FOREIGN DIRECT INVESTMENT INTERNATIONAL MOOT COMPETITION OCTOBER 2013 GERMAN INSTITUTION OF ARBITRATION

Transcription

1 TEAM PETREN FOREIGN DIRECT INVESTMENT INTERNATIONAL MOOT COMPETITION OCTOBER 2013 GERMAN INSTITUTION OF ARBITRATION CASE NO. XX UNDER THE UNCITRAL ARBITRATION RULES ADMINISTERED BY THE DIS BETWEEN: CONTIFICA ASSET MANAGEMENT CORP. THE STATE OF RURITANIA CLAIMANT/INVESTOR RESPONDENT/PARTY MEMORIAL FOR CLAIMANT

2 TABLE OF CONTENTS LIST OF AUTHORITIES... IV LIST OF LEGAL SOURCES... VI LIST OF ABBREVIATIONS... XIII STATEMENT OF FACTS... 1 ARGUMENTS... 5 PART ONE: JURISDICTION AND ADMISSIBILITY... 5 I. THE TRIBUNAL HAS JURISDICTION UNDER THE BIT OVER THE SUBMITTED CLAIMS, AND THOSE CLAIMS ARE ADMISSIBLE A. Under the BIT, the Tribunal has jurisdiction over the submitted claims i. Claimant satisfies the nationality requirement under the BIT ii. The submitted claims meet the jurisdictional requirement under the BIT B. The submitted claims are admissible i. The UNCITRAL Rules permit tribunals to deliberate on questions of jurisdiction but not admissibility in the preliminary stages of arbitration proceedings ii. Whether there was an abuse of process is a question of motive, which must be reserved for the merits phase of the proceedings iii. Claimant s acquisition of FBI shares formed part of Contifica Group s prospective corporate planning and was not an abuse of process II. THE TRIBUNAL HAS JURISDICTION OVER THE SUBMITTED CLAIMS BASED ON RESPONDENT S BREACH OF THE AGREEMENT, AND THOSE CLAIMS ARE ADMISSIBLE A. The Tribunal has jurisdiction over the submitted claim based on the State Fund s breach of the Agreement i. BIT Article 6.2 brings Respondent s failure to meet a contractual obligation within the ambit of the BIT ii. The State Fund s actions and obligations are attributable to Respondent B. The submitted claims based on Respondent s breach of the Share Purchase Agreement are admissible PART TWO: MERITS III. RESPONDENT HAS VIOLATED THE FAIR AND EQUITABLE TREATMENT STANDARD UNDER BIT ARTICLE 2.1(B) A. The FET clause refers to an autonomous standard broader than the customary international law minimum B. Respondent has violated Claimant s reasonable and legitimate expectations by dramatically changing the legal environment of the investment in breach of representations made to Claimant i

3 C. Respondent failed to provide Claimant with transparency and due process in enacting the Reyhan ordinance D. Respondent has treated Claimant s investment arbitrarily IV. RESPONDENT HAS TREATED CLAIMANT S INVESTMENTS IN AN ARBITRARY AND DISCRIMINATORY MANNER IN VIOLATION OF BIT ARTICLE 3.1(C) A. The Reyhan ordinance arbitrarily impaired Claimant s management, maintenance, use, enjoyment, and disposal of FREEBREW B. The MAB Act s bottle-size restriction and the Reyhan ordinance discriminatorily impaired Claimant s management, maintenance, use, enjoyment, and disposal of FREEBREW C. Respondent cannot justify its actions under BIT Article 3.2 as taken for public security and order V. RESPONDENT HAS INDIRECTLY EXPROPRIATED CLAIMANT S INVESTMENTS IN RURITANIA, IN VIOLATION OF BIT ARTICLE A. The MAB Act s trademark and bottle-size restrictions indirectly expropriate Claimant s Ruritania-registered trademarks i. Respondent s measures permanently affect Claimant ii. Respondent s measures substantially deprive Claimant of control over its trademarks iii. Respondent s measures interfere with Claimant s legitimate, investment-backed expectations B. Together, the effects of Respondent s trademark and bottle-size restrictions and its Reyhan labeling requirement are equivalent to the expropriation of Claimant s investment in FBI i. The cumulative effect of Respondent s measures on Claimant is permanent ii. The cumulative effect of Respondent s measures is to deprive Claimant of its investment iii. The cumulative effect of Respondent s measures is to interfere with Claimant s legitimate, investment-backed expectations C. Respondent s measures are not justifiable under BIT Article i. The expropriation was not for the public benefit ii. The expropriation was discriminatory iii. The expropriation did not conform with due process iv. The expropriation was not against compensation VI. RESPONDENT HAS VIOLATED BIT ARTICLE 2.1(B) S FULL PROTECTION AND SECURITY GUARANTEE VII. CLAIMANT IS ENTITLED TO RECOVER MORAL DAMAGES BECAUSE THE ARREST AND TREATMENT OF MESSRS. GOODFELLOW AND STRAW VIOLATED THE FULL PROTECTION AND SECURITY CLAUSE OF THE BIT ii

4 A. The treatment of Messrs. Goodfellow and Straw violates BIT Article 2(b) B. Customary international law supports the award of moral damages under the full protection and security principle i. The executives detention constituted exceptional circumstances ii. Claimant should be awarded moral damages because the executives suffered damage iii. Tribunals have awarded moral damages even when the damage could not be quantified VIII. LOSS OF SALES BY CLAIMANT S SUBSIDIARIES CONSTITUTES RECOVERABLE DAMAGES UNDER THE BIT AND CUSTOMARY INTERNATIONAL LAW A. Claimant is entitled to compensation for expropriation of its investments B. Claimant is entitled to reparation and compensation for lost profits under customary international law C. Claimant mitigated its losses and is entitled to full recovery REQUEST FOR RELIEF iii

