Team Klæstad: Written Submissions For The Respondent

T E A M K L ÆS T A D
IN THE ARBITRATION INSTITUTE
OF THE STOCKHOLM CHAMBER OF COMMERCE
CASE SCC NO 00/2013
CALRISSIAN AND CO., INC.
(CLAIMANT)
VERSUS
THE FEDERAL REPUBLIC OF DAGOBAH

(RESPONDENT)
WRITTEN SUBMISSIONS FOR THE RESPONDENT

Written Submissions for the Respondent KLÆSTAD
CONTENTS
TABLE OF ABBREVIATIONS ....................................................................................................... iv
TABLE OF AUTHORITIES ............................................................................................................ vi
STATEMENT OF FACTS ................................................................................................................ 1
ARGUMENTS ADVANCED
PART - I
JURISDICTION AND ADMISSIBILITY
I THE SOVEREIGN BONDS HELD BY THE CLAIMANT ARE NOT PROTECTED INVESTMENTS
WITHIN THE CORELLIA-DAGOBAH BIT. ...................................................................................... 4
A. The bonds do not fulfill the definition of investment under the BIT. ............................. 4
i. Sovereign bonds do not fulfill the chapeau given in Art. 1. ......................................... 4

ii. Bonds are absent from the laundry list and hence there is no indication that bonds
are protected within the BIT. ....................................................................................... 7
B. The investment is not made in the territory of the Respondent. ..................................... 8
i. There is no direct flow of capital within the territory of the Respondent. ................... 9
ii. The Respondent State has no relation with the bondholders. .................................... 10
II THE PCA AWARD HAS NO BEARING ON THE PRESENT PROCEEDINGS. .............................. 12
A. The PCA Award is not binding on this Tribunal. ......................................................... 12
i. Decisions under Art. 7 are binding only on State Parties ......................................... 12

ii. The Award does not amount to an agreement between the parties. .......................... 14
iii. The Award cannot amount to an amendment of the BIT. .......................................... 15
B. The award has limited persuasive value ....................................................................... 15
i
III THE TRIBUNAL CANNOT AND IN ANY CASE, SHOULD NOT EXAMINE THE PRESENT
CLAIM ON MERITS GIVEN THE PARTIES’ AGREEMENT TO SUBMIT DISPUTES EXCLUSIVELY TO
COURTS OF DAGOBAH. ............................................................................................................. 17
A. The FSC is a withdrawal of Respondent’s consent to arbitrate disputes arising from

bonds before this Tribunal.................................................................................................... 17
B. The FSC covers the present claim. ............................................................................... 18

i. The FSC is wide enough to cover any claims arising from the bonds. ...................... 19
ii. In any case, the FSC grants exclusive jurisdiction over contractual claims to Courts
in Dagobah. ............................................................................................................... 19
C. Alternatively, the Tribunal should not admit the Claim in favor of the jurisdiction of
Courts in Dagobah. ............................................................................................................... 21
i. The Tribunal should defer to the sanctity of the Contract. ........................................ 21

ii. The Contract constitutes lex specialis. ...................................................................... 21
iii. A preliminary determination of Contract rights is essential before a BIT claim may
be raised..................................................................................................................... 22
PART - II
LIABILITY
IV THE SOVEREIGN DEBT RESTRUCTURING UNDERTAKEN BY THE RESPONDENT DOES NOT

VIOLATE ITS OBLIGATIONS UNDER ARTICLE 2 OF THE 1992 BIT. ............................................. 23
A. There has been no violation of the standard of fair and equitable treatment. ............... 23
i. The FET standard is the same as the Minimum Standard of Treatment in CIL. ....... 23
ii. The measures taken by the Respondent are within its regulatory space ................... 24
iii. There is no violation of any “legitimate expectation” of the Claimant. ................... 24
iv. There is no denial of justice in the present case. ....................................................... 27
B. The measures undertaken by the Respondent State do not unreasonably or

discriminatorily impair the rights of the Claimant ............................................................... 28
C. There has been no violation of the full protection and security clause. ........................ 29
i. Full protection and security applies only to physical protection .............................. 29
ii. Alternatively, the restructuring does not violate FPS even if it is applicable. .......... 30
ii
V. THE RESPONDENT’S RESTRUCTURING MEASURES WERE PERMISSIBLE AS THEY FALLS

WITHIN THE CONDITIONS OF THE ESSENTIAL SECURITY INTEREST EXCEPTION UNDER ARTICLE
6 (2) .......................................................................................................................................... 31
A. The applicable conditions for taking advantage of Article 6 (2) are the same as under
Article XX of GATT ............................................................................................................ 31
B. The conditions for taking advantage of Article 6 (2) are not those under the CIL
doctrine of necessity ............................................................................................................. 32
i. Article 6 (2) is by its nature different from the CIL defense of necessity .................. 32
ii. Applying the CIL defense would be contrary to the lex specialis status of Article 6
(2) in the BIT .............................................................................................................. 33
iii. Applying the CIL defense would be contrary to the rule of effectiveness in treaty
interpretation ............................................................................................................. 33
C. The conditions for invoking Art. 6(2) have been met in the present case. ................... 34
i. The measures taken by the Respondent were to protect an interest of higher relative
importance than the conflicting interests .................................................................. 34
ii. The measures taken by the Respondent contributed to the protection of the
Respondent’s essential security interests................................................................... 35
iii. The measures taken by the respondent were the least restrictive or treaty
inconsistent ................................................................................................................ 35
D. In any case, the Respondent’s restructuring measures satisfied the conditions of the
CIL doctrine of necessity ..................................................................................................... 36
E. The Respondent has no obligation to pay compensation as the measures it took were
permitted under Article 6 (2)................................................................................................ 37
RELIEF SOUGHT ........................................................................................................................ xx
iii
TABLE OF ABBREVIATIONS
Abbreviation Full Form

ARB Arbitration
ARB Arbitration
ARfA Answer to the Request for Arbitration
Art. Article
BIT Bilateral Investment Treaty
BIT Bilateral Investment Treaty
CAC Collective Action Clause
CIL Customary International Law
Co. Company
ed. Editor/edition
Eds. Editors
FET Fair and Equitable Treatment
FSC Forum Selection Clause
GDP Gross Domestic Product
ICJ International Court of Justice
ICJ International Court of Justice
ICSID International Center for Settlement of Investment
Disputes
ICSID International Center for Settlement of Investment
Disputes
ILC International Law Commission
IMF International Monetary Fund
Inc. Incorporated
Inc. Incorporated
LLP Limited Liability Partnership
NAFTA North American Free Trade Agreement
No. Number
NPM Non Precluded Measure
OUP Oxford University Press
iv
Abbreviation Full Form

p. Page
P.C.I.J. Permanent Court of International Justice
¶ Paragraph
PCA Permanent Court of Arbitration
PO. Procedural Order
pp. Pages
Rep. Reports
Rep. Reports
SCC Stockholm Chamber of Commerce
SRA Sovereign Debt Restructuring Act
Supp. Supplement
U.K. United Kingdom
U.S.A. United States of America
UN United Nations
UN GAOR UN General Assembly Official Records
UNCITRAL United Nations Commission on Trade Law
UNCITRAL United Nations Commission on Trade Law
v. versus
v. Versus
VCLT Vienna Convention on the Law of Treaties
Vol. Volume
Vol. Volume
v
TABLE OF AUTHORITIES
CASES:
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No.
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viii

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ix

No.
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x

No.
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xi

No.
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xii

No.
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xiii

No.
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SCHOLARS:

No.
1 Burke-White, William W. Burke-White and Andreas von Staden,
Extraordinary Times Investment protection in extraordinary times: The
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2 Douglas ZACHARY-DOUGLAS, THE INTERNATIONAL LAW OF
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3 Francioni Francesco Francioni, Access to Justice, Denial of Justice
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4 Newcombe and ANDREW NEWCOMBE & LLUÍS PARADELL, LAW AND
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5 Nolan Nolan, The Interplay between State Consent to ICSID
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7 Paparinskis - Limits Martins Paparinskis, The Limits of Depoliticisation in
of Depoliticisation Contemporary Investor-State Arbitration, SELECT
PROCEEDINGS OF THE EUROPEAN SOCIETY OF
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8 Paulsson, Expert Op., Chevron Corporation and Texaco Petroleum Corporation
Chevron v. Ecuador v. The Republic of Ecuador, Expert Opinion of Jan
Paulsson, UNCITRAL, PCA Case No. 2009-23.
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Precedents Precedent in Investment Arbitration, TDM 3
(2008).
xv

No.
10 Reissman, Expert Republic of Ecuador v. United States of America, Expert
Opinion Opinion with Respect to Jurisdiction, Prof. W. Michael
Reisman, PCA Case No. 2012-5 (24 April, 2012).
11 Roberts Anthea Roberts, State-to-State Investment Treaty
Arbitration: A Hybrid Theory of Interdependent Rights
and Shared Interpretive Authority, 55, HARVARD
INTERNATIONAL LAW JOURNAL 1 (2014).
12 Roberts - Power and Anthea Roberts, Power and Persuasion in Investment
Persuasion Treaty Interpretation: The Dual Role of States, AMERICAN
JOURNAL OF INTERNATIONAL LAW, Vol. 104, p. 179,
(2010).
13 Roberts - Subsequent Anthea Roberts, Subsequent Agreements and Practice:
Agreements The Battle Over Interpretive Power, Treaties and
Subsequent Practice, (Georg Nolte ed., 2013).
14 Schreuer (FET Christoph Schreuer, Fair And Equitable Treatment (FET):
Standard) Interactions With Other Standards, INVESTMENT
PROTECTION AND THE ENERGY CHARTER TREATY 63
(Graham Coop & Clarisse Ribeiro eds., 2008).
15 Schreuer-Consent Christopher Schreuer, Consent to Arbitration, TDM, Vol
2, No. 5 (2005).
16 Snodgrass Elizabeth Snodgrass, Protecting Investors’ Legitimate
Expectations: Recognizing and Delimiting a General
Principle (2006) 21 ICSID Rev—FILJ 1.
17 Sornarajah SORNARAJAH MUTHUCUMARASWAMY, THE
INTERNATIONAL LAW ON FOREIGN INVESTMENT,
Cambridge (3rd Ed. 2010).
18 Spiermann Ole Spiermann, Individual Rights, State Interests and the
Power to Waive ICSID Jurisdiction under Bilateral
Investment Treaties, 20 ARBITRATION INTERNATIONAL 179
(2004).
xvi

