MEMORIAL FOR THE CLAIMANT TEAM BAXTER IVAN CAVDAREVIC JUAN PABLO CAICEDO VITALII DANYLCHENKO MARIYA-KHRYSTYNA KOZIY

FOREIGN DIRECT INVESTMENT INTERNATIONAL ARBITRATION MOOT 2014 TEAM BAXTER IVAN CAVDAREVIC JUAN PABLO CAICEDO VITALII DANYLCHENKO MARIYA-KHRYSTYNA KOZIY ARBITRATION INSTITUTE OF THE STOCKHOLM CHAMBER OF COMMERCE CASE SCC NO. 00/2013 BETWEEN: CALRISSIAN & CO., INC. FEDERAL REPUBLIC OF DAGOBAH CLAIMANT/INVESTOR RESPONDENT/PARTY MEMORIAL FOR THE CLAIMANT

TABLE OF CONTENTS TABLE OF CONTENTS... ii LIST OF AUTHORITIES... iv Academic Sources... iv ARTICLES... iv BOOKS... iv JOURNALS... v Legal Sources... vi ARBITRAL DECISIONS... vi INTERNATIONAL COURT CASES... xii TREATIES... xii MISCELLANEOUS... xii STATEMENT OF FACTS... 1 ARGUMENTS... 4 PART ONE: JURISDICTION AND ADMISSIBILITY... 4 I. THE TRIBUNAL HAS JURISDICTION OVER THE DISPUTE... 4 I.1. The Tribunal has jurisdiction ratione materiae... 5 a. The sovereign bonds qualify as "investments" under Article 1 of the BIT... 6 b. The sovereign bonds satisfy the general notion of "investment" in International Investment Law... 11 c. The bonds have a territorial link with Dagobah... 13 I.2. The Tribunal has juridiction ratione personae... 15 I.3. The PCA Decision recognized sovereign bonds as "investments" under the BIT... 16 a. The PCA Decision is a binding rule of law for Respondent... 17 b. Collateral Estoppel... 19 ii

c. The PCA Decision can be applied as an interpretative element under VCLT Article 31.3 (c) 21 II. THE CLAIMS SUBMITTED ARE ADMISSIBLE BEFORE THE TRIBUNAL... 22 II.1. The difference between treaty claims and contractual claims... 22 II.2. The claims submitted by Claimant are treaty claims and therefore not covered by the Forum Selection Clause... 24 PART TWO: MERITS... 27 I. RESPONDENT'S ACTIONS HAVE VIOLATED ARTICLE 2.2 OF THE BIT... 27 I.1. Respondent's actions are inconsistent with the Fair and Equitable standard of treatment under the first sentence of article 2.2 of the BIT... 27 a. Legitimate expectations... 28 b. Coercion... 32 II. RESPONDENT'S ACTIONS ARE NOT EXEMPTED FROM BREACHING THE BIT... 33 II.1. Article 6.2 of the BIT and the Necessity Doctrine... 33 a. The "only means requirement"... 35 b. The situation faced by Respondent did not threaten its essential interests... 36 II.2. Respondent cannot justify its actions under the security exception of Article 6.2 of the BIT... 37 PRAYER FOR RELIEF... 40 iii

LIST OF AUTHORITIES Academic Sources ARTICLES Alvarez and Khamsi Burke-White Crawford Crawford (2 nd Report) Gaillard Schill Alvarez, J.E., and Khamsi, K., The Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime, in Sauvant, K.P., Yearbook on International Investment Law and Policy, New York: Oxford University Press, 2009, available at http://www.vcc.columbia.edu/pubs/documents/alvarezfinal_000.pdf Burke-White, W. The Argentine Financial Crisis: State Liability Under BIT's and the Legitimacy of the ICSID System, Research Paper No. 08-01. University of Pennsylvania Law School, Institute for Law and Economics (January 2008). Crawford, J., Treaty and Contract in Investment Arbitration, The 22 nd Freshfields Lecture on International Arbitration (29 Nov 2007) Crawford, J., Second Report on State Responsibility: Addendum, U.N. Doc. A/CN.4/498/ Add.2, 1999, available at http://untreaty.un.org/ilc/guide/9_6.htm Emmanuel-Gaillard, Investment-Treaty-Arbitration and- Jurisdiction-over-Contract-Claims The-SCS cases- Considered, in-todd-weiler-(ed.), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (Cameron, 2005) Schill, S., Fair and Equitable Treatment as an Embodiment of the Rule of Law, in R. Hofman and C. J. Tams(eds.), ICSID: Taking Stock after 40 Years, 2007 BOOKS Brunne, Kindred & Saunders Brunnee, J., Kindred, H.M., Saunders, P.M, International Law, Chiefly as Interpreted and Applied in Canada, 7th ed., Emond Montgomery Publications Limited, 2006 iv

Brownlie Dolzer and Schreuer Douglas Greenspan Jackson and Sanger McLachlan Newcombe and Paradell Oppenheim Redfern Schneidraman Sinclair JOURNALS Fietta Reinisch Brownlie, L., Principles of Public International Law, 6th ed., Oxford: Oxford University Press, 2003 Dolzer, R., and Schreuer, C., Principles of International Investment Law, Oxford University Press, 2008 Douglas, Z., The International Law of Investment Claims, Cambridge University Claims, 2009 Greenspan, A. The Age of Turbulence: Adventures in a New World, Penguin, 2008. Jackson A., and Sanger, M., Dismantling Democracy: the Multilateral Agreement on Investment (MAI) and Its Impact, Ottawa: Canadian Centre for Policy Alternatives, 1998 McLachlan, C., Shore, L., and Weiniger, M., International Investment Arbitration: Substantive Principles, Oxford University Press, 2007 Newcombe, A., and Paradell, L., Law and Practice of Investment Treaties, Kluwer, 2009 Jennings, R., and Watts, A.L., Oppenheim s International Law, 1996 Redfern A. et al., Law and Practice of International Commercial Arbitration, Sweet & Maxwell, 2004 Schneidarman, D., Constitutionalizing Economic Globalization: Investment Rules And Democracy s Promise (New York: Cambridge University Press) 2008 Sinclair, I. The Vienna Convention on the Law of Treaties, 2nd Edition, Manchester University Press, 1984. Fietta, S., Expropriation and the Fair and Equitable Standard: The Developing Role of Investor s Expectations in International Investment Arbitration, (2006) 23 (5) Journal of International Arbitration 375 Reinisch, A., Necessity in International Investment Arbitration An Unnecessary Split of Opinions in Recent ICSID Cases? (2007) 8 Journal of World Investment and Trade 191 v

