TEAM AJIBOLA GERMAN INSTITUTION OF …TEAM AJIBOLA GERMAN INSTITUTION OF ARBITRATION UNDER THE UNCITRAL ARBITRATION RULES ADMINISTERED BY THE DIS CONTIFICA ASSET MANAGEMENT CORP. (CLAIMANT)TEAM

TEAM AJIBOLA

GERMAN INSTITUTION OF ARBITRATION

UNDER THE UNCITRAL ARBITRATION RULES ADMINISTERED BY THE DIS

CONTIFICA ASSET MANAGEMENT CORP.

(CLAIMANT)

v.

REPUBLIC OF RURITANIA

(RESPONDENT)

MEMORIAL FOR CLAIMANT

TEAM AJIBOLA

i

TABLE OF CONTENTS

LIST OF AUTHORITIES.............................................................................................................. iv

LIST OF LEGAL SOURCES ........................................................................................................ xi

STATEMENT OF FACTS ............................................................................................................. 1

SUMMARY OF ARGUMENTS .................................................................................................... 4

ARGUMENTS ................................................................................................................................ 6

I. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS SUBMITTED BY CAM

AND THOSE CLAIMS ARE ADMISSIBLE ............................................................................ 6

A. The Claimant meets all jurisdictional requirements under the BIT .................................... 6

1. The Claimant is the Investor under the BIT ..................................................................... 7

2. The dispute concerns Investment of the Claimant in Ruritania ....................................... 7

B. Restructuring of Contifica Group is not an abuse of right or an infringement of the

principle of a good faith ........................................................................................................... 9

1. International law does not recognize nationality planning as abuse of right ................... 9

2. In any event, the Claimant exercised bona fide nationality planning ............................ 10

(i) The dispute arose after FBI’s shares were transferred to the Claimant and was not

foreseeable ...................................................................................................................... 10

(ii) The Claimant maintains substantial business activity and is not a mere shell

company ......................................................................................................................... 11

(iii) Restructuring pursued legitimate goals ................................................................... 12

II. THE TRIBUNAL HAS JURISDICTION OVER CAM’S CLAIMS ON THE BREACH OF

THE SHARE PURCHASE AGREEMENT BY THE STATE PROPERTY FUND OF

RURITANIA ............................................................................................................................. 12

A. The conduct of the State Property Fund of Ruritania is attributable to the Respondent .. 13

1. The Fund exercised elements of governmental authority .............................................. 13

2. In any event, the Fund is a state entity directed and controlled by Ruritania ................ 15

B. Umbrella clause in the BIT extends protection to the Claimant’s contract claims under the

Share Purchase Agreement .................................................................................................... 16

1. Umbrella clause should be interpreted in accordance with Articles 31 and 32 of the

VCLT ................................................................................................................................. 16

(i) The ordinary meaning................................................................................................ 16

(ii) Object and purpose of the BIT ................................................................................. 17

TEAM AJIBOLA

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2. Even applied restrictively the umbrella clause covers the Claimant’s contract claims . 17

C. The Forum Selection clause in the Agreement does not deprive the Tribunal from

exercising jurisdiction............................................................................................................ 18

III. RURITANIA BREACHED ITS OBLIGATIONS UNDER THE BIT .............................. 19

A. Cumulative effect of measures adopted by Ruritania has resulted in substantial

deprivation of CAM’s Investment ......................................................................................... 19

1. CAM was effectively deprived of the shares in FBI...................................................... 21

2. CAM’s intellectual property rights were substantially deprived of the use and

enjoyment ........................................................................................................................... 22

(i) The plain packaging requirement .............................................................................. 22

(ii) Container requirement .............................................................................................. 23

B. Ruritania’s measures cannot be considered as non-compensable general regulatory

measures ................................................................................................................................ 23

1. The adopted measures were disproportionate to the pursued aims................................ 24

(i) Disproportionality of the MAB Act .......................................................................... 24

(ii) Disproportionality of the Ordinance......................................................................... 25

2. The adopted measures were discriminatory ................................................................... 26

(i) The MAB Act was specifically targeted against FBI ................................................ 26

(ii) The Ordinance was intentionally implemented after the MAB Act ......................... 27

C. Alternatively, Ruritania failed to provide fair and equitable treatment ............................ 28

1. The MAB Act and the Ordinance violated CAM’s legitimate expectations ................. 28

(i) The MAB Act violated CAM’s expectation arisen from the existed regulation of

alcohol trade ................................................................................................................... 29

(ii) The Ordinance violated CAM’s expectation arisen from the Share Purchase

Agreement ...................................................................................................................... 29

2. In adopting the MAB Act and the Ordinance Ruritania acted non-transparently .......... 30

IV. THE CLAIMANT IS ENTITLED TO COMPENSATION FOR MORAL DAMAGES

CAUSED BY THE PERSECUTION OF ITS EMPLOYEES .................................................. 31

A. The present Tribunal has jurisdiction to grant compensation for moral damages ............ 31

1. The BIT does not eliminate jurisdiction of the Tribunal over moral damages claims .. 32

2. Arrest of the Claimant's employees has resulted in a breach of Ruritania’s obligation to

provide full protection and security ................................................................................... 32

TEAM AJIBOLA

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3. Detention of the Claimant’s employees has led to infliction of injury to the investment

of the Claimant ................................................................................................................... 33

(i) Detention of CAM's employees by Ruritanian authorities affected the good-will, one

of the assets invested in FBI ........................................................................................... 34

(ii) Detention of employees constitute actions against the Investor’s executives for their

activity on behalf of the Investor.................................................................................... 35

B. Circumstances that justify awarding compensation for moral damages are present ........ 35

1. Exceptional circumstances test is not applicable .......................................................... 36

2. Alternatively, exceptional circumstances test is satisfied .............................................. 36

(i) Ruritanian authorities’ actions have implied illegal detention and contravene the

norms according to which civilized nations are expected to act .................................... 37

(ii) Actions of Ruritanian authorities incidental to the arrest have caused stress, anxiety

and mental suffering to the Claimant’s employees and harm to the Claimant’s

Investment ...................................................................................................................... 38

(iii) Cause and effect of the actions of Ruritanian authorities are grave and substantial 40

C. Ruritania is bound to compensate moral damages under the ILC Articles on State

Responsibility ........................................................................................................................ 40

1. The ILC articles are applicable in the present case ........................................................ 40

2. The internationally wrongful act of the Respondent caused the damages ..................... 42

3. Harm caused to the Claimant by unlawful actions of the host state is to be recovered by

compensation and satisfaction ........................................................................................... 42

V. THE LOSS OF SALES OF CAM’S SUBSIDIARIES LOCATED OUTSIDE OF

RURITANIA CONSTITUTES A RECOVERABLE ITEM OF DAMAGES ......................... 44

A. Ruritania has the duty of full compensation for expropriation and violation of FET ...... 44

B. CAM’s subsidiaries losses constitute protectable investment under the BIT ................... 45

PRAYER FOR RELIEF ............................................................................................................... 47

TEAM AJIBOLA

iv

LIST OF AUTHORITIES

ABBREVIATION FULL CITATION

AWARDS AND DECISIONS IN INVESTMENT ARBITRATIONS

AAPL v. Sri Lanka

Asian Agricultural Products Limited v. Democratic Socialist Republic

of Sri Lanka,

ICSID CASE No. ARB/87/3, Award of June 27, 1990

ADC v. Hungary

ADC Affiliate Limited and ADC & ADMC Management Limited v. The

Republic of Hungary,

ICSID Case No. ARB/03/16, Award of October 2, 2006

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 of November 21, 2007

AES v. Hungary

AES Summit Generation Limited and AES-Tisza Erömü Kft v. The

Republic of Hungary,

ICSID Case No. ARB/07/22, Award of September 23, 2010

Aguas del Tunari v.

Bolivia

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

ICSID Case No. ARB/02/3, Decision on Respondent’s Objections to

Jurisdiction of October 21, 2005

Alpha v. Ukraine Alpha Projektholding GMBH v. Ukraine,

ICSID Case No. ARB/07/16, Award of November 8, 2010

Amco v. Indonesia

Amco Asia Corporation and others v. Indonesia,

ICSID Case No. ARB/81/1 Decision on the Application for

Annulment of May 16,1986

Autopista v. Venezuela

Autopista Concesionada De Venezuela, C.A. v. Bolivarian Republic of

Venezuela,

ICSID Case No. ARB/00/5, Decision on Jurisdiction

Azurix v. Argentina

(Jurisdiction)

Azurix Corp. v. The Argentine Republic,

ICSID Case No. ARB/01/12, Decision on Jurisdiction of December 8,

2003

Azurix v. Argentina

(Award)

Azurix Corp. v. The Argentine Republic,

ICSID Case No. ARB/01/12, Award of July 14, 2006

Bayindir v. Pakistan

(Jurisdiction)

Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of

Pakistan,

ICSID Case No. ARB/03/29, Decision on Jurisdiction

Bayindir v. Pakistan

(Award)

Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of

Pakistan,

ICSID Case No. ARB/03/29, Award of August 27, 2009

BG Group Plc v.

Argentina

BG Group Plc v. Republic of Argentina,

(UNCITRAL), Final Award of December 24, 2007

BIVAC v. Paraguay

Inspection, Valuation, Assessment and Control, BIVAC B.V. v.

Paraguay,

ICSID Case No. ARB/07/9, Decision of the Tribunal on Objections to

Jurisdiction of May 29, 2009

BiwaterGauff v.

Tanzania

BiwaterGauff (Tanzania) Ltd. v. United Republic of Tanzania,

ICSID Case No. ARB/05/22, Award of July 24, 2008.

BiwaterGauff v. BiwaterGauff (Tanzania) Ltd. v. United Republic of Tanzania,

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Tanzania (Dissenting

Opinion)

ICSID Case No. ARB/05/22, Concurring and Dissenting Opinion of

July 18, 2008

Bosh v. Ukraine

Bosh International, Inc and B&P Ltd Foreign Investments Enterprise

v. Ukraine,


Cargill v. Mexico Cargill, Incorporated v. United Mexican States,

ICSID Case No. ARB(AF)/05/2, Award of September 18, 2009

Cementownia v. Turkey Cementownia “Nowa Huta” S.A. v. Republic of Turkey,

ICSID Case No. ARB(AF)/06/2 Award of September 17, 2009

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

(UNCITRAL) Partial Award of September 13, 2001

CMS v. Argentina

CMS Gas Transmission Company v. The Argentine Republic,


Jurisdiction of July, 2003

ConocoPhillips v.

Venezuela

ConocoPhillips Petrozuata B.V, ConocoPhillips Hamaca B.V.,

ConocoPhillips Gulf of Paria B.V. and ConocoPhillips Company v.

Bolivian Republic of Venezuela,

ICSID Case No. ARB/07/30, Decision on Jurisdiction and Merits of

September 3, 2013

Duke Energy v.

Ecuador

Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of

Ecuador,

ICSID Case No. ARB/04/19, Award of August 18, 2008

DLP v. Yemen Desert Line Projects LLC v. Republic of Yemen,

ICSID Case No. ARB/05/17, Award of February 6, 2008

El Paso v. Argentina El Paso Energy International Company v. The Argentine Republic,


Eureko v. Poland

Eureko B.V v. Republic of Poland,

ad hoc UNCITRAL Arbitration, IIC 9, Partial Award and Dissenting

Opinion of August 19, 2005

Europe Cement v.

Turkey

Europe Cement Investment & Trade S.A. v. Republic of Turkey,

ICSID Case No. ARB(AF)/07/2, Award of August 13, 2009

Generation Ukraine v.

Ukraine

Generation Ukraine, Inc. v. Ukraine,

ICSID Case No. ARB/00/9, Award of September 16, 2003

Impregilo v. Pakistan Impregilo v. Pakistan,

ICSID Case No. ARB/03/3, Decision on Jurisdiction of April 22, 2005

Klöckner v. Cameroon

Klöckner Industrie-Anlagen GmbH and others v. United Republic of

Cameroon and Société Camerounaise des Engrais,

ICSID Case No. ARB/81/2, Decision of May 3, 1985

Lemire v. Ukraine Lemire v. Ukraine,

ICSID Case NO. ARB/06/18, Award of March 28, 2011

LESI v. Algeria LESI SpA & ASTALDI SpA v. Algeria,

ICSID Case No. ARB/05/3, Decision on Jurisdiction of July 12, 2006

LETCO v. Liberia Liberian E. Timber Corp. (LETCO) v. Liberia,

Case No. ARB/92/1, Award of February 16, 1994

LG&E v. Argentina

LG&E Energy Corp., LG&E Capital Corp., LG&E International Inc.

v. Argentine Republic,

ICSID Case No. ARB/02/1, Decision on Liability of October 3, 2006

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Maffezini v. Spain

Emilio Agustin Maffezini v. The Kingdom of Spain,


Jurisdiction of January 25, 2000

Metalclad v. Mexico Metalclad Corporation v. The United Mexican States,

ICSID Case No. ARB(AF)/97/1, Award of August 30, 2000

Methanex v. United

States

Methanex Corp. v. United States of America,

(NAFTA) Final Award of August 3, 2005

Mobil v. Venezuela

Mobil Corporation, Venezuela Holdings, B.V. et al. v. Bolivian

Republic of Venezuela,

ICSID Case No. ARB/07/27, Decision on Jurisdiction of June 10,

2010

Mondev v. United

States

Mondev International Ltd. v. United States of America,

ICSID Case No. ARB(AF)/99/2, Award of October 11, 2002

Noble Ventures v.