5 LIST OF AUTHORITIES BOOKS Crawford Dolzer & Schreuer Drahozal Gilson Khalilian Marboe James Crawford, The International Law Commission s Articles on State Responsibility (2002). Rudolf Dolzer & Christoph Schreuer, Principles of International Investment Law (2008). Christopher R. Drahozal & Christopher S. Gibson, The Iran-U.S. Claims Tribunal at 25: The Cases Everyone Needs to Know for Investor-State & International Arbitration (2007). Anne Gilson LaLonde & Jerome Gilson, 1-1 Gilson on Trademarks (2010). Sayyed Khalil Khalilian, The Law of International Arbitration: A Jurisprudential Study on the Iran-United States Claims Tribunal (2000). Irmgard Marboe, Calculation of Compensation and Damages in International Investment Law (2009). McLachlan Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (2007). Paulsson Rosenne Jan Paulsson & Zachary Douglas, Indirect Expropriation in Investment Treaty Arbitration, in ARBITRATING FOREIGN INVESTMENT DISPUTES: PROCEDURAL AND SUBSTANTIVE LEGAL ASPECTS (Nobert Horn & Stefan Kroll eds., 2004). Shabtai Rosenne, International Courts and Tribunals, Jurisdiction and Admissibility of Inter-State Applications, in MAX PLANCK ENCYCLOPEDIA OF PUBLIC INTERNATIONAL LAW (Rüdiger Wolfrum ed., 2012 online edition). Salacuse Jeswald Salacuse, The Law of Investment Treaties (2010). Schill Vandevelde Stephan Schill & Robyn Briese, If the State Considers : Self-Judging Clauses in International Dispute Settlement, 13 MAX PLANCK YEARBOOK OF UNITED NATIONS LAW 61 (A. von Bogdandy and R. Wolfrum eds. 2009). Kenneth J. Vandevelde, United States Investment Treaties: Policy and Practice (1992). iv

6 ARTICLES Burke-White de Brabandere Dolzer Fietta Fitzmaurice Parish Schreuer Treise Wälde Van Harten Varaiya William W. Burke-White & Andreas von Staden, Investment Protection in Extraordinary Times: The Interpretation and Application of Non- Precluded Measures Provisions in Bilateral Investment Treaties, 48 VA. J. INT L L. 307 (2008). Eric de Brabandere, Good Faith, Abuse of Process and the Initiation of International Treaty Claims, 3.3 J. OF INT L DISP. SETTLEMENT, 609 (2012). Rudolf Dolzer, Indirect Expropriations: New Developments?, 11 N.Y.U. ENVTL. L.J. 64 (2002). Stephen Fietta, Expropriation and the Fair and Equitable Standard: The Developing Role of Investor's Expectations in International Investment Arbitration, 23 J. OF INVESTMENT ARBITRATION 275 (2006). Gerald Fitzmaurice, The Law and Procedure of the International Court of Justice, : Questions of Jurisdiction, Competence and Procedure, 34 Brit. Y.B. Int'l L. 1 (1958). Matthew T. Parish, Annalise K. Newlson & Charles B. Rosenberg, Awarding Moral Damages to Respondent States in Investment Arbitration, 29 BERKELEY J. OF INT L L. 225 (2011). Christoph Schreuer, Calvo s Grandchildren: The Return of Local Remedies in Investment Arbitration, 4 LAW PRAC. INT L CTS TRIBUNALS 1, 5 (2005). Deborah M. Treise, Ronald E. Taylor & Ludmilla G. Wells, How Recovering Alcoholics Interpret Alcoholic-Beverage Advertising, 12 HEALTH MARKETING QUARTERLY 125 (1995). Thomas Wälde, Energy Charter Treaty-based Investment Arbitration 5 J WORLD INVEST TRADE (2004). Gus Van Harten & Martin Loughlin, Investment Treaty Arbitration as a Species of Global Administrative Law, 17(1) EUR. J. INT L L. 137 (2006). Nikhil P. Varaiya & Kenneth R. Ferris, Overpaying in Corporate Takeovers: The Winner's Curse, 43(3) FIN. ANALYSTS J. 64, 68 (1987). MISCELLANEOUS Accenture Accenture, Achieving High Performance in the Alcoholic Beverages Industry (2007). OED Oxford English Dictionary (2d ed. 1989). v

7 UNCTAD UNCTAD, Bilateral Investment Treaties : Trends in Investment Rulemaking (2007). LIST OF LEGAL SOURCES ARBITRAL DECISIONS ADC ADM AES AES Summit Aguas ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No. ARB/03/16, Award (2 October 2006). Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/5, Award (21 November 2007). AES Corporation v. The Argentine Republic, ICSID Case No. ARB/02/17, Decision on Jurisdiction (26 April 2005). AES Summit Generation Limited and AES-Tisza Erömü Kft v. The Republic of Hungary, ICSID Case No. ARB/07/22, Award (23 September 2010). Aguas del Tunari, S.A., v. Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on Respondent's Objections to Jurisdiction (21 October 2005). AIG AIG Capital Partners, Inc. and CJSC Tema Real Estate Company Ltd. v. The Republic of Kazakhstan, ICSID Case No. ARB/01/6, Award (7 October 2003). Alpha Alpha Projecktholding GMBH v. Ukraine, ICSID Case No. ARB/07/16, Award (20 October 2010). Arif Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award (8 April 2013). Asian Ag. Products Azurix Banro Bayindir Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award (27 June 1990). Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Award (14 July 2006). Banro American Resources, Inc. and Société Aurifère du Kivu et du Maniema S.A.R.L. v. Democratic Republic of the Congo, ICSID Case No. ARB/98/7, Award of the Tribunal (1 September 2000). Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award (27 August 2009). vi