Vagts Vandevelde Vandevele II Weiler Vagts, Detlev F., Coercion and Foreign Investment Re- Arrangements, the American Journal of International Law, 1978 Vandevelde, K., J., A Unified Theory of Fair and Equitable Treatment, (2010) 43 N.Y.U. Journal of International Law & Politics Vandevelde, K., J., Of Politics and Markets: The Shifting Ideology of the BITs, 11 INT L TAX & BUS. LAW. (1993) Weiler, T. J., Methanex Corp. v. U.S.A.: Turning the Page on NAFTA Chapter Eleven? (2005) Journal of World Investment and Trade 6 Weisbrod Alfred J. Weisbrod, Offensive Collateral Estoppel, 6 AM. J. TRIAL ADVOC. 257, 257 58 (1983). White and Staden White, W.W.B, and Staden, A., Investment Protection in Extraordinary Times: The Interpretation and Application of Non Precluded Measures Provisions in Bilateral Investment Treaties, (2008) 48 Virginia Journal of International Law 307 Legal Sources ARBITRAL DECISIONS Abaclat Abaclat and others v. Argentina, ICSID Case No. ARB/07/5, Decision on Jurisdiction, 4 August 2011 ADC ADC v. Hungary, ICSID Case No. ARB/03/16, Award, 2 October 2006 ADF Amco Asia Amco Jurisdiction Azurix Jurisdiction ADF Group Inc. v. USA, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003 Amco Asia Corp. and Others v. The Republic of Indonesia, ICSID Case No. ARB/81/1, Award, 20 November 1984 Amco Asia Corp., Pan America Development Ltd., and PT Amco Indonesia v Republic of Indonesia, Resubmitted Case, Decision on Jurisdiction, 10 May 1988 Azurix Corp. v. Argentina, ICSID Case No. ARB/01/12, Decision on Jurisdiction, 8 December 2003 vi

Azurix Award Amoco Biwater Azurix Corp. v. Argentina, ICSID Case No. ARB/01/12, Final Award, 14 July 2006 Amoco International Finance Corporation v. Iran, Iran-U.S. Claims Tribunal, Vol. 15, 1982 Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania (ICSID Case No. ARB/05/22), Award of 24 July 2008. BG Group BG Group Plc v. Argentina, UNCITRAL, Award, 24 December 2007 Capital India Capital India Power Mauritius I v. Maharashtra Power Development Corp Ltd et. al., International Chamber of Commerce, 2005 CDC CDC v. Seychelles. Annulment, 29 June 2005. Champion Trading Chevron CME C.M.S Jurisdiction C.M.S Award Corn Products C.S.O.B Desert Line Projects Ecuador v. United States Champion Trading Co. v. Arab Republic of Egypt, ICSID Case No. ARN/02/9, Decision on Jurisdiction, 21 October 2003 Chevron Corp. (U.S.) v. Ecuador, PCA Case No. 34877, Partial Award on the Merits, (2010) CME Czech Republic B.V. v The Czech Republic, UNCITRAL, Partial Award, 13 September 2001 CMS Gas Transmission Co. v. Republic of Argentina, ICSID Case No. ARB/01/08, Decision on Objections to Jurisdiction, 42 ILM 788 (2003), July 17, 2003. CMS Gas Transmission Co. v. Republic of Argentina, ICSID Case No. ARB/01/08, Award, 12 May 2005 Corn Products v. United Mexican States, ICSID Case No. ARB (AF)/04/01, Decision on Responsibility, 15 January 2008. Ceskoslovenska Obchodni Banka v. The Slovak Republic, ICSID Case No. ARB/97/4, Decision on Jurisdiction, 1 December 2000 Desert Line Projects LLC v. The Republic of Yemen, ICSID Case No. ARB/05/17 Ecuador v. United States, PCA Case No. 2012-5, Request for Arbitration, (2011) vii

Enron Jurisdiction Enron Award Feldman Fedax Fireman s Fund Flexi-van Foremost Tehran Enron Corp. & Ponderosa Assets L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on Jurisdiction, 14 January 2004 Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award, 22 May 2007 Marvin Roy Feldman v. Mexico, ICSID Case No. ARB(AF)/99/(1), Award, 16 December 2002 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 Fireman's Fund Insurance Company v. The United Mexican States, ICSID Case No. ARB(AF)/02/01 (Ch. 11 Panel), Award, 2006 Flexi-van Leasing, Inc. v. The Government of the Islamic Republic of Iran, Iran-US CTR, vol. 12, 1986 Foremost Tehran, Inc., et al. v The Government of The Islamic Republic of Iran, et al., No. 220-37/231, Award, 11 April 1986 GAMI GAMI Investments v Mexico, UNCITRAL, Final Award, 15 November 2004. Generation Ukraine Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003. Genin Alex Genin and Others v. Republic of Estonia, ICSID Case No. ARB/99/2, Award, June 25, 2001 Glamis Gold Glamis Gold, Ltd. v. United States of America, Award, 14 May 2009 Goetz Antoine Goetz et consorts v. Burundi, ICSID Case No. ARB/95/3, Award, 10 February 1999 Impregilo Joy Mining Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3, Decision on Jurisdiction, 22 April 2005 Joy Mining Machinery Ltd. v. Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award on Jurisdiction of 6 August 2004. viii

