Ruritania. However, this exceeds the scope of protection provided by the BIT. Respondent

refers this Tribunal to that the Contracting States of the Ruritania-Cronos BIT in the Preamble, which

recognized: “[t]he encouragement of investments are essential to the prosperity of both nations and the

welfare of their nationals.”

146. Accordingly, the BIT shall serve the augmentation of prosperity on both sides. The implied

reciprocal relation between an investor and the host State entails a crucial trade-off. In exchange for an

introduced investment with its beneficial effects of, for example, increased tax revenues and higher

employment rates, a State ensures protection of assets generating such benefits. On the contrary, as a

matter of principle, a State is not obliged to ensure protection and provide compensation if an entity

generates such benefits to the advantage of a third party.

147. Such approach prevents an inequitable, lopsided relation, in which a State already restricting its

sovereign powers must bear responsibility for something that it neither was entitled to control nor was

able to enjoy the benefits of. This approach likewise prevents potential limitlessness of investors’

entitlements to bring claims, in that the larger an affected claimant conglomerate is, the more ramifications

a regulating host State has to fear. This may either lead to depleted fiscal capacities, or, even worse, to

overly prudent behavior in the first place in crucial instances of securing public health, for example.

148. In accordance with those considerations, the protection provided by the Ruritania-Cronos BIT

exhibits a corresponding territorial limitation in Article 1 para. 1:

“The term “Investment” means every asset which is directly or indirectly invested in accordance with laws and regulations of the Contracting State in

39

which territory the Investment is made by Investors of the other Contracting State.”

149. As it follows from this provision, the BIT does not extend to any investment residing outside the

host State’s territory. This is a matter of intelligible principle in the realm of bilateral investment treaties.

150. In line with this principle, the Tribunal in ADM v. Mexico clearly and explicitly recognized such

territorial limitation with respect to recovering losses when it refused to award the claimant investors

residing in the United States any damages for loss of sales to their Mexican investment.229 In ADM v.

Mexico, the Tribunal stated:

“When the Claimants manufactured HFCS in the United States for sale in Mexico, the investment of the Claimants responsible for generating the profits is the investment in plant and other facilities in the United States. These losses did not relate to an investment in Mexican territory, and therefore the Tribunal did not have jurisdiction over these alleged losses.”230

151. The only opposing authority Claimant might invoke in order to assert the recoverability of the loss

of sales is Cargill v. Mexico.231 In that case, losses were recoverable despite the affected entities’ residence

outside the host State of Mexico.232

152. However, the Tribunal in Cargill v. Mexico did not provide a logical basis for legitimately

departing from the ADM v. Mexico analysis. Moreover, ADM claimants had an even more justified claim

to damages because, in accordance with the goals of the NAFTA, they had made a substantial investment

in a production operation in Mexico as opposed to a mere distribution centre for HFCS produced in the

United States233. And yet, compensation was not granted.234

229 ADM v. Mexico, para.52.

230ADM v. Mexico(Decision), para.52.

231Cargill v. Mexico, paras.524-526. See also: Bayview v. Mexico, para.94.

232 ADM v. Mexico, para.270.

233ADM v. Mexico, para.100; Cargill v. Mexico, para.67; Mexico v. Cargill (Appeal), para.7.

234ADM v. Mexico, para.270.

40

153. Moreover, even when acknowledging the NAFTA Parties’ commonly held position that no

language in Chapter 11 NAFTA prohibit the award of damages “suffered by [an] investor in its home

business operation”.235

154. Respondent urges this Tribunal to realize that this must not be equated with damages suffered by

investors in its third State business operation. In Cargill v. Mexico the affected entity at least resided

within a Contracting State of the–multilateral–investment treaty NAFTA. Therefore, it could be conceived

that both the Tribunal’s award and the ensuing approval of the Contracting Parties was to some extent

premised on the fact that compensation remained within the territorial limits of the relevant investment

treaty.