8 Benvenuti BG Group Biwater Gauff C.S.O.B. Cargill Cementownia Chevron CME CMS S.A.R.L. Benvenuti & Bonfant v. People's Republic of the Congo, ICSID Case No. ARB/77/2, Award (8 August 1980). BG Group Plc. v. The Republic of Argentina, UNCITRAL, Final Award (24 December 2007). Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award (24 July 2008). Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No. ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction (24 May 1999). Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award (18 September 2009). Cementownia Nowa Huta S.A. v. Republic of Turkey, ICSID Case No. ARB(AF)/06/2, Award (17 September 2009). Chevron Corporation (U.S.A.) and Texaco Petroleum Corporation (U.S.A.) v. Republic of Ecuador [II], PCA Case No , Third Interim Award on Jurisdiction and Admissibility (27 February 2012). CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award (13 September 2001). CMS Gas Transmission Company v The Argentine Republic, ICSID Case No ARB/01/08, Award (12 May 2005). Continental Casualty Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9, Award (5 September 2008). Corn Products Desert Line Deutsche Bank Duke Energy Corn Products International, Inc. v. United Mexican States, ICSID Case No. ARB (AF)/04/1, Decision on Responsibility (15 January 2008). Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No. ARB/05/17, Award (6 February 2008). Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award (31 October 2012). Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No. ARB/04/19, Award (18 August 2008). EDF EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award (11 June 2012). El Paso Award El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Award (31 October 2011). vii

9 El Paso, DJ EnCana Enron El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction (27 April 2006). EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL, Award (3 February 2006). Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award (22 May 2007). Eureko Eureko B.V. v. Republic of Poland, Ad Hoc Tribunal, Partial Award (19 August 2005). Fedax Feldman Gemplus Fedax N.V. v. The Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction (11 July 1997). Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award (16 December 2002). Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v. The United Mexican States, ICSID Case No. ARB(AF)/04/3, Award (16 June 2010). Generation Ukraine Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award (16 September 2003). Glamis Gold Glamis Gold, Ltd. v. The United States of America, UNCITRAL, Award (8 June 2009). Inmaris Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ICSID Case No. ARB/08/8, Excerpts of Award (1 March 2012). Joy Mining Lanco Joy Mining Machinery Ltd v. The Arab Republic of Egypt, ICSID Case No ARB/03/11, Award on Jurisdiction (6 August 2004). Lanco International Inc. v. The Argentine Republic, ICSID Case No. ARB/97/6, Preliminary Decision: Jurisdiction of the Tribunal (8 December 1998). Lauder Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award (3 September 2001). Lemire Award Lemire, DJL LG&E Award Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Award (28 March 2011). Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010). LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Award (25 July 2007). viii

10 LG&E, DL Link-Trading Loewen M.E. Cement LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006). Link-Trading Joint Stock Company v. Department for Customs Control of the Republic of Moldova, UNCITRAL, Final Award (18 April 2002). Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award (26 June 2003). Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award (12 April 2002). Maffezini Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction (25 January 2000). Metalclad Methanex Mobil Mondev MTD Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (30 August 2000). Methanex Corp. v. United States of America, UNCITRAL, First Partial Award (7 August 2002). Mobil Corporation, Venezuela Holdings BV, Mobil Cerro Negro Holding, Ltd, Mobil Venezolana de Petroleos Holdings, Inc, Mobil Cerro Negro, Ltd, and Mobil Venezolana de Petroleos, Inc v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/27, Decision on Jurisdiction (10 June 2010). Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award (11 October 2002). MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May 2004). National Grid National Grid plc v. The Argentine Republic, UNCITRAL, Award (3 November 2008). Noble Ventures Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award (12 October 2005). Nykomb Nykomb Synergetics Technology Holding AB v. The Republic of Latvia, SCC, The Arbitration Institute of the Stockholm Chamber of Commerce, Award (16 December 2003). Occidental (2004) Occidental Exploration and Production Company v. The Republic of Ecuador, LCIA Case No. UN3467, Final Award (1 July 2004). ix

11 Occidental (2012) Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (20 September 2012). Oil Fields Oil Fields Of Texas, Inc. v. Iran et al., 1 Iran-U.S. C.T.R. 347 (1982). Pac Rim Pac Rim Cayman LLC v. The Republic of El Salvador, ICSID Case No. ARB/09/12, Decision on the Respondent s Jurisdictional Objections (1 June 2012). Pan American Pan American Energy LLC and BP Argentina Exploration Company v. The Argentine Republic, ICSID Case No. ARB/03/13, Decision on Preliminary Objections (27 July 2006). Paushok Phoenix Pope & Talbot PSEG Award PSEG, DJ Railroad Dev. Rompetrol S.D. Myers Sergei Paushok, CJSC Golden East Company and CJSCVostokneftegaz Company v. The Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (28 April 2011). Phoenix Action Ltd v. Czech Republic, ICSID Case No. ARB/06/5, Award (15 April 2009). Pope & Talbot Inc. v. Government of Canada, UNCITRAL, Interim Award (26 June 2000). PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award (19 January 2007). PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Decision on Jurisdiction (4 June 2004). Railroad Development Corporation v. Republic of Guatemala, ICSID Case No. ARB/07/23, Award (29 June 2012). The Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/06/3, Decision on Jurisdiction and Admissibility (18 April 2008). S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award (13 November 2000). Saba Saba Fakes v Turkey, ICSID Case No ARB/07/20, Award (14 July 2010). Salini v. Jordan Salini v. Morocco Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction (9 November 2004). Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction (31 July 2001). x

