ICSID Report Vol 6

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ICSID Reports
Volume 6
The ICSID Reports provide the only comprehensive collection of the decisions
of arbitral tribunals and ad hoc committees established under the auspices of the
World Banks International Centre for the Settlement of Investment Disputes. These
decisions make an important contribution to the highly specialized jurisprudence on
international investment. The series also includes arbitration under the Additional
Facility to the icsid Convention which has increased in recent years, most notably in
relation to the North American Free Trade Agreement (nafta). The ICSID Reports
are thus an invaluable tool for practitioners and scholars alike working in the field
of international commercial arbitration. Volume 6 of the ICSID Reports brings the
series substantially up to date and includes the annulment decisions of 5 February
2002 in Wena Hotels Ltd v. Arab Republic of Egypt and of 3 July 2002 in Compana
de Aguas del Aconquija SA and Vivendi Universal v. Argentine Republic; it also
includes the award of 11 October 2002 in Mondev International Ltd v. USA as well
as the award of 9 January 2003 in ADF Group Inc. v. USA.
ICSID REPORTS
Volume
This volume may be cited as: 6 ICSID Reports
ICSID REPORTS
Reports of Cases decided under the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States, 1965
Volume
6
edited
by
JAMES CRAWFORD, SC, FBA
Whewell Professor of International Law,
University of Cambridge
and
KAREN LEE, MA (CANTAB.)
Director of Publications,
Lauterpacht Research Centre for International Law
consulting editor
Sir ELIHU LAUTERPACHT, CBE, QC
Honorary Professor of International Law, University of Cambridge
Bencher of Grays Inn
grotius publications
cambridge university press

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Cambridge University Press
The Edinburgh Building, Cambridge cb2 2ru, UK
Published in the United States of America by Cambridge University Press, New York
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Cambridge University Press 2004
This publication is in copyright. Subject to statutory exception and to the provision of
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without the written permission of Cambridge University Press.
First published in print format 2004
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CONTENTS
Page
Introduction
xi
Editorial Note
xiii
Acknowledgements
xv
Table of Cases Reported in Volume 6
xvi
Table of Cases Reported in Volumes 16
xviii
Digest of Cases Reported in Volume 6
xxiv
CASES
Goetz and Others v. Republic of Burundi (Case No. ARB/95/3)
Award, 10 February 1999
Part 1. Decision on Liability, 2 September 1998
Part 2. The Parties Agreement, 23 December 1998
United Mexican States v. Metalclad Corporation
Judicial Review, Supplementary Reasons for Judgment, Supreme
Court of British Columbia, 31 October 2001
Lemire v. Ukraine (Case No. ARB(AF)/98/1)
Award embodying the Parties Settlement Agreement, 18 September
2000
Wena Hotels Ltd v. Arab Republic of Egypt (Case No. ARB /98/4)
3
5
5
46
52
53
59
60
67
Decision on Jurisdiction, 29 June 1999
74
Award, 8 December 2000
89
Decision on Annulment, 5 February 2002

Olgun v. Republic of Paraguay (Case No. ARB/98/5)
Decision on Jurisdiction, 8 August 2000
vii
129
154
156
viii
CONTENTS
Award, 26 July 2001

Mondev International Ltd v. United States of America
(Case No. ARB(AF)/99/2)
164
181
Miscellaneous Procedural Orders
186
Award, 11 October 2002
192
Genin and Others v. Republic of Estonia (Case No. ARB/99/2)
236
Award, 25 June 2001
241
Decision on Claimants Request for Supplementary Decisions and

Rectification, 4 April 2002
304
Mihaly International Corporation v. Democratic Socialist Republic of

Sri Lanka (Case No. ARB/00/2)
308
Award, 15 March 2002

Individual concurring opinion
310
323
Compana de Aguas del Aconquija SA and Vivendi Universal v.

Argentine Republic (Case No. ARB/97/3)
327
Decision on the Challenge to the President of the Committee,

3 October 2001
330
Decision on Annulment, 3 July 2002
340
Casado and President Allende Foundation v. Republic of Chile

(Case No. ARB/98/2)
Decision on Provisional Measures, 25 September 2001
Salini Costruttori SpA and Italstrade SpA v. Kingdom of Morocco
(Case No. ARB/00/4)
Decision on Jurisdiction, 23 July 2001
Autopista Concesionada de Venezuela CA v. Bolivarian Republic of
Venezuela (Case No. ARB/00/5)
Decision on Jurisdiction, 27 September 2001
ADF Group Inc. v. United States of America (Case No. ARB(AF)/00/1)
373
375
398
400
417
419
449
CONTENTS
ix
Procedural Order No. 2 Concerning the Place of Arbitration, 11 July

2001
453
Procedural Order No. 3 Concerning the Production of Documents,

4 October 2001
461
Award, 9 January 2003
470
Waste Management Inc. v. United Mexican States (No. 2)

538
Decision on Venue of the Arbitration, 26 September 2001
541
Decision on Preliminary Objection, 26 June 2002
549
ANNEX AND INDEX

NAFTA, Free Trade Commission, Chapter 11 Interpretation, 31 July
2001
567
Cumulative Index, Volumes 16
569
INTRODUCTION
Arbitral tribunals and ad hoc committees set up under the Convention on the
Settlement of Investment Disputes between States and Nationals of Other States
administered by the International Centre for Settlement of Investment Disputes
have produced a large number of awards and decisions. In recent years, through
the Additional Facility mechanism, their number has increased substantially, and
their contribution to both the substance of international investment law and the
procedure of international arbitration grows in importance. Chapter 11 arbitration
under nafta will increasingly contribute its share. Moreover many of these cases
raise vital issues of investment protection and relate to fundamental questions of
the relations between national and international law.
Article 48(5) of the icsid Convention provides that the Centre shall not publish an
award without the consent of the parties thereto. In the absence of an official series
of reports of these texts, a number have appeared unofficially, from time to time, in a
variety of publications in different parts of the world. For those who wish to refer to
these awards and decisions in a systematic manner, this diffusion has been a source
of difficulty which has only been partially remedied by the provision of selected
decisions on the icsid website. There remains considerable value in collecting and
presenting this material in a single publication accompanied by summaries, tables
of cases and a detailed cumulative index. Some of the texts have previously been
available only in French or Spanish, and it has been thought desirable to make these
available in English.
The novelty and importance of the concepts introduced and applied within icsid
fully warrant the ever-growing literature dedicated to them. It is our hope that the
present series will encourage even greater use of this developing system.
James Crawford
Karen Lee
Lauterpacht Research Centre for International Law
September 2003
xi
EDITORIAL NOTE
The ICSID Reports contain decisions rendered by arbitral tribunals and ad hoc
committees set up within the framework of the Centre established pursuant to the
icsid Convention (including those rendered by icsid tribunals established pursuant
to bilateral investment treaties) and other decisions, whether judicial or arbitral,
relating to such proceedings. These are accompanied by a full scholarly apparatus
and index.
Volume 1 contains, in addition to the Basic Texts of the icsid system, decisions
in cases commenced during the period 1972 to 1981. Volume 2 contains material
relating to proceedings commenced between 1981 and 1983, and Volume 3
contains the first three proceedings commenced in 1984. Volume 4 contains the
texts of decisions and awards relating to icsid cases commenced between 1984
and 1992. Volume 5 contains available texts of decisions and awards commenced
between 1992 and 2000, and Volume 6 contains those commenced between 1995
and 2001. These are printed in chronological order based on the date when the
particular case was first started. However, all the proceedings relating to any given
icsid case are, so far as possible, assembled together in their own chronological
order.
The awards and decisions in these Reports are reproduced, to the greatest extent
possible, in the form in which they were handed down. Editorial intervention is
limited to the introduction of a summary and of a bold-letter rubric at the head of
each case. These are followed by the full text of the original decision, if available,
or its translation. No attempt has been made to tamper with the texts by purporting
to correct errors or clarify occasional obscurities of expression.
Attempts have been made to obtain the full text of all icsid awards and decisions.
Where only excerpts are available these have been reproduced. Any omission of
material is indicated either by a series of dots or by the insertion of a sentence in
square brackets stating the nature of the passage which has been omitted. Should
the full text of a previously excerpted or omitted decision or award subsequently
become available it will be published in a later volume in the series.
Bold-letter headings preceding each case indicate the main points of law involved
in the decision. These entries are also collected in a digest at the beginning of the
volume.
Where appropriate, notes relating to the progress of proceedings still pending
are included at the end of the case. Awards given in cases still pending will be
published in the series as they become available.
The source of the material in this volume is indicated at the end of each case.
Where the material has been published in more than one language, one publication
in each language is listed. The language of the original decision is also mentioned.
Various tables are printed at the beginning of each volume: an alphabetical table
of cases reported in the volume, a consolidated alphabetical table of all the cases
so far reported and a digest of the cases reported in the volume.
xiii
xiv
EDITORIAL NOTE
An index (consolidated in each succeeding volume) is published at the end of

each volume.
Occasionally, material relating to icsid proceedings, such as select bibliographies
or an article summarizing an icsid decision not yet in the public domain, will be
published as an Annex at the end of a volume.
ACKNOWLEDGEMENTS
The permissions granted for the publication of the following texts are gratefully
acknowledged.
Mr Brian Conroy, Mr Jonathan Goldberg, Dr Joanna Gomula and Dr Kishan
Manocha contributed summaries for this volume. The translations of the decisions
in Casado, Goetz and Salini were prepared by Mr Brian Conroy and the decisions in
Olgun by Mr Jonathan Goldberg. Ms Margaret Young provided general assistance.
The Index was prepared by Miss Maureen MacGlashan, cmg and the Tables were
prepared by the Editors.
Thanks are due to the Secretary-General and staff of icsid for their assistance in
many ways, including the provision of texts of decisions where this could be done
consistent with icsid rules. Responsibility for the summaries and other contents of
this volume remains, however, solely with the Editors.
xv
TABLE OF CASES
REPORTED IN VOLUME 6
[alphabetical]
Page
Procedural Order No. 2 Concerning the Place of Arbitration,
11 July 2001
Procedural Order No. 3 Concerning the Production of Documents,
4 October 2001
449
453
461
470

417
419

(Case No. ARB/98/2)
373
375
Compana de Aguas del Aconquija SA and Vivendi Universal v.

Argentine Republic (Case No. ARB/97/3)
3 October 2001
Award, 25 June 2001
Rectification, 4 April 2002
327
330
340
236
241
304

3
5
5
46

Award embodying the Parties Settlement Agreement,
18 September 2000
59

xvi
60
308
TABLE OF CASES REPORTED IN VOLUME 6

Individual concurring opinion
xvii
310
323

181
186
192

Award, 26 July 2001
154
156
164

(Case No. ARB/00/4)
398
400
United Mexican States v. Metalclad Corporation

Judicial Review, Supplementary Reasons for Judgment,
Supreme Court of British Columbia, 31 October 2001
52
53

538
541
549
Wena Hotels Ltd v. Arab Republic of Egypt (Case No. ARB/98/4)

67
74
89
129
TABLE OF CASES
REPORTED IN VOLUMES 161
[alphabetical]
Vol., Page
Procedural Order No. 2 Concerning Place of Arbitration,
11 July 2001
Procedural Order No. 3 Concerning Production of Documents,
4 October 2001
6, 449
dIvoire
Adriano Gardella SpA v. Government of Cote
Award, 29 August 1977 (excerpts)
1, 283
1, 287
AGIP SpA v. Government of the Peoples Republic of the Congo

Award, 30 November 1979
1, 306
1, 309
Amco Asia Corp., Pan American Development Ltd and PT Amco

Indonesia v. Republic of Indonesia
Jurisdiction, 25 September 1983
Provisional Measures, 9 December 1982
Annulment, 16 May 1986
Resubmitted Case: Jurisdiction, 10 May 1988
Resubmitted Case: Award, 5 June 1990
Resubmitted Case: Rectification, 10 October 1990
1, 376
1, 389
1, 410
1, 413
1, 509
1, 543
1, 569
1, 638
6, 453
6, 461
6, 470
American Manufacturing and Trading Inc. v. Republic of Zaire

(Case No. ARB/93/1)
Individual Opinions, 21 February 1997
5, 11
5, 14
5, 37
Asian Agricultural Products Ltd [AAP] v. Democratic Socialist

Republic of Sri Lanka
Award, 27 June 1990
Dissenting Opinion, 27 June 1990
4, 245
4, 250
4, 296
Atlantic Triton Company Limited v. Peoples Revolutionary

Republic of Guinea
1
The figures in bold type refer to the volume number.
xviii
3, 3
TABLE OF CASES REPORTED IN VOLUMES 16
France, Cour dappel, Rennes, 26 October 1984

France, Cour de cassation, Rennes, 18 November 1986
Award, 21 April 1986
xix
3, 4
3, 10
3, 13

6, 419
Azinian, Davitian and Baca v. United Mexican States

5, 269
5, 272
Benvenuti and Bonfant srl v. Government of the Peoples Republic

of the Congo
Award, 8 August 1980
France, Tribunal de grande instance, Paris, 13 January 1981
France, Cour dappel, Paris, 26 June 1981
France, Cour de cassation, Paris, 21 July 1987
1, 330
1, 335
1, 368
1, 369
1, 373
Cable Television of Nevis Ltd and Cable Television of Nevis Holdings

Ltd v. Federation of St Kitts and Nevis (Case No. ARB/95/2)
5, 106
5, 108

(Case No. ARB/98/2)
6, 373
6, 375
Ceskoslovenska Obchodni Banka AS v. Slovak Republic

(Case No. ARB/97/4)
Decision on Objections to Jurisdiction, 24 May 1999
Decision on Further and Partial Objections to Jurisdiction,
1 December 2000
a de Aguas del Aconquija SA and Compagnie Generale des
Compan
Eaux/Vivendi Universal v. Argentine Republic (Case No. ARB/97/3)
3 October 2001
5, 330
5, 335
5, 358
5, 296
5, 299
6, 330
6, 340
a del Desarrollo de Santa Elena SA v. Republic of Costa Rica

Compan
(Case No. ARB/96/1)
Rectification of Award, 8 June 2000
5, 153
5, 157
5, 180
Fedax NV v. Republic of Venezuela (Case No. ARB/96/3)
5, 183
xx
Decision on Objections to Jurisdiction, 11 July 1997

Award, 9 March 1998
5, 186
5, 200

Award, 25 June 2001
Decision on Claimants Request for Supplementary Decisions
and Rectification, 4 April 2002
6, 236
6, 241

6, 3
6, 5
6, 5
6, 46
6, 304
Gruslin v. Malaysia (Case No. ARB/99/3)

5, 483
5, 484
Kaiser Bauxite Company v. Government of Jamaica

Jurisdiction and Competence, 6 July 1975
1, 296
1, 298
Klockner Industrie-Anlagen GmbH, Klockner Belge SA and Klockner

Handelsmaatschappij BV v. Republic of Cameroon and Societe
Camerounaise des Engrais SA
Award, 21 October 1983 (excerpts)
Dissenting Opinion, 21 October 1983 (excerpts)
Annulment, 3 May 1985
2, 3
2, 9
2, 77
2, 95
LANCO International Inc. v. Argentine Republic (Case No. ARB/97/6)

Preliminary Decision on Jurisdiction, 8 December 1998
5, 367
5, 369

Award embodying the Parties Settlement Agreement, 18 September
2000
6, 59
Liberian Eastern Timber Corporation [LETCO] v. Government of the

Republic of Liberia
Rectification, 10 June 1986
United States, District Court, Southern District of New York,
5 September 1986
United States, District Court, Southern District of New York,
12 December 1986
United States District Court, District of Columbia, 16 April 1987
Maffezini v. Kingdom of Spain (Case No. ARB/97/7)
Decision on Request for Provisional Measures (Procedural Order
No. 2), 28 October 1999
6, 60
2, 343
2, 346
2, 380
2, 383
2, 385
2, 390
5, 387
5, 393
Decision on Objections to Jurisdiction, 25 January 2000

Rectification of Award, 31 January 2001
Maritime International Nominees Establishment [MINE] v. Republic of
Guinea
United States, District Court, District of Columbia, 12 January 1981
United States, Court of Appeals, District of Columbia,
12 November 1982
Belgium, Rechtbank van eerste aanleg, Antwerp, 27 September 1985
Switzerland, Tribunal federal, 4 December 1985
Switzerland, Tribunal de première instance, Geneva, 13 March 1986
Switzerland, Autorite de surveillance des offices de poursuite pour
dettes et de faillite, Geneva, 7 October 1986
Annulment, 22 December 1989
Request for Annulment, Procedural Order No. 1, 17 May 1988
Application for Stay of Enforcement of Award, Interim Order No. 1,
12 August 1988
Metalclad Corporation v. United Mexican States
Award, 30 August 2000
Canada, Supreme Court of British Columbia, United Mexican States
v. Metalclad Judicial Review, 2 May 2001 (2001 BCSC 664)
Supplementary Reasons for Judgment (2001 BCSC 1529)
xxi
5, 396
5, 419
5, 440
4, 3
4, 4
4, 8
4, 32
4, 35
4, 41
4, 45
4, 54
4, 79
4, 110
4, 111
5, 209
5, 212
5, 236
6, 52

Individual concurring opinion, 15 March 2002
6, 308
6, 310
6, 323
Mobil Oil Corporation, Mobil Petroleum Company Inc., Mobil Oil

New Zealand v. Her Majesty the Queen in Right of New Zealand
New Zealand, High Court, 1 July 1987
Findings on Liability, Interpretation and Allied Issues, 4 May 1989
4, 117
4, 119
4, 140

6, 181
6, 186
6, 192

Award, 26 July 2001
6, 154
6, 156
6, 164
xxii

(Case No. ARB/00/4)
Scimitar Exploration Limited v. Republic of Bangladesh and
Bangladesh Oil, Gas and Mineral Corporation
(Case No. ARB/92/2)
Award, 5 April 1994
6, 398
6, 400
5, 3
5, 4
Societe Ouest Africaine des Betons Industriels [SOABI] v. State of

Senegal
Jurisdiction, 1 August 1984
Dissenting Opinion, 25 February 1988
Declaration of the President of the Tribunal, 25 February 1988
France, Cour dappel, Paris, 5 December 1989
France, Cour de cassation, 11 June 1991
2, 164
2, 175
2, 190
2, 277
2, 333
2, 337
2, 341
Southern Pacific Properties (Middle East) Limited [SPP(ME)] v. Arab

Republic of Egypt
ICC Award No. YD/AS No. 3493, 11 March 1983
France, Cour dappel, Paris, 12 July 1984
Netherlands, District Court, Amsterdam, 12 July 1984
France, Cour de cassation, Paris, 6 January 1987
Jurisdiction (No. 1), 27 November 1985
Jurisdiction (No. 2), 14 April 1988
Dissenting Opinion, 14 April 1988
Award, 20 May 1992
Dissenting Opinion, 20 May 1992
3, 45
3, 49
3, 79
3, 92
3, 96
3, 101
3, 131
3, 163
3, 189
3, 249
Tradex Hellas SA v. Republic of Albania (Case No. ARB/94/2)

Decision on Jurisdiction, 24 December 1996
Award, 29 April 1999
5, 43
5, 47
5, 70
Vacuum Salt Products Limited v. Government of Republic of Ghana

Provisional Measures, 14 June 1992
4, 320
4, 323
4, 329
Waste Management Inc. v. United Mexican States

Award, 2 June 2000
Dissenting Opinion, 2 June 2000
5, 443
5, 445
5, 462
6, 538
6, 541
6, 549
Wena Hotels Ltd v. Arab Republic of Egypt (Case No. ARB/98/4)

xxiii
6, 67
6, 74
6, 89
6, 129
DIGEST OF CASES
IN VOLUME 6
Admissibility
bit requiring notification to host State requesting amicable settlement
Notification to Minister also holding office as President of local contracting
company Whether sufficient notification
Salini Costruttori SpA and Italstrade SpA v. Kingdom of Morocco (Case No.
ARB/00/4), 398
Claim brought more than three years after incidents causing damage Three-year
time-limit Application nafta, Article 1116(2)
Mondev International Ltd v. United States of America (Case No.
ARB(AF)/99/2), 181
Claimants standing to bring proceedings Majority shareholders having foreign

nationality suing in relation to conduct affecting locally incorporated company
Standing upheld
Goetz and Others v. Republic of Burundi (Case No. ARB/95/3), 3
Annulment
Annulment proceedings Claimant seeking partial annulment of decision on
merits Respondent seeking in the alternative annulment of whole award
Admissibility of Respondents claim Whether a counterclaim Power of
ad hoc Committee to determine extent of annulment Respondents arguments
admissible
a de Aguas del Aconquija SA and Vivendi Universal v. Argentine
Compan
Republic (Case No. ARB/97/3), 327
Annulment proceedings State responsibility Tribunal finding that it could not

determine whether there was a treaty breach prior to municipal court proceedings on the contract claim Bilateral investment treaty excluding requirement
of exhaustion of local remedies Manifest excess of jurisdiction Failure to
give reasons Relation of treaty claim to contract claim icsid Convention,
xxiv
DIGEST OF CASES IN VOLUME 6
xxv
Articles 26, 53 ilc Articles on Responsibility of States for Internationally

Wrongful Acts, 2001, Article 3
Compan
Annulment proceedings Tribunal finding that federal authorities did not fail
to assist in resolution of provincial claim No basis for annulment icsid
Convention, Article 53
Compan
Grounds for Manifest excess of power by arbitral tribunal Sufficiency of evidence Relationship between domestic arbitration and arbitration under the icsid
Convention Compensation under domestic arbitration to be taken into account
when awarding damages under the icsid Convention Criteria for compensation
under UKEgypt Bilateral Investment Treaty, Article 5
Wena Hotels Ltd v. Arab Republic of Egypt (Case No. ARB/98/4), 67
Grounds for Manifest failure to apply applicable law icsid Convention, Article
42(1) Subject matter of commercial agreements as opposed to subject matter
brought before icsid arbitration Role of international law in the context of
Article 42(1) Relationship between international law and domestic law
Time limit for request for annulment icsid Convention, Article 52 Raising
new arguments related to a ground of annulment invoked within the time limit
fixed in the icsid Convention
Arbitration
Abuse of process Successive arbitrations of same claim Whether Tribunal
has inherent power to stay proceedings No evidence of lack of bona fides
Second arbitration allowed
Waste Management Inc. v. United Mexican States (No. 2) (Case No.
ARB(AF)/00/3), 538
xxvi
Arbitral procedure Place of arbitration icsid Additional Facility arbitration

pursuant to Chapter 11 of nafta Canada or United States Standard of review
of international arbitration in both countries similar Convenience of parties and
Tribunal Arbitration conducted at icsid headquarters Neutrality as between
parties
ADF Group Inc. v. United States of America (Case No. ARB(AF)/00/1), 449
Award Partial annulment Judicial review Supplementary Reasons for

Judgment Whether appropriate case to correct Order flowing from Reasons
of Judgment Section 34(4) of International Commercial Arbitration Act
Adjournment of judicial review proceedings Whether appropriate Arbitral
proceedings Whether Tribunal to be given opportunity to consider breaches of
Articles 1105 and 1110 of nafta based on concepts within the scope of submission to arbitration Damages Whether Metalclad entitled to interest prior to
20 September 1997
United Mexican States v. Metalclad Corporation, 52
Bilateral investment treaty Alleged violations of bit by Respondent through

its State enterprise
Bilateral investment treaty Investment dispute Alleged violations of bit by

Respondent through its State enterprise Misrepresentations in connection with
purchase of local branch of Estonian social bank Failure to adhere to write-off
agreement to amortize losses arising from purchase Alleged breach of settlement agreement to assign claims Unjustified revocation of banking licence
Harassment of claimants Damages
Genin and Others v. Republic of Estonia (Case No. ARB/99/2), 236
Documents Disclosure Documents available to the public on reasonable

inquiry Whether requiring to be specifically disclosed Test of necessity
Arbitration (Additional Facility) Rules, Article 41(2)
International Centre for Settlement of Investment Disputes Jurisdiction

Conditional consent to icsid jurisdiction Control over locally registered
xxvii
company passing with Venezuelas consent to a national of an icsid State party

icsid Convention, Article 25(2)(b)
Autopista Concesionada de Venezuela CA v. Bolivarian Republic of Venezuela
(Case No. ARB/00/5), 417
Procedure Failure by Respondent State to appear Obligation on tribunal

to consider jurisdiction and merits of claim despite non-appearance icsid
Convention, Article 45 Arbitration Rules, Rule 42
Request by Claimant USSri Lanka Bilateral Investment Treaty Jurisdiction

of icsid and Arbitral Tribunal Both jurisdiction ratione personae and materiae
must be satisfied Respondents objections to jurisdiction
Mihaly International Corporation v. Democratic Socialist Republic of Sri
Lanka (Case No. ARB/00/2), 308
Res judicata Decision denying jurisdiction of first Tribunal Whether precluding new arbitration on same claim Interpretation of first Tribunals decision
nafta Article 1136 icsid (Additional Facility) Rules, Article 53(4)
ARB(AF)/00/3), 538
Arbitrators
Composition of tribunal Challenge to President of ad hoc Committee
Connection between Presidents law firm and related company of Claimant
No personal involvement of President No general retainer Partners legal
advice on matters unrelated to dispute before the Committee Work substantially complete before commencement of proceedings De minimis rule
Challenge rejected
Compan
Composition of tribunal Challenge to President of ad hoc Committee

Procedure for challenging members of ad hoc Committee icsid Convention,
Article 53(4) Validity of Arbitration Rule 53
Compan
xxviii
Award
Award on agreed terms Agreement for settlement of dispute Nature of
agreement No additional rights, benefits or privileges conferred Principles
governing interpretation and implementation Agreement binding on legal
successors to parties Article 55 of icsid Arbitration Rules
Lemire v. Ukraine (Case No. ARB(AF)/98/1), 59
Request for supplementary decisions and rectification Alleged failure by

tribunal to discuss specific violations of bit contended by Claimants Request
denied No omission on part of Tribunal Costs of request awarded against
Claimants
Compensation
Interest How calculated Compound interest Exercise of discretion
Costs
Costs against defeated Claimant Nature and complexity of proceedings Costs
shared equally between parties
Costs and expenses Unsuccessful jurisdictional objection Whether Respondent should be required to pay costs and expenses in any event Extent of
Tribunals discretion
ARB(AF)/00/3), 538
Discretion Respondent failing on jurisdiction but succeeding on merits

Conduct of Respondent officials non-exemplary No order against Claimant
for Respondents costs
Olgun v. Republic of Paraguay (Case No. ARB/98/5), 154
Provisional measure for security for costs Alleged probability of unsuccessful

claim Claimant alleged to be without means Whether provisional measure
xxix
required to protect Respondents interests Failure of Convention and Rules to

provide for security for costs
Casado and President Allende Foundation v. Republic of Chile (Case No.
ARB/98/2), 373
Counterclaim
Dismissal of claim and counterclaim No breach of bit No misrepresentations
associated with purchase No breach of settlement agreement No breach
of write-off agreement Revocation of bank licence not contrary to bit or
Estonian law No proof of harassment of Claimants Respondents counterclaim dismissed
Damages
Determination of damages Prompt, adequate and effective compensation
Compensation amounting to the market value of an investment UKEgypt
Bilateral Investment Treaty, Article 5
Diplomatic Protection
Diplomatic representations made by State not an icsid party Not amounting to
espousal Whether inconsistent with standing of holding company not a national
of that State Distinction between icsid arbitration and diplomatic protection
icsid Convention, Article 27
Autopista Concesionada de Venezuela CA v. Bolivarian Republic of Venezuela
(Case No. ARB/00/5), 417
Discrimination
Local manufacture requirement Applicable equally to local as to foreign suppliers No showing of discrimination in law or fact nafta, Article 1102
Expropriation
Articles 1105 and 1110 of nafta Annulment of part of Award relating to breaches involving decisions beyond scope of submission to arbitration Whether
xxx
Tribunal to be given opportunity to consider breaches of Articles 1105 and 1110

of nafta based on concepts within the scope of submission to arbitration
Failure to provide prompt, adequate and effective compensation UKEgypt
Measures equivalent to Grant of free-zone status for mining company Substantial investment in reliance on free-zone status Subsequent change in government policy leading to revocation of status Whether measure equivalent to
taking Whether compensation required BelgiumBurundi Bilateral Investment Treaty, Article 4
Provisional measures to preserve property claim Claim generic and unrelated
to specific assets Whether provisional measures necessary
ARB/98/2), 373
Whether lawful under international law Non-discriminatory Valid public

policy Due process under national law Only compensation lacking No offer
made at the time of taking Respondent given four months to pay compensation
or to restore permit, otherwise taking would be held internationally unlawful
BelgiumBurundi Bilateral Investment Treaty, Article 4
Foreign Investment
Failure to provide fair and equitable treatment and full protection and security
to an investment UKEgypt Bilateral Investment Treaty, Article 2(2) Failure
to prevent seizure of an investment Failure to impose substantial sanctions for
seizure
Investment protection Bankruptcy Law on bankruptcy leading to loss of
investment Whether conduct tantamount to expropriation 1994 Convention
xxxi
between Peru and Paraguay on reciprocal promotion and protection of investments

Investment protection Central Bank encouragement of investment Official
representations as to safety of investment Bank certification of investment
bonds Whether amounting to guarantee of investment Bankruptcy of local
company amid general financial crisis 1994 Convention between Peru and
Paraguay on reciprocal promotion and protection of investments Whether
breached
Investment protection Full protection and security nafta ftc Interpretation
of 31 July 2001 Whether binding on Chapter 11 Tribunals Meaning of
Interpretation Requirement on Claimant to show that treatment violated a
specific rule of customary international law relating to foreign investment
nafta, Articles 1105(1), 1132
ICSID (Additional Facility)

Rules Venue of arbitration Relevant factors Neutrality of forum Applicability of New York or Panama Conventions Differences between two Conventions Positions taken by Government of Canada in earlier proceedings
Whether relevant Convenience of parties and counsel nafta Articles 1122,
1130 Arbitration (Additional Facility) Rules, Articles 20, 21
ARB(AF)/00/3), 538
Interest
Exclusion of interest in the Award Whether breach of Articles 1105 or 1110 of
nafta based on concepts within the scope of submission to arbitration Whether
Metalclad entitled to interest from 5 December 1995 to 20 September 1997
Jurisdiction
Alleged breach of nafta Article 1103 asserted in course of pleadings
Article 1103 not mentioned in Notice of Intention to arbitrate Whether
xxxii
Tribunal deprived of jurisdiction over Article 1103 claim nafta, Article

1119
Based on bilateral investment treaty No contractual relations between claimant

investors and Respondent State Consent to jurisdiction manifested by commencement of proceedings in accordance with treaty No right of Respondent
unilaterally to withdraw consent
Consent Contractual submission to local jurisdiction Whether ousting jurisdiction under bilateral investment treaty Local jurisdiction not susceptible to
prorogation whether consent given icsid Convention, Article 25(1)
ARB/00/4), 398
Consent to icsid arbitration Whether given by 1994 Convention between

Peru and Paraguay on reciprocal promotion and protection of investments
Arbitration without privity icsid Convention, Article 25(1)
Jurisdiction ratione materiae Claim of breach of bit Not excluded because

also based on contract Onus of proof on Claimant to establish breach of bit
attributable to the State Relation of responsibility under treaty to contractual
liability
ARB/00/4), 398
Jurisdiction ratione materiae Investment Particular relevance of State law

in determining existence of an investment Dual requirements of bit and icsid
Convention, Article 25(1) Whether satisfied
ARB/00/4), 398
xxxiii
Jurisdiction ratione personae National motorway company with majority State

ownership Whether agency of State icsid Convention, Article 25(1)
ARB/00/4), 398
Objection ratione materiae Existence of an investment Requirements of

Article 25(1) of the icsid Convention not satisfied Existence of investment
within meaning of Convention and bit Preparatory and development expenses
incurred pursuant to letter of intent from Respondent Recovery of development
costs following failure of negotiations Definition of investment a question
of law No investment within meaning of icsid Convention
Objection to jurisdiction ratione personae Nationality requirement of icsid

Convention Theories of partnership or assignment Claimant permitted to
file its own claim in its own name Capacity to bring claim not modified by
existence of international partnership Pacta tertiis principle No invocation
of icsid Convention by non-State party, non-State party national or company
No improvement of rights of non-State party company by assignment of rights
to party with standing before Tribunal
Objections by Respondent No arbitrable investment dispute Alleged violations of investment treaty denied Damages Counterclaim Whether dispute
concerning an investment
Objections to jurisdiction Bilateral investment treaty Exceptions to the nationality requirement icsid Convention, Article 25(2)(b) Whether company
incorporated in one State Party and owned by nationals of another State Party
is a national of the former Existence of prima facie legal dispute for the
purpose of determining jurisdiction
Over incidental or additional claims How related to primary claim Requirement of close relationship or connection Claimant failing to present evidence
xxxiv
of such connection Absence of jurisdiction Arbitration (Additional Facility)

Rules, Article 48(1)
Proceedings brought under nafta Article 1116(1) Whether brought on behalf

of an enterprise Failure to rely on Article 1117(1)
ARB(AF)/99/2), 181
Relation between concession contract, bilateral investment treaty and icsid

Convention Dispute with provincial authorities relating to investment
contract Investment contract providing for exclusive jurisdiction of
provincial courts Whether precluding claim under treaty
Compan
Respondent contesting jurisdiction of icsid Request for icsid arbitration by

investor holding dual United States and Peruvian nationality Request based
on 1994 Convention between Peru and Paraguay on reciprocal promotion and
protection of investments Whether Claimant entitled to treaty protection
Whether of Peruvian nationality
State responsibility claim against Argentina arising from conduct of provincial

authorities Non-designation of province under icsid, Article 25 Article 25
irrelevant to treaty claim
Compan
Termination of an investment Lapse of contractual option Banks foreclosure

on mortgage over investment property Subsisting claims under national law
Whether an investment Relevance of ownership of national law proprietary
rights nafta, Article 1139
ARB(AF)/99/2), 181
xxxv
Municipal Law
Confidentiality of proceedings Application of national freedom of information legislation to pleadings, minutes of meetings, orders of Tribunal Extent
and duration of parties obligation of confidentiality absent statutory obligations
of disclosure nafta Article 1126, Annex 1137.4 Arbitration (Additional
Facility) Rules, Articles 14, 24, 38, 44
ARB(AF)/99/2), 181
Provisional measure of Tribunal said to interfere with ministerial decision

Municipal law not binding on international tribunal Exercise of discretion
ARB/98/2), 373
Time bar Whether claims time-barred by domestic statute of limitation

Domestic statutes of limitation not binding on international tribunal
NAFTA
Chapter 11 Award of costs and expenses Extent of Tribunals discretion
ARB(AF)/99/2), 181
Chapter 11 Claim pursuant to Additional Facility Rules Place of arbitration

Relevant factors Joinder of jurisdictional objections to merits Extent of
discovery Confidentiality
ARB(AF)/99/2), 181
Chapter 11 First arbitration commenced without valid waiver under Article

1121(2)(b) First Tribunal deciding that it lacked jurisdiction over the claim
Whether new proceedings permissible nafta Articles 1120, 1121
ARB(AF)/00/3), 538
xxxvi
Domestic content requirement Whether excluded from nafta Article 1106

as procurement by a Party Whether federal funding programme involves
procurement Whether procurement by component State procurement by a
Party ilc Articles on Responsibility of States for Internationally Wrongful
Acts, Article 4 nafta, Article 1108, Annex 1001.1a-3
Domestic content requirement Whether violating contemporary standards of
international law embodied in Article 1105(1) Whether idiosyncratic, aberrant
or arbitrary
Free Trade Commission interpretation Whether binding on Chapter 11
Tribunal Whether interpretation or amendment Scope of ftc interpretation Effect on pending proceedings
ARB(AF)/99/2), 181
Most-favoured-nation treatment Onus of proof mfn treatment not applicable

to governmental procurement nafta, Articles 1103, 1108(7)(a)
Nationality
Deemed nationality of locally incorporated company Whether foreign control indicates ultimate beneficial interest Transfer of shares to a holding company Transfer not a sham Transfer consented to by Respondent without any
misrepresentation on Claimants part icsid Convention, Article 25(2)(b)
Autopista Concesionada de Venezuela, CA v. Bolivarian Republic of
Venezuela (Case No. ARB/00/5), 417
Provisional Measures
State of tension between parties Duty of Tribunal proprio motu to ensure no
action taken which may prejudice rights of the other party or aggravate or extend
dispute
ARB/98/2), 373
xxxvii
To preserve rights of parties No evidence of existing right Whether hypothetical right may be protected by provisional measures
ARB/98/2), 373
Whether binding Article 41 of icj Statute Authority of icjs decision in

LaGrand icsid Convention, Article 47 Arbitration Rules, Rule 39
ARB/98/2), 373
Whether objection to jurisdiction precludes recommendation of provisional

measures Registration by Secretary-General under Article 36 of icsid
Convention Whether registration unless dispute manifestly outside jurisdiction same as prima facie jurisdiction Extent of jurisdiction to grant provisional
measures
ARB/98/2), 373
Settlement
Agreement for settlement of dispute Recorded as award on agreed terms
Discontinuance of proceedings
Lemire v. Ukraine (Case No. ARB(AF)/98/1), 59
Amicable settlement following determination on merits Settlement agreement

embodied in Award Arbitration Rules, Rule 43(2) Award of costs following
settlement
State Responsibility
nafta, Article 1105(1) Denial of justice Whether new law applied retrospectively Procedural decisions Scope and standard of nafta review
ARB(AF)/99/2), 181
xxxviii
nafta, Article 1105(1) Full protection and security Non-application of

trade practices law to regulatory authority
ARB(AF)/99/2), 181
nafta, Article 1105(1) Full protection and security Statutory immunity of

State agency in respect of intentional torts Tortious interference with contractual
relations Jury finding implying lack of legitimate regulatory purpose Whether
immunity in breach of Article 1105(1)
ARB(AF)/99/2), 181
nafta, Articles 1102, 1105, 1110 Application to acts done before naftas
entry into force National court decisions after entry into force Retrospective
effect
ARB(AF)/99/2), 181
Organ of the State Structural and functional criteria Acts of a State corporation
attributable to the State Relation to contractual claim
ARB/00/4), 398
Treaties
Bilateral investment treaty ArgentinaFrance bilateral investment treaty,
Article 8(2) Fork in the road provision Relevance to Tribunals jurisdiction
over treaty claim Relevance to merits of claim
Compan
CASES
GOETZ v. BURUNDI
Jurisdiction Based on bilateral investment treaty No contractual relations

between claimant investors and Respondent State Consent to jurisdiction
manifested by commencement of proceedings in accordance with treaty No
right of Respondent unilaterally to withdraw consent
Admissibility Claimants standing to bring proceedings Majority shareholders having foreign nationality suing in relation to conduct affecting locally
incorporated company Standing upheld
Expropriation Measures equivalent to Grant of free-zone status for mining
company Substantial investment in reliance on free-zone status Subsequent
change in government policy leading to revocation of status Whether measure
equivalent to taking Whether compensation required BelgiumBurundi
Expropriation Whether lawful under international law Non-discriminatory
Valid public policy Due process under national law Only compensation
lacking No offer made at the time of taking Respondent given four months to
pay compensation or to restore permit, otherwise taking would be held internationally unlawful BelgiumBurundi Bilateral Investment Treaty, Article 4
Arbitration Procedure Failure by Respondent State to appear Obligation
on tribunal to consider jurisdiction and merits of claim despite non-appearance
icsid Convention, Article 45 Arbitration Rules, Rule 42
Settlement Amicable settlement following determination on merits Settlement agreement embodied in Award Arbitration Rules, Rule 43(2) Award
of costs following settlement
Goetz and Others v. Republic of Burundi
(Case No. ARB/95/3)
Award. 10 February 1999
(Arbitration Tribunal: Weil, President; Bedjaoui and Bredin, Members)
Summary: The facts: By Decree-law No. 1/30 of 31 August 1992 the Republic
of Burundi established a free-zone regime allowing certain companies formed
in Burundi to benefit from a range of tax and customs exemptions. Obtaining
the benefit of this regime was made conditional on the granting of a free-zone
certificate by the relevant Minister on the advice of a consultative commission;
only companies undertaking activities in a non-traditional sector were eligible
for the regime. Ministerial Order No. 750/14 of 28 September 1992 declared that
companies working with minerals were eligible for the regime on condition that the
minerals have undergone a process of conversion in accordance with the particular
GOETZ v. BURUNDI
provisions laid down, for each type of mineral, by the relevant staff of the Ministries
responsible for mines and overseas trade respectively.
affimet SA was formed under Burundian law on 22 December 1992 in Bujumbura. Of its 1,000 shares, 999 were held by six different Belgian nationals and one
share was held by a Rwandan national. Its chief object was the production, fining
and marketing of precious metals. On 3 February 1993, the company was granted
a free-zone certificate by the Minister of Industry and Commerce. On the basis of
the certificate, affimet undertook massive investments with a view to realizing its
goals.
On 9 July 1993, the Minister informed affimet that differences of opinion had
arisen within the Burundian administration as to the proper scope of the regime and
that, pending the outcome of a number of studies on the matter undertaken by a
Commission, the company could continue to benefit from the free-zone regime only
if it deposited a sum equivalent to the duties that it would have to pay if the certificate
was withdrawn. Following the completion of the studies, the Minister informed
affimet on 20 August 1993 that its free-zone certificate had been suspended.
However, by letter of 10 January 1994, the Minister advised affimet that the
certificate had come back into force. But following the intervention of the Burundian
Prime Minister and a further study by an international consultancy, affimet was
informed that, pursuant to Ministerial Order No. 750/184 of 29 May 1995, which
provided that the regime no longer applied to companies involved in the extraction
and sale of ore, its certificate had been withdrawn.
affimet sought to have the matter resolved via an amicable settlement, and also
sought to address the matter at a diplomatic level, with the help of the Belgian
Government. Neither of these initiatives succeeded. In consequence, the six shareholders in affimet holding Belgian nationality lodged a request for arbitration
with icsid dated 29 November 1995, founding this request on Article 8 of the
1989 BelgiumBurundi Bilateral Investment Treaty.1 Burundi having sought and
obtained deferrals on several occasions, the first hearing of the Tribunal was eventually held in the absence of the Respondent. Although the Respondent appointed
an arbitrator and expressed willingness to co-operate with the Tribunal, it did not
file any memorials, nor were its representatives present at any of the oral hearings.
Applying Article 45 of the icsid Convention and Rule 42 of the Arbitration Rules,
the Tribunal sought to consider fully the arguments available to the Respondent
despite its non-appearance.
In their request the Claimants demanded the annulment of the decision of
29 May 1995 withdrawing the free-zone certificate or, if this were not possible,
substantial damages.
Held: The Republic of Burundi was obliged either to restore the free-zone
certificate to affimet or to pay an adequate indemnity to compensate for the loss
of this certificate and the privileges entailed by it.
1
Belgo-Luxembourg Economic UnionBurundi, Convention on the Mutual Promotion and Protection
of Investments, Brussels, 13 April 1989: United Nations Registration No. 33517.
AWARD
(1) Since the event generating this dispute was the decision of 29 May 1995
withdrawing the certificate and not any of the earlier communications between the
parties, the BelgiumBurundi Investment Treaty was fully applicable, having been
in force since 13 September 1993 (paras. 706).
(2) Since the Claimants had undertaken an investment and all six parties were
clearly nationals of a Contracting State other than that against which the claim
was brought, the Tribunal had jurisdiction ratione materiae and ratione personae
(paras. 7785).
(3) As nationals of a Contracting State who were controlling figures in the investing company, the Claimants were competent to bring the request in question.
However, only those elements of the request that pertained to the legality of the
withdrawal of the free-zone certificate on 29 May 1995 were within the Tribunals
jurisdiction; this was not true of the claims for reimbursement of taxes and customs
duties which did not fulfil the conditions laid down in Article 8(2) and (3) of the
BelgiumBurundi Investment Treaty (paras. 8693).
(4) Burundi was not liable for fault and the principle of strict liability pertaining
to public bodies could not apply to a case which concerned legitimate changes in
governmental policy concerning the economy (paras. 10019).
(5) Burundi had not been guilty of discrimination, nor had it failed in its duty
to encourage investments under the BelgiumBurundi Investment Treaty. On the
other hand, it had violated its duty under the Treaty to refrain from adopting
measures similar to depriving an investor of or restricting its property rights.
Burundi would thus be found liable of a breach of international law if it did not
either provide adequate and fair compensation within four months of the notice of
the decision or grant a new free-zone certificate (paras. 12037).
Subsequently the parties reached an amicable agreement which, pursuant to
Article 43 of the Rules, the Tribunal embodied in its Award, dealing also with
unresolved issues of costs.
The text of the award is set out as follows:
Part One: Decision on Liability (2 September 1998)
Part Two: The Parties Agreement (23 December 1998)
p. 5
p. 46
FIRST PART: THE DECISION OF 2 SEPTEMBER 1998

(Translation)
[459] On 2 September 1998 the Arbitration Tribunal gave the decision the text of
which follows:
GOETZ v. BURUNDI
I. The Facts
1. By Decree-law no. 1/30 of 31 August 1992 the Republic of Burundi instituted a free zone regime allowing certain businesses established in Burundi to
benefit from a number of customs and fiscal exemptions as well as from certain
facilitative measures in the areas of labour legislation and exchange control. By
the terms of the preamble of this Decree-law, this regime aimed to encourage
exports, particularly of non-traditional products, facilitate private investment, both
domestic and foreign, generate new jobs and stimulate the circulation of ideas and
of technology in the areas of production, management and marketing, as well as
to make Burundian products more competitive on the export market, particularly
as against those coming from other developing nations where free zone regimes
exist. The Decree-law declared activities falling within a non-traditional sector
as eligible for the free zone regimewithout however giving a definition of this
concept or listing the activities envisagedand made obtaining the benefit of this
regime conditional on the receipt of a ministerial agreement entitled a free zone
certificate, given on the advice of a consultative commission.
2. The measures necessary to execute Decree-law no. 1/30 of 31 August 1992
were taken by Ministerial Order no. 750 of 28 September 1992. Businesses exporting listed traditional products (ordinary coffee, black tea, cotton-fibre, animal
skins, living animals) were declared ineligible for the free zone regime by this text,
it being noted, however, that this list could be modified by order of the Minister
responsible for overseas trade. As regards minerals, they formed the object of a
special provision. By the terms of Article 2 of the order, in effect,
Minerals can be eligible for the free zone regime on condition that they have undergone
a process of conversion in accordance with the particular [460] provisions laid down,
for each type of mineral, by the relevant staff of the Ministries responsible for mines
and overseas trade respectively.
3. On 22 December 1992, by means of an agreement sealed before a notary

in Bujumbura, a company limited by shares was formed, governed by Burundian
law, and the seat of which was established at Bujumbura, a company known as
affinage des metaux, abbreviated as affimet. By terms of Article 4 of its
statutes,
The companys business is the production, the fining and the marketing of precious
metals as well as the purchase on the local, regional and international market of the
minerals necessary for such activity.
And generally all financial, commercial, industrial, civil, personal and real property
transactions capable of being linked directly or indirectly either to one of the above
activities or to any other similar or connected social object.
It can in particular acquire, and carry out all necessary import, export, representative
or advisory transactions without the present list being . . . limitative.
The share capital of affimet is represented by a thousand shares divided between

six Belgian shareholders (these being 750 shares for Mr Antoine Goetz, 230 shares
AWARD
for Ms Theresia Pooters and 19 shares for four other persons) and one shareholder
with Rwandan nationality (1 share).
4. By letter of 2 January 1993 affimet requested to be given the status of a free
business.
5. On 1 February 1993 the consultative commission for the free zone regime
concluded unanimously that the activities of this business are eligible for the free
zone regime, and two days later, that is to say on 3 February 1993, the Minister
for Industry and Commerce delivered the free zone certificate to affimet. Under
the terms of this certificate,
The activities of the business are: the production of 99.9% pure silver, of 99.9%
pure gold in grain and in ingots; the manu-[461]facture of alloys and jewellery, the
treatment and fining of precious metals, and the cutting of precious metals.
The certificate subjected the companys activities to certain conditions. It indicated in particular that the business had to initiate its activities by 1 July 1993 at
the latest. It added that if the company had not begun its activities by that date, it
exposed itself to the risk of having its certificate annulled.
6. On the strength of this certificate, affimet effected, according to the claimants
massive investments with the goal of optimally achieving its corporate aims.
Without the Tribunal having to pronounce at this stage on the well-foundedness or
otherwise of this claim, it notes that according to affimet these investments had
reached 2 million dollars by June 1995 (letter to Amex International of 9 June 1995).
7. The granting of the certificate was followed by what the Minister for Industry
and Commerce, in a letter of 9 July 1993, termed disputes regarding the interpretation of the texts governing the companys activities. These divergences of
opinion, the Minister noted, formed the basis of instructions which could hinder
the functioning of your company. From the evidence to be found in the dossier it
seems in effect that the Burundian administrative and governmental staff took different views at the same time as regards the legality of the certificate being granted
when the applicable texts relating to minerals had not yet been published and as
regards the eligibility of activities relating to gold and precious minerals to benefit
from the advantages of the free zone regime. In this same letter of 9 July 1993, the
Minister for Industry and Commerce informed affimet that
After consultations with the staff of the Minister responsible for mines, the following
has been decided:
1) A commission will be put into place to examine the viability of keeping gold and
other minerals within the free zone regime . . . The members of the commission
will doubtless visit your company in order to take account of the investment already
realised.
2) In order to verify that your company is conforming with the undertakings given in
return for the free zone certificate, an investigation will instituted to this end. [462]
3) Pending the decisions that will follow from the commissions recommendations,
the company affimet is authorised to pursue its activities within the free zone
regime once a sum equivalent to the customs charges that would be demanded if
the ordinary business regime applied is deposited. This deposit will be reimbursed
if the administration is satisfied that the company has respected its undertakings.
GOETZ v. BURUNDI
8. In its report dated 30 July 1993 the Commission created by the Government,
whilst concluding that the refining (of gold) is a non-traditional activity eligible
for the advantages of the free zone regime and that the company affimet has acquired its free zone certificate in a valid fashion and can in consequence carry out its
activities within the context of this law, declared itself nonetheless as deploring
the fact that the lack of co-operation between the staff responsible for commerce
and those responsible for mines had led to an impasse . . . as regards the future
of the Burundian free zone regime. The commission decried in particular the fact
that the provisions necessary to fix the degree of processing required for each mineral had not been taken, and it recommended that this lacuna should be quickly
filled. This lacuna, it added, was imputable to the administration, and could not
be attributed to affimet, which had fulfilled all the conditions laid down by the
law. As regards the ease of coming within the law, the commission declared itself
as having strong worries that the law governing this regime was so liberal that
the State of Burundi risked not being able to reap all the expected benefits. In the
specific case of affimet, it considered however that the shortfall due to fiscal and
customs exemptions could be regarded as facilitative measures accepted by the
government as attracting investors to the free zone regime; it noted in particular
the size of the investments made by affimet, the benefits gained by Burundi
from the development of the gold industry, the creation of jobs and the technology
made available.
9. A Note on the affimet free zone regime dossier written by the Agency for the
promotion of foreign trade was passed to the Minister for Industry and Commerce
on 30 July 1993.1 Having noted the significance for the national economy of the
promotional measures taken by the government with the goal of attracting investors
and of guaranteeing the security of their investments, the note decried the divisions
that had sprung up between the various [463] competent authorities as regards the
application to gold of the free zone regime as well as the restrictive measures taken
in regard to affimet on 9 July. The note concluded in these terms:
As it relates to the present analysis, we strongly recommend that all of the rights
of the company affimet should be entirely restored. We also recommend that other
businesses should set up in this sector and benefit from the same advantages.
If it is necessary to reformulate a given legal provision, the staff involved should
work together and propose the necessary modifications to the relevant authorities. In
the meantime, the business will continue to enjoy all its rights.
10. On 20 August 1993 the Minister for Industry and Commerce informed
affimet that
the effects of the free zone certificate no 001/93 handed over to you on 3 February
1993 are suspended from today in accordance with the decision taken by the Council
of Ministers on 17 August 1993.
1
According to the terms of the covering letter, it related to a confidential note. This note was submitted
for the Tribunals dossier by the claimants at their own risk.
AWARD
11. By letter of 10 January 1994, the Minister advised affimet that the measure
indicated in his letter of 20 August 1993 had been lifted, and added:
Your free zone certificate no 001/93 granted you on 3 February 1993 has come fully
back into force.
12. The Prime Minister objected to this decision of the Minister for Industry and
Commerce in a letter of 3 February 1994. The Prime Minister considered in effect
that this decision went against that taken by the Council of Ministers on 17 August
1993 to suspend the application of the free zone regime to minerals pending the
publication of applying provisions. In consequence, the Prime Minister demanded
that the Minister for Industry and Commerce annul his decision and restore the
situation of the company affimet to within the context of the decision taken by the
Council of Ministers on 17 August 1993.
[464] 13. On 24 March 1994 the Prime Minister designated a national team
charged with assisting an international consultancy, the company amex international, of Washington, in the study of the advantages and the disadvantages
of making minerals in general, and gold in particular, eligible for the free zone
regime. In its report returned to the Prime Minister on 22 April 1994, the national
team criticised the conditions in accordance with which the free zone regime had
been created and its benefit accorded to affimet. It considered nonetheless that
it would be difficult and delicate to again withdraw the certificate from affimet
without damaging consequences for the reputation of the state of Burundi and
recommended in consequence to keep the status quo for the moment and (to) hasten the study of the eligibility of minerals for the free zone regime. A definitive
decision on the subject of giving the certificate to affimet, it suggested, could be
taken in the light of the conclusions of this study.
14. The amex international Report, entitled Study on the reform of legislation on the free zone regime, was returned to the Minister for Industry and
Commerce on 25 April 1995. In this voluminous report, the international consultancy proceeded to a diagnostic of the legislation on the free zone regime, and
described its strengths and failings. One of its principal conclusions was that the
cause of the problem is . . . the approval of a company which exercises a traditional
activity, existing prior to the creation of the free zone regime.
15. On 29 May 1995 the Minister for Industry and Commerce informed
affimet that the free zone certificate had been withdrawn from it:
In execution of the decision taken by the Council of Ministers on this Friday 26 May
1995 and of the Ministerial Order no 750/184 of 29 May 1995, I have the duty of
informing you that the free zone certificate no 001/93 granted to you on 3 February
1993 has been withdrawn.
16. The relevant administrative staff were told of this decision by a letter from
the Minister of the same date, to which was joined the text of the Ministerial Order
no 750/184 of 29 May 1995 involving measures to execute Decree-law no 1/30
of 31 August 1992 involving the creation of a free zone regime in Burundi. This
order abrogated and replaced order no 750/14 of 28 September 1992 the provisions
10
GOETZ v. BURUNDI
of which it replicated word for word with the exception of the first article, which
provided as follows:
[465] Businesses exercising the supposedly traditional activities in the following list
are not eligible for the free zone regime:
a. The production and marketing of ordinary coffee;
b. The production and marketing of black tea;
c. The production and marketing of cotton fibre;
d. The production and marketing of animal skins;
e. The production and marketing of live animals;
f. The research, extraction, enriching, refining and/or fining, the purchase and the sale
of minerals.2
This list can be modified by order of the Minister responsible for overseas trade on
consultation with the Council of Ministers.
The effect of this order was from then on to add activities relating to minerals to the
list of activities regarded as non-traditional and thus not eligible for the free zone
regime.
17. affimet protested against this measure before various authorities either directly or through the intermediary of its lawyer. It addressed itself to the Minister
for Industry and Commerce, to the Prime Minister, to the World Bank. It called
upon the Administrative Court of Bujumbura to hear a claim for the striking down
of the decision withdrawing its certificate as a free business. On 5 June 1995 it
informed the Minister for Justice that unless there was an amicable settlement it
would resort to the procedure for arbitration in the context of the International Centre for the Settlement of Investment Disputes (icsid), since this was provided for
by the Treaty signed between the BelgiumLuxembourg union and the Republic of
Burundi concerning the reciprocal protection and encouragement of investments.
The following day 6 June 1995 its lawyer proceeded to notify the Government
of Burundi in writing of the dispute as envisaged by Article 8 of this Treaty. On
1 September 1995 it requested the diplomatic support of the Belgian government.
These initiatives, as well as several others of the same type, did not produce any
solution.
[466] 18. It was in these conditions that by claim dated 29 November 1995
the six shareholders with Belgian nationality of affimet, holders of 999 of the
1,000 shares in the company, acting in their capacity as founders of the company,
called upon the Secretary-General of icsid to hear a request for arbitration in the
context of and in reliance on the Treaty for the settlement of investment disputes
between States and nationals of other States. This request was founded on Article
8 of the Treaty between the BelgiumLuxembourg union and the Republic of
Burundi concerning the reciprocal protection and encouragement of investments
signed 13 April 1989. This request was registered by the secretary of icsid on
18 December 1995.
Italics added.
AWARD
11
II. The Procedure

A. The Constitution of the Arbitral Tribunal
19. By letter of 4 January 1996 the claimants communicated to the SecretaryGeneral of icsid that, the parties not having agreed in advance on the number and
the manner of selection of the arbitrators, they proposed, relying on Article 2(1)(a)
of icsid Arbitration Rules, the constitution of a Tribunal of three members, each
party selecting an arbitrator and the two arbitrators thus selected being responsible
for the nomination of a third arbitrator as President of the arbitral Tribunal.
20. By letter of 29 February 1996 the claimants, affirming that the 60-day period
following the recording of the claim, envisaged by Article 2(3) of the Arbitration
Rules, had expired without any reaction from the opposing party, selected Professor Jean-Denis Bredin, a lawyer at the Paris Bar, as co-arbitrator and proposed
Professor Andreas Bucher, a lawyer at the Geneva Bar, as President. Professor
Bredin accepted this nomination on 11 March 1996.
21. By letter of the same day the Republic of Burundi let it be known that it
had chosen, in reliance on Article 2(3) of the Arbitration Rules, the formation of
the Tribunal envisaged by Article 37(2)(b) of the Treaty. It added that it reserved
the right in the appropriate case to raise the issue of the arbitral Tribunals lack
of jurisdiction and/or the lack of foundation of the claim filed before the said
Tribunal.
[467] 22. On 1 March 1996 icsid informed the parties that it appeared from
their correspondence that they had both opted for the method of forming a Tribunal
envisaged by Article 37(2)(b) of the Treaty and that it was left to the Republic of
Burundi, on the one hand to select an arbitrator, and on the other to accept the
nomination of Professor Bucher as President or to propose another person to fulfil
this function.
23. On 12 March 1996 the Republic of Burundi demanded that affimet withdraw
the claim for arbitration in order to facilitate the study of the dossier with the goal
of securing an amicable settlement. affimet rejected this proposal by letter of 15
March 1996.
24. On 18 March 1996 the Republic of Burundi informed the Secretary-General
of icsid that it proposed Mr Mohammed Bedjaoui, President of the International
Court of Justice, as arbitrator, and Mr Keba Mbaye, a judge at the International
Court of Justice, as President. It added that this proposal did not prevent (it)
from raising any objection based on jurisdiction that (it regarded) as useful at any
time and indicated that it continued to hold out its proposal for the suspension
of proceedings in order to allow amicable settlement of the dispute. The judge
Bedjaoui accepted his nomination on 22 March 1996.
25. On 28 March 1996 the claimants informed the Secretary-General of icsid that
they did not accept the proposal for the nomination of judge Mbaye as President of
the arbitral Tribunal and confirmed their proposal to nominate Professor Bucher to
fill this role.
26. On 30 May 1996 the claimants, noting that the Tribunal had not been constituted within 90 days of the recording of the claim for arbitration, asked the President
12
GOETZ v. BURUNDI
of the Administrative Council of icsid to proceed to nominate the President of the

Tribunal in accordance with Article 4(1) of the Arbitration Rules.
27. On 25 June 1996 the President of the Administrative Council of icsid nominated Professor Prosper Weil as President of the Arbitration Tribunal. Professor
Weil accepted his nomination on 26 June 1996.
28. The Secretary-General of icsid in consequence informed the parties, by letter
of 26 June 1996, that, in accordance with Article 6(1) of the Arbitration Rules, [468]
the arbitral Tribunal could be considered as constituted from today, 26 June 1996.
It was also made known to them that Mr Nassib G. Ziade, legal advisor to icsid,
had been nominated as secretary to the Tribunal.
B. The Course of the Proceedings
29. Having consulted with the members of the Tribunal and the secretariat of
icsid, the President of the Tribunal fixed 23 August 1996 (being within the period
of 60 days from the formation of the Tribunal envisaged by Article 13(1) of the
Arbitration Rules), as the date for the first hearing of the Tribunal in the presence
of the parties, at the headquarters of the World Bank in Paris. The parties were
informed of this date by letter of the secretary of the Tribunal dated 1 July 1996. By
reason of the unavailability of one of the arbitrators, the President of the Tribunal,
having consulted the members of the Tribunal and the secretariat of icsid, decided
to bring the date for the first hearing back to 26 August 1996. The parties were
informed of this by letter of the secretary of the Tribunal dated 15 July 1996,
confirmed by letter of 2 August 1996.
30. By letter of 9 August 1996 the Minister for Justice of Burundi informed
icsid that the date fixed did not suit (him), since the situation of his country
did not permit (his) staff to organise themselves sufficiently to take part in these
proceedings. The Minister in consequence proposed 22 October 1996 as the date
of the first hearing.
31. The claimants expressed their opposition to this rescheduling by letter of
14 August 1996 and, having proposed to hold the first session of the Tribunal
during the month of September, the President of the Tribunal fixed 30 September
1996 as the date of this hearing. The parties were informed of this decision by letter
of the secretary of the Tribunal dated 23 August 1996.
32. By letter of 20 September 1996 the Minister for Justice of the Republic of
Burundi asked the secretary of the Tribunal to put back this date, for the reason
that being under an embargo, his staff were finding it impossible to organise the
travel arrangements of (their) lawyers. By letter of 22 September 1996 the claimants gave their agreement to this adjustment, which was accepted by the arbitral
Tribunal.
33. The first hearing of the Tribunal was thus fixed for 4 December 1996 at 2 pm
at the headquarters of the World Bank in Paris. The claimants counsel informed
[469] icsid that he would be present on 4 December, with Mr Antoine Goetz. In
contrast, the Minister for Justice of the Republic of Burundi addressed the following
letter, dated 3 December 1996, to the secretary of the Tribunal:
AWARD
13
We have received your telephone message inviting the State of Burundi to present itself
before the arbitral Tribunal at Paris on 4 December 1996.
However, we have learned that the claimant is willing to accept amicable settlement
of the dispute between itself and the State of Burundi.
We therefore consider that the judicial and arbitration proceedings already initiated
should be suspended pending the result of these negotiations.
34. The first session of the arbitral Tribunal was held as envisaged on 4 December
1996 in Paris. The Republic of Burundi was not represented. The President of the
Tribunal read the letter from the Minister for Justice of the Republic of Burundi demanding the suspension of the arbitration proceedings. The claimants opposed this
demand. The Tribunal decided to continue the hearing, but the President stressed
that the Republic of Burundi retained all rights to participate in the proceedings
at any later stage.Several questions relating to the questions of procedure mentioned in Article 20 of the Arbitration Rules were addressed, among them the
following:
the language of the proceedings would be French;
the arbitration proceedings would be conducted, in reliance on Article 44
of the icsid Convention, in accordance with the Arbitration Rules adopted by icsid
on 26 September 1984 and still in force;
the secretary would record the oral proceedings in a summary fashion; the hearings
would not be the object of a sound recording or of a transcript, except if both parties
requested it; all of the members of the Tribunal would sit at Tribunal hearings, and
recourse to Article 14(2) of icsid Arbitration Ruleswhich authorised a Tribunal
hearing in the absence of one of its memberswould be had only in exceptional
circumstances;
in reliance on Article 16 of the Arbitration Rules, the Tribunal could take decisions
by correspondence among its members, so long as all members were consulted;
[470]
the arbitration proceedings would take place at the Centres headquarters in Washington, DC; the Tribunal reserved the right however to suggest that some of the
hearings take place in another appropriate location;
the proceedings would comprise a written stage, followed by an oral stage;
the claimants were obliged to submit their memorial by 28 February 1997 at the latest
and the defendant its counter-memorial three months after receipt of this memorial;
the number of subsequent decisions could be determined at a later stage;
the President of the Tribunal would have the power to fix time-limits in accordance
with Article 26(1) of the Arbitration Rules;
the arbitration award would be made and signed within 60 days of the closure of
proceedings; the Tribunal could extend this period by 30 days if it was otherwise
impossible for it to make the award.
35. The day after the hearing, on 5 December 1996, the President of the Tribunal
addressed a letter, in the name of the Tribunal, to the Minister for Justice of the
Republic of Burundi in which he confirmed that the Tribunal truly regretted the
absence of a representative from the Republic of Burundi and informed him that
14
GOETZ v. BURUNDI
the summary of the oral proceedings would be sent to him by the secretary of the
Tribunal. The Presidents letter continued as follows:
The Tribunal has taken note of the information that you wished to provide us with, by
letter dated 3 December 1996 addressed to Mr Ziade, according to which negotiations
with the claimant with a view to an amicable settlement are underway.
With this in mind, the claimant suggested to the Tribunal that recourse should be
had to the facility provided by Article 21, paragraph 2, of the Arbitration Rules,
according to which;
At the request of the parties, a preliminary conference between the Tribunal and the
parties, duly represented by their authorised representatives, can be organised with
a view to examining the issues forming the object of the dispute and to reaching an
amicable settlement.
It goes without saying that the Tribunal is available to the parties to contribute to
an amicable settlement which would allow the arbitration proceedings underway to be
brought to an end.
[471] In the light of the wish expressed by the two parties to look for an amicable
settlement to the dispute, and taking account of the availability of the Tribunals members, we suggest that a conference be organised to this end on 14 January 1997 at 10 am
at the World Bank headquarters, 66 Iena Avenue in Paris.
I would be obliged to you if you were to inform the secretary of the Tribunal, Mr
Nassib G. Ziade, if you wish for your part that the Tribunal should aid the parties to
reach an amicable settlement to bring an end to the arbitration proceedings, and in the
case of an answer in the affirmative, to indicate to him the name of the persons who
would represent the Republic of Burundi at the conference on 14 January 1997. Allow
me to add that this information should reach Mr Ziade before 31 December next, in
order to allow him to take the necessary practical steps, in the case that they are needed,
for the organisation of the conference.
The Republic of Burundi acknowledged receipt of this letter on 30 December

1996.
36. The Republic of Burundi not having indicated its intention to participate in
the conference scheduled for 14 January 1997, this last did not take place, the parties
being informed of this by letter of the secretary of the Tribunal dated 3 January
1997.
37. The claimants memorial, dated 25 February 1997, was submitted on 26
February 1997. By letter of 25 March 1997 the Government of the Republic of
Burundi was advised by icsid that, in accordance with the decision taken by the
Tribunal during the hearing of 4 December 1996, it had to submit its countermemorial within the three months following the receipt of these memorial. By
letter of 21 April 1997 the Minister for Justice informed icsid that the memorial
had reached him on 18 April and that we are going to make every effort to respond
to it without delay. The time-limit for the submission of the counter-memorial
thus expired on 18 July 1997.
38. In the meantime, Mr Nassib G. Ziade, called upon to perform other duties,
had been replaced as secretary of the Tribunal by Mr Andrea E. Rusca, who was
succeeded from the month of December 1997 by Ms Eloise M. Obadia.
AWARD
15
[472] 39. By letter of 17 July 1997 addressed to the secretary of the Tribunal the
Minister for Justice of Burundi asked for an extra period of 40 days to be made
available pending the intervention of an amicable settlement. The claimants had
made known their opposition to the granting of any extra period by letter of 10 July
1997. The extra period requested by the Government of Burundi was nevertheless
accorded to it by the arbitral Tribunal on 21 July, the time-limit for the deposition
of the counter-memorial thus being pushed back to 27 August 1997. The attention
of the parties was directed to the exceptional character of this extra period, at the
expiration of which, it was noted, the provisions of the Treaty and of the Arbitration
Rules of icsid regarding one partys default would be invoked.
40. By letter of 24 July 1997, the claimants requested that in the event that
the counter-argument had not been submitted in time the proceedings should be
continued in accordance with the provisions of Article 45 of the icsid Convention
and of Article 42 of the Arbitration Rules. This request was reiterated by letter of
2 September 1997.
41. By letter of 8 September 1997 the secretary of the Tribunal informed the
parties that in application of Article 45 of the Treaty and of Article 42 of the
Arbitration Rules of icsid, the arbitral Tribunal had decided to extend a period of
grace ending on 10 October 1997 to the Republic of Burundi for the submission of
its counter-memorial.
42. On 30 September 1997 the Minister for Justice, announcing his complete
determination to definitively settle the dispute with affimet, informed the Tribunal, by means of a letter to its President, that the government of Burundi have
already begun a series of consultations with the above company with a view to
reaching an amicable settlement of the dispute; concrete proposals, he noted, had
just been communicated to the company. Considering that the submission of the
counter-memorial should not pre-empt affimets reaction to these proposals, the
Minister requested an extra period of 45 days for the submission of the countermemorial.
43. On 7 October 1997 the secretary of the Tribunal addressed the following
letter to the Minister for Justice:
...
Having consulted the two other members of the Tribunal, the President of the Tribunal
has requested me to indicate the following to you:
[473] . . .
3. The granting of the extra period that you seek should be seen as an extension of
the period of grace, which, by the terms of paragraph 2 of Article 42 of the Arbitration
Rules should not, without the consent of the other party, exceed 60 days. In these
circumstances, and in the absence of the consent of the claimants, the Tribunal considers
that would not be appropriate to extend to the Republic of Burundi the delay which it
seeks.
4. Under the terms of paragraph 3 of the same Article 42, after the expiry of the
period of grace . . . the Tribunal should continue with its examination of the dispute.
In consequence, in the event that the Republic of Burundi has not deposited its countermemorial by 10 October 1997 at the latest, the Tribunal will continue its examination
of the dispute by fixing a date for the stage of oral proceedings, in accordance with the
relevant provisions of the Arbitration Rules.
16
GOETZ v. BURUNDI
5. The Tribunal wishes to remind the parties that the initiation of arbitration proceedings does not in any way inhibit the parties from seeking an amicable settlement
of their dispute. At any time during the proceedings, and by mutual consent, they can
inform the Tribunal of such and ask for the suspension of proceedings or for the hearing
to be brought to an end. The attention of the parties is directed in this regard to Article
43 of the Arbitration Rules.
44. On 15 October 1997 the secretary of the Tribunal, stressing that the countermemorial of the defendant had not reached him within the period of grace allowed,
which expired on 10 October 1997, informed the parties that in accordance with
Article 42(3) of the Arbitration Rules the Tribunal had decided to continue with
the examination of the dispute and had fixed the beginning of the oral phase of
proceedings for 1 December 1997 at 10 am at the headquarters of the World Bank
in Paris.
45. On 28 November 1997 the government of the Republic of Burundi made
known, by letter to the secretary of the Tribunal, that it requested the Tribunal to
demonstrate more patience and that it sought a moratorium of one month from
this day, in order not to compromise [474] the chances of success of the first attempt
at settlement already set in train by the two parties.
46. At the first hearing on 1 December 1997 the claimants were represented by
Master Herbosch, accompanied by Mr Antoine Goetz. The Republic of Burundi
was not represented. The report of the oral proceedings for 1 December 1997 reads
as follows:
1. The hearing opens at 10.05 am by the President of the arbitral Tribunal (the
President).
2. The President notes and regrets the absence of the Republic of Burundi.
I Course of the proceedings
3. The President recalls the salient aspects of the sequence of the arbitration proceedings to this date. The President stresses that from the moment that it selected one
of the arbitrators, the Republic of Burundi demonstrated its intention to participate in
the hearing and to put forward its own memorial. The President notes that at no stage,
since then, has the Republic of Burundi indicated that it had decided not to participate
in the hearing or to put forward its own side.
4. The President adds that the Republic of Burundi requested on several occasions that
the arbitral Tribunal put back the dates fixed for the various stages of the proceedings
or to accord to it extra periods of grace and that the arbitral Tribunal had accorded
numerous such periods to the Republic of Burundi, sometimes with the consent of the
claimants, sometimes despite their objections. The President notes that the secretariat
of icsid has entered into contact by telephone with the government of the Republic
of Burundi at every stage of the proceedings to inform it of the desire of the arbitral
Tribunal that it participate in the hearings. The President has had the opportunity to
present his own views by telephone to the head of the office of the Minister for Justice
of Burundi.
5. The President indicates that the first session of the arbitral Tribunal, which had to
be held within 60 days from the constitu-[475]tion of the Tribunal, was put back twice
at the request of the Republic of Burundi. The President stresses that no representative
AWARD
of the Republic of Burundi was present at this session, but that a summary transcript of
this session was communicated to the Republic of Burundi. This last also made known
the time-limits fixed by the arbitral Tribunal for the submission of its conclusions.
6. The President observes that in acknowledging receipt of the claimants memorial
(the memorial), the Republic of Burundi informed the secretariat of icsid of its intention
to respond to [it]. The President adds that the Republic of Burundi sought an extra
period of 40 days for the submission of its counter-memorial on 17 July 1997; this
period was allowed to it, the attention of the parties nonetheless being directed to
the exceptional nature of this extra period, at the expiration of which the provisions
of the Treaty and of icsid Arbitration Rules regarding one partys default would be
applied.
7. The President notes that, the counter-memorial of the Republic of Burundi not having been submitted at the conclusion of the extra period, the arbitral Tribunal accorded
to the Republic of Burundi, in accordance with Article 45 of the icsid Convention and
of Article 42 of icsid Arbitration Rules, a period of grace expiring on 10 November
1997. The arbitral Tribunal subsequently rejected a request from the Republic of Burundi seeking a 45-day extension of the period of grace, this period not being capable,
under the term of Article 42(2) of icsid Arbitration Rules, of exceeding 60 days. The
arbitral Tribunal, at the same time, reminded the parties that the pursuit of arbitration
proceedings in no way excluded the search by them of an amicable solution to their
dispute.
8. The President expressed his regret, in the name of the arbitral Tribunal, that the
Republic of Burundi had not submitted its counter-memorial and was not present for
the opening of oral proceedings. The President recalled however that under the terms of
Article 45(1) of the icsid Convention, Failure of a party [476] to appear or to present
his case shall not be deemed an admission of the other partys assertions.
9. The President recalled that Article 42(4) of icsid Arbitration Rules requires the
arbitral Tribunal, when one party defaults, to examine independently the question of
the Centres jurisdiction and that of its own jurisdiction and to take into account all
factual and legal factors relevant to the settlement of the dispute.
10. The President informs the claimant that the arbitral Tribunal has just become
aware of a letter dated 28 November 1997 from the Minister for Justice of the Republic
of Burundi requesting a moratorium of one month in order to pursue negotiations with
the claimant. The President adds that the Tribunal has decided to pursue its examination
of the case.
11. The President draws the attention of the parties once more to the text of Article
43 of icsid Arbitration Rules by virtue of which if the parties, before the award has been
given, agree to settle the dispute amicably or otherwise to put an end to the hearing, the
Tribunal will announce the end of the hearing by order, on written notification from
the parties. It is thus for the parties, if they wish, to pursue their negotiations and to
inform the Tribunal of the agreement which they have arrived at.
12. Master Herbosch underlines that the Republic of Burundi has not responded to
the proposal suggesting a preliminary conference with view to reaching an amicable
settlement of the dispute. He adds that the preliminary discussions between the parties
envisaging an amicable settlement have not yet arrived at any result but that the claimant
continues to wish to settle the dispute amicably in a manner acceptable to both parties.
13. Master Herbosch sets out the principal strands of his memorial. The President
requests Master Herbosch, in the name of the arbitral Tribunal, to explain further a
number [477] of matters and invites him to submit written responses. These details
relate both to questions of fact and to law.
17
18
GOETZ v. BURUNDI
II Questions of fact
14. The arbitral Tribunal is astonished at how quickly affimet (the company) applied
for and received the free zone certificate, that is to say hardly a month after its formation.
The claimant indicates that the formation of the company in fact came in the wake of an
urgent request from the Burundian authorities. The Tribunal asks it to provide evidence
for this claim.
15. The Tribunal wishes to be enlightened as to the companys activities following
the granting of the free zone certificate:
15.1 Did the business of Tony Goetz continue to operate following the formation
of the company and the granting of the free zone certificate to this company? Annex
28 of the memorial relies on two documents dated 3 and 4 May 1993 regarding
communications between this business and the company: does this imply that in
AprilMay 1993 that business continued to operate alongside the company?
15.2 It appears from the documents cited in this same Annex 28 that from spring
1993 the Burundian administration appeared uncertain and divided as regards the
eligibility of minerals and of gold for the free zone regime. The measures to execute envisaged at Article 2 of the order of 28 September 1992 moreover were not
taken, and have not been since then. Why, in these circumstances, did the company
nevertheless proceed with the significant investments described in its memorial?
15.3 What was the companys situation during the period of suspension of the
certificate, that is to say between 17 August 1993 and 10 January 1994? The fact
that the claimants are requesting the reimbursement of taxes and duties paid during
this period suggests that some activities did take place: what were they?
[478] 15.4 What has the situation of the company been since the withdrawal of the
free zone certificate on 29 May 1995? The memorial indicates that this withdrawal
had as a direct and immediate consequence the halting of all of the companys
activities (p. 28). In a letter of 25 August 1995 to the Ambassador of Belgium in
Bujumbura the company wrote to the contrary: since the illegal withdrawal of our
certificate . . . duties and taxes have wrongly been imposed on all of our companys
exports (Annexe 28, p. 6); and in its memorial the claimant requests the repayment
of these taxes and duties. What were they exactly?
16. The arbitral Tribunal enquires as regards as to the situation of the bank and the
jewellers project which is referred to in a presentation report of April 1995 reproduced
in Annexe 2 of the memorial (pp. 41 and 44). The claimant indicates to the Tribunal
that the bank is pursuing its activities within the context of the free zone regime and
that the jewellers project is pending.
17. In response to a question from the Tribunal, the claimant indicates that:
the Tony Goetz business was the only one of its type to convert itself into a
gold and precious metal treating company and to seek the benefit of the free
zone regime;
to its knowledge, the only other case of withdrawal of the certificate following
an order concerned the Ejumeau company, whose activities centred around
tin.
18. Master Herbosch notes at the request of the Tribunal that the exchange rate is
1 US Dollar to 406 Burundian francs and 1 Belgian franc to 11.5 Burundian francs.
III Questions of law
19. The arbitral Tribunal proceeds then to setting out the questions of law. The
arbitral Tribunal wishes first of all [479] to examine the request of the claimant during
AWARD
the period of the certificates suspension. Master Herbosch responds that the request
does not envisage the annulment of the decision to suspend, and limits itself to seeking
the repayment of the taxes and duties paid during this period.
20. In response to a question from the Tribunal, Master Herbosch indicates
that the argument previously advanced by the claimant to the effect that the noneligibility of minerals for the free zone regime did not apply to gold and to
precious metals (Annexes 16 and 17 of the memorial) must be considered as put
before the Tribunal although it was not expressly stated in the claim and in the
memorial.
21. The arbitral Tribunal wishes to obtain further details as regards the claim of
a subsidiary order for damages. Master Herbosch indicates that this claim is not
subsidiary as regards the arbitral Tribunal but rather as regards the Republic of Burundi
in the event that this last was ordered to annul the order of 29 May 1995 and refused
to go ahead with this annulment.
22. The arbitral Tribunal examines various legal aspects of the claim and asks the
following questions:
22.1 Does the arbitral Tribunal have the power to impose an obligation to do
something on the Republic of Burundi, in this case to annul the order of 29 May
1995?
22.2 How can the application of the Treaty between the Belgo-Luxembourg
economic union and the Republic of Burundi regarding the reciprocal encouragement and protection of investments be justified, since it is a treaty which only
came into force 30 days after the exchange of the instruments of ratification, an
event which took place on 13 August 1993?
22.3 To what extent do the provisions of this treaty regarding nondiscrimination against foreign investments apply in this case, since it seems that
no other [480] companies were placed in similar situations?
22.4 Why were the present proceedings before icsid brought by the investing
persons who hold shares in the company, whilst those before the Burundian
Administrative Court were brought in the name of the company?
22.5 The Tribunal wished to be given some information as regards the law
applicable to the case:
22.6 What is the hierarchy between the sources of law set out in Article 8 of the
treaty between the BelgiumLuxembourg union and the Republic of Burundi?
22.7 Has international law been incorporated into the domestic Burundian legal
order?
22.8 What are, according to Burundian administrative law, the circumstances
required in order to be given compensation in the event of the changing of a
regulation by the Burundian State (the said case-law of the legislating State,
invoked by the claimant)?
22.9 Does the International Pact on economic and social rights quoted in the
memorial bind the parties in this case?
23. The arbitral Tribunal wishes to be given further details as concerns the juridical
standing of the compensation required by the claimant. More precisely, is this request
founded on the illegality of the withdrawal of the certificate or on the said theory of
the responsibility of the legislating state?
24. The arbitral Tribunal enquires regarding the size of the compensatory sum of
175,000,000 US dollars sought as a subsidiary order and requests the claimants to
furnish some details in this regard.
19
20
GOETZ v. BURUNDI
IV Documents to be produced
25. The arbitral Tribunal asks Master Herbosch to produce the following documents:
[481] 25.1 the documents cited at points 17, 18 and 19 of Annexe 28 to the
memorial;
25.2 the interlocutory decision of the Administrative Court of the Republic of
Burundi declaring the request for the annulment of the order of 29 May 1995 put
forth by the company as capable of being heard;
25.3 the International Pact on economic and social rights.
V. Remainder of the proceedings
26. The arbitral Tribunal asked the claimant to submit its written answers in as
precise a manner as possible and accompanied by the relevant documents which would
be communicated to the Republic of Burundi. The arbitral Tribunal adds that the
defendant may enlighten the Tribunal on the same points. However, the Republic of
Burundi can in no way put forth a counter-argument.
27. The arbitral Tribunal indicates that the claimants as well as the defendant, if it
wishes, have until 31 January 1998 to submit their written remarks on the questions
raised by the arbitral Tribunal.
28. Further oral submissions not being requested, the session closed at 12.35 am.
29. The session was the subject of a sound recording which will be passed to both
parties.
47. The report of the oral proceedings was passed to the parties by the secretary
of the Tribunal on 5 January 1998. A certified copy of this text, accompanied by
tapes of the session, was sent to the parties by the secretary of the Tribunal on 15
January 1998.
48. On 30 January 1998 the claimants written answers to the questions of fact
and law posed by the Tribunal arrived at the Tribunal. The defendant submitted
neither observations nor any other documents for the dossier.
[482] 49. On 3 March 1998 counsel for the claimants passed to the Tribunal
a copy of the letter sent by the Government of Burundi to Mr Antoine Goetz
dated 26 February 1998. This letter asserted that the Government was somewhat
perturbed to be following both judicial proceedings and settlement proceedings at
once and suggested that they jointly notify the Tribunal that the parties are in
the course of searching for a compromise and seeking on its part the suspension
of the proceedings for which it is the mechanism of deliberation. Counsel for the
claimants contested for his part that there had been some negotiations that were
on the brink of concluding and informed the Tribunal that his clients opposed the
request of the Republic of Burundi to suspend the arbitration claim underway.
C. The Defendants Failure to Set Out His Side of the Case
50. By selecting one of the arbitrators the Republic of Burundi had manifested its
intention to participate in the proceedings. At the time of selecting Judge Bedjaoui
as arbitrator it noted, as indicated above, that this proposal did not prevent (it)
from raising any exception (that it) judged useful at any time. At no moment in
the course of proceedings did the Republic of Burundi declare, or even give to
AWARD
21
understand, that it had decided, or that it might decide, not to participate in the
hearings or to put forward its side of the case. Quite the contrary, as indicated
previously, the Republic of Burundi on numerous occasions requested icsid and
the Tribunal to push back the dates fixed for the various stages of the proceedings
and to allow it extra time extensions; and in acknowledging receipt of the claimants
memorial of 21 April 1997, the Republic of Burundi informed the secretary of the
Tribunal that it was going to do all it could to respond to it without delay hence
confirming that it did not intend to default.
51. Conscious of the difficulties that Burundi has found itself in over a number of
years and wishing to facilitate an amicable settlement, the arbitral Tribunal allowed
it numerous time extensions, sometimes with the consent of the claimants and
sometimes despite their objections. At every stage of the proceedings the secretary
of the arbitral Tribunal has entered into contact with the government of the Republic
of Burundi by telephone in order to inform it of the wish of the Tribunal that it
participate in the hearings, to assure it of the Tribunals understanding and to stress
that it was in Burundis own interest not to leave the proceedings to go [483] by
default. The President of the Tribunal himself had the opportunity to present his
views to the Minister for Justice of Burundi by telephone.
52. Under the terms of Article 45, paragraph 1, of the icsid Convention,
Failure of a party to appear or to present his case shall not be deemed an admission of
the other partys assertions.
Article 42 of the Arbitration Rules makes it clear that

If a party . . . fails to appear or to present its case at any stage of the proceeding, the
other party may, at any time prior to the discontinuance of the proceeding, request the
Tribunal to deal with the questions submitted to it and to render an award.
...
The Tribunal shall examine the jurisdiction of the Centre and its own competence
in the dispute, and, if it is satisfied, decide whether the submissions made are wellfounded in fact and in law. To this end, it may, at any stage of the proceeding, call on
the party appearing to file observations, produce evidence or submit oral explanations.
53. The Tribunal strongly regrets that the defendant, even if it has not defaulted
in the true sense of the term, has abstained from putting forward its side of the
case. As the International Court of Justice declared, a situation of this kind clearly
carries negative consequences for the proper administration of justice.3 By not
submitting the counter-memorial, by not presenting itself for the oral proceedings,
by not submitting any observation to the Tribunal other than the requests for the
extension of time-limits or for the suspension of the proceedings, the Republic
of Burundi has deprived the Tribunal of assistance which could have clarified the
defendants memorial or led to the production of some documents or some other
piece of evidence.
3
Military and paramilitary activities in Nicaragua and against this last (Nicaragua v. US) ICJ Reports
1986, p. 23, para. 27.
22
GOETZ v. BURUNDI
[484] 54. The previously cited provisions of the Treaty and of the icsid Arbitration
Rules clearly being inspired by those of Article 53 of the Statute of the International
Court of Justice, the Tribunal considers that it is appropriate to refer to the principles
enunciated by the International Court of Justice.
55. In the first place, in no case of non-participation by a party to the proceedings or to any phase of such is the validity of the eventual judgment threatened.4
The State which defaults or fails to put forward its memorial must accept the
consequences of its decision, the first of which is that the hearing will go ahead
without it; it remains however a party to proceedings and the eventual judgment
binds it . . .5
56. In the second place, it is . . . out of the question that (the Tribunal) will
pronounce automatically in favour of the party appearing since it is obliged to
ensure that its findings are well-founded in fact and in law and to this end it can, at
any stage of the hearings, invite the party that is pleading to submit its observations,
to produce evidence or to give oral explanations. As regards the law, the Tribunal
regrets not being able to hear the views of the defendant on Burundian constitutional
and administrative law. As regards the facts, the Tribunal, applying the principle set
out by the International Court of Justice according to which this last is not obliged
to limit itself to the elements of the case formally submitted to it by the parties,6
has sought, via the questions posed in the course of the hearing of 1 December
1997, to complete the information available to it. It is however necessary not to lose
the perspective that, as the Court has declared,
. . . one would be simplifying too much in concluding that the only inconvenient aspect
of the absence of one party is that this party thus deprives itself of the opportunity to
put forth evidence and memorial in support of its own position . . . The absent party
also surrenders the possibility of responding to the factual allegations of its adversary.7
The Tribunal, like the Court, is certainly obliged to proceed to an examination

of the conclusions of the party pleading; it is not however obliged to verify all
details of it in their minutiaa task which, in certain [485] cases and in the absence
of contradiction, could reveal itself as totally impossible.8
57. The International Court of Justice has declared that
The vigilance that the Court is doubtless obliged to exercise when it benefits from the
presence of both parties to a case has as a corollary the special care that it must take
to properly administer justice in a case where only one of them is participating in the
hearing.9
The Tribunal reminded itself of this governing principle.
Loc. cit.
Op. cit., p. 24, para. 28.
6
Op. cit., p. 25, para. 30.
7
Ibid.
8
Ibid.
9
Op. cit., p. 26, para. 31.
5
AWARD
23
III. The Claim

58. In their claim the claimants requested the annulment of the decision of 29
May 1995 withdrawing the free zone certificate and, as a subsidiary claim, that the
Republic of Burundi be ordered to pay damages.
59. This claim was elaborated in the claimants memorial. In this document the
claimants requested the Tribunal to order the Republic of Burundi:
to annul ministerial order no 750/184 of 29 May 1995 and the decision to withdraw the free zone certificate of the same day and to return the claimants to the
position they found themselves in after 3 February 1993 thanks to the granting
of this certificate;
to reimburse the taxes and duties taken, on the one hand during the period of
suspension of the free zone certificate between 20 August 1993 and 10 January
1994, on the other hand since the withdrawal of the certificate on 29 May 1995,
as well as the taxes paid to the National Laboratory for the examination and
analysis and the convertible stocks exchanged for Burundian francs during these
same periods; [486]
to compensate the investors for the damage caused by the stoppage of the construction works on the factory and for the loss caused by the said stoppage and
by the stoppage of commercial operations;
to order the Republic of Burundi to pay the costs of the arbitration and all
additional and extrajudicial charges necessary to uphold the rights of the investors and to make up for the inconvenience and loss of time caused by the
proceedings.
60. The Tribunal is also requested, in the event that the Republic of Burundi
refuses to annul the withdrawal of the free zone certificate and to return this certificate to the claimants, to order it to pay damagesadjusted to include interest
from 29 May 1995designed to cover the expected benefit, the infrastructural
spending thus rendered useless, as well as the intrinsic value of the property of the
affimet corporation and the loss of return and profitability of the company over
15 years.
61. The claims set out over the two previous paragraphs are presented in the
memorial as being formulated respectively as a principal argument and as a
subsidiary argument. In response to a question from the Tribunal counsel for the
claimants has noted that it is not requested that the Tribunal should accede to the
second of these type of claims if it does not accede to the first, but that it should
decide that Burundi must satisfy the first type of claim and, if it chooses not to do
so that it must satisfy the second.
IV. The Principal Characteristics of the Case

62. The case before the Tribunal presents two principal characteristics, which it
is useful to point out.
24
GOETZ v. BURUNDI
A. The Dominant Feature is the Existence of a Bilateral Treaty for the

Encouragement and the Protection of Investments
63. The case provides, firstly, an illustration of the influence exercised on the
mechanisms of icsid by the growing practice of bilateral treaties aimed at encouraging and protecting investments. Since 1985 the number of these treaties increased
from 220 to around 1,100, as is demonstrated by a recent study, which talks in this
respect of dramatic [487] growth.10 At the present time, 160 States are parties to
such treaties. Moreover, as the same study indicates, a great number of these treaties
envisage that disputes between one of the States and an investor that is a national
of the other party should be submitted to icsid for settlement and/or arbitration.11
The significance of this phenomenon should not be underestimated.
64. In a general context, the existence of a bilateral treaty to encourage and protect
investments demonstrates the willingness of States to place investments made by
nationals of one or the other State on the territory of the other within the safety-net
of inter-State relations and the protection of international law, and it may often be
helpful to speak in this regard of an umbrella agreement. It is one of the chief
attractions of icsid, created by the the icsid Convention of 1965, and also one of
the reasons for its huge success, that it places the settlement of disputes regarding
investments under the protection of an international mechanism founded on the
consent of the interested parties.
65. In the present case, in consequence, the duty for the Republic of Burundi to
respect not only international law, but also the provisions of the Treaty that it concluded with the BelgiumLuxembourg union, is nothing more than the expression
of its national sovereignty in the full sense of that term. It is appropriate to recall
in this regard the celebrated dictum of the Permanent Court of International Justice
in the SS Wimbledon case:
The Court declines to see in the conclusion of any Treaty by which a State undertakes to perform or refrain from performing a particular act an abandonment of its
sovereignty . . . [T]he right of entering into international engagements is an attribute
of State sovereignty.12
One might equally invoke the principle, enunciated by Max Huber in the arbitration award relating to the Island of Palmas, according to which terri-[488]torial
sovereignty includes not only the exclusive right to exercise State activities but
also the corollary of the duty to protect on the territory of the State the rights of
nationals of other States.13 It falls to the Tribunal, therefore, as we will see later, to
take into consideration both the powers that the Republic of Burundi draws from its
sovereignty and of its domestic law as regards foreigners who invest in its territory
10
Antonio R. Parra, Provisions on the Settlement of Investment Disputes in Modern Investment Laws,
Bilateral Investment Treaties and Multilateral Instruments on Investment, ICSID ReviewForeign
Investment Law Journal, vol. 12, 1997, pp. 2901.
11
Op. cit., p. 323.
12
PCIJ series A no. 1, p. 25.
13
United Nations, Arbitration Awards Reports, vol. II, p. 839.
AWARD
25
and, at the same time, of the duties which it freely assumed in becoming a party to
the BelgiumBurundian Investment Treaty of 1989.
66. Legally, the influence of a bilateral treaty to protect investments is exerted
both as regards jurisdiction and on the level of the applicable law.
67. As regards the jurisdiction of icsidand, in consequence, that of the arbitral Tribunal, it finds its basis not in an agreement concluded between the State
hosting the investment and the foreign investor but directly in the convention concluded between the host State and the State of which the investor is a national. The
fundamental requirement of the consent of the parties, set out in Article 25 of icsid
Convention, thus finds itself manifested in a novel manner, one which hardly could
have been envisaged at the time of icsid Conventions framing, at a time when the
idea of bilateral investment treaties was still at an embryonic stage.14 The present
case is only the second in the case-law of icsid to fit within such a framework.
There is no doubt, however, that a situation of this kind will present itself more and
more frequently in the future.
68. The bilateral investment protection treaty is not limited however to providing a basis for the Centres and the Tribunals jurisdiction; it also determines the
applicable law. The present case is one of the first in the case-law of icsid to have
unfolded in such a manner. Given the growing number of choice of law clauses
being inserted in investment treaties, as well their great diversity,15 a situation of
this kind will also be found to present itself more and more often.
[489] 69. It is not without interest at this point to note that the fairly common
reference, within the choice of law clauses inserted in treaties for the protection of
investments, to the provisions of the treaty itselfand, more broadly, to the rules and
principles of international lawhas caused, after a certain reversal both in practice
and in the case-law, a remarkable return to the area of legal relations between States
and foreign investors for international law. This internationalisation of investment
relationshipswhether they be contractual or otherwisehas certainly not led
to a radical denationalisation of the legal relations springing from international
investment, to the point that the domestic law of the host State would be deprived of
all relevance or application in the interests of an exclusive role for international law.
It merely signifies that these relations relate at oncein parallel, one might sayto
the sovereign supremacy of the host State in domestic law and to the international
undertakings to which it has subscribed.
70. The Tribunal asks itself to what extent, taking account of the date of its
coming into force, the Treaty concluded between the BelgiumLuxembourg Union
and the Republic of Burundi regarding the reciprocal encouragement and protection
of investments is applicable to the present case. It is hardly necessary to recall that
international law shows particular rigour in relation to the date of coming into force
of international agreements.16 In this case, if the Treaty was signed on 13 April 1989
14
See Christoph Schreuer, Commentary on the icsid Convention, ICSID ReviewForeign Investment
Law Journal, vol. 11, 1996, p. 441.
15
Ibid., pp. 416, 422, 433. Cf. Parra, op. cit. supra note 10, p. 332.
16
The International Court of Justice decided thus that even when a State had signed and ratified the
protocol of signature of the Statute of the Permanent International Court of Justice it had not become
a party to this treaty since it had not lodged its instrument of ratification of this treaty: Military and
26
GOETZ v. BURUNDI
and ratified on 4 April 1991 by Burundi and on 19 April 1991 by Belgium, it only
came into force, in reliance on Article 10 of the Treaty itself, thirty days after
the exchange of the instruments of ratification; this exchange having taken place
on 13 August 1993, it was therefore only on 13 September 1993 that the treaty
came into force. Yet the legislative and regulatory Burundian texts establishing the
free zone regime (Decree-law no. 1/30 of 31 August 1992 and ministerial order
no. 750/415 of 28 September 1992) came prior to that date, as did the formation
of the affimet company (22 December 1992), the request from affimet [490] for
the free zone certificate (2 January 1993) and the granting to affimet of the free
zone certificate (3 February 1993).
71. The Tribunal notes however that neither the legality of the Burundian texts
governing the free zone regime nor the formation of the affimet corporation nor
even the request for the granting to affimet of the free zone certificate are at issue in
the dispute before the Tribunal. In particular, the Tribunal is not required to enquire
into the legality of the decision according the benefit of the free zone regime to
affimet even though the measures to apply this regime to minerals had not yet been
taken. The event at the root of the dispute is the decision to withdraw the free zone
certificate dated 29 May 1995, and this event took place after 13 September 1993,
the date of the coming into force of the investment treaty. The legality and the legal
consequences of the decision must be examined in relation to the rules in force at
the date when this decision occurred, that being 29 May 1995. Among these rules
figures the Treaty which has bound the parties since 13 September 1993.
72. As regards the jurisdiction of the Tribunal and its capacity to hear this claim,
it should be examined, according to the principle recently reasserted by the International Court of Justice, at the date of the filing of the claim,17 that is to say, in
the present case, on 8 December 1995, therefore, there again, in the light, among
other documents, of the BelgiumBurundian treaty on investment in force since
13 September 1993.
73. The BelgiumBurundian treaty on the protection of investments is, in consequence, entirely applicable to the dispute which the Tribunal has to decide.
B. The Case does not involve a State Contract
74. The second major characteristic of the present case is that it does not involve a
State contract and does not therefore raise the problems, often difficult ones, which
stem from such contracts. In consequence, the Tribunal is not obliged to enquire as
to the importance to accord to the principle of pacta sunt servanda in the context of
contractual relations between a State and a foreign investor. More specifically, the
State does not have to examine the effects [491] of the presence in a State contract
of a clause freezing the relevant domestic law, especially in fiscal and customs
matters, and protecting the investor against all modifications of this law (known as
a stabilisation clause), or of a clause under which the contracting State renounces
paramilitary activites in Nicaragua and against this last (Nicaragua v. United States), jurisdiction and
capacity to hear, ICJ Reports 1984, p. 404, paras. 256.
17
Issues of interpretation and of application of the 1971 Montreal Treaty resulting from the Lockerbie
aerial incident (Libya v. USA), paras. 37 and 42.
AWARD
27
all power to intervene in contractual relations (a so-called intangibility clause18 ).

Nor are we confronted in the current case with a situation whereby the legislation
of the host Statean investment code, for exampleprotects the investor from any
change in the legislative regime, especially in fiscal or customs matters. Neither the
Decree-law instituting the free zone regime nor the orders taken to apply it contain
any guarantee of this kind.
75. The Tribunal could furthermore enquire as to whether the conjunction of the
request for the free zone certificate lodged by affimet and of the decision granting
to it this certificate would not stem from a contractual situation which could despite
everything cause this case to be assimilated to a State contract case. In a previous
icsid case, the Tribunal effectively considered that the legal relation born of a request
to authorise an investment followed by the granting of such an authorisation could
be analysed as a sui generis relationship capable of being assimilated to a contract.19
Contrary to the claimants actions in that case, the claimants have not suggested
in this case that outside the unilateral act in question was a contractual situation.
Furthermore, nothing permits us in this case to have the slightest doubt as to the
strictly unilateral character of the legal relation born both from the granting to
affimet of the free zone certificate and from its revocation. The text of Decreelaw no. 1/30 of 31 August 1992 regarding the creation of the free zone regime in
Burundi is decisive in this regard. This regime is defined by the Decree-law as the
special legal status accorded to certain businesses . . . in the circumstances laid
down by the present Decree-law . . . The free zone certificate [492] is defined as
the certificate granted by the Minister. The Minister has the power to certify any
company . . .. On the advice of the consultative commission the Minister takes the
final decision. Any company which has submitted a request for a certificate . . .
must receive a response within thirty days . . .; this response will detail the type
of activities in which the free business must participate and fix the time-limit
for the initiation of operations as well as other details related to the functioning
of the company. In case of the repetition of certain violations the Minister can
revoke the certificate of this company. Nor does the text itself of the certificate
granted to affimet on 3 February 1993 allow the strictly unilateral character of
the certificate to be cast in doubt: this certificate, let it be noted, is granted on the
following conditions: (a) the activities of the company are: . . . (b) The company
start its operations by 1 July 1993 at the latest. In the event that the company has not
begun its activities by this date, it exposes itself to the risk of seeing its certificate
annulled . . .
18
Cf. Prosper Weil, Stabilisation Clauses or Intangibility Clauses Inserted into Economic Development
Agreements, in: The International Community. Articles for Charles Rousseau, Paris, Pedone, 1974,
p. 301.
19
Amco Asia Corporation and Others v. Republic of Indonesia (1984), International Legal Materials,
vol. XXIV, 1985, p. 1030, para. 189: . . . the relationship established between foreign enterprise and a
State by an investment application on the one hand and the approval of the same on the second . . . should
not be characterised as a contract as such, but rather as a sui generis legal relationship, comparable to a
contract. Indeed, in the Tribunals view, such a relationship does not draw its source from a unilateral act
of the State, but from a bilateral agreement between the State and the foreign applicant whose application
is approved by the State.
28
GOETZ v. BURUNDI
76. The decision granting to affimet the free zone certificate as well as the
decision revoking this certificate are both, in consequence, unilateral acts of the
Burundian State. The present case does not raise any specific problem regarding
contracts of State.
V. The Jurisdiction of the Centre and of the Tribunal

77. At the time of choosing the method of forming the arbitral Tribunal envisaged
in Article 37, paragraph 2 of the icsid Convention, the Republic of Burundi, we have
seen previously, reserved itself the right to raise, if necessary, objections relating
to the Tribunals lack of jurisdiction or to its lack of capacity to hear the claim
before it. In proceeding at a later stage to the nomination of one of the arbitrators
in accordance with the above provision, the defendant confirmed this reservation in
noting that the present proposal, does not prevent (it) raising any exception (that
it) regards as appropriate at any time.
78. No objection to the jurisdiction of the Centre or of the Tribunal has been
raised by the Republic of Burundi in the course of the written or oral proceedings.
79. The Tribunal must do more, however, than make this statement, since Article
42 of the Arbitration Rules obliges it, if one party [493] defaults or fails to put
forward its side of the case, to examine whether the dispute is or is not within the
jurisdiction of the Centre and its own competence.
80. As the Report of the Executive Directors on the icsid Convention notes, the
consent of the parties is the cornerstone of the jurisdiction of the Centre.20 It does
not however suffice that the State of the investor and the host State are both parties
to the icsid Convention, it is also necessary that the parties to the disputethat is to
say the investor and the host Statehave consented to the Centres jurisdiction. Its
written form apart, the expression of consent is not subjected to any strict rules. As
the already cited Report notes, consent can be given, for example, in a provision
of an investment agreement envisaging the submission to the centre of disputes
which might later unfold, or in a compromise concerning a dispute that has already
begun.21 Furthermore, the Report notes, the Convention does not require that the
consent of the parties be expressed in a single instrument.22
81. As with the observation already made above, the present case illustrates
a tendencywhich can only increase with the growth in bilateral investment
agreementsto base the jurisdiction of the Centre not on a specific arbitration
treaty but on an investment treaty of general scope concluded between a host State
and the State of the investor. The case-law of icsid includes at least two relevant
precedents in this regard: the case of Asian Agricultural Products Ltd (AAPL) v.
20
Report of the Executive Directors on the Convention for the Settlement of Disputes relating to Investments between States and Nationals of Other States, 18 March 1965, Doc. CIRDI/ 2, para. 23 [1 ICSID
Reports 28].
21
Op. cit., para. 24.
22
Loc. cit.
AWARD
29
Republic of Sri Lanka23 and the case of American Manufacturing and Trading Inc.
v. Republic of Zaire.24 The award given in the latter case notes that to the consent
of the two parties to the investment [494] protection treaty must be added that of
the parties to the dispute: the consent of the host State, it indicates, derives from its
signing the treaty; as regards the consent of the investor, it derives from the lodging
of its claim for arbitration.25 A situation of the same type exists in this case. To the
consent of the interested Statesthe Republic of Burundi and Belgiumresulting
from their signing of the investment treaty is added that of the parties to the dispute:
the consent of the Republic of Burundi derives from its ratification of the Treaty;
that of the claimants derives from the lodgement of the claim for arbitration.
82. The Report of the Executive Directors mentioned above adds that
While consent of the parties is an essential prerequisite for the jurisdiction of the Centre,
consent alone will not suffice to bring a dispute within its jurisdiction. In keeping with
the purpose of the Convention, the jurisdiction of the Centre is further limited by
reference to the nature of the dispute and the parties thereto.26
In the present case, the jurisdiction of the Centre has been established as regards
all of these conditions.
83. As regards the nature of the dispute, Article 25 of the icsid Convention
limits the jurisdiction of the Centre to legal disputes . . . which relate directly
to an investment. According to the Executive Directors Report, the condition of
a legal dispute as against simple conflicts of interest, means that [t]he dispute
must concern the existence or scope of a legal right or obligation, or the nature or
extent of the reparation to be made for breach of a legal obligation.27 The present
dispute, which relates to the legality of a decision putting an end to the benefit of
the free zone regime and to the possible granting of a remedy, clearly fulfils the
required condition. The dispute also satisfies the condition of a direct link with an
investment: it suffices in fact to have reference to Article 8, paragraph 1, of [495]
the BelgiumBurundi investment treaty in order to assert that the dispute before the
Tribunal is of the type which this provision defines as disputes relating to investments, in other words disputes concerning the interpretation or the application of
any investment authorisation accorded by the authorities of the host State which
governs foreign investments as well as the allegation that any right conferred or
established by the present treaty regarding investments has been violated.
84. As regards the identity of the interested parties, Article 25 of the icsid Convention limits the jurisdiction of the Centre to disputes between a contracting
State . . . and a national of another State. If this last is a natural personwhich in
practice in icsid does not occur that frequently, he must possess nationality of the
23
Asian Agricultural Products Ltd (AAPL) v. Republic of Sri Lanka (1990), ARB/87/3, ICSID Review
Foreign Investment Law Journal, vol. 6, 1991, p. 514, see para. 18, p. 533, with the commentary of
N. G. Ziade; cf. Journal of International Law, 1992, p. 216, with the observations of E. Gaillard.
24
Case of American Manufacturing and Trading Inc. v. Republic of Zaire (1997) ARB/93/1, International Legal Materials, vol. 36, 1997, p. 1531; cf. Journal of International Law, 1998, p. 243, with the
observations of E. Gaillard; Year Book of Commercial Arbitration, vol. 22, 1997, p. 60.
25
Ibid., para. 23 [1 ICSID Reports 28].
26
Op. cit., supra note 20, para. 25.
27
Op. cit., para. 26.
30
GOETZ v. BURUNDI
other contracting State both at the date on which the parties consented to submit the
dispute . . . to arbitration and on the date on which the claim was recorded. The
possibility of dual nationality is, however, excluded by Article 25. In the present
case, the six natural persons who are claimants seem to have possessed Belgian
nationality on the two crucial dates without also possessing Burundian nationality.
85. The jurisdiction of the Centre and of the Tribunal has, as a result, been
established both ratione materiae and ratione personae.
VI. The Admissibility of the Claim
86. Although no objection has been raised in this regard by the defendant, the
Tribunal regards itself as duty-bound also to examine whether it is capable of
hearing the claim. Two difficulties have caught its attention in this regard.
87. The first relates to the ability to act ( jus standi) of the six claimants, all natural
persons and shareholders in the Burundian company affimet,28 whilst the measure
grounding the litigation, that is to say the withdrawal of the free zone certificate,
related to the company itself.
88. At the time of its first session, on 1 December 1997, the Tribunal enquired as
to why the present icsid proceedings were . . . [496] initiated by the natural persons
who had invested and were shareholders of the company, while those before the
Administrative Court of the Republic of Burundi were taken in the name of the
company. In their observations in response dated 30 January 1998 the claimants
explained that in its capacity as a Burundian company affimet could not claim the
benefit of the icsid Convention, particularly since one of its shareholders did not
hold Belgian nationality; before the Administrative Court of Burundi on the other
hand, they added, it was its character as a Burundian company that gave to affimet
its jus standi. This explanation is hardly in truth convincing since it results from
Article 25 of the icsid Convention, as the already cited Executive Directors Report
notes, that a legal person having nationality of a State that is a party to the dispute
can be a party to the proceedings established under the auspices of the Centre if
the State in question is willing to recognise it as belonging to another contracting
State by reason of the control exercised upon it by foreign interests. The fact that
affimet was a Burundian company did not in consequence prevent it from lodging
the claim for arbitration so long as the Burundian government had given its consent.
89. Whatever the reasons which drove the Belgian shareholders to act as individuals rather than to lodge the claim in the name of affimet, the Tribunal
notes that the previous case-law of icsid does not limit the ability to act only to
the legal persons directly affected by the measures causing the litigation but extends it to shareholders in these persons, who are the true investors. The award
AGIP v. Peoples Republic of the Congo (1979) was rendered upon request of the
Italian company which complained of having been dispossessed of its holding in a
Congolese company in which it held 90% of the shares.29 The already cited award
28
It is recalled that these six shareholders hold 999 of the 1,000 shares of the company, one share being
possessed by a Rwandan national.
29
Rivista di diritto internazionale, vol. LXIV, 1981, pp. 863 and ss.
AWARD
31
in the case of AAPL v. Sri Lanka (1990) was rendered on the claim of a Hong
Kong company for loss of its investment in a Sri Lankan company in the wake of
a military action against insurgents. The already cited award in the case of AMT v.
Zaire (1997) was rendered on the claim of an American company relating to the
destruction of the infrastructure of a Zairean company in which it held 94% of the
shares. That which is true of a foreign company investing and controlling a domestic company must also be of a foreign natural person [497] controlling a domestic
company. The Tribunal concludes that the claim of the six Belgian shareholders
who control the Burundian company affimet is capable of being heard. It is on
this claim that the Tribunal is called to give an award, and not on the claim of the
affimet company, which is not a claimant before the Tribunal.
90. The second problem relating to whether the case is capable of being heard
relates to the condition of proceedings prior to the lodgement of the claim for
arbitration. In effect, by the terms of Article 8, paragraphs 2 and 3, of the Belgium
Burundi investment treaty,
2. All disputes relating to investments must be the object of written notification, accompanied by a sufficiently detailed memorandum addressed at the investors initiative
by one of the parties, to the other contracting party.
In the first place such a dispute should be amicably settled by an arrangement between
the parties to the dispute and, in the absence of such, by negotiation between the parties,
at the diplomatic level.
3. If the dispute cannot be settled in the three months following the written notification
envisaged in paragraph 2,30 it is submitted, at the request of the investor concerned,
to conciliation or arbitration before the International Centre for the Settlement of
Investment Disputes (icsid).
91. The notification envisaged in paragraph 2 of Article 8 was addressed to the

Minister of Industry and Commerce of Burundi by a lawyer from affimet on 6 June
1995, accompanied by a detailed memorandum as demanded by this provision. In
accordance with the same provision, affimet requested the Belgian government
to try to settle the dispute at the diplomatic level on 1 September 1995. Neither
one nor the other of these efforts came to fruition. A letter from the secretary of
the Belgian embassy in Bujumbura dated 16 October 1995 asserted the failure of
the diplomatic efforts and the Burundian governments refusal to go back on the
withdrawal of affimets free zone certificate. The dispute not having been settled
within three months of the written notification, the claim for arbitration was, as
a result, validly lodged on 29 November 1995, that is to say after [498] both the
failure of the investors direct efforts and of diplomatic initiatives.
92. It follows from the foregoing that the conditions for the Tribunal being able
to hear the claim set out in Article 8, paragraphs 2 and 3, of the BelgiumBurundi
investment treaty are satisfied so far as the conclusions of the claim relating to the
legality and the legal consequences of the withdrawal of the free zone certificate of
29 May 1995 are concerned.
30
The copy of the Treaty communicated to the Tribunal refers to paragraph 1, whilst it clearly relates
to the notification envisaged in paragraph 2.
32
GOETZ v. BURUNDI
93. The conditions set out in the already cited provisions of Article 8, paragraphs
2 and 3 of the BelgiumBurundi investment protection treaty are not, on the other
hand, fulfilled as regards the conclusions of the claim aiming to order the Republic
of Burundi to reimburse taxes and duties paid by affimet, as well as the convertible
shares changed into Burundian francs by affimet, during the prior period during
which the free zone certificate was suspended, that is between 20 August 1993
and 10 January 1994. These conclusions are not in consequence capable of being
decided on, and the dispute on which the Tribunal is called to give an award relates
exclusively to the legitimacy and the consequences of the decision of 29 May 1995
relating to the withdrawal of the free zone certificate given to affimet.
VII. The Facts
A. The Applicable Law
94. By the terms of Article 42, first paragraph, of the icsid Convention,
The Tribunal shall decide a dispute in accordance with such rules of law as may be
agreed by the parties. In the absence of such agreement, the Tribunal shall apply the
law of the Contracting State party to the dispute (including its rules on the conflict of
laws) and such rules of international law as may be applicable.
The present case falls within the framework of the first sentence of this provision
since Article 8, paragraph 5, of the BelgiumBurundi investment treaty provides
as follows:
[499] The arbitral body decides on the basis of:
the domestic law of the contracting party to the dispute, on the territory of which the
investment is located, including its rules relating to the conflict of laws;
the provisions of the present Treaty;
the terms of the particular agreement which might have taken place regarding the
investment;
the generally admitted rules and principles of international law.
Without doubt the determination of the applicable law is not, in its true sense, made
by the parties to the present dispute (Burundi and the claimant investors) but by
the parties to the investment treaty (Burundi and Belgium). As that was a case for
the parties consent, the Tribunal considers however that the Republic of Burundi
decided in favour of the applicable law as it is determined in the already cited
provision of the BelgiumBurundi investment treaty in becoming a party to this
treaty and that the claimant investors have effected a similar choice in lodging their
claim for arbitration based on the said treaty. If this is not the first time, as we have
noted, that the jurisdiction of the centre results directly from a bilateral treaty for
the protection of investments, and not from a distinct agreement between the host
State and the investor, it is one of the first times, it seems, that an icsid Tribunal is
called to apply the law as directly determined by such a treaty.31
31
Cf. the case of AAPL v. Sri Lanka (supra note 23), where the consent of the parties derived from a
clause in a bilateral treaty for the protection of investments, without that treaty pronouncing explicitly
AWARD
33
95. The provisions of Article 8 of the BelgiumBurundi investment treaty relating

to the law on the base of which the Tribunal is called to decide are linked to those
of Article 7 relating to the substance of the duties assumed by the parties by virtue
of this treaty. Under the terms of the first paragraph of Article 7, effectively,
The present treaty is without prejudice to: [500]
a) laws, rules, practices or administrative procedures or administrative or judicial decisions of one or the other contracting parties;
b) international legal obligations;
c) duties contracted by one or the other of the contracting parties, including those
figuring in a particular investment agreement or in an investment authorisation,
existing, in one or the other case, after or before its coming into force.
The legal rules governing the rights and obligations of the parties and the principles
and rules applicable by the Tribunal to the solution of the dispute are, as a result,
both to be found in the same combination of international law and domestic law.
96. As a result it is sufficient for the Tribunal, to give effect, within the framework
of the first sentence of Article 42, first paragraph, of the icsid Convention, to the
choice of the parties as it is expressed by means of Article 8, paragraph 5, of the
BelgiumBurundi investment treaty. The four categories of legal rules to which this
provision refers can be grouped two by two and relate to Burundian law, on the
one hand, and to international law on the other. The particular terms of agreement
which might have taken place regarding the investment relate to the free zone
regime established by the Burundian legislative and regulatory acts. As regards
the provisions of the present treaty, that is to say the provisions of the Belgium
Burundi investment treaty, they constitute part of the applicable rules and principles
of international law; in the present case there hardly exist any applicable principles
of international law outside of the BelgiumBurundi investment treaty.
97. In the previous case-law the problem of the links between the various applicable sources of international law is posed in the context of the second sentence of
Article 42, first paragraph, of the icsid Convention, and it has received divergent
responses, abundantly commented on in academic writings: hierarchal relationships according to some, domestic law applying first of all but being overborne
where it contradicts international law; according to others, relationships based on
subsidiarity, with international law being called upon only to fill lacunae or to settle uncertainties in national [501] law; according to others again, complementary
relationships, with domestic law and international law each having its own sphere
of application.
98. In the present casewhich relates, it must be recalled, to the first sentence of
Article 42 of the icsid Conventiona complementary relationship must be allowed
to prevail. That the Tribunal must apply Burundian law is beyond doubt, since this
last is also cited in first place by the relevant provision of the BelgiumBurundi
investment treaty. As regards international law, its application is obligatory for two
on the applicable law. The majority of the Tribunal made an implicit choice there in favour of the
application of international law, a conclusion which was contested by the dissenting opinion of one of
the judges.
34
GOETZ v. BURUNDI
reasons. First, because, according to the indications furnished to the Tribunal by

the claimants, Burundian law seems to incorporate international law and thus to
render it directly applicable; by reason of the non-appearance of the defendant,
the Tribunal is not however in a position to reach a definite conclusion on this
point. Furthermore, because the Republic of Burundi is bound by the international
law obligations which it freely assumed under the Treaty for the protection of
investments, just as it can benefit from the rights conferred on it under the Treaty,
and more especially, we shall see, of that conferred on it by Article 4 of the Treaty,
in order to take, under certain conditions and limitations, measures depriving of or
restricting property rights or similar measures as regards investments situated on
its territory. To that is added the fact that the international obligations assumed by
Burundi under the investment treaty refer in several places to the legitimacy of the
conduct of the State as regards its domestic law, although one also finds oneself
in the presence of joint references to domestic Burundian law and to international
lawmore especially to the rights and obligations laid down by the investment
treatyand to international law and domestic Burundian law.
99. It is convenient to note that the question of the legitimacy of a States acts
does not necessarily merit the same response under international law as envisaged
under the domestic law of the State in question. In the case of Elettronica Sicula
SpA v. Italy the International Court of Justice declared that the fact that an act of
a public authority may have been unlawful in municipal law does not necessarily
mean that that act was unlawful in international law, as a breach of a treaty or
otherwise.32 Conversely, an act that is valid in domestic law may be illicit in
inter-[502]national law because it violates a treaty or otherwise. In such a case,
the Tribunal should take account of the already cited provision of paragraph 2 of
Article 7 of the BelgiumBurundi investment treaty under the terms of which
When a question relating to an investment is governed both by the present treaty and
by one or other of the provisions referred to in paragraph 1, the investors can always
assert the provisions which are more favourable to them.
Far from establishing a priori a hierarchy between the two systems of law which
govern the relationship between Burundi and Belgian investors and must serve as a
base for the Tribunals settlement of the dispute, the BelgiumBurundi investment
treaty obliges the Tribunal to examine the legal situation created in the wake of the
measure of 29 May 1995 in the context of both: each must reign in its own sphere
of application, and in case of conflict between the two it is, by common accord of
the parties, the provisions which are more favourable to the investors which must
be applied.
B. The Problem as it Relates to Burundian Law
100. As was indicated above, the Minister for Industry and Commerce of the
Republic of Burundi addressed the following letter to affimet on 29 May 1995:
32
ICJ Reports 1989, p. 74, para. 124.
AWARD
35
In execution of the decision taken by the Council of Ministers on this Friday 26 May
1995 and of Ministerial Order no 750/184 of 29 May 1995, I am obliged to inform you
that the free zone certificate no 001/93 granted to you on 3 February 1993 has been
withdrawn.
On the same day the Minister addressed a letter to several Burundian authorities
including a copy of Order no 750/184 of 29 May 1995 and adding:
I inform you that in application of this order, the free zone certificates awarded to the
affimet and ejumeau businesses have been withdrawn.
[503] The ordinance on which the decision of 29 May 1995 was founded repeated
word for word, it must be recalled, Order no 750/415 of 28 September 1992 executing Decree-law no 1/30 of 31 August 1992 which instituted a free zone regime
in Burundi, with one relevant exception: to the list of businesses ineligible for the
free zone regime as it figured in the first article of the 1992 order were added, in
the first article of the 1995 order:
f ) The mining, extraction, treatment, refining and/or fining, the purchase and the sale
of minerals.
101. The claimants argue that the decision of 29 May 1995 withdrawing the
free zone certificate granted on 3 February 1993 violates Burundian law. To this
end the claimants found their argument on certain principles of administrative law,
which, although not written, form, according to them, the framework in which
the administration is required to operate in Burundi and which, they indicate, are
for the most part a quasi-identical reproduction of the principles in application
in France and in Belgium. They refer, in particular, to the theory of the withdrawal of administrative acts, to the principle of the parallelism of forms, to the
hierarchy between legislative acts and administrative acts, and to the liability of the
legislating State. The defendant not having exercised its rights, the Tribunal does
not have access in relation to Burundian administrative law to any information
other than that furnished by the claimants, that being to the effect that this body
of law is inspired by the same principles as Belgian and French administrative
law.
102. The Tribunal must observe in the first place that, contrary to the argument put
forward by the claimants, the contested decision of 29 May 1995 cannot be regarded
as a withdrawal of the free zone certificate in the sense of the French theory of the
withdrawal of administrative acts. The benefits acquired by affimet before 29
May 1995 (exemption from duties and taxes, etc.) were not effectively attacked in a
retroactive fashion; they were only abolished for the future. The contested decision
can be analysed as a simple abrogation or revocation of the agreement, and the
French theory of the withdrawal of administrative acts is not relevant to this case.
The Tribunal does not, in consequence, have to enquire as to whether the conditions
of application of this theory are fulfilled.
103. The Tribunal notes in the second place that to put an end, whether or not
simply for the future, to the free zone certificate the Burundian [504] government
36
GOETZ v. BURUNDI
did not justify itself by reference to the illegality or to the unwarranted nature of
the decision by which this certificate was awarded. The letter of the Minister for
Industry and Commerce dated 29 May 1995 informing affimet of the decision
taken does not leave any doubt as to the motivation of this last: the benefit of the
free zone regime had been put to an end for the future because the manner in which
this issue was regulated had just been modified.33
104. In these circumstances the contested decision could only be regarded as
illegal as regards Burundian law in two possible situations: if it was deprived of its
legal basis because the Order of the same day on which it was founded was itself
tainted with illegality, or if it was tainted by an intrinsic illegality. The claimants
submit that such was the case.
105. The claimants submit, firstly, that the decision putting an end to the free
zone certificate was deprived of a legal basis because the provision of Order no
750/184 of the same day declaring activities relating to minerals to be ineligible
for the free zone regime was itself illegal both because it constituted a regulatory
attack on a right acquired by a party by virtue of a legislative decision and because
it constituted an individual measure disguised in the form of a regulatory measure.
106. Primo: If one were to believe the claimants, the Order of 29 May 1995 would
be illegal because it constituted a regulatory attack on a right validly acquired by a
party as a result of a legislative text, that is to say Decree-law no 1/30 of 31 August
1992 relating to the creation of the free zone regime in Burundi. The Tribunal cannot
acquiesce to this analysis. Clearly no contradiction exists between the Decree-law
of 31 August 1992 and the Ministerial Order of 29 May 1995. The Decree-law of 31
August 1992 did not itself determine the activities eligible for the free zone regime
and managed, in Article 42, to charge the Minister for Industry and Commerce
with its execution. It was by the first article of Ministerial Order no 750/415 of
28 September 1992 that the list of activities ineligible for the free zone regime
was established; and this same provision noted in express terms that this list could
be further modified by an order of the Minister responsible for overseas trade.
Article 2 of the Order added that the eligibility of [505] each mineral could be
conditional on special conditions laid down by the relevant staff of the Ministries
responsible for mines and overseas trade respectively. It is clear, in consequence,
that the rights that the claimants apparently have acquired through affimet were
not theirs by virtue of the legislative text of 31 August 1992 but in virtue of the
regulatory text of 28 September 1992. It is no more clear that the Order of 29
May 1995, which constituted, by the same token as that of 28 September [1992]
that it modified, a measure to execute the Decree-law of 31 August 1992, did not
contradict, misconstrue or violate any provision of the latter.
107. The legal situation is ultimately very simple: the regulatory Order of 28
[September] 1992 taken in execution of the Decree-law of 31 August 1992 did not
prevent minerals from being eligible for the free zone regime; the regulatory Order
of 29 May 1995 put an end to this eligibility. Moreover it follows from the principle
that there is no legal right to the maintenance of a regulation that the regulatory
authority can at any time modify or abrogate a previous regulatory provision. The
33
Supra, para. 15.
AWARD
37
claimants do not in consequence have any standing right to the maintenance of

the 1992 regulation, and the Burundian government did not exceed its powers in
any way in 1995 in adding minerals by regulatory means to the list of ineligible
activities established by regulatory means in 1992.
108. Secundo: According to the claimants, the Order of 29 May 1995 on which the
disputed decision putting an end to affimets free zone certificate of the same day
is founded is tainted by illegality because the ending of the eligibility of minerals
was decided only in relation to a single case, that of affimet, and because of this
constituted an individual decision disguised as a regulatory measure. The Tribunal
cannot endorse this analysis since an analogous measure was taken in application
of the disputed provision as regards at least one other company, ejumeau, whose
activities related to tin.
109. The claimants are not satisfied with alleging that the decision to put an end
to the free zone certificate lacked a legal basis; they also invoke several intrinsic
illegalities in the decision.
110. The claimants submit that by virtue of the principle of parallelism of forms
the decision putting an end to the certificate should have been preceded by the
same formalities as that under which the certificate had been accorded, that [506]
being consultation with the consultative commission on the free zone regime.
The Tribunal cannot accept this argument. The consultation of the commission is
required by the Decree-law of 31 August 1992 prior to the delivery of the free
zone certificate in order to examine the particulars of the business and to give its
opinion on, among other things, the activities envisaged, the time-limit for the initiation of these activities, the inventory of products for which the customs exemption
is requested, the impact of the functioning of the business on the environment, etc.
The decision to put an end to the certification of affimet in its capacity as a free
business was the necessary consequence of the putting to an end of, by order of
the same day, the eligibility of minerals. Consultation with the commission would
have had no object and thus there would have been no reason for it to take place.
111. The claimants also refer to the fact that the revocation of the free zone certificate is only envisaged by Article 34 of the Decree-law of 31 August 1992 where
a company has repeatedly been guilty of certain infringements listed in Articles
32 and 33; no infringement of this ordernor moreover any fault or negligence
having been attributed to affimet, the contested decision, they submit, is tainted
with illegality. The Tribunal cannot, once more, support this argument from the
claimants. The free zone certificate was not withdrawn for the reason that the company had not respected the legislative or regulatory conditions or the conditions
pertaining to the granting of the free zone certificate (notably the initiation of activities by 1 July 1993 at the risk of annulment of the certificate). No fault had
been alleged against the company, and the decision to put an end to its certification
had in no way the character of a punishment. The Decree-law of 31 August 1992
made the granting of a certificate conditional upon certain eligibility criteria, in
particular the exercise of an activity directed exclusively towards exporting in a
non-traditional sector, the application of this concept to specific cases being left
for ministerial orders. In accordance with these provisions, a first list of ineligible
traditional products was fixed by ministerial order of 28 September 1992, and to
38
GOETZ v. BURUNDI
this list the Order of 29 May 1995 added minerals. As has already been stated, the
benefit of the free zone regime granted to affimet as a result was deprived of any
legal basis.
112. Without doubt, as the claimants assert, neither the Decree-law of 31 August
1992 nor the applying regulations of 1992 and 1995 envisage that the free zone
certificate, once accorded, can be later withdrawn in the absence of the specific[507]ally envisaged possibility of punishment for repeated infringements. But it
would be contrary to all principle that a certification entailing certain benefits for
its recipient, in particular in the area of duties and taxes, could carry an irreversible
and absolute character. As the preamble to the decree of 31 August 1992 asserts,
the special regime dubbed the free zone regime was created for the common
good: the promotion of exports of non-traditional products, the encouragement of
private investment, the creation of jobs, the circulation of technology, the increased
competitiveness of Burundian products on export markets, in particular in relation
to those of other development countries possessing free zone regimes. From the
moment when, in the judgment of the relevant State authorities, the common good
for which this last was responsible no longer justified such a stimulus for a given
product or activity, it was in their power to modify the texts governing the free
zone regime and to put an endfor the future, and without retroactive effectto
previously accorded certifications.
113. As regards the disputed decision the claimants invoke one more intrinsic
illegality. The provision of Ministerial Order no 750/184 of 29 May 1995, they
submit, declares ineligible for the free zone regime the mining, the extraction, the
treating, the refining and/or fining, the purchase and the sale of minerals,34 which,
they consider, does not cover operations relating to precious metals, in particular
to gold. In applying to affimet, whose activities related to gold, a provision concerning minerals, they conclude that the Burundian administration has committed
an illegality.
114. The Tribunal cannot accept this analysis. Whatever might be the relationship
between the concepts of minerals and precious metals, it appears from the dossier
before the Tribunal that for the purposes of the free zone regime established by
Burundian law precious metals were regarded as forming part of the category of
minerals. Of this there are abundant examples:
On 9 July 1993 the office of the Minister for Industry and Commerce informed
affimet that a commission will be put in place to examine the implications
of keeping gold and other minerals within the free zone.35 [508]
On 20 July 1993 the Director of Mines and Quarries invited affimet to pay a
caution equivalent to the taxes and other payments required for the exportation
of gold pending further information as regards the implications of keeping
gold and other minerals within the free zone.36
In its report of 30 July 1993 the Commission charged by the Minister
for Industry and Commerce with studying the affimet dossier decried the
34
Italics added.
Italics added.
36
Italics added.
35
AWARD
39
fact that the provisions which, under the terms of the ministerial order of
28 September 1992, should have fixed the degree of treatment for each mineral had not yet been framed and observed that the administration could not
blame anyone else if the degree of conversion for gold had not been determined
before the granting of approval to affimet.
In its report of 22 April 1994 the national team charged with proposing to the
government the provisional measures to regulate the exportation of minerals
and gold emphasised, as regards operations regarding gold and the affimet
problem, the special conditions of eligibility for the free zone regime of
minerals.37
The report returned to the government by amex international on 25 April
1995 treated gold as a mineral from beginning to end. From the first sentence
it sets itself the objective of analysing the problem relating to the inclusion of
minerals, in particular of gold, within the free zone.38 Further on, under the
title The Problem of Minerals, it deals with gold, then the other minerals
regularly traded, and observes that the problem of minerals in Burundi is
in reality a problem linked uniquely to gold and not to minerals in general.
Further on again, dealing with the trading of minerals, it writes that gold
is by far the most important mineral as regards trade. It represents, in value,
more than 99% of the minerals traded in Burundi . . . The problem of gold
has been called the problem of minerals when in reality gold alone is the
problem. The problem of minerals . . . is in fact the problem of gold. Annex
B to the report, titled Eligibility of minerals for the free zone, treats in detail
the problem of gold, and more particularly the issue of affimet; and under
the title Present Situation of mining exploitation this report examines firstly
The Exploitation of gold.
[509] 115. The Tribunal observes furthermore that the claimants have not themselves distinguished between minerals and precious metals, since also, in his
letter of 2 January 1993 requesting the granting of the free zone certificate, Mr Alain
Goetz indicates that affimet, intends to apply itself to the production, the fining
and the exportation of precious metals, as well as the purchase on the domestic,
regional and international market of the minerals necessary for such activity.39
116. Taking account of all the foregoing, the Tribunal conceded that in applying
to affimet, whose activities related to gold, the provisions of the Ministerial Order
of 29 May 1995 relating to minerals the contested decision is not tainted with
illegality.
117. From the examination of the legitimacy of the decision of 29 May 1995
putting an end to the certification of affimet as a free business it appears that the
illegality of this decision in relation to Burundian law has not been established.
This conclusion entails another, on the issue of the liability of the Burundian State.
It stems from the principle, in effect, that a legal administrative decision cannot
be regarded as entailing that the party making it is at fault and is therefore not
capable of making the State liable on the grounds of fault. However, it is not on
37
Italics added.
Italics added.
39
Italics added.
38
40
GOETZ v. BURUNDI
these grounds that the claimants are basing themselves to claims that the Burundian
State should be made liable in Burundian law, but on that of strict liability, more
specifically on the liability of a State as legislator.
118. Answering a question from the Tribunal, counsel for the claimants noted
that no Burundian constitutional or legislative provision explicitly grants a party
compensation for an injury caused by a law or legal administrative measure. In the
face of the texts silence, the application of the said theory of State as legislator is
however imposed by the academic writings, the case-law and the general principles
of law of the countries whose legal system derives from the Napoleonic code. The
claimants seem to ground their claim on the case-law of the French Council of
State relating to the liability of the State for its valid decisions, which is inspired by
principles similar to those which in French law govern the question of the liability
of the State as legislator. The concept at the root of this case-law [510] is that a
lawful administrative decision, whether it be individual or regulatory, can give rise
to a right to reparation, on the principle of equality as regards public burdens, when
it imposes a special particularly onerous burden on a party. As with the liability
of the State as legislator, the case-law of the French Council of State, however,
denies liability stemming from administrative legal measures in two cases: on the
one hand, when it is the intrinsic nature of the subject that it causes discriminatory
decisions, as with economic issues, as a result of authorisations or certifications
which inevitably favour those who benefit; on the other hand, when the injury
invoked is due to a measure taken in the pre-eminent public interest, in particular
with a view to protecting the national economy and public finances. Hence, even if
one was to suppose that Burundian law allowed for the strict liability of the State
for legal administrative decisions within the same conditions and limits as French
administrative law, compensation for injury suffered by the claimants stemming
from the Ministerial order of 29 May 1995 and from the decision applying it would
be excluded. Taking account of this conclusion, the Tribunal considers it useless to
pronounce on the existence and the contours of such a theory in Burundian law.
119. The Tribunal concludes as a result that the illegality of the decision putting
an end to the certification of affimet as a free enterprise under Burundian law has
not been established and that as regards Burundian law the liability of the Burundian
State to the claimants has not been engaged either on the grounds of fault or on
grounds of strict liability of a public body.
C. The Problem as regards International Law
120. As the Tribunal noted above, one of the essential characteristics of the
present case relates to the existence of a convention covering both parties (umbrella
agreement)the BelgiumBurundi investment treatywhich defines certain rights
and obligations of the parties. Whatever the mastery over its domestic law that
the Burundian State derives from its sovereignty, it is obliged, by virtue of this
same sovereignty, to respect its international undertakings. That is to say that the
Tribunals role is not limited to examining the legitimacy and the legal consequences
of the disputed decision in relation to Burundian law, but that it must necessarily
extend to examining the legitimacy and the legal consequences of the disputed
AWARD
41
decision in relation to the international rights and obligations of the Burundian

State.
[511] 121. The Tribunal does not regard it as useful, in this regard, to spend time
considering the allegation, put forth by the claimants, of a violation by the Republic
of Burundi of its duties under Article 2, paragraph 2 of the International Covenant
on Economic, Social and Cultural Rights, to which Burundi and Belgium are both
parties. This provision reads as follows:
The States that are parties to the present pact undertake to guarantee that the rights
which are hereby set out will be exercised without any discrimination founded on race,
colour, language, religion, political opinion, national origin, wealth, birth or any other
situation.
Discrimination supposes a differentiated treatment applied to persons finding

themselves in similar situations; but it is not alleged that the claimant Belgian
investors have been worse treated than other investors finding themselves in the
same situation. Even supposing that the claimant Belgian investors could rely on
the Pact, the Tribunal does not see in what way the decision to put an end to
the free zone certificate granted to affimet could fall within the scope of this
provision.
122. It is therefore in relation to the obligations assumed by the Republic of Burundi under the BelgiumBurundi investment treaty that the issue of the legality of
the decision revoking the certification of affimet as a free business in international
law must be examined.
123. The Tribunal can immediately dismiss the suggestion that the Republic of
Burundi violated the obligation to encourage investments that it assumed under
Article 2 of the Treaty; no specific wrong has even been mentioned by the claimants
in this regard. Under the terms of the first paragraph of this article,
Each contracting party is to encourage and allow on its territory, in accordance with its
legislation, investments effected by investors from the other contracting party as well
as all supporting activities.
[512] The Tribunal considers that the precise motivation behind the introduction of
the free zone regime in Burundian legislation was the goal of encouraging foreign
investments. That it placed certain conditions on this regime, that it assigned to it
certain limits and that it might amend at a given time the regulations governing
the regime, all of this constituted part of its sovereign decision-making power. The
Treaty is perfectly explicit on this point: the encouragement of investments by each
party must be executed in accordance with its legislation.
124. It is essentially in relation to Article 4 of the Treaty, headed Measure
depriving of and restricting property, that the conformity with international law
of the revocation of the free zone certificate must be examined. Without doubt
the disputed decision cannot be analysed as a measure depriving of property or
restricting its use, but it appears from the very words of Article 4 that this provision
does not refer only to measures depriving of and restricting the use of property
stricto sensu, but governs more broadly all measures having a similar effect. By
42
GOETZ v. BURUNDI
the terms of the first paragraph of this article, in effect, the Republic of Burundi
undertook to
. . . not take any measure depriving of or restricting property, or any other measure
having a similar effect 40 as regards investments situated on its territory, unless the
imperatives of public needs, security, or the national interest demand it to an exceptional
extent, in which case the following conditions must be fulfilled:
a. the measures are taken in a legal manner;
b. they are neither discriminatory nor contrary to a specific agreement . . .;
c. they derive from provisions envisaging the payment of an effective and adequate
sum of compensation.
This last condition is elaborated by paragraph 2 of Article 4 in the following terms:

The compensation envisaged in paragraph 1 c) must represent the market value of the
investments concerned the day before the measures were taken or, if the case arises,
the day before [513] they were nationalised. However, when an investment does not
have a market value or when the investor concerned proves that the market value of the
investments expropriated is less than their real and objective value, the compensation
is fixed on the basis of this last value.
An indemnity must be paid in the currency of the State to which the investor concerned belongs or in any other convertible currency.
It must be paid without delay, be effectively realisable and include interest running
from the date of expropriation, at a reasonable commercial rate.
It must be freely transferable.
Since, according to the information furnished to the Tribunal by the claimants, the
revocation of the Minister for Industry and Commerce of the free zone certificate
forced them to halt all activities beginning on 13 August 1996, the date of their final
exportation, which deprived their investments of all utility and deprived the claimant
investors of the benefit which they could have expected from their investments, the
disputed decision can be regarded as a measure having similar effect to a measure
depriving of or restricting property within the meaning of Article 4 of the Investment
Treaty.
125. Under the terms of Article 4 of the Treaty a measure depriving of or restricting property or a measure having similar effect is legal under international
law once certain conditions are fulfilled. It is only when one of these conditions is
found not to be satisfied that the host State can be regarded as having contravened
its international obligations under the Treaty and, more especially, having breached
its obligation, set out in Article 3, to ensure the constant security . . . and protection
of investors from the other party.
126. First condition: a measure such as that which was taken as regards affimet
is not legal under international law unless imperatives of public need, security or
national interest of an exceptional nature demand it. To all appearances it is in
relation to Burundian domestic law that this condition should be examined. But
it appears from the dossier that it is in the interests of the national economy that
40
Italics added.
AWARD
43
the Burundian authorities in 1992 instituted a free zone regime geared towards
encouraging investments and [514] that it was in this interest that they had to begin
by including gold among the activities for which the national interest justified this
favoured regime, before excluding such a regime for gold at a later stage. The
change in regulations was preceded by in-depth studies, one of which came from
a panel of international experts. In the absence of an error of fact or of law, of an
abuse of power or of a clear misunderstanding of the issue, it is not the Tribunals
role to substitute its own judgment for the discretion of the Government of Burundi
of what are imperatives of public need . . . or of national interest.41 The first
condition for the conformity of the measure with international law has thus been
found to have been fulfilled.
127. Second condition: to be internationally lawful, the measure must not only
be supported by valid reasons, it must also have been taken in accordance with a
lawful procedure. It was established above that this was the case. The international
lawfulness of the measure, once more based on its lawfulness with regard to national
law, is found to be established also in regard to this second condition.
128. Third condition: to be internationally lawful, the measure must not be either
discriminatory or contrary to a specific agreement between the investors and the
host State. This condition does not pose problems. As has already been noted,
the claimants do not assert any discrimination as against any businesses finding
themselves in a similar situation. Moreover, since the granting of the free zone
regime does not have a contractual character but results from a unilateral measure
of the Burundian administration, there is no question here of a measure which could
have been contrary to a specific agreement.
129. Thus remains only the final condition: in order that the measure be legal as
regards the BelgiumBurundi investment treaty, it must be accompanied by provisions envisaging the payment of adequate and effective compensation, this sum
of compensation being calculated in line with the principles laid out in paragraph
2 of Article 4 set out above. The Treaty thus enshrines on the international level
one of the dominant concepts in French administrative lawand, to the extent that
it is inspired by this last, of Burundian law, that is to say that the prerogatives
allowed to the State must, if they impose a special and abnormal charge on a party
in the general interest, be exercised subject to [515] monetary compensation. In
the contractual sphere, this idea is reflected in the so-called act of the prince
theory, applied by the arbitration case-law to State contracts,42 by virtue of which
the administration can modify unilaterally certain rights and obligations defined
in the contract, or even terminate the contract, when the public interest justifies
it but must then compensate its contracting partner. As regards non-contractual
matters, it is on this concept that the case-law on the strict liability of the State
for its legislative or administrative actsregulatory or individualwhich impose
a special and abnormal charge on a party in the public interest, is founded.
41
Cf. I. F. I. Shihata, Recent Trends Relating to Entry of Foreign Direct Investment, ICSID Review
Foreign Investment Law Journal, vol. 9, 1994, p. 47, who refers to a self-judging discretion, in
accordance with customary international law, subject to the requirement of good faith (p. 58).
42
Southern Pacific Properties (Middle East) (SPP) v. Arab Republic of Egypt, ARB/84/3, International
Legal Materials, vol. 32, 1993, p. 970, paras. 1767; Journal du droit international, 1994, p. 235.
44
GOETZ v. BURUNDI
130. In this case, the final condition placed by Article 4 of the Treaty to the legality of a measure having a similar effect to a measure depriving of or restricting
the use of property has not until now been fulfilled, since the revocation of the free
zone certificate decided on 29 May 1995 was not accompanied by the adequate and
effective compensation on which its legality under international law was made conditional. The Tribunal does not however consider that this circumstance suffices to
taint this measure as illegal under international law. The Treaty requires an adequate
and effective indemnity; unlike certain domestic rights as regards expropriation, it
does not require prior compensation.
131. All this means that the legality of the decision of 29 May 1995 under international law remains in the balance. There could be one of two results, in effect.
Either the Republic of Burundi satisfies the condition of an adequate and effective
indemnity within a reasonable period by allowing an indemnity fulfilling the requirements and criteria of paragraph 2 of Article 4 of the Treaty. In that case, the
conformity of the decision of 29 May 1995 with international law will be found to
have been definitively established. Or the Republic of Burundi does not satisfy this
ultimate condition of the conformity of this decision with international law within a
reasonable period. In such a case, it will have violated the international obligation,
assumed by it in the BelgiumBurundi investment treaty to which it subscribed
in the full and free exercise of its international sovereignty, to not take any measure depriving of or restricting of property, nor any other measure having similar
effect in regard to investments situated on its territory without respecting certain
conditions. The international responsibility of the Burundian State would therefore
be triggered both for the violation of the obligation, set out [516] in Article 4,
to abstain from taking any measure having similar effect to a measure depriving
of or restricting property and for violation of the obligation, set out in Article 3, to
assure Belgian investments on its territory constant security and . . . protection.
132. It could however transpire otherwise if the Republic of Burundi decides
to return to affimet the benefit of its status as a free business. In such a case, the
conformity with international law of the action of the Republic of Burundi would not
be problematic. The re-establishment of affimets status as a free business would
certainly only take effect for the future, and the question of reparation for damages
caused between the date of withdrawal and that of its re-establishment could arise.
The Tribunal considers however that, the revocation of the agreement having been
legal in Burundian domestic law and not having engendered any liability for the
Burundian State in the context of its domestic law, there would be no need for
compensation for such damage, even supposing that such could be established.
133. In other words, it falls to the Republic of Burundi, in order to establish
the conformity with international law of the disputed decision to withdraw the
certificate, to give an adequate and effective indemnity to the claimants as envisaged
in Article 4 of the BelgiumBurundi investment treaty, unless it prefers to return
the benefit of the free zone regime to them. The choice lies within the sovereign
discretion of the Burundian government. If one of these two measures is not taken
within a reasonable period, the Republic of Burundi will have committed an act
contrary to international law the consequences of which it would be left to the
Tribunal to ascertain.
AWARD
45
VIII. The Tribunals Decision

134. For the preceding reasons, the Arbitration Tribunal unanimously decides as
follows.
135. In order to adhere to its international duties under the Treaty concluded
by it with the BelgiumLuxembourg union regarding the reciprocal protection and
encouragement of investments, the Republic of Burundi must:
Either give the effective and adequate indemnity which Article 4 of the said
Treaty requires as a condition for the conformity with international legality
of the revocation of [517] the free zone certificate awarded to affimet. In
accordance with this provision, this indemnity must represent the market
value of the investments concerned the day before the measure was taken,
that is to say on 28 May 1995, except if the investors concerned prove that
the market value of the investments is less than their real and objective value,
in which case the indemnity would be fixed on the basis of this last value.
The indemnity must be paid in Belgian francs or in any other convertible
currency. It must be given without delay, be effectively realisable and include
interest running from 29 May 1995, at a reasonable commercial rate. It must
be freely transferable. If the parties do not reach agreement on the amount
of the indemnity to be paid in accordance with the provisions of Article 4 of
the said Treaty or on any other solution involving their common agreement,
it will return to the Tribunal to determine this amount, after expert advice if
needed;
Or, if it prefers this solution, terminate the disputed decision, which could
be effected by abrogation of Ministerial Order no. 750/184 of 29 May
1995 followed by the re-establishment of the free zone certificate, or by reestablishment of the free zone certificate without prior abrogation of Ministerial Order no. 750/184 of 29 May 1995.
136. The choice between these two approaches, which both allow the Republic
of Burundis action to remain valid in international law, lies within the sovereign
discretion of the Burundian government.
137. If, within the four months following its notification of the present decision,
the Republic of Burundi has not taken one or other of the measures set out in the
preceding paragraph, its behaviour would constitute an illegal act under international law because it would be contrary both to the duty it assumed to abstain from
taking any measure towards the Belgian investors having a similar effect to a measure depriving of or restricting the use of property and of the duty it assumed to
ensure the constant security and protection of Belgian investments on its territory.
It would also fall upon the parties to come back before the Tribunal with a view to
fixing the amount and the form of the reparation owed by the Republic of Burundi
to the claimants, it being noted that the Tribunal does not intend to decide at this
stage of proceedings on the well-foundedness of reference, with the aim of evaluating this reparation, to any factor, such as the life expectancy, the profitability or
the expected return on the business created by the claimants.
46
GOETZ v. BURUNDI
SECOND PART: THE PARTIES AGREEMENT OF 23 DECEMBER 1998

(Translation)
[518] 1. The decision of 2 September 1998 was communicated to the parties on
that date.
2. On the basis of this decision, and in execution of it, on 23 December 1998
the parties signed a Protocol of agreement in relation to the amicable settlement
of the case of Antoine Goetz and partners versus the Republic of Burundi (case
icsid ARB 95/3) as well as a special convention relating to the functioning of
affimet, this convention forming an integral part of the protocol by the terms of
Article 5 of this last. By Article 4 of the Protocol the parties decided that the
special convention and the protocol of agreement are going to be included in the
arbitration award in the form of an award of agreement between the parties. In
accordance with these provisions, the text of the Protocol of agreement and of
the special convention was communicated to the Arbitration Tribunal by means of
a joint letter from the Minister of Justice of the Republic of Burundi and of the
President of the Administrative Council of affimet, the signatories requesting the
Tribunal to include it in the final decision of icsid in the form of an agreement
between the parties.
3. The Protocol of agreement reads as follows:
PROTOCOL OF AGREEMENT IN RELATION TO THE AMICABLE
SETTLEMENT OF THE CASE OF ANTOINE GOETZ AND
PARTNERS VERSUS THE REPUBLIC OF BURUNDI
CASE ICSID ARB 95/3
BETWEEN:
THE STATE of Burundi, represented by the Minister of Justice, on the one hand,
AND
LA SOCIETE dAFFINAGE DES METAUX, abbreviated as affimet, registered at
the registry of trade and companies of Bujumbura under the number 31872, whose
statutory seat is at no 20 Boulevard de la Nation in [519] Bujumbura, represented by
the President of its Administrative Council, Mr Antoine Goetz, afterwards termed The
Company on the other hand;
THE FOLLOWING IS AGREED:
Article 1: The State unconditionally undertakes to reimburse Two Million Nine
Hundred and Eighty Nine Thousand six hundred and thirty six American dollars (USD
2,989,636), representing the duties and taxes and other payments taken by the State
in the form of a caution and payments from the Company during the periods from
20 August 1993 to 10 January 1994 and from 29 May 1995 to 13 August 1996 in
accordance with letter no 750/287/CM/93 of 9 July 1993 from the Minister of Commerce, Industry and Tourism, augmented by commercial interest of 8% per year until
the day of payment.
Article 2: The State signs with the Company a Special convention approved by
Decree.
This Treaty will be ratified by icsid whose jurisdiction will be renewed in the case
of litigation as to its execution.
AWARD
47
Article 3: As soon as the provisions contained in the present protocol of agreement

have been entirely executed, the Company will discharge the State from and renounce
any claim, action or request before icsid and the courts of the Republic of Burundi by
reason of this Treaty and in connection with this litigation.
Article 4: The parties agree that the Special convention and the Protocol of Agreement
will be included in the arbitration decision in the form of an award reached by agreement
between the parties.
Article 5: The special convention relating to the functioning of the Company will
constitute an integral part of the present protocol.
[520] Article 6: The parties agree to reserve the question of the costs of the arbitration
proceedings for icsid, this last having to decide in the final award by agreement between
the parties.
Signed on 23 December 1998.
FOR THE REPUBLIC OF BURUNDI
THE MINISTER FOR JUSTICE
FOR AFFIMET
THE PRESIDENT OF THE
ADMINISTRATIVE COUNCIL
/s/ Therence SINUNGURUZA
/s/ Antoine GOETZ
4. The special convention regarding the functioning of the affimet company

reads as follows:
SPECIAL CONVENTION REGARDING THE FUNCTIONING OF
THE AFFIMET COMPANY
BETWEEN:
THE STATE of Burundi on the one hand represented by the Ministers responsible
for development and planning, Finance, Trade and Industry described in the present
document as the State.
La Societe dAffinage des Metaux, abbreviated as affimet, registered at the register
of trade and companies of Bujumbura under the no 31782, having its statutory seat
at no 20 Boulevard de la Nation in Bujumbura, represented by the President of its
Administrative Council, Mr Antoine Goetz, hereafter referred to as the Company,
on the other hand,
[521] Taking into account Law no 01/005 of 14 January 1987 regarding the Burundi
Investments Code in its present modified form,
Taking into account Decree-Law no 1/007 of 20 March 1989 regulating access, residence and permanence of foreigners on the territory of Burundi and regulating their
deportation, particularly in Articles 17, 18 and 19,
Taking into account Decree-Law no 01/138 of 17 July 1976 regarding the Mining and
Petrol Code of the Republic of Burundi,
Taking into account Decree no 100/30 of 14 December 1982 fixing the measures
necessary to execute the Decree-Law no 01/138 of 17 July 1976,
Making reference to the Treaty signed and ratified by the State of Burundi with the
BelgiumLuxembourg Economic Union concerning the reciprocal encouragement and
protection of investments,
Considering the willingness of the two parties to put an end, by amicable settlement,
to the case setting them against one another in relation to the Treaty negotiated, which
48
GOETZ v. BURUNDI
case arose from the suspension of the certificate of free zone and its withdrawal from
the company,
Considering that in this regard the company affimet fulfils the conditions required
to benefit from the status of agreed company, given the volume of the investments
already realised (663,137,614 Burundian francs) and those currently being realised
(336,862,386 Burundian francs), its creation of permanent jobs (100 jobs) and its
contribution to the improvement of the balance of payments,
The following is decided and set down,
TITLE I: GENERAL PROVISIONS
Article 1: The State of Burundi and the Company affimet admit to having taken all
necessary measures in order to ensure the observance of the present Agreement.
[522] Article 2: affimet is extended the benefit of the agreed companies regime
within the meaning of Heading VI of Law no 1/005 of 14 January 1987 regarding the
Investments Code as it appears with modifications.
Article 3: The Company is authorised to buy all transitional metals containing precious and semi-precious materials on the national territory. These minerals must be the
object of a simple declaration to Customs. After industrial treatment of up to 99.9%
of its contents, the finished product is designated for exportation only absent a special
derogation granted by the Minister responsible for Finance.
TITLE II. GENERAL GUARANTEES AND PARTICULAR ADVANTAGES
Article 4: The Company will benefit from, beginning on the date of signature of this
Treaty, the advantages contained in the following provisions:
1. Exemption from duties and taxes sustained in importing:
a) Equipment and materials, machines and tools necessary for the realisation of the
investment programme permitting the construction and fitting of the jewellers, as
well as machines and tools, equipment and materials and other items necessary
for the functioning of the company. However, each time that a new type of
mineral is introduced, the establishment of an exhaustive list of the equipment
and material required for the new activity and an investment plan is obligatory.
b) The primary materials and intermediary products necessary for production.
2. Total exemption from personal taxes and from property taxes.
[523] 3. Total exemption from taxes on capital gains for the first ten years. Beginning in
the eleventh year and for the whole life of the Company, taxes on capital gains should
be at 15%.
4. All exportations undertaken by the Company in the context of the present Treaty,
are exempted from all direct and indirect duties, taxes and payments, present and
future.
5. All provisions relating to mining legislation, future or now in force, which contradict the present Treaty, are not applicable to the Company.
TITLE III: UNDERTAKINGS OF THE COMPANY
Article 5: The Company undertakes to:
Proceed to the realisation of the investment programme as envisaged by Ministerial
Order no. 120/327 of 10/10/1991 regarding the classification of eligible companies
and the fixation of the criteria to be fulfilled to benefit from the advantages of the
Burundi Investment Code and all this within a period of 24 months from the date of
signature of the present Treaty.
AWARD
Create permanent jobs and reach a workforce of 100 before the end of the second
year following the signature of the present Treaty.
Favour in priority the employment of the domestic workforce, contribute to the
development of professional training and technique and permit the accession of
domestic workers to all positions which they are qualified for.
TITLE IV: THE STATES UNDERTAKINGS
Article 6: THE STATE guarantees to the Company the continuance in force of the
legal provisions relating to respect for property and to the free exercise of its industrial
and commercial activities as well as the free use of its corporeal and non-corporeal
assets.
[524] Article 7: The Company will be able to call on workers at its own discretion,
whether domestic or expatriate, in accordance with the provisions of the Employment
Code of Burundi.
The expatriate employees will not be the object of factual or legal discrimination so
long as their presence does not disturb the peace.
Article 8: THE STATE undertakes not to take any discriminatory measures concerning entry, residence, travel or employment against these workers or their families, the
Company guaranteeing in all cases the repatriation of the said persons.
TITLE V: ECONOMIC AND FINANCIAL GUARANTEES
Article 9: The Company can hold one or several accounts in foreign currencies with
the commercial banks of its choice. These accounts are not to be added to except in
foreign currency coming from a foreign source or one of the foreign accounts of the
Company.
Article 10: The Company can export or import freely, without quota or licence, and
it is not subject to a qualitative or quantitative inspection or to a price comparison
effected by a controlling body prior to departure, except at the request of a foreign
importer. Nevertheless, the Company must submit itself to the control of the Customs
Administration and that of the Police of the Air, Borders, and Foreigners, for all of its
exportations.
Article 11: The Company continues to possess free choice regarding its foreign
providers, distributors, transporters, bankers, business partners and sub-contractors,
whatever their nationality or legal status.
Article 12: The general provisions of the Employment Code apply to the Company.
[525] TITLE VI: FINAL AND MISCELLANEOUS PROVISIONS
Article 13: The clauses of the present Treaty can only be modified by agreement
of the two parties. However, in the event that the Company or the State fail to adhere
to their reciprocal undertakings, the two parties give jurisdiction to the International
Centre for the Settlement of Investment Disputes (icsid) located in Washington which
will receive a copy of the present Treaty.
Article 14: The present Treaty takes effect following the arbitration decision of the
International Centre for the Settlement of Investment Disputes (icsid) enshrining the
amicable settlement of the two parties and covering a period of ten years to be renewed
unless one of the parties indicates otherwise.
49
50
GOETZ v. BURUNDI
Concluded at Bujumbura, 23 December 1998
THE MINISTER FOR PLANNING

RECONSTRUCTION AND
DEVELOPMENT
THE PRESIDENT OF THE

ADMINISTRATIVE COUNCIL
OF THE AFFIMET COMPANY
/s/ Leon NIMBONA
/s/ Antoine GOETZ
THE MINISTER FOR

COMMERCE
INDUSTRY AND TOURISM
/s/ Nestor NYABENDA
THE MINISTER FOR FINANCE
/s/ Astere GIRUKWIGOMBA
[526] 5. Under the terms of Article 43 of icsids Arbitration Rules
(1) If, before the award is rendered, the parties agree on a settlement of the dispute or
otherwise to discontinue the proceeding, the Tribunal . . . shall, at their written request,
in an order take note of the discontinuance of the proceeding.
(2) If the parties file with the Secretary-General the full and signed text of their
settlement and in writing request the Tribunal to embody such settlement in an award,
the Tribunal may record the settlement in the form of its award.
6. In accordance with these provisions, the protocol of agreement of 23 December

1998 and the special convention of the same date, both reproduced above, are
incorporated in the present award and are declared to be an integral part of that
award.
7. By Article 5 of the protocol of agreement the parties agreed to reserve the
question of the costs of icsid arbitration proceedings, this last having to be settled
in the final award of agreement between the parties. The arbitral Tribunal decides
as follows:
(a) Each party will pay the costs that it incurred in defending its own interests
during the arbitration hearing.
(b) Amounts incurred by icsid as a result of the proceedings will be paid in equal
parts by the two parties. The claimant having, according to the information
given to the Tribunal by the secretary of the Centre, paid all of the monies
required by icsid under the heading of costs incurred by this last, the Government of the Republic of Burundi will reimburse to the claimant half of this
sum. The Secretary of the Centre will notify the parties of the exact amount
of this sum.
8. By the terms of Article 3 of the Protocol of Agreement, the company affimet
will discharge the State and renounce all claims, actions or requests whatever before
icsid and the courts of the Republic of Burundi by reason of the special convention
AWARD
51
and in connection with the present case as soon as the provisions contained in
the present [527] protocol of agreement are entirely executed. The provisions
envisaged are, on the one hand, those of Article 1 of the Protocol relating to the
payment by the Government of the Republic of Burundi to the company affimet of
a sum of USD 2,989,636 under the heading of reimbursing various duties and taxes
and other payments and, on the other hand, those of Article 6 of the protocol under
which the parties undertake to conform with the decision of the Tribunal regarding
the costs of the present arbitration. The Tribunal decides as follows:
(a) The reimbursement of the sum envisaged in Article 1 of the protocol will be
effected in twelve payments of US $249,136,133, each one effected at the
latest by the last day of each month, the first payment being effected at the
latest on 31 March 1999 and the last on 29 February 2000 at the latest. It is
permissible for the Government of Burundi to increase the amount of one or
several of the monthly payments or to pay the balance of the debt at any time.
The first payment, to be effected before 31 March 1999, will be exempted
from all interest. The later payments will include interest of 8% calculated
to run from 1 April 1999.
(b) The reimbursement by the Government of the Republic of Burundi to the
affimet company of half of icsid spending in execution of paragraph 7(b)
above will be effected in the month following the notification to the parties,
by the secretary of the Centre, of the exact amount of the spending incurred
by the Centre; in case of delay, the sum due will include interest at 8%.
[Source: Translated from the French text in 15 ICSID ReviewFILJ 457 (2000) by
Mr Brian Conroy; excerpted in English in 26 Yearbook Commercial Arbitration 24
(2001).]
Note:A further case between the same parties (ARB/01/2) is pending.
52
MEXICO v. METALCLAD
Arbitration Award Partial annulment Judicial review Supplementary

Reasons for Judgment Whether appropriate case to correct Order flowing
from Reasons of Judgment Section 34(4) of International Commercial
Arbitration Act Adjournment of judicial review proceedings Whether
appropriate Arbitral proceedings Whether Tribunal to be given opportunity to consider breaches of Articles 1105 and 1110 of nafta based on
concepts within the scope of submission to arbitration Damages Whether
Metalclad entitled to interest prior to 20 September 1997
Expropriation Articles 1105 and 1110 of nafta Annulment of part of
Award relating to breaches involving decisions beyond scope of submission to
arbitration Whether Tribunal to be given opportunity to consider breaches
of Articles 1105 and 1110 of nafta based on concepts within the scope of
submission to arbitration
Interest Exclusion of interest in the Award Whether breach of Articles
1105 or 1110 of nafta based on concepts within the scope of submission to
arbitration Whether Metalclad entitled to interest from 5 December 1995 to
20 September 1997
United Mexican States v. Metalclad Corporation1
Judicial Review, Supplementary Reasons for Judgment, Supreme Court of British
Columbia. 31 October 2001
(Tysoe J)
Summary: The facts: On 2 May 2001, the arbitration award issued on
30 August 2000 by the Tribunal constituted under Chapter 11 of the North
American Free Trade Agreement (nafta) and reported in 5 ICSID Reports 209
was annulled in part and the amount payable thereunder revised accordingly (see
5 ICSID Reports 236).
The Award was not set aside in its entirety since Mexico had not demonstrated
that the third of the Tribunals findings of breach of Articles 1105 and 1110 of nafta
was beyond the scope of submission to arbitration. Since the first two findings of
breach involved decisions beyond that scope, the inclusion of interest in the Award
from 5 December 1995 to 20 September 1997 was found to be inappropriate. (For
further details, see 5 ICSID Reports 236.)
Mexico appealed and Metalclad cross-appealed. On 1 October 2001,
Metalclad made an application for directions respecting the reference to the
1
The petitioner was represented by Patrick G. Foy QC, J. Christopher Thomas and Robert J. C. Dean.
The Respondent was represented by D. Geoffrey Cowper QC, Henri C. A. Alvarez, B. J. Greenberg
and M. D. Parrish. The Intervenor, Attorney-General of Canada, was represented by Joseph C.
de Pencier, and the Intervenor, La Procureure general du Quebec on behalf of the Province of Quebec,
was represented by Jack M. Giles QC and Victoria Colvin.
SUPREME COURT OF BRITISH COLUMBIA
53
Tribunal contemplated in paragraphs 135 and 136 of the Reasons for Judgment,2
to settle the form of the Order and for an Order adjourning proceedings.
Held: The Order of 2 May 2001 was varied.
(1) Appropriate case for correction. Since either the judge or counsel for
Metalclad had failed properly to refer the outstanding issue to the Tribunal in
accordance with Section 34(4) of the International Commercial Arbitration Act
(the icaa), this was an appropriate case to correct the Order flowing from the
Reasons of Judgment (paras. 712).
(2) Section 34(4) of the icaa. In light of the approach of the uncitral Model
Arbitration Law, which formed the basis of the icaa, it was inappropriate to follow
the usual common law approach of partially setting the award aside and remitting
the matter to the Tribunal. It would have been appropriate to adjourn the proceedings under Section 34(4) of the icaa to give the Tribunal the opportunity to consider
breaches of Articles 1105 and 1110 of nafta based on concepts other than transparency prior to the issuance of the Ecological Decree so as to entitle Metalclad to
the additional interest (paras. 1315).
(3) Alternative positions of Mexico. There was no basis on which to reverse
the decision that the Award was not to be set aside in its entirety. Neither was there
any reason to adjourn proceedings in order to allow the Tribunal to consider further
the Ecological Decree since its conclusion was within the scope of submission to
arbitration (para. 16).
(4) Variation of Order. The Order pronounced on 2 May 2001 was varied.
Paragraphs 3 and 4 of the Order as settled by the Registrar were to be deleted
and replaced by an Order adjourning proceedings in order to give the Tribunal
an opportunity to resume the arbitral proceedings for the purpose of determining
whether there was a breach of Article 1105 or Article 1110 prior to the issuance of
the Ecological Decree without regard to the concept of transparency and thereby
determining whether Metalclad was entitled to interest prior to 20 September 1997
(para. 18).
(5) Adjournment. The proceedings were to be adjourned for eighteen months
from the date of the Supplementary Reasons for Judgment. An indefinite adjournment was not permitted by the wording of Section 34(4) of the icaa (para. 19).
The following is the text of the judgment:
1. These Reasons are supplementary to my Reasons for Judgment dated

May 2, 2001 and cited as 2001 BCSC 664, [2001] BCJ No. 950 (QL). The terms
used herein have the same meanings as defined in the Reasons for Judgment.
2. The Tribunal had based the Award on three breaches of Articles 1105 and 1110
of the nafta. The first two breaches were based on a concept of transparency and the
2
For the text of paragraphs 135 and 136 of the Reasons for Judgment, see paragraph 4. For the text of
Section 34(4) of the International Commercial Arbitration Act, see paragraph 6.
54
MEXICO v. METALCLAD
third breach was based on the conclusion that the issuance of the Ecological Decree
constituted an expropriation without payment of compensation. In my Reasons for
Judgment, I held that although Mexico was successful in demonstrating that the
first two of the three findings of breaches involved decisions beyond the scope of
the submission to arbitration, it was not successful in showing that the third finding
of a breach was beyond the scope of the submission to arbitration or that the Award
should be set aside in view of Metalclads allegedly improper acts or the Tribunals
alleged failure to answer all questions submitted to it. Accordingly, I concluded
that the Award should not be set aside in its entirety. I went on to consider the
fact that the interest included in the Award had been calculated from December 5,
1995 on the basis of the occurrence of the first two findings of breaches, while
the third breach did not occur until September 20, 1997. It was my view that the
Award inappropriately included interest from December 5, 1995 to September 20,
1997.
3. During the hearing before me (which lasted two weeks), neither Metalclad
nor Mexico made detailed submissions in the event that I agreed with any or all of
Mexicos challenges of the Award. Mexico wanted the entire Award set aside and
Metalclad sought to defend all aspects of the Award. In its written submissions,
Metalclad requested that if intervention was found to be merited, the Court should
consider whether remission to the Tribunal was required. In oral submissions, counsel for Metalclad spoke in terms of remission, remit any matters and remit
rather than set aside in the event that intervention was warranted. Counsel for
Mexico did not take exception to the use of this terminology.
4. On the basis of these submissions, I dealt with the inappropriate inclusion
of interest in the Award as follows at paragraphs 135 and 136 of the Reasons for
Judgment:
135. The result is that the amount of compensation ordered to be paid by Mexico to
Metalclad includes interest from December 5, 1995 to September 20, 1997 (plus the
compounding effects thereafter). As I would have set aside the Award in its entirety if
it had been based solely on the first two of the Tribunals findings of breaches of the
nafta, the Award should be set aside insofar as it includes interest which flows only
from those two findings. Therefore, I set the Award aside to the extent that it includes
interest prior to September 20, 1997 (and any consequential compounding effects). If
the parties are unable to agree on the interest re-calculation, the matter is remitted back
to the Tribunal.
136. Although I have concluded that the Tribunal made decisions on matters outside
the scope of the submission to arbitration when it found the first two breaches of Articles
1105 and 1110, I should not be taken as holding that there was no breach of Article
1105 and no breach of Article 1110 until the issuance of the Ecological Decree. The
function of this Court is limited to setting aside arbitral awards if the criteria set out
in s. 34 of the International caa are shown to exist. I express no opinion on whether
there was a breach of Article 1105 or a breach of Article 1110 prior to the issuance
of the Decree on grounds other than those relied upon by the Tribunal. If Metalclad
wishes to pursue the portion of the interest contained in the Award which I have set
aside, by establishing a breach of Article 1105 or Article 1110 prior to the issuance of
the Decree without regard to the concept of transparency, the matter is remitted to the
Tribunal.
55
I am advised that the parties were able to agree on the interest re-calculation referred
to in paragraph 135.
5. Mexico has appealed my refusal to set aside the Award. Metalclad has crossappealed the referral back to the Tribunal based on my conclusions with respect
to the first two findings of breaches of Articles 1105 and 1110 of the nafta. A
five day appeal hearing has been scheduled for April 8, 2002 and a schedule of
pre-appeal proceedings has been established by the Chief Justice.
6. Counsel for Metalclad wrote to icsid requesting that the issue of entitlement
to interest for the period from December 5, 1995 to September 20, 1997 be remitted
to the Tribunal. Following an exchange of correspondence, senior counsel at icsid
wrote to counsel for Metalclad on June 13, 2001 stating that the former members of
the Tribunal, in their personal capacities, had expressed the view that the conditions
specified in s. 34(4) of the International caa for a remission to the Tribunal appeared
not to have been met because there was no evidence of a request by Metalclad to
adjourn the proceedings, the proceedings were not adjourned to allow the remission
to take place and no period of time was determined by the Court in order to give
the Tribunal an opportunity to resume the arbitral proceedings. Subsection 34(4)
reads as follows:
When asked to set aside an arbitral award the court may, if it is appropriate and it is
requested by a party, adjourn the proceedings to set aside the arbitral award for a period
of time determined by it in order to give the arbitral tribunal an opportunity to resume
the arbitral proceedings or to take such other action as in the arbitral tribunals opinion
will eliminate the grounds for setting aside the arbitral award.
7. By Notice of Motion dated October 1, 2001, Metalclad made application (i)

for directions respecting the reference to the Tribunal contemplated in paragraphs
135 and 136 of the Reasons for Judgment (ii) to settle the form of Order flowing
from the Reasons for Judgment and (iii) for an Order adjourning these proceedings
generally or to a specified date to provide the Tribunal opportunity to resume the
arbitral proceedings in accordance with the Reasons for Judgment and directions
of this Court or to take such other action as in the Tribunals opinion will eliminate
the grounds upon which this Court has set aside the Award in part.
8. Mexico took the position that the settlement of the form of the Order
must first go before a registrar and took out an appointment in that regard for
October 9, 2001. The Registrar settled the form of the Order, which included the
following two paragraphs:
3. the application to set aside the Tribunals assessment of damages is allowed to the
extent of that portion of the award of interest for the period prior to September 20,
1997 representing the sum of US $1,657,184 (Cdn $2,541,457.30) (as of the date
of this order), which is hereby set aside;
4. if the respondent, Metalclad Corporation, wishes to pursue the portion of the award
of interest hereby set aside by attempting to establish a breach of Article 1105 or
a breach of Article 1110 occurring prior to the issuance of the Ecological Decree
on grounds other than an obligation of transparency, the matter is remitted to the
Tribunal;
56
MEXICO v. METALCLAD
The Order has not been entered in the court records; counsel for Mexico has
agreed to refrain from submitting it for entry pending the outcome of Metalclads
application.
9. Counsel appeared before me on October 9 after the Registrar had settled the
form of the Order. Counsel for Mexico took the position that I should not entertain
Metalclads application and that I should leave the matter to the Court of Appeal.
I declined to prohibit Metalclad from making submissions on its application, while
reserving to Mexico its argument that the Court of Appeal should deal with the
issue. Counsel agreed to make written submissions, which I have now received and
considered.
10. Counsel for Mexico accepts that the Court has the discretion, in appropriate
circumstances, to reopen proceedings prior to the entry of an order, but says that
these are not appropriate circumstances to do so.
11. Two of the circumstances where the court has held that it is appropriate to
reopen the proceedings are (i) where the judge fails to deal with a matter which had
been brought to the judges attention by one of the parties (see Rule 41(24), Liu v.
Hansen (1995), 38 CPC (3d) 398 (BCSC) and Coughlin v. Kuntz (1997), 43 BCLR
(3d) 360 (SC)) and (ii) where one of the parties should have drawn to the attention
of the judge a matter which affects the consequences of the primary decision (see
Hellinckx v. Large, [1998] BCJ No. 3072 (QL)). In my view, whether the blame
for failing to properly refer the outstanding issue to the Tribunal in accordance
with s. 34(4) falls on me or counsel for Metalclad, this is an appropriate case to
correct the Order flowing from the Reasons for Judgment. It is not necessary for
me to decide whether the submissions of counsel for Metalclad during the initial
hearing constituted a request under s. 34(4) because the request has now clearly
been made in the October 1 Notice of Motion. I have no doubt that if the provisions
of s. 34(4) had been specifically raised during the initial hearing, I would have
clarified whether Metalclad was making a request under s. 34(4) if I concluded
that intervention was warranted and I would have framed the Order in terms of
s. 34(4).
12. I do not accept Mexicos submission that I should not vary the Order because
there is a pending appeal and a reopening would compromise the orderly progress of
the appeal proceedings. An appeal is not a bar to a judge reconsidering an unentered
order (see Sharp Electronics of Canada Ltd v. Ono, [1982] BCJ No. 470 (QL) and
Constantinescu v. Barriault, [1996] BCJ No. 2105 (QL)). The timely issuance of
these Supplementary Reasons for Judgment will avoid a disruption in the schedule
of pre-appeal proceedings.
13. The concept of remission is utilized in common law jurisdictions when the
court is of the view that an award of an arbitral tribunal or administrative body
cannot be upheld. As an example, s. 30(1) of the Commercial Arbitration Act,
RSBC 1996, c. 55, provides that if an award has been improperly procured or an
arbitrator has committed an arbitral error, the court may set aside the award or remit
the award to the arbitrator for reconsideration. A different approach was adopted by
the uncitral Model Arbitration Law (which is the basis of the International caa),
as explained in the Seventh Secretariat Note, Analytical Commentary on Draft Text
A/CN.9/264 (25 March 1985):
57
13. Paragraph (4) envisages a procedure which is similar to the remission known
in most common law jurisdictions, though in various forms. Although the procedure
is not known in all legal systems, it should prove useful in that it enables the arbitral
tribunal to cure a certain defect and, thereby, save the award from being set aside by
the Court.
14. Unlike in some common law jurisdictions, the procedure is not conceived as a
separate remedy but placed in the framework of setting aside proceedings. The Court,
where appropriate and so requested by a party, would invite the arbitral tribunal, whose
continuing mandate is thereby confirmed, to take appropriate measures for eliminating a
certain remediable defect which constitutes a ground for setting aside under paragraph
(2). Only if such remission turns out to be futile at the end of the period of time
determined by the Court, during which recognition and enforcement may be suspended
under article 36(2), would the Court resume the setting aside proceedings and set aside
the award.
14. Hence, it was inappropriate for me to have followed the usual common law approach of partially setting the Award aside and remitting the matter to the Tribunal.
I should have clarified whether Metalclad was requesting me to adjourn the proceedings under s. 34(4) if I concluded that there were grounds to set aside the
Award in whole or in part and, if Metalclad had made such a request, it would
have been appropriate for me to adjourn the proceedings to give the Tribunal an
opportunity to deal further with the matter in view of my conclusion that breaches
of Article 1105 and Article 1110 could not be founded on an obligation of
transparency.
15. I do not agree with the submission on behalf of Mexico that Article 34(4)
of the Model Law (and, hence, s. 34(4) of the International caa) was intended
to be restricted to procedural defects. There is no such limitation contained in the
language of Article 34(4). There is no reason why Metalclad should be prevented
from endeavouring to establish a breach of Article 1105 or Article 1110 of the
nafta, on a basis other than the concept of transparency and at a date earlier than
the issuance of the Ecological Decree, so as to entitle it to additional interest.
16. I also disagree with the alternative positions of Mexico that the Award ought
to be set aside in its entirety or that these proceedings should be adjourned in order
to allow the Tribunal to resume the arbitral proceedings in respect of the Ecological
Decree. I specifically concluded in the Reasons for Judgment that the Award should
not be set aside in its entirety and there is no basis to reverse my decision in this
regard. There is no point in adjourning the proceedings to allow the Tribunal to
give further consideration to the Ecological Decree because I held in the Reasons
for Judgment that the Tribunal did not make a decision on a matter beyond the
submission to arbitration when it concluded that the issuance of the Ecological
Decree constituted an expropriation without payment of compensation.
17. Counsel for Metalclad argues that the Registrar was in error in settling the
form of Order and that I have the inherent jurisdiction to settle the form of Order
to be entered. Counsel also says that Metalclad is not applying to vary the Order
made by the Court but, rather, is simply applying for directions with respect to the
terms of the remission compatible with s. 34(4) of the International caa. I do not
agree with these submissions. The Registrar correctly settled the form of the Order
58
MEXICO v. METALCLAD
in accordance with the Reasons for Judgment and, properly construed, this is an
application to vary an unentered order.
18. I vary the Order pronounced on May 2, 2001 by deleting paragraphs 3 and
4 of the Order as settled by the Registrar and substituting in their place an order
adjourning these proceedings in order to give the Tribunal an opportunity to resume
the arbitral proceedings for the purpose of determining whether there was a breach
of Article 1105 or Article 1110 prior to the issuance of the Ecological Decree
without regard to the concept of transparency and thereby determining whether
Metalclad is entitled to interest prior to September 20, 1997.
19. Metalclad requested that these proceedings be adjourned generally. In my
opinion, an indefinite adjournment of the proceedings is not permitted by the wording of s. 34(4) of the International caa. In view of the past history and the present
circumstances, I order that these proceedings be adjourned for a period of 18 months
from the date of these Supplementary Reasons for Judgment or such other period as
may be ordered upon application to this Court. A further hearing may be scheduled
at any time after the expiry of this adjournment for the purpose of determining
whether the Award should be set aside to the extent that it includes interest prior to
September 20, 1997.
[Source: The text is reproduced from 2001 BCSC 1529, available at www.courts.
gov.bc.ca/jdb%2Dtxt/sc/01/15/2001bcsc1529.htm.]
LEMIRE v. UKRAINE
59
Settlement Agreement for settlement of dispute Recorded as award on

agreed terms Discontinuance of proceedings
Award Award on agreed terms Agreement for settlement of dispute
Nature of agreement No additional rights, benefits or privileges conferred
Principles governing interpretation and implementation Agreement binding
on legal successors to parties Article 55 of icsid (AF) Arbitration Rules
Lemire v. Ukraine
Award. 18 September 2000
(Arbitration Tribunal: Lauterpacht, President; Paulsson and Voss, Members)
Summary: The facts: On 14 November 1997, icsid received the Consent to
Arbitrate and Request for Approval of Access to the Centres Additional Facility in
a case brought by a US national under the 1994 Bilateral Investment Treaty between
Ukraine and the United States. The dispute concerned the issuance and operation
of radio broadcasting licences in the Ukraine.
On 10 December 1997, the Secretary-General of icsid informed the parties
that the Claimants application for access to the Additional Facility had been
approved and registered. On 16 January 1998, the Secretary-General registered the
Request.
On 24 September 1999, the Tribunal issued its Decision on Ukraines Objection
to the Tribunals Competence, joining the jurisdictional objections to the merits
of the dispute. On 20 March 2000, the parties concluded an agreement for the
settlement of the dispute. Pursuant to Article 50 of the icsid (Additional Facility)
Arbitration Rules (the Rules), the parties requested the Tribunal to record the
settlement in the form of an award and the Tribunal agreed to this.
Held: The Agreement concluded by the parties for the settlement of the
dispute should be recorded as an award on agreed terms, and such record entailed
the discontinuance of the proceedings.
(1) The parties agreed and confirmed that all the claims, complaints and requests contained in the Consent to Arbitrate, Notice for Arbitration, Ancillary
Claims and all other official letters of the Claimant to the Respondent or icsid
were thereby finally settled. Further, the parties acknowledged the absence of any
claims or misunderstandings between them as on the date of signing the Agreement
(paras. 1013).
(2) As a goodwill gesture, the Respondent agreed to fulfil a number of additional
considerations of the Claimant for the purpose of the settlement (para. 13).
(3) The parties further agreed that they would refrain from any demands at
present or in the future in any judicial or arbitration forum on compensation of
60
LEMIRE v. UKRAINE
material and/or moral damages with regard to the issues included in the settlement
(para. 15).
(4) The parties further confirmed that the Agreement would not be treated as
a document granting any rights, benefits or privileges which were different or
additional to the ordinary rights and obligations of a foreign investor in Ukraine
in accordance with the Ukrainian laws and international treaties to which Ukraine
was a party (para. 16).
(5) The parties further agreed that the Agreement would be binding on their
respective legal successors and would be governed by the applicable law as
determined by Article 55 of the Rules. It was also confirmed that all disputes
arising from or in connection with the Agreement would be settled by negotiations
(paras. 2831).
The following is the text of the award on agreed terms:
[531] I. The Arbitral Proceedings
Procedural Matters
1. By Consent to Arbitrate and Request for Approval dated November 14, 1997,
Mr Joseph Charles Lemire, a national of the United States of America, requested the
Secretary-General of the International Centre for Settlement of Investment Disputes
(hereinafter icsid) to approve and register his request for access to arbitration
against Ukraine under the icsid Additional Facility Rules and the 1994 Treaty
Between the United States of America and Ukraine Concerning the Encouragement
and Reciprocal Protection of Investment.
2. By letter dated December 10, 1997, the Secretary-General of icsid informed
the Parties that the requirements of Article 4(2) of the icsid Additional Facility Rules
had been fulfilled and that the Claimants application for access to the Additional
Facility had been approved and registered.
3. By Notice to Institute Arbitration Proceedings dated December 29, 1997,
the Claimant requested the Secretary-General of icsid to register the Notice and
dispatch to the parties a certificate of registration according to the Arbitration
(Additional Facility) Rules.
4. By letter dated January 16, 1998, the Secretary-General of icsid informed the
Parties that the Notice had been registered in the Arbitration Register, and issued
and dispatched to the Parties a Certificate of Registration of the case.
5. Pursuant to Article 10(1) of the Arbitration (Additional Facility) Rules,
Mr Lemire appointed as arbitrator Mr Jan Paulsson (a French national) and Ukraine
appointed as arbitrator Dr Jurgen Voss (a German national). By agreement of the
Parties, Professor Sir Elihu Lauterpacht, CBE, QC (a British national) was appointed President of the Tribunal. The Tribunal was constituted on August 13,
1998.
6. On October 6, 1998, Ukraine filed its Objection to the Tribunals Competence.
On October 13, 1998 the Claimant filed Ancillary Claims.
AWARD
61
[532] 7. The first session of the Arbitral Tribunal was held, with the Parties
agreement, in London on November 11, 1998. During the course of the first session,
the President recalled that the Respondent had filed objections to jurisdiction and
the proceedings on the merits were suspended in accordance with Article 46(4)
of the Arbitration (Additional Facility) Rules. The Tribunal proposed, and the
Parties agreed to, a schedule for the filing of observations on Ukraines Objection to the Tribunals Competence.
Settlement of the Dispute on Agreed Terms
8. On September 24, 1999, the Tribunal issued its Decision on Ukraines Objection to the Tribunals Competence, joining the jurisdictional objections to the
merits of the dispute. After consultations with the Parties, the schedule for the
further filings on the merits was fixed.
9. On March 20, 2000 the Parties concluded an agreement for the final settlement
of all the claims, complaints and requests contained in the Consent to Arbitrate,
Notice for Registration, Ancillary Claims and all other letters of the Claimant to
the Respondent or icsid as well as other correspondence of the Claimant addressed
to third parties.
10. In accordance with Article 50 of the Arbitration (Additional Facility) Rules,
the Parties agreed to request the Tribunal to record the settlement in the form of
an award of the Tribunal. The Parties further agreed that the proceedings would
thereby be discontinued.
11. The Tribunal is willing to meet the request of the Parties to record the settlement between them in the form of an award.
II. The Award

13.[1] Accordingly, the Tribunal orders unanimously that the said agreement between the Parties as set forth below shall be recorded verbatim as an award on
agreed terms:
[533] AGREEMENT ON THE DISPUTE SETTLEMENT

Joseph Charles Lemire v. Ukraine
(icsid Case No. ARB(AF)/98/1)
MARCH 20, 2000
This Agreement on the Dispute Settlement (hereinafter called this Agreement) is
entered into by and between:
[1 Paragraph numbering as in the original text.]
62
LEMIRE v. UKRAINE
Joseph Charles Lemire, the US national (hereinafter called as the Claimant);
and
The Government of Ukraine (hereinafter called as the Respondent), represented by
the Minister of Economy S. L. Tihipko.
The Claimant and the Respondent are hereinafter collectively referred to from time to
time as the Parties and individually as a Party.
WHEREAS, the Parties desire to reach a settlement of the International Center for Settlement of Investment Disputes (hereinafter referred to as the icsid) Case No. ARB
(AF)/98/1 upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Parties agree as follows:
I. Background
1. On January 16, 1998 the Secretary-General of the icsid registered in the Arbitration Register the December 29, 1997 Notice to Institute Arbitration Proceedings with
the use of the Additional Facility of icsid (hereinafter called the Notice for Arbitration) addressed by the US national Mr Joseph Charles Lemire (hereinafter called the
Claimant) in relation to an investment dispute between him and Ukraine (hereinafter
referred to as the Respondent).
[534] 2. On page 5 of the Consent to Arbitrate and Request for Approval for use of
the Additional Facility of the icsid dated November 14, 1997 (hereinafter referred to
as the Consent to Arbitrate) the Claimant stated that he wished to arbitrate his investment dispute with Ukraine in accordance with the provisions of the Treaty between
the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment (hereafter called the Bilateral Investment Treaty).
The Claimant also stated that his investment dispute with Ukraine existed at the time
the Bilateral Investment Treaty entered into force and is of a continuing nature. The
Claimant expressed his consent to the submission of that dispute to binding arbitration
under the Additional Facility of the icsid in accordance with Article VI(3)(a)(ii) of the
Bilateral Investment Treaty.
3. The Bilateral Investment Treaty was signed on March 4, 1994, entered into force
on November 16, 1996 and remains in force at present.
4. At the time when the Notice for Arbitration was filed with the Secretary-General
of the icsid and registered in the Arbitration Register, Ukraine was not a party to the
Convention on the Settlement of Investment Disputes between States and Nationals of
Other States. The consent of Ukraine to the submission of any investment dispute for
settlement by binding arbitration to the Additional Facility of the icsid, provided there
is a written consent of the national or company of the United States of America, was
given in Article VI(4) of the Bilateral Investment Treaty.
5. In the letter addressed to the Secretary-General of the icsid of March 12, 1998
signed by the Acting Chairman of the National Agency of Ukraine for Reconstruction
and Development Mr Vladimir Ignaschenko, it was stated that the National Agency
was authorized by the President of Ukraine to represent Ukraine in this dispute and is
prepared to cooperate closely with icsid in settlement of the issue.
6. In accordance with Article 14 of the icsid Additional Facility Arbitration Rules,
the Tribunal was constituted of three members Professor Sir Elihu Lauterpacht,
Mr Jan Paulsson and Dr Juergen Voss, and the proceedings began on August 13,
1998.
AWARD
7. On October 5, 1998 in accordance with Article 46 of the icsid Additional
Facility Arbitration Rules, the Respondent filed the Objection to [535] the Tribunals
Competence with the Secretary-General of the icsid. In its Decision of September 24,
1999 the Tribunal joined the Respondents Objection to the Tribunals Competence to
the merits of the case and resumed the suspended proceedings on the merits.
8. On October 13, 1998 the Claimant addressed to the Tribunal its Ancillary Claims
(hereinafter referred to as the Ancillary Claims) to which the Respondent extended
its Objection to the Tribunals Competence.
9. On October 15, 1999 the Claimant addressed a formal invitation to the Vice-Prime
Minister of Ukraine Mr Sergiy Tihipko to reach an amicable resolution of the dispute.
Based on the Claimants request of February 16, 2000, and the Respondents consent
to it, the Tribunal suspended the proceedings till June 1, 2000 in order to allow the
parties to finalize the peaceful settlement.
II. Settlement of the Dispute

10. The Parties agree and confirm that all the claims, complaints and requests
contained in the Consent to Arbitrate, Notice for Arbitration, Ancillary Claims and
all other official letters of the Claimant to the Respondent or icsid, as well as
other correspondence of the Claimant addressed to third parties are hereby finally
settled.
11. By such settlement the Parties, in the event of compliance with this Agreement,
exclude all of the claims referred to in item 10 of Section II Settlement of the Dispute
from any further judicial or arbitration settlement.
12. The Parties acknowledge the absence of any claims or misunderstandings between them as on the date of signing this Agreement.
13. As a good-will gesture, the Respondent agrees to fulfill the following additional
conditions of the Claimant for the purpose of this settlement under the schedule below.
(a) By April 15, 2000 the Commission of experts, appointed by the Respondent, shall
examine the quality of broadcasting within the radio frequencies band of FM 100108. Based on the conclusions of the Commission, the Respondent will take [536]
necessary, reasonable among others, technical measures to remove the obstacles
(if any) for radio broadcasting of Gala Radio on FM 100 in Kiev by June 1,
2000.
(b) By May 15, 2000 the Respondent, in person of the State Committee on Communications and Information Technology, agrees to use its best possible efforts
to consider in a positive way the application of Gala Radio to provide it with
the licenses for radio frequencies (provided there are free frequencies bands) in
the following cities: Kharkiv, Lviv, Donetsk, Zaporizhya, Lugansk, Simpheropol,
Dniepropetrovsk, Odessa, Vynnitsa, Kryviy Rog, Uzhgorod.
The Claimant can apply for the radio channels in the above cities to the National
Council for TV and Radio Broadcasting (hereinafter called the National Council)
in due course in accordance with the current legislation after the National Council
has been fully personally formed under the existing law of Ukraine. The Respondent, within the limits of its powers, will assist for the positive consideration of
this issue at the National Council.
The granting of licenses for radio frequencies and broadcasting channels will be
made in accordance with the requirements of Ukrainian legislation upon payment
of the license fees.
63
64
LEMIRE v. UKRAINE
(c) By April 10, 2000 the Respondent will propose for the Claimants consideration
three locations for the beauty salon on the terms of rent.
14. In the event that the Respondent appears to be unable to follow the above schedule
for the objective reasons, it will promptly inform the Claimant and agree with it the
revised schedule.
15. The Parties shall refrain from any demands at present or in the future in any
judicial or arbitration forum on compensation of material and/or moral damages with
regard to the issues included into this settlement.
16. The Agreement shall not be treated as a document granting any rights, benefits or
privileges which are different or additional to the ordinary [537] rights and obligations
of a foreign investor in Ukraine in accordance with the Ukrainian laws and international
treaties to which Ukraine is a party.
17. In accordance with Article 50 of the icsid Additional Facility Arbitration Rules,
the Parties agree to request the Tribunal to record the settlement in the form of the
Tribunals award. Such record will mean the discontinuance of the proceedings.
18. The Parties agree that the Tribunals award containing this Agreement as a part
of it can be published in the icsid Review.
19. The Parties agree that each of them bears its own fees and expenses in connection
with the proceedings under the icsid Case No. ARB(AF)/98/1.
III. Principles of Interpretation and Implementation of the Agreement

20. Each Party shall act in accordance with good faith and fair dealing in the international business. The Parties shall not exclude or restrict this duty.
21. The mere fact that at the moment of the conclusion of this Agreement the
performance of the obligation assumed by a Party was not possible shall not adversely
affect the validity of this Agreement.
22. This Agreement shall be interpreted according to the common intent of the
Parties. If such an intention cannot be established, the Agreement shall be interpreted
according to the meaning that reasonable persons of the same kind as the Parties would
give to it in the same circumstances.
The Statement and other actions of a Party shall be interpreted according to that
Partys intention if the other Party was aware of, or should have been aware of that
intention.
If the preceding paragraph is not applicable, such statements and other actions of
a Party shall be interpreted according to the meaning that a reasonable person of the
same kind as the other Party would give to it in the same circumstances.
23. For interpreting this Agreement all the circumstances shall be taken into consideration, including the following: [538]
(a) preliminary negotiations between the Parties;
(b) the practices which the Parties have established in their relations;
(c) the conduct of the parties following the conclusion of the Agreement;
(d) the nature and purpose of the Agreement;
(e) the meanings commonly given to the terms and expressions in the business concerned;
(f) usages.
Terms and conditions of the present Agreement shall be interpreted in such a way that
all of such terms are deemed effective without making void any of them.
AWARD
24. Each Party shall cooperate with the other Party when such cooperation may be
reasonably expected for the performance of that Partys obligations under the present
Agreement.
To the extent that an obligation of the Party involves a duty to achieve a certain
result, this Party is to attain it.
25. Where the performance of the Agreement becomes more onerous for one of
the Parties, that Party is nevertheless bound to perform its obligations subject to the
following provisions of this Agreement on hardship.
There is hardship where the occurrence of the events fundamentally alters the equilibrium of the Agreement either because the cost of the Partys performance has increased
or the value of the performance a Party receives has diminished, and
(a) the events occur or become known to the disadvantaged Party after the conclusion
of the Agreement;
(b) the events could not have been reasonably taken into account by the disadvantaged
Party at the time of the conclusion of the Agreement;
(c) the events are beyond control of the disadvantaged Party; and
(d) the risk of occurrence of the events was not assumed by the disadvantaged Party.
[539] In case of hardship the disadvantaged Party is entitled to request a revision of
the Agreement. The request shall be made without undue delay and shall indicate the
grounds on which it is based.
The request for revision of the Agreement does not in itself entitle the disadvantaged
Party to withhold performance hereunder.
Upon failure to reach agreement within a reasonable time either Party may resort to
the arbitration court, according to Article 31 (Section IV) of the present Agreement.
26. Non-performance shall mean the failure by a Party to perform any of its
obligations under the present Agreement, including improper performance or late
performance.
The non-performing Party may, at its own expense, remedy any non-performance,
provided that
(a) without undue delay, it gives notice indicating the proposed manner and time period
of such cure;
(b) the cure is appropriate in the given circumstances;
(c) the aggrieved Party has no legitimate interest in refusing such cure.
In the event of non-performance the aggrieved Party may by notice to the other Party
allow an additional period of time for performance of the cure.
During the additional period the aggrieved Party may withhold performance of
its own reciprocal obligations and may claim damages but may not resort to any
other legal remedy. If it receives notice from the other Party that the latter will
not perform its obligations under the present Agreement within that period, or if
upon expiration of that period due performance has not been made, the aggrieved
Party may resort to any of the legal remedies that may be available under this
Agreement.
Where in case of delay in performance, which is not fundamental, the aggrieved
Party has given notice allowing an additional period of time of reasonable length, it
may terminate the Agreement upon the expiry of that period. If the additional period
allowed is not of reasonable length it shall be [540] extended up to a reasonable
length. The aggrieved Party may in its notice provide that if the other Party fails to
perform within the period allowed by the notice the Agreement shall automatically
terminate.
65
66
LEMIRE v. UKRAINE
I. Miscellaneous
27. This Agreement constitutes the entire agreement between the Parties on the
subject matter hereof and supersedes all prior correspondence, negotiations and understandings between them with respect to the matters covered herein.
28. This Agreement shall be binding on the respective legal successors of the Parties.
Neither of the Parties may assign or otherwise transfer all or any part of their rights or
obligations under this Agreement to any third party.
29. If any provision of this Agreement is held by a court or arbitration tribunal
of competent jurisdiction to be invalid, unenforceable or violative of any applicable
law, such circumstance shall not have the effect of rendering any other provision or
provisions hereinafter contained invalid, inoperative or unenforceable.
30. This Agreement shall be governed by the applicable law as determined by
Art. 55 of the icsid Additional Facility Arbitration Rules.
31. All the disputes arising from or in connection with this Agreement shall be
settled by negotiations. In the event no solution is achieved within 60 days from the
date of beginning of negotiations, either party may address to the icsid its application
for settlement under the icsid Additional Facility Arbitration Rules.
32. This Agreement shall be executed in the Ukrainian and English languages. In
the event of dispute between the two texts, the Ukrainian language shall prevail.
33. This Agreement shall be executed in three counterparts, one for each party and
one for the Tribunal, each of which shall be deemed the original.
[541] 34. This Agreement enters into force on the date of signing by the Parties and
shall not be limited in time.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on March
20, 2000.
(signed by)
(signed by)
S. L. Tihipko
Minister of Economy
Joseph Charles Lemire
14. The Tribunal notes the Parties agreement, set forth in Article 19 of the
Agreement on the Dispute Settlement, that each side bears its own fees and expenses. The Tribunal orders unanimously that the fees and expenses of the members
of the Tribunal and the charges for the use of the facilities of icsid, which have
been covered by the equal advance deposits by both parties, shall be borne by the
parties in equal shares.
[Source: 15 ICSID ReviewFILJ 530 (2000).]
WENA HOTELS v. EGYPT
67
Jurisdiction Objections to jurisdiction Bilateral investment treaty

Exceptions to the nationality requirement icsid Convention, Article 25(2)(b)
Whether company incorporated in one State Party and owned by nationals
of another State Party is a national of the former Existence of prima facie
legal dispute for the purpose of determining jurisdiction
Arbitration Bilateral investment treaty Alleged violations of bit by Respondent through its State enterprise
Foreign investment Failure to provide fair and equitable treatment and
full protection and security to an investment UKEgypt Bilateral Investment Treaty, Article 2(2) Failure to prevent seizure of an investment Failure
to impose substantial sanctions for seizure
Expropriation Failure to provide prompt, adequate and effective compensation UKEgypt Bilateral Investment Treaty, Article 5
Municipal law Time bar Whether claims time-barred by domestic statute
of limitation Domestic statutes of limitation not binding on international
tribunal
Damages Determination of damages Prompt, adequate and effective compensation Compensation amounting to the market value of an investment
UKEgypt Bilateral Investment Treaty, Article 5
Annulment Time limit for request for annulment icsid Convention, Article
52 Raising new arguments related to a ground of annulment invoked within
the time limit fixed in the icsid Convention
Annulment Grounds for Manifest failure to apply applicable law
icsid Convention, Article 42(1) Subject matter of commercial agreements as
opposed to subject matter brought before icsid arbitration Role of international law in the context of Article 42(1) Relationship between international
law and domestic law
Annulment Grounds for Manifest excess of power by arbitral tribunal
Sufficiency of evidence Relationship between domestic arbitration and arbitration under the icsid Convention Compensation under domestic arbitration to be taken into account when awarding damages under the icsid
Convention Criteria for compensation under UKEgypt Bilateral Investment Treaty, Article 5
Compensation Interest How calculated Compound interest Exercise of
discretion
68
Wena Hotels Ltd v. Arab Republic of Egypt1

(Case No. ARB/98/4)
Decision on Jurisdiction. 29 June 1999
(Arbitration Tribunal: Leigh, President; Fadlallah and Haddad, Members)
Award. 8 December 2000
(Arbitration Tribunal: Leigh, President; Fadlallah and Wallace, Members)
Decision on Annulment. 5 February 2002
(Ad hoc Committee: Kerameus, President; Bucher and Orrego Vicuna, Members)
Summary: The facts: In 1989 and 1990, Wena Hotels Ltd (Wena or the
Claimant), a company incorporated in the United Kingdom, entered into two
agreements with the Egyptian Hotels Company (ehc), an Egyptian public sector
company. Pursuant to the agreements, Wena was to operate and manage two hotels
in Egypt, the Luxor Hotel and the El Nile Hotel, with the aim of developing and
raising their efficiency and standard. Shortly after entering into the agreements,
disputes arose between the parties concerning their respective obligations. Wena
claimed that the condition of the hotels was below the standard stipulated in the
agreements and withheld part of the rent. In response, ehc liquidated a performance
security posted by Wena. On 3 May 1990, Wena instituted arbitration proceedings
in Egypt against ehc concerning the Luxor Hotel. On 14 November 1990, the
arbitral tribunal ordered ehc to make repairs to the hotel and ordered Wena to
pay its outstanding rental obligations. Wena subsequently brought an action in the
Egyptian courts to have the arbitration set aside.
On 1 April 1991, the hotels were attacked by large crowds, and the staff and
guests were forcibly evicted from the hotels. ehc, whose staff participated in the
attacks, subsequently took control of the hotels. In two separate decisions issued in
1992, the Chief Prosecutor of Egypt ruled that the attacks on the hotels had been
illegal and, subsequently, Wena resumed control over them. On 23 February 1992,
the Ministry of Tourism withdrew the Nile Hotels operating licence and in April
of that year the Ministry denied Wena a permanent operating licence for the Luxor
Hotel. On 24 November 1993, ehc requested that a receiver be appointed for the
Luxor Hotel because of Wenas alleged failure to pay rent. On 2 December 1993,
Wena initiated arbitration in Egypt against ehc for damages for the attack on the
Nile Hotel. On 10 April 1994, an arbitration award was issued ordering payment
of 1.5 million Egyptian pounds to Wena but requiring Wena to surrender the hotel
1
Wena Hotels Ltd was represented by Mr Emmanuel Gailliard, Mr John Savage and Mr Peter Griffin
of Shearman & Sterling. The Arab Republic of Egypt was represented by Mr Eric A. Schwartz and
Mr Simon B. Stebbings of Freshfields Bruckhaus Deringer, and Counselor Osama Ahmed Mahmoud
and Counselor Hussein Mostafa Fathi from the Egyptian State Lawsuits Authority.
SUMMARY
69
to ehcs control. On 21 June 1995, Wena was evicted from the Nile Hotel. In a
similar arbitration relating to the Luxor Hotel, Wena was awarded, on 29 September
1994, 18 million Egyptian pounds for damages, but the award was nullified on 20
December 1995 in an appeals proceeding. On 14 August 1997, Wena was evicted
from the Luxor Hotel and the hotel was turned over to a court-appointed receiver
requested by ehc.
Decision on Jurisdiction: 29 June 1999
On 10 July 1998, Wena filed a request for arbitration against the Arab Republic
of Egypt, under the terms of the Agreement for the Promotion and Protection of
Investments (the ippa) between the United Kingdom and Egypt.2 Wena contended
that Egypt had expropriated its investment without providing prompt, adequate and
effective compensation, and by failing to accord its investments fair and equitable
treatment and full protection and security. Wena also requested payment of damages
of not less than US $62,820,000 and costs.
Egypt objected to the jurisdiction of the Tribunal on four grounds: that it had not
agreed to arbitrate with Wena because, by virtue of ownership, Wena should be
treated as an Egyptian, not a foreign, company; that Wena had made no investment
in Egypt; that there was no legal dispute between Wena and Egypt; and that
Wenas consent to arbitration in the request for arbitration was insufficient and
the request premature. Subsequently, Egypt withdrew the second and fourth of its
objections. With respect to the first objection, Egypt argued that although Wena
was incorporated in the UK, by virtue of its ownership it should have been treated
as an Egyptian company pursuant to Article 8(1) of the ippa.
Held: The Tribunal had jurisdiction under the ippa and the icsid Convention.
(1) The purpose of the second sentence of Article 8(1) of the ippa was to incorporate a specific situation, contemplated in the second part of Article 25(2)(b) of
the icsid Convention, where a local company (i.e. a company incorporated in the
host State) was controlled by nationals of the non-host State and, hence, was to be
treated as a foreign national for purposes of icsid arbitration. The second sentence
of Article 8(1) of the ippa related only to the situation in which an investment in
Egypt or the United Kingdom was made through a local company in the host State
which was owned by companies or nationals of the other country. The provision did
not reverse the consent given in the first sentence of Article 8(1) when a Contracting
State was a party to a dispute with a juridical person of the other Contracting State
(pp. 814).
(2) Wena alleged a prima facie dispute with Egypt which (assuming it could make
its case on the facts) would entitle it to damages. Egypts defences were defences
on the merits, which could be addressed by the Tribunal only with the benefit of
full briefing and explanation by the parties of the facts of the case (pp. 845).
2
United Kingdom of Great Britain and Northern IrelandEgypt, Agreement for the Promotion and
Protection of Investments, London, 11 June 1975: 1032 UNTS 32.
70
(3) Contrary to Wenas contention, Egypts jurisdictional objections were not

wholly groundless; Wenas request for costs would thus be denied (pp. 856).
Award: 8 December 2000
On 14 August 1999, Professor Hamzeh Ahmed Haddad resigned from the Tribunal. The Tribunal was reconstituted with the appointment of Michael F. Hollering
as the replacement for Professor Haddad. Following the resignation of Mr Hollering, the Tribunal was reconstituted with the appointment of Professor Don Wallace
Jr as the replacement for Mr Hollering.
Held: Egypt had breached its obligations to Wena under Articles 2(2) and 5
of the ippa.
(1) Applicable law. Beyond the provisions of the ippa, there was no special
agreement between the parties to the dispute; accordingly the Tribunal should apply
both Egyptian law and such rules of international law as might be applicable. The
provisions of the ippa were in any event the primary rules of law to be applied by
the Tribunal, both on the basis of the agreement of the parties and as mandated by
Egyptian law, as well as international law (paras. 1879).
(2) Fair and equitable treatment. Egypt had violated its obligations under Article 2(2) of the ippa by failing to accord Wenas investment fair and equitable
treatment and full protection and security. Egypt was aware of ehcs intentions
to seize the hotels and took no action to prevent ehc from doing so. Once the seizures
occurred, both the police and the Ministry of Tourism took no immediate action to
restore the hotels promptly to Wenas control. Egypt had never imposed substantial
sanctions on ehc or its senior officials, which suggested Egypts approval of ehcs
actions (paras. 8495).
(3) Prompt, adequate and effective compensation. Egypt had violated its obligation under Article 5 of the ippa by failing to provide Wena with prompt, adequate
and effective compensation for the losses it suffered as a result of the seizures of
the Luxor and Nile Hotels. Egypt had deprived Wena of its fundamental rights of
ownership by allowing ehc forcibly to seize the hotels, to possess them illegally
for nearly a year, and to return the hotels stripped of much of their furniture and
fixtures. After the hotels were returned to Wena, Egypt had failed to satisfy its
obligation under the ippa, and international norms generally, by refusing to offer
Wena prompt, adequate and effective compensation for the losses it had suffered
as the result of Egypts failure to act (paras. 96101).
(4) Statute of limitation. Wenas claims were not time barred under Article
172(i) of the Egyptian Civil Code, which sets a three-year statute of limitation.
There was no legal or equitable reason to bar Wenas claim. First, according to the
evidence before the Tribunal, neither party seemed to have been disadvantaged.
The principle of repose could not be applied because Wena continued to be
active in prosecuting its claims and Egypt had ample notice of the ongoing dispute.
Second, municipal statutes of limitation did not necessarily bind with respect to
a claim for a violation of an international treaty before an international tribunal.
Strict application of Article 172(i) would collide with the general, well-established
SUMMARY
71
international principle that municipal statutes of limitation did not bind claims
before an international tribunal. Article 8(1) of the ippa suggested a greater concern
that the parties did not rush into arbitration than that the parties delayed the initiation
of proceedings (paras. 10210).
(5) Damages. In its determination of damages, the applicable standard was as
set out in Article 5 of the ippa: in the event of expropriation the private investor was
entitled to prompt, adequate and effective compensation and such compensation
shall amount to the market value of the investment immediately before the expropriation. The Tribunal awarded Wena US $20,600,986.43 in damages, interest,
attorneys fees and expenses, payable by Egypt within thirty days of the date of
the Award. Thereafter, additional interest was to accumulate at 9% compounded
quarterly until paid (paras. 11830).3
Decision on Annulment: 5 February 2002
On 19 January 2001, Egypt filed an application for annulment under Article 52(1)
of the icsid Convention of the arbitral award rendered on 8 December 2000 (the
Award). Egypt contended first, that the Tribunal had manifestly exceeded its powers under Article 42(1) of the icsid Convention by failing to apply Egyptian law
and by allowing Wena to assert claims on behalf of investors who were not entitled
to protection under the ippa; second, that there was a serious departure from a fundamental procedure in that the Award failed to state the reasons on which it was
based. Egypt subsequently withdrew its argument that the Tribunal had exceeded
its powers in refusing to apply Egyptian law to Egypts defence that Wenas claims
were time-barred.
The application was accompanied by a request for a stay of enforcement of the
Award. In accordance with Article 52(2) of the icsid Convention, the SecretaryGeneral of icsid informed both parties of the provisional stay of enforcement of the
Award. Wena requested that the stay be terminated or, in the alternative, it requested
that the stay be modified by posting of security by Egypt as a condition for its
continuation. On 5 April 2001, the Committee issued Procedural Order No. 1,
by which it granted the continuation of the stay, conditional upon the posting by
Egypt of an unconditional and irrevocable letter of guarantee for the total amount
of the Award, plus interest accrued up to 7 April 2001. Egypt posted such letter of
guarantee, with an original validity until 31 October 2001, subsequently extended
to 28 February 2002.
Held: The application for annulment was rejected.
(1) Time limit for request of annulment. Wena claimed that several grounds for
annulment were time-barred because they had not been argued in the initial request
but only in the applicants Memorial. Arbitration Rule 50(1)(c) required that the
grounds for annulment be stated in detail in the application for annulment. On
the other hand, the icsid Convention did not state any requirement of completeness
3
Professor Wallace concurred in the award but was not persuaded that the compounding of interest
should be quarterly.
72
of the application, except to the extent that the application must invoke one or more
of the grounds listed in Article 52(1) on which it was based. The icsid Convention thus did not preclude raising new arguments provided that they were related
to a ground of annulment invoked within the time limit fixed in the Convention
(para. 19).
(2) Manifest failure to apply the applicable law. For any such failure to be a
ground of annulment, the Tribunal must have manifestly exceeded its powers, as
stated in Article 52(1)(b) of the icsid Convention. The excess of power must be
self-evident rather than the product of elaborate interpretation one way or the other.
(a) The question was whether the Tribunal, although having referred to the law
of the host State, had in fact failed to apply Egyptian law because it had turned to
the application of the provisions of the ippa as the primary source. The two lease
contracts concluded between Wena and ehc were subject to Egyptian law and
dealt with questions of a commercial nature, while the ippa dealt with questions
that were essentially of a governmental nature, namely the standards of treatment
accorded by the State to foreign investors. Wena, as a national of a Contracting
State, could invoke the ippa for the purpose of a dispute concerning the treatment
of foreign investors by Egypt. This mechanism had a different and separate dispute
settlement arrangement and might include a different choice of law provision or
make no choice at all. Since the subject matter of the lease agreements submitted
to Egyptian law was different from the subject matter brought to arbitration under
the ippa, it could not be held that the parties had made a choice of law under
the first sentence of Article 42(1) of the icsid Convention. With respect to the
role of international law in the context of Article 42(1) of the icsid Convention,
the use of the word may in the second sentence of this provision indicated that
the Convention did not draw a sharp line for the distinction of the respective scope
of international and domestic law and, correspondingly, the Tribunal had a certain
margin of interpretation. The law of the host State could be applied in conjunction
with international law if this was justified, and international law could be applied
by itself if appropriate. In particular, the rules of international law that directly or
indirectly related to the States consent prevailed over domestic rules that might be
incompatible with them. The reliance of the Tribunal on the ippa as the primary
source of law was not in derogation of or contradiction to the Egyptian law and
policy in this matter (paras. 2846).
(b) In applying the rules of the ippa, the Tribunal did not exceed its powers. With
respect to Egypts claim that the leases were invalid because of corruption or conflict,
the Tribunal did not consider that there was sufficient evidence to prove such a claim.
It was therefore not a question of failure to apply the applicable law but one of
evidence, the evaluation of which did not raise any ground of annulment (para. 47).
(c) With respect to the determination of interest, although the Egyptian Civil
Code provided for various limits to such determination, ways had been found in
domestic practice to increase those limits, particularly by means of the award of
supplemental damages. Once the Tribunal decided to apply the ippa to the dispute,
it could not ignore the criteria in Article 5 of the ippa. Although not referring
to interest, the provision had to be read as including a determination of interest
that was compatible with the two principles stated in Article 5. The option the
SUMMARY
73
Tribunal took was within its powers. International law and icsid practice, unlike
the Egyptian Civil Code, offered a variety of alternatives that were compatible
with those objectives, including the compounding of interest in some cases. This
was a discretionary decision of the Tribunal; but even if the Tribunal erred, this
in itself would not amount to a manifest excess of power leading to annulment
(paras. 513).
(3) Serious departure from a fundamental rule of procedure. Article 52(1)(d)
of the icsid Convention referred to a set of minimal standards of procedure to be
respected as a matter of international law. In order to be a serious departure from a
fundamental rule of procedure, the violation must have caused the Tribunal to reach
a result substantially different from that it would have reached had the rule been
observed. With respect to Egypts contention that the Tribunal stated wrongly that
the existence of a consultancy agreement was undisputed, Egypt did not show
what impact this issue might have had on the Award nor did it demonstrate why,
and in respect of which fundamental rule of procedure, the burden of proof would
have shifted from Egypt to Wena.
With respect to the question of assessment of damages, the pertinence of factual
statements presented by Wena in order to prove its losses might have been a matter
of substance rather than a procedural issue. Irrespective of whether the matter was
one of substance or procedure, it was within the Tribunals discretion to express its
opinion about the relevance and evaluation of the elements of proof presented by
each party.
With respect to Egypts contention that the Tribunal breached a fundamental rule
of procedure by not exercising its discretion to call further evidence and then deciding the issue against one of the parties on the basis of the absence of such evidence,
the principle underlying Article 43 of the icsid Convention and Arbitration Rule
34(2) was that it is incumbent on the parties to produce the evidence they wish to
present or they intend to request the Tribunal to call for (paras. 5674).
(4) Failure to state reasons. The ground for annulment of Article 52(1)(e) of
the icsid Convention invoked by Egypt did not allow any review of the challenged
Award which would lead the Committee to reconsider whether the reasons underlying the Tribunals decisions were appropriate or convincing. This requirement
was based on the Tribunals duty to identify and express the factual and legal
premises leading the Tribunal to its decision. If the Tribunal had given such reasons, there was no room left for a request for annulment under Article 52(1)(e).
Neither Article 48(3) nor Article 52(1)(e) specified the manner in which the Tribunals reasons were to be stated. The object of both provisions was to ensure that
the parties would be able to understand the Tribunals reasoning but it was not
required that each reason be stated expressly. The Tribunals reasons might be implicit in the considerations and conclusions contained in the award, provided they
could be reasonably inferred from the terms used in the decision.
With respect to the explanation given by the Tribunal for not determining the
respective obligations of Wena and ehc under the leases, it was sufficient to
understand the premises on which the Tribunals decision was based in this respect. With respect to the reasons supporting the Tribunals determination of the
amount awarded to Wena, the appropriate information was contained in Wenas
74
documentary evidence and the reasons relevant for the Tribunals findings were
thus stated implicitly by reference to such documentation. With respect to the reasons given by the Tribunal for the adoption of the rate and date from which interest
would be determined, international tribunals and arbitration panels usually disposed of a large margin of discretion when fixing interest. The reasons underlying
the Tribunals decision in this respect were sufficiently stated (paras. 75111).
(5) Costs. Each party should bear its own expenses and each party should bear
one half of the costs incurred by the Centre in connection with the proceeding
(para. 112).
The texts of the decisions are set out as follows:
Decision on Jurisdiction (29 June 1999)

Award (8 December 2000)
Decision on the Application for Annulment (5 February 2002)
p. 74
p. 89
p. 129
DECISION ON JURISDICTION (29 JUNE 1999)
I. The Proceedings
The present arbitration was initiated on July 10, 1998 when Claimant, Wena
Hotels Limited (Wena), filed a request for arbitration with the Secretary-General
of the International Centre for Settlement of Investment Disputes (icsid). The
request was filed against Respondent, the Arab Republic of Egypt (Egypt), and
asserted that [a]s a result of Egypts expropriation of and failure to protect Wenas
investment in Egypt, Wena has suffered enormous losses leading to the almost total
collapse of its business.1 Wena requested the following relief:
(a) a declaration that Egypt has breached its obligations to Wena by expropriating Wenas investments without providing prompt, adequate and effective
compensation, and by failing to accord Wenas investment in Egypt fair and
equitable treatment and full protections and security;
(b) an order that Egypt pay Wena damages in respect of the loss it has suffered
through Egypts conduct described above, in an amount to be quantified precisely during this proceeding but, in any event, no less than USD 62,820,000;
and
(c) an order that Egypt pay Wenas costs occasioned by this arbitration including
the arbitrators fees and administrative costs fixed by icsid, the expenses of
the arbitration, the fees and expenses of any experts, and the legal costs
incurred by the parties (including fees of counsel).2
1
2
Claimants Request for Arbitration, at 1 (submitted on July 10, 1998) (Request).

