FOREIGN DIRECT INVESTMENT INTERNATIONAL MOOT COMPETITION 29 OCTOBER 1 NOVEMBER 2015

TEAM AZEVEDO FOREIGN DIRECT INVESTMENT INTERNATIONAL MOOT COMPETITION 29 OCTOBER 1 NOVEMBER 2015 ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE LONDON COURT OF INTERNATIONAL ARBITRATION Vasiuki LLC (Claimant) v. The Republic of Barancasia (Respondent) MEMORIAL FOR CLAIMANT 19 September 2015

TABLE OF CONTENTS LIST OF LEGAL SOURCES... iii LIST OF AUTHORITIES... viii LIST OF ABBREVIATIONS... x SUMMARY OF FACTS AND ARGUMENT... 1 I. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS AND THE CLAIMS ARE ADMISSIBLE... 5 II. A. Claimant s Projects Meet the BIT s Jurisdictional Requirements... 5 1. Claimant Meets the BIT s Definition of Investor... 5 2. Claimant s Projects Meet the BIT s Definition of Investment... 5 B. Claimant s Claims are Admissible... 7 C. The BIT Is in Force Between the Contracting Parties... 7 1. The Contracting Parties Accession to the EU Did Not Terminate the BIT... 7 2. Respondent Did Not Terminate the BIT Through Its Actions... 11 3. Claimant s Investments Are Protected Even if the BIT Was Terminated... 12 RESPONDENT S ACTIONS BREACHED ITS OBLIGATION TO ACCORD CLAIMANT S INVESTMENT FAIR AND EQUITABLE TREATMENT... 12 III. A. Respondent s Actions Violated the Legitimate Expectations that Formed the Basis of Claimant s Investments... 13 1. Respondent s Actions Violated Claimant s Reasonable and Legitimate Expectations of Stability and Predictability... 13 2. Respondent s Breach of the Stabilization Clause in the LRE Amounted to a FET Violation as a Matter of Law... 16 B. Respondent Did Not Accord Due Process to Claimant and Its Investments... 17 C. Respondent Acted Arbitrarily and Without Transparency... 17 THE DOCTRINE OF NECESSITY DOES NOT RELIEVE RESPONDENT OF ITS TREATY OBLIGATIONS... 18 A. The BIT s Necessity Defense Is Not Applicable... 19 1. The Situation in Barancasia Does Not Qualify as a State of Necessity Under the BIT... 19 2. The State of Necessity Clause in the BIT Is Not Self-Judging... 22 3. Even In a State of Necessity Under the BIT, Restitution or Just and Adequate Compensation is Required... 22 B. The Necessity Defense Under Customary International Law Does Not Apply... 23 C. There Is No Conflict With EU Law that Excuses Respondent From Its Obligations Under the BIT... 25 i

IV. THE TRIBUNAL SHOULD ORDER RESPONDENT TO COMPLY WITH ITS TREATY OBLIGATIONS... 26 A. This Tribunal Should Order Respondent to Rescind the LRE Amendment... 27 1. The Tribunal Has the Power to Order Rescission... 27 2. Ordering Rescission of the LRE Amendment Will Not Unduly Infringe on Respondent s Sovereignty... 29 B. Alternatively, This Tribunal Should Order Respondent to Pay Claimant the Pre-2013 Feed-In Tariff Rate for Twelve Years From the Date of Licensing... 31 V. CLAIMANT IS ENTITLED TO FULL COMPENSATION FOR ITS LOSSES RESULTING FROM RESPONDENT S BREACH OF THE BIT.... 32 A. Claimant Is Entitled to the Net Present Value of the Profits Alfa and Beta Would Have Generated Under a 0.44EUR/kWh Tariff... 33 1. Use of the Income Approach Discounted Cash Flow (DCF) Method Provides the Correct Valuation of Claimant s Losses for Alfa and Beta... 33 2. WACC Is the Correct Discount Rate... 34 B. Claimant Is Entitled to the Net Present Value of the Profits Its Twelve Additional Projects Would Have Generated Under a 0.44EUR/kWh tariff, or the Reliance Expenditures It Made on Land and Equipment... 35 1. Claimant Is Entitled to the Net Present Value of the Profits Its Twelve Additional Projects Would Have Generated Under a 0.44EUR/kWh Tariff... 35 2. Claimant Is Entitled to Compensation for the Reliance Expenditures It Made in Land and Equipment.... 36 C. Claimant Is Entitled to the Fair Market Value of the Lost Business Opportunity for the Follow-On Solar Installations It Planned to Pursue Under the LRE... 37 REQUEST FOR RELIEF... 39 ii

LIST OF LEGAL SOURCES ARBITRAL DECISIONS ADC Al-Bahloul Amco Bayindir Biloune ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No. ARB/03/16, Award (2 October 2006). Mohammad Ammar Al-Bahloul v. Republic of Tajikistan, SCC Case No. V(064/2008), Partial Award on Jurisdiction and Liability (8 June 2010). Amco Asia Corporation, Pan American Development Limited, PT Amco Indonesia v. Republic of Indonesia, ICSID Case No. ARB/81/1, Second Award, (31 May 1990). Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award (27 August 2009). Biloune and Marine Drive Complex Ltd v. Ghana Investments Centre and the Government of Ghana, UNCITRAL, Award on Damages and Costs (30 June 1990). Binder Binder v. Czech Republic, UNCITRAL, Award on Jurisdiction (6 June 2007). CME CMS Continental Casualty Deutsche Bank Duke Energy CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award, (13 September 2001). CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No. ARB/01/8, Award (12 May 2005). Continental Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9, Award (5 September 2008). Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/02, Award (31 October 2012). Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No. ARB/04/19, Award (18 August 2008). Eastern Sugar Eastern Sugar B.V. (Netherlands) v. The Czech Republic, SCC No. 088/2004, Partial Award (27 March 2007). EDF EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award (8 October 2009). Enron, Annulment Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic (30 July 2010). iii