Lauder Lauder v. Czech Republic, UNCITRAL Arbitration Stockholm Chamber of Commerce Rules, Award, 3 September 2001 LESI-Dipenta LESI & Astaldi LG&E Loewen Lucchetti Kardassopoulos Maffezini Malaysian Historical Salvors Metalclad Methanex Middle East Cement Mitchell Consorzio Groupement L.E.S.I.-Dipenta v. People s Democratic Republic of Algeria, ICSID Case No. ARB/03/08, Award, 10 January 2005 LESI, S.p.A. and Astaldi, S.p.A. v. People's Democratic Republic of Algeria ICSID Case No. ARB/05/3, Decision on Jurisdiction, 12 July 2006 LG&E v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006 Loewen v. United States, ICSID Case No. ARB(AF)/98/3, Award on the Merits, 26 June 2003 Empresas Lucchetti, S.A. v. Republic of Peru, ICSID Case No. ARB/03/4, Award (Feb. 7, 2005) Kardassopoulos v Georgia, ICSID Case No ARB/05/18, Decision on Jurisdiction, 6 July 2007 Emilio Augustin Maffezini v. Spain, ICSID Case No. ARB/97/7, Award, 13 November 2000 Malaysian Historical Salvors, SDN, BHD v. Malaysia (ICSID Case No. ARB/05/10), Decision on Jurisdiction of 17 May 2007 Metalclad Corp v. United Mexican States, ICSID Case No. ARB(AF)/97/1 (2000), Award, 30 August 2000 Methanex Corporation v. United States of America, Final Award on Jurisdiction and Merits, 3 August 2005 Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award, 12 April 2002 Mitchell v. Democratic Republic of Congo (ICSID Case No. ARB/99/7), Decision on Annulment of Award of 1 November 2006 ix

MTD Myers Neer Occidental Oil Field Olguín Pan American Pantechniki Petrolane Pope & Talbot Award Pope & Talbot Damages RayGo Romak RSM Salini v. Morocco MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, Award, signed 25 May 2004 S.D. Myers, Inc. v. Canada, NAFTA Arbitration under UNCITRAL Rules, Partial Award, 13 November 2000 L. F. H. Neer and Pauline E. Neer v. Mexico, (1926) Journal of the American Society of International Law 21 Occidental Exploration and Production Co. v. Republic of Ecuador, London Court of International Arbitration, Case No. UN3467, Final Award, July 1, 2004 Oil Field of Texas, Inc. v. The Government of the Islamic Republic of Iran, Interlocutory Award No. ITL 10-43-FT, 1982 Olguín v. Paraguay, ICSID Case No. ARB/98/5, Decision on Jurisdiction, August 8, 2000 Pan American Energy L.L.C and other v. Argentine Republic, ICSID Case No. ARB/04/08, Decision on Preliminary Objections, July 27, 2006 Pantechniki S.A. Contractors & Engineers v. Republic of Albania, ICSID Case No. ARB/07/21, Award, 30 July 2009 Petrolane Inc. v. The Government of the Islamic Republic of Iran, Iran-US. CTR, vol. 27, 1991 Pope & Talbot Inc. v. Canada, NAFTA, Award on the Merits of Phase 2, 10 April 2001 Pope & Talbot Inc. v. Government of Canada, NAFTA UNCITRAL Investor-State Claim, Award on Damages, 31 May 2002 RayGo Wagner Equipment Co. v. Star Line Iran Co., Iran-US CTR, Award No. 20-17-3, 10 January 1983 Romak S.A. v. The Republic of Uzbekistan (PCA Case No. AA280), Award of 26 November 2009 RSM Production Company and others v. Grenada, ICSID Case No. ARB/10/6, 10 December 2010 Salini Costruttori S.p.A. and Italstrade S.P.A. and Italstrade S.P.A v. Kingdom of Morrocco, ICSID Case No. ARB/00/4, 23 x

Saluka Award Saluka Counterclaim Santa Elena July 2001 Saluka Investments BV (the Netherlands) v The Czech Republic (Partial Award), Award of 17 March 2006 Saluka Investments BV v Czech Republic, UNCITRAL, Decision on Jurisdiction over the Czech Republic s Counterclaim, 7 May 2004 Compañia del Desarrollo de Santa Elena, S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1, Award, 17 February 2000 SD Myers S.D. Myers Inc. v Government of Canada, Partial Award, 13 November 2000 SEDCO(1) SEDCO(2) Sempra SGS Siemens Annulment Tecmed Telenor Toto Costruzioni Vivendi I SEDCO, Inc. v. National Iranian Oil Company, Iran-US CTR, ITL 59-129-3, 1987 SEDCO, INC. v. Iran Marine Industrial Company, National Iranian Oil Company, and the Islamic Republic of Iran, Iran- US CTR, Award No. 419-128/129-2, 1987 Sempra Energy International v. Argentina, ICSID ARB/02/16, Award, 28 September 2007 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 of 6 August 2003 Siemens AG v The Argentine Republic, ICSID Case No. ARB/02/08, Annulment Committee, 6 February 2007 Tecnicas Medioambientales Tecmed S.A. v. The United Mexican States, ICSID Case No. ARB(AF)/00/2, Award, 29 May 2003 Telenor Mobile Communications A.S v. Hungary, ICSID Case No. ARB/04/15, Award, 13 September 2006 Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, ICSID Case No. ARB/07/12, Decision on Jurisdiction, 11 September 2009 Compañia de Aguas del Aconquija S.A & Compagnie Générale des Eaux (Vivendi) v. Argentine Republic, ICSID Case No. ARB/97/3, Award, November 21, 2000 xi