12 Saluka Santa Elena Sempra Award Sempra, DOJ SGS v. Pakistan SGS v. Philippines Siemens Saluka Investments BV (The Netherlands) v. The Czech Republic, UNCITRAL/PCA, Partial Award (17 March 2006). Compañiá del Desarrollo de Santa Elena, S.A. v. The Republic of Costa Rica, ICSID Case No. ARB/96/1, Final Award (17 February 2000). Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award (28 September 2007). Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on Objections to Jurisdiction (11 May 2005). SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision of the Tribunal on Objections to Jurisdiction (6 August 2003). SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction (29 January 2004). Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award (17 January 2007). Sistem Sistem Mühendislik Inşaat Sanayi ve Ticaret A.Ş. v. Kyrgyz Republic, ICSID Case No. ARB(AF)/06/1, Award (9 September 2009). Spyridon Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (7 December 2011). Tecmed Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award (29 May 2003). Telenor Tza Yap Shum Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award (13 September 2006). Señor Tza Yap Shum v. The Republic of Peru, ICSID Case No. ARB/07/6, Award (7 July 2011). Ulysseas Ulysseas, Inc. v. The Republic of Ecuador, UNCITRAL, Final Award (12 June 2012). Unglaube Vannessa Marion Unglaube and Reinhard Unglaube v. Republic of Costa Rica, ICSID Case Nos. ARB/08/1 and ARB/09/20, Award (16 May 2012). Vannessa Ventures Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)04/6, Award (16 January 2013). Vivendi Award Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award (27 November 2000). xi

13 Vivendi Annulment Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment (10 August 2010). Waste Mgmt. II Waste Management, Inc. v. United Mexican States ( Number 2 ), ICSID Case No. ARB(AF)/00/3, Award (30 April 2004). INTERNATIONAL COURT CASES Chorzow Factory Factory at Chorzow (Germ. v. Pol.), 1928 P.C.I.J. (ser. A) No. 17 (Sept. 13). ELSI Elettronica Sicula Spa (ELSI) (U.S. v. It.), 1989, I.C.J. 15 (July 20). Nicaragua Military and Paramilitary Activities in and Against Nicaragua (Nicar. v. U.S.), 1986 I.C.J. 14 (June 27). Serbian Loans Payment of Various Serbian Loans Issued in France (Fr. v. Yugo.), 1929 P.C.I.J. (ser. A) No. 20 (July 12). TREATIES Ecuador-Canada BIT Agreement on the Promotion and Reciprocal Protection of Investments, Ecuador-Canada, 29 April Italy-Jordan BIT Swiss-Pakistan BIT VCLT Agreement on the Promotion and Protection of Investments, Jordan-Italy, 21 July Agreement on the Promotion and Reciprocal Protection of Investments, Swiss-Pakistan, 11 July Vienna Convention on the Law of Treaties, opened for signature 23 May 1969 (entered into force 27 January 1980). MISCELLANEOUS ICSID Rules ICSID Regulations and Rules (as amended effective April 10, 2006). ILC Articles International Law Commission, Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries (2001). UNCITRAL Rules UNCITRAL Arbitration Rules (as revised in 2010). G.A. Res. 65/22. U.S Model BIT United States 2012 Model Bilateral Investment Treaty. xii

14 LIST OF ABBREVIATIONS / Paragraph(s) Art(s). Article(s) BIT Bilateral Investment Treaty CAM Contifica Asset Management Corp. Cl. Clause CQ Clarification Question FBI Freecity Breweries Inc. FET Fair and Equitable Treatment FPS Full Protection and Security HRI Human Health Research Institute ICC International Chamber of Commerce ICJ International Court of Justice ICSID International Centre for Settlement of Investment Disputes p. / pp. Page / Pages PO Procedural Order R Record SC Statement of Claim SD Statement of Defense UNCITRAL United National Commission on International Trade Law xiii

15 STATEMENT OF FACTS 1. Claimant, Contifica Asset Management Corp. ( CAM or Claimant ), is a company incorporated under the laws of the State of Cronos. 1 Claimant is a member of Contifica Group, an international conglomerate. 2 Contifica Group s parent company, Contifica Enterprises Plc, is incorporated in Prosperia Respondent is the Republic of Ruritania ( Ruritania or Respondent ). 4 The State Property Fund of Ruritania ( State Fund ), a state establishment incorporated in Ruritania, owned Freecity Breweries Inc. ( FBI ), the country s largest brewery, until FREEBREW is FBI s most famous and popular beer brand. 6 The beer s unique flavor comes from Reyhan, a local plant. 7 FREEBREW is sold in iconic 0.8l bottles Following the financial crisis, the State Fund publicly requested offers to sell FBI. 9 On 30 June 2008, Contifica Spirits S.p.A. ( Contifica Spirits ), a wholly owned subsidiary of Contifica Enterprises Plc, won the tender. 10 Contifica Spirits and the State Fund entered into a share purchase agreement (the Agreement ) whereby Contifica Spirits acquired all shares in FBI for US$300,000, The agreement included the guarantee that no FBI products pose higher health risks than other alcoholic beverages. 12 The agreement was completed despite the Ministry of Health and Social Security s (the Ministry ) knowledge that Reyhan might pose greater risks SC, 1. 2 SC, 4. 3 SC, 4. 4 SC, 1. 5 SC, 3, 5. 6 SC, 5. 7 SC, 5. 8 SC, 5. 9 SC, SC, SC, SC, SC, 16. 1

