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Team: Baxter

FOREIGN DIRECT INVESTMENT

INTERNATIONAL ARBITRATION MOOT COMPETITION

2 - 5 NOVEMBER 2017

________________________________________________________________

ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF

THE PERMANENT COURT OF ARBITRATION

Atton Boro Limited (Claimant)

v.

The Republic of Mercuria (Respondent)

PCA ARBITRATION CASE No. 2016 - 74

MEMORIAL FOR CLAIMANT

September 18, 2017

I

TABLE OF CONTENTS

LIST OF AUTHORITIES III

LIST OF ABBREVIATIONS XVIII

SUMMARY OF ARGUMENTS 4

ARGUMENTS 5

PART ONE: JURISDICTION 5

A. The requirements of the arbitration clause are fulfilled 5

I. Ratione personae 5

1. Atton Boro is an investor under Art. 1(2) BIT 5

2. Respondent cannot sustain a claim that Atton Boro transgressed the bona fide

standard 6

II. Atton Boro made protected investments 7

1. The LTA is an investment 7

a) The LTA is an investment according to Art. 1(1) BIT 7

b) The LTA is an investment according to the ‘Salini’ criteria 8

2. The Award is an investment according to Art. 1(1)(c) BIT 11

a) The Award is a ‘claim to money’ 12

b) The Award is an investment as an outgrowth of the underlying contract 12

3. The Patent is an investment according to Art. 1(1)(e) BIT 13

III. Amicable negotiations have failed 13

B. Respondent cannot preclude the Tribunal’s jurisdiction by invoking the Denial of

Benefits Clause under Art. 2(1) BIT 14

I. Atton Boro has substantial business activity in Basheera 14

II. Respondent did not invoke the Denial of Benefits Clause in a timely manner 15

C. Conclusion 16

PART TWO: MERITS 17

A. Enactment of Law No. 8458/09 and the granting of a compulsory licence breached

substantial protections of the BIT with respect to the patent 17

I. Respondent breached FET 17

1 Enactment of Law No. 8458/09 breached FET 18

a) Legitimate Expectations 18

aa) Legal framework 18

II

bb) Breach of representations 19

cc) Right to Regulate 21

b) Favourable conditions 22

c) Good Faith 22

2. Granting a licence breached FET 24

b) Respondent did not comply with Atton Boro’s legitimate expectations 25

II. Respondent indirectly expropriated Atton Boro 28

1. Granting the compulsory licence is an indirect expropriation 28

2. The indirect expropriation was not followed by immediate full and effective

compensation 29

a) The compensation was not full and effective 29

b) The compensation was not made immediately 31

3. No justification under Art. 6(4) BIT 31

B. Respondent violated Art. 3(2) BIT by failing to enforce the Award 33

I. Respondent breached the FET Standard 33

1. Legitimate expectations 33

2 Denial of Justice 34

a) Complexity of the issue 34

b) Parties’ behaviour 36

c) Court’s behaviour 37

II. Full Protection and Security 37

III. Liability 38

C. Respondent violated Art. 3(3) BIT by terminating the LTA 39

I. Termination of the LTA 40

II. Liability 41

D. Conclusion 42

PART THREE:REMEDIES 43

A. Compensation 43

B. Costs 43

PRAYER FOR RELIEF 44

III

LIST OF AUTHORITIES

BOOKS

Baumgartner Jorun Baumgartner, Treaty Shopping in

International Investment Law (2016).

Black’s Law Dictionary Bryan A. Garner, Black’s Law Dictionary,

10th Edition (2016).

Carvalho Nuno Pires de Carvalho, The TRIPS

Regime of Patent Rights, 2nd Edition

(2005).

Correa Carlos M. Correa, Intellectual Property

Rights, the WTO and Developing Countries:

The TRIPS Agreement and Policy Options

(2000).

Dörr/Schmalenbach Oliver Dörr / Kirsten Schmalenbach (Edit.),

Vienna Convention on the Law of Treaties,

A Commentary (2012).

Dolzer/Schreuer Rudolf Dolzer / Christoph Schreuer,

Principles of International Investment Law,

2nd Edition (2012).

ICCA International Council for Commercial

Arbitration (Edit.), ICCA’s Guide to the

Interpretation of the 1958 New York

Convention: A Handbook for Judges (2011).

ICSID Commentary Christoph Schreuer with Loretta

Malintoppi, August Reinisch and Anthony

Sinclair, The ICSID Convention, A

Commentary, 2nd Edition (2009).

Kläger Roland Kläger, ‘Fair and Equitable

Treatment’ in International Investment Law

(2011).

IV

Klett/Sonntag/Wilske Alexander L. Klett / Matthias Sonntag /

Stephan Wilske, Intellectual Property Law in

Germany (2008).

Kronke/Nacimiento/Otto/Port Herbert Kronke / Patricia Nacimiento / Dirk

Otto / Nicola Christine Port (Edit.),

Recognition and Enforcement of Foreign

Arbitral Awards: A Global Commentary on

the New York Convention (2010).

Malbon/Lawson/Davison Justin Malbon / Charles Lawson / Mark

Davison, The WTO Agreement on Trade-

Related Aspects of Intellectual Property

Rights, A Commentary (2014).

Marboe Irmgard Marboe, Calculation of

Compensation and Damages in International

Investment Law (2009).

McLachlan/Shore/Weiniger Campbell McLachlan / Laurence Shore /

Matthew Weiniger, International Investment

Arbitration: Substantive Principles (2007).

Muchlinski/Ortino/Schreuer Peter Muchlinski / Federico Ortino /

Christoph Schreuer (Edit.), The Oxford

Handbook of International Investment Law

(2008).

Newcombe/Paradell Andrew Newcombe / Lluís Paradell, Law

and Practice of Investment Treaties (2009).

Oxford Dictionary John Simpson / Edmund Weiner (Edit.), The

Oxford English Dictionary, 2nd Edition

(1989).

Poudret/Besson Jean-François Poudret / Sébastien Besson,

Comparative Law of International

Arbitration, 2nd Edition (2007).

Roe/Happold Thomas Roe / Matthew Happold, Settlement

of Investment Disputes under the Energy

Charter Treaty (2011).

V

Stoll/Busche/Arend Peter-Tobias Stoll / Jan Busche / Katrin

Arend (Edit.), WTO - Trade-Related

Aspects of Intellectual Property Rights

(2009).

Titi Aikaterini Titi, The Right to Regulate in

International Investment Law (2014).

Tudor Ioana Tudor, The Fair and Equitable

Treatment Standard in the International Law

of Foreign Investments (2008).

UNCTAD/ICTSD United Nations Conference on Trade and

Development / International Center for

Trade and Sustainable Development (Edit.),

Resource Book on TRIPS and Development

(2005).

Villiger Mark E. Villiger, Commentary on the 1969

Vienna Convention on the Law of Treaties

(2009).

ARTICLES

Bird Robert C. Bird, Developing Nations and the

Compulsory License: Maximizing Access to

Essential Medicines While Minimizing

Investment Side Effects, The Journal of

Law, Medicine & Ethics, Volume 37, Issue

2, pp.209-221 (2009).

Brower/Schill Charles N. Brower / Stephan W. Schill, Is

Arbitration a Threat or a Boom

to the Legitimacy of International

Investment Law?, Chicago Journal of

International Law, Volume 9, Number 2,

Article 5, pp. 471-498 (2009).

Gibson Christopher Gibson, A Look at the

Compulsory License in Investment

Arbitration: The case of Indirect

Expropriation, American University

International Law Review, Volume 25,

Number 3, pp.357-422 (2009).

VI

Grantham William Grantham, The Arbitrability of

International Intellectual Property Disputes,

Berkeley Journal of International Law,

Volume 14, Issue 1, pp.173-221 (1996).

Lehman Bruce Lehman, The Pharmaceutical Industry

and the Patent System (2003).

Mann Howard Mann, The Right of States to

Regulate and International Investment Law

(2002).

Nikiėma Suzy H. Nikiėma, Best Practises Definition

of Investors (2012).

Reichman/Hasenzahl Jerome H. Reichman / Catherine Hasenzahl,

Non-voluntary Licensing of Patented

Inventions, Historical Perspective, Legal

Framework under TRIPS, and an Overview

of the Practice in Canada and the USA,

UNCTAD-ICTSD Project on IPRs and

Substantial Development, Issue Paper No. 5

(2003).

Schill Stephan W. Schill, Fair and Equitable

Treatment under Investment Treaties as an

Embodiment of the Rule of Law, IILJ

Working Paper 2006/6 (2006).

Schreuer/Kriebaum Christoph Schreuer / Ursula Kriebaum, At

What Time Must Legitimate Expectation

Exist? (2009).

Sykes Alan O. Sykes, TRIPS, Pharmaceuticals,

Developing Countries, and the Doha

"Solution", John M. Olin Program in Law

and Economics Working Paper No. 140

(2002).

Valasek/Dumberry Martin J. Valasek / Patrick Dumberry,

Developments in the Legal Standing of

Shareholders and Holding Corporations in

Investor-State-Disputes, ICSID Review

Volume 26, Number 1, pp.34-75 (2011).

Weissman Robert, Weissman, A Long, Strange TRIPS:

The Pharmaceutical Industry Drive to

Harmonize Global Intellectual Property

Rules, and the Remaining WTO Legal

Alternatives Available to Third World

Countries, University of Pennsylvania

Journal of International Economic Law,

VII

Volume 17:4, pp.1069-1125 (2014).

MISCELLANEOUS

AICPA American Institute of Certified Public

Accountants (Edit.), Statement on Standards

for Valuation Services No. 1: Valuation of a

Business, Business Ownership Interest,

Security, or Intangible Asset (2007).

ASA American Society of Appraisers (Edit.),

ASA Business Valuation Standards (2009).

ICJ Reports International Court of Justice (Edit.),

Reports of Judgements, Advisory Opinions

and Orders 1974 (1974).

International Legal Materials American Society of International Law

(Edit.), International Legal Materials,

Volume 23, Number 5 (1984).

RIAA I United Nations (Edit.), Reports of

International Arbitral Awards, Volume I

(1948).

RIAA XI United Nations (Edit.), Reports of

International Arbitral Awards, Volume XI

(2006).

Siebrasse Norman V. Siebrasse, Expert Opinion in the

case Eli Lilly and Company v. The

Government of Canada (Case No.

UNCT/14/2), September 29, 2014.

YCA 1996 Albert Jan van den Berg (Edit.), Yearbook

of Commercial Arbitration, Volume XXI

(1996).


of Commercial Arbitration, Volume XXII

(1997).


of Commercial Arbitration, Volume XXIVa

(1999).

VIII

LIST OF LEGAL SOURCES

ARBITRAL DECISIONS

ADC ADC Affiliate Limited and ADC & ADMC

Management Limited v. The Republic of

Hungary (ICSID Case No. ARB/03/16),

Award, October 2, 2006.

ADF ADF Group, Inc. v. United States of

America (ICSID Case No. ARB(AF)/00/1),

Award, January 9, 2003.

AES AES Corporation v. The Argentine Republic

(ICSID Case No. ARB/02/17), Decision on

Jurisdiction, April 26, 2005.

Ambiente Ambiente Ufficio S.p.A. and others v.

Argentine Republic (ICSID Case No.

ARB/08/9), Decision on Jurisdiction and

Admissibility, February 8, 2013.

AMTO Limited Liability Company AMTO v.

Ukraine (SCC Arbitration No. 080/2005),

Final Award, March 26, 2008.

Ascom Anatolie Stati, Gabriel Stati, Ascom Group

S.A. and Terra Raf Trans Trading Ltd. v.

Republic of Kazakhstan (SCC Case No V.

(116/2010)), Award, December 19, 2013.

Azurix Azurix Corp. v. The Argentine Republic

(ICSID Case No. ARB/01/12), Award, July

14, 2006.

Bayindir Bayindir Insaat Turizm Ve Sanayi A.S. v.

Islamic Republic of Pakistan (ICSID Case

No. ARB/03/29), Decision on Jurisdiction,

November 14, 2005.

BG Group BG Group PLC. v. The Republic of

Argentina (UNCITRAL), Final Award,

December 24, 2007.

Biwater Biwater Gauff (Tanzania) Ltd. v. United

Republic of Tanzania (ICSID Case No.

ARB/05/22), Award, July 24, 2008.

Casado Victor Pey Casado and President Allende

Foundation v. Republic of Chile (ICSID

Case No. ARB/98/2), Award, May 8, 2008.

IX

CMS CMS Gas Transmission Company v. The


ARB/01/8), Award, May 12, 2005.

ConocoPhillips ConocoPhillips Petrozuata B.V.,

ConocoPhillips Hamaca B.V.,

ConocoPhillips Gulf of Paria B.V. and

ConocoPhillips Company v. The Bolivarian

Republic of Venezuela (ICSID Case No.

ARB/07/30), Decision on Jurisdiction and

Merits, September 3, 2013.

Corn Products Corn Products International Inc. v. The

United Mexican States (ICSID

ARB(AF)/04/01), Decision on

Responsibility, January 15, 2008.