Vivendi II Waste Management Compañia de Aguas del Aconquija S.A & Compagnie Générale des Eaux (Vivendi) v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, July 3, 2002 Waste Management, Inc. v. United Mexican States, ICSID Case Nr. ARB(AF)/ 00/3, Award, 30 April 2004 INTERNATIONAL COURT CASES ELSI Elettronica Sicula SpA (ELSI) (United States v. Italy), Judgment, 20 July 1989 Nicaragua North Sea TREATIES ILC Articles U.S. Argentina BIT Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), International Court of Justice, Judgment, 27 June 1986 North Sea Continental Shelf (Frg/Den.; Frg/ Neth.), Judgment, 20 February 1969 International Law Commission, Articles on State Responsibility for Internationally Wrongful Acts (including official Commentary), Yearbook of the International Law Commission 2001, Vol. II (Part 2) The Treaty between the United States of America and the Argentine Republic concerning the reciprocal encouragement and protection of investment, signed on November 14, 1991 VCLT Vienna Convention on the Law of Treaties, 23 May 1969 MISCELLANEOUS Restatement (Third) ILC Fragmentation Report OECD Paper 2 Montana v. United States American Law Institute, Restatement (Third) of the Foreign Relations Law of the United States (1986) Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, Report of the Study Group of the International Law Commission at its fifty-eighth session, finalized by Martii Koskenniemi, UN Document A/CN.4/L.682 (13 April 2006)) Fair and equitable treatment standard in international investment law, OECD Directorate For Financial and Enterprise Affairs, Working Papers On International Investment Number 2004/3 Montana v. United States, 440 U.S. Supreme Court Ruling (1979). xii

xiii

STATEMENT OF FACTS 1. Claimant, Calrissian & Co., Inc., ( Claimant ) is a hedge fund incorporated in the Corellian Republic that in 2005 purchased in the secondary market a number of sovereign bonds issued by the Federal Republic of Dagobah ( Respondent or Dagobah ). 1 2. Dagobah and the Corellian Republic ( Corellia ) concluded in 1992 the Agreement between the Corellian Republic and the Federal Republic of Dagobah for the Promotion and Protection of Investments ("BIT"). 2 3. Respondent has undergone two processes of sovereign debt restructuring. 3 In early 2001, after a decade of heavy borrowing on international financial markets, combined with high government budget deficits, Dagobah faced an unsustainable debt burden and descended into an economic crisis. 4 Dagobah s inability to meet its debt obligations led to a sovereign debt restructuring process in which Dagobah made an exchange offer to the bondholders. The new series of bonds would reduce the bonds face value by 43% and provide the possibility of cash buybacks. The final value reduction was estimated at 50% of the bonds net value, thereby causing major losses to bondholders, including investors from Corellia. 5 4. Concerned with the effects that Dagobah s debt restructuring might have on its economy, Corellia decided to clarify the language of the BIT to determine if sovereign bonds fell under the definition of investments under the BIT. 6 Pursuant to Article 7 of the BIT Corellia commenced arbitral proceedings against Dagobah, administered by the Permanent Court of Arbitration ( PCA ), under UNCITRAL Arbitration Rules ("UNCITRAL Rules"). 7 5. On 29 April 2003, the PCA Arbitral Tribunal decided ("PCA Decision"), by majority, that sovereign bonds were investments within the definition of the BIT and that bondholders of both countries were entitled to its standards of protection and to resort to the investor-state dispute settlement mechanism included therein. 8 Corellian bondholders had already 1 Uncontested Fact ( UF ), 22, Requests for Clarification ( Clarification ), No.11. 2 UF, 2. 3 UF, 3, 4, 14-18. 4 UF, 3. 5 UF, 4. 6 UF, 6. 7 UF, 8. 8 UF, 11. 1

accepted a restructuring offer made by Dagobah, therefore no litigation proceedings were pursued by Corellian nationals against Dagobah. 9 6. Dagobah's second debt restructuring process derived from the 2008 world financial crisis. At the beginning of 2010 a new recession hit Dagobah as a consequence of this crisis; its ability to meet its debt obligations was questioned and concerns about a possible default appeared. 10 Again, the IMF provided recommendations and recognized that Dagobah's debt was unsustainable and suggested the implementation of a new debt restructuring. 11 7. On 28 May 2012, Dagobah enacted the Sovereign Restructuring Act ( SRA ), applicable to all bonds governed by Dagobah s law, which provided that if a qualified majority of the owners of 75% of the aggregate nominal value of all bonds governed by domestic law agreed to modify the terms of the bonds, that decision would bind all the remaining bondholders. Before the adoption of the SRA, the affected bonds did not allow for amendment unless all bondholders agreed to it. 12 The bonds acquired by Claimant were issued in August 2003 and purchased in 2005. These bonds were affected by the SRA and covered by this second debt restructuring process. 13 8. On 29 November 2012, the Dagobah government offered bondholders the option to exchange their bonds for new ones worth approximately 70% of the net value of the outstanding sums under the original bonds. 14 Dagobah s law governed the majority of restructured bonds and more than 85% of holders of bonds that were subjected to the SRA decided to participate in the exchange offer. Therefore, on 12 February 2013 all of such bonds were exchanged for new ones on the terms provided by the exchange offer. 15 9. The new bonds included provisions regulating collective action (Collective Action Clauses, CACs ), which related both to the collective change of the bond terms as well as to the enforcement of any of the current bonds contractual obligations. The CACs provided that if bondholders wanted to initiate any legal action, they would need to gather at least 20% 9 UF, 13. 10 UF, 14. 11 UF, 15. 12 UF, 17. 13 UF, 22, Clarifications No. 11-12. 14 UF, 18. 15 UF, 19. 2

of the nominal value of the issue in order to sue. Such a clause was absent in the old bonds. 16 10. Claimant was among the holdout minority, and pursuant to Article 8 of the BIT and relying on the PCA Decision, it decided to initiate arbitral proceedings against Dagobah before the Arbitration Institute of the Stockholm Chamber of Commerce ( SCC ). 17 Claimant submits that the adoption of a collective action mechanism with retroactive effects through the enactment of the SRA constituted a violation of the fair and equitable treatment standard of protection contained in Article 2(2) of the BIT and therefore requests full compensation for the losses incurred. 18 11. The SCC Board of Directors decided that the SCC did not manifestly lack jurisdiction over the dispute. The SCC Secretariat confirmed to Claimant receipt of the notice of arbitration and notified Dagobah of the Request. 19 Following the payment of the advance on costs by the parties, the case was referred to the Arbitral Tribunal ("Tribunal") on 8 January 2014. 20 On 3 February 2014, the Tribunal issued Procedural Order No. 1, indicating that the first stage of the proceedings will cover issues regarding jurisdiction and liability. Claimant will elaborate on these issues in the following section. 16 UF, 21. 17 UF, 22. 18 UF, 23. 19 UF, 24. 20 UF, 28. 3