16 4. Immediately following the acquisition, Contifica Group integrated FBI into its global procurement network, with various group subsidiaries supplying bottles, aluminium cans, yeast, hops, and barley to FBI On 17 March 2010, Contifica Spirits transferred its shares in FBI to Claimant for US$5, Contifica Spirits also assigned its Ruritania-registered trademarks including the FREEBREW trademark and bottle design to Claimant. 16 These measures were part of an intragroup restructuring conducted in pursuit of the most investor-friendly environment On 20 November 2010, the Ruritanian parliament with the recently elected antialcohol New Way party in the majority 18 adopted the Regulation of Sale and Marketing of Alcoholic Beverages Act ( MAB Act ). 19 The MAB Act restricts the marketing and sale of alcoholic beverages and requires that trademarks on beer bottles be displayed in the same color and font as other text on the label and prohibits selling alcohol in containers larger than 0.5l Because of the MAB Act, FBI cannot use FREEBREW and related trademarks on its beer bottles. 21 FBI also cannot use its iconic 0.8l FREEBREW bottle and had to reconfigure its production line to accommodate 0.5l bottles. 22 As a result, FBI s sales dropped by close to 60% during the first half of 2011 and the company suffered net income losses of US$10,000, On 15 June 2011, the Human Health Research Institute (HRI), a Ruritanian government-funded institution, released a report stating that consumers of FREEBREW have a higher risk of cardiac complications due to the effects of Methyldioxidebenzovat found in Reyhan concentrate. 24 The Ministry knew of these results since a 2005 interim report. 25 Without 14 SC, SC, 9; SD, SC, SC, 9; Exhibit RX1, R SD, SC, SC, SC, SC, SC, SC, 14. 2

17 consulting the affected parties, the Ministry adopted an ordinance requiring all products containing Reyhan to be labeled with the warning that consumption of such products may lead to higher risk of cardiac complications On 20 August 2011, FBI wrote to the Ministry, pointing out a number of serious flaws that an independent scientist had identified in the HRI report. 27 Despite these serious flaws, the Ministry refused to suspend its labeling requirement and conduct further research Following the Reyhan labeling ordinance, FBI s sales fell significantly, forcing it to terminate over half of its employees. 29 FBI could no longer comply with the financial covenants established by its lenders, who have now enforced their security rights over FBI s shares, tangible assets, and any damages Claimant may receive in this arbitration On 1 December 2011, the Ruritanian Prosecutor s Office began investigating Messrs Goodfellow and Straw, executives of FBI and Contifica Group, on suspicion that they had bribed State Fund officials. 31 Under Ruritanian law, the executives could travel pending investigations. 32 However, on 23 December 2011, Ruritanian police detained the executives at the airport. 33 Although the arrest violated Ruritanian law, 34 the executives were held for nearly two weeks without explanation Ruritanian police passed a video of the detention to Free TV, Ruritania s most popular TV channel, 36 and a spokesman for the Prosecutor s Office declared that [Ruritanian law enforcement agencies] will not let people responsible for corruption escape investigation SC, SC, SC, SC, SC, SC, SC, SC, SC, SD, SC, SC, SC, 24. 3

18 Despite these pronouncements, the investigation was terminated in June 2012 for want of evidence. 38 The executives did not receive an apology or compensation for their treatment On 10 December 2011, Claimant informed Respondents that its measures violated multiple provisions of the Treaty of Mutual Promotion and Protection of Foreign Investment between The Republic of Ruritania and the State of Cronos ( the BIT ). 40 Claimant repeatedly tried, but failed, to amicably resolve its dispute with Respondent On 30 September 2012, Claimant filed a request for this arbitration under the UNCITRAL Rules before the German Institution for Arbitration, by invoking the dispute resolution provision in BIT Article Claimant submits that (1) Respondent s actions violate the fair and equitable treatment guarantee found in BIT Article 2.1. Claimant further submits that (2) Respondent has impaired Claimant s investment in an arbitrary and discriminatory manner in violation of BIT Article 3.1(c) and (3) unlawfully expropriated Claimant s investments in Ruritania in violation of BIT Article 4.1. Independent consultants have found that Claimants damages from these measures total US$380,000, Claimant requests an additional US$1,000,000 in moral damages for the detention of Messrs. Goodfellow and Straw in violation of the full protection and security principle in BIT Article SC, SC, SC, SC, SC, SC, 30. 4

19 ARGUMENTS PART ONE: JURISDICTION AND ADMISSIBILITY I. THE TRIBUNAL HAS JURISDICTION UNDER THE BIT OVER THE SUBMITTED CLAIMS, AND THOSE CLAIMS ARE ADMISSIBLE. 17. Claimant submits that (A) under the BIT, the Tribunal has jurisdiction over the submitted claims. Furthermore, (B) these claims are admissible. A. Under the BIT, the Tribunal has jurisdiction over the submitted claims. 18. The BIT vests jurisdiction in the Tribunal over [d]isputes concerning Investments between a Contracting State and an Investor of the other Contracting State under this Treaty. 44 Claimant invites the Tribunal to interpret the BIT in light of VCLT Article 31, in good faith and in accordance with the ordinary meaning of the terms of the treaty in its context and in light of its object and purpose. The BIT provides for the Tribunal s jurisdiction since (i) Claimant satisfies the BIT s nationality requirement and (ii) its claims meet the BIT s jurisdictional requirement. i. Claimant satisfies the nationality requirement under the BIT. 19. The Tribunal only has jurisdiction over disputes between a Contracting State and an Investor of the other Contracting State. 45 Claimant submits that Claimant and Respondent meet this nationality requirement. Ruritania and Cronos are both Contracting States. Claimant is an Investor within the meaning of BIT Article 1.3, which defines the term investor as: any entity which is established in accordance with, and recognised as a legal person by the law of that Contracting State,... which is the owner, possessor or shareholder of an Investment in the other Contracting State. 46 An investment, under Article 1.1, is every asset which is directly or indirectly invested in accordance with laws and regulations of the host state by Investors of the other Contracting 44 BIT, Art BIT, Art BIT, Art