Id., at 18.
DECISION ON JURISDICTION
75
In accordance with Article 36 of the icsid Convention and Rule 6(1) of the
icsid Institution Rules, the Acting Secretary-General of icsid registered the request
for arbitration on July 31,1998, and invited the parties to constitute an Arbitral
Tribunal.
The Tribunal was constituted on December 18, 1998 and held its first session, at
the Permanent Court of Arbitration in The Hague, on February 11, 1999. During
this first session, Egypt objected to the request for arbitration filed by Wena and
raised objections as to the Tribunals jurisdiction to hear the dispute.
The Tribunal, pursuant to Article 41(2) of the icsid Convention, granted
the parties an opportunity to brief the jurisdictional objections before proceeding to the merits of the dispute. The parties have filed four papers with the
Tribunal:
(1) Respondents Memorial on its Objections to Jurisdiction (submitted on
March 4, 1999);
(2) Claimants Response to Respondents Objections on Jurisdiction (submitted
on March 25, 1999);
(3) Respondents Reply on Jurisdiction (submitted on April 8, 1999); and
(4) Claimants Rejoinder on Jurisdiction (submitted on April 22, 1999).
The Tribunal heard oral arguments on Respondents objections to jurisdiction
during a second session, at the offices of the World Bank in Paris, on May 25,
1999.
Both parties were ably represented by counsel and presented well-considered
arguments, both in writing and orally. The Tribunal has been greatly assisted by the
professional work of counsel for each party.
For the reasons discussed below, the Tribunal has concluded that Respondents
objections should be denied and jurisdiction exercised over the dispute. Accordingly, the Tribunal directs the parties to proceed to briefing the merits of the
dispute, pursuant to the schedule discussed during the Tribunals first session in
The Hague:
Claimants Memorial on the Merits
Respondents Counter-Memorial on the Merits
Claimants Reply on the Merits
Respondents Rejoinder on the Merits
July 26, 1999

August 27, 1999
September 10, 1999
September 24, 1999
The Tribunal proposes holding a session to hear the merits of the case during
either the week of September 27, 1999 or the week of October 4, 1999. The Tribunal
anticipates that the session would last two to three days. The Tribunal requests that
the parties advise the Tribunal, by no later than July 12, 1999, of their availability
during either of the two proposed weeks.
The Tribunal has noted that, during the second session, Respondent expressed
concerns with its ability to prepare a counter-memorial within the original schedule
of thirty days. If Respondent continues to believe that it will require additional time
to prepare its brief, it should notify the Tribunal by no later than July 12, 1999.
The Respondent also should submit a proposed, revised briefing schedule, however,
the Tribunals session on the merits will be postponed no later than the last two
76
weeks of October (i.e., the weeks of October 18, 1999 and October 25, 1999). If a
modification of the original schedule is requested, the Tribunal is hopeful that the
parties would be able to agree on an acceptable alternative. If agreement were not
possible, however, the Claimant should notify the Tribunal of any concerns it has
with the Respondents proposed schedule.
II. The Facts

This dispute arose out of agreements to develop and manage two hotels in Luxor
and Cairo, Egypt. Without the benefit of the parties briefs on the merits and without
prejudging the facts of the case, the Tribunal will provide a brief summary of the
major events concerning the hotels.
On August 8, 1989, Wena and the Egyptian Hotels Company (ehc), a company of the Egyptian Public Sector affiliated to the General Public Sector Authority
for Tourism,3 entered into a 21 year, 6 month Lease and Development Agreement for the Luxor Hotel in Luxor, Egypt.4 Pursuant to the Agreement, Wena
was to operate and manage the Hotel exclusively for [its] account through the
original or extended period of the Lease, to develop and raise the operating efficiency and standard of the Hotel to an upgraded four star hotel according to the
specifications of the Egyptian Ministry of Tourism or upgratly [sic] it to a five star
hotel if [Wena] so elects. . . . Wena also agreed to make certain additions to and
expansion of the Hotel, including at least forty additional guest rooms, a coffee
shop, fast food shops, a childrens swimming pool, a recreation center and other
improvements.5
On January 28, 1990, Wena and ehc entered into a similar, 25-year agreement
for the El Nile Hotel in Cairo, Egypt.6 Wena also entered into an October 1, 1989
Training Agreement with ehc and the Egyptian Ministry of Tourism to train in the
United Kingdom . . . Egyptian Nationals in the skills of hotel management. . . .7
Shortly after entering into the agreements, disputes arose between ehc and Wena
concerning their respective obligations. Wena claims that it found the condition of
the Hotels to be far below that stipulated in the lease [and] withheld part of the rent,
as the lease permitted.8 In turn, Egypt claims that Wena failed to pay rent due to
ehc on May 15 and August 15, 1990, and ehc in turn liquidated the performance
security posted by Claimant.9
3
As explained during oral argument, the Egyptian government holds all of the shares of ehc, but the
company is considered a separate legal entity.
4
Luxor Hotel Lease and Development Agreement (August 8, 1989) [Annex W5]. Note, in referencing
the documentary annexes submitted by the parties, the notation W indicates a document submitted by
Claimant, Wena Hotels Limited; the notation ARE indicates a document submitted by Respondent,
the Arab Republic of Egypt.
5
Id., arts. III & VIII.
6
El Nile Hotel Lease and Development Agreement (January 28, 1990) [Annex W4].
7
An Agreement between His Excellency Fouad Sultan Minister of Tourism for the Egyptian Government
jointly with Mr Kamal Kandil of the Egyptian Hotels Company and Wena Hotels Limited (October 1,
1989).
8
Request, at 8.
9
Respondents Memorial on its Objections to Jurisdiction, at 4 (submitted March 4, 1999) (Memorial).
77
According to Egypt, Wena subsequently instituted arbitration proceedings in

Egypt against ehc. The Tribunal has not seen copies of the resulting arbitration
decision; however, Wena, so far, has not contested Egypts summary of the award
as requiring Wena to pay rental due, but denying ehcs request to revoke the
Luxor Lease.10
On April 1, 1991, large crowds attacked the Luxor and Nile Hotels and the staff
and guests were forcibly evicted. Both parties agree that ehc participated in these
attacks and subsequently took control of the hotels. As Egypt notes, [i]t has been
recognized by the authorities in Egypt that the repossession by ehc of the Luxor and
Nile Hotels and ehcs eviction of the Claimant from the Hotels on April 1, 1991 was
wrong.11 The Tribunal expects that both parties will present additional information
about these attacksand Egypts role, if anyas part of their submissions on the
merits.
In January 1992, the Chief Prosecutor of Egypt ruled that the attack on the Nile
Hotel was illegal and, on February 25, 1992, the hotel was returned to Wenas
control.12 Similarly, on April 28, 1992, the Chief Prosecutor of Egypt ruled that
the attack on the Luxor Hotel was illegal and Wena resumed control of the hotel
sometime thereafter.13
On November 24, 1993 ehc requested that a receiver be appointed for the Luxor
Hotel because of Wenas alleged failure to pay rent.14 Soon thereafter, on December
2, 1993, Wena initiated arbitration in Egypt against ehc for damages from Nile
Hotel invasion.15 Similar arbitration was initiated by Wena regarding the Luxor
Hotel.
On April 10, 1994, an arbitration award of LE 1.5 million for damages from the
invasion of the Nile Hotel was issued in favor of Wena. However, the award also
required Wena to surrender the Nile Hotel to ehcs control.16 On June 21, 1995,
Wena was evicted from the Nile Hotel.17
The Luxor Hotel arbitration panel also found in favor of Wena, awarding the
company, in a September 29, 1994 decision, nearly LE 18 million for damages
from the invasion.18 However, this award subsequently was nullified by the Cairo
Appeal Court on December 20, 1995.19 On August 14, 1997, Wena was evicted
from the Luxor Hotel and, according to Egypt, the hotel was turned over to a courtappointed receiver requested by ehc.20 Again, the Tribunal expects that both parties
10
Id.
Id., at 9.
12
Request, at 10.
13
Id., at 11.
14
Memorial, at 6.
15
Id.
16
Translation of Nile Hotel Arbitration Award (April 10, 1994) [Annex ARE20].
17
Request, at 12; Memorial, at 8; Annual Return and Financial Statements for Wena Hotels Limited
(period ended December 31, 1995) [Annex ARE141; Letter from Kevin Heath, Esq. to Mr Nael ElFarargy (March 2, 1999) [Annex W16].
18
Translation of Luxor Hotel Arbitration Award (September 29, 1994) [Annex ARE31].
19
Translation of the Cairo Court of Appeals Judgement (December 20, 1995) [Annex ARE32]. See
also Request, at 12.
20
Request, at 13; Memorial, at 6; Annual Return and Financial Statement for Wena Hotels Limited
(period ending December 31, 1996) [Annex ARE15].
11
78
will present additional information about Wenas eviction from the two hotels, and
Egypts responsibility, if any, for the evictions.
In addition to the disputes regarding the two hotels, Wena also has alleged a
campaign of continual harassment of Wena, including the following allegations:
in 1991 the Minister of Tourism made defamatory statements about Wena that were
reproduced in the media; in 1992 Egypt revoked the Nile Hotels operating license
without reason; in 1995 Egypt imposed an enormous, but fictitious, tax demand on
Wena; in 1996 Egypt removed the Luxor Hotels police book, effectively rendering
it unable to accept guests; and, last but not least, in 1997 Egypt imposed a three-year
prison sentence and a LE 2,000,000 bail bond on the Managing Director of Wena
based on trumped-up charges.21 With the exception of the 1997 conviction of Mr
Nael El-Farargy, the Managing Director of Wena, the parties have discussed none
of these allegations in detail before the Tribunal. The Tribunal looks forward to the
parties elaboration on these issues.
III. Respondents Jurisdictional Objections
In its Memorial Egypt raised four objections to jurisdiction before this Tribunal.
First, Egypt asserted that it has not agreed to arbitrate with the Claimant as it is, by
virtue of ownership, to be treated as an Egyptian company. Second, Egypt argued
that the Claimant has made no investment in Egypt. Third, Egypt claimed that
there is no legal dispute between the Claimant and the Respondent. Finally, Egypt
contended that the Claimants consent to arbitration in the Request for Arbitration
is insufficient and its request premature.22
The first three objections reflected substantive challenges to the Tribunals jurisdiction under Article 25 of the icsid Convention and Article 8(1) of the Agreement
between the Arab Republic of Egypt and the United Kingdom of Great Britain
and Northern Ireland for the Promotion and Protection of Investments (ippa).
The fourth objection contained a pair of procedural challengesarguing that Wena
failed to comply with the three month waiting period requirement of Article 8(1)
of the ippa and that Wenas consent to jurisdiction and its request for arbitration
should have been filed in two separate documents.
During the Tribunals second session, Egypt withdrew two of its four objections.
First, it noted that the papers that we have now been supplied as part of the
Rejoinder do indicate at least a prima facie case that the Claimant has made an
investment, that money was spent in the development and renovation of the hotels
and that the money was paid for by the Claimant, rather than by any other party.
Thus, for the purpose of establishing jurisdiction only, the Respondent is willing
to accept that an investment has been made.
Similarly, Respondent also withdrew its procedural objections to Claimants
request for arbitration. As Egypt appropriately noted, even if the Tribunal endorsed
its objections, the alleged defects could have been easily rectified. Noting that it
is not our wish to raise arguments simply for the purpose of being difficult or to
21
22
Request, at 16.
Memorial, at 1.
79
delay, Egypt advised that as far as that particular objection is concerned, we are
prepared to forgo it.
In view of Respondents decision to withdraw these two objections, the Tribunal,
in its deliberations, has mainly considered Egypts two remaining objections to
jurisdiction(1) that the consent to arbitrate it made in the ippa does not apply
to Wena because Wena is, by virtue of ownership, to be treated as an Egyptian
company, and (2) that there is no dispute between Wena and the Arab Republic of
Egypt.
As noted above, the Tribunal, despite the strong presentation of Egypts counsel
on these two remaining issues, has concluded that Egypts objections should be
denied and jurisdiction exercised over this matter. The Tribunals reasons for so
deciding are set forth below.
At the same time, the Tribunal disagrees with Wenas contention that Egypts
objections were wholly groundless. Accordingly, the Tribunal also denies Wenas
request for costs incurred in rebutting Egypts unreasonable and unfounded
objections to jurisdiction.23
IV. Objection 1: The Respondent has not Agreed to Arbitrate with the Claimant
as it is, by Virtue of Ownership, to be Treated as an Egyptian Company
The Arab Republic of Egypts principal object is that, although the claimant is
an English company, it is, by virtue of Mr El-Farargys ownership and his Egyptian nationality, to be treated as an Egyptian company pursuant to Article 8(1).
Accordingly, [a]s the respondent has not consented under the ippa, to arbitrate
with companies, such as the claimant, that are to be treated as Egyptian thereunder, it therefore follows from the ippas express terms that the respondent has not
consented to the present arbitration.24
Egypts objection raised three potential issues for consideration by the Tribunal.
The first issue concerned the proper construction of the second sentence of Article
8(1) of the ippa. Did the sentence, as Egypt contends, exclude jurisdiction in cases
where a company of the non-host State is controlled by nationals or companies of
the host State? Or, did the sentence, as Wena contends, extend jurisdiction in cases
where a company of the host State is controlled by nationals or companies of the
non-host State?
If the Tribunal had agreed with Egypts interpretation, it would have faced two
underlying, largely factual questions. First, were a majority of Wenas shares owned
by Mr Farargy? Second, did Mr Farargydespite his adoption of British citizenship
in 1987remain an Egyptian national? However, for the reasons discussed below,
the Tribunal eventually rejected Egypts proposed construction of Article 8(1) and,
as a result, did not have to address these two questions.
23
Claimants Response to Respondents Objections on Jurisdiction, at 40 (submitted on March 25,
1999) (Response).
24
Respondents Reply on Jurisdiction, at 2 (submitted on April 8, 1999) (Reply).
80
A. Article 8(1) of the ippa and Article 25 of the icsid Convention

Consent of the parties is the cornerstone of the jurisdiction of the Centre.25 As
Georges Delaume notes, jurisdiction of the Centre rests upon a strictly voluntary
basis. . . . Any Contracting State is entirely free to decide in the light of all relevant
circumstances whether to consent to the submission of existing or future investment
disputes to the jurisdiction of the Centre.26
In its deliberations, the Tribunal gave considerable attention to the instrument
in which Egypt expressed its consent to icsid arbitrationArticle 8(1) of the ippa
between Egypt and the United Kingdom. The first sentence of this article contains a
general consent to arbitration between a contracting State to the ippa and a juridical
person of the other contracting State to the ippa, the situation in this case:
Each Contracting Party hereby consents to submit to the International Centre for the
[sic] Settlement of Investment Disputes . . . any legal dispute arising between that Contracting Party and a national or party of the other Contracting Party concerning an
investment of the latter in the territory of the former.
Of considerable importance to this arbitration, however, is the second sentence

of Article 8(1), which states that:
Such a company of one Contracting Party in which before such a dispute arises a
majority of shares are owned by nationals or companies of the other Contracting Party
shall in accordance with Article 25(2)(b) of the Convention be treated for the purposes
of the Convention as a company of the other Contracting Party.
Article 25(2)(b) of the icsid Convention, which the second sentence expressly
references, provides that, for purposes of jurisdiction under Article 25(1) of the
Convention,27 National of another Contracting State means:
(b) any juridical person which had the nationality of the Contracting State other than
the State party to the dispute on the date on which the parties consented to submit such
25
Report of the Executive Directors on the Settlement of Investment Disputes between States and
Nationals of Other States, icsid Document No. 2 (March 18, 1965) [Annex ARE23, at 5]. See also
C. F. Amerasinghe, Jurisdiction Ratione Personae under the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States, 47 British Year Book of International Law
(1976) [Annex W40, at 229]; Aron Broches, The Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, Academie de Droit International, Recueil des Cours 1972
II 136 [Annex W37, at 352]; Aron Broches, Bilateral Investment Protection Treaties and Arbitration
of Investment Disputes, in The Art of Arbitration edited by Jan C. Schultz (1982) [Annex W38, at 64];
Rudolf Dolzer and Margrete Stevens, Bilateral Investment Treaties, Martinus Nijhoff Publishers (1995)
[Annex W39, at 131]; and Carolyn B. Lamm, Jurisdiction of the International Centre for Settlement of
Investment Disputes, 6 ICSID ReviewFILJ (1991) [Annex ARE30, at 46].
26
Georges R. Delaume, Convention on the Settlement of Investment Disputes between States and
Nationals of Other States, 1 International Lawyer (1966) [Annex W32, at 67].
27
Article 25(1) of the icsid Convention provides that The jurisdiction of the Centre shall extend to
any legal dispute arising directly out of an investment, between a Contracting State (or any constituent
subdivision or agency of a Contracting State designated to the Centre by that State) and a national of
another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.
When the parties have given their consent, no party may withdraw its consent unilaterally.
81
dispute to conciliation or arbitration and any juridical person that had the nationality
of the Contracting State party to the dispute on that date and which, because of foreign
control, the parties have agreed should be treated as a national of another Contracting
State for the purposes of this Convention.
B. The Parties Interpretation of Article 8(1)

Egypt contends that the second sentence of Article 8(1) of the ippa reverses the
nationality of a company incorporated in the United Kingdom but majority owned
by Egyptian nationals.28 Thus, a company such as the Claimant, in which the
majority of shares are held by an Egyptian national, is to be treated as an Egyptian
company, not a United Kingdom company.29 Because the first sentence of Article
8(1), quoted above, requires diversity of nationality between the Contracting Party
and the national or party of the other Contracting Party, Egypt argues that the
second sentence of Article 8(1) has the effect of exclud[ing] jurisdiction in cases,
such as this one, where a company is majority-owned by shareholders having the
nationality of the State with which the company has a dispute.30
In contrast, Wena argues that Egypt has completely misconstrued the meaning
of Article 8(1): it is a provision allowing companies incorporated in a state to sue
that state where local companies are under foreign control; it does not prevent
companies incorporated in that state from suing the other state.31 In other words,
Wenas construction of this provision is that it applies not in every case, but only
to a company which has the nationality of the Contracting State party to the
dispute, in accordance with Article 25(2)(b) of the icsid Convention . . . to which
the second sentence of Article 8(1) cross-refers.32 Thus, according to Wena, the
second sentence of Article 8(1) . . . does not apply to Wena, a company which does
not have the nationality of Egypt, the Contracting State party to this dispute.33
C. The Tribunals Analysis
Unfortunately, neither party has presented any direct evidence of the intent of
the Arab Republic of Egypt and the United Kingdom in negotiating and drafting
the ippa. No documents, such as the travaux preparatoires, that might assist in
interpreting Article 8(1) are available. Accordingly, the Tribunal can only rely upon
third party commentary and its own interpretation of the provision to determine the
intent of the United Kingdom and Egypt in consenting to bring disputes under icsid
jurisdiction.
Both parties interpretations of the second sentence of Article 8(1) are plausible
on their face. Nevertheless, the Tribunal agrees with Wenas interpretation that
the purpose of the sentence is to expand jurisdiction in cases where a company
28
29
30
31
32
33
Memorial, at 12.
Id., at 11.
Reply, at 7.
Response, at 25 (emphasis in original).
Claimants Rejoinder on Jurisdiction (submitted on April 22, 1999), at 21-2 (emphasis in original).
Id., at 22.
82
incorporated in the host State is controlled by nationals of the non-host State, in

accordance with Article 25(2)(b) of the [icsid] Convention.
This interpretation is consistent with the extensive commentary cited by both
parties. Egypts proposed construction, in contrast, has never been suggested by
any of the commentatorsa striking omission considering the substantial analysis
that has been devoted to Article 25(2)(b) and bilateral investment provisions nearly
identical to Article 8(1) of the ippa.
The literature rather convincingly demonstrates that Article 25(2)(b) of the icsid
Conventionand provisions like Article 8 of the United Kingdoms model bilateral
investment treatyare meant to expand icsid jurisdiction by permitting parties to
a dispute to stipulate that a subsidiary of a national of another contracting state
which is incorporated in the host state (and therefore arguably a local national)
will be treated as itself a national of another contracting state .34 In the absence
of any direct evidence of the intent of the Arab Republic of Egypt and the United
Kingdom in negotiating Article 8(1), the Tribunal was strongly convinced by this
common academic interpretation.
The purpose of Article 25(2)(b) is to account for the rather common situation
in which a host government insists that foreign investors channel their investment
through a locally incorporated company. In the absence of this qualification to the
general rule, such a company could not resort to icsid facilities. . . . 35 As every
commentator cited by the parties explains, Article 25(2)(b) was specifically designed to accommodate this problem by creating an exception to the diversity of
nationality requirement.36 Thus, the article acts to expand the Conventions normal
34
Aron Broches, Bilateral Investment Protection Treaties and Arbitration of Investment Disputes, in
The Art of Arbitration edited by Jan C. Schultz (1982) [Annex W38, at 70] (emphasis added). See also
Aron Broches, The Convention on the Settlement of Investment Disputes between States and Nationals of
Other States, Academie de Droit International, Recueil des Cours 1972 II 136 [Annex W37, at 359]; and
Christoph Schreuer, Commentary on the ICSID Convention, 12 ICSID ReviewFILJ (1997) [Annex
ARE24, at 99] (such provisions constitut[e] an exception to the general rule that a State cannot be
brought before an international forum by its own nationals.
35
Georges R. Delaume, ICSID Arbitration: Practical Considerations, Journal of International Arbitration, vol. 1 (1984) [Annex W33, at 112] (emphasis added).
See also Aron Broches, The Convention on the Settlement of Investment Disputes between States
and Nationals of Other States, Academie de Droit International, Recueil des Cours 1972 II 136 [Annex
W37, at 3589] (It is quite usual for host States to require that foreign investors carry on their business
within their territories through a company organized under the laws of the host country. If we admit, as
the Convention does implicitly, that this makes the company technically a national of the host country,
it becomes readily apparent that there is a need for an exception to the general principle that the Centre
will not have jurisdiction over disputes between a Contracting State and its own nationals.); Christoph
Schreuer, Commentary on the ICSID Convention, 12 ICSID ReviewFILJ (1997) [Annex ARE24,
at 934] ( . . . host States frequently require that investment operations are carried through companies
organized under local law. . . . Incorporation in the host State makes the investor technically a national
of that State. This would exclude all investors that operate through local companies from the ambit of
the icsid Convention. . . . The second clause of Art. 25(2)(b) is designed to accommodate this problem
by creating an exception to the diversity of nationality requirement.).
36
ARE24, at 94].
See also C. F. Amerasinghe, Jurisdiction Ratione Personae under the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States, 47 British Year Book of International
Law (1976) [Annex W40, at 255] (Ultimately, the position that corporations which were nationals of
the host States could have the required nationality, if the parties so agreed, because of foreign control,
83
jurisdictionallowing a juridical person incorporated in the host State [to] be regarded as the national of another Contracting state if because of foreign control,
the parties have agreed that it should be treated as such for the purposes of the
Convention.37
Numerous bilateral investment treaties have given effect to this article in what
[a]commentator refers to as 25(2)(b) clauses.38 The purpose of these clauses is to
record the Contracting Parties agreement in advance that companies incorporated
in one Party but controlled by nationals of the other Contracting Party shall be
considered as falling within the exception of Article 25(2)(b). . . . 39 One of the
25(2)(b) clauses most frequently cited in the literature is incorporated in Article
8 of the United Kingdoms investment agreements.40 For example, Aron Broches
notes that:
The UK treaties and some other treaties following the UK model have taken account
of this point, by providing expressly:
A company which is incorporated or constituted under the law in force in the territory of one Contracting Party and in which before such a dispute arises the
majority of shares are owned by nationals of companies of the other Contracting Party shall in accordance with article 25(2)(b) of the Convention be
treated for the purposes of the Convention as a company of the other Contracting
Party.
Under treaties containing such a provision, proceedings may be instituted directly by
the local subsidiary.41
Similarly, Rudolf Dolzer and Margrete Stevens note that [a] number of bits of
the UK and US contain provisions that . . . in effect record the Contracting Parties
was incorporated in the final version.); Aron Broches, Bilateral Investment Protection Treaties and
Arbitration of Investment Disputes, in The Art of Arbitration edited by Jan C. Schultz (1982) [Annex
W38, at 70]; Georges R. Delaume, Convention on the Settlement of Investment Disputes between States
and Nationals of Other States, 1 International Lawyer (1966) [Annex W32, at 68]; Georges R. Delaume,
ICSID Arbitration: Practical Considerations, Journal of International Arbitration, vol. 1 (1984) [Annex
W33, at 113] (Article 25(2)(b) makes an exception to the general rule that the Convention does not
apply to disputes between a Contracting State and one of its nationals) (citing Holiday Inns icsid case);
and Carolyn B. Lamm, Jurisdiction of the International Centre for Settlement of Investment Disputes,
6 ICSID ReviewFILJ (1991) [Annex ARE30, at 470].
37
Georges R. Delaume, ICSID Arbitration: Practical Considerations, Journal of International Arbitration, vol. 1 (1984) [Annex W33, at 112] (emphasis added).
38
Paul Peters, Dispute Settlement Arrangements in Investment Treaties, 22 Netherlands Yearbook of
International Law 91 (1991) [Annex W60, at 144] (explaining that these clauses specify when a
company of the host country is to be treated as a foreign investor.) (emphasis added).
39
Rudolf Dolzer and Margrete Stevens, Bilateral Investment Treaties, Martinus Nijhoff Publishers
(1995) [Annex W39, at 142].
40
See, e.g., Aron Broches, Bilateral Investment Protection Treaties and Arbitration of Investment
Disputes, in The Art of Arbitration edited by Jan C. Schultz (1982) [Annex W38, at 70]; Rudolf Dolzer
and Margrete Stevens, Bilateral Investment Treaties, Martinus Nijhoff Publishers (1995) [Annex W39,
at 142]; Paul Peters, Dispute Settlement Arrangements in Investment Treaties, 22 Netherlands Yearbook
of International Law (1991) [Annex W60, at 144]; and Christoph Schreuer, Commentary on the ICSID
Convention, 12 ICSID ReviewFILJ (1997) [Annex ARE24, at 110].
41
Aron Broches, Bilateral Investment Protection Treaties and Arbitration of Investment Disputes, in
The Art of Arbitration edited by Jan C. Schultz (1982) [Annex W38, at 70].
84
agreement in advance that companies incorporated in one Party but controlled by

nationals of the other Contracting Party shall be considered as falling within the
exception of Article 25(2)(b). . . .42 Finally, Christoph Schreuer notes that [s]ome
national investment laws providing for icsids jurisdiction extend access to local
companies that are under foreign control.43 Commenting on the same practice in
bilateral investment treaties, Schreuer observes that:
A number of bilateral investment treaties provide that companies constituted in one
State but controlled by nationals of the other State shall be treated as nationals of the
other State for purpose of Art. 25(2)(b). For instance, Art. 8(2) of the United Kingdom
Model Agreement runs as follows:
A company which is incorporated or constituted under the law in force in the
territory of one Contracting Party and in which before such a dispute arises the
majority of shares are owned by nationals or companies of the other Contracting
Party shall in accordance with article 25(2)(b) of the Convention be treated for
the purposes of the Convention as a company of the other Contracting Party.44
D. Conclusion
Faced with two plausible constructions of Article 8(1) of the ippa and no direct
evidence of the intent of the United Kingdom and Egypt in drafting this provision
the Tribunal gave considerable weight to this indirect evidence of the provisions
purpose. Accordingly, the Tribunal agrees with Wenas interpretation (and that of
most commentators) that the second sentence of Article 8(1) of the ippa relates only
to the situation in which an investment in Egypt or the United Kingdom is made
through a local company, owned by companies or nationals of the other country.
The provision does not reverse the consent given in the first sentence of Article 8(1)
when a Contracting State is a party to a dispute with a juridical person of the other
Contracting State.
Having declined to endorse Respondents interpretation of Article 8(1), the Tribunal did not have to consider the related factual issues of: (1) whether a majority
of Wenas shares were owned by Mr Farargy, and (2) whether Mr Farargy, a British
citizen, remained an Egyptian national.
V. Objection 2: The Claimant has made no Investment in Egypt
Egypts second argument was that Wena Hotels Limited failed to make an investment in Egypt, with[in] the meaning of that term under Article 25 of the icsid
Convention and Article l(a) of the ippa.
42
Rudolf Dolzer and Margrete Stevens, Bilateral Investment Treaties, Martinus Nijhoff Publishers
(1995) [Annex W39, at 142].
ARE24, at 109] (emphasis added).
44
Id., at 110.
43
85
Article 25(1) of the icsid Convention requires that a dispute must arise directly
out of an investment. However, the Convention does not define the term investment. As the Executive Directors of the International Bank of Reconstruction and
Development (ibrd) reported on the final version of the icsid Convention, this
lack of a definition was intentional:
No attempt was made to define the term investment given the essential requirement
of consent by the parties, and the mechanism through which the Contracting States
can make known in advance, if they so desire, the classes of disputes which they
would or would not consider submitting to the Centre.45
As several commentators have noted, the import of this comment is to leave a

large measure of discretion to the parties in defining what activities qualify as an
investment.46
Article l(a) of the ippa defined investment as meaning every kind of asset.
The term asset, however, was not defined. Instead, Article 1(a) provided a nonexclusive list of assets that would qualify under the ippa, including movable and
immovable property and any other rights such as mortgages, liens and pledges.
As noted above, during oral argument, Egypts counsel concluded that the papers
that we have now been supplied as part of the Rejoinder do indicate at least a prima
facie case that the Claimant has made an investment, that money was spent in
the development and renovation of the hotels and that the money was paid for by
the Claimant, rather than any other party. As Egypt noted, at least for purposes
of jurisdiction, Wena has demonstrated possible investments in Egypt sufficient
to invoke arbitration under the ippa and the icsid Convention. Accordingly, the
Tribunal accepts Respondents offer to withdraw this objection.
Of course, in conceding that for the purpose of establishing jurisdiction only,
the Respondent is willing to accept that an investment has been made, Egypt has
not conceded the factual validity of Wenas claims. It is Wenas burden to prove
during the merits phase of the arbitration that it suffered the damages it has alleged.
VI. Objection 3: There is no Legal Dispute between the Claimant

and the Respondent
Egypts third objection is that there is no legal dispute between Wena and
Egypt.47 Specifically, Egypt contends that Wena has attempted to make a succession
of disputes arising out of a series of private relations into something larger than the
45
Report of the Executive Directors on the Settlement of Investment Disputes between States and
Nationals of Other States, icsid Document No. 2 (March 18, 1965) [Annex ARE23, at 8].
46
Aron Broches, The Convention on the Settlement of Investment Disputes between States and Nationals
of Other States, Academie de Droit International, Recueil des Cours 1972 II 136 [Annex W37, at 362].
See also Moshe Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of
Investment Disputes, Martinus Nijhoff Publishers (1993) [Annex W34, at 59].
47
Although Egypts third objection concerns Article 25(1)s requirement that there must be a legal
dispute arising directly out of an investment, Egypt does not contest the legality of any alleged dispute
between Egypt and Wena. Instead, it simply claims that Wena is arbitrating against the wrong party. As
it explained during oral argument, it is not taking any point on the legality, on the legal nature of any
86
sum of its partsa dispute with Respondent. . . .48 According to Egypt, Wenas
disputes actually are with the Egyptian Hotel Company (ehc), with whom Wena
entered its original lease agreements and whose employees allegedly attacked the
two hotels. As Egypt concluded, Claimant has not demonstrated, and cannot, that
there is any dispute between it and the Respondent.49
Wena, of course, disagrees. During the second session, Wenas counsel argued
that Claimant actually has two separate disputes. One dispute, Wena acknowledges,
is with ehc for violating its agreements with Wena. As the parties agree, this
dispute with ehc has been the subject of at least four domestic arbitrations in
Egypt. However, Wena also contends that it has a separate dispute with Respondent
for expropriating Wenas investments without providing prompt, adequate and
effective compensation, and by failing to accord Wenas investments in Egypt fair
and equitable treatment and full protection and security.50
Egypt argues that Wenas assertions are insufficient and that the Tribunal must
find evidence that Wenas claims against Egypt are valid.51 The Tribunal declines
to convert a preliminary, jurisdictional dispute into a determination of the merits.
Egypts contention that it is not responsible for the conduct Wena accuses it of
performing may be an effective defense on the merits, as Wena acknowledged
during oral argument. Nevertheless, Respondents objection is a defense that should
be addressed on the merits, with the benefit of a full briefing by both parties of the
facts of this case.
As the tribunal in Amco Asia noted, in order for it to make a judgement at this
time as to the substantial nature of the dispute before it, it must look firstly and only
to the claim itself as presented to icsid and the Tribunal in the Claimants Request
for Arbitration.52 The tribunal continued by explaining that [i]n other words, the
Tribunal must not attempt at this stage to examine the claim itself in any detail,
but the Tribunal must only be satisfied that prima facie the claim, as stated by the
Claimants when initiating this arbitration, is within the jurisdictional mandate of
icsid arbitration . . .53
From a jurisdictional perspective, the Tribunal believes that Wena has satisfied this burden. Wena has raised allegations against Egyptof assisting in, or
at least failing to prevent, the expropriation of Wenas assetswhich, if proven,
clearly satisfy the requirement of a legal dispute under Article 25(1) of the icsid
Convention. In addition, Wena has presented at least some evidence that suggests
Egypts possible culpability.54
dispute which does exist. What we are saying is that there does not exist a dispute of any sort between
the Claimant and the Respondent.
48
Memorial, at 26.
49
Id., at 20.
50
Request, at 18.
51
Reply, at 25 (Where, as here, the Claimant has misdescribed its claims and mischaracterized them
as claims against the Contracting State, it is both permissible and, the Respondent submits, incumbent
upon the Tribunal to look for credible evidence to support the proper characterization of those claims.).
52
Award on jurisdiction in Amco Asia Corporation, Pan America Development Limited and P.T. Amco
Indonesia v. Republic of Indonesia (Case no. ARB/81/1), 23 ILM 351 (1984) [Annex W43, at 375].
53
Id., at 376.
54
See, e.g., British tourists are beaten and thrown out of Egypt hotels, Daily Telegraph (April 4, 1991)
[Annex W7].
87
Of course, in determining that Wena has presented a prima facie dispute with
Egypt sufficient to invoke jurisdiction under the ippa and the icsid Convention, the
Tribunal makes no determination on the merits. It remains Wenas burden to prove
that Egypt is, indeed, responsible for the conduct it has alleged.
VII. Objection 4: The Claimants Consent to Arbitration in the Request for
Arbitration is Insufficient and its Request Premature
Egypts last objection constituted two procedural challenges to Wenas request
for arbitration. Article 8(1) of the ippa provides that:
If any dispute should arise and agreement cannot be reached within three months between the parties of this dispute through pursuit of local remedies, through conciliation
or otherwise, then, if the national or company affected also consents in writing to submit this dispute to the Centre . . . either party may institute proceedings by addressing
a request to that effect to the Secretary General of the Centre as provided in Articles
28 and 36 of the Convention.
Egypt initially objected that Wena failed to satisfy two procedural prerequisites
contained in this provision. First, Egypt asserted that Wena has failed to comply
with the three month waiting requirement. Second, it claimed that Wenas consent
should have been given prior to the commencement of proceedings, and not at the
same time.55
However, as noted above, during oral argument at the Tribunals second session,
Respondent withdrew this objection. As Respondent appropriately noted, even if
these procedural objections were granted, they could have been easily rectified
and would have had little practical effect other than to delay the proceedings.
Accordingly, the Tribunal accepts Respondents offer to forgo these objections.
VIII. Conclusion
In sum, the Tribunal concludes that it has jurisdiction under the ippa and the
icsid Convention for this matter to proceed to the merits of this case. First, although
Egypts interpretation of Article 8(1) of the ippa is plausible, the Tribunal declines
to endorse its interpretation. Instead, the Tribunal agrees with Claimant (and the
extensive commentary cited by both parties) that the purpose of the second sentence
of Article 8(1) is to incorporate the specific situationcontemplated in the second
part of Article 25(2)(b)where a local company (i.e., a company incorporated in
the host State) is controlled by nationals of the non-host State and, hence, treated
as a foreign national for purposes of icsid arbitration.
Second, Wena has alleged a dispute with Egypt, which (assuming it can make
its case on the facts) would entitle it to damages. Although Egypt has suggested a
55
Memorial, at 28.
88
plausible defense to Wenas allegationsthat ehc actually is liable for the conduct
Wena accuses Egypt of doingthis defense is a defense on the merits, which should
be addressed by the Tribunal only with the benefit of full briefing and explanation
by the parties of the facts of the case.
IX. The Operative Part

For these reasons,
THE TRIBUNAL, unanimously,
DENIES the Objections to Jurisdiction filed by Respondent, the Arab Republic
of Egypt;
DENIES Claimants request, as set forth in its Response to Respondents Objections to Jurisdiction, for costs incurred in rebutting Respondents objections;
DIRECTS the parties to brief the merits of the dispute, pursuant to the following
schedule:
Claimants Memorial on the Merits
Respondents Counter-Memorial on the Merits
Claimants Reply on the Merits
Respondents Rejoinder on the Merits
July 26, 1999

August 27, 1999
September 10, 1999
September 24, 1999
DIRECTS the parties to advise the Tribunal by no later than July 12, 1999 of
their availability for a session on the merits during either the week of September
27, 1999 or the week of October 4, 1999;
and
DIRECTS Respondent to advise the Tribunal by no later than July 12, 1999 of
whether it will require additional time to prepare its counter-memorial on the merits
and to suggest a proposed, revised briefing schedule (although the session on the
merits must not be postponed any later than the weeks of October 18, 1999 and
October 25, 1999).
[Source: The text of the decision was supplied by Shearman & Sterling, Paris; see
also 41 International Legal Materials 881 (2002).]
AWARD
89
AWARD (8 DECEMBER 2000)
Table of Contents
I. The Proceedings
II. The Facts
A. UKEgypt Agreement for the Promotion and Protection
of Investments
B. Luxor and Nile Hotel Agreements
C. Events Leading up to the April 1, 1991 Seizures
D. Seizures of the Nile and Luxor Hotels (April 1, 1991)
1. Decision to seize the hotels
2. Seizure of the Nile Hotel
3. Seizure of the Luxor Hotel
E. Events Following the Seizures of the Nile and Luxor
Hotels
F. Harassment
G. Relationship between ehc and Egypt
H. Consultancy Agreement between Wena Hotels Ltd and
Mr Kamal Kandil
III. Liability
A. Law Applicable to this Arbitration
B. The Issue of Egypts Substantive Liability
1. Summary of Wenas claims
2. Article 2(2) of the ippa: fair and equitable treatment
and full protection and security
3. Article 5 of the ippa: expropriation without prompt,
adequate and effective compensation
C. Whether Wenas Claims are Time Barred
D. Consultancy Agreement with Mr Kandil
IV. Damages
V. Conclusion
VI. The Operative Part
Statement of Professor Don Wallace, Jr
Page
89
93
93
94
94
97
97
99
103
104
107
107
109
110
111
112
112
113
117
120
122
124
127
128
128
I. The Proceedings
1. The present arbitration was initiated on July 10, 1998, when Claimant, Wena
Hotels Limited (Wena),1 filed a request for arbitration with the Secretary-General
of the International Centre for Settlement of Investment Disputes (icsid). The
1
Wena Hotels Limited is a British company incorporated in 1982 under the laws of England and Wales.
See Certificate of Incorporation on Change of Name of Wena Hotels Limited (April 22, 1982) [Annexes
W1 & E-J2]. Note, in referencing the documentary annexes submitted by the parties, the notation W
90
request was filed against Respondent, the Arab Republic of Egypt (Egypt), and
asserted that [a]s a result of Egypts expropriation of and failure to protect Wenas
investment in Egypt, Wena has suffered enormous losses leading to the almost total
collapse of its business.2 Wena requested the following relief:
(a) a declaration that Egypt has breached its obligations to Wena by expropriating Wenas investments without providing prompt, adequate and effective
compensation, and by failing to accord Wenas investments in Egypt fair and
equitable treatment and full protection and security;
(b) an order that Egypt pay Wena damages in respect of the loss it has suffered
through Egypts conduct described above, in an amount to be quantified precisely during this proceeding but, in any event, no less than USD 62,820,000;
and
(c) an order that Egypt pay Wenas costs occasioned by this arbitration, including
the arbitrators fees and administrative costs fixed by icsid, the expenses of
the arbitrators, the fees and expenses of any experts, and the legal costs
incurred by the parties (including fees of counsel).3
The Acting Secretary-General registered the request for arbitration on July 31,
1998.
2. In accordance with Article 37(2)(a) of the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States (the icsid Convention), the parties agreed that the Tribunal was to consist of three arbitrators, one
appointed by each party and the third, presiding, arbitrator, appointed by agreement
of the parties or, in the absence of such agreement, by agreement of the two partyappointed arbitrators. Wena appointed Professor Ibrahim Fadlallah, a national of
Lebanon, as an arbitrator. Egypt then appointed Hamzeh Ahmed Haddad, a national
of Jordan, as an arbitrator. In accordance with Article 38 of the icsid Convention,
the Chairman of icsids Administrative Council was requested by Wena to appoint
the third, presiding, arbitrator. The Center informed the parties that the SecretaryGeneral of icsid was planning to recommend Mr Monroe Leigh, a United States
national, for the Chairmans appointment. Having received no objection from either
party, the Center informed the parties that the Chairman of the icsids Administrative Council had appointed Mr Leigh as the arbitrator to be the President of
the Arbitral Tribunal. Having received from each arbitrator the acceptance of his
appointment, the Center informed the parties that the Tribunal was deemed to be
constituted and the proceedings to have begun on December 18, 1998. The parties subsequently agreed that the Tribunal had been properly constituted under the
provisions of the icsid Convention.
3. The Tribunal held its first session, at the Permanent Court of Arbitration in
The Hague, on February 11, 1999. During this first session, Egypt objected to the
request for arbitration filed by Wena and expressed reservations as to the Tribunals
jurisdiction to hear the request.
indicates a document submitted by Claimant, Wena Hotels Limited. The notation E-J indicates a
document submitted by Respondent, the Arab Republic of Egypt as part of its briefing on jurisdiction;
a notation of E-M indicates a document submitted by Egypt as part of its briefing on the merits.
2
Claimants Request for Arbitration, at 1 (submitted on July 10, 1998).
3
Id., at 18.
AWARD
91
4. The Tribunal, pursuant to Article 41(2) of the icsid Convention, granted the
parties an opportunity to brief the jurisdictional objections. The parties filed four
sets of papers (including accompanying documentary annexes) with the Tribunal:
(1) Respondents Memorial on its Objections to Jurisdiction (submitted on
March 4, 1999);
(2) Claimants Response to Respondents Objections on Jurisdiction (submitted
on March 25, 1999);
(3) Respondents Reply on Jurisdiction (submitted on April 8, 1999); and
(4) Claimants Rejoinder on Jurisdiction (submitted on April 22, 1999).
In its briefing, Egypt raised four objections to jurisdiction. First, Egypt asserted that
it had not agreed to arbitrate with the Claimant as it is, by virtue of ownership, to
be treated as an Egyptian company.4 Second, Egypt argued that [t]he Claimant
has made no investment in Egypt.5 Third, Egypt claimed that [t]here is no legal
dispute between the Claimant and the Respondent.6 Finally, Egypt contended that
[t]he Claimants consent to arbitration in the Request for Arbitration is insufficient
and its Request premature.7
5. The Tribunal heard oral argument on Respondents objections to jurisdiction
during a second session, at the offices of the World Bank in Paris, on May 25,
1999. During the session, Egypt withdrew two of its four objections. First, it noted
that the the papers that we have now been supplied as part of [Wenas briefing]
do indicate at least a prima facie case that the Claimant has made an investment,
that money was spent in the development and renovation of the hotels and that the
money was paid for by the Claimant, rather than any other party.8 Thus, for the
purpose of establishing jurisdiction only, the Respondent is willing to accept that
an investment has been made.9
6. Second, Respondent also withdrew its procedural objections to Claimants
request for arbitration. As Egypt appropriately observed, even if the Tribunal had
endorsed its objections, the alleged defects could have been easily rectified. Noting
that it is not our wish to raise argument simply for the purpose of being difficult
or to delay, Egypt advised that as far as that particular objection is concerned, we
are prepared to forgo it.10
7. In its Decision on Jurisdiction dated June 29, 1999, the Tribunal concluded
that Respondents two remaining jurisdictional objections should be denied and
that jurisdiction should be exercised over the dispute. Specifically, the Tribunal: (1)
declined to adopt Egypts contention that Wena should be treated as an Egyptian
company for purposes of the Agreement for the Promotion and Protection of Investments between Egypt and the United Kingdom (ippa),11 and (2) found, without
4
Respondents Memorial on its Objections to Jurisdiction, at 1 (submitted on March 4, 1999) (Respondents Memorial on Jurisdiction).
5
Id.
6
Id., at 2.
7
Id.
8
Tribunals Decision on Jurisdiction, at 89 (released on June 29, 1999) (quoting Recordings from
Tribunals Session on Jurisdiction, Offices of the World Bank, Paris (on May 25, 1999)).
9
Id., at 9.
10
Id.
11
Id., at 1019.
92
prejudice to the merits of the case, that Wena had at least alleged a prima facie
legal dispute with Egypt.12 The Tribunal proceeded to set a briefing schedule on the
merits and proposed dates for oral argument.
8. On August 14, 1999, Professor Hamzeh Ahmed Haddad resigned from the
Tribunalapologizing that, as a result of his new duties as Minister of Justice for
Jordan, he would no longer be able to continue as a member of the Tribunal. The
Tribunal was reconstituted on September 14, 1999 with the appointment by Egypt
of Mr Michael F. Hoellering as the replacement for Professor Haddad.
9. The parties filed four sets of papers (each including voluminous accompanying
documentary annexes) with the Tribunal addressing the merits of the case:
(1) Claimants Memorial on the Merits (submitted on July 26, 1999);
(2) Respondents Memorial on the Merits (submitted on September 6, 1999);
(3) Claimants Reply on the Merits (submitted on September 27, 1999); and
(4) Respondents Rejoinder on the Merits (submitted on October 18, 1999).
10. Regrettably, the session on the meritswhich had been scheduled for November 1518, 1999had to be postponed by the sudden hospitalization of Mr Hoellering for a medical emergency. On November 15, 1999, Mr Hoellering resigned from
the Tribunalapologizing for the inconvenience this unexpected turn of events
had caused.
11. The Tribunal was reconstituted on December 9, 1999, with the appointment
by Egypt of Professor Don Wallace, Jr as the replacement for Mr Hoellering. The
Tribunal subsequently fixed a new schedule for oral argument on the merits.
12 The Tribunal heard witnesses and oral argument on the merits during its
third session, at the offices of the World Bank in Paris, on April 2529, 2000.13
In lieu of closing argument, the Tribunal permitted the parties to file post-hearing
briefs. The Tribunal also requested that the parties submit proposed findings of
fact, chronologies of events and statements of their attorneys fees and costs. In
accordance with this schedule, the parties filed a final round of papers with the
Tribunal:
(1) Claimants Post-Hearing Brief (submitted on May 30, 2000);
(2) Respondents Post-Hearing Memorial (submitted on May 30, 2000);
(3) Claimants Post-Hearing Reply (submitted on June 15, 2000); and
(4) Respondents Post-Hearing Rebuttal Memorial (submitted on June 15, 2000).
13. On July 13, 2000, the Tribunal issued a Procedural Order concerning the
introduction of certain documents into the proceeding subsequent to the hearing.
As part of this Order, the Tribunal admitted into the record, without prejudice to
their probative value, nine documents submitted by Wena with its Post-Hearing
Reply brief14 and a memorandum dated January 19, 1997 on the El Nile Hotel
prepared by Arthur Andersen & Co., which the Tribunal had received from the US
Agency for International Development.15
12
Id., at 213.
Full, verbatim transcripts were made of the session and distributed to the parties and the Tribunal
following each day of the hearing.
14
Annexes W179 & 18794.
15
Annex W183. Wena had sought the Arthur Anderson report (which was prepared for the benefit of
Egypt under a Contract with the US Agency for International Development) from Egypt as early as
13
AWARD
93
14. On November 1, 2000, the Secretary of the Tribunal issued a letter, advising
the parties of the closure of the proceedings, pursuant to Arbitration Rule 38(1).
II. The Facts

15. This dispute arose out of long-term agreements to lease and develop two hotels
located in Luxor and Cairo, Egypt. Having received voluminous submissions from
the two parties and heard five days of oral testimony, the Tribunal hereby makes
the following findings of fact:
A. UKEgypt Agreement for the Promotion and Protection of Investments

16. On June 11, 1975, the United Kingdom and the Arab Republic of Egypt entered into an Agreement for the Promotion and Protection of Investments (ippa).16
Under Article 2(1) of the ippa, Egypt and the United Kingdom promised to encourage and create favorable conditions for nationals or companies of other Contracting
Party to invest capital in its territory. They also guaranteed that [i]nvestments of
nationals or companies 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.17 Finally, Egypt and the United Kingdom agreed
that [i]nvestments of nationals or companies of either Contracting Party shall not
be nationalised, expropriated or subjected to measures having effect equivalent to
nationalisation or expropriation . . . in the territory of the other Contracting Party
except for a public purpose related to the internal needs of the Party and against
prompt, adequate and effective compensation.18 As discussed in the Tribunals
previous Decision on Jurisdiction, Wena is a British company for purposes of the
ippa.19
August 30, 1999. Notwithstanding this request and the Tribunals subsequent directions to search for
this document, Egypt never produced a copy of the report. At the Tribunals April 25, 2000 session on
the merits (and, again, in the Respondents Post-Hearing Memorial), Egypts counsel explained what
efforts the Egyptian State Lawsuit Authority had taken to obtain a copy of the report, without success.
See Transcript of Tribunals Session on the Merits (TR) Day 1, at 80:2781:21; Respondents PostHearing Memorial, Appendix E (submitted on May 30, 2000). Shortly after the session, however, the
icsid Secretariat obtained a copy of the report from the US Agency for International Development.
16
Agreement for the Promotion and Protection of Investments, June 11, 1975, UKEgypt (ippa)
[Annexes W2 & E-J22].
17
Id., art. 2(2).
18
Id., art. 5(1).
19
See Certificate of Incorporation on Change of Name of Wena Hotels Limited (April 22, 1982) [Annexes
W1 & E-J2]. As discussed above, although Egypt never challenged the fact that Wena Hotels Limited
was incorporated as a British company, it asserted as part of its objections to jurisdiction that Wena by
virtue of Mr El-Farargys ownership and his Egyptian nationality, [should] be treated as an Egyptian
company pursuant to Article 8(1) of the ippa. Respondents Reply on Jurisdiction, at 2 (submitted on
April 8, 1999). The Tribunal, however, rejected Egypts proposed construction of Article 8(1) of the
ippa and, thus, determined that Wena was an English company for purposes of the ippa. See Decision
on Jurisdiction, at 1019.
94
B. Luxor and Nile Hotel Agreements

17. On August 8, 1989, Wena and the Egyptian Hotels Company (ehc), a
company of the Egyptian Public Sector affiliated to the General Public Sector
Authority for Tourism20 entered into a 21 year, 6 month Lease and Development
Agreement for the Luxor Hotel in Luxor, Egypt.21 Pursuant to the agreement,
Wena was to operate and manage the Hotel exclusively for [its] account through
the original or extended period of the Lease, to develop and raise the operating
efficiency and standard of the Hotel to an upgraded four star hotel according to
the specification of the Egyptian Ministry of Tourism or upgratly [sic] it to a five
star hotel if [Wena] so elects. . . .22 The agreement provided that ehc would not
interfere in the management and or/operation of the Hotel or interfere with the
enjoyment of the lease by Wena and that disputes between the parties would be
resolved through arbitration.23 The lease was awarded to Wena in a competitive bid,
after Wena agreed to pay a higher rent than another potential investor.24
18. On January 28, 1990, Wena and ehc entered into an almost identical, 25-year
agreement for the El Nile Hotel in Cairo, Egypt.25 Wena also entered into an October
1, 1989 Training Agreement with ehc and Egyptian Ministry of Tourism to train in
the United Kingdom . . . Egyptian nationals in the skills of hotel management. . . .26
C. Events Leading up to the April 1, 1991 Seizures

19. Shortly after entering into the agreements, disputes arose between ehc and
Wena concerning their respective obligations. Wena claims that it found the condition of the Hotels to be far below that stipulated in the lease [and] withheld part
of the rent, as the lease permitted.27 In turn, Egypt claims that Wena failed to pay
rent due to ehc . . . and ehc in turn liquidated the performance security posted by
Claimant.28 In the view which the Tribunal takes of this case it is not necessary
at this time to determine the truth of these conflicting allegations. It is sufficient
for this proceeding simply to acknowledge, as both parties agree, that there were
serious disagreements between Wena and ehc about their respective obligations
under the leases.
20. On May 3, 1990, Wena instituted arbitration proceedings in Egypt against ehc
concerning their disputes over the Luxor Hotel. In an award dated November 14,
1990, the ad hoc arbitral tribunal ordered ehc to make repairs to the Luxor Hotel
20
See section II.G, infra, concerning the relationship between ehc and Egypt.
Luxor Hotel Lease and Development Agreement (August 8, 1989) [Annex W5].
22
Id., art. III.
23
Id., arts. I, XIII & XV(3).
24
Direct Examination of Mr Yusseri Mahmud Hamid Hajjaj, TR Day 5, at 4:311 (Yusseri Direct
Ex.).
25
El Nile Hotel Lease and Development Agreement (January 28, 1990) [Annex W4].
26
An Agreement between His Excellency Fouad Sultan, Minister of Tourism for the Egyptian Government, jointly with Mr Kamal Kandil of the Egyptian Hotels Company and Wena Hotels Limited
(October 1, 1989) [Annex W6].
27
Claimants Request for Arbitration, at 8.
28
Respondents Memorial on Jurisdiction, at 4.
21
AWARD
95
and ordered Wena to pay its outstanding rental obligation.29 Wena subsequently
brought an action in the South Cairo Court to have the arbitration set aside.30
21. At about the same time, toward the end of 1990, according to Wenas
parliamentary consultant, Mr Humfrey Malins, MP, rumour, I think, must have
reached Mr Farargy because he told me that there were rumours that there would
be violence and the hotels would be violently seized back.31 As a result, in
December 1990, Mr Malins traveled to Egypt to meet with the Egyptian Minister of Tourism, Minister Fouad Sultan, and the Egyptian Minister of the Interior, Minister Halim Moussa.32 Mr Malins recounted that [b]oth Ministers gave
me their separate, absolute assurances . . . that no violence could or would take
place.33
22. Nevertheless, disagreements between Wena and ehc continued. On February
11, 1991, Mr Nael El-Farargy, Wenas founder, wrote to Minister Sultan, seeking
his intervention to resolve these on-going disputes as well as to offset financial
difficulties caused by the Gulf War.34 In his letter, Mr Farargy mentions that ehc
had threatened to repossess the hotels through force:
officials from the Egyptian Hotels Company threatened to storm the hotels and expel
us, and this was after our Company had spent the sums previously outlined. The matter
reached a point were [sic] the Chairman of the Board of Directors of the Egyptian
Hotels Company issued a decision for his company to take possession of the Luxor
Hotel without a legal ruling or any other measure [to support his decision].35
23. In response to Mr Farargys request, on February 26, 1991, Minister Sultan

convened a meeting in his offices to discuss the differences between the
Egyptian Hotels Company and Wena. . . .36 The attendees at the meeting included
the Minister, representatives of ehc (including ehcs Chairman, Mr Kamal Kandil),
29
Final Award in Wena Hotels Ltd v. Egyptian Hotel Company (November 14, 1990) [Annex E-M17].
Declaration of Mr Nael El-Farargy, para. 14, attached to Claimants Memorial on the Merits (submitted
on July 26, 1999) (Farargy Declaration). The Respondents Memorial on Jurisdiction also reports that
Wena brought a nullity action (No. 18644 of 1990), which was refused by South Cairo Court on
February 27, 1994. Respondents Memorial on Jurisdiction, at 4. However, a copy of the South Cairo
Courts decision was not provided to the Tribunal.
31
Direct Examination of Mr Humfrey Malins, MP, TR Day 4, at 174:269 (Malins Direct Ex.). The
Tribunal generally found Mr Malins to be a reliable and convincing witness, with no apparent financial
or personal stake in the outcome of the arbitration. See also Farargy Declaration, paras. 1719.
32
Malins Direct Ex., TR Day 4, at 175:14.
33
Id., at 175:259. See also Declaration of Mr Humfrey Malins, MP, para. 4, attached to Claimants
Memorial on the Merits (Malins Declaration).
34
Letter from Mr Nael El-Farargy (Wena Hotels Ltd) to Minister Fouad Sultan (Minister of Tourism)
(February 11, 1991) [Witness Statement of Minister Fouad Sultan, Attachment A, attached to Respondents Memorial on the Merits (submitted on September 6, 1999) (Sultan Statement); also Annexes
E-M21 & W127]. At the time of the events that are the subject of this dispute, Minister Sultan was the
Minister for Tourism and Civil Aviation of Egypt. Minister Sultan held this position from 1985 to 1993.
Sultan Statement, para. 3. Although Minister Sultan has now returned to the private sector (serving as
Chairman and Managing Direct of Alahly for Development and Investment sae), the Tribunal shall for
convenience refer to the witness as Minister Sultan.
35
Id. (emphasis added; brackets in original English translation) [Sultan Statement, Attachment A; also
Annexes E-M21 & W127].
36
Minutes of Meeting between Representatives of the Ministry of Tourism, ehc and Wena (February
26, 1991) [Sultan Statement, Attachment B; also Annexes E-M22 & W124].
30
96
and Wenas lawyer (Mr Ahmad Al Khawaga). During the meeting, Minister Sultan
declared that [t]he Ministry took no pleasure from any misunderstandings with
investors; however, at the same time it could not accept any excesses in respect of
any of the Governments rights.37 The Minister proposed a series of compromises
between the parties. Wena, however, subsequently did not accept the Ministers
proposals.38
24. On March 21, 1991, Mr Kandil wrote to Minister Sultan, noting that Wena
had refused to accept the Ministers proposals.39 Mr Kandil proposed to Minister
Sultan:
that the following steps be taken:
(One)
the Letter of Guarantee for the Nile Hotel be seized and the sum deducted
from their debt;
(Two)
the contractual relationship for the two hotels be terminated;
(Three)
the two hotels be taken and the license withdrawn;
(Four)
list all development work at the two hotels and deduct it from their debt;
and,
(Five)
in the event that the company is still in debt following these measures,
proceedings should be taken to seize [the outstanding money] in the
United Kingdom.40
Alternatively, Mr Kandil suggested that Minister Sultan establish a 10-day grace

period for Wena to pay its debts, with the understanding, however, that [i]n
the event that the payment is not made, the license for the two hotels would be
withdrawn and the Egyptian Hotels Company would take the measures that it
views appropriate to preserve its rights.41 Mr Kandil closed the letter by advising
Minister Sultan: We leave the matter to you.42
25. Marginalia on this March 21, 1991 letter (in Minister Sultans handwriting),
indicate that Minister Sultan telephoned the British Ambassador to Egypt, asking
the Ambassador to ascertain Wenas response to the proposed compromises from
the February 26, 1991 meeting.43
26. Contemporaneously, on March 25, 1991, Mr Malins wrote to Minister Sultan
asking for another meeting in mid-April or May to discuss the continued disputes
37
Id.
Direct Examination of Mr Nael El-Farargy, TR Day 1, at 147:1725 (Farargy Direct Ex.). See
also Letter from Mr Kamal Kandil (Chairman, ehc) to Mr Ahmad Al-Khawaga (Attorney for Wena)
(March 3, 1991) [Annexes W125 & E-M23]; Witness Statement of Mr Munir Abdul Al-Aziz Gaballah
Shalabi, para. 13, attached to Respondents Rejoinder on the Merits (submitted on October 18, 1999)
(Munir Statement). The Witness Statement of Mr Munir should not be confused with the Summary of
Evidence to be given by Mr Munir Abdul Al-Aziz Gaballah Shalabi, attached to Respondents Memorial
on the Merits. Because counsel for Egypt were unable to obtain a signed witness statement from Mr
Munir before submitting their Memorial on the Merits, counsel submitted a short Summary of Evidence
insteadproviding the witness statement when it subsequently became available.
39
Letter from Mr Kamal Kandil (Chairman, ehc) to Minister Fouad Sultan (Minister of Tourism) (March
21, 1991) [Sultan Statement, Attachment D; also Annex W126].
40
Id. (emphasis added; brackets in original English translation).
41
Id.
42
Id. (emphasis added).
43
Id. (Arabic original). See also Cross examination of Minister Fouad Sultan, TR Day 3, at 235:23
237:27 (Sultan Cross-Ex.); Sultan Statement, para. 17.
38
AWARD
97
between Wena and ehc.44 Mr Malins concluded his letter by requesting an understanding from the Minister that no actions would be taken until that meeting
could occur: please confirm what must surely be [sic] right, mainly that all matters
be absolutely frozen, with no detrimental action of whatever nature being taken
pending our meeting . . .45
27. Minister Sultan personally did not reply to Mr Malins letter. Instead, although
the letter had been sent to Minister Sultan and not ehc, on March 31, 1991, Mr
Kandil responded to Mr Malins, referencing your fax dated 25th March 1991,
concerning your request for a meeting,in your capacity as the parliament advisor
for Wena Ltd . . . 46 Mr Kandil mentioned the February 26, 1991 meeting and
Wenas refusal to accept the proposed compromises. Mr Kandil ended his letter by
threatening that the owning company will take all necessary measures to protect
its rights which is considered a state ownership.47
D. Seizures of the Nile and Luxor Hotels (April 1, 1991)
1. Decision to seize the hotels
28. On March 27, 1991, ehcs Board of Directors met to consider what action
should be taken.48 According to Mr Munir Abdul Al-Aziz Gaballah Shalabi, of
the Legal Affairs Division at ehc, the Board decided to present Wena with an
ultimatum to implement the proposed compromises from the February 26, 1991
meeting with Minister Sultan.49 He further explained that Wena having failed
to meet the deadline, it was decided that ehc would take possession of the Nile
Hotel.50 Similarly, Mr Yusseri Mahmud Hamid Hajjaj, ehcs Manager for the
Upper Egypt Hotels Division at ehc, stated that [faced] with [Wenas] breaches
of contract, the board of directors of ehc had no choice but to issue its decision
of March 27, 1991 to take over the Luxor Hotel and to place it under its own
management with effect from April 1, 1991.51
44
Letter from Mr Humfrey Malins, MP (Parliamentary Consultant, Wena) to Minister Fouad Sultan
(Minister of Tourism) (March 25, 1991) [Annex W 128].
45
Id.
46
Letter from Mr Kamal Kandil (Chairman, ehc) to Mr Humfrey Malins, MP (Parliamentary Consultant,
Wena) (March 31, 1991) [Annexes W81 & W129]. During the session on the merits, Minister Sultan
suggested that perhaps Mr Malins March 25, 1991 letter had been faxed to ehc, not the Minister of
Tourism (thus, potentially explaining why Mr Kandil, and not Minister Sultan, responded to the letter).
See Sultan Cross-Ex., TR Day 4, at 47:910 & 48:2949:l. However, both the attached fax cover sheet
and confirmation sheet for Mr Malins letter show that the letter was faxed to number 2829771 in Egypt.
See Annex W128. Subsequent inquiry by counsel for Wena on May 29, 2000 to France Telecoms
International Yellow Pages service determined that the same number (2829771) was given as the
fax number listed for the Egyptian Ministry of Tourism. Claimants Post-Hearing Brief, at 16 & n.
5 (submitted on May 30, 2000). In contrast, as reflected in ehcs contemporaneous letterhead, the fax
number for ehc at that time was 3911322. See Annex W129.
47
Id.
48
Munir Statement, para. 14.
49
Id.
50
Id.
51
Witness Statement of Mr Yusseri Mahmud Hamid Hajjaj, para. 8, attached to Respondents Memorial
on the Merits (Yusseri Statement).
98
29. The decision to seize the hotels was confirmed by a resolution of the Chairman of the Board No. 215 of 1991, dated March 30, 1991.52 Although this resolution
is mentioned by Mr Munir in his witness statement and is referenced in at least two
contemporaneous documents,53 a copy of this resolution was not provided to the
Tribunal.
30. ehc purported to notify Wena of its decision to terminate both the Nile and
Luxor Leases and to reclaim the Hotels in a letter from Mr Kandil to Mr Farargy
dated March 30, 1991.54 In the letter, Mr Kandil stated that:
the board of Directors of the [Egyptian Hotels] Company had decided:
a to terminate the two hotels Contracts.
b to receive the hotels and operate them with knowledge of the owning company
starting from April 1, 1991.
c to complain to the courts and to the Public Prosecutor in order to recover [our] companys dues which amount to millions of Egyptian pounds and that are considered
as public funds, either by legal or diplomatic . . . means including freezing of your
accounts receivable.
d to warn security services to be aware of your arrival from abroad in order to present
you to courts to decide what you owe and to collect it.55
However, there is no evidence that this letter was received before the seizures on
April 1, 1991.56 Of the two copies of the March 30, 1991 letter provided to the
Tribunal, one was sent by registered mail to Wenas Gatwick Hotel in England
and does not appear to have been received until April 5, 1991.57 The second copy
bears a fax legend indicating that the letter had been faxed by ehc and received by
Wena on April 14, 1991.58 Although Mr Munir testified that the second copy had
been faxed to Wenas offices in England on March 30, 1991, no fax cover sheet or
confirmation sheet has been submitted to support this claim.59
31. In an Administrative Decision Number 216, dated March 31, 1991 and signed
by Mr Kandil, two ehc officialsMessrs Fakhri Hamid Al-Batuti and Atif Abd
Al-Alwere authorized to act on behalf of ehc in respect of the Nile Hotel.60
52

See, e.g., Kasr El-Nile Police Report, at 4 (April 1 & 2, 1991) [Annex E-M25]; Resolution Number
[blank] for the Year 1991 [Annex E-M26].
54
Letter from Mr Kamal Kandil (Chairman, ehc) to Mr Nael El-Farargy (Wena Hotels Ltd) (March 30,
1991) [Annexes W80 & W186].
55
Id. (Brackets in original English translation); emphasis added by the Tribunal.
56
Mr Munir also asserted that a copy of Resolution Number 215 concerning the seizures was sent to
Wena in ehcs letter dated 30 March 1991 addressed to its head office in England. Munir Statement,
para. 14. However, there is no evidence to confirm that a copy of this resolution was attached to the
letter. See Annex W80.
57
See registered mail receipt in Annex W80.
58
See fax legend in Annex W186.
59
Cross-examination of Mr Munir Abdul Al-Aziz Gaballah Shalabi, TR Day 5, at 76:2278:3 (Munir
Cross-Ex.). During the fifth day of the Tribunals session on the merits, the absence of a confirmatory
fax cover sheet (or a fax number of the letter) was noted. Both parties agreed that ehc should be asked
to search its files for any record that could confirm that the document was faxed on March 30, 1991. TR
Day 5, at 77:1278:15.
60
Administrative Decision Number 216 (March 31, 1991) [Annex E-M28].
53
AWARD
99
Mr Yusseri was given the same authority concerning the Luxor Hotel.61 ehc
planned to evict Wena simultaneously from both hotels during the early evening on
April 1, 1991 when they expected no resistance because all the senior people of
Wena would be taking the Ramadan breakfast at home . . .62
32. Egypt does not dispute that the repossession by ehc of the Luxor and Nile
Hotels and ehcs eviction of the Claimant from the Hotels on April 1, 1991 was
wrong.63
2. Seizure of the Nile Hotel
33. On April 1, 1991, at approximately 6:15 p.m., Mr Simon Webster and Ms
Angela Jelcic, Wenas foreign managers, left the Nile Hotel to have dinner at the
nearby Nile Hilton Hotel.64 Short[ly] thereafter, several buses owned by ehc arrived
at the Nile Hotel.65
34. According to a statement made that evening to the Kasr El-Nile Police by Mr
Muhammad Abdul Hameed Wakid, an attorney for Wena Hotels, about one hundred and fifty persons, some of whom were carrying sticks and cudgels, assaulted
the hotel against us immediately after Ramadan breakfast.66 When he tried to
enquire of them who they were they stated that they had come to seize the hotel
according to instructions from the Chairman of the Board of Directors of their
company to do so.67 According to Mr Wakid, [t]hey seized all the keys of the
offices and safes in which the companys funds and hotel receipts from the guests
are deposited [and] seized the hotel in full and they threatened any person who
resisted them and attacked them . . .68
35. Similarly, Mr Tamim Foda, Wenas resident manager at the Nile Hotel, stated
in a subsequent police deposition:
At about 6:30 p.m., when it was time to take the fast breaking meal, I was reviewing
some documents concerning my work . . . I have been surprised by violent knocking
on the door and its breaking, shouting in the hall of the hotel and I saw three persons bursting into my office. They attacked me, slapping my face and breaking my
eye-glasses. They took possession of my office by force and everything inside it. . . . I
was prevented from getting in touch with anybody outside the hotel and they told me
that all the telephones were cut. . . . I was entrusted to three persons holding rods and
cudgels who took me out of the hotel by force and while I was going out I saw more
61
Id. See also Yusseri Statement, para. 9.

Munir Cross-Ex., TR Day 5, at 55:2656: l. See also Munir Statement, para. 18. The Tribunal notes
that this plan to seize the hotels surreptitiously, while Wena management were away from the hotels,
contradicts Mr Munirs claim that ehc had previously notified Wena of its intentions to repossess the
hotels.
63
Respondents Memorial on Jurisdiction, at 4.
64
Direct Examination of Mr Simon Webster, TR Day 3, at 12:89 (Webster Direct Ex.); Direct
Examination of Ms Angela Jelcic, TR Day 3, at 91:2692:5 (Jelcic Direct Ex.).
65
See, e.g., Police Statements, at 6, 9, 10 & 12 (July 6, 1991) [Annex W134]; Webster Direct Ex.,
TR Day 3, at 12:1521; Jelcic Direct Ex., TR Day 3, at 95:1319. Mr Munir, however, testified that
he arrived at the hotel in a single bus, with approximately 35 accountants, reception[ist]s and other
management staff required to run the hotel. Munir Statement, para. 17.
66
Kasr El-Nile Police Reports, at 3 (April 1, 1991) [Annex E-M25]. See also id., at 2.
67
Id., at 3.
68
Id.
62
100
than one hundred men inside the hotel, holding rods and cudgels, some of them were
taking out a number of cartons, belongings and implements of the hotel to vehicles
parking in front of the door of the hotel. I waited outside the hotel until arrival of the
police when I was taken inside for inspection under guard of the police.69
36. Mr Mostafa Ahmed Osman, Financial Manager for Wena, who was taking
my fast breaking meal at the restaurant on the ninth floor, reported being surprised
by strange and suspicious persons [who] took me downstairs by force holding my
arms to the administrative offices on the mezzanine. . . .70 According to Mr Osman,
one of the ehc employees threatened me, saying that he holds a licensed weapon
and that he is ready to use it if I resist. He informed me that all communications
inside and outside the hotel have been cut.71
37. A guest of the hotel restaurant, Mr Sherif Ibrahim Mohamed Khalifa, who
was with my wife to take the fast breaking meal at the hotel as it is our favorite
place, witnessed similar scenes.72 In his statement to the police, Mr Khalifa said
that he heard shoutings, sounds of breaking and crushing at the hotel.73 When
he went downstairs from the restaurant, he found may [sic] person in the lobby, a
state of absolute disorder, holding rods and some of them taking out carton cases
and other things that I do not know, to vehicles parking in front of the hotel. These
vehicles were bearing the badge of the Egyptian Hotels Co.74 Afraid of being
attacked[,] I rushed out of the hotel with my wife.75
38. Another guest of the restaurant, Mr Mohamed Sabry Ismail Emam, stated that
he heard shoutings and sounds of breaking coming from the side of the kitchen
and somebody announcing in a loud voice that all the employees of the WENA
HOTELS LTD have to go downstairs.76 When he tried to go downstairs escaping
from this situation, one of the a/m took me downstairs and told me to go out quietly
as the hotel had been seized by the Egyptian Hotels Co. and he noted several
people carrying carton cases and taking them to buses parking in front of the
hotel, bearing the badge of the Egyptian Hotels Co.77
39. A Daily Telegraph article describing the seizure reported that [o]ne British
tourist said he was punched and gouged by semi-military types who ordered him
out of bed at 2 a.m.78 The article also quoted a British visitor as saying:
The new managers said we could stay, but I did not feel safe. They told me they were
repossessing the hotel on government orders because of an argument between Wena
managers and the authorities.79
69
Police Statement of Mr Tamim Foda, at 56 (July 5, 1991) [Annex W134].

Police Statement of Mr Mostafa Ahmed Osman, at 3 (July 6, 1991) [Annex W134].
71
Id., at 34.
72
Police Statement of Mr Sherif Ibrahim Mohamed Khalifa, at 8 (July 6, 1991) [Annex W134].
73
Id.
74
Id., at 9.
75
Id.
76
Police Statement of Mr Mohamed Sabry Ismail Emam, at 10 (July 6, 1991) [Annex W134] (capital
letters in original).
77
Id.
78
British Tourists are Beaten and Thrown Out of Egypt Hotels, Daily Telegraph (April 4, 1991)
[Annex W7].
79
Id.
70
AWARD
101
40. Mr Hany Mohamed Hassan Mohamed Wahba, a security guard at the Nile
Hotel, also stated in a subsequent deposition to the police:
While I was at the main entrance of the hotel, I saw a bus bearing the badge of the
Egyptian Hotels Co. and numerous persons going into the hotel. They caught me and I
was subject to personal searching. They were holding rods and cudgels and requested
the key of the main door of the hotel. When I told them that I do not keep it and tried
to inquire about the matter, as they were numerous, they tried to attack me and my
colleagues.80
Mr Wahba stated that he was taken to the rear gate by force threatening me with
the rods and cudgels.81 As he was taken, Mr Wahba saw the guests of the hotel
rushing out in a state of fear and terror caused by their bursting into the hotel in this
savage way.82 Mr Wahba also reported seeing a group of the a/m persons going
upstairs and another group cutting the telephone wires, a third group burst into the
reception and broke the cupboards containing the guests registers.83 Eventually,
when he was released, Mr Wahba proceeded with a number of the employees of the
WENA HOTELS LTD who were thrown out with me, to the Tourist Police where
we informed verbally about the event. Then the Policeman came to the hotel.84
41. At approximately 8:45 p.m., Ms Jelcic returned to the Nile hotel. She testified
that she had just returned to her room when a group of men broke in, grabbed her
and removed her from the hotel.85 According to Ms Jelcic, the men had like Navy
blue pants, dark pants, which is kind of unusual because they do not normally,
you know, dress alike, so that gave me the illusion as if they were some sort of
organization. . . .86 Ms Jelcic testified that she and other Wena employees (including
Mr Webster) then stood outside the hotel, looking into the lobby where she says
she noticed about four gentlemen or so that were standing in the lobby, towards
the back of the lobby, and they were radically different from the other people that
were in the lobby. . . . [t]hey were very well groomed, very well dressed. . . .87
According to Ms Jelcic, some of the Egyptian Wena staff told me that they were
Ministry of Tourism officials.88 However, Ms Jelcic admitted that she personally
did not recognize them, no, but my staff, obviously the staff that were there saw
the people come into the hotel on previous occasions, so I had no reason to doubt
them.89 Mr Webster also testified that, although he did not personally recognize
80
Police Statement of Mr Hany Mohamed Hassan Mohamed Wahba, at 1112 (July 6, 1991).
Id., at 12.
82
Id.
83
Id.
84
Id. (capital letters in original).
85
Jelcic Direct Ex., TR Day 3, at 92:1793:24. See also Declaration of Ms Angela Jelcic, para. 13,
attached to Claimants Memorial on the Merits (Jelcic Declaration).
86
Jelcic Direct Ex., TR Day 3, at 94:1116.
87
88
Jelcic Direct Ex., TR Day 3, at 97:78. See also Jelcic Declaration, para. 13 (I recognized certain
ehc executives and personnel, some of whom were standing with some other well-groomed men in
suits. These men were identified as Ministry of Tourism officials by our staff who recognized them.).
89
81
102
any officials from the Ministry of Tourism, two of his Egyptian staff said to me
that there were officials from the Ministry of Tourism in the lobby at the time.90
42. Further evidence of their contemporaneous impression that the Ministry of
Tourism was involved in the seizure of the Nile Hotel is reflected in the police
statements that Ms Jelcic and Mr Webster made to the Kasr El-Nile police. Ms
Jelcics statement, for example, begins I would like to make a complaint, charge
and case against the Egyptian Hotels Company and the Ministry of Tourism of
Egypt.91 Similarly, Mr Websters statement, which is titled Against the Egyptian
Hotels Company/Ministry of Tourism, concludes [w]e therefore place and hold
the Egyptian Hotel Company and Ministry of Tourism responsible for items as
listed below and not returned immediately.92
43. However, in his testimony, Minister Sultan adamantly rejected the suggestion
that Ministry officials might have been present during the seizure: I am sure that
none of them have been there. I am sure of that, and, please, those who are accusing
the Ministry should have come up with physical evidence showing representatives
of the Ministry were there.93 Mr Munir also testified that [t]here was no official
of the Ministry of Tourism present during the seizure.94
44. According to Ms Jelcic and Mr Webster, Wena staff went to both the nearby
Kasr El-Nile police station and the Tourist police station seeking assistance.95 Although both Ms Jelcic and Mr Webster testified thatwith the exception of one,
lone policeman who arrived two to three hours laterboth police forces refused to
assist Wena,96 there is evidence that officers from Kasr El-Nile police did begin an
investigation at around 11:00 p.m.97
45. The report by the Kasr El-Nile Police records that they were informed by
the Director of the Security Department in the El-Nile Hotel, perhaps Mr Wahba,
that the Management of the Egyptian Hotels Corporation had previously sent a
number of its employees to seize the hotel in full. . . .98 According to the report,
four officers from the Kasr El-Nile police station went to investigate. When they
90
Webster Direct Ex., TR Day 3, at 14:612. See also Webster Direct Ex., TR Day 3, at 14:2515:6 &
16:912.
91
Statement of Ms Angela Jelcic to Kasr El-Nile Police (April 2, 1991) [Annex W82].
92
Statement of Mr Simon Webster to Kasr El-Nile Police (April 2, 1991) [Annex W83]. Similar contemporaneous evidence of Wenas impression that the Egyptian government was involved in the seizures is
reflected in several of the newspaper articles describing the events. For example, an article in the Caterer
and Hotelkeeper reported that Mr Farargy believed the attack . . . was organised either by government
elements or people who are fiercely opposed to foreign ownership in Egypt. Wena Hotels Attacked
by Crowds, Caterer & Hotelkeeper (April 18, 1991) [Annex W85]. Similarly, an article in the Crawley
Observer quoted Wena Managing Director Bernard Dihrberg as saying [t]his is a legal dispute with
the Egyptian government. We owe money to them and they owe money to us. Mob Turn on Hotel
Workers, The Crawley Observer (April 24, 1991) [Annex W86].
93
Sultan Cross-Ex., TR Day 4, at 52:1922.
94
Direct Examination of Mr Munir Abdul Al-Aziz Gaballah Shalabi, TR Day 5, at 12:29 (Munir Direct
Ex.).
95
Jelcic Direct Ex., TR Day 3, at 97:2398:13; Webster Direct Ex., TR Day 3, at 16:1717:12 & 19:8
15; Jelcic Declaration, para. 14; Declaration of Mr Simon Webster, paras. 301, attached to Claimants
Memorial on the Merits (Webster Declaration).
96
Id.
97
See Kasr El-Nile Police Report (April 1, 1991) [Annex E-M25]; Munir Cross-Ex., TR Day 5, at
101:1112.
98
Kasr El-Nile Police Report, at 1 (April 1, 1991) [Annex E-M25].
AWARD
103
arrived, they met with officials from ehc, who presented to us a photocopy of
the administrative order number 216 dated 31/3/1991 stamped and signed by Mr
Muhammad Kamal Qindeel, Chairman of the Board of Directors of the Egyptian
Hotels Corporation.99 During their investigation that evening, the Kasr El-Nile
Police reported that damage was noticed which resulted from the use of force to
locks in the rooms of the secretaries, the resident manager and the administrative
business and the room for [reception?] customers and the buffet and the room of
the lawyer to the Wena Company who is resident in the hotel.100
46. As previously indicated, at approximately 1:00 a.m., Ms Jelcic, Mr Webster,
and several other Wena employees went to the nearby Kasr El-Nile police station to
file a complaint.101 According to Ms Jelcic and Mr Webster, the police at first refused
to let them make a statement, and then only would allow them to submit statements
dealing with the loss of personal items, not the illegality of ehcs seizure.102 Several
other employees also prepared statements, reporting the loss of money, jewelry,
watches, and other personal items.103
3. Seizure of the Luxor Hotel
47. Also on April 1, 1991, at approximately 7:00 p.m., several ehc employees,
led by Mr Yusseri, took possession of the Luxor Hotel.104
48. According to a subsequent statement to the Luxor police by Mr Bahia El Din
Abdel Hadi El Wakeel, a security guard at the Luxor Hotel, more than 100 people
from the ehc seized the Wena Hotel by force in spite myself and others responsible
for the security and guards in the hotel presence at the time.105 Mr Wakeel also
stated that ehc forced their entry through by force . . . which caused panic, fear,
and hysteria for the guests and employees.106 Two other guards, Messrs Ismael
Ahmed Hefni and Ahmed Hamza Mostafa, made short statements, agreeing with
Mr Wakeels description of events.107
49. Mr Muhammad Nagib Al-Sayyid, Wenas general manager of the Luxor
Hotel, also filed a police statement, asserting that, at approximately 7:00 p.m.,
ehc personnel entered his office, seized the hotels papers and ordered him to
99
Id.
Kasr El-Nile Police Reports, at 9 (April 1, 1991) [Annex E-M25] (brackets in original English
translation).
101
See Jelcic Direct Ex., TR Day 3, at 100:22101:4; Webster Direct Ex., TR Day 3, at 20:28.
102
See Jelcic Direct Ex., TR Day 3, at 100:26101:15; Webster Direct Ex., TR Day 3, at 21:2022:1;
Statement of Ms Angela Jelcic to Kasr El-Nile Police (April 2, 1991) [Annex W82]; Statement of Mr
Simon Webster to Kasr El-Nile Police (April 2, 1991) [Annex W83].
103
See Kasr El-Nile Police Reports (April 2, 1991) [Annex E-M25]. The Tribunal also heard testimony
from Mr Tahir Al-Misiri Qasim (TR Day 4 at 223:8 et seq.) and Mr Sameer Muhammad Khatir (TR Day
4 at 231:23 et seq.) to the effect that there was no violence at the time of the takeover. This testimony is
inconsistent with the testimony of Webster and Jelcic and the other witnesses who testified consistently
with Webster and Jelcic. Since the testimony of Mr Qasim and Mr Khatir has also been found inconsistent
with the decision of the Southern Cairo Court of Appeal, which characterized the situation at the Nile
Hotel on April 1, 1991 as including many acts of violence, the Tribunal has chosen not to rely on the
testimony of these two witnesses.
104
Yusseri Statement, paras. 911.
105
Police Statement Number 984, at 1 (April 2, 1991) [Annex W132].
106
Id.
107
Id., at 3.
100
104
leave the hotel.108 Mr Nagib reported the incident to the Luxor Tourist Police, who
accompanied Mr Nagib back to the hotel and subsequently opened an investigation
into the seizure.109
50. These contemporaneous descriptions comport with the subsequent report by
the Advocate General at the Office of the Assistant Attorney General for Upper
Egypt, which concluded that ehc broke into the Hotel . . . entered by force into
the management office, broke open the doors and Offices of the Hotels Ltd [and]
forced the personnel they found there to quit the Hotel.110
E. Events Following the Seizures of the Nile and Luxor Hotels
51. Minister Sultan testified that he first learned of the seizures by reading the
newspaper the next morning.111 Minister Sultan stated that he requested one of my
associates to investigate the issue and we found that he [Mr Kandil] is mistaken by
taking the law into his hands. . . .112 Minister Sultan also testified that we most
probably discussed that with the Prime Minister. . . .113
52. Minister Sultan repeatedly stated that he was furious114 at ehcs decision to
seize the hotels, that ehcs actions were wrong,115 and that [i]f I had the slightest
idea about that incident, I would have immediately stopped it because during that
time I was also involved in the spp dispute. . . .116 However, Minister Sultan also
admitted that he did not take any action to return Wena to the hotels, to punish ehc
or its officials, or to withdraw the hotels licenses so that ehc could not operate
the hotels.117 Minister Sultan explained that by reinstating Wena I would be taking
again of siding [sic] with someone, whereas the dispute should be settled through
arbitration or a court.118
53. From April 1, 1991 through February 25, 1992, the Nile Hotel remained
in the control of ehc. The Luxor Hotel remained in ehcs control until April
21, 1992. During this time, Wena made several efforts to recover possession of
108
Police Statement Number 959, at 1 (April 1, 1991) [Annex E-J18].

Id.
110
Memorandum from the Public Prosecutors Office, at 3 (April 13, 1992) [Annex W133].
111
Sultan Cross-Ex., TR Day 4, at 55:1418. See also Sultan Statement, para.20.
112
113
114
See, e.g., Direct Examination of Minister Fouad Sultan, TR Day 3, at 180:1921 (Sultan Direct
Ex.); Sultan Cross-Ex., TR Day 4, at 58:1213.
115
See, e.g., Sultan Direct Ex., TR Day 3, at 176:1114 (I fully agree that it is a wrong action taken
by the ehc, notwithstanding their rights, but they should not have taken that action. They should have
gone to arbitration or to the court.).
116
Sultan Direct Ex., TR Day 3, at 175:911. Minister Sultan apparently was referring to the dispute
between Southern Pacific Properties (Middle East) Limited (spp) and the Arab Republic of Egypt
regarding the development of a tourist complex in Egypt, which eventually resulted in a decision that
Egypt had expropriated spps investment and an award in favor of spp. See Southern Pacific Properties
(Middle East) Limited v. Arab Republic of Egypt, icsid Case No. ARB/84/3, 8 ICSID Review 328 (1993)
[Annex W61].
117
See, e.g., Sultan Cross-Ex., TR Day 4 at 57:1028 & 59:961:1.
118
Sultan Direct Ex., TR Day 4, at 176:258. See also Sultan Cross-Ex., TR Day 4, at 57:1721 (As
I said, I will not take back again the law in my hand and take action with the police to evict him [Mr
Kandil] from the hotel. This is something which has to be settled according to our description [sic] laws
by a court and not by an administrative decision.).
109
AWARD
105
the hotelsincluding seeking the assistance of officials in the United States and
United Kingdom.119 For example, on July 9, 1991, Mr Farargy wrote to the Egyptian
Ambassador to the United Kingdom, complaining about the apparent collapse of
negotiations between Wena and a representative of the Egyptian government.120
Apparently, also during this time, the Civil Defense Authority (which is responsible
for fire safety) issued at least two reportson May 22, 1991 and November 12,
1991about unsafe conditions at the Nile Hotel.121
54. On January 16, 1992, the Chief Prosecutor of Egypt ruled that the seizure
of the Nile Hotel was illegal and that Wena was entitled to repossess the hotel.122
However, the Nile Hotel was not immediately returned to Wena. On February 21,
1992, Mr Webster wrote to the British Embassy in Cairo, complaining of Minister
Sultans uncooperative stance and the delays that Wena was experiencing in
recovering the hotels: if he [Minister Sultan] wishes to press settlement of account,
then we too will press for settlement of monies outstanding to Wena.123 Mr Webster
concluded his letter by saying that [w]e are of the impression that the Minister is
either poorly informed or part of the entire scheme.124
55. On February 25, 1992, the Nile Hotel was returned to Wenas control.125
Just two days before the hotel was returned, on February 23, 1992, the Ministry of
Tourism withdrew the Nile Hotels operating license because of fire safety violations
and the hotel was closed down.126 According to Mr Munir, these safety violations
had pre-dated ehcs seizure of the hotel in April 1991.127 In a contemporaneous report to the Kasr El-Nile police, an ehc official confirmed that on February 23, 1992,
just before returning the Nile Hotel to Wena, ehc had issued decree no 148/92 to
stop operations in response to orders from the Ministries of Interior and Tourism.128
56. According to the witnesses produced by Wena, upon returning to control of
the Nile Hotel, they found the hotel vandalized.129 Although Mr Munir denied that
any such vandalism occurred, he confirmed that ehc had removed and auctioned
much of the hotels fixtures and furniture.130 According to Wenas management, it
never operated the Nile Hotel again.131
57. On April 21, 1992, the Chief Prosecutor of Egypt ruled that ehcs seizure of
the Luxor Hotel was illegal and ordered that the hotel should be returned to Wena.132
119
See, e.g., Malins Declarations, para. 6.

See Letter from Mr Nael El-Farargy (Wena Hotels Ltd) to His Excellency, Ambassador Shaker
(Egyptian Ambassador to the United Kingdom) (July 9, 1991) [Annex W50].
121
See Letter from the Director General of the Civil Defense Authority (January 4, 1992) [Annex
E-M43].
122
See Munir Direct Ex., TR Day 5, at 31:67; Munir Statement, para. 22.
123
Letter from Mr Webster (Wena Hotels Ltd) to Mr Ceurvost (British Embassy, Egypt) (February 21,
1991) [Annex W130].
124
Id. See also Webster Direct Ex., TR Day 3, at 26:616.
125
126
Munir Direct Ex., TR Day 5, at 30: 1028. See also Munir Statement, paras. 223.
127
Id.
128
Police Report on Hand-over of the Nile Hotel (February 25, 1992) [Annex W137].
129
See, e.g., Malins Direct Ex., TR Day 4, at 179:120; Webster Direct Ex., TR Day 3, at 26:204; Jelcic
Direct Ex., TR Day 3, at 109:38.
130
See Munir Cross-Ex., TR Day 5, at 89:311; Munir Statement, para. 24.
131
Jelcic Direct Ex., TR Day 3, at 110:235; Farargy Declaration, para. 27.
132
Yusseri Statement, para. 13.
120
106
On April 28, 1992, Wena reentered the hotel.133 According to Wenas witnesses,
the Luxor Hotel had also been damaged, although not nearly as badly as the Nile
Hotel.134 The Ministry of Tourism denied Wena a permanent operating license for
the Luxor Hotel; instead, it granted only a series of temporary licenses because
of alleged defects in the drainage system and the fire safety system, which Wena
complains prohibited it from properly operating the hotel.135
58. After the return of the hotels, Wena sought compensation from Egypt.136 On
November 11, 1992, Mr Malins wrote to the Honorable Lee Hamilton, a senior
member of the US House of Representatives, complaining that the Minister of
Tourism, Dr Fouad Sultan, will not consider our requests and that it is clear that
subsequent to any perceived movement, Dr Sultan personally intervenes to obstruct
a solution.137
59. On April 10, 1993, the Kasr El-Nile court convicted several representatives
of ehcincluding Messrs Kandil and Munirunder Article 369/1 of the Egyptian
Criminal Code (dispossession by violence), holding that unlawful force was used
to expel Wena from the Nile Hotel.138 These convictions were subsequently upheld
by the Southern Cairo Court of Appeal, on January 16, 1994.139 According to Mr
Munir, the decision is currently under appeal to the Court of Cassation.140 Neither
Mr Kandil nor Mr Munir was sentenced to serve any jail time; both were fined only
200 Egyptian pounds, which Mr Munir stated that he had not paid.141 Since then,
Mr Munir has been promoted to become the Head of the Legal Affairs division at
ehc and is expecting a further promotion.142 According to Ms Jelcic, Mr Kandil is
currently an advisor to a senior member of the Egyptian parliament.143
60. On December 2, 1993, Wena initiated arbitration in Egypt against ehc for
breaching the Nile Hotel 1ease.144 Similar arbitration was initiated by Wena against
ehc for breaching the Luxor Hotel lease on January 12, 1994.145
61. On April 10, 1994, an arbitration award of EGP 1.5 million for damages from
the invasion of the Nile Hotel was issued in favor of Wena. However, the award also
required Wena to surrender the Nile Hotel to ehcs control.146 On June 21, 1995,
133
Report on Hand-over of the Luxor Hotel (April 28, 1992) [Annex E-M30].
See, e.g., Malins Direct Ex., TR Day 4, at 179:120; Jelcic Direct Ex., TR Day 3 at 110:1322.
135
See, e.g., Yusseri Direct Ex., TR Day 5, at 113:711; Jelcic Direct Ex., TR Day 3, at 113:1520;
Letter from Classic Edition Travel to Wena (March 16, 1995); Letter from Inter Air Travel Limited to
Wena (April 11, 1995).
136
See, e.g., Malins Direct Ex., TR Day 4, at 180:23181:23.
137
Letter from Mr Humfrey Malins, MP (Parliamentary Consultant, Wena) to the Honorable Lee H.
Hamilton (Chairman, Subcommittee on Europe & the Middle East, US House of Representatives)
(November 11, 1992) [Annex W131].
138
See decision of the Southern Cairo Court of Appeal (January 16, 1994) [Annex W135].
139
Id.
140
See Munir Direct Ex., TR Day 5, at 32:1117; Munir Cross-Ex., TR Day 5, at 91:1192:12.
141
Decision of the Southern Cairo Court of Appeal (January 16, 1994) [Annex W135]; Munir Cross-Ex.,
TR Day 5, at 94:23.
142
Munir Cross-Ex., TR Day 5, at 93:2094:26.
143
Redirect Examination of Ms Angela Jelcic, TR Day 3, at 155:22156:22 (Jelcic Redirect Ex.).
144
Nile Hotel Arbitration Award, at 1 (April 10, 1994) [Annex E-M19].
145
Luxor Hotel Arbitration Award, at 1 (September 29, 1994) [Annex E-J31].
146
Nile Hotel Arbitration Award (April 10, 1994) [Annex E-M19].
134
AWARD
107
Wena was evicted from the Nile Hotel.147 Nearly two years later, on June 9, 1997,
Wena received the damages awarded by the Nile Hotel arbitration, less feesa
total of EGP 1,477,498.30.148
62. The Luxor Hotel arbitration also found in favor of Wena, awarding the company, in a September 29, 1994 decision, EGP 9.06 million for damages from the
seizure.149 The award subsequently was nullified by the Cairo Appeal Court on December 20, 1995, on the basis, among other things, that the arbitrator appointed by
ehc had not signed the final decision.150 On August 14, 1997, Wena was evicted
from the Luxor Hotel and, according to Mr Yusseri, the hotel was turned over to a
court-appointed receiver requested by ehc.151
F. Harassment
63. Wena has also alleged a campaign of continual harassment by Egypt since
the seizure of the two hotels, including the following allegations: in 1991 the Minister of Tourism made defamatory statement[s] about Wena that were reproduced in
the media; in 1992 Egypt revoked the Nile Hotels operating license without reason;
in 1995 Egypt imposed an enormous, but fictitious, tax demand on Wena; in 1996
Egypt removed the Luxor Hotels police book, effectively rendering it unable to
accept guests; and, last but not least, in 1997 Egypt imposed a three-year prison
sentence and a LE 200,000 bail bond on the Managing Director of Wena based on
trumped-up charges.152
64. The Tribunal has received some limited testimony and other evidence on
these various allegations. However, because it finds, as discussed in section III,
infra, that Egypts actions concerning the April 1, 1991 seizures of the two hotels
are sufficient to determine liability, the Tribunal does not find it necessary to make
a finding on the veracity of these additional allegations.
G. Relationship between ehc and Egypt
65. From 1983 through September 1991, ehc was a public sector company,
wholly owned by the Egyptian Government, and operating in accordance with law
Number 97 of 1983 governing Public Sector Companies and Organisations.153 In
September 1991, Egypt enacted the Public Business Sector Companies Law, which
reorganized the 314 State owned economic companies, pooling them into 16
147
Annual Return and Financial Statements for Wena Hotels Limited (period ended December 31,
1995) [Annex E-J14]; Letter from Kevin Heath, Esq. (Lester Aldridge, Solicitors for Wena) to Mr Nael
El-Farargy (Wena Hotels Ltd) (March 20, 1999) [Annex W16].
148
Check drawn in Wenas favor by the Egyptian Ministry of Justice [Annex W93].
149
Luxor Hotel Arbitration Award, at 1 (September 29, 1994) [Annex E-J31].
150
Cairo Court of Appeals Judgement (December 20, 1995) [Annex E-J32].
151
Yusseri Direct Ex., TR Day 5, at 112:929; Annual Return and Financial Statements for Wena Hotels
Limited (period ending December 31, 1996) [Annex E-J15].
152
Claimants Request for Arbitration, at 16.
153
See Munir Statement, para. 3; Egyptian Law Number 97 of 1983 governing Public Sector Authorities
and Affiliated Companies (Law Number 97 of 1983) [Annex W65].
108
(reduced later to 12) State owned holding companies supervised by the Minster for
[the] public Sector.154 However, at the time of the seizures of the Nile and Luxor
Hotels, ehc was governed by Law Number 97 of 1983.
66. As explained by Minister Sultan during his testimony, under Law Number
97 of 1983, the sole shareholder of ehc was Egypt.155 ehcs shareholder assembly was chaired by the Minister of Tourism and would be attended by several
other government officials.156 The Minister of Tourism also was responsible for
the appointment of at least one half of the Board of Directors of ehc, and furthermore nominated ehcs Chairman.157 Indeed, in May 1989, Mr Kamal Kandil
was appointed, at the nomination of Minister Sultan, Chairman and CEO of ehc
by Egyptian Prime Ministers Decree Number 539 of 1989.158 According to Mr
Munirs statement ehcs Directors were also appointed by the Ministry of Tourism
and Civil Aviation.159
67. Of considerable relevance to this proceeding, the Minister of Tourism was
also empowered to dismiss the Chairman and the members of the Board of ehc
if it appears that the continued presence of these persons would affect the proper
functioning of the company.160
68. Until at least the passage of the September 1991 Public Business Sector
Companies Law, ehc operated within broad policy guidelines laid down by the
Egyptian Government.161 As Minister Sultan explained during a parliamentary
debate on July 14, 1992, at the time of the seizures, the tourism sector with its
companies was [s]ubordinated to the Minister of Tourism.162 In a letter from
February 1992, the Ministry of Tourism contrasted the relationship between ehc
and the Egyptian Government before and after the passage of the September 1991
law, by explaining:
After the issuance of the new law of the Business Sector and after its implementation
starting from Oct. 1991, the Egyptian Hotels Company has full autonomy in all of its
business dealings without intervention from the Ministry.163
154
Sultan Statement, para. 4.

156
Id., at 228:28.
157
See Sultan Statement, para. 8; Sultan Cross-Ex., TR Day 3, at 211:26212:2; Law Number 97 of
1983, art. 30 [Annex W65].
158
See Prime Ministers Decree No. 539 of 1989 [Annex E-M27]; Sultan Statement, para. 8; Sultan
Cross-Ex., TR Day 3, at 211:1723. Mr Kandils appointment by virtue of the Decree of the Prime
Minister No. 539/1989 was noted in both the Nile and Luxor agreements. See Luxor Hotel Lease and
Development Agreement, at 1 [Annex W4]; El Nile Hotel Lease and Development Agreement, at 1
[Annex 5].
159
See Munir Statement, para. 4.
160
Law Number 97 of 1983, art. 37 [Annex W65]. See also Sultan Cross-Ex., TR Day 3, at 214:18
215:11; Munir Cross-Ex., TR Day 5, at 44:417.
161
162
Record of the Lower House Session No. 99, at 36 (July 14, 1992) [Annex W67] (Arabic original).
See also Sultan Cross-Ex., TR Day 3, at 209:1226.
163
Letter from Mr Abdel-Moneim Rashad (Director General, Ministers OfficeMinistry of Tourism)
to Ms Angela Jelcic (Wena Hotels Ltd) (February 20, 1992) [Annex W66].
155
AWARD
109
69. The documents also reflect that ehc and the Ministry of Tourism considered
ehcs money to be public money or public funds,164 and ehcs rights to be
a state ownership.165 Indeed, during the February 26, 1991 meeting chaired by
Minister Sultan, the Minister is recorded as saying that [t]he Ministry took no
pleasure from any misunderstandings with investors; however, at the same time
it could not accept any excesses in respect of any of the Governments rights.166
Similarly, in his April 1, 1991 statement to the Luxor police, Mr Atitu Sinni Atitu,
Manager of the Legal Department at Egyptian Hotels Company for hotels in
the Luxor area, explained that the Egyptian Hotels Company, as a Government
company, was compelled to preserve the public money by the means it viewed in
as being in accordance with the public interest.167
H. Consultancy Agreement between Wena Hotels Ltd and Mr Kamal Kandil
70. Egypt has contended that the claimant improperly sought to influence the
Chairman of ehc with respect to the award of the leases.168 Both parties agree that,
on or about August 20, 1989, Wena Hotels Ltd entered into a consultancy agreement
with Mr Kamal Kandil.169 The second paragraph of the agreement provides that Mr
Kandils duties shall be to give advice and assistance to the company as to the
opportunities available to the company for developing its hotel business in Egypt.170
71. On March 26, 1991, Wena (through its attorneys, Tuck & Mann) issued a
Writ of Summons in England against Mr Kandil, alleging that, under the agreement,
Wena had made five payments to Mr Kandil between August 18, 1989 and January
30, 1990.171 The total of these payments, which Wena sought to reclaim, was GB
52,000.
72. On August 19, 1991, Mr Kandil responded to this Writ in a letter written to the
Senior Master of the Royal Court of Justice.172 In his letter, Mr Kandil objected to
Wenas writ, claiming that there was no Contract between the Claimant Company
and myself, that there was only a Draft Contract which is not a Contract because
164
See, e.g., Luxor Police State Report No. 959 of 1991, at 12 & 26 (April 1, 1991) [Annex E-M18];
Kasr El-Nile Police Report, at 6 (April 1, 1991) [Annex E-M25] (The Egyptian Hotels Corporation
is a public sector company and its funds are property of the state.); Letter from Mr Kamal Kandil
(Chairman, ehc) to Mr Nael El-Farargy (Wena Hotels Ltd) (March 30, 1991) [Annex W80]. See also
Munir Cross-Ex., TR Day 5, at 47:1011.
165
Letter from Mr Kamal Kandil (Chairman, ehc) to Mr Humfrey Malins, MP (Parliamentary Consultant, Wena) (March 31, 1991) [Annex W129].
166
Minutes of Meeting between Representatives of the Ministry of Tourism, ehc and Wena (February
26, 1991) (emphasis added) [Sultan Statement, Attachment B; also Annexes E-M22 & W124]. During
testimony regarding the meaning of this statement, Minister Sultan explained that I cannot give up
entitlements or the rights of the State. If the right of the State is to collect rent I cannot give that right
up. Sultan Cross-Ex., TR Day 3, at 230:24.
167
Luxor Police State Report No. 959 of 1991, at 8 (emphasis added) [Annex E-M18].
168
Respondents Post-Hearing Memorial at 15.
169
See Consultancy Agreement between Mr Kamal Kandil and Wena Hotels Limited [Annex W149].
170
Id.
171
Writ of Summons issued by Wena Hotels Limited against Mr Mohamed Kamal Ali Mohamed Kandil
(March 26, 1991) [Annex E-M7].
172
Letter from Mr Kamal Kandil to the Senior Master of the Royal Court of Justice (August 19, 1991)
[Annex Wl50].
110
it was neither signed nor sealed between the Parties, and that the signature which
appears is not mine.173 Mr Kandil asserted that the subject of the above-mentioned
Draft Contract was to develop new hotels in Egypt, these hotels being the Ramses
Village project in Abou Simbal and a Conference Center in Aswan City. . . .174
Mr Kandil also stated that [i]n the Draft Contract I did not act in my quality of
Chairman of the Egyptian Hotels Company nor did the Draft Contract concern
either the Nile Hotel or the Luxor Hotel, instead I acted as Tourist Consultant for
the Aswan Government and Chairman of the Board of Directors of Misr Aswan
Tourist Co.175
73. As corroborating evidence of Mr Kandils statements, Wena has submitted
two letters it sent to the Governor of Aswan in December 1989 and January 1990
(including one letter on which Mr Kandil was copied), concerning the Abou Simbal
and Aswan City development.176
74. Mr Farargy testified that the Egyptian government was aware of the consultancy agreement and that Mr Kandil offered his help and assistance officially
above board with their knowledge.177 According to Minister Sultan, however, he
was not personally aware that Mr Kandil was an agent to Farargy and that when
he did learn about it, I passed that to the prosecutor requesting a full fledged investigation. . . .178 Both parties agree, however, that the investigation appears . . . to
have been closed179 and that Mr Kandil was never prosecuted in Egypt in connection with the Consultancy Agreement.180 Unfortunately, other than this consensus
that Mr Kandil was never prosecuted, the Tribunal has been presented with no evidence of any investigation the Egyptian government might have undertaken in this
matter.
III. Liability
75. In its Memorial on the Merits, Wena claims that Egypt violated the ippa,
Egyptian law and international law by expropriating Wenas investments without
compensation.181 Wena also argues that Egypt violated the ippa and other international norms by failing to protect and secure Wenas investments.182
76. Egypt denies Wenas claims, asserting that it has neither violated the ippas
prohibition on expropriation without compensation183 nor breached any obligation under international law to protect and secure the claimants investment.184 In
173
174
175
Id., at 1.
Id.
Id.
See Facsimile from Mr Dimopolous (Wena Hotels Ltd) to Mr Kamal Kandil (Chairman, ehc) (December 13, 1989), enclosing letter from Mr Nael El-Farargy (Wena Hotels Ltd) to His Excellency, the
Governor of Aswan (December 11, 1989) [Annex W188]; letter from Mr Nael El-Farargy (Wena Hotels
Ltd) to His Excellency, the Governor of Aswan (January 15, 1990) [Annex W189].
177
Farargy Direct Ex., TR Day 1, at 142:278. See also Farargy Direct Ex., TR Day 1, at 142:26143:6.
178
Sultan Direct Ex., TR Day 3, at 188:1114.
179
Respondents Post-Hearing Memorial, at 14.
180
Claimants Post-Hearing Reply, at 16 (submitted on June 15, 2000).
181
Claimants Memorial on the Merits, at 4351.
182
Id., at 514.
183
Respondents Memorial on the Merits, at 840.
184
Id., at 402.
176
AWARD
111
addition to its objections to the substance of Wenas claims, Egypt has also raised
two affirmative defenses. First, Egypt asserts that Claimants claims in respect of
the seizure of the hotels and acts of vandalism are time barred.185 Second, Egypt
contends that Claimant improperly sought to influence the Chairman of ehc [Mr
Kamal Kandil] with respect to the award of the leases that are the subject of this
arbitration and, therefore, as a result of this alleged corruption, Claimant cannot now properly appear before an international tribunal, constituted in accordance
with the ippa, and claim compensation for the alleged loss of leasehold interests that
were improperly obtained in the first place.186 The Tribunal has carefully considered all of these claims. The Tribunal devoted particular attention to the allegations
of corruption raised by Egypt.
77. Despite the able representation of Egypts counsel, the Tribunal concludes
that Egypt did violate its obligations under the ippa by failing to provide Wenas
investments in Egypt fair and equitable treatment and full protection and security187 and by failing to provide Wena with prompt, adequate and effective
compensation following the expropriation of its investments.188 The Tribunal also
finds that Wenas claims are not time barred. Finally, although Egypt has raised
serious allegations of misconduct and corruption, the Tribunal finds that Egypt
(which bears the burden of proving such an affirmative defense) has failed to prove
its allegations. The Tribunals rationale is discussed in more detail below.
A. Law Applicable to this Arbitration
78. Before disposing of the merits of this case, the Tribunal must consider the
applicable law governing its deliberations. As both parties agree, this case all
turns on an alleged violation by the Arab Republic of Egypt of the agreement
for the promotion and protection of investments that was entered into in 1976 between the United Kingdom and the Arab Republic of Egypt.189 Thus, the Tribunal,
like the parties (in both their submissions and oral advocacy), considers the ippa to
be the primary source of applicable law for this arbitration.
79. However, the ippa is a fairly terse agreement of only seven pages containing
thirteen articles. The parties in their arguments have not treated it as containing all
the rules of law applicable to their dispute, and this is also the view of the Tribunal.
In particular, Egypt has relied on Egyptian law, namely, the Egyptian Civil Code
to raise its first defensethat Wenas claims are time barred. In its response to that
defense, Wena has taken the position that both Egyptian law and international law
are applicable to the dispute.190 Under Article 42(1) of the icsid Convention:
185
Id., at 424.
ippa, art. 2(2) [Annexes W2 & E-J22].
188
189
Respondents Opening Statement, TR Day 1, at 29:248. See also Claimants Opening Statement,
TR Day 1, at 15:245 (the basis of this action is the breach of [the] Bilateral Treaty by Egypt).
190
See, e.g., Claimants Reply on the Merits, at 4850. See also Claimants Memorial on the Merits, at
42; Respondents Memorial on the Merits, at 78 (referring, in regard to Respondents second defense,
to practices condemned by both Egyptian and international law.).
186
187
112
agreed upon by the parties. In the absence of such agreement, the Tribunal shall apply
the law of the Contracting State party to the dispute (including its rules on the conflicts
of laws) and such rules of international law as may be applicable.
The Tribunal finds that, beyond the provisions of the ippa, there is no special
agreement between the parties on the rules of law applicable to the dispute. Rather,
the pleadings of both parties indicate that, aside from the provisions of the ippa,
the Tribunal should apply both Egyptian law (i.e., the law of the Contracting State
party to the dispute) and such rules of international law as may be applicable.
The Tribunal notes that the provisions of the ippa would in any event be the first
rules of law to be applied by the Tribunal, both on the basis of the agreement of the
parties and as mandated by Egyptian law as well as international law.
B. The Issue of Egypts Substantive Liability
1. Summary of Wenas claims
80. As noted already, Wena raises two claims against Egypt. First, it contends that
Egypts actions constitute an unlawful expropriation without prompt, adequate and
effective compensation in violation of Article 5 of the ippa, as well as Egyptian law
and other international law.191 Second, Wena argues that Egypt violated Article 2(2)
of the ippa, and other international norms, by failing to accord Wenas investments
fair and equitable treatment and full protection and security.192
81. Egypt disputes both allegations, contending, inter alia, that the Claimant
has no legitimate grievance against the Respondent, who neither authorized nor
participated in the repossession of the Luxor and Nile Hotels on April 1, 1991 or
most of the subsequent events of which the Claimant complains.193
82. The Tribunal disagrees. There is substantial evidence that, even if Egyptian
officials other than officials of ehc did not participate in the seizures of the hotels
on April 1,1991, 1) Egypt was aware of ehcs intentions to seize the hotels and did
nothing to prevent those seizures, 2) the police, although responding to the seizures,
did nothing to protect Wenas investments; 3) for almost one year, Egypt (despite
its control over ehc both before and after April 1, 1991) did nothing to restore the
hotels to Wena; 4) Egypt failed to prevent damage to the hotels before their return
to Wena; 5) Egypt failed to impose any substantial sanctions on ehc (or its senior
officials responsible for the seizures), suggesting its approval of ehcs actions; and
6) Egypt refused to compensate Wena for the losses it suffered.
83. The Tribunal shall consider each of Wenas claims, beginning with its assertion that Egypt violated its obligations under Article 2(2) of the ippa to provide
full protection and security to Wenas investments.
191
See, e.g., Claimants Memorial on the Merits, at 4351; Claimants Reply on the Merits, at 2938
(submitted on September 27, 1999); Claimants Post-Hearing Brief, at 414.
192
Claimants Memorial on the Merits, at 514; Claimants Reply on the Merits, at 3944; Claimants
Post-Hearing Brief, at 446.
193
Respondents Post-Hearing Rebuttal Memorial, at 8 (submitted on June 15, 2000).
AWARD
113
2. Article 2(2) of the ippa: fair and equitable treatment and full protection
and security
84. The Tribunal agrees with Wena that Egypt violated its obligation under Article
2(2) of the ippa to accord Wenas investment fair and equitable treatment and
full protection and security. Although it is not clear that Egyptian officials other
than officials of ehc directly participated in the April 1, 1991 seizures, there is
substantial evidence that Egypt was aware of ehcs intentions to seize the hotels
and took no actions to prevent ehc from doing so. Moreover, once the seizures
occurred, both the police and the Ministry of Tourism took no immediate action
to restore the hotels promptly to Wenas control. Finally, Egypt never imposed
substantial sanctions on ehc or its senior officials, suggesting Egypts approval of
ehcs actions.
Article 2(2) of the ippa provides:
Investments of nationals or companies of either Contracting Party shall at all time be
accorded fair and equitable treatment and shall enjoy full protection and security in the
territory of the other Contracting Party. Each Contracting Party shall ensure that the
management, maintenance, use, enjoyment or disposal of investments in its territory
of nationals or companies of the other Contracting Party is not in any way impaired
by unreasonable or discriminatory measures. Each Contracting Party shall observe any
obligation it may have entered into with regard to investments of nationals or companies
of the other Contracting Party.194
In interpreting a similar provision from the bilateral investment treaty between

Zare and the United States, another icsid panel has recently held that the obligation
incumbent on [the host state] is an obligation of vigilance, in the sense that [the host
state] shall take all measures necessary to ensure the full enjoyment of protection
and security of its [sic] investments and should not be permitted to invoke its
own legislation to detract from any such obligation.195 Of course, as still another
icsid panel has observed, a host states promise to accord foreign investment such
protection is not an absolute obligation which guarantees that no damages will
be suffered, in the sense that any violation thereof creates automatically a strict
liability on behalf of the host State.196 A host state is not an insurer or guarantor . . .
[i]t does not, and could hardly be asked to, accept an absolute responsibility for all
194
ippa, art. 2(2) [Annex W2 & E-J22].

American Manufacturing and Trading, Inc. v. Republic of Zare, icsid Case No. ARB/93/1, at 28
(1997) [Annex W115]. Article II(4) of the ZareUnited States bilateral investment treaty, much like
Article 2(2) of the ippa, provides that [i]nvestment of nationals and companies of either Party shall at
all times be accorded fair and equitable treatment and shall enjoy protection and security in the territory
of the other party. Id., at 28 [Annex W115].
196
AAPL v. Sri Lanka, icsid Case No. ARB/87/3, at 545 (1990) [Annex W117; a digested version of
the decision has also been provided at Annex E-M35]. The wording of Article 2(2) of the bilateral
investment treaty in that case (between Sri Lanka and the United Kingdom) is almost identical to that
in the same article in the ippa: Investment of nationals and companies of either Party shall at all times
be accorded fair and equitable treatment and shall enjoy protection and security in the territory of the
other Party. Agreement for the Promotion and Protection of Investments, February 13, 1980, UKSri
Lanka [Annex W41].
195
114
injuries to foreigners.197 Here, however, there is no question that Egypt violated its
obligation to accord Wenas investments fair and equitable treatment and full
protection and security.
85. Even if Egypt did not instigate or participate in the seizure of the two hotels,
as Wena claims,198 there is sufficient evidence to find that Egypt was aware of ehcs
intentions and took no actions to prevent the seizures or to immediately restore
Wenas control over the hotels. As discussed in section II.C, supra, in December
1990, Wenas parliamentary consultant, Mr Malins, traveled to Egypt expressly
to meet with Minister Sultan and the Egyptian Minister of the Interior to express
Wenas concerns about such a seizure.199 Mr Malins recounted that [b]oth Ministers
gave me their separate, absolute assurances . . . that no violence could or would
take place.200 In February 1991, Wena wrote to Minister Sultan, mentioning that
ehc was again threatening to repossess the hotels through force:
officials from the Egyptian Hotels Company threatened to storm the hotels and expel
us, and this was after our Company had spent the sums previously outlined. The matter
reached a point where the Chairman of the Board of Directors of the Egyptian Hotels
Company issued a decision for his company to take possession of the Luxor Hotel
without a legal ruling or any other measure [to support his decision].201
86. Then, on March 21, 1991 (only eleven days before the seizures), Mr Kandil
wrote to Minister Sultan, proposing that, among other things, the two hotels be
taken and the license withdrawn.202 Mr Kandil closed the letter by advising Minister
Sultan: We leave the matter to you.203 Marginalia, in Minister Sultans handwriting, confirm that the Minister received and reviewed the letter.204
197
AAPL v. Sri Lanka, at 546 (quoting Alwyn V. Freeman, Responsibility of States for Unlawful Acts of
Their Armed Forces, 14 (1957)) [Annex W117; also Annex E-M35].
198
The evidence submitted by the parties does suggest a unity of interest between ehc and Egypt such
that it is possible that Egypt might have authorized and participated in the seizures of the hotels. The
repeated reference in contemporaneous documents to ehc as a government company, to its money
as public money and to its rights as the Governments rights or state ownership is particularly
compelling in this regard. See, e.g., Luxor Police State Report No. 959 of 1991, at 8, 12 & 26 (April 1,
1991) [Annex E-M18]; Kasr El-Nile Police Report, at 6 (April 1, 1991) [Annex E-M25]; Letter from
Mr Kamal Kandil (Chairman, ehc) to Mr Nael El-Farargy (Wena Hotels Ltd) (March 30, 1991) [Annex
W80]; Letter from Mr Kamal Kandil (Chairman, ehc) to Mr Humfrey Malins, MP (Parliamentary
Consultant, Wena) (March 31, 1991) [Annex W129]; Minutes of Meeting between Representatives of
the Ministry of Tourism, ehc, and Wena (February 26, 1991) [Sultan Statement, Attachment B; also
Annexes E-M22 & W124]. Nevertheless, the Tribunal concludes that Wena has failed to satisfy its burden
of proving that Egypt actually participated in the seizures of the two hotels. For example, although both
Ms Jelcic and Mr Webster believe that Ministry of Tourism officials were present at the Nile Hotel, they
both admit that they were, personally, unable to identify any such officials. See, e.g., Jelcic Direct Ex.,
TR Day 3, at 97:1013; Webster Direct Ex., TR Day 3, at 14:612.
199
Malins Direct Ex., TR Day 4, at 175:14.
200
Id., at 175:269. See also Malins Declaration, para. 4.
201
Letter from Mr Nael El-Farargy (Wena Hotels Ltd) to Minister Fouad Sultan (Minister of Tourism)
(February 11, 1991) (emphasis added; brackets in original English translation) [Sultan Statement, Attachment A; also Annexes E-M21 & W127].
202
Letter from Mr Kamal Kandil (Chairman, ehc) to Minister Fouad Sultan (Minister of Tourism)
(March 21, 1991) [Sultan Statement, Attachment D; also Annex W126].
203
Id.
204
Id. (Arabic original). See also Sultan Cross-Ex., TR Day 3, at 235:23237:27; Sultan Statement,
para. 17.
AWARD
115
87. Finally, on March 25, 1991 (only six days before the seizure), Mr Malins wrote
to Minister Sultan asking for another meeting and requesting an understanding from
the Minister that no actions would be taken until that meeting could occur: please
confirm what must surely be [sic] right, mainly that all matters be absolutely
frozen, with no detrimental action of whatever nature being taken pending our
meeting. . . .205 As evidence of the close coordination between the Ministry of
Tourism and ehc, Mr Kandil (and not Minister Sultan) responded to this letter on
March 31, 1991 (the day immediately before the seizures).206 Mr Kandil ended his
letter by threatening that the owning company will take all necessary measures to
protect its rights which is considered a state ownership.207
88. Despite all these warnings, Egypt took no action to protect Wenas investment.
Minister Sultan sought to defend Egypts failure to prevent the seizure by explaining
he was not aware that ehc planned to illegally seize the hotels,208 and that [i]f I had
the slightest idea about that incident, I would have immediately stopped it. . . .209
Even if the Tribunal were to accept this explanation for Egypts failure to act before
the seizures, it does not justify the fact that neither the police nor the Ministry of
Tourism took any immediate action to protect Wenas investments after ehc had
illegally seized the hotels.
89. For example, despite the convincing evidence that a large number of people
forcibly seized the Nile Hotel at approximately 7:00 p.m.,210 it is undisputed that the
Kasr El-Nile police (located only a few minutes away) did not begin an investigation
until four hours later and it is not evident that the Ministry of Tourism police (also
located nearby) ever responded to Wenas request for assistance.211 Moreover, even
after the Kasr El-Nile police began their investigation, they took no steps to remove
ehc and restore Wena to control of the hotel. The Luxor police, although more
prompt in their response, also declined to expel ehc and restore the Luxor hotel to
Wena.212
90. The Ministry of Tourism also failed to take any immediate action to protect
Wenas investments. Although he testified that he was furious213 at ehcs decision
205
Letter from Mr Humfrey Malins, MP (Parliamentary Consultant, Wena) to Minister Fouad Sultan
(Minister of Tourism) (March 25, 1991) [Annex W128].
206
Letter from Mr Kamal Kandil (Chairman, ehc) to Mr Humfrey Malins, MP (Parliamentary Consultant, Wena) (March 31, 1991) [Annex W128].
207
Id.
208
209
210
See, e.g., Kasr El-Nile Police Reports (April 12, 1991) [Annex E-M25]; Police Statement of Mr
Tamim Foda (July 6, 1991) [Annex W134]; Police Statement of Mr Mostafa Ahmed Osman (July 6,
1991) [Annex W134]; Police Statement of Mr Sherif Ibrahim Mohamed Khalifa (July 6, 1991) [Annex
W134]; Police Statement of Mr Mohamed Sabry Ismail Emam (July 6, 1991) [Annex W134]; British
Tourists are Beaten and Thrown Out of Egypt Hotels, Daily Telegraph (April 4, 1991) [Annex W7].
211
See Jelcic Direct Ex., TR Day 3, at 97:2398:13; Webster Direct Ex., TR Day 3, at 16:1717:12
& 19:815; Jelcic Declaration, para. 14; Webster Declaration, paras. 301; Kasr El-Nile Police Report
(April 1, 1991) [Annex E-M25]; Munir Cross-Ex., TR Day 5, at 101:1112.
212
See Police Statement Number 984 (April 2, 1991) [Annex W132]; Police Statement Number 959
(April 1, 1991) [Annex E-J18].
213
See, e.g., Sultan Direct Ex., TR Day 3, at 180:1921 Sultan Cross-Ex., TR Day 4, at 58:1213.
116
to seize the hotels and that ehcs actions were wrong,214 Minister Sultan also acknowledged that he did not take any action to return the hotels to Wena, to punish
ehc or its officials, or to withdraw the hotels licenses so that ehc could not operate
the hotels.215 Under Law Number 97 of 1983 governing Public Sector Companies
and Organizations, Minister Sultan was empowered to dismiss the Chairman and the
members of the Board of ehc if it appears that the continued presence of these persons would affect the proper functioning of the company.216 Also, given its power
as the sole shareholder in ehc,217 with several of its senior officials participating in
and one of them chairing ehcs shareholder assembly,218 and with ehc operat[ing]
within broad policy guidelines laid down by the Egyptian Government,219 Egypt
could have directed ehc to return the hotels to Wenas control and make reparations.
91. Instead, neither hotel was restored to Wena until nearly a year later, after decisions by the Chief Prosecutor of Egypt,220 which Wena asserts were only obtained
as a result of diplomatic pressure on Egypt.221 Even after the Chief Prosecutors
first decision (concerning the Nile Hotel) was issued on January 16, 1992, in which
he found the seizures illegal, the Ministry of Tourism delayed returning control
of the Nile Hotel to Wena. For example, on February 21, 1992, Mr Webster wrote
to the British Embassy in Cairo, complaining of Minister Sultans uncooperative
stance and the delays that Wena was experiencing in recovering the hotels: if he
[Minister Sultan] wishes to press settlement of account, then we too will press for
settlement of monies outstanding to Wena.222 Mr Webster concluded his letter by
saying that [w]e are of the impression that the Minister is either poorly informed
or part of the entire scheme.223
92. Moreover, neither hotel was returned to Wena in the same operating condition that it had been in before the seizures. According to Wenas witnesses, both
hotels had been vandalized.224 Although Mr Munir denied that any such vandalism occurred, he confirmed that ehc had removed and auctioned much of the Nile
Hotels fixtures and furniture.225 Furthermore, neither hotel had a permanent operating license. In fact, just two days before the Nile Hotel was returned to Wena,
the Ministry of Tourism withdrew that hotels operating license because of alleged
214
See, e.g., Sultan Direct Ex., TR Day 3, at 176:1114 (I fully agree that it is a wrong action taken
by the ehc, notwithstanding their rights, but they should not have taken that action. They should have
gone to arbitration or to the court.).
215
See, e.g., Sultan Cross-Ex., TR Day 4 at 57:1028 & 59:961:1.
216
Law Number 97 of 1983, art. 37 [Annex W65]. See also Sultan Cross-Ex., TR Day 3, at 214:18
215:11; Munir Cross-Ex., TR Day 5, at 44:417.
217
218
Id., at 228:28.
219
Munir Statement, para. 4. See also Record of the Lower House Session No. 99, at 36 (July 14, 1992)
[Annex W67]; Letter from Mr Abdel-Moneim Rashad (Director General, Ministers OfficeMinistry
of Tourism) to Ms Angela Jelcic (Wena Hotels Ltd) (February 20, 1992) [Annex W66].
220
See Munir Direct Ex., TR Day 5, at 31:67; Munir Statement, para. 22; Yusseri Statement, para. 13.
221
See, e.g., Farargy Declaration, para. 26.
222
Letter from Mr Webster (Wena Hotels Ltd) to Mr Ceurvost (British Embassy, Egypt) (February 21,
1991) [Annex W130].
223
Id. See also Webster Direct Ex., TR Day 3, at 26:616.
224
See, e.g., Malins Direct Ex., TR Day 4, at 179:120; Webster Direct Ex., TR Day 3, at 26:204; Jelcic
Direct Ex., TR Day 3, at 109:38 & 110:1322.
225
See Munir Cross-Ex., TR Day 5, at 89:311; Munir Statement, para. 24.
AWARD
117
fire safety violations.226 Although, as Mr Munir noted, these safety violations had
pre-dated ehcs seizure of the hotel in April 1991,227 it is noteworthy that the Ministry of Tourism allowed ehc to operate the Nile Hotel from April 1991 through
February 1992, despite these violations, and revoked the license only on February
23, 1992, just prior to restoring the hotel to Wenas control.
93. Egypt also refused to compensate Wena for the losses it had experienced.228
On November 11, 1992, Mr Malins wrote to the Honorable Lee Hamilton, a senior
member of the US House of Representatives, complaining that the Minister of
Tourism, Dr Fouad Sultan, will not consider our requests and that it is clear that
subsequent to any perceived movement, Dr Sultan personally intervenes to obstruct
a solution.229
94. Finally, neither ehc nor its senior officials were seriously punished for their
actions in forcibly expelling Wena and illegally possessing the hotels for approximately a year. Although several representatives of ehcincluding Messrs Kandil
and Munirwere convicted for their actions, neither Mr Kandil nor Mr Munir was
sentenced to serve any jail time. Instead, both were fined only EGP 200, which Mr
Munir stated that he has never paid.230 Also, neither official appears to have suffered any repercussions in their careers. As noted above, the Ministry of Tourism
chose not to exercise its authority to remove Mr Kandil as Chairman of ehc and,
according to Ms Jelcic, he currently is serving as an advisor to a senior member
of the Egyptian parliament.231 Since the seizures, Mr Munir has been promoted to
become the Head of the Legal Affairs Division at ehc and is expecting a further
promotion in the near future.232 This absence of any punishment of ehc and its
officials suggests that Egypt condoned ehcs actions.
95. For all of these reasons, the Tribunal concludes that Egypt violated its obligation under Article 2(2) of the ippa, by failing to accord Wenas investments fair
and equitable treatment and full protection and security.
3. Article 5 of the ippa: expropriation without prompt, adequate and
effective compensation
96. The Tribunal also agrees with Wena that Egypts actions constitute an expropriation and one without prompt, adequate and effective compensation, in
violation of Article 5 of the ippa. That article provides in relevant part that:
(1) Investments of nationals or companies of either Contracting Party shall not be
nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as expropriation) in the territory of
226
See Munir Direct Ex., TR Day 5, at 30:1028; Munir Statement, paras. 223; Police Report on
Hand-over of the Nile Hotel (February 25, 1992) [Annex W137].
227
Munir Direct Ex., TR Day 5, at 30:1028.
228
See, e.g., Malins Direct Ex., TR Day 4, at 180:23181:23.
229
(November 11, 1992) [Annex W131].
230
See Decision of the Southern Cairo Court of Appeal (January 16, 1994) [Annex W134]; Munir
Cross-Ex., TR Day 5, at 94:23.
231
Jelcic Redirect Ex., TR Day 3, at 155:22156:22.
232
Munir Cross-Ex., TR Day 5, at 93:2094:26.
118
the other Contracting Party except for a public purpose related to the internal needs
of the Party and against prompt, adequate and effective compensation. Such compensation shall amount to the market value of the investment expropriated immediately
before the expropriation itself or before there was an official Government announcement that expropriation would be effected in the future, whichever is the earlier, shall
be made without delay, be effectively realizable and be freely transferable. The national
or company affected shall have a right under the law of the Contracting Party making
the expropriation, to prompt review, by a judicial or other independent authority of
that Party, of whether the expropriation is in conformity with domestic law and of
the valuation of his or its investment in accordance with the principles set out in this
paragraph.233
97. Although, as Professor Ian Brownlie has commented, the terminology of the
subject is by no means settled,234 the fundamental principles of what constitutes an
expropriation are well established under international law. For example, as the icsid
tribunal in Amco Asia v. Indonesia noted, it is generally accepted in International
Law, that a case of expropriation exists not only when a state takes over private
property, but also when the expropriating state transfers ownership to another legal
or natural person.235 The tribunal continued by observing that an expropriation also
exists merely by the state withdrawing the protection of its courts from the owner
expropriated, and tacitly allowing a de facto possessor to remain in possession of
the thing seized. . . .236
98. It is also well established that an expropriation is not limited to tangible property rights. As the panel in SPP v. Egypt explained, there is considerable authority
for the proposition that Contract rights are entitled to the protection of international
law and that the taking of such rights involves an obligation to make compensation
therefore.237 Similarly, Chamber Two of the IranUS Claims Tribunal observed in
the Tippets case that [a] deprivation or taking of property may occur under international law through interference by a state in the use of that property or with the
enjoyment of its benefits, even where legal title to the property is not affected.238
The chamber continued by noting:
[w]hile assumption of control over property by a government does not automatically and
immediately justify a conclusion that the property has been taken by the government,
thus requiring compensation under international law, such a conclusion is warranted
233
ippa, art. 5(1) [Annex W2 & E-J22].

Ian Brownlie, Principles of International Law, 537 (4th ed. 1990) [Annex W104]. Professor Brownlie
also accurately observes that in any case form should not take precedence over substance. Id.
235
Amco Asia Corporation, et al. v. Republic of Indonesia, Award on the Merits, icsid Case
No. ARB/81/1, at 62 (1984) [Annex W94].
236
Id.
237
Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, icsid Case No.
ARB/84/3, 8 ICSID Review 328, 375 (1993) [Annex W61]. See also G. C. Christie, What Constitutes a Taking of Property Under International Law, 38 Brit. Y.B. Intl L. 308, 31011 (1962) (citing
German Interests in Polish Upper Silesia, Judgement No. 7, PCIJ, Series A (1926)) [Annex E-M11].
238
Tippets, Abbett, McCarthy, Stratton v. TAMS-AFFA Consenting Engineers of Iran et al., IranUS
Claims Tribunal, Award No. 141-7-2, at 225 (June 22, 1984) [Annex E-M12]. In some legal systems, a
lease of land or a building is deemed real property.
234
AWARD
119
whenever events demonstrate that the owner has been deprived of fundamental rights
of ownership and it appears that this deprivation is not merely ephemeral.239
99. Here, the Tribunal has no difficulty finding that the actions previously described constitute such an expropriation. Whether or not it authorized or participated
in the actual seizures of the hotels, Egypt deprived Wena of its fundamental rights
of ownership by allowing ehc forcibly to seize the hotels, to possess them illegally for nearly a year, and to return the hotels stripped of much of their furniture
and fixtures.240 Egypt has suggested that this deprivation was merely ephemeral
and therefore did not constitute an expropriation.241 The Tribunal disagrees. Putting
aside various other improper actions, allowing an entity (over which Egypt could
exert effective control) to seize and illegally possess the hotels for nearly a year
is more than an ephemeral interference in the use of that property or with the
enjoyment of its benefits.242
100. Moreover, even after the hotels were returned to Wena, Egypt failed to satisfy
its obligation under the ippa, and international norms generally, by refusing to offer
Wena prompt, adequate and effective compensation for the losses it had suffered
as result of Egypts failure to act.243 For example, as already noted, on November
11, 1992, Mr Malins wrote to US Congressman Lee Hamilton, complaining that
the Minister of Tourism, Dr Fouad Sultan, will not consider our requests and
that it is clear that subsequent to any perceived movement, Dr Sultan personally
intervenes to obstruct a solution.244
101. For all these reasons, the Tribunal concludes that Egypt violated its obligation under Article 5 of the ippa, by failing to provide Wena with prompt, adequate
and effective compensation for the losses it suffered as a result of the seizures of
the Luxor and Nile Hotels.
239
Id.
See generally discussion in section III.B.1, supra.
241
See, e.g., Respondents Memorial on the Merits, at 1011; Respondents Rejoinder on the Merits, at
68.
242
Tippets, at 225 [Annex E-M12]. Such a deprivation easily qualifies as an expropriation within the
meaning of Article 3(a) of the Harvard Draft Convention on the International Responsibility of States for
Injuries to Aliens, 55 Amer. J. Intl L. 545 (1961) (A taking of property includes not only an outright
taking of property but also any such unreasonable interference with the use, enjoyment, or disposal of
property as to justify an inference that the owner will not be able to use, enjoy or dispose of the property
within a reasonable period of time after the inception of such interference. (as quoted in G. C. Christie,
What Constitutes a Taking of Property Under International Law, 38 Brit. Y.B. Intl L. 308, 330 (1962)
[Annex E-M11]).
243
ippa, art. 5(1) [Annex W2 & E-J22]. See also Ian Brownlie, Principles of International Law, 537
(4th ed. 1990) (Expropriation of particular items of property is unlawful unless there is provision for
payment of effective compensation. [Annex W104].
244
(November 11, 1992) [Annex W131]. See also Malins Direct Ex., TR Day 4, at 180:23181:23; Letter
from Mr Nael El-Farargy (Wena Hotels Ltd) to His Excellency, Ambassador Shaker (Egyptian Ambassador to the United Kingdom) (July 9, 1991) (complaining about the apparent breakdown in negotiations
between Egypt and Wena) [Annex W50].
240
120
C. Whether Wenas Claims are Time Barred

102. In its Memorial on the Merits, Egypt argues that Wenas claims are time
barred under Article 172(i) of the Egyptian Civil Code.245 This article provides that:
A case filed for damages claimed for an illegal act, shall fall by prescription by lapse
of three years from the day the wronged person learns of the damage taking place and
of the person who is responsible for it, in all events the case shall fall with the lapse of
15 years from the day the illegal act takes place.246
Egypt also observes that [e]ven if, contrary to the above, the Tribunal were to
refuse to apply Article 172(i), it nevertheless would clearly still have the discretion
to determine whether there has been unreasonable delay in the submission of the
Claimants claims to icsid.247 Finally, Egypt contends that if Egyptian law is not
applied, it would be reasonable . . . to have regard to the principles of prescription
that are common to both of the Contracting Parties to the ippa, i.e., in this case, the
United Kingdom, noting that the statute of limitation, under the English Limitation
Act 1980, for breach of contract or tortious behavior is six years.248
103. Ironically, as Wena notes, Respondent did not previously raise this time
bar claim in its objections to jurisdiction.249 To the contrary, Respondent asserted,
as part of its objections, that Wenas Request for Arbitration was premature.250
104. Setting aside this apparent inconsistency, however, the Tribunal sees no
legal or equitable reason to bar Wenas claim. First, contrary to Respondents claim
that Claimant severely compromised the ability of the Respondent to defend itself
in these proceedings,251 the Tribunal agrees with Wena that, given the voluminous
evidence produced by the parties as well as the extensive testimony provided by
several witnesses (in particular, ehcs counsel, Mr Munir, who showed a remarkable
recollection of the case), neither party seems to have been disadvantagedwhich,
of course, is one of the equitable reasons for disallowing an untimely claim.
105. Another equitable principle is the notion of reposethat a respondent
who reasonably believes that a dispute has been abandoned or laid to rest long
ago should not be surprised by its subsequent resurrection.252 Here, however, the
Tribunal finds that Wena has continued to be aggressive in prosecuting its claims
and that Egypt has had ample notice of this on-going dispute.253
106. Second, as Wena notes, municipal statutes of limitation do not necessarily
bind a claim for a violation of an international treaty before an international tribunal.
245

Translation of Article 172(i) of the Egyptian Civil Code [Annex E-M36].
247
248
Id., at 44.
249
Claimants Reply on the Merits, at 49.
250
See, e.g., Respondents Memorial on Jurisdiction, at 2.
251
252
See, e.g., Gentini Case, ItalyVenezuela Mixed Claims Commission, XRSA 551, 5601, (1903)
[Annex W147].
253
See, e.g., Letter from Mr Nael Farargy (Wena Hotels Ltd) to His Excellency DrKamal El Ganzouri
(Prime Minister of Egypt) (February 23, 1998) (complaining of Wenas long and bitter disputes with
the Egyptian State over direct foreign investment in Egypt.) [Annex W15].
246
AWARD
121
In Alan Craig v. Ministry of Energy of Iran, Chamber Three of the IranUS Claims
Tribunal declined to apply an Iranian statute of limitation, despite the applicability
of Iranian law.254 The tribunal noted:
Municipal statutes of limitation have not been considered as binding on claims before
an international tribunal, although such periods may be taken into account by such a
tribunal when determining the effect of an unreasonable delay in pursuing a claim.255
This general principle was recognized as long ago as 1903 by the ItalyVenezuela
Mixed Claims Commission, which held in the Gentini case that, although local
statutes of limitation cannot be invoked to defeat an international claim, international tribunals may consider equitable principles of prescription to reject untimely
claims.256 Indeed, in the Gentini case, the American Umpire dismissed a thirty-yearold claim. As discussed above, however, the Tribunal sees no reason to exercise
such discretion in this case, where Egypt has had ample notice of Wenas continued
claims and where neither party appears to have been substantially harmed in its
ability to bring its case.
107. Egypt contends that Article 42(1) of the icsid Convention mandates that the
Tribunal must apply Article 172(i)s three-year statute of limitation. The Tribunal
does not agree. Article 42(1) of the icsid Convention provides that a Tribunal shall
apply domestic law and such rules of international law as may be applicable. As
Wena notes, the decision in the Amco Asia case advised that one situation where
a tribunal should apply rules of international law is to ensure the precedence
of international law norms where the rules of the applicable domestic law are in
collision with such norms.257 Here, strict application of Article 172(i)s threeyear limit, even if applicable, would collide with the general, well-established
international principle recognized since before the Gentini case: that municipal
statutes of limitation do not bind claims before an international tribunal (although
tribunals are entitled to consider such statutes as well as equitable principles of
prescription when handling untimely claims).
108. Moreover, as discussed in Section III.A, supra, the principal source of
substantive law in this case is the ippa itself. The Tribunal notes that although
the ippas concise provisions do not contain detailed procedures for bringing an
arbitration, Article 8(1) does expressly provide that if a dispute should arise and
agreement cannot be reached within three months between the parties to this dispute
through pursuit of local remedies, through conciliation or otherwise, then, and only
then, may a party institute icsid proceedings.258 This provision suggests a greater
concern that the parties not rush into arbitration than that the parties will delay the
initiation of proceedings.
254
Alan Craig v. Ministry of Energy of Iran, 3 IranUS Claims Tribunal 280 (1984) [Annex W155].
See also George Aldrich, The Jurisprudence of the IranUnited States Claims Tribunal 4802 (1996)
[Annex E-M47].
255
Id., at 287.
256
Gentini Case, ItalyVenezuela Claims Commission, X RSA 551 (1903) [Annex W147].
257
Amco Asia Corporation, et al. v. Republic of Indonesia, icsid Case No. ARB/81/1, International
Arbitration Report 649, 654 (1986) [Annex W102].
258
122
109. Finally, although not necessary to the Tribunals decision, the Tribunal is
not convinced by the interpretation of Egyptian law presented by Respondent. As
Respondents expert noted, normally [a]ctions for liability for administrative acts
are time-barred after fifteen years.259 Article 172(i), to the contrary, is viewed as an
exception to the general principle concerning the statute of limitation [because] it
relates to . . . unlawful acts.260 Dr Elehwany reached the conclusion that the normal
15-year prescription did not apply and that the exceptional three-year period of
Article 172(i) did, because what was being attributed to Egypt is liability for the
physical acts the police are alleged to have committed on 1 April 1991namely
the storming [of the] Nile and Luxor Hotels, the forcible eviction of the hotel
guests and staff, the theft of cash, the detention of employees, the wrecking of
everything. . . .261
110. Of course, as Egypt argued on the merits, and the Tribunal agrees, it has
not been demonstrated that the police physically participated in the seizure of the
hotels. As discussed in section III.B., supra, Egypts liability does not arise from
physical acts by the police, but from Egypts failure to accord Wenas investments
as required by ippa, full protection and securityby failing to prevent or immediately reverse ehcs physical acts. Such failure to provide legal protection would
appear to constitute the typical administrative act for which the normal, fifteen-year
prescription period applies. Thus, Egypts response to the contention that it failed
to provide full protection and security is inadequate.
D. Consultancy Agreement with Mr Kandil
111. Finally, the Tribunal considers Egypts contention that Claimant improperly sought to influence the Chairman of ehc with respect to the award of the
leases for the Luxor and Nile hotels.262 If true, these allegations are disturbing
and ground for dismissal of this claim. As Egypt properly notes, international tribunals have often held that corruption of the type alleged by Egypt is contrary
to international bones mores.263 However, as Professor Lalive notes, the delicate
problem remains for an arbitral tribunal to determine precisely where the line
should be drawn between legal and illegal contracts, between illegal bribery and
legal commissions.264
112. As noted above in section II.H (paragraphs 704), it is undisputed that
Wena and Mr Kandil entered into an agreement in August 1989, that the purpose
of the agreement was for Mr Kandil to give advice and assistance to the company
as to opportunities available to the company for developing its hotel business in
259
Legal opinion of Dr Hossam Al din Kamil Elehwany, at 23 (September 1999) [Annex E-M8].
Id.
Id., at 25 (emphasis added).
262
263
See, e.g., Professor Ibrahim Fadlallah, Lordre public dans les sentences arbitrales, Academie de
Droit International, Recueil des Cours, 377 (1994-V); Professor Pierre Lalive, Transnational (or Truly
International) Public Policy and International Arbitration, icca Congress Series, No. 3, 2767 (1987)
[Annex E-M10].
264
Lalive, at 277 [Annex E-M10].
260
261
AWARD
123
Egypt,265 that between August 18, 1989 and January 30, 1990 Wena made a total of
GB 52,000 in payments to Mr Kandil, and that on March 26, 1991, Wena initiated
a lawsuit against Mr Kandil for allegedly breaching the agreement.266
113. Egypt notes that, coincidentally, the first payment (on August 18, 1989) was
ten days after the execution of the Luxor Hotel lease and that the last payment (on
January 30, 1990) was two days after the signing of the Nile Hotel lease. It also
observes that the amount paid to Mr Kandil exceeds that which would have been
authorized under the consultancy agreement.
114. Wena, however, contends that the agreement did not concern the Nile and
Luxor hotels, but was to help Wena pursue development opportunities in Misr
Aswan, where Mr Kandil was a tourist consultant. This assertion is supported by
both Mr Kandils response to Wenas March 1991 lawsuit,267 as well as the letters
Wena has submitted from December 1989 and January 1990, evincing its interest
in the Abou Simbal and Aswan City developments in Misr Aswan.268
115. Wena also noted that according to Mr Yusseri, the Luxor lease was awarded
to Wena in a competitive bid with another investor, with Wena winning the lease
because it agreed to pay a higher rent.269 Finally, Mr Farargy testified that the
Egyptian government was aware of the agreement that Mr Kandil offered his help
and assistance officially above board with their knowledge.270
116. Although the Tribunal believes Minister Sultans testimony that he was
not personally aware that Mr Kandil was an agent to Farargy and that when
he did learn about it, I passed that to the prosecutor requesting a full fledged
investigation,271 it is undisputed that Mr Kandil was never prosecuted in Egypt in
connection with this agreement.272 Regrettably, because Egypt has failed to present
the Tribunal with any information about the investigation requested by Minister
Sultan, the Tribunal does not know whether an investigation was conducted and, if
so, whether the investigation was closed because the prosecutor determined that Mr
Kandil was innocent, because of lack evidence, or because of complicity by other
government officials. Nevertheless, given the fact that the Egyptian government
was made aware of this agreement by Minister Sultan but decided (for whatever
reasons) not to prosecute Mr Kandil, the Tribunal is reluctant to immunize Egypt
265
Consultancy Agreement between Mr Kamal Kandil and Wena Hotels Limited [Annex W149].
Writ of Summons issued by Wena Hotels Limited against Mr Mohamed Kamal Ali Mohamed Kandil
(March 26, 1991) [Annex E-M7].
267
Letter from Mr Kamal Kandil to the Senior Master of the Royal Court of Justice (August 19, 1991)
[Annex W150] (the subject of the above-mentioned Draft Contract was to develop new hotels in Egypt,
these hotels being the Ramses Village project in Abou Simbal and a Conference Center in Aswan city. . . .
I did not act in my quality of Chairman of the Egyptian Hotels Company nor did the Draft Contract
concern either the Nile Hotel or the Luxor Hotel, instead I acted as Tourist Consultant for the Aswan
Government and Chairman of the Board of Directors of Misr Aswan Tourist Co.).
268
Facsimile from Mr Dimopolous (Wena Hotels Ltd) to Mr Kamal Kandil (Chairman, ehc) (December
13, 1989), enclosing letter from Mr Nael El-Farargy (Wena Hotels Ltd) to his Excellency, the Governor
of Aswan (December 11, 1989) [Annex W188]; letter from Mr Nael El-Farargy (Wena Hotels Ltd) to
his Excellency, the Governor of Aswan (January 15, 1990) [Annex W189].
269
Yusseri Direct Ex., at 4:311.
270
Farargy Direct Ex., TR Day 1, at 142:278. See also Farargy Direct Ex., TR Day 1, at 142:26143:6.
271
Sultan Direct Ex., TR Day 3, at 188:1114.
272
See, e.g., Claimants Post-Hearing Reply, at 16; Respondents Post-Hearing Memorial, at 14.
266
124
from liability in this arbitration because it now alleges that the agreement with Mr
Kandil was illegal under Egyptian law.
117. Moreover, with the exception of the coincidence in the timing of the payments and the signing of the Luxor and Nile hotels (and the apparent over-payment
of Mr Kandil), the Tribunal notes that Egyptwhich bears the burden of proving
such an affirmative defensehas failed to present any evidence that would refute
Wenas evidence that the Contract was a legitimate agreement to help pursue development opportunities in Misr Aswan. Nor did either party offer to present live
testimony from Mr Kandil.
IV. Damages
118. Article 5 of the ippa between Egypt and the United Kingdom provides that
in the event of an expropriation, the private investor shall be entitled to prompt,
adequate, and effective compensation and such compensation shall amount to
the market value of the investment immediately before the expropriation.273 The
Tribunal shall apply this standard to the determination of damages.
119. Altogether Wena claims damages of GB 20.4 million for lost profits, GB
22.8 million for lost opportunities and GB 2.5 million for reinstatement costs,
making a total of GB 45.7 million.274 In addition, it seeks interest on the previous
sum and makes a claim of US$ 1,251,541 for counsel fees and costs of experts and
witnesses incurred in pursuing its claim.275
120. In the alternative, Wena claims US$ 8,819,466.93 as the amount of its
investment in the Egyptian hotel venture.276
121. The Respondent disputes these requests, contending that the claims summarized in paragraphs 11920 are inappropriate and greatly overstated.277 In the
alternative, the Respondent suggests that if anything were awarded for damages it
should be the amount of Wenas investment in the Egyptian hotel venture, which,
according to Respondents expert, could not be more than GB 750,000.278
122. Although experts presented by each party adopted variations of the wellknown discounted cash flow (dcf) method of calculating the amount of the damages sustained by Wena, the experts reached widely varying results from their
calculations.279 Since, however, the Tribunal is not persuaded that the dcf method is
273
ippa, art. 5 [Annexes W2 & E-J22].

Claimants Post-Hearing Brief, at 67.
275
Id., at 68; Claimants Statement of Fees and Expenses [Annex W194].
276
Claimants Post-Hearing Brief, at 67 & n. 64; Claimants Post-Hearing Reply, at 36.
277
Respondents Post-Hearing Memorial, at 2542; Respondents Post-Hearing Rebuttal Memorial, at
2234.
278
Respondents Post-Hearing Memorial, at 43; Respondents Post-Hearing Rebuttal Memorial, at 34;
Provisional Evaluation of Lost Investment and Review of Financial Information prepared by Pannell Kerr
Forster, attached to Respondents Rejoinder on the Merits; Direct Examination of Mr Hugh Matthew
Jones, TR Day 4, at 135:1215.
279
See Expert Report prepared by BDO Hospitality Consulting, attached to Claimants Memorial on
the Merits (calculating a profit of GB 4 million for the Luxor Hotel and a profit of GB 21.3 million
for the Nile Hotel); Reports for El-Nile and Luxor Hotels prepared by Pannell Kerr Forster, attached to
274
AWARD
125
appropriate in this case, it deems it unnecessary to enter into a detailed discussion

of the differences that the experts calculations disclosed.
123. The Tribunal agrees with Egypt that, in this case, Wenas claims for lost
profits (using a discounted cash flow analysis), lost opportunities and reinstatement
costs are inappropriatebecause an award based on such claims would be too
speculative. As another icsid panel recently noted in the Metalclad decision:
Normally, the fair market value of a going concern which has a history of profitable
operation may be based on an estimate of future profits subject to a discounted cash
flow analysis. However, where the enterprise has not operated for a sufficiently long
time to establish a performance record or where it has failed to make a profit, future
profits cannot be used to determine going concern or fair market value.280
Similarly, the icc panel in the SPP (Middle East) v. Egypt arbitration case declined
to accept a discounted cash flow projection because, inter alia, by the date of
cancellation the great majority of the work had still to be done, and the calculation
put forward by the Claimants produces a disparity between the amount of the
investment made by the Claimants and the supposed value of the investment as
calculated by the dcf analysis.281
124. Like the Metalclad and SPP disputes, here, there is insufficiently solid
base on which to found any profit . . . or for predicting growth or expansion of the
investment made by Wena.282 Wena had operated the Luxor Hotel for less than
eighteen months, and had not even completed its renovations on the Nile Hotel,
before they were seized on April 1, 1991. In addition, there is some question whether
Wena had sufficient finances to fund its renovation and operation of the hotels.283
Finally, the Tribunal is disinclined to grant Wenas request for lost profits and
lost opportunities given the large disparity between the requested amount (GB
45.7 million) and Wenas stated investment in the two hotels (US$8,819,466.93).284
125. Rather, the Tribunal agrees with the parties that the proper calculation of
the market value of the investment expropriated immediately before the expropriation285 is best arrived at, in this case, by reference to Wenas actual investments in
the two hotels. As noted above, Wena pleads in the alternative for award of at least
Respondents Post-Hearing Memorial (calculating a profit of less than GB 10,000 for the Luxor Hotel
and an actual loss for the Nile Hotel).
280
Metalclad Corporation v. United Mexican States, paras. 11920, icsid Case No. ARB(AF)/97/1
(2000) (internal citation omitted). The Metalclad award is publicly available from the US Securities
Exchange Commission, Washington, DC 20549, and electronically at http://www.edgar-online.com,
as an attachment to an 8-K filing of September 5, 2000 by Metalclad Corporation. See also Southern
Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, icsid Case no. ARB/84/3, 8 ICSID
Review 328, 381 (1993) [Annex W61] (In the Tribunals view, the dcf method is not appropriate for
determining the fair compensation in this case because the project was not in existence for a sufficient
period of time to generate the data necessary for a meaningful dcf calculation.).
281
SPP (Middle East) Ltd (Hong Kong), et al. v. Arab Republic of Egypt, para. 65, Appendix IV of icc
Arbitration (1983) [Annex E-M38].
282
American Manufacturing & Trading, Inc. v. Republic of Zaire, icsid Case No. ARB/93/1, at 28 (1997)
[Annex W115].
283
See, e.g., Review of Financial Information prepared by Pannell Kerr Forster, attached to Respondents
Rejoinder on the Merits.
284
Approximately GB 6 million at current exchange rates.
285
ippa, art. 5 [Annexes W2 & E-J22].
126
the amount of Wenas proven investment in the Egyptian hotel venture. Similarly,
Respondent pleads in the alternative that if any award were made it should not be
more than the amount of Wenas proven investment.
126. The Tribunal is not persuaded by the relevance of the Respondents contention that much of the Egyptian investment came from affiliates of Wena rather
than from Wena. Instead the panel takes the view that whether the investments were
made by Wena or by one of its affiliates, as long as those investments went into
the Egyptian hotel venture, they should be recognized as appropriate investments.
The panel was persuaded from the testimony it received that it is a widely established practice for hotel enterprises to adopt allocation measures, which spread
the profits from the group operations into various jurisdictions where there are tax
advantages to the group as a whole.
127. On the basis of investment, Claimant states its loss as US$8,819,466.93.
However, the panel in pursuing an objection raised by the Respondent that there
were certain elements of double counting,286 decided that the gross figure should
be diminished by US$322,000.00 to eliminate probably double counting in certain
instances. Beyond that, however, the panel was not persuaded by Respondents
evidence that there were significant other instances of double counting. Thus, the
figure of US$8,819,466.93 should be diminished by US$322,000.00, leaving a
total of US$8,497,466.93, which the Tribunal judges to be the approximate total
for Wenas investment. From this, the Tribunal agreed that $435,570.38 should be
deducted for the amount received already by Claimant as a result of the Egyptian
arbitration award (the equivalent of EGP 1,477,498.30 at the exchange rate of $1
= EGP 3.3921 on June 9, 1997, the date of payment of the Egyptian award).287
128. To this should be added an appropriate sum for interest. Claimant has
claimed interest but neither specified a rate nor whether interest should be compounded.288 Moreover, the ippa, the lease agreements, and the icsid Convention and
Rules are all silent on the subject of interest. The panel is of the view that in this
case interest should be awarded and that it would be appropriate to adopt a rate of
9%, to be compounded quarterly.289
129. Like the distinguished panel in the recently-issued Metalclad decision,
this Tribunal also has determined that compounded interest will best restore the
Claimant to a reasonable approximation of the position in which it would have
been if the wrongful act had not taken place.290 Although the Metalclad tribunal
awarded compound interest without comment, this panel feels that a brief explanation of its decision is warranted.291 This Tribunal believes that an award of
286
See Provisional Evaluation of Lost Investment, paras. 2.22.3 & 2.8, attached to Respondents Rejoinder on the Merits.
287
Check drawn in Wenas favor by the Egyptian Ministry of Justice [Annex W93].
288
Claimants Post-Hearing Brief, at 68.
289
Report for El-Nile Hotel prepared by Pannell Kerr Forster, at 18, attached to Respondents PostHearing Memorial (Long-term government bonds in Egypt are currently yielding 10%. . . .).
290
Metalclad Corporation v. United Mexican States, para. 128, icsid Case No. ARB(AF)/97/1 (2000).
291
As several authorities have noted, virtually all monetary judgements . . . contain rulings on interest,
and yet, this decision to award interest is often made without any discussion. See, e.g., J. Gillis Wetter,
Interest as an Element of Damages in Arbitral Process, 5 Intl Fin. L. Rev. 20 (1986); F. A. Mann,
Compound Interest as an Item of Damage in International Law, 21 Univ. of California, Davis L. J. 577,
578 (1988).
AWARD
127
compound (as opposed to simple) interest is generally appropriate in most modern,

commercial arbitrations. As Professor Gotanda has observed, almost all financing
and investment vehicles involve compound interest. . . . If the claimant could have
received compound interest merely by placing its money in a readily available and
commonly used investment vehicle, it is neither logical nor equitable to award the
claimant only simple interest.292 For similar reasons, Professor Mann has submitted that . . . compound interest may be and, in absence of special circumstances,
should be awarded to the claimant as damages by international tribunals.293
130. Thus, the total, with interest through December 1, 2000 (US$11,431,386.88)
is US$19,493,283.43. To this figure there should be added an appropriate sum to
reimburse Claimant for attorneys fees and related costs, as reparation for losses
sufficiently related to its central claims and in keeping with common practice in
international arbitration. It will be recalled that the Tribunal, in its Decision on
Jurisdiction, rejected Wenas claims for costs incurred in rebutting Egypts objections to jurisdiction.294 Accordingly, the Tribunal shall only reimburse Claimant for
that portion of its attorneys fees and costs incurred in presenting the merits of this
arbitration. Wena has claimed US$1,107,703 for these expenses.295 Thus, including
the Claimants attorneys fees and costs, the grand total to be awarded Claimant is
US$20,600,986.43. This award will be payable within 30 days from the date hereof.
Thereafter, it will accumulate additional interest at 9% compounded quarterly until
paid.
V. Conclusion
131. In sum, the Tribunal concludes that Egypt breached its obligations under
Article 2(2) of the ippa by failing to accord Wenas investments in Egypt fair
and equitable treatment and full protection and security. Even if the Egyptian
Government did not authorize or participate in the attacks, its failure to prevent the
seizures and subsequent failure to protect Wenas investments give rise to liability. The Tribunal also finds that Egypts actions amounted to an expropriation
transferring control of the hotels from Wena to ehc without prompt, adequate and
effective compensation in violation of Article 5 of the ippa.
132. The Tribunal also dismisses the two affirmative defenses raised by Egypt.
First, the Tribunal does not agree with Egypts contention that Wenas claims
are time barred. Second, although Egypt has raised some disturbing allegations
292
John Y. Gotanda, Awarding Interest in International Arbitration, 90 Amer. J. Intl L. 40, 61 (1996).
F. A. Mann, Compound Interest as an Item of Damage in International Law, 21 Univ. of California,
Davis L. J. 577, 586 (1988). See also id., at 585 (In this spirit it is necessary first to take account of
modern economic conditions. It is a fact of universal experience that those who have a surplus of funds
normally invest them to earn compound interest. On the other hand, many are compelled to borrow
from banks and therefore must pay compound interest. This applies, in particular, to business people
whose own funds are frequently invested in brick and mortar, machinery and equipment, and whose
working capital is obtained by way of loans or overdrafts from banks.); Starrett Housing Corp. v. Iran,
16 IranUS Claims Tribunal 112, 2514 (1987) (Holtzmann, concurring).
294
Tribunals Decision on Jurisdiction, at 9 (released on June 29, 1999).
295
Claimants Statement of Fees and Expenses as of June 13, 2000 (Annex W194); letter from Mr John
Savage (Counsel for Wena) to Mr Alejandro Escobar (Secretary to the Tribunal) (November 21, 2000).
293
128
regarding payments made to Mr Kandil, the Tribunal finds that Egypt has failed to
meet its evidentiary burden of proving that these payments were illegitimate.
VI. The Operative Part

133. For these reasons
THE TRIBUNAL, unanimously,
134. FINDS that Egypt breached its obligations to Wena by failing to accord
Wenas investments in Egypt fair and equitable treatment and full protection and
security in violation of Article 2(2) of the ippa;
135. FINDS that Egypts actions amounted to an expropriation without prompt,
adequate and effective compensation in violation of Article 5 of the ippa;
and
136. AWARDS to Wena US$20,600,986.43 in damages, interest, attorneys fees
and expenses. This award will be payable by Egypt within 30 days from the date
of this Award. Thereafter, it will accumulate additional interest at 9% compounded
quarterly until paid.
Statement of Professor Don Wallace, Jr

Professor Wallace concurs in the Tribunals entire award and is persuaded that compound interest should be awarded. However, he is not persuaded that compounding
should be quarterly.
[Source: The text of the decision was supplied by Shearman Sterling, Paris; see
DECISION ON ANNULMENT
129
DECISION ON THE APPLICATION FOR ANNULMENT

(5 FEBRUARY 2002)
Table of Contents
I. Introduction
A. The Proceeding
B. Background of the Dispute and Award
C. The Request for Annulment
II. Did the Tribunal Manifestly Exceed its Powers?
A. Did the Tribunal Manifestly Fail to Apply the Applicable
Law?
(i) The dispute brought before the Tribunal
(ii) The role of international law
(iii) Specific complaints
B. Did the Tribunal Exceed its Powers in Permitting Wena to
Assert Claims on Behalf of Other Investors?
C. No Finding of Excess of Power
III. Did the Tribunal Seriously Depart from a Fundamental Rule
of Procedure?
A. The Proof of the Consultancy Agreement with Mr Kandil
B. The Assessment of Damages
C. The Assessment of Interest
D. The Absence of Mr Kandil as a Witness
E. No Finding of a Serious Departure from a Fundamental
Rule of Procedure
IV. Does the Award State the Reasons on which it is Based?
A. Preliminary Observations
B. The Tribunals Determination that it was not Necessary to
Consider EHCs and Wenas Respective Obligations
under the Leases
C. The Tribunals Determination of the Amount Awarded to
Wena
D. The Tribunals Determination of the Interest Awarded
E. Did the Tribunal not Deal with Questions Submitted for
its Decision?
F. No Finding of Lack of Reasons
V. Costs
VI. Decision
Page
130
130
133
134
135
136
136
137
139
141
142
142
142
143
144
144
145
145
145
147
147
149
150
152
152
152
130
I. Introduction
A. The Proceeding
1. On January 19, 2001, the Arab Republic of Egypt (hereinafter also Egypt
or the Applicant) filed with the Secretariat of the International Centre for Settlement of Investment Disputes (hereinafter icsid or the Centre) an application
for annulment, under Article 52 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (hereinafter the icsid
Convention or the Convention), of an arbitral Award rendered on December 8,
2000 (hereinafter the Award) in the arbitration proceeding between Wena Hotels
Limited and the Arab Republic of Egypt, icsid Case No. ARB/98/4.
2. Wena Hotels Limited (hereinafter Wena or the Respondent), a company
established under the laws of the United Kingdom, had instituted that arbitration
proceeding against Egypt by submitting to the Centre a request for arbitration dated
July 10, 1998, which was supplemented by Wenas letters to the Centre of July 16,
1998 and July 17, 1998, and was registered by the Secretary-General of icsid on
July 31, 1998. The request for arbitration invoked the provisions of the Agreement
between the United Kingdom and the Arab Republic of Egypt for the Promotion
and Protection of Investments, which was concluded on February 24, 1976, and
entered into force on February 24, 1976.
3. The Arbitral Tribunal that handed down the Award (hereinafter the
Tribunal) was composed of Professor Ibrahim Fadlallah, a national of Lebanon,
appointed by Wena; Professor Don Wallace, Jr, a United States national, appointed by Egypt; and by Mr Monroe Leigh, a United States national, appointed
by the Chairman of icsids Administrative Council, who served as President of the
Tribunal.
4. The Arab Republic of Egypts Request for annulment was registered by the
Secretary-General of icsid on January 24, 2001. In due course, the Chairman of
icsids Administrative Council appointed Professor Andreas Bucher, a national
of Switzerland, Professor Konstantinos D. Kerameus, a national of Greece, and
Professor Francisco Orrego Vicuna, a national of Chile, as members of the ad hoc
Committee to consider the application (hereinafter the Committee), in accordance
with Article 52(3) of the icsid Convention. By letter of March 6, 2001, the Deputy
Secretary-General of icsid notified the parties that all the members of the Committee
had accepted their appointment and that the Committee was therefore deemed
to have been constituted, and the proceedings to have begun, on that date. The
members of the Committee elected Professor Konstantinos D. Kerameus as its
President. Mr Alejandro Escobar, Senior Counsel, icsid, served as Secretary of the
Committee.
5. The application for annulment was accompanied by a request for stay of enforcement of the Award (hereinafter also the stay). In accordance with Article
52(5) of the icsid Convention, together with the notice of registration of the application, the Secretary-General of icsid informed both parties of the provisional stay of
enforcement of the Award. By letter of January 25, 2001, Wena requested the Committee, upon its constitution, to decide whether the provisional stay of enforcement
131
of the Award should be continued. Wena sought the termination of the stay; in the
alternative, it sought for the Committee to modify the stay by requiring the posting
of security by Egypt as a condition for continuation of the stay. In accordance with
Rule 54 of the Arbitration Rules of the Centre (hereinafter Arbitration Rules),
the Committee immediately proceeded to consider the question of continuation of
the stay of enforcement of the Award.
6. Having invited and received in due course the written observation of the parties
on the question of continuation of the stay, the Committee issued its Procedural
Order No. 1 on April 5, 2001, by which it granted the continuation of the stay,
conditional upon the posting by Egypt of an unconditional and irrevocable letter of guarantee for the total amount of the Award, plus interest accrued through
April 7, 2001. Procedural Order No. 1 set forth the following further proviso
concerning such letter of guarantee:
The letter of guarantee may be entirely drawn down upon by Wena Hotels Limited in
the event that the application is denied in its entirety. In the event the application is
accepted only in part, the letter of guarantee may be drawn down upon Wena Hotels
Limited to the extent of the unannulled part of the Award, subject to any further stay
granted by the Committee under Arbitration Rule 54(3) or by a new Arbitral Tribunal
under Arbitration Rule 55(3).
The Arab Republic of Egypt posted such letter of guarantee in due course, with
an original validity through October 31, 2001. By letter of September 27, 2001,
Egypt informed the Committee that the validity of such letter of guarantee had been
extended to February 28, 2002.
7. With agreement of the Parties, the Committee held its first session with the
Parties in Paris on May 7, 2001. Each member of the Committee having signed the
declaration required by Arbitration Rule 6, it was agreed at the first session that
the Committee had been properly constituted in accordance with the Convention
and the Arbitration Rules. The following representation of the parties was also
noted at the first session:
The Applicant, the Arab Republic of Egypt, is represented in this proceeding by
Egyptian State Lawsuits Authority
c/o Counselor Osama Ahmed Mahmoud, Vice-President, and
Counselor Hussein Mostafa Fathi
Ei Tahreer Building, 10th Floor
Cairo, Egypt
and by
Freshfields Bruckhaus Deringer
c/o Mr Eric A. Schwartz
69 boulevard Haussmann
75008 Paris, France
The Respondent, Wena Hotels Limited, is represented in this proceeding by
Shearman & Sterling
c/o Mr Emmanuel Gaillard
132
and Mr John Savage

114, avenue des Champs-Elysees
75008 Paris, France
Mr Peter Griffin, Shearman & Sterling, also acted as counsel for Wena in the
proceeding. Certified copies of the minutes of that first session were distributed
to the parties and the members of the Committee by the Secretariats letter of
May 31, 2001.
8. As agreed at the first session, the parties filed in due course their written pleadings on the application for annulment. The Arab Republic of Egypt filed its memorial on annulment, with accompanying documentation, on June 29, 2001. Wena
filed its counter-memorial opposing annulment, with accompanying documentation, on August 28, 2001. Egypt filed its reply, with accompanying documentation,
on September 10, 2001. Wena filed its rejoinder, with accompanying documentation, on September 26, 2001. Complete copies of each filing were duly delivered
by each party to the Paris-based counsel of the other party, and distributed to the
members of the Committee by the Secretariat.
9. As further agreed at the first session, the Committee held a hearing with the
Parties in Paris on October 22 and 23, 2001. At the hearing, Mr Eric A. Schwartz
addressed the Committee on behalf of Egypt, and Professor Emmanuel Gaillard,
Mr Peter Griffin and Mr John Savage addressed the Committee on behalf of Wena.
In addition the Committee heard the testimony at the hearing of Professor W.
Michael Reisman as the expert proposed by Egypt. Wena and Egypt proceeded
respectively to the cross- and re-direct examination of Professor Reisman at the
hearing. The Committee put questions to the Parties, which were answered by their
respective counsel at the hearing. A full verbatim transcript was made of the hearing,
under arrangements undertaken by the Parties, and copies of such transcript were
distributed to the members of the Committee by the Secretariat.
10. At the first session of May 7, 2001, Egypt submitted documentation concerning a garnishee order on payment of the Award by Egypt, as security for the
satisfaction of a claim by a third party against Wena for approximately US$45,000
(hereinafter the garnishee order). Counsel for Egypt indicated that, under Egyptian law, the entire amount of the Award is garnished or frozen until that claim is
settled, and that payment of the Award in any part, for example by drawing down
on the letter of guarantee posted by Egypt, could result in Egypts liability and thus
double jeopardy as regards the amount of that claim. The Committee at the first
session reserved its opinion and further directions on this matter.
11. On May 25, 2001, counsel for Egypt addressed a letter to counsel for Wena,
with a copy to the Centre, concerning the garnishee order. By letter of September
27, 2001, Egypt informed the Committee that it had not received a response from
Wena to its letter of May 25, and requested the Committee to provide the parties
with further directions on this matter. By letters of October 2 and 16, 2001, Wena
submitted its observations on the garnishee order, offering to assist Egypt in contesting such order before the Egyptian courts. Further observations on the garnishee
order were made by both Parties at the conclusion of the hearing on October 23,
2001.
133
12. At the hearing, Egypt reserved its right to make further written comments
in response to Wenas letters of October 2 and 16, 2001, and Wena submitted
that it would be premature for the Committee to provide any directions on the
matter, arguing that more information was needed from Egypt on the status of
the garnishee order. The President of the Committee then informed the parties
that the Committee would refrain from making any ruling on the question of the
garnishee order until such a time as the Parties submitted further observations.
The President outlined certain aspects that the Parties should address in that event.
However, neither Party submitted such further observations following the hearing.
Accordingly, no determination on this issue by the Committee was required.
13. The Committee began its deliberation following the hearing and held a working session in Paris on January 28, 2002.
14. On January 25, 2002, the President of the Committee requested icsid to
inform the Parties that the proceeding was closed.
B. Background of the Dispute and Award
15. The Award subject of this proceeding for annulment concerns a dispute
relating to two hotels located in Luxor and Cairo, Egypt, that were leased to Wena in
1989 and 1990 respectively on a long-term basis by the Egyptian Hotel Company, a
State-owned Egyptian company with its own legal personality (hereinafter ehc).
After certain disputes arose between ehc and Wena related to their respective
obligations under the lease agreements, the two hotels were seized by ehc on April
1, 1991. Egypt did recognize that the latter event was an act of self-help that was
wrongful. It caused the hotels to be returned to Wena in 1992. Wena was ultimately
evicted from the Nile Hotel in 1995, while the Luxor Hotel was placed in judicial
receivership in 1997. Egypt asserts that Wena failed to pay rent or to fulfill its
development obligations to the hotels. It refers to an arbitral award finding that
Wenas failure to pay rent for the Nile Hotel entitled ehc to terminate the lease.
16. After the return of the hotels, Wena sought compensation from Egypt, based
on rights of nationals of the United Kingdom in respect of their investments in Egypt
and arising out of the Agreement for the Promotion and Protection of Investments
entered into by the United Kingdom and Egypt on June 11, 1975 (hereinafter
ippa). In its Award, the Tribunal concluded that Egypt did violate its obligation
under the ippa by failing to provide Wenas investments in Egypt fair and equitable
treatment and full protection and security (Art. 2[2] ippa) and by failing to
provide Wena with prompt, adequate and effective compensation following the
expropriation of the investments (Art. 5[1] ippa). For the reasons stated in the
Award, the Tribunal
134. FINDS that Egypt breached its obligations to Wena by failing to accord Wenas
investments in Egypt fair and equitable treatment and full protection and security in
violation of Article 2(2) of the ippa;
135. FINDS that Egypts actions amounted to an expropriation without prompt,
adequate and effective compensation in violation of Article 5 of the ippa;
and
134
136. AWARDS to Wena US$20,600,986.43 in damages, interest, attorneys fees and

expenses. This award will be payable by Egypt within 30 days from the date of this
Award. Thereafter, it will accumulate additional interest at 9% compounded quarterly
until paid.
C. The Request for Annulment

17. Under Article 52(1) of the icsid Convention,
(1) Either party may request annulment of the award by an application in writing
addressed to the Secretary-General on one or more of the following grounds:
(a) that the Tribunal was not properly constituted;
(b) that the Tribunal has manifestly exceeded its powers;
(c) that there was corruption on the part of a member of the Tribunal;
(d) that there has been a serious departure from a fundamental rule of procedure;
or
(e) that the award has failed to state the reasons on which it is based.
These grounds for annulment are enumerated exhaustively. The Request for annulment is based on three of these grounds. The Applicant contends that the Tribunal
has manifestly exceeded its powers (1.b), that there has been a serious departure
from a fundamental rule of procedure (l.d), and that the Award has failed to state
the reasons on which it is based (1.e).
18. As has been stated in earlier published decisions made on requests for annulment of icsid awards, the remedy of Article 52 is in no sense an appeal.1 The power
for review is limited to the grounds of annulment as defined in this provision. These
grounds are to be interpreted neither narrowly nor extensively.2
19. Article 52(2) provides, in relevant part, that the application shall be made
within 120 days after the date on which the Award was rendered. The Applicants
Request for Annulment has been deposited within such time limit and it invoked
expressly the grounds stated in Article 52(1), letters b), d) and e). It was argued by
Wena, however, that several grounds for annulment were time-barred, by the fact
that they had not been argued in the initial Request, but only later in the Applicants
Memorial requesting annulment. It is admitted by Wena that these arguments do
not exceed the scope of the grounds for annulment initially invoked. Arbitration
Rule 50(l)(c) requires indeed that the grounds for annulment be stated in detail
in the application for annulment. On the other hand, the icsid Convention does
not state any requirement of completeness of the Application, except to the extent
that the Application must invoke one or more of the grounds listed in Article 52(1)
on which it is based. The icsid Convention thus does not preclude raising new
arguments which are related to a ground of annulment invoked within the time
limit fixed in the Convention. This is of no harm to the opposing party, which is not
1
See Klockner v. Cameroon, Decision on Annulment, 3 May 1985 (hereinafter Klockner I), 2 ICSID
Reports 95, at 97, 126 (paras. 3, 83); Amco Asia Corporation and others v. Republic of Indonesia,
Decision on Annulment, 16 May 1986 (Amco I), 1 ICSID Reports 509, at 515/516 (para. 23); Maritime
International Nominees Establishment v. Republic of Guinea, Decision on Annulment, 22 December
1989 (MINE), 4 ICSID Reports 79, at 85 (para. 4.04).
2
See Klockner I, 2 ICSID Reports, at 97, 120, 138 (paras. 3, 62, 119); MINE, 4 ICSID Reports, at 85
(para. 4.05).
135
requested to answer the Request, but later only the first memorial of the Applicant.
The Committee therefore does not retain Wenas objection.
20. The Committee notes that the Applicant has withdrawn the argument that
the Tribunal exceeded its powers under Article 42(1) in refusing to apply Egyptian
law to Egypts defense that Wenas claims were time-barred.
II. Did the Tribunal Manifestly Exceed its Powers?

21. In respect of the first ground for annulment it invoked, the Applicant argues
that the Tribunal manifestly exceeded its powers in the terms of Article 52(1)(b)
of the icsid Convention. In the Applicants view this occurred in two ways. First,
the Tribunal failed to apply Egyptian law in contravention of Article 42(1) of
the Convention. Second, the Tribunal allowed Wena to assert claims on behalf of
investors that are not entitled to protection under the ippa.
22. The Committee is mindful of the views expressed [in] Klockner I,3
Amco I4 and MINE5 to the effect that the failure to apply the proper law may constitute a manifest excess of power and a ground for annulment. It is also mindful of
the distinction between failure to apply the proper law and the error in judicando
drawn in Klockner I, and the consequential need to avoid the reopening of the merits
in proceedings that would turn annulment into appeal.6
23. The question is then whether in the instant case the Tribunal, although having
referred to the law of the host State, has in fact failed to apply Egyptian law because
of having turned to the application of the provisions of the ippa as the primary source.
In the Applicants opinion in all cases it is the law of the host State that is intended
to be the primary source, not international law. The Respondent is of the view that
the Tribunal correctly applied the ippa as the law relevant to this dispute.
24. The Applicant has moreover made the argument that the application of Egyptian law touches upon a fundamental question, that of the legitimate principle that
a country that attracts foreign investment is entitled to insist that investors comply
with the laws of that country. There can be no disagreement with such proposition. The quest[ion], however, is whether the resort to international law in any way
contradicts the principle stated.
25. In the context of determinations on excess of power, it is further to be considered that for it to be a ground of annulment, the Tribunal must have manifestly
exceeded its powers, as stated in Article 52(l)(b) of the icsid Convention. The
classic example of manifest excess of power under international law is that of a
tribunal having been asked to adjudicate on one of two possible boundary lines
submitted by the parties chooses a third line.7 The excess of power must be selfevident rather than the product of elaborate interpretations one way or the other.
3
Klockner I, 2 ICSID Reports, at 118 (para. 58).