ARGUMENTS PART ONE: JURISDICTION AND ADMISSIBILITY I. THE TRIBUNAL HAS JURISDICTION OVER THE DISPUTE 1. The jurisdiction of an arbitral tribunal depends on the existence of a valid arbitration agreement. This agreement does not need to be embodied in a single instrument. In the context of BIT's, it is usual that arbitration agreements come to existence when the host State's standing offer to arbitrate in a BIT meets the investor's implied consent through its submission to arbitration. 21 At this moment consent to arbitration has been given by both parties to the dispute, and thus a valid arbitration agreement has been formed. 2. Respondent s consent to submit to arbitration the present dispute has been expressed in Article 8 of the BIT. This provision first establishes that any legal dispute that arises between an investor of one Party and the other Party in connection with an investment shall, as far as possible, be settled amicably through negotiations between the parties to the dispute. 22 However, in case this amicable solution is not achieved, the investor and the Respondent State should proceed to the dispute settlement mechanism set forth in Article 8.2 of the BIT, which reads as follows: "8.2 Each Party hereby consents to submit a dispute referred to in paragraph (1) of this Article, to binding arbitration before: (c) the Arbitration Institute of the Stockholm Chamber of Commerce." 23 3. Based on the wording of the aforementioned provision we can conclude that each Party to the BIT has made a binding offer to arbitrate any legal dispute in connection with an investment that arises between an investor of one Party and the other Party. 4. On 30 August 2013 Claimant filed a request for arbitration before the SCC against Respondent. 24 This action constitutes an acceptance by Claimant of the host State s offer to arbitrate under Article 8.2 of the BIT. Hence, an arbitration agreement was formed. 5. Having proven the element of consent, it is now necessary to analyze what does this arbitration agreement covers. The Tribunal s jurisdiction under the BIT is limited to 21 Redfern, pg. 66. 22 BIT, Article 8.1. 23 BIT, Article 8.2. 24 UF, 31. 4

disputes within the scope of the dispute resolution provisions of the BIT. 25 The consent of the host State recorded in Article 8 of the BIT controls the scope of the Tribunal's jurisdiction in several aspects. 26 First, the dispute must be a legal dispute in connection with an investment within the terms of Article 8.1 of the BIT (jurisdiction ratione materiae). Second, the parties of the dispute must be a Contracting Party and an Investor of another Contracting Party, as provided in Article 8.1 of the BIT (jurisdiction ratione personae). Claimant will demonstrate the fulfillment of these requirements respectively, emphasizing more on the element of jurisdiction ratione materiae, as it has been the one mainly challenged by the Respondent. I.1. The Tribunal has jurisdiction ratione materiae 6. As previously established, for the Tribunal to have jurisdiction ratione materiae the dispute must be a legal dispute in connection with an investment within the terms of Article 8.1 of the BIT. 7. Regarding the first element of this rule, i.e. the "legal" nature of the dispute, previous tribunals have defined this concept in general terms as referring to "disputes regarding the existence or scope of a legal right or obligation, or to disputes regarding the nature or extent of the reparation to be made for the breach of a legal obligation". 27 8. Claimant submits that the aim of this dispute is to remedy the impairment of Claimant's rights as a foreign investor in Dagobah under the terms of the BIT. Claimant considers that the actions taken by the Government of Dagobah's throughout the process of restructuring its sovereign debt are in breach of the Fair and Equitable standard of treatment to which Claimant is entitled to under the BIT. 9. Furthermore, the record demonstrates that the actions that have triggered this dispute constitute sovereign acts of a State fully attributable to Dagobah under Public International Law 28, and therefore Dagobah should be held liable for the breach of its obligations under the BIT. Hence, the dispute presented before the Tribunal at this stage is of a legal nature. 25 Generation Ukraine, 8.10. 26 Douglas, pgs. 144-145. 27 Abaclat Jurisdiction, 255. 28 UF, 17-21. 5

10. These actions constitute direct actions of a State or of a State organ, therefore pursuant to Article 4 of the ILC's Articles on State Responsibility ("ILC Articles") they are attributable to Respondent under customary international law. 29 11. The second element of this rule, i.e. that the legal dispute has arisen "in connection with an investment", will be the main point of discussion in this section of Claimant's submission. 12. Claimant submits that the present dispute has arisen "in connection with an investment" on the basis of four main arguments. First, Claimant asserts that the bonds acquired from the Government of Dagobah qualify as investments under Article 1 of the BIT. Second, Claimant considers that the bonds at issue not only qualify as investments under Article 1 of the BIT, but also satisfy the essential requirements for an investment to exist under International Investment Law, as developed by numerous arbitral decisions on the matter. Third, Claimant considers that the bonds at issue have a territorial link with Dagobah. Finally, Claimant submits that the bonds at issue have already been recognized as investments under Article 1 of the BIT by the PCA Decision 30 which is legally binding for Dagobah and Corellia. However, given the specific objections raised by Respondent in relation to the applicability of the PCA Decision, Claimant will address this issue as a separate matter in this first section, before analyzing the admissibility of the claims. a. The sovereign bonds qualify as "investments" under Article 1 of the BIT 13. Article 1 of the BIT defines investment as: "every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk." 14. For the Tribunal to determine if the sovereign bonds acquired by Claimant qualify as investments under this provision the first step that must be taken consists in clarifying the meaning and scope of the provision. For this undertaking the Tribunal must have recourse to the customary rules of interpretation of public international law. It has been a recurrent practice of arbitration tribunals to rely on Articles 31 and 32 of the Vienna Convention on the Law of Treaties of 1969 ("VCLT") to interpret treaty provisions. 31 Furthermore, Article 8.3 of the BIT clearly establishes that the Tribunal must decide the issues in dispute not 29 ILC Articles, Art. 4.1. 30 UF, 11. 31 Abaclat Jurisdiction, 291. Dolzer and Schreuer, pg. 28. 6

