FOREIGN DIRECT INVESTMENT INTERNATIONAL MOOT COMPETITION BOSTON, MASSACHUSETTS 2 TO 5 NOVEMBER 2017 ARBITRATION PURSUANT TO THE RULES OF

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1 TEAM SINGH FOREIGN DIRECT INVESTMENT INTERNATIONAL MOOT COMPETITION BOSTON, MASSACHUSETTS 2 TO 5 NOVEMBER 2017 ARBITRATION PURSUANT TO THE RULES OF PERMANENT COURT OF ARBITRATION ATTON BORO LIMITED Claimant v. THE REPUBLIC OF MERCURIA Respondent PCA Case No MEMORIAL FOR CLAIMANT

2 TABLE OF CONTENTS TABLE OF CONTENTS... i LIST OF ABBRIVIATIONS...iii LIST OF AUTHORITIES...v LIST OF LEGAL SOURCES... viii STATEMENT OF FACTS... 1 ARGUMENTS...1 PART ONE: ARGUMENTS ON JURISDICTION THE TRIBUNAL MAY EXERCISE ITS JURISDICTION UNDER THE AGREEMENT BETWEEN THE REPUBLIC OF BASHEERA AND THE REPUBLIC OF MERCURIA FOR THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENT DATED 11 JANUARY I. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS SUBMITTED BY ATTON BORO AND THOSE CLAIMS ARE ADMISSIBLE..1 A. The Requirement of Ratione Materiae Jurisdiction Is Satisfied 2 B. The Requirement of RationePersoneJurisdiction Is Satisfied 6 II. THE RESPONDENT CANNOT EXERCISE THE RIGHT TO DENY THE BENEFITS OF THE BIT BY VIRTUE OF ARTICLE 2 OF THE MERCURIABASHEERA BIT 12 III. THE TRIBUNAL HAS JURISDICTION OVER ATTON BORO CLAIMS BASED ON THE UNILATERAL TERMINATION OF THE LONG-TERM AGREEMENT BY THE NATIONAL HEALTH AUTHORITY THROUGH OPERATION OF THE UMBRELLA CLAUSE OF THE MERCURIABASHEERA BIT 19 A. The Umbrella Clause in Article 3(3) of the Mercuria-Basheera BIT Covers Violation of the Long-Term Agreement B. National Health Authority s Conduct Is Attributable to Mercuria The NHA exercised elements of governmental authority In alternative, the NHA was directed and controlled by Mercuria 24 PART TWO: MERITS IF THE TRIBUNAL FINDS THAT IT HAS JURISDICTIONOVER THE SUBMITTED CLAIMS: i

3 IV. THE RESPONDENT HAS VIOLATED THE FAIR AND EQUITABLE TREATMENT STANDART ENSHRINED TO ARTICLE 3 OF THE MERCURIA- BASHEERA BIT A. The Fair and Equitable Treatment Provision of the Mercuria-Basheera BIT Encompasses the Autonomous Standard of Treatment...30 B. The Respondent Acted Contrary to Claimant s Legitimate Expectations Atton Boro s expectations were based on the legal order existed at the time when the Claimant made its decision to invest in Mercuria Atton Boro relied on specific representation made by Mercuria The legal order in Mercuria at the time of Atton Boro s investments was not stable, predictable and consistent C. The Respondent Failed to Provide the Claimant with Transparency and Due Process 37 D. Mercurian Courts Actions Amounted to Denial of Justice Mercurian courts conduct is attributable to the Respondent Mercurian courts actions amounted to denial of justice E. The Respondent Treated Claimant s Investments in Arbitrary and Discriminatory Manner.45 F. The Respondent Acted in Bad Faith 47 PRAYER FOR RELIEF...48 ii

4 LIST OF ABBREVIATIONS / Paragraph(s) ARV treatment Antiretroviral treatment Award BIT Claimant ECT FDC FET HIV/AIDS Law No.8458/9 ICC ICSID IP LTA NHA The Award obtained under the LTA Bilateral Investment Treaty AttonBoro Limited Energy Charter Treaty Fixed-dose combination Fair and Equitable Treatment Human immunodeficiency virus infection and acquired immune deficiency syndrome Mercurian National Legislation to amend Intellectual Property Law, 1976 (Law No. 232/76) International Chamber of Commerce International Centre for Settlement of Investments Disputes Intellectual Property Long-Term Agreement National Health Authority p. / pp Page / Pages iii

5 PCA Respondent The M-B BIT Permanent Court of Arbitration Republic of Mercuria Mercuria-Basheera Bilateral Investment Treaty TRIPS WTO Agreement The Agreement on Trade-Related Aspects of Intellectual Property Rights World Trade Organization LIST OF AUTHORITIES ABBRIVIATION FULL CITATION BOOKS Bryan Dolzer/Shreuer Dugan Feit Gazzini/Barbandere Jagusch Newcombe/Paradell Bryan A. Garner, Black s Law Dictionary. Ninth Edition. (2009) Rudolf Dolzer& Christoph Schreuer, Principles of International Investment Law (2008) C.F. Dugan et.al, Investor-State Arbitration Michael Feit, Responsibility of the State Under International Law for the Breach of Contract Committed by a State-Owned Entity, 2010, 28 Berkeley J. Tarcisio Gazzini,Eric De Brabandere, International Investment Law: The Sources of Rights and Obligations, Martinus Nijhoff Pub., (2012) Jagusch, Stephen; Sinclair, Anthony; The Limits of Protection for Investments and Investors under the Energy Charter Treaty (2011) Andrew Newcombe and LluísParadell, Law and Practice of Investment Treaties: Standards of Treatment (2009) iv