Romania

Noble Ventures Inc. v. Romania,


Petrobart Limited v.

Kyrgyz Republic

Petrobart Limited v. Kyrgyz Republic,

(SCC) Case No. 126/2003, Award of March 29, 2005

Phoenix v. Czech

Republic

Phoenix Action Ltd v. Czech Republic,

ICSID Case No ARB/06/5, Award of 15 April 2009

Rompetrol v. Romania

Rompetrol Group NV v Romania,

ICSID Case No ARB/06/3, Decision on Preliminary Objections of

April 18, 2008

Rumeli v. Kazakhstan

Rumeli Telecom A.S. & Telsim Mobil Telekomikasyon Hizmetleri A.S.

v. Republic of Kazakhstan,

ICSID Case No. ARB/05/16, Award of July 29, 2008

Saluka v. Czech

Republic

Saluka Investments BV v. The Czech Republic,

(PCA) Partial Award of March 17, 2006

Santa Elena v. Costa

Rica

Compañiá del Desarrollo de Santa Elena, S.A. v. The Republic of

Costa Rica,


S.D. Myers v. Canada S.D. Myers, Inc. v. Government of Canada,

(NAFTA) Partial Award of November 13, 2000

SGS v. Pakistan

SGS Societe Generale de Surveillance S.A. v. Islamic Republic of

Pakistan,

ICSID Case No. ARB/01/13, Decision of the Tribunal on Objections

to Jurisdiction of August 6, 2003

SGS v. Paraguay

(Award)

SGS Societe Generale de Surveillance S.A. v. The Republic of

Paraguay,


SGS v. Paraguay

(Jurisdiction)

SGS Societe Generale de Surveillance S.A. v. The Republic of

Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction of

February 12, 2010

SGS v. Philippines

SGS Societe Generale de Surveillance S.A. v. Republic of the

Philippines,


Jurisdiction of January 29, 2004

SGS v. Philippines SGS Societe Generale de Surveillance S.A. v. Republic of the

TEAM AJIBOLA

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(“Crivellaro

Declaration”)

Philippines,

ICSID Case No. ARB/02/6, Decision by One of the Arbitrators

(“Crivellaro Declaration”)

Siag v. Egypt

Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of

Egypt,

ICSID Case No. ARB/05/15 Award of June 1, 2009

Siemens v. Argentina Siemens A.G. v. The Argentine Republic,

ICSID Case No. ARB/02/8, Award of January 17, 2007

Tecmed v. Mexico Tecnicas Medioambientales Tecmed S.A. v. United States of Mexico,

ICSID Case No. ARB(AF)/00/2, Award of May 29, 2003

Thunderbird v. Mexico

International Thunderbird Gaming Corporation v. The United

Mexican States,

(NAFTA) Award of January 26, 2006

Tippets et al v. Iran

Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA Consulting

Engineers of Iran, the Government of the Islamic Republic of Iran,

Civil Aviation Organization, Plan and Budget Organization, Iranian

Air Force, Ministry of Defense, Bank Melli, Bank Sakhteman,

Mercantile Bank of Iran and Holland

Iran-U.S. Claims Tribunal Case No. 7, Award No. 141-7-2 of June 29,

1984

Tokios Tokeles v.

Ukraine

Tokios Tokeles v. Ukraine,

ICSID Case No ARB/02/18, Decision on Jurisdiction of 29 April 2004

Total v. Argentina

Total S.A. v. Argentine Republic,

ICSID Case No. ARB/04/1, Decision on Liability of December 27,

2010

Toto v. Lebanon Toto Construzioni Generali S.P.A. v. Republic of Lebanon,

ICSID Case No. ARB/07/12, Award of June 7, 2012

Vivendi I v. Argentina

(Annulment)

Compañia de Aguas del Aconquija SA and Vivendi Universal v.

Argentine Republic,

ICSID Case no. ARB/97/3, Decision on the Application for

Annulment of July 3, 2002

Vivendi II v. Argentina

Compañia de Aguas del Aconquija SA and Vivendi Universal v.

Argentine Republic,

ICSID Case no. ARB/97/3, Award of August 20, 2007

Waste Management v.

Mexico

Waste Management, Inc. v. United Mexican States,

ICSID Case No. ARB(AF)/00/3, Award of April 30, 2004

Wena Hotels v. Egypt Wena Hotels Limited v. Arab Republic of Egypt, ad hoc Committee

Decision on Application for Annulment of February 5, 202

OTHER DECISIONS

Chorzów Factory

(PCIJ)

The Chorzów Factory Case (Germany v. Poland),

(PCIJ) Judgment of July 26, 1927

IRC v. Muller & Co

Margarine Limited

IR Commrs v. Muller and Co's Margarine Ltd,

(1901) AC

James and Others v.

United Kingdom

(ECHR)

James and Others v. The United Kingdom,

Application No. 8793/79, Judgment of February 21, 1986

Letelier and Moffit Dispute concerning responsibility for the deaths of Letelier and Moffit

TEAM AJIBOLA

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(US-Chile Tribunal) (United States – Chile Tribunal) Decision of January 11, 1992

Lusitania Cases

(US–Germany

Commission)

Lusitania Cases,

(United States–Germany Mixed Claims Commission) Opinion of

November 1, 1923

available at http://legal.un.org/cod/riaa/cases/vol_VII/1-391.pdf

Matos E Silva, LDA.,

and Others v. Portugal

(ECHR)

Matos E Silva, LDA., and Others v. Portugal,

Application No. 15777/89, Judgment of September 16, 1996

Portugal v. Germany

(Ad Hoc)

Responsabilité de l’Allemagnedans les colonies portugaise du sud de

l’Afrique (Portugal v. Germany),

(Ad Hoc) Award of June 30, 1930

Rainbow Warrior

(the Secretary-General

of the United Nations)

Case Concerning the Differences Between New Zealand and France

Arising from the Rainbow Warrior Affair,

(the Secretary-General of the United Nations) Ruling of July 6, 1986

United States v. Iran

(ICJ)

Case Concerning United States Diplomatic and Consular Staff in

Tehran (United States of America v. Iran),

(ICJ ) Judgment of May 24, 1980

TREATISES

Lange

J. de Oliveira Ascensao [et al.]; Ed. by P. Lange; Language consultant:

J. Phillips.

International trademark and signs protection: a Handbook

(2010 Beck/Hart

Dolzer/Schreuer

Rudolf Dolzer, Christoph Schreuer

Principles of International Investment Law,

(2012) OUP

Dugan/Wallace/Rubins/

Sabahi

Christopher Dugan, Don Wallace, Noah D. Rubins, Jr., Borzu Sabahi

Investor-State Arbitration,

(2008) OUP

Douglas

Zachary Douglas

The International Law of Investment Claims

(2009) CUP

Sabahi

Borzu Sabahi

Compensation and Restitution in Investor-State Arbitration: Principles

and Practice,

(2011) OUP

Schwenzer/Hachem

Ingeborg Schwenzer, Pascal Hachem

International arbitration and international commercial law

(2011) Kluwer Law International

Subedi

Surya P. Subedi

International Investment Law Reconciling Policy and Principle,

(2008) Hart

JOURNAL ARTICLES

Ball

Markham Ball

Assessing Damages in Claims By Investors Against States,

(2001) 16 ICSID Review

Cremades

Bernardo M. Cremades

Arbitration in Investment Treaties: Public Offer of Arbitration in

Investment-Protection Treaties,

http://legal.un.org/cod/riaa/cases/vol_VII/1-391.pdf

TEAM AJIBOLA

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available at

http://www.cremades.com/pics/contenido/File634528980336478688.p

df

Crawford

James Crawford S. C.,

Investment Arbitration and the ILC Articles on State Responsibility,


Gaillard

Emmanuel Gaillard

Investment Treaty Arbitration and Jurisdiction over Contract Claims –

the SGS Cases Considered,

(2005) International Investment Law and Arbitration: Leading Cases

from the ICSID, NAFTA, Bilateral Treaties and Customary

International Law

Kriebaum

Ursula Kriebaum

Regulatory taking: Balancing the Interests of the Investor and the

State,

(2007) 8(5) Journal of World Investments and Trade

Mitchell/Wurzberger

Andrew D. Mitchell, Sebastian M. Wurzberger

Boxed In? Australia’s Plain Tobacco Packaging Initiative and

International Investment Law,

(2011) 27(4) Kluwer Law International

Newcombe

Andrew Newcombe

The Boundaries of Regulatory Expropriation in International Law,


Olynyk

Stephen Olynyk

Balanced Approach to Distinguishing between Legitimate Regulation

and Indirect Expropriation in Investor-State Arbitration,

(2012) 15 Int'l Trade & Bus. L. Rev.

Potesta

Michele Potesta

Legitimate Expectations in Investment Treaty Law: Understanding the

Roots and the Limits of a Controversial Concept,

(2013) 28(1) ICSID Review

Reisman/Sloane

W. Michael Reisman, Robert D. Sloane

Indirect Expropriation and Its Valuation in the BIT Generation,

(2004) 74 BYBIL

Skinner/Miles/Luttrell

Matthew Skinner, Cameron A. Miles, Sam Luttrel

Access and advantage in investor-state arbitration: The law and

practice of treaty shopping,

(2010) 20 Journal of World Energy Law & Business

Waelde/Kolo

Thomas Waelde, Abba Kolo

Environmental Regulation, Investment Protection and ‘Regulatory

Taking’ in International Law,

(2001) 50(4) International and Comparative Law Quarterly

Westberg

John Westberg

Applicable Law, Expropriatory Takings and Compensation in Cases of

Expropriation; ICSID and Iran-United States Claims Tribunal Case

Law Compared,


MISCELLANEOUS

http://www.cremades.com/pics/contenido/File634528980336478688.pdf

http://www.cremades.com/pics/contenido/File634528980336478688.pdf

TEAM AJIBOLA

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Black’s law Dictionary

Black's Law Dictionary

Henry Campbell Black, M.A. Revised Fourth Edition, St. Paul, MINN.

WEST PUBLISHING CO.

1968

Coriell/Marchili

Wade M. Coriell & Silvia M. Marchili,

Unexceptional Circumstances: Moral Damages in International

Investment Law, paper presented at the Third Annual Investment

Treaty Arbitration Conference: A Debate and Discussion,

(2009) Interpretation in Investment Arbitration

IVSC

International Valuation Standards Committee

Review of the International Valuation Standards,

(2007) IVSC

ILC Articles

Draft articles on Responsibility of States for Internationally Wrongful

Acts, with commentaries

(2001) 2(2) Yearbook of the International Law Commission

OECD Companion

Volume

International Investment Law: a Changing Landscape,

OECD 2005, 55,

available at

http://www.oecd.org/daf/inv/internationalinvestmentagreements/40077

899.pdf

Panel Discussion

Panel Discussion

Should Moral Damages Be Compensable in Investment Arbitration?

(2009) III International Treaty Arbitration and International Law

Reparation

Reparation for Injuries Suffered in the Service of the United Nations,

Advisory Opinion,

(1949) I.C.J. Reports

Schreuer

Christoph Schreuer

Nationality Planning

Fordham Conference, London, 27 April 2012. Revised 12 October

2012, available at http://www.univie.ac.at/intlaw/wordpress/wp-

content/uploads/2012/11/nationality-Planning-Fordham-revised.pdf

WHO CVDs Cardiovascular diseases (CVDs) // WHO Fact sheet N°317, available

at http://www.who.int/mediacentre/factsheets/fs317/en/

WHO Strategy

WHO Global strategy to reduce harmful use of alcohol, endorsed on

May 21, 2010 by resolution WHA63, available at

http://www.who.int/substance_abuse/alcstratenglishfinal.pdf

http://www.oecd.org/daf/inv/internationalinvestmentagreements/40077899.pdf


http://www.univie.ac.at/intlaw/wordpress/wp-content/uploads/2012/11/nationality-Planning-Fordham-revised.pdf

http://www.univie.ac.at/intlaw/wordpress/wp-content/uploads/2012/11/nationality-Planning-Fordham-revised.pdf

http://www.who.int/mediacentre/factsheets/fs317/en/


TEAM AJIBOLA

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LIST OF LEGAL SOURCES

INTERNATIONAL TREATIES

Covenant International Covenant on Economic, Social and Cultural

VCLT Vienna Convention on the Law of Treaties

TEAM AJIBOLA

1

STATEMENT OF FACTS

Parties to the dispute

1. The Claimant, a Cronos company, Contifica Asset Management Corp. (“Claimant or

CAM”), is a member of the Contifica Group – an international conglomerate with the parent

company, Contifica Enterprises Plc, incorporated in Prosperia. The latter also owns

Contifica Spirits S.p.A., incorporated in Posteriana.

2. The Respondent is the Republic of Ruritania. Ruritania has The Treaty for the Mutual

Promotion and Protection of Foreign Investment with Cronos (“BIT”).