No.
19 Stone Sweet, Alec Stone Sweet, Investor-State arbitration:
Proportionality Proportionality’s new frontier, 4(1) LAW AND ETHICS OF
HUMAN RIGHTS 47 (2010).
20 Vandevelde Kenneth J. Vandevelde, Unified Theory of Fair and
Equitable Treatment, NEW YORK UNIVERSITY JOURNAL OF
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MISCELLANEOUS:

No.
1 ASR Articles on State Responsibility, G.A. Res. 56/83, 56 UN
GAOR, Annex, Agenda Item 162, U.N. Doc.
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3 ASR Commentaries International Law Commission, Draft articles on
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Commission on the work of its Fifty-Third Session, UN
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6 Ecuador v. US, Republic of Ecuador v. United States of America,
Claimant Counter Counter-Memorial of the Claimant Republic of Ecuador
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7 GATT General Agreement on Tariffs and Trade, 1947, 55 UNTS

194.
10 ICJ Statute Statute of the International Court of Justice, June 26,
1945, 33 UNTS 993.
xvii

No.
11 ILC – Subsequent Commentary to Conclusion 2, International Law
Agreements Commission, Report of the 60-5th Session (2013),
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13 ILC Law of Treaties International Law Commission, Draft articles on the law
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Law Commission on the work of its Eighteenth Session,
UN Doc. A CN.4/191 at ¶ 38.
15 IMF Conditionality International Monetary Fund, Guidelines on
Conditionality, Prepared by the Legal and Policy
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Arrears to Private Creditors, June 14, 1999 (available at
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19 Kuwait-China BIT Agreement Between the Government of the People’s
Republic of China and the Government of the State of
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20 OECD 1984 “Intergovernmental Agreements Relating to Investment in
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21 OECD Draft OECD Draft Convention on the Protection of Foreign
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22 OECD Essential Organisation for Economic Cooperation and
Security Interests Development (OECD), Essential Security Interests Under
International Investment Law, in INTERNATIONAL
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A CHANGING WORLD (2007).
xviii

No.
23 OECD Fair and OECD, “Fair and Equitable Treatment Standard in
Equitable Treatment International Investment Law”, OECD Working Papers
on International Investment, 2004/03, OECD Publishing.
26 The Role of the IMF The Role of the IMF in Future Sovereign Debt
Restructurings, Report of the Annenberg House Expert
Group, USC Gould School of Law Center for Law and
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Legal Studies Research Papers Series No. 13-19.
28 US Model FCN United States Model Treaty of Friendship, Commerce and
Navigation (reproduced in Jose E. Alvarez, Political
Protectionism and United States International Investment
Obligations in Conflict: The Hazards of Exon-Florio, 30
VANDERBILT JOURNAL OF INTERNATIONAL LAW 1, Annex
A (1989-1990)).
30 US-Argentina BIT Argentina-United States Treaty Between the United
States of America and the Argentine republic Concerning
the Reciprocal Encouragement and Protection of
Investment, Washington, November 14, 1991, 31 I.L.M.
124 (1992).
xix
STATEMENT OF FACTS
Involved Entities
1. The Respondent is the Federal Republic of Dagobah (“Dagobah”), an emerging market.
2. Corellian Republic (“Corellia”), is a developed neighbouring nation of Dagobah, and has
close economic and diplomatic relations with it.
3. In 1992, the two countries entered into the Agreement between the Corellian Republic
and the Federal Republic of Dagobah for the Promotion and Protection of Investments
(“Corellia-Dagobah BIT” or “BIT”).
4. The Claimant is Calrissian & Co., Inc. (“Calrissian”), a Corellian hedge fund that holds
a number of sovereign bonds issued by Dagobah.
Previous Restructuring
5. In 2001, Dagobah was faced with an unsustainable debt burden and descended into a
two-and-a-half year long economic crisis. This was because of a decade of heavy
borrowing, high government budget deficits and massive tax evasion.
6. On 7 May 2001, Dagobah restructured its debt. The haircut was estimated at 50% of the
bonds’ net present value. This was accepted by Corellian bondholders; however the
actual losses were less than 20% of Net Present Value.
7. The International Monetary Fund (“IMF”) presented recommendations for Dagobah to
appropriately implement the sovereign debt restructuring process and to prevent further
increase of its debt and another future crisis. Dagobah followed most of these
recommendations.
8. After the 2001 restructuring, the Dagobah’s government made representations as to its
“commitment to a more stable economy and financial sector”.
9. In August 2003, new bonds with a 12 year maturity period were issued and acquired by
Calressian & Co. in the secondary market in 2005. These are the bonds in dispute.
PCA Decision
10. Corellia commenced arbitral proceedings pursuant to Article 7 of the BIT to decide
whether sovereign bonds constitute a protected investment, since diplomatic negotiations
in latter part of 2001 did not result in any conclusion on the same.
1
11. On 29 April 2003, the PCA Arbitral Tribunal decided, by majority, that sovereign bonds
were protected investments within the BIT.
12. On 19 May, 2003 Professor Andreas Jeger delivered his dissent saying that bonds do not
constitute protected investment within the BIT.
13. No litigation proceedings were commenced by Corellian bondholders based on this
decision.
Second Economic Crisis

14. As a result of the global financial crisis in 2008, another recession hit Dagobah in the
beginning of 2010. Dagobah’s debt was then estimated at an unsustainable US$400
billion.
15. The IMF issued another round of recommendations on 14 September 2011 to help
Dagobah reduce its Debt-GDP ratio.
16. On 12 December, 2011, the Global Financial Herald published an article predicting a
second sovereign debt restructuring in Dagobah. It also highlighted the strict austerity
measures taken by Dagobah, the problem of tax evasion and the increasing oil prices all
of which contributed to the crisis.
Governmental Measures
17. On 28 May 2012, Dagobah enacted the Sovereign Restructuring Act (“SRA”) applicable
to all bonds governed by Dagobah’s law, which provided that if a qualified majority of
the owners of 75% of the aggregate nominal value of all outstanding bonds governed by
domestic law agreed to modify the terms of the bonds, that decision would bind all the
remaining bondholders.
18. On 29 November 2012, the Dagobah government offered bondholders the option to
exchange their bonds for new ones worth approximately 70% of the net value of the
outstanding sums under the original bonds. This was accepted by 85% of the bondholders
and hence was binding on the all the bondholders.
19. In contrast to the old bonds, which were governed by Dagobah’s law and contained a
forum selection clause granting exclusive jurisdiction to Dagobah’s courts over any
disputes arising therefrom, the new bonds were governed by the law of the Kingdom of
Yavin. They also included provisions regulating collective action (Collective Action
Clauses, ‘CACs’), which required at least 20% of the nominal value of the issue in order
2
to sue for change in bond terms as well as for enforcement of their contractual
obligations. Such a clause was absent in the old bonds.
Procedural History
20. 30 August 2013, Calrissian & Co., Inc. (“Calrissian”), commenced arbitral proceedings
before the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”)
pursuant to Article 8 of the BIT.
21. On 3 February 2014, the Arbitral Tribunal issued Procedural Order No. 01.
22. On 4 October, 2014 the Answer to the Request for Arbitration was provided by Dagobah.
23. On 23 June 2014 the Arbitration Institute of the Stockholm Chamber of Commerce
adopted the Procedural Order No. 2.
24. On 1 September 2014 the Arbitration Institute of the Stockholm Chamber of Commerce
adopted the Procedural Order No. 3.
3
PART – I
JURISDICTION AND ADMISSIBILITY
I THE SOVEREIGN BONDS HELD BY THE CLAIMANT ARE NOT PROTECTED INVESTMENTS
WITHIN THE CORELLIA-DAGOBAH BIT.
1. The Claimant purchased the bonds under dispute in the secondary market in 2005.1
Following the restructuring of the debt, the Claimant has filed the present claim under
Art. 8 of the BIT, which requires that the claimant be an investor holding an investment.
2. The Respondent contends that the Tribunal does not have jurisdiction over the present
claim because sovereign bonds do not fall under the definition of investment as given
under the BIT [A.] and they are not made in the territory of the Respondent [B.].
A. The bonds do not fulfill the definition of investment under the BIT.
3. Art. 1 of the BIT defines an investment as:
“Every asset that an investor owns or controls, directly or indirectly, that has
the characteristics of an investment, including such characteristics as the
commitment of capital or other resources, the expectation of gain or profit,
or the assumption of risk.”
4. This constitutes what is the chapeau of the definition. Art. 1 goes on to list out forms that
such an investment is expected to take. The Respondent submitted that sovereign bonds
do not fall within and are not covered by this definition as they do not fulfill the chapeau
[i.] and are not specifically mentioned within the “laundry list” [ii.].
i. Sovereign bonds do not fulfill the chapeau given in Art. 1.