6 Salacuse Jeswald W. Salacuse, The Law of Investment Treaties (2010) Shreuer Christoph Schreuer, The ICSID Convention: A Commentary (2009) LAW JOURNALS Cynthia Cynthia M.Ho, A Collision Course Between TRIPS Flexibilities and Investor-State Proceedings, Vol. 6, December (2016) Dolzer F.A. Mann Gaffney Grabowsk Harb Mansinghka Schreuer and Kriebaum Rudolf Dolzer, Fair and Equitable Treatment: Today's Contours, San-ta Clara Journal of International Law, Vol.12 (2014) F.A. Mann, British Treaties for the Promotion and Protection of Investments, 52 Brit. Y.B. Int l L. 24 (1982) J. Gaffney, and J. Loftis, The Effective Ordinary Meaning of BITs and the jurisdiction of Treaty Based Tribunals to hear Contract Claims, 8 W.I.T 5 (2007). Alex Grabowsk, The Definition of Investment under the ICSID Convention: A Defense of Salini. Chicago Journal of International Law (2014) Jean-Pierre Harb, Mealey s International Arbitration Report Vol. 26, 8 August (2011) Varun Mansinghka& Sanjana Srikumar. Do arbitral awards constitute investment. Indian journal of arbitration law, December 1, 2016 Christoph Schreuer and Ursula Kriebaum, At What Time Must Legitimate Expectations Exit? Jacques Werner and ArifHyder Ali (eds), A Liber Amicorum: Thomas Walde Law Beyond Conventional Thoughts, Cameron Publications (2009) Schreuer, FET Schreuer, Protection Christoph Schreuer, Fair and Equitable Treatment in Arbitral Practice, 6 J. World Investment & Trade 357 (2005) Christoph Schreuer, Protection against Arbitrary or Discriminatory Measures, The Future of Investment Arbitration, C. A. Rogers, R.P. Alford eds., 183 (2009) v

7 Stone Tudor Vandevelde Vasciannie Jacob Stone, Arbitrariness, The Fair and Equitable Treatment Standard, and the International Law of Investment, 25 Leiden J. Int l L., 77 (2012) Ioana Tudor, Actual Situations in which the FET Standard has been applied in International Law, The Fair and Equitable Treatment Standard in the International Law of Foreign Investment, Oxford University Press (2008) Kenneth J Vandevelde, A Unified Theory of Fair and Equitable Treatment 43 New York University Journal International, Law & Politics ( ) Stephen Vasciannie, The Fair and Equitable Treatment Standard in International Investment Law and Practice, 70 Brit. Y.B. Int l L. 99 (1999) MISCELLANEOUS Cartwright, Borshell UN, 2005 WTO, 2002 The Royalty Rate Report 2012, by Heather Cartwright and Nigel Borshell( Difference Relating to Immunity from Legal Process of a Special Rapporteur of the Commission on Human Rights (2005) WTO Working Group on the Relationship Between Trade and Investment (2002), Transparency, Document WT/WGTI/W/109 vi

8 LIST OF LEGAL SOURCES ABBRIVATION FULL CITATION ARBITRAL DECISIONS Aconquija v. Argentine Compañia De Aguas Del Aconquija S.A. and Vivendi Universal v. Argentine Republic, Award, ICSID Case No. ARB/97/3, 21 November, 2000 ADC v. Hungary ADCAffiliate Limited and ADC & ADMC Management Limited v. The Republic Hungary, ICSID Case No. ARB/03/16, Award, 2 October 2006 American Energy v. Argentine Pan American Energy LLC, et al. v. Argentine Republic, ICSID Case No. ARB/03/13, Decision on Preliminary Objections, 27 July 2006 Amto v. Ukraine Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Award, 28 March 2008 ATA Construction v Jordan ATA Construction, Industrial and Trading Company v the Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/02, Award, 18 May 2010 Azurix v. Argentine Azurix Corp. v. The Argentine Republic, Award, ICSID Case No. ARB/01/12, 14 July, 2006 Bayindir v Pakistan BayindirInsaatTurizmTicaretVe Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29 Award, 27 August 2009 vii

9 BIVAC v. Paraguay Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Paraguay, ICSID Case No. ARB/07/9, Decision of the Tribunal on Objections to Jurisdiction of May 29, 2009 Bosh v. Ukraine Cayman v. El Salvador Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine, ICSID Case No. ARB/08/11, Award of 25 October 2012 Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/09/12, Award, 14 October 2006 Chevron Co. v Ecuador Chevron Corporation and Texaco Petroleum Company v Republic of Ecuador, UNCITRAL, PCA Case No.34877, Interim Award, 1 December 2008 CMS v Argentine CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005 Consortium R.F.C.C. v Morocco Consortium RFCC v. Royaume du Maroc, ICSID Case No. ARB/00/6, Desicion on Jurisdiction, 16 July 2001 Duke v Ecuador Duke Energy Electroquil Partners &Electroquil S.A. v. Republic of Ecuador, ICSID Case No. ARB/04/19, Award, 18 August 2008 EDF v Romania El Paso v Argentine EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award, 8 October 2009 El Paso Energy International Company v. The Argentine Republic, Award, ICSID Case No. ARB/03/15, 31 October 2011 Electrabel v Hungary Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012 viii

10 Eli v Canada ELSI case Emilio v Spain Eli Lilly and Company v. The Government of Canada, ICSID Case No. UNCT/14/2. Notice of Intent, 7 November 2012 United States of America v. Italy (Case concerning Elettronica Sicula S.p.A. (ELSI)), Award, International Court of Justice, 20 July 1989 Emilio Agustin Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Award, 13 November 2000 Enron v Argentine Eureko v. Poland Fedax v Venezuela Frontier v Czech Republic Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007 Eureko B.V. v. Republic of Poland, Partial Award, BIT, 19 August, 2005 Fedax N.V. v. The Republicof Venezuela, ICSID Case No. ARB/96/3,Decision of the Tribunal on Objections to Jurisdiction, 11 July 1997 Frontier Petroleum Services Limited v. The Czech Republic, Permanent Court of Arbitration, Final Award, 12 November 2010 Guardian Fiduciary Trust v. Macedonia Generation Ukraine v Ukraine Guardian Fiduciary Trust, Ltd, f/k/a Capital Conservator Savings & Loan, Ltd v. Macedonia, former Yugoslav Republic of, ICSID Case No. ARB/12/31, Award, 2 October 2012 Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003 Grid v Argentine Immaris v Ukraine National Grid P.L.C. v. Argentine Republic, Award, UNCITRAL Arbitration Tribunal, Award, 3 November 2008 Inmaris Perestroika Sailing Maritime Services GmbH v Ukraine,lCSID Case No. ARB/08/08, Decision on Jurisdiction, 8 March 2010 ix