Enron, Jurisdiction EURAM Eureko Gemplus Himpurna Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on Jurisdiction (14 January 2004). European American Investment Bank AG (Austria) [EURAM] v. The Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction (22 October 2012). Eureko B.V. v. The Slovak Republic, PCA Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension (26 October 2010). Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v. The United Mexican States, ICSID Case No. ARB(AF)/04/3, Award (16 June 2010). Himpurna California Energy Ltd. V. PT. PLN, UNCITRAL, Final Award (4 May 1999). Impregilo Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Award (21 June 2011). Lemire, Award Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Award (28 March 2011). Lemire, Liability Joseph C. Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability (21 January 2010). LG&E LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2006). Metalclad Metalclad Corporation v. United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (30 August 2000). Metalpar Micula Middle East Cement Mondev MTD Murphy Oil Metalpar S.A. and Buen Aire S.A. v. The Argentine Republic, ICSID Case No. ARB/03/05, Award on the Merits (6 June 2008). Ioan Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility (24 September 2008). Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award (12 April 2002). Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Final Award (11 October 2002). MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May 2004). Murphy Exploration and Production Company International v. Ecuador, ICSID Case No. ARB/08/4, Award on Jurisdiction (15 December 2010). iv

National Grid National Grid plc v. The Argentine Republic, UNCITRAL, Award (3 November 2008). Occidental Exploration Occidental Exploration and Production Company v. The Republic of Ecuador, LCIA Case No.UN3467, Final Award (1 July 2004). Occidental Petroleum Oostergetel Pantechniki Petrobart Philip Morris Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012). Jan Oostergetel and Theodora Laurentius v. The Slovak Republic, UNCITRAL, Decision on Jurisdiction (30 April 2010). Pantechniki S.A. Contractors & Engineers (Greece) v. The Republic of Albania, ICSID Case No. ARB/07/21, Award (30 July 2009). Petrobart Limited v. The Kyrgyz Republic, SCC Case No. 126/2003, Arbitral Award (29 March 2005). Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Decision on Jurisdiction (2 July 2013). Quiborax Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplun v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction (27 September 2012). Rumeli Telecom Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008). Saipem Salini Sapphire SAUR Saipem S.p.A. v. The People s Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on Jurisdiction and Recommendation on Provisional Measures (21 March 2007). Salini Construttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction (31 July 2001). Sapphire International Petroleums Ltd. v. National Iranian Oil Company, Award (15 March 1963). SAUR International S.A. v. Argentine Republic, ICSID Case No. ARB/04/4, Decision on Jurisdiction and Liability (6 June 2012). SD Myers SD Myers, Inc. v. Canada, UNCITRAL, Partial Award (13 November 2000). Sempra, Annulment Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic s Application for Annulment of the Award (29 June 2010). v

Sempra, Award Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award (28 September 2007). Siemens Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award (17 January 2007). Sistem Suez Tecmed Texaco Total Vivendi I Vivendi II Sistem Mühendislik Inşaat Sanayi ve Ticaret A.Ş. v. Kyrgyz Republic, ICSID Case No. ARB(AF)/06/1, Award (9 September 2009). Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Liability (30 July 2010). Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB (AF)/00/2, Award (29 May 2003). Texaco Overseas Petroleum and California Asiatic Oil Company v. Libyan Arab Republic, Award on the Merits, 17 I.L.M. 1 (1978). Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability (27 December 2010). Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award (21 November 2000). Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award (20 August 2007). INTERNATIONAL COURT CASES Amoco Arrest Warrant Chorzów Factory, Jurisdiction Amoco Int l Fin. Corp. v. Islamic Republic of Iran, Award No. 310-56-3, Iran-US Claims Tribunal (24 July 1987). Case Concerning the Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), Judgment, 2002 I.C.J. 3 (14 February). Case Concerning the Factory at Chorzów (Germany v. Poland), Decision on Jurisdiction, 1927 P.C.I.J. (ser. A) No. 9 (26 July). Chorzów Factory, Case Concerning the Factory at Chorzów (Germany v. Poland), Judgment, 1928 Merits P.C.I.J. (ser. A) No. 17 (13 September). Nicaragua Military and Paramilitary Activities in and Against Nicaragua (Nicaragua v. U.S.), 1986 I.C.J. 14 (27 June). Preah Vihear Temple of Preah Vihear (Cambodia v. Thailand), 1962, I.C.J. 6 (15 June). vi

Rainbow Warrior Case concerning the differences between New Zealand and France concerning the interpretation or application of two agreements, concluded on 9 July 1986 between the two states and which related to the problems arising from the Rainbow Warrior Affair, 30 April 1990, 20 R.I.A.A. 215. TREATIES Argentina-U.S. BIT Argentina-United States Bilateral Investment Treaty (20 October 1994). ICJ United Nations, Statute of the International Court of Justice, 18 April 1946. ICSID Convention Convention on the Settlement of Disputes Between States and Nationals of Other States, opened for signature 18 March 1965 (entered into force 14 October 1966). VCLT Vienna Convention on the Law of Treaties, opened for signature 23 May 1969 (entered into force 27 January 1980). MISCELLANEOUS ICSID Rules ICSID Regulations and Rules (as amended effective 10 April 2006). ILC Articles International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries (2001). LCIA Rules LCIA Arbitration Rules (as revised in 2014). UNCITRAL Rules UNCITRAL Arbitration Rules (as revised in 2010), G.A. Res. 65/22. vii