5. The chapeau must be interpreted in light of Art. 31(1) of VCLT in its ordinary meaning.
A plain reading of the chapeau shows that the parties’ intention was to protect only
certain kind of assets which qualify as an investment, and not ordinary commercial
transactions.
6. The word investment has an inherent meaning that requires an asset to qualify certain
criteria before it may be protected.2 Such criteria include, contribution by the investor,
significant duration, regularity of profits, an assumption of risk and a contribution to the
1
PO. No. 2, ¶11.
2
Alps Finance, Award, ¶231; Romak, Award, ¶194.
4
economic development of the host State.3 The Respondent submits that there must be a
substantial fulfilment of these in order to distinguish an investment from an ordinary
commercial transaction. Some of these criteria have been specifically included within the
BIT.4
7. The Respondent submits that in the present case the bonds constitute an ordinary
commercial transaction as there is no assumption of a shared investment risk [a.] nor a
contribution to the economic development of the host State [b.]. Further, the bonds do
not carry any bespoke features to elevate them to an investment [c.] and are speculative
capital that are not held for any significant duration [d.].
a. There is no assumption of shared investment risk.
8. An ordinary commercial risk must be distinguished from the higher threshold of an
‘investment risk’.5 The Respondent submits that all economic activity entails a certain
degree of risk. Hence, even contracts that do not amount to an investment carry the risk
of non-performance or default. Therefore, such a risk is not a useful factor to distinguish
contracts from investments.6
9. On the other hand, an investment risk entails a “shared operational risk”7 between the
host state and the investor. The Tribunal in Romak while considering a sale contract
provided a useful test to determine the existence of such risk:
“An “investment risk” entails a different kind of alea, a situation in which the
investor cannot be sure of a return on his investment, and may not know the
amount he will end up spending, even if all relevant counterparties discharge
their contractual obligations. Where there is “risk” of this sort, the investor
simply cannot predict the outcome of the transaction.”8
10. The words a return indicate that it is not relevant to see whether there is uncertainty in
the value of the return.9 Hence, the transaction must bear a risk of loss, which is inherent
to any investment.10
3
Salini, Jurisdiction, ¶52.
4
Article 1, BIT.
5
MHS, Annulment, ¶21.
6
Romak, Award, ¶229.
7
Alps Finance, Award, ¶241.
8
Romak, Award, ¶230.
9
Waibel, p. 238.
10
Electrabel, Jurisdiction, ¶5.43.
5
11. In the present case, had the Respondent complied with the bond terms, there would have
been regular payment of interest and hence the investor would have made a profit had he
held on to the bonds until maturity.11 Therefore, there is no risk of loss within such bonds
except the risk of default, which as stated above, is a mere commercial risk.12
12. Such risk may be fulfilled if the outcome of the investment is tied to the success of an
economic operation.13 In the present case, the capital raised by the Respondent through
the bonds and the interest payments on the same are independent of the success of any
economic venture.14
13. The bonds held by the Claimant do not involve any active contribution or participation
of the Bondholder and hence cannot be considered to bear any investment risk.15
b. There is no contribution to the economic development of the Host state.
13. The mere fact that the capital forms a part of the general state budget does not result in
the economic development of the Host state.16 The words economic development entail
an increase in the production capacity of the state.17 Not all funds made available to
governments are necessarily used as “investment” in projects or activities contributing to
the expansion of the productive capacities of the country.18
14. Hence the Tribunal in Joy Mining found “no reference to investment anywhere and that
‘production and supply of the kind of equipment involved in this case is a normal activity
of the Company, not having required a particular development of production that could
be assimilated to an investment.”19
15. Even in other cases, the contribution to development was acknowledged by the Host
State. For example, in Fedax, Venezuela expressly acknowledged that the funds were
raised "to undertake productive works, attend to the needs of national interest and cover
11
Uncontested Facts, ¶18.
12
MHS, Annulment, ¶21.
13
Douglas, p. 181.
14
PO. No. 3, ¶30.
15
Abaclat, Dissent, ¶60.
16
Id. ¶113.
17
Id. ¶50.
18
PO. No. 3, ¶30.
19
Joy Mining, Jurisdiction, ¶56.
6
transitory needs of the treasury.” The Tribunal considered the same as being sufficient to
elevate them to an investment since they served a public purpose.20
16. In the absence of such acknowledgement in the present case, the bonds cannot be
considered as investments.
c. The bonds do not carry any bespoke features to elevate them to an
investment.
17. The Respondent submits that an “investment” does not include a simple sale and like
transient commercial transactions. The UNCITRAL Tribunal in Mytilineos found that
various transactions taken together constituted an investment under the BIT, but that
certain sales, loans and services transactions, by themselves, were ordinary commercial
transactions.21.
18. The present bonds are one off issuances and are not part of any complex economic
transaction. Further, they do not carry any bespoke features22 that were acknowledged by
the Host State23 to elevate them to a level of investment.
d. The bonds are not held for any significant duration.
19. The Respondent submits that Claimants cannot argue, on one hand, the unity of a
purported “investment operation” and, on the other hand, the speeded placement and
circulation of the bonds in the markets since duration is one of the basic distinguishing
features of an “investment.”24
20. Such speculative purchases cannot be considered to be an investment. Hence, even the
primary market purchases do not fulfil the criteria of investment. That therefore the
purchase of these bonds by the Claimant in 2005 does not bring them within the
protection of the BIT.
ii. Bonds are absent from the laundry list and hence there is no indication
that bonds are protected within the BIT.
20
Fedax, Jurisdiction, ¶42.
21
Mytilineos, Partial Award, ¶¶124-125.
22
Pantechniki, Award, ¶44.
23
24
Ambiente, Dissent, ¶159.
7
22. The chapeau of Art. 1 is followed by a list of forms that the parties intended that the
investment could take. The Respondent concedes that such a list is not exhaustive25
however, the Article must be read as a whole and the list should not be discarded.26
23. The Respondent submits that lack of any other contribution other than nominal price by
the purported investor do not qualify an asset as an investment.27 Hence, portfolio
investments which involve no active control by the holder are usually not considered as
investments.
24. In such cases, tribunals may rely on a specific inclusion of such instruments within the
BIT to rebut such a presumption.28 Had the parties intended that sovereign bonds be
protected under the BIT, they could have expressly mentioned it within the list.29
25. Hence, the Respondent submits that the list was carefully drafted after negotiations and
the Tribunal should be slow to read an instrument not within such a list into the
definition.30
B. The investment is not made in the territory of the Respondent.

27. The Respondent submits that for an investor to bring a claim before the investor-state
tribunal, there must be an investment in the territory of the host state. Although the word
investment has not been defined in the context of a territorial link, such a requirement
may be implied from other provisions of the BIT.31 In the present case, the word
“investor” has been defined as “a Party or a national of a Party that attempts to make,
is making, or has made an investment in the territory of the other Party.”32
28. Under Art. 8, the right to bring arbitration claims before the Tribunal is given only to an
investor. Hence, the Claimant must establish a territorial link of the investment with the
host state before the Tribunal may exercise jurisdiction over the dispute.33 The
25
Article 1, BIT.
26
Art. 31 (1), VCLT.
27
Caratube, Award, ¶435.
28
Id.
29
Kuwait-China BIT.
30
Article 1, BIT.
31
Inmaris, Jurisdiction, ¶118.
32
Art. 1, BIT.
33
8
Respondent submits that such a territorial link is absent in the present case because there
is no direct flow of capital in the territory of the Respondent from the Claimant [i.].
Further, the Respondent has no negotiations with and cannot identify the bondholders
[ii.].
i. There is no direct flow of capital within the territory of the Respondent.
29. The Claimant purchased the sovereign bonds from the secondary market. The
Respondent submits that for territoriality, there must be flow of capital within the host
state [a.] and that the primary market and secondary market transaction cannot be
considered as one economic transaction [b.]. Alternatively, the secondary market
transactions are not for the benefit of the Respondent [c.].
a. There must be a direct flow of capital within the host state.
30. The BIT defines the word territory in strictly geographical terms.34 Hence, the words “in
the territory” must strictly refer to investments within the geographical limits of the State.
For reasons elaborated below, the Respondent differs from the test laid down in Fedax,
which is to see the ultimate beneficiary of a transaction.35
31. Almost every legitimate governmental transaction satisfies Fedax’s public interest test.
Under such a test, most, if not all, financial transactions would amount to an
‘investment’.36
32. Even, if the ultimate beneficiary test is to be applied, the threshold for the fulfilment
requires such investments to be linked to a venture or a project that results in development
within the host state. The LESI Dipenta tribunal when dealing with the issue of funds
invested outside the host country stated, that “as long as they [investment committed
outside the host state] are allocated to the project to be carried out abroad [in the host
country,]” the requisite territorial link is satisfied.”37
33. Abstract financial flows derived from bonds are not connected with any project, except
with the host country’s macroeconomic data and hence do not fulfil the required
territorial link.38
34
Art. 1, BIT.
35
36
Waibel, p. 219.
37
LESI, Award, Para, 72.
38
PO. No. 3, ¶30.
9
b. The primary market and secondary market transactions cannot be

considered as one economic transactions.
34. The Respondent argues that bond issuance and sovereign lending would take place
regardless of whether there is a secondary market as used to happen earlier.39 Further,
40
the purchases in the secondary market are neither automatic nor certain and the
conditions governing the two markets are distinct and are controlled by different
considerations.41
35. Therefore, the purchase of bonds cannot be considered an investment in the territory of
the host state since the consideration for the bonds is not given to the host State but the
underwriters in the primary market.42
c. Alternatively, the purchases are not for the benefit of the host state.
36. Transactions that are made in the secondary market are made for purely personal gain
similar to transactions with any other speculative instruments.43 Waibel argues that the
“better view is that purchases on the secondary market themselves need to meet the long-
term transfer criterion, because of the required personal link between the purchaser of
the bond and the substantive requirements of an investment.”44
37. Hence, there is no benefit of the host state involved in secondary market purchases, in as
much as such benefit has already been provided by the primary market players. 45 The
Claimant therefore does not qualify as an “investor” under the BIT.
ii. The Respondent State has no relation with the bondholders.
38. The Respondent contends that the respondent state has no control over who are the final
purchasers of the bonds. Like other speculative capital, bonds change hand frequently
and at a moment’s notice and often amongst owners of different nationalities. 46 Hence,
there is no long term relationship considered between the two parties. Such a purchase
therefore constitutes an ordinary commercial transaction.
39
Abaclat, Jurisdiction, ¶359.
40
Abaclat, Dissent, ¶70.
41
Id.
42
PO. No. 2, ¶11.
43
Waibel, p. 235.
44
Id.
45
Id.
46
Id. p. 236.
10
39. The place of payment of the bonds is Yavin,47 which being the place of performance of
the bond terms takes precedence and should be deemed as the situs. Hence when no part
of such transaction has any link with the geographic territory of the host State, they
cannot be considered to have fulfilled the territoriality requirement under the BIT.
47
PO. No. 3, ¶33.
11
II THE PCA AWARD HAS NO BEARING ON THE PRESENT PROCEEDINGS.