11 Impregilo v. Pakistan Joy v Egypt Impregilo S.P.A. v. Islamic Republic of Pakistan, Decision on Jurisdiction, ICSID Case No. ARB/03/3, 22 April, 2005 Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case No. ARB/03/11, Award, 6 January 2006 Lanco v Argentine Lanco International v. The Argentine Republic, Jurisdiction of the Arbitral Tribunal, ICSID Case No. ARB/97/6, 8 December, 1998 Lauder v Czech Republic Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award, 3 September 2001 Lemire v Ukraine LESI v Algeria LG&E v Argentine Loewen v USA Joseph Charles Lemire v. Ukraine, Award, ICSID Case No. ARB/06/18, Award, 28 March 2011 L.E.S.I. S.p.A. and ASTALDI S.p.A. v. RépubliqueAlgérienneDémocratique et Populaire, ICSID Case No. ARB/05/3, Award, 12 November 2008 LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006 Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003 Maffezini v. Spain Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Award, 13 November 2000 Malicarp Ltd. v Egypt Marion v Costa Rica Malicorp Limited v. The Arabian Republic of Egypt, ICSID Case No. ARB/08/18, Award, 7 February 2011 Marion Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/08/1, Award, 12 May 2012 x

12 Metalclad v Mexico MHS v Malasia Mitchel v Congo Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award, 30 August 2000 Malaysia Malaysian Historical Salvors, SDN, BHD v. Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, 17 May 2007 Mitchell (Patrick) v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Annulment Decision, 1 November 2006 Mondev v USA Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002 MTD v Chile Noble Ventures v. Romania MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004 Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, 12 October 2005 Occidental II v Ecuador Occidental Petroleum Corporation and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award, 5 October 2012 Ocidential I v Ecuador Occidental Petroleum Corporation and Production Company v. The Republic of Ecuador, ICSID Case No.UN 3467, Final Award, 1 July 2004 Panevezys-Saldutiskis v Lithuania Panevezys-Saldutiskis Railway, Estonia v Lithuania, Judgment, PCIJ Series A/B No 76, ICGJ 328б, PCIJ 1939 Paushok v Mongolia Plama v Bulgaria Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. The Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability, 28 April 2011 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, 8 February 2005 xi

13 Pope v Canada Pope & Talbot Inc v. Government of Canada, UNCITRAL, Award in Respect of Damages, 31 May 2002 PSEG v Turkey Saipem v Bangladesh Salini v Jordan PSEG Global Inc. & Konya IlginElektrikUretimveTicaret Ltd. Srketi v. Turkey, ICSID Case No. RB/02/5, AwardandAnnex, 19 January 2007 Saipem S.p.A. v The Peoples Republic of Bangladesh, ICSID Case No. ARB/OS/07, Decision on Jurisdiction and Recommendation on Provisional Measures, 21 March 2007 SaliniCostruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Award, 31 January 2006 Salini v Morocco SaliniCostruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No.ARB/00/4, 23 July 2003 Saluka v Czech Republic Saluka Investments B.V. v. The Czech Republic, UNCITRAL Arbitration Proceedings, Partial Award, 17 March 2006 Salvors v Malasia SGS v. Phillipines Siemens v Argentine Malaysian Historical Salvors, SDN, BHD v. The Government of Malaysia, ICSID Case No. ARB/05/10, Award, 17 May 2007 Jurisdiction SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, ICSID Case No. ARB/02/6, 29 January, 2004 Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, 6 February 2007 Suez v Argentine Suez, Sociedad General de Aguas de Barcelona S.A., and Inter AguasServiciosIntegrales del Agua S.A. v. Argentina, ICSID Case No. ARB/03/17, Decision on Jurisdiction, 16 May 2006 xii

14 Tecmed v Mexico TécnicasMedioambientalesTecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003 Thunderbird v Mexico International Thunderbird Gaming Corporation v. The United Mexican States, UNCITRAL, Award, 26 January 2006 Tokios Tokelés v. Ukraine Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, 29 April 2004 TSA Spectrum v. Argentine TSA Spectrum de Argentina S.A. v. Argentine Republic, ICSID Case No. ARB/05/5, Award, 19 December 2008 Ulysseas v. Ecuador Waste Management v Mexico Ulysseas, Inc. v. The Republic of Ecuador, UNCITRAL Interim Award, 28 September 2008 Waste Management, Inc. v. Mexico, ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004 White v India Yannaca-Small Yaung Chi. v. Myanmar Yukos v. The Russian Federation White Industries v. The Republic of India, Permanent Court of Arbitration, Final Award, 30 November 2011 Yannaca-Small, K. Interpretation of the Umbrella Clause in Investment Agreements, OECD Working Papers on International Investment, (2006) Yaung Chi Oo Trading PTE Ltd. v. Government of the Union of Myanmar, ASEAN I.D. Case No. ARB/01/1, Award, 31 March 2003 Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. AA 22, Award, 18 July 2014 xiii

