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VSA- 512

Professor V.S. Mani


Memorial International Law Moot Court
Competition 2016 (Banking and Investment Law)

Before

THE AD-HOC ARBITRAL TRIBUNAL SETUP IN


ACCORDANCE WITH UNCITRAL
IN JAIPUR NATIONAL UNIVERSITY, JAIPUR

In the matter of
RURITANIAN TELECOMS LIMITED ... APPLICANT

V.

REPUBLIC OF AREANA ..RESPONDENT

Memorial on behalf of the Applicant

Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
TABLE OF CONTENTS

LIST OF ABBREVIATIONS ....................................................................................................... IV


TABLE OF AUTHORITIES ........................................................................................................ VI
STATEMENT OF JURISDICTION............................................................................................XV
SUMMARY OF FACTS ........................................................................................................... XVI
QUESTIONS PRESENTED ...................................................................................................... XIX
SUMMARY OF ARGUMENTS .................................................................................................XX
1.

THAT THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF THE BIT ARE

MAINTAINABLE. ......................................................................................................................... 1

2.

1.1

THAT THEREARE NO EFFECTIVE LOCAL REMEDIES TO BE EXHAUSTED. .......................... 1

1.2

THAT THE EXHAUSTION OF LOCAL REMEDIES WAS FUTILE. ........................................... 3

1.3

THAT THE ACT OF AREANAS JUDICIARY AMOUNTS TO DENIAL OF JUSTICE. ................. 5

THAT THE ACTS OF THE STATE OF AREANA AMOUNTED TO DEPRIVATION OF

SOVEREIGN WEALTH OF THE RURITANIAN REPUBLIC, IN VIOLATION OF THE


PRINCIPLE OF SOVEREIGN IMMUNITY ................................................................................. 9
2.1

THAT THE ACT OF AREANA HAS LED TO DEPRIVATION OF SOVEREIGN WEALTH OF

RURITANIA ................................................................................................................................... 9
2.2

THAT THE VIOLATION OF SOVEREIGN IMMUNITY RENDERS THE EXHAUSTION OF LOCAL

REMEDIES CLAUSE MEANINGLESS ............................................................................................. 10


2.3

THAT THE DEPRIVATION OF SOVEREIGN WEALTH HAS LED TO VIOLATION OF THE

PRINCIPLE OF SOVEREIGN IMMUNITY ........................................................................................ 12


3.

THAT RURITANIA HAS VIOLATED ARTICLE 2(2) OF THE BIT BY NOT

CONFORMING TO THE PRINCIPLES OF FAIR AND EQUITABLE TREATMENT AND


FULL PROTECTION AND SECURITY. ................................................................................... 17
3.1

THAT THE RESPONDENT HAS VIOLATED THE LEGITIMATE EXPECTATIONS OF THE

CLAIMANT COMPANY. ............................................................................................................... 18


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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)

4.

3.2

THAT THE RESPONDENT DID NOT FOLLOW DUE PROCESS NORMS. .................................. 20

3.3

THAT THE RESPONDENT DID NOT ACT IN GOOD FAITH. ................................................ 22

3.4

THAT THE RESPONDENTS ACTIONS LACKED PROPORTIONALITY .................................... 23

THAT THE 2012 SUPREME COURT RULING AND THE 2015 STATE HIGH COURT

RULING

AMOUNTED

TO

EXPROPRIATION

OF

INVESTMENTS

OF

THE

APPLICANT25
4.1

VALIDITY OF SOLE EFFECTS DOCTRINE. ..................................................................... 26

4.2

THE REQUIREMENT FOR SERIOUS AND IRREVERSIBLE DAMAGE .................................... 29

4.2.1

DURATION OF THE MEASURE .................................................................................... 31

4.2.2

THAT THERE WAS A LOSS OF CONTROL OVER THE INVESTMENT ................................ 32

4.2.3

THAT THERE WAS INTERFERENCE WITH INVESTORS EXPECTATIONS .......................... 33

4.2.4

THAT THE ACTIONS OF RESPONDENT LACK PROPORTIONALITY .................................. 35

4.3

THAT THE POLICE POWER EXCEPTION CANNOT BE TAKEN BY THE RESPONDENTS ....... 37

4.4

THAT THE RURITANIA- AREANA BIT DOES NOT CONTAIN ANY EXCEPTION TO THE

PAYMENT OF COMPENSATION. .................................................................................................. 37


5.

THAT THE RESPONDENT ARE OBLIGED TO MAKE REPARATION FOR THE

LOSSES. ....................................................................................................................................... 39
5.1

THAT REPARATION AGAINST UNLAWFUL EXPROPRIATION IS TO BE MADE. .................. 39

5.2

THAT THE COMPENSATION FOR VIOLATION OF FAIR AND EQUITABLE TREATMENT IS TO

BE MADE . .................................................................................................................................. 40
5.3

THAT THE MORAL DAMAGES SHOULD IN PRINCIPLE BE AWARDED TO THE

CLAIMANTS.. ...................................................................................................................... 41
PRAYER ......................................................................................................................................XV

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
LIST OF ABBREVIATIONS

S NO.

ABBREVIATION

FULL FORM

1.

Paragraph

2.

Art.

Article

3.

BIT

Bilateral Investment Treaty

4.

Chap.

Chapter

5.

DoT

Department of Telecomunication

6.

Ed.

Edition

7.

Eds.

Editions

8.

FCFS

First Come First Serve

9.

FET

Fair And Equitable Treatment

10.

ICSID

International Center For Settlement of Investment Dispute

11.

ICJ

International Court of Justice

12.

IIAs

International Investment Agreements

13.

ILC

International Law Commission

14.

NAFTA

North-American Free Trade Agreement

15.

No.

Number

16.

O.U.P.

Oxford University Press

17.

P.

Page

18.

PCIJ

Permanent Court Of International Justice

19.

Rep.

Report

20.

RTL

Ruritanian Telecoms Company

21.

RAAWL

Ruritania- Areana Air Waves Limited

22.

SC

Supreme Court
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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)

23.

TAAWL

Trans- Areana Air Waves Limited

24.

TRAA

Telecom Regulatory Authority of Areana

25.

UAS

Unified Access Services

26.

UN

United Nations

27.

UNGA

United Nations General Assembly

28.

UNCTAD

United Nations Conference on Trade and Development

29.

UNCITRAL

United Nations Commission on International Trade Law

30.

v.

Versus

31.

VCLT

Vienna Convention on the Law of Treaties

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
TABLE OF AUTHORITIES
ARTICLES
1.

A. Bjorklund,Reconciling State Sovereignty and Investor Protection in Denial of Justice


Claims(2005) 45 Virginia Journal of International Law 809

2.

A.O. Adede,ASurvey of Treaty Provisions on the Rule of Exhaustion of Local Remedies,


Harward Law Review, Vol. 18 1 (1977)

3.

Barnali Choudhury, Evolution or Devolution: Defining Fair and Equitable Treatment in


International Investment Law, 6 J. WORLD INV. & TRADE 297 (2005).

4.

F. Bloch, Indirect Expropriation: Conceptual Realignment? International Law Forum,


vol. 5(3), 2003.

5.

Gaukrodger, D. (2010), Foreign State Immunity and Foreign Government Controlled


Investors, OECD Working papers on International Investments 2010/02 OECD.

6.

J.D.M. Lew, Does National Court Involvement Undermine the International Arbitration
Process? (2008)[24](3) American University International Law Review PL 489

7.

KajHober, State Responsibility and Attribution in Muchlinski, Ortino and Schreuer, The
Oxford Handbook of International Investment Law (Oxford Uni Press, Oxford and New
York 2008) 553

8.

P. Y. Tschanz and J. E. Vinuales,Compensation for Non-Expropriatory Breaches of


International Investment Law, Journal of International Arbitration, Vol. 26 (5)

9.

Richard B. Lillich, The Effectiveness of Local Remedies Rule Today (1964) [58]
American Society of International Law 101

10.

R. Dolzer, Indirect Expropriation, New Developments? Environmental Law Journal,


vol. 11, 2002

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
11.

Suzi H. Nikiema, Best Practices: Indirect Expropriation, THE INTERNATIONAL INSTITUTE


FOR

SUSTAINABLE

DEVELOPMENT,

11

(Sept.

3,

2016)

http://www.iisd.org/pdf/2012/best_practice_indirect_expropriation.pdf
12.

Ioana Tudor, Actual Situations in which the FET Standardhas been applied in
International Law, The Fair and Equitable Treatment Standard in the International Law
of Foreign Investment, Oxford University Press (2008)

13.

Kenneth J Vandevelde, A Unified Theory of Fair and Equitable Treatment 43 New


York University Journal International, Law & Politics (201011)

14.

Vicuna, Some International Law Problems Posed by the Nationalization of the Copper
Industry by Chile, 67 Am. J.INT'L L. 7"1, 7r5-i8 (i973).

15.

W. Dodge, National Courts and International arbitration: Exhaustion of local Remedies


and Res judicata under Chapter Eleven of NAFTA (2000) [23] Hasting International and
comparative Law review 357

16.

YemiOsinbajo, International Commercial Arbitration: The Nigerian Experience, 4 Afr. J.


Int'l & Comp. L. 1 (1992)
BOOKS
1. Ernest K. Bankas, The State Immunity Controversy in International Law: Private Suits
Against Sovereign States in Domestic Courts (2005).
2. J. Paulsson, Denial of Justice in International Law (Published in 2005).
3. Majorie M Whiteman, Damages in International Law 1837 (USGPO 1937).
4. M.N. Shaw, International Law (first published in 1977, 6th ed. 2008) 148-157, 166-179
5. R. Dolzer and C. Schreuer, Principle of International Law (Published in 2012, 2nd
edition) 214

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
CASE LAWS
INTERNATIONAL

1.

Asian Agricultural Products Limited v. Democratic Socialist Republic Of Sri Lanka


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

2.

ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of
Hungary,Award, ICSID Case No. ARB/03/16 (2 October, 2006)

3.

Akdivar and Others v. Turkey,1987 I.C.J 68-69

4.

Amco Asia Corporation and others v. Republic of IndonesiaAward, ICSID Case No.
ARB/81/1 (10 May, 1988)

5.

Amoco Iran Oil Co. v. Iran1 Iran-U.S. C.T.R. 493 (1982)

6.

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

7.

Azinian v. Mexico,Award, ICSID Case No. ARF (AF)/97/2 (1 November, 1999)

8.

Azurix Corp. v.The Argentine Republic, Award, ICSID Case No. ARB/01/12(14 July
2006)

9.

BayindirInsaatTurizmTicaretVeSanayi A.S. v. Islamic Republic of Pakistan,Decisio


on Jurisdiction, ICSID Case No. ARB/03/29, (27 August, 2000).

10.

Biloune and Marine Drive Complex Ltd v. Ghana Investments Centre and the
Government of Ghana, ad hoc award of October 27, 1989, ILR, vol. 95, 1990

11.

Chattln Case (United States v. Mexico),4 R. Int'l Arb. Awards 282 (1927)

12.

Case concerning the Factory at Chorzow Factory (Poland v. Germany)PCIJ (1927)


Judgment No.8

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
13.

CMS Gas Transmission Company v. The Argentine Republic,Decision on


Jurisdiction,ICSID Case No. ARB/01/8 (17 July, 2003)

14.

Compaa del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica, Award,
ICSID Case No. ARB/96/1. (17 February, 2000).

15.

Consortium R.F.C.C. v. Kingdom of Morocco(ARB/00/6), award Dec 22, 2003,


ICSID Rev.-FILJ, vol. 20, 2005.

16.

Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, Award, ICSID


Case No. ARB/09/2, Award (31 October 2012).

17.

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

18.

Duke Energy Electroquil Partners &Electroquil S.A. v. Republic of Ecuador, Award,


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

19.

Edward Case (United States v. Cuba)

20.

EnCana Corporation v. Republic of Equador, LCIA Case No. UN3481


UNCITRAL(Feb 3, 2006)

21.

ElettronicaSicula S.p.A. (ELSI) (U.S. v. Italy), 1989 I.C.J. 15

22.

Eliza Case (United States v. Peru)(1864), de La Pradelle,,RAI, vol. 2.

23.

Enron Corporation Ponderosa Assets, L.P v. Argentine Republic, Award, ICSID Case
No. ARB/01/3 (24 March, 2007)

24.

Fabian Case (France v. Venezuela)Ralston, French Venzuelan Mixed Claims


Commission Report, 1906, p. 182

25.

Marvin Feldman v. Mexico, Award, ICSID Case No. ARB(AF)/99/1 (16 December,
2002)

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)

26.

Finnish Ships Arbitration (Fin. v. U.K.),2 R.I.A.A. 1479, 1502 (1934).

27.

Firemans Fund Insurance Companyv.The United Mexican State, Award, ICSID Case
No. ARB/02/1,(17 July, 2003).

28.

Foremost Tehran, Inc., et al v. Islamic Republicof Tehran,Award No. 10-7174, 10


Iran-United States Claims Tribunal Reports

29.

Gahagan Case (United States v. Mexico)

30.

Genin v. Estonia,Award, ICSID Case no. ARB/99/2 (25 June, 2001)

31.

Great Britain v. Colombia, 2 J. MOORE, ARBITRATIONS 2050 (1875)

32.

ITT Industries Inc. v. Iran et al., Award, 26 May 1983, 2 Iran-United States Claims
Tribunal Reports

33.

Khashiyev and Akayeva v. Russia, 1984 I.C.J. 116-17

34.

Lauder v. Czech Republic,UNCITRAL (United States/Czech Republic BIT),3


September 2001

35.

Lemire v. Ukraine, Award, ICSID Case NO. ARB/06/18 (28 March, 2011)

36.

LG&E Energy Corp., LG&E Capital Corp., LG&E International Inc. v. Argentine
Republic,Award, ICSID Case No. ARB/02/1 (25 July, 2007)

37.

Lubicon Lake Band v. Canada,1984 I.C.J 32.

38.

Martini Case (Italy v. Venezuela)(1930)2 R.I.A.A. 975

39.

M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador,Award,
ICSID Case No. ARB/03/6 (31 July, 2007)

40.

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

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)

41.

Methanex Corp. v. United States of America, Final Award, NAFTA(3 August , 2005)

42.

Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of
Egypt,Award, ICSID Case No. ARB/99/6 (12 April, 2002)

43.

Morton Case (United States v. Mexico),GCC, vol. IV(1929)

44.

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

45.

Norwegian Loans (France v. Norway),1957 I.C.J. 39

46.

