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ORREGO

ARBITRATION INSTITUTE OF THE

STOCKHOLM CHAMBER OF COMMERCE

IN THE MATTER BETWEEN

FENOSCADIA LIMITED

VS.

THE REPUBLIC OF KRONOS

MEMORIAL FOR THE RESPONDENT

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Table of Contents 1.1. LIST OF AUTHORITIES ........................................................................................................... 4

A. Abbreviations ......................................................................................................................... 4

B. Statutes and Treaties. .............................................................................................................. 5

C. Cases ....................................................................................................................................... 6

i. International Court of Justice ........................................................................................... 6

ii. ICSID ............................................................................................................................... 6

iii. London Court Of International Arbitration ................................................................ 10

iv. SCC ............................................................................................................................. 11

v. UNCITRAL .................................................................................................................... 11

vi. US-IRAN Tribunals .................................................................................................... 12

D. Books ................................................................................................................................... 12

E. Law Journals and Articles. ................................................................................................... 12

1.2. STATEMENT OF FACTS .................................................................................................... 14

I: PROCEDURAL ARGUMENTS ................................................................................................... 15

1.3THE TRIBUNAL LACKS JURISDICTION ................................................................................... 15

A. Claimant does not qualify as an investor under Article 1(3) of the TK-BIT ....................... 15

i. Control .............................................................................................................................. 16

a. Substantial business activity .......................................................................................... 18

1.4. CLAIMANT’S CLAIMS ARE INADMISSIBLE AS IT HAS TRIGGERED THE FORK IN THE ROAD

PROVISION IN ARTICLE 11(2) OF THE TK-BIT. ........................................................................... 19

i. Similarity of parties ........................................................................................................ 19

ii. Similarity of cause of action........................................................................................... 19

iii. Similarity of object ..................................................................................................... 21

1.5. ADMISSIBILITY OF COUNTERCLAIM ................................................................................... 22

A. The SCC Arbitral Tribunal Procedural rules. ...................................................................... 22

B. The counterclaim involves interpretation of the BIT ........................................................... 23

C. Contractual claim does not negate the Tribunal’s jurisdiction over the claim ..................... 23

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1.6: WHETHER THE ENACTMENT OF PRESIDENTIAL DECREE NO. 2424, ITS IMPLEMENTATION

AND OTHER RELATED ACTS OF THE RESPONDENT AMOUNT TO EXPROPRIATION OF

CLAIMANT’S INVESTMENT IN VIOLATION OF THE BIT.............................................................. 24

A. THE CONCEPT OF EXPROPRIATION ......................................................................... 24

i. Whether the decree suffices to expropriate Claimant’s property. .................................. 24

ii. Whether Claimant had rights susceptible to expropriation. ........................................... 25

B. IF THE TRIBUNAL WERE TO FIND THAT RESPONDENT’S ACTIONS AMOUNT

TO EXPROPRIATION, RESPONDENT SUBMITS THAT THE EXPROPRIATION HAS

BEEN LAWFUL AND NO COMPENSATION IS TO BE PAID. ...................................... 26

i. Presidential decree 2424 was for a public purpose. ....................................................... 26

ii. Respondent followed the due process of the law. .......................................................... 28

iii. That the expropriation was done in a non-discriminatory manner ............................. 31

iv. That Claimant is not entitled to compensation ........................................................... 33

C. RESPONDENT HAS ACTED WITHIN THE MINIMUM STANDARD OF

TREATMENT AS PER ARTICLE 6 OF THE TK- BIT ..................................................... 34

i. Burden Of Proof ............................................................................................................. 35

ii. Respondent Has Met the Investor’s Reasonable and Legitimate Expectations ............. 36

1.7. PRAYERS ......................................................................................................................... 41

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1.1. LIST OF AUTHORITIES

A. Abbreviations

Art./Arts. Article / Articles

BIT Bilateral Investment Treaty

CVD Cardio Vascular Diseases

ed. Edition

FET Fair and equitable treatment

ibid. Ibidem

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Disputes

KFU Kronian Federal University

MFN Most Favored Nation

NAFTA North American Free Trade Agreement

PCIJ Permanent Court of International Justice

[ ] Paragraph

SCC Stockholm Chamber of Commerce

UNCTAD United Nations Conference on Trade and Development

USA United States of America

UNICITRAL United Nations Commission on International Trade Law.

VCLT Vienna Convention of the Law of Treaties

vs. Versus

WTO World Trade Organization

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B. Statutes and Treaties.

1. Agreement between the Republic of Ticadia and the Republic of Kronos for the

promotion and Reciprocal protection of investments (1995)

2. Convention on the Trans boundary Effects of Industrial Accidents,1992.

3. North American Free Trade Agreement, (1993).

4. Protocol on Water and Health to the 1992 Convention on the protection and the use of

Transboundary Watercourses and International Lakes.

5. Stockholm Chamber of Commerce Arbitration Rules 2017-

6. Vienna Convention on the Law of Treaties, 23 May 1969, 1155 U.N.T.S. 331, 8 I.L.M.

679 (1969)

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C. Cases

i. International Court of Justice

Barcelona Traction Case Concerning Barcelona Traction, Light

and Power Company (Belgium vs. Spain)

Decision of 1970.

Nottebhom Nottebohm, Liechenstein v Guatemala,

Preliminary Objection(Second Preliminary

Objection (Second phase), Judgement, [1955]

ICJ Rep 4, ICGJ 185 (ICJ 1955), 6th April 1955

ii. ICSID

ADC vs. Hungary ADC Affiliate Limited and ADC & ADMC

Management Limited v. The Republic of

Hungary (ICSID Case No. ARB/03/16)

AES v Hungary AES Summit Generation Limited and AES-Tisza

Eromu kft v The Republic of Hungary (ICSID

Case No. ARB/07/22) Award of September 27,

2010

AMCO AMCO Asia Corp. v. Indonesia (ICSID Case

No. ARB/81/1), Final Award of June 5, 1990

Azinian v Mexico Robert Azinian, Kenneth Davitian & Ellen

Baca v The United Mexican States (ICSID Case

No. ARB(AF)/97/2

Azurix Azurix Corp. v. The Argentine Republic,

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

2006)

Bayindir v Pakistan Bayindir Insaat Ticaret Ve Sanayi A.S. v

Islamic Republicof Pakistan (ICSID Case No.

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ARB/03/29) Award of 27 August, 2009

CEAC Holdings CEAC Holdings Limited vs. Montenegro,

ARB/14/8, Award,26 July 2016

CMS vs. Argentina CMS Gas Transmission Company v The

Republic of Argentina (ICSID Case No.

ARB/01/8)

Enron Corporation Enron Corporation and Ponderosa Assets, L.P.

v Argentine Republic (ICSID Case No.

ARB/01/3), Award of 22 May 2007

Eudoro Olguin Eudoro Armando Olguin v. The Republic of

Paraguay (ICSID Case No. ARB/98/5)

Gemplus vs. Mexico Gemplus S.A, SLP S.A, Gemplus Industrial S.A.

de C.V. v. The United Mexican States

(ICSID Case No. ARB(AF)/04/9)

Generation Ukraine v Ukraine Generaton Ukraine Inc. v Ukraine (ICSID Case

No. ARB/00/9) Award of Septemebt 2003

Genin Alex Genin and Others v. Republic of Estonia,

ICSID Case No.ARB/99/2, Award, June 25,

2001

Inceysa Inceysa Vallisoletana S.L. v. Republic of El

Salvador (ICSID Case No. ARB/03/26) Award

of Aug 2, 2006

Klockner v Cameroon Klockner v The Republic of Cameroon (ICSID

Case No. ARB/81/2)

Lemire v Ukraine Joseph Charles Lemire v Ukraine (ICSID Case

No. ARB/06/18)

LG&E v Argentina LG&E Energy Corp., LG&E Capital Corp.

and LG&E International Inc. v. Argentine

Republic, ICSID Case No. ARB/02/1, Decision

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on Liability, October 3, 2006,

Masdar vs. Spain Masdar Solar & Wind Cooperatief U.A v.

Kingdom of Spain (ICSID Case No. ARB/14/1)

Mercer v Canada Mercer International Inc. v The Republic of

Canada (ICSID Case No. ARB(AF)/12/3

Metalclad Metalclad Corporation v. United States of

Mexico (ICSID Case No. ARB(AF)/97/1)

Micula v Romania Loan Micula, Viorel Micula, S.C European

Food S.A, S.C. Starmill S.R.L. and S.C.

Mulitipack S.R.L. v Romania (ICSID Case No.

ARB/05/20)

Middle East Cement Middle East Cement Shipping and Handlin Co.