Duke Energy Duke Energy Electroquil Partners and

Electroquil S.A. v. Republic of Ecuador

(ICSID Case No. ARB/04/19), Award,

August 18, 2008.

EDF EDF (Services) Limited v. Romania (ICSID

Case No. ARB/05/13), Award, October 8,

2009.

El Paso El Paso Energy International Company v.

The Argentine Republic (ICSID Case No.

ARB/03/15), Award, October 31, 2011.

Enkev Enkev Beheer B.V. (the Netherlands) v. The

Republic of Poland (PCA Case No. 2013-

01), First Partial Award, April 29, 2014.

Enron Enron Corporation and Ponderosa Assets,

L.P. v. The Argentine Republic (ICSID Case


January 14, 2004.

Ethyl Ethyl Corporation v. The Government of

Canada (UNCITRAL), Award on

Jurisdiction, June 24, 1998.

Feldman Marvin Roy Feldman Karpa v. The United

Mexican States (ICSID Case No.

ARB(AF)/99/1), Award, December 16,

2002.

Fireman’s Fund Fireman’s Fund Insurance Company v. The

X

United Mexican States (ICSID Case No.

ARB(AF)/02/01), Award, July 17, 2006.

Frontier Frontier Petroleum Services Ltd. v. The

Czech Republic (UNCITRAL), Final

Award, November 12, 2010.

Genin Alex Genin, Eastern Credit Limited, Inc. and

A.S. Baltoil v. The Republic of Estonia

(ICSID Case No. ARB/99/2), Award, June

25, 2001.

Jan de Nul Jan de Nul N.V. and Dredging International

N.V. v. Arab Republic of Egypt (ICSID Case


June 16, 2006.

Joy Mining Joy Mining Machinery Limited v. The Arab

Republic of Egypt (ICSID Case No.

ARB/03/11), Award on Jurisdiction, August

6, 2004.

Kardassopoulos Ioannis Kardassopoulos v. Georgia (ICSID

Case No. ARB/05/15), Decision on

Jurisdiction, July 6, 2007.

Lauder

Ronald S. Lauder v. The Czech Republic

(UNCITRAL), Final Award, September 3,

2001.

Lemire Joseph Charles Lemire v. Ukraine (ICSID

Case No. ARB/06/13), Decision on

Jurisdiction and Liability, January 14, 2010.

LG&E LG&E Energy Corp., LG&E Capital Corp.

and LG&E International Inc. v. Argentina

Republic (ICSID Case No. ARB/02/1),

Decision on Liability, October 3, 2006.

Liman Liman Caspian Oil BV and NCL Dutch

Investment BV v. Republic of Kazakhstan

(ICSID Case No. ARB/07/14), Award, June

22, 2010.

Maffezini Emilio Augustín Maffezini v. The Kingdom

of Spain (ICSID Case No. ARB/97/7),

Decision of the Tribunal on Objections to

Jurisdiction, January 25, 2000.

XI

Malaysian Historical Salvors Malaysian Historical Salvors SDN, BHD v.

The Government of Malaysia (ICSID Case

No. ARB/05/10), Award on Jurisdiction,

May 17, 2007.

Metalclad Metalclad Corporation v. The United

Mexican States (ICSID Case No.

ARB(AF)/97/1), Award, August 30, 2000.

Merrill & Ring Merrill and Ring Forestry L.P. v. The

Government of Canada (Case No.

UNCT/07/1), Award, March 31, 2010.

Middle East Cement Middle East Cement Shipping and Handling

Co. S.A. v. Arab Republic of Egypt (ICSID

Case No. ARB/99/6), Award, 12 April,

2002.

Mondev Mondev International LTD. v. United States

of America (ICSID Case No.

ARB(AF)/99/2), Award, October 11, 2002.

MTD MTD Equity Sdn. Bhd. and MTD Chile S.A.

v. Republic of Chile (ICSID Case No.

ARB/01/7), Award, May 25, 2004.

Noble Ventures Noble Ventures, Inc. v. Romania (ICSID

Case No. ARB/01/11), Award, October 12,

2005.

North Atlantic Coast Fisheries PCA, The North Atlantic Coast Fisheries

Case (Great Britain v. United States of

America), Award, September 7, 1910

(RIAA XI, pp. 167-226)

Norwegian Shipowners‘ PCA, Norwegian Shipowners’ claims

(Norway v. USA), Award, October 12, 1922

(RIAA I, pp.307-346).

OEPC Occidental Exploration and Production

Company v. The Republic of Ecuador

(LCIA Case No. UN3467), Final Award,

July 1, 2004.

Pac Rim Pac Rim Cayman LLC v. The Republic of El

Salvador (ICSID Case No. ARB/09/12),

Decision on the Respondent’s Jurisdictional

Objections, June 1, 2012.

XII

Parkerings-Compagniet Parkerings-Compagniet AS v. Republic of

Lithuania, (ICSID Case No. ARB/05/8),

Award, September 11, 2007.

Paushok Sergei Paushok, CJSC Golden East

Company and CJSC Vostokneftegaz

Company v. The Government of Mongolia

(UNCITRAL), Award on Jurisdiction and

Liability, April 28, 2011.

Petrobart Petrobart Limited v. The Kyrgyz Republic

(SCC Arbitration No. 126/2003), Arbitral

Award, March 29, 2005.

Philip Morris Philip Morris Bands Sàrl, Philip Morris

Products S.A. and Abal Hermanos S.A. v.

Oriental Republic of Uruguay (ICSID Case

No. ARB/10/7), Award, July 8, 2016.

Plama Plama Consortium Limited v. Republic of

Bulgaria (ICSID Case No. ARB/03/24),

Decision of Jurisdiction, February 2005.

Pope & Talbot Pope & Talbot Inc. v. The Government of

Canada (UNCITRAL), Interim Award, June

26, 2000.

PSEG PSEG Global Inc., The North American

Coal Corporation, and Konya Ilgin Elektrik

Üretim ve Ticaret Limited Sirketi v.

Republic of Turkey (ICSID Case No.

ARB/02/5), Decision on Jurisdiction, June

4, 2004.

RFCC Consortium R.F.C.C. v. Kingdom of

Morocco (ICSID Case No. ARB/00/6),

Decision on Jurisdiction, July 16, 2001.

Romak Romak S.A. (Switzerland) v. The Republic of

Uzbekistan (PCA Case No. AA 280),


Rompetrol The Rompetrol Group N.V. v. Romania

(ICSID Case No. ARB/06/3), Decision on

Respondent’s Preliminary Objections on

Jurisdiction and Admissibility, April 18,

2008.

Rumeli Rumeli Telekom A.S. and Telsim Mobil

Telekomunikasyon Hizmetleri A.S. v. The

Republic of Kazakhstan (ICSID Case No.

ARB/05/16), Award, July 29, 2008.

XIII

S.D. Myers S.D. Myers, Inc. v. Government of Canada

(UNCITRAL), Partial Award, November

13, 2000.

Saipem Saipem S.p.A v. The People’s Republic of

Bangladesh (ICSID Case No. ARB/05/07),

Decision on Jurisdiction and

Recommendation on provisional measures,

March 21, 2007.

Salini Salini Costruttori S.P.A and Italstrade S.P.A

v. Kingdom of Morocco (ICSID Case No.

ARB/00/4), Decision on Jurisdiction, July

23, 2001.

Saluka Saluka Investment BV (the Netherlands) v.

The Czech Republic (UNCITRAL), Partial

Award, March 17, 2006.

Santa Elena Compañia del Desarrollo de Santa Elena

S.A. v. Republic of Costa Rica (ICSID Case

No. ARB/96/1), Final Award, February 17,

2000.

Sempra Sempra Energy International v. The


ARB/02/16), Award, September 28, 2007.

Siemens Siemens A.G. v. The Argentine Republic

(ICSID Case No. ARB/02/8), Award,

February 6, 2007.

SGS I SGS Société Générale de Surveillance S.A.

v. Islamic Republic of Pakistan (ICSID Case

No. ARB/01/13), Decision of the Tribunal

on Objections to Jurisdiction, August 6,

2003.

SGS II SGS Société Générale de Surveillance S.A v.

The Republic of Paraguay (ICSID Case No.

ARB/07/29), Award, February 10, 2012.

Starrett Starrett Housing Corporation, Starrett

System Inc. and Starrett Housing

Internatonal Inc. v. The Government of the

Islamic Republic of Iran, Bank Markazi

Iran, Bank Omran and Bank Mellat (Iran-

United States Claims Tribunal, Case No.

24), Interlocutory Award, December 19,

1983 (International Legal Materials,

pp.1090-1142).

XIV

Tecmed Técnicas Medioambientales Tecmed, S.A. v.

The United Mexican States (ICSID Case No.

ARB(AF)/00/2), Award, May 29, 2003.

Total Total S.A. v. Argentine Republic (ICSID

Case No. ARB/04/1), Decision on Liability,

December 27, 2010.

Toto Toto Costruzione Generali S.P.A. v. The

Republic of Lebanon (ICSID Case No.

ARB/07/12), Decision on Jurisdiction,

September 11, 2009.

Veteran Petroleum Veteran Petroleum Limited (Cyprus) v. The

Russian Federation (PCA Case No. AA

228), Interim Award on Jurisdiction and

Admissibility, November 30, 2009.

Waste Management Waste Management Inc. v. United Mexican

States (ICSID Case No. ARB(AF)/00/3),

Award, April 30, 2004.

Western NIS Western NIS Enterprise Fund v. Ukraine

(ICSID Case No. ARB/04/2), Order, March

16, 2006.

White Industries White Industries Australia Limited v. The

Republic of India (UNCITRAL), Final


Yukos Yukos Universal Limited (Isle of Man) v.

The Russian Federation (PCA Case No. AA

227), Interim Award on Jurisdiction and

Admissibility, November 30, 2009.

INTERNATIONAL AND DOMESTIC COURT CASES

Admart Admart AG, Heller Werkstatt Gesmbh,

Andre Heller and Stefan Seigner v. Stephan

and Mary Birch Foundation, Inc. (United

States Court of Appeals, Third Circuit, Case

No. 457 F.3d 302), August 8, 2006.

Gater Gater Assets Ltd v. Nak Naftogaz Ukrainiy

(High Court of Justice in England & Wales,

Case No. [2007] APP.L.R. 03/22), March

22, 2007.

General National Maritime General National Maritime Transport

Company v. Götaverken Arendal Aktiebolag

XV

(Swedish Supreme Court, Case No. Ö 1243-

78), August 13, 1979.

Gould Ministry of Defense of the Islamic Republic

of Iran v. Gould, Inc., Gould Marketing,

Inc., Hoffman Export Corporation and

Gould International, Inc. (United States

Court of Appeals, Ninth Circuit, Case No.

969 F.2d 764), June 30, 1992.

Hebei Hebei Import & Export Corporation v.

Polytek Engineering Company Limited

(Court of Final Appeal of the Hong Kong

Special Administrative Region, Case No. 10

of 1998 (Civil)), February 9, 1999.

Karaha Bodas Karaha Bodas Company, L.L.C. v.

Perusahaan Pertambangan Minyak Dan

Gas Bumi Negara and P.T. PLN (Persero)

(Court of Queen’s Bench of Alberta, Case

No. 2004 ABQB 918), December 8, 2004.

Kersa Kersa Holding Company Luxembourg v.

Infancourtage (Luxembourg Court of

Appeal, Case No. 14983), November 24,

1993 (YCA 1996 pp.617-627).

Murray Oil Murray Oil Products Co., Inc. v. Mitsue &

Co., Limited (United States Court of

Appeals, Case No. 146 F.2d 381), December

28, 1944.

Nuclear Tests ICJ, Nuclear Tests Case (New Zealand v.

France), Judgement, December 20, 1974

(ICJ Reports, pp.457-478)

Renusagar Renusagar Power Co., Ltd v. General

Electric Co. (Supreme Court of India, Case

No. 1994 AIR 860, 1994 SCC Supl. (1)

644), October 7, 1993.

S.E.E.E. Société Européenne d’Etudes et

d'Entreprises v. Federal Republic of

Yugoslavia (Rouen Court of Appeal, Case

No. 982/82), November 13, 1984.

Sovereign Participations Sovereign Participations S.A. v. Chadmore

Developments, Inc. (Luxembourg Court of

Appeal, Case No. 22402), January 28, 1990

(YCA 1999, pp. 714-723).

XVI

TCL TCL Air Conditioner (Zhongshan) Co., Ltd

v. The Judges of the Federal Court of

Australia & Anor (High Court of Australia,

Case No. [2013] HCA 5 S178/2012), Order,

March 13, 2013.

Yukos Oil Yukos Oil Company v. Dardana, Ltd (Court

of Appeal in England & Wales, Case No.

[2002] EWCA Civ 543), April 18, 2002.

WTB WTB - Walter Thosti Boswau

Bauaktiengesellschaft v. Costruire Coop. srl

(Italian Supreme Court, Case No.

R.G.N.09078/93), January 12, 1995 (YCA

1997, pp.727-733).