Investment

3. From 1928 to 2008, the State Property Fund of Ruritania (“Fund”), a legal entity established

by an Act of the Parliament of Ruritania, with government-appointed management, was the

owner of Freecity Breweries, Inc. (“FBI”). FBI was the largest and profit-generating

brewery in Ruritania producing a number of brands of beer, including the most famous

“FREEBREW”. The FREEBREW’s peculiarity is destined by the remarkable and unique

0,8 l. bottle and the flavouring added to it. The flavouring is produced from the local plant

Reyhan, which has traditionally been added to a number of local food products.

4. In the beginning of 2008 the financial crisis led to a significant budget deficit, and the Fund

decided to privatize FBI. Contifica Spirits S.p.A. won the tender and acquired all shares in

FBI for USD 300,000,000 on 30 June 2008.

5. Under the Share Purchase Agreement (“Agreement”) Contifica Spirits S.p.A. was entitled

to assign all its contractual rights and obligations to any member of the Contifica Group. The

contract also had a guarantee that the products of FBI were not more harmful than ordinary

alcoholic beverages.

6. Following acquisition of FBI, Contifica Group significantly invested in the brewery and

transformed it into a state of the art enterprise. The large-scale improvements led to increase

of the output to 130,000,000 decaliters per annum and recognition of FBI as “the safest

place to work” in Ruritania. To serve the needs of FBI CAM commenced a number of

supplies of barley, hops and cans from abroad.

7. On 1 March 2010, executives of FBI seeking further protection of Contifica Group’s assets

and investor-friendly environment came to the decision to transfer shares in FBI to CAM.

TEAM AJIBOLA

2

On 17 March 2010, as part of intra-group restructuring CAM acquired the shares in FBI and

rights to intellectual property used by FBI, including FBI’s brands and the designs of bottles.

Drastic alteration of the legal framework

8. In January 2010, the New Way party with “reduction-of-alcohol-consumption” election

manifesto won the election to the Parliament of Ruritania and got 211 of 400 seats there.

9. On 20 November 2010, the Parliament of Ruritania adopted the Regulation of Sale and

Marketing of Alcoholic Beverages Act (“MAB Act”). It banned the marketing of alcohol on

TV and at sporting events as well as the serving of alcohol at sport facilities, outdoors and at

any place from 9 pm to 9 am. The act also included the requirements to write all text on the

white label in the same colour and font and to pack alcohol in containers no more than 0,5 l.

10. As a result of the MAB Act implementation, during two quarters of 2011, FBI lost 60% of

sales, 60% of revenue and approximately 10 million USD of net income.

11. Shortly after the adoption of the MAB Act, on 30 June 2011, the Ministry of Health and

Social Security (“Ministry”) adopted an ordinance (“Ordinance”), based on scientific

report prepared by Human Health Research Institute (“HRI”), a government-funded

institution. The report determined that Reyhan increased the risk of cardiac complications.

The Ordinance in turn required labeling any product with Reyhan with a warning that the

latter leads to higher risk of cardiac complications.

12. On 20 August 2011, FBI requested the Ministry to lift the Ordinance and attached a

scientific evidence from an independent scientist that techniques used in the HRI report led

to wrong conclusion on harmfulness of Reyhan. On 25 August 2011 the Ministry entirely

denied this request.

13. At the same time, FBI’s competitors launched an extensive advertising campaign against

Reyhan based on research of the “most respected” HRI.

14. By the last quarter of 2011 losses of sales dropped by further 20% and the revenue in the last

quarter of 2011 fell to 10% of the revenue for the same period of 2009. FBI was also forced

to dismiss over half of its employees and to decrease the output to 5,000,000 decaliters per

annum. As a result of the losses, on 15 September 2012, FBI was induced to provide lenders

with additional security rights over its various assets in order not to declare default.

TEAM AJIBOLA

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Arrest of Contifica Group employees

15. On 23 December 2011, Messrs Goodfellow and Straw, executives of FBI and Contifica

Group, were detained when boarding their flight to Prosperia. The detention was in the

course of investigation of alleged bribery of the officials of the Fund related to the

acquisition of shares in FBI. But CAM’s employees were informed only orally about alleged

summons after holiday season. The police passed a video of their detention to Ruritania’s

most popular TV channel, which subsequently aired it. A spokeswoman for Prosecutor’s

Office of Ruritania said that people responsible for corruption would not escape

investigation.

16. On 3 January 2012, Messrs Goodfellow and Straw were released, while the investigation

remained pending up to 20 June 2012. Eventually, it was terminated due to insufficient

evidence. Ruritanian authorities gave no explanation or apologies on this matter.

Arbitration

17. On 30 September 2012, relying on the BIT between Ruritania and Cronos CAM filed the

Statement of Claim to the German Institution of Arbitration.

18. CAM requested the Tribunal to find that in adopting the MAB Act and the Ordinance

Ruritania de facto expropriated its investments associated with FBI, including Claimant’s

supplying businesses outside Ruritania. In the alternative, the Claimant submitted that those

measures violated fair and equitable treatment obligation. Relying on the BIT’s umbrella

clause CAM also asked to find that the contractual guarantee towards the products of FBI

was violated. Finally, the Claimant requested compensation for its moral damages caused by

persecution of Messrs Goodfellow and Straw.

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SUMMARY OF ARGUMENTS

19. JURISDICTION. The Claimant submits that the Tribunal has jurisdiction for four reasons.

Firstly, the Claimant meets all formal jurisdictional requirements under the BIT: the

Claimant satisfies the ratione personae and ratione materiae requirements. Secondly, CAM

exercised bona fide nationality planning: the Claimant satisfies the ratione temporis

requirement, because the dispute arose after the restructuring of Contifica Group in the light

of unforeseeable dispute. Thirdly, the Tribunal has jurisdiction over CAM’s claim based on

the alleged breach of the Agreement, because the conduct of the Fund is attributable to

Ruritania and the Article 6(2) of the BIT extends the BIT protection on contractual

undertakings. Fourthly, the Forum Selection Clause in the Agreement does not divest the

present Tribunal from exercising jurisdiction, because the Respondent breached the

umbrella clause.

20. BREACH OF THE BIT. The Claimant submits that implementation of the MAB Act and

the Ordinance resulted in indirect expropriation of its Investment or, in alternative, in

violation of fair and equitable treatment standard. Firstly, Ruritania’s measures substantially

deprived CAM of its Investments. Specifically, the MAB Act and the Ordinance depreciated

economic value, enjoyment and management of CAM’s shares as well as essentially

obstructed the full-value use of CAM’s intellectual property right associated with FBI.

Secondly, the MAB Act and the Ordinance are not non-compensable regulatory measures.

In applying “balanced approach” CAM submits that measures of Ruritania are measures of

expropriation rather than non-compensable regulatory measures as not only they resulted in

substantial deprivation of CAM’s Investment but were also adopted in disproportional and

discriminatory way. Finally, in any event, Ruritania failed to provide fair and equitable

treatment for the Claimant, because the existed restrictions of alcohol trade and the

contractual guarantee created CAM’s legitimate expectation that no total and drastic

alteration of the legal framework towards alcohol and Reyhan would happen. In addition,

Ruritania failed to provide all the parties concerned to express their proposals on the issues

of alcohol and Reyhan as well as hid the 2005 report when the shares in FBI had been

acquired, and thus acted non-transparently.

21. MORAL DAMAGES. The Claimant submits that moral damages for the arrest of Messrs

Goodfellow and Straw may in principle be awarded and should be granted in the present

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case. Firstly, the present Tribunal has jurisdiction to grant compensation for moral damages

under applicable law. Secondly, moral damages should be awarded as the criteria for

compensation are met. Serious violations of the basic minimum standard of treatment took

place and it is enough to award moral damages. Alternatively, exceptional circumstances

test is satisfied. Thirdly, harm caused to the Claimant by unlawful actions of the Respondent

is to be recovered by compensation and satisfaction.

22. RECOVERABILITY OF LOSSES OF SUBSIDIARIES LOCATED OUTSIDE

RURITANIA. The Claimant submits that the losses of CAM’s bottling and agricultural

businesses located outside Ruritania are compensable in the present case for two reasons.

Firstly, under customary international law losses suffered due to expropriation by companies

outside the undertaking itself are included in recoverable damages. Secondly, companies

associated with FBI constitute a part of one and indivisible investment project, which in its

entirety is in the territory of Ruritania.

TEAM AJIBOLA

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ARGUMENTS

I. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS SUBMITTED BY

CAM AND THOSE CLAIMS ARE ADMISSIBLE

23. Under Article 1 of the UNCITRAL Arbitration Rules jurisdiction of the Tribunal is

contingent upon the existence of an arbitration agreement whereby the parties have

consented to submit disputes between them to arbitration under the UNCITRAL Arbitration

Rules.

24. The host State may consent to arbitrate disputes with foreign investors via a treaty for the

reciprocal promotion and protection of investments.1 Accordingly, the Respondent’s consent

to arbitrate the present dispute is recorded in Article 8 of the BIT, whereby it consented that

the Investor would submit disputes concerning Investments to an ad hoc arbitral tribunal

established under the UNCITRAL Arbitration Rules. The Claimant expressed its consent by

submitting the Statement of Claim. Such request for arbitration is treated as an acceptance of

the offer, creating the arbitration agreement.2

25. The Claimant admits that the scope of the Respondent’s offer to arbitrate and consequently

jurisdiction of the Tribunal is conditioned upon fulfillment of requirements contained in the

BIT. The Claimant will accordingly demonstrate that it meets all jurisdictional requirements

under the BIT [A]. The Claimant will further prove that restructuring of the Contifica Group

is not an abuse or right or an infringement of the principle of good faith [B].

A. THE CLAIMANT MEETS ALL JURISDICTIONAL REQUIREMENTS UNDER THE BIT

26. Under Article 8 of the BIT only “disputes concerning Investments between a Contracting

State and an Investor of the other Contracting State” shall be submitted to international

arbitration. The Claimant is the Investor [1] and the present dispute concerns its Investment

in Ruritania [2].

1Cremades, p.10.

2Statement of Claim, Record, §26, p.6.

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7

1. The Claimant is the Investor under the BIT

27. Article 1(3) of the BIT defines the “Investor” as

any entity which is established in accordance with, and recognized

as a legalperson by the law of [the home] State.

28. The plain language of the BIT requires only that the Investor be constituted under the laws

of the home State. The test of place of incorporation has long been applied by the tribunals

in accordance with its ordinary meaning.3 Indeed, the Contracting States were free to

stipulate other requirements, such as the corporation be controlled by nationals of the State

of incorporation or existence of substantial business activities in that.4 Therefore, the

Contracting States intentionally omitted to add those requirements.5

29. The Claimant is “a company incorporated under the laws of the State of Cronos”.6 Hence,

CAM is recognized as a legal person by the State of Cronos7 and is the Investor under the

BIT.

30. Nonetheless, the Respondent may argue that the real Investor is another entity – either

Contifica Spirits S.p.A. or its parent company Contifica Enterprises Plc, which are not

protected under the BIT. However, CAM is a subsidiary of Contifica Enterprises Plc.8

According to the prevalent case law, intermediate corporations are allowed to bring a direct

claim whenever complied with a treaty definition of the “Investor”.9

31. Hence, the requirement of jurisdiction ratione personae under the BIT is satisfied.

2. The dispute concerns Investment of the Claimant in Ruritania

32. Article 1(1) of the BIT defines “Investment” as

every asset which is directly or indirectly invested in accordance

with laws and regulations of the Contracting State in which

3Tokios Tokeles v. Ukraine, §52; ConocoPhillips v. Venezuela, §285; Wena Hotels v. Egypt, §887; CMS v.

Argentina, §51; Autopista v. Venezuela, §109.

4Mobil v. Venezuela, §160.

5Saluka v. Czech Republic, §241.


7Tokios Tokeles v. Ukraine, §28.


9Saluka v. Czech Republic, §229; ADC v. Hungary, §357.

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8

territory the Investment is made by Investor of the other

Contracting State.

33. Particularly, the Investments include “shares of companies”10 and “intellectual property

rights”.11 Hence, the BIT provides protection for shareholders and possessors of intellectual

property rights.

34. The Claimant became the shareholder of FBI as a result of an intra-group restructuring,12

which was in accord with the terms of the Agreement.13 On the same day CAM acquired

rights to trademarks and trade dresses associated with FBI’s production.14 All the claims

submitted by CAM concern violations of the BIT with respect to CAM’s shares in FBI and

its intellectual property.15 Therefore, the present dispute concerns Investment protected

under the BIT and the Tribunal has jurisdiction.

35. The Respondent may argue the Investment is absent as the shares in FBI were transferred for

a token sum of money – less than 5000 USD, and not in the territory of Ruritania. Indeed,

the plain definition of the term “Investment” requires that the assets should be invested in

the territory of the host State.16 However, there are no further requirements regarding the

possible variants of acquisition of Investments. Noteworthy, in Phoenix v. Czech Republic

the tribunal held that there were no grounds to deny the fact that the Investments were made

notwithstanding the token price paid for a company.17 In any event, conclusion to the

contrary would make the sale of an existent Investment to potential Investors from the third

States not feasible. This is because they would be deprived of the BIT protection for not

investing directly in the territory of the host State.

