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TRANSCRIPT
TEAM HSU
FOREIGN DIRECT INVESTMENT MOOT COMPETITION
Boston, 2–5 November 2017
IN THE MATTER OF AN ARBITRATION UNDER THE 2012 ARBITRATION
RULES OF THE PERMANENT COURT OF ARBITRATION
- between -
ATTON BORO LIMITED
Claimant
- and -
THE REPUBLIC OF MERCURIA
Respondent
MEMORIAL FOR CLAIMANT
PCA Case No. 2016-74
Registry
The Permanent Court of Arbitration
ii
TABLE OF CONTENTS
TABLE OF CONTENTS .................................................................................................................. II
INDEX OF ABBREVIATIONS .................................................................................................... XVI
STATEMENT OF FACTS ................................................................................................................ 1
STATEMENT OF ARGUMENTS ................................................................................................... 4
PART ONE: JURISDICTION AND ADMISSIBILITY ........................................................................ 5
THE TRIBUNAL HAS JURISDICTION OVER CLAIMANT’S CLAIMS ............................................. 5
A. CLAIMANT’S OPERATION IN MERCURIA CONSTITUTES AN INVESTMENT UNDER THE BIT ... 5
1. Claimant’s assets individually qualify as protected investments under Article 1(1) BIT 5
2. Even considered collectively, Claimant’s assets in Mercuria fall within the ordinary
meaning of ‘investment’ ................................................................................................................. 7
a) The LTA is a core element of Atton Boro’s overall investment operation ........................ 7
b) The Award crystallizes Claimant’s rights under the LTA ............................................... 11
B. CLAIMANT’S CLAIM UNDER ARTICLE 3(3) BIT FALLS WITHIN THE SCOPE OF THIS
TRIBUNAL’S JURISDICTION .............................................................................................................. 12
1. Mercuria undertook to “observe” contractual obligations pursuant to Article 3(3)
BIT 12
2. Mercuria, acting through NHA, “entered into” the LTA with Atton Boro .................... 13
a) Article 3(3) encompasses entities, such as NHA, whose acts are attributable to
Respondent .................................................................................................................................... 14
b) The conclusion of the LTA is attributed to Respondent under the ILC Articles ........... 15
3. LTA’s dispute resolution clause does not preclude this Tribunal from exercising
jurisdiction over the claims arising thereof ................................................................................ 19
a) The LTA’s forum selection clause does not amount to a waiver of the right to arbitrate
under the Treaty ........................................................................................................................... 19
b) The present claims are admissible since Claimant already resorted to the contractually
agreed forum ................................................................................................................................. 20
MERCURIA CANNOT DENY THE BENEFITS OF THE BIT TO CLAIMANT WHOSE CLAIMS ARE
THEREFORE ADMISSIBLE .................................................................................................................. 20
A. RESPONDENT’S ATTEMPT TO DENY THE BENEFITS TO CLAIMANT LEAVES THE PRESENT
CLAIMS UNAFFECTED ........................................................................................................................ 21
1. Denial of benefits can only apply prospectively ................................................................. 21
2. Respondent is not entitled to deny the benefits of the BIT to Claimant after the initiation
of the arbitration .......................................................................................................................... 22
iii
B. IN ANY EVENT, THE SUBSTANTIAL REQUIREMENTS PROVIDED UNDER ARTICLE 2(1) BIT ARE
NOT MET IN THE PRESENT CASE ....................................................................................................... 23
1. Atton Boro has substantial business activities in Basheera .............................................. 23
2. Atton Boro is not owned and controlled by nationals of a third State............................. 25
3. In any event, Respondent manifestly failed to discharge its burden of proof ................. 26
PART TWO: MERITS ........................................................................................................................... 28
RESPONDENT BREACHED ARTICLE 3(3) BIT BY FAILING TO OBSERVE THE OBLIGATION IT
ENTERED INTO UNDER THE LTA ...................................................................................................... 28
A. NHA’S TERMINATION OF THE LTA IS ATTRIBUTABLE TO MERCURIA ................................. 28
1. NHA is a State organ ............................................................................................................ 28
2. In any event, NHA exercised governmental authority in terminating the LTA ............. 29
3. NHA acted on the instructions of Mercuria when terminating the LTA ........................ 29
B. MERCURIA FAILED TO OBSERVE ITS OBLIGATIONS TOWARDS CLAIMANT UNDER THE LTA
IN VIOLATION OF ARTICLE 3(3) BIT ................................................................................................ 30
1. NHA breached its municipal law obligations under the LTA .......................................... 30
a) The Tribunal should accept the Award’s finding regarding the NHA’s wrongful
termination .................................................................................................................................... 30
b) In any event, NHA never adduced any evidence of Claimant’s unsatisfactory
performance under Clause 6 LTA .............................................................................................. 32
2. The contractual breach of the LTA by NHA amounts to a violation of Article 3(3) by
Respondent .................................................................................................................................... 32
MERCURIA BREACHED ITS OBLIGATION TO ACCORD FAIR AND EQUITABLE TREATMENT TO
INVESTORS BY DENYING JUSTICE TO CLAIMANT IN THE PROCEEDINGS....................................... 35
A. MERCURIA BEARS THE OBLIGATION TO TREAT INVESTORS WITH DUE PROCESS ................ 35
B. MERCURIA UNJUSTIFIABLY FAILED TO TREAT CLAIMANT WITH DUE PROCESS .................. 37
1. The Court failed to respect due process in the Proceedings ............................................. 37
a) The 8-year delay in enforcing the Award amounts to a denial of justice ........................ 37
b) Claimant was denied its right to an impartial justice ....................................................... 41
2. Claimant was not required to exhaust local remedies....................................................... 42
MERCURIA BREACHED THE FET STANDARD BY ENACTING THE LAW AND GRANTING THE
LICENSE TO HG-PHARMA IN VIOLATION OF ARTICLE 3(2) BIT ....................................................... 42
A. MERCURIA ALTERED CLAIMANT’S IP RIGHTS IN A NON-TRANSPARENT MANNER DESPITE
SPECIFIC ASSURANCES GIVEN TO THE CONTRARY .......................................................................... 43
1. Mercuria frustrated Claimant’s legitimate expectations by making specific
representations regarding its IP regime ..................................................................................... 43
2. Mercuria acted in a non-predictable and non-transparent manner in changings its IP
regime ............................................................................................................................................ 45
iv
3. Mercuria’s right to regulate cannot justify the disproportional effects of the changes to
its IP regime .................................................................................................................................. 47
B. MERCURIA BREACHED FET STANDARD BY VIOLATING ITS INTERNATIONAL OBLIGATIONS
ON IP RIGHTS ..................................................................................................................................... 48
1. Mercuria must respect the international standard of conduct set by TRIPS ................. 48
2. Mercuria violated the FET standard by according a treatment less-favorable than that
under TRIPS in granting the License ......................................................................................... 49
PRAYER FOR RELIEF .................................................................................................................. 52
v
INDEX OF AUTHORITIES
ARBITRAL DECISIONS
Alpha
Al Tamimi
Alpha Projektholding GmbH v Ukraine – Award, 8 November 2010
Adel A Hamadi Al Tamimi v Oman – Award, 3 November 2015
Alps Finance
Alps Finance v Slovakia – Award, 5 March 2011
Amto Limited Liability Company Amto v Ukraine – Award, 26 March 2008
Anatolie Anatolie Stati et al. v Kazakhstan – Award, 19 December 2013
Anglia Anglia Auto Accessories Ltd. v Czech Republic – Award, 10 March
2017
ATA ATA Construction, Industrial and Trading Company v Jordan –
Award, 18 May 2010
Awdi
AWG
Mr. Hassan Awdi, Enterprise Business Consultants, Inc. and Alfa El
Corporation v Romania – Award, 2 March 2015
AWG Group Ltd. v Argentina – Decision on Liability, 30 July 2010
Bayindir Award
Bayindir Jurisdiction
Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v Pakistan – Award,
27 August 2009
Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v Pakistan – Decision
on Jurisdiction, 14 November 2005
BG Group
Binder
BG Group Plc. v Argentina – Award, 24 December 2007
Binder v Czech Republic – Award, 15 July 2011
vi
BIVAC Bureau Veritas, Inspection, Valuation, Assessment and Control,
BIVAC B.V. v Paraguay – Decision on Jurisdiction, 29 May 2009
Bosh
Bosca
Bullis
Burlington
Chattin
Chevron I
Bosh International, Inc and B&P Ltd Foreign Investments Enterprise
v Ukraine – Award, 25 October 2012
Luigiterzo Bosca v Lithuania – Award, 17 May 2013
Bullis case (USA v Venezuela) – 1903-1905
Burlington Resources Inc. v Ecuador – Decision on Jurisdiction, 2
June 2010
B.E. Chattin (Mexico v USA) – 23 July 1927
Chevron Corporation and Texaco Petroleum Company v Ecuador –
Interim Award, 1 December 2008
Chevron II
Chevron Corporation and Texaco Petroleum Company v Ecuador –
Partial Award, 30 March 2010
CMS Award
CMS Annulment
CMS Gas Transmission Company v Argentina – Award, 12 May
2005
CMS Gas Transmission Company v Argentina – Decision on
Annulment, 25 September 2007
Convial Callao
Crystallex
Convial Callao S.A. and CCI - Compañía de Concesiones de
Infraestructura S.A. v Peru – Award, 21 May 2013
Crystallex International Corporation v Venezuela – Award, 4 April
2016
vii
Desert Line
Deutsche Bank
Desert Line Projects LLC v Yemen – Award, 6 February 2008
Deutsche Bank AG v Sri Lanka – Award, 31 October 2012
Duke Energy
El Oro Mining
Duke Energy Electroquil Partners & Electroquil S.A. v Ecuador –
Award, 18 August 2008
El Oro Mining and Railway Company (Great Britain) Mexico – 18
June 1931
Eli Lilly
Enron
Eureko
Fedax
Eli Lilly and Company v Canada – Award, 16 March 2017
Enron Corporation and Ponderosa Assets, L.P. v Argentina – Award,
22 May 2007
Eureko B.V. v Poland – Partial Award, 19 August 2005
Fedax N.V. v Venezuela – Decision on Jurisdiction, 11 July 1997
Flemingo
Frontier
Flemingo DutyFree Shop Private Limited v Poland – Award, 12
November 2016
Frontier Petroleum Services v Czech Republic – Award, 12
November 2010
GAMI GAMI Investments, Inc. v Mexico – Award, 15 November 2004
Garanti Koza Garanti Koza LLP v Turkmenistan – Award, 19 December 2016
Gavazzi Marco Gavazzi and Stefano Gavazzi v Romania – Decision on
Jurisdiction/Admissibility/Liability, 21 April 2015
viii
Generation Ukraine Generation Ukraine Inc. v Ukraine – Award, 16 September 2003
Hamester
Helnan Award
Gustav F W Hamester GmbH & Co KG v Ghana – Award, 19 June
2010
Helnan International Hotels A:S v Egypt – Award, 7 June 2008
Helnan Jurisdiction Helnan International Hotels A:S v Egypt – Decision on Jurisdiction,
17 October 2006
Jan de Nul Jan de Nul N.V. Dredging International N.V. v Egypt – Award, 6
November 2008
Kardassopoulos
Ioannis Kardassopoulos v Georgia – Award, 3 March 2010
Lemire Joseph C. Lemire v Ukraine – Decision on Jurisdiction/Liability, 14
January 2010
L.E.S.I
Liman
Consortium Groupement L.E.S.I.- DIPENTA v Algeria – Award, 10
January 2005
Liman Caspian Oil B.V. and NCL Dutch Investment B.V. (the
Netherlands) v Kazakhstan – Award, 22 June 2010
Loewen Award
Loewen Jurisdiction
Loewen Group, Inc. and Raymond L. Loewen v USA – Award, 26
June 2003
Loewen Group, Inc. and Raymond L. Loewen v USA – Decision on
Jurisdiction, 5 January 2001
Mamidoil Mamidoil Jetoil Greek Petroleum Products Societe S.A. v Albania –
Award, 30 March 2015
ix
M.C.I
Metalclad
Micula
M.C.I. Power Group L.C. and New Turbine, Inc. v Ecuador – Award,
31 July 2007
Metalclad Corp. v Mexico – Award, 30 August 2000
Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill
S.R.L. and S.C. Multipack S.R.L. v Romania – Award, 11 December
2013
MTD
Murphy
MTD Equity Sdn. Bhd. and MTD Chile S.A. v Chile – Award, 25 May
2004
Murphy Exploration and Production Company International v
Ecuador – Partial Final Award, 6 May 2016
Mytilineos Mytilineos Holdings SA v The State Union of Serbia & Montenegro
and Serbia – Partial Award on Jurisdiction, 8 September 2006
National Grid
Noble Ventures
National Grid plc v Argentina – Award, 3 November 2008
Noble Ventures v Romania – Award, 12 October 2005
OI Group
OI European Group B.V. v Venezuela – Award, 10 March 2015
Oostergetel
Oxus
Jan Oostergetel v Slovak Republic – Award, 23 April 2012
Oxus Gold plc v Uzbekistan – Award, 17 December 2015
Pac Rim Pac Rim Cayman LLC. v El Salvador – Decision on Jurisdiction, 1
June 2012
Pantechniki
Pantechniki SA contractors v Albania – Award, 30 July 2009
x
Petrobart
Petrobart Limited v Kyrgyztan– Award, 29 March 2005
Pey Casado
Victor Pey Casado and President Allende Foundation v Chile –
Award, 8 May 2008
Philip Morris Award
Philip Morris v Uruguay – Award, 8 July 2016
Philip Morris Jurisdiction
Philip Morris v Uruguay – Decision on Jurisdiction, 2 July 2013
Plama Plama Consortium Limited v Bulgaria – Decision on Jurisdiction, 8
February 2005
Quiborax
Quiborax v Bolivia – Decision on Jurisdiction, 27 September 2012
R.F.C.C.