LIST OF AUTHORITIES BOOKS Dolzer & Schreuer Gray Kinnear Sabahi Rudolf Dolzer & Christoph Schreuer, Principles of International Investment Law (2008). Christine Gray, The Different Forms of Reparation: Restitution, in The Law of International Responsibility (eds. James Crawford, Alain Pellet, and Simon Olleson, 2010). Meg Kinnear, Damages in Investment Arbitration, in Arbitration Under International Investment Agreements (ed. Katia Yannaca-Small, Oxford Press 2010). Borzu Sabahi, Compensation and Restitution in Investor-State Arbitration: Principles and Practice (2011). Schreuer, ICSID Christoph Schreuer et al, The ICSID Convention: A Commentary (2009). Ripinsky Sergey Ripinsky and Kevin Williams, Damages in International Investment Law (2008). ARTICLES Abdala & Spiller Hanson Martinez Manuel A. Abdala, Pablo T. Spiller, Chorzów s Standard Rejuvenated: Assessing Damages in Investment Treaty Arbitrations, 25 JOURNAL OF INT L ARB. 1 (2008). Kenneth Hanson et al, The Dabhol Power Project Settlement, INFRASTRUCTURE JOURNAL (December 2005), http://www.chadbourne.com/files/publication/a5aa1e52-4285-4bb5-87e6-7201123895a0/presentation/publicationattachment/352f8f09-ae96-40fc-a293-720d0b8f0ca8/dabhol_infrastructurejournal12_2005.pdf. Elizabeth A. Martinez, Understanding the Debate Over Necessity: Unanswered Questions and Future Implications of Annulments in the Argentine Gas Cases, 23 DUKE J. OF COMP. & INT L LAW 149 (2012). Schreuer, FET Christoph Schreuer, Fair and Equitable Treatment in Arbitral Practice, 6 J. WORLD INV. & TRADE 357 (2005). Schreuer, Remedies Christoph Schreuer, Non-Pecuniary Remedies in ICSID Arbitration, 20 ARB. INT L 325 (2004). viii

Thomson Douglas Thomson, EDF Wins Claim Against Hungary, GLOBAL ARBITRATION REVIEW (December 2014), http://globalarbitrationreview.com/news/article/33251/edf-wins-claim-againsthungary/. MISCELLANEOUS EC Press Release Commission asks Member States to terminate their intra-eu bilateral investment treaties, European Commission Press Release (18 June 2005), europa.eu/rapid/press-release_ip-15-5198_en.htm. UNIDROIT Principles UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS (2010). World Bank Guidelines Guidelines on the Treatment of Foreign Direct Investment in World Bank, Legal Framework for the Treatment of Foreign Investment: Report to the Development Committee and Guidelines on the Treatment of Foreign Direct Investment, Volume II (Washington, D.C.: World Bank, 1992). ix

LIST OF ABBREVIATIONS / Paragraph(s) Facts Uncontested Facts ICJ International Court of Justice ICSID International Centre for Settlement of Investment Disputes ILC International Law Commission p. / pp. Page / Pages PCA Permanent Court of Arbitration PCIJ Permanent Court of International Justice PO Procedural Order R Record RA Request for Arbitration UNCITRAL United National Commission on International Trade Law x

SUMMARY OF FACTS AND ARGUMENT 1. The present dispute arises from an Agreement for the Promotion and Reciprocal Protection of Investments (the BIT ) entered into on 31 December 1998 between the Republic of Barancasia ( Barancasia or Respondent ) and the Federal Republic of Cogitatia ( Cogitatia ). 1 Respondent concluded the BIT to attract foreign investment, but breached it by failing to honor its obligation to accord fair and equitable treatment to Vasiuki LLC ( Vasiuki or Claimant ), a Cogitatian energy company that made extensive investments in Respondent s territory. 2 2. Claimant qualifies as an investor under the terms of the BIT and its renewable energy projects in Barancasia are qualified investments. Although Respondent suggests otherwise, the BIT remains in effect. It was guaranteed to be in effect until 1 August 2012, and was not terminated with the required written notice after that date. 3 Nor did either Party s subsequent accession to the European Union ( EU ) terminate the BIT. Regardless, Claimant s investments are protected under the BIT until 2023, ten years after the earliest possible date of termination. 4 3. In 2004, Respondent acceded to the EU. In May 2010, Respondent adopted the Law on Renewable Energy ( LRE ) to encourage the development of renewable energy technology and improve the security of the energy supply in Respondent s territory. 5 The LRE provided that feed-in tariffs for licensees would be calculated using a multitude of factors, including variable costs of operation... [and] their variation over the useful life of power plants, 6 and fixed for a period of 12 years. 7 On 1 July 2010, Respondent s national energy regulator, the Barancasia Energy Authority ( BEA ) announced publicly the twelve-year fixed feed-in tariff of 0.44EUR/kWh. 8 4. From 2007 onwards, Claimant developed renewable energy projects in Respondent s territory while monitoring the regulatory environment. 9 In May 2009, Claimant launched its first 1 Facts 1, R-20. 2 BIT Preamble, R-25. 3 BIT Art. 13(2), R-31. 4 BIT Art. 13(3), R-31. 5 Facts 14, R-21. 6 Annex 3 Art. 2(5), R-34. 7 Facts 16 17, R-22. 8 Facts 21, R-22. 9 Facts 8, R-21. 1