only in accordance with the BIT itself, but with "any other applicable agreements between the parties". According to Clarification 7 in Procedural Order No. 2, both Dagobah and Corellia are parties to the VCLT. Thus, the interpretation rules contained in Articles 31 and 32 of this convention are fully applicable to the present dispute. 15. Article 31 of the VCLT reads as follows: "1. 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." 16. In order to clarify the concept of "investment" under Article 1 of the BIT, the terms of this provision must be read in accordance with the aforementioned rule of interpretation. 17. The ordinary meaning of the terms contained in Article 1 indicates a broad definition of the term "investment". The language chosen by the parties to the BIT when drafting this provision reflects their intention to be comprehensive in the types of interests that could qualify as investments under the BIT and therefore be covered under the BIT's scope of protection. 18. Basically, under Article 1 of the BIT every asset that has the characteristics of an investment (which are mentioned in the provision) and is owned or controlled by an investor qualifies as an investment. Therefore, a two-fold test must be made at this point. First, are the bonds acquired by Claimant assets? Second, do they have the characteristics of an investment? If the answer to these two queries is affirmative, the bonds indeed would be "investments" under Article 1 of the BIT. 19. Regarding the first point, the Oxford English Dictionary defines "asset" as "an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies". 32 20. In Nigel, the Tribunal had to analyze the concepts of "investment" and "asset" under the UK-Czech Republic BIT. Article 1 of this BIT defines "investment" as "every kind of asset belonging to an investor of one Contracting Party in the territory of the other Contracting Party " The Tribunal considered that the terms "asset" and "investment" in Article 1 of the UK-Czech Republic BIT should be considered to refer to rights and claims which have a financial value for the holder. 33 32 Oxford English Dictionary, http://www.oxforddictionaries.com/definition/english/asset 33 Nigel, 300. 7

21. In Abaclat, the Tribunal defined bonds as a type of debt in which an interested party loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at certain interest rates. Furthermore, the Tribunal explained that bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. 34 Therefore, the Tribunal expressly recognized bonds as a specific type of asset. 22. Moreover, the finding of the Tribunal in Abaclat would be in harmony with the reasoning of the Tribunal in Nigel. In this case the Tribunal considered that a claim, as a type of asset, can normally have a financial value only if it appears to be well-founded or at the very least creates a legitimate expectation of performance in the future. 35 Surely, a sovereign bond creates a legitimate expectation of performance in the future, both through the interest and the principal owed by the issuing State to the bondholder. 23. In light of the above we can conclude that the bonds acquired by Claimant qualify as "assets" under Article 1 of the BIT. Therefore, the first step of the analysis is satisfied. 24. The second step of this two-fold analysis consists in determining if the asset at hand has the characteristics of an investment. Article 1 of the BIT sets forth these characteristics, which include i) commitment of capital or other resources, ii) the expectation of gain or profit, or iii) the assumption of risk. The record shows that Claimant acquired the bonds at issue in 2005 through transactions in the secondary market. 36 In order for this purchase to take place, Claimant delivered something in return, either in the form of other financial securities (resources) or monetary funds (capital). Furthermore, the fact that Claimant is a hedge fund necessarily entails that the aim of the transaction through which the bonds were acquired was to obtain a certain margin of profit. Scholars on this subject have identified the search for "high financial profits" as one of the major factors that turned hedge funds into major players in modern financial markets. 37 Finally, we can also conclude that Claimant assumed risks when purchasing the bonds. The main risk assumed by Claimant was the possibility of default by the issuing State, which pursuant to the record muted from a possibility into a reality in the case Dagobah. For these reasons, we can conclude that the 34 Abaclat Jurisdiction, 11. 35 Nigel, 301. 36 Clarification No. 11. 37 Greenspan, pg. 370. 8

bonds acquired by Claimant are assets that have the characteristics of an investment under Article 1 of the BIT. 25. The second sentence of Article 1 of the BIT contains an illustrative list of assets that can be considered as investments under the BIT. However, Respondent alleges that the absence of sovereign bonds in the illustrative list contained in the second sentence of Article 1 indicates that "such transactions, which are mere promises to pay, of a commercial nature, are within its scope". 38 Claimant considers that this affirmation not only disregards the express language of Article 1 of the BIT, but also the intention of the Parties to the BIT. 26. The second part of the provision reads as follows: "Forms that an investment may take include: i. an enterprise; ii. shares, stock, and other forms of equity participation in an enterprise; iii. turnkey, construction, management, production, concession, revenuesharing, and other similar contracts; iv. intellectual property rights; v. licenses, authorizations, permits, and similar rights conferred pursuant to domestic law; vi. other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges." 27. As it can be observed, the list is of a non-exhaustive nature, intending merely to illustrate what types of assets would qualify as investments. A list of a similar nature can be found in Article 1 of the Argentina-Italy BIT. In Abaclat, when the Tribunal faced the issue of whether the sovereign bonds issued by Argentina and acquired by the claimants qualified as investments under said BIT, it expressly recognized that as Article 1(1) of the Argentina-Italy BIT included a list that covered an extremely wide range of investments and used a broad wording, it could not be concluded that the definition of investment provided for in said provision was drafted in a restrictive way. 39 The same conclusion can be reached in the present case in relation to Article 1 of the BIT. 28. In Nigel, the Tribunal recognized that the examples illustrated in the subparagraphs of Article 1 of the UK-Czech Republic BIT assist in shedding light on the meaning of "asset" and "investment" in that provision, as they all seem to relate to rights or claims that have a 38 Answer to the Request for Arbitration, 4. 39 Abaclat Jurisdiction, 354. 9