20 State. 47 Article 1.1 specifically lists shares of companies and other kinds of interest in companies and intellectual property rights, in particular copyrights and related rights, patents, utility-model patents, industrial designs, trademarks, plant variety rights as asset categories, the ownership of which will constitute an investment. 48 Claimant is an Investor because (a) it was duly incorporated under the laws of Cronos and (b) owns FBI shares and trademarks, which fall under the BIT s definition of an Investment. 49 Thus, the BIT permits Claimant to submit disputes concerning its investments in Ruritania to arbitration. ii. The submitted claims meet the jurisdictional requirement under the BIT. 20. The BIT only confers jurisdiction over [d]isputes concerning Investments. 50 As noted in the previous paragraph, Claimant s shares in FBI and its Ruritania-registered trademarks are investments within the meaning of the BIT. Claimant requests that the Tribunal interpret the word concern according to its ordinary meaning to relate to pursuant to VCLT Article Claimant requests the Tribunal to find Respondent s violation of multiple BIT provisions, including Article 2.1(b) on fair and equitable treatment; Article 3.1(c) on arbitrary or discriminatory measures; and Article 4.1 on unlawful expropriation, as they relate to Claimant s investments. Thus, Claimant meets the BIT s jurisdictional requirements. 21. Respondent asserts that the consideration Claimant paid for FBI s shares was insufficient to characterize the purchase as a bona fide investment. 52 However, the BIT s plain meaning supports protecting Claimant s investment. BIT Article 1.1 states that the Investment must be an asset that is directly or indirectly invested in accordance with laws and regulations of the host state. 53 Respondent has made no showing that Claimant s investment was not made in accordance with the laws and regulations of Ruritania. There is no requirement in the BIT that the putative investment must qualify as bona fide or substantial. Other tribunals have rejected the requirement that an investment be bona fide BIT, Art BIT, Art SC, 2, BIT, Art OED; VCLT, Art SD, BIT, Art Saba,

21 22. Moreover, Respondent fails to show that Claimant s investment was not bona fide. The nominal price paid for an investment does not necessarily disprove an investment s authenticity. 55 Acquisitions may be made for a price below the real cost for various reasons. For example, when a large portion of the costs and benefits of an investment arise after the transaction, the upfront purchase price typically reflects a small amount of the total value and is accompanied by contractually obligated expenditure on the investment, as well as royalty and tax payments. 56 Contifica Spirits could have grossly overpaid the State Fund in the first instance, but decided not to transfer the burden of overpayment to Claimant. B. The submitted claims are admissible. 23. Claimant submits that (i) under the UNCITRAL Rules, admissibility questions belong to the merits phase. Even if such questions could be determined during the preliminary phase, (ii) whether there was an abuse of process, as Respondent alleges, is highly fact-dependent and cannot be resolved at this preliminary phase. Even if the Tribunal were to prematurely opine on the admissibility of the claims based solely on the known facts, (iii) Claimant s FBI share acquisition was part of prospective corporate planning by Contifica Group, and is thus permissible. i. The UNCITRAL Rules permit tribunals to deliberate on questions of jurisdiction but not admissibility in the preliminary stages of arbitration proceedings. 24. Under Articles 16 and 19 of the UNCITRAL Rules, Respondent s objections to the admissibility of the submitted claims should be treated as issues relating to the merits phase of these proceedings. 57 Article 16 states that [t]he arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement The tribunal in Methanex concurred with this interpretation, finding that the UNCITRAL Rules bestow on the tribunal the express power to rule on objections that it has no 55 Vannessa, Vannessa, Chevron, UNCITRAL Rules, Art.16. 7

22 jurisdiction,... [but] confers no separate power to rule on objections to admissibility. 59 Likewise, the tribunal in Chevron noted that determining admissibility is an exercise belonging to the merits phase of arbitration, to be decided by one or more awards on the merits. 60 ii. Whether there was an abuse of process is a question of motive, which must be reserved for the merits phase of the proceedings. 26. Even if the Tribunal were to delve into admissibility at this stage, it has the authority to dismiss a claim based only on grounds not related to the merits of the case. 61 Whether there was an abuse of process is a question of motive, which is highly fact-dependent and cannot be resolved without delving into the merits In Rompetrol Group, the tribunal determined that an abuse of process argument is one that seeks essentially to impugn the motives behind the Claimant s request for arbitration and therefore could not be assessed during the preliminary stage. 63 Likewise, in Pac Rim, the tribunal stated that the answer to whether a change of nationality can become an abuse of process would depend on the particular facts and circumstances of each case. 64 In Saluka, the tribunal noted that the allegation of the claimant s ulterior motive could not be the basis for the tribunal s decision to refuse to exercise its jurisdiction Whether the Claimant s conduct constitutes an abuse of process, as Respondent alleges, is a highly fact-dependent question that the Tribunal cannot assess until Claimant has the chance to fully present its case during the merits phase. iii. Claimant s acquisition of FBI shares formed part of Contifica Group s prospective corporate planning and was not an abuse of process. 29. Even if the Tribunal were to opine on the question of motive at this stage, there was no abuse of process and the submitted claims are admissible. Prospective nationality planning is 59 Methanex, Chevron, Fitzmaurice, p.12; Rosenne, 2, reviewed by Brabandere, p Sempra, DOJ, Rompetrol, Pac Rim, Saluka,

