team forster london court of … · the respondent has acted in accordance with the fair and...

TEAM FORSTER

LONDON COURT OF INTERNATIONAL ARBITRATION

UNDER THE LCIA ARBITRATION RULES

VASIUKI LLC

(CLAIMANT)

v.

REPUBLIC OF BARANCASIA

(RESPONDENT)

LCIA Arbitration No 00/2014

MEMORIAL FOR RESPONDENT

ii

TABLE OF CONTENTS

LIST OF AUTHORITIES ............................................................................................................. IV

LIST OF LEGAL SOURCES ..................................................................................................... XIX

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

SUMMARY OF ARGUMENTS.......................................................................................................4

ARGUMENTS ..................................................................................................................................6 I. THE TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE DISPUTE AND THE CLAIMS ARE INADMISSIBLE ....................................................................................................6

A. The BIT became obsolete due to parties accession to the EU ...............................................6 1. Jurisdiction over investment disputes is transferred to the EU........................................................................ 6 2. The BIT was terminated under Article 59 of the VCLT ................................................................................. 7

(i) Parties to the BIT concluded successive treaties ...................................................................................... 8 (ii) Both treaties relate to the same subject-matter ....................................................................................... 8 (iii) The parties had an intention to govern the subject-matter by EU Treaties .............................................. 8 (iv) Provisions of the BIT and the EU Treaties are incompatible .................................................................. 9 (v) Formal requirements under Article 65 of the VCLT were observed....................................................... 10

3. Arbitration clause is inapplicable under Article 30(3) of the VCLT ............................................................. 11 (i) The Parties agreed to a new juridical authority for dispute resolution ..................................................... 11 (ii) The decision under Article 8 of the BIT could threaten the integrity of EU law ..................................... 12

B. The BIT was terminated under its provisions ..................................................................... 13 C. The claims are inadmissible ............................................................................................... 14

II. THE RESPONDENT ACTED WITHIN THE BIT, IN PARTICULAR, PROVIDED FAIR AND EQUITABLE TREATMENT .............................................................................................. 15

A. The Respondent has acted in accordance with the Fair and Equitable treatment standard . 15 1. Barancasia has not frustrated the Claimant’s legitimate expectations ........................................................... 16

(i) The Respondent has not provided any special commitments .................................................................. 16 (ii) Amendment of the LRE in the presence of special commitments does not automatically result in breach of Article 2.2 of the BIT ............................................................................................................................... 18 (iii) The Claimant failed to evaluate the situation in Barancasia before investing or its decision to invest is covered by a business risk ............................................................................................................................. 20

2. The Respondent has acted with transparency .............................................................................................. 22 3. The Respondent has acted in non-arbitrary manner ..................................................................................... 23

III. RESPONDENT’S ACTIONS ARE EXEMPTED BOTH UNDER “ESSENTIAL SECURITY” CLAUSE IN THE BIT AND UNDER CUSTOMARY DEFENCE OF NECESSITY ..................... 23

A. The BIT “essential security” clause excludes liability of Barancasia ................................. 24 1. The LRE amendment was to fulfill the obligation to maintain international peace and security ..................... 24 2. Energy and environment security and economic stability in the EU are under threat ..................................... 26 3. The LRE amendment was necessary........................................................................................................... 27

B. The Respondent is not liable for the BIT breach under customary defence of necessity ....... 28 1. The Respondent’s essential interests were seriously impaired ...................................................................... 29 2. The Respondent faced up with grave and imminent peril to its essential interests ......................................... 29 3. Amendment of the LRE was the only way to safeguard essential interests ................................................... 30 4. Respondent’s actions did not seriously impair essential interests of the EU .................................................. 30 5. The Respondent did not contribute to the state of necessity ......................................................................... 30

IV. JURIDICAL RESTITUTION OR SPECIFIC PERFORMANCE SHOULD NOT BE AWARDED TO THE CLAIMANT .............................................................................................. 31

A. Juridical restitution is not a primary form of reparation .................................................... 32 B. Awarding of juridical restitution or specific performance will constitute intervention in sovereignty of Barancasia......................................................................................................... 32 C. Juridical restitution or specific performance are not enforceable ....................................... 33

iii

D. Alternatively, conditions under Article 35 of the ILC Articles are not satisfied ................... 33 V. THE CLAIMANT’S BASIS FOR CLAIMING AND QUANTIFYING COMPENSATION IS NOT APPROPRIATE .................................................................................................................. 34