36. Hence, the requirement of jurisdiction ratione materiae under the BIT is satisfied.

10BIT, Record, Article 1(1)(b), p.10.

11BIT, Record, Article 1(1)(d), p.10.


13Exhibit No.2, Record, Article 11, p.18; Procedural Order No.2, Record, §16, p.30.


15Statement of Claim, Record, §§28-32, p.7-8.

16BIT, Record, Article 1(1), p.9.

17Phoenix v. Czech Republic, §127.

TEAM AJIBOLA

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B. RESTRUCTURING OF CONTIFICA GROUP IS NOT AN ABUSE OF RIGHT OR AN INFRINGEMENT

OF THE PRINCIPLE OF A GOOD FAITH

37. The Respondent argues that the Claimant abuses its right to bring the claims before the

Tribunal as the transfer of shares in FBI was allegedly made in anticipation of the present

dispute.18 The Claimant will accordingly demonstrate that international law does not

recognize prospective nationality planning as abuse or right [1] and the Claimant exercised

bona fide nationality planning [2].

1. International law does not recognize nationality planning as abuse of right

38. Protection of the BIT is limited to those investors who meet the definition of the Investor

under the BIT.19 The Ruritania-Cronos BIT contains the most commonly used20 criterion for

corporate nationality – place of incorporation.21 In Saluka v. Czech Republic the tribunal

held in this respect that “it is not open to the Tribunal to add other requirements”.22

Such a broad definition allows the Investor to organize its investment in a way that affords

maximum protection under existing treaties.23 It is neither illegal nor improper for an

investor of one nationality to establish a new entity in jurisdiction perceived to provide a

beneficial regulatory and legal environment, including the availability of an investment

treaty.24

39. The Respondent, however, may argue that the Tribunal should look beyond the text of the

BIT and establish the existence of a “genuine connection” between the Claimant and its

home State or that the object and purpose of the BIT requires consideration of the origin of

investment capital when determining the Claimant’s nationality. However, such

requirements cannot be presumed. As it was established in ADC v. Hungary if the issue of

nationality planning is settled unambiguously by the text of BIT – there is the only

18Statement of Defense, Record, §3, p.21.

19Dolzer/Schreuer, p.44.

20Dugan/Wallace/Rubins/Sabahi, p.306; Schreuer, p.2.


22Saluka v. Czech Republic, §229.

23Skinner/Miles/Luttrell, pp.260-261. 24Aguas del Tunari v. Bolivia, §330; Schreuer, p.4.

TEAM AJIBOLA

10

requirement that a company should be incorporated in the territory of the home State.25

Ruritania and Cronos were free to include a “genuine connection” requirement or “denial of

benefits” clause for purposes of determining nationality, but chose not to do so.26

40. Thus, the existing case law27 does not recognize nationality planning per se as an abuse of

right. Practice confirms that it is permissible and to be expected that investors will structure

their investments in order to avail themselves of treaty protection including access to

international arbitration.28

2. In any event, the Claimant exercised bona fide nationality planning

41. The Claimant concedes that legitimacy of nationality planning is conditioned upon certain

limits beyond which it becomes an abuse of right.29 However, none of these limits has been

breached in the present case as the dispute arose after the restructuring and was not

foreseeable (i); the Claimant maintains substantial business activity and is not a shell

company (ii); and the restructuring pursued legitimate goals (iii).

(i) The dispute arose after FBI’s shares were transferred to the Claimant and was not

foreseeable

42. The transfer of shares took place on 17 March 2010, whereas MAB Act was adopted eight

months later - on 20 November 2010.30

43. Furthermore, the dispute was not foreseeable. Foreseeability of the dispute means very high

probability and not merely a possible controversy.31 Discussion of the Party program32

cannot not be an evidence of high probability of adoption any restrictive measures,

concerning alcohol consumption. No prospective rules and regulations have been

25ADC v. Hungary, §357.

26ADC v. Hungary, §§357-359; Rompetrol v. Romania, §2,45; Saluka v. Czech Republic, §223; Tokios Tokeles v.

Ukraine, §52.

27Tokios Tokeles v. Ukraine, §§27-41; Saluka v. Czech Republic, §§226-242; Mobil v. Venezuela, §§191-204.

28Schreuer, p.18.

29Phoenix v. Czech Republic, §§135-147.

30Statement of Claim, Record, §§9-10, pp.3-4.

31Douglas, p.465.

32Procedural Order No.2, Record, §9, p.29.

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11

mentioned.33 Only the need to eliminate association between sports and alcohol was

mentioned during one of the debates.34 However, this does not evidence crucial changes

regarding the alcohol regulatory measures, because since 1992 Ruritanian law already

included restrictions regarding alcohol consumption.35

44. The evidence of high probability of the dispute might have been the publicly available Draft

of the MAB Act, which contained specific and detailed measures. However, the Draft of the

MAB Act was not even under consideration in the Parliament at the moment of the

restructuring. It was introduced to the Parliament and became a public record only on 20

June 2010.36

45. Finally, the Party in its program did not consider possible risks of Reyhan consumption at

all. This makes the dispute concerning the effect of the Ordinance absolutely unanticipated.

46. Therefore, the restructuring of Contifica Group took place in the absence of any

backgrounds to the possible dispute.

(ii) The Claimant maintains substantial business activity and is not a mere shell company

47. CAM is a company with a long record of activity. It was established in 200337 and it has

more than 30 subsidiaries,38 all of which were operating even before FBI was acquired by

Contifica Spirits S.p.A.39 Therefore, although it could be a ground for finding an abuse of

right,40 CAM has never been a mere shell company created for jurisdictional purposes.41

33Ibid.

34Ibid.

35Procedural Order No.3, Record, §3.p.33.



38Procedural Order, No.2, Record, §18, p.30.


40Phoenix v. Czech Republic, §§136-145.

41Autopista v. Venezuela, §§123-126.

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12

(iii) Restructuring pursued legitimate goals

48. The Memorandum sent by Adam Straw to Lucas Goodfellow plainly evidences that the

main purpose of the restructuring was to find a country, which has an investor-friendly

environment.42 This environment may also include availability of international arbitration.43

Besides, this factor was not decisive. Contifica Group also considered other States with BITs

and access to international arbitration.44 Among them Cronos has been chosen as the most

convenient and legally favorable place. Indeed, dividends, royalty payments and income

received from sale of shares were taxed at acceptable rates in Cronos.45 Contifica Group

already had CAM there since 2003.46 Most importantly, however, CAM had a number of

subsidiaries capable of supplying FBI’s production.47 Therefore, it was reasonable to choose

Cronos as a home State of the FBI’s controlling company.

49. Hence, the restructuring was not made for the sole purpose of gaining access to international

arbitration and does not constitute abuse of right.

II. THE TRIBUNAL HAS JURISDICTION OVER CAM’S CLAIMS ON THE BREACH

OF THE SHARE PURCHASE AGREEMENT BY THE STATE PROPERTY FUND OF

RURITANIA

50. The Claimant submits that the Tribunal has jurisdiction to consider CAM’s claims on the

breach of the Agreement by the Fund as the conduct of the latter is attributable to the

Respondent [A] and Article 6(2) of the BIT should be interpreted under the principle pacta

sunt servanda [B]. Finally, the Forum Selection Clause in the Agreement (“FSC”) does not

render the claim inadmissible [C].

42Exhibit RX1, Record, p.24.

43Aguas del Tunari v. Bolivia, §330(d).


45Exhibit RX1, Record, p.24.



TEAM AJIBOLA

13

A. THE CONDUCT OF THE STATE PROPERTY FUND OF RURITANIA IS ATTRIBUTABLE TO THE

RESPONDENT

51. The Respondent submits that Ruritania cannot be held liable for the alleged breach of the

Agreement, as the Fund is a separate legal entity.48 The Claimant does not dispute that the

Fund is not a state organ of Ruritania. However, the conduct of the Fund should nonetheless

be considered an act of Ruritania under customary international law. According to the ILC

Articles “there is an internationally wrongful act of a State when conduct … is attributable

to the State”.49 ILC Articles are “widely regarded as a codification of customary

international law”.50

52. The Claimant will accordingly demonstrate that the conduct of the Fund is attributable to the

Respondent as the Fund exercised elements of governmental authority [1], and in any event

the Fund is a state entity directed or controlled by Ruritania [2].

1. The Fund exercised elements of governmental authority

53. Article 5 of the ILC Articles provides that

The conduct of a person or entity … which is not an organ of the

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

elements of governmental authority shall be considered an act of

the State.

54. The term “governmental authority” comprises exercise of “functions of a public character

normally exercised by State organs”.51 In this regard the tribunal in Noble Ventures v.

Romania found that acts of implementation of a privatization program performed by certain

Romanian state entities were attributable to Romania.52 These legal entities were empowered

by Romanian law “to conclude agreements with investors [and] manage the whole legal

relationship with them”.53 The tribunal concluded that “no relevant legal distinction is to be


49ILC Articles, p.34.

50Dolzer/Schreuer, p.221; Noble Ventures v. Romania, §69.

51ILC Articles, p.43; Maffezini v. Spain, §77.

52Noble Ventures v. Romania, §147.

53Ibid.,§79.

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14

drawn” between the host State and a state entity implementing the privatization program.54

Otherwise it would let the host State “escape responsibility for wrongful acts or omissions

by hiding behind a private corporate veil”.55

55. In the present case the State Property Fund of Ruritania was established by the Act of

Parliament of Ruritania,56 which alone evidences the governmental nature of its principal

function.57 Most importantly, however, the decision of the Fund to privatize FBI and to enter

into the Agreement was made “as the result” of Ruritania’s decision to privatize “a number

of assets”.58 Given that Ruritania defines the competence of the Fund59 the latter could have

acted only as an entity empowered by Ruritania to privatize FBI, i.e. to exercise functions

otherwise reserved to the State.60

56. The Respondent may argue that a distinction between governmental and commercial acts

should be drawn, the latter not attributable to the State.61 The sale of shares in FBI would

then appear to be of commercial nature, as it is not directly concerned with the exercise of

sovereign power. However, the term “governmental authority” refers to the actions in

general, which could not be undertaken by others unless empowered by the State.62

Therefore, the ILC Articles do not stand for the distinction in question.63 The right to decide

which state assets should be privatized is an exclusive power of Ruritania delegated to the

Fund.64

57. Therefore, in relation to the sale of FBI the Fund exercised governmental authority and its

conduct should be attributed to the Respondent.

54Ibid.,§79.

55Maffezini v. Spain, §78.






61Ibid.,§§78-79.




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15

2. In any event, the Fund is a state entity directed and controlled by Ruritania

58. If the Tribunal does not find the conduct of the Fund attributable to the Respondent under

Article 5 of the ILC Articles, the Claimant would submit that the Fund acted under the

direction or control of Ruritania. Thus the conduct in question is still attributable to the

Respondent.

59. Article 8 of the ILC Articles provides that

the conduct of a person or group of persons shall be considered an

act of a State … if the person or group of persons is in fact acting

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

State in carrying out the conduct.

60. The conduct is attributable to the State where a specific factual relationship exists between

the entity and the State.65 The Claimant submits that the decision to privatize FBI was

adopted under the direction or control of Ruritania in light of the financial crisis, which had

led to significant budget deficit.66

61. The Fund is a legal entity wholly owned by Ruritania.67 Its principal managing bodies are

appointed by Ruritania.68 In the event of dissolution of the Fund by the decision of

Ruritania69 all its assets pass to the Respondent.70 It follows that Ruritania was directly

interested in the operations of the Fund and was capable of having effect on them. The

decision to privatize FBI was made “as the result” of Ruritania’s decision to privatize “a

number of assets”.71 Therefore, the Fund was under direction or control of Ruritania at the

moment of entering into the Agreement and its conduct should be attributed to the

Respondent.




68Ibid.

69Ibid.

70Ibid.


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B. UMBRELLA CLAUSE IN THE BIT EXTENDS PROTECTION TO THE CLAIMANT’S CONTRACT

CLAIMS UNDER THE SHARE PURCHASE AGREEMENT

1. Umbrella clause should be interpreted in accordance with Articles 31 and 32 of the

VCLT

62. Article 6(2) of the BIT uses the most typical72 version of the umbrella clause, which

provides that

Each Contracting State shall fulfill any other obligations it may have

entered into with an Investor or an Investment of an Investor of the

other Contracting State.

63. The Claimant submits that the Tribunal should not depart from the prevailing approach

among the tribunals,73that an umbrella clause

makes it a breach of the BIT for the host State to fail to observe

binding commitments, including contractual commitments, which it

has assumed with regard to specific investments.74

This follows from the consistent interpretation of the umbrella clause in accordance with

Articles 31 and 32 of the VLCT.

(i) The ordinary meaning

64. The Claimant submits that Article 6(2) of the BIT transparently “means what it says”75 and

should “be interpreted and applied according to its precise wording”.76 The term

“obligation” means a legal duty, by which a person is bound to do or not to do a certain

thing.77 The ordinary meaning does not support a distinction amongst possible obligations

the State might have undertaken vis-à-vis the Investor.78 Thus obligations may rise from a

wide list of grounds, including obligations under both international treaties and private

contracts.79 Moreover, the Contracting States were free to stipulate a restriction to limit the

72Dugan/Wallace/Rubins/Sabahi, p.543; Dolzer/Schreuer, p.153.