40. In 2001, faced with a similar economic crisis the Respondent had undertaken a debt
restructuring which led Corellia to initiate state-state arbitration proceedings under Art.
7 when the parties could not reach an agreement on whether bonds would be protected
under the BIT.48
41. In 2003, the Tribunal passed the award holding that sovereign bonds issued by the State
parties constitute investments within the terms of the BIT.49 The Respondent submits that
the Award is not binding on this Tribunal [A.] and that it has limited persuasive value
[B.].
A. The PCA Award is not binding on this Tribunal.

42. The Respondent submits that the PCA Award cannot bind this Tribunal because the word
“binding” in Art. 7 must be interpreted in its ordinary sense to be binding only on the
Parties [i.]. The PCA decision also does not amount to an authoritative agreement
between the parties [ii.] and cannot effect an amendment of the BIT [iii.].
i. Decisions under Art. 7 are binding only on State Parties.
43. As per Art. 31(1) of the VCLT, treaties must be interpreted in good faith in accordance
with the ordinary meaning of the words. The Respondent submits that the words must be
narrowly construed to mean binding only on the Parties. The provision cannot be given
an interpretation clearly not within the contemplation of the parties [a.] and since it
affects the rights of third parties, it cannot bind them without an explicit provision to that
effect [b.]. An interpretation that makes such decisions binding is also against the objects
and purpose of the BIT [c.] and lastly, such interpretation does not lead to conflict [d.].
a. Art. 7 cannot be given an interpretation clearly not within the
contemplation of the Parties.
44. The Respondent asserts that states, scholars and investors widely acknowledge that there
is no system of stare decisis50 or appellate procedure51 within international investment
arbitration.
48
49
50
El Paso, Jurisdiction, ¶39; Peter Berger, p. 4, 5, 18.
51
Ecuador v. US, Claimant Counter Memorial, p. 4.
12
45. If such decisions are made binding on investor-state tribunals, it would amount to
creating an artificial system of stare decisis and appeals within investment arbitration.52
There exists no state-practice to support the intention given by the Claimant53 and hence,
the Respondent submits that had the State Parties intended such a radically different
interpretation to the settled jurisprudence they would have made an express provision to
that effect.54
b. The decision affects rights of third parties and hence cannot bind them
in the absence of an explicit provision to that effect.
46. The Respondent submits that when a treaty creates rights for third parties, the
interpretative authority of the States is restricted.55 One of the main objectives of BITs is
to provide remedies and rights to the investors independent of their Home State.56
47. The Respondent asserts that when such a provision does not allow such affected parties
to make submissions before or be a party to the State-State arbitration, it cannot be
allowed to bind investor-state tribunals to the prejudice of such rights.57 In the present
instance, the PCA Award determines whether the bondholders would be protected under
the BIT or not. Hence, since such third party rights are affected, state-state awards should
not bind this Tribunal regardless of whether the decision was in favor of such
bondholders.
c. Art. 7 must be interpreted in light of the objects and purpose of the BIT.
48. The Respondent submits that one of the main objectives of the BIT is to give the right to
an investor to approach a Tribunal directly. Historical developments shows a conscious
move away from relying on claims of diplomatic protection to investor-state arbitration
as a means for resolving and protecting the rights of the investors.58
49. An interpretation that gives superiority to a state-state arbitral award would be a step
backwards from such development and lead to politicization of disputes.59 An example
52
Roberts, p. 69.
53
Paparinskis - Limits of Depoliticisation, p. 28.
54
Art. 30 (3), US Model BIT 2012.
55
Roberts - Power and Persuasion, p. 183; Roberts - Subsequent Agreements, p. 95, 101–02.
56
Reismann, Expert Opinion, ¶25.
57
Reismann, Expert Opinion, ¶¶4, 14-15, 32.
58
Paparinskis - Limits of Depoliticisation, p. 271–82.
59
Reismann, Expert Opinion, ¶25.
13
of this can be seen from the case of Peru v. Chile,60 where Peru initiated state-state
arbitration in a clear abuse of process in order to stay the ongoing proceedings in
Empresas Lucchetti v. Peru.61 If such state-state arbitrations is made binding on investor-
state arbitral tribunals, it would lead to a proliferation of such claims being filed by states
in order to defeat ongoing investor-state proceedings.
50. Hence, the Respondent contends that such an interpretation which is against the purposes
of the BIT must not be adopted and accordingly, Art. 7 must be interpreted narrowly.
d. A narrow interpretation does not lead to conflict.
51. The Respondent submits that giving Art. 7 a narrow interpretation to only bind the parties
does not necessarily create the possibility of conflict or contradiction. This is for three
reasons.
52. Firstly, as opined by Prof. Reismann in his Expert Opinion in the Ecuador v. US
proceedings, the mandate of investor-state tribunal and a state-state arbitral tribunal are
different and form two separate “tracks” within the BIT.62
53. Secondly, an investor-state tribunal, as stated above, decides the liability of the State in
a given factual scenario. The state-state arbitral tribunal decides the obligations of the
State independent of a factual scenario and hence there is no possibility of being unable
to comply with both such decisions, even if they were contradictory.
54. Thirdly, giving such an interpretation to the word binding within Art. 7 contradicts the
meaning of the same word in Art. 8. Decisions of investor-state tribunals are also binding
upon State and often involve the interpretation of the BIT terms and yet, have never been
considered binding on other tribunals.63
ii. The Award does not amount to an agreement between the parties.
55. An agreement between the parties cannot be given the same status as a decision arising
fundamentally out of a disagreement between the two States.64 Further, such a decision
does not amount to such an agreement nor does it create any expectation for the Claimant
given that the Respondent publicly voiced its disagreement with the decision.65
60
Roberts, p. 8.
61
Empresas Lucchetti, Award, ¶9.
62
Id. p. 13.
63
El Paso, Award, ¶39.
64
Roberts, p. 63.
65
Procedural Order No. 2, ¶10.
14
56. Such an award or submissions before the PCA cannot amount to subsequent “practice”
since they do not involve the application of the BIT66, and hence also does not give rise
to an “agreement” between the two States with respect to its interpretation. 67 Therefore,
the PCA award is not an authoritative interpretation of the BIT by the two States.
iii. The Award cannot amount to an amendment of the BIT.
57. The PCA under Art. 7 has no authority to amend the BIT. Further, an amendment of the
BIT is fundamentally different from its interpretation68 and requires specialized
procedures for adoption.69
58. An agreement on the interpretation of the Treaty is not binding on parties unless there is
an express provision to that effect.70 Hence, such an agreement is at best a means to
interpret the treaty but does not bind this Tribunal.71
B. The award has limited persuasive value.
59. The Respondent submits that the PCA award carries limited persuasive authority in the
present dispute. This is because of three reasons.
60. Firstly, the award must be confined in its operation to the bonds in question in the 2001
restructuring. The burden to show that the nature of the bonds in the disputes are similar
lies on the Claimant and the Respondent submits that the facts at hand are insufficient to
show any similarity between the two.72
61. Secondly, the Award cannot be interpreted to mean that all bonds in all circumstances
are to be considered investments notwithstanding their individual characteristics and
surrounding circumstances.73
62. Lastly, the Award does not furnish sufficient reasons to support the conclusions of the
Tribunal and hence cannot be used to persuade this Tribunal.74 The Respondent requests
this Tribunal to undertake an independent analysis and for the reasons given in the
66
National Grid, Jurisdiction, ¶85.
67
Case Concerning Kasikili/Sedudu Island, ¶63
68
Pope and Talbot, Award in Respect of Damages, ¶47.
69
ADF, Award, ¶177.
70
ILC-Subsequent Agreements, ¶4
71
Id. ¶5
72
Uncontested Facts, ¶¶4, 18.
73
PCA Arbitral Award, p. 13.
74
PCA Dissenting Opinion, p. 17.
15
foregoing Argument hold that bonds held by the Claimant are not protected investments
in the territory of the host state.
16
III THE TRIBUNAL CANNOT AND IN ANY CASE, SHOULD NOT EXAMINE THE PRESENT
CLAIM ON MERITS GIVEN THE PARTIES’ AGREEMENT TO SUBMIT DISPUTES
EXCLUSIVELY TO COURTS OF DAGOBAH.
63. Without prejudice to the arguments made with respect to the existence of a protected
investment, the Respondent further submits that the present Claim should not be heard
on merits. The Claimant purchased the bonds in 2005 and was aware of the terms within
the bond as well as rights under the BIT. Hence, the Claimant made an informed choice
to submit disputes arising from the bond exclusively to Courts of Dagobah.75
64. The Respondent contends that the FSC operates as a withdrawal of Respondent’s consent
to arbitrate before this Tribunal [A.]. Further, the FSC is broad enough to include the
present claim [B.]. Alternatively, if the Tribunal were to hold that it has jurisdiction, it
should stay these proceedings in favor of Courts within Dagobah [C.].
A. The FSC is a withdrawal of Respondent’s consent to arbitrate disputes arising

from bonds before this Tribunal.
65. The jurisdiction of any arbitral tribunal is based on the mutual consent between the parties
to submit a dispute for arbitration.76 The Respondent submits that Art. 8 does not by itself
constitute consent and is in fact a mere standing offer to arbitrate and it is only once such
offer is accepted by the investor that consent is “perfected.”77
66. A standing offer is therefore not a basis for arbitration because such an offer can be
withdrawn before it matures into consent.78 The Respondents submit that a representation
made by a state which is inconsistent with such offer constitutes a withdrawal of the offer
once such representation is accepted by the investor.79
67. In the present case, the Respondent submits that an exclusive choice of forum clause in
favor of Courts in Dagobah is clearly inconsistent with the offer to arbitrate or resolve
disputes in any other fora and hence constitutes a withdrawal of that offer.
75
PO. No. 2, ¶16.
76
Sornarajah, p. 251.
77
Schreur-Consent, p. 1285.
78
Id., p. 253.
79
Nolan, p. 19.
17
68. The effect of any forum selection clause must be seen from its wording80 and if it is
unequivocal to the effect of excluding the jurisdiction of other Tribunals it would
constitute a waiver by the Claimant of his rights under the BIT.81
69. In Saluka, the Tribunal considered a clause that stated:
“[a]ll or any disputes or differences arising out of or in connection with this