financial value. 40 Therefore, the Tribunal should rely on the second sentence of Article 1 of the BIT to further clarify the concept of "investment", not to restrict its scope. 29. Moreover, Article 1 of the BIT cannot be read only considering the ordinary meaning of its terms. The context of the provision together with the object and purpose of the treaty must be taken into consideration. The International Law Commission has emphasized that the process of treaty interpretation is a unity, and therefore the provisions of VCLT Article 31 form a single, closely integrated rule. 41 The Tribunal in Abaclat also followed this approach by referring to the object and purpose of the Argentina-Italy BIT to confirm its broad lecture of the term "investment" in the Argentina-Italy BIT. 42 30. The Tribunal can identify the primary object and purpose of the treaty by relying on the preamble of the agreement. 43 The preamble of the BIT expressly recognizes that promoting economic co-operation, stimulating economic development and the flow of private capital are explicit objectives of the BIT. 44 These set of objectives can be better pursued by adopting a comprehensive approach to the types of interests and assets that would be covered by the agreement and its scope of protection. For this reason, the object and purpose of the BIT reaffirms what can be concluded from the express wording of Article 1 and its context; every asset that satisfies the requirements of an investment will fall under the scope of protection of the BIT. Just as in Abaclat, Article 1 of the BIT does not reflect an intention of the Parties to adopt a restrictive approach with regard to what kind of activity or dealing was meant to qualify as an investment. 45 31. In light of the foregoing arguments, it can be concluded that under the customary rules of treaty interpretation embedded in VCLT Article 31, the bonds at issue qualify as investments under Article 1 of the BIT. 40 Nigel, 299. 41 Sinclair, pg. 116. 42 Abaclat Jurisdiction, 354 43 Dolzer and Schreuer, pg. 29. 44 BIT, Preamble. 45 Abaclat Jurisdiction, 354. 10

b. The sovereign bonds satisfy the general notion of "investment" in International Investment Law 32. The concept of "investment" has been the subject of much debate in International Investment Law. 46 While most BIT's contain their own definition of "investment", there is no single, universal definition of investment that is unanimously accepted. The ICSID Convention, namely the most-widely accepted legal instrument in relation to the protection of international investment, does not contain a definition of "investment". Article 25(1) of the ICSID Convention only declares that "the jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment " 47 However, the Convention fails to define what an investment is. This absence of a definition of "investment" in Article 25(1) of the ICSID Convention triggered the necessity for ICSID Tribunals to elaborate on the notion of "investment" under this provision, as this was a necessary step in the process of determining their own jurisdiction in the disputes brought forward by claimants from ICSID contracting parties. As a consequence, the case law produced by arbitration tribunals has yielded a series of criteria that today can generally be considered in order to determine if there is an investment or not. 33. It must be emphasized that these criteria have emerged mainly by the practice of ICSID tribunals of defining the notion of "investment" under Article 25(1) ICSID in order to determine their own jurisdiction ratione materiae. Such analysis is not a responsibility of the Tribunal in this dispute, as it is not governed by the ICSID Convention. Under the SCC Rules there is no provision such as Article 25(1) ICSID which defines the general jurisdiction ratione materiae of arbitration tribunals. Consequently, if the sovereign bonds acquired by Claimant satisfy the requirements of Article 1 of the BIT, and the dispute is a "legal dispute between an investor of one Party and the other Party in connection with an investment" in the sense of Article 8, the Tribunal has jurisdiction ratione materiae. 34. Notwithstanding the above, Respondent could rely on the Romak case and allege that that the term "investments" under the BIT has an inherent meaning, irrespective of whether a dispute is governed by ICSID, UNCITRAL or SCC Rules. 48 Furthermore, Respondent could allege that in order for the bonds to qualify as "investments" under International 46 Dolzer and Schreuer, pg. 65. 47 ICSID Convention, Art. 25 (1). 48 Romak, 180 and 207, Abaclat Jurisdiction, 370-371. 11

Investment Law they must satisfy the criteria set forth in Salini, also referred to as the Salini test. Claimant will now demonstrate why Respondent cannot succeed on either of these allegations. 35. In Romak, the Tribunal identified three elements that give an investment its "inherent meaning". These requirements are i) a contribution, ii) extending over a certain period of time, and iii) which involves some risk. 49 36. In Salini, the Tribunal considered that in order to qualify as an "investment" under Article 25(1) ICSID, an economic transaction should meet certain criteria, which include: (i) a substantial contribution of the investor, (ii) a certain duration, (iii) the existence of an operational risk, (iv) a certain regularity of profit, and (v) a contribution to the economic development of the host State. These criteria came to be known as the Salini factors. 50 As it can be observed, the Salini test encompasses the three requirements set forth in Romak. 37. The previous factors are not rigid and should be assessed on a flexible and pragmatic approach, giving due consideration to the economic reality of the investment at stake. 51 38. In order to determine if the bonds at issue qualified as "investments" under Article 1 of the BIT it was necessary to analyze if they presented the characteristics of an investment mentioned in said provision, namely; i) commitment of capital or other resources, ii) the expectation of gain or profit, or iii) the assumption of risk. Claimant has already demonstrated how the bonds at issue satisfy all these three requirements. Therefore, in order for the bonds to fulfill both the Romak and the Salini criteria, only the requirements of (i) duration and (ii) contribution to the economic development of the host State must be demonstrated. Claimant considers that the bonds also comply with these two requirements, which have been expressly recognized by previous arbitration tribunals. 52 39. Regarding the contribution requirement, tribunals applying this criterion have often indicated a minimum duration of two years for an investment project to have a sufficient duration. 53 In the present case, the record shows that the bonds at issue were acquired in 49 Romak, 180 and 207. 50 Salini v. Morocco, 52. Biwater 312, 314, 316-318. 51 Joy Mining, 50, Mitchell 25; Malaysian Historical Salvors, 55. 52 Salini v. Morocco, 52; Fedax, 43; C.S.O.B, 64. 53 Salini v. Morrocco, 54, MHS, 111. 12