Amco I, 1 ICSID Reports, at 515 (para. 23).
5
MINE, 4 ICSID Reports, at 87 (para. 5.03).
6
7
North-Eastern Boundary case, United StatesCanada, 1831, Moore, Arbitrations, Vol. I, 119, at 1334,
as cited in J. L. Simpson and Hazel Fox, International Arbitration, Law and Practice, 1959, at 250.
4
136
When the latter happens the excess of power is no longer manifest. This is, among
others, the reason why earlier decisions reached by ad hoc committees have been
so extensively debated.
A. Did the Tribunal Manifestly Fail to Apply the Applicable Law?
26. Article 42(1) of the icsid Convention provides that:
agreed by the parties. In the absence of such agreement, the Tribunal shall apply the
law of Contracting State party to the dispute (including its rules on the conflict of laws)
and such rules of international law as may be applicable.
27. The first aspect the Committee must establish is whether the Parties agreed
to the rules of law to be applied by the Tribunal in the light of the first sentence of
the Article. In fact, the question touches upon a prior determination of the proper
subject of the dispute brought before the Tribunal and the parties concerned by it.
(i) The dispute brought before the Tribunal
28. It is undisputed that the lease contracts were concluded between Wena and
ehc. It is also undisputed that the two leases were subject to Egyptian law. However,
there is disagreement about the meaning of this submission to Egyptian law. In the
Applicants view this was the choice of law required by the first sentence of Article
42(1). Accordingly, the Tribunal was under the obligation to apply such law.
29. The Respondent believes otherwise. Egyptian law was indeed applicable, but
only in the context of the disputes concerning those parties and for the commercial
aspects specifically arising from the contracts. The dispute before the Tribunal
involved different parties, namely the investor and the Egyptian State, and concerned
a subject matter entirely different from the commercial aspects under the leases.
The dispute before the Tribunal is, in the Respondents view, about the role of the
State in the light of its obligations under the ippa. Accordingly, the Respondent is
of the view that the parties to the instant case made no choice of law under Article
42(1).
30. It is not disputed that ehc is a State-owned company with its own legal
personality. Neither is it disputed that its functions are essentially commercial and
not governmental in nature. In fact, none of the Parties has claimed that the acts of
ehc could be attributed to the State. Therefore, ehc is to be dealt with as an entity
different from the Egyptian State, with a legal personality of its own, the functions
of which cannot be confused with those of the State.
31. The leases deal with questions that are by definition of a commercial nature.
The ippa deals with questions that are essentially of a governmental nature, namely
the standards of treatment accorded by the State to foreign investors. It is therefore
apparent that Wena and ehc agreed to a particular contract, the applicable law and
the dispute settlement arrangement in respect of one kind of subject, that relating to
commercial problems under the leases. It is also apparent that Wena as a national
of a Contracting State could invoke the ippa for the purpose of a different kind
137
of dispute, that concerning the treatment of foreign investors by Egypt. This other
mechanism has a different and separate dispute settlement arrangement and might
include a different choice of law provision or make no choice at all.
32. The issue was also raised during the jurisdictional phase of the case before
the Tribunal. In fact, Egypt objected to the jurisdiction of the Tribunal on the basis
that there was no legal dispute between Wena and Egypt. This objection was denied
by the Tribunal.
33. The Parties appear to be in agreement that the acts of self-help undertaken by
ehc in respect of the hotels were wrongful and that the initiative to undertake those
acts is not to be attributed to the State. Indeed, this case involves a claim not against
the acts of ehc but against those acts or omissions of the State that the investor
considers to be in violation of the ippa. It is the latter acts that were considered by
the Tribunal on the merits as amounting to measures having effects equivalent to
expropriation of the investment.
34. However, the Parties again here differ as to the consequences of such dual
relationship, existing between Wena and ehc on one hand, and between Wena and
Egypt on the other hand. For the Applicant the resolution of the dispute brought
before the Tribunal cannot be separated from the leases and the rights of the parties
to those contracts. The Applicant has in fact argued that the relationship between
Wena and Egypt under the ippa is entirely dependent upon and a function of the
relationship between Wena and ehc under the leases. The Respondent believes that
the failure of the State to adopt measures in protection of the investor is a violation
of the ippa independently of any questions arising under the leases.
35. The Committee cannot ignore of course that there is a connection between the
leases and the ippa since the former were designed to operate under the protection
of the ippa as the materialization of the investment. But this is simply a condition
precedent to the operation of the ippa. It does not involve an amalgamation of
different legal instruments and dispute settlement arrangements. Just as ehc does
not represent the State nor can its acts be attributed to it because of its commercial
and private function, the acts or failures to act of the State cannot be considered
as a question connected to the performance of the parties under the leases. The
private and public functions of these various instruments are thus kept separate and
distinct.
36. This Committee accordingly concludes that the subject matter of the lease
agreements submitted to Egyptian law was different from the subject matter brought
before icsid arbitration under the ippa. It follows that it cannot be held that the Parties
to the instant case have made a choice of law under the first sentence of Article
42(1) of the icsid Convention.
(ii) The role of international law
37. The second sentence of Article 42(1) of the icsid Convention provides that,
in the absence of an agreement on the applicable rules of law, the Tribunal shall
apply the law of the host State, including its rules on the conflict of laws, and such
rules of international law as may be applicable. It is therefore necessary for the
Committee to examine the meaning of this second sentence and the question of the
interrelation between domestic and international law in this context.
138
38. This discussion brings into light the various views expressed as to the role
of international law in the context of Article 42(1). Scholarly opinion, authoritative
writings and some icsid decisions have dealt with this matter. Some views have
argued for a broad role of international law, including not only the rules embodied
in treaties but also the rather large definition of sources contained in Article 38(1)
of the Statute of the International Court of Justice.8 Other views have expressed
that international law is called in to supplement the applicable domestic law in
case of the existence of lacunae.9 In Klockner I the ad hoc Committee introduced
the concept of international law as complementary to the applicable law in case
of lacunae and as corrective in case that the applicable domestic law would not
conform on all points to the principles of international law.10 There is also the
view that international law has a controlling function of domestic applicable law
to the extent that there is a collision between such law and fundamental norms of
international law embodied in the concept of jus cogens.11
39. Some of these views have in common the fact that they are aimed at restricting
the role of international law and highlighting that of the law of the host State.
Conversely, the view that calls for a broad application of international law aims
at restricting the role of the law of the host State. There seems not to be a single
answer as to which of these approaches is the correct one. The circumstances of
each case may justify one or another solution. However, this Committees task
is not to elaborate precise conclusions on this matter, but only to decide whether
the Tribunal manifestly exceeded its powers with respect to Article 42(1) of the
icsid Convention. Further, the use of the word may in the second sentence of this
provision indicates that the Convention does not draw a sharp line for the distinction
of the respective scope of international and of domestic law and, correspondingly,
that this has the effect to confer on to the Tribunal a certain margin and power for
interpretation.
40. What is clear is that the sense and meaning of the negotiations leading to the
second sentence of Article 42(1) allowed for both legal orders to have a role. The
law of the host State can indeed be applied in conjunction with international law if
this is justified. So too international law can be applied by itself if the appropriate
rule is found in this other ambit.
41. In particular, the rules of international law that directly or indirectly relate
to the States consent prevail over domestic rules that might be incompatible with
them. In this context it cannot be concluded that the resort to the rules of international
law under the Convention, or under particular treaties related to its operation, is
antagonistic to that States national interest.
8
World Bank, Report of the Executive Directors on the ICSID Convention, Documents Concerning the
Origin and the Formulation of the Convention, 1968, 962, at 1029 (para. 40).
9
Amco I, 1 ICSID Reports, at 515 (para. 20); Southern Pacific Properties (Middle East) Limited v. Arab
Republic of Egypt, Award, 20 May 1992 (SPP v. Egypt), 3 ICSID Reports 189, at 207 (para. 80).
10
11
W. Michael Reisman: The Regime for Lacunae in the icsid Choice of Law Provision and the Question of Its Threshold, 15 ICSID ReviewForeign Investment Law Journal 36281 (2000). Professor
Reisman also prepared a legal opinion on the matter submitted by the Applicant in the proceeding before
the Committee, whereas Wena submitted a legal opinion prepared by Professor Christoph Schreuer.
139
42. Particular emphasis is put on this view when the rules in question have
been expressly accepted by the host State. Indeed, under the Egyptian Constitution treaties that have been ratified and published have the force of law.12 Most
commentators interpret this provision as equating treaties with domestic 1egislation.13 On occasions the courts have decided that treaty rules prevail not only over
prior legislation but also over subsequent legislation.14 It has also been held that
lex specialis such as treaty law prevails over lex generalis embodied in domestic
law.15 A number of important domestic laws, including the Civil Code and Code
of Civil Procedure of Egypt, provide in certain matters for a without prejudice
clause in favor of the relevant treaty provisions.16 This amounts to a kind of renvoi
to international law by the very law of the host State.
43. Most prominent among this treaty law is that embodied in investment
treaties.17 As from 1953 Egypt has been a leader in the field. Examples of this
leadership are the Convention on Payments on Current Transactions and the Facilitation of Transfer of Capital among the States of the Arab League of 1953, the
Convention on the Investment and Transfer of Arab Capital of 1971, the Convention
Establishing the Arab Investment Guarantee Corporation, the icsid Convention and
numerous bilateral investment treaties.
44. This treaty law and practice evidences that when a tribunal applies the law
embodied in a treaty to which Egypt is a party it is not applying rules alien to
the domestic legal system of this country. This might also be true of other sources
of international law, such as those listed in Article 38(1) of the Statute of the
International Court of Justice mentioned above.
45. Therefore, the reliance of the Tribunal on the ippa as the primary source of
law is not in derogation or contradiction to the Egyptian law and policy in this
matter. In fact, Egyptian law and investment policies are fully supportive of the
rights of investors in that country. The icsid Convention and the related bilateral
investment treaties are specifically mentioned in Egypts foreign investment policy
statements.18
46. In the light of the above this Committee concludes that in applying the rules
of the ippa in the instant case the Tribunal did not exceed its powers.
(iii) Specific complaints
47. The Applicant invokes three specific areas in which the Tribunal exceeded
its powers as a consequence of not applying Egyptian law. The first concerns the
validity of the leases in connection with an alleged incident of corruption or conflict
of interest in the person of Mr Kandil who was consulting Wena while he acted
12
Ibrahim Shihata: Egypt in: Elihu Lauterpacht and John G. Collier (eds.): Individual Rights and the
State in Foreign Affairs, 1977, 20442, at 235, with particular reference to Article 151 of the Egyptian
Constitution.
13
Ibid., at 2356.
14
Ibid., footnotes 1269.
15
Ruling on the application for cassation No. 1885 for the 50th judicial year. Hearing No. 50, December
1983 excerpt as translated for the record.
16
Shihata, loc. cit., at 236, note 125.
17
Ibid., at 237 and discussion of the investment treaties made by Egypt.
18
Egyptian State Information Service, Foreign Investment, <www.sis.gov.eg/inv2000/html>
(Chapter 2); and <www.sis.gov.eg/inv99/html/ent 1.htm>.
140
also as Chairman of ehc. While such improper influence can invalidate the lease
agreements under Egyptian law, or for the matter of corruption also under international law, such unlawful act has to be proved. The Tribunal did not consider that
there was sufficient evidence to prove such a claim. It is therefore not a question
of the applicable law but of evidence, the evaluation of which relates to the merits
of the case and is not a matter for the ground for annulment related to a purported
excess of power by the Tribunal.
48. The second area the Applicant argues should have been considered under
Egyptian law is the investors rights under the leases. There is no doubt that there
was a dispute between Wena and ehc in respect of the obligations under the leases,
each accusing the other of failure to comply with the agreed terms of the contract.
This is precisely the kind of dispute governed by Egyptian law that was, at least in
respect of one hotel, submitted to arbitration under the lease agreements. This is
not the dispute brought to arbitration under the icsid Convention and the ippa.
49. It is here where the relationship between one dispute and the other becomes
relevant. The ultimate purpose of the relief sought by Wena is to have its losses compensated. To the extent this relief was partially obtained in the domestic arbitration,
the Tribunal in awarding damages under the ippa did take into account such partial
indemnification so as to prevent a kind of double dipping in favor of the investor.
The two disputes are still separate but the ultimate result is the compensation of the
investor for the wrongdoings that have affected its business.
50. The third area where the Applicant argues the Tribunal should have applied
Egyptian law is the determination of interest. It is quite true, as argued by the
Applicant, that Article 226 of the Egyptian Civil Code provides for various limits
to the determination of interest. But it is also true that various ways have been
used to increase those limits, particularly by means of the award of supplemental
damages.19 Some of these alternatives were utilized in SPP v. Egypt, including the
adjustment for devaluation.20
51. The issue before this Committee, however, is a different one. Once the Tribunal decided to apply the ippa to the dispute brought to it, and given the fact that
this agreement does not contain provisions on the determination of interest as such,
should the Tribunal have reverted to Egyptian law to this end or should it have
resorted, as it did, to international law and related icsid practice?
52. When operating under the rules of the ippa in a matter of expropriation or
measures of equivalent effect, the Tribunal could not ignore the fact that Article 5
of this Agreement provides for two criteria in respect of compensation. Article 5
of the ippa reads as follows:
Investments of nationals or companies of either Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation
or expropriation (hereinafter referred to as expropriation) in the territory of the other
19
John Y. Gotanda: Awarding interest in international arbitration, 90 American Journal of International

Law 4063, at 48 (1996).
SPP v. Egypt cited supra note 9, 3 ICSID Reports at 242, 244 (paras. 222, 237), and discussion in
W. Laurence Craig: The Final Chapter in the Pyramids Case: Discounting an icsid Award for Annulment
Risk, 8 ICSID ReviewForeign Investment Law Journal 26493, at 2789 (1993).
20
141
Contracting Party except for a public purpose related to the internal needs of that
Party and against prompt, adequate and effective compensation. Such compensation
shall amount to the market value of the investment expropriated immediately before
the expropriation itself or before there was an official Government announcement that
expropriation would be effected in the future, whichever is the earlier, shall be made
without delay, be effectively realizable and be freely transferable. The national or
company affect[ed] shall have a right, under the law of the Contracting Party making
the expropriation, to prompt review, by a judicial or other independent authority of
that Party, of whether the expropriation is in conformity with domestic law and of
the valuation of his or its investment in accordance with the principles set out in this
paragraph.
Compensation must be, first, prompt, adequate and effective and, second, compensation shall amount to the market value of the investment expropriated immediately before the expropriation itself. Although not referring to interest, the
provision must be read as including a determination of interest that is compatible with those two principles. In particular, the compensation must not be
eroded by the passage of time or by the diminution in the market value. The
award of interest that reflects such international business practices meets these two
objectives.
53. The option the Tribunal took was in the view of this Committee within the
Tribunals power. International law and icsid practice, unlike the Egyptian Civil
Code, offer a variety of alternatives that are compatible with those objectives. These
alternatives include the compounding of interest in some cases.21 Whether among
the many alternatives available under such practice the Tribunal chose the most
appropriate in the circumstances of the case is not for this Committee to say as
such matter belongs to the merits of the decision. Moreover, this is a discretionary
decision of the Tribunal. Even if it were established that the Tribunal did not rely
on the appropriate criteria this in itself would not amount to a manifest excess of
power leading to annulment.
B. Did the Tribunal Exceed its Powers in Permitting Wena to Assert Claims on
Behalf of Other Investors?
54. Besides the invocation of excess of power on the ground of the Tribunal
failing to apply the proper law, the Applicant has also raised the question that
investors other than Wena and not entitled to claim under ippa were allowed to do
so. It is a matter of fact and evidence on the origin of the sums invested and the
ultimate beneficiary of the sums awarded. In any event, only Wena was found by
the Tribunal to be entitled to damages. Moreover, icsid practice has also been quite
flexible on claims that include the interests of subsidiaries and affiliates, including
21
Atlantic Triton v. Guinea, Award of 21 April 1986, 3 ICSID Reports 17, at 33, 43; Compania del
Desarrollo de Santa Elena SA v. Republic of Costa Rica, Award of 17 February 2000, 15 ICSID Review
Foreign Investment Law Journal 169, at 2002 (2000) (paras. 96107); Emilio Augustin Maffezini v.
The Kingdom of Spain, Award, 13 November 2000, 16 ICSID ReviewForeign Investment Law Journal
248, at 277 (2001) (para. 96).
142
on occasions entities that are nationals of States that are not contracting parties to
the Convention.22
C. No Finding of Excess of Power
55. The Committee must reach the conclusion that excess of power, as a ground
for annulment, cannot prevail in the instant case. The request to this effect is therefore dismissed.
III. Did the Tribunal Seriously Depart from a Fundamental Rule of Procedure?
56. The second ground for annulment, which is based on Article 52(l)(d) of the
icsid Convention, requires from the Applicant to demonstrate that there has been
a serious departure from a fundamental rule of procedure. The Applicant has to
identify the fundamental rule of procedure from which the Tribunal departed and
it has to show that such departure has been serious.
57. The said provision refers to a set of minimal standards of procedure to be
respected as a matter of international law. It is fundamental, as a matter of procedure,
that each party is given the right to be heard before an independent and impartial
tribunal. This includes the right to state its claim or its defense and to produce all
arguments and evidence in support of it. This fundamental right has to be ensured
on an equal level, in a way that allows each party to respond adequately to the
arguments and evidence presented by the other. Both Parties accept these basic
principles. The Applicant makes an additional reference to the application of the
burden of proof which it further explains in respect of the specific complaints raised
in connection with the ground for annulment of Article 52(l)(d) of the Convention.
58. In order to be a serious departure from a fundamental rule of procedure, the
violation of such a rule must have caused the Tribunal to reach a result substantially
different from what it would have awarded had such a rule been observed. In the
words of the ad hoc Committees Decision in the matter of MINE, the departure
must be substantial and be such as to deprive a party of the benefit or protection
which the rule was intended to provide.23
A. The Proof of the Consultancy Agreement with Mr Kandil
59. The Applicant contends that the Tribunal stated wrongly that the existence of
a consultancy agreement between Wena and Mr Kandil was undisputed. It recalls
that it did dispute that a document containing such agreement was ever signed by Mr
Kandil. In the Applicants view, the Tribunal, in so doing, committed an erroneous
reversal of the burden of proof, because the burden of proving the existence of such
an agreement should have shifted to Wena.
22
SOABI v. Senegal, Decision on Jurisdiction, 1 August 1984, 2 ICSID Reports 164, at 1823 (paras.
338).
23
4 ICSID Reports, at 87 (para. 5.05).
143
60. The Applicant does not identify the rule on burden of proof on which it is
relying upon. It is not disputed that payments were made by Wena to Mr Kandil
in return for services to be provided by Mr Kandil to Wena. The Applicants objection is therefore limited to the question whether such agreement was confirmed
in writing. This is a purely factual issue which is irrelevant as a matter of minimal
standard of procedure.
61. Moreover, the Applicant does not show the impact that this issue may have had
on the Award nor does it demonstrate why, and in respect of which fundamental rule
of procedure, the burden of proof would have shifted from Egypt to Wena, although
Wena admitted the existence of a consultancy agreement with Mr Kandil. To the
extent the Applicants objection refers to the content of such agreement and to the
alleged improper influence exercised by Wena on Mr Kandil, the Tribunal stated
in its Award that the burden of proving corruption was on Egypt and that Egypt
had failed to prove its allegations in this respect (paras. 77, 117). The Applicants
disagreement with this conclusion does not show any departure from a fundamental
rule of procedure.
B. The Assessment of Damages
62. The Applicant argues that Wena at no time supplied any evidence of the
sums it claimed it had invested in the hotels nor gave any evidence as to the losses it
claimed to have suffered. The Application does not identify the fundamental rules
of procedure it claims were violated with any more precision than merely requiring
Wena to discharge its burden of proof.
63. The Award shows that the Tribunal considered Wena to be in charge of proving
its losses. When determining the damages owed to Wena, the Award refers to the
Claimants statement on its actual investment in the two hotels (paras. 120, 124,
125, 127). It indicates that the Tribunal accepted, in part, objections raised by Egypt
that there were certain elements of double counting, leaving as a total an amount
which the Tribunal judges to be the approximate total for Wenas investment
(para. 127), from which it further deducted the amount already received by Wena
as a result of the arbitration award rendered in respect of the Nile Hotel.
64. In fact, the Applicants criticism is directed to the Tribunals judgment on
the pertinence of factual statements presented by Wena in order to prove the losses
it claimed to have suffered. The question could be raised whether this objection is
not a matter of substance, rather than a procedural issue, as referred to in Article
52(l)(d) of the Convention. The law applicable to the allocation of damages, as
designated pursuant to Article 42(1) of the Convention, may indeed contain rules
about the method to be applied to the assessment of damages.
65. However, irrespective whether the matter is one of substance or procedure, it is
in the Tribunals discretion to make its opinion about the relevance and evaluation
of the elements of proof presented by each Party. Arbitration Rule 34(1) recalls
that the Tribunal is the judge of the probative value of the evidence produced. The
record also shows that account had to be taken of the loss of part of Wenas financial
documentation as a result of the events of April 1, 1991. The Applicant does not
show in what respect the Tribunal would have manifestly exceeded its discretion
144
in assessing damages. Its complaint in this respect has therefore to be rejected by

this Committee.
C. The Assessment of Interest
66. The Applicant submits that it was not offered the opportunity to address the
issue of the appropriate rule of interest and thus it was deprived of its right to be
heard.
67. The record shows, however, that Wena requested on various occasions, and
in particular in the relief claimed in its memorials, an award of interest at an
appropriate rate, from April 1, 1991 until the date of effective payment. The record
also shows that the Applicant was invited to reply to Wenas claims and arguments,
thus including the matter of interest.
68. The question raised appears to be rather whether the Applicants objection
is pertinent in respect of the award of compound interest, which was not specifically claimed by Wena nor addressed by the Applicant and, to the Committees
knowledge, not discussed at the hearings before the Tribunal.
69. Both Parties took very broad and undetermined positions in respect of the
fixing of interest, basically calling for the fixing of appropriate interest. Both
Parties admit that the allocation of compound interest is, albeit not dominant, at
least one of the methods followed by international tribunals. Therefore, both parties
must have been aware of the possibility that the Tribunal, referring to international
practice, might consider compound interest as appropriate in the particular case.24
70. In the light of this, the Committee cannot accept the complaint that the
Tribunal fixed interest by reference to a method not included in Wenas claim and
on which the Applicant would have no opportunity to express its views.
D. The Absence of Mr Kandil as a Witness
71. The Application further contends that the Tribunal breached a fundamental
rule of procedure when not requesting further evidence concerning Mr Kandil,
whom neither Party offered as a witness in the arbitration, and then concluded the
issue relating to Mr Kandil against the Respondent. The Applicant notes that the
Tribunal had the power to order further evidence under Arbitration Rule 34(2). In
its view, the Tribunal was wrong in not exercising its discretion to call for further
evidence, and to decide nevertheless the issue against one of the Parties on the basis
of the absence of the evidence it had, in its discretion, decided not to ask for.
72. It is true that pursuant to Article 43 of the icsid Convention and Arbitration
Rule 34(2), the Tribunal has the discretionary power to call upon the parties to
produce further evidence. The principle underlying this possibility is, however,
24
See also in this respect the remarks of Klockner I, 2 ICSID Reports, at 129 (para. 91): Within the
disputes legal framework, arbitrators must be free to rely on arguments which strike them as the best
ones, even if those arguments were not developed by the parties (although they could have been). Even
if it is generally desirable for arbitrators to avoid basing their decision on an argument that has not been
discussed by the parties, it obviously does not follow that they therefore commit a serious departure
from a fundamental rule of procedure. Any other solution would expose arbitrators to having to do
the work of the parties counsel for them and would risk slowing down or even paralyzing the arbitral
solution to disputes.
145
that it is incumbent to the parties to produce the evidence they wish to present or
they intend to request the Tribunal to call for. Under the heading Marshalling of
Evidence, this principle is embodied in Arbitration Rule 33.
73. The Applicant tries to turn the discretionary nature of the rules on evidence
to their contrary when it asserts the existence of an obligation of the Tribunal
to call for evidence on any item critical for the outcome of the dispute. Neither
the Convention nor the Arbitration Rules contain any such provision. The Applicant fails to demonstrate the existence of a fundamental rule of procedure which
would have put the Tribunal under an obligation to call for further evidence concerning Mr Kandil. Therefore, the Applicants complaint must fail also in this
respect.
E. No Finding of a Serious Departure from a Fundamental Rule of Procedure
74. The Committee therefore comes to the conclusion that the ground for annulment relating to a serious departure of the Tribunal from a fundamental rule of
procedure cannot prevail in the instant case. The request to this effect is therefore
dismissed.
IV. Does the Award State the Reasons on which it is Based?
A. Preliminary Observations
75. The third ground for annulment invoked by the Applicant is based on Article
52(1)(e) of the icsid Convention. Under this rule, a party may request annulment of
the award on the ground that the award has failed to state the reasons on which it
is based. This provision is related to Article 48(3) of the Convention, which states
that [t]he award shall deal with every question submitted to the Tribunal, and shall
state the reasons upon which it is based.
76. The Applicant identified three distinct matters on which it contends that the
Award does not state the reasons on which it [is] based (hereinafter B to D). It
further argues that the Tribunal did not deal with some questions submitted for its
decision. In this respect, it is argued that the failure to comply with the first part of
Article 48(3) of the icsid Convention amounts to a failure to state reasons within
the meaning of Article 52(1)(e). The latter question will be dealt with separately
(under E).
77. Both Parties, when explaining the meaning and scope of Article 52(1)(e) of
the icsid Convention, rely on the standard of reasoning laid down by the ad hoc
Committee in MINE as follows:
. . . the requirement to state reasons is satisfied as long as the award enables one to follow
how the tribunal proceeded from Point A to Point B, and eventually to its conclusion,
even if it made an error of fact or law. The minimum requirement is in particular not
satisfied by either contradictory or frivolous reasons.25
25
146
The same ad hoc Committee also stated that:

. . . the requirement that an award has to be motivated implies that it must enable the
reader to follow the reasoning of the Tribunal on points of fact and law. It implies that,
and only that. The adequacy of the reasoning is not an appropriate standard of review
under paragraph 1(e), because it almost inevitably draws an ad hoc Committee into an
examination of the substance of the tribunals decision, in disregard of the exclusion
of the remedy of appeal by Article 53 of the Convention.26
78. Other ad hoc Committees have used similar language, referring to reasons that
are sufficiently relevant, that is, reasonably sustainable and capable of providing
a basis for the decision,27 or demonstrating a reasonable connection between the
basis invoked by the tribunal and the conclusions reached by it.28
79. The ground for annulment of Article 52(1)(e) does not allow any review
of the challenged Award which would lead the ad hoc Committee to reconsider
whether the reasons underlying the Tribunals decisions were appropriate or not,
convincing or not. As stated by the ad hoc Committee in MINE, this ground for
annulment refers to a minimum requirement only. This requirement is based on
the Tribunals duty to identify, and to let the parties know, the factual and legal
premises leading the Tribunal to its decision. If such sequence of reasons has been
given by the Tribunal, there is no room left for a request for annulment under Article
52(1)(e).
80. Any other than a limited scope given to this ground for annulment would cause
some confusion with other remedies provided by the Convention. Indeed, when the
reasons stated in the award give rise to doubts about its meaning, either party may
request interpretation of the award under Article 50. In the case where the Tribunal
omitted to decide on a question or where the award contains an error, either party
may request the award be rectified, according [to] Article 49(2). These remedies
confirm the understanding that any challenge as to the substance of reasons given
in the award cannot be retained as a ground for annulment under Article 52(1)(e).
81. Neither Article 48(3) nor Article 52(1)(e) specify the manner in which the
Tribunals reasons are to be stated. The object of both provisions is to ensure that
the Parties will be able to understand the Tribunals reasoning. This goal does not
require that each reason be stated expressly. The Tribunals reasons may be implicit
in the considerations and conclusions contained in the award, provided they can be
reasonably inferred from the terms used in the decision.
82. The Tribunals duty to state the reasons supporting its conclusions has as its
basis the statements on facts and law, together with all the evidence adduced, that
were before the Tribunal at the latest at the time it declared the proceeding closed
pursuant to Arbitration Rule 38. The award cannot be challenged under Article
52(1)(e) for a lack of reasons in respect of allegations and arguments, or parts
thereof, that have not been presented during the proceeding before the Tribunal.
83. It is in the nature of this ground of annulment that in case the award suffers
from a lack of reasons which can be challenged within the meaning and scope of
26

28
Amco I, 1 ICSID Reports, at 520 (para. 43).
27
147
Article 52(1)(e), the remedy need not be the annulment of the award. The purpose
of this particular ground for annulment is not to have the award reversed on its
merits. It is to allow the parties to understand the Tribunals decision. If the award
does not meet the minimal requirement as to the reasons given by the Tribunal,
it does not necessarily need to be resubmitted to a new Tribunal. If the ad hoc
Committee so concludes, on the basis of the knowledge it has received upon the
dispute, the reasons supporting the Tribunals conclusions can be explained by the
ad hoc Committee itself.
B. The Tribunals Determination that it was not Necessary to Consider EHCs
and Wenas Respective Obligations under the Leases
84. In the first place, the Applicant recalls that it had argued during the arbitral
proceedings that Wena had suffered no deprivation as a result of the events of
April 1, 1991, as its various defaults under the leases entitled ehc, as of that date, to
request the termination of the leases for default. Such termination had subsequently
been pronounced by an arbitral tribunal constituted under the Nile Hotel lease. In
the Applicants view, this item is fundamental as Egypt cannot be held liable for
having expropriated rights claimed to be attributed to Wena which no longer existed
as of the date of April 1, 1991.
85. The Applicant states that the Tribunal, while it acknowledged that disputes
had arisen between ehc and Wena concerning their respective obligations under
the leases, merely noted, in the statement of facts of the Award, that in the view
which the Tribunal takes of this case it is not necessary at this time to determine the
truth of these conflicting allegations. It is sufficient for this proceeding simply to
acknowledge, as both parties agree, that there were serious disagreements between
Wena and ehc about their respective obligations under the leases (para. 19). The
Applicant complains in this respect that the Tribunal failed to explain the reasons
why it was taking such view, which makes the Award subject to the ground for
annulment of Article 52(1)(e).
86. The Award states expressly that it is based on Articles 2 and 5 of the ippa and
that its object is to resolve a dispute which opposes Wena to Egypt (see, in particular, paras. 78, 108, 118). It follows from this position that the Tribunal declared
irrelevant to consider the rights and obligations of the parties to the leases for the
purpose of reaching a decision on the dispute submitted to it. The Award confirms
that Wena had been expropriated and lost its investment, and this irrespective of the
particular contractual relationship between Wena and ehc. The explanation thus
given for not determining the respective obligations of Wena and ehc under the
leases is sufficient to understand the premises on which the Tribunals decision is
based in this respect.
C. The Tribunals Determination of the Amount Awarded to Wena
87. Secondly, the Applicant complains that, on the face of the Award, it cannot
understand the legal basis on which Wenas claim for payment of damages has been
made and how it has been quantified.
148
88. With respect to the first item, the Award states that the allocation of damages
is based on the standard set forth in Article 5(1) of the ippa (para. 118), which
is declared to be the primary source of applicable law (para. 78). Article 5(1)
of the ippa sets out the legal basis for damages to be paid to the investor in case
of expropriation, and it identifies such damages by using the fundamental notion of
prompt, adequate and effective compensation. Therefore, this Committee cannot
accept the Applicants objection that the Award, when referring explicitly to Article
5 of the ippa, did not state the legal basis on which Wenas claim for payment of
damages has been awarded.
89. The same holds true in respect of the Applicants various statements about
the Tribunals finding on expropriation not conforming to Egyptian law or other
standards. The finding of the Tribunal on this matter is based on Article 5 of the ippa
which, as discussed further above, applies international law standards. It follows
that both the meaning of expropriation and the compensation for damages in the
event of it happening are determined by the same source of law. The reasoning for
it all becomes clear in the Award when invoking this Article.
90. The Applicant further contends that the Award does not explain the way in
which the Tribunal has quantified the damages awarded to Wena.
91. With respect to determination of the quantum of damages awarded, it may be
recalled that the notion of prompt, adequate and effective compensation confers
to the Tribunal a certain margin of discretion, within which, by its nature, few
reasons more than a reference to the Tribunals estimation can be given, together
with statements on the relevance and the evaluation of the supporting evidence.
92. In this regard, the Tribunal declared in its Award at the outset that Wenas
claims for lost profits, lost opportunities and reinstatement costs were inappropriate
because they were too speculative (paras. 1224). It decided therefore to calculate
the market value of the investment expropriated immediately before the expropriation under Article 5 of the ippa by reference to Wenas actual investments in
the two hotels (para. 125). The Award further explains that the panel accepted the
amount stated by Claimant as its loss as a gross figure, from which it deducted an
amount corresponding to probable double counting (para. 127). The Award also
states that the Tribunal was not persuaded by Respondents evidence that there
were significant other instances of double counting (para. 127). In respect of the
alleged investment by Wenas affiliates, the tribunal declared not to be persuaded
by Egypts contention that much of the investment came from affiliates of Wena
rather than from Wena and that as long as those investments went into the Nile and
Luxor hotels venture, they should be recognized as appropriate investments (para.
126). The reasons given thus allow to understand that the Tribunal accepted Wenas
evidence on the losses it claimed to have suffered, to the exception of a correction
related to possible double counting.
93. With respect to any further reasons supporting the Tribunals determination of
the amount awarded to Wena, the appropriate information is contained in Wenas
documentary evidence. The reasons relevant for the Tribunals findings are thus
stated implicitly by reference to such documentation. The ground for annulment
of Article 52(1)(e) does not allow to argue further that the Tribunal evaluated
erroneously the evidence submitted by Claimant and thus decided without stating
149
sufficient reasons. This Committee therefore concludes that the quantification of

the damages awarded to Wena cannot be challenged for a failure to state reasons in
the Award.
D. The Tribunals Determination of the Interest Awarded
94. In the third place, the Applicant complains that the Tribunal failed to give
reasons for its decision to adopt a rate of interest at 9% and for its determination of
the date from which interest accrues.
95. When fixing the rate of interest at 9%, the Award specifies that this rate
was 1% below long-term government bonds in Egypt (para. 128, note 289). The
Applicants view is that such reasoning is not sufficient and does not meet the
requirement of reasons stated under Article 52(1)(e).
96. As an extended practice shows, international tribunals and arbitration panels
usually dispose of a large margin of discretion when fixing interest. It is normal,
therefore, that very limited reasons are given for a decision which is left almost
entirely to the discretion of the tribunal. When fixing a rate of interest 1% below
long-term government bonds in Egypt, the Tribunal concluded that Wena should
be granted interest close to but still below such bonds. It must be assumed that
it took such decision in order to award damages corresponding to an adequate
and effective compensation as provided for in Article 5 of the ippa. The reasons
underlying the Tribunals decision in this respect are thus stated sufficiently.
97. The requirement to state the reasons supporting the allocation of interest appears particularly weak when, like in these proceedings, as mentioned in paragraph
69 above, both Parties were not more determinative than referring to the allocation
of appropriate interest, thus conferring to the Tribunal a wide discretionary power
to assess interest. Under such circumstances, the Tribunal need not be more explicit
than the Parties were in their respective positions taken on this particular matter. In
addition, this Committee does not have to entertain arguments and submissions a
party has not developed before the Tribunal.
98. The Applicant further objects that the Award does not allow to know the
date from which interest accrues (the dies a quo). It is true that no such date
is specified expressly in the Tribunals decision. The Applicant accepts that such
date might be determined by an appropriate mathematical calculation, based on the
total amount of accrued interest and the interest rate awarded. The Applicant did
not undertake any such calculation, nor did it demonstrate that the Tribunal had
chosen a wrong dies a quo. In the light of such a lack of support given to the
Applicants own contention, this Committee need not inquire on its own initiative
whether the Tribunals calculation is based on April 1, 1991 as the dies a quo, as
this appears implicitly from the Tribunals statement with respect to the day when
the expropriation of Wenas rights occurred. Although this is outside the scope of
examination as required in a proceeding under Article 52(1), the Committee has
anyhow made its own calculation. In this respect, the Committee concludes that,
when taking into account the payment of the amount awarded in the Nile Hotel
arbitration on June 14, 1997 and the amounts respectively owed to Wena, before
and after this date, together with the respective amounts of interest accrued as stated
150
in the Award, the resulting amount is very close to the total amount as set forth in
the Award. The Committee is satisfied that April 1, 1991 is discernible from the
Award as the dies a quo.
99. The Applicant further argues that if the relevant date would appear to be
April 1, 1991, it would be wrong, because a substantial portion of Wenas investment
had been invested long after that date. This argument cannot be heard as a ground for
annulment based on Article 52(1)(e) because it invites this Committee to proceed
to a re-examination of the merits of the Award.
E. Did the Tribunal not Deal with Questions Submitted for its Decision?
100. Article 48(3) of the Convention, quoted above, makes a distinction between
the Tribunals duty to deal with every question submitted to it, and the requirement that the award shall state the reasons upon which it is based. The ground for
annulment of Article 52(1)(e) only refers to the latter element. In case a Tribunal
had omitted to decide a question in the award, a party may request the Tribunal to
decide such question, in an additional proceeding pursuant to Article 49(2) which
is distinct from an annulment proceeding under Article 52.
101. However, the remedy provided for in Article 49(2) is not always sufficient in
such a case, as other ad hoc Committees have pointed out.29 Indeed, the answer to the
question the Tribunal omitted to decide may have direct or collateral effects upon
the arguments which are at the basis of the Tribunals conclusions. A proceeding
under Article 49(2) would not allow the Tribunal to go further than to decide upon
the question it had omitted to deal with. It is not a sufficient remedy when such a
decision may affect the sequence of arguments contained in the Award and require
that it be reconsidered in the light of the Tribunals decision on the omitted question.
The ground for annulment under Article 52(1)(e) includes therefore the case where
the Tribunal omitted to decide upon a question submitted to it to the extent such
supplemental decision may affect the reasoning supporting the Award.
102. The Applicant argues in this respect that the relationship between Wena
and Mr Kandil rendered the lease agreements null and void, irrespective of the
purpose of the alleged consultancy agreement between Wena and Mr Kandil. In the
Applicants view, the Tribunal failed to deal with this argument.
103. The Tribunal explained in its Award that in the light of the fact that Mr Kandil
had not been prosecuted and, on the basis of the evidence before the tribunal, had
not been subject to investigation by the Egyptian authorities, it could not share
Egypts view that the agreement with Mr Kandil was illegal under Egyptian law
(para. 116) and that Egypt failed to present any evidence that would refute Wenas
evidence that the contract was a legitimate agreement (para. 117). The Applicants
object is directed, therefore, not to any failure to state reasons, but to the merits of
the reasons given by the Tribunal. As has been explained, such argument cannot be
heard by this Committee in respect of the ground for annulment stated in Article
52(1)(e).
29
See MINE, 4 ICSID Reports, at 88/89 (paras. 5.115.13), 107 (para. 6.101); Amco I, 1 ICSID Reports,
at 51719 (paras. 326).
151
104. The Applicant further argues that the Award deals exclusively with the issue
raised as to an alleged case of corruption, but that the Tribunal failed to consider
that the lease agreements were null and void for another reason. This reason is,
according to the Applicant, a conflict of interest in the person of Mr Kandil who
was a consultant to Wena while he acted also as Chairman of ehc, and which Mr
Kandil allegedly did not declare to ehcs board of directors as required by Article
97 of the Egyptian Companies Law No. 159/1981.
105. The Applicant has not demonstrated to this Committee that the alleged
failure of the Tribunal to consider the argument of nullity of the lease agreements
based on a conflict of interest in the person of Mr Kandil, as an argument separate
from alleged nullity based on corruption, would have resulted in affecting Wenas
right to protection of its investment under the ippa. Hence, the Applicant did not
show that the lack of a decision on the question it has raised would have any effect
on the result of the Award, which is a prerequisite to entertain a request based
on Article 52(1)(e) complaining that the Tribunal omitted to deal with a question
submitted to it.
106. When leaving the latter consideration aside, this Committee observes that
the Tribunal did not address in as much express terms the argument based on an
alleged conflict of interest than it dealt with the question whether improper influence
had been exercised on Mr Kandil. The said argument is, however, rejected implicitly
in the Award, where it is noted that Egypt failed to present any evidence which
would have led it to think that the agreement was not legitimate, and that neither
party offered to present live testimony from Mr Kandil (para. 117). The Award also
accepts Wenas contention that the agreement did not concern the Nile and Luxor
hotels, but was to help Wena to pursue development opportunities in Misr Aswan,
where Mr Kandil was a tourist consultant (para. 114). Thus, the Award denies the
existence of a factual situation which might have implied that Mr Kandils interests
in the tourist development in Misr Aswan would conflict with the interests of ehc
in the conclusion of the lease agreements in respect of the Nile and Luxor hotels.
Therefore, the Applicants complaint must fail.
107. The Applicant further contends that the Tribunal failed to consider and give
effect to the Nile arbitral award which definitively settled the rights and obligations
of Wena in respect of the Nile Hotel and thus had an immediate effect on Wenas
purported rights which the Award declared to have been subject of an expropriation.
The Applicant believes that its contentions in this regard, irrespective of whether
they were right or wrong, still need to be addressed, because they concerned the
very nature and extent of the rights that Wena claimed had been expropriated.
108. As has been mentioned before, the Tribunal took another view. It concluded
that the rights and obligations between Wena and ehc under the lease agreements
were not relevant to determine the relationship between Wena and Egypt under the
ippa. The Award did however take account of the damages awarded to Wena in
the Nile Hotel award, the respect[ive] amount being deducted from the damages
claimed by Wena (para. 127). Therefore, reasons were given in the Award to dispose
of the Applicants submission in this respect.
109. The Applicant moreover objects that the Tribunal did not address the fact
that Wena still owned, possessed and operated the Luxor Hotel for over five years
152
after the hotel had been returned to it in 1992 and that, in fact, Wena still remained
the lessee of that property. The Applicant states that, as a matter of Egyptian law,
the receivership ordered in 1997 was in the nature of a conservatory measure, which
did not affect Wenas continuing rights under the Luxor lease.
110. The Award states as a matter of fact (para. 62) that on August 14, 1997,
Wena was evicted from the Luxor Hotel and, according to a witness, the hotel was
turned over to a court-appointed receiver requested by ehc. The Tribunal further
stated that Egypt took no immediate action to restore the hotels to Wena (paras.
84 and 85) and to protect Wenas investments after ehc had illegally seized the
hotels (para. 88), that neither hotel was restored to Wena until nearly a year after
the events of April 1, 1991 (para. 91), nor was it returned to Wena in the same
operating conditions that it had been in before the seizures (para. 92). This is ample
explanation for the Tribunals conclusion that the fact of the lease concerning the
Luxor Hotel remaining in force, had not the effect of removing Egypts liability as
a consequence of the violation of its obligation to ensure Wenas investment fair
and equitable treatment and full protection and security under Article 2(2) of
the ippa. Hence, the respective part of the Award cannot be challenged for any lack
of reasons given by the Tribunal.
F. No Finding of Lack of Reasons
111. This Committee therefore concludes that the objections raised by the Applicant under Article 52(1)(e) of the Convention, to the extent that they are admissible
for the Committees consideration, are not founded and must be rejected.
V. Costs
112. In the light of the importance of the arguments advanced by the Parties in
connection with this case, the Committee considers it appropriate that each Party
bear its own litigation costs with respect to this annulment proceeding, and that the
Parties bear equally all expenses incurred by the Centre in connection with such
proceeding.
VI. Decision
113. Based on the foregoing, the Committee rejects in its entirety the Application
for annulment of the Arbitral Award rendered on December 8, 2000.
114. Independently of the above decision on the Application for annulment
the Committee decides as follows the question of the allocation of costs in this
proceeding:
(a) Each Party shall bear its own expenses, including legal fees, incurred in
connection with this annulment proceeding.
153
(b) Each Party shall bear one half of the costs incurred by the Centre in connection with this proceeding, including the fees and expenses of the members
of the Committee; and,
(c) Accordingly, Wena Hotels Limited shall reimburse the Arab Republic of
Egypt one half of the total costs incurred by the Centre in connection with
this annulment proceeding once the amount has been determined by the
Secretariat of the Centre.
[Source: The text of the decision was supplied by Shearman & Sterling, Paris; see
154
OLGUIN v. PARAGUAY
Jurisdiction Respondent contesting jurisdiction of icsid Request for icsid

arbitration by investor holding dual United States and Peruvian nationality
Request based on 1994 Convention between Peru and Paraguay on reciprocal promotion and protection of investments Whether Claimant entitled to
treaty protection Whether of Peruvian nationality
Jurisdiction Consent to icsid arbitration Whether given by 1994 Convention between Peru and Paraguay on reciprocal promotion and protection of
investments Arbitration without privity icsid Convention, Article 25(1)
Foreign investment Investment protection Central Bank encouragement
of investment Official representations as to safety of investment Bank
certification of investment bonds Whether amounting to guarantee of investment Bankruptcy of local company amid general financial crisis 1994 Convention between Peru and Paraguay on reciprocal promotion and protection
of investments Whether breached
Foreign investment Investment protection Bankruptcy Law on
bankruptcy leading to loss of investment Whether conduct tantamount to
expropriation 1994 Convention between Peru and Paraguay on reciprocal
promotion and protection of investments
Costs Discretion Respondent failing on jurisdiction but succeeding on
merits Conduct of Respondent officials non-exemplary No order against
Claimant for Respondents costs
Olgun v. Republic of Paraguay
(Case No. ARB/98/5)
Decision on Jurisdiction. 8 August 2000
Award. 26 July 2001
(Arbitration Tribunal: Oreamuno B., President;
Rezek and Mayora Alvarado, Members)
Summary: The facts: The Claimant referred to icsid a dispute which arose
from the Claimants investment in a finance company in Paraguay. The Claimant
alleged that a finance company, Mercantil SA de Finanzas, had defaulted on payment of investment bonds in relation to a food supply company in Paraguay, and
that the Government should be regarded as a guarantor of the said investment.
The Claimant invoked the provisions of the Convention between the Republic of
Peru and the Republic of Paraguay on the Reciprocal Promotion and Protection of
Investments of 31 January 1994.
SUMMARY
155
Paraguay denied that it had consented to icsid jurisdiction, that the operations
conducted by the Claimant were investments within the meaning of the bit, and
that it had guaranteed any obligations of the finance company, and it relied on a
written waiver by the Claimant of his right to institute any further proceedings,
in return for which certain payments were made by the Paraguayan Central Bank.
As to the merits, in 1993 an official of the Central Bank wrote to the Claimant,
referring to dealings conducted with the finance company, and cited rates of interest
which the latter was prepared to pay to the Claimant on his deposits. The official
forwarded a report of the Central Bank on the finance company and its position
in Paraguay, and referred the Claimant to the General Manager of the finance
company. One month later, the Claimant began to make capital transfers, in dollars,
to the Republic of Paraguay. These transfers, which amounted to the sum of US
$1,254,500.00, were converted into local currency and deposited with the finance
company. Against the deposit of these sums, the Claimant was sent investment
bonds which (with one exception) were issued in the name of the Claimant, and
bore the seal of a clerk of the Central Bank. Subsequently a payment was made
by the Bank in Paraguayan guaranis for each of the investment bonds (again with
one exception). The funds were set aside to finance the installation in Paraguay of
a factory for maize products, to be owned by a corporation named Super Snacks of
Paraguay Inc. The Central Bank official who had previously communicated with
the Claimant, together with the Claimant and others, concluded various formalities
required for the incorporation of Super Snacks and the subscription of twelve shares
in the corporation founded. The Government of Paraguay subsequently granted tax
incentives to Super Snacks.
In December 1994, the Convention between the Republic of Peru and the Republic of Paraguay on the Reciprocal Promotion and Protection of Investments came
into force. Seven months later, in the midst of an economic crisis in Paraguay, the
finance company closed its operations and defaulted on the payment of the investment bonds. Paraguay promulgated a law regulating its financial institutions and a
second law containing an amendment to the first, to the effect that its Central Bank
would guarantee deposits up to a certain amount.
At its first meeting, the Tribunal set down a timetable for written submissions
by the parties on the issues both of jurisdiction and merits, but confirmed that even
if Paraguays memorial was confined to the question of jurisdiction, this would not
preclude its right to argue at a later stage on the merits of the claims.
Decision on Jurisdiction: 8 August 2000

Held: (1) By ratifying the 1994 Convention, Paraguay consented in writing
to icsid jurisdiction as provided for in Article 25(1) of the icsid Convention (paras.
267).
(2) The Claimant was an investor within the meaning of both Conventions
and had complied with the prerequisites in Article 8 of the 1994 Convention for
invoking icsid jurisdiction (para. 28).
156
OLGUIN v. PARAGUAY
(3) There was no evidence that the Claimant had irrevocably elected to sue in
the courts of Paraguay (para. 30).
(4) Paraguays other jurisdictional objections would be joined to the merits
(paras. 289).
Award: 26 July 2001
Held: (1) Even though the Claimant held both Peruvian and United States
nationalities and was domiciled in the United States, he was entitled to treaty
protection as he held a valid and effective Peruvian nationality (paras. 612).
(2) The Claimants allegation that he should be reimbursed by Paraguay for the
unpaid part of his investment, together with an adjustment for the devaluation of
the guaran and other ancillary payments, failed. The seal placed on the six investment bonds did not involve a guarantee of the substantive obligation by Paraguay.
Although criticisms could be levelled at the Paraguayan officials whose task was
to ensure the integrity of the financial system of that country, such conduct did not
create liability on the part of Paraguay for payment on the bonds (paras. 635).
(3) Nothing in the 1994 Convention obliged the host State to guarantee payment
of an investment in the event of bankruptcy; rather, that risk was assumed by the
Claimant, an experienced businessman. Nor could a claim be brought under the
treaty on the basis that the Claimant was induced to make his investment by reports
of the Central Bank and the office of the Superintendent of Banks; the fact that
information and assessments about investments were provided by a State did not
dispense the investor from making due inquiries nor did it make the State a guarantor
of the investment (paras. 726).
(4) The claim that loss of an investment arising from a bankruptcy involved
conduct tantamount to an expropriation of the investment by the State lacked any
foundation (paras. 834).
(5) Having regard to deficiencies in the conduct of Paraguayan officials and the
fact that the Claimant had been successful in upholding the Tribunals jurisdiction,
each party would bear its own costs and half the costs and expenses of the Tribunal
(para. 85).
Decision on Jurisdiction (8 August 2000)
Award (26 July 2001)
p. 156
p. 164
DECISION ON JURISDICTION (8 AUGUST 2000)

(Translation)
I. Introduction
1. On 27 October 1997, the International Centre for the Settlement of Investment
Disputes (icsid or the Centre) received from Mr Eudoro Armando Olgun, a national
157
of the Republic of Peru (Peru), a Request for Arbitration against the Republic of
Paraguay (Paraguay). The Request related to a dispute which arose from treatment
which Mr Olgun allegedly received from the Paraguayan authorities, relating to
his investment in a company for the manufacture and distribution of food products
in Paraguay. In his Request, the Claimant invoked the provisions of the Convention
between the Republic of Peru and the Republic of Paraguay on the Reciprocal
Promotion and Protection of Investments (the Convention or the cpi).
2. On receiving the Request for Arbitration, the Centre, in accordance with Rules
5(1)(a) and 5(1)(b) of the icsid Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (Institution Rules), acknowledged receipt of the
Request and informed the applicant that it would not be possible to take any other
action with respect to this until it had received payment of the lodging fee prescribed by Regulation 16 of the icsid Administrative and Financial Regulations.
In addition, the Centre requested Mr Olgun to provide: (i) complementary information relating to the parties to the dispute; (ii) more detailed information on the
consent of Paraguay to submit the dispute that was the subject of his Request to
arbitration in accordance with the rules of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (icsid Convention),
including information on the date of his Request for the settlement of his dispute
with Paraguay; and (iii) specific information on the questions which constituted the
subject-matter of the dispute. The Claimant replied to these questions by means of
a letter dated 15 December 1997.
3. The Claimant having paid the appropriate lodging fee, on 5 January 1998, the
Centre transmitted to the Republic of Paraguay and to the Paraguayan Embassy
in Washington, DC a copy of the Request for Arbitration, of the complementary
documentation provided by the Claimant, and of the correspondence which had
taken place up until that time.
4. On 11 February 1998, the Centre asked Mr Olgun to provide additional
information relating to the alleged existence of judicial cases in Paraguay, or in
any other country, relating to the dispute which was the subject of the Request for
Arbitration. It also requested from him more information on the origin of the alleged
obligation of the Republic of Paraguay to guarantee certain deeds of investment
belonging to the Claimant, as well as on the precise terms of the said obligation.
The Claimant replied to icsids request on 17 April 1998.
5. In a letter dated 21 May 1998, the Republic of Paraguay informed the Centre
that it contested the Request for Arbitration presented by Mr Olgun, on the following grounds: (i) it denied that the operations conducted by the Claimant were
investments; (ii) it denied knowledge of the existence of obligations of guarantee
attributed by the Claimant to Paraguay; (iii) it affirmed the existence of a payment
made by the Central Bank of Paraguay to Mr Olgun after the facts in dispute;
(iv) the written waiver by the Claimant to his right to institute any further action
against the Paraguayan authorities based on these facts; (v) the inapplicability of
the dispute settlement mechanisms contemplated by the cpi, given that Mr Olgun
had chosen the jurisdictional route, thereby waiving international arbitration;
(vi) the non-existence of a dispute between Paraguay and Mr Olgun; (vii) the
previous lack of consent of the parties to submit the dispute to arbitration before
158
OLGUIN v. PARAGUAY
icsid. The Claimant responded in detail to that letter by a communication dated

17 June 1998.
6. On 26 August 1998, the Acting Secretary-General of the Centre registered the
Request, pursuant to Article 36(3) of the icsid Convention and, in accordance with
Institution Rule 7, he notified the parties that the Request had been registered and
invited them to establish an Arbitral Tribunal as soon as possible.
7. On 29 October 1998, after more than 60 days had elapsed from the date of
registration of the Request, the Claimant informed the Secretary-General of the
Centre that it had opted for the formula envisaged in Article 37(2)(b) of the icsid
Convention for the constitution of the Tribunal. Consequently, the Tribunal was
established with three arbitrators, one appointed by Mr Olgun, another by the
Republic of Paraguay and a third, who would preside over the Tribunal, would be
appointed by common agreement of the parties. In the same communication, the
Claimant appointed as arbitrator for the present case, Professor Dale Beck Furnish,
a national of the United States of America.
8. On 23 November 1998, Paraguay, in a letter signed by the Director of Legal
Affairs of the Ministry of Foreign Relations of that Republic, Mr Jose A. Fernandez,
informed the Centre that it had decided to nominate the appointment of Mr Walter
Villalba Zaldvar, a national of Paraguay, as an arbitrator for this case.
9. The Centre immediately informed the Republic of Paraguay that, pursuant to
Article 39 of the icsid Convention and Rule 1(3) of the Rules of Procedure for
Arbitration Proceedings (Arbitration Rules), in cases where the Arbitral Tribunal
has been established with three arbitrators, the appointment as arbitrator by one
of the parties of a national of that partys State, or of a State whose national is a
party to the dispute, requires the consent of the other party. As the Claimant had not
given such consent, Paraguay was prevented from appointing Mr Villalba Zaldvar
as arbitrator. Consequently, on 25 November 1998, the Republic of Paraguay appointed Justice Francisco Rezek, a Brazilian national, as arbitrator for the present
case.
10. The parties did not reach agreement in respect of the appointment of the third
arbitrator who was to preside over the Tribunal. In those circumstances, with more
than 90 days having elapsed from the date on which the parties had been notified
of the registration of the Request for Arbitration, the Claimant, by a letter dated
12 January 1999, requested that the third arbitrator in the case and the President
of the Tribunal be appointed by the Chairman of the Administrative Council of the
Centre, pursuant to Article 38 of the icsid Convention and Rule 4 of the icsid Rules
of Arbitration.
11. After having consulted with the parties, the Chairman of icsids Administrative Council appointed Mr Rodrigo Oreamuno Blanco, a national of Costa Rica,
as the President of the Arbitral Tribunal. On 12 February 1999, the Chief Legal
Adviser, on behalf of the Centres Secretary-General, and in accordance with Rule
6(1) of the Arbitration Rules, notified the parties that all the arbitrators had accepted
their appointments and that the Tribunal was therefore deemed to be constituted
from that date. On the same day, pursuant to Regulation 25 of icsids Administrative and Financial Regulations, the parties were informed that Mr Gonzalo Flores,
Counsel, icsid, would serve as Secretary of the Arbitral Tribunal.
159
12. On 16 March 1999, the Centre received a communication from the Ministry
of Foreign Relations of the Republic of Paraguay, addressed to icsids SecretaryGeneral, in which Paraguay challenged the appointment of Professor Dale Beck
Furnish, pursuant to Article 57 of the icsid Convention. The challenge was based
on the fact that, because the Claimant held United States nationality in addition
to Peruvian nationality, pursuant to the above-mentioned Article 39 of the icsid
Convention and Arbitration Rule 1(3), the latter was prevented from nominating a
United States national as arbitrator in the present case.
13. Pursuant to Arbitration Rule 9, the Secretary immediately transmitted the
disqualification proposal to the other members of the Tribunal and to the Claimant.
On 17 March 1999, Professor Furnish tendered his resignation as arbitrator in this
case. Pursuant to Rule 8 of the Arbitration Rules, the Tribunal on 19 March 1999
accepted the resignation tendered by Professor Furnish and informed the parties
thereof. Consequently, the proceedings were suspended for the Claimant to appoint
a new arbitrator. On 22 March 1999 the Claimant appointed as arbitrator, to replace
Professor Furnish, Dr Eduardo Mayora Alvarado, a national of Guatemala, who
accepted the said appointment, pursuant to Arbitration Rule 5. The proceedings
were resumed on 29 March 1999.
14. The first session of the Tribunal with the parties present was held, after
consulting with them, on 16 April 1999, at the seat of icsid, in Washington, DC. At
that session the parties expressed their agreement that the Tribunal had been properly
constituted in accordance with the relevant provisions of the icsid Convention and
the Arbitration Rules.
15. In the course of this first session, the Republic of Paraguay expressed objections to the jurisdiction of the Centre and requested that these objections be resolved
as a preliminary matter, prior to addressing the merits of the claims. The Claimant,
for his part, requested that the Tribunal deal jointly with both the objections to
jurisdiction of the Centre submitted by the Republic of Paraguay and the merits of
the claims.
16. After hearing both parties, the Arbitral Tribunal set down the following
timetable: the Claimant would present its memorial within 60 days of the date
of the first session; within 60 days following receipt of the Claimants memorial
the respondent would present a counter-memorial containing its factual and legal
arguments on the question of the Centres jurisdiction and the merits.
17. It was also agreed that when this first stage of written submissions was
completed, the Tribunal would determine the subsequent steps, leaving open the
possibility of permitting or requiring the parties to make additional submissions
and of fixing a date for a new hearing with the parties.
18. At the close of the first session, at the request of the Republic of Paraguay,
the Tribunal confirmed that even if the memorial contained arguments relating only
to the question of jurisdiction, this would not preclude the right of the Respondent
to argue at a later stage on the merits of the claims.
19. In accordance with the timetable fixed by the Tribunal, the Claimant submitted
his memorial to the Centre on 27 May 1999.
20. On 2 August 1999 the Republic of Paraguay formally submitted its objection
to the jurisdiction of icsid, expounded the arguments on which such objection was
160
OLGUIN v. PARAGUAY
based and attached documents in support of these arguments. The following is a

summary of those arguments:
(a) To be subject to the jurisdiction of icsid, a State must expressly accept this
jurisdiction since . . . no contracting State shall by the mere fact of its
ratification, acceptance or approval of this Convention and without its consent
be deemed to be under any obligation to submit any particular dispute to
conciliation or arbitration. (Preamble to the icsid Convention).
(b) The fact that the Republic of Paraguay concluded with the Republic of Peru,
on 31 January 1994, the Convention on the Reciprocal Promotion and Protection of Investments does not signify that Paraguay has given its consent
to submit to the jurisdiction of icsid, because:
(a) Speculative financial investments are not protected by the cpi; and
(b) To be protected by the cpi, the investments made must have been accepted
in advance by the State in which they are made, which was not the case
for those of Mr Olgun [; and]
(c) Mr Olgun made a judicial claim before the courts of the Republic of
Paraguay with a view to recovering his financial speculation, which,
pursuant to Article 8(3) of the cpi, prevents him from requesting arbitration before icsid for the same purpose; and
(d) In conformity with the domestic legislation of Paraguay, even if the
Republic of Paraguay were liable to fulfil the obligations as sought by
Mr Olgun, that liability would not be direct but only subsidiary, obliging
the Claimant first to claim the fulfilment of these alleged obligations
from the agents of the State involved in the actions which gave rise to
this dispute, and only subsidiarily from the Republic of Paraguay.
21. On 31 August 1999, the Claimant referred in writing to the objections
to the Centres jurisdiction raised by the Republic of Paraguay, expounded the
reasons why he thought that those objections should be dismissed, and submitted documents in support of his position. In essence, Mr Olguns case was the
following:
(a) The Republic of Paraguay, by concluding the Convention with the Republic
of Peru, impliedly submitted to the jurisdiction of icsid;
(b) The operations conducted by the Claimant constitute an investment under
the icsid Convention and the cpi; and
(c) Mr Olgun never submitted any judicial claim in Paraguay the fulfilment of
the obligations to which the arbitration referred.
22. In its statement dated 18 December 1999, received by icsid on the 21st
of that month, the Republic of Paraguay formulated its Counter-Memorial to the
reply given by Mr Olgun. The statement contained in the document of 2 August
specified that Mr Olgun had lodged a judicial claim for the purpose of recovering
his financial speculation, indicating that what Mr Olgun had done was to request
a declaratory judgment of bankruptcy and liquidation of a commercial corporation
and it insisted in its argument that even in a case where the Republic of Paraguay
was liable to fulfil the obligations sought by Mr Olgun, that liability would not be
direct but only subsidiary, obliging the Claimant first to claim this alleged debt from
the agents of the State who were involved in the actions that gave rise to the dispute
161
and only where the latter could not comply could the claim be made against the
Republic of Paraguay.
23. On 2 February 2000, the Claimant submitted to icsid his rejoinder on the
question of jurisdiction. In it he expounded with greater precision and detail the
reasons why he considered that the objection to the jurisdiction of the Centre should
be dismissed and he cited abundant doctrine and jurisprudence in support of his
case. In particular, the Claimant elaborates on the plea that no judicial proceedings
had been brought by him against the Republic of Paraguay and he argues that the
only existing proceeding is one of bankruptcy in which Mr Olgun was considered
a creditor of the financial institution in question.
24. This case suffered several delays caused by the non-fulfilment on the part
of the Republic of Paraguay of its obligation to make the payments set down
in Regulation 14 of icsids Administrative and Financial Regulations, which the
Secretary had requested from the parties in good time.
II. Considerations on the Objection to Jurisdiction
25. In resolving the question raised, the Arbitral Tribunal will not elaborate on
the facts which have been accepted by the Parties, namely:
a) This Tribunal has the powers to resolve the question of its own competency
and consequently, in this case, to rule on the objection raised as to icsids
jurisdiction;
b) The Republic of Paraguay is a Contracting State to the Convention on the
Settlement of Investment Disputes between States and Nationals of Other
States, and Mr Olgun is a national of another Contracting State (the Republic
of Peru);
c) The Republics of Paraguay and Peru concluded the Convention on the Reciprocal Promotion and Protection of Investments (the cpi) on 31 January
1994.
26. The conclusion by the Republic of Paraguay of the cpi constitutes the written
consent required by Article 25(1) of the Convention which created icsid. This
statement has been strongly endorsed by scholarship and by many decisions given
by icsid Arbitral Tribunals. Amongst others, the following may be cited:
i) Bilateral Investment Treaties by Rudolf Dolzer and Magrete Stevens, published under the auspices of icsid in 1995, pages 132 ff.1
1
Citing the Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes between States and Nationals of
Other States, icsid Doc. 2, of 18 March 1965, paragraphs 23 and 24:
23. The consent of the parties is the cornerstone of the Centres jurisdiction. Consent to jurisdiction must be given in writing and once given cannot be unilaterally revoked (Article 25(1)).
24. The consent of the parties must exist when the request is made to the Centre (Articles
28(3) and 36(3)), but the Convention does not specify in any form the time at which the consent
must be given. Consent may be given, for example, in the clauses of a contract of investment,
which provides for the submission to the Centre of future disagreements which may arise from the
contract, or in a settlement between the parties relating to a dispute which has already arisen. Nor
162
OLGUIN v. PARAGUAY
ii) The award rendered in the arbitration Asian Agricultural Products Limited v.
Democratic Socialist Republic of Sri Lanka on 27 June 1990 (icsid Case No.
ARB/87/3);2
iii) The decision on jurisdiction handed down in the arbitration of Tradex Hellas
SA v. Republic of Albania, on 24 December 1996 (icsid Case No. ARB/94/2,
especially paragraph D.1);3
iv) The award rendered in the arbitration of American Manufacturing & Trading,
Inc. v. Republic of Zaire, on 21 February 1997 (icsid Case No. ARB/93/1,
especially paragraphs 5.20 and 5.23);4
v) The decision on jurisdiction handed down in the arbitration of Ceskoslovenska Obchodni Banka, AS v. Slovak Republic, 24 May 1999 (icsid Case No.
ARB/97/4, especially paragraphs 37 and 38).5
27. In this instant case, the consent of Paraguay is clearer since Article 8 of the cpi
indicates clearly that when disputes arise between contracting parties, they should
meet to resolve them, and if that is not possible within 6 months, the person making
the investment may submit the dispute, inter alia, to international arbitration by the
International Centre for Settlement of Investment Disputes.
28. This Tribunal has no doubt that the investments made by Mr Olgun in the
Republic of Paraguay are included in those enumerated in Article 1 of the cpi.
Moreover, there exists no rule in the cpi which requires investments made by a
national of another Contracting State to be accepted or recognized by the State in
which they are made. With regard to the possible flaws in Mr Olguns investments,
this is clearly a subject relating to the merits, which cannot be resolved at this stage
of the proceedings.
29. Nor can this Arbitral Tribunal analyze at this stage of the arbitration the plea
of the Republic of Paraguay to the effect that if any liability existed, it would not
be direct but only secondary.
30. There is nothing in the file of the proceedings to demonstrate that Mr Olgun
submitted a judicial claim against the Republic of Paraguay in order to collect
payment in fulfilment of the latters obligations, which he is seeking to collect in
the present arbitration case. The application which he apparently made (proof of
which is not conclusive) for a declaratory judgment of bankruptcy and liquidation
of a commercial corporation, cannot have the same juridical effect as a claim against
the Republic of Paraguay.
does the Convention require the consent of both parties to be recorded in the same document. Thus,
a receiving State could propose in its legislation on the promotion of investments that disputes on
certain classes of investments be submitted to the jurisdiction of the Centre, and the investor can
give his consent by written acceptance of the offer. (Emphasis not in the original).
2
Asian Agricultural Products Limited v. Democratic Socialist Republic of Sri Lanka, 27 June 1990,
icsid Case No. ARB/87/3, Award of 27 June 1990, ICSID Reports, Vol. 4, p. 246.
3
Tradex Hellas SA v. Republic of Albania, icsid Case No. ARB/94/2, Decision on jurisdiction of
24 December 1996, ICSID ReviewForeign Investment Law Journal, Vol. 14, 1999, p. 161 [5 ICSID
Reports 43].
4
American Manufacturing & Trading, Inc. v. Republic of Zaire, icsid Case No. ARB/93/1, Award of
21 February 1997, International Legal Materials, Vol. 36, 1997, p. 1534 [5 ICSID Reports 11].
5
Ceskoslovenska Obchodni Banka, AS v. Slovak Republic, icsid Case No. ARB/97/4, Decision on
jurisdiction of 24 May 1999, ICSID ReviewForeign Investment Law Journal, Vol. 14, 1999, p. 250
[5 ICSID Reports 330].
163
III. Decision
31. For the foregoing reasons the Arbitral Tribunal unanimously decides to dismiss the objection to the jurisdiction of the International Centre for the Settlement
of Investment Disputes submitted by the Republic of Paraguay and declares that it
is competent to proceed with this arbitration. Accordingly, the Tribunal has made
the necessary Order for the continuation of the procedure pursuant to Arbitration
Rule 41(4).
[Source: Translated from the Spanish text at http://www.worldbank.org/

icsid/cases/paraguay-decision.pdf by Mr Jonathan Goldberg.]
164
OLGUIN v. PARAGUAY
AWARD (26 JULY 2001)

(Translation)
I. Introduction
1. The Claimant, Mr Eudoro Armando Olgun, holds Peruvian and United States
dual nationality and is domiciled in Florida, United States of America. He is represented in this case by:
Dr Gonzalo Garca-Calderon Moreyra,
Estudio Garca-Calderon, Ghersi & Asociados
domiciled for the purposes of this case at:
Libertadores 350,
San Isidro,
Lima 27, Peru.
2. The Respondent is the Republic of Paraguay (Paraguay), represented in this
case by:
Dr Juan Carlos Barreiro Perrotta,
Procurador General de la Republica del Paraguay, domiciled for the purpose of
this case in:
Embajada del Paraguay en Washington, DC
2400 Massachusetts Avenue, N.W.
Washington, DC 20008
3. This Award contains the Tribunals declaration of closure of the proceeding
made by the Tribunal pursuant to Rule 38 of the icsid Rules of Procedure for
Arbitration Proceedings (Arbitration Rules), as well as the Award on the merits
in accordance with Rule 47 of the Arbitration Rules. The Tribunal has taken into
consideration all pleadings, documents and testimonies in this case which it has
deemed relevant.
II. Summary of the Procedure
A. Procedure Leading to the Decision on Jurisdiction
4. On 27 October 1997, the International Centre for Settlement of Investment
Disputes (icsid or the Centre) received from Mr Eudoro Armando Olgun a request
for arbitration against the Republic of Paraguay. The request related to a dispute
which arose from treatment that Mr Olgun allegedly received at the hands of
the Paraguayan authorities, in connection with his investment in a company which
manufactures and distributes food products in Paraguay. In his request, the Claimant
invoked the provisions of the Convention between the Republic of Peru and the
Republic of Paraguay on the Reciprocal Promotion and Protection of Investments
(cpi).6
6
Convention between Paraguay and Peru of 31 January 1994, hereinafter referred to as cpi, in force as
of 18 December 1994.
AWARD
165
5. On receipt of the request for arbitration, the Centre, in accordance with Rules
5(1)(a) and 5(1)(b) of the icsid Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (Institution Rules), acknowledged receipt of
the request and informed the applicant that it would not be possible to take any
other action with respect to this until it had received payment of the lodging fee
prescribed by Regulation 16 of the icsid Administrative and Financial Regulations.
In addition, the Centre requested Mr Olgun to provide: (i) complementary information relating to the parties to the dispute; (ii) more detailed information on the
consent of Paraguay to submit the dispute that was the subject of his Request to
arbitration in accordance with the rules of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (icsid Convention),
including information on the date of his Request for the settlement of his dispute
with Paraguay; and (iii) specific information on the questions which constituted the
subject-matter of the dispute. The Claimant replied to these questions by means of
a letter dated 15 December 1997.
6. After the Claimant paid the aforementioned lodging fee, the Centre, pursuant
to the provisions of Institution Rule 5(2), sent a copy, dated 5 January 1998, of the
request for arbitration and of the complementary documentation provided by the
Claimant, as well as the correspondence in existence until that date, to the Republic
of Paraguay and the Embassy of Paraguay in Washington, DC.
7. On 11 February 1998, the Centre requested from Mr Olgun additional information relating to the alleged existence of judicial proceedings in Paraguay,
or in any other country, relating to the dispute which was the subject of the request for arbitration. It also requested from him additional information on the
origin of the alleged obligation of the Republic of Paraguay to guarantee certain investment bonds belonging to the Claimant, as well as on the precise terms
of the said obligation. The Claimant replied to the request of icsid on 17 April
1998.
8. In a letter dated 21 May 1998, the Republic of Paraguay communicated to
the Centre that it rejected the request for arbitration presented by Mr Olgun, on
the following grounds: (i) it denied that the operations conducted by the Claimant
were investments; (ii) it denied knowledge of the existence of obligations of guarantee attributed by the Claimant to Paraguay; (iii) it acknowledged the existence
of a payment made by the Central Bank of Paraguay to Mr Olgun immediately
after the facts in dispute; (iv) the written waiver of the Claimant to his right to
institute any further action against the Paraguayan authorities for these facts; (v)
the inapplicability of the mechanisms for the resolution of disputes set down in
the PeruParaguay cpi, given that Mr Olgun had chosen the jurisdictional route,
thereby renouncing international arbitration; (vi) the non-existence of a dispute
between the Republic of Paraguay and Mr Olgun; (vii) the previous lack of
consent of the parties to submit the dispute to arbitration before icsid. The
Claimant responded in detail to that letter in a communication dated 17 June
1998.
9. On 26 August 1998, the Acting Secretary-General of the Centre registered the
request pursuant to Article 36(3) of the icsid Convention and, in accordance with
Institution Rule 7, notified the parties of the registration of the request and invited
them to constitute an Arbitral Tribunal as soon as possible.
166
OLGUIN v. PARAGUAY
10. On 29 October 1998, after more than 60 days had elapsed from the date
of registration of the request, the Claimant informed the Secretary-General of the
Centre that it had opted for the formula set down in Article 37(2)(b) of the icsid
Convention for the constitution of the Tribunal. Consequently, the Tribunal was
established with three arbitrators, one appointed by Mr Olgun, another by the
Republic of Paraguay and a third, who would preside over the Tribunal, would be
appointed by common agreement of the parties. In the same communication, the
Claimant appointed as arbitrator for the present case Professor Dale Beck Furnish,
a national of the United States of America.
11. On 23 November 1998, Paraguay, in a letter signed by the Director of Legal
Affairs of the Ministry of Foreign Relations of that Republic, Mr Jose A. Fernandez,
informed the Centre that it had decided to nominate Mr Walter Villalba Zaldvar, a
national of Paraguay, as an arbitrator for this case.
12. The Centre immediately informed the Republic of Paraguay that, pursuant
to Article 39 of the icsid Convention and Rule 1(3) of the Arbitration Rules, in
cases where the Arbitral Tribunal consists of three arbitrators, the appointment as
arbitrator by one of the parties of a national of the State party in the dispute or of a
State whose national is a party in it, requires the consent of the other party. As the
Claimant had not given such consent, Paraguay was prevented from nominating Mr
Villalba Zaldvar as arbitrator. Consequently, on 25 November 1998, the Republic
of Paraguay appointed Justice Francisco Rezek, a Brazilian national, as arbitrator
for the instant case.
13. The parties did not reach agreement in respect of the appointment of the third
arbitrator who would preside over the Tribunal. In such circumstances, with more
than 90 days having elapsed from the date on which the parties were notified of the
registration of the request for arbitration, the Claimant, in a letter dated 12 January
1999, requested that the third arbitrator in the case and President of the Tribunal be
appointed by the Chairman of the Administrative Council of the Centre, pursuant
to Article 38 of the icsid Convention and Rule 4 of the Arbitration Rules.7
14. After consulting with the parties, the Chairman of icsids Administrative
Council appointed Mr Rodrigo Oreamuno Blanco, a national of Costa Rica, as
President of the Arbitral Tribunal. On 12 February 1999, icsids Chief Legal
Adviser, on behalf of the Secretary-General of the Centre, and pursuant to Rule 6(1)
of the Arbitration Rules, notified the parties that all the arbitrators had accepted
their appointments and the Tribunal was deemed itself to be constituted from that
date. On the same day, pursuant to Regulation 25 of the icsid Administrative and
Financial Regulations, the parties were informed that Mr Gonzalo Flores, Counsel,
icsid, would serve as Secretary of the Arbitral Tribunal.
15. On 16 March 1999, the Centre received a communication from the Ministry of
Foreign Relations of the Republic of Paraguay, addressed to the Secretary-General
of icsid, in which Paraguay challenged the appointment of Professor Dale Beck
7
In conformity with Article 38 of the icsid Convention and Arbitration Rule 4, if the Tribunal is not
constituted within 90 days after the date of dispatch of notice of registration of the request, the Chairman
of icsids Administrative Council, at the request of either party, and after consulting both parties as far
as possible, shall appoint the arbitrator or arbitrators not yet appointed and designate one of them to act
as President of the Tribunal.
AWARD
167
Furnish, pursuant to Article 57 of the icsid Convention. The challenge was based
on the fact that, because the Claimant held United States nationality in addition
to Peruvian nationality, pursuant to the above-mentioned Article 39 of the icsid
Convention and Arbitration Rule 1(3), the latter was prevented from nominating a
United States national as arbitrator in the present case, without the consent of the
respondent. The dual nationality of the Claimant was unknown up until that date
by the Tribunal and by icsid.
16. Pursuant to the provisions of Arbitration Rule 9, the Secretary of the Tribunal
immediately transmitted the disqualification proposal to the other members of the
Tribunal and to the Claimant. On 17 March 1999, Professor Furnish tendered his
resignation as arbitrator in this case. Pursuant to Rule 8 of the Arbitration Rules, the
Tribunal on 19 March 1999 accepted the resignation tendered by Professor Furnish
and informed the parties thereof. Consequently, the proceedings were suspended
for the Claimant to appoint a new arbitrator. On 22 March 1999 the Claimant
appointed as arbitrator, to replace Professor Furnish, Dr Eduardo Mayora Alvarado,
a national of Guatemala, who accepted the said nomination, pursuant to Rule 5 of
the Arbitration Rules. The proceedings resumed on 29 March 1999.
17. The first session of the Tribunal with the parties was held, after consulting
with them, on 16 April 1999, at the seat of icsid, in Washington, DC. At that
session the parties expressed their agreement that the Tribunal had been properly
constituted, in accordance with the relevant provisions of the icsid Convention
and the Arbitration Rules, and they indicated that they had no objections in this
respect. The Tribunal consequently declared that it was constituted pursuant to the
provisions of the Convention.
18. In the course of the first session, the parties agreed on a number of procedural
matters reflected in the written minutes signed by the President and the Secretary
of the Tribunal. The parties chose Spanish as the language of the proceedings and
chose Washington, DC, the seat of the Centre, as the official venue for its operation.
The Republic of Paraguay, through its Attorney General, Dr Juan Carlos Barreiro
Perrotta, announced its objections to the jurisdiction of the Centre and requested
that those objections be resolved as a preliminary question prior to addressing the
merits. The Claimant, through Dr Gonzalo Garca-Calderon Moreyra, requested
that the Tribunal address the objections to the jurisdiction of the Centre submitted
by the Republic of Paraguay and the merits of the claims at the same time.
19. After hearing both parties, the Arbitral Tribunal set down the following
timetable: the Claimant would present his memorial within 60 days of the date of
the first session; within 60 days following the receipt of this memorial, the Republic
of Paraguay would present a counter-memorial with its factual and legal arguments
on the question of jurisdiction, the merits of the claims, or both.
20. It was also agreed that when this first stage of written submissions was
completed, the Tribunal would determine the subsequent steps, leaving open the
possibility of permitting or requiring the parties to make additional submissions.
Likewise the possibility of holding a hearing on the question of jurisdiction was
left open.
21. At the close of the first session, the Tribunal confirmed, at the request of the
Republic of Paraguay, that the submission of a statement exclusively containing
168
OLGUIN v. PARAGUAY
arguments relating to the question of jurisdiction, would not preclude the right of
the Respondent to argue at a later stage on the merits of the claims.
22. In keeping with the timetable fixed by the Tribunal, the Claimant submitted
his memorial to the Centre on 27 May 1999.
23. On 2 August 1999, the Republic of Paraguay submitted a plea formally
objecting to the jurisdiction of icsid, expounded the arguments on which the said
objections were based and attached documents in support of its arguments, thereby
deferring the proceedings on the substantive dispute, pursuant to Article 41(2) of
the icsid Convention and Rule 41 of the Arbitration Rules.
24. On 31 August 1999, the Claimant contested in writing the objections to the
jurisdiction of the Centre raised by the Republic of Paraguay, expounded the reasons
why it deemed that those objections should be rejected and submitted documents
in support of its position.
25. In its statement dated 18 December 1999, received by icsid on the 21st of
that month, the Republic of Paraguay formulated its response to the reply given by
Mr Olgun. On 2 February 2000, the Claimant presented icsid with his rejoinder
on the question of jurisdiction.
26. Various delays were encountered in this first stage in the proceedings, as a
result of the non-fulfilment by the Republic of Paraguay of its obligation to make
the payments stipulated in Regulation 14 of the icsid Administrative and Financial
Regulations, which the parties were requested in due time by the Secretary of the
Tribunal to pay.
27. On 8 August 2000, the Tribunal, after deliberating by telephone and by
correspondence, handed down a unanimous decision on the objections to jurisdiction raised by the Republic of Paraguay. In its decision, the Tribunal rejected the
objections to jurisdiction formulated by the Respondent, ruling (a) that the conclusion on the part of the Republic of Paraguay of the PeruParaguay cpi constituted
written consent as required by Article 25(1) of the icsid Convention; (b) that the
investments made by the Claimant in the Republic of Paraguay were included in
the enumeration of Article 1 of the PeruParaguay cpi, and that the said Convention contained no rule that might require investments made by a national of one
of the Contracting States to be first admitted or recognized by the State in whose
territory they were made; (c) that it could not decide at this first stage on the possible flaws in Mr Olguns investments alleged by the Republic of Paraguay, this
clearly being a subject relating to the merits of the claims; (d) that, for the same
reason, it could not at this stage of the arbitration decide on the allegation of the
Republic of Paraguay that if any liability were incurred, it would be subsidiary
and not direct; and finally, (e) that there was nothing in the file of the proceedings to indicate that Mr Olgun had presented a judicial claim against the Republic
of Paraguay to collect payments which he was seeking to collect in the instant
arbitration.
28. On these grounds, the Tribunal decided unanimously to reject the objections
to the jurisdiction of the Centre submitted by the Republic of Paraguay and to declare
that the Centre had jurisdiction and that the Tribunal was competent to resolve the
dispute between the parties, pursuant to the provisions of the PeruParaguay cpi
and the icsid Convention.
AWARD
169
29. The Secretary of the Tribunal sent certified copies of the Tribunals decision
to the parties. He attached to the instant decision, as an integral part thereof, a copy
of the decision on jurisdiction issued by the Tribunal.
B. Procedure Leading to the Award on the Merits
30. On 8 August 2000, the Tribunal, pursuant to Rules 19 and 41(4) of the
Arbitration Rules of the Centre, issued Procedural Order No. 1 for the continuation
of the proceedings on the merits. In the said Procedural Order, the Tribunal fixed
the following timetable for subsequent proceedings:
The Claimant having submitted, pursuant to the agreement formulated in the first
session of 16 April 1999, a memorial containing his arguments of facts and law relating
to the merits of the claims, the Respondent would present a counter-memorial, with
its arguments of fact and law on the merits of the claims, within 60 days of the date
of receipt of the Tribunals decision on the question of jurisdiction. Thereafter, the
Claimant would submit a reply relating to the merits of the claims, within 30 days from
the date of receipt of the stated counter-memorial and finally, the Respondent would
submit a rejoinder on the merits of the claims, no more than 30 days after receipt of
the Claimants reply. Upon conclusion of this exchange of submissions, the Tribunal
would fix a date for a hearing.
31. Pursuant to that timetable, on 5 October 2000, the Republic of Paraguay

submitted to the Centre its counter-memorial on the merits of the claims. On
9 November 2000, the Claimant presented his reply on the merits. Finally, on
18 December 2000, the Respondent submitted its rejoinder on the merits.
32. In a letter dated 12 February 2001, the Tribunal, having consulted with
counsel for both parties, called for a hearing on the merits to be held from
11 March 2001 to 14 March 2001 inclusive at the seat of the Centre in
Washington, DC. By the same means the Tribunal requested, pursuant to Rules
33 and 34 of the icsid Arbitration Rules, precise information from each party
regarding the evidence which it intends to produce and that which it intends to
request the Tribunal to call for, together with an indication of the points to which
such evidence will be directed.
33. In a letter dated 20 February 2001, the Republic of Paraguay transmitted to
the Centre the information required by the Tribunal, and requested the presence
of Mr Eudoro Armando Olgun at the hearing, where he would be examined. The
Claimant, in turn, in a letter of the same date, requested the presence of Mr Angel
Canziani, for the purpose of examining him.
34. In a notification dated 21 February 2001, the Arbitral Tribunal directed the
parties to indicate the specific matters to which the depositions of Messrs Olgun
and Canziani would be directed. The parties provided the information requested
within the time-limit set down by the Tribunal.
35. Consequently, in a notification dated 23 February 2001, the Tribunal, pursuant to Rule 34(2)(a) of the Arbitration Rules, requested the Claimant to submit
the following witnesses to cross-examination during the hearing on the merits of
the claims: Mr Eudoro Armando Olgun and Mr Angel Canziani. In that same
170
OLGUIN v. PARAGUAY
communication, the Tribunal instructed the parties on the form that the hearing
would take.
36. In accordance with the said instructions, the hearing on the merits of the
claims would take place as follows:
The hearing on the merits would commence on Sunday, 11 February 2001, at
10 a.m.
Firstly, counsel for the Claimant would make a 30 minute oral submission and then
counsel for the Respondent would do likewise for a further 30 minutes. After that, each
party would have 15 minutes to submit, in the form of a reply and a rejoinder, whatever
additional remarks it might have.
Then, each of the witnesses would be examined by counsel for the party which
requested his presence and then by the other partys counsel, with each party having
two hours for the examination of each of the witnesses.
The Members of the Tribunal would be able to ask counsel for the parties and the
witnesses questions and to ask for explanations at any point during the hearing. The
time used for the Tribunals questions and the replies would not be deducted from the
time assigned to each of the parties.
Finally, the members of the Tribunal would meet, in private, to deliberate during the
day of 13 March 2001 and if necessary during the following day.
37. The hearing on the merits of the claims took place as planned on 11 February
to 13 February 2001, at the seat of the Centre in Washington, DC. Present at the
hearing were:
Members of the Tribunal
Mr Rodrigo Oreamuno, President; Mr Francisco Rezek, Arbitrator, and
Mr Eduardo Mayora Alvarado, Arbitrator
ICSID Secretariat:
Mr Gonzalo Flores, Secretary of the Tribunal
Claimant
Mr Eudoro Armando Olgun
On behalf of the Claimant:
Dr Gonzalo Garca-Calderon Moreyra
On behalf of the Respondent:
Dr Juan Carlos Barreiro Perrotta, Procurador General de la Republica del
Paraguay
Also attending on behalf of the Respondent:
Dr Benigno Lopez, Banco Central de Paraguay
Dr Amelio Calonga Arce, Procuradura General de la Republica del
Paraguay
Mr Jose Mara Iban ez, Embajada del Paraguay en Washington, DC.
38. The hearing commenced, as planned, on Sunday, 11 February 2001, at
10 a.m. After a brief introduction by the President of the Tribunal, Dr Gonzalo
Garca-Calderon Moreyra addressed the Tribunal on behalf of the Claimant, referring to the arguments put forward in his written pleadings.
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In the course of his presentation, and pursuant to the notice contained in his letter
dated 20 February 2001, counsel for the Claimant delivered to the Tribunal and to
the Respondent, by means of the Secretary, documents in evidence of his financial
claims. Immediately afterwards, Drs Juan Carlos Barreiro Perrotta, Amelio Calonga
Arce and Benigno Lopez made a presentation before the Tribunal on behalf of the
Republic of Paraguay.
39. Messrs Canziani and Mr Olgun, whom the Tribunal had ordered to be present
as witnesses, participated in the hearing on the merits and made their respective
statements in that order, after consulting the parties. Each of them was examined
by the party which requested his presence, and cross-examined by the other party,
and they replied to questions put to them by the Tribunal. The examination, the
cross-examination and the questions formulated by the Tribunal took place in the
session of 11 February 2001.
40. The hearing continued during the morning of 12 February 2001. During this
hearing, counsel for both parties made their final presentations and were questioned
by the Tribunal, in keeping with the schedule. In addition, and pursuant to the order
of the Tribunal in the course of the session of 11 March 2001, both parties presented
their replies, in writing, to specific questions posed by the Tribunal the previous
day. Finally, counsel sent written transcripts of their oral pleas to the Secretary, as
suggested by the Tribunal in its letter of 23 February 2001. The hearing concluded
with some closing remarks by the President of the Tribunal.
41. During the afternoon of 12 February 2001 and during the day of 12 March
2001, the members of the Tribunal met at the seat of the Centre, in Washington,
DC to deliberate.
C. Declaration of Closure of the Proceeding
42. Rule 38(1) of the icsid Arbitration Rules provides that when the parties have
concluded making their presentation, the proceeding must be declared closed.
43. Having examined the submissions of the parties, the Tribunal reached the
conclusion that there had been no requests by any of them, nor was there any other
reason to reopen the proceeding, as permitted by Rule 38(2) of the icsid Arbitration
Rules.
44. Consequently, by letter dated 8 May 2001 the Tribunal declared the proceeding closed, pursuant to Rule 38(1) of the icsid Arbitration Rules.
III. Summary of the Facts

45. In the month of November 1993, Mr Juan Luis Olselli Pagliaro occupied a post
in the Central Bank of Paraguay. This gentleman sent to Engineer Olgun a letter,
on notepaper with no letterhead, dated 3 November 1993, in which he informed
him of dealings conducted with the company La Mercantil SA de Finanzas in
keeping with what was discussed with Oscar and for our account. Basically the
letter describes the rates of interest which this finance body would be willing to grant
to Mr Olgun for his USA dollar deposits or in Guarans, which would respectively
be from 11% and from 33% annually.
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OLGUIN v. PARAGUAY
46. Mr Olselli also states in this letter that he is sending the Official Report of
the Central Bank of Paraguay on the La Mercantil and the position which it holds
amongst the financial corporations of Paraguay. The missive concludes with the
following paragraph:
This friend whom I spoke to you about is Tomas Rovira, General Manager of the
Finance Company, whom you can locate at the telephone number appearing in his
card.
47. On 16 March 1994, the same Mr Olselli sent a note to Engineer Olgun, to
which he attached a report in order to keep you informed on La Mercantil and its
progress in the market.
48. As of the month of December, 1993, the Claimant began to make capital
transfers, in dollars, to the Republic of Paraguay. These transfers, which amounted
to the sum of US $1,254,500.00, were converted into Guarans (Gs) and deposited
in a finance corporation named La Mercantil SA de Finanzas (La Mercantil).
49. Against the deposit of these sums, Mr Olgun was sent Investment Bonds
(IBs), which were renewed successively.
In July 1995, the following IBs existed:
(i) No. 06361 in the value of Gs 570,000,000, dated 2/8/94,
(ii) No. 2225 in the value of Gs 481,250,000, dated 23/6/95,
(iii) No. 2226 in the value of Gs 481,250,000, dated 23/6/95,
(iv) No. 2227 in the value of Gs 508,200,000, dated 23/6/95,
(v) No. 2231 in the value of Gs 231,000,000, dated 4/7/95,
(vi) No. 2232 in the value of Gs 67,375,000, dated 4/7/95,
(vii) No. 2253 in the value of Gs 67,982,500, dated 6/7/95.
The first of these bonds was issued in the name of Mr Angel Canziani Zuccarelli
and the remainder in the name of Mr Eudoro Olgun. These latter bonds bore the
seal of a clerk of the Central Bank of Paraguay. The seven bonds amounted to Gs
2,407,057,500.00.
50. On 26 August 1996, a payment of Gs 48,006,750 was made for each of these
bonds, with the exception of that issued in the name of Mr Canziani. Although the
parties were not in agreement regarding the legal implications of this seal, what was
clear to the Tribunal was that no payment was made on the bond issued in the name
of Mr Canziani because it lacked the seal of a clerk of the office of the Supervisor
of Banks who held Mr Olguns bonds.
51. The funds mentioned were set aside to finance the installation in Paraguay of
a factory for maize products, the owner of which would be the corporation called
Super Snacks of Paraguay Inc. (Super Snacks).
52. On 25 May 1994 Messrs Juan Luis Olselli Pagliaro and Tomas Gumercindo
Rovira Barchello appeared, together with Mr Olgun and other persons, before the
Notary Public Blanca Cilda Nun ez Noguera, to grant the deed of incorporation of
Super Snacks of Paraguay Inc., are appointed, respectively, as Vice President and
Executive Director of this Corporation and they subscribed, in that document, to 12
shares of one million Gs each. The articles of incorporation and legal personality of
this corporation were approved on 26 July 1994, by Mr Olselli. Super Snacks was
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173
registered on 22 August 1994 in the Registry of Public Commerce of the Republic

of Paraguay.
53. In the month of June 1994, the corporation, Consulting Analysis and Proposals, presented to Mr Olgun a Study of Technical, Commercial and Financial
Feasibility relating to the maize product plant. According to this study, the project
would require an investment of Gs 1,425,500.00 and would be financed to the extent of 36.9% from the corporations own resources and of 63.1% from resources
provided by the bank.
54. On 22 September 1994, by means of Resolution 415 of the Paraguayan
Ministry of Industry and Commerce, Super Snacks was granted the tax incentives
provided for in Law No. 60/90.
55. In the midst of an economic crisis which the financial system of the Republic
of Paraguay suffered, on 14 July 1995, La Mercantil closed its operations and
defaulted on payment of the IBs.
56. On 18 December 1994, the Convention between the Republic of Peru and the
Republic of Paraguay on the Reciprocal Promotion and Protection of Investments,
the purpose of which was . . . to create and maintain conditions favourable to investments by nationals of a Contracting Party in the territory of the other Contracting
Party, came into force.
57. In the month of July 1995, Law No. 417/73, regulating the banks and other
financial bodies, came into force in Paraguay and whose Article 66 stipulated:
Upon dissolution in the cases contemplated by this law, the Central Bank of Paraguay
will administer the assets and liabilities of the body for the sole purpose of its liquidation
and will grant financial assistance for the purpose of paying depositors in savings
accounts, deducting the legal aspects corresponding to the savings accounts . . .
58. On 4 December 1995 the Legislature of Paraguay approved the Financial

Stabilization and Reactivation Law No. 797, which modified the aforementioned
Article 66, the wording of which became as follows:
Upon the withdrawal of a financial bodys license to operate, the Central Bank of
Paraguay will guarantee the payment of deposits duly registered in the liabilities of the
body, by whatever method, in national or foreign currency, incurred by natural or legal
persons, in banks, financial corporations and other credit bodies, up to the equivalent
of one hundred minimum monthly salaries per account.
59. As of the closure of operations of La Mercantil, Mr Olgun personally and as

representative of Super Snacks, took numerous actions to try to recover the funds
deposited in this financial body.
IV. Considerations
60. Paraguay urges the Tribunal to examine the matter of the nationality of
Mr Olgun, a subject which is naturally preliminary to an examination of the
merits. The Respondents position is that, because this gentleman is a Peruvian
174
OLGUIN v. PARAGUAY
national and at the same time a national of the United States of America and
as the Peruvian judicial regime allegedly establishes that in the case of dual nationality the domicile of persons determines the exercise of that persons specific
rights, Mr Olgun, who resides in the United States, cannot claim the protection of
the cpi.
61. What is important in this case, in order to ascertain if the Claimant has access
to the jurisdiction of arbitration based on the cpi, is solely to determine if he holds
Peruvian nationality and if this nationality is in effect. As regards that there was no
doubt. There was no dispute that Mr Olgun holds dual nationality, and that both
nationalities were effective. One of his two nationalities, or the other, or perhaps
both, on for example the exercise on the part of that person of political rights, civil
rights, responsibility for diplomatic protection and the importance of domicile for
the determination of such rights lacks importance, given the legitimate, legal fact
that Mr Olgun actually holds both nationalities. For the Tribunal it is sufficient
that he has Peruvian nationality to decide that he may not be excluded from the
protection of the cpi regime.
62. In the case of diplomatic protection of a person holding dual nationality,
either of his States can act in his favour against a third State, and the latter does not
have to invoke, on the international plane, norms which in the domestic law of the
protecting State serve to transfer the burden of protectionwhich furthermore is
not obligatoryto the co-national State on account of the domicile of the person or
for any other similar reason. The third State, the hypothetical author of the illegal
act which will have caused damage to the foreigner, will only be authorized by
international law, in this precise domain, to deny the legitimacy of the diplomatic
protection, when an effective nationality link between the person and the protector
State is missing; never on account of rules of domestic law which in both the States
serve to regulate the exercise of the said rights and which, moreover, could be shown
to be mutually inconsistent.
But even if this were not so, domestic rules of such a nature, relevant to the
grant of diplomatic protection to private persons, and therefore to that which by
international law is a prerogative of the home State, cannot apply by analogy to
the case of access to the icsid forum, which has as one of its most important and
specific objectives the grant of a right of action to a private person, excluding from
the legal process the endorsement of his claim and any other initiative of his native
State, which is only required to be a party to the 1965 Convention and the relevant
cpi.
63. The Claimant alleged that the Republic of Paraguay should reimburse
the unpaid part of the investment, which on 30 June 1995 had increased to Gs
2,407,057,500.00, with the corresponding adjustment on account of the devaluation of the Guaran, from June 1995 until the effective date of payment, the interest
on that sum, during that same period, at the rate of interest agreed upon in the IBs,
the damages incurred by the failure to pay the capital and the costs of the arbitration
process.
64. Mr Olgun states the liability of Paraguay stems from four different factors:
(a) The IBs were underwritten by the office of the Superintendent of Banks of
the Republic of Paraguay, an organ of the State of Paraguay.
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175
(b) The Republic of Paraguay and its organs were negligent in their supervision
of the activities of La Mercantil and this negligence led to the closure of
operations of this financial body.
(c) It was the discriminatory conduct on the part of the Republic of Paraguay and
its organs that breached the provisions of the cpi, particularly the provision
in Article 4(2) of this Convention.8
(d) The conduct of the Republic of Paraguay relating to the investment of
Mr Olgun was tantamount to expropriation.
65. The Arbitral Tribunal will now analyze each of those arguments:
(a) This Tribunal does not share the thesis of the Claimant that the seal placed
on six IBs issued in the name of Mr Olgun constitutes an underwriting or
other similar legal act, capable of obliging the Republic of Paraguay to pay
that bond. Leaving aside the point whether the office of the Superintendent
of Banks was legally qualified to oblige the Republic of Paraguay to extend
a guarantee of this type, it appears obvious that the effect of this seal would
be solely to register the IB.
There has been extensive discussion on the possibility of creating bonds
which are different from those expressly assigned in the said legal system.
The Claimant has repeatedly stated that the IBs were different documents
from the deposit deeds. In order to be able to conclude that a signature
placed on one of these IBs constitutes a collateral or similar guarantee, the
existence of an explicit rule in the Paraguayan legislation to that effect would
be required. The existence of this rule was not demonstrated in the file of the
proceedings.
(b) As will be explained further on in this Award, the Tribunal considers that the
general attitude of Paraguay concerning the operations of La Mercantil was
not the most appropriate. Nevertheless, it appears exaggerated to attribute to
this careless conduct liability for payment of the IBs.
It is evident to this Tribunal that there were serious shortcomings in the
Paraguayan judicial system and in the performance of various organs of that
State. This Tribunal does not endeavour to elucidate if this situation is worse
in Paraguay than in other countries. What is clear is that Mr Olgun, a seasoned businessman, with a commercial record of many years and experience
gained in the world of commerce in various countries, was not unaware of
the situation in Paraguay. He had his reasons (which this Tribunal does not
presume to judge) for investing in that country, but it is unacceptable for
him to seek to be indemnified for losses which he suffered in making an
investment which was speculative or, at best, hardly prudent.
(c) The statement made by the Claimant that the Republic of Paraguay paid the
entire investment of Hamilton Bank of the United States of America was
8
Article IV: Protection Treatment and Zone of Economic Integration

(2) Treatment: Each Contracting Party will guarantee in its territory a just and fair treatment of the
investments of nationals of another Contracting Party. This treatment will be no less favourable than that
accorded by each Contracting Party to investments effected in its territory by its own nationals or that
granted by each Contracting Party to investments effected in its territory by nationals of a most-favoured
nation, on condition that this latter treatment be the most favourable.
176
OLGUIN v. PARAGUAY
not proved in the proceeding. Nor did that party show any other case in
which any other Paraguayan or foreign creditor might have been favoured
in a manner which discriminated against Mr Olgun. The Financial Stabilization and Reactivation Law No. 797/95 sought to compensate, in part,
for losses which a large number of investors have suffered, so as to help
alleviate the grave economic crisis which the nation of Paraguay was living
through. To a small degree, Mr Olgun (as well as many other persons) even
benefited from the promulgation of this Act, which, in amending Article 66
of Law No. 417/73, extended the protection that in the previous wording
was limited to persons who had savings accounts, which earned very meagre
interest.
(d) Although the Tribunal made a great effort, it could not understand the reasoning of the Claimant, who sought to liken the loss of money which he incurred
to an expropriation. In the case of expropriation, a person regards himself as
deprived of a benefit by an act of a State which takes the benefit for itself and,
logically, bears the obligation to pay its price. In this case, it cannot be said
that the State of Paraguay appropriated Mr Olguns investment, because he
lost it due to the crisis suffered by La Mercantil and the Paraguayan financial
system in general.
The Tribunal will address these subjects in greater detail below.
66. As stated, it has been clearly demonstrated that Mr Olgun made a substantial
investment in Paraguay. Freely, and, it appears, on the advice of several persons,
inter alia, Messrs Olselli and Rovira, with whom he formed a close relationship,
so much so that he appointed them to the Board of Directors of Super Snacks, he
decided to convert into Guarans the dollars which he brought from abroad (for cpis
purposes, it is irrelevant from which country)9 and to invest them in La Mercantil,
which offered to pay him an interest rate of 33%, which at the time was extremely
attractive.
67. At the final stage of the proceedings in which evidence was adduced, the
Tribunal wished to verify, consulting directly with the parties, in the presence
of both, that its understandingthat of the Tribunal, of courseof the material
part of each partys thesis, both in relation to the facts stated and to the juridical
conclusions deriving therefrom, was substantially correct. It did so assure itself of
this.
68. Two of the dimensions directly relating to the said theses, the examination
of which we cannot omit without prejudice to the substance of this judgment, are:
(a) the existence or non-existence of certain omissions relating to the discharge
of obligations that are the responsibility of the controlling agencies of Paraguay,
9
During the hearing on the merits which took place on 11 to 13 March, 2001 at the seat of icsid in
Washington, DC, the Republic of Paraguay argued that the funds invested by Mr Olgun in Paraguay
originated, physically, in the United States of America (the Claimants place of residence), and his
investment therefore was not protected by the PeruParaguay cpi. According to this argument, for an
investment to be protected by the PeruParaguay cpi, the funds invested must originate in the country of
which the investor is a national. This requirement is not expressly indicated in the cpi and the Tribunal
therefore rejected the said argument.
AWARD
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relating to financial supervision; and (b) the existence of a causal relationship between those omissionsso to speakand the obligation to indemnify the Claimant.
69. Both parties agree, albeit in different degrees, with the Claimants charge, or
the Respondents admission, that the bankruptcy of La Mercantil, occurring within
the framework of an extensive national economic crisis, was the consequence of
irregular conduct carried out by its managers, who could have been detected, made
to stop and, if that had occurred, could have been sanctioned, to the benefit both of
the integrity of the financial system of Paraguay, and the credits of the investors in
bonds issued by La Mercantil.
70. Without entering into an analysis of the opinions of third parties, whether
those of communication media or other bodies, on the problematic politico-social
nature of Paraguay, which obviously exceeds the scope of this Judgment, there are
nevertheless sufficient elements of the case of which it is possible to take stock,
in order to reach the conclusion that considerable omissions were made by the
public organs of Paraguay, which bore the duty of safeguarding the integrity of the
financial system of that country, and in turn, not exclusively but specially of foreign
investment. Put another way, the organs of financial control of Paraguay appear
to have been clearly remiss in their duties of care, supervision or control over the
financial market agencies of their country, during the period in which the facts that
brought about this dispute.
71. That being the case, we must determine whether in this case there existed
an appropriate causal link which resulted in definite legal consequences, such as
the obligation on the part of the State of Paraguay and the right on the part of
Mr Olgun to demand and obtain indemnity for the losses which he had suffered.
To resolve this question would require the provision of certain hypothetical criteria
by which the facts could be measured with the aforementioned legal effects.
72. Following a careful analysis of the cpi, this Tribunal concludes that there is
no rule in that text that obliges the State in whose territory an investment is made
to guarantee the payment of that investment in the event of bankruptcy.
73. If, as a hypothetical assumption, the cpi had contemplated legal consequences
such as those claimed by the Claimant, which the Contracting States would incur
in the event of serious derelictions of their constitutional and legal duties and obligations, which also gave rise to third party losses, it is conceivable that in the light
of the facts proved in this case, this Arbitral Tribunal would have found in favour
of the Claimant. It is probable but not certain, as already indicated elsewhere in this
Award, that the Claimant, by his own individual action, contributed significantly to
the very outcome which he himself criticizes. Nevertheless, this hypothesis must
be discarded because no rule exists in the cpi relating to grave omissions which
could provide grounds for the claims of the Claimant.
The scope of the Bilateral Investment Treaties was strictly delineated in the Award
rendered in the case between Mr Emilio Augustin Maffezini and the Kingdom of
Spain (icsid Case No. ARB/97/7). That Award, handed down by the distinguished
Arbitral Tribunal on 13 November 2000, determined in para. 64:
. . . the Tribunal must emphasize that Bilateral Investment Treaties are not insurance
policies against bad business judgments.
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OLGUIN v. PARAGUAY
74. Even if, as will be explained elsewhere in this Award, it would be desirable
in future for strict rules to exist that would impose economic sanctions on States
which do not scrupulously supervise financial agencies, it is certain that such rules
do not now exist in Paraguayan legislation or in the cpi. The Tribunal would also
add that neither do such rules exist in most other countries.
75. This Tribunal does not accept the thesis that Mr Olgun was induced to
make his investment by the reports issued by the Central Bank of Paraguay. On
the contrary, the Tribunal considers that prudence would have prompted a foreigner
who arrived in a country which had suffered serious economic problems to be much
more cautious in making his investments.
76. The statistical reports of the Central Bank of Paraguay (cbp) and of the office
of the Superintendent of Banks, which are official bodies, on the position of the
diverse agencies comprising the financial system of Paraguay, should be understood
to be published so that diverse economic agencies may take decisions to invest or
to expend. Some of the said reports, which were included in the transcripts, and
whose contents were not disputed by any of the parties, show, for example, that La
Mercantil was ranked the second biggest financial corporation in the country, in
terms of net wealth, on 30 September 1993 (the date appears in the tables, although
not at the foot of the graphs.)
77. This situation stands in contrast to the statements of Mr Angel Canziani
and of the Claimant himself and to various submissions by counsel and other
lawyers of the Government of Paraguay made during the evidentiary hearings,
from which it could be inferred that La Mercantilamongst other agencies
issued investment bonds which should have been reflected as liabilities in the
books of the issuer, circulating like black bonds as they were called by the
lawyers acting for the Respondent. On these questions the report of The Administrators of the Central Bank of Paraguay on La Mercantil SA de Finanzas, dated
20 October 1995, a copy of which appears in the file of the proceedings, there is the
following:
We have observed that the volume of the agencys deposits on 28 April 1995, reached
a total of Gs 20,225 million, and remained relatively stable until 30 May of the current
year. However, as of 31 May substantial increments in the deposits began, in amounts
not registered in the normal activities of the corporation, contrary to the claims made
in the notice of meeting that the said discrepancy was due to an attempt to legalize
the operations of parallel deposits, improperly using for this purpose the deposit deeds
authorised by the Central Bank of Paraguay. The said attempt resulted in an increase
of Gs 20,225 million to Gs 98,259 million in the level of deposits.
78. Mercantil consequently issued and put into circulation investment bonds, on
the date of the said report, for a sum of approximately five times that which appeared
in its books or account registers. Thereafter the following statement appeared in
the report:
By means of preferential loans granted to related natural persons (whether the parties
in question are linked by employeremployee relationships or by commercial relationships) and legal persons (Dimex Inc., Financiera Corpus Inc., Publicity Inc., Laprofarm,
AWARD
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Arami Inc., Super Snacks, Distrimport, inter alia) connected to La Mercantil SA de

Finanzas, funds held by the corporation were diverted, in breach of the provisions of
Article 35f) of Law 417/73 of the Banks and Other Financial Agencies.
79. The inclusion of Super Snacks amongst the legal persons linked to La
Mercantil stands out. But in the context of these considerations it is most important
to analyze these facts and circumstances in relation to the omission on the part of
the competent authorities of Paraguay, as will be done later.
80. Two facts accepted by both parties also relate to the findings of the bank
administrators. One is that an official of the Central Bank of Paraguay (cbp),
Mr Juan Luis Olselli Pagliaro, provided the Claimant with a written recommendation (communication dated 3 November 1993, mentioned above) in
order for financial operations with La Mercantil to be conducted; the other is
that the general manager of the latter firm, Mr Tomas Rovira, and Mr Olselli
agreed to join the Board of Directors of Super Snacks, apparently without
any consequence in terms of the action of inspection of the Superintendent of
Banks.
81. It would perhaps require an excess of fervour to require the Paraguayan agencies of financial control to detect and prevent hidden relations or those conducted
in the dark by public officials (in the case of Olselli) or private persons (in the
case of Rovira), which put them in legally unacceptable clear conflicts of interest
as the auditors of La Mercantil indicate. Nevertheless it has been stated previously
that both officials took the extreme steps of appearing before a notary public to
form, together with Mr Olgun, Super Snacks Paraguay Inc.
82. It was not noted in the proceedings until when Mr Olselli retained his position
as an official of cbp, which could be an important date having regard to the fact,
in itself rather important, that it was Mr Olselli who made the submission to the
Ministry of the Interior which issued Decree 4,861 of the President of the Republic
(a copy of which appears in the record of the proceedings), approving the deed of
incorporation of Super Snacks and recognizing its legal personality.
83. As indicated in the previous paragraph, the Tribunal wanted to be sure that
it had understood precisely the positions of the Parties and, in that sense, it noted
that the juridical thesis of the Claimant was based, inter alia, on the existence
of an expropriation, in the context and in the terms of Article 6 of the cpi. The
said expropriation, it was maintained by the Claimant, would be indirect in nature,
and created by omissions such as those to which the Arbitral Tribunal referred
above, would be specific and not exhaustive in character. To give the legal rule
of expropriation the scope which the Claimant seeks to grant it would require the
Arbitral Tribunal to deviate from the general principles and rules of positive law
which define and regulate expropriation.
84. For an expropriation, acts would be necessary which may be reasonably
deemed to produce the effect of depriving the person affected of a benefit, in a
manner in which whoever performs such acts would acquire, directly or indirectly,
the ownership or at least the fruits of the benefits expropriated. Expropriation thus
requires a teleological action to realize it. It does not suffice for it to have occurred
by omission, however serious that may be.
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OLGUIN v. PARAGUAY
Costs
85. Although this Tribunal rejects the submissions of Mr Olgun in their entirety,
it does not consider it proper to award the costs of this case against him. Firstly, the
Respondents calling into question of the jurisdiction of this Tribunal was rejected
for reasons which have been fully expounded.
Secondly, as has been explained in this Award at various times, although the
State of Paraguay through its agencies was not so negligent in the exercise of due
care that it incurred responsibility for payment of losses suffered by the Claimant,
its conduct could certainly not be considered exemplary. In addition, the conduct
of the Republic of Paraguay has unnecessarily delayed this case by repeatedly not
meeting deadlines set by this Tribunal, in particular regarding obligations imposed
by the icsid Administrative and Financial Rules. For these reasons, the Tribunal
considers it right for the Parties to pay a part of the costs incurred by this case, by
equally dividing the costs of the case and by each of them assuming their own costs
of legal representation.
V. Decision
For the reasons stated above, the Tribunal unanimously decides that:
(1) The submissions of the Claimant Eudoro Armando are dismissed in their
entirety.
(2) Each party will pay half of the costs of this case and will pay the entire costs
of its own representation.
[Source: Translated from the Spanish text at http://www.worldbank.org/icsid/

cases/paraguay-laudo.pdf by Mr Jonathan Goldberg.]
MONDEV INTERNATIONAL v. UNITED STATES
181
nafta Chapter 11 Claim pursuant to Additional Facility Rules Place of

arbitration Relevant factors Joinder of jurisdictional objections to merits
Extent of discovery Confidentiality
Municipal law Confidentiality of proceedings Application of national freedom of information legislation to pleadings, minutes of meetings, orders of
Tribunal Extent and duration of parties obligation of confidentiality absent
statutory obligations of disclosure nafta, Article 1126, Annex 1137.4 Arbitration (Additional Facility) Rules, Articles 14, 24, 38, 44
State responsibility nafta, Articles 1102, 1105, 1110 Application to acts
done before naftas entry into force National court decisions after entry into
force Retrospective effect
Jurisdiction Proceedings brought under nafta, Article 1116(1) Whether
brought on behalf of an enterprise Failure to rely on Article 1117(1)
Jurisdiction Termination of an investment Lapse of contractual option
Banks foreclosure on mortgage over investment property Subsisting claims
under national law Whether an investment Relevance of ownership of
national law proprietary rights nafta, Article 1139
Admissibility Claim brought more than three years after incidents causing
damage Three-year time-limit Application nafta, Article 1116(2)
nafta Free Trade Commission interpretation Whether binding on Chapter 11 Tribunal Whether interpretation or amendment Scope of ftc
interpretation Effect on pending proceedings
State responsibility nafta, Article 1105(1) Denial of justice Whether new
law applied retrospectively Procedural decisions Scope and standard of
nafta review
State responsibility nafta, Article 1105(1) Full protection and security
Statutory immunity of State agency in respect of intentional torts Tortious
interference with contractual relations Jury finding implying lack of legitimate regulatory purpose Whether immunity in breach of Article 1105(1)
State responsibility nafta, Article 1105(1) Full protection and security
Non-application of trade practices law to regulatory authority
nafta Chapter 11 Award of costs and expenses Extent of Tribunals
discretion
182

Procedural orders. 25 September 2000, 13 November 2000,
25 January 2001, 27 February 2001
Award. 11 October 2002
(Arbitration Tribunal: Stephen, President; Crawford and Schwebel, Members)
Summary: The facts: A tripartite contract was concluded in 1979 between
the City of Boston(the City), the Boston Redevelopment Authority (bra) and
Lafayette Place Associates (lpa), a Massachusetts limited partnership owned by
the Claimant, Mondev International Ltd, a Canadian company. The contract, as
amended, envisaged a two-phase development project. A necessary part of phase 2
was the acquisition by lpa of an option to acquire certain land (the Hayward
parcel) on favourable terms. The option was duly acquired from the City, but difficulties arose over planning consents and other matters. Eventually phase 2 failed
and lpas bankers foreclosed on the project property. In 1992, lpa sued in the
Massachusetts courts, alleging breach of contract by the City and tortious interference with the contract by bra. On 1 January 1994, nafta entered into force.
Subsequently, lpa won jury verdicts against both respondents for substantial damages, but the trial judge declined to enter the verdict against bra on the grounds of
bras statutory immunity from suit for intentional tort. In 1998, the Massachusetts
Supreme Judicial Court affirmed the trial judges decision in respect of bras immunity and upheld the Citys appeal in respect of the claim for breach of contract. lpas further petitions for rehearing before the Supreme Judicial Court and
for certiorari before the US Supreme Court were rejected. Its claims accordingly
failed.
Pursuant to Article 1116 of nafta and the icsid Additional Facility Rules,
Mondev brought a claim against the United States, alleging breaches of Articles
1102(1), 1105(1) and 1110 of nafta. It argued that the United States, through the
decisions of its courts, State and federal, had violated Articles 1102(1), 1105(1)
and 1110 of nafta, because they failed to extend the prescribed full protection and security to Mondevs investment and/or because they failed to provide
a remedy in respect of earlier conduct by the City and bra which was discriminatory and in breach of Massachusetts and/or international law. The United
States raised a series of objections, both as to jurisdiction and as to the merits
of the claim, emphasizing that nafta had no application to a dispute substantially occurring before its entry into force. To the extent that the dispute concerned decisions of United States courts given after 1 January 1994, those decisions
were, in its view, unexceptionable and did not contravene nafta standards in any
respect.
SUMMARY
183
Preliminary Decision on Confidentiality, Place of Arbitration and Bifurcation:

25 September 2000
Mondev sought rulings as to the confidentiality of proceedings, and argued
that Canada should be chosen as the venue of the arbitration, in part because
confidentiality of the proceedings was better protected under Canadian law. The
United States argued that venue was irrelevant to its obligation to comply with
the US Freedom of Information Act (foia), that Washington, DC was the most
convenient forum, and that its preliminary objections to the Tribunals competence
should be heard separately.
Held: (1) The place of arbitration would be the seat of the Centre in
Washington, DC, which, considering all relevant factors, appeared to be the most
appropriate. Since it appeared that the United States would be bound to comply
with any foia request wherever the arbitration was conducted, confidentiality was
not a relevant consideration in the choice of forum, and the balance of convenience
otherwise favoured Washington (p. 187).
(2) No further ruling on confidentiality was required at this stage (p. 187).
(3) The United States objections to competence could best be heard in conjunction with issues of liability; questions of quantification would be reserved, if
necessary, to a later stage (p. 187).
(4) The United States having made extensive discovery of documents, no further
order for discovery should be made (pp. 1878).
Interim Decision regarding Confidentiality of Documents: 13 November 2000
The United States subsequently informed the Tribunal of its intention to post on
its Internet site both the Notice of Arbitration and the Tribunals order and interim
decision of 25 September 2000; Mondev objected to any such disclosure.
Held: (1) The Claimants Notice of Arbitration was already a public document which, pursuant to nafta Article 1126(10)(b) and (13), appeared on a public
register; thus the United States had the right to publish the Notice of Arbitration by
any medium it chose (pp. 18990).
(2) The order and interim decision of 25 September 2000 were the outcome of a
hearing not open to the public, the minutes of which could not be published without
the consent of the parties pursuant to Article 44(2) of the Arbitration (Additional
Facility) Rules. The Respondent was precluded from publishing the Tribunals
order and interim decision until the conclusion of the proceedings; thereafter it
could publish the interim decision with the Tribunals permission (p. 190).
Further Decision regarding foia Requests: 25 January 2001
The United States informed the Tribunal that it had received and intended to comply
with a foia request for the release of certain pleadings and correspondence in the
case. Mondev objected to such release.
184
Held: The icsid (Additional Facility) Rules did not purport to qualify statutory obligations of disclosure which might exist for either party. Since it appeared
that the foia created a statutory obligation of disclosure for the Respondent, the
Tribunal would not prohibit the Respondent from releasing its submissions and
correspondence in the case pursuant to the foia (pp. 1901).
Order and Further Interim Decision regarding Confidentiality: 27 February 2001

The parties subsequently asked the Tribunal to clarify whether in the absence of any
statutory obligation of disclosure, the icsid (Additional Facility) Rules require the
parties to treat as confidential pleadings and correspondence relating to the case.
Held: In view of Articles 14(2), 24(1), 39(2) and 44(2) of the Arbitration (Additional Facility) Rules, and of Annex 1137.4 to Chapter 11 of nafta, the parties
must treat as confidential until the conclusion of the proceedings those submissions and correspondence which, exempting any applicable statutory obligation of
disclosure, did not already exist in a public register held by the Secretariat (p. 191).
Award: 11 October 2002

After the close of the written pleadings, the Respondent submitted an interpretation
of 31 July 2001 by the Free Trade Commission (ftc) established under Article
2001 of nafta, regarding the issues of confidentiality and the minimum standard of
treatment in accordance with international law. (For the text of the interpretation see
below, p. 567.) After the close of the oral hearings, Mondev drew to the Tribunals
attention the award on damages rendered on 31 May 2002 in a nafta Chapter 11
case, Pope & Talbot Inc. v. Canada, in which the Tribunal cast doubt on the validity of the ftcs interpretation. The parties and the interveners made extensive
submissions on the ftcs interpretation and on the Pope & Talbot decision.
Held: To the extent that it concerned the decisions of the United States courts
given after the entry into force of nafta, the Tribunal had jurisdiction pursuant to
Article 1116, and the claim was admissible. However the claim must be dismissed
on the merits as the decisions of the United States courts did not contravene Article
1105(1) of nafta.
As to the Tribunals jurisdiction:
(1) nafta was not retrospective in effect, nor did the conduct of Boston or the
bra continue after 1 January 1994 so as to be amenable to consideration under
nafta. Any expropriation claim Mondev may have had under Article 1110(1)
related to conduct which had definitive effect, at the latest, on the expiry of lpas
option over the Hayward parcel or the foreclosure of the mortgage. Any claim as
to possible discrimination likewise concerned conduct of an incidental character
occurring before that date. Mondevs nafta claim was accordingly confined to a
SUMMARY
185
claim under Article 1105(1) concerning the decisions of the United States courts
(paras. 5775).
(2) Even if the project effectively lapsed in 1991 with the foreclosure of the
mortgage over the site, Mondev continued to have claims in relation to the failure
of the project which involved interests arising from the commitment of capital or
other resources in the territory of a Party to economic activity in such territory as
at 1 January 1994. Once an investment exists, it remains protectedby nafta even
after the enterprise in question may have failed, provided there are subsisting claims
relating to that investment. Mondev had standing to bring its claim concerning
the decisions of the United States courts by virtue of Article 1116 of nafta, in
conjunction with paragraph (h) of the definition of investment in Article 1139
(paras. 7686).
(3) To the extent that Mondevs claim related to the decisions of the United States
courts, it was brought within three years and thus within the time allowed by Article
1116(2) of nafta (para. 87).
(4) It was not necessary to decide whether as a matter of Massachusetts law
Mondev lost all its property rights concerning the project, including the Hayward
parcel option, on the foreclosure of the mortgage in 1991, since it retained legal
claims against Boston and the bra after that date and at the date nafta entered into
force. Moreover there was no reason to doubt lpas ownership of the legal interests
which were in issue before the United States courts (paras. 8891).
As to the merits of the Article 1105(1) claim concerning the decisions of the United
States courts:
(5) The ftcs interpretation did not require that the concept of denial of justice,
incorporated in Article 1105(1), had to be applied exclusively by reference to
formulas in use in the 1920s. Article 1105(1) was intended to provide a real measure
of protection of investments, and had evolutionary potential. The question was
whether, at an international level and having regard to generally accepted standards
of the administration of justice, a tribunal could conclude in the light of all the
available facts that the impugned decision was clearly improper and discreditable,
with the result that the investment had been subjected to unfair and inequitable
treatment (paras. 10027).
(6) On the contract claim, the United States courts applied existing law to the
circumstances of the case with impartiality and in a manner which was neither
unpredictable nor irrational. They did not base their decision on any governmental
prerogative to violate investment contracts (paras. 12934).
(7) In declining to remand the contract claim to lower courts, the Supreme Judicial
Court acted in accordance with local procedural rules; and there was no procedural
denial of justice (paras. 1356).
(8) It was a matter for the local courts to determine whether and in what circumstances to apply new decisional law retrospectively, and there was no abuse of
discretion in the present case (paras. 1378).
(9) The extension to bra of statutory immunity in respect of wrongful interference
did not, in the circumstances of the case, violate Article 1105(1). Although the
conferral of a general immunity from suit for conduct of a public authority affecting
186
a nafta investment could amount to a breach of Article 1105(1), the extent of the
immunity granted in the present case, having regard to the bras role and functions,
did not violate Article 1105(1) (paras. 13954).
(10) Nor did the bras immunity from the application of trade practices legislation
raise any nafta problem. nafta does not require a State to apply its trade practices
legislation to statutory authorities (para. 155).
(11) As to costs, in the circumstances it was not appropriate to order costs or
expenses of the Tribunal to be paid by the Claimant (paras. 1589).
Interim decision regarding place of arbitration, bifurcation of proceedings,
production of documents, schedule of pleadings and procedure for the
submission of evidence (25 September 2000)
Interim decision regarding publication of documents (13 November 2000)
Interim decision regarding US compliance with foia request
(25 January 2001)
Further interim decision regarding confidentiality (27 February 2001)
Award (11 October 2002)
p. 186
p. 189
p. 190
p. 191
p. 192
PROCEDURAL ORDER OF 25 SEPTEMBER 2000

Interim decision regarding place of arbitration, bifurcation of proceedings, production of documents, schedule of pleadings and procedure for the submission of
evidence.
Tribunal:
Sir Ninian Stephen (President)

Judge Stephen M. Schwebel (Arbitrator)
Professor James Crawford (Arbitrator)
At the first session of the Arbitral Tribunal in this matter, held in Washington,
DC, on 20 April, 2000, the parties presented oral argument regarding the place of
arbitration, the bifurcation of proceedings and a proposed schedule of pleadings
and have subsequently presented extensive written submissions in support of their
arguments. The Claimant later requested the production of certain documents by
the Respondent and the parties have made written submissions thereon.
The Tribunal has considered the arguments and submissions of the parties and
now states its unanimous conclusions and reasons. In addition it adopts the agreement arrived at by the parties relating to procedures for the submission of evidence.
Place of Arbitration
The Claimant seeks an order that the arbitration be held in a Canadian city whereas
the Respondent urges that it be held in Washington, DC.
PROCEDURAL ORDER
187
The Tribunal has concluded that the place of arbitration shall be at the International Centre for the Settlement of Investment Disputes facilities in Washington,
DC. All relevant factors appear to the Tribunal to point to it as the appropriate place
of arbitration. Only one contention of the Claimant to the contrary calls for further
mention: it relates to confidentiality. This is of particular concern to the Claimant
in view of the Respondents statement that it regards itself as bound by the requirements of the US Freedom of Information Act with which, should it receive a
request for disclosure under the terms of that legislation, it will be obliged to comply, subject only to such exceptions from disclosure as are provided for in that Act.
The Claimant contends that a hearing in Canada will advantage it in successfully
opposing compliance by the Respondent with any request under that legislation
whereas the Respondent responds, correctly in the Tribunals view, that it will be
bound to comply with a request under the Freedom of Information Act (subject to
statutory exceptions) wherever the arbitration be conducted, whether in the United
States of America or in Canada.
Extensive further argument was heard and written submissions made regarding
the broader general question of confidentiality of proceedings but these do not affect
the question of the place of arbitration, to which only the effect of a request made
to the US under the Freedom of Information Act may be argued to be relevant.
Accordingly no ruling is at this time made regarding the general question of confidentiality which the Claimant is at liberty to raise should it become relevant.
Bifurcation of Proceedings
The Respondent seeks to have certain objections to competence which it raises
dealt with as a preliminary question separately from any hearing on the merits.
The Claimant on the contrary seeks to have those objections, if persisted in by the
Respondent, disposed of at the same time as the hearing of the merits of its claim.
The Tribunal, having considered the nature of each of the Respondents objections
to competence concludes that the proper administration of this dispute indicates
that these objections can best be dealt with at the same time as the hearing of the
merits of the case rather than as matters preliminary to that hearing.
Production of Documents
The Claimant has requested disclosure by the Respondent of specified documents
said to be in its possession, custody or control. This request, initially made by
letter from the Claimants counsel of 25 April 2000, concerned three classes of
documents: first, two documents relied upon by the Respondent at the hearing on
20 April 2000, secondly, all the submissions of the parties and decisions of the
tribunal at another arbitration to which the Respondent is a party and, thirdly, the
submissions and decisions in the Respondents possession from all other arbitrations
brought under nafta Chapter 11.
In response and after extensive correspondence between the parties the Respondent has supplied to the Claimant the first class of documents requested and also
such of the documents in the second and third classes in its possession as have been
188
submitted to or rendered by a tribunal in other Chapter 11 arbitrations and have

been made public previously by a disputing party.
The Claimant relied upon Article 41(2) of the icsid (Additional Facility) Rules
in making its request for production of documents. That Article relates to general
principles of evidence and in the view of the Tribunal is, in its reference to the
production of documents, concerned with documents which are or may be of an
evidentiary character in the dispute between the parties. The second and third classes
of documents are not of that character and are not discoverable by the Respondents
under Article 41. The Claimant also relies upon the relevance of those documents
as raising substantive and procedural issues similar to those in this arbitration; the
Respondent alone having access to them, the Claimant contends that, as a matter
of fairness and equality of arms, the Respondent should make them available to it.
The Tribunal notes the extensive compliance by the Respondent with the request
of the Claimant and does not consider that it should now order the latter to make
further disclosure of any of these classes of documents.
Schedule of Pleadings
The parties each proposed its own version of a schedule of pleadings. The Tribunal,
having considered those proposals, concludes that pleadings shall take the following
form:
(a) The Claimant shall initially deliver the first memorial, devoted both to competence and to the merits.
(b) The Respondent shall follow with its counter-memorial of the same scope.
(c) The Claimant may, if it sees fit, deliver a reply.
(d) The Respondent may, if it sees fit, deliver a rejoinder to that reply.
Any issues regarding matters of quantum of damages, should they arise for determination, will be disposed of following the disposition of the issues of the merits.
The parties are asked forthwith to confer together as to dates for the delivery
of the above pleadings and to advise the Tribunal of what agreement is arrived at.
Failing agreement, the Tribunal will fix dates after receiving submissions in writing
from each of the parties.
Submission of Evidence
The parties have reached agreement upon procedures for the submission of evidence
which the Tribunal hereby adopts, as set out in the Claimants counsels letter of 8
June 2000.
Orders
To give effect to the foregoing the Tribunal orders as follows:
1. That all further proceedings in this arbitration be held at the premises of The
International Centre for the Settlement of Investment Disputes in Washington,
DC.
PROCEDURAL ORDER
189
2. That at those proceedings the issues both of competence and of the merits be
argued, without any bifurcation of proceedings.
3. That no further order be made for production by the Respondent of documents
requested by the Claimant in its letter of 25 April 2000.
4. That pleadings on the issues of competence and of the merits be delivered
in the sequence described above, the issue of quantum of damages, should it
arise for determination, being disposed of separately and subsequently.
5. That in the proceedings in this arbitration evidence be submitted and testimony
received as follows:
The Parties agree that they shall include in or with their written submissions
(i.e., memorials, counter-memorials, reply memorials, and rejoinder memorials) not only their legal arguments, but also all of the evidence on which they
intend to rely for the legal arguments advanced therein, including written witness testimony, expert opinion testimony, documents, and all other evidence in
whatever form. The Tribunal shall not receive any testimony or other evidence
that has not been introduced in writing as part of the written submissions of the
Parties, unless the Tribunal determines that exceptional circumstances exist.
Before oral hearings and within time limits to be announced by the Tribunal,
a Party may be called upon by the Tribunal or the other Party to produce at the
hearing for examination and cross-examination any witness whose statement
has been advanced with the written submissions. If such a witness does not
appear at the hearing, unless the Parties otherwise agree, the Tribunal, in its
sole discretion, shall determine whether in the circumstances it will receive the
witnesss statement and, if so, it shall ascribe to that statement the probative
value that the Tribunal deems appropriate.
PROCEDURAL ORDER OF 13 NOVEMBER 2000
Interim decision regarding publication of documents.
Tribunal: Sir Ninian Stephen (President)
By its letter of 20 October 2000 the Respondent informed the Tribunal of its intention to post on its Internet site both the Claimants Notice of Arbitration and
this Tribunals Order and Interim Decision of 25 September 2000. By its letter of
30 October 2000 to the Tribunal the Claimant objected to any publication of these
documents, of any other documents submitted by the parties and of any orders or
decisions of the Tribunal.
The Tribunal has considered the submission of the parties and now states its
unanimous conclusion and reasons as follows:
(a) The Claimants Notice of Arbitration is already a public document since,
pursuant to Chapter 11 of the North American Free Trade Agreement,
Article 1126, 10(b) and 13, it already appears on a public register. Accordingly no question of confidentiality applies to it and in the absence of such
190
confidentiality each party should be free to publish it by whatever medium

it sees fit.
(b) The Tribunals Order and Interim Decision of 25 September 2000 is not a
public document. It represents the outcome of a hearing before the Tribunal,
followed by subsequent written submissions by the parties, which hearing
was itself not open to the public and the minutes of which are by Article 44(2)
of the Arbitration (Additional Facility) Rules not to be published without the
consent of the parties. Accordingly such Order and Interim Decision should
not be published by the Respondent whether by posting on its Internet site
or otherwise during the pendency of this arbitration.
(c) The Tribunal reserves for determination if and when the occasion arises the
question of the publication of any other documents in this arbitration and
also any publication after the conclusion of this arbitration of the said Order
and Interim Decision.
And It Is Accordingly Ordered that
1) The Respondent may publish the Claimants Notice of Arbitration in whatever
medium it sees fit.
2) The Respondent shall not publish the Tribunals Order and Interim Decision
in any medium during the pendency of this arbitration and shall thereafter be
free to publish the same only upon an order of this Tribunal to that effect.
PROCEDURAL ORDER OF 25 JANUARY 2001

Interim decision regarding US compliance with foia request.
Tribunal:

By letter of December 13, 2000 the Respondent informed the Tribunal that it had
received and intended to comply with a request by a member of the public pursuant
to the Freedom of Information Act, 5 USC 552 (the foia) for release of certain
of the Respondents written submissions to the Tribunal in this arbitration and of
certain letters from it to the Claimants counsel and to the Tribunal.
By letter of December 28, 2000 the Claimant informed the Tribunal that it objected to such release and stated its grounds for that objection. Each party has
subsequently made detailed written submissions in support of its contentions regarding such proposed release.
The Tribunal has considered the submissions of the parties and now states its
unanimous conclusion and reasons as follows:
The release by the Respondent of its written submissions and letters [is] proposed
to be made in compliance with a request made under the foia, with which the
Respondent asserts it is bound to comply unless those documents are exempt from
PROCEDURAL ORDER
191
disclosure under the provisions of the foia. The Claimant does not allege that any
of those submissions and letters fall within any such exemption but instead relies
upon the fact that unless the parties otherwise consent the proceedings before this
Tribunal are not open to the public.
The foia creates a statutory obligation of disclosure upon the Respondent. The
icsid (Additional Facility) Rules provide that the minutes of all hearings shall
not be published without the consent of the parties (Article 44(2)) and that the
consent of the parties determines who shall attend those hearings (Article 39(2)).
In general terms, however, the Rules do not purport to qualify statutory obligations
of disclosure which may exist for either party.
It Is Accordingly Ordered that the request of the Claimant for an Order directing
that the submissions and letters above referred to and which the Respondent proposes to release in accordance with a request made pursuant to the foia be denied.
PROCEDURAL ORDER OF 27 FEBRUARY 2001

Futher Interim Decision regarding confidentiality.
Tribunal:

By letter of January 31, 2001 the parties have sought clarification of an aspect of
the Tribunals Order of January 25, 2001, namely whether, in the absence of any
applicable statutory obligation of disclosure, the Arbitration (Additional Facility)
Rules of the International Centre for Settlement of Investment Disputes require the
parties to treat as confidential documents such as the submissions and letters the
subject of the Order of January 25, 2001.
The parties have, for the purposes of earlier requests for interim orders, already
made extensive submissions dealing inter alia with confidentiality. In the light of
its further consideration of those submissions and giving due weight to the terms
of Articles 14(2), 24(1), 39(2) and 44(2) of the said Rules and to Annex 1137.4 of
Chapter 11 of the North American Free Trade Agreement and such implications as
may be drawn from them, the Tribunal has unanimously concluded that during the
pendency of this arbitration all such documents should remain confidential unless
both parties agree to their publication.
It Is Accordingly Ordered:
That, unless otherwise ordered by the Tribunal and subject always to any applicable statutory obligation of disclosure, neither party to this arbitration shall before
the making by the Tribunal of its award publish the documents the subject of the
Order of January 25, 2001 or any other documents filed in these proceedings not
being documents already appearing in a public register maintained by the Secretariat.
192
AWARD (11 OCTOBER 2002)
Table of Contents
A. Introduction
B. The Underlying Dispute
C. The Tribunals Jurisdiction and the Admissibility of the Claim
1. The Arguments of the Parties
2. The Tribunals Views on the Preliminary Issues
(a) The United States objection ratione temporis
(b) Mondevs standing under Articles 1116(1) and 1117(1)
(c) The three year time bar (Articles 1116(2) and 1117(2))
(d) Ownership of the claim and the issue of the mortgage
3. Conclusion
D. The Merits of Mondevs Article 1105 Claim
1. The Interpretation of Article 1105
(a) The ftcs interpretations of 31 July 2001
(b) The applicable standard of denial of justice
2. The Application of Article 1105(1) to the Present Case
(a) The dismissal of LPAs contract claim against the City
(b) The sjcs failure to remand the contract claim
(c) The sjcs failure to consider whether it retrospectively
applied a new rule
(d) bras statutory immunity
E. Conclusion
paragraph
136
3740
4192
4555
5691
5775
7686
87
8891
92
93156
94127
100125
1267
12856
12934
1356
1378
13956
1579
AWARD
193
A. Introduction
Earlier Proceedings Concerning the Claim
1. This dispute arises out of a commercial real estate development contract concluded in December 1978 between the City of Boston (the City), the Boston
Redevelopment Authority (bra) and Lafayette Place Associates (lpa), a Massachusetts limited partnership owned by Mondev International Ltd, a company
incorporated under the laws of Canada (Mondev or the Claimant). In 1992,
lpa filed a suit in the Massachusetts Superior Court against the City and bra. The
trial was held in 1994 and culminated in a jury verdict in favour of lpa against both
defendants. The trial judge upheld the jurys verdict for breach of the Tripartite
Agreement against the City, but rendered a judgment notwithstanding the verdict
in respect of bra, holding bra immune from liability for interference with contractual relations by reason of a Massachusetts statute giving bra immunity from suit
for intentional torts. Both the City and lpa appealed. The Massachusetts Supreme
Judicial Court (sjc) affirmed the trial judges decision in respect of bra but upheld the Citys appeal in respect of the contract claim. lpa petitioned for rehearing
before the sjc on both claims, and sought certiorari to the United States Supreme
Court in respect of its contract claim against the City. Each of these petitions was
denied. In the event, therefore, lpa eventually lost both its claims.
2. Mondev subsequently brought a claim pursuant to Article 1116 of the North
American Free Trade Agreement (nafta) and the Additional Facility Rules of the
International Centre for Settlement of Investment Disputes (icsid or the Centre)
on its own behalf for loss and damage caused to its interests in lpa. Mondev claims
that due to the sjcs decision and the acts of the City and bra, the United States
breached its obligations under Chapter Eleven, Section A of nafta. In particular,
the Claimant alleges violations of nafta Articles 1102 (National Treatment), 1105
(Minimum Standard of Treatment), and 1110 (Expropriation and Compensation)
and seeks compensation from the United States of no less than US$50 million, plus
interest and costs.
The Parties
3. Pursuant to Article 27 of the Arbitration (Additional Facility) Rules, Mondev
is represented in these proceedings by:
Ms Abby Cohen Smutny
Ms Anne D. Smith and
Mr Lee A. Steven
White & Case llp
601 Thirteenth Street, NW
Washington, DC, 200053807 USA
and since 1 February 2001,
Sir Authur Watts, kcmg, qc
Mr Stephen H. Oleskey and

Ms Lisa J. Pirozzolo
Hale and Dorr llp
60 State Street
Boston, Massachusetts 021091803, USA
194
20 Essex Street
London WC2R 3AL, UK
4. Mr Charles N. Brower, of the law firm White & Case llp, represented the
Claimant from the beginning of the case until 27 December 2000. On 6 May 2002,
the Centre was notified that the Claimant would also be represented by Mr Rayner
M. Hamilton, also of White & Case llp.
5. Pursuant to Article 27 of the Arbitration (Additional Facility) Rules, the
Government of the United States of America is represented in these proceedings
by:
Mr Barton Legum
Chief, nafta Arbitration Division
Office of International Claims and Investment Disputes
Office of the Legal Adviser (L/CID)
2430 E Street, NW
Suite 203, South Building
Washington, DC 20037-2800, USA
6. The Respondent was also represented by Mr David R. Andrews, Mr Ronald
J. Bettauer, Ms Andrea K. Bjorklund and Ms Laura Svat of the United States
Department of State. Mr Andrews withdrew upon his resignation as the Legal
Adviser of the Department of State. On May 3, 2002, the Respondent notified
the Centre that in addition to Mr Bettauer, Mr Legum and Ms Svat, it would also
be represented in these proceedings by Mr William H. Taft IV (who succeeded
Mr Andrews as State Department Legal Adviser), Mr Mark A. Clodfelter,
Mr David Pawlak and Ms Jennifer I. Toole.
The Other NAFTA State Parties

7. nafta was concluded between the Governments of the United States of America, Canada and the United Mexican States, and entered into force on 1 January
1994. Article 1128 entitles a nafta Party to make submissions to a Chapter 11
Tribunal on any question of interpretation of nafta. Canada by letters of 19 April
and 12 June 2000 and Mexico by letter of 7 June 2000 expressed their wish to make
such submissions. They also expressed their wish to attend hearings held in the
course of the proceedings.
8. Canada was represented by Ms Meg Kinnear, General Counsel, Trade Law
Bureau, Department of Foreign Affairs and International Trade, Department of
Justice, 125 Sussex Drive, Ottawa, Ontario, K1A 0G2, Canada.
9. Mexico was represented by Mr Hugo Perezcano Daz, Consultor Jurdico de
Negociaciones, Consultora Jurdica de Negociaciones, Secretara de Comercio y
Fomento Industrial (secofi), Alfonso Reyes N 30, Piso 17, Col. Condesa 06179,
Mexico, D.F., Mexico and Mr Salvador Behar, Embassy of the United Mexican
States, Washington, DC, USA.
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Procedural History
10. As required by nafta Article 1119, the Claimant notified the Respondent on
6 May 1999 of its intention to submit its dispute with the United States to arbitration
under Section B of Chapter 11 of nafta. The Respondent acknowledged receipt
of this notice on that same day and by letter of 11 June 1999.
11. By letter of 18 May 1999, the Claimant offered to consult and negotiate on
this claim with the Respondent as envisaged by Article 1118 of nafta. By letter of
11 June 1999 the Respondent acknowledged receipt of this offer and agreed to meet
with Claimants counsel to discuss the claim. A meeting between the Claimant and
the Respondent took place in Washington, DC on 9 July 1999 but did not result in
a settlement.
12. Pursuant to nafta Article 1121(3), Mondev delivered its nafta Article 1121
Consent to Arbitration and Waiver of Other Dispute Settlement Procedures directly
to the United States on 31 August 1999. The terms of the waiver covered further
domestic claims both by Mondev and lpa. By a Notice of Arbitration dated 1
September 1999, the Claimant requested the Secretary-General of icsid to approve
and register its application for access to the icsid Additional Facility, and submitted
its claim to arbitration under the icsid Additional Facility Rules.
13. On 20 September 1999, the Acting Secretary-General of icsid informed the
parties that the requirements of Article 4 of the Additional Facility Rules had been
fulfilled and that the Claimants application for access to the Additional Facility
was approved, and issued a Certificate of Registration of the case on the same day.
14. In accordance with Article 1123 of nafta and Article 6 of the icsid Arbitration (Additional Facility) Rules, the parties proceeded to constitute the Arbitral
Tribunal. The Claimant appointed Professor James Crawford, an Australian national, as arbitrator. The Respondent appointed Judge Stephen M. Schwebel, a US
national, as arbitrator. The parties, by agreement, appointed the Rt Hon. Sir Ninian
Stephen, an Australian national, to serve as President of the Tribunal.
15. On 12 January 2000, in accordance with Article 14 of the Arbitration (Additional Facility) Rules, the Secretary-General of icsid informed the parties that all
the arbitrators had accepted their appointment and that the Tribunal was deemed
to have been constituted, and the proceeding to have begun, on that date. By that
same letter, the Secretary-General informed the parties that Mr Gonzalo Flores,
icsid, would serve as Secretary of the Tribunal. All subsequent written communications between the Arbitral Tribunal and the parties were made through the icsid
Secretariat. Mr Flores having left icsid in June 2001, Ms Elose Obadia, icsid, was
appointed as Secretary of the Tribunal.
16. On 15 February 2000, in order to comply fully and unambiguously with
its obligations under Article 1125(b) of nafta, the Claimant consented, in writing,
to the appointment of each individual member of the Tribunal.
17. On 1 March 2000, the Respondent informed the Centre that it objected to the
competence of the Tribunal. By letter of 14 April 2000, the Respondent submitted a
request that consideration of competence as a preliminary question be added to the
provisional agenda for the first session. In its view there were at least four reasons
why it submitted that the dispute was not within the Tribunals competence on the
196
grounds that Mondev did not own the rights at issue, that most of Mondevs claims
were time-barred, that Mondev lacked standing under Article 1116 of nafta and
that there was a lack of a final judicial act. This last objection was later withdrawn
by the Respondent.
18. Prior to the first session, on 19 April 2000, the Claimant filed a submission on
the issues of confidentiality of the proceedings (requesting that the parties and the
Tribunal retain control over the timing and extent of disclosure), place of arbitration
(suggesting Montreal or Toronto), and the objections to the competence of the
Tribunal (proposing that the objections, being so intertwined with the underlying
facts, be joined to the merits).
19. The first session of the Tribunal was held, with the parties agreement, in
Washington, DC on 20 April 2000. During the course of the session, the parties
acknowledged that the Tribunal had been properly constituted and were invited to
elaborate on the issues of confidentiality, place of arbitration and bifurcation of the
questions of jurisdiction and merits. The Tribunal, after deliberation, requested the
parties to file memorials on these three issues according to the following schedule:
Respondents Counter-Memorial due on 12 May 2000, Claimants Reply due within
three weeks of the date of receipt of the Respondents submission, and Respondents
Rejoinder due within ten days of receipt of the Claimants submission.
20. Following the Tribunals order, the United States submitted, on 12 May
2000, its Submission on Secrecy, Place of Arbitration and Bifurcation. Mondev
responded with a Reply to the Submission on Secrecy, Place of Arbitration and
Bifurcation on 2 June 2000 and the United States submitted its Rejoinder on
12 June 2000.
21. The Respondent argued that there was no requirement under nafta that the
parties keep arbitration proceedings secret and that, if Canada were chosen as the
place of arbitration, it would do nothing to further the secrecy of the proceedings,
since the United States must comply with US law, in particular the Freedom of
Information Act (foia), no matter where the arbitration was held. The Respondent
suggested that the place of arbitration be Washington, DC, for practical reasons and
because all relevant evidence was in the United States. Finally, Respondent asked the
Tribunal to treat the objections to competence as a preliminary question, following
standard practice in international arbitration and since the objections presented
questions of law distinct from the merits.
22. The Claimant explained that the issue was not the existence of an obligation of
confidentiality but rather its scope: it objected to unlimited disclosure to the public
of all documents in the case, such as transcripts, minutes, and tape recordings
of hearings, written arguments, expert opinions and witness statements. Claimant
argued in favour of Canada as the place of arbitration, since this would best safeguard
the confidentiality of the proceedings and would be a neutral site. Finally, the
Claimant, denying each of the United States objections to competence, requested
the Tribunal to join those objections to the merits.
23. On 15 May 2000, the Claimant requested the Tribunal, pursuant to Article
41(2) of the Arbitration (Additional Facility) Rules, to call upon the Respondent
to produce certain specified documents related to the previous and pending nafta
Chapter 11 arbitration cases, and in particular to Loewen Group, Inc. & Raymond L.
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Loewen v. United States of America (the Loewen case). By letter of 2 June 2000,
the Respondent agreed to produce those documents generated in other Chapter 11
arbitrations that had been made public, and also to provide Mondev with a broader
group of documents under the foia. By letter of 15 June 2000, the Claimant considered that the Respondents proposal complied only partially with its request for
documents, which it reiterated. The United States replied by letter of 30 June 2000
asking the Tribunal to deny Mondevs request except for the documents described
in its 2 June 2000 letter which it offered to produce. Copies of these documents
were given to the Claimant on 3 August 2000. On 21 August 2000, Claimant
acknowledged receipt of these documents but, considering that the United States
was still in possession of other documents requested but not produced, reiterated
its request.
24. On 25 August 2000, following the Respondents request and with the consent
of the claimant parties in the Loewen case, the Centre transmitted to the parties a
copy of the Loewen tribunals decision of 2 June 2000 clarifying its 28 September
1999 decision on disclosure. This decision was transmitted to the Tribunal under
cover of a 6 September 2000 letter from counsel for the Claimant. As for the
Respondent, it made a request for documents on 5 June 2000 which was complied
with by Mondev on 8 June 2000.
25. On 17 August 2000, the Centre informed Mexico and Canada that the Tribunal
invited them to make nafta Article 1128 submissions on the issues of secrecy,
place of arbitration and bifurcation by 15 September 2000, as they had respectively
requested on 7 June and 12 June 2000. In the event neither Mexico nor Canada
made submissions on these points.
26. On 25 September 2000, the Tribunal issued an order and an interim decision
regarding the place of arbitration, bifurcation of proceedings, production of documents, schedule of pleadings and procedure for the submission of evidence. The
Tribunal concluded that the place of arbitration would be the seat of the Centre in
Washington, DC, which, considering all relevant factors, appeared to be the most
appropriate. The Tribunal expressed the view that the Respondent would be bound
to comply with any foia request wherever the arbitration was conducted, whether
in the United States or in Canada. The Tribunal also concluded that except for this
consideration, the question of confidentiality was not relevant to the question of the
place of arbitration, and that no ruling on confidentiality was needed at this time in
the proceedings. Regarding the bifurcation of proceedings, the Tribunal considered
that the Respondents objections to competence could conveniently be, and should
be, joined to the merits of the case. Regarding the production of documents, the
Tribunal noted that the Respondent had extensively complied with the Claimants
request and did not consider that it should be ordered to make any further disclosure of the types of documents requested by the Claimant. The Tribunal stipulated
the number and sequence of pleadings devoted both to competence and the merits,
while leaving it for the parties to agree on the schedule. The Tribunal further ordered that issues of quantum of damages, should they arise for determination, be
disposed of separately and subsequent to the findings on liability. Finally, regarding
the submission of evidence, the Tribunal adopted the procedures agreed upon by
the parties and reflected in a letter of 8 June 2000 from the Claimant.
198
27. On 4 October 2000, the parties informed the Tribunal that they had agreed on a
schedule for the filing of pleadings. On 18 October 2000, the parties supplemented
their agreement to include a filing date for nafta Article 1128 submissions by
the non-disputing nafta State Parties. Upon the parties request, their agreement
was reflected in the Tribunals procedural order of 24 October 2000 according to
which the Claimant should file its Memorial on or before 1 February 2001; the
Respondent should file its Counter-Memorial on or before 1 June 2001; the nondisputing State Parties should make their submissions, if any, on or before 11 July
2001; the Claimant should file its Reply, including any response to any submissions
made by the two State Parties, on or before 1 August 2001; and the Respondent
should file its Rejoinder, including any response to any submissions made by the
two State Parties, on or before 1 October 2001. It was also agreed that the Claimant
could be granted additional time, if needed, to respond to any submissions by
the two State Parties, in which event, the Respondent would similarly be granted
additional time to respond to such submissions. The week starting 26 November
2001 was reserved for the hearing on competence and the merits.
28. On 20 October 2000, the Respondent informed the Tribunal of its intention
to post on its Internet site both the Claimants Notice of Arbitration and the Tribunals order and interim decision of 25 September 2000. By letter of 30 October
2000, the Claimant objected to any publication of these documents, of any other
documents submitted by the parties and of any orders or decisions of the Tribunal.
On 13 November 2000, the Tribunal issued its order and interim decision regarding publication of documents. The Tribunal held that, since the Claimants Notice
of Arbitration was already a public document which pursuant to nafta Article
1126(10)(b) and (13) appeared on a public register, the Respondent had the right
to publish the Notice of Arbitration by any medium it chose. However, the Tribunal considered that its order and interim decision of 25 September 2000 was not
a public document since it represented the outcome of a hearing not open to the
public and the minutes of which could not be published without the consent of
the parties pursuant to Article 44(2) of the Arbitration (Additional Facility) Rules.
The Respondent was precluded from publishing the Tribunals order and interim
decision until the conclusion of the proceedings; thereafter it could publish the
interim decision with the Tribunals permission.
29. On 13 December 2000, the Respondent informed the Tribunal that it had
received and intended to comply with a request under the foia for the release
of certain of the Respondents written submissions to the Tribunal and of certain
letters that it had addressed to the Claimant and the Tribunal. By letter of 28
December 2000, the Claimant informed the Tribunal that it objected to such release
and stated its grounds for that objection. Each party subsequently made written
submissions in support of its contentions regarding such proposed release. On
25 January 2001, the Tribunal issued an order and interim decision in which it
expressed the view that in general terms the icsid (Additional Facility) Rules did
not purport to qualify statutory obligations of disclosure which might exist for either
party. Since it appeared that the foia created a statutory obligation of disclosure
for the Respondent, the Tribunal rejected the Claimants request for the Tribunal
to prohibit the Respondent from releasing its submissions and correspondence in
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the case pursuant to the foia. By letter of 31 January 2001, the parties asked
the Tribunal to clarify its order on the question of whether, in the absence of
any statutory obligation of disclosure, the icsid (Additional Facility) Rules would
require the parties to treat as confidential documents such as parties submissions
made to the Tribunal and letters between the parties regarding the conduct of the
arbitration. In response, the Tribunal issued on 27 February 2001 an order and
further interim decision regarding confidentiality. In view of Articles 14(2), 24(1),
39(2) and 44(2) of the Arbitration (Additional Facility) Rules, and of Annex 1137.4
to Chapter 11 of nafta, the Tribunal ordered the parties to treat as confidential
until the conclusion of the proceedings such submissions and correspondence that,
exempting any applicable statutory obligation of disclosure, do not already exist in
a public register held by the Secretariat.
30. The Claimant filed its Memorial on Liability and Competence on 1 February
2001. The Respondent filed its Counter-Memorial on Competence and Liability on
1 June 2001. A nafta Article 1128 submission dated 6 July 2001 was made by
Canada on 9 July 2001.
31. On 31 July 2001, the Respondent submitted an interpretation of the same
date by the Free Trade Commission (ftc), established under Article 2001 of
nafta, regarding the issues of confidentiality and the minimum standard of treatment in accordance with international law. On 1 August 2001, the Claimant submitted its Reply on Liability and Competence. By letter of 2 August 2001, the
Claimant expressed its concern that it had lacked time to examine carefully the ftcs
interpretation before submitting its Reply. By letter of 8 August 2001, the Centre
informed the parties that the Tribunal acknowledged the reservation of the
Claimants right to comment on the applicability of the ftcs interpretation at a
later date.
32. As a separate matter, the Tribunal, having been obliged to depart from the date
originally fixed for the hearing on competence and the merits and after consultation
with the parties on their availability, requested that the parties confer with each
other to determine a five day period at the end of May 2002 for the hearing. The
parties informed the Centre on 28 August 2001 that they agreed to hold the hearing
during the week of 2024 May 2002. On 6 September 2001, the Centre informed
the parties that the Tribunal had confirmed its availability for those dates.
33. The Respondent filed its Rejoinder on Competence and Liability on 1 October 2001. On 26 November 2001, the Centre informed the parties that the Tribunal
agreed to a proposal by the parties of 15 November 2001 that the oral testimony of
witnesses was not necessary and that evidence presented at the hearing be confined
to written statements and/or opinions. During the written phase of the pleadings,
written statements and/or opinions were submitted by the parties. The Claimant
submitted statements by Messrs Stephen H. Oleskey and Martin Surkis, and opinions and reply opinions by Judge Kenneth W. Starr, Professor Robert E. Scott and
Professor Daniel R. Coquillette. The Respondent submitted opinions and rejoinder
opinions by Judge Rudolph Kass and Professor Karl B. Holtzschue.
34. The hearing on competence and the merits was held from 2024 May 2002 at
the World Bank headquarters in Washington, DC. The non-disputing nafta State
Parties were given two weeks following the hearing to make a nafta Article 1128
200
submission, if any. Canada informed the Tribunal on 5 June 2002 that it would not
file such a submission.
35. On 4 June 2002, the Claimant transmitted for the Tribunals consideration
a copy of the award on damages rendered on 31 May 2002 in nafta Chapter 11
case, Pope & Talbot Inc. v. Canada.1 By letter of 10 June 2002, the Respondent
objected to that submission, but requested permission to present brief comments
on the Award if the Tribunal were to consider it. On 28 June 2002 the Tribunal
granted an opportunity for the Respondent to file its views on the Pope & Talbot
Damages Award by 8 July 2002 and for the Claimant to file a reply by 15 July
2002. Canada and Mexico respectively informed the Tribunal on 2 July and 4
July 2002 of their wish to have an opportunity to review the submissions made
by the parties. By letter of 5 July 2002, the Tribunal granted seven days from the
filing of the Claimants reply for Canada and Mexico to file a nafta Article 1128
submission and seven days from the receipt of the later of the submissions by
Canada and Mexico, if any, for the disputing parties to file a final submission in
response.
36. The Respondent filed a substantial post-hearing submission on Pope & Talbot
on 8 July 2002. The Claimant answered by letter of 15 July 2002. Canada and
Mexico filed their respective submissions on this issue on 19 July and 23 July
2002, and the Respondent filed its Final Post-Hearing Submission, summarising
the submissions made by the three governments, on 29 July 2002. The Claimant
replied by letter of 30 July 2002. The Tribunal will refer to the content of these
submissions in due course.
B. The Underlying Dispute

37. The dispute arises out of efforts in the late 1970s by the City to rehabilitate
a dilapidated area in downtown Boston known as the Combat Zone, adjacent
to a shopping area. bra, the Citys planning and economic development agency,
selected Mondev and its then joint-venture partner, Sefrius Corporation, for a project
consisting in the construction of a department store, a retail mall, and a hotel in
the designated area. In 1978, Mondev and Sefrius formed lpa, through which they
would develop, build, own and manage the project. On 22 December 1978, lpa,
bra and the City signed the Tripartite Agreement, governed by the laws of the
Commonwealth of Massachusetts, providing for the development of the area in two
phases. Phase I involved the construction of a shopping mall, a parking garage and
a hotel. In accordance with the Agreement, lpa acquired in September 1979 the
right to develop certain parcels of property necessary for Phase I. Specifically, lpa
purchased the air rights over the Lafayette Parcel Phase I. Construction of that
Phase was completed in November 1985. Phase II contemplated the construction
of additional retail spaces, an office building and a department store on four parcels
of City-owned land adjacent to those used in Phase I. These four parcels of land
were to be assembled into a single parcel, called the Hayward Parcel. At the time
1
Pope & Talbot Inc. v. Canada, Award in respect of Damages, www.naftalaw.org, 31 May 2002.
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201
of the Agreement the parcels were partially occupied by a city car park, known as
the Hayward Place garage.
38. In the Tripartite Agreement, construction of Phase II of the project was made
contingent upon the decision by the City to remove the Hayward Place garage. If it
did, the City could build an underground parking garage on the site, and lpa would
be granted the air rights to build over it. The agreement as to the development
of the Hayward Parcel was principally set out in Section 6.02 of the Tripartite
Agreement (as amended). Section 6.02 contained an option for lpa to purchase the
Hayward Parcel. The option was conditional on notice by the City of its decision to
discontinue the Hayward Place garage and to construct an underground car park. lpa
could thereupon notify the City within a three-year period of its intent to purchase the
Hayward Parcel for a price calculated by a formula described in Section 6.02 of the
Tripartite Agreement. The Tripartite Agreement and accompanying maps identified
the boundaries of the Hayward Parcel, but indicated several alternatives concerning
the rights to be conveyed. In the Tripartite Agreement, the City was stated to have in
hand appraisals of the fair market value of two of the four component parcels of the
Hayward Parcel, and agreed forthwith to obtain appraisals of the two remaining
parcels.
39. In the event, the City decided to demolish the Hayward Place garage, and
lpa notified its intention to purchase the Hayward Parcel in 1986. But there were
various delays and difficulties in realising Phase II. By a further amendment to
the Tripartite Agreement made in 1987, the last date for closure under lpas option was 1 January 1989 unless otherwise agreed; this was however subject to the
proviso that the option would not expire if the City and/or the Authority shall
fail to work in good faith with the Developer through the design review process
to conclude a closing. But this change in the Tripartite Agreement did not accelerate progress. What then happened was described by the sjc in the following
terms:
lpa never demanded and the city never tendered a deed within the required time period
or at any other time. The basis of [lpas] contract action against the city is that the city
in bad faith failed to carry out those of its obligations under the Tripartite Agreement
necessary to allow lpa to proceed to demand a closing, and indeed that it engaged in
bad faith actions designed to impede lpa in effecting a timely closing. The reason for
these obstructionist tactics by the city, as lpa sought to show . . . was that the new
administration of Mayor Raymond Flynn believed that the price established by the
Section 6.02 formula, which was based on 1978 values, was grossly unfair to the city
in the light of a strong surge in real estate prices in the intervening years. lpa offered
evidence of several instances of what it claimed were the citys obstructionist tactics.
These included failing to complete the appraisals necessary to establish the price for
the Hayward Parcel, initiating zoning changes that would have greatly reduced the
allowable height of the office towers planned for the site, lack of cooperation about
determining [certain road closures], and threatening to put a new street through the
middle of the parcel, which would have made its development economically unviable.2
427 Mass 509, 51314 (1998).
202
In March 1988 lpa leased its rights in the project to another larger Canadian developer, Campeau, which proceeded to redesign the project.3 It was Campeau acting
as lessee which vainly sought an extension of the closure date of 1 January 1989.
When this was refused, in December 1988 Campeau notified the City that it wished
to complete the transaction immediately. But there was no tender of payment at the
time, nor was any other formal step taken. Subsequent to 1 January 1989, Campeau
obtained permission for the redesigned project. But subsequently it defaulted on
its obligations to lpa under the lease agreement, and lpa terminated the lease. In
February 1991, the mortgagor, Manufacturers Hanover Trust Co., foreclosed on the
mortgage. lpa subsequently, in March 1992, brought proceedings against the City
and bra.
40. For reasons which will appear, the Tribunal does not need to decide all of
the contested issues of fact and law which have been pleaded by the parties in
relation to this long-running dispute. It is worth stressing at this stage, however,
that a Massachusetts jury decided in Claimants favour against both the City and
bra. It is true that this verdict was not entered against bra because the Court
upheld its statutory immunity. But that aspect of the verdict was at no stage authoritatively contradicted as a matter of fact. Under Massachusetts law, the jurys
finding against bra implied some measure of bad faith or at least the absence of a
valid regulatory purpose. The United States argued that the substance of the jurys
finding against bra was never tested on appeal because of the statutory immunity,
and that is true. On the other hand the jury did have the advantage of seeing the
witnesses and reviewing the evidence at length on the particular issues it was asked
to address.
C. The Tribunals Jurisdiction and the Admissibility of the Claim
41. The procedural history of the case has already been described, including the
various United States objections to jurisdiction and admissibility, and the Tribunals
decision to join these to the merits. Before turning to the preliminary objections
raised by the United States, certain general comments are necessary.
42. International tribunals distinguish between issues going to their jurisdiction
and questions of procedure in relation to a claim which is within jurisdiction.
Arguably, nafta Article 1122 elides that distinction by providing that nafta Parties
consent to the submission of a claim in accordance with the procedures set out in
this Agreement. The United States raised a series of objections, some apparently
of a procedural character, but argued that since these concerned procedures set out
in this Agreement within the meaning of Article 1122, they went to the Tribunals
jurisdiction. According to the United States, its consent to arbitration was given
only subject to the conditions set out in nafta, which conditions should be strictly
and narrowly construed.
3
An earlier sale agreement to Campeau was not completed. lpa alleged that the reason was the Citys
refusal to grant, or even to consider granting, necessary consents for a sale of rights to the project. By
contrast the Citys consent to the lease agreement with Campeau was not required.
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43. In the Tribunals view, there is no principle either of extensive or restrictive

interpretation of jurisdictional provisions in treaties.4 In the end the question is
what the relevant provisions mean, interpreted in accordance with the applicable
rules of interpretation of treaties. These are set out in Articles 313 of the Vienna
Convention on the Law of Treaties, which for this purpose can be taken to reflect
the position under customary international law.5
44. It may be that a distinction is to be drawn between compliance with the
conditions set out in Article 1121, which are specifically stated to be conditions
precedent to submission of a claim to arbitration, and other procedures referred to in
Chapter 11. Unless the condition is waived by the other Party, non-compliance with
a condition precedent would seem to invalidate the submission,6 whereas a minor or
technical failure to comply with some other condition set out in Chapter 11 might
not have that effect, provided at any rate that the failure was promptly remedied.7
Chapter 11 should not be construed in an excessively technical way, so as to require
the commencement of multiple proceedings in order to reach a dispute which is in
substance within its scope.
1. The Arguments of the Parties
45. The United States made a series of objections to the competence of the Tribunal to hear the present case. Many of these objections centre on the circumstance
that the dispute arose in the period from 1985 to 1991, well before nafta entered
into force, albeit that the final United States judicial decisions denying lpas claims
occurred after 1 January 1994. This circumstance was said by the United States,
first, to deprive the Tribunal of jurisdiction, since under Articles 1116(1)(a) and
1117(1)(a), jurisdiction is limited to breaches of specified obligations arising after
nafta entered into force; secondly, to render the claim time-barred, since under
Articles 1116(2) and 1117(2) a claim may not be brought more than three years . . .
from the date on which the investor first acquired, or should have first acquired,
knowledge of the alleged breach and knowledge that the investor has incurred loss
or damage, and thirdly, to defeat the claim in substance, since there can be no
breach of a treaty which was not in force at the time of the acts constituting the
alleged breach. The United States also objected to the claim on the ground that
any loss or damage had been suffered by lpa (the enterprise), and that the claim
should accordingly have been brought on behalf of lpa under Article 1117 and
4
Neither the International Court of Justice nor other tribunals in the modern period apply any principle
of restrictive interpretation to issues of jurisdiction. For the International Court see e.g., Fisheries
Jurisdiction Case (Spain v. Canada), ICJ Reports 1998 p. 432 at pp. 4512 (paras. 378), 4526 (paras.
4456); Case concerning the Aerial Incident of 10 August 1999 (Pakistan v. India), 39 ILM 1116 (2000)
at p. 1130 (para. 42). For other tribunals see, e.g., Amco Asia Corporation v. Republic of Indonesia
(Jurisdiction), (1983) 1 ICSID Reports 389 at p. 394; Ethyl Corporation v. Canada (Jurisdiction),
decision of 24 June 1998, (1999) 38 ILM 708 at p. 723 (para. 55).
5
As the International Court has repeatedly held: e.g., Case concerning Kasikili/Sedudu Island
(Botswana/Namibia), ICJ Reports 1999 p. 1045 at pp. 105960 (paras. 1820).
6
Cf. Waste Management v. Mexico, decision of 2 June 2000, 40 ILM 56 (2001).
7
As previous Chapter 11 Tribunals have noted in Ethyl Corporation v. Canada (Jurisdiction), decision
of 24 June 1998, (1999) 38 ILM 708 at p. 723 (para. 58), p. 727 (para. 75), p. 729 (paras. 85, 91); Pope
& Talbot Inc. v. Government of Canada, interim award of 7 August 2000, para. 26.
204
not by Mondev on its own behalf. But since the notice of intention to submit the
claim to arbitration did not refer to Article 1117 and did not contain the address
of the enterprise, the claim must be considered as having been brought only under
Article 1116. The United States reserved the right at a later stage, if necessary, to
argue that Mondev had not itself suffered any loss or damage within the meaning of
Article 1116(2). The United States also argued that since the entirety of Mondevs
and lpas interests in the project had lapsed in 1991, with the foreclosure of the
mortgage, Mondev was not an investor, nor was lpa an enterprise or an investment,
as defined in Article 1139, at the time nafta entered into force.
46. It is convenient to deal with these arguments together, irrespective of whether
they may be considered as going to jurisdiction, admissibility or the merits.
The objection ratione temporis
47. The United States argued that, with the exception of the Massachusetts court
decisions, all the acts complained of occurred prior to 1 January 1994, when nafta
entered into force, and cannot therefore sustain a nafta claim. It accepted that,
if Mondev had been an investor as at 1 January 1994 (which it denied), and if
the decisions of the Massachusetts courts had constituted a denial of justice or
had otherwise breached Article 1105, those decisions would have been in principle
subject to nafta review. But it denied that there had been the slightest infringement
of the minimum standard of treatment under Article 1105.
48. Mondev for its part argued that the breaches were not perfected until the
United States courts had dealt with lpas claims under Massachusetts law. The
pre-1994 conduct of Boston and bra was wrongful, in terms of the international
minimum standard or of Massachusetts law or both, and this created a continuing
situation which, under Article 1105, the United States had an obligation to remedy.
After 1994, and as a result of the court decisions, the United States failed to provide
any remedy. This failure was itself a breach of nafta which encompassed the whole
dispute between the parties, or at least so much of it as was covered by lpas claims
for breach of contract and tortious interference.
Mondevs standing under Articles 1116(1) and 1117(1)
49. The United States stressed that Mondevs notice of intent delivered under
Article 1119 made no mention of Article 1117, nor did it give the address of the
enterprise (lpa) required by Article 1119(a). Accordingly, it argued, the claim could
only be considered as having been brought under Article 1116 by the investor on its
own behalf. Since Mondev had not shown that it had itself suffered loss or damage,
the United States reserved the right to argue at the quantum stage, if necessary,
that no claim could be brought under Article 1116. If Mondev wished to claim on
behalf of lpa as an enterprise, it could only do so by submitting a further notice of
intent under Article 1119 (which would, in any event, be out of time).
50. Mondev argued that its claim was properly brought under Article 1116. It
stressed that it had made an investment which it controlled indirectly; that nafta
applies to pre-existing investments, and that the phrase owned or controlled directly
or indirectly in the definition of investment of an investor of a Party in Article
1139 excluded restrictive definitions of direct investment based upon the principle
AWARD
205
of separateness of corporate personality laid down by the International Court in the

Barcelona Traction case.8 In any event, if it was necessary to regard the claim as
brought under Article 1117 on behalf of lpa, there was no difficulty in the Tribunal
doing so. The only information required under Article 1119 which Mondev did not
provide was the address of lpa, and this deficiency was soon afterwards corrected.
The three year time bar (Articles 1116(2) and 1117(2))
51. The United States argued that, even if Mondevs arguments concerning the
continuing character of the breaches of Articles 1102, 1105 and 1110 were tenable,
the breaches occurred at the latest on 1 January 1994, and Mondevs commencement
of the arbitration was therefore out of time under Article 1116(2). It accepted that
this objection did not apply to the denial of justice claim arising from the decisions
of the United States courts, the arbitration having been commenced within 3 years
of those decisions.
52. In response Mondev argued that the breaches did not occur until the decisions
of the United States courts which finally failed to give it any redress; alternatively,
until those decisions, Mondev was not in a position to be sure whether it had
suffered loss. Thus it was not until those decisions that Mondev first acquired,
or should have first acquired . . . knowledge that the investor has incurred loss or
damage. The term knowledge in Article 1116(2) and 1117(2) required certain
knowledge, which by definition until that time Mondev could not have had. Since
(as the United States accepted), the time bar was only triggered when the investor
acquired both knowledge of the breach and knowledge of the loss or damage, there
was no applicable time bar in the present case.
Ownership of the claim and the foreclosure of the mortgage
53. Another issue on which the parties disagreed concerned the status and extent
of lpas interest in the project following foreclosure of the mortgage by the United
States bank, Manufacturers Hanover Trust Co. (Manufacturers Hanover), in 1991.
Conflicting expert testimony on the point was put forward by Professor Robert Scott
(for the Claimant) and Professor Karl Holtzschue (for the Respondent). Essentially
the question was whether the mortgage interest of Manufacturers Hanover covered
lpas contractual rights of action against the City and bra arising from the failure
of the project.
54. The United States argued that when Manufacturers Hanover foreclosed on the
mortgage over the whole project in 1991, it also acquired all lpas rights in relation
to the Hayward Parcel option, since the mortgage deed expressly covered any rights
of option associated with the property. Thereafter there was no investment of any
kind owned or controlled by Mondev, and Mondev no longer held any rights of
action in relation to the project.
55. Mondev pointed to the express exclusion in the mortgage deed of any
rights of the mortgagor hereunder to develop parcels adjacent to the premises,
and noted that Manufacturers Hanover had never claimed ownership of the
8
Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain), ICJ Reports 1970 p. 3.
In this respect Mondev cited K. J. Vandevelde, United States Investment Treaties: Policy and Practice
(Kluwer, Boston, 1992), pp. 456.
206
contractual and other causes of action which lpa had pursued before the United
States courts. lpa and, through lpa, Mondev thus had subsisting rights in the
project and the Tripartite Agreement on 1 January 1994 which nafta could protect.
2. The Tribunals Views on the Preliminary Issues

56. The Tribunal has reached the following conclusions on the preliminary
issues.
(a) The United States objection ratione temporis
57. Both parties accepted that the dispute as such arose before naftas entry
into force, and that nafta is not retrospective in effect. They also accepted that in
certain circumstances conduct committed prior to the entry into force of a treaty
might continue in effect after that date, with the result that the treaty could provide a
basis for determining the wrongfulness of the continuing conduct. They disagreed,
however, over whether and how the concept of a continuing wrongful act applied
to the circumstances of this case.
58. For its part the Tribunal agrees with the parties both as to the non-retrospective
effect of nafta and as to the possibility that an act, initially committed before nafta
entered into force, might in certain circumstances continue to be of relevance after
naftas entry into force, thereby becoming subject to nafta obligations. But there
is a distinction between an act of a continuing character and an act, already completed, which continues to cause loss or damage.9 Whether the act which constitutes
the gist of the (alleged) breach has a continuing character depends both on the facts
and on the obligation said to have been breached. In that regard it is convenient to
deal initially with Mondevs claim under Article 1110 for expropriation.
59. Mondevs claim under Article 1110 could be put in three ways, partly overlapping. First, it could be said that by the Citys action in frustrating the exercise of
the Hayward Parcel optionaction attributable to the United Statesthe United
States effectively expropriated the value of that option. Secondly, it could be
said that by the overall course of conduct of the City and bra, the United States
effectively expropriated the value of the enterprise as a whole. Thirdly, it could be
said that by the decisions of its courts, the United States effectively expropriated
the value of the rights to redress arising from the failure of the project.
Alleged taking of the Hayward Parcel option
60. As to the Hayward Parcel option, assuming for the sake of argument that
lpas option over the Hayward Parcel could have been expropriated by the conduct
alleged, that option nonetheless lapsed on 1 January 1989 in accordance with its
terms.10 If there was an expropriation of that right, it was complete as at that time.
9
Cf. ILC Articles on Responsibility of States for Internationally Wrongful Acts, annexed to GA Resolution 86/83, 12 December 2001, Article 14(1).
10
Although the Third Amendment to the Tripartite Agreement contained a proviso excluding the expiry
date in cases of lack of good faith efforts by the City or bra to conclude a closing (see above, para. 39),
this does not appear to have been relied on by Mondev or Campeau.
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207
Issues of failure to compensate for the taking of the right never subsequently arose,
still less did lpa argue at the time that its consent to the Third Amendment to the
Tripartite Agreement was void or should be invalidated for coercion or duress. The
question was rather whether the Citys conduct constituted a breach of the option
under the amended Tripartite Agreement.
Loss of LPAs and Mondevs rights in the project
61. As to the loss of lpas and Mondevs rights in the project as a whole, this
occurred on the date of foreclosure and was final. Any expropriation, if there was
one, must have occurred no later than 1991. In the circumstances it is difficult to
accept that there was a continuing expropriation of the project as a whole after that
date. All that was left thereafter were lpas in personam claims against Boston and
bra for breaches of contract or torts arising out of a failed project. Those claims
arose under Massachusetts law, and the failure (if failure there was) of the United
States courts to decide those cases in accordance with existing Massachusetts law,
or to act in accordance with Article 1105, could not have involved an expropriation
of those rights.
62. It is accordingly not necessary to consider any issues of attribution or causation, or the circumstances in which the loss of contractual rights can amount to a
breach of Article 1110.
63. Similar conclusions apply to Mondevs claims under Articles 1102 and 1105
as they relate to conduct of Boston or bra which had definitive effect before 1994.
64. As to Article 1102, Mondev complained of certain remarks by officials of
Boston and bra which, it maintained, indicated a certain anti-Canadian animus.11
The United States sought to explain these as de minimis or incidental, and it argued
that they had and could have had no effect on the outcome of the dispute. It also
noted that lpa achieved a striking verdict before a Boston jury, notwithstanding its
Canadian ownership.
65. In any event, the statements in question were all made well before naftas
entry into force, and Mondev specifically disclaimed any allegation of discrimination or bias in the decisions of the United States courts after naftas entry into
force. Moreover there were reasons, independent of lpas Canadian parentage, for
the positions taken by the City and bra in relation to the Tripartite Contract. It does
not matter for the purposes of Article 1102 whether those reasons were or were not
discreditable, or whether they involved an intention to breach or assist in the breach
of a contract. The Tribunal does not think they were discriminatory, and this conclusion is supported by the Citys and bras subsequent treatment of Campeau, also a
Canadian corporation. As Mondev itself stressed, Campeau rather rapidly obtained
the various permissions required for its Boston Crossing project. The project did
not proceed because of Campeaus insolvency, which had nothing to do with either
the City or bra. One reason Campeau had no difficulty in obtaining bras consent
for the projectand it may be the crucial reasonwas that it was prepared to pay
the market price for the Hayward Parcel, unlike Mondev, which understandably
11
For example Mr Coyle, Director of the bra, is said to have objected to Mondev taking profits from
the project and running back to Canada with them. Other statements were of a similar character.
208
was willing to pay no more than the Tripartite Agreement specified. Moreover no
allegation of discrimination was pursued by lpa in the Massachusetts proceedings.
In the circumstances these allegations of breaches of Article 1102 would clearly
fail on the merits. But, however that may be, they are not relevant to any claim of a
breach of nafta relating to acts or omissions of the United States after 1 January
1994.
66. As to Mondevs claim under Article 1105(1), this covers conduct both before
and after the date of naftas entry into force. Mondev argued that the situation
at the end of 1993 was that it had an unremedied claim in respect of conduct of
Boston and bra, which conduct was (or, if nafta had been in force at relevant
times, would have been) a violation of the standard of protection under Article
1105(1). The subsequent failure of the United States courts to provide any remedy
for that continuing situation was itself, in the circumstances, a breach of Article
1105(1), which matured only with the definitive rejection of Mondevs claims.
67. The United States for its part did not dispute that the decisions of the City
of Boston, bra and the Massachusetts courts were attributable to it for nafta
purposes.12 But it denied that any conduct which occurred prior to 1 January 1994
could be taken as constituting a breach of nafta. In this respect it cited the following
passage from Feldman v. United Mexican States:
Given that nafta came into force on January 1, 1994, no obligations adopted under
nafta existed, and the Tribunals jurisdiction does not extend, before that date. nafta
itself did not purport to have any retroactive effect. Accordingly, this Tribunal may not
deal with acts or omissions that occurred before January 1, 1994.13
The Respondent also argued that any remedial duty that might have arisen as a
result of the acts of Boston and bra before 1994 could not, ex hypothesi, involve
any continuing breach of nafta obligations. Any such duty could only arise from
a breach of nafta, which was not in force at the time.
68. The basic principle is that a State can only be internationally responsible for
breach of a treaty obligation if the obligation is in force for that State at the time
of the alleged breach. The principle is stated both in the Vienna Convention on
the Law of Treaties14 and in the ILCs Articles on State Responsibility,15 and has
been repeatedly affirmed by international tribunals.16 There is nothing in nafta to
the contrary. Indeed Note 39 to nafta confirms the position in providing that this
Chapter covers investments existing on the date of entry into force of this Agreement
as well as investments made or acquired thereafter. Thus, as the Feldman Tribunal
held, conduct committed before 1 January 1994 cannot itself constitute a breach of
nafta.
12
See nafta, Article 105, and cf. ILC Articles on Responsibility of States for Internationally Wrongful
Acts, 2001, Article 4.
13
Feldman v. United Mexican States (icsid Case No. ARB(AF)/99/1), Interim Decision on Preliminary
jurisdictional issues, 6 December 2000, (2001) 65 ILM 615 at p. 625 (para. 62).
14
Vienna Convention on the Law of Treaties, 23 May 1969, 1155 UNTS 331, Article 28.
15
ILC Articles on Responsibility of States for Internationally Wrongful Acts, 2001, Article 13.
16
E.g., Amoco International Finance Corp. v. Islamic Republic of Iran (1987) 15 IranUS Claims
Tribunal Reports 189 at p. 215.
AWARD
209
69. On the other hand, it does not follow that events prior to the entry into force of
nafta may not be relevant to the question whether a nafta Party is in breach of its
Chapter 11 obligations by conduct of that Party after naftas entry into force.17 To
the extent that the last sentence of the passage from the Feldman decision, quoted
in para. 67 above, appears to say the contrary, it seems to the present Tribunal to
be too categorical, as indeed the United States conceded in argument.
70. Thus events or conduct prior to the entry into force of an obligation for
the respondent State may be relevant in determining whether the State has subsequently committed a breach of the obligation. But it must still be possible to
point to conduct of the State after that date which is itself a breach. In the present
case the only conduct which could possibly constitute a breach of any provision
of Chapter 11 is that comprised by the decisions of the sjc and the Supreme
Court of the United States, which between them put an end to lpas claims under
Massachusetts law. Unless those decisions were themselves inconsistent with
applicable provisions of Chapter 11, the fact that they related to pre-1994 conduct which might arguably have violated obligations under nafta (had nafta
been in force at the time) cannot assist Mondev. The mere fact that earlier conduct has gone unremedied or unredressed when a treaty enters into force does not
justify a tribunal applying the treaty retrospectively to that conduct. Any other approach would subvert both the intertemporal principle in the law of treaties and the
basic distinction between breach and reparation which underlies the law of State
responsibility.
71. It is true that the obligation to compensate as a condition for a lawful expropriation (nafta Article 1110(1)(d)) does not require that the award of compensation
should occur at exactly the same time as the taking. But for a taking to be lawful
under Article 1110, at least the obligation to compensate must be recognised by the
taking State at the time of the taking, or a procedure must exist at that time which
the claimant may effectively and promptly invoke in order to ensure compensation.
A taking of property, not acknowledged as such by the government concerned
and not accompanied by any offer of compensation, is not rendered conditionally
lawful by the contingency that the aggrieved party may sue in the local courts for
conversion or for breach of contract. There is a distinction between compensation
offered or provided for a lawful taking of property and damages for the wrongful
seizure of property.
72. In this respect it should be noted that Article 1110 requires that the nationalization or expropriation be on payment of compensation in accordance with
paragraphs 2 through 6. The word on should be interpreted to require that the
payment be clearly offered, or be available as compensation for taking through a
readily available procedure, at the time of the taking. That was not the case here,
and accordingly, if there was an expropriation, it occurred at or shortly after the
rights in question were lost.
73. The Tribunal has already given reasons for concluding that any expropriation
of the enterprise occurred not later than the date of foreclosure, and that it was
17
Cf. Papamichalopoulos v. Greece, ECHR Ser. A No. 260-B (1993), a case of continuing de facto
expropriation of land acknowledged to belong to the applicants.
210
completed at the latest by that date. Similarly, lpas rights associated with the
Hayward Parcel option terminated when the option terminated. As to these rights
or interests, there was no continuing wrongful act in breach (or potentially in
breach) of Article 1110 at the date nafta entered into force. There remained only
the possibility that the subsequent conduct of the courts in dealing with lpas claims
under Massachusetts law, seen in the context of the factual dispute out of which
those claims arose, might give rise to a nafta breach.
74. Nor do Articles 1105 or 1110 of nafta effect a remedial resurrection of
claims a Canadian investor might have had for breaches of customary international
law occurring before nafta entered into force. It is true that both Articles 1105 and
1110 have analogues in customary international law. But there is still a significant
difference, substantive and procedural, between a nafta claim and a diplomatic
protection claim for conduct contrary to customary international law (a claim which
Canada has never espoused).
75. For these reasons, the Tribunal concludes that the only arguable basis of
claim under nafta concerns the conduct of the United States courts in dismissing
lpas claims. Moreover it is clear that Article 1105(1) provides the only basis for
a challenge to that conduct under nafta.
(b) Mondevs standing under Articles 1116(1) and 1117(1)
76. In substance, only two claims were before the United States courts, although
these were formulated in a variety of ways, both under the common law of Massachusetts and under certain Massachusetts statutes. These claims concerned, first,
the Citys breach of contract by reason of its failure to sell the Hayward Parcel
on the terms agreed, and secondly, bras wrongful interference with the sale contract for the enterprise as a whole between lpa and Campeau. It may be noted that
these claims were not coextensive with Mondevs overall grievance against Boston.
However, for the reasons given in the preceding section, either these broader claims
were not covered by nafta at all, or (if they survived as domestic law claims which
might have been pursued before the Massachusetts courts) they were not pursued
and are now on any view time-barred. Thus the only live question for the Tribunal is
whether Mondev has standing to protest the United States court decisions concerning lpas claims for breach of contract and wrongful interference. For the reasons
given, the only basis for challenging those claims is Article 1105.
77. The United States argued that there was no subsisting investment in the
project as at 1 January 1994. The project had definitively failed at the time of the
foreclosure, and all that was left were certain claims for damages. Since there was
no investment at that time, Mondev could not be considered an investor of a Party
at that time. The United States noted that the exhaustive definition of investment
in Article 1139 specifically excluded . . .
(j) any other claims to money,
that do not involve the kinds of interests set out in subparagraphs (a) through (h).
By 1 January 1994, all Mondev had were claims to money associated with an
investment which had already failed.
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211
78. Mondev argued that, through lpa, it has subsisting and substantial interests
arising from the project, and thus has standing as an investor to assert a breach of
Chapter 11. In particular, it stressed the definition in Article 1139 of investment
of an investor of a Party:
investment of an investor of a Party means an investment owned or controlled directly
or indirectly by an investor of such Party.
The phrase owned or controlled directly or indirectly was, in its view, specifically
adopted to avoid the difficulties relating to the standing of shareholders raised by
the decision of the International Court in the Barcelona Traction case.18 To interpret
Chapter 11 in the light of that case, as the United States sought to do, was inconsistent
both with its plain language and with its object and purpose.
79. The Tribunal notes that Chapter 11 specifically addresses issues of standing
and scope of application through a series of detailed provisions, most notably the
definitions of enterprise, investment, investment of an investor of a Party and
investor of a Party in Article 1139. These terms are used with care throughout
Chapter 11. nafta does not adopt the device commonly used in bilateral investment
treaties (bits) to deal with the foreign investment interests held in local holding
companies, namely, that of deeming the local company to have the nationality of
the foreign investor which owns or controls it.19 On the contrary, it distinguishes
between claims by investors on their own behalf (Article 1116) and claims by
investors on behalf of an enterprise (Article 1117). Under Article 1116 the foreign
investor can bring an action in its own name for the benefit of a local enterprise
which it owns and controls; by contrast, in a case covered by Article 1117, the
enterprise is expressly prohibited from bringing a claim on its own behalf (Article
1117(4)). Faced with this detailed scheme, there does not seem to be any room for
the application of any rules of international law dealing with the piercing of the
corporate veil or with derivative actions by foreign shareholders. The only question
for nafta purposes is whether the claimant can bring its interest within the scope
of the relevant provisions and definitions.
80. In the present case, in the Tribunals view, Mondevs claims involved interests arising from the commitment of capital or other resources in the territory
of a Party to economic activity in such territory as at 1 January 1994,20 and they
were not caught by the exclusionary language in paragraph (j) of the definition of
investment, since they involved the kinds of interests set out in subparagraphs
(a) through (h). They were to that extent investments existing on the date of entry
into force of this Agreement, within the meaning of Note 39 of nafta. In the
Tribunals view, once an investment exists, it remains protected by nafta even
after the enterprise in question may have failed. This is obvious with respect to the
protection offered by Article 1110: as the United States accepted in argument, a
18
Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain), ICJ Reports 1970 p. 3.
See, e.g., SwitzerlandBolivia bit 1987, 1748 UNTS 414 Art. 1(b)(aa); Protocol to the Sweden
Lithuania bit 1992, 1823 UNTS 15, para. 2. See further, R. Dolzer & M. Stevens, Bilateral Investment
Treaties (Martinus Nijhoff, The Hague, 1995), pp. 3842.
20
See Art. 1139, definition of investment, para. (h).
19
212
person remains an investor for the purposes of Articles 1116 and 1117 even if the
whole investment has been definitively expropriated, so that all that remains is a
claim for compensation. The point is underlined by the definition of an investor
as someone who seeks to make, is making or has made an investment. Even
if an investment is expropriated, it remains true that the investor has made the
investment.
81. Similar considerations apply to Articles 1102 and 1105. Issues of orderly liquidation and the settlement of claims may still arise and require fair and equitable
treatment, full protection and security and the avoidance of invidious discrimination. A provision that in a receivership local shareholders were to be given
preference to shareholders from other nafta States would be a plain violation of
Article 1102(2). The shareholders even in an unsuccessful enterprise retain interests in the enterprise arising from their commitment of capital and other resources,
and the intent of nafta is evidently to provide protection of investments throughout their life-span, i.e., with respect to the establishment, acquisition, expansion,
management, conduct, operation, and sale or other disposition of investments.21
82. Accordingly, there were subsisting interests relating to Mondevs investment
in the project as at 1 January 1994. It is true that these interests were held by lpa,
but lpa itself was owned or controlled directly or indirectly by Mondev, and these
interests were an investment of an investor of a Party as defined in Article 1139.
It may be noted that the United States did not really contest Mondevs standing
under Article 1116, subject to the question whether it had actually suffered loss or
damage. In the Tribunals view, it is certainly open to Mondev to show that it has
suffered loss or damage by reason of the decisions it complains of, even if loss or
damage was also suffered by the enterprise itself, lpa.
83. For these reasons, the Tribunal concludes that Mondev has standing to bring
its claim concerning the decisions of the United States courts by virtue of Article
1116 of nafta in conjunction with paragraph (h) of the definition of investment
in Article 1139.
84. More attention was devoted in argument to Article 1117 than to Article 1116.
In particular the United States argued that Mondev should have brought the action
on behalf of the enterprise, lpa, under Article 1117. It pointed to the importance of
the distinction between claims brought by an investor of a Party on its own behalf
under Article 1116 and claims brought by an investor of a Party on behalf of an
enterprise under Article 1117. The principal difference relates to the treatment of
any damages recovered. If the claim is brought under Article 1117, these must
be paid to the enterprise, not to the investor (see Article 1135(2)). This would
enable third parties with, for example, security interests or other rights against the
enterprise to seek to satisfy these out of the damages paid. It could also make a
difference in terms of the tax treatment of those damages.
85. In addition, if a claim is brought under Article 1117, both the investor and
the enterprise must waive the right to initiate or continue local proceedings (Article
1121(2)). In the present case, although its Notice of Arbitration purported to be
limited to claims under Article 1116, Mondev submitted with that Notice an express
21
nafta, Art. 1102(1) and (2).
AWARD
213
waiver not only on its own behalf but also on behalf of lpa, and the United States
raised no question about the validity of that waiver vis-à-vis lpa. Accordingly no
question of the sufficiency of these proceedings arises under Article 1121 of nafta.
86. Having regard to the distinctions drawn between claims brought under Articles 1116 and 1117, a nafta tribunal should be careful not to allow any recovery,
in a claim that should have been brought under Article 1117, to be paid directly
to the investor. There are various ways of achieving this, most simply by treating
such a claim as in truth brought under Article 1117, provided there has been clear
disclosure in the Article 1119 notice of the substance of the claim, compliance with
Article 1121 and no prejudice to the Respondent State or third parties. International
law does not place emphasis on merely formal considerations, nor does it require
new proceedings to be commenced where a merely procedural defect is involved.22
In the present case there was no evidence of material non-disclosure or prejudice,23
and Article 1121 was complied with. Thus the Tribunal would have been prepared,
if necessary, to treat Mondevs claim as brought in the alternative under Article
1117.24 In the event, the matter does not have to be decided, since the case can be
resolved on the basis of Claimants standing under Article 1116. But it is clearly
desirable in future nafta cases that claimants consider carefully whether to bring
proceedings under Articles 1116 and 1117, either concurrently or in the alternative,
and that they fully comply with the procedural requirements under Articles 1117
and 1121 if they are suing on behalf of an enterprise.
(c) The three year time bar (Articles 1116(2) and 1117(2))
87. Since the claims within the Tribunals jurisdiction are limited to those under
Article 1105 which challenge the decisions of the United States courts, no question
arises as to the time bar. The present proceedings were commenced within three
years from the final court decisions. If it had mattered, however, the Tribunal would
not have accepted Mondevs argument that it could not have had knowledge of . . .
loss or damage arising from the actions of the City and bra prior to the United
States court decisions. A claimant may know that it has suffered loss or damage
even if the extent or quantification of the loss or damage is still unclear. It must have
been known to Mondev, at the latest by 1 January 1994, that not all its losses would
be met by the proceedings lpa had commenced in Massachusetts. In any event,
the words loss or damage refer to the loss or damage suffered by the investor
as a result of the breach. Courts award compensation because loss or damage has
been suffered, and this is the normal sense of the term loss or damage in Articles
1116 and 1117. Thus if Mondevs claims concerning the conduct of the City and
bra had been continuing nafta claims as at 1 January 1994, they would now be
22
Cf. Mavrommatis Palestine Concessions (Jurisdiction), PCIJ Ser. A No. 2 (1924) at p. 34; Case
concerning Application of the Convention on the Prevention and Punishment of the Crime of Genocide
(Bosnia & Herzegovina v. Yugoslavia) (Preliminary Objections) ICJ Reports 1996 p. 595 at pp. 61314
(para. 26).
23
As noted already, Mondevs waiver under Article 1121 extended to claims belonging to lpa. Accordingly there is here no question such as arose in Waste Management v. Mexico, award of 2 June 2000, 40
ILM 56 (2001).
24
Another possibility, if the case should have been brought under Article 1117, would be for the Tribunal
to order that the damages be paid to the enterprise.
214
time-barred. This is a further reason for limiting the Tribunals consideration of the
substantive claims to those concerning the decisions of the United States courts.
(d) Ownership of the claim and the issue of the mortgage
88. The United States also challenged Mondevs standing on the ground that,
with the foreclosure of the mortgage in 1991, all rights associated with the project,
including the claims asserted by Mondev before the Massachusetts courts, vested
in the mortgagee, Manufacturers Hanover Trust Co., a New York corporation.
89. The issue of the construction of the mortgage is one on which the arguments
are finely balanced. If it had been necessary to do so, the Tribunal would have been
inclined to decide it in Mondevs favour. It is not clear what meaning could be given
to the specifically negotiated exclusion in the mortgage if it were not a reference
to Mondevs interest in the Hayward Parcel option, and it is arguable that the
boilerplate language in the mortgage referring to rights of option should not prevail
over a specifically negotiated exclusion. Moreover, this could be so whether the
appropriate canon of construction is to be found in the Uniform Commercial Code,
as argued by Mondev, or in New York real property law, as argued by the United
States. In any event, it seems that any rights of action covered by the mortgage
would have been limited to the contract claims against the City and would not have
extended to the tortious claim against bra.
90. The Tribunal does not, however, need to decide these questions, for two
reasons. First, it is not contested by the United States that lpa, a wholly owned
subsidiary of Mondev, did in fact commence and conduct the litigation before the
United States courts in its own name and on the footing that its own rights were
involved. There is no evidence that Manufacturers Hanover disputed that view
or sought to assert any rights it might arguably have had under the mortgage. If
Manufacturers Hanover took no steps to assert any private rights it may have had,
it was in the Tribunals view not for third parties (including the United States) to
do so.25 In the circumstances the Tribunal sees no reason to doubt lpas ownership
of the legal interests which were in issue before the United States courts.
91. Secondly, the Tribunal would again observe that Article 1105, and even
more so Article 1110, will frequently have to be applied after the investment in
question has failed. In most cases, the dispute submitted to arbitration will concern
precisely the question of responsibility for that failure. To require the claimant
to maintain a continuing status as an investor under the law of the host State at
the time the arbitration is commenced would tend to frustrate the very purpose of
Chapter 11, which is to provide protection to investors against wrongful conduct
including uncompensated expropriation of their investment and to do so throughout
the lifetime of an investment up to the moment of its sale or other disposition
(Article 1102(2)). On that basis, the Tribunal concludes that nafta should be
interpreted broadly to cover any legal claims arising out of the treatment of an
investment as defined in Article 1139, whether or not the investment subsists as
such at the time of the treatment which is complained of. Otherwise issues of the
25
Thus the present case is distinguishable from Rio Grande Irrigation & Land Co. Ltd (Great Britain)
v. United States (1923) 6 RIAA 131, at p. 137, where the United States successfully relied on a public
Act which it had not previously invoked.
AWARD
215
effective protection of investment at the international level will be overshadowed by

technical questions of the application of local property laws and the classification
of local property interests affected by foreclosure or other action subsequent to the
failure of the investment.
3. Conclusion
92. For these reasons, the Tribunal decides that it has jurisdiction over the claim
under Articles 1116 and 1122 to the extent (but only to the extent) that it concerns
allegations of breach of Article 1105(1) by the decisions of the United States courts.
To that extent (but only to that extent) the claim is admissible.
D. The Merits of Mondevs Article 1105 Claim
93. The Tribunal turns to the merits of this claim. In doing so, it will consider
first a number of issues relevant to the interpretation of Article 1105, before turning
to the application of Article 1105 to the facts of the case.
1. The Interpretation of Article 1105
94. There was extensive debate before the Tribunal as to the meaning and effect
of Article 1105. The debate included such issues as the binding effect and scope of
the ftcs interpretation of Article 1105, given on 31 July 2001, the origin and meaning of the terms fair and equitable treatment and full protection and security
occurring in Article 1105(1), and the extent of the various customary international
law duties traditionally conceived as falling within the rubric of the minimum
standard of treatment under international law.
95. Article 1105 is entitled Minimum Standard of Treatment. It provides as
follows:
(1) Each Party shall accord to investments of investors of another Party treatment
in accordance with international law, including fair and equitable treatment and full
(2) Without prejudice to paragraph 1 and notwithstanding Article 1108(7)(b), each
Party shall accord to investors of another Party, and to investments of investors of another Party, non-discriminatory treatment with respect to measures it adopts or maintains relating to losses suffered by investments in its territory owing to armed conflict
or civil strife.
(3) Paragraph 2 does not apply to existing measures relating to subsidies or grants
that would be inconsistent with Article 1102 but for Article 1108(7)(b).
In the present case only Article 1105(1) is relevant. Article 1105(2) does make
it clear, however, by the phrase [w]ithout prejudice to paragraph 1, that Article
1105(1) is not limited to issues concerning the treatment of investments before the
courts of the host State. This would be clear in any event, since the minimum
standard of treatment under international law as applied by arbitral tribunals and
216
in State practice applies to a wide range of factual situations, whether in peace or

in civil strife, and to conduct by a wide range of State organs or agencies.
96. This is significant in two ways. First, under the system of Chapter 11, it will
be a matter for the investor to decide whether to commence arbitration immediately,
with the concomitant requirement under Article 1121 of a waiver of any further
recourse to any local remedies in the host State, or whether initially to claim damages
with respect to the measure before the local courts. The standard laid down in Article
1105(1) has to be applied in both situations, i.e., whether or not local remedies have
been invoked. Thus under nafta it is not true that the denial of justice rule and the
exhaustion of local remedies rule are interlocking and inseparable.26 Secondly,
in the present case, Mondev through lpa did choose to invoke its remedies before
the United States courts. Indeed at the time it did so it had no nafta remedy, since
nafta was not in force. The Tribunal is thus concerned only with that aspect of the
Article 1105(1) which concerns what is commonly called denial of justice, that is
to say, with the standard of treatment of aliens applicable to decisions of the host
States courts or tribunals.
97. In particular, since the Tribunal lacks jurisdiction to pass upon acts of the City
or the bra that took place before nafta came into force, it only needs to consider
how Article 1105(1) applies to a case where the measure challenged is that of a
local court, here the sjc. This is to be distinguished from a case where the action
challenged is that of another branch of government and a court has passed upon that
action under its internal law (the situation that would have obtained here if nafta
hadas it does not haveretrospective effect).
98. In this respect the Respondent initially appeared to argue that Article 1105(1)
does not protect intangible property interests such as those arising following lpas
exercise of the Hayward Parcel option.27 In oral argument, however, the Respondent made clear that the set of standards which make up the international law
minimum standard, including principles of full protection and security, apply to
investments.28 In the Tribunals view, there can be no doubt on the point. Many of
the decisions cited by the parties as relevant to the scope of the standard involved
intangible property, including contract claims.29 Moreover it is clear that the protection afforded by the prohibition against expropriation or equivalent treatment in
Article 1110 can extend to intangible property interests, as it can under customary international law. In the Tribunals view, there is no reason for reading Article
1105(1) any more narrowly.
99. As to the meaning of Article 1105(1), the principal issues debated between
the parties concerned the effect of the ftcs interpretations, and in particular, the
content of the notion of denial of justice, which is central to Mondevs remaining
nafta claims.
26
Cf. C. Eagleton, The Responsibility of States in International Law (New York University Press, New
York, 1928), p. 113.
27
United States Counter-Memorial, p. 37.
28
Transcript, p. 683.
29
See, e.g., Shufeldt Claim (United States/Guatemala) (1930) 2 RIAA 1081 at 1097; Norwegian
Shipowners Claims (1922) 1 RIAA 309 at p. 332; Phillips Petroleum Co. Iran v. Islamic Republic
of Iran (1989) 21 IranUS CTR 79 at 106 (para. 76).
AWARD
217
(a) The FTCs interpretations of 31 July 2001

100. Article 1131 of nafta provides that:
1. A Tribunal established under this Section shall decide the issues in dispute in
accordance with this Agreement and applicable rules of international law.
2. An interpretation by the Commission of a provision of this Agreement shall be
binding on a Tribunal established under this Section.
The Commission referred to in Article 1131 is the Free Trade Commission, established pursuant to Article 2001 of nafta. It comprises cabinet-level representatives of nafta Parties or their designees. One of its functions is to resolve disputes that may arise regarding [the] interpretation or application of nafta (Article
2001(2)(c)).
101. In pursuance of these provisions, on 31 July 2001 the ftc adopted, among
others, the following interpretations of Chapter Eleven in order to clarify and
reaffirm the meaning of certain of its provisions:
B. Minimum Standard of Treatment in Accordance with International Law
1. Article 1105(1) prescribes the customary international law minimum standard of
treatment of aliens as the minimum standard of treatment to be afforded to investments
of investors of another Party.
2. The concepts of fair and equitable treatment and full protection and security
do not require treatment in addition to or beyond that which is required by the customary
international law minimum standard of treatment of aliens.
3. A determination that there has been a breach of another provision of the nafta,
or of a separate international agreement, does not establish that there has been a breach
of Article 1105(1).
Copies of the interpretations were forwarded to the Tribunal by the United States
on the day of their issue. Subsequently they were the subject of extended argument
both by the Claimant and the Respondent.
102. The Claimant professed to be somewhat bewildered by the interpretations. It maintained that the Respondent saw fit to change the meaning of a nafta
provision in the middle of the case in which that provision plays a major part and
questioned whether it could do so in good faith. It contended that the ftcs decision
was more a matter of amendment to the text of nafta than an interpretation of
it, observing that the interpretations conflicted with judicially found meaning of
the text in three nafta arbitration awards. In the view of the Claimant, the 31
July 2001 interpretations added to the text of Article 1105 by adding the word,
customary, while treating the terms fair and equitable treatment and full protection and security as surplusage. The Claimant found astounding what it saw
as the ftcs view that a violation of a treaty may constitute treatment in accordance
with international law. It submitted that the provisions of Article 1105 for fair and
equitable treatment and full protection and security could not be read out of the
Treaty by the ftc, and that those provisions governed the treatment that the Parties
are obliged to extend to investors of another Party. Moreover, if those provisions
were to be treated as affording investors no more than the minimum standard provided by customary international law, that law had to be given its current content,
218
as it has been shaped by the conclusion of hundreds of bilateral investment treaties,

including nafta, and by modern international judgments and arbitral awards.
103. The Respondent maintained that the meaning of Article 1105 had been
conclusively established by the ftcs interpretations of 31 July 2001. These
constituted the definitive statement of what the Parties intended from the source
designated by the Treaty as the ultimate and most authoritative source of its meaning,
the Parties themselves. The obligation of Article 1105(1) was intentionally limited
to that pre-existing body of customary international legal obligations. Fair and
equitable treatment and full protection and security were accordingly subsumed
within the minimum standard. The nafta Parties had adopted the interpretations in
view of what they saw as the misinterpretations of Article 1105 by earlier nafta
tribunals. They did not do so in order to frustrate Mondevs arguments, and there
was no basis for an allegation that the Respondent had not acted in good faith or had
abused its powers as a member of the ftc in order to improve its position in pending
litigation. In any event, Article 1131 is one of the rules of the game, a rule designed
just so that the Parties could assure that what they meant by naftas terms could
be made known whenever there were misinterpretations. Nor was there ground
for the Claimants contention that the 31 July 2001 interpretations constituted an
amendment to nafta. In particular, Paragraph B(3) simply emphasized the original
intention of nafta Parties not to subject themselves to arbitration of obligations
under other international agreements.
104. As noted already, following the Claimants post-hearing submission of the
award of the Pope & Talbot Tribunal on damages,30 both parties as well as Canada
and Mexico submitted post-hearing briefs.
105. In its damages award of 31 May 2002, the Pope & Talbot Tribunal raised the
question whether it was bound by the ftcs interpretation, in particular in relation
to an award already made. It noted that nafta treats issues of interpretation (Article
2001(2)) and amendment (Article 2202) differently, and concluded that it was for
the Tribunal to determine whether the ftcs action can properly be qualified as
an interpretation.31 After referring to newly available travaux preparatoires of
Article 1105, it expressed the view that the ftcs decision probably amounted to
an amendment rather than an interpretation.32 But even if the ftcs interpretation
bound the Tribunal and had retrospective effect, this did not necessitate a revision
of the Tribunals decision on the merits. Article 1105 incorporated an evolutionary
standard, which allowed subsequent practice, including treaty practice, to be taken
into account.33 In any event, even applying Canadas own version of the Article 1105
standard, the conduct complained of would have constituted a breach entitling the
claimant to damages.34
106. In a post-hearing submission of 8 July 2002 in these proceedings, the United
States criticised the Pope & Talbot Tribunal for suggesting that it was not bound
by the ftc interpretation, and it argued that the award merited little consideration.
30
Pope & Talbot Inc. v. Canada, Award in respect of Damages, www.naftalaw.org, 31 May 2002.
Ibid., para. 24.
Ibid., para. 47.
33
Ibid., para. 59.
34
Ibid., para. 65.
31
32
AWARD
219
According to the Respondent, nothing in the text of nafta supports the view that
ftc interpretations would be subject to . . . review by an ad hoc tribunal constituted
under Chapter Eleven. In any event the ftcs interpretation was supported by wellsettled principles of treaty interpretation. Even if it was permissible to refer to the
content of other bits in interpreting Article 1105(1) (which it denied), the United
States had consistently taken the position, for example in advising the Senate on
ratification of bits, that the fair and equitable treatment standard was intended to
require a minimum standard of treatment based on customary international law.35
On the other hand the Pope & Talbot Tribunal had erred in its automatic equation of
customary international law with the content of bits, without regard to any question
of opinio juris. In particular, the decision of the Chamber in the ELSI case,36 on
which the Pope & Talbot Tribunal relied, concerned a particular FCN treaty. That
decision, in the United States view, cannot reflect an evolution in customary
international law . . . ELSI did not even purport to address customary international
law standards requiring treatment of an alien amounting to an outrage for a finding
of a violation. In any event, ELSI clearly does not establish that any relevant standard
under customary international [law] requires mere surprise.37
107. In its letter to the Tribunal of 15 July 2002, the Claimant noted that it had
not argued that the ftcs Interpretation should be disregarded; nor did its claims
depend on a view of Article 1105(1) which was contradicted by the ftc. It observed
that the formulation of arbitrariness given by the Chamber in the ELSI case had
been applied in the context of denial of justice by an icsid Tribunal in Amco Asia.38
In the Claimants view it was incorrect to seek to limit the ELSI dictum to the
particular FCN treaty applicable in that case.
108. In its Article 1128 submission of 23 July 2002, Mexico stressed that most
of the problems it saw (in common with the United States) with the Pope & Talbot
Tribunal award concerned obiter dicta, i.e., statements which were not necessary to
the decision in that case. In Mexicos words [t]he Pope & Talbot Tribunal created
the interpretative problem that it complained of, in particular in adopting an additive approach to Article 1105(1). Mexico noted that the customary international
law standard is relative and that conduct which may not have violated international law [in] the 1920s might very well be seen to offend internationally accepted
principles today. Mexico agreed with the United States that the ELSI Tribunal had
considered the notion of arbitrariness under a specific provision of a bit, but also
noted that the Chambers discussion is nevertheless instructive as to the standard
of review that the international tribunal must employ when examining whether a
State has violated the international minimum standard. In its view, the core idea
was that of arbitrary action being substituted for the rule of law.
35
Post-Hearing Submission of Respondent United States of America on Pope & Talbot, 8 July 2002,
p. 11. In support the Respondent attached, by way of example, Letters of Submittal in respect of 11 bits.
36
ICJ Reports 1989 p. 15 at p. 76, cited by the Pope & Talbot Tribunal at para. 63.
37
Post-Hearing Submission of Respondent United States of America on Pope & Talbot, 8 July 2002,
pp. 1617.
38
Amco Asia Corp. v. Republic of Indonesia, Resubmitted Case, Award of 31 May 1990, paras. 1367,
1 ICSID Rep. 569 at 604.
220
The key point is that the Chamber accorded deference to the respondents legal system
in applying the standard, finding that even though the mayors act of requisitioning the
factory at issue in the case was unlawful at Italian law as an excess of power, mere
domestic illegality did not equate to arbitrariness at international law.39
109. In its submission of 19 July 2002, Canada likewise denied the capacity of
Chapter 11 Tribunals to review ftc interpretations, and submitted that, in any event,
the ftc interpretation clearly qualified as such under the standards for interpretation
in Article 31 of the Vienna Convention on the Law of Treaties. As to the substance
of the Article 1105 standard, Canada noted that its position has always been that
customary international law can evolve over time, but that the threshold for finding
violation of the minimum standard of treatment is still high.40
110. In their post-hearing submissions, all three nafta Parties challenged holdings of the Tribunal in Pope & Talbot which find that the content of contemporary
international law reflects the concordant provisions of many hundreds of bilateral
investment treaties. In particular, attention was drawn to what those three States
saw as a failure of the Pope & Talbot Tribunal to consider a necessary element
of the establishment of a rule of customary international law, namely opinio juris.
These States appear to question whether the parties to the very large numbers of
bilateral investment treaties have acted out of a sense of legal obligation when they
include provisions in those treaties such as that for fair and equitable treatment
of foreign investment.
111. The question is entirely legitimate. It is often difficult in international practice to establish at what point obligations accepted in treaties, multilateral or bilateral, come to condition the content of a rule of customary international law binding
on States not party to those treaties. Yet the United States itself provides an answer to this question, in contending that, when adopting provisions for fair and
equitable treatment and full protection and security in nafta (as well as in other
bits), the intention was to incorporate principles of customary international law.
Whether or not explanations given by a signatory government to its own legislature
in the course of ratification or implementation of a treaty can constitute part of the
travaux preparatoires of the treaty for the purposes of its interpretation,41 they can
certainly shed light on the purposes and approaches taken to the treaty, and thus
can evidence opinio juris. For example the Canadian Statement on Implementation
of nafta states that Article 1105(1) provides for a minimum absolute standard
of treatment, based on long-standing principles of customary international law.42
The numerous transmittal statements by the United States of bits containing language similar to that of nafta show the same general approach. For example, the
transmittal statement with respect to the United StatesEcuador bit of 1993 states
39
Article 1128 Submission of the United Mexican States in the Matter of Mondev International Ltd v.
United States of America, 23 July 2002, p. 17.
40
Submission of Canada on the Pope & Talbot Award, 19 July 2002, para. 33.
41
Cf. Anglo-Iranian Oil Company Case (Preliminary Objections), ICJ Reports 1952 p. 93 at p. 107;
Case concerning Oil Platforms (Islamic Republic of Iran v. United States of America) (Preliminary
Objection), ICJ Reports 1996 p. 803 at p. 814 (para. 29).
42
Canada, Department of External Affairs, North American Free Trade Agreement, Canadian Statement
on Implementation, Canada Gazette, 1 January 1994, p. 68 at p. 149.
AWARD
221
that the guarantee of fair and equitable treatment sets out a minimum standard
of treatment based on customary international law.43 It is to be noted that these
official statements repeatedly refer not to the but to a minimum standard of
treatment.
112. More recent transmittal statements are even more explicit. For example the
transmittal statement for the United StatesAlbania bit of 1995 states in relevant
part:
Paragraph 3 sets out a minimum standard of treatment based on standards found in
customary international law. The obligations to accord fair and equitable treatment
and full protection and security are explicitly cited, as is the Parties obligation not
to impair through unreasonable and discriminatory means, the management, conduct,
operation, and sale or other disposition of covered investments. The general reference to
international law also implicitly incorporates other fundamental rules of international
law: for example, that sovereignty may not be grounds for unilateral revocation or
amendment of a Partys obligations to investors and investments (especially contracts),
and that an investor is entitled to have any expropriation done in accordance with
previous undertakings of a Party.44
As Mexico noted in its post-hearing submission to the Tribunal, it did not have a
practice prior to nafta of concluding bits, but it expressly associated itself with
the Canadian Statement on Implementation.45
113. Thus the question is not that of a failure to show opinio juris or to amass
sufficient evidence demonstrating it. The question rather is: what is the content
of customary international law providing for fair and equitable treatment and full
protection and security in investment treaties?
114. It has been suggested, particularly by Canada, that the meaning of those
provisions in customary international law is that laid down by the Claims Commissions of the inter-war years, notably that of the Mexican Claims Commission in the
Neer case. That Commission laid down a requirement that, for there to be a breach
of international law, the treatment of an alien . . . should amount to an outrage, to
bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so
far short of international standards that every reasonable and impartial man would
readily recognize its insufficiency.46
115. The Tribunal would observe, however, that the Neer case, and other similar
cases which were cited, concerned not the treatment of foreign investment as such
but the physical security of the alien. Moreover the specific issue in Neer was that
of Mexicos responsibility for failure to carry out an effective police investigation
into the killing of a United States citizen by a number of armed men who were
not even alleged to be acting under the control or at the instigation of Mexico.
43
103d Congress, 1st Session, Treaty Doc. 10315 (Washington, 1993) p. ix.
104th Congress, 1st Session, Treaty Doc. 104-15 (Washington, 1995) pp. viiiix.
45
Article 1128 Submission of the United Mexican States in the Matter of Mondev International Ltd v.
United States of America, 23 July 2002, pp. 5, 7.
46
USA (L.F. Neer) v. United Mexican States, decision of the General Claims Commission, United States
Mexico, 15 October 1926, Opinions of Commissioners, 1927, p. 1, reproduced in the American Journal
of International Law 1927, pp. 555, 556; 3 ILR 213.
44
222
In general, the State is not responsible for the acts of private parties,47 and only
in special circumstances will it become internationally responsible for a failure
in the conduct of the subsequent investigation. Thus there is insufficient cause
for assuming that provisions of bilateral investment treaties, and of nafta, while
incorporating the Neer principle in respect of the duty of protection against acts of
private parties affecting the physical security of aliens present on the territory of
the State, are confined to the Neer standard of outrageous treatment where the issue
is the treatment of foreign investment by the State itself.
116. Secondly, Neer and like arbitral awards were decided in the 1920s, when
the status of the individual in international law, and the international protection of
foreign investments, were far less developed than they have since come to be. In particular, both the substantive and procedural rights of the individual in international
law have undergone considerable development. In the light of these developments
it is unconvincing to confine the meaning of fair and equitable treatment and full
protection and security of foreign investments to what those termshad they been
current at the timemight have meant in the 1920s when applied to the physical
security of an alien. To the modern eye, what is unfair or inequitable need not
equate with the outrageous or the egregious. In particular, a State may treat foreign
investment unfairly and inequitably without necessarily acting in bad faith.
117. Thirdly, the vast number of bilateral and regional investment treaties (more
than 2,00048 ) almost uniformly provide for fair and equitable treatment of foreign
investments, and largely provide for full security and protection of investments.
Investment treaties run between North and South, and East and West, and between
States in these spheres inter se. On a remarkably widespread basis, States have
repeatedly obliged themselves to accord foreign investment such treatment. In the
Tribunals view, such a body of concordant practice will necessarily have influenced the content of rules governing the treatment of foreign investment in current
international law. It would be surprising if this practice and the vast number of provisions it reflects were to be interpreted as meaning no more than the Neer Tribunal
(in a very different context) meant in 1927.
118. When a tribunal is faced with the claim by a foreign investor that the
investment has been unfairly or inequitably treated or not accorded full protection
and security, it is bound to pass upon that claim on the facts and by application of
any governing treaty provisions. A judgment of what is fair and equitable cannot
be reached in the abstract; it must depend on the facts of the particular case. It is
part of the essential business of courts and tribunals to make judgments such as
these. In doing so, the general principles referred to in Article 1105(1) and similar
provisions must inevitably be interpreted and applied to the particular facts.
119. That having been said, for the purposes of the present case the Tribunal does
not need to resolve all the issues raised in argument and in the written submissions
concerning the ftcs interpretation. The United States itself accepted that Article
1105(1) is intended to provide a real measure of protection of investments, and that
47
As stressed by the ILC in its commentary to the Articles on Responsibility of States for Internationally
Wrongful Acts; see Chapter II, para. (3), Article 11, paras. (2)(3).
48
According to unctads World Investment Report 2002, the actual number as at December 2001 was
2,099: see www.unctad.org/WIR/pdfs/fullWIR02/pp.1-22.pdf.
AWARD
223
having regard to its general language and to the evolutionary character of international law, it has evolutionary potential.49 At the same time, Article 1105(1) did not
give a nafta tribunal an unfettered discretion to decide for itself, on a subjective
basis, what was fair or equitable in the circumstances of each particular case.
While possessing a power of appreciation, the United States stressed, the Tribunal is
bound by the minimum standard as established in State practice and in the jurisprudence of arbitral tribunals. It may not simply adopt its own idiosyncratic standard
of what is fair or equitable, without reference to established sources of law.
120. The Tribunal has no difficulty in accepting that an arbitral tribunal may not
apply its own idiosyncratic standard in lieu of the standard laid down in Article
1105(1). In light of the ftcs interpretation, and in any event, it is clear that Article
1105 was intended to put at rest for nafta purposes a long-standing and divisive
debate about whether any such thing as a minimum standard of treatment of investment in international law actually exists.50 Article 1105 resolves this issue in
the affirmative for nafta Parties. It also makes it clear that the standard of treatment, including fair and equitable treatment and full protection and security, is to
be found by reference to international law, i.e., by reference to the normal sources
of international law determining the minimum standard of treatment of foreign
investors.
121. To this the ftc has added two clarifications which are relevant for present
purposes. First, it makes it clear that Article 1105(1) refers to a standard existing
under customary international law, and not to standards established by other treaties
of the three nafta Parties. There is no difficulty in accepting this as an interpretation of the phrase in accordance with international law. Other treaties potentially
concerned have their own systems of implementation. Chapter 11 arbitration does
not even extend to claims concerning all breaches of nafta itself, being limited
to breaches of Section A of Chapter 11 and Articles 1503(2) and 1502(3)(a).51 If
there had been an intention to incorporate by reference extraneous treaty standards
in Article 1105 and to make Chapter 11 arbitration applicable to them, some clear
indication of this would have been expected. Moreover the phrase Minimum standard of treatment has historically been understood as a reference to a minimum
standard under customary international law, whatever controversies there may have
been over the content of that standard.
122. Secondly, the ftc interpretation makes it clear that in Article 1105(1) the
terms fair and equitable treatment and full protection and security are, in the
view of the nafta Parties, references to existing elements of the customary international law standard and are not intended to add novel elements to that standard.
The word including in paragraph (1) supports that conclusion. To say that these
elements are included in the standard of treatment under international law suggests that Article 1105 does not intend to supplement or add to that standard.
49
This potential is likewise accepted by A. V. Freeman, The International Responsibility of States for
Denial of Justice (Longmans, London, 1938, reprinted by Kraus, New York, 1970), p. 570.
50
See, e.g., E. Borchard, The Minimum Standard of Treatment of Aliens, (1940) Michigan Law
Review 445; A. Roth, The Minimum Standard of International Law as Applied to Aliens (The Hague,
Sijthoff, 1949); F. A. Mann, British Treaties for the Promotion and Protection of Investments, (1981)
52 BYIL 241, and works there cited.
51
See Arts. 1116(1), 1117(1).
224
But it does not follow that the phrase including fair and equitable treatment and
full protection and security adds nothing to the meaning of Article 1105(1), nor
did the ftc seek to read those words out of the article, a process which would
have involved amendment rather than interpretation. The minimum standard of
treatment as applied by tribunals and in State practice in the period prior to 1994
did precisely focus on elements calculated to ensure the treatment described in
Article 1105(1).
123. A reasonable evolutionary interpretation of Article 1105(1) is consistent
both with the travaux, with normal principles of interpretation and with the fact that,
as the Respondent accepted in argument, the terms fair and equitable treatment
and full protection and security had their origin in bilateral treaties in the post-war
period.52 In these circumstances the content of the minimum standard today cannot
be limited to the content of customary international law as recognised in arbitral
decisions in the 1920s.
124. The Respondent noted that there was some common ground between the
parties to the present arbitration in respect of the ftcs interpretations, namely, that
the standard adopted in Article 1105 was that as it existed in 1994, the international
standard of treatment, as it had developed to that time . . . like all customary international law, the international minimum standard has evolved and can evolve . . . the
sets of standards which make up the international law minimum standard, including
principles of full protection and security, apply to investments.53 Moreover in their
written submissions, summarised in paras. 1078 above, both Canada and Mexico
expressly accepted this point.
125. The Tribunal agrees. For the purposes of this Award, the Tribunal need
not pass upon all the issues debated before it as to the ftcs interpretations of
31 July 2001. But in its view, there can be no doubt that, by interpreting Article 1105(1) to prescribe the customary international law minimum standard of
treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of another Party under nafta, the term customary international law refers to customary international law as it stood no earlier than the
time at which nafta came into force. It is not limited to the international law
of the 19th century or even of the first half of the 20th century, although decisions from that period remain relevant. In holding that Article 1105(1) refers to
customary international law, the ftc interpretations incorporate current international law, whose content is shaped by the conclusion of more than two thousand bilateral investment treaties and many treaties of friendship and commerce.
Those treaties largely and concordantly provide for fair and equitable treatment of, and for full protection and security for, the foreign investor and his
investments. Correspondingly the investments of investors under nafta are entitled, under the customary international law which nafta Parties interpret Article
1105(1) to comprehend, to fair and equitable treatment and to full protection and
security.
52
As noted in unctad, Bilateral Investment Treaties in the Mid-1990s (United Nations, NY, 1998),
pp. 535.
53
Transcript, p. 683.
AWARD
225
(b) The applicable standard of denial of justice

126. Enough has been said to show the importance of the specific context in which
an Article 1105(1) claim is made. As noted already, in applying the international
minimum standard, it is vital to distinguish the different factual and legal contexts
presented for decision. It is one thing to deal with unremedied acts of the local
constabulary and another to second-guess the reasoned decisions of the highest
courts of a State. Under nafta, parties have the option to seek local remedies. If
they do so and lose on the merits, it is not the function of nafta tribunals to act
as courts of appeal. As a nafta tribunal pointed out in Azinian v. United Mexican
States:
The possibility of holding a State internationally liable for judicial decisions does not,
however, entitle a claimant to seek international review of the national court decisions
as though the international jurisdiction seised has plenary appellate jurisdiction. This
is not true generally, and it is not true for nafta.54
The Tribunal went on to hold:

A denial of justice could be pleaded if the relevant courts refuse to entertain a suit, if
they subject it to undue delay, or if they administer justice in a seriously inadequate
way . . .
There is a fourth type of denial of justice, namely the clear and malicious misapplication of the law. This type of wrong doubtless overlaps with the notion of pretence
of form to mask a violation of international law. In the present case, not only has no
such wrongdoing been pleaded, but the Arbitral Tribunal wishes to record that it views
the evidence as sufficient to dispel any shadow over the bona fides of the Mexican
judgments. Their findings cannot possibly be said to have been arbitrary, let alone
malicious.55
127. In the ELSI case, a Chamber of the Court described as arbitrary conduct
that which displays a wilful disregard of due process of law, . . . which shocks,
or at least surprises, a sense of judicial propriety.56 It is true that the question
there was whether certain administrative conduct was arbitrary, contrary to the
provisions of an fcn treaty. Nonetheless (and without otherwise commenting on
the soundness of the decision itself) the Tribunal regards the Chambers criterion as
useful also in the context of denial of justice, and it has been applied in that context,
as the Claimant pointed out. The Tribunal would stress that the word surprises
does not occur in isolation. The test is not whether a particular result is surprising,
but whether the shock or surprise occasioned to an impartial tribunal leads, on
reflection, to justified concerns as to the judicial propriety of the outcome, bearing
in mind on the one hand that international tribunals are not courts of appeal, and
on the other hand that Chapter 11 of nafta (like other treaties for the protection
54
Azinian v. United Mexican States (1999) 39 ILM 537 at p. 552 (para. 99).
Ibid., at pp. 5523 (paras. 1023).
Elettronica Sicula SpA (ELSI) (United States of America v. Italy), ICJ Reports 1989 p. 15 at p. 76
(para. 128), citing the judgment of the Court in the Asylum case, ICJ Reports 1950 p. 266 at p. 284,
which referred to arbitrary action being substituted for the rule of law.
55
56
226
of investments) is intended to provide a real measure of protection. In the end

the question is whether, at an international level and having regard to generally
accepted standards of the administration of justice, a tribunal can conclude in the
light of all the available facts that the impugned decision was clearly improper and
discreditable, with the result that the investment has been subjected to unfair and
inequitable treatment. This is admittedly a somewhat open-ended standard, but it
may be that in practice no more precise formula can be offered to cover the range
of possibilities.57
2. The Application of Article 1105(1) to the Present Case
128. Mondev questioned the decisions of the United States courts essentially
on four grounds. The Tribunal will take these in turn. Because the United States
Supreme Court denied certiorari without giving any reasons, it is necessary in each
case to focus on the unanimous decision of the sjc, delivered by Judge Fried.58 In
approaching these four issues the Tribunal has had regard to the contrasting expert
opinions tendered for the Claimant by Professor Coquillette and for the Respondent
by Judge Kass.
(a) The dismissal of LPAs contract claim against the City
129. On this point the Supreme Judicial Court began by noting that whether
there was a binding contract, and whether the City was in breach, were issues
which had to be considered together to come to a fair and sensible view of the
arrangements between the parties and their dealings with each other.59 This was
because the contract contained formulae and procedures to deal with unresolved
issues (including the price to be paid for the Hayward Parcel); if those formulae
and procedures had not been included, the arrangement would have lacked certainty
on essential terms. By the same token, however, if a party does not follow those
procedures, it should not be able to claim that the other side is in breach of what
is necessarily still an open-ended arrangement.60 For reasons given in detail in
its opinion the sjc concluded that there was sufficient evidence to find a binding
agreement, as the jury indeed did find, but it is also clear, as a matter of law,
that lpa failed to follow the steps required of it under the Tripartite Agreement
as supplemented to put the city in breach.61 In particular the sjc relied on earlier
authority, including its own decision of 1954 in Leigh v. Rule, for the proposition
that a material failure by a plaintiff to put the defendant in breach bars recovery . . .
unless the plaintiff is excused from tender because the other party has shown that
57
One may compare the rule stated in the Harvard Draft Convention on the International Responsibility
of States for Injuries to Aliens, Article 8(b), referring to a decision which unreasonably departs from
the principles of justice recognized by the principal legal systems of the world; reprinted in L. B. Sohn
& R. R. Baxter, Responsibility of States for Injuries to the Economic Interests of Aliens (1961) 55
AJIL 515 at p. 551.
58
427 Mass. 509 (1998).
59
Ibid., 516.
60
Ibid.
61
Ibid., pp. 51617.
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227
he cannot or will not perform.62 The only evidence of lpas tender of performance
was Campeaus letter of 19 December 1988, but this, in the Courts view, was far
too unspecific to satisfy the test in Leigh v. Rule. There was accordingly no basis
in law for finding the City in breach of contract.63 Moreover, the Court held, there
was no outright refusal by the City to comply with the contract, and lpa could not
attribute repudiation to the city based on the mere fact that uncertainties remained
that lpa shared responsibility for resolving.64 Nor did lpas claim based on the
Citys bad faith assist it: the basis of that claim was the Citys refusal to extend the
expiry date for the exercise of the option, but the City was under no contractual
obligation to consent to an extension.65
130. The Court noted that its analysis applied particularly in the case of a
complex and heavily regulated transaction such as this one, where public entities
and public and elected officials with changing policies and constituencies are involved, and the transaction spans many years, and it went on to note a dictum of
Justice Holmes that [m]en must turn square corners when they deal with the Government.66 By inference, neither lpa nor Campeau had turned such cornersin
the absence of which lpa was not excused from its obligation to put the city in
default.67
131. Claimant argued that the sjcs decision involved a significant and serious
departure from its previous jurisprudence, which was exacerbated when the sjc
completely failed to consider whether it should apply the rules it articulated retrospectively to Mondevs claims.68 In those circumstances the SCJs dismissal of
lpas claims was arbitrary and profoundly unjust.69
132. The Respondent, on the other hand, argued that the sjc acted reasonably in
accordance with its existing jurisprudence, and there was no occasion to consider
any question of a new law or of its retrospective application.
133. The Tribunal is unimpressed by the new law argument so far as concerns
the basic principle set out in Leigh v. Rule70 and embodied in many other systems
of contract law. The question whether an agreement in principle to transfer real
property is binding, and whether all the conditions for the performance of such
an agreement have been met, is one which all legal systems have to face. In the
Tribunals view, it is doubtful whether the sjc made new law in its application of
the principle in Leigh v. Rule. But even if it had done so its decision would have
fallen within the limits of common law adjudication. There is nothing here to shock
or surprise even a delicate judicial sensibility.
134. On balance, the position is the same with the so-called square corners
rule. It is true that Justice Holmess statement was made in a tax case, not a
62
Ibid., p. 519, citing Leigh v. Rule, 331 Mass. 664, 668 (1954).
427 Mass. 509, 521 (1998), qualifying the letter as an empty gesture that could not possibly have
been acted on in the time remaining before the expiry of the option.
64
Ibid., p. 523.
65
Ibid., p. 526.
66
Ibid., p. 524, citing Rock Island, Ark. & La. R.R. v. United States, 254 US 141, 143 (1920).
67
427 Mass. 509, 524 (1998).
68
See, e.g., Transcript, p. 921, referring to the expert opinions of Professor Coquillette.
69
Transcript, p. 933.
70
331 Mass. 664 (1954).
63
228
contract case, and it stands in some tension with the general proposition (accepted
as part of Massachusetts law) that governments are subject to the same rules of
contractual liability as are private parties.71 To the extent that it might suggest the
contrary, the square corners rule might raise a delicate judicial eyebrow. Indeed
a governmental prerogative to violate investment contracts would appear to be
inconsistent with the principles embodied in Article 1105 and with contemporary
standards of national and international law concerning governmental liability
for contractual performance. But in the Tribunals view, the sjcs remark was
at most a subsidiary reason for a decision founded on normal principles of the
Massachusetts law of contracts, and the sjc expressly disclaimed any intention to
absolve governments from performing their contractual obligations.72 In its context
the remark was merely supplementary and was not itself the basis for the decision.
(b) The SJCs failure to remand the contract claim

135. Alternatively, Mondev argued that, once the sjc had concluded that the issue
of tender of performance arose, it should have remanded questions of fact to the
jury, in particular the question whether Mondev was willing and able to perform or
whether the City had constructively repudiated the contract. The Respondent argued
that under Massachusetts law and practice it was for the sjc to decide whether or
not to remand a question, and that within extremely broad limits there was no basis
on which such a decision could be questioned under Article 1105(1).
136. The Tribunal agrees with the United States on this point. Questions of factfinding on appeal are quintessentially matters of local procedural practice. Except
in extreme cases, the Tribunal does not understand how the application of local
procedural rules about such matters as remand, or decisions as to the functions of
juries vis-à-vis appellate courts, could violate the standards embodied in Article
1105(1). On the approach adopted by Mondev, nafta tribunals would turn into
courts of appeal, which is not their role. Conceivably there might be a problem if
the appellate decision took into account some entirely new issue of fact essential to
the decision and there was a substantial failure to allow the affected party to present
its case. But lpa had (and exercised) the right to apply for a rehearing and then to
seek certiorari to the Supreme Court. In these circumstances there was no trace of
a procedural denial of justice.
(c) The SJCs failure to consider whether it retrospectively applied a new rule
137. The Claimant noted that the sjc had failed to consider whether the allegedly
new rule it was applying to government contracts should be applied retrospectively,
and thereby violated its own standards for judicial law-making. But as the Tribunal
has already noted, the Courts decision on the point of Massachusetts contract law
fell well within the interstitial scope of law-making exercised by courts such as
those of the United Statesif indeed it was new law at all. In any event, once
71
See e.g., Minton Construction Corp. v. Commonwealth, 397 Mass 879 (1986); Space Master International, Inc. v. City of Worcester, 940 F 2d 16 (1991).
72
427 Mass. 509, 523 (1998).
AWARD
229
again it is normally a matter for local courts to determine whether and in what
circumstances to apply new decisional law retrospectively.73
138. The European Court of Human Rights has given some guidance on this
question under Article 7 of the European Convention in the context of criminal
proceedings, where the effect of a new judicial decision is to impose a criminal
liability which did not, or arguably did not, exist when the crime was committed.74
If there is any analogy at all, it is much fainter in civil cases.75 Assuming, for the
sake of argument, that standards of this kind might be applicable under Article
1105(1), in the Tribunals view there was no contravention of any such standards
in the present case.
(d) bras statutory immunity
139. The Tribunal turns to the question of bras statutory immunity for intentional
torts under the Massachusetts Tort Claims Act (PL 258). Under 10(c) of that Act,
a public employer which is not an independent body politic and corporate is
immune from any claim arising out of an intentional tort, including assault, battery,
false imprisonment, false arrest, intentional mental distress, malicious prosecution,
malicious abuse of process, libel, slander, misrepresentation, deceit, invasion of
privacy, interference with advantageous relations or interference with contractual
relations. As recalled above, the trial judge declined to enter the jurys verdict
against bra, holding that it was entitled to immunity as a public employer under
the Massachusetts Tort Claims Act. That decision was affirmed by the sjc,76 which
emphasised the desirability of making the [Massachusetts Tort Claims Act] regime
as comprehensive as possible.77 That decision was not challenged on certiorari to
the United States Supreme Court, no doubt on the basis that the matter involved the
interpretation of a Massachusetts statute and presented no federal claim or issue.78
140. In the present proceedings, Mondev did not challenge the correctness of
this decision as a matter of Massachusetts law. Rather, it argued that for a nafta
Party to confer on one of its public authorities immunity from suit in respect of
wrongful conduct affecting an investment was in itself a failure to provide full
protection and security to the investment, and contravened Article 1105(1). For its
part the United States argued that Article 1105(1) did not preclude limited grants of
immunity from suit in respect of tortious conduct. It noted that there is no consensus
in international practice on whether statutory authorities should be subject to the
same rules of tortious liability as private parties. In the absence of any authority
73
From the cases cited, it appears that the Massachusetts courts may sometimes announce a change in
decisional law with prospective effect only (e.g., Tucker v. Badoian, 376 Mass 907 (1978)), but they will
only do so where there are special circumstances: Payton v. Abbott Labs, 386 Mass. 540, 565 (1982);
Tamerlane Corp. v. Warwick Ins. Co., 412 Mass. 486, 490 (1992); MacCormack v. Boston Edison Co.,
423 Mass. 652 (1996).
74
See S.W. v. United Kingdom, ECHR, decision of 22 November 1995, paras. 346; C.R. v. United
Kingdom, ECHR, decision of 22 November 1995, paras. 324; Streletz, Kessler & Krenz v. Germany,
ECHR, decision of 22 March 2001, para. 50.
75
See e.g., Carbonara & Ventura v. Italy, ECHR, decision of 30 May 2000, paras. 649; Agoudimos &
Cefallonian Sky Shipping Co. v. Greece, ECHR, decision of 28 June 2001, paras. 2930.
76
427 Mass. 509, 52735 (1998).
77
Ibid., p. 532.
78
As explained in the expert opinion of Judge Kenneth Starr for the Claimant, 29 January 2001.
230
under customary international law requiring statutory authorities to be generally

liable for their torts, or any consistent international practice, it could not be said
that the immunity of bra infringed Article 1105(1).
International jurisprudence on immunities of public authorities
141. The parties sought to draw analogies for the present case from the field of
foreign State immunity. It is well established that foreign States and their agencies
may claim immunities in respect of conduct in the exercise of governmental authority, even if such conduct is or would otherwise be civilly wrongful. Moreover in a
series of decisions the European Court of Human Rights has held that the conferral
of immunity in ways recognised in international practice does not involve a denial
of access to a court, contrary to Article 6(1) of the European Convention of Human
Rights.79 By analogy, the United States argued, the recognition of a limited statutory
immunity for certain torts could not be considered a violation of the international
minimum standard or a denial of justice, given the lack of any clear or consistent
State practice requiring the denial of immunity.
142. The Tribunal is not persuaded that the doctrine of foreign State immunity
presents any useful analogy to the present situation. That immunity is concerned
not with the position of State agencies before their own courts, but before the courts
of third States, where considerations of interstate relations and the proper allocation
of jurisdictional competence are raised.
143. There is a closer analogy with certain decisions concerning statutory immunities of State agencies before their own courts. In a number of cases the European
Court of Human Rights has held that special governmental immunities from suit
raise questions of consistency with Article 6(1) of the European Convention on
Human Rights, because they effectively exclude access to the courts in the determination of civil rights. As the Court said in Fogarty v. United Kingdom:
it would not be consistent with the rule of law in a democratic society or with the basic
principle underlying Article 6 1namely that civil claims must be capable of being
submitted to a judge for adjudicationif, for example, a State could, without restraint
or control by the Convention enforcement bodies, remove from the jurisdiction of the
courts a whole range of civil claims or confer immunities from civil liability on large
groups or categories of persons . . .80
On the other hand the Court recognises that it may not create by way of interpretation of Article 6(1) a substantive civil right which has no legal basis in the
State concerned.81 By parity of reasoning, there are difficulties in reading Article
79
See Al-Adsani v. United Kingdom, Application No. 35763/97, (2002) 34 EHRR 11; McElhinney v.
Ireland, Application No. 31253/96, (2002) 34 EHRR 13; Fogarty v. United Kingdom, Application No.
37112/97, (2002) 34 EHRR 12.
80
Fogarty v. United Kingdom, Application No. 37112/97, (2002) 34 EHRR 12, paras. 245, citing Fayed
v. United Kingdom, judgment of 21 September 1994, Series A no. 294B, 65. See also Tinnelly &
Sons Ltd v. United Kingdom, (1999) 27 EHRR 249; Devlin v. United Kingdom, judgment of 30 January
2002; Osman v. United Kingdom, (2000) 29 EHRR 245; TP & KM v. United Kingdom (2002)
34 EHRR 2.
81
Al-Adsani v. United Kingdom, Application No. 35763/97, (2002) 34 EHRR 11 at para. 47; Fogarty v.
United Kingdom, Application No. 37112/97, (2002) 34 EHRR 12 at para. 25; McElhinney v. Ireland,
Application No. 31253/96, (2002) 34 EHRR 13 at para. 24.
AWARD
231
1105(1) so as in effect to create a new substantive civil right to sue bra for tortious
interference with contractual relations. Moreover the distinction between the existence of a civil liability and a defence to a lawsuit can be difficult to draw, as the
case of Matthews v. Ministry of Defence, which was debated before the Tribunal,
demonstrates.82
144. These decisions concern the right to a court, an aspect of the human rights
conferred on all persons by the major human rights conventions and interpreted by
the European Court in an evolutionary way. They emanate from a different region,
and are not concerned, as Article 1105(1) of nafta is concerned, specifically with
investment protection. At most, they provide guidance by analogy as to the possible
scope of naftas guarantee of treatment in accordance with international law,
including fair and equitable treatment and full protection and security. But the
Tribunal would observe that, as soon as it was decided that bra was covered by
the statutory immunity (a matter for Massachusetts law), then the existence of
the immunity was arguably to be classified as a matter of substance rather than
procedure in terms of the distinction under Article 6(1) of the European Convention.
Rationale for exempting public authorities from liability for intentional torts
145. More important than analogies from other legal regimes is the question of
the rationale for the bras immunity. The United States argued that the conferral
of a limited immunity on certain State authorities for intentional torts was neither
arbitrary nor indiscriminate. It adduced in support evidence of two kinds, first,
that related to the legislative history and rationale underlying the exemption for
intentional torts, and secondly, comparative law indications that there is nothing
approaching an international consensus on the appropriate extent of the immunities
of public authorities in tort.
146. As to the first point, the United States noted that governmental immunity
in actions in tort had been general for many years. The Federal Tort Claims Act
1946 abrogated that immunity for the United States itself, but subject to various
exceptions including interference with contractual rights (28 USC 2680(h)). In
Massachusetts the equivalent change in the law did not occur until 1978.83 As
in other common law jurisdictions, governmental immunity could sometimes be
avoided, e.g., by suing the responsible officials in person,84 but this did not affect
the principle that the government itself could not be sued without its consent. The
United States argued that the existence of certain immunities of public authorities
with respect to intentional torts is relatively well known,85 and cannot be regarded
as exceptional or eccentric in international terms.
147. For its part, the Claimant argued that any governmental immunity from
suit in contract or tort, at least where the only remedy sought was damages, was
82
See [2002] EWHC 13 (QB), decision of Keith J, 22 January 2002, overturned on appeal, [2002]
EWCA Civ 773, [2002] 3 All ER 513, Court of Appeal, decision of 29 May 2002.
83
Following Whitney v. City of Worcester, 373 Mass. 208 (1977).
84
Larson v. Domestic & Foreign Commerce Corporation, 337 US 682, 687 (1949); Bivens v. Six
Unknown Named Agents of Federal Bureau of Narcotics, 403 US 388 (1971).
85
There is an equivalent immunity from suit for foreign States under the Foreign Sovereign Immunities
Act 1976 (USA), Stat. 2891, 1604.
232
increasingly seen as anomalous,86 and that it was inconsistent with the express
requirement in Article 1105(1) for full protection and security that the government
be able to avoid liabilities arising under the general law of the land.
148. The Tribunal notes that the broad exception for intentional torts in United
States legislation, and the sometimes artificial ways in which they have been
circumvented,87 have led to criticism and to suggestions that the exception be
repealed, leaving the government to rely on the discretionary functions exception
in the legislation, or to defend the case on the merits.88 On the other hand, it does
not appear that these suggestions have been acted on at federal or state level.
The comparative law experience with tortious immunity of public authorities
149. As to the second point, the United States referred to a comparative review
which concluded that in no legal system today is [the liability of officials for
wrongful acts] the same as that of private individuals or corporations.89 The authors
of that study, Professors Bell and Bradley, go on to develop the range of limitations
on governmental liability still existing in many States, while noting at the same time
a general tendency towards widening the scope of liability. It also noted the rather
brief comparative review of jurisprudence on interference with contractual rights,
undertaken in the context of the ILCs work on State responsibility, which concluded
that there were important differences in approach to tortious interference within
Western legal systems, and even more so if non-Western systems are taken into account. In short, there is no international consensus on the proper scope of that tort.90
150. The Claimant argued that comparative reviews of the position in nonnafta States, and decisions of the European Court of Human Rights, were
irrelevant to the question of the extent of nafta protection. nafta provided its
own standard for full protection and security. The conferral on a public employer
such as bra of a blanket immunity from suit for tortious interference infringed that
standard, and did so irrespective of whether the conduct immunized was itself a
breach of nafta. According to the Claimant, Article 1105(1) requires that there be
a remedy when a State breaches its own laws in a manner that is aimed directly at
and interferes with a foreign investment.91 In any event, the conferral of a general
immunity for intentional torts would be disproportionate under Article 6(1) as
applied by the European Court, and a fortiori under the more explicit standard of
full protection afforded by nafta.
The Tribunals conclusions
151. In the Tribunals opinion, circumstances can be envisaged where the conferral of a general immunity from suit for conduct of a public authority affecting a
86
As an early example of this trend it referred to Larson v. Domestic & Foreign Commerce Corp., 337
US 682, 7034 (1949), although the Court did in fact grant immunity in that contract case on the ground
that the United States was indirectly impleaded.
87
E.g., Andrews v. United States, 732 F. 2d 366 (1984); Sheridan v. United States, 487 US 392 (1988).
88
See, e.g., Davis & Pierce, Administrative Law Treatise (3rd edn, 1994), pp. 2445.
89
J. Bell & A. W. Bradley, Governmental Liability: A Comparative Study (United Kingdom Comparative
Law Series, vol. 13, 1991) p. 2.
90
J. Crawford, Second Report on State Responsibility, A/CN.4/498/Add. 3, 1 April 1999.
91
Transcript, p. 910.
AWARD
233
nafta investment could amount to a breach of Article 1105(1) of nafta. Indeed the
United States implicitly accepted as much. It did not argue that public authorities
could, for example, be given immunity in contract vis-à-vis nafta investors and
investments.
152. But the distinction between conduct compliant with or in breach of nafta
Article 1105(1) cannot be co-extensive with the distinction between tortious conduct and breach of contract. For example, the Massachusetts legislation immunizes
public authorities from liability for assault and battery. An investor whose local staff
had been assaulted by the police while at work could well claim that its investment
was not accorded treatment in accordance with international law, including . . .
full protection and security if the government were immune from suit for the assaults. In such a case, the availability of an action in tort against individual (possibly
unidentifiable) officers might not be a sufficient basis to avoid the situation being
characterised as a breach of Article 1105(1).
153. The function of the present Tribunal is not, however, to consider hypothetical
situations, or indeed any other statutory immunity than that for tortious interference
with contractual relations. This was the immunity relied on by bra and upheld by
the trial judge and the appeal courts. In that specific context, reasons can well
be imagined why a legislature might decide to immunize a regulatory authority,
mandated to deal with commercial redevelopment plans, from potential liability
for tortious interference. Such an authority will necessarily have both detailed
knowledge of the relevant contractual relations and the power to interfere in those
relations by granting or not granting permissions. If sued, it will be able to plead
that it was acting in good faith and in the exercise of a legitimate mandatebut
such a claim may well not justify summary dismissal and will thus be a triable
issue, with consequent distraction to the work of the Authority.
154. After considering carefully the evidence and argument adduced and the
authorities cited by the parties, the Tribunal is not persuaded that the extension to a
statutory authority of a limited immunity from suit for interference with contractual
relations amounts in this case to a breach of Article 1105(1). Of course such an
immunity could not protect a nafta State Party from a claim for conduct which was
substantively in breach of nafta standardsbut for this nafta provides its own
remedy, since it gives an investor the right to go directly to international arbitration
in respect of conduct occurring after naftas entry into force. In a Chapter 11
arbitration, no local statutory immunity would apply.92 On the other hand, within
broad limits, the extent to which a State decides to immunize regulatory authorities
from suit for interference with contractual relations is a matter for the competent
organs of the State to decide.
155. In the same context Mondev complained that the Massachusetts Act dealing
with unfair or deceptive practices in trade and commerce (G.L. Chapter 93A) was
held by the trial judge to be inapplicable to bra notwithstanding that it engaged
in the regulation of commercial activity or acted for commercial motives. But if
what has been said above as to the partial immunity of bra from suit is correct,
92
As noted already, in the present case the conduct immunized took place well before nafta entered
into force, and nafta protections do not apply to it as such.
234
then a fortiori there could be no breach of Article 1105(1) in holding Chapter 93A
inapplicable to bra. nafta does not require a State to apply its trade practices
legislation to statutory authorities.
156. In reaching these conclusions, the Tribunal has been prepared to assume
that the decision to allow bras statutory immunity could have involved conduct
of the Respondent State in breach of Article 1105(1) after naftas entry into force
on 1 January 1994. That assumption may be questioned. The United States courts,
operating in accordance with the rule of law, had no choice but to give effect to
a statutory immunity existing at the time the acts in question were performed and
not subsequently repealed, once they had concluded that the statute in question
did apply.93 It is not disputed by the Claimant that this decision was in accordance
with Massachusetts law, and it did not involve on its face anything arbitrary or
discriminatory or unjust, i.e., any new act which might be characterised as in itself
a breach of Article 1105(1).94 In other words, if it was not in December 1993 a
breach of nafta for bra to enjoy immunity from suit for tortious interference (and,
because nafta was not then in force, it could not have been such a breach), it is far
from clear how the (ex hypothesi correct) decision of the United States courts as to
the scope of that immunity, after 1 January 1994, could have been in itself unfair
or inequitable. On this ground alone, it may well be that Mondevs Article 1105(1)
claim was bound to fail, and to fail whether or not one classifies bras statutory
immunity as procedural or substantive.
E. Conclusion
157. For these reasons the Tribunal dismisses Mondevs claims in their entirety.
158. As to the question of costs and expenses, the United States sought orders
that Mondev pay the Tribunals costs and the legal expenses of the United States
on the basis that its claim was unmeritorious and should never have been brought.
159. nafta tribunals have not yet established a uniform practice in respect of
the award of costs and expenses. In the present case the Tribunal does not think it
appropriate to make any order for costs or expenses, for several reasons. First, the
United States has succeeded on the merits, but it has by no means succeeded on
all of the many arguments it has advanced, including a number of arguments on
which significant time and costs were expended. Secondly, in these early days of
nafta arbitration the scope and meaning of the various provisions of Chapter 11 is
a matter both of uncertainty and of legitimate public interest. Thirdly, the Tribunal
has some sympathy for Mondevs situation, even if the bulk of its claims related
to pre-1994 events. It is implicit in the jurys verdict that there was a campaign by
93
There was earlier Massachusetts authority in favour of the (unsurprising) proposition that bra in
exercising its planning powers was a public agency acting in its public capacity: Reid v. Acting
Commissioner of Community Affairs, 362 Mass. 136, 141 (1972).
94
Compare Consuelo et al. v. Argentina. iachr, Report N 28/92, 2 October 1992, where immunity
from prosecution and suit was extended after the entry into force of the Convention in respect of acts
committed before its entry into force. The Inter-American Commission had no difficulty in rejecting
Respondents objection ratione temporis; it went on to hold that the conferral of immunity was in breach
of the Convention.
AWARD
235
Boston (both the City and bra) to avoid contractual commitments freely entered
into. In the end, the City and bra succeeded, but only on rather technical grounds.
An appreciation of these matters can fairly be taken into account in exercising the
Tribunals discretion in terms of costs and expenses.
Award
For the foregoing reasons, the Tribunal unanimously DECIDES:
(a) That its jurisdiction is limited to Mondevs claims concerning the decisions
of the United States courts;
(b) That to this extent only, Mondevs claims are admissible;
(c) That the decisions of the United States courts did not involve any violation
of Article 1105(1) of nafta or otherwise;
(d) That Mondevs claims are accordingly dismissed in their entirety;
(e) That each party shall bear its own costs, and shall bear equally the expenses
of the Tribunal and the Secretariat.
Done at Washington, DC in the English language.
[Source: www.state.gov/documents/organization/14442.pdf, reported at 42 International Legal Materials 85 (2003).]
236
GENIN v. ESTONIA
Arbitration Bilateral investment treaty Investment dispute Alleged violations of bit by Respondent through its State enterprise Misrepresentations
in connection with purchase of local branch of Estonian social bank Failure
to adhere to write-off agreement to amortize losses arising from purchase
Alleged breach of settlement agreement to assign claims Unjustified
revocation of banking licence Harassment of claimants Damages
Jurisdiction Objections by Respondent No arbitrable investment dispute
Alleged violations of investment treaty denied Damages Counterclaim
Whether dispute concerning an investment
Counterclaim Dismissal of claim and counterclaim No breach of bit
No misrepresentations associated with purchase No breach of settlement
agreement No breach of write-off agreement Revocation of bank licence
not contrary to bit or Estonian law No proof of harassment of Claimants
Respondents counterclaim dismissed
Award Request for supplementary decisions and rectification Alleged failure by tribunal to discuss specific violations of bit contended by Claimants
Request denied No omission on part of Tribunal Costs of request awarded
against Claimants
Genin, Eastern Credit Limited Inc. and AS Baltoil v. Republic of Estonia1

(Case No. ARB/99/2)
Award. 25 June 2001
Decision on Claimants Request for Supplementary Decisions and Rectification.
4 April 2002
(Arbitration Tribunal: Fortier, President; Heth and van den Berg, Members)
Summary: The facts: The Claimants, Mr Alex Genin, a national of the United
States of America, AS Baltoil (Baltoil) and Eastern Credit Limited Inc. (Eastern
Credit), were the principal shareholders in Estonian Innovation Bank (eib), a
financial institution incorporated under the laws of Estonia. Baltoil was an Estonian
company wholly owned by Eastern Credit, a corporation incorporated under the
laws of the State of Texas, usa, and which in turn was owned by Mr Genin. In 1994,
at an auction conducted by the Bank of Estonia, the central bank of the Republic of
Estonia (the Respondent or Estonia), eib agreed to purchase a local branch of
1
The Claimants were represented by Mr Kurt Arbuckle of Kurt Arbuckle PC. The Respondent was
represented by Mr Martin D. Beirne, Mr Michael J. Stanley and Mr Christopher Bell of Beirne,
Maynard & Parsons LLP, and Mr Allen B. Green of Howrey & Simon.
SUMMARY
237
Estonian Social Bank Limited (Social Bank), an insolvent financial institution.

