Mister/Madam President, Members of the tribunal, and the Counsel for claimant,
Good morning/afternoon, My name is Camille Angelica Gonzales, and it is my
honor to represent the Republic of Mercuria, respondent in the present
proceedings. As first counsel, I will be discussing the absence of jurisdiction of this
honorable tribunal.
It is of our respectful submission, your excellences, that this honorable court lacks
jurisdiction over the dispute (for three reasons.)
Background facts
Atton Boro Limited (Atton Boro) is a wholly owned subsidiary of Atton Boro Group
in the Kingdom of Basheera. It is engaged in the manufacture and sale of
pharmaceutical products since its incorporation. Atton Boro and the Mercuria
National Health Agency (NHA) entered into a Long Term Agreement (LTA) for
supply of Atton Boros greyscale-treatment drug, Sanior, at a fixed discounted
rate of 25%.1 Sanior contains a compound called Valtervite which improves
treatment for greyscale patients.2 NHA renegotiated the price of Sanior with Atton
Boro on the ground that it had grossly underestimated the number of greyscale
cases in Mercuria and needed to supply medicines for nearly twice the number
of patients. Atton Boro offered an additional discount of 10% but the NHA
rejected such offer, demanding an additional discount of 40%.3 Failing to reach
an agreement, the NHA terminated the LTA citing unsatisfactory performance by
Atton Boro.4
When the Atton Boro Limited and National Health Agency failed to reach an
agreement regarding the renegotiation of the LTA, the National Health Agency
terminated the agreement citing unsatisfactory performance by the Atton Boro.
The latter, in turn, invoked the arbitration clause of the LTA before a tribunal
seated in Republic of Reef. Atton Boro received a favorable award. Now, Atton
Boro seeks this Honorable tribunal to adjudicate its claims regarding the
enforcement of such award.
We beg the question, is an arbitral award an investment within the ambit of the
ICSID Convention and the BIT?
As to our first submission, we respectfully submit that the Tribunal has no jurisdiction
to adjudicate any claims in relation to the enforcement of the Award dated 20
January 2009. This is because arbitral award does not qualify as an investment
within the meaning of the BIT.
I. Related provisions
The tribunal ruled in the case of Phoenix Action Ltd. v. Czech Republic that, at the
outset, it should be noted that BITs, which are bilateral arrangements between
two States parties, cannot contradict the definition of the ICSID Convention. In
other words, they can confirm the ICSID notion or restrict it, but they cannot
expand it in order to have access to ICSID.
ICSID Preamble
Salini Test
a. A certain duration;
b. A contribution to the host States development;
c. An element of risk;
d. A substantial contribution or commitment on the part of the investor.8
8Salini Costruttori SpA and Italstrade SpA v. Morocco, ICSID Case ARB/00/4, Decision on Jurisdiction,
42 I.L.M. 609, 23 July 2003, 52.
transaction (cf commentary by E. Gaillard, cited above, p. 292). In reading the
Convention's preamble, one may add the contribution to the economic
development of the host State of the investment as an additional condition.
"No attempt was made to define the term" investment" given the essential
requirement of consent by the parties, and the mechanism through which
Contracting States can make known in advance, if they so desire, the classes of
disputes which they would or would not consider submitting to the Centre (art.
25(4))." (Salini v. Morocco)
That is why, in the case of GEA Group v. Ukraine, the Tribunal considers that the
fact that the Award rules upon rights and obligations arising out of an investment
does not equate the Award with the investment itself. In the Tribunals view, the
two remain analytically distinct, and the Award itself involves no contribution to,
or relevant economic activity within Ukraine such as to fall itself within the
scope of the BIT or (if needed) Article 25 of the ICSID Convention.
Properly analyzed, the arbitral award which the claimant seeks to enforce is a
legal instrument, which provides for the disposition of rights and obligations arising
out of the long term agreement which is not an investment itself.
Therefore, this honorable tribunal has no authority to adjudicate any claims arising
from the enforcement of the arbitral award.
Phoenix Action bought the two Czech companies while they were under a
criminal investigation over alleged custom duty evasion. The Israeli company
argued that lengthy litigation proceedings, which continued after it took
ownership of the companies, amount to a denial of justice.
In light of these facts, the Tribunal concluded that Phoenix Actions purchase of
the Benet companies was simply a rearrangement of assets within a family, to
gain access to ICSID jurisdiction to which the initial investor was not entitled.
In late 1997 a representative of the German party responsible for inspecting the
Oriana operations was shot in the kneecap. After the incident in 1998 it was
discovered that 125,000 tons of naphtha supplied to Oriana were missing.
The parties then sought a negotiated resolution to the dispute, which culminated
in a Settlement Agreement (where Oriana agreed to offer payment) followed by
a Repayment Agreement (providing for a minimum USD 27.6 million in
compensation). Both agreements provided that any disputes should be resolved
under ICC Arbitration Rules. Importantly, Oriana and Ukraine later contested the
authority of those who signed the Repayment Agreement.
In 2002 the claimants predecessor obtained an ICC award against Oriana, which
it then sought to enforce in Ukraine. Ukrainian court refused enforcement
because the Repayment Agreement (pursuant to which the award was
rendered) was not signed by an authorized person. The courts found that such
contract should have been signed by the president of the company, whereas in
fact the person signing the agreement was referred to as the president of the
company, but in fact was not. GEAs predecessor then sought to enforce its claim
within the framework of Oriantas bankruptcy proceedings, but the claim was
rejected as time-barred.
The Tribunal held that an award in and of itself does not constitute an
investment (para 161). The Tribunal reasoned that even if the award determined
the rights and obligations arising out of an investment, it remained analytically
distinct. Furthermore, a separate analysis of whether the award itself met
requirements of the BIT and Article 25 of the ICSID Convention was required (para
162). Finding that the award itself involves no contribution to, or relevant
economic activity within, Ukraine, the Tribunal concluded that the award was
not an investment (Ibid.).
Salini v. Morocco
The negotiations that followed the award of section No.2 resulted in the signature
of Contract 53/95 on October 17, 1995.
A provisional Taking Over of the work took place on July 31, 1998.
The works were completed on October 14, 1998. The works therefore took 36
months to complete, 4 months longer than stipulated in the contract (32 months).
A draft of the final account was sent to the Italian companies by ADM. They
signed it on March 26, 1999 (with reservations).
On April 29, 1999, the Italian companies sent ADM's Head Engineer a
memorandum setting out the reasons for the reservations put forward: technical
reservations, exceptionally bad weather, project upheaval, modifications
concerning the dimensions of the work, extension of contractual time limits,
financial burdens, unforeseeable fluctuations of the value of the Yen. On
September 14, 1999, following the rejection of all of their claims by ADM's Head
Engineer, the Italian companies sent a memorandum relating to the final account
to the Minister of Infrastructure, in accordance with Article 51 of the Cahier des
Clauses Administratives Generales [Book of General Administrative Clauses]. No
reply was received from either the Minister of Infrastructure or ADM.