A. Net present value of equity is a future losses equivalent ..................................................... 34 B. The Claimant’s calculation on the Alfa project’s revenue losses is unreasonable ............... 35 C. The Claimant's investment in land, panels and required equipment is not wasted ............... 36 D. The Claimant’s presumptions on future developments were unreasonable ......................... 37 E. WACC or cost of equity is invalid as an interest rate.......................................................... 37

PRAYER FOR RELIEF ................................................................................................................. 39

iv

LIST OF AUTHORITIES

Abbreviation Citation

CASES/ ARBITRAL AWARDS

ICSID

ADC v. Hungary ADC Affiliate Limited and ADC & ADMC

Management Limited v. Hungary,

ICSID Case No. ARB/03/16, Award,

2 Oct.2006

AES v. Hungary AES Summit Generation Limited and AES-

Tisza Erömü Kft v. Hungary,


23 Sep.2010

AGIP v. Congo Agip S.p.A. v. People’s Republic of Congo,


30 Nov.1979

Arif v. Moldova Mr. Franck Charles Arif v. Moldova,


8 Apr.2013

Am. Mfg. & Trading v. Zaire American Manufacturing& Trading, Inc. v.

Republic of Zaire,


21 Feb.1997

Archer v. Mexico Archer Daniels Midland Company and Tate &

Lyle Ingredients Americas, Inc. v. Mexico,

ICSID Case No. ARB (AF)/04/5, Award,

21 Nov.2007

Aucoven v. Venezuela Autopista Concesionada de Venezuela, C.A. v.

Venezuela,


23 Sept.2003

Azurix v. Argentina Azurix Corp. v. Argentina,

v


14 July 2006

Cargill v. Mexico Cargill, Inc. v. Mexico,

ICSID Case No. ARB(AF)/05/2,

18 Sept.2009

CMS v. Argentina CMS Gas Transmission Company v. Argentina,


12 May 2005

CMS v. Argentina

(Annulment)

CMS Gas Transmission Company v. Argentina,

Decision on the Application for Annulment of

Argentina,

ICSID Case No. ARB/01/8,

25 Sep.2007

Continental v. Argentina Continental Casualty Company v. Argentina,

ICSID Case, No. ARB/03/9, Award,

5 Sep.2008

DFS v. Argentine Daimler Financial Services AG v. Argentina,


22 Aug.2012

Duke v. Ecuador Duke Energy Electroquil Partners &Electroquil

S.A. v. Ecuador,


18 Aug.2008

EDF v. Argentina EDF International S.A., SAUR International

S.A. and León Participaciones Argentinas S.A.

v. Argentina,


11 June 2011

EDF v. Romania EDF (Services) Limited v. Romania, ICSID

Case No. ARB/05/13, Award,

8 Oct.2009

Electrabel v. Hungary Electrabel S.A. v. Hungary,

ICSID Case No. ARB/07/19,Decision on

vi

Jurisdiction, Applicable Law and Liability,

30 Nov.2012

Enron v. Argentina Enron Corporation v. Argentina,


22 March 2007

Feldman v. Mexico Marvi Feldman v. Mexico,

ICSID Case No. ARB(AF)/99/1, Award,

16 Dec.2002

Genin v. Estonia Alex Genin, Eastern Credit Limited, Inc. and

A.S. Baltoil v. Estonia,

ICSID Case No. ARB/99/2,

25 June 2001

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

and LG & E International, Inc. v. Argentina,

ICSID Case No. ARB/02/1, Decision on

Liability,

3 Oct.2006

LG & E v. Argentina

(Remedies)

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

and LG & E International, Inc. v. Argentina,


25 July 2007

Loewen v. US Loewen Group, Inc. and Raymond L. Loewen

v. United States of America,

ICSID Case No. ARB(AF)/98/3,

26 June 2003

Maffezini v. Spain Emilio Augustín Maffezini v. Spain,


13 Nov.2000

Malicorp v. Egypt Malicorp Limited v. The Arab Republic of

Egypt,

ICSID Case No. ARB/08/18 ,

7 Feb.2011

Metalclad v. Mexico Metalclad Corporation v. Mexico,

vii


30 Aug.2000

Micula v. Romania Micula and others v. Romania,

ICSID Case No ARB/05/20, Award and

separate opinion,

11 Dec.2013

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

Chile,


25 May 2004

Occidental v. Ecuador Occidental Petroleum Corporation and

Occidental Exploration and Production

Company v. Ecuador,

ICSID Case No ARB/06/11, Decision on

Provisional Measures,

17 Aug.2007

Parkerings v. Lithuania Parkerings-Compagniet AS v. Lithuania,


11 Sep.2007

Plarna v. Bulgaria Plarna Consortium Limited v. Bulgaria,


27Aug.2008

PSEG v. Turkey Pseg Global Inc. and Konya Ilgin Elektrik

Üretim Ve Ticaret Limited Şirketi v. Turkey,

ISCID Case No. ARB/02/5, Award,

19 Jan.2007

Sempra v. Argentina

Sempra Energy International v. Argentina,


28 Sept.2007

Sempra v. Argentina

(Annulment)