solar project, Alfa, which was connected to Respondent s electrical grid on 1 January 2010. 10 In reliance on the LRE s guaranteed twelve-year fixed feed-in tariff of 0.44EUR/kWH, Claimant decided to continue investing in Respondent s renewable energy sector. On 25 August 2010, Claimant applied for a BEA license for the Alfa project, which was arbitrarily denied. 11 On that same date, Claimant was granted a BEA license with the guaranteed 0.44EUR/kWh feed-in tariff for its second solar project, Beta. 12 Beta became operational on 30 January 2011. 13 In furtherance of its investment, Claimant borrowed substantial sums of money, bought land plots in Barancasia, and invested heavily in new equipment. 14 5. In 2011, new technology emerged that reduced manufacturing and development costs for photovoltaic projects. 15 Claimant developed twelve additional projects in Barancasia using the new technology, and on 1 July 2012, the BEA granted Claimant all twelve licenses with the guaranteed 0.44EUR/kWh rate. 16 Claimant thus had a total of 14 projects in Respondent s renewable energy sector, which individually and jointly constitute investment in Respondent s territory. 6. The BEA also granted around 6,000 licenses to other producers as late as 3 January 2013, 17 even though officials and some domestic groups complained that the LRE was creating a solar bubble and had privileged producers starting in early 2012. 18 7. In June 2012, Respondent faced teachers strikes and projected that it might face budgetary difficulties in the future. 19 Allegedly in response to these occurrences, and despite a complete lack of evidence that any problems were escalating, Respondent made the unilateral decision to renege on its guarantees to investors under the LRE through a nontransparent and biased process. In November 2012, the Barancasian Parliament conducted private hearings with select industry representatives, excluding Claimant, and on 3 January 2013 Respondent adopted the Law on the Amendment of Article 4 of the LRE ( LRE Amendment ), replacing the 10 Facts 12 13, R-21. 11 Facts 22, R-22. 12 Facts 23, R-22. 13 Facts 23, R-22. 14 Facts 27, R-23. 15 Facts 25, R-23. 16 Facts 33, R-24. 17 PO2 13, R-58. 18 Facts 28, 29, 32, R-23 24. 19 Facts 32, R-24. 2

original twelve-year feed-in tariffs with annually renewable rates. 20 Without any explanation for the new rate, and without any open consultation with Claimant an affected investor the BEA then calculated and announced a new feed-in tariff of 0.15EUR/kWh, with retroactive application from 1 January 2013. 21 By then, Claimant had made significant investments in land, personnel, and equipment in reliance on the original LRE and the licenses it had obtained from Respondent pursuant thereto. 22 8. These actions violated Respondent s obligation under the BIT to accord fair and equitable ( FET ) treatment to Claimant s investments. Respondent lured investors like Claimant with the promise of predictable returns on investments, and then unilaterally modified its obligations in violation of Claimant s legitimate expectations and rights to due process, transparency, and nonarbitrary treatment. 9. Respondent s illegal actions do not qualify for the defense of necessity. Respondent merely faced teachers strikes and projected budgetary difficulties that had not yet even materialized. 23 Such mundane occurrences do not constitute the type of emergency situation that the BIT requires for a Party to claim necessity. The customary international law ( CIL ) doctrine of necessity also does not apply. Respondent s decision to respond to teachers strikes and potential future budgetary difficulties by unilaterally amending the LRE, which Respondent itself had enacted and pursuant to which Respondent issued licenses to investors with the twelveyear fixed feed-in tariff, was not the only way for Respondent to safeguard itself against perceived peril. Even assuming there was an actual peril, Respondent itself created it. In addition, Respondent cannot rely on its energy objectives and EU obligations to derogate from its BIT obligations because any alleged conflict with EU law is entirely speculative. 10. Even if a state of necessity existed, Respondent is obligated to provide restitution to Claimant. Respondent should be ordered to rescind the LRE Amendment or to pay Claimant the tariff rate guaranteed by the LRE and the licenses that Respondent approved as late as 2012. Ordering specific performance of Respondent s international law obligations is expressly within the powers of this Tribunal under the terms of the BIT, customary international law, and the 20 Facts 34, R-24. 21 Facts 35, R-24. 22 Facts 36, R-24. 23 Facts 29, 32, R-23 24. 3

LCIA rules, and is the most appropriate remedy to place Claimant in the position it would have been had the breach not occurred. If the Tribunal declines to award specific performance, it should order Respondent to pay Claimant 2,437,217EUR in compensation. This represents the total of the net present value of the profits that Claimant s investments would have generated under the promised 0.44EUR/kWh tariff had Respondent not breached its obligations under the BIT, as well as the fair market value of Claimant s lost business opportunities. 4

ARGUMENTS I. THE TRIBUNAL HAS JURISDICTION OVER THE CLAIMS AND THE CLAIMS ARE ADMISSIBLE 11. This Tribunal has jurisdiction over Claimant s claims for three reasons: (A) Claimant s projects meet the BIT s jurisdictional requirements, (B) Claimant s claims are admissible, and (C) the BIT is in force between Respondent and Cogitatia ( the Contracting Parties ). A. Claimant s Projects Meet the BIT s Jurisdictional Requirements 12. Respondent has consented to binding arbitration pursuant to Article 8 of the BIT, which grants this Tribunal jurisdiction over [a]ny dispute which may arise between an investor of one Contracting Party and the other Contracting Party in connection with an investment in the territory of that other Contracting Party. Claimant s claims meet the jurisdictional prerequisites under Article 1 of the BIT: (1) Claimant qualifies as an investor, and (2) Claimant s projects qualify as investments. 1. Claimant Meets the BIT s Definition of Investor 13. Article 1(2) of the BIT provides that an investor must (i) be a natural or legal person, (ii) of one Contracting Party, who (iii) invests in the territory of the other Contracting Party. Claimant meets this rationae personae jurisdictional requirement. 14. Claimant is a legal person of Cogitatia, a Contracting Party. Claimant fulfills the requirements of Article 1(2)(b) because it is both incorporated in Cogitatia 24 and seated there, as its headquarters are located there. Claimant s projects constitute investments in Respondent s territory, as explained below. 2. Claimant s Projects Meet the BIT s Definition of Investment 15. Article 1(1) defines an investment as compris[ing] every kind of asset invested in connection with economic activities by an investor of one Contracting Party in the territory of the other Contracting Party in accordance with the laws and regulations of the latter. 25 Given the broad language of Article 1(1) ( every kind of asset ), it is clear that the Parties intended an expansive definition of investment. Claimant s photovoltaic projects fall within this definition: the constituent turbines, solar panels, and other possessions are assets, and these assets were 24 Facts 3, R-20. 25 BIT Art. 1(1), R-25. 5