NykombSynergetics Technology Holding AB, Stockholm v. The Republic of Latvia,


Award, The Arbitration Institute of The Stockholm Chamber of Commerce (16
December, 2003)

47.

Paksas v. Lithuania 1972 I.C.J 392

48.

Panevezys-Saldutiskis Railway (Estonia v. Lithuania)1939 P.C.I.J. (ser. A/B) No.76

49.

Pope & Talbot Inc. v. The Government of Canada, Award on the Merits of Phase
2,NAFTA (10 April, 2001)

50.

PSEG Global Inc. And Konya IlginElektrikUretimveTicaretLimitedSirketi v. Republic


of TurkeyICSID Case No ARB/02/5, (19 January,2007)

51.

Case Concerning Pulp Mills on the River Uruguay (Argentina v Uruguay)[2010] ICJ
Rep 14 [273]

52.

Revere Copper and Brass Incorporated v. Overseas Private Investment Corporation,


Award, United States Court of Appeals17 ILM 1978

53.

Rexnord Inc. v. Iran (1983)2 Iran-U.S. C.T.R. [6] [10]

54.

Robert E. Brown (U.S. v. Gr. Brit.), 6 Int'l Arb. Awards 120, 129 (Perm. Ct. Arb.
923).
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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)

55.

Rumeli Telecom A.S. &Telsim Mobil TelekomikasyonHizmetleri A.S. v. Republic of


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

56.

SalukaInvestmentsBVv.The Czech Republic, (PCA) Partial Award of March 17, 2006

57.

Compai del Desarrollo de Santa Elena, S.A. v. The Republic ofCosta Rica,
Award, ICSID Case No. ARB/96/1,(17, February 2000)

58.

Scoppola v. Italy 1965 I.C.J 32

59.

S.D. Myers, Inc. v.GovernmentofCanadaPartial Award,NAFTA (13 November, 2000)

60.

Sempra Energy International v. Argentine Republic,Award, ICSID Case No.


ARB/02/16 (28 September, 2007)

61.

Siderman v. Republic of Argentina


965 F.2d 699 (1992); 103 ILR.

62.

Starrett Housing Corporation, Starrett Systems, Inc., Starrett Housing International,


Inc., v. Iran, Bank Oman, Bank Mellat, Bank Markaziaward Dec 19, 1983.

63.

State v Trostle191 Ariz. 4, 951 P.2d 869 (1997), 884-86

64.

Sterling Case (Great Britain v. Peru)

65.

TecnicasMedioambientalesTecmedS.A. v. United States of MexicoAward ICSID Case


No. ARB(AF)/00/2 (29 May, 2006)

66.

International

Thunderbird

Gaming

Corporation

v.

The

United

Mexican

StatesAward,NAFTA (26 January, 2006)


67.

Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA Consulting Engineers of Iran,


the Government of the Islamic Republic of Iran, Civil Aviation Organization, Plan
and Budget Organization, Iranian Air Force, Ministry of Defense, Bank Melli, Bank
Sakhteman, Mercantile Bank of Iran and HollandIran-U.S. Claims Tribunal Case No.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
7, Award No. 141-7-2 of June 29, 1984
68.

TokiosTokeles v. Ukraine, Decision on Jurisdiction,ICSID Case No. ARB/02/18 (29


April, 2004)

69.

U.S. v Great Britain (1923) 4 UNRIAA [120] [129]

70.

Compaia De Aguas Del Aconquija S.A. and Vivendi Universal v. Argentine Republic
Award, ICSID Case No. ARB/97/3 (21 November, 2000)

71.

Compaia de Aguas del Aconquija SA and Vivendi Universal v. Argentine Republic


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

72.

WaguihElie George Siag and ClorindaVecchi v. The Arab republic of EgyptAward


ICSID Case No.ARB/05/15(19 June, 2009)

73.

Waste Management, Inc. v. United Mexican StatesAward ICSID Case No.


ARB(AF)/00/3 (30 April, 2004)

74.

Captain T. Melville White (Great Britain v. Peru) 1864 5 Moore Intl Arbitration
4969

MUNICIPAL
1.

Buttes Gas and Oil Co. v .Hammer (No. 3):273 [1982]AC 888,931;64 ILR

2.

De Sanchez v. Banco Central de Nicaragua and Others. 770 F.2d 1385, 1393 (1985);
88 ILR

3.

Ex parte Pinochet[2000] 1 AC 147, 201; 119 ILR

4.

Holland v. Lampen-Wolfe[2000] 1 WLR 1573, 1588; 119 ILR

5.

R v. Director of the Serious Fraud Ofce and BAE Systems [2008] EWHC 714
(Admin)

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
6.

Reid v. Republic of Nauru [1993] 1 VR 251; 101 ILR.

7.

The Schooner Exchange v. McFaddon, 7 Cranch 116, 136 (1812)

8.

Trendtex Trading v. Bank of Nigeria [1977] 1 Q.B. 529

9.

United States of America v. The Public Service Alliance of Canada and Others (Re
Canada Labour Code). (1992) 91 DLR (4th) 449; 94 ILR

REPORTS
1.

Difference Relating to Immunity from Legal Process case, ICJ Reports, 1999,

2.

Ekizabeth Wilmshurst & Joanne Foakes, State Immunity: The United Nations
Convention and its effect, International law Programme, Chatam House ILP BP
05/01

3.

ELSI, id., at para.59; Draft Articles on Diplomatic Protection, art. 14(1),


International Law Commission, U.N. GAOR, 61st Sess., Supp. No. 10, U.N. Doc.
A/61/10 [Draft Articles on Diplomatic Protection]; Draft Articles on State
Responsibility, supra n.85, art. 44(b).

4.

UNCTAD Series on International Investment Agreements II

TREATIES & CONVENTIONS


1.
UN Convention on Jurisdictional Immunities of States and Their Property, 2004
2.
United Nations, Draft articles on Diplomatic Protection, 2006, Art 14(2).
3.
Arbitration rules, United Nation Commission on International Trade Law
4.
Conciliation Rules, United Nations Commission on International Trade Law

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
STATEMENT OF JURISDICTION
Ruritanian Telecoms Limited (RTL), the Applicant, has the honour to submit the present dispute
and its memorandum before the International Arbitration Tribunal set up in accordance with the
arbitration rules of UNCITRAL, under article 9(2) of the Bilateral Investment Treaty (BIT)
between Government of Republic of Ruritania and Government of Republic of Areana for the
Promotion and Protection of Investment.The UNCITRAL Rules for Arbitration shall be the
governing law for the dispute.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
SUMMARY OF FACTS
I
Areana and Ruritania are two friendly neighbouring countries which have forged strong
economic and commercial relations since 1990's. They have entered into a Bilateral Agreement
for the Promotion and Mutual Protection of investments on 23rd December, 1994 (Annexure I).
The Agreement came into force on 1 January, 1995. Due to very cordial relationship between
these two countries, although the initial period of validity of this agreement was 10 years , the
agreement continues to be in force since neither party has served notice of termination on the
other and investments from either country in the other have proliferated over time.
II
In 1999 there was the introduction of 2-G mobile cell technology on a massive scale in the state
of Areana the 2-G mobile cell technology came to be widely introduced in Areana. 2G is the
short form for second-generation wireless telephone technology. Second generation 2G cellular
telecom networks being much more efficient and better than its predecessors quickly became the
need of the hour. At the same time Ruritarian government was encouraging advancement and
development in the telecom sector by subsidizing Research and developmentthrough directly
subscribing to the equity of the new telecom companies. As a result RTL was formed with 20%
stakes of Ruritanian Government in it.By the end of 1990's, the Ruritanian Telecoms became a
name to reckon with in the world of advanced telecoms technology.
III
The Areana Department of Telecommunications (DoT) followed the simple first-come-firstserved (FCFS) policy in allocating spectrum licences to eligible applicant firms, in order to
encourage more operators to venture in this arena for the benefit of the consumers, from 200307.
IV
In 2008, the Areana Minister for DoT deviated from FCFS policy without consulting the
Cabinet. This resulted in a number of flaws of both substantial and procedural nature. As a result
of which many corporations which were in eligible were given licenses and favourism and
inconsistency prevailed. Furthermore, despite the warnings from the Areana Ministry of Finance
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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
expressing strong procedural concerns to the DoT, these were ignored, and the cut-off date was
moved backwards from 1st October 2007 to 25th September. (The reason for this backdating
could probably be that by 1st October, 2007 DoT received 575 applications for UAS licences
from 46 companies.). On 25th September, the DOT announced on its website that applicants
filing between 3:30 and 4:30 pm that day would be granted licenses, and 122 licenses were
shown to have been granted that day, according to a 10th January, 2008 DoT notification.
V
As a result of diversification in Ruritanian investment, after the allocation of spectrum, RTL
entered into a 51:49 joint venture agreement with TAAWL, which was granted 17 licenses under
the Areana Dot notification of 25th September 2007. the January 2008 allocation and formed
RAAWL which entered the market of both the countries in March 2008.
VI
As a result of all these defections and inconsistencies the Supreme Court of Areana in Airtel
Infotech Co. Ltd. v. Government of Areana and Others decided on 2nd February, 2012, quashed
all the 122 licenses issued by Dot, calling the procedure arbitrary and unconstitutional.
Furthermore, it directed TRAA to make fresh recommendations for grant of license and
allocation of spectrum in 2G band by auction. The Court also imposed a fine of US $ 50 million
on two licensee companies, and US $ 5 million on four other licensee companies which included
RAAWL.
VII
Reacting to the Areana Supreme Court's judgment, RTL invoked its right under Article 9.1 of the
Ruritania-Areana bilateral investment treaty by filing a notice of dispute against Areana and
called for conciliation proccedings. However,the Government of Areana drew the attention of the
Ruritanian parties to Para 81 (iv) of the Supreme Court Ruling, and asked them to await the
outcome of the public auction. Also, one of the companies penalized with US $ 50 million fine
had preferred a review of the on 2nd February,2012 Judgment of the Areana Supreme Court on
10 December, 2012 and this review was pending decision. For these reasons, the Government
requested RTL to postpone the conciliation proceedings. For the moment RTL, upon a little
persuasion from the Ruritanian Government, decided to suspend the conciliation proceeding.
Following RTL's notice.
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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
VIII
However, subsequent developments proved unfavourable to RTL as the auction that took place
on 15th November 2012, proved too expensive for RAAWL which had to pay US $ 1400/=
million per licenses. The review petition was dismissed by the Areana Supreme Court in June
2013. Furthermore, Areana State High Court in Airwaves Holding v. the Areana Department of
Telecoms declared the 15th November, 2012 auction illegal and banned the fined companies
from participating in future auctions,without serving notices on the said companies, on 30th
January, 2015. The Areana Department of Telecoms' appealed against this ruling before the
Supreme Court which is pending. The Supreme Court refused to implead any interveners as there
were none before the High Court.
IX
In the meantime, the Government of Areana did propose to RTL other lucrative areas of
investment, such as manufacturing of mobile cells and I-Pads. However, taking the view that no
useful purpose would be served either by resorting to any further grievance redressal mechanism
or to waiting any longer for the conciliation procedure, RTL has now invoked the arbitration
procedure vide Article 9 (2) of the Bilateral Treaty. Areana Government has accepted the notice
of arbitration under protest.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
QUESTIONS PRESENTED

The following questions have been raised before this Honorable Tribunal to consider:
I.

WHETHER THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF


THE BIT ARE MAINTAINABLE?

II.

WHETHER BOTH THE DEPRIVATIONS WERE TANTAMOUNT TO


DEPRIVATION OF SOVEREIGN WEALTH OF THE RURITANIAN
REPUBLIC IN VIOLATION OF THE PRINCIPLES OF SOVEREIGN
IMMUNITY?

III.

WHETHER THE GOVERNMENT OF REPUBLIC OF AREANA HAS


VIOLATED ARTICLE 2(2) OF THE BIT BY NOT CONFORMING TO THE
PRINCIPLES OF FAIR AND EQUITABLE TREATMENT AND FULL
PROTECTION AND SECURITY?

IV.

WHETHER THE FEBRUARY 2012 SUPREME COURT JUDGEMENT AND


THE JANUARY 2015 RULING OF THE STATE HIGH COURT AMOUNTS
TO EXPROPRIATION?

V.

WHETHER THE RESPONDENT IS OBLIGED TO MAKE REPARATION


FOR THE LOSSES?

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
SUMMARY OF ARGUMENTS

I.

THAT THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF THE BIT


ARE MAINTAINABLE.

The arbitral proceedings under Article 9(2) of the BIT are maintainable. RTL has all the rights to
go for arbitration proceedings. The Areana government had failed in providing an effective
redress to the Claimant and thus it can approach the forum to seek relief.
Under customary international law all local remedies must be pursued within the state allegedly
responsible before an international claim is admissible. But this principle also contains a
condition that the local remedies available must be effective to provide redress to the Claimant.
Secondly, the remedies if any available under Areana laws were futile and would not have
resulted in any benefit but pursuing them could have rather aggravated the situation. The same is
evident by the precedents set by their judicial system and their administrative setup.The acts of
the Respondent amount to denial of justice, thereby paving the way for the Claimant to directly
seek relief through arbitration procedure. Under international law, non recourse to a local
remedy is permissible when a denial of justice is suffered in affording such remedies.

II.

THAT THE ACT OF AREANA HAS LED TO DEPRIVATION OF


SOVEREIGN WEALTH OF RURITANIA IN VIOLATION OF THE
PRINCIPLE OF SOVEREIGN IMMUNITY

The Claimant humbly submits that the act of Areana has led to deprivation of sovereign wealth
of Ruritanian Republic in violation of the principle of Sovereign Immunity. This Contention is
threefold (a)That the decision of Supreme Court and High Court has led to deprivation of wealth
of Ruritanian Republic as Ruritanian Government owned 20% shares of RTL;(b)That the
Municipal Courts have no jurisdiction to deal with issues arising in case where the Sovereign
Immunity of a particular state has been infringed.;(c)That the deprivation of Sovereign wealth
has led to violation of Sovereign immunity as the formation of RTL as well as its investment in
Areana was for public welfare.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
III.

THAT AREANA HAS VIOLATED ARTICLE 2(2) OF THE BIT BY NOT


CONFORMING TO THE PRINCIPLES OF FAIR AND EQUITABLE
TREATMENT AND FULL PROTECTION AND SECURITY.