The branch in question was known as the Koidu branch.
Subsequently eib informed the Bank of Estonia, as trustee responsible for Social Bank, of alleged discrepancies in the Koidu branch balance sheet furnished to
potential purchasers of the branch prior to the sale, and claimed losses allegedly
suffered by eib as a result of the misrepresentations in the branch balance sheet. In
May 1995, the City Court of Tallinn, Estonia, entered an order establishing eibs
damages representing the losses it had sustained as a result of these alleged misrepresentations. In March 1996, the Bank of Estonia and eib discussed the possibility
of amortizing the losses related to the Koidu branch over five years. Although the
Claimants alleged that a binding agreement was reached (the Write-Off Agreement), the Respondent denied this. In October 1996, the Bank of Estonia required
eib to write off its Koidu-related losses. In April 1996, eib and the Bank of Estonia
concluded an agreementwhich the Respondent claimed was tentativeunder
the terms of which eib was to assign all of its claims against Social Bank to the
Bank of Estonia, in exchange for the latters assignment to eib of various obligations owed to it by third-party banks. In August 1996, eib assigned its outstanding
claims relating to the Koidu branch to Eastern Credit, which then proceeded to file
a lawsuit in the State of Texas, USA, seeking unsuccessfully to recover those losses
from the Bank of Estonia.
On two occasions in 1997, the Bank of Estonia requested eib to provide information concerning certain of its shareholders, including two of the Claimants. On
the latter occasion, in May 1997, the Bank of Estonia forwarded a list (the May
1997 Regulations/Guidelines) stipulating the information to be provided. In March
1997, the Bank of Estonia issued Prescription No. 19-2-406 (the Prescription)
requiring eib, Eastern Credit, Baltoil and Eurocapital Ltd, a company owned by
Mr Genin, to apply for qualified holding permits, formally entitling those entities
to hold stock in eib in accordance with Estonian law. eib challenged the validity of
the Prescription in the Administrative Court of Tallinn; while the proceedings were
pending the Bank of Estonia, in September 1997, revoked eibs banking licence.
In November 1998, the Administrative Court ordered the liquidation of eib on the
grounds that eibs licence had been revoked; subsequent application by eib to stay
the liquidation proceedings pending the outcome of separate licence revocation
proceedings was rejected.
By a Request for Arbitration of 2 February 1999, the Claimants sought to institute
arbitration proceedings against Estonia, under the terms of a Bilateral Investment
Treaty entered into by the US and Estonia on 19 April 1994 (in force since 16 February 1997) (the bit). On 12 May 1999, the Secretary-General of icsid registered
the Request.
The Claimants argued that an investment dispute had arisen as a result of the
Respondents conduct, through its State enterprise, the Bank of Estonia and its
representatives, amounting to violations of the bits requirements of fair and equal
treatment, and discriminatory and arbitrary treatment, in relation to the Claimants
investment in eib. In particular it argued (a) that the Respondent, through its agency,
the Bank of Estonia, violated the bit in that the balance sheet of the Koidu branch
submitted to eib contained serious misrepresentations; that the Bank of Estonia was
238
GENIN v. ESTONIA
aware of these misrepresentations; that the Bank of Estonia, in its capacity as agent
of the Respondent, failed to abide by the March 1996 Write-Off Agreement and,
further, entered into, and then breached, the settlement agreement of April 1996;
(b) that the Respondent, through its agency, the Bank of Estonia, violated the bit
by revoking eibs licence; (c) that the Respondent, through its police, violated the
bit by harassing the Claimants. Damages in the amount of US $1,639,344 were
claimed, representing losses resulting from the alleged misrepresentations as well
as damages relating to the loss of the original 3,000,000 Estonian kroons investment
in eib.
The Respondent objected to the jurisdiction of the Tribunal on the grounds that
most, if not all, of the Claimants claims were not arbitrable investment disputes
within the meaning of the bit and that several were in any event time-barred. As to
the merits, the Respondent argued inter alia that there was no misrepresentation by
the Bank of Estonia in the sale of the Koidu branch; that the April 1996 agreement
between eib and the Bank of Estonia was only a tentative settlement agreement
not enforceable under Estonian law; that eibs licence was justifiably revoked because eib had committed serious violations of the Estonian banking code; and that
criminal investigations of certain Claimants had nothing to do with the matter of
eibs conduct. By way of counterclaim, Estonia requested damages in excess of
US $3,400,000 for money illegally diverted from eib by the Claimants following
the revocation of eibs licence.
Award: 25 June 2001
Held: The Respondents jurisdictional objections were dismissed, but the
conduct of the Respondent or its agencies did not constitute a breach of either the
bit or Estonian law.
On the preliminary issue of jurisdiction:
(1) There was a legal dispute arising directly out of an investment. The term
investment as defined in Article I(a)(ii) of the bit clearly embraced the investment
of the Claimants in eib; likewise under the icsid Convention. Further, the dispute as
to the revocation of eibs licence was an investment dispute under Article VI(I)
of the bit (paras. 3246).
(2) The Bank of Estonia was a State agency, as defined by the bit, and the
Republic of Estonia was therefore the appropriate respondent to a complaint relating
to the conduct of the Bank of Estonia (para. 327).
(3) The Claimants had not submitted the dispute for resolution to the courts or
administrative tribunals of Estonia or in accordance with any applicable, previously
agreed dispute settlement procedure. The lawsuits in Estonia relating to the purchase
by eib of the Koidu branch of Social Bank and to the revocation of eibs licence
were not identical to the Claimants cause of action in the investment dispute
they sought to arbitrate under icsid. Although certain aspects of the facts that gave
rise to the investment dispute submitted to icsid arbitration were also at issue in
the Estonian litigation, the investment dispute itself related to losses allegedly
SUMMARY
239
suffered by the Claimants alone, arising from what they claimed were breaches of
the bit. Therefore the Claimants were not barred from using the icsid arbitration
mechanism. Similarly, the US litigation did not relate to the major issue at stake
before icsidthe revocation of eibs licenceand did not preclude submission of
the present investment dispute to arbitration. It was not correct to consider eib
and the Claimants as a group and therefore to view eibs legal acts in Estonia as
an election of remedy for the group as a whole (paras. 3304).
As to the merits of the claim:

(4) There was no legal basis for the demand that the Bank of Estonia compensate
eib for its losses arising from the Koidu branch purchase. The claim that the balance
sheet of the Koidu branch submitted to eib in advance of its purchase of that
branch contained serious misrepresentations had not been proved to the Tribunals
satisfaction (para. 345).
(5) Although the Claimants contended that the April 1996 agreement with the
Bank of Estonia was intended to be final, despite the heading Tentative Agreement, the Tribunal was not persuaded that the proposed change in the package of
assets offered to eib in August 1996 justified its rejection by eib without further
negotiation. There was accordingly no breach of a binding agreement to settle the
Koidu branch controversy with eib (para. 346).
(6) The Bank of Estonias reversal of its previous agreement to allow a gradual
amortization of the losses caused to eib did not constitute a breach of agreement.
Both the decision to allow gradual amortization and its reversal were regulatory rulings, and the demand to write down the losses at once was not, in the circumstances,
unreasonable according to accepted accounting practices (para. 347).
(7) The Republic of Estonia, through its agency, the Bank of Estonia, did not
violate the bit, or the international law principles enshrined therein, or Estonian
law, by revoking eibs licence. The context in which the dispute arose was that of
a renascent independent State, coming rapidly to grips with the reality of modern
financial, commercial and banking practices and the emergence of State institutions responsible for overseeing and regulating areas of activity perhaps previously
unknown. The Bank of Estonia had acted within its statutory discretion when it
took the steps that it did, for the reasons that it did, to revoke eibs licence. This
decision, although at first sight formalistic and technical, had to be considered in
the context of serious and reasonable misgivings regarding eibs management, its
operations, its investments and, ultimately, its soundness as a financial institution,
even if the Central Bank was unable, at the time, to identify precisely the cause of
its unease or to confirm its suspicions regarding self-dealing among eibs shareholders and affiliated entities. The Bank of Estonias ultimate decision could not
therefore be said to have been arbitrary or discriminatory against the foreign investors in the sense of the bit. The decision, as it turned out, was further justified
by subsequent revelations and appeared even more understandable with hindsight
(paras. 34863).
(8) However, certain procedures followed by the Estonian authorities, while
conforming to Estonian law and not amounting to a denial of due process, could
240
GENIN v. ESTONIA
be characterized as being contrary to generally accepted banking and regulatory

practice (paras. 36473).
(9) The Republic of Estonia did not harass one or more of the Claimants
in violation of the bit or Estonian law. The Claimants had failed to prove that the
alleged contacts between the Respondents agents and one or more of the Claimants
amounted to harassment (para. 374).
(10) On the other hand, the Respondents counterclaim was also dismissed since
it had failed to demonstrate to the satisfaction of the Tribunal the merits of the claim
(paras. 3768).
(11) Each party should bear all of its own costs and expenses incurred in
connection with the proceedings, and the costs of the arbitration were to be borne
by the parties in equal share.
Decision on Claimants Request for Supplementary Decisions
and Rectification: 4 April 2002
On 7 August 2001, the Claimants submitted a Request for Supplementary Decisions
and Rectification of the Award of 25 June 2001 (the Request). The essence
of the Claimants argument was that the Tribunal in its Award failed to discuss
three specific provisions of the bit in respect of which the Claimants had alleged
violations by the Republic of Estonia.
Held: The Claimants Request for Supplementary Decisions and Rectification
was denied.
(1) The Claimants Request did not concern questions which the Tribunal had
omitted to decide. Rather, it related to issues that the Claimants themselves had
failed to address in their various submissions in the arbitration. The Claimants
had neither adduced evidence nor made arguments concerning the bit provisions
that they suggested were omitted from the Tribunals award. The Award itself
revealed that the issues raised by the Claimants in their Request were in fact dealt
with, implicitly if not explicitly, in both the reasoning and the conclusions set out
in the Award. Accordingly no supplementary decision was required (paras. 1014).
(2) Paragraph 356 of the Award spoke for itself; it was clear and comprehensive,
and required no rectification (para. 17).
(3) The costs of the Request, including the expenses of the Tribunal, were to be
paid in full by the Claimants (paras. 201).
Award (25 June 2001)
Rectification (4 April 2002)
p. 241
p. 304
AWARD
241
AWARD (25 JUNE 2001)
Table of Contents
A. Institution of Proceedings
B. The bit
1) General Description
2) Relevant Provisions of the bit Invoked by the Parties
C. The First Session of the Tribunal
D. The Hearing on Jurisdiction
E. Factual Background to the Arbitration
1) Dramatis Personae
2) The Facts Giving Rise to the Dispute
3) Relevant Provisions of Estonian Law
F. The Written Procedure
1) Claimants Memorial
2) Respondents Counter-Memorial
3) Claimants Response
4) Respondents Rejoinder
G. The Oral Procedure
1) Claimants Evidence
2) Respondents Evidence
H. Post-Hearing Submissions
1) Claimants Post-Hearing Memorial
2) Respondents Post-Hearing Memorial
I. Issues and Analysis
1) Jurisdictional Issues
2) The Koidu Branch Purchase and its Aftermath
3) The Revocation of eibs Licence
4) The Harassment Claim
5) Respondents Counterclaim
J. Costs
K. Award
Page
241
242
242
243
244
245
245
245
246
248
251
251
257
271
272
274
274
276
277
277
283
288
289
292
295
301
301
302
303
A. Institution of Proceedings
1. By letter dated 11 March 1999, the International Centre for Settlement of
Investment Disputes (the Centre or icsid) acknowledged receipt of a Request
for Arbitration dated 2 February 1999 (the Request) from Mr Alex Genin, a
national of the United States of America; Eastern Credit Limited Inc., a corporation
incorporated under the laws of the State of Texas; and AS Baltoil, an Estonian
company wholly-owned by Eastern Credit (collectively, the Claimants).
242
GENIN v. ESTONIA
2. The Request stated that Claimants wished to institute arbitration proceedings

against the Republic of Estonia (the Respondent or Estonia), under the terms
of a Bilateral Investment Treaty1 entered into by the US and Estonia on 19 April
1994 and in effect as of 16 February 1997 (the bit).
3. In their Request, the Claimants declared that an investment dispute had arisen
as a result of Respondents conduct, comprising violations of numerous provisions
of the bit, in relation to Claimants investment in Estonian Innovation Bank, a
financial institution incorporated under the laws of Estonia.
4. In the Centres letter of 11 March 1999 acknowledging receipt of Claimants
Request (copy of which was sent to Respondent, enclosing the Request) icsid requested from Claimants additional information concerning the nature of the dispute
alleged by them as well as regarding the ownership of Estonian Innovation Bank at
the time of the dispute. This information was provided to the Centre by Claimants,
in letters dated 6 and 14 April 1999.
5. By letter dated 6 May 1999, the Centre requested confirmation from Claimants
that the dispute covered by the Request related exclusively to investments owned
or controlled by Claimants. Confirmation was provided by Claimants on the same
date.
6. On 12 May 1999, the Secretary-General of icsid transmitted to the parties a
Notice of Registration, pursuant to Article 36(3) of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the
Convention) and Rules 6(1)(a) and 7(a) of the icsid Rules of Procedure for the
Institution of Conciliation and Arbitration Proceedings, stating that the Request
had been registered in the Centres Arbitration Register on 12 May 1999.
7. The Arbitral Tribunal (the Tribunal) was duly constituted on 21 September
1999. The Tribunal consists of Mr L. Yves Fortier, CC, QC (nominated jointly by
the two party-appointed arbitrators) as President, Professor Meir Heth (nominated
by Claimants) and Professor Albert Jan van den Berg (nominated by Respondent).
8. In the absence of any agreed request by the parties to vary the rules of procedure
laid down in the Convention and the icsid Rules of Procedure for Arbitration Proceedings, in effect from 26 September 1984 (the Arbitration Rules), the Tribunal
has followed the direction provided in Article 44 of the Convention, to the effect
that the proceedings shall be conducted in accordance with Section 3 of Chapter
IV of the Convention and the Arbitration Rules.
B. The bit
1) General Description
9. The bit is a bilateral investment treaty between the US and the Republic of
Estonia. It entered into effect on 16 February 1997.
1
Treaty Between the Government of the Republic of Estonia and the Government of the United States
of America for the Encouragement and Reciprocal Protection of Investment, done at Washington, DC
on 19 April 1994. (See Part B of this Award for a description of the bit and its relevant provisions.)
AWARD
243
10. The objectives of the bit, as delineated in its preamble, include economic cooperation, increased flow of capital, a stable framework for investment, development
of economic and business ties, respect for internationally-recognised worker rights,
and maximum efficiency in the use of economic resources.
2) Relevant Provisions of the bit Invoked by the Parties

11. The following constitutes a brief summary of the provisions of the bit invoked
by the parties in this arbitration.
12. Article I sets out the definitions used in the bit, including investment,
national and state enterprise.
13. Article II deals with the Parties obligations with respect to the treatment of
investments.
r Article II, Paragraph 2(b) requires the Parties to ensure that the conduct of
r
r
r
r
r
r
governmental authority by a State enterprise is done in a manner that is not

inconsistent with the Partys obligations under the Treaty.
Article II, Paragraph 3(a) provides for the fair and equitable treatment of
investments and states that no investment shall be accorded treatment less
favourable than that required by international law.
Article II, Paragraph 3(b) prohibits the Parties from impairing by arbitrary or
discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investments.
Article II, Paragraph 3(c) provides for the respect of obligations entered into
with regard to investments.
Article II, Paragraph 7 declares that each Party must provide effective means of
asserting rights and claims with respect to investments, investment agreements
and investment authorisations.
Article II, Paragraph 8 requires that all laws, regulations, administrative practices and procedures, as well as adjudicative decisions that pertain to or affect
investments, be duly published.
Article II, Paragraph 11 prohibits interference with the granting of rights under
licences and requires that nationals and companies of either Party receive the
better of national or most favoured nation treatment with respect to certain
activities associated with their investment.
14. Article III incorporates into the bit the international law rules and standards
relating to expropriation and compensation.
r Article III, Paragraph 1 requires that an expropriation be done for a public
purpose; in a non-discriminatory manner; with payment of prompt, adequate
and effective compensation; and that it meet the requirements of due process
and the general principles of fair and equitable treatment provided for in
Article II, Paragraph 3 of the bit.
r Article III, Paragraph 2 requires the availability of prompt and effective judicial
or administrative review of claims relating to an expropriation.
244
GENIN v. ESTONIA
15. Article IV protects investors from certain government exchange controls

limiting current account and capital account transfers.
r Article IV, Paragraph 1 provides for the free transfer of investments.
16. Article VI deals with Stateinvestor dispute resolution and defines the term
investment dispute.
17. Article IX reserves the right of a Party to take measures for the maintenance of
public order and the fulfilment of its obligations to international peace and security,
including such measures as it considers necessary for the protection of its own
essential security interests.
r Article IX, Paragraph 2 prohibits the imposition of formal requirements that
impair substantive rights under the bit.
18. Article XII applies the Treaty to all investments that existed at the time the
Treaty became effective.
C. The First Session of the Tribunal
19. By agreement of the parties, the First Session of the Arbitral Tribunal was
held on 12 October 1999, in Zurich, Switzerland, in accordance with, and within
the period set out in, Rule 13(1) of the Arbitration Rules.
20. At that Session, the parties confirmed that the Tribunal had been properly
constituted in accordance with the Convention and the Arbitration Rules.
21. Among the procedural and other matters addressed at the First Session of the
Tribunal, it was confirmed that the language of the proceedings would be English
and that the place of the proceedings would be Washington, DC, the seat of the
Centre.
22. It was also confirmed that the proceedings would comprise a written procedure followed by an oral procedure.
23. At the First Session of the Tribunal, counsel for Respondent informed the
Tribunal of Estonias position to the effect that the Tribunal lacked jurisdiction to
adjudicate the dispute as alleged by Claimants.2 For their part, Claimants rejected
the merits of Estonias objection to jurisdiction and argued that, in any event, the
issue of jurisdiction and the Tribunals consideration of the issue should be joined
to the merits of the dispute.
24. Following counsels presentations, and after deliberation among the members
of the Tribunal, the President informed the parties of the Tribunals decision to
establish a written and oral phase for the hearing of Respondents objection to
jurisdiction as a preliminary matter, and a schedule was fixed, as follows:
r 12 November 1999, for Respondent to file its Memorial in support of its
objection to jurisdiction;
2
Respondents intention to raise this preliminary issue had previously been communicated to the Centre
in letters dated 6 April, 14 April, 12 May and 5 October 1999.
AWARD
245
r 13 December 1999, for Claimants to file their Memorial in response to

Respondents objection to jurisdiction; and
r 8 January 2000 for the oral hearing on jurisdiction, in London, UK.
D. The Hearing on Jurisdiction

25. In accordance with the schedule set by the Tribunal at its First Session, an
oral hearing took place on 8 January 2000, in London, UK, on the objection to
jurisdiction raised by Respondent.
26. As submitted by counsel for Respondent, and as previously set out in writing
in Respondents 12 November 1999 Memorial on jurisdiction, Estonia advanced
two principal grounds in support of its objection to jurisdiction, namely, that the
matters alleged by Claimants had been fully, finally and fairly litigated before the
courts and administrative agencies of Estonia, and that the facts do not evidence
an investment dispute under the bit given Claimants de minimis interests in eib.
Both of these arguments were strenuously contested by Claimants.
27. After deliberation, the President of the Tribunal delivered orally, on 8 January
2000, the Tribunals unanimous decision to the effect that Respondents objection
to jurisdiction was not ripe for decision and would, therefore, be joined to the
Tribunals consideration of the merits of the dispute.
28. As regards the timetable for the arbitration of the merits, after consultation
with the parties, the Tribunal established the following schedule prior to the close
of the 8 January 2000 hearing:
r 23 March 2000, for the filing of Claimants Memorial on the merits;
r 16 June 2000, for the filing of Respondents Memorial (Counter-Memorial)
on the merits;
r 17 July 2000, for the filing of Claimants Response; and
r 17 August 2000, for the filing of Respondents Rejoinder.
29. In addition, the Tribunal set the date of 2 October 2000 for the commencement
of the oral hearing on the merits, in Washington, DC.3
E. Factual Background to the Arbitration

1) Dramatis Personae
Corporate entities
30. Estonian Innovation Bank (eib) is a financial institution incorporated under
the laws of Estonia. Its principal shareholders during the period relevant to the
arbitration were AS Baltoil, Eastern Credit Limited Inc. and Eurocapital.
3
Prior to the close of the hearing on jurisdiction, the Tribunal also drew the parties attention to several
questions that it wished the parties to address in their written submissions on the merits, including as
regards various aspects of Estonian law relevant to the arbitration. These issues are summarised, below,
where the written procedure is reviewed.
246
GENIN v. ESTONIA
31. AS Baltoil (Baltoil) is an Estonian company wholly-owned by Eastern

Credit, which in turn is owned by Mr Genin.
32. Eastern Credit Limited, Inc. (Eastern Credit) is a corporation incorporated
under the laws of the State of Texas, USA, and owned by Mr Genin.
33. Eurocapital, as used in this Award, refers both to Eurocapital Group Limited
(Eurocapital Ltd) and Eurocapital Group Company (Eurocapital Co.), an Isle of
Man corporation, incorporated in 1988. As stated by Mr Genin during his testimony
in the arbitration,4 the two are in fact the same company, of which Mr Genin is the
beneficial owner of all of the outstanding (bearer) shares.
34. Pacific Commercial Credit is a company affiliated to Eurocapital. It has two
shareholders: Eurocapital and Eastern Credit.
35. The Koidu branch of Social Bank (the Koidu branch) was a branch of
Estonian Social Bank Limited (Social Bank), an insolvent Estonian financial
institution.
Individuals
36. Mr Alex Genin is a national of the United States of America. He is eibs
Chairman of the Board, as well as the owner, managing director and sole shareholder
of Eastern Credit. As mentioned, Mr Genin is also the beneficial owner of all of the
outstanding (bearer) shares of Eurocapital.
37. Mr Michail Dashkovsky was the President of eib. He was a shareholder and
the President of Baltoil, and the Claimants principal representative in Estonia.
38. Mr Peep Sillandi was the President of eib at the time of the signature of the
Koidu branch Sales Agreement (discussed below). He was succeeded as President
of eib by Mr Michail Dashkovsky.
39. Mr Vahur Kraft is the President of the Bank of Estonia and was its VicePresident from 19911995, including at the time of the signature of the Koidu branch
Sales Agreement. He was previously Deputy Manager of the Credit Department of
Social Bank, from 1991 to 1993, and also worked in the international department
of Social Banks main office.
40. Ms Pilvia Nirgi was the Head of the Banking Supervision Department of the
Bank of Estonia.
41. Ms Eve Sirts was the head of the Off-site Supervision Subdepartment of
the Banking Supervision Department of the Bank of Estonia. She was also the
Inspector/Share Capital Specialist of the Bank of Estonia, reporting to Ms Nirgi at
all times relevant to the arbitration.
2) The Facts Giving Rise to the Dispute
42. It is useful to set out here, by way of background, certain facts of a general
nature, largely uncontested, relating to the principal issues in dispute between the
parties.5
4
See Part G, below: The Oral Procedure.

In the following sections of this Award, the parties detailed allegations and submissions of fact and
law are summarised.
5
AWARD
247
43. On 12 August 1994, at an auction conducted by the Bank of Estonia, the

central bank of the Republic of Estonia, eib agreed to purchase a local branch
of Estonian Social Bank Limited, an insolvent financial institution, for 3,000,000
Estonian kroons (eek). The branch in question is known as the Koidu branch.
44. On 13 August 1994, a Sales Agreement (the Koidu branch Sales Agreement) was signed by the President of eib, Mr Peep Sillandi,6 and by the Vice
President of the Bank of Estonia (on behalf of the insolvent Social Bank), Mr
Vahur Kraft.7
45. On 16 September 1994, eib informed the Bank of Estonia, in writing, of
discrepancies that it had allegedly uncovered in the Koidu branch balance sheet
that had been furnished to potential purchasers of the branch prior to the sale. eib
claimed from the Bank of Estonia, as trustee responsible for Social Bank, the losses
allegedly suffered by eib as a result of these discrepancies.
46. On 2 December 1994, the Bank of Estonia denied any liability for such
discrepancies and for whatever losses may have been suffered by eib as a result.
47. On 9 January 1995, eib sued Social Bank before the City Court of Tallinn
(City Court), in Estonia, seeking to recover its losses allegedly caused by misrepresentations in the Koidu branch balance sheet.
48. On 3 May 1995, the City Court entered an order, pursuant to an agreement
between the parties, establishing eibs damages in the amount of 20,977,117 eek,
representing approximately 2,893,991 eek for nonexistent assets included on the
Koidu branch balance sheet, and 18,083,126 eek for non-performing notes. Certain
payments were made by Social Bank to eib, leaving a total of 19,491,947 eek owing.
49. In March 1996, the Bank of Estonia and eib discussed the possibility of
eib amortising its losses related to the Koidu branch over five years. As explained
more fully below, although Claimants allege that a binding agreement was reached,
Respondent contends that no such agreement was ever concluded. In any event, in
October 1996, the Bank of Estonia required eib to write off its Koidu-related losses.
50. On 12 April 1996, eib and the Bank of Estonia concluded an agreement
which Respondent claims was merely tentativeunder the terms of which eib
was to assign all of its claims against Social Bank to the Bank of Estonia, in exchange
for the latters assignment to eib of various obligations owed to it by third-party
banks. As discussed below, that agreement was never finalised.
51. In August 1996, eib assigned its outstanding claims relating to the Koidu
branch losses, in the amount of 19,491,947 eek (US $1,639,344), to Eastern Credit.8
Eastern Credit then proceeded to file a lawsuit in the State of Texas, USA, seeking,
unsuccessfully, to recover those losses from the Bank of Estonia.9
52. In early 1997, the Bank of Estonia conducted its annual audit of eib. In
the course of their inspections, the Bank of Estonias inspectors requested eib to
6
Mr Sillandi was succeeded as President of eib by Mr Michael Dashkovsky. In that capacity,

Mr Dashkovsky represented eib during the period relevant to the arbitration.
7
Mr Kraft was later named President of the Bank of Estonia, a position he occupied throughout much
of the period relevant to the arbitration.
8
A restated assignment was entered into in May 1997, to correct certain omissions. Claimants
Memorial, para. 134.
9
In June 1998, the US Court declared that it did not have jurisdiction over the Koidu branch dispute
and dismissed the case, without prejudice.
248
GENIN v. ESTONIA
provide various information concerning certain of its shareholders, including two

of the Claimants.
53. On 18 March 1997, the Bank of Estonia issued Prescription10 No. 19-2406 (the March 1997 Prescription), requiring eib, Eastern Credit, Baltoil and
Eurocapital Ltd to apply for qualified holding permits, formally entitling those
entities to hold stock in eib in accordance with Estonian law.
54. Although eib claims that it complied with the March 1997 Prescription by
submitting the required applications, on 24 March 1997 it nonetheless challenged
the validity of the Prescription in the Administrative Court of Tallinn (Administrative Court).11
55. On 21 May 1997, the Bank of Estonia sent a letter to eib requesting further
detailed information about its shareholders and their affiliates, and enclosing a
list (which the Tribunal shall refer to as the May 1997 Regulations/Guidelines)
stipulating the information to be provided.
56. On 19 June 1997, Estonian counsel for eib met with representatives of the
Bank of Estonia to discuss the matter of the March 1997 Prescription and the 21
May 1997 request for information. As discussed below, Claimants allege that, at
that meeting, the Bank of Estonia admitted that its conduct was motivated by a
desire to glean information of use to it in its defence to the Texas lawsuit.
57. On 9 September 1997, while the proceedings challenging the 18 March 1997
Prescription were pending, the Council of the Bank of Estonia voted a resolution
revoking eibs banking licence, effective immediately.
58. On 11 September 1997, eib instituted proceedings before the Administrative
Court, challenging the licence revocation as regards both the Bank of Estonias
authority to revoke the licence and the correctness of its decision to do so in this
case.
59. While the licence revocation proceedings were pending, a minority shareholder of eib (unrelated to the parties to the arbitration) petitioned the court on 18
November 1998, in separate proceedings, to order the liquidation of eib, on the
grounds that eibs licence had been revoked on 9 September 1997. The petition was
granted.
60. On 12 January 1999, an application by eib to stay the liquidation pending the
outcome of the licence revocation proceedings was rejected, which decision was
subsequently upheld on appeal.
61. On 6 October 1999, eibs challenge to the revocation of its licence was dismissed, on the grounds, inter alia, that the bank was, by then, already in liquidation.
3) Relevant Provisions of Estonian Law
62. The principal provisions of domestic law referred to by the parties and relevant
for the purposes of the Tribunals determination are found in two Estonian statutes,
namely, the Law of the Central Bank of the Republic of Estonia, passed on 18 May
10
A prescription is a form of regulatory order, also referred to in the parties submissions as a precept.
Those proceedings were suspended on 23 March 1998, by which time they had been superseded by
events: eibs licence had been revoked by the Bank of Estonia and separate proceedings challenging
that revocation had been launched by eibsee below.
11
AWARD
249
1993 and in force as of 18 June 1993, as amended on 5 April 1994 (the Bank of
Estonia Act)12 and the Law on Credit Institutions, passed on 15 December 1994 and
in force as of 20 January 1995 (the Credit Institutions Act).13 Those provisions
read as follows:
Bank of Estonia Act
Part I. General Regulations
Article 2. Responsibilities of Eesti Pank14
(. . .)
(4) Eesti Pank carries out the monetary and banking policy and directs the credit
policy of the Republic of Estonia.
(5) Eesti Pank carries out control over all credit institutions within the Republic of
Estonia. Eesti Pank supervises their activities as regards to their correspondence to the
laws, obligatory norms and regulations as well as takes measures to ensure the strict
following of the laws, norms and regulations.
(. . .)
Part IV. Control Over Credit Institutions
Article 17. Basic Generalities of Banking Supervision
(1) Eesti Pank provides control over all credit institutions located in the Republic of
Estonia through the Banking Inspection and its own departments.
(. . .)
(5) Eesti Pank has the right to request from all credit institutions data, documents,
reports and agreements as well as to require appropriate explanations of these data.15
Article 18. Issuing and Cancelling Licences
(1) Eesti Pank issues to credit institutions licences and cancels them in case the credit
institution[s] do not follow established laws and regulations, or violate the law or any
demands imposed upon them by Eesti Pank.
(2) Conditions for issuing and cancelling licences for credit institutions are established by Eesti Pank.
(. . .)
Credit Institutions Act
Article 19. Withdrawal of the Licence
Eesti Pank may withdraw the licence
(. . .)
(5) if wrong or misleading data, information, advertisements or reports are submitted
or published deliberately;
12
Claimants Exhibit 8 (English version).

Claimants Exhibit 9 (English version).
14
Eesti Pank refers to the Bank of Estonia.
15
Claimants have alleged that certain words are missing from Article 17(5) of the English version of
the Bank of Estonia Act that has been filed as an exhibit in these proceedings. According to Claimants,
the correct translation of art. 17(5) is: Eesti Pank has the right to request from all credit institutions
data, documents, reports and agreements relating to their operations as well as to require appropriate
explanations of these data. While the matter was the object of testimony and submissions during the
hearing, the controversy, such as it is, need not be resolved. Even if Claimants contention is accepted,
that is, even if art. 17(5) of the Bank of Estonia Act is read so as to include the qualifying words relating
to their operations, this would have no impact on the Tribunals assessment of the Bank of Estonias
conduct or its determination of the merits of Claimants claims in this arbitration.
13
250
GENIN v. ESTONIA
Article 28. Qualifying Holding

A qualifying holding within the meaning of this law is a holding of capital representing
10% or more of the undertakings share capital or of the voting rights, or which makes
it possible to exercise significant influence over the management of the undertaking,
either on the basis of a contract or in some other way.
Article 29. Increasing and Disposing of Qualifying Holding
(1) A credit institution or individual who is willing to acquire, directly or indirectly,
a qualifying holding of a credit institution, or to increase such a holding to exceed 20%,
30% or 50% of the credit institutions share capital or number of votes, must apply for
authorization from Eesti Pank. The application shall be submitted in writing and must
contain information on the size of the intended holding.
(2) The obligation to obtain authorization set out in Clause 1 of the present Article
applies also to cases when:
1) the acquisition or increase of a qualifying holding results from the activities of
third parties;
2) the credit institution might, as a result of a transaction, become a subsidiary of
some other person.
(3) Eesti Pank will refuse authorization to acquire or increase a qualifying holding
in a credit institution:
1) to a person who lacks an immaculate business reputation;
2) if it may restrict free competition.
(4) Eesti Pank will make a notification of its decision concerning the authorization
mentioned in Clause 1 of the present Article no later than one month after the receipt
of the application.
(5) Should Eesti Pank refuse the authorization mentioned in Clause 1 of the present
Article, the transaction of acquiring or increasing the qualifying holding will be forbidden.
(6) A credit institution and a person wishing to dispose of a qualifying holding in a
credit institution is required to first inform Eesti Pank.
Article 59. The Basis and Limits of Supervision
(1) The activities of credit institutions are subject to supervision by Eesti Pank. The
objective of such supervision is to guarantee that the establishing and activities of all
the credit institutions conform with the existing laws and other legal acts issued on
their basis.
(. . .)
(6) The Banking Supervision Department will carry out continuous inspection of a
credit institutions activities and its condition on the basis of regular reports submitted
by the latter. If necessary, the Banking Supervision Department is entitled to:
1) demand that a credit institution submit supplementary information, in order to
specify information in the reports;
2) demand information from persons who are shareholders of the credit institution,
as well as from legal persons in which the credit institution is a shareholder;
3) carry out on-site inspection of a credit institutions clients, relating to issues
concerning the relations between the client and the credit institution.
(7) The principles and procedures of the consolidated supervision of a credit institution and parties connected to it, shall be established by Eesti Pank.
(. . .)
AWARD
251
Article 60. On-Site Inspection of Credit Institutions

(1) The Banking Supervision Department is entitled by this law and its own Statutes
to carry out on-site inspection of credit institutions.
(2) When being inspected on site, it is the obligation of the credit institution to allow
the employees of the Banking Supervision Department and other persons authorised
by Eesti Pank in accordance with this law:
1) to enter all the rooms of the credit institution provided all security regulations
established by the credit institution are observed;
2) to use a separate room for performing their duties. The credit institution shall
appoint a competent representative whose responsibility is to provide the inspector will (sic) all the necessary documents and with explanations related to
these documents.
(. . .)
Article 69. Methods of Winding Up a Credit Institution
(1) A credit institutions activities may be wound up:
(. . .)
2) on the initiative of Eesti Pank or other persons listed in the law and on the basis
of a court order (hereinafter compulsory liquidation);
(. . .)
F. The Written Procedure

1) Claimants Memorial
63. As ordered by the Tribunal, Claimants duly filed their Memorial, with supporting documentation, on 24 March 2000.
64. In their Memorial, Claimants allege what they refer to as eight transgressions of the bit committed by Respondent, arising in particular as a result of
the conduct of the Bank of Estonia and its representatives. These are summarised,
below.16
65. The central theme that emerges from Claimants written submissions is that
Respondents actions were allegedly motivated by a desire to destroy eib, by revoking the banks operating licence, as a means of evading its liability arising from
the Bank of Estonias role in the Koidu branch affair and by an intent to retaliate
for the launching of the Texas lawsuit.
Claim 1: the Bank of Estonia is responsible for eibs losses relating to the
purchase of the Koidu branch
66. Claimants allege that, in the summer of 1994, Mr Kraft, then Vice President of
the Bank of Estonia, wrote to Estonias financial institutions regarding the auction
of various branches of the insolvent Social Bank, among them, the Koidu branch.
Enclosed with that letter, inter alia, was a copy of the Koidu branchs balance sheet.
16
At the outset of their Memorial, Claimants also reiterate their argument in support of the Tribunals
jurisdiction in these proceedings, as originally submitted in their Memorial on Jurisdiction, discussed
above.
252
GENIN v. ESTONIA
67. Claimants declare that eib agreed to purchase, and did purchase, the Koidu
branch in reliance on Mr Krafts representations, including, in particular, the balance sheet provided by him. The agreed purchase price for the Koidu branch was
3,000,000 eek (in addition to the assumption of the branchs liabilities), which,
in accordance with the Koidu branch Sales Agreement, eib paid to the Bank of
Estonia, apparently in partial payment of amounts owed to the Bank of Estonia by
Social Bank.
68. It is Claimants contention that the balance sheet of the Koidu branch submitted to eib in advance of its purchase of the Koidu branch contained serious
misrepresentations, and that, moreover, the Bank of Estonia was aware of these
misrepresentations. Indeed, Claimants allege that, as Deputy Manager of the credit
department of Social Bank from 1991 to 1993, Mr Kraft had been directly involved
in the evaluation of the particular loans that were misstated in the Koidu branch
balance sheet.
69. Claimants submit that the Bank of Estonia refused to remedy the situation
caused by its complicity in the misrepresentations of the assets of the Koidu branch
and to compensate eib for losses resulting from those misrepresentations. Those
losses, Claimants state, total 19,491,947 eek,17 in addition to the 3,000,000 eek
paid to purchase the Koidu branch.
70. Claimants submit that, by its conduct, the Bank of Estonia violated Article
II, Paragraph 3(a) of the bit. Specifically, it is submitted that the Bank of Estonia
failed to give eibs (and hence the Claimants) investment in the Koidu branch fair
and equitable treatment, that it failed to provide full protection for the investment
and that such treatment falls below the standards required by international law.
71. Claimants also allege that the requirement that eibs payment for the Koidu
branch be made directly to the Bank of Estonia, rather than to Social Bank, should
be regarded as an expropriation for a non-public purpose, done in a discriminatory
manner and without payment of prompt, adequate and effective compensation, thus
violating Article III, Paragraph 1 of the bit.
Claim 2: the Bank of Estonia entered into, and then breached, a settlement
agreement
72. Claimants contend that the Bank of Estonia acknowledged its partial responsibility for eibs losses resulting from the purchase of the Koidu branch. Specifically,
Claimants allege that, on 12 April 1996, eib and the Bank of Estonia entered into
an agreement under the terms of which eib was to assign all of its claims against
Social Bank to the Bank of Estonia, in exchange for the latters assignment to
eib of various obligations owed to it by third-party banks (the Koidu Settlement
Agreement).18 According to Claimants, it remained only for the Bank of Estonia to
arrange with those banks for the extension of certain of the obligations in question
(essentially, for the Bank of Estonia to extend the terms of various loans) before
the Koidu Settlement Agreement could be finalised and signed.
17
18
See para. 48 of this Award.

Claimants Exhibit 29.
AWARD
253
73. Claimants state that, on 14 June 1996, Mr Michail Dashkovsky, President of

eib, inquired of Mr Kraft as to when the Koidu Settlement Agreement would be
ready for signing. According to Claimants, Mr Dashkovsky was assured that only
technical matters remained outstanding and that the required contract would be
completed and signed shortly.
74. Claimants allege that, on 17 July 1996, the matter still unresolved, Mr
Dashkovsky sent a letter to the chief of the Bank Inspectorate of the Bank of
Estonia. In reply, eib received, on 5 August 1996, a letter signed by Mr Andres
Sutt, secondary head of the Bank Inspectorate, enclosing what was purportedly a
draft text of the agreement concerning the assignment of claims.19 Claimants stress
that this so-called draft contained terms that bore little resemblance to those
agreed on 12 April 1996 and were far less generous as regards the consideration
for eibs claims against Social Bank.
75. On 5 August 1996, Mr Genin, on behalf of eib, responded by letter, rejecting
the changes to the Koidu Settlement Agreement and notifying the Bank of Estonia
that he considered it to be in breach of that Agreement.20 Claimants contend that, in
so doing, eib rejected only the 5 August 1996 text proffered by the Bank of Estonia,
and not the April 1996 Settlement Agreement itself.
76. Claimants submit that the conduct of the Bank of Estonia as regards the
Koidu Settlement Agreement constitutes a violation of Article II, Paragraphs 3(a)
and (c) of the bit, which provide, respectively, for the fair and equitable treatment of investments and for the respect of obligations entered into with regard to
investments.
Claim 3: the Bank of Estonia attempted to cause eibs capital to fall below
minimum capitalisation requirements
77. Claimants allege that, by letter dated 21 March 1996, the Bank of Estonia agreed to allow eib to amortise the damages resulting from the purchase of
the branch of Estonian Social Bank over a maximum of five years (. . .) (the
Write-Off Agreement).21 This, they claim, was expressly intended to enable eib
to maintain its capitalisation above the legally required minimum, and to avoid the
under-capitalisation that would have resulted had eib been required to write off its
approximately 19,000,000 eek Koidu branch-related losses all at once. Claimants
argue that the Bank of Estonias letter also demonstrated its view that eib was sufficiently healthy and well-managed to absorb those losses by the end of the five-year
period.
78. Claimants allege that, on 10 October 1996, the Bank of Estonia reneged on
the Write-Off Agreement, instead requiring eib to charge its Koidu branch-related
losses as costs and noting, moreover, that this would cause eibs equity to fall below
minimum required levels.22
19

21
22
20
254
GENIN v. ESTONIA
79. As mentioned above,23 in August 1996, Eastern Credit had taken an assignment of eibs claims (restated in May 1997) in order to pursue those claims in a
United States court. The consideration owed to eib for the assignment was to have
comprised the first 15,000,000 eek recovered in the litigation; alternatively, it was
hoped that a settlement could be reached with the Bank of Estonia. In either case,
Claimants allege, there was no need for Eastern Credit actually to transfer funds
to eib to pay for the assignment. In December 1996, however, after receiving the
Bank of Estonias 10 October 1996 letter reneging on the Write-Off Agreement,
Claimants state that Eastern Credit made full payment to eib for the assignment of
claims, in the amount of 19,491,947 eek (US $1,639,344).
80. Claimants contend that the Bank of Estonia intentionally breached the WriteOff Agreement in order to engineer a shortfall in eibs capital levels that would
justify the revocation of the banks licence. Claimants declare that the resulting
payment by Eastern Credit was made with the express aim of ensuring that eib
would be able to write off the Koidu branch losses without falling below the minimum capital requirements imposed by Estonian law and constituted an additional
investment for which Respondent is liable.
81. Claimants submit that the Bank of Estonias actions violate Article II, Paragraphs 3(a) and (c) of the bit, as well as Article III, Paragraph 1. In addition,
Claimants allege breaches of Article II, Paragraph 3(b), prohibiting arbitrary or
discriminatory measures, and Article IX, Paragraph 2, prohibiting the imposition
of formal requirements that impair substantive rights under the bit.
Claim 4: the Bank of Estonias 18 March 1997 Prescription was illegal
82. As noted earlier, on 18 March 1997, the Bank of Estonia issued Prescription
No. 19-2-406, requiring eib and certain of its shareholders (Eastern Credit, Baltoil
and Eurocapital Ltd) to apply for qualified holding permits entitling them, under
Estonian law, to hold stock in eib in excess of certain specified percentages (socalled qualified holdings) of eibs share capital.
83. Claimants allege that Eastern Credits shares in eib were already legally held
pursuant to a foreign investment licence granted by the Bank of Estonia on 7 October
1992, permitting Eastern Credit to acquire a 33% interest in eib.24 Claimants also
state that, on 30 June 1995, an entity known as Eurocapital Co. had been granted
a qualified holding permit for an interest in excess of 50% of eib, and the Bank of
Estonia was well aware that Eurocapital Ltd and Eurocapital Co. were in fact one
and the same company. Claimants further allege that Baltoils 5% shareholding in
eib did not, on its own, even constitute a qualified holding requiring a permit.
84. While contesting the validity of the March 1997 Prescription, Claimants state
that eib and the shareholders in question nonetheless complied with its terms, by
submitting the requested applications on 18 April 1997.
85. Claimants submit that the issuance of the Bank of Estonias 18 March 1997
Prescription violates Article II, Paragraphs 3(a) and (b) and Article IX, Paragraph
23
24

AWARD
255
2 of the bit, as well as Article II, Paragraph 11, relating to interference with the
granting of rights, licences, permits.
Claim 5: the use of unpublished and legally baseless regulationsthe 1997
Regulations/Guidelines
86. Claimants allege that the Bank of Estonias purpose in requesting detailed
information concerning eibs shareholdersand, in particular, the use of the 1997
Regulations/Guidelineswas unrelated to any legitimate supervisory activity. The
information requests, say Claimants, fell like rain out of a clear blue sky, unrelated to any supposed concern regarding qualified holdings. Those requests, say
Claimants, served merely as a pretext, first, to gain information to assist the Bank
of Estonia in its defence to the United States litigation launched by Eastern Credit
and, ultimately, to revoke eibs licence.
87. Claimants contend that the Bank of Estonia had no legal right to much of
the information requestedfor example, balance sheets of eibs shareholders and
information concerning the shareholders of the shareholders of eiband that eib
did not possess and could not possibly have provided such information in any event.
Indeed, Claimants declare that eib in fact provided all of the information requested
by the Bank of Estonia of which eib had knowledge.
88. Claimants submit that the Bank of Estonias use, in particular, of unpublished, secret and legally baseless regulations (i.e., the 1997 Regulations/Guidelines enclosed with its 21 May 1997 request for information) to glean
information to which it had no legal right constitutes a violation of Article II, Paragraph 8 of the bit, requiring that all laws, regulations, administrative practices, etc.,
affecting investments be duly published.
Claim 6: the Bank of Estonia revoked eibs licence on a pretext
89. Claimants assert that the reasons stated by the Bank of Estonia for the revocation of eibs licence are mere pretexts. In Claimants words:
Of course, all of these prescriptions and demands for information would have meant
nothing had they stopped at this point. However, on September 9, 1997, the Bank of
Estonia used the supposed requests for information and the supposed requirement for
applications to acquire qualifying holdings as its reasons for revoking the license of
[eib].25
90. Claimants contend that the Bank of Estonias conduct, and in particular its
revocation of eibs licence, was designed to enable the Bank of Estonia to avoid
its liability to eib for its involvement in the Koidu branch affair. Claimants also
contend that they were denied due process in the matter of the licence revocation.
91. Claimants submit that the Bank of Estonias revocation of eibs licence
without due process, without prior notice of any kind and for reasons which were
totally pretextual, comprises a violation of Article II, Paragraph 3(a) and (b), Article
25
Claimants Memorial, para. 166.
256
GENIN v. ESTONIA
II, Paragraph 11, Article III, Paragraph 1, Article IX, Paragraph 2 of the bit, as well
as Article IV, Paragraph 1, providing for the free transfer of investments.
Claim 7: Respondent is responsible for the forced liquidation of eib and the
dismissal of its challenge to the licence revocation
92. As indicated above, on 11 September 1997, eib challenged the revocation
of its licence in proceedings before the Administrative Court. While that challenge
was pending, the Administrative Court, in separate proceedings, granted a petition
by a minority shareholder of eib to order the banks liquidation, on the grounds that
the banks licence had been revoked.
93. On 12 January 1999, the City Court refused to stay the liquidation of eib
pending the outcome of the litigation over the revocation of its licence (which
decision was upheld by the District Court on appeal) and, on 6 October 1999, eibs
licence revocation challenge was dismissed by the Administrative Court, on the
grounds that the bank was in liquidation.26
94. Claimants submit that the Estonian courts, by refusing to allow the liquidation
of eib to be stayed pending the outcome of litigation regarding the revocation of
its licence, and then dismissing the licence revocation proceedings on the grounds
that a liquidation was pending, have committed a travesty of justice for which the
Republic of Estonia is liable under Articles II, Paragraphs 3(a) and (b), Article
III, Paragraph 1 and Article IV, Paragraph 1 of the bit, in addition to Article II,
Paragraph 7, requiring that investors be provided with effective domestic means of
asserting investment claims.
Claim 8: the Republic of Estonia is responsible for harassment
95. Claimants allege that, on 15 January 1999, Alex Genin received a letter from
the Estonian police stating that a criminal investigation was pending against Eastern
Credit. They further claim that Eastern Credit was subsequently accused of various
false charges, but that the Estonian authorities never pursued a criminal case against
the company, their purpose being to intimidate rather than prosecute.
96. Claimants also allege that, on 18 September 1997, Mr Dashkovsky, the President of eib and Claimants principal representative in Estonia, was confronted by
the Manager of Control of the Department of Immigration and Citizenship of the
Republic of Estonia and threatened with deportation and the refusal to extend his
residency permit; the officer in question also allegedly questioned Mr Dashkovsky
about Mr Genin.
97. Claimants submit that the Republic of Estonia, by threatening criminal
charges against one or more of the Claimants, among other forms of harassment,
has violated Articles II, Paragraphs 3(a) and (b) of the bit.
Damages
98. Claimants claim damages in the amount of US $1,639,344 representing their
alleged losses resulting from misrepresentations associated with the purchase of
the Koidu branch of Social Bank (based on the amount paid by Eastern Credit to
26
Claimants Exhibits 78 and 79.
AWARD
257
purchase eibs claims against Social Bank in December 199627 ) plus 10% interest
as of the date of payment.
99. Claimants also request damages relating to the loss of their original 3,000,000
eek investment in eib, which they submit should be calculated on the basis of
the current fair market value of eib had its licence not been revoked. Claimants
valuation of their losses in this regard, as stated in their Memorial, is based on
the expert valuation provided by Mr Bryan V. Murray of B. V. Murray Company
(discussed below), who calculated eibs potential worth, currently, to be between
US $50 and US $70 million.28
2) Respondents Counter-Memorial
100. As ordered by the Tribunal, Respondent duly filed its Counter-Memorial,
with supporting documentation, on 19 June 2000.
101. In an overview of its case, at the outset of its Counter-Memorial, Respondent summarises the series of events leading to the revocation of eibs licence. It
states that, in the course of its 1997 audit of eib, the Bank of Estonia requested, and
was denied, information concerning the identity of the banks largest shareholders and regarding what appeared to be irregular transactions with related parties.
Respondent declares that eibs refusal, in addition to violating Estonian law, only
invited further scrutiny.29 Closer examination revealed, it claims, serious violations
of Estonias banking laws and regulations by eib, as well as a pattern of reporting
false and misleading information to regulatory authorities. In Respondents words:
[eib] did nothing to ameliorate the situation and, consequently, its license was revoked
by the Bank of Estonia. Although numerous legal challenges were brought in Estonia, Claimants are again seeking a review of the Bank of Estonias actions in this
arbitration.30
102. Respondent further states: At the heart of the matter were the banking
regulators legitimate concerns over the nature and identity of [eibs] owners.31
103. In sum, Respondents basic tenet is that the Bank of Estonias concerns,
and eibs alleged refusal to provide the information requested of it and required by
Estonian law, justifiably led to the decision to revoke the banks licence.
The factual background as described by Respondent
104. In a lengthy review of the facts, Respondent alleges that, during the 1997
audit of eib, Ms Eve Sirts, banking examiner of the Bank of Estonia, asked for
information concerning the identity of the banks largest shareholders and for explanations about irregular transactions with seemingly related parties. Respondent
states that Ms Sirts was denied any information. Respondent also alleges that, upon
27
See paras. 4851 of this Award.

Counter-Memorial, p. 1.
30
Id.
31
Id.
28
29
258
GENIN v. ESTONIA
closer examination, serious violations of Estonian banking law were discovered, as

well as a pattern of false and misleading reporting.
105. Respondent contends that eib did nothing to improve the situation and that
this led to its licence revocation. Respondent reiterates that this action was justified
in view of the banking regulators legitimate concerns over the nature and identity
of eibs owners.
Eurocapital Group Limited
106. Respondent submits that Eurocapital Ltd is an Isle of Man corporation,
incorporated in 1988, that owned in excess of 70% of eib. Respondent alleges that
Eurocapital is not a claimant in this arbitration and, in any event, could not avail
itself of the bit because of its nationality.
107. Respondent alleges that the shareholders of Eurocapital and its state of
incorporation were never disclosed to the Estonian banking authorities and that this
was one of the central concerns that led to the revocation of eibs licence.
Estonian banking reform
108. Respondent claims that the Bank of Estonia is responsible for the banking
reform that has taken place in Estonia over the last decade. It is directly responsible
for regulating the banking industry, including the establishment and enforcement
of regulations regarding minimum share capital requirements.
109. Respondent asserts that Mr Vahur Kraft presided as Governor of the Bank
of Estonia for a five-year term starting in April 1995 and was the Vice-Governor
from 19911995. During the period relevant to this arbitration, Ms Pilvia Nirgi
was the Head of the Banking Supervision Department, and Ms Eve Sirts was the
Inspector/Share Capital Specialist, reporting to Ms Nirgi.
110. Respondent claims that, in December 1994, the Estonian Parliament passed
the Credit Institutions Act, which contained important financial reforms. Respondent also states that both the Credit Institutions Act and the Bank of Estonia Act
grant certain powers to the Bank of Estonia which enable it to carry out its mandate, including the right to obtain information relating to a financial institution, its
operations and its shareholders.
Claimants initial investment in eib
111. Respondent alleges that, in 1992, Eastern Credit applied for a foreign investment licence in order to become a shareholder of eib. Respondent claims that,
as part of its application, Mr Genin submitted a balance sheet for Eastern Credit
which reflected that it had over $34,400,000 in assets; after reviewing the application, the Council of the Bank of Estonia decided to grant the licence to Eastern
Credit.
112. Respondent contends, however, that the licence was obtained by presenting
false financial information. It alleges that a majority of Eastern Credits assets,
$34,041,987, was reported as investments in subsidiaries, while Eastern Credits
tax returns for 1991, 1992 and 1993 did not identify any such investments and
expressly stated that Eastern Credit did not control any foreign corporations.
113. Moreover, Respondent alleges that Eastern Credits initial investment in
AWARD
259
eib was actually paid for by Eurocapital. Similarly, according to Respondent, when
Baltoil purchased eib shares in 1993, it did so with funds wired from the same
Eurocapital account.
114. Respondent states that Baltoil never sought permission for its shareholding
in eib and made no disclosure about its relationship to Eastern Credit or Eurocapital.
As a result, Baltoil is not a party to any investment agreement with the Estonian
Government, such as to render its claim arbitrable.
115. Respondent also contends that Baltoils shareholding should not be considered part of Eastern Credits 1992 application for the following reasons:
r Eastern Credit never mentioned Baltoil in its request for a foreign investment
licence;
r Eastern Credit requested permission for an interest up to 33%, which it acquired
in its own name;
r Baltoils 20% interest was acquired in 1993, more than a year after Eastern
Credit applied for its shareholding; and
r Eastern Credit and Baltoil had a combined shareholding of 51%, far in excess
of what Eastern Credit sought permission to hold.
116. Respondent also submits that no claim by Baltoil should be permitted since
the bit does not apply to domestic corporations who invest in their home state.
117. Respondent alleges that, by 1994, Eurocapital had acquired a majority
ownership of eib through its surrogates Eastern Credit and Baltoil, although it had
never applied for a foreign licence or entered into any agreement with the Estonian
regulators.
The auction of the Koidu branch
118. Respondent claims that notice of the auction of the Koidu branch was sent to
all Estonian financial institutions on 11 August 1994. Respondent also alleges that
the assets of the said branch were available for inspection and that arrangements
were made for potential bidders actually to visit the branch and review the assets
on-site.
119. Respondent further contends that all documents concerning the value of the
assets purchased were prepared and presented by Social Bank personnel, not by the
Bank of Estonia. In this regard, Respondent asserts that neither Mr Kraft nor any
other Bank of Estonia official prepared the documents representing the value of the
branches sold, nor did they make representations concerning the assets during the
auction.
120. Respondent claims that Mr Kraft had no specific knowledge of the Koidu
branch assets sold at the auction and that, although Mr Kraft had worked, years
earlier, in the international department of Social Banks main office, he had no
dealings with the Koidu branch operations.
121. Respondent alleges that Mr Peep Sillandi, President of eib, was present
at the auction, and that he bid for, and ultimately purchased, the Koidu branch of
Social Bank on behalf of eib. Respondent contends that Mr Sillandi was invited to
inspect the assets on-site at the Koidu branch subsequent to the auction, and that eib
personnel in fact visited the Koidu branch and undertook their own due diligence
260
GENIN v. ESTONIA
with regard to the assets purchased, to their satisfaction, before the transaction was
completed.
122. Respondent asserts that the purchase price of 3,000,000 eek was paid to the
Bank of Estonia, rather than to Social Bank, in partial satisfaction of Social Banks
debt to the Bank of Estonia.
123. Respondent alleges that, one month after the auction, Alex Genin and eibs
President, Mr Sillandi, wrote to the Bank of Estonia, alleging that approximately
7,200,000 eek worth of loans outstanding on the Koidu branch books were in default and non-performing. Respondent also submits that, on 2 December 1994, the
Supervision Department of the Bank of Estonia reviewed eibs claim and determined that it was unfounded, since eib had conducted its own due diligence before
agreeing to the transfer of assets.
124. Respondent contends that, after the claim was denied by the Bank of Estonia,
eib brought a lawsuit against Social Bank in the City Court, that eib and Social Bank
settled the lawsuit in 1995 and that an agreement was reached by virtue of which
eib returned some of the Koidu branch assets to Social Bank in return for certain
monetary payments (totalling approximately 20 million eek). Respondent points
out that no representatives of the Bank of Estonia or the Estonian Government were
parties to the agreement.
Eurocapital Group Companys qualified shareholding in eib
125. Respondent contends that Claimants should not be entitled to an award
relating to Eurocapitals investment in eib, since Eurocapital is not covered by
the bit.
126. Respondent alleges that, on 21 April 1995, a letter was sent to Mr Kraft at the
Bank of Estonia, on the letterhead of Eurocapital Group Ltd, in regard to a possible
$1,000,000 investment in eib. The letter was purportedly signed by Gregory F. Zak,
Eurocapital Ltds Vice President of Finance. Respondent alleges that Mr Zak did
not author the 21 April 1995 letter from Eurocapital Group Ltd; that the signature is
not his; that he never authorised anyone to prepare the letter on his behalf; that the
signature was placed on the letter by Ms Delores Severson, Mr Genins secretary;
that Mr Zak and Eurocapital Ltd never made a $1,000,000 investment in eib; and
that Mr Zak was never even aware of an entity known as Eurocapital Co.32
127. Respondent submits that subsequently, on 1 June 1995, eib submitted an
application for a qualified shareholding of Eurocapital Group Company (a finance
company located in England) and that the permit was granted by the Bank of
Estonia on 30 June 1995.
128. Respondent contends that Eurocapital Ltd was hiding behind other companies in order to acquire and maintain, secretly, a controlling interest in eib, first
through Eastern Credit and Baltoil (a combined 51% interest in 1993 and 1994)
and then through Eurocapital Co.
129. Respondent contends that, regardless of whether there was one or more
Eurocapitals, Eastern Credits purported investment in eib in fact was owned by
Eurocapital, for the following reasons:
32
Counter-Memorial, pp. 910.
AWARD
261
r
r
r
r
r
r
r
r
eib voted to sell shares to Eurocapital;

Eurocapital applied for a qualified shareholding;
Eurocapital funds were used to purchase Eastern Credits shares;
Eurocapital ledgers do not reflect a loan to Eastern Credit;
the eib share ledger names Eurocapital as the shareholder;
Eastern Credits tax return does not reflect a controlling interest in eib;
Eastern Credits tax return does not reflect a loan from Eurocapital;
there is no evidence that Eastern Credit deposited funds with Eurocapital to
purchase the shares;
r Eurocapital claimed the investment as its own in the Texas litigation; and
r Eurocapital presented a claim to the eib liquidation commission based on its
investment in eib.
eib struggled to meet minimum capitalisation requirements

130. Respondent contends that eib struggled to satisfy the capital requirements
for lending institutions in Estonia. Respondent states that, in June 1995, eib was
warned that its insolvency indicator was below the minimum of 8% and that its risk
concentration was too high. Respondent alleges that eib was able to maintain its
marginal status only by artificially inflating its balance sheet.33
131. Respondent asserts that, under the new banking law implemented in 1995
by means of the Credit Institutions Act:
r the qualified shareholding requirement was introduced as part of the Credit
Institutions Act;
r the Bank of Estonia was given the responsibility of scrutinising banks balance
sheets to make sure the many capital and liquidity requirements were properly
met; and
r the Bank of Estonia was given broad powers to inspect commercial banks in
order to fulfil its mandate.
132. Respondent alleges that eib, given its precarious financial situation in early
1996, sought assistance from the Bank of Estonia. Respondent also states that, on
12 April 1996, the Bank of Estonia entered into a tentative agreement with eib34 in
which the Bank of Estonia would transfer 5,000,000 eek worth of debentures to eib
in exchange for eibs claim against the insolvent Social Bank; the Bank of Estonia
further agreed to try to reach an agreement with a third partyCommercial Bank
of Industry and Building (Commercial Bank)that would possibly result in the
assignment to eib of an additional 10,000,000 eek notes.
133. Respondent contends that this tentative agreement was not an admission
that the Bank of Estonia was responsible for representations concerning the Koidu
branch, but was, rather, an action motivated by its desire to assist a financial institution in difficulty.
134. Respondent states that the Bank of Estonia gave no guarantees as regards the
third-party agreements and, in the end, was unable to conclude the 10,000,000 eek
33
34
The Koidu Settlement Agreement.
262
GENIN v. ESTONIA
agreement with Commercial Bank. Respondent states that the Bank of Estonia offered instead to assign to eib 5,000,000 eek worth of bills with Estonian Land Bank
(Land Bank) and pay eib up to 5,000,000 eek in recovered loans. Respondent
contends that this offer had much more value than the claims against Commercial
Bank that were the subject of the original, tentative agreement.
135. Respondent asserts that, on 5 August 1996, Mr Genin responded to this
offer by stating that he considered the tentative agreement of 12 April 1996 to be
null and void.
Requests for information followed by the Texas lawsuit
136. Respondent claims that, on 20 September 1996, due to reforms in banking
legislation as well as a general concern about the ability of Estonian banks to
meet their share capital requirements, the Bank of Estonia sent a letter to all credit
institutions requesting information concerning their shareholders, shareholders of
shareholders, subsidiaries and affiliated corporations of the shareholders.
137. Respondent states that, on 9 October 1996, eib identified its largest shareholder as Eurocapital Group, a Texas company and, shortly thereafter, eib reported that its largest shareholder was Eurocapital Group, Ltd, a UK company.
138. Respondent denies that its 20 September 1996 letter and subsequent requests
for information were sent in an effort to harass eib or retaliate for the Unites States
lawsuit filed against the Bank of Estonia. Respondent notes that similar requests
had been sent at the beginning of 1996, well before the Texas lawsuit was filed,
and that even the 20 September 1996 request was sent before the Bank of Estonia
received notice of the lawsuit.
The 20,000,000 eek juggle
139. Respondent alleges that, by October 1996, Social Bank had gone out of
business and filed for bankruptcy, and that eib had filed a bankruptcy claim in
the Estonian courts against Social Bank for the amount of the unpaid settlement
agreement (approximately 19,000,000 eek).
140. Respondent submits that:
r following the filing of eibs bankruptcy claim and because recovery of the full
r
r
r
r
35
amount from Social Bank was unlikely, the Bank of Estonia directed eib to
reclassify its claim as a doubtful account on its balance sheet, by the end of
October 1996, in accordance with sound accounting practices;
no response was received from eib by the deadline;
on 4 November, the Supervision Department of the Bank of Estonia followed
up on this matter;
in response to this inquiry, eib informed the Bank of Estonia that the claim had
been sold to Eastern Credit for 20,000,000 eek on 25 October 1996;
Eastern Credit did not pay anything on the closing of the transaction; rather, it
promised to pay in four instalments over more than two years.35
Counter-Memorial, p. 17; Respondents Exhibit 29.
AWARD
263
141. Respondent contends that the agreement between eib and Eastern Credit
is inconsistent with an earlier agreement, dated 26 August 1996, in which eib had
purportedly already assigned all of its rights and claims regarding the Koidu branch
to Eastern Credit, in exchange for the first 15,000,000 eek recovered by Eastern
Credit.36
142. Respondent submits that the 25 October 1996 agreement between eib and
Eastern Credit was simply a manoeuvre concocted to inflate eibs balance sheet,
by reporting a 20,000,000 eek asset when, in reality, such an asset did not exist.
143. Respondent alleges that the Bank of Estonia, having discerned the nature of
the transaction, instructed eib to classify it as a loan, not a receivable, so as to reflect
the true value of the asset. Respondent alleges that eib refused to do so, claiming
that it would classify the transaction as a sale from the moment of the transaction
regardless of when it might actually receive payment. Respondent also states that
Eastern Credit made its first payment to eib with worthless shares of stock in a
defunct company called Landmark International (Landmark).
144. Respondent also alleges that eib entered into a similar series of questionable
transactions relating to stock in a defunct yacht manufacturer, Tollycraft Corporation (Tollycraft). Respondent claims that the Tollycraft stock was purchased by
eib for a price much higher than their worth and was then sold to Eurocapital, a
few months later, for only half of the purchase price.37
Two Eurocapitals, Pacific Commercial Credit, more questions
145. Respondent contends that the Bank of Estonias requests for information
were prompted in part by inconsistent references to Eurocapital Group and an
undisclosed relationship to a company, Pacific Commercial Credit, that had received
hundreds of thousands of dollars from eib. Respondent points out that the Bank of
Estonia subsequently learned that Pacific Commercial Credit had two shareholders,
Eurocapital Group Limited and Eastern Credit, and that the Eastern Credit in
question appeared to be an Isle of Man corporation and not a Texas corporation,
suggesting that there may as well have been two corporations named Eastern
Credit.38
146. Respondent claims that, following a January 1997 request for additional
information, eib identified its largest shareholder as EuroCapital Group Ltd.39
The 1997 audit of eib
147. Respondent states that, from 4 February 1997 through 7 March 1997, the
Bank of Estonia conducted its annual audit of eib. Ms Sirts was assigned the specific
responsibility of verifying the share capital of eib. Respondent claims that, despite
numerous requests, eib refused to clarify the confusion surrounding Eurocapital.
148. Respondent further asserts that, during the audit, several other unusual and
irregular facts were discovered, including:
36

38
39
37
264
GENIN v. ESTONIA
r eib had given a proxy to invest its funds to Alex Genin, Gregory Zak and Harri
Faiman;
r eib funds were invested in Landmark and Tollycraft stock acquired from a
related entity, Eastern Credit, at inflated prices;
r not all of the stock transactions were reflected on the books of eib;
r interest-free loans (approximately US $600,000 to US $800,000) had been
made to Pacific Commercial Credit Limited without proper documentation;
and
r questions had arisen about a Russian company called sais.
149. Respondent asserts that Ms Sirts requests for information in regard to these
matters, both oral and in writing, were denied or ignored by eib.
150. Respondent also submits that the formal inspection report issued following
the audit raised additional questions concerning eibs shareholders, their affiliates
and suspect transactions.
The March 1997 Precept (Prescription)
151. Respondent asserts that the Estonian Credit Institutions Act requires a party
or related parties seeking to acquire a 10%, 30% or 50% shareholding (or to increase
an existing shareholding to such levels) to obtain permission from the Bank of
Estonia, in the form of a qualified holding permit.
152. Accordingly, Respondent claims that the Bank of Estonia issued, on 18
March 1997, Prescription No. 192406 requiring eib and certain shareholders to
apply for a qualified holding permit, because (1) no qualified shareholding had
ever been sought or issued in the name of Eurocapital Group Limited and (2) the
combined shareholding of Eastern Credit and Baltoil, which claimed to be related,
put them above the 10% threshold.40
153. Respondent alleges that, immediately following issuance of the March 1997
Prescription, eibs lawyers wrote to the Bank of Estonia, claiming that Eurocapital
Group Limited has never acquired nor enlarged a holding in the share capital of
eib. Further, in legal pleadings filed that same day, eib challenged the Prescription
and claimed that it was unfamiliar with Eurocapital Group Limited.41
154. Respondent contends that Claimants attempted to create the illusion that
they were trying to comply with the Bank of Estonias request. In this regard,
Respondent states that, on 24 March 1997, Mr Dashkovsky filed with the Estonian
court copy of a letter from eib addressed to Eurocapital Group Company, Eastern
Credit and AS Baltoil with no names of individuals or addresses. Respondent also
claims that, on 27 March 1997, Mr Dashkovsky wrote to Ms Nirgi at the Bank of
Estonia and told her that he had asked for the shareholders help in obtaining the
requested information.
155. Respondent asserts the following:
r Mr Dashkovsky was the sole shareholder and president of Baltoil, as well as
the European representative of Eurocapital and Eastern Credit;
40
41
AWARD
265
r Mr Genin was the managing director and sole shareholder of Eastern Credit;
r the letters in question were, in effect, letters written by Mr Dashkovsky to
himself.
156. Respondent claims that it was a ruse and fiction to suggest that Mr
Dashkovsky, as president of eib, and Mr Genin, as chairman of eibs board, were
unable to provide the information requested.
157. Respondent states that, on 18 April 1997, the Estonian law office of Kaasik
& Co. applied for qualified holdings for Eurocapital Ltd, Eastern Credit and Baltoil.
Respondent submits that the Bank of Estonia responded by requesting additional
information concerning the applicants, necessary to evaluate their suitability to be
qualified shareholders. Respondent submits that, in this regard, the Bank of Estonia provided internal guidelines (i.e., the March 1997 Regulations/Guidelines)
delineating the exact information sought, but that eib refused to supply this information.
The licence revocation
158. Respondent contends that eibs pattern of refusing to answer the Bank of
Estonias questions; barely meeting, for a number of years, the minimum capital
requirements and, on numerous occasions, falling below the statutory minimum;
and conducting a series of questionable transactions, fully warranted increased
regulatory scrutiny and justified the eventual revocation of eibs licence.
159. Respondent submits that, during the February 1997 audit, inspectors discovered once again that eibs share capital was below the minimum required level,
and an appropriate instruction was issued to eib. Respondent also claims that, on
27 June 1997, another precept was issued to eib requiring it to comply with the
minimum capital requirements by 21 July 1997.42
160. Respondent alleges that, on 16 July 1997, Eurocapital converted subordinated debt of eib into stock in the bank, without prior permission of the Bank of
Estonia. Respondent further contends that the Bank of Estonia repeatedly asked to
see information concerning this debt instrument, but that eib refused to comply.
161. Respondent claims that, on 30 July 1997, representatives of the Bank of
Estonia again visited eib to follow up on these issues, at which time the inspectors
learned the following:
r that Landmark shares had been acquired from Eastern Credit for $3.75 a share
and then sold to Eurocapital a few months later for $2.50 a share;
r that Tollycraft shares had been acquired directly from Tollycraft, many for
only $1.50 a share;
r that eib was planning to have its shares listed on the nasdaq market in the
United States.
162. Respondent submits that eibs purported plans to go public in the US were
speculative, at best, as no business plan was shown to the inspectors and no supporting documentation was ever provided. On the contrary, Respondent points out
42
266
GENIN v. ESTONIA
that eibs business plan for 1997, furnished to its auditors earlier that year, made
absolutely no reference to this purported plan.43
163. Respondent states that, during the week of 7 August 1997, based on the
information gleaned during the July inspection as well as eibs and its shareholders continued refusal to submit data in support of their application for qualified
shareholdings, the Bank of Estonia conducted a special inspection of eib; the inspectors continued to ask questions about particular transactions and relationships,
but still received no answers. Respondent declares that the report issued following
the special inspection mentions several problems, the most notable of which related
to the banks capital adequacy rate. Respondent alleges that, rather than a 38.5%
rate, as reported by eib, the true rate was only 10.91%.44
164. Respondent alleges that the recommendation to revoke eibs licence was
made by Ms Sirts following the August 1997 special inspection, and was based
on eibs repeated presentation of false and misleading information, its refusal to
provide information requested in accordance with the law, and its failure to meet
the minimum capital requirements for a banking institution.
165. Respondent claims that the recommendation was transmitted to the Council
of the Bank of Estonia, which voted on 9 September 1997 to revoke eibs licence
as of 10 September 1997,45 and that a formal notice was sent to eib containing the
following instructions:
(1) to call a meeting of shareholders in order to decide on reorganisation or
dissolution;
(2) not to prefer one client over another;
(3) to make no transactions concerning the banks share capital until all claims
are settled; and
(4) to forward a notice of annulment to all foreign correspondent banks.
166. Respondent alleges that eib ignored all of these instructions. Specifically:
(1) no decisions on the future of eib were taken until a minority shareholder
petitioned the bank into involuntary liquidation in 1999;
(2) eib continued to make preferential transfers to Eastern Credit and Eurocapital: it paid the rent for Eastern Credits office in Texas, and paid $21,000
every two months to Eurocapital as management fees;
(3) eibs management made a share capital-related transaction in 1997 by, in
essence, transferring $2,900,000 to Eurocapital (as collateral for its investment as a shareholder);
(4) eib did not notify correspondent bank abn amro that its licence was revoked,
and the Bank of Estonia was therefore required to do so itself.
167. Finally, Respondent claims that eib launched a challenge to the licence
revocation in the Estonian courts one day following notice of the revocation. Respondent contends that the Estonian judicial system was accessible to the Claimants,
that there are no allegations, much less evidence, that the system was anything other
than impartial, and that Claimants have no grounds for a denial of justice claim.
43

45
44
AWARD
267
Respondents defences
168. After describing the factual background to the dispute, Respondent sets out
its defences to the claims alleged by Claimants.
The pre-bit claims are untimely
169. Respondent first submits that most, if not all, of Claimants claims are not
investment disputes within the meaning of the bit and that several are, moreover,
time-barred. In this regard, Respondent notes that the first three of Claimants eight
claims arose prior to 16 February 1997, the date on which the bit came into effect,
and are therefore not actionable.
170. Respondent then addresses the merits of each of the so-called eight transgressions alleged by Claimants in their Memorial.
Claimants Claim 1: the Koidu branch
171. Respondent submits, first, that there is no investment agreement or investment authorisation between Claimants and the Republic of Estonia, as those
terms are used in the bit. For this reason, there is no arbitrable investment dispute
under the bit in this case.
172. In this regard, Respondent contends as follows:
r neither Mr Genin, Baltoil or Eastern Credit ever obtained the legally required
permission for a shareholding in eib that, when combined, exceeded 10%;
r in the absence of such authorisation to invest in eib, there was no investment
agreement under the bit;
r for the same reasons, investment authorisation for Claimants holdings in
eib was also lacking;
r Baltoil never applied for a qualified holding permit for its interest in eib, as
required by law;
r Eastern Credits 1992 foreign investment licence was obtained on false pretences (i.e., that the company had US$34,000,000 in assets) and was, in any
event, superseded by the enactment in 1995 of the Credit Institutions Act, which
required Eastern Credit to obtain a new authorisation;
r Eastern Credits purchase of eibs claims relating to the sale of Koidu branch
does not represent an investment under the bit. Moreover, the rights and
remedies purchased from eib did not include the right to icsid arbitration,
and Claimants do not allege misconduct by Respondent with respect to the
alleged investment represented by the assignment. Further, Eastern Credit never
paid for the assignment of eibs claims: the alleged December 1996 transfer of
funds for this purpose was illusory.
173. Respondent submits that there was no misrepresentation made by the Bank
of Estonia in the sale of the Koidu branch. Indeed, Respondent alleges that all
representations concerning the Koidu branch assets were made by Social Bank
personnel. Respondent also contends that Mr Kraft had no specific knowledge of the
Koidu branch assets sold at the auction and that he did not make any representations
whatsoever concerning those assets.
268
GENIN v. ESTONIA
174. Respondent submits that, after the auction, Claimants had the opportunity to inspect the Koidu branch assets and to review them on-site, at the branch,
prior to going forward with the transaction. Respondent contends that Claimants
availed themselves of this opportunity, which demonstrates that they did not, in
fact, rely on whatever prior representations concerning the assets may have been
made.
175. Respondent states that the 3,000,000 eek payment for the Koidu branch
was made to the Bank of Estonia (and not Social Bank) in order to satisfy Social
Banks obligations to the Bank of Estonia. Respondent submits that this is clearly
not a case of expropriation, and that, even were it to be considered an expropriation,
it would be an expropriation of Social Banksnot eibsassets.
176. Respondent submits, lastly, that, even if Eastern Credit legally acquired eibs
claims relating to the sale of the Koidu branch, those claims were already timebarred in 1996, since the statute of limitations for a fraud claim, under Estonian
law, is one year.
Claimants Claim 2: the tentative Koidu Settlement Agreement
177. Respondent contends that the 12 April 1996 agreement between eib and
the Bank of Estonia was only a tentative settlement agreement, little more than
a conditional memorandum of understanding and not enforceable under Estonian
law.
178. Respondent alleges that, because the Bank of Estonia was unable to obtain
certain third-party approvals necessary to give effect to the tentative agreement,
it proposed another form of agreement to eib. Respondent contends that, when
Mr Genin refused this second offer, on 5 August 1996, the tentative agreement
of 12 April 1996 became null and void.46 In any event, Respondent alleges that
Claimants suffered no damage as a consequence of these events.
Claimants Claim 3: eibs reduction in capital
179. Respondent submits that the claim based on eibs reduced capital does not
involve an arbitrable investment agreement between Claimants and the Republic
of Estonia.
180. Respondent declares that, more than two years after the Koidu branch acquisition, its banking regulators determined that eibs approximately 20,000,000
eek claim against Social Bank should be reclassified on its books as a doubtful
account. Respondent alleges that, in order to avoid this reclassification, eib sold
the claim to Eastern Credit.
181. Respondent contends that there was no agreement between eib and the
Bank of Estonia regarding amortisation of eibs Koidu branch-related losses over
five years (the so-called Write-Off Agreement). Respondent claims that eibs
ability to amortise those losses was, in any event, unrelated to the Bank of Estonias
instructions to reclassify the asset in question, which simply constituted prudent
banking oversight.
46
Counter-Memorial, p. 37; Respondents Exhibits 24 and 26.
AWARD
269
Claimants Claims 4 & 5: the qualified holding prescription

182. Respondent alleges that, in the course of routine semi-annual inquiries,
inspectors of the Bank of Estonia discovered many discrepancies in eibs books
and records. Respondent alleges that eib either refused to provide information
regarding these discrepancies or provided inadequate information.
183. Respondent claims that, among the questions raised by eibs records, it was
discovered that Eurocapital Co. (the company that had applied for and received a
qualified holding permit in 1995) was not listed as a shareholder, but that there
were two companies listed as Eurocapital Ltd. eib, Respondent claims, stated that
the companies were one and the same, but refused to provide any documentation
in this regard to the inspectors.
184. Estonia also claims that its inspectors uncovered evidence of questionable
transactions, including:
r Pacific Commercial Credit, a subsidiary or affiliate of Eurocapital, was receiving deposits from eib;
r eib was involved in the purchase and sale of shares of two corporations, Tollycraft and Landmark, that were misleadingly and inaccurately reported; and
r Claimants themselves, through these transactions, had diverted millions of
dollars from eib to their own accounts.
185. As indicated above, Respondent alleges that Eastern Credit, Baltoil and
Eurocapital Ltd, were not authorised to be shareholders of eib, none of them ever
having applied for qualified holding. However, Respondent acknowledges that Eurocapital Group Co. did apply for, and was granted, a qualified holding permit in
1995.
186. Respondent contends that the above-mentioned discrepancies and
Claimants confusing, if not deceptive, use of what appeared to be multiple shell
companies, justified the Bank of Estonias requests for information. Respondent
also submits that the information requested by the Bank of Estonia from eib was
directly related to Bank of Estonias oversight responsibility and had nothing to do
with the US litigation.
187. Respondent states that the Bank of Estonias power to obtain information
relating to a financial institution, its operations and its shareholders derives from the
Credit Institutions Act and the Bank of Estonia Act, and that its requests, as indeed
all of its conduct in this case, were in full conformity with its statutory rights and
responsibilities.
188. Finally, Respondent submits that Claimants have failed to demonstrate any
damages arising from these transgressions and that, in any event, its claims are
barred by the one-month statute of limitations relating to administrative acts under
Estonian law.
Claimants Claims 6 & 7: the licence revocation
189. Respondent submits that eibs licence was revoked because eib committed
serious violations of the Estonian banking code. In particular:
r eib repeatedly refused to provide information or reported false and misleading
information to regulatory authorities;
270
GENIN v. ESTONIA
r eibs principal shareholders did not have qualified holding permits;

r eib had difficulties in meeting its minimum capitalisation requirements;
r eib, its shareholders and their affiliates were responsible for a series of questionable transactions; and
r eib artificially inflated its balance sheet.
190. Respondent submits that, for the above-mentioned reasons, eibs licence
revocation was justified. Respondent also contends that this revocation cannot be
considered an expropriation.
191. Respondent declares that there was no denial of justice in the Estonian
courts, and that much of what Claimants now complain of was due to their own
dilatory tactics in the various Estonian proceedings.
192. Finally, Respondent submits that Claimants claims are time-barred.
Claimants Claim 8: harassment
193. Respondent claims that the criminal investigation of Mr Genin for possible
tax evasion and Mr Dashkovskys troubles with the Immigration Board had nothing
to do with the matter of eibs conduct.
194. Respondent submits that, in any case, this claim is not an investment
dispute under the bit and therefore does not give rise to an arbitrable claim, and
further submits that Claimants have failed to demonstrate any damages relating to
the alleged harassment.
Damages and counterclaim
195. As a preliminary matter, Respondent submits that Eastern Credits purchase
of eibs claims relating to the sale of the Koidu branch does not involve an investment agreement with the Republic of Estonia and, therefore, is not an arbitrable
investment dispute under the bit.
196. Respondent also contends that the transfer of eibs claims relating to the sale
of the Koidu branch to Eastern Credit was entered into for the purpose of artificially
inflating eibs balance sheet and that there is no evidence that any money was ever
paid to eib. Indeed, Respondent alleges that Eastern Credit, employing feigned
transactions, used over-valued stock to divert in excess of US$ 500,000 from the
coffers of eib to the Claimants.47
197. Similarly, Respondent alleges that Claimants diverted in excess of
US$ 1,000,000 in transactions involving the purchase and sale by eib of shares
in Tollycraft Corporation.48
198. Respondent submits that Claimants request for the future value of eib,
following a merger and/or a public offering, is purely speculative, and that such
damages may not be recovered under Estonian law. Respondent also points out
that such a claim is based on ownership of 100% of eib, while Claimants (to the
exclusion of Eurocapital) only owned 9.2% of eib at the time that the licence
was revoked.49 Thus, Respondent contends that, even assuming that any damages
47
49
Counter-Memorial, p. 54, referring to Claimants Exhibit 12.
48
AWARD
271
resulting from that violation could be established, Claimants would only be entitled
to 9.2% of those damages.
199. Respondent also alleges that Mr Genin and Mr Dashkovsky took approximately US$ 2,900,000 out of eib after the licence was revoked, and that this
constitutes a preferential transfer in violation of Estonian law.
200. Respondent submits Claimants are not entitled to recover any sums from
Respondent, but should, rather, be required to return the proceeds of their various
illicit transactions.
201. By way of counterclaim, Estonia requests damages in excess of
US$ 3,400,000 for money illegally diverted from eib by the Claimants, plus the
costs of the arbitration.
3) Claimants Response
202. As ordered by the Tribunal, Claimants filed their Reply Memorial (Reply),
with supporting documentation, on 18 July 2000.
203. In their Reply, Claimants address a series of preliminary points.
204. First, Claimants allege that Eastern Credit owns Baltoil, and that there is
overwhelming documentation contained in public records in Estonia in that regard.
Claimants also state that it is not possible for them to prove who the shareholders
of Eurocapital Ltd were at the time that the transactions at issue in this arbitration
occurred, because the shares of Eurocapital Ltd are, and always have been, issued
to bearer.
205. Claimants reiterate their contention that the Bank of Estonia revoked eibs
licence in order to avoid its responsibility for misrepresentations in connection
with the sale of the Koidu branch, and that the Bank of Estonia created so-called
regulations (the 1997 Regulations/Guidelines) in order to discover information
from eibs shareholders that it hoped to use in the United States litigation.
206. Claimants point out that the only trouble that eib had in maintaining its
legal capital requirements resulted from the losses it suffered in the purchase of the
Koidu branch, for which the Bank of Estonia is responsible. Indeed, it was the Bank
of Estonias breach of the April 1996 Koidu Settlement Agreement that imperilled
the banks capitalisation. Further, the third party agreement that the Bank of Estonia
claims was a condition of the Settlement Agreement was, in essence, irrelevant.
207. Claimants contend that all transactions concerning Landmark International,
Tollycraft and Pacific Commercial Credit are legitimate. Moreover, Claimants submit that the Bank of Estonia revoked eibs licence on the sole ground of the alleged
failure to apply for qualified holdings. For this reason, it is Claimants contention
that Respondents arguments regarding these transactions have nothing to do with
the present arbitration.
208. Claimants assert that all of the relief sought by them is grounded in breaches
of the bit that occurred after the date on which the bit entered into force. Claimants
point out that the Treaty specifically applies to investments that were already in
effect at the time the Treaty went into force.
209. Claimants reiterate their position that the assignment of claims to Eastern
Credit by eib was not limited to claims against Social Bank, but rather covered any
272
GENIN v. ESTONIA
claims arising out of the sale of Koidu branch, including claims against the Bank
of Estonia.
210. Claimants contend that the assignment of eibs claims to Eastern Credit was
validly paid for with the transfer of Landmark and Tollycraft shares.
211. Claimants submit that the one-year statute of limitations raised by Respondent only applies to a cause of action to cancel a contract on the basis of
misrepresentation, and not to a cause of action for compensation. Claimants allege
that the cause of action for compensation, which comprises the sort of claims made
in this arbitration, has a ten-year statute of limitations under Estonian law.
212. Finally, as regards the amount of damages claimed, Claimants submit that
Respondent has not offered any evidence as an alternative to Mr Murrays valuation
of the fair market value of eib.
4) Respondents Rejoinder
213. As ordered by the Tribunal, Respondent filed its Rejoinder Memorial (Rejoinder), with supporting documentation, on 18 August 2000.
214. In its Rejoinder, Respondent reiterates that eib lost its licence because
it failed to follow the law governing the operation of a commercial bank in
Estonia.
215. Respondent states that, under international law, it is the party alleging a
violation of international law giving rise to international responsibility that has the
burden of proving the allegation. Respondent submits that Claimants have failed to
meet this burden.
216. Respondent reiterates that the Tribunal does not have jurisdiction over the
claims that relate to acts that occurred before the entry into effect of the bit, citing,
as examples, Claimants claims 1 to 3.
217. Respondent also contends that the Bank of Estonia at all times acted in
conformity with the relevant banking laws and regulations.
218. Respondent then reviews its position with respect to each of the issues
addressed in its Counter-Memorial.
Claimants Claim 1: the Koidu branch
219. Respondent contends that Claimants claim regarding compensation for
misrepresentations in the sale of Koidu branch is not related to an investment
for which there may be an investment dispute under the bit; that the investment in question is a domestic claim by eib; and that Eastern Credit should not be
able to convert an acquired domestic claim into an international dispute. Respondent also contends that this investment is pre-bit and is therefore not subject to
arbitration.
220. Respondent further submits that there is no proof that the Bank of Estonia
made any misrepresentations in the sale of Koidu branch.
Claimants Claim 2: the April 1996 Settlement Agreement
221. Respondent reiterates its contention to the effect that the April 1996
Koidu Settlement Agreement between eib and the Bank of Estonia was merely a
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memorandum of understanding, or tentative agreement, and that no final agreement

was ever entered into. Respondent also points out that this attempt to reach an agreement was ultimately rejected by Alex Genin, who declared all prior agreements,
including the tentative agreement, null and void.
222. Respondent submits that the allegations relating to this claim are pre-bit
and, for this reason, the Tribunal does not have jurisdiction over the matter.
Claimants Claim 3: eibs reduction in capital
223. Respondent reiterates its contention that there was no agreement between
eib and the Bank of Estonia to amortise eibs losses relating to the sale of the
Koidu branch over a five-year period. Respondent explains that such an accounting
mechanism is recognised in Estonia and is available to all, but that eib apparently
chose not to avail itself of this mechanism.
224. Respondent also submits that the allegations relating to this claim are pre-bit
and are therefore not subject to arbitration.
Claimants Claims 4 & 5: the qualified holding prescription
225. Respondent submits that the requests for information by the Bank of Estonia
from eib were reasonable and in accordance with published Estonian law.
226. Respondent also submits that, under Estonian law, the claims relating to the
March 1997 Prescription or the September 1999 licence revocation are barred by
the Estonian statute of limitations.
Claimants Claim 6: the licence revocation
227. Respondent reiterates its position that the Bank of Estonia was justified in
revoking eibs licence and that it did so in accordance with the laws of Estonia.
228. Respondent also reiterates its submission that the litigation before Estonian
courts and the statute of limitations for challenging administrative acts gives rise
to an absolute, jurisdictional bar to arbitration on this issue.
Claimants Claim 7: the actions of the Estonian courts
229. First, Respondent points out that it was a minority shareholder of eib, over
whom Respondent exercised no control, who initiated mandatory liquidation of
eib. For this reason, Respondent contends that this act cannot be attributed to the
Republic of Estonia.
230. Respondent further submits that the Bank of Estonia revoked eibs licence
in accordance with Estonian law and that this was neither the result of, nor did it
give rise to, any denial of justice in the Estonian administrative or judicial process.
231. Respondent also reiterates that Claimants prior resort to litigation in Estonia
divests the Tribunal of jurisdiction.
Claimants Claim 8: harassment
232. Respondent reiterates its position that the claim of harassment is not an
investment dispute and that the acts described in the claim have no relation to
this case.
274
GENIN v. ESTONIA
Damages
233. Respondent asserts that the valuation report prepared by Mr Murray is
flawed; that it is Claimants burden to construct a credible model of damages; and
that they have failed to do so in this case. Respondent also reiterates its contention
that Claimants have suffered no damages from the actions of the Bank of Estonia.
234. In any event, Respondent reiterates that the appropriate measure of damages
in this case is the quantum actually lost by the Claimants and not the value of a
100% interest in eib.
235. Moreover, Respondent reiterates that Claimants illicitly diverted nearly
US$ 3,000,000 to Eurocapital following the revocation of eibs licence, and that
the proceeds from these transactions must be returned.
G. The Oral Procedure

236. In accordance with the Tribunals directions, each party filed with the Tribunal, prior to the commencement of the oral hearing, written statements by its
witnesses.
237. As scheduled, the hearing commenced on Monday, 2 October 2000, in
Washington, DC. Eleven witnesses were heard and counsel for the parties presented
extensive oral arguments.
238. The hearing ended on Friday, 6 October 2000.
1) Claimants Evidence
239. On behalf of Claimants, the following two expert and four fact witnesses
appeared and gave evidence during the oral hearing:
r Mr Brian V. Murray and Mr Janos Eros, both of whom were involved in
the preparation of the expert valuation prepared for Claimants, gave evidence
jointly, as agreed by counsel and the Tribunal. They testified as to the nature
of their mandate (to value eib, not its operating licence per se), the conduct of
their mandate and the conclusions reached by them. They testified that, in their
opinion, the most realistic valuation could be attained only on the basis of a
going concern analysis and by means of a price to book value assessment.
Their going forward approach involved estimating a value for eib had it
been able to achieve its business plan objectives, one of which included a
possible merger with Evea Bank and eventual listing on US stock markets. The
witnesses stressed that they had no mandate to conduct an audit of eib or to
test the financial or other information provided to them by Messrs Genin and
Daskkovsky, which formed the basis of their analysis.
r Mr Alex Genin testified, over almost two full days, regarding virtually all aspects of Claimants claims as well as the issues raised in Respondents submissions. This included the origin and nature of the Claimants respective shareholdings in eib, the ownership and inter-relationship of the various companies
in which Mr Genin is involved, and the actions of eib and its shareholders,
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on one hand, and of the Bank of Estonia, on the other, comprising the factual
background to the arbitration. Of particular interest was Mr Genins disclosure,
for the first time in these proceedings, that he is the beneficial owner of the
bearer shares of Eurocapital. Mr Genin also gave evidence regarding the
transactions at issue in the arbitration, involving himself, his companies, eib
and third parties, including as regards the purchase and sale of Landmark and
Tollycraft stock. He also testified as to the history of his relationship with the
Bank of Estonia and, in particular, Mr Kraft; this included evidence concerning his companies various requests for investment authorisation, as well as
the alleged Koidu Settlement Agreement and Write-Off Agreement between
the central bank and eib.
r Mr Michail Dashkovsky gave evidence regarding his ten-year relationship
with Mr Genin, working on projects in Russia and Estonia, and his eventual appointment as president of eib. Along with Mr Genin, Mr Dashkovsky
was a key participant in almost all of the events on which Claimants claims
are based, including eibs purchase of the Koidu branch and the subsequent
negotiations, with Mr Kraft of the Bank of Estonia, regarding the losses allegedly suffered by eib as a result of that purchase. Mr Dashkovsky also testified regarding the ownership of the various companies at issue in the arbitration. In addition, he gave evidence regarding the relationship between eib
and the Bank of Estonia, the latters audits, inspections and requests for information, eibs responses to those requests and, generally, regarding events
leading up to the revocation of eibs licence. Finally, Mr Dashkovsky testified
regarding the alleged harassment suffered by him at the hands of the Estonian
authorities.
r Mr Viktor Kaasik, Claimants and eibs Estonian counsel, gave evidence regarding certain aspects of the Estonian statutes at issue in the arbitration (the
Credit Institutions Act and the Bank of Estonia Act), as well as regarding the
proceedings launched by eib to challenge the 9 September 1997 revocation
of its licence. Mr Kaasik testified that, in his opinion, much of the information requested of eib and its shareholders by the Bank of Estonia prior to the
revocation of eibs licence was illegal, and the revocation itself constituted a
breach of Estonian law.
r Mr Janus Mody, a lawyer working with Mr Kaasiks law firm, testified regarding eibs responses to the Bank of Estonias various information requests, including the May 1997 filing of applications for qualified holdings and the eibs
request regarding the legal basis of the March 1997 Regulations/Guidelines.
He also gave evidence regarding certain provisions of the Bank of Estonia Act
and the Credit Institutions Act and, in particular, their English translations. Of
particular relevance was Mr Modys testimony regarding a meeting with representatives of the Bank of Estonia, prior to the revocation of eibs licence, at
which he claims to have shown those present a document containing information responsive to the Bank of Estonias various requests, in response to which
he was told that the sole purpose of those requests was to garner information
that would be of use to Bank of Estonia in its defence to the Texas litigation
initiated by Eastern Credit.
276
GENIN v. ESTONIA
2) Respondents Evidence
240. The following two expert and three fact witnesses appeared and gave evidence on behalf of Respondent:
r Mr Paul Varul testified regarding his expert opinion concerning the Bank of
Estonia Act and the Credit Institutions Act. He gave evidence regarding the
origin and the nature of these statutes and their applicability to the questions
at issue in this arbitration. His testimony covered the specific provisions of
the Estonian legislation that, in his opinion, empower the Bank of Estonia
to request such information as it considers necessary in the exercise of its
regulatory and supervisory functions; this includes the legislative provisions
empowering the Bank of Estonia to revoke an institutions licence, provisions
which, in Mr Varuls opinion, were respected in this instance.
r Mr Vahur Kraft, President of the Bank of Estonia, gave evidence principally
in respect of the sale of the Koidu branch of Social Bank and the subsequent
events relating to alleged discrepancies in the branchs balance sheet. Mr Kraft
also testified regarding the nature and content of the so-called Koidu Settlement Agreement, which he described as tentative, and, generally, regarding
the action of the Bank of Estonia leading up to and surrounding the revocation
of eibs licence. In particular, Mr Kraft described the decision-making process
immediately preceding the Bank of Estonias revocation of eibs licence on
9 September 1997, and explained the reasons for the Bank of Estonias decision.
r Ms Eve Sirts, the head of the Off-site Supervision Subdepartment of the Banking Supervision Department of the Bank of Estonia, provided evidence concerning details of the Bank of Estonias various requests for information, which
culminated in its decision to revoke eibs licence. Ms Sirts testified regarding
the conduct of the Bank of Estonias inspections and audits of eib, as well as
regarding the reasons for those inspections and their results. In particular, she
gave evidence with respect to the various concerns regarding eib alleged in
Respondents written submissions, such as the identity of Eurocapital, alleged
self-dealing among eib and its shareholders and eibs alleged misstatement
of assets on its books. Ms Sirts also described the nature of the March 1997
Regulations/Guidelines, including their use by the Bank of Estonia in this and
other instances.
r Mr Aare Tark, Estonian counsel to the Bank of Estonia, gave evidence and
answered questions from the Tribunal.50 He testified as to various procedural
issues associated with the Estonian legal proceedings launched by Claimants,
and expressed his opinion that the long delays in the conduct of those proceedings was the fault of eib. He also gave evidence regarding the Bank of
Estonias authority to issue Prescriptions (Precepts) and described the nature
of such Prescriptions and the obligations arising therefrom.
50
While a witness statement by Mr Tark had been filed by Respondent, neither Claimants nor Respondent
expressed a desire to examine him at the hearing.
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r Mr Joseph Anastasi, a representative of Deloitte & Touche, gave evidence

seeking to rebut the expert report and testimony of Claimants witness, Brian
V. Murray. Although Mr Anastasi did not participate in the Deloitte & Touche
report in this regard, which was filed with Respondents written submissions,
his testimony was permitted by agreement of the parties and with the consent of the Tribunal. Accordingly, Mr Anastasi testified in particular as regards the assumptions underlying Mr Murrays report and the methodology
employed by him, which, in his opinion, rendered Mr Murrays conclusions
inaccurate.
H. Post-Hearing Submissions
1) Claimants Post-Hearing Memorial
241. As ordered by the Tribunal, Claimants duly filed their Post-Hearing Memorial, with supporting documentation, on 19 December 2000.
242. In their Post-Hearing Memorial, Claimants summarize what they refer to
as the core issue in this case as follows:
(. . .) Estonia violated the [bit] when its state enterprise, the Bank of Estonia, revoked
[eibs] license at a time when the bank was a solvent and growing institution, the
depositors and creditors of the bank were in no danger, and the [Claimants] investment
in the bank posed no potential harm to the Estonian banking system.51
243. Boil[ing] this case down to its essence, Claimants declare:

(. . .) [w]hat makes the Bank of Estonias actions so unjust, so unfair, and so totally
without due process is the complete lack of any legitimate reason to take the extreme
measures of destroying [eib].52
244. Claimants post-hearing submissions focus on the nature of the conduct of

the Bank of Estonia as reflected in its actions and the allegations it has attempted
to make in this proceeding.53
245. Claimants emphasise that the motivations of the Bank of Estonia are at the
heart of the matter, and are relevant in determining whether or not its actions were
fair, just and in accordance with the requirement of due process.
246. Claimants declare that the case that the Bank of Estonia attempted to make
when it revoked eibs licence and that it is now defending in this arbitration is but
an illusion, that is, an attempt (. . .) to persuade the decision-maker that some
circumstance is true without meeting [the] burden of proof on that issue.54
51
Claimants Post-Hearing Memorial, p. 1.

Ibid., p. 2.
53
Id.
54
Ibid., p. 3.
52
278
GENIN v. ESTONIA
Proof vs. illusion

247. Claimants submit that they have met their burden of proof on the evidence
that they have adduced.
248. They state that, on 9 September 1997, eibs licence was revoked, for four
stated reasons:
(1) the address of Eurocapital Group on eibs stock register was Houston, Texas,
while on the list of stockholders it was the Isle of Man;
(2) the Bank of Estonia refused to recognise that Eurocapital Co. and Eurocapital
Ltd are the same entity;
(3) the eib failed to provide information on the shareholders of Eurocapital
Group;
(4) eibs shareholders did not provide information sufficient to determine their
application for qualified holdings.
249. In response, Claimants state the following:
(1) Eurocapital Group has both an Isle of Man address and a Houston, Texas,
address;
(2) the Bank of Estonia knew, on 9 September 1997, that Eurocapital Group
Company and Eurocapital Group Ltd are the same company;
(3) the Bank of Estonia knew that the shareholder of Baltoil was Eastern Credit,
that Eastern Credit was owned by Mr Genin and had been informed in April
1996, that Mr Genin was also Eurocapital Groups owner and sole shareholder;55
(4) the necessary investment licences and authorisations had already been
granted to Claimants.
250. Claimants contend that, in order for misinformation to be a ground for
licence revocation, the allegedly wrong or misleading data in question must have
been communicated deliberately, which is not the case with eib.56
251. Claimants allege that, on 10 February 1997, the Bank of Estonia requested
information about eibs shareholders that it had already twice requested in 1996, at
the time eib and the Bank of Estonia were involved in the United States litigation
over the Koidu branch. Claimants contend that Estonian law did not allow the Bank
of Estonia to request this information.
252. Claimants reiterate that, when the Bank of Estonia sent eib a set of regulations in support of its request for information in regard to Claimants applications
for qualified holding (the March 1997 Regulations/Guidelines), eib responded with
its own request regarding the legal basis for the regulations. Claimants state that
the Bank of Estonia never responded to this request. Claimants contend that the
Bank of Estonias decision to revoke eibs licence, while ignoring eibs legitimate
request, was unfair, unjust and contrary to due process.
253. Claimants submit that the Bank of Estonias decision to revoke eibs licence
is flawed in three respects:
(1) the stated reasons were false;
55
56
Claimants Post-Hearing Memorial, pp. 89; Claimants Exhibit 16 to Respondents Exhibit 3.

Claimants Post-Hearing Memorial, pp. 910; Claimants Exhibit 9, Article 195.
AWARD
279
(2) even in the event that the reasons were true, those reasons are purely formalistic, with no substantive basis;
(3) even in the event that the reasons were true and based on substantive issues,
revocation was a disproportionate remedy in the circumstances.
254. Claimants also allege that, as a result, the Bank of Estonias revocation of
eibs licence is unjust, unfair and devoid of due process.
The bilateral investment treaty
255. Claimants submit that the Bank of Estonia has violated the bit:
r by revoking eibs licence;
r by failing to abide by the April 1996 Koidu Settlement Agreement; and
r by failing to abide by the March 1996 Write-Off Agreement.
256. In this regard, Claimants refer to the following provisions of the bit:
r Article 2, Paragraph 2(b), requiring Estonia to ensure that the conduct of govr
r
r
r
r
r
ernmental authority by the Bank of Estonia was not inconsistent with its obligations under the Treaty;
Article 2, Paragraph 3(a), requiring Estonia to accord fair and equitable
treatment to Claimants investment;
Article 2, Paragraph 3(b), prohibiting Estonia from impairing by arbitrary
means Claimants activity related to that investment;
Article 2, Paragraph 3(c), requiring that Estonia abide by its agreements entered
into in connection with Claimants investment;
Article 2, Paragraph 7, requiring Estonia to provide effective means for the
Claimants to assert claims and enforce their rights regarding their investment;
Article 3, requiring an expropriation to meet the requirements of due process
(paragraph 1) and requiring the availability of a prompt review of the expropriation (paragraph 2);
Article 7, Paragraph 1, rendering the Treaty applicable to investments that
existed at the time the Treaty became effective.
257. Claimants contend that the bit applies retroactively to all investment disputes that arise from a failure by the State to abide by the Treaty, even if the
controversy initially arose before the Treaty went into effect.
The defenses that never end
258. Claimants contend that most of the Bank of Estonias stated justifications
for its actions were not mentioned at the time of eibs licence revocation. Claimants
contend that these justifications have been constructed for the purpose of this arbitration.
Inconsistent reasoning
259. Claimants allege the following:
r Eastern Credit has held an authorised qualified holding in eib since the early
1990s;
280
GENIN v. ESTONIA
r Baltoil is the subsidiary of Eastern Credit; and

r Eurocapital Group Ltd has held an authorised holding since 1995.
260. Claimants contend that the Bank of Estonia concocted, in 1997, a technical argument that the above-mentioned entities had neither applied nor received
permission for qualified holdings in eib.
261. Moreover, Claimants allege that Estonian law requires the Bank of Estonia to
notify an applicant for a qualified holding of its decision in regard to that application
within one month. Claimants submit that this was not done for the above-mentioned
entities when they re-applied for qualified holdings, in 1997. Claimants state that
the Bank of Estonia instead responded, on exactly the 30th day after receipt of the
applications, by sending the March 1997 Regulations/Guidelines.
262. Claimants assert that, while Respondent claims that the March 1997 Regulations/Guidelines were established in 1995, the information supposedly required by
that instrument was never requested of Eurocapital when it applied for a qualified
holding, in 1995, approximately six months after the Credit Institutions Act went
into effect. Claimants contend that the March 1997 Regulations/Guidelines were
fabricated specifically so that the Bank of Estonia could use them to get information
from eib for use in the United States litigation.
When is an eye really an ear?
263. Claimants assert that the fact that Mr Genin has incorporated numerous
companies for specific purposes (such as the need to have a corporate entity in
different countries) merely reflects the scale of Mr Genins business activities, not
that he is engaged in any improper activity.
264. Claimants emphasise that it is Estonia that bears the burden of proving
that the existence of those corporations is related to activity that affected eib in an
improper way. Claimants submit that Estonia has failed to provide any evidence
that these companies were involved in any wrongdoing.
265. Regarding the Landmark and Tollycraft stock transactions, Claimants contend that, overall, eib lost no money in these transactions.57 Claimants also submit
that the Respondent has not proved any wrongdoing merely by showing that this
stock was purchased by the bank and ultimately sold to its shareholders. Claimants
allege that the reason for transferring the stock into eib in the first place was to
cover losses caused by the Bank of Estonias reneging on the March 1996 WriteOff Agreement.
266. Claimants submit that Respondent bears the burden of proving that
Claimants have acted improperly in a manner that related to the revocation of eibs
licence. Claimants declare that Estonia has provided no evidence of such wrongdoing or of any relationship between the conduct in question and the revocation of
eibs licence.
Alex Genins testimony concerning Eurocapital
267. Claimants acknowledge that Mr Genin declared at the hearing that he considers himself to be the beneficial owner of Eurocapital Ltd, after having previously
maintained, throughout the case, that he was not the owner of the company.
57
Claimants Post-Hearing Memorial, pp. 301; Claimants Exhibit 98100.
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268. Claimants contend that the fact that this declaration was not made previously
does not have any bearing on the merits of the case, because Estonia already knew,
in essence, that Mr Genin was the owner of Eurocapital Groupin early 1996, eib
stated this fact in its report to the Bank of Estonia.58 Further, there is nothing in
the record that would in any way indicate that Estonia believed the shareholder of
Eurocapital to be anyone other than Mr Genin, or that the Bank of Estonia believed
there was anything improper in Mr Genins ownership.
269. In addition, Claimants suggest that Mr Genins ownership of Eurocapital is
actually favourable to his claims in the arbitration:
r since the bit defines an investment as being direct or indirect, an investment
in the name of Eurocapital Ltd is arbitrable;
r the ownership issue in no way changes the fact that Eastern Credit had entered
into an agreement with Eurocapital Ltd to borrow funds for the purchase of
eib stock in its own name.
270. Claimants state that the Bank of Estonia was not concerned about Eurocapital Ltd until the US litigation began, and that all the matters that the Bank of
Estonia complained about in September 1997, when it revoked eibs licence, had
been evident at least since 1995.
271. Claimants concede that Mr Genins failure to reveal the fact that he considered himself the beneficial owner of Eurocapital Ltd could be considered to have
affected this case. They declare that, as a result, it would be appropriate for the
Tribunal to adjust the amount of costs to be awarded in the arbitration, to reflect the
extra work and expenses to which Mr Genins conduct in this regard has contributed.
272. However, Claimants submit that, even had Mr Genin stated at the outset that
he was the beneficial owner of Eurocapital Ltd, it is clear that Respondent would
have investigated the matter in any event, given that the shares are issued to bearer
and are currently held as collateral by another individual. Claimants contend that,
while the issues that would have been raised might have been different, the issue
of Eurocapitals ownership would not have been eliminated altogether.
A matter of perspective
273. In regard to Mr Hobbs, the promoter of the Tollycraft stock who was apparently found to have engaged in securities fraud, Claimants state that there is no
indication that Mr Genin was in any way related to those matters.
274. Claimants contend that, whether or not Mr Hobbs is a criminal, there is no
proof of any wrongdoing by Mr Genin.
Get out your straightedge
275. Claimants submit that, throughout the arbitration, whenever Estonia is unable to reply to the documentary evidence, it qualifies that evidence as forged. For
example, the Bank of Estonia denies receiving the 26 May 1997 letter produced by
Claimants, in which Mr Mody, Estonian counsel to eib, requests the legal justification for the March 1997 Regulations/Guidelines, even though internal Bank of
58
Claimants Post-Hearing Memorial, p. 32; Claimants Exhibit 16 to Respondents Exhibit 3.
282
GENIN v. ESTONIA
Estonia documents indicate that personnel from eib reminded the Bank of Estonia
of this letter well before the eibs licence was revoked in September 1997. Similarly, Estonia suggests that Claimants Exhibit 80, a letter predating the licence
revocation by a year, in which various rumours regarding the Bank of Estonias
intentions vis-à-vis eib are recordedintentions that were actually manifested over
the course of the ensuing yearis a forgery.59
276. Finally, Claimants reiterate their submissions to the effect that the Bank of
Estonia revoked eibs licence on totally fabricated grounds and without any prior
notice, that Respondent caused negative publicity for eib and its investors, and that
it harassed those investors and Mr Dashkovsky.60
Damages
277. Claimants explain the valuation of eib conducted by B. V. Murray & Company, by stating the following:
r Claimants own a total of 84.145% of eib (assuming that Eurocapital is a direct
investment of Genin);
r the value of eib, as valued by B. V. Murray & Company in September 1997,
when eibs licence was revoked, ranges between US$20 million to US$21
million;
r at the time, there was good chance that eib would merge with a financial
institution known as evea Bank;
r the total equity in a merged eib/evea entity would have been 151.6 million
eek; eibs share would have been 82.3 million eek (54%), while evea Banks
share would have been 69.3 million eek (46%);
r Claimants would have owned 84.145% of 54% of the merged bank, i.e. approximately 46%.
278. B. V. Murray & Companys three alternate valuations, based on projections
of the value of the merged entity as of the end of 1999, are as follows:
r $29 million to $36 million, based on Estonian market conditions at the time;
r $67 million to $112 million, as a bank publicly traded on the less volatile, more
liquid US markets.
r $100 million to $125 million, as an internet stock traded on US markets.
279. As a matter of law, Claimants argue that the amount that should be awarded
is the market value of the investment at the time that the injury occurred,61 including
future profits.
280. Claimants state that the calculation of damages should also include the 5%
interest in eib held by a company called ocs, which was bought back by Eurocapital, out of fairness towards ocs, when eibs licence was revoked by the Bank of
Estonia.62
59

61
Claimants cite the AAPL v. Sri Lanka case.
62
Claimants Post-Hearing Memorial, pp. 459. Claimants refer to their Exhibit 103.
60
AWARD
283
2) Respondents Post-Hearing Memorial

281. As ordered by the Tribunal, Respondent duly filed its Post-Hearing Memorial, with supporting documentation, on 19 December 2000.
282. In its Post-Hearing Memorial, Respondent states that Claimants entire
case lacks credibility; that their assertions are unsubstantiated, as nearly all their
proof derives from the self-serving declarations and unreliable oral testimony of
Mr Genin and Mr Dashkovsky; and that no credible, contemporaneous evidence
documentary or otherwisehas been offered to support their claims of misrepresentation, breach of contract, denial of justice or harassment.
283. Respondent claims that Mr Genins evasiveness at the hearing illustrates
that he was attempting to circumvent Estonian banking regulations and deceive
Estonian banking officials.
284. Respondent submits that, based on what has been revealed about eib in this
proceeding, it is abundantly clear that it was not unfair, inequitable or arbitrary for
the Estonian regulators to act to protect depositors and creditors by revoking eibs
licence.
Jurisdiction is absent
285. Respondent alleges that Mr Genin controlled eibboth directly and
indirectlythrough his subordinates and other corporations over which he had
unlimited authority. Three such corporations, Eurocapital Ltd, Eastern Credit and
Baltoil, held over an 85% interest in eib when the licence was revoked.
286. Respondent also submits that the testimonial and documentary evidence
proves that Mr Genin dominated and controlled eib and its majority shareholders.
Specifically:
r Mr Genin was Chairman of the Board of eib;
r Mr Genin and his surrogates, Mr Dashkovsky, Ms Dee Severson, Mr James
r
r
Sutherland, and Mr Joselito Sangel, engaged in numerous, non-arms length

transactions with eib;
Mr Genin had unlimited investment authority for eib;
in exercising his authority, Mr Genin reportedly transferred assets (e.g., the
Tollycraft and Landmark stock he had obtained both personally and in the
names of Eastern Credit and Eurocapital) to eib without requiring or producing
any written documentation;
one of the few written documents regarding the transfers of shares was unilaterally disregarded by Mr Genin: Mr Genin entered into a put agreement
with eib which he ignored once he felt that the bank had benefited enough
from the instrument (although eib had the right under the agreement to sell
its remaining 500,000 shares of Tollycraft stock to Eurocapital for $4.50 per
share, Mr Genin decided that Eurocapital should only pay $1.75 per share);
although the Texas litigation is not litigation in the host State, which would divest the Tribunal of jurisdiction, it provides further evidence of how Claimants
dominated eib and ignored the traditional boundaries between a company and
its shareholderin that instance, by means of a self-serving assignment of
eibs rights to Eastern Credit;
284
GENIN v. ESTONIA
r Messrs Genin and Dashkovsky used eib to pay for their Houston office space;
r eib paid substantial management fees to Eurocapital, although there is no
evidence that there was any type of management agreement between the two
companies;
r Mr Dashkovsky was the formal decision maker who first authorised eibs
decision to pursue litigation in the Estonian courts over the Koidu bank dispute;
r Mr Genin admitted he was the owner and sole shareholder of Eastern Credit
throughout the relevant period;
r Mr Genin beneficially owned Eurocapital at all relevant times, and held a full
power of attorney to act on Eurocapitals behalf;
r Mr Genin made decisions to appoint and replace Eurocapitals directors, including his secretary and his wife, and also dictated how Eurocapitals ledgers
were handled;63
r Respondent also submits that there is no evidence that anyone other than
Mr Genin (through his companies and Mr Dashkovsky) controlled eib.
287. Respondent submits that the parties to the arbitration are, in effect, the
same as those in the Estonian court proceedings and that, for this reason alone, the
Tribunal does not have jurisdiction in this case.
288. Respondent contends that, under Article VI(3) of the bit, icsid has no
jurisdiction if the national or company submitted the dispute for resolution to the
courts or administrative tribunals of Estonia. Respondent also alleges that it would
be contrary to the bit to allow an entity (eib) to sue in one forum while its parent
company or shareholders sue, derivatively elsewhere, for the same alleged wrong.
289. Respondent also submits that Baltoil is not owned by Eastern Credit, as
claimed by Claimants, and therefore Baltoil cannot be a proper claimant in this
arbitration under Article VI(8) of the bit.
Genins story is not credible
290. Respondent contends that Mr Genins testimony is discredited for the following reasons, and should therefore be rejected by the Tribunal:
r he lacks credibility;
r he repeatedly gave inconsistent statements on key issues in this case;
r he deliberately misrepresented facts when it was to his legal and financial
advantage to do so; and
r he engaged in questionable financial activities.
291. Respondent contends that there are many inconsistencies in Mr Genins
testimony, e.g. the refusal or inability to explain the origin and nature of Eurocapital,
while finally admitting, during his cross-examination, that he is its legal owner.64
292. Respondent alleges that Claimants entire relationship with the Bank of
Estonia was predicated upon false and misleading information:
63
64
Respondents Post-Hearing Memorial, pp. 34.

Respondents Post-Hearing Memorial, pp. 79.
AWARD
285
r Eastern Credit misrepresented its financial condition when it originally submitted financial statements to the Bank of Estonia in 1992, listing $34 million
in assets which it did not, in reality, own.
293. Eurocapitals application for a qualified shareholding in eib, in 1995, was
likewise predicated upon false information submitted by Genin and Dashkovsky to
the Bank of Estonia:
r Eurocapital misrepresented itself as Eurocapital Group Company when, in
fact, there is no evidence that such a company ever existed;65
r Ms Severson, Mr Genins secretary, forged the signature of Eurocapital Ltds
CFO, Mr Gregory Zak, on the application.66
294. Respondent contends that this evidence is but part of a larger pattern of
conduct in which Mr Genin and his associates fabricated documents and evidence
to support their ends, for example:
r Mr Genin admitted that he used fictitious names on commercial contracts;
r Mr Genin knowingly participated in false confirmations of nonexistent transactions; and
r Mr Genin manufactured evidence of US $41 million damages as made-up
expenses for another Genin entity (Sovtex).67
295. Respondent submits that, given Claimants pattern of conduct, no weight
should be given to allegations that are not substantiated by credible, independent
evidence.
296. Respondent contends that the testimony at the hearing on the merits showed
the extent to which Mr Genin, aided and abetted by Mr Dashkovsky, regularly engaged in self-dealing between and among his companies to further his own personal
interests. For example:
r Mr Genin prepared and signed documents as both borrower and lender;
r the funds of many of Eurocapitals clients were regularly commingled with
Eurocapitals own money;
r Mr Genin used his companies to buy his house (Pacific Commercial Credit)
and his car (Eastern Credit);
r eib agreed to settle its lawsuit with Social Bank in exchange for the latters
promise to pay over 20 million eek, although eib never contemplated that
those payments would be met by Social Bank;
r Mr Genin used worthless stock in a defunct corporation, Tollycraft, through a
series of feigned transactions, to inflate artificially eibs balance sheet;
r similarly, Mr Genin acquired shares of Landmark for less than $0.15 per share
from Peter Hobbs, which he immediately conveyed to eib at a much higher
price;
r eib executed a put with Eurocapital, but sold shares to Eurocapital below the
strike price when Mr Genin decided the bank had benefited enough;
65
Respondents Post-Hearing Memorial, p. 11; Respondents Exhibit 146.

Respondents Post-Hearing Memorial, p. 10; Respondents Exhibit 109.
67
Respondents Post-Hearing Memorial, p. 11.
66
286
GENIN v. ESTONIA
r eib made a $2.9 million deposit of its money with Eurocapital to secure
Eurocapitals claim against eib.68
Dashkovskys story is not credible
297. Respondent contends that Mr Dashkovsky lacks credibility for the following
reasons:
r he (along with Mr Genin) executed most of the documents involving relatedparty transactions;
r he conceded on cross-examination that he effectively sent to himself a letter
from eib to Eastern Credit, Baltoil and Eurocapital requesting information
from those companies;
r although he knew the answers to the questions posed by the Bank of Estonia,
he never provided the banks regulators with the information requested during
their inspections.
The revocation of eibs licence was justified
298. Respondent claims that the decision to revoke eibs licence was not made
overnight, but was based on events that had occurred over the better part of a year.
The banks licence was revoked for several reasons, as disclosed in the minutes of
the meeting of the Council of the Bank of Estonia and in the formal denunciation
(revocation notice) of the licence. Those reasons included:
r the submission of incorrect or misleading information about shareholders;
r Eurocapital Ltd had not been granted permission for a qualified shareholding;
r eib had refused to provide information concerning its shareholders and concerning parties and companies related to those shareholders;
r the instructions contained in the 10 February 1997 and 13 February 1997 letters
had not been fulfilled; and
r the documents necessary to consider the granting of an authorisation for a
qualified shareholding had not been submitted.69
299. Respondent also submits that Claimants, even when purportedly responding to the Bank of Estonias requests for information, never actually provided the
information requested.
300. Respondent reiterates that Estonian banking law permits the Bank of Estonia
to request information from financial institutions, and specifically provides for
the revocation of an institutions licence in the event that such information is not
transmitted. Respondent also asserts that Estonian banking officials had legitimate
questions about the identity of eibs shareholders.
301. For these reasons, Respondent contends that the Bank of Estonias requests
for information in order to determine eibs shareholders identity, as well as its
decision to revoke eibs licence to operate as a depository institution, were not
unfair, arbitrary or inequitable.
68
69

AWARD
287
302. Respondent reiterates that, following the licence revocation, eib was given
the opportunity to challenge the action in the Estonian courts, that it availed itself
of its due process rights and was heard, repeatedly, in a series of legal challenges.
Respondent also states that there is no evidence of any irregularity or fraud in the
Estonian legal system; no reasons have been offered by Claimants as to why the
Tribunal should effectively disavow the Estonian legal system at the international
level.
The Koidu branch claims have no merit
303. Respondent contends that the Koidu branch claims fail for several reasons:
r Claimants offer no evidence that Mr Kraft had knowledge of the condition or
value of the Koidu branch assets that eib purchased;
r Mr Kraft had not worked for Social Bank for years, and was never in a position
at Social Bank that would have given him knowledge of the Koidu assets;
r eibs purchase of the Koidu branch assets is not an investment under the bit.
304. Regarding the 12 April 1996 tentative agreement, Respondent reiterates
that Claimants have not adduced any evidence that the Bank of Estonia acted
improperly, nor did they submit proof that the Bank of Estonia breached a binding
agreement by failing to obtain the third-party consent necessary for agreement
to be finalised. Respondent also contends that eib never intended to perform its
obligations under the Settlement Agreement.
305. Respondent contends that the Koidu branch claims should fail because no
damages have been demonstrated. It submits that Claimants have offered no credible
evidence regarding how the fair market value of their eib shareholdingwhich
Respondent alleges comprises no more than approximately 8%was diminished
by any alleged wrongdoing relating specifically to the Koidu branch affair.
306. Finally, Respondent reiterates that all of the claims relating to the Koidu
branch concern events that occurred in 19941996, thus pre-dating the bit.
Claimants have suffered no damages
307. Respondent contends that Claimants have suffered no damages in the present
case, for the following reasons:
r Claimants presented no evidence of the fair market value of their pro rata
portion of eib as of the date of the revocation of its licence;
r Mr Murrays opinion is not credible and does not prove the fair market value
of Claimants interest. No independent investigation of the information upon
which he based his opinion was ever made; the valuation was based on totally
unrealistic growth projections;70
r Mr Murray failed to account for the relatively small percentage of eib shares
actually owned by Claimants (approximately 8%) and the value that might be
assigned such a small portion even in an eventual merger with evea Bank;
r eib was not insolvent at the time of the licence revocation. Mr Genin and
Mr Dashkovsky transferred approximately $2.9 million of eibs funds to
70
288
GENIN v. ESTONIA
Genin-controlled trading accounts of Eurocapital Ltd and gave up $2.75 per

share on Tollycraft shares when eib intentionally waived its right to force
Eurocapital Ltd to purchase the shares at $4.50 each under a pre-existing put
option agreement;
r Claimants failed to mitigate any damages that they may have suffered. For
example, the licence revocation did not prevent eib from reorganising as a
lending (as opposed to a depository) institution.
308. Respondent also contends that Claimants should not be entitled to claim
damages on the basis of Eurocapitals interest in eib, since Eurocapital is not a
party to the arbitration. Likewise, Respondent contends that, since there has been
no evidence that Baltoil was owned by Eastern Credit at the time of the alleged
wrongful actions, its interest should not be accounted for.
309. Finally, Respondent states that the Tribunal should award Estonia the
$2.9 million transferred out of eib by Mr Genin and Mr Dashkovsky, so that it
may continue the liquidation process. As long as these funds are held by Eurocapital, Respondent states that it will be impossible to wind down the bank and
distribute its funds to any remaining creditors and shareholders.
Mr Genins conduct compels an award of costs & fees
310. Respondent claims that Mr Genins conduct throughout this case, and his
extraordinary efforts to obfuscate the truth, demonstrate his severe lack of credibility. By way of example, Respondent cites the issue of Mr Genins ownership of
Eurocapital.
311. Respondent submits that an award requiring Claimants to reimburse it the
costs and fees incurred defending itself in this proceeding is a proper means for the
Tribunal to sanction Mr Genins conduct.
I. Issues and Analysis
312. Given the exceedingly lengthy and detailed submissions made by the parties, and the extensive documentation filed by them as evidence, the Tribunal has
summarized, above, in greater detail than might otherwise have been the case, the
parties respective positions. At the end of the day, however, and as the foregoing
recital makes clear, the issues to be determined are relatively few.
313. The claimsthe so-called eight transgressions of the bitalleged by
Claimants, and addressed at length in the parties respective written submissions,
can properly and logically be grouped into three categories:
(1) Claims relating to eibs purchase of the Koidu branch and its losses arising
therefrom (Transgressions 1 and 2);
(2) Claims relating to the revocation of eibs licence (Transgressions 3 to 7);
(3) Claims concerning the alleged harassment of Messrs Genin and Dashkovsky
(Transgression 8).
314. By way of counterclaim, Respondent asks the Tribunal to order the restitution of $2.9 million allegedly transferred out of eib by Messrs Genin and
Dashkovsky and currently held by Eurocapital, failing which Respondent claims it
will be impossible to finalize the liquidation of eib.
AWARD
289
315. Accordingly, the substantive issues to be determined may be simply and

comprehensively stated as follows:71
(1) Did Respondent, in the person of its agency, the Bank of Estonia, violate the
bit or Estonian law in relation to the sale of the Koidu branch to eib or in
regard to the handling of losses relating to eibs purchase of the branch (and
if so, what damages are owed as a result)?
(2) Did Respondent, in the person of its agency, the Bank of Estonia, violate the
bit or Estonian law by revoking eibs licence (and if so, what damages are
owed as a result)?
(3) Did Respondent, in the person of its police or other agencies, violate the bit
or Estonian law by harassing Messrs Genin and/or Dashkovsky (and if so,
what damages are owed as a result)?
(4) Is Respondents counterclaim justified (and if so, what damages are owed as
a result)?
316. From the foregoing, and consistent with its obligations under the Convention
and the bit, it is evident that the mandate of the Tribunal is to determine whether the
conduct of Respondent or its agencies, as alleged in this case, constitutes a breach
of the bit. More specifically, the fundamental question is whether the conduct of the
Bank of Estonia as regards the sale of the Koidu branch and the revocation of eibs
licence, and of the Estonian police as regards their treatment of Messrs Genin and
Dashkovsky, was such as to rise to the level of violations of the international law
standards of fair and equal treatment and non-discriminatory and non-arbitrary
treatment of investment, as those standards are reflected in Articles II(3)(a) and
(b) of the bit.
317. For the reasons explained more fully below, this multi-part question must
be answered in the negative.
318. Prior to addressing the four issues identified above, however, it is necessary
to consider the objection to the Tribunals jurisdiction in this case, as formulated
by Respondent.
1) Jurisdictional Issues
319. The Tribunal wishes to express the following observations regarding the
matter of jurisdiction. The amount of $1.6 million paid by Eastern Credit for the
claims it bought from eib could only with difficulty be considered an investment
within the meaning of Articles I and VI of the bit, for many of the reasons set out by
Estonia in its Counter-Memorial.72 Moreover, the payment was not made in cash, as
required by Article 27(2) of the Law on Credit Institutions, and could not, therefore,
qualify as additional capital. As a result, if the entirety of Claimants case revolved
around eibs purchase of the Koidu branch and the losses allegedly suffered by
Claimants as a result, it is possible that jurisdiction would not be present. This is
not, however, the case. Rather, the heart of the matter to be determined by the
71
The issue of the costs of the arbitration, and their allocation as between the parties, is dealt with in
the following section of this Award.
72
290
GENIN v. ESTONIA
Tribunal, to borrow Respondents words,73 is the legitimacy of the Bank of Estonias

concerns regarding eib and its reaction to those concerns, that is, its revocation of
eibs licence. Claimants, too, recognize that the core issue in the arbitration is
the revocation of eibs licence.74 The Tribunal agrees. As such, the question of
jurisdiction relates essentially to Claimants ownership interest in eib (as opposed
to eibs ownership interest in the Koidu branch) and whether that interest constitutes
an investment under the bit such as to afford jurisdiction to the Tribunal.
320. The Tribunal has no hesitation in stating that Respondents objection to the
jurisdiction of the Tribunal over claims relating to Claimants ownership of eib and
the loss of that investment do not withstand scrutiny and should thus be dismissed.
321. Estonia claims that the Claimants were not entitled to submit their dispute
with the Government of Estonia for settlement by binding arbitration provided for
in the bit, for two reasons. First, Respondent submits that Claimants claims do not
relate to investments as that term is understood in the bit. Second, Estonia argues
that those claims were previously litigated in Estonia and the US; both the bit and
the Convention include provisions relating to choice of forum, and by choosing to
litigate their disputes with Estonia in the Estonian courts, argues Estonia, Claimants
have exhausted their right to choose another forum to relitigate those same disputes.
322. In his declaration in support of Estonias contentions, Prof. Andreas F.
Lowenfeld expresses his opinion that Claimants, Eurocapital Group and eib, (. . .)
are affiliated with one another, and that they are or were all controlled or managed
by Mr Alex Genin and/or his associate Mr Michael Dashkovsky.75 Prof. Lowenfeld
goes on to state:
If I am correct that all of the corporate entities are affiliated with one another and are
or have been under common control, it follows, in my view, that any resort to local
administrative or judicial remedies by any member of the group is attributable to all
members of the group and to the group itself . . . It would be wholly inconsistent with
the principle [of election of remedies] . . . and in particular with the objective of
avoiding inconsistent decisions, for one member of the group to try a domestic court,
for another member of the group to try an administrative proceeding, and for still
another member of the group (or its controlling shareholders) to submit the dispute to
arbitration pursuant to the bit and the icsid Convention.76
323. In order to assess the validity of Prof. Lowenfelds conclusion that Claimants
have forfeited their right to have their claims arbitrated under icsids auspices, it
is appropriate to consider, one by one, the conditions laid down in the Convention
and the bit for icsid to have jurisdiction in this case. Those conditions are:
(1) A legal dispute arising directly out of an investment;
(2) between a Contracting State or an agency of a Contracting State; and
(3) a national of another Contracting State;
73
Counter-Memorial, p. 1; see also para. 102 of this Award.

Claimants Post-Hearing Memorial, p. 1; see Part H of this Award.
75
Declaration of Prof. Andreas F. Lowenfeld dated 10 November 1999, Exhibit B to Respondents
Memorial in support of its objection to jurisdiction, p. 11. Prof. Lowenfeld also testified, on behalf of
Respondent, at the 8 January 2000 hearing on jurisdiction.
76
Id.
74
AWARD
291
(4) consent to submit the dispute to icsid; and, as a condition attached to Respondents consent given in the bit,
(5) that the Claimants have not submitted the dispute for resolution to the courts
or administrative tribunals of Estonia or in accordance with any applicable,
previously agreed dispute-settlement procedure.
324. The term investment as defined in Article I(a)(ii) of the bit clearly embraces the investment of Claimants in eib. The transaction at issue in the present
case, namely the Claimants ownership interest in eib, is an investment in shares
of stock or other interests in a company that was owned or controlled, directly or
indirectly by Claimants. The investment of Claimants in eib is also embraced by
the meaning of the term investment under the Convention.
325. An investment dispute is defined in Article VI(I) of the bit as a dispute
arising out of or relating to: (a) an investment agreement . . . (b) an investment
authorization . . . or (c) an alleged breach of any right conferred or created by this
Treaty with respect to an investment. The revocation of eibs licence is, without
doubt, covered by this definition.
326. It is also significant to note that Article XII of the bit provides for the
application of the bit to all investments made prior to, and existing at the time of,
the entry into effect of the Treaty, on 16 February 1997.
327. The Bank of Estonia is an agency of a Contracting State. The Estonian
central bank is a state agency, as defined by the bit, which stipulates in Article
II(2)(b) that Each Party shall ensure that any state enterprise that it maintains or
establishes acts in a manner that is not inconsistent with the Partys obligations
under this Treaty wherever such enterprise exercises any regulatory, administrative
or other governmental authority that the Party has delegated to it, such as the power
to expropriate, grant licenses . . .. The Republic of Estonia is therefore the appropriate Respondent to a complaint relating to the conduct of the Bank of Estonia.
328. The Claimants are nationals of another Contracting State. Mr Genin is an
American citizen and Eastern Credit is a US corporation wholly-owned by him.
Baltoil is an Estonian corporation wholly-owned by Eastern Credit and therefore
entitled to be considered a national of the United States by virtue of Article 25(2)(a)
of the Convention and Article VI(8) of the bit.
329. Estonias consent to resolution of disputes by submission to icsid arbitration
is provided in Article VI(3) of the bit. Claimants provided evidence of their consent
to submit this dispute to icsid arbitration in their Request and in their Exhibit B.
330. The first four conditions having been satisfied, the fundamental issue as
regards the matter of the Tribunals jurisdiction in this case relates to whether the
Claimants have submitted the dispute for resolution to the courts or administrative
tribunals of Estonia or in accordance with any applicable, previously agreed disputesettlement procedure. Two questions arise in this regard. First, to what extent were
the issues litigated in Estonia and the United States identical to those raised by
the Claimants in this arbitration? And second, is it proper to consider eib and the
Claimants as a group and to view eibs legal acts in Estonia as an election of
remedy for the group as a whole?
331. As to the first of these questions, the Tribunal is of the view that the lawsuits
in Estonia relating to the purchase by eib of the Koidu branch of Social Bank and
292
GENIN v. ESTONIA
to the revocation of eibs licence are not identical to Claimants cause of action
in the investment dispute that they seek to arbitrate in the present proceedings.
The actions instituted by eib in Estonia regarding the losses suffered by eib due to
the alleged misconduct of the Bank of Estonia in connection with the auction of the
Koidu branch and regarding the revocation of the Banks licence certainly affected
the interests of the Claimants, but this in itself did not make them parties to these
proceedings.
332. The distinction between the causes of action brought by eib, in Estonia,
and by the Claimants, here, is perhaps best illustrated by the circumstances of eibs
recourse to the courts in the matter of its licence revocation. The effort by eib
to have the Bank of Estonias decision overturned, and its licence restored, was
in effect undertaken on behalf of all the Banks shareholders (including minority
shareholders), as well as on behalf of its depositors, borrowers and employees, all
of whom were damaged by the cessation of eibs activities. It is quite obvious that
this matter had to be litigated in Estonia; there was no other jurisdiction competent
to deal with the restoration of the status quo. The investment dispute submitted
to icsid arbitration, on the other hand, relates to the losses allegedly suffered by the
Claimants alone, arising from what they claim were breaches of the bit. Although
certain aspects of the facts that gave rise to this dispute were also at issue in the
Estonian litigation, the investment dispute itself was not, and the Claimants should
not therefore be barred from using the icsid arbitration mechanism.
333. Estonia also submits that since Article VI(8) of the bit qualifies eib as a
US national or company, its resort to the courts and administrative tribunals of
Estonia should preclude the parents from submission of their dispute to an icsid
arbitration. However, as mentioned above, eib had no choice but to contest the
revocation of its licence in Estonia, in the interest of all its shareholders, whereas
the Claimants submitted to icsid arbitration an investment dispute, as defined by
the bit, seeking compensation for what they claim was a violation of their rights
under the bit.
334. For similar reasons, the litigation instituted by one of the Claimants, Eastern
Credit, in the United States, should also not be an obstacle to icsid arbitration. The
US litigation did not relate to the major issue at stake herethe revocation of
eibs licenceand should not be considered resort to an alternative forum under
Article VI(2)(a) of the bit such as to preclude submission of the present investment
dispute to arbitration.
335. As regards the question of jurisdiction over the last of Claimants claims,
arising from the alleged harassment of Messrs Genin and Dashkovsky, the Tribunal
declines to address the matter other than to state that the question need not be
resolved given the lack of any support for the claim itself. Moreover, the claim,
if not entirely abandoned by Claimants, has been relegated to secondaryif not
tertiarystatus in Claimants submissions at the hearing and subsequently.
2) The Koidu Branch Purchase and its Aftermath
336. The facts relating to the Koidu branch transaction, and the parties submissions in this regard, are dealt with in some detail above, in Parts E, F and H
AWARD
293
of this Award. Many of the facts pertinent to this Award are indeed uncontested
as between the parties. For present purposes, it is sufficient to highlight those
events of particular relevance, which include the relevant facts as found by the
Tribunal.
337. On 12 August 1994, eib purchased the Koidu branch of Social Bank, in
an auction organized by the Bank of Estonia. The Sales Agreement was signed,
on behalf of Social Bank, by Mr Vahur Kraft then Vice-President of the Bank of
Estonia. The purchase price of 3 million eek was paid to the Bank of Estonia,
according to the instructions of Mr Kraft. On 16 September 1994, eib informed
the Bank of Estonia that the assets of the branch fell short of the amounts stated
in the balance sheet provided to it in advance of the auction, creating a loss of
approximately 7.25 million eek. eib blamed Kraft, inter alia, for the discrepancies
and claimed that he should have been aware of them, having formerly been an
officer of Social Bank.
338. The Inspection Department of the Bank of Estonia, designated by the parties
in the Sales Agreement of 13 August 1994 as a final arbiter in the event of a dispute
with regard to the description of the Object, determined that eibs claim against
Social Bank was unfounded.
339. eib sued Social Bank for recovery of its losses, but on or about 28 April
1995 the parties reached an out-of-court settlement entitling eib to transfer to Social
Bank some 21 million eek of the Koidu branch assets and receive payments totalling
approximately 17 million eek in instalments stretching over close to three years.
These payments were secured by loans totalling some 47 million eek from the loan
portfolio of Social Bank, that were apparently worthless. Only about 1 million eek
were paid on account of this settlement since Social Bank was declared bankrupt
soon after signing the settlement.
340. eib applied to the Bank of Estonia, asking for compensation for its losses.
The Bank of Estonia agreed to cover a substantial part of eibs claim against esb
Finanskontor Ltd (the successor to Social Bank), by assigning to eib its rights in
loans granted to other Estonian banks in the total amount of 15 million eek. A
tentative agreement to this effect was signed on 12 April 1996. On 5 August 1996,
the Bank of Estonia sent eib the draft of an agreement that altered some of the terms
of the tentative agreement.
341. Claimants contend that the 12 April 1996 tentative agreement was binding
and that the changes made in the new agreement diminished the value of the package
that had been promised in the tentative agreement. For this reason, eib refused to sign
the second agreement and assigned to Eastern Credit its interest in the settlement
with Social Bank. The Claimants also consider the purchase by Eastern Credit of
eibs claims, resulting from the Koidu branch purchase, to be a separate investment
of more than $1.6 million in Estonia. Eastern Credit went on to sue the Bank of
Estonia and Mr Kraft in Texas.77
342. Another offshoot of the Koidu branch affair relates to the accounting treatment of the losses arising from the purchase of the branch in eibs balance sheet.
77
The assignment was substituted later by a sales agreement selling eibs claims arising from the
acquisition of the Koidu branch to Eastern Credit for 20 million eek.
294
GENIN v. ESTONIA
In a letter dated 4 March 1996 to eib, Mr Sutt from the Bank of Estonias Bank
Inspectorate suggested that the loss would be amortized over a period of no more
than five years. Six months later, the Bank of Estonia demanded an immediate
write-off of the said loss, resulting in a capital deficiency for eib.78
343. In sum, Claimants claim that the Bank of Estonia violated Article II(3)(a)
of the bit, which provides for the fair and equitable treatment of investments, by
the following acts or omissions:
(1) Its refusal to compensate eib for the losses resulting from the misrepresentations of the Koidu branch assets in which the Bank of Estonia participated;
(2) the Bank of Estonias breach of the tentative agreement to settle the Koidu
branch controversy with eib;
(3) the Bank of Estonias reversal of its previous agreement to allow a gradual
amortization of the losses caused to eib, which necessitated the $1.6 million
sale to Eastern Credit of eibs claims arising from its acquisition of the Koidu
branch.
344. These claims are rejected, for the following reasons.
345. First, there is no legal basis for the demand that the Bank of Estonia compensate eib for its losses arising from the Koidu branch purchase. The claim
that Mr Kraft participated in the misrepresentation of the branch assets is simply not substantiated. His previous association with Social Bank, in a head-office
function, does not support the contention that he was aware of the condition of
the credit portfolio of the branch at the time of the auction. On the other hand,
the officers of eib who conducted the negotiations regarding the purchase of the
branch clearly acted unprofessionally and, indeed, carelessly. A credit portfolio
cannot be checked on the spot in a few hours; the buyers should have known that
Social Bank was on the verge of bankruptcy and should thus have taken extra
precautions, such as insisting on warranties relating to the quality of the assets.
The responsibility for the result of eibs conduct, including its omissions, is eibs
alone.79
346. Second, although the Claimants contend that the April 1996 agreement
with the Bank of Estonia was intended to be final, despite the heading Tentative
Agreement, this Tribunal is not persuaded that the proposed change in the package
of assets offered to eib in August 1996 justified its rejection by eib without further
negotiation. Simply put, the claim that the Bank of Estonia breached a binding
agreement was not proven to our satisfaction.
347. Third, no convincing explanation was provided to the Tribunal regarding
why the Bank of Estonia was willing to allow a gradual writing down of the Koidu
branchs bad assets; neither were we adequately informed why this decision was
apparently reversed.80 In any event, whatever was the reason for the Bank of Estonias apparent change of mind, it cannot be considered a breach of agreement. Both
the decision to allow gradual amortization and its reversal were regulatory rulings,
78

It should be noted, however, that one would expect a central bank handling an auction of the assets of
a failing institution to be more attentive to the potential risks to the buyers.
80
The Claimants contend that it was an act of retaliation following the lodging of the lawsuit in Texas.
79
AWARD
295
and the demand to write down the losses at once was not, in the circumstances,
unreasonable according to accepted accounting practices.
3) The Revocation of eibs Licence
348. We turn now to the crux of the case to be determinedwhat Claimants refer
to as the core issue and Respondent calls the heart of the matter: the revocation
of eibs licence. In doing so, the Tribunal considers it imperative to recall the
particular context in which the dispute arose, namely, that of a renascent independent
state, coming rapidly to grips with the reality of modern financial, commercial and
banking practices and the emergence of state institutions responsible for overseeing
and regulating areas of activity perhaps previously unknown. This is the context
in which Claimants knowingly chose to invest in an Estonian financial institution,
eib.
349. As described above,81 the Claimants consider the repeated demands by the
Bank of Estonia to apply for approval of their holdings in eib, and the demands
for information grounded on what they claim were legally baseless regulations, as
distinct transgressions of their rights under various provisions of the bit. However,
it seems to the Tribunal that these claims are in fact part and parcel of the principal
issue at stake, namely, the legitimacy of the Bank of Estonias revocation of eibs
licence. They will therefore be treated as such.
350. According to Article 42(1) of the Convention, the Tribunal shall decide
a dispute in accordance with such rules as may be agreed by the parties. In the
absence of such agreement, the Tribunal shall apply the law of the Contracting
State party to the dispute (including its rules on the conflict of laws) and such rules
of international law as may be applicable. In the present case, in the absence of any
agreement by the parties to the contrary, it is the law of the Republic of Estonia that
applies. Moreover, neither party has argued otherwise or contended that particular
rules of international law (other than as set out in the bit and the Convention)
apply, and there is no basis on which to conclude that the application of rules of
international law would effect a result any different than that reached on the basis
of Estonian law.
351. The essence of the explanation given by Respondent for the Bank of Estonias demands to submit fresh applications for qualified holdings in eib by
Eurocapital Eastern Credit and Baltoil is as follows:
It became apparent from eibs limited and evasive disclosures that Eastern Credit
claimed to be the shareholder of Baltoil and that, together, they owned more than 10%
of eib. Under the law, a party wishing to acquire a 10% interest in a bank must first
make an application for a qualified holding. Eastern Credit and Baltoil, however, had
never applied for their qualified holding.
Similarly, Eurocapital Group Limited had never applied for a qualified holding.
Although a company called Eurocapital Group Company did apply in 1995, it appeared to inspectors that the investment was held in the name of Eurocapital Group
81
See Parts F and G of this Award.
296
GENIN v. ESTONIA
Limited and there was great confusion over the identity of that entity. It was unknown
whether Company and Limited were the same entities (sic); which Limited was
the investor (Hong Kong or Isle of Man); who was behind Eurocapital; and how Eurocapital was related to eib and other shareholders. The only facts that were known with
any degree of certainty were that Limited had not applied for a qualified shareholding
and . . . was not authorized to be a shareholder.82
352. This is exceptionally formalistic reasoning. On its own, the explanation

could not have justified, in the opinion of the Tribunal, the revocation of eibs
licence, as eventually occurred. However, the facts amply demonstrate that, although its reasoning may have been superficial, the decisions reached by the Bank
of Estonia and the actions taken by it as a result were not unsound. A few examples
of Claimants lack of prudent cooperation in providing information required by the
Bank of Estonia, by virtue of its powers according to Article 17(5) of the Bank of
Estonia Act, suffice to make the point.83 Eurocapital used alternate addresses in the
US, UK and Hong Kong, and the enquiries of the Bank of Estonia with the regulatory authorities of the Isle of Man and Hong Kong yielded ambiguous results.
eib refused to supply to the Bank of Estonia clear, reliable data concerning shareholders of their shareholders, inter alia, shareholders of Eurocapital. Tellingly, as
discussed above, it was not until Mr Genin testified at the hearing in these proceedings, and only after substantial questioning, that the Bank of Estonia, and indeed
the Tribunal, learned for a fact that all of the companies in question, including Eurocapital, were owned, at all relevant times, by Mr Genin himself, either directly or
indirectly.84
353. In the opinion of the Tribunal, there is no doubt but that the Bank of Estonias demands for information on eibs shareholders and their shareholders were
validly based on Article 59(6) of the Credit Institutions Act,85 and constituted entirely legitimate and fully proper exercises of the central banks regulatory and
supervisory responsibilities. The information sought was needed to assess whether
eib granted credit to, or was otherwise engaged in transactions with, related parties. The unreasonable reluctance of eib to divulge this information gave rise to
genuine suspicion that transactions with related parties had taken place. Indeed, in
82
83

Article 17(5) provides (see Part E. 3) of this Award):
Eesti Pank has the right to request from all credit institutions data, documents, reports and agreements as well as to require appropriate explanations of these data.
84
85
See Transcript, pp. 4269, and especially p. 429, lines 1521.

Article 59(6) provides (see Part E. 3 of this Award):
The Banking Supervision Department will carry out continuous inspection of a credit institutions
activities and its condition on the basis of regular reports submitted by the latter. If necessary, the
Banking Supervision Department is entitled to:
1) demand that a credit institution submit supplementary information, in order to specify
information in the reports;
2) demand information from persons who are shareholders of the credit institution, as well as
from legal persons in which the credit institution is a shareholder;
3) carry out on-site inspection of a credit institutions clients, relating to issues concerning the
relations between the client and the credit institution.
AWARD
297
the inspection carried out by the Bank of Estonia from 4 February 1997 to 7 March
1997, the inspectors took particular exception to the deposit of $650,000 with Pacific Commercial Credit Ltd, a company located in Hong Kong at the same address
as Eurocapital Group (HK). In the Inspection Report, the following comments
appeared in the section on eibs share capital:
During the inspection of eib the Banking Supervision Department requested information in respect of shareholders, related parties as well as subordinate companies and
subsidiaries. No such information was provided. By this action, Article 60 Section 2
clause 2 of the Credit Institutions Act and Article 17 Section 5 of the Bank of Estonia
Act were violated.86
354. In its letter dated 21 May 1997, the Bank of Estonia demanded that the
applicants for qualified holdings in eib submit to the central bank certain documents
and information that were specified in the attached Procedure for the acquisition,
increase and disposal of a qualifying holding in a credit institution appended to the
letter. These were the so-called Regulations/Guidelines. eib, through its lawyers,
contested this demand by purporting to require the Bank of Estonia to notify by
whom and under which legal basis the specified order has been established.87
355. We consider that the Bank of Estonia was fully authorized by Article 17(5)
of the Bank of Estonia Act to make such a demand. We find, further, that the Bank of
Estonia was fully empowered to utilize and to communicate to commercial banks,
such as eib, the sort of guidelines appended to its demand. However, we consider
that it was somewhat irregular to send such a demand to eib more than 30 days after
submission of the various applications for qualified holdings, on 18 April 1997,
when Article 29(4) of the Credit Institutions Act stipulates that the Bank of Estonia
must notify its decision on an application for the acquisition of a qualifying holding
not later than one month after receiving such application. In any event, fortunately
or unfortunately as the case may be, the 21 May 1997 demand cannot be regarded
as a breach of the relevant statutes or the bit such as to have caused Claimants any
damages or to afford them any recourse.
356. In its report dated 27 June 1997, the Banking Supervision Department of the
Bank of Estonia reported to the Governor of the Bank of Estonia on eibs transactions in the shares of Landmark and Tollycraft. The prudence of these investments
was, without a doubt, highly questionable. The amount invested was excessive in
relation to eibs capital, the prices of the shares fluctuated widely and Mr Genin
was associated with the promoters of both. The report concludes that booking the
Tollycraft shares according to their market price would reduce eibs capital below
the minimum required. Although the Tollycraft transaction was covered by a put
option provided by Eurocapital Ltd, which, as alleged by Claimants, protected eib,
the Landmark shares purchased on 31 October 1996 for $3.75 per share were sold
four months later to Eurocapital Ltd at $2.50 a share, for a loss of $500,000.
357. It is quite obvious that the Banking Supervision Department had good reason
to be critical of various aspects of eibs business and operations. It was perfectly
86
87
See eib Inspection Report, Respondents Exhibit 80.

Respondents Exhibit 79.
298
GENIN v. ESTONIA
justified to request the information which it sought. The question the Tribunal must
answer, however, is whether the central bank afforded Claimants due process in the
procedure leading to the revocation of eibs licence. Not without some hesitation,
we conclude that the actions of the Bank of Estonia did not amount to a denial of
justice.
358. The principal reasons why the Tribunal is concerned with the process which
led to the revocation of eibs licence are the following. No notice was ever transmitted to eib to warn that its licence was in danger of revocation unless certain corrective
measures were taken, and no opportunity was provided to eib to make representations in that regard. When the Council of the Bank of Estonia was convened on
9 September 1997 to discuss the revocation of eibs licence, no representative of
eib was invited to respond to the submission made by P. Nirgi, head of Banking
Supervision, and A. Schmidt, head of the Legal Department, as to why revocation
of eibs licence was necessary or appropriate in the circumstances.
359. The document presented to the Council by Nirgi and Schmidt accused eib of
violating numerous Articles of the Bank of Estonia Act and of the Credit Institutions
Act. The main contention related to the discrepancy between the name of the major
shareholder in the share register of eib (Eurocapital Group Ltd) and in the list of
shareholders as at the same date presented to the Banking Supervision Department
in the course of an inspection (Eurocapital Group Company). As a ground for
revocation, this contention is, as mentioned above, exceedingly formalistic since
the amount of eibs shares held by the two entities on 31 July 1997 was identical and
one could have presumed that the two Eurocapitals were, in fact, one and the same.
But since the authorization to acquire a qualifying holding in eib was granted in 1995
to Eurocapital Group Company and the share register of eib recorded Eurocapital
Group Limited as the major shareholder, it is arguable that the Bank of Estonia
was justified in concluding that the latter shareholder had not received a permit
to acquire a qualified holding. It should also be recalled that in its action before
the Tallinn Administrative Court of 24 March 1997, eib, through its lawyers, had
claimed that Eurocapital Ltd, the major shareholder of record had never acquired
or increased a qualifying interest in eib.
360. The effect of the Bank of Estonias refusal to recognize Eurocapital Ltds
shareholding as a legally-held qualified holding was that the companys holdings
in excess of 10% less 1 share were deduced from eibs capital and resulted in a
large capital deficiency. This result, and the ramifications which flowed therefrom,
are, in the end, soundly based on Article 29(1) of the Credit Institutions Act.88
361. Can the revocation of eibs licence be justified on grounds that, at first
blush, appear extremely technical? It is the opinion of this Tribunal that the decision
taken by the Bank of Estonia must be considered in its proper contexta context
88
Article 29(1) provides (see Part E. 3) of this Award):

A credit institution or individual who is willing to acquire, directly or indirectly, a qualified
holding of a credit institution, or to increase such a holding to exceed 20%, 30% or 50% of the
credit institutions share capital or number of votes, must apply for authorization from Eesti Pank.
The application shall be submitted in writing and must contain information on the size of the
intended holding.
AWARD
299
comprised of serious and entirely reasonable misgivings regarding eibs management, its operations, its investments and, ultimately, its soundness as a financial
institution.
362. The unlimited authority given to Mr Genin to invest money on behalf of
eib made the identity of Eurocapitals shareholders a matter of genuine and pressing regulatory concern. Contrary to Claimants repeated assertions, both in their
written submissions and during the hearing, the reluctance of Mr Genin to divulge
the beneficial ownership of Eurocapital, which would have enabled the Bank of
Estonias Banking Supervision department to understand the relationship of the
various entities associated with him, was the cause of legitimate concern and cannot be considered to have been a mere excuse, or pretext, to revoke eibs licence.
Mr Genins failure to disclose the true ownership of the companies in question was
one of the very reasons for the Bank of Estonias suspicions regarding eibeven if
the central bank was unable, at the time, to identify precisely the cause of its unease
or to confirm its suspicions regarding self-dealing among eibs shareholders and
affiliated entities.
363. In sum, the Tribunal finds that the Bank of Estonia acted within its statutory
discretion when it took the steps that it did, for the reasons that it did, to revoke eibs
licence. Its ultimate decision cannot be said to have been arbitrary or discriminatory
against the foreign investors in the sense in which those words are used in the bit.89
The decision, as it turns out, was further justified by subsequent revelations and
appears even more understandable with hindsight.
364. The Tribunal considers, however, that certain procedures followed by the
Estonian authorities in the present instance, while they do conform to Estonian
law and do not amount to a denial of due process, can be characterized as being
contrary to generally accepted banking and regulatory practice. They include the
following:
(1) No formal notice was given to eib that its licence would be revoked unless
it complied with the Bank of Estonias demands within a reasonable time;
(2) no representative of eib was invited to the session of the Bank of Estonias
Council that dealt with the revocation to respond to the charges brought by
the Governor;
(3) the revocation of the licence was made immediately effective, giving eib no
opportunity to challenge it in court before it was publicly announced.
365. Having considered the totality of the evidence, the Tribunal concludes that
while the Central Banks decision to revoke eibs licence invites criticism, it does
not rise to the level of a violation of any provision of the bit.
366. The Tribunal has also considered the question whether the Bank of Estonias
procedures violated the international law standards of fair and equal treatment and
non-discriminatory and non-arbitrary treatment of investment as those standards
are reflected in the USEstonia Bilateral Investment Treaty.90
367. Article II(3)(a) of the bit requires the signatory governments to treat foreign
investment in a fair and equitable way. Under international law, this requirement
89
90
See Dolzer and Stevens, Bilateral Investment Treaties, 1995, pp. 61 et seq.
See Articles II(3)(a) and (b) of the bit.
300
GENIN v. ESTONIA
is generally understood to provide a basic and general standard which is detached

from the host States domestic law.91 While the exact content of this standard is not
clear,92 the Tribunal understands it to require an international minimum standard
that is separate from domestic law, but that is, indeed, a minimum standard. Acts that
would violate this minimum standard would include acts showing a wilful neglect
of duty, an insufficiency of action falling far below international standards, or even
subjective bad faith.93 Under the present circumstanceswhere ample grounds
existed for the action taken by the Bank of EstoniaRespondent cannot be held to
have violated Article II(3)(a) of the bit.
368. Article II(3)(b) of the bit further requires that the signatory governments
not impair investment by acting in an arbitrary or discriminatory way. In this regard, the Tribunal notes that international law generally requires that a state should
refrain from discriminatory treatment of aliens and alien property. Customary
international law does not, however, require that a state treat all aliens (and alien
property) equally, or that it treat aliens as favourably as nationals. Indeed, even
unjustifiable differentiation may not be actionable.94 In the present case, of course,
any such discriminatory treatment would not be permitted by Article II(1) of the
bit, which requires treatment of foreign investment on a basis no less favourable
than treatment of nationals.
369. In any event, in the opinion of the Tribunal, there is no indication that the
Bank of Estonia specifically targeted eib in a discriminatory way, or treated it less
favourably than banks owned by Estonian nationals. Moreover, Claimants have
failed to prove that the withdrawal of eibs licence was done with the intention
to harm the Bank or any of the Claimants in this arbitration, or to treat them in a
discriminatory way.95
370. The Tribunal has further considered whether the Bank of Estonias actions
constituted an arbitrary treatment of investment as that term is used in Article
II(3)(b) of the bit. In this regard, it is relevant that the Tribunal has found no
evidence of discriminatory action.96 In addition, the Tribunal accepts Respondents
explanation that it took the decision to annul eibs licence in the course of exercising
its statutory obligations to regulate the Estonian banking sector. The Tribunal further
accepts Respondents explanation that the circumstances of political and economic
transition prevailing in Estonia at the time justified heightened scrutiny of the
banking sector. Such regulation by a state reflects a clear and legitimate public
purpose.97
91
Dolzer and Stevens, p. 58; see also American Manufacturing and Trading, Inc. v. Zaire, Award of 21
February 1997 in icsid Case No. ARB/93/1, ICCA Yearbook YB Vol. XXII, 1997, pp. 6086 (noting
that the standard is an objective obligation which must not be inferior to the minimum standard of
vigilance and of care required by international law.)
92
See Ian Brownlie, Principles of Public International Law (5th ed.), p. 529 (noting that [t]he basic
point would seem to be that there is no single standard.)
93
In this regard, see Brownlie, pp. 52731.
94
See Dolzer and Stevens, pp. 612. See also Oppenheims International Law, Volume 1 Peace
(9th edition), p. 933 (noting that [a] degree of differential treatment as between national and foreign
investment may be called for, and is not necessarily contrary to the states international obligations).
95
See Brownlie, p. 541, footnote 96 ([t]he test of discrimination is the intention of the government).
96
97
See Brownlie, p. 551.
AWARD
301
371. It is also relevant that the Tribunal, having regard to the totality of the
evidence, regards the decision by the Bank of Estonia to withdraw the licence as
justified. In light of this conclusion, in order to amount to a violation of the bit,
any procedural irregularity that may have been present would have to amount to
bad faith, a wilful disregard of due process of law or an extreme insufficiency of
action. None of these are present in the case at hand. In sum, the Tribunal does not
regard the licence withdrawal as an arbitrary act that violates the Tribunals sense
of juridical propriety.98 Accordingly, the Tribunal finds that the Bank of Estonias
actions did not violate Article II(3)(b) of the bit.
372. It is to be hoped, however, that Bank of Estonia will exercise its regulatory
and supervisory functions with greater caution regarding procedure in the future.
373. In conclusion, the Tribunal finds that Claimants have failed to show that the
Bank of Estonias conduct in cancelling eibs licence rose to the level of a violation
of the bit or of the international law principles enshrined therein.
4) The Harassment Claim
374. As regards Claimants allegations of harassment of Messrs Genin and
Dashkovsky by the Estonian authorities, the Tribunal is far from convinced that
the allegations made by Claimants, even if true, could amount to a violation of the
bit. In any event, the Tribunal finds that Claimants have failed to prove that such
contacts between Respondents agents and Messrs Genin and Dashkovsky as did
take place amount to harassment. Claimants claim in this regard is, accordingly,
denied.
375. For all of the foregoing reasons, Claimants claims against the Respondent
Republic of Estonia are dismissed.
5) Respondents Counterclaim
376. In its various submissions, Respondent asks the Tribunal to award it, by
way of counterclaim, an amount equivalent to sums allegedly transferred out of eib
by Messrs Genin and Dashkovsky, and currently held by Eurocapital, failing which
the liquidation of eib cannot, it says, be finalized. Its claim is expressed in varying
fashions, and in varying amounts, in various places.99 The apparent confusion need
not, however, be resolved for the purposes of this Award, for the reason that Estonia
has failed to demonstrate to the satisfaction of the Tribunal the merits of its request.
377. The Tribunal notes that Respondents allegations are belied, inter alia, by
the terms of a letter dated 15 November 2000 regarding the current amount of eibs
98
See the ICJs decision in the Elettronica Sicula or ELSI Case (United States v. Italy), ICJ Reports
(1989), pp. 15, 737 (defining the concept of arbitrariness as not so much something opposed to a
rule of law, as something opposed to the rule of law. . . . It is a wilful disregard of due process of
law, an act which shocks, or at least surprises, a sense of juridical propriety). Compare Amco Asia
Corp. v. Indonesia, Final Award of 5 June 1990 in icsid Case No. ARB/81/8, ICCA Yearbook YB Vol.
XVII, 1992, pp. 73105 (following the Elettronica Sicula Case and finding that procedural irregularities
amounted to a denial of justice in the circumstances of that case).
99
The sum of $3.4 million is mentioned in Respondents Counter-Memorial at p. 53, $3 million in its
Rejoinder at p. 15 and $2.9 million at p. 28 of its Post-Hearing Memorial.
302
GENIN v. ESTONIA
assets, addressed to counsel for Claimants by the Liquidation Committee of eib.100

That letter reads, in its pertinent part:
We have received your request for information concerning Estonian Innovation Bank
[eib]. The purpose of this letter I (sic) to respond to the questions forwarded to you by
the Arbitral Tribunal.
All existing depositors of [eib] have received their deposits back, except for a few
depositors who are currently unlocatable. The total amount of deposits that have not
been returned because the depositor is unlocatable is 893,827.40 eek. If any of these
depositors are located, there is money reserved to return the full amount of their deposit.
The total amount currently held by the bank in assets is 57,429,515.24 eek.
All of the creditors of the bank have been paid in full.
To date, no shareholder has received any payment or distribution.
378. In the light of the foregoing, Respondents counterclaim is rejected.101

J. Costs
379. Two factors, in particular, have shaped the Tribunals determination of the
allocation of the costs of the arbitration. Both of those factors relate to the conduct
of the parties as demonstrated by the written and oral evidence adduced by them.
380. First, the Tribunal cannot but decry Mr Genins failure to cooperate with the
Estonian banking authorities during the period in which the salient facts underlying
the dispute took place. His concealment, right up until his cross-examination by
Respondents counsel during the hearing, of his ownership of the companies in
question was an element of both substantive and procedural significance, with
effect on the conduct of the arbitration. Claimants themselves concede, in their
Post-Hearing Memorial, that Mr Genins conduct could be considered to have
affected the case and that it is thus appropriate for the Tribunal to take this conduct
into account when considering the allocation of costs. The Tribunal cannot but
concur with both parts of that statement.
381. On the other hand, as mentioned above, the awkward manner by which the
Bank of Estonia revoked eibs licence, and in particular the lack of prior notice of
its intention to revoke eibs licence and of any means for eib or its shareholders to
challenge that decision prior to its being formalized, cannot escape censure.
382. Either of these factors, alone, might have impelled an award of costs against
the offending party.
383. Accordingly, and taking into consideration the circumstances of the case,
the Tribunal determines that each party shall bear all of the expenses incurred by
it in connection with the arbitration. The costs of the arbitration, including the fees
100
Filed subsequent to the hearing, pursuant to a request by the Tribunal, as Claimants Exhibit 116.
A question also arises, which need not be and is not answered here, as to whether Respondent is the
proper party to the request set out in its counterclaim. Without deciding the issue, the Tribunal notes
that, even if the facts alleged by Respondent in support of its counterclaim were true, the proper claimant
of the sums in question is arguably not the Republic of Estonia but the Liquidation Committee of eib.
101
AWARD
303
and expenses of the members of the Tribunal and the charges for the use of the
facilities of the icsid, shall be borne by the parties in equal shares.
384. Inasmuch as the parties have advanced to the icsid deposits of equal amounts
in respect of, and adequate to pay, the costs of the arbitration, no monetary award
is required.
K. Award
385. For all of the foregoing reasons, the Tribunal unanimously decides:
(1) Respondents objections to jurisdiction are dismissed;
(2) The Republic of Estonia, in the person of its agency, the Bank of Estonia,
did not violate the bit or Estonian law in relation to the sale of the Koidu
branch of Social Bank to eib or in regard to eibs claims concerning losses
relating to its purchase of that branch;
(3) The Republic of Estonia, in the person of its agency, the Bank of Estonia,
did not violate the bit or Estonian law by revoking eibs licence;
(4) The Republic of Estonia did not harass Messrs Genin or Dashkovsky, in
violation of the bit or Estonian law;
(5) All of Claimants claims are dismissed;
(6) Respondents counterclaim is dismissed; and
(7) Each party shall bear all of its own costs and expenses incurred in connection with the proceedings, and the costs of the arbitration shall be borne by
Claimants and Respondent, respectively, in equal shares.
[Source: http://www.worldbank.org/icsid/cases/genin.pdf.]
304
GENIN v. ESTONIA
DECISION ON CLAIMANTS REQUEST FOR SUPPLEMENTARY

DECISIONS AND RECTIFICATION
(4 APRIL 2002)
A. Procedural History
1. On 25 June 2001, the icsid Secretary-General dispatched to the parties
certified copies of the Award rendered by the Tribunal in this arbitration (the
Award).
2. On 7 August 2001, in accordance with Article 49 of the icsid Convention
and Rule 49 of the icsid Arbitration Rules, Claimants submitted a Request for
Supplementary Decisions and Rectification of the Award (the Request).
3. By letter dated 24 September 2001, after consultation among the members of
the Tribunal, the President advised the parties that the Tribunal granted Respondent
until 12 October 2001 to submit a response to Claimants Request, and ordered
the parties to confer among themselves with a view to setting a timetable for the
written phase of the procedure associated with the Request.
4. By letter dated 27 September 2001, the parties jointly advised the Tribunal
of their agreed procedural timetable, which was confirmed and accepted by the
Tribunal on 4 October 2001.
5. In accordance with the procedural timetable, Claimants duly filed a Memorial
in Support of their Request dated 9 November 2001 (Claimants Memorial), and
Respondent filed a Memorial in Response dated 13 December 2001 (Respondents
Memorial).
6. By letter dated 19 December 2001, the Secretary of the Tribunal advised
the parties that, as proposed in their agreed procedural timetable of 27 September
2001, the Tribunal did not envisage the need for a hearing in order to consider
issues associated with the Request, and requested that the parties confirm that
they did not object to the Tribunal deciding the Request on the basis solely of the
parties written submissions. By letters dated 7 January 2002 and 10 January 2002,
respectively, Claimants and Respondent confirmed that they had no objection to
the Tribunal proceeding to consider and decide the Request in the manner set out
in the Secretarys 19 December 2001 letter.
B. The icsid Convention and Arbitration Rules

7. Article 49(2) of the icsid Convention, in accordance with which the Request
is made, reads, in pertinent part:
The Tribunal upon the request of a party made within 45 days after the date on which
the award was rendered may after notice to the other party decide any question which it
had omitted to decide in the award, and shall rectify any clerical, arithmetical or similar
error in the award. Its decision shall become part of the award and shall be notified to
the parties in the same manner as the award. (. . .)
REQUEST FOR SUPPLEMENTARY DECISIONS AND RECTIFICATION 305
8. Similarly, Arbitration Rule 49, entitled Supplementary Decisions and Rectification, reads, in part:
(1) Within 45 days after the date on which the award was rendered, either party may
request, pursuant to Article 49(2) of the Convention, a supplementary decision on, or
the Rectification of, the award. (. . .)
C. Decision
9. Having considered the parties arguments as set out in their written submissions, and after deliberation among the members of the Tribunal, the Tribunal
unanimously decides that Claimants Request for Supplementary Decisions and
Rectification must be denied, for the reasons explained below.
1) Supplementary Decisions
10. With respect to the supplementary decisions requested by Claimants, the
Tribunal considers it necessary to state that these do not concern questions which
it omitted to decide. Rather, they relate to issues that Claimants themselves failed
virtually altogether to address in either their written or oral submissions in the
arbitration.
11. In their Memorial, Claimants state that the Tribunal, in its Award, failed to
discuss three provisions of the bit in respect of which Claimants had alleged violations by the Republic of Estonia, to wit: Article III, para. 1 (expropriation); Article
IV (free transfer of investments and capital); and Article IX, para. 2 (prohibiting
the imposition of formalities that impair substantive rights under the bit).1 In fact,
however, the extent to which these provisions were ever raised by Claimants is
limited to their mere invocation in the concluding paragraphs of certain sections
of Claimants prehearing submissions.2 Claimants neither adduced evidence nor
made arguments concerning the bit provisions that they now suggest were omitted from the Tribunals Award. Indeed, the provisions of the bit in question were
not even mentioned by Claimants either during the hearing or in their post-hearing
submissions.3
12. Throughout the arbitration, from the first to the last of Claimants extensive
and exceptionally detailed submissions, the Claimants structured and presented a
case the core issue of which they themselves described as the alleged lack of
fairness and due process involved in the Bank of Estonias decision to revoke eibs
licence.4 As the Tribunal noted in its Award, the Claimants explicitly declared, in
their Post-Hearing Memorial:
1
These and other provisions of the bit are described at paragraphs 9 to 18 of the Award.
This is well and amply demonstrated by Respondent in its Memorial in Response to Claimants Request.
3
By way of example, a word search of the transcript of the 26 October 2000 hearing reveals that the
word expropriate or expropriation was mentioned only 4 times during those 5 daysall by counsel
for Respondent and all during opening submissions on the first day of the hearing.
4
See para. 242 of the Award, quoting from Claimants Post-Hearing Memorial.
2
306
GENIN v. ESTONIA
Boil[ing] this case down to its essence . . . what makes the Bank of Estonias actions
so unjust, so unfair, and so totally without due process is the complete lack of any
legitimate reason to take the extreme measures of destroying [eib].5
13. In its Award, the Tribunal addressed all of the questions raised by Claimants
with at least as much seriousness and care as did Claimants themselves in their
written and oral submissions. Each of the so-called eight transgressions or eight
violations of the bit alleged by Claimants and around which their written and
oral submissions were presented are discussed in detail in the Award. Simply put,
there was no omission on the part of the Tribunal that now requires it to render any
supplementary decision.
14. The foregoing explains why the Tribunal did not consider it necessary to
address in its Award, specifically and in detail, the three provisions of the bit
identified in Claimants Request. However, it is important to state that the Award
itself reveals that the issues now raised by Claimants are in fact dealt with, implicitly
if not explicitly, in both the reasoning and the conclusions set out in the Award.
Based on its consideration of all of the evidence before it, and in view of all the
parties submissions, the Tribunal found that none of the impugned conduct of the
Republic of Estonia amounted to a violation of any provision of the bit or Estonian
law, and it accordingly dismissed all of Claimants claims.
15. No more need be said in respect of this aspect of Claimants Request.
2) Rectification
16. As regards Claimants request for rectification of paragraph 356 of the Award,
the Tribunal states, to the extent that any such statement is necessary, that the
findings contained in that paragraph concerning, inter alia, what it refers to as
the highly questionable prudence of the transactions in question, are based on
its consideration and evaluation of the positions and evidence adduced by both
Claimants and Respondent.
17. In sum, the Tribunal considers that paragraph 356 of the Award speaks for
itself. The paragraph is both clear and comprehensive, and requires no rectification.
3) Conclusion
18. For all of these reasons, and as stated above, Claimants Request for Supplemental Decisions and Rectification is denied.
D. Costs
19. The Claimants had their day in court. In fact, they had their week before
the Tribunal. Not content with the result, they initiated further proceedings, as was
their right, making the Request which the Tribunal hereby denies.
See para. 243 of the Award.
REQUEST FOR SUPPLEMENTARY DECISIONS AND RECTIFICATION 307
20. In the present instance, the Tribunal has no hesitation in ordering that the
costs associated with Claimants Request shall follow the result. Specifically, and in
accordance with Article 61 of the icsid Convention and Arbitration Rule 47(1)(g),
the Tribunal orders that the costs of the present proceedingthat is, the expenses
incurred by the parties as well as the fees and expenses of the members of the
Tribunal associated with the Requestshall be paid in full by Claimants.
21. In this regard, the Tribunal assesses the expenses incurred by the Respondent
in connection with the present proceeding in the amount of US$26,485.43, in
accordance with the Respondents Statement on Costs submitted on March 11, 2002,
and assesses the fees and expenses of the members of the Tribunal associated with
the Request in the amount of US$14,769.15, in accordance with the Secretariats
communication of March 14, 2002. Accordingly, the Tribunal orders Claimants to
reimburse Respondent the total amount of US$41,254.58 within 15 days of the date
on which the present decision is dispatched to the parties.
[Source: http://www.worldbank.org/icsid/cases/genin-sp.pdf.]
308
MIHALY INTERNATIONAL v. SRI LANKA
Arbitration Request by Claimant USSri Lanka Bilateral Investment

Treaty Jurisdiction of icsid and Arbitral Tribunal Both jurisdiction
ratione personae and materiae must be satisfied Respondents objections to
jurisdiction
Jurisdiction Objection to jurisdiction ratione personae Nationality
requirement of icsid Convention Theories of partnership or assignment
Claimant permitted to file its own claim in its own name Capacity to bring
claim not modified by existence of international partnership Pacta tertiis
principle No invocation of icsid Convention by non-State party, non-State
party national or company No improvement of rights of non-State party
company by assignment of rights to party with standing before Tribunal
Jurisdiction Objection ratione materiae Existence of an investment
Requirements of Article 25(1) of the icsid Convention not satisfied Existence
of investment within meaning of Convention and bit Preparatory and
development expenses incurred pursuant to letter of intent from Respondent Recovery of development costs following failure of negotiations
Definition of investment a question of law No investment within meaning
of icsid Convention
Mihaly International Corporation v. Democratic Socialist
Republic of Sri Lanka
(Case No. ARB/00/2)
Award. 15 March 2002
(Arbitration Tribunal: Sucharitkul, President; Rogers and Suratgar, Members)
Summary: The facts: On 29 July 1999, icsid received a Request for arbitration from Mihaly International Corporation (Mihaly USA or the Claimant), a
company established under the laws of the United States of America, against the
Democratic Socialist Republic of Sri Lanka. The Request invoked the provisions of
a 1991 Treaty between the United States of America and Sri Lanka concerning Reciprocal Encouragement and Protection of Investment (the bit).1 The Request was
submitted under the Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States (the Convention or icsid Convention). On
11 January 2000, the Secretary-General of icsid registered the Request.
The claim arose from activities undertaken by the Claimant with a view to the
construction of an electricity generating facility in Sri Lanka. After a tendering
process, the Claimant was selected as the preferred bidder, and Sri Lanka executed
1
Sri LankaUnited States of America, Treaty concerning the Reciprocal Encouragement and Protection
of Investment, 20 September 1991 (in force 1 May 1993): S. Treaty Doc. No. 25, 102nd Cong., 2nd
Sess. (1992).
SUMMARY
309
a Letter of Intent, conferring exclusive rights on the Claimant for a specified period
to negotiate with a view to reaching agreement on the project. This and subsequent letters were stated not to constitute an obligation binding upon any party,
although the Respondent undertook to work in good faith towards a project agreement. Subsequently a Letter of Agreement was issued by Sri Lanka, expressing
satisfaction at the progress in the negotiations and setting out proposed terms for
the project; the Letter of Agreement was stated to be subject to contract. The
claimants exclusivity was subsequently extended by a further letter for a specific
period, on the same terms as the Letter of Intent. The negotiations did not prove
successful and no contract was concluded. The Claimant alleged that this was the
Respondents fault, and sought recovery of substantial preparatory costs.
Sri Lanka argued that the claim should be dismissed for lack of jurisdiction
ratione personae: the true nationality of the claim in this case was Canadian; since
Canada was not a party to the icsid Convention the nationality requirement under
Article 25(2) of the Convention was not satisfied. Sri Lanka rejected the Claimants
contention that it had standing before the Tribunal, both by reason of its partnership
with Mihaly International Corporation, organized under the laws of Ontario, Canada
(Mihaly Canada), which, the Claimant argued, empowered it to file a claim in its
own name as well as on behalf of its Canadian counterpart; and on the theory of
assignment whereby Mihaly (USA) claimed that it was the lawful assignee of all
the rights, interests and claims of its Canadian partner and was thereby authorized
to bring a claim for all the rights and interests that Mihaly (Canada) had against the
Respondent.
Sri Lanka further argued that the Tribunal lacked jurisdiction ratione materiae
because there had been no investment within the meaning of the Convention and
the bit. In response the Claimant relied on the Letters of Intent, of Agreement and
of Extension as evidence of Sri Lankas agreement, authorization and approval for
the Claimant to invest in the proposed project. The Claimant further argued that
consent to jurisdiction could be founded on the USSri Lanka bit because there
had been an alleged breach of a right conferred or created by this Treaty with
respect to an investment.
Held: The Tribunal lacked jurisdiction ratione materiae to entertain the
Request.
(1) The Respondents objection to the jurisdiction of the Centre and of the
Tribunal ratione personae was dismissed.
(a) The Request for arbitration from Mihaly (USA) did not appear to contain
any information on the basis of which the Secretary-General of icsid could have
found the request to be manifestly outside the Centres jurisdiction. The existence
of an international partnership, such as that suggested between Mihaly (USA)
and Mihaly (Canada), could neither add to, nor subtract from, the capacity of the
Claimant, Mihaly (USA), to file a claim against the Respondent for whatever rights
or interests it might be able to substantiate on the merits, upon fulfilment of the other
requirements for icsid jurisdiction. It was undisputed that the designated Claimant
in the present case was Mihaly (USA) eo nomine and not Mihaly International or
a binational partnership (para. 22).
310
(b) Under the principle pacta tertiis nec nocent nec prosunt the icsid Convention,
to which Canada was not a party, could not be invoked by Canada, nor by a national
or company of Canada, such as Mihaly (Canada) (para. 23).
(c) Consequently, whatever rights Mihaly (Canada) had or did not have against
Sri Lanka could not have been improved by the process of assignment with or
without the express consent of Sri Lanka: nemo potiorem potest transfere quam
ipse habet, and Mihaly (Canada) could not have assigned rights to Mihaly (USA)
which it did not itself have (para. 24).
(d) The finding that Mihaly (USA) was entitled to file a claim eo nomine against
Sri Lanka did not in itself establish the Tribunals jurisdiction; proof of the existence
of jurisdiction ratione materiae was required (para. 27).
(2) The Respondents objection to jurisdiction ratione materiae was sustained,
in the absence of any proof or admission of an investment in respect of which a
legal dispute could have arisen.
(a) In the absence of a generally accepted definition of investment for the
purpose of the icsid Convention, the Tribunal had to examine the current and past
practice of icsid and the practice of States bearing on this matter. It was for the
Tribunal to determine the meaning or definition of investment as a question of
law (para. 58).
(b) None of the three Letters (of Intent, of Agreement and of Extension) cited
by the Claimant contained any binding obligation either on Sri Lanka or on the
Claimant. In the circumstances of the case, these documents did not signify acceptance by Sri Lanka of preparatory or preliminary expenditures as constituting an
investment within the sense of the Convention (para. 59).
(c) Further, there was no evidence of State practice to the effect that preinvestment and development expenditure in the circumstances of the case could
automatically be regarded as investment in the absence of the consent of the host
State, Sri Lanka, to implementation of the proposed project (para. 60).
(d) The conclusions of the Tribunal went to icsid jurisdiction only and were
without prejudice to any rights of action which might be available to the Claimant
before other instances (para. 61).
(3) The costs of the proceedings were to be shared by the parties equally
(para. 63).
Per Mr Suratgar: Although on the evidence the Claimants development expenditures were shown to have been not accepted by Sri Lanka as investments, the
position would have been different had these been incurred by a local subsidiary
(pp. 3236).
The following is the text of the Award:
[143] I. Procedural History
A. Request for Arbitration
1. On 29 July 1999, the Centre received a request for arbitration dated 22 July
1999 (the request) from Mihaly International Corporation (Mihaly USA or the
AWARD
311
Claimant), a company established under the laws of the United States of America,
against the Democratic Socialist Republic of Sri Lanka (Sri Lanka or the
Respondent). The request invoked the provisions of the 20 September 1991
Treaty between the United States of America and Sri Lanka concerning Encouragement and Reciprocal Protection of Investment (the USSri Lanka bit). The
request was submitted under the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States (the icsid Convention).
Both Sri Lanka and the United States of America are Contracting States to the icsid
Convention.
2. On 21 December 1999, further information having been requested by
the Centre, Mihaly USA submitted a supplemental information concerning its
request.
B. Registration of Request
3. On 11 January 2000, the Secretary-General of icsid registered the request and
notified the Parties of the registration in accordance with Article 36(3) of the icsid
Convention.
C. Appointment of Arbitrators
4. Following exchanges of proposals between the Parties, on 6 April 2000 the
Respondent chose the formula set forth in Article 37(2)(b) of the Convention regarding the number of arbitrators and the method of their appointment. Accordingly,
on 7 April 2000, the Centre notified the Parties that the Tribunal was to consist of
three arbitrators, one appointed by each party and the third arbitrator, who was to be
President of the Tribunal, to be appointed by agreement of the Parties. The Claimant
appointed Mr David Suratgar, a British national, as an arbitrator. The Respondent
appointed the Hon. Andrew J. Rogers, QC, an Australian national, as an arbitrator.
The Parties, by agreement, appointed Professor Sompong Sucharitkul, a national
of Thailand, as the arbitrator to serve as President of the Tribunal. By letter of
5 June 2000, the Acting [144] Secretary-General of icsid notified the Parties that
all the arbitrators had accepted their appointment and that the Arbitral Tribunal was
therefore deemed to have been constituted, and the proceedings deemed to have
begun, on that date.
D. First Session of the Tribunal with the Parties
5. On 19 July 2000, the Tribunal held its first session with the Parties in London,
United Kingdom. At the first session, the Respondent confirmed that it was raising
objections to jurisdiction. Following consultations between the Tribunal and the
Parties, it was agreed that the Respondent would submit a written statement of its
objections to jurisdiction. The Claimant would then submit a memorial on jurisdiction with a statement of relevant facts, to be followed by the submission by the
312
Respondent of a counter-memorial on jurisdiction, a reply by the Claimant and a

rejoinder by the Respondent.
E. Exchange of Written Pleadings on Objections to the Jurisdiction
6. In due course, following some adjustment of the original schedule,
the Claimants memorial on the objections to jurisdiction was submitted on
16 November 2000; the Respondents counter-memorial on jurisdiction was submitted on 16 February 2000; the Claimants reply was submitted on 28 February
2001; and the Respondents rejoinder on jurisdiction was submitted on 28
March 2001. In addition, the Claimant submitted without objection, on 9 March
2001, supplementary documentation inadvertently omitted from its memorial on
jurisdiction.
F. Hearing on Jurisdiction
7. As has been agreed at the Tribunals first session, the Tribunal held a hearing
on jurisdiction in Washington, DC on 30 April and 1 May 2001. During the hearing,
both Parties submitted demonstrative exhibits in support of their respective presentations to the Tribunal. In addition, the Claimant submitted a memorandum on the
law of the State of California, USA, applicable to partnerships. At the hearing, the
following appearances were made on behalf of the Parties. Appearing on behalf of
the Claimant were: Mr Brian T. Beck, Mr David R. Haigh, QC, Mr Eugene B. [145]
Mihaly, Mr Michael Robinson, QC and Mr John H. Walker. Appearing on behalf
of the Respondent were: Mr Paul D. Friedland, Esq., Ms Siranthani Gopallawa,
Mr Robert N. Hornick, Esq., Mr Saleem Marsoof, Mr Arjuna Obeysekere, Mr A.
Rohan Perera and Mr Timothy N. Tanner, Esq.
G. Exchange of Post-Hearing Supplemental Written Pleadings
8. Under directions given by the Tribunal at the hearing on jurisdiction, the
Claimant submitted, on 8 May 2001, a supplemental memorandum on the California
law of partnerships, the Respondent submitted, on 18 May 2001, its observations on
the memoranda on the California law of partnerships submitted by the Claimant, and
the Claimant submitted, also on 18 May 2001, a list of references to the evidentiary
record in connection with the role of Mihaly USA in the events leading up to the
dispute. Also under directions given by the Tribunal at the hearing on jurisdiction,
both Parties submitted, on 18 May 2001, their respective statements on the costs
incurred by each of them during this stage of the proceeding.
9. On 21 May 2001, the Respondent submitted an objection to the Claimants
above-mentioned list of references to the evidentiary record. On 1 June 2001, the
Claimant submitted, by fax, a post-hearing rejoinder to the Respondents 18 May
observations on the memoranda of law, and the Respondents 21 May objection to
the list of references.
AWARD
313
II. Objections to the Jurisdiction

10. Sri Lanka raised two main objections to the jurisdiction of the Centre as
well as that of the Tribunal. For all practical purposes, these objections could be
characterized as follows:
A. Objection to the jurisdiction ratione personae; and
B. Objection to the jurisdiction ratione materiae.
The Tribunal will examine each of these objections in the light of the contentions
of the Parties and thereupon will also provide its own analysis and findings on each
of these objections to the jurisdiction.
[146] A. Jurisdiction Ratione Personae
(1) Nature of Sri Lankas Objection Ratione Personae
11. Sri Lanka described the case before the Tribunal as a claim by a Canadian
Company, allegedly assigned to this US Claimant but without Sri Lankas consent, for reimbursement of expenditures made pursuing a possible investment in a
proposed power project in Sri Lanka that never happened. (Respondents CounterMemorial on Jurisdiction, paragraph 1.)
12. In other words, Sri Lanka alleged the true and undisguised nationality of
the claim in this case as being Canadian. Hence the claim must be dismissed for
lack of jurisdiction since Canada is not a party to the icsid Convention. It follows
that the Centre is without jurisdiction to entertain a claim on behalf of a Canadian
corporation although filed by a United States corporation. The claim contains an
inherent defect, according to Sri Lanka, in that the nationality requirement under
Article 25(2) of the icsid Convention is not satisfied.
(2) Contentions of the Parties
13. The Claimant maintained that it is known by name as Mihaly International
Corporation organized under the laws of California in the United States and as such
is fully entitled to the protection under Article 25(2) of the icsid Convention, and that
Mihaly International Corporation (USA) eo nomine could initiate the proceedings
in its own name as well as on behalf of its partner, Mihaly International Corporation
organized under the laws of Ontario, Canada. The Claimant based its contentions
on two legal theories, namely, partnership and assignment.
14. (i) Partnership: the Claimant advanced the theory that under the laws of
California where the Claimant was incorporated, the partnership formed between
the Claimant and its Canadian counterpart, Mihaly International Corporation organized under the laws of Ontario, Canada, Mihaly International Corporation (USA),
the Claimant, was empowered to file a claim on its own behalf as well as on behalf
of its other partner, the Canadian counterpart.
15. (ii) Assignment: Mihaly International Corporation (USA) further argued that
it is the lawful assignee of all the rights, interests, and [147] claims of its Canadian
partner, Mihaly International Corporation (Canada), and that under the assignment
instrument, the Claimant is authorized to bring a claim for all the rights and interests
that Mihaly International Corporation (Canada) had against the Respondent. In the
314
Claimants view, this assignment, which is objectively valid and is recognized in