S.A. v. Arab Republic of Egypt (ICSID Case

No. ARB/99/6) Award of 12 April 2002

MTD Equity MTD Equity Sdn. Bhd. and MTD Chile S.A. v.

Republic of Chile, ICSID Case No. ARB/01/7

Award, May 25, 2004, ¶114)

MTD v Chile MTD Equity Sdn. Bhd and MTD Chile S.A v

Republic of Chile (ICSID Case No. ARB/01/7)

Award of 25 May 2004

Noble Ventures v Romania Noble Ventures, Inc. v Romania (ICSID Case

No. ARB/01/1)

Parkerings v Lithuania Parkerings v Lithuania (ICSID Case No.

ARB/05/8)

Patenchniki Patenchniki S.A Contractors & Engineers

(Greece) v The Republic of Albania (ICSID

Case No. ARB/07/21)

Rompetrol Group Rompetrol Group NC vs. Romania, ICSID case

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No.ARB/06/3

Ronald Ronald S. Lauder v Czech Republic

(UNCITRAL), Award, 3 September 2001

Santa Elena Compania del Desarrollo de Santa Elena, S.A.

v Republic of Costa Rica (ICSID Case No.

ARB/96/1)

SGS vs. Pakistan SGS Société Générale de Surveillance S.A. v.

Islamic Republic of Pakistan (ICSID Case No.

ARB/01/13)

Siemens Siemens A.G. v The Argentine Republic (ICSID

Case No. ARB/02/8)

Siemens v Argentina Siemens A.G. v Argentina (ICSID Case No.

ARB/02/8) Decision on Jurisdiction, 3 August

2004

Soabi Société Ouest Africaine des Betons Industriels

v Senegal (ICSID Case No. ARB/82.1) Award

of February 1988

Spyridon Roussalis Spyridon Roussalis v. Romania (ICSID Case

No. ARB/06/1)Decision on Counterclaim,

Award December 7, 2011

Suez vs. Argentina Suez, Socedad General de Aguas de Barcelona,

S.A. and Interagua Servicios

Intergrales de Agua, S.A v. Argentine Republic

(ICSID Case No. ARB/03/17)

Tecmed v Mexico Tecnicas Medioambientales Tecmed, S.A v The

United Mexican States (ICSID Case No.

ARB(AF)/00/2) Award of 29 May 2003

Teinverv Cercanias Teinver S.A, Transports de Cercanias S.A and

autobuses Urbanos del Sur S.A v The Argentine

Republic (ICSID Case No. ARB/09/1)

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Telsim Rumeli Telekom A.S. and Telsim Mobil

Telekomunikasyon Hizmetleri A.S. v. Republic

of Kazakhstan (ICSID Case No. ARB/02/19)

Decision on Jurisdiction

Texaco Texaco Overseas Petroleum Company v. the

Government of the Libyan Arab republic. AD

HOC AWARD OF JANUARY 19, 1977.

Tokios Tokeles Tokios Tokeles v. Ukraine (ICSID Case No.

ARB/02/18) Decision on jurisdiction

Total v Argentina Total S.A. v Argentine Republic (ICSID Case

No. ARB/04/01)

Toto Toto Costruzioni Generali S.p.A. v. The

Reoublic of Lebanon (ICSID Case No.

ARB/07/12) Decision on jurisdiction

Vivendi Compania de Aguas del Aconnquija S.A and

Vivendi Universal S.A. v. Argentine Republic

(ICSID Case No. ARB/97/3) (Formerly

Compania de Aguas del Aconguija , S.A. and

Compagnie Generale des Eaux v. Argentine

Republic)

Waste Management Waste Management v. Mexico, Final Award,

30 April 2004

iii. London Court Of International Arbitration

Encana v Ecuador Encana v Ecuador (LCIA Case No. UN3481)

UNCITRAL (Formerly EnCana Corporation v

Government of Republic of Ecuador) Award of

3 Feb, 2006

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iv. SCC

Amto vs. Ukraine Amto v Ukraine (SCC Case No. 080/05)

v. UNCITRAL

Australia v India White Industries Australia Limited v The

Republic of India (UNCITRAL) Final Award

of 30 November 2011

Encana Encana Corporation v The Republic of

Ecuador (LCIA Case No. UN3481)

UNCITRAL (Canada/Ecuador BIT) Award of

3 February 2006

Ethyl Corporation Ethyl Corporation v The Government of

Canada (UNCITRAL 1976)

Frontier v Czech Republic Frontier Petroleum Services Ltd. V Czech

Republic (UNCITRAL ) Final Award of 12

November, 2010

Methanex v USA Methanec Corporation v United States of

America (UNCITRAL)

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

(UNCITRAL)

P.L.C v Argentina National Grid P.LC v Argentine Republic

(UNCITRAL) Award of 3 Novemeber 2008

Pope v Canada Pope & Talbot Inc. v The Government of

Canada (UNCITRAL)

Saluka v Czech Saluka Investments B.V. v The Czech Republic

(UNCITRAL)

Thunderbird v Mexico International Thunderbird Gaming

Corporation v The United Mexica States

(UNCITRAL Award of Jan 2006)

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vi. US-IRAN Tribunals

Philips Petroleum Philips Petroleum Company Iran v. The

Islamic Republic, et al (21 Iran-U.S. C.T.R. 79,

Partial Award No. 425-39-2, 29 June 1989)

AMOCO v Iran Amoco International Finance v Iran , Award

No. 310-56-3, 15 Iran-US Claims Tribunal

(1987)

D. Books

1. Alan Refern, Martin Hunter, Nigel Blackaby and Constantine Partasides, Law and

Practise of International Commercial Arbitration, 4th Edition at page 486.

2. Write, C. Miller A.: “Federal Practice and Procedure: Federal Rules of Civil

Procedure Vol. 6.” 2 ed, St. Paul, 1990, pg. 1426.

3. Rudolf Dolzer & Cristoph Schreur, Principles of International Investment Law , 2nd

Edition, OUP 2008 at page 135

4. Iona Tudor, The Fair and Equitable Treatment Standard in the Law of Foreign

Investment, 2008 at page 138.

5. Christoph Schreur, Fair and Equitable Standard (FET) : Interaction with Other

Standards, Transnational Dispute Management 17, 2007 at page 193

6. Halsbury’s Laws of England Volume 42, 4th Edition.

E. Law Journals and Articles.

1. Aeberli, P.: “Abatements, Set-Offs and Counterclaims in Arbitration Proceedings,”

taken from www.aeberli.co.uk/article/setoff.pdf at page 4.

2. UN Doc. UNCTAD/ITE/IIT/2004/10, International Investment Agreements: Key

Issues, Vol. 1, 2004 at page 235.

3. Christoph Scheuer, Investment Disputes, found at Max Planck Encyclopedia of

Public International Law www.mpepil.com

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4. Catherine Yannaca, Lahra Liberti, Definition of Investor and Investment in

International Investment Agreements, OECD 2008.

5. Expropriation, UNCTAD Series on issues in International Investment Agreements II,

United Nations, New York and Geneva, 2012.

6. Schreuer, C., “Traveling the BIT Route of Waiting Periods, Umbrella Clauses and

Forks in the Road”, (2004) 5 Journal of World Investment and Trade 231.

7. OECD, Discrimination and Non-Discrimination in Foreign Direct Investment Mining

issues at page 3.

8. UNCTAD Series on issues in International investment agreements, Taking of

Property, 2000 at page 2.

9. UNCTAD Series on Issues in International Investment Agreements II (Fair and

equitable Treatment, 2012 at page 63

10. Article 4 of the 1962 General Assembly Resolution No. 1803 on permanent

sovereignty over natural resources

11. Yaraslau Kryvoi Counterclaims in Investor-State Arbitration, Minnesota Journal of

Int’l Law [Vol 21:2]

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1.2. STATEMENT OF FACTS

2. For the past 10 years, Claimant has been actively conducting mining operations in the

Republic of Kronos. Mining of the rare earth metal, Lindoro, is Claimant’s sole

responsibility.

3. However, since the year 2011, the area round the Rhea River where exploitation of

Lindoro is carried out has been greatly polluted, making the river among the top three

most polluted rivers in the world. There has been a rapid increase in the risk of CVD

among the population living around the area where mining of Lindoro is done. 88% of

the newborns in the area have also displayed symptoms of microcephaly, a disease that

impairs the brain causing disturbances in motor functions and facial distortions.

4. These incidences were virtually non-existent prior to the commencement of Claimant’s

mining activities. This disregard for national and international environmental, human

health and safety standards led to passing of Presidential Decree No. 2424 thus the

revocation of Claimant’s mining license and the termination of the Concession

Agreement. Respondent could not bear with Claimant’s negligent acts at the expense of

its land and people.

5. Respondent acted within its normal regulatory powers to protect environmental and

human health of its citizens.