The fair and equitable treatment (FET) standard is a key element in contemporary international
investment agreements (IIAs). It requires that Respondent act in a manner that is not arbitrary, in
violation of legitimate expectations of the investor, grossly unfair, unjust, idiosyncratic, [or]
lacking in due process or procedural propriety. The acts of Areana do not conform to such
conditions of fair and equitable treatment resulting in violation of the same. A reasonable
relationship has to be established between the measures of the State and the burden on the
investor, taking into account the investors legitimate expectation which the Respondent failed to
maintain.
IV.

THAT THE FEBRUARY 2012 SUPREME COURT JUDGEMENT AND THE


JANUARY 2015 RULING OF THE STATE HIGH COURT AMOUNTS TO
EXPROPRIATION.

It is humbly submitted that indirect expropriation of Claimants investments has occurred which
is in violation of Article 5 of the Ruritania- Areana BIT. Expropriation may be defined as the
taking or deprivation of the property of the foreign investor by a host state. Indirect expropriation
occurs when control or the economic value of any property has been rendered essentially
useless.
In the course of the argument the Claimant establishes the validity of the Sole effects Doctrine
which focuses on the adverse effect of the State measure on the investor as a major factor, or
even the sole factor, in determining whether or not a Taking has occurred. Further the major
factors which indicate expropriation are examined with respect to the given situation. The
claimant demonstrates how the 2012 Supreme Court ruling and 2015 State High Court ruling
resulted in substantial and irreversible loss to the RTLs investments and how the acts of State
of Areana have culminated in Claimants loss of control over its investments and were contrary
to the valid expectations of the Claimant as an investor. Finally the measures taken by the state
of Areana were completely disproportional they to the public interest presumably protected
thereby and to the protection legally granted to investments.
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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
Finally it is the responsibility of the Respondent to provide full and effective compensation as
they cannot take the exception of the Doctrine of Police Powers cannot be applied in this case
and even if the tribunal considers the acts of the State of Areana as regulatory measures, the
respondents still has to provide damages for the loss incurred by the Claimant under the
provision of Lawful Expropriation which is stated in Article 5 of the BIT.

V.

THAT THE RESPONDENT ARE OBLIGED TO MAKE REPARATION FOR


THE LOSSES.

The February 2013 SC judgment and the January 2015 ruling of the Areana State High Court
amounts to expropriation of property for which it is obliged to make reparation for the losses.
The violation of Fair and equitable treatment also poses a liability on the Respondent to
compensate the Claimant for its breach. Further, the Claimants also seek moral damages on the
grounds of loss of reputation and harm to its social position.It is a settled principle that unlawful
expropriation requires reparation for the losses so caused. It is widely recognized under
international law that the responsible State is under an obligation to make full reparation for the
injury caused by the internationally wrongful act. The acts of the State of Areana amount to
expropriation and it needs to be compensated.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
ARGUMENTS ADVANCED
1.

THAT THE ARBITRAL PROCEEDINGS UNDER ARTICLE 9(2) OF THE BIT


ARE MAINTAINABLE.

1. It is humbly submitted that the arbitration proceedings under Article 9(2) of the BIT are
maintainable. The submission is threefold- Firstly, the claimants have exhausted all the effective
legal remedies. Secondly, exhaustion of legal remedies was futile. Thirdly, the act of Areana
amounts to denial of justice.
1.1

THAT THEREARE NO EFFECTIVE LOCAL REMEDIES TO BE EXHAUSTED.

2. Under customary international law,1 all local remedies must be pursued within the State
allegedly responsible before an international claim is admissible.2 The Claimants claim are
admissible because it has exhausted all the effective remedies possible under Areana laws.
3. The ILC, Articles on Diplomatic Protection (2006) define local remedies in Article 14(2) as a
legal remedy which is open to an injured person before the judicial or administrative courts or
bodies, whether ordinary or special, of the State alleged to be responsible for causing the
injury.3
4. It is also a settled principle that the local remedies need to be exhausted only when the same are
effective. In The Lubicon Lake Band case,4 regarding exhaustion of domestic remedies before
approaching human rights laws internationally, it was said that the requirement need to be
fulfilled only when the remedies are effective and applicable. This precondition does not stand
where there is no reasonably available local remedy to provide effective redress. 5
5. The Court must take realistic account not only of formal remedies available in the domestic legal
system, but also of the general legal and political context in which they operate as well as the
personal circumstances of the applicant.6 The remedy must be capable of providing redress in
1

ElettronicaSicula S.p.A. (ELSI) (U.S. v. Italy), 1989 I.C.J. 15, 50 (July 20); Finnish Ships Arbitration (Fin. v.
U.K.), 2 R.I.A.A. 1479, 1502 (1934).
2
Draft Articles on Diplomatic Protection, art. 14(1), International Law Commission, U.N. GAOR, 61st Sess., Supp.
No. 10, U.N. Doc.A/61/10 [Draft Articles on Diplomatic Protection].
3
United Nations, Draft articles on Diplomatic Protection, 2006, Art 14(2) (2006).
4
Lubicon Lake Band v. Canada, 1984 I.C.J 32.
5
ILC Article on Diplomatic Protection, Art 15(a) (2006).
6
Akdivar and Others v. Turkey, 1987 I.C.J 68-69; Khashiyev and Akayevav. Russia, 1984 I.C.J. 116-17.

Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
respect of the applicants complaints and of offering reasonable prospects of success. 7Thus, the
claimant asserts that exhaustion of local remedies means exhaustion of effective local remedies.
6. It is also argued that in the present matter pecuniary interests of the State of Areana are
concerned and thus, going before its legal system for any remedy will not be effective as it would
not offer reasonable prospects of success.8
7. The claimants most humbly submit that they have exhausted all the available effective remedies
and the onus of proving it otherwise lies on the respondents. In ELSI, the ICJ found that the
initial onus was on the party who asserts that local remedies have not been exhausted to prove
the existence, in its system of internal law, of remedies which have not been used.9Amerasinghe
stated that if the respondent claims that local remedies have not been exhausted, it will be
incumbent upon them to prove not only that some local remedies existed, but also that they
were effective.10
8. In his opinion in the Norwegian Loans Case,11 Justice Lauterpacht recognized the view quoted
by Trindade. He referred to the burden of proof as it is for the defendant state to show that
notwithstanding the apparent absence of a remedy its existence can nevertheless reasonably be
assumed. Thus, the local remedies rule applies only when effective remedies are available in the
national system.
9. The claimants hereby submit that they have made all the possible efforts from their side and have
resorted to all the available effective remedies. It is submitted that in response to the SC decision
quashing the licenses12 a review petition was filed by one of the aggrieved company.13 The
subject matter of this review petition contained the essence of claimants claims. Under
customary international law, an international claim is not admissible unless the essence of the
claim has been pursued as far as permitted by the local law of the state allegedly
responsible.14Also, according to the principle of res judicata, the review petition could not be
7

Scoppolav.Italy 1965 I.C.J 32.


Sejdovicv.Italy 1956 I.C.J 373; Paksas v. Lithuania 1972 I.C.J 392.
9
ElettronicaSicolacase supra note 1.
10
CHITTHARANJAN FELIX AMERASINGHE, LOCAL REMEDIES IN INTERNATIONAL LAW, 285Cambridge Univ. Press
(2nd ed. 2004).
11
Certain Norwegian Loans (Fr. v. Nor.), 1957 I.C.J. 39 (July 6).
12
Factsheet 8
13
Ibid 12
14
ElettronicaSicolacase supra note 1 at 51.
8

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
filed as the subject matter of the review petition was already decided over by SC in the review
filed by another company. In the Panevezys-Saldutskis Railway15case, the Permanent Court of
International Justice ("PCIJ") declared:
"There can be no need to resort to the municipal courts if those courts have no
jurisdiction to afford relief; nor is it necessary again to resort to those courts if the result
must be a repetition of a decision already given.
10. Apart from this the claimants did not have any effective remedy available to them. In the case
filed by Airwaves Holding Company the Areana State High Court without serving notice to the
company16 decided the matter. Also, in the appeal filed by dot against the High Court decision,
the SC did not allowed the claimants to intervene. The claimants were not left with any effective
remedy for exhaustion.
1.2

THAT THE EXHAUSTION OF LOCAL REMEDIES WAS FUTILE.

11. The Claimant argue that remedies if any available under Areana were futile and would not have
resulted in any benefit but pursuing them could have rather aggravated the situation. In many
countries domestic courts are bound to apply the local law even if it is at odds with international
legal rules protecting the rights of investors.17 Even if the investor succeeds in proceedings
before domestic courts, the executive may choose to ignore the verdicts of the judiciary. 18Host
States dealing with foreign investors will frequently act in the exercise of sovereign powers
(jureimperii) rather than in a commercial capacity (jure gestionis).19
12. It is a settled principle that where resort to local remedies would be obviously futile, the
requirement to exhaust local- remedies will be excused. Thus, for instance, where a State's
judiciary has established a consistent course of decisions or jurisprudence constant which could
only lead to a hopeless pursuit of a remedy, it will be unnecessary to seek to exhaust local

15

Panevezys-SaldutiskisRailway(Estonia v. Lithuania) 1939 P.C.I.J. (ser. A/B) No.76


Factsheet, 13
17
M.N. SHAW, INTERNATIONAL LAW 148-157, 166-179 (6th ed. 2008).
18
WaguihElie George Siag and ClorindaVecchi v. The Arab republic of Egypt [2009] WL 1834562[33-87], [436],
[448], [454-455]
19
J.D.M. Lew, Does National Court Involvement Undermine the International Arbitration Process?,AMERICAN
UNIVERSITY INTERNATIONAL LAW REVIEW PL 489 (2008).
16

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
remedies. In the Panevezys-Saldutskis Railway20case, the Permanent Court of International
Justice ("PCIJ") declared:
"There can be no need to resort to the municipal courts if those courts have no
jurisdiction to afford relief; nor is it necessary again to resort to those courts if the result
must be a repetition of a decision already given.
13. One of the reasons for instituting an international arbitration procedure is precisely that parties
rightly or wronglyfeel often more confident with a legal institution which is not entirely
related to one of the parties. If a national judgment was binding on an international tribunal such
a procedure could be rendered meaningless.21The main reason why local remedies are ineffective
in many countries is the obvious fact that their judicial and administrative bodies often fail to
render impartial and unbiased decisions. The intrusion of political considerations into the
courtroom is apparent.22
14. Seeking judicial remedies against executive action is an unnecessary endeavor where the
executive branch of government dominates the courts. Local remedies are ineffective where the
courts have been reduced to submission and brought into line with a determined policy of the
Executive to reach the desired result regardless of Constitutional guarantees and inhibitions.23
15. Arbitration clauses allow the investor to bypass local courts and the obstacles that it fears might
arise from local remedies. The main concerns arising from the submission of investment disputes
to local courts are the following:
(1) Domestic remedies in developing states might be inadequate because they are biased,
corrupt and unreliable. The investors will fear a lack of impartiality as, in many
countries, the independence of the judiciary cannot be taken for granted and political
pressures are likely to influence the outcome of the proceedings.24

20

Estonia v. Lithuania case supra note 15.


Amco-Asia Corp v. Republic of Indonesia 1985 (24) ILM 1022 [177]
22
Richard B. Lillich, The Effectiveness of Local Remedies Rule Today, AMERICAN SOCIETY OF INTERNATIONAL LAW
101 (1964).
23
Robert v. Brown (U.S. v. Gr. Brit.), 6 Int'l Arb. Awards 120, 129 (Perm. Ct. Arb. 923)., U.S. v Great Britain
(1923) 4 UNRIAA [120] [129]
24
R. DOLZER AND C. SCHREUER, PRINCIPLE OF INTERNATIONAL LAW 214 (2d ed, 2012).
21

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
(2) These courts might rely on the act of state doctrine and the foreign sovereignty
immunity, if the host state acts in the exercise of sovereign powers, rather than in a
commercial capacity.25
(3) Local courts might be bound to apply national law even if they are at odds with the
rights of the investors under the BIT. In that respect, the State can unilaterally change its
laws in the disfavour of the investors and the courts would have to apply domestic laws
instead of the BIT.
(4) Also the domestic courts lack the expertise to correctly apply and enforce international
investment law.26
1.3

THAT THE ACT OF AREANAS JUDICIARY AMOUNTS TO DENIAL OF JUSTICE.

16. The Claimant humbly submits that the actions of Areana and its judiciary amount to denial of
justice. If an adequate remedy exists in the state, the nonrecourse to such remedy is permissible
when a denial of justice has been suffered inresorting to the remedy afforded and an international
claim arises.27 The State is responsible for the acts of its judiciary28 and violation of investors
rights may occur as a consequence of the actions of domestic courts.29 The classical case would
be a denial of justice- well-recognized under customary international law.30 In Azinian v. Mexico
the Tribunal defined denial of justice in the following terms:A denial of justice could be pleaded if the relevant courts refuse to entertain a suit, if
they subject it to undue delay, or if they administer justice in a seriously inadequate way.
. . . There is a fourth type of denial of justice, namely the clear and malicious
misapplication of the law.31
17. The states have often suspended the application of the rule of exhaustion of local remedies when
denial of justice has occurred. Denial of justice embraces the whole field of state responsibility
25

W. Dodge, National Courts and International arbitration: Exhaustion of local Remedies and Res judicata under
Chapter Eleven of NAFTA, Hasting International and comtive Law review 357 (2000).
26
DOLZERsupranote 24.
27
Finnish Ships (Fin. v. U.K.), 1934 I.C.J. 413; MARJORIE M WHITEMAN, DAMAGES IN INTERNATIONAL LAW 3 (US
GPO 1937).
28
ILC Articles on State Responsibility, Art 4.
29
A. Bjorklund, Reconciling State Sovereignty and Investor Protection in Denial of Justice Claims, VIRGINIA
JOURNAL OF INTERNATIONAL LAW809 (2005).
30
J. PAULSSON, DENIAL OF JUSTICE IN INTERNATIONAL LAW (1sted, 2005).
31
Azinian v. Mexico, Award (1999) 5 ICSID Reports 272 [102][103]

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
and has been applied to all types of wrongful conduct on the part of the state toward aliens.32 The
expression 'denial of justice' has been employed in connection with improper administration of
civil and criminal justice as regards an alien, including denial of access to local courts,
inadequate procedures and unjust decisions.33By including "unjust decisions," it recognizes the
existence of both procedural34 and substantive denial of justice. Such a distinction was drawn in
the Cotesworthand Powell case, which established that "unjust decisions" oflocal courts
constitute substantive denial of justice. To deal with the problem of defining "unjust decisions,"
the following useful definition has been suggested:
18. Adecision or judgment of a tribunal or an administrative authority rendered in a proceeding
involving the determination of the civil rights or obligations of an alien or criminal charges
against him, and either denying him recovery in whole or in part or granting recovery against
him or imposing a penalty, whether civil or criminal charges upon him is wrongful:
(a) If it is a dear and discriminatory violation of the law of the State concerned;
(b) If it unreasonably departs from the principles of justice recognised by the principal
legal system of the world;
(c) If it otherwise involves a violation by the State of a treaty.35
19. Also, as mentioned in the UNCTAD, Denial of justice may include: (a) Denial of access to
justice and the refusal of courts to decide; (b) Unreasonable delay in proceedings; (c) Lack of a
courts independence from the legislative and the executive branches of the State; (d) Failure to
execute final judgments or arbitral awards; (e) Corruption of a judge; (f) Discrimination against
the foreign litigant; (g) Breach of fundamental due process guarantees, such as a failure to give
notice of the proceedings and failure to provide an opportunity to be heard.36

32

Charles C. Hyde. I C. HxD, INTERNATIONAL LAW 491-92 (1922).