15 STATEMENT OF FACTS 1. The Respondent is the Republic of Mercuria ( Mercuria ) which concluded an Agreement for the Promotion and Reciprocal Protection of Investment (the M-B BIT ) on 11 January The Claimant to the present dispute is AttonBoro Limited ( AttonBoro ). It has the following structure: AttonBoro and Company is a corporation organized under the laws of the People s Republic of Reef ( Reef ) and acts as the primary holding company For AttonBoro Group. In April 1998, AttonBoro Group incorporated AttonBoro Limited in Basheera. 3. AttonBoro Group created a compound called Valtervite as a medical treatment against greyscale and secured a patent protection for it in Reef in On 21 February 1998, AttonBoro and Company obtained the patent for Valtervite in Mercuria. It was further assigned to AttonBoro. 4. AttonBoro entered to the Mercurian market, by concluding long-terms agreements for the manufacture and supply of essential medicines at competitive rate with the government and the National Health Authority (the NHA ). AttonBoro rented out an office space, opened a bank account, hired a manager, and commenced business. It set up a robust manufacturing base in Mercuria. 5. On 19 January 2004, the Minister for Health of Mercuria announced statements concerning the success of Partnership with AttonBoro. And in May 2004 the NHA offered AttonBoro to enter into a Long-Term Agreement (the LTA ). Under the LTA AttonBoro was obliged to supply Mercuria with Sanior (FDC drug) at a 25% discounted rate. By June 2005 AttonBoro set up its manufacturing unit and delivered its first consignment. 6. In early 2006, the NHA asked the AttonBoro to change the price due to the increasing number of greyscale disease. Atton Born offered a father discount of 10%, the NHA rejected this discount and required an additional discount for 40$, otherwise it is going to terminate the agreement. AttonBoro refused because in case of granting such discount margins of AttonBoro would be reduced. 7. On 15 May 2008, the Minister for Health and the President of Mercuria met privately with the Director of the NHA discussing healthcare and budgetary problems. After this meeting on 20 June 2008 the NHA terminated the LTA referring to unsatisfactory performance by AttonBoro. This act of the NHA led to the invocation of arbitration xiv

16 under the LTA by AttonBoro. On January 2009, a Tribunal in Reef found for AttonBoro passing an Award due to the fact that the NHA had breached the LTA by the prematurely termination of it. 8. AttonBoro filed enforcement proceeding before the High Court of Mercuria. The NHA filed its response to decline the enforcement of the Award citing to the fact that it is contrary to public police. Until the present time the Award is not enforced. The length of the process is more than 8 years and Mercuria as a party to the Convention of the Recognition and Enforcement of Foreign Arbitral Awards, cannot explain this delay. 9. The President of Mercuria promulgated National Legislation for its Intellectual Property Law (the Law No. 8458/09 ), which allowed to use the patented inventions without permission of the owner. The Court of Mercuria granted to a Mercurian company, HG- Pharma,a license on 17 April 2010 to manufacture Valtervite. A fixed royalty to be paid to AttonBoro was 1% of total earnings. 10. On 12 January 2012, the Parliament of Mercuria passed the Commercial Courts Act directing the High Court to constitute special benches on commercial matters. This act caused a delay in enforcement proceedings. On September 2013, the Supreme Court of Mercuria clarified that the benches on commercial matters had no jurisdiction to hear enforcement proceedings. The enforcement matters of AttonBoro were returned to the regular benches that caused another delay. xv

17 PART ONE ARGUMENTS ON JURISDICTION THE TRIBUNAL MAY EXCERCISE ITS JURISDICTION UNDER THE AGREEMENT BETWEEN THE REPUBLIC OF BASHEERA AND THE REPUBLIC OF MERCURIA FOR THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENT DATED 11 JUNUARY Pursuant to the Rules of Permanent Court of Arbitration (the PCA Rules ), the PCA has jurisdiction to hear claims if there is an Arbitration Agreement where the parties have agreed to submit a dispute to arbitration under the PCA Rules. 2. In the case at hand, the Respondent consented to conduct the arbitration disputes with Basheeras investors under the PCA Rules by signing the Agreement between the Republic of Basheera and the Republic of Mercuria for the Promotion and Reciprocal Protection of Investments (the M-B BIT). Thus, in accordance with Article 8 (2)(c) of the M-B BIT: Where the dispute is submitted to international arbitration, the investor may choose to refer the dispute to the Permanent Court of Arbitration. The arbitration shall be conducted in accordance with the Optional Rules for Arbitrating Disputes and the dispute shall be settled by three arbitrators appointed in accordance with the said Rules. 3. On 7 November 2016, the Claimant submitted a request for arbitration before the PCA against Mercuria. By doing this AttonBoro has accepted the Respondent s offer to arbitrate. Consequently, both parties have consented to arbitration under the PCA Rules. I. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS SUBMITTED BY ATTON BORO AND THOSE CLAIMS ARE ADMISSIBLE 4. The Tribunal s jurisdiction under the M-B BIT is limited to the disputes within the framework of the dispute resolution provision provided in Article 8 of the M-B BIT. The consent of the host State recorded in this Article controls the scope of the Tribunal's jurisdiction in several aspects. 1

18 5. In this respect, the Claimant insists that this Tribunal has jurisdiction over the submitted claims due to the following reasons. Firstly, a dispute must be legal in nature and arise out of or in relation to an «investment», i.e. jurisdiction rationemateriae (A). Secondly, parties to a dispute must be a Contracting State and a national of another Contracting State, i.e. jurisdiction ratione personae (B). The Claimant will demonstrate its position on the enumerated arguments respectively. A. The Requirement of RationeMateriae Jurisdiction Is Satisfied 6. The Claimant contends that this Tribunal has rationematerie jurisdiction over AttonBoro s claims in relation to the LTA and the Award since: (1) AttonBoro made an investment to Mercuria under Article 1(1) of the M-B BIT; (2) AttonBoro s investments satisfy the criteria under the Salini test; (3) the Award is a crystallization of AttonBoro s rights under the LTA. 1. AttonBoro made an investment to Mercuria under Article 1(1) of the Mercuria-Basheera BIT 7. Article 1(1) of the M-B BIT contains the following definition of the notion of investment : The term investment means any kind of asset held or invested either directly, orindirectly through an investor of a third state, by an investor of one Contracting Party inthe territory of the other Contracting Party in accordance with the latter s laws and, in particular, though not exclusively, includes: (c) claims to money, and claims to performance under contract having a financialvalue; 2