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I: PROCEDURAL ARGUMENTS

1.3THE TRIBUNAL LACKS JURISDICTION

A. Claimant does not qualify as an investor under Article 1(3) of the TK-BIT

6. Respondent submits that the Tribunal lacks jurisdiction under Article 11(1) of TK-BIT1

because this is not an investment dispute. Reason being that Claimant is not an investor

under Article 1(3) of the TK-BIT and does not have substantial business activity in

Ticadia.

7. Article 11(1) of the TK-BIT defines an investment dispute to be a dispute between a State

and an investor of the other State Party.2 Schreuer defines an investment dispute to be a

dispute arising from investments made by nationals of States other than the host

State.3Nationality being the legal bond having as its basis a social fact of attachment, a

genuine connection of existence, interests and sentiments together with the existence of

reciprocal rights and duties.4 It only follows that Claimant must be a national of Ticadia

for this Tribunal to have jurisdiction rationae personae.

8. In Tokio Tokeles,5 it was held that nationality of a company should be determined

according to individual BITs.6 Indeed the TK-BIT does not establish the nationality test,7

therefore Respondent urges the Tribunal to interpret the provisions of Article 1(3) of the

TK-BIT in light of Article 31 of the VCLT, in good faith in light of its object and

purpose. The preamble of the TK-BIT stipulates the parties’ desire to promote greater

economic cooperation between them. Thus, Claimant ought to be an investor under the

TK-BIT if it wishes to rely on it.

1 Agreement between the Republic of Ticadia and the Republic of Kronos for the Promotion and Reciprocal

Protection of Investments. 2 Facts [1225] 1 3 Christoph Scheuer, Investment Disputes found at Max Planck Encyclopedia of Public International Law

www.mpepil.com 4 Nottebhom Case (Liechtensein v Guatemala) Judgement of April 6th, 1965 at pg. 23 5 Tokios Tokeles v. Ukraine, ICSID Case No. ARB/02/18, Ukraine-Lithuania BIT, Decision on Jurisdiction, April

29, 2004. 6 Ibid 7 Article 1(4). TK-BIT

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9. As earlier stated, the TK-BIT does not establish the nationality test. As pointed out by

Judge Jessup in Barcelona Traction,8 there are two standard tests of the nationality of a

corporation: (i) place of incorporation and (ii) siege social.9 Although the Tribunal in

Rompetrol Group v Romania10 stated that ICSID Tribunals have uniformly adopted the

place of incorporation or seat test rather than control, a position also taken by Yaraka-

Small and Liberti in Definition of Investor and Investments in International Investment

Agreements,11 Respondent submits that this Tribunal should take a different position.

This argument is based on the following:

i. Control

10. The law has recognized that the independent existence of the legal entity cannot be

absolute.12 In this context, according to the ICJ in Barcelona Traction, the process of

“lifting the corporate veil” is justified for the reasons of: (i) preventing misuse of

privileges of legal personalities (ii) cases of fraud or malfeasance (iii) protecting third

parties and (iv) preventing evasion of legal requirements or obligations.13 To prevent

treaty abuse of the investor-state mechanism for dispute resolution provided under Article

11 of the TK-BIT, Respondent urges this Tribunal to ‘lift the corporate veil’ and establish

that the real nationality of Fenoscadia Limited, lies with Kronian nationals. This approach

has been reaffirmed in CMS Jurisdiction,14 Soabi15 and the dissenting opinion of Judge

Weil in Tokios Tokeles.16

11. Claimant fails to qualify as an investor since it is controlled by nationals of Kronos.

Nationality of the persons who exercise control, whether through the board of directors

8 Case Concerning Barcelona Traction, Light and Power Company (Belgium v Spain) 1970 9 Judge Jessup in his Dissenting Opinion in Barcelona Traction, par. 39 10 The Rompetrol Group N.V v Romania, ICSID Case No. ARB/06/3 11 This survey was prepared by Catherine Yannaca-Small, Investment Division, OECD Directorate for Financial and

Enterprise Affairs. Lahra Liberti, Investment Division, OECD Directorate for Financial and Enterprise Affairs

prepared Section II of Part II and revised the document in light of the discussions in the OECD Investment

Committee. 12 Supra 8, par. 56 13 Ibid 14 CMS Gas Transmission Company v The Republic of Argentina, ICSID Case No. ARB/01/8, par. 43-48 15 Societe Ouest Africaine des Betons Industriels v Senegal, ICSID Case No. ARB/82/1, Award of 25th February

1988, par. 32 16 Tokios Tokeles v Ukraine (ICSID Case No. ARB/02/18), Decision on Jurisdiction, April 29,2004

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and management or through stock interest, can be used to establish the like between a

corporation and a State.17 Respondent relies on the Tribunal’s notion of control in

Thunderbird v Mexico,18which it emphasized should be interpreted in its ordinary

meaning.19 In the case, the de facto control exercised by Thunderbird over the EDM

entities was sufficient and unquestionable.

12. This type of effective control can also be achieved by the power to make and implement

key decisions of the business, through factors such as technology, access to capital,

access to markets, knowhow and authoritative reputation.20Thus it became apparent that

the legal entity that were EDM, had the nationality of the USA despite being incorporated

in Mexico. Just as Judge Jessup puts it, “The center of power is not necessarily to be

identified by the location of the largest number of shares.”21 A corporation having

nominal connection with a State of incorporation but whose management and control lies

with nationals of the latter State, has behind it the shareholders who represent the real

interest.22

13. Extracting from the facts, Fenoscadia’s management is in the hands of a board of

directors elected by its shareholders. 23 This board for the past five years has largely

comprised of Kronian nationals.24Furthermore, majority of the voting power is held by

Kronian nationals after delegation of such powers by a private equity fund from

Ticadia.25 Indeed Kronian shareholders exert considerable influence over Claimant’s

decision-making specifically in relation to the operation and management of its mining

activities in Kronos, due to their experience and expertise in the mining industry acquired

in other countries.26 This is the level of influence and control sufficient to demonstrate

Kronian interests in the company making Fenoscadia Limited’s incorporation argument

insufficient.

17 Judge Jessup in his Dissenting Opinio in Barcelona Tracton Case, par.68 18 International Thunderbird Gaming Corporation v The United Mexican States, UNCITRAL,Award of Jan 2006 19 Ibid, par. 106 20 Ibid, par 108 21 Supra, par.80 22 Ibid, par. 48 23 Uncontested Facts [900]7 24 Ibid. 25 Facts, [350] 3 26 Uncontested Facts, par. [900]7

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a. Substantial business activity

14. Claimant does not have substantial business activity in Ticadia. The criteria used to

determine what amounts to substantial business activity as set out in AMTO v Ukraine,27

is to be based on form rather than magnitude. In 2010, Claimant decided to Claimant

decided to transfer and concentrate almost all its mining activities and resources in

Kronos and effectively shut down its mining operations in Ticadia.28 Furthermore, the

CEO often travels to Kronos due to concentration of Claimant’s activities in Kronos.29

Respondent contends that although Claimant regularly holds its meetings in Ticadia, this

does not amount to substantial business activity as per the TK-BIT. The TK-BIT seeks to

protect only genuine investors who do not carry out business activity as a formality but

out of substance.

15. Respondent relies on Judge Jessup’s dissenting opinion in Barcelona Traction, that the

place of incorporation […] has lost its significance as real identification of a holding

company. Moreover, the siege social in terms of an office, etc. can be merely a façade.

For these reasons, Respondent pleads this Tribunal to declare that it lacks jurisdiction.

27 Limited Liability Company AMTO v Ukraine, SCC Case No. 080/2005 28 Uncontested Facts [930] 12 29 Uncontested Facts [907] 3

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1.4. CLAIMANT’S CLAIMS ARE INADMISSIBLE AS IT HAS

TRIGGERED THE FORK IN THE ROAD PROVISION IN ARTICLE 11(2)

OF THE TK-BIT.

16. Respondent submits that even if the Tribunal finds it has jurisdiction rationae personae

under Article 11(1), it still lacks jurisdiction to hear the matter pursuant to Article 11(2)

of the TK-BIT. Claimant has triggered fork-in-the road provision contained in Article

11(2) thus claim is inadmissible.