Sempra Energy International v. Argentina,

ICSID Case No. ARB/02/16, Decision on the

Application for Annulment of the Argentina,

29 June 2010

viii

Suez v. Argentina Suez, Sociedad General de Aguas de Barcelona

S.A., and Inter Aguas Servicios Integrales del

Agua S.A. v. Argentina,


Liability,

30 July 2010

Teco v. Guatemala TECO Guatemala Holdings, LLC v.

Guatemala,


19 Dec.2013

Total v. Argentina Total S.A. v. Argentina,


Liability,

27 Dec.2010.

Waste Management v. Mexico Waste Management, Inc. v. Mexico,


30 Apr.2004

Wintershall v. Argentine Wintershall Aktiengesellschaft v. Argentina,


8 Dec.2008

OTHERS COURTS AND TRIBUNALS

Al-Bahloul v. Tajikistan Mohammad Ammar Al-Bahloul v. Tajikistan,

SCC Case No 064/2008,

8 June 2010

Amoco v. Iran, Amoco International Finance Co. v. Islamic

Republic of Iran,

Iran-U.S. C.T.R., Award No. 310–56–3,

14 July 1987

BP v. Libya BP Exploration Company (Libya) Limited v.

Libyan Arab Republic, 52 I.L.R. 297, (1974)

BP v. Libya(2) BP Exploration Company(Libya)Limited v.

Libyan Arab Republic, 53 I.L.R. 291, (1979)

Chevron v. Ecuador Chevron Corporation and Texaco Petroleum

ix

Company v. Ecuador,

PCA Case No 2009-23, Third interim award on

jurisdiction and admissibility,

27 Feb.2012

CME v. Czech Republic CME Czech Republic B.V. v. Czech Republic,

Final Award and Separate Opinion, IIC 62

(2003),

14th March 2003

Eastern Sugar v. Czech Republic Eastern Sugar B.V. v. The Czech Republic,

SCC No. 088/2004,

27 March 2007

EnCana v. Ecuador EnCana Corporation v. Ecuador,

LCIA Case No. UN3481, UNCITRAL,

3 Feb.2006

Eureko v. Slovakia Eureko B.V. v. Slovakia,

PCA Case No.2008-13,

26 Oct.2010

Forests of Central Rhodopia Forests of Central Rhodopia (Greece v.

Bulgaria), Decision,

29 March 1933

Lauder v. Czech Republic Ronald S. Lauder v. The Czech Republic,

UNCITRAL, Final Award,

3 Sep.2001

LIAMCO v. Libya Libya American Oil Company (LIAMCO) v.

Libyan Arab Republic,

12 Aprl.1977

National Grid v. Argentina National Grid P.L.C. v. Argentina, Case 1:09-

cv-00248-RBW,

UNICTRAL Arbitration Proceedings,

3 Nov.2008

Salukav. Czech Republic Saluka Investments B.V. v. The Czech

Republic,

x

UNCITRAL Arbitration Proceedings,

17 March 2006

Texaco v. Libya Texaco Overseas Petrolium Co. v. Libya,

Award, JDI,

29 Jan.1977

Thunderbird v. Mexico International Thunderbird Gaming Corporation

v. Mexico,

UNCITRAL,

26 Jan.2006

Ulysseas v. Ecuador Ulysseas, Inc. v. Ecuador,

UNCITRAL,

12 June 2012

Walter Bau v. Thailand Walter Bau v. Thailand,

UNCITRAL,

1 July 2009

PCIJ/ICJ

Chorzow Factory Factory at Chorzow (Germany v. Poland), 1928

P.C.I.J. (ser. A) No. 17 (Sept. 13)

Gabcikovo-Nagymaros Gabcikovo-Nagymaros Project (Hungary v.

Slovakia) Judgment 1997 I.C.J. 7(Sept. 25)

ELSI v. Italy ElettronicaSiculaSpA (ELSI) United States v.

Italy, Judgement 1989ICJ (20 July)

Iran v. US Oil Platforms (Islamic Republic of Iran v.

United States of America), Judgment 2003 ICJ

(6 Nov.)

