TEAM PATHAK

NINTH ANNUAL

FOREIGN DIRECT INVESTMENT

INTERNATIONAL MOOT COURT

3 to 6 November 2016

ARBITRATION PURSUANT TO THE RULES OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE

Peter Explosive (Claimant)

v.

Republic of Oceania (Respondent)

MEMORIAL FOR CLAIMANT

19 September 2016

i    

TABLE OF CONTENTS

LIST OF LEGAL SOURCES…………………………………………………….………ii

LIST OF AUTHORITIES…………………………………………………………..…....vi

LIST OF ABBREVIATIONS……………………………………..…………………….viii

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

SUMMARY OF ARGUMENTS…………………………………………………………..5

ARGUMENTS…………………………………………………………………………...…7

I. The Tribunal Has And Should Exercise Jurisdiction Over The Present Dispute...…7

A. Claimant is an investor pursuant to Art. 1.2 of the Euroasia BIT………..……….8

B. Claimant may invoke Art. 8 of the Eastasia BIT pursuant to Art. 3 of the Euroasia BIT………………………..…...…………....10

II. Respondent Expropriated Claimant’s Investment.....................................................12

A. Claimant’s investment was indirectly and unlawfully expropriated

by Respondent’s Executive Order…………………………………………12

i. Respondent was the author of an indirect expropriation………………………….12 ii. Respondent’s indirect expropriation was unlawful………………………………..16

B. Oceania cannot invoke a threat to the peace or a breach of the peace

to expropriate Euroasian companies……………………………………….17

III. Claimant Made A Protected Investment Especially in light of The “Clean Hands” Doctrine With Reference To Art. 1.1 of the Eastasia BIT……………….19

A. Claimant’s Investment was developed in compliance with Respondent’s

Laws and Regulations……………………………………………………...20

B. Claimant’s behavior does not fall within the types of violations that justify an application of the “Clean Hands” doctrine……………………...21

IV. Claimant Did Not Contribute To The Damage Suffered By His Investment.……23

V. PRAYERS FOR RELIEF……………………...……………………………………...27

ii    

LIST OF LEGAL SOURCES

ABITRAL DECISIONS

Azurix Azurix Corporation v. The Argentine Republic, ICSID Case No. ARB/01/12, Award (14 July 2006)

BG Group BG Group Plc. v. The Republic of Argentina, UNCITRAL, Final Award (24 December 2007)

CME CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award (13 September 2001)

CMS CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Award (12 May 2005)

Enron Enron Corporation and Ponderosa Assets, L.P v. Argentine Republic, ICSID Case No. ARB/01/3, Award (22 May 2007)

Eureko Eureko B.V. v. Republic of Poland, Ad Hoc tribunal, Partial Award (19 August 2000)

Gemplus Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v. The United Mexican States, ICSID Case No. ARB(AF)/04/3, Award (16 June 2010)

Generation Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award (16 September 2003)

Hamester Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award (18 June 2010)

Inceysa Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award (2 August 2006)

LG&E LG&E Energy Corporation, LG&E Capital Corporation and LG&E International, Inc. v. Argentine Republic, ICSID Case No. ARB/07/1, Decision on Liability (3 October 2006)

Metalclad Metalclad Corporation v. United Mexican States, ICSID Case No. ARB (AF)/97/1, Award (30 August 2000)

Methanex Methanex Corporation v. United States of America, UNCITRAL, Final Award (3 August 2005)

Middle East Middle East Cement Shipping and Handling Co. S.A. v. Arab

iii    

Cement Republic of Egypt, ICSID Case No. ARB/99/6, Award (12 April 2002)

MTD MTD Equity Sdn, Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May 2004)

MTD, Annulment MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment (21 May 2007)

Myers S.D. Myers, Inc. v. Government of Canada, UNCITRAL, First Partial Award (13 November 2000)

National Grid National Grid plc v. The Argentine Republic, UNCITRAL, Award (3 November 2008)

National Grid, Jurisdiction

National Grid plc v. The Argentine Republic, UNCITRAL, Decision on Jurisdiction (20 June 2006)

Occidental Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012)

Phoenix Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award (15 April 2009)

Plama Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27 August 2008)

Saluka Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award (17 March 2006)

Sempra Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award (28 September 2007)

Siemens Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction (3 August 2004)

SPP Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award on the Merits (20 May 1992)

Starrett Starrett Housing Corporation v. Government of the Islamic Republic of Iran, Iran - United States C.T.R (19 December 1983)

Tippetts Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA,6 Iran-United Sates C.T.R. (29 June 1984)

iv    

Wena Wena Hotels Ltd. V. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award (8 December 2000)

Wena, Decision on interpretation

Wena Hotels Ltd. V. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on Interpretation (31 October 2005)

World Duty Free World Duty Free Company v. Republic of Kenya, ICSID Case No. ARB/00/7, ICSID Case No. ARB/00/7, Award (4 October 2006)

INTERNATIONAL COURT CASES

Kosovo Accordance with international law of the unilateral declaration of independence in respect of Kosovo. Advisory opinion 2010 I.C.J. (22 July)

Upper Silesia Case concerning certain German interests in Polish Upper Silesia. Judgment (merits) 1926 P.C.I.J (25 May)

TREATIES

CETA Canada – European Union Comprehensive Economic and Trade Agreement, signed on 26 September 2014 (not in force)

Eastasia BIT Eastasia – Oceania Bilateral Investment Treaty, signed on 1 January 1992 (entered into force 1 April 1993)

Euroasia BIT Euroasia – Oceania Bilateral Investment Treaty signed 1 January 1995 (entered into force 23 October 1995)

NAFTA North America Free Trade Agreement, signed on 4 October 1988 (entered into force 1 January 1994)

TPP Trans Pacific Partnership, signed on 4 February 2016 (not in force)

VCLT Vienna Convention on the Law of Treaties, opened for signature 23 may 1969 (entered into force 27 January 1980)

MISCELLANEOUS

ILC Articles International Law Commission, Draft Articles on the Responsibility of States for Internationally Wrongful Acts (2001)

OECD Draft Convention

Draft convention on the Protection of foreign property, Organization for Economic Cooperation and Development (1967)

Resolution 1514 Resolution 1514 (XV), United Nations General Assembly (1960)

Resolution 1540 Resolution 1540, United Nations Security Council (2004)

v    

UN CHARTER Charter of the United Nations, signed on 26 June 1945 (entered into force 24 October 1945)

vi    

LIST OF AUTHORITIES

BOOKS

Dolzer & Schreuer

Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (Ed. Oxford University Press, 2008)