Consortium R.F.C.C. v Morocco – Decision on Jurisdiction, 16 July
2001
Romak
Romak v Uzbekistan – Award, 26 November 2009
Rumeli
Rumeli Telekom v Kazakhstan – Award, 29 July 2008
Rusoro
Saipem
Rusoro Mining Ltd. v Venezuela – Award, 22 August 2016
Saipem v Bangladesh – Decision on Jurisdiction, 21 March 2007
Salini
Salini Costruttori S.p.A v Morocco – Decision on Jurisdiction, 31
July 2001
Saluka Saluka Investments BV v Czech Republic – Partial Award, 17 March
2006
xi
Sempra
SGS/Paraguay
SGS/Pakistan
SGS/Philippines
Sempra Energy International v Argentina – Award, 28 September
2007
SGS Société Générale de Surveillance S.A. v Paraguay – Decision on
Jurisdiction, 12 February 2010
SGS Société Générale de Surveillance S.A. v Pakistan – Decision on
Jurisdiction, 6 August 2003
SGS Société Générale de Surveillance S.A. v Philippines – Decision
on Jurisdiction, 19 January 2009
Smith
Swisslion
Tecmed
Walter Fletcher Smith Claim (Cuba v USA) – 2 May 1929
Swisslion DOO Skopje v Macedonia – Award, 6 July 2012
Técnicas Medioambientales Tecmed, S.A. v Mexico – Award, 29 May
2003
Teinver
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos
del Sur S.A. v Argentina – Decision on Jurisdiction, 21 December
2012
Thunderbird
International Thunderbird Gaming Corporation v Mexico – Award,
26 January 2006
Toto Award
Toto Jurisdiction
Toto Costruzioni Generali S.p.A. v Lebanon – Award, 7 June 2012
Toto Costruzioni Generali S.p.A. v Lebanon – Decision on
Jurisdiction, 11 September 2009
Urbaser Urbaser S.A. v Argentina – Award, December 8, 2016
xii
Vestey Vestey Group Ltd v Venezuela – Award, 15 April 2016
Veteran
Vivendi I Annulment
Veteran Petroleum Limited (Cyprus) v Russia – Interim Award on
Jurisdiction/Admissibility, 30 November 2009
Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v
Argentina – Decision on Annulment, 3 July 2002
Vivendi II Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v
Argentina – Award, 20 August 2007
Waste Management Waste Management Inc. v Mexico – Award, 30 April 2004
White Industries White Industries v India – Award, 30 November 2011
Yukos Yukos Universal Limited (Isle of Man) v Russia – Interim Award on
Jurisdiction/Admissibility, 30 November 2009
INTERNATIONAL COURTS DECISIONS
ECHR, Kin-Stib ECHR – Kin-Stib and Majkić v Serbia, Second
Section, Judgement, 4 October 2010
ELSI
Immunity/Rapporteur
ICJ – Elettronica Sicula S.p.A. (USA v Italy), 20 July
1989
ICJ – Difference Relating to Immunity from Legal
Process of a Special Rapporteur of the Commission
on Human Rights - Advisory Opinion, 29 Avril 1999
xiii
UN Review
Oil Platforms
WTO/India
ICJ – Application for Review of Judgment No J 58 of
the United Nations Administrative Tribunal -
Advisory Opinion, 12 July 1973
ICJ – Case concerning oil platforms – Separate
Opinion of Judge Higgins (Islamic Republic of Iran v
USA), 6 November 2003
WTO Panel Report, India – Patent protection for
pharmaceuticals and agricultural chemical products,
WT/DS50/R, (5 September 1997)
WTO/US WTO Panel Report, US – Sections 301-310 of the
Trade Act of 1974, WT/DS152/R (22 December
1999)
TEXTBOOKS
Crawford Crawford, Pellet and Olleson, The Law of
International Responsibility, 2010
Dolzer/Schreuer Dolzer, Schreuer, Principles of International
Investment law, 2012
Dolzer/Stevens Dolzer, Stevens, Bilateral Investment Treaties,
1995
Douglas Douglas - The International Law of Investment
Claims, 2009
Freeman Freeman - The International Responsibility of
States for Denial of Justice, 1938
Grotius Grotius - De Jure ac Pacis, 1626
McLachlan/Shore/Weiniger McLachlan, Shore, Weiniger, International
Investment Arbitration, substantive principles,
2017
xiv
Newcombe/Paradell Newcombe, Paradell - Law and Practice of
Investment Treaties: Standards of Treatment, 2009
Paulsson Paulsson, Denial of Justice in International Law,
2005
Paparinski Paparinski, The International Minimum Standard
and FET, 2013
Schreuer Schreuer, Interaction of International Tribunals
and Domestic Courts in Investment Law, 2011
Schreuer/Malintoppi/Reinisch/Sinclair Schreuer, Malintoppi, Reinisch, Sinclair - The
ICSID Convention: A Commentary, 2009
ARTICLES
Bishop/Stevens Bishop, Stevens - Safeguarding the Fair Conduct of
Proceedings in International Arbitration, the Coming
of a New Age?, 2013
Correa Correa, Bilateral Investment Agreements: Protection
of IPRs, 2004
Crawford-Treaty/Contract Crawford, Treaty and Contract in Investment
Arbitration, TDM, 2009
Gadelshina Gadelshina - Burden of Proof Under the ‘Denial-of-
Benefits’ Clause of the Energy Charter Treaty: Actori
Incumbit Onus Probandi?', Journal of International
Arbitration, Kluwer Law International 2012
Gaillard Gaillard, Treaty-Based Jurisdiction: Broad Dispute
Resolution Clauses, New York Law Journal, 2005
Gallagher/Shan Gallagher, Shan, Chinese Investment Treaties -
Policies and Practice, Oxford International
Arbitration Series, 2009
Isotalo Isotalo, The role of legitimate expectations,
Schreuer - FET Schreuer - Fair and Equitable Treatment in Arbitral
Practice, The Journal of World Investment & Trade,
2005
xv
Schreuer/Kriebaum Schreuer, Kriebaum - At What Time Must Legitimate
Expectations Exist?, in Werner and Ali, 2009
Schreuer-Vivendi I Schreuer, Investment Treaty Arbitration and
Jurisdiction over Contract Claims – the Vivendi I
Case Considered
Schreuer–Umbrella Schreuer, Travelling the BIT Route:of Waiting
Periods, Umbrella clauses and Forks in the Road,
2004
Wälde Wälde, Investment Arbitration under the Energy
Charter Treaty: An Overview of Selected Key Issues
based on Recent Litigation Experiencein Kröll and
Horn, Arbitrating Foreign Investment Disputes, 2004
Van Aaken Van Aaken - Fragmentation of International Law:
The Case of International Investment Protection,
Finnish Yearbook of International Law, 2008
OTHER
CAFTA-DR Hearings The Implementation of DR-CAFTA hearings before
the H. Comm. on Ways and Means, 2005
Doha TRIPS Doha Declaration on the TRIPS Agreement and
public health, 2001
ILC Articles on Diplomatic
Protection
ILC Articles on Diplomatic Protection, 2006
Unctad/FET FET - Unctad Series on Issues in International
Investment, 2012
WHO Remuneration WHO - Remuneration guidelines for non-voluntary
use of patent on medical technologies, 2005
xvi
INDEX OF ABBREVIATIONS
¶/¶¶ Paragraph(s)
BIT Agreement Between the Republic of Mercuria and the Kingdom of
Basheera for the Promotion and Reciprocal Protection of
Investments, 1998
Facts Statement of Uncontested Facts
FDC Fixed-dose Combination
ICSID International Centre for Settlement of Investment Disputes
ILC Articles ILC Articles on State Responsibility for Internationally Wrongful
Acts
IP Intellectual Property
L Line
Law Law No. 8458/09
LTA Long-Term Agreement
New York
Convention
The New York Convention on the Recognition and Enforcement
NHA National Health Authority
Notice Notice of Arbitration
P.(PP.) Page(s)
PCA Permanent Court of Arbitration
PO Procedural Order
R&D Research and Development
Response Response to the Notice
TRIPS Agreement on Trade-Related Aspects of Intellectual Property
Rights, 1994
VCLT Vienna Convention on the Law of Treaties, 1969
WHO World Health Organization
WTO World Trade Organization
1
STATEMENT OF FACTS
1. “One ungrateful man does an injury to all who stand in need of aid.”1 This case concerns
the Republic of Mercuria’s short-sighted measures which have crippled a successful
pharmaceutical investor’s ability to continue its long track-record of life-saving needy
people in the developing world with innovative and sophisticated drugs at discounted
prices.
2. Atton Boro Limited (“Atton Boro” or “Claimant”) is a leading discovery and
development pharmaceutical company 2 incorporated in the Kingdom of Basheera
(“Basheera”),3 who holds patents and produces cutting-edge medicines throughout
South America and Africa,4 as part of the Atton Boro Group.
3. In 1998, Atton Boro built a manufacturing base to produce medicines in the Republic
of Mercuria (“Mercuria” or “Respondent”), where it holds several patents.5
4. In 2004, after successfully working hand in hand with Mercuria’s National Health
Authority (“NHA”) to treat underprivileged patients against fatal diseases, such as
HIV/AIDS6, at affordable rates, Atton Boro was awarded a new long-term agreement
(“LTA”) with NHA,7 through public tender, to help tackle greyscale, a disabling disease
for which no suitable treatment existed at the time.8
5. Indeed, after years dedicated to research and experimentation, Atton Boro had
successfully synthesized Valtervite, a unique chemical compound, patented by Atton
1 Publilius Syrus.
2 Facts, P28:¶2:L847.
3 Facts, P:28¶4:L859.
4 PO3, P:48¶3:L1513.
5 Facts, P:29¶11:L900.
6 Facts, P:29¶8:L885.
7 Facts, P:29¶9:L891.
8 Facts, P:28¶6:L879.
2
Boro in Mercuria in 1998 (“Patent”), which achieves to mute all symptoms of
greyscale. 9 After concluding the LTA with NHA, Atton Boro built an additional
manufacturing unit to produce Sanior,10 its Valtervite-based drug, and soon thereafter
started supplying Sanior throughout Mercuria’s health centers.11 In 2007, Atton Boro
further expanded this manufacturing unit to cope with a higher demand for Sanior.12
6. In 2008, while Atton Boro was already offering a 25% discount for the supply of Sanior
to Mercuria,13 NHA tried to coerce Atton Boro into accepting a further discount of 40%,
under the threat of instant termination of the LTA.14 In an effort to maintain their
longstanding relationship, Atton Boro offered NHA a further 10% discount.15 Carrying
out its threat, the response came in no other form than a unilateral termination of the
LTA by NHA, under the false pretense of unsatisfactory performance.16
7. To safeguard its contractual rights, Atton Boro started proceedings against NHA before
an arbitral tribunal (“Prior Tribunal”) which rendered an award (“Award”) in favor of
Claimant, holding that NHA had wrongfully terminated the LTA.17 To date, however,
the High Court of Mercuria (“Court”) together with NHA used every excuse in endless
proceedings (“Proceedings”) to delay enforcement for more than 8 years,18 reducing
the Award and the rights protected thereunder to a mere piece of paper.
8. Mercuria further curtailed Atton Boro’s operations by enacting a new legislation
legitimizing the use of patented inventions, such as Valtervite, without its owner’s
9 Facts, P:28¶3:L853.
10 Facts, P:29¶11:L900.
11 Notice, P:4¶7:L17.
12 Facts, P:29¶15:L917.
13 Facts, P:29¶10:L895.
14 Facts, P:30¶15:L923.
15 Facts, P:30¶15:L922.
16 Facts, P:30¶17:L930.
17 Facts, P:30¶17:L931-934.
18 Facts, P:30¶18:L935-943.
3
authorization (“Law”)19 and started to produce Valtervite, acting through HG-Pharma,20
a State-owned enterprise, 21 entitled to a compulsory license (“License”).
9. The combination of these acts caused Atton Boro to suffer substantial losses22 and
deprived it of the necessary resources to continue its efforts to develop and provide
essential medicines to populations across the developing world.
10. In sum, Mercuria benefited of Atton Boro’s investments in innovative treatment for
greyscale without incurring any expenses. 23 Yet, in return, it destroyed Claimant’s
market share and rendered its investment worthless.24 That is why Claimant is left with
no other option than to seek remedy before this Tribunal established under the Mercuria-
Basheera BIT (“BIT”).25
19 Facts, P:30¶20:L944.
20 Facts, P:30¶21:L950.
21 PO3, P:50:L1597.
22 Facts, P:30¶24:L959.
23 Facts, P:31¶25:L965.
24 Facts, P:30¶24:L959.
25 Notice, ¶3; PO1, Annex 1.
4
STATEMENT OF ARGUMENTS
Jurisdiction
11. This Tribunal has jurisdiction over the present dispute, since Claimant’s claims relate
to assets that qualify as protected investments pursuant to Article (1)1 BIT either
individually under the asset-based definition, or collectively as part of Claimant’s
overall investment operation. In addition, by virtue of Article 3(3) BIT, Respondent
undertook to observe the obligations arising from the LTA, the conclusion of which is
attributable to Respondent. Indeed, the forum selection clause contained in LTA cannot
have the effect of precluding this Tribunal from exercising jurisdiction over Claimant’s
treaty claims (I).