TREATIES

Argentina-Italy BIT Fra la Repubblica Italiana e la Repubblica

Argentina sulla Promozione e Protezione

degli Investimenti (1988).

ICSID Convention Convention on the Settlement of Investment

Disputes between States and Nationals of

Other States (1966).

ICJ-Statute Statute of the International Court of Justice

(1945).

LTA Long-Term Agreement between Atton Boro

and NHA (2004).

Mercuria-Basheera BIT (‘BIT’) Agreement between the Republic of

Mercuria and the Kingdom of Basheera for

the Promotion and Reciprocal Protection of

Investments (1998).

New York Convention Convention on the Recognition and

Enforcement of Foreign Arbitral Awards

(1958).

PCA Rules Permanent Court of Arbitration Arbitration

Rules (2012).

Romania-United States BIT Treaty between the Government of the

United States of America and the

Government of Romania concerning the

Reciprocal Encouragement and Protection

of Investments (1994).

XVII

TRIPS Agreement on Trade-Related Aspects of

Intellectual Property Rights (1994).

UNCITRAL Rules United Nations Commission on

International Trade Law Arbitration Rules

(2010).

VCLT Vienna Convention on the Law of Treaties

(1969).

MISCELLANEOUS

ILC Articles International Law Commission, Draft

Articles on Responsibility of States for

Internationally Wrongful Acts with

Commentary (2001).

XVIII

LIST OF ABBREVIATIONS

¶/¶¶ paragraph/paragraphs

Art. Article

Edit. Editor(s)

e.g. For example

FDC Fixed-dose Combination

FET Fair and Equitable Treatment

GDP gross domestic product

High Court High Court of Mercuria

ibid. ibidem

ICSID International Centre for Settlement and

Investments Disputes

IIA International investment agreement

l./ll. line/lines

LCIA London Court of International Arbitration

NHA Mercuria National Health Authority

p./pp. page/pages

PCA Permanent Court of Arbitration

SCC Arbitration Institute of the Stockholm

Chamber of Commerce

UNCITRAL United Nations Commission on

International Trade Law

USD US Dollar

1

STATEMENT OF FACTS

1. Claimant, Atton Boro Limited (‘Atton Boro’), is a pharmaceutical company

organised under the laws of the Kingdom of Basheera (‘Basheera’), incorporated by

Atton Boro Group, a leading drug discovery and development enterprise which is

established in Basheera’s pharmaceutical market. In 1998, Respondent, the Republic

of Mercuria (‘Mercuria’), and Basheera concluded the Agreement between the

Republic of Mercuria and the Kingdom of Basheera for the Promotion and Reciprocal

Protection of Investments (‘BIT’), a bilateral investment treaty.

2. Atton Boro entered into a variety of public-private partnerships with states and state

agencies in order to manufacture and supply essential medicines at competitive rates.

For this purpose, Atton Boro rented an office space and opened a bank account in

Basheera. From 1998 to 2016, Atton Boro has had between two and six permanent

employees including a manager, an accountant, a commercial lawyer, and a patent

attorney. Since 1998, they have paid taxes and maintained a presence in Basheera,

managing Atton Boro’s portfolio of patents registered in South America and Africa,

providing support for regulatory approval, and providing marketing, sales, legal,

accounting, and tax services for Atton Boro Group affiliates in South America and

Africa.

3. Furthermore, a number of Atton Boro Group’s patents, including the Mercurian one

for Valtervite (Mercurian Patent No. 0187204) (‘Patent’), were assigned to Atton

Boro. Valtervite is the main ingredient of Atton Boro’s blockbuster greyscale-

treatment FDC drug Sanior.

4. Since 1998, Atton Boro has entered into several public-private collaborations with

Respondent’s government and the National Health Authority (‘NHA’), an agency of

the Respondent. The success of this partnership was underlined by a press statement

issued by Mr. Joseph Bell, Respondent’s Minister for Health, on January 19, 2004. At

the invitation of the NHA, the collaboration led to a Long-Term-Agreement (‘LTA’)

between Atton Boro and the NHA on July 20, 2004. Under this agreement, Atton

Boro furnished Sanior to the NHA at a generous 25% discount rate. Clause 5 placed

2

the NHA under the obligation to purchase a minimum guaranteed annual amount of

Sanior. According to Clause 6, the agreement was valid for a period of 10 years

effective from its commencement date.

5. As a result of the LTA, Atton Boro set up a robust manufacturing unit for Sanior in

Mercuria to ensure a timely and stable supply. Since July 2005, Atton Boro has

delivered Sanior to the NHA. Until the end of 2006, one-third of all greyscale patients

were treated with Sanior. In 2007, the order value of Sanior doubled in each quarter.

6. In early 2008, the NHA demanded to renegotiate the price for Sanior. Atton Boro was

willing to concede a further discount of 10%. The NHA rejected this generous offer

and instead demanded a discount of 40% in addition to the contractual discount.

Because of these high and unreasonable demands, a settlement could not be reached.

7. On June 10, 2008, the NHA unilaterally terminated the LTA. Subsequently, Atton

Boro invoked arbitration under the LTA. In January 2009, the competent Tribunal

issued an award (‘Award’) in favour of Atton Boro, finding that the NHA had

breached the LTA, and ordered the NHA to pay USD 40,000,000 in damages to Atton

Boro.

8. On March 3, 2009, Atton Boro brought a proceeding before the High Court of

Mercuria (‘High Court’) to enforce the Award in accordance with the provisions of

the New York Convention. The proceeding was adjourned repeatedly for over seven

years without good reason, and as a result, Respondent has yet to enforce the Award

and these delays continue to the present day.

9. On October 10, 2009, Respondent enacted a new Intellectual Property Law (Law No.

8458/09). Section 23 C authorises, under specific conditions, the use of patented

inventions without the owner’s permission. In November 2009, HG-Pharma, a

Mercurian generic drug manufacturer, petitioned the High Court for such a

compulsory licence to appropriate Valtervite for commercial use. On April 17, 2010,

the Court granted the petition in a fast-tracked process and granted HG-Pharma a

licence to use Valtervite. In return, HG-Pharma was obligated to pay a mere 1% of its

Valtervite earnings to Atton Boro.

3

10. By 2014, Atton Boro had lost nearly two-thirds of its market share of FDC pills to

HG-Pharma. Various distributors with whom Atton Boro maintained long-time

business relationships began to indicate their intention to switch to the more cost-

effective alternative of generic drugs once their contracts with Atton Boro expired. In

February 2015, Atton Boro’s manager announced that the company had been forced

to terminate the sale and distribution of Sanior in Mercuria.

4

SUMMARY OF ARGUMENTS

11. Atton Boro submits that this Tribunal has jurisdiction over the dispute concerning the

protection of an investment within Mercuria under the BIT. Moreover, the Tribunal’s

jurisdiction is not precluded by Art. 2(1) BIT. (Part One)

12. Additionally, Atton Boro claims that Respondent, by enacting Law No. 8458/09 and

by granting a compulsory licence to HG-Pharma, breached substantial provisions of

the BIT. In particular, it breached the FET Standard under Art. 3(2) BIT and

indirectly expropriated Atton Boro according to Art. 6(2) BIT. Furthermore, Atton

Boro contends that Respondent violated Art. 3(2) BIT by not enforcing the Award.

Lastly, Atton Boro submits that the termination of the LTA constitutes a breach of the

Umbrella Clause under Art. 3(3) BIT. (Part Two)

13. Accordingly, Atton Boro requests the Tribunal to order Respondent to pay no less

than USD 1,540,000,000 in damages to Atton Boro for the losses caused by

Respondent’s violations of the BIT. Additionally, the Tribunal should impose all costs

associated with these proceedings on Respondent. (Part Three)

5

ARGUMENTS

PART ONE: JURISDICTION

14. Atton Boro respectfully submits that this Tribunal has jurisdiction to adjudicate the

present dispute under the arbitration clause of Art. 8(1) BIT (I). Moreover,

Respondent cannot preclude this jurisdiction by invoking the Denial of Benefits

Clause under Art. 2(1) BIT (II).

A. The requirements of the arbitration clause are fulfilled

15. Pursuant to Art. 8(1) BIT, Atton Boro falls within the scope of ratione personae (1).

Atton Boro made protected investments, since the LTA, the Award, and the Patent all

qualify as investments (2). Furthermore, the attempt to settle the dispute through

amicable negotiations failed (3).

I. Ratione personae

16. Atton Boro is clearly an investor according to the language of Art. 1(2)(b) BIT (a).

Moreover, Respondent cannot sustain a claim that Atton Boro transgressed the bona

fide standard (b).

1. Atton Boro is an investor under Art. 1(2) BIT

17. Art. 1(2)(b) BIT states the relevant requirements for a legal person to qualify as an

investor:

“Investor means (...) any corporation (...) incorporated or duly constituted in

accordance with the applicable laws of that Contracting Party”.

18. Numerous Tribunals have established that Investment Tribunals are bound by the

definition of ‘investor’ in the relevant IIA.1 In this context, a Tribunal in Yukos

determined that the principles of international law prohibit a Tribunal to:

“write new, additional requirements - which the drafters did not include - into

a treaty, no matter how auspicious or appropriate they may appear”.2

1 Saluka, ¶241; Yukos, ¶415; Rompetrol, ¶97.

6

Accordingly, no additional requirements besides those explicitly mentioned in the

BIT can be taken into account when interpreting the relevant provision.

19. Atton Boro is a corporation organised under the laws of Basheera. The BIT does not

include any advanced requests. Consequently, Atton Boro is an investor according to

Art. 1(2)(b) BIT.

2. Respondent cannot sustain a claim that Atton Boro transgressed the bona fide

standard

20. Respondent may claim that Atton Boro is not a bona fide investor. However, such a

claim cannot be sustained. Atton Boro was incorporated 18 years prior to any possible

dispute, and as such, it is impossible that its founding overstepped the high threshold

of the bona fide principle.

21. A Tribunal in ConocoPhillips ascertained that the standard of bona fide is a high one

which is breached seldomly.3 As Martin Valasek and Patrick Dumberry have pointed

out:

“Bona fide corporate structuring would include, for instance cases [...] when

the incorporation is done many years before any arbitration proceedings are

actually launched [...]”.4

Indeed, this view finds broad support in the caselaw. In Rumeli, the Claimants existed

since 1993,5 and in 2005, Claimants’ Request for the arbitration proceeding was

submitted to the ICSID.6 Because the companies existed well before a dispute arose,

the Tribunal concluded that Claimants’ treaty shopping did not bar its jurisdiction.7

Moreover, in Rompetrol, Claimant was incorporated six years before the arbitration

2 Yukos, ¶415. 3 ConocoPhillips, ¶275. 4 Valasek/Dumberry, pp.65-66. 5 Rumeli, ¶326. 6 Ibid., ¶14. 7 Ibid., ¶326.

7

commenced.8 Again, the Tribunal found that the Claimant had not transgressed the

bona fide threshold.9

22. Atton Boro was incorporated in April 1998 in Basheera. The dispute between Atton

Boro and Respondent arose with Atton Boro’s Notice of Arbitration on November

7th, 2016. Consequently, there was a period of more than 18 years between both

events. Because the incorporation of Atton Boro happened many years before any

arbitration proceedings, no violation of the bona fide principle is possible. Hence,

Atton Boro did not transgress the bona fide standard.

23. In conclusion, Atton Boro falls within the scope of ratione personae.

II. Atton Boro made protected investments

24. Atton Boro made protected investments because the LTA (1), the Award (2), and the

acquisition of the Patent (3) are all investments.

1. The LTA is an investment

25. The LTA is a protected investment according to Art. 1(1)(c) and (e) (a), and

according to the Salini criteria (b).

26.

a) The LTA is an investment according to Art. 1(1) BIT

27. Pursuant to Art. 1(1) BIT, “Investment means any kind of asset”. In paragraphs (a) to

(e), the BIT features a non-exclusive list of assets. According to Art. 1(1)(c) BIT,

“claims to money” are assets. Similarly, Art. 1(1)(e) BIT states that “rights, conferred

by law or under contract, to undertake any economic and commercial activity” are

also assets.

28. A Tribunal in Petrobart defined contracts as “legal documents” bearing legal rights

which can “be considered as assets”.10 Accordingly, a Tribunal in SGS I pointed out

8 Rompetrol, ¶67. 9 Ibid., ¶110. 10 Petrobart, p.71.

8

that the contractual right to obtain payments qualifies as a claim to money as well as

“rights given [...] by contract”.11 Additionally, a Tribunal in Petrobart, which

concerned a contract for the sale of gas condensate, determined that the right to

payment constitutes a “clai[m] to money, even if not based on any long-term

involvement”12. Moreover, the Tribunal found that this right also qualifies as a right

conferred under contract.13

29. In the present case, like the investor in Petrobart, Atton Boro has the right to obtain

payments for deliveries of a good under contract. The right to payment under Atton

Boro’s LTA would even constitute a ‘claim to money’ if it was not based on a long-

term agreement. Since the right to payment under Atton Boro’s 10-year LTA is

clearly a long-term agreement, there is no doubt that the right to payment states a

‘claim to money’. Therefore, it qualifies both as a ‘claim to money’ as well as a ‘right,

conferred under contract’, which are assets according to Art. 1(1)(c) and (e) BIT.