invested for the development of renewable energy undoubtedly an economic activity. Additionally, as the projects were physically established within Respondent s territory, they clearly meet the territoriality requirement. Claimant therefore meets the rationae materiae jurisdictional requirement. 16. Consistent with the Vienna Convention on the Law of Treaties ( VCLT ), which governs treaty interpretation for Respondent and Cogitatia, 26 the BIT should be read to encompass the ordinary meaning of the term investment (in accordance with the BIT s object and purpose to protect investments), which includes the development and operation of energy infrastructure. 27 Energy production and transmission projects are a common form of investment, and have repeatedly been found to fall within the scope of investment treaties. 28 If the Contracting Parties intended to exclude energy projects from the range of covered investments, they would have included explicit language to that effect. 17. Though not required, Claimant s projects also meet other international law definitions of investment. The Salini tribunal introduced a well-known list of typical hallmarks of investments: (1) financial contribution, (2) duration, (3) risk, (4) regular profit and return, and (5) contribution to the host state s development. 29 Although some tribunals prefer a less formulaic approach, 30 Claimant s projects satisfy all five criteria. 18. First, Claimant invested significant capital in developing the farms, turbines, and transmission infrastructure necessary to develop energy and transmit it to Respondent s energy grid. Second, Claimant has operated photovoltaic projects in Respondent s territory for over five years, beginning in 2009 and expanding under the LRE regime. 31 Other tribunals have found the duration requirement to be met by investments of much shorter length. 32 Third, Claimant incurred significant expense in developing infrastructure up front for long-term investment, an element that multiple tribunals have observed entails substantial risk. 33 Fourth, Claimant s 26 PO2 5, R-58. 27 VCLT Art. 30(1). 28 Al-Bahloul 140; Petrobart pp.68 72. 29 Salini 52. 30 Philip Morris 204-06; Pantechniki 36. 31 Facts 12, 13, 23, 27, R-21 23. 32 Deutsche Bank 303 04 (12 months); Quiborax 234 (3 years). 33 Saipem 109; Salini 56. 6

projects were to receive regular and predictable returns through Respondent s guaranteed tariff. 34 Finally, Claimant s production and transmission of renewable energy contributed to meeting Respondent s climate and energy targets. 35 B. Claimant s Claims are Admissible 19. Article 8(1) of the BIT requires investors and Contracting Parties to resolve disputes by negotiation if possible, but Article 8(2) allows a party to submit a claim if a dispute is not settled six months from the written notification of a claim. 36 Claimant notified Respondent of its claims on 20 April 2014, through correspondence with three of Respondent s authorities: the Ministry of Foreign Affairs, the Ministry of Economics, and the BEA. 37 In that correspondence, Claimant stated that it would not resort to legal remedies if the disputes could be resolved through other means. Respondent refused to negotiate, and did not indicate any willingness to resolve the dispute. 38 Claimant then waited over six months before commencing the arbitration, filing its Request on 2 November 2014. Claimant s claims are therefore admissible and ripe for arbitration. C. The BIT Is in Force Between the Contracting Parties 20. Respondent suggests that the Tribunal lacks jurisdiction because the BIT is terminated. 39 This is incorrect, because: (1) the Contracting Parties accession to the EU did not displace the BIT, (2) Respondent s actions did not terminate the BIT, and (3) regardless, the BIT s protections still apply to Claimant s investments. 1. The Contracting Parties Accession to the EU Did Not Terminate the BIT 21. Claimant s and Respondent s accession to the EU did not terminate the BIT for three reasons. First, the European Commission ( EC ) has acknowledged that EU accession does not result in automatic termination of intra-eu BITs. Second, the circumstances underlying these proceedings do not fulfill the requirements for treaty termination. Third, the BIT does not violate Article 207 of the Treaty on the Functioning of the European Union ( EU Treaty ). 34 Facts 21, R-22. 35 Facts 7 8, R-20 21. 36 BIT Art. 8, R-29. 37 RA, R-4. 38 RA, R-4. 39 Response to RA, R-11. 7