Admissibility
12. Respondent’s attempt to deny the benefits of the BIT to Claimant under Article 2(1)
BIT is procedurally invalid. In any event, the substantial requirements of Article 2(1)
BIT are not met. Claimant’s claims are therefore admissible (II).
Merits
13. First, Respondent breached Article 3(3) BIT by failing to observe the obligations it had
entered into under the LTA. The termination of the LTA by NHA is an act attributable
to Mercuria and amounts to a breach of Article 3(3) BIT (III).
14. Second, Respondent failed to accord fair and equitable treatment to Claimant’s
investment in blatant violation of Article 3(2) BIT. One, the conduct of the Enforcement
Proceedings amounts to a denial of justice. The High Court failed to enforce the Award
within a reasonable time and violated Claimant’s right to equality of arms and access to
an impartial tribunal (IV). Two, Respondent frustrated Claimant’s expectations as to the
stability and predictability of its IP regime and violated its international obligations
under TRIPS (V).
5
ARGUMENTS
PART ONE: JURISDICTION AND ADMISSIBILITY
THE TRIBUNAL HAS JURISDICTION OVER CLAIMANT’S CLAIMS
15. Contrary to Respondent’s objections, Claimant will demonstrate that, first, the LTA and
the Award constitute protected investments under the BIT (A) and second, the claims
arising out of the wrongful termination of the LTA give rise to a violation of the BIT
(B).
A. Claimant’s operation in Mercuria constitutes an investment under the BIT
16. Under Article 8 BIT, the Tribunal’s jurisdiction is limited to “Investment Disputes”, i.e.
“dispute[s] between an investor of one Contracting Party and the other Contracting
Party”.26 As it cannot be disputed that Claimant is an ‘investor’ duly incorporated in
Basheera,27 it is sufficient that the dispute relate to an investment made under the BIT.28
17. The Tribunal should assert jurisdiction since Claimant’s claims relate to assets protected
under the definition of Article 1(1) BIT (1). Even under the objective definition of
‘investment’, the Tribunal should find that Claimant’s overall investment operation falls
within the ambit of the BIT (2).
1. Claimant’s assets individually qualify as protected investments under Article 1(1) BIT
18. Given that the present arbitration was brought under the PCA Arbitration Rules,29 it is
sufficient for the Tribunal to consider that Claimant’s claims relate to protected
26 Article 8 BIT, Title – “Settlement of Investment Disputes”.
27 Article 1(2)(b) BIT.
28 Vivendi I, ¶55; Philip Morris Jurisdiction, ¶109; Teinver, ¶112.
29 PO1, P26:¶12:L798-799.
6
investments within the asset-based definition set out in Article 1(1) BIT.30 Even in the
ICSID system, where the objective definition or so-called Salini Test was developed,
tribunals consider that a BIT’s definition of ‘investment’ should be given “greatest
weight”.31
19. In the present dispute, the Patent, the manufacturing unit, the LTA and past agreements
with NHA, as well as the Award qualify individually as protected investments under
Article 1(1) BIT.32
20. First, Claimant submits that the Patent is an “intellectual property righ[t]” within the
meaning of Article 1(1)(d) BIT, which expressly refers to “patents”. Tribunals have
upheld jurisdiction over intellectual property rights protected by international
investment agreements.33 In the recent Eli Lilly Award, the Tribunal adjudicated a
dispute relating to Eli Lilly’s Canadian patents.34 In the present case, Claimant holds the
Patent for Valtervite since April 1998.35
21. Second, the manufacturing unit is an “immovable property” within the meaning of
Article 1(1)(a) BIT which expressly refers to “movable and immovable property and
any related property rights”. It is thus clear that physical infrastructure are included in
such definition.36 In order to expand within the pharmaceutical sector, Claimant set up
its manufacturing unit in Mercuria as of 1998.37
22. Finally, the LTA and Claimant’s past agreements with NHA,38 together with the Award,
qualify as “claims to money” within the meaning of Article 1(1)(c) BIT. Under the LTA,
30 Anglia, ¶¶150-154; White Industries, ¶7.4.9; Saluka, ¶211; Mytilineos, ¶118.
31 SGS/Paraguay, ¶¶93-94; Garanti Koza, ¶241.
32 Article 1(1) BIT.
33 Philip Morris Award, ¶194; Douglas, ¶395.
34 Eli Lilly.
35 Facts, P28:¶4:L861-862; PO3, P50:L1574-1575.
36 Al Tamimi, ¶¶279-280; Gallagher/Shan, ¶2.13.
37 Facts, P28:¶5:L870.
38 PO1, P39:¶3:L1261-1262.
7
Atton Boro undertook to manufacture and supply Sanior to NHA, which in turn agreed
to purchase Sanior periodically.39 Accordingly, Claimant possesses “claims to money”
over the quantities of Sanior to be supplied for the duration of the LTA.40 Likewise, the
Prior Tribunal awarded Claimant USD 40.000.000 for breach of the LTA. 41 This
amount embodies “claims to money”. 42 This is all the more true given that the
“transformation clause” enshrined in Article 1(1) BIT43 transforms Claimant’s claims
to money under the LTA into a claim to money under the Award.44
2. Even considered collectively, Claimant’s assets in Mercuria fall within the ordinary
meaning of ‘investment’
23. In its Response, Mercuria raised jurisdictional objections regarding Claimant’s claims
relating to the LTA45 and the Award.46 Should the Tribunal consider that the application
of the asset-based definition set out in Article 1(1) BIT would lead to a result “manifestly
absurd or unreasonable”,47 Claimant submits that the LTA (a) and the ensuing Award
(b) qualify as protected investments as part of its overall investment operation in
Mercuria.
a) The LTA is a core element of Atton Boro’s overall investment operation
24. Claimant submits that the LTA is so inextricably linked to the Patent and the
manufacturing unit that a determination as to whether the LTA is an investment under
39 Facts, P29:¶¶9-10:L892-897.
40 White Industries, ¶7.4.5; Schreuer/Malintoppi/Reinisch/Sinclair, ¶148.
41 Facts, P30:¶17:L931-935; Notice, P4:¶9:L125-128.
42 Anglia, ¶151; Gavazzi, ¶120; Saipem, ¶126; Kin-Stib, ¶¶83-84.
43 Article 1(1) BIT in fine, L1010: “[a]ny change in the form of an investment does not affect its character
as an investment”.
44 Frontier, ¶231; White Industries, ¶7.6.8; Chevron I, ¶184.
45 Response, P16:¶8:L500-507.
46 Response, P16:¶4:L474-476.
47 Alps Finance, ¶237; Romak, ¶184.
8
the BIT needs to be made in reference to the entire operation that is the subject of these
arbitral proceedings.48
25. In the present dispute, the Patent for Valtervite was the prior step to Claimant’s
manufacturing and supply of Sanior in Mercuria. Save for the Patent and its local
production in Mercuria, Claimant would not have been able to conclude the LTA. It is
therefore clear that the LTA is an integral part and core element of Atton Boro’s overall
investment operation.
26. Since the LTA is “part of a unity that the Tribunal must appraise in its totality”,49 the
Tribunal should find that Claimant’s overall investment qualifies as a protected
investment under the objective definition.50
27. First, Claimant made a contribution in terms of know-how, equipment and personnel:51
(i) By registering the Patent, Claimant disclosed exclusive processes and technical
knowledge to the Mercurian authorities on a compound that cost USD 1 billion
to develop;52
(ii) Prior to introducing Sanior in the Mercurian market, no FDC treatment for
greyscale was available to Mercurian citizens. NHA’s 2003 annual report
illustrates the scarcities of the prior treatment available in Mercuria. Not only
did the prior medicine require patients a 5 to 7 pills intake per day, but it only
proved effective when prescribed at very early stages of the infection. 53
Respondent might try to disprove this contribution arguing that the Patent’s
R&D expenses originate from Claimant’s parent company. Yet, the Patent was
48 White Industries, ¶7.4.19; Mytilineos, ¶124; Vestey, ¶196; Dugan/Wallace/Rubins/Sabahi, P61
49 Mamidoil, ¶288.
50 Mamidoil, ¶¶285-288; Saipem, ¶¶110-111; White Industries, ¶7.4.19; Mytilineos, ¶124; Vestey, ¶196;
SGS/Paraguay, ¶83. Concerning the objective definition, see: Fedax, ¶43, Salini, ¶52; Douglas, PP161-
164.
51 Salini, ¶53; L.E.S.I., P19:¶14; Deutsche Bank, ¶297; Bayindir Jurisdiction, ¶116.
52 PO3, P50:L1600-1601.
53 Facts, P28:¶6:L876-880.
9
assigned to Claimant in exchange for shares,54 i.e. Claimant’s contribution for
the Patent.55
(iii) Even if Claimant was funded by its parent company to set up the manufacturing
unit and to perform its agreements with NHA,56 Claimant was an “active”
investor 57 in Mercuria. It concluded the LTA with NHA 58 and committed
resources59 to Mercuria. As of 1998, Claimant started to manufacture medicine
from its Mercurian premises, hired local workforce and purchased land and
machinery to meet the increasing demand for Sanior.60
28. Second, Claimant’s overall investment operation entailed a significant risk inherent to
the long-term duration of the LTA,61 and the economic climate prevailing in Mercuria
throughout the period of the investment:62
(i) As a public-private partnership,63 the LTA implied increased risk for Claimant.64
The mere existence of a minimum guaranteed annual order-value is in itself
insufficient to diminish such risk.65
(ii) The immovable nature of the manufacturing unit increased Claimant’s exposure
to risk due to the uncertainty as to its return on investment.
54 PO3, P50:L1575.
55 Quiborax, ¶229.
56 PO3, P50:L1572-1573.
57 Garanti Koza, ¶232.
58 Facts, P29:¶9:L892-894.
59 Garanti Koza, ¶232.
60 Facts, P9:¶15:L916-918.
61 Bayindir Jurisdiction, ¶136; Toto, ¶78; Mytilineos, ¶124; Saipem, ¶109.
62 Alpha, ¶¶320-321; Deutsche Bank, ¶301; Quiborax, ¶234.
63 Facts, P28:¶5:L866-868; Minister for Health’s Statement, P39:¶4:L1265-1266; World Bank Definition.
64 L.E.S.I., P19:¶14.
65 Alpha, ¶322; SGS/Paraguay, ¶105.
10
(iii) This risk also materialized when Claimant was confronted with unexpected
occurrences due to Mercuria’s budgetary crisis. 66 Respondent threatened
Claimant to terminate the LTA unless it was granted a further 40% discount.67
Not only did Respondent terminate the LTA, it also enacted the Law,68 which
allowed HG-Pharma to start manufacturing Valtervite. 69 Claimant’s risk
increased due to HG-Pharma’s direct and unfair competition.70
29. Third, Claimant’s investment in Mercuria far exceeds the duration standard of two to
five years set out in the Salini.71 In Bayindir, the tribunal recalled that “duration is the
paramount factor which distinguishes investments […] and ordinary commercial
transactions”.72 Claimant entered Mercuria’s pharmaceutical market in 1998. The same
year, Claimant obtained the 20-year73 Patent for Valtervite. Claimant then concluded
the LTA with NHA for 10 years.74 Therefore, Claimant’s overall investment operation
extended over a period of more than 15 years.
30. Finally, Claimant submits that it contributed to the development and public interest75 of
Mercuria:
(i) The successful “Comprehensive HIV/AIDS Partnership” between NHA and
Claimant has allowed 30,000 new patients to obtain access to ARV treatment
and significantly reduced cost of treatment.76
66 NHA Report, PP42-43:L1362-1374.
67 Facts P30:¶15:L923-925.
68 Law, PP44-45.
69 Facts, P30:¶¶20-21:L944-952.
70 SGS/Paraguay, ¶105.
71 Salini, ¶54; R.F.C.C., ¶62; Bayindir Jurisdiction, ¶¶132-133.
72 Bayindir Jurisdiction, ¶132.
73 Article 33 TRIPS.
74 Facts, P29:¶10:L898-899.
75 White Industries, ¶7.4.18; Salini, ¶57; Helnan Jurisdiction, ¶77.
76 Minister for Health’s Statement, P39:¶3:L1263-1264.
11
(ii) Supplying Sanior, Claimant introduced FDC treatment in Mercuria. 77 This
treatment improved the health condition of greyscale patients and prevented
transmission of greyscale to healthy people.78 By the end of 2006, about a third
of all greyscale patients were being treated using Sanior,79 and the order value
for Sanior doubled with each quarter in 2007.80
(iii) Improving the health condition of Mercurian working-age individuals, 81
Claimant indirectly contributed to Mercuria’s economic development. In this
regard, Claimant supplied Sanior from 2004 to 10 June 2008 at a 25% discounted
rate,82 hired local workforce to produce HIV treatment drugs as of 199883 and
Sanior since 2005.84
31. In view of the above, the LTA, together with the manufacturing unit and the Patent,
undeniably qualifiy as an investment.
b) The Award crystallizes Claimant’s rights under the LTA
32. For the Award to qualify as a protected investment, it is sufficient to determine that the
LTA constitutes an investment. Indeed, if the latter constitutes an investment under the
BIT, the Award crystallizing the contractual rights arising from it will accordingly
qualify as a protected investment.85
33. The LTA qualifies as an investment in itself and as part of Claimant’s overall investment
operation in Mercuria. The Award directs NHA to pay Claimant damages for
77 Facts, P29:¶9:L891-892; NHA Report, P42:L1351-1354.
78 PO3, P50:L1586-1587.
79 Facts, P29:¶11:L901-902.
80 Facts, P29:¶15:L916-917.
81 Response, P16:¶6:L485-486; Facts, P28:¶6:L872-876; NHA Report, P41:L1315-1316.
82 Facts, P29:¶10:L895-896.
83 Facts, P28:¶5:L870-871.
84 Facts, P29:¶11:L900-901.
85 Saipem, ¶127; White Industries, ¶7.6.10; ATA, ¶115; Chevron I, ¶180; Gavazzi, ¶120.
12
prematurely terminating the LTA. 86 As such, the Award crystallizes Atton Boro’s
contractual rights under the LTA. Therefore, it cannot be disputed that the Award
qualifies as an investment and that Claimant’s claim relating to the Award falls within
the jurisdiction of the Tribunal.