19 (e) rights, conferred by law or under contract, to undertake any economic and commercial activity, including any rights to search for, cultivate, extract or exploit natural resources The Claimant insists that the LTA itself as well as the Award associated with it fall within the meaning of the investment under the M-B BIT. 9. In May 2004 AttonBoro accepted an invitation made by NHA to enter into the LTA on the supply of Sanior.2In order to comply with its obligations under the LTA the Claimant purchased land and machinery to bolster its production setup in pharmaceutical market. 3 By that time AttonBoro Group had already assigned a number of patents to AttonBoro, including the Mercurian patent for Valtervite.4The Claimant emphasizes that AttonBorro s activities associated with the LTA fall under the list of investment types enumerated in the Article 1(1) of the M-B BIT. 10. Firstly, the rights under the LTA satisfy the criterion of an investment provided by Article 1(1)(e) of the M-B BIT. This criterion requires that rights to undertake economic and commercial activities should arise out of a contract. A contract is defined as agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law The LTA was concluded between AttonBoro and the NHA in accordance with Mercurian laws. Under the LTA both parties have mutual rights and obligations which must be complied with. Consequently, the LTA should be considered as a contract under Article 1(1)(e) of the M-B BIT. 1 FDI Moot Court 2017,Mercuria-Basheera BIT, Article 1, p FDI Moot Court 2017, Statement of Uncontested Facts, p. 29, 9. 3 FDI Moot Court 2017, Statement of Uncontested Facts, p. 29, FDI Moot Court 2017, Statement of Uncontested Facts, p. 28, 4. 5 Black s Law Dictionary. Ninth Edition. Bryan A. Garner,

20 12. Secondly, AttonBoro has a right to "money" under the LTA for the purposes of Article 1(1)(c) of the M-B BIT. The essence of the LTA consists in the manufacture and supply of Sanior on behalf of AttonBoro in exchange for payments made by the NHA. Hence, the LTA falls within the criterion (c) of Article 1(1) of the M-B BIT. 13. It is also well established that rights arising from contracts may amount to investments for the purposes of many BITs. 6 The tribunals in Chevron, Inmaris, ATA held that rights arising from contracts may amount to investments The case at hand is similar towhite Industries v India 8, where the tribunal considered rationemateriejurisdiction over the claims concerning a contract and an award associated with it. White Industrial entered into a contract with Coal India, a stateowned entity, for supply of equipment. After Coal India terminated the contract, White Industrial obtained an award of the ICC tribunal in its favor. 15. The tribunal in White Industries v India agreed that: White's rights under the Contract may be in personam rather than in rem does not exclude the Contract from qualifying as an investment In the present case, the Claimant initiated the arbitration in order to find that a unilateral termination of the LTA on behalf of the NHA is a breach of the LTA.10 The existence of commercial nature of the LTA does not preclude this Tribunal to consider the LTA as an investment contract. 17. Therefore, the Claimant insists that its actions directed on the fulfillment of obligations under the LTA constitute an "investment" under the M-B BIT. 6 Christoph H. Schroeuer, the ICSID Convention: A Commentary (Cambridge, 2nd Ed, 2009) p Chevron Co. v Ecuador, Inmaris v Ukraine, ATA Construction v Jordan. 8 White v. India. 9 White v. India, p.76, FDI Moot Case 2017, Notice of Arbitration, p.4, 9. 4

21 2. AttonBorro s Investments Satisfy the Criteria Under the Salini Test 18. If this Tribunal finds the definition of an investment enshrined to Article 1(1) of the M-B BIT insufficient, the Claimant insists that the requirements of the Salinitest 11 are also complied with. 19. The Salini test was developed in order to determine whether an "investment" had been made for the purposes of the ICSID Convention. It is widely accepted that the "double-check" imposes a higher standard of defining whether an investment is made than simply resolving whether there is an "investment" for the purposes of a particular BIT. 20. The present case is not subject to the ICSID Convention and, consequently, the Salini test should not be considered. However, the arbitral tribunals often consider the Salini test in order to define an investment since it contributes to a more accurate consideration of the definition of «investment» itself An investment should have the following characteristics to satisfy the requirements of the Salini test: (i) a substantial commitment to the host state economy, (ii) a certain duration, (iii) an element of risk, and (iv) significance to the host state s development. The Claimant insists that all these characteristics are present in the case at hand. i. AttonBoro made a substantial commitment to the economy of Mercuria 22. While adjudging whether a contribution constitutes a substantial commitment, tribunals have made several important conclusions. Firstly, the commitment should not be assessed only in financial terms, but also in terms of know-how, equipment, personnel and services. 13 Secondly, in Joy Mining v Egypt the tribunal noted that the 11 Salini. v. Morocco, The Definition of Investment under the ICSID Convention: A Defense of Salini. Alex Grabowsk. Chicago Journal of International Law. Volume 15. Number 1, p Consortium R.F.C.C. v. Morocco, 61. 5