L. SOHN &R. BAXTER (Rapporteurs), CONVENTION ON INTERNATIONAL RESPONSIBILITY OF
STATES FOR INJURIES TO ALIENS (Draft No. 13), in L. SOHN. BAXTER, RECENT CODIFICATIONS OF
THE LAW OF STATE RESPONSIBILITY FOR INJURIES TO ALIENS 180 (1974).
34
Gahagan Case (United States v. Mexico), 4 J. MOORE, ARBTRATIONS 3240 (1839); White Case (Great Britain
v. Peru), H. LA 46 (1889); Barcelona Traction Case, [1970] I.C.J. 3, digested in 64 Am. J. INr'- L. 653 (1970).
35
L. SOHN, supra note 33, at 96; Vicuna, Some International Law Problems Posed by the Nationalization of the
Copper Industry by Chile, 67 AM. J. INTL L. 711 (1973).
36
UNCTAD, Fair and Equitable Treatment, UNCTAD Series On Issues In International Investment Agreements II,
81 ( Sep. 07, 2016) http://unctad.org/en/Docs/unctaddiaeia2011d7_en.pdf
33

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
In the instant case, the decision of the supreme court to quash the licenses without giving
compensation to the aggrieved parties as well as High Courts decision to ban the companies
fined by Supreme Court37 without giving them an opportunity to present their case is a violation
of their right to be heard and as such fulfils the criteria of Denial of Justice.
20. This indicates that when denial of justice is shown, exhaustion of local remedies is no longer
required and an international proceeding in the form of conciliation can be instituted. Thus, it
contains evidence indicating that states have accepted the occurrence of a denial of justice as a
legitimate basis for relieving an alien of the duty to exhaust local remedies as a precondition of
admissibility of his claim to an international forum.
21. It is humbly submitted that Claimant invoked Article 9(2) of the BIT because of the ineffective
local remedies. The decisions of SC and Areana State HC amount to denial of justice.
22. The claimants most humbly submit that the Arbitral Tribunal do not condition its jurisdiction on
the exhaustion of local remedies.38The mere availability of a local remedy, whether judicial or
otherwise, cannot preclude the Tribunal from its jurisdiction.39 The UNCITRAL Arbitration
Rules40and the Additional Facility Rules provide that the tribunal has the power to rule on its
own jurisdiction.
23. In BancoNacional de Cuba v. Sabbatino, the U.S. SupremeCourt held that before resort can be
made to international law, claimants are required to first seek local remedies or show that such
remedies are unavailable, but this does not render it an absolute condition of admissibility of
international claims.41
24. It is also submitted that the rule of exhaustion of local remedies is procedural, rather than
substantive in nature.42
25. Hence, it is submitted that the Claimant invoked the arbitration after trying all the effective local
remedies but finding them of no help and keeping in mind the loss through which the company
37

Factsheet 13
Amoco Iran Oil Co. v. Iran (1982) 1 Iran-U.S. C.T.R. 493 (1982); Amoco Int'l Fin. Corp. v. Iran (1987) 15 IranU.S. C.T.R. 189
39
Rexnord Inc. v. Iran (1983)2 Iran-U.S. C.T.R. [6] [10]
40
UNCITRAL Arbitration Rules 2010, Art. 23(1)
41
Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)
42
AO Adede, A Survey of Treaty Provisions, 18 HARVARD ILJ1, 1-17 (Winter 1977),.
38

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
was going on, had to find a suitable remedy through International Arbitration under Article 9(2)
of the agreement between both the contracting parties for the promotion and protection of
investments.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
2.
THAT THE ACTS OF THE STATE OF AREANA AMOUNTED TO
DEPRIVATION OF SOVEREIGN WEALTH OF THE RURITANIAN REPUBLIC, IN
VIOLATION OF THE PRINCIPLE OF SOVEREIGN IMMUNITY
26. The Claimant humbly submits that the decision of Areana Supreme Court to quash the licenses
as well as the decision of High Court to quash the auction of 15th November 2012 and bar RTL
from taking part in the subsequent auction was tantamount to deprivation of Sovereign wealth of
the Ruritanian Republic, in violation of the principle of Sovereign Immunityand as such the local
courts of Areana have no jurisdiction to hear the case so the decision of RTL to approach the
Arbitration Tribunal is justified and the exhaustion of local remedies clause is waived of. This
contention is threefolds (a) Act of Areana has led to deprivation of Sovereign wealth of
Ruritania. (b)Violation of Sovereign immunity renders the Exhaustion of Local remedies Clause
meaningless (c) Deprivation of Sovereign wealth has violated the principle of sovereign
immunity.
2.1

THAT THE ACT OF AREANA HAS LED TO DEPRIVATION OF SOVEREIGN WEALTH OF


RURITANIA

27. The claimant humbly submits that there has been a loss of sovereign wealth of the state of
Ruritania. 20% of the shares of Ruritanian Telecom Limited is being owned by the government43
and the fact that RTL is a well-known name in the field of advanced telecom technology44 shows
that the stakes are very high and any loss suffered by RTL is a direct loss to the treasury of the
state of Ruritania and as such a loss to public in general.
28. RTL invested in Areana in 2008 and owns majority shares in the joint venture company,
Ruritania-Areana Air Waves Limited (RAAWL).45 In the joint venture agreement RTL pledged
its latest technology in favour of RAAWL. The fact that after investing billions of dollars into
Areanas cellular sector,46 the Supreme courts decision of quashing the licenses without
granting compensation for that and furthermore imposing a fine of $ 5 million on RAAWL47 has
not only violated the BIT but also affected the money invested by RTL and frozen it assets in
Areana as now. It cannot withdraw the money it has invested and advanced machinery that has
43

Factsheet 3
Ibid 3
45
Ibid 7
46
Ibid 11
47
Ibid 10
44

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
been installed by RTL is useless without the spectrum. Also, the cost of spectrum in the auction
of 15th November was $ 1400 million per license48 which was much higher than the cost at which
TAAWL had bought during the allocation.
2.2

THAT THE VIOLATION OF SOVEREIGN IMMUNITY RENDERS THE EXHAUSTION OF LOCAL


REMEDIES CLAUSE MEANINGLESS

29. The rules of state immunity address the extent to which a foreign state is protected from being
sued in the courts of other countries. Immunity prevents a foreign state being made a party to
proceedings in the forum state and/or will protect its property from being seized to satisfy a
judgment. Immunity can extend to legal proceedings against the foreign state itself, its organs
and enterprises, and its agents.49
30. As ,the question of sovereign immunity is a procedural one and one to be taken as a preliminary
issue,50 logically preceding the issue of act of state,51 it decides the jurisdiction of the local court.
31. It has been a general principal of International law that one state cannot inquire in to matters
relating to other states, in consonance with the principle of Sovereign Immunity. This principle
was reinstated in UN Convention on Jurisdictional Immunities of States and Their Property,
2004, which notes that:
Astate enjoys immunity in respect of itself and its property, from the jurisdiction of the
courts of another state subject to the provisions of the present Convention.52
32. This principle has been further provided in judgements of various cases like in the case of The
Schooner Exchange v. McFaddon,53 Chief Justice Marshall declared that the jurisdiction of a
state within its own territory was exclusive and absolute, but it did not encompass foreign
sovereigns.
33. Similarly, Lord Browne-Wilkinson stated in Ex parte Pinochet that,

48

Ibid 13
Gaukrodger, D., Foreign State Immunity and Foreign Government Controlled Investors,OECD WORKING PAPERS
ON INTERNATIONAL INVESTMENTS (2010).
50
Difference Relating to Immunity from Legal Process case, ICJ Reports, 1999, 62, 88;
51
Siderman v. Republic of Argentina 965 F.2d 699 (1992); 103 ILR, 454.
52
David P. Stewart, The UN Convention on Jurisdictional Immunity of States and their Property, 99 AJIL, 194-211
(Jan. 2005)
53
The Schooner Exchange v. McFaddon, 7 Cranch 116, 136 (1812)
49

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
It is a basic principle of international law that one sovereign state(the forum state) does
not adjudicate on the conduct of a foreign state. The foreign state is entitled to
procedural immunity from the processes of the forum state. This immunity extends to both
criminal and civil liability.54
34. Also, Lord Millett in Holland v. Lampen-Wolfe put the point as follows:
State immunity...is a creature of customary international law and derives from the
equality of sovereign states. It is not a self-imposed restriction on the jurisdiction of its
courts which theUnited Kingdom has chosen to adopt. It is a limitation imposed from
without upon the sovereignty of the United Kingdom itself.55
35. Lord Wilber force declared in Buttes Gas and Oil Co. v .Hammer Case:
36. There exists in English law a general principle that the courts will not adjudicate upon the
transactions of foreign sovereign states...it seems desirable to consider this principle...not as a
variety of act of state but one for judicial restraint or abstention.56
37. Thus, widespread state practice and arbitration judgements proves that sovereign immunity is the
established principle of International Law.
38. State immunity has been justified on a variety of grounds. One ground is the status of equality
attaching to the independent sovereign, which is said to preclude one State from exercising
jurisdiction over another under the principle of par in parem non habetjurisdictionem: one
sovereign State is not subject to the jurisdiction of another State. This was often invoked as the
basis for absolute immunity, as for instance in the frequently-cited 1849 French case,
LambgeetPujol.57
39. As noted by Brownlie, the rationale rests equally on the dignity of the foreign nation, its organs
and representatives, and on the functional need to leave them unencumbered in the pursuit of

54

R v Bow Street Metropolitian Stipendiary Magistrate, exppinochet[2000] 1 AC 147, 201; 119 ILR, p. 152.
Holland v. Lampen-Wolfe[2000] 1 WLR 1573, 1588; 119 ILR, p. 367.
56
Buttes Gas and Oil Co. v .Hammer (No. 3):273[1982]AC888,931;64 ILR, p. 344; Duke of Brunswick v. King of
Hanover (1848) 1 HLC 1. Fatima,Using International Law, pp. 385 ff. ; R v. Director of the Serious Fraud Ofce
and BAE Systems [2008] EWHC 714 (Admin), 74 and 160.
57
Spanish Government v. Lambege and Pujol Jan 22, 1849, Sirey 1830, I, 81 at 93.
55

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
their mission.58 There is also no doubt that court proceedings against foreign states may
generate tensions and interfere with the conduct of international relations.
40. A number of commentators have pointed to another aspect that may be relevant in the current
context with regard to SWFs. It is that the economic interests of States may affect their
interpretation of state immunity principles. An eminent professor offered a version of this thesis
in his conclusions to a 2004 international conference on state immunity: Considerations
specific to States significantly influence the supposed interpretation of international law in the
development of their own national law of immunity. [] To a substantial degree it is the
interests of States and businesses in those States that determine the national rules applicable to
the immunity of foreign States.59
41. This was seen in the case of Trendtex Trading v. Bank of Nigeria,60 in which the Central Bank of
Nigeria (C.B.N.) was sued on one of the letters of credit issued by it in relation to the cement
transactions. C.B.N. claimed that it could not be sued in the U.K. on the letters of credit issued
by it in relation to the cement transactions as it was entitled to sovereign immunity. After a
detailed analysis, Lord Denning M.R. held that the C.B.N. had no immunity once it entered into
a commercial transaction. The English court also held that the Central Bank was not an organ or
a department of the Federation of Nigeria. That a U.K. court could hold that the Central Bank of
a sovereign nation is not a department of that nation's government is an indication of the extent
of the panic caused by the cases."61
2.3

THAT THE DEPRIVATION OF SOVEREIGN WEALTH HAS LED TO VIOLATION OF THE


PRINCIPLE OF SOVEREIGN IMMUNITY

42. The Claimant contends that while dealing with the instant case the tribunal shall apply absolutely
the approach of Sovereign Immunity as direct interest of Ruritania is involved. Also, continued
application of the absolute rule relating to commercial acts have appeared in court decisions in

58

I. BROWNLIE, PRINCIPLES OF PUBLIC INTERNATIONAL LAW 326 (7th ed. 2008).


PINGEL, I., ED., DROIT DES IMMUNITS ET EXIGENCES DU PROCSQUITABLE 152 (Editions Pedone 2004).
60
Trendtex Trading v. Bank of Nigeria[1977] 1 Q.B. 529
61
YemiOsinbajo, Sovereign Immunity in International Commercial Arbitration The Nigerian Experience,7
AFRICAN JOURNAL OF INTERNATIONAL AND COMTIVE LAW 7, 3(1992)
59

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
Bulgaria, the Czech Republic, Poland, Romania and Russia.62A recent monograph argues that a
broad range of countries continues to hold to the doctrine of absolute immunity.63
43. The consistent and principled position of China is that a state and its property shall, in foreign
courts, enjoy absolute immunity, including absolute immunity from jurisdiction and from
execution, and [it] has never applied the so-called principle or theory of restrictive immunity.64
44. Further, from the fact that The United Nations Convention on Jurisdictional Immunities of States
(UNCSI) which was adopted by the United Nations General Assembly after decades of
negotiations and which provided restrictive approach to state immunity has only been signed by
28 countries(the treaty provided that at least 30 states must sign it, for it to be enforced) and ,as
of March 2010, has been ratified by only 4 states clearly proves that majority of states still prefer
and adopt absolute approach on sovereign immunity.65
45. Theconcept of absolute immunity, whereby the sovereign was completely immune from foreign
jurisdiction in all cases regardless of circumstances.66
46. Also, proceeding before a court of a State shall be considered to have been instituted against
another State if that other State: (a) is named as a party to that proceeding; or (b) is not named as
a party to the proceeding but the proceeding in effect seeks to affect the property, rights, interests
or activities of that other State.67 In the instant case the property as well as the interests of
Ruritanian state has been affected as it has 20% shares in RTl68 and RTL has invested billions of
dollars in Areana69 thus the interest of Ruritania is conspicuous enough to fall within the
definition of point (b).