22. First, accession of the Contracting Parties to the EU does not automatically terminate the BIT. The EC has acknowledged that EU accession does not terminate a BIT without notification and proper termination procedures neither of which was present here. In the 2004 Eureko proceedings, the EC s legal expert opined that EU accession renders intra-eu BITs obsolete, but that the parties must notify each other that they agree on this point. 40 In 2006, the EC clarified that intra-eu BITs are not automatically terminated upon accession. It stated: [T]he effective prevalence of the EU acquis does not entail, at the same time, the automatic termination of the concerned BITs or, necessarily, the non-application of all their provisions.... [T]o terminate these agreements, Member States would have to strictly follow the relevant procedure provided for this in regard in the agreements themselves. 41 The EC has repeatedly called for its members to terminate their intra-eu BITs and in June 2015, the EC initiated proceedings against five member states in an attempt to convince them to terminate their BITs. 42 By repeatedly recognizing the need for member states to affirmatively terminate their BITs, the EC has shown that EU accession does not automatically terminate intra- EU BITs. 43 23. Second, the Contracting Parties EU accession does not terminate the BIT under the terms of the VCLT. The VCLT provides for automatic treaty termination in only two scenarios, both of which require incompatibility. 24. Article 59 addresses situations where a later treaty is entirely incompatible with an earlier treaty, and the earlier treaty cannot be enforced at all. It provides that: A treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject-matter and: (a) it appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or (b) the provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time. 44 40 Eureko 90. 41 Eastern Sugar 119. 42 EC Press Release. 43 EURAM 208; Binder 64. 44 VCLT Art. 59. 8

25. Article 30(3), which states that it governs successive treaties with the same subject matter, provides that [w]hen all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under Article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the latter treaty. 45 26. Neither Article 59 nor Article 30 applies here. First, both Article 59 and Article 30 permit termination only where the later treaty relates to the same subject matter. The EU Treaty and the BIT do not cover the same subject matter. The tribunal in Oostergetel explained that, as the objective of the EU Treaty (unified state functioning) and the objective of a BIT (investment protection) differ, the treaties cannot be considered to relate to the same subject matter. 46 The EURAM tribunal arrived at the same conclusion, only differing in finding the EU s objective to be the creation of an internal market. 47 The Oostergetel and Eastern Sugar tribunals also explained that the significant differences between the investment protections in the EU Treaty and the relevant BITs in those cases foreclosed the conclusion that the treaties covered the same subject matter. 48 In particular, both tribunals highlighted that the EU Treaty does not provide for an investor-state dispute mechanism while the BITs in question did. 49 27. Furthermore, the BIT and the EU Treaty are neither entirely (Article 59), nor partially (Article 30(3)) incompatible. The EU legal regime has existed alongside bilateral investment treaty regimes in various member states for many years, and none of the provisions relevant to this dispute are in conflict with the EU Treaty. No specific provision of the EU Treaty interferes with protections to Claimant s investments under Articles 10 (simultaneous applicability of multiple treaties), 12 (applicability of the BIT), and 13 (entry into force and termination) of the BIT. Article 8 of the BIT, which provides for arbitration of investor-state disputes, similarly does not conflict with the EU Treaty. There is no evidence that the Contracting Parties intended the EU Treaty, rather than the BIT, to govern investments by their nationals. Indeed, the EURAM tribunal concluded that the arbitration provision in the relevant BIT in that case was not in conflict with the EU Treaty, because the EU Treaty did not provide for investor-state dispute 45 VCLT Art. 30(3). 46 Oostergetel 75. 47 EURAM 178. 48 Oostergetel 77; Eastern Sugar 160. 49 Oostergetel 77; Eastern Sugar 164 66. 9

settlement. 50 Finally, as the Binder and EURAM tribunals explained in a similar context, the EU Treaty does not conflict with Respondent s obligation to compensate investors in accordance with Articles 4 (compensation) and 5 (expropriation) of the BIT. 51 28. Moreover, Article 10(1) of the BIT explicitly envisages situations where a matter is governed simultaneously both by this Agreement and by another international agreement to which both Contracting Parties are parties. This is precisely the situation in the present dispute. Article 10 of the BIT provides that where another set of international rules binds the Contracting Parties, investors may take advantage of whichever set of rules is more favorable to them. Analyzing a similar provision, the EURAM tribunal concluded that the parties intended that future treaties between them would complement the States Parties rights and obligations, and not that such treaties would replace provisions in the BIT. 52 29. Third, the BIT is in no way inconsistent with Article 207 of the EU Treaty. Article 207(1) calls for uniform principles for commercial aspects of foreign investment, while Article 207(2) states that the EU common commercial policy is to be determined by the European institutions. Given the emphasis on commercial elements, the BIT does not fall within the scope of 207(1) or 207(2). As a legal agreement between states, the BIT relates to sovereign elements of foreign investment (for example, Respondent s regulatory decision to adjust the tariff) rather than commercial ones. Nor does the BIT conflict with Article 207(3), which provides that [w]here agreements with one or more third countries or international organisations need to be negotiated and concluded, the European institutions must act according to certain enumerated procedures. This provision does not apply to agreements between Cogitatia and Barancasia, both of which are EU member states and not third countries. Moreover, Article 207 is silent as to agreements already concluded at the time of ratification. The BIT is therefore not inconsistent with Article 207 of the EU Treaty, nor with any other provision. 30. In light of the VCLT requirements, all five tribunals that have considered the impact of EU accession on BIT validity have held that accession does not automatically terminate a BIT. Each of these tribunals has found that that the relevant BIT was compatible with the EU Treaty, 50 EURAM 255 67. 51 EURAM 279; Binder 63 65. 52 EURAM 196. 10