22 term substantial refers inter alia to the relationship between the actual contribution to the project and an expected value of an entire project Moreover, the commitment criterion requires an analysis inconcreto of the reality of an obligation or investor s promises without taking into account the quantum of its expenditures The Malicorp tribunal held that: [I]t is true that Malicorp does not appear to have performed many services in connection with it (the Contract). Nonetheless, the fact of being bound by that Contract implied an obligation to make major contributions in the future. That commitment constitutes the investment The key purpose of the LTA was the implementation of the state policy for long-term strategic supply of FDC greyscale medicines, including Sanior. Therefore, AttonBoro set up its manufacturing unit for supplying it, using its obtained patent, know-how, its own technology. 17 AttonBorro expanded its business activities in Mercuria by purchasing land and machinery Thus, the Claimant made the substantial commitment to the economy of Mercuria. ii. Atton Boro s investment has a sufficient duration 14 Joy v. Egypt, Christoph H. Schreuer, The ICSID Convention: A Commentary (2001), p Malicorp Ltd v. Egypt, FDI Moot Court 2017, Statement of Uncontested Facts, p. 29, FDI Moot Court 2017, Statement of Uncontested Facts, p. 29, 15. 6

23 27. Commitment to an investment must be evidenced by a certain length of time. It is generally accepted that the required duration must be of at least two years. 19 For instance, the Salini tribunal clarified that: [T]he transaction, therefore, complies with the minimal length of time upheld by the doctrine, which is from 2 to 5 years [...] Likewise, the Malaysian Historical Salvors tribunal found that the contract giving rise to the alleged investment fulfilled the minimum length of time of two to five years since it took almost four years to complete it Professor Schreuer points out that a contract is considered to be investment if long term relationship between the parties exists or, at least, expected to exist In the case at hand AttonBoro signed the LTA in October 2004 and this agreement should have been valid for a period of 10 years. 23 AttonBoro relied on the Clause 6 of the LTA establishing that the only reason for an early termination of the agreement was unsatisfactory performance of the Claimant. 24 Although, the NHA terminated the LTA in , the LTA lasted more than 4 years. 31. Therefore, the Claimant insists that the LTA s duration is sufficient for the satisfaction of the 2 ed requirement of the Salinitest. 19 Mealey s International Arbitration Report Vol. 26, 8 August 2011 Jean-Pierre Harb, p Salini. v. Jordan, MHS v. Malaysia, Christoph H. Schreuer, The ICSID Convention: A Commentary (2001), p FDI Moot Court 2017, Statement of Uncontested Facts, p.29, FDI Moot Court 2017, Statement of Uncontested Facts, p.29, FDI Moot Court 2017, Statement of Uncontested Facts, p.30, 17. 7

24 iii. AttonBoro s investment satisfies the requirement of the assumption of risk requirement 32. Tribunals have acknowledged the risk of changes in production costs, 26 of a work stoppage, 27 posting guarantee money. 28 These investment risks must be higher than normal commercial risks. 29 Moreover, the mere existence of a dispute may serve as an indication of risk. 30 The tribunals also pointed out that the risk is inherent in any long-term commercial contract In the case at hand, AttonBoro experienced high commercial risks when signed the LTA with the NHA. AttonBoro manufactures a medicine for the unpredictable disease, there is no guarantee that our treatment will prevent the number of patients or decrease the number of them. In case of leaving the situation unchanged with amounts of diseases, it would lead to the termination of the LTA on behalf of the NHA. 34. Thus, the risks faced by AttonBoro fall under the 3 rd criterion of Salini test. iv. AttonBoro made contribution to the economic development of Mercuria 35. The ad hoc committee in Patrick Mitchell held that: 26 Bayindir. v. Pakistan, Saipem v Bangladesh, Saipem v Bangladesh, MHS v. Malaysia, Fedax v. Venezuela, Consortium R.F.C.C. v. Morocco,

25 the contribution to the economic development of the host State hallmark is an essential-although not sufficient characteristic or unquestionable criterion of the investment The Claimant point out that the LTA was initiated by the NHA as part of a policy aimed at prevention of the further spread of Greyscale in Mercuria and neighboring countries as well as treatment of already infected citizens of Mercuria. The Claimant supplied a unique medicine, using its patent on Valtervite, for the reduction of infected people and stabilization of the economy in Mercuria. Moreover, by the end of 2006 about a third of all greyscale patients were being treated using Sanior Hence, the Claimant argues that the LTA s contribution to the economic development of Mercuria is sufficient for the satisfaction of the 4 ed requirement of the Salinitest. 38. Consequently, all the characteristics of the investment required by the Salini test are present in the case. 3. The Award is a crystallization of AttonBoro s rights under the LTA 39. The Claimant insists this Tribunal has jurisdiction over the claims in relation to the Award rendered by the arbitral tribunal after the unilateral termination of the LTA on behalf of the NHA. 40. The large majority of arbitral tribunals and doctrine agree that an arbitration award can only constitute an investment if and only if - the underlying transaction is an investment Mitchell v. Congo, FDI Moot Court 2017, Statement of Uncontested Facts, p.29, Saipem v Bangladesh. 9

26 41. The Claimant argues that the present dispute is similar to the dispute considered by the tribunal in Saipem v Bangladesh 35. Saipem and Petrobangla, a Bangladeshi state-owned entity, had entered into a contract to build a gas pipeline. Saipem initiated the ICC Arbitration after Petrobangla failed to pay certain amounts of money due under the contract. The ICC tribunal ruled in favor for the foreign investor. However, the courts of Bangladesh did not enforce the ICC award. The ICSID tribunal established that contractual rights constitute an investment. 36 Under the Italy-Bangladesh BIT the words credit for sums of money would cover rights under an award ordering a party to pay an amount of money: [T]he prevailing party undoubtedly has a credit for a sum of money in the amount of the award The Saipem v Bangladesh tribunal established that: [T]he rights embodied in the ICC Award were not created by the Award but arise out of the Contract. The ICC Award crystallized the parties' rights and obligations under the original Contract The same position was expressed in White Industries v India case 39. The tribunal held that the Coal Contract constituted investment under Article 1 of the Australia-India BIT, namely, right to money or to any performance having a financial value, right to conduct economic activity. 40 As to the eligibility of the arbitral award for protection under the BIT, 35 Saipem v Banglades. 36 Saipem v Bangladesh, Saipem v Bangladesh, Saipem v Bangladesh, White v. India. 40 White v. India,