73Noble Ventures v. Romania, §53; SGS v. Philippines, §163; Eureko v. Poland, §251.

74SGS v. Philippines, §128.

75Ibid, §119.

76BIVAC v. Paraguay, §141.

77Black‘s Law Dictionary, p.1223.

78Bosh v. Ukraine, §246; BIVAC v. Paraguay, §141; SGS v. Philippines, §128.

79BIVAC v. Paraguay, §141; SGS v. Philippines, §115.

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17

umbrella clause to obligations arising under “other international law instruments” and they

had not done so.80

65. Therefore, the ordinary meaning of the umbrella clause does not justify any kind of its

restrictive application.

(ii) Object and purpose of the BIT

66. The Preamble of the BIT establishes its object and purpose, which is “to create favourable

conditions for Investments”.81 As it was held in SGS v. Philippines

it is legitimate to resolve uncertainties in [the BIT’s] interpretation

so as to favour the protection of covered investments.82

67. The Tribunal in SGS v. Philippines interpreted nearly identical preamble language in the

Philippines-Switzerland BIT as indicative of the treaty’s broad scope of investment

protection.83 Therefore, the object and purpose of the BIT is to provide broad protection of

investors and their investments.

68. The Claimant submits that Article 6(2) of the BIT can be applied to all types of contracts in

respect of any sort of breach by the State. Hence, the alleged breach of the warranties in the

Agreement automatically violated Article 6(2) of the BIT.

2. Even applied restrictively the umbrella clause covers the Claimant’s contract claims

69. The Respondent is likely to rely on SGS v. Pakistan where the tribunal refused to extend

umbrella clause to investor-state contracts.84 However, the Claimant submits that the said

approach is invalid as the tribunal manifestly failed to apply well-established rules of

interpretation under the VCLT.85


81BIT, Record, Preamble, p.9.



84SGS v. Pakistan, §166.


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18

70. The Respondent further may argue that the umbrella clause should be applied restrictively,

that is the extension of treaty protection to mere contractual breaches would not be

possible.86 However, this interpretation

would deprive the investor of any internationally secured legal

remedy in respect of investment contracts that it has entered into

with the host State.87

71. If the Tribunal does not find the broad approach of interpretation applicable, the Claimant

submits that the umbrella clause extends its protection to CAM’s claim anyway. The alleged

breach of the Agreement was made by Ruritania on behalf of a “sovereign”, but not as a

“merchant”.88 Indeed, adoption of the Ordinance, which declared Reyhan poisonous in the

territory of Ruritania and breached the warranty, is an act of sovereign interference for

which the State may be held internationally responsible.89

C. THE FORUM SELECTION CLAUSE IN THE AGREEMENT DOES NOT DEPRIVE THE TRIBUNAL

FROM EXERCISING JURISDICTION

72. The FSC in the Agreement90 does not preclude CAM from bringing claims based on the

BIT. There is a distinction between contract and treaty claims, which can co-exist and be

subject to separate dispute resolution procedures.91 Indeed, “the same set of facts can give

rise to different claims grounded on different legal orders.”92

73. The Claimant advanced breach of the BIT. It claims that the obligation under the umbrella

clause of Article 6(2) of the BIT has not been observed by the Respondent. The umbrella

clause thus is a separate standard of protection under the BIT,93 which allows any breach of

an investment contract to be resolved in an international forum provided for in the BIT.94



88El Paso v. Argentina, §79.

89Vivendi I (Annulment), §§102-103.

90Exhibit No.2, Record, Article 14.2, p.18.


92SGS v. Pakistan, §147; Impregilo v. Pakistan, §258; Azurix v. Argentina (Jurisdiction), §76. 93Vivendi I (Annulment), §101.

94SGS v. Paraguay (Jurisdiction), §174.

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19

74. In SGS v. Paraguay the tribunal found that the forum selection clause could not be deemed

to prevent the Claimant on claim charging the State with a violation of the BIT.95 As the

Bayındır v. Pakistan tribunal expressed it:

When the investor has a right under both the contract and the treaty,

it has a self-standing right to pursue the remedy accorded by the

treaty.96

75. The historical backgrounds of umbrella clause should also be taken into account. The

umbrella clause was created in order to give advantage to the investors under the BIT – the

right to resolve relevant investment disputes with the host State in accordance with the BIT’s

dispute settlement provisions.97 If the main purpose of umbrella clause is disregarded, the

institution of umbrella clause would be nullified.98 Therefore, the Agreement’s forum

selection clause cannot divest the Tribunal of jurisdiction as the Claimant advanced no claim

under the Agreement.

III. RURITANIA BREACHED ITS OBLIGATIONS UNDER THE BIT

76. The Claimant states that implementation of the MAB Act and the Ordinance resulted in

indirect expropriation of its Investment or, in alternative, in violation of fair and equitable

treatment standard. This is because, firstly, Ruritania’s measures substantially deprived

CAM of its Investments [A]. Secondly, the MAB Act and the Ordinance are not non-

compensable regulatory measures [B]. In any event, Ruritania failed to provide fair and

equitable treatment to the Claimant [C].

A. CUMULATIVE EFFECT OF MEASURES ADOPTED BY RURITANIA HAS RESULTED IN

SUBSTANTIAL DEPRIVATION OF CAM’S INVESTMENT

77. Under Article 4(1) of the BIT “Investment by Investors of either Contracting State may not

directly or indirectly be expropriated…”.99 To constitute indirect expropriation the

interference with the Investment has to be substantial. The impact is substantial if it deprives

the Investor in whole or significant part of fundamental rights of ownership, use, enjoyment

95Ibid., §138.

96Bayındır v. Pakistan (Jurisdiction), §167.

97SGS v. Philippines (“Crivellaro Declaration”),§§5-6. 98Gaillard, p.334. 99BIT, Record, Article 4(1), p.12.

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or management of the business by rendering them useless,100 or when it interferes with the

Investment for a significant period of time.101

78. The so-called “creeping expropriation”, a form of indirect expropriation, is present, when a

series of governmental measures over a prolonged period of time is designed to reduce the

economic value of the Investment.102 Creeping expropriation “may occur where State action

makes it impossible for the [Investor] to operate at a profit…”.103 The Claimant submits that

acts of Ruritania were “…designed to make continued economic operation of … [beer

production]… uneconomical so that it is abandoned”.104

79. Respective measures should be considered cumulatively as both of them restricted FBI’s

ability to market and sale its products in Ruritania and were targeted at FBI’s most famous

and popular brand of beer “FREEBREW”. Moreover, the time period between adoptions of

the acts was only six and a half months.105 This intensified the effect of each separate

measure.

80. Adoption of the MAB Act and the Ordinance resulted in substantial depreciation of the

economic value of CAM’s assets. FBI was forced to implement a large-scale redundancy

program terminating employment of over half of its employees.106The revenue has fallen by

90 %,107 the sales – by 68 %108 and the output – by approximately 96 %.109 Moreover due to

the fall in revenue and profit CAM had to provide its lenders with an additional security

package consisting of pledge of all of FBI’s tangible assets, all shares in FBI and any claims

100AES v. Hungary, §14.3.1; BiwaterGauff v. Tanzania, §452; Metalclad v. Mexico, §103; Tecmed v. Mexico, §§115

–116; Tippetts et al. v. Iran, pp.225-226.

101 OECD Companion Volume, p.11.

102Subedi, p.76; Reisman/Sloane, p.128; Generation Ukraine v. Ukraine, §20.22.

103Reisman/Sloane, p.124.

104Ibid.



107Ibid.

108Statement of Claim, Record, §13, p.4, §19, p.5.

109Statement of Claim, Record, §8, p.3, §20, p.5.


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and recovery that CAM may receive in this arbitration.110 Hence, FBI cannot operate at a

profit anymore.

81. Below the Claimant will further demonstrate that CAM's assets [1] and intellectual property

rights were substantially deprived of the use and enjoyment [2].

1. CAM was effectively deprived of the shares in FBI

82. CAM's ability to use, enjoy and manage its business was substantially affected by each

respective prohibition and requirement of the MAB Act. Prohibition of sale at the most

profitable time and place111 as well as illegality of all the most convenient and consumers

attracting advertisement112 caused significant losses in FBI’s net income and revenue.113

Trademarks, brands written in the same font and colour as all other text on the label114

resulted in poor recognition of the beer by the consumers. The prohibition of large

containers usage115 forced CAM to quickly implement a comprehensive reconfiguration of

its bottling line116 alongside with suspension of its other brands.117 All these requirements

and their consequences taken together resulted in substantial deprivation of use, enjoyment

and management of FBI.

83. CAM’s assets were to the same extent affected by the Ordinance. The requirement that any

product containing Reyhan concentrate to be labeled with an explicit warning118

substantially interfered with the use and enjoyment of CAM’s assets. There was no adequate

scientific foundation for this.119 Therefore, the Ordinance undermined the attractiveness and

credibility of FBI’s production. As a result the demand for the products dropped and CAM

incurred losses in net income and revenue.

110Statement of Claim, Record, §21, pp.5-6.


112Ibid.

113Statement of Claim, Record, §13, p.4. 114Statement of Claim, Record, §11, p.4.

115Statement of Claim, Record, §12, p.4. 116Ibid.

117Ibid. 118Statement of Claim, Record, §15, p.4. 119See section III(B)(1) below.

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2. CAM’s intellectual property rights were substantially deprived of the use and

enjoyment

84. The Claimant submits that the MAB Act deprived it of the intellectual property rights

associated with FBI as it effectively obstructed the full-value use and enjoyment of FBI’s

trademarks and trade dress of the bottles.120 Specifically, the plain packaging requirement (i)

and the container requirement (ii).

(i) The plain packaging requirement

85. The MAB Act requires trademarks/brands of beer be written in the same font and colour as

all the other text on the label.121 The requirement discredits the basic idea of trademarks. The

fundamental criterion of trademark composition is the likelihood of graphic

representation.122 The graphic representation of the traditional trademark is its objectified

form, the main function of which is to exclusively identify the commercial source or origin

of products.123 Integrity of graphic elements reflects such immanent characteristics of

trademark as familiarity and memorability, uniqueness and unmistakability. Hence, the way

in which the name is written, the shapes, colours and drawings associated with it are

extremely important for the essence of trademark.124 CAM’s trademarks were composed of

words in different font and colours and designs of the labels.125 Thus the plain packaging

requirement precluded the Investor from the use of its intellectual property rights.126 Its main

function – to identify and differentiate – has been lost. Such strict regulation created

difficulties for consumers to recognize FBI’s production as well as to distinguish it from

production of other breweries.

120Statement of Claim, Record, §9, p.3. 121Statement of Claim, Record, §11, p.4. 122Lange, p.781. 123Ibid.

124Ibid. 125Procedural Order No.2, Record, §17, p.30.

126Mitchell/Wurzberger, p.636.

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(ii) Container requirement

86. The MAB Act prohibited sale of alcohol in containers of over 0.5 l.127 This neutralized the

ability to use and enjoy such CAM’s trade dress as the iconic 0.8 FREEBREW bottle. Thus

respective CAM’s registered trade dress was rendered useless. Furthermore, CAM will lose

its trade dress ownership entirely within several years.128 Besides inability to use its

trademark in itself, CAM is confronted with destruction of the traditional image of

FREEBREW, its 0.8 l. bottle that was the main feature of FBI’s success from 1928.129 These

consequences have led to a substantial deprivation of CAM’s intellectual property rights,

crucial to the whole business.

87. To conclude, the cumulative effect of measures adopted by Ruritania has resulted in

substantial deprivation of the use and enjoyment of CAM’s assets and intellectual property

rights associated with FBI.

88. Not only Ruritania expropriated CAM’s Investment, but made it unlawfully, i.e. in breach of

Article 4 of the BIT.130 In case of expropriation the State has to pay compensation.131

Otherwise such expropriation is unlawful. In the present case no compensation has ever been

provided for the Claimant.132

B. RURITANIA’S MEASURES CANNOT BE CONSIDERED AS NON-COMPENSABLE GENERAL

REGULATORY MEASURES

89. The Claimant invites the Tribunal to apply a “balanced approach” in assessing adopted

measures of Ruritania.133 The Claimant does not dispute that a State has a right to regulate

its domestic affairs. Yet this right is not unlimited. It has definitive boundaries such as



129Statement of claim, Record, §5, p.3.

130BIT, Record, Article 4(1), p.12. 131Subedi, p. 80.

132Procedural Order No.2, Record, §7, p.29. 133Tecmed v. Mexico, §122; Azurix v. Argentina (Award), §§311,312; LG&E v. Argentina, §§189,194,195; Olynyk,

pp.279-280; Kriebaum, pp.731-743.