deciding that both regimes applied simultaneously. There is no reason for a different finding here. 2. Respondent Did Not Terminate the BIT Through Its Actions 31. In June 2007, Respondent notified Cogitatia of its intent to terminate the BIT, but this notification did not comply with the BIT s requirements for termination. Respondent s notification was ineffective under Article 13(2), which provides: This Agreement shall remain in force for a period of ten years. Thereafter, it shall remain in force until the expiration of a twelve month period from the date either Contracting Party notifies the other in writing of its intention to terminate the Agreement. In accordance with Article 13(1), the BIT entered into force on 1 August 2002, the date of the final written notification through diplomatic channels of the fulfillment of procedures to bring the BIT into force. The BIT thus applied until at least August 2012. After that ten-year period, the BIT remains in force until twelve months after a Contracting Party provides written notification of termination to the other Contracting Party. The presence of the term [t]hereafter in Article 13(2) confirms that notification (and therefore termination) is not possible during the initial ten-year period. Respondent s attempt to terminate the BIT violated Article 13, and was therefore ineffective. 53 32. The BIT also does not provide that written notification of termination before the expiration of the ten-year period would take effect at the end of the initial ten years, so Respondent s supposed notice of termination did not automatically become an effective termination in 2012. Cogitatia s indication that it received Respondent s notification had no effect; it simply acknowledged receipt but did not approve early termination in 2008 or any other adjustment to Article 13 s termination process. 54 Similarly, Respondent s informal contact with Cogitatia regarding termination did not terminate the BIT. The most recent communication was in 2010, more than a year before the end of the initial ten years. 55 As Respondent failed to properly terminate the BIT, the BIT remains in force. 53 Annex 5, 6, 7.1, R-36 39. 54 Annex 7.2, R-40. 55 Facts 24 25, R-22 23. 11

3. Claimant s Investments Are Protected Even if the BIT Was Terminated 33. Even if Respondent s notification took effect on 1 August 2012 (upon the conclusion of the ten-year period), the protections of the BIT still apply to Claimant s investments by virtue of the sunset clause in Article 13(3). Article 13(3) provides that, for investments made prior to its termination, the BIT remains in force for ten years from termination. This means that even if the BIT was terminated in August 2013 (one year after notification on 1 August 2012), its protections continue to apply to Claimant s investments until 2023. All of Claimant s projects in Respondent s territory began between 2009 and July 2012. 56 As the BIT remained in effect until at least August 2013, all the investments were made before the earliest possible termination date of the BIT. Similarly, the license denial took place in 2010 and the tariff revisions in 2013, both well within that time frame. The BIT therefore covers Claimant s claims. II. RESPONDENT S ACTIONS BREACHED ITS OBLIGATION TO ACCORD CLAIMANT S INVESTMENT FAIR AND EQUITABLE TREATMENT 34. Respondent failed to accord Claimant s investments fair and equitable treatment as required by the BIT. BIT Article 2(2) provides that [i]nvestments of investors of either Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party. 57 35. By their ordinary meaning, fair and equitable mean impartial, free from prejudice, evenhanded, and just. 58 Past tribunals have read FET clauses with similar language to capture principles of transparency, stability, and protection of investors legitimate expectations; compliance with contractual obligations; procedural propriety and due process; good faith; and freedom from coercion and harassment. 59 Though FET is an inherently flexible standard, violation of any of the above independently constitutes a violation of FET, even in the absence of bad faith. 60 56 RA, R-5. 57 The clause is not qualified by a reference to customary international law, so this is an independent treaty standard that is broader than minimum standard. (Enron 258; Sempra 302; Vivendi II 7.4) Nevertheless, both the autonomous treaty standard and the CIL minimum standard are defined with respect to the same principles, and Respondent s actions violated FET under either standard. 58 Merriam-Webster Dictionary. 59 Schreuer, FET, pp.373 74; Dolzer & Schreuer, pp.133 49; Tecmed 154; MTD 113 44; CMS 274 79. 60 Mondev 116; Siemens 299. 12

36. Taken as a whole, Respondent s actions undoubtedly violated FET. First, Respondent created a regime that guaranteed favorable measures to attract investors to provide critical energy. After investors expended significant capital building energy-generating facilities in Respondent s territory, Respondent unilaterally revoked the very measures on which investors relied when deciding to invest. There are three independent bases for establishing that Respondent s conduct amounted to a FET violation: (A) the violation of Claimant s legitimate expectations, (B) the lack of due process accorded to Claimant, and (C) the arbitrariness and lack of transparency in Respondent s actions. A. Respondent s Actions Violated the Legitimate Expectations that Formed the Basis of Claimant s Investments 37. Respondent s actions must accord with Claimant s reasonable and legitimate expectations when it made the investment. 61 Respondent failed to honor this obligation because: (1) Respondent s actions violated Claimant s reasonable and legitimate expectations of stability and predictability that formed the basis of its decision to invest, and (2) the stability clause in the LRE guaranteeing the feed-in tariff for twelve years provides an independent basis for concluding that Respondent violated Claimant s legitimate expectations as a matter of law. 1. Respondent s Actions Violated Claimant s Reasonable and Legitimate Expectations of Stability and Predictability 38. Through its regulatory framework, Respondent created an expectation of stability and predictable returns in order to induce investment and then, in a classic bait-and-switch maneuver, upended the applicable framework, effectively destroying the value of Claimant s investments. 39. When determining whether a FET provision has been violated, tribunals look to a claimant s expectations at the time it decided to invest. 62 Legitimate expectations may be based on the host state s legal framework, as well as both explicit and implicit representations, or other undertakings made by the host state. 63 While the host state has the right to determine its own legal and economic order, the protection of investors reasonable and legitimate expectations balances state interest with investors need for planning and stability. 64 61 Dolzer & Schreuer, pp.133-149. 62 Bayindir 190 91; LG&E, Liability 127; Duke Energy 340; Occidental Exploration 182 86. 63 Dolzer & Schreuer, p.145. 64 Dolzer & Schreuer, p.146. 13