Douglas Zachary Douglas, The international law of investment claims (Ed. Graduate Institute of International Studies, 2012)

Reinisch August Reinisch, “Expropriation” The Oxford Handbook of International Investment Law (eds. Peter Muchlinski, Federico Orino, Christoph Schreuer, 2008)

Zimmermann Andreas Zimmermann, “Secession and the law of State succession” Secession: International Law Perspectives (ed. Marcelo Kohen, 2006)

ARTICLES

Daujotas Rimantas Daujotas, “Jurisdiction Ratione Personae and Corporate Nationality in International Investment Arbitration – Legitimate Corporate Planning or Abuse of Right?” in Social Science Research Network (2011), Available at: http://dx.doi.org/10.2139/ssrn.1955110

Kreindler Richard Kreindler, “Are Tribunal Setting New Limits on Access to International Jurisdiction?” in ICSID Review, Foreign Investment Law Journal (2010)

Moloo Rahim Moloo, “A comment on the clean hands doctrine in international law” in Social Science Research Network (2010), Available at: http://dx.doi.org/10.2139/ssrn.2358229

Pellet Alain Pellet, “The Opinions of the Badinter Arbitration Committee A Second Breath for the Self-Determination of Peoples” in European Journal of international law (1992)

Ripinsky Sergey Ripinsky, “Assessing Damages in Investment Disputes: Practice in Search of Perfect” Journal of World Investment and Trade No.1 (2009)

Schreuer & Kriebaum

Christoph Schreuer and Ursula Kriebaum, “At What Time Must Legitimate Expectations Exist?”, Available at: http://www.univie.ac.at/intlaw/pdf/97_atwhattime.pdf

MISCELLANEOUS

Palwankar Umesh Palwankar, “Measures available to States for fulfilling their obligation to ensure respect for international humanitarian law” in International Review of the Red Cross No. 298 (1994)

vii    

UNCTAD United Nations Conference on Trade and Development, Taking of

Property: UNCTAD series on issues in international investment agreements (2001), Available at: http://unctad.org/en/Docs/psiteiitd15.en.pdf

viii    

LIST OF ABBREVIATIONS

¶ / ¶¶ Paragraph(s)

Art. / Arts. Article(s)

BIT Bilateral Investment Treaty

Executive Order Executive Order of 1 May 2014 on Blocking Property of Persons Contributing to the Situation in the Republic of Eastasia (1 May 2014)

Facts Statement of Uncontested Facts

ICC International Chamber of Commerce

ICJ International Court of Justice

ILC International Law Commission

MFN Most Favored Nation

NEA National Environment Authority of Oceania

p. / pp. Page / Pages

PO Procedural Order No.1

PO2 Procedural Order No.2

R Record

Rocket Bombs Rocket Bombs Ltd.

UN United Nations

1  

STATEMENT OF FACTS

1. On 1 January 1992, Oceania concluded a BIT with Eastasia. On 1 January 1995, the

Oceania concluded a BIT with Euroasia.1 The Euroasia BIT entered into force on 23

October 1995 and the Eastasia BIT entered into force on 1 April 1993.2

2. In February 1998, Peter Explosive (“Claimant”) was a resident of Fairyland, Eastasia

and acquired 100% of the shares of the bankrupt company Rocket Bombs Ltd (“Rocket

Bombs”), located in Valhalla, Oceania. Rocket Bombs was dedicated to arms

production, however the production had been stopped because the company had lost its

environmental license.3 Claimant then became the President and sole member of the

board of directors of the company.4

3. Rocket Bombs was the center of Valhalla’s economic activity. Valhalla was an

impoverished region of Oceania and the fact that the arms production had been stopped

had a great impact on its population. Several inhabitants of Valhalla were employees at

Rocket Bombs. Even those who were not, contributed to the operation of the company

by providing materials.5

4. In order to resume arms production, Claimant needed to obtain an environmental

license from the NEA of Oceania. To achieve that purpose, Claimant needed to fulfill

the requirements established under the Environmental Act of 1996. This was a difficult

task as it required an amount of financial resources that he did not possess at the time.6

5. The Environmental Act of 1996 established the possibility for companies working in

Oceania to acquire a subsidy,7 which would allow them to fulfill the State’s

                                                                                                                         1 Facts ¶ 1 2 Facts ¶ 1 3 Facts ¶ 3 4 Facts ¶ 2 5 Facts ¶ 3 6 Facts ¶ 4 7 Facts ¶ 5

2  

environmental requirements. This would lead to the granting of the environmental

license that would have allowed Claimant to resume arms production.

6. Under those circumstances, and given that such a subsidy had never been approved for

any company,8 Claimant decided to lawfully attempt to personally expedite the process,

since it was the only possibility he had to comply with the environmental requirements

under the Environmental Act of 1996 and to keep his investment afloat. In order to

make his case, he was able to have a meeting with the President of the NEA.9

7. On 23 July 1998, Rocket Bombs obtained the environmental license from the NEA of

Oceania.10 However, the request for a subsidy was denied,11 which left Claimant in a

very difficult position, because, even though he now had the environmental license, he

still did not have the resources to resume arms production.12

8. Claimant had to find other sources to finance his investment. He discovered that a

contract for arms production between Super Missiles Ltd. and Euroasia was about to

expire13 and took the necessary steps to become the next arms dealer for Euroasia.

Rocket Bombs acquired this contract for a period of fifteen years starting on 1 January

1999, with the possibility for renewal.14

9. One of the contract’s conditions was that it would grant an advance payment to Rocket

Bombs.15 This payment allowed Rocket Bombs to resume activities in Valhalla.