17. Article 11(2) of the TK-BIT gives parties the option of seeking domestic avenues or

binding arbitration in dispute resolution between them. As Redfern, Hunter, Blackabay

and Partasides in Law and Paratcise of International Commercial Arbitration30 put it,

many BITs provide that investors may choose to submit a dispute either to the local

courts of the host state or to arbitration and, once made, the choice is final.31 Thus, if the

investor has already submitted the dispute to the local courts it may no longer consent to

arbitration.32 This is the so-called “fork in the road” provision.33 The three part test for

establishing a trigger of “fork in the road” was established in Toto v Lebanon34 and is

based on the following factors: (i) Similar parties (ii) similar identity of cause of action

and; (iii) similar objects.

i. Similarity of parties

18. It is indisputable that the parties before the Respondent’s domestic courts are the same

parties before this Arbitral Tribunal.35 Respondent will therefore not belabor on this

submission.

ii. Similarity of cause of action

19. The Tribunal in Patenchniki36 applied the “fundamental basis of a claim” as taken from

the Woodruff,37 and Vivendi.38 Claimed entitlements must have the same normative

30 Alan Refern, Martin Hunter, Nigel Blackaby and Constantine Partasides, LAW AND PRACTISE OF

INTERNATIONAL COMMERCIAL ARBITRATION, 4th Edition at page 486 31 Ibid, par. 11-18 32 Ibid 33 ibid 34 Toto Costruzoini Generali S.p.A v The Republic of Lebanon, ICSID Case No. ARB/07/12, Decision on Jurisdiction

11 Sep 2009 35 Facts [195]16 ; Uncontested Facts [1015] 25

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source.39 The Tribunal must determine whether the claim truly does have an autonomous

existence outside the contract. Otherwise, the Claimant must live with the consequences

of having elected to take its grievance to the national courts.40

20. In the analysis of the facts at hand, Claimant sought the suspension of the Presidential

Decree41which prohibited exploitation of Lindoro, revoked Claimant’s license and

terminated the Agreement.42 In its claim at both the Federal and Circuit Courts,43

Claimant directly questioned the Decree’s reasoning and the impacts it supposedly had on

its activities.44 The grounds on which Claimant argued are essentially the same submitted

in its Request for Arbitration.45 For instance, the Decree which Claimant argues to be

expropriatory in nature in this claim, advances the argument that this claim does not have

an autonomous existence. Claimant must therefore bear the burden of electing to submit

its grievance to Respondent’s National Courts.

21. Claimant, relying on CMS Jurisdiction,46 argues that this claim is founded on a treaty

while that submitted to the Courts is founded on a contract. However, as the Tribunal in

Patenchniki puts it, “…there comes a time when it is no longer sufficient merely to assert

that a claim is founded on the Treaty.”47 The Tribunal must determine whether the claim

truly does have an autonomous existence outside the contract. Claimant has failed to bear

its burden of proof accordingly. Respondent therefore urges the Tribunal to find this

condition met.

36 Patenchniki S.A Contractors & Engineers (Greece) v The Republic of Albania ICSID Case No. ARB/07/21 37 Woodruff Case, 1903-1905 38 Compania de Aguas del Aconquija S.A and Vivendi Universal S.A v Argentine Republic ICSID Case No.

ARB/97/3 39 Supra, par. 63 40 Supra, par. 64 41 No. 2424, Exhibit 5 42 Facts [430] 18 ; [435] 19 ; Uncontested Facts [1005] 25 43 Uncontested Facts [1020] 25 , 26 44 Facts [370] 6 45 Fact [370] 6 46 CMS Gas Transmission Company v The Republic of Agentina ICSID Case No. ARB/01/8 47 Supra, par 64

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iii. Similarity of object

22. As stated in Toto the relief sought must be similar. Respondent submits that Claimant

sought to suspend the effects of the Decree, one of them being losses.48 Claimant sought

the declaration of the unconstitutionality of the Decree. That it violated its legistlative

right to due process. Claimant seeks compensation for losses borne out of the Decree’s

passing.49 Claimant knew and understood what it sought before the courts,to the extent

that such reliefs were granted it would be similar to the reliefs sought before this

Tribunal.

23. Finally, Respondent submits that Claimant acted in bad faith by attempting negotiations

while initiating proceedings before the Courts. The ICSID Tribunal in Inceysa50 stated

that “Good faith is a supreme principle which governs legal relations in all of its aspects

and contents…”51 Claimant therefore ought to have conducted himself in a manner that

depicted his good faith intentions to negotiate.

24. In conclusion, Claimant’s choice to submit the dispute to the National Courts triggered

the “fork in the road” provision in Article 11(2) of the TK-BIT, barring it from presenting

the same claim to this Tribunal. Therefore it should be declared inadmissible.

48 Uncontested Facts [1015] 24 49 Facts [225] 23 50 Inceysa Valliosoletana S.L V Republic of El Salvador, Award of Aug 2, 2009 51 Ibid, par. 230

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1.5. ADMISSIBILITY OF COUNTERCLAIM

A. The SCC Arbitral Tribunal Procedural rules.

25. First, in SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan,52

it is equitable that a Respondent be allowed to submit counterclaims. This is an appealing

reason for the Tribunal to find that it has jurisdiction over the Respondent’s counterclaim

and thus admissible.

26. Secondly, the Claimant and Respondent have indicated their agreement to arbitrate with

respect to the counterclaim through the selection of the SCC arbitration rules.53 Primarily,

the rules simply allude to the procedural steps and the time limits required to be followed

in order to bring a counterclaim. Article 9 (1) (iii) of the SCC Arbitration Rules clearly

guarantees that the Respondent by replying to the Secretariat, the Answers shall include a

Counterclaim, including an estimate of the monetary value thereof. It thus implies that

the parties’ agreement to arbitrate with respect to a counterclaim provided that it is as an

Answer to the Secretariat.

27. Thirdly, in Inter-State National Bank v. Luther,54 if the Tribunal finds that both parties

have submitted to its jurisdiction with respect to the Claimant’s claim, a separate

submission is not necessary with respect to the Respondent’s counterclaim since a

counter-claim should be treated like a claim for set-off,55 both being a defense to the

primary claim.56

28. Factually, the Respondent included its counterclaim in a reply within the statement of

defense.57 Secondly, both the Respondent and Claimant have submitted to the jurisdiction

of the Tribunal as derived from Article 11(2) of the BIT.58 Therefore, the Tribunal has

52 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13 53 Facts [65]1; [70] 2; [810] 2 54 221 F.2d 382 (10th Cir. 1955); also Aeberli, P.: “Abatements, Set-Offs and Counterclaims in Arbitration

Proceedings”, taken from www. aeberli.co.uk/articles/setoff.pdf, p. 4.; Halsbury’s Laws of England, Volume 42, 4 th

Edition (counterclaim should be treated as a claim) 55 Wright, C., Miller A.: “Federal Practice and Procedure: Federal Rules of Civil Procedure Vol. 6”, 2. ed, St. Paul,

1990, p. 1426.;, Inter-State National Bank v. Luther with certain reservations with regard to subject-matter

jurisdiction, Federman v. Empire Fire & Marine Insurance Co. 597 F.2d 798 (2nd Cir. 1979). 56 European Court of Justice clearly distinguished between counterclaim and setoff but clearly pointed out that they

are initially a defense to the primary claim in the case of Danvaern Production A/S v. Schuhfabriken Otterbeck

GmbH & Co. C– 341–93 57 Facts 445 [22] 58 Facts [70] 2

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jurisdiction to admit the Respondent’s counterclaim on its compliance with Article 7(1)

(iii) of the Tribunal’s Rules and therefore the Claimant has submitted to the jurisdiction

of the Tribunal same as the Respondent.

B. The counterclaim involves interpretation of the BIT

29. In Klöckner v. Republic of Cameroon,59 the Tribunal has jurisdiction over a

counterclaim if it relates to the subject matter of the BIT. Article 9(2) of the BIT provides

a general obligation upon the contracting parties to strive to minimize, harmful

environmental impacts occurring within its territory.60 The counterclaim raised by the

Respondent is premised on Claimant’s activities which resulted to contamination of the

Rhea River and damages simultaneously.61 The counterclaim falls within the definition of

an investment dispute as under Article 11(1) (b) and (c) of the BIT, since it involves

breach of the BIT provisions which the Tribunal is being called upon to interpret and

apply. The Respondent’s counterclaims turn on the same factual question, thus satisfy

this jurisdictional prerequisite.

C. Contractual claim does not negate the Tribunal’s jurisdiction over the claim

30. In Noble Ventures, Inc. v. Romania,62 the Tribunal in the interpreting the U.S.-Romania

BIT determined the issue whether it had jurisdiction over a dispute arising under a

Privatization Agreement. The Tribunal decided that the Claimant’s breach of contract

claim under the Privatization Agreement “constitutes a [claim of] breach of the BIT.”

Similarly, the Tribunal in Eureko v. Poland,63 (Ad Hoc Partial Award) interpreted the

Netherlands-Poland BIT with an almost identical issue on a contractual claim, extended

its jurisdiction over the contractual claim.

31. In this case, the Tribunal should not shy away from extending its jurisdiction in the event

the Claimant cites that the Respondent’s counterclaim arises out of the Concession

Agreement,64 thus making it a contractual claim.