Ontario as well as in California, together with the existence of an international
partnership between the Claimant and its Canadian counterpart, provide sufficient
legal ground for the Claimant to file a claim which is the subject-matter of the
current dispute before the Tribunal.
16. (b) The Respondent rejected the linkages between the Claimant, Mihaly
International Corporation (USA) and its alleged partner, Mihaly International
Corporation (Canada), both
(i) on the theory of partnership for lack of evidence; and
(ii) on the theory of assignment on the ground that the personal nature of the
transactions and negotiations between Mihaly (Canada) and Sri Lanka precluded any possibility of a valid assignment of any claim of rights without
the consent of Sri Lanka to Mihaly (USA), the Claimant, which is not privy
either to the negotiations or to any agreements with Sri Lanka.
17. In other words, Sri Lanka contended that the Claimant, Mihaly (USA), had
no standing before the Tribunal, neither by reason of its partnership with Mihaly
(Canada), nor in its capacity as an undisclosed assignee. Sri Lanka denied any
awareness of its ever dealing with Mihaly (USA) at any given stage of the negotiations or in any part of the arrangements made with Sri Lanka, let alone its consent,
in writing, to submit the dispute, if any, to icsid Arbitration.
(3) Analysis and Findings of the Tribunal
18. Having examined the contentions of the Parties, and having heard further
precision in the oral arguments presented by the Parties at the Hearing on Jurisdiction on 30 April and 1 May 2001, the Tribunal will now present its own analysis
and its own findings on the relevant facts and the pertinent rules of law which will
guide the Tribunal to its logical conclusions.
19. The Tribunal maintains that the jurisdiction of the Centre for Settlement
of Investment Disputes (icsid) and of this Tribunal is based [148] on the icsid
Convention and the rules of general international law. It does not operate under any
national law in particular, and certainly not under the law of the State of California
or the law of the Province of Ontario.
20. The nationality requirement of a claim before an icsid Tribunal has in
each case to be satisfied before an icsid proceeding can be initiated or even
registered.
21. Regardless of the Parties subsequent contentions, the request for arbitration
submitted by Mihaly (USA) did not appear to contain any information on the basis
of which the Secretary-General of icsid could find the request to be manifestly
outside the Centres jurisdiction, hence the registration of the case under Article 36
of the Convention and the commencement of the proceedings.
22. It was common ground between the Parties that the suggested partnership
between Mihaly (USA) and Mihaly (Canada) which did not have a separate juridical
personality of its own distinct from its members, neither acquired dual or joint
nationality, nor was any of the partners divested of its original US or Canadian
nationality. The existence of an international partnership, wherever and however
formed, could neither add to, nor subtract from, the capacity of the Claimant, Mihaly
AWARD
315
(USA), to file a claim against the Respondent for whatever rights or interests it may
be able to substantiate on the merits in connection with the proposed power project
in Sri Lanka, upon fulfilment of the other requirements of icsid jurisdiction. The fact
remains undisputed that the designated Claimant in the case at bar is unmistakably
Mihaly (USA) eo nomine and not the Mihaly International or Binational Partnership
(USA and Canada).
23. Under Articles 34, 35 and 36 of the Vienna Convention on the Law of Treaties
1969 (United Nations, Treaty Series, Vol. 1155, p. 331), pacta tertiis nec nocent
nec prosunt. Treaties neither harm nor benefit non-Parties. The icsid Convention,
to which Canada is not a Party, could not be invoked by Canada, nor by a national
or company of Canada, such as Mihaly (Canada). This principle was admitted by
the Parties at the Hearing.
24. It follows that as neither Canada nor Mihaly (Canada) could bring any claim
under the icsid Convention, whatever rights Mihaly (Canada) had or did not have
against Sri Lanka could not have been [149] improved by the process of assignment
with or without, and especially without, the express consent of Sri Lanka, on the
ground that nemo dat quod non habet or nemo potiorem potest transfere quam
ipse habet. That is, no one could transfer a better title than what he really has.
Thus, if Mihaly (Canada) had a claim which was procedurally defective against
Sri Lanka before icsid because of Mihaly (Canada)s inability to invoke the icsid
Convention, Canada not being a Party thereto, this defect could not be perfected
vis-à-vis icsid by its assignment to Mihaly (USA). To allow such an assignment
to operate in favour of Mihaly (Canada) would defeat the object and purpose of
the icsid Convention and the sanctity of the privity of international agreements not
intended to create rights and obligations for non-Parties. Accordingly, a Canadian
claim which was not recoverable, nor compensable or indeed capable of being
invoked before icsid could not have been admissible or able to be entertained under
the guise of its assignment to the US Claimant. A claim under the icsid Convention
with its carefully structured system is not a readily assignable chose in action as
shares in the stock-exchange market or other types of negotiable instruments, such
as promissory notes or letters of credit. The rights of shareholders or entitlements of
negotiable instruments holders are given different types of protection which are not
an issue in this case before the Tribunal. This finding is without prejudice to the right
of Mihaly (Canada) to pursue its claims, if any, before another otherwise competent
forum.
25. This proposition is confirmed by icsid long-standing practice as is amply
demonstrated by the decision in Klockner v. Cameroon (icsid Case No. ARB/81/2),
where all the three Klockner Corporations (Germany: Klockner Industrie-Anlagen
GmbH; Belgium: Klockner Belge SA; and Netherlands: Klockner Handelsmaatschappij BV) were named as co-claimants. Besides, icsid case-law appears
settled in the sense that a US company, such as the American Manufacturing and
Trading Company in AMT v. Zare (icsid Case No ARB/93/1) could not and did
not attempt to recover more than the shares represented by its US shareholders.
This does not preclude a State Party to the icsid Convention from expressly consenting to include under icsid protection an investment contract it concludes with
an international consortium.
316
26. The Tribunal finds, nonetheless, that Mihaly International Corporation (USA)
is entitled to file a claim in its own name against Sri Lanka in respect of the rights
and interests it may be able subsequently to establish in the proposed power project.
[150] 27. It must be noted, however, that this finding does not per se create
jurisdiction of the Tribunal. It merely necessitates further proof of the existence
of jurisdiction ratione materiae. Accordingly, the Tribunal is required to examine
the second objection to the jurisdiction ratione materiae, even after the finding that
the Claimant, Mihaly (USA), may have locus standi before the Tribunal, which
may find itself without jurisdiction to entertain the subject-matter of the dispute
presented to it for determination.
B. Jurisdiction Ratione Materiae
(1) Nature of the Objection Ratione Materiae
28. Throughout its written and oral pleadings, the Claimant relied on the provisions of Article 25 of the icsid Convention as the basis of the jurisdiction of the
Tribunal and of the International Centre for the Settlement of Investment Disputes.
In particular, the Claimant cited paragraph (1) which reads:
The jurisdiction of the Centre shall extend to any legal dispute arising directly out of
an investment, between a Contracting State (or any constituent subdivision or agency
of a Contracting State designated to the Centre by that State) and a national of another
Contracting State, which the parties to the dispute consent in writing to submit to the
Centre. When the parties have given their consent, no party may withdraw its consent
unilaterally.
29. The phrase between a Contracting State and a national of another Contracting
State refers to jurisdiction ratione personae, already discussed in the preceding
paragraphs 11-27. The opening phrase which describes the coverage and extent of
the jurisdiction of the Centre explicitly refers to any legal dispute arising directly
out of an investment. This phrase contains the constitutive elements of what may be
regarded as the basis for subject-matter jurisdiction or jurisdiction ratione materiae.
30. To succeed on the issue of jurisdiction, the Claimant must establish the
existence of jurisdiction of the Centre and of the Tribunal both ratione personae
and ratione materiae.
[151] (2) Contentions of the Parties
31. For the objection to the jurisdiction ratione materiae, the Parties presented
opposing arguments on each of the elements that establish the legal basis for jurisdiction under Article 25(1) of the icsid Convention, namely,
(i) that there was a dispute;
(ii) that the dispute was a legal one;
(iii) that the dispute arises directly and not indirectly out of an investment; and
(iv) that there was an investment out of which a legal dispute has directly arisen.
32. The most crucial and controversial contentions of the Parties were concentrated upon the existence vel non of an investment for the purpose of Article 25(1)
AWARD
317
to found the jurisdiction of icsid Centre and the Tribunal. A fortiorissime, without
proof of an investment under Article 25(1), neither Party need to argue further, for
without such an investment, there can be no dispute, legal or otherwise, arising
directly or indirectly out of it, which could be submitted to the jurisdiction of the
Centre and the Tribunal.
33. Neither Party asserted that the icsid Convention contains any precise a priori
definition of investment. Rather the definition was left to be worked out in the
subsequent practice of States, thereby preserving its integrity and flexibility and
allowing for future progressive development of international law on the topic of
investment.
(a) Expert opinions
34. The Parties did not cite any practice of States to indicate the acceptance of an extended definition of investment to include and cover also
pre-investment expenditures. The Claimant nevertheless cited the opinion of
Mr Per Ljung as saying that The expenditures during the development phase
typically amount to 2 to 4 percent of the total cost and wondered if the
expenditures during the development phase should not be considered as constituting investment in the host country. The Claimant contended that the development phase activities are as essential for the successful commercial operation of the bot project as the physical construction of a plant, and that it is
standard practice accepted by host [152] governments, lenders and other equity
investment to include the sponsors development expenditures in the investment
cost.
35. The Respondent did not reject the possibility for accounting purposes of
including the sponsors development expenditures in the investment cost, provided
always that there was finally an agreement or consent of the host government to
receive or admit the investment in question.
(b) The loi, the loa and the loe
36. The Claimant contended that without a precise definition of investment,
it was appropriate to give the term a broad interpretation to encourage a freer flow
of capital into developing countries. It submitted that otherwise the free flow of
capital investment to developing countries would subside. The Respondent, for
its part, contended that developing countries would find it difficult to adhere to
the Convention, if, by means of a broad interpretation, the Tribunal were to hold
the expenditures in the present case to be an investment in the absence of their
explicit consent. The Claimant cited three documents as evidence of agreement or
authorization or awareness, if not acquiescence and approval, on the part of Sri
Lanka for the Claimant to invest in the proposed project. These were: the loi, the
loa and the loe.
(i) The Letter of Intent (loi).
37. The Claimant contended that, in the particular circumstance of this case, the
date of the Letter of Intent, 15 February 1993, was the date from which interest of the
Claimant in being considered for the project was transformed into an investment.
It is the letters exchanged between the Parties that determine whether or not the
money, indubitably expended by the Claimant, constitutes an investment within the
meaning of the Convention.
318
38. The Government of Sri Lanka determined that the supply of electricity within
the Republic should be improved by the erection of a new power generation facility.
It wished this facility to be constructed and operated by private enterprise. Accordingly, in 1992 it called for expressions of interest on a build own transfer (bot)
basis. The Claimant was one of a number of consortia of international investors,
financiers and utilities [153] suppliers to develop, on an exclusive basis, a 300 MW
thermal power station on a bot basis, with the objective of supplying power to
the Ceylon Electricity Board (ceb) electrical transmission grid. The expression of
interest itself was obviously the product of considerable work and expenditure of
money on the part of the Claimant.
39. Originally some 25 groups expressed interest in the project. Of these, five
were invited to enter into negotiations, and from that group of five, the Claimant
was selected as a recipient of the Letter of Intent.
40. Negotiations ensued and resulted in the issue to the Claimant of a Letter of
Intent dated 15 February 1993. In its guidelines for bot projects published at the
same time as the Letter of Intent, the Respondent described the function of such
documents. Paragraph 8.2 of the guidelines stated that a Letter of Intent confers
. . . some degree of exclusivity in relation to a project for a period of time long
enough to enable the sponsor to finalize the project proposal. The Letter of Intent
determines the period of exclusivity, spells out any changes to the original proposal
that must be made in order to remain in compliance, and defines what technical
inputs are required in order to reach project finalization and negotiation.
41. The Letter of Intent stated that the Government accepted a number of principles on the basis of which matters should proceed. Negotiations were to proceed
in an orderly fashion for the project leading to the signing of a contract by the end
of the third quarter of 1993. The estimated cost of the project was just under US
$400 million. The document pointed out that the project and contract details are
subject to Cabinet approval. Most importantly it specified that this Letter of Intent
constitutes a Statement of Intention and does not constitute an obligation binding
on any party. It went on however, the Government shall use its best efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things necessary
or proper or advisable under applicable laws and regulations to consummate the
transactions contemplated hereby as promptly as practicable.
42. Following upon the issue of the Letter of Intent, there were further extensive
negotiations and indeed the parties had arrived at Draft 5 of the Power Purchase
Agreement. Nonetheless, the exclusivity period of six months was coming to an
end.
[154] (ii) The Letter of Agreement (loa).
43. Thereupon, a document entitled Letter of Agreement, dated 22 September
1993, was executed.
44. The Letter of Agreement stated in part that in furtherance of our Letter of
Intent to you February 15, 1993, which was issued as a result of your proposal dated
31 December 1992 and the ongoing discussion and negotiations that have taken
place since then among your representatives, representatives of the Secretariat for
Infrastructure Development & Investment and the Ceylon Electricity Board [ceb],
we are pleased to confirm that we are satisfied with the degree of progress that
AWARD
319
has been made in completing the requirements set forth in the Letter of Intent and
hereby issue this Letter of Agreement for the purpose of this Letter of Agreement
subject to contract, understanding has been reached between the parties on the
following matters. One was the understanding on matters such as a take or pay
obligation of 70 percent of the rated capacity of the plant, at price of US $0.06
per kilowatt hour, as of 31 December 1992, with escalation up to the date of plant
operations as per the escalation formula in the contract.
45. It was apparent that considerable further sums of money and effort were
expended in planning the financial and economic modelling so as to arrive at the
basis of understanding mentioned in the Letter. It was significant to note that the
term of the operation had moved from 15 years to 20 years, which in itself would
have had great impact on the modelling and the cost of it. The document concludes
this Letter of Agreement is conditional upon ceb agreeing on the contract with
saec [South Asia Electricity Company, a company formed in Sri Lanka to negotiate
and manage the distribution of the supplies of electricity], and all other associated
agreement[s] to facilitate the completion of arrangements for your financing the
project with various lenders from whom commitments/ expressions of interest have
been obtained and presented to us so that a financial closing can occur on or about
February 15, 1994. Once again the Letter specifically recognized that there was
no contractual obligation on any party.
(iii) Letter of Extension (loe).
46. The parties entered into a Letter of Extension dated 20 July 1994 in response to
a request by the Claimant for reinstatement of exclusivity on the project in the light
of the fact that financial closing on 15 February, as [155] specified in the Letter
of Agreement dated 22 September, had not eventuated. The Letter of Extension
confirmed that exclusivity granted for the negotiations with yourself is extended
subject to the conditions laid down hereunder. The Letter of Extension imposed the
number of obligations on the Claimant, one of them was that if the Claimant failed
to achieve any of the milestones by the due date, the Letter of Extension should
automatically cease to be operative. There was also provision for an extension of
the period of the exclusivity provided for by the Letter of Extension and it again
concluded this Letter of Extension does not constitute an obligation binding on
any party. However, the Government shall use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary or proper or
advisable under applicable laws and regulations in Sri Lanka to consummate the
transactions contemplated hereby as promptly as practicable (emphasis added).
47. Ultimately, there was never any contract entered into between the Claimant
and the Respondent for the building, ownership and operation of the power station.
48. It is in this factual setting that the Tribunal has been asked to consider whether
or not, the undoubted expenditure of money, following upon the execution of the
Letter of Intent, in pursuit of the ultimately failed enterprise to obtain a contract,
constituted investment for the purpose of the Convention. The Tribunal has not
been asked to and cannot consider in a vacuum whether or not in other circumstances
expenditure of moneys might constitute an investment. A crucial and essential
feature of what occurred between the Claimant and the Respondent in this case
was that first, the Respondent took great care in the documentation relied upon
320
by the Claimant to point out that none of the documents, in conferring exclusivity
upon the Claimant, created a contractual obligation for the building, ownership and
operation of the power station. Second, the grant of exclusivity never matured into a
contract. To put it rhetorically, what else could the Respondent have said to exclude
any obligations which might otherwise have attached to interpret the expenditure
of the moneys as an admitted investment? The operation of saec was contingent
upon the final conclusion of the contract with Sri Lanka, thus the expenditures for
its creation would not be regarded as an investment until admitted by Sri Lanka.
49. The Tribunal is not unmindful of the need to adapt the Convention to changes
in the form of cooperation between investors and host [156] States. However, these
changes have to be considered in the context of the specific obligations which the
parties respectively assume in the particular case. The Tribunal repeats that, in other
circumstances, similar expenditure may perhaps be described as an investment.
50. Again, if the negotiations during the period of exclusivity, or for that matter, without exclusivity, had come to fruition, it may well have been the case that
the moneys expended during the period of negotiations might have been capitalised as part of the cost of the project and thereby become part of the investment. By capitalising expenses incurred during the negotiation phase, the parties
in a sense may retrospectively sweep those costs within the umbrella of an
investment.
51. It is an undoubted feature of modern day commercial activity that huge
sums of money may need to be expended in the process of preparing the stage
for a final contract. However, the question whether an expenditure constitutes an
investment or not is hardly to be governed by whether or not the expenditure is
large or small. Ultimately, it is always a matter for the parties to determine at what
point in their negotiations they wish to engage the provisions of the Convention
by entering into an investment. Specifically, the Parties could have agreed that the
formation of a South Asia Electricity Company was to be treated as the starting
point of the admitted investment, engaging the responsibility of the Respondent for
the Claimants failure to complete other arrangements to achieve the milestones by
the due date mentioned in the Letter of Extension. The facts of the case point to the
opposite conclusion. The Respondent clearly signalled, in the various documents
which are relied upon by the Claimant, that it was not until the execution of a
contract that it was willing to accept that contractual relations had been entered
into and that an investment had been made. It may be and the Tribunal does not
have to express an opinion on this, that during periods of lengthy negotiations even
absent any contractual relationships obligations may arise such as the obligation to
conduct the negotiations in good faith. These obligations if breached may entitle the
innocent party to damages, or some other remedy. However, these remedies do not
arise because an investment had been made, but rather because the requirements of
proper conduct in relation to negotiation for an investment may have been breached.
That type of claim is not one to which the Convention has anything to say. They
are not arbitrable as a consequence of the Convention.
[157] (c) The bit
52. The term investment is found not only in Article 25 of the Convention as
an objective requirement, but also in the bit as part of the consent of the disputing
AWARD
321
Parties. The Respondent contended in its Counter Memorial on Jurisdiction,

paragraph 65, that the only investment disputes for which a priori consent can
exist are those covered by the definition set forth in the United StatesSri Lanka
bit. Sri Lanka maintained that none of the documents hitherto considered (namely,
the Letter of Intent, the Letter of Agreement or the Letter of Extension) constituted
an investment agreement between a US company and Sri Lanka as envisaged
in clause (a) of Article VI(1) of the bit, or investment authorization granted by
Sri Lankas foreign investment authority under clause (b). Therefore the criteria
of USSri Lanka bit, Article VI(1)(a) and (b), have not been met, and there is no
consent on the part of Sri Lanka. Sri Lankas consent is not otherwise created by
the purported assignment of claim to the Claimant.
53. The Claimant argued that consent to jurisdiction can be founded in Article
VI(1)(c) of the United StatesSri Lanka bit because there has been an alleged breach
of a right conferred or created by this Treaty with respect to an investment.
The alleged breach in this case, the Claimant added, derives in particular from
Article II(2) of the bit, including the right for investment to be accorded fair and
equitable treatment as well as full protection and security and treatment which in
no case shall be less than required by international law. The Claimant also asserted
that academic commentary supports a finding in favour of icsid jurisdiction on this
basis.
54. The Claimant did not advance any argument based on the provisions of
Article I of the bit in connection with the incorporation in Sri Lanka of South
Asian Electricity Corporation (Private) Limited, an office company waiting to be
activated. In the circumstances, the Tribunal considers it inappropriate to develop
that point.
(3) Conclusions of the Tribunal
55. The Tribunal notes that the jurisdiction of the Centre, and consequently of the
Tribunal established thereunder, is based on the consent of the Parties to the dispute
that have previously agreed to submit the dispute in question to the jurisdiction of
icsid and this Tribunal.
[158] 56. The Tribunal further observes that the question of jurisdiction of an
international instance involving consent of a sovereign State deserves a special
attention at the outset of any proceeding against a State Party to an international
convention creating the jurisdiction. As a preliminary matter, the question of the
existence of jurisdiction based on consent must be examined proprio motu, i.e.,
without objection being raised by the Party. A fortiori, since the Respondent has
raised preliminary objections to the jurisdiction, the existence of consent to the
jurisdiction must be closely examined.
57. In the case under review, the fact of the registration of this case as icsid
Case No. ARB/00/2 constituted an indication that, on the basis of the information contained in the request for arbitration, the dispute was not manifestly outside
the jurisdiction of the Centre. Such registration is naturally without prejudice to
the further examination of arguments of evidence presented by the Parties on issues of jurisdiction. The Tribunal is competent to determine the limits of its own
competence.
322
58. In the absence of a generally accepted definition of investment for the purpose
of the icsid Convention, the Tribunal must examine the current and past practice of
icsid and the practice of States as evidenced in multilateral and bilateral treaties and
agreements binding on States, notably the United StatesSri Lanka bit. It is for the
Tribunal to determine the meaning or definition of investment for this purpose as
a question of law. Opinions of experts on the theory and practice of multinational
corporations are not to be identified with the teachings of the most highly qualified
publicists of the various nations, which as such constitute subsidiary means for
the determination of rules of law. Only subject to Article 59 of the Statute of
the International Court of Justice are judicial decisions to be considered as such
subsidiary sources of law.
59. The Tribunal concludes in regard to the three Letters of Intent, of Agreement and of Extension successively issued by and on behalf of the Government of
Sri Lanka in the course of 1993 and 1994 that none of these Letters contains any
binding obligation either on Sri Lanka or on the Claimant. As the Tribunal has
already stated, in the circumstances of this case, they are not to be treated in any
way as signifying acceptance by the host State, Sri Lanka, of such expenditures as
constituting an investment within the sense of the Convention. There is no evidence
which could [159] contradict the contingent and non-binding character of the three
Letters of Intent, of Agreement and of Extension.
60. The Tribunal is of the view that de lege ferenda the sources of international
law on the extended meaning or definition of investment will have to be found
in conventional law or in customary law. The Claimant has not succeeded in furnishing any evidence of treaty interpretation or practice of States, let alone that of
developing countries or Sri Lanka for that matter, to the effect that pre-investment
and development expenditures in the circumstances of the present case could automatically be admitted as investment in the absence of the consent of the host
State to the implementation of the project. It should be observed that while the
USSri Lanka bit contains provisions regarding the definition of investment and
conditions for its admission, they recognize the Parties prerogative in this respect.
61. The Tribunal is consequently unable to accept as a valid denomination of
investment, the unilateral or internal characterization of certain expenditures
by the Claimant in preparation for a project of investment. The only reference
made by the Claimant to the bit, in particular, Article II(2), is not to any extended
definition of investment but to existing investment or investment in esse or in
being, which is to be accorded fair and equitable treatment. In the case under
review, the Tribunal finds that the Claimant has not provided evidence of such
an investment in being which qualifies for full protection and security. Failing
to provide evidence of admission of such an investment, the Claimants request
for initiation of a proceeding to settle an investment dispute is, to say the least,
premature. However, in finding the request to be unfounded, the Tribunal does not
say that it is frivolous, vexatious or malicious. Nor does the Tribunals determination
that the subject-matter of the dispute, if any, falls outside the jurisdiction of icsid and
beyond the competence of the Tribunal preclude whatever recourse the Claimant
may have at its disposal to pursue its claim arising out of commercial, financial
or other types of dispute. The Tribunals conclusions are declared to be without
CONCURRING OPINION (SURATGAR)
323
prejudice to any rights of action which may be available before other instances,
national or international, with the consent of the Parties, if required.
[160] III. Decision

62. For reasons specified in the foregoing paragraphs, the Tribunal decides with
unanimity:
(a) With regard to the preliminary objection ratione personae that, subject to
paragraph (b) below, the objection must be dismissed;
(b) With regard to the preliminary objection ratione materiae that the objection
is sustained in the absence of any proof of admission of an investment in
being out of which a legal dispute could possibly have arisen; and
(c) Accordingly, that the Tribunal is without jurisdiction to entertain the question
submitted to it either in part or in whole.
63. The Tribunal further decides that
(a) The costs of the proceedings including the fees and expenses of the Arbitrators and the Secretariat shall be shared by the Parties in equal portion; and
that
(b) Each Party shall bear its own costs and expenses in respect of legal fees for
counsels and their respective costs for the preparation of the written and the
oral proceedings.
Attached to this Award is an individual opinion by Mr David Suratgar.
The following is the text of the individual concurring opinion of Mr David

Suratgar:
[161] 1. Although in agreement with the findings of the Arbitral Tribunal as set
out in this Award, I believe that there are important features in this case which need
to be set out for the record and should be taken into consideration by the Government
of Sri Lanka and by other Governments interested in encouraging private foreign
investment in infrastructure projects. This is particularly true in the case of public
utility projects in power generation and distribution or in water and waste water
treatment. These invariably require some form of international competitive bidding
or competitive proposals leading to a Build Own and Transfer (bot) or Build Own
and Operate (boo) transaction or to a Concession.
2. The Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (the icsid Convention) was devised by the World Bank
in order to assist in the improvement of the climate for private foreign investment.
At the time, there was a limited flow of private foreign or indeed private investment
in infrastructure projects in emerging markets and in many cases there was some
degree of disinvestment. Governments were yet to embark on programmes of privatisation of public utilities. The drafters of the Convention debated a definition of
investment for purposes of the Convention and following debate decided against
a definition. Under Article 25(4), States could put investors on notice as to the type
324
of disputes that they would be prepared to have submitted to the Centre, and also
to define the scope of their advance consent to the jurisdiction of icsid by means
of a law or by Bilateral Investment Treaties such as the United StatesSri Lankan
Bilateral Investment Treaty.1
[162] 3. Sri Lanka accordingly had the opportunity to adopt a precise and limited
definition of investment for purposes of its consent to jurisdiction of the Centre.
Apparently it had not done so. It signed a Bilateral Investment Treaty with the United
States which sets out in Article I(1)(a) a very general definition of investment for
purposes of the Treaty. It specifically provides in Article I(1)(a) that investment
should include:
(ii) a company or shares of stock or other interests in a company or interests in the
assets thereof
(iii) a claim to money or a claim to performance having economic value, and associated
with an investment, . . . and
(iv) any right conferred by law or contract, and any licenses and permits pursuant to
law [emphasis added].
4. As the Award accepts, the Claimant in this case argued (cogently in my view)
that [it was] given a period of exclusivity in which to develop a bot project for
a 350 mw power generating facility in accordance with Sri Lankan law and rules
and under a series of performance benchmarks. This commitment by Sri Lanka
was set out in a Letter of Intent (15 February 1993) which followed expressions
of interest from some 25 groups from which 5 groups were invited to enter into
negotiations and finally out of which the Claimants group was selected and given
the Letter of Intent. (See Award paras. 40 and 41). This Letter of Intent was
superseded by a Letter of Agreement (dated 22 September 1993) and by a Letter
of Extension (dated 20 July 1994). The Award (paras. 401) fully describes these
letters and their scope and content.
5. As the Award indicates (paras. 31-2) the icsid Convention (Article 25(1))
states that the necessary basis for jurisdiction requires that there be a dispute, that it
be a legal one, that the dispute arises directly . . . out of an investment and that there
was an investment. The Award notes (paras. 334) that as the Convention does not
define investment . . . the definition was left to be worked out in the subsequent
practice of States, thereby preserving its integrity and flexibility and allowing for
future progressive development of international law on the topic of investment.
6. The Award takes the position that while expenditures directly incurred under
bot procedures prior to final contract could become investments in accordance with
internationally accepted accounting practices, this would only occur once contracts
were signed. While noting the [163] expert opinion of Per Ljung, cited by the
Claimant, to the effect that such expenditures would constitute investment in the
host country, the Award holds that the Respondent had not given its consent to this
1
Aron Broches, Bilateral Investment Protection Treaties and Arbitration of Investment Disputes in
The Art of Arbitration (1952) at pp. 636; and A. R. Parra, Provisions on the Settlement of Investment
Disputes in Modern Investment Laws, Bilateral Investment Treaties and Multilateral Instruments on
Investment, 12 ICSID Rev.FILJ 287 (1997). See also Rudolf Dolzer and Margrete Stevens, Bilateral
Investment Treaties (1994) at pp. 2631.
CONCURRING OPINION (SURATGAR)
325
treatment of development costs (para. 36). In taking this position the Award appears
to rely on the need for actual consent by Sri Lanka to a particular development cost
being accepted as constituting an investment for purposes of the case. On this
matter I believe the Tribunal should have called for evidence of international legal
and utility precedents and practice. This could have been done by joining the final
decision on jurisdiction to the hearings on the merits.
In this context I believe the Tribunal should have called for evidence from the
World Bank and the International Finance Corporation as well as from insurance
agencies such as the Multilateral Investment Guarantee Agency (miga) and the
Overseas Private Investment Corporation (opic). It does appear for example that
investment insurance can be obtained for development costs. As for the World
Bank practice attention should be paid to the guidelines set out in the World Banks
Discussion Paper of September 1999, Submission and Evaluation of Proposals for
Private Power Generation Projects in Developing Countries where (at p. 14) a
full discussion is provided with respect to the correct make-up of proper Capacity
Payments. The document emphasises that in addition to Fixed O&M costs, Financing Costs, Insurance Costs and agreed Equity Shareholder returns, there should
be included Project Capital Costs. These comprise all project development and
construction costs, including but not limited to pre-feasibility engineering, legal
and auditing services.
In its decision relying on the lack of consent to such treatment of development
costs the Award lays emphasis on the specific language to be found in the Letter
of Intent, Letter of Agreement and the Letter of Extension to the effect that these
instruments were not intended to create a binding legal obligation on either party
(paras. 3647).
I believe that the Tribunal should have sought the position of the parties and
have called for evidence as to whether this exculpatory language was designed to
ensure that there was no contractual liability before a final bot contract was signed
or whether its effect under Sri Lankan and general principles of international law
was to exclude any liability of Sri Lanka arising from its conduct after the award
of the Letter of Intentincluding a duty to negotiate in good faith.
[164] 7. Although I agree with the Awards finding that the development expenditures allegedly incurred by the Claimant were not accepted by Sri Lanka as
investments and that the Claimant has in this respect not succeeded in meeting the
requirements of Article 25(1) of the icsid Convention, I believe the position clearly
would be different if the Claimant could have demonstrated that the expenditures
had been incurred by a Sri Lankan company in which it had a share. Such a shareholding by Mihaly International Corporation of the United States would appear on
its face to meet the definition of investment set out in Article I of the USSri Lanka
bit.
8. Further examination of the Claimants written materials (see Claimants
Memorial on Jurisdiction para. 22 and p. 33 of Mr John Walkers first affidavit
of the Claimants Memorial on Jurisdiction para. 65 and also Tab. 49, Exhibit A
Vol. 2 from Mr Walkers first affidavit) appear to indicate that although the international consortium of participants in the successful bidding group established and
incorporated a Sri Lankan project development company, the South Asia Electricity
326
Corporation (Private) Limited, Mihaly International Corporation of the United

States did not take up shares in such a company. If they did in fact do so or if
they had done so, I believe that the test of investment under the icsid Convention
Article 25(1) as buttressed by Article I of the USSri Lankan bit would have been
met. In this case the Tribunal would perforce have to accept that jurisdiction existed
ration[e] materiae.
9. In the absence of such evidence, I reluctantly must agree with the conclusions
of the Award. In so doing it should be added that the written and oral evidence
presented to the Tribunal suggests that the Claimant may well have a sound basis
for pursuing its claim before other fora. The expense and patience displayed by
the Claimant and its associated corporate partners in following the letter of the
requirements imposed by Sri Lanka under its own contract procedures and the
Letters of Intent, of Agreement and Extension were considerable and apparently
carried out in good faith. The Embassies of numerous governments also supported
these efforts.
10. If private foreign investors are to be encouraged to pursue transparency
in seeking such bot opportunities the international community must address the
lessons of this case. Expenditure[s] incurred by successful bidders do indeed produce economic value as specified by [165] Article 1 of the USSri Lanka bit
and the protection mechanism developed under the aegis of the World Bank in the
form of the icsid Convention should be available to those who are encouraged to
embark on such expensive exercises.
CAA AND VIVENDI UNIVERSAL v. ARGENTINA
327
Arbitrators Composition of tribunal Challenge to President of ad hoc

Committee Procedure for challenging members of ad hoc Committee
ICSID Convention, Article 53(4) Validity of Arbitration Rule 53
Arbitrators Composition of tribunal Challenge to President of ad hoc
Committee Connection between Presidents law firm and related company
of Claimant No personal involvement of President No general retainer
Partners legal advice on matters unrelated to dispute before the Committee
Work substantially complete before commencement of proceedings De
minimis rule Challenge rejected
Jurisdiction Relation between concession contract, bilateral investment
treaty and icsid Convention Dispute with provincial authorities relating to
investment contract Investment contract providing for exclusive jurisdiction
of provincial courts Whether precluding claim under treaty
Jurisdiction State responsibility claim against Argentina arising from
conduct of provincial authorities Non-designation of province under icsid,
Article 25 Article 25 irrelevant to treaty claim
Treaties Bilateral investment treaty ArgentinaFrance bilateral investment
treaty, Article 8(2) Fork in the road provision Relevance to Tribunals
jurisdiction over treaty claim Relevance to merits of claim
Annulment Annulment proceedings Claimant seeking partial annulment
of decision on merits Respondent seeking in the alternative annulment of
whole award Admissibility of Respondents claim Whether a counterclaim Power of ad hoc Committee to determine extent of annulment
Respondents arguments admissible
Annulment Annulment proceedings Tribunal finding that federal authorities did not fail to assist in resolution of provincial claim No basis for
annulment icsid Convention, Article 53
Annulment Annulment proceedings State responsibility Tribunal finding
that it could not determine whether there was a treaty breach prior to municipal court proceedings on the contract claim Bilateral investment treaty
excluding requirement of exhaustion of local remedies Manifest excess of
jurisdiction Failure to give reasons Relation of treaty claim to contract
claim icsid Convention, Articles 26, 53 ilc Articles on Responsibility of
States for Internationally Wrongful Acts, 2001, Article 3
328

Compan
Republic1
(Case No. ARB/97/3)
Decision on the Challenge to the President of the Committee. 3 October 2001
(Arbitration Tribunal: Crawford and Fernandez Rozas, Members)
Decision on Annulment. 3 July 2002
(Ad hoc Committee: Fortier, President; Crawford and Fernandez Rozas, Members)
Summary: The facts: On 21 November 2000, an icsid Tribunal consisting
of Judge Francisco Rezek, President, Judge Thomas Buergenthal and Mr Peter
Trooboff unanimously dismissed a claim brought by Compana de Aguas del
Aconquija SA and its parent company, Compagnie Generale des Eaux, now
Vivendi Universal (the Claimants) against the Argentine Republic. The facts
and the decision of the Tribunal are reported at 5 ICSID Reports 296. On 20
March 2001, the Claimants requested partial annulment of the award pursuant to
Article 52 of the icsid Convention, on the grounds of breach of a fundamental
rule of procedure, manifest excess of jurisdiction and failure to give reasons. The
Respondent argued that the Tribunals decision as to the merits was correct in
principle; alternatively, there was a contradiction between the reasoning of the
Tribunal as to jurisdiction and as to the merits, so that if any part of the decision
was annulled the decision as a whole should be annulled.
Decision on the Challenge to the President of the Committee: 3 October 2001
The Respondent challenged the President of the Committee pursuant to Article
52(4) of the icsid Convention and Rule 53 of the icsid Arbitration Rules. The
President had disclosed that a partner in his law firm had been engaged by
Compagnie Generale des Eaux to advise on certain matters relating to taxation
under Quebec law. The President had had no personal involvement in the work,
which was wholly unrelated to the arbitration.
Held: The challenge was dismissed.
(1) Although Article 53(4) of the Convention did not apply Chapter V to the disqualification of members of ad hoc Committees, this was not a deliberate omission.
The Administrative Council had the power, under Article 6 of the Convention, to
1
The Claimants were represented by Judge Stephen M. Schwebel, Mr Bernardo M. Cremades of
B. Cremades y Asociados, Mr Daniel M. Price and Mr Stanimir A. Alexandrov of Powell, Goldstein,
Frazer & Murphy LLP, Mr Luis A. Erize of Abeledo Gottheil Abogados and Mr Ignacio Colombres
Garmendia of Ignacio Colombres Garmendia & Asociados. The Respondent was represented by Dr
Ruben Miguel Citara, Dr Ernesto Alberto Marcer, Mr Hernan M. Cruchaga and Mr Carlos Ignacio
Suarez Anzorena of the Procuracion del tesoro de la Nacion.
SUMMARY
329
apply Chapter V to such a case, and Arbitration Rule 53 was accordingly within
the competence of the Administrative Council (paras. 513).
(2) Under Article 14 of the Convention, as applied to members of ad hoc Committees by Article 53, members must be able to be relied upon to exercise independent
judgment. In substance, the question was whether a real risk of lack of impartiality
based upon the facts as established (and not on any mere speculation or inference)
could reasonably be apprehended by either party (paras. 205).
(3) In the present case, the relationship was not personal to the President, it
was immediately and fully disclosed, it was wholly unrelated to the dispute before
the Tribunal and it involved a specific (substantially completed) transaction, not a
general retainer (paras. 19, 26).
(4) Even if the remaining relationship was not de minimis, it gave no reason to
regard the Presidents independence as in any way impaired (paras. 278).
Decision on Annulment: 3 July 2002
Held: The Tribunal committed no annullable error in deciding that it had
jurisdiction, or that the claims concerning the conduct of the federal authorities
disclosed no breach of the bit. On the other hand, in relation to the claims against
the authorities of Tucuman under the bit, the Tribunals decision constituted a
manifest excess of power and would be annulled under Article 52(1)(c).
(1) The Respondents alternative argument, seeking total annulment of the award
if the Committee were to decide to annul it in part, was not an inadmissible counterclaim; it relied on the Committees power to determine for itself the extent of
annulment on any ground specified in Article 52 on which the Claimants relied
(paras. 6770).
(2) The Tribunal was correct in upholding its jurisdiction over the claim. The
dispute was one relating to investments made under this Agreement, and (if this
was necessary for jurisdiction) the Claimants invoked substantive provisions of the
bit as the basis of claim. The exclusive jurisdiction clause in the contract did not
purport to affect the jurisdiction of an icsid Tribunal in respect of a claim under the
bit. Further, it was irrelevant that the province of Tucuman had not been separately
designated under Article 25(1), since the claim was for breach of a treaty and was
brought against Argentina, to whom the conduct of a provincial authority allegedly
in breach of a treaty was attributable (paras. 7280).
(3) There was no basis for annulling the award under Article 52(1)(d) on grounds
of any departure from a fundamental rule of procedure (paras. 825).
(4) There was no basis for annulling the Tribunals decision concerning the
conduct of the federal authorities; that decision was fully reasoned and involved no
contradiction (paras. 8992).
(5) A tribunal committed a manifest error of jurisdiction if, having upheld its
jurisdiction over an admissible treaty claim, it declined to decide that claim. This
was in effect what the Tribunal did as respected the treaty claim arising from the
conduct of the Tucuman authorities. That conduct might have involved a breach of
the bit; if so, it was irrelevant to say that it might also have involved a breach of the
contract or that the Tucuman courts should have provided a remedy. The Claimants
330
were entitled to elect for international arbitration under Article 8(2) of the bit in
respect of a claim for breach of a substantive provision of the bit, thereby taking the
risk that if their treaty claim failed they would be left without any remedy whatever
(paras. 93115).
(6) Article 52(1)(e) concerned failure to state any reasons with respect to all
or part of an award, not failure to state correct or convincing reasons; an ad hoc
Committee was not a court of appeal. Provided that the reasons given by a tribunal
could be followed and related to the issues that were before the tribunal, their
correctness was beside the point in terms of Article 52(1)(e). Applying this test,
the Tribunals decision was not vitiated in any respect by failure to give reasons
(paras. 645, 116).
(7) In the circumstances, no order for costs would be made against either party
(paras. 11718).
Decision on the Challenge to the President of the ad hoc Committee
(3 October 2001)
Decision on Annulment (3 July 2002)
p. 330
p. 340
DECISION ON THE CHALLENGE TO THE PRESIDENT OF THE

COMMITTEE (3 OCTOBER 2001)
Introduction
1. On 21 November 2000, an icsid Tribunal consisting of Judge Francisco Rezek,
President, Judge Thomas Buergenthal and Mr Peter Trooboff unanimously dismissed a claim brought by Compana de Aguas del Aconquija SA and its parent
company, now Vivendi Universal (the Claimants) against the Argentine Republic. On 20 March 2001, the Claimants requested annulment of the award pursuant
to Article 52 of the icsid Convention. Under Article 52(3), the Chairman of the
Administrative Council appointed three members of the Panel of Arbitrators, the
undersigned [Professor James Crawford SC and Professor Jose Carlos Fernandez
Rozas] and Mr Yves Fortier, CC, QC, as an ad hoc Committee to consider the
request. The three members agreed that Mr Fortier would be the President of the
Committee.1 At its first session in Washington on 21 June 2001, all members made
declarations in terms of Rule 6 of the Arbitration Rules. Mr Fortier qualified his
declaration in one respect, and the Respondent reserved the right to challenge him.
Subsequently it did so.
2. Chapter V of the Convention is entitled Replacement and Disqualification
of Conciliators and Arbitrators. Article 56 provides that once a Commission or
1
On the election of the President by members of an ad hoc Committee see C. H. Schreuer, The ICSID
Convention: A Commentary (Cambridge, Cambridge University Press, 2001) pp. 101314 (345).
CHALLENGE TO THE PRESIDENT
331
Tribunal has been constituted and has begun its proceedings, its composition shall
remain unchanged, subject to contingencies such as the death, incapacitation or resignation of a member. Articles 57 and 58 of the Convention deal with the procedure
to be followed in case of a proposal to disqualify any member of a Commission
or Tribunal. In particular Article 58 states that a proposal to disqualify a conciliator or arbitrator is to be decided by the other members of the Commission or
Tribunal . . . provided that where those members are equally divided, or in the
case of a proposal to disqualify a sole conciliator or arbitrator, or a majority of the
conciliators or arbitrators, the Chairman shall take that decision. Arbitration Rule
9 deals with issues of disqualification of arbitrators in further detail.
3. Chapter V does not refer to disqualification of the members of ad hoc Committees. Nor does Article 52. Article 52(4) stipulates that:
The provisions of Articles 4145,48, 49, 53 and 54, and of Chapters VI and VII shall
apply mutatis mutandis to proceedings before the Committee.
Chapter V is not mentioned, although it deals with questions that could well arise
with respect to the membership of Committees. However Rule 53, which is entitled
Rules of Procedure, states:
The provisions of these Rules shall apply mutatis mutandis to any procedure relating
to the interpretation, revision or annulment of an award and to the decision of the
Tribunal or Committee.
The effect is to apply the procedure referred to in Arbitration Rule 9 to proposals to

disqualify any member of a Committee. Pursuant to Rules 9 and 53, the undersigned
were called on promptly to decide on the Respondents proposal.
4. Before doing so Mr Fortier made an explanation of his position in terms of
Rule 9(3). This was circulated to the Parties, who were given a brief period to
comment on it. The Claimants made no observations. By letter of 12 September
2001 the Respondent confirmed its earlier challenge and made certain additional
observations, which are discussed below.
Competence of Members of the Committee to Decide on a

Disqualification Proposal
5. An initial question concerns our competence to decide on the proposal. Although neither Party raised the issue, it might be argued that the failure of Article
53(4) of the Convention to refer to Chapter V or to apply it to the disqualification of members of ad hoc Committees was deliberate. If so, the Administrative
Council was arguably incompetent to achieve by a Rule what the Convention itself
specifically did not achieve and thus by implication precluded. It is necessary to
consider this question before turning to the circumstances of the present case.
6. The rule-making powers of the Administrative Council are set out in Article
6 of the Convention. This provides, inter alia, that:
332
(1) Without prejudice to the powers and functions vested in it by other provisions of
this Convention, the Administrative Council shall:
...
(c) adopt the rules of procedure for conciliation and arbitration proceedings (hereinafter called the Conciliation Rules and the Arbitration Rules);
...
The decisions referred to in sub-paragraphs (a), (b), (c) and (f) above shall be adopted
by a majority of two-thirds of the members of the Administrative Council.
(2) The Administrative Council may appoint such committees as it considers necessary.
(3) The Administrative Council shall also exercise such other powers and perform
such other functions as it shall determine to be necessary for the implementation of the
provisions of this Convention.
The Council consists of one representative of each Contracting State (Article 4).
7. It is not entirely clear from the Convention whether annulment requests and
proceedings pursuant to such requests under Article 52 come within the term arbitration proceedings in Article 6(1)(c), or whether they are to be considered
as distinct. There are indications both ways. On the one hand annulment proceedings occur before a separate ad hoc Committee, separately constituted; on
the other hand, the role of the Committee is narrowly defined and could be seen
[as] ancillary to the arbitration function of icsid as a whole. Nothing turns on
this, however, since in any event the Council has power under Article 6 to regulate the procedures to be applied on a request for annulment, procedures which
are only skeletally set out in Article 52. In particular it would have such power
under Article 6(3), on the basis that to establish orderly procedures for dealing
with annulment requests can plainly be regarded as necessary for the implementation of the provisions of this Convention. No doubt any such Rules must
be consistent with the terms of the Convention and with its object and purpose.
But subject to this, the judgement whether they are necessary is a matter for the
Council.
8. Article 52(3) provides that no member of an ad hoc Committee can have
been a member of the Tribunal which rendered the award. In addition no member
may have the same nationality as any of the members of the Tribunal or of either
Party or have been nominated to the Panel of Arbitrators by either of the States
concerned. This covers some issues relating to the independence of members of ad
hoc Committees but it does not do so exhaustively. Although such members must
be Panel members (and may therefore be presumed to have the general qualities
required), they may still have or have had particular links with the parties to an
annulment proceeding which would disqualify them from sitting. Yet it is not clear
that the Chairman of the Administrative Council would have inherent power to decide such issues in the absence of any article or rule to that effect. It would clearly
be appropriate for the Administrative Council under Article 6(3) to provide a procedure for challenging the appointment of an ad hoc Committee member. It seems
equally clear that the Council has actually done so. Although Arbitration Rule 9
itself refers to Article 57 of the Convention (which does not apply to disqualification of Committee members), Rule 9 is sufficiently self-contained and can be given
333
effect without relying on powers expressly conferred by the Convention itself on

other bodies. There can be no doubt as to the competence of the Administrative
Council to apply the Arbitration Rules mutatis mutandis to proceedings relating
to the interpretation, revision or annulment of an award, since this can clearly be
seen as necessary for the implementation of the provisions of this Convention.
Norif such a characterisation is relevantis there any difficulty in describing
proceedings on a request for disqualification, including the identification of those
who will make the decision, as procedural questions for the purposes of Rule 53.
9. The intention of the Administrative Council to apply Arbitration Rule 9 to the
membership of ad hoc Committees can be inferred from the history of the Rules.
Rule 53 of the initial Arbitration Rules of 1968 provided that:
Chapter II to V (excepting rules 39 and 40) of these Rules shall apply mutatis mutandis
to any procedure relating to the interpretation, revision and annulment of an award,
and Chapter VI shall similarly apply to the decision by the Tribunal or Committee.2
Rule 39 concerned provisional measures; Rule 40, ancillary claims. These corresponded to Articles 46 and 47 of the Convention, which likewise were not applied
by Article 52(4) to annulment proceedings. Apart from these two Rules, the only
significant exclusion from former Arbitration Rule 53 was Chapter I, which dealt
with the establishment of the Tribunal, and which included the procedures for dealing with challenges. In 1984, the Administrative Council adopted a new set of
Arbitration Rules, including Rule 53 in the terms set out above. The substantial
effect of new Arbitration Rule 53 as compared with its predecessor was to apply
mutatis mutandis the provisions of Chapter 1 and of Rules 39 and 40 to annulment
procedures. We are informed that Parties to the Convention, who were given the
opportunity to comment on the new Rules, made no comments on Rule 53. The
new Rules were adopted without debate or dissent.3
10. Thus it can be inferred that the intention of the Council in 1984 was to apply
all the Arbitration Rules, so far as possible, to annulment proceedings, including
Rule 9. In our view the only reason why the procedure laid down in Arbitration
Rule 9 could not be applied to members of ad hoc Committees mutatis mutandis
would be if to apply such a procedure was inconsistent with the Convention, having
regard to its object and purpose. We see no reason to regard it as such.
11. As to the object and purpose of the Convention, there is no difficulty. Ad hoc
Committees have an important function to perform in relation to awards (in substitution for proceedings in national courts), and their members must be, and appear
to be, independent and impartial. No other procedure exists under the Convention,
expressly or impliedly, for deciding on proposals for disqualification. The only
question then is whether it is literally inconsistent with the terms of the Convention, given that Chapter V is not applied by Article 52 to annulment, for the Rules
to step in and make equivalent provision. Admittedly, the catalogue of provisions
incorporated by reference in Article 52(4) appears a considered one. The provisions
2
3
For the text of the 1968 Arbitration Rules see 1 ICSID Reports p. 63.
See ICSID Annual Report 1985, p. 18.
334
incorporated are not only concerned with the powers of Committees. They apply to
a range of questions, including the status of decisions made. On the other hand the
matter of disqualification might simply have been overlooked, and other aspects of
Chapter V are clearly apt to be applied to ad hoc Committees.
12. The point is noted as follows by Schreuers Commentary:
the application of Arbitration Rules 812 to annulment proceedings is only possible on
the assumption that the omission of the Conventions Chapter V from the list of provisions in Art. 52(4) was unintentional. If the omission of Arts. 5658 from Art. 52(4) is
interpreted as a deliberate exclusion, it is not permissible to reintroduce these Articles
under the guise of the corresponding Arbitration Rules . . . If this were otherwise, one
could introduce the procedures for interpretation, revision and annulment in respect of
decisions on annulment by way of applying the pertinent Arbitration Rules, a result
that is clearly not intended by the Convention.4
But as Schreuer also notes,5 the travaux preparatoires of the Convention do not
suggest that there was any particular reason for excluding the application of
Chapter V. It appears that no State party at the time of the adoption of Arbitration Rule 53 suggested any such reason. That Rule was adopted unanimously and
was treated by the Members of the Administrative Council as uncontroversial. In the
circumstances, the unanimous adoption of Arbitration Rule 53 can be seen, if not as
an actual agreement by the States parties to the Convention as to its interpretation,
at least as amounting to subsequent practice relevant to its interpretation.6
13. For all these reasons, we accept that Arbitration Rule 53 was within the
competence of the Administrative Council under Article 6(3) of the Convention, to
the extent that it applies Chapter V mutatis mutandis to proposals to disqualify any
member of an ad hoc Committee.
The Question of Disqualification

14. We turn then to the particular question raised by the challenge to Mr Fortier.
The governing standard here is not in doubt. It is set forth in Article 14 of the
Convention, which is applied to members of annulment Committees by Article 57
of the icsid Convention. Article 14 provides as follows:
(1) Persons designated to serve on the Panels shall be persons of high moral character
and recognized competence in the fields of law, commerce, industry or finance, who
may be relied upon to exercise independent judgment. Competence in the field of law
shall be of particular importance in the case of persons on the Panel of Arbitrators.
Neither Mr Fortiers moral character nor his competence in the field of law have
been questioned by the Respondent. The issue centres only on the question of his
4
C. H. Schreuer, The ICSID Convention: A Commentary (Cambridge, Cambridge University Press,
2001) p. 1042 (422).
5
Ibid., p. 1039 (412).
6
Cf. Vienna Convention on the Law of Treaties, 1969, Art. 31(3).
335
independence and impartiality with respect to the parties to the dispute, specifically
the Claimants, i.e. on whether he may be relied upon to exercise independent
judgment.
15. Arbitration Rule 6, as applied to ad hoc Committees by Arbitration Rule 53,
requires from each of the members a declaration that there is to the best of their
knowledge no reason why they should not serve, and a statement of . . . past and
present professional, business and other relationships (if any) with the parties. In
his statement of 18 June 2001, Mr Fortier advised that one of the partners in his
law firm Ogilvy Renault had been engaged by Vivendis predecessor, Compagnie
Generale des Eaux, to advise on certain matters relating to taxation under Quebec
law. Mr Fortier had had no personal involvement in the work, which was wholly
unrelated to the present case.
16. In response to certain questions put by the Respondent at the first session, Mr
Fortier affirmed that the remuneration involved was de minimis. He subsequently
provided a memorandum from his firm stating that the work done for Vivendi SA had
always been very limited and, in relative terms, is inconsequential to our firms total
billing. The responsible tax partner of the firm provided a further memorandum
outlining in general terms the nature of the work done and specifying the fees
charged. According to this statement, fees of approximately $216,000 had been
billed, of which the great majority (approximately $204,000) concerned work done
in the period 19951999. The work was done for Vivendi SA but on instructions
from a United States law firm which was acting generally in the matter. The work
remaining to be done by Ogilvy Renault in respect of the matter was trivial; it
concerned only the winding up of the arrangements in question and would involve
fees of not more than $2,000. The partner undertook that he would not accept any
further instructions from Vivendi SA until after the completion of this Committees
mandate.
17. In its statement of 12 September 2001 the Respondent noted that the retainer from Compagnie Generale des Eaux was a continuing one and stated that
the amounts charged on that retainer since 1995 cannot be considered by the Republic of Argentina as de minimis. It also stressed the importance of the present
proceedings. In these circumstances it affirmed its challenge under Article 14 of
the Convention. It had originally relied, inter alia, on the following provisions
of the Code of Ethics for International Arbitrators (International Bar Association,
1987):
Rule 3.1: The criteria for assessing questions relating to bias are impartiality and
independence. Partiality arises where an arbitrator favours one of the parties, or
where he is prejudiced in relation to the subject-matter of the dispute. Dependence
arises from relationships between an arbitrator and one of the parties, or with
someone closely connected with one of the parties.
Rule 3.2: Facts which might lead a reasonable person, not knowing the arbitrators
true state of mind, to consider that he is dependent on a party create an appearance
of bias. The same is true if an arbitrator has a material interest in the outcome of
the dispute, or if he has already taken a position in relation to it. The appearance
of bias is best overcome by full disclosure as described in Article 4 below.
336
Rule 4 establishes, in effect, the obligation of arbitrators to declare all facts or

circumstances that may give rise to justifiable doubts.
18. Consistently with this Code of Ethics, Arbitration Rule 6 of the icsid Arbitration Rules, which is directly applicable here, imposes the obligation to declare
past and present professional, business and other relationships (if any) with the
parties. The fundamental principle is that arbitrators shall be and remain independent and impartial; in terms of Article 14(1) of the Convention, they must be
able to be relied on to exercise independent judgment. Exactly the same principle
applies to the members of ad hoc Committees. The role of the other members of
this Committee is to determine whether there is a manifest lack of the qualities
required by paragraph (1) of Article 14.
19. Certain initial points should be made. First, although various legal entities
within the Vivendi group have been mentioned (Compagnie Generale des Eaux,
Vivendi SA, Vivendi Universal), it does not appear that there is any relevant distinction between them for present purposes. Accordingly we approach the question
on the basis that one of the claimant companies, or at any rate a company within
the Vivendi group, is a client of Mr Fortiers law firm in an as yet uncompleted
matter. The great bulk of the work was done before the present proceedings were
commenced and only a minor amount of work remains to be done. Mr Fortier at no
stage has had any personal involvement with the work or with the Claimant companies in relation thereto, and the work done bears no relationship to the present
dispute.
20. Secondly, a question arises with respect to the term manifest lack of the
qualities required in Article 57 of the Convention. This might be thought to set a
lower standard for disqualification than the standard laid down, for example, in Rule
3.2 of the iba Code of Ethics, which refers to an appearance of bias. The term
manifest might imply that there could be circumstances which, though they might
appear to a reasonable observer to create an appearance of lack of independence
or bias, do not do so manifestly. In such a case, the arbitrator might be heard to
say that, while he might be biased, he was not manifestly biased and that he would
therefore continue to sit. As will appear, in light of the object and purpose of Article
57 we do not think this would be a correct interpretation.
21. Decisions on a proposal to disqualify an arbitrator under Article 57 have been
made in two previous cases. In the Amco Asia case, the Respondent challenged the
Claimants party-appointed arbitrator, Mr Rubin, on a number of grounds. Prior to
his appointment as arbitrator (but after the commencement of the arbitration) Mr
Rubin had personally given a limited amount of tax advice to the principal shareholder in the Claimant company. His law firm had also, prior to the commencement
of the arbitration, had a profit sharing arrangement with the lawyers acting for
the Claimants. During the period of that arrangement neither the shareholder nor
the Claimant had been clients of either law firm. In their unpublished decision of
14 June 1982,7 the other two arbitrators (Professors Goldman and Foighel) first
affirmed by reference to the object and purpose of the Convention, that . . .
7
icsid Case ARB/81/1, Amco Asia Corp. v. Republic of Indonesia, Decision on the proposal to disqualify
an arbitrator, of 24 June 1982, unpublished.
337
an absolute impartiality . . . of all the members of an arbitral tribunal, is required,

and it is right to say that no distinction can and should be made, as to the standard of
impartiality, between the members of an arbitral tribunal, whatever the method of their
appointment.8
But they went on to say that this requirement did not preclude the appointment as
an arbitrator of a person who has had, before his appointment, some relationship
with a party, unless this appeared to create a risk of inability to exercise independent
judgment. In this context, in their view, the existence of some prior professional
relationship in and of itself did not create such a risk whatever the charactereven
professionalor the extent of said relations.9 As to Article 57, they laid stress on
the term manifest, which in their view required not a possible lack of the quality,
but . . . a highly probable one.10 On this basis they rejected the challenge. In their
view, legal advice (with a fee, in 1982, of Can$450) given by someone who had
never been regular counsel of the appointing party was minor and had no bearing
on the reliability of the arbitrator; nor could the links between the two law firms
create any psychological risk of partiality.11 Thus Mr Rubins lack of reliability
was not manifest; indeed, in their view, it was not even reasonably apprehended.
22. The decision has been strongly criticized.12 To the extent that it concerned a
personal relationship of legal advice given by the arbitrator to a party or to a related
person after the dispute in question had arisen, it can in our view only be justified
under the de minimis exception. That the advice was given on an unrelated matter,
though a relevant factor, can hardly be sufficient. The fact remains that a lawyer
client relationship existed between the claimant and the arbitrator personally during
the pendency of the arbitration; this must surely be a sufficient basis for a reasonable
concern as to independence, unless the extent and content of the advice can really
be regarded as minor and wholly discrete.
23. The second decision under Article 57 was given on 19 January 2001 in the
Zhinvali case, which is still pending. There the challenge was based on the existence of occasional, purely social, contacts between the arbitrator in question and
an executive instrumental in the claimants investment. The other two arbitrators
stressed the absence of any professional or business relationship between the arbitrator and the person concerned, and concluded that to suggest that a merely
occasional personal contact could manifestly affect the judgment of an arbitrator,
in the absence of any further facts, was purely speculative.13 They accordingly
dismissed the challenge.
24. On the crucial question of the threshold test, the travaux preparatoires of
Article 57 give little guidance. Schreuer says only that the requirement that the lack
of impartiality must be manifest imposes a relatively heavy burden of proof on
8
As cited by M. Tupman, Challenge and Disqualification of Arbitrators in International Commercial
Arbitration, ICLQ, v. 38, 1989, p. 26 at p. 45.
9
Ibid.
10
Ibid.
11
Ibid.
12
Ibid., p. 51.
13
icsid Case ARB/00/1, Zhinvali Development Ltd v. Republic of Georgia, Decision on Respondents
Proposal to Disqualify Arbitrator, 19 January 2001 (Davis Robinson, Seymour J. Rubin), unpublished.
338
the party making the proposal.14 Some guidance is however to be obtained from
general authorities in the field of international arbitration. According to Fouchard,
Gaillard & Goldman, the existence of business relations between an arbitrator and
one of the parties does not necessarily lead to the existence of a relationship of
dependency that would justify a challenge.15 They note, realistically, the large number of possibilities that exist for arbitrators to have or have had some professional
contact with the parties. In this respect, an illustrative case is that of Philipp
Brothers,16 where it was stressed that a professional party could not be allowed to
challenge en bloc all other professionals within his or her milieu. The authors also
refer to an icc arbitration where counsel acting for one of the parties belonged to
the same firm as the president of the arbitral tribunal. The Paris Cour dappel held
that belonging to such an association of interests as a large law firm with multiple divisions and specializations does not imply economic dependency sufficient
to justify disqualification.17
25. It is not necessary to consider the implications of the term manifest in
Article 57 for cases in which there is any dispute over the facts, since there is none
in the present case. On the one hand it is clear that that term cannot preclude consideration of facts previously undisclosed or unknown, provided that these are duly
established at the time the decision is made. On the other hand, the term must exclude reliance on speculative assumptions or argumentsfor example, assumptions
based on prior and in themselves innocuous social contacts between the challenged
arbitrator and a party. But in cases where (as here) the facts are established and no
further inference of impropriety is sought to be derived from them, the question
seems to us to be whether a real risk of lack of impartiality based upon those facts
(and not on any mere speculation or inference) could reasonably be apprehended
by either party. If (and only if) the answer is yes can it be said that the arbitrator
may not be relied on to exercise independent judgment.18 That is to say, the circumstances actually established (and not merely supposed or inferred) must negate or
place in clear doubt the appearance of impartiality. If the facts would lead to the
raising of some reasonable doubt as to the impartiality of the arbitrator or member,
the appearance of security for the parties would disappear and a challenge by either
party would have to be upheld. Once the other arbitrators or Committee members
had become convinced of this conclusion, there would no longer be room for the
view that the deficiency was not manifest.
26. Turning to the facts of the present case, it is true that a partner of Mr Fortiers
had (and still has) the Claimants or one of their affiliates as a client. But we do not
14
Schreuer, Commentary, p. 1200, 16, and see ibid., p. 1199, 14 for a review of the travaux. On the
meaning of the term manifestly in Arts. 36(3) and 52 of the Convention see ibid., pp. 45860, 457,
pp. 9326, 13746, respectively. It is implicit in what we have said that the term may have a different
meaning in these different contexts.
15
Traite darbitrage commercial international, Paris, Litec, 1999, p. 584.
16
TGI Paris, 28 October 1988 and 29 June 1989, Rev. arb. 1990, p. 497.
17
Judgment of 28 June 1991, Rev. arb. 1992, p. 568, reported by P. Bellet; cited by Fouchard, Gaillard
& Goldman, pp. 5845.
18
For examples of the application of a test of this kind to diverse facts see e.g. AT & T Corporation v.
Saudi Cable Co. [2000] 2 Lloyds Rep. 127; In re Medicaments and Related Classes of Goods (No. 2)
[2001] 1 WLR 700.
339
think that this, in and of itself, is enough to justify disqualification in the circumstances of this case. Relevant on the other hand are the following facts: (a) that the
relationship in question was immediately and fully disclosed and that further information about it was forthcoming on request, thus maintaining full transparency;19
(b) that Mr Fortier personally has and has had no lawyerclient relationship with
the Claimants or its affiliates; (c) that the work done by his colleague has nothing
to do with the present case; (d) that the work concerned does not consist in giving
general legal or strategic advice to the Claimants but concerns a specific transaction,
in which Ogilvy Renault are not the lead firm; (e) that the legal relationship will
soon come to an end with the closure of the transaction concerned.
27. In these specific circumstances we see no reason to regard Mr Fortiers independence as in any way impaired by the facts disclosed. We therefore do not
need to rely on any de minimis rule as a basis for our conclusion. We note that
the Respondent does accept in principle the existence of such a rule.20 While we
agree with the Respondent that the amount of fees earned in the transaction since its
inception is not de minimis, it is the case that only a small amount will have been
charged for the last stages of the work, in the period 20002002. This is the relevant period for the purposes of the present annulment request. If necessary, the
de minimis rule would have provided a further basis for rejecting the proposal for
disqualification.
Conclusions
28. To summarise, we agree with earlier panels which have had to interpret and
apply Article 57 that the mere existence of some professional relationship with a
party is not an automatic basis for disqualification of an arbitrator or Committee
member. All the circumstances need to be considered in order to determine whether
the relationship is significant enough to justify entertaining reasonable doubts as
to the capacity of the arbitrator or member to render a decision freely and independently. In the present case, for the reasons given above, the continuing relationship
between another partner of Ogilvy Renault and Vivendi is not significant enough
for this purpose. Accordingly the proposal for disqualification submitted by the
Respondent must be dismissed.
[Source: 17 ICSID Review FILJ 168 (2002).]
19
Mr Fortier declined, in our view reasonably, to provide details of his overall remuneration with Ogilvy
Renault. Disclosure of that information, confidential to him and his partners, was not necessary in order
to decide on the proposal for disqualification.
20
See above, paragraph 17.
340
DECISION ON ANNULMENT (3 JULY 2002)
Table of Contents
A. The Annulment Proceedings

B. The Tribunals Award
(1) The Tribunals Findings on Jurisdiction
(2) The Tribunals Findings on the Merits
(a) The federal claims
(b) The Tucuman claims
C. The Committees Analysis
(1) Relevant Provisions of the FranceArgentina bit
(a) Definition of investor and investment
(b) Local remedies and their relation to arbitration under
the bit
(c) Scope and application of substantive provisions of the
bit
(2) The Role of Annulment Under the icsid Convention
(3) The Grounds of Annulment
(a) The Tribunals jurisdictional finding
(b) The Tribunals findings on the merits
(i) Serious departure from a fundamental rule of
procedure: Article 52(1)(d)
(ii) Manifest excess of powers: Article 52(1)(b)
(iii) Failure to state reasons: Article 52(1)(e)
D. Costs
E. Decision
Page
340
342
345
346
346
347
353
353
353
355
356
357
360
360
362
362
363
371
371
372
A. The Annulment Proceedings

1. On 20 March 2001, Compana de Aguas del Aconquija SA (caa) and Compagnie Generale des Eaux (cge; cge and caa are referred to, collectively, as
Claimants) filed with the Secretary-General of the International Centre for Settlement of Investment Disputes (icsid) an application in writing (the Application) requesting the partial annulment of an Award dated 21 November 2000
(the Award) rendered by the Tribunal in the arbitration between Claimants and
Respondent.1
2. The Application was made within the time period provided in Article 52(2)
of the Convention on the Settlement of Investment Disputes between States and
The text of the award is published at 40 ILM 426 (2001).
341
Nationals of Other States (the icsid Convention). The Application sought partial
annulment of the Award on three of the five grounds set out in Article 52(1) of the
icsid Convention, specifically: the Tribunal had manifestly exceeded its powers;
there had been a serious departure from a fundamental rule of procedure; and the
Award failed to state the reasons on which it was based.
3. The Application was registered by the Secretary-General of icsid on 23 March
2001. In accordance with Rule 50(2) of the icsid Rules of Procedure for Arbitration Proceedings (the Arbitration Rules), the Secretary-General transmitted a
Notice of Registration to the parties on that date and also forwarded to the Respondent copies of the Application and accompanying documentation. Thereafter,
in accordance with Article 52(3) of the icsid Convention and at the request of
the Secretary-General, the Chairman of the Administrative Council proceeded to
appoint an ad hoc Committee (the Committee).
4. The Committee was subsequently duly constitutedcomposed of Professor James R. Crawford, Professor Jose Carlos Fernandez Rozas and Mr L. Yves
Fortierand the parties were so notified by the Secretary-General on 18 May 2001,
in accordance with Rule 52(2) of the Arbitration Rules. On 25 May 2001, the Secretary of the Committee informed the parties that Mr L. Yves Fortier had been
designated president of the Committee.
5. The first meeting of the Committee was held at the seat of icsid, in Washington,
DC, on 21 June 2001. At that meeting all members made declarations in terms of
Rule 6 of the Arbitration Rules. Mr Fortier qualified his declaration in one respect,
and the Respondent reserved the right to challenge him. Subsequently it did so,
pursuant to Articles 14 and 57 of the icsid Convention and Arbitration Rule 53.
The challenge concerned Mr Fortiers disclosure that one of the partners in his
law firm had been engaged by cge to advise on certain specific matters relating
to taxation under Quebec law. Mr Fortier had had no personal involvement in the
work, which was wholly unrelated to the present case and which did not involve a
general retainer. After receiving written statements from the parties, the other two
members of the Committee, by a decision of 24 September 2001, dismissed the
challenge.
6. In accordance with the procedural timetable laid down by the Committee at
its meeting of 21 June 2001, the parties filed their respective Memorials on 20
August 2001 and on 12 November 2001. Claimants Memorial was accompanied
by an Expert Opinion prepared by Professor Christoph H. Schreuer, and Respondent
filed an Expert Opinion rendered by Professor Arthur T. von Mehren. Claimants
thereafter submitted a Reply on 10 December 2001. Respondent filed a Rejoinder
on 8 January 2002.
7. A two-day hearing in this annulment proceeding was held at the seat of icsid
on 31 January and 1 February 2002, at which counsel for both parties presented
their arguments and submissions, and responded to questions from the members
of the Committee. The parties subsequently made observations to the English and
Spanish transcripts made of the hearing, which have been taken into account by the
Committee.
8. In the absence of any agreed request by the parties to vary the rules of procedure laid down in the icsid Convention and the Arbitration Rules, the annulment
342
proceeding was at all times conducted in accordance with the applicable provisions
of Section 3 of Chapter IV of the icsid Convention and the Arbitration Rules.2
B. The Tribunals Award

9. The dispute underlying the arbitration arose out of certain alleged acts of the
Argentine Republic and its constituent Province of Tucuman that, according to
Claimants, caused the termination of a thirty-year concession contract (the Concession Contract) entered into by Tucuman and caa on 18 May 1995. In the
arbitration, Claimants asserted that all of these acts were attributable to the Argentine Republic under international law and, as such, violated Argentinas obligations
under the Agreement between the Government of the Argentine Republic and the
Government of the Republic of France for Reciprocal Protection and Promotion of
Investments of 3 July 1991 (the bit).3 Relevant provisions of the bit are set out
later in this decision.
10. The Award that is the subject of the present annulment proceeding was
rendered on 21 November 2000. In the Award, the Tribunal rejected the objections
to its jurisdiction raised by the Argentine Republic. Having upheld its jurisdiction,
the Tribunal nonetheless dismissed the claim.
11. In order to provide relevant background and context to the present decision,
and before proceeding to consider the detailed findings of the Tribunal and the
grounds for annulment to which those findings are said to give rise, the Committee
can do no better than recite the Tribunals own Introduction and Summary:
A. Introduction and Summary
This case arises from a complex and often bitter dispute associated with a 1995 Concession Contract that a French company, Compagnie Generale des Eaux, and its Argentine
affiliate, Compania de Aguas del Aconquija, SA (collectively referred to as Claimant
or cge), made with Tucuman, a province of Argentina, and with the investment in
Tucuman resulting from that agreement. The Republic of Argentina (Argentine Republic) was not a party to the Concession Contract or to the negotiations that led to
its conclusion. . . .
The Concession Contract . . . makes no reference to either the bit or icsid Convention
or to the remedies that are available to a French foreign investor in Argentina under
these treaties. Articles 3 and 5 of the bit provide that each of the Contracting Parties
shall grant fair and equitable treatment according to the principles of international
law to investments made by investors of the other Party, that investments shall enjoy
protection and full security in accordance with the principle of fair and equitable
treatment, and that Contracting Parties shall not adopt expropriatory or nationalizing
2
Article 52(4) of the icsid Convention provides: The provisions of Articles 4145, 48, 49, 53 and
54, and of Chapters VI and VII [of the Convention, dealing with arbitration proceedings] shall apply
mutatis mutandis to proceedings before the Committee.
3
Signed 3 July 1991; entered into force 3 March 1993; United Nations Treaty Series, vol. 1728, p. 282
(French text). The bit provisions quoted, in English, in the present decision are drawn from the official
United Nations English translation: United Nations Treaty Series, vol. 1728, p. 298. Appendix 1 to the
Tribunals Award of 21 November 2001 is the source of the English translation of the provisions of the
Concession Agreement referred to herein: 40 ILM 426 (2001), pp. 44951.
343
measures except for a public purpose, without discrimination and upon payment of
prompt and adequate compensation. Article 8 of the ArgentineFrench bit provides
that, if an investment dispute arises between one Contracting Party and an investor
from another Contracting Party and that dispute cannot be resolved within six months
through amicable consultations, then the investor may submit the dispute either to the
national jurisdiction of the Contracting Party involved in the dispute or, at the investors
option, to arbitration under the icsid Convention or to an ad hoc tribunal pursuant to
the Arbitration Rules of the United Nations Commission on International Trade Law.
Article 16.4 of the Concession Contract between cge and Tucuman provided for the
resolution of contract disputes, concerning both its interpretation and application, to
be submitted to the exclusive jurisdiction of the contentious administrative courts of
Tucuman. While this case presents many preliminary and other related questions, the
core issue before this Tribunal concerns the legal significance that is to be attributed
to this forum-selection provision of the Concession Contract in light of the remedial
provisions in the bit and the icsid Convention. This question bears both on the jurisdiction of the Centre and the competence of this Tribunal under the icsid Convention
and on the legal analysis of the merits of the dispute between cge and the Argentine
Republic.
When cge invoked the jurisdiction of icsid in reliance on the terms of the bit and the
icsid Convention and sought damages of over US $300 million, the Argentine Republic
responded that it had not consented to submission of the dispute for resolution under
the icsid Convention. Because of the close relationship between the jurisdictional issue
and the underlying merits of the claims, the Tribunal decided that it would not be able
to resolve the jurisdictional question without a full presentation of the factual issues
relating to the merits. Accordingly, the Tribunal, after receiving memorials from the
parties and hearing oral argument, joined the jurisdictional issue to the merits.
For the reasons set forth in this Award, the Tribunal holds that it has jurisdiction to
hear the claims of cge against the Argentine Republic for violation of the obligations
of the Argentine Republic under the bit. Neither the forum-selection provision of the
Concession Contract nor the provisions of the icsid Convention and the bit on which
the Argentine Republic relies preclude cges recourse to this Tribunal on the facts
presented.
With respect to the merits, cge has not alleged that the Republic itself affirmatively
interfered with its investment in Tucuman. Rather, cge alleges that the Argentine
Republic failed to prevent the Province of Tucuman from taking certain action with
respect to the Concession Contract that, Claimants allege, consequently infringed their
rights under the bit. cge also alleges that the Argentine Republic failed to cause the
Province to take certain action with respect to the Concession Contract, thereby also
infringing Claimants rights under the bit. In addition, cge maintains that international
law attributes to the Argentine Republic actions of the Province and its officials and
alleges that those actions constitute breaches of the Argentine Republics obligations
under the bit.
While cge challenged actions of Tucuman in administrative agencies of the Province,
cge concedes that it never sought, pursuant to Article 16.4, to challenge any of
Tucumans actions in the contentious administrative courts of Tucuman as violations
of the terms of the Concession Contract. cge maintains that any such challenge would
have constituted a waiver of its rights to recourse to icsid under the bit and the icsid
Convention.
The Tribunal does not accept cges position that claims by cge in the contentious
administrative courts of Tucuman for breach of the terms of the Concession Contract, as
344
Article 16.4 requires, would have constituted a waiver of Claimants rights under the bit
and the icsid Convention. Further, as the Tribunal demonstrates below, the nature of
the facts supporting most of the claims presented in this case make it impossible
for the Tribunal to distinguish or separate violations of the bit from breaches of the
Concession Contract without first interpreting and applying the detailed provisions of
that agreement. By Article 16.4, the parties to the Concession Contract assigned that
task expressly and exclusively to the contentious administrative courts of Tucuman.
Accordingly, and because the claims in this case arise almost exclusively from alleged
acts of the Province of Tucuman that relate directly to its performance under the
Concession Contract, the Tribunal holds that the Claimants had a duty to pursue their
rights with respect to such claims against Tucuman in the contentious administrative
courts of Tucuman as required by Article 16.4 of their Concession Contract.
cge presented certain additional claims regarding allegedly sovereign actions of
Tucuman that Claimants maintained were unrelated to the Concession Contract. cge
asserted that these actions of the Province gave rise to international responsibility
attributable to the Argentine Republic under the bit as interpreted by applicable international law. Furthermore, cge alleged that the Argentine Republic was also liable
for its failures to perform certain obligations under the bit that Claimants submitted
gave rise to international responsibility independent of the performance of Tucuman
under the Concession Contract. The Tribunal finds that many of these other claims
arose, in fact, from actions of the Province relating to the merits of disputes under
the Concession Contract and, for that reason, were subject to initial resolution in the
contentious administrative tribunals of Tucuman under Article 16.4. To the extent such
claims are the result of actions of the Argentine Republic or of the Province that are
arguably independent of the Concession Contract, the Tribunal holds that the evidence
presented in these proceedings did not establish the grounds for finding violation by
the Argentine Republic of its legal obligations under the bit either through its own acts
or omission or through attribution to it of acts of the Tucuman authorities.4
12. In the final section of its Award, after reviewing the procedural history of the
arbitration,5 summarising the facts and respective legal positions of the parties6 and
explaining its reasoning with respect to both its jurisdiction7 and the merits,8 the
Tribunal disposed of Claimants case in the following terms:
G. Award
The Tribunal herewith dismisses the claims filed by the Claimants against the Republic
of Argentina.9
13. Before considering the grounds for annulment presented to the Committee,
it is necessary to set out in some greater detail the Tribunals reasoning both as to
its jurisdiction and regarding the merits of the claim.
4
Award, Part A, pp. 13; 40 ILM 426 (2001), pp. 4279 (footnotes omitted).
Award, Part B, paras. 123; 40 ILM 426 (2001), pp. 42933.
6
Award, Part C, paras. 2439; 40 ILM 426 (2001), pp. 4335.
7
Award, Part D, paras. 4055; 40 ILM 426 (2001), pp. 4359.
8
Award, Part E, paras. 5692; 40 ILM 426 (2001), pp. 43946.
9
Award, Part G, p. 35; 40 ILM 426 (2001), p. 447. Part F of the Award, paras. 936, contains the
Tribunals assessment and determination regarding the allocation of the costs and fees associated with
the arbitration: 40 ILM 426 (2001), pp. 4467.
5
345
(1) The Tribunals Findings on Jurisdiction

14. The core of the Tribunals reasoning in support of its jurisdictional finding is contained in paragraphs 49 to 54 of the Award. The Tribunal found as
follows:
(a) Claimants claims concerning the actions of the federal government of
Argentina as well as those of the provincial authorities of Tucuman are properly characterised as claims arising under the bit, and not as contractual
claims under the Concession Agreement.10
(b) Under international law, the acts of organs of both the central government and
provincial authorities are attributable to the statein this case, the Argentine
Republicwith the result that Argentina cannot rely on its federal structure
as a means of limiting its treaty obligations.11
(c) Article 25(3) of the icsid Convention is intended to allow for constituent
subdivisions or agencies of a state party to the icsid Convention to be subject
to icsid jurisdiction and to be parties to icsid cases, in their own right and
in their own name, where they have so consented and the Contracting State
in question has approved. Article 25(3) neither limits the scope of the states
international responsibilities in accordance with normal rules of attribution
nor qualifies the jurisdiction of an icsid tribunal over that state. In the present
case, it does not restrict the Tribunals jurisdiction over the Argentine Republic pursuant to the bit, and there is no question of the Province of Tucuman
itself being a party to the arbitration in its own name.12
(d) Similarly, Article 16(4) of the Concession Contractwhich provides that
[f]or purposes of interpretation and application of this Contract the parties
submit themselves to the exclusive jurisdiction of the Contentious Administrative Tribunals of Tucumandoes not, and indeed could not, exclude the
jurisdiction of the Tribunal under the bit. Claimants claims are not subject
to the jurisdiction of the contentious administrative tribunals of Tucuman,
if only because, ex hypothesi, those claims are not based on the Concession
Contract but allege a cause of action under the bit.13
15. The Tribunal went on to state that [b]y this same analysis,14 instituting
proceedings against the Province of Tucuman before the contentious administrative
tribunals for breach of the Concession Contract would not have been the kind of
choice by Claimants of legal action in national jurisdictions (i.e., courts) against
10
Award, para. 50; 40 ILM 426 (2001), p. 438.

Award, para. 49; 40 ILM 426 (2001), p. 437.
Award, para. 51; in para. 52, the Tribunal supports this conclusion by reference to the travaux of
Article 25; 40 ILM 426 (2001), p. 438.
13
Award, para. 53; 40 ILM 426 (2001), pp. 4389 (footnote omitted). This conclusion is supported inter
alia by reference to the decision of the icsid Tribunal in Lanco International Inc. v. Argentine Republic
(Preliminary Decision on Jurisdiction of 8 December 1998), 40 ILM 457 (2001).
14
Referring to the analysis contained in paras. 534 of the Award (40 ILM 426 (2001), pp. 4389) and
summarized at para. 14(d) of this decision.
11
12
346
the Argentine Republic that constitutes the fork in the road under Article 8 of the
bit, thereby foreclosing future claims under the icsid Convention.15
(2) The Tribunals Findings on the Merits
16. In considering the Tribunals findings on the merits, it is necessary to distinguish between what the Tribunal referred to as, on the one hand, claims based
directly on alleged actions or failures to act of the Argentine Republic16 and, on
the other hand, claims relating to conduct of the Tucuman authorities which are
nonetheless brought against Argentina and rely . . . upon the principle of attribution.17 For the purposes of this decision, these two categories of claims will be
referred to, respectively, as the federal claims and the Tucuman claims.
17. Although, as mentioned above, the Tribunal expressly dismisse[d] the claims
filed by Claimants against the Republic of Argentina,18 what it actually didand
did not dowas much disputed between the parties. According to the Respondent, the Tribunal carefully considered and, as stated in its Award, dismissed all of
Claimants claims on the merits. According to Claimants, the Tribunal never actually considered the merits of their bit claims at all, and by purporting to dismiss
those claims without effectively considering them on their merits, the Tribunal
manifestly exceeded its powers. Further, Claimants submit, even if it could be
said that the Tribunal did consider their claims on the merits, it nonetheless failed
to give any reasons for dismissing them. There is thus a fundamental difference
between the parties as to the manner in which the Tribunals decision is to be
characterised.
(a) The federal claims
18. The Tribunal dealt with the federal claimsthat is, claims arising from
alleged conduct on the part of the federal authorities of the Argentine Republicin
paragraphs 8390 and 92 of the Award.
19. It began by noting that on only one occasionin a letter dated 5 March
1996did Claimants ever raise the issue, as against the federal authorities directly, of a breach of the bit.19 The Tribunal noted that nowhere in the letter did
15
Award, para. 55; 40 ILM 426 (2001), p. 439. Strictly speaking, this passage did not constitute part of
the Tribunals findings on jurisdiction, though it flowed from its analysis of the jurisdictional situation.
We return to it later in this decision.
16
Award, para. 50; 40 ILM 426 (2001), p. 438.
17
Ibid. The terminology employed by the Tribunal in this regard is not entirely happy. All international
claims against a state are based on attribution, whether the conduct in question is that of a central or
provincial government or other subdivision. See ilc Articles on Responsibility of States for Internationally Wrongful Acts, annexed to GA Resolution 54/83, 12 December 2001 (hereafter ilc Articles),
Articles 2(a), 4 and the Commissions commentary to Article 4, paras. (8)(10). A similar remark may
be made concerning the Tribunals later reference to a strict liability standard of attribution (Award,
para. 63; 40 ILM 426 (2001), p. 440). Attribution has nothing to do with the standard of liability or
responsibility. The question whether a states responsibility is strict or is based on due diligence or
on some other standard is a separate issue from the question of attribution (cf. ilc Articles, Arts. 2,
12). It does not, however, appear that either of these terminological issues affected the reasoning of the
Tribunal, and no more need be said of them.
18
Award, Part G, p. 35; 40 ILM 426 (2001), p. 447.
19
Award, para. 83; 40 ILM 426 (2001), p. 444.
347
Claimants ask Argentine officials to take any particular action relating to the Concession Contract or the pending differences between Claimants and the authorities
of Tucuman.20 Accordingly the Tribunal determined that [t]he record contains
no evidence that Argentine officials ever failed to take any specific action that the
Claimants requested.21
20. The Tribunal nonetheless went on to deal with the federal claims in some
detail. It surveyed the range of legal and political means which, according to
Claimants, the federal authorities should have used to protect Claimants rights.22
These included: commencing legal proceedings against Tucuman in a federal court
(para. 87); exercising financial (para. 88) and political (para. 89) leverage over
the province; and notifying Tucuman that its conduct was in breach of the bit
(para. 90).
21. Representative of this discussion is the treatment of potential legal action by
the federal government, in a federal court, designed to compel Tucuman to comply
with the bit.23 The Tribunal acknowledged (but declined to resolve) the contested
issue of Argentine law as to whether a federal court action would lie against a
province for breach of a treaty. It observed that recourse to the Tucuman tribunals
was available to Claimants (or at least to caa) under the terms of the Concession
Contract. It concluded by holding:
On the facts presented, the Tribunal finds that there was no action of the Province
of Tucuman that, absent such a local court proceeding [viz. under Article 16(4) of
the Concession Agreement], so obviously violated the bit as to require the Argentine
government to seek a legal remedy against the Province in the Argentine courts nor, for
that matter, did the Claimants ever specify any such action to the Argentine Republic.24
22. The Tribunals overall conclusion regarding the federal claims was as follows:
In conclusion, the Tribunal finds that the record of these proceedings does not provide
a basis for holding that the Argentine Republic failed to respond to the situation in
Tucuman and the requests of the Claimants in accordance with the obligations of the
Argentine government under the bit.25
(b) The Tucuman claims

23. Claimants claims arising from the alleged conduct of Tucuman and its officials are discussed in paragraphs 5782 and 91 of the Award.
24. After some initial discussion of the arguments of the parties regarding the socalled strict liability standard of attribution (paras. 5761), the Tribunal declared
that it would resolve the case not by answering any general question as to whether
treaty provisions impose a strict liability standard on a central government for
20
21
22
23
24
25
Ibid.
Award, para. 84; 40 ILM 426 (2001), p. 444.
Award, para. 86; 40 ILM 426 (2001), p. 445.
Award, para. 87; 40 ILM 426 (2001), p. 445.
Ibid.
Award, para. 92; 40 ILM 426 (2001), p. 446.
348
actions of a political subdivision, but rather by analysing the specific allegations

on which the Claimants base their claims and their legal significance in light of the
terms of the Concession Contract and the bit.26 It then proceeded to analyse what
Claimants had identified as four categories of acts of the Province attributable to
[Respondent] that violated Claimants rights under the bit.27
25. The first category of alleged bit violations by Tucuman concerned [a]cts
that resulted in a fall in the recovery rate.28 These included a decision by the
Ombudsman, in December 1996, which was said to have deprived cge of their
right to cut off service to non-paying customers, as well as certain decisions of
a local regulatory authority, ersact, which were said to have forced a reduction
in the tariff and thereby created uncertainty as to what invoices had to be paid. In
respect of all these decisions, the Tribunal found that Claimants never challenged
in the courts of Tucuman any of these actions of the administrative agencies of
Tucuman relating to implementation of the Concession Contract.29
26. Under this first category of impugned conduct, the Tribunal also considered
Claimants allegations concerning public statements by provincial legislators and
others purportedly urging customers not to pay their water bills. The Tribunal
remarked that those allegations concerned a highly disputed issue of fact, i.e.,
whether Tucuman authorities organized a campaign for non-payment of invoices
issued by Claimants; but it determined that [i]n any event, this non-payment issue
relates to the grounds for non-payment under the Concession Contract, and, as with
the administrative decisions discussed above, the Tribunal found that Claimants
failed to challenge any of these acts in the Tucuman courts.30
27. The second category of Tucuman conduct allegedly in violation of Claimants
rights under the bit concerned [a]cts that unilaterally reduced the tariff rate.31
These were found to comprise essentially the same acts referred to in the first category, and the Tribunal determined that, as with the impugned conduct comprising
the first category, they were never challenged in the Tucuman courts.32
28. With respect to the third category of alleged Tucuman breaches of the bit,
which concerned certain [a]buses of regulatory authority,33 the Tribunal again
noted that cge never challenged in the Tucuman courts the interpretation that the
Tucuman agencies gave to the provisions of the Concession Contract bearing on
this issue.34
26
Award, para. 62; 40 ILM 426 (2001), p. 440. Thus, as mentioned above (see note 17), the confusion
inherent in the phrase strict liability standard of attribution seems to have no operative effect in the
Award.
27
Award, para. 63; 40 ILM 426 (2001), p. 440.
28
Award, paras. 656; 40 ILM 426 (2001), pp. 4401.
29
Award, para. 65; 40 ILM 426 (2001), p. 440.
30
Award, para. 66; 40 ILM 426 (2001), pp. 4401.
31
Award, para. 67; 40 ILM 426 (2001), p. 441.
32
Ibid.
33
Award, paras. 689; 40 ILM 426 (2001), p. 441.
34
Award, para. 68. In para. 69, the Tribunal sidestepped a factual dispute as to whether the ersact
intervention was a legitimate administrative intervention or was politically motivated, to the detriment
of Claimants, noting again that Claimants never brought any legal challenge in the courts of Tucuman
[in respect] of the ersact intervention on the ground that such action violated the rights of cge under
the Concession Contract. See 40 ILM 426 (2001), p. 441.
349
29. The fourth category of alleged bit violations by Tucuman concerned certain
[d]ealings in bad faith.35 A number of examples were given, including conduct
by the provincial Governor designed to alter unilaterally the terms of the second
renegotiated agreement that was submitted to the Tucuman legislature in the period
MarchAugust 1997 (paras. 701). After briefly reviewing the factual differences
between the parties on this point (para. 72), the Tribunal observed that this aspect of
the dispute related solely to the parties efforts to conclude a negotiated settlement.
It stressed that, as Claimants themselves acknowledged, Tucuman was not legally
obligated to modify the Concession Contract (para. 73). After noting that Argentina
itself was involved in attempts to resolve the impasse, the Tribunal held that on the
evidence presented, the Tribunal does not find the basis for holding the Argentine
Republic liable for actions of the Tucuman authorities.36
30. Three additional allegations were made by Claimants in support of their
claim of bad faith. One concerned certain fines imposed on Claimants for poor
water quality allegedly discovered during water testing by Tucuman. Argentina
argued that the fines were authorised by the Concession Contract, and were in any
event never collected; Claimants asserted that the fines were politically motivated
and were intended to induce it to modify the Concession Contract, thus amounting
to an abuse of power. For its part, the Tribunal concluded that [s]ince none of the
fines were ever enforced against Claimants, the Tribunal cannot base a finding of
bad faith dealings on this alleged action, particularly when the dispute concerning
its justification appears to depend in significant part on an interpretation of the Concession Contract that the parties thereto agreed would be decided by the Tucuman
courts.37 Similarly, as regards the other acts of Tucuman allegedly committed in
bad faith, the Tribunal concluded that the parties disagree over the meaning and
applicability of the pertinent provisions of the Concession Contract, as well as over
the underlying facts.38
31. The Tribunals conclusions, drawn from its analysis of these four categories
of Tucuman acts, are summarised in paragraphs 7784 of the Award.
32. The Tribunal opens this section of its Award with the statement that it is
apparent that all of the . . . actions of the Province of Tucuman on which the
Claimants rely . . . are closely linked to the performance or non-performance of the
parties under the Concession Contract.39 It concludes that all of the issues relevant
to the legal basis for these claims against Respondent arose from disputes between
Claimants and Tucuman concerning their performance and non-performance under
the Concession Contract.40 These findings lead to the Tribunals central conclusion:
35
Award, paras. 706; 40 ILM 426 (2001), pp. 4412.

Award, para. 73; 40 ILM 426 (2001), p. 442. This conclusion is repeated in para. 82 of the Award:
40 ILM 426 (2001), p. 444.
37
Award, para. 74; 40 ILM 426 (2001), p. 442.
38
Award, para. 75; 40 ILM 426 (2001), p. 442. The Tribunal also referred summarily to the posttermination conduct of the parties, specifically Claimants allegations that they were forced to continue
to provide services under the Concession Contract while the provincial authorities continued to obstruct
their attempts to collect charges from their customers (para. 76). The Tribunal only summarised the
arguments made by the parties in this regard.
39
Award, para. 77; 40 ILM 426 (2001), p. 443.
40
Ibid.
36
350
[T]he Tribunal holds that, because of the crucial connection in this case between the
terms of the Concession Contract and these alleged violations of the bit, the Argentine Republic cannot be held liable unless and until Claimants have, as Article 16.4
of the Concession Contract requires, asserted their rights in proceedings before the
contentious administrative courts of Tucuman and have been denied their rights, either
procedurally or substantively.41
33. The Tribunal went on to make a number of additional findings in support of

this overarching conclusion:
[G]iven the nature of the dispute between Claimants and the Province of Tucuman, it
is not possible for this Tribunal to determine which actions of the Province were taken
in exercise of its sovereign authority and which in the exercise of its rights as a party to
the Concession Contract . . . To make such determinations the Tribunal would have to
undertake a detailed interpretation and application of the Concession Contract, a task
left by the parties to that contract to the exclusive jurisdiction of the administrative
courts of Tucuman.42
...
There is no allegation before the Tribunal that the courts of Tucuman were unavailable
to hear such claims or that they lacked independence or fairness in adjudicating them.43
...
Because the Tribunal has determined that on the facts presented the Claimants should
first have challenged the actions of the Tucuman authorities in its administrative courts,
any claim against the Argentine Republic could arise only if Claimants were denied
access to the courts of Tucuman to pursue their remedy under Article 16.4 or if the
Claimants were treated unfairly in those courts (denial of procedural justice) or if the
judgment of those courts were substantively unfair (denial of substantive justice) or
otherwise denied rights guaranteed to French investors under the bit by the Argentine
Republic.44
...
The Tribunal emphasizes that this decision does not impose an exhaustion of remedies requirement under the bit because such requirement would be incompatible with
Article 8 of the bit and Article 26 of the icsid Convention.
In this case, however, the obligation to resort to the local courts is compelled by the
express terms of Article 16.4 of the [Concession Contract] and the impossibility, on
the facts of the instant case, of separating potential breaches of contract claims from
bit violations without interpreting and applying the Concession Contract, a task that
the contract assigns expressly to the local courts.45
34. Two further points should be noted. The first concerns Article 10 of the bit,
on which Claimants had relied to avoid the apparently preclusive effect of Article
16(4) of the Concession Contract. Article 10 provides that:
41
42
43
44
45
Award, para. 78; 40 ILM 426 (2001), p. 443.

Award, para. 79; 40 ILM 426 (2001), p. 443.
Ibid.
Award, para. 80; 40 ILM 426 (2001), p. 443.
Award, para. 81; 40 ILM 426 (2001), p. 444.
351
Investments which have been the subject of a specific undertaking by one Contracting
Party vis-à-vis investors of the other Contracting Party shall be governed, without
prejudice to the provisions of this Agreement, by the terms of this undertaking, in so
far as its provisions are more favourable than those laid down by this Agreement.
35. In a footnote, the Tribunal declared:

Article 10 protects rights granted to an investor under a special agreement if such rights
are more favorable to the investor than those granted under the bit. The question here is
not whether one or the other is more favorable, but whether the Tribunal is in a position,
on the facts of this case, to separate the breach of contract issues from violations of the
bit, considering that the parties to the Concession Contract have agreed to an exclusive
remedy in the Tucuman courts for the determination of the disputed contractual issues
which are not governed by the bit.46
36. The second point concerns the Tribunals explanation of why, in its view, the
so-called fork in the road provision of Article 8(2) of the bit has no application
to Claimants in the circumstances of this case. Article 8(2) provides in relevant part
that, [o]nce an investor has submitted the dispute to the courts of the Contracting
Party concerned or to international arbitration, the choice of one or the other of
those procedures is final. In the Tribunals view, recourse by Claimants to the
contentious administrative courts of Tucuman would not have precluded them from
subsequently bringing claims before an icsid tribunal in accordance with the bit,
i.e., it would not have amounted to a final choice of one or the other of those
procedures within Article 8(2). The Tribunal addressed this question twice, in
paragraphs 55 and 81 of the Award.
37. In paragraph 55, the Tribunal announced this conclusion with the prefatory
words [b]y this same analysis. The analysis in question is found in paragraphs 53
and 54, where, after analysing the decision in the Lanco case, the Tribunal stated:
53. . . . In this case the claims filed by cge against Respondent are based on violation
by the Argentine Republic of the bit . . . As formulated, these claims against the
Argentine Republic are not subject to the jurisdiction of the contentious administrative
tribunals of Tucuman, if only because, ex hypothesi, those claims are not based on the
Concession Contract but allege a cause of action under the bit.
54. Thus, Article 16.4 of the Concession Contract cannot be deemed to prevent the
investor from proceeding under the icsid Convention against the Argentine Republic
on a claim charging the Argentine Republic with a violation of the ArgentineFrench
bit.
55. By this same analysis, a suit by Claimants against Tucuman in the administrative
courts of Tucuman for violation of the terms of the Concession Contract would not
have foreclosed Claimant from subsequently seeking a remedy against the Argentine
Republic as provided in the bit and icsid Convention . . .47
46
47
Award, para. 78, note 20; 40 ILM 426 (2001), p. 449.

40 ILM 426 (2001), pp. 4389 (emphasis added, footnote omitted).
352
38. As these passages show, the Tribunal interpreted Article 8(2) as applying
only to claims of a breach of the bit, and not to purely contractual or other claims
within the jurisdiction of the administrative courts of Tucuman, even if those claims
overlapped with the claims for breach of the bit. In other words, in the view of the
Tribunal, the fork in the road set out in Article 8(2) is limited in its application to
claims which explicitly allege a cause of action under the bit or which [charge]
the Argentine Republic with a violation of the ArgentineFrench bit; it does not
apply in the circumstance of claims based on the Concession Contract or to a
suit by Claimants . . . for violation of the terms of the Concession Contract.
39. That this is the correct interpretation of the Tribunals ruling as to Article
8(2) is reinforced by the discussion contained in footnote 19, at paragraph 53 of
the Award, where the Tribunal explicitly rejected Respondents contention that the
Tucuman courts would have had jurisdiction over a claim against the Argentine
Republic based on the bit. It gave two reasons: first, the Argentine Republic
could have engaged in conduct or failed to act in violation of its obligations under
the bit even if Tucuman were not in violation of the Concession Contract; and
second, the Tucuman courts do not have jurisdiction over such a suit [against the
Argentine Republic] absent consent by Respondent. The underlying assumption
is, again, that for a claim before the Tucuman courts to be covered by Article 8(2),
it would have to be based on the bit.
40. The Tribunal returned to the question in paragraph 81 of its Award:
That is why the Tribunal rejects Claimants position that they had no obligation to
pursue such local remedies against the Province or that, in the event of a denial of
justice of [sic] rights under the bit, that any such legal action in the Tucuman courts
would have waived their right to resort to arbitration against the Argentine Republic
before icsid under the bit.48
41. The Tribunals stated rationale for rejecting Claimants position is the impossibility, on the facts of the instant case, of separating potential breaches of
contract claims from bit violations without interpreting and applying the Concession Contract, a task that the contract assigns expressly to the local courts. The
Tribunal appears to have considered that, because Claimants contract and treaty
claims could not be separated, a distinct claim based on the bit was impossible
in the circumstances of the case, at least prior to submission of the dispute to the
provincial courts.
42. Thus, it seems that the Tribunals conclusion that the fork in the road was
never reached in this case is based on an interpretation of Article 8(2) which limits
its application exclusively to claims alleging a breach of the bit, that is, to treaty
claims as such.
43. The Tribunal returned to consider the Tucuman claims in paragraph 91 of
the Award, which addresses Claimants allegations regarding hostile and concerted
action by officials, legislative and executive. In this regard, the Tribunal said:
48
Ibid., p. 444.
353
In addition to pointing out that the legislators on whose actions the Claimants rely
were opponents of the governing party in Tucuman at the time that the disputes arose
under the Concession Contract, Respondent presented a point by point refutation of
the other evidence upon which Claimants rely for these allegations. After carefully
reviewing the extensive memorials and testimony, the Tribunal finds that the record
in these proceedings regarding these allegations does not establish a factual basis for
attributing liability to the Argentine Republic under the bit for the alleged actions of
officials of Tucuman.49
C. The Committees Analysis

44. Before proceeding to analyse the Tribunals reasoning in more detail, with
a view specifically to assessing the validity of the grounds of annulment raised
by the parties, it is necessary to say something about the FranceArgentina bit of
3 July 1991, and about the role of annulment panels and the scope of their powers.
(1) Relevant Provisions of the FranceArgentina bit
45. The Agreement between the Government of the Argentine Republic and the
Government of the Republic of France for Reciprocal Protection and Promotion
of Investments was signed by France and Argentina at Paris on 3 July 1991 and
came into force on 3 March 1993.50 It deals, inter alia, with the following matters
relevant to the present proceeding.
(a) Definition of investor and investment
46. Article 1(1) contains a broad definition of the term investment, which
includes: Shares, issue premiums and other forms of participation, albeit minority
or indirect, in companies constituted in the territory of either Contracting Party,
which are invested in accordance with the law of the Contracting Party before or
after the entry into force of the bit.51
47. The term investor is defined in Article 1(2). It is stated to apply to: (a)
individuals; (b) bodies corporate having the nationality of one of the Contracting
Parties, and also to
(c) Any body corporate effectively controlled, directly or indirectly, by nationals
of one Contracting Party, or by bodies corporate having their registered office in the
territory of one Contracting Party and constituted in accordance with that Partys legislation.52
48. At the time the Concession Contract was signed and the initial investment
was made, the shareholding in caa was divided between cge, a Spanish company,
Dragados y Construcciones Argentina SA (Dycasa), and an Argentine company,
49
50
51
52
Ibid., p. 446.
Above, note 3.
bit, Article 1(1)(b).
bit, Article 1(2)(c).
354
Benito Roggio e Hijos SA (Roggio), none of which had a controlling shareholding

in caa. When the letter of 5 March 1996 was written, Dycasa maintained its interest
in caa, hence the letter referred not only to the ArgentineFrance bit but also to
a bit between Spain and Argentina. Subsequently, in June 1996, cge acquired
Dycasas shareholding and thus had effective control of caa within the meaning of
Article 1(2)(c) of the ArgentineFrench bit at the time the arbitration proceedings
were commenced.
49. Notwithstanding these facts (on which there seems to be no dispute between
the parties) the Tribunal held, in a footnote, that caa should be considered a French
investor from the effective date of the Concession Contract.53 The Respondent
claims that this finding was unsupported by any reasons and was in fact contradicted
by uncontested evidence before the Tribunal. According to the Respondent, cge was
not the controlling shareholder at the time when most of the alleged bit violations
occurred, and caa was accordingly not an investor for the purposes of the bit at
that time.
50. In common with other bits, Article 1 clearly distinguishes between foreign
shareholders in local companies and those companies themselves. While the foreign
shareholding is by definition an investment and its holder an investor, the local
company only falls within the scope of Article 1 if it is effectively controlled,
directly or indirectly, by nationals of one Contracting Party or by corporations
established under its laws. In accordance with these provisions, which determine
the scope of operation of the bit, issues might well arise where there has been a
transfer of control of a local company from a shareholder of one nationality to a
shareholder of another. For example, if Dycasa had a Spanish treaty claim prior to
March 1996, questions might arise as to how that claim could be later transferred
to a French company, or as to how cge could have acquired a French treaty claim
in respect of conduct concerning an investment which it did not hold at the time
the conduct occurred and which at that time did not have French nationality. At
least, such questions might affect the quantum of recovery, but they might have
further and even more basic legal consequences. But while it is arguable that the
Tribunal failed to state any reasons for its finding that caa should be considered
a French investor from the effective date of the Concession Contract, that finding
played no part in the subsequent reasoning of the Tribunal, or in its dismissal of the
claim. Moreover it cannot be argued that cge did not have an investment in caa
from the date of the conclusion of the Concession Contract, or that it was not an
investor in respect of its own shareholding, whether or not it had overall control of
caa. Whatever the extent of its investment may have been, it was entitled to invoke
the bit in respect of conduct alleged to constitute a breach of Articles 3 or 5. It is
also clear that cge controlled caa at the time the proceedings were commenced,
so that there was no question that the Tribunal lacked jurisdiction over caa as one
of Claimants in the arbitration. In the circumstances, and for the purposes of the
present proceedings, the Committee does not need to reach any conclusion on the
precise extent of caas and cges treaty rights at different times.
53
Award, para. 24, note 6; 40 ILM 426 (2001), pp. 4478.
355
(b) Local remedies and their relation to arbitration under the bit
51. The role and effect, if any, of local remedies available to the investor under
the FranceArgentina bit are addressed in Article 8 of the bit, which is central to
this case, and in certain articles of the icsid Convention, especially Article 26.
52. In accordance with Article 26 of the Convention, consent to icsid arbitration
involves consent to the exclusion of any other remedy. A Contracting State may
qualify its consent by requiring, as a pre-condition to arbitration, the exhaustion
of local administrative or judicial remedies. Argentina did not impose such a precondition when it agreed to Article 8 of the bit. Accordingly it is common ground
(and the Tribunal so held) that the exhaustion of local remedies rule does not apply
to claims under the bit.
53. Article 8 of the bit expressly gives investors a choice of forum. Article 8
provides in full as follows:
1. Any dispute relating to investments made under this Agreement between one
Contracting Party and an investor of the other Contracting Party shall, as far as possible,
be settled amicably between the two parties concerned.
2. If any such dispute cannot be so settled within six months of the time when a
claim is made by one of the parties to the dispute, the dispute shall, at the request of
the investor, be submitted:
Either to the domestic courts of the Contracting Party involved in the dispute;
Or to international arbitration under the conditions described in paragraph 3 below.
Once an investor has submitted the dispute to the courts of the Contracting Party concerned or to international arbitration, the choice of one or the other of these procedures
is final.
3. Where recourse is had to international arbitration, the investor may choose to
bring the dispute before one of the following arbitration bodies:
The International Centre for Settlement of Investment Disputes (icsid), established
by the Convention on the Settlement of Investment Disputes between States and
National of other States opened for signature in Washington on 18 March 1965,
if both States Parties to this Agreement have already acceded to the Convention.
Until such time as this requirement is met, the two Contracting Parties shall agree
to submit the dispute to arbitration, in accordance with the rules of procedure of the
Additional Facility of icsid;
An ad hoc arbitral tribunal established in accordance with the Arbitration Rules of
the United Nations Commission on International Trade Law (uncitral).
4. The ruling of the arbitral body shall be based on the provisions of this Agreement,
the legislation of the Contracting Party which is a party to the dispute, including rules
governing conflict of laws, the terms of any private agreements concluded on the subject
of the investment, and the relevant principles of international law.
5. Arbitral decisions shall be final and binding on the parties to the dispute.
54. Two initial points may be made about these provisions. First, it is evident that the term national jurisdictions as used in Article 8(2) (juridictions
nationales/jurisdiciones nacionales in the authentic French and Spanish texts;
domestic courts in the unts English translation) refers to all the courts and
tribunals of the Contracting Parties, and not just to those at the federal level.
In a treaty between a unitary and a federal state, such as France and Argentina
356
respectively, one would not expect any disparity in the application of a phrase such
as national jurisdictions: all French courts and tribunals are national, as are, for the
purposes of the bit, all courts and tribunals of Argentina. The relevant distinction,
as Article 8(2) makes clear, is between national and international tribunals, not
between national and provincial courts. Thus, there is no disparity between
the phrases national jurisdictions [i.e., courts] and jurisdictions [courts] of the
Contracting Party as used in the two paragraphs of Article 8(2). In consequence,
the contentious administrative courts of Tucuman are to be considered as national
courts falling within the scope of Article 8(2).54
55. Secondly, Article 8 deals generally with disputes relating to investments
made under this Agreement between one Contracting Party and an investor of
the other Contracting Party. It is those disputes which may be submitted, at the
investors option, either to national or international adjudication. Article 8 does not
use a narrower formulation, requiring that the investors claim allege a breach of
the bit itself. Read literally, the requirements for arbitral jurisdiction in Article 8
do not necessitate that the Claimant allege a breach of the bit itself: it is sufficient
that the dispute relate to an investment made under the bit. This may be contrasted,
for example, with Article 11 of the bit, which refers to disputes concerning the
interpretation or application of this Agreement, or with Article 1116 of the nafta,
which provides that an investor may submit to arbitration under Chapter 11 a
claim that another Party has breached an obligation under specified provisions of
that Chapter. Consequently, if a claim brought before a national court concerns a
dispute relating to investments made under this Agreement within the meaning of
Article 8(1), then Article 8(2) will apply.55 In the Committees view, a claim by caa
against the Province of Tucuman for breach of the Concession Contract, brought
before the contentious administrative courts of Tucuman, would prima facie fall
within Article 8(2) and constitute a final choice of forum and jurisdiction, if that
claim was coextensive with a dispute relating to investments made under the bit.
(c) Scope and application of substantive provisions of the bit
56. Claimants case before the Tribunal was based on Articles 3 and 5 of the
bit, which deal, respectively, with fair and equitable treatment according to the
principles of international law and with measures of expropriation . . . or any
other equivalent measure.
57. Article 3 provides that:
Each Contracting Party shall undertake to accord in its territory and maritime zone just
and equitable treatment, in accordance with the principles of international law, to the
investments of investors of the other Party and to ensure that the exercise of the right
so granted is not impeded either de jure or de facto.
58. Article 5 provides that:

54
Although counsel for the Respondent contended otherwise before the Committee, the issue does not
appear to have been the basis for the Tribunals ruling on Article 8(2). See above, paras. 3541, where
the Committee summarises its understanding of the Tribunals reasoning on this point.
55
Cf. Waste Management, Inc. v. Mexico (No. 1), 40 ILM 56 (2001) at p. 68 (para. 28).
357
1. Investments made by investors of one Contracting Party shall be fully and completely protected and safeguarded in the territory and maritime zone of the other
Contracting Party, in accordance with the principle of just and equitable treatment
mentioned in article 3 of this Agreement.
2. The Contracting Parties shall not take, directly or indirectly, any expropriation or
nationalization measures or any other equivalent measures having a similar effect of
dispossession, except for reasons of public necessity and on condition that the measures
are not discriminatory or contrary to a specific undertaking.
Any such dispossession measures taken shall give rise to the payment of prompt
and adequate compensation the amount of which, calculated in accordance with the
real value of the investments in question, shall be assessed on the basis of a normal
economic situation prior to any threat of dispossession.
The amount and methods of payment of such compensation shall be determined not
later than the date of dispossession. The compensation shall be readily convertible,
paid without delay and freely transferable. It shall yield, up to the date of payment,
interest calculated at the appropriate rate.
3. Investors of either Contracting Party whose investments have suffered losses as
a result of war or any other armed conflict, revolution, state of national emergency
or uprising in the territory or maritime zone of the other Contracting Party shall be
accorded by the latter Party treatment which is no less favourable than that accorded
to its own investors or to investors of the most-favoured nation.
59. Both these Articles refer to an international law standard, expressly or by clear
implication. The protection afforded under both Articles is extended to investments
made by investors.
60. Again it is evident that a particular investment dispute may at the same
time involve issues of the interpretation and application of the bits standards and
questions of contract. Article 8(4), by expressly empowering the Tribunal to base its
ruling on the provisions of the bit as well as on the terms of any private agreements
concluded on the subject of the investment, clearly acknowledges that possibility.
So too does Article 8(2), which contemplates that the very same dispute may be
submitted either to the domestic courts of the Contracting Party (to be determined
in accordance with the domestic law of that State), or to international arbitration (to
be determined in accordance with the applicable law identified in Article 8(4)).
(2) The Role of Annulment Under the icsid Convention
61. It is against this background that the Committee has to consider the grounds
for annulment relied on before it. Before doing so, however, some brief remarks on
the role of annulment in the icsid system are necessary.
62. Although the issue of the proper role of an annulment committee in the icsid
system must necessarily inform the analysis and the conclusions of this Committee,
relatively little needs to be said about the issue for the reason that there seems to
be little disagreement between the parties. Claimants and Respondent agree that an
ad hoc Committee is not a court of appeal and that its competence extends only to
annulment based on one or other of the grounds expressly set out in Article 52 of
the icsid Convention. It also appears to be established that there is no presumption
358
either in favour of or against annulment,56 a point acknowledged by Claimants as

well as Respondent.
63. No doubt the Committee must take great care to ensure that the reasoning of
an arbitral tribunal is clearly understood, and must guard against the annulment of
awards for trivial cause. But where a tribunal has manifestly exceeded its powers
or has committed a serious departure from a fundamental rule of procedureboth
grounds for annulment under Article 52 of the icsid Convention and both relied on
by Claimants in this proceedingthe matter is by definition not trivial.
64. A greater source of concern is perhaps the ground of failure to state reasons,
which is not qualified by any such phrase as manifestly or serious. However, it
is well accepted both in the cases and the literature that Article 52(1)(e) concerns a
failure to state any reasons with respect to all or part of an award, not the failure to
state correct or convincing reasons.57 It bears reiterating that an ad hoc committee is
not a court of appeal. Provided that the reasons given by a tribunal can be followed
and relate to the issues that were before the tribunal, their correctness is beside the
point in terms of Article 52(1)(e). Moreover, reasons may be stated succinctly or
at length, and different legal traditions differ in their modes of expressing reasons.
Tribunals must be allowed a degree of discretion as to the way in which they express
their reasoning.
65. In the Committees view, annulment under Article 52(1)(e) should only occur in a clear case. This entails two conditions: first, the failure to state reasons
must leave the decision on a particular point essentially lacking in any expressed
rationale; and second, that point must itself be necessary to the tribunals decision.
It is frequently said that contradictory reasons cancel each other out, and indeed, if
reasons are genuinely contradictory so they might. However, tribunals must often
struggle to balance conflicting considerations, and an ad hoc committee should
be careful not to discern contradiction when what is actually expressed in a tribunals reasons could more truly be said to be but a reflection of such conflicting
considerations.
66. Finally, it appears to be established that an ad hoc committee has a certain measure of discretion as to whether to annul an award, even if an annullable
error is found. Article 52(3) provides that a committee shall have the authority
to annul the award or any part thereof, and this has been interpreted as giving
committees some flexibility in determining whether annulment is appropriate in
the circumstances.58 Among other things, it is necessary for an ad hoc committee
to consider the significance of the error relative to the legal rights of the parties.
This question, as it applies in the circumstances of the present case, is addressed
below.
67. Another question, which was debated between the parties in this case, is
whether an ad hoc committee is limited to the grounds for annulment relied on
by a Claimant, or whether the Respondent may itself raise additional grounds for
56
Cf. MINE v. Guinea, Decision on Annulment of 22 December 1989, (1989) 4 ICSIDReports 79 at p.
86 (paras. 4.094.12); and see also C. Schreuer, The ICSID Convention: A Commentary (Cambridge,
Cambridge Unversity Press, 2001) (hereafter Schreuer), at pp. 9023.
57
See Schreuer, pp. 9841008.
58
See Schreuer, pp. 101823, with references to the authorities, especially MINE, at paras. 4.094.10.
359
annulment. In their Application, Claimants sought only the partial annulment of the
Award, on three grounds: (1) that the Tribunal manifestly exceeded its powers; (2)
that there had been a serious departure from a fundamental rule of procedure; and
(3) that the Award failed to state the reasons on which it is based.59 The Respondent
not only resisted each of these contentions, it further argued that if any of them were
to be upheld, the Award as a whole should be annulled, on the grounds either that
the Tribunal had no jurisdiction at all, or that there was a fundamental contradiction
in the Tribunals reasoning as between that part which dealt with jurisdiction and
that part which dealt with the merits. By way of reply, in their written pleadings,
Claimants argued that what they called Respondents counterclaim for annulment
of the Award as a whole was inadmissible, on the ground that it was out of time
and that Article 52 made no provision for counterclaims.
68. The Committee agrees with Claimants that a counterclaim for annulment,
that is, a claim which is not raised by the party concerned as a separate request in
accordance with Article 52(1) of the Convention, is inadmissible. But it does not
follow that a party, such as Respondent in the present case, may not present its own
arguments on questions of annulment, provided that those arguments concern specific matters pleaded by the party requesting annulment, in this case the Claimants.
In the opinion of the Committee, a party to annulment proceedings which successfully pleads and sustains a ground for annulment set out in Article 52(1) of the icsid
Convention cannot limit the extent to which an ad hoc committee may decide to
annul the impugned award as a consequence. Certain grounds of annulment will
affect the award as a wholefor example, where it is demonstrated that the tribunal
which rendered the award was not properly constituted (Article 52(1)(a)). Others
may only affect part of the award. An ad hoc committee is expressly authorised by
the Convention to annul an award in whole or in part (Article 52(3)).
69. Thus where a ground for annulment is established, it is for the ad hoc committee, and not the requesting party, to determine the extent of the annulment. In
making this determination, the committee is not bound by the applicants characterisation of its request, whether in the original application or otherwise, as requiring
either complete or partial annulment of the award. This is reflected in the difference
in language between Articles 52(1) and 52(3), and it is further supported by the
travaux of the icsid Convention. Indeed, Claimants in the present case eventually
accepted this view.
70. In seeking in the alternative the annulment of the jurisdictional portion of the
Award, the Respondent was not making a late annulment application by way of a
counterclaima procedure which, as Claimants correctly asserted, is not contemplated by Article 52 of the icsid Convention. Rather it was arguing that if Claimants
position on the merits were to be upheld, either under Article 52(1)(b) or 52(1)(e),
the effect must necessarily be to bring down the whole Award. That position was
entirely open to the Respondent. It in no way entailed what would have been an
inadmissible counterclaim for annulment on new grounds.
59
Application, para. 3; see also para. 2 of the present decision.
360
(3) The Grounds of Annulment

71. The Committee accordingly turns to the grounds for annulment themselves.
Since, as explained above, the grounds validly pleaded by the Respondent extend
to the Tribunals holding on jurisdiction, it is appropriate to consider first the issue
of the Tribunals jurisdiction.
(a) The Tribunals jurisdictional finding

72. The Committee has already summarised the grounds on which the Tribunal
upheld its jurisdiction. The Tribunal gave extensive reasons for doing so, and these
reasons are not in themselves contradictory.60 It is true that Respondent argued, in the
alternative, that there was a contradiction between those reasons and the reasons
given by the Tribunal concerning the merits. But Argentina also argued that the
Tribunal lacked jurisdiction in any event. If this is right, it was a manifest excess
of power for the Tribunal to proceed to consider the merits, and the whole Award
must be annulled. Accordingly, the question of failure to give reasons, including
possibly contradictory reasons, does not arise so far as the Tribunals jurisdictional
finding is concerned.
73. For its part, however, the Committee has no difficulty accepting each of
the four propositions, summarised in paragraph 14 above, on the basis of which
the Tribunal held that it had jurisdiction and that its jurisdiction extended to the
Tucuman claims.
74. In particular, the Committee agrees with the Tribunal in characterising the
present dispute as one relating to investments made under this Agreement within
the meaning of Article 8 of the bit. Even if it were necessary in order to attract the
Tribunals jurisdiction that the dispute be characterised not merely as one relating
to an investment but as one concerning the treatment of an investment in accordance
with the standards laid down under the bit, it is the case (as the Tribunal noted)
that Claimants invoke substantive provisions of the bit.
75. The Committee likewise agrees that the fact that the investment concerns a
Concession Contract made with Tucuman, a province of Argentina which has not
been separately designated to icsid under Article 25(1), does not mean that the
dispute falls outside the scope of the bit, or that the investment ceases to be one
between one Contracting Party and an investor of the other Contracting Party
within the meaning of Article 8(1) of the bit.
76. This being so, the fact that the Concession Contract referred contractual
disputes to the contentious administrative courts of Tucuman did not affect the
jurisdiction of the Tribunal with respect to a claim based on the provisions of the
bit. Article 16(4) of the Concession Contract did not in terms purport to exclude
the jurisdiction of an international tribunal arising under Article 8(2) of the bit; at
the very least, a clear indication of an intention to exclude that jurisdiction would
be required.
60
With the possible exception of the matter concerning Dycasas shares, referred to above, para. 48.
361
77. The Lanco decision, cited by the Tribunal, supports its finding of jurisdiction.61
In that case the contract at issue, which involved an agency of the federal government of Argentina, contained an exclusive jurisdiction clause referring contractual
disputes to a federal contentious administrative tribunal. The Lanco Tribunal held:
[T]he stipulation of Article 12 of the Concession Agreement, according to which the
parties shall submit to the jurisdiction of the Federal Contentious-Administrative Tribunals of the City of Buenos Aires, cannot be considered a previously agreed disputesettlement procedure. The Parties could have foreseen submission to domestic or international arbitration, but the choice of a national forum could only lead to the jurisdiction
of the contentious-administrative tribunals, since administrative jurisdiction cannot be
selected by mutual agreement.62
78. But in any event the Lanco Tribunal denied that an exclusive jurisdiction
clause could exclude icsid jurisdiction, relying in particular on Article 26 of the
icsid Convention. It said:
39 A State may require the exhaustion of domestic remedies as a prior condition for
its consent to icsid arbitration. This demand may be made (i) in a bilateral investment
treaty that offers submission to icsid arbitration, (ii) in domestic legislation, or (iii) in
a direct investment agreement that contains an icsid clause. The ArgentinaUS Treaty
does not provide at any point for the exhaustion of domestic remedies, and the Argentine
Republic, for its part, has not alleged that there is any such domestic legislation. The
only requirement that the ArgentinaUS Treaty does provide for is the period of six
months that is required for turning to icsid arbitration.
40 In our case, the Parties have given their consent to icsid arbitration, consent that
is valid, there thus being a presumption in favor of icsid arbitration, without having
first to exhaust domestic remedies. In effect, once valid consent to icsid arbitration is
established, any other forum called on to decide the issue should decline jurisdiction.
The investors consent, which comes from its written consent by letter of September
17, 1997, and its request for arbitration of October 1, 1997, and the consent of the State
which comes directly from the ArgentinaUS Treaty, which gives the investor the
choice of forum for settling its disputes, indicate that there is no stipulation contrary to
the consent of the parties . . . In effect, the offer made by the Argentine Republic to covered investors under the ArgentinaUS Treaty cannot be diminished by the submission
to Argentinas domestic courts, to which the Concession Agreement remits.63
79. Indeed, Lanco was a stronger case on the facts than the present, as regards
the effect of an exclusive jurisdiction clause, since the foreign claimant in Lanco
was actually a party to the exclusive jurisdiction clause at issue, unlike cge here.64
61
40 ILM 457 (2001), cited by the Tribunal in its Award, para. 53.
40 ILM 457 (2001), p. 466 ( 26).
Ibid., 3940.
64
See also Salini Costruttori SpA v. Kingdom of Morocco, icsid, jurisdictional decision, 23 July 2001,
reported in [2001] Journal de droit international 196, with note by Gaillard, ibid., p. 209. This was a
construction dispute focusing on the amount payable under a contract with a local jurisdiction clause.
The Tribunal held that provisions in the bit concerning measures of expropriation or nationalization
ne saurait e tre interpretee dans le sens dune exclusion de tout grief dorigine contractuelle du champ
de lapplication de cet article (p. 209, para. 59), and further that, notwithstanding the local jurisdiction
62
63
362
80. For all these reasons, the Respondents request that the Tribunals jurisdictional finding be annulled must be rejected.
(b) The Tribunals findings on the merits
81. Claimants relied on three grounds set out in Article 52 of the icsid Convention
as supporting its request for partial annulment. The Committee will deal with these
in turn.
(i) Serious departure from a fundamental rule of procedure: Article 52(1)(d)
82. The first of these grounds concerns the claim that there has been a serious
departure from a fundamental rule of procedure (Article 52(1)(d)). Claimants
argued that the Tribunal had departed from a fundamental rule of procedure in
that its eventual decision, notably as to the dismissal of the Tucuman claims on
grounds related to Article 16(4) of the Concession Contract, concerned a question
not adequately canvassed in argument.
83. The Committee cannot find in the record of the arbitration, including the
Award, any basis for Claimants allegations in this regard. Under Article 52(1)(d),
the emphasis is clearly on the term rule of procedure, that is, on the manner in
which the Tribunal proceeded, not on the content of its decision. In the opinion of
the Committee, the Tribunal proceeded with abundant care. It considered the issue
of jurisdiction first, and it decided, in the exercise of its discretion, to join that issue
to the merits of the dispute. It then considered the merits at length and rendered a
densely reasoned award.
84. Claimants contend the Tribunals decision came unannounced, and that they
had no opportunity to present arguments on the decision to dismiss their claim
on the merits on grounds related to Article 16(4) of the Concession Contract. It
may be true that the particular approach adopted by the Tribunal in attempting to
reconcile the various conflicting elements of the case before it came as a surprise
to the parties, or at least to some of them. But even if true, this would by no means
be unprecedented in judicial decision-making, either international or domestic,
and it has nothing to do with the ground for annulment contemplated by Article
52(1)(d) of the icsid Convention. In fact, the Tribunal had already determined that
the questions of jurisdiction and merits were closely linked, and it had joined the
two. Moreover, in its questioning and especially its request for post-hearing briefs,
the Tribunal clearly indicated that it had concerns as to how to reconcile Article 8
of the bit and Clause 16(4) of the Concession Contract.
85. From the record, it is evident that the parties had a full and fair opportunity to
be heard at every stage of the proceedings. They had ample opportunity to consider
and present written and oral submissions on the issues, and the oral hearing itself
was meticulously conducted to enable each party to present its point of view. The
Tribunals analysis of issues was clearly based on the materials presented by the
parties and was in no sense ultra petita. For these reasons, the Committee finds
no departure at all from any fundamental rule of procedure, let alone a serious
departure.
clause, le Tribunal arbitral demeure competent pour les violations du contrat qui constituerait en meme
temps, a` la charge de lEtat une violation de lAccord bilateral (p. 209, para. 62).
363
(ii) Manifest excess of powers: Article 52(1)(b)

86. It is settled, and neither party disputes, that an icsid tribunal commits an
excess of powers not only if it exercises a jurisdiction which it does not have under
the relevant agreement or treaty and the icsid Convention, read together, but also if
it fails to exercise a jurisdiction which it possesses under those instruments.65 One
might qualify this by saying that it is only where the failure to exercise a jurisdiction
is clearly capable of making a difference to the result that it can be considered a
manifest excess of power. Subject to that qualification, however, the failure by a
tribunal to exercise a jurisdiction given it by the icsid Convention and a bit, in
circumstances where the outcome of the inquiry is affected as a result, amounts in
the Committees view to a manifest excess of powers within the meaning of Article
52(1)(b).
87. No doubt an icsid tribunal is not required to address in its award every argument made by the parties, provided of course that the arguments which it actually
does consider are themselves capable of leading to the conclusion reached by the
tribunal and that all questions submitted to a tribunal are expressly or implicitly
dealt with. In the present case, Claimants contend that, far from considering their
claims concerning breach of the bit prior to purportedly dismissing them, the Tribunal actually declined to decide Claimants allegations since it considered that,
in order to do so, it would have had to address issues which, according to the
Concession Contract, fell within the exclusive jurisdiction of the Tucuman courts.
Claimants argue that if the Tribunal was wrong as regards this approachthat is,
if the Tribunal erred in finding that it could not consider the bit claims, in the
circumstancesit failed to exercise its treaty jurisdiction, a jurisdiction which it
had itself upheld. On that assumption, its failure to do so could also be said to be
manifest.
88. With these preliminary comments in mind, the Committee turns to the substance of Claimants request for partial annulment of the Award on the ground of
manifest excess of powers. In doing so, it is necessary to distinguish between the
Tribunals treatment of the federal claims and the Tucuman claims.
The federal claims
89. An initial point concerns Claimants argument that there was a breach of the
bit by reason of the actions and omissions of ministers and officers of the federal
government of the Argentine Republicthe so-called federal claims. As the
review of the Tribunals reasoning set out at paragraphs 1822 above demonstrates,
the Award clearly evidences a certain reliance on Article 16(4) of the Concession
Contract even as to the federal claims; and the Tribunals interpretation of the
obligations incumbent on the federal authorities under the bit emerges more by
implication from its treatment of the facts than as a result of any detailed analysis.
However, in the opinion of the Committee, it is nonetheless clear that the Tribunal
carefully considered the federal claims on the facts, and that it rejected those claims.
The Tribunal committed no excess of power, manifest or other, so far as the federal
claims are concerned.
65
Schreuer, pp. 9378.
364
90. Claimants submit that, even if the Tribunal could be said to have considered
the federal claims on their merits, its consideration was vitiated in that the Tribunals handling of the federal and Tucuman claims was interdependent. Specifically, Claimants argue that if Tucumans actions did in truth constitute a breach
of the bit, then Respondent was under a far more stringent obligation to respond
and to correct the situation than the Tribunal found applied to it. Claimants contend
that the Tribunalalways with its mind set on Article 16(4)failed to consider
this alternative. In the opinion of the Committee, it is true, as mentioned in the
preceding paragraph, that Article 16(4) did obtrude into the Tribunals analysis
of the federal claims to some degree. However, the Tribunal did not suggest that
Claimants were in any sense obliged to pursue their federal claims in any domestic
court or tribunal. It held, rather, that the federal authorities could reasonably have
regarded the dispute as contractual in character,66 and that the extent of any federal
obligation to react could reasonably have been influenced by this perception.
91. As to the Tribunals findings of fact, there is no basis under Article 52 of
the icsid Convention for this Committee to disagree. The Tribunal found that the
Argentine federal authorities responded to Claimants initiatives, that they sought
to resolve the problem and in fact took reasonable steps to do so, that they did
not fail to do anything requested of them and that they were never themselves
charged, directly, with any breach of the bit. As to the Tribunals findings of law,
it may be that the Award lacks a detailed analysis of the relevant bit provisions,
as Claimants contend. Yet the gist of the Tribunals reasoning is clear enough. On
its face, Article 3 of the bit imposes no more than an obligation on the Argentine
Republic to take appropriate care. And the Tribunals findings, taken together, are
more than sufficient to provide a basis for the Tribunals clear conclusion that the
federal claims were not sustainable, and that there had been no breach of Article 3 as
a result of any federal act or omission. Moreover the Committee does not consider
that the Tribunals dismissal of Claimants federal claims was so intimately linked
to its decision regarding the Tucuman claims, and to its alleged failure to exercise
its jurisdiction with respect to the latter, that the Tribunals determination of the
federal claims must fall in the event that its decision on the Tucuman claims is
annulled.
92. For these reasons, Claimants request for partial annulment of the Award in
relation to the Tribunals determination of the federal claims is rejected.
The Tucuman claims
93. The second question in relation to Article 52(1)(b) is whether the Tribunal,
having validly held that it had jurisdiction over the Tucuman claims, was entitled
nonetheless to dismiss them as it did. Claimants, for their part, submit that the
Tribunal did not so much dismiss the Tucuman claims as decline to address them.
They argue that the only reason those claims were dismissed was that they were
held to be substantially identical with claims against Tucuman under the Concession
Contract, which the Tribunal found it could not determine, and that the Tribunals
refusal to decide the Tucuman claims on this basis was a manifest excess of powers.
The Respondent argues that, assuming the Tribunal had jurisdiction over these
66
Award, para. 87; 40 ILM 426 (2001), p. 445.
365
claims, it acted correctly in dismissing them on the basis of Article 16(4) of the
Concession Contract, but that in any event this was not the only reason for dismissal
since the Tribunal did consider the Tucuman claims on their merits.
94. In dealing with these issues, it is necessary first to consider the relationship
between the responsibility of Argentina under the bit and the rights and obligations
of the parties to the Concession Contract (especially those arising from Article
16(4), the exclusive jurisdiction clause); and secondly, to consider precisely what
the Tribunal decided with respect to the Tucuman claims.
95. As to the relation between breach of contract and breach of treaty in the
present case, it must be stressed that Articles 3 and 5 of the bit do not relate
directly to breach of a municipal contract. Rather they set an independent standard.
A state may breach a treaty without breaching a contract, and vice versa, and this
is certainly true of these provisions of the bit. The point is made clear in Article 3
of the ilc Articles, which is entitled Characterization of an act of a State as
internationally wrongful:
The characterization of an act of a State as internationally wrongful is governed by
international law. Such characterization is not affected by the characterization of the
same act as lawful by internal law.
96. In accordance with this general principle (which is undoubtedly declaratory

of general international law), whether there has been a breach of the bit and whether
there has been a breach of contract are different questions. Each of these claims
will be determined by reference to its own proper or applicable lawin the case of
the bit, by international law; in the case of the Concession Contract, by the proper
law of the contract, in other words, the law of Tucuman. For example, in the case of
a claim based on a treaty, international law rules of attribution apply, with the result
that the state of Argentina is internationally responsible for the acts of its provincial
authorities.67 By contrast, the state of Argentina is not liable for the performance
of contracts entered into by Tucuman, which possesses separate legal personality
under its own law and is responsible for the performance of its own contracts.
97. The distinction between the role of international and municipal law in matters
of international responsibility is stressed in the commentary to Article 3 of the ilc
Articles, which reads in relevant part as follows:
(4) The International Court has often referred to and applied the principle. For
example in the Reparation for Injuries case, it noted that [a]s the claim is based on the
breach of an international obligation on the part of the Member held responsible . . .
the Member cannot contend that this obligation is governed by municipal law. In the
ELSI case, a Chamber of the Court emphasized this rule, stating that:
Compliance with municipal law and compliance with the provisions of a treaty are
different questions. What is a breach of treaty may be lawful in the municipal law
and what is unlawful in the municipal law may be wholly innocent of violation of a
treaty provision. Even had the Prefect held the requisition to be entirely justified in
67
See above, paras. 16, 2333, 43.
366

Italian law, this would not exclude the possibility that it was a violation of the FCN
Treaty.
Conversely, as the Chamber explained:

. . . the fact that an act of a public authority may have been unlawful in municipal law
does not necessarily mean that that act was unlawful in international law, as a breach
of treaty or otherwise. A finding of the local courts that an act was unlawful may
well be relevant to an argument that it was also arbitrary; but by itself, and without
more, unlawfulness cannot be said to amount to arbitrariness . . . Nor does it follow
from a finding by a municipal court that an act was unjustified, or unreasonable, or
arbitrary, that that act is necessarily to be classed as arbitrary in international law,
though the qualification given to the impugned act by a municipal authority may be
a valuable indication.
...
(7) The rule that the characterization of conduct as unlawful in international law
cannot be affected by the characterization of the same act as lawful in internal law makes
no exception for cases where rules of international law require a State to conform to the
provisions of its internal law, for instance by applying to aliens the same legal treatment
as to nationals. It is true that in such a case, compliance with internal law is relevant to
the question of international responsibility. But this is because the rule of international
law makes it relevant, e.g. by incorporating the standard of compliance with internal
law as the applicable international standard or as an aspect of it. Especially in the fields
of injury to aliens and their property and of human rights, the content and application of
internal law will often be relevant to the question of international responsibility. In every
case it will be seen on analysis that either the provisions of internal law are relevant
as facts in applying the applicable international standard, or else that they are actually
incorporated in some form, conditionally or unconditionally, into that standard.68
98. In a case where the essential basis of a claim brought before an international
tribunal is a breach of contract, the tribunal will give effect to any valid choice of
forum clause in the contract.69 For example in the Woodruff case,70 a decision of an
AmericanVenezuelan Mixed Commission in 1903, a claim was brought for breach
of a contract which contained the following clause:
Doubts and controversies which at any time might occur in virtue of the present agreement shall be decided by the common laws and ordinary tribunals of Venezuela, and
they shall never be, as well as neither the decision which shall be pronounced upon
them, nor anything relating to the agreement, the subject of international reclamation.
68
Commentary to Article 3, paras. (4), (7) (footnotes omitted). The passages from the ELSI case, quoted
in para. (4) of the commentary, are to be found at ICJ Reports 1989 at p. 51, para. 73, and p. 74, para.
124.
69
That is, unless the treaty in question otherwise provides. See, e.g., Article II(1) of the Claims Settlement
Declaration of 19 January 1981, 1 IranUS Claims Tribunal Reports p. 9, which overrode exclusive
jurisdiction clauses concerning United States courts but not Iranian courts: see the cases cited by
C. N. Brower & J. D. Brueschke, The IranUnited States Claims Tribunal (The Hague, Martinus
Nijhoff, 1998) pp. 6072. The Committee does not need to consider whether the effect of Article 8 of
the bit is to override exclusive jurisdiction clauses in contracts underlying investments to which the bit
applies.
70
Reports of International Arbitral Awards, vol. IX, p. 213.
367
99. The Commission in that case held that Woodruff was bound by this clause not
to refer his contractual claim to any other tribunal. At the same time, the exclusive
jurisdiction clause did not and could not preclude a claim by his government in the
event that the treatment accorded him amounted to a breach of international law:
[W]hereas certainly a contract between a sovereign and a citizen of a foreign country
can never impede the right of the Government of that citizen to make international
reclamation, wherever according to international law it has the right or even the duty
to do so, as its rights and obligations can not be affected by any precedent agreement
to which it is not a party;
But whereas this does not interfere with the right of a citizen to pledge to any other
party that he, the contractor, in disputes upon certain matters will never appeal to other
judges than to those designated by the agreement, nor with his obligation to keep
this promise when pledged, leaving untouched the rights of his Government, to make
his case an object of international claim whenever it thinks proper to do so and not
impeaching his own right to look to his Government for protection of his rights in case
of denial or unjust delay of justice by the contractually designated judges; . . .71
100. The Commission accordingly dismissed the claim without prejudice on

its merits, when presented to the proper judges, on the ground that by the very
agreement that is the fundamental basis of the claim, it was withdrawn from the
jurisdiction of this Commission.72
101. On the other hand, where the fundamental basis of the claim is a treaty
laying down an independent standard by which the conduct of the parties is to be
judged, the existence of an exclusive jurisdiction clause in a contract between the
claimant and the respondent state or one of its subdivisions cannot operate as a
bar to the application of the treaty standard.73 At most, it might be relevantas
municipal law will often be relevantin assessing whether there has been a breach
of the treaty.
102. In the Committees view, it is not open to an icsid tribunal having jurisdiction
under a bit in respect of a claim based upon a substantive provision of that bit,
to dismiss the claim on the ground that it could or should have been dealt with by
a national court. In such a case, the inquiry which the icsid tribunal is required to
undertake is one governed by the icsid Convention, by the bit and by applicable
international law. Such an inquiry is neither in principle determined, nor precluded,
by any issue of municipal law, including any municipal law agreement of the
parties.
103. Moreover the Committee does not understand how, if there had been a
breach of the bit in the present case (a question of international law), the existence
of Article 16(4) of the Concession Contract could have prevented its characterisation
71
Ibid., p. 222.
Ibid., p. 223.
73
It is not necessary for the Committee to pronounce on the content of the standard laid down in the
bit, in particular Article 3. It may be that mere breaches of contract, unaccompanied by bad faith
or other aggravating circumstances, will rarely amount to a breach of the fair and equitable treatment
standard set out in Article 3. The Tribunal did not, however, offer any interpretation of Article 3, nor
seek to base itself on this consideration.
72
368
as such. A state cannot rely on an exclusive jurisdiction clause in a contract to avoid

the characterisation of its conduct as internationally unlawful under a treaty.
104. The Respondent argues that, even if the Tribunal had jurisdiction, and even
if it could not decline to exercise that jurisdiction by reference to the exclusive
jurisdiction clause in the Concession Contract, this was not what the Tribunal did.
According to the Respondent, it emerges clearly from the Award that the Claimants
had no arguable case for a breach of Articles 3 or 5 of the bit and that, at best,
their claim was one for breach of contract: the issue of a treaty claim could only
arise in the event that the contentious administrative tribunals of Tucuman denied
Claimants justice, substantively or procedurally.
105. The question thus becomes how to characterize the Tribunals decision.
In considering that question, the Committee does not believe that it is material
either that cge was not a party to the Concession Contract or that the parties to
the Concession Contract were caa and the Province of Tucuman, as opposed to
caa and the federal government. If the Tribunal was right in saying that it could
not consider any allegation of breach of treaty which required it to interpret or
apply the Concession Contract, then it is arguable that cge could be in no better
position than caa. It is also arguable that this conclusion should apply even though
caas contractual commitment was to a province, since the acts of that province
form the nub of the claim. But it is one thing to exercise contractual jurisdiction
(arguably exclusively vested in the administrative tribunals of Tucuman by virtue of
the Concession Contract) and another to take into account the terms of a contract in
determining whether there has been a breach of a distinct standard of international
law, such as that reflected in Article 3 of the bit.
106. Claimants made a series of allegations as to the conduct of Tucuman, much
of which, they claim, involved measures taken in bad faith. Such action included
alleged instances of: acts of the Ombudsman and other regulatory authorities; incitement of consumers, by legislators and others, not to pay their water bills; unauthorized tariff changes; the incorrect imposition of fines (never in fact collected) for
allegedly deficient water quality; incorrect invoicing for municipal and provincial
water taxes; conduct relating to the black water problem, which was blamed on
caa but which caa denied was its fault; unilateral changes by the provincial Governor to the second renegotiated agreement; and various post-termination conduct.
This conduct, they contend, amounted on the whole to concerted action by the
Tucuman authorities to frustrate the concession.
107. The Tribunal expressed views on some of these allegations, but by no means
all. For example, in paragraph 82 of the Award, the Tribunal took the view that the
unilateral changes to the renegotiated agreement did not amount to a breach of the
bit because there was no legal duty to revise the concession contract.74 In paragraph
91, under the general heading Failure of the Argentine Republic to Respond to
Actions of Tucuman Officials, the Tribunal concluded that the record . . . does not
establish a factual basis for attributing liability to the Argentine Republic under the
bit for the alleged actions of officials of Tucuman.75 In its context the latter passage
74
75
Award, para. 82; 40 ILM 426 (2001), p. 444.

Award, para. 91; 40 ILM 426 (2001), p. 446.
369
is not unequivocal; it suggests that the Tribunal had in mind earlier discussion of
the strict liability standard of attribution, and the reference to alleged action is
troublesome: it is in the end unclear whether the Tribunal rejected the Claimants
allegations of fact or whether they held that the allegations, though potentially made
out, were not sufficient to attribute liability to the federal government.
108. But however this may be, it is clear from the core discussion of the Tucuman
claims, at paragraphs 7781 of the Award, that the Tribunal declined to decide
key aspects of the Claimants bit claims on the ground that they involved issues
of contractual performance or non-performance. The Tribunal itself characterised
these passages, in paragraph 81, as embodying its decision with respect to the
Tucuman claims.
109. A key passage in this regard is found in paragraph 79, where the Tribunal
said:
[G]iven the nature of the dispute between Claimants and the Province of Tucuman,
it is not possible for this Tribunal to determine which actions of the Province were
taken in exercise of its sovereign authority and which in the exercise of its rights as a
party to the Concession Contract considering, in particular, that much of the evidence
presented in this case has involved detailed issues of performance and rates under the
Concession Contract.76
110. This passage calls for two remarks. First, it is couched in terms not of
decision but of the impossibility of decision, the impossibility being founded on the
need to interpret and apply the Concession Contract.77 Yet under Article 8(4) of the
bit the Tribunal had jurisdiction to base its decision upon the Concession Contract,
at least so far as necessary in order to determine whether there had been a breach
of the substantive standards of the bit. Second, the passage appears to imply that
conduct of Tucuman carried out in the purported exercise of its rights as a party to
the Concession Contract could not, a priori, have breached the bit. However, there
is no basis for such an assumption: whether particular conduct involves a breach of
a treaty is not determined by asking whether the conduct purportedly involves an
exercise of contractual rights.78
76
Award, para. 79; 40 ILM 426 (2001), p. 443.

See also the Tribunals summary, cited in para. 11 above, where the Tribunal said it was impossible . . .
to distinguish or separate violations of the bit from breaches of the Concession Contract without first
interpreting and applying the detailed provisions of that agreement.
78
See ilc Articles, commentary to Article 4, para. (6), commentary to Article 12, paras. (9)(10).
See also C. Amerasinghe, State Breaches of Contracts with Aliens and International Law, American
Journal of International Law, vol. 58 (1964), p. 881, at pp. 91012: The general proposition that,
where a state performs an act which is prohibited by a treaty to which it is a party, it will be responsible
for a breach of international law to the other party or parties to the treaty requires no substantiation. In
accordance with the same principle, an act which constitutes a breach of contract would be a breach
of international law, if it is an act which that state is under an obligation not to commit by virtue of a
treaty to which it and the national state of the alien are parties; R. Jennings & A. Watts, Oppenheims
International Law (9th edn) (Harlow, Longman, 1992), p. 927: It is doubtful whether a breach by a
state of its contractual obligations with aliens constitutes per se a breach of an international obligation,
unless there is some such additional element as denial of justice, or expropriation, or breach of treaty,
in which case it is that additional element which will constitute the basis for the states international
responsibility.
77
370
111. For these reasons, and despite certain passages of the Award in which the
Tribunal seems to go further into the merits, the Committee can only conclude
that the Tribunal, in dismissing the Tucuman claims as it did, actually failed to
decide whether or not the conduct in question amounted to a breach of the bit. In
particular, the Tribunal repeatedly referred to allegations and issues which, it held,
it could not decide given the terms of Article 16(4) of the Concession Contract, even
though these were adduced by Claimants specifically in support of their bit claim.79
Moreover, it offered no interpretation whatsoever either of Article 3 or of Article
5 of the bit, something which was called for if the claims were to be dismissed on
their merits.
112. It is not the Committees function to form even a provisional view as to
whether or not the Tucuman conduct involved a breach of the bit, and it is important
to state clearly that the Committee has not done so. But it is nonetheless the case
that the conduct alleged by Claimants, if established, could have breached the bit.
The claim was not simply reducible to so many civil or administrative law claims
concerning so many individual acts alleged to violate the Concession Contract or
the administrative law of Argentina. It was open to Claimants to claim, and they
did claim, that these acts taken together, or some of them, amounted to a breach of
Articles 3 and/or 5 of the bit. In the Committees view, the Tribunal, faced with
such a claim and having validly held that it had jurisdiction, was obliged to consider
and to decide it. Although the Tribunal expressed conclusions on certain aspects of
the claim, it never expressed a conclusion as to the claim as a whole, still less did
it assess Claimants case against the requirements of Article 3 or 5 of the bit.
113. In the light of Article 8 of the bit, the situation carried risks for Claimants.
Having declined to challenge the various factual components of its treaty cause of
action before the administrative courts of Tucuman, instead choosing to commence
icsid arbitrationand having thereby, in the Committees view, taken the fork in
the road under Article 8(4)caa took the risk of a tribunal holding that the acts
complained of neither individually nor collectively rose to the level of a breach
of the bit. In that event, it would have lost both its treaty claim and its contract
claim. But on the other hand it was entitled to take that risk, with its associated
burden of proof. A treaty cause of action is not the same as a contractual cause
of action; it requires a clear showing of conduct which is in the circumstances
contrary to the relevant treaty standard. The availability of local courts ready and
able to resolve specific issues independently may be a relevant circumstance in
determining whether there has been a breach of international law (especially in
relation to a standard such as that contained in Article 3). But it is not dispositive,
and it does not preclude an international tribunal from considering the merits of the
dispute.
114. It should be stressed that the conduct complained of here was not more
or less peripheral to a continuing successful enterprise. The Tucuman conduct (in
conjunction with the acts and decisions of Claimants) had the effect of putting
an end to the investment. In the Committees view, the bit gave Claimants the
right to assert that the Tucuman conduct failed to comply with the treaty standard
79
Award, paras. 65, 66, 67, 68, 69, 74, 75, 76, 77, 78, 79, 80, 81; 40 ILM 426 (2001), pp. 4404.
371
for the protection of investments. Having availed itself of that option, Claimants
should not have been deprived of a decision, one way or the other, merely on the
strength of the observation that the local courts could conceivably have provided
them with a remedy, in whole or in part. Under the bit they had a choice of
remedies.
115. For all of these reasons, the Committee concludes that the Tribunal exceeded
its powers in the sense of Article 52(1)(b), in that the Tribunal, having jurisdiction
over the Tucuman claims, failed to decide those claims. Given the clear and serious
implications of that decision for Claimants in terms of Article 8(2) of the bit, and
the surrounding circumstances, the Committee can only conclude that that excess
of powers was manifest. It accordingly annuls the decision of the Tribunal so far
as concerns the entirety of the Tucuman claims.
(iii) Failure to state reasons: Article 52(1)(e)
116. In view of the foregoing conclusion, it is unnecessary to consider the further
ground of annulment relied on by Claimants, viz., that in dismissing the claim the
Tribunal failed to state the reasons on which its decision was based. As to the
federal claims, the Committee has already concluded that reasons for the dismissal
of those claims were given. As to the Tucuman claims, in the Committees view
the Tribunal gave very full reasons for the step it took, viz., the dismissal of those
claims without any overall consideration of their merits. The question of failure
to state reasons would only arise if one took the view that the Tribunal actually
did reach a conclusion adverse to Claimants under Articles 3 and 5 in respect
of the Tucuman claims as a wholea view the Committee has already rejected.
Accordingly, nothing more needs to be said on this ground of annulment.
D. Costs
117. The Tribunal made no order for costs, and required Claimants and Respondent to share equally the costs of icsid. It observed that the dispute raised a
set of novel and complex issues not previously addressed in international arbitral
precedent relating to the interplay of a bilateral investment treaty, a Concession
Contract with a forum-selection clause and the icsid Convention.80 It noted that
both parties had prevailed to some extent. These considerations apply equally to
the present phase of the proceedings. Claimants have succeeded in part, but only
in part. Moreover, Argentina was entitled to take the position it took, which itself
raised a difficult and novel question of public importance concerning icsid and the
operation of investment protection agreements on the model of the bit.
118. In the light of the importance of the arguments advanced by the parties in
connection with this case, the Committee considers it appropriate that each party
bear its own expenses incurred with respect to this annulment proceeding, and that
the parties bear equally all expenses incurred by the Centre in connection with this
proceeding, including the fees and expenses of the members of the Committee.
80
Award, para. 95; 40 ILM 426 (2001), p. 447.
372
E. Decision
119. For the foregoing reasons, the Committee DECIDES:
(a) The Tribunal rightly held that it had jurisdiction over the claims.
(b) The Tribunal committed no annullable error in its rejection of the federal
claims (claims concerning the conduct of federal authorities) on the merits,
and that rejection is accordingly res judicata.
(c) The Tribunal manifestly exceeded its powers by not examining the merits of
the claims for acts of the Tucuman authorities under the bit and its decision
with regard to those claims is annulled.
(d) Each party shall bear its own expenses, including legal fees, incurred in
connection with this annulment proceeding.
(e) Each party shall bear one half of the costs incurred by the Centre in connection
with this annulment proceeding. Accordingly, the Argentine Republic shall
reimburse the Claimants one half of the total costs incurred by the Centre
in connection with this annulment proceeding once the amount has been
determined by the Secretariat of the Centre.
Done in English and Spanish, both versions being equally authoritative.
[Source: The text of the decision was supplied by Sidley Austin Brown &
Wood LLP; see also 41 International Legal Materials 1135 (2002).]
CASADO v. CHILE
373
Provisional measures Whether objection to jurisdiction precludes recommendation of provisional measures Registration by Secretary-General under Article 36 of icsid Convention Whether registration unless dispute
manifestly outside jurisdiction same as prima facie jurisdiction Extent of
jurisdiction to grant provisional measures
Provisional measures Whether binding Article 41 of icj Statute
Authority of icjs decision in LaGrand icsid Convention, Article 47 Arbitration Rules, Rule 39
Provisional measures To preserve rights of parties No evidence of existing
right Whether hypothetical right may be protected by provisional measures
Municipal law Provisional measure of Tribunal said to interfere with ministerial decision Municipal law not binding on international tribunal Exercise
of discretion
Expropriation Provisional measures to preserve property claim Claim
generic and unrelated to specific assets Whether provisional measures
necessary
Provisional measures State of tension between parties Duty of Tribunal
proprio motu to ensure no action taken which may prejudice rights of the
other party or aggravate or extend dispute
Costs Provisional measure for security for costs Alleged probability of unsuccessful claim Claimant alleged to be without means Whether provisional
measure required to protect Respondents interests Failure of Convention
and Rules to provide for security for costs
(Case No. ARB/98/2)
Decision on the Request for Provisional Measures. 25 September 2001
(Arbitration Tribunal: Lalive, President; Bedjaoui and Leoro Franco, Members)
Summary: The facts: Mr Vctor Pey Casado, a Spanish national, and the
Fundacion Presidente Allende, a foundation established under the laws of Spain,
instituted arbitration proceedings against the Republic of Chile, invoking the Agreement on the Reciprocal Protection and Promotion of Investments between Chile
374
CASADO v. CHILE
and Spain of 2 October 1991. The substance of the dispute related to claims for
compensation for company assets allegedly seized by Chile between 1973 and
1975. The claim was registered by the Centre on 20 April 1998.
The Respondent filed objections to jurisdiction and a request for provisional
measures requiring the Claimants to lodge a guarantee to cover those costs for
which the Claimants might eventually be liable.
The Claimants, in turn, requested provisional measures requiring the Respondent to undertake to suspend the execution of an internal decision made by the
Chilean Minister for National Assets, Ministerial Decision No. 43. The Claimants
alleged that this decision purported to resolve the issues raised in the arbitration
proceedings, which would have irremediable consequences on the execution of a
later award and an aggravating effect on the pending proceedings.
The Claimants also sought a more general provisional measure, requiring both
parties to the dispute to abstain from any act or omission likely to aggravate the
dispute or to render the execution of a later award more difficult.
Held: (1) An icsid Tribunal must determine for itself whether jurisdiction
appears prima facie to exist before indicating provisional measures; the decision
of the Secretary-General to register a case is not, without more, a sufficient basis
for such a determination (paras. 512).
(2) Under Article 47 of the icsid Convention, an icsid Tribunal has power to issue
a range of provisional measures, not limited to those sought by the parties, and to
do so with binding effect; the decision of the International Court in the LaGrand
case to that effect was highly persuasive as to the interpretation of Article 47,
the language of which was based on the equivalent provision of the Statute of the
International Court (paras. 1326).
(3) The Claimants claim to suspend the execution of Ministerial Decision No. 43
was rejected. Although the Claimants did not need to prove the actual existence of
the rights in question, which was a matter for the merits, they needed to demonstrate
a real risk of prejudice but had failed to do so, since Ministerial Decision No. 43
did not have the force of res judicata so far as the Claimants alleged rights were
concerned, nor did it bind the Arbitral Tribunal (paras. 4361).
(4) The fact that by Ministerial Decision No. 43 certain other parties were accorded compensation did not directly affect the Claimants rights, since it did not
prevent the Tribunal awarding compensation to the Claimants in respect of the loss
of the same property (paras. 626).
(5) By analogy with the decision of the International Court of Justice in the
Anglo-Iranian Oil Company Case, the state of tension between the parties justified
the Tribunal in recommending that no action be taken which might prejudice the
rights of the other party in respect of the carrying out of the judgment which the
Tribunal might subsequently render, or which might aggravate or extend the dispute
(paras. 6777).
(6) The Respondents request for security of costs was rejected. The absence
of an express provision for security for costs in the icsid Convention suggested
that the negotiating States did not consider that such measures would normally be
REQUEST FOR PROVISIONAL MEASURES
375
necessary, and the Respondent had not demonstrated that risk of non-payment of
costs was either probable or almost inevitable (paras. 7889).
The following is the text of the decision:

(Translation)
[568] Considering Articles 41, 46, 47, 48 of the Convention on the Settlement
of Investment Disputes between States and Nationals of other States (the icsid
Convention) and Rules 12, 15, 19, 28, 39 of the Rules of Procedure for Arbitration
Proceedings (the Arbitration Rules);
Considering the claim of 3 November 1997 of Vctor Pey Casado and the Fundacion Presidente Allende, the Claimants in this proceeding, against the Republic
of Chile, the Respondent;
Considering the registration of this claim by the Secretary-General of the Centre
of 20 April 1998;
Considering the correspondence from the Respondent of 1 and 2 February 1999
which objects to the jurisdiction of the Tribunal;
Considering the first hearing of the Tribunal, held at Washington, DC on
2 February 1999;
Considering the correspondence of the Claimants of 9 February 1999 informing
the Tribunal that the Chief of the Chilean Marines had made certain official press
statements which were alleged to prejudice the hearing of the current dispute and
claiming an existing right to call upon the Tribunal to accept their request that the
Chilean authorities immediately cease all media campaigns, thus rendering illegal
any declarations having the direct effect of prejudicing the current proceedings;
Considering the notice of objection to jurisdiction of the Respondent of 20 July
1999, in particular its request that the Tribunal hold the Claimants liable for costs,
and furthermore demand from them, within the shortest period possible, a guarantee
sufficient to cover them;
Considering the correspondence of the Claimants of 22 July 1999, which requested the Tribunal to ask the Respondent to pass to it certain documents listed
therein and documents set out in previous correspondence of 9 February 1999;
[569] Considering the correspondence of the Respondent of 4 August 1999,
which requested the Tribunal to reject the Claimants request for the production of
documents;
Considering the correspondence of the Respondent of 13 September 1999, which
urged the Tribunal to declare a provisional measure requiring the Claimants to lodge
a sufficient guarantee to cover those costs for which the Claimants might eventually
be made liable;
Considering the Memorial of the Claimants of 6 October 1999, outlining its
response to the Respondents objection to jurisdiction;
Considering the Rejoinder to this correspondence from the Republic of Chile of
27 December 1999;
376
CASADO v. CHILE
Considering the Claimants further Reply in relation to the Respondents objection to jurisdiction of 7 February 2000;
Considering the Tribunals hearing on jurisdiction held at Washington, DC on 3,
4 and 5 May 2000;
Considering the Responses to the Tribunals Queries from the Respondent of
5 May 2000 and those from the Claimants of 17 May 2000;
Considering the correspondence of 4 January 2001 from the Claimants, under
which they produced their letters of 6 May 2000 to the Minister for National Assets
and to the Controller-General of the Republic;
Considering the request of the Claimants of 12 March 2001 for the withdrawal
of the President of the Tribunal, and that of 13 March 2001 for his removal;
Considering the nomination of Professor Pierre Lalive for the role of Arbitrator
and of President of the Tribunal on 11 April 2001;
Considering the correspondence of the Claimants of 23 April 2001, which sought
from the Tribunal an order of provisional measures in the following terms:
[570] In consequence, having regard to Articles 47, 26, and 25(1) of the icsid Convention, Rule 39 of the Arbitration Rules and Article 10(2) in fine of the Agreement
on the Reciprocal Protection and Promotion of Investments between Chile and Spain
of 2 October 1991, the Arbitration Tribunal is requested:
to order the Republic of Chile to suspend the execution of Ministerial Decision No.
43 taken by the Minister for National Assets on 28 April 2000;
to take all necessary measures in this regard, including those in relation to its own
administrative bodies and national courts; and
to invite the Parties to keep the Tribunal regularly informed regarding the execution
of its orders pending a conclusive decision of the Tribunal on jurisdiction and, should
this arise, on the merits of the case.
Considering the correspondence of 7 May 2001 from the Claimants, reminding

the Tribunal of its previous requests of 9 February and 22 July 1999 regarding
the production of documents and in particular drawing the Tribunals attention to
a document that featured at a conference on 3 February 1975 and stressing the
relevance of this document in the context of the making of Ministerial Decision
No. 43;
Considering Procedural Order No. 1 of 10 May 2001, notified to the Parties
on 11 May 2001, under which the Tribunal, stating that no decision had yet been
reached on the preliminary arguments against jurisdiction raised by the Respondent at the time of the removal of the previous President of the Tribunal, gave
each Party an opportunity to present its observations on the requests for provisional measures sought by the other Party, to be provided within a period of
10 days;
Considering the statement of the Claimants of 17 May 2001 responding to, and
rejecting, the Respondents claim for provisional measures;
Considering the statement of the Respondent of 21 May 2001 responding to, and
rejecting, the Claimants request for provisional measures;
[571] Considering Procedural Order No. 2 of 13 June 2001 under which the
Tribunal decided, after consultations with the Parties, to hold a hearing in respect
377
of their respective claims for provisional measures and to request supporting documents to be lodged by Monday 18 June 2001;
Taking into account the oral submissions of the Parties at the hearing on the
provisional measures held at Geneva on 21 June 2001 and regarding the supporting
documents produced by the Parties at the hearing;
Considering also Procedural Order No. 3 of 22 June 2001, notified to the Parties
on 25 June 2001, under which the Tribunal stated that Rule 12 of the Arbitration
Rules had been properly observed in the present case and declared closed the
complaint raised by the Respondent, under its correspondence of 25 April, 9, 14
and 21 May 2001, which sought the certification by the Tribunal of the exact point
the procedure had reached at the time the President of the Tribunal withdrew;
Considering, as a preliminary point, that the arguments expressed by the Parties in
a number of items of correspondence after the hearing of 5 May 2000, which sought
the removal from the dossier of evidence of every document passed to the Tribunal
after the closure of the said hearing, are today declared groundless pursuant to the
three orders of the Tribunal of 10 May, 13 and 22 June 2001, the first two of which
gave the Parties a further opportunity to set out their arguments and to produce
any relevant evidence in the context of the hearings on the issuing of provisional
measures,
The Arbitral Tribunal:

I. On Provisional Measures in the icsid System
1. Prior to analysing the respective claims of the Parties, it is appropriate to
recall the applicable rules and to locate them in their general context, in the light of
international case-law, in particular that of the arbitration tribunals which have given
judgments in the context of the International Centre for the Settlement of Investment
Disputes (icsid or the Centre), and the lessons to be drawn from academic writings.
[572] 2. According to Article 47 of the icsid Convention of 1965:
Except as the parties otherwise agree, the Tribunal may, if it considers that the circumstances so require, recommend any provisional measures which should be taken
to preserve the respective rights of either party.
This provision is not an innovation in the history of international jurisdiction; it

is directly inspired by Article 41 of the Statute of the International Court of Justice,
hence the particular importance that can be accorded to the judgments given in
the past by that court and its predecessor, the Permanent International Court of
Justice, regarding provisional measures. (See for example Christoph Schreuer, in
ICSID Review, volume 13 no. 1, Spring 1998, page 211; as well as L. Collins,
Provisional and Protective Measures in International Litigation, 234 Recueil des
Cours 98 (1992III) pages 98 ff; Ch. Brower and R. E. Goodman: Provisional
Measures and the Protection of icsid Jurisdictional Exclusivity against Municipal
Proceedings, 6 ICSID Review, 1991, pages 431 ff; and D. Friedland, Provisional
378
CASADO v. CHILE
Measures in icsid Arbitration, 2 Arbitration International 335 (1986); A. R. Parra,

The Practice and Experience of the icsid in Conservatory and Provisional Measures
in International Arbitration, 37 ICC Publication no. 519 (1993)).
3. Article 47 of the icsid Convention is repeated, completed or developed by
Rule 39 of the Arbitration Rules which provides:
1. At any time during the proceeding a party may request that provisional measures for the preservation of its rights be recommended by the Tribunal. The request
shall specify the rights to be preserved, the measures the recommendation of which is
requested, and the circumstances that require such measures.
2. The Tribunal shall give priority to the consideration of a request made pursuant
to paragraph (1).
3. The Tribunal may also recommend provisional measures on its own initiative or
recommend measures other than those specified in a request. It may at any time modify
or revoke its recommendations.
[573] 4. The Tribunal shall only recommend provisional measures, or modify or
revoke its recommendations, after giving each party an opportunity of presenting its
observations.
5. Nothing in this Rule shall prevent the parties, provided that they have so stipulated
in the agreement recording their consent, from requesting any judicial or other authority
to order provisional measures, prior to the institution of the proceeding, or during the
proceeding, for the preservation of their respective rights and interests.
4. These provisions, as well as those of Article 47 of the icsid Convention, require

a number of observations taking account of the details of the present dispute, the
first being the jurisdiction of the Arbitration Tribunal to order provisional measures
where its jurisdiction to decide the case is contested.
5. It is in the very nature of the institution of provisional measures that they
are not only provisional, but also and above all urgent, that is to say that they
must be or be able to be decided quickly, as confirmed, for example, in Rule 39(2)
of the Arbitration Rules, according to which the Tribunal shall give priority to
the consideration of a request made pursuant to paragraph (1). These measures
must therefore be capable of being taken, recommended, indicated or commanded
(terms which shall be commented upon later) at any stage of the proceedings and in
consequence also before the Tribunal has been able to rule on all of the objections
to its jurisdiction or on the admissibility of the claim on the merits.
6. It has sometimes been suggested that those Arbitration Tribunals whose jurisdiction on the merits is contested should not as a result have jurisdiction to decide
on a request for provisional measures. This argument cannot seriously be sustained;
it goes against not only the applicable texts but also considerations of good sense,
since such a submission would remove all efficiency and utility from the institution
of provisional measures, the necessity for which is recognised as much in domestic
as in international law. In addition, as noted by Schreuer (op. cit. page 229):
[574] the urgency of the matter may make it impossible to defer provisional measures
until the Tribunals jurisdiction has been fully argued and decided.
379
7. The international case-law is also clear in this regard: the court whose jurisdiction is contested is in no way deprived of the power to declare provisional
measures. This rule, however, is subject to certain minimum conditions, the precise
definition of which has been the object of controversy, in particular in certain
dissenting or individual opinions of judges of the International Court of Justice (see
Mendelson, Interim Measures of Protection in cases of Contested Jurisdiction 46
British Yearbook of International Law (1972-3) 259; and L. Collins, op. cit., pages
220-2).
8. According to the dominant and generally accepted opinion, the International
Court is satisfied with a prima facie test, and considers itself to have jurisdiction
to indicate provisional measures if its lack of jurisdiction is not manifest and if the
texts invoked by the claimant to base the Courts jurisdiction prima facie confers
it on the Court. But no matter what the case, the question is posed a little differently
in the context of icsid arbitration since each claim is subjected to a preliminary
examination (or screening) for the Centres jurisdiction by the Secretary-General
pursuant to Article 36 of the icsid Convention. Under Article 36, the SecretaryGeneral is required to register a claimants request for proceedings to be instituted
unless he finds, on the basis of the information contained in the request, that the
dispute is manifestly outside the jurisdiction of the Centre, a criterion which to a
certain extent resembles, despite the different situations, the prima facie test of
the International Court of Justice.
9. Manley Hudson said in the same work on the PICJ:
It is not necessary . . . that the Court decides in advance and affirmatively the question
of whether it has jurisdiction to judge, as regards the substance, the case which it is
called upon to hear. In other words the jurisdiction of the Court to declare provisional
measures does not depend upon a preliminary declaration of the existence, in this case,
of its jurisdiction to judge the substance of the case. (Translation)
[575] 10. In the Fisheries Jurisdiction Case (United Kingdom v. Iceland), often
cited in many different contexts, one can read that:
. . . on a request for provisional measures the Court need not, before indicating them,
finally satisfy itself that it has jurisdiction on the merits on the case, yet it ought not
to act under Article 41 of the Statute if the absence of jurisdiction on the merits is
manifest [Article 41 allows the Court to indicate provisional measures]
the decision given in the course of the present proceedings in no way prejudges the
question of the jurisdiction of the Court to deal with the merits of the case or any questions relating to the merits themselves and leaves unaffected the right of the Respondent
to submit arguments against such jurisdiction or in respect of such merits. (Fisheries
Jurisdiction Case (United Kingdom v. Iceland), ICJ Reports 1972, pp. 15-16; 1973,
pp. 99 ff and 135 ff; 1976, pp. 6 ff; 1979, pp. 13 ff).
11. It is intended that registration by the Secretary-General of the Centre does

not in any way bind the Tribunal; nor does registration free it from determining,
in a case where its jurisdiction is contested, the prima facie existence of
jurisdiction or, to couch this in negative terms, the absence of a clear lack of
jurisdiction.
380
CASADO v. CHILE
12. A typical and pertinent example is that of the first arbitration taking place
under the icsid Convention, the case of Holiday Inns et al. v. Government of
Morocco (icsid Case No. ARB/72/1). While Morocco had objected to the
Tribunals jurisdiction, the Tribunal decided that it had jurisdiction to recommend
provisional measures according to the terms of Article 47 of the [icsid Convention],
the Parties still having the right to express, in the rest of the procedure, any exception
relating to jurisdiction of the Tribunal on any other aspect of the dispute.
[576] 13. In the present case, there is no element likely to place in doubt the
jurisdiction of the Tribunal to order provisional measures within the meaning of
Article 47 of the icsid Convention and Rule 39 of the Arbitration Rules, and that
conclusion is made even stronger by the fact that the Respondent, which is contesting the jurisdiction of this Tribunal as regards the substance of the case, has
itself sought from the Tribunal, as we have seen and as will be further discussed,
provisional measures as regards the Claimants. This clearly implies the recognition
of this Tribunals power within the limits of Article 47 of the icsid Convention and
of Rule 39 of the Arbitration Rules.
14. There is occasion to add that the provisional measures, which are provisional
by nature and by definition (as the Respondent has observed), can be modified or
cancelled at any time by the Tribunal, do not benefit from the force of res judicata,
will only last for the duration of the proceedings and automatically fall if the
Tribunal decides that it lacks jurisdiction to decide the case.
15. Nor is it contested that the provisional measures authorised by Article 47
of the icsid Convention and Rule 39 of the Arbitration Rulesprovisions which
contain no indication or exact statement in this regardcan be extremely diverse
and are left to the appreciation of each Arbitration Tribunal. The drafters of the
icsid Convention in effect decided not to delimit the range of possible measures,
given the infinite variety of situations in which such measures can justifiably be
invoked. The same situation exists in relation to Article 41 of the Statute of the
International Court of Justice (the ICJ Statute) which, as has been stated, served as
a model for Article 47 of the icsid Convention. Moreover, judicial and arbitration
practice both illustrate this great variety of circumstances and measures that may
either be requested or adopted by the court in question.
16. We will mention finally the fact, clearly affirmed by Rule 39(3) of the Arbitration Rules, that the Arbitration Tribunal can act of its own initiative and is in no
way limited by the pleadings of the Parties.
[577] It was in this way, in the first dispute brought before the Tribunal, the case
of Holiday Inns v. Government of Morocco, already cited, the Arbitration Tribunal,
which had not allowed a number of measures sought by the claimants, did not
hesitate (although with a caution noted by the commentators, stemming from the
fact that it was the first application of the icsid Convention) to issue others, in a
way that was certainly to some extent ambiguous, but which nonetheless prevented
the stymieing of the dispute and contributed, it seems, with other decisions of the
same Tribunal, to the final amicable settlement reached by the parties.
17. Another general question is worth examining, that of the force, binding
or otherwise, of provisional measures issued by virtue of Article 47 of the icsid
Convention and Rule 39 of the Arbitration Rules. Long debated in the academic
381
writings, this question can today be considered closed, in the light of the general
jurisprudence and a recent decision of the International Court of Justice.
18. Various commentators have relied on a literal interpretation of Article 47 of
the icsid Convention (as well as the questionable method of interpretation which
consists of referring to the travaux preparatoires where the term prescribes was
eventually replaced by recommend) to deduce that the order issued to the parties
by the Arbitration Tribunal does not have a binding character, unlike arbitration
rulings (and procedural orders) coming from the same Tribunal.
In an analogous fashion, it has been argued that Article 41 of the ICJ Statute
only permits the principal judicial organ of the United Nations to indicate such
provisional measures but not to order them (cf. for example L. Collins, op. cit.,
pages 71, 216-20).
19. In its judgment of 27 June 2001, in LaGrand Case (Germany v. United States
of America), the International Court of Justice was called to rule for the first time
on the binding effect of its judgments on provisional measures issued pursuant
to Article 41 of the ICJ Statute, the interpretation of which had been the object
of abundant academic debates. The Court reached the conclusion that orders on
provisional measures under Article 41 have binding effect.
[578] 20. In the course of a detailed analysis not necessary to reproduce here, the
International Court of Justice compared in particular the French and English texts
of the ICJ Statute, examined the travaux preparatoires of this text as well as its own
case-law, but ultimately founded its conclusion on the goal and the object of the ICJ
Statute which, in its view, was to enable the Court to fulfil the functions provided
for therein, and in particular, the basic function of judicial settlement of international
disputes by binding decisions in accordance with Article 59 of the Statute. The
conclusion of this decision is particularly relevant, even more so because it seems
manifestly to apply by analogy to Article 47 of the icsid Convention, and it is useful
to reproduce it here:
It follows from the object and purpose of the Statute, as well as from the terms of
Article 41 when read in their context, that the power to indicate provisional measures
entails that such measures should be binding, inasmuch as the power in question is
based on the necessity, when the circumstances call for it, to safeguard, and to avoid
prejudice to, the rights of the parties as determined by the final judgment of the Court.
The contention that provisional measures indicated under Article 41 might not be
binding would be contrary to the object and purpose of that Article. (LaGrand Case,
paragraph 102)
21. For a similar view, one can cite the Decision on Procedure No. 2 of 28 October
1999 of the icsid Arbitration Tribunal in the case of Maffezini v. Kingdom of Spain
(icsid Case No. ARB/97/7), to which both Parties referred, which ruled (at No. 9)
that the term recommend has the same meaning as the term order.
22. The case-law of the IranUS Claims Tribunal can also be cited in this regard
when it finds the existence of a legal obligation to abide by the provisional measures
ordered, indicated, recommended, etc., by an international courtwhich draws its
authority in the case (even, it was said, if a party objects to its jurisdiction on
the merits) from an international agreementwhether this is the ICJ Statute, the
382
CASADO v. CHILE
Declaration of Algiers under which the IranUS Claims Tribunal was created, the
icsid Convention [579] or even of a bilateral agreement such as that concluded
between Chile and Spain on 2 October 1991.
23. Hence, in the case of Rockwell v. Iran (Award no. ITM 17-430-1, of 15 May
1983, 2 IranUS CTR 310-11, cited by Brower-Goodman, page 449), the Tribunal
ruled that
both Governments are under an international obligation to comply with any decision
rendered by the Tribunal pursuant to [this] agreement.
This obligation to conform with provisional measures, according to Manley

Hudson (in his work The PCIJ. (1943) pages 145, 420) exists apart from and
prior to a determination of the jurisdiction of the Court to deal with merits of the
pending case.
24. Whatever the issue, even at the time when some were questioning the exact
legal nature and consequences of the indication or recommendation of provisional measuresand of the power of an Arbitration Tribunal to ensure respect for
itone point seems to have been generally recognised: the Tribunal was entitled
to take into account, in its final decision, the behaviour of the parties and their final
failure to observe the provisional measures ordered (cf. for example C. Schreuer,
op. cit. no. 36-7 and the decision in AGIP v. Congo (icsid Case No. ARB/77/1, at
paragraph 42).
25. One can also note that, in a first draft of the former rules of icsid (in force on
1 January 1968, reported in 1 ICSID Reports (1993) pp. 63 ff) which contained some
interesting explanatory notes, it is indicated at Article 39 (page 99) that Article 47
of the icsid Convention is based on the principle that once a dispute is submitted
to arbitration the parties should not take steps that might aggravate or extend their
dispute or prejudice the execution of the award, a principle which has a certain
generality.
26. It is clear from the preceding that provisional measures are principally aimed
at preserving or protecting the efficiency of the decision that is given on the merits;
they are intended to avoid prejudicing the execution of judgment, or prevent a party,
[580] by unilateral act or omission, infringing the rights of the opposing party.
27. It is in this general context that there is now occasion to analyse consecutively
the various claims of the Parties, in the light, as already indicated, of the prior
decisions and academic writings likely, in each particular case, to contribute to the
solution to the questions posed.
II. Regarding the Claimants request that the Republic of Chile forswear the
execution of Ministerial Decision No. 43
28. In a letter of 23 April 2001 to the Secretariat of the Centre, the counsel for
the Claimants, Mr Juan E. Garces, regarded it as necessary to formulate a request
for provisional measures in order to preserve the rights of Mr Pey Casado and of
the Fundacion Presidente Allende so that the eventual Decision is efficacious.
383
This claim aimed to ensure that the Republic of Chile undertook to suspend the
execution of the decision of the Minister for National Assets of 28 April 2000 stated
as Ministerial Decision No. 43.
The claim notes that it is, in the view of the Claimants, necessary that the
execution of Ministerial Decision No. 43 be immediately paralysed, by reason of
the irremediable consequences that it could have on the execution of the eventual
decision.
29. It is to be noted that the Claimants also invoke (same letter, page 6), as well
as the icsid Convention and the Arbitration Rules, Article 10 part 2 in fine of the
Agreement on the Reciprocal Protection and Promotion of Investments between
Chile and Spain of 2 October 1991 (the Bilateral Investment Treaty).1 Article 10,
entitled (in translation), Disputes Between a Party and an Investor from another
Party), foresees in short that any dispute in relation to investments which has not
been amicably settled can be submitted at the choice of the investor either to
the national courts of the contracting party implicated in the dispute, or to international arbitration, [581] which will consist of, at the same partys choice, icsid
arbitration or an ad hoc arbitration (pursuant to the uncitral Rules). It is noted
that this choice by the investor, once made, will be definitive (Article 10 part 2
in fine).
30. According to the request of the Claimants (same claim, page 5), Ministerial Decision No. 43 is a threat to the arbitration proceedings and a case
identical or analogous to it, which relates to the amount of compensation allegedly due following the death of Mr Dario Saint-Marie and the shareholders
of the company Consorcio Publicitario y Periodstico SA (CPP SA), a company
whose assets were confiscated on 10 February 1975 in application of Decree No.
77 of 1973. The Claimants also allege that Ministerial Decision No. 43 may
have been taken on 28 April 2000 with the goal of circumventing the arbitration proceedings prior to the final hearing of the memorial. It was claimed that
the execution of Ministerial Decision No. 43 constituted a complete misapplication of the exclusive jurisdiction of the Arbitration Tribunal to decide on questions
which were assigned to it (regarding the ownership of the shares of the company
CPP SA) and its execution would have the effect of undermining the terms of the
litigation.
31. The Claimants argue in this regard that the Chilean authorities have recognised the fact that Mr Pey Casado had bought the company CPP SA as well as the
business Empresa Periodstica el Clarn Lta. (EPC Lta), which is also attested by
a memorial (of 3 February 1975) from the Minister for the Interior and from the
State Defence Counsel and from various Chileans from that same period.
These are in summary the main arguments set out by the Claimants to support
their claim for provisional measures.
32. As regards the Respondent, it seeks the rejection of the said claim, on the basis
that it has no link with the conditions set out in Article 47 of the icsid Convention
and in Rule 39 of the Arbitration Rules.
Unpublished. unts Registration No. 30883.
384
CASADO v. CHILE
33. The principal arguments on which the Respondent bases its arguments are
the following (according to a memorial of 21 May 2001 sent to the Centre intended
for the Tribunal):
[582] The inexistence of a need to safeguard the rights invoked, rights or claims which,
moreover, are not real and present but purely hypothetical; the need to safeguard
is even less real since it relates in this case to a generic obligation that a State is
always capable of assuming.
Chile is a sovereign State which has always fulfilled its international obligations and
is, furthermore, more than solvent in respect of its financial obligations.
The recommendation of provisional measures sought represents an undermining
of the present process of arbitration and would cause damage to third parties not
party to the present dispute.
The measures sought would not be genuinely conservatory and would entail an
anticipatory judgment on a question of substance.
Furthermore, Ministerial Decision No. 43, the suspension of which is sought, was
rendered in accordance with Chilean law and independently of the present arbitration
judgment.
34. In accordance with Rule 39(4) of the Arbitration Rules, the Tribunal has
given to each Party the opportunity to present its observations, and both Parties
have made use of this opportunity, both in the much deeper written analyses and
in the course of the memorial of 21 June 2001.
The Tribunal is accordingly ready to give its judgment on the request of the
Claimants.
35. It is stated in the first place that, as already indicated in the preamble, the
dispute which had arisen, in particular in May 2000, as regards the right of reply and
the production of documents is now closed, due to the fact that, in the most recent
proceedings, the two Parties have authorised the production of new submissions and
new documents regarded by them as relevant to the claim for provisional measures.
[583] 36. As regards the issue of executing Ministerial Decision No. 43, the
following remarks are necessary:
This decision is based on Chilean Law No. 19,568 (published in the Official
Journal on 23 July 1998) on the recovery of assets confiscated after 11 September
1973.
The law in question was therefore passed after the filing of a claim for icsid
arbitration on 3 November 1997, and after the registration of this claim by the
Secretary-General of the Centre on 20 April 1998.
In any event, the claim for arbitration was not based on the Chilean law in
question, and as much was recognised by the Claimants by a letter of 24 June
1999 addressed to the Minister for National Assets (piece C32 of the Claimants),
when they declared that they did not intend to invoke this law.
37. On the other hand, Ministerial Decision No. 43 relates to a series of persons
other than the Claimants, being those parties asserting their interests at the time
of the confiscation, under diverse heads (for example as shareholders or heirs) in
real or personal property, on the one hand in the CPP SA, on the other hand in
385
the seasonal business EPC Ltatwo companies which, as we have seen, Mr Pey
Casado declares himself to have acquired.
Ministerial Decision No. 43 treats some of these assertions as founded, in whole
or in part, rejects others, and fixes the means by which the corresponding compensation is to be valued, that is by applying Law No. 19,568 cited above (in Article
10 and the following articles), a procedure which comprises the recording and the
fixing of a sum of compensation and a decree ratified by the Minister for Finance.
38. The Claimants have signalled in particular that the Controller-General of the
Republic, whose function it is to rule on the legality of the decisions of the Chilean
administration, had rejected their complaint (interpreted as an appeal, wrongly
in their view), relying on the view adopted by the Ministers for Foreign Affairs and
[584] National Assets signalling that Chile was contesting the jurisdiction of the
icsid Arbitration Tribunal.
39. It seems that, at the present moment, there has not yet been a conclusion
to the process of valuing the property and determining the sum of compensation
allegedly due to Mr Dario Sainte Marie and to others, but the Claimants have argued
(23 April 2001, page 4) that:
as soon as the Minister for National Assets, in accordance with the provisions of Law
No. 19,568, records the sum of compensation by Decree, all litigation relating to the
States liability for the compensation of the property of CPP SA, will be regarded by
the State as conclusively decided in Chile.
40. This proposition leads to one or two questions. On the one hand, it has not
been shown and it is not certain that the litigation decided by Ministerial Decision
No. 43 (concerning the claims presented by a certain number of persons other than
the Claimants at this arbitration) will be regarded by the Government as conclusively deciding the litigation between other parties (i.e., the litigation to which the
Claimants are parties) and this is all the more the case since Chile (admittedly in
a different context, that of the present arbitration) has been particularly mindful in
its arguments of the rights of third parties that are not participating in the present
litigation. On the other hand and perhaps particularly, since it relates to the same
case, the fact that a national government (by hypothesis being party to an international arbitration) regards a case as being conclusively decided in Chile, does not
necessarily imply, as we will see further on, that the same point of view would be
taken by the Arbitration Tribunal, if it had jurisdiction.
41. In any event, the case put forward, in Chile, regarding Ministerial Decision
No. 43 is clearly not identical (the differences relating not only to the different
parties) to that which was put before icsid by the claim of 3 November 1997 and
registered on 20 April 1998. It obviously has some common elements, insofar
as Ministerial Decision No. 43 envisages the recovery of or compensation for
assets confiscated either from CPP SA or by EPC Lta, [585] whilst the claim
for arbitration seems in part to have the same objectthe Claimants in particular
holding themselves out as legitimate owners of 40,000 shares in the company CPP
SA. It results from this that, prima facie, to a greater or lesser extent, the Claimants
seem to have valid reasons for concern as to the possible or probable consequences
386
CASADO v. CHILE
of the process currently unfolding in Chile, which also relates to the consequences
of the confiscation of the shareholding of the same company CPP SA.
42. There is therefore good reason to examine more closely, taking account of
all the circumstances of the litigation and in the light of the arguments put forth on
both sides, whether the conditions necessary to the recommendation of provisional
measures exist in this case. There will be a need to examine furthermore and parallel
to this, whether, as the Claimants contend, the execution of Ministerial Decision
No. 43 would entail the negation of the exclusive jurisdiction of the Tribunal in the
hypothesis, obviously, that it makes a finding for jurisdiction in the present case.
43. According to the Respondent, the Tribunal could not or should not recommend
the provisional measure sought by the Claimants, notably for the reason that the
Claimants do not, in its view, possess a real and present right. Thus, according
to the Respondents submissions of 24 May 2001, (at no. 8):
Rule 39 of the Arbitration Rules requires the present existence of a right that needs
to be protected or safeguarded for the application of provisional measures. We have
stated that such a right must exist, it must not be hypothetical or conditional or subject
to any kind of time lapse.
44. We should point out that this objection is presented under the rubric Prejudgment of the substance of the case, which is in accordance with the argument
propounded by the Respondent, in the same section of its submissions, that states:
The recommendation of a measure such as that sought would signify that this Tribunal
is judging in an anticipatory fashion that the Claimant will obtain a favourable decision
[586] as regards the substance of the issues that have been presented.
45. The objection seems to stem from a certain misunderstanding as regards

the very nature of the system of provisional measures established by the icsid
Convention and as regards the objective and the type of measures that an icsid
Arbitration Tribunal can be called on to recommend. It is clearly not a question for
the Tribunal of prejudging in any way (if it regarded itself as having jurisdiction on
the matter) its eventual decision on the substance. But the mechanism of Article 47
of the icsid Convention and of Rule 39 of the Arbitration Rules does not require in
any way the Tribunal to prejudge entirely hypothetical rights or even to prejudge
the eventual results of a case the substance of which has not yet even begun as the
Respondent believes.
46. The Parties themselves naturally attempt, in their respective and opposing
submissions, to prejudge, either the jurisdiction or the lack of jurisdiction, describing the issue as obvious, or the existence or non-existence of the rights in question,
described as manifest or obvious. For its part, the Tribunal can neither prejudge nor
even, to put it correctly, assume in an anticipatory fashion. But we have seen that
the Tribunal may, if it considers that the circumstances so require, recommend
any provisional measures which should be taken to preserve the respective rights
of either party. It must therefore reason, at this preliminary stage of the arbitration
process, on the basis not of assumptions but of hypotheses, in particular that by
387
which it may come to recognise its own jurisdiction on the substance of the case,
and in such a case, the hypothesis whereby the rights that the decision may recognise for one or the other of the parties in question could be placed in danger or
compromised by the absence of provisional measures.
It results from the very nature of this mechanism that the Tribunal cannot require,
as a preliminary condition to the delivery of a recommendation within the meaning
of Rule 39 of the Arbitration Rules, evidence of the existence, the reality or the
present nature of the rights which the measure sought aims to safeguard or preserve.
47. Procedural Order No. 2 delivered on 28 October 1999 in the case of Maffezini
v. Kingdom of Spain (icsid Case No. ARB 97/ 7, a decision on [587] provisional
measures; cited by the Respondent at no. 1.1) contains in this regard some statements
that may be susceptible to misunderstanding.
This case related to an application for provisional measures from the respondent,
the Kingdom of Spain, which requested the Tribunal to require the claimant to
lodge a guarantee for the payment of any eventual order for costs in the case, that
is a cautio judicatum solvi.
The order, which dismissed the respondents request, interprets Rule 39 of the
Arbitration Rules and the preservation of rights as rights existing at the moment
of the claim and not hypothetical (paragraph 13 et seq.). It is probable that the
terms used encouraged or caused the Respondents objection that the Claimants
request invoked unproved, uncertain and even merely hypothetical rights.
48. This argument cannot be upheld in the circumstances of the present case.
To demand that the right that one seeks to preserve must be existing, demonstrated
or proved at the time of the claim can certainly, in certain circumstances, be seen
as raising no difficulties. On the other hand, in other circumstances, it could, ex
natura rerum, oblige the Tribunal to prejudge the substance, at a time when it is
not yet in a position to judge it, and in hypotheses which, by definition, cannot be
used to affirm or prove the existence or reality of the right invoked until later, by
the judgment on the merits of the case.
49. For example, it is to this circumstance that a passage from the LaGrand decision, cited above, refers, when the International Court of Justice justifies the
obligatory character of provisional measures, according to the ICJ Statute, by
the necessity, when the circumstances call for it, to safeguard . . . the rights of the
parties as determined by the final judgment of the Court. It is clear that, before
this final decision, the alleged rights (the safeguarding of which is sought) cannot
be considered (outside of an agreement) as proved, real or present.
50. In the hypothesis that Ministerial Decision No. 43 envisaged the recovery in
kind of the assets confiscated, as we have seen, either by the company CPP SA, or
by the company EPC Lta, and that the Claimants [588] managed to show or make
evident that they were the owners of the said companies, one could conceive that
the Tribunal might consider as necessary the recommendation of the suspension of
an internal judicial or administrative inquiry. The Respondent even seems to admit
as much in citing (loc. cit. at 1.1) the Procedural Order No. 2 of 28 October 1999
in the icsid case of Maffezini, according to which a provisional measure could be
ordered [according to this hypothesis] to require that the property not be sold or
alienated before the final award of the arbitration tribunal.
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CASADO v. CHILE
51. This would not entail, in reality, any kind of interference by the Tribunal
in the internal affairs of a sovereign State, but the normal exercise by the icsid
Arbitration Tribunal of its international functions and of the general jurisdiction
which has been recognised for it, as regards provisional measures, by all the States
who were party to the icsid Convention (one of which is the Republic of Chile,
which has rightly stressed its willingness to respect its international obligations).
52. It is thus superfluous to analyse here in detail the discussion which has taken
place between the Parties on the respective powers of international courts (of the
icsid Arbitration Tribunal) and those of the internal courts or bodies (of the Republic
of Chile), whether administrative or judicial. It is not necessary to stress again the
principles and practice relating to the links between internal law and international
law, or the rule according to which a State should not invoke its domestic law to
excuse or justify the breach of one of its international obligations.
53. It will suffice, in this regard, to cite the perfectly clear decision of the icsid
Arbitration Tribunal in the case of Holiday Inns v. Government of Moroccoa
particularly interesting precedent for the reason that, as in the present case, it posed
the issue of the links between an internal court, which has jurisdiction according
to the domestic law of a State which is party to an international arbitration, and the
international court called to resolve a dispute (even though the jurisdiction of the
Arbitration Tribunal was being contested).
54. In a decision of 12 May 1974, the icsid Arbitration Tribunal in the Holiday
Inns case declared the following, in respect of the respective jurisdiction, [589] on
the one hand of the Moroccan courts, and on the other of the Tribunal (and this in a
decision in which it is noted to constitute the natural development of a decision of
the Arbitration Tribunal of 2 July 1972, on its jurisdiction in relation to provisional
measures). Having stressed that the Moroccan tribunals could . . . be faced with
questions which the Arbitral Tribunal for its part would equally be called upon to
decide, the decision goes on as follows:
In such a hypothetical situation the Moroccan tribunals should refrain from making
decisions until the Arbitral Tribunal has decided these questions or, if the Tribunal
has already decided them, the Moroccan tribunals should follow its opinion. Any other
solution would, or might, put in issue the responsibility of the Moroccan State and would
endanger the rule that international proceedings prevail over internal proceedings.
55. In the same way and in the same spirit, the IranUS Claims Tribunal (in a
case E-Systems v. Islamic Republic of Iran, cited by Brower and Goodman, op. cit.
pages 431 ff, and pages 4489), declared as follows:
Not only should it be said that the award to be rendered in this case by the Tribunal
which was established by Inter-governmental agreement, will prevail over any decisions inconsistent with it rendered by Iranian or United States Courts, but, in order
to ensure full effectiveness of the Tribunals decisions, the Government of Iran should
request that actions in the Iranian Court be stayed until proceedings in this Tribunal
have been completed.
389
56. It is clear that the passages cited from these two decisions are susceptible,
prima facie, to being applied by analogy to the present case, whereby the Respondent, whilst clearly affirming its respect for its international obligations, seemed
to set its courts and its internal law against the (possible) jurisdiction of the icsid
Arbitration Tribunal and its powers regarding provisional measures.
[590] 57. It is opportune, in this context, to mention the argument of the Claimants
according to which the proceedings taking place in Chile on the basis of Law No.
19,568 on the recovery of confiscated assets, and in the course of which Ministerial
Decision No. 43 was issued, would constitute not only a threat to the arbitration
proceedings but also a complete undermining or the negation of the exclusive
competence of the Arbitration Tribunal to decide on the issues which have been
assigned to it.
The argument might be convincing if it were shown that the issue of the ownership of the shares in the company CPP SA (cf. a letter of the counsel of the
Claimants of 23 April 2001, page 5) was either the principal or essential object of
Ministerial Decision No. 43 and its procedure for execution and of the proceedings
set before icsid on 3 November 1997 and registered on 20 April 1998.
58. Reading the text of Ministerial Decision No. 43, it seems certain that the issue
of the ownership of the shares is its object for various reasons and considerations,
and in particular for the following reason: that it is attested that the real property
forming the object of the claims was alienated by the State under various titles and
that it is, on the other hand, materially impossible to recover the moveable assets
confiscated . . ..
On the other hand, Ministerial Decision No. 43 certainly implies, as regards the
well-foundedness or otherwise of several claims, that several persons should be
recognised as shareholders and therefore, as a logical consequence, at least in an
indirect manner, the negation of the shareholding claims of the Claimants to the
present arbitration (at least to the extent that it relates to the same shares). But this
Decision has as its object compensation for specified assets, assets amongst which
seem to be, at least prima facie, those which the Claimants contend were confiscated
from them by the Chilean military regime, those being the same confiscations
invoked as much by the Claimants in the icsid context as by the various parties who
partook in the procedure introduced by Law No. 19,568, applied by Ministerial
Decision No. 43.
59. It results from the preceding observations and from the analysis of Ministerial
Decision No. 43 that, abstracting from its administrative rather than judicial character, Ministerial Decision No. 43 does not decide the same case as that which the
Claimants wish to submit [591] to the jurisdiction of the icsid Arbitration Tribunal,
although indeed some of the arguments seem likely to affect, at least indirectly,
the interests which the Claimants are asserting. Even if it were regarded as conclusive in the context of Chilean domestic law, Ministerial Decision No. 43 has not
conclusively decided with the force of res judicata the question of the ownership
of the shares, but rather has decided on or proposed a number of compensatory
sums on the basis of arguments effectively implying or presupposing a decision on
ownership.
390
CASADO v. CHILE
60. It does not therefore appear that this decision, to judge from its text, can be
used against the Claimants as a judicial decision having the force of res judicata.
The fact that, if one were to believe more or less the allegations of the Claimants
(of 23 April 2001), the Chilean party might have presented (on 5 May 2000 in the
course of oral pleadings on jurisdiction) Ministerial Decision No. 43 as an element
substantially modifying the arguments in this case is clearly not determinative, but
simply indicative of a unilateral interpretation which, just like that of the opposing
party, cannot be substituted for the analysis of the Tribunal.
In any case, taking account of the principle of the supremacy of international
proceedings over domestic proceedings laid down by the precedents cited above,
this decision can neither bind the Tribunal nor prevail over the decision that it may
be led to give, in the hypothesis that it might recognise itself as having jurisdiction
to do so.
61. This observation suffices in itself to render unnecessary or inappropriate the
recommendation of provisional measures sought by the Claimants, aimed at ensuring that the Republic of Chile binds itself to suspend the execution of the decision of
the Minister for National Assets of 28 April 2000, known as Ministerial Decision
No. 43.
62. It will be noted furthermore in this context that the Parties are in disagreement on the exact nature of the Claimants contentions regarding the object of the
proceedings.
The Respondent objected (observations of 24 May 2001, no. 1.1 and transcript
from the oral pleadings of 21 June 2001, page 46) that the contention of the
claimant . . . refers to a generic obligation, that is to say to monetary compensation, and not to specific assets. It draws from this that the provisional measures
sought are not justified because in the event that [592] Chile is ordered to pay,
its obligation is a generic one and must be executed from public funds . . . even if
compensation has already been paid to other claimants. The Respondent adds that
a provisional measure could be useful if specific assets for example real property
were disputedthat could therefore be the case if Ministerial Decision No. 43 had
as its object to determine the ownership of the shares in the companies CCP SA
and EPC Lta, which, as we have seen, is not the case.
63. As regards a decision relating to compensation, it is not in any way, as
indicated above, binding on the Claimants and, in consequence, does not cause
damage to them (or does not directly do so). If it were otherwise, this damage
would not be considered as irreparable by the Tribunal since, as the Respondent
rightly observed, in the hypothesis that Chile would be ordered to pay on the
facts (by a Tribunal recognising itself as having jurisdiction), the clear, principal
or exclusive, practical consequence for Chile could only be either an obligation
to return the shares sought to their legitimate owners (that is to say restitution in
kind) or, in case of impossibility a restitutio in integrum, the obligation to compensate.
64. For their part, the Claimants have contested that their claim relates to a
generic obligation, stating in particular that the compensation was only the
reflection of an investment in shares and of property rights (observations from the
dossier of the oral pleadings of the Claimants, of 21 June 2001, page 2) and that
391
the property rights of Mr Pey Casado had been recognised several times by the
Government of Chile (same dossier, pages 8 ff.)
65. In the context of the present decision on the claim for provisional measures,
it is superfluous to reach a conclusion on these two opposing arguments and to
pronounce on the exact nature of the rights set forth and sought to be safeguarded.
Whether or not it relates to a generic obligation, Ministerial Decision No. 43
and its execution in Chile do not have consequences such that could affect either
the jurisdiction of the Tribunal or the rights of the Claimants alleged in the claim
for arbitration in a manner that, in the view of the Tribunal, makes necessary
the pronouncement of the provisional measures [593] sought as regards Ministerial
Decision No. 43 and its execution.
66. For analogous reasons, it is superfluous to pronounce on the supplementary
arguments raised by the Parties for or against the provisional measure sought. Since,
in the view of the Tribunal, one of the conditions required for the recommendation
sought is not present, there is no need to pursue the analysis in the context of a
necessarily theoretical debate.
III. On the Other Provisional Measures

67. It is opportune to discuss now, before passing to an examination of the provisional measure sought by the Chilean government, another aspect of the Claimants
request, a more general and less specific one than the claim aiming to suspend
the execution of Ministerial Decision No. 43. It relates to the general principle,
frequently affirmed in international case-law, whether judicial or arbitration proceedings are in question, according to which each party to a case is obliged to
abstain from every act or omission likely to aggravate the case or to render the
execution of the judgment more difficult. It is thus that the Claimants have argued (for example in their Memorial of 21 June 2001) that a recommendation was
necessary so as not to aggravate the dispute which, indubitably in their view, the
execution of Ministerial Decision No. 43 would do as well as, it seems, the persistent refusal of the Chilean authorities to take account of their protestations and
explanations or to recognise the jurisdiction of the Tribunal in line with the terms
of the icsid Convention and the Bilateral Investment Treaty between Chile and
Spain.
68. It is necessary to note that, if the Respondent contested the Claimants allegations as well as the necessity for or the opportune nature of the measures sought by
the Claimants, it never contested either the general principle invoked or the power
of the Tribunal to order provisional measures which would be tailored to avoid the
aggravation or the extension of the dispute. On the contrary, it relied on the same
principle in another context. Thus in its observations of 21 May 2001 to icsid, at
the probing of the members of the Tribunal, it referred several times [594] (pages 7
and 10) to a note to Rule 39 in the 1968 icsid Arbitration Rules [1 ICSID Reports
(1993) page 99], according to which the parties should not take steps that might
aggravate or extend their dispute or prejudice the execution of the award. And it
considers in particular that (page 2) the recommendation of provisional measures
392
CASADO v. CHILE
required by the opposing party represents an aggravation of the present arbitration

proceedings.
69. The Parties are therefore in agreement in admitting the pertinence, as regards
provisional measures, of the general principle of law which has just been cited. With
good reason. In effect, this principle has undoubtedly been enshrined for decades
in international case-law, and in particular since the celebrated precedent of the
case of The Electricity Company of Sofia and Bulgaria (provisional measures)
judgment of 5 December 1939, PCIJ, Series A/B, No. 79, page 199, a case in
which the Court indicated provisionally that awaiting its conclusive judgment,
the Bulgarian State:
should ensure that no step of any kind is taken capable of prejudicing the rights claimed
by the Belgian Government or of aggravating or extending the dispute submitted to the
Court.
70. In the same way, in the Anglo-Iranian Oil Company Case (a claim for
the indication of provisional measures, United Kingdom v. Iran) the judgment of
5 July 1951 of the International Court of Justice indicated provisionally the following provisional measures (at p. 93):
1. That the Iranian Government and the United Kingdom Government should ensure
that no action is taken which might prejudice the rights of the other Party in respect
of the carrying out of any decision on the merits which the Court may subsequently
render;
2. That the Iranian Government and the United Kingdom Government should each
ensure that no action of any kind is taken which might aggravate or extend the dispute
submitted to the Court.
71. More recently, in a judgment of 1 July 2000, the case of Armed Activities
on the Territory of the Congo (Democratic Republic of the Congo v. Uganda),
provisional measures, the International Court of Justice incidentally recalled that
Article 41 of its [595] Statute also gave it (at paragraph 44) the power to indicate
provisional measures with a view to preventing the aggravation or extension of the
dispute whenever it considers the circumstances so require.
72. The same power was affirmed in the context of icsid arbitrations, for example,
more or less implicitly, in the Holiday Inns case already cited (cf. Georges R.
Delaume, icsid Tribunals and Provisional MeasuresA Review of the Cases,
ICSID Review volume 1 no. 2 Fall 1986, page 392; Paul D. Friedland, op. cit.,
page 336, who notes at page 338 that . . . international legal precedents . . .
permit provisional measures in cases of aggravated tension, even if the conduct
at issue did not affect the particular rights in dispute; cf. also C. Schreuer, op.
cit. nos. 6870, who cites in particular the decision Amco v. Indonesia (page 241),
where the Arbitration Tribunal rejected the claim, in particular for the reason that
there had been no aggravation or extension of the dispute). This last judgment
contains, despite several ambiguities, a clear reference to the principle examined
here, mentioned as:
393
the good and fair practical rule, according to which both Parties to a legal dispute,
should refrain, in their own interest, to do anything that could aggravate or exacerbate
the same, thus rendering its solution possibly more difficult.
73. It remains for the Tribunal to decide whether, taking account of the circumstances of the case and the analysis above, there exist risks of aggravation or of
extension of the dispute, or of a development likely to make the execution of an
eventual judgment more difficult (in the hypothesis, again, that the Tribunal recognises itself as having jurisdiction) and in consequence a compromise of the rights
recognised therein for one or other of the Parties.
As a result of the above, it is the opinion of the Tribunal that this issue has to be
resolved with certainty.
74. In the view of the Tribunal, the factual elements summarised in the first part
of the present decision and the behaviour of the two Parties clearly establish the
existence of a state of tension, which, while the proceedings continue, it is the aim
of the Arbitrators to reduce, or, at least, the aggravation of which they should try
to prevent.
[596] 75. This state of tension can be explained, in part at least, by referring to
the political context and origin of the dispute, which derives from confiscations
carried out by the Chilean military regime from the companies CPP SA and EPC
Lta and from the compensation promised or due to the affected parties.
We should refer as well to the bitter criticisms and debates exchanged between
the Parties, who have accused each other for example of fraud or of impersonation,
of legislative or administrative manipulation, or even of obstruction.
76. In such a climate of almost total mutual incomprehension, one might well
fear unilateral acts or behaviour taking diverse formsfor example, on the part of
the Claimants, that of a hostile press campaign or, on the part of the Respondent,
of decisions of the judicial or administrative authorities. This latter risk seems to
have necessarily increased given the belief, upheld by the government in this case
as we have seen, that the proceedings should have a purely domestic character and
that the icsid Arbitration Tribunal should not have jurisdiction.
It is of course more than possible that the Tribunal will agree, but it is also possible
that it will arrive at the opposite conclusion, and give a judgment on the merits of
the case, the execution of which may be rendered more difficult, even impossible,
by unilateral measures taken in the meantime by the respondent Statea situation
of a character such as to occasion the international liability of this State, as we
have pointed out above, for example in the case of Holiday Inns v. Government of
Morocco.
77. For these reasons and taking account of the circumstances, the Tribunal
judges it necessary to invite the two Parties, under the heading of a provisional
measure, to take into account the various possible hypotheses and each to ensureto
reproduce the expression used by the International Court of Justice (Anglo-Iranian
Oil Company Case, Judgment of 5 July 1951, p. 93) that no action is taken which
might prejudice the rights of the other Party in respect of the carrying out of [the
judgment] which the [Arbitration Tribunal] may subsequently render and that no
action of any kind is taken which might aggravate or extend the dispute.
394
CASADO v. CHILE
[597] IV. Regarding the Respondents Claim for a Guarantee

of the Payment of Costs
78. Relying on Rule 39 of the Arbitration Rules, by a correspondence dated
13 September 1999 to the Tribunal, the Respondent sought from the Tribunal an
order for the production of guarantees sufficient to cover the costs to which the
parties may be subject.
On the one hand, the Respondent considers that the Tribunal should take into
account the high probability of the Claimants being ordered to pay costs. On the
other, it asserts that the Fundacion Presidente Allende undertakes practically no
activites and . . . possesses no assets, while Mr Vctor Pey Casado does not seem
to have the benefit of a substantial financial base.
79. Taking account of the educated doubts that it suffers as regards the financial
wherewithal of the claimants to cover the costs of the hearing and of its legitimate
concern in this regard, the State of Chile stresses the absence of a financially
capable opposing party to which it may be able to address its demand for payment
of whatever sum derives from a judgment favourable [to it] and in particular a
judgment ordering the Claimants to pay costs.
In a more general context, the Respondent insists on the significant expense
generated to organise its defence in the present case and given the serious precedent that this case might present for States importing foreign capital, taking account
of the ease with which a claim for arbitration may be constituted.
80. For their part, the Claimants oppose this claim for provisional measures,
which seems to them baseless because it relates to non-existent rights, to potential
rights and furthermore . . . prejudges the decision of the Tribunal (dossier of oral
pleadings from 21 June 2001, p. 11 of transcript).
We should note in this regard that this argument is identical to that which the
Respondent put forward to oppose the claim for the suspension of Ministerial
Decision No. 43, in relation to which it postulated that the [598] Tribunal could
not recommend provisional measures unless they were to safeguard present rights
recognised to exist, etc. However, it has been established above that this proposition
is false and rests on a misunderstanding as regards the very system of provisional
measures that constitutes part of the system of the icsid Convention and the Arbitration Rules (it suffices to refer to what was said above, for example at paragraphs
43 to 50).
81. In its observations of 21 May 2001, the Respondent considered that the
application of provisional measures would require the present existence of the
right which one wished to protect, a right which must be neither hypothetical nor
conditional nor subject to any kind of time lapse. It is obvious that if this criterion
was applied to the Chilean claim for provisional measures aimed at guaranteeing
its (hypothetical) right to the eventual costs which a judgment on the merits of the
case might order the Claimants to pay, this criterion would lead to a rejection of the
claim for a guarantee. However, the Tribunal considered that this criterion should
not be applied in favour of any of the Parties to the present case. It results from
this that the objection raised by the Claimants regarding the clearly hypothetical
character of a right of the State of Chile to the payment of costs must be rejected.
395
It cannot suffice to refuse the request for the payment of a guarantee in the guise
of a provisional measure.
82. It remains to examine whether the claim is authorised by the applicable texts,
that is to say by Article 47 of the icsid Convention and Rule 39 of the Arbitration
Rules and whether it is or should be justified by the circumstances of the case.
On the first question the Tribunal stresses that none of the applicable texts expressly envisages the possibility of a provisional measure aimed at the payment of
a sort of cautio judicatum solvi, that is to say the possibility of the payment of a
guarantee against the eventual financial incapability of the party which is ordered to
pay costs, an issue close to the other, broader, one, that of the preliminary guarantee
of the payment of a sum which a party may be ordered to pay as a result of the
judgment on the facts (pre-judgment security; cf. for example Paul D. Friedland,
op. cit., in Arbitration International vol. 2 no. 4 October 1986, pages 34750).
83. Reference has already been made to the very broad and varied nature of
the possible provisional measures available within the icsid regime, and to the
willingness of the framers of the applicable texts to forswear a precise list of the
[599] measures available to the Tribunal (cf. supra paragraph 15). One may however
be surprised that a practical question such as that of the guaranteeing of the payment
of costsparticularly by the investor who is the Claimant in the casemight have
escaped the attention of the framers of the icsid Convention and of the Arbitration
Rules (the payment of costs by a State does not provoke, in contrast, any problem
given both the financial capacity of the State, rightly stressed by the Respondent,
and the internationally obligatory and executory character of judgments within the
icsid system).
84. The Republic of Chile has stressed the risk run by the States that are party to
the icsid Convention by reason of the possible impecuniosity of the investor who
is the claimant in a case; this observation without doubt merits examination (even
though the eventual failure to execute a judgment regarding costs may be more of
a theoretical than a practical problem, particularly in a situation where, as in this
case, the system of the icsid Convention is backed up by a bilateral treaty such as
the Agreement on the Reciprocal Protection and Promotion of Investments between
Chile and Spain).
85. If the risk mentioned by the Respondent should not be ignored, it is opportune
to believe that neither the framers of the icsid Convention nor the States who ratified
it (of which Chile was one) were ignorant of it. It would have been easy for them,
if they wished to protect themselves against this risk, to include an appropriate
provision in the icsid Convention or the Arbitration Rules. It is permissible to
suppose that, if this was not done, it was because the said risk seemed to them
minimal or possible to accept.
86. In summary, the absence of any text on the guaranteeing of the payment of
costs, without being decisive in itself, seems to entail a certain presumption that
such a measure is not authorised or included. In other words, there is no indication,
in the system of the icsid Convention, that the claim submitted by an investor should
not be considered as capable of being heard unless the claimant establishes his own
financial good standing. Such a restriction on the protection of investments would
certainly be conceivable but it would have to be expressly included, whether this
396
CASADO v. CHILE
be by the icsid Convention or the Bilateral Investment Treaty between Chile and
Spain, mentioned above.
[600] In summary, in the absence of any contrary indication, it is permitted to
suppose that the parties to the icsid Convention, who without doubt could and
should have foreseen the possibility of the claimant investor not having sufficient
means to pay costs, before deciding to ratify the icsid Convention, evaluated and
accepted the risk which the Respondent is affected by in this case.
The only result of this first provisional conclusion is that the recommendation
of a caution for the payment of any costs cannot be admitted as an ordinary and
general measure.
87. The analysis of international arbitration law and of the comparative practice
of States in this regard does not permit a different conclusion (on this point see for
example O. Sandrock, The Cautio Judicatum Solvi in Arbitration Proceedings or
the Duty of an Alien Claimant to provide Security for the Course of the Defendant
in Journal of International Arbitration, vol. 14 no. 2 1997, pages 1737). The
evidence provided by domestic judicial practice is mostly contradictory and, for
the rest, inconclusive as regards arbitration, while the foreign or non-resident status
of the claimant cannot have the same importance as before a domestic judge.
Furthermore, it was not alleged in the instant case by the Respondent that the
institution of the cautio judicatum solvi is known and used in Chilean proceedings
(the Claimants having argued, incidentally, that such was not the case).
Neither was it alleged that, in the proceedings initiated in Chile by Mr Pey Casado
(before the court of first instance of Santiago, First Chamber) in the Goss rotativa
case, such an argument might have been invoked.
88. In any case, taking account of the preceding general observations on provisional measures (cf. I, paragraph 15) and of the absence of a clear answer in the
texts, there is no justification for excluding the Tribunal from being able to recommend in certain circumstances the deposition of a guarantee aimed at protecting
the respondent against the eventual non-payment of costs where the claimant is
financially incapable. Thus in the case of Atlantic Triton v. Guinea (cf. Paul D.
Friedland, op. cit., pages 347 ff; C. Schreuer [601] op. cit., page 233), the Arbitral
Tribunal, whilst rejecting the claim of the two Parties requesting the furnishing
of financial guarantees from the opposing party, affirms that recommendation of
such measures would clearly be within its mandate under Article 47 of the icsid
Convention. The jurisprudence of icsid is relatively slender in this regard and,
according to one of the few commentators who has written on this topic (Paul D.
Friedland, op. cit., page 348):
The Atlantic Triton decision thus establishes that prejudgment security to ensure payment of an eventual award [including the question of the payment of costs] will not be
granted in the ordinary course of icsid arbitration. This result is undoubtedly appropriate . . .
(See also Procedural Order No. 2 of the Arbitration Tribunal presided over by
Mr Francisco Orrego Vicuna of 28 October 1999 in the case of Maffezini (icsid
case ARB/97/7)).
397
89. In conclusion, the Tribunal considers that the circumstances of the case do
not justify the recommendation of the measure sought by the Respondent. In effect,
if the danger of non-payment has indeed been brought up in a general manner, it
has not been shown nor even suggested as particularly probable or evident that this
risk is present in this case nor, even if it had been established, that it would make
necessary the recommendation of the provisional measure sought.
For These Reasons

The Arbitral Tribunal,
1) rejects the claim for provisional measures from the Claimants insofar as it
relates to Ministerial Decision No. 43 and the suspension of its execution;
2) rejects the claim for provisional measures from the Respondent insofar as it
relates to the deposition by the Claimants of a guarantee for the payment of
any costs that might issue from a conclusive judgment on the facts of the case;
[602]
3) accepts with satisfaction the assurances that the representatives of Chile have
again given as regards the supremacy accorded by that country to international law over domestic law and its reiterated undertaking to execute without
hesitation any judgment which may issue from the Tribunal, even in the event
that the Tribunal judges itself as having jurisdiction and gives a judgment on
the merits of the case in favour of the compensation of the Claimants;
4) requests the Parties to strictly comply with the general principle of law according to which each party to the case is obliged to ensure that no action
is taken which might prejudice the rights of the other Party in respect of the
carrying out of any award which the Arbitration Tribunal may subsequently
render and that no action of any kind is taken which might aggravate or extend
the dispute submitted to the Arbitration Tribunal;
5) requests the Parties to keep the Arbitration Tribunal informed of any fact or
evolution of the situation coming within their knowledge and which might be
likely to influence the respect for this general principle;
6) reserves its judgment on the rest of the proceedings.
[Source: Translated from the French text in 16 ICSID ReviewFILJ 567 (2001) by
Mr Brian Conroy.]
398
SALINI COSTRUTTORI v. MOROCCO
Jurisdiction Consent Contractual submission to local jurisdiction

Whether ousting jurisdiction under bilateral investment treaty Local
jurisdiction not susceptible to prorogation whether consent given icsid
Convention, Article 25(1)
Jurisdiction Jurisdiction ratione personae National motorway company
with majority State ownership Whether agency of State icsid Convention, Article 25(1)
Jurisdiction Jurisdiction ratione materiae Investment Particular
relevance of State law in determining existence of an investment Dual
requirements of bit and icsid Convention, Article 25(1) Whether satisfied
Jurisdiction Jurisdiction ratione materiae Claim of breach of bit Not
excluded because also based on contract Onus of proof on Claimant to
establish breach of bit attributable to the State Relation of responsibility
under treaty to contractual liability
Admissibility bit requiring notification to host State requesting amicable
settlement Notification to Minister also holding office as President of local
contracting company Whether sufficient notification
State responsibility Organ of the State Structural and functional criteria
Acts of a State corporation attributable to the State Relation to contractual
claim
(Case No. ARB/00/4)
Decision on Jurisdiction. 23 July 2001
(Arbitration Tribunal: Briner, President; Cremades and Fadlallah, Members)
Summary: The facts: The National Motorway Company of Morocco (adm)
was a limited company formed in 1989 with the object of executing various road
maintenance and construction projects in accordance with a special concession
agreed with the Moroccan State. It was substantially but not wholly State-owned.
In August 1994 it sought tenders for the construction of a motorway linking Rabat to
Fes. Salini Costruttori SpA and Italstrade SpA (the Italian companies) submitted
a joint tender for the construction of a portion of this project. This tender was
accepted and eventually led to the conclusion, on 17 October 1995, of deal 53/95
between adm and the Claimants, fixing the price and setting out the conditions for
the construction of this stretch of road.
SUMMARY
399
The project was eventually finished on 14 October 1998, having taken thirtysix months to complete, four months more than the contractual time-limit. A
notice of general and conclusive termination of the deal was communicated by
adm to the Italian companies, which signed the notice (with reservations) on
26 March 1999.
The Claimants drafted memoranda explaining and justifying the delay in completing the works, the first addressed to adm itself, the second addressed to the
Minister for Infrastructure. The first memorandum was rejected, the second met
with no response. More than six months after the second memorandum, the Italian
companies lodged a request for arbitration with icsid directed against the Kingdom of Morocco, relying on the Agreement relating to the reciprocal encouragement and protection of investments between Italy and the Kingdom of Morocco
(the Agreement), which had entered into force in favour of Italian investors on
1 January 1992. The Kingdom of Morocco raised a number of objections to icsids
jurisdiction in the matter, claiming:
(i) that the request was premature in the light of the Agreement;
(ii) that icsid lacked jurisdiction ratione materiae and ratione personae;
(iii) that the Italian companies had agreed that only the administrative court in
Rabat could have jurisdiction over disputes under the contract.
Held: The Arbitration Tribunal had jurisdiction, but only in so far as the
request related to alleged breaches of the Agreement.
(1) The Agreement placed no formal conditions on the manner in which a request to achieve an amicable settlement should be framed. Since the request for
arbitration was lodged almost eight months after the Minister for Infrastructure and
President of adm had been presented with the companies memorandum regarding
the termination of the deal, the six-month period required by the Agreement before
the filing of a request for arbitration had been fulfilled (paras. 1423).
(2) The contractual clause under which the defendant sought to exclude icsid
jurisdiction did not constitute a true prorogation clause. For the purposes of Article
8(2) of the Agreement, both parties had consented in writing to icsid jurisdiction,
notwithstanding the exclusive jurisdiction clause in the contract (paras. 257).
(3) From both a structural and a functional point of view, adm could only be
distinguished from the Moroccan State by virtue of its status as a private company.
It could thus be regarded as an arm of the State and the Tribunal had jurisdiction
ratione personae to hear the case (paras. 305).
(4) Since the works at issue were approved by the relevant authorities and the
various criteria set out in the case-law and doctrine were clearly satisfied in this
case, the deal concluded between adm and the Italian companies did constitute
an investment within the meaning of the Agreement and of the icsid Convention. The Tribunal thus had jurisdiction ratione materiae to hear the request
(paras. 4358).
(5) Article 8 of the Agreement only extended to breaches of contracts between
investors and the State itself; to the extent that the request concerned a breach
of contract which was not also a breach of the Agreement, the Tribunal lacked
jurisdiction to hear it (paras. 5963).
400
The following is the text of the Decision on Jurisdiction:

(Translation)
Facts
1. The arbitration tribunal has been called upon to resolve a case involving the
following two Italian companies:
Salini Costruttori SpA
Italstrade SpA
and the Kingdom of Morocco.
2. The National Motorway Company of Morocco (hereafter: adm), formed in
1989 in the form of a limited company, has as its object to construct, maintain and
manage a variety of motorways and road-works in accordance with the Concession
Agreement concluded with the Minister for Public Works, Professional Training
and Management Training, acting on behalf of the State.
In the framework of this Agreement, adm sought, in August 1994, international
tenders to construct a motorway linking Rabat to Fes. The above-mentioned Italian
companies made a joint bid for the construction of stretch of road no. 2 between
Khemisset and West Meknes, a distance of about 50 kilometres. The Italian companies were selected to construct this stretch of road for a price of 280,702,166.84
Moroccan dinars and 3,122,286,949.50 Yen.
The negotiations which followed the accepting of the tender for stretch of road
no. 2 culminated, on 17 October 1995, in the conclusion of deal 53/95.
3. In the interests of executing the contract which has given rise to the present
dispute, the two plaintiff companies had together formed the Salini-Italstrade Group
of Companies (hereafter: the group). The group did not possess legal personality.
At the present arbitration hearing, the Italian companies appear as a result in the
capacity of joint and several co-claimants.
4. The works were provisionally opened on 31 July 1998.
Work on the project was completed on 14 October 1998. Hence it had lasted 36
months, or 4 months more than the period envisaged by the contract (32 months).
The above-mentioned works were officially opened on 26 October 1999.
5. A notice of general and definitive termination was served on the Italian
companies by adm. This was signed by them (with reservations) on 26 March
1999.
On 29 April 1999, the Italian companies addressed an affidavit to adms Chief
Engineer setting out the reasons for their reservations, labelling these last as follows: technical difficulties, exceptional delays, bad weather, market upheaval,
changes regarding the scale of the construction work, extension of contractually specified time limits, financial charges, and unforeseeable changes in the
value of the Yen. On 14 September 1998, in the wake of the Chief Engineers
total rejection of all of their claims, the Italian companies addressed an affidavit
to the Minister for Infrastructure regarding the general and definitive termination, relying on Article 51 of the Handbook of General Administrative Clauses.
No response was received either from the Minister for Infrastructure or from adm.
401
Procedure
6. On 1 May 2000, the Italian companies filed a request for arbitration directed
against the Kingdom of Morocco with icsid. The Secretary-General registered the
request on 13 June 2000.
The Italian companies sought 132,639,617,409 Italian lire as reparation for the
damage suffered by them.
7. The Arbitration Tribunal was constituted as agreed by the parties. The Italian companies selected M. Bernardo Cremades in the capacity of arbitrator. The
Kingdom of Morocco chose Professor Ibrahim Fadlallah. By consensus, the two
arbitrators selected M. Robert Briner to act as President of the Arbitration Tribunal.
The parties agreed that the arbitration should take place in Paris.
8. The Kingdom of Morocco raised an objection to jurisdiction in a letter addressed to the icsid on 17 July 2000. An introductory hearing took place on the 27
October 2000 in Paris. This argument regarding jurisdiction was raised again by the
defendant in its letter of 20 December 2000, to which the Italian companies were
required to respond by 2 February 2001 at the latest. This expiry date was put back,
at the request of the claimants, until 15 February of the same year. In consequence,
the President of the Arbitration Tribunal delayed the date for the submission of the
parties rejoinder and duplicate memorials. The defendant delivered a responding
set of memorials on 16 March 2001 and the claimants a duplicate set on 16 April
2001. A hearing devoted to the question of whether the tribunal lacked competence
to deal with the claim and whether it had jurisdiction in disputes between the parties
was scheduled for 3 May 2001 in Paris.
Discussion
9. In the claim for arbitration, the Italian companies founded the jurisdiction of
the icsid on Article 8 of the Agreement between the Government of the Kingdom
of Morocco and the Government of the Italian Republic concerning the reciprocal
promotion and protection of investments, which was concluded on 18 July 1990
and came into force on 1 January 1992 as regards Italian investors, in conformity
with an exchange of letters between the Ministers for Foreign Affairs of the two
Governments, dated 26 November 1991. The coming into force of this bilateral
Agreement on the Protection of Investments is no longer contested by the Kingdom
of Morocco.
In effect, upon the hearing of the arguments on the question of jurisdiction which
took place on 3 May 2001 in Paris, counsel for the Kingdom of Morocco recognised
that the parties are at one in recognising that effectively the exchange of letters
permitted the provisional implementation of the Treatynot for prior investments
(to which the text does not refer), but allowing the provisional operation of the
Treaty in its entirety (transcript from the hearing of arguments on jurisdiction of
3 May 2001, p. 2).
10. The Kingdom of Morocco raised a variety of objections to the action being
brought before the Arbitration Tribunal. It argued, relying on Article 8 of the said
402
Agreement, that the claim could not be heard because it was premature (I), that the
tribunal did not have jurisdiction ratione personae and ratione materiae (II), and
that the Italian companies had accorded exclusive jurisdiction to the Administrative
Court at Rabat.
I. Regarding Objections to Jurisdiction based on the Premature Character of
the Claim
A.Arguments of the parties
11. In its written memorials regarding jurisdiction and in its oral pleadings, the
Kingdom of Morocco declared the claimants claim premature in the light of Article
8.2 of the bilateral Agreement. In effect, it contended that this provision required:
that the injuries set out in the claim for arbitration had been the object of a
claim for amicable resolution made to the Kingdom of Morocco at least six
months previously;
that these injuries constituted breaches of the bilateral Agreement, the arbitration procedure set out in Article 8.2 being inseparable from the other
provisions of the said Agreement.
12. This second argument concerns the jurisdiction ratione materiae of the
Tribunal. It will be dealt with in the context of an examination of this last issue.
As regards the issue of prematurity, the only point of importance is to ascertain
whether the claim for amicable resolution envisaged in sections 1 and 2 of Article 8
was effectively made by the Italian companies.
13. As regards the first argument, the defendant contends that the requests of
the Italian companies were addressed to the Director General (Chief Engineer) of
adm and to the Minister for Infrastructure, not in his capacity as Minister but in
his capacity as President of adm, in such a way their claims would not have been
communicated to the Kingdom of Morocco.
The Italian companies believe that such a request had been made. They produce
in support of this contention the following documents:
affidavit of claim relating to the general and conclusive termination, presented
to the Minister for Infrastructure and President of adm, dated 14 September
1999;
letter dated 10 April 1998, addressed to the Moroccan Ambassador in Rome;
letter dated 15 May 1998, addressed to the Prime Minister of Morocco.
B.Decision
14. In view of the documents exchanged between the parties and their oral arguments, in order to give its decision on the premature character of the claim for
arbitration, the arbitration tribunal must ascertain whether:
a) the Kingdom of Morocco was properly furnished with a request for amicable
resolution of the disputes deriving from the deal in question;
b) the request for amicable resolution involved the same subject-matter as the
arguments set out in the claim for arbitration;
c) a period of at least six months elapsed between the two claims.
403
a) Was the Kingdom of Morocco properly furnished with a request for

amicable resolution of the disputes deriving from the deal in question?
15. Article 8 of the Bilateral Agreement provides:
1) All conflicts or disputes, including disputes involving the amount of compensation payable in case of expropriation, nationalisation or analogous measures, between
a contracting party and an investor from the other contracting party concerning an
investment from the said investor on the territory of the former contracting party must,
to the extent that this is possible, be amicably resolved.
2) If these disputes cannot be amicably resolved within a period of six months from
the date of the request for amicable resolution, to be presented in writing, the investor
in question will be able to raise the dispute either:
a) before the court of the contracting party in question having jurisdiction;
b) before an ad hoc tribunal, in conformity with the arbitration rules of uncitral;
c) to the International Centre for the Settlement of Investment Disputes (icsid) for
the initiation of arbitration procedures, as envisaged by the Washington Convention
of 18 March 1965 on the Settlement of Investment Disputes between States and
Nationals of other States.
3) The two contracting parties will abstain from dealing by diplomatic means with
any issue relating to an ongoing arbitration or judicial investigation, so long as these
proceedings have not finished and one of the parties in question has not disobeyed the
judgement of the selected arbitration tribunal or ordinary court, within the time limitations fixed in the judgement or within the time limitations to be otherwise ascertained,
on the basis of the relevant dispositions of international or domestic law.
16. The disputes in question clearly set an investor against a State. The obligatory
initiatives regarding amicable resolution imposed by Article 8.2 apply to the same
parties. The Italian companies, Italian investors, were therefore obliged to have
sought amicable resolution with the Kingdom of Morocco.
17. It is not disputed that the deal concluded between adm and the Italian companies constitutes a public agreement.
Article 2.2.1 of the ccap provides:
The investing party remains moreover bound by the following general texts which do
not constitute part of the Deal:
The Handbook of General Administrative Clauses (ccag) applicable to deals for works
carried out for the benefit of the Ministry for Public Works and Communications
as approved by Royal Decree no. 209-65 dated 24 Joumada II 1385 (19 October
1965) rendered applicable to public administration by Royal Decree no. 151-66 of 29
Safar 1386 (18 June 1966) other than the derogations expressly laid out in the present
Rulebook of Specific Administrative Clauses.
Article 18, section 1 of the ccap provides:

In case of disputes between the Master of Works and the investing party, recourse
should be had to the procedure envisaged by Articles 50 and 51 of the ccag.
Under the heading Representation of the Master of Works, Article 23 of the ccag
provides:
404
As regards the set of general texts envisaged by Article 2, functions are distributed as
follows:
MinisterPresident
Chief EngineerDirector General.
18. The Kingdom of Morocco rightly stresses that the ccap, a contractual document designed to govern the relationship between adm and the Italian companies,
cannot bring about the attribution to the Minister of the function of President of
adm. But it cannot deduce from this that the ccap removed the issue of disputes
relating to the investor from the Ministers authority to place it within the separate field of authority of the President of adm. The multiplicity of roles falling on
the Minister that stems from the organisation of the Moroccan authorities intervention mechanisms regarding motorways should not be invoked, deducing from
the reference in Article 51 of the ccap, in order to argue that facts that the Minister may be ignorant of facts in one capacity that he has dealt with in another
role.
19. The Tribunal notes that Article 8.2 of the Agreement does not fix any procedure to follow in regard to bringing about an amicable resolution of the dispute
between the parties. This article does nothing more than fix a six-month limitation
period during which the parties will have to try to settle their differences in an amicable manner. This Tribunal does not aim to posit strict rules that the parties should
have followed, but satisfies itself with discovering whether it is possible to deduce
from the course of the parties actions whether, by observing a six-month limitation period, the claimants have undertaken the necessary and appropriate steps as
regards the corresponding authorities in relation to an agreement bringing an end
to the dispute.
The Tribunal concludes therefore that the various above-mentioned documents
together constitute a written request for the amicable resolution of the dispute and
fulfil the condition laid down by the bilateral agreement as regards the recipient of
this request.
b) Is the request geared towards the resolution of the dispute brought before
the Arbitration Tribunal?
20. The Tribunal feels that the attempt at amicable resolution must in essence
confirm the existence of injuries and the willingness to find a non-contentious
solution. It does not have to be detailed or comprehensive.
21. The Tribunal considers that this last condition is fulfilled in this case: in
effect, the various documents claimed to constitute a written request for amicable
resolution of the dispute refer to the injuries complained of in the present proceedings: furthermore, these documents permitted or, at the least, should have permitted
the Kingdom of Morocco to become aware of the dispute and to put the means of
resolving the dispute into operation.
c) Has the six-month limitation period been observed?
22. The claim for arbitration was filed on 4 May 2000, or almost 8 months after
the letter of claims relating to the general and conclusive breach, presented to the
Minister for Infrastructure and President of adm on 14 September 1999. Moreover,
405
this last document is the most recent one among those regarded by this Tribunal as
constituting an attempt at amicable resolution prior to arbitration.
23. In conclusion, the Arbitration Tribunal feels that the defect of prematurity
of claim has not been established in light of the requirements of Article 8.2 of the
bilateral Agreement.
II. Regarding the Arbitration Tribunals Jurisdiction

24. The Kingdom of Morocco has raised the issue of the Arbitration Tribunals
jurisdiction to deal with this matter, invoking what it terms the Italian companies
renunciation of the jurisdictional choice in Article 8 of the bilateral Agreement (1),
as well as citing its lack of jurisdiction ratione personae and ratione materiae.
1) The renunciation of the jurisdictional choice in Article 8 of the bilateral

Agreement
25. The Kingdom of Morocco claims that the Italian companies are bound by
Article 18 of the ccap which states that the procedure laid down in Articles 50
and 51 should govern, which last gives the Rabat courts jurisdiction to deal with
litigation springing from the execution of a business contract.
26. For their part, the Italian companies contend that the submission to the
jurisdiction of the icsid by the Kingdom of Morocco and by themselves as a result
of the bilateral Agreement prevails over the contractual recognition of a different jurisdiction. Thus, the submission to the Rabat courts does not constitute a
renunciation of the icsid, taking into account particularly the fact that recourse
to the administrative courts is required given the public character of the contract,
which necessitates the application of the Rulebook of Administrative Clauses and,
in consequence, of Article 52 of the ccag.
27. In general, icsid jurisdiction exists in the consent of the various parties to
the dispute, that is to say a contracting State and a resident of another contracting
State.
As regards the formal conditions for the validity of the demonstration of this
consent, Article 25.1 of the Washington Convention (hereafter: the Convention)
only lays down one condition: that consent should be given in writing. As regards
the moment at which the consent should be demonstrated, one can understand from
the Convention that this should exist prior to the filing of a request for arbitration
since this request, in order to be recorded, must specify the date and the character
of the documents regarding the parties consent G. R. Delaume, The International
Centre for the resolution of disputes in relation to investments (icsid), in JDI 1982,
p. 775).
The consent referred to by Article 25.1 of the Convention can have three sources: a
clause contained in a contract concluded between a State and the investor; domestic
law, generally a code or law relating to investments; or international law, by means
of a clause contained in a bilateral or multilateral agreement.
Moreover, the bilateral Agreement provides:
406
2) If these disputes cannot be amicably resolved within a period of six months from
the date of the request for amicable resolution, to be presented in writing, the investor
in question will be able to raise the dispute either:
d) before the court of the contracting party in question having jurisdiction;
e) before an ad hoc tribunal, in conformity with the arbitration rules of uncitral;
f) to the International Centre for the Settlement of Investment Disputes (icsid) for
the initiation of arbitration procedures, as envisaged by the Washington Convention of
18 March 1965 on the Settlement of Investment Disputes between States and Nationals
of other States.
The necessary and sufficient character of the consent expressed by means of

a jurisdictional clause such as that cited above has been recognised in the case
of Asian Agricultural Products Ltd (AAPL) v. Republic of Sri Lanka (Yearbook
Commercial Arbitration XVII (1992) p. 103[1] ).
In summary, Article 8(2)(c) constitutes the unilateral consent of a State as regards
the State of an investor to submit to the icsid as defendant to an action taken by a
foreign investor.
In light of these considerations, the delivery to the icsid of a claim for arbitration
by the claimants constitutes a valid demonstration of their consent to the Centres
jurisdiction, in line with those set out in Article 8 of the Agreement.
The jurisdiction of the administrative courts not being susceptible to prorogation,
the consent set out above to the jurisdiction of the icsid prevails over the content
of Article 52 of the ccap, this article not being capable of constituting a true clause
of prorogation of jurisdiction governed by the principle of free will. Hence the
reasoning set forth by the Kingdom of Morocco in its submissions of 2 July 2001,
p. 2 s., according to which the route of recourse to the icsid could no longer be
open to the plaintiffs by reason of their involvement in a process of resolution of
the dispute in line with Articles 50 and 51 of the ccag cannot be supported.
2) Jurisdiction ratione personae
A.The Arguments of the parties
28. The Kingdom of Morocco argues that the Arbitration Tribunal does not
have jurisdiction ratione personae because it has been assigned by reason of the
acts of adm which is not a State body. adm is a private law company, enjoying
private ownership rights. The fact that the State is exercising its rights as a party
to the proceedings cannot have the effect of detracting from the legal autonomy
of the adm. The character of a public agreement, demanded of every construction
contract concluded in the public domain, cannot affect the nature of adm, nor can
the perception of a super tax the benefit of which can be attributed neither to public
legal persons nor to private legal persons.
29. The Italian companies contend that adm is a public law entity notwithstanding
its status as a limited company. The composition of its capital upon its incorporation
and of its board of directors, the direct involvement of the Minister for Infrastructure
in all of its fundamental market decisions, establish the active participation of the
State. The construction agreement in question is governed by the ccag like all
[ 1 4 ICSID Reports 245.]
407
works executed for the benefit of the State and is subject to the jurisdiction of the
administrative court, which necessarily implies that it is a public agreement. adm
is directly or indirectly financed by the Moroccan State. The construction projects
on the motorway network are funded by the State. adm being in this sense a public
body bound by a public agreement, all the requirements for regarding it as an arm
of the State have been fulfilled.
B.Decision
30. Given that the claims of the Italian companies lie against the State and are
founded on the violation of the bilateral Agreement, it is not necessary, to determine
whether the Tribunal has jurisdiction, to ascertain whether adm is a State body.
But since this question has been vehemently disputed by both parties and could
in some circumstances affect the decision on the facts, the Tribunal regards it
as useful to reach a conclusion on it to satisfy the legitimate expectations of the
parties.
31. Article 25.1 of the Convention provides:
(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of
an investment, between a Contracting State (or any constituent subdivision or agency
of a Contracting State designated to the Centre by that State) and a national of another
Contracting State . . .
Neither the Convention nor the bilateral Agreement proposes the slightest definition of what is meant by a contracting State. The references that the Convention
makes to any constituent subdivision or agency are not important in this regard,
because adm does not fulfil the conditions laid down by the Washington Convention
in order to be a party to the proceedings. In general, every commercial company
that is predominantly governed or controlled by the State or by State institutions is
considered a State company, whether or not it possesses legal personality. (Various
writers concur in this definition: L. J. Bouchez, The Prospects for International
Arbitration: Disputes Between States and Private Enterprises, 8 Journal of International Arbitration 81-115 (1, 1991); K-H. Bockstiegel, Arbitration and State
Enterprises: Survey on the National and International State of Law and Practice,
Arbitration International, vol. 1, no. 2, 1985, pp. 1959).
To determine the degree of State control and participation in a company, the Tribunal, referring to an icsid judgment given in Emilio Agustn Maffezini v. Kingdom
of Spain (icsid Case ARB/97/7), feels that recourse must be had to the international rules governing State responsibility. Analysis of the degree of State control
and participation in a company is performed by reference to two criteria: the first
structural, that is to say relating to the structure of the company and especially that
of its shareholding, the other functional, that is to say relating to the final say that
the company in question has over its affairs.
32. From a structural point of view, the Tribunal considers that:
adm is a commercial company founded as a private limited company, in
accordance with the law of 2 June 1989 relating to such companies, registered
at the Commercial Registry since 3 August 1989, hence possessing its own
legal personality;
408
The share capital of adm is apportioned in the following manner: the Treasury
holds 77.79%; public institutions hold 10.57%; banks and financial institutions hold 5.17%; insurance companies hold 3%; commercial and industrial
companies hold 2.67%; and finally the research office holds 0.81%.
Hence more than 89% of adm is held by the Kingdom of Morocco, through
the intermediary of the Treasury and other public law bodies.
The functioning and management of adm is governed by Article 20 of its
statutes:
The company is administered by a Council consisting of five members at least
and twenty members at most, selected by the Ordinary General Assembly or by
co-option by the Council.
Moreover, Article 35 of the same statutes provides:

The General Assembly consists of all shareholders, no matter what the size of
their holdings, provided that their holdings have been fully paid up.
By virtue of what has been set out above, the majority participation of the
Moroccan State in the shareholding of the company adm greatly shapes the
extent of its representation on the General Assembly, as well as on the Administrative Council. To convince oneself of this, it suffices to read the minutes of
the Administrative Council for 18 March 1998 (Annex M43) which contain
the list of its members. Among these can be found notably the Minister for
Infrastructure, who at the same time exercises the functions of President of
the Company, the General Secretary of the Minister for Infrastructure, the
Director of Roads and Traffic, the Director General of the Office for the Exploitation of Ports, the President and Director General of the National Bank for
Economic Development, the Budget Director, who work under the Minister
for Finance and the Economy, etc.
The majority participation of the Moroccan State in the Administrative Council of the company results in effective control by this last, it being accepted
that, in accordance with Article 27 of the statutes of the adm:
The Administrative Council is invested with the most extensive powers to act
in the name of the company and to authorise all acts or operations relating to
its object, to the exclusion only of those acts expressly reserved for the General
Assembly wither [sic] by the statutes or by the law.
Finally, two other facts reflect the evident interest that the Moroccan State
had in the control and management of adm. Firstly, the minutes show that the
position of the President of the Administrative Council must be occupied by
a natural person holding the post of Minister for Infrastructure at the time he
sits. The Tribunal recalls in addition that in 1995, it was indeed the Minister
for Public Works, Professional Training and Specialist Training, who, in the
capacity of President of adm, initiated the call for tenders which instigated the
agreement which is the object of the present arbitration. Secondly, the Tribunal
stresses that adm would in practice pass a copy of its minutes to the Prime
Minister of the Kingdom of Morocco, as well as to the Secretariat-General
409
of the Government (Annex G14). In consequence and from a structural point

of view, it is indisputable that the company adm is a body controlled and
directed by the Moroccan State, by means of the Minister for Infrastructure
and various other public organs.
33. From a functional point of view, in other words if one now focuses on the
role and the functions that the company adm exercises:
In accordance with its statutes, adm has as its principal object the construction, the maintenance and the management of motorways, large-capacity routes of
communication, which are assigned to it by the State.
It is thus clear that the social objective of adm is to strive towards the realisation
of tasks related to the State (construction, management and maintenance of assets
related to public services necessary for the structural needs of the Kingdom of
Morocco in the field of infrastructure and of efficient communication networks).
34. The administrative nature of the agreement and of the legislation which
governs it corroborates the Tribunals analysis. Both the provisions of the ccag,
applicable to public works agreements executed on behalf of the Minister for Public
Works and Communications and approved by two royal decrees, as well as certain
provisions relating to their control and management, laid down in Royal Decree
no. 2-98-482 of 11 Ramadan 419, support what has just been stated.
35. Finally, the Tribunal affirms that the fact that a State might be able to act
by means of a company having its own legal personality is not unusual if one
considers the vast expansion of administrative activity that has occurred. In order to
accomplish these tasks, whilst taking into account the sometimes divergent interests
that are sheltered by private enterprise, the State has recourse to a wide range of
forms of organisation, amongst them notably semi-state companies, in the nature
of adm, a company the majority of which is held by the State, which, having
regard to the scale of its interest (80%), effectively manages and directs it. All these
circumstances imprint this company with a firmly public character.
In consequence, adm being, both from a structural and functional point of view,
a body distinguishable from the State only by virtue of its legal status, the Tribunal,
notwithstanding the observations made by the Kingdom of Morocco on 2 July 2001,
concludes that the Italian companies have shown that adm is a State company, acting
in the name of the Kingdom of Morocco.
3) Jurisdiction ratione materiae
A.The arguments of the parties
36. The Kingdom of Morocco maintains that the jurisdiction ratione materiae
of the Arbitration Tribunal is conditional upon:
(a) the existence of an investment both in the sense understood by both the
bilateral Agreement and the Washington Convention;
(b) the existence of claims founded on the breach of the bilateral Agreement.
a) The notion of an investment
37. As regards the bilateral Agreement, the Italian companies argue that the
agreement in question relates to an investment in the sense of Articles 1c) and 1e),
which envisage rights to every contractual benefit having an economic value and
410
every right of an economic character conferred by the law or under contract.