Employees were rehired and contracts were signed in order to provide Rocket Bombs

with the necessary materials to produce arms.16

                                                                                                                         8 Facts ¶ 5 9 Facts ¶ 6 10 Facts ¶ 6 11 Facts ¶ 7 12 Facts ¶ 7 13 Facts ¶ 8 14 Facts ¶ 9 15 Facts ¶ 10 16 Facts ¶ 11

3  

10. Rocket Bombs became very successful over time; allowing for the opening of new

factories and the conclusion of several new contracts. Rocket Bombs’ success had a

great impact in the economic conditions of Valhalla, since a notable portion of the

population worked for Rocket Bombs.17

11. Once Claimant was in an economic position to do so, he renewed his factory’s

equipment and modernized the production line in order to comply with all the

environmental requirements established in the Environmental Act of 1996. By 1

January 2014, Rocket Bombs had adjusted all of its production to meet Oceania’s legal

requirements.18

12. In the meantime, a diplomatic situation had developed in Fairyland, a region of

Eastasia, which wanted to become a part a Euroasia mostly because the people of

Fairyland had stronger historical ties with Euroasia than with Eastasia.19 A referendum

was held and the vote approved of the separation of Fairyland from Eastasia in order to

become a part of Euroasia.20 Eastasia considered the referendum unlawful, however the

vote took place and the people of Fairyland decided become Euroasian. 21

13. After careful consideration, Euroasia decided to accept the people of Fairyland as a part

of Euroasia.22 Even though the annexation took place peacefully,23 this lead to a

diplomatic crisis between Euroasia an Eastasia, who declared the annexation unlawful

and consequently broke all diplomatic channels with Euroasia.24

14. Before the annexation, Claimant signed a new contract with Euroasia on 28 February

2014, this one with a duration of 6 years, for the same purpose as the previous one.25

                                                                                                                         17 Facts ¶ 12 18 Facts ¶ 13 19 Facts ¶ 14 20 Facts ¶ 14 21 Facts ¶ 14 22 Facts ¶ 14 23 Facts ¶ 14 24 Facts ¶ 14 25 Facts ¶ 15

4  

15. In the meantime, the dissolution of diplomatic ties between the two countries as a result

of the annexation divided the international community.26 Oceania, supporting Eastasia’s

position, declared the annexation illegal and took a step further by issuing an Executive

Order that would amount to economic sanctions against Claimant’s investment.27 This

meant blocking the economic activity of anyone contributing to Eastasia’s situation.

The sanctions included a ban on business operations with anyone from Euroasia,

suspending existing contracts with them and making any future contracts with them

illegal.28

16. Because of Rocket Bombs’ involvement with the government of Euroasia, the

Executive Order covered the company. This meant complete financial ruin for

Claimant, who not only was hindered from performing his investment activity but also

was denied the possibility of selling his company.29

17. Lastly, the General Prosecutor’s Office of Oceania decided to investigate possible cases

of corruption on behalf of the President of the NEA.30 His investigation concluded that

the President had received bribes to expedite issuance of the environmental license.

This lead to a conviction and to the investigation of those who could have bribed him,

including Claimant.31 However, there is no factual indication or legal decision that has

implicated Claimant.

                                                                                                                         26 Facts ¶ 16 27 Facts ¶ 16 28 Facts ¶ 16 29 Facts ¶ 17 30 Facts ¶ 18 31 Facts ¶ 19

5  

SUMMARY OF ARGUMENTS

18. Claimant made an investment in Respondent’s territory thus, the Euroasia BIT applies

and the parties have agreed to file the dispute before this tribunal pursuant to Art. 9 of

the Euroasia BIT.32 Art. 3 of this same treaty allows Claimant to bypass the domestic

dispute settlement requirements of Art. 9 and seek direct relief from this tribunal.

Therefore, the ICC has jurisdiction ratione materiae, ratione temporis and ratione

voluntatis. Additionally, this tribunal has jurisdiction ratione personae as Fairyland’s

secession and Euroasia’s subsequent annexation of Fairyland were both lawful, making

Claimant a national of Euroasia at all relevant times and thus an investor under the

Euroasia BIT. (Part I)

19. Claimant’s investment was developed in compliance with Respondent’s law and

regulations and thus his investment is protected under the Eastasia BIT. Moreover,

Claimant’s behavior does not fall within the types of violations that justify an

application of the “Clean Hands” doctrine and Oceania has not convicted Claimant of

bribery or corruption. (Part II)

20. Respondent’s Executive Order of May 2014 violated Art. 3 of the Eastasia BIT and Art.

4 of the Euroasia BIT as this measure caused an expropriatory effect over Claimant’s

investment. The Executive Order made Claimant’s investment worthless and prevented

the development of Claimant’s property rights as an investor. Furthermore, Claimant

has not received any prompt and adequate compensation. Finally, since Euroasia’s

annexation of Fairyland was lawful, Respondent may not argue the presence of a threat

or breach to international peace as an essential security interest in order to justify its

unlawful indirect expropriation. (Part III)

21. Finally, Claimant’s devastating loss of his entire investment is a direct and full

consequence of the Respondent’s Executive Order. The Oceanian government’s

decision to arbitrarily block the property of all the people that had relations with                                                                                                                          32 Euroasia BIT Art. 9

6  

Euroasia 33 occurred quite suddenly and after his contract with Euroasia had already

been concluded leaving Claimant with no way of acting in a way that could not have

hurt his own investment. Therefore, Respondent should fully compensate the Claimant

for his losses generated by its Executive Order. (Part IV)

                                                                                                                         33 R p. 51

7  

ARGUMENTS

I. The Tribunal Has And Should Exercise Jurisdiction Over The Present Dispute

22. Claimant made an investment in Respondent’s territory thus, the Euroasia BIT applies

and the parties have agreed to file the dispute before this tribunal pursuant to Euroasia

BIT Art. 9.34 Therefore, the ICC has jurisdiction ratione materiae, ratione temporis and

ratione voluntatis. Additionally, this tribunal has jurisdiction ratione personae as

Claimant at all relevant times has been a national of Euroasia and an investor under the

Euroasia BIT.

23. The scope of investment protection depends on what the parties have agreed upon in the

treaty.35 Here, this tribunal has jurisdiction ratione materiae as Claimant’s investment

meets the definition of investment under Art. 1.1 of the Euroasia BIT. The parties have

agreed here that an investment refers to movable and immovable property and shares of

companies.36 Claimant owns 100% of the shares of his company, Rocket Bombs.

Therefore, his investment complies with the jurisdiction ratione materiae

requirement.37

24. This tribunal’s jurisdiction ratione temporis extends to claims relating to Claimant’s

investment that occurred while the treaty was in force and enforces the State’s

obligations.38 Claimant pursues arbitration in response to Respondent’s economic

sanctions in May 2014, which resulted in Claimant’s total economic loss of his

investment.39 The Euroasia BIT was signed on 1 January 1995 and has a duration of

twenty years, thus, in May 2014 the Claimant’s investment was covered and protected

by the Euroasia BIT. Therefore, this tribunal has jurisdiction ratione temporis for the

present dispute.

                                                                                                                         34 Euroasia BIT Art. 9. 35 Douglas p. 235. 36 Euroasia BIT Art. 1.1. 37 Euroasia BIT Art. 1.1. 38 Douglas p. 328. 39 Facts ¶ 17.