Consequently, the LTA is an asset, and hence, an investment.

b) The LTA is an investment according to the ‘Salini’ criteria

30. To determine whether an investment was made, previous ICSID caselaw has

established the well-known Salini criteria.14 A Tribunal in Romak, even though settled

in accordance with UNCITRAL Rules, stated that in order to define ‘investment’,

caselaw interpreting Art. 25 ICSID Convention can and should also be taken into

account, partially because cases arbitrated under the ICSID Convention are far more

numerous than those arbitrated under UNCITRAL Rules.15 Romak noted that the

definition of ‘investment’ should not vary depending on the dispute settlement

mechanism employed, especially if the BIT provides for the possibility of resorting to

both UNCITRAL and ICSID arbitration.16 This would lead to “absurd or

unreasonable” results under Art. 32(b) VCLT, because as Romak observed, the scope

of the term ‘investment’ would depend upon the rules under which the investor chose

11 SGS I, ¶135. 12 Petrobart, p.72. 13 Ibid. 14 Salini, ¶52; see also Jan de Nul, ¶91; Bayindir, ¶130; AES, ¶88; Malaysian Historical Salvors, ¶¶108-145. 15 Romak, ¶196. 16 Ibid., ¶193.

9

to arbitrate.17 Thus, even though the investor in Romak chose to arbitrate under the

UNCITRAL Rules, the Tribunal decided to consider the Salini criteria.

31. The same approach should be applied in the present case. Even though Atton Boro

decided to settle this dispute in accordance with PCA Rules, Art. 8(2) BIT includes

the possibility to arbitrate under the ICSID Convention. Because it would be

“manifestly absurd and unreasonable” if the definitions of the term investment would

differ depending on the choice of forum, ICSID caselaw can be used to define the

term ‘investment’, and therefore, the Salini criteria should be applied.

32. The LTA is a protected investment in accordance with the Salini criteria. The

Tribunal in Salini established the need for a certain duration (aa), a contribution to

money or other assets of economic value (bb), an element of risk (cc), and a

contribution to the host state’s development (dd).18

aa) Certain duration

33. The Tribunals in RFCC and Salini specified the requirements for duration for

investments be at least two to five years.19 Various later Tribunals have followed.20

34. Clause 5 LTA set out a validity period of 10 years. This is obviously beyond the

scope of the abovementioned duration. Hence, the LTA fulfils the requirement of

‘certain duration’.

bb) Contribution of money or other assets of economic value

35. According to the Tribunals in Salini and in Bayindir, a contribution exists if the

investor uses its ‘know-how’ and provides the necessary equipment and qualified

personnel.21

17 Ibid. 18 Salini, ¶52; see also Jan de Nul, ¶91; Bayindir, ¶130; AES, ¶88; Malaysian Historical Salvors, ¶¶108-145. 19 RFCC, ¶62; Salini, ¶54. 20 Jan de Nul, ¶¶93-95; Malaysian Historical Salvors, ¶¶110-111; Saipem, ¶¶100-102. 21 Bayindir, ¶131; Salini, ¶53.

10

36. Atton Boro set up its manufacturing unit for Sanior in Mercuria to ensure a fast

delivery of Sanior to the NHA, and thereby, provided the necessary equipment and

qualified personnel to fulfil its obligations under the LTA. Furthermore, Atton Boro

and its consortium are a leading pharmaceutical company that utilises more than one

hundred years of ‘know-how’ and experience in development and delivery of drugs to

treat critical epidemic diseases such as AIDS, cancer, tuberculosis, malaria or

greyscale.22 Presumably, Atton Boro used its ‘know-how’ and provided the necessary

equipment and qualified personnel. Thus, it had made a contribution.

cc) Risk

37. According to the Tribunal in Romak, an ‘investment risk’ entails a situation:

“in which the investor [...] may not know the amount he will end up spending,

even if all relevant counterparties discharge their contractual obligations”.23

38. Clause 5 LTA only set a minimum guaranteed annual order-value, and Atton Boro

had no way to ascertain the extent of NHA’s demand for Sanior because the demand

was highly dependent on the spread of greyscale in Mercuria. Moreover, because

Atton Boro depended upon the annual order to determine how many Sanior pills to

produce, it was impossible to know beforehand “the amount [it would] end up

spending” on production. Therefore, there was always a risk that Atton Boro could

not comply with Respondent’s production demands. That in turn, would justify

Respondent’s termination of the agreement due to unsatisfactory performance

pursuant to Clause 6 LTA. Thus, the LTA entailed an ‘investment risk’.

dd) Contribution to host state’s development

39. Several Tribunals have found that a contribution to a host state’s development is

present if the investment supports public services.24 Furthermore, as Christoph

Schreuer has noted, the criterion of contribution to a host state’s development:

22 Case, ll. 848-852. 23 Romak, ¶230; see also Salini, ¶56. 24 See Joy Mining, ¶57; Salini, ¶57; Bayindir, ¶137.

11

“should not be restricted to measurable contributions to GDP but should

include development for human potential, political and social development

and the protection of the local and global environment”.25

This view finds support in the BIT’s Preamble: “Desiring to achieve these objectives

in a manner consistent with the protection of health, safety, and the environment”, and

according to Art. 31(1) VCLT, a treaty should be interpreted in light of its “object and

purpose”, which can be determined pursuant to Art. 31(2) VCLT through its

preamble.

40. In the case at hand, a majority of greyscale patients in Mercuria were able to transition

from a costly multiple-pill therapy to the FDC pill Sanior, which would not have been

possible without Atton Boro’s generous 25% discount off the retail price. In an effort

to meet the increasing public demand for Sanior, Atton Boro scaled up its operations

in Mercuria to provide the ‘public service’ of healthcare. As a result of these

operations, Atton Boro not only contributed to the economic development of

Respondent through increased production activity, it also contributed to the health of

Respondent’s public by increasing the availability of cost-effective drugs, and

contributed to human potential by allowing previously unhealthy Mercurians to lead

healthier, more fulfilling lives. In addition to economic development, making

greyscale treatment available for so many patients is much more important than a

simple contribution to economic development. Hence, Atton Boro made a

contribution to the host state’s development.

41. In conclusion, because the LTA fulfils all of the Salini criteria, it qualifies as an

investment.

2. The Award is an investment according to Art. 1(1)(c) BIT

42. The Award is an investment because it is a ‘claim to money’ (a). Even if the Award is

not an investment in itself, it is nevertheless an investment as an outgrowth of the

underlying contract (b).

25 ICSID Commentary, Art.25, ¶174.

12

a) The Award is a ‘claim to money’

43. According to Art. 31(1) VCLT, a treaty shall be interpreted “in accordance with the

ordinary meaning to be given to the terms of the treaty in their context”. The Tribunal

in Saipem established that:

“[...] in their ordinary meaning the words ‘credit for sums of money’ also

cover rights under an award ordering a party to pay an amount of money: the

prevailing party undoubtedly has a credit for a sum of money in the amount of

the award.”26

44. In the case at hand, Art. 1(1)(c) BIT requires a ‘claim to money’, and the ordinary

meaning of a ‘claim to money’ clearly includes a ‘credit for sums of money’.

Accordingly, because the Award is a ‘credit for a sum of money’, it is a ‘claim to

money’ under Art. 1(1)(c) BIT, and therefore, an asset, and hence, an investment.

b) The Award is an investment as an outgrowth of the underlying contract

45. The Tribunal in Saipem pointed out that an award “crystallized the parties’ rights and

obligations under the original contract”.27 Additionally, the Tribunal in White

Industries clarified that the rights entailed in an award “constitute part of [the]

original investment”.28 Therefore, they “are subject to such protection as is afforded

to investments”.29

46. Even if this Tribunal does not consider the Award an investment in and of itself, the

LTA, as set out above, still qualifies as an investment.30 If the underlying contract is

an investment, which the LTA clearly is, it is not necessary that the Award itself

qualify as an investment, because it is part of the original investment.

47. Thus, the Award qualifies as an investment under the BIT.

26 Saipem, ¶126. 27 Ibid., ¶127; see also White Industries, ¶7.6.4. 28 White Industry, ¶7.6.10. 29 Ibid. 30 See ¶¶25-40.

13

3. The Patent is an investment according to Art. 1(1)(e) BIT

48. According to Art. 1(1)(e) BIT, ‘patents’ are investments. Therefore, the Patent was

obviously an asset and hence, an investment as defined in Art. 1(1)(e) BIT.

III. Amicable negotiations have failed

49. According to Art. 8(1) BIT, disputes between investors and a Contracting Party shall

resort to arbitration only after “failing settlement through amicable negotiations”.

50. According to the Tribunals in Enkev and in Western NIS, amicable negotiations

require a notice containing the particular claims under the investment treaty, as well

as a reasonable period of time between the notice and the beginning of arbitration.31

Moreover, the Tribunal in Ambiente stated that, since the underlying Argentina-Italy

BIT did not include a specific waiting period, jurisdiction could not be denied on the

grounds that the waiting period was too short.32 Furthermore, various Tribunals

pointed out that even if a Claimant does not comply with a waiting period, even if the

BIT is not silent, the Tribunal’s jurisdiction cannot be denied on this basis alone.33

51. On September 20, 2016, Atton Boro announced an attempt to amicably settle with

Respondent’s Foreign Ministry. Respondent did not reply to this letter. The arbitration

began on November 7, 2016. Furthermore, the Contracting Parties of the BIT chose

not to include an ‘amicable waiting period’ before commencing arbitration, and this

strongly indicates that the ‘amicable negotiations’ threshold is not high. In conclusion,

Atton Boro fulfilled its requirement to pursue amicable negotiations under Art. 8(1)

BIT prior to pursuing arbitration. In any event, the issue of amicable negotiation does

not influence the Tribunal’s jurisdiction.

31 Enkev, ¶¶316-317; Western NIS, ¶8. 32 Ambiente, ¶581. 33 Ethyl, ¶¶84-85; Lauder, ¶187; Paushok, ¶220; Bayindir, ¶100.

14

B. Respondent cannot preclude the Tribunal’s jurisdiction by invoking the

Denial of Benefits Clause under Art. 2(1) BIT

52. Art. 2(1) BIT states that a Contracting Party can deny an investor protection of the

BIT „if that entity has no substantial business activity in the territory of the

Contracting Party in which it is organized”.

53. Atton Boro has substantial business activity in Basheera (I). Furthermore, even if

Atton Boro did not have substantial business activity, Respondent did not invoke the

Denial of Benefits Clause in a timely manner (II).

I. Atton Boro has substantial business activity in Basheera

54. The term ‘substantial’ refers to the materiality rather than the magnitude of the

business activity.34 Substantial business activity is not a high standard,35 and

Respondent has the burden of proving its absence.36 In AMTO, the Tribunal found that

if an entity has an office, a bank account, more than one full-time employee and pays

taxes, it is sufficient for a finding of substantial business activity.37 Indeed, in Pac

Rim, the Tribunal declined ‘substantial business activity’ on the grounds that these

criteria were not fulfilled.38 Additionally, the Tribunal in Petrobart established that a

parent company's ‘substantial business activity’ within a Contracting State can be

allocated to its subsidiary and can therefore be sufficient to reject the requirements of

a Denial of Benefits Clause. Lastly, like Thomas Roe and Matthew Happold have

observed, actions like concluding contracts, buying goods, or selling goods constitute

‘substantial business activity’.39

55. In the case at hand, similar to Claimant in AMTO, Atton Boro has an office space, a

bank account, as well as between two to six permanent employees including a

manager, an accountant, a commercial lawyer, and a patent attorney.40 While

operating from and paying taxes to Basheera, these employees manage Atton Boro’s

34 AMTO, ¶69. 35 Ibid., ¶68-70. 36 Petrobart, p.59; Liman, ¶227. 37 AMTO, ¶¶68-70. 38 Pac Rim, ¶¶4.69-4.78. 39 Roe/Happold, p.78. 40 Case, ll.863-865.

15

portfolio of South American and African patents, and provide regulatory support,

marketing, sales, legal, accounting, and tax services for Atton Boro Group affiliates in

those continents.41 Therefore, because all of the AMTO elements are more than

fulfilled, there is a prima facie case for Atton Boro’s substantial business activity.

Indeed, Atton Boro’s longtime contractual engagements with public and private

Basheeran agencies within Basheera likely satisfy the ‘substantial business activity’

definitions suggested by distinguished practitioners.

56. Moreover, Atton Boro Group - Atton Boro’s parent company - is a longtime player in

Basheera’s pharmaceutical market,42 and therefore also conducts substantial business

activity in Basheera, which can be transferred to Atton Boro under the Petrobart

standard. Thus, Atton Boro has substantial business activity in Basheera.