B. Claimant’s claim under Article 3(3) BIT falls within the scope of this Tribunal’s
jurisdiction
34. To establish jurisdiction, Claimant must, according to the Oil Platforms test,87 adduce
facts that, if proven, could constitute a violation of Article 3(3). The jurisdictional test
of Article 3(3) requires to prove that: (i) Respondent “entered into” (ii) a protected
“obligation” (iii) “with regard to investments”. The latter condition has already been
fulfilled as Claimant’s activities in Mercuria qualify as an investment under the BIT.
35. With respect to the remaining conditions, Claimant submits that, notwithstanding the
LTA’s arbitration clause (3), the Tribunal has jurisdiction over the umbrella claim, as
the LTA was “entered into” by Respondent (2) and the obligations arising thereof are
protected by Article 3(3) BIT (1). The termination of the LTA therefore pertains to the
merits.
1. Mercuria undertook to “observe” contractual obligations pursuant to Article 3(3) BIT
36. By inserting Article 3(3) in the BIT, Mercuria undertook to guarantee obligations it
enters into with investors of Basheera, thus bringing those undertakings under the
protective “umbrella” of the Treaty.88
37. First, it is well-established that umbrella clauses impose a binding “international
obligation for the parties to the BIT to observe contractual obligation with respect to
investors.”89 This view is furthered by the ordinary meaning of the language of Article
86 Facts, P30:¶17:L931-934; Notice, P4:¶9:L126-128.
87 Oil Platforms, ¶¶27-36.
88 McLachlan/Shore/Weiniger, ¶4.55.
89 BIVAC, ¶141; Oxus, ¶365.
13
3(3).90 The wording “any obligation” includes, at least, contractual obligations,91 such
as the LTA. As for the terms “shall observe”, they prescribe a mandatory obligation on
Respondent.92 Therefore, Mercuria cannot argue that it was not aware of the binding
character of such provision, since the Fedax tribunal had already confirmed this position
before the BIT was ratified.93
38. Second, contrary to Respondent’s allegations, the demonstration of the Tribunal’s
jurisdiction under Article 3(3) does not require the violation of another substantive
provision94. This provision is an autonomous and additional standard of protection under
the Treaty.95 To argue otherwise would deprive it of any effet utile96 and Respondent
fails to explain the purpose of the umbrella clause other than the one advanced by
Claimant.
39. Finally, Respondent argues that Article 3(3) may only cover host State’s contractual
obligations assumed as a “sovereign”. 97 Yet, Article 3(3) does not impose such
limitation. On the contrary, it clearly provides that “any obligation” shall be observed
and does not add further criteria. Consequently, there is no basis to import non-textual
limitations into the broad wording of the umbrella clause.98 It is therefore established
that the obligations arising out of the LTA are protected by Article 3(3).
2. Mercuria, acting through NHA, “entered into” the LTA with Atton Boro
40. Article 3(3) imposes the host State to observe obligations “it may have entered into”.
Thus, to assume jurisdiction, the Tribunal must determine whether NHA “entered into”
90 Article 31(1) VCLT.
91 Philip Morris Award, ¶472; BIVAC, ¶141; SGS/ Paraguay, ¶168; SGS/Philippines, ¶115.
92 Eureko, ¶246
93 Fedax, ¶29.
94 Micula, ¶417. Gaillard, P3.
95 Noble Ventures, ¶51.
96 Schreuer-Vivendi I, P301.
97 Response, P17:¶8:L500-507.
98 SGS/Paraguay, ¶168; Burlington, ¶190; Noble Ventures, ¶82.
14
the LTA, acting qua State. The relevant conduct for Tribunal’s analyses is therefore the
act of conclusion of the LTA. If it is attributed to Mercuria, the jurisdictional test of the
umbrella clause will be satisfied. In this respect, Claimant submits that, first, the
language of Article 3(3) includes entities whose acts are attributable to Respondent (a)
and, second, the conclusion of the LTA is indeed attributable to Respondent (b).
a) Article 3(3) encompasses entities, such as NHA, whose acts are attributable to
Respondent
41. Respondent contends that Article 3(3) BIT only refers to municipal law obligations to
which Mercuria itself is party. However, this narrow reading is absurd as it would allow
States to easily escape liability by setting entities distinct from the State when
concluding agreements with investors.99 Respondent’s allegation would run afoul of a
well-established principle that:
“[I]nternational law does not permit a State to escape its international
responsibilities by a mere process of internal subdivision. The State as a subject
of international law is held responsible for the conduct of all the organs […]
whether or not they have separate legal personality under its internal law.”100
42. Therefore, the wording “Contracting Party” and “it may have entered into” shall be
understood in the sense of international law, not domestic law.101 This approach is
consistent with the purpose of Article 3(3), which is for the host State to guarantee
obligations entered into by entities it is responsible for. In adopting this view, this
Tribunal shall interpret the wording of Article 3(3) in accordance with “any relevant
rules of international law” applicable between the Parties102 which includes customary
international law. 103 The attribution rules of the ILC Articles, being part of the
customary international law,104 constitute general rules of attribution under which both
99 ILC Articles Commentary, Chapter II, ¶7.
100 Article 27 VCLT.
101 ILC Articles Commentary, Chapter II, ¶7; Bosh, ¶246; SGS/Pakistan, ¶166.
102 Article 31(3)(c) VCLT; PO1, P26:¶11:L796.
103 Saluka, ¶254.
104 Jan de Nul, ¶156; Tulip, ¶281; Immunity/Rapporteur, ¶62.
15
wrongful and non-wrongful acts can be attributed to States.105 Consequently, the State
of Mercuria, as subject of international law, is extended to all entities, such as NHA,
whose acts can be attributed to Respondent.
b) The conclusion of the LTA is attributed to Respondent under the ILC Articles
43. Claimant submits that the conclusion of the LTA is automatically attributable to
Respondent as NHA is Mercuria’s State organ (i). In any event, the conclusion is still
attributable under Article 5 (ii) and Article 8 ILC (iii).
i) NHA is a State organ
44. Respondent argues that NHA is not a State organ as it has a separate legal personality
from that of the State. Yet, this allegation is erroneous as an entity’s domestic status is
not decisive106 as States cannot avoid responsibility for the conduct of a body acting as
one of its organs by “denying it that status under its own law”.107 Thus, if an entity is
not a de jure State organ,108 it may still, in practice, be a de facto State organ.109
45. To qualify as State organ, an entity shall meet a structural test,110 sometimes completed
by a functional test.111 The structural test is met, if the entity is placed within the
structure of another State organ, such as a State Ministry, 112 or if it is owned or
controlled by the State directly or indirectly.113 The functional test is fulfilled if the
105 Newcombe/Paradell, P461; Wälde, P218; Kardassopouloss, ¶¶274–280.
106 Deutsche Bank, ¶405(a).
107 ILC Articles, Article 4, Commentary ¶11.
108 ILC Articles, Article 4(2).
109 Crawford, P243; Flemingo, ¶433.
110 Maffezini, ¶¶77-80; M.C.I., ¶225.
111 Flemingo, ¶¶418-435.
112 Kardassopoulos, ¶275.
113 Flemingo, ¶427.
16
entity was created to carry out activities of public nature, which are not usually carried
out by private businesses.114
46. In the present case, NHA satisfies both of these tests. First, with regard to the structural
test, NHA was set up by the Central government itself,115 and is generally presented as
belonging to Respondent116 and being politically accountable to it. 117 Furthermore, it
operates under the auspices of the Ministry of Health by intensively reporting to it118
and receiving direct instructions. 119 In addition, NHA is financed by Respondent
directly from the national taxation funds,120 which altogether proves that it is controlled
and ultimately owned by Mercuria.
47. Second, regarding the functional test, NHA was created specifically to achieve a goal
of the Central government itself, namely to secure the universal healthcare for the people
of Mercuria, 121 provided for in the State’s Constitution. 122 Moreover, NHA was
empowered to perform a five-year health plan to combat critical diseases123 and was
previously in charge of national prevention of sexually transmitted diseases.124 Such
functions, being undoubtedly strategic for the national well-being and existence of the
State, are not usually carried out by private businesses.
48. It is thus certain that NHA, despite its status under municipal law, is a de facto State
organ under Article 4 ILC. Therefore, all of its acts, and specifically the conclusion of
114 Maffezini, ¶77.
115 PO1, P39:¶2:L1255.
116 Facts, P28:¶5:L868-870.
117 PO3, P50:L1591.
118 Facts, P28:¶6:L872.
119 Facts, P29:¶7:L881-882.
120 PO3, P50:L1592-1594.
121 PO1, P39:¶2:L1255-1257.
122 PO1, P39:¶2:L1257.
123 Facts, P29:¶8:L885-888; PO1, P39:¶2:L1257-1260.
124 Facts, P29:¶12:L903-904.
17
the LTA, are attributable to Mercuria which establishes jurisdiction of this Tribunal to
hear Atton Boro’s claim under Article 3(3).
ii) NHA exercised governmental authority when it concluded the LTA with Claimant
49. In the event this Tribunal is not convinced by the abundant evidence that NHA is a State
organ, Claimant submits that the conclusion of the LTA is nevertheless attributable to
Respondent under Article 5 ILC as NHA fulfils the two-prong test set forth therein.125
First, the entity shall exercise governmental authority and, second, the act itself should
be performed in such capacity.126
50. The term “entity” is broad and includes public corporations,127 such as NHA.128 The
relevant criterion for determining the general exercise of governmental authority is for
the entity to be empowered by domestic law “to exercise functions of a public character
normally exercised by State organs”.129 In this sense, the test under Article 5 is similar
to the functional test described above and has already been met as it was demonstrated
that Respondent entrusted NHA to exercise functions of an utmost importance.130
51. NHA concluded the LTA with Claimant in the exercise of governmental authority. In
2003, an imminent public health concern was already reported and, yet, there was no
effective cure in Mercuria at that moment.131 To address this issue, NHA concluded the
LTA shortly after 132 and began distribution of Sanior across Mercuria. 133 Thus,
Respondent cannot seriously argue that NHA’s acts were done in “commercial
capacity” as, the record clearly proves that it “entered into” the LTA with the purpose
125 Jan de Nul, ¶163.
126 Article 5 ILC.
127 ILC Articles, Article 5, Commentary ¶2.
128 PO3, P50:L1592-1595.
129 Noble Ventures, ¶81; Bayindir Award, ¶121.
130 See supra ¶47.
131 Facts, P28:¶6:L872-878.
132 Facts, P29:¶9:L892-895.
133 Facts, P29:¶9:L900-901.
18
to combat a rising health problem. Such act constitutes, in and of itself, an exercise of
governmental authority.
iii) NHA was “directed” by Respondent when concluding the LTA
52. Under Article 8 ILC, the conduct of an entity is attributable to the State if it is proved
that it acted either “on the instructions”, “direction” or “control” of the State.134 The
threshold for establishing “control” in the present circumstances is lower than the one
in situations of international criminal responsibility.135
53. Claimant submits that when NHA signed the LTA, it was ultimately acting under the
direction of the government of Mercuria. First, as already demonstrated above, NHA is
generally controlled by the Ministry of Health. Second, the decision to “enter into” the
LTA was ultimately taken by the Minister for Health and the President of Mercuria, also
involved in its termination. 136 When NHA reported about the imminent health
concern,137 the Ministry directed it to estimate Mercuria’s need for the FDC drug and
invited offers from pharmaceutical companies for its long-term supply.138 Shortly after
this decision, the Long-Term Agreement was concluded with Claimant.139 This line of
events undoubtedly proves that, when “entering into” the LTA, NHA acted under the
direction of Respondent.
54. Therefore, the conclusion of the LTA, being attributable to Respondent, the Tribunal’s
jurisdiction over Claimant’s claim under Article 3(3) is established.