59 ICSID Case No. ARB/81/2 60 Facts [1200] 2 61 Facts [440] 20, [445] 22, Exhibit 6: President’s Statement of 22 February 2017 extracted from Government’s

[1450] 62 Noble Ventures, Inc. v. Romania, ICSID Case N°ARB/01/1 63 Eureko v. Poland (Ad Hoc Partial Award, August 19, 2005) 64 Facts [440] 20;[460] 24; [1190] Exhibit 2, Concession Agreement, Executed in Kronos, on 1 June 2000.

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1.6: WHETHER THE ENACTMENT OF PRESIDENTIAL DECREE NO.

2424, ITS IMPLEMENTATION AND OTHER RELATED ACTS OF THE

RESPONDENT AMOUNT TO EXPROPRIATION OF CLAIMANT’S

INVESTMENT IN VIOLATION OF THE BIT.

A. THE CONCEPT OF EXPROPRIATION

25 Expropriations generally refer to property-specific or enterprise-specific takings where

the property rights remain with the State or are transferred by the State to other economic

operators.65

26 The Tribunal in Metalclad vs. Mexico,66 stated that, “Expropriation can take various

forms: Direct expropriation, stems from a deliberate formal act of taking, thus involves

the seizure of the investor's property. But expropriation may also be indirect, as where,

when measures result in the effective loss of management, use or control, or a significant

depreciation of the value, of the assets of a foreign investor.67

i. Whether the decree suffices to expropriate Claimant’s property.

27 To determine whether expropriation or actions amounting to it have been triggered is the

Tribunal in Phillips vs. Iran.68 The Tribunal identified two things to be looked at; one,

the effect of a measure and two, the reality of the impact. In this case, the Presidential

Decree69 only revoked the Claimant’s license to mine Lindoro.70

28 In furtherance of the effect test, the Respondent, as was in Spyridon vs. Romania,71 when

the Tribunal was determining if there is deprivation of control so as to amount to

expropriation. Found the following, there is no interference with the directors of

Fenoscadia Ltd, therefore they can carry on their mining activities elsewhere. Neither the

shareholders of the company were interfered with by the State. Thus, the management

65 UNCTAD Series on issues in international investment agreements, Taking of Property, 2000, p.2)., also Phillips

Petroleum Co. Iran v. Iran; also Starrett Housing v. Iran 66 ICSID Case No. ARB AF/97/1 67 See n. 1; UNACTAD p.2 68 Phillips Petroleum Co. Iran v. Islamic Republic of Iran, ITL 11-39-2 (Dec. 30, 1982), 1 Iran–United States Claims

Tribunal Reports [hereinafter Iran-U.S. C.T.R.] 487 (1981–82). 69 Facts, Presidential Decree No. 2424 dated 7 September 2016 Exhibit No. 5, 70 Facts [430] 18, [1005] 23 71 Spyridon Roussalis v Romania (ICSID Case No. ARB/06/1) Decision on counterclaim, Award of December 7,

2011

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and day to day operation of the venture of the Claimant has not been interfered by the

presidential decree. Thus the decree does not suffice to amount to expropriation.

29 Examining the reality of the impact, Claimant claims that it has incurred loss of economic

value; unable to honor contractual obligations with purchasers and suppliers,

accumulating unbearable losses.72 It is the Respondent submission that failure by the

Respondent to manage its own contractual obligation with its buyers and sellers should

not be a subject matter of discussion before this Tribunal.

ii. Whether Claimant had rights susceptible to expropriation.

30 Two important questions are asked so as to determine whether the rights of the Claimant

have been expropriated.73 Firstly, do the relevant rights, interests or assets fall under the

BIT definition of investment? Secondly, does the investor have valid rights under the

domestic law of the host State? In response to the first question, in EnCana vs.

Ecuador,74 the Tribunal in determining whether a right to VAT refunds constituted an

“investment,” made a firm stand that it has to refer to the BIT as to the definition, unless

ambiguous, it can then refer to extrinsic sources.75 The same affirmation was reiterated in

AMOCO vs. Iran.76 In the present case, the Claimant is not an investor therefore there is

no investment and indeed a covered investment as under Article 1(1) and 1(3)

respectively of the BIT.77

31 In response to the second question, in Suez vs. Argentina,78 the Tribunal stated that to

assess the nature of these rights in a case of alleged expropriation of contractual rights,

one must look to the domestic law under which the rights were created.79 In light of this,

the Claimant attained its mining license on 1 June 2000,80 for the exploitation of Lindoro,

72 Facts [1010] 24 73 Supra no.1 see pg. 32 74 EnCana v. Ecuador, Award, 3 February 2006. Par. 179–183. 75 As put by the Enron v. Argentina, Decision on Jurisdiction, 14 January 2004, para. 70. Tribunal, “an investment

is indeed a complex process including various arrangements, such as contracts, licenses and other agreements

leading to the materialization of such investment 76 Amoco International Finance v Iran , Award No. 310-56-3, 15 Iran-US Claims Tribunal (1987) 77 See argument on jurisdiction… 78 Suez et al. v. Argentina, Decision on Liability, 30 July 2010, para. 129. 79 ibid 80 Facts [125] 5; [390] 11

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which effectively started in August 2008.81 However, Claimant failed to comply with

the KEA which made the Respondent revoke its license.82 This was by virtue of Clause

2.2.1 of the Concession Agreement which recognized that laws might change and that the

Claimant must adapt to the changes.

32 It is therefore prudent to arrive at a conclusion that indeed there is no expropriation and

that the Claimant’s clams are frivolous. However, if the Tribunal finds that there is

expropriation, the Respondent maintains that it is lawful.

B. IF THE TRIBUNAL WERE TO FIND THAT RESPONDENT’S ACTIONS AMOUNT

TO EXPROPRIATION, RESPONDENT SUBMITS THAT THE EXPROPRIATION HAS

BEEN LAWFUL AND NO COMPENSATION IS TO BE PAID.

33 Article 7(1) of the TK-BIT stipulates that the expropriation is legal if the following

requirements of a government measure are met, (i)measure must serve a public purpose,

(ii) the measure must be non-discriminatory, (iii)due process must be observed,

(iv)compensation is to be paid.83 The four criteria for a lawful expropriation as set out in

the TK-BIT has been reaffirmed by the Tribunal in ADC vs. Hungary,84 and by the

United Nations Conference on Trade and Development.85

i. Presidential decree 2424 was for a public purpose.

34 The Tribunal in AMOCO vs. Republic of Iran,86 in defining the concept of public

purpose highlighted that: A precise definition of the “public purpose” for which an

expropriation may be lawfully decided has neither been agreed upon in international law

nor even suggested.87 Moreover, the Tribunal in Liamco vs. Libya, 88supported the

81 Exhibit 2: Concession Agreement, Clause 2.2.1 82 Exhibit 2; Concession Agreement. 83 Ticadia-Kronos BIT,article 7(1),Facts [1160] 84 ADC Affiliate Limited and ADC & ADMC Management Limited v The Republic of Hungary, ICSID Case No.

ARB/03/16, 2 October 2006, para. 476 85 UN Doc. UNCTAD/ITE/IIT/2004/10, International Investment Agreements: Key Issues, Vol. 1, 2004, p. 235 86 AMCO International Finance Corporation vs. Islamic Republic of Iran ,Iran-United Sates Claims Tribunal,1987,

Award,310-56-3. 87 ibid 88 Libyan American Oil Co. (“LIAMCO”) v. Libya, 17 I.L.M. 3 (1978), 4 Y.B. COM. ARB. 177 (1979)

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AMOCO case by stating: motives are different in international law and each state is free

to judge for itself what it considers useful or necessary for the public good.89

35 The Tribunal in ADC vs. Hungary,90 noted that a treaty requirement for public interest

requires some genuine interest of the public.91 The taking of property must be motivated

by the pursuance of a legitimate welfare objective, as opposed to a purely private gain or

an illicit end.92 In LG&E vs. Argentina,93 the Tribunal found that a state must prove the

existence of serious public disorders in order for the expropriation to be for the public

benefit.94 The Respondent relies on various expressions of a genuine public interest as

“overriding purely individual or private interests” 95or a bona fide public purpose.96

36 Respondent submits that the Presidential Decree 2424 and its implementation pursued

two major public interests; public health and the environment. In 2016, the Kronian

Federal University released data from a study indicating an abnormal amount of heavy

metals and graspel, a toxic substance released during the exploitation of lindoro, in the

waters of Rhea River making it among the top three most

polluted rivers in the world.97 A constant yearly increase of up to 45% since 2011 in

cardiovascular disease (“CVD”) among the population of the areas surrounding the Rhea

River has been recorded.98 The study cannot identify any other factor other than

exploitation of lindoro that may have caused such sudden increase in CVD.99 Moreover,

at least 10 different studies conducted by top-tier universities and independent

researchers across the globe over the last 5 years have demonstrated a connection

between water contamination by graspel and an increase in CVD in the population of the

89 ibid 90 ADC Affiliate Limited and ADC & ADMC Management Limited v The Republic of Hungary, ICSID Case No.