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international treaty obligations134 and proportionality to the pursued aims. CAM submits that

measures of Ruritania are measures of expropriation rather than non-compensable regulatory

measures as not only they resulted in substantial deprivation of CAM’s Investment,135 but

were also adopted in disproportional and discriminatory way. Thus, the Claimant will

accordingly demonstrate that both the MAB Act and the Ordinance are not non-compensable

regulatory measures as they were disproportionate [1]136 and discriminatory [2].137 Moreover

Ruritania’s measures are subject to compensation even under “the purpose test” doctrine, as

under this approach the criterion of non-discriminatory character of an action is crucial.138

1. The adopted measures were disproportionate to the pursued aims

90. The Claimant submits that Ruritania’s measures were disproportionate to the pursued aims.

To be considered as regulatory, measures should be proportional and scientifically

reasonable.139 Ruritania failed to maintain a balance between obligation to protect public

health and obligation to promote and protect Investments made by the Investor of the

Contracting State.140 When Ruritania entered in the BIT with Cronos it took upon itself

definitive boundaries provided by treaty investment-protection obligations. Therefore, such

boundaries “…must be honoured rather than be ignored by a later argument of the State’s

right to regulate”.141

(i) Disproportionality of the MAB Act

91. Under international law measures of the State should not be more severe than is needed to

achieve the legitimate objective.142 Hence, the chosen measure should not have the less

restrictive alternative. The requirements and prohibitions of the MAB Act failed to fulfill

134Tecmed v. Mexico, §122; ADC v. Hungary, §423-424. 135See Section III(A) above.

136Olynyk, p.287; James and Others v. United Kingdom (ECHR), §50; S.D. Myers v. Canada, §285; LG&E Energy

v. Argentina, §195.

137Olynyk, p.291; Eureko BV v Poland, §242; Methanex v. United States, Part IV (D), §7. 138Methanex v. United States, Part IV(D), §12; Saluka v. Czech Republic, §309.

139Waelde/Kolo, p.827; James and Others v. United Kingdom (ECHR), §§19,46.

140BIT, Record, Article 2(1)(a-b), pp.10-11.

141ADC v. Hungary, §423.

142Waelde/Kolo, p.828.

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this rule. Protecting public health the State should take into account “other goals,

obligations, including international legal obligations, and interests”.143 International

community recognizes various measures to reduce harmful use of alcohol besides

restrictions of sale and marketing of alcoholic beverages. Among them are: availability of

alcohol [a], drink-driving policies [b], pricing policies [c], reduction of the negative

consequences of drinking and alcohol intoxication [d], monitoring and surveillance [e],

health service response [f].144 Ruritania adopted none of these measures except availability

of alcohol.145 While there were other ways to achieve the same goal with much less harm to

Investments, Ruritania imposed unjustifiably severe restrictions in relation to trademarks

and brands146 as well as prohibition of large containers usage.147 Hence, Ruritania failed to

strike a necessary balance between pursued aim and property rights as the effectiveness of

respective measures alcohol consumption reduction is much less than the degree of

interference with the intellectually property rights.148

(ii) Disproportionality of the Ordinance

92. The requirement of the Ordinance should be considered as scientifically unreasonable and

hence disproportionate.149 The HRI’s report was positioned as the foundation for the

Ordinance.150 However the credibility and correctness of controlled clinical study cause

doubts as respective report contained numerous flaws in the analysis conducted by the HRI

as well as its process of raw data collection.151 The most obvious flaws are: research failed

to consider the most important behavioral risk factors of liability to cardiac

complications [1],152 dosage of Methyldioxidebenzovat was vastly superior to its dosage in

143WHO Strategy, p.7.

144Ibid, p.10.




148See section III(A)(2) above.

149Waelde/Kolo, p.835;

150Statement of Claim, Record, §§14-15, p.4.

151Statement of Claim, Record, §.17, p.5.

152Statement of Claim, Record, §17, p.5; WHO CVDs.


http://www.who.int/mediacentre/factsheets/fs317/en/

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Reyhan concentrate [2],153 the report failed to consider the effects of Methyldioxidebenzovat

accompanied with alcohol and other ingredients of FREEBREW [3].154 Therefore, the

requirement of the Ordinance has no scientific foundation.

93. Accordingly, measures of Ruritania were disproportionate to the purported aims.

2. The adopted measures were discriminatory

94. Article 3(1)(c) of the BIT requires that state actions should not be discriminatory.155 The

regulatory measures doctrine has the same requirement for non-compensable measure.156

The discriminative intention or effect of the state measures is considered as one of the

important criteria to establish whether indirect expropriation exists.157 The Claimant submits

that Ruritania failed to fulfill this requirement and consequently its measures resulted in

expropriation.

(i) The MAB Act was specifically targeted against FBI

95. The prohibition of large containers usage of the MAB Act was specifically targeted against

FBI. FREEBREW was the only beer produced in Ruritania packed in bottles larger than

0.5 l.158 A legal act should regulate the most important social relationships and should be

addressed to the general public. It cannot include individually intended clauses.159 Not only

was the basis for this requirement discriminatory but also its implementation. There was not

enough time after the MAB Act adoption for FBI to implement a comprehensive

reconfiguration of its bottling line.160 For this reason FBI was forced to suspend bottling of

its other brands to comply with the requirements of law. This put FBI in unequal position to

domestic and foreign competitors.161 Hence, this prohibition was discriminatory.

153Statement of Claim, Record, §5, p.3, §14, p.4, §17, p.5; Procedural Order No.3, Record, §12, p.34.


155BIT, Record, Article 3(1), p.11. 156Olynyk, p.291; Newcombe, p.38.

157Methanex v. United States, Part IV(D), §7. 158Procedural Order No.3, Record, §16, p.35.

159Black’s Law Dictionary, p. 43.


161Subedi, p.75; Waelde/Kolo, p.835.

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(ii) The Ordinance was intentionally implemented after the MAB Act

96. The Ordinance should also be considered discriminatory as time of its implementation was

intentionally chosen to strengthen the effect of the MAB Act on FBI. Despite the fact that

the scientific research was started in October 1999162 and in 2005 an interim report was

made,163 the Ordinance based on the second HRI’s Report entered into force in 2011, shortly

after implementation of the MAB Act with its severe economic impact on FBI.164 Moreover

HRI cannot be considered as an independent research institution as its Executive Director

and the majority of Board of Supervisors are appointed by the Ministry of Health and Social

Security of Ruritania.165 Hence, the state policy of Ruritania could have a knock-on effect on

the character of HRI’s scientific research and timing of its publication.

97. Therefore, Ruritania’s measures were discriminatory in strict violation of Article 4(1)(b) of

the BIT.166

98. The fact that such disproportionally severe measures were adopted by Ruritania in a

discriminative way clearly indicates that the main goal of Ruritania was not to protect public

health, but to make continued economic operation of FBI unacceptable so that it would be

abandoned.

99. To conclude, firstly, measures of Ruritania caused severe economic consequences for FBI

and CAM subsequently. Secondly, they failed to comply with requirements of balanced

approach they are of expropriatory nature. And finally, the respective measures should be

considered not only as expropriation but also as unlawful expropriation as they were

discriminative and no compensation was paid. Hence, the measures of Ruritania resulted in

unlawful expropriation of CAM’s Investment associated with FBI in breach of Article 3(1)

and Article 4 of the BIT.





166BIT, Record, Article 3(1), p.11; Article 4(1)(b), p.12.

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C. ALTERNATIVELY, RURITANIA FAILED TO PROVIDE FAIR AND EQUITABLE TREATMENT

100. Under Article 2(1)(b) of the BIT Ruritania was obliged to accord the Investor fair and

equitable treatment. FET obligation allows the Investor to expect that the State will act “in

a consistent, free from ambiguity and totally transparent manner”.167 FET requires

reasonable (i.e. related to rational policy) and non-discriminatory treatment168 and protects

the Investor’s legitimate expectations that the legal framework would be stable.169

101. While the MAB Act and the Ordinance were unreasonable170 and discriminatory171

measures, the Respondent also submits that they violated CAM’s legitimate expectations

[1], and that in adopting them Ruritania acted non-transparently [2].

1. The MAB Act and the Ordinance violated CAM’s legitimate expectations

102. The Investor’s legitimate expectations of how the State would treat the Investment are

recognized as a considerable factor in defining a violation of FET.172 Such expectations

should be based on the host State’s legal framework or on the host State’s explicit or

implicit representations,173 which may arise, inter alia, from contracts.174

103. The Claimant accepts that no one can expect that the host State’s legislation will remain

unchanged.175 However, total and drastic alteration of the legal setup for foreign

investments will result in a breach of the duty to grant fair and equitable treatment.176

104. Furthermore, while a simple breach of contract by the State would not constitute a

violation of FET177 an exercise of sovereign power while violating the contract would lead

to a breach of FET.178

167Tecmed v. Mexico, §154.

168Saluka v. Czech Republic, §309; Waste Management v. Mexico, §98.


170See section III(B)(3) above.

171See section III(B)(2) above.

172Dolzer/Schreuer, p.145; Metalclad v. Mexico, §89; Thunderbird v. Mexico, §147.

173Azurix v. Argentina (Award), §318.

174Mondev v. United States, §134; SGS v. Paraguay (Award), §146.

175Total v. Argentina, §164; Duke Energy v. Ecuador, §340.

176El Paso v. Argentina, §374; Toto v. Lebanon, §244.

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(i) The MAB Act violated CAM’s expectation arisen from the existed regulation of alcohol

trade

105. At the time of acquisition of shares in FBI Ruritania had already adopted common

restrictions of alcohol trade, prohibiting (a) the sale of alcoholic beverages to persons

under 21, (b) promotion of positive health effects of alcohol, and (c) marketing practices as

well as labeling of alcoholic beverages that misleads customers.179

106. That already tough legal framework created expectation on the side of CAM that no further

uncommon restrictions in Ruritania’s laws and regulations governing sale and marketing of

beer would be adopted. The MAB Act being unreasonable violated such expectation and

thus was in contradiction with Respondent’s duty to provide fair and equitable treatment.

(ii) The Ordinance violated CAM’s expectation arisen from the Share Purchase Agreement

107. Under the Share Purchase Agreement Ruritania warranted that

the products of the Brewery do not pose any risks to the consumers,

other than those which are ordinary for similar alcoholic

beverages.180

108. This representation creating CAM’s expectation that beer with Reyhan is not harmful was

disproved through the implementation of sovereign authority, i.e. the adoption of the

Ordinance, which recognized Reyhan as leading to cardiac complications.181 Therefore

adoption of the Ordinance violated FET.

109. If the Tribunal considers that the MAB Act and the Ordinance taken in isolation did not

result in violation of FET the Claimant invites to apply the El Paso v. Argentina case,

where the tribunal pointed out that the cumulative effect of the measures was a total change

in the essential features of the investments.182 The MAB Act and the Ordinance taken

together entirely altered the legal setup for FBI, the main features of which were (a) 0.8 l.

177Potesta, p.14.

178Bayindir v. Pakistan (Award), §377; Rumeli v. Kazakhstan, §615; Alpha v. Ukraine, §422.


180BIT, Record, Article 9(2)(1), p.18.


182El Paso v. Argentina, §517.

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30

bottles and (b) the usage of Reyhan as the flavouring.183 Hence, Ruritania violated CAM’s

legitimate expectations that the legal framework would be stable and thereby violated FET.

2. In adopting the MAB Act and the Ordinance Ruritania acted non-transparently

110. Transparency plays central role in understanding the FET standard184 and means that the

legal framework for the Investments is readily apparent.185 Furthermore, it requires the

exchange of information about the ongoing Investments between the government and the

Investor and clarification of possible amendments in laws regulating the investment

project.186 Finally, while the host State is not obliged to accept any Investor’s proposal to

adopt certain regulation, transparent treatment requires the host State to provide an

opportunity for private parties to play a part in the rule-making process.187

111. In the present case both the MAB Act and the Ordinance regulated very controversial

issues.

112. First, ways to reduce alcohol consumption were actively discussed in the media.188

Moreover, the Association of Alcoholic Beverages Producers and Importers, of which FBI

is a member, presented to the Parliament a Memorandum arguing against adoption of the

MAB act.189 At the same time, the New Way party with its hard stance towards alcohol

trade190 secured only a little more than 50% places in Parliament.191 Therefore, the said

Memorandum should have been deliberated on rather than just cited in the parliamentary

debate. Otherwise, CAM was deprived of the opportunity to be heard.

183Statement of Claim, Record, §5, pp.2-3.

184Tecmed v. Mexico, §154; Metalclad v. Mexico, §76.


186Dugan/Wallace/Rubins/Sabahi, p.520.

187Saluka v. Czech Republic, §363; Dugan/Wallace/Rubins/Sabahi, p.520.





TEAM AJIBOLA

31

113. Second, the results of scientific research of Reyhan harmfulness were also controversial,

because the techniques used in that research do not guarantee its correctness.192 While the

Ministry complied with requirements of the adoption of the Ordinance,193 it failed to

discuss the issue of Reyhan with all the parties concerned depriving private companies of

the opportunity to express their proposals. Furthermore, Ruritania failed to disclose the

2005 report on harmfulness of Reyhan surely available at the time of the investment

entry.194

114. As a result, procedure of adoption of the MAB Act and the Ordinance as well as its legal

and factual background were not readily apparent and thus Ruritania acted non-

transparently.

115. To conclude, non-transparent action of Ruritanian government violating CAM’s legitimate

expectations resulted in the failure to provide FET.