Agreement, or the breach, termination or invalidity thereof, shall be finally settled
by arbitration…”82
70. The Tribunal held that such a clause excluded the jurisdiction of the Tribunal. The present
clause states that:
“Any dispute arising from or relating to this contract will be exclusively resolved
before the Courts of Dagobah.”
The clause therefore clearly excludes jurisdiction of other fora.
71. Further, this Tribunal may note that the BIT was entered into in 199283 and the Claimant
purchased the bonds in 2005. 84 Hence, if the parties had wanted to retain the jurisdiction
of the arbitral Tribunal under the BIT, they could have easily mentioned it within the
FSC.85
72. Hence, where the Claimant was aware of his rights and made a free and informed choice
to purchase these bonds, the presumption must be that the Parties by such wording
intended to waive the jurisdiction of the BIT Tribunal.86
B. The FSC extends in its operation to the present claim.
80
Spiermann, p. 179.
81
Occidental Petroleum, Jurisdiction, ¶71.
82
Saluka, Jurisdiction, ¶52.
83
84
PO. No. 2, ¶11.
85
SGS v. Philippines, Jurisdiction, ¶142.
86
BIVAC, Jurisdiction, ¶146.
18
73. The Respondent submits that [i.] the FSC is wide enough to cover any claims arising
from the bonds. In any case, [ii.] this Tribunal is not competent to adjudicate the present
claim since it is purely a contractual dispute.
i. The FSC is wide enough to cover any claims arising from the bonds.
74. The FSC uses the terms “any dispute” and “arising from the contract” which give very
wide jurisdiction to Courts in Dagobah.87 The words give the widest possible jurisdiction
to the Courts and hence all claims must be resolved by Courts regardless of the legal label
attached to them.
75. Hence, such FSC would take precedence even if the Courts could not apply BIT
provisions because the Claimant consented to waive the remedies that the Courts would
be incompetent to grant.
ii. In any case, the FSC grants exclusive jurisdiction to Courts in Dagobah
over contractual claims.
76. As has been widely recognized, contractual claims and treaty claims are fundamentally
distinct. 88 The Respondents submit that this the present claim is a contractual dispute [a.]
and hence this Tribunal has no jurisdiction over Contract Claims since there is no
umbrella clause in the BIT [b.] and even if it had such jurisdiction the FSC would take
precedence over the BIT with respect to such claims89 [c.].
a. The present claim is rooted in the Contract.
77. The Claimant bears the burden to demonstrate the facts at hand show a prima facie
violation of the BIT. The test as laid down by the ICJ in the Oil Platforms Case90 is
objective in its application and hence, mere labelling of claims as being grounded in
treaty or invoking of treaty provisions is insufficient.91
87
PO. No. 2, ¶16.
88
SGS v. Pakistan, Jurisdiction ¶154; Bayindir, Jurisdiction, ¶272.
89
Abaclat, Jurisdiction, ¶498.
90
Oil Platforms, Separate Opinion of Judge Higgins, p. 31.
91
UPS v. Canada, Jurisdiction, ¶36.
19
78. The apparent exercise of “sovereign power” to breach a contract does not elevate that
dispute to a treaty dispute without an umbrella clause under the BIT.92 Here, the claim is
based essentially on the default of the Respondent to comply with the old bond terms.93
79. Nevertheless, the Respondent submits that such prima facie case cannot be made out
since the restructuring undertaken by the Respondent state was for legitimate public
purpose and in good faith.94 Such acts are not be considered to be in violation of the BIT
obligations especially since local remedies are available to the Claimant.95
b. The Tribunal has no jurisdiction over Contract Claims
80. The present treaty does not possess any Umbrella Clause. Hence, the parties clearly
intended to exclude such claims from the ambit of jurisdiction of a tribunal under Art. 8.
The Respondent submits that an arbitral tribunal is confined to the terms of the agreement
under which it is constituted.96
81. The words of the BIT must be read in good faith and not be construed too widely to also
include ordinary commercial disputes since that would amount to conflating such terms
with an umbrella clause, which in practice is drafted specifically in a distinct manner.97
82. Given the narrow scope of jurisdiction of such clauses, the jurisdiction of this Tribunal
must accordingly be further narrowed to exclude even such claims, as the present, which
pertain to default on contract terms and hence this Tribunal must decline jurisdiction to
adjudicate this dispute.
c. Alternatively, the FSC would take precedence over the BIT with respect
to Contract claims.
83. It is widely recognized that an exclusive forum selection clause would serve to displace
the jurisdiction of an arbitral Tribunal under the BIT with respect to contractual disputes.
Claims arising out of the contract must be adjudicated upon as agreed by the Parties. 98
92
El Paso, Jurisdiction, ¶84.
93
94
Preamble, SRA.
95
Generation Ukraine, Award, ¶20.30.
96
El Paso, Jurisdiction, ¶85.
97
Hamster v. Ghana, Award, ¶335.
98
Impregilo v. Pakistan, Jurisdiction, ¶289.
20
84. Hence, the Respondent contends that since the FSC displaces the jurisdiction of this
Tribunal with respect to Contract claims, only Courts in Dagobah are competent to hear
this dispute and therefore this Claim need not be examined on merits.
C. Alternatively, the Tribunal should not admit the Claim in favor of the
jurisdiction of Courts in Dagobah.
85. Even if the Tribunal were to hold that it has jurisdiction over the present claim and that
the FSC does not override the BIT, the Respondents submit that both exist in parallel.
86. In SPP v. Egypt No. 1, the tribunal held that when two tribunals have jurisdiction over a
claim, that in the interest of international judicial order, either of the tribunals may in its
discretion and as a matter of comity decide to stay the exercise of its jurisdiction pending
a decision by the other tribunal.99
87. The Respondent contends that the FSC must be given primacy and these proceedings
should be stayed because the Tribunal should defer to the sanctity of the contract [i.] and
further because the FSC constitutes lex specialis [ii.]. Further, the local Courts in
Dagobah are the superior fora to decide this dispute [iii.]. In addition, a preliminary
determination of contract rights by local courts is necessary before BIT claims may be
raised with respect to them [iv.].
i. The Tribunal should defer to the sanctity of the Contract.
88. The Tribunal should recognize and defer to the mutual agreement between the parties to
have disputes resolved exclusively before Courts in Dagobah.
89. As party cannot be allowed to raise and enforce claims based on one provision of the
Contract without itself complying with the other. If the Tribunal were to ignore the effect
of such a FSC then it would undermine international commerce by interfering with the
efficacy of such choice of jurisdiction clauses.100
ii. The Contract constitutes lex specialis.
90. In determining which of the competing jurisdictions must prevail, the Respondent
submits that the rule generalia specialibus non derogant must be applied and “a specific
99
SPP v. Egypt I, Jurisdiction, ¶129.
100
Douglas, p. 379.
21
agreement between the parties to a dispute must naturally take precedence with respect
to a bilateral treaty between the investor’s State and a particular sovereign.”101
91. The Corellia-Dagobah BIT was not concluded keeping in mind any specific dispute or
rights. Hence, the bond terms which give rise to specific rights and a specific dispute on
those terms would constitute lex specialis especially considering the fact that they were
entered into after the date of conclusion of the BIT and must therefore be given primacy.
iii. A preliminary determination of Contract rights is essential before a BIT

claim may be raised.
92. As stated by the Tribunal in Generation Ukraine “...an international tribunal may deem
that the failure to seek redress from national authorities disqualifies the international
claim.”102
93. This approach was further embraced in Parkerings where the Tribunal held that in most
cases, a preliminary determination by a competent court as to whether the contract was
breached under municipal law is necessary. This preliminary determination is even more
necessary if the parties to the contract have agreed on a specific forum for all disputes
arising out of the contract.103
94. This is not because there is a requirement to exhaust local remedies but because in the
absence of such determination, the BIT claim remains inchoate and hence cannot be
admitted because it deprives the State the opportunity to correct the “alleged” breach
through judicial intervention.104
101
SPP v. Egypt II, Preliminary Objections, ¶¶149-150.
102
Generation Ukraine, Jurisdiction, ¶20.30.
103
Parkerings, Award, ¶316.
104
Id.
22
PART – II
LIABILITY
IV THE SOVEREIGN DEBT RESTRUCTURING UNDERTAKEN BY THE RESPONDENT DOES