8  

25. Art. 9 of the Euroasia BIT requires parties to the dispute to seek an amicable settlement

and exhaust local remedies before bringing the matter to an international arbitration

tribunal. However, Claimant may invoke this BIT’s MFN provision,40 and bypass this

local remedy requirement, as it is not an obligation under the Eastasia BIT.41

Therefore, this tribunal has jurisdiction ratione voluntatis.

A. Claimant is an Investor Pursuant to Art. 1.2 of the Euroasia BIT

26. Claimant fits the Euroasia BIT definition of investor.42 According to Art. 1.2 of the

Euroasia BIT, an investor is either a natural or legal person, who has the nationality of

the Contracting Party, in accordance with its laws.43 Fairyland lawfully seceded from

Eastasia to join Euroasia and Claimant fulfilled all the requirements in order to become

a Euroasian citizen under the citizenship act of 2014, so much so that he acquired a

Euroasian passport and an identity card.44 Thus, Claimant is lawfully a Euroasian

national. As such, Claimant’s investment is protected under the Euroasia BIT and this

tribunal has jurisdiction ratione personae.

27. Claimant’s act of obtaining Euroasian nationality is supported by the principle of self-

determination. Individuals or groups of people hold the right of self-determination and

are thus allowed to demand and obtain recognition as being part of a group of persons

of their choice.45 It also allows a State to exercise the right of secession and

consequently to determine the nationality of its citizens.46

28. Fairyland’s lawful secession is supported by the principle of territorial integrity, which

requires States to refrain from “threaten(ing) or us(ing) force against the territorial

                                                                                                                         40 Euroasia BIT Art. 3. 41 Eastasia BIT Art. 8. 42 Daujotas p. 2. 43 Euroasia BIT Art. 2.2. 44 PO2 ¶4. 45 Pellet p. 180. 46 Zimmerman p. 225.

9  

integrity of any State.”47 While a State’s territorial integrity is important to its stability,

it does not prevent that State’s citizens from becoming part of a different State when a

secession occurs. The ICJ, in its advisory opinion on Kosovo, refers to the principle of

territorial integrity, and sets forth that “the unilateral declarations of independence are

implicit in the principle of territorial integrity and […] general international law

contains no applicable prohibition of declarations of independence.”48 Additionally, the

UN General Assembly has held that every person has the right to freely determine their

political status, even if it is a colonial or non-self-governing territory, without

interference from a third party.49

29. In accordance with the principle of self-determination, broadly accepted by the UN and

the ICJ, Fairyland made a decision, which in no way violated the principle of territorial

integrity. Here, Fairyland peacefully and lawfully decided to become a part of Euroasia.

Claimant, like most people living in Fairyland, has close historical ties with Euroasia.50

The decision to reunite with Euroasia was made in a lawful and peaceful manner by

way of a referendum that took place in 2013 to truly determine the will of the people of

Fairyland.51 They decided to be a part of Euroasia by a vast margin.52 Although the

government of Eastasia considered the referendum to be unlawful, the principle of self-

determination of the peoples, recognized by the UN treaties, must prevail.

30. Following the ICJ on Kosovo, and because of the right to unilaterally declare

independence, the people of Fairyland took democratic measures to decide whether to

remain as a part of Eastasia or to become a part of Euroasia and then made the

transition peacefully.53 Thus, there is no reason for this tribunal to disregard the will of

the Claimant to be a part of Euroasia, even if Respondent does not agree with the

secession.

                                                                                                                         47 UN Charter Art. 2.4. 48 Kosovo ¶84. 49 Resolution 2625 ¶ 65. 50 Facts ¶14. 51 Facts ¶14. 52 Facts ¶14. 53 Facts ¶14.

10  

31. Art. 1.2 of the Euroasia BIT defines investor as “any natural person having the

nationality of either Contracting Party in accordance with its laws”. Claimant in this

dispute has complied with all the laws of Euroasia in terms of nationality, namely the

Citizenship Act of 2014, by which Fairyland residents could apply for Euroasian

nationality54, and under which Claimant received Euroasian nationality on 23 March

2014.55

32. In conclusion, Claimant is a citizen of Euroasia, according to its laws, and therefore he

is an investor under Art. 1.2 of the Euroasia BIT. Thus, the tribunal has jurisdiction

ratione personae in the present dispute.

B. Claimant may invoke Art. 8 of the Eastasia BIT pursuant to Art. 3 of the

Euroasia BIT

33. Art. 3(1) of the Euroasia BIT’s MFN Clause provides that investments by Oceanian and

Euroasian investors, activities related to such investments and any other investment

matters regulated by the Euroasia BIT must be accorded a no less favorable treatment

than the treatment given to national investors and investors from third-party countries.56

34. The scope of MFN clauses can vary according to the way they are worded and have

been defined as either being broad clauses (“covering all matters governed by this

Agreement”) or narrow clauses (conferring the MFN treatment only to “investments”,

to “investment related matters” or to certain specified aspects of an investment).

35. Where there is a broad MFN clause, tribunals have accepted the extension of the MFN

clauses to dispute settlement provisions. However, even in some cases involving narrow

MFN clauses, which is the case here, tribunals have accepted its application to allow an

investor to invoke dispute settlement provisions contained in third-party BITs. For

example, in Siemens, Arts. 3(1) and 3(2) of the Germany-Argentine BIT limited the                                                                                                                          54 PO2 ¶4. 55 PO2 ¶4. 56 Euroasia BIT Art. 3.1.

11  

MFN treatment to investments and activities related to investments.57 However, the

ICSID tribunal found that these provisions allowed the claimant to invoke the broader

dispute resolution clause contained in the Argentina-Chile BIT, because the intention of

the parties was to create favorable conditions for investors and to stimulate private

initiative58 and that by not excluding the dispute settlement from these provisions nor

qualifying the expression "activities" in Art. 3(2), the tribunal found that the parties’

intentions were not to grant MFN treatment only on substantive matters.59

36. The tribunal in National Grid, also allowed the investor in that case to invoke the

benefits in the dispute settlement provisions of a third-party BIT.60 In that case, the

scope of the MFN clause of the UK-Argentine BIT provided MFN treatment only to the

“management, maintenance, use, enjoyment or disposal” of investments.61 The tribunal

found that the intention of the parties in this BIT was not to exclude procedural matters

from this narrow MFN clause because, among other reasons, while it did not

incorporate nor exclude the settlement of disputes it also failed to expressly refer to all

the matters covered by the UK-Argentine BIT.62

37. In our case, the Euroasia BIT MFN clause is a narrow clause as it only grants the MFN

treatment to investments, their income and all investment related matters.63 However,

neither Oceania nor Euroasia have ever expressed their intention to exclude nor include

the settlement of disputes from the scope of this MFN clause and the fifth recital of the

Euroasia BIT recognizes “the importance of providing effective means of asserting

claims and enforcing rights with respect to investments under national law as well as

through international arbitration.”64 Thus, it can be reasonably concluded that the

intention of the parties to this BIT was not to exclude procedural matters from the scope

of this MFN clause. Therefore, since the settlement of disputes is inextricably related to

                                                                                                                         57 Siemens ¶ 82. 58 Siemens ¶ 81. 59 Siemens ¶¶ 82 – 85. 60 National Grid, Jurisdiction ¶ 93. 61 National Grid, Jurisdiction ¶ 81. 62 National Grid, Jurisdiction ¶¶ 79 – 94. 63 Euroasia BIT Art. 3.1. 64 Euroasia BIT Preamble.