IV. THE CLAIMANT IS ENTITLED TO COMPENSATION FOR MORAL DAMAGES

CAUSED BY THE PERSECUTION OF ITS EMPLOYEES

116. The Claimant submits that persecution of FBI executives Messrs Goodfellow and Straw

constitutes a violation of the full protection and security guarantee by the Respondent. This

violation has resulted in significant moral damages to the Claimant and should be

compensated in accordance with international law due to the following: the present

Tribunal has jurisdiction to grant compensation for moral damages [A], circumstances that

justify awarding compensation for moral damages are present [B] and Ruritania is bound to

compensate moral damages under the ILC Articles [C].

A. THE PRESENT TRIBUNAL HAS JURISDICTION TO GRANT COMPENSATION FOR MORAL

DAMAGES

117. The Tribunal has jurisdiction to award moral damages to the Claimant as the BIT does not

eliminate jurisdiction of the Tribunal over moral damages claims [1], arrest of the

Claimant's employees has resulted in a breach of Ruritania’s obligation to provide full




TEAM AJIBOLA

32

protection and security [2] and detention of the Claimant’s employees has led to infliction

of injury to the Investment of the Claimant [3].

1. The BIT does not eliminate jurisdiction of the Tribunal over moral damages claims

118. Assuming the present Tribunal has jurisdiction to consider the case at hand, it shall have

jurisdiction to grant compensation for moral damages to the Claimant.

119. An investment treaty tribunal has the power to award compensation for moral damages to

the Investor, if it has jurisdiction over the dispute and unless otherwise is provided by the

applicable BIT.195

120. The Claimant has demonstrated that the Tribunal has jurisdiction over the claims submitted

by CAM as the latter is the Investor under the BIT and the dispute concerns Investment of

CAM in Ruritania.196 Further, the BIT does not exclude the jurisdiction of the Tribunal to

award compensation for moral damages and does not provide for any additional

requirements to such jurisdiction.197 As noted in Cementownia v. Turkey198 if there is

nothing in applicable law which prevents an arbitral tribunal from granting moral damage,

the Tribunal has jurisdiction over the claim.

2. Arrest of the Claimant's employees has resulted in a breach of Ruritania’s obligation

to provide full protection and security

121. Detention of the Claimant’s employees Messrs Goodfellow and Straw and the conduct of

Ruritanian authorities during the detention constitute a breach of full protection and

security obligation.

122. Under Article 2(1)(b) of the BIT the host State is obliged to provide full protection and

security for the Claimant’s Investment. In accordance with approach adopted in Siemens v.

Argentina,199 full protection and security obligation covers not only physical assets, but

195Sabahi, p.138; Siemens v. Argentina, §349; Vivendi II v. Argentina, §§ 8.2.3- 8.2.7.

196See Section I(A) above.

197BIT, Record, Articles 1-12, pp.9-17.

198Cementownia v. Turkey, §169. 199Siemens v. Argentina, §§286,308.

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33

also the intangible ones. Therefore, the damage to the Claimant’s reputation caused by the

host State is to be qualified as a violation of full protection and security obligation of the

BIT.

123. The Claimant submits that the arrest of its employees taken together with all of the related

circumstances is a breach of the full protection and security provision of the BIT, admitted

by the Respondent.200

124. In particular, damage to the reputation has been caused by activities of Ruritanian police,

which included not only illegal detention, but the publicity attached to it by passing the

videotape to a TV channel201 and public statements made by the Spokesman for the

Prosecutor’s office at the time not supported by substantial evidence of the alleged

bribery.202 Damage to an intangible asset, such as reputation, is not easy to measure and at

the same time it can be clearly seen by anyone and is nevertheless “very real”.203

Moreover, even if an injury may have not resulted in a quantifiable monetary damage, it

does not necessarily demonstrate that there was no injury, on contrary, an injury can be

more than real and clearly seen without any monetary damage.204

125. Consequently, detention of the Claimant’s employees and the related conduct of Ruritania

constitute a breach of the full protection and security provision of the BIT.

3. Detention of the Claimant’s employees has led to infliction of injury to the investment

of the Claimant

126. As noted in Rompetrol v. Romania205 the Tribunal has jurisdiction over the dispute when

actions of the State could fall within the area of protection under the BIT. Such actions are:

(i) actions against the Investor itself (or its Investment), (ii) or actions against the

Investor’s executives for their activity on behalf of the Investor, (iii) or actions against the

executives personally but with the intent to harm the Investor. Actions of the Respondent

200Procedural order No.1, Record, §5, p.26.


202Ibid.

203Lusitania Cases (US–Germany Commission), p.40.

204BiwaterGauff v. Tanzania (Dissenting Opinion), §26.

205Rompetrol v. Romania, §200.

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34

satisfy two of the said criteria, namely: detention of CAM's employees by Ruritanian

authorities affected the good-will, one of the assets invested in FBI (i) and detention of

employees constitute actions against the Investor’s executives for their activity on behalf of

the Investor (ii).

(i) Detention of CAM's employees by Ruritanian authorities affected the good-will, one of

the assets invested in FBI

127. Good-will is an Investment under Article 1(1)(e) of the BIT. The good-will is “the benefit

and advantage of the good name, reputation and connection of a business”.206 Thus,

good-will entails the value of reputation of an enterprise207 and loss of reputation qua non-

pecuniary loss is compensable.208 Therefore, any harm caused to reputation of the Investor

inevitably leads to harm to its Investment, the good-will.

128. As stated in AAPL v. Sri Lanka, in order to establish good-will as an intangible asset, the

Investor has to prove its prior presence on the market for at least two or three years and

substantial expenses … incurred in supporting the management

efforts devoted to create and develop the marketing network of the

company's products.209

129. FBI is present on the marker from 1928.210 Contifica Group, to which the Claimant is a

part, had been the owner of FBI for over four years since 30 June 2008, when Contifica

Spirits S.p.A. had entered into the Agreement regarding the shares in FBI.211 CAM was an

Investor for only two month and a half left before two years for the moment of its

employees detention. And for the moment of filing the claim and incurring losses the

Claimant has been an Investor for two year and a half.

130. Moreover, not only had the Claimant maintained business operation of the newly

purchased asset, but also it had made significant monetary contribution into the enterprise.

206IRC v. Muller & Co Margarine Limited, § 223.

207Sabahi, p.136; IVSC, p. 129.

208Schwenzer/Hachem, p.425.

209AAPL v. Sri Lanka, §103.



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The contribution of the Claimant resulted in 30 million deciliters increase of the brewery’s

output and recognition of FBI as “the safest place to work” in Ruritania.212

131. The actions of he Respondent constitute actions against the Investor itself and its

Investment.

(ii) Detention of employees constitute actions against the Investor’s executives for their

activity on behalf of the Investor

132. Mr. Goodfellow is the Chief Executive Officer of FBI and an employee of Contifica Spirits

S.p.A. and Contifica Enterprises PLC. Mr. Straw is the General Counsel of FBI, a member

of the Board of Directors of CAM (considered an employee under the laws of Cronos) and

an employee of Contifica Enterprises Plc.213 Messrs Goodfellow and Straw were detained

because they were allegedly involved in bribery of the officials of the Fund in connection

with the acquisition of the FBI shares.214 The shares of FBI was the asset in which

Contifica Group and the Claimant were personally interested.

133. As Messrs Goodfellow and Straw are executives of the Claimant and were detained for

alleged activity on behalf of the Claimant the actions of Ruritania fall within the area of

protection under the BIT.

134. The Claimant has demonstrated that there is a clear connection between Ruritania’s

conduct against the individuals and Ruritania’s conduct against the Investment itself in

order for that conduct to be qualified as a violation of the BIT protections. Therefore, any

dispute arising from Ruritania’s direct or indirect interference with FBI’s reputation shall

be considered by the present Tribunal.

B. CIRCUMSTANCES THAT JUSTIFY AWARDING COMPENSATION FOR MORAL DAMAGES ARE

PRESENT

135. Moral damages may be granted to the Investor as exceptional circumstances test is not

applicable [1], or alternatively, exceptional circumstances test is satisfied [2].




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1. Exceptional circumstances test is not applicable

136. Higher-level test of exceptional circumstances is not a precondition for awarding

compensation for moral damages.

137. As justly stated by prominent scholars

it is important to recognize the distinction between the concept of

moral damages—which is compensatory in nature and should, like

other forms of compensatory damages, require no proof of grave or

exceptional liability—and the context in which moral damages are

most often awarded.215

138. In DLP v. Yemen the Tribunal mentioned exceptional circumstance test but did not apply it

step by step. The Tribunal rendered moral damages because of serious violations of the

basic minimum standard of treatment accorded to foreign investors.216

139. In the case at hand illegal detention of the Claimant employees also constitutes a serious

violation of the basic minimum standard of treatment accorded to foreign investors.

Therefore, the present Tribunal should not appeal to exceptional circumstances test and

grant moral damages to the Claimant on the basis of ill-treatment of CAM’s employees.

2. Alternatively, exceptional circumstances test is satisfied

140. Even if exceptional circumstance test is applicable, its requirements are satisfied.

141. In accordance with the approach introduced by the Tribunal in DLP v. Yemen and

developed in Lemire v. Ukraine case, moral damages may be granted to the Investor in

exceptional circumstances: the State’s actions imply,

First,

physical threat, illegal detention, or other analogous situations in

which the ill-treatment contravenes the norms according to which

civilized nations are expected to act,217

215Coriell/ Marchili, p.5.; Dumberry, p.269.

216 DLP v. Yemen, §289.

217Ibid.

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Second,

cause[d] a deterioration of health, stress, anxiety, other mental

suffering such as humiliation, shame and degradation, or loss of

reputation, credit and social position218

and, third, both “cause and effect” are to be “grave or substantial”.219

The requirements of this test are met in the present case as Ruritanian authorities’ actions

have implied illegal detention and contravene the norms according to which civilized

nations are expected to act (i), actions of Ruritanian authorities incidental to the arrest have

caused stress, anxiety and mental suffering to the Claimant’s employees and harm to the

Claimant’s Investment (ii) and cause and effect of the actions of Ruritanian authorities are

grave and substantial (iii).

(i) Ruritanian authorities’ actions have implied illegal detention and contravene the

norms according to which civilized nations are expected to act

142. Detention of Messrs Goodfellow and Straw is incompatible with norms, according to

which civilized nations are expected to act. According to the position of the ICJ

wrongfully to deprive human beings of their freedom and to subject

them to physical constraint in conditions of hardship is in itself

incompatible with … the fundamental principles enunciated in the

Universal Declaration of Human Rights.220

143. The said norms are also present in the International Covenant on Economic, Social and

Cultural Rights ratified by Ruritania. Specifically, Article 9 of the Covenant states

No one shall be subjected to arbitrary arrest or detention… be

deprived of his liberty except on such grounds and in accordance

with such procedure as are established by law221

and

218Lemire v. Ukraine, §333.

219DLP v. Yemen, §286.

220United States v. Iran (ICJ), §91.

221Covenant, Article 9(1).

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Anyone who is arrested shall be informed, at the time of arrest, of

the reasons for his arrest and shall be promptly informed of any

charges against him.222

144. Messrs Goodfellow and Straw were detained unexpectedly on 23 December 2011 in

contravention with previously expressed position of Ruritanian authorities223 and their

attorneys’ advice.224 Moreover, the Respondent clearly states that it is possible that “the

applicable law may not have been entirely complied with during the arrest”.225

145. Further, in violation of Article 9(2) of the Covenant, at the time of detention Messrs

Goodfellow and Straw clearly were not properly informed about the reason for their arrest,

because the motive of stopping the executives from “fleeing justice”226 cannot be regarded

as valid and based on legal grounds for detention.

146. Consequently, the arrest shall be recognized arbitrary and executed in violation of the

norms that are to be complied with by civilized nations.

(ii) Actions of Ruritanian authorities incidental to the arrest have caused stress, anxiety

and mental suffering to the Claimant’s employees and harm to the Claimant’s Investment

147. The Investor shall receive compensation for injury to its credit and reputation caused by

unlawful actions of the host State, and the compensation shall be granted in a form of

moral damages.227

148. According to DLP v. Yemen, the Investor is entitled to be compensated for its employees’

psychological suffering resulting from negative physical intervention, e.g. unlawful

detention.228 This position of the tribunal has introduced a corporate espousal approach to

establishing a connection between injury caused to an employee and injury to its

222Covenant, Article 9(2).


224Ibid.





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employer229 (by analogy with the state espousal doctrine, where an injury to an individual

is equaled to injury of the state to which one is citizen of).230 The Claimant invites the

present Tribunal to adopt the same approach as factual background of the decision is

similar to the case at hand.