ARB/03/16, 2 October 2006. 91 ibid 92 Expropriation, UNCTAD series on issues in International Investment Agreements II , United Nations, New York

and Geneva, 2012. 93 LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v Argentine Republic, ICSID Case No.

ARB/02/1, 94 ibid 95Article 4 of the 1962 General Assembly Resolution No. 1803 on permanent sovereignty over natural resources. 96 Liberian Eastern Timber Corporation v. Republic of Liberia, ICSID Case No. ARB/83/2 97 Exhit 4, [1390]; uncontested facts 98 Exibit 4, [1400] 99 Exibit 4, [1405]; uncontested facts [995], 22

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surrounding areas.100 The Claimant is the only company licensed to mine Lindoro in

Kronos,101 therefore all these negative effects are attributable to the Claimant. Although

graspel is not only produced by mining Lindoro, the area surrounding the mining is most

concentrated and affected. It is as result of these studies that the Respondents decided to

pass presidential decree 2424 to protect the environment and ultimately its population.102

37 In Copper Mesa Mining vs. Ecuador,103 the Tribunal held that, it is not part of the

Tribunals function to determine for itself what was or what was not in the national

interest of the Respondents, its citizens or the local population.104 The Tribunal referred

to the Respondent’s sovereign right , as a regulator to determine what lies within its

national interest. Further the Tribunal in AES vs. Hungary,105 emphasized that the fact

that an issue becomes a political matter does not mean the existence of a rational policy is

erased.106

38 Therefore, the Respondents contend that it is clear that the protection of public health and

the environment override the alleged political interests of the Respondents government

thereby fulfilling the public interest requirement of a lawful expropriation.

ii. Respondent followed the due process of the law.

39 The Tribunal in Teinver vs.Cercanias,107 the Tribunal stated that an expropriation that is

done in accordance with the local law will satisfy this branch of the test.108 Additionally,

due process of the law requires : (a) That the expropriation comply with the procedures

established in domestic legislation and internationally recognized rules, (b)that the

100 Uncontested facts[1000], 22 101 Uncontested facts[930], 11 102 Facts,430[18] 103 Copper Mesa Mining Corporation Versus The Republic of Ecuador ,PCA Case No. 2012 -2 , Award 15th

MARCH 2016 104 Ibid 105 AES Summit Generation Limited and AES-Tisza Eromu kft vs. The Republic of Hungary, ICSID Case

No.ARB/07/22, Award 27th September 2010. 106 ibid 107Teinver S.A ,Transports de Cercanias S.A and Autobuses Urbanos del Sur S.A vs. THE Argentine Republic ,

ICSID case No.ARB/09/1 108 Ibid

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affected party have an opportunity to have the case reviewed before an independent

body.109

b) The Expropriation was in line with the Kronian Environmental Act and International

law.

40 The Tribunal in Lemire vs.Ukraine,110 recognized the legitimate right of states to pass

legislation and to adopt measures for the protection of what is sovereign.111 A state can

exercise its legitimate regulatory authority and the investor cannot complain of any

frustrations of its expectations, absent a specific commitment by the state not to modify

the relevant laws and regulations.112 Moreover, Tribunal in Saluka vs. Czech,113 pointed

out that, no investor may reasonably expect that the circumstances prevailing at the

investment is made remain totally unchanged.114

41 The Respondents made no commitment to the Claimant that the substantive laws

governing the mining of Lindoro would not change.115 In fact the Claimant had a good

faith obligation to comply with the laws in force (KEA) in the Respondent state

throughout the performance of the Agreement, with adaptations that may be necessary in

light of new laws and regulations. 116 Both the Presidential Decree No. 2424 and the KEA

were in line with the Respondents state legislative sovereignty.117As to the legality of the

KEA, the Kronian House of Representative passed the Act, which was based on the

obligations of the Protocol on Water and Health to the 1922 Convention on the Protection

and use of Trans Boundary Watercourses and International Lakes.118

109 UNCTAD Series on International Investment Agreements II page 36. 110 Joseph Charles Lemire vs. Ukrain Award,ICSID case No.ARB/06/18. 111 Ibid 112 Final Award, METHAX vs.United States of America,UNCITRAL,Final Award on Jurisdiction and merits, 3rd

August 2005(RLA-86- 113 Saluka Investments BV vs.The Czech Republic, UNCITRAL , Partial Award , page 114 ibid 115 Consession Agreement Article 2 116 Exihbit 2 , Facts [1300]2 117 Exhibit 5, Facts [425]. 118 Uncontested Facts,[960]16,Facts,400[5], [170]1

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a. Claimant was given an opportunity to have their case reviewed.

42 The Tribunal in ADC vs. Hungary,119 stated that due process of the law in an

expropriation context, demands actual and substantive legal procedure for a foreign

investor to raise claims against the depriving actions already taken against it. In

Generation Ukraine vs. Ukraine,120 the Tribunal held that, a preliminary determination

by a competent court as to whether the contract was breached under municipal law is

necessary.121 This preliminary determination is even more necessary if the parties to the

contract have agreed on a specific forum for all the disputes arising out of the contract.122

43 Respondent does not dispute the fact that it did not give advance notice to the Claimant as

to the passing of the decree and that the KEA was passed without a public hearing.

However, the Respondents urge this Tribunal to take note of the fact that the Kronian

Environmental Act was passed on 12th June 2015,123 while the Presidential Decree was

passed on 7th September 2016,124 a time clearly sufficient for the Claimant to remedy

their actions. That even though the Speaker waived the public hearing, Article 59 of the

constitution gives her the right to do so in matters affecting the national industry.125

44 Respondent submits that in any event the Claimant argue that they were not afforded the

due process of the law, the Claimant had the opportunity to bring the case before the

forum contractually chosen i.e. Kronian court, in order to complain for the breach of the

Agreement.126 The record does not show any objective reason to question the Kronian

Courts ability to dispose of the case fairly, competently, impartially and within a

reasonable time. This, the Respondents submits is the lack of due diligence on the

Claimants to take advantage of the local channels to have their dispute resolved amicably.

Moreover, the Claimant withdrew an appeal to the Kronos Circuit Court. In, Azinian vs.

119 ADC Affiliate Limited and ADC and ADM Management Limited vs. The Republic of Hungary,ICSID Case

No.AB/03/16 120 Generation Ukraine Inc vs. Ukraine ,ICSID Case No. ARB/00/9, Award Septmber 2003,paragraph 91 121 ibid 122 ibid 123 Facts,[405]13 124 Facts 430[18] 125 Facts,970(17) 126 Exihbit 2 Concession Agreement, Facts[1335]7

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Mexico,127 the Tribunal opined that, a denial of justice could be pleaded if the relevant

courts refuse to entertain a suit, if they subject it to undue delay, or if they administer

justice in a seriously inadequate way.”128 Moreover, the Claimant withdrew an appeal to

the Kronos Circuit Court

45 It is crystal clear that the Claimant, if not for other reasons, seems to be contented with

the decision of the Federal Court when it withdrew its appeal from the Circuit Court,129

therefore it can be construed that there was no denial of justice and that due process of

the law was accorded.

46 The Tribunal in AES vs. Hungary,130 stated that, any reasonably informed business

person or investor knows that the laws can evolve in accordance with the perceived

political or social dictates at the time.131 The fact that an issue becomes a political matter

does not mean that the existence of rational policy is erased.132

iii. That the expropriation was done in a non-discriminatory manner

47 Article 7(1) of the TK-BIT prohibits expropriation based on discrimination.133 This is

also embedded in Article 4 and 5 of the TK-BIT, that provide for national and most-

favored nation treatment. The OECD in Discrimination and Non-discrimination in

Foreign Direct Investment Mining Issues,134 defines “non-discrimination” as “…the

treatment of foreign investors like domestic investors under like circumstances.”135

48 The legal standard of demonstrating non-discrimination was set out in Mercer vs.

Canada.136 The three-part test involves a fact- specific analysis of whether Claimant: (i)

was accorded treatment by Respondent with respect to the establishment, acquisition,

expansion, management, conduct, operation and sale or other disposition of investments;

(ii) was in like circumstances with the identified domestic or foreign investors as

127 Robert Azinian, Kenneth Davitian, & Ellen Baca v. The United Mexican States, ICSID Case No. ARB (AF)/97/2 128 Robert Azinian, Kenneth Davitian, & Ellen Baca v. The United Mexican States, ICSID Case No. ARB (AF)/97/2 129 Uncontested Facts,[1026]26 130 AES Summit Generation Limited and AES-Tisza Eromu Kft Versus The Republic of Hungary ICSID Case No.