134 ILC Articles, Article 8, Commentary ¶7.
135 Bayindir Award, ¶130.
136 See infra, ¶¶98.
137 Facts, P28:¶6:L872-876.
138 Facts, P29:¶7:L882-883.
139 Facts, P29:¶9:L893-894.
19
3. LTA’s dispute resolution clause does not preclude this Tribunal from exercising
jurisdiction over the claims arising thereof
55. Contrary to Respondent’s allegations, Claimant did not waive its right to bring a claim
under the BIT (a). A contractual dispute resolution clause may, at best, raise an issue of
admissibility, which is only relevant if the contractual forum had not been seized (b).
a) The LTA’s forum selection clause does not amount to a waiver of the right to arbitrate
under the Treaty
56. Respondent’s submission that the LTA’s arbitration clause constitutes a waiver of right
to arbitrate under the Treaty140 is erroneous, as such waiver can only be expressed in
clear and specific terms,141 and must be explicit.142 Yet, there is no evidence that the
parties to the LTA explicitly provided to exclude any recourse to an investment tribunal
for claims arising out of the LTA. An exclusive arbitration clause does not constitute
such waiver.143 Thus, Respondent’s argument shall be rejected.
57. Moreover, when a claim is based on an independent treaty standard, a contractual
arbitration clause does not bar tribunal’s jurisdiction conferred by Treaty, 144 as it
provides Claimant with a different cause of action, independent from the contractual
cause of action.145 Thus, the LTA’s arbitration clause has no effect on this Tribunal’s
jurisdiction as the Claimant’s claim is based on the autonomous standard of protection
of Article 3(3).
140 Response, P17:¶8:L506-507.
141 Crystallex, ¶¶481-482.
142 TSA, ¶55.
143 SGS/Paraguay Jurisdiction, ¶180.
144 Vivendi I, ¶101.
145 Vivendi I, ¶113.
20
b) The present claims are admissible since Claimant already resorted to the contractually
agreed forum
58. Claimant agrees with Respondent that where a contract provides for a specific dispute
resolution clause, all disputes arising thereof shall be submitted to the selected forum.146
Indeed, the chosen forum shall be accorded priority in deciding the dispute and the
parties’ will has to be respected. 147 Thus, in the presence of such clause, if the
contractual forum has not yet been seized or not rendered its decision, an investment
tribunal may be faced with an issue of admissibility and declare the claim
inadmissible.148
59. However, in the case at hand, this Tribunal is not facing such issue, as Claimant abided
by the LTA arbitration clause and obtained the Award.149 Thus, the question of the
termination of the LTA had been conclusively decided by the Prior Tribunal applying
lex contractus. This Tribunal shall therefore refer to this finding while assessing whether
such termination constitutes a violation of Article 3(3).
MERCURIA CANNOT DENY THE BENEFITS OF THE BIT TO CLAIMANT WHOSE CLAIMS ARE
THEREFORE ADMISSIBLE
60. Respondent has purported to deny the benefits of the BIT to Claimant pursuant to the
denial of benefits provision set out in Article 2 BIT. This objection has no effect for two
reasons. Respondent cannot deny retrospectively the benefits of the BIT to Atton Boro
(A). In any event, Respondent failed to demonstrate that the substantial requirements
are met (B).
146 BIVAC, ¶145.
147 BIVAC, ¶148
148 SGS/Philippines, ¶¶154-155; BIVAC, ¶159.
149 Facts, P30:¶17:L932.
21
A. Respondent’s attempt to deny the benefits to Claimant leaves the present claims
unaffected
61. Respondent’s denial of benefits cannot deploy its effects retroactively (1) and the latter
failed to provide advance notice to Claimant (2).
1. Denial of benefits can only apply prospectively
62. Claimant submits that the denial of benefits only has a prospective effect, which stems
from the paramount concern of stability and certainty that BITs must offer to
investors.150 In the present case, such finding is coherent with the BIT’s purpose “to
promote greater economic cooperation” and to “stimulate [...] economic
development”151.
63. Moreover, such prospective effect is derived from the Parties’ intention enshrined in
Article 2(1) BIT to “reserv[e] the right to deny the advantages”152 of the Agreement.
Accordingly, there needs to be a positive action from the denying Party. Case law has
considered this language as equating to a prospective effect only.153
64. In addition, the use of the present tense implies that denial can only operate
prospectively, from the moment of the denial onwards. Indeed, if Respondent were
allowed to apply the BIT’s denial provision retroactively, it would be able to receive all
of the advantages of Claimant’s investment in its territory without being subject to any
of the obligations the BIT contains. This vulnerability for the investor was highlighted
by the Plama tribunal. 154
65. For all these reasons, the Tribunal should find that Article 2(1) BIT applies
prospectively, i.e. from the Response onwards.
150 Yukos, ¶458; Plama, ¶¶160-162; Liman, ¶225.
151 BIT, Preamble.
152 BIT, Article 2.
153 Plama, ¶¶155-156, 165; Veteran, ¶¶512-514; Yukos, ¶¶456,458.
154 Plama, ¶159-165.
22
2. Respondent is not entitled to deny the benefits of the BIT to Claimant after the initiation
of the arbitration
66. In light of the prospective effect of a denial of benefits, Claimant submits that Article
2(1) can only be triggered after Mercuria’s advance notice of its intention to deny the
rights of the BIT to Claimant.
67. At a minimum, such prior notice must be provided before a dispute arises.155 The
discretion afforded to the State goes hand in hand with the advance notice provided to
investors in order to ensure a predictable and stable framework. Here, the Contracting
Parties did not opt for an automatic denial whenever the substantial requirements are
met, since they did not chose the formula “shall be denied”. In the present case, it is a
right that the State can choose to exercise (or not), hence the simple knowledge of the
BIT is insufficient to warn Claimant of that probability.156 At most, Article 2 merely
informs investors on the State’s right, but does not provide any kind of warning that the
State actually intends to activate it.
68. Furthermore, the State should warn potential investors that it might deny them the
benefits of a BIT before they made their investment, and at the latest before the dispute
arises. Indeed, Article 2(1) can potentially deprive both substantive protections and
access to international arbitration. This interpretation becomes all the more true since
Article 2(1) permits denial of “the advantages of this Agreement” as a whole, including
the dispute settlement provision. Considering otherwise would implicitly recognize a
right for the Host State to unilaterally withdraw its consent, after a dispute arises.
69. Lastly, Respondent cannot pretend that such prior notice would be too burdensome. In
practice, there are many acceptable and effortless forms of notice available to States,
including “a general declaration in an official gazette; a statutory provision in
investment or other laws; or even an exchange of letters with a particular investor or
class of investors”157.
155 Anatolie, ¶745.
156 Plama, ¶¶156-157.
157 Plama, ¶157.
23
70. In the present case, no prior notice was provided; neither to pharmaceutical companies
investing in Mercuria nor to the Claimant itself. Respondent waited until 26 November
2016 (i.e. its Response) to notify Claimant of its intent to deny it the advantages.
Respondent can no more pretend that it notified Claimant in due course. Indeed, on 20
September 2016, Mercuria was notified through its Foreign Ministry of Claimant’s
intent to initiate arbitration.158 Yet, Mercuria never responded nor did it notify Claimant
of its intent to invoke the denial of benefits provision.
71. For all these reasons, Mercuria’s invocation of Article 2(1) BIT is belated since it took
place after the dispute arose and after Claimant’s acceptance of Mercuria’s offer to
arbitrate under the BIT (i.e. Claimant’s initiation of the present arbitration proceedings).
72. Consequently, since Respondent raised the denial of benefits belatedly, the Tribunal
does not need to enquire on the clear and unambiguous character of this objection.159
B. In any event, the substantial requirements provided under Article 2(1) BIT are not met in
the present case
73. In addition to Respondent’s belated attempt to deny the benefits to Atton Boro, the
cumulative requirements under Article 2(1) BIT are not satisfied.160 First, Atton Boro
has substantial business activities in the territory of the Contracting Party in which it is
organized i.e. Basheera (1). Second, Atton Boro is owned and controlled by nationals
of Contracting States (2). In any event, the burden of proving these requirements lies on
Respondent (3).
1. Atton Boro has substantial business activities in Basheera
74. Claimant submits that the term “substantial” does not require considering the magnitude
of the activities, but rather their materiality.161 Further, there is no generic definition of
158 Notice, P3:L101-102.
159 Veteran, ¶¶221.
160 Amto, ¶62.
161 Amto, ¶69.
24
what constitutes “a substantial business activity” which would be suitable for all
different business practices.162 Therefore, whether Claimant is engaged in substantial
business activities in Basheera depends on the very nature of the company and its
corporate purpose.
75. Indeed, in Pac Rim, respondent objected that claimant did nothing other than holding
shares. However, the tribunal ruled that holding companies may satisfy the substantial
business activities requirement, provided that they actively hold and manage shares of
other companies and have a continuous physical presence in the State of incorporation,
a functioning board of directors and a bank account.163
76. In the present dispute, it cannot be alleged that Atton Boro is a mere mailbox company
for the following reasons:
(i) The patents held by Atton Boro were the prior step leading to the production of
such drugs. After securing the Mercurian Patent, Atton Boro set up its
manufacturing unit for Sanior and commenced production in 2005.164 Therefore,
Atton Boro is neither passively nor merely holding assets, it is directly exploiting
them.
(ii) Since its incorporation in 1998, Claimant opened a bank account and has rented
an office space165 in Basheera.
(iii) From 1998 to 2016, Atton Boro has had between 2 and 6 permanent employees
working in Basheera,166 including a manager and an accountant, who supervise
Claimant’s portfolio of patents registered in South America and Africa,
providing permanent support for administrative matters, as well as for sales and
162 CAFTA-DR Hearings, statement by Ambassador Peter F. Allgeier that it would be “difficult, if not
impossible, to come up with a generic definition suitable for all business arrangements in all sectors”.
163 Pac Rim, ¶4.72.
164 Notice, P4:¶7:L115-116.
165 Facts, P28:¶4:L863-864; Pac Rim, ¶¶4.8; Petrobart p.63.
166 PO2, P48:¶3:L1510-1515; Pac Rim, ¶¶4.69, 4.8.
25
marketing strategy. In addition, Claimant employed commercial and patent
attorneys serving as legal advisers and overseeing its tax obligations167.
77. Should the Tribunal consider that Atton Boro is a patent holding company, Claimant
submits that this does not change its real and continuous link with Basheera.168
78. For all these reasons, the requirement provided by the second limb of Article 2(1) BIT
is not met in the present case. Since one of the conditions is not met, Respondent cannot
deny the benefits of the BIT to Claimant.
2. Atton Boro is not owned and controlled by nationals of a third State
79. In the event that the Tribunal finds that Claimant has no substantial business activities
in Basheera, Claimant submits that it is neither owned nor controlled by “nationals of a
third state”. The Tribunal should interpret Article 2(1) BIT according to its ordinary
meaning.169
80. First, “nationals” does not encompass legal entities and is restricted to natural
persons.170 Indeed, BITs define “nationals” as referring to natural persons,171 and in the
absence of express definition, BITs make clear that “nationals” only refers to natural
persons172. In the present case, the Tribunal shall refer to the BIT’s Preamble, where the
Contracting Parties have expressed their intent to “promote greater economic
cooperation between them with respect to investment by nationals and enterprises of
one Contracting Party in the territory of the other Contracting Party” 173 . The
Contracting Parties therefore intended to distinguish between “enterprises” as legal
entities and “nationals” which solely refers to natural persons.
167 PO3, P50:L1574; Petrobart, p.42; Pac Rim, ¶4.8; Amto, ¶68.
168 On the contrary, see Pac Rim, ¶4.74.
169 Article 31(1) VCLT.
170 Article 2(1) BIT.
171 E.g.:Article I.1(c) US-Ecuador BIT (1993).
172 E.g.:Article III.6 of the Australia-Indonesia BIT (1992).
173 Preamble BIT.
26
81. Second, “control” includes “control in fact”, i.e. an ability to exercise substantial
influence over legal entity’s day-to-day management and operation.174 In the present
case, Atton Boro’s parent company is directed by nationals of Basheera and Mercuria.175
As directors of the holding company of Atton Boro Group, they implement the common
strategy of the group and as such have “the power to effectively decide and implement
the key decisions of the business activity” 176 of Atton Boro.
82. Third, the “ownership” requirement was considered fulfilled whenever nationals of a
third State own a majority shareholding in a company. For instance, in Pac Rim, the
tribunal found that claimant was owned by its third-Party parent company holding a
100% of its shares.177 In the present case, Claimant’s parent company shares are held
by “a mix of private entities and private individuals of a wide variety of nationalities”,178
including shareholders from Contracting Parties.
83. For the following reasons, it is undisputed that Atton Boro Ltd is owned and controlled
by natural persons of a third State. Since the first limb of Article 2(1) BIT is neither
satisfied, Respondent cannot exercise its right under Article 2(1).
3. In any event, Respondent manifestly failed to discharge its burden of proof
84. The burden of proof of establishing the two limbs of Article 2(1) BIT lies with
Respondent. Indeed, it is well established in international law that the burden of proof
initially rests on the Party who makes an assertion, in accordance with the maxim onus
probandi actori incumbit.179 Several arbitral tribunals confirmed this conclusion.180
174 Plama, ¶170.
175 PO3, P50:L1571.
176 Thunderbird, ¶108.
177 Pac Rim, ¶¶4.79-4.828.
178 PO3, P50:L1570-1572.
179 Gadelshina, PP269-284: “the old Roman maxim actori incumbit onus probandi still holds, in the practice
of both municipal and international fora”.