62

Shaw, supra note 17.


ERNEST K. BANKAS, THE STATE IMMUNITY CONTROVERSY IN INTERNATIONAL LAW: PRIVATE SUITS AGAINST
SOVEREIGN STATES IN DOMESTIC COURTS (Springer 2005)
64
Gaukrodger, supra note 50.
65
Ibid
66
Shaw supra note 17, at 701
67
Joanne Foakes and Elizabeth Wilmshurst, State Immunity: The United Nations Convention and its effect,
CHATHAM HOUSE (2005).
68
Factsheet 3
69
Factsheet 11
63

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
47. There is some limitation to the absolute immunity rule to the extent that a mere claim by a
foreign sovereign to have an interest in the contested property would have to be substantiated
before the English court would grant immunity.70
48. Thus, in the light of above stated facts and keeping in mind the absolute approach on sovereign
immunity the petitioner contends that the respondent court has no jurisdiction to decide the
matter, as such the claimant is not under the obligation to exhaust the local remedies as provided
in the BIT.
49. [Inarguendo], even if the honorable tribunal wishes not to apply the absolute approach on
sovereign immunity, then also the investment by RTL doesnt form outside the definition of
Sovereign act. According to the established principle of International law, Governmental acts
with regard to which immunity would be granted are termed acts jure imperii71 or sovereign act
which is different from commercial transaction.
50. It should be noted that article 2(2) of the Convention72 provides that:
In

determining

whether

contract

or

transaction

is

commercial

transaction...reference should be made primarily to the nature of the contractor


transaction, but its purpose should also be taken into account if the parties to the
contract or transaction have so agreed, or if, in the practice of the state of the forum, that
purpose is relevant to determining the non-commercial character of the contract or
transaction.
51. The reason for the modied nature test was in order to provide an adequate safeguard and
protection for developing countries, particularly as they attempt to promote national economic
development. The ILC Commentary notes that a two-stage approach is posited, to be applied
successively. First, reference should be made primarily to the nature of the contract or
transaction and, if it is established that it is non-commercial or governmental in nature, no further
enquiry would be needed. If, however, the contract or transaction appeared to be commercial,
then reference to its purpose should be made in order to determine whether the contract or
transaction was truly sovereign or not. States should be given an opportunity to maintain that in
70

Shaw, supra note 17, at 703.


Shaw,supra note 17, at 701.
72
United Nations Convention on Jurisdictional Immunities of States, art.2, 2004.
71

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
their practice a particular contract or transaction should be treated as non-commercial since its
purpose is clearly public and supported by reasons of state.73
52. The importance of the contextual approach at least as the starting point of the investigation was
also emphasized by the Canadian Supreme Court in United States of America v. The Public
Service Alliance of Canada and Others (Re Canada Labour Code).74
53. In Reid v. Republic of Nauru,75which stated that in some situations the separation of fact, motive
and purpose might not be possible. The motive or purpose underlying particular conduct may
constitute part of the denition of the act itself in some cases, while in others the nature or
quality of the act performed might not be ascertainable without reference to the context within
which it is carried out. The Court also made the point that a relevant factor was the perception
held or policy adopted in each particular country as to the attributes of sovereignty itself.76
54. The point that unless we can inquire into the purpose of such acts, we cannot determine their
nature was also made by the US Court of Appeals in De Sanchez v. Banco Central de
Nicaragua and Others.77
55. Thus, in order to decide whether a transaction is a commercial transaction or a sovereign act the
purpose of that transaction has to be considered. In the instant case the purpose of Ruritanian
government was to provide cheaper and better services to its people and also to equip them with
state of the art technology, this was the reason why it encouraged local entrepreneurs to enter the
telecom field by subsidized R & D through directly subscribing to the equity of the new telecom
companies.78Thus, RTL was formed as a result of Ruritanias keen interest and enthusiasm in its
development by development in telecom sector and as such the purpose of establishing RTL as
well as its investment in Areana was not benefit individuals but to serve the public purpose and
as such was entitled to benefits of sovereign immunity.For, ultimately, activities of the State, if
not wholly, then to the widest degree, serve sovereign purposes and duties .79As was held in
the well-known Empire of Iran case. Also, as stated earlier, it had 20% shares in RTL and the
73

Shaw, supra note 17, at 710


United States of America v.The Public Service Alliance of Canada &Ors. ((1992) 91 DLR (4th) 449; 94 ILR,
p.264
75
Reid v. Republic of Nauru [1993] 1 VR 251; 101 ILR, p. 193
76
Ibid at 1956
77
De Sanchez v. Banco Central de Nicaragua and Others770 F.2d 1385, 1393 (1985); 88 ILR, pp. 75, 85.
78
Factsheet 3
79
Empire of Iran case, German Federal Constitutional Court (30 April 1963), 45 ILR 57.
74

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
fact that Ruritanian Telecom Limited was renowned company throughout the world in advanced
telecom technology clearly makes out the point that a huge amount of public money is involved
in the company.
56. The above claims have been supported in the case of AIG v. Republic of Kazakhstan, in which
the court appeared to consider that an SWF that invests in securities is engaged in immune
sovereign activity by virtue of its general purpose of accumulating assets in the public interest;
the invested assets were accordingly immune from execution.80

80

AIG Capital Partners Inc. and Another v. Kazakhstan, [2005] EWHC 2239 (Comm.), 129 ILR 589

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
3.
THAT RURITANIA HAS VIOLATED ARTICLE 2(2) OF THE BIT BY NOT
CONFORMING TO THE PRINCIPLES OF FAIR AND EQUITABLE TREATMENT
AND FULL PROTECTION AND SECURITY.
57. The fair and equitable treatment (FET) standard is a key element in contemporary international
investment agreements (IIAs). Over the years, it has emerged as the most relied upon and
successful basis for IIA claims by investors. The standard protects investors against serious
instances of arbitrary, discriminatory or abusive conduct by host States.81
58. The FET standard is a broad standard,82 which requires that Respondent act in a manner that is
not arbitrary, grossly unfair, unjust, idiosyncratic, [or] lacking in due process or procedural
propriety.83 It requires Respondent to provide . . . treatment that does not affect the basic
expectations that were taken into account by the foreign investor and act in a consistent
manner, free from ambiguity and totally transparently in its relations with the foreign investor. 84
Tribunals and scholars have understood this language to mean that the fair and equitable
treatment standard is breached by conduct that violates principles of transparency, the protection
of the investors legitimate expectations, freedom from coercion or harassment, procedural
propriety and due process, and good faith.85
59. Also, as far as the scope of the FET is concerned, current arbitral practice shows that all types of
governmental conduct legislative, administrative and judicial alike can potentially be found
to breach the FET obligation.86
60. It is humbly submitted that Respondent has breached Article 3(2) of the BIT and any relevant
rules of international law87by failing to accord Claimants investment fair and equitable
treatment (FET). Article 3(2) of the BIT provides that investments of each Party or of nationals
of each Party shall at all times be accorded fair and equitable treatment.88In addition,

81

UNCTAD Fair and Equitable Treatment II, supra 37 at 1.


Ibid at 11.
83
BitwaterGauff Ltd. V. Tanzania, Award, ICSID Case No. ARB/05/22,253 (July 18, 2002).
84
TcnicasMedioambientalesTecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2,154
(May 29, 2003).
85
Barnali Choudhury, Evolution or Devolution: Defining Fair and Equitable Treatment in Investment Law, 6 J.
WORLD INV. & TRADE 297 (2005)
86
UNCTAD supra note 37 at 12.
87
SGS v. Philippines,ICSID Case No. ARB/03/11, 153 (Apr. 24, 2002).
88
BIT, Art 3(2)
82

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
Areanamay not impair by unreasonable or discriminatory measures the management, use,
enjoyment or disposal of investment in its territoryof nationals of Ruritania.
61. Article 3(2) of the BIT also requires Areana to provide full protection and security to
investments made by nationals of Ruritania in its territory. Tribunals generally treat this as a
different standard. Nevertheless, it should be noted that Respondents actions would also breach
the full protection and security standard, which imposes upon states an obligation of objective
vigilance and due diligence, which should be legitimately expected to be secured for foreign
investors by a reasonably well-organized modern State.89 The facts that support Claimants
argument that Respondent violated FET also demonstrate that Respondent failed to meet its
obligations under the full protection and security standard.
62. The claimants most humbly submit that the respondent state has violated the principle of fair and
equitable treatment. The following are the aspects of the Fair and Equitable Treatment, violation
of any of which results in violation of the principle of fair and equitable treatment:
a. Legitimate Expectations
b. Due Process
c. Proportionality
d. Good Faith

3.1

THAT THE RESPONDENT HAS VIOLATED THE LEGITIMATE EXPECTATIONS OF THE


CLAIMANT COMPANY.

63. The aspect of Legitimate Expectation has been referred to as a dominant element of the Fair and
Equitable Treatment standard.90 Foreign investors take relevant business decisions based on the
existing legal framework of the host State.91 Tribunals and scholars agree that investors

89

AAPL v Sri Lanka, ICSID Case No.ARB/87/3, 77 (27 June 1990).


Saluka Investments v Czech Republic, Partial Award, IIC 210, 302 (2006).
91
DOLZERsupranote 24
90

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
legitimate expectations rely on the stability, predictability and consistency of the host States
legal and business framework.92
64. Also, Claims relating to breach of legitimate expectations arise in situations when an investor is
suffering losses due to the changes brought about by certain State measures. In other words,
when a host States conduct causes adverse effects to an investment, that is, it reduces its
economic value, an investor may allege that the State violates legitimate expectations that the
investor had when making the investment.93
65. In light of the good faith principle established by international law, the plain language of fair
and equitable treatment establishes that the Respondent must treat Claimant in a manner that
accords with the basic expectations it had when it made the investment.94
66. The tribunal in Thunderbird defined legitimate expectation as a condition which creates
reasonable and justifiable expectations on the part of an investor to act in reliance on said
conduct, and that a failure to honour those expectations could cause the investor to suffer
damages.95
67. In determining a violation of FET, the expectations to be considered are those existing when the
investor decided to invest.96From the statement of tribunals in Duke Energy v.Ecuador and other
cases97, it is possible to identify a number of key qualifying elements:
(a) Legitimate expectations may arise only from a States specific representations or
commitments made to the investor, on which the latter has relied;
(b) The investor must be aware of the general regulatory environment in the host
country;
(c) Investors expectations must be balanced against legitimate regulatory activities
of host countries.

92

Kenneth J Vandevalde, A Unified Theory of Fair and Equitable Treatment, 43 New York Unib J IntnL& Pol 43,
66 (2010-11).
93
UNCTAD:Fair and Equitable Treatment supra note 37 at 2, 63
94
DOLZER, supranote 24, at 133-149.
95
International Thunderbird Gaming Corporation v Mexico, Award, IIC, 147, 36 (2006).
96
BayindirInsaatTurizmTicaretVeSanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29 (Aug. 27
2010)
97
Duke Energy Electroquil Partners and Electroquil S.A. v. Republic of Ecuador, Award, ICSID Case
No. ARB/04/19 (Aug. 18 2008)

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
In the instant case the Bilateral Investment Treaty between Areana and Ruritania provided for
protection and promotion of each others investments. This satisfies the first criteria mentioned
in Duke Energy v.Ecuadorand other cases.
68. The claimant company had sufficient grounds to believe that the general regulatory environment
was safe as for their investments. It is so because even after the expiry of 10 years the agreement
continued to be in force as the investments from either country in the other proliferated over
time.98
69. Later the respondent state breached the legitimate expectations of the claimant company. The
Areana Dot arbitrarily, capriciously and contrary to public interest allocated the spectrum
licenses. Both the legislative environment as well as the attitudes and policies of the
administration relating to investments were contrary to the need to ensure a stable and
predictable business environment for investors to operate in, as required [] by the Treaty,99
and hence, the acts of Areana cannot be called a legitimate regulatory activity. This situation
was unknown to the Ruritanian company which in good faith entered into a joint venture with
one such company to whom the Dot had arbitrarily allocated the spectrum licenses.
3.2

THAT THE RESPONDENT DID NOT FOLLOW DUE PROCESS NORMS.

70. Due process of law is unanimously considered to be a universally accepted principle of


international law.100 It applies to all forms of government decision making in which the host state
decisions affect the rights of the investor.101 Due process, inter alia, must be observed in order
for a taking of property to be lawful both in domestic legal systems and international law which
protects the basic rights of natural and legal persons.102 In order for due process of law to be
respected, State actions must not be arbitrary or discriminatory.103

98

Factsheet 3
PSEG v. Turkey, ICSID Case No. ARB/02/5 (2007)
100
MCLACHLAN, C. ET AL, INTERNATIONAL INVESTMENT ARBITRATION: SUBSTANTIVE PRINCIPLES239 (Oxford
2008).
101
NEWCOMBE, A. AND DELL, L., LAW AND PRACTICE OF INVESTMENT TREATIES: STANDARDS OF TREATMENT244
(Kluwer Law International 2009).
102
PAULSSON,supra note 30, at 148
103
CMS Gas Transmission Company v The Republic of Argentina, ICSID Case No. ARB/01/8 (2007)
99

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
71. Furthermore, the duty to accord due process of law shall also be deemed breached in case of
procedural irregularities.104 Accordingly, in ADC case, the tribunal ruled that the due process
requires some basic legal mechanisms, such as reasonable advance notice, a fair hearing and
unbiased and impartial adjudicator and if no legal procedure of such nature exists at all, the
argument that the actions are taken under due process of law rings hollow.105
72. Due Process refers to procedural fairness in all types of procedures in which the investor may be
involved with the organs of the state.106 The Tribunal in Waste Management defined lack of due
process as complete lack of transparency and candour in administrative process. The Claimant
contends that the actions of the Areana Government are in gross violation of due process norms.
Specifically the Claimant questions the acts of the Respondent on the following aspects :1. Arbitrary allocation of licesnses.
2. SC decision cancelling the licenses of the claimant company without providing
appropriate compensation.
3. SC decision holding the Claimant company as disqualified from participation in
subsequent auctions.
4. HC proceedings without serving notices to the Claimant company.
73. Many tribunals have found a separate requirement of transparency within the standard of fair and
equitable treatment. In Tecmed, for example, the tribunal found that fair and equitable treatment
includes the idea that:
The foreign investor expects the host State to act in a consistent manner, free from
ambiguity and totally transparently in its relations with the foreign investor, so that it
may know beforehand any and all rules and regulations that will govern its
investments.107

104

Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v.The Republic of Estonia, ICSID Case No.ARB/99/2
371 (2002).
105
ADC Affiliate Ltd. & ADC & ADMC Management Ltd. v The Republic of Hungary, ICSID Case No.
ARB/03/16, 435 (Oct. 2, 2006)
106
Parkerings-Compagniet v. Republic of Lithuania, ICSID Arbitration Case No. ARB/05/8 , 35 (Sept. 2007)
107
TecnicasMedioambientalesTecmed S.A, v. The United Mexican States, ICSID Award Case No. ARB (AF)/00/2
(2003).