ARB/07/22, Award 23rd September 2010 paragraph 9.3,34 and 10.3 131 Ibid 132 ibid 133 TK-BIT , Facts, [1160] 134 OECD in Discrimination and Non Discrimination in Foreign Direct Investment Mining Issues at page 3. 135 Ibid. 136 Mercer International Inc. v The Republic of Canada, ICSID Case No. ARB(AF)/12/3

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comparators; and (iii) received treatment less favorable than that accorded to those

identified investors or investments.137 The burden of proof lies on the Claimant and it

must establish more than a prima facie case.138

Treatment: Respondent does not dispute that the treatment at issue under Article 7 is the

assessment of “discriminatory treatment” by the Respondent against the Claimant.

(i) National treatment

49 Like circumstances: As required in Article 4, a Party must accord another Party’s

investors treatment no less favorable than it accords its own investors that are “in like

circumstances.”139 Such a provision was interpreted by the Tribunal in Pope vs.

Canada,140 where it held that it prohibits treatment that discriminates on the basis of the

foreign investment’s nationality.141 In Methanex vs. USA,142 the Claimant alleged

discrimination based on nationality by Califonia. The Tribunal held that in order to

sustain its claim, Claimant must demonstrate, cumulatively, that California intended to

favor domestic investors by discriminating against foreign investor and that Methanex

and the domestic courts investor supposedly being favored were in like circumstances.143

This was also the position of the Tribunal in Pope.144

50 Drawing from the facts, there were no national companies in Kronos with expertise to

mine Lindoro.145 Claimant was the only company extracting Lindoro from Respondent’s

territory.146 In the absence of a national company that can be used for comparison with

the treatment accorded to Claimant, this provision serves no purpose in the present case.

The passing of the Decree147 was also non-discriminatory. Respondent sought to give

effect to statutory provisions of KEA on environment and human health.148

137 Ibid, par. 7.6 138 Ibid, par. 7.13 139 Article 4, TK-BIT, Facts [1125] 1 140 Pope & Talbot Inc v The Government of Canada, UNCITRAL 141 Ibid, par. 79 142 Methanex Corporation vs United States of America, UNCITRAL 143 Supra, par 12 144 Supra 8 145 Uncotested Facts, [890] 4 146 Uncontested Facts [930] 11 147 Presidential Decree, Exhibit no. 5 148 Exhibit 5. Facts [1430]

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(ii) Most favored nation treatment

51 Respondent submits further pursuant to Article 5 of the TK-BIT that it afforded Claimant

no less favorable treatment than it accords, in like circumstances to investors of a non-

Party to the TK-BIT. In Parkerings vs. Lithuania,149 in order to determine if there is

discrimination in violation of the standard of fair and equitable treatment, which also

applies to national treatment standard and most favored nation treatment,150 Claimant has

to make a comparison with another investor in a similar position (like circumstances).

Before 7th September 2016, when the Decree was passed,151 Claimant was the sole

company mining Lindoro. Claimant has failed to establish the existence of a foreign

investor who was accorded a different treatment from that which he received. In

Parkerings, this ground was dismissed as Claimant failed to show that there existed a

foreign investor who received more favorable treatment than it was accorded.152

52 Claimant’s claims lack merit and are founded on the proposition that, whenever a State

takes action to protect the public health or environment, the State is responsible for

damages to every business enterprise claiming a resultant setback in its fortunes. That is

if the enterprise can convince an Arbitral Tribunal that the action could have been

handled differently.153 Not only has Claimant failed to bear its burden of proof, but has

also failed to meet its standard of proof. This Tribunal should therefore dismiss

Claimant’s claim.

iv. That Claimant is not entitled to compensation

53 In Methanex Corporation,154 the Tribunal held that as a matter of general international

law, a non-discriminatory regulation for a public purpose, which is enacted in accordance

with due process and, which affects, inter alia, a foreign investor or investment is not

deemed expropriatory and compensatory.155 Respondent’s passing KEA which was

149 ICSID Case No. ARB/05/8 150 Ibid, par 367 151 Uncontested Facts [1005] 23 ; Facts [180] 13 152 153 Statement of Defense of Respondent United States of America in Methanex Corporation vs USA, par 2. 154 155 Supra 10 , Final Award, Part IV, Chapter D, par. 7

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effected through the Decree was done, for a public purpose,156 in accordance with due

process of the law,157 and in a non-discriminatory manner.158 Claimant is therefore not

entitled to compensation.

C. RESPONDENT HAS ACTED WITHIN THE MINIMUM STANDARD OF

TREATMENT AS PER ARTICLE 6 OF THE TK- BIT

54 Article 6(1) of the TK-BIT provides that a covered investment shall be accorded

treatment in accordance with the Customary International Law Minimum Standard of

Treatment of aliens, including Fair and Equitable Treatment and Full Protection and

Security by the hosting contracting party.159 This standard has its historical origins in the

OECD Draft Convention on the Protection of Foreign Property of 1967.160

55 In Waste Management vs. Mexico,161 the Tribunal held that jurisprudence developed

overtime and Customary International Law on FET standards have evolved in Investment

law treaties to include; (a) Prohibition of denial of justice/ lack of due process of the

law;162 (b) Prohibition of arbitrary, unreasonable or discriminatory measures; (c)

Irrelevance of a breach of a different treaty and (d) Lack of transparency and good faith.

The same elements were considered in Telsim vs. Kazakhstan, 163 of which the Tribunal

in Spyridon vs. Romania, relied on them.164

156 Facts [430] 18 157 Uncontested Facts [970] 17 158 Uncontested Facts [930] 11 159 Article 6(1) of the Ticadia Kronos BIT; 1150 160 Rudolf Dolzer & Christoph Schreuer, Principles of International Investment Law (2nd edition, OUP 2008), p.

135.

161 Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/98/2. 162 Azinian v. United Mexican States ICSID Case No. ARB(AF)/97/2, Award, November 1, 1999, 39 I.L.M., ¶¶102-

103 163 Rumeli and Telsim v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, ¶605 164 ADC vs. Hungary, par. 214

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56 In Myers vs. Canada,165 the Tribunal noted that a breach occurs when it is shown that an

investor has been treated in “such an unjust or arbitrary manner that the treatment rises

to the level that is unacceptable from the international perspective”.166

i. Burden Of Proof

57 As was in Siemens vs. Argentina,167 the burden rests on Claimant to prove that, at the

time the BIT was concluded, the minimum standard of treatment is different than the one

set out.168 In interpreting the language of the FET clause, Article 31(1) of the Vienna

Convention on the Law of Treaties provides that the Tribunal must first look to the

ordinary meaning of the treaty language.169

58 In MTD vs. Chile,170 the Tribunal held that “the terms ‘fair’ and ‘equitable’ [...] mean

‘just’, ‘even-handed’, ‘unbiased’, ‘legitimate’ in their ordinary meaning and can only be

inferred to mean that the standard is breached only by treatment so unjust and arbitrary, it

becomes internationally unacceptable.171 Moreover, in Micula vs. Romania,172 the

Tribunal set that “the fair and equitable treatment standard is not a laundry list of

potential acts of misconduct.”173 Thus, the burden falls on the Claimant to show not only

that one element of fair and equitable treatment may have been violated, but that the

standard has been breached as a whole when looking at all the facts and elements. 174

Claimant here has failed to establish that Respondent breached any of the strands of the

FET standard.

165 S.D. Myers Inc. v. Government of Canada, UNCITRAL, Parital Award (13 November 2000) ¶263. 166 Ibid 167 Siemens A.G. v Argentina, ICSID Case No. ARB/02/8, Decision on Jurisdiction, 3 August 2004, ¶295.

168 L.F.H. Neer and Pauline Neer (U.S.A) v. United Mexican States (1926) p.62, ¶5. . 169 Vienna Convention on the Law of Treaties Art. 3(1). 170 MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May

2004) ¶113. 171 S.D. Myers Inc. v. Government of Canada, UNCITRAL, Parital Award (13 November 2000) ¶263.

172Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Award (11 December 2013),

¶517 173 Ibid 174 Ioana Tudor, The Fair and Equitable Treatment Standard in the Law of Foreign Investment (2008). Page138.