23 acceptable, but claims seeking remedies for past grievances are not. 66 Prospective nationality planning occurs when corporate re-structuring takes place before the facts leading to a dispute occur or before a dispute arises. 67 The tribunal in Pac Rim, for example, held that a change of nationality can become an abuse of process when the relevant party can see an actual dispute or can foresee a specific future dispute as a very high probability and not merely as a possible controversy [...]. The answer in each case will, however, depend upon its particular facts and circumstances The current dispute was not foreseeable as a specific future dispute until the draft of the MAB Act was introduced to the parliament on 20 June 2010, three months after the FBI share transfer. 69 Even then, the passage of the act was uncertain and only when the Ruritanian parliament adopted the MAB Act in November 2010, eight months after the FBI share transfer, was the dispute foreseeable with a very high probability. 70 While the New Way party had already won the election before the FBI shares were transferred, the party s tough stance towards the marketing and sale of alcohol alone did not portend how unfairly and arbitrarily Respondent would have acted against Claimant in a purported attempt to address those issues. Therefore, Claimant submits that there has been no abuse of process precluding the Tribunal s jurisdiction to hear its claims. 31. Respondent s assertion that the sole purpose of Claimant s acquisition of FBI shares and trademarks was to commence this arbitration is false. Cronos favorable tax environment was another important factor behind the transfer of assets to Claimant. 71 The Agreement also shows that the sole objective of the FBI share transfer was to bring an existing dispute to investment arbitration. The Agreement s assignment clause, which allows the assignment of rights or obligations arising from the purchase of FBI shares from Contifica Spirits to any Contifica company, suggests that the group specifically contemplated that FBI shares could be moved within the group from the moment it purchased the shares from the Fund. The tribunal in Aguas del Tunari confirmed that strategic changes in corporate structure to obtain the protection 66 Compare Mobil with Banro, Phoenix, Cementownia. 67 Dolzer & Schreuer, p Pac Rim, PO 2, CQ SC, SC, 10. 9

24 of a BIT do not amount to fraud or abuse of corporate form, acknowledging that corporations commonly and legitimately relocate in search of more favorable taxation or the substantive law... including the availability of a BIT. 72 Therefore, the submitted claims are admissible. II. THE TRIBUNAL HAS JURISDICTION OVER THE SUBMITTED CLAIMS BASED ON RESPONDENT S BREACH OF THE AGREEMENT, AND THOSE CLAIMS ARE ADMISSIBLE. 32. Claimant submits that (A) the Tribunal has jurisdiction over claims arising out of the State Fund s breach of its 2008 Agreement with Contifica Spirits and that (B) such claims are admissible before the Tribunal. A. The Tribunal has jurisdiction over the submitted claim based on the State Fund s breach of the Agreement. 33. The present claim meets the jurisdictional requirement that the dispute be under the BIT, as (i) BIT Article 6.2 is an umbrella clause that transforms a Contracting State s breach of a contract with an Investor into a breach of the BIT. Additionally, (ii) the actions and obligations of the Fund are attributable to Respondent, making the Fund s failure to meets its obligations under the Agreement a breach of BIT Article 6.2. i. BIT Article 6.2 brings Respondent s failure to meet a contractual obligation within the ambit of the BIT. 34. The BIT requires that a claim must be under this Treaty. 73 This requirement is met through BIT Article 6.2, in which Respondent promised to fulfill any other obligations it may have entered into with an Investor or an Investment of the other Contracting State. 74 This provision of the BIT is an umbrella clause, which tribunals and commentators have recognized as imposing an international treaty obligation on host countries to respect agreements entered into with investors. 75 Such clauses extend the jurisdiction of tribunals to violations of contracts even if the BIT limits arbitration to claims arising under the treaty. 76 Claimant therefore submits that Respondent violated BIT Article 6.2 by failing to fulfill its obligation under the Agreement. 72 Aguas, BIT, Art BIT, Art Salacuse, p Dolzer & Schreuer, p

25 35. Claimant invites the Tribunal to interpret the text of Article 6.2 in light of VCLT Article 31, which is the established understanding of how a tribunal should approach an umbrella clause. 77 In Article 6.3, the language shall fulfill makes the provision mandatory and unqualified. The use of any other obligations indicates that this provision was intended to create substantive obligations for the Contracting States additional to those in other sections of the BIT. Finally, entered into suggests obligations in the form of mutual agreements, such as those encapsulated in a contract. The words used are explicit the plain language of Article 6.2 states that it should encompass the Agreement. Furthermore, tribunals, such as those in Noble Ventures, SGS v. Philippines, and Eureko, have interpreted similarly worded umbrella clauses to encompass the contractual breaches of respondents Reading Article 6.2 in light of its object and purpose also supports such a conclusion. 79 The BIT s preamble states that it intend[s] to create favorable conditions for Investments and recogniz[es] that the encouragement and protection of such investments are essential. 80 Umbrella clauses play an important role in achieving this purpose, as they serve to mollify investor concerns that a state will abandon its commitments to the investor after the investment is made Additionally, to read this clause as not bringing contractual breaches between a Contracting State and an Investor under the BIT would render it meaningless, contradicting the cardinal rule of treaty interpretation that each and every operative clause of a treaty is to be interpreted as meaningful. 82 If Respondent had intended Article 6.2 to have no meaning beyond the other provisions of the BIT, it would have not included it. Only a minority of BITs forty percent include umbrella clauses, and both the 2004 Model US BIT and the French Model BIT are among the many BITs that lack such clauses VCLT, Art.31; Noble Ventures, 50; Dolzer & Schreuer, p Noble Ventures; SGS v. Philippines, 115; Eureko, 246; Fedax, Noble Ventures, 52; SGS v. Philippines, BIT, Preamble. 81 Salacuse, pp Eureko, UNCTAD, p.73; Dolzer & Schreuer, p