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
74. In Waste Management, the tribunal found that a violation of fair and equitable treatment would
involve a lack of due process leading to an outcome which offends judicial propriety, as might
be the case with a lack of transparency and candour [sic] in an administrative process.108
75. The Respondent state did not afford Claimant transparency and did not serve formal notice
providing them opportunities that would be consistent with traditional notions of due process and
judicial propriety. In Metalclad, the tribunal found a violation of the FET standard because the
claimant received no notice, invitation, or opportunity to appear at a meeting at which its permit
was denied.109 In Tecmed, the tribunal found a violation of the FET standard where the claimant
had been deprived of the opportunity to contest the non-renewal of its regulatory permit.110 In
Deutsche Bank AG, the tribunal found a violation of the FET standard because the claimant was
neither informed of the case against it before the states central bank nor given an opportunity to
respond to an investigation report.111
76. The Respondents failure to provide an opportunity to the claimants to put their objections before
its courts represents a violation of the FET standard, which requires consistency and
transparency so that the investor may know any and all rules and regulations that will govern its
investments.112
3.3

THAT THE RESPONDENT DID NOT ACT IN GOOD FAITH.

77. Good faith refers in a general sense to the duty of the parties to act reasonably, consistently, and
transparently in their relations with each other.113 This duty to act in good faith stems from the
BITs Preamble, which specifies that the BITs goal is to promote greater economic cooperation
through a stable investment climate for investments made by nationals of a BIT party. This duty
also derives from Article 26 of the VCLT, which states: Every treaty in force is binding upon
the parties to it and must be performed in good faith.114 Accordingly, the performance of an
investment treaty must be in good faith.

108

Waste Management, Inc. v. United Mexican States, ICSID Case No.ARB(AF)/00/3 (2001).
Metalclad Corporation v. Mexico, Award, ICSID Case No. ARB (AF)/97/1),91 (Aug 30, 2000).
110
Tecmedcase supra note 107 at 162.
111
Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No.ARB/09/2, 487-488 (2009).
112
Tecmedcase supra note 107 at 154.
113
Vandeveldesupra note 93 at 98.
114
Vienna Convention on the Law of Treaties, Art.3, 1155 U.N.T.S. 331, 8 I.L.M. 679.
109

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
78. In Tecmed, the tribunal found that Mexico breached a good faith obligation because its denial of
the permit necessary for the claimants investment to yield returns was either a coercive attempt
to force relocation of the claimants facility or a nontransparent attempt to achieve some other
undisclosed objective.115 Coercion and a lack of transparency are, as the Tecmed decision
demonstrates, hallmarks of a violation of the good faith obligation.
79. In the instant case the actions of the Respondents which resulted in denial of legitimate
expectations of the Claimants constitutes bad faith on behalf of the Respondent. Further, the lack
of transparency in spectrum allocation, failure to create a stable investment climate are sufficient
to prove bad faith on behalf of the Respondents.
80. The Claimant submits that lack of good faith is viewed as an aggravating measure for violation
of FET rather than a separate component of FET116 especially when the failure to negotiate in
good faith is accompanied by the discriminatory application of the law.117
81. Alternatively, lack of bad faith is not an essential characteristic to find a breach of FET. 118 In the
C.M.S Award, the ICSID tribunal found that breach of FET requires an objective requirement,
unrelated to deliberate intention or bad faith in adopting the measures in question.119
3.4

THAT THE RESPONDENTS ACTIONS LACKED PROPORTIONALITY.

82. It is important to ensure the measures do not cause more economic harm than what is necessary
to achieve those ends. The Tribunal in Tecmedlaid down a proportionality test which weighs the
reasonableness of a measure to its goal, the deprivation of the Claimants economic rights and
the legitimate expectations of the investor.120 There must be a reasonable relationship between
the measures of the State and the burden on the investor, taking into account the investors
legitimate expectation.
83. The Claimant puts forth that there was absence of proportionality in the actions of the
Respondents in :-

115

Tecmedcase supra note 107 at 172.


Azurix Corp. v.The Argentine Republic, ICSID Case No.ARB/01/12, 372 (2001).
117
Salukacase supra note 92 at 466.
118
Loewen Group, Inc. and Raymond L. Loewen v. United States of America, Award, ICSID Case No
ARB(AF)/98/3, 132 (2003).
119
CMS Gas Transmission Company v.The Republic of Argentina, ICSID Case No.ARB/01/8, 280 (2012).
120
Tecmedcase supra note 107.
116

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
1. The SC order quashing the licenses without providing the claimant company
any compensation.
2. The Areana State HC decision declaring the claimant as disqualified for
subsequent auction.
84. In response to the writ petition filed by Airtel Infotech Co. Ltd, the SC quashed all 122 licenses
issued in January 2008. This amounts to expropriation of property of RTL. Article 5 of the BIT
provides protection against expropriation except in cases where expropriation serves some public
purpose but that too can be done only against compensation. The SC order led to expropriation
of the investments of the claimant. Even if the expropriation is said to be done to serve a public
purpose it was to be compensated for as provided in Article 5 of the BIT.
85. The Areana State High Court in response to a writ petition filed by Airwaves Holding Company
held that the companies fined by the SC in its Feb 2012 judgment were disqualified from the
auction involving the spectrum. This again clearly indicates the disproportionality in the actions
of Areana. The order could not be said to be justified. There has to be a reasonable balance
between the measures of the state and the burden on the investor. The said action did not serve
any purpose of the Areana government.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
4.
THAT THE 2012 SUPREME COURT RULING AND THE 2015 STATE HIGH
COURT RULING AMOUNTED TO EXPROPRIATION OF INVESTMENTS OF THE
APPLICANT
86. It is humbly submitted before the Honble Tribunal that indirect expropriation of Claimants
property has occurred. Expropriation may be defined as the taking or deprivation of the property
of the foreign investor by a host state.121 Indirect expropriation occurs when control or the
economic value of any property has been rendered essentially useless.122The Tribunal in
Tecmedexplained that an expropriation takes place where the act radically deprives the investor
of the economic use and enjoyment of the investment.123
87. In fact, it has been held that incidental interference in the use and benefit of the investment alone
is sufficient to establish the existence of expropriation.124 Therefore, expropriation may be
ascertained even if control vests with the investor.125
88. The BIT between Ruritania and Areana protects foreign=investors=from=host=Stateexpropriations or takings. Article 5(1) of the BIT provides that:
Investments of Investors of either Contracting Party shall not be nationalised,
expropriated or subjected to measures having effect equivalent to nationalisation or
expropriation (hereinafter referred to as expropriation) in the territory of the State of the
other Contracting Party except for a public purpose in accordance with the laws and
regulations of the State of the latter Contracting Party, on a non-discriminatory basis, and
against compensation.126
89. The determination of whether an action or series of actions by a Party, in a specific fact situation,
constitutes an indirect expropriation, requires a case-by-case, fact-based inquiry that considers,
among other factors:

121

Marvin Roy Feldman Karpa v. United Mexican States, Award, ICSID Case No. ARB(AF)/99/1, 366-67 (2003);
SD Myers Incorporated v Canada IIC 252 (2004)
122
Ibid
at
100;
MckessonCorporationForemost
Iran
Corporation;
Overseasprivate
Investment
Corporation,appellees/cross-appellants, v. Islamic Republic of Iran, Appellant/cross-appellee, 52 F.3d 346 (D.C. Cir.
1995).
123
Telenor Mobile Communications A.S. v.The Republic of Hungary, ICSID Case No.ARB/04/15, 67 (2006).
124
DOLZER,supra note 24, at 108.
125
EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL (2006);
Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6 (2002)
126
BIT, Art. 5(1)

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
I.
II.

The economic impact of the government action;


The extent to which the government action interferes with distinct, reasonable
investment- backed expectations; and

III.

The character of the government action.

90. Three factors must be used on a cumulative basis, although these factors are not exhaustive, as
evidenced by the use of the phrase among other factors the above paragraph. Firstly, the
investor must have suffered an adverse impact to the investment concerned. This is the economic
impact of the measure. Secondly, reasonable investment-backed expectations are taken into
account when assessing whether there has been expropriation. Thirdly, and finally, the character
of the measure must be taken into consideration.127
91. Three main criteria are used by arbitration tribunals to identify whether there has been an indirect
expropriation: detrimental effect, legitimate expectations of the investors and proportionality.128
The following criteria in relation the given situation are examined below

4.1

VALIDITY OF SOLE EFFECTS DOCTRINE.

92. A major determining factor to establish expropriation is the presence of substantial deprivation,
which has been identified through an effects based doctrine developed in various instances.129
The Sole Effects doctrine is regarded as the dominant doctrine in international investment law,
which looks at the effects of the governmental measure on the investor, instead of the purpose
behind it.130 This includes a substantial deprivation of the rights of the Investor.131 The Doctrine
has been applied successfully in the various decisions of arbitral tribunals, all of whom have held
in some degree that the intention behind adopting any measure is not material in identifying an
expropriatory conduct.132

127

Suzi H. Nikiema, Best Practices: Indirect Expropriation, THE INTERNATIONAL INSTITUTE FOR SUSTAINABLE
DEVELOPMENT, 11 (Sept. 3, 2016) http://www.iisd.org/pdf/2012/best_practice_indirect_expropriation.pdf
128
Ibid
129
M.C.I. Power Group L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, 300
(2007);LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc .v. Argentine Republic, ICSID
Case No. ARB/02/1,65 (2007).
130
TokiosTokels v. Ukraine, ICSID Case No.ARB/02/18, 120 (2004).
131
Sempra Energy International v.The Argentine Republic, ICSID Case No.ARB/02/16, 284 (2007).
132
TokiosTokelesAward supra note 131 at 205; Compai de AguasdelAconquija S.A. & Vivendi Universal S.A. v.
Argentine Republic, ICSID Case No. ARB/97/3 (2010).

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
93. The exclusive criterion of injurious or adverse effect on the investment, also known as the sole
effect doctrine133 has been described as making the adverse effect of the State measure on the
investor a major factor, or even the sole factor, in determining whether or not a Taking has
occurred.134 In this regard, the terms measure tantamount to expropriation or measure with a
similar effect to expropriation simply mean measure having the same injurious effect on the
investment as expropriation.135
94. The injurious effect criterion has been applied in numerous arbitration awards. It has become
known as the TippetsBilouneMetalclad line,136 after the three principle cases often cited in
support of this approach.
95. The Tippets v. Iran award clearly illustrates the sole effect doctrine.In fact, the arbitrators
explicitly rejected all other conceivable criteria before concluding that the damage suffered by
the investor alone was relevant: [T]he governments intention is less important than the effects
of the measures on the owner of the assets [...], and the form of the measures of control or
interference is less important than the reality of their impact.137 The tribunal in the case of
Biloune v. Ghana only took into account the fact that the measure had the effect of causing the
irreparable cessation of work on the project138 due to the order to stop work, the demolition of
the works, and the arrest and then deportation of Mr. Biloune. Finally, in Metaclad v. Mexico,
the tribunal unambiguously defended the sole effect doctrine in the following terms: The
Tribunal need not decide or consider the motivation or intent of the adoption of the Ecological
Decree (...).139 It added that indirect expropriation could occur even if not necessarily to the
obvious benefit of the host State.140
96. TheNykombSynergetics v. Latvia tribunal described this approach as follows: The Tribunal finds
that regulatory takings may under the circumstances amount to expropriation or the equivalent
of an expropriation. The decisive factor for drawing the border line towards expropriation must
133

R. Dolzer, Indirect Expropriation, New Developments? 11 Environmental Law Journal, 65 (2002).


Dolzersupranote 24 at 78.
135
Suzi H. Nikiema, Best Practices: Indirect Expropriation supra note 128 at 113.
136
F. Bloch, Indirect Expropriation: Conceptual Realignment?, 5(3) INTERNATIONAL LAW FORUM, 161 (2003).
137
Tippetts, Abbett, McCarthy, Stratton (Tams) v. Tams-Affa Consulting Engineers of Iran v. Iran, and others,
Award, Iran-U.S. CTR, 6, 225226 (1986).
138
Biloune and Marine Drive Complex Ltd v. Ghana Investments Centre and the Government of Ghana, Ad hoc
award of October 27, 1989, ILR, vol. 95, 209 (1990).
139
Metalclad Case supra note 110, at111.
140
Ibid 103.
134

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
primarily be the degree of possession taking or control over the enterprise the disputed measures
entail.141
97. The tribunal in Firemans Fund v. Mexico, when summarizing its understanding of current law
of expropriation under NAFTA, stated that [t]he effects of the host States measures are
dispositive, not the underlying intent, for determining whether there is expropriation.142
98. The caseCompaa del Desarrollo de Santa Elena v. Costa Rica143, although referred to a direct
expropriation, not an indirect taking, has attracted particular attention because the panel
expressly stated that the environmental purpose had no bearing on the issue of compensation. In
this case, the claimant (Company Santa Elena) was formed primarily for the purpose of
purchasing Santa Elena a 30 kilometer terrain in Costa Rica with the intention of developing
it as a tourist resort. In 1978, Costa Rica issued an expropriation decree for Santa Elena aiming at
declaring it a preservation site. Twenty years of legal proceedings between the Parties finally
ended with a decision by an ICSID panel. While this case concerns a direct expropriation where
the issue was the day of the taking for purposes of determining compensation, the panel, citing
the Tippett case144, indicated that a compensable expropriation could occur through measures of
a state which deprives the owner of access to the benefit and economic use of his property or
has made those [property] rights practically useless.
99. The panel held that:While an expropriation or taking for environmental reasons may be
classified as a taking for a public purpose, and thus be legitimate, the fact that the property was
taken for this reason does not affect either the nature or the measure of the compensation to be
paid for the taking. That is, the purpose of protecting the environment for which the Property was
taken does not alter the legal character of the taking for which adequate compensation must be
paid.145 The international source of the obligation to protect the environment makes no
difference. It also added that:Expropriatory environmental measures no matter how laudable
and beneficial to society as a whole are, in this respect, similar to any other

141

NykombSynergetics Technology Holding AB v Latvia, Award, IIC 182 (2003), 4.3.1 (Dec. 16 2003).
Fireman's Fund Insurance Company v. The United Mexican States, Award, ICSID Case No. ARB(AF)/02/1,
176(f) (July 17 2006).
143
CompaadelDesarrollo de Santa Elena S.A. v. Republic of Costa Rica, Award, ICSID Case No. ARB/96/1. (Feb.
17, 2000).
144
Tippettscase supra note 138 at 225-226.
145
Ibid.
142

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
expropriatorymeasures that a state may take in order to implement its policies: where property is
expropriated, even for environmental purposes, whether domestic or international, the states
obligation to pay compensation remains.
100.