II. Respondent did not invoke the Denial of Benefits Clause in a timely manner

57. Even if the Tribunal does not find that Atton Boro has substantial business activity,

Respondent did not invoke the Denial of Benefits Clause in Art. 2(1) BIT in a timely

manner.

58. A Denial of Benefits Clause does not have an automatic effect and must therefore be

invoked by Respondent.43 The Tribunal in Plama found that a Denial of Benefits

Clause right must be invoked before a putative investor makes an investment because,

if a Contracting Party were to invoke the Clause retrospectively, the invocation would

violate the investor’s legitimate expectations that it would receive protection from the

relevant IIA.44 In other words, “the covered investor needs at least the same

protection as it enjoyed as a putative investor able to plan its investment”.45 Indeed, a

plurality of Tribunals have denied retrospective claims for Denial of Benefits

Clauses.46

41 Case, ll.861-863. 42 Case, ll.862-863. 43 Plama, ¶155; Yukos, ¶456; Petrobart, pp. 58-59; Nikiėma, p.17. 44 Ibid., ¶161. 45 Ibid. 46 Ibid., ¶¶159-165; Yukos, ¶458; Liman, ¶225; Veteran Petroleum, ¶514; Ascom, ¶745.

16

59. Respondent exercised the right to deny benefits in its Response to the Notice of

Arbitration, dated from November 26, 2016. However, Atton Boro made its protected

investments many years prior to this event. Specifically, in 1998, Atton Boro acquired

the Mercurian patent for Valtervite, a protected investment under the BIT, and in

November 2004, Atton Boro concluded the LTA with NHA, which also qualifies as

an investment under the BIT, as established above. Moreover, Atton Boro obtained an

Award against Mercuria in January 2009, which also qualifies as an investment under

the BIT. Obviously, in the absence of any undisclosed barrier presented in the facts,

Respondent had every chance to exercise its right during those years, but failed to do

so, and thereby created a legitimate expectation on the part of Atton Boro that it

would receive protection under the BIT. Therefore, Respondent did not invoke the

Denial of Benefits Clause in a timely manner.

C. Conclusion

60. In conclusion, this Tribunal has jurisdiction over the present case. In particular, the

requirements of the arbitration clause under Art. 8(1) BIT are fulfilled and the

Tribunal’s jurisdiction is not denied under Art. 2(1) BIT.

17

PART TWO: MERITS

61. Atton Boro respectfully asserts that the enactment of Law No. 8458/09 and the

granting of a compulsory licence to HG-Pharma breached substantial provisions of

the BIT. Specifically, Respondent breached the FET Standard under Art. 3(2) BIT and

indirectly expropriated Atton Boro’s patent according to Art. 6(2) BIT (A). Moreover,

Respondent violated Art. 3(2) BIT because it failed to enforce the Award (B). Lastly,

Atton Boro submits that NHA’s termination of the LTA constitutes a violation of Art.

3(3) BIT (C).

A. Enactment of Law No. 8458/09 and the granting of a compulsory licence

breached substantial protections of the BIT with respect to the patent

62. Respondent breached the FET Standard under Art. 3(2) BIT (I) and indirectly

expropriated Atton Boro according to Art. 6(2) BIT (II).

I. Respondent breached FET

63. By enacting Law No. 8458/09 (1) and by granting a licence to HG-Pharma pursuant

to that law (2), Respondent breached the FET Standard under Art. 3(2) BIT, which

establishes that:

“Investments and returns of investors of each Contracting Party shall at all

times be accorded fair and equitable treatment [...] in the territory of the other

Contracting Party”.

64. The FET Standard “provide[s] a basic and general standard which is detached from

the host State’s domestic law”.47 It “intend[s] to strengthen and increase the security

and trust of foreign investors”.48 The FET Standard can generally “be understood as

government according to the rule of law [which] [...] establishes basic substantive

and procedural rights”.49 These rights concern inter alia the protection of the

investor’s legitimate expectations, the obligation to act in good faith, the prohibition

47 Genin, ¶367. 48 Tecmed, ¶156. 49 Brower/Schill, p.487.

18

of Denial of Justice, the protection against discrimination and arbitrariness, and the

requirement of transparency.50

1 Enactment of Law No. 8458/09 breached FET

65. The enactment of Law No. 8458/09 breached the FET Standard because it failed to

comply with Atton Boro’s legitimate expectations (a), and it created unfavourable

conditions (b). Moreover, Respondent thereby failed to act in good faith (c).

a) Legitimate Expectations

66. The FET Standard includes the protection of the investor’s legitimate expectations.51

Respondent frustrated Atton Boro’s legitimate expectations by creating an unstable,

uncertain, and unpredictable legal framework (aa) and by breaching specific

representations (bb). Respondent’s Right to Regulate does not outweigh Atton Boro’s

legitimate expectations (cc).

aa) Legal framework

67. Previous caselaw has strongly established that legitimate expectations can inter alia

be based on the host state’s legal framework.52 The Tribunal in Duke Energy

established that “the stability of the legal and business environment is directly linked

to the investor’s justified expectations”.53 Similarly, in OEPC, Claimant expected a

refund of taxes pursuant to the host state’s legal framework.54 However, Respondent

revoked the legislation on which the right to refund was based and denied further

refunds.55 The Tribunal found that, by doing so, Respondent changed “a legal and

business environment that was certain and predictable” upon which the investor had

relied, and therefore breached the FET Standard.56 Additionally, the Tribunal in

LG&E pointed out that it is the “State’s obligation to provide a stable legal and

business environment”.57 Thus, where a host state’s legal framework is stable, certain,

50 Lemire, ¶284; see also Sempra, ¶289; Biwater, ¶602; Schill, pp.11-23; Kläger, pp.154-256. 51 Saluka, ¶302; El Paso, ¶227; McLachlan/Shore/Weiniger, ¶7.99. 52 Total, ¶114; LG&E, ¶127; Duke Energy, ¶340; Lemire, ¶284; OEPC, ¶183. 53 Duke Energy, ¶340. 54 OEPC, ¶29. 55 Ibid., ¶196. 56 Ibid. 57 LG&E, ¶127.

19

and predictable, a foreign investor can legitimately expect the host state not to

substantially change that legal framework.

68. In the case at hand, the Patent was granted on February 21, 1998. By that time,

Respondent’s legal framework did not include any possibility to use a patented

invention without its owner’s authorisation.58 It was the owner’s privilege to

determine whether, to whom, and under which conditions it would allow the use of its

invention. This legal environment was plain and predictable. By invoking Law No.

8458/09, Respondent enabled the High Court to grant compulsory licences under

unpredictable conditions.

69. Specifically, a compulsory licence can be granted if reasonable requirements of the

public have not been satisfied, the patented invention is not available to the public at a

reasonable and affordable price, or if the patented invention does not work in the

territory of Mercuria. The interpretation of these rather vague criteria solely depends

upon the High Court’s arbitrariness, because the law does not point out what

reasonable requirements of the public are and when they are satisfied. Neither does it

present any indication to define a reasonably affordable price. Therefore, the legal

environment changed in such a way that it is now ambiguous and unpredictable. Thus,

because Respondent created an unstable, uncertain, and unpredictable legal

framework it failed to comply with Atton Boro’s legitimate expectations.

bb) Breach of representations

70. Caselaw has firmly established that an investor's legitimate expectations include the

confidence that the host state does not breach specific representations which it made

to an investor.59

71. Although many Tribunals determine legitimate expectations by evaluating the

investor’s expectations at the time an investment is made, a host state’s specific

representations to an investor can also create protected legitimate expectations:

58 Case, ll.1577-78. 59 Waste Management, ¶98; Lemire, ¶284; Metalclad, ¶¶89, 101; see also McLachlan/Shore/Weiniger, ¶7.108;

Dolzer/Schreuer, p.145.

20

“[i]f the investor relied on assurances given after the investment’s inception

and adapted its subsequent investment decisions accordingly”.60

Indeed, the ‘general unity doctrine’, established and followed by a plurality of

Tribunals,61 requires that the complex process of an investment be considered as a

whole.62 Accordingly, this Tribunal should take all investment-related host state

representations into account when determining legitimate expectations.

72. In the case at hand, all of Atton Boro’s investments in Mercuria constitute and

intertwined a ‘complex process’ and therefore must be considered as a whole: the

Patent as the basis for concluding the LTA, whose termination then led to the Award.

73. Respondent made several explicit representations that Atton Boro legitimately relied

upon after the Patent was already given to Atton Boro, but before the LTA was

concluded. Firstly, there was a long-time-standing partnership between Atton Boro

and Respondent, starting with a five-year health plan (1999-2004), whose success was

publicly lauded in a January 19, 2004 press statement by Respondent’s Ministry of

Health, Mr. Joseph Bell. Respondent expressed its interest in cooperating with foreign

investors to guarantee a better medical care in its territory.

74. Secondly, Respondent's President published a statement on his official Twitter-

account - a primary information source for more than 40 million people - to welcome

all investors to Mercuria, claiming that “Mercuria will do away with red tape and roll

out the red carpet for investors”. Immediately thereafter, NHA invited Atton Boro to

supply Sanior.

75. Finally, by granting the patent for Valtervite to Atton Boro in 1998, Respondent

generated Atton Boro’s legitimate expectation that its patent would be protected under

the laws of Mercuria. As a direct result of those representations, Atton Boro ‘adapted

its investment decisions’ by agreeing to the terms of the LTA. Accordingly, because

Respondent made investment-related representations to Atton Boro, and because

60 Schreuer/Kriebaum, p.8. 61 PSEG, ¶¶115, 124; Joy Mining, ¶54; Saipem, ¶114. 62 Ibid.; Schreuer/Kriebaum, p.5; see also Enron, ¶70.

21

Atton Boro ‘adapted its investment decisions’ on the basis of those representations,

Respondent’s representations created legitimate expectations on the part of Atton

Boro.

76. By enacting Law No. 8458/09, Respondent created the possibility to deprive Atton

Boro of its exclusive rights to exploit the patent,63 and to exclude others from its

use.64 By doing so, it deprived Atton Boro of receiving the benefits it legitimately

expected to receive as owner of a Mercurian patent. Thus, Respondent violated Atton

Boro’s legitimate expectations.

cc) Right to Regulate

77. Under international law, it is acknowledged that a state generally has the Right to

Regulate domestic matters in the public interest.65 Nevertheless, this right is not

boundless.66 To this end, the Tribunal in Saluka found and several Tribunals

concurred67 that:

“The determination of a breach of [the FET Standard] therefore requires a

weighing of the Claimant’s legitimate and reasonable expectations on the one

hand and the Respondent’s legitimate regulatory interests on the other.”68

In ADC, a Tribunal found that Hungary could not sustain a claim under the Right to

Regulate in the absence of a sufficient legal and factual demonstration that the

regulation in question actually served the public interest.69

78. Atton Boro’s reasonable expectations must outweigh Respondent’s Right to Regulate.

Respondent passed legislation that arbitrarily created the possibility of depriving

Atton Boro of its patent investment and, contrary to the standard articulated in ADC,

provided no legal or factual basis whatsoever for the deprivation. Thus, this Tribunal

63 Grantham, p.180; Siebrasse, ¶3. 64 Lehman, p.4; Klett/Sonntag/Wilske, p.15. 65 Saluka, ¶ 305; Philip Morris, ¶422; Parkerings-Compagniet, ¶332. 66 ADC, ¶423; Feldman ¶110; Mann, p.9; Titi, p.288. 67 EDF, ¶219; BG Group, ¶298; Lemire, ¶285. 68 Saluka, ¶306. 69 ADC, ¶¶429-433.

22

should find that Respondent has not met its burden in establishing that the legislation

falls within its Right to Regulate.

79. In conclusion, this Tribunal should find that Atton Boro had legitimate expectations in

accordance with the FET Standard and Respondent’s violation of these expectations

cannot be justified by the Right to Regulate.

b) Favourable conditions

80. The FET Standard includes the host state obligation to create favourable conditions. A

Tribunal in MTD established that a state has the active obligation ‘to promote’, ‘to

create’, and ‘to stimulate’ favourable conditions for the investor.70 In other words, a

host state is obligated to “treat [investors] in an even-handed and just manner,

conducive to fostering the promotion of foreign investment”.71

81. In the case at hand, Respondent’s actions progressively deteriorated the favourable

conditions in Mercuria. Atton Boro justifiably assumed that its Valtervite patent in

Mercuria would grant it exclusive use rights; however, by enacting Law No. 8458/09,

Respondent de facto invalidated these rights by permitting Mercuria’s High Court to

grant compulsory licences for patented inventions. Such an invalidation cannot be

considered a ‘promotion’, ‘creation’, or ‘stimulation’ of favourable conditions for

Atton Boro.

c) Good Faith

82. The FET Standard includes the obligation for the host state to act in good faith.72

Good faith is a well-established cornerstone of international interactions.73 As early as

1910, the PCA noted that parties to an international treaty are bound by “[t]he

principle of international law that treaty obligations are to be executed in perfect

good faith”, and that this principle “exlud[es] the right to legislate at will concerning

the subject-matter of the Treaty”.74 Moreover, it found that the principle of good faith

70 MTD, ¶113. 71 Ibid.; Azurix, ¶360. 72 Lemire, ¶284; ADF, ¶191; Siemens ¶308; Genin, ¶367. 73 See e.g. Nuclear Tests, ¶49. 74 North Atlantic Coast Fisheries, p.188.