26 38. Claimant recognizes the international law principle that in normal circumstances per se a breach of a contract by the State does not give rise to direct international responsibility on the part of the State. 84 This principle, however, is not a preemptory norm, and states are free to enter into treaties that contradict this principle. 85 States are simply required to indicate an intention to do so, 86 which the Contracting States manifested through the plain language of Article Respondent lacks a convincing reason for the Tribunal to depart from the traditional understanding of umbrella clauses, given the BIT s language. 87 In SGS v. Pakistan, the tribunal made such a departure because the BIT at issue only required that contracting parties constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors. 88 It can thus be contrasted with Article 6.2, which expressly provides that the Contracting state shall fulfill its obligations. Furthermore, the tribunal s decision in SGS v. Pakistan has been heavily criticized for its failure to base its treaty interpretation on VCLT Article Claimant urges the Tribunal to use the approach of a majority of other tribunals, which aligns with principles of treaty interpretation and enacts the will of the Contracting States. 40. Subsequent tribunals relying on SGS v. Pakistan have attempted to limit umbrella clauses to cover only obligations entered into by the state as a sovereign or to obligations with a certain level of governmental intervention. 90 However, such attempts are problematic and irrelevant to the Tribunal s jurisdiction over this claim, given the unambiguous text of Article The text of Article 6.2 makes no attempt to limit its scope to obligations entered into by the state in its sovereign capacity or in any other manner. 92 Therefore, Claimant submits that the Tribunal should not impose any limits to the scope of Article 6.2 since doing so would be inconsistent with the plain meaning of the text as agreed upon by the Contracting Parties. 84 Noble Ventures, 53; Serbian Loans, Noble Ventures, ELSI, Dolzer & Schreuer, p.155; Salacuse, p ; Noble Ventures, Swiss-Pakistan BIT, Art Dolzer & Schreuer, p.158; Drahozal, p El Paso, DJ, 72-74; Pan American, ; Joy Mining, 81; CMS, 81, Siemens, 206; Salacuse, p Dolzer & Schreuer, p.161; SGS v. Philippines,

27 ii. The State Fund s actions and obligations are attributable to Respondent. 41. The State Fund s actions and obligations are attributable to Respondent, satisfying BIT Article 8.1 s requirement that disputes before this Tribunal be between a Contracting State and an Investor. The BIT is silent on the question of attribution and whether its use of the term State encompasses state entities. As a result, Claimant submits that the Tribunal should interpret State according to its ordinary meaning supplemented by considerations of the BIT s context and its object and purpose, as required by VCLT Article The ordinary meaning of the term State includes all instrumentalities controlled by the state and should encompass bodies such as the State Property Fund of Ruritania. 94 Additionally, the Contracting Parties chose to leave State undefined, implicitly intending it to have a broad interpretation. This approach can be contrasted with the one taken by the United States in its 2012 Model BIT, where the term state enterprise is explicitly defined, suggesting it has a separate meaning for the purposes of that BIT. 95 Likewise, the object and purpose of the BIT support this interpretation, given that it is necessary for all branches of the state to fulfill the obligations of the BIT to create favorable conditions for investment Furthermore, the ILC Articles, as an indication of customary international law on the rules of attribution, support attributing the State Fund s actions to Respondent. 97 That the State Fund is an entity with a separate legal personality does not end the inquiry as to whether its actions can be attributed to the state. 98 Thus Claimant submits that the State Fund s actions are attributable to Respondent through either ILC Article 5, which concerns the conduct of entities exercising elements of governmental authority, or ILC Article 8, which addresses conduct directed or controlled by a state. 93 VCLT, Art Khalilian, p U.S Model BIT, Art BIT, Preamble. 97 Noble Ventures, 69; Dolzer & Schreuer, p Salini v. Morocco, 35; C.S.O.B,

28 44. To determine if an entity exercises elements of governmental authority the test laid out in ILC Article 5 tribunals first employ a structural test. 99 The Tribunal should consider the content of the powers, how the powers are conferred on an entity, the purpose of conferring the power on the entity, and the entity s accountability to the government in exercising the power In the Agreement, the State Fund is referred to as a state establishment. 101 Given that the State Fund was established by an Act adopted by the Parliament of Ruritania, 102 it was empowered by the law of [Ruritania] to exercise elements of the governmental authority. 103 Respondent appoints the people principally responsible for managing the State Fund: the Board of Governors and the Director-General. 104 Inherent in this appointment power is some level of accountability to Respondent for the State Fund s activities. Finally, the State Fund makes periodic distributions to Respondent, and all of its assets and liabilities pass to Respondent in the event of its dissolution. 105 In short, the State Fund was created in part to exercise authority over FBI on Respondent s behalf. 46. However, if the Tribunal finds the structural evidence inconclusive, Claimant invites it to further consider the function of the State Fund. 106 The ILC Commentary indicates that the conduct of the entity should concern governmental activity The State Fund s conduct privatizing FBI through the sale of shares to Contifica concerned governmental activity. At the time of the sale, Respondent sought to privatize a number of assets due to a significant budget crisis. 108 Thus the sale was part of a governmentenacted policy of privatization. Privatization is a process that by definition can only be carried out by the government. Therefore, the privatization of FBI was a governmental activity carried 99 Maffezini, ILC Articles, p.43, Exhibit 2, R PO 2, CQ ILC Articles, Art PO 2, CQ PO 2, CQ Maffezini, 79; see also Salini v. Morocco; C.S.O.B. 107 ILC Articles, p.43, SC, 6. 14