40. Tribunals have repeatedly found FET violations where investors acted on the basis of an existing law that was changed by the host state after the investment was made. 65 Here, when making its investment, Claimant relied on Respondent s explicit commitment in the LRE to provide a guaranteed feed-in tariff rate for twelve years when making its investment. In CMS, the tribunal found a breach of FET because the claimant relied upon guarantees for price adjustments in legislation and the claimant s license. 66 Similarly, here, the LRE fixed a feed-in tariff rate for a set period of time to lure investment by allowing Claimant to recover high start-up costs in a nascent and volatile industry. The legal and business framework Respondent created gave Claimant an expectation of stability and guaranteed returns on its investments. Respondent s failure to protect those expectations amounts to a violation of FET. 41. While the legitimate expectations standard does not require the state to freeze its regulatory power and the BIT is not a blanket insurance policy, as noted in EDF, stability is implied where the state makes specific promises or representations. 67 The LRE made specific guarantees as to the twelve-year application of the feed-in tariff rate for all licensees. 68 It contains no fallback provisions, adjustments, or contingent rights for unforeseen circumstances. The only qualification for revocation of the measures under the LRE is when electricity generated from renewable sources amounts to 20% or more of gross consumption, 69 which is not the case here. In fact, calculation of the initial tariff rate accounted for variable costs of operation... [and] their variation over the useful life of power plants. 70 Respondent is now trying to correct its own calculation mistake at Claimant s expense. 42. Respondent s continued representations after its domestic troubles began also supported Claimant s expectations. The tribunal in MTD found an FET violation where an agency granted a license contrary to national urban policy, and added that the claimant s FET argument was even 65 CME 611 (the state eviscerated arrangements upon which the claimant relied when making its investment), Tecmed 172 73 (the state replaced unlimited licenses with licenses of a limited duration); LG&E 132 38 (the state abrogated guarantees upon which the claimant relied when making its investment); Occidental Petroleum 526 27 (the state unilaterally modified a contractual clause upon which the claimant relied when making its investment). 66 CMS 275, 281. 67 EDF 216 17. 68 LRE Art. 4, R-32. 69 LRE Art. 2, R-32. 70 Annex 3 Art. 2(5), R-34. 14

stronger if the agency knew of the inconsistency between the policy and the license. 71 Here, the BEA granted twelve additional licenses even after the Government admitted that the program was unsustainable and contrary to public policy. 72 In fact, as late as 3 January 2013, Respondent granted around 6,000 licenses under the original LRE. 73 Claimant s reliance on these affirmative actions was justified. Since the BEA was still granting licenses under the original regime, Claimant reasonably and justifiably expected the promised rate to be delivered, and made substantial investments after receiving licenses. Furthermore, Respondent s officials complained that guaranteed profits for twelve years was a windfall, 74 which indicates they also expected the regime to last for twelve years as promised. 43. Even if a minor modification of the legal framework could have been expected, such an arbitrary wholesale transformation was not. In Occidental Exploration, the tribunal found a FET violation when Ecuador changed the VAT framework under which the claimant was operating, without providing any clarity as to the meaning or scope of the change. 75 Respondent similarly failed to provide any reasoning for why the tariff rate was cut so drastically, by nearly two-thirds of the original guaranteed rate. Even if Claimant could have expected that the tariff rate might be adjusted despite the guarantee in the LRE and Respondent s continued representations, Claimant could not have expected such a drastic and arbitrary reduction. 44. Lastly, EU obligations and good faith do not protect Respondent from a FET violation. In Micula, Romania revoked state aid because it would violate EU limits on such aid, but the tribunal found that Romania still violated FET. 76 Last year, the tribunal in EDF also found that Hungary had violated the Energy Charter Treaty s FET clause when it terminated long-term power purchase agreements because they violated EU state aid rules. 77 In the same vein, EU borrowing limits do not shield Respondent from liability for violating FET under the BIT. Even assuming that Respondent was guided by the best of intentions and acted in good faith, Respondent unpredictably and arbitrarily changed the legal and business framework under which 71 MTD 166. 72 Facts 28 29, 33, R-22 23. 73 PO2 13, R-58. 74 Facts 29, R-23. 75 Occidental Exploration 184 87. 76 Micula 869 70. 77 Thomson. 15

the investment was decided and implemented, and therefore objectively breached the FET standard. 78 2. Respondent s Breach of the Stabilization Clause in the LRE Amounted to a FET Violation as a Matter of Law 45. Respondent s violation of the LRE s stabilization clause is an independent FET violation. Stabilization clauses are defined as: [C]lauses... with the intended effect of freezing a specific host State s legal framework at a certain date, such that the adoption of any changes in the legal regulatory framework of the investment concerned (even by law of general application and without any discriminatory intent by the host State) would be illegal. 79 46. The clause in the LRE that froze the feed-in tariff for twelve years was such a clause. Claimant was allowed to rely on Respondent s domestic law in its expectations as a matter of law, 80 and Respondent s revocation of the stabilization clause amounts to an independent FET violation. 47. The prospective nature of energy investments does not defeat Claimant s position because a claim to stability can be based on the inherently prospective nature of the regulation at issue. 81 As the tribunals in Total S.A. and National Grid held, the entire purpose of regimes such as the one initially guaranteed by Respondent is to encourage and protect long-term investments and operations, and to guarantee that investors can recover operating costs and make a reasonable return over time. 82 Otherwise, states should provide contingent rights in case the relevant framework has to be changed. 83 Respondent changed the regulatory framework in violation of its international law obligations, and failed to provide any contingent rights or fallback measures to lessen Claimant s losses. To the contrary, Respondent enacted the reduced rate retroactively from 1 January 2013. 84 78 Sempra 303 04. 79 Total 101. 80 National Grid 84. 81 Total 122. 82 Total 122; National Grid 176 79. 83 Total 122; National Grid 179. 84 Facts 35, R-24. 16