149. The Claimant’s employees have suffered significant level of stress due to the fact that they

were kept in a cell in the Freecity airport231 for twelve days (from 23 December 2011232

until 3 January 2012233) during the period of Christmas holidays. Their poor mental state

was further aggravated by their release with no further explanation.234

150. In addition to that, the Claimant has suffered substantial injury to its reputation which has

resulted from several factors. Firstly, the mere fact of commencement of criminal

proceedings against Claimant’s top executives due to their alleged involvement in

bribery235 is causing a negative impact to relationships with business partners. Secondly, a

video record of detention of CAM’s executives has been passed to a TV channel by the

police236and consequently, the information and all of the circumstances of the arrest have

immediately become available to citizens of Ruritania, each of whom is considered a

potential customer of the FBI’s production. Finally, the categorical statement of the

spokesman for the Prosecutor’s office, that contained a clear message that CAM’s

executives were “people responsible for corruption”237 that was not supported by

condemnatory judgment and moreover was further disposed with the termination of

criminal investigation.238 In light of the abovementioned facts it is rational to presume that

activities of the Ruritanian authorities that accompanied the detention of Messrs

229Sabahi, p.140; Panel Discussion, p.241.

230Sabahi, p.140.




234Ibid.



237Ibid.


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Goodfellow and Straw, were aimed to discredit the Claimant’s Investment and its public

image.

151. The Investor is entitled to receive compensation for an injury to its credit and reputation

caused by unlawful actions of the host State, and the compensation shall be granted in a

form of moral damages.239

(iii) Cause and effect of the actions of Ruritanian authorities are grave and substantial

152. The Claimant submits that the damages it has suffered due to loss of reputation are grave

and substantial. The rationale for that conclusion is that taken together actions of

Ruritanian authorities, particularly baseless detention of the top executives of the Claimant,

negative media coverage that resulted from passing of the video tape from a security

camera to journalists and public statement made by the spokesmen of the Prosecutor’s

Office with extremely negative evaluation of Messrs Goodfellow and Straw activity,

clearly demonstrate that these actions served a common aim of discrediting the investor

and its investment. The Claimant considers that, first of all, such conduct of the host State

may create a negative tendency and thus shall not be encouraged. Secondly, as an

aggrieved party, the Claimant seeks to reestablish its previous position on the market.

C. RURITANIA IS BOUND TO COMPENSATE MORAL DAMAGES UNDER THE ILC ARTICLES ON

STATE RESPONSIBILITY

153. Moral damages should be awarded as ILC articles are applicable in the present case [1], the

internationally wrongful act of the Respondent caused the damages [2] and harm caused to

the Claimant by unlawful actions of the host State is to be recovered by compensation and

satisfaction [3].

1. The ILC articles are applicable in the present case

154. The Claimant submits that the actions of the Ruritanian police and statement made by the

spokesman for the Prosecutor’s office240 are to be evaluated in accordance with

international law despite the provisions of domestic law of the host State.



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155. According to Article 35(1) of the UNCITRAL Arbitration Rules, when the parties fail to

designate rules applicable to the substance of the dispute, the Tribunal shall apply the law

which it determines to be appropriate. The applicable law in the present case was not

established by the parties. Therefore, the Claimant would like to propose application of the

ILC Articles and to point out that it is generally accepted that application of national law is

not an obstacle for application of international law for the purpose of protection of an

investor.241 Moreover, this approach is recognized by ICSID case-law.242

156. The Claimant invites the Tribunal to apply the basic principle of reparation in international

law proclaiming that “a state must make full reparation for any “injury” caused to another

state by an internationally wrongful act”.

157. It is the position of the Claimant, that moral damages in the present case are to be

recovered as a remedy for an internationally wrongful act, committed by Ruritania, in

accordance with Article 31 of the ILC Articles.

158. In establishment of this standard the ILC Articles expressly rely and closely follow the

PCIJ decision in Chorzów Factory case,243 that has set “the default standard contained in

customary international law”244 and that is to be applied in the present case. The same

rationale has been widely applied by arbitration tribunals inter alia in investment

disputes.245 Moreover, the proportion of investment arbitration awards that rely on the ILC

Articles amounts to almost 60 percent of all the decisions where these articles are

applied.246

159. The Claimant accepts that in spite of substantial influence of the ILC Articles to the

development of international investment arbitration system,247 the present Tribunal is not

241Ball, p.410; Westberg, pp.6-8.

242Amco v. Indonesia, §39; LETCO v. Liberia, §39; Klöckner v. Cameroon, §57; Santa Elena v. Costa Rica, §64.

243Chorzów Factory (PCIJ), §55.

244ADC v. Hungary, §§486-494.

245LG&E v. Argentina, §43; BG Group Plc v Argentina, §409; CME v. Czech Republic, §164; Petrobart Limited v.

Kyrgyz Republic, p.77.

246Crawford, p.128.

247Ibid.

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42

bound by the ILC articles, however it is the position of the Claimant, that they should be

taken into account.

2. The internationally wrongful act of the Respondent caused the damages

160. The Claimant states that violation of Article 2(1)(b) of the BIT by the Respondent

constitutes an internationally wrongful act.248 Further, “every internationally wrongful act

of a State entails the international responsibility of that State”.249

161. According to Article 2 of the ILC Articles, an internationally wrongful act falls under two

criteria: 1) the act is attributable to the State under international law and 2) the act

constitutes a breach of international obligation of the State. Both criteria are satisfied in the

present case as Ruritania accepts the constitution of breach of its obligation to provide full

protection and security.250

162. Therefore, Ruritania has to bear international responsibility for the wrongful act it has

committed.

3. Harm caused to the Claimant by unlawful actions of the host state is to be recovered

by compensation and satisfaction

163. Obligation to pay reparation for breach of an engagement is a general principle of

international law.251 Moreover, an obligation to recover moral damages arises from a

general obligation to provide reparation for an injury caused.252

164. As provided by the Tribunal chaired by Secretary-General of the UN, Javier Pérez de

Cuéllarin, in the Rainbow Warrior case:

Unlawful action against non-material interests, such as acts

affecting the honor, dignity or prestige of a State, entitle the victim

248ADM Company v. Mexico, §275.



251Chorzów Factory (PCIJ), §55; Reparation, p.184.

252Sabahi, p.135.

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State to receive adequate reparation, even if those acts have not

resulted in a pecuniary or material loss for the claimant State.253

The Claimant states that this position is also applicable for protection of non-material

interests of a private investor.

165. In the present case the available form of reparation for moral damages would be

compensation for the loss of its reputation due to an illegal act by the state. As, firstly,

according to the ILC Articles,

material and moral damage resulting from an internationally

wrongful act will normally be financially assessable and hence

covered by the remedy of compensation.254

Moreover, compensation is a remedy whenever restitution (which is a general rule) is not

available, including situations when the damage is not financially assessable. Therefore,

the Claimant is entitled to receive compensation for the moral damages it has suffered for

detention of its employees which resulted in the loss of reputation.

166. Moreover, the Claimant states that treatment of the claim for moral damages shall not

depend on the outcome of the dispute regarding expropriation. Consequently, an award in

favour of the Claimant cannot be equaled to awarding moral damages in a form of

satisfaction.

167. First of all, the ILC Articles recognize compensation to be a proper remedy for moral

injury of an investor whether a natural person or a corporation.255 The statement is

supported by the drafters of the ILC Articles that “there is no general requirement of

material harm or damage for a State to be entitled to seek some form of reparation”.256 At

the same time, in Europe Cement v. Turkey the Tribunals stated that satisfaction is a proper

remedy for any damage to its reputation, specifically, satisfaction in a form of a favorable

award.257 Consequently, the Claimant shall be awarded compensation for moral damages.

253Rainbow Warrior (the Secretary-General of the United Nations), §§107,109.




257Europe Cement v. Turkey, §181.

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168. Further, the Claimant is not seeking to punish the host State for its unlawful actions, its

only aim is to reestablish as far as possible the state that existed prior to the arrest and

therefore the Claimant accepts the compensatory, not punitive nature of the moral damages

and invites the Tribunal to adopt the same approach. In line with the ILC Articles, the

Claimants seeks to compensate “actual losses incurred as a result of the internationally

wrongful act” and accepts that the compensation “is not concerned to punish the

responsible State, nor does compensation have an expressive or exemplary character.”258

The Claimant invites the present Tribunal to follow the prevalent approach in the existing

jurisprudence on this issue,259 also adopted by international investment tribunals.260

169. To conclude, CAM has demonstrated that it has suffered significant moral harm due to

detention of its employees and incidental harm to its reputation caused by the Respondent's

breach of the obligation to provide full protection and security to the investment and thus is

entitled to be granted reparation for moral damages in a form of compensation.

V. THE LOSS OF SALES OF CAM’S SUBSIDIARIES LOCATED OUTSIDE OF

RURITANIA CONSTITUTES A RECOVERABLE ITEM OF DAMAGES

170. CAM submits that the sales of its subsidiaries dropped due to the MAB Act and the

Ordinance should be compensated by Ruritania as, firstly, international law requires full

reparation for committing internationally wrongful act [A] and, secondly, CAM’s

subsidiaries losses of sales constitute protectable Investment under the BIT [B].

A. RURITANIA HAS THE DUTY OF FULL COMPENSATION FOR EXPROPRIATION AND VIOLATION

OF FET

171. According to Article 31(1) of the ILC Articles (that are applicable in the present case261)

[t]he responsible State is under an obligation to make full reparation

for the injury caused by the internationally wrongful act.


259Portugal v. Germany (Ad Hoc), p.1077; Lusitania Cases (US-Germany Commission), pp.38–44; Letelier and

Moffit (US – Chile Tribunal), p.15.

260S.D. Myers v. Canada, §6; CMS v. Argentina, §404; Siag v. Egypt, §§544-545.

261See Section IV(C)(i) above.

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172. This provision of the ILC Articles is based on the approach adopted by the PCIJ in the

Chorzów Factory case.262 In the former case a dispute arose as to what losses resulted in by

expropriation of Chorzów Factory are compensable under expropriation claim.263 The PCIJ

pointed out that the indemnity due is not limited to the value of Chorzów Factory itself,264

stating at the same time that recoverable damages encompass, among others, losses

suffered by the companies outside the undertaking itself.265

173. The Chorzów Factory case represents the rule of customary international law266 and

reflects the authoritative principle governing determination of recoverable items of

damages suffered due to committing internationally wrongful acts.267 The Claimant invites

the Tribunal to apply the same formula.

174. In the present case expropriation and violation of FET committed by Ruritania make the

latter responsible to make full reparation for those acts. The reparation is not limited to the

losses of FBI only, but includes losses of sales of CAM’s subsidiaries.

B. CAM’S SUBSIDIARIES LOSSES CONSTITUTE PROTECTABLE INVESTMENT UNDER THE BIT

175. The Claimant accepts that the BIT generally protects only the assets invested in the

territory of the host state.268 However, CAM asks the Tribunal to consider all its

businesses, including those located outside Ruritania, as one and indivisible Investment.

The same approach was adopted in a number of cases,269 where the tribunals pointed out

that if the substantial part of one investment is within the territory of the host State the

territorial requirement is satisfied.270

262Sabahi, p.53.




266ADC v. Hungary, §480; Siemens v. Argentina, §353.

267Sabahi, p.47.


269SGS v. Philippines, §102; LESI v. Algeria, §73; Cargill v. Mexico, §523.

270Ibid.

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176. Furthermore, the tribunal in the Cargill case, where the claimant also sought to recover the

losses of suppliers located outside the host State and owned by the investor, pointed out

that inability of those suppliers to export products “is just the other side of the coin of

inability of the investment to operate as [the investor] was intended to import [the

products]”.271

177. In the present case supply of bottles, cans, yeast, hops and barley to FBI was closely

associated with FBI, which was the main and substantial element of the whole CAM’s

investment. Indeed, a new production line at the aluminium can was specifically added for

the needs of FBI, and most supplies commenced shortly after FBI was acquired.272 The

losses of sales suffered by CAM’s subsidiaries are as much losses of CAM’s Investment in

Ruritania as undisputedly compensable losses caused by FBI’s inability to use packages

and raw materials due to restrictions towards marketing and production of alcohol.

178. Thus, CAM’s bottling and agricultural businesses should be considered as integral part of

one protectable investment.

179. To conclude, CAM submits that its businesses located outside Ruritania are included in

one protectable investment and thus their losses should be fully compensated.

271Cargill v. Mexico, §525.


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PRAYER FOR RELIEF

Claimant respectfully asks this Tribunal to find that:

(1) The Tribunal has jurisdiction over the claims submitted by CAM and those claims are fully

admissible.

(2) The Tribunal has jurisdiction to consider CAM’s claims based on the breach of the

Agreement by the Fund.

(3) Ruritania violated its obligations under the BIT when adopted the MAB Act and the

Ordinance, namely unlawfully expropriated CAM’s investment, or, in any event, failed to

provide fair and equitable treatment and order to pay compensation.

(4) Moral damages caused to the Claimant due to the arrest of Messrs Goodfellow and Straw

may in principle be awarded by the present Tribunal.

(5) Loss of sales of CAM’s subsidiaries located outside of Ruritania to FBI constitutes

recoverable item of damages.

Respectfully submitted on 22 September 2013.

-------

Team AJIBOLA.

On behalf of the Claimant,

Contifica Asset Management Corp.

Documents

TEAM AJIBOLA GERMAN INSTITUTION OF …TEAM AJIBOLA GERMAN INSTITUTION OF ARBITRATION UNDER THE UNCITRAL ARBITRATION RULES ADMINISTERED BY THE DIS CONTIFICA ASSET MANAGEMENT CORP. (CLAIMANT)TEAM