23

“limit[s] the exercise of [state legislative power] with respect to that subject-matter

[...] consistent with the treaty.”75 More recently, arbitral Tribunals have affirmed that

the good faith obligation contains inter alia a prohibition on host states to use a “legal

instrument for purposes other than those for which they were created”.76

83. In the present case, although the BIT between the parties contained explicit patent

protections, Respondent nevertheless used its legislative power to create and enforce a

measure which ran afoul of its international obligations under the BIT. Through the

enactment of Law No. 8458/09, which creates the possibility to deprive patent holders

of their exclusive rights, Respondent legislated regarding a ‘subject-matter’ it had

already acceded to an international agreement, namely through the patent provisions

in the BIT. By exercising state legislative power in a manner that was inconsistent

with its obligations under an international agreement, Respondent breached the good

faith principle.

84. Moreover, although a state can generally use its power to enact legislation for the

purpose of serving the public interest,77 the timing of the enactment of Law No.

8458/09 is highly suspicious. Indeed, the totality of the circumstances indicates that

the actual purpose was to damage Atton Boro: Given the fact that Atton Boro was the

only supplier for an effective FDC pill in Respondent’s pharmaceutical market, and

given the fact that greyscale had recently emerged as the most severe public health

epidemic at the time Law No. 8458/09 was passed, it is clear that the new law was

designed to appropriate Atton Boro’s patent for Valtervite. Furthermore, the law was

enacted directly after Atton Boro received a favourable Award, which was issued as a

result of the NHA’s unilateral termination of the LTA after the NHA was unsatisfied

with the generous discounts Atton Boro offered for Sanior. As indicated by ‘reliable

sources’ in the local paper, government and NHA officials met and colluded in

reaction to budgetary problems caused by several healthcare programs in Mercuria.78

This government-NHA collusion leaves little room for doubt that Law No. 8458/09,

although presumably passed under the auspices of ‘public health’, is used for the

75 North Atlantic Coast Fisheries, p.188. 76 Frontier, ¶300; Tecmed, ¶154. 77 See Saluka, ¶305; Lemire, ¶285. 78 Case, ll.927-928.

24

purpose of appropriating Atton Boro’s Valtervite patent. Thus, because Respondent

acceded the right to legislate on matters affecting patent protection inconsistent with

the BIT, and because the circumstances indicate a misuse of Law No. 8458/09, this

Tribunal should find that Respondent failed to act in good faith. Consequently,

Respondent violated the FET Standard.

85. In conclusion, this Tribunal should find a violation of the FET standard set out in Art.

3(2) BIT. First, Atton Boro had legitimate expectations, which Respondent violated.

Second, Respondent failed to create favourable conditions for Atton Boro’s

investment, and in fact, actively engaged in deteriorating existing favourable

conditions. And finally, Respondent failed to act in good faith through its creation and

its use of Law No. 8458/09.

2. Granting a licence breached FET

86. By granting a compulsory licence to HG-Pharma pursuant to Law. No. 8458/09,

Respondent undermined Atton Boro’s legitimate expectations, which were based on

the fact that both states are parties to the TRIPS Agreement.

87. The TRIPS Agreement can create legitimate expectations (a) and Respondent did not

comply with Atton Boro’s legitimate expectations when it granted a compulsory

licence to HG-Pharma (b).

a) TRIPS can create legitimate expectations

88. A Tribunal in Philip Morris found, that the “scope and the content of FET must [...]

be determined by reference to the rules of international law”.79 That Tribunal

concluded that every provision of a BIT has to be interpreted in accordance with the

VCLT.80 Art. 31(3)(c) VCLT states that any treaty interpretation has to be made in

light of “any relevant rules of international law applicable in the relations between

the parties”. The term ‘rules of international law’ has to be interpreted according to

Art. 38(1) ICJ-Statute,81 which includes (c) “international conventions”. ‘Applicable’

79 Philip Morris, ¶317. 80 Ibid.; see also Maffezini, ¶27; Yukos, ¶411. 81 Villiger, Art.31, ¶25; Dörr, in Dörr/Schmalenbach, Art.31, ¶92.

25

means that only binding rules can be relied upon, and ‘relevant’ refers to the fact that

the rules must “concern the subject-matter [...] at issue”.82 This view finds support in

the BIT’s preamble, which states:

“Building on their respective rights and obligations under the Marrakesh

Agreement Establishing the World Trade Organization and other multilateral,

regional, and bilateral agreements and arrangements to which they are both

parties”.

Furthermore, the FET Standard includes the principle of pacta sunt servanda,83 which

according to Art. 26 VCLT, purports that a state is bound by its ratified treaties.

89. TRIPS is a binding, international convention pursuant to Art. 38(1)(c) ICJ Statute,

concerning inter alia the protection of patents. Both Mercuria and Basheera are

Contracting Parties to TRIPS.84 Therefore, pursuant to the principle of pacta sunt

servanda, it is incumbent upon Respondent to fulfil its international obligations under

TRIPS. Hence, because TRIPS qualifies as an ‘international convention’, because

both parties are bound to it, and because it concerns the subject-matter at issue, it can

be relied upon in creating legitimate expectations.

b) Respondent did not comply with Atton Boro’s legitimate expectations

90. Art. 31 TRIPS governs the requirements of compulsory licensing for patented

inventions. Atton Boro could legitimately expect that Respondent would act in

accordance with the obligations that TRIPS create, such as but not limited to Art.

31(b) (aa) and (h) (bb).

aa) Art. 31(b) TRIPS

91. No effort to obtain authorisation from Atton Boro for Valtervite has been made,

although required in Art. 31(b) TRIPS. It reads:

“such use may only be permitted if, prior to such use, the proposed user has

made efforts to obtain authorization from the right holder on reasonable

82 Villiger, Art.31, ¶25. 83 Tudor, p.196; Newcombe/Paradell, ¶6.22. 84 Case, l.1497.

26

commercial terms and conditions and that such efforts have not been

successful within a reasonable period of time. This requirement may be

waived by a Member in the case of a national emergency or other

circumstances of extreme urgency.”

92. The word ‘extreme’ implies that not every urgency is sufficient and therefore the

standard of ‘extreme urgency’ can only be high one.85

93. In the case at hand, because there were no circumstances of ‘extreme urgency’,

Respondent cannot argue that an effort to obtain authorisation for the use of Valtervite

was not required. Given the fact that Sanior was available in sufficient quantities to

treat all greyscale patients in Mercuria, it is difficult to imagine how the situation

might be characterised as an ‘extreme urgency’. Nevertheless, neither HG-Pharma nor

Respondent made any effort to obtain authorisation for Valtervite. Because there were

no circumstances of ‘extreme urgency’, Atton Boro legitimately expected such an

effort pursuant to TRIPS Art. 31(b).

94. Even if the Tribunal finds that there was a case of ‘extreme urgency’, as previously

established,86 Respondent failed to act in good faith when enacting Law No. 8458/09,

and it was this law that granted the High Court the authority to issue a compulsory

licence. However, as Jerome Reichman and Catherine Hasenzahl have pointed out, a

state breaching good faith obligations cannot successfully invoke a case of ‘extreme

urgency’.87

95. In the case at hand, Respondent was required to invoke a case of ‘extreme urgency’ to

access the waiver under Art. 31(b) TRIPS as a basis for the High Court’s granting of

the compulsory licence to HG-Pharma. However, the High Court issued the licence on

the basis of Law. No 8458/09, which was enacted in breach of Respondent’s good

faith obligations. Because the underlying legislative measure failed to comply with

Respondent’s good faith obligations, the High Court’s action must also be considered

as a breach of the good faith principle. Therefore, Respondent cannot justify the grant

of the compulsory licence by alleging a case of ‘extreme urgency’.

85 Carvalho, ¶31.14; UNCTAD/ICTSD, p.471; see also Eikermann, in Stoll/Busche/Arend, Art.31, ¶30. 86 See, ¶81-85. 87 Reichman/Hasenzahl, p.16; see also Malbon/Lawson/Davison, ¶31.09.

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bb) Art. 31(h) TRIPS

96. Atton Boro did not obtain adequate remuneration in accordance with Art. 31(h)

TRIPS, which states:

“the right holder shall be paid adequate remuneration in the circumstances of

each case, taking into account the economic value of the authorization”.

97. The amount of adequate remuneration is generally based upon the full economic value

of the licence.88 In the wording of Carvalho:

“The compensation for compulsory licenses is not to be calculate based on

political, charitable or other non-economic considerations, but exactly on the

amount of actual or potential financial gains that the compulsory licensee may

extract from the market”.89

The value of a compulsory licence correlates to the average amount of voluntary

licence fees in a given single market.90 The value of voluntary licenses for

pharmaceutical products depends heavily on the costs of research and development.91

Furthermore, a drop in market share caused by a compulsory licence must be

considered in calculating the value of adequate remuneration.92 A licensor is never -

even in national emergency situations - obligated to give away its invention without

any return.93

98. In the present case, the High Court granted HG-Pharma a compulsory licence to use

Valtervite on April 17, 2010. Nevertheless, Atton Boro has yet to receive a single

meaningful payment. The nominal fee stipulated by the Court, which required only

1% of HG-Pharma’s total earnings, cannot be considered a ‘meaningful payment’

based on ‘the average amount of voluntary licence fees’, especially because HG-

Pharma’s generic earnings pale in comparison to Atton Boro’s hard-earned Valtervite-

based revenues. Atton Boro invested billions of USD in research and development to

produce Valtervite; this breakthrough development required years of intensive pre-

88 Carvalho, ¶31.47; Weissman, p.1114; Eikermann, in Stoll/Busche/Arend, Art.31, ¶46. 89 Carvalho, ¶31.47. 90 Correa, pp.245-246; Eikermann, in Stoll/Busche/Arend, Art.31, ¶46. 91 Sykes, p.24. 92 Eikermann, in Stoll/Busche/Arend, Art.31, ¶46. 93 Sykes, p.24; Bird, p.214; Eikermann, in Stoll/Busche/Arend, Art.31, ¶46.

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clinical study and clinical trials, not to mention overcoming extensive legal and

regulatory hurdles. And Atton Boro’s efforts were not in vain: Valtervite is a unique

success that represents a huge step forward in combating greyscale. Instead of reaping

the rewards of these efforts, Respondent issued a compulsory licence that deprived

Atton Boro of nearly two thirds of its market share, passing it directly to HG-Pharma.

In light of these facts, the High Court’s 1% fee assessment is particularly egregious,

especially considering that the High Court has recently set royalty rates at 3% for non-

fatal diseases in similar cases.94

99. In conclusion, the Tribunal should find that Respondent breached the FET Standard in

Art. 3(2) BIT based on Atton Boro’s legitimate expectations derived from TRIPS.

II. Respondent indirectly expropriated Atton Boro

100. Respondent indirectly expropriated Atton Boro by granting a compulsory licence to

HG-Pharma for Atton Boro’s patented invention Valtervite. Art. 6(2) BIT governs

inter alia the legitimacy of indirect expropriations. The relevant part reads:

“Investments of investors of one Contracting Party shall not be [...] indirectly

[...] expropriated [...], except for public purposes, or national interest, against

immediate full and effective compensation [...]”.

Granting the compulsory licence is an indirect expropriation (1), which was not

followed by immediate full and effective compensation (2). Moreover, this measure

cannot be justified by public welfare objectives under Art. 6(4) BIT (3).

1. Granting the compulsory licence is an indirect expropriation

101. Indirect expropriations are, like a Tribunal in Tecmed established, measures which

“do not explicitly express the purpose of depriving rights or assets, but actually have

that effect”.95 To this end, a Tribunal in Starrett found an indirect expropriation where

an owner’s rights “are rendered […] useless”,96 and various Tribunals have clarified

that an owner’s rights are ‘rendered useless’ in the event of a ‘substantial

94 Case, ll.1589-1590. 95 Tecmed, ¶114. 96 Starrett, p.1123.

29

deprivation’97 In determining whether a ‘substantial deprivation’ has occurred, several

Tribunals have noted that the relevant question is whether the investor is able to

extract the benefits and economic use of its investment.98

102. A patent grants its owner an exclusive right to exploit its invention.99 It has the right

to exclude anybody else from its invention.100 As Christopher Gibson pointed out,

both rights are violated when a compulsory licence is granted.101

103. In the case at hand, Atton Boro holds the Mercurian patent for Valtervite. The High

Court granted HG-Pharma, a generic drug manufacturer and competitor of Atton

Boro, a compulsory licence to use Valtervite without Atton Boro’s authorisation.