The sole effect doctrine is thus an exclusive criterion that disregards all other parameters in the
process of determining whether an indirect expropriation has occurred, particularly the intention
of those in government to do harm to the investor (or not), the public interest aim being pursued
by the measure and the beneficial effect (or not) that the lost investment may have on the States
assets. It is only the damage suffered by the investor that counts when deciding whether or not a
State measure constitutes an indirect expropriation.

101.

It is humbly submitted that the measures taken by the state of Ruritania were tantamount to
expropriation and the cancellation of licenses was contrary to the obligations of Areana under the
BIT, especially Article 3 which deals with promotion and mutual protection of Investments. 146
4.2

102.

THE REQUIREMENT FOR SERIOUS AND IRREVERSIBLE DAMAGE

In order to define any State measure as indirect expropriation, the tribunals require proof that the
measure has caused serious and irreversible damage to the investment. In the Starrett Housing
case, the tribunal thus spoke of rights rendered so useless that they must be deemed to have
been expropriated.147 Nonetheless, some tribunals have ruled that mere interference in the
investors enjoyment of rights can represent serious damage,148 or have admitted in theory that
partial damage could be sufficient.149

103.

Destruction of the economic value of the investment must be total or close to total. In Pope &
Talbot v. Canada, the test used by the arbitral tribunal to establish indirect expropriation was
whether the interference is sufficiently restrictive to support a conclusion that the property has
been taken from the owner150. This approach has been followed in other cases. In Vivendi v.
Argentina II, the tribunal observed that the weight of authority appears to draw a distinction
between only a partial deprivation of value (not an expropriation) and a complete or near

146

BIT, Art. 3
Iran-US Claims Tribunal, Starrett Housing Corp. v. Iran, 16 IRAN-U.S. C.T.R., at 112 et seq. (Dec 19, 1983).
148
Metalclad case supra note 110, at 110.
149
SD Myers case supra note 125 at 283.
150
Pope & Talbot v. Canada, Interim Award, NAFTA ch. 11, Arb. Trib26, 102 (June 2000).
147

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
complete deprivation of value (expropriation).151 In Sempra v. Argentina, the tribunal explained
that the value of the business had to be virtually annihilated.152 In CMS v. Argentina, the
tribunal opined that the relevant test was whether the enjoyment of the property has been
effectively neutralized.153
104.

The income-producing nature of investments may pose a challenging problem when a State
measure extinguishes the ability to generate profits but leaves an investors physical assets intact.
The question is whether the loss of income can be viewed as a separate investment or whether
the impact should be assessed by reference to the overall investment that includes physical
assets. As a general matter, it would seem that the future income is not an asset capable of
separate economic exploitation and the assessment of the impact that the measure has on the
value of investment must take into account the residual value of physical assets as well as other
expenditures made as part of the investment. This would mean that the requisite level of neartotal deprivation would need to be reached with respect to the investment as a whole.154

105.

Itis humbly submitted that the orders of the Supreme Court and the State High Court have
resulted in a substantial and a near complete reduction of the value of the investments made by
the Claimant. The claimant is a telecommunications company and entered the Ruritanian mobile
cell industry by forming a joint venture RAAWL with a local company TAAWL.155 In the joint
venture the claimant company, RTL, pledged its latest technology for which it is renowned in the
world in favor of RAAWL while TAAWL transferred its seventeen 2G licenses which it had
acquired through an auction conducted by the Government of Areana. It is humbly submitted
that RTL has invested enormous amounts of money156 for the setting up of technology and
acquiring the spectrum licenses and when the Supreme Court of Areana gave an order cancelling
the licenses and ordering a re-auction due to the faults of the Telecom Minister of Areana, there
was substantial deprivation of investments of the claimants company. Furthermore the 2015
State High Court order banning RAAWL from participating in the re-auction resulted in
151

Vivendi v. Argentina (II)Suez, Sociedad General de Aguas de Barcelona, S.A. & Vivendi Universal, S.A. v.
Argentine Republic, Award, ICSID Case No. ARB/03/19, 7.5.11 (Aug 20 2007).
152
Sempra Energy v. Argentina supra note131 at 285.
153
CMS v. Argentinasupra note 104 at 262.
154
OECD (2004), "Indirect Expropriation" and the "Right toRegulate" in International Investment Law, OECD
Working Papers on International Investment, 2004/04, OECD Publishing. (Sept 3 2016)
http://dx.doi.org/10.1787/780155872321.pdf
155
Fact Sheet 7
156
Ibid 11

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
imperishable losses to the claimant as it completely eliminated the profit making ability of RTLs
investments. The claimant also suffered large losses as huge amounts of Claimants money is
now locked up in capital projects having long gestation periods from which it cannot withdraw.
4.2.1 DURATION OF THE MEASURE
106.

In order to constitute an expropriation, the measure should be definitive and permanent. A


measure that leads to a temporary diminution in value or loss of control would normally not be
viewed as expropriatory. As noted by the Tecmed v. Mexico tribunal, it is understood that the
measures adopted by a State, whether regulatory or not, are an indirect de facto expropriation if
they are irreversible and permanent .157

107.

However, some of the de jure temporary measures may also be considered expropriatory
depending on the specific circumstances of the case. As noted in the explanatory note to Article
10(3) of the Harvard Draft Convention on the International Responsibility of States for Injuries
to Aliens (1961), whether an interference might amount to indirect expropriation will depend on
its extent and duration, but there obviously comes a stage at which an objective observer would
conclude that there is no immediate prospect that the owner will be able to resume the enjoyment
of his property.158

108.

As to the irreversible nature of the adverse measure, this implies that the investors situation will be
compromised over a long period of time. The tribunals thus require that damage is not merely
ephemeral,159or is a deprivation [] enduring.160For the tribunal in LG&E v. Argentina, the
expropriation must be permanent, that is to say, it cannot have a temporary nature.161As to the issue

ofhow long does such a measure therefore have to last, the tribunals do not set a standard period of
time162but assess situations on a case-by-case basis. In the case Middle East Cement Shipping and
Handling Co. S.A. v. Arab Republic of Egypt,163 a mere four-month import ban following the revocation
of a license was deemed sufficient to be termed an expropriation measure. As stated by the tribunal in the
case of RFCC v. Morocco, a temporary measure must [] have substantial consequences equivalent to a
157

Tecmed v. Mexico supra note 108at 116.


Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens, Art. 10(3) (1961)
159
Tippettscase supra note 138 at 225.
160
LG&E Energy Corp. v. Argentina, supra note 130 at 190.
161
Ibid 193.
162
SD Myers Incorporated v Canada IIC 252 (2004).
163
Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt (ARB/99/6), award,18ICSID
Rev.-FILJ 200, 602 et seq, (Apr. 12, 2002)
158

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
permanent loss. The recovery of the property right or access to it does not replace ownership in its initial
situation ().164Consequently, it is not a matter of how long the measure itself lasts but of how long the
adverse effects endure on the investment, in other words, their irreversible nature.165

109.

In the given case the permanent nature of the expropriatory measures of the State of Areana are
clearly visible as the Court orders cancelled the licenses held by RAAWL and ordered for a fresh
auction. Moreover the State High Court banned the claimant company from taking part in the reauction. Thus there is no immediate prospect that RTL will be able to resume the enjoyment of
its property166 and the measures adopted by the state whether regulatory or not, are an indirect de
facto expropriation as they are irreversible and permanent.167
4.2.2

110.

THAT THERE WAS A LOSS OF CONTROL OVER THE INVESTMENT

It has been held that an expropriation claim may be accepted not because of a decrease in value
of investment, but because of a loss of control, which prevents the investor from using or
disposing of its investment. An investor may lose control of the investment by losing rights of
ownership or management, even if the legal title is not affected.

111.

Loss of control is thus a factor that is alternative to destruction of value. It is particularly relevant
in situations where the investment is a company or a shareholding in a company. The tribunal
noted in Sempra v. Argentina that a finding of indirect expropriation would require that the
investor no longer be in control of its business operation, or that the value of the business has
been virtually annihilated.168 A valuable investment would be useless to the owner if he cannot
use, enjoy or dispose of such an investment.

112.

In ITT Industries v. Iran169 and Starrett Housing170the Tribunal held that the assumption of
control over the claimants assets by government appointed managers, which rendered the
claimants rights of ownership meaningless, amounted to an effective expropriation.

164

Consortium R.F.C.C. v. Kingdom of Morocco (ARB/00/6), Award,20ICSID Rev.-FILJ, 2005, 68, 391 (Dec 22,
2003).
165
Suzi H. Nikiema, Best Practices: Indirect Expropriation supra note 128 at 14.
166
Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens, Art. 10(3) , (1961)
167
Tecmed v. Mexico supra note 108at 116.
168
Sempra Energy v. Argentina supra note131 at 285.
169
ITT Industries, Inc. v. Iran et al., Award, 26 May 1983, 2 Iran-United States Claims Tribunal Reports 348, pp.
351352.
170
Starrett Housing v. Iransupra note 148

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
113.

It is humbly submitted that the acts of the State of Areana has resulted in the loss of control of
the claimant over its investments as the 2015 order of the Supreme Court cancelled the 2G
spectrum licenses171 which were a part of its investments. Furthermore the State High Court
order disqualifying RAAWL from participating in the fresh auctions172 has virtually
incapacitated the claimant from using its investments without being able to acquire spectrum
licenses, the capital goods machinery and other technology used in telecom sector owned by the
claimant become redundant and of no use.
4.2.3

114.

THAT THERE WAS INTERFERENCE WITH INVESTORS EXPECTATIONS

Another criterion identified is whether the governmental measure affects the investors
reasonable expectations. In these cases the investor has to prove that his/her investment was
based on a state of affairs that did not include the challenged regulatory regime. The claim must
be objectively reasonable and not based entirely upon the investors subjective expectations.

115.

A relevant factor used in IIAs to guide the determination of whether a measure or series of
measures amounts to an indirect expropriation relates to the existence of expectations on the part
of the investor that a certain type of act or measure will not be taken by the host State. It requires
an evaluation of whether the measure interferes with an investors reasonable investment backed
expectations.173

116.

In IIA arbitrations, the notion of legitimate expectations has gained particular prominence in the
context of the fair and equitable treatment standard.174 However, this concept has a role to play
when considering expropriation claims too both on the national and international level. Recent
research, which focused on a number of national jurisdictions and on experiences of the
European Court of Human Rights and the EU, has concluded that one important factor for the
courts assessment [of an expropriation claim] is whether the individual has some form of
legitimate expectation that his or her rights will not be regulated or restricted in a certain
way.175

171

Fact Sheet 81
Ibid 13
173
UNCTAD, Expropriation, UNCTAD Series on Issues in International Investment Agreements II, 73 (Sep. 03,
2016) http://unctad.org/en/Docs/unctaddiaeia2011d7_en.pdf.
174
Ibid
175
STEPHAN W. SCHILL , INTERNATIONAL INVESTMENT LAW AND COMTIVE PUBLIC LAW, 149 (2010).
172

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
117.

In TecnicasMedioambientalesTecmed S.A, v. The United Mexican States,176 the Tribunal


attempted to determine whether the Mexican governments measures were reasonable with
respect to their goals, the deprivation of economic rights and the legitimate expectations of who
suffered such deprivation. Even before the Claimant made its investment, it was widely
known that the investor expected its investments in the Landfill to last for a long term and that it
took this into account to estimate the time and business required to recover such investment and
obtain the expected return upon making its tender offer for the acquisition of the assets related to
the Landfill. To evaluate if the actions attributable to the Respondent as well as the
Resolution violate the Agreement, such expectations should be considered legitimate and
should be evaluated in light of the Agreement and of international law.177 Based on this and the
fact that the Resolution was not proportionate to the infringements by Techmed, the Tribunal
found that the Resolution and its effects amounted to an expropriation.

118.

It is humbly submitted that the measures of the state of Areana were against the legitimate
expectations of the Claimant Company. When the claimant company entered the Areana
Telecom sector it acted on the belief that it is making investments for a long period and the same
will be protected by State of Areana from any expropriatory measures as stated in article 3 and
article 4 of the BIT. The claimant company while acquiring the 2G Spectrum licenses from
TAAWL acted on the faith that the companies had obtained those licenses by a fair and equitable
procedure after following due process and law. However when it was found that the procedure
followed by Minister of C&IT followed an unconstitutional and arbitrary, the Supreme Court
cancelled all the licenses issued

178

which resulted in substantial losses to the Claimant even

though it was not at fault. Further the State High Court decision banning RAAWL from
participating in the re-auction further went against the expectations of the claimant as the
company acted on the belief that it will participate in the telecom sector of Areana for a long
period of time and thus invested billions of Dollars into the Areana cellular sector 179 and
acquired the spectrum licenses accordingly which were valid for 20 years with further 10 years

176

Tecmed v. Mexico supra note 108at 116.


Ibid.
178
Fact Sheet, 8
179
Ibid 11.
177

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
extension.180 However the disqualification of RAAWL incapacitated the claimant to use the
resources which it had acquired considering the long term stay.
4.2.4
119.

THAT THE ACTIONS OF RESPONDENT LACK PROPORTIONALITY

The principle of proportionality is defined as that of finding a balance between two contradictory
interests, in this case the public and the private. Its aim is to ensure that, when pursuing a public
interest, the sacrifice imposed on private interests is proportionate.181

120.