The dispute arose in the wake of the non-execution of the agreement in question.
Furthermore, the contract conferred a right of an economic nature on the plaintiffs,
that is to say the right to compensatory damages.
38. The Kingdom of Morocco contends that, considered on their own, these
articles are of such a character as to dilute the notion of an investment such that it
is equated with the very general concept of an economic right. Articles 1c) and 1e)
should therefore be read in the light of section 1 of Article 1, which refers back to
the laws and regulations of the State relating to the encouragement of investment.
It is therefore Moroccan law which ought to define the notion of an investment.
Furthermore, by virtue of Decree no. 2-98-482 of 30 December 1998, the transaction in question should be regarded as a business contract rather than one of
investment.
The Italian companies attach the title of investment to the agreement in referring
to the bilateral Agreement.
They contend that reference to the laws and regulations of the State should only
extend to the logistics of the investment and not to its definition. The notion of an
investment should not therefore be limited by reference to the laws and regulations
envisaged under Article 1 section 1 but by reference to Article 1g). This provision
requires the rights envisaged in particular by Articles 1c) and 1e) to be the object
of contracts approved by the competent authority. This condition was fulfilled in
this case. The Kingdom of Morocco contends otherwise.
39. Regarding the Washington Convention, the Kingdom of Morocco argues that
the agreement in question does not constitute an investment in the sense of the said
Convention.
40. The Italian companies argue both for the application of the Convention and
for the view that the agreement constitutes an investment in the sense of the said
Convention.
b) The basis of the claims
41. The Kingdom of Morocco contends that the injuries set forth by the Italian
companies do not relate to violations of the bilateral Agreement, but to simple
contractual violations. It also argues that the only basis on which the jurisdiction
of the Tribunal could rest would be the violation of the bilateral Agreement, its
consent to icsid arbitration only being communicated in the said Agreement.
42. The Italian companies argue that both the contractual breaches and the violations of the bilateral Agreement can be submitted to icsid arbitration.
B.Decision
a) On the existence of an investment.
1) In the sense of the bilateral Agreement:
43. The protection of investments constitutes the basis of the choice of jurisdictions laid out in Article 8.2 of the bilateral Agreement. This Article is thus designed
to define those investments that fall within the protection of the Agreement.
44. However, to the extent that the choice of jurisdiction clause was exercised in
favour of icsid, the rights at stake must equally constitute an investment in the sense
411
of Article 25 of the Washington Agreement. The Arbitration Tribunal is therefore

of the view that its jurisdiction depends on the existence of an investment both in
the sense of the bilateral Agreement and of the Convention, following the case-law
on this point.
It is this view that various arbitration tribunals have favoured in giving judgments
in cases where the concept of an investment was at issue (cf. award of 9 March
1998 in the case of Fedax NV v. Republic of Venezuela: JDI 1999 p. 294[2] ).
45. Article 1 of the Agreement provides:
In the sense of the present Agreement,
1) the term investment designates all those categories of assets invested by a natural
or legal person, including the government of a contracting party, since the coming into
force of the present Agreement, on the territory of the other contracting party, in
accordance with the laws and regulations of the said party. The term investment
includes in particular but not exclusively:
a) moveable and immoveable assets, as well as every other property right linked to
investment such as mortgages, privileges, securities, usufructs;
b) the shareholdings, ownership rights and liabilities or other rights or interests and
ownership rights held by the State or public organs;
c) realised debts, including reinvested income, as well as rights to every contractual
privilege having a monetary value;
d) copyright, trademarks, licences, processes and other industrial and intellectual property rights, know-how, commercial secrets, business names and businesses;
e) every right of a monetary character conferred by the law or by contract, and every
licence and concession conforming to the laws and regulations in force, including
rights to the seeking out, extraction and exploitation of natural resources;
f) capital and additional injections of capital used to maintain and/or increase investment;
g) those elements mentioned in c), d) and e) above must be the subject of contracts
approved by the relevant authority.
The parties have thus agreed on a number of hypothetical initiatives, which are not
exhaustive, which they regard as investments.
45.[3] The construction agreement created a right to a contractual privilege having
a monetary value for the business, as envisaged in Article 1c). Similarly, the
business benefited from a right of a monetary character conferred . . . by contract
as envisaged in Article 1e). The defendant does not deny moreover that the rights
of the Italian companies are of the same kind as those envisaged under sections c)
and e) of Article 1.
46. The Tribunal cannot agree with the Kingdom of Morocco when it argues that
section 1 of Article 1 refers back to the law of the State facilitating the investment
for its definition. In envisaging the categories of invested assets . . . in accordance
with the laws and regulations of the said party, the provision in question refers
to the legality of the investment and not to its definition. It aims in particular to
ensure that the bilateral Agreement does not protect investments which it should
not, generally because they are illegal.
[ 2 5 ICSID Reports 183.]
[ 3 Paragraph numbering as in the original report.]
412
Furthermore, in this case, the claimants have participated in the procedure of

submission of their offer whilst respecting the legal rules applicable to the tendering
procedure. And it is again in accordance with the legislation in force as well as the
terms of the said procedure, that these last parties have set about assessing the works
and completing the corresponding business contract.
Hence, when one considers the pre-contractual stage or that which corresponds
to the execution of the business contract, it has never been shown that the Italian companies might have infringed the laws and regulations of the Kingdom of
Morocco.
47. To constitute investments, the rights set out under parts c) and e) must be
the objects of contracts approved by the relevant authority in the words of Article
1(g).
The bilateral Agreement does not indicate which is the relevant authority, this
last being susceptible to change depending on the contract in question. The relevant
authority is determined in accordance with the laws and regulations of the State on
the territory of which the investments are carried out (cf. Article 1 section 1).
48. The Tribunal rules that the deal in question has clearly been authorised by
the relevant authority, for the following reasons:
The selection of the Italian companies for the deal was carried out in accordance with the procedure fixed by the President of adm, acting by virtue of
the powers which have been conferred on him by the Administrative Council
of this company. As has been pointed out previously, no infringement of the
rules and regulations of the Kingdom of Morocco occurred at this time. The
Tribunal points out, without enquiring as to whether adm was or not simply
an arm of the Moroccan State, that in his capacity as agent for the contracting
party, the Minister for Infrastructure approved the conclusion of the deal for
public works by adm in accordance with the obligatory procedure which it is
not alleged either party failed to follow.
The different stages leading to the signature of the construction contract had
been the object of frequent interventions on the part of the relevant authorities.
Witness the request for tenders launched by the Minister for Infrastructure,
Professional Training and Career Training, President of adm; the presentation
of the offer carried out by the Director General of adm; the evaluation of this
offer and the adjudication had been the work of a commission chaired by the
Director General of adm and consisting of various public organs; finally, it
was the Director General of adm, in his capacity as head of the project, who
signed the construction contract regarding this deal.
49. In consequence the Tribunal rules that the condition laid down in Article
1g) is fulfilled. The deal concluded between adm and the Italian companies is an
investment in the sense of the bilateral Agreement. The jurisdictional choice set
out in Article 8.2 could therefore be exercised in favour of an arbitration procedure
under the aegis of the icsid.
2) Within the meaning of the Washington Convention:
50. The jurisdiction of the icsid is determined by Article 25 of the Washington
Convention which provides:
413
(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly
out of an investment, between a Contracting State (or any constituent subdivision or
agency of a Contracting State designated to the Centre by that State) and a national of
another Contracting State, which the parties to the dispute consent in writing to submit
to the Centre. When the parties have given their consent, no party may withdraw its
consent unilaterally.
51. No definition of an investment is given by the Convention. The two parties

have stressed that such a definition seemed useless to the States that negotiated it.
In effect, as the Executive Directors Report on the Convention points out:
No attempt was made to define the term investment given the essential requirements
of consent by the parties, and the mechanisms through which the Contracting States
can make known in advance, if they so desire, the classes of disputes which they would
or would not consider submitting to the Centre (Article 25.4).
52. The Tribunal notes that there have been almost no cases where the notion of
an investment in the sense of Article 25 of the Convention has been raised. However,
it would be misguided to consider that the demand of a dispute directly related to
an investment can always be equated with the consent of the contracting parties.
In fact, the case-law of the icsid and commentators are consistent in regarding the
necessity of an investment as an objective condition for the Centres jurisdiction to
be activated (cf. in particular the note by E. Gaillard, in JDI 1999, p. 278, which
cites the decision given in the case of Alcoa Minerals v. Jamaica as well as several
others).
The criteria to stress in defining an investment, in the sense of the Convention,
would be easier to set out if one was aware of decisions stating the Centre to lack
jurisdiction because of the transaction giving rise to the dispute. With the exception
of a decision of the Secretary General of the icsid refusing to record a claim for
arbitration regarding a dispute stemming from a simple sale (I. F. I. Shihata and
A. R. Parra, The Experience of the International Centre for Settlement of Investment Disputes, ICSID ReviewForeign Investment Law Journal, vol. 14, no. 2,
1999, p. 308), the decisions available have only very rarely focused on the concept
of an investment. Significantly, the first decision only came in 1997 (the Fedax
award cited above). The criteria for definition thus appear from cases where an
investment was recognised without, in the vast majority of cases, there being any
real discussion of this issue.
Academic writings have generally observed that an investment suggests payments, a certain period of execution of the deal and participation in the risks of the
transaction (cf. note by E. Gaillard cited above, p. 292). A reading of the preamble of the Convention permits to add to these the criterion of contribution to the
economic development of the State receiving the investment.
In truth, these various elements can be interdependent. Hence, the risks of the
transaction can depend on the payments and the period of execution of the deal.
It results from this that these various criteria must be appreciated together even
if, in the interests of clear reasoning, the Tribunal considers them separately here.
414
53. The payments effected by the Italian companies are detailed and evaluated
in their files. It is not contested that they used their know-how, that they furnished
the necessary equipment and skilled personnel to execute the works, that they
undertook the installation of the production tools on the sites, that they obtained
loans in order to finance the purchases necessary for the completion of the works
and for the payment of the workforces salaries, that finally they agreed to setting
up bank guarantees, in the form of provisional deposit fixed at 1.5% of the amount
of their tender, then, at the end of the selection process, in that of a conclusive
deposit fixed at 3% of the value of the deal in question. The Italian companies have
thus undergone costs in figures, in character and in industry.
54. While the total period of the execution of the deal, in accordance with the
ccap, had been fixed at 32 months, this period was lengthened to 36 months. The
transaction thus satisfies the minimum period required by the academic writings,
which ranges from 2 to 5 years (D. Carreau, Th. Flory, P. Juillard, International
Economic Law: 3rd edition Paris, LGDJ, 1990, pp. 55878; C. Schreuer,
Commentary on the icsid Convention, ICSID ReviewFILJ vol. 11, 1996, 2
pp. 318493).
55. As regards the risks run by the Italian companies, these last derive from
the nature of the contract in question. The plaintiffs, in their Reply relating to
the question of jurisdiction, have furnished an exhaustive list of risks run in the
execution of the deal in question. The following in particular constitute some of
these: that linked to the prerogative of the director of the works permitting him to
cut short the contract prematurely, to impose changes within certain limits without changing the key prices fixed; that linked to the eventual reimbursement of
the workforce in case of changes in Moroccan legislation; every accident or every injury caused to property during the execution of the works; those linked to
the problems of coordination that might arise because of the simultaneous execution of other works; every unforeseeable event that could not be considered as
force majeure and hence could not give rise to a right to compensation; finally
those linked to the lack of any possibility of compensation in case of a rise or a
diminishing in the volume of work not exceeding 20% of the price of the deal in
question.
56. It matters little in this regard that these risks were freely consented to. It also
matters little that the payment of the businesses was not linked to the exploitation
of the project in question. A construction which stretches out over several years and
the cost of which cannot be accurately established in advance creates a manifest
risk for the business undertaking it.
57. Regarding finally the contribution of the deal to the economic development
of the Moroccan State, this cannot be seriously disputed. The construction of the
relevant infrastructure, in most countries, is a matter for the State or other public
bodies. It cannot be seriously argued that the motorway in question does not serve
the public interest. Finally, the Italian companies were also aiding economic development in bringing to the State a certain know-how in relation to the project in
question.
58. In consequence, the Tribunal rules that the deal concluded between adm and
the Italian companies constitutes an investment both in the sense of Articles 1 and 8
415
of the bilateral Agreement concluded between the Kingdom of Morocco and Italy
on 18 July 1990 and in that of Article 25 of the Washington Convention.
b) Regarding the basis of the claims
59. Article 8 of the bilateral Agreement offers a jurisdictional choice regarding:
All conflicts or disputes, including disputes involving the amount of compensation
payable in case of expropriation, nationalisation or analogous measures, between a
Contracting Party and an investor from the other Contracting Party concerning an
investment from the said investor on the territory of the former Contracting Party . . .
The terms of Article 8 are very general. The reference to measures of expropriation
and nationalisation, which relate to the unilateral will of the State, should not be
interpreted in the sense of an exclusion of all injuries of contractual origin from the
field of application of this Article.
60. In contrast, the Tribunal feels that its field of application as regards the
character of disputes is limited as regards the parties. In the hypothesis of a State
that organised a sector of activity by means of a separate legal person, whether or
not it be an arm of that State, it cannot be concluded that it should be accepted a
priori that the jurisdictional choice of Article 8 binds this body by reason of its
contractual breaches.
61. In other words, Article 8 obliges the State to respect the jurisdictional choice
arising by reason of breaches of the bilateral Agreement and of any breach of a
contract which binds it directly. The jurisdictional choice of Article 8 does not
extend on the other hand to breaches of contract where another party than the State
is named as a party.
62. But this restriction as to the jurisdiction of the Arbitration Tribunal does not
apply to claims resting only on breach of contract.
In fact, the Arbitration Tribunal continues to have jurisdiction over breaches of
contract which would constitute at the same time a breach of the bilateral Agreement
on the part of the State.
Moreover, the Italian companies have explicitly recognised in their claim for
arbitration that:
the claims set forth in the present arbitration . . . also include claims addressed directly
to the Moroccan government and relating to the breach of rights of the businesses
as foreign investors within the meaning of the international rules relating to foreign
investors (thus known as treaty claims).
63. The claims of the Italian companies, only to the extent that they correspond to
breaches of the bilateral Agreement, come within the jurisdiction of the Arbitration
Tribunal. It is their role to demonstrate the well-foundedness of these claims in the
ensuing arbitration proceedings.
64. The Tribunal reserves the question of costs and arbitration fees.
For these reasons, the Tribunal asserts its jurisdiction over the claims of the
Italian companies, as they are set out, it being noted that it does not have jurisdiction
416
over breaches of the contract between the Italian companies and adm that do not
constitute at the same time a breach of the bilateral Agreement.
[Source: Translated from the French text in 129 Journal du droit international 196
(2002) by Mr Brian Conroy; also reported at 42 International Legal Materials 609
(2003).]
AUTOPISTA v. VENEZUELA
417
Arbitration International Centre for Settlement of Investment Disputes

Jurisdiction Conditional consent to icsid jurisdiction Control over locally
registered company passing with Venezuelas consent to a national of an icsid
State party icsid Convention, Article 25(2)(b)
Nationality Deemed nationality of locally incorporated company Whether
foreign control indicates ultimate beneficial interest Transfer of shares to a
holding company Transfer not a sham Transfer consented to by Respondent
without any misrepresentation on Claimants part icsid Convention, Article
25(2)(b)
Diplomatic protection Diplomatic representations made by State not an icsid
party Not amounting to espousal Whether inconsistent with standing of
holding company not a national of that State Distinction between icsid
arbitration and diplomatic protection icsid Convention, Article 27
Autopista Concesionada de Venezuela CA v. Bolivarian Republic
of Venezuela
(Case No. ARB/00/5)
Decision on Jurisdiction. 27 September 2001
(Arbitration Tribunal: Kaufmann-Kohler, President; Bockstiegel
and Cremades, Members)
Summary: The facts: In 1994, the Government of Venezuela called for tenders for a highway project. The tender was awarded to a consortium consisting of a
Mexican construction company, ica, and a Venezuelan bank. The partners subsequently incorporated the Claimant company in Venezuela to serve as the concessionaire for the project. On its incorporation, 99 per cent of the shares in the
Claimant company were held by ica. In 1996, the Concession Agreement was concluded between the Claimant and the relevant Venezuelan Ministry. Subsequently,
a US subsidiary of ica, Icatech, agreed to acquire 75 per cent of icas share in the
Claimant; pursuant to the Concession Agreement, the Claimant sought the Ministrys permission for the transfer, which was eventually given after ica guaranteed
Icatechs performance under the contract. The acquisition of 75 per cent of the
shares in the Claimant then went ahead. A further request to approve transfer of the
remaining 25 per cent of the shares to Icatech was never approved.
Disputes subsequently arose over the performance of the contract, in particular
as to the level of toll increases. The Claimant commenced proceedings for conciliation under the Concession Agreement; these having failed, it filed a request for
arbitration pursuant to Clause 64 of the Agreement. Shortly thereafter it gave notice
of termination of the Agreement, while agreeing to continue routine maintenance
and toll collection on a without-prejudice basis. Diplomatic efforts by the Mexican
Government to resolve the dispute likewise failed.
418
Venezuela argued that the Tribunal lacked jurisdiction because it had never agreed
to treat the Claimant as an entity which by virtue of foreign control should be
considered a national of another Contracting State under Article 25(2)(b) of the
Convention. In any event, it argued that real control of the Claimant was still
vested in the Mexican parent company; the transfer of a controlling interest in
the Claimant made no difference in practice; no United States national was involved as a director of Icatech, and the United States had no significant interest in
the claim.
Held: The Tribunal had jurisdiction over the dispute.
(1) Under Clause 64 of the Concession Agreement, the parties had agreed that if
the majority shareholder of the Claimant came to be a national of an icsid Member
State, icsid arbitration would be substituted for arbitration in Venezuela as otherwise
provided for in Clause 63 of the Agreement. The language of Clause 64 was clear,
and it was not limited to situations of the takeover of ica by an unrelated company.
For the purposes of Clause 64, it was sufficient that the actual majority shareholder
of the Claimant should have, or come to have, the nationality of an icsid Member
State, whether or not there was a change in ultimate control over the ica group
(paras. 79, 867).
(2) Such a conditional agreement to icsid jurisdiction was effective under Article
25 of the icsid Convention when the condition was satisfied in accordance with the
requirements of the Concession Agreement (paras. 8993).
(3) The present dispute satisfied the objective requirements of Article 25 of the
Convention (paras. 99101).
(4) Article 25(2)(b) did not require any particular form of consent so that a
locally incorporated company might be treated as able to consent to icsid jurisdiction because of foreign control (para. 105); for this purpose the consent given
by Venezuela to icsid jurisdiction under Clause 64 of the Agreement, and to the
transfer of a controlling interest to Icatech, a United States company, together met
the requirements of Article 25(2)(b) without any need to search for the location of
ultimate control over the ica group as a whole. If, consistently with the Convention, the parties had wished to specify a different meaning of foreign control,
they could have done so, but there was no indication of this in the Agreement
(paras. 11316).
(5) The criterion of Icatechs majority shareholding in the Claimant company
satisfied the requirements of Article 25(2)(b) and did not involve a mere device
or fiction (para. 126). Nor was there any indication that in seeking Venezuelas
approval for the share transfer there was any misleading or deceptive conduct on
the part of the Claimant (paras. 1302).
(6) The fact of Mexicos attempts at diplomatic intervention in the dispute, although somewhat disturbing, did not change this conclusion. Article 27 distinguished clearly between diplomatic protection and icsid arbitration, and the intervention of a State not a party to icsid (and not involving formal espousal of the
Claimants claim) could not affect the jurisdiction of a tribunal properly established
under the Convention (paras. 13740).
419
The following is the text of the Award:
[6] Table of Contents
I. The Parties
A. The Claimant
B. The Respondent
II. The Relevant Facts Regarding the Issue of Jurisdiction
A. The CaracasLa Guaira Highway System
B. The Formation of Aucoven
C. The Highway Concession
D. The United States Corporation Icatech
E. The Transfer of Aucovens Shares to Icatech
F. The Outset of the Dispute
G. Mexicos Diplomatic Interventions
III. The Chronology of the Proceedings
IV. The Parties Positions on Jurisdiction
A. Venezuelas Position
1. Aucovens operations in Venezuela are controlled by
ica Holding
2. ica Holdings control over Aucoven was a condition
of the approval of the share transfer
3. The United States has no significant interest in this
matter
4. Diplomatic interventions by the Mexican Government
5. Venezuela has not consented to icsid jurisdiction in
the circumstances of this case, i.e. on the basis of a
fictional control relationship
6. The foreign control provision of Article 25(2)(b)
does not permit the exercise of icsid jurisdiction in
the circumstances of this case [7]
7. Aucoven cannot benefit from both Mexicos
diplomatic efforts and icsid arbitration
B. Aucovens Position
1. The parties executed an icsid arbitration clause that is
effective by its terms
2. The definition of foreign control adopted by the parties
in Clause 64 is reasonable and must be enforced
3. Venezuela has not identified any circumstances that
warrant setting aside the parties agreement
4. The efforts of Mexican officials towards an amicable
resolution cannot affect jurisdiction
5. Venezuelas arguments based on convenience are
legally irrelevant
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V. The Jurisdiction of this Tribunal

A. The Relevant Texts
1. Article 25 of the icsid Convention [8]
2. Clause 63 of the Agreement
B. Discussion
1. Introduction
2. Article 64 of the Agreement: the parties agreement to
icsid arbitration
3. Clause 64: a conditional agreement to icsid arbitration
4. The effectiveness of the parties agreement to icsid
arbitration
5. The requirements of Article 25 of the icsid
Convention
5.1 The parties consent: the cornerstone of the jurisdiction
of the Centre
5.2 The objective requirements provided by Article 25 of
the icsid Convention [8]
5.3 The parties agreement expressed in Clause 64 remains
within the limits of the icsid Convention
6. The parties agreement to icsid arbitration is valid and
in full effect
7. The significance of the intervention by Mexican
officials
VI. Conclusion
VII. Decision on Jurisdiction
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[9] I. The Parties

A. The Claimant
1. The Claimant, Autopista Concesionada de Venezuela, CA (Aucoven) is a
company incorporated under the laws of Venezuela, which has its registered office
at La Florida Avenida Las Acacias No. 39 Sector Av. Libertador y Andres Bello,
Caracas, Venezuela.
2. The Claimant is represented in this arbitration by David W. Rivkin, Donald
Francis Donovan, and Alexander A. Yanos, of Debevoise & Plimpton, New York.
B. The Respondent
3. The Respondent is the Republica Bolivariana de Venezuela (Venezuela).
It is represented by the Government of Venezuela, Ministry of Infrastructure
(as successor to the Ministry of Transportation and Communication), Avenida Lecuna, Parque Central Torre Oeste, Piso 51, Caracas, Venezuela and the Attorney
General of Venezuela, Avenida Lazo Mart, Edificio Procuradura General de la
Republica, Piso 8, Santa Monica, Caracas, Venezuela.
421
4. The Respondent is represented in this arbitration by Alexander E. Bennett,

Susan G. Lee and Angie Armer-Rios, of Arnold & Porter, Washington, DC.
II. The Relevant Facts Regarding the Issue of Jurisdiction
A. The CaracasLa Guaira Highway System
5. On April 20, 1994, the President of Venezuela issued Decree no. 138 regarding
Concessions for National Public Works and Services (Cl. Ex. 1).
6. The design, construction, operation, preservation, and maintenance of the
CaracasLa Guaira Highway System (the Project) was put [10] to bid under this
decree (Ven. Ex. 2). The project also included the construction of an alternative
viaduct over the Tacagua Gorge.
7. The Ministry of Transportation and Communication, which subsequently became the Ministry of Infrastructure (the Ministry), was to be responsible for the
process and supervision of the concession (Ven. Ex. 2, art. 12).
8. On December 28, 1995, the Ministry awarded the bid to a consortium consisting
of ica, a Mexican engineering and construction firm, and Baninsa, a Venezuelan
investment bank.
B. The Formation of Aucoven
9. Aucoven was incorporated on January 24, 1996 to serve as the concessionaire
for the project. Aucoven is domiciled and registered in Caracas, Venezuela. Upon
Aucovens incorporation, ica held 99% of Aucovens shares and Baninsa 1%.
10. ica is a subsidiary of Empresas ica Sociedad Controladora, SA de CV (ica
Holding or emica), the parent company of a Mexican conglomerate of over
140 corporations, which provides a wide range of engineering, construction and
construction-related services (Cl. Ex. 7).
11. The majority of ica Holdings shares are traded on the Bolsa Mexicana de
Valores and on the New York Stock Exchange (Cl. Ex. 8).
C. The Highway Concession
12. Shortly after its incorporation, Aucoven began to negotiate with the
Ministry a contract providing for the terms and conditions of the highway concession. On December 23, 1996 (Cl. Ex. A), Aucoven and the Ministry entered into the
Concession Agreement (the Agreement), under which Aucoven has initiated these
proceedings. Pursuant to the Agreement, Aucoven was granted the exclusive right to
design, construct, operate, exploit, conserve, and maintain the CaracasLa Guaira
Highway and the CaracasLa Guaira old road (this included the construction of
the alternative viaduct, substantial improvements to the [11] CaracasLa Guaira
Highway, as well as improvements to the CaracasLa Guaira old road) (Clause 2,
Ven. Ex. 1).
13. Under the Agreement, Aucoven was permitted to collect tolls generated by the
Highway over a 30-year period (Clause 31, Ven. Ex. 1). In addition, the Ministry
422
guaranteed Aucoven the EconomicFinancial Equilibrium of the Concession,

according to the EconomicFinancial Plan, the updates thereof, and the terms and
conditions for the financing negotiated with financial institutions. The Economic
Financial Equilibrium (i.e. the ability for Aucoven to cover its costs and obtain a
fair and equitable remuneration) was to be maintained at all times, to ensure the
continuity of the service to be rendered by Aucoven and the performance of the
corresponding services and work (Clause 44, Cl. Ex. 3).
14. The Ministry was also to compensate Aucoven through direct payments
and/or rate increases for any event not attributable to Aucoven that would affect the
EconomicFinancial Equilibrium (Clause 45, Cl. Ex. 3).
D. The United States Corporation Icatech
15. Icatech was incorporated on November 2, 1989, in the State of Florida, United
States of America. The first corporate name of the company was ica Investment
Corporation. It was changed to Icatech Corporation on June 15, 1990 (Cl. Ex. 6).
Icatech has its principal place of business in Miami, Dade County (Cl. Ex. 5).
16. As a company organised under the laws of Florida, Icatech is subject to
Florida and United States laws and regulations. Particularly, it was required to file
its Articles of Incorporation with the Florida Secretary of State and to designate
and continuously maintain a registered office in Florida with a registered agent. It
was also required to pay mandated fees and must submit its annual report to the
Secretary of the State.
17. Like ica, Icatech is a wholly-owned subsidiary of the Mexican company
ica Holding. Shortly after its incorporation, Icatech acquired different companies
active in the construction industry. As a consequence of the peso crisis in 1995
1996, during which Mexicos currency was repeatedly devalued, ica Holding undertook to internationalise its oper-[12]ations. It was, however, difficult for a Mexican
company to finance projects under the then prevailing economic conditions and
a connection to the United States enhanced the ability to obtain financing, a fact
which Aucoven asserted at the Hearing of June 28, 2001, without being contradicted and which the Tribunal finds plausible. As a result, ica Holding decided that
its US subsidiary Icatech would establish or acquire several international project
companies including Aucoven (namely Empresas y Guatemala, Empresas y Chile,
Empresas y Peru, IcaDom in the Dominican Republic, subsidiaries in Malaysia and
Puerto Rico, IcaPanama, Cl. Ex. 10; Ven. Ex. 4, pp. 6-7. Ven. Ex. 14, 6 (see next
paragraph)).
E. The Transfer of Aucovens Shares to Icatech
18. The Agreement between Aucoven and Venezuela became effective on April
1, 1997. On April 7, 1997, at the start of Aucovens operation of the Highway
system, Aucoven requested, in accordance with Clause 7 of the Agreement (see
par. 92 below), the authorisation from the Ministry to transfer 75% of Aucovens
shares to Icatech (Cl. Ex. 11):
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[. . .] so that (i) Ingenieros Civiles Asociados, Sociedad Anonima de Capital Variable, a commercial company duly organized and existing under the laws of the United
Mexican States, may transfer to ICATECH CORPORATION (formerly known as ICA
INVESTMENT CORPORATION), a commercial company duly organized and existing under the laws of the state of Florida, United States of America, domiciled
at 2655 Lejeune Road, Suite 1000, Coral Gables, Florida 33134 and registered with
the Department of State of Dade County on October 30, 1989, under NO L27636,
two million, four hundred eighty-four thousand, seven hundred twenty (2,484,720)
Class A Shares with a par value of one thousand bolivars (Bs.1,000.00) each, and
four hundred thirty-three thousand, eight hundred forty (433,840) Class B Shares
with a par value of one thousand bolivars (Bs. 1,000.00) each, which make up the
capital stock of Autopista Concesionada de Venezuela, Acoven [sic], CA; and so
that (ii) Baninsa Finanzas y Valores, VA a commercial company duly organized and
existing under the laws of Venezuela, may transfer to ICATECH CORPORATION,
identified above, thirty-nine thousand, four [13] hundred forty (39,440) Class D
Shares, with a par value of one thousand bolivars (Bs. 1,000.00) each, which make
up the capital stock of Autopista Concesionada de Venezuela, Acoven [sic], CA [. . .]
(Cl. Ex. 11)
19. Its request remaining unanswered, Aucoven renewed it on July 11, 1997
(Ven. Ex. 25). In response, the Ministry asked for additional financial information
regarding Icatech, which was provided on July 18 and August 13, 1997 (Cl. Ex.
12, 13).
20. On August 7, 1997, the Special Commission of the Minister for Concessions submitted the request filed by Aucoven to Dr Carmen Carrillo, of the Legal
Department of the Ministry:
I would like to submit for your study and consideration, the requests presented by
the concessionaire Autopista Concesionada de Venezuela, CA, submitted to this Office by means of Remittal Sheet NO. 02350, received on July 14, 1997, whereby the
aforementioned concessionaire company requests authorization to transfer shares representing its equity capital, in accordance with the conditions specified in the same
request.
In this regard, I would like to inform you that in the opinion of this Office, the
aforementioned share transfers are appropriate in accordance with that stipulated in
Article 33 of Decree Law No. 138 regarding Concessions of Public Works and National
Public Services. [. . .] (Ven. Ex. 26)
21. On April 6, 1998, after further requests by Aucoven, the Ministry asked
Aucoven to provide a guarantee from Icatechs parent company:
[. . .] In response and after having reviewed and studied the documents submitted with
your request, this office has made the following observations:
1. ICATECH CORPORATION AND SUBSIDIARIES:
From the evaluation conducted for this company, we have noted from the negative
financial results of its operations that there are [14] ongoing financial problems, which
are covered by the parent company; accordingly, it is necessary to request a guarantee
from its sole shareholder to financially guarantee the fulfillment of the contract to be
executed. [. . .] (Ven. Ex. 27)
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22. ica Holding submitted the requested guarantee on April 22, 1998. It accepted
to be jointly responsible for share contributions that Icatech was to make to Aucoven
and to assume each and every obligation of Icatech, in its capacity as shareholder
of Aucoven. Attached to the same letter, ica Holding also submitted its financial
statements, in order to facilitate a better understanding and evaluation of its technical
and financial capacity (Ven. Ex. 29).
23. On May 7, 1998, Aucoven renewed its request for the transfer of the shares.
24. On June 6, 1998, the Ministry asked the Attorney General whether the transfer
of shares requested by Aucoven required the approval of the President in Cabinet.
The Attorney General answered on June 29, 1998 that the transfer of shares did
not require the Cabinets approval and was within the powers of the Ministry. The
Attorney General also stated:
[. . .] Finally, it would be important to point out that the official letter in question
clearly shows that the Minister of Transportation and Communication is aware, that
he is responsible for authorizing or not authorizing the Concessionaire Companys
transfer of shares, and that he is in favor thereof, having given much consideration to
the request from the economicfinancial and legal point of view. Therefore, he does not
require the opinion of the Federal Attorney General as to the substance of the matter.
[. . .] (Cl. Ex. 16)
25. On June 30, 1998, 15 months after Aucovens first request, the Ministry
authorized the transfer of 75% of Aucovens shares to Icatech (Ven. Ex. 30).
[15] 26. On August 28, 1998 Icatech acquired from ica all of the registered class
A shares in Aucoven and a majority of the registered class B shares (Ven. Ex. 24).
At the same time, it purchased Aucovens registered class D shares from Santiago
de Leon Valores, CA (Ven. Ex. 42). As a result of these transactions, Icatech became
Aucovens majority shareholder with 75% of its shares.
27. On August 31, 1998, Aucoven provided the Ministry with a copy of these
share purchase agreements (Cl. Ex. 17). The remaining 25% of Aucovens shares
stayed in icas hands. On July 14, 1999, Aucoven requested that the Ministry authorise the transfer of these remaining shares to Icatech as well. Such authorisation
was never granted.
28. On August 31, 1998, Aucovens shareholders adopted a resolution stating that
Aucoven was subject to foreign control by Icatech, for all purposes of the Washington Convention and that Aucoven was subject to the arbitration provisions of Clause
64 of the Agreement (see chapter B.1, below). This resolution was forwarded to
the Ministry on September 1, 1998 (Ven. Ex. 43).
29. In an administrative decision dated September 15, 1998, the Ministry stated
inter alia the following:
[. . .] It should nevertheless be pointed out that this Ministry entered into the Concession
Contract with a Venezuelan company domiciled in Venezuela pursuant to the Decree
with rank and force of Organic Law No. 138, contractually electing special domicile in
the city of Caracas. Accordingly, any act claiming to change the domicile or nationality
thereof cannot be approved by this Office unless previously approved by the Congress
of the Republic; in like manner, we wish to remind you that the Concession Contract is
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an administrative contract and as such, is of public interest pursuant to Article 127 of

the Constitution and the clause shall be incorporated according to which doubts and
disputes which may arise regarding such contracts and which are not amicably settled
by the contracting parties will be decided by the competent courts of the Republic, in
accordance with its laws, and they may not for any reason or cause give rise to foreign
claims. (Ven. Ex. 44)
[16] 30. The reasons that motivated this decision remain unclear. However, when
Aucoven filed an Appeal for Review from the above administrative decision, the
Ministry confirmed on January 13, 1999 that Clauses 63 and 64 of the Agreement
were legal and valid and in full effect between the parties:
[. . .] That clauses 63 and 64 of the Concession Contract No. MTC-COP-001-95,
referring to arbitration, will be in full effect between the contracting parties, and are
considered legal and valid. [. . .] (Ven. Ex. 45)
31. During October and November 1998, the parties discussed amendments to
several provisions of the Agreement. As a result, eleven clauses of the latter and of
its Annex A were clarified or modified (Cl. Ex. 20). Clauses 63 and 64 remained
untouched.
F. The Outset of the Dispute
32. The performance of the Agreement gave rise to disagreements between the
parties, particularly regarding the implementation of the toll increases as provided
by Clauses 31 to 34 of the Agreement.
33. On March 8, 2000 Aucoven sent a letter to the Ministry to initiate conciliation
proceedings pursuant to Clause 62 of the Concession Agreement (Cl. Ex. 22, 23,
24). The conciliation proceedings having failed (Cl. Ex. 23, 24), on June 1, 2000,
Aucoven filed a Request for Arbitration pursuant to Clause 64 of the Agreement.
34. On June 13, 2000, Aucoven gave Venezuela notice of the termination of the
Agreement:
1. We inform the Ministry of Aucovens decision to terminate the Concession Agreement, under the rights granted to the parties in Clause 60 of the aforementioned Agreement. Notwithstanding the foregoing and expressly subject to all the rights of the
company I represent arising from the Concession Agreement, we would like to inform
you that Aucoven is willing to continue performing in good faith the routine maintenance and toll collection activities described in the Concession Agreement, with [17]
the understanding that the execution of such activities in good faith must not in any
way affect the termination of the aforementioned Concession Agreement.
2. We respectfully ask that this Ministry proceed to terminate the administrative
proceeding instituted by means of Resolution No. 068 of October 25, 1999, thereby
resolving that the matter involved in this proceeding is reserved for the competent
Arbitration Panel, since clearly, pursuant to Clause 64 of the Concession Agreement,
Aucoven and the Ministry agreed to submit to the Center for arbitration any dispute or
difference related to the Concession Agreement, and hence the aforementioned administrative proceeding cannot have any effect on Aucovens rights under the Concession
Agreement. (Cl. Ex. 25)
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G. Mexicos Diplomatic Interventions

35. On several occasions, before and after the transfer of 75% of Aucovens shares
to Icatech, Mexican officials attempted to facilitate meetings with the Venezuelan
Government, in order to find an amicable solution to the parties disagreements.
The letter sent by the Ambassador of Mexico to the Venezuelan Ministry of Foreign
Affairs on November 25, 1999 is an example of such attempts:
[. . .] Under such circumstances, I respectfully request the intervention and valuable
actions of Your Excellency before His Excellency the President of the Republic, Hugo
Chavez Frias for the search for a solutionboth viable and mutually acceptable
to the outstanding matters discussed in relation to the Concession Contract, in order
that the important project of the CaracasLa Guaira Highway make progress and be
completed in the full environment of traditional understanding and the ever more
important relations between Mexico and Venezuela. (Ven. Ex. 36; see also Ven. Ex.
37, 38)
36. The Mexican Government continued to try to facilitate settlement discussions (Ven. Ex. 39) after the filing of Aucovens Request for Arbitration. These
interventions proved unsuccessful.
[18] III. The Chronology of the Proceedings

37. This paragraph sets forth the sequence of these arbitration proceedings leading
to this decision on jurisdiction:
r On June 1, 2000, Aucoven filed its Request for arbitration.
r On June 23, 2000, the Secretary-General of icsid registered the request for
arbitration and notified the parties of the registration.
r By clause 64 of the Agreement, the parties had agreed that the Tribunal was
to be composed of three members from the Panel of Arbitrators of the Centre,
one appointed by each party and the third, presiding, arbitrator appointed by
the two party-appointed arbitrators.
r On August 1, 2000, Aucoven appointed Professor Karl-Heinz Bockstiegel as
arbitrator.
r On September 14, 2000, Venezuela sent a letter to the Secretary General of
icsid informing the latter that the parties had agreed to a 90 day extension for
Venezuela to name an arbitrator.
r On November 17, 2000, counsel for Aucoven informed the Secretary General
of icsid that Aucoven had terminated the extension for Venezuela to appoint
an arbitrator.
r On December 6, 2000, Venezuela appointed Professor Bernardo Cremades as
arbitrator.
r On January 8, 2001, Professor Bockstiegel and Professor Cremades designated
Professor Gabrielle Kaufmann-Kohler as President of the Tribunal.
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r On January 16, 2001, the Acting Secretary-General of icsid notified the parties
that all the arbitrators had accepted their appointment and therefore the Tribunal
was deemed to be constituted on that date.
r By letter dated February 14, 2001, Venezuela objected to the Tribunals jurisdiction.
r On February 15, Aucoven submitted to the Arbitral Tribunal Preliminary Observations further to Venezuelas letter dated February 14, 2001.
r The Arbitral Tribunal held its first session in Paris on February 19, 2001. On this
occasion, the Tribunal and the parties adopted procedural rules and agreed on a
timetable for the arbitration proceedings. The Tribunal noted the Respondents
objections to the Tribunals jurisdiction in the following terms:
[19] Having considered the views of the parties and the relevant rules, the Tribunal
decided to suspend the proceeding on the merits pursuant to Rule 41(3) of the
Arbitration Rules. It was agreed that each party shall submit its observations
on objections to jurisdiction (see below para. 17) and that the Tribunal will then
decide by June 13, 2001 whether it will deal with these objections as a preliminary
question or join them to the merits of the dispute. If these objections are joined to
the merits, a telephone conference will be arranged to discuss the following steps
in the proceeding. (Minutes of the First Session of the Tribunal)
r On April 5, 2001, Venezuela submitted its Observations on jurisdiction.

r On May 7, 2001, Aucoven submitted its Counter-Memorial in support of jurisdiction.
r On May 22, 2001, Venezuela submitted Further Observations on jurisdiction.
r On June 6, 2001, Aucoven submitted its Rejoinder in support of jurisdiction.
r On June 13, 2001, the President of the Arbitral Tribunal and the counsel for Aucoven and Venezuela held a pre-hearing telephone conference for the purpose
of organising the hearing on jurisdiction to be held on June 28, 2001.
r On June 14, 2001, the Tribunal rendered its Procedural Order no. 1 regarding
the organisation of the hearing on jurisdiction.
r On June 28, 2001, the Tribunal held a hearing in Washington, DC on the
objection to jurisdiction. During such hearing each party presented oral arguments and the Arbitral Tribunal asked questions from counsel. An immediate,
verbatim transcript was made.
r Thereafter, the Arbitral Tribunal proceeded to deliberate and issue this decision.
IV. The Parties Positions on Jurisdiction
A. Venezuelas Position
38. Venezuela argues that Aucovens claim should be dismissed on the ground
that the Arbitral Tribunal lacks jurisdiction. Aucoven is a [20] company locally
incorporated and Venezuela never agreed to treat it as a national of another
Contracting State because of foreign control pursuant to Art. 25(2)(b) of the icsid Convention. In fact, Aucovens argument regarding icsid jurisdiction rests on
428
two fictions: Aucoven is under the foreign control of a US national and Venezuela
agreed to icsid jurisdiction based on such fictional foreign control.
1. Aucovens operations in Venezuela are controlled by ica Holding
39. From the date of its incorporation until today, Aucoven has been a wholly
or majority owned subsidiary of ica Holding, through one or more ica Holding
subsidiaries. The transfer of the shares to Icatech did not change ica Holdings
direct control over, and involvement in, Aucovens operations and decision-making.
ica Holding is not only the sole shareholder of ica, Icatech and numerous other
subsidiaries, it also exerts direct control over these subsidiaries. Notably, several
officers and directors of ica Holding hold the same positions with many of the
subsidiaries, including ica and Icatech (Ven. Ex. 15, 16). Significantly, the presence
of Dr Jose Luis Guerrero, Executive Vice President of the ica Group, was required
at almost all important meetings with officials of Venezuela regarding Aucovens
operations (Ven. Ex. 14, 16, 17).
40. The transfer of shares to Icatech did not diminish ica Holdings control over
Aucovens operations in Venezuela. For example, Aucovens President went on requesting meetings with the Minister of Infrastructure for himself and Dr Guerrero,
the Mexican Vice President of Aucoven (Ven. Ex. 20, 21). Mexican nationals with
ties to the ica Group continued to exercise control over decisions related to Aucovens future in Venezuela (Ven. Ex. 33, 34, 35). At all times relevant to this case,
Aucovens board of directors remained under the majority control of Mexican nationals (Ven. Ex. 37, 38).
41. These elements show that the true control over Aucoven has always been
exerted by ica Holding, notwithstanding the transfer of 75% of Aucovens shares
to Icatech.
[21] 2. ica Holdings control over Aucoven was a condition of the approval of
the share transfer
42. ica Holdings continued control over Aucovens operations was a condition of
the Venezuelan Ministrys approval of the transfer of shares. Venezuela was advised
that because of icas ownership of ica and Icatech, the share transfer would not
affect any material aspect of the concession.
43. Given Icatechs perilous financial condition and its dependence on its parent
company, the Ministry advised Aucoven that it would not approve the transfer of
shares, without a guarantee of Icatechs obligations given by ica Holding (Ven.
Ex. 29). When it finally agreed to the share transfer, the Ministry clearly indicated
that its decision was motivated by the fact that Aucoven had complied with the
requirements contained in its demand dated April 6, 1998, i.e. that it had provided
the required guarantee (Ven. Ex. 30).
3. The United States has no significant interest in this matter
44. The United States has no significant national interest in this matter which
involves a Venezuelan corporation controlled by Mexican interests, on the one
hand, and the Republic of Venezuela, on the other. When the present case was filed
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and until August 2000, no United States citizen served as an officer or director of
Aucoven.
4. Diplomatic interventions by the Mexican Government
45. The control by Mexican nationals is further confirmed by the diplomatic
interventions undertaken by the Mexican Government both before and after the
transfer of the shares. Mexican actions have included contacts between officials of
the Mexican and Venezuelan Governments (Ven. Ex. 31, 32, 33, 34, 35, 36, 37).
46. Mexican diplomatic efforts continued during 1999 and 2000. On August 4,
2000, the Ambassador of Mexico and the Venezuelan Minister of Infrastructure
held a meeting, during which the Ambassador pressed for a resolution of the
disagreement between Aucoven and Venezuela. The [22] Minister agreed to open
settlement discussions, which resulted in a temporary suspension of the arbitration
proceedings in September, 2000.
5. Venezuela has not consented to icsid jurisdiction in the circumstances of
this case, i.e. on the basis of a fictional control relationship
47. Venezuela never agreed that, by reason of the transfer of shares, Aucoven
would be treated as a United States national for purposes of icsid jurisdiction. Upon
receipt of Aucovens resolution of August 31, 1998, Venezuela promptly rejected
Aucovens position that it was under the control of a United States corporation and
that any disputes would be resolved by icsid arbitration (Ven. Ex. 44).
48. Consent of the parties is the cornerstone of icsid jurisdiction. Article 25(2)(b)
requires a clear expression in writing of the parties consent to icsid jurisdiction
and of their agreement that a national of the host State may be treated as a national
of another Contracting State (Holiday Inns v. Morocco (Case No. ARB/72/1), in P.
Lalive, The First World Bank Arbitration (Holiday Inns v. Morocco)Some Legal
Problems, 1 ICSID Reports 645 (1993), Ven. Auth. 4; Cable Television of Nevis, Ltd
and Cable Television of Nevis Holdings, Ltd v. Federation of St Christopher (St Kitts)
and Nevis (Case No. ARB/95/2), Award of December 16, 1996, 13 ICSID Review
FILJ 328 (1998), Ven. Auth. 3; Klockner Industrie-Anlagen GmbH and others v.
Republic of Cameroon (Case No. ARB/81/2), Award of October 21, 1983, 2 ICSID
Reports 4 (1994), Ven. Auth. 5; Amco Asia Corporation and Others v. The Republic
of Indonesia (Case No. ARB/81/1), Decision on Jurisdiction of September 25, 1983,
1 ICSID Reports 377 (1993), Ven. Auth. 1; Liberian Eastern Timber Corporation
(LETCO) v. Government of the Republic of Liberia (Case No. ARB/83/2), Award
of March 31, 1986 and Rectification of May 14, 1986, 2 ICSID Reports 343 (1994),
Ven. Auth. 6; Societe Ouest Africaine des Betons Industriels (SOABI) v. State of
Senegal, Decision on Jurisdiction of August 1, 1984, 2 ICSID Reports 165 (1994),
Ven. Auth. 8).
49. In the present case, when the Agreement was executed, the parties agreed
that there would be no icsid jurisdiction based on the foreign control of Aucoven
that then existed, namely control by the ica Group in Mexico. Hence, there can
be no reasonable inference that the [23] Republic agreed to icsid jurisdiction, or
agreed that Aucoven should be treated as a national of the United States, as long
as it would continue to be under the control of the ica Group. Thus, Venezuelas
430
consent to arbitration in the present circumstances was limited to an arbitration by

independent arbitrators in Caracas under Venezuelan law, pursuant to Clause 63 of
the Agreement.
50. According to Venezuela, a full reading of Clauses 63 and 64 shows that the
parties consent to icsid jurisdiction is subject to a transfer of actual control to a
national of another Contracting State, as Article 25(2)(b) requires. The transfer of
Aucovens shares among subsidiaries of ica Holding does not establish consent by
Venezuela to icsid jurisdiction. As a consequence, Clause 64 of the Agreement did
not become effective.
6. The foreign control provision of Article 25(2)(b) does not permit the
exercise of icsid jurisdiction in the circumstances of this case [7]
51. The cases decided under Article 25(2)(b) establish that the foreign control
referred to in the second clause of Article 25(2)(b) means foreign control by nationals of a Contracting State party to the Convention. Moreover, such foreign control
must meet an objective standard (Vacuum Salt Products Ltd v. Government of the
Republic of Ghana (Case No. ARB/92/1) Award of February 16, 1994, 4 ICSID
Reports 165 (1994), Ven. Auth. 9). As a result, an arbitral tribunal must take into
account the true control relationship (Banro American Resources, Inc. and Societe
Aurifère du Kivu et du Maniema, SARL v. the Democratic Republic of the Congo
(Case No. ARB/98/7), Award Declining Jurisdiction of September 1, 2000, Ven.
Auth. 2; LETCO, Ven. Auth. 6; SOABI, Ven. Auth. 8; Christoph Schreuer, Commentary on the ICSID Convention, 12 ICSID ReviewFILJ 59 (1997) (Second
Instalment of Commentaries Discussing Article 25), 560, 5623, Ven. Auth. 11).
52. Therefore, even if the parties had agreed to treat Aucoven as a United States
national for jurisdictional purposes, the pervasive control by Mexican nationals
over, and involvement in the affairs of, Aucoven should lead the Tribunal to decline
jurisdiction.
[24] 7. Aucoven cannot benefit from both Mexicos diplomatic efforts and
icsid arbitration
53. Nationals of non-contracting States have no access to icsid. Indeed, the treaty
obligations of a Contracting State were an important part of the balance that the
drafters of the Washington Convention sought to achieve. Significantly, when a
national of a Contracting State consents to an icsid proceeding, a suspension of
diplomatic protection takes place in accordance with Article 27 of the Convention
(Christoph Schreuer, Commentary on the ICSID Convention, 11 ICSID Review
FILJ 175 (1997), Ven. Auth. 11; Aron Broches, The Convention on the Settlement
of Investment Disputes Between States and Nationals of Other States, 136 Recueil
des Cours 331, 356 (1972II), Ven. Auth. 12; Banro, Ven. Auth. 2).
54. In this case, Mexico has made diplomatic representations to the Republic of
Venezuela on behalf of the Claimant, even after the share transfer. In fact, it has
espoused and endorsed Aucovens claim (see Ven. Ex. 36, 37, 38). Mexico is free of
any treaty commitments that would prevent it from providing diplomatic protection
to Aucoven, even while the latter pursues the present arbitration proceedings.
431
55. Under these circumstances, to allow Aucoven access to icsid arbitration

in spite of the overwhelming control and domination of it by its Mexican parent
company, would be contrary to the text and purpose of the Convention. To do
so would be incompatible with icsids overall scheme, which seeks to prevent a
situation in which an investor benefits from both diplomatic protection and icsid
arbitration at the same time. Neither the icsid Convention, nor any consent or
agreement the Republic has given, allows Aucoven to have it both ways.
56. In conclusion, the parties agreed when entering into the Agreement that the
dispute resolution mechanism would be a Venezuelan arbitration. Such arbitration
is an appropriate forum to resolve the present dispute. This is fully supported
by considerations of expense, burden, convenience of parties and witnesses, and
respect for the parties deliberate choices.
[25] B. Aucovens Position
57. Aucoven considers that the conditions of Article 25(2)(b) are fulfilled, the
parties having agreed to treat Aucoven as a national of another Contracting State
because of foreign control. It argues that, as a consequence, Venezuelas objection
to jurisdiction must be dismissed.
1. The parties executed an icsid arbitration clause that is effective by its terms
58. By Clause 64 of the Agreement, Venezuela consented to icsid arbitration, if
Aucovens majority shareholder came to be a national of a Contracting State.
59. The icsid Convention allows the parties to subordinate the entry into force
of an arbitration clause to the subsequent fulfilment of certain conditions, such as
the adhesion of the States concerned to the Convention, or the incorporation of
the entity contemplated by the agreement. On this assumption, a partys consent is
deemed given on the date on which the conditions are definitely met (Holiday Inns
SA v. Morocco, Ven. Auth. 4).
60. On August 28, 1998, with Venezuelas express authorisation, 75% of Aucovens shares were sold to Icatech, a corporation organised under the laws of the
State of Florida, with its principal place of business in Miami (Cl. Ex. 5, 6; Ven.
Ex. 24, 42). As a consequence, Venezuelas consent to icsid jurisdiction became
effective on that day and may not be revoked.
2. The definition of foreign control adopted by the parties in Clause 64 is
reasonable and must be enforced
61. The drafters of Article 25(2)(b) icsid Convention deliberately left the term
foreign control undefined in order to afford the parties wide discretion to provide
a definition (A. Broches, The Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States, 136 Recueil des Cours 331, 360
(1972II), Ven. Auth. 12). In other words, they solved the definitional difficulties
by recognising the [26] autonomy of the parties to agree upon the criteria which
would determine foreign control.
62. The parties freedom to define foreign control within the framework of
Article 25(2)(b) is confirmed by Vacuum Salt Ltd v. Ghana (Ven. Auth. 9) and
432
authoritative commentaries (C. F. Amerasinghe, Jurisdiction Ratione Personae

under the Convention on the Settlement of Investment Disputes between States
and Nationals of Other States, 47 BYIL 227, 262 (1974/75), Cl. Auth. 9; C. F.
Amerasinghe, Interpretation of Article 25(2)(b) of the icsid Convention, at 232,
Cl. Auth. 8; P. C. Szasz, A Practical Guide to the Convention on Settlement of
Investment Disputes, 1 Cornell Intl L. J., I 20 (1968), Cl. Auth. 14).
63. In the present case, Venezuela and Aucoven agreed that Aucoven would be
under foreign control, and Clause 64 would become effective, if a majority of
Aucovens shares were transferred to a national of a Contracting State. The parties
thus agreed that, once a majority of Aucovens shares were owned by a national of
a Contracting State, the criterion of foreign control would be met. No other test
was considered by the parties.
64. The agreement contained in Clause 64 is reasonable: the parties defined
control to mean direct control and used the traditional test of share ownership to
determine control. Indeed, as the two major cases dealing with layers of foreign
control, i.e. Amco (Ven. Auth. 1), and SOABI (Ven. Auth. 8), made it clear, while
there is authority for the proposition that direct control is not the exclusive means of
determining control under Article 25(2)(b), direct control is undoubtedly one reasonable method of determining control available to the parties to an icsid arbitration
clause.
65. In light of the parties agreement on that test of control, there is no reason
for the Tribunal to examine different criteria (nationality of the board members,
frequency of visits of board members of the direct shareholder, frequency of monitoring of Aucovens activities, financial support etc.), even if such criteria might
be relevant in different circumstances.
66. Aucoven nonetheless points out that, since the time that Icatech became Aucovens majority shareholder, all shareholder resolu-[27]tions have been
passed with the votes of Icatech alone. Similarly, Icatech exercised control by
passing the shareholder resolutions pursuant to which Aucoven terminated the
Agreement.
3. Venezuela has not identified any circumstances that warrant setting aside
the parties agreement
67. Although Venezuela views Icatechs corporate identity as a mere formality,
this formality is the fundamental building block of the global economy. No State,
court, or tribunal, has the right to set aside that corporate identity, except where the
parties consent to such action or the corporation has engaged in abuse or fraud. No
such circumstances are present here.
68. The fact that members of the boards of Aucoven and Icatech are Mexican
nationals, as well as the fact that ica Holding made efforts to settle the present
dispute and gave Icatech financial support, do not suffice to disregard Icatechs
independent corporate identity (Pierre Lalive, The First World Bank Arbitration
(Holiday Inns v. Morocco) Some Legal Problems, 1 ICSID Reports 645 (1993),
Ven. Auth. 4; Klockner, Cl. Auth. 19).
69. The thicket into which Venezuela would lead the Arbitral Tribunal is precisely
what the drafters of the icsid Convention decided to avoid. Finding the ultimate, or
433
effective, or true controller would often involve difficult and protracted factual
investigations, without any assurance as to the result.
70. In addition, Aucoven has engaged in no abuse. Since its incorporation, Icatech
has been an active corporation. It holds directly or indirectly about 20 subsidiaries
(Cl. Ex. 10). Icatech acquired its majority shares in Aucoven at a time when it
reoriented its activities towards the international market.
71. Aucoven did not defraud the Ministry. The Ministry could not have failed
to know that Icatech was a United States national and it had every opportunity
to assess the legal consequences of the share transfer. Hence, Venezuelas position according to which Aucoven had an affirmative obligation to advise the Ministry of the legal consequences under Clause 64 of the share transfer has no legal
support.
[28] 4. The efforts of Mexican officials towards an amicable resolution cannot
affect jurisdiction
72. The bar on diplomatic protection under Article 27(1) is not meant to discourage the amicable resolution of disputes.
73. At no point has Mexico filed a formal protest before the Venezuelan
Government. It has not in any other way espoused a claim, and no international
dispute has arisen between Mexico and Venezuela. Thus, even if Mexicos activities could affect Aucovens rights, which they could not, they would not do so in
this case.
74. Even if Mexicos actions could be construed as some form of prohibited
diplomatic protection, Article 27(1) would not apply here. Indeed, Article 27(1)
does not apply to Mexico which is not a Contracting Party. Article 27(1) limits the
prohibition of diplomatic protection to disputes in which a national of the State
granting the protection is a claimant (Christoph Schreuer, Commentary on Article
27 of the ICSID Convention, 12 ICSID ReviewFILJ 205 (1997) at 206, 1, Cl.
Auth. 13).
75. While active solicitation of diplomatic protection by the investor might be
a violation of Article 26, there is no support, however, for the proposition that an
icsid tribunal may deny jurisdiction on this ground.
5. Venezuelas arguments based on convenience are legally irrelevant
76. Finally, Venezuela argues that considerations of convenience should influence
the interpretation of the dispute settlement provisions of the Agreement. Such
arguments are legally irrelevant.
V. The Jurisdiction of this Tribunal

A. The Relevant Texts
77. Before entering the discussion on jurisdiction, it may be useful to set out
the relevant treaty and contract provisions in full text. These [29] provisions are
Article 25 icsid Convention and Clauses 63 and 64 of the Agreement.
434
1. Article 25 of the icsid Convention [8]

(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly
out of an investment, between a Contracting State (or any constituent subdivision or
agency of a Contracting State designated to the Centre by that State) and a national of
another Contracting State, which the parties to the dispute consent in writing to submit
to the Centre. When the parties have given their consent, no party may withdraw its
consent unilaterally.
(2) National of another Contracting State means:
(a)
(b)
any natural person who had the nationality of a Contracting State other than the
State party to the dispute on the date on which the parties consented to submit
such dispute to conciliation or arbitration as well as on the date on which the
request was registered pursuant to paragraph (3) of Article 28 or paragraph (3)
of Article 36, but does not include any person who on either date also had the
nationality of the Contracting State party to the dispute; and
any juridical person which had the nationality of a Contracting State other than
the State party to the dispute on the date on which the parties consented to submit
such dispute to conciliation or arbitration and any juridical person which had
the nationality of the Contracting State party to the dispute on that date and
which, because of foreign control, the parties have agreed should be treated as
a national of another Contracting State for the purposes of this Convention.
(3) Consent by a constituent subdivision or agency of a Contracting State shall

require the approval of that State unless that State notifies the Centre that no such
approval is required.
(4) Any Contracting State may, at the time of ratification, acceptance or approval
of this Convention or at any time thereafter, notify the Centre of the class or classes
of disputes which it would or would not consider submitting to the jurisdiction of
the Centre. The Secretary-General shall forthwith transmit such notification [30] to
all Contracting States. Such notification shall not constitute the consent required by
paragraph (1). (emphasis added)

78. By Clause 63 of the Agreement, the parties agreed to submit their disputes to
ad hoc arbitration in Caracas pursuant to the Venezuelan Code of Civil Procedure
and the Model Law on International Commercial Arbitration of the United Nations
Commission on International Trade Law:
In accordance with that expressly provided in article 10 of the Decree with rank and
force of Organic Law No. 138, which allows the doubts and controversies that may
arise regarding the interpretation and/or execution of the Concession, and in view of
the necessary financing and foreign investments in order to fulfill the Concession, the
parties agree that: Any doubt or controversy that may arise regarding the interpretation
and/or execution of the Agreement that cannot be resolved amicably by means of the
conciliation procedure established in the previous Clause within a total period of thirty
(30) working days from the time of the last notification mentioned in Clause 62 of
this document, must be resolved by means of arbitration by law, the procedure of
which shall be governed by the provisions of the Civil Procedure Code of Venezuela,
provided these provisions are not modified by this document or by the Model Law on
435
International Commercial Arbitration, approved by the United Nations Commission

on International Trade Law of June 21, 1985 (uncitral, 1985) (Model Law), whose
provisions are understood to be contained in this document.
The arbitration shall be carried out in Spanish in the city of Caracas, by an Arbitration Tribunal (the Tribunal) composed of three (3) independent arbitrators, with the
understanding that each of the parties shall name one (1) arbitrator and the third arbitrator, who will be president of the Tribunal, shall be designated by mutual agreement
between the two (2) arbitrators designated by the parties. If within twenty (20) working
days from the time of receiving a request from the other party, one of the parties does not
appoint the arbitrator to which it is enti-[31]tled, or if within the same amount of time,
counted from the designation of the arbitrators by the parties, they are not able to come
to an agreement on the appointment of the third arbitrator, the same shall be appointed
in accordance with the Model Law. The swearing in of the arbitrators, their recusal, the
validity of the arbitration clause and the execution of the award or arbitral decision in
Venezuela shall be governed by the rules of the Code of Civil Procedures of Venezuela.
Each party shall waive any right that either may have at the present time or in the future
to initiate or maintain any judgement or legal procedure with regard to any dispute,
claim, controversy, disagreement and/or difference related to, derived from, or in connection with this Contract or related in any way to the interpretation, execution, nonfulfillment, termination and/or resolution of the same by any mechanism that is different
from that provided in this Clause. The validity and legality of the Concession shall be
discussed before the Supreme Court of Justice and shall be excluded from this clause.

79. Venezuela being a party to the icsid Convention, the parties agreed in Clause
64 to icsid Arbitration instead of ad hoc arbitration under Clause 63 if the following
requirement was met:
Whereas, by virtue of the Act of Approval of the Convention on the Settlement of
Investment Disputes between States and Nationals of other States and its ratification,
published in the Official Gazette of The Republic of Venezuela No. 35685, of April 3,
1995, which constitutes valid law in Venezuela, The REPUBLIC OF VENEZUELA
has seen fit to submit disputes that may arise relating to investors who are nationals of
other Contracting States to international settlement methods, the parties agree that if
the shareholder or majority shareholder(s) of THE CONCESSIONAIRE come to be
(a) national(s) of a country in which the Convention on the Settlement of Investment
Disputes between States and Nationals of other States were to be in force, Clause 63
of this document would immediately be substituted by the following text:
[32] Any dispute, claim, controversy, disagreement and/or difference related to,
derived from, or in connection with the Concession or related in any way with the
interpretation, performance, non-fulfillment, termination, resolution of the same, all of
which are recognized by both parties to pertain to investments, which cannot be resolved
amicably through the process of conciliation provided for by the previous Clause within
a time period of thirty (30) working days from the time of the last notification provided
in accordance with the methods established in this Document, must be resolved by the
International Centre For Settlement of Investment Disputes (the Centre), by means
of arbitration, in accordance with the provisions of the Convention on the Settlement of
Investment Disputes between States and Nationals of other States (the Convention)
and, except as otherwise agreed by the parties, pursuant to the Rules of Arbitration of
the Centre that are valid for the date of entry into force of this clause (the Arbitration
436
Rules). The arbitration shall be carried out at the Centre by an Arbitration Tribunal
(the Tribunal) consisting of three (3) arbitrators from the List of Arbitrators of the
Centre, with the understanding that each party shall name one (1) arbitrator and the
third arbitrator, who will be President of the Tribunal, shall be designated by mutual
agreement by the two arbitrators designated by the parties. If, within a period of twenty
(20) working days from the time of the designation of the arbitrators by the parties,
they have been unable to agree on the designation of the third arbitrator, the latter
shall be designated in accordance with the Rules of Arbitration. Each of the parties
shall waive any right either may have at the present time or in the future to initiate or
maintain any judgement or legal procedure with regard to any dispute, until the same
has been determined pursuant to the aforementioned arbitration procedure, and later
only to enforce the award or decision rendered by means of said arbitration procedure.
Both The Republic of Venezuela, acting by means of THE MINISTRY, and THE
CONCESSIONAIRE, agree to attribute to THE CONCESSIONAIRE, a legal person
of Venezuela subject to foreign control for the date when this clause enters into force,
the character of National of another Contracting State for the purpose of applying
this Clause and the provisions of the Convention.
Regardless of that set forth in Clause 64, if for any reason The Republic of Venezuela
and/or the country of citizenship of the [33] majority shareholder or shareholders
of THE CONCESSIONAIRE were to revoke the Convention or if in any other way
the Convention were to lose validity for these countries before initiating arbitration
pursuant to the provisions of Clause 64 or if for any other reason the Convention
ceases to have validity in said countries or if it is impossible to carry out the arbitration
in accordance with the convention, the Clause 63 of this document shall regain its full
effect and validity.
B. Discussion
1. Introduction
80. Given Venezuelas objections to icsid jurisdiction, the Tribunal will first construe Clause 64 of the Agreement to determine whether it is meant to apply in the
event of a transfer of Aucovens shares within the ica group (headings 2 to 4 below).
81. It will then determine whether the conditions of Article 25 of the icsid
Convention are fulfilled (heading 5 below). In particular, it will examine whether
the parties agreement to treat Aucoven as a national of another Contracting State
because of foreign control remains within the scope of the icsid Convention. In
this context, the Tribunal will address the objections raised by Venezuela regarding
the alleged abuse of the Conventions purposes, specifically due to ica Holdings
continued control over Aucoven notwithstanding the share transfer to Icatech, and
Aucovens alleged misleading conduct when requesting Venezuelas approval of
the share transfer.
82. Finally, the Tribunal will examine if Mexicos diplomatic efforts may have
an impact on the Tribunals jurisdiction.
2. Article 64 of the Agreement: the parties agreement to icsid arbitration
83. Clause 64 of the Agreement provides that the parties agree to submit to
icsid any dispute, claim, controversy, disagreement and/or difference related to,
437
derived from, or in connection with the Concession or related in any way with the
interpretation, performance, non-fulfilment, termination, resolution of the same,
if the shareholder or majority shareholder(s) of the Concessionaire, i.e. Aucoven,
come to be a national of a country [34] in which the ICSID Convention is in force.
Restating the conditions of Article 25(2)(b), Clause 64 (penultimate paragraph)
expressly specifies that, in this event, Aucoven shall be deemed a company under
foreign control:
Both The Republic of Venezuela, acting by means of the MINISTRY, and THE CONCESSIONAIRE, agree to attribute to THE CONCESSIONAIRE, a legal person of
Venezuela subject to foreign control for the date when this clause enters into force, the
character of National of another Contracting State for the purpose of applying this
Clause and the provisions of the Convention. (Emphasis added)
84. Again referring to the criterion of majority shareholding, Clause 64, last paragraph, states that, if, for any reason, Venezuela and/or the country of citizenship of
the majority shareholder or shareholders of THE CONCESSIONAIRE (emphasis
added) were to revoke the Convention, Clause 63 would regain its full effect and
validity.
85. According to Venezuela, Clause 64 does not aim at a transfer of shares within
the ica group. Clause 64 is not meant to apply as long as ica Holding retains the
ultimate and actual control over Aucoven (Venezuelas Further Observations on
jurisdiction dated May 22, 2001, p. 4, transcript of the Hearing of June 28, 2001,
p. 25). Hence, Venezuela did not consent to icsid jurisdiction under the present
circumstances.
86. Venezuelas construction is not in conformity with the clear wording of
Clause 64. Furthermore, there is no indication on record showing that, when they
entered into the Agreement, the parties intended to subject their consent to icsid
jurisdiction to a condition different from the one they had clearly expressed. The
Tribunal has found no element allowing it to find that, by the words the majority
shareholder(s) of THE CONCESSIONAIRE , the parties did not mean the person holding the majority shares, but rather the person exercising effective control
over Aucoven. In other words, there is no indication on record that the parties
intended to exclude share transfers among ica Holdings subsidiaries and meant
to condition their agreement upon a change of effective or ultimate control over
Aucoven.
[35] 87. As a result, in the absence of any contrary indication, the Tribunal does
not see any reason nor justification for departing from the clear wording of Clause
64, according to which the parties consented to icsid jurisdiction in the event that
Aucovens majority shareholder(s) came to be a national of another Contracting
State.
88. Having established the meaning of Clause 64, the Tribunal must determine whether the parties consent to icsid jurisdiction meets the requirements of
Article 25 of the icsid Convention. However, before discussing this matter, the
Tribunal will briefly address the issue of conditional consent and of the effectiveness of such consent in the context of Clauses 7 and 64 of the Agreement.
438
3. Clause 64: a conditional agreement to icsid arbitration

89. The parties agreement to icsid jurisdiction expressed in Clause 64 is subject
to the fulfilment of a condition, i.e. the transfer of Aucovens majority shares to a
national of another Contracting State.
90. It is common ground that such a conditional arbitration agreement is valid.
Indeed, the icsid Convention does not forbid the parties to subject the entry into
force of their arbitration agreement to the subsequent fulfilment of conditions:
The Tribunal is of the opinion that the Convention allows parties to subordinate the entry into force of an arbitration clause to the subsequent fulfilment of certain conditions,
such as the adherence of the States concerned to the Convention, or the incorporation
of the company envisaged by the agreement. On this assumption, it is the date when
the conditions are definitely satisfied, as regards one of the Parties involved, which
constitutes in the sense of the Convention the date of consent by that Party. As for the
date of consent contemplated by Article 25(2)(b) of the Convention, it will automatically be the date on which the two corresponding consents coincide . . . (Pierre Lalive,
The First World Bank Arbitration (Holiday Inns v. Morocco)Some Legal Problems,
1 ICSID Reports 645 (1993) p. 668, Ven. Auth. 4)
[36] 91. In such a case, the parties consent to icsid jurisdiction becomes effective
once the condition provided in the arbitration agreement is met. Assuming that
Clause 64 is a valid agreement to arbitrate, the consent became effective on August
28, 1998, on the date of the share transfer.
4. The effectiveness of the parties agreement to icsid arbitration
92. Pursuant to Clause 7 of the Agreement, the transfer of Aucovens shares was
subject to Venezuelas approval:
THE CONCESSIONAIRE is obligated to maintain, within the term of the Concession,
its status as a corporation domiciled in Venezuela and its Venezuelan nationality. It is
expressly understood that the shares of THE CONCESSIONAIRE shall remain registered and not convertible to bearer shares and that they may not be sold or encumbered,
directly or indirectly, without prior authorization from THE MINISTRY. [. . .].
93. Thus, the occurrence of the event defined by the parties as the condition
for icsid jurisdiction requires Venezuelas approval. However, once the approval
has been given and the transfer of the shares has taken place, Clause 64 becomes
immediately effective. There is no need for an additional consent by the parties. In
other words, Clause 7 does not constitute an opportunity to reassess the conditions
under which the parties consented to icsid jurisdiction in Clause 64.
5. The requirements of Article 25 of the icsid Convention
5.1 The parties consent: the cornerstone of the jurisdiction of the Centre
94. Article 25(1) of the icsid Convention requires the parties consent to submit
a dispute to icsid jurisdiction. No proceedings can take place under the Centres
auspices unless the parties to the dispute have given their consent in writing. More
specifically, the system of the Convention is premised on two levels of consent.
At the first level, one finds the consent expressed by the Contracting States which
439
agreed to be bound by the Convention. At the second level, one finds the consent
given by the host State and the investor by means of an agreement to icsid arbitration (Bernardo M. Cremades, Arbitration between States and [37] Investors: Some
Jurisdiction Issues, in Business Law International, May 2001, p. 157 (160-2)).
95. According to icsid Tribunals and the commentaries on the icsid Convention,
great weight must be placed on the fact that the parties consented to icsids jurisdiction, consent often being described as the cornerstone of the jurisdiction of the
Centre:
The third and in a sense the most important jurisdictional requirement is that of
consent, by both parties, to the submission of the dispute to the Centre. In the report
of the Executive Directors this requirement is described as the cornerstone of the
jurisdiction of the Centre. Its paramount importance is underlined by the fact that at
least to a certain extent the other two jurisdictional requirements can be conditioned
(though not waived) by agreement of the parties that would normally be expressed in
the instrument expressing the consent: the characterization of a particular transaction
as an investment, and the stipulation that a domestic corporation is to be considered
as a national of another State because of foreign control. (P. Szasz, A Practical Guide
to the Convention on Settlement of Investment Disputes, I Cornell IntI Law Journal
(1968), Cl. Auth. 14; see also Aron Broches, The Convention on the Settlement of
Investment Disputes Between States and Nationals of Other States, 136 Recueil des
Cours 331 (1972II), Ven. Auth. 12).
96. However essential, consent in and of itself is not sufficient to ensure access
to the Centre. Indeed, Article 25 of the icsid Convention provides for additional
objective requirements which must be met in addition to consent. These objective
requirements are the following:
r The dispute between the parties must be a legal dispute;
r The dispute must arise directly out of an investment; and,
r In the event that the investor is a corporation registered under the laws of the
host State, the parties must agree to treat the locally incorporated company,
because of foreign control, as a national of another Contracting State for
the purposes of the Convention.
97. The Convention does not contain any definition of these objective requirements. The drafters of the Convention deliberately chose not [38] to define the
terms legal dispute investment, nationality and foreign control. In reliance
on the consensual nature of the Convention, they preferred giving the parties the
greatest latitude to define these terms themselves, provided that the criteria agreed
upon by the parties are reasonable and not totally inconsistent with the purposes
of the Convention (Aron Broches, The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 136 Recueil des
Cours 331 (1972II), Ven. Auth. 12; C. F. Amerasinghe, Jurisdiction Ratione Personae under the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States, 47 BYIL 227 (1974/75), pp. 2312, Cl.
Auth. 9); Christoph Schreuer, Commentary on the icsid Convention (1997), p. 82),
Ven. Auth. 11).
440
98. Or in the words of Dr Aron Broches, General Counsel of the World Bank,
who chaired the consultative meetings at which the preliminary draft of the
Convention of October 15, 1963 was discussed:
The World Bank staff in preparing a new draft for the Legal Committee which
was to advise the Executive Directors on a final text, drew the conclusion from the
Consultative Meetings that attempts at definitions should be abandoned and that
instead an attempt should be made, relying on the consensual character of the Convention, to give the greatest possible latitude to the parties to decide under what circumstances a company could be treated as a national of another Contracting State. [Aron
Broches, The Convention on the Settlement of Investment Disputes Between States
and Nationals of Other States, 136 Recueil des Cours 331 (1972II), p. 360, Ven.
Auth. 12]
In the end, the effort to devise a generally acceptable definition of the term investment was given up given the essential requirement of consent by the Parties.
I believe that this was a wise decision, fully consonant with the consensual nature of the
Convention, which leaves a large measure of discretion to the parties. It goes without
saying, howeverand I have made this remark before in another connectionthat
this discretion is not unlimited and cannot be exercised to the point of being clearly
inconsistent with the purposes of the Convention. [. . .]
[39] It was impossible to reconcile the different points of view, quite apart from the
fact that some of the proposals would have unduly limited the Centres jurisdiction.
In the end, a large majority was in favour of dropping the definition but to retain the
term legal dispute. (Aron Broches, The Convention on the Settlement of Investment
Disputes Between States and Nationals of Other States, 136 Recueil des Cours 331
(1972-II), pp. 3623, Ven. Auth. 12).
99. As a result, to determine whether these objective requirements are met in a

given case, one needs to refer to the parties own understanding or definition. As
long as the criteria chosen by the parties to define these requirements are reasonable,
i.e. as long as the requirements are not deprived of their objective significance, there
is no reason to discard the parties choice.
5.2 The objective requirements provided by Article 25 of the icsid Convention
[8]
a) Article 25(1): a legal dispute arising directly out of an investment
100. The conditions of Article 25(1) of the icsid Convention, which are not disputed by the parties, are clearly met. The dispute between Aucoven and Venezuela
is a legal dispute, since it relates to the parties obligations agreed upon in the
Agreement.
101. Moreover, according to the Agreement, Aucoven was to design, construct,
operate, exploit, conserve, and maintain the CaracasLa Guaira Highway and the
CaracasLa Guaira old road. Pursuant to Clause 64, the parties expressly agreed to
consider these works as an investment, which seems reasonable. Indeed, the performance of the Agreement, which implies substantial resources during significant
periods of time, clearly qualifies as an investment in the sense of Article 25 of the
icsid Convention.
441
b) Article 25(2)(b): any locally registered corporation which, because of foreign

control, the parties have agreed should be treated as a national of another Contracting
State
102. Article 25(2)(b) creates an exception to the rule that a national cannot
initiate icsid proceedings against its own State. This exception is justified by the
fact that host States may require foreign investors to [40] operate by way of a locally
incorporated company, without intending to prevent such investor from acceding
to icsid arbitration.
103. Article 25(2)(b) (second prong) defines national of another Contracting
State as any juridical person which had the nationality of the Contracting State
party to the dispute, and which because of foreign control, the parties have agreed
should be treated as a national of another Contracting State for the purposes of this
Convention.
104. Hence, locally incorporated companies may agree to icsid arbitration subject
to two requirements:
r The parties have agreed to treat the said company as a national of another
Contracting State for the purposes of this Convention; and
r The said company is subject to foreign control.
c) The agreement to treat a juridical person as a national of another Contracting
State
105. The Convention does not require any specific form for the agreement to treat
a juridical person incorporated in the host state as a national of another Contracting
State because of foreign control.
106. Further, Article 25(2)(b) does not define nationality. As reflected in the
Travaux preparatoires, the drafters intentionally gave up inserting into the icsid
Convention a definition of nationality:
The subsequent First Draft is silent on the possible criteria for corporate nationality
and merely refers to a possible agreement on nationality between the parties (History,
Vol. I, p. 124). Although there was some reference to the fact that the criteria for the
nationality of a juridical person remained to be determined (History, Vol. II, pp. 669,
671), no serious effort to do so was made. A United States attempt to reintroduce the
criterion of a controlling interest in the definition of national of another Contracting
State was defeated by a large majority (at pp. 837, 871). The Revised Draft and the
Convention are silent on the method to be employed for the determination of a juridical
persons nationality. (Christoph [41] Schreuer, Commentary on the icsid Convention,
12 ICSID ReviewFILJ 59 (1997) (Second Instalment of Commentaries Discussing
Article 25), p. 81, Ven. Ex. 11)
107. According to international law and practice, there are different possible
criteria to determine a juridical persons nationality. The most widely used is the
place of incorporation or registered office. Alternatively, the place of the central
administration or effective seat may also be taken into consideration (Christoph
Schreuer, Commentary on icsid Convention: Article 25, p. 81, Ven. Auth. 11; Aron
Broches, The Convention on the Settlement of Investment Disputes Between States
442
and Nationals of Other States, 136 Recueil des Cours 331 (1972II), p. 360, Ven.
Auth. 12).
108. The test of the place of incorporation or of the seat has been largely adopted
by icsid Tribunals, for example in SOABI:
The Tribunal has observed that the Convention does not define the term nationality,
thus leaving to each State the power to determine whether or not a company is
possessed of its nationality. As a general rule, States apply either the head office or the
place of incorporation criteria in order to determine nationality. By contrast, neither
the nationality of the companys shareholders nor foreign control, other than over
capital, normally govern the nationality of a company, although a legislature may
invoke these criteria in exceptional circumstances. Thus a juridical person which
had the nationality of the Contracting State, party to the dispute, the phrase used in
Article 25(2)(b) of the Convention, is a juridical person which, in accordance with the
laws of the State in question, has its head office or has been incorporated in that State.
(SOABI, p. 181, Ven. Auth. 8)
Such a reasoning is, in law, not in accord with the Convention. Indeed, the concept of
nationality is there a classical one, based on the law under which the juridical person
has been incorporated, the place of incorporation and the place of the social seat. An
exception is brought to this concept in respect of juridical persons having the nationality,
thus defined, of the Contracting State Party to the dispute, where said juridical persons
are under foreign control. [. . .] (Amco, p. 396, Ven. Auth. 1)
[42] 109. However, as stated by Aron Broches, the purpose of Article 25(2)(b)
being to indicate the outer limits within which disputes may be submitted to
conciliation or arbitration under the auspices of the Centre, the parties should be
given the widest possible latitude to agree on the meaning of nationality. Any
definition of nationality based on a reasonable criterion should be accepted (see
Aron Broches, The Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States, 136 Recueil des Cours 331 (1972II), p. 361,
Ven. Auth. 12).
d) Foreign control
110. Like the other objective requirements of Article 25 of the icsid Convention,
foreign control is not defined. Article 25(2)(b) does not specify the nature, direct,
indirect, ultimate or effective, of the foreign control.
111. In different decisions on jurisdiction, arbitral tribunals have discussed how
far a tribunal should go in searching for foreign control. In Amco the tribunal
considered that it should go one step behind the nationality of the host State; in
SOABI the tribunal searched for real control and went one step further to second-tier
control, i.e. to the majority shareholders of the company holding the share of the
locally incorporated entity.
112. According to Venezuela, foreign control in the meaning of Article 25(2)(b)
means effective control. However, this interpretation lacks convincing support.
Indeed, the term effective control is not found in the icsid Convention. In addition,
there is no indication in the Travaux preparatoires and in the commentaries on
Article 25(2)(b) that effective control should be viewed as a threshold that has
443
to be reached before the parties may agree to treat a local corporation as a foreign
national in the meaning of Article 25(2)(b).
113. The review of the Travaux preparatoires shows that, given the criticism
drawn by attempts to define foreign control, the drafters considered that the enterprise of defining foreign control (like nationality, investment or legal dispute)
was impracticable. Moreover, definitions of these terms would be difficult to apply in practice and would often lead to protracted investigation of the ownership of
shares, nomi-[43]nees, trusts, voting arrangements, etc. Hence, the drafters decided
to give the parties wide discretion to determine under what circumstances a company could be treated as a national of another Contracting State because of foreign
control. The concept of foreign control being flexible and broad, different criteria may be taken into consideration, such as shareholding, voting rights, etc. (see
Aron Broches, The Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States, 136 Recueil des Cours 331 (1972II), p. 361,
Ven. Auth. 12).
114. Given the autonomy granted to the parties by the icsid Convention, an
Arbitral Tribunal may not adopt a more restrictive definition of foreign control,
unless the parties have exercised their discretion in a way inconsistent with the
purposes of the Convention:
The Convention does not specify what constitutes control for this purpose (i.e. must
there be a majority of foreign shareholders), and thus it would be difficult to challenge
later such a stipulation agreed to by the Contracting State concerned, regardless of the
objective situation. (Paul C. Szasz, A Practical Guide to the Convention on Settlement
of Investment Disputes, p. 20, Cl. Auth. 14)
115. Some commentators even consider that an Arbitral Tribunal should be

less stringent in assessing the level of control and the reasonableness of the
criterion or criteria chosen by the parties when there is an express agreement
in this respect (Amerasinghe, Interpretation of Article 25(2)(b) of the ICSID
Convention, in R. B. Lillich, C. N. Brower (eds.): International Arbitration in the
21st Century: Towards Judicialization and Uniformity?, 223 (1993), p. 242 Cl.
Auth. 8).
116. On the basis of the foregoing developments, it is the task of the Tribunal
to determine whether the parties have exercised their autonomy within the limits of the icsid Convention, i.e. whether they have defined foreign control on
the basis of reasonable criteria. For this purpose, the Tribunal has to review the
concrete circumstances of the case without being limited by formalities. However, as long as the definition of foreign control chosen by the parties is reasonable and the purposes of the Convention have not been abused (for example in
cases of fraud or misrepresentation), the Arbitral Tribunal must enforce the parties
choice.
[44] 5.3 The parties agreement expressed in Clause 64 remains within the
limits of the icsid Convention
117. As stated above, the parties decided to subject their consent to icsid jurisdiction to the occurrence of a transfer of the majority of Aucovens shares to a national
444
of another Contracting State. Thus, Aucoven and Venezuela chose to define the
term foreign control only by reference to Aucovens direct shareholding. They
did not take into account additional criteria, such as nationality of the directors,
effective or ultimate control over Aucoven.
118. According to Venezuela, this definition of foreign control, which is merely
based on a formal criterion, i.e. direct shareholding, does not meet the requirements
of Article 25(2)(b) icsid. Indeed, notwithstanding the share transfer, ica Holding
retained the ultimate control over Aucoven: the Executive Vice President of the
ica group, Dr Guerrero, continued to attend meetings with officials of Venezuela,
the majority of Aucovens directors remained Mexican nationals and ica Holding
continued to financially support Aucoven and Icatech.
119. As a general matter, the arbitral Tribunal accepts that economic criteria often
better reflect reality than legal ones. However, in the present case, such arguments
of an economic nature are irrelevant. Indeed, exercising the discretion granted by
the Convention, the parties have specifically identified majority shareholding as the
criterion to be applied. They have not chosen to subordinate their consent to icsid
arbitration to other criteria.
120. As a result, the Tribunal must respect the parties autonomy and may not
discard the criterion of direct shareholding, unless it proves unreasonable.
121. Direct shareholding confers voting right, and, therefore, the possibility to
participate in the decision-making of the company. Hence, even if it does not constitute the sole criterion to define foreign control, direct shareholding is certainly
a reasonable test for control.
122. The actual circumstances prevailing in this case confirm this finding. Indeed,
the Tribunal has found no indication supporting Venezuelas assertions that Icatech
would be a corporation of convenience [45] exerting a purely fictional control for
jurisdiction purposes or that Aucovens conduct in the context of the share transfer
would have been misleading.
a) Icatech is not a corporation of convenience exerting merely fictional control
over Aucoven
123. Icatech was incorporated in Florida on November 2, 1989, well before the
conclusion of the Agreement, the share transfer and the emergence of the present
dispute. Icatech, which has about 20 subsidiaries in different countries, is subject
to economic, tax and social regulations in the United States, a country which is not
considered a tax or regulatory haven.
124. As stated above (see para. 18), Aucoven requested Venezuelas approval of
the share transfer at the very beginning of the project. As Aucoven alleged without
being contradicted, it was difficult at that time for a Mexican company to finance
projects because of the peso crisis. Since a connection to the United States enhanced
the ability to obtain financing, again an assertion which remained unchallenged,
ica Holding decided that Icatech would establish or acquire several international
project companies including Aucoven. Such explanation which is being put forward
by Aucoven in the context of the present proceedings (Hearing of June 28, 2001,
transcript, p. 175) is consistent with the one expressed in the request for approval
of the share transfer:
445
On the other hand, I must indicate, Honorable Minister, that the purpose of the authorization requested herein is to create a new capital participation structure of the concessionaire company in charge of the project, construction, development, conservation
and maintenance of the CaracasLa Guaira Expressway and Old Caracas Highway and
Related Services (Letter from E. Perez Alfonso to Minister M. Orozco Graterol dated
July 11, 1997, Ven. Ex. 25)
125. Further, in connection with corporate decision-making, the fact that Icatech
exercises its voting rights (at least as far as major issues are concerned) in a way
consistent with ica Holdings strategy shows the groups coherence. It is certainly
not sufficient to conclude that Icatech is a corporation of convenience.
[46] 126. On the basis of these facts, the Tribunal finds that Icatech cannot be
regarded as a corporation of convenience. Hence, the assertion of icsid jurisdiction
based on the fact that Icatech holds 75% of Aucovens shares does not constitute
an abuse of the Convention purposes.
b) Aucovens conduct was not misleading
127. According to Venezuela, when requesting approval for the share transfer,
Aucoven purposefully failed to mention the consequences of such transfer. Following Venezuelas argumentation, Aucoven knew well that Venezuela would not
have given its approval pursuant to Clause 7 of the Agreement, had it realized that
such approval would entail consent to icsid jurisdiction. Far from being informed
of the jurisdictional consequences of its approval, Venezuela had merely been advised that the transfer from one subsidiary to another would not affect any material
aspect of the Concession. ica Holding accepted to guarantee Icatechs obligations
as Aucovens shareholder, thus confirming its intention to maintain its financial
support to Aucoven.
128. On the basis of the foregoing, the Tribunal does not find Aucovens conduct
misleading. Aucoven unequivocally stated that the shares would be transferred to a
United States corporation. With its request, Aucoven submitted Icatechs Articles
of Incorporation and other documents, such as a good standing certificate and consolidated financial statements (Cl. Ex. 11, 15; Ven. Ex. 25). On this basis, Venezuela
was in a position to assess the jurisdictional consequences of the contemplated share
transfer.
129. Venezuela approved the share transfer 15 months after Aucovens first request. During this period of time, Venezuela apparently studied the consequences
of the transfer carefully. The record shows that Venezuelas main concern
understandably sowas to ascertain that ica Holding would continue to grant
Aucoven the necessary financial support to perform its obligations and that the new
majority shareholder would have the technical expertise to run the project. The
memorandum from Mr F. Salas and the letter from the Attorney General clearly
expressed these concerns:
By virtue of the foregoing, we can conclude that both Ingenieros Civiles Asociados, SA de CV and ICATECH Corpora-[47]tion are owned by and indirectly controlled by the Mexican company called ica Holding by virtue of which the operation
whose authorization has been requested initially implies the transfer of shares between
446
associated and related companies that preserve and maintain the construction experience, financial situation, infrastructure and necessary equipment to fulfill the scope
of the concession of the Highway System, already accredited. (Memorandum from F.
Salas to C. Carrillo dated August 7, 1997 Ven. Ex. 26)
[. . .] Finally, it would be important to point out that the official letter in question
clearly shows that the Minister of Transportation and Communication is aware, that
he is responsible for authorizing or not authorizing the Concessionaire Companys
transfer of shares, and that he is in favor thereof, having given much consideration to
the request from the economicfinancial and legal point of view. Therefore, he does not
require the opinion of the Federal Attorney General as to the substance of the matter.
[. . .] (Letter from J. N. Garrido Mendoza, Attorney General to Minister M. Orozco
Graterol, dated June 29, 1998, Cl. Ex. 16)
130. The review of these documents does not lead to the conclusion that
Venezuela was misled as to the jurisdictional implications of the share transfer.
They merely demonstrate that Venezuelas foremost preoccupations regarded the
continued viability of the project, more specifically Icatechs expertise in the construction field and Icatechs financial situation. The consequences of the transfer on
Clause 64 do not appear to have been a concern. Significantly, once it obtained ica
Holdings guarantee of Icatechs obligations, Venezuela promptly gave its approval
on June 30, 1998, without raising any further points.
131. This understanding of the facts is further confirmed by the parties conduct
during the following months. Indeed, in October and November 1998, the parties
discussed several provisions of the Agreement. As a result, eleven clauses of the
latter and its Annex A were clarified or modified (Cl. Ex. 20). Clause 64 remained
untouched. Its validity was even specifically confirmed by the Ministry on January
13, 1999 (Minister of Infrastructure J. Mart, Resolution No. 003 dated January 13,
1999, Ven. Ex. 45).
[48] 132. On the basis of the above considerations, the Tribunal considers that
Aucoven did not mislead Venezuela by omitting to draw its attention to the jurisdictional consequences of the share transfer.
6. The parties agreement to icsid arbitration is valid and in full effect
133. Pursuant to the above considerations, Clause 64 which makes the parties
consent to icsid jurisdiction conditional upon the transfer of Aucovens majority
shares to a national of another Contracting State meets the requirements of Article
25 of the icsid Convention.
134. A majority of Aucovens shares, i.e. 75%, were transferred to Icatech on
August 28, 1998. Pursuant to the criterion of incorporation which is commonly
used to determine the nationality of a corporation, Icatech is a national of another
Contracting State (the United States) according to Article 25(2)(b) of the icsid
Convention. As a result, Clause 64 became effective on the same day.
7. The significance of the intervention by Mexican officials
135. Article 27 prohibits a Contracting State from espousing the claim of one of
its nationals in respect of a dispute that one of its nationals and another Contracting
State consented to submit to icsid arbitration.
447
136. Mexico is not a Contracting State. Therefore, it is not bound by Article 27 of

the icsid Convention. Hence, Venezuela contends that, should the Tribunal accept
its jurisdiction, Venezuela would have to face multiple claims. Indeed, no treaty
provision would prevent Mexico from interfering in the dispute between Venezuela
and Aucoven. According to Venezuela, Mexico has already espoused Aucovens
claim with a view to protecting the financial interests of ica Holding, which is one
of its nationals.
137. The Tribunal agrees with Venezuela that Mexicos interest in the outcome
of this dispute is somewhat disturbing when one considers the purpose of the icsid
Convention. However, it cannot give such interest the weight Venezuela seeks to
give it for two reasons.
[49] 138. First, Article 27 of the icsid Convention makes a clear distinction
between diplomatic protection and efforts to settle a dispute. The icsid Convention
provides a forum for resolving disputes. However, its purpose is not to commit
parties to arbitration, when there is a possibility to reach an amicable solution.
Hence, attempts to settle a dispute do not constitute prohibited diplomatic protection
in the sense of Article 27.
139. The record shows that the purpose of Mexicos efforts has been to facilitate
the settlement of the dispute between Aucoven and Venezuela (see Ven. Ex. 36, 37,
38, 39). There is no indication that Mexico has espoused Aucovens claim.
140. Second, even if Mexicos interventions were to constitute prohibited diplomatic interventions in the meaning of Article 27 of the icsid Convention, this would
have no bearing on the jurisdiction of this Arbitral Tribunal which is properly created under Article 25(2)(b). Indeed a denial of jurisdiction is not a remedy available
in the context of Article 27.
VI. Conclusion
141. The conditions of Article 25 of the icsid Convention and of Clause 64 of
the Agreement are clearly met in the present case. As a result, Clause 63 providing
for arbitration in Caracas was substituted by Clause 64. Venezuelas arguments as
to the convenience of arbitration proceedings in Caracas are thus inapposite.
142. As a result of the factual and legal considerations set out in this decision, the
Tribunal comes to the conclusion that it has jurisdiction over the dispute submitted
to it in these proceedings. This conclusion should not be read as a general statement
in favour of one definition of foreign control in Article 25(2)(b) rather than another.
It does not reflect such a statement or opinion. It applies the provisions pertinent to
this dispute, i.e. Clause 64 of the Agreement and Article 25 of the icsid Convention.
In doing so, it enforces the parties own test of foreign control, which the Tribunal
has found to be within the boundaries set by Article 25 of the icsid Convention.
[50] 143. Finally, the Tribunal is aware that the icsid award in Banro (Banro
American Resources, Inc. and Societe Aurifère du Kivu et du Maniema, SARL v.
the Democratic Republic of the Congo (Case No. ARB/98/7)) reached a different
conclusion. However, the circumstances in Banro were different too. In Banro the
transfer of shares was not subject to the approval of the Government and, more
448
importantly, the parties had not contractually defined the test for foreign control.
As a result of these differences, the Arbitral Tribunal is of the opinion that an
analogy between Banro and the present case is inapposite.
144. The Tribunal reserves its decision on costs, legal fees and other expenses
for this stage of the arbitration to be dealt with in the final award.
VII. Decision on Jurisdiction

The Arbitral Tribunal hereby makes the following decision:
a) The Arbitral Tribunal has jurisdiction over the dispute submitted to it in this
arbitration.
b) The arbitration costs, legal fees and other expenses in connection with the
issue of jurisdiction shall be addressed in the Final Award.
Done on September 27, 2001, the place of Arbitration being Washington, DC,
USA.
ADF v. UNITED STATES
449
Arbitration Arbitral procedure Place of arbitration icsid Additional

Facility arbitration pursuant to Chapter 11 of nafta Canada or United
States Standard of review of international arbitration in both countries similar Convenience of parties and Tribunal Arbitration conducted at icsid
headquarters Neutrality as between parties
Arbitration Documents Disclosure Documents available to the public on
reasonable inquiry Whether requiring to be specifically disclosed Test of
necessity Arbitration (Additional Facility) Rules, Article 41(2)
Jurisdiction Alleged breach of nafta Article 1103 asserted in course of
pleadings Article 1103 not mentioned in Notice of Intention to arbitrate
Whether Tribunal deprived of jurisdiction over Article 1103 claim nafta,
Article 1119
Jurisdiction Over incidental or additional claims How related to primary
claim Requirement of close relationship or connection Claimant failing to
present evidence of such connection Absence of jurisdiction Arbitration
(Additional Facility) Rules, Article 48(1)
Discrimination Local manufacture requirement Applicable equally to local
as to foreign suppliers No showing of discrimination in law or fact nafta,
Article 1102
nafta Domestic content requirement Whether excluded from nafta Article 1106 as procurement by a Party Whether federal funding programme
involves procurement Whether procurement by component State procurement by a Party ilc Articles on Responsibility of States for Internationally
Wrongful Acts, Article 4 nafta, Article 1108, Annex 1001.1a-3
Foreign investment Investment protection Full protection and security
nafta ftc Interpretation of 31 July 2001 Whether binding on Chapter 11
Tribunals Meaning of Interpretation Requirement on Claimant to show
that treatment violated a specific rule of customary international law relating
to foreign investment nafta, Articles 1105(1), 1132
nafta Domestic content requirement Whether violating contemporary
standards of international law embodied in Article 1105(1) Whether idiosyncratic, aberrant or arbitrary
nafta Most-favoured-nation treatment Onus of proof mfn treatment not
applicable to governmental procurement nafta, Articles 1103, 1108(7)(a)
Costs Costs against defeated Claimant Nature and complexity of proceedings Costs shared equally between parties
450
ADF Group Inc. v. United States of America1

Procedural Order No. 2 Concerning the Place of Arbitration. 11 July 2001
Procedural Order No. 3 Concerning Production of Documents. 4 October 2001
Award. 9 January 2003
(Arbitration Tribunal: Feliciano, President; de Mestral and Lamm, Members)
Summary: The facts: scc, a US corporation, was the successful bidder
in respect of a federally funded road project in Northern Virginia. Following a
further bidding round it subcontracted with adf to supply and deliver structural
steel components for nine bridges involved in the project. Federal regulations
incorporated by reference in the contract and sub-contract required (with certain
exceptions) the use of materials produced in the United States. The Claimant
proposed to purchase United States steel and to fabricate and finish girders and
other components in Canada. United States authorities ruled that such operations
violated the federal conditions and refused to grant a waiver. The Claimant, at
increased expense, thereupon performed the operations in the United States on
time, but sought to recover additional amounts on the grounds that the local
manufacture condition violated Articles 1102(1) and (2), 1103, 1105(1) and
1106(1)(c) of nafta. It also claimed that it had subsequently suffered further
losses from the local manufacture condition in relation to other projects.
Procedural Order No. 2 Concerning the Place of Arbitration: 11 July 2001
The parties disputed the venue of the arbitration; the Claimant argued that the
venue should be Montreal, Canada, on the ground that Canadian law for the review
of Additional Facility arbitration was now clearer and more predictable following
the decision of the British Columbia Supreme Court in the Metalclad case; the
United States argued that there was no relevant difference in the arbitration laws
of the two States, and that Washington DC was both a more convenient venue and
closer to the subject matter of the dispute.
Held: (1) There was no reason to think that the law of the United States was
either more uncertain or more favourable to international arbitration than the law
of Canada (paras. 316).
1
The Claimant was represented by Mr Peter E. Kirby, Mr Rene Cadieux, Ms Stacey Pinchuk, Ms Diane
Bertrand and Mr Pierre Labelle of Fasken Martineau DuMoulin LLP. The Respondent was represented
by Mr James H. Thessin, Mr Ronald J. Bettauer, Mr Mark A. Clodfelter, Mr Barton Legum, Ms Andrea
J. Menaker, Ms Laura A. Svat, Mr David Pawlak and Ms Jennifer Toole of the Office of the Legal
Adviser of the United States Department of State.
SUMMARY
451
(2) The balance of convenience of the parties and the Tribunal marginally
favoured Washington as a venue, which was also physically proximate to the subject
of the dispute (paras. 1820).
(3) icsids headquarters in Washington were widely perceived as a neutral forum
(para. 21).
(4) The venue of the arbitration would accordingly be Washington (para. 22).
Procedural Order No. 3 Concerning Production of Documents: 4 October 2001
The Claimant sought production of a range of documents relating to the main
contract and the sub-contract concerning the work in question (Category A documents), as well as internal documents concerning the Buy America policy, its
implementation in the context of highway projects over the past ten years, and
the potential implications of nafta for that policy. The United States objected
to production on a range of grounds, including that some of the documents were
publicly available, and made a general reservation as to documents covered by
attorney-client and government deliberative and pre-decisional privileges.
Held: (1) Documents in Category A were sufficiently precisely defined, were
relevant to the claim and (unless those documents had emanated from adf itself)
should be disclosed (paras. 78).
(2) Disclosure would not be ordered of documents available to the public on
reasonable inquiry (e.g. reports mandated by statute); the United States offer to
cooperate in identifying and providing such documents should be accepted by the
Claimant (paras. 4, 9, 14, 17).
(3) Other categories of documents were either described in such broad terms as
to make their identification problematic, or related to different versions of the Buy
America policy operating in sectors which lacked relevance to the present case
(paras. 10, 11).
(4) The United States claim of privilege could not be determined in the abstract;
it was for the United States to make objection in relation to specific documents
or identified classes of documents otherwise disclosable in accordance with the
Tribunals determination (para. 18).
Award: 9 January 2003
Held: (1) The Tribunal had jurisdiction over the whole of the claim referred
to in the Notice of Intention, even if the Claimant had failed to refer to Article 1103
in the Notice; subsequent reliance on Article 1103 in the course of argument did
not change the character of the claim or cause any prejudice to the Respondent
(paras. 12739).
(2) The Tribunal lacked jurisdiction over the claim relating to subsequent projects,
which did not arise directly out of the Northern Virginia project and which were in
any event entirely unsubstantiated; these were thus not incidental or additional
claims within Article 48(1) of the Additional Facility Rules (paras. 1406).
452
(3) Under Article 1102, there was no evidence of discrimination: the local manufacture condition applied equally to Canadian and United States entities, and the
Claimant had failed to show that similarly situated United States manufacturers
were or would have been treated any differently in fact (paras. 1508).
(4) Under Article 1106, the local manufacture condition was a requirement of
domestic content within nafta Article 1106(1)(b); but it was excluded from the
effect of Article 1106 as procurement by a Party under Article 1108. The United
States did not procure the goods merely by virtue of the federal funding programme,
but the State of Virginia did procure them, and in accordance with nafta and general
international law, procurement by the State of Virginia constituted procurement
by a Party (paras. 15966).
(5) The fact that the United States could not have applied the local manufacture
requirement, under Articles 1003 and 1006 of nafta, if it had itself procured the
goods, did not establish a breach of Article 1106 by Virginia, which was expressly
exempted from Chapter 10 disciplines by nafta Annex 1001.1a-3. There was no
indication that through the long-established federal road-funding programme the
United States was seeking to achieve indirectly that which it could not achieve
directly (paras. 16774).
(6) As to Article 1105(1), the Free Trade Commissions Interpretation of 31 July
2001 (see p. 567 below) was binding, and a Chapter 11 Tribunal lacked jurisdiction
to determine that it was not in truth an interpretation of nafta. On the other hand,
the Interpretation did not freeze the development of international law; rather it was
for the Claimant to show that the treatment complained of violated a specific rule
of customary international law relating to foreign investors and their investments
(paras. 17586).
(7) The Claimant had failed to show that the local manufacture condition violated
contemporary standards of international law embodied in Article 1105(1). Domestic
content and performance requirements were found in the internal law of many States
and were not to be seen as idiosyncratic, aberrant or arbitrary, nor was there any
abuse of process or lack of good faith in the Respondents treatment of the waiver
application in the present case (paras. 18792).
(8) As to Article 1103, even if similarly situated suppliers under the United States
bits with Albania and Estonia would have been treated more favourably than the
Claimant (which had not been shown), Article 1108(7)(a) of nafta excluded the application of most-favoured-nation treatment in cases of governmental procurement
by a party (paras. 1938).
(9) In view of the nature and complexity of the proceedings, there would be no
order against the Claimant as to costs (para. 200).
Procedural Order No. 2 Concerning the Place of Arbitration

(11 July 2001)
p. 453
PROCEDURAL ORDER NO. 2
Procedural Order No. 3 Concerning the Production of Documents

(4 October 2001)
Award (9 January 2003)
453
p. 461
p. 470
PROCEDURAL ORDER NO. 2 CONCERNING

THE PLACE OF ARBITRATION
1. At our first session held by video-conference with the parties and their respective counsel, it was noted that the parties had not been able to agree on the
location of the place of arbitration of the instant case, having agreed only that
the place of arbitration, for reasons of cost and convenience, should be located
either in Canada or in the United States. Nevertheless, the parties agreed that the
question of the proper place of arbitration should be determined by the Tribunal,
after the parties have each had an opportunity to submit a written memorial to the
Tribunal.
2. The Claimant submitted its written Memorial together with its Annexes on
the place of arbitration question (Claimants Memorial) to the Secretary of the
Tribunal on 26 February 2001, having sent copies thereof directly to counsel for
the Respondent. The Respondent filed its written Submission on the same question (Respondents Submission) with the Secretary of the Tribunal on 19 March
2001. On 2 April 2001, the Claimant filed a written Reply to the Submission of
the Respondent (Investors Reply). In turn, the Respondent submitted its Final
Observations on the place of arbitration to the Tribunals Secretary on 16 April
2001 (Respondents Final Observations).
3. The Claimant requests us to designate Montreal, in the Province of Quebec, Canada, as the place of arbitration in the instant case (Claimants Memorial,
para. 16). The Respondent submits that we should instead select Washington DC
as the place of arbitration (Respondents Submission, p. 1).
4. Article 1130 of the North American Free Trade Agreement (nafta) provides
that
[u]nless the disputing parties agree otherwise, a Tribunal shall hold an arbitration in the
territory of a Party that is a party to the New York Convention, selected in accordance
with:
(a) the icsid Additional Facility Rules if the arbitration is under those Rules or the
icsid Convention; or
(b) the uncitral Arbitration Rules if the arbitration is under those Rules. (Emphasis
supplied.)
Both the United States of America and Canada are parties to the UN Convention
on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New
York on 10 June 1958 (New York Convention). Indeed, so is the United Mexican
States.
5. Article 21 of the icsid Arbitration (Additional Facility) Rules reads in full as
follows:
454
Determination of Place of Arbitration

(1) Subject to Article 20 of these Rules the place of arbitration shall be determined
by the Arbitral Tribunal after consultation with the parties and the Secretariat.
(2) The Arbitral Tribunal may meet at any place it deems appropriate for the inspection of goods, other property or documents. It may also visit any place connected with
the dispute or conduct inquiries there. The parties shall be given sufficient notice to
enable them to be present at such inspection or visit.
(3) The award shall be made at the place of arbitration.
6. Article 20 of the icsid Arbitration (Additional Facility) Rules, entitled Limitation on Choice of Forum, requires no more than that arbitration proceedings be
held only in States that are parties to the [New York Convention]. Clearly, Article
20 does not bring us very far in approaching the issue of an appropriate place of
arbitration.
7. The uncitral Rules, the other set of arbitration rules referred to in Article
1130 of the nafta, provide only the most general guidance on this matter:
Place of Arbitration
Article 16
(1) Unless the parties have agreed upon the place where the arbitration is to be
held, such place shall be determined by the arbitral tribunal, having regard to the
circumstances of the arbitration.
. . . (Emphasis added.)
Fortunately, the uncitral Notes on Organizing Arbitral Proceedings (uncitral

Notes) are substantially more helpful, even though they do not bind either the
disputing parties or the Arbitral Tribunal:
3. Place of Arbitration
(a) Determination of the place of arbitration, if not already agreed upon by the parties
...
22. Various factual and legal factors influence the choice of the place of arbitration,
and their relative importance varies from case to case. Among the more prominent
factors are: (a) suitability of the law on arbitral procedure of the place of arbitration;
(b) whether there is a multilateral or bilateral treaty on enforcement of arbitral awards
between the State where the arbitration takes place and the State or States where the
award may have to be enforced; (c) convenience of the parties and the arbitrators,
including the travel distances; (d) availability and cost of support services needed; and
(e) location of the subject-matter in dispute and proximity of evidence.
...
Both the Claimant and the Respondent agree that we may and should take into
consideration the kinds of factors identified as pertinent in Paragraph 22 of the
uncitral Notes. We will do so seriatim.
8. The first factor that bears consideration is the suitability of the law on arbitral
procedure of (a proposed) place of arbitration. The Claimant begins its case for
Montreal as an appropriate place of arbitration with the general proposition that
455
a suitable domestic legal system is one which is supportive of arbitration and

that a jurisdiction which creates uncertainty in arbitration by permitting a myriad
of legal challenges to an award is not supportive. In the view of the Claimant,
a supportive jurisdiction provides a legal environment that sets out clear, predictable and limited procedures for challenging an award along with an effective
mechanism for recognition and enforcement of an award. (Claimants Memorial,
paras. 49-50.)
9. For its part, the United States stresses its broad commitment to facilitating
international arbitration (Respondents Submission, p. 7) and the recognition by
the United States Supreme Court of an emphatic federal policy in favor of arbitral
dispute resolution (Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc. 473
US 614, 631 (1985); US Appendix, Exh. 5). That Court held that
concerns of international comity, respect for the capacities of foreign and transnational
tribunals and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties agreement,
even assuming that a contrary result would be forthcoming in a domestic context. (473
US at 629; emphasis added.)
10. It appears to us that the suitability in international arbitration of the law

on arbitral procedure of a suggested place of arbitration has multiple dimensions.
These dimensions include the extent to which that law, e.g., protects the integrity
of and gives effect to the parties arbitration agreement; accords broad discretion
to the parties and to the arbitrators they choose to determine and control the conduct of arbitration proceedings; provides for the availability of interim measures
of protection and of means of compelling the production of documents and other
evidence and the attendance of reluctant witnesses; consistently recognizes and
enforces, in accordance with the terms of widely accepted international conventions, international arbitral awards when rendered; insists on principled restraint in
establishing grounds for reviewing and setting aside international arbitral awards;
and so on. The Claimant has tended to focus and distinguish between two aspects
of the lex arbitri: (a) recognition and enforcement of arbitral awards; and (b) review
by the courts of the locus arbitri of such awards in actions to modify or set aside
and vacate those awards. The Respondent has, for its part, sought to confront the
distinction on which Claimant focuses.
11. In respect of the recognition and enforcement of international awards, including awards issued under the nafta and icsid (Additional Facility) Rules, the parties
agree that the laws of the United States and the laws of Canada and the Province
of Quebec render applicable the pertinent provisions of the New York Convention.
Both Canada and the United States, in their respective reservations to the New York
Convention, had determined that they would apply the Convention only to arbitral
proceedings arising out of disputes which are considered as commercial under
their respective national laws. Article 1136(7) of the nafta, however, provides that
[a] claim that is submitted to arbitration under this Section [B] shall be considered
to arise out of a commercial relationship or transaction for purposes of Article 1
of the New York Convention and Article 1 of the Inter-American Convention.
456
Accordingly, the parties are agreed that the laws of both the United States and of
Canada (and of Quebec Province) concerning international arbitrations are equally
suitable so far as concerns the recognition and enforcement of the ensuing awards.
12. In respect of review by a national court in the place of arbitration of an
international arbitral award, it is suggested by the Claimant that the deeming provision of Article 1136(7) of the nafta might not reach actions to review and set
aside Chapter Eleven awards in situations where domestic review remedies were
limited to awards in commercial arbitration. (Investors Reply, para. 17.) The
Claimant points out that Canada amended its Federal Commercial Arbitration Act
to deem Chapter Eleven awards to be commercial for the purposes of actions
to review (such) award(s), while the United States made no similar amendment to
its own Federal Arbitration Act. The Claimant states further that (all) three nafta
Parties (have claimed at differing times and in different fora) that nafta Article
1136(7) deems Chapter Eleven arbitrations to be commercial strictly for the purposes of recognition and enforcement of awards and not for any other purpose and
specifically not for the purposes of review of awards. (Investors Reply, para. 18;
emphasis added.) The Claimant goes on to elaborate that actions in a US federal
court to review and set aside arbitral awards are governed by Chapter 1 (General
Provisions) of the Federal Arbitration Act, usc Title 9, Arbitration, the grounds
for vacating such awards being set out in Chapter 1, Sec. 10, usc Title 9, while
actions for recognition and enforcement are governed by Chapter 2 (referring to
the New York Convention) and Chapter 3 (referring to the Inter-American Convention) of usc Title 9. Neither Chapter 2 of 9 usc nor the New York Convention,
the Claimant contends, provides for actions to review and set aside arbitral awards
(Investors Reply, para. 30). Although Sec. 208, Chapter 1 of 9 usc does provide
for application of Chapter 1 to actions brought under Chapter 2 to the extent that
Chapter [1] is not in conflict with this Chapter [2] or the [New York] Convention,
Claimant argues that whether an action initiated in the United States to set aside
a Chapter Eleven award can be considered an application or proceeding brought
under [Chapter 2] is a serious question. (Investors Reply, id.) Accordingly, the
Claimant characterizes United States law on this matter as unclear and affected
with uncertainty, a condition tending to undermine the authority of the Tribunal
and its eventual award by possible post award litigation which will severely test
judicial deference to international arbitration awards (Investors Reply, paras. 13,
36 and 44) and which renders United States arbitration law as unsuitable.
13. Upon the other hand, the Claimant submits that Quebec law clearly provides
for, and identifies the grounds of, judicial review of Chapter Eleven awards. (Id.,
para. 46.) Quebecs arbitration law is said to be based on the uncitral Model Law
and does not distinguish between commercial and non-commercial arbitration
(id., para. 47) and hence is unclouded by the uncertainty resulting from the debate
whether Chapter Eleven arbitrations are international commercial arbitrations.
(Id., para. 9(a).)
14. The United States, for its part, rejects the Claimants contentions summed
up above. The United States stresses, firstly, that it is impossible at this stage
of Chapter Elevens evolution for any party to have absolute certainty as to the
legal regime governing review of a Chapter Eleven award (Respondents Final
457
Observations, p. 3), whether such review takes place in Canada or in the United
States. At the time of its Final Observations, no decision in a proceeding to review
a Chapter Eleven award had, according to the United States, been rendered, even
in a first instance court, in any of the nafta Parties. (Id., p. 3.) The United States
goes on to note that the Attorney-General of Canada has gone on record in United
Mexican States v. Metalclad Corporation, recently before the British Columbia
Supreme Court, as contending that in interpreting nafta, Chapter Eleven tribunals should not attract extensive judicial deference and should not be protected by
a higher standard of judicial review. (Outline of Argument of Intervenor AttorneyGeneral of Canada in United Mexican States v. Metalclad Corporation, para. 30;
Tab 17 of Claimants memorial, p. 12.) The Claimant has not, in the view of the
United States, adduced any basis for believing that an action in Quebec to review a Chapter Eleven award would not be subject to similar questions as to the
applicable standard of judicial review. (Respondents Final Observations, p. 14.)
We note, incidentally, that the case of United Mexican States v. Metalclad Corporation was decided in first instance by the Supreme Court of British Columbia on
2 May 2001, which held, among other things, that the applicable standard of review
was that of the British Columbia International Commercial Arbitration Act, which
closely follows the uncitral Model Law. In considering the standard of review to
be applied in reviewing the Metalclad Corp. v. United Mexican States Award, the
Supreme Court of British Columbia referred to the leading British Columbia authority on enforcement under the International Commercial Arbitration Act, Section 34,
Quintette Coal, Ltd. v. Nippon Steel Corporation [1991] 1 WWR 219 (BCCA). The
British Columbia Court noted that case has been followed by several other courts
in Canada. (United Mexican States v. Metalclad Corporation and the Attorney
General of Canada, 2 May 2001; Case No. 2001 BCSC 664, at page 19.) In the
Quintette Coal, Ltd. case, the majority of the Court commented on the standard of
review stating:
It is important to parties to future such arbitrations and to the integrity of the process
itself that the court express its views on the degree of deference to be accorded the
decision of the arbitrators. The reasons advanced in the cases discussed above for
restraint in the exercise of judicial review are highly persuasive. The concerns of
international comity, respect for the capacities of foreign and transnational tribunals,
and sensitivity to the need of the international commercial system for predictability in
the resolution of disputes spoken of by Blackmun J [in Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth Inc., 473 US 614 (1985)] are as compelling in this jurisdiction
as they are in the United States or elsewhere. It is meet therefore, as a matter of policy,
to adopt a standard which seeks to preserve the autonomy of the forum selected by the
parties and to minimize judicial intervention when reviewing international commercial
arbitral awards in British Columbia. (p. 229).
15. The United States also, perhaps more importantly, directly controverts the
correctness of the Claimants description of the condition of United States law in
this respect and states outright that suitable procedures for review of a Chapter
Eleven award are available in the United States under both federal and DC law,
regardless of whether the award is deemed commercial for purposes of review. The
458
clear statement is made, albeit in a footnote, that under Sec. 208 of the US Federal
Arbitration Act (9 usc 208), Chapter 1 of the faa, and specifically Section 10
governing vacatur of awards, would apply to Chapter Eleven awards made in the
United States. (Respondents Final Observations, p. 4 and footnote 2; emphasis added.) We would also observe that in the United States, with respect to the
enforcement of an arbitral award against a foreign state (e.g., if Mexico or Canada
were involved) under the Foreign Sovereign Immunities Act 28 usc 1605(a)(6), the
foreign state would not have immunity from suit in the courts of the United States.
The fsia favors enforcement of awards. The standard applicable to the enforcement
of a nafta arbitral award against the United States is similar as the United States
has waived its sovereign immunity with respect to the enforcement of nafta Arbitral Awards under the Tucker Act 18 usc 1491(a) in conjunction with nafta 19
usc 3311(a).
16. After extensive consideration of the submissions of both parties, we are
unpersuaded that we must characterize the US Federal Arbitration Act as an unsuitable lex arbitri or as a less suitable lex arbitri than the Canadian or Quebec
law on international arbitration. In the absence of United States case law directly
addressing the specific issue raised here by the Claimant, we do not consider that
the Claimant has adequately documented its description of the relevant United
States law as infected, as it were, by a lack of clarity which undermines the
authority of the Tribunal and its eventual award and promises to multiply post
award litigation. (Claimants Response, para. 13.) We would also note that the
distinction heavily stressed by the Claimant between an action to review and set
aside a Chapter Eleven award and an action for recognition and enforcement of
such an award may not, in certain situations, be as important as might be supposed.
The grounds for vacating an arbitral award under 9 usc Chapter 1, Section 10
and those for setting aside an award under Article 34 of the uncitral Model Law
on the one hand, and the grounds specified in the New York Convention for resisting an action for recognition and enforcement of an award on the other hand,
exhibit overlapping in significant degree. An action for recognition and enforcement may frequently be expected to be resisted by pleading the existence of grounds
for vacating the award. We do not believe that the Claimant has provided us with
sufficient basis for refusing to join the tribunals in the Methanex and Ethyl cases
in holding that Canadian law and United States law relating to international arbitration are equally suitable for purposes of determining an appropriate place
of arbitration. (Ethyl Corporation v. Government of Canada, Decision Regarding
the Place of Arbitration of 28 November 1997, 38 International Legal Materials
700 (1999, May No. 3); Tab 23 of Claimants Memorial; and Methanex Corporation v. United States of America, Written Reasons for the Tribunals Decision of
7 September 2000 on the Place of Arbitration, 21 December 2000, US Appendix,
Exh. 1.)
17. We turn now to the second factor listed in Paragraph 22 of the uncitral
Notes: the existence of a multilateral or bilateral treaty on enforcement of arbitral
awards between the State where the arbitration takes place and the State or States
where the award may have to be enforced. Since both the United States and Canada
are parties to the New York Convention, this factor is moot in the present case.
459
18. The third uncitral Notes factor is the convenience of the parties and the
arbitrators. The convenience, or relative inconvenience, of the arbitrators offers
no real guidance in this case. Two of the three arbitrators reside or hold office
outside the United States. Similarly, two of the three arbitrators reside or hold
office outside Canada. Thus, whether the place of arbitration be in Canada or in
the United States, two of the arbitrators would have to travel to one or the other
State. It is no more inconvenient for Mr Feliciano to travel to Washington DC
than to Montreal. Similarly, it seems no more inconvenient for Ms Lamm to travel
to Montreal than it is for Professor de Mestral to come to Washington DC. In
respect of the parties, however, the relative inconvenience of travelling to Montreal
or to Washington DC may not be as finely balanced. At this stage, we are not
informed as to how many officials, counsel, representatives and witnesses of one
or the other party would have to travel to Montreal or Washington DC, as the
case may be. The United States submits that the convenience of the parties favors
Washington DC over Montreal because the United States, qua party, is comprised
of numerous agencies of which as least seven are concerned with or involved in the
instant dispute. (Respondents Final Observations, pp. 8-9.) Presumably, all seven
agencies are based in Washington DC. So far as Claimant is concerned, it may well
be that some of its officials or representatives involved in this dispute are based in
Virginia, though others would presumably be located in Quebec or elsewhere in
Canada. We should, at the same time, note that the Tribunal may, when necessary
or appropriate, meet in Montreal or any other place to hear particular witnesses
and facilitate the presentation of evidence, upon request of either party and with
prior notice to and agreement of both parties. On balance, in the circumstances of
this case, we believe that the submission of the United States on this point is not
unreasonable, even though the relative inconvenience of a State, as a party, is not
necessarily compelling.
19. The next uncitral factor relates to the availability and cost of support
services needed. In principle, there may well be no significant difference between
Montreal and Washington DC in respect of the availability of arbitration support
services in one or the other city. It appears to us, however, that because the icsid is
administering this case and providing the services of the Secretary of the Tribunal,
the over-all costs of the arbitration support involved are likely to be substantially
less in Washington DC than in Montreal. The opinion of the icsid, solicited by us
and conveyed to us by our Secretary, is to that effect.
20. The uncitral Notes refer, lastly, to the location of the subject-matter of the
dispute and proximity of evidence. The question of proximity of testimonial and
documentary evidence has been substantially dealt with above under the rubric of
the convenience of the parties. The subject matter of the dispute, when examined
in terms of ordinary meaning, refers to the issue presented for consideration;
the thing in which [or in respect of which] a right or duty has been asserted; the
thing in dispute. (Blacks Law Dictionary, 7th ed., 1999, p. 1439; brackets added.)
Article 1119(c) of the nafta requires the written notice of intent of an investor
to submit a claim to arbitration to specify, inter alia, the issues and the factual
basis for the claim. Similarly, Article 3(d) of the icsid Arbitration (Additional
Facility) Rules provides that the notice of intent to institute arbitration proceedings
460
shall include information concerning the issues in dispute. From the notice of
intent to submit a claim to arbitration field by the Claimant under Article 1119
of the nafta and the notice of intent to institute arbitration proceedings submitted
by the Claimant under Article 3 of the icsid Arbitration (Additional Facility) Rules,
the subject-matter of the present dispute may be seen to refer to, essentially,
the claims made by the Claimant about the consistency or lack of consistency of
certain measures (or applications thereof) taken by the Respondent United States
with certain provisions of Chapter Eleven of the nafta. To the extent that such
claims can be regarded as having a location or situs anywhere, we consider that
those claims may, for purposes of determining an appropriate place of arbitration,
be deemed to be located in the place where the United States authorities, to whom
they are addressed, are based. We do not imply that that is the only place in which
those claims can be deemed to be located for present or related purposes. But the
location of the official addressees of the claims appears to us as a sufficiently real
and substantial basis. The physical facilities or construction project in respect of
which the claims are made are also in relative geographic proximity to Washington
DC. That the place of fabrication of certain parts or materials to be installed in the
project may be in Canada, seems to relate only peripherally, at most, to the matter
of location of the claims asserted in this case. We should add that we have yet to
receive the parties main pleadings in this case. We do not believe, however, that
the content of those pleadings will affect our consideration above of the factor of
location of the subject-matter of the dispute.
21. We come finally to the element of neutrality of the place of arbitration. It is
our belief that Washington DC is properly regarded as a neutral place of arbitration, notwithstanding that it is the capital of the Respondent Party. Our perspective
on this last point is rooted in the belief that the icsid is, and is widely perceived to
be, a neutral forum and institution. The policy imperatives which drive parties
proceeding to international arbitration to seek a neutral forum are, in our opinion,
satisfied by choosing the city in which the icsid is located which also happens to
be the capital of the United States.
22. For all the foregoing considerations, the Tribunal determines to designate
Washington DC as the place of arbitration in the instant case. The Tribunal may
also meet in Montreal or any other place, when necessary or appropriate, to hear
particular witnesses and facilitate the presentation of evidence, upon request of
either party and with notice to and the agreement of both parties.
[Source: http://www.worldbank.org/icsid/cases/adf.pdf.]
461
PROCEDURAL ORDER NO. 3 CONCERNING THE PRODUCTION OF

DOCUMENTS (4 OCTOBER 2001)
1. We have before us the following submissions:
(a) Claimants Motion for Production of Documents, dated 3 August 2001
(the Motion);
(b) Respondents Objections to Claimants Request for Documents of Respondent United States of America, dated 17 August 2001 (the Objections);
(c) Claimants Response to Objections Raised by the Respondent United
States of America to Production of Documents, dated 24 August 2001
(the Response); and
(d) Respondents Final Observations on Claimants Request for Production
of Documents, dated 4 September 2001 (the Final Observations).
2. In its Motion, adf Group Inc. (adf/Investor/Claimant) asks us to require
the United States of America (Party/Respondent) to produce and communicate
certain documents grouped under the following nine categories:
(A) The administrative file held by the United States and those held by Virginia relating
to the supply of steel to the Springfield Interchange Project by adf Group Inc.
and adf International Inc. (Investment), including, but without limiting the
generality of the foregoing:
1) All records relating to the Main Contract, and the Shirley/adf SubContract,as those terms are defined in the Notice of Arbitration filed by the
Investor (Notice);
2) All records prepared by or on behalf of the United States or by or on behalf
of Virginia relating to the scope and meaning of the Buy America provisions
found at Section 165 of the staa (1982), Pub. L. 97-424, 23 CFR 635.410 and
to the scope and meaning of Special Provision 102.5 of the Main Contract;
3) All records (including correspondence between the United States and the State
of Virginia) relating in whole or in part to the supply of steel to the Springfield
Interchange Project;
4) All correspondence between the United States and Virginia relating in whole
or in part to the Special Provision 102.5 of the Main Contract.
(B) The administrative files held by the US Department of Transport[ation] or the
Federal Highway Administration relating to the consideration, development, drafting, approval and adoption of the Final Rule of the Federal Highway Administration concerning Buy America Requirements (23 CFR Part 635) which was
published in Volume 48, No. 228 of the Federal Register dated November 25,
1983.
(C) All records prepared by or on behalf of the Office of the United States Trade
Representative, the Department of State or the Department of Transport[ation],
or any agencies thereof relating in whole or in part to the impact of the North
American Free Trade Agreement (nafta) on buy national requirements such
as Buy America and Buy American requirements, including, but without limiting
the generality of the foregoing:
1) All records relating to the Buy America and Buy American requirements,
policies and laws, as those requirements and policies and laws relate to or are
affected by nafta;
462
(D)
(E)
(F)
(G)
(H)
(I)

3) [sic] All records relating to the impact of the implementation of nafta on
Tea-21, Pub. L. 105178, Section 165 of the staa (1982), Pub. L. 97-424 and
23 CFR 635.410.
The administrative file in the following cases, including all the administration
records in all appeals taken from these cases and all pleadings submitted by the
parties:
1) S. J. Amoroso Construction Co., Inc. v. The United States, 26 Cl. Ct. 759
(1992), aff. 12 F. 3d 1072 (United States Court of Appeals);
2) Wright Contracting, Inc., asbca Nos. 39120, 39121, 91-1 BCA P23, 649
(1990); and
3) Decision of the Comptroller General, B-167635 (1969) US Comp. Gen., Lexis
2267.
AIl records relating to every instance within the last ten years wherein federal
funding for a highway project (including bridges and tunnels) has been withheld
from or denied to a Department of Transport of any State of the United States
(State) or any agency thereof as a result of the application of any Buy America
provisions.
All documents used to report to or inform members of Congress, the President
of the United States on the application of Buy America provisions to federally
funded highway contracts and the impact of nafta on those provisions.
A complete list of highway contracts and/or highway projects, listed by State,
which have been approved for funding under Tea- 21, Pub. L. 105-178 or which
are currently under consideration to receive funding under Tea-21, Pub. L. 105178, along with a list of the amount of funding for each such contract or project.
A list of all national and regional waivers of the provisions of Buy America
requirements which have been granted within the last ten years under 23 CFR
635.410(c), along with the record which provides the administrative rational for
granting such a waiver and the reports to Congress made during the last ten years
in compliance with Section 165(e) of the Surface Transportation Assistance Act
of 1982.
All pleadings filed by the United States in nafta Chapter 11 proceedings to date.
(Motion, pp. 910).
We set out some general considerations we think important concerning document

production, before examining below each of the categories of documents requested.
General Considerations
3. Article 41(2) of the icsid Arbitration (Additional Facility) Rules (icsid
Rules) states that [t]he Tribunal may, if it deems it necessary at any stage of the
proceeding, call upon the parties to produce documents, witnesses and experts.
(emphasis added) There are at least two main aspects of necessity when considered
in the context of a request for document production. The first aspect relates to a
substantive inquiry into whether the documents requested are relevant to, and in
that sense necessary for, the purposes of the proceedings where the documents are
expected to be used. Inquiry into the relevancy of the documents requested needs
to be done on a category by category basis.
463
4. The second aspect concerns a procedural inquiry into the effective and equal
availability of the documents requested to both the requesting party and the party
requested. Where only one party has access to requested documents relevant to the
proceeding at hand, we consider that the party with access should be required to
make the documents available to the other party. Where, however, the documents
requested are in the public domain and equally and effectively available to both
parties, we believe that there would be no necessity for requiring the other party
physically to produce and deliver the documents to the former for inspection and
copying. Where, however, the requesting party shows it would sustain undue burden or expense in accessing the publicly available material, the other party should
be required to produce the documents for inspection. In the present case, where the
Respondent identifies the particular government office at which the documents are
in fact available to the Claimant or its representatives, as members of the general
public, the Respondent will, in principle, have produced the documents requested
within the meaning of Article 41(2) of the icsid Rules. The Respondent should
also provide the document reference numbers, and any other data, necessary to enable the official custodians of the documents to identify and locate them physically
or in electronic data bases, with reasonable dispatch. There may be other administrative details that may need to be attended to by the Respondent (e.g., phone
calls to the document custodians) to ensure the Claimants effective and prompt
access to the documents. The Respondent would be reasonably expected to provide
such necessary and appropriate assistance, without having to deliver the documents
physically to the Claimant. The appropriate assumption in every case is that, both
parties having proceeded to international arbitration in good faith, neither would
withhold documents for its own benefit and that good faith will render any practical
problems of document production susceptible of prompt resolution without undue
hardship or expense on either party.
5. The Claimant cites a paragraph from Procedural Order No. 8 in Pope and
Talbot v. Government of Canada also a nafta Chapter Eleven case, where the
Tribunal said:
Documents which the Claimant has refused to produce on the grounds that they are
publicly available and readily accessible to Canada. In the Tribunals view, the fact those
documents are available to Canada from other sources, assuming that to be correct,
is not an adequate basis for refusal to produce to Canada those in the possession of
the Claimant. Accordingly, the Claimant is required to produce documents under the
heads listed in this paragraph. (Response, para. 42)
The Pope and Talbot Procedural Order does not provide enough detail to be helpful
in the present case and may well have been the result of the specific circumstances
of that case. On the other hand, the view we have adopted above is in line with the
procedure and practice in the District of Columbia, as well as with the case law under
the United States Federal Rules of Civil Procedure (frcp), both of which form part
of the lex arbitri in the present case. Under Rule 34(b) of the frcp, the requirement to
produce a document is a requirement to make the requested document available for
inspection and copying at a reasonable time and place. Federal courts in the United
464
States have held that a court may refuse to order production of documents of public
record that are equally accessible to all parties (See 7 Moores Federal Practice
(Third Edition) at 3446; and e.g., Dushkin Publishing Group, Inc. v. Kinkos
Service Corporation, 134 FRD 334, 335 (DDC); SEC v. Samuel H. Sloan & Co.,
369 Fed. Supp. 994, 995-6 (SDNY 1973); Hoffman v. Charnita, 17 Federal Rules
Service 2D 1215, 1217 (W.D. Penn. 1973). It has also been held that production
from the adverse party may be ordered if the requesting party could demonstrate
that it would be excessively burdensome for financial and other reasons for the
requesting party to obtain documents from a public source rather than from the
opposing party who has them in their files (e.g., Snowden v. Connaught Laboratory,
Inc., 137 FRD 325, 333 (D. Kan., 1991).
6. The Respondent brings to our attention the timing of the Motion, which was filed
on 3 August 2001, one day after the Claimant submitted its Memorial on 2 August
2001. The Respondent states that adfs Memorial did not purport to rely on any of
the documentation that is the subject of [the] Motion and [that the documentation
was not] necessary to the proof of its case. (Objections, pp. 2-3) While the Motion
could have been filed earlier, it appears to us that the documents sought could still be
used in preparing a Reply. If the Respondent has been substantially inconvenienced
by the timing of the Motion, a request for additional time to prepare its CounterMemorial may be submitted for the consideration of the Tribunal. We do not believe
in this instance that the timing of the Motion affords adequate basis for dismissing
the Motion.
Category A Documents
7. In its Objections, the Respondent states that, subject to its objection that the
request for Category A documents is too broadly drawn and to the Respondents
general claim of privileges,
the United States is willing to make available to adf the administrative files held by the
United States Federal Highway Administration and the Department of Transportation
of the Commonwealth of Virginia relating to the supply of steel to the Springfield
Interchange Project by adf Group and adf International Inc. to the extent that adf
Group Inc. or adf International Inc. did not originate documents contained in those
files and such documents are not already in the possession of adf Group Inc. or adf
International Inc. (Objections, p. 8)
We believe that while the request could perhaps have been more tightly drawn, it
does refer with sufficient specificity to the subject of the desired files: relating
to the supply of steel to the Springfield Interchange Project by the adf Group,
Inc. and adf International Inc. The four sub-categories under Category A add
further clarity by specifying records relating to the Main Contract and the
Shirley/adf Sub-Contract and to Special Provision 102.5 of the Main Contract. The relevance of these documents to the subject-matter of the present
case is, in effect, conceded by the Respondent. Accordingly, we believe that the
465
Claimant should accept the offer of the Respondent which we read as embracing all Category A documents and the Respondent should produce those documents by making them available in the manner indicated above under General
Considerations.
8. We note that the Respondent qualifies its willingness to make Category A
documents accessible by excluding documents originated by, and therefore presumably already in the possession of, adf Group Inc. or adf International Inc. This
exclusion is reasonable enough in principle, but it should not apply to documents
which, though originated by the Claimant, have upon them information or notations
placed there by staff of the governmental agencies through whose desks the documents passed. At the same time, we agree with the Claimant that the Respondent
need not make available documents which appear under the adf letterhead and are
signed by a responsible official of adf (Response, para. 31). For this purpose, a
person purporting to sign as an officer or staff of adf shall be presumed to be a
responsible officer or staff of adf.
Category B Documents
9. Category B documents might possibly provide some background information
on the Final Rule (23 CFR part 635). But they have not been shown by the
Claimant to bear upon the subject-matter of, that is, the issues raised or likely to
be raised in, the present case. We note, however, that the Respondent has stated
that these documents are publicly available and that the United States is willing
to make such documents available to adf under the same conditions as they are
available to the general public. (Objections, p. 10) Accordingly, the Claimant
should accept the offer of the Respondent and the Respondent should make the
Category B documents available to the Claimant in the manner indicated above
under General Considerations.
Category C Documents
10. We consider that Category C documents are described in overly broad terms
which makes identification of the requested documents very problematical. In addition, the Claimant has not shown how those documents relate to the issues raised,
or expected to be raised, in the present case. There appear to be differing buy
national requirements in different statutes or regulations pertaining to various sectors of business activity, each of which might have been affected in some measure
by the provisions of nafta invoked by the Claimant. At the same time, we do not
necessarily agree with the Respondent that the only relevant documents are those
on which the United States intends to rely in preparing its Counter-Memorial. The
request for Category C documents simply lacks the necessary particularity and
indication of potential relevancy to the present case for us to determine it is sufficiently necessary to order production.
466
Category D Documents
11. The Respondent objects to the request for Category D documents upon the
ground, inter alia, that they do not relate to the Buy America provisions found
in Section 165 of the staa and concern conduct that pre-dates the entry into force
[of] the nafta (Objections, pp. 13-14). The Claimant believes the documents are
relevant since they relate to the manner in which US courts and administrative
agencies have addressed buy national policies in the context of the fabrication of
steel. ( Motion, p. 6) It is unclear to us what the administrative file and administration records of judicial cases and appeals and administrative adjudications
would consist of. The Claimant has not shown how such administrative files and
records and pleadings would shed light on the manner in which US courts and administrative agencies have addressed buy national policies. We refer here to light
not already captured in and discernible from the published decisions themselves
rendered by the courts and agencies involved. Since, however, according to the Respondent, many of the requested documents are publicly available (Objections,
p. 14), we believe that Claimant should consult with the Respondent to determine
which of those documents (other than the published decisions) are available to the
general public and proceed in the manner indicated above under General Considerations.
Category E Documents
12. In the Respondents informal response dated 20 June 2001 (Exhibit R-2,
Motion) to the Claimants informal request for production of documents of 14 May
2001 (Exhibit R-l, Motion), the Respondent stated that in respect of Category E,
[t]o the best of the [Respondents counsels] knowledge, information and belief
after due inquiry, there are no documents responsive to the request. In its Motion
(p. 6), the Claimant noted this response but nevertheless included Category E
documents in its prayer for relief. In their subsequent submissions, neither Claimant
nor Respondent addressed the request for Category E documents. Accordingly, we
consider that Claimant has dropped its request for these documents, having in effect
accepted Respondents statement that there are no such documents.
Category F Documents
13. In its Response (para. 58), the Claimant clarified its request for Category
F documents as referring to documents used to report to or inform members
of Congress acting as a body, whether it be acting as the full Congress or as a
Congressional Committee and the President of the United States. This request
is still cast in overly broad terms, since it is not limited in respect of, e.g., the
government agencies whose reports are sought and the years during which such
reports were rendered. The Claimant has also not indicated how such reports would
467
bear upon the issues raised or expected to be raised in this case. In principle, the
request for this Category of documents should be denied.
14. Nevertheless, it appears to us that there may be reports from agencies required
by statutes embodying Buy America requirements to be made to the US Congress
or to the US President and that such statutorily mandated reports would probably
be publicly available in the United States. The Claimant should consult with the
Respondent to determine what reports are required by which Buy America statute
to be made to the US Congress or the President, possibly falling within Category F,
are publicly available and to request the information and assistance necessary for
accessing such reports promptly on the ground or in electronic databases.
Category G Documents
15. In its Response (para. 62), the Claimant has expressed its willingness to
postpone its request for Category G documents, which relate to the issue of damages,
until a subsequent phase of the present proceedings. Accordingly, we regard this
particular request as withdrawn, without prejudice to the Claimant re-submitting
it, or a similar request, should it so wish, at some later stage of these arbitration
proceedings.
Category H Documents
16. Claimant and Respondent have effectively reached agreement as to the Category H documents that the Respondent will produce and make available to the
Claimant (Final Observations, pp. 1213).
Category I Documents
17. The Claimant invokes paragraph 2(b) of the Interpretative Note on Certain
Chapter Eleven Provisions issued by the nafta Free Trade Commission, dated 31
July 2001, which reads, in pertinent part:
Each party agrees to make available to the public, in a timely manner, all documents
submitted to, or issued by, a Chapter Eleven Tribunal, subject to the redaction of: . . .
It is not clear to us, and neither party to this case has made any submission on,
whether paragraph 2(b) above is intended to refer to all documents submitted to all
Chapter Eleven Tribunals past, present and future. By its terms, the Interpretative
Note may be read as designed to have prospective rather than retroactive operation.
It is also unclear to us, and no pertinent submission has been made on this point too,
whether paragraph 2(b) establishes a duty that is enforceable by a Chapter Eleven
Tribunal. Pleadings and evidence may as a technical matter be distinguishable from
each other. However, a written submission may have evidentiary value where the
468
issue is, e.g., what position was taken in the past on a particular question by the
party making the submission. But Claimant has not shown what pleadings filed by
the United States in which Chapter Eleven proceedings, set out matters relevant to
the issues raised or expected to be raised in the present case. On the other hand, it
is our impression that some Category I documents are publicly available in the
United States. Accordingly, we believe that the Claimant should consult with the
Respondent to determine what Category I documents are available to the general
public and how these might be effectively accessed.
Privileged Documents
18. The Respondent entered a general objection to the Motion to the extent that
the documents requested are protected from disclosure by applicable law, including without limitation, documents protected by the attorney-client and government
deliberative and pre-decisional privileges. (Objections, p. 18) For the Tribunal to
be able to determine the applicability of the privileges so adverted to, the Respondent will have to specify the particular documents in respect of which one or more
privilege is claimed and the nature or scope of the specific privilege claimed, and
show the applicability of the latter to the former. This is a matter for future determination, should the Respondent decide in fact to withhold, under claim of privilege,
particular documents it should otherwise make available to the Claimant.
19. Wherefore, the Tribunal disposes of the requests for production of the following categories of documents in the following manner:
(a) Category A documents shall be made available by the Respondent to the
Claimant in the manner and subject to the terms indicated above;
(b) Category B documents need not be made available by the Respondent to the
Claimant, save to the extent that such documents are publicly available in
the United States, in which case Claimant and Respondent shall proceed in
the manner indicated above;
(c) The request for Category C documents is denied for lack of the necessary
specificity and indication of potential relevance to the present case;
(d) Category D documents need not be made available by the Respondent to the
the United States in which case Claimant and Respondent shall proceed in
the manner indicated above;
(e) The request for Category E documents has been rendered moot, having in
effect been dropped by the Claimant;
(f) Category F documents need not be made available by the Respondent to
the Claimant, save to the extent such documents consist of publicly available statutorily mandated agency reports to the US Congress or the US
President, in which case Claimant and Respondent shall proceed in the manner indicated above;
(g) The request for Category G documents is deemed withdrawn without prejudice to re-submission thereof by the Claimant at some later stage of the
present proceedings;
469
(h) Category H documents shall be made available by the Respondent to the

Claimant in accordance with the understanding reached by the parties and
in the manner indicated above;
(i) Category I documents need not be made available by the Respondent to the
the United States in which case Claimant and Respondent shall proceed in
the manner indicated above.
[Source: United States Department of State, http://www.state.gov/documents/

organization/5963.pdf.]
470
AWARD (9 JANUARY 2003)
Table of Contents
I.
Procedural History
Notice of Intent and Notice of Arbitration
Registration of the Notice of Arbitration
Appointment of Arbitrators
First Session of the Tribunal with the Parties: Procedural
Order No. 1
Place of Arbitration: Procedural Order No. 2
Motion for Production of Documents: Procedural Order
No. 3
Interpretation of 31 July 2001 by the Free Trade
Commission
Exchange of Pleadings on Competence and Liability
Hearing on Competence and Liability
Exchange of Post-Hearing Submissions
II. Background of the Dispute: Basic Facts
III. The United States Measures at Stake
IV. The Principal Claims and Submissions of the Parties
1. The Investors Principal Claims and Submissions
(a) Article 1102: the national treatment obligation
(b) Article 1105: the minimum standard of treatment
obligation
(c) Article 1103: most-favored-nation treatment
obligation
(d) Article 1106: the obligation not to impose or enforce
performance requirements
(e) Non-applicability of exceptions to Articles 1102, 1103
and 1106: effect of Article 1108(7) and
(8)procurement by a party
(f) Claims concerning projects other than the Springfield
Interchange Project
2. The Respondents Principal Defenses and Submissions
(a) Concerning Article 1102: the national treatment
obligation, and Article 1106: the obligation not to
impose or enforce performance requirements
(b) Concerning Article 1105(1): minimum standard of
treatment of foreign investors and their investments
and the ftc Interpretation of 31 July 2001
Page
471
471
472
472
472
473
477
481
481
482
482
482
487
489
490
490
492
494
496
497
499
499
499
502
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(c) Concerning Article 1103: most-favored-nation

treatment
(d) Concerning investors claims relating to projects other
than the Springfield Interchange Project
3. The Post-Hearing Submissions of the Parties and the
Other nafta Parties on Article 1105(1)
(a) The disputing parties post-hearing submissions on
Article 1105(1)
(b) The submissions of the other nafta parties pursuant
to Article 1128 of nafta
V. Findings and Conclusions
1. Jurisdiction to Consider the Investors Claim concerning
nafta Article 1103
2. Jurisdiction to Consider the Investors Claims Concerning
Certain Federal-aid Construction Projects Other than the
Springfield Interchange Project
3. Articles 1102, 1106 and 1108: National Treatment
Obligation and Prohibition of Local Content and
Performance Requirements in the Context of
Governmental Procurement
(a) Preliminary interpretive considerations
(b) Appraising the Investors Articles 1102 and 1106
claims and the exception in Article 1108(7)(a) and
(8)(b)
4. Article 1105(1): Minimum Standard of Treatment under
Customary International Law
(a) General Considerations
(b) Appraising the Investors claim based on Article
1105(1) as interpreted by the ftc Interpretation of 31
July 2001
5. Article 1103: Most-Favored-Nation Treatment and the
USAlbania and USEstonia Bilateral Investment
Treaties
VI. Award
471
503
504
504
504
508
510
510
513
515
515
517
526
526
531
533
536
I. Procedural History
Notice of Intent and Notice of Arbitration
1. On 1 March 2000, adf Group Inc. (adf or the Claimant or the Investor), a
company established under the laws of Canada, delivered to the Government of
the United States of America (US or the Respondent), a Notice of Intention to
Submit a Claim to Arbitration pursuant to Articles 1116, 1117, 1120(1)(b) and
1137(1)(b) of the North American Free Trade Agreement (nafta). On 21 July
2000, the Centre (icsid) received a Notice of Arbitration dated 19 July 2000 from
472
the Claimant against the Respondent with application for approval by the SecretaryGeneral of access to the Additional Facility under Article 4 of the icsid Arbitration
(Additional Facility) Rules. The Notice was supplemented by a letter of 1 August
2000.
Registration of the Notice of Arbitration
2. On 25 August 2000, the Acting Secretary-General of icsid, pursuant to Article
4(5) of the icsid Arbitration (Additional Facility) Rules, notified the parties that
the Claimants application for access to the Additional Facility was approved. The
Acting Secretary-General, on the same day, issued and dispatched to the parties, a
Certificate of Registration of the Notice of Arbitration, as amended.
Appointment of Arbitrators
3. Article 1123 of the nafta provides that, unless otherwise agreed by the
disputing parties, the Arbitral Tribunal shall be composed of three arbitrators,
one appointed by each party, and the third, who shall be the presiding arbitrator,
appointed by agreement of the parties.
4. There was no agreement by the parties to depart from the provisions of Article 1123 of the nafta. The Notice of Arbitration contained a notification of the
Claimants appointment of Professor Armand de Mestral, a national of Canada, as
arbitrator. The Respondent appointed Ms Carolyn B. Lamm, a national of the US,
as arbitrator and the parties, by agreement, appointed Judge Florentino P. Feliciano,
a national of the Philippines, as the third arbitrator to serve as the President of the
Tribunal.
5. By letter of 11 January 2001, the Secretary-General of icsid notified the parties
that all the arbitrators had accepted their appointment and the Arbitral Tribunal was
therefore deemed to have been constituted, and the proceeding deemed to have
begun, on that date.
First Session of the Tribunal with the Parties: Procedural Order No. 1
6. On 29 January 2001, the Tribunal held its first session with the Parties, by video
conference, which was devoted to preliminary procedural matters. In respect of the
place of arbitration, the parties had not been able to reach agreement. Nevertheless,
they agreed that they would make written submissions to the Tribunal in accordance
with an agreed schedule, that no hearing would be necessary with respect to this
issue, and that the Tribunal should render its decision on the place of arbitration
on the basis of their written submissions. Following a request by the parties for
guidance on the issue of the schedule for the production of documents, the Tribunal
on 7 March 2001 invited the parties to seek agreement on a schedule on the basis
AWARD
473
that production of documents by the parties would proceed concurrently with the
time periods for filing of the parties written pleadings.
7. By a joint letter of 4 April 2001, the parties communicated to the Tribunal, their
agreement on the schedule of proceedings, the production of documents, treatment
of trade secrets and confidential information and the submission of evidence. The
Tribunal on 3 May 2001 issued Procedural Order No. 1 adopting the agreement of
the parties in their joint letter of 4 April 2001, and instructing the icsid Secretariat
to inform the Governments of Canada and the United Mexican States (Mexico) that
any submission they may wish to make pursuant to nafta Article 1128, should
be filed within forty days after the service upon the Claimant of the Respondents
Counter-Memorial.
Place of Arbitration: Procedural Order No. 2

8. On 26 February 2001, the Claimant filed written submissions on the issue of the
place of arbitration, requesting the Tribunal to designate Montreal, in the province of
Quebec, Canada, as the place of arbitration. On 19 March 2001, the Respondent filed
a submission on place of arbitration, asking the Tribunal to designate Washington,
DC, USA, as the place of arbitration. The Claimant on 2 April 2001, filed a reply to
the submission of the Respondent on the place of arbitration and on 16 April 2001,
the Respondent filed its final observations on this matter.
9. The Tribunal considered the submissions of the parties including specifically
their reference to:
(a) Article 1130(a) of nafta that requires the arbitration to be held in the territory
of a Party to the New York Convention.
(b) Articles 20 and 21 of icsid Arbitration (Additional Facility) Rules that require, inter alia: the arbitration to be held in a State Party to the New York
Convention; and the Tribunal to determine the place of arbitration after consultation with the Secretariat and parties.
(c) Article 16 of the uncitral Rules including paragraph 22 of the related
uncitral Notes on Organizing Arbitral Proceedings (uncitral Notes)
that enumerate factual and legal factors which influence the choice of the
place of arbitration although the importance of each varies from case to
case. These factors are (1) suitability of the law on arbitral procedure of the
place of arbitration; (2) whether there is a multilateral or bilateral treaty on
enforcement of arbitral awards between the State where the arbitration takes
place and the State or States where the award may have to be enforced; (3)
convenience of the parties and the arbitrators, including the travel distances;
(4) availability and cost of support services needed; and (5) location of the
subject-matter in dispute and proximity to evidence.
10. The Tribunal considered each of the above factors. On the suitability of
the law on arbitral procedure of (a proposed) place of arbitration, the Claimant
argued that an appropriate place of arbitration must provide a legal environment
that sets out clear, predictable and limited procedures for challenging an award
474
along with an effective mechanism for recognition and enforcement of an award.1

The United States argued that its commitment to facilitating international arbitration
and favoring arbitral dispute resolution makes it the more appropriate place for the
arbitration.2
11. The Tribunal observed in its Procedural [Order] No. 2 that suitability of the
law on arbitral procedure of a suggested place of arbitration has multiple dimensions, including the extent to which that law:
(i) protects the integrity of, and gives effect to, the parties arbitration agreement;
(ii) accords broad discretion to the parties and to the arbitrators to determine and
control the conduct of arbitration proceedings;
(iii) provides for the availability of interim measures of protection and of means of
compelling the production of documents and other evidence and the attendance
of reluctant witnesses;
(iv) consistently recognizes and enforces international arbitral awards, in accordance
with the terms of widely accepted conventions concerning the enforcement of
such awards; and
(v) insists on principled restraint in establishing grounds for reviewing and setting
aside international arbitral awards.
12. The Claimant also argued the distinction between two aspects of lex arbitri: (a) recognition and enforcement of arbitral awards and (b) review by courts
of the locus arbitri of such awards in actions to modify or set aside and vacate those awards. According to the Claimant, Article 1136(7) of NAFTA that
deems Chapter 11 arbitration as commercial for purposes of Article 1 of the
New York Convention, might not reach actions to set aside Chapter 11 awards
where the domestic review remedies were limited to awards in commercial arbitration.3 While the Canadian Federal Commercial Arbitration Act was specifically
amended to provide for such, the US had not made any similar amendment to its own
statute. Accordingly, the Claimant characterized the US law in the matter as unclear
and uncertain with respect to post-award litigation rendering US arbitration laws
unsuitable.
13. The United States responded that it was impossible at this stage of Chapter
Elevens evolution for any party to have absolute certainty as to the legal regime
governing review of a Chapter Eleven award whether such review takes place in
Canada or the US.4 Moreover, the US noted that the Attorney General of Canada
had gone on record in United Mexican States v. Metalclad contending that in
interpreting NAFTA Chapter Eleven Tribunals should not attract extensive judicial
deference and should not be protected by a higher standard of judicial review.5
14. The Tribunal noted that both Canada and the United States, in their respective reservations to the New York Convention, determined that they would
1
Claimants Memorial, paras. 4950.

Respondents Submission, para. 7.
3
See Claimants Reply at para. 17.
4
See Respondents Final Observations, p. 3.
5
Citing Outline of Argument of Intervenor Attorney General of Canada in Metalclad, para. 30, Tab. 17
of Claimants Memorial, p. 12.
2
AWARD
475
apply the convention only to arbitral proceedings arising out of disputes considered
commercial under their respective national laws. Accordingly, both parties agreed
that the laws of both the US and Canada are equally suitable as far as recognition
and enforcement of awards are concerned.
15. The Tribunal noted that, after the parties submissions, the case of United
Mexican States v. Metalclad was decided on 2 May 2001 by the Supreme Court
of British Columbia. That Court held that the applicable standard of review was
that obtaining under the British Columbia International Commercial Arbitration
Act (icaa) which closely follows the uncitral model law. In considering that
standard, the Supreme Court of British Columbia referred to Quintette Coal Ltd
v. Nippon Steel Corp. [1991] 1 WWR 219 (bcca). In that case, decided under the
icaa Section 34, the majority of the court commented on the standard of review in
the following terms:
It is important to parties to future such arbitrations and to the integrity of the process
itself that the court express its views on the degree of deference to be accorded the
decision of the arbitrators. The reasons advanced in the case discussed above for
restraint in the exercise of judicial review are highly persuasive. The concerns of
international comity, respect for the capacities of foreign and international Tribunals,
and sensitivity to the need of the international commercial system for predictability in
the resolution of disputes spoken of by Blackman J [in Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth Inc., 473 US 614 (1985)] are as compelling in this jurisdiction
as they are in the United States or elsewhere. It is needed therefore, as a matter of policy,
to adopt a standard which seeks to preserve the autonomy of the forum selected by the
parties and to minimize judicial intervention when reviewing international commercial
arbitral awards in British Columbia (p. 229).
The US stressed that suitable procedures for review of Chapter 11 awards are
available under both US federal and District of Columbia laws regardless of whether
or not the award is deemed commercial. The US specifically stated that Section 10
of the US Federal Arbitration Act (9 USC 208, Chapter 1 of the faa) governing
vacature of awards, would apply to Chapter 11 awards made in the United States.6
16. The Tribunal observed that in the United States, in case of enforcement of
an arbitral award against a foreign state (e.g., if Mexico or Canada were involved)
under the Foreign Sovereign Immunities Act, 28 USC 1605 (a-6), the foreign
state would not have immunity from suit and the fsia favors enforcement of the
award. The standard applicable to enforcement of nafta arbitral awards against the
United States is similar as the US has waived its sovereign immunity with respect
to the enforcement of nafta arbitral awards under the Tucker Act, 18 USC 1491
(a) in conjunction with nafta 19 USC 3311 (a).
17. After extensive consideration of the submissions of both parties, the Tribunal
was not persuaded that it must characterize the US Federal Arbitration Act as an
unsuitable lex arbitri or as a less suitable lex arbitri than Canadian or Quebec law
on international arbitration. In the absence of US case law directly addressing the
specific issue raised here by the Claimant, the Tribunal did not consider that the
6
Respondents Final Observations, p. 4 and footnote 2.
476
Claimant had adequately demonstrated that the relevant US law was infected by a
lack of clarity which undermines the authority of the Tribunal and its eventual
award and promises to multiply post award litigation.7
18. The Tribunal also noted that the distinction heavily stressed by the Claimant
between an action to review and set aside a Chapter 11 award and an action for
recognition and enforcement of such an award may not, in certain situations, be as
important as might be supposed. The grounds for vacating an arbitral award under
9 USC chapter 1, Section 10 and those for setting aside an award under Article 34
of the uncitral model law on one hand, and the grounds specified in the New
York Convention for resisting an action for recognition and enforcement of an
award on the other hand, exhibit overlapping to a significant degree. An action for
recognition and enforcement may frequently be expected to be resisted by pleading
the existence of grounds similar to those for vacating the award. The Tribunal did
not believe that the Claimant had provided it with a sufficient basis for refusing to
join the Tribunals in the Methanex and the Ethyl cases in holding that Canadian law
and US law relating to international arbitration are equally suitable for purposes
of determining an appropriate place of arbitration.8
19. In respect of the factor of existence of a multilateral or bilateral treaty on
enforcement of arbitral awards, the Tribunal observed that both the United States
and Canada are parties to the New York Convention.
20. The factor of convenience or relative inconvenience of the arbitrators offered
no real guidance in this case. Two of the three arbitrators reside outside the United
States and similarly two of the three arbitrators reside outside of Canada. Thus,
whether the place of arbitration be in Canada or the United States, two arbitrators
would have to travel to one or the other state.
21. The parties relative inconvenience of traveling to Montreal or to Washington,
DC, may not be as finely balanced. The Tribunal was uncertain as to how many
officials, counsel, representatives and witnesses of one party would have to travel to
Montreal or Washington, DC. The US contended that, given the numerous agencies
involved (i.e., at least 7) all of which are based in Washington, DC, and therefore
would have to travel to Montreal, the balance of inconvenience favored Washington,
DC. The Claimant was concerned that some of its officials and representatives are
based in Virginia and others may be located in Quebec or elsewhere in Canada
and they would have to travel. The Tribunal noted that it could meet at the parties
request in Montreal or any other place to hear particular witnesses and facilitate
the presentation of evidence upon prior notice to and agreement of both parties. On
balance, in the circumstances of this case, the Tribunal believed that the submission
of the United States on this point was not unreasonable even though the relative
inconvenience of a state as a party, is not necessarily compelling.
22. In principle, the Tribunal found that there was not any significant difference
between Montreal and Washington, DC, in respect to the availability of arbitration
7
Claimants Response, para. 13.

Ethyl Corp. v. Government of Canada, decision regarding the place of arbitration of 28 November
1997, 38 ILM 700 (1999); Tab. 23 of Claimants Memorial; and, Methanex Corp. v. The United States
of America, written reasons for Tribunals decision of 7 September on place of arbitration, 21 December
2000, US Appendix, Exhibit 1.
8
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477
support services. The Tribunal, however, solicited the opinion of icsid which noted
that overall costs of providing arbitration support are likely to be substantially less in
Washington, DC than in Montreal because icsid headquarters (including excellent
facilities to accommodate the hearing) and staff are in Washington, DC.
23. The subject matter of the dispute, when examined in terms of ordinary meaning, refers to the issue presented for consideration; the thing in which or in respect
of which a right or duty has been asserted; the thing in dispute. (Blacks Law
Dictionary, Seventh Edition, 1999, page 1439). The Tribunal regarded the Notice
of Intent to Submit a Claim to Arbitration by Claimant as presenting the subject
matter of the present dispute consisting of its claims concerning the consistency
or lack of consistency of certain measures (or applications thereof) taken by the
United States with certain provisions of Chapter 11 of nafta.
24. To the extent the claims have a location, the Tribunal considered that, for
purposes of determining an appropriate place of arbitration, they may be deemed
to be located in the place where the US authority to which they were addressed
[is] based, such location being a sufficient, real and substantial basis. The physical
construction project in respect of which the claims are made is in relative geographic
proximity to Washington, DC.
25. The Tribunal found that Washington, DC, is properly regarded as a neutral
place of arbitration notwithstanding that it is the capital of the Respondent party.
icsid is, and is widely perceived to be, a neutral forum and institution. The policy
imperatives which drive parties proceeding to international arbitration to seek a
neutral forum are, in the Tribunals opinion, satisfied by choosing the city in which
icsid is located.
26. On 11 July 2001, the Tribunal, for the foregoing reasons, issued Procedural
Order No. 2 Concerning the Place of Arbitration, designating Washington, DC, as
the place of arbitration in this case, without prejudice to the Tribunal being able
to meet in Montreal or any other place, when necessary or appropriate, to hear
particular witnesses and facilitate the presentation of evidence, upon the request of
either party and with notice to and agreement of both parties.
Motion for Production of Documents: Procedural Order No. 3

27. On 6 August 2001, the Claimant filed a Motion for Production of Documents
and on 17 August 2001, the Respondent filed Objections to the Claimants Request
for Documents. The Claimants Response to the Objections Raised by the Respondent was filed on 27 August 2001, while the Respondents Final Observations
[were] filed on 4 September 2001.
28. The Claimant asked the Tribunal to require the Respondent to produce and
communicate certain documents grouped under nine categories best presented in
the Claimants own words:
(A) The administrative file held by the United States and those held by Virginia relating
to the supply of steel to the Springfield Interchange Project by adf Group Inc. and
478
(B)
(C)
(D)
(E)
(F)
(G)

adf International Inc. (Investment), including, but without limiting the generality
of the foregoing:
1. All records relating to the Main Contract, and the Shirley/adf Sub-Contract,
as those terms are defined in the Notice of Arbitration filed by the Investor
(Notice);
2. All records prepared by or on behalf of the United States or by or on behalf
of Virginia relating to the scope and meaning of the Buy America provisions
found at Section 165 of the staa (1982), Pub. L. 97-424, 23 CFR 635.410 and
to the scope and meaning of Special Provision 102.5 of the Main Contract;
3. All records (including correspondence between the United States and the State
of Virginia) relating in whole or in part to the supply of steel to the Springfield
Interchange Project;
4. All correspondence between the United States and Virginia relating in whole
or in part to the Special Provision 102.5 of the Main Contract.
The administrative files held by the US Department of Transport or the Federal
Highway Administration relating to the consideration, development, drafting, approval and adoption of the Final Rule of the Federal Highway Administration
concerning Buy America Requirements (23 CFR Part 635) which was published
in Volume 48, No. 228 of the Federal Register dated November 25, 1983.
All records prepared by or on behalf of the Office of the United States Trade
Representative, the Department of State or the Department of Transport, or any
agencies thereof relating in whole or in part to the impact of the North American
Free Trade Agreement (nafta) on Buy America requirements, including, but
without limiting the generality of the foregoing:
1. All records relating to the Buy America and Buy American requirements and
policies and laws as those requirements and policies and laws relate or are
affected by nafta;
2. All records relating to the impact of the implementation of nafta on Tea-21,
Pub. L. 105-178, Section 165 of the staa (1982), Pub. L. 97-424 and 23 CFR
635.410.
The administrative file in the following cases, including all the administration
records in all appeals taken from these cases and all pleadings submitted by the
parties:
1. S. J. Amoroso Construction Co., Inc. v. The United States, 26 Cl. Ct. 759 (1992),
aff. 12 F. 3d 1072 (United States Court of Appeals);
2. Wright Contracting, Inc., asbca Nos. 39120, 39121, 91-1 BCA P23, 649 (1990);
and
3. Decision of the Comptroller General, B-167635 (1969) US Comp. Gen. Lexis
2267.
All records relating to every instance within the last ten years wherein federal
funding for a highway project (including bridges and tunnels) has been withheld
from or denied to a Department of Transport of any State of the United States
(State) or any agency thereof as a result of the application of any Buy America
provisions.
All documents used to report to or inform members of Congress, the President of
the United States on the application of Buy America provisions to federally funded
highway contracts and the impact of nafta on those provisions.
A complete list of highway contracts and/or highway projects, listed by State,
which have been approved for funding under Tea-21, Pub. L. 105-178 or which
are currently under consideration to receive funding under Tea-21, Pub. L.
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105-178, along with a list of the amount of the funding for each such contract or
project.
(H) A list of all national and regional waivers of the provisions of Buy America requirements which have been granted within the last ten years under 23 CFR 635.410(c),
along with the record which provides the administrative rationale for granting such
a waiver and the reports to Congress made during the last ten years in compliance
with Section 165(e) of the Surface Transportation Assistance Act of 1982.
(I) All pleadings filed by the United States in nafta Chapter 11 proceedings to date.
(Motion, pp. 910)
29. The Tribunal set out the general considerations of principle which, in its view,
underlie the appropriate resolution of the Motion for production of document. The
fundamental principle is embodied in Article 41(2) of the icsid Arbitration (Additional Facility) Rules which authorizes a Tribunal, if it deems it necessary, at any
stage of the proceeding, [to] call upon the parties to produce documents, witnesses
and experts.(Emphasis added). The Tribunal considered that there are at least
two main aspects of necessity in the context of a request for document production:
The first aspect relates to a substantive inquiry into whether the documents requested
are relevant to, and in that sense necessary for, the purposes of the proceedings where
the documents are expected to be used. Inquiry into the relevancy of the documents
requested needs to be done on a category by category basis.
The second aspect concerns a procedural inquiry into the effective and equal availability of the documents requested to both the requesting party and the party requested.
Where only one party has access to requested documents relevant to the proceeding
at hand, we consider that the party with access should be required to make the documents available to the other party. Where, however, the documents requested are in
the public domain and equally and effectively available to both parties, we believe
that there would be no necessity for requiring the other party physically to produce
and deliver the documents to the former for inspection and copying. Where, however,
the requesting party shows it would sustain undue burden or expense in accessing the
publicly available material, the other party should be required to produce and deliver
the documents.
30. The Tribunal then sketched out the application of the above principles to the
Claimants motion:
In the present case, where the Respondent identifies the particular government
office at which the documents are in fact available to the Claimant or its representatives,
as members of the general public, the Respondent will, in principle, have produced
the documents requested within the meaning of Article 41(2) of the icsid [Arbitration (Additional Facility)] Rules. The Respondent should also provide the document
reference numbers, and any other data, necessary to enable the official custodians of
the documents to identify and locate them physically or in electronic data bases, with
reasonable dispatch. There may be other administrative details that may need to be
attended to by the Respondent (e.g., phone calls to the document custodians) to ensure the Claimants effective and prompt access to the documents. The Respondent
would be reasonably expected to provide such necessary and appropriate assistance,
480
without having to deliver the documents physically to the Claimant. The appropriate
assumption in every case is that, both parties having proceeded to international arbitration in good faith, neither would withhold documents for its own benefit and that
good faith will render any practical problems of document production susceptible of
prompt resolution without undue hardship or expense on either party.
31. The principles which the Tribunal outlined are in line with the procedure and
practice in the District of Columbia and the caselaw under the US Federal Rules of
Civil Procedure (frcp), both of which form part of the lex arbitri in the present
case:
Under Rule 34(b) of the frcp, the requirement to produce a document is a requirement
to make the requested document available for inspection and copying at a reasonable
time and place. Federal courts in the United States have held that a court may refuse to
order production of documents of public record that are equally accessible to all parties
(See Moores Federal Practice (Third Edition) at 3446; e.g. Dushkin Publishing Group,
Inc. v. Kinkos Service Corporation, 134 FRD 334, 335 (DDC); SEC v. Samuel H. Sloan
& Co., 369 Fed. Supp. 994, 9956 (SDNY 1973); Hoffman v. Charnita, 17 Federal
Rules Service 2D 1215, 1217 (W.D. Penn. 1973)). It has also been held that production
from the adverse party may be ordered if the requesting party could demonstrate that it
would be excessively burdensome for financial and other reasons for the requesting
party to obtain documents from a public source other than from the opposing party
who has them in their files (e.g., Snowden v. Connaught Laboratory, Inc., 137 FRD
325, 333 (D. Kan., 1991)).
32. The Tribunal found that the request for Category A documents did
refer with sufficient specificity to the subject of the files sought: relating to the
supply of steel to the Springfield Interchange Project by the adf Group, Inc. and
adf International Inc. The four subcategories under Category A added further
clarity by specifying records relating to the Main Contract and the Shirley/adf
Sub-Contract and to Special Provision 102.5 of the Main Contract. The relevancy of these documents to the subject matter of the present case was not disputed by the Respondent. Accordingly, the Tribunal held that the Respondent
should produce those documents by making them available in the manner indicated
above.
33. While the Claimant had not shown how the Category B documents bear upon
the subject matter, i.e., the issues raised or likely to be raised, in the present case, the
Respondent stated that those documents are publicly available and that the US
was willing to make them available to the Claimant under the same conditions as
they are available to the general public. Hence, the Tribunal held that the Respondent
should make those documents available to the Claimant in the manner indicated
above.
34. The Category C documents and Category F documents were held to be described in overly broad terms which makes their identification very problematical.
Further, the Claimant had not shown how those kinds of documents relate to the
subject matter of the present case. The Tribunal denied the request for Category
C documents. It also held that Category F documents need not be made available
AWARD
481
to the Claimant save publicly available statutorily mandated agency reports to the
US Congress or the US President.
35. As to Category D documents, the Claimant failed to show how administrative
files and administration records of judicial cases and administrative adjudications would shed additional light on the manner in which buy national policies
have been addressed by such agencies. The Tribunal held that such documents need
not be made available by the Respondent to the Claimant, save to the extent they
are publicly available in the US.
36. The Tribunal found that the request for Category E documents was rendered
moot, the Claimant having in effect accepted the Respondents declaration that no
such documents existed. Similarly, the Tribunal held that the request for Category
G documents, relating to the issue of damages, was deemed withdrawn, without
prejudice to re-submission, the Claimant having expressed willingness to defer its
request to a subsequent phase of these proceedings. As to the request for Category H
documents, the parties reached agreement on which documents would be produced
and made available to the Claimant by the Respondent.
37. In respect of Category I documents, the Claimant did not show what pleadings
filed by the US in which Chapter 11 proceedings were pertinent to the issues raised,
or expected to be raised, in this case. The Tribunal held that such documents need
not be made available by the Respondent to the Claimant, except to the extent they
are publicly available in the US.
38. Finally, the Tribunal noted the general objection entered by the Respondent to
the extent the documents are protected from disclosure by applicable law, including
without limitation, documents protected by the attorney-client and government
deliberative and pre-decisional privileges. The Tribunal ruled that for it to be able
to determine the applicability of the privileges adverted to, the Respondent will have
to specify the documents in respect of which one or more privilege is claimed and
the nature and scope of the particular privilege claimed, and show the applicability
of the latter to the former. This was a matter for future determination, should
the Respondent decide actually to withhold, under claim of privilege, particular
documents it should otherwise make available to the Claimant.
Interpretation of 31 July 2001 by the Free Trade Commission
39. On 31 July 2001, the Tribunal received from the Respondent a copy of an
Interpretation issued on the same day by the Free Trade Commission established
under Article 2001 of nafta, concerning certain provisions of Chapter 11 of the
nafta, including in particular Article 1105, entitled Minimum Standard of Treatment.
Exchange of Pleadings on Competence and Liability
40. In compliance with the agreed schedule, on 1 August 2001, the Claimant filed
its Memorial on competence and liability; the Respondents Counter-Memorial was
filed on 29 November 2001. The Claimants Reply to the Counter-Memorial was
482
submitted on 29 January 2002; and the Rejoinder of the Respondent on 29 March

2002.
Hearing on Competence and Liability
41. The hearing on competence and liability took place in Washington, DC, from
15 to 18 April 2002. The Claimant was represented by Mtre Peter E. Kirby, Mtre
Rene Cadieux and Mtre Jean-Francois Hebert of Fasken Martineau Du Moulin
LLP. Mr Pierre Paschini, President and Chief Operating Officer, and Mtre Caroline
Vendette, General Counsel, respectively, of adf Group were also present. The
Respondent was represented by Mr Mark A. Clodfelter, Mr Barton Legum, Ms
Andrea J. Menaker, Mr David Pawlak and Ms Jennifer Toole, all of the Office of
the Legal Adviser to the United States Department of State.
42. Representatives of the Governments of Canada and Mexico were also in
attendance: Ms Sylvie Tabet for Canada; Mr Maximo Romero, Mr Salvador Bejar
and Mr Sanjay Mullick for Mexico. During the hearing, representatives of Canada
and Mexico reserved the rights of their respective Governments to file post-hearing
submissions. After the hearing, however, they informed the Tribunal by letters of
24 April 2002 and 25 April 2002, respectively, that they would not be filing any
such submissions.
Exchange of Post-Hearing Submissions
43. By a letter dated 4 June 2002, the Claimant forwarded to the Tribunal a copy
of the Award in respect of Damages issued on 31 May 2002 by the Tribunal in the
nafta Chapter 11 case of Pope and Talbot v. Government of Canada (Pope and
Talbot Damages Award). The Claimant stated that the Award speaks for itself on
the matter of Article 1105(1). The Respondent considered that the Claimant had
thereby made an unauthorized submission and asked for an opportunity to make
its own submission with respect to Article 1105(1) and the Pope and Talbot Damages
Award. The Tribunal gave the parties the opportunity to make final submissions
on Article 1105(1). The other nafta Parties requested the Tribunal to give them
the opportunity to comment, under Article 1128, on the parties submissions on
Article 1105(1). In the event, the Respondent filed its Post-Hearing Submission on
27 June 2002 while the Claimant filed its Post-Hearing Submission on 11 July 2002.
Canada and Mexico filed their submissions, pursuant to Article 1128, on 19 July
2002 and 23 July 2002, respectively. Thereafter, the Claimant and the Respondent
simultaneously filed their second and final Post-Hearing Submissions on Article
1105(1) on 1 August 2002. These Post-Hearing Submissions are summarized in a
later part of this Award.
II. Background of the Dispute: Basic Facts

44. The underlying facts of the dispute in this case relate to the construction of the Springfield Interchange Project (Springfield Project or Project). The
AWARD
483
Springfield Interchange is a heavily-used and accident-prone highway junction, located in Northern Virginia approximately 20 kilometers south of Washington, DC.
The junction brings together three interstate highways and a Virginia state highway
(including I-95, the principal northsouth highway on the east coast of the United
States) and an important Virginia state highway, in the immediate vicinity of which
are located a large shopping mall and extensive office and other development. The
result is the mixture of interstate, state and local traffic. The original design of the
Springfield Interchange dated from the 1960s. As traffic volumes increased during
subsequent decades, the original design generated conditions which gave rise to
increased incidence of accidents and traffic bottlenecks.9
45. Starting in the early 1990s, Virginia state officials and US federal officials
held a series of meetings and hearings relating to changing the original design of the
Interchange. In 1998, the Commonwealth of Virginia applied to and received approval from, the Federal Highway Administration (fhwa) of the US Department of
Transportation for federal funding assistance for the construction of a multi-phased
project designed to improve the safety and efficiency of the Interchange. Phases II
and III of the Project, which are the phases involved in the present case, entailed the
addition of a series of new lanes, ramps (long bridges curving above the highways
below) and lane dividers to the section of the Springfield Interchange where the
Virginia highway 644 intersects I-95. These bridges required long steel girders,
custom-built to exacting specifications, to support them. In addition, Phases II
and III involved the construction of a number of conventional bridges which too
necessitated support by structural steel girders. In short, the Springfield Interchange
Project involved major changes to the original design of the structures and highways
comprising the Interchange and the construction of new and additional structures,
approaches and highways on several levels, all intended to increase the carrying
capacity, safety, efficiency and convenience of the Interchange.
46. In September 1998, the Department of Transportation of the Commonwealth
of Virginia (vdot) issued an invitation for bids to construct and deliver Phases
II and III of the Project. Shirley Contracting Corporation (Shirley) submitted the
lowest bid and was awarded the contract for the Project (Main Contract).10 Shirleys
bid included an estimated USD 16.8 million for the structural steel requirements of
the Project.11
47. Shirley, as main contractor, in turn issued a request for bids covering certain
parts of the Project Phases awarded to Shirley, including the supply of the structural steel requirements of those parts of the Project. adf International Inc. (adf
International) submitted the lowest bid and Shirley and adf International, on 19
March 1999, signed a Sub-Contract for the supply and delivery by the latter of
all structural steel components for nine (9) bridges (Sub-Contract). Structural
steel components are described in this Sub-Contract as includ[ing] but . . . not
limited to continuous plate girders, cross frames, diaphragms, splice plates, loose
9
See Counter-Memorial of Respondent United States of America on Competence and Liability, dated
29 November 2001 (Respondents Counter-Memorial), pp. 47.
Order No. D30; Contract ID No. C0000054C02, Vol. I, Materials and Cases, A and B, Tab. B-1,
appended to Claimants Memorial.
11
Respondents Counter-Memorial, p. 8.
10
484
angles and plates, connection angles and plates, galvanized bolts for field erection,
galvanized bolts for steel to steel connections required for completing the work.12
The Sub-Contract provided inter alia that:
All materials supplied by adf International Inc. to be in accordance with the Plans,
Specifications, Contract Documents and Supplemental Specifications. Subcontractor
specifically acknowledges Section 102c of the Special Provisions regarding the Use of
Domestic Material.13
The Subcontract also referred to the materials to be supplied by adf International as

fabricated structural steel and accessories14 which had to include a shop primer
coat of paint at each bearing location.15 The Sub-Contract further required that,
before payments are made therefore, the structural steel materials and fabricated
units shall have been tested or certified and found acceptable.16
48. The process of fabricating structural steel has been described by the Respondent in terms the accuracy of which has not been disputed by the Claimant:
Structural steel fabrication for bridges principally involves the production of custom
steel girders. Fabrication transforms functionally unusable flat plate shapes into loadcarrying structural plate girders. The fabricator begins with long, flexible sheets of
steel produced by steel mill. Using special equipment, the fabricator cuts the steel into
plates of the specified length. It then welds the plates into familiar I shape, which
transforms the wobbly plates into a rigid girder capable of carrying massive loads.
Virginia, like many other places, approves only flawlessly welded girders for use in
highway projects. The fabricator then custom-fits the girder for its intended use, bolting
or welding elements to hold it securely in place atop piers or abutments at the bridge
site. The girders to be painted are then blast-cleaned to remove rust and dirt, inspected
and coated to protect the structural steel from weather and other conditions.17
49. On 19 April 1999, Shirley informed vdot that adf International was proposing to perform its obligations under the Sub-Contract by using US-produced steel
and by subsequently carrying out certain fabrication work on that US-produced
steel in Canada, in facilities owned by the parent adf Group. Shirley stated that:
adf [International] proposes to perform in Canada cutting, welding, punching/reaming holes, and milling on steel product produced in the United States. The
fabricated US-origin steel product which has been subjected to these processes will
then be shipped to the construction site and will be used in construction of the I-95
Springfield Interchange.18
12
Para. 2 of Exhibit B of Sub-Contract, Vol. I, Materials and Cases, A and B, Tab. B-3, appended to
Claimants Memorial.
13
Ibid., para. 4.
14
Ibid., para. 5, and Unit Price Schedule.
15
Ibid., para. 5.
16
Ibid., para. 10.
17
18
Letter of Shirley to vdot, dated 19 April 1999, Materials and Cases Vol. IA and B, Tab. A-3, p. 1,
appended to Claimants Memorial.
AWARD
485
50. On 28 April 1999, vdot advised Shirley that the proposed operations of adf
International were not in compliance with the provisions of the Special Provision
for Section 102.05 and 23 CFR 635.410 which formed part of the vdotShirley
Main Contract and which were incorporated by reference into the Shirleyadf
International Sub-Contract:
Based on the Departments, the Attorney Generals, and the Federal Highway Administrations interpretation, Special Provision for Section 102.05 and 23 CFR 635.410
refers to all manufacturing processes involved in the production of steel or iron manufactured products. This means smelting or any subsequent process that alters the materials physical form, shape or chemical composition. These processes include rolling,
extruding, machining, bending, grinding, drilling, and the application of various types
of coating.
The manufacturing process is not considered complete until all grinding, drilling and
finishing of steel or iron material has been accomplished. As proposed, the additional
processes that are to be performed in Canada are necessary to turn steel into a product
suitable to be installed in the project. As such, they fall under the aforementioned
provision and are not allowable under this contract.19
51. On 3 June 1999, representatives of Shirley and adf International met with
representatives of vdot and the Federal Highway Administration (fhwa) in Richmond, Virginia. The former explained their reading of Special Provision for Section
102c Use of Domestic Material, and the bases of such reading, to the latter. The
representatives of vdot stated that the interpretation given by the fhwa to the contractual provisions involved was the controlling interpretation that vdot could not
change. The representatives of the fhwa confirmed that the interpretation given
to the provisions involved and conveyed by vdot to Shirley, was the governing
interpretation rendered by the fhwa which had exclusive authority to interpret the
contract provisions at stake.20
52. On 14 June 1999, Shirley and adf International officials met with fhwa
officials. The latter officials explained that the Springfield Interchange Project was
a Federal-aid highway construction project operated as a cost reimbursement program. It was stated that the Buy America clause in the Main Contract (Special Provision 102.05) and the incorporation thereof in the Sub-Contract were necessary to
comply with 23 CFR 635.410, the Federal Highway Administration Regulations. It
was also made clear to the Shirley and adf International officials that the US Federal Government would not reimburse vdots project costs unless the Buy America
clause was applied and complied with, in accord with the fhwa interpretation of
that clause already conveyed to vdot, Shirley and adf International. The fhwa
officials advised that the fabrication in Canada of US-produced steel would be allowed only if the Commonwealth of Virginia sought and received a waiver of the
Buy America requirements under 23 CFR 635.410(c) on the basis that application
of those requirements would be inconsistent with the public interest.21
19
20
21
Letter of C. F. Gee of vdot, dated 28 April 1999, to M. E. Post of Shirley, ibid., Tab. A-4, pp. 12.
Investors Memorial, paragraphs 1317.
Investors Memorial, paragraphs 1821.
486
53. On 25 June 1999, adf International requested Shirley to seek a waiver from
vdot of the Buy America requirements. adf International wrote that
adf cannot perform the fabrication work at its facility in Florida. While the Florida
facility is large, it does not have heavy lifting capacity to handle the steel for this job.
In addition, as is the case with all US fabricators, the adf facility is fully loaded.
We are unable to locate a steel fabricator who is capable of performing the work in
the US within the required time frame. We understand that all fabricators capable of
performing the work are fully loaded.22
adf International also stressed the public interest in completing the Project on time,
urging that the interstate highway systemof which the Springfield Interchange
was an important partserved local needs, interstate commerce and national and
civil defense. These interests, in the view of adf International, will be promoted by permitting the timely completion of the [P]roject through the grant of a
waiver and prejudiced by any delay in the [P]roject caused by a refusal to grant a
waiver.23
54. Shirley complied with adf Internationals request and wrote to vdot seeking
a waiver.24 By a letter dated 26 July 1999, vdot informed Shirley that the application for a waiver had been denied, there being no basis for granting a waiver.25
In that same letter, vdot also advised Shirley that the National Steel Bridge Alliance (nsba) is available to assist in locating domestic sources for your consideration. In a letter of 8 July 1999 to the fhwa, the nsba had written that there
was ample steel bridge fabrication capacity available in the United States and
attached a list of nearly 50 certified major steel bridge fabricating firms . . . a large
number [of which] can effectively meet the needs of the Springfield interchange
bypass project.26 Shirley conveyed that information to adf International a few days
later.
55. adf International then proceeded to attempt fulfilling its obligations under
the Sub-Contract partially by using its own facilities located in the State of Florida,
but mostly by sub-contracting the fabricating work to structural steel fabricators in
the US. According to adfs president, Pierre Paschini, adf had to fabricate its steel
at five different subcontracting facilities with the result of massively increasing
the cost of the Project. According to Mr Paschini the costs increased due to: (1) hiring the five US fabricators; (2) testing, equipment rental, transport and demurrage;
(3) significant additional time in project management, engineering work, transport
and demurrage shop to field were required; (4) separate systems of control, coordination and logistics to ensure steel was properly delivered to five fabricators,
fabricated in accordance with the contract and quality requirements and delivered
22
Letter of Mr P. Paschini, adf International, to Mr M. E. Post, Shirley, dated 25 June 1999, pp. 34;
Investors Materials and Cases, Vol. IA and B, Tab. A-7.
23
Ibid., pp. 46.
24
Letter of Mr M. E. Post, Shirley, to Mr F. Gee, vdot, dated 29 June 1999; Investors Materials and
Cases, Vol. IA and B, Tab. A-8.
25
Letter of Mr C. F. Gee, vdot, to Mr M. E. Post, Shirley, dated 26 July 1999; Investors Materials and
Cases, Vol. IA and B, Tab. A-12.
26
Investors Memorial, para. 27; Respondents Counter-Memorial, p. 13.
AWARD
487
to the site in accordance with the delivery schedule.27 Shirley in turn completed its
work on the Project in a timely manner and vdot, it appears, offered Shirley its
USD 10 million incentive bonus.28
III. The United States Measures at Stake

56. The United States measures about which the Claimant complains in the
present case comprise three tiers of legal provisions: (a) legislative statutory provisions promulgated in 1982; (b) implementing administrative regulations promulgated in 1983; and (c) contractual provisions embodying the administrative regulations and applying them in a particular highway construction or improvement
project, e.g., the Springfield Project. The first tier consists of Section 165(a) to (d)
of the Surface Transportation Assistance Act of 1982 (Section 165, staa of 1982)
as it stood on the filing of the Notice of Intention to Submit a Claim to Arbitration
dated 29 February 2000. Section 165 provides in pertinent part:
(a) Notwithstanding any other provision of law, the Secretary of Transportation shall
not obligate any funds authorized to be appropriated by this Act, or by any Act
amended by this Act or, after the date of enactment of this Act, any funds authorized
to be appropriated to carry out this Act, Title 23, United States Code, Federal Transit
Act, or the Surface Transportation Assistance Act of 1978 and administered by the
Department of Transportation, unless steel, iron, and manufactured products used
in such project are produced in the United States.
(b) The provisions of subsection (a) of this section shall not apply where the Secretary
finds
(1) that their application would be inconsistent with the public interest;
(2) that such materials and products are not produced in the United States in
sufficient and reasonably available quantities and of a satisfactory quality; or
(3) [repealed];
(4) that inclusion of domestic material will increase the cost of the overall project
contract by more than 10 percentum in the case of projects for the acquisition
of rolling stock, and 25 percentum in the case of all other projects;
. . . (Emphases added)29
57. The second tier of provisions consists primarily of 23 CFR Section 635.410,
entitled Buy America requirements, the regulations issued by the fhwa, Department of Transportation, for the implementation of Section 165, the first tier statutory
provisions. The portions of 23 CFR 635.410 pertinent for present purposes are the
following:
Sec. 635.410 Buy America requirements.
...
27
Exhibit 2 of the Investors Memorial, the witness statement of Pierre Paschini at paras. 513.
29
23 USCA sec. 101; Vol. IIInvestors Materials and Cases, A.1, Tab. A-4. The full text of Section
165 of the staa of 1982, as currently amended, is also quoted in the Investors Memorial, para. 47.
28
488
(b) No federal-aid highway construction project is to be authorized for advertisement

or otherwise authorized to proceed unless at least one of the following requirements
is met:
(1) The project either: (i) includes no permanently incorporated steel or iron materials, or (ii) if steel or iron materials are to be used, all manufacturing
processes, including application of a coating, for these materials must occur
in the United States. Coating includes all processes which protect or enhance
the value of the material to which the coating is applied.
(2) The State has standard contract provisions that require the use of domestic
materials and products, including steel and iron materials, to the same or
greater extent as the provisions set forth in this section.
...
(4) When steel and iron materials are used in a project, the requirements of this
section do not prevent a minimal use of foreign steel and iron materials, if
the cost of such materials used does not exceed one-tenth of one percent (0.1
percent) of the total contract cost or $2,500, whichever is greater. For purposes
of this paragraph, the cost is that shown to be the value of the iron and steel
products as they are delivered to the project.
(c) (1) A State may request a waiver of the provisions of this section if:
(i) The application of those provisions would be inconsistent with the public
interest; or
(ii) Steel and iron materials/products are not produced in the United States in
sufficient and reasonably available quantities which are of a satisfactory
quality.
. . . (Emphases added).30
58. The third tier of provisions consists of Special Provision for 102CUse of
Domestic Material (Section 102.05) which is a contractual provision, being (as
noted earlier) built into the Main Contract between vdot and Shirley and incorporated by reference into the Sub-Contract between Shirley and adf International.
The pertinent part of Section 102.05 is quoted below:
Section 102.05. . . .
Except as otherwise specified, all iron and steel products (including miscellaneous steel
items such as fasteners, nuts, bolts and washers) incorporated for use on this project
shall be produced in the United States of America; unless the use of any such items
will increase the cost of the overall project by more than 25%. Produced in the United
States of America means all manufacturing processes whereby a raw material or a
reduced iron ore material is changed, altered or transformed into an item or product
which, because of the process, is different from the original material, must occur in
one of the 50 States, the District of Columbia, Puerto Rico or in the territories and
possessions of the United States. Raw materials such as iron ore, pig iron, processed,
pelletized and reduced iron ore and other raw materials used in steel products may, however, be imported. All iron and steel items will be classified hereinafter as domestic
or foreign, identified by and subject to the provisions herein. In the event use of the
aforementioned domestic iron and steel will increase the cost of the overall project
30
23 CFR 635.410; ibid., Tab. A-7. The full text of 23 CFR 635.410, as currently amended, is also
quoted in the Investors Memorial, para. 53.
AWARD
489
by more than 25%, the Contractor may furnish either domestic or foreign items.
. . . (Emphases added).31
The Investor explicitly stated, and the Respondent has not disputed, that Section
102.05 formed part of the Main Contract and the Sub-Contract because of the force
and effect of 23 CFR 635.410, the fhwa regulation implementing Section 165 of the
1982 staa of the US Congress.32 vdot included special provision 102C in vdots
Road and Bridge Specifications as of 3 May 1995; and those Road and Bridge
Specifications as of 1 January 1997 also required, under paragraph 107.01, that all
federal and state laws be observed. Further, the Shirley/adf Sub-Contract provides
that the subcontractor specifically acknowledges Section 102C of the special provisions regarding the use of domestic material.33 The Commonwealth of Virginia
has no statute or regulation of its own prescribing any preference for domestic (US
or Virginia) steel materials and products in Virginia highway construction projects.
59. It will be seen below that the Claimant in fact complains about a fourth
tier measure of the Respondentthe interpretation and application by the fhwa
and vdot of Section 102.05 as well as the pertinent statutory and administrative provisions (the first two tiers of legal provisions) to the facts of this case
in such a manner as to include within the scope of the term all manufacturing
processes required to take place in the United States of America the operations
which adf Group designates as post-production fabrication of structural steel products out of steel materials which had been previously manufactured in the United
States of America.34 The Claimant argues below that such interpretation and application are inconsistent with the obligations of the Respondent set out in nafta
Articles 1102(1) and (2) and 1105(1) to accord National Treatment and fair and
equitable treatment [and] full protection and security, respectively. On 19 March
1999, at or shortly before signing its Sub-Contract with Shirley, the Claimant had
received a legal opinion from its US lawyers35 to the effect that its proposed fabrication operations in Canada were consistent with the Buy America clause in its
Sub-Contract.
IV. The Principal Claims and Submissions of the Parties
60. It is useful at this stage to summarize, in broad strokes, the principal claims
and submissions of the Investor on the one hand, and of the Respondent on the
31
Text quoted in extenso in Investors Memorial, p. 4; Material and Cases Appended to Investors
Memorial, Vol. IA and B, Tab. B(1) excerpts from main contract containing vdot Section 102.5;
Tab. B(3) Shirley/adf subcontract, paragraph 12, incorporating Exhibit B, paragraph 4 providing that
contractor acknowledges domestic content requirements of Section 102.
32
Investors Memorial, para. 6; Respondents Counter-Memorial on Competence and Liability,
pp. 1418.
33
In Tab. B(3), Exhibit B, para. 4; supra, note 31.
34
Investors Memorial, pp. 11-14. The Investor points to the definition of measure in Article 201(1),
nafta, as including any law, regulation, procedure, requirement or practice. It may also be noted that
the Investor refers to the interpretation and application of the measures in question in the Springfield
Interchange Project in particular, or in any Federal-aid Highway Project in general. Ibid., p. 14.
35
Legal Opinion dated 22 March 1999, from Emalfarb, Swan and Bain; Materials and Cases, Vol. IA
and B, Tab. 2, Annexed to Investors Memorial. The opinion seems to have been post-dated.
490
other hand. These claims and submissions are examined in detail at a later portion
of this Award in the light of the facts of this case and of the requirements of the
applicable law.
1. The Investors Principal Claims and Submissions
(a) Article 1102: the national treatment obligation
61. The Investor claims, firstly, that the Buy America provisions here in question,
coupled with the US requirement that those measures be applied by State governments, are designed to favor US domestic steel, US steel manufacturers and US
steel fabricators over non-US steel, steel manufacturers and steel fabricators. The
Investor submits that by definition, the US measures treat national investments
more favorably than non-national investments, and as such are inconsistent with
the requirements of Article 1102 of the nafta.36
62. Article 1102 states in relevant part:
Article 1102: National Treatment
Each Party shall accord to investors of another Party treatment no less favorable
than that it accords, in like circumstances, to its own investors with respect to the
establishment, acquisition, expansion, management, conduct, operation, and sale or
other disposition of investments.
Each Party shall accord to investments of investors of another Party treatment no less
favorable than that it accords, in like circumstances, to investments of its own investors
with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.
...
63. It is claimed by the Investor that adf Group is an investor of a Party, Canada,
within the meaning of Article 1102(1), being an enterprise organized under the
laws of a Party. The Investor also states that adf International is an enterprise
and an investment of an investor of a Party for purposes of Article 1102(2) since
adf International is owned by an investor (adf Group) of a Party. Accordingly,
the Investor argues, the United States of America is obliged to accord national
treatment to adf Group under Article 1102(1), and to adf International under
Article 1102(2), with respect to the sale of steel and the expansion, management,
conduct and operation of adf International. The investments of adf Group are
identified as including (a) the fabricated steel acquired by adf Group or adf International, and (b) the interests [of adf Group or adf International] arising from
the commitment of capital or other resources in or under the Sub-Contract.37
64. It is further claimed by the Investor that adf Group and adf International are
in like circumstances, but are discriminated against, as compared with US steel
manufacturers and fabricators. US steel fabricators operate in the same sector, sell
the same product and compete for the same customers as adf Group. They buy the
same input (US steel), treat that input the same way and deliver the same fabricated
36
37
Investors Memorial, para. 120.