Thus, Atton Boro was forced to relinquish the right to exclude HG-Pharma from its

invention. Moreover, Atton Boro lost the legal monopoly to exploit its invention since

HG-Pharma is now able to produce a generic drug based on Valtervite. Without the

right to exclusive use, and without the right to exclude others from use, the patent -

Atton Boro’s investment - is de facto useless. Thus, because Atton Boro’s patent is

useless, the deprivation of Atton Boro’s investment is obviously substantial.

Therefore, the granting of the compulsory licence to HG-Pharma constitutes an

indirect expropriation pursuant to Art. 6(2) BIT.

2. The indirect expropriation was not followed by immediate full and effective

compensation

104. Since Respondent’s conduct qualifies as an indirect expropriation, it must be followed

by immediate full and effective compensation according to Art. 6(2) BIT. However,

Respondent failed to provide compensation that was full and effective (a), and

immediate (b).

a) The compensation was not full and effective

105. Art. 6(3) BIT requires that, in the event of an expropriation, a state must accord an

97 Pope & Talbot, ¶102; Merrill & Ring, ¶145; Fireman’s Fund, ¶ 176; Corn Products, ¶92; S.D. Myers, ¶285. 98 Middle East Cement, ¶107; Santa Elena, ¶77; Tecmed, ¶115; S.D. Myers, ¶283; Metalclad, ¶103. 99 Grantham, p.180; Siebrasse, ¶3. 100 Lehman, p.4; Klett/Sonntag/Wilske, p.15. 101 Gibson, pp.386-387.

30

investor ‘just compensation’. According to the BIT, “[j]ust compensation shall be

equivalent to the real market value of the investment”, which “shall be calculated

according to internationally acknowledged evaluation standards”.

106. A Tribunal in CMS established that “the general concept upon which commercial

valuation of assets is based is that of ‘fair market value’”.102 This standard “reflects

the price a hypothetical buyer would pay to a hypothetical seller” in an open and

unrestricted market.103 Experts have interpreted ‘fair market value compensation’ as

requiring an assessment of the average market price of the product at issue, and

therefore an assessment of the fair market value for a compulsory licence must

depend upon the average value of voluntary licence fees.104 When considering

pharmaceutical products, the value of voluntary licence fees especially depends

largely upon its research and development expenses.105 Additionally, the PCA in

Norwegian Shipowners’ pointed out that the term “[j]ust compensation implies a

complete restitution of the status quo ante”.106 Accordingly, to restore the status quo,

the compensation must equalise every financial loss incurred by the expropriation,

including lost profits.107

107. In the case at hand, as demonstrated above,108 the 1% compensation for the

compulsory licensing fee was clearly nominal, and cannot be considered equivalent to

the ‘fair market value’ of Atton Boro’s investment as “calculated according to

internationally acknowledged evaluation standards” such as those used in anti-

dumping cases at the WTO.

108. Moreover, Atton Boro lost nearly two-thirds of its market share for Sanior, which

would not have happened but for Respondent’s expropriation. After spending billions

of USD in research and development, Atton Boro introduced Sanior to the Mercurian

public, which revolutionised the market for greyscale treatment. Sanior was so

effective that it rendered previous greyscale treatments archaic and obsolete. As a

102 CMS, ¶402; see also Marboe, ¶7.03. 103 Marboe ¶7.03; see also AICPA, p.33; ASA, p.27; CMS, ¶402. 104 Correa, pp.245-246; Eikermann, in Stoll/Busche/Arend, Art.31, ¶46. 105 Sykes, p.24. 106 Norwegian Shipowners’, p.338. 107 Ibid. 108 See ¶¶ 95-98.

31

result of its innovation, Atton Boro became the sole treatment provider for the

Mercurian citizens suffering from greyscale. For reasons beyond Atton Boro’s

control, the number of greyscale patients ballooned from 20,485 in 2003 to 266,298 in

2006,109 and this number presumably continued to rise in the years since 2006.

Therefore, when Respondent expropriated Atton Boro’s patent, it not only deprived

Atton Boro of 177,532 potential customers (two-thirds of the 2006 market), it also

deprived Atton Boro of new customers who may have contracted greyscale in the

years since 2006. Therefore, 1% of HG-Pharma’s earnings from Valtervite cannot be

considered a “complete restitution of the status quo ante” as Norwegian Shipowners’

required, and accordingly, this Tribunal should find that the 1% offer is neither full

nor effective compensation.

b) The compensation was not made immediately

109. According to Art. 31(1) VCLT, every provision in the BIT shall be interpreted in

accordance with its ordinary meaning. The ordinary meaning of the term

‘immediately’ implies that the action should happen “without delay”.110

110. In the case at hand, despite the clear requirements of the BIT, Atton Boro has yet to

receive any compensation. Although HG-Pharma attempted to distribute the nominal

1% fee suggested by the High Court, as demonstrated above, such a fee cannot be

considered ‘compensation’ as defined by the BIT. Thus, because nearly seven years

have passed since the compulsory licence was issued, Atton Boro has not been

compensated ‘without delay’. Consequently, the compensation was not made

‘immediately’ as required by the BIT.

3. No justification under Art. 6(4) BIT

111. The indirect expropriation cannot be justified under Art. 6(4) BIT because it is not

designated and applied to protect legitimate public welfare objectives. Art 6(4) BIT

states that:

“Non-discriminatory measures of a Contracting Party that are designated and

applied to protect legitimate public welfare objectives, such as public health,

109 Case, ll.1339-1340. 110 See Oxford Dictionary, “immediately”.

32

safety and the environment, do not constitute an indirect expropriation under

this Article”.

112. The Tribunal in Pope & Talbot established that no legal justification for expropriation

can be a

“blanket exception for regulatory measures [which] would create a gaping

loophole in international protections against expropriation”.111

The examples of ‘public welfare objectives’ listed in Art. 6(4) BIT are all highly

protected interests. Moreover, according to Art. 31(1) VCLT, every provision shall be

interpreted in accordance with its ordinary meaning. The ordinary meaning of the

term ‘designated’, implies that the legitimate public welfare must be the aim of the

measure.112

113. In the case at hand, the High Court granted a compulsory licence to HG-Pharma

pursuant to Law No. 8458/09, and as demonstrated above, Law No. 8458/09 serves

Respondent’s financial rather than public interests.113 Financial interests are not

‘public welfare objectives’ in accordance with Art. 6(4) BIT. Moreover, Atton Boro

supplied Sanior to the NHA at all times with the purpose of combating the spread of

greyscale, so Respondent cannot sustain a claim that Law No. 8458/09 was necessary

to pursue public health.

114. Furthermore, Atton Boro’s drug Sanior is the sole invention that enables Respondent

to treat greyscale effectively amongst its population. Despite this strong bargaining

position, Atton Boro allowed Respondent a generous 25% discount for Sanior and

raised its production capacity to secure a stable supply, thereby enabling Respondent

to treat every one of its afflicted citizens with Sanior. Atton Boro was willing to give

Respondent a further discount of 10%, which shows its willingness to compromise

and its desire to work with Respondent in combatting greyscale. Respondent’s

outright rejection of Atton Boro’s bargaining efforts undermine any argument that it

could not afford to pay for the drug; Respondent did not even know how much the

111 Pope & Talbot, ¶99; see also Feldman, ¶110. 112 See Black’s Law Dictionary, ‘designate’; Oxford Dictionary, ‘designate (verb)’. 113 See, ¶83.

33

drug would cost after negotiation and nevertheless declined to embrace Atton Boro’s

openness to negotiation. Clearly, Respondent’s actions are inconsistent with the claim

that Law No. 8458/09 was aimed at combating the public health crisis, since effective

treatment was already present, and Atton Boro was more than willing to negotiate

alternative pricing options.

115. Consequently, the granting of the compulsory licence was not designated to protect

legitimate public welfare objectives and hence, the expropriation cannot be justified

under Art. 6(4) BIT.

116. In conclusion, Respondent breached the FET Standard under Art. 3(2) BIT by

enacting Law No. 8458/09 and granting a licence to HG-Pharma, and indirectly

expropriated Atton Boro according to Art. 6(2) BIT by granting the licence.

B. Respondent violated Art. 3(2) BIT by failing to enforce the Award

117. By failing to enforce the Award, Respondent violated the FET Standard of Art. 3(2)

BIT (I) and the Standard of Full Protection and Security of Art. 3(2) BIT (II).

Additionally, Respondent is liable for these violations (III).

I. Respondent breached the FET Standard

118. Respondent breached the FET Standard by failing to comply with Atton Boro’s

legitimate expectations (1), by denying Atton Boro justice (2), and by creating

unfavourable conditions for Atton Boro (3).

1. Legitimate expectations

119. Respondent frustrated Atton Boro’s legitimate expectations by violating its

obligations under Art. 3 New York Convention.

120. As stated above, pursuant to principles codified in the VCLT, every binding

convention concerning the subject matter between the BIT’s Contracting Parties can

create legitimate expectations.114 The New York Convention concerns the recognition

114 See ¶87.

34

and enforcement of foreign Arbitral Awards and is a binding, international convention

as defined by Art. 38(1)(c) ICJ Statute. Both Mercuria and Basheera are Contracting

Parties to the New York Convention.115 Therefore, pursuant to the pacta sunt

servanda principle, it is incumbent upon Respondent to fulfil its international

obligations under the New York Convention. Because Atton Boro claims that

Respondent failed to enforce an Arbitral Award passed by a Tribunal seated in Reef,

the New York Convention governs the present subject matter and therefore creates

legitimate expectations.

121. Under Art. 3 New York Convention, a domestic court has the prima facie obligation

to enforce an Award116 in a speedy and effective way.117 Therefore, Atton Boro could

legitimately expect Respondent to ensure a ‘speedy and effective’ proceeding to

enforce its Award. In spite of this, the High Court has yet to enforce the Award, and

thus, by failing to fulfil its international obligations under the New York Convention,

Respondent has frustrated Atton Boro’s legitimate expectations. Consequently,

Respondent violated the FET Standard.

2. Denial of Justice

122. Respondent denied Atton Boro justice by adjourning the proceedings for over seven

years and thereby failing to enforce the Award.

123. Tribunals have agreed that when a state denies an investor justice, this constitutes a

breach of the FET Standard.118 In this respect, the Tribunals in Toto and White

Industries established several criteria to evaluate whether deferred proceedings can

sustain a Denial of Justice claim.119 These criteria, while not exclusive, include the

complexity of the issue (a), the Parties’ behaviour (b), and the Court’s behaviour (c).

a) Complexity of the issue

124. As stated in White Industries, there is nothing “particularly complex about the [...]

115 Case, ll.1497-1498. 116 WTB, ¶8; Yukos Oil, ¶10. 117 Gater, ¶22; Murray Oil; Sovereign Participations, ¶25. 118 Casado; ¶658; Mondev, ¶141; Frontier, ¶328; Jan de Nul, ¶¶195-196; Waste Management, ¶98. 119 Toto, ¶163; White Industries, ¶10.4.10.

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application to enforce the Award”.120 Moreover, a domestic court has the prima facie

obligation to enforce an Award,121 which must take place speedily and effectively.122

Furthermore, an international arbitration award is, like Jean-François Poudret and

Sébastien Besson pointed out, “removed from any national arbitration law and not

subject to the judicial review of a state court”.123 Hence, a domestic Court’s only role

is to enforce an Award quickly and effectively, not to review its merits: an

uncomplicated task.

125. Moreover, Art. 5 New York Convention, delimits an exhaustive list of reasons under

which the enforcement of an international Arbitral Award may be refused,124 and

since this list is exhaustive, the Court needs only to evaluate whether one of the

exceptions applies.

126. Art. 5(2)(b) New York Convention, which the NHA invoked,125 requires that the

enforcement of the Award must be contrary to the state’s ‘public policy’. It reads:

“Recognition and enforcement of an arbitral award may also be refused if the

competent authority in the country where recognition and enforcement is

sought finds that:

[...]

(b) The recognition or enforcement of the award would be contrary to the

public policy of that country”.

In this context, ‘public policy’ is that policy which affects essential moral, political,

economic, or judicial principles establishing the order of the country.126 Indeed, this is

a high standard.127

127. In the case at hand, like the Award in White Industries, Atton Boro’s Award ordered

120 White Industries, ¶10.4.11. 121 WTB, ¶8; Yukos Oil, ¶10. 122 Gater, ¶67; Murray Oil; Sovereign Participations, ¶25. 123 Poudret/Besson, ¶880; see also Gould, ¶11; General National Maritime, p.2; S.E.E.E., p.6. 124 Admart; Karaha Bodas, ¶14; TCL, ¶53 . 125 Case, ll.936-937. 126 Kersa, p.625; Parsons & Whittemore, ¶9; ICCA, pp.107-108. 127 Hebei p.41; Parsons & Whittemore, ¶9; Renusagar, ¶66; see also Otto/Elwan, in

Kronke/Nacimiento/Otto/Port, p.365.

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Respondent party to pay an amount of money for caused damages.128 Such Awards

merely entail payment of damages, which should not be considered ‘particularly

complex’.