155. Such minimal legal foundation, however, is absent in the case at hand. Contrary to Cargill v.

Mexico, the protection provided would extend to an entity residing in an entirely alien third state.

Respondent considers such undue extension of the BIT’s protective scope highly detrimental to both its

own interest and the fulfilment of the BIT’s very purpose.

156. In sum, Respondent calls on this Tribunal to recognize the arbitrary and legally unsound departure

of Cargill v. Mexico from ADM v. Mexico and to uphold that the territorial limitation in terms of awarding

damages does prevail and that, therefore, the loss at issue is not a recoverable item of damages.

B. IN ANY EVENT, THE CRITERION OF “INEXTRICABILITY” IS NOT MET,

PREVENTING THIS TRIBUNAL TO AWARD DAMAGES ON THE BASIS

OF THE CONCEPT OF UP-STREAM LOSSES

157. Respondent submits that even if this Tribunal was to accede to the reasoning of Cargill v. Mexico

and assumes jurisdiction over this matter in principal, compensation is to be denied. Drawing upon Cargill

v. Mexico, Claimant is precisely required to show that its subsidiaries form an “inextricable part” of its

investment in FBI.236

158. Respondent fiercely refutes the presence of such inextricability in the case at hand. By no means,

FBI and Claimant’s subsidiaries embody a monolithic entity in which one part is fully dependent upon the

other. Various indications in the facts of the case at hand can be observed to substantiate this assumption.

235Mexico v. Cargill (Appeal), para.72.

236Cargill v. Mexico, para.523.

41

159. In the first place, the subsidiaries merely lost revenues as opposed to file for bankruptcy as it

happened in Cargill v. Mexico, indicating a moderate (at best) level of economic dependence.

Furthermore, Claimant’s subsidiaries were not set up for the particular purpose of supplying FBI but

existed long before that function.237 Accordingly, they must have proved to be economically viable even

without being a supplier of FBI. Likewise, the goods supplied by the subsidiaries—hops, barley and

aluminium cans238—are evidently no highly customized goods but rather easily interchangeable, raw

commodities, which may easily be sold elsewhere. Lastly, Claimant refers to the newly implemented

production line at the aluminium can plant devised to serve FBI’s individual demand. Respondent,

conversely, holds that merely one tangible adaption measure much rather suggests that by and large no

profound and comprehensive adaptation efforts were undertaken. As a result, the level of internal

integration cannot be assumed to manifest a level of interdependence tantamount to inextricability.

160. For those reasons above, jointly and severally, Respondent rejects the notion of Claimant’s

subsidiaries to represent inextricable parts of Claimant’s investment in FBI. In the absence of such

inextricable relation, Claimant’s has not incurred the loss in its capacity as investor but rather as a

producer and exporter. Yet, in this capacity—as Claimant is bound to concede—losses are no recoverable

items of damages under the BIT.



42

PRAYER FOR RELIEF

Respondent respectfully requests this Tribunal to find that:

I. This Tribunal lacks jurisdiction over the claims submitted, as CAM is not a qualified investor and

that, in any event, those claims are inadmissible because the intra-group restructuring constitutes an

abuse of process.

II. This Tribunalneither has jurisdiction over claims based on the alleged breach of the S.P.A., and

that, in any event, those claims are inadmissible, since the general BIT arbitration clause cannot

supersede the more specific one contained in the S.P.A.

III. Respondent’s measures are non-discriminatory bona fide regulations conducive to the

preservation of public health, therefore covered by the State’s police powers and not in contravention

of any obligation under the BIT towards CAM.

IV. Moral damages may not be awarded by this Tribunal, as the arrest of Mssrs. Goodfellow and

Straw did not cause to FBI any grave and substantial non-pecuniary harm.

V. The loss of sales by CAM’s subsidiaries does not constitute a recoverable item of damages, as

they do not form an “inextricable part” of CAM’s investment in FBI.

43

Respectfully submitted on 22 September 2013.

-----

Team TANAKA.

On behalf of the Respondent,

The Republic of Ruritania.

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