2005 by Claimant in the secondary market, and they had a maturity of 12 years. 54 Therefore, the minimum duration requirement is substantially met by the bonds. 40. Regarding the contribution to the economic development of the host State, it must be noted that a process of purchase of sovereign bonds necessarily entails a contribution to the economic development of the issuing State. The Tribunal in Abaclat had to solve exactly the same question; does the purchase of sovereign bonds by a foreign investor contribute to the economic development of the issuing State? The Tribunal answered the question categorically by affirming that there was no doubt that the funds generated through the bonds issuance process were ultimately made available to Argentina (the debtor and host State), and served to finance Argentina s economic development. 41. Furthermore, the Tribunal expressly affirmed that the destination given by Argentina to the funds was irrelevant, considering that ultimately the funds were used by Argentina to manage its finances, and as such must they must be considered to have contributed to Argentina s economic development. 55 In addition, the record clearly indicates that the funds derived from the bonds became part of Respondent's general budget. 56 Following this reasoning, it can be concluded that the bonds at issue in the present case also fulfill the last element of the Salini test. 42. In light of the above, it has been demonstrated that the bonds acquired by Claimant not only qualify as investments under Article 1 of the BIT, but also satisfy the requirements set forth in Romak and Salini. Hence, Respondent has no valid grounds to dispute the nature of the bonds as "investments". c. The bonds have a territorial link with Dagobah 43. The record shows that Respondent has also challenged the Tribunal's jurisdiction ratione materiae on the basis of an alleged lack of territorial link between the bonds at issue and Dagobah. 57 Claimant considers that such an affirmation ignores the fundamental principles on which financial markets operate and thus lacks any technical grounds. 44. The determination of the place in which the investments were made depends on the nature of the investment. In the present case, the investment at issue is of a financial nature. 54 Clarifications No. 11 and 14. 55 Abaclat Jurisdiction, 378. 56 Clarification No. 30. 57 Answer to the Request for Arbitration, 5. 13

Therefore, the criteria that must be taken into account by the Tribunal to determine the place in which the investments were made is where and for the benefit of whom have the funds been used ultimately. The place from which the funds were transferred is not relevant for investments of a financial nature. 58 The relevant question that must be addressed is whether the funds were ultimately placed at Dagobah's disposal or not. 59 45. Clarification 11 of Procedural Order No. 2 indicates that Claimant acquired the bonds at issue in the secondary market in 2005. However, Respondent cannot rely on the fact that the bonds were purchased in the secondary market in order to question the territorial link between the bonds and Dagobah. As established in Abaclat, this argument would ignore the reality of the bond issuance process. 60 46. The Tribunal in Abaclat explained thoroughly a bond issuance process: "The process of issuing new bonds involves a chain of sales in order to achieve distribution of the issued bonds to the final investor. The bond issuer enters into an agreement with a group of banks, which undertake to subscribe to and purchase a bond. These banks, commonly referred to as the "Subscribers" or "Lead Managers", then organize together with other banks, the so-called "Underwriters" or "Co-Managers", a syndicate. The members of this syndicate jointly referred to as the "Participants", each underwrite differing parts of this bond, depending on their status in the syndicate. These Participants then distribute their specific part of the bond to further "Intermediaries", such as commercial banks, pension funds and other financial institutions, which in turn may or may not distribute their own part to their clients, including individual investors. Thus, the purpose of the subscribers, underwriters and intermediaries is to act as a distribution conduit." 61 47. As mentioned previously, the record also indicates that the funds derived from the bonds became part of Respondent's general budget. 62 Therefore, the fact that the moment in which Claimant acquired the bonds is not simultaneous to the moment in which the Participants delivered the funds to Dagobah does not affect the territorial link of the bonds as investments. In fact, operations such as the one through which Claimant acquired the bonds form the basis on which the Participants decided to engage in the bond issuance 58 Abaclat Jurisdiction, 374. 59 Abaclat Jurisdiction, 374. Fedax, 41. SGS, 136-140). 60 Abaclat Jurisdiction, 376. 61 Abaclat Jurisdiction, 17-18. 62 Clarification No. 30. 14

process. As the Tribunal in Abaclat established, they are part of one and the same economic operation and they make only sense together. 63 48. For the above reasons, the Tribunal must find no merits in Respondent's allegation that the bonds acquired by Claimant lack a territorial link with Dagobah. Hence, as none of the allegations raised by Respondent in relation to the Tribunal's jurisdiction ratione materiae have succeeded, Claimant submits that the Tribunal indeed has jurisdiction. I.2. The Tribunal has juridiction ratione personae 49. Claimant would now like to demonstrate why the Tribunal also has jurisdiction ratione personae. However, Claimant respectfully requests the Tribunal to note that Respondent has raised no challenges to the Tribunal's jurisdiction ratione personae. 50. Under Article 8.1 of the BIT, the jurisdiction of the Tribunal ratione personae extends to disputes between a Contracting Party and an Investor of the other Contracting party. Claimant submits that Claimant is an Investor within the terms of Article 1 of the BIT. 51. The definition of Investor is contained in Article 1 of the BIT. Under this provision the term "investor of a Party" means "a Party or a national of a Party that attempts to make, is making, or has made an investment in the territory of the other party." Subsequently, Article 1 also defines "national of a Party" as "any legal person established in the Territory of one of the Parties in accordance with the respective national legislation." Claimant submits that it complies with the BIT definition of Investor, as it is a national of Corellia that has made an investment in the territory of Dagobah. 52. The record shows as an uncontested fact that Claimant is a hedge fund incorporated in the Corellian Republic. 64 In this sense, Claimant qualifies as a "legal person established in the Territory of one of the Parties". Secondly, Claimant has already demonstrated that the sovereign bonds acquired in the secondary market in 2005 qualify as "investments" under Article 1 of the BIT and generally under International Investment Law. 53. Therefore, it can be concluded that the Tribunal has jurisdiction ratione personae. 63 Abaclat Jurisdiction, 376. 64 UF, 22. 15