180 Generation Ukraine, ¶15.8, Amto, ¶64; Liman, ¶164.
27
85. In the present case, Respondent has failed to demonstrate that Claimant has neither
substantial business activities in Basheera, nor that it is owned or controlled by nationals
of a third State.
86. For all of the above reasons, the Tribunal should reject Respondent’s denial of benefits
objection.
28
PART TWO: MERITS
88. Respondent has violated several treaty provisions. First, by failing to observe its
obligations under the LTA, Respondent has breached Article 3(3) (III). Second, by
denying justice to Claimant in the enforcement Proceedings, Mercuria failed to provide
fair and equitable treatment (IV). Finally, Mercuria breached the FET standard by
enacting the Law and granting a license to HG-Pharma in violation of Article 3(2) (V).
RESPONDENT BREACHED ARTICLE 3(3) BIT BY FAILING TO OBSERVE THE OBLIGATION IT
ENTERED INTO UNDER THE LTA
89. Pursuant to Article 2 ILC, an internationally wrongful act of a State arises out of a
conduct attributable to a State under international law and if such conduct amounts to a
breach of an international obligation assumed by the State.
90. Accordingly, Claimant submits that the termination of the LTA is attributable to
Mercuria (A) and constitutes a breach of Article 3(3) BIT (B).
A. NHA’s termination of the LTA is attributable to Mercuria
91. NHA’s termination of the LTA is attributable to Mercuria under international law in
application of the ILC Articles.
1. NHA is a State organ
92. NHA is a State organ under Article 4 ILC. 181 All acts of NHA are thus attributable to
Respondent, including the LTA’s termination.
181 See supra ¶¶44-48.
29
2. In any event, NHA exercised governmental authority in terminating the LTA
93. An entity’s conduct is attributable to the State under Article 5 ILC if it exercises
governmental authority, and if it acts in such capacity “in the particular instance”. As
already demonstrated above, the first condition is fulfilled.182
94. Regarding the second condition, Respondent cannot deny that the termination of the
LTA constituted a critical decision in the context of the national health concerns in
Mercuria. In view of the paramount importance of the LTA and the risk of unavailability
of effective cure for Mercurian patients, its termination could not have been decided by
NHA without the government’s approval.
95. Moreover, as the termination was solely motivated by the government budgetary
problems and not by the alleged – and refuted by the Prior Award – Claimant’s
insufficient performance, it reveals that NHA exercised governmental authority when
terminating the LTA. Consequently, the termination of the LTA is attributable to
Respondent.
3. NHA acted on the instructions of Mercuria when terminating the LTA
96. The acts of an entity can be attributed to a State under Article 8 ILC if such entity acts
“on the instructions of, or under the direction or control of that State”.
97. To attribute the termination of a contract to the State of Pakistan under Article 8 ILC,
the Tribunal shall take into account “a certain degree of government involvement”
evidenced for instance by a governmental clearance given at a prior meeting “to resort
to the available contract remedies, including termination”.183 In addition, whether the
conduct is characterized as “either sovereign or commercial in nature” is without
prejudice to the attribution of the act.184
98. In the present case, following the refusal of Claimant to accord an unjustified discount,
the Director of NHA had a private meeting with the Minister and the President of
182 See supra ¶¶48-50.
183 Bayindir Award, ¶128.
184 Bayindir Award, ¶129, referring to ILC Articles (Commentary), Article 8, ¶2.
30
Mercuria on 15 May 2008, to discuss “budgetary problems” in government healthcare
programs.185 Less than one month later, NHA terminated the LTA on the basis of
Claimant’s alleged “unsatisfactory performance”, although such contention had never
been raised before. This sequence of facts clearly demonstrates that Respondent
ultimately instructed NHA to terminate the LTA.
B. Mercuria failed to observe its obligations towards Claimant under the LTA in
violation of Article 3(3) BIT
99. To find a violation of the umbrella clause, the Tribunal shall first establish that NHA
breached its municipal law obligations under the LTA (1); and second, that such breach
amounts to a breach by Respondent of its international law obligations under Article
3(3) BIT (2).
1. NHA breached its municipal law obligations under the LTA
100. Article 3(3) brings under the ambit of the BIT municipal law obligations,186 without
modifying their content and extent. 187 Accordingly, whether NHA breached its
municipal law obligations under the LTA is to be determined in application of the lex
contractus which has already been conclusively determined by the Award (a). In any
event, Respondent never adduced evidence of Claimant’s purported unsatisfactory
performance under the LTA (b).
a) The Tribunal should accept the Award’s finding regarding the NHA’s
wrongful termination
101. Where an international tribunal deciding upon treaty claims needs to answer a
preliminary question under municipal law, it must give due deference to a prior decision
rendered on that issue within the domestic legal order. While there is no res judicata
185 Facts, P30:¶16:L927-929.
186 Lemire, ¶498.
187 CMS Annulment, ¶95; SGS/Philippines, ¶127; Crawford-Treaty/Contract, P20.
31
effect between two distinct legal orders188, the renvoi from one legal order to another
justifies that a decision in the latter shall be respected by the former to the extent that it
is relevant for assessing the treaty claim.
102. Yet, it is primarily for the competent tribunal under domestic law to apply and interpret
municipal law obligations.189 Indeed, an investment tribunal cannot act as an appellate
body of such tribunals.190 Thus, international tribunals should defer to the findings of
municipal tribunals as authoritative on points of national law.
103. In the present case, pursuant to the forum selection clause in the LTA, it was for the
Prior Tribunal to settle contractual claims. The competent tribunal rendered a final and
binding decision holding that NHA wrongfully terminated the LTA. Respondent does
not contest the Award’s conclusive decision on the matter.191
104. Nevertheless, a relevant municipal law decision is not automatically transposed in the
international legal order. An investment tribunal may only rely upon its findings if such
tribunal is satisfied that the decision is not tainted by any procedural or substantive
deficiencies of such gravity that would render it unacceptable from the perspective of
international law.192 Naturally, an international tribunal will not defer to a municipal
law decision which would appear arbitrary, lacking due process, or amounting to denial
of justice.193
105. Here, Respondent has not proved and not even alleged that the proceedings or the Award
itself showed any sign of deficiencies which would lead the Tribunal to question the
validity of its findings.
188 Helnan Award, ¶124; Al Tamimi, ¶358; Desert Line, ¶¶136-137; GAMI, ¶41.
189 Helnan Award, ¶106; Petrobart, PP76,88.
190 Liman, ¶274; Swisslion, ¶264; Helnan Award, ¶106; Awdi, ¶327.
191 Response, P17:¶8:L500-507.
192 Helnan Award, ¶106; Bosca, ¶198; Desert Line, ¶133.
193 Awdi, ¶¶326-327.
32
106. In light of the above, the Tribunal deciding on a treaty claim under the umbrella clause
should thus acknowledge that the Prior Award can be relied upon and accept its finding
that NHA breached its contractual obligations in terminating the LTA.
b) In any event, NHA never adduced any evidence of Claimant’s unsatisfactory
performance under Clause 6 LTA
107. The LTA could only be terminated by NHA in case of unsatisfactory performance of
Claimant, according to Clause 6. As the record stands, NHA or Respondent never
alleged that Claimant’s performance under the LTA was unsatisfactory. Thus,
Respondent does not challenge the findings of the Award or the fact that the Prior
Tribunal has conclusively decided the matter.194
2. The contractual breach of the LTA by NHA amounts to a violation of Article 3(3) by
Respondent
108. Claimant submits that the breach of the LTA by NHA equals a breach of Article 3(3)
BIT by the State firstly since the provision covers “any” breach, secondly since the BIT
omitting any additional requirement. In any case, Claimant further argues that even if
Mercuria seeks to apply an additional iure imperii requirement, this Tribunal should
consider such requirement met.
109. First, on the basis of the broad wording of the clause and previous analysis regarding
the scope of the umbrella clause encompassing “any obligation”, “any” breach of such
obligations should amount to a breach of the umbrella clause. The umbrella clause
creates an automatic link between contract breach and treaty breach so that any violation
of a private law agreement becomes ipso iure a violation of the BIT.195 This implies that
any kind of breach of a contract would be sufficient to trigger the umbrella clause.
110. An umbrella clause imposes a substantive treaty obligation on a contracting State to
comply with its undertakings towards investments, which implies that “[a]ny non-
compliance with or breach of such undertakings, even if of a commercial nature,
194 Response, P1:¶8:L500-507.
195 Lemire, ¶498; SGS/Philippines, ¶115; Noble Ventures, ¶68; Micula, ¶447.
33
constitutes a violation of this treaty obligation”.196 This is consistent with the object of
such clause, which is to protect the investor’s contractual rights against any State
interference, even “a simple breach of contract”.197
111. Tribunals basing their reasoning on Article 31(1) VCLT specify that the application of
umbrella clauses only requires that an obligation entered into by a State with regard to
investments, has not been observed.198 Hence, the violation of a contract covered by an
umbrella clause becomes automatically a violation of the BIT itself.
112. Article 3(3) BIT provides protection against “any” breach since it covers “any
obligations”. It was already demonstrated that Mercuria entered into an obligation, with
regard to an investment that it wrongfully terminated (iii). Therefore, its breach of the
LTA obligations amounts to a breach of Article 3(3) BIT.
113. Second, this Tribunal shall reject any purported additional requirement, as the wording
of Article 3(3) is clear and unambiguous. In Burlington Jurisdiction where the
applicable umbrella clause was very similar to Article 3(3) BIT199, the tribunal found
that, due to the broad wording of the umbrella clause, a claimant might rely upon the
treaty’s umbrella clause even if no exercise of sovereign power is involved.200 Indeed,
no additional criteria such as the use of “sovereign powers” should be applied to
determine whether a contractual breach could amount to a treaty breach, unless the BIT
expressly provides such criterion. The ILC Draft Articles do not distinguish between
acts iure imperii and iure gestionis as it is irrelevant and “capable of producing arbitrary
results”201. Most tribunals also do not endorse such distinction or any additional criteria
of use of sovereign powers.202 In fact, one of the reasons of the rejection of such criteria
is that the distinction between the State acting as merchant and the State acting as
196 Newcombe/Paradell, ¶9.22; Schreuer-Umbrella, PP231-256.
197 Dolzer/Stevens, PP81-82.
198 Duke Energy, ¶318.
199 Article II(3)(c) US-Ecuador BIT.
200 Burlington, ¶190; Duke Energy, ¶320.
201 Crawford-Treaty/Contract, P19.
202 Duke Energy, ¶320.
34
sovereign does not constitute an adequate test as “[i]n many cases, it might be difficult
to draw this distinction.”203
114. Hence, Article 3(3) allows Claimant to elevate contractual breaches at the level of treaty
breaches even if no exercise of sovereign power is involved.
115. In any case, if Respondent seeks to apply an additional iure imperii requirement, this
Tribunal should consider such requirement to be met firstly as the iure imperii condition
is redundant with the earlier analysis of attribution of NHA’s termination to the State,
secondly since NHA’s termination of the LTA bears all the characteristics of an act iure
imperii.
116. It is unnecessary to analyze both attribution and the iure imperii requirement. 204
Therefore, when an act is found to be attributable to the State, such requirement is met
without any further analysis. If the Tribunal finds that NHA’s wrongful termination of
the LTA is attributable to the State, NHA’s termination of the LTA constitutes an act
iure imperii as it necessarily involved the use of “governmental powers”205.
117. In any event, NHA’s termination of the LTA bears all the characteristics of an act iure
imperii as the State’s conduct goes beyond that of an ordinary counterpart. If the State
acted in the past using sovereign powers, the past act taints the new act. Here, the
conclusion of the LTA involved sovereign authority as it was concluded for public
purposes, its termination should therefore be deemed to involve elements of public
authority. Indeed, termination occurred to handle health concerns in Mercuria, whereas
such reason for termination was not stipulated in the LTA. Therefore, Respondent
cannot argue that a public interest termination was “explicitly part of the Parties’
negotiated bargain.”206 Therefore when NHA used its sovereign authority to terminate
the LTA it stepped out of its role of ordinary counterpart.
203 Sempra, ¶311.
204 AWG, ¶¶146-157.
205 Noble Ventures, ¶85, Hamester, ¶172.
206 Convial Callao, ¶537.
35
118. Finally, a contractual breach amounts to a treaty breach under the composite acts
doctrine when the State used its sovereign powers under the prospective unity test. Here
the State used its sovereign powers during this single-purpose operation at several
stages: when it decided to terminate the LTA, when it enacted the Law as well as during
the licensing proceedings and when Mercuria raised a public power exception not
available to a private entity during the Proceedings. As a consequence, the wrongful
termination of the LTA by NHA constitutes a contractual breach amounting to a breach
of Article 3(3) by the Respondent.
MERCURIA BREACHED ITS OBLIGATION TO ACCORD FAIR AND EQUITABLE TREATMENT
TO INVESTORS BY DENYING JUSTICE TO CLAIMANT IN THE PROCEEDINGS
119. Mercuria’s obligation not to deny justice to investors (A) was breached by lack of due
process in the conduct of the Proceedings (B).
A. Mercuria bears the obligation to treat investors with due process
120. Claimant submits that the BIT’s FET standard imposes an obligation upon Mercuria to
ensure that investors are treated with due process since the State is responsible of its
judiciary. Indeed, pursuant to Article 4 ILC, States are responsible for the acts and
omissions of their organs. As judicial courts undeniably qualify as State organs under
Article 4, 207 the treaty violations committed by the Court are attributable to Mercuria.