27 the tribunal agreed with the Saipem decision and held that the award was a crystallization of the original investment made in the form of the Coal Contract Similarly, in Chevron v. Ecuador, it was held that lawsuits fall within the 1993 US- Ecuador BIT s definition of investment as «claims to money» since they represent the subsisting rights under the contract The tribunal in Frontier Petroleum Services 43 held that Frontier s original investment, in the form of loans, was transformed into an entitlement under the final arbitral award. 44 The tribunal held that the arbitral award was what remained of Frontier s original investment 45 and the same was protected under the BIT. 46 In this decision, the tribunal characterized arbitral award as continuing an investment under a contract. 46. In order to determine the association between an award and a contract the arbitral tribunals consider it under the head of «claims of money arising out of an investment» of a BIT In Section I(A) of this Memorial the Claimant provided sufficient evidence that all its actions directed on the fulfillment of obligations under the LTA constitute an "investment" under the M-B BIT. 41 White v. India, Chevron Co. v Ecuador, Frontier v. The Czech Republic, Frontier v. The Czech Republic, Frontier v. The Czech Republic. 46 Frontier v. The Czech Republic, Varun Mansinghka& Sanjana Srikumar. Do arbitral awards constitute investment. Indian journal of arbitration law, December 1, p.3. 11

28 48. The Claimant emphasizes that the present dispute has similar circumstances as the cases considered above. To be more precise, the Claimant initiated the arbitration in order to find that a unilateral termination of the LTA on behalf of the NHA is a breach of the LTA. AttonBoro initiated arbitration proceedings and obtained the Award in its favor. Since the national courts of Mercuria don t enforce it, the Claimant asserts that this tribunal has jurisdiction over the claims in relation to the Award. 49. Article 1(c) of the M-B BIT expressly includes as an "investment" a "claims to money, and claims to performance under contract having a financial value". AttonBoro asserts that its rights under the LTA are now represented in the Award. 50. Therefore, the Award is crystallization of AttonBoro s rights under the LTA and, as such, is subject to such protection as is afforded to investments by the M-B BIT. B. The Requirement of Ratione Persone Jurisdiction is Satisfied 51. In order to satisfy the requirement of ratione personae jurisdiction the Claimant is to demonstrate that Atton Boro constitutes a national of another contracting state in terms of the Article 1 of the M-B BIT. 52. Article 1(2) of the M-B BIT contains the following definition of the notion investor : (b) any corporation, partnership, trust, joint venture, organization, association or enterprise incorporated or duly constituted in accordance with the applicable laws of that Contracting Party Thus, the legal person is to have a nationality of a Contracting State to the M-B BIT and may not have the nationality of the host state. 49 The investor of the Contracting State 48 FDI Moot Court 2017,Mercuria-Basheera BIT, Article 1, p C.H. Schreuer, The ICSID Convention: A Commentary, p

29 has to be incorporated (1) at the time when the violation of its rights was committed and (2) at the time of filing the claim In the case of legal entities, most investment agreements use one of three different criteria for determining nationality: the country of organization or incorporation, the country of the seat or the country of ownership or control. 51 An example of an agreement using the place of organization as the criterion of nationality is the Energy Charter Treaty, which in Article 1 (7) (a) (ii) defines investor with respect to a Contracting Party to include a company or other organization organized in accordance with the law applicable in that Contracting Party. 52 Similarly, the M-B BIT defines the term legal person as any entity established on the territory of contracting state in accordance with respective national legislation i.e. the BIT itself enshrines the incorporation test. 55. Atton Boro had been incorporated in Basheera in April 1998 and remained incorporated in Basheera on the 7 November 2016, when it filed an arbitration request to PCA.53 Thus, all the relevant requirements of investor s nationality are present in the case. 56. Consequently, both requirements of ratione personae jurisdiction are satisfied. II. THE RESPONDENT CANNOT EXERCISE THE RIGHT TO DENIAL OF BENEFITS ESTABLISHED BY ARTICLE 2 OF THE MERCURIA- BASHEERA BIT 57. There is no express time-limit in M-B BIT for the election by a Contracting Party to deny benefits under Article 2 of the M-B BIT. In a different case under different 50 Panevezys-Saldutiskis v Lithuania, Judgment, PCIJ Series A/B No 76, ICGJ 328 (PCIJ 1939), p UNCTAD Series on International Investment Agreement II. New York and Geneva, 2011, p Energy Charter Treaty. 53 FDI Moot Court 2017, Statement of uncontested facts, p. 28, 4. 13

30 arbitration rules, the issue of timeliness might have caused this Tribunal certain difficulties given the importance of investor-state arbitration generally and, in particular, the potential unfairness of a State deciding, as a judge in its own interest, to thwart such an arbitration after its commencement The Claimant argues that any valid denial of benefits by Mercuria would only affect benefits otherwise applicable after the date of denial. Article 2 of the M-B BIT constitutes a reservation by each Contracting Party of a right to deny the advantages but does not constitute a denial of the benefits in itself. That right, to becomeeffective, must be expressly exercised, and once exercised, cannot take effect retroactively. 59. The same position was expressed in Ulysseas v Ecuador where the tribunal stated that the right to deny benefits under the US-Ecuador BIT could be exercised no later than in the statement of defense The Claimant contends that the Respondent's purported exercise of the denial of benefits to the Claimant only occurred on 26 November 2016, when the Republic of Mercuria sent a response to the notice of arbitration to PCA stating that the application of the M-B BIT to the Claimant shall be denied. 61. In any event, Article 2 of the M-B BIT sets forth two cumulative conditions for a Contracting Party to exercise its right to deny the benefits to promotion and protection of investments. Only (A) legal entities controlled or owned by citizens or nationals of a third state and that (B) have no substantial business activity in the Contracting Party where they are organized may be denied the benefit. 62. If one of the requisites provided by Article 2 of the M-B BIT is not met, the denial of the benefits clause is inapplicable. 56 The tribunal in the Yukos Cases pointed out that: 54 Cayman v. Salvador, ICSID. 55 Ulysseas v. Ecuador, Yukos v. The Russian Federation,