NOT VIOLATE ITS OBLIGATIONS UNDER ARTICLE 2 OF THE 1992 BIT.
95. The Respondent faced a severe economic crisis in 2011 after the global recession in
2008.105 The IMF offered a bailout package of US$150 billion106 which was contingent
on the Respondent restructure its foreign debt. Accordingly, the Respondent enacted the
SRA, pursuant to which there was an exchange of sovereign bonds on acceptance by a
supermajority of bondholders.107
96. The Respondent submits that these actions do not violate Art. 2(2) of the BIT because
there has been no violation of the FET standard within the BIT [A.]. Further, the measures
do not impair the rights of the bondholders in an unreasonable or discriminatory manner
[B.]. And lastly, the Respondent did not deny full protection and security to the
investments of the bondholders [C.].
A. There has been no violation of the standard of fair and equitable treatment.
97. The Respondent submits that the standard of fair and equitable treatment is the same as
minimum standard of treatment in customary international law [i.]. In the alternative the
Respondent argues that there has been no breach of an independent BIT standard because
the measures are within the regulatory space given to the State [ii.]. In addition there is
no frustration of any “legitimate expectations” of the Claimant [iii.]. Further, the
measures do not amount to a denial of justice to the bondholder [iv.].
i. The FET standard is the same as the Minimum Standard of Treatment in
CIL.
98. Under Article 1, the OECD Draft Convention on the Protection of Foreign Property states
that each party “shall at all times ensure fair and equitable treatment.”108 The words used
are identical to the language in Article 2(2) of the BIT. However, the commentary to the
105
106
107
108
Article 1A, OECD Draft Convention.
23
OECD Draft Convention clarified that the obligations under FET were equivalent to the
minimum standard of treatment in customary law which was further confirmed by OECD
Committee on International Investment and Multinational Enterprises in 1984109 and has
been recently confirmed in several arbitral decisions.110
99. The MST standard requires a high threshold for violation.111 The conduct of the host state
must be “egregious” or “shocking”.112 The Respondent submits that the restructuring
was taken in the pursuit of legitimate public purpose to maintain public order and restore
the economy113 and was in consonance with developing practice in this regard.114 Hence,
such acts can neither be termed “egregious” or “shocking” and hence do not violate MST.
ii. The measures taken by the Respondent are within its regulatory space
100. The Tribunal in Tecmed recognized that a Tribunal’s analysis must start with due
deference for a State’s regulatory space especially when considerations of public
importance and society are concerned.115 For instance, in S.D. Myers the Tribunal
deferred to the domestic authorities once it was established that firstly, the measure was
in connection with a public policy116 and secondly, that it was not prima facie
unreasonable. 117
101. Similarly, the restructuring by the Respondent had a nexus with a public policy, i.e., it
sought to maintain public order and to prevent a complete economic collapse.118 Hence,
it cannot be termed to be prima facie unreasonable. The Respondent submits that,
therefore, such an Act is within the regulatory space of the state and the Tribunal must
show deference to the exercise of such power.
iii. There is no violation of any “legitimate expectation” of the Claimant.
109
OECD 1984, p. 12, ¶36.
110
CMS, Award, ¶263. Merrill & Ring, Award, ¶211 ; Biwater, Award, ¶599.
111
Waste Management II, Award, ¶98.
112
Glamis Gold, Award, ¶22.
113
Preamble, SRA.
114
115
Tecmed, Award, ¶122.
116
S.D. Myers, Partial Award, ¶ 263.
117
Newcombe & Paradell, ¶358.
118
Preamble, SRA.
24
102. The Respondent submits that for there to be a frustration of legitimate expectations under
the FET standard, the expectation in question must be “legitimate” as recognized under
the international law.119 The Respondent contends that the Claimant cannot claim a
legitimate expectation that a restructuring would not be undertaken since all relevant
circumstances at the time of investment must be seen [a.] and the Respondent made no
specific assurances with respect to restructuring [b.]. Further, the bond terms do not give
rise to any legitimate expectation [c.].
a. An expectation of the investor should take into account all
circumstances surrounding the investment in order to be considered
reasonable or legitimate
103. The Respondent contends that not every subjective expectation of an investor is protected
under a BIT.120 An expectation of the investor to be protected under the international
investment law regime needs to reasonable and needs to have taken all circumstances in
consideration.121 This assessment requires, on the part of the Investor, a consideration of
a myriad of factors ‘including not only the facts surrounding the investment, but also the
political, socioeconomic, cultural and historical conditions prevailing in the host
State.’122
104. The State of Dagobah is a developing country which has undergone restructuring on a
previous occasion.123 The Claimant made their investment in the year 2005 and was
aware of the fact that the Respondent State had already undertaken such a
restructuring.124
105. Moreover, as an investor who is investing in a developing country, the expectation of the
investor includes greater volatility than that associated to markets of developed
countries.125. The Respondent quotes the words of the Tribunal in Parkerings which
stated that “by deciding to invest notwithstanding this possible instability, the Claimant
119
Duke, ¶340.
120
Toto v. Lebanon, ¶165.
121
Id.
122
Duke, ¶340.
123
124
PO. No.2, ¶11.
125
25
took the business risk to be faced with changes of laws possibly or even likely to be
detrimental to its investment.”126
106. The Claimant was a hedge fund and, therefore, as an investor should have carried his due
diligence prior to investing in the market of an emerging economy and one that has
undergone a restructuring. Hence, there can be no legitimate expectation that a
restructuring would not be carried out.
b. The Respondent State made no specific assurances to the Claimant.
107. For an expectation to be considered legitimate, it must rely on specific assurances made
by the government at the time of investment.127 Such assurances can be either explicit or
implicit but should have been made specifically to the investor and should have acted as
a catalyst to induce investment. 128
108. The Respondent submits that general statements regarding stability of the economy and
legal order due to their ambiguity cannot give rise to any legitimate expectation with
respect to any specific obligations.
109. In the absence of a stabilization clause in the bond, the Claimant cannot claim a protection
from change in the legal order, especially considering that the Claimant was aware that
the bonds were governed under laws of Dagobah. A lack of the stabilization clause has
been considered by the Tribunal in AES v. Hungary to constitute absence of any
legitimate expectation with respect to disadvantageous regulatory changes.129
110. The Respondent contends that in the present case no assurances have been made by the
government to the Claimant that may give rise to any legitimate expectation.
c. All contractual terms do not give rise to a legitimate expectation
111. The Respondent submits that a breach of bond terms is not a breach of the legitimate
expectation of the Claimant. If every term in the contract were considered to give rise to
legitimate expectation then a mere breach of contract would become a treaty claim under
FET and would amount to an Umbrella clause. 130
126
127
Snodgrass, p. 44.
128
129
AES v. Hungary, Award, ¶ 9.3.29
130
Schreur (FET Standard), p. 90.
26
112. As stated by the Tribunal in Parkerings, “an expectation a party to an agreement may
have of the regular fulfillment of the obligation by the other party is not necessarily an
expectation protected by international law.”131
113. The Respondent submits that if the contract terms were elevated to such a level, this
would conflate obligations the state entered into as a private party to obligations the state
entered into under the BIT in the capacity of a sovereign.132 Therefore, a mere breach of
bond terms cannot be termed as a violation of legitimate expectations of the Claimant.
iv. There is no denial of justice in the present case.
114. The notion of denial of justice is defined as improper administration of civil and criminal
justice towards an alien, including denial of access to the courts, inadequate procedures,
and unjust decisions.133
115. As confirmed by the Tribunal in Iberdrola, the notion of denial of justice under FET is
the same as that under customary international law.134 The Respondent argues that words
imply that before an international tribunal may find a denial of justice to have occurred,
the domestic legal system as a whole must have been put to the test and, as a system,
have failed to meet the standard required by international law.135
116. Such a standard necessarily requires that there must be an exhaustion of local remedies
before a claim for denial of justice may be brought before this Tribunal by the
Claimant.136 For instance, in Loewen, the Tribunal held that a decision that is both in
breach of municipal law and discriminatory against a foreign litigant constitutes a
manifest injustice. However, the claim ultimately failed because the Claimant could not
show that the available remedies had been exhausted.137
117. The facts do not show any attempt by the Claimant to avail the remedy available in the
Respondent’s Courts and hence, cannot bring a claim for denial of justice before this
131
132
Hamster v. Ghana, Award, ¶335.
133
Brownlie, p. 506; OECD, Fair and Equitable Standard, p. 28.
134
Iberdrola, ¶427.
135
Ambatielos Claim, p. 120.
136
Ecuador v. US, Paulsson, Expert Op., ¶63.
137
Loewen, Award, ¶135.
27
Tribunal. The Respondent further submits that the inclusion of the CAC within the new
bonds cannot be considered as a denial of justice for two reasons.
118. Firstly, the Respondent submits that there is a distinction between the standard of denial
of justice and the obligation to provide effective means of redress.138 Thus, the tribunal
in White Industries declined to find a denial of justice, whilst finding a breach of an
effective means provision.139 Hence, in the absence of such an obligation under the 1992
BIT, there cannot be a denial of justice in the absence of a grievance for which remedy
has, in fact, been denied.
119. Secondly, restrictions may be imposed upon access to courts for legitimate reasons.140
The Respondent submits that States cannot be expected to expose themselves to frivolous
litigation from countless bondholders across the globe and hence such clauses are now
commonplace.
120. In conclusion, the Respondent submits that the SRA nor the CAC amount to a denial of
justice to the Claimant.
B. The measures undertaken by the Respondent State do not unreasonably or

discriminatorily impair the rights of the Claimant.
121. The Tribunal in Saluka Investments provided that a violation of non-impairment clause
does not differ considerably from that of FET and it merely postulates two specific
grounds on which such impairment may amount to a violation of the BIT, i.e.,
unreasonableness and discrimination.141
122. Reasonable and Discriminatory measures were defined in Toto to mean
“(i) a measure that inflicts damages on the investor without serving any
apparent legitimate purpose; (ii) a measure that is not based on legal
standards but on discretion, prejudice or personal preference, (iii) a measure
taken for reasons that are different from those put forward by the decision
maker, or (iv) a measure taken in willful disregard of due process and proper
procedure.”142
138
Ecuador v. US, Paulsson, Expert Op., ¶26.
139
White Industries, Award, ¶10.4, 11.3, 11.4.
140
Francioni, p. 747.
141
Saluka, Award, ¶460.
142
Toto v. Lebanon, Award, ¶157.
28
123. The Respondent submits that once a policy objective is established and crystallized into
targeted measures to achieve the same, its effectiveness and existence of alternative is
not a relevant consideration for Tribunals.143
124. The Respondent submits that the Claimant has failed to prove the existence of any of the
above criteria necessary to constitute breach of the Respondent state’s duty of non-
impairment. In fact, prior to the restructuring offer being made, an invitation was sent
out to ensure participation of the Bondholders in arriving at an equitable restructuring
offer.144 Based on the response to the said invitation, the Respondent proceeded to
negotiate the terms of the new Bond contracts with an aggregate of 50% of the value of
the bonds thereby ensuring that the adequate representation of their interests was made
during the negotiation.145 Hence such a measure cannot be termed to be unreasonable or
discriminatory.
C. There has been no violation of the full protection and security standard.
125. The Respondent submits that such a clause within Art. 2(2) applies only to physical
protection [i.] and that in any case, the restructuring does not violate such a clause [ii.].
i. Full protection and security applies only to physical protection