121. The standard the judicial courts are bound to apply is contained in Article 3(2) which
provides that FET shall be accorded “at all times” and prohibits the “impair[ment]
unreasonable or discriminatory measures” on investments. The FET standard implies
a prohibition for the host State to deny justice to investors, even in the absence of a
specific provision regarding justice in the BIT.208
207 Lotus; Immunity/Rapporteur, ¶62; Loewen Jurisdiction, ¶54; Schreuer, P89; Paulsson, P39.
208 Jan de Nul, ¶188; Oostergetel, ¶272; Pey Casado, ¶653, Waste Management, ¶98; OI Group, ¶523;
Rumeli, ¶651; Dolzer/Schreuer, P142.
36
122. Claimant submits that the interpretation of the BIT standard of prohibition of denial of
justice reveals that a stringent obligation rests upon Mercuria.
123. First, the wording of Article 3(2) specifies that the standard shall be accorded “at all
times”. In its ordinary meaning, 209 this language imposes a more stringent obligation on
the Contracting Parties to ensure at all levels of the judicial system that investors are
treated with fairness and equity.
124. Second, the Preamble210 provides that the Contracting Parties:
“[r]ecogniz[e] the importance of providing effective means of asserting claims
and enforcing rights with respect to investments […] through international
arbitration”.
125. Such reference to effective means creates an autonomous and higher standard to address
a lack of clarity in customary international law regarding denial of justice.211 Moreover,
the mention of international arbitration shows that the Parties wished to apply the
standard specifically regarding the enforcement of awards.
126. Third, the standard should be interpreted in light of other treaties in force between
Mercuria and Basheera,212 in particular the New York Convention,213 under which the
awards are considered as binding.214 The denial of justice standard applies stringently
to enforcements such as the enforcement of the Award.
127. Consequently, the Parties intended to set a high Standard regarding the administration
of justice. This stringent obligation has been breached by Mercuria since the Court has
conducted the Proceedings in violation of due process.
209 Article 31(1) VCLT.
210 Article 31(2) VCLT.
211 Chevron II, ¶¶242-244.
212 Article 31(3)(c) VCLT.
213 PO2, P48:¶2:L1497-1499.
214 Article 3 New York Convention.
37
B. Mercuria unjustifiably failed to treat Claimant with due process
128. The conduct of the Proceedings amounts to a denial of justice (1). Moreover, Claimant
had no obligation to exhaust local remedies (2).
1. The Court failed to respect due process in the Proceedings
129. Through the prohibition of denial of justice, international law condemns any “willful
disregard of due process of law” that is characterized by an act that “surprises a sense
of juridical propriety”.215
130. Due process aims at protecting fundamental rule of law values in decision-making such
as predictability, accessibility and impartiality,216 and requires that justice be rendered
in a reasonable delay (a) and by an impartial body (b).
a) The 8-year delay in enforcing the Award amounts to a denial of justice
131. For 8 years, Claimant has been awaiting the enforcement of its rights under the Award.
This delay amounts to a denial of justice which is even more prejudicial than facing an
absolute refusal to access justice.217
132. Under international law, the prohibition of denial of justice implies for justice to be
rendered in a reasonable time.218 As the assessment of undue delays is highly fact-
sensitive,219 the Tribunal should take into consideration the number of years of the
Proceedings,220 as well as other relevant factual elements: the behaviors of the Court
215 ELSI, ¶128.
216 McLachlan/Shore/Weiniger, ¶7.182.
217 Paulsson, P177.
218 UN Review, ¶92; Chattin, ¶30; Toto Jurisdiction, ¶156; Binder, ¶448; Grotius, Livre III, Chap. 2;
Paulsson, P177.
219 White Industries, ¶10.4.10.
220 El Oro Mining, P198.
38
and Claimant, the complexity of the case and the need for speedy resolution. Tribunals
do not consider that specific circumstances of the Court can serve as justification. 221
133. The Court’s behavior. The legitimacy of the delays depends on the behavior of the
judicial bodies i.e. acts and omissions 222 in relation to the organization of the
Proceedings. It also includes the tolerance towards litigants’ dilatory maneuvers which
amounts to their endorsement.223
134. In the present case, the conduct of the Court resulted in over 4½ years delays. In fact,
the judge’s absences224 and the many adjournments because of lengthy arguments in
other cases225 caused a delay of 467 days in total.
135. Further, the Court endorsed NHA’s dilatory maneuvers by granting many extensions
and adjournments, 226 and refused to judge ex parte 227 despite NHA’s numerous
absences228 and regardless of Claimant’s objections. 229 The first threat of the Court to
judge ex parte230 was followed by several absences causing 292 additional days delays.
In total, the Court is responsible for an additional delay of 1 238 days.
136. Claimant’s behavior. Whether claimants contributed to the delays, depends their
diligence to accelerate the procedure.231
221 White Industries, ¶10.4.10; Toto Jurisdiction, ¶¶163, 165; Chevron II, ¶250; Oostergetel, ¶290.
222 ILC Articles Commentary, Article 1.
223 Waste Management, ¶131.
224 Notice, P7:¶3:L203; P11:¶33:L320-321.
225 Notice, P7:¶9:L217-218; P8:¶15L:243-244; P9:¶20L:269-270, ¶24:L281-282; P11:¶40:L343-344.
226 Notice, P7:¶7:L213-214, ¶8:L215-216; P8:¶12:L227-228, ¶13:L229-233, ¶14:L234-242; P9:¶22:L275-
278; P10:¶31:L313-315; P11:¶37:L331-335, ¶41:L345-346; P12:¶42:L347-349.
227 Notice, P7:¶5:L207-209; P9:¶21:L271-274.
228 Notice, P7:¶4:L204-206, ¶5:L207-209; P9:¶19:L263-267, ¶21:L271-274; P11:¶34:L322-325, ¶39:L340-
343; P12:¶44:L353-354.
229 Notice, P7:¶ 4:L204-206; P8:¶13:L229-232; P9:¶19:L263-267, ¶21:L271-274; P11:¶34:L322-325.
230 Notice, P7:¶5:L207-209.
231 Chevron II, ¶255; Toto Award, ¶167.
39
137. In the present case, Claimant accomplished many diligences to accelerate the
proceedings. Claimant immediately requested transfer of its case to the Commercial
Benches232 specifically set up to expedite commercial matters. 233 It also “requested a
hearing within a short time” twice, 234 and pointed out that NHA’s absences were
contrary to Mercurian procedural law and were aimed at deliberately delaying the
Proceedings.235
138. The complexity. Enforcement proceedings are not a complex issue236 since the New
York Convention prohibits a review on the merits and imposes to recognize arbitral
awards as binding and enforce them,237 except under limited grounds.238
139. In our case, Claimant seeks to enforce the Award which is in the ambit of the New York
Convention.239 Accordingly, Mercuria can only refuse enforcement on limited grounds,
only one of which was invoked by NHA, namely public policy240 which should not
require an 8-year examination. Therefor the delays are not justified by the complexity
of the case.
140. The need for swift resolution. The need for a swift resolution is decisive is assessing the
legitimacy of the delays.241
232 Notice, P8:¶17:L255-259.
233 Facts, P30:¶19:L938-940.
234 Notice, P9:¶23:L279-280; P10:¶32:L316-317.
235 Notice, P7:¶4:L204-206; P8:¶13:L229-232; P9:¶19:L263-267, ¶21:L271-274; P11:¶34:L322-325.
236 White Industries, ¶10.4.11.
237 Article 3 New York Convention.
238 Article 5 New York Convention.
239 PO2, P48:¶2:L1497-1499.
240 Facts, P30:¶18:L936-937.
241 White Industries, ¶10.4.14.
40
141. The termination of the LTA and the grant of the License significantly affected Atton
Boro242 which announced that it would no longer be dealing Sanior in Mercuria.243 This
implies irreparable harm since Claimant will thus be selling the manufacturing unit and
terminating the personnel’s employment contracts. Thus, Claimant’s financial
difficulties legitimate its need for a speedy enforcement of the Award under which NHA
is debtor of USD 40 000 000.
142. The specific circumstances of Mercurian courts. Specific circumstances, as the
overburdening of courts, may explain but not excuse the delays since they reveal the
defectiveness of the judicial machinery.244
143. In the present case, Claimant contests that the courts are overburdened since the License
only took 5 months for the Court to deliver. Yet, the Court invoked “overwhelming
caseload” to justify the delays between hearings245 and their numerous adjournments.246
However, the overburden of the Court cannot serve as an excuse for undue delays
whatever the legitimacy of their cause.
144. Consequently, the facts reveal that despite Claimant’s diligence, the Court failed to
ensure its mission to render justice in a reasonable time and thereby committed denial
of justice.
242 Facts, P31:¶24:L959-962.
243 Facts, P31:¶25:L963-967.
244 El Oro Mining, ¶10; Toto Jurisdiction, ¶162; Pantechniki, ¶76; Freeman, P261.
245 Notice, P1:¶32:L317-319.
246 Notice, P7:¶9, L217-218; P8:¶15:L243-244; P9:¶20:L269-270, ¶24:L281-282; P11:¶33:L320-321,
¶40:L343-344.
41
b) Claimant was denied its right to an impartial justice
145. The FET standard implies fair procedure 247 and a prohibition of discriminatory
measures in administering justice. From this prohibition stems that of partiality248 and
equality of arms, which are assessed by the differences in the parties’ treatment. 249
146. The impartiality requirement is objective, i.e. the judges must give guarantees of their
impartiality for the parties to be freed from their perception of bias.250
147. In the present case, the judge’s statement clearly reveals a bias:
“private parties ought to be more accommodating of their public counterparts
who have limited resources at their disposal. A delay in service of one rejoinder
will hardly run a billion dollar corporation into the ground.” 251
148. Moreover, the discrepancies of treatment further demonstrate this bias. In fact, while
Claimant had 66 days to submit its reply to NHA’s response,252 NHA had at least 190
days to file its rejoinder to the reply.253 Also, NHA had 161 days to file its notes on the
amendment application,254 whereas Claimant only had 34 days.255
149. The judge’s bias towards NHA breaches the requirement of impartiality of justice and
further characterizes a denial of justice.
247 Frontier ¶289; Metalclad ¶91.
248 Paparinski P13.
249 Paparinski P13; Bishop/Stevens, P485.
250 Loewen Award, ¶139; Bullis, ¶¶231-232; Smith, ¶¶384-386-7.
251 Notice, P8, ¶14:L237-240.
252 Notice, P7, ¶10:L219-224.
253 Notice, P8, ¶11:L223-224, ¶14:L234-242.
254 Notice, P8, ¶16:L249-250, P9, ¶19:L263-267.
255 Notice, P8, ¶16:L249-254.
42
2. Claimant was not required to exhaust local remedies
150. As Claimant has suffered from undue delays in the Proceedings, its claim for denial of
justice is not subject to the requirement to exhaust local remedies. Indeed, undue delays
are an exception to this requirement.256
151. This general rule finds its justification in the fact that in case of undue delay, an
insistence to exhaust local remedies would constitute in and of itself a denial of
justice.257 In addition, such a requirement would allow a State to escape its international
responsibility by delaying the issuance of a final decision.
152. In the present case, the delays suffered by Claimant qualify as an exception to the
requirement to exhaust local remedies. Consequently, all requirements to bring a claim
under denial of justice were fulfilled.
MERCURIA BREACHED THE FET STANDARD BY ENACTING THE LAW AND GRANTING THE
LICENSE TO HG-PHARMA IN VIOLATION OF ARTICLE 3(2) BIT
153. As the standard under the BIT does not contain any reference to international law, the
FET clause should be understood as autonomous from the international minimum
standard,258 giving a higher protection to investors.259
154. Claimant submits that Mercuria altered Claimant’s IP rights in a non-transparent manner
despite specific assurances (A) and by violating its international obligations on IP rights
(B).
256 OI Group ¶527; Article 15(b) ILC Articles on Diplomatic Protection; Article 41.1(c) International
Covenant on Civil and Political Rights.
257 Jan de Nul, ¶256; McLachlan/Shore/Weiniger, ¶7.118; Paulsson P113.
258 Micula, ¶503; Lemire, ¶284.
259 Schreuer FET, P30; Enron, ¶258.
43
A. Mercuria altered Claimant’s IP rights in a non-transparent manner despite specific
assurances given to the contrary
155. Mercuria frustrated Claimant’s legitimate expectations by making specific
representations regarding its IP regime (1), and acted in a non-predictable and non-
transparent manner in changing its IP regime (2). The disproportional effects of these
changes on Claimant’s investments cannot be justified by Mercuria’s right to regulate
(3).
1. Mercuria frustrated Claimant’s legitimate expectations by making specific
representations regarding its IP regime
156. Mercuria created legitimate expectations by making specific representations Claimant
relied on, which were then frustrated by the enactment of the Law.
157. It is widely accepted that the obligation to accord FET requires the host State to protect
the investor’s legitimate expectations 260 which is a “dominant element” 261 of this
standard.