12  

protection of foreign investors and the parties’ intent does not exclude procedural

matters from the scope of its MFN clause, Art. 3.1 of the Euroasia BIT allows Claimant

to refer this dispute to international arbitration without prior exhaustion of local

remedies, giving this tribunal jurisdiction ratione voluntatis over the present dispute.

II. Respondent Expropriated Claimant’s Investment

38. Respondent’s Executive Order makes Respondent the author of an indirect and

unlawful expropriation. This measure violates international treaties and conventions,

which prohibit indirect and unlawful expropriation,65 as well as the Expropriation

clauses in Art. 4 of the Euroasia BIT and Art. 3 of the Eastasia BIT.

A. Claimant’s investment was indirectly and unlawfully expropriated by

Respondent’s Executive Order

i. Respondent was the author of an indirect expropriation

39. Tribunals have held that an indirect expropriation exists when a State’s measure affects

the investor’s property rights ‘‘in whole or significant part’’66 in such a manner that

they are ‘‘deemed useless,’’67 effectively ‘‘neutralizing” the benefit of the property of

the foreign owner.’’68 Indirect expropriation can exist even when the property’s legal

title remains with the foreign investor.69

40. Additional aspects that tribunals consider on a case-by-case basis when determining

whether a State’s measure has produced an expropriatory effect70 include 1) the

economic impact of the State’s action and whether these actions caused a substantial

                                                                                                                         65 OECD Draft Convention Art. 3; NAFTA Art. 1110; CETA Art. 8.12; TPP Art. 9.8. 66 Metalclad ¶103. 67 Starrett ¶¶122 - 154. 68 Metalclad ¶103; CME ¶604. 69 Starrett ¶¶ 122-154; Tippetts ¶¶219 - 225. 70 Dolzer & Schreuer pp. 101 - 114; Reinisch pp. 438 - 451.

13  

devaluation of the investment71 or reduced the investor’s ability to make use of its

economic rights;72 2) whether the State’s measure interfered with the investor’s

reasonable expectations73 created through general regulatory frameworks, by specific

transactions or by governmental assurances, such as licenses;74 and 3) whether the

duration of the measure was such that it was not simply transitory and has since become

irreversible.75

41. Arbitral tribunals have likewise held that expropriation, both direct and indirect, can

apply to non-tangible rights, such as the right to celebrate contracts and the expectation

to do so.76 In SPP the tribunal held that there was considerable authority for the

proposition that contract rights were entitled to the protection of international law and

that the taking of such rights involved an obligation to make compensation.77

42. Arbitral tribunal decisions are split on whether the investor’s loss of control over the

enterprise because of a State’s measure is tantamount to expropriation. In some

instances, tribunals have held that expropriation did not occur because the owner did

not lose control of its enterprise.78 However, other tribunals have held that the foreign

investor does not necessarily need to lose overall control of the investment to conclude

that an expropriation has occurred; therefore, it is possible to expropriate specific rights

separately enjoyed by the investor. In Middle East Cement the tribunal held that when

the State’s measures deprive the investor of the use and benefit of his investment even

though he may retain nominal ownership of the respective rights being the investment,

those measures are often referred as a ‘creeping’ or ‘indirect’ expropriation.79

                                                                                                                         71 UNCTAD p. 41. 72 Myers ¶ 283. 73 Generation ¶ 20.37. 74 Schreuer & Kriebaum p. 8; BG Group ¶307; Sempra ¶¶148 – 158; LG&E ¶ 133; CMS ¶¶275 – 281; National Grid ¶173. 75 Myers ¶283; Wena ¶99; Wena, Decision on interpretation ¶120. 76 Wena ¶98. 77 SPP ¶164. 78 Azurix ¶322; LG&E ¶198 – 200. 79 Middle East Cement ¶107; Eureko ¶ 241.

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43. Here, the effect of the Executive Order affects the Claimant’s property rights in such a

manner that they are deemed useless in whole or significant part, neutralizing any

benefit Claimant could lay claim to.

44. While Claimant remains the owner and still has legal title to Rocket Bombs, the

Executive Order has deemed Claimant’s investment wholly useless. Oceanian

companies delivered the necessary materials for the arms production but, since the

Executive Order prohibited any relation between them and Euroasian companies, the

arm’s production has stopped, making it impossible for Claimant to develop the object

of his investment, which is to produce and to sell arms.

45. The economic impact of the Executive Order has caused a substantial devaluation of the

investment. Oceania’s measure has led to a plummet in the value of Rocket Bomb’s

shares, making it impossible for Claimant to even sell his investment.

46. Oceania’s Executive Order interfered with Claimant’s reasonable expectations based on

the approval of the environmental license by the President of the NEA, granting

permission to Rocket Bombs to commence arms production, on 23 July 1998.80 Relying

on this license, Claimant began production, rehired the company’s workforce in

Valhalla and “concluded a number of contracts with Oceanian companies for the

delivery of necessary material for the arms production.”81

47. With everything in order, Claimant continued production without any problem or

interruption between 1999 and 2014, thus for 15 years he built an important and strong

company. His investment improved Oceania’s economy, both because of the contracts

concluded with Oceania companies and because of the much needed employment it

provided to the community of Valhalla. Thus, Claimant’s investment was a total

success, becoming ‘‘increasingly profitable’’ and there was no situation that could

                                                                                                                         80 Facts ¶ 6. 81 Facts ¶ 11.

15  

make Claimant believe that his company would be devalued to almost zero at the rate

that it did.82

48. Oceania’s Executive Order caused Claimant’s investment to irretrievably lose its value.

As a consequence of the decrease in the value of his shares and the impossibility to

celebrate contracts due to Oceania’s measure, Claimant lost the benefits of the

production that he would have gained if Oceania had not passed the Executive Order.