126. The Respondent submits that the FPS clause was inserted to protect foreign investors
from unchecked violence that jeopardizes the safety of the property of foreign
nationals.146 The FPS standard enshrines obligation of a state to protect investments on
its territory from excessive interference, whether caused by the state itself or by third
parties.147
127. Hence, in the words of the Tribunal in Saluka “the ‘full security and protection’ clause it
not meant to cover just any kind of impairment of an investor’s investment, but to protect
more specifically the physical integrity of an investment against interference by use of
force.”
143
Vandevelde, p. 54.
144
PO. No. 2, ¶35.
145
Id.
146
AAPL, Award, ¶76; Lauder, Award, ¶¶306-7.
147
Occidental Exploration, Award, ¶186; AAPL, Award, ¶77.
29
128. The Respondent argues that to apply FPS to obligations beyond the above would be to
conflate the standard of FPS with that of FET. Hence, in the present case where no
bondholder was subjected to physical violence, there can be no violation of this clause.
ii. Alternatively, the restructuring does not violate FPS even if it is applicable.
129. The Respondent submits that it has been recognized that if the state’s action was not
totally unjustifiable, but was reasonably connected to some rational legal policy, there
would be no breach of obligation of vigilance and protection.148
130. The Respondent further argues that in the present case, the restructuring was in pursuance
of the attempts to maintain public order and control the deteriorating economy.149 Hence,
such acts cannot amount to a violation of the FPS standard within Art. 2(2) of the 1992
BIT.
148
Id.
149
Preamble, SRA.
30
V. THE RESPONDENT’S RESTRUCTURING MEASURES WERE PERMISSIBLE AS THEY FALL

WITHIN THE CONDITIONS OF THE ESSENTIAL SECURITY INTEREST EXCEPTION
UNDER ARTICLE 6 (2).
132. The Respondent contends that even if that there has been a breach of Article 2 of the BIT,
the measures taken by the Respondent would be permissible under Art.6(2) of the 1992
BIT. The Respondent argues that the conditions for invoking the defense under Art. 6(2)
are identical to Article XX of the (GATT) [A.] and that the conditions cannot be held to
be those under the CIL doctrine of necessity [B.]. Further, the present facts satisfy the
applicable conditions. [C.]. In any case, it is contended that the restructuring measures
taken by the Respondent also satisfy the conditions of the CIL doctrine of necessity [D.]
and that the Respondent is therefore under no obligation to pay compensation [E.].
A. The applicable conditions for taking advantage of Article 6 (2) are the same as
under Article XX of GATT.
133. Article 6(2) must be interpreted as per its ordinary meaning as per Art. 31 of VCLT.
However, along with the context it is necessary to take into account “any relevant rules
of international law applicable between the parties”.150 The Respondent submits that the
relevant rule of international law in the present case is Art. XX of the GATT.
134. Hence, while interpreting a clause that was identical to Article 6 (2), the Tribunal in
Continental Casualty held that, given the historical evolution of the clause, the
appropriate test was to apply the GATT.151
135. The Respondent submits that the text of Article 6(2) is identical in all relevant aspects to
Article XI of the US-Argentina BIT152 and this clause has in turn developed from Article
XXI(I)(d) of the Model US FCN Treaty.153 The FCN Treaty on its part had developed
from GATT. The Respondent contends that the language used within Art. 6(2) of the
1992 BIT and Art. XI of the US-Argentina BIT is unique.154 The Respondent contends
that the when Corellia and Dagobah entered into the 1992 BIT, they had full knowledge
150
Art. 31(3) VCLT.
151
Continental, Award, ¶192.
152
Article XI, US-Argentina BIT.
153
Article XXI (I) (d), US Model FCN.
154
OECD Essential Security Interests, pp. 93-134.
31
of the legal effect of using the phrasing developed from the FCN and GATT text and
must have intended this very legal effect from Article 6 (2).
136. The preamble shows that the object of the BIT is not the promotion and protection of
investments but “economic cooperation with respect to investment.” It also recognizes
that such investment would be towards not just flow of capital but also economic
development155 and further that any stability in the framework for investments is aimed
at maximizing effective utilization of resources and the improvement of living
standards.156
137. The Respondent submits that in light of the preamble, a test that rigidly restricts the right
to take measures for economic benefit should not be applied. Therefore, a more
appropriate test is the one under GATT since it balances the interests of host states and
investors.157 It further emphasizes the element of proportionality while evaluating the
conduct of the host state as recognized within the BIT.158 The Respondent submits that
this Tribunal must proceed by providing a significant margin of appreciation to the host
state in its determination of threats to its essential security interests and the measures it
takes to protect them.159
B. The conditions for taking advantage of Article 6 (2) are not those under the
CIL doctrine of necessity.
138. The Respondent contends that the CIL doctrine of necessity cannot form the applicable
standard to interpret Art. 6(2). Firstly, the treaty provision in Article 6 (2) is
fundamentally distinct from the CIL defense of necessity [i.]. Secondly, Art. 6(2)
constitutes lex specialis [ii.] and thirdly, such an application would be contrary to the rule
of effectiveness used in interpreting treaties [iii.].
i. Article 6 (2) is by its nature different from the CIL defense of necessity.
139. The Respondent submits that there is a fundamental difference between non-precluded
measures clauses and defenses under international law. An NPM clause operates to
155
1992 BIT, Preamble, ¶¶2, 3.
156
1992 BIT, Preamble, ¶4.
157
Burke-White, Extraordinary Times, pp. 348-349.
158
Stone Sweet, Proportionality, pp. 70-71.
159
32
remove certain actions from the ambit of the treaty, while a defense operates to excuse
an internationally wrongful act of the State.160
140. Art. 6(2) therefore operates as a primary rule within international law, while Art. 25 of
ASR operates as a secondary rule, i.e., it applies only after there has been a breach of a
primary rule.161
141. The Respondent differs from the position taken by tribunals in the CMS, Enron and
Sempra cases. The Annulment Committee in the CMS case strongly criticized its reading
of the ILC Articles on State Responsibility and pointed out several errors in applying the
CIL conditions to Art. 6(2).162
ii. Applying the CIL defense would be contrary to the lex specialis status of
Article 6 (2) in the BIT.
142. Article 55 of ASR states these rules of general international law would not apply if the
conduct of the States in a given situation was governed under special rules of
international law. 163 Hence, such a lex specialis would override the more general rules
of customary international law.164 As is clear from the foregoing arguments, Article 6 (2)
through its wording and formulation excludes the application of CIL rules. Hence, the
CIL defense can thus never be conflated with the treaty provision.165
iii. Applying the CIL defense would be contrary to the rule of effectiveness in
treaty interpretation.
143. The interpretation of a treaty must be made in good faith and such an interpretation must
ensure that the provisions of a treaty are given effect to under the rule ut res magis valeat
quam pereat.166
160
Burke-White, Extraordinary Times, p. 321.
161
Sempra, Annulment, ¶¶115-116.
162
CMS, Annulment, ¶¶132-133, 144-147.
163
ASR Commentaries, Commentary to Article 55, ¶3.
164
Article 55, ASR.
165
Nicaragua, ICJ, p. 95.
166
Article 31 (1), VCLT.
33
144. For instance, the arbitral tribunal in Noble Ventures found that even though the phrasing
of a particular clause did not mention investment contracts expressly, it would make the
clause redundant to read it in any other way except as an umbrella clause.167
145. In the present case, it is clear that the CIL defense of necessity is already available to the
Respondent and it may take advantage of it as an applicable rule of international law.
Article 8 (3) of the Corellia-Dagobah BIT makes clear that “any relevant rules of
international law” and “the applicable rules of international law.” Since this defense is
already available to a host state under any proceeding that may arise in relation with the
Corellia-Dagobah BIT, an interpretation that equates CIL to Art. 6(2) would result in Art.
6(2) being rendered redundant.
C. The conditions for invoking Art. 6(2) have been met in the present case.
146. The Respondent argues that the conditions that must be met to invoke Art. 6(2) are the
same as those under Art. XX of the GATT. The three elements of the test168 have been
met because the measures taken were to protect an interest that was of a higher relative
importance than the conflicting interests [i.], they contributed to the policy objective of
protecting the economy of the Respondent from a crisis [ii.] and they were the least
restrictive measures that could have been employed to achieve the goal [iii.].
i. The measures taken by the Respondent were to protect an interest of higher

relative importance than the conflicting interests
147. It is clear in the present case that the protection of the economic foundation of the
Respondent-State and the prevention of an economic crisis was an interest of much
greater importance than the 30% haircut faced by the bondholders.169
148. In arbitral cases against Argentina involving suspension of gas tariff adjustments,
limitations on withdrawal from bank deposits and redenomination of tariffs in pesos, it
was found by the tribunals that the losses faced by the investors in the face of those
measures did not harm the essential interests of any state or of the international
167
Noble Ventures, Award, ¶50-52.
168
Korea—Beef, Appellate Body, ¶¶161-166; Brazil—Retreaded Tyres, Panel, ¶7.104.
169
Uncontested facts, ¶17.
34
community.170 The economic interests of the Respondent therefore have higher