31 [I]t is apparent from the wording of Article 17(1) that two additional cumulative substantive conditions must be met before the denial-ofbenefits clause can be exercised in respect of any particular entity The tribunal in Generation Ukraine v. Ukraine touched upon the burden of proof under these circumstances and held that: the burden of proof to establish the factual basis of the third country control, together with the other conditions, falls upon the State as the party invoking the right to deny Atton Boro insists that Respondent cannot invoke Article 2 of the M-B BIT in this case since the conditions for its application do not exist. Moreover, the burden of proof that Atton Boro is owned or controlled by nationals of a third state and has no substantial activity in the territory of the Contracting Party falls upon the Republic of Mercuria. A. Atton Boro is not owned and controlled by nationals of a third state 65. Article 31 of the VCLT stipulates that: A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose The tribunal in Plama v. Bulgaria stated that a "third state" means being a non- Contracting State under the BIT. 60 The same position was expressed in case Amto v. Ukraine, where the tribunal concluded that third state : 57 Yukos v. The Russian Federation, para Generation Ukraine, Inc. v. Ukraine, Vienna Convention on the law of treaties (with annex). Concluded at Vienna on 23 May Plama v. Bulgaria,

32 [ ] is used in Article 1(7) in contradistinction to Contracting Party, which suggests that a third state is any state that is not a Contracting Party to the ECT The tribunal in Plama v. Bulgaria interpreted the phrase «if citizens or nationals of a third state own or control» as following: the word "or" signifies that ownership and control are alternatives. In other words, only one needs to be met for the first requirement to be satisfied In the tribunal s view in Plama v. Bulgaria, control includes control in fact, including an ability to exercise substantial influence over the legal entity s management, operation and the selection of members of its board of directors or any other managing body In case Guardian Fidiciary Trust v Macedonia the tribunal defined the notion of ownership as a legal right or the capacity to exercise control In order to clarify the notion of control contained in international investment agreements, arbitral tribunals have discussed whether it should be understood as legal or effective control In establishing the meaning of control for the purpose of Article 17, ECT tribunals looked behind the first layer of ownership or control, 66 and discarded minority beneficiaries or ownership in assessing control Amto v. Ukraine, Plama v. Bulgaria, Plama v. Bulgaria Guardian Fiduciary Trust v. Macedonia, TSA Spectrum. v. Argentine,

33 72. Atton Boro and Company is a corporation organized under the laws of the People s Republic of Reef and acts as the primary holding company for Atton Boro Group, a leading drug discovery and development enterprise. 68 Atton Boro and Company shares are held by a mix of private entities and private individuals of a wide variety of nationalities. Its directors come from several different countries, including Basheera and Mercuria Atton Boro Limited ( Atton Boro ) is a wholly owned subsidiary which was incorporated by Atton Boro Group in Basheera, as a vehicle for carrying on business in South American and African countries. 70 The shares of Atton Boro Limited are currently held by Atton Boro Group affiliates, which are all ultimately controlled by Atton Boro and Company In case Tokios Tokelés v. Ukraine 72 the majority of the tribunal held that a company incorporated in Lithuania, but owned and controlled by Ukrainian nationals (who owned 99 per cent of the shares and formed two thirds of the management), was a Lithuanian national for the purposes of Article 25(2)(b). As this provision was aimed at expanding, and not restricting, the jurisdiction of ICSID so long as the formal nationality of incorporation was that of another Contracting Party the tribunal would not lift the corporate veil. 73 This conclusion was reinforced by the fact that the BIT 66 Yukos v. The Russian Federation, Yukos v. The Russian Federation, FDI Moot Court 2017, Statement of uncontested facts, p. 28, FDI Moot Court 2017, Procedural order No 3, p. 50, FDI Moot Court 2017, Statement of uncontested facts, p. 28, FDI Moot Court 2017, Procedural order No 2, p. 48, Tokios Tokelés v. Ukraine. 73 Tokios Tokelés v. Ukraine. 17

34 defined an investor of Lithuania under Article 1(2)(b) as an entity established in the territory of the Republic of Lithuania in conformity with its laws and regulations. In addition, the company had been incorporated six years before the Lithuania Ukraine BIT (1994) had entered into force, showing that the incorporation was not undertaken to gain access to ICSID arbitration. 75. A number of more recent cases have done the same approach as in Tokios Tokelés v. Ukrainecase where the applicable treaty and/or national law refer only to a test of formal incorporation as determining nationality Therefore, the Claimant insists that in present proceedings a test of a formal incorporation is applicable. Moreover, the ultimate owner or controller cannot be found since shares of Atton Boro and Company are held private entities and individuals from different countries Thus, since Atton Boro was incorporated in accordance with the law of the Republic of Basheera, there is no ownership or control from a third state. B. Atton Boro has a substantial business activity in the territory of Mercuria 78. Though the substantial business activities element frequently constitutes the benchmark for denial of benefits clauses, this term is neither defined in the treaties nor addressed in their explanatory notes In AMTO v. Ukraine, the tribunal discussed the meaning of the term substantial and reached the conclusion that: [ ] in this context means 'of substance, and not merely of form'. It does not mean 'large', and the materiality not the magnitude of the business activity is the decisive question ADC v. Hungary, FDI Moot Court 2017, Procedural order No 2, p. 48, American Energy. v. Argentine. 18