In Tecmed v. Mexico, regarding the States refusal to renew an operating licence for a hazardous
waste treatment plant, the tribunal deemed that the criterion of proportionality was a necessary
criterion in establishing a case of indirect expropriation: The Arbitral Tribunal will consider, in
order to determine if they are to be characterized as expropriatory, whether such actions or
measures are proportional to the public interest presumably protected thereby and to the
protection legally granted to investments.182 Since the award in Tecmed v. Mexico, the relevance
of the criterion of proportionality has been recognized as applicable to expropriation litigation in
other treaty-based investor-State disputes.183

121.

The tribunal took three factors into account when assessing whether the regulatory measure
taken to protect the public interest was proportional to the damage suffered by the investor.

122.

Firstly, the damage has to be substantial. To assess this, the arbitrators took into account the sole
effect doctrine.184Secondly, the prima facie existence of a public interest has to be verified. In
Tecmed v. Mexico, the arbitrators did, however, deem it necessary to verify whether the public
interest invoked by the State was, in fact, the reason behind the measure, not in order to
scrutinise the legitimacy of the measure but to test its proportionality in terms of the real public
interest at issue. Thirdly, at least one tribunal, the tribunal in Tecmed v. Mexico, has demanded
that the authorities response be necessary to achieve the intended public interest. This means
that the measure taken by the State has to be the only measure available to achieve the objective,
or the least detrimental if a number of effective solutions exist.185 It is in the light of this
180

Ibid 7
Suzi H. Nikiema, Best Practices: Indirect Expropriation supra note 128 at 15.
182
Tecmed v. Mexico, ICSID Case No.ARB(AF)/00/2, Award, 43 ILM, 2004, 122 (May 29, 2003).
183
LG&E Energy Corp. v. Argentina, supra note 130 at 190.
184
Tecmed v. Mexico case supra note 183 at 124
185
Suzi H. Nikiema, Best Practices: Indirect Expropriation supra note 128 at 15.
181

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
condition that the damage caused to the investor must be proportional. In this case, the tribunal
concluded that the decision not to renew the operating licence was not necessary to achieve the
intended goal, which was to resolve the complaints from people living in the vicinity of the
factory regarding the health and environmental consequences of its operations. Other less
detrimental solutions were conceivable, such as relocation of the treatment plant to a more
appropriate site. The measure had thus imposed an excessive burden on the investor.186
123.

It is humbly submitted that on applying the conditions enumerated above in the Tecmed case, it
is clear that the acts of the Respondent were expropriatory in nature. Keeping in consideration
the sole effects doctrine, the first condition is fulfilled as the Claimant incurred substantial losses.
Further the State High Court decision resulted in the fulfillment of second and third condition as
the claimant was made to suffer even though it was not at fault. The fault in the arbitrary
allocation of Spectrum Licenses was of senior representatives of the Government of Areana187
and RTL acquired the licensees acting on the faith that the allocation process was fair and
equitable and followed due process and law. Thus the cancellation of licenses by the Supreme
Court resulted in substantial losses to the claimant without doing anything wrong. Moreover the
State High Court order was prima facie in violation of principle of proportionality as the
disqualification of RAAWL from the re-auction was completely unjustifiable and
disproportional. Regarding the issue of not being eligible for the first election, the fault if any
was of the domestic company TAAWL which was no longer the owner of the licenses and
RAAWL cannot be punished for TAAWLs faults.188 Still in honoring the Supreme Court
decision RAAWL duly paid the fine which was imposed on it by the apex court of Areana.
However the State High Court decision declaring the claimant as disqualified was completely out
of proportion as the claimant company was punished twice for a wrong it did not commit. The
act of disqualifying RAAWL from the auctions was not required and neither necessary.

124.

Thus it becomes clear that the acts of the state of Areana led to substantial loss to the investments
of the Claimant, disproportional, permanent and irreversible in nature and were against the
legitimate expectations of the investor. The claimant deserves full and effective compensation
for the same.
186

Tecmed v. Mexico case supra note 183 at 151.


Fact Sheet, 8
188
Ibid 7
187

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
4.3
125.

THAT THE POLICE POWER EXCEPTION CANNOT BE TAKEN BY THE RESPONDENTS

The Police powers exception gives the state a right to regulate in public interests without that
measure being rendered expropriatory and liable for compensation.189 However, this doctrine has
been severely criticised since the conditions for the application of the doctrine are identical to
those of a lawful expropriation except the obligation to pay compensation.190

126.

Tribunals have held that the obligation to pay compensation is not extinguished merely because
the nature or purpose of regulation is in public interest, particularly if the actions have a severe
impact in diminishing the value of the investments.191

127.

Moreover, the scope of the police powers exception was read in a limited sense by the tribunal in
Tecmed, to cover bona fide general taxation and measures necessary for the maintenance of
public order, provided it is not discriminatory.192

128.

Thus, in the absence of any specific clause exempting the Respondents from paying
compensation and the limited scope of the police powers doctrine, the Respondent has breached
Article 4 and 5 of the Ruritania- Areana BIT.
4.4

129.

THAT THE RURITANIA- AREANA BIT DOES NOT CONTAIN ANY EXCEPTION TO THE
PAYMENT OF COMPENSATION.

Article 5 of the BIT prohibits any form of expropriation by the host state except when it is for
public purpose, is non-discriminatory, follows due process of law and is against compensation.
Thus a lawful expropriation necessarily requires payment of adequate compensation. Failure to
pay compensation would render the expropriation unlawful and give the Claimant a claim for
compensation and damages.193

130.

The Ruritania- Areana BIT does not contain any provision which gives any exception to the
payment of compensation unlike other BITs where regulatory measures for the public purpose
are excluded from the scope of payment of compensation.194 Following the literal interpretation

189

Salukacase supra note 91 at 262.


Azurix Corp. v.The Argentine Republic, ICSID Case No. ARB/01/12, 311
191
CompaiadelDesarrollo de Santa Elena S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1, 71 (2000).
192
Tecmed v. Mexico case supra note 183 at 115.
193
Siemens A.G. v.The Argentine Republic, ICSID Case No. ARB/02/8 (2008)
194
US-Rwanda BIT, Annex B 4(b), Canada- Peru BIT Annex B13 (1) (c).
190

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
standard of the VCLT,195 since there is no exception for non-payment of compensation, the
Respondent is liable to pay the Claimants damages for breach of the BIT.

195

VCLT, Art 31(1).

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
5.

131.

THAT THE RESPONDENT ARE OBLIGED TO MAKE REPARATION FOR THE


LOSSES.

The Claimant most humbly submits that the February 2013 SC judgment and the January 2015
ruling of the Areana State High Court amounts to expropriation of property for which it is
obliged to make reparation for the losses. The violation of Fair and equitable treatment also
poses a liability on the Respondent to compensate the Claimant for its breach. Further, the
Claimants also seek moral damages on the grounds of loss of reputation and harm to its social
position.
5.1

132.

THAT REPARATION AGAINST UNLAWFUL EXPROPRIATION IS TO BE MADE.

It is a settled principle that unlawful expropriation requires reparation for the losses so caused.196
Investment treaties do not include rules on reparation leaving this matter to customary
international law. It is widely accepted that the applicable standard for the assessment of
damages resulting from an unlawful act is set out in the decision of the Permanent Court of
International Justice in the Chorzw Factory case, and later formulated in Article 31 of the
Articles on International State Responsibility of the International Law Commission.

133.

In Chorzw Factory case concerning reparation for international wrongful act it was held,
The essential principle contained in the actual notion of an illegal act a principle which
seems to be established by international practice and in particular by the decisions of
arbitral tribunals is that reparation must, as far as possible, wipe out all the consequences
of the illegal act and re-establish the situation which would, in all probability, have existed
if that act had not been committed. Restitution in kind, or, if this is not possible, payment
of a sum corresponding to the value which a restitution in kind would bear; the award, if
need be, of damages for loss sustained which would not be covered by restitution in kind
or payment in place of it such are the principles which should serve to determine the
amount of compensation due for an act contrary to international law.

134.

The Chorzw Factory standard of compensation demands wiping out the consequences of the
wrongful act and re-establishing the situation that would have prevailed had the illicit act not
occurred.
196

UNCTAD, Expropriation supra note 174 at 131.

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
135.

The Articles on the Responsibility of States for Internationally Wrongful Acts (ASR), drafted by
the International Law Commission (ILC), was adopted as Resolution 56/83 by the UN General
Assembly.197According to Noble Ventures Inc v Romania, it is widely regarded as codification
of customary international law.198
Article 31(1) stipulates that
the responsible State is under an obligation to make full reparation for the injury caused
by the internationally wrongful act. The PCIJ in the Chorzw Factory case also affirmed
that "it is a principle of international law that the breach of an engagement involves an
obligation to make reparation in an adequate form there is no necessity for this to be
stated in the convention itself."199 In Argentina v Uruguay, citing the ASR, the ICJ stated
that customary international law provides that compensation is available.200

136.

The Claimant submits that the February 2012 SC judgment and the January 2015 ruling of the
Areana State High Court amounts to unlawful expropriation. It is thus evident that Areana is
responsible for committing internationally wrongful acts 201 and must compensate for RTLs
injuries.
5.2

137.

THAT THE COMPENSATION FOR VIOLATION OF FAIR AND EQUITABLE TREATMENT IS TO


BE MADE .

The Claimant most humbly submit that the respondents apart from their expropriatory measures
are also liable for breach of their duty to accord fair and equitable treatment.It is submitted that
the Respondent breached the condition of fair and equitable treatment on the grounds of violation
of legitimate expectations of the Claimant, failure to follow due process, acting unproportionally,
failure to act in good faith. All these grounds clearly show violation of the fair and equitable
treatment which can only be compensated by awarding damages against such breach.

197

UNGA Resolution 56/83 Responsibility of States for internationally wrongful acts (28 January 2002) (A/56/589
and Corr.1) [3]
198
ICSID Noble Ventures Inc v Romania (2005) No ARB/01/11 [69]; KajHober, State Responsibility and
Attribution in Muchlinski, Ortino and Schreuer, The Oxford Handbook of International Investment Law (Oxford
Uni Press, Oxford and New York 2008) 553
199
Case Concerning the Factory at Chorzw (Germany v Poland) (Merits) PCIJ Rep Series A No 17 29
200
Case Concerning Pulp Mills on the River Uruguay (Argentina v Uruguay) [2010] ICJ Rep 14 [273]
201
State v Trostle191 Ariz. 4, 951 P.2d 869 (1997), 884-86

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
138.

The Claimant submits that the effects of a treatment that redundantly fails to be fair and
equitable ultimately leads to such a substantial deprivation of rights that the investor can only be
compensated if he is granted the fair market value of his investment. In such a situation, the ongoing losses burden the business so dire that its value is not diminished, but rather voided,
allowing for the import of compensation standards originally applicable to expropriation.

139.

A series of investment arbitration practitioners and scholars have argued that the standard of
compensation for expropriation can also be applied in regard to breaches of FET, stating that
the absence of explicit standards of compensation for non-expropriatory breaches of
international investment law does not preclude the use of standards applicable in case of
expropriation.202

140.

Investment treaties typically set out an explicit standard of compensation for expropriation cases
only most frequently, IIAs require prompt, adequate and effective compensation equal to the
fair market value of the expropriated investment. When non-expropriatory treaty violations are
found, damages have been awarded in accordance with the rules of international law that require
full compensation.203 In a number of cases concerning FET breaches, this resulted in an award
of the fair market value of the investment calculated by reference to future cash flows.204
5.3

141.

THAT THE MORAL DAMAGES SHOULD IN PRINCIPLE BE AWARDED TO THE CLAIMANTS.

Moral Damages should be awarded to the Claimant for the suffering and loss of reputation for
the Claimants as well as representatives of the Claimant. Various arbitral tribunals have
recognized the capacity of investment tribunalstoward damages for actions against the
investors.205 Actions that restrict the enjoyment of the rights of the Claimant and its executives
should necessarily be heard by this Tribunal since the Treaty itself is titled Mutual Promotion
and Protection of Foreign Investment.

202

P. Y. Tschanz and J. E. Vinuales,Compensation for Non-Expropriatory Breaches of International Investment


Law,26(5) JOURNAL OF INTERNATIONAL ARBITRATION 735 (2009).
203
RIPINSKY, S. AND WILLIAMS, K., DAMAGES IN INTERNATIONAL INVESTMENT LAW 88-90(British Institute of
International and Comparitive Law 2008).
204
CMS v. Argentina, Award, 12 May 2005; Enron v. Argentina, Award of 22 May 2007; Sempra Energy v.
Argentina, Award, 28 September 2007; British Gas v. Argentina, Final Award, 24 December 2007.
205
Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No. ARB/05/17, 290 (2008)

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
142.

The Tribunal in Lemirelaiddown the conditions206 in which moral damages can be awarded. It
specifically laid down that if the States actions cause a deterioration of health, stress, anxiety,
other mental suffering such as humiliation, shame and degradation, or loss of reputation, credit
and social position then moral damages can be claimed.

143.

The Claimant most humbly submits that the expropriatory measures of Areana government , the
breach of fair and equitable treatment laid down in the BIT has caused a great loss of reputation
and social position to the company in addition to the economic losses suffered by the company.

144.

The Claimant thus request the Honble tribunal to award moral damages in addition to damages
for expropriation and breach of fair and equitable treatment.

206

Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, 333(2011).

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Prof. V.S. Mani Memorial International Law Moot Court Competition 2016 (Banking and Investment Law)
PRAYER
Wherefore, in the light of the facts stated arguments advanced and authorities cited, it is most
humbly prayed and implored before this arbitration tribunal, that it may be graciously pleased to
adjudge and declare that:
I.

The Tribunal has jurisdiction and the claims put forth are admissible.

II.

The act of State of Areana has led to deprivation of sovereign wealth of Ruritanian
Republic which is in violation of the principle of sovereign immunity.

III.

The State of Areana has violated Article 2(2) of the BIT by not conforming to the
principles of Fair and Equitable Treatment and full protection and security.

IV.

The February 2012 Supreme Court judgement and the January 2015 ruling of the
State High Court amounts to Expropriation of investments made by RTL.

V.

The respondent state is obliged to make reparation for the losses incurred by RTL.

Also, pass any other order that it may deem fit in the favour of the Claimant to meet the ends of
equity, justice, and good conscience.
For this act of Kindness, the Claimant shall duty bound forever pray.

s/d
Counsel for Applicant