importance than the interests of the bondholders on payment terms.
ii. The measures taken by the Respondent contributed to the protection of the
Respondent’s essential security interests.
149. The measures taken by the Respondent were aimed at protecting the essential security
interests of the Respondent, an objective permissible under Article 6(2) of the BIT.
Arbitral tribunals have held on a number of instances that economic interests could often
be essential security interests171
150. Despite the fact that the crisis had not yet occurred, public services in the state of
Dagobah were on the verge of being compromised172 and along with the recession and
the growing debt levels, other economic indicators like the unemployment rate and the
inflation rate had also increased. Large-scale dismissals had also resulted in social unrest
and several demonstrations in the capital and large cities.173
151. This bailout and the IMF assistance was necessary as per the IMF’s own technical
assessment under its criterion for such loans.174 This adequately satisfies the threshold
that the measure must make a material contribution to the objective.175
iii. The measures taken by the respondent were the least restrictive or treaty
inconsistent .
152. The Respondent has already shown a prima facie situation of necessity and therefore the
burden to show a viable alternative to the measures taken by the Respondent lies on the
Claimant.176
153. The Respondent contends that the measures adopted were the least treaty inconsistent
measures it could have adopted. This requirement is in line with the application of the
170
CMS, Award, ¶¶357-358; Enron, Award, ¶¶310, 341; Sempra, Award, ¶¶352, 390.
171
CMS, Award, ¶359; Enron, Award, ¶332; Continental, Award, ¶178.
172
PO2, ¶20.
173
PO3, ¶38.
174
IMF Lending, p. 10.
175
Brazil—Retreaded Tyres, AB, ¶210.
176
United States—Gambling, Appellate Body, ¶¶ 309– 11.
35
‘least restrictive’ means test under Article XX of GATT to the BIT in the present case.177
It must further be noted that this requirement would only take the Tribunal into an
analysis of alternatives that are ‘reasonably available’ to the Respondent and does not
include measures that are impracticable or speculative as to their effects.178
154. The “several measures” suggested by the IMF were not alternatives to the restructuring
measures undertaken by the Respondent. This is clear from the fact that even though such
measures were suggested, the IMF nonetheless made the restructuring measure a
condition to its bailout. Thus, the fact that those other measures were not all employed
do not affect the necessity of the restructuring.
155. An open offer restructuring would not have met the requirements of debt reduction
necessary to obtain the IMF bailout. An open offer restructuring would have resulted in
favorable treatment to holdout creditors and could have discriminated against protected
investments under the BIT. This would have resulted in a far more treaty inconsistent
measure than the restructuring that was carried out.
156. The specific modalities of the restructuring and exchange offer were as per IMF policy
and thus there can be no question as to necessity of the level of the haircut and the
acceptable level of negotiations. IMF policy makes restructuring a condition to its
lending only so as to ensure the sustainability of the state’s debt levels179 and such
conditions are not formulated so as to impose excessive burdens.180
D. In any case, the Respondent’s restructuring measures satisfied the conditions

of the CIL doctrine of necessity.
157. The CIL doctrine of necessity as enshrined in Article 25 of the ILC Articles on State
Responsibility places a number of requirements on the state seeking to employ it which
must be cumulatively satisfied. The Respondent submits that these have been met in the
present case.
177
178
Brazil—Retreaded Tyres, Panel, ¶7.211; Continental, Award, ¶198.
179
The Role of the IMF, p. 4.
180
IMF Conditionality, p. 2, ¶¶6 and 7.
36
158. The Respondent submits that for reasons already stated above, the threat faced by the
Respondent’s essential interest was a grave and imminent one. The fact that the crisis
had not yet occurred did not make its threat any less imminent as the certainty of its
occurrence has been established. The ICJ in the Gabcikovo-Nagymaros case held that a
“peril” appearing in the long term might be held to be “imminent” as soon as it is
established that the realization of that peril, however far off it might be, is not any less
certain and inevitable.181
159. Further, the losses of investors in situations of an economic crisis of a host state does not
qualify as the impairment of an essential interest of any other state. The Respondent
further argues that the BIT clearly does not exclude the application of the defense.182
160. Lastly, the Respondent’s actions do not amount to substantial contribution towards the
State of necessity.183 The situation faced by the Respondent clearly followed from the
2008 financial crisis and it is also clear that the fears among investors of a default resulted
in a loss of access to capital markets.184 Further, economic policies adopted by the
Respondent should not be analyzed in hindsight185 as these were advised by financial
bodies such as the IMF and were taken in good faith for economic benefit.
161. It is therefore contended that the Respondent’s measures were permissible under Article
6(2) and excused under the CIL defense of necessity.
E. The Respondent has no obligation to pay compensation as the measures it took were
permitted under Article 6 (2)
162. The Respondent submits that there is no obligation to pay compensation under Article
27 of the ASR. As has already been argued, Article 6 (2) operates as a primary rule of
international law and precludes the possibility of a breach under the treaty if its conditions
are met. Under these circumstances, no secondary rule of international law creating an
obligation to pay compensation can arise.
181
Gabcikovo, ICJ, p. 42, ¶54.
182
LG&E, Award, ¶255.
183
ASR Commentaries, Commentary to Article 25, ¶20.
184
185
Continental Casualty, ¶¶234-236.
37
163. The Respondent submits that any internationally wrongful act would take place at the
time of the restructuring, during a situation of necessity and hence would not become
compensable after the necessity passed.186 In any case, to require the Respondent to pay
compensation after the situation of necessity has passed would be to impose a redundant
obligation as such an obligation would once again put the Respondent into a situation of
necessity by making its debt levels unsustainable.
186
CMS, Annulment, ¶¶144-147
38
RELIEF SOUGHT
The Respondent respectfully prays to the Tribunal for the following relief-
1. Declare that the Tribunal does not have jurisdiction over this dispute;
2. In the alternative, declare that it is not entitled to rule on the claims asserted in
view of the forum selection clause contained in the sovereign bonds;
3. Furthermore, in the event the tribunal decides that is has jurisdiction, declare
that the relief sought by Claimant has no support in the applicable law and thus
should be denied; and
4. In any event declare that Claimant shall pay for all costs related to these
proceedings.
Counsels for the Respondent

Team Klæstad
20 September 2014
xx

Team Klæstad: Written Submissions For The Respondent

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Team Klæstad: Written Submissions For The Respondent

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T E A M K L ÆS T A D

IN THE ARBITRATION INSTITUTE

OF THE STOCKHOLM CHAMBER OF COMMERCE

CASE SCC NO 00/2013

CALRISSIAN AND CO., INC.

THE FEDERAL REPUBLIC OF DAGOBAH

WRITTEN SUBMISSIONS FOR THE RESPONDENT

TABLE OF ABBREVIATIONS ....................................................................................................... iv

TABLE OF AUTHORITIES ............................................................................................................ vi

STATEMENT OF FACTS ................................................................................................................ 1

JURISDICTION AND ADMISSIBILITY

i. Sovereign bonds do not fulfill the chapeau given in Art. 1. ......................................... 4

B. The investment is not made in the territory of the Respondent. ..................................... 8

II THE PCA AWARD HAS NO BEARING ON THE PRESENT PROCEEDINGS. .............................. 12

A. The PCA Award is not binding on this Tribunal. ......................................................... 12

i. Decisions under Art. 7 are binding only on State Parties ......................................... 12

B. The award has limited persuasive value ....................................................................... 15

A. The FSC is a withdrawal of Respondent’s consent to arbitrate disputes arising from

B. The FSC covers the present claim. ............................................................................... 18

i. The Tribunal should defer to the sanctity of the Contract. ........................................ 21

IV THE SOVEREIGN DEBT RESTRUCTURING UNDERTAKEN BY THE RESPONDENT DOES NOT

B. The measures undertaken by the Respondent State do not unreasonably or

V. THE RESPONDENT’S RESTRUCTURING MEASURES WERE PERMISSIBLE AS THEY FALLS

RELIEF SOUGHT ........................................................................................................................ xx

Abbreviation Full Form

Abbreviation Full Form

Sr. Cited As Full Citation

8 Ambatielos, Award Ambatielos Case (Greece v. UK), 1953 ICJ 10 (May

9 Ambiente, Dissent Ambiente Ufficio S.p.A. and others v. Argentine

Sr. Cited As Full Citation

13 Bayindir, Jurisdiction Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v.

15 BIVAC, Jurisdiction Bureau Veritas, Inspection, Valuation, Assessment and

18 Brazil—Retreaded WTO Panel Report, Brazil—Measures Affecting

19 Caratube, Award Caratube International Oil Company LLP v. The

Sr. Cited As Full Citation

27 Deutsche Bank, Award Deutsche Bank AG v. Democratic Socialist Republic of

Sr. Cited As Full Citation

37 Genin, Award Alex Genin, Eastern Credit Limited, Inc.

39 Globex, Award Global Trading Resource Corp. and Globex

Sr. Cited As Full Citation

47 LESI, Award Consorzio Groupement L.E.S.I. – Dipenta v. People’s

Sr. Cited As Full Citation

56 Occidental Occidental Petroleum Corporation and Occidental

59 Pan American, Pan American Energy LLC and BP Argentina

Sr. Cited As Full Citation

60 Pantechniki, Award Pantechniki S.A. Contractors & Engineers (Greece) v.

65 Rumeli, Award Rumeli Telekom A.S. and Telsim Mobil

Sr. Cited As Full Citation

76 SPP v. Egypt II, SPP v. Egypt No. 2 (Preliminary Objections), 3 ICSID

77 Tecmed, Award Técnicas Medioambientales Tecmed, S.A. v. The

Sr. Cited As Full Citation

78 Total v. Argentina, Total S.A. v. The Argentine Republic, Decision on

81 UPS v. Canada, United Parcel Service of America Inc. v. Government

Sr. Cited As Full Citation

Sr. Cited As Full Citation

Sr. Cited As Full Citation

Sr. Cited As Full Citation

7 GATT General Agreement on Tariffs and Trade, 1947, 55 UNTS

Sr. Cited As Full Citation

Sr. Cited As Full Citation

Second Economic Crisis

JURISDICTION AND ADMISSIBILITY

i. Sovereign bonds do not fulfill the chapeau given in Art. 1.