128. Furthermore, Respondent violated its international obligation to enforce the Award

and no exceptions apply. Specifically, Respondent cannot rely on Art. 5(2)(b) New

York Convention, because enforcing the Award does not conflict with Respondent’s

public policy. Contrary to Respondent’s assertion, enforcing the Award does not

affect Respondent’s moral, political, economic or judicial order. In particular,

Respondent is not able to refer to its economic order, since the Award merely

represents the damages arising out of the termination of the LTA - the same amount

Respondent would have been required to pay had it fulfilled their original obligations

under the LTA. Although Atton Boro sympathises with Respondent’s budgetary

problems, these problems cannot simply be shifted onto Atton Boro under the

moniker of ‘public policy’. In the absence of a true public policy crisis, recognising

and enforcing the Award cannot be considered contrary to Respondent’s ‘public

policy’. Therefore, the NHA’s claim to the New York Convention exception clearly

lacks substance, and the underlying enforcement proceeding should not be considered

‘particularly complex’.

b) Parties’ behaviour

129. A Tribunal in White Industries found that a party to an enforcement proceeding has a

right to seek treatment in accordance with a host state’s international obligations, such

as those enshrined in the New York Convention.129

130. In the present case, Atton Boro sought to enforce its Award. As a party to the New

York Convention, Respondent had an international obligation to enforce the Award

pursuant to Art. 3 New York Convention. Therefore, Atton Boro’s behaviour should

not be criticised because its only goal was for the Award to be enforced. By contrast,

the Respondent state entity was absent from the proceedings seven times without

providing any good reason, and it sought extensions eleven times, again without

128 See White Industries, ¶3.2.33; Case, ll.127-128. 129 White Industries, ¶10.4.15.

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adequate justification.130 Thus, Respondent, acting through the NHA, exhibited

behaviour throughout the proceeding that can be considered at best negligent and, at

worst, an effort to sabotage the proceedings by causing constant delays.

c) Court’s behaviour

131. The Tribunal in Casado pointed out that if the Court does not reply to one Party’s

requests this clearly qualifies as a Denial of Justice.131

132. In the case at hand, Atton Boro claimed a breach of Mercurian procedural law three

times during the proceedings when the NHA was absent without good reason.

However, the Court ignored Atton Boro’s request to find a breach of procedural

law.132 Thereby, the Court clearly privileged the NHA. Moreover, the Judge’s

statement that a “delay in service of one rejoinder will hardly run a billion-dollar

corporation into the ground”,133 clearly shows the Court’s bias against Atton Boro.

133. In conclusion, the High Court was tasked with executing a very simple procedure, but

has inexplicably taken more than seven years to do so. Although Atton Boro has been

cooperative and accommodating, the High Court has nevertheless delayed the

proceedings multiple times without adequate justification. Consequently, Respondent

denied justice to Atton Boro, and thus, violated the FET Standard.

II. Full Protection and Security

134. Atton Boro submits that Respondent failed to provide full protection and security

pursuant to Art. 3(2) BIT due to the delay of the enforcement proceedings for over

seven years. The relevant part reads:

“Investments and returns of investors of each Contracting Party [...] shall

enjoy full protection and security in the territory of the other Contracting

Party”.

130 Case, ll.204-353. 131 Casado, ¶658. 132 Case, ll.237, 266, 323. 133 Case, ll.239-240.

38

135. The principle of ‘full protection and security’ goes beyond physical security;134 it also

extends to:

“providing a legal framework that offers legal protection to investors-

including [...] appropriate procedures that enable investors to vindicate their

rights”.135

136. In the case at hand, although Atton Boro had access to enforcement proceedings in

Mercuria, those proceedings cannot be considered ‘appropriate procedures’. First, the

High Court delayed proceedings for over seven years without apparent reason, even

though it was under an obligation to enforce the Award speedily and effectively.

Second, although Atton Boro has the right to enforce its Award, Respondent’s

procedures have prevented it from doing so. Thus, because Respondent failed to

provide ‘appropriate procedures’ Atton Boro could not ‘vindicate’ its right to enforce

its Award. Respondent therefore did not provide ‘legal protection’ as required by Art.

3(2) BIT, and hence, breached its obligation to ensure full protection and security to

Atton Boro. Consequently, this Tribunal should find that Respondent violated Art.

3(2) BIT.

III. Liability

137. Respondent is liable for its judicial conduct, which violated the BIT by failing to

enforce the Award. It is recognised that the rules of state liability, which are

summarised in the ILC Draft Articles on Responsibility of States for Internationally

Wrongful Acts (‘ILC Articles’) are part of customary international law,136 and as

such, have been applied by innumerable Investment Tribunals.137 According to Art. 1

ILC Articles, a state is internationally responsible for “every internationally wrongful

act”, which is defined in Art. 2 ILC Articles as “an action or omission” that

“(a) is attributable to the State under international law; and (b) constitutes a

breach of an international obligation of the State.”

138. According to Art. 4(1) ILC Articles, any conduct of a state organ is attributable to the

134 Biwater, ¶729; Azurix ¶408. 135 Frontier, ¶263. 136 Noble Ventures, ¶69; Hobér, in Muchlinski/Ortino/Schreuer, p.550; Baumgartner, p.28. 137 Noble Ventures, ¶¶69-70; Total, ¶220; Kardassopoulos, ¶254.

39

state.138 The relevant part reads:

“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 […].”

According to Art. 12 ILC Articles, a breach of international obligations exists if a

state action is not in conformity with the requests of the international obligation. It

reads:

“There is a breach of an international obligation by a State when an act of

that State is not in conformity with what is required of it by that obligation,

regardless of its origin or character”.

Foreign investment law constitutes a part of international law.139 Therefore,

obligations under investment treaties are international obligations.

139. In the case at hand, Respondent is liable for its judicial conduct for several reasons.

Firstly, the BIT violations were performed by the High Court, the Respondent’s

judicial state organ, and therefore attributable to Respondent according to Art. 4(1)

ILC Articles. Secondly, as shown above, the conduct breached obligations under the

BIT. Those constitute a part of foreign investment law and hence, international

obligations pursuant to Art. 12 ILC Articles. Finally, the Court’s failure to enforce the

Award is an omission in the sense of Art. 2 ILC Articles, which is both attributable to

the state pursuant to Art. 4 and a breach of international obligations under Art. 12 ILC

Articles. Hence, the judicial conduct constitutes an internationally wrongful act under

Art. 1 ILC Articles, and therefore, this Tribunal should find that Respondent is liable

for the conduct of its judiciary.

C. Respondent violated Art. 3(3) BIT by terminating the LTA

140. Respondent breached Art. 3(3) BIT by terminating the LTA (I) and Respondent is

liable for the NHA’s actions (II).

138 ILC Articles, Art.4, ¶1. 139 Dolzer/Schreuer, p.19.

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I. Termination of the LTA

141. Because the NHA unilaterally terminated the LTA, Respondent breached the

Umbrella Clause under Art. 3(3) BIT, which states:

“Each Contracting Party shall observe any obligation it may have entered

into with regard to investments of investors of the other Contracting Party”

142. A Tribunal in Noble Ventures found that “it is difficult not to regard [the Umbrella

Clause] as a clear reference to investment contracts”140 and that the provision “would

be very much an empty base unless understood as referring to contracts”.141 The

Tribunal's decision was based on the wording of Art. 2(2)(c) Romania-United States

BIT,142 which reads: “Each Party shall observe any obligation it may have entered

into with regard to investments”. Further, the Tribunal defined investment contracts as

“agreements [which] describe specific rights and duties of the parties concerning a

specific investment”.143

143. Since the wording of the Romania-United States BIT is the same as in the Mercuria-

Basheera BIT, the same interpretation should be applied, and accordingly, the

Umbrella Clause is applicable to investment contracts. The LTA is a contract between

Atton Boro and the NHA which lays out conditions for supplying Sanior in Mercuria.

These conditions amount to ‘specific rights and duties’ of the type described in Noble

Ventures. Moreover, these rights and duties concern a ‘specific investment’ because

the LTA was concluded specifically for the supply of Sanior, whose main ingredient

is Atton Boro’s patented invention Valtervite, or in other words, Atton Boro’s

investment. Hence, the LTA is an investment contract, and therefore an ‘obligation’

within the meaning of Art. 3(3) BIT.

144. According to Clause 6, the LTA “shall be valid for a period of 10 years effective from

commencement date subject to the Supplier’s satisfactory performance.” Hence, both

Parties to the LTA were obligated to stay committed to the Agreement for ten years.

The LTA commenced on July 20, 2004 and should have remained in place until July

140 Noble Ventures, ¶51; see also SGS II, ¶91. 141 Noble Ventures, ¶51. 142 Ibid. 143 Ibid.

41

20, 2014. Atton Boro’s performance of the Agreement was uniformly ‘satisfactory’

for the duration of the Agreement; it gave no reason for termination. Nevertheless, the

NHA unilaterally terminated the investment contract on June 10, 2008, years ahead of

its expiration. Thus, the NHA violated its obligations under the LTA, specifically

under Clause 6. This was confirmed by the Award in favour of Atton Boro, which

established that the NHA’s termination of the LTA was both unilateral and premature,

and therefore, a breach of contract.

II. Liability

145. Respondent is liable for the NHA’s conduct. Again, referring to the ILC Articles,

Respondent is liable under Arts. 1 and 2 ILC Articles, because there is an

internationally wrongful act. The NHA’s actions can be attributed to Respondent

under Art. 5 ILC Articles and constitute a breach of international obligations pursuant

to Art. 12 ILC Articles. Art. 5 reads:

“The conduct of a person or entity [...] which is empowered by the law of that

State to exercise elements of the governmental authority shall be considered

an act of the State under international law, provided the person or entity is

acting in that capacity [...]”.

146. The NHA, a state entity, was set up by the Central Government “to pursue its goal of

securing universal healthcare for its people, as envisioned by the Constitution of

Mercuria”,144 and it is politically accountable to Respondent’s government.145 As a

constitutionally mandated politically accountable agency, the NHA is empowered to

exercise elements of governmental authority. By concluding the LTA, the NHA

guaranteed a cheap and stable supply of Sanior, and thereby made an important step

towards ‘securing universal healthcare for its people’, as mandated by Respondent’s

constitution. Hence, by entering into the LTA, the NHA furthered the goals of

Respondent’s constitution by exercising governmental authority. Considering that the

NHA exercised governmental authority to establish the LTA, it would be inconsistent

to imagine that it acted without governmental authority in terminating the LTA.

Therefore, by terminating the LTA, the NHA acted as an organ of the government,

144 Case, ll.1256-1257. 145 Case, l.1591.

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empowered to exercise ‘governmental authority’ within the meaning of Art. 5 ILC

Articles.

147. Furthermore, the termination constitutes a breach of international obligations under

Art. 12 ILC Articles. As already established, by terminating the LTA, Respondent

breached Art. 3(3) BIT. Obligations under the BIT constitute a part of foreign

investment law and hence, international obligations pursuant to Art. 12 ILC Articles.

As a result, the termination of the LTA is an ‘internationally wrongful act’ under Arts.

1 and 2 ILC Articles, since it is attributable to the state under Art. 5 and a violation of

international obligations under Art. 12. Hence, Respondent is liable for the NHA’s

actions.

148. Accordingly, because the LTA is an ‘obligation’ within the meaning of Art. 3(3) BIT,

because the NHA exercised governmental authority when it terminated the LTA, and

because the NHA’s actions are thereby attributable to Respondent, this Tribunal

should find that Respondent breached Art. 3(3) BIT by unilaterally terminating the

LTA.

D. Conclusion

149. In conclusion, Respondent clearly breached substantial provisions of the BIT.

Specifically, it breached the FET Standard under Art. 3(2) BIT multiple times, it

indirectly expropriated Atton Boro’s investment pursuant to Art. 6(2) BIT, it breached

the Standard of Full Protection and Security under Art. 3(2) BIT and it violated the

Umbrella Clause of Art. 3(3) BIT.

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PART THREE:REMEDIES

150. The Tribunal should order Respondent to pay no less than USD 1,540,000,000 in

damages to Atton Boro for the losses caused by the BIT violations (A). It should

further impose all costs associated with the proceedings on Respondent (B).

A. Compensation

151. The Tribunal should order Respondent to pay no less than USD 1,540,000,000 in

damages to Atton Boro. This is sufficient to cover Atton Boro’s financial losses

caused by Respondent’s BIT violations.

B. Costs

152. Furthermore, Respondent should bear all costs of the proceedings. According to Art.

42(1) PCA Rules, “[t]he costs of arbitration shall in principle be borne by the

unsuccessful party”. In the case at hand, there are no circumstances justifying a

deviation from this general rule. Therefore, Respondent should bear all costs of the

proceedings.

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PRAYER FOR RELIEF

153. Atton Boro respectfully requests the Tribunal to find that:

(1) It has jurisdiction;

(2) Respondent violated Art. 3 and Art. 6 BIT;

(3) Respondent should pay no less than USD 1,540,000,000 in damages to Atton

Boro;

(4) Respondent should bear all costs of the proceeding.

Respectfully Submitted on September 18, 2017

For and on behalf of the Claimant

Atton Boro Limited

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