These setbacks resulted in a total economic lost. Therefore, the harm caused to

Claimant’s investment by the Executive Order is not transitory and is now irreversible.

49. While Claimant did not legally lose the control of his investment, the effect of

Oceania’s measure caused such a grave impact to Claimant’s investment that it is as if

he had been stripped of his rights. Due to Oceania’s Executive Order, Claimant cannot

develop his property rights as every investor would do. Therefore, despite being a 100%

shareholder of Rocket Bombs, his situation is as if he had never invested, as his

property rights have been reduced to nothing.

50. Oceania’s Executive Order interferes with the right for Claimant to celebrate contracts

and his expectation to do so. Under the threat of sanctions, the Executive Order

prohibits all companies in Oceania to celebrate contracts with anyone or thing related to

Euroasia.83 It also requires the cancelation and nullification of any contracts with

companies somehow affiliated with Euroasia that were in force when the Executive

Order was issued.84

51. Thus, Claimant’s right to celebrate contracts and the expectation to do so was indirectly

expropriated and has devastated Claimant’s investment as Oceania’s Executive Order

has made it impossible for Claimant to celebrate contracts with Oceania’s companies

due to the sanctions that they now seek to avoid.

                                                                                                                         82 Facts ¶ 17. 83  Executive Order Section 1 84  Executive Order Section 1

16  

ii. Respondent’s indirect expropriation was unlawful

52. In order for an expropriation to be lawful, the State’s measure must 1) be for a public

purpose; 2) not have an arbitrary and discriminatory basis; 3) be in accordance with the

due process law; and 4) be followed by prompt, adequate, and effective compensation.85

53. Here, Oceania’s indirect expropriation is unlawful because the Executive Order does

not have a real public purpose to protect it citizens or its environment as there is no

proof that Fairyland’s lawful secession and Euroasia’s subsequent, lawful annexation

are threats to Oceania’s peace or security. The secession was a legal development of

Fairyland’s right to self-determination based on the freely made decision of Fairyland’s

inhabitants. In fact, Claimant produced and exported arms to Euroasia from Oceania’s

territory for 15 years without problem or recrimination from Oceania, thus this recent,

indirect expropriation is based on unfounded fear and is unlawful.

54. The Executive Order is arbitrary because there is no factual foundation to support the

prohibition of Oceanian companies with Euroasian investors or anyone affiliated with

them.

55. The measure is also discriminatory because it only targets Euroasian companies and

anyone affiliated with them doing business in Oceania. In fact, the real basis of this

measure is to finger Euroasian citizens and its companies as threats to peace by blaming

them for acts in which they did not even participate.

56. Oceania’s Executive Order failed to follow the principles of due process. It was an

abrupt measure that no Euroasian company or any of the related companies doing

business with them could foresee. For example, Rocket Bombs celebrated all its

contracts before the secession so there was absolutely no way for Claimant to even

consider the possibility of a sanction; Rocket Bombs was simply remaining true to the

purpose of the BIT and developing its investment.

                                                                                                                         85 NAFTA Art. 1110; Methanex ¶32; Saluka ¶255; Upper Silesia p. 22.

17  

57. Finally, Oceania to date has failed to provide any form of prompt, adequate and

effective compensation. Therefore, Oceania’s Executive Order is an unlawful act of

indirect expropriation.

B. Oceania cannot invoke a threat to the peace or a breach of the peace to

expropriate Euroasian companies

58. According to Art. 39 of the UN Charter, the concept of a threat to the peace, a breach of

the peace and an act of aggression, and what measures must be taken to protect

international security is determined by the UN Security Council. Until now the Security

Council, through its resolutions, has declared threats to the peace to be ‘‘acts of

terrorism, the proliferation of weapons of mass destruction and the proliferation and

illicit trafficking of small arms and light weapons’’86 and breaches of the peace to be

‘‘situations involving the use of armed force,87 and have encouraged States to take

legislative measures to prevent them.88

59. Art. 25 of the ILC Articles allows States to invoke ‘‘necessity’’ in order not to perform

some other international obligation of lesser weight or urgency to safeguard an essential

interest.89 In order for a State to invoke “necessity” is must 1) be the only way to

safeguard the essential security interest, 2) be taken to guard against a grave and

imminent peril, and 3) not seriously impair an essential interest of the State towards

which the obligation existed.90

60. Tribunals have examined situations of ‘necessity’ on a case-by-case basis and have held

that if BITs do not include a ‘self-judging’ clause that defines what to is to be

understood as a ‘necessity’ situation, “it is not for the State in question but for the

                                                                                                                         86  UN Charter Art. 39.  87 UN Charter Art. 39. 88 Resolution 1540 ¶ 18. 89 ILC Articles Art. 25. 90 ILC Articles Art. 25; CMS ¶¶ 319 – 331; Enron ¶ 313.

18  

international jurisdiction to determine whether the plea of necessity may exclude

wrongfulness.”91

61. Here, the UN Security Council would not consider the present situation to be a threat to

the peace or breach of the peace. Rocket Bombs production and selling of arms to

Eastasia was a legal and consensual commercial activity that did not involve weapons

of mass destruction and, in fact the production and marketing of the arms lasted 15

years without any objection from any of the States involved. Rather, as Fairyland

requested a lawful intervention from Euroasia for protection, Euroasia’s military

entrance into Fairyland’s territory was the answer to that request and the only aim was

to guarantee the development of Fairyland’s right to self-determination; this is reflected

in the fact that Euroasia did not maintain a military presence in the territory.92

62. Oceania’s indirect expropriation of Claimant’s investment by way of its Executive

Order was not the only way to safeguard its alleged international peace. Oceania could

have made use of diplomatic measures directly with Euroasia and Fairyland, as

provided for in Art. 33 of the UN Charter, before using coercive measures. For

example, Oceania could have repeatedly protested against the secession through

consular channels or issued a public accusation.93 Instead it decided to use retaliatory

measures, which are only taken by a State when another one violates international

obligations.94 Fairyland’s secession was not a violation of international obligations as it

was a legal and democratic development of its right to self-determination. Therefore,

there is not an internationally wrongful act that justifies Oceania’s measure.95

63. Fairyland’s secession to Euroasia does not constitute a grave and imminent peril to

international peace. There is no UN Security Council resolution which has held that the

exercise of a State’s right to self-determination means a threat to the peace or breach of

the peace and, in fact it is a recognized right in UN General Assembly Resolution 1514                                                                                                                          91 CMS ¶¶ 368 – 373; Sempra ¶¶ 374 – 378. 92 Facts ¶ 14. 93 Palwankar. No. 298, 28-02 94 ILC Articles Art. 49. 95 ILC Articles Arts. 1, 2, 49.