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ii. Respondent Has Met the Investor’s Reasonable and

Legitimate Expectations

59 In P.L.C vs. Argentina,175 the Tribunal held that the FET clause is to protect the

reasonable expectations of the investor at the time it made the investment and that such

expectations be legitimate.176 The Tribunal defined legitimate expectations in Parkerings

vs. Lithuania,177 ‘must be that which is evaluated objectively: that an Investor’s

expectations are legitimate where they are reasonably based on specific representations

made at the time of investment.178

60 The Tribunal in Bayindir vs. Pakistan, 179 held that all circumstances, including the

political, socioeconomic, cultural and historical conditions prevailing in the host State

should be considered in assessing legitimacy and reasonableness of expectations.180

61 In the present case, Kronos is an underdeveloped country.181 The political circumstances

have also changed with The Nationalist Party taking office after 60 years under the

Liberal Party’s rule,182 wining majority of the seats in the house. The new president, Mr.

Bazings has a strong environmentalist and nationalist political agenda promising to

significantly stimulate the national industry.183 Following these, The House passed the

KEA that was mostly based on obligations to miners to protect the waters of the regions

where the extraction took place from toxic mine waste.184 Following the prevailing

175 National Grid P.L.C. v. Argentina Republic, UNCITRAL, Award (3 November 2008). , ¶173

176 Ibid; also Tecnicas Medioambientes S.A. v The United Mexican States, 43 I.L.M. 133, Award, 29 May 2003

¶340; LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case

No. ARB/02/1, Decision on Liability (3 October2006), ¶130.

177 Parkerings- Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, ¶ 331.

178 Saluka Investments BV (The Netherlands) v. The Czech Republic, UNCITRAL/PCA, Partial Award (17 March

2006). ¶304; see also Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador,

ICSID Case No. ARB/04/19, Award (18 August 2008), ¶340.

179Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29,

Award (27 August 2009) ¶185 &¶ 179 . 180 Ibid ; also, Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No.

ARB/04/19, Award (18 August 2008) ¶¶339–40; also Saluka Investments B.V. v. Czech Republic, UNCITRAL,

Partial Award (17 March 2006) ¶304. 181 Uncontested facts[875], 2 182 Uncontested facts[945],14 183 Uncontested facts[945],15 184 Uncontested facts[955],16

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political circumstances, it is neither legitimate nor reasonable for the Claimant to expect

to continue operating their mining activity disregarding the new political agenda.185

62 Even if the Tribunal considers Claimant’s expectations as reasonable and legitimate, it

could also adopt the decision in Total vs. Argentina,186 providing that the host State’s

right to regulate domestic matters in the public interest should be considered.”187 In

Saluka vs. Czech Republic,188 the Tribunal observed that “No investor may reasonably

expect that the circumstances prevailing at the time the investment is made remain totally

unchanged. In order to determine whether frustration of the foreign investor’s

expectations was justified and reasonable, the host State’s legitimate right to regulate

domestic matters in the public interest must be taken into consideration.”189

63 The Respondent submits that it did not violate the Claimant’s legitimate expectations but

was acting within its mandate by taking measures necessary to protect human, animal and

plant life and health and also for the conservation of living and non-living exhaustible

natural resources.190

i. Respondent Has Acted in Good Faith

64 Actions that constitute bad faith were listed by the Tribunal in Frontier petroleum vs.

Czech Republic,191 to include: (a) the use of legal instruments for purposes other than

those for which they were created; (b) a conspiracy by state organs to inflict damage

upon or to defeat the investment; (c) the termination of the investment for reasons other

than the one put forth by the government; and (d) expulsion of the an investment based

on local favoritism.192

185 Uncontested facts[985],20; [995],22; Exhibit 4[1390] 186 Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability (27 December 2010) ¶12 187 Ibid; also Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award (16

December 2002) ¶112; Saluka Investments B.V. v. Czech Republic, UNCITRAL, Partial Award (17 March 2006)

¶¶305–06; also Arif, ¶537, citing Saluka, ¶305.(2014); also Continental, ¶258. .(2014) 188 Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award, (17 March 2006) ¶ 305.

189 Ibid 190 Article 10 TK-BIT [1215] 191 Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Final Award (12 November 2010) ¶300. 192 Ibid

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65 Respondent’s action was to enact legislation in good faith for the purpose of addressing a

health crisis.193 Claimant has not discharged its burden of proof obligation that the

Respondent acted in bad faith.

ii. Respondent Has Acted with Transparency

66 In Tecmed vs. Mexico,194 the Tribunal found as a requirement of transparency under

FET, the host State is to act in a consistent manner, free from ambiguity and totally

transparent.”195 However, in Saluka vs. Czech Republic,196 the Tribunal turned away

from this view, stating that “if their terms were to be taken too literally, they would

impose upon host States’ obligations which would be inappropriate and unrealistic.”197 In

this vein, the 2012 UNCTAD found that the notions of transparency and consistency

“may not be said to have materialized into the content of fair and equitable treatment with

a sufficient degree of support.” 198 For the above reasons, the Tribunal should not read in

transparency as a stand-alone element of fair and equitable treatment.

67 Regardless, Respondent’s actions meet the standard for transparency provided for in

Metalclad vs. Mexico,199 as the idea that all relevant legal requirements for the purpose

of initiating, completing and successfully operating laws relating to the Agreement

should be capable of being readily known to all affected investors.200

68 In the present case, KEA passed after Parliamentary hearing.201 Therefore, Respondent’s

actions were transparent.

193 Uncontested facts[985], 20; [995-1000], 22; Exhibit 4[1390-1415] 194 Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, (29

May 2003) ¶154 195 Ibid 196 Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award, (17 March 2006) ¶304 197 Ibid 198 UNCTAD Series on Issues in International Investment Agreements II (Fair and Equitable Treatment)

p.63..(2012) 199 Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (30 August 2000),

¶76 200 Ibid 201 Uncontested fact[960], 16

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iii. Respondent Has Not Acted In a Discriminatory, or Arbitrary Fashion

69 In Azurix vs. Argentina,202 the Tribunal understood that: “in its ordinary meaning,

arbitrary means derived from mere opinion, “capricious”, “unrestrained”, “despotic”. The

Tribunal found that the ordinary meaning of arbitrary emphasizes the element of willful

disregard of the law.”203 In the present case, Respondent acted in accordance with the

provisions of Article 6 on minimum standards, Article 7 of on lawful expropriation and

Article10 to protect human life and environment.204 KEA also provides for immediate

withdrawal of environmental licenses with the forfeiture of facilities as a penalty for

environmental damage.205

70 In Saluka vs. Czech Republic,206 non-discrimination “requires a rational justification of

any differential treatment of a foreign investor.”207 Discrimination is most frequently on

based on nationality.”208 Respondent did not act in a discriminatory fashion but was

exercising its obligation under the BIT to adopt measures necessary to protect human life

and environment.209

iv. Respondent Has Accorded Claimant Due Process of Law

71 Furthermore, it was held in Australia vs. India,210 that the denial of due process is a high

standard, only met where there is “particularly serious shortcoming and egregious

conduct that shocks, or at least surprises, a sense of judicial propriety.”211 UNCTAD

provides that due process and denial of justice may include: (a) Denial of access to justice

and the refusal of courts to decide; (b) Unreasonable delay in proceedings; (c) Lack of a

court’s independence from the legislative and the executive branches of the State; (d)

202 Azurix Corp. v. Argentina, ICSID Case No. ARB/01/1, Award (23 June, 2006) ¶392. 203 Ibid; Aslo Elettronica Sicula S.p.A. (ELSI) (United States of America v. Italy), International Court of Justice,

Judgment (20 July 1989) ¶15.

204 Articles 6,7,8 of the TK-BIT 205Articles 6(Minimum Standard of Treatment) [1155], 7(Expropriation)[1160] and 10(General Exceptions)[1215]

of the TK-BIT 206 Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award, (17 March 2006) , ¶460 207 Ibid 208 Christoph Schreuer, Fair and Equitable Standard (FET): Interaction with Other Standards, 4 Transnational

Dispute management 17 (2007) p.193 209 Article 10 of the TK-BIT[1215] 210 White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award (30 November

2011)¶10.4.7. 211 Ibid

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Failure to execute final judgments or arbitral awards; (e) Corruption of a judge; (f)

Discrimination against the foreign litigant; (g) Breach of fundamental due process

guarantees, such as a failure to give notice of the proceedings and failure to provide an

opportunity to be heard.212 The Respondent submits that no undue process can be proved

by the Claimant since no denial to justice or any of the aforementioned conditions in the

Australia case has been demonstrated.

212 UNCTAD Series on Issues in International Investment Agreements II (Fair and Equitable Treatment)(2012),

p.81.

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1.7. PRAYERS

2. Declare that this Tribunal lacks jurisdiction on the grounds that Claimant is not an

investor under the BIT.

3. Declare that Claimant’s requests are not admissible.

4. Declare that Claimant’s claims be entirely rejected.

5. Order Claimant to pay USD 150,000,000 for the damage arising out of its operations in

Kronos.