Id., paras. 1278.
AWARD
491
steel to the same clients. The only difference, in the Investors view, between adf
Group and US steel fabricators is the physical location of their facilities.38 But
Article 1102(1) assumes that an investor will be located outside the territory of the
Party which is bound to provide national treatment.39 The Investor was prohibited
from fabricating the steel (part of its investment) in Canada and selling to adf
International, because its facilities in Canada were treated less favorably than any
like facilities in the United States.40
65. Article 1102, the Investor argues, has extended the principle against discrimination in trade in goods to cover investors and their investments.41 Article 1102
must be viewed in its context which consists of a free trade agreement designed
to encourage the free flow of goods, services and investments within the nafta
area.42 Upon the other hand, the Congressional intent underlying the US measures
in question is unequivocal: it is to favor the output of US enterprises over [that
of] non-US enterprises and thereby to favor US enterprises over non-US enterprises. (Emphasis and brackets added)43 The US measures are, in the Investors
submission, de jure (on their face) discriminatory, and protectionist, treating
non-US investors and their investments less favorably than US investors and their
investments.44
66. The Investor elaborates by arguing that the US measures, by requiring investors of another nafta Party to use domestically produced goods only and effectively prohibiting the use of imported goods in certain contracts, adversely affect
the management, conduct and operation of the investment.45 The measures here in
question restrict the ability to freely transfer goods and services between a parent
corporation and its subsidiary, and diminish the investments capacity to integrate
its operations with those of the investor.46 Thus, in the view of the Investor, the US
measures place adf International at a competitive disadvantage vis-à-vis domestic
fabricators.47 For steel fabricators in the US, the ability to fabricate in Canada is
irrelevant. Upon the other hand, adf International alone is confronted with the necessity of choosing from three options: expanding its US facility; or subcontracting
work to its US competitors; or abandoning significant business opportunities.48
38
39
40
41
42
Id., para. 155.

Id., para. 157.
Id., para. 160.
Id., para. 135.
Id., para. 138. Article 102(1) of nafta sets out the objectives of nafta which are, inter alia, to:
(a) eliminate barriers to trade in, and facilitate the cross-border movement of goods and services
between the territories of the Parties;
(b) promote conditions of fair competition in the free trade area; [and]
(c) increase substantially investment opportunities in the territories of the parties;
...
43
44
45
46
47
48

Id., paras. 146, 208.
Id., para. 162.
Id., para. 165.
Id., para. 171.
Id., paras. 173, 175.
492
67. Finally, the application of the US measures to the Sub-Contract between

Shirley and adf International constituted a refusal of US authorities to follow their
own consistent caselaw to the effect that post-production fabrication of steel
products does not change the origin of that steel for purposes of buy national
requirements.49 The rule applied to the Investor was that fabrication in Canada of USorigin steel constituted manufacturing or production that does change the country
of origin of the steel from US to Canada. Such refusal to follow the applicable
caselaw was in itself a violation of [the] national treatment [obligation].50
(b) Article 1105: the minimum standard of treatment obligation
68. Article 1105, in its pertinent portion, provides:
Article 1105: Minimum Standard of Treatment
1. Each Party shall accord to investments of investors of another Party treatment
in accordance with international law, including fair and equitable treatment and full
...
69. The Claimant begins by recalling the provisions of Article 102(2) which direct
Parties to interpret and apply nafta provisions in the light of [nafta] objectives set
out in Article 102(1) and in accordance with applicable rules of international law.
Thus, the Claimant submits that Article 1105(1) is to be interpreted in a manner
which eliminates barriers to trade in goods and services in order to attain the . . .
objectives [of nafta] and read purposefully and in a large and liberal manner
so as to defeat the barriers [to trade] that the objectives of nafta are designed to
overcome.51
70. The Claimant goes on to make a textual argument: full protection and security, the words actually used in Article 1105(1), should not be recast as protection
and security from the most egregious of government action, or as full protection
and security from actions that would shock the international community. (Emphasis added)52 Neither may international law as used in Article 1105(1) be read as
customary international law, since customary international law does not provide fair and equitable [treatment] and full protection and security to investors.
(Emphasis added) If it did so provide, the Investor argues, there would have been
no need for the multitude of bilateral investment treaties (bits) which are now in
force.53
71. To the Claimant, Article 1105(1) does not simply prohibit treatment of investments of another Partys investors which constitutes egregious conduct, but rather
prohibits any treatment that is not in itself fair and equitable or which does not
provide full protection and security.54 The international law referred to in Article
1105(1) establishes and projects fair and equitable treatment and the providing
49
50
51
52
53
54
Id., paras. 18190.

Id., para. 189.
Id., para. 235.
Id., para. 238.
Id., para. 239.
Id., para. 243.
AWARD
493
of full protection and security as positive legal requirements, against which the
treatment accorded by the United States to the Investor and its investments may be
evaluated by the Tribunal.
72. The Investor contends that the US measures here in question fail to come up
to those legal requirements in a variety of ways. First, the Buy America provision
in Section 165 of the staa of 1982 as amended is per se unfair and inequitable
within the context of nafta.55 Second, the Buy America provision fails adequately
to control the discretionary authority of the fhwa, which agency applies the law as
it sees fit, irrespective of the text of Section 165. Section 165 hence does not accord
full protection and security to investors of another Party.56 Third, the application
of the Buy America provision to the Investor arbitrarily dissolves the legitimate expectations created by previous decisions of US courts and administrative agencies
with respect to buy national policies.57 The Investor also complains about the
procedures used by the US to adopt the [administrative] regulations in question as
violative of the requirements of Article 1105(1) and the Albanian and Estonian bits
with the US58 It is less than clear, however, whether this complaint is not already
covered by the second or the third specification of the Investor. Finally, after having undertaken to exclude the Buy America provision from Federal Government
procurement under Chapter 10 of nafta, the US should not indirectly force states
to apply [that provision]. Allowing states to pursue Buy America policies is one
thing; it is quite another thing actively to forc[e] them to do so.59
73. On 31 July 2001, a day before the submission by the Claimant of its Memorial
dated 1 August 2001, the nafta Free Trade Commission (ftc) issued its Notes
of Interpretation of Certain Chapter XI Provisions (ftc Interpretation), signed
for their respective Governments by the United States Trade Representative, the
Mexican Secretary of Economy and the Canadian Minister for International Trade.
The ftc Interpretation, which was also on 31 July 2001, forwarded to the Tribunal
by the Respondent,60 addressed certain articles of the nafta, including Article
1105(1):
1. Article 1105(1) prescribes the customary international law minimum standard of
treatment of aliens as the minimum standard of treatment to be afforded to investors
of another Party.
2. The concepts of fair and equitable treatment and full protection and security
do not require treatment in addition to or beyond that which is required by the
customary international law minimum standard of treatment of aliens.
3. A determination that there has been a breach of another provision of the nafta, or
of a separate international agreement, does not establish that there has been a breach
of Article 1105(1).
55
Id., para. 249.

Ibid.
57
Id., para. 251.
58
Investors Reply to the Counter-Memorial of the United States on Competence and Liability (Investors
Reply), para. 283.
59
60
Letter, dated 3 August 2001, of the Secretary of the Tribunal to the Members of the Tribunal.
56
494
74. The Investors response to the issuance of the ftc Interpretation, set out in its
Reply to the Counter-Memorial of the Respondent, was twofold: firstly, the Investor
reiterated the several arguments made in its Memorial that we have already noted;61
secondly, it brought within the focus of its submissions the provisions of Article
1103.
(c) Article 1103: most-favored-nation treatment obligation
75. Article 1103 reads as follows:
Article 1103: Most-favored-nation Treatment
1. Each Party shall accord to investors of another Party treatment no less favorable
than that it accords, in like circumstances, to investors of any other Party or of a
non-Party with respect to the establishment, acquisition, expansion, management,
conduct, operation, and sale or other disposition of investments.
2. Each Party shall accord to investments of investors of another Party treatment no
less favorable than that it accords, in like circumstances, to investments of investors
of any other Party or of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of
investments.
76. The Investor submits that one effect of Article 1103 is that investors of a
Party to nafta are entitled to benefit from the better of the treatment afforded to
(i) nafta investors under Article 1105, or (ii) the treatment afforded to investors
of a non-nafta Party under Article 1103.62 If a bilateral investment treaty (bit or
treaty) entered into by the United States of America with any non-nafta Party
offered treatment to investors more favorable than the treatment provided for by
customary international law, a nafta investor is, in the view of the Investor,
entitled to the treatment required under that treaty.
77. The Investor goes on to adduce Article II(3)(a) and (b) of the bit between
the Respondent and the Republic of Albania which went into effect on 4 January
1998 and which provides:
...
Article II
3. (a) Each Party shall at all times accord to covered investments fair and equitable
treatment and full protection and security and shall in no case accord treatment
less favorable than that required by international law.
(b) Neither Party shall in any way impair by unreasonable and discriminatory measures the conduct, operation and sale or other disposition of covered investments.63
78. To the Investor, the text of Article II(3)(a) of the USAlbania bit contemplates
separate obligations of fair and equitable treatment and full protection and
61
Investors Reply, paras. 24864.

Investors Reply, para. 221 and footnote 53 thereof.
63
The USAlbania bit was signed on 11 January 1995 and went into effect on 4 January 1998; text in
Materials and Cases, appended to the Investors Memorial, Vol. II-A.2; Tab. A-17.
62
AWARD
495
security and establishes a floor, treatment required by international law, below

which the first two elements cannot fall.64 Article II(3)(a) requires, in other words,
fair and equitable treatment and full protection and security to be accorded to
covered investments, a standard of treatment separate or distinct from, and more
favorable than, the treatment required by customary international law minimum
standard of treatment incorporated in Article 1105(1) of nafta as interpreted by
the ftc Interpretation.65
79. The Investor also submits that Article II(3)(b) of another treaty, the US
Estonia bit, which entered into force on 16 February 1997 establishesvia Article
1103 of naftaanother self-contained standard of treatment of investors and
investments of a nafta Party:
Article II
...
3. (b) Neither Party shall in any way impair by arbitrary or discriminatory measures the
management, operation, maintenance, use or enjoyment, acquisition, expansion,
or disposal of investment. For purpose of dispute resolution under Articles VI
and VII [the arbitration provisions], a measure may be arbitrary or discriminatory
notwithstanding the fact that a Party has had or has exercised the opportunity
to review such measure in the courts or administrative tribunals of a Party.66
(Emphasis added)
80. A final contention of the Investor is that the separate, distinct and selfcontained standards of treatment projected by the USAlbania and USEstonia
bits, considered by the Investor to be more favorable than the minimum standard
of treatment associated with the customary international law by the ftc, are in any
case available to the Investor under the national treatment provisions in Article
1102 of the nafta. Invoking certain statements made by the Arbitral Tribunal in
the Maffezini case,67 the Investor urges that national treatment covers not just the
treatment of foreign investors in the territory of a nafta Party, but also the treatment
demanded by that nafta Party for its own investors outside its own territory. Under
this view, the Investor is entitled by virtue of nafta Article 1102 to the treatment
accorded to US investors by Albania and Estonia in their respective territories under
the USAlbania and USEstonia treaties.68
64
Investors Reply, paras. 223, 231.

The Investor also describes the fair and equitable treatment and full protection and security
standards set out in Article II(3)(1) of the USAlbania bit as self-contained; Investors Reply, paras.
231 and 236, citing R. Dolzer and M. Stevens, Bilateral Investment Treaties, p. 60 (1995).
66
As quoted in Investors Reply, 238; see id., para. 240. It is worth noting that Article II(3)(2) of the
USAlbania bit, substantially reproducing the first sentence of Article II(3)(b) of the USEstonia bit,
prohibits unreasonable and discriminatory measures.
67
Maffezini v. Kingdom of Spain, icsid Case No. ARB/97/7; 40 ILM 1129 (2001); Decision of the
Tribunal on Objections to Jurisdiction, 25 January 2000.
68
Investors Reply, paras. 242-7. The Maffezini case referred to the national-treatment not to the
most-favored-nation treatment obligation.
65
496
(d) Article 1106: the obligation not to impose or enforce

performance requirements
81. The next principal claim of the Investor is that the United States measures
here at stake are inconsistent with the requirements of nafta Article 1106. The
Investor cites the following portions of Article 1106:
Article 1106: Performance Requirements
1. No Party may impose or enforce any of the following requirements, or enforce
any commitment or undertaking, in connection with the establishment, acquisition,
expansion, management, conduct or operation of an investment of an investor of a
Party or of a non-Party in its territory:
(a) . . .
(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use or accord a preference to goods produced or services provided
in its territory, or to purchase goods or services from persons in its territory;
. . . (Emphasis added)
82. The Buy America measures of the Respondent, the Investor argues, violate
Article 1106(1)(b) by imposing a 100% domestic (United States) content requirement, and Article 1106(1)(c) by requiring preference to be given to United Statesproduced steel materials and products, if the Investor is to provide fabricated steel
products to Federal-aid highway projects.69 In the present case, adf International is
obliged to purchase only US steel and either to fabricate that steel in the US itself,
or to subcontract the fabrication to US steel fabricators rather than to its Canadian
parent.70 The Respondents measures impose performance requirements relating to
or connected with the management, conduct or operation of adf International
within the meaning of the chapeau of Article 1106 since those measures directly
impact the daily activities, operations and sales of adf International.71
83. To document the non-conforming nature of the Buy America measures, the
Investor adverts to the part of Article 1108(1) of nafta which provides:
Article 1108: Reservations and Exceptions
1. Articles 1102, 1103, 1106 and 1107 do not apply to:
(a) any existing non-conforming measure that is maintained by
(i) a Party at the federal level, as set out in its Schedule to Annex I or III,
...
(b) continuation or prompt renewal of any non-conforming measure referred to in
subparagraph (a);
. . . (Emphasis added)
84. The Investor further points to the United States Schedule to Annex I, entitled Reservations for Existing Measures and Liberalization Commitments, which
Schedule includes the following item:
69
70
71
Investors Memorial, paras. 257 et seq.

Ibid., para. 259.
AWARD
497
Sector:
...
Waste Management
Type of Reservation:
Level of Government:
Measures:
Performance Requirements (Article 1106)

Federal
Clean Water Act, 33 USC
secs. 1251 et seq.
The Clean Water Act authorizes grants for the
construction of treatment plants for municipal sewage
or industrial waste. Grant recipients may be privately
owned enterprises. The Act provides that grants shall
be made for treatment works only if such articles,
materials and supplies as have been manufactured,
mined or produced in the US will be used in the
treatment works. The Administrator of the
Environmental Protection Agency has authority not to
apply this provision for example, if the cost of the
72
articles in question is unreasonable. (33 USC sec. 1295)
Description:
85. The Investor believes that the United States has admitted that the Buy
America provisions of the Clean Water Act are inconsistent with the requirements
of Article 1106 and hence needed to be saved under Article 1108(1) and the US
Schedule to Annex I. The Buy America provisions of Section 165 of the staa
Act of 1982 as amended are more stringent than the comparable provisions of
the Clean Water Act, since the former (as interpreted by the fhwa) requires that
the steel products used in a Federal-aid highway project be wholly manufactured
and fabricated in the United States, while the latter is satisfied if the products
involved had been manufactured in the United States substantially all from articles
manufactured in the United States. Since the US measures here in question have
not been saved under Article 1108(1), it follows, the Investor submits, that those
measures are a fortiori inconsistent with Article 1106(1)(b) and (c) and may no
longer be applied in respect of investments of investors of a nafta Party.73
(e) Non-applicability of exceptions to Articles 1102, 1103 and 1106: effect of
Article 1108(7) and (8)procurement by a party
86. The Investor turns to Article 1108(7) and (8) of nafta which the Respondent
in its Counter-Memorial invokes as a principal defense against the principal claims
72
The Clean Water Act provides:

Section 1295. Requirements for American Materials. Notwithstanding any other provision of
law, no grant . . . shall be made under this subchapter for any treatment works unless only such
manufactured articles, materials and supplies as have been mined or produced in the United
States, and only such manufactured articles, materials and supplies as have been manufactured
in the United States substantially all from articles, materials and supplies mined, produced or
manufactured, as the case may be, in the United States will be used in such treatment works...
(Emphases provided)
Full text in Materials and Cases, vol. IIA.1, Tab. A-8, appended to Investors Reply.
Investors Memorial, paras. 264-7.
73
498
of the Investor. The pertinent portions of Article 1108 follow:

...
7. Articles 1102, 1103 and 1107 do not apply to:
(a) procurement by a Party or a state enterprise; or
(b) subsidies or grants provided by a Party or a state enterprise, including government-supported loans, guarantees and insurance.
8. The provisions of:
...
(b) Article 1106(1)(b), (c), (f) and (g), and (3)(a) and (b) do not apply to
procurement by a Party or a state enterprise;
. . . (Emphases added).
87. The Investor seeks to avoid the thrust of Article 1108(8)(b) by stating that the
present case is not a procurement case and that the Investor is not complaining about
the conduct of any Federal procurement. The Investor complains, rather, about the
Respondents measures imposed and enforced by the Federal Government upon the
purchase of goods and services by the vdot in connection with the Springfield Interchange Project. Had the Federal Government not imposed its measures on vdot,
the Claimant would have been able to supply to vdot steel products fabricated in
Claimants facilities in Canada. The activities and operations of vdot, the Investor
concedes, did constitute procurement by the Commonwealth of Virginia. The Federal Government did not purchase or otherwise acquire any goods and services for
the Springfield Interchange Project; the vdot did, for the Commonwealth of Virginia. However, unlike the US Federal Government, the Commonwealth of Virginia
is not subject to the disciplines of Chapter 10 and has not voluntarily assumed any
obligations in respect of procurement under Chapter 10. Thus, in the view of the
Investor, if the Respondents measures here in question do constitute procurement,
they would constitute violation by the United States Government of the prohibitions of Chapter 10, including in particular Article 1006. If, on the other hand, the
Respondents measures do not constitute procurement by the Federal Government,
then they are not saved by Article 1108(8)(b).74
88. The Investor concedes that Article 1108(7)(b) permits a Party to derogate
from the national treatment obligation when making grants and subsidies. Article
1108(7)(b), however, does not permit a Party to continue ad infinitum to require
that grant recipients in turn violate the national treatment obligation when they
spend [the grant or subsidy] funds . . .75 The Respondent may, in other words,
discriminate between nationals and non-nationals in selecting the grantee of a
subsidy or grant, but may not impose on the grantee an obligation to continue
discriminating.76
74
75
76
Ibid., paras. 2924.

Ibid., para. 305.
Ibid., para. 308.
AWARD
499
(f) Claims concerning projects other than the Springfield Interchange Project
89. In its Notice of Arbitration, paragraph 76, the Investor stated that the
[c]ontinued application of the [United States measures] will cause additional damage to adf International, limiting its ability to fully participate in all future Federalaid highway construction projects. In its Memorial, the Investor builds upon the
above sentence and alleges that it has participated in certain other Federal-aid highway projects, namely: (a) the Lorten Bridge Project in Virginia; (b) the Brooklyn
Queens Expressway Bridge Project in the State of New York; and (c) the Queens
Bridge Project also in the State of New York.77
90. In the above-mentioned projects, the Investor claims, the United States measures here in question were applied, with the result that adf International or adf
Group was unable to use in those projects US-origin steel that was fabricated in
Canada. The Investor alleges it sustained damages, the extent of which it proposes
to address at the second phase of this arbitration.78
2. The Respondents Principal Defenses and Submissions
(a) Concerning Article 1102: the national treatment obligation, and Article
1106: the obligation not to impose or enforce performance requirements
91. A basic defense of the Respondent is that the Investors claims based on
Articles 1102 and 1106 are foreclosed by the exceptions set out in Article 1108(7)(a)
and (8)(b) for procurement by a Party.79
92. It is stated, firstly, by the Respondent that, as the Investor has conceded, the
Commonwealth of Virginia, in purchasing steel and services from Shirley (which in
turn contracted with the Investor), was engaged in procurement.80 Virginia being
one of the States of the United States, there was, in the present case, procurement
by a governmental unit of the United States. The purchase of steel and services
by a governmental unit of the United States is plainly procurement by a Party
within the meaning of Article 1108.81
93. The second argument of the Respondent relates to the coverage or scope of
application of nafta Chapter 10, entitled Government Procurement. Notwithstanding the comprehensiveness of the title of Chapter 10, not all government
procurement, in fact, was intended to be subjected directly to the disciplines of
Chapter 10. At present, Chapter 10 applies only to measures relating to procurement82 by specified US Federal Government entities listed in Annex 1001.1a-1
under the rubric Schedule of the United States which lists 56 United States
Government agencies or entities (including, it may be noted, the Department
77
Investors Memorial, para. 31. These other Projects are also listed in the Witness Statement of
Mr Pierre Paschini, para. 54; Appendix 1 to Investors Memorial. In para. 55 of this same Statement,
it is said that adf has incurred significant additional costs on those [other] Projects because of the
imposition of the Buy America Measures. Id.
78
79
Respondents Counter-Memorial on Competence and Liability (Counter-Memorial), p. 20.
80
81
Ibid., p. 20.
82
Article 1001(1). The nafta Parties have, in Article 1024, recorded their intent to enter into future
negotiations for expansion of the coverage of Chapter X to include procurement by state and provincial
government agencies and enterprises. See further, infra, paras. 1637.
500
of Transportation). Thus, while Article 1108 excludes from the provisions of

Chapter 11 any and all government procurement (whether by the Federal Government or by sub-federal governmental agencies), Chapter 10 in fact reaches only
procurement by certain listed Federal Government agencies. More specifically,
in the view of the Respondent, state and provincial government procurement is
not subjected to any national-treatment and performance-requirement obligations
whether under Chapter 11 or under Chapter 10.83
94. To document the limited scope of application of Chapter 10, the Respondent
cites the United States Statement of Administrative Action84 and Canadas Statement of Implementation.85 In addition, it is contended by the Respondent that all
three nafta Parties, after the nafta had gone into effect, continue to maintain federal assistance programs for state and provincial government procurement.86 The
Federal Government of Canada, for instance, provides heavy financial assistance to
the provinces for highway construction and many of the provinces receiving this assistance enforce domestic preference regulations in their procurement. In Mexico,
too, federal law prescribes preferences for Mexican goods and services in procurement by states wholly or partially funded by the federal Mexican government.87
Finally, it is submitted by the Respondent that, in point of fact, domestic requirements for government procurement are in place in most, if not all, countries. Even
where countries have accepted limited obligations not to impose domestic content
or preference requirements for domestic goods and services, they have commonly
exempted local government procurement from such obligations.88
95. The third argument of the Respondent is that the Investors assertions concerning Article 1108(7) and (8) lead to a conclusion that makes no sense.89 Procurement by a state or provincial government is exempt from the national-treatment
and performance-requirement obligations imposed by Chapter 10 which expressly
addresses government procurement. Nevertheless, according to the Respondent, the
Investor claims that state-level procurement is subject to the disciplines of Chapter
11 because domestic-content requirements and preferences for domestic products
are in themselves protectionist, discriminatory and unfair. The nafta Parties
simply have not agreed to subject state-level procurement to the requirements and
prohibitions of either Chapter 10 or Chapter 11. Only federal-level procurement
by certain identified federal government agencies and entities [has] been brought
by the nafta Parties under the coverage of Chapter 10 and disputes arising with
respect to such procurement fall within the ambit of the State-to-State dispute
83
Respondents Counter-Memorial, pp. 256.

Respondents Counter-Memorial, p. 28; see North American Free Trade Agreement, . . . Statement of
Administrative Action, p. 135, Appendix vol. II; appended to Respondents Counter-Memorial, Tab.-32.
85
Ibid., p. 27; see Dept of External Affairs, North American Free Trade Agreement, Canadian Statement
on Implementation, Canada Gazette, 1 January 1994, p. 47, ibid.; Tab.-24.
86
Stobo Declaration, Appendix of Evidentiary Materials, to Respondents Counter-Memorial, Tab.-3
at pp. 3647; Von Wobeser Declaration, id., Tab.-4.
87
Ibid., pp. 289; see Expert Report of Gerald H. Stobo, Appendix of Evidentiary Materials, Respondents Counter-Memorial, Tab.-3, paras. 910, 25-6, 31 et seq. See further Expert Report of Claus von
Wobeser, id., Tab.-4, paras. 12, 17 et seq.
88
Respondents CounterMemorial, pp. 301.
89
Ibid., pp. 21, 35.
84
AWARD
501
resolution procedures of Chapter 20,90 that is, outside the Investor-to-State dispute
settlement framework set up in Chapter 11.
96. The next principal defense of the Respondent against the Investors claims
of violation of Articles 1102 and 1106 presents multiple layers of argument. The
Respondent submits, firstly, that Article 1102 requires national treatment in respect of investors and investments of one Party, located in the territory of another
Party, not in respect of trade in goods and services originating from the territory
of a Party. The latter is regulated, not by Chapter 11 and its InvestorState dispute
resolution system, but rather by other Chapters of nafta and other dispute resolution procedures.91
97. Secondly, the Respondent stresses that, by virtue of the Buy America provision in the vdotShirley Main Contract, every steel fabricator in the United
Stateswhether of US or Canadian or Mexican or other nationalityfaces precisely the same constraints that adf International faced. None may subcontract
work to fabricators outside the United States and use the resulting steel products
in a federal-aid highway project like the Springfield Interchange Project. In other
words, adf International was not, with respect to its facilities in Canada or the
sale of its investment consisting of US-origin steel or otherwise, accorded treatment
less favorable than the treatment that would have been given to any steel fabricator
of US nationality.92 More fundamentally, adfs facilities in Canada were neither
an investor nor an investment within the meaning of Chapter 11 and therefore,
in the view of the Respondent, they cannot be subject of an Article 1102 national
treatment violation.93
98. The Respondent argues, thirdly, that Article 1102 does not guarantee a parent
and its subsidiary corporation an ability to freely transfer goods and services
between [them inter se]. Neither does Article 1102 restrain a Party from limiting
an investors management, conduct or operation of its investment, so long as its
own investors and their investments in like circumstances are not given treatment,
in respect of the same matters, more favorable than that accorded to the investors
of another Party and their investments.94
99. To the Respondent, the judicial and administrative caselaw cited by the
Claimant is simply not on point. That caselaw deals with the interpretation of the
1933 Buy American Act which is concerned only with direct federal procurement,
while the Buy America provisions of the 1982 staa Act relate only to federally
funded state procurement for highway projects. The US statutory provisions applicable to direct federal procurement are different from those bearing upon
federally funded state highway procurement. The former require only the use of
articles, . . . manufactured in the United States substantially all from articles, . . .
manufactured, . . . in the United States. In contrast, the latter (1982) provisions
require the use of steel, iron and manufactured products . . . produced in the
United States, a requirement read by the fhwa as meaning wholly produced in
90
91
92
93
94
Ibid., p. 36.
Ibid., pp. 379.
Ibid., pp. 3940.
Ibid., pp. 434.
Ibid., p. 43.
502
the United States.95 The difference in statutory language is reflected in differences

in the implementing regulations. The regulations implementing the 1933 direct
federal procurement law provide that materials shall be considered to be of foreign origin if the cost of the foreign products used in such materials constitutes 50
percentum or more of the cost of all the products used in such materials. In contrast, the regulations implementing the 1982 statute dealing with federally-funded
state highway projects require that if steel or iron materials are to be used, all
manufacturing processes, including application of a coating, for those materials
must occur in the United States.96
100. It is, further, submitted by the Respondent that the interpretation given by
the fhwa to the Buy America provision of the 1982 staa has been consistently
maintained.97 The Investor has not shown that a different construction of the same
Buy America provision has been rendered by the fhwa in respect of an investor
of the United States and its investment, situated in like circumstances as the adf
Group.98
101. In respect of the Investors Clean Water Act argument, the Respondent explains99 that, as the reservation made by the US in its Schedule to Annex 1 of the
nafta expressly states, that Act authorizes grants for the construction of treatment
plants for municipal sewage and industrial waste, and that [g]rant recipients may
be privately owned enterprises. The procurement involved would not therefore be
regarded as governmental procurement or procurement by a Party saved by the
exception provided in Article 1108(7)(a) and (8)(b). Accordingly, the US negotiators found it necessary, or at least desirable, to save such federal-aid construction
under another paragraph of Article 1108, that is, under Article 1108(1)(a)(i), which
saves certain existing non-conforming measures listed in a nafta Partys Schedule
to Annex 1.
(b) Concerning Article 1105(1): minimum standard of treatment of foreign
investors and their investments and the ftc Interpretation of 31 July 2001
102. To the Respondent, the Investors claim that the measures here in question are
inconsistent with the requirements of Article 1105(1) rests on the supposition that
Article 1105(1) projects a subjective and intuitive standard [of treatment of foreign
investors and their investments] unknown to customary international law.100 The
Respondent relies upon the ftc Interpretation101 to the effect that Article 1105(1)
prescribes the customary international law minimum standard of treatment of aliens
as the minimum standard of treatment to be afforded to investments of investors
of another Party. The Respondent stresses that under Article 1131(2) of nafta,
the ftc interpretation is binding on this Tribunal, as on other nafta Chapter 11
tribunals.
95

Ibid., pp. 456.
97
Ibid., p. 46.
98
Ibid., p. 46.
99
100
Ibid., p. 49.
101
See supra, para. 39.
96
AWARD
503
103. Building on the ftc Interpretation, the principal submission of the Respondent is that the Investor, if it is to sustain its claim of violation of Article
1105(1), must demonstrate that the measures here in question are incompatible
with a specific rule of customary international law.102 The Respondent contends
that the Investor has not identified, and cannot identify, any rule of customary
international law forbidding the United States from imposing domestic content
requirements in respect of government procurement.103 Similarly, the Investor has
not adduced any rule of customary international law violated by the administrative process by which the fhwa promulgated its Buy America clause interpretation
requiring that all manufacturing processes used in the production of steel products,
including postproduction fabrication, occur in the United States. The Respondent
concludes that the Investor has not shown any breach of customary international
law obligations incorporated into Article 1105(1).104
(c) Concerning Article 1103: most-favored-nation treatment
104. As earlier noted, it was in its Reply to the Counter-Memorial that the
Investor for the first time made a specific claim based on Article 1103, the ftc
Interpretation having been issued shortly before the Investors Memorial was filed.
Thus, the Respondents first opportunity to traverse the Investors Article 1103
claim was in the Rejoinder. The United States response to the Article 1103 claim
has three parts.
105. The Respondent contends, in the first part, that this Tribunal has no jurisdiction to deal with the Article 1103 claim. Article 1119(b) of nafta states that
the notice of intention to submit a claim to arbitration shall specify, inter alia, the
provisions of [nafta] alleged to have been breached and any other relevant provisions. But adf Internationals notice of intent did not allege breach of Article
1103 and in fact did not mention that Article. By virtue of the provisions of Article
1122, the United States consent to the submission to arbitration did not encompass
the Investors Article 1103 claim. Accordingly, the arbitration agreement of the
parties to this case does not include an agreement to refer to arbitration the Article
1103 claim.105 This flaw is not cured by the omnibus relief clause (the Investors
basket clause) in the notice of intention in which the Investor reserv[ed] its right
to request such further relief that counsel [for the Investor] may advise and the
Arbitral Tribunal may permit.106
106. The Respondent argues, in the second part, that the Article 1108 exception
for procurement by a Party includes the Article 1103 claimalong with the
Articles 1102 and 1106 claimsof the Investor. Accordingly, all three claims should
be dismissed under Article 1108(7)(a) and 1108(8)(b).107
107. In the third place, and in any event, the Respondent submits that the US
Albania and the USEstonia treaties, invoked by the Investor as projecting more
102
103
104
105
106
107

Ibid.
Ibid., pp. 524; Respondents Rejoinder, pp. 313.
Respondents Rejoinder, p. 38.
Ibid., p. 39.
Ibid., p. 40.
504
favorable standards of treatment than that set out in Article 1105(1) as interpreted
by the ftc, do not in fact do so. To the contrary, in the view of the United States,
the relevant provisions of the two treaties set out a minimum standard of treatment
based on standards found in customary international law, or based on customary
international law simply.108 At no time since the nafta came into force has the
United States considered that the treatment to be accorded to foreign investors by
virtue of the fair and equitable treatment clauses of treaties of the United States
is more favorable to investors than the treatment required under Article 1105(1) of
nafta. Still further, according to the Respondent, state practice has consistently
viewed fair and equitable treatment as referring to the customary international
law minimum standard of treatment of aliens.109
(d) Concerning investors claims relating to projects other than the Springfield
Interchange Project
108. The Respondent rejects the Investors claims concerning other projects,
that is, projects other than the Springfield Interchange Project. The Respondent
questions the jurisdiction of the Tribunal to consider those claims upon the ground
that the United States has not given its consent to submission of those other claims
to arbitration. Under Article 1122(1), the United States maintains that its consent
is limited to the submission of a claim to arbitration in accordance with the procedures set out in [the nafta]. The Investors Notice of Intent to Submit a Claim
to Arbitration made no mention of highway construction projects other than the
Springfield Interchange Project and the Investor is accordingly precluded from
asserting claims relating to such other projects.
3. The Post-Hearing Submissions of the Parties and the Other nafta Parties
on Article 1105(1)
109. It was noted earlier that the issuance of the 31 May 2002 Pope and Talbot
Damages Award, and the Investors act of providing a copy thereof to the Tribunal
and the Respondent, occasioned the filing of a series of Post-Hearing Submissions
from the parties and from Canada and Mexico, all focusing on nafta Article 1105
and the reading thereof by the Pope and Talbot Tribunal. The Tribunal had asked
the parties to provide it with their comments on what factors, or kinds of factors, a
Chapter Eleven tribunal applying in a concrete case the fair and equitable treatment
and full protection and security standard referred to in Article 1105(1), nafta, may
take into account. We summarize below, in very condensed terms, the principal
post-hearing submissions made by the parties and Canada and Mexico in respect
of Article 1105(1).
(a) The disputing parties post-hearing submissions on Article 1105(1)
110. The Respondent in its first Post-Hearing Submission of 27 June 2002 submits that the factors that a tribunal applying the fair and equitable treatment and
108
109
Ibid., pp. 401.

Ibid., p. 42.
AWARD
505
full protection and security standard depend upon the rule of the customary international law minimum standard of treatment implicated by the claims asserted.
The Claimant, however, has not identified any rule of customary international law
embodied in Article 1105(1) that has been violated by the conduct of the Respondent about which the Claimant complains. The international minimum standard
embraced by Article 1105(1) is, according to the Respondent, an umbrella concept
incorporating a set of rules which have crystallized into customary international
law in specific concepts.110 The term fair and equitable treatment refers to the
customary international law minimum standard of treatment which encompasses
rules such as those for denial of justice, expropriation and other acts subject to an
absolute, minimum standard of treatment under customary international law.111 On
the other hand, the term full protection and security refers to the minimum level
of police protection against criminal conduct required as a matter of customary
international law.112 The pertinent rules of the customary international law minimum standard of treatment of aliens, according to the Respondent, are specific
ones that address particular contexts. There is no single standard applicable to all
contexts.113
111. The Respondent goes on to stress that a Chapter 11 tribunal may not disregard
an interpretation of a nafta provision by the nafta Parties acting through the ftc,
or interpret that provision in a manner inconsistent with an ftc interpretation, by
characterizing that interpretation as an amendment. The authority of a Chapter
11 tribunal with respect to the interpretation of the nafta is expressly made subject
to decisions taken by the ftc. The ftcs authority to issue binding interpretations
ensures the consistent and uniform interpretation of the nafta. A Chapter 11
tribunal which disregards an interpretation of the ftc, exceeds thereby the scope of
its authority under the nafta.114
112. At the same time, however, the Respondent expressly reiterates that customary international law, including the minimum standard of treatment of aliens,
may evolve over time.115 The Pope and Talbot Tribunal did not examine the mass of
existing bits to determine whether those treaties represent concordant state practice
and whether they constitute evidence of the opinio juris constituent of customary
international law. Thus, in the Respondents view, that Tribunal was not in a position to state whether any particular bit obligation has crystallized into a rule of
customary international law.116
113. On 11 July 2002, the Investor filed its first Post-Hearing Submission and
there, in response to the Respondents Post-Hearing Submission, sets out a series
of observations. The first is that a Chapter 11 tribunal must of course regard an
110
Post-Hearing Submission of Respondent United States of America on Article 1105(1) and Pope and
Talbot, 27 June 2002 (Respondents Post-Hearing Submission) p. 2.
111
Id., p. 3.
112
Ibid.
113
Id., pp. 34.
114
Id., pp. 1012.
115
Id., p. 20.
116
Id., p. 21.
506
interpretation by the ftc of a nafta provision as binding upon it.117 At the same time,
a nafta tribunal is obliged under Article 1131(1) to interpret nafta provisions in
accordance with the applicable rules of international law, including the customary
international law rules on treaty interpretation. Thus, a tribunal must consider ftc
interpretations alongside the objects and purposes of the nafta and the plain and
ordinary meaning of the terms in the context in which they appear.118 The second
observation of the Claimant relates to the evolving nature of customary international
law, including the portion thereof embodying the minimum standard of treatment
of aliens. The Investor notes that the Respondent has expressly accepted that the
customary international law standards are not frozen in time but instead do
evolve, and that the ftc when it issued its interpretation of Article 1105(1) had
in mind customary international law as it exists today.119 The Investor rejects,
thirdly, the basic submission of the Respondent that violation of a specific rule of
customary international law must be shown by the Investor. To the Investor, this is
like suggesting that there is no law of tort, but only a large group of unconnected
wrongs, each with its own name into one of which a plaintiff must fit the defendants
acts and the resulting harm before a remedy will be judicially granted.120 Customary
international law, in the Claimants view, does not establish such a requirement.
The Investor goes on to list what it calls factors that this Tribunal should take into
account but which, it appears to us, are in fact what the Investor believes are the
differing courses of action open to us in resolving its claim of violation of Article
1105(1).
114. The Investor, in its first Post-Hearing Submission, adduces what is arguably
a new contention to sustain its claim of violation of nafta Article 1105(1). The
Investor contends that the Respondent violated its Article 1105(1) obligation by
failing to perform its nafta obligations in good faith.121 The Buy America requirement is not good faith performance of the nafta obligations of the US and
the interpretation submitted by the US of the relevant nafta terms falls short of a
good faith interpretation of the treaty.122 The principle of good faith performance
is part of customary international law and is subsumed in Article 1105(1).123
This new emphasis on the principle of good faith is in line with the Investors
contention, asserted in its pre-hearing pleadings, that the Respondent abused its
discretion in administering its Buy America program which results in effective
discrimination against foreign investors such as adf.124
115. On 1 August 2002, the Respondent filed a Final Post-Hearing Submission in
which it states that all three nafta Parties have confirmed that the nafta does not
permit a Chapter Eleven tribunal to review an interpretation of the nafta Parties,
sitting as members of the ftc, and disregard it on the basis that interpretation is
117
Post-Hearing Submission of Claimant adf Group Inc. on nafta Article 1105(1) and the Damages
Award in Pope and Talbot and Canada, 11 July 2002 (Claimants Post-Hearing Submission), para. 9.
Id., para. 11.
119
Id., paras. 334; 39; 62.
120
Id., paras. 436.
121
Id., para. 86.
122
Id., para. 96.
123
Id., para. 89.
124
Investors Reply to Counter-Memorial, paras. 248, 260, 263.
118
AWARD
507
in fact an amendment.125 The Respondent also notes that Canada and Mexico
have joined the US in its rejection of key arguments or positions taken by the Pope
and Talbot Tribunal in respect of Article 1105(1). Thus, the nafta Parties are one
in stating that Article 1105(1), read together with the ftc Interpretation, clearly
prescribes the customary international law minimum standard of treatment.
116. In its Final Post-Hearing Submission, the Respondent also confronts the
Investors arguments that the US measures constitute arbitrary and discriminatory
conduct inconsistent with Article 1105(1) on the one hand, and violative of the
principle of good faith performance incorporated in customary international law,
on the other hand. The Respondent contends that the Investor has failed to sustain
its assertion that there exists a general international obligation to refrain from arbitrary conduct.126 Similarly, the Respondent construes the Investors argument
about the principle of good faith performance as an assertion that customary international law prescribes a general obligation of good faith subsumed in Article
1105(1), and rejects the notion that such a general obligation of good faith exists.127 The Respondent does recognize that customary international law rules, like
the rule of pacta sunt servanda, may impose obligations of good faith performance,
but points out that the Buy America provisions were not issued to implement nafta
obligations. The Claimant did not prove that a specific obligation of good faith
had been violated by the US.128 Finally, it is stressed that, in any event, the Claimant
has not presented any evidence of acts on the part of the Respondent that constitute
arbitrary or bad faith conduct.
117. On 1 August 2002, the Investor filed its Second (and final) Post-Hearing
Submission responding to the Respondents first Post-Hearing Submission and to
the Article 1128 Submissions of Canada and Mexico. The Investor at the outset
reiterates that ftc interpretations issued under nafta Article 2001(2)(c) are indeed
binding on this and other Chapter Eleven tribunals.129 At the same time, the Investor
insists that there is a threshold issue this Tribunal must address: whether the ftc
statement of 31 July 2001 is an interpretation by the Commission within the meaning
of article 1131 such that it is binding on this Tribunal.130 In addressing that issue,
the Tribunal, according to the Investor, would simply be exercising its authority,
indeed, its duty to determine the governing law that it must apply. Otherwise, the
ftc would be empowered to amend nafta, at least . . . Chapter Eleven [thereof],
which result would fly in the face of Article 2202 which prescribes the procedure
for amendment of nafta provisions.131
118. The Investor also suggests that Canada and Mexico do not go the full
length to which the Respondent goes. In the view of the Investor, Canada and
125
Final Post-Hearing Submission of Respondent United States of America on Article 105(1) and Pope
and Talbot, 1 August 2002 (Respondents Final Post-Hearing Submission), p. 2.
126
Id., p. 7.
127
Id., p. 11.
128
Id., pp. 1214.
129
Second Post-Hearing Submission of the Investor Responding to Article 1128 Post-Hearing Submissions of Canada and Mexico, 1 August 2002 (Investors Second Post-Hearing Submission),
para. 3.
130
Id., para. 7.
131
Id., paras. 89.
508
Mexico have not supported the pigeonhole approach to international claims put
forward by the US.132 Canada and Mexico begin with the position that a wrong
committed by a state in respect of an investor is actionable [provided] that wrong
is of a sufficient magnitude. Their disagreement with the Investor concerns the
magnitude of the wrong which will trigger liability.133 The Investor reads Mexicos
position in its Submission to be that the substitution of arbitrary act for the rule of
law indicates the kind of action that in appropriate circumstances attract[s] State
responsibility.134 The Investor affirms that such is precisely the kind of arbitrary
action it is complaining about.
(b) The submissions of the other nafta parties pursuant to Article 1128 of
nafta
(i) The submissions of Canada
119. Canada made two submissions to the Tribunal pursuant to nafta Article
1128, the first on 18 January 2002 before the oral hearing of 1519 April 2002, and
the second on 19 July 2002 after that oral hearing.
120. In its first (i.e., pre-hearing) Submission, the Government of Canada affirmed
that the 31 July 2001 ftc Interpretation is binding on this Tribunal and constitutes
the proper basis for interpreting nafta Article 1105(1). The ftc, Canada stresses,
is the Parties to the nafta acting collectively under that treaty. Further, in acting
through the [ftc], the Parties act through a single body with decision-making power
under the nafta. The ftc is vested with the prime and final authority as the
interpreter of the nafta, and an interpretation by the ftc is the full expression
of what the nafta Parties intended.135
121. In its Second (i.e., post-hearing) Submission, Canada rejected the assertion
of the Pope and Talbot Damages Award that the fair and equitable treatment
and full protection and security standards in Article 1105(1) were additive to
the customary international law minimum standard of treatment. Further, Canada
states that the ftc interpretations are not themselves subject to interpretation by a
Chapter Eleven tribunal since it is ftcs mandate to resolve interpretation disputes
with finality.136 The view expressed by the Pope and Talbot Tribunal that the ftc
31 July 2002 Interpretation was an amendment and not a true interpretation, is
explicitly rejected by Canada. The statement by the S. D. Myers Tribunal that a
breach of 1105 occurs only when it is shown that an investor has been treated in such
an unjust or arbitrary manner that the treatment rises to the level that is unacceptable
from the international perspective, is, in the view of Canada, consistent with the
ftc Interpretation.137 In Canadas view, the standard set in Article 1105(1) is a
minimum standard, well captured by the Neer decision, but by no means static or
132
Id., para. 25.

Id., para. 26.
134
Id., paras. 301.
135
Submission of the Government of Canada Pursuant to nafta Article 1128, 18 January 2002,
paras. 57.
136
Second Submission of Canada Pursuant to nafta Article 1128, 19 July 2002 (Second Canada
Submission), paras. 810.
137
Id., para. 24.
133
AWARD
509
frozen in time.138 Canada expresses skepticism that a customary law standard can
be derived from the many hundreds of bits existing today.139 As to the standard
for characterizing a measure as arbitrary, Canada believes that has been best
expressed in the ELSI case by a chamber of the International Court of Justice as a
willful disregard of due process of law, an act which shocks, or at least surprises
a sense of judicial propriety. Canada submits that the threshold for designating a
measure as arbitrary remains high.140
(ii) The submissions of Mexico
122. Mexico, like Canada, made two submissions to the Tribunal: a pre-hearing
one on 18 January 2002 and a post-hearing one on 22 July 2002.
123. Mexico, in its pre-hearing submission, stated that Article 1105(1) must be
read in the light of the ftc Interpretation of 13 July 2001, and not expansively
as urged by the Claimant.141 The US measures in question should be construed as
applying to goods in a procurement context and not to investment; in other words,
the Investors claims do not properly fall within the scope of Chapter 11. Article
1105 must be interpreted in the light of international customary law and thereunder,
there has been no state practice to accord national treatment to foreign goods in
governmental procurement transactions.142 Finally, it is stressed by Mexico that the
Tribunal, while called upon to interpret nafta, is not called upon to sit as a court
of appeal in respect of national law.143
124. In its post-hearing submission, Mexico stresses that the three nafta Parties are one on two key interpretative issues: (a) they agree that fair and equitable
treatment was to be found within international law; and (b) they agree that the reference to international law was a reference to the international minimum standard
at customary international law.144 Mexico also noted that it had earlier expressly
adopted a central point of the US that the plain language of Article 1105(1) describes fair and equitable treatment as part of customary international law, not as
an additive requirement that might be derived from other bits.145 Mexico goes to
substantial lengths to demonstrate that, in its Article 1128 submission in the Pope
and Talbot case, it had clearly stated that the threshold to establish a breach of customary international law continues to be high; one which requires conduct of a very
serious nature, amounting to a significant departure from internationally accepted
legal norms. It had there concurred in Canadas statement that only egregious
conduct should be seen to offend Article 1105.146 In the ELSI case, the key point,
138
Id., para. 33. Obviously, what is shocking or egregious in the year 2002 may differ from that which
was considered shocking or egregious in 1926. Canadas position has always been that customary
international law can evolve over time . . .
139
Id., paras. 368.
140
Id., para. 41.
141
Letter signed by Mr Hugo Perezcano Diaz, Consultor Juridico de Negociaciones, dated 18 January
2002, Article 1128 Submission of the United Mexican States, p. 1.
142
Id., p. 3.
143
Id., p. 4.
144
Letter signed by Mr Hugo Perezcano Diaz, Consultor Juridico de Negociaciones, dated 27 July
2002, Second Article 1128 Submission of the United Mexican States in the matter of adf Group Inc.
v. United States of America, p. 3.
145
Id., p. 9.
146
Id., p. 15.
510
according to Mexico, was that the Chamber accorded deference to the respondents
(Italys) legal system in applying the standard in the relevant (USItaly Friendship,
Commerce and Navigation) Treaty, finding that though the mayors requisition of
the factory was unlawful under Italian law as an excess of power, mere domestic
illegality did not equate to arbitrariness at international law.147
125. Mexico also records its agreement with the US submission in Pope
and Talbot that the Tribunal had no authority to second-guess the ftc. The
jurisdiction of a Chapter 11 tribunal is confined to the subject matter set out in Articles 1116 and 1117: it is authorized to determine whether a nafta Party (in the
singular) violated one of the nafta obligations listed in those two articles. That
jurisdiction does not include look[ing] behind the governing law which, under
Article 1131(2), . . . include[s] [an] [ftc] interpretation . . . binding upon a
Tribunal.148 Mexico goes on to note that given the absence of a careful analysis of state practice and opinio juris, the sheer number of extant bits today does
not suffice to show that conventional international law has become customary international law. Similarly, the simple antiquity of the Neer decision does not show
that it is no longer a leading case on the customary international law standard.149
Finally, Mexico observes that, save for the wto Agreement on Trade-Related Investment Measures (trims) and the General Agreement on Trade in Services (gats),
wto law does not address foreign investment disciplines,150 and that work on the
relationship of trade and investment is at an early stage.
V. Findings and Conclusions

126. Canvassing the issues raised in this case, we note that there are two issues
which relate to the jurisdiction of this Tribunal or the admissibility of certain claims
submitted by the Claimant, while the rest of the issues are concerned with the merits
of the Claimants claims about the consistency or inconsistency of the US measures
with certain nafta provisions. We address first the issues relating to jurisdiction
or admissibility.
1. Jurisdiction to Consider the Investors Claim concerning nafta Article 1103
127. The first jurisdictional or admissibility issue raised by the Respondent concerns the Investors claim that the US measures here in question are inconsistent with
the Respondents obligations under nafta Article 1103. The Respondent submits
that this Tribunal is bereft of jurisdiction to consider and pass upon the Investors
claim brought under Article 1103. The Respondent points to the fact that the Investors Notice of Intention to Submit a Claim to Arbitration, dated 29 February
2000, did not allege any breach of Article 1103 on the part of the Respondent. We
147
148
149
150
Id., p. 18.
Id., pp. 1819.
Id., pp. 1920.
Id., p. 21.
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note that the Investors Notice of Intention does not mention Article 1103; neither
does the Investors Notice of Arbitration dated 19 July 2000.
128. nafta Article 1119 provides that the disputing Investors written notice of
its intention to submit a claim to arbitration shall specify, inter alia, the provisions
of [the nafta] alleged to have been breached and any other relevant provisions.
At the same time, Article 1122(1) states that each party [to nafta] consents to
the submission of a claim to arbitration in accordance with the procedures set out
in this Agreement.
129. The basic submission of the Respondent is that since the Investor failed
to comply with the requirements of Article 1119, the United States consent to
the Investors submission to arbitration did not include consent to the bringing of
the Investors claim based on Article 1103. In the absence of such consent, the
Respondent denies that the Tribunal has jurisdiction to consider the Article 1103
claim of the Investor.
130. We begin by examining the meaning of Article 1122(1) and inquire whether
the phrase in accordance with the procedures set out in this Agreement was
intended to condition the effectivity or validity of the consent of a nafta Party to
the submission of claims to arbitration, and the jurisdiction ratione materiae of a
Chapter 11 tribunal, upon the strict and literal compliance of a disputing Investor
with every single procedure set out in Section B of Chapter 11 of the nafta.
131. In this connection, it should be noted that Article 1122 goes on to say that
2. The consent given by paragraph 1 and the submission by a disputing investor of a
claim to arbitration shall satisfy the requirement of:
(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional
Facility Rules for written consent of the parties;
(b) Article II of the New York Convention for an agreement in writing; and
(c) Article I of the Inter-American Convention for an agreement. (Emphases added)
132. It should further be noted that Article 1121(1) and (2) use exactly the same
phrase in accordance with the procedures set out in this Agreement in respect of
the consent of the investor and of the enterprise owned or controlled by the investor:
1. A disputing investor may submit a claim under Article 1116 to arbitration only if:
(a) the investor consents to arbitration in accordance with the procedures set out in
this Agreement; and . . .
2. A disputing investor may submit a claim under Article 1117 to arbitration only if
both the investor and the enterprise:
(a) consent to arbitration in accordance with the procedures set out in this Agreement;
and
. . . (Emphases added)
133. When Articles 1122 and 1121 are read together, they appear to us to be
saying essentially that the standing consent of a nafta Party constituted by Article
1122(1), when conjoined with the consent of a disputing investor given in a particular case, generate the agreement to arbitrate required under the icsid Convention
and the Additional Facility Rules, the New York Convention and the Inter-American
512
Convention. We see no logical necessity for interpreting the procedures set out in
the [nafta] as delimiting the detailed boundaries of the consent given by either
the disputing Party or the disputing investor.
134. Turning back to Article 1119(2), we observe that the notice of intention to
submit to arbitration should specify not only the provisions of [nafta] alleged to
have been breached but also any other relevant provisions [of nafta]. Which
provisions of nafta may be regarded as also relevant would depend on, among
other things, what arguments are subsequently developed to sustain the legal claims
made. We find it difficult to conclude that failure on the part of the investor to set
out an exhaustive list of other relevant provisions in its Notice of Intention to
Submit a Claim to Arbitration must result in the loss of jurisdiction to consider and
rely upon any unlisted but pertinent nafta provision in the process of resolving
the dispute.
135. It is also instructive to note that the notice to be given by a claimant
wishing to institute arbitration proceedings under the icsid Arbitration (Additional Facility) Rules is required merely to contain information concerning the
issues in dispute and an indication of the amount involved, if any. (Article 3(1)(d),
icsid Arbitration (Additional Facility) Rules) The generality and flexibility of this
requirement do not suggest that failure to be absolutely precise and complete in
setting out that information must necessarily result in diminution of jurisdiction
on the part of the Tribunal. While the icsid Convention is not applicable to Additional Facility cases (like the instant case), it is useful to observe that a similar
negative inference may be seen to arise from the specification of the contents of
the Request for Arbitration required under Article 36(2) of the icsid Convention to
be filed by a Contracting State or a national of a Contracting State with the icsid
Secretary-General who must send a copy to the other party:
(2) The request shall contain information concerning the issues in dispute, the identity of the parties and their consent to arbitration in accordance with the rules of
procedure for the institution of . . . arbitration proceedings. (Emphases added)
136. We turn to certain circumstances specific to the present case which bear upon
the Article 1103 claim of the Investor. The Investor made its Article 1103 claim
not in its Memorial but rather in its Reply to the Respondents Counter-Memorial.
We consider that this circumstance was principally the result of the issuance of
the ftc Interpretation of 31 July 2001 relating to, inter alia, Article 1105(1) a day
before the filing of the Investors Memorial. The Investor, in making its Article 1103
claim and adducing certain provisions of certain bilateral investment treaties of the
Respondentthe USAlbania and the USEstonia treaties, was responding to
and seeking to mitigate what it perceived to be the impact of the ftc Interpretation
upon the Investors Article 1105 claim. In other words, we do not believe that
in failing to mention Article 1103 in its Notice of Intention to Submit a Claim
to Arbitration and failing to discuss it in its Memorial, the Investor was seeking
unfairly to inflict tactical surprise upon the Respondent. There was no reason for the
Investor, at the time of its Notice, to regard Article 1103 as a relevant provision
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given that the substance of its later Article 1103 claim, in fact, was already asserted
under its Article 1105 claim.
137. There is another aspect of this Article 1103 issue which the Tribunal needs
to consider: the pertinence of Article 1104 which provides as follows:
Article 1104: Standard of Treatment
Each Party shall accord to investors of another Party and to investments of investors of another Party the better of the treatment required by Articles 1102 and 1103.
(Emphasis added)
As we read it, an investor of another nafta Party is entitled to claim the benefit of
the best standard of treatment which the nafta party affords to its own nationals
under Article 1102 and even to a non-party under Article 1103(2). Moreover, the
investor is entitled to the benefit of the better treatment by virtue of Article 1104
without having to allege and prove breach by the respondent Party of its obligations
under both Articles 1102 and 1103. It is sufficient for the investor to allege and
seek to prove breach of Article 1102 in order to be entitled to claim the benefit
of Article 1104 by seeking to show that more favorable treatment is accorded
to investors of another Party, or even investors of a non-Party (such as Albania
and Estonia). In our view, that is precisely what the Investor here was trying to
show.
138. Finally, we observe that the Respondent has not shown that it has sustained
any prejudice by virtue of the non-specification of Article 1103 as one of the provisions allegedly breached by the Respondent. Although the Investor first specified its
claim concerning Article 1103 in its Reply to the Respondents Counter-Memorial,
the Respondent had ample opportunity to address and meet, and did address and
meet, that claim and the Investors supporting arguments, in its Rejoinder.
139. For the foregoing reasons, the Tribunal believes and so holds that it has
jurisdiction to pass upon the Article 1103 claim of the Investor.
2. Jurisdiction to Consider the Investors Claims Concerning Certain
Federal-aid Construction Projects Other than the Springfield Interchange
Project
140. A second jurisdictional or admissibility objection was raised by the Respondent in respect of claims made by the Investor concerning certain Federal-aid
construction projects other than the Springfield Interchange Project. In its Notice
of Intention to Submit a Claim to Arbitration, the Investor referred only to the application of the US measures here at stake to the Springfield Interchange Project.
At the same time, the Investor did allege in its Notice that the continued application of the US measures will cause additional damage to adf International,
limiting its ability to participate fully in future Federal-aid highway construction
projects.
141. In its Memorial, the Investor stated since the Springfield Interchange
Project, the adf Group or adf International has participated in three named
projects said to be also Federal-aid highway projects: another bridge project in the
514
Commonwealth of Virginia and two other bridge projects in the State of New York.
The Investor alleged that the US measures applied in the Springfield Interchange
Project were also applied in all of the three other projects, resulting in inability to
supply and use US-origin steel fabricated in Canada and the incurring of damages
by the Investor. The extent of those damages the Investor proposed to address in
the second phase of these proceedings.
142. The Tribunal is bound to observe that no evidence of any kind was submitted at any time by the Investor in respect of these other projects to support its
exceedingly general statements in its Memorial. In the present proceedings which
have related solely to the Springfield Project, the Investor made no visible effort
to show the factual bases of its claims about those other projects, something
which, under nafta Article 1119(c), should have been set out as early as in its
Notice of Intention to Submit a Claim to Arbitration. Neither did the Investor try
to show the legal regime governing its asserted participation therein. No contract
documents and no correspondence with anyone relating to the Investors involvement in those other projects have been submitted to the Tribunal. The Investor
offered no demonstration at all that the US measures have in fact been applied or
enforced in respect of the other projects.
143. Under the above circumstances, the failure of evidence on the part of the
Investor relates not simply to the quantum of damages said to have been sustained by
reason of breaches of nafta Chapter 11 provisions by the Respondent. The failure
of proof relates to both the factual basis of the Investors claims about the other
projects and the fundamental aspect of liability of the Respondent, that is, whether
the Respondent had breached any of its nafta obligations in connection with any of
the other projects. This kind of failure of proof of liability cannot be sought to be
remedied at any subsequent phase of these proceedings as the Respondent would
have been denied the opportunity to present its case against liabilityif any
that is, to controvert the Claimants proof. This could amount to a denial of due
process.
144. The Investors claims concerning other projects are not properly regarded
as incidental or additional claims within the meaning of Article 48(1) of the icsid
Arbitration (Additional Facility) Rules. This Article does not define or elaborate
on incidental or additional claims. Article 46 of the icsid Convention and Rule
40(1) of the icsid Arbitration Rules do provide some elaboration on incidental or
additional claims, and while these two instruments are not applicable to Additional
Facility cases, like the instant case, they often do supply, in our opinion, relevant, and
even close, analogues for terms used in the Additional Facility Rules. Rule 40 of the
icsid Arbitration Rules, entitled Ancillary Claims, essentially tracks the language
of Article 46 of the icsid Convention and requires, inter alia, that ancillary claims,
that isincidental claims and additional claimsaris[e] directly out of the subject
matter of the dispute. It is not necessary to distinguish between incidental claims
and additional claims; both must satisfy the requirement of a close relationship
with or connection to the original or primary claim. We consider that an incidental
or additional claim in the instant case must arise directly out of the Investors claims
about the Springfield Interchange Project. But the Investors claims about its other
projects clearly do not arise directly out of the Springfield Interchange Project.
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They are specifically alleged to be claims arising out of construction projects other
than the Springfield Project. Thus, there was no allegation or proof that the other
project said to be also located in the Commonwealth of Virginia, and the Springfield
Project are, for instance and as a matter of fact, integral parts of one, larger, project.
So far as the record of the present case shows, the other Virginia project (and a
fortiori the two New York projects) is physically distinct from and totally unrelated
to the Springfield Interchange Project.151
145. Putting the matter in slightly different terms, the Investor has presented to the
Tribunal no bases, factual or legal, for passing upon the Respondents liability for
breaches of any provision of nafta Chapter 11, Section A in the other projects.
There has been, therefore, nothing for the Respondent to controvert and disprove
or rebut. There was, moreover, no dispute or controversy to consult and negotiate
about, during the 90-day cooling-off or waiting period prescribed in Article 1119.
Finally, to permit, under these circumstances, the claims relating to the other
projects to stand in the present proceedings could impose material prejudice upon
the Respondent.
146. For the foregoing reasons, the Tribunal believes and so holds that all claims
of the Investor relating to any construction project other than the Springfield Interchange Project must, accordingly, be dismissed as inadmissible.
3. Articles 1102, 1106 and 1108: National Treatment Obligation and

Prohibition of Local Content and Performance Requirements in the Context of
Governmental Procurement
(a) Preliminary interpretive considerations
147. Before commencing detailed consideration of the Investors claims under
particular nafta provisions and the Respondents defense against those claims, it
appears appropriate to note certain aspects of the task of interpreting provisions of
nafta. The Investor has urged the Tribunal to bear in mind the directive of Article
102(2) that the Parties shall interpret and apply nafta provisions in the light of
[naftas] objectives set out in [Article 201(1)] and in accordance with applicable rules of international law. naftas objectives, together with the statements
set out in the Preamble of nafta, are necessarily cast in terms of a high level of
151
Note B to Article 40 of the icsid Arbitration Rules suggests that the test to satisfy this condition
is whether the factual connection between the original and the ancillary [i.e., incidental] claim[s]
is so close as to require the adjudication of the latter in order to achieve the final settlement of the
dispute, the object being to dispose of all grounds of dispute arising out of the same subject matter.
ICSID Regulations and Rules With Explanatory Notes Prepared by the Secretariat of ICSID; (1975)
p. 105 (Emphases added). Article 48 of the icsid Arbitration (Additional Facility) Rules reproduces
paragraphs 1 and 2 of Article 40 of the icsid Arbitration Rules. C. H. Schreuer, The ICSID Convention:
A Commentary (2001) p. 738, referring to Article 46 of the Convention, writes: This close connection
is not a matter of jurisdiction. The wording of Article 46 makes it clear that the arising directly
requirement is in addition to jurisdiction. A claim may well be within the Centres jurisdiction but not
arise directly from the subject matter of a particular dispute before the tribunal. An obvious example
would be a claim arising from a different investment operation between the same investor and the same
host state also covered by an ICSID arbitration clause. . . (para. 49). (Emphasis added) See further,
id., p. 742, para. 62.
516
generality and abstraction. In contrast, interpretive issues commonly arise in respect of detailed provisions embedded in the extraordinarily complex architecture
of the treaty. We understand the rules of interpretation found in customary international law to enjoin us to focus first on the actual language of the provision being
construed. The object and purpose of the parties to a treaty in agreeing upon any
particular paragraph of that treaty are to be found, in the first instance, in the words
in fact used by the parties in that paragraph.152 This is in line with Article 102(1)
which states that NAFTAs objectives are elaborated more specifically through its
principles and rules such as national treatment, most-favored-nation treatment
and transparency. The provision under examination must of course be scrutinized
in context; but that context is constituted chiefly by the other relevant provisions
of nafta. We do not suggest that the general objectives of nafta are not useful or
relevant. Far from it. Those general objectives may be conceived of as partaking of
the nature of lex generalis while a particular detailed provision set in a particular
context in the rest of a Chapter or Part of nafta functions as lex specialis. The
former may frequently cast light on a specific interpretive issue; but it is not to be
regarded as overriding and superseding the latter.
148. Clearly, nafta is a complex document, arguably the most complex free trade
agreement currently in existence. Virtually every Chapter contains its own articles
on definitions. Annexes, beginning with Annex 201.1 attached to Chapter 2, are
used to create further definitions, or may contain their own definitions applicable
to those annexes alone. Some Chapters, such as Chapter 15 on Competition, stand
virtually alone, while others, such as Chapter 3 on Goods, contain general rules and
principles which run through much of the treaty text. There is a separate Chapter
21 dealing in a general way with exceptions, such as in Article 2101 which relates
to the incorporation, to a certain extent, of provisions of Article XX of the gatt,
in respect of most of nafta, and Article 2106 excepting cultural industries for
Canada alone. Additional exceptions are to be found throughout the nafta. Five
major Schedules list different types of non-conforming measures maintained by
each of the Parties. State, provincial and local government measures, in several
important areas, have not as yet actually been subjected to the disciplines of nafta,
due to failure to agree within two years from entry into force of nafta as originally
contemplated.
149. Thus, the specific provisions of a particular Chapter need to be read, not
just in relation to each other, but also in the context of the entire structure of nafta
if a treaty interpreter is to ascertain and understand the real shape and content of
the bargain actually struck by the three sovereign Parties.153
152
See, e.g., United StatesImport Prohibition of Certain Shrimp and Shrimp Products, Report
of the Appellate Body (AB-1998-4) (WT/DS58/AB/R) adopted 12 October 1998, para. 114; EC
Measures Concerning Meat and Meat Products (Hormones), Report of Appellate Body (AB-1997-4)
(WT/DS26/AB/R; WT/DS48/AB/R) adopted 16 January 1998, paras. 181, 165.
153
Vienna Convention on the Law of Treaties, 23 May 1969 (UN Doc. A/Conf. 39/27), Articles 31, 32.
See also, in this connection, J. R. Johnson, The North American Free Trade Agreement: A Comprehensive
Guide (Toronto, 1994).
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(b) Appraising the Investors Articles 1102 and 1106 claims and the exception
in Article 1108(7)(a) and (8)(b)
150. We turn to consideration of the Investors claims based on nafta Articles
1102 and 1106. These two claims are most conveniently examined together if only
because the Respondents defense based on Article 1108 is directed against, and
seeks to repel, both claims.
151. Article 1102 needs to be quoted again in its pertinent parts:
Article 1102: National Treatment
1. Each Party shall accord to investors of another Party treatment no less favorable
than that it accords, in like circumstances, to its own investors with respect to the
establishment, acquisition, expansion, management, conduct, operation, and sale or
other disposition of investments.
2. Each Party shall accord to investments of investors of another Party treatment
no less favorable than that it accords, in like circumstances, to investments of its own
investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments.
152. The beneficiaries of Article 1102(1) and (2) are both investors and their investments. The broad scope of application of Article 1102 is indicated by the breadth
of the definitional scope of the critical term investment. Article 1139 defines
investment as embracing not just the more familiar enterprise, and the traditional equity security or debt security of an enterprise, but also the following:
(g) real estate or other property, tangible or intangible acquired in the expectation or
used for the purpose of economic benefit or other business purposes;
(h) interest arising from the commitment of capital or other resources in the territory of
a Party to economic activity in such territory, such as under
(i) contracts involving the presence of an investors property in the territory of the
Party, including turnkey or construction contracts, or concessions, or
(ii) contracts where the remuneration depends substantially on the production, revenues or profits of an enterprise;
153. Enterprise itself is given an equally capacious meaning by nafta Article

201(1) in relation to Article 1139: any entity constituted . . . under applicable law
whether or not for profit, and whether or not privately-owned or governmentally
owned . . . (Emphases added). Another indicator of the extensive reach of Article
1102 is the range of the treatment which must be accorded to the beneficiary investor and investment: that is, treatment with respect to the establishment,
acquisition, expansion, management, conduct, operation and sale or other disposition of investments. Thus, it appears to us that a nafta Party must accord to the
investors of another Party and their investments treatment no less favorable than
that it accords to its domestic investors and their investments in like circumstances
not only with respect to the establishment of investments, but also with respect to
518
the acquisition of additional investments, the expansion of already established

investments, the management, conduct and operation of investments once
established or acquired and the sale or other disposition of investments, e.g.,
liquidation of assets and repatriation of net proceeds. In slightly different terms,
Article 1102 entitles an investor of another Party and its investment to equal (in
the sense of no less favorable) treatment, in like circumstances, with a Partys
domestic investors and their investments, from the time of entry and establishment or acquisition of the investment in the territory of that Party, through the
management, conduct and operation and expansion of that investment, and
up to the final sale or other disposition of the same investment.
154. We agree with the Investor that adf Group is an investor of another Party
while adf International is both an enterprise and an investment of an investor of
another Party, within the meaning of Article 1102, Article 1139 and Article 201(1).
This has not been controverted by the Respondent. We also agree that the US-origin
steel materials purchased by the Investor in the US, which the Investor sought
unsuccessfully to bring to Canada to adf Groups steel facilities for the carrying
out of fabrication operations thereon prior to incorporation into the Springfield
Interchange Project, also constituted an investment of the Investor for purposes of
Article 1102.
155. As noted earlier, the US measures here in question essentially require that
steel materials be 100% produced and fabricated in the US, if such materials are to
be used in the construction of the Springfield Interchange Project. The Investors
Article 1102 claim is that the US measures are incompatible with the requirements of Article 1102. The Respondent, in approaching this issue, suggests somewhat obliquely, that the Investor is in effect claiming that Canadian-produced and
Canadian-fabricated steel is being discriminated against in the US, so far as concerns Federal-aid construction projects and that that claim is properly brought under
another portion of nafta, Chapter 3 and not Chapter 11, and is not properly cognizable in the InvestorState dispute settlement process established by Chapter 11.
In other words, the Respondent suggests that the Investors claim is effectively a
claim relating to the national treatment of goods and not of investments, a
suggestion that Mexico apparently agrees with.154 The correctness of this approach
is not self-evident to us, in view of the many and comprehensive areas with respect
to which the investment of a Canadian investor may claim national treatment under
Article 1102. Those areas include the management, conduct and operation of
a Canadian enterprise in the US and the goods produced by such enterprise in
the territory of the US can be regarded as investments of the Canadian investor
and are closely related to, and are the results of, the management, conduct and
operation of the enterprise. Thus, it may be recalled that the Investor stressed the
impact of the US measures on the operations of adf International. Fortunately, as
the Respondent itself recognized, it is not absolutely necessary to try to resolve this
question. What Article 1002 requires is that we assess whether these investments
of the Investor (e.g., its steel in the US) are treated differently than the US-origin
steel of US investors is treatedin like circumstances.
154
See Rejoinder of the US at page 27.
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156. It was vigorously argued by the Respondent that, even upon the assumption
that the Investors claim was properly brought under Article 1102, the Investor in
any event failed to prove that the US measures constitute a violation of Article
1102. For the same US measures, the Respondent explicitly stated, were applied
to US steel manufacturers and US steel fabricators bidding for the Springfield
Interchange Project and other Federal-aid highway construction projects. Both steel
of the Canadian Investor and of a US investor must be fabricated in the United States.
Moreover, steel fabricated in the United States is not treated differently, depending
on the nationality of the investor owning such steel. Indeed, the Canadian investors
steel and a US investors steel, if fabricated in Canada, are treated in the same
manner and both are excluded from use in the Springfield Interchange Project. US
steel manufacturers and fabricators are confronted with the same constraints or
limitations of options that the Investor had to address: (a) expand their fabricating
facilities in the US, if they wanted to carry out the fabrication operations themselves;
or (b) subcontract out the fabricating operations to other US steel fabricators; or (c)
forego bidding on Federal-aid highway construction projects. The Tribunal is bound
to note that the Investor presented no evidence at all to overcome the Respondents
defense. The Investor did not identify a US steel manufacturer or fabricator which,
by virtue of its nationality, had been exempted from the requirements of the Buy
America provisions and allowed to supply to the Springfield Interchange Project,
or some other Federal-aid state construction project, structural steel materials that
had been manufactured or fabricated in Canada or elsewhere outside the US. In other
words, the Investor did not try to show that some US construction and fabrication
company, similarly situated as the Investor, had been accorded treatment different
from and more favorable than that given to the Investor, in respect of the provision
and use of structural steel products in Federal-aid highway construction projects.155
157. The question may be raised whether the equality of treatment accorded by the
Respondent to the Investor and to US steel manufacturers and steel fabricators was
more apparent than real, and whether less favorable treatment was de facto (though
not de jure) being meted out to adf International. Can a US steel manufacturer
or fabricator be expected to want to source its structural steel requirements in
Canada, or China, or Korea? Would it not be natural for a US steel manufacturer
or fabricator to carry out the fabricating operations in the US, in its own plant
if possible? It appears to us that the Investor was trying to raise these questions,
albeit obliquely or indirectly, when it argued, as was noted earlier, that the only
difference between the adf Group and US steel fabricators is the physical location
of their facilities. The Investor also submitted that Article 1102 assumes that an
investor of another nafta Party entitled to invoke Article 1102 will have its facilities
located outside the territory of the host Party and that for a US steel fabricator,
the ability to fabricate structural steel in Canada was irrelevant. Evidence of
discrimination, however, is required. For instance, it appears to the Tribunal that
specific evidence concerning the comparative economics of the situation would
be relevant, including: whether the cost of fabrication was significantly lower in
Canada; whether fabrication capacity was unavailable at that time in the United
155
Rejoinder of the US at pages 257.
520
States and whether transportation costs to Canada were sufficiently low to make
up the differential. We note the US did submit evidence of available capacity156
and Mr Paschini referred to massive increases in costs due to fabrication in the
US.157 This scant evidence is, however, not sufficient to show what the relevant
competitive situation of Canadian fabricators and US fabricators was in general,
nor was it evidence of the comparative costs of steel fabrication in the US and
Canadian facilities, in particular. The Investor did not sustain its burden of proving
that the US measures imposed (de jure or de facto) upon adf International, or the
steel to be supplied by it in the US, less favorable treatment vis-à-vis similarly
situated domestic (US) fabricators or the steel to be supplied by them in the US.
158. The Tribunal finds that the Investor has failed to show that the US measures
are inconsistent with the requirements of nafta Article 1102.
159. Turning to the nafta Article 1106 claim of the Investor, the US measures
here at stake appear, by their own terms, to be requirements of local content and other
performance requirements. The Respondent did not dispute that the US measures
constitute a requirement of domestic content within the sense of Article 1106(1)(b),
and a requirement to accord preference to goods produced or services provided in
the US for purposes of Article 1106(1)(a). The Respondent instead focused on the
applicability to the present case of certain provisions of Article 1108 which exclude
the operation of, inter alia, Article 1106 in cases of procurement by a Party.
160. We therefore turn again to nafta Article 1108 which reads in pertinent part
as follows:
...
7. Article 1102, 1103 and 1107 do not apply to:
(a) procurement by a Party or a state enterprise; or
(b) subsidies or grants provided by a Party or a state enterprise, including
government-supported loans, guarantees and insurance.
8. The provisions of:
...
(b) Article 1106(1)(b), (c), (f) and (g), and (3)(a) and (b) do not apply to procurement
by a Party or a state enterprise;
The pertinent issue is whether or not the Springfield Interchange Project constituted
or involved procurement by a Party. We approach this issue by inquiring, first,
into the meaning of procurement, and second into the appropriate reference of
the term Party, both as used in Article 1108.
161. Procurement is not defined in nafta Chapter 11; but it is defined in nafta
Chapter 10. Chapter 10 is entitled Government Procurement simply, and deals
only with procurement by governmental entities or offices. It does not purport at
all to address procurement by private sector companies. Article 1001(5) provides
a description in the following terms:
156
See letter of 8 July 1999 from the National Steel Bridge Alliance to the fhwa referred to in para.
54, supra.
157
See statement of Mr Paschini referred to in para. 55, supra.
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(5) Procurement includes procurement by such methods as purchase, lease or rental,

with or without an option to buy. Procurement does not include:
(a) non-contractual agreements or any form of government assistance, including cooperative agreements, grants, loans, equity infusions, guarantees, fiscal incentives,
and government provision of goods and services to persons or state, provincial and
regional governments; and . . . (Emphases added)
In its ordinary or dictionary connotation, procurement refers to the act of obtaining, as by effort, labor or purchase. To procure means to get; to gain; to come
into possession of.158 In the world of commerce and industry, procurement may
be seen to refer ordinarily to the activity of obtaining by purchase goods, supplies,
services and so forth.159 Thus, governmental procurement refers to the obtaining
by purchase by a governmental agency or entity of title to or possession of, for instance, goods, supplies, materials and machinery. What is excluded from the scope
of procurement is the governmental assistance to the public entity or agency engaged in procurement, especially assistance in the form of financing or funding of
the procurement activity by providing grants, loans, equity infusions, guarantees,
fiscal incentives. In other words, the government entity or agency providing or
arranging for funds for the purchase of goods, supplies, materials, etc. used or to
be used in the construction of a government project, is not itself thereby engaged
in procurement.
162. Applying the above reading of Article 1001(5) to the facts of the present
dispute, it is clear to the Tribunal that the construction of the Springfield Interchange
Project constituted or involved governmental procurement for purposes of Article
1001(5) and of Chapter 10 as a whole. It is equally clear to us that the government
entity which carried out the procurement of goods or services for the Project was
the Commonwealth of Virginia. The Virginia Department of Transportation (vdot)
is designated as Owner of the Springfield Interchange Project, both in the Main
Contract between Shirley Contracting Corporation (Shirley) and vdot, and in the
Sub-Contract between Shirley and adf International.160 The US Federal Government did provide federal funds for the construction of the Project, but that did not
result in the US Federal Government, or any agency thereof, being itself engaged
in procurement. It may be observed in this connection that the Investor did not deny
that the procurement activity in respect of the Project had been carried out by the
vdot. Neither did the Investor claim that the US Federal Government had, by its
funding activity, itself engaged in procurement.
163. We consider next whether, in the present case, there was procurement by
a Party in the sense of Article 1108(7)(a) and (8)(b). Party, in the first instance,
refers to a sovereign state which has adhered to and become bound by the nafta.
Where a Party is a federal state (and all three Parties are federal states), the question
158
Websters New Twentieth Century Dictionary of the English Language, Unabridged (2d Edition,
1976) p. 1435.
159
The French text of nafta Article 1108(7) uses the term achats effectues par une Partie. The French
text is included in Materials and Cases, Annexed to the Memorial of the Investor, Vol. II-A.1, Tab. 1,
p. 11-5. The Spanish text refers to las compras realizadas por una Parte; available at http://www.naftasec-alena.org/spanish/nafta/chap-111,htm.
160
Investors Memorial, Materials and Cases Vol. I, Exhibit B(3) introductory paragraph.
522
arises whether Party encompasses both the federal government and the several
state or provincial governments, or only the former.
164. Article 1001(1), describing the scope and coverage of the nafta Chapter
on Government Procurement, states that Chapter 10 applies to measures adopted
or maintained by a Party relating to procurement: (a) by a federal government
entity set out in Annex 1001.1a-1, . . . or a state or provincial government entity
set out in Annex 1001.1a-3 in accordance with Article 1024, . . . This Article thus
provides clear textual basis for holding that government procurement embraces
both procurement by a federal government entity and procurement by a state or
provincial government entity, so long as such agency is listed by a Party in its
Schedule attached to the appropriate Annex to Article 1001(1). Further, we consider
that government procurement is appropriately read as having the same scope and
coverage as procurement by a Party. While procurement by a Party, the term
on which we presently focus, is found in Article 1108(7) and (8), and government
procurement is the term used in Article 1001(1), in our opinion, and in present
context, no sensible distinction can be drawn between the two terms. We note that
neither party has suggested that such a distinction was intended to be projected by
the nafta Parties.
165. Article 1108 itself supplies support for the above reading. Article 1108(1)
states that Articles 1102, 1103, 1106 and 1107 do not apply to any existing nonconforming measure maintained by (i) a Party at the federal level, as set out in
its Schedule to Annex I or III, [or] (ii) a state or province, for two years after the
date of entry into force of [nafta] . . ., or (iii) a local government; . . . Thus, an
existing non-conforming measure of a Party saved by Article 1108(1) may not
only be a federal government measure but also a state or provincial government
measure and even a measure of a local government.
166. The view taken above by the Tribunal is in line with the established rule
of customary international law that acts of all its governmental organs and entities
and territorial units are attributable to the State and that that State as a subject
of international law is, accordingly, responsible for the acts of all its organs and
territorial units. This rule is now formulated in Article 4 of the Articles on State
Responsibility of the International Law Commission, in the following terms:
Article 4. Conduct of Organs of a State
1. The conduct of any State organ shall be considered an act of that State under
international law, whether the organ exercises legislative, executive, judicial or any
other functions, whatever position it holds in the organization of the State, and whatever
its character as an organ of the central government or of a territorial unit of the State.
2. An organ includes any person or entity which has that status in accordance with
the internal law of the State. (Emphases added)161
161
Text in J. Crawford, The International Law Commissions Articles on State Responsibility: Introduction, Text and Commentaries (2002) p. 94. The international customary law status of the rule is
recognized in, inter alia, Differences Relating to Immunity from Legal Process of a Special Rapporteur
of the Commission on Human Rights, ICJ Reports 1999, p. 62 at p. 87, para. 62. See also paras. 8, 9 and
10 of the Commentary of the ILC, stressing that the principle in Article 4 applies equally to organs of
the central government and to those of regional or local units (para. 8; p. 97), and that [i]t does not
matter for this purpose whether the territorial unit in question is a component unit of a federal State or
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523
167. It is important to stress, firstly, that although both procurement by a Party

and government procurement embrace, in principle, procurement measures by a
federal government entity as well as procurement measures by a state or provincial
government, federal procurement measures are actually, at this time, subjected to
the disciplines of nafta Chapter 10 only if and to the extent that such measures are
issued by a federal government entity listed in the negotiated Schedule of a nafta
Party attached to Annex 1001.1a-1. The US Schedule lists 56 Federal Government entities, including the US Department of Transportation, while the Canadian
Schedule enumerates 100 federal entities and the Mexican Schedule lists the
entities forming part of 22 Federal Government Ministries. A procurement measure
issued by an unlisted US Federal Government entity would not be subject to the
Chapter 10 disciplines and detailed procedures.
168. It is equally important to note that under Article 1001, state or provincial
government entities of a nafta Party are in fact subjected to Chapter 10 disciplines
only if and to the extent that such entities are listed in a Partys Schedule attached
to Annex 1001.1a-3 in accordance with Article 1024. Annex 1001.1a-3 states,
tersely:
State and Provincial Government Entities
Coverage under this Annex will be the subject of consultations with State and provincial
governments in accordance with Article 1024. (Emphases added)
Article 1024, entitled Further Negotiations, contemplates that the Parties shall
commence further negotiations no later than 31 December 1998, with a view to
the further liberalization of their respective government procurement markets. . .
So far as the Tribunal has been able to determine, the negotiations envisaged have
not to date been commenced, or if commenced, have not been completed. In the
event, no Schedules have to date been attached by any of the Parties to Annex
1001.1a-3. It is also instructive to note Article 1024(3) which speaks of the Parties
endeavor[ing] to consult with their state and provincial governments on obtaining
commitments on a voluntary and reciprocal basis to include within Chapter 10
procurement by state and provincial government entities and enterprises. If any
such voluntary commitment has been obtained by the US from the Commonwealth
of Virginia, neither the Investor nor the Respondent has brought such a critical fact
to the attention of the Tribunal. Finally, so far as the Tribunal has been able to
determine, there has been no voluntary assumption of the procurement disciplines
of Chapter 10 by any sub-federal governmental entity of any of the nafta Parties.
169. We consider, lastly, the Investors argument that the US measures here involved set out performance requirements similar to those found in the US Clean
Water Act with respect to federal-aid construction of municipal sewage and industrial waste treatment plants. Such construction is saved in the US Schedule to
Annex 1 of nafta. Since the US measures have not been similarly saved in that
a specific autonomous area, and it is equally irrelevant whether the internal law of the State in question
gives the federal parliament power to compel the component unit to abide by the States international
obligations. (para. 9; p. 97).
524
Schedule, the Investor urges us to infer that they are non-conforming and violative
of Article 1106.162 We have already noted the Respondents response that the pertinent reservation in the US Schedule states that grant recipients may be privately
owned enterprises, and that therefore the US negotiators thought it necessary or
advisable to protect such federal-aid construction by an express reservation.163 The
Investor controverts the US response as inaccurate and quotes detailed provisions
of the Clean Water Act seeking to show that grants under this Act are made to a
public body.164 We have examined with care the statutory provisions adduced by
the Investor and we are satisfied that there are important differences between the
federal-aid state highway construction projects contemplated in the US measures
and the federal-aid construction of municipal sewage and industrial waste treatment plants envisaged in the Clean Water Act. The public body referred to by the
Investor makes an application for a federal grant under the Act on behalf of the
private owners of principal residences and commercial establishments that
would benefit from the existence of the treatment facility.165 More importantly, such
application is allowed only when that public body certifies that public ownership of such works is not feasible.166 In other words, the treatment plant constructed
with federal funds is or becomes, in the words of the Act, privately owned. The
flow of federal funds may be coursed through a public body but brings about
a privately owned facility. The operation and maintenance of the facility upon
construction become the responsibility of its private owner(s). We consider that the
propriety of characterizing such a fact situation as governmental procurement or
procurement by a Party is at least open to serious doubt. We decline, therefore
to draw the inference of nafta-inconsistency of the Buy America requirement of
the US measures that the Investor requests.
170. Our findings set out in the preceding paragraphs may be economically
summed up in the context of this case in the following propositions. Firstly, by
virtue of Article 1108(7)(a) and (8)(b), the provisions of Articles 1102, 1103, 1106
and 1107 are not applicable in respect of procurement by a Party, whether the procurement is carried out by an office or entity of the US Federal Government or by
an office or entity of the Commonwealth of Virginia. In other words, the exclusionary effect of Article 1108(7)(a) and (8)(b) operates on both federal and state
governmental procurement. Secondly, by granting Federal-aid funds to the vdot to
enable the latter to construct the Springfield Interchange Project, the fhwa of the
162
Supra, paras. 845.

Supra, para. 101.
164
Investors Reply to the US Counter-Memorial on Competence and Liability, paras. 14059.
165
The provisions of the Clean Water Act (33 USC sec. 1281(h)(1)(3)) relied upon by the Investor
read in part as follows:
163
(h) A grant may be made under this section to construct a privately owned treatment plant
serving one or more principal residences or small commercial establishments constructed prior
to, and inhabited in December 27, 1977, where the Administrator finds that
(1) a public body otherwise eligible for a grant under subsection (g) of this section has applied
on behalf of a number of such units and certified that public ownership of such works is not
feasible; . . .
166
Ibid.
AWARD
525
US Department of Transportation did not constitute itself as the procuring entity

in that Project, and did not itself engage in procurement. Thirdly, the procurement
carried out by the Commonwealth of Virginia through its vdot in the Springfield
Interchange Project was not subject to the restraints imposed in nafta Chapter 10
because the Commonwealth of Virginia is not listed in a US Schedule which has
yet to be negotiated and attached to Annex 1001.1a-3; nor has vdot voluntarily
subjected itself to the restraints of Chapter 10.
171. It may be recalled that the Investor recognized that the Commonwealth of
Virginia was, in the Springfield Interchange Project, engaged in governmental procurement. The Investor in fact explicitly stated that it was not complaining about the
procurement by the vdot. It appears to the Tribunal that the Investor was aware that
the Commonwealth of Virginia was not subject to the disciplines of Chapter 10
including the national-treatment and non-discrimination obligations (Article 1003)
and the prohibition of national content and other performance requirements (Article 1006)and that Virginia could have enacted its own statute imposing domestic
content and performance requirements in respect of steel materials or products for
use in state construction projects without colliding with either nafta Chapter 10
or Chapter 11. The Tribunal also observes that the Investor acknowledges that the
US Federal Government itself had not undertaken procurement in connection with
the Springfield Interchange Project.
172. Given the above circumstances, the real gravamen of the Investors claim
that the US measures here at stake are in breach of Article 1106 appears to be that
the Respondent had forced the Commonwealth of Virginia to impose and enforce
the Buy America measures upon Main Contractor Shirley and Sub-Contractor adf
International. The Investor concedes that the US could, without breaching nafta
Chapters 10 and 11, restrict the grant of Federal-aid funding to entities like the vdot.
The Investor, however, insists that the US could not require vdot to enforce those
measures downstream, in the course of spending the federal funds. The Investor
appears, in effect, to be contending that the Respondent was doing indirectly what
it could not, consistently with Article 1106, do directly. If the Respondent, in other
words, had engaged in direct federal procurement in respect of the Springfield
Interchange Project, through the US Department of Transportation, it could not
have enforced the US measures here in question without breaching Articles 1003
and 1006 of Chapter 10. What the Respondent did was to impose upon the vdot
the task of enforcing the Buy America provisions as a condition for the grant of
Federal-aid funding to vdot for the Springfield Project.
173. We do not find the Investors argument persuasive. The Investor has not
shown that the Commonwealth of Virginia was forced to adopt the Buy America
measure. In the first place, so far as the evidence of record shows, Virginia chose on
its own to undertake and implement the Springfield Interchange Project in view of its
obvious importance for both inter-state and intra-state traffic. Thereupon, Virginia
approached the fhwa for funding and assistance in designing the complex Project.
In the second place, Virginia could have, as already noted, enacted its own Buy
America statute and regulations identical in terms with Section 165 of the 1982
staa and with 23 CFR 635.410, the fhwa Regulations, without violating either
Chapter 10 or 11 of nafta. In the present case, the Commonwealth of Virginia
526
in effect adopted and applied the US measures as its own, for purposes of the
Springfield Interchange Project. In fact, as noted earlier, vdot incorporated special
provision 102C into its Road and Bridge Specifications. Thirdly, we consider
that the US measures are not reasonably regarded as amounting to circumvention
of the Respondents obligations under nafta Chapter 10; the US measures were
enacted in 1982 and were in effect long before the nafta came into force in
1994. To the contrary, Article 1001(5)(a) appears expressly designed to separate
the financing or funding of construction or other projects from the procurement
operations necessarily entailed by such projects, and thus precisely to make possible
the continuation of federal government funding of state or provincial government
procurement. Finally, with the deferment of negotiations between the Parties on
the Schedules to be attached to Annex 1001.1a-3, state and provincial governments
have simply not been brought under the procurement disciplines of Chapter 10.
174. For the foregoing reasons, the Tribunal believes, and so holds, that the
Investor has not shown that the US measures here in question are inconsistent with
the requirements of nafta Article 1106.
4. Article 1105(1): Minimum Standard of Treatment under Customary
International Law
(a) General Considerations
175. Before addressing the Investors claims relating to the consistency of the US
measures with the requirements of nafta Article 1105(1), certain general aspects
of those requirements and of the ftc Interpretation of 31 July 2001 may usefully
be considered.
176. We begin by noting that the Free Trade Commission (ftc) created under
Article 2001 consists of cabinet-level representatives of the nafta Parties and
its mandate includes the [resolution of] disputes that may arise regarding [the]
interpretation or application of [nafta]. An interpretation of a nafta provision
rendered by the ftc is under Article 1132(2) binding on this and any other Chapter
11 Tribunal.
177. We have noted that the Investor does not dispute the binding character of
the ftc Interpretation of 31 July 2001. At the same time, however, the Investor
urges that the Tribunal, in the course of determining the governing law of a particular dispute, is authorized to determine whether an ftc interpretation is a true
interpretation or an amendment. We observe in this connection that the ftc
Interpretation of 31 July 2001 expressly purports to be an interpretation of several nafta provisions, including Article 1105(1), and not an amendment, or
anything else. No document purporting to be an amendment has been submitted by either the Respondent or the other nafta Parties. There is, therefore, no
need to embark upon an inquiry into the distinction between an interpretation
and an amendment of Article 1105(1). But whether a document submitted to a
Chapter 11 tribunal purports to be an amendatory agreement in respect of which
the Parties respective internal constitutional procedures necessary for the entry
into force of the amending agreement have been taken, or an interpretation rendered by the ftc under Article 1131(2), we have the Parties themselvesall the
AWARD
527
Partiesspeaking to the Tribunal. No more authentic and authoritative source of instruction on what the Parties intended to convey in a particular provision of nafta,
is possible. Nothing in nafta suggests that a Chapter 11 tribunal may determine for
itself whether a document submitted to it as an interpretation by the Parties acting
through the ftc is in fact an amendment which presumably may be disregarded
until ratified by all the Parties under their respective internal law. We do not find
persuasive the Investors submission that a tribunal is impliedly authorized to do
that as part of its duty to determine the governing law of a dispute. A principal
difficulty with the Investors submission is that such a theory of implied or incidental authority, fairly promptly, will tend to degrade and set at naught the binding
and overriding character of ftc interpretations. Such a theory also overlooks the
systemic need not only for a mechanism for correcting what the Parties themselves
become convinced are interpretative errors but also for consistency and continuity
of interpretation, which multiple ad hoc arbitral tribunals are not well suited to
achieve and maintain.
178. The ftc Interpretation of 31 July 2001 specifies that the treatment in
accordance with international law referred to in Article 1105(1) is the minimum
standard of treatment of aliens prescribed in customary international law. Thus,
it clarifies that so far as the three nafta Parties are concerned, the long-standing
debate as to whether there exists such a thing as a minimum standard of treatment
of non-nationals and their property prescribed in customary international law, is
closed.167 It also makes clear that the grant of equality of treatment between nationals
and non-nationals, or between nationals of third states, does not necessarily exhaust
the international law obligations of the host state vis-à-vis the home states of nonnationals. Where the treatment accorded by a State under its domestic law to its own
nationals falls below the minimum standard of treatment required under customary
international law, non-nationals become entitled to better treatment than that which
the State accords under its domestic law.
179. In considering the meaning and implications of the 31 July 2001 ftc Interpretation, it is important to bear in mind that the Respondent United States accepts
that the customary international law referred to in Article 1105(1) is not frozen
in time and that the minimum standard of treatment does evolve.168 The ftc Interpretation of 31 July 2001, in the view of the United States, refers to customary
international law as it exists today.169 It is equally important to note that Canada170
167
J. C. Thomas, Reflections on Article 1105 of NAFTA: History, State Practice and the Influence of
Commentators, 17 ICSID ReviewForeign Investment Law Journal 21 at 2239 (2002) provides a
recent survey of this debate. See also, e.g., G. Schwarzenberger, International Law, vol. 1 (3d edition,
1957) 200 et seq. and A. V. Freeman, The International Responsibility of States for Denial of Justice,
chaps. 1718 (1938).
168
Transcript of the Oral Hearing, Vol. II, 16 April 2002, pp. 4923. Also Post-Hearing Submission of
the United States, 27 June 2002, p. 20.
169
Transcript of the Oral Hearing, Vol. II, 16 April 2002, p. 501.
170
See Canadas Second Submission Pursuant to nafta Article 1128, 19 July 2002, para. 33: Canadas
position has never been that the customary international law regarding the treatment of aliens was frozen
in amber at the time of the Neer decision. Obviously, what is shocking or egregious in the year 2002
may differ from that which was considered shocking or egregious in 1926. Canadas position has always
been that customary international law can evolve over time, but that the threshold for finding violation
of the minimum standard of treatment is still high.
528
and Mexico171 accept the view of the United States on this point even as they stress
that the threshold [for violation of that standard] remains high. Put in slightly
different terms, what customary international law projects is not a static photograph
of the minimum standard of treatment of aliens as it stood in 1927 when the Award
in the Neer case was rendered. For both customary international law and the minimum standard of treatment of aliens it incorporates, are constantly in a process of
development.
180. In the very recent Award rendered 11 October 2002 in Mondev International
Ltd v. United States of America,172 a copy of which was forwarded to the Tribunal
by the Respondent on 17 October 2002, the Tribunal made certain observations
which appear to us to be both important and apropos:
It has been suggested, particularly by Canada, that the meaning of those provisions in
customary international law is that laid down by the Claims Commission of the interwar years, notably that of the Mexican Claims Commission in the Neer case. That
Commission laid down a requirement that, for there to be a breach of international law,
the treatment of an alien . . . should amount to an outrage, to bad faith, to willful neglect
of duty, or to an insufficiency of government action so far short of international standards
that every reasonable and impartial man would readily recognize its insufficiency.
The Tribunal would observe, however that the Neer case, and other similar cases
which were cited, concerned not the treatment of foreign investment as such but the
physical security of the alien. Moreover the specific issue in Neer was that of Mexicos
responsibility for failure to carry out an effective police investigation into the killing
of a United States citizen by a number of armed men who were not even alleged to
be acting under the control or at the instigation of Mexico. In general, the State is
not responsible for the acts of private parties, and only in special circumstances will
it become internationally responsible for a failure in the conduct of the subsequent
investigation. Thus there is insufficient cause for assuming that provisions of bilateral
investment treaties, and of NAFTA, while incorporating the Neer principle in respect
of the duty of protection against acts of private parties affecting the physical security
of aliens present on the territory of the State, are confined to the Neer standard of
outrageous treatment where the issue is the treatment of foreign investment by the State
itself.
Secondly, Neer and like arbitral awards were decided in the 1920s, when the status of the individual in international law, and the international protection of foreign
investments, were far less developed than they have since come to be. In particular,
both the substantive and procedural rights of the individual in international law have
undergone considerable development. In the light of these developments it is unconvincing to confine the meaning of fair and equitable treatment and full protection
and security of foreign investments to what those termshad they been current at
the timemight have meant in the 1920s when applied to the physical security of
an alien. To the modern eye, what is unfair or inequitable need not equate with the
171
See the Second Submission of the United Mexican States in the Matter of adf Group Inc. v. United
States of America, 22 July 2002, p. 11. In the Pope and Talbot case, Mexico submitted that [it] also
agrees that the standard is relative and that conduct which may not have violated international law [in]
the 1920s might very well be seen to offend internationally accepted principles today. As quoted in the
Pope and Talbot Award on Damages, para. 8.
172
icsid Case No. ARB(AF)/99/2.
AWARD
529
outrageous or the egregious. In particular, a State may treat foreign investment unfairly
and inequitably without necessarily acting in bad faith.173 (Emphases added)
181. It may be added that the Claims Commission in the Neer case did not purport
to pronounce a general standard applicable not only with respect to protection
against acts of private parties directed against the physical safety of foreigners
while in the territory of a host State, but also in any and all conceivable contexts.
There appears no logical necessity and no concordant state practice to support
the view that the Neer formulation is automatically extendible to the contemporary
context of treatment of foreign investors and their investments by a host or recipient
State.
182. In the present case, the issue may be seen to relate to the normative structure
and content of the customary international law minimum standard of treatment,
pertinent to foreign investors and their investments. The Investor claims that the
customary international law minimum standard of treatment includes a general
obligation to accord fair and equitable treatment and full protection and security
to investors and their investments. The Respondent appears to reject the notion
that the customary international law minimum standard of treatment prescribes
such a comprehensive duty upon a territorial sovereign to give fair and equitable
treatment and full protection and security to aliens and their property, including
in principle investors and their investments. The Respondent insists that the Investor,
if it is to succeed in its claim based on nafta Article 1105(1), must show a violation
of a specific rule of customary international law relating to foreign investors and
their investments.
183. The Tribunal considers that the issue relating to the structure and content
of the customary international law minimum standard of treatment has not been
adequately litigated, and that neither the Investor nor the Respondent has been able
persuasively to demonstrate the correctness of their respective contentions. We
are not convinced that the Investor has shown the existence, in current customary
international law, of a general and autonomous requirement (autonomous, that
is, from specific rules addressing particular, limited, contexts) to accord fair and
equitable treatment and full protection and security to foreign investments. The
Investor, for instance, has not shown that such a requirement has been brought
into the corpus of present day customary international law by the many hundreds
of bilateral investment treaties now extant. It may be that, in their current state,
neither concordant state practice nor judicial or arbitral caselaw provides convincing
substantiation (or, for that matter, refutation) of the Investors position. It may also
be observed in this connection that the Tribunal in Mondev did not reach the position
of the Investor, while implying that the process of change is in motion:
Thirdly, the vast number of bilateral and regional investment treaties (more than
2000) almost uniformly provide for fair and equitable treatment of foreign investments,
and largely provide for full security and protection of investments. Investment treaties
run between North and South, and East and West, and between States in these spheres
173
Id., paras. 114, 115 & 116.
530
inter se. On a remarkably widespread basis, States have repeatedly obliged themselves
to accord foreign investment such treatment. In the Tribunals view, such a body of
concordant practice will necessarily have influenced the content of rules governing the
treatment of foreign investment in current international law. It would be surprising if
this practice and the vast number of provisions it reflects were to be interpreted as
meaning no more than the Neer Tribunal (in a very different context) meant in 1927.174
(Emphases added)
184. At the same time, Mondev went on to say that:

. . . At the same time, Article 1105(1) did not give a NAFTA tribunal an unfettered
discretion to decide for itself, on a subjective basis, what was fair or equitable in
the circumstances of each particular case. While possessing a power of appreciation,
the United States stressed, the Tribunal is bound by the minimum standard as established
in State practice and in the jurisprudence of arbitral tribunals. It may not simply adopt
its own idiosyncratic standard of what is fair or equitable without reference to
established sources of law.175 (Emphasis added)
We understand Mondev to be sayingand we would respectfully agree with itthat

any general requirement to accord fair and equitable treatment and full protection
and security must be disciplined by being based upon State practice and judicial
or arbitral caselaw or other sources of customary or general international law.
185. The Investor, of course, in the end has the burden of sustaining its charge of
inconsistency with Article 1105(1). That burden has not been discharged here and
hence, as a strict technical matter, the Respondent does not have to prove that current
customary international law concerning standards of treatment consists only of discrete, specific rules applicable to limited contexts. It does not appear inappropriate,
however, to note that it is not necessary to assume that the customary international
law on the treatment of aliens and their property, including investments, is bereft of
more general principles or requirements, with normative consequences, in respect
of investments, derived fromin the language of Mondevestablished sources
of [international] law.176
186. We adopt the prudential approach of Mondev that, for purposes of resolving
the dispute before this Tribunal, there is no need to resolve all issues raised, directly
or impliedly, by one or the other party either in oral argument or in written pleadings,
concerning the allegation of violation of Article 1105(1). Without expressing a view
174
Id., para. 117. See, in this connection: e.g., S. Vasciannie, The Fair and Equitable Treatment Standard
International Investment Law and Practice, 70 Brit. Yb. Intl L. 99 (1999); and Fair and Equitable Treatment, unctad Series on Issues in International Investment Agreements (1999) (based on manuscript
prepared by S. Vasciannie); and R. Dolzer and M. Stevens, Bilateral Investment Treaties, chap. 3 (1995);
and J. C. Thomas, supra, note 167, pp. 3951. Note may also be taken of the continuing efforts of a
number of countries to achieve, during the ongoing Doha Round of trade negotiations, a general multilateral convention on the promotion and protection of foreign investment within the framework of the
World Trade Organization.
175
Id., para. 119.
176
Ibid. Schwarzenberger, supra, note 167 at p. 231 makes the comment that [i]t is arguable that
the law-creating process on which [the minimum] standard [of treatment of aliens] now rests is either
international customary law or the general principles of law recognized by civilized nations.(Emphasis
added); Bin Cheng, General Principles of Law (1953) stresses the organic nature of general principles
of law as one of the sources of international law.
AWARD
531
on the Investors thesis, we ask: are the US measures here involved inconsistent
with a general customary international law standard of treatment requiring a host
State to accord fair and equitable treatment and full protection and security to
foreign investments in its territory?
(b) Appraising the Investors claim based on Article 1105(1) as interpreted by
the ftc Interpretation of 31 July 2001
187. We recall that the Investor submitted a series of arguments to sustain its claim
that the US measures are inconsistent with the requirements of Article 1105(1). The
arguments have tended to vary in some measure as this case proceeded on its course.
We examine the principal arguments seriatim.
188. The first submission of the Investor is that the US measures are in themselves unfair and inequitable within the context of nafta. We find this per se
argument unconvincing. It was observed by the Respondent, and not controverted
by the Investor, that domestic content and performance requirements in governmental procurement by both federal and sub-federal (state or provincial) entities
are common to all three nafta Parties.177 It was also noted that although governmental procurement by the federal agencies or entities specifically identified and
listed by the nafta Parties in their respective Annexes to nafta Chapter 10 have
been subjected to the disciplines (including prohibition of domestic content and
performance requirements) of Chapter 10, governmental procurement by state or
provincial entities (like the Commonwealth of Virginia in the Springfield Interchange Project) has yet to be brought under those disciplines.178 Finally, domestic
content and performance requirements in governmental procurement are by no
means limited to the nafta Parties. To the contrary, they are to be found in the
internal legal systems or in the administrative practice of many States.179 Thus, the
US measures cannot be characterized as idiosyncratic or aberrant and arbitrary.
189. The second submission of the Investor is that the fhwa of the US Department
of Transportation refused to follow and apply pre-existing caselaw in respect of adf
International in the Springfield Interchange Project, thus ignoring the Investors
legitimate expectations generated by that caselaw. We do not believe that the refusal
of the fhwa to follow prior rulings, judicial or administrative is, in itself, in the
circumstances of this case, grossly unfair or unreasonable. We have already noted
the Respondents explanation that the caselaw relied upon by the Investor does not
relate to the Buy America provisions of the 1982 staa dealing with Federal-aid
construction projects of state governments (like the Springfield Interchange Project
of the Commonwealth of Virginia), but rather to the Buy American provisions of the
1933 statute on direct procurement by the Federal Government, and the substantial
textual differences between those two statutes.180 The Investor has not, in our view,
successfully rebutted that explanation; it has not explained why caselaw under the
1933 statute should be applicable in respect of the 1982 statute notwithstanding
the differences between the two laws. Moreover, any expectations that the Investor
177
178
179
180
See, supra, para. 94.

See the materials referred to in the Respondents Counter-Memorial, pp. 301.
532
had with respect to the relevancy or applicability of the caselaw it cited were not
created by any misleading representations made by authorized officials of the US
Federal Government but rather, it appears probable, by legal advice received by the
Investor from private US counsel.
190. The Investor submitted, thirdly, that the fhwa acted ultra vires and in
disregard of the terms of the 1982 staa. Here, the Tribunal is bound to observe that
the Investor has not established a prima facie case for holding that, as a matter of US
administrative law, the fhwa had acted without or in excess of its authority under
the 1982 staa.181 More important for present purposes, however, is that even had the
Investor made out a prima facie basis for its claim, the Tribunal has no authority to
review the legal validity and standing of the US measures here in question under US
internal administrative law. We do not sit as a court with appellate jurisdiction with
respect to the US measures.182 Our jurisdiction is confined by nafta Article 1131(1)
to assaying the consistency of the US measures with relevant provisions of nafta
Chapter 11 and applicable rules of international law. The Tribunal would emphasize,
too, that even if the US measures were somehow shown or admitted to be ultra vires
under the internal law of the United States, that by itself does not necessarily render
the measures grossly unfair or inequitable under the customary international law
standard of treatment embodied in Article 1105(1).183 An unauthorized or ultra
vires act of a governmental entity of course remains, in international law, the act
of the State of which the acting entity is part, if that entity acted in its official
181
The very general assertions adduced by the Investor are summarized supra, para. 72. The Investor
appears to argue principally that the fhwa disregarded the language of Sec. 165 of the 1982 staa in
issuing the implementing regulations. It appears to the Tribunal that the Investor believes that the fhwa
fell into legal error in its interpretation of Sec. 165. It seems unnecessary to add that, in any event, such
error, if error there was, does not automatically translate into lack or excess of authority on the part of
fhwa.
182
In Mondev, the tribunal commented that [o]n the approach adopted by Mondev, nafta tribunals
would turn into courts of appeal, which is not their role. Mondev International Ltd v. United States of
America, icsid Case No. ARB(AF)/99/2, 11 October 2002, para. 136. We agree also with the statement
of Mexico in its Pre-hearing Submission under Article 1128, that the Tribunal is not called upon to sit
as a court of appeals in respect of national law; supra, para. 124. The same view was earlier set out
in Robert Azinian and others v. United Mexican States, icsid Case No. ARB(AF)/97/2, para. 99:
The possibility of holding a State internationally liable for judicial decisions does not, however,
entitle a claimant to seek international review of the national court decisions as though the
international jurisdiction seized has plenary appellate jurisdiction. This is not true generally and
it is not true for NAFTA. What must be shown is that the court decision itself constitutes a violation
of the treaty. . .(Emphasis partly in original and partly added)
Cf. the statement in S. D. Myers, Inc. v. Canada that:
[w]hen interpreting and applying the minimum standard, a Chapter 11 tribunal does not have
an open-ended mandate to second-guess government decision-making. . . (para. 261 of the Myers
Award rendered under the uncitral Rules)
Cf. also the statement in Marvin Roy Feldman Karpa v. United Mexican States (icsid Case No.
ARB[AF]/99/1), Interim Decision on Jurisdiction, 6 December 2000, para. 61: [T]he Tribunal does not
have, in principle, jurisdiction to decide upon claims arising because of an alleged violation of general
international law or domestic Mexican law . . . (Emphases added)
183
Cf. the statements of a Chamber of the International Court of Justice in the Case Concerning
Elettronica Sicula, SpA (ELSI) (US v. Italy) (1989) ICJ Rep. 4, para. 124.
AWARD
533
capacity.184 But something more than simple illegality or lack of authority under
the domestic law of a State is necessary to render an act or measure inconsistent
with the customary international law requirements of Article 1105(1), even under
the Investors view of that Article. That something more has not been shown by
the Investor.
191. The fourth submission of the Investor is that the United States failed to
comply with obligations under Article 1105(1) in good faith, and breached its duty
under customary international law to perform its obligations in good faith. As noted
earlier, the Respondent construes this submission as an assertion that customary
international law prescribes a general obligation of good faith subsumed in
Article 1105(1) and denies that such a general obligation exists. We do not consider
it essential to address in any detail this issue cast in terms just as abstract as the issue
posed in respect of the content of fair and equitable treatment and full protection
and security. An assertion of breach of a customary law duty of good faith adds
only negligible assistance in the task of determining or giving content to a standard
of fair and equitable treatment. At the same time, without meaning to intimate any
view on the Respondents defense of denial, we observe that the Investor did not
try to prove, for instance, that the rejection of its request for waiver of the Buy
America requirements by the fhwa was flawed by arbitrariness. The Investor did
not suggest that other companies, situated in like circumstances as the Investor, had
been granted waivers of the same requirements by the fhwa. The Investor, again,
did not allege that the specifications of the structural steel products required under
its Sub-Contract with Shirley had been so finely tailored that only a particular US
steel fabrication company could comply with such specifications. Neither did the
Investor allege that application of the US measures had imposed extraordinary costs
or other burdens on the Investor not also imposed on successful bidders for the other
portions of the Springfield Interchange Project. More generally, the Investor did not
establish a serious basis for contending that some specific treatment received by
adf International from either the fhwa or the vdot constituted a denial of the fair
and equitable treatment and full protection and security included in the customary
international law minimum standard embodied in Article 1105(1).
192. Accordingly, the Tribunal considers that the Investor did not sustain its claim
that the US measures are inconsistent with the requirements of Article 1105(1).
5. Article 1103: Most-Favored-Nation Treatment and the USAlbania and
USEstonia Bilateral Investment Treaties
193. We have earlier noted that the Investor has invoked Article 1103 which
requires each Party to accord to the investors of another Party and their investments
treatment no less favorable than that it accords in like circumstances, to investors
of any other Party or non-Party, and their investments, with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other
disposition of investments. Through the medium of Article 1103, the Investor also
184
See Article 7 of the International Law Commissions Draft Articles on Responsibility of States for
Internationally Wrongful Acts; text in J. Crawford, supra, note 161, p. 106.
534
invokes certain provisions of the USAlbania and USEstonia treaties relating to

fair and equitable treatment and full protection and security.185 The Investors
theory appears to be twofold. Firstly, the relevant provisions of the USAlbania and
USEstonia treaties provide for treatment to Albanian and Estonian investors and
their investments in the United States that is more favorable than the treatment given
to US investors and their investments and (through the medium of Article 1103)
to Canadian investors and their investments, in the United States. The treatment
referred to by the Investor here consists of the US measures involved in the present
case, which measures, according to the Investor, would be inconsistent with the
fair and equitable treatment and full protection and security clauses of the two
treaties. Secondly, the pertinent provisions of the two treaties provide for more favorable treatment than the treatment available to the Claimant under the provisions
of Article 1105(1) as interpreted in the ftc Interpretation of 31 July 2001.
194. The Investors theory assumes the validity of its own reading of the relevant clauses of the treaties with Albania and Estonia. That reading, as observed in
some detail earlier, is that the fair and equitable treatment and full protection
and security clauses of the two treaties establish broad, normative standards of
treatment distinct and separate from the specific requirements of the customary
international law minimum standard of treatment. We have, however, already concluded that the Investor has not been able persuasively to document the existence of
such autonomous standards, and that even if the Tribunal assumes hypothetically
the existence thereof, the Investor has not shown that the US measures are reasonably characterized as in breach of such standards.186 The Investor also contends
that Article II(3)(b) of the USEstonia treaty establishes, through the operation
of Article 1103, another self-contained standard of treatment prohibiting arbitrary or discriminatory measures impairing the operation, use and disposal of
investment. Assuming, once again, the existence of this self-contained standard
of treatment, the Tribunal does not believe that the US measures here in question,
in the circumstances of this case, are reasonably regarded as merely arbitrary and
discriminatory.187
195. The Respondent rejects the Investors reading of the fair and equitable
treatment language in the USAlbania and USEstonia treaties. Although there
are textual differences between nafta Article 1105(1) on the one hand, and Article
II(3)(a) and (b) of the USAlbania and the USEstonia treaties on the other hand,
the Respondent argues vigorously that the two treaties have much the same effect
as Article 1105(1) of nafta as construed in the ftc Interpretation of 31 July 2001.
The two bilateral treaties project, according to the US Department of State letters
transmitting them to the US Senate, a minimum standard of treatment that is
based on customary international law (in the case of the USEstonia treaty)
or based on standards found in customary international law (in the case of the
USAlbania treaty).188 The intent of one of the two State Parties to the two treaties is
185
Supra, paras. 77 et seq. The pertinent portions of the USAlbania and USEstonia treaties are quoted,
supra, paras. 77 and 79.
186
Supra, paras. 187 et seq.
187
Supra, id.
188
Supra, para. 107. See, in this connection, J. C. Thomas, Reflections on Article 1105 of NAFTA:
. . . supra, note 167 at p. 51 where he concludes, after a quick but comprehensive survey of treaty
AWARD
535
clearly relevant, and it does not appear necessary to engage in rigorous interpretative
analysis.
196. Assuming, once more, for purposes of argument merely, that the USAlbania
and USEstonia treaties do provide for better treatment for Albanian and Estonian
investors and their investments in the United States, than the treatment to which the
Investor is entitled in the United States under nafta Article 1105(1), the Investor
still has not thereby shown violation of Article 1103 by the Respondent. For in
any event, the Respondent is entitled to the defense provided by nafta Article
1108(7)(a) which, as noted earlier in some detail, excludes the application of Article
1103 in a case (like the instant one) involving governmental procurement by a
Party.189
197. The Investor invokes a ruling in the Decision on Objections to Jurisdiction in Maffezini v. Kingdom of Spain.190 The Maffezini Tribunal had before it a
SpainArgentina bilateral investment treaty which includes a fair and equitable
treatment clause that establishes national-treatment as the floor below which the
treatment accorded by a State Party to investors of the other State Party shall not be
allowed to fall. The Maffezini Tribunal held that the national-treatment clause may
be understood to embrace the treatment a Government required for its investors
abroad, when more favorable than the treatment granted to foreign investors in its
own territory.191 We understand the Investor to be saying that the more favorable
treatment accorded to US investors in Albania and Estonia under the fair and equitable treatment clauses in their bilateral investment treaties, and to Albanian and
Estonian investors in the US, becomes available to the Investor not only by reason
of nafta Article 1103 (most-favored-nation clause) but also by virtue of nafta
Article 1102 (national-treatment clause). We observe that Maffezini does not set
out in any detail the basis for the above ruling and hence does not provide much
guidance. We note also that nafta Article 1105(1) sets the customary international
law minimum standard of treatment, and not the national treatment clause (nafta
Article 1102), as the floor. But even if we were hypothetically to put aside the
textual differences between nafta Article 1105(1) and the SpainArgentina treaty,
and arguendo to assume that the Investor has demonstrated the more favorable
nature of the Albanian and Estonian treaty provisions, ultimately Maffezini does not
advance the cause of the Investor in any appreciable way. As pointed out already,
Article 1108(7)(a) renders inapplicable both Articles 1102 and 1103 in cases of
practice (pp. 3951), that [w]hile the precise wording varied, it is evidence that states propounding
the negotiation of investment protection treaties saw a clear and intended link between constant (or
full) protection and security and fair and equitable treatment and the international minimum standard at
general international law. The former were considered to be expressions of the latter.
189
Supra, paras. 160 et seq.
190
icsid Case No. ARB/97/7, 25 January 2000; 40 ILM 1129 (2001).
191
40 ILM at p. 1139:
While this clause applies to national treatment of foreign investors, it may also be understood
to embrace the treatment required by a Government for its investors abroad, as evidenced by
the treaties made to ensure their protection. Hence, if a Government seeks to obtain a dispute
settlement method for its investors abroad, which is more favorable than that granted under the
basic treaty to foreign investors in its territory, the clause may be construed so as to require a
similar treatment of the latter.
536
procurement by a Party. And the instant case does involve procurement by a

Party.
198. Accordingly, the Tribunal believes and so holds that the Investors claim
that the US measures in question are inconsistent with the requirements of nafta
Article 1103 must be denied.
VI. Award
199. The conclusions the Tribunal has reached may be summed up in the following terms:
(1) The Tribunal has jurisdiction to pass upon the Investors claim that the US
measures in question are inconsistent with nafta Article 1103.
(2) The Investors claims concerning construction projects other than the Springfield Interchange Project have not been considered in this proceeding because
they are inadmissible and are, accordingly, dismissed without prejudice.
(3) The Tribunal does not find that the US measures in question are inconsistent
with nafta Article 1102. Assuming, however, arguendo, that the US measures are inconsistent with the provisions of Article 1102, the Respondent
is, in any event, entitled to the benefit of nafta Article 1108(7)(a) which
renders inapplicable the provisions of, inter alia, Article 1102 in case of
procurement by a Party. Procurement by the Commonwealth of Virginia for,
or in connection with, the Springfield Interchange Project, constitutes procurement by a Party within the meaning of Article 1108(7)(a). The Investors
claim concerning Article 1102 is, accordingly, denied.
(4) The Investor has shown prima facie that the US measures in question are
inconsistent with the requirements of nafta Article 1106(1)(b) and (c). The
Respondent is, however, entitled to the benefit of nafta Article 1108(8)(b)
which renders inapplicable the provisions of Article 1106(1)(b) and (c) in
case of procurement by a Party. The Springfield Interchange Project involves
procurement by the Commonwealth of Virginia, which constitutes procurement by a Party in the sense of Articles 1106(1)(b) and (c) and 1108(8)(b).
The Investors claim concerning Article 1106 is, accordingly, denied.
(5) The Tribunal does not find it necessary to resolve the issue of whether the US
Albania and the USEstonia bilateral investment treaties accord treatment
more favorable than the treatment available under nafta Article 1105(1).
The Investor is not entitled to the benefits claimed under nafta Article 1103,
which Article is inapplicable by virtue of nafta Article 1108(7)(a) in case
of procurement by a Party. The Investors claim concerning Article 1103 is,
accordingly, denied.
(6) The Tribunal does not find that the US measures in question are inconsistent
with the requirements of nafta Article 1105(1) as construed in the ftc
Interpretation of 31 July 2001, which Interpretation is binding upon the
Tribunal.
200. In its Counter-Memorial, the Respondent asked the Tribunal for an order
requiring the Investor to bear the costs of this proceeding, including the fees
AWARD
537
and expenses of the Members of the Tribunal, the expenses and charges of the
Secretariat and the expenses incurred by the United States by reason of this
proceeding. Having regard to the circumstances of this case, including the nature
and complexity of the questions raised by the disputing parties, the Tribunal
believes that the costs of this proceeding should be shared on a fiftyfifty basis
by the disputing parties, including the fees and expenses of the Members of the
Tribunal and the expenses and charges of the Secretariat. Each party shall bear its
own expenses incurred in connection with this proceeding.
Done at Washington, DC, in English language.
[Source: United States Department of State, http://www.state.gov/documents/

organization/16586.pdf.]
538
WASTE MANAGEMENT v. MEXICO (NO. 2)
icsid (Additional Facility) Rules Venue of arbitration Relevant factors

Neutrality of forum Applicability of New York or Panama Conventions
Differences between two Conventions Positions taken by Government of
Canada in earlier proceedings Whether relevant Convenience of parties
and counsel nafta Articles 1122, 1130 Arbitration (Additional Facility)
Rules, Articles 20, 21
nafta Chapter 11 First arbitration commenced without valid waiver
under Article 1121(2)(b) First Tribunal deciding that it lacked jurisdiction
over the claim Whether new proceedings permissible nafta Articles 1120,
1121
Arbitration Res judicata Decision denying jurisdiction of first Tribunal
Whether precluding new arbitration on same claim Interpretation of first
Tribunals decision nafta Article 1136 icsid (Additional Facility) Rules,
Article 53(4)
Arbitration Abuse of process Successive arbitrations of same claim
Whether Tribunal has inherent power to stay proceedings No evidence of
lack of bona fides Second arbitration allowed
Costs Costs and expenses Unsuccessful jurisdictional objection Whether
Respondent should be required to pay costs and expenses in any event
Extent of Tribunals discretion
Decision on Venue of the Arbitration. 26 September 2001
Decision on Mexicos Preliminary Objection Concerning the Previous
Proceedings. 26 June 20021
(Arbitration Tribunal: Crawford, President; Civiletti
and Magallon Gomez,2 Members)
Summary: The facts: On 27 September 2000, the Secretary-General registered
a notice for the initiation of arbitration proceedings, lodged by Waste Management
Inc. (the Claimant) under the icsid Arbitration (Additional Facility) Rules. The
claim arose out of a dispute concerning the provision of waste management services under a concession granted by the Municipality of Acapulco de Juarez in the
1
For a list of counsel, see para. 5 of the decision.

Replacing Mr Aguilar Alvarez, who resigned as a member of the Tribunal after the decision on the
venue of the arbitration.
2
SUMMARY
539
Mexican State of Guerrero. The claim, based on nafta Articles 1105 and 1110,
had already been presented to an earlier panel, which held by majority that it lacked
jurisdiction to judge the issue in dispute on the ground that the Claimant had not
deposited an unconditional and effective waiver of further domestic remedies as
required by nafta Article 1121(2)(b).3 The first tribunal held that the defective
waiver could not be made good by subsequent action on the part of the Claimant.
Mexico argued that the first tribunals decision precluded any second proceedings
on the same claim, and the Tribunal ordered that this objection be dealt with as a
preliminary issue.
Decision on Venue of the Arbitration: 26 September 2001
Under Article 1130, a nafta Tribunal was to hold the arbitration on the territory of
one of the States Parties that is also a Party to the New York Convention. All three
nafta States are parties to the Convention. The United States was, but Canada
was not, a party to the Inter-American Convention on International Commercial
Arbitration of 1975 (the Panama Convention).
The Claimant argued that the hearing should be held in Washington, DC, on
three grounds: (a) neutrality; (b) the clarity and adequacy of United States law
on international arbitration; and (c) the balance of convenience. On the question
of neutrality, it noted that the Government of Canada had intervened in the first
proceedings in favour of the Mexican position, and that Government had also
intervened in the proceedings before the British Columbia Supreme Court in the
Metalclad case, again in support of Mexicos position. The Respondent argued that,
since the Claimant was a United States corporation, Canada was the neutral forum.
The Tribunal raised proprio motu the question whether, if the proceedings were
held in the United States, the Panama Convention would apply, pursuant to section
305 of the Federal Arbitration Act, to the exclusion of the New York Convention.
Having regard to the apparent intention of the drafters of nafta that the New
York Convention be applicable to Chapter 11 arbitrations, this raised the question
whether a party might have a legitimate juridical advantage in the selection of a
Canadian venue.
In response, the Claimant argued that there was no material difference between
the Panama and New York Conventions but offered to consent to the proceedings
being governed by the New York Convention; the Respondent saw the potential
uncertainties as to the application of the Panama Convention in the United States
as a further reason for the choice of a Canadian venue.
Held: The venue for the arbitration would be Washington, DC.
(1) Since the first arbitration had been held in Washington, DC, and since the
effect of the first Tribunals decision was an issue in the second arbitration, it was
desirable that there be no change in the arbitral or curial law (para. 12).
(2) As a matter of convenience, Washington, DC was an appropriate place for
the arbitration (para. 13).
3
5 ICSID Reports 443. One of the arbitrators, Mr K. Highet, dissented: ibid., p. 462.
540
(3) The potential application of the Panama Convention by United States courts
was not a material factor in the present case. Article 1122 of nafta envisaged that
the Panama Convention might be applicable, and there was no indication that either
party would be prejudiced thereby (paras. 1518).
(4) Considerations of neutrality were likewise not decisive; the Canadian courts
would be independent of any position taken by the executive (paras. 202).
Decision on Mexicos Preliminary Objection Concerning the Previous Proceedings: 26 June 2002
Although the Claimant in commencing the second arbitration unequivocally and
unconditionally waived further resort to local remedies under Article 1121 of
nafta, the Respondent argued that it was debarred from commencing a second
arbitration on the same claim by the terms of nafta itself, the doctrine of res
judicata, or the principle of abuse of process.
Held: The Claimant was not barred by the decision of the first Tribunal from
commencing the second proceeding.
(1) Article 1121 did not preclude a second proceeding on the same claim, if the
first proceeding was held to be outside jurisdiction and the defect was remediable
under Chapter 11 (paras. 1932).
(2) The first Tribunal, having concluded that the Claimants waiver was not valid
for the purposes of Article 1121, held that it lacked jurisdiction to consider the
merits of the claim. Under international law, the dismissal of a claim on grounds of
lack of jurisdiction did not preclude the commencement of a second proceeding on
the same claim before a tribunal which did have jurisdiction over it (paras. 327).
(3) The first Tribunal not having considered any other aspect of the case than the
requirements of Article 1121, there was no res judicata precluding the bringing of
a second proceeding (paras. 3847).
(4) In the circumstances, the Claimant had acted in good faith and there
was no abuse of process in commencing the second arbitration. Although
the outcome of the subsequent proceedings in Mexico might be relevant to
the merits, the Claimants second application was properly submitted within the
framework of the remedies open to it (paras. 4850).
(5) The question of costs would be dealt with in the context of the final award
(paras. 523).

Decision on Venue of the Arbitration (26 September 2001)
Decision on Mexicos Preliminary Objection Concerning the Previous
Proceedings (26 June 2002)
p. 541
p. 549
VENUE OF THE ARBITRATION
541
DECISION ON VENUE OF THE ARBITRATION

(26 SEPTEMBER 2001)
Introduction
1. On 27 September 2000, the Secretary-General of icsid registered a notice
for the initiation of arbitration proceedings, lodged by Waste Management Inc.
(Claimant) pursuant to Article 2 of the icsid Arbitration (Additional Facility)
Rules, in relation to a claim against the United Mexican States (Respondent).
The claim arises out of a dispute concerning the provision of waste management
services under a concession granted by the Municipality of Acapulco de Juarez in
the Mexican State of Guerrero. Claimant alleges that certain conduct of Mexican
organs or entities, including the Municipality and the State, was a violation of
nafta Articles 1105 and 1110.
2. This was the second occasion on which Claimant had brought proceedings in
respect of its claim. On the first occasion a Tribunal (consisting of Mr Bernardo Cremades, President; Messrs Keith Highet and Eduardo Siqueiros T.) held by majority
that it lacked jurisdiction to judge the issue in dispute.1 The reason was a breach
by the Claimant of a requirement laid down by nafta Article 1121(2)(b); viz. the
waiver of certain local remedies with respect to the measure of the disputing Party
that is alleged to be in breach of nafta, which waiver has to be included in the
submission of the claim to arbitration. The Tribunal held that the waiver deposited
with the first request did not satisfy Article 1121 and that this defect could not be
made good by subsequent action on the part of the Claimant.
3. In these second proceedings (as we will call them), the Claimants submission was accompanied by an unequivocal waiver in terms of Article 1121. The
Respondent now argues that the effect of the first proceedings is to debar Claimant
from bringing any further nafta claim with respect to the same cause of action.
At the initial procedural hearing of the second proceedings, held at the seat of the
World Bank in Washington, DC on 8 June 2001, the parties acknowledged that the
present Tribunal had been duly constituted pursuant to Article 1120 of nafta and
in accordance with the icsid Arbitration (Additional Facility) Rules. An exchange
of views took place on the venue of the arbitration and on the procedure for dealing
with the Respondents objections to jurisdiction based on the previous proceedings,
and in particular on the decision of the previous Tribunal. The Tribunal laid down
timetables for written observations on the question of venue and on the preliminary
objection. This order deals with the question of venue.
Applicable Provisions with Respect to the Place of Arbitration
4. Article 1120 of nafta provides that:
1. Except as provided in Annex 1120.1, and provided that six months have elapsed
since the events giving rise to a claim, a disputing investor may submit the claim to
arbitration under:
1
40 ILM 56 (2001).
542
(a) the icsid Convention, provided that both the disputing Party and the Party of the
investor are parties to the Convention;
(b) the Arbitration (Additional Facility) Rules of icsid, provided that either the
disputing Party or the Party of the investor, but not both, is a party to the icsid
Convention; or
(c) the uncitral Arbitration Rules.
2. The applicable arbitration rules shall govern the arbitration except to the extent
modified by this Section.
Article 1130 further provides that:

Unless the disputing parties agree otherwise, a Tribunal shall hold an arbitration in the
territory of a Party that is a Party to the New York Convention, selected in accordance
with:
(a) the icsid Arbitration (Additional Facility) Rules if the arbitration is under those
Rules or the icsid Convention;
(b) the uncitral Arbitration Rules if the arbitration is under those Rules.
In the present case, the United States (the party of the investor) is a party to the
icsid Convention but Mexico is not. Accordingly the claim was submitted under
the Arbitration (Additional Facility) Rules, which the parties agree are applicable
to the question of venue.
5. Chapter IV of the Arbitration (Additional Facility) Rules deals with the place
of arbitration. Article 20 provides that arbitration proceedings shall be held only in
States that are parties to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards. All three nafta States are parties to the 1958
Convention. Article 21, entitled, Determination of Place of Arbitration, provides:
(1) Subject to Article 20 of these Rules the place of arbitration shall be determined
by the Arbitral Tribunal after consultation with the parties and the Secretariat.
(2) The Arbitral Tribunal may meet at any place it deems appropriate for the inspection of goods, other property or documents. It may also visit any place connected with
the dispute or conduct inquiries there. The parties shall be given sufficient notice to
enable them to be present at such inspection or visit.
(3) The award shall be made at the place of arbitration.
Unlike arbitration under the icsid Convention, arbitration under the Arbitration
(Additional Facility) Rules is not quarantined from legal supervision under the law
of the place of arbitration. The possible requirements of that law are specifically
referred to in the Arbitration (Additional Facility) Rules (see Articles 1, 53(3), (4)).
Thus the determination of the place of an Additional Facility arbitration can have
important consequences in terms of the applicability of the arbitration law of that
place.
The Views of the Parties as to Venue
6. In accordance with the directions of the Tribunal, both parties made written
observations on the question of venue.
543
7. The Claimant argued for Washington, DC, on three grounds: (a) neutrality;
(b) the clarity and adequacy of United States law on international arbitration, and
(c) the balance of convenience. On the question of neutrality, which it regarded as
of dominant importance, it noted that the Government of Canada had intervened
in the first proceedings in favour of the Mexican position; that Government had
also intervened in the proceedings before the British Columbia Supreme Court
in the Metalclad case, supporting Mexicos challenge to a decision in a nafta
arbitration held under the Arbitration (Additional Facility) Rules. For its part the
Government of the United States had not intervened in the first proceedings. The
Claimant further argued that following the British Columbia Supreme Courts ruling
of 2 May 2001,2 there was substantial uncertainty about the extent and standard of
review of Additional Facility decisions in Canada. Although there had not yet been
a challenge before a United States court to an Additional Facility award, there was
substantial United States experience with international arbitration, and the Federal
Arbitration Act clearly embodied the standards of the New York Convention.3
8. The Respondent agreed that neutrality was a dominant consideration, but argued that this favoured Canada rather than the United States since the courts that
might be called upon to exercise curial review of the award should be those of
the nafta Party that is neither the disputing Party nor the Party of the disputing
investor. It stressed that the Government of Canadas intervention in the first proceedings on an issue of nafta interpretation in no way bound the Canadian courts,
which would decide the legal issues on their merits, as they had done in Metalclad. It observed that legal issues would arise under United States law analogous
to those which arose in the Metalclad case before the British Columbia Supreme
Court, and that in the absence of specific precedents the standard of review in the
United States was also unclear. It noted that the essential issue was which courts
would be competent to review any eventual award; where the Tribunal was actually
to sit was an entirely separate issue.4
9. Upon further consideration of the issues, it appeared to the Tribunal that a question might arise as to whether the provisions of the New York Convention would
be relevant in a United States court if the United States was selected as the place
of arbitration. It was at least arguable that the provisions of the Inter-American
Convention on International Commercial Arbitration of 1975 (the Panama Convention)5 would apply, pursuant to section 305 of the Federal Arbitration Act, to
the exclusion of the New York Convention.6 Having regard to certain differences
between the two Conventions and to the apparent intention of the drafters of nafta
2
United Mexican States v. Metalclad Corporation, 2001 BCSC 664.

Claimants submission of 18 June 2001.
4
Respondents submission of 18 June 2001.
5
14 ILM 336 (1975); 1438 UNTS 248.
6
Section 305 of the Federal Arbitration Act provides as follows:
3
Relationship between the Inter-American Convention and the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards of June 10, 1958
When the requirements for application of both the Inter-American Convention and the Convention
on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, are met,
determination as to which Convention applies shall, unless otherwise expressly agreed, be made
as follows:
544
that the New York Convention be applicable to Chapter 11 arbitrations, this raised
the question whether one or other party might have a legitimate juridical advantage
in the selection of a Canadian venue. Canada is not a party to the Panama Convention and the question of the relationship between the two would not arise there. The
Tribunal invited the parties to comment on that question and both did so.
10. In its response, the Claimant agreed that, pursuant to section 305 of the
Federal Arbitration Act, a United States court called to deal with an issue arising in
the present proceedings would apply the Panama Convention rather than the New
York Convention. But it argued that there was no material difference between the
two. This was true in particular as far as the present proceedings are concerned;
these are already commenced and the rules of procedure are already established.
As to the standards for enforcement of awards under the two Conventions, it saw
these as nearly identical. In the event that Mexico preferred the application of the
New York Convention, it expressly offered to agree to that course, as permitted by
section 305.7
11. The Respondent likewise agreed that if the place of arbitration were Mexico
or the United States, the Panama Convention would apply to the recognition and
enforcement of the award, whereas if Canada were selected, the New York Convention would apply. It saw the potential uncertainties as to the application of the
Panama Convention in the United States as a further reason for the choice of a
Canadian venue.8
Assessment of the Relevant Considerations
12. Turning to the Tribunals own view of the matter, it is relevant to note, at
the outset, that the place at which the first arbitration proceedings were held was
Washington, DC. Indeed this does not seem to have been an issue before the first
Tribunal.9 This factor appears to the Tribunal to have a certain relevance, especially
since a major preliminary issue in the present proceedings is the legal effect of
the conduct of the Claimant in the first proceedings. Prima facie it would seem
desirable that the same curial law be applicable to both proceedings, involving as
they do the same dispute and the same cause of action.
13. As a pure matter of convenience, Washington, DC was and is an appropriate
place for the arbitration. The representation of both parties includes lawyers from
1. If a majority of the parties to the arbitration agreement are citizens of a State or States that have
ratified or acceded to the Inter-American Convention and are member States of the Organization
of American States, the Inter-American Convention shall apply.
2. In all other cases the Convention on the Recognition and Enforcement of Foreign Arbitral Awards
of June 10, 1958, shall apply.
This is not well adapted to dealing with a case where one of the parties is the State itself, but neither
party in the present case argued that Mexico should be treated other than as a citizen of a State party for
the purposes of section 305.
7
Claimants further submission of 27 August 2001.
8
Respondents further submission of 27 August 2001.
9
See the first Tribunals Award of 2 June 2000, 3, where it is simply stated that the jurisdictional
hearing took place in Washington, DC. The question was decided at the initial procedural hearing on
16 July 1999, apparently without controversy.
545
firms based in Washington, DC. icsid facilities are available there at little or no
cost to the parties. Were the arbitration to be held, for example, in Toronto there
would be additional expenses in the travel of the members of the Tribunal, the
Secretariat and the representatives of the parties, as well as in the hiring of a venue
and associated services. Should the Tribunal reach the merits of the dispute, it is
possible that an evidentiary hearing might more conveniently and economically be
held in Mexico, where the dispute arose. But provision is made for this eventuality
in Article 21(2) of the Arbitration (Additional Facility) Rules, without prejudice to
the actual place of the arbitration, and in fact neither party finally argued that the
place of the arbitration should be in Mexico.
14. The Respondents arguments for a Canadian venue are essentially ones of
principle. If they are valid, they could well prevail over considerations of convenience and cost. Essentially, two issues are raised: (a) the adequacy and clarity
of the applicable law, and (b) the neutrality, actual or perceived, of the place of
arbitration. As noted, the parties are sharply divided on each of these issues.
The Adequacy of the Proper Law of the Arbitration
15. An initial question concerns the relevance of the Panama Convention of 1975.
Both parties agree that by virtue of section 305 of the Federal Arbitration Act, a
court dealing with the present proceedings in the United States would apply the
Panama Convention rather than the New York Convention. The question is whether
this conclusion (assuming it is correct) provides a reason for selecting a Canadian
venue, it being clear that in a Canadian court the Panama Convention would be
irrelevant.
16. Evidently the drafters of nafta had the 1958 Convention in mind, since
they required the proceedings to be held in a State party to that Convention.10 At
the same time they were aware of the potential interaction of the New York and
Panama Conventions, as indicated by nafta Article 1122, which provides that:
1. Each Party consents to the submission of a claim to arbitration in accordance
with the procedures set out in this Agreement.
2. The consent given by paragraph 1 and the submission by a disputing investor
of a claim to arbitration shall satisfy the requirement of:
(a) Chapter 11 of the icsid Convention (Jurisdiction of the Centre) and the Arbitration (Additional Facility) Rules for written consent of the parties;
(b) Article I of the Inter-American Convention for an agreement.11
In these circumstances the Tribunal concludes that the application of the Panama
Convention rather than the New York Convention to a nafta Chapter 11 arbitration raises no question of principle, unless it is possible to point to some specific
10
nafta, Art. 1130, cited in paragraph 4 above. To the same effect Arbitration (Additional Facility)
Rules, Art. 20, cited in paragraph 5 above.
11
See also nafta, Art. 1136(6) and (7).
546
disadvantage which one party or another may suffer from the application of the
former rather than the latter.
17. The question of the relationship between the Panama and New York Conventions has been the subject of some discussion in the literature. For example van den
Berg concludes that the two Conventions are generally compatible, but he notes that
the Panama Convention does not contain provisions regarding its field of application, the referral by a court to arbitration, and the conditions to be satisfied by the
party seeking enforcement of the award.12 Unlike the New York Convention, the
Panama Convention also provides for its own residual set of arbitral rules, where
no other arbitral rules are agreed between the parties.
18. In the present case, having regard to the stage which the proceedings have
reached, most of the differences between the two Conventions are irrelevant. Of
the matters referred to by van den Berg, only the question of enforcement might
possibly arise as an issue. Neither party has however raised any difficulty on that
score. In this case it was primarily for the Claimant to do so, but it is evidently content
to accept that the Panama Convention should apply to any issue of recognition or
enforcement arising in a United States court. If this presents any difficulty for the
Respondent, it is still open for it to accept the Claimants offer to apply the New
York Convention instead of the Panama Convention, a course specifically permitted
by section 305 of the Federal Arbitration Act. For these reasons the Tribunal does
not believe that the potential application of the Panama Convention, if Washington,
DC be chosen as the venue, should be treated as determinative.
19. The Tribunal turns to the other issues concerning the applicable law which
were debated by the parties. It is no doubt the case that more international arbitrations occur in the United States than Mexico or Canada, and that there is a body of
jurisprudence on the Federal Arbitration Act and the New York Convention which
indicates a generally supportive attitude on the part of the United States courts
to international arbitration. On the other hand the specific issue of the applicable
law and the standard of review in nafta arbitration has arisen in Canada while
it has not (yet) arisen in the United States. The Tribunal is inclined to agree with
the Respondent that legal issues of the same general order as those which arose in
Metalclad would arise in the United States courts in the event of a challenge to
a Chapter 11 arbitration held in the United States. What answers would be given
remain to be seen, but commentators do not regard all questions as closed in the
United States. Nor, in these early days of Chapter 11 arbitration, could they be.
It would be invidious, and is unnecessary, to compare the actual or hypothetical
performance of United States and Canadian courts in such cases. It is sufficient on
this point to say that the Tribunal cannot identify any particular issue on which
there is likely to be a significant difference of approach by the courts of the two
nafta states.
12
A. J. van den Berg, The New York Convention 1958 and Panama Convention 1975: Redundancy or
Compatibility? 5 Arbitration International 214 (1989) at 229. See also J. Jackson, The 1975 InterAmerican Convention on International Commercial Arbitration: Scope, Application and Problems 8
Jnl of Intl Arb 91 (1991); J. P. Bowman, The Panama Convention and its Implementation under the
Federal Arbitration Act, 11 American Review of International Arbitration 116 (2000).
547
The Neutrality of the Place of Arbitration

20. As noted already, both parties regarded the question of neutrality as the
dominant one for present purposes, though they disagreed as to which forum would
be neutral. Earlier decisions, both under the Arbitration (Additional Facility) Rules
and the uncitral Rules, have likewise treated neutrality as a relevant factor.13
It has certainly been treated as relevant in the context of international commercial
arbitration generally. On the other hand, in the specific context of nafta Chapter 11
arbitration it is perhaps of lesser importance. The three nafta parties are associated
in a wide ranging agreement aimed, inter alia, at free trade and protection of
investments. There is as yet no indication that nafta arbitrators are likely to suffer
attacks on their integrity, or their nerves, from sitting in one of the States parties
as compared with another. There was evidently no difficulty in the first tribunal
sitting in Washington, DC, and feeling able to decide in that city in favour of
the Respondent. The present Tribunal, for its part, does not apprehend that its
independence or capacity to decide is likely to be affected by the question where it
is to sit.
21. There are only three parties to nafta. If the principle of neutrality were
treated as dominant in relation to nafta Chapter 11 arbitration, it would produce
a rule that the tribunal would always sit in the state party other than that of the
claimant and respondent. The drafters of nafta laid down no such rule;14 rather
they left the matter for each tribunal to decide, having regard to relevant factors. It
may be accepted that neutrality could be one of thesealthough it is specifically
not mentioned in the uncitral Notes which provide a guide to choice of forum in
cases under the uncitral Rules.15 But the nafta parties themselves do not seem
to have treated it as decisive.
22. One difficulty with neutrality as a criterion is that it can tend to lead to a
confusion between the position taken by the executive government of a nafta party
on the one hand and that taken by its courts on the other. Under the principles of the
separation of judicial power constitutionally guaranteed in all three states parties, it
is for the courts to decide on issues concerning the functioning of arbitral tribunals
and the recognition and enforcement of their awards and to do so in accordance with
the law. If there were any indication that the courts of a state party were deferring
to executive pronouncements on these issues, that would be highly relevant to the
choice of venue. It is almost needless to say that there is no evidence or suggestion
of this.
13
See, e.g., Ethyl Corporation v. Government of Canada, decision on venue of 28 November 1997;
Methanex Corporation v. United States of America, decision on venue of 7 September 2000. These
were both arbitrations held under the uncitral Rules, but the question has also arisen in Additional
Facility cases.
14
This contrasts with the rule laid down for interstate arbitration under nafta Chapter 20. In accordance
with Rule 22 of the Model Rules of Procedure, a Chapter 20 tribunal is to sit on the territory of the
respondent State party. Normally a strong rule of neutrality is applied to interstate arbitration, with
interstate tribunals invariably sitting in a third state. This is a further indication that the parties to
nafta do not regard the neutrality of an arbitral venue as the overriding consideration. See also Ethyl
Corporation v. Government of Canada, decision on venue of 28 November 1997, pp. 45.
15
Cf. Ethyl Corporation v. Government of Canada, decision on venue of 28 November 1997, p. 10
note 12.
548
23. By parity of reasoning the Tribunal is not persuaded that the intervention of
Canada to present its views in the previous proceedings, still less its intervention
before the British Columbia Supreme Court in Metalclad, entails that Canada is
somehow unneutral in the present case. In taking these steps the Government of
Canada was merely exercising procedural rights which it had, respectively, under
Article 1128 of nafta and under Canadian law. In each case it was a matter for the
tribunal or court to take into account as it saw fit the comments made.
Conclusion
24. In the Tribunals view the dominant consideration in this case is that the
very same claim has already been presented between the same parties in proceedings held, without apparent objection or difficulty, in Washington, DC. The claim
failed on procedural grounds, and the legal implications of that failure are a key
issue, indeed the first substantive issue, for the present Tribunal to decide. In these
circumstances it would be, to say the least, unfortunate if the arbitral law should
now be different as a result of a different decision as to the venue of the second
arbitration. No compelling reason has been presented for such a decision in any
event, having regard to what has been said above, and especially to the marginal
balance of convenience in favour of Washington, DC.16
25. For these reasons the Tribunal decides unanimously that the venue of the
arbitration shall be Washington, DC. Unless otherwise agreed or decided, hearings
will be held at the icsid facilities within the World Bank building.
[Source: http://www.worldbank.org/icsid/cases/venue-e.pdf.]
16
See paragraph 13 above.
MEXICOS PRELIMINARY OBJECTION
549
DECISION ON MEXICOS PRELIMINARY OBJECTION

CONCERNING THE PREVIOUS PROCEEDINGS (26 JUNE 2002)
Introduction
1. On 27 September 2000, the Secretary-General of icsid registered a notice
for the initiation of arbitration proceedings, lodged by Waste Management Inc.
(Claimant) under the icsid Additional Facility Rules, in relation to a claim against
the United Mexican States (Respondent). The claim arose out of a dispute concerning the provision of waste management services under a concession granted by
the Municipality of Acapulco de Juarez (Acapulco) in the Mexican State of Guerrero (Guerrero). The Claimant alleged that certain conduct of Mexican organs
or entities, including Acapulco and Guerrero, was a violation of nafta Articles
1105 and 1110. The Tribunal was constituted on 30 April 2001: its members were
Mr Benjamin R. Civiletti (United States of America) appointed by the Claimant,
Mr Guillermo Aguilar Alvarez (United Mexican States) appointed by the Respondent, and as President, Professor James R. Crawford (Australia) appointed by the
Secretary-General of icsid pursuant to Article 1124(2) of nafta.
2. This was the second occasion on which the Claimant had brought proceedings
in respect of its claim. On the first occasion a Tribunal (consisting of Mr Bernardo
Cremades, President; Messrs Keith Highet and Eduardo Siqueiros T.) held by majority that it lacked jurisdiction.1 The reason was a breach by the Claimant of one
of the requirements laid down by nafta Article 1121(2)(b) and deemed essential
in order to proceed with submission of a claim to arbitration; viz., the waiver of
the right to initiate or continue before any tribunal or court, dispute settlement proceedings with respect to the measures taken by the Respondent that are allegedly in
breach of the nafta, which waiver has to be included in the submission of the claim
to arbitration. The Tribunal held that the waiver deposited with the first request did
not satisfy Article 1121 and that this defect could not be made good by subsequent
action on the part of the Claimant.2
3. In these second proceedings (as we will call them), the Claimants submission
was accompanied by an unequivocal waiver in terms of Article 1121. The Respondent now argues, however, that the effect of the first unsuccessful proceedings is to
debar the Claimant from bringing any further claim with respect to the measure that
is alleged to be a breach of nafta. At the initial procedural hearing, held at the seat
of the World Bank in Washington, DC on 8 June 2001, the parties acknowledged
that this Tribunal had been duly constituted pursuant to Article 1120 of nafta and
in accordance with the icsid Additional Facility Rules. An exchange of views took
place on the venue of the arbitration and on the procedure for dealing with the
Respondents objections to jurisdiction based on the previous proceedings, and in
particular on the decision of the previous Tribunal. In its Procedural Order No. 1,
the Tribunal laid down timetables for written observations on the question of venue
1
Waste Management, Inc. v. United Mexican States, Arbitral Award of 2 June 2000, 40 ILM 56 (2001);
also in 15 ICSID ReviewForeign Investment Law Journal 211 (2000).
2
Award, 31, 40 ILM 56 (2001), at pp. 6970.
550
and on the preliminary objection. Subsequently, by Order dated 26 September 2001,

the Tribunal decided that the venue of the present proceedings would be the same
as those of the first proceedings, viz., Washington, DC.
4. Following a communication from the Respondent dated 16 November 2001
which did not, however, amount to a challenge, one of the Arbitrators, Mr Guillermo
Aguilar Alvarez, tendered his resignation from the Tribunal. Pursuant to Article
15(3) of the Additional Facility Rules, the Tribunal accepted his resignation. Pursuant to Article 18(1) of the Rules, Mexico thereupon nominated Mr Eduardo
Magallon Gomez to fill the vacancy so created. The Tribunal was reconstituted on
December 14, 2001, following Mr Magallon Gomez acceptance of his appointment.
5. Pursuant to the Procedural Order No. 1 of 8 June 2001, Respondent lodged a
Memorial on Jurisdiction of 8 August 2001. Claimant lodged a Counter-Memorial
on jurisdiction on 9 October 2001. The hearing initially scheduled for 3 December
2001 having been postponed in order to allow the vacancy on the Tribunal to be
filled, the Tribunal convened at the premises of the World Bank, Washington DC
on 2 February 2002 to hear the parties oral arguments on the questions dealt with
in those pleadings. The parties were represented as follows:
Attending on behalf of the Claimant:
Mr J. Patrick Berry, Baker Botts LLP
Mr Richard King, Baker Botts LLP
Ms Lorena Perez, Baker Botts LLP
Mr Jay L. Alexander, Baker Botts LLP
Mr Bob Craig, Assistant General Counsel, Waste Management, Inc.
Attending on behalf of the Respondent:
Mr Hugo Perezcano Daz, Lead Counsel, Ministry of Economy, Government
of Mexico
Mr Salvador Behar La Valle, Ministry of Economy, Government of Mexico
Ms Adriana Gonzalez Arce Brilanti, Ministry of Economy, Government of
Mexico
Mr Cameron Mowatt, Thomas & Partners
Mr Carlos Garca, Thomas & Partners
Mr Robert Deane, Thomas & Partners
Mr Stephan E. Becker, Shaw Pittman
Mr Sanjay Mullick, Shaw Pittman
Ms Brooke Bentley, Shaw Pittman
The Tribunal heard, on behalf of the Respondent, Mr Hugo Perezcano Daz, and
on behalf of the Claimant, Mr Jay Alexander.
6. In response to certain questions from the Tribunal concerning both the case as
argued before the previous Tribunal and the proceedings brought by the Claimant
in Mexico, the parties provided certain additional information and argument by
letters both dated 19 February 2002.
551
7. Representatives of the other two nafta parties attended the hearing on

2 February 2002:
Attending on behalf of the United States of America:
Mr Barton Legum, Office of Legal Adviser, Office of International Claims,
Department of State
Mr David A. Pawlak, Office of International Claims, Department of State
Attending on behalf of the Government of Canada:
Mr Douglas Heath, Embassy of Canada in Washington, DC
The Decision of the First Tribunal

8. Article 1121 of nafta is headed Conditions Precedent to Submission of a
Claim to Arbitration. Paragraph 1 provides in relevant part that:
A disputing investor may submit a claim under Article 1116 to arbitration only if:
...
b) the investor and, where the claim is for loss or damage to an interest in an
enterprise of another Party that is a juridical person that the investor owns or
controls directly or indirectly, the enterprise, waive their right to initiate or continue
before any administrative tribunal or court under the law of any Party, or other
dispute settlement procedures, any proceedings with respect to the measure of the
disputing Party that is alleged to be a breach referred to in Article 1116, except for
proceedings for injunctive, declaratory or other extraordinary relief, not involving
the payment of damages, before an administrative tribunal or court under the law
of the disputing Party.
9. The first Tribunal noted that the Claimants waiver was qualified in the following terms:
Without derogating from the waiver required by nafta Article 1121, Claimants here
set forth their understanding that the above waiver does not apply to any dispute
settlement proceedings involving allegations that Respondent has violated duties
imposed by sources of law other than Chapter Eleven of nafta, including the
municipal law of Mexico.3
In a subsequent letter responding to an inquiry from the icsid Secretariat, the

Claimant confirm[ed] that the waiver contained in the Notice of Institution applies
to dispute settlement proceedings in Mexico involving allegations of breaches of
any obligations, imposed by other sources of law, that are not different in substance
from the obligations of a nafta State Party under Chapter Eleven of the nafta . . .4
3
4
Award, 5, 27, 40 ILM 56 (2001), at pp. 59, 67.

Award, 5, 40 ILM 56 (2001), at p. 60.
552
10. The first Tribunal stressed that the lodging of a waiver in conformity with
Article 1121 is a condition precedent to the submission of a claim to arbitration
under Chapter 11.5 As an aspect of its power to determine its jurisdiction, the first
Tribunal had to determine both that the waiver conformed to nafta requirements
and that it was a genuine waiver, expressing the true intent of the Claimant at the time
it was lodged.6 This did not mean that the Tribunal was entitled or required to ensure
actual compliance with the waiver. That would be a matter for the Respondent to
plead in any Mexican court before which proceedings were brought contrary to the
terms of the waiver.7 But it was for the Tribunal to determine that the waiver was
valid as such; if it was not, then the Respondent had not consented to arbitration
and the Tribunal lacked jurisdiction.8
11. The first Tribunal began by saying that a waiver had to be clear, explicit and
categorical,9 and that it had to be effective as a waiver at the time it was lodged.10
The Claimants waiver was valid in point of form,11 but that left open the question
whether it was valid ratione materiae.
12. In the first Tribunals view, an Article 1121 waiver could not be limited
to claims specifically made under nafta itself. Rather it must cover any claim
concerning a measure of a nafta Party which was in dispute,12 even if the basis
of claim, i.e. the specific cause of action pleaded, was a purely domestic one. The
test was whether the measures complained of in the national proceedings were
measures that are also invoked in the present arbitral proceedings as breaches
of nafta provisions.13 In the present case, the Mexican proceedings did concern
claims (non-compliance with guarantees, non-payment of invoices) which were part
of the Claimants nafta claim, i.e., which were part of the disputed measures
of Mexico which had been submitted to arbitration.14 Moreover the Claimants
continued pursuit of the Mexican proceedings at the time of and subsequent to the
commencement of the first arbitration demonstrated that it did not have the required
intent to waive those claims.15 Its subsequent action in seeking to explain the
waiver amounted to an a posteriori interpretation of its waiver made in light of
the vicissitudes of the Mexican actions and Mexicos insistence before the Tribunal
on a waiver complying with Article 1121.16 As the waiver had to conform with
Article 1121 at the time it was lodged, the Claimants explanation came too late
to remedy the deficiency.
13. The first Tribunal thus concluded that the Claimants waiver was not valid for
the purposes of Article 1121, and that it lacked jurisdiction to consider the merits
of the claim:
5
Award, 13, 40 ILM 56 (2001), at p. 62.

Award, 14, 40 ILM 56 (2001), at p. 63.
7
Award, 15, 40 ILM 56 (2001), at p. 63.
8
Award, 16, 40 ILM 56 (2001), at p. 63.
9
Award, 18, 40 ILM 56 (2001), at p. 64.
10
Award, 19, 40 ILM 56 (2001), at p. 64.
11
Award, 23, 40 ILM 56 (2001), at p. 65.
12
Award, 27, 40 ILM 56 (2001), at pp. 678.
13
Award, 27, 40 ILM 56 (2001), at p. 68.
14
Award, 27, 40 ILM 56 (2001), at pp. 678.
15
Ibid.
16
Award, 28, 40 ILM 56 (2001), at p. 68.
6
553
. . . this Tribunal cannot deem as valid the waiver tendered by the Claimant in its
submission of the claim to arbitration, in view of its having been drawn up with
additional interpretations, which have failed to translate as the effective abdication
of rights mandated by the waiver. In the light of the foregoing, the claims of the
Respondent must necessarily be allowed . . .17
It ordered that the Claimant pay the Tribunals expenses but not the Respondents
costs, there being no evidence of recklessness or bad faith on the Claimants part.18
14. Mr Highet dissented. In his view nafta Article 1121 is not specific as to
the form or precise terms of a waiver. Given that the Claimant had eventually expressed its qualification in terms of an understanding which was given [w]ithout
derogating from the waiver required,19 it was open to the Tribunal to interpret the
waiver as being effective and sufficient for the purpose. In any event, in his view,
the Claimants underlying interpretation of Article 1121 was correct, since claims
relating to Mexican remedies for Mexican wrongs are not the same as claims for
nafta remedies for nafta wrongs.20 Moreover the measures specifically complained of in the Mexican proceedings were not as such actionable under nafta,
and were therefore not the kind of measure contemplated by Article 1121.21
It was true that Article 1121 does not contemplate concurrent proceedings before
national courts and a nafta Tribunal concerning the very same issue, but [s]uch a
risk is not raised . . . by collateral domestic proceedings that only relate to a portion
of the factual background underlying or supporting the nafta claim.22
15. Mr Highet thus disagreed with the majority both as to the scope of Article
1121 and as to the interpretation of the waiver. He also disagreed with the Tribunals
treatment of the waiver in this case as going to its jurisdiction rather than to the
admissibility of the claim.23 By doing so, in his view, the Tribunals decision had
a drastically preclusive effect24 with the result that the entire nafta claim has
been undone.25
The Positions of the Parties

16. Both Article 1136 of nafta and Article 53(4) of the icsid (Additional Facility)
Rules clearly provide that an award is final and binding on the parties, unless action
is duly taken to set aside or annul the award (which has not happened here). The
parties in the present case agreed that the first Tribunals decision was res judicata
and had to be given effect as such. They also agreed that the first Tribunal did
17
Award, 31, 40 ILM 56 (2001), at p. 70.

Ibid.
19
Dissent, para. 6, 40 ILM 56 (2001), at p. 71 (emphasis in original).
20
Dissent, para. 7, 40 ILM 56 (2001), at p. 72.
21
22
Dissent, para. 42, 40 ILM 56 (2001), at p. 78; cf. para. 47, 40 ILM 56 (2001), at p. 78.
23
Dissent, paras. 569, 40 ILM 56 (2001), at p. 80.
24
Dissent, para. 9, 40 ILM 56 (2001), at p. 72, citing Southern Pacific Properties (Middle East) Ltd v.
Arab Republic of Egypt, Decision on Jurisdiction of 14 April 1988, 3 ICSID Reports 131 at p. 144, para.
63.
25
18
554
not proceed to consider the merits of the dispute but dismissed the claim for want
of jurisdiction. In our view, this is clearly correct. The first Tribunal expressly
disclaimed any intention to embark on an analysis of the merits of the question,26
nor did it do so in fact. In his dissenting opinion, Mr Highet criticized the Tribunal
for treating the issue as one of jurisdiction. But he had no doubt that this was what
it had done.
17. The disagreement between the parties concerned not so much the characterization of the first Tribunals decision as its legal consequences under nafta Chapter
11. According to the Respondent, it is implicit in Chapter 11, and especially Article
1121, that an election under that provision is irrevocable and allows a Claimant
a single opportunity to vindicate its nafta claim before a Chapter 11 tribunal.
Whatever the grounds on which it failed, its failure put an end to nafta procedures
in respect of the claim. In any event, the Respondent argued, the Tribunal did in
law decide the claim against the Claimant, whether or not it considered the merits
of that claim, and its decision should be considered as res judicata. Finally the
Respondent argued, in deliberately choosing to maintain a variety of claims at domestic and international level, including two separate Chapter 11 arbitrations, the
Claimant had engaged in an abuse of process. Its current claim should be disallowed
in consequence.
18. The Claimant argued that the only issues the first Tribunal actually decided,
and thus the only issues which were res judicata, were that the first waiver was
invalid and that accordingly the Tribunal lacked jurisdiction. In such a case, the
commencement of new arbitral proceedings under nafta accompanied by a valid
waiver was not expressly prohibited by Chapter 11, nor was it contrary to its object
and purpose. In the present case, none of the tribunals to which the Claimant had
resorted had considered the substantial merits of its claim; yet nafta Chapter
11 clearly contemplated that such a forum would exist. In the circumstances the
Claimants conduct did not involve any abuse of process or want of good faith.
The Present Tribunals Conclusions
19. During argument and in subsequent written responses, the parties placed considerable emphasis on what the first Tribunal perceived it was doing in dismissing
the proceedings. On the face of the award (as analyzed above), all the first Tribunal
did was to hold the initial waiver invalid and thus ineffective to amount to the condition precedent expressly required by Article 1121 for the invocation of arbitral
jurisdiction. The first Tribunal did not say in so many words whether a new claim
accompanied by a valid waiver was or was not open. The Respondent however
stressed Mr Highets statement that the entire nafta claim has been undone.27 In
its view, this indicated much more than a procedural error immediately curable by
new proceedings.
26
27
Award, 27 a), 40 ILM 56 (2001), at p. 67.

555
20. On a careful reading of the first Tribunals reasons and decision, we cannot
find any expression of opinion on the point which now has to be decided. The first
Tribunal did not need to decide what effect its decision had for the future, and there
is no indication in the Award that it did so.
21. It is true that the question whether the Claimant might validly resubmit
its claim was discussed in argument before the first Tribunal. In its Memorial,
the Claimant indicated its intention to resubmit the claim, if it lost on the point
concerning the effect of its waiver.28 The Respondent noted that any new claim
would have to take into account what had happened in the domestic proceedings:
The Claimant would have to present a new claim taking into consideration what
happened since [the first claim].29 It said further that if this [sc. the first] Tribunal
decides, as we believe it should, that in the particular circumstances of this case
it lacks competence and the Claimant decides to present again a claim, we would
have to evaluate it on its own merits.30 In fact it appears that the Claimant has
resubmitted the very same claim to arbitration, since it does not rely on the later
domestic proceedings in any way in terms of its current claim. On the other hand,
those proceedings are facts which either party may bring to the Tribunals attention,
to the extent they may be relevant.
22. The Tribunal does not suggest that in the passage set out above, or otherwise,
the Respondent agreed that a later arbitration complying with naftas procedural
requirements would be permissible. Indeed, it expressly reserved its position. But
the fact that the issue was discussed before the first Tribunal, which failed to express
a view on the point, is relevant. It supports the conclusion that the issue was not
decided by the first Tribunal.
23. In the present Tribunals view, the dissenting arbitrators characterization of
the effect of the decision cannot be decisive, even if that characterization was clear
and unambiguous (which it is not). Only a majority of the Tribunal could determine
the effect of its decision, and as noted there is no indication on the face of the award
that the majority expressed any view on the matter.
24. In these circumstances it is unnecessary for us to decide whether the first
Tribunal could have precluded a later action, or whether such a decision would by
definition have been outside the scope of its inquiry.
25. On this basis we turn to the three main legal grounds on which Respondent
grounded its objection.
Does Article 1121 Allow only a Single Claim for Arbitration?
26. The Respondents principal argument was based on the language and intention
of Article 1121, which in its view implies that a disputing investor may have one
but only one attempt at an international arbitration under Chapter 11. To put it in
colloquial terms, a Claimant may have only one bite of the apple.
28
Claimants Memorial in the first proceedings, para. 4.18, as cited in Claimants Response of 19
February 2002, p. 1.
29
As noted in Respondents Additional Submission of 19 February 2002.
30
Ibid.
556
27. It should be noted that Chapter 11 of nafta does not say this in so many
words. Moreover neither Party referred to any material in the travaux preparatoires
of nafta that suggested this was the common intention of the parties, or indeed
shed any light on the question at all. No doubt the concern of the nafta parties in
inserting Article 1121 was to achieve finality of decision and to avoid multiplicity
of proceedings. But where the first proceeding produces no decision on the merits
because of a jurisdictional barrier, there is nothing in Chapter 11 which expressly
or impliedly prohibits a second proceeding brought after the jurisdictional barrier
has been removed.
28. Neither of the other nafta parties wished to make submissions on this issue,
as they were entitled to do under Article 1128. In the Methanex case, however, the
United States, faced with what it considered a non-complying waiver, recognized . . .
that if this Tribunal were to dismiss Methanexs claim on jurisdictional grounds
solely for failure to submit waivers in accordance with Article 1121, Methanex would
be free to refile its claim upon the submission of complying waivers. If that were
to occur, these proceedings would take longer to conclude . . . Recognizing this,
in the interests of efficiency, if Methanex finally supplies the United States with
waivers that fully comply with the requirements of Article 1121, the United States
consents in advance to the reconstitution of this Tribunal to be composed of its current
memberson the condition that this Tribunal issue an order deeming the arbitration
to be duly commenced only as of the date that Methanex submits the effective waivers.31
Evidently the United States there relied on the decision of the first Tribunal in Waste
Management,32 but took the view that this did not prevent a claimant resubmitting
the case to arbitration with a valid waiver. On the other hand, such a view of one
nafta Party is not opposable to another.
29. Chapter 11 of nafta does not contain any express provision requiring a
claimant to elect between a domestic claim and a nafta claim in respect of the same
dispute. Such fork in the road provisions are not unusual in bilateral investment
treaties, although their language varies. For example Article 8(2) of the French
Argentine Agreement on the reciprocal promotion and protection of investments
of 3 July 199133 provides that:
Once an investor has submitted the dispute to the courts of the Contracting Party
concerned or to international arbitration, the choice of one or the other of these
procedures is final.
By contrast, Article 11(3) of the AustraliaCzech Agreement of 30 September

1993 provides for reference of disputes to international arbitration irrespective
of whether any local remedies available pursuant to action under paragraph (2) of
31
Methanex Corporation v. United States of America, Memorial on Jurisdiction and Admissibility of

Respondent United States of America, 13 November 2000, p. 77.
32
Before the first Tribunal, Canada likewise argued that a conditional waiver such as that lodged by
Waste Management did not meet the requirements of Article 1121: letter of 17 December 1999, referred
to in Award, 3, 40 ILM 56 (2001), at p. 58.
33
United Nations Treaty Series, vol. 1728, p. 298 (English translation).
557
this Article have already been pursued or exhausted,34 apparently implying that,
at least so far as jurisdiction is concerned, the proceedings may be continued in
parallel.
30. Chapter 11 of nafta adopts a middle course. A disputing investor is evidently
entitled to initiate or continue proceedings with respect to the measure in question
before any administrative tribunal or court of the respondent State in accordance
with its law, without prejudice to eventual recourse to international arbitration. It
is only when submitting a claim under Article 1120 that the requirement of waiver
arises. Even then there is a potentially important exception for proceedings for
injunctive, declaratory or other extraordinary relief. In common with almost all
investment treaties, there is no requirement of exhaustion of local remedies. These
remain open and available up to the time of submission of the dispute to international
arbitration under Chapter 11 of nafta.
31. A further point to note is thatas the parties agreed in response to a question
from the Tribunalit seems that the waiver contemplated by Article 1121(1)(b) is
definitive in its effect, whatever the outcome of the arbitration. The waiver concerns
the right to initiate or continue domestic proceedings for damages or similar relief.
A dismissal of the nafta claim would, it seems, be final not only with respect to
nafta itself but also any domestic proceedings with respect to the measure of the
disputing Party that was alleged to be a breach of nafta. Such proceedings may
not be initiated or continued (except as permitted by Article 1121) at any time after
the claim has been submitted to arbitration.
32. The question, then, is what amounts to a submission of a claim within the
meaning of Article 1121? Is it sufficient that a claimant, having given due notice
of intent under Article 1119, has purported to commence the arbitration? Or must
its notice be effective to attract the jurisdiction of the Tribunal under Chapter 11, at
least in the sense that the conditions precedent for submission under Article 1121
are satisfied? There are three reasons for preferring the latter view.
33. The first reason is to be found in the language of Article 1121 itself. The
normal meaning of condition precedent is that of a condition sine qua non, a
requirement without which any subsequent action is invalid or ineffective in law.
The language of Article 1121 is to the same effect as its title: A disputing investor
may submit a claim under Article 1116 to arbitration only if35 two conditions are
satisfied. In other words, if those conditions are not satisfied the dispute may not
be submitted to arbitration under Chapter 11 of nafta. It was on this basis that the
first Tribunal held that Claimants failure to lodge a valid waiver meant that it had
no jurisdiction. The same would be true, evidently, of a failure by a claimant to
comply with Article 1121(a), that is, to consent to arbitration in accordance with
the procedures set out. By contrast, merely procedural requirements which had to
be satisfied in lodging an application would not necessarily go to jurisdiction but
could be capable of subsequent correction by the Claimant.
34. Thus, even if it were the case that a Claimant could only submit a claim
under Article 1120 on one occasion, this would not necessarily apply to a
34
United Nations Treaty Series, vol. 1819, p. 456. Article 11(2) provides for recourse to the competent
judicial or administrative bodies of the Contracting Party concerned.
35
nafta Article 1121(1) (emphasis added).
558
submission which was defective by reason of a failure to comply with a condition precedent under Article 1121, such that the Tribunal lacked jurisdiction.
What Article 1120 contemplates is a submission of a claim for adjudication on the
merits.
35. The second reason concerns the underlying purpose of the arbitration provisions in Chapter 11, which was to create effective procedures . . . for the
resolution of disputes.36 An investor in the position of the Claimant, who had
eventually waived any possibility of a local remedy in respect of the measure in
question but found that there was no jurisdiction to consider its claim at the international level either, might be forgiven for doubting the effectiveness of the
international procedures. The Claimant has not had its nafta claim heard on
the merits before any tribunal, national or international; and if the Respondent
is right, that situation is now irrevocable. Such a situation should be avoided if
possible.
36. The third reason is that there is no equivalent rule under general international
law. In international litigation the withdrawal of a claim does not, unless otherwise
agreed, amount to a waiver of any underlying rights of the withdrawing party.
Neither does a claim which fails for want of jurisdiction prejudice underlying rights:
if the jurisdictional flaw can be corrected, there is in principle no objection to the
claimant State recommencing its action. This applies equally to claims which fail on
(remediable) grounds of inadmissibility, such as failure to exhaust local remedies.
As the International Court said in the Barcelona Traction case:
It has been argued that the first set of proceedings exhausted the Treaty processes
in regard to the particular matters of complaint, the subject of those proceedings, and
that the jurisdiction of the Court having once been invoked, and the Court having been
duly seised in respect of them, the Treaty cannot be invoked a second time in order to
seise the Court of the same complaints. As against this, it can be said that the Treaty
processes are not in the final sense exhausted in respect of any one complaint until
the case has been either prosecuted to judgment, or discontinued in circumstances
involving its final renunciationneither of which constitutes the position here.37
37. Under Article 1131(1), Chapter 11 tribunals are to decide the issues in
dispute in accordance with this Agreement and applicable rules of international
law. In the Tribunals view, neither the express terms of nafta nor the applicable
rules of international law preclude a claimant who has failed to comply with the
prerequisites for submission to arbitration under Article 1121(1) from commencing
arbitration a second time in compliance with those prerequisites. That is what the
Claimant has done here.
36
nafta Article 102(1)(e); cf. Article 1115, referring to due process before an impartial tribunal.
Case concerning the Barcelona Traction, Light and Power Company, Ltd (New Application: 1962),
Belgium v. Spain, Preliminary Objections, ICJ Reports 1964, p. 6, at p. 26. See also Amoco International
Finance Corporation v. Government of the Islamic Republic of Iran, (1987) 15 IranUS CTR 189 at
p. 196 (paras. 1618); Islamic Republic of Iran v. United States of America, Cases Nos. A15 (IV) and
A24, award of 28 December 1998, para. 75: Settlement of a claim, by definition, requires its resolution
on the merits.
37
559
The Principle of Res Judicata

38. Alternatively, the Respondent argued that, even if the first Tribunal had not
actually considered the merits of the claim, it had nonetheless effectively dealt with
the merits in dismissing the claim for want of jurisdiction. This decision was res
judicata and bound the Claimant in the present proceedings. The Claimant on the
other hand argued that the principle of res judicata only applies to those questions
which the first Tribunal actually decided, and that its decision was limited to the
interpretation of Article 1121 and the effect of an invalid waiver.
39. There is no doubt that res judicata is a principle of international law, and even
a general principle of law within the meaning of Article 38(1)(c) of the Statute of
the International Court of Justice.38 Indeed both parties accepted this.39 However, a
judicial decision is only res judicata if it is between the same parties and concerns
the same question as that previously decided.
40. This was stated, for example, by the Franco-Venezuelan Mixed Claims Commission in the case of the Compagnie Generale de lOrenoque:
The general principle announced in numerous cases is that a right, question, or fact
distinctly put in issue and directly determined by a court of competent jurisdiction, as
a ground of recovery, cannot be disputed . . .40
It is only the particular matter in controversy which is decided.41
41. The AmericanBritish Claims Tribunal in a decision of 1921 likewise held

that:
It is a well established rule of law that the doctrine of res judicata applies only where
there is identity of the parties and of the question at issue . . . [I]t is impossible to say
that the question of the liability of the United States is concluded by the decision of
His Britannic Majestys Court, when that Court, on the contrary, held that it had no
jurisdiction to deal with that question.42
42. Similarly in its advisory opinion concerning the Polish Postal Service in
Danzig, the Permanent Court of International Justice said:
Once a decision has been duly given, it is only its contents that are authoritative,
whatever may have been the views of its author . . . [I]t is certain that the reasons
contained in a decision, at least in so far as they go beyond the scope of the operative
part, have no binding force as between the Parties concerned.43
The same rule should be applied in the context of Chapter 11 arbitration.

38
See e.g. Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals
(London, Sweet & Maxwell, 1953; repr. Grotius, Cambridge, 1987) pp. 33672 and authorities there
cited.
39
See Transcript in English of the hearing on jurisdiction of February 2, 2002, pp. 33ff and 77ff.
40
(1905) Ralstons Report, p. 244 at p. 355, quoting Southern Pacific Railroad Co. v. United States, 168
Sup. Ct. Rep. 355 (1897), at p. 377.
41
(1905) Ralstons Report, p. 244 at p. 357.
42
In the Matter of the S.S. Newchang, Claim No. 21, reprinted in (1922) 16 AJIL 323 at p. 324.
43
PCIJ, Ser. B, No. 11 (1925) at pp. 2830.
560
43. Thus there is no doubt that, in general, the dismissal of a claim by an international tribunal on grounds of lack of jurisdiction does not constitute a decision on
the merits and does not preclude a later claim before a tribunal which has jurisdiction.44 The same is true of decisions concerning inadmissibility. As Amerasinghe
notes:
the success of an objection based on the [exhaustion of local remedies] rule has never
been regarded as rendering the case res judicata, as might otherwise be logically
required if the rule is considered truly one of substance pertaining to the merits of
the case. The success of such an objection has always had the effect of delaying the
justiciability of a claim on the basis that it is inadmissible because of a defect in the
procedure of litigation . . .45
It is not necessary for present purposes to explore the distinction between substance and procedure, which is not necessarily the same as the distinction between jurisdiction or admissibility on the one hand and the merits of a claim on the
other. The point is simply that a decision which does not deal with the merits of the
claim, even if it deals with issues of substance, does not constitute res judicata as
to those merits.
44. It should be noted that exactly the same rule is applied by the courts of the
nafta parties. For example, the Mexican Supreme Court in a decision in 2001
observed that:
. . . [P]ara considerar desestimada una demanda (. . .) la sentencia que lo concluye
forzosamente debe ser aquella que decida el negocio en lo principal, ocupandose para
ello de la litis planteada mediante la acciones deducidas y las excepciones opuestas, y
respecto de la cual la ley comun no conceda ningun recurso ordinario por virtud del
cual pueda ser modificada o revocada, ya condenando o absolviendo, segun proceda,
en forma tal que la litis quede definitivamente juzgada . . .
. . . [C]uando en la resolucion que ponga fin al proceso se declare procedente alguna
excepcion dilatoria o procesal que no hubiere sido resuelta . . . se abstendra el Juez o
tribunal de fallar la cuestion principal y hara reserva de los derechos de las partes. Es
decir, que la falta de integracion de la relacion jurdica procesal solo tiene por efecto
el de absolver de la instancia, o sea, dejar a salvo los derechos de los contendientes,
dado que esa excepcion no destruye la accion, por ser su efecto dilatorio u nicamente;
de ah que en ese supuesto, no pueda jurdicamente tenerse por desestimada la accion
ejercitada . . .46
44
In the Trail Smelter arbitration, the proposition that a decision merely denying jurisdiction can never
constitute res judicata as regards the merits of the case at issue was described as undoubtedly correct:
see 35 AJIL 684 at p. 702 (1941).
45
C. F. Amerasinghe, Local Remedies in International Law (Cambridge, Grotius, 1990), p. 354.
46
In order to consider a claim dismissed . . . the judgment that concludes it [the proceeding] must be
one that decides on the merits, dealing with the litis set out in the complaint, through the causes of action
relied on and the defenses made to them, and in respect of which the law will not grant any ordinary
recourse by virtue of which it can be modified or reversed, either imposing liability or dismissing the
claims on the merits, as the case may be in such a way that the litis is definitively decided . . .
. . . [W]hen a judgment that puts an end to the proceedings dismisses the claims by reference to a
preliminary or procedural defense . . . the judge or tribunal shall refrain from ruling on the merits, and
should reserve the rights of the parties. Furthermore, the lack of integration of the procedural legal relation
561
45. The Respondent argued that, in deciding whether or not it had jurisdiction,
an international tribunal might be required to decide some issue which also went
to the merits. It cited in that regard The Sennar,47 a decision of the English House
of Lords. In that case, an issue decided by a Dutch court in declining jurisdiction
was held to be res judicata in proceedings on the merits in an English court. Lord
Brandon said:
The argument . . . was that the judgment of the Dutch Court of Appeal was procedural
in nature, in that it consisted only of a decision that a Dutch court had no jurisdiction
to entertain and adjudicate on the appellants claim, and did not pronounce in any
way on the question whether the claim itself, or any substantive issue in it . . . would
succeed or fall. In my opinion, this argument is based on a misconception with regard
to the meaning of the expression on the merits as used in the context of the doctrine
of issue estoppel . . . Looking at the matter negatively a decision on procedure alone is
not a decision on the merits. Looking at the matter positively a decision on the merits
is a decision which establishes certain facts proved or not in dispute, states what are
the relevant principles of law applicable to such facts and expresses a conclusion with
regard to the effect of applying those principles to the factual situation concerned. If
the expression on the merits is interpreted in this way . . . there can be no doubt
whatever that the decision of the Dutch Court of Appeal in the present case was a decision on the merits for the purposes of the application of the doctrine of issue estoppel.48
The Tribunal agrees with this statement in so far as it concerns the principle of
res judicata in international law. In cases where the same issue arises at the level
of jurisdiction and of merits, it may be appropriate to join the jurisdictional issue
to the merits.49 But at whatever stage of the case it is decided, a decision on a
particular point constitutes a res judicata as between the parties to that decision if
it is a necessary part of the eventual determination and is dealt with as such by the
tribunal.50
46. The difficulty for the Respondent in the present case, however, is that there is
no indication in the Award of the first Tribunal that it considered any issue pertaining
to the merits, let alone that it decided any such issue. It is true that the first Tribunal
considered aspects of the proceedings brought by the Claimant in Mexico. But it
did so only with a view to determining the relation between those proceedings and
the nafta claim, and only for the purpose of deciding on the validity of the waiver.
has only the effect of terminating the proceedings, that is, it leaves untouched the rights of the parties,
because these defenses do not destroy the action, and have only a dilatory effect . . .: Suprema Corte
de Justicia de la Nacion (Mexico), IUS 2001, Registro 189,629. Novena Epoca, Instancia: Tribunales
Colegiados de Circuito, Fuente: Semanario Judicial de la Federacion y su Gaceta; Tomo XIII, mayo de
2001; Tesis VII.1 . C.72 C, pag. 1200.
47
DSV Silo- und Verwaltungsgesellschaft mbH v. Owners of the Sennar and thirteen other ships (The
Sennar) [1985] 2 All ER 104.
48
Ibid., at pp. 110-11.
49
See e.g. Tradex Hellas SA v. Republic of Albania, decision on jurisdiction of 24 December 1996, 14
ICSID ReviewForeign Investment Law Journal 161 (1999).
50
But see the Second South West Africa cases, where the International Court went so far as to say that
a decision on a preliminary objection can never be preclusive of a matter appertaining to the merits:
ICJ Reports 1966, p. 6 at p. 37 (para. 59) (emphasis added).
562
In the circumstances, therefore, there was no decision by the first Tribunal between
the parties which would constitute a res judicata as to the merits of the claim now
before us.
47. In reaching this conclusion, the present Tribunal in no way denies the value of
the principle of res judicata, nor its potential application in the present proceedings
to the extent that any issue already decided between the parties may prove to
be relevant at a later stage. In this respect it draws attention to what was said in
Azinian v. United Mexican States: a nafta tribunal does not have plenary appellate
jurisdiction in respect of decisions of national courts, and whatever may have been
decided by those courts as to national law will stand unless shown to be contrary
to nafta itself.51
Abuse of Process on the Part of the Claimant
48. Finally, the Respondent argued that the Claimant had committed an abuse
of process in commencing serial proceedings both under Chapter 11 and before
domestic courts and tribunals in respect of the same claim, and that the Tribunal
should exercise its inherent power to prevent such an abuse of process. For its part,
the Claimant accepted that such an inherent power might exist in extreme cases,
but denied that it was applicable here. In particular it stressed the finding of the
first Tribunal that in qualifying the waiver as it did, the Claimant was not acting
recklessly or in bad faith.52
49. It is not necessary to decide whether nafta Chapter 11 tribunals possess
any inherent power to dismiss a claim on grounds of abuse of process, or what
circumstances might justify the exercise of any such power.53 No specific provision
of Chapter 11, or of the icsid Convention or Rules, confers such a powerby
contrast, for example, with Article 294(1) of the United Nations Convention on the
Law of the Sea of 1982. It may be inferred that if such a power exists, it would only
be for the purpose of protecting the integrity of the Tribunals processes or dealing
with genuinely vexatious claims. In the Phosphate Lands case, the International
Court dealt with an objection related to abuse of process rather summarily, although
without denying that there might be some inherent power in the matter. It noted:
. . . that the Application by Nauru has been properly submitted in the framework of
the remedies open to it. At the present stage, the Court is not called upon to weigh
the possible consequences of the conduct of Nauru with respect to the merits of the
case. It need merely note that such conduct does not amount to an abuse of process.54
51
Azinian v. United Mexican States, decision of 1 November 1999, 39 ILM 537 at p. 552 (para. 99).
Award, 31, 40 ILM 56 (2001), at p. 70.
53
In its helpful submission of 19 February 2002, the Respondent agreed that the doctrine of abuse of
process could be applicable in appropriate circumstances, perhaps not as a general legal principle, but as
an inherent authority of the tribunal to safeguard the process. It noted also the prohibition in Mexican
law against multiple claims in amparo: Law on Amparo, Article 73, sections III and IV.
54
Certain Phosphate Lands in Nauru, Nauru v. Australia, Preliminary Objections, ICJ Reports 1992,
p. 240, at p. 255 (para. 38).
52
563
The Respondents objection at the present stage is of an entirely different character from that in the Phosphate Lands case. Nonetheless the Tribunal believes it
appropriate to apply the same basic approach. Without prejudice to the possibility
that the outcome of the subsequent proceedings in Mexico might be relevant in
some way to the merits, the Tribunal concludes that the Claimants application has
been on this occasion properly submitted within the framework of the remedies
open to it.
50. In particular, the Tribunal does not consider that, on the evidence available to
it, there is any basis for saying that the present claim was brought in bad faith or that
it is not a bona fide claim. Procedurally the Claimant no doubt erred in the manner
in which it commenced the first proceedings, but it was open in its approach and
the first Tribunal expressly found that it was not acting in bad faith. That episode
does not provide any legal ground for disqualifying the present proceedings, nor is
there any basis for putting an end to these proceedings as an abuse of process.
Conclusion
51. For these reasons, the Tribunal rejects the Respondents submission that the
Claimant is precluded from bringing the present proceedings on any of the three
grounds alleged.
52. The first Tribunal dealt with the issue of costs, requiring the Claimant to
pay the Tribunals costs but not those of the Respondent. In the present case, the
basis of the Respondents objection was the failure of the Claimant to produce a
valid waiver in the first proceedings. The Respondent was fully entitled to take that
objection, which raised novel questions about the relation between nafta and local
remedies. In the circumstances, the Tribunal makes no order for the expenses of
the Tribunal or the costs of the parties in dealing with the objection. This is without
prejudice to any eventual order for costs that may be equitable, having regard to
the outcome of the proceedings as a whole.
Decision
53. For the foregoing reasons, the Tribunal unanimously:
(a) decides that the Claimant is not prevented from bringing the present proceedings for the reasons presented by the Respondent;
(b) reserves to a later stage questions relating to the costs and expenses of the
present phase of the proceedings.
Done at Washington, DC in the English and Spanish languages, both languages
being authoritative.
[Source: http://www.worldbank.org/icsid/cases/waste united eng.PDF, reported at

41 International Legal Materials 1315 (2002).]
ANNEX
NAFTA FTC INTERPRETATION
567
NAFTA CHAPTER 11 INTERPRETATION

North American Free Trade Area, Free Trade Commission
31 July 2001
The Free Trade Commission established by the North American Free Trade Agreement (nafta), Article 2000(1), and consisting of the Governments of the three
nafta Parties, Canada, Mexico and the United States of America, adopted the following interpretations of Chapter 11 of nafta at its meeting on 31 July 2001. Under
Article 1131(2) of nafta, an interpretation by the Commission of a provision of
nafta shall be binding on a tribunal established under Chapter 11, Section B, of
nafta.
The following is the text of the decision of the Free Trade Commission:
Having reviewed the operation of proceedings conducted under Chapter Eleven
of the North American Free Trade Agreement, the Free Trade Commission hereby
adopts the following interpretations of Chapter Eleven in order to clarify and reaffirm the meaning of certain of its provisions:
A. Access to Documents
1. Nothing in the nafta imposes a general duty of confidentiality on the disputing parties to a Chapter Eleven arbitration, and, subject to the application of
Article 1137(4), nothing in the nafta precludes the Parties from providing public
access to documents submitted to, or issued by, a Chapter Eleven tribunal.
2. In the application of the foregoing:
(a) In accordance with Article 1120(2), the nafta Parties agree that nothing
in the relevant arbitral rules imposes a general duty of confidentiality or
precludes the Parties from providing public access to documents submitted
to, or issued by, Chapter Eleven tribunals, apart from the limited specific
exceptions set forth expressly in those rules.
(b) Each Party agrees to make available to the public in a timely manner all
documents submitted to, or issued by, a Chapter Eleven tribunal, subject to
redaction of:
(i) confidential business information;
(ii) information which is privileged or otherwise protected from disclosure
under the Partys domestic law; and
(iii) information which the Party must withhold pursuant to the relevant
arbitral rules, as applied.
(c) The Parties reaffirm that disputing parties may disclose to other persons in
connection with the arbitral proceedings such unredacted documents as they
consider necessary for the preparation of their cases, but they shall ensure
that those persons protect the confidential information in such documents.
568
ANNEX
(d) The Parties further reaffirm that the Governments of Canada, the United
Mexican States and the United States of America may share with officials
of their respective federal, state or provincial governments all relevant documents in the course of dispute settlement under Chapter Eleven of nafta,
including confidential information.
3. The Parties confirm that nothing in this interpretation shall be construed to
require any Party to furnish or allow access to information that it may withhold in
accordance with Articles 2102 or 2105.

1. Article 1105(1) prescribes the customary international law minimum standard
of treatment of aliens as the minimum standard of treatment to be afforded to
investments of investors of another Party.
2. The concepts of fair and equitable treatment and full protection and security do not require treatment in addition to or beyond that which is required by the
customary international law minimum standard of treatment of aliens.
3. A determination that there has been a breach of another provision of the nafta,
or of a separate international agreement, does not establish that there has been a
breach of Article 1105(1).
Closing Provision
The adoption by the Free Trade Commission of this or any future interpretation
shall not be construed as indicating an absence of agreement among the nafta
Parties about other matters of interpretation of the Agreement.
Done in triplicate at Washington, DC, on the 31st day of July, 2001, in the English,
French and Spanish languages, each text being equally authentic.
For the Government of the United States of America: Robert B. Zoellick, United
States Trade Representative;
For the Government of the United Mexican States: Luis Ernesto Derbez Bautista,
Secretary of Economy;
For the Government of Canada: Pierre S. Pettigrew, Minister for International
Trade.
[Source: Text provided by the Free Trade Commission.]
CUMULATIVE INDEX
VOLUMES 16
Note 1: This index focuses on legal issues and on the arbitral and judicial decisions under
consideration. Parties arguments, facts and ancillary documents are indexed only to the
extent they are essential to an understanding of the legal issues. It has been designed in
such a way as to be amenable to developing ICSID case law, so far as appropriate adopting
the terminology of the index to C. H. Schreuer, The ICSID Convention: A Commentary
(Cambridge University Press, 2001).
Note 2: For procedural points reference should be made to the ICSID Convention (1965) by
Article and the ICSID Rules headings. References are included under subject headings
only where the point at issue is the subject of debate.
Note 3: References to cases are to substantial discussion of those cases, not to the original
report of the case.
Note 4: State immunity entries are listed under the separate headings of State immunity from
execution/attachment and State immunity from jurisdiction only when it is clear that they
apply in that particular context. Where the same principles apply in both cases they appear
under the general heading State immunity.
Note 5: Dates of treaties normally refer to the date of signature, not entry into force.
A
abuse of process
bad faith, relevance 6.563
NAFTA and 6.5623
Phosphate Lands 6.562
UNCLOS and 6.562
access to courts, State immunity and 6.2301
accord cadre 2.69, 923
acquired rights
assignment 1.493
failure of claim for want of jurisdiction/admissibility and 6.558
general principle of international law 1.493
German Interests in Polish Upper Silesia 1.492, 493
Shufeldt Case 1.493
investment licence 1.4935
withdrawal, State responsibility 1.4934
withdrawal of approval of project, effect 3.1234
withdrawal of claim, effect on 6.558
act of State. See also State immunity from jurisdiction
arbitral award, recognition and enforcement 2.388
expropriation 1.322
ad hoc Committee
applicability of Arbitration Rules
absence of provision in Convention 6.331
Art. 53 (Rules of Procedure), effect 6.331
570
CUMULATIVE INDEX
ad hoc Committee, cont.

appointment to 1.512
costs. See costs, ad hoc Committee
disqualification of arbitrator. See also disqualification of conciliator or arbitrator, grounds
applicability of Arbitration Rules 6.3304
competence of members of Committee to determine 6.3314
membership of Tribunal which rendered award 6.332
nationality of either party 6.332
nationality of member of Tribunal 6.332
nomination to Panel of Arbitrators by either of States concerned 6.332
task/powers
annulment on grounds set out in Article 52, limitation to 6.3578
disqualification of arbitrator, determination 6.3314
examination of written proceedings 2.1234
following finding of grounds for annulment 2.1612
full or partial annulment of award 1.518
neutral approach 6.3578
pronouncement on construction of facts 2.143
pronouncement on justice of award 2.135
provision of reasoning 2.117, 123, 142
second-guessing 2.115, 117, 142
Additional Facility. See also NAFTA arbitral tribunal
application and approval for access to
Azinian 5.2778
Lemire 6.601
Metalclad 5.215
notice of wish to arbitrate, requirements 6.512
arbitral award under
challenge to
domestic courts as normal channel 5.265
grounds 5.2656
ICSID proceedings distinguished 5.2657
request within 45 days to deal with unanswered questions 5.2667
arbitration proceedings, applicability of law of place of arbitration 6.542
costs 6.64
Additional Facility Rules (Arbitration) 6.542. See also Administrative and Financial
Regulations; ICSID Rules (Arbitration); ICSID Rules (Conciliation) (1968/84);
ICSID Rules (Institution)
2 5.446, 5.448, 454, 6.541
2(b) 5.194
3 5.264
3(1)(d) 6.45960, 512
4 6.195, 4712
4(2) 5.215, 278, 6.60
4(4) 5.194
6 6.195
10(1) 6.60
14 6.62, 195
14(2) 6.191
15 5.447
CUMULATIVE INDEX
571
Additional Facility Rules (Arbitration), cont.

15(3) 6.550
18 5.447
18(1) 6.550
20 6.454, 473, 542
21 5.215, 6.4534, 473, 542
21(2) 6.545
24(1) 6.191
27 6.1934
39(2) 6.1901
40(1) 6.51415
41(2) 6.1878, 1967, 4624, 47980
43 5.280
44(2) 6.190, 191
46 6.623
46(4) 6.601
48 5.2235, 245, 257
48(1) 5.224, 6.514
48(2) 5.224
49 5.264
50 6.61, 64
53(1) 5.264, 265
53(3) 6.542
53(4) 6.542, 5534
55 6.66
58 5.2667
as applicable law 5.446
incidental or additional claim 5.2578, 6.51415
questions 5.264
revision/amendment of claim 5.223
administrative act. See also damages, for, unlawful administrative act; investment licence,
withdrawal
procedural irregularities, effect 1.5979
administrative contract. See also State contract
applicable law, administrative law of Contracting State 3.304
concession as 1.492
failure 4.67
pacta sunt servanda 1.492
requirements 3.304
as unilateral act 1.492
unilateral amendment, right to 3.2312, 304, 6.434
adequate compensation, need for 3.231, 6.434
Aminoil 3.231
public interest 3.231, 6.43
refusal to accept proposed changes 3.247, 3045
SPP 6.43 n. 42
Administrative Council, powers and functions
Article 6(1) and 6(3) of Convention distinguished 6.332
as it shall determine to be necessary for the implementation of the provisions of this
Convention 6.3313
572
CUMULATIVE INDEX
Administrative Council, powers and functions, cont.

conciliation and arbitration rules of procedure, adoption 6.3313
annulment proceedings 6.3313
Administrative and Financial Regulations. See also Additional Facility Rules (Arbitration);
ICSID Rules (Arbitration); ICSID Rules (Conciliation) (1968/84); ICSID Rules
(Institution)
2(1) 2.336
13 2.176
14 2.276, 6.161, 168
16 6.157, 1645
24 4.110
25 5.187, 201, 397, 6.158, 166
administrative law 1.4656
acquired benefits, withdrawal 6.35
as applicable law in administrative contract 2.218, 221, 3.304
in favorem sententiae 2.116
materiality 1.537
private law and 2.222
proportionality 1.537
admissibility. See also exhaustion of local administrative or judicial remedies; jurisdiction
(ICSID); NAFTA arbitral tribunal, conditions precedent
jurisdiction distinguished 1.673, 5.47880, 6.2023
res judicata and 6.55962
agency. See also constituent subdivision or agency as party to proceedings; State agency
evidence of 4.246
Albania
burden of proof, claimant, general principle of international law 5.84
commitment to ICSID system 5.68
Law 7406 of 31 July 1990 5.52
Law 7512 of 10 August 1991 5.52
Law 7501 of 1991 (Land Law) 5.94
privatization of joint venture rights, legality 5.923
Law 7496 of 4 August 1992 5.53
Law 7764 of 2 November 1993
consent to ICSID jurisdiction, whether 5.589
dispute arises 5.646
English translation as text accepted by parties 5.65, 823
foreign investment 5.86, 8893
any right conferred by law or contract 5.912
company, shares in stock of company and any form of participation in company 5.92
loan 5.901
property right 5.912
sources of, relevance 5.8990
territorial requirement 5.901
foreign investor 5.59, 89
investment terminated before entry into force of law 5.59
good faith obligation to settle amicably 5.601, 634
out of or relates to expropriation, compensation for expropriation 5.834
retroactive effect 5.629
text 5.535
CUMULATIVE INDEX
573
Albania, cont.
legislation, interpretation
aids, international law 5.82, 934
presumption in favour of ICSID jurisdiction 5.689
legislation, retroactive effect, presumption against 5.68
privatization process 5.93104
State responsibility, for acts and omissions of, joint venture 5.88
UNCITRAL Arbitration Rules, refusal to agree to arbitration under 5.69, 73
AlbaniaGreece BIT (1991)
consent to jurisdiction, whether 5.578, 82
entry into force 5.58
provisions 5.557
AlbaniaUS BIT (1995)
Art. 2(3)(a) (fair and equitable treatment/protection and security) 6.4945
Art. 2(3)(b) (unreasonable and discriminatory measures) 6.4945, 5336
minimum standard of treaty/customary international law 6.221, 534, 536
aliens. See also diplomatic protection; protection and security of investment, State
responsibility; standard of treatment of alien
treatment by courts 1.602
amnesty/pardon
distinction 5.34
State responsibility and 5.345
amortization of losses, offer of 6.2935
applicable law 1.51421, 677
as acknowledgement of possibility of mixed BIT/contract issues 6.357
as agreed by parties 5.9
in arbitration agreement 6.1367
independent commercial agreements distinguished 6.1367
clear and unequivocal agreement, need for 5.16970
express provision, need for 3.2067
arbitral award
binding nature 4.44
law governing arbitral proceedings 4.44
arbitral award, annulment 1.51421
procedure
generally recognized principles and rules of treaty interpretation 1.514
ICSID Convention 1.514
substance
domestic law of Contracting State 1.51415, 2.358
supplemented if need be by any principles of international law 1.515, 2.358
arbitration
BIT 4.2567, 2634, 2979, 5.206, 6.256, 111, 1478
supplemented by relevant international or domestic law 4.2567, 6.11112
customary international law 4.2556
domestic law of Contracting State 1.462, 51415, 2.59, 283, 358, 3.19, 5.206, 6.32,
3440, 295
caution in determining, need for 2.124
conflict of laws 2.59
supplemented if need be by any principles of international law 1.452, 580, 2.121,
122, 358, 4.2556, 2934, 309310, 5.137, 206
574
CUMULATIVE INDEX
applicable law, arbitration, cont.

domestic law of third State 4.306
equity 1.529
failure to apply 1.51516, 5289, 5301, 532, 5346, 540, 2.1206, 4.867, 937
general rules and principles of international law 6.32, 33
jurisdiction. See jurisdiction (ICSID); NAFTA arbitral tribunal, jurisdiction
place, Additional Facility provisions 6.542
procedure, Arbitration Rules 1.514, 2.3578, 5.158
substance 1.57980
domestic law of Contracting State. See domestic law of Contracting State
above
tribunal case-law. See precedent, previous ICSID tribunal decision
arbitration clause
scope, domestic law where tribunal sits 3.129
validity ratione personae, domestic law where tribunal sits 3.129
BITs as. See BITs (bilateral investment treaties), as applicable law
choice of law clause 1.318, 323, 3.19. See also forum, choice of
absence 1.349, 452
in case of arbitration based on treaty provision 4.2567
conduct of parties to determine 4.2567, 2989
domestic law of Contracting State 1.349, 452
binding nature 1.318
choice of seat of tribunal as 3.129
exclusion of ICSID jurisdiction, whether 5.315 n. 19, 6.345, 3512, 3601
contract
damages for breach, domestic law of Contracting State 2.371
interpretation 4.1819
lex loci contracti 3.64
place of performance 2.221, 3.64
third party interest, domestic law of Contracting State 1.325, 452
corporation
dissolution 1.5612
nationality
Contracting State party to dispute 2.181
dependent territory, in case of 3.185
place of incorporation 1.394, 396, 4812, 666 n. 76, 2.181
registered seat 1.394, 396, 4812, 666 n. 76, 2.181, 2889
place of incorporation 1.562
customary international law
arbitration 4.2556
renvoi 4.282
State immunity 4.39
State responsibility 4.2667, 26972, 2768, 282
treaty interpretation 2.120
damages
domestic law of contracting State 2.371, 3.75
measure
relevant principles of domestic law 1.61011
relevant principles of international law 1.611
determined by private international law 3.64
CUMULATIVE INDEX
575
applicable law, cont.

diplomatic protection, dual/multiple nationality 6.174
domestic law of Contracting State
arbitration 1.462, 51415, 2.59, 283, 358, 3.19, 6.32, 3440
caution in determining, need for 2.124
conflict of laws 2.59
supplemented if need be by any principles of international law 1.452, 580, 2.121,
122, 358, 4.2556, 2934, 30910, 5.137, 206
contract
damages for breach 2.371
third party interest 1.325, 452
interest 1.361, 506, 2.252, 3.241, 242
investment 3.3227
investment dispute 1.313, 318, 4901, 3.635
supplemented if need be by any principles of international law 1.313, 318, 4914,
3.207
investment licence, withdrawal 4.945
joint venture agreement 1.287, 4.945, 124
subsequent legislation, applicability 4.945
within framework and context of international law 1.287
joint-stock company 3.177
jurisdiction 3.1403, 177
domestic law of third State 4.306
domestic law where tribunal sits 3.129
dual system of domestic law, in case of 2.59
equity. See equity
ex aequo et bono. See ex aequo et bono
expropriation, validity
domestic law 1.3223, 6.423
international law 1.3234
expropriation/nationalization, compensation, primacy of international law 5.170
foreign investment
choice of law, admissibility 3.3227
ICC, contractual provisions 3.65
ICSID Convention
consonance with 5.3
interpretation, Vienna Convention on the Law of Treaties (1969) 5.190
jurisdiction 3.155, 5.22, 6.314
interest
choice of law clause 3.2423
domestic law of Contracting State 1.361, 506, 2.252, 3.241, 242
need to observe 4.1078
international law 1.287, 313, 318, 3234, 349, 452, 4914, 580, 2.121, 122, 358, 3.207,
4.2556, 2934, 30910, 540, 5.82, 137, 206, 415, 6.32, 334, 404, 11112, 1379
corrective role 1.515, 580, 3.326
definition for purposes of 6.1378
incorporation into domestic law, need for 3.645, 207
576
CUMULATIVE INDEX
applicable law, international law, cont.

increasing resort to 6.25
Klockner v. Republic of Cameroon 1.515, 3.3256
lacunae in domestic law
in case of 3.207, 3212, 3256, 6.138
limited to, whether 1.3234, 515, 580
norms to be applied 1.515
primacy in case of conflict 3.689, 73, 5.170, 6.34, 1389
as supplement 1.3234, 3.326
investment
domestic law of Contracting State 3.3227
investment dispute
choice of law clause. See choice of law clause above
domestic law of Contracting State 1.313, 318, 4901, 3.635
supplemented if need be by any principles of international law 1.313, 318, 4914,
3.207
identity of rules with State contracts in general 3.64
terms of agreement regarding investment 6.32
free zone regulations 6.33
investment licence 1.476
general principles of law 1.4613
investment licence, withdrawal, domestic law of Contracting State 4.945
joint venture agreement
agreement, supplemented by domestic law of Contracting State 4.945
domestic law of Contracting State 1.287, 4.945, 124
subsequent legislation, applicability 4.945
within framework and context of international law 1.287
joint-stock company, domestic law of Contracting State 3.177
jurisdiction. See jurisdiction (ICSID), applicable law
NAFTA arbitral tribunal. See NAFTA arbitral tribunal
procedure, ICJ Statute 6.22
relevant trade usages 3.65
renvoi
domestic law 4.278
most favoured nation clause 4.277
settlement on agreed terms 6.66
State agency status
domestic law 1.351
State contract 4.39
administrative law 2.218, 221
investment contract rules 3.64
nature 1.4613
State immunity, customary international law 4.39
State responsibility. See State responsibility, applicable law
time limits for submission of claim to international tribunal 6.1201
treaty interpretation
CUMULATIVE INDEX
577
arbitral award
Additional Facility provisions. See Additional Facility, arbitral award under; Additional
Facility Rules
annulment. See arbitral award, annulment
basis, courtesy 1.369
binding nature 4.126. See also res judicata
applicable law, law governing arbitral proceedings 4.44
in domestic courts 4.84, 6.557
final distinguished 3.94
non-appearance of party and 6.22
obiter dicta comments 5.256
subsequent proceedings 4.44, 501
challenge to under Additional Facility, domestic courts as normal channel 5.265
compliance
dependence on legislative approval 5.203, 204
duty of 2.357
date, dispatch to parties 4.81
decision on preliminary objections to jurisdiction, whether 3.193
enforcement. See arbitral award, recognition and enforcement
finality. See binding nature above
in favorem validatis principle 2.116
integrality 1.54852
corruption of arbitrator and 1.549
judicial review. See arbitral award, review by domestic courts
publication
agreement to 6.64
effect on reputation 2.135
right to refuse 1.520
value 1.646
reasons, need for. See also arbitral award, annulment, grounds, failure to state reasons
domestic law 5.2656
refusal to sign 3.47 n. 2
res judicata. See res judicata
resubmission. See arbitral award, annulment, resubmission
safeguarding measures. See provisional measures
separability, 2.125. See also arbitral award, annulment, partial
State, against, liability of State bank 1.3734
time-limits 6.13
validity, non-appearance of party and 6.22
arbitral award, annulment 1.50942, 2.95163, 6.89150
annulment as a whole 1.5467
res judicata and. See res judicata
appeal distinguished 1.515, 520, 530, 539, 559, 2.97, 126, 4.84, 989, 5.2645, 6.134,
150
error in judicando 2.118, 142, 6.135
applicable law 1.51421
procedure
Arbitration Rules 1.514
generally recognized principles and rules of treaty interpretation 1.514
578
CUMULATIVE INDEX
arbitral award, annulment, applicable law, cont.

substance
supplemented if need be by any principles of international law 1.515, 2.358
arbitration proceedings (Art. 6(1)(c) of Convention, whether) 6.332
automatic, whether 2.162
consideration of arguments already accepted 4.1001
context, to be seen in 1.516
damages. See damages
discretionary power 2.162, 5.266, 6.358
balance of error/parties rights 6.358
effect 1.53840, 542, 547
Committee of Jurists Report (1930) 1.549
on counterclaim 1.53940
on damages 1.5389
exhaustion of local procedures and 1.519, 5257
waiver 1.526, 680
jurisdiction
discretionary 4.856
separability of award 1.539
waiver of objection 1.528
memorial, amendment or supplement to 1.5212
new argument, admissibility 2.126, 4.956, 6.1345
partial 1.939, 2.156, 4.81, 856, 5.2678
Committee of Jurists Report (1930) 1.549
corruption of arbitrator 1.549
in favorem validatis sententiae 2.125
remission to arbitral tribunal and 6.57
res judicata and. See res judicata
rectification distinguished 1.51719
refusal of application, Decision on objections to jurisdiction 3.193
requirements
injury 2.137
request for 4.856
res judicata. See res judicata
resubmission of case to new tribunal. See arbitral award, annulment, resubmission
review by domestic courts distinguished 6.4745, 476
right to, whether 2.162
risk to effectiveness of ICSID 4.86
stay of enforcement
security, provision of 1.513
temporary 4.823
subsequent decision of domestic court, relevance 1.539, 554
time-limits 1.5213, 528
waiver of right to 1.5234
express 1.524
arbitral award, annulment, grounds
absence of arbitration agreement 3.8591
Additional Facility/ICSID proceedings distinguished 5.2657
assumption of improper ex aequo et bono jurisdiction 1.516
CUMULATIVE INDEX
579
arbitral award, annulment, grounds, cont.

costs, effect on 5.268
equitable principles, application 2.125
evidence, inadequacy and 6.13940
excess of power 1.515, 526, 527, 530, 531, 532, 540, 2.978, 11826, 6.1356, 36371
absence of subject-matter or personal jurisdiction 1.5278, 2.98, 105, 6.360
error of law distinguished 2.11920
King of Spains Award 2.119
Trail Smelter 2.119
infra petita 6.363
failure to consider breach of concession contract as breach of BIT 6.36871
manifest 2.97, 98, 100, 104, 116, 4.857, 6.1356
Orinoco Steamship Company 2.11819
timely complaint, need for 2.128
failure to apply applicable law 1.51516, 5289, 5301, 532, 5346, 540, 2.1206,
4.867, 937, 6.1356, 36371
erroneous application distinguished 2.119, 4.87, 88, 96
failure to decide all questions referred to tribunal 1.51719, 2.14356, 4.88, 5.2637,
6.145, 1502
questions 2.1434, 151, 153, 5.2645
failure to state reasons 1.51920, 5245, 526, 530, 531, 532, 5356, 540, 541, 2.91,
1067, 13643, 1567, 159, 4.856, 946, 5.265, 6.14552, 371
adequacy of reasons, relevance 2.1378, 1423, 4.879, 978, 6.1456
apparently relevant, sufficiency 2.1389
calculation of damages 2.15061, 4.1079
contradictory reasons 2.137, 13941, 4.1079, 6.358, 360
correctness, relevance 6.358
damages, measure of 6.1479
decision not to consider obligations deemed irrelevant 6.147
dubious or hypothetical reasons 2.1412, 151, 156
explanation by ad hoc Committee as alternative to annulment 6.1467
failure to decide all questions referred to Tribunal distinguished 2.137, 5.2646,
6.145, 146, 150
form and expression of reasons, relevance 6.358
implied reasons 2.151, 156, 6.146, 1489
information available before closure of proceedings, limitation to 6.146, 149, 1501
interest, determination of 6.14950
interpretation of award distinguished 6.146
King of Spains Award 1.520, 521
Klockner v. Republic of Cameroon 1.520
knowledge of context assumed 1.520
manifest, relevance 6.358
measure of damages/valuation of company 6.1479
MINE 6.1456
ratio decidendi and obiter dicta distinguished 1.521
rectification for error distinguished 6.146
standard of reasoning 6.1456
state 2.151, 156
statement of the obvious 4.967, 1078
sufficiently pertinent 1.5201, 6.146
waiver 4.88
580
CUMULATIVE INDEX
arbitral award, annulment, grounds, cont.

lack of impartiality 2.12936
structure of award 2.1324
misinterpretation of applicable law 1.51516
Respondents right to raise additional grounds 6.3589
serious departure from fundamental rules of procedure 1.518, 541, 2.97, 12636,
4.856, 5.265, 6.1425, 362
absence of deliberation 2.1267
failure to base decision on arguments of parties 2.1289
failure to call witness 6.1445
failure to consider unelaborated arguments 2.150
failure to observe right to be heard rule before independent and impartial tribunal
6.144
failure to respect legal framework 2.129
failure to treat parties equally 1.532, 533, 540, 2.120, 129, 4.87
fundamental 4.87
parties surprise, relevance 6.362
serious 4.87, 6.142
wrongful allocation of burden of proof 6.1424
arbitral award, annulment, resubmission 1.163, 543642
adverse inference, request for 1.605
excluded matter 1.5556
express annulment 1.55861
express non-annulment 1.5536
integrality of tribunals reasoning and 1.55861
new claim/counterclaim 1.560, 607
obiter findings 1.560, 607
parties change of status 1.5678
ratione personae 1.5612
unchallenged findings 1.5567
unpresented matters 1.5647
arbitral award, recognition and enforcement 1.515. See also attachment proceedings; State
immunity from execution/attachment
act of State 2.388
basis, evidence of debt 4.50
costs 2.340
damages 2.340
exequatur 1.369, 2.338, 4.42
domestic courts, role 1.371
double exequatur, avoidance, New York Convention on the Recognition and
Enforcement of Arbitral Awards (1958) 3.94
execution measure, whether 1.371
ICSID award as 4.50
judgment of sister State as 4.19 n. 19, 42
requirements 1.36972
State immunity from execution/attachment and, 1.36972, 2.340, 341
grounds for refusal. See also requirements below
absence of arbitration agreement 3.93
award set aside by competent tribunal 3.94, 4.43
minimization, need for 3.94
CUMULATIVE INDEX
581
arbitral award, recognition and enforcement, cont.