19  

(XV), paragraph 11 and Art. 2.96 While it might affect diplomatic relations between

Euroasia and Oceania, the secession does not justify Oceania’s breach of international

treaty obligations.97

64. Rocket Bombs’ production and marketing of arms and Fairyland’s secession do not

seriously impair an essential interest of Oceania, therefore the Essential Security

Interest Clauses contained in both BITs cannot apply here. The Essential Security

Interest Clauses in the BITs are not ‘‘self-judging’’ as they do not define what is to be

understood as a ‘‘necessity’’ situation. Therefore, Oceania cannot unilaterally

determine when a situation can be considered as such.

65. Finally, the Executive Order is not covered by the BIT’s Essential Security Clauses

because it was not taken to ‘‘maintain international peace or security.’’ Rather, the main

aim of the measure, according to its preamble, is to protect ‘‘the national security and

foreign policy of the Republic of Oceania.’’98

66. In conclusion, Oceania’s Executive Order violates Art. 4 of the Euroasia BIT and Art. 3

of the Eastasia BIT, respectively as there has not been a breach of an international

obligation nor a threat or breach of international peace to protect against Claimant’s

investment, Fairyland’s lawful secession and Euroasia’s subsequent and lawful

annexation of Fairyland.

III. Claimant Made A Protected Investment, Especially in light of the “Clean

Hands” Doctrine With Reference to Art. 1.1 of the Eastasia BIT

67. Contrary to what Respondent has suggested,99 all of Claimant’s actions have been legal

and conform to Oceania’s regulations and the Eastasia BIT. Mere assumptions made by

Respondent about Claimant having “unclean hands” because of his supply of weapons

                                                                                                                         96 Resolution 1514 ¶¶ 11 – 14. 97 VCLT Art. 60. 98 Executive Order Preamble. 99 Answer to Request for Arbitration, p. 16

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to Euroasia, even after he knew about Euroasia’s intention to incorporate Fairyland into

its territory100 and his alleged involvement in acts of corruption should be dismissed as

Claimant’s investment was developed in compliance with Oceania’s laws and

regulations and in conformance with the governing BIT. Therefore, all claims brought

to the Tribunal by Claimant are admissible.

A. Claimant’s Investment was Developed in Compliance with Respondent’s

Laws and Regulations

68. According to the ICJ, a claimant’s request for relief can be dismissed if its illegal

conduct is in relation to its claims.101 Investment treaties usually include a requirement

for the investor to perform its investment in accordance with the host State’s laws. This

means that an investor cannot request protection for its investment once he has been

found to have violated those laws, also known as having “unclean hands.”102

69. A “clean hands” principle does not need to be expressly agreed to in the treaty in order

to apply to an investment dispute. This was recognized by the tribunal in Inceysa, where

it was concluded that the expression “in accordance with the laws” in one of the clauses

of the BIT was equivalent to a “clean hands” clause.103

70. The same tribunal invoked the international law principle of nemo auditur propriam

turpitudinem allegans, meaning that no one shall be heard when invoking one’s own

wrong.104 This principle relates to the “clean hands” doctrine because when a party has

committed a chain of illegal acts, that same party cannot benefit from any of them. The

tribunal concluded that this legality requirement was a prerequisite to jurisdiction.105

                                                                                                                         100 R p. 16. 101 Moloo p. 1. 102 Moloo p. 6. 103Inceysa ¶ 195. 104 Inceysa ¶243. 105 Inceysa ¶ 244.

21  

71. The objective of the application of the “clean hands” doctrine is to prevent the

protection of investments made contrary to the host State’s law in international

arbitration.106 In Plama the tribunal held that substantive protections of a treaty could

not be granted when investments were made contrary to law.107 Thus, when an

investment is made without complying with the requirements of the domestic law of the

host country that investment cannot be protected by a tribunal.108

B. Claimant’s behavior does not fall within the types of violations that justify

an application of the “Clean Hands” doctrine

72. There are various circumstances under which a tribunal may apply the “clean hands”

doctrine such as when misrepresentations are made by the claimant, or in cases of fraud,

bribery and corruption or bad faith on the part of the claimant.109

73. The Plama tribunal addressed misrepresentations by the claimant. In that case the

investment was obtained by deceitful conduct, which constituted a violation of the host

State’s law. It was concluded that a tribunal should not enforce a contract obtained by

wrongful means or fraudulent misrepresentation.110

74. Fraud in the context of the “clean hands” doctrine was addressed by the tribunal in

Inceysa111 which found that it was not possible to recognize the existence of rights

arising from illegal acts, because it would violate the respect for the law which

constitutes a principle of international public policy.112 It also held that when

interpreting treaties fraud must be discouraged by denying protection to fraudulent

investments.113

                                                                                                                         106 Plama ¶ 138. 107 Plama ¶ 138. 108 Phoenix ¶ 102. 109 Hamester ¶ 123. 110 Plama ¶ 144. 111 Inceysa ¶¶ 250 – 252. 112 Inceysa ¶ 251. 113 Inceysa ¶ 251.

22  

75. The issue of bribery or corruption as a sign of “unclean hands” was addressed by the

tribunal in World Duty Free, which found that in accordance with domestic laws and

international conventions relating to corruption, and in light of the decisions taken on

the issue of “clean hands” by courts and arbitral tribunals, bribery is contrary to the

international public policy of most States and transnational public policy.114 The

tribunal concluded that claims based “on contracts of corruption or on contracts

obtained by corruption cannot be upheld.”115

76. Lastly, the principle of bad faith has been acknowledged as a reason to invoke the

“unclean hands” doctrine. An investment acquired in bad faith could be an investment,

but not one worthy of protection by any investment treaty.116

77. Here, this is not a case where Respondent may invoke the “clean hands” doctrine to

dismiss Claimant’s rightful claims. First, Claimant’s investment was developed in

compliance with Oceania’s laws. Not having the funds to purchase the environmental-

friendly technology needed in order to meet the requirements set forth in the

Environmental Act of 1996, Claimant along with other entities requested a subsidy

from the Ministry of Environment of Oceania.117 All entities had been denied their

request for such a subsidy.118 Keeping in mind this negative precedent and given the

lengthily time of adjudication, Claimant lawfully sought to expedite the decision on his

request for a subsidy.119 He did so in the interest of national security, as he provided

arms destined to protect the people of Oceania,120 and in order to keep his investment

afloat.