158. Legitimate expectations arise from representations made in the form of explicit or
implicit promises or assurances, attributable to the host State and on which the investor
reasonably relied on.262 These assurances need to be specific, i.e. they must be addressed
either to the particular investor, or in the context of particular industry.263
159. On January 2004, the Minister for Health underlined during a press statement that “[a]
stable, progressive IPR regime is essential” to “their strategy to tackle critical
diseases”. 264 He emphasized that “patents are the cornerstone of the innovative
pharmaceutical industry” and “reaffirmed [Mercuria’s] commitment to empower and
260 Tecmed, ¶154.
261 Saluka, ¶302.
262 McLachlan/Shore/Weiniger, ¶¶7.184-7.185.
263 National Grid, ¶177; BG Group, ¶304.
264 PO1, P39:¶2:L1259.
44
engage right holders”.265 The next day, the President of Mercuria shared his statement
on its “verified” official twitter account.266
160. Both the Minister for Health and the President are State representatives whose conducts
are attributable to the State. Their statements reach out to investors of a particular
industry, namely, the “right holders” dealing with “critical diseases” in the
“pharmaceutical industry”.267 They reassure investors of this industry that Mercuria’s
IP regime is firmly established, subject to gradual developments, i.e. "stable,
progressive”.
161. The existence of legitimate expectations further requires the reliance of the investors.268
Reliance typically refers to a decision to invest capital,269 either in the form of an initial
investment, or the expansion of an existing one,270 following the specific representation.
Thus where the overall investment is a combination of investment decisions covering
diverse transactions and activities spread over a period of time, it is necessary to identify
each of these decisions and “to examine individually whether they were based on
contemporary legitimate expectations”.271
162. Claimant’s reliance on the specific representation is proven by its decisions to enter into
the LTA,272 and to expand its investment by setting up the manufacturing unit for
Sanior, just after the specific representations made by the Host State’s officials in
January 2004. 273
265 PO1, P39:¶4:L1270.
266 PO3, P50:L1567.
267 PO1, P39:¶4L1265-1270.
268 Enron, ¶262.
269 Suez, ¶226.
270 Newcombe/Paradell, P278.
271 Schreuer/Kriebaum, PP271-272; See Frontier, ¶287.
272 Facts, P29:¶9:L892-894.
273 Facts, P29:¶11:L901.
45
163. Once the existence of Claimant’s legitimate expectations is established, the last element
to be proven is their frustration.
164. On 10 October 2009, despite these specific assurances, Mercuria adopted the Law
allowing the use of patented inventions without the authorization of the owner.274 This
Law, embodied by the grant of the License, is nothing else than a “myopic measure”
abridging the right of patent holders contrary to the representations made by State
officials.275
165. Therefore, Mercuria frustrated Claimant’s legitimate expectations as to the
predictability of the IP regime.
2. Mercuria acted in a non-predictable and non-transparent manner in changings its IP
regime
166. Mercuria’s non-transparent conduct breached its right to a predictable IP legal
framework under the FET standard.
167. Protecting the predictability of the legal framework is considered as part of the modern
customary international law standard.276 Moreover, where tribunals interpreted the FET
standard under Treaties with similar wording as the BIT, they concluded that
predictability of the legal framework is part of the duties of the host State.277
168. Indeed, the FET obligation should be given a sufficiently wide interpretation278 to be
consistent with the object and purpose of the BIT279 and within its context to “encourage
and create favorable conditions for investors”.280 Moreover, the Contracting Parties
274 Facts, P30:¶20:L944-946; Law, PP44-45.
275 PO1, P39:¶4:L1269.
276 Murphy, ¶207; Duke Energy, ¶339; LG&E, ¶125.
277 BG Group, ¶298; Murphy, ¶¶206-207, 248-249; Saluka, ¶¶301,303; Tecmed, ¶154.
278 Article 31 VCLT.
279 BIT, Preamble, L977-981.
280 Article 3(1) BIT.
46
aimed at giving particular importance to the protection of IP rights.281 The FET standard
should therefore be interpreted as a “pro-active”282 obligation to provide a predictable
legal framework283 as to the IP regime.
169. Moreover, host States have to behave in a totally transparent manner in their relations
with investors284 even in situations of unforeseen circumstances such as a public health
concern.285 Transparency encompasses obligations such as notification requirements
with respect to laws as well as to provide a reasonable opportunity to comment on new
laws. These are especially relevant factors where the investor relied on specific
government representations about State regulation.286
170. In our case, an omission to negotiate would seem at odds with State’s practice in using
compulsory licenses tool to first negotiate with pharmaceutical industries on reduced
prices. NHA did ask for a further discount in early 2008, but ended the negotiations
rapidly by terminating the LTA in June 2008 with no mention of compulsory licenses.
At that time, Mercurian law did not provide for the possibility of compulsory license.287
171. Mercuria did not conduct any consultation with stakeholders during 1½ year that lapsed
before the adoption of the Law in October 2009, while it represents a “sword of
Damocles” upon industries using patents. Mercuria did not enter into any dialogue with
Claimant before HG-Pharma, a State-owned enterprise, 288 sought a License for
Valtervite to find a cost-saving solution for the supply of Sanior by using compulsory
licenses as evidenced by the meeting among governmental authorities in May 2008.289
281 BIT, Preamble, Article 1(1), Article 4(2).
282 MTD, ¶113.
283 Murphy, ¶248.
284 Tecmed, ¶154; Murphy, ¶206; Lemire, ¶284; Rusoro, ¶524.
285 Urbaser, ¶628.
286 Newcombe/Paradell, PP291-292.
287 PO3, P50, L1577-78; See the contrary in Eli Lilly, ¶384.
288 PO3, P50:L1596.
289 Facts, P30:¶16:L926-929.
47
Claimant was not given the opportunity to find solutions with Mercuria to avoid the
grant of the License nor to adapt its business in consideration of the License.
172. Therefore, by failing to engage in a reasonable period of negotiations before taking the
adverse measures, Mercuria failed to provide a predictable framework.
3. Mercuria’s right to regulate cannot justify the disproportional effects of the changes to
its IP regime
173. Claimant submits that it is not sufficient that Mercuria’s actions relate to a rational
policy: it is also necessary that in the pursuit of that policy it behaved with due regards
to the consequences imposed on investors.
174. In assessing the violation of FET, tribunals take into account all the relevant
circumstances290 and especially the motivations of the host State.291 While admitting
host State’s right to regulate, tribunals prohibited “substantial” 292 or “drastic” 293
changes in the legal and business framework under which the investment was decided
and implemented.
175. In that respect, Claimant invites the Tribunal to compare the magnitude and the impact
of the measures taken by Mercuria with the seriousness of the health problem.
176. The sole purpose of a patent is to grant an “exclusive right to prevent third parties from
using, producing or commercializing the patented invention.”294 The License following
the enactment of the Law removes Claimant’s exclusivity over Valtervite, rendering the
very existence of a patent null and void. Consequently, Claimant had lost nearly two-
thirds of its market share and several distributors.295
290 Saluka, ¶304.
291 Isotalo, P19.
292 Sempra, ¶303.
293 Toto Award, ¶244.
294 Correa, P14.
295 Facts, P31:¶24:L959-960.
48
177. Despite the health concern, Mercuria did not provide any effective greyscale treatment
between the termination of LTA and production of the generic drug by HG-Pharma.296
Moreover, once the deliveries have started it decided to export Sanior to third
countries.297 All these elements put into doubt the seriousness of the health concerns in
Mercuria.
178. The Tribunal should conclude that Claimant’s investment was denied FET when
Mercuria took the Law and granted the License and that these acts cannot be justified
by the prevailing circumstances in Mercuria.
B. Mercuria breached FET standard by violating its international obligations on IP rights
179. TRIPS provides international standards of conduct (1) and Mercuria failed to accord a
treatment no less-favorable that accorded under TRIPS by granting the License (2).
1. Mercuria must respect the international standard of conduct set by TRIPS
180. Mercuria and Basheera are parties to TRIPS, 298 which is directly applicable under
Article 11 and also a relevant reference for assessing fairness and equity of Mercuria’s
measures.299
181. First, TRIPS is directly applicable under Article 11. The Parties agreed to apply
international law to the dispute300 and Article 11 sets a standard of regulatory treatment
which refers to rules of international law applicable between the Contracting Parties.
This “preservation of rights” clause permits applicability of special international law
provisions that are more-favorable to investments of investors.
296 PO3, P50:L1583-1584.
297 Facts, P30:¶23:L956-958.
298 PO2, P48:¶2:L1496.
299 VanAaken, P108.
300 PO1, P26:¶11:L796.
49
182. Second, TRIPS can inform the interpretation of FET. In fact, under Article 31(2) VCLT,
reference to WTO Agreements in the Preamble should serve to interpret the standard.301
Moreover, according to Article 31(3)(c) VCLT, any relevant rules of international law
applicable in the relations between the parties should be taken into account, as
confirmed by PO1.302
183. Therefore, the Tribunal should not construe the FET standard as providing a lesser
treatment than that under TRIPS.
2. Mercuria violated the FET standard by according a treatment less-favorable than that
under TRIPS in granting the License
184. Claimant submits that Mercuria violated TRIPS by acting contrary to its object and
purpose and by breaching several provisions of the agreement.
185. Mercuria’s actions are contrary to the object and purpose of TRIPS which is to protect
and enforce IP rights to contribute to the promotion of technological innovation among
members.303 TRIPS explicitly addresses the interests of nationals of WTO members304
which are beneficiaries of treatment accorded under TRIPS as recalled by a WTO Panel:
“Predictability in the intellectual property regime is indeed essential for the
nationals of WTO Members when they make trade and investment decisions in
the course of their businesses.”305
186. In particular, Mercuria breached Article 33 TRIPS protecting patents for a minimum of
20 years. Claimant expected its Patent to last until 21 February 2018, however the grant
of the License de facto ended this protection.
301 BIT, Preamble, L985.
302 PO1, P26:¶11:L796.
303 Doha Declaration TRIPS, ¶7.
304 Article 1(3) TRIPS.
305 WTO, India, ¶7.30; WTO, US, ¶¶7.76-7.81.
50
187. Moreover, the License was issued following a fast-track process and for a limited period
of time i.e. until greyscale was no longer a threat to public health in Mercuria.306
However, the public health concern was not sufficiently grave as to amount to a national
emergency or an extreme urgency under Article 31(b) TRIPS justifying a fast-track
process. Indeed, evidence undermines the seriousness of greyscale in Mercuria. In any
event, Claimant should have been notified of HG-Pharma’s application. The License is
still in effect today while there is no evidence of a remaining public health concern307
thus breaching the duration requirement under Article 31(c) TRIPS.
188. Also, a mere 1% royalty cannot be considered as “adequate remuneration (…) taking
into account the economic value of the authorization” under Article 31(h) TRIPS.
Royalty guidelines show that criteria such as benefits of the invention, therapeutic value
of the medicine, costs of R&D or price of the patented product should be taken into
account.308 Valtervite has the potential to prevent 80% of patients from transmitting
greyscale 309 and Claimant expended over USD 1-billion in R&D to develop
Valtervite.310
189. Mercuria also breached Article 31(i)(j) TRIPS by providing judicial review against the
decision on grant of the License and on the remuneration before a similar higher
authority than the one that previously ruled on these matters. However, TRIPS requires
judicial review before a distinct higher authority. Here, the High Court is competent in
both cases.311
190. Finally, Mercuria did not respect Article 31(f) TRIPS requirement to use the compulsory
license predominantly to supply the domestic market. In August 2013, Mercuria
306 Facts, P29:¶21:L950-951.
307 Facts, PP.30-31,¶¶22-25:L953-970
308 WHO Remuneration, PP.67-74,82-86.
309 PO3, P50:L1585.
310 PO3, P50:L1600.
311 Law, P44:L1391; Facts, P30:¶21; PO3, P50:L1578-1580.
51
provided neighboring countries with Sanior medicines manufactured under the
License.312 Yet, the supply of export markets is not an accepted ground in the Law.313
191. The export of Sanior is neither in line with amendment Article 31bis TRIPS requiring
the grant of a compulsory license specifically for export of medicines to countries
lacking the manufacturing capacity in the pharmaceutical sector with a remuneration
taking into account the economic value to importing Members. Annex to Article 31bis
emphasizes the need to ensure that products exported are used for public health purposes
underlying their importation and the risk of trade diversion. Here, there is insufficient
information about the manufacturing capacity of the neighboring countries nor on the
public health concerns they might face. Moreover, the License was not granted for the
specific purpose of exports under Article 31bis. Export of Sanior constitutes a loss for
income for Claimant since Valtervite was patented in three neighboring States.314 Lack
of information and transparency on the export of Sanior furthermore increases the risk
of possible trade diversion.
192. For all the above reasons, Mercuria failed to provide Claimant with FET.
312 Facts, P30:¶23:L956-958.
313 Law, P44:L1391-1398.
314 PO3, P50:L1581-1582.
52
PRAYER FOR RELIEF
193. In light of the above submissions, Claimant respectfully requests this Tribunal to find
that:
(i) It has jurisdiction over the present dispute;
(ii) Claimant’s claims are admissible;
(iii) Respondent breached its obligations under Article 3(3) BIT;
(iv) Respondent breached its obligations under Article 3(2) BIT;
(v) Claimant is entitled to damages in the amount of USD 1,540,000,000 with
interest as of the date of issuance of the Award;
(vi) Claimant is entitled to payment by Respondent of pre- and post-award interest
at a rate to be fixed by the Tribunal.
Submitted on 18 September 2017 by TEAM HSU
On behalf of Claimant
ATTON BORO LIMITED