Inter-American Convention on International Commercial Law and Enforcement of
Arbitral Awards (1975) (Panama Convention)
as applicable law in USA 6.5434
NAFTA Art. 1122 and 6.545
New York Convention distinguished 6.5456
New York Convention on the Recognition and Enforcement of Arbitral Awards (1958)
applicability, limitation to commercial disputes 6.4745
as determined by national law 6.4556
NAFTA Art. 1136(7) and 6.455
Art. 4(2) 3.93
Art. 5(1) 3.93
Art. 5(1)(a) 3.93
Art. 5(1)(d) 4.43, 44
Art. 5(1)(e) 3.93, 94
Art. 5(13)(3) 4.44
Art. 6 3.93
choice of law, parties freedom 4.44
domestic law, part of 4.423
double exequatur, avoidance 3.94
grounds for refusal 3.934, 4.43
object and purpose, minimization of conditions attached to enforcement 3.94
stay of execution, provision of security 4.114
obligation to avoid steps which might prejudice 3.8
refusal. See grounds for refusal above; requirements below
requirements. See also grounds for refusal above
binding award 4.43, 44
conformity with arbitration agreement 4.13
exequatur. See exequatur above
good faith 4.501
review of award, distinguishability 6.4558
simplified procedure 1.371
domestic courts 1.371
State immunity from execution/attachment 1.36972, 2.340, 341, 4.11213, 11516,
6.475
stay. See also attachment proceedings, stay; provisional measures
conditions, admissibility 4.11415
dilatoriness, effect 4.11314
effect on parties obligations 4.11213
extension 4.11314
reasons, irreparable harm 4.11314, 11617
security, provision of 3.94, 4.11316
New York Convention on the Recognition and Enforcement of Arbitral Awards
(1958) 4.11415
pending decision in action for annulment 3.935, 6.1301
temporary 1.513, 4.834, 4.10910
waiver of right to, consent to ICSID jurisdiction as 3.1212
582
CUMULATIVE INDEX
arbitral award, rectification 1.63840, 2.3802, 5.1802, 4402, 6.306. See also arbitral
award, supplementary decisions
annulment distinguished 1.51719
clerical, arithmetical or similar error 1.63940, 5.1801, 4412
failure to state partys position accurately 5.1812
arbitral award, review by domestic courts 4.84, 5.236, 23968
annulment proceedings distinguished 6.4745, 476
remission to arbitral tribunal 6.568
common law approach 6.56
as means of avoiding setting-aside 6.56
partial annulment and 6.57
procedural aspects, whether limited to 6.57
UNCITRAL Model Arbitration Law 6.56
reopening of proceedings, grounds 6.56
standard of review 5.24850
conflict with public policy 5.2603
corruption 5.2623
decision beyond scope of submission to jurisdiction 5.250, 2535, 258
failure to address every question 5.2637
fraudulent claim 5.2623
patently unreasonable error 5.249, 25860
pragmatic and functional approach 5.24950
requirement to raise at early stage 5.254
ultra vires award. See decision beyond scope of submission to jurisdiction above
supplementary reasons for judgment 6.528
task 5.239, 268
arbitral award, setting aside. See arbitral award, annulment
arbitral award, supplementary decisions. See also arbitral award, rectification
on matters not addressed by parties 6.3056
arbitral tribunal
burden of proof. See burden of proof
competence. See jurisdiction (ICSID); NAFTA arbitral tribunal, jurisdiction
confidentiality of proceedings 1.412, 5.21516, 4867, 6.1989. See also disclosure
obligation
decisions relating to 6.190
documents precluded from publication without consent 6.191
notification of arbitration (NAFTA) 6.18990
Order and Interim Decision 6.190
Orders and Interim Decisions relating to (Mondev v. USA) 6.18991, 1989
constitution 1.2989, 310, 2.10, 5.5, 15
domestic courts and
decisions, relevance 1.453, 460, 498, 4.6067, 5.365
primacy 1.67881, 6.38890, 397, 562
res judicata and 1.460, 498, 6.389
domestic law, whether binding on 6.385, 389, 390
non-identity of Ministerial Decision and case before tribunal 6.3846
equality of parties. See equality of parties
failure of State to appear. See non-appearance of party
failure of State to appoint arbitrator. See arbitrator, failure of State to appoint
findings of fact, incorporation of findings of another court, admissibility 3.162
CUMULATIVE INDEX
583
arbitral tribunal, cont.

function. See powers below; jurisdiction (ICSID); NAFTA arbitral tribunal,
jurisdiction
ICJ as model 1.522, 6.22
jurisdiction. See powers below; jurisdiction (ICSID); NAFTA arbitral tribunal,
jurisdiction
powers. See also terms of reference below; jurisdiction (ICSID); NAFTA arbitral tribunal
review of decisions of domestic courts, exclusion 6.228, 5323
to increase level of damages claimed 2.3302
to raise arguments ex proprio motu 2.221, 286, 353
president
an English speaking international lawyer familiar with the common law system
4.330
appointment
agreement between arbitrators 4.330, 6.426
agreement between parties 5.303
by Chairman of the Administrative Council 1.298, 337, 4.81, 5.16, 187, 201, 397,
421, 6.1112, 158
inability to preside at oral hearings 4.3304
quorum 1.338
seat 1.338
suspension, resignation of arbitrator 2.1945
terms of reference. See also powers above; jurisdiction (ICSID); NAFTA arbitral tribunal
arbitration clause distinguished 3.85, 98
purpose 3.85
arbitrary act
bad faith and 6.301
as denial of justice 5.290, 291, 6.2256, 234, 3001
international law concept 1.604
as unfair and inequitable treatment 6.531
arbitration
applicable law. See applicable law, arbitration
appointment of arbitrators distinguished 4.17 n. 17
appropriateness in certain cases 4.1368
commercial arbitration, definition 5.2468
compulsion, domestic courts power of 4.19
consent. See arbitration clause/agreement; BITs (bilateral investment treaties); consent
to ICSID jurisdiction
diplomatic protection. See diplomatic protection
equality of parties 1.532, 533
institution of proceedings
incompetent or unauthorized 5.67, 9
withdrawal of reliance upon alleged authorization 5.89
as limitation on States rights 2.300, 4.1349
obligation, provisional measures as preliminary 3.9
place. See place of arbitration
provisional measures. See provisional measures
request for
as memorial on the merits 5.203, 204
required information
584
CUMULATIVE INDEX
arbitration, request for, cont.

details of consent, 5.130, 1323. See also consent to ICSID jurisdiction
identity of parties 5.130, 6.512
issues in dispute 5.130, 6.512
nationality of party 5.1336
right of resort to
alternative methods, obligation to pursue, 5.267, 28, 601, 634. See also dispute
settlement, good faith obligation to settle amicably
comity 4.1379
prior exhaustion of local administrative or judicial remedies, effect 5.4013
waiver 1.40910
submission to
legislation as undertaking of 1.399
as radical reversal of policy 3.1578, 167
arbitration clause/agreement 1.650. See also BITs (bilateral investment treaties); consent to
ICSID jurisdiction
absence, effect 5.3489, 365
applicability
nationals 5.3756
members of consortium 5.3735
applicable law
ratione personae, domestic law where tribunal sits 3.129
scope, domestic law where tribunal sits 3.129
assignment. See transferability below
AucovenMinistry of Infrastructure (Venezuela) (1996). See Venezuela,
AucovenMinistry of Infrastructure Concession Agreement (1996)
bifurcation clause 5.31016, 3278, 6.343, 3456, 3512, 3556, 376, 383, 5567
binding nature 1.395
choice between domestic courts and international arbitration 5.3803
dispute relating to arbitration under the clause 4.1302
entry into force
accession to ICSID and 5.118, 128, 1323
subsequent fulfilment of condition 1.667, 5.1323, 136, 144
forum. See forum, choice of
GruslinMalaysia 5.493
guarantors right to invoke 1.670
ICSID jurisdiction, consent to 1.3401, 2.1314, 298300, 6.405
applicable law distinguished 4.2978
application to subsequent agreement 2.1314, 91
controlling bodys rights under clause agreed by controlled entity 5.1412
sufficient written consent, whether 1.3034, 5.1412
ICSID Model Clauses of Consent to Jurisdiction (1993) 1.672 n. 94, 4.338
interpretation
aids
conduct of parties 1.398
legislation 1.398400
promotional literature 1.399, 400, 401
good faith 2.2056
guidelines
agreement as a whole 1.398
CUMULATIVE INDEX
585
arbitration clause/agreement, interpretation, cont.

good faith 1.400, 5.147
intention of parties 1.398, 402, 5.3634
purpose of ICSID Convention 1.399, 5.147
purpose and scope 2.104
reasonableness 5.147
restrictive/broad 1.401, 420, 679, 2.206, 5.147, 6.2023
investment, attachment to 1.403
joint venture agreement, frustration 4.1946
matters falling outside scope of 3.39
modification 2.434, 1023
nationality and 2.335
as agreement to treat as foreign national 1.3925, 65963, 2.1517, 181, 272, 28790,
32930, 5.1345
New ZealandMobil Oil NZ Ltd
Art. II(1)(e), enforceability 4.197243
Art. VII(1)
any dispute under this agreement 4.1301
arising on a matter contained in this agreement 4.1301
non-signatory, applicability to 5.1419
as offer of arbitration requiring acceptance 5.3803
separability and 1.675
shareholders right to invoke on own behalf 1.403, 4.2978
US Model BIT (1984), Art. I(c) 4.298
sovereignty and 1.674, 67980
State agency, acceptance of 3.58, 59
terms of reference of dispute distinguished, ICC Rules 3.85, 98
third parties and 5.364
transferability 1.4203, 66876
approval, need for 1.403, 5.149
effect 1.403
uncertainty of contract and 4.1946
withdrawal 2.21920
arbitration proceedings, annulment requests and proceedings, whether 6.332
Arbitration Rules. See ICSID Rules (Arbitration)
arbitrator. See also disqualification of conciliator or arbitrator, grounds
appointment
by Chairman of the Administrative Council 1.298, 310, 4.80, 5.16, 303, 6.158
consent of other party, relevance 2.184, 2902, 3356
by party 5.187, 201, 303
by President of ICSID 4.68, 125
declaration of professional, business or other relationships 6.336
efficiency considerations 4.80
extension of period for 6.426
method of appointment distinguished from actual appointment 2.336
corruption, annulment of award and 1.549
death 1.646
discretion, weighing-up of evidence 3.73
failure of State to appoint 1.298, 310, 5.1516, 303
honorarium 2.176
586
CUMULATIVE INDEX
arbitrator, cont.
national of State of party to dispute 6.158
dual nationality and 6.1589, 1667
number 5.15, 72, 3023
qualities/qualifications, See also qualities/qualifications of conciliators and arbitrators
(Panel membership)
resignation 1.2989, 646, 2.1945, 6.92
Argentina, administrative courts, exhaustion of local administrative or judicial remedies
and 5.31516, 3213, 3779, 6.3456, 34850, 3512, 3556, 3601
ArgentinaFrance BIT (1991) 5.299, 310, 6.342
applicable law as acknowledgement of possibility of mixed BIT/contract issues 6.357
Art. 1(1)(b) (investment) 5.311, 6.353
Art. 1(2)(c) (investor) 6.353
Art. 3 (fair and equitable treatment) 5.311, 327, 6.3423
test 6.356
Art. 5 (just and equitable treatment/expropriation/compensation), text 6.3567
Art. 5(1) (protection and full security) 5.327, 6.3423
Art. 5(2) (expropriation/nationalization) 5.311, 323, 327, 6.3423
Art. 8(1) (dispute settlement) 6.360
Art. 8(2) (bifurcation clause) 5.31016, 3278, 6.343, 3456, 3512, 3556, 357, 360,
556
juridictions nationales/domestic courts 6.3556
Art. 8(4) (applicable law) 6.357, 369
Art. 10 (special agreement: applicable law) 5.321 n. 20, 328
ArgentinaSpain BIT (1991)
compliance with national law, need for 5.433
dispute settlement clause
18 months rule 5.399403, 404
exhaustion of local administrative or judicial remedies 5.399403
decision on merits requirement 5.401
text 5.399400
fair and equitable treatment (Art. IV(1)), transparency, need for 5.436
MFN treatment (Art. IV(2)) 5.40417
ArgentinaUSA BIT (1991), dispute settlement clause 5.369
applicability
members of consortium 5.5735
nationals 5.3756
choice between domestic courts and international arbitration 5.3803
consent to ICSID jurisdiction, whether 5.384
exhaustion of local administrative or judicial remedies, break from tradition 5.380
investment dispute 5.3756, 386, 6.360
as offer of arbitration requiring acceptance 5.3803
previously agreed dispute-settlement methods 5.3769
text 5.3767
assignment
acquired rights 1.493
failure to object to, estoppel 1.480
investment licence. See investment licence, assignment of interest
rights, interests and claims of juridical person of non-Contracting Party 6.31314, 315
sub-contract distinguished 1.479
CUMULATIVE INDEX
587
attachment proceedings 4.334, 40

basis, prima facie debt 3.11
enforcement proceedings and 4.49
immunity of central bank accounts 2.39
improper request
remedies
damages/costs 4.689
discontinuance of action 4.69
jurisdiction, exclusion 4.334, 40, 51
other remedy 4.689
statutory limitation 4.49
stay 4.4952
Australia, law of, Federal Trade Commission Act, s 5 4.230
AustraliaCzech Republic BIT (1993), Art. 11(3) (exhaustion of local remedies) 6.5567
award. See arbitral award
B
bad faith. See also good faith
abuse of process and 6.563
arbitral award, recognition and enforcement, and 4.512
arbitrary act 6.301
breach of joint venture agreement 4.73
costs, effect on 2.378
as defence 6.1224
intention to harm, need for 1.321
joint venture agreement, repudiation 1.291
standard of treatment of alien and 6.222, 299300
withdrawal of investment licence on grounds of 1.5947
banking practice, non-compliance
breach of BIT/legislation, whether 6.299
due process and 6.299
bankruptcy/liquidation proceedings
exclusion of jurisdiction and 6.162, 168
standing, effect on 6.212
Belgium
contract, definition 1.462
law of
Law of 15 July 1970 (ICSID Convention (1965): ratification) 4.34
Law of 15 June 1935 4.33
BeneluxBurundi BIT (1989)
dispute settlement provisions
diplomatic channels, obligation to use 6.31
written notification of dispute 6.31
domestic and international obligations, effect on 6.33
measure depriving of and restricting property 6.414
compensation, need for 6.42, 434, 45
measure/valuation of company 6.45
588
CUMULATIVE INDEX
BeneluxBurundi BIT (1989), measure depriving of and restricting property, cont.

reinstatement of right 6.44, 45
object and purpose, reciprocal encouragement and protection of foreign investment
in accordance with its legislation 6.41
free zone regime as 6.41
BITs (bilateral investment treaties). See also AlbaniaGreece BIT (1991); AlbaniaUS
BIT (1995); ArgentinaFrance BIT (1995); ArgentinaSpain BIT (1991);
ArgentinaUSA BIT (1991); AustraliaCzech Republic BIT (1993);
BeneluxBurundi BIT (1989); ChileSpain BIT (1991); ChinaUK BIT (1986);
Ecuador-US BIT (1993); EgyptUK BIT (1975); EstoniaUS BIT (1994);
ItalyMorocco BIT (1990); NetherlandsVenezuela BIT (1992); ParaguayPeru
BIT (1994); PhilippinesUK BIT (1980); SlovakCzech BIT (1992); Sri
LankaUK BIT (1980); Sri LankaUS BIT (1991); SwedenLithuania BIT (1992);
SwitzerlandBolivia BIT (1987); UkraineUS BIT (1994); USZaire BIT (1984)
18 months rule 5.399403, 404
as applicable law 4.2567, 2634, 2979, 5.206, 6.256, 111, 121, 135, 1478. See also
as source of applicable rules of international law below
determination by 6.323
domestic law of host State and, primacy 6.135
entry into force of treaty, relevance 6.256
breach
as basis for ICSID jurisdiction 3.3134, 5.310, 37283
determination of breach of concession agreement, relevance 5.315 n. 19, 316, 321
n. 20, 6.3456, 3601
compensation for loss during war or civil disturbance not attributable to State 4.3079
consent to ICSID jurisdiction. See consent to ICSID jurisdiction, BIT
customary international law and, 4.3037, 6.218, 534. See also opinio juris and below
dispute settlement provisions, MFN treatment 5.40411
domestic and international obligations, effect on 6.33
dual/multiple national, rights under 6.1734
implementation prior to 6.401
relevance 6.256
requirements 5.3446, 378, 6.256
exhaustion of local administrative or judicial remedies
compromise formula 5.408
freedom of choice 6.5567
fair and equitable as standard of treatment 6.222
importance 6.24, 222
inseparability of contractual obligations 5.322
interpretation. See treaty interpretation
investment 5.245, 1947, 311, 3534, 3734, 386, 6.324, 353
MFN treatment, as measure of 6.4945, 534, 536
national of another Contracting State, agreement to treat as 6.834
national treatment, as measure of 6.495, 5356
nationality (juridical person), control test (piercing the corporate veil) 6.211
opinio juris and, 6.2201. See also customary international law and above
origin of funds, relevance 6.176
procedure, 6 months rule 5.404, 6.402, 4046
as source of applicable rules of international law, 5.22. See also as applicable law above
CUMULATIVE INDEX
BITs (bilateral investment treaties), cont.
US Model BIT (1984)
Art. I(c) 4.2989
Art. III(1), text 4.308 n. 26
standard of treatment, NAFTA (1992) provisions distinguished 5.2523
burden of proof
arbitral tribunal 1.533
claimant 6.520, 530, 5313
general principle of international law 4.272, 5.39, 84
contract, fraudulent misrepresentation 3.72
costs incurred 3.2556, 331
damages 3.255, 314, 331, 6.1434
equality of parties and 1.533
existence of loan 5.435
expropriation 5.87, 95, 978, 101, 104
foreign investment 1.486, 5.86, 901, 6.85, 91
joint venture agreement, enforceability 1.193, 208, 4.1978, 21213
jurisdiction 3.57, 5.464
lack of Article 14 qualities 6.3378
obligation, existence 1.289
onus probandi actori incumbit 4.2723
person alleging fact 4.2723
res judicata 1.554
shift 4.273, 5.86
standard of proof 4.273
standing 5.412
State immunity from jurisdiction, waiver 3.181
State responsibility 4.2726, 5.39, 85
defence to alleged breach 6.111, 124, 1278
wrongful allocation as serious departure from fundamental rule of procedure
6.1424
Burundi
administrative contract, unilateral amendment, right to 6.434
AFFIMET (Affinage des Metaux)
BurundiAntoine Goetz (AFFIMET), Protocol of Agreement (1998) 6.467
due process/lawful procedure requirement 6.43
formation and structure 6.67
free zone certificate, grant and withdrawal 6.710
adequate compensation, need for 6.434, 45
consultation, relevance 6.37
critical dates 6.256, 312
discriminatory, whether 6.37, 43
fault, relevance 6.378
public interest/public purpose requirement 6.423
as unilateral measure 6.43
Special Convention regarding the functioning of AFFIMET (1998) 6.4750
due process 6.43
international law in relation to domestic law
complementarity 6.334
incorporation 6.34
589
590
CUMULATIVE INDEX
Burundi, cont.
law of
Decree-law 1/30 of 31 August 1992 (free zone regime) 6.6
gold and precious minerals, applicability to 6.79, 389
French administrative law 6.35, 43
Ministerial Order 750/415 of 28 September 1992 (implementation of Decree-law 1/30
of 31 August 1992), Art. 2 6.6
Ministerial Order 750/184 of 29 May 1995 (amendment of Ministerial Order 750/415
of 28 September 1992) 6.4, 910, 18, 357
retroactive effect, whether 6.35
validity 6.3540
C
Cameroon, law of, dual system, applicable law and 2.59
Canada
arbitral award, annulment
damages, effect on 5.2678
discretionary power 5.266
partial 5.2678
remission to arbitral tribunal and 6.57
arbitral award, reasons, need for 5.2656
arbitral award, review by domestic courts
applicable law, International Commercial Arbitration Act RSBC 1966, Commercial
Arbitration Act RSBC 1996 distinguished 5.2468
remission to arbitral tribunal 6.568. See also International Commercial Arbitration
Act RSBC 1966 below
partial annulment and 6.57
reopening of proceedings, grounds 6.56
appeal against review, relevance 6.56
standard of review 5.24850
conflict with public policy 5.2603
decisions beyond scope of submission to jurisdiction 5.250, 2535, 258
failure to address every question 5.2637
fraudulent claim 5.2623
patently unreasonable error 5.249, 25860
pragmatic and functional approach 5.24950
requirement to raise at early stage 5.254
supplementary reasons for judgment 6.523
task 5.239, 268
arbitral procedure law, suitability under NAF TA Art. 1136(7) 6.4558
arbitration, commercial arbitration, definition 5.2468
International Commercial Arbitration Act RSBC 1966
review of arbitral award, limitations 5.2489
s 34(4) (setting aside of award: remission to arbitral tribunal)
failure to comply with as ground for correction of Order flowing from Reasons of
Judgment 6.56
indefinite adjournment, possibility of 6.58
text 6.55
CUMULATIVE INDEX
591
Canada, International Commercial Arbitration Act RSBC 1966, cont.

UNCITRAL Model Arbitration Law as basis 6.567
New York Convention on the Recognition and Enforcement of Arbitral Awards (1958),
applicability, limitation to commercial disputes 6.4556, 4745
as determined by national law 6.4556
central bank
accounts, immunity from attachment 2.39
liability for arbitral award against State 1.3734
negligence 6.294, 301
as State agency 1.374, 6.291
State responsibility and 5.4336
changed circumstances
contract 2.80
frustration 4.71
joint venture agreement 4.71
measure of damages and 3.247
requirements
equilibrium of agreement, alteration 6.65
events beyond control of disadvantaged party 6.65
events occurring or becoming known after conclusion of agreement 6.65
risk not assumed by disadvantaged party 6.65
unforeseeability by disadvantaged party at time of conclusion of agreement 6.65
equilibrium of agreement, alteration 6.65
hardship 6.65
obligation to perform obligations 6.65
revision of agreement, right to 6.65
Chile, Ministerial Decision No 43, request for suspension 6.38291, 397
ChileSpain BIT (1991)
Art. 10(2) (bifurcation clause) 6.376, 383
6 months rule 5.404
ChinaUK BIT (1986), Art. 4 4.309
choice of law clause. See applicable law, choice of law clause
civil law
restitutio in integrum 1.499500
civil war. See combat action; State responsibility, revolution
claim
incidental or additional 5.2578, 6.51415
arising directly out of the subject matter of the dispute 6.51415
revision/amendment 5.223
Code of Ethics for International Arbitrators (International Bar Association, 1987). See
qualities/qualifications of conciliators and arbitrators (Panel membership)
combat action 4.2735, 3067. See also war or other armed conflict, revolution, a state of
national emergency, revolt, insurrection or riot in the territory
Adams v. Naylor 4.3067
guerrilla warfare 4.274, 3067
Sri Lanka/Tamil Tigers 4.274, 307
Zaire 5.312
592
CUMULATIVE INDEX
comity
acceptance of right of resort to international arbitration 4.1379
stay of proceedings in case of concurrent jurisdiction 3.129
commercial activity, having substantial contact with the United States. See jurisdiction
(ICSID), nexus
common good, as ground for modification of free zone rights 6.38
common law
damages, measure 1.500
company. See corporation
compensation agreement. See also damages; expropriation/nationalization, compensation
tentative agreement, status 6.293, 294
compensation claims, as waiver of State immunity 3.7
compromissory clause. See arbitration clause/agreement
concession agreement. See also contract; foreign investment; investment licence; joint
venture agreement; State contract
as administrative contract 1.492
concluded by political subdivision
State responsibility for
breach 6.365
renegotiation 5.3223
consortium. See consortium, members of
termination for invalidity 5.28990
conciliation
advantages 2.410
informality 2.410
binding award, absence 2.401
costs. See costs
as method of dispute settlement 3.171
procedure, informal 2.401, 410
request for 2.3001
refusal 2.4001
review 2.4001
Conciliation Rules. See ICSID Rules (Conciliation) (1968/84)
conciliator
appointment 2.4056
report 2.409
task
to clarify issues 2.408
to evaluate claims and chance of success 2.408
to examine parties contentions 2.408
confidentiality. See also arbitral award, publication; arbitral tribunal, confidentiality of
proceedings; disclosure obligation
decisions relating to 6.190
notification of arbitration (NAFTA) 6.18990
Orders and Interim Decisions relating to (Mondev v. USA) 6.18991, 1989
place of arbitration and 6.1867, 197
proceedings 1.412, 5.21516, 4867
CUMULATIVE INDEX
confidentiality, proceedings, cont.
Order and Interim Decision 6.190
publication of
arbitral award 1.646, 2.135, 6.64
precluded documents 6.191
provisional measures, information concerning case 1.4103
conflict of laws. See private international law
Congo, Peoples Republic 1.325
Constitution 1.349
Art. 33 1.318, 322
Art. 55 1.318, 320
contract
third party, stipulation in favour of 1.325
acceptance of obligation, effect 1.325
expropriation 1.318
act of State 1.322
breach of contract as 1.323
nationalization as possibility 1.322
private interest of State as shareholder, relevance 1.3223
requirements
compensation 1.357
general interest 1.3223
stabilization clause and 1.324
expropriation, compensation 1.357
lacunae 1.3234
primacy 1.3234
as supplement 1.3234
law of
Civil Code (French) 1.318
Art. 1121 1.325
Art. 1134 1.323
Art. 1149 1.326
Art. 1150 1.326
Art. 1153 1.327
Art. 1174 1.323
Art. 1354 1.350
Art. 1356 1.350
Art. 1871 1.323
Art. 2028 1.328
Constitution. See Constitution above
French law at time of independence, French Decree of 28 September 1897 1.318,
349
Fundamental Act of 5 April 1977 1.349
Law 1/74 (nationalization of oil companies) 1.312
AGIP and 1.312
Law 71/75 1.31516, 3214
Ordinance 5/78 1.317, 3214
Prime Ministerial Decree 75/508 1.365
593
594
CUMULATIVE INDEX
Congo, Peoples Republic, cont.

nationalization measures 1.31216
AGIP, relating to 1.31516
compensation 1.317
validity 1.3214
stabilization clause, expropriation and 1.324
consent to ICSID jurisdiction 1.287, 298, 2.272. See also arbitration clause/agreement;
jurisdiction (ICSID); jurisdiction (ICSID), exclusion of class of dispute
ambiguity 2.99100, 3.177, 1878, 4.12933
arbitration and judicial settlement distinguished 5.67
BIT 5.256, 578, 310, 344, 384, 6.25, 28, 7984, 1612, 168, 291, 4056
entry into force and 5.578, 3789, 4178
ratification 6.29
conditions
automaticity on fulfilment 6.438, 446
good faith attempt at amicable settlement 5.601, 634, 6.403, 4045
requirements, good faith attempt at amicable settlement. See dispute settlement, good
faith obligation to settle amicably
transfer of shares to a national of another Contracting State 6.438, 446
of constituent subdivision or agency 5.119
critical date 5.306 n. 6
date of fulfilment of all conditions for consent 5.133, 144, 149
institution of proceedings 6.405
date of contract 5.350
declaration of intent as 3.174, 177
legislative provision as 3.1767
effect on right of resort to domestic courts 2.205
ICSID Convention
Preamble as 3.120, 143
ratification as 3.143
ICSID Model Clauses 1.672 n. 94
importance 6.22, 439
interpretation
good faith 3.145
restrictive/liberal 3.1434, 5.344
legislation as 1.399, 3.579, 86, 121, 1403, 14562, 168, 1767, 5.589, 634, 384
bilateral treaties as evidence of general absence of consent 3.159
in consecutive pieces of legislation 5.527, 629
as declaration of intent 3.1767
domestic law as fact 3.1412
as evidence of absence of bar 3.59
interpretation
international law applicable to unilateral declarations 3.143
original language to determine, whether 3.1478, 1723
parties interpretation 3.142
limitation to terms of legislation 5.834
mandatory, whether 3.1469, 161
CUMULATIVE INDEX
595
consent to ICSID jurisdiction, legislation as, cont.

as offer requiring acceptance 3.1701, 178, 182, 185, 253
self-executing, whether 3.176
separate agreement, need for 3.1526
translation
agreed by parties for use in ICSID proceedings 3.1456
variations 3.1726
as unilateral act 3.142, 1701, 5.63
international obligation, whether 3.142
memorial asserting lack of consent, whether 5.498, 499
national court proceedings involving Attorney-General, whether 5.12430
non-binding letter of intent, agreement or extension 6.31720, 322
notice in Official Gazette of entry into force of BIT as 5.3467
notification to ICSID of kinds of disputes which might be submitted as 3.143, 171
open door policy as evidence of willingness to give 3.59
presumption of 2.205, 3.143, 177
presumption of validity 4.1367
pursuit of alternative remedy as recognition that consent lacking 3.121
reference in choice of law clause to unratified BIT, whether 5.3489, 357, 364
requirements. See also conditions above; foreign investment; legal dispute arising
directly out of investment; national of another Contracting State; national of
another Contracting State, agreement to treat as
clear and unequivocal consent 3.62
consent of non-State party in case of generic offer 5.256, 384, 6.289
formality, relevance 1.400, 5.142, 1478, 3434
writing. See written, need for below
subsequent agreement, effect 2.1314, 17, 903
timing, forum prorogatum 2.14, 19, 100
unilateral 5.3467, 6.406
unilateral withdrawal 1.302, 304, 668 n. 80, 2.184, 5.142, 3823
written, need for 1.3034, 400, 661, 6712, 2.2947, 307, 3501, 3.1202, 155, 1689,
5.379, 6.405
ad hoc, need for 3.1556
arbitration clause. See arbitration clause/agreement, jurisdiction, basis for
promotional literature as offer 3.169, 17782
required elements 4.17 n. 17
single instrument, relevance 3.121, 169, 4.17 n. 17, 5.384, 6.28
submission of dispute to ICSID as 5.344
consent to NAFTA arbitration. See NAFTA arbitral tribunal, jurisdiction, consent to
conservation measures. See provisional measures
consortium, members of
agreement to give ICSID protection to 6.315
as co-claimants 6.400
liability 5.3735
status as foreign investor and 5.3735, 6.3256
constituent subdivision or agency as party to the proceedings. See also proper party; State
responsibility, acts and omissions of, political subdivision
approval of consent, need for 5.119, 133, 314, 6.345
596
CUMULATIVE INDEX
constituent subdivision or agency as party to the proceedings, cont.

class exclusion 5.31415
classification as 5.1212
ADM (National Motorway Company of Morocco) 6.407
Nevis Island 5.123
travaux preparatoires 5.1223
designation
as in Constitution, relevance 5.121
need for 1.659, 5.119, 121, 123, 1312, 133, 151, 6.360
disputes related to concession contract involving State party itself 5.314
Klockner 5.122
list of designations 5.122
substitution of Contracting State 5.1167, 119, 1212, 124
consular jurisdiction 5.4078
consultations, obligation to seek settlement through 5.267, 28
contract. See also concession; investment licence; joint venture agreement; State contract
agreement to agree 2.108
applicable law
damages for breach, domestic law of Contracting State 2.375
interpretation 4.1819
third party interest, domestic law of Contracting State 1.349, 452
application and use as aid to interpretation distinguished 2.115
breach
acts possibly constituting
breach of law 3.21216
legislative measures 3.667
provisional measures, request for 3.356
unlawful conduct 3.21920, 30515
appreciable effect, need for 1.351, 2.73, 3.71, 74
by government, joint attribution to State agency 3.75
damages 1.3267
termination without breach distinguished 2.249
tort distinguished 1.498, 612
estoppel
approval of changes 3.20912, 215
failure to complain at time 3.702, 74
evidence of 3.73
national audit office report 3.73
as expropriation 1.323
good faith 4.73
mitigating factors 2.725
simultaneous breach of law 3.1245
State immunity and 3.669
waiver of right to invoke, implied acceptance of defective performance 2.76
withdrawal of investment licence distinguished 1.489, 490
burden of proof, fraudulent misrepresentation 3.72
changed circumstances 2.80
definition 1.462, 466
civil law 1.4613
CUMULATIVE INDEX
contract, definition, cont.
common law 1.463
disinvestment negotiations distinguished 5.4367
effective date 5.1445
formation 5.437
fraudulent misrepresentation. See fraudulent misrepresentation
frustration 3.71
good faith
breach 4.73
negotiation 6.320, 325
performance 3.701
interpretation. See contract, interpretation
modification
by subsequent agreement 2.1314, 1023
refusal to accept, damages 3.247
multiple, distinction maintained 3.90
obligations
diligence 2.812
evidence of failure 2.812
exceptio non adimpleti contractus 2.6172, 801, 1589
effect on obligation to pay interest 2.712
in English law 2.63, 5.823
exceptio non rite adimpleti distinguished 2.64
in French law 2.623, 71
judicial power to invoke 2.62
notice of default, need for 2.62, 71, 84
partial performance and 2.638, 801
timing 2.62
good faith in performance 3.701
governments obligation to observe 6.2278
multiple contracts, interaction 2.656, 70
obligation of means 2.812, 1478
obligation of result 2.81, 1438
self-executing provision 2.10715
Islamic law 1.492
pactum de contrahendo. See agreement to agree above
parties to
Ministerial countersignature approving, effect 3.602, 879
autorite en tutelle 3.60
as evidence of 3.602
principles and usages of international commerce 3.44
as property right 2.3478, 3678
repudiated, damages for non-performance 1.298
requirements
agreement 1.4645
instrumentum 1.464
risk 3.76, 77, 2578, 3323
597
598
CUMULATIVE INDEX
contract, cont.
satisfactory performance. See also unsatisfactory performance below
evidence of 2.3040, 86
State immunity and, pacta sunt servanda 3.69
stipulation pour autrui. See third party, stipulation in favour of below
sub-contract
assignment of interest distinguished 1.479
jurisdiction, exclusion 2.264, 3267
indemnification for loss under 2.264
subsequent agreement
accord cadre 2.69, 923
effect 2.1314, 11015
interaction of obligations 2.656, 70
presumption of compatibility 2.69, 91, 11011, 11315
retroactive effect 2.913, 108
synallagmatic 1.466, 467
termination 1.458
unilateral 1.458, 467
as expropriation 1.458
third party
stipulation in favour of 1.3256, 374, 2.117
acceptance of obligation 1.325
acceptance of right 1.325
French law 1.325
right of stipulator to stand in shoes of promissory 1.325
tacit mandate by contracting party, effect 1.325
as unified contractual scheme 3.59, 90
unsatisfactory performance. See also satisfactory performance above
failure to challenge 3.389
validity where party not in existence at time of conclusion 5.13749
voidable, for fraudulent misrepresentation 3.72
contract, interpretation
aids
context 4.177, 178
subsequent agreement 2.115
subsequent conduct of parties 4.17
applicable law 4.18
guidelines
clear language 4.181
commercial reasonableness 4.183, 184
effectiveness 4.1879
fairness 4.184
grammatical structure 4.1789
intention of parties 2.2978, 304, 4.181, 183
object and purpose 4.177, 182
reasonable meaning 4.177, 179, 181
sentence as a whole 2.109
ut res magis valeat quam pereat. See effectiveness above
phrases. See words and phrases
CUMULATIVE INDEX
Contracting State
status as
Hong Kong 3.120, 185
St Kitts and Nevis 5.118
corporation. See also joint-stock company; nationality (juridical person); partnership
agreement; State agency
applicable law. See applicable law, corporation
confiscation of assets. See expropriation
of convenience 6.4445
dissolution
by government
effect on arbitration agreement 1.562
justification, need for 1.3556
effect 1.6667
tribunal jurisdiction 1.294
interference, price-fixing 1.3545
State corporation. See State agency
Costa Rica
Expropriation Decree 1978 5.1601
compatibility with international law 5.170, 1812
expropriatory effect 5.1724
US invocation of Helms Amendment 5.1623
variation in practice 5.326
costs 4.76
ad hoc Committee
advance payment
default 2.274
reimbursement 2.274
criteria 2.135
equal division 1.541, 2.163
Additional Facility proceedings, parties to bear own 6.64
annulment of award, effect 5.268
avoidable 1.6356
Azinian 5.326
in case of
invalid waiver of right to initiate or continue domestic proceedings 5.461
unauthorized institution of proceedings 5.10
conciliation 2.4012
damages distinguished 4.109
dependence on legislative approval 5.203, 204, 205
enforcement of award 2.340
equality of parties and 5.509
equitable 6.563
expert 2.271, 274
hypothetical assumptions 5.509
interest 1.366, 6.51
legal 2.378, 5.207, 6.127
offset, annulment costs 1.6367
599
600
CUMULATIVE INDEX
costs, cont.
parties
75 per cent 4.295
80 per cent 3.77
party unsuccessfully seeking supplementary decisions and rectification 6.3067
State party to pay claimants 3.94
refusal 5.203
to bear own 1.294, 295, 329, 366, 508, 541, 633, 2.274, 3.44, 4.77, 110, 3512, 5.105,
152, 178, 207, 235, 295, 326, 438, 442, 510, 6.50, 180, 3023, 323, 371,
5367
Additional Facility proceedings 6.64
where objections to jurisdiction not wholly groundless 6.79, 127
production of documents 5.215
reasons, need to state 4.109
relevant factors
bad faith 2.378
complexity of issues 6.5367
contributory fault of successful party 5.294
enforceability 5.294
existing right argument 6.3945
failure of party to observe procedural requirements 6.180
importance of issues 6.152, 234, 371
impropriety of successful partys actions 6.2345, 302
non-cooperation of unsuccessful party 6.302
nuisance claim 5.509
professional handling of proceedings 5.294, 326
reasonableness of objections to jurisdiction 6.79, 127, 180, 563
success on merits unmatched by success on arguments 6.234
unfamiliarity of proceedings 5.294
security/cautio judicatum solvi as provisional measure 6.3957
Atlantic Triton 6.396
State practice 6.396
tribunal
advance payments, delay in making 6.161, 168
effect on award of costs 6.180
equal division 1.294, 295, 329, 365, 366, 508, 541, 633, 2.274, 3.44, 342, 4.77, 110,
5.105, 152, 178, 207, 235, 295, 326, 438, 510, 6.50, 66, 152, 180, 3023, 323, 371,
5367
party unsuccessfully seeking supplementary decisions and rectification 6.3067
State party to pay 1.329, 344, 2.378
60 per cent 4.295
80 per cent 3.77
tribunals discretion 1.294, 4.10910, 6.235
unsuccessful partys liability for 5.294
counterclaim 1.6089
annulment of award, effect 1.53940
annulment, grounds for, right of counterclaim 6.3589
for
breach of joint venture agreement 1.293
intangible loss 1.3645, 2.77
CUMULATIVE INDEX
counterclaim, for, cont.
investment sums improperly transferred 6.301302
legal fees and expenses 4.767
failure to object to proceedings 4.767
non-payment of duties and taxes 1.3623, 5067
over-pricing 1.363
unsatisfactory performance 1.293, 3634, 3.2478
evidence, need for 1.293
jurisdiction 2.18
mitigating factors 4.767
courtesy, arbitral award and 1.369
critical date
consent to jurisdiction 5.133, 144, 149, 306 n. 6
dispute 5.645, 4178
entry into force of treaty 6.256, 312
expropriation 5.1724
jurisdiction (ICSID) 6. 26. See also consent to jurisdiction (ICSID), critical date
nationality (juridical person)
consent to jurisdiction 4.3367, 345
effective date of concession contract 5.307 n. 6
registration of claim 4.346, n. 29
previously agreed dispute-settlement procedures 5.3779
standing, institution of proceedings 5.343
BITs (bilateral investment treaties) 4.3037, 6.218, 534
Draft Convention on the International Responsibility of States for Injuries to Aliens
1.600
damages for unlawful act 1.600
evolutionary nature 6.218, 2212, 2234
expropriation/nationalization, lawfulness 6.43 n. 41
failure of claim for want of jurisdiction/admissibility, effect on underlying rights
6.558
opinio juris. See opinio juris
protection and security of investment, State responsibility 1.600
standard of treatment 2.3045, 308, 310, 4.2667, 26972, 2768
customary international law as reference point 6.223, 527
evolution 6.218, 2214, 5279
fair and equitable, as general obligation under 6.52931
most favoured nation treatment (MFN) 4.308, 31011
transparency 5.253
State responsibility
breach of treaty, applicable law 6.365
counter-insurgency activities 4.31013
damages 4.3004
federal State 6.522
national security as justification 4.317
treaties and similar international instruments reflecting
BITs 4.3037
Sri LankaUK BIT (1980) 4.2667, 300, 3014, 307
European Convention on State Immunity (1972) 4.39
601
602
CUMULATIVE INDEX
customary international law, treaties and similar international instruments reflecting, cont.
ILC Draft Articles on the International Responsibility of States for Injuries to Aliens
1.600
NAFTA (1992), Art. 1105 obligations 5.252, 6.2234
OECD Draft Convention for the Protection of Foreign Property 4.2978, 3046
UNESCO Convention for the Protection of the World Cultural and Natural Heritage
(1975) 3.2589
Vienna Convention on the Law of Treaties (1969) 2.118, 6.2023
as aid 4.2656
as applicable law 2.120, 6.516
as determining factor 5.41
customary law, as law of Guinea 4.945
CzechSlovak BIT (1992). See SlovakCzech BIT (1992)
D
damages 1.499, 611, 616
agreed 2.370
applicable law
measure
award, annulment, effect on 1.5389, 5.2678
breach of joint venture agreement 1.292, 4.736
burden of proof 3.314, 6.1434
causal link, need for 1.4958, 611, 612, 3.41
allocation of prejudice, relevance 1.496
direct prejudice 1.501, 2.24851
compliance with contract, need for 2.3656
costs distinguished 4.109
currency of payment 1.504, 540, 6.45
exchange rate 1.504, 6267, 629
applicable date 1.638
devaluation of currency, adjustment for 3.2446
Aminoil 3.245
basis of calculation, US Consumer Price Index 3.246
domestic law 3.2456
discount rate 1.627, 62931
discounted cash flow (DCF). See measure/valuation of company, discounted cash flow
(DCF) below
discretionary 2.250, 257, 5.36
double payment, risk of 3.2930, 423, 5.234, 4767, 6.126, 140, 151, 162, 168
bank agreement as protection against 3.30, 423
ex proprio motu order 3.30
waiver of second suit and 3.30, 43
rights under domestic law 5.234, 6.126, 140, 151
CUMULATIVE INDEX
damages, cont.
duration 1.4945, 539
ex aequo et bono, ex gratia 4.318
ex gratia 4.318
expert evidence 1.3589, 5.36
fault, relevance 2.2578, 3226
for
breach of contract 1.3267
breach of joint venture agreement 1.292, 4.736
breach of State contract 1.3267, 2.24772
breach of State responsibility 4.2767, 28794, 3004, 30811, 5.336
loss 1.5813
capital expenditure 2.26571, 273
contract
breach 1.3267
non-performance of repudiated contract 1.298
de facto dispossession 1.496
delays in arbitration proceedings 2.340
denial of justice 1.528, 604
domestic court decisions 1.498
enforcement proceedings 2.340
expenses incurred 3.33
expropriation. See expropriation/nationalization, compensation
general damages. See intangible loss below
indemnification against non-performance of contract 3.32
installation costs 1.35960
intangible loss 1.360, 366, 501, 2.271
investment in subsidiary company 2.354, 374
liability to third party 2.2712, 273
loans 1.359, 366
loss of credit 1.361
loss of reputation 3.33
loss of right to invest 1.501
loss of right to repurchase shares 1.360
operating expenses 2.26571, 273
part-performance 2.262
promotional expenses 2.270
reimbursement of discharged debt 1.359, 366
Restatement of Foreign Relations Law (Third) 1.600
Sramek 1.600
US-Cuba (Walter Fletcher Smith) 1.6034
US-Mexico (Chattin) 1.6023
US-Panama General Claims Arbitration 1.601
US-Venezuela (Idler) 1.602
termination of State contract 1.468, 2.224, 225, 226 n. 31, 230, 24772
parties conduct, relevance 2.230, 245
tortious act 1.499
unlawful act 1.499
603
604
CUMULATIVE INDEX
damages, for, cont.

unlawful administrative act
Bayerische HNL Vermehrungsbetriebe GmbH and Co. 1.601
denial of justice as test 1.604
domestic law 1.5979
Draft Convention on International Responsibility of States for Injuries to Aliens
1.600
ECJ 1.601
ELSI 1.604
European Convention on Human Rights (1950) 1.6001
Golder 1.601
unpaid promissory note 5.206
war and similar events in territory of Contracting State 5.31
withdrawal of investment licence 1.4968, 58693
breach of contract principles 1.4989
withdrawal of right to manage hotel 1.538, 5825
right to share of profit and 1.5825
foreseeability 1.501, 611, 612, 3.76
interest. See interest
just satisfaction proceedings distinguished 1.601
justification for act, effect on 1.529
legal reasons, need for 2.161
lost profit 1.326, 3578, 366, 499, 6124, 2.77, 24751, 2548, 273, 3701, 3747,
3.76, 3345, 4.291, 318
calculation 2.3747, 4.756
difficulty, relevance 4.75, 318
change in economic climate 3.76
change of tax status 3.77
contributory fault 1.326
investment, relevance 6.125
lost opportunities. See measure/valuation of company, lost opportunities and
opportunity costs below
lucrum cessans 4.291, 292
net profit 2.255
payment for use of trademarks 1.327
percentage payment of sales 1.327
performance largely outstanding 3.77
period 4.75
real and ascertainable 2.24851, 5.35
renewal of concession assumed 2.373, 4.75
resulting from loss of monopoly 1.327
supervening illegality 3.2345
unforeseeable damage 1.326
unlawful taking 1.61213
measure/valuation of company 1.3589
adequate 4.3012
agreement between parties 6.45
Aminoil 1.612
CUMULATIVE INDEX
605
damages, measure/valuation of company, cont.

Amoco (USIran) 1.612, 613, 614, 615, 4.292
applicable law
domestic law 4.290
Aris Gloves Claim 1.616
base period 1.6189
breach of contract and termination of without breach distinguished 2.249
breach of contract and tort distinguished 1.498
quantum of damages, relevance 1.612
bundling of costs and 5.2334, 245
Chorzow Factory 1.613, 5.233
common law 1.500
compensation for illegal expropriation and damages for breach of State responsibility
distinguished 4.291, 3012, 31718, 5.33, 42
costs incurred
burden of proof 3.255, 331, 6.1434
expenses in connection with development of project 3.237, 5.233, 245
failure to document sufficiently 3.2378, 2556, 3125, 3312
investment 3.236
critical date 5.1724
damnum emergens. See loss suffered below
DCF method. See discounted cash flow (DCF) below
depreciation allowance 1.61922
determination
binding arbitration 1.455
as separate issue 6.189
Tribunal with expert advice 6.45
discounted cash flow (DCF) 1.5013, 6167, 62831, 4.291, 292, 5.232
in absence of evidence of future profits 5.233, 6.1245
rejection 3.76, 77, 2335, 6.1245
discretion 6.148
effect of taking 1.615
equitable considerations 5.175
equitable estimate 2.161, 5.33
estimated profits, projected profits/duration/valuation rates 1.358
evidence of 5.175
ex aequo et bono 1.357
expert evidence 1.3589
independent 1.358
failure to state reasons 6.1479
fair market value 1.614, 4.291, 5.35
by reference to highest and best use 5.171
willing buyer/willing seller test 5.171
fault, relevance 5.33
fees due under third-party contract 2.25864, 273
imprudence in agreeing 2.260, 262
foreseeability and 1.613, 2.2451
606
CUMULATIVE INDEX
damages, measure/valuation of company, cont.

full compensation 1.501, 2.247, 248
full value 4.288
going concern 1.5012, 4.291, 318
failure to establish market price 1.358
goodwill 4.2914
GuatemalaUS
May 1.6123
Shufeldt Claim 1.612
INA 1.616
investment 6.1256
in company 1.358
disparity with critical date value 3.77
incremental factor 3.77
legal and audit costs 3.2389
incurred in proceedings before another tribunal 3.2389
Liamco 1.612
loss suffered 1.326, 499, 2.77, 247, 36970, 372, 3.76, 4.318
lost dividends 1.327
lost opportunities. See also opportunity costs below
restitutio in integrum as 3.22941
lost profit. See lost profit above
lucrum cessans. See lost profit above
market value on day before/immediately before property taken 6.45, 124
MFN BIT provision 5.33
net book value 1.6156, 2.374
opportunity costs 1.3601, 366, 5378, 2.257, 273
Phelps Dodge 1.616
real and objective value 6.45
reasonable businessmans expectation 1.619
registered capital 1.359, 360
remediation costs 5.234, 245
restitutio in integrum. See restitutio in integrum
risk factor 1.627, 631, 3.76, 77
Sedco 1.612
symbolic 1.326
tax returns as evidence of 5.233
taxes 1.6246
termination of State contract 2.226 n. 31
tourist development potential 5.176
transparency 1.615
value of shares 1.3589, 366, 4.2901
absence of market and 3.2356, 4.290
mitigation 1.610. See also offset below
known risk 3.247, 335, 5.356
lawfulness of expropriation 3.247
non-pecuniary 2.251
non-performance of obligations under repudiated joint venture agreement 1.292
CUMULATIVE INDEX
damages, cont.
non-speculative 1.61213, 6224
offset. See also mitigation above
contributory fault 3.77
ex aequo et bono award 3.32
side-benefits derived from agreement giving rise to dispute 2.2812
unjust enrichment 3.2467
unsatisfactory performance 3.32
value of part-performance 2.601, 712
payment, place of 1.540
procedural defects, as basis for. See for, unlawful administrative act above
punitive 2.3712
repatriation 1.504, 540
restitutio in integrum. See restitutio in integrum
restoration of equality of contributions as alternative 1.2934
symbolic 1.326
ruling on claims and 1.326
taxation 6.212
third party rights 6.212
transferability 6.45
unjust enrichment. See unjust enrichment
debt
basis for
enforcement proceedings 4.50
provisional measures 3.9
evidence of, arbitration proceedings 4.51
State agency, obligation of government to meet 1.321
denial of justice
arbitrary or discriminatory decision 5.290, 291, 6.2256, 3001
bad faith and 6.301
implementation of State immunity in respect of intentional tort 6.234
by reference to the facts of the case at issue 6.2256
damages, basis for 1.528, 604
delay 5.290
equity 1.52930
general principle of law 1.4724, 52930
ICSID arbitration and 1.4734
judicial acts, whether limited to 1.604
jurisdiction
international tribunal 5.4023
personal 4.224
misapplication of the law 5.290, 6.2256
procedural issues 6.228
serious departure from previous jurisprudence/new rule 6.227
retrospective application 6.2289
State responsibility 1.453, 5.290, 6.216
turning square corners 6.2278
Denmark, contract, definition 1.463
607
608
CUMULATIVE INDEX
designation as constituent subdivision or agency. See constituent subdivision or agency as

party to the proceedings
diplomatic channels, obligation to seek settlement through 5.267, 28, 6.31
diplomatic immunity. See also Vienna Convention on Diplomatic Relations (1961)
State immunity distinguished 2.393, 396
diplomatic protection
attempts to promote amicable settlement distinguished 6.4467
customary law rights and treaty based claims distinguished 6.210
dual/multiple nationality and 6.174
preclusion in respect of an ICSID case 1.515, 647, 6612, 665, 4.338 n. 12
effect of attempt to exercise 6.447
disclosure obligation 6.1878, 45069, 47781
discretion of tribunal 6.462, 479
documents of evidentiary character, limitation to 6.1878, 4678
documents originated by requesting party and annotated by other party 6.465
documents in public domain 6.4624, 465, 480
administrative assistance 6.463, 466, 4678, 47980
details of document and location, sufficiency 6.463, 466, 467, 47980
undue burden or expense to requesting party 6.4634
equality of parties and 6.4624, 479
freedom of information legislation
Additional Facility Rules (Arbitration) and 6.1901
applicability to proceedings in third country 6.1867
general principle of evidence 6.1878
general principle of law 2.1214
good faith and 6.463, 47980
joint venture agreement 2.2730, 5961, 7881, 4.181
NAFTA Chapter Eleven interpretations (31 July 2001) 6.4678
necessity. See requirements below
place of arbitration and 6.1867, 197
Pope and Talbot 6.463
postponement of request 6.467
privilege and 6.468, 481
requirements
clear identification of documents 6.464, 465, 4667, 480
relevance to purposes of proceedings 6.462, 464, 465, 466, 4678, 479, 4801
withdrawal of request 6.466, 481
discounted cash flow (DCF). See damages, measure/valuation of company
disinvestment negotiations 5.4367
dispute. See also legal dispute arising directly out of investment
aggravation, obligation to avoid 3.9, 6.3913, 397
critical date 5.645, 41718
dispute under this agreement, disagreement as to effect of subsequent legislation
4.12933
existence of 1.317
language of agreement to prevail 4.80
tentative compensation agreement, status 6.293, 294
CUMULATIVE INDEX
609
dispute settlement. See also arbitration; conciliation; diplomatic channels

conciliation or arbitration
choice 3.156, 5.256
national or companys right of option in case of dispute 5.26
ICSID jurisdiction, need for distinction 3.156, 16970, 1712, 1856
diplomatic protection distinguished 6.4467
efforts by non-Contracting State 6.4467
good faith obligation to settle amicably 5.601, 634
in accordance with any applicable, previously agreed dispute-settlement procedures
5.3769
MFN treatment and 5.40411
settlement on agreed terms and 6.66
disqualification of conciliator or arbitrator, grounds. See also qualities/qualifications of
conciliators and arbitrators (Panel membership)
manifest lack of Article 14 qualities 6.3369
Amco 6.3367
appearance of bias as 6.336
de minimis rule 6.335, 337, 339
general professional contact 6.338
lawyerclient relationship continuing after dispute has arisen 6.3367
Philipp Brothers 6.338
real risk test 6.338
relationship of independent professional partner with party 6.3389
relevant factors 6.339
social contacts 6.337
transparency requirement 6.339
disclosure of remuneration 6.339 n. 19
previous connection with party 1.389, 6.3349
Zhinvali 6.337
dissenting opinion 2.7793, 277333, 4.296319
improved procedures 2.127, 136
value to be attached to 6.555
domestic courts
appeal on factual findings 4.1617
arbitral award
enforcement 1.371
judicial review. See arbitral award, review by domestic courts
decisions, relevance. See precedent
foreign judgment, enforcement 4.42
jurisdiction. See jurisdiction (ICSID), waiver of right to, domestic court proceedings as
language of proceedings 4.42
primacy 1.67881, 6.38890, 397, 562
E-Systems 6.388
Holiday Inns 6.388
provisional measures 1.654, 655, 657, 3.89
exclusion, agreement, need for 3.8, 11, 4.51, 5.52
fragmentation of jurisdiction 3.8
implementation 3.9
610
CUMULATIVE INDEX
domestic courts, provisional measures, cont.

jurisdiction of tribunal, effect on 3.9
preliminary to submission to arbitration, admissibility 3.9
stay 4.41
right of access, arbitration as constraint 4.1323
domestic law
binding on tribunal, whether 6.385, 38790, 397
non-identity of Ministerial Decision and case before tribunal 6.3846, 389
as fact 3.170
German Interests in Polish Upper Silesia 3.141
international law and. See international law, in relation to domestic law
domicile. See jurisdiction (ICSID), nexus; nationality (natural person), dual/multiple
nationality
dual nationality. See nationality (natural person), dual/multiple nationality
due process. See also denial of justice
banking practice, non-compliance and 6.299
Burundi 6.43
inadequacy of procedures, costs, effect on allocation 6.302
Indonesia 1.449, 611, 616
jurisdiction, personal 4.224
retroactive application of new rule of procedure 6.2289
withdrawal of free zone licence 6.43
withdrawal of investment licence 1.4724, 489, 490, 491, 529, 588, 6.2979
E
economic development contract. See concession; contract; foreign investment; investment
licence; joint venture agreement; State contract
economic relations treaties, AustraliaNew Zealand Closer Economic Relations Trade
Agreement (1983) 4.2023
EcuadorUS BIT (1993), minimum standard of treaty/customary international law 6.2201
Egypt
administrative contract
requirements 3.304
unilateral amendment, right to 3.2312, 304
applicable law
foreign investment
arbitration, willingness to submit to
Law 43 (1974). See Law 43 (1974) entries below
as radical reversal of policy 3.1578, 167
Art. 151 (treaties: status) 6.139
burden of proof, fraudulent misrepresentation 3.72
Constitution, Art. 34 (compensation for expropriation) 3.227, 328, 329
contract
breach, evidence of 3.73
obligation, good faith in performance 3.701
damages, devaluation of currency, adjustment for 3.2456
CUMULATIVE INDEX
Egypt, cont.
Egyptian Hotels Company (EHC)
as public sector company 6.1079, 136
State responsibility for acts of 6.114 n. 198, 136
expropriation, contractual rights 3.2279
expropriation, compensation
adequacy 3.2278, 230
Civil Code 3.328
Constitution 3.227, 328
discretion as to amount 3.330
Law 215 (1951) (Protection of Monuments and Antiquities) 3.227
Law 577 (1974) (compensation for expropriation) 3.328, 32930
power of courts to award 3.32930
foreign investment in. See also Law 43 (1974) entries below
applicable law
investor, approval by General Authority for Arab Investment, need for 3.2203,
3.31820
fraudulent misrepresentation 3.712
burden of proof 3.72
rendering contract voidable 3.72
frustration 3.71
garnishee order as security for third party claim 6.1323
interest
compound, exclusion 3.2412
date of commencement, date of award 3.242
principal, not to exceed 3.2412
as part of 3.635
just compensation for expropriatory measures 3.64, 65
pacta sunt servanda 3.64, 65, 69
investment treaties 6.139
Law 43 (1974), Art. 8 (investment disputes)
consent to arbitration, whether 3.12630, 140, 14588
Decree No 375 (1977) and 3.1501
mandatory, whether 3.1469, 161
as offer to submit to 3.1701, 178, 182, 185, 253
Prime Minsters Decision No 91-1975 and 3.151
separate agreement, need for 3.1526
ICSID Convention, significance of reference to 3.65, 15260
interpretation. See legislation, interpretation below
Law 90 (1971), whether abrogation of 3.1589
limitation to Law 43 obligations, whether 3.1256, 183, 3158
remedies
hierarchy 3.1278, 144, 1467, 14952, 161, 1745
mutually exclusive, whether 3.123
self-executing, whether 3.12630, 176
text 3.58
translation
611
612
CUMULATIVE INDEX
Egypt, Law 43 (1974), Art. 8 (investment disputes), cont.

agreed by parties for use in ICSID proceedings 3.1456
variations 3.1726
withdrawal of approval of project, effect 3.1234, 130
Law 43 (1974), Art. 23 (information relating to investment) 3.319
Law 43 (1974), Art. 27 (approval of investment) 3.319
law of
Civil Code
Art. 1 (sources of law) 3.321, 326
Art. 125 (fraudulent misrepresentation) 3.712
Art. 139 (implied ratification of contract) 3.72
Art. 148 (good faith) 3.701
Art. 172(i) (statutory limitation) 6.1202
Art. 216 (offset) 3.76, 335
Art. 226 (interest) 3.76, 2434, 317, 6.140
Art. 446 (risk) 3.333
Art. 447 (known fault) 3.333
Art. 805 (compensation for expropriation) 3.328
Art. 985 (usufruct) 3.328
Decree No 90 (1978) (Al Giza pyramids region as public property) 3.2256
Decree No 539 (1989) (Egyptian Hotels Company (EHC): appointment of Chairman)
6.108
Law 215 (1951) (Protection of Monuments and Antiquities), s 11 (compensation for
expropriation) 3.217
Law 577 (1954) (compensation for expropriation) 3.328, 32930
Law 43. See Law 43 (1974) above
Law 97 (1983) (Public Sector Authorities and Affiliated Companies Law) 6.107
Public Business Sector Companies Law 1991 6.1079
aids
implementing legislation 3.151
legislative history 3.157, 176, 177
promotional literature 3.1601, 17781
guidelines
effectiveness 3.174
ordinary grammatical meaning 3.147
original language, primacy 3.1478, 1723
phrases
shall be 3.1479, 1746
within the framework of the Convention ... where it applies 3.1523, 1546
State immunity from jurisdiction, waiver, express 3.678
treaties, domestic law, part of 6.1389
EgyptUK BIT (1975) 5.42, 6.93
as applicable law 6.111, 121, 135
Art. 2(2) (fair and equitable treatment) 6.111, 11317
Art. 2(2) (protection and security of investment) 6.111, 11217, 122, 124
Art. 5(1) (expropriation/nationalization, compensation) 6.111, 11719
interest and 6.1401
Art. 8(1) (agreement to treat as national of the other Contracting Party), majority
Egyptian shareholding in company incorporated in UK 6.7984, 87, 93 n. 19
CUMULATIVE INDEX
EgyptUK BIT (1975), cont.
Art. 8(1) (as consent to ICSID arbitration) 6.7984
investment (Art. 1(a)) 6.85
eminent domain 3.226
Energy Charter Treaty (1994), investment 5.196
environment
expropriation measures for protection of, effect on level of compensation 5.171
international trade interface, balance, NAFTA (1992) 5.221, 229, 260
environmental impact assessment
as legal requirement 5.4323
State responsibility for effects of 5.4323
equality of parties 1.532, 540
arbitration 1.532, 533, 5.491
burden of proof and 1.533
costs and 5.509
disclosure obligation 6.4624
exclusion of alternative remedy 4.19, 334, 434
forum. See forum, choice of
jurisdiction, agreement to treat as foreign national 2.2124
State contract, termination 2.222, 299, 368
equitable principles. See also equity
equitable considerations distinguished 2.125
ex aequo et bono distinguished 1.5167
Judgment of ILOAT upon complaints against UNESCO 1.3167
jurisdiction 1.5167
maritime delimitation disputes, limitation to 1.5167
equity. See also equitable principles; justice
Barcelona Traction 1.516
Corfu Channel 1.516
denial of justice 1.52930
ex aequo et bono distinguished 1.5167
expropriation/nationalization, compensation 1.357, 5.175
general principles of law distinguished 2.124
general rules of law distinguished 2.125
jurisdiction 1.5167
improper resort to as ground for annulment 1.516
Estonia
Bank of Estonia Act 1993 as amended 1994
Art. 2(4) 6.249
Art. 2(5) 6.249
Art. 17(1) 6.249
Art. 17(5) 6.249, 2956, 297
alternative version 6.249 n. 15
Art. 18(1) 6.249
Art. 18(2) 6.249
banking practice, non-compliance
breach of BIT/legislation, whether 6.299
613
614
CUMULATIVE INDEX
Estonia, banking practice, non-compliance, cont.

central bank
negligence 6.294, 301 n. 5
as State agency 6.291
compensation agreement, tentative agreement, status 6.293, 294
Credit Institutions Act 1995
Art. 18(5) 6.249
Art. 19 6.249
Art. 27(2) 6.289
Art. 28 6.250
Art. 29 6.250, 297
Art. 59(1) 6.250
Art. 59(6) 6.250, 2967
Art. 60(1) 6.251
Art. 60(2) 6.251
Art. 69(1)(2) 6.251
investment licence, withdrawal
due process, right to 6.2979
grounds
formalism, relevance 6.2956, 2989
misrepresentation/failure to provide information 6.2959
irregularities by State not amounting to breach of legislation or BIT, relevance 6.297
EstoniaUS BIT (1994)
Art. 1 (definitions) 6.243, 289, 290
Art. 2(2)(b) (responsibility for consistency of State agencys conduct with treaty
obligations) 6.243, 291
Art. 2(3)(a) (fair and equitable/minimum treatment under international law) 6.243, 299,
294300, 533, 471536
Art. 2(3)(b) (arbitrary or discriminatory measures) 6.243, 299, 3001, 495, 5336
Art. 2(3)(c) (respect for obligations with regard to investments) 6.243
Art. 2(7) (effective means for asserting rights) 6.243
Art. 2(8) (publication of laws, regulations, practices, procedures and decisions) 6.243
Art. 2(11) (non-interference with licence rights and national/MFN treatment) 6.243
Art. 3(1) (expropriation: requirements) 6.243, 3056
Art. 3(2) (prompt and effective review of expropriation claims) 6.243
Art. 4(1) (free transfer of investments and capital) 6.244, 3056
Art. 6 (dispute resolution/investment dispute) 6.244, 289, 291
Art. 6(2)(a) (alternative forum) 6.292
Art. 6(3) (consent to ICSID arbitration) 6.291
Art. 6(8) (national of the other Contracting State) 6.291
Art. 9 (public order/security measures) 6.244, 3056
Art. 9(2) (formal requirements impairing substantive rights) 6.244
Art. 12 (applicability to investments prior to/existing at entry into force) 6.291
customary international law and 6.534, 536
objectives 6.2423
estoppel 1.4069
acknowledgment of State immunity 4.1920
assignment of investment licence, right to object 1.480
CUMULATIVE INDEX
615
estoppel, cont.
breach of contract
approval of changes 3.20912, 215
failure to complain at time 3.702, 74
by representation 1.407
definition
domestic law 1.4078
international law, Temple of Preah Vihar 1.408
good faith and 1.407, 3.123
jurisdiction 1.4068, 2.17
admissibility of evidence distinguished 1.407, 408
payment of first overrun costs 3.29
recognition of claim 1.350
requirements
intention to be bound 5.3467, 500
prejudice 1.408, 5.347
relevance to issue 5.500
reliance on 5.347, 499500
res judicata distinguished 4.14 n. 10
simultaneous pursuit of alternative remedies 3.123
State contract and 1.408
prevention of performance 1.408
States, whether limited to 1.408
tribunals approach, written proceedings 2.1245
European Convention on Human Rights (1950)
Art. 6(1) (fair and public hearing within reasonable time) 6.2301
Art. 7 (no punishment without law) 6.229
European Energy Charter Treaty (1994), State responsibility for acts and omissions of
armed forces 5.42
evidence. See also evidence of; witnesses
accuracy 1.4867
admissibility 5.767, 846
parties agreement on 6.189
burden of proof. See burden of proof
credibility 3.87, 89
evaluation, arbitrators discretion 3.73, 4.274, 284, 3478, 5.85, 86, 6.1434
failure to argue case 5.2934
minutes of meeting 5.98
oral hearings, desirability 4.3478
rules of. See ICSID Rules (Arbitration)
standard of proof, arbitral tribunal, Rules of Arbitration between Nations (1875) (Institut
de Droit International) 4.2723
State partys failure to produce documentation 6.92 n. 15
submission of new documents at final hearing 5.78
sufficiency 1.360, 361, 4.274
damage by government forces in revolution 4.2756, 2845, 2967
failure to document 3.2378, 2556, 3125, 3312
tax returns 5.233
evidence of
agency 4.246
616
CUMULATIVE INDEX
evidence of, cont.

authorization to institute arbitral proceedings 5.9
breach of State contract 1.319, 3201
consent to jurisdiction, open door policy 3.59
corruption 6.122, 89124, 13940, 143, 150
costs incurred, tax returns 5.233
damage caused by government forces or authorities during revolution 4.2745, 2867,
2967, 317
damage suffered
failure to produce 3.32, 33, 34, 402
failure to take action 3.42
debt, arbitration proceedings 4.51
due diligence, failure to produce 3.312
expropriation/nationalization
failure to notify Board meetings 1.3567
terms of legislation 5.260
treatment of company as State company 1.356
failure to carry out obligation 1.319, 3201, 2.813
foreign investment 1.901, 485, 5345
good faith attempt to settle amicably 5.61, 6.404
intention to treat company as foreign
arbitration clause 1.395, 2.16, 181, 184, 335, 352, 5.1345
certificate of registration 2.353
Holiday Inns 1.395
implied agreement 1.295, 2.16
investment, parties consent to treatment as 5.351
investor, approval 3.2203
jurisdiction, absence of bar 3.59
repudiation of joint venture agreement
decision not to pursue suggestions for modification 1.293
non-acceptance of request for modification 1.292
satisfactory performance 2.2040
tribunals approach 2.1234
validity of State contract 2.2201, 2856
value of expropriated property 5.175
withdrawal of repudiation of contract 1.2923
written consent to jurisdiction, arbitration clause 1.3034
ex aequo et bono 1.338, 342, 3.42
agreement of parties, need for 1.349, 452, 3.19
arbitral award
annulment 1.516
power to decide 1.338, 342
damages 1.357
ex gratia 4.318
offset 3.32
equitable principles distinguished 1.5167
equity distinguished 1.5167
interest rate 1.361
protection against double payment of damages 3.30
CUMULATIVE INDEX
617
exchange rate. See damages, currency of payment

exclusive remedy rule 1.434, 33940, 2.356, 4.334, 43, 5.316, 379, 3813, 400. See also
exhaustion of local administrative or judicial remedies; NAFTA arbitral tribunal,
waiver of right to initiate or continue domestic proceedings
exhaustion of local administrative or judicial remedies rule and 5.3813, 400,
4023
lis pendens 1.340
obligation of domestic court to decline jurisdiction 1.434, 5.338, 3813
execution. See arbitral award, recognition and enforcement; State immunity from
execution/attachment
exequatur. See arbitral award, recognition and enforcement, exequatur
exhaustion of alternative methods, obligation 5.267, 28, 601, 634
exhaustion of local administrative or judicial remedies 4.44, 5.301. See also exclusive
remedy rule; forum selection clause
administrative courts 5.31516, 3213, 3779, 6.3456, 34850, 3512,
3601
arbitral award, annulment 1.519, 5257
waiver 1.526, 680
arbitration 4.44
BIT provisions
compromise formula 5.408
freedom of choice 6.5567
condition of consent to ICSID arbitration 3.8, 5.381, 400
BIT provision 5.4002
decision on merits requirement 5.401
denial of justice and 6.216
failure to pursue, effect 5.318, 403
Finnish Shipowners 1.519
inseparability of BIT and contractual obligations 5.322
language 4.330
NAFTA 6.557
as remedial problem 6.558
requirements
fair hearing 5.322
jurisdiction 5.315 n. 19
standard of treatment of alien and 6.216
State responsibility and 1.5257, 5.301, 324, 6.347, 3634
waiver 1.526
subsequent resort to arbitration, right of 5.4013
in case of
breach of international obligation 5.402
denial of justice 5.4023
waiver 1.526, 680, 5.229, 315, 6.216
exclusive remedy rule and 5.3813, 400, 4023
expert
appointment 2.196, 266
refusal to accept 2.196
618
CUMULATIVE INDEX
expert, cont.
costs 2.271, 274
damages, calculation 1.3589, 5.36
evidence 1.3589
hearing, whether necessary 2.268, 32930
independent 1.358
integral part of award, whether 1.294, 4.109
meeting with one party 2.2689
report 1.3423, 358, 2.2668
absence of parties 2.268
error, non-material 2.270
need for 1.312, 364
tribunals right/duty to seek 6.325
writings of publicists distinguished 6.3212
expropriation/nationalization 1.318
act of State 1.322
breach of contract
as 1.323
distinguished 1.326, 2.3667, 3.3167, 5.288
interest rate on compensation/damages dependent on 3.242, 243, 3167
burden of proof 5.87, 95, 978, 101, 104
classification as. See also breach of contract above; contractual rights below
act of government or attributability to State, need for 1.455, 5.94, 956,
989
breach of transparency obligation 5.2556
broad range 5.934, 259
compulsory transfer of property rights 5.99100
direct expropriation/nationalization 5.87
dissolution of joint venture 5.99102
ephemeral deprivation 6.11819
expropriation of land no longer in use 5.1012
failure to issue building permit 5.2301, 2445, 259
intention to deprive/transfer ownership, need for 6.179
interference in use of property or enjoyment of benefits 5.1724, 6.11819
loss of investment as result of financial crisis 6.176, 179
measure tantamount to 5.87, 218, 2223, 231, 2556
non-payment under guarantee 5.4745
omission and 6.179
policy intentions distinguished 5.94104
as question of law 5.259
revocation of free zone licence 6.412
transfer of ownership to another party 6.118, 127, 137
transfer of title, relevance 5.95, 6.11819
withdrawal of investment licence 1.468, 478
withdrawal of protection of courts 6.118
contractual rights 3.229, 5.288, 6.118, 216
Amoco 3.229
German Interests in Polish Upper Silesia 3.228
Phillips 3.229
CUMULATIVE INDEX
619
expropriation/nationalization, contractual rights, cont.

terminated in domestic proceedings 6.94, 1479
unilateral termination 1.458
damage caused by armed forces distinguished 5.335
date of, creeping expropriation 5.1724
evidence of
failure to notify Board meetings 1.3567
terms of legislation 5.260
treatment of company as State company 1.356
grounds. See lawfulness, requirements below
indirect expropriation. See also classification as, measure tantamount to above
withdrawal of essential government support 3.22930
known risk of 1.322, 5.923
lawfulness, requirements. See also requisition; State responsibility
compensation 1.357, 3.225, 2267, 5.87, 171, 6.111, 11719, 127. See also damages;
expropriation/nationalization, compensation
damages for wrongful taking distinguished 6.209
refusal 6.117, 119
compliance with UNESCO Convention for the Protection of the World Cultural and
Natural Heritage (1975) 3.2247, 2578
inclusion of site on World Heritage Committee List 3.2246
customary international law 6.43 n. 41
due process 5.87
good faith 1.604, 2.367
legality under domestic law 3.227, 229, 6.43
applicable law 6.43
legislation 1.468, 478, 585, 2.37, 366
motivation, relevance 5.231
non-discrimination 2.367, 5.87, 6.43
public interest/purpose 1.3223, 467, 2.366, 3.226, 5.87, 171, 6.423
applicable law 1.3223, 6.423
private interest of State as shareholder distinguished 1.3223
as legal dispute arising directly out of investment 1.405
nationalization measures
Congo, Peoples Republic 1.3126
AGIP, relating to 1.3156
compensation 1.317
validity 1.3214
negotiation of transfer distinguished 4.327
right of
judicial and arbitral decisions 1.466
UNGA Resolution 803 (XVII) 1.466
stabilization clause. See stabilization clause
standing to bring claim under NAFTA, effect on 6.211212
State contract and 1.4668
validity
applicable law
domestic law 1.3223
620
CUMULATIVE INDEX
adequacy 1.317, 324, 3259, 357, 35961, 468, 2.3667
minority shares in new project 3.228
applicable law
domestic law 1.357, 3.277, 32730
primacy of international law 5.170
availability at time of taking, need for 6.209
causal connection, need for 5.1034
damages for breach of State responsibility distinguished 4.291, 3012, 3178, 5.33, 42
equity 1.357
general principle of international law 1.357, 467, 3.64, 65, 277
lawful appropriation 3.247, 5.878, 6.42
environmental protection measures required under international law, relevance 5.171
ex post facto 6.434, 45
refusal to accept proposed changes to contract 3.247
measure. See damages, measure/valuation of company
power of courts to award 3.32930
return of assets, relevance 5.88
transfer of residual rights to joint venture company and 3.230
F
fair hearing, witnesses, objection to 5.76
federal States
State responsibility 5.226, 31314, 3223, 6.345, 3467, 364, 5223. See also State
responsibility, for failure to take remedial action in respect of acts of officials of
political subdivision
constituent State acting independently 6.5256
constitutional provisions, relevance 5.313
ILC Draft Articles on State Responsibility (1977) 5.313
ILC Draft Articles on State Responsibility (2001) 6.522
treaties
Party
federal government 6.5212
provincial government 6.5212
fiduciary duty
breach, damage, need for 4.177
force majeure
coup detat 2.365
revolution
State agency and 3.745
State responsibility 4.316
risk distinguished 6.414
foreign control of corporation. See nationality (juridical person), foreign control
CUMULATIVE INDEX
621
foreign investment 1.504. See also investment licence

Additional Facility Rules (Arbitration) 5.194
amount 1.484, 2.31011, 365
accumulated depreciation and 1.488
calculation 1.4879
applicable law
domestic law of Contracting State 3.3227, 5.496, 6.411
approval of host government, relevance 2.21819, 220, 2846, 5.497508, 6.162, 168,
412
burden of proof 1.486, 5.86, 901, 6.85, 91
definition/classification as 1.303, 2.219
absence from ICSID Convention 6.845, 317, 43940
agreement by parties to treat as 6.440
agreement consenting to arbitration 5.492, 6.85
any right conferred by law or contract 5.912
BITs 5.245, 1947, 311, 3534, 3734, 386, 6.324
broad 5.889, 1912, 194, 351
by consent 5.1901, 194
reference in contract to BIT as evidence of 5.351, 364
CGEFrance 5.311
company, shares in stock of company and any form of participation in company 5.92,
4112
company or shares of stock or other interests in company or assets thereof 5.245
concession granted by law or by virtue of an agreement 5.311
contractual right having a monetary value 6.40912
for determination by tribunal as matter of law 6.3212
enterprise 6.517
evolution 6.317
ICSID jurisprudence, limited nature 6.413
inward flow of capital for economic development 3.253, 254, 6.413, 414, 517
loan 1.420, 4834, 5.901, 1912, 193, 197, 3515, 357
long term transfer of foreign capital 5.189, 1989
monetary receivables or claims to any performance related to an investment 5.357
mortgages, liens, guarantees and similar rights 5.357
multilateral treaties
Andean Group Regulation on Foreign Investments (1992) 5.1967
Energy Charter Treaty (1994) 5.196
MERCOSUR Protocols 5.196
Mexico-ColombiaVenezuela Free Trade Agreement (1994) 5.197
Multilateral Investment Guarantee Agency (MIGA), Convention establishing
(1985) 5.193
NAFTA (1992) 5.196, 6.21112, 517
ordinary commercial transaction distinguished 5.194, 1989
pre-investment expenditure on basis of letter of intent, agreement or extension
6.31720, 322
consent of host State, relevance 6.320, 3245
promissory notes 5.1979
assigned to foreign holders 5.1978, 2056
622
CUMULATIVE INDEX
foreign investment, definition/classification as, cont.

property right 5.912
realized debts 6.40912
right of monetary character conferred by law or contract 6.40912
shares of stock or other interests in a company owned or controlled, directly or
indirectly 6.291
factual situation 6.2456, 2589, 2601, 271, 2745, 2789, 2834
stocks, bonds, debentures, guarantees and like financial instruments 5.1956
tangible or intangible property 6.517
titles to money, assets or performance having an economic value 5.1957
direct, relevance 5.192, 1937
World Bank Guidelines on the Treatment of Foreign Direct Investment (1991) 5.196
every kind of asset 6.85
evidence of 1.901, 485, 5345, 5.901
foreign investor 5.59, 89, 3556, 6.353
approval
evidence of 3.2203
General Authority for Arab Investment 3.2203, 31820
control of company, relevance 5.3723, 6.354
member of consortium 5.3735, 6.3256
foreign and national enterprises defined 1.482
foreign personnel costs 1.420
incentives 1.41920
withdrawal 1.41920
jobs created 2.311312
legality of investment as key factor 6.41112
nationality. See nationality of investment
non-discrimination
Paraguay Law No 797/95 of 4 December 1995 (Financial Stabilization and
Reactivation Law) 6.1756
UkraineLemire settlement 6.64
period 1.4845, 6.414
flexibility 1.489
profits, government to determine 1.423
protection and security of. See protection and security of investment, State responsibility
repatriation of funds in currency of investment 1.420, 540
accrued profits 1.420, 488
compensation in case of nationalization 1.420
costs as determined by government 1.420
depreciation of capital assets 1.420
risk, relevance 5.198, 6.175, 1778, 413, 414
negligence of investor 6.294
sources of, relevance 5.8990
State holdings 2.3123
tax exemption 1.5067
taxes on deferred income 1.488
termination of investment before entry into force of law consenting to jurisdiction 5.59
territorial requirement 5.901, 198, 4916, 509
CUMULATIVE INDEX
foreign investment, cont.
transfer of capital, relevance 3.3312, 3345, 5.189, 1989, 354, 6.41314
undistributed profits 1.488, 489
foreign judgment, enforcement. See also arbitral award, recognition and enforcement
executory status, declaration of 4.42
under international convention, domestic courts, role 4.42
forum, choice of, 1.650, 6725. See also exhaustion of local administrative or judicial
remedies
forum prorogatum 2.14, 19, 100
forum selection clause, relevance 4.1378, 5.301
administrative courts proceedings 5.31516, 3213, 3779, 6.3456, 3556
preclusion of ICSID jurisdiction, whether 5.315, 6.345, 3512, 3556
Lanco 5.315, 6.3601
France
administrative contract, unilateral amendment, right to 3.2312, 304, 6.434
administrative law 1.4656, 6.35
admissibility, timing of plea, relevance 3.10
arbitral award, annulment, grounds, absence of arbitration agreement 3.8591, 98
arbitral award, basis, courtesy 1.369
arbitration agreement, enforcement 1.36972
exequatur. See exequatur for enforcement of arbitral award below
contract
definition 1.461
stipulation pour autrui 1.325, 374
termination 1.458
courtesy, arbitral award 1.369
debt, basis for provisional measures 3.9
exequatur for enforcement of arbitral award
execution measure, whether 1.371
State immunity from execution/attachment and 2.340, 2.341
jurisdiction, competence of tribunal to determine, subject to review, whether
3.856
law of
Civil Code. See also Congo (Peoples Republic), law of, Civil Code
Art. 1134 1.458, 491, 4.73, 956
Art. 1149 1.499500, 4.99100
Art. 1150 1.501
Art. 1154 3.33
Art. 1184 1.4656
Art. 1101 1.462
Civil Procedure Code (New)
Art. 74 3.10
Art. 1502 2.340, 3.98
Art. 1502(1) 3.856
Art. 1504 3.86, 98
Decree of 27 October 1967 (conservatory attachment of ships), prima facie
attachment as basis for attachment 3.11
623
624
CUMULATIVE INDEX
France, cont.
provisional measures
basis
prima facie debt 3.9
urgency 3.9
State immunity from execution/attachment 1.36972
sovereign independence 1.369
State agency
immunity from execution 3.7
as separate entity
commercial activities governed by laws and customs of commerce 3.7
legal personality 3.7
ownership of assets 3.7
State immunity from execution/attachment
arbitral award, recognition and enforcement
and 1.36972, 2.340, 341
exequatur 2.340, 341
public international order and 2.340
assets
need for segregation, whether 1.369
protection, need for authorization 1.369
public and commercial distinguished 1.369
waiver
compensation claim 3.7
submission to arbitral proceedings 2.341
State immunity from jurisdiction, waiver, defence on merits as 3.85
responsibility
courts 3.11
government in respect of international law questions 3.11
fraud, foreign control of corporation 1.397, 2.28990, 335
fraudulent misrepresentation
effect on
contract 3.72
State contract 3.2169
financial and technical capacity 3.2169
foreign control of corporation 1.397, 2.28990, 335
Free Trade Commission (FTC). See NAFTA Free Trade Commission (FTC)
freedom of information. See disclosure obligation
frustration
contract 3.71
joint venture agreement
changed commercial circumstances 4.71
default of parties 4.18997
legislation 4.18997
police power 4.1912
CUMULATIVE INDEX
625
frustration, joint venture agreement, cont.

uncertainty of contract 4.18597
arbitration clause, relevance 4.1946
G
garnishee order as security for third party claim 6.1323
General Act for the Pacific Settlement of Disputes (1928), provisional measures 1.654 n. 26
general principles of international law. See also general principles of law
burden of proof, claimant 4.2712, 5.39, 84
consent as basis of jurisdiction 3.145
exceptio non adimpleti 2.63, 122
expropriation/nationalization, compensation 1.357, 467, 3.64, 65, 277
general principles of law distinguished 2.122
good faith 1.287
interest, reasonable rate 4.2945
pacta sunt servanda 1.287, 394, 3.64, 65, 69
res judicata 6.559
rules distinguished 2.118, 121, 3.322
State immunity, implied waiver 3.68
general principles of law. See also general principles of international law
due process 1.4724
duty of disclosure 2.1214
equity distinguished 2.124
establishment 2.122, 124
judicial reason, need for 2.1245
general principles of international law distinguished 2.122
good faith 1.287, 2.123, 124
non-aggravation of dispute 3.9, 6.3913, 397
pacta sunt servanda 1.394, 4913
as positive law 2.1212, 123
res judicata 1.549, 552, 6.559
State contract, nature 1.4613
general rules of law, equity distinguished 2.125
Germany, Federal Republic, contract, definition 1.463
Ghana
law of
Companies Code 1963 4.335
Minerals and Mining Law (Law 153)
s 8 (State ownership) 4.3401
s 84(1) (citizen of Ghana) 4.3412
Provisional National Defence Council Law 116 (1983) (Investment Code) 4.342 n. 22
s 60 (control of company) 4.342 n. 22
626
CUMULATIVE INDEX
Ghana, law of, cont.

Provisional National Defence Council Law 287 (1992) (cancellation of Ada-Songhor
Lagoon Lease Agreement) 4.3238
moveable property, applicability to 4.327
good faith. See also bad faith
arbitration clause/agreement, interpretation 1.400, 2.2056
contract
breach 4.73
negotiation 6.320, 325
performance 3.701
disclosure obligation 6.463, 47980
estoppel and 1.407, 3.123
expropriation and 1.604, 2.367
general principle of law 1.287, 2.123, 124
in international business 6.64
interpretation
consent to jurisdiction 3.145
ICSID Convention (1965) 1.394
treaty interpretation 1.394, 5.225, 401, 451, 463
non-excludability/restriction 6.64
obligation to settle amicably 5.601, 634
evidence of attempt 5.61, 6.404
State contract 1.6724, 6756
treaty compliance 5.225, 6.533
governing law. See applicable law
Guinea
customary law 4.945
law of
Civil Code, Art. 1134 4.945
customary law 4.945
Decree of 6 January 1982 (Soguipeche) 3.7
pre-independence French law, identity with 3.19, 4.946
specialite legislative 4.945
Soguipeche
as State agency
legal personality 3.7
ownership of assets 3.7
H
Harvard Draft Convention on the International Responsibility of States for Injuries to
Aliens (1961) 6.119 n. 242, 226 n. 57
Hong Kong, as Contracting State 3.120, 185
CUMULATIVE INDEX
627
I
IBRD, Report of Executive Directors accompanying ICSID Convention. See ICSID
Convention (1965), interpretation, aids, IBRD Report (Executive Directors)
ICC (International Chamber of Commerce) applicable law
contractual provisions 3.65
jurisdiction. See jurisdiction (ICSID)
relevant trade usages 3.65
Rules of Procedure
1 4.343 n. 23
13 3.85
13(5) 3.65
24 3.86
ICSID
processes, self-executing 4.19
status
full international legal personality 4.1819
fully administered type of arbitration 4.1256
ICSID Convention (1965)
applicable law, international law 4.126
arbitral award, recognition and enforcement, simplified procedure, domestic courts, role
1.371
conservative measures. See provisional measures
diplomatic protection, waiver of 1.515, 647, 665, 4.338 n. 12
domestic law and
implementing legislation
New Zealand 4.124
USA 4.18
part of 4.43
exhaustion of local administrative or judicial remedies 1.526, 4.44
condition of consent to arbitration 3.8
general principles
primacy of international proceedings 1.680
respect for sovereignty 1.680
unity of investment operation 1.680
interpretation. See ICSID Convention (1965), interpretation
nationality, relevance 1.3947
object and purpose
encouragement of inward investment for economic development 3.2523, 4.345,
5.146
provision of international methods of dispute settlement 4.19, 1367, 5.146
provisional measures 1.6545, 3.8, 356
ratification, relevance 1.6646
signatories 4.3536
travaux preparatoires 1.515, 518, 665, 3.8, 123, 5.1223, 189, 314, 33940, 6.334, 345,
381, 441, 443, 5556
ICSID Convention (1965) by Article
Preamble 1.400, 493, 5.351, 352
628
CUMULATIVE INDEX
ICSID Convention (1965) by Article, Preamble, cont.

consent to jurisdiction 3.120
object and purpose of Convention 4.19, 344, 6.413
1(2) 4.19
6(1)(c) 6.3312
6(3) 6.3312, 334
13(1) 1.298
13(2) 1.298
14(1) 6.3349, 341
15 1.299
18 4.19
25 1.302, 394, 403, 671, 2.180, 219, 3.11921, 1556, 185, 5.226, 63, 64, 110, 124,
131, 3836, 6.25, 7984, 87
25(1) 1.3034, 394, 403, 565, 2.184, 185, 205, 2934, 3178, 3335, 349, 3.168, 4.17 n.
17, 334, 5.25, 51, 118, 1213, 18895, 31114, 33840, 3434, 3507, 41112,
413, 4913, 498, 6.845, 31617, 3256, 376, 405, 407, 41215, 43840
25(2)(a) 6.291
25(2)(b) 1.394, 396, 65963, 669 n. 85, 2.15, 16, 177, 182, 2879, 293, 351, 3.185,
4.32952, 5.109, 133, 136, 306 n. 6, 339, 385, 6.2930, 804, 31316, 441
25(3) 5.122, 123, 314, 413
25(4) 3.143, 171, 176, 5.195, 31415, 351, 6.3234
26 1.410, 526, 680 n. 120, 2.356, 3.8, 11, 35, 1212, 130, 186, 4.19, 334, 40, 43, 51,
689, 5.124, 338, 400, 4023, 6.355, 376
27 1.515, 3.35, 4.11516, 6.4467
27(1) 4.338 n. 12
28(2) 3.168, 1712
32(2) 3.168
36 1.336, 645, 4.19, 80, 5.14, 302, 6.75
36(1) 1.298
36(2) 3.168, 172, 184, 4.17 n. 17, 5.124, 6.512
36(3) 1.298, 309, 4.125, 330, 348 n. 36, 5.22, 110, 130, 186, 200, 396, 420, 6.158, 165,
242, 311, 314
37 4.1245, 5.110
37(2)(a) 2.336, 6.90
37(2)(b) 1.298, 5.15, 47, 72, 187, 201, 302, 397, 420, 6.11, 28, 158, 1656, 311
38 1.298, 310, 5.48, 72, 303, 397, 421, 6.90, 158, 166
39 2.184, 2902, 6.158, 159, 1667
40(1) 1.298
41 1.300, 4.1279, 6.375
41(1) 1.391
41(2) 2.2956, 3.168, 5.187, 337, 398, 422, 6.75, 130
42 1.514, 2.589, 4.3567, 6.168
42(1) 1.349, 452, 515, 5612, 677 n. 113, 2.11726, 3.64, 2067, 208, 242, 322,
4.1920, 4.867, 2979, 5.9, 82, 137, 16971, 6.324, 11112, 121, 1359, 295
42(3) 1.349, 516
43 6.1445
43(a) 5.337
44 3.184, 4.1920, 5.158, 486, 6.13, 242
45 1.341, 342, 343, 2.3557, 6.15, 17
45(1) 6.17, 21
CUMULATIVE INDEX
629
ICSID Convention (1965) by Article, cont.

46 6.375, 51415
47 1.410, 3.8, 4.1920, 5.338, 393, 6.375, 376, 37782, 386
48 6.375
48(3) 1.514, 51718, 520, 605, 2.137, 143, 4.878, 968, 1068, 5.265, 6.145, 150
48(5) 1.520
49 4.1920, 84, 5.181, 6.304
49(1) 4.81
49(2) 1.517, 51819, 638, 4.88, 5.4412, 6.146, 150, 304
50 4.84, 6.146
51 4.84
52 1.514, 549, 2.95, 3.193, 4.84, 111, 6.130, 3309, 3579
52(1) 1.514, 519, 552, 2.162, 4.845, 86, 5.265, 6.134, 3401, 359
52(1)(a) 6.359
52(1)(b) 1.514, 515, 518, 559, 2.97117, 4.856, 6.1356, 363, 34071
52(1)(d) 1.514, 518, 2.97, 4.856, 5.265, 6.142, 362
52(1)(e) 1.514, 516, 51718, 519, 520, 521, 2.1389, 140, 158, 4.96, 5.265, 6.1457,
358, 359
52(2) 1.521, 6.134, 340
52(3) 1.512, 518, 2.95, 1512, 162, 4.83, 85, 6.130, 330, 358, 359
52(4) 6.331, 3334, 3412
52(5) 1.512, 4.834, 109, 111, 6.1301
52(6) 1.552, 560, 566, 2.162, 4.109, 110
53 4.17, 84, 112, 126, 6.331
53(3) 1.552
53(4) 6.331
54 1.370, 371, 2.231, 340, 3878, 4.19 n. 19, 5.146
54(1) 1.515, 4.83, 112
54(2) 4.83
55 1.371, 2.340, 341, 388, 4.11516
55(3) 1.566
56 6.3301
57 6.1667, 331, 3369, 341
58 6.331
61 5.508
61(2) 1.294, 508, 2.378, 4.10910, 3512
62 1.31011, 4.125
62(2) 1.329
63 1.31011
63(a) 4.125
63(b) 4.125
64 4.11516, 5.383
68(2) 1.303
ICSID Convention (1965), interpretation
14(3)(c) 1.636
absence of definitions 6.845, 317, 43940, 4424
aids
Arbitration Rules 3.8
BITs 5.411
IBRD Report (Executive Directors) 1.303, 304, 5.190, 3834, 6.28, 29
630
CUMULATIVE INDEX
ICSID Convention (1965), interpretation, aids, cont.

Multilateral Investment Guarantee Agency (MIGA), Convention establishing (1985)
5.193
subsequent practice, adoption of Arbitration Rules 6.334
travaux preparatoires. See ICSID Convention (1965), travaux preparatoires
applicable law, Vienna Convention on the Law of Treaties (1969) 5.190
guidelines
article as a whole 1.518
balance of objectives 2.97
consistency 6.3334
context 2.118
effectiveness 2.120
full effect 4.85
good faith 1.394
object and purpose 1.493, 550, 3.8, 11, 4.85, 6.3334
parties intention 1.394, 398, 6.3334
principles of international law 2.120
teleological 1.665
multilingual nature 1.418, 514, 549
examination of alternative versions 2.151
phrases
any claim/the claim distinguished 1.5667
by appointment of the parties 2.336
Contracting State
absence of definition 6.407
Hong Kong 3.120, 185
foreign interests 2.182
investment 1.303, 2.219, 4.124, 125, 6.41215
investment dispute 1.303, 2.219, 5.3756, 386, 6.360
juridical person which has the nationality of the Contracting State party to the
dispute 2.181, 5.235, 33940
legal dispute arising directly out of investment. See legal dispute arising directly out
of investment
national of a Contracting State, 1.664. See also national of another Contracting State
not manifestly outside the jurisdiction of the Centre 1.391
questions 2.1434, 151, 153, 5.2646
remedy 4.334, 43, 69
attachment proceedings 4.334, 40
State 2.151, 156
ICSID Model Clauses of Consent to Jurisdiction (1993) 1.672 n. 94, 4.338
text 4.35770
ICSID Rules (Arbitration) 1.63, 157. See also Additional Facility Rules (Arbitration);
Administrative and Financial Regulations; ICSID Rules (Conciliation) (1968/84);
ICSID Rules (Institution)
1(3) 6.1589, 1667
2 1.298, 5.485
2(1)(a) 6.11
2(3) 6.11
3 3.113
CUMULATIVE INDEX
ICSID Rules (Arbitration), cont.
3(1)(a) 5.1516
3(1)(a)(i) 3.113
4 1.198, 305, 310, 337, 2.176, 3.113, 5.48, 72, 421, 6.1112, 158, 166
4(1) 5.16
4(4) 5.16
5 5.5, 486, 6.159, 167
5(1) 4.251
6 1.310, 2.175, 192, 4.251, 5.5, 303, 6.131, 330, 335
6(1) 1.337, 2.10, 3.113, 5.16, 337, 397, 421, 486, 6.12, 158, 166
6(2) 5.5, 486
8 1.299, 6.159, 167
9 1.389, 6.167, 331, 3323
9(3) 6.331
10(2) 2.176, 195
11 2.176, 195
12 6.375, 377
13 1.299, 5.6
13(1) 4.331, 5.158, 303, 6.12, 16, 244
14 1.311, 338
14(2) 4.332, 333, 6.13
15 6.375
15(1) 1.337
16(2) 1.311, 6.13
17 4.332, 333
19 1.341, 5.423, 6.169, 375
20 1.311, 2.11, 3.113, 4.110, 6.13
21(2) 6.1314
25 1.311, 337, 338, 344
26 2.128
26(1) 6.13
27 2.278, 5.4989
28 5.21516, 6.375
28(2) 5.10
29 4.348 n. 36
30 1.311, 337, 341
31(1) 4.331
32(3) 5.188, 398, 422
33 6.169
337 5.84
34 1.532, 5.501, 6.143, 169
34(1) 5.846
34(2) 5.337, 6.1445
34(2)(a) 5.423, 6.16970
35 5.85
36(a) 5.85
38 1.311, 342, 344, 2.195, 4.329, 5.71, 78, 419, 6.146, 164
38(1) 2.12, 5.78, 425, 6.923, 171
38(2) 2.12, 5.78, 425, 6.171
38(3) 5.281
631
632
CUMULATIVE INDEX

39 1.655 n. 28, 2.195, 3.8, 3.35, 4.41, 52, 5.338, 6.375, 376, 378, 386, 387, 3937
amendment (1984) 4.52
note to 1968 Rule 39 6.382, 391392
39(1) 5.3935
39(2) 6.378
39(3) 6.380
39(4) 6.384
39(5) 5.394 n. 1
40 1.344, 564, 566, 3.223
Note B 6.515 n. 151
40(1) 1.362
40(2) 1.362, 564
41 1.300, 6.168
41(1) 5.48, 723, 159
41(2) 5.159
41(3) 1.3389, 2.177, 5.6, 48, 73, 187, 304, 337, 398, 422, 486, 489
41(4) 4.348 n. 36, 5.62, 199, 418, 423, 6.162, 169
41(5) 5.9, 151
42 1.341, 342, 2.3557, 6.15, 21, 28
42(2) 6.15, 17
42(3) 6.15, 16
42(4) 6.17
43 5.8, 6.1516, 17, 50
43(2) 5.205
46 2.1356, 4.68
47 2.378, 3.162, 5.71, 418, 508, 6.164
47(1) 5.180
47(1)(j) 2.162, 4.351
47(1)(a)(g) 5.442
48 5.440
49 1.519, 638, 2.382, 5.440, 6.304
49(1) 5.180
49(1)(d) 5.440, 442
49(2) 5.180, 440, 6.305
49(3) 5.180, 440
49(4) 5.180
50 1.419, 521, 522, 3.193
50(1)(c) 1.521, 522, 6.134
50(2) 6.341
52(2) 6.341
52(3) 6.341
53 2.162, 6.3334, 341
53 (1968 Arbitration Rules) 6.3334
54 6.131
54(2) 1.512
54(3) 4.109
54(4) 4.112
54(5) 4.111
55(3) 1.567, 4.109
CUMULATIVE INDEX
633

60 1.344
61 1.633
adoption as subsequent practice 6.334
Notes, relevance 1.655 n. 28, 660 n. 53
recommend/order 5.394, 6.381
ICSID Rules (Conciliation) (1968/84) 1.119, 181, 2.405. See also Additional Facility
Rules (Arbitration); Administrative and Financial Regulations; ICSID Rules
(Arbitration); ICSID Rules (Institution)
5 2.406
30 2.409
30(2) 3.168
31 2.409
32 2.409
41(2) 3.168
ICSID Rules (Institution) 1.51, 153. See also Additional Facility Rules (Arbitration);
Administrative and Financial Regulations; ICSID Rules (Arbitration); ICSID Rules
(Conciliation) (1968/84)
1 1.298, 337
2 1.337, 659, 665 n. 71, 5.5, 1306, 485
2(1)(a) 5.1312, 151
2(1)(b) 5.132, 151
2(1)(c) 5.132, 133, 151
2(1)(d) 5.151
2(1)(d)(ii) 4.337, n. 9
2(1)(d)(iii) 4.337 n. 9, 5.1334
2(1)(e) 1.522
2(d)(iii) 5.136
4 4.330
5 5.186, 200, 396, 420
5(1)(a) 6.157, 1645
5(1)(b) 6.157, 1645
5(2) 5.110, 6.165
6 5.5, 485
6(1) 1.298, 645, 6.75
6(1)(a) 6.242
7 5.186, 200, 396, 420, 6.158, 165
7(a) 6.242
21(1)(d) 1.663 n. 63
place of arbitration, ICSID headquarters 4.1617
ILC. See International Law Commission (ILC)
Indonesia
administrative act, procedural irregularities, effect 1.5979
administrative law
materiality 1.537
Bank Indonesia, role 1.5923
damages 1.499, 611, 616
mitigation 1.610
634
CUMULATIVE INDEX
Indonesia, cont.
due process 1.449, 611, 616
lawfulness, requirements
compensation. See expropriation/nationalization, compensation below
legislation 1.478, 585
public interest 1.467
binding arbitration to determine 1.455
need for 1.455
foreign investment 1.504. See also investment licence
foreign capital, loans, whether 1.420
foreign personnel costs 1.420
incentives 1.41920
withdrawal 1.41920
profits, government to determine 1.423
tax exemption 1.5067
transfer of funds out of Indonesia in currency of original investment 1.540
accrued profits 1.420, 488
compensation in case of nationalization 1.420
costs as determined by government 1.420
depreciation of capital assets 1.420
law of
BKPM Chairmans Decree 01/1977 1.470, 477, 490, 5289
Civil Code
Art. 1233 1.462
Art. 1234 1.462
Art. 1246 1.499, 611, 616
Art. 1250 1.506
Art. 1313 1.462
Art. 1338 1.491
Art. 1365 1.491, 529, 534, 540, 611
Corporation Tax Ordinance 1925/1970 1.507
Decree 63/1969 1.470, 476, 478, 490, 507, 532, 540, 586, 6089
Decree 21/1973 (Principal Rules of Capital Investment Procedure) 1.4767, 478
Decree 54/1977 1.401, 478, 490, 532
Law 1/1967 (Foreign Capital Investment Law) 1.41920, 481, 586, 5923
Preamble 1.401
Art. 1 1.482
Art. 2 1.484, 485, 486, 5356
Art. 21 1.399, 4778, 525, 527, 534
Art. 22 1.467
Art. 23 1.399
Bank of Indonesia role 1.5923
Tax Law on Interest, Dividend and Royalty 1959/1970 1.507
proportionality
State contract, protection of private party 1.4713
State responsibility, act of State agency 1.5301
CUMULATIVE INDEX
635
Institute of International Law (Institut de droit international)

Rules of Arbitration between Nations (1975), Art. 15 4.2723
Institution Rules. See ICSID Rules (Institution)
intangibility clause. See also stabilization clause
definition 6.267
Inter-American Convention on International Commercial Law and Enforcement of
Arbitral Awards (1975) (Panama Convention). See arbitral award, recognition and
enforcement, Inter-American Convention on International Commercial Law and
Enforcement of Arbitral Awards (1975) (Panama Convention)
interest 1.3612, 2.2514
advances in respect of services to be rendered 2.269
applicable law
discretion of tribunal 6.1401
domestic law of Contracting State 1.361, 506, 2.252, 3.241, 242
need to observe 4.107
calculation
currency of payment 1.329
discussion of method, need for 6.144
discussion of rate and dates, need for 6.14950
disputed 1.329
recalculation following annulment of award 5.2678
capitalization 3.33, 43
on compensation/damages 4.2945, 5.234
compound 1.2423, 5.234, 438, 6.144
exclusion 3.2412
justification for 5.1768, 6.1267
on costs 1.366, 6.51
currency of payment 1.329, 4.107, 5.206
date of commencement 1.506, 2.276
date of award 3.242, 330, 4.77, 5.438
date of maturity of promissory note 5.203, 204, 205, 206
date of request for arbitration 1.506, 4.2945
date of wrong 1.506, 3.241, 2434, 5.234
discretionary 2.2534
date of termination 2.276
40 days from award 5.234
date of payment of award 3.244, 5.204, 205, 2067, 235, 438
discretion 6.149
exceptio non adimpleti contractus, effect on 2.712
interest on 3.33, 43
market value changes and 6.1401
penal 5.206
post-judgment 2.333, 379
compensatory interest distinguished 3.244
delay in compliance as basis. 2.253
loss, need for 2.253
prejudgment
admissibility 4.107
prejudgment damage as basis 2.2534
636
CUMULATIVE INDEX
interest, cont.
principal, not to exceed 3.2412
rate
9 per cent 4.77
10 per cent 4.2935
bad faith and 1.328
currency of contract, relevance 4.107
discretionary 2.2534
ex aequo et bono 1.361
expropriation/breach of contract distinguished 3.242, 243, 31617
fixed 1.3278
LIBOR 5.204, 438
lowest market 1.328, 329
provision in relevant financial instrument 5.203, 204, 205, 206
reasonable commercial 6.45
reasonable rate, Alabama 4.294
US inter-bank rate 3.30, 32
res judicata 1.5578, 628
restitutio in integrum and 5.234
simple 1.628, 3.242, 5.76
statutory limits, means of avoiding 6.140
suspension, non-compliance with award 3.301, 43
interim measures. See provisional measures
International Bank for Reconstruction and Development. See ICSID Convention (1965),
interpretation, aids, IBRD Report (Executive Directors)
International Court of Justice (ICJ) Statute
as applicable law, procedure 6.22
Art. 41 (provisional measures) 6.3778, 380
finality/binding effect 6.381
International Covenant on Economic, Social and Cultural Rights (1966) 6.41
international development law
UN Development Decade (Resolution 1710 (XVI)) 3.2545
UN Resolution 1803 (XVII) 3.255
international law
as applicable law. See applicable law, international law
breach
domestic law as defence 6.388
State immunity, relevance 4.11516
domestic law and. See in relation to domestic law below
general principles. See general principles of international law
individual
evolution of status 6.222
right to sue own State internationally 1.6612
in relation to domestic law
complementarity 6.25, 334
incorporation 6.34
independence of two systems 6.34
lacunae 1.3234, 515, 580, 3.207, 3212, 3256, 6.138
primacy in case of conflict 3.689, 73, 5.170, 6.34, 121, 1389
CUMULATIVE INDEX
637
international law, in relation to domestic law, cont.

as regulator 2.3589
as supplement 1.3234
sources. See also customary international law; general principles of international law;
general principles of law; treaties
arbitral and judicial decisions 4.39, 278, 306, 31214, 480, 5.82
as subsidiary source 6.3212
writings of publicists 2.31214, 4.39, 278, 2802, 5.82, 6.3212
expert opinion distinguished 6.3212
International Law Commission (ILC)
Draft Articles on State Responsibility (1977)
conduct of territorial government entity 5.226
customary international law, whether 1.600
damages for unlawful act 1.600
federal State 5.313
international tribunal, primacy 5.402 n. 5
State entity, classification as 5.414
[Draft] Articles on State Responsibility (2001)
acts of private persons 6.2212
attribution, appropriateness of term 6.346 n. 17
breach of treaty
breach of contract distinguished 6.3656
obligation in force at time of alleged breach, limitation to 6.208
continuing wrongful act 6.206
federal State 6.522
ultra vires act 6.532
intervention
accessoire ou conservatoire 3.184
principal ou agressive 3.184
request for to be treated as request for arbitration 3.184
investment. See foreign investment; investment licence; protection and security of
investment, State responsibility
investment licence. See also concession; joint venture agreement; State contract
general principles of law 1.4613
assignment of interest 1.66876
estoppel and 1.480
knowledge of 1.47980
permissibility, written approval 1.476, 479
sub-contract distinguished 1.479
waiver of right to object 1.480
incentives 1.41920
withdrawal 1.507
investment. See foreign investment
nature of relationship
agreement 1.468
concession contract compared 1.4923, 500
contract distinguished 1.4678, 6.27
private law contract distinguished 1.467, 478, 489, 4901, 498
638
CUMULATIVE INDEX
investment licence, cont.

revocation. See withdrawal below
termination. See withdrawal below
withdrawal
applicable law, domestic law of Contracting State 1.4901
breach of contract distinguished 1.489, 490
compensation 1.468, 490
damages. See damages, for, withdrawal of investment licence
grounds
assignment of interest 1.475, 586
bad faith of non-State party 1.5947
estoppel 1.606
formalism, relevance 6.2956, 2989
insufficiency of investment 1.4819, 586
material failure, need for 1.480, 484, 485, 489, 490
misrepresentation/failure to provide information 6.2959
non-fulfilment of obligations. See non-fulfilment of obligations below
public interest 1.468, 490, 499
remedied 1.481
irregularities by State not amounting to breach of legislation or BIT, relevance 6.297
nationalization, whether 1.468, 478
nature of relationship as basis of right 1.470
non-fulfilment of obligations 1.468, 4789
procedure
due process, right to 1.4724, 489, 490, 491, 529, 588, 6.2979
need to respect 1.467, 46974, 530
notice, need for. See warnings, need for below
tainted background 1.58893, 594, 598, 6056
warnings, need for 1.4704, 489, 490, 5289
rectification, possibility of 1.489
retroactive 1.470
revocation 1.480, 5267, 539, 541
unlawful
procedural irregularities. See procedure above
under domestic law 1.5979
under international law 1.599604
IranUS Treaty of Amity (1955), Art. II(4) 4.3045
Islamic law, contract, pacta sunt servanda 1.492
Italy, contract, definition 1.462
ItalyMorocco BIT (1990)
Art. 1 (investment)
applicable law under 6.411
legality of investment as key factor 6.41112
Art. 1(c) (realised debts and contractual rights having a monetary value) 6.40912
Art. 1(e) (right of a monetary character conferred by law or contract conforming to law
in force) 6.40912
Art. 1(g) (approval by relevant authority) 6.412
CUMULATIVE INDEX
ItalyMorocco BIT (1990), cont.
Art. 8 (dispute settlement)
applicability
contract 6.415
State agency with separate legal personality 6.415
text 6.403
Art. 8(1) (amicable settlement) 6.4045
evidence of good faith attempt to settle amicably 6.404
Art. 8(2) (6 months rule) 6.402, 4046
Art. 8(2)(c), as unilateral consent 6.406
Ivory Coast
Civil Code, Art. 1832 1.288
law of
Civil Code
Art. 1865 1.294
Art. 1865(5) 1.291
Art. 1869 1.291
Art. 1872 1.294
Companies Act 1867 (France), Art. 40 1.292
J
joint venture agreement. See also concession; contract; foreign investment; investment
licence; State contract
as accord cadre 2.18
annulment. See repudiation below
applicable law
agreement supplemented by domestic law of Contracting State 4.945
breach
bad faith 4.73
damages 1.292, 4.736
enforceability
burden of proof 1.193, 208, 4.1978, 21213
subsequent legislation 4.197243
fiduciary duty 4.16877
breach, damage, need for 4.177
governments obligation to explain situation 4.1727
frustration
changed commercial circumstances 4.71
default of parties 4.18997
legislation 4.18997
police power 4.1912
uncertainty of contract 4.18597
arbitration clause, relevance 4.1946
joint-stock company. See joint-stock company
639
640
CUMULATIVE INDEX
joint venture agreement, cont.

modification
consent of other party, need for 1.292
justification, economic conditions 1.292
provision for in agreement, minor adjustments 1.291
unilateral. See consent of other party, need for above
obligations
disclosure 2.2730, 5961, 7881, 4.181
to assist in advancement of project 2.244
to engage in cooperation and discussion 4.16877, 188, 1934
as partnership agreement 1.288
effect on rights in joint-stock company to be established 1.288
renunciation. See repudiation below
repudiation
bad faith, whether 1.291
change of terms of operation, admissibility 1.292
evidence of
decision not to pursue suggestions for modification 1.293
non-acceptance of request for modification 1.292
failure to take action on alleged breach, effect 1.2889
grounds
delay in establishing joint-stock company 1.2889
fault 1.288
lack of diligence 1.288
obligations under agreement, effect on
damages for non-performance 1.192
right of repudiating party to demand performance 1.292
repudiating party, effect of 1.293
unilateral, size of obligations, relevance 1.2912
withdrawal, unequivocal, need to be 1.292
separability 1.292
termination as expropriation 5.99102
validity
coercion
language problems 4.71
partys understanding of objectives 4.71
misrepresentation 4.71
joint-stock company. See also corporation
delay in setting up 1.2889
dissolution 1.293
division of property 1.294
joint decision 1.293
restoration of equality of contributions and 1.294
voting rights, joint venture agreement and 1.288
judgment. See arbitral award
judicial admission, effect 1.350
judicial review of arbitral award. See arbitral award, review by domestic courts
juridical person 2.181, 5.235. See also nationality (juridical person)
State-owned corporation 5.33940
CUMULATIVE INDEX
641
jurisdiction (ICSID) 1.299304, 33941, 389409, 4734. See also arbitration

clause/agreement, ICSID jurisdiction, basis; legal dispute arising directly out of
investment; NAFTA arbitral tribunal, jurisdiction; national of another Contracting
State; national of another Contracting State, agreement to treat as; State immunity
from jurisdiction
absence of subject-matter or personal jurisdiction
alternative remedies and 6.3223, 326
effect on underlying claim 6.558
as ground for annulment of award 1.5278, 2.98, 105
remedial absence 6.558
ad hoc approach 5.364
admissibility distinguished 1.673, 6.2023
annulment, waiver of objection 1.528
anticipated breach 5.2234
applicable law
BIT 5.22
distinguished 4.2978
domestic law of Contracting State 3.1403, 177
ICSID Convention 3.155, 5.22, 344, 6.314
ICSID Rules (Arbitration) 5.22
international law 3.1412, 6.314
requirement to apply, 4.318. See also arbitral award, annulment, grounds, failure to
apply applicable law; State immunity from jurisdiction
basis. See also arbitration clause/agreement, ICSID jurisdiction, consent to
BIT 3.3134, 5.310, 5.37283
breach 5.31314, 6.345
doubtful status of BIT and 5.345
consent. See consent to ICSID jurisdiction
ICSID Convention 1.391, 2.3001, 5.310
limitation 5.82
nature of claim 1.299
nature of relief 1.299
burden of proof, claimant 3.57
in case of request by incompetent or unauthorized party 5.67, 9
of Centre 3.169
challenge. See objection to below
claim turning on statutory interpretation 4.1349
competence de la competence. See competence of tribunal to determine below
competence of enforcement authority to determine 4.50
competence of tribunal to determine 1.391, 2.1034, 3.57, 85, 1525, 4.128, 133,
6.161
decisions by other courts in same matter, relevance 3.1445
matter sub judice in another forum 3.129
non-appearance of party and 6.17
parties interpretation of unilateral consent, relevance 3.142, 158
reviewable, whether 3.856
tribunals obligation to examine 5.22, 6.321
competence/duty of tribunal to determine, ex proprio motu 1.300, 5.28, 159, 192,
6.321
642
CUMULATIVE INDEX
jurisdiction (ICSID), cont.

conciliation or arbitration, need for distinction 3.156, 16970, 1712, 1856
concurrent 3.129
absence of rule governing 3.129
stay of proceedings pending decision
comity 3.129
discretion 3.129
consent. See consent to ICSID jurisdiction
contractual jurisdiction and taking account of terms of contract distinguished 6.368
counterclaim 2.18
critical date 6.26
designation of subdivision or agency, need for. See constituent subdivision or agency as
party to proceedings, designation
equitable principles 1.51617
equity 1.51617
improper resort to as ground for annulment 1.516
estoppel 1.4068, 2.17. See also estoppel
admissibility of evidence distinguished 1.407, 408
ex aequo et bono. See ex aequo et bono
exclusion
attachment proceedings 4.334, 40, 51
in case of provision for ICC arbitration 5.88
choice of law clause as 5.315 n. 19, 6.345, 3512, 3601
identity of cause of action, need for 1.340, 449, 6.2912
bankruptcy/liquidation, whether 6.162, 168
as improper constraint on right of access to courts 4.133
identity of object, need for 1.340, 409
identity of parties, need for 1.340, 409, 453, 6.2912
waiver 4.434
settlement out of court 1.3423
sub-contract 2.264, 3267
indemnification for loss under 2.264
exclusion of class of dispute 5.195
claims based on actions of political subdivision 5.3145
financial threshold 4.124, 130, 141
prior consent to arbitrate and 1.304
exclusive remedy rule. See exclusive remedy rule
exhaustion of local administrative or judicial remedies. See exhaustion of local
administrative or judicial remedies
forum. See forum
interim measures. See provisional measures
joint-stock company
dissolution 1.294
liquidation 1.294
limitations on. See waiver of limitations on below
merits
distinguished 1.300, 404, 5.27, 6.858, 168
res judicata and 6.5556, 5602
joinder 2.189, 5.612, 69, 300, 6.187, 189, 245
limitation of initial memorial to jurisdiction, effect 6.159, 1678
CUMULATIVE INDEX
643
jurisdiction (ICSID), merits, cont.

suspension 1.341
nexus
applicable law 4.39
benefit from acts in forum State 4.26
commercial acts, relevance 4.31
direct and foreseeable result of conduct outside territory 3.2931
domicile of party to agreement 4.3940
place of performance 4.39
State contract 4.39
substantial contact with the United States, minimum contacts distinguished
4.278
not manifestly outside the jurisdiction of the Centre 1.391, 5.302, 6.314, 321
objection to 5.35866
early submission, need for 5.159
failure to consider 3.252
reservation of right of 6.11, 28
stay of proceedings and 5.480, 486
validity 5.486
waiver 1.528, 5.4989
withdrawal 4.164, 6.87, 91
offer
legislation as 3.1701, 178, 182, 185
promotional literature as 3.169, 17782
personal 1.392404, 5.385. See also proper party
attribution to State of acts of agent
authorization by State, need for 4.247
direct link, need for 4.267
due process requirement 4.224
State immunity exception distinguished 4.23, 26 n. 32
as preliminary issue 1.299, 341, 5.399
private international law principles 1.6778
ratione materiae. See subject-matter below; legal dispute arising directly out of investment
ratione personae. See personal above
reviewable, whether 3.856, 98
subject-matter 2.14, 17. See also legal dispute arising directly out of investment
action between contracting State and national of another party 2.388
Art. 25 provisions as enlargement of 5.31415
dependence on personal jurisdiction (ICSID) 4.15
State immunity from jurisdiction, relevance 4.15
subsidiary company 2.3534, 6.1412
subsidiary contract 1.67781, 2.259
waiver of limitations on 4.3423
ICC Court of Arbitration 4.343 n. 23
waiver of other remedies 3.1212, 4.43, 50
waiver of right to
domestic court proceedings as 1.409, 5.301
implied 2.115
waiver of right to initiate or continue domestic proceedings. See NAFTA arbitral
tribunal, waiver of right to initiate or continue domestic proceedings
644
CUMULATIVE INDEX
jus cogens, UNESCO Convention for the Protection of the World Cultural and Natural
Heritage (1975) 3.2589
just satisfaction proceedings, damages distinguished 1.601
justice, need for, 2.277. See also equity
L
law as body of rules 2.121
aids
comparable legislation 4.28 n. 40
in third country 4.2014
context, legal 4.21213
Law of the Sea Convention (1982)
abuse of process 6.562
Art. 294(1) 6.562
legal dispute arising directly out of investment 1.3023, 4045, 2.34950, 3.11920, 6.29,
440. See also dispute
directly 5.192, 3523
Fedax 5.352
incidental or additional claim 6.51415
failure to challenge, effect 5.131
legal
conflict of interests. See conflict of rights or obligations, need for below
conflict of rights or obligations, need for 5.189, 386, 6.29
dispute over operation of investment contract 5.131, 6.29
dispute requiring application of rules of law and legal solutions 5.23
as objective requirement 6.413
prima facie case, sufficiency at jurisdiction stage 6.858
reparation for breach of legal obligation, determination of as 5.386
taking or expropriation as 1.405
tax fraud claim as 1.565
tort distinguished 1.5278
withdrawal of banking licence 6.291
legislation, extraterritorial 4.2931
disclosure of information requirement 6.1867
aids
arbitral and judicial decisions 5.82
context, long title 4.201
implementing legislation 3.151
international law 5.823, 934
legislative history 3.157, 176, 177, 4.1617, 28 n. 40
long title 4.2012
treaty 4.128
writings of publicists 5.82
CUMULATIVE INDEX
645
legislation, interpretation, cont.

guidelines
clear meaning 4.28 n. 40
effectiveness 3.174
ordinary grammatical meaning 3.147
statute as a whole 4.2012
responsibility, arbitral tribunal, public policy reasons against 4.1349
translation
original language, primacy 3.1478, 1723
as text accepted by parties 5.65
legislation, retroactive effect. See also retroactive effect, legislation consenting to
jurisdiction
presumption against 5.68
legitimate expectation, application of case law 6.531
Liberia
contract, as property right 2.3478
damages
loss suffered 2.372
lost profits 2.372
punitive 2.3712
law of
Code of Laws 1956 2.3679, 3712
residual law 2.367
M
MalaysiaBelgo-Luxembourg Intergovernmental Agreement (1979)
approved project requirement 5.497508
interpretation
other treaties and 5.5001
typographical error, relevance 5.501
investment in the territory requirement 5.4916, 509
text (extracts) 5.4889
MERCOSUR Protocols, investment 5.196
Mexico
environmental protection measures
fair and equitable treatment under NAFTA, whether 5.2269
responsibility for 5.2269, 230, 2445
law of
Ecological Decree (San Luis Potosi) (20 September 1997), as measure tantamount to
expropriation/nationalization 5.2223, 231, 245, 2567, 258, 25960
General Ecology Law (LGEEPA) 1988, constituent State responsibilities under 5.2278
waiver of right to initiate or continue domestic proceedings (NAFTA (1992)) 5.45282
Annex 1120.1 5.4734
MFN treatment. See most favoured nation treatment (MFN)
ministerial countersignature, effect. See contract, parties to
646
CUMULATIVE INDEX
mitigating factors. See also damages, mitigation

compensation for breach of State responsibility, non-payment of compensation to
national, relevance 5.323
counterclaim 4.767
Morocco
ADM (National Motorway Company of Morocco)
constituent subdivision or agency as party to the proceedings, whether 6.407
State agency, whether 6.4069
ADM (National Motorway Company of Morocco)Salini/Italstrade Group (CCAP)
Art. 2.2.1 (applicability of GCAG) 6.403
Art. 18(1) (dispute settlement) 6.403
reference to Arts. 50 and 51 of GCAG as renunciation of BIT jurisdictional choice
6.4056
reference to Arts. 50 and 51 of GCAG as renunciation of BIT jurisdictional choice,
effect on Ministerial roles 6.404
as public contract 6.403
constituent entity or agency, whether 6.407
law of
Handbook of General Administrative Clauses (CCAG)
Art. 23 (Representation of the Master of Works) 6.4034
as law applicable to public contract 6.403
State contract, approval, need for, compliance with procedures established by State
agency as 6.412
mortgage foreclosure
mortgagors continuing legal interest 6.214
standing and 6.214
most favoured nation treatment (MFN) 4.2667, 2712, 2767, 307, 30812, 5.40417.
See also ArgentinaSpain BIT (1991); Sri LankaUK BIT (1980), Art. 4(1)
BIT provisions as measure of 6.4945, 534
customary international law 4.308, 31011, 5.252
dispute settlement, application to 5.40411
public policy considerations 5.410
eiusdem generis rule 5.4056, 408
NAFTA (1992) 5.251, 6.513
treatment of foreign investors/treatment sought for its own nationals abroad equation
5.40910, 6.5356
Multilateral Investment Guarantee Agency (MIGA), Convention establishing (1985),
foreign investment 5.193
municipal courts. See domestic courts
N
NAFTA (North American Free Trade Agreement) (1992). See also NAFTA arbitral
tribunal; NAFTA (North American Free Trade Agreement) (1992) by Article
amendment, interpretation distinguished 6.218, 2234, 5267
applicability
continuing wrong 6.20810
federal State
CUMULATIVE INDEX
647
NAFTA (North American Free Trade Agreement) (1992), applicability, cont.

federal government 6.5212
provincial government 6.5212
investments existing on entry into force or made thereafter 6.208
Basel Convention on the Control of Transboundary Movements of Hazardous Waste and
Their Disposal (1989), resurrection of claims under, possibility of 6.210
breach, inconsistent legislation as 5.28990
customary international law, Art. 1105 obligations 5.252, 6.2234. See also standard of
treatment, in accordance with [customary] international law below
damages
taxation 6.212
denial of justice, by reference to the facts of the case at issue 6.2256
contractual rights 5.288
measure tantamount to nationalization or expropriation 5.218, 2223, 231, 2556
availability at time of taking, need for 6.209
measure
actual investment 5.233
bundling of costs and 5.2334, 245
fair market value 5.2323
remediation costs 5.234, 245
method, discounted cash flow (DCF), in absence of evidence of future profits 5.233
Free Trade Commission (FTC). See NAFTA Free Trade Commission (FTC)
interpretation. See NAFTA (North American Free Trade Agreement) (1992), interpretation
national 5.251
nationality (juridical person), control test (piercing the corporate veil), relevance 6.211
notice of arbitration 6.4712
as public document 6.18990
registration 6.472
notice of intention to submit claim 5.452, 6.472. See also arbitration, request
90-day cooling-off period 6.515
failure to comply fully, effect 6.51013
prejudice to other party, relevance 6.513
specification of issues and the factual basis of the claim 6.51315
specification of provisions of Agreement alleged to have been breached, need for
5.223, 6.511, 51213
any other relevant provisions 6.512
FTC Chapter 11 interpretations (31 July 2001) and 6.51213
ICSID Arbitration (Additional Facility) Rules compared 6.512
ICSID Convention, Art. 36(2) compared 6.512
as submission of complaint 6.5578
objectives
balance between NAFTA free trade obligations and protection of environment,
governments right to regulate in interest of public values, effect on 5.221, 229,
260
creation of effective procedures for resolution of disputes 6.558
increase in investment opportunities 5.226, 243
648
CUMULATIVE INDEX
NAFTA (North American Free Trade Agreement) (1992), objectives, cont.

transparent and predictable commercial framework 5.225, 2267, 229, 243
applicability to Art. 1105 obligations (fair and equitable treatment) 5.2534
applicability to Art. 1110 obligations (expropriation/nationalization) 5.2534
obligations, application to federal States or local governments 5.218
procurement. See procurement (NAFTA)
retroactive, whether 6.206, 216
standard of treatment
in accordance with [customary] international law 5.2513
[customary] as acceptable gloss 6.223
evolution 6.218, 2224, 5279
exhaustion of local remedies rule and 6.216
fair and equitable 5.2269, 2434
additional to minimum standard, whether 5.2513
customary law, as general requirement of 6.52931
illegality under domestic law, relevance 6.5323
as objective standard 6.223
Free Trade Commission (FTC) interpretations (31 July 2001) 6.21724
as amendment 6.218, 2234
intangible property rights and 6.216
MFN 5.251
BIT provisions as measure of 6.4945, 534, 536
MFN/national treatment, the better of 6.513, 527
minimum standard in accordance with international law
FTC interpretations (31 July 2001) 6.21724
national treatment
evidence of differential treatment, need for 6.51820
minimum standard and 5.2512
treatment, range 6.51718
US Model BIT distinguished 5.2523
standard of treatment of alien, fair and equitable, arbitrary act and 6.531
State immunity from jurisdiction
Article 1105(1) obligations and 6.22934
European Convention on Human Rights (1950) (Art 6(1)) compared 6.2301
NAFTA (North American Free Trade Agreement) (1992) by Article. See also NAFTA
(North American Free Trade Agreement) (1992); NAFTA (North American Free
Trade Agreement) (1992), interpretation
Chapter 1
102(1) 5.2534
102(2) 5.225, 242, 6.51516
105 6.208 n. 12
Chapter 2
201 5.465
201(1) 5.230, 242
Chapter 10
1001, Annex 1001.1a-3 6.523
1001(1) 6.499500, 522
CUMULATIVE INDEX
649
NAFTA (North American Free Trade Agreement) (1992) by Article, Chapter 10, cont.
1001(5) 6.5201, 526
1024 6.499 n. 12
Chapter 11
1102 5.251, 467, 6.2078, 4902, 499502, 51520
1102(1) 5.2267
1102(2) 6.212, 214
1103 5.251, 6.4945, 5034, 51013, 5336
1104 6.513
1105 5.213, 22630, 231, 242, 2434, 2515, 2678, 446, 458, 480, 6.210, 21434,
4924
1105(1) 5.226, 287, 288, 467, 6.20810, 21534, 5023
1106 6.496502, 51526
1107 5.467
1108 5.467, 6.51526
1108(1) 6.522
1108(7)(a) 6.497502, 5202, 535
1108(8)(b) 6.497502, 5202, 536
1109 5.467
1110 5.213, 218, 2301, 25560, 2678, 446, 458, 467, 480, 6.2067, 21415
1110(1) 5.242, 287
1110(1)(d) 6.209
1110(2) 5.232
1114 5.229
1114(1) 5.260
1115 5.452
1116 5.460, 464, 469, 6.193, 1956, 4712
1116(1) 5.2412, 6.2045, 4712
1116(1)(a) 6.2034
1116(2) 6.2034, 205, 21314
1116 (investors on own behalf) / 1117 (investors on behalf of an enterprise)
distinguished
damages, recipient 6.212, 213
procedural requirements, importance of compliance 6.213
standing issues 6.211
1117 5.214, 215, 4523, 6.4712
1117(1) 6.2045, 21013
1117(1)(a) 6.2034
1117(2) 6.205, 21314
1117(2)(a) 6.2034
1117(4) 6.211
1118 5.2234, 6.195
1119 5.2234, 241, 264, 4489, 452, 6.195
1119(b) 6.503, 511, 512
1119(c) 6.45960, 514
1120 5.214, 2234, 241, 257, 446, 6.5412, 5578
1120(1)(b) 6.4712
1121 5.447, 6.203, 213, 216
1121(1) 5.278, 4623, 6.51112
1121(1)(b) 5.451, 46970
650
CUMULATIVE INDEX
NAFTA (North American Free Trade Agreement) (1992) by Article, Chapter 11, cont.
1121(2) 5.278, 6.21213, 51112
1121(2)(a) 5.214
1121(2)(b) 5.214, 215, 229, 454, 6.541, 5518
1121(3) 5.463, 4723, 478, 6.195
1122 5.250, 454, 6.202
1122(1) 6.504, 51112, 545
effect on jurisdiction of failure to comply fully with NAFTA procedures 6.51112
1123 6.195, 472
1125(b) 6.195
1126(10)(b) 6.18990
1126(13) 6.18990
1128 5.218, 6.197, 473, 556
1130(a) 6.453, 473
1131 5.242, 451, 6.217
1131(1) 5.225, 243, 6.532, 558
1132(2) 6.526
1134 5.2156
1135 5.234
1135(1)(a) 5.232
1135(2) 6.212
1135(2)(b) 5.234
1135(2)(c) 5.234
1136 6.4558, 5534
1137(1)(b) 5.274, 454, 6.4712
1137(2) 5.448
1139 5.286, 6.2045, 21012, 21415, 517
1139(a) 6.21112
Annex 1120.1 5.4734, 4802
Annex 1137.4 6.191
Chapter 18
1801 5.242
1802 5.2423
1802(1) 5.225, 243
1803 5.243
Chapter 20
2001 6.217, 218
2001(2)(c) 6.217
Chapter 22, 6.218
Note 39 6.208, 211
NAFTA (North American Free Trade Agreement) (1992), interpretation
aids, contexts, other provisions of treaty 6.516
amendment distinguished 6.218, 2234, 5267
guidelines
actual/clear language 6.516
conformity with applicable rules of international law 5.225, 6.51516
object and purpose 5.225, 6.51516, 558
ordinary meaning 5.225, 252
treaty as a whole 6.516
Vienna Convention on the Law of Treaties (1969) 6.2023
CUMULATIVE INDEX
651
NAFTA (North American Free Trade Agreement) (1992), interpretation, cont.

lex generalis/lex specialis distinguished 6.516
phrases
achats effectues par une Partie 6.521 n. 159
breach 5.4669
commercial arbitration 5.2478
enterprise 6.517
existing on the date of entry into force of this Agreement 6.21112
in accordance with the procedures set out in this Agreement 6.51112
interest arising from the commitment of capital or other resources... 6.21112
investment 5.196, 6.517. See also foreign investment
goods for purposes of Chapter 3 distinguished 6.518
loss or damage 6.21314
measure 5.230, 242, 4656
state or province 5.226
submit a claim 6.557558
with respect to 5.46970
responsibility for
Free Trade Commission (FTC) 6.21724
binding, whether 6.21820
opposability of view of NAFTA party 6.556
NAFTA arbitral tribunal, abuse of process 6.5623
NAFTA arbitral tribunal, applicable law
Additional Facility Arbitration Rules 5.446
applicable rules of international law 5.225, 243
NAFTA (1992) 5.225, 243, 446
normal sources of international law determining the minimum standard of treatment
6.223
NAFTA arbitral tribunal, award, binding nature, in domestic courts 6.557
NAFTA arbitral tribunal, conditions precedent. See also NAFTA arbitral tribunal,
jurisdiction; NAFTA arbitral tribunal, waiver of right to initiate or continue
domestic proceedings
admissibility/jurisdiction distinguished 5.479, 6.203, 5578
submission of claim, dependence on 6.5578
NAFTA arbitral tribunal, consent to jurisdiction. See NAFTA arbitral tribunal, jurisdiction;
NAFTA arbitral tribunal, waiver of right to initiate or continue domestic
proceedings
NAFTA arbitral tribunal, costs
equitable 6.563
relevant factors
contributory fault of successful party 5.294
reasonableness of parties 6.563
unfamiliarity of proceedings 5.294
unsuccessful partys liability for 5.294
NAFTA arbitral tribunal, disclosure obligation. See also disclosure obligation
Chapter Eleven interpretations (31 July 2001) 6.4678
NAFTA arbitral tribunal, evidence, failure to argue case 5.2934
652
CUMULATIVE INDEX
NAFTA arbitral tribunal, jurisdiction. See also NAFTA arbitral tribunal, waiver of right to
initiate or continue domestic proceedings
admissibility distinguished 5.47880, 6.2023
Ethyl 5.479
anticipated breach 5.2234
Art. 1121 provisions 6.5556
claims arising before entry into force of NAFTA 6.204, 20610
continuing wrongful act 6.206
consent to
fulfilment of Article 1122 procedures as 5.454
need for 5.453
failure/expropriation of investment, relevance 6.21112
presumption in favour of 5.4645, 6.553
procedural rules distinguished, Ethyl 5.480
resort to domestic tribunal, effect 5.287
resubmission of claim after rectification of jurisdictional defect 6.5556. See also
NAFTA arbitral tribunal, waiver of right to initiate or continue domestic
proceedings, invalidity, whether precluding resubmission of same claim with valid
waiver
review of decisions of domestic courts, exclusion 6.228, 5323
violation of Chapter 11, Part A obligation, need for 5.2867
NAFTA arbitral tribunal, place of arbitration 6.5408. See also place of arbitration
disclosure of information obligations and 6.1867, 197, 4737
NAFTA arbitral tribunal, precedent, decision of tribunal other than NAFTA 5.231, 2556
NAFTA arbitral tribunal, procedure, 6 months rule 5.223
NAFTA arbitral tribunal, revision/amendment of claim 5.2235
NAFTA arbitral tribunal, standing 5.2789, 6.2045
Articles 1116 and 1117 distinguished 6.211
bankruptcy/liquidation, effect 6.212
expropriation/nationalization, effect on 6.21112
investors of a Party 5.286, 6.212
continuing status as, need for 6.21415
joinder to merits 5.279
mortgage foreclosure, relevance, mortgagors continuing legal interest 6.214
nationals of signatory States, limitation to 5.276 n. 1
as preliminary matter 5.278
NAFTA arbitral tribunal, time bar 6.205, 21314
NAFTA arbitral tribunal, waiver of right to initiate or continue domestic proceedings
5.2778, 44851, 45280, 6.195, 21213, 541, 54963
Annex 1120.1 (Mexico) and 5.4734
as condition precedent 5.4635, 6.5512, 5578
conditions, effect 5.4635
denial of justice/exhaustion of local remedies rule relationship and 6.216
duties imposed by other sources of law, application to 5.45760
enforcement, Tribunals responsibilities 5.453, 6.552
finality 6.557
invalidity, whether precluding resubmission of same claim with valid waiver 6.54963.
See also validity, tribunals obligation to determine below
issue left open by tribunal finding invalidity 6.5545
Methanex 6.556
CUMULATIVE INDEX
653
NAFTA, arbitral tribunal, waiver of right to initiate or continue domestic proceedings, cont.
requirements
clear waiver 5.454, 6.552
delivery to disputing parties 5.456
express waiver 5.454, 4623, 6.552
form of words, relevance 5.4623
identity of cause of action, relevance 5.45760, 4728, 6.552, 553
intent supported by conduct 5.45661, 470
retroactive correction of defect, effect 5.4778, 6.5523
submission at time of notification of arbitration 5.454, 456, 6.552
termination of proceedings in domestic courts and 5.4723
writing 5.456, 4623
as unilateral act 5.454
validity, tribunals obligation to determine, 5.453. See also invalidity, whether
precluding resubmission of same claim with valid waiver above 6.5512
NAFTA arbitral tribunal, witnesses, credibility 5.2934
NAFTA Free Trade Commission (FTC)
Chapter 11 interpretations (31 July 2001)
as amendment 6.218, 5267
binding, whether 6.21820, 526
disclosure obligation 6.468
minimum standard of treatment 6.21724
as at time of conclusion of NAFTA 6.2234
endorsement of role 6.223, 527
as reason for partys decision to add additional relevant provisions to notice of
intent to claim 6.51213
composition 6.217, 526
functions, resolution of disputes regarding the interpretation or application of NAFTA
6.217, 526
national of another Contracting State 3.119, 120, 5.235. See also national of another
Contracting State, agreement to treat as; nationality (juridical person); nationality
(natural person)
Contracting State. See Contracting State
corporation of host State wholly owned by national of other Contracting State
6.291
critical date[s] 5.189
definition, absence from Convention 6.43940, 441
different nationalities, need for 5.26
exclusion, nationals of non-Contracting State, assignment of rights, interests and claims,
effect 6.315
nationality and capacity to act distinguished 5.234
nationals of non-Contracting States, exclusion 6.315
State agency 5.33942
CSOB 5.41415
subsequent change of nationality or control 2.16
national of another Contracting State, agreement to treat as 1.3925, 65963, 2.1517, 181,
272, 28790, 32930, 5.151, 6.30, 441. See also national of another Contracting
State
Amco 4.33940
654
CUMULATIVE INDEX
national of another Contracting State, agreement to treat as, cont.

arbitration clause as 1.395, 2.16, 184, 335, 352, 5.1345
AucovenMinistry of Infrastructure (Venezuela) Concession Agreement (1996) 6.4367
BIT provision for 6.834
certificate of registration as 2.353
documentation, need for 5.1334
equality of parties 2.21214
express/implied 1.395, 6603, 4.33842, 5.136
foreign control. See nationality (juridical person)
Holiday Inns 1.395, 65963, 4.339 n. 19, 5.136
Klockner 4.33940
legislative provision 4.3402, 6.84
LETCO 4.33940
majority shareholding by national of host State in company incorporated in other
Contracting State 6.7984, 87, 93 n. 19
need for reference to 4.338
presumption of 2.352, 4.33842
privity of contract, need for 5.133
reasons for provision 2.15, 6.823
representation distinguished 2.1845
sufficiency of itself to confer jurisdiction 4.3423
nationality of investment 1.4813, 4.486. See also foreign investment
accounting practices and 1.403
foreign capital and enterprise distinguished 1.482
nationality (juridical person). See also national of another Contracting State, agreement to
treat as
applicable law
Amco 6.442
any reasonable criterion 6.442
in case of dependent territory 3.185
Contracting State party to dispute 2.181, 5.385
place of incorporation 1.394, 396, 4812, 666 n. 76, 2.181, 6.4412
registered seat 1.394, 396, 4812, 666 n. 76, 2.181, 2889, 6.4412
SOABI 6.442
arbitration clause and 2.335
continuity 2.16, 6.2930
control test (piercing the corporate veil)
BITs 6.211
NAFTA 6.211
corporation of convenience 6.4445
critical date 2.183
consent to jurisdiction 4.3367, 345
effective date of concession contract 5.307 n. 6
dual nationality 6.30
evidence of
errors in documentation, relevance 5.134
events after critical date 4.349, 5.134
foreign control 1.3945, 396, 2.181, 2923, 3514, 5.1346, 6.4426
absence of definition 6.4424
agreement to treat as national of another Contracting State and 6.441
CUMULATIVE INDEX
655
nationality (juridical person), foreign control, cont.

Amco 6.442
Banro 6.4478
direct shareholding as sole test 6.4436
fraud or misrepresentation 1.397, 2.28990, 335
presumption of 4.344
threshold 4.3401, 3478
requirements
any reasonable criterion compatible with ICSID 6.443, 444, 447
direct control 2.3345
effectiveness 2.2923, 6.4423
exclusive control 5.347 n. 32
SOABI 6.442
State agency 5.340
freedom to confer nationality of Contracting State 2.184
misleading conduct 6.4456
nationality of controlling shareholder 4.80 n. 1
nationality of foreign interests 2.182
nationality of nationals exercising control 2.182
nationality (natural person)
applicable law, diplomatic protection compared 6.174
continuity of nationality 6.301
dual/multiple nationality
diplomatic protection and 6.174
domicile, relevance 6.1734
entitlement to protection under BIT, national of non-host State and of another
Contracting Party 6.1734
national of another Contracting Party, whether 6.30
nationalization. See expropriation/nationalization; requisition
nationals. See aliens; diplomatic protection
natural resources, expropriation, justification for, UNESCO Convention for the Protection
of the World Cultural and Natural Heritage (1975), 3.2449, 3334. See also
UNESCO Convention for the Protection of the World Cultural and Natural Heritage
(1975)
necessity, State responsibility 4.2678, 2746
Netherlands, contract, definition 1.462
NetherlandsVenezuela BIT (1992)
investment 5.1947
territorial requirement 5.198
New York Convention on the Recognition and Enforcement of Arbitral Awards (1958). See
arbitral award, recognition and enforcement, New York Convention on the
Recognition and Enforcement of Arbitral Awards (1958)
New Zealand
arbitration
appropriateness in certain cases 4.1378
comity and 4.1379
as limitation on States rights 4.1359
arbitration clause, uncertainty of contract and 4.1946
burden of proof, joint venture agreement, enforceability 4.198, 21213
comity, acceptance of right of resort to international arbitration 4.1389
656
CUMULATIVE INDEX
New Zealand, cont.

domestic courts, arbitration as constraint on access 4.1323
frustration of contract, police power 4.191
ICSID, status as fully administered type of arbitration 4.1256
ICSID Convention
domestic law and, implementing legislation 4.124
jurisdiction, exclusion, improper constraint on right of access to courts, whether
4.1323
law of
Acts Interpretation Act 1924, s 5(j) 4.2012
Arbitration Act 1908
ICSID Convention and 4.124
s 5 4.127
Arbitration (Foreign Agreements and Awards) Act 1982
s 4 4.127
s 7 4.1312
Arbitration (International Investment Disputes) Act 1979 (implementation of ICSID
Convention (1965)) 4.124
Arbitration Act 1908 distinguished 4.1278
s 8 4.1269, 1338
Commerce Act 1985
long title 4.2012
s 3 4.1978
s 3(1) 4.2045, 216
s 3(2) 4.208
s 5 4.2023
s 6 4.2023
s 27 4.1201, 126, 1319, 197, 20043
s 27(2) 4.198, 20112
s 30 4.199200, 203
s 36 4.202
s 50 4.202
s 66 4.202
s 76 4.21011
s 80 4.211
s 88 4.137
s 89(3) 4.137
s 111(1) 4.121, 1989
(s 27) 4.198
Control of Prices Act 1947 4.148
repeal 4.148
Economic Stabilisation Act 1948 4.148
Motor Spirits (Regulation of Prices) Act 1933 4.1478, 1524, 191
repeal 4.1534
Petroleum Sector Reform Act 1988 4.148, 1534
Sale of Goods Act 1908 4.196
Trade Practices Act 1974
Part 5 4.1312
s 45(2) 4.212
CUMULATIVE INDEX
657
New Zealand, cont.

aids
comparable legislation in third country 4.201, 2023
legal context 4.212
long title 4.201
guidelines
statute as a whole 4.2012
phrases
collusion 4.2001, 22831, 23942
competition 4.203, 2057
competition, interdependence with market 4.203
competition in a market 4.2037
in respect of any matter agreed to be referred 4.128
in respect of any matter to which the proceedings pursuant to the Convention
relate 4.128
likely effect 4.203, 20913, 2412
market 4.2035, 21328
more probable than not 4.209, 2112
real possibility 4.209, 21112, 213, 2412
substantial 4.2079
substantially lessening 4.2412
trade 4.202
responsibility, arbitral tribunal, public policy reasons against 4.1359
police power, frustration of contract and 4.191
stay
discretion 4.129, 1338
ICSID proceedings 4.12630
requirements 4.1278
public policy
difficulty for tribunal 4.1356
limited range of remedies available to tribunal 4.137
risk of unacceptable interpretation 4.136
stay of ICSID proceedings 4.1359
domestic nature of dispute 4.135
execution of award, difficulty 4.136
aids
context 4.129
nexus. See jurisdiction (ICSID), nexus
non-appearance of party 1.299, 300, 341, 2.299, 300, 341, 3557, 4.8, 5.1517, 1819, 20,
212, 6.1617, 202
abstention/default distinguished 6.21
admission of claim, whether 2.356, 6.17
binding nature of award and 6.22
658
CUMULATIVE INDEX
non-appearance of party, cont.

damages, calculation 5.356
grace period 2.356, 6.17. See also time-limits, extension
oral proceedings, inevitability 5.16
preliminary consultation
default, whether 1.341
inevitability of oral proceedings in case of 5.16
proposal for 6.1314
procedure 1.299, 300, 341, 2.3557
right of subsequent participation 6.13
settlement on agreed terms, request to suspend proceedings in expectation of
6.1214
Tribunals competence to determine jurisdiction and 6.17, 28
Tribunals duty to test claimants assertions 2.3567, 6.22
validity of award and 6.22
note verbale, status 5.503
notice of arbitration. See NAFTA (North American Free Trade Agreement) (1992), notice
of arbitration and notice of intention to submit claim
O
OECD Draft Convention for the Protection of Foreign Property
Art. 1 4.2978
fair and equitable treatment 4.3046
most constant protection and security 4.3056
opinio juris
BITs and 6.2201
evidence of, explanatory statements to legislature 6.2201
P
pacta sunt servanda
administrative contract 1.492
common law 1.4912
contract 1.4913
general principle of international law 1.287, 394, 3.64, 65, 69
general principle of law 1.394, 4913
Islamic law 1.492
State contract 1.4923, 6.26
State immunity 3.69
Paraguay
Law No 417/73 of July 1995 (regulation of banks and other financial bodies), Article 66,
text 6.173
Law No 797/95 of 4 December 1995 (Financial Stabilization and Reactivation Law) 6.173
discriminatory, whether 6.1756
CUMULATIVE INDEX
659
Paraguay, cont.
acts and omissions of
financial regulatory authority 6.175, 1769
officials, improper acts 6.179
private persons, improper acts 6.179
for
financial information provided by State agency 5.4302, 6.1789
negligence in supervision of finance company 6.175, 1769
ParaguayPeru BIT (1994)
Art. 4(2), text 6.175 n. 3
Art. 8, as consent to jurisdiction 6.1612, 168
dual/multiple national, rights under 6.1734
participation agreement. See joint venture agreement
partnership agreement
joint venture agreement as 1.288
nationality and 6.31415
separate juridical person, whether 6.31415
Permanent Court of International Justice (PCIJ), nullification competence, Committee of
Jurists Report (1930) 1.549
PhilippinesUK BIT (1980), Art. 6 4.30910
place of arbitration
applicable provisions
Arbitration (Additional Facility) Rules 6.542
NAFTA Art. 1120 6.5412
concession agreement making provision for change 6.447
determined by Tribunal 6.453
disclosure obligation and 6.1867, 197
evidentiary hearing distinguished 6.460, 545
ICSID headquarters 4.16, 125, 6.13
right to suggest alternative location 6.13
law of as applicable law under Additional Facility proceedings 6.542
NAFTA tribunal 6.1867, 197, 473, 4707, 5408
Chapter 11 and Chapter 20 rules distinguished 6.547 n. 14
UNCITRAL rules distinguished 6.547
Permanent Court of Arbitration 4.3301, 334
relevant factors
arbitral procedure law, suitability 6.4548, 4736, 5456
relative experience 6.546
review of award, provision for 6.4558
availability and cost of support services 6.459, 473
convenience of parties and arbitrators 6.459, 473, 4767, 5445
enforcement of award, appropriate multilateral or bilateral treaty 6.458, 473, 476
location of evidence 6.45960, 473, 477
location of subject matter in dispute 6.45960, 473, 477
neutrality of forum 6.460, 477, 5478
separation of powers and 6.547
related proceedings, desirability of same applicable law 6.544
660
CUMULATIVE INDEX
place of arbitration, cont.

seat of appropriate institution in Contracting State 4.125
UNCITRAL Arbitration Rules 6.473, 547
police power
frustration of joint venture agreement 4.1912
revolution, State responsibility 4.316
precedent. See also domestic courts; domestic law; res judicata
Arbitration Rules. See ICSID Rules (Arbitration)
decision of a different tribunal 5.231, 2556
domestic court decisions
binding, whether 1.453, 460, 498, 2.3523, 371, 4.3056, 5.3656, 475
res judicata, whether 1.460, 498, 6.389
on third State 4.3056
jurisdiction, decisions by other courts in same matter, relevance 3.1445
previous ICSID tribunal decision 1.395, 401
preliminary measures. See provisional measures
private international law
applicable law determined by 3.64
jurisdiction 1.6778
procedure. See also Additional Facility Rules (Arbitration); ICSID Rules (Arbitration);
ICSID Rules (Conciliation); ICSID Rules (Institution); time-limits
6 months rule 5.379, 409, 6.402, 4046
18 months rule 5.399403, 404
agreed statement of facts 5.305
applicable law, ICJ Statute 6.22
duty to comply 2.357
formalities, failure to comply with, relevance 6.213
incidental or additional claim 5.2578, 6.51415
language
delay in providing translation 5.216
English 5.304, 6.244
French 6.13
Spanish 5.187, 2012, 422, 6.167
legal representation, absence 5.50910
memorial
amendment or supplement to 1.5212
request for arbitration as 5.203, 204
schedule for presentation 6.188
non-appearance of party. See non-appearance of party
opening session, extension 5.303
oral hearings
desirability 4.347
timetable 6.170
proper party. See proper party
record
sound recording of proceedings 6.13, 20
summary 6.13
verbatim 6.92 n. 13, 132, 427
CUMULATIVE INDEX
661
procedure, cont.
registration of Application with Secretary-General
acceptability of request not manifestly outside the jurisdiction 5.302, 6.314, 321
effect 1.521, 4.125, 5.22, 304, 6.321, 379
Secretary-Generals role 5.304
requests for additional information
documents 6.20
facts 6.18
law 6.1819
revision/amendment of claim 5.2235
fairness and clarity 5.2245
submissions, on material produced during proceedings 3.194
unilateral submission of dispute 5.34950
visit to site 5.159
written proceedings, as evidence of tribunals approach 2.1234
procurement (NAFTA)
achats effectues par une Partie 6.521 n. 159
government procurement 6.5203
government assistance distinguished 6.521, 5236
State agency 6.5213
procurement by a Party
federal government entity 6.5213, 524
government procurement, identity of terms 6.522
listing in appropriate Annex, need for 6.522, 523, 525, 531
provincial government entity 6.5213, 524
promissory notes
currency of payment 5.203, 204, 205, 206
as investment 5.1979
proper law. See applicable law
proper party. See also constituent subdivision or agency as party to the proceedings;
national of another Contracting State; national of another Contracting State,
agreement to treat as
assignment of rights, effect 3.63, 5.3423, 6.315
critical date 5.342
designation, need for. See constituent subdivision or agency as party to the proceedings
foreign investor in national of another Contracting State 5.41112
incompetent or unauthorized party 5.67, 9
joinder, need for consent 3.2234, 5.141
natural person. See nationality (natural person)
offshore company prohibited by law from operating within Contracting State 5.14950,
151
property right
contract 2.3478, 3678
as subject of expropriation 5.912
662
CUMULATIVE INDEX
response to failure to meet obligations 1.537
protection and security of investment, State responsibility 1.4589, 499, 525, 4.26687,
5.2930. See also BITs (bilateral investment treaties); standard of treatment of alien
controversial principle 1.525
developing countries and 1.4001
failure to provide adequate protection 4.2801, 5.30, 6.111, 127, 137
ILC Draft Articles on the International Responsibility of States for Injuries to Aliens,
customary international law, whether 1.600
intangible property interests and 6.216
non-intervention to prevent or punish seizure of property 6.11217, 122, 137,
1512
OECD Draft Convention for the Protection of Foreign Property 4.2978, 3046
physical protection of alien distinguished 6.2212
preventive measures, obligation 4.2837, 31517, 5.2930
State immunity from jurisdiction and 6.22934
treaty obligation 5.2930
protective measures. See provisional measures
provisional measures 1.311, 312, 41012, 6539
abusive resort to 3.367
debt, confinement as protection 3.36
factors determining 3.36
intention to frustrate other party, need for 3.36, 37
Arbitral Commission of Property, Rights and Interests in Germany 1.654 n. 26
arbitral tribunal 3.89
exclusive role, whether 3.8, 356
attachment proceedings. See attachment proceedings
basis
prima facie debt 3.9
urgency 3.9, 6.378
commercial arbitration 1.654
disputed jurisdiction and 6.37880
Anglo-Iranian Oil Company Case 1.656
Holiday Inns 6.37980
ICJ practice 6.3789
Secretary-Generals screening role under Article 36(3) and 6.379
domestic courts, role 1.654, 655, 657, 3.89
exclusion except by agreement 3.8, 11, 4.51, 5.52
fragmentation of jurisdiction 3.8
implementation 3.9
jurisdiction of tribunal, effect on 3.9
preliminary to submission to arbitration, admissibility 3.9
relinquishment by parties 5.394 n. 1
finality/binding effect 6.3802
General Act for the Pacific Settlement of Disputes (1928) 1.654 n. 26
ICJ Statute 6.3778, 380
CUMULATIVE INDEX
663
provisional measures, cont.

ICSID Convention (1965) 1.6545, 3.8, 356, 6.37782
interference with internal affairs, whether 6.3878
jurisdiction. See arbitral tribunal and domestic courts, role above
non-compliance, effect on award 1.3178, 6.382
AGIP 6.382
possible measures
diversity 6.380, 395
non-publication of information concerning the case 1.4103
publication of information concerning the case, confidentiality of proceedings 1.412,
5.21516, 4867
security for costs/cautio judicatum solvi 6.3957. See also costs, security/cautio
judicatum solvi as provisional measure
suspension of Ministerial Decision 6.38292, 397
undertaking to suspend action subject of claim 4.3238
provisional nature 6.380
tribunals power of modification or revocation 6.380
purpose
non-aggravation of dispute 1.41012, 6.3913, 397
Amco 6.3923
Anglo-Iranian Oil Company Case 6.392, 393
Armed Activities on the Territory of the Congo (Congo v. Uganda) 6.392
Electricity Company of Sofia and Bulgaria (Belgium v. Bulgaria) 6.392
as general principle of law 6.3913, 397
Holiday Inns 6.392, 393
note to 1968 Arbitration Rule 39 6.382, 3912
non-frustration of award 1.412, 6.382
preservation of parties rights 6.382, 397
restitutio in integrum obligation, relevance 6.3901
request as breach of contract 3.356
requirements
existing right 5.3945, 6.387, 3945
injury 1.411
non-prejudice to merits 6.3867
specification of rights to be preserved 1.411
subject-matter of case, relationship with 5.395
State immunity from execution/attachment 1.36972
stay
discretion 4.129, 1338
domestic court proceedings 4.41
ICSID proceedings 4.12639
requirements 4.12728
suspension, competence of tribunal and 4.43
timing 6.378
tribunals powers
to take initiative 6.380
Holiday Inns 6.380
664
CUMULATIVE INDEX
public interest
termination of State contract 2.222, 6.43
withdrawal of
free zone licence 6.423
investment licence 1.468, 490, 499
public international order
State immunity from execution/attachment and 2.340
arbitral award, recognition and enforcement, and 2.340
public policy
legislation, interpretation by arbitral tribunal 4.1349
difficulty for tribunal 4.1356
risk of unacceptable interpretation 4.136
legislation, interpretation by arbitral tribunal, limited range of remedies available to
tribunal 4.137
MFN treatment and 5.410
provisional measures, stay 4.1345
stay of ICSID proceedings 4.1359
domestic nature of dispute 4.135
execution of award, difficulty 4.136
Q
qualities/qualifications of conciliators and arbitrators (Panel membership). See also
disqualification of conciliator or arbitrator, grounds
Code of Ethics for International Arbitrators (International Bar Association, 1987)
6.3356
Rule 3.1 (impartiality and independence) 6.335
Rule 3.2 (impartiality and independence: criteria) 6.335, 336
Rule 4 (declaration of circumstances giving rise to doubt) 6.336
competence in law, commerce, industry or finance 4.81
impartiality/independence of judgment 6.3356
presumption of 6.3378
R
rebus sic stantibus. See changed circumstances
recognition of arbitral award. See arbitral award, recognition
rectification of arbitral award. See arbitral award, rectification
remedies. See also attachment proceedings; damages; restitutio in integrum; specific
performance
alternative, possibility of 3.1213, 130, 4.334
in absence of ICSID jurisdiction 6.3223, 326
discontinuance of proceedings 4.69
hierarchy 3.1278, 144, 1467, 14952, 161, 1745
invitation to reach agreement to free transfer of shares/liabilities 4.286, 288
mutually exclusive, whether 3.123
reimbursement of duties, taxes and cautionary payments 6.501
repeal of offending legislation 6.45
ruling on claim 1.327
statement of adverse influence 1.605
CUMULATIVE INDEX
requisition, definition 4.288
res judicata 4.10910, 6.5534, 55962. See also arbitral award, binding nature
annulled award 1.54861
currency of payment of damages 1.5556
decision not to rule on certain matters 1.555
decisions on jurisdiction and merits distinguished 6.5556
as general principle of international law 6.559
as general principle of law 1.549, 552, 6.559
identity of parties and issue, need for 6.559
interest
date 1.5578
rate 1.5578, 628
in international law 1.549
intervening domestic court judgment and 1.5534, 6067
integrality of decision 1.548
relitigation and 1.548
jurisdiction/admissibility, decision on, whether 6.55960
mixed jurisdiction/admissibility and merits 6.5602
proportionality under domestic law 1.5545
reasoning, whether 1.54852
Chorzow Factory 1.551
civil law 1.551
obiter findings, relevance 1.521, 529, 538, 539, 540
Orinoco 1.552
Pious Fund 1.550
specific annulment, need for 1.548, 5536
restitutio in integrum
arbitral tribunals power to order 1.4734
civil law 1.499500
common law 1.500
interest and 5.234
loss during war or civil disturbance not attributable to the State 4.3002
lucrum cessans and damnum emergens as components 1.500
legality under domestic law and 6.44
provisional measures and 6.3901
reinstatement of free zone licence 6.44, 45
restitution in kind distinguished 6.3901
Chorzow Factory 1.500, 614, 5.233
INA 1.614
Lena Goldfields 1.500
Lighthouses Arbitration 1.500
Norwegian Shipowners Claim 1.500
Sapphire 1.500
Shufeldt Claim 1.500
TOPCO 1.614
resubmission. See arbitral award, annulment, resubmission
665
666
CUMULATIVE INDEX
retroactive effect
legislation consenting to jurisdiction 5.629
procedural law 5.67
subsequent agreement 2.913, 108
withdrawal of free zone licence 6.35
withdrawal of investment licence 1.470
revolution. See State responsibility, revolution
risk
changed circumstances 6.65
contract 3.76, 77, 2578, 3323
damages
double payment 3.2930, 423, 5.234, 4767, 6.126, 140, 151, 162, 168
measure 3.76, 77, 247
mitigation 3.247, 335
force majeure distinguished 6.414
foreign investment 5.198, 6.175, 1778, 414
negligence of central bank 6.294 n. 5
negligence of investor 6.294
Rules. See Additional Facility Rules (Arbitration); ICSID Rules (Arbitration); ICSID
Rules (Conciliation) (1968/84); ICSID Rules (Institution)
S
St Kitts and Nevis Islands
as Contracting State 5.118
contract, validity where party not in existence at time of conclusion 5.13740, 145
Nevis Island
Cable contract
arbitration clause 5.118, 12430, 131, 1323, 1345, 136
power to enter into 5.11517
as proper party to 5.11921, 1312
terms 5.11415
as constituent subdivision or agency 5.123
constitutional provisions governing status and powers 5.11216, 1201
legal personality 5.11314, 121
designation as subdivision or agency, absence 5.119
Senegal
law of
administrative and private law, relationship 2.222
Code of Civil and Commercial Obligations 2.284, 285, 297
Code of Government Obligations 1965 2.218, 2216, 230, 24754, 271, 286
Code of Investments (Law 72/43 of 12 June 1972) 2.21819
nullity of contract 2.2201, 2856
Decree of 16 June 1967 (Contracts Commission) 2.218
Decree 67697 of 16 June 1967 (Government business transactions) 2.21819
French law, role 2.281
State agency, immunity from execution 3.7
State contract
applicable law, administrative law 2.218, 221
CUMULATIVE INDEX
Senegal, State contract, cont.
approval, need for, ministerial 2.21819
nullity in absence of 2.220, 2846
approval, need for, presidential 2.220, 2846
classification as 2.221 n. 3
commercial stability, importance 2.2256
equality of parties 2.222
termination
damages 2.224, 230
governments power of 2.2226
notice, need for 2.225, 230, 323
public interest 2.222
as sanction 2.222, 324
for serious breach 2.225, 248, 249
without breach 2.225, 248, 249
validity
power of judge to raise ex proprio motu 2.2846
separability
arbitral award 2.125
funds in embassy bank account 2.3956
issues in case of concurrent jurisdiction 5.480
separation of powers, place of arbitration, neutrality and 6.547
settlement on agreed terms 1.305 n., 342, 6456, 2.409, 3.335
applicable law 6.66
assignment of rights/obligations 6.66
as award/part of award 6.50, 61, 64
BurundiAntoine Goetz (AFFIMET)
Protocol of Agreement (1998) 6.467
Special Convention regarding the functioning of AFFIMET (1998) 6.4750
discontinuance of proceedings 6.64
dispute settlement provisions 6.66
exclusion of jurisdiction 1.3401
extension of time-limits and 6.1417
filing and request for incorporation in award, need for 5.205
request to discontinue proceedings distinguished 5.205
goodwill gestures in consideration of 6.634
inability of party to comply at time of conclusion, relevance 6.64
interpretation and implementation, principles 6.645
aids
nature and purpose of agreement 6.64
negotiations 6.64
parties conduct subsequent to agreement 6.64
parties established practices 6.64
usages 6.64
changed circumstances 6.64. See also changed circumstances
common meaning in the relevant business 6.64
667
668
CUMULATIVE INDEX
settlement on agreed terms, interpretation and implementation, principles, cont.

cooperation, obligation 6.64
effectiveness of all terms 6.64
language, conflict between different versions 6.66
non-performance. See non-performance below
obligation of result 6.65
parties common intent 6.64
reasonableness 6.64
statements and conduct of parties
partys intention as known to other party 6.64
reasonable persons interpretation 6.64
negotiations
contract distinguished 5.4367
effect on claim 1.350
non-appearance at hearing in expectation of 6.1214
non-performance 6.65
improper performance 6.65
late performance 6.65
remedies
damages 6.65
withhold of reciprocal obligations 6.65
right to remedy, requirements 6.65
additional period, request for 6.65
appropriateness of remedy 6.65
damages 6.65
notification without delay of manner and timing 6.65
refusal, absence of reason for 6.65
termination 6.65
preliminary consultation, invitation to 6.1314
publication, agreement to 6.64
ratification by parties, need for 1.350
revision, request for
grounds 6.65
time limits 6.65
withhold of performance and 6.65
Settlement Order 1.305 n., 4.116
succession and 6.66
terms of offer (Fedax) 5.2034
UkraineLemire 6.616
interpretation and implementation, principles of 6.645
withhold of performance 6.65
severability. See separability
ships, attachment proceedings, basis, prima facie debt 3.11
Slovak Republic
Consolidation Agreement (19 December 1993) (privatization of CSOB)
ICSID jurisdiction and 5.34750
arbitration clause, absence 5.3489, 365
reference in choice of law clause to unratified BIT 5.3489, 357, 364
CUMULATIVE INDEX
Slovak Republic, Consolidation Agreement (19 December 1993), cont.
rejection of domestic court jurisdiction 5.349
terms 5.336, 3557
CSOB, State agency, whether 5.3402
Loan Agreement on the Refinancing of Assigned Receivables (31 December 1993)
5.336, 3525
SlovakCzech BIT (1992)
arbitration clause 5.34750
as basis for ICSID jurisdiction 5.3446
investment 5.3534
provisions 5.336
ratification, need for 5.345
sovereign independence 1.369
sovereignty
derogation, submission to external jurisdiction 2.3001
rights, action to regain control of territory 4.31516
stabilization clause and 1.324
treaty compliance and 6.245
Spain
burden of proof, existence of loan 5.435
contract, formation 5.437
environment, measures for the protection of 5.4323
law of
Civil Code
Art. 1214 5.435
Art. 1262 5.437
Law 30/1992 of 27 November 1992 (Public Administrations and Common
Administrative Procedure) 5.428
Law 6/1997 of 14 April 1997 (State commercial organizations) 5.428
Law 1/1999 of 5 January 1999 (capital venture entities) 5.4289
State agency, employee/official distinguished 5.441
State agency status
public business entities/State commercial corporations distinguished 5.4289
SODIGA 5.41217, 42730
specific performance, impossibility 2.3701
Sri Lanka
Constitution, Art. 157 (incorporation of treaties) 3.319, 4.256, 299, 31718
Tamil Tigers, combat action 4.2735
treaties, domestic law, part of 2.299, 4.256
Sri LankaUK BIT (1980)
Art. 2, text 4.300
Art. 2(2) 4.26772, 2768, 296, 3007
Art. 3 4.2601, 265, 2923, 296
Art. 3(1) 4.356
Art. 3(2) 4.356
Art. 4 4.3007, 356
text 4.251
Art. 4(1) 4.2678, 2712, 2758, 28990, 2967, 3004, 30712, 31719
Art. 4(2) 4.2678, 2712, 2738, 2956, 3014, 3067, 314, 315, 31719
669
670
CUMULATIVE INDEX
Sri LankaUK BIT (1980), cont.

Art. 8(1) 4.250, 2978
text 4.251
Art. 8(3) 4.251
customary international law 4.2667, 300, 3014, 307
Hong Kong, extension to (Exchange of Notes of 14 January 1981) 4.2501
standard of treatment, customary international law 4.267
Sri LankaUS BIT (1991) 6.311
Art. 1 (applicability) 6.321
Art. 1(1)(a) (investment) 6.324, 3256
Art. 2(2) (fair and equitable treatment/investment) 6.322
Art. 6(1)(a) (investment agreement) 6.321
Art. 6(1)(b) (investment authorization) 6.321
Art. 6(1)(c) (consent to jurisdiction) 6.321
stabilization clause 1.321, 324, 2.368. See also intangibility clause
basis
agreement of parties on international juridical plane 1.324
sovereignty 1.324
consensual nature 1.324
definition 6.26
expropriation and 1.324
nationalization, validity 1.324
sovereignty, effect on 1.324
standard of treatment of alien
customary international law 2.3045, 308, 310, 4.2667, 26972, 2768,
2513
evolution 6.218, 2214, 5279
as reference point 6.223, 527
transparency 5.253
degree of security reasonably expected 4.279
due diligence 4.270, 27782, 3012, 3056, 314, 317
presumption of compliance 4.312
exhaustion of local remedies rule and 6.216
fair and equitable 4.305, 6.111, 11317
arbitrary act and 6.531
bad faith, relevance 6.222, 299300
BITs, general adoption by 6.222
illegality under domestic law, relevance 6.5323
minimum international standard 6.299300
NAFTA (1992) 5.2269, 2434
as objective standard 6.223, 300 n. 91
transparency, need for 5.436
intangible property rights and 6.216
jurisprudence
Blumenkson 4.313
ELSI 4.269, 271, 304, 6.219
Home Insurance Company 4.280
Kummerow 4.279
Neer 6.2212
CUMULATIVE INDEX
671
standard of treatment of alien, jurisprudence, cont.

Sambiaggio 4.269, 271, 304
Spanish Zone of Morocco claims 4.2789
United States Diplomatic and Consular Staff in Tehran (Judgment) 4.304
Upton 4.313
Victor A Ermerins 4.280
legislative change, legislative guarantee of protection 6.27. See also intangibility clause;
stabilization clause
minimum international standard 4.270, 277, 3056, 5.2930, 6.299300
most constant protection and security 4.269, 3056
most favoured nation. See most favoured nation treatment (MFN)
national treatment 4.3012, 30810, 315
evidence of differential treatment, need for 6.51820
minimum standard and 5.2512, 6.299300
non-discrimination 4.316, 6.41
objective 4.2801, 284
preventive measures, obligation 4.285, 5.2930
protection of investment and physical protection distinguished 6.2212
protection and security by international law 4.266, 26971, 277, 3046,
5.2930
strict liability 4.26971, 296, 3046, 318, 6.3940
transparency, customary international law 5.253
treaty provision 4.26678
standing. See NAFTA arbitral tribunal, standing; proper party
State, constituent states distinguished 5.11920
State agency. See also agency; constituent subdivision or agency as party to the proceedings
assimilated to State, whether 1.374
control 1.374
breach of obligation by government, joint attribution 3.75
classification as. See also as separate entity below
applicable law
domestic law 1.351
international law [of State responsibility] 5.415, 6.407
central bank 1.374, 6.291
juridical personality, relevance 6.407
privatization/commercialization policy and 5.341, 430
public business entities/State commercial corporations distinguished 5.4289
rebuttable presumption 5.41314, 4278
test
corporate veil and 5.414
functional. See nature of activities below
nature of activities 5.1415, 3402, 41317, 429
object and purpose 6.409
State control. See State control and State ownership below
structure 5.41314, 4279, 6.4089
debt, obligation of government to meet 1.321
employee/official distinguished 5.441
672
CUMULATIVE INDEX
State agency, cont.

as juridical person for purposes of ICSID jurisdiction 5.33940
as separate entity. See also classification as above
accounts governed by company law 3.89
legal personality 3.7, 89, 6.409
ownership of assets 3.7, 89
relevance 6.409
State control 5.413
Board membership 6.4089
State ownership 5.413, 415, 416
majority shareholding 6.4078
State responsibility and. See State responsibility, acts and omissions of, State
agency
State contract. See also administrative contract; concession; foreign
investment; investment licence; joint venture agreement
annulment. See also termination below; joint venture agreement, repudiation
grounds
breach of international convention 3.2246
illegality under domestic law 3.208
misrepresentation 3.21619
administrative law 2.218, 221, 3.304
investment contract rules 3.64
approval, need for
compliance with procedures established by State agency as 6.412
ministerial 2.21819
nullity in absence of 2.220, 2846
presidential 2.220, 2846
breach
damages 1.3267, 2.24772
dispute relating to, right to refer to arbitration 2.363
failure to
ensure payment for supplies 1.354
grant preferential tax status 1.3523
meet obligation to pay debts of State agencies and quasi-agencies 1.321
provide finance 1.352
replace contracting party as guarantor 1.31920
take protectionist measures 1.3534
nationalization compared 1.468
notice, need for 2.362, 3689
failure to give, effect 2.364, 369
repudiation of obligation to supply petroleum 1.320
classification as 2.221 n. 233
commercial stability, importance 2.2256
drafting errors 2.210, 211, 214
CUMULATIVE INDEX
State contract, cont.
equality of parties 2.222, 299, 368
estoppel 1.408
expropriation and 1.4668
good faith and 1.672, 6756
interpretation
aids
context 2.207
preamble 2.2078, 210
third party agreement 2.218
title 2.21415
good faith 1.6724, 6756
guidelines 1.6725
agreement as a whole 2.215
parties intention 2.208
object and purpose, recital of objects, whether conclusive 2.215
nature
contract, whether 1.4608
private law contract distinguished 1.466
sovereign act 1.323, 324, 2.386
pacta sunt servanda 1.4923, 6.26
protection of private party 1.4713
restitutio in integrum. See restitutio in integrum, State contract
separability 1.675
stabilization clause. See stabilization clause
sub-contract
approval, need for 2.261
liability for costs incurred 2.25864
res inter alios acta 2.261
subsequent agreement, interrelationship 2.20921, 31517, 321
termination
damages 1.468, 2.224, 225, 226 n. 31, 230, 24772
declaratory 2.224
equality of parties 2.222, 229, 368
governments power of 2.2226
notice, need for 2.225, 230, 323
premature 1.450
public interest 2.222, 6.43
as sanction 2.222, 324
for serious breach 2.225, 248, 249
without breach 2.225, 248, 249
unilateral modification, 1.323. See also stabilization clause
validity
power of judge to raise ex proprio motu 2.2846
State corporation. See State agency
673
674
CUMULATIVE INDEX
State entity. See constituent subdivision or agency as party to the proceedings; State
agency
State immunity. See also diplomatic immunity; Vienna Convention on Diplomatic
Relations (1961)
access to courts, effect on right of 6.2301
classification of act 4.39
contractual undertaking 4.212
contractual obligations, governments obligation to observe 6.2278
diplomatic immunity distinguished 2.393, 396
estoppel 4.1920
restrictive 4.39
waiver
agreement to arbitration 4.1617
ICSID Convention 2.3868, 394
implied, general principle of international law 3.68
waiver of proceedings to compel arbitration 4.19 n. 19
State immunity from execution/attachment
arbitral award, recognition and enforcement and 1.36972, 2.340, 341, 4.11213,
11516, 6.475
exequatur 2.340, 341
assets
need for segregation, whether 1.369
protection, need for authorization 1.369
public and commercial distinguished 1.369, 4.40
authorization for measures of execution or safeguarding measures, need for 1.36972
embassy bank account 2.3923, 396. See also assets above
held in receiving State 2.3923
separability 2.3956
exequatur as execution measure 1.371
obligation to comply with treaty obligations, effect on 4.11516
waiver
submission to arbitral proceedings 2.341
State immunity from jurisdiction. See also act of State
immunity in own courts distinguished 6.230
intentional tort
protection and security of investment and 6.22934
rationale 6.2312
protection and security of investment, State responsibility and 6.22934
waiver
arbitration in foreign country, agreement to 4.1620
authorization of acts of third party 4.267
CUMULATIVE INDEX
675
State immunity from jurisdiction, waiver, cont.

defence on merits as 3.85
enforcement role of domestic courts, relevance 4.1921
express, need for 3.678, 177, 181
objection to 1.528, 3.85
participation in mixed economy company 4.16 n. 13
right to 1.409
submission to arbitral proceedings 3.57, 668, 1612, 177
State practice
expropriation 1.323
foreign investment, definition 6.3212
procurement 6.531
security/cautio judicatum solvi 6.396
standard of treatment of alien 4.280
State responsibility, standard of protection 4.280
State responsibility 1.4589, 499, 525, 4.26787. See also protection and security of
property, State responsibility; standard of treatment of alien
acquired rights, withdrawal 1.4934
acts and omissions of
armed forces 1.45760
commercial enterprise acting on behalf of 1.45660
central bank 5.4336
constituent State acting independently 6.5256
during revolution. See revolution below
financial regulatory authority 6.175, 1769
joint venture 5.88
judicial authorities 1.453, 498, 5.28990, 4758, 6.209. See also for, denial of justice
below
courts own action as source of challenge and its handling of action of another
branch of government distinguished 6.216
local authorities 5.2269, 230, 2445
officials, improper acts 6.179
persons in uniform acting as individuals 5.34, 402
political subdivision 5.313. See also for, failure to take remedial action in respect of
acts of officials of political subdivision below; constituent subdivision or agency as
party to the proceedings; protection and security of investment, State responsibility
applicable law, contract and treaty distinguished 6.3657
private bank 5.4336
private persons 6.2212
improper acts 6.179
revolutionaries. See revolution below
security forces outside armed combat 4.268, 5.312, 335, 402
State agency 1.3512, 5301, 5.4306, 6.291
quasi-State agency 1.3512
676
CUMULATIVE INDEX
State responsibility, cont.

amnesty or pardon, relevance 5.345
applicable law
customary international law 4.2667, 26972, 2768, 282
domestic law 4.278
ILC Articles on State Responsibility (2001) 6.3656
international and domestic law, role distinguished 6.3657
treaty 4.2634, 6.365
attribution
appropriateness of term 6.346 n. 17
standard of liability, relevance 5.317, 6.346 n. 17, 3478, 3689
breach
damages 4.2767, 28794, 3004, 30811, 5.312
compensation for expropriation/nationalization distinguished 4.291, 3012,
31718, 5.33, 42
defence
corruption of other party 6.1224, 13940, 143, 150
domestic law 5.31, 6.3656
reparation distinguished 6.209
burden of proof 4.2726, 5.39, 85, 6.111, 124, 1278
damages 4.3004
national security 4.317
exhaustion of local administrative or judicial remedies and 1.5257, 5.301
waiver 1.526
fault, relevance 5.40, 6.3940
federal States. See federal States, State responsibility; procurement (NAFTA)
for. See also acts and omissions of above; obligations below
continuing wrongful act 6.206, 20810
continuing loss or damage distinguished 6.206
damage caused by interference in running of company 1.3534
denial of justice 1.453, 5.290, 6.216, 2256
effects of environmental impact assessment required by law 5.4323
failure of State to take remedial action in respect of acts of officials of political
subdivision 5.3236, 6.3467, 364
exhaustion of available remedies and 5.324, 6.347, 34850, 3634
failure to notify political subdivision of breach of international obligations 5.325
failure to provide adequate protection to alien 4.2801, 6.245, 434, 45
failure to renegotiate concession agreement 5.3223
failure to force political subdivision to do so 5.3245
financial information provided by State agency 5.4302, 6.1789
investment guarantee in absence of legislative provision 6.175
judicial act. See also acts and omissions of, judicial authorities; denial of justice above
legitimization of wrongful act 1.4589, 5267
legislative act, strict liability 6.3940
loss during war or civil disturbance not attributable to State 4.3001, 30714, 5.401
negligence in supervision of finance company 6.175, 1769
tort 1.5278
contractual responsibility compared 1.499
transfer of funds on authority of State agency 5.4346
CUMULATIVE INDEX
677
State responsibility, for, cont.

treaty, breach
continuing wrong 6.20810
obligation in force at time of alleged breach, limitation to 6.208
ultra vires act 3.2089, 5.226, 230, 245, 6.532
unilateral termination of State contract 1.454
unlawful act
damages for 1.600
ILC Draft Articles on the International Responsibility of States for Injuries to
Aliens 1.600
illegality under domestic law 3.2089
withdrawal of investment licences 1.4904
forum selection clause, relevance 6.3668
Harvard Draft Convention on the International Responsibility of States for Injuries to
Aliens (1961) 6.119 n. 242
justification
force majeure 4.316
national security
constitutional provision 4.317, 319
treaty provision 4.317
necessity 4.2678, 2746
principle and application distinguished 1.5813
revolution 4.268, 2835, 5.31. See also standard of treatment of alien, preventive
measures, obligation
counter-insurgency activities 4.278, 31417
damage caused by government forces or authorities 4.268, 273
caused unnecessarily 4.268, 2745, 31314, 31516
evidence of 4.2745, 2867, 2967, 317
wanton destruction 4.31314, 31516
failure to provide proper standard of protection 4.27887
negligence, relevance 4.2813
justification, force majeure 4.316
police power 4.316
revolutionaries 4.2678
recognition, relevance 4.31213, 315
treaty provision 4.268, 5.31
State succession
continuity of laws 1.318, 325
treaty concluded pre-division of State, entry into effect 5.3446
statutory limitation
attachment proceedings 4.49
ICSID proceedings and 5.438, 6.1201
stay of proceedings. See also arbitral award, recognition and enforcement, stay; attachment
proceedings, stay; provisional measures, stay
concurrent jurisdiction, pending decision 3.12930, 2512
comity 3.129
discretion 3.129
objection to ICSID jurisdiction and 5.480, 486
waiver of right to initiate or continue domestic proceedings (NAFTA (1992)) 5.4723
678
CUMULATIVE INDEX
strict liability
standard of treatment of alien 4.26971, 296, 3046, 318, 6.3940
acts of political sub-division 5.317, 6.346 n. 17, 3478
legislative act 6.3940
supplemental decision. See arbitral award, rectification; arbitral award, supplementary
decisions
supplementary reasons for judgment. See arbitral award, review by domestic courts,
supplementary reasons for judgment
SwedenLithuania BIT (1992), nationality (juridical person), control test (piercing the
corporate veil) 6.211
Switzerland
applicable law
arbitral award 4.44
State contract 4.39
State immunity, customary international law 4.39
arbitral award, recognition and enforcement
basis, evidence of debt 4.50
choice of law, parties freedom 4.44
exequatur 4.12
ICSID award as 4.50
judgment of sister State as 4.42
New York Convention on the Recognition and Enforcement of Arbitral Awards (1958)
(Art. 5(1)d)) 4.43, 44
part of the law of Switzerland 4.423
refusal, grounds, award set aside by competent tribunal 4.43
requirements
binding award 4.43, 44
conformity with arbitration agreement 4.43
good faith 4.501
arbitration, exclusion of alternative remedy 4.434
attachment proceedings 4.40
enforcement proceedings and 4.49
stay 4.4952
bad faith, arbitral award, recognition and enforcement, and 4.501
contract, validity where party not in existence at time of conclusion 5.146
corporation, applicable law 1.666
debt
basis of enforcement proceedings 4.50
evidence of 4.51
domestic courts, language of proceedings 4.42
exhaustion of local administrative or judicial remedies
arbitration and 4.44
foreign judgment, enforcement
executory status, declaration of 4.42
under international convention, domestic courts, role 4.42
CUMULATIVE INDEX
679
Switzerland, cont.
general principles of international law, exhaustion of local administrative or judicial
remedies 4.44
international law
sources
publicists, writings of 4.39
jurisdiction
competence of enforcement authority to determine 4.50
domestic court proceedings, waiver 4.434
exclusion, attachment proceedings 4.40, 51
nexus
applicable law 4.39
domicile of party to agreement 4.3940
place of performance 4.39
State contract 4.39
law of
C LPC, Art. 472(1) 4.42
Civil Code (ZBG), Art. 2, 4.51
Code of Obligations 1.666 n. 77
Debt Claims and Bankruptcy Law (LP)
Art. 17(2) 4.49
Art. 17(3) 4.49
Art. 81(3) 4.42
Art. 109 4.46
Art. 271(1)(4) 4.45
Art. 278 4.40, 42, 4952
Art. 278(1) 4.49
Art. 278(2) 4.49
Art. 278(3) 4.49
Art. 278(4) 4.51
discontinuance of domestic court proceedings 4.41
domestic courts, role, exclusion except by agreement 4.51, 52
responsibility, arbitral tribunal 4.43
suspension, competence of tribunal and 4.43
State immunity, applicable law, customary international law 4.39
State immunity from execution
acta jure gestionis 4.39
assets, public and commercial purpose distinguished 4.40
statutory limitation, attachment proceedings 4.49
treaties, applicability, non-party 4.39
SwitzerlandBolivia BIT (1987), nationality (juridical person), control test (piercing the
corporate veil) 6.211
T
taking. See expropriation
tax exemption, foreign investment 1.5067
tax fraud claim, as legal dispute arising directly out of investment 1.565
680
CUMULATIVE INDEX
tax returns as evidence of costs incurred 5.233

taxation, damages 6.212
third parties, contract. See contract, third party
time-limits 1.311, 338. See also NAFTA arbitral tribunal, time bar; statutory limitation
arbitral award 6.13
claim for annulment 1.528
default 1.339, 4.125
effect 1.339
delay in providing translation 5.216
disadvantages 2.136
extension 1.339, 342, 3434, 3.198, 199200, 4.834
grace period 6.15, 17
settlement on agreed terms and 6.1417
failure to comply, political upheaval as justification 1.344
failure to reply to claims 4.251
pleadings 1.339, 5.2813, 6.13, 756
submission of claim to ICSID 6.1202
absence 4.26970
as aid to interpretation of settlement on agreed terms 6.64
explanatory statements to legislature, whether 6.220
ICSID Convention 1.515, 518, 665, 3.8, 123, 5.1223, 189, 314, 33940, 6.334, 345,
381, 441, 443, 5556
questionable method 6.381
Vienna Convention on Diplomatic Relations (1961) 2.3945
treaties. See also BITs (bilateral investment treaties); settlement on agreed terms; treaty
interpretation; and individual treaties such as IranUS Treaty of Amity
(1955)
breach
justification, domestic law 5.225, 229
State responsibility for. See State responsibility, for, treaty, breach
compliance/implementation
cooperation, obligation 6.64
good faith obligation 5.225, 6.533
non-compliance as breach of international law 4.115, 6.34, 401
non-performance 6.65. See also settlement on agreed terms, non-performance
obligation of result 6.65
sovereignty and 6.245
State immunity, relevance 4.115
statements and conduct of parties
partys intention as known to other party 6.64
reasonable persons interpretation 6.64
domestic law
part of 4.2978, 356, 6.1389
primacy 5.278
subsequent legislation 6.139
entry into force. See also BITs (bilateral investment treaties) and individual treaties such
as IranUS Treaty of Amity (1955)
CUMULATIVE INDEX
681
treaties, entry into force, cont.

requirements 5.3446, 3789
notice of completion of formalities 5.3447
treaty concluded pre-division of State 5.3446
validity of treaty distinguished 5.345
federal States and. See federal States, treaties
note verbale, status 5.503
priority as between provisions 5.39
ratification, need for 5.345, 6.25 n. 16
retroactive, whether 6.206, 216
State succession and 5.3446
termination, for non-performance 6.65
third party and 4.39
dispute settlement provisions 5.40411
MFN treatment. See most favoured nation treatment (MFN)
pacta tertiis nec nocent nec prosunt 6.315
unilateral statement of intention to be bound 5.3467
treaties and similar international instruments reflecting customary international law, Vienna
Convention on the Law of Treaties (1969) 2.118, 6.2023
treaty interpretation. See also ICSID Convention (1965), interpretation; NAFTA (North
American Free Trade Agreement) (1992), interpretation; words and phrases
aids
context 4.129
annexes 5.481
other provisions of treaty 6.516
preamble and annexes 5.225
dictionary 5.40
exchange of notes 5.5026
other treaties 5.40910, 5001
analysis by negotiators 4.307, 3089, 319
draft 4.3056
previous 4.2656
subsequent 4.2656
parties conduct 4.2978
rules and principles of international law 4.2667, 270
subsequent to agreement 6.64, 334
parties established practices in their relations 6.64
relevant rules of international law applicable between the parties 5.225, 6.51516
travaux preparatoires. See travaux preparatoires
usage 6.64
writings of publicists 6.814
amendment distinguished 6.218, 2234, 5267
as aid 4.2656, 6.516
aid 4.2656
as applicable law 2.120, 6.516
as determining factor 5.41
682
CUMULATIVE INDEX
treaty interpretation, cont.

guidelines
actual/clear language 4.2635, 6.516
agreement between parties on 6.645
avoidance of the absurd 5.28
common usage 4.2645, 268, 269
in the relevant business 6.64
consistency 6.3334
customary international law as determining factor 5.41, 6.516
effectiveness 2.2656, 4.344, 5.42, 345, 365, 403
every element of treaty to be given effect 4.266, 270, 6.64
expressio unius est exclusio alterius 4.337 n. 9
fairness 4.2645, 268, 269
generalia specialibus non derogant 3.150, 306, 4.3024
Admissions Case 4.303
Payment of Various Serbian Loans Issued in France 4.3034
good faith 1.394, 5.225, 401, 451, 463, 6.64
international law written in 4.270
multilingual texts, conflict 6.66
natural and ordinary meaning 4.2645, 268, 269, 5.40, 225, 252
object and purpose 4.2723, 3445, 5.278, 40, 225, 6.64, 3334, 51516, 558
parties intention 1.394, 398, 6.64, 3334
in absence of direct evidence 6.81
reasonableness 4.337 n. 9, 6.64
spirit of treaty 4.26970
treaty as a whole 4.265, 273, 6.516
ICSID Convention. See ICSID Convention (1965), interpretation
lex generalis/lex specialis distinguished 6.516
phrases. See words and phrases
responsibility
courts 3.11
government in respect of international law questions 3.11
typographical error, relevance 5.28, 501
tribunal. See arbitral tribunal
turnkey project. See concession; foreign investment; investment licence; joint venture
agreement; State contract
U
Ukraine
Additional Facility, consent to arbitration under 6.62
foreign investment, non-discrimination, UkraineLemire settlement 6.64
UkraineUS BIT (1994)
Additional Facility, Ukraines consent to arbitration under 6.62
CUMULATIVE INDEX
683
UNCITRAL Arbitration Rules

place of arbitration 6.547
refusal to agree to arbitration under 5.69, 73
Rule 16 and related Notes on Organizing Arbitral Proceedings 6.454, 473
UNCITRAL Model Law of International Commercial Arbitration (Model Law)
commercial arbitration, definition 5.2468
remission to arbitral tribunal 6.56
UNESCO Convention for the Protection of the World Cultural and Natural Heritage (1975)
3.2449, 3334
jus cogens 3.2589
listing under, declaratory effect 3.259
unilateral declaration, effect 5.3467
United Kingdom, contract, validity where party not in existence at time of conclusion
5.13740
United Nations General Assembly Resolutions
1710 (XVI) (Development Decade) 3.2545
1803 (XVII) (compensation for expropriation) 3.255
United States of America (USA)
act of state, arbitral award, recognition and enforcement 2.388
arbitral award, recognition and enforcement 2.3859, 3916
arbitral procedure law, suitability under NAFTA Art. 1136(7), review of award,
provision for 6.4558
arbitration, compulsion, domestic courts power of 4.1920
Code (USC), ss 16501650a (ICSID Convention (1965), implementation) 4.18, 19 n. 19
commercial activity
acts of agent 4.4218
carried on in the United States by a foreign State 4.219
collection of shipping fees and taxes 2.3889
having substantial contact with the United States. See jurisdiction, nexus below
disclosure obligation (FRCP, Rule 34(b)) 6.4634, 480
domestic courts, appeal on factual findings 4.1617
estoppel, acknowledgment of State immunity 4.1920
evidence of, agency 4.256
expropriation, Helms Amendment 5.1623
Foreign Sovereign Immunities Act (FSIA)
legislative history, attribution to State of acts of agent 4.223
phrases
commercial activity. See commercial activity above
direct effect in the United States. See jurisdiction, nexus below
law of a particular country 4.18
Sections
1330(a) 4.15
1330(b) 4.15, 27
1603(a) 2.394
1603(d) 4.212
1603(e) 4.212
1604 2.387
1605(a)(1) 4.15, 16 n. 13, 1820
1605(a)(2) 4.15, 16 n. 13, 2031
684
CUMULATIVE INDEX
United States of America (USA), Foreign Sovereign Immunities Act (FSIA), cont.
1606(a)(1) 4.1518
1609 2.387, 393
1610 2.387
1610(a) 2.3889, 3934
1611(b)(1) 2.396
Vienna Convention on Diplomatic Relations (1961) and 2.393 n. 4
waiver of immunity
implied 4.16, 18
withdrawal 4.16 n. 13
jurisdiction
nexus
benefit from acts in forum State 4.267
direct and foreseeable result of conduct outside territory 4.2931
minimum contacts 4.289
substantial contact with the United States 4.289
personal
attribution to State of acts of agent and, authorization by State, need for 4.247
due process requirement 4.234
State immunity exception distinguished 4.23, 26 n. 32
subject-matter
action between foreign company and foreign State 2.388
dependence on personal jurisdiction 4.15
law of
22 USC 2378 (Helms Amendment, 30 April 1994) 5.1623
Buy America requirements (23 CFR Section 635.410)
compatibility with NAFTA national treatment provisions 6.51820, 52633
extracts 6.4878
Clean Water Act (33 USC 1251 ff)
highway construction projects distinguished 6.5234
s 1281(h)(1)(3) 6.5234
s 1295 (Buy America) 6.4967
Federal Arbitration Act
arbitral award, recognition and enforcement 4.19 n. 19
s 305, Inter-American Convention on International Commercial Law (1975)
(Panama Convention)/New York Convention on the Recognition and Enforcement
of Arbitral Awards (1975), applicability 6.5434
suitability under NAFTA 6.4558
Freedom of Information Act (5 USC 552)
Additional Facility Rules (Arbitration) and 6.1901
arbitration proceedings in third country and 6.1867
FSIA. See Foreign Sovereign Immunities Act (FSIA) above
General Corporation Law (Delaware) 1.562
Massachusetts Tort Claims Act (PL 258), s 10(c) 6.229
Surface Transportation Assistance Act (STAA) 1982, Section 165, extracts 6.487
Uniform Commercial Code, Sections 1106 1.500
legislation, extraterritorial 4.2931
CUMULATIVE INDEX
685
United States of America (USA), cont.

aids
legislative history 4.1617, 28 n. 40
New York Convention on the Recognition and Enforcement of Arbitral Awards (1958),
applicability, limitation to commercial disputes 6.4745
under national law 6.4556
Restatement of Agency (Second) (1958)
s 1 4.24
s 26 4.245
Restatement of the Law of Contracts (Second), s 344 (restitutio in integrum) 1.500
Restatement of the Law of Foreign Relations (Second), s 18 (extraterritorial legislation)
4.2931
Restatement of the Law of Foreign Relations (Third), measure of damages 1.600
State immunity
classification of act
contractual undertaking 4.212
nexus. See jurisdiction, nexus above
State immunity from execution/attachment. See also Foreign Sovereign Immunities Act
(FSIA) above
arbitral award, recognition and enforcement 2.3859, 3916, 6.475
diplomatic immunity distinguished 2.393, 396
embassy bank account 2.3926
FSIA 2.3935
separability 2.3956
waiver
agreement to arbitration 4.1617
ICSID Convention 2.3868, 394
State immunity from jurisdiction
commercial activity. See commercial activity above
intentional tort
protection and security of investment and 6.22934
rationale 6.2312
waiver
arbitration in foreign country, agreement to 4.1620
authorization of acts of third party 4.267
enforcement role of domestic courts, relevance 4.1921
participation in mixed economy company 4.16 n. 13
treaties, domestic law, application in, Vienna Convention on Diplomatic Relations
(1961) 2.1923
VDOTShirley Contract
Section 102.05, text 6.4889
STAA 1982, s. 165 and 6.489
unjust enrichment 1.453, 507, 535, 6078
as basis for damages 4.1078
as offset 3.2467
686
CUMULATIVE INDEX
USZaire BIT (1984)

Art. I 5.245
Art. II 5.27
Art. II(4) 5.2933, 38
Art. III 5.334, 38
Art. IV 5.27
Art. IV(1) 5.389
Art. IV(1)(b) 5.31
Art. IV(2) 5.3942
exceptional nature 5.42
Art. IV(2)(b) 5.312, 334
Art. VII(2) 5.25
Art. VII(3) 5.256, 28
Art. VII(4) 5.26
Art. VIII 5.267
Art. IX 5.278
consent to jurisdiction, whether 5.256
interpretation or application of this Treaty 5.267
investment 5.245
object and purpose, reciprocal encouragement and protection of investment 5.40, 6.113
priority as between provisions 5.39
protection and security of investment, State responsibility 5.2930
as source of applicable rules of international law 5.22
V
valuation. See damages, measure/valuation of company
Venezuela
AucovenMinistry of Infrastructure Concession Agreement (1996)
Clause 7 (transfer of Aucoven shares, approval) 6.438
Clause 63 (dispute settlement), text 6.4345
Clause 64 (consent to ICSID jurisdiction)
fulfilment of condition 6.446
national of another Contracting State, agreement to treat as 6.4367
text 6.435
conditions
automaticity on fulfilment 6.438, 446
transfer of Aucoven majority shares to a national of another Contracting State
6.438, 446
place of arbitration, change 6.447
Law on Public Credit 1983 5.1989
as applicable law in investment dispute 5.206
promissory notes, status 5.1989
Vienna Convention on Diplomatic Relations (1961)
Art. 22(3) 2.3923
Art. 24 2.393
Art. 25 2.3923
Art. 31 2.33
domestic law, effect on Convention 2.393 n. 4
CUMULATIVE INDEX
687
Vienna Convention on Diplomatic Relations (1961), cont.

embassy bank account, immunity from attachment 2.3926
interpretation
aids, preamble 2.392
guidelines, parties intention 2.392, 393
phrases, full facilities for performance of the functions of the mission 2.3923
Vienna Convention on the Law of Treaties (1969)
Art. 24(1) 5.345, 378
Art. 26 5.225, 229
Art. 27 5.225, 229, 243
Art. 28 6.208
Art. 31 4.263, 5.401, 451, 463, 6.516 n. 153
Art. 31(1) 4.337 n. 9, 5.40, 190, 225, 243, 252, 349
Art. 31(2)(a) 5.225
Art. 31(2)(b) 5.481
Art. 31(3) 5.225, 6.334
Art. 31(3)(c) 4.2656
Art. 32 6.516 n. 153
Art. 32(b) 4.337 n. 9
Art. 34 6.315
Art. 35 6.315
Art. 36 6.315
Art. 46 5.345
customary international law 2.118, 6.2023
W
waiver. See NAFTA arbitral tribunal, waiver of right to initiate or continue domestic
proceedings; State immunity, waiver; State immunity from execution/attachment,
waiver; State immunity from jurisdiction, waiver
war. See combat action; war or other armed conflict, revolution, a state of national
emergency, revolt, insurrection or riot in the territory [or act of violence]
war or other armed conflict, revolution, a state of national emergency, revolt, insurrection
or riot in the territory [or act of violence] 4.275, 5.31, 39
witnesses
contact with other partys 5.2801
credibility 5.2934
objection to 5.76, 85
obligation to call, tribunals discretion 6.1445, 189
refusal of visas to 5.745
words and phrases not clearly attributable to a specific heading
accessoire ou conservatoire 3.184
acte sous condition 1.465
affectio societatis 3.299
arising on a matter contained in this agreement 4.1301
autorite en tutelle 3.60, 75
carry out (assurer) 2.10910
688
CUMULATIVE INDEX
words and phrases not clearly attributable to a specific heading, cont.

collusion 4.2001, 22831, 23942
competition 4.203, 2057
competition in a market 4.2037
interdependence with market 4.203
conciliation or arbitration 3.156, 16970, 1712, 1856
conditio resolutoire 1.465
Crown avoidance 4.228, 2369
damnum emergens. See damages, measure/valuation of company, loss suffered
defaut de consentement 2.59
degree of security reasonably expected 4.279
dispute arises 5.646
dispute under this agreement 4.12933
dol 2.59
dolus 3.72
droit commun 3.169
employee/official distinguished 5.441
error in judicando 2.118, 142
exceptio non adimpleti contractus. See contract, obligations
exceptio non rite adimpleti 2.64
fair and equitable treatment. See standard of treatment of alien, fair and equitable
fin de non-recevoir 1.675
forces 5.402
foreign control. See nationality (juridical person), foreign control
full facilities for performance of the functions of the mission 2.3923
full international legal personality 4.1819
gestion privee 1.322
hardship 6.65
in New Zealand 4.17881
in respect of any matter agreed to be referred 4.128
in respect of any matter to which the proceedings pursuant to the Convention relate
4.128
inaudita altera partita 3.73
incidental or additional claims 5.2578, 6.51415
interpretation or application of this Treaty 5.267
juridictions nationales/domestic courts 6.3556
law of a particular country 4.18
lex Aquila 4.278
likely effect 4.203, 20913, 2412
lis pendens 1.340
loss or damage 6.21314
losses suffered 4.275
lucrum cessans. See damages, lost profit
manifest, 2.97, 98, 100, 104, 116, 4.857, 6.1356, 336, 338 n. 14. See also
disqualification of conciliator or arbitrator, grounds, manifest lack of Article 14
qualities; jurisdiction (ICSID), not manifestly outside the jurisdiction of the
Centre
market 4.2035, 21328
measure 5.230, 242, 4656
CUMULATIVE INDEX
words and phrases not clearly attributable to a specific heading, cont.
measure depriving of and restricting property 6.414
minerals 6.389
more probable than not 4.209, 21112
novus actus interveniens 1.607
obligation de moyen 2.812, 1438
obligation de resultat 2.81, 1438
other remedy 4.689
persons 4.183
prejudice moral 1.3601, 3645
principal ou aggressive 3.184
protection and security by international law 4.266, 26971, 277, 3046, 5.2930
real possibility 4.209, 21112, 213, 2412
reasonable price 4.196
shall be 3.1479, 1746
shall be adjusted 4.182
situation de fait 3.331
situation juridique 3.181, 331, 332
siyadat et kamoun 3.65
specialite legislative 4.945
stipulation pour autrui 1.325, 374
subject matter of the dispute 6.45960, 477
substantial 4.2089
substantially lessening 4.2412
sufficiently pertinent 1.5201
trade 4.202
usus loquendi 4.2645, 2689
ut res magis valeat quam pereat 1.674, 4.187
vices caches 2.60
with respect to 5.46970
within the framework of the Convention... where it applies 3.1523, 1546
World Bank Guidelines on the Treatment of Foreign Direct Investment (1991), direct
investment, whether limited to 5.196
written consent to arbitration. See consent to ICSID jurisdiction
Z
Zaire. See USZaire BIT (1984)
689

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This volume may be cited as: 6 ICSID Reports

cambridge university press

978-0-511-19456-6 eBook (EBL)

Table of Cases Reported in Volume 6

Table of Cases Reported in Volumes 16

Digest of Cases Reported in Volume 6

Decision on Jurisdiction, 29 June 1999

Award, 8 December 2000

Decision on Annulment, 5 February 2002

Award, 26 July 2001

Miscellaneous Procedural Orders

Award, 11 October 2002

Genin and Others v. Republic of Estonia (Case No. ARB/99/2)

Award, 25 June 2001

Decision on Claimants Request for Supplementary Decisions and

Mihaly International Corporation v. Democratic Socialist Republic of

Award, 15 March 2002

Compana de Aguas del Aconquija SA and Vivendi Universal v.

Decision on the Challenge to the President of the Committee,

Decision on Annulment, 3 July 2002

Casado and President Allende Foundation v. Republic of Chile

Procedural Order No. 2 Concerning the Place of Arbitration, 11 July

Procedural Order No. 3 Concerning the Production of Documents,

Award, 9 January 2003

Waste Management Inc. v. United Mexican States (No. 2)

Decision on Venue of the Arbitration, 26 September 2001

Decision on Preliminary Objection, 26 June 2002

ANNEX AND INDEX

Cumulative Index, Volumes 16

An index (consolidated in each succeeding volume) is published at the end of

Autopista Concesionada de Venezuela CA v. Bolivarian Republic of

Casado and President Allende Foundation v. Republic of Chile

Compana de Aguas del Aconquija SA and Vivendi Universal v.

Goetz and Others v. Republic of Burundi (Case No. ARB/95/3)

Lemire v. Ukraine (Case No. ARB(AF)/98/1)

Mihaly International Corporation v. Democratic Socialist Republic of

TABLE OF CASES REPORTED IN VOLUME 6

Award, 15 March 2002

Mondev International Ltd v. United States of America

Olgun v. Republic of Paraguay (Case No. ARB/98/5)

Salini Costruttori SpA and Italstrade SpA v. Kingdom of Morocco

United Mexican States v. Metalclad Corporation

Waste Management Inc. v. United Mexican States (No. 2)

Wena Hotels Ltd v. Arab Republic of Egypt (Case No. ARB/98/4)

AGIP SpA v. Government of the Peoples Republic of the Congo

Amco Asia Corp., Pan American Development Ltd and PT Amco

American Manufacturing and Trading Inc. v. Republic of Zaire

Asian Agricultural Products Ltd [AAP] v. Democratic Socialist

Atlantic Triton Company Limited v. Peoples Revolutionary

The figures in bold type refer to the volume number.

TABLE OF CASES REPORTED IN VOLUMES 16

France, Cour dappel, Rennes, 26 October 1984

Autopista Concesionada de Venezuela CA v. Bolivarian Republic of

Azinian, Davitian and Baca v. United Mexican States

Benvenuti and Bonfant srl v. Government of the Peoples Republic

Cable Television of Nevis Ltd and Cable Television of Nevis Holdings

Casado and President Allende Foundation v. Republic of Chile

Ceskoslovenska Obchodni Banka AS v. Slovak Republic

a del Desarrollo de Santa Elena SA v. Republic of Costa Rica

Fedax NV v. Republic of Venezuela (Case No. ARB/96/3)

TABLE OF CASES REPORTED IN VOLUMES 16

Decision on Objections to Jurisdiction, 11 July 1997

Genin and Others v. Republic of Estonia (Case No. ARB/99/2)