78. Claimant has not been accused of misrepresentation, fraud or bad faith and

Respondent’s reckless accusation that Claimant’s request to expedite the Ministry’s

decision involved bribery or corruption is not supported by anything other than                                                                                                                          114  World Duty Free ¶ 156  115 World Duty Free ¶ 157. 116 Kreindler pp. 40 – 41. 117 Facts ¶¶ 4 – 5. 118 Facts ¶ 5. 119 Facts ¶ 6. 120 Facts ¶ 6.

23  

assumptions and media fanfare.121 There are no legal decisions within the State of

Oceania that find the Claimant guilty for any bribery or corruption. Even though the

President of the NEA was convicted for taking bribes,122 this in no way proves that

Claimant is one of the people who actually participated in the bribes. While criminal

proceedings were initiated in 2015 against Claimant, they remain pending because there

is no solid evidence to obtain a conviction.123 Finally, any testimony against Claimant

by the convicted President of the NEA should be examined apprehensively as it is being

offered as part of a plea bargain that would relieve him from prosecution.124

79. In conclusion, there is no proof that the actions taken by Claimant in order to try to

protect his investment violated the “clean hands” clause in Art. 1.1 of the Eastasia BIT

and thus Claimant’s investment should be protected.

IV. Claimant Did Not Contribute To The Damage Suffered By His Investment

80. Contributory fault arising from an act or omission that contributes to the damage and/or

a failure to mitigate the damage are both circumstances that reduce compensation and

relate to the general matter of causation.125 In order to receive full compensation, one

party’s loss must be a fully attributable consequence of the other party’s wrongful

act.126

81. Arbitral tribunals have invoked the doctrine of contributory negligence to find the

investor liable for a portion of the damages. In MTD, the tribunal held the doctrine of

contributory negligence should be applied because claimant contributed to the damages

caused to its investment as its company had initiated the investment without having the

proper licenses from the Chilean government.127 Contributory negligence in that case

                                                                                                                         121 Facts ¶ 19. 122 Facts ¶ 19. 123 PO2 ¶ 5. 124 PO2 ¶ 5. 125 Ripinsky p. 15. 126 ILC Articles Art. 31 Commentary 10. 127 MTD, Annulment ¶¶100 – 101.

24  

was also found to be based on the lack of claimant’s due diligence to lawfully obtain

such a license.128

82. The Occidental tribunal also held that the investor must share the cost of damages129

based on the contributory negligence doctrine. In that case, the investor was found to

have contributed to his own injury because he failed to request the State’s authorization

before entering into a contract that required such authorization. In reaction, the State

issued the Caducidad Decree (the measure in that case that caused the plaintiff’s

alleged injury), but the tribunal found that the Claimant was partially at fault for his

own injury for having disregarded Ecuadorian law.130

83. Conversely, the Gemplus tribunal held that the doctrine of contributory negligence

should not be applied as the investor was unaware of the situation that would contribute

to the alleged damages.131 The tribunal added that contributory negligence is a matter of

culpability, not an objective act or omission132 and therefore the doctrine of

contributory negligence cannot be applied if there is no knowledge or the possibility to

know a fact.133

84. Here, unlike the investors in MTD and Occidental, Claimant did not contribute to the

damage caused by Oceania’s illegal expropriation of Rocket Bombs. Claimant acted

diligently in the development of his investment and his behavior was at all times in

accordance with Oceania’s law. On July 23, 1998134 Claimant obtained the license

required for arms production in accordance with Oceania’s Environmental Act of

1996.135 Likewise, the development of Claimant’s two contracts with the Republic of

Euroasia for arms production, the first of which expired on January 1, 2014136 and the

                                                                                                                         128 MTD ¶242; MTD Annulment ¶ 107. 129 Occidental ¶ 687. 130 Occidental ¶ 679. 131 Gemplus ¶ 11.14. 132 Gemplus ¶ 11.12. 133 Gemplus ¶ 11.14. 134 Facts ¶ 6. 135 Facts ¶ 4. 136 Facts ¶ 9.

25  

second, which was concluded on February 28, 2014,137 did not breach any of the

Oceanian laws.

85. Here, as in Gemplus, Claimant was not (and could not have been) aware of the possible

measures to be taken by Respondent, principally, the issuance of the Executive Order.

The Oceanian government’s decision to arbitrarily block the property of all the people

that had relations with Euroasia138 occurred quite suddenly and after Claimant’s

contract with Euroasia had already been concluded leaving him with no way of acting

in a way that could not have hurt his own investment. On March 23, 2014 Euroasia

declared Fairyland part of its territory and just a little over five weeks later the

government of Oceania issued its Executive Order.139 At that time Claimant had a

binding contract with the Euroasia for the provision of weapons, which was signed on

February 28 of the same year,140 before the annexation occurred. Because of this,

Claimant was unable to take any measure to avoid the effects of the Executive Order,

therefore Claimant is in no way contributorily at fault for the damages suffered by his

investment.

86. Rather, Oceania is fully responsible for the damages caused to Claimant’s investment.

Its Executive Order was a discriminatory act that has reduced the value of Rocket

Bombs to almost zero141 and has left Claimant, who had helped to revive Oceania’s

community of Valhalla, unable to sell his investment.142

87. In conclusion, the doctrine of contributory fault cannot be applied here. Claimant’s

devastating loss of his entire investment is a direct and full consequence of the

Respondent’s Executive Order. Claimant’s hands were tied and there was nothing that

he could have done to either contribute to or mitigate the damage caused by the

                                                                                                                         137 Facts ¶ 15. 138 Executive Order Section 1. 139 Facts ¶ 16. 140 Facts ¶ 15. 141 Facts ¶ 17. 142 Facts ¶ 17.

26  

Executive Order. Therefore, Respondent should fully compensate the Claimant for his

losses generated by its Executive Order.

27  

V. PRAYERS FOR RELIEF

For the aforementioned reasons, Claimant respectfully requests the Tribunal to find that:

(1) It has jurisdiction over the present dispute;

(2) Claimant made a protected investment in the light of the “Clean Hands” doctrine;

(3) Respondent breached its obligation under Euroasia BIT Art. 4 by indirectly and

unlawfully expropriating Claimant’s Investment;

(4) Claimant did not contribute to the damage suffered by his investment;

(5) Respondent should compensate Claimant for a value of no less than 120,000,000.00

USD.

Respectfully submitted on 19 September 2016

By TEAM PATHAK

On behalf of Claimant

PETER EXPLOSIVE