Monetary Goldcase Case of the monetary gold removed from Rome

in 1943 (Preliminary Question) (Italy v. France,

United Kingdom and United States of America),

Judgment 1954 ICJ(15June)

Nicaragra v. US Military and Paramilitary Activities In and

Against Nicaragua (Nicaragua v. United

Statesof America), Judgment 1986 ICJ (June

xi

27)

EUROPEAN CASES

Bosphorus case Bosphorus v. Ireland, Eur.Ct.H.R.

(2005)

Commission v. Austria Commission v. Austria, ECJ Case C-205/06,

(2009)

Commission v. Finland Commission v. Finland, ECJ Case C-118/07,

(2009)

Commission v. Germany Commission v. Federal Republic of Germany,

ECJ Case C-546/07, (2010)

Commission v. Ireland Commission v. Ireland, ECJ Case C-495/03

(2003)

Commission v. Italy(1962) Commission v. Italy, ECJ Case C-10/6127,

(1962)

Commission v. Italy(2005) Commission v. Italy, ECJ Case C-174/04,

(2005)

Commission v. Netherlands Commission v. Kingdom of

the Netherlands, ECJ Cases C-282/04 to C-

283/04, (2006)

Commission v. Sweden Commission v. Sweden, ECJ Case C-249/06,

(2009)

Costa v. E.N.E.L Flaminio Costa v. E.N.E.L,ECJ Case 6/64,

(1964)

Gottardo v. INPS Elide Gottardov.

IstitutoNazionaledellaPrevidenzaSociale

(INPS), ECR I-413, 15 Jan. 2002

Handyside v. UK Handyside v. United Kingdom,

Eur.Ct.H.R.

(1979)

M.&Co. case M.&Co. v. Germany,

Eur.Ct.H.R.

(1990)

xii

Nordsee Nordsee Deutsche Hochseefischerei GmbH v.

Reederei Mond Hochseefischerei Nordstern

AG & Co. KG and Reederei Friedrich Busse

Hochseefischerei Nordstern AG & Co,

Eur.Ct.H.R.

(1982)

Vaassen G. Vaassen-Göbbels v. Management of

the Beambtenfonds

voor het Mijnbedrijf, ECJ С- 61/65

(1966)

Van Gend& Loos Van Gend & Loos v. Administratie der

Belastingen, ECJ C-26/62

(1963)

ARTICLES

De Luca Luca De Anna, Non-Pecuniary Remedies

under the Energy Charter Treaty,2015

Gehne&Brillo Katja Gehne & Romulo Brillo, Stabilization

Clauses in International Investment Law:

Beyond Balancing and FET,2014

Gotanda John Y. Gotanda, Awarding Interest in

International Arbitration

Harrison James Harrison, The Life and Death of BITs:

Legal Issues Concerning Survival Clauses and

the Termination of Investment Treaties,2012

Himpurna v. Pt. PLN Himpurna California Energy Ltd. (Bermuda)

v. Pt. (Persero) Perusahan Listruik Negara

(Indonesia) 14(12) Mealey’s Int’l Arb. Rep.

12/99, A1 (1999)

Hinderlang Steffen Hindrelang, Circumventing Primacy

of EU Law and the CJEU’s Judicial

Monopoly by Resorting to Dispute Resolution

Mechanisms Provided for in Inter-se

xiii

Treaties,2012

Krajewski Markus Krajewski, Modalities for investment

protection and Investor-State Dispute

Settlement (ISDS) in TTIP from a trade

union perspective,2013

Kleinheisterkamp Jan Kleinheisterkamp, Investment protection

and EU law: the intra- and extra-EU

dimension of the energy charter treaty,2012

Maniruzzaman AFM Maniruzzaman, The Pursuit of Stability

in International Energy Investment Contracts:

A Critical Appraisal of the Emerging

Trends,2008

Olik&Fyrbach Milos Olik & David Fyrbach, The

Competence of Investment Arbitration

Tribunals to Seek Preliminary Rulings from

European Courts,2011

Reinisch August Reinisch, Necessity in International

Investment Arbitration,2007

Schreuer (2004) Christoph Schreuer, Non-Pecuniary Remedies

in ICSID Arbitration,2004

Schreuer Christoph Schreuer, Investment Protection

and International Relations,2007

Schill Stephan W. Schill, FET Under Investment

Treaties as an Embodiment of the Rule of

Law,2006

Söderlund Christer Söderlund, Intra-EU BIT Investment

Protection and the EC Treaty,2007

BOOKS

Ashford Peter Ashford,

Handbook on International Commercial

Arbitration,2014

Brownlie Ian Brownlie,

xiv

Legal Status of Natural Resources in

International Law (Some Aspects),1979

Commentary to the UN Charter The Charter of the United Nations, a

Commentary,2012

Commentary to VCLT The Vienna Conventions on the Law of

Treaties, A Commentary

Ed. by Olivier Corten and Pierre Klein,2011

Crawford James Crawford,

The International Law Commission’s Articles

on State Responsibility,2002

Damodaran Aswath Damodaran,

Damodaran on Valuation: Security Analysis

for Investment and Corporate Finance,2011

Dolzer&Shreuer Rudolf Dolzer, Christoph Schreuer,

Principles of International Investment

Law,2012

Douglas Zachary Douglas,

The International Law of

Investment Claims,2009

Higgins Dame Rosalyn C. Higgins,

Taking of property by the State: Recent

developments in International law,1982

Investor-State Arbitration Investor-State Arbitration, Christopher

Dugan, Don Wallace, Noah Rubins, and

Borzu Sabahi, 2011

Manwaring&Corr Max G. Manwaring & Edwin G. Corr,

Defense and Offense in Peace and Stability

Operations,2000

Newcombe&Paradell Andrew Newcombe & Lluís Paradell,

Law and Practice of Investment Treaties:

Standards of Treatment,2009

xv

Pauwelyn Joost Pauwelyn,

Conflict of Norms in Public International

Law: How WTO Law Relates to other Rules

of International Law,2009

Sabahi Borzu Sabahi,

Compensation and Restitution in Investor-

State Arbitration: Principles and Practice,2011

Villiger Commentary on the 1969 Vienna Convention

on the Law of Treaties, By Mark

E.Villiger,2009

MISCELLANEOUS

A more secure world: Our shared responsibility A more secure world: Our shared

responsibility, Report of the High-level Panel

on Threats, Challenges and Change,2004

Burke-White & Slaughter

(Witness statement in El Paso v. Argentina)

Witness statement of Burke-White &

Slaughter

in El Paso v. Argentina,

ISCID Case No. ARB/03/15

Burke-White & Slaughter

(Witness statement in Sempra v. Argentina)

Witness statement of Burke-White &

Slaughter

in Sempra v. Argentina,

ISCID Case No. ARB/02/16

Council Directive 88/361/EEC of 24 June 1988 Council Directive 88/361/EEC of 24 June

1988, O.J. L 178, 08/07/1988

Fragmentation of International Law Fragmentation of International Law:

Difficulties Arising from the Diversification

and Expansion of International Law, Report

of the Study Group of the ILC,2006.

ILC Commentary (2001) Report of the International Law Commission,

Fifty-third session (23 April – 1 June and 2

July – 10 Aug. 2001)

ILC Reports Reports of the International Law Commission

xvi

on the work of the second part of its

seventeenth session,1966(II)

Repertoire Repertoire of the Practice of the Security

Council 17th Supplement 2010-2011

UNCC GC Decision 9 United Nations Compensation Commission

(UNCC) Governing Council (GC) Decision 9,

UNCC GC, Resumed 4th Sess.,

U.N. Doc. S/AC.26/1992/9 (1992)

EU

20 20 by 2020. Europe's climate change

opportunity

/COM/2011/500 final/ Communication from

the Commission to the European Parliament,

the Council, the European Economic and

Social Committee and the Committee of the

Regions; 20 20 by 2020. Europe's climate

change opportunity; A budget for Europe

2020 - Part II: Policy fiches

A policy framework for climate and energy in

the period from 2020 up to 2030

http://ec.europa.eu/smart-

regulation/impact/planned_ia/docs/2013_clim

a_007_energy_climate_framework_en.pdf

CETA Comprehensive Economic and Trade

Agreement between Canada and the EU

Climate and Energy Package of 2009 Directive 2009/28/EC of the European

Parliament and of the Council of 23 April

2009 on the promotion of the use of energy

from renewable sources and amending and

subsequently repealing Directives

2001/77/EC and 2003/30/EC

Cover note of Council of the EU Cover note of Council of the European Union

5044/07 of 4 Jan. 2007

Energy 2020 A Strategy For Competitive,

Sustainable And Secure Energy

/COM/2010/0639 final/ Communication from


The Council, The European Economic And

xvii

Social Committee And The Committee Of

The Regions, Energy 2020 A Strategy For

Competitive, Sustainable And Secure Energy

European Energy Security Strategy /COM/2014/330 final/ Communication from


the Council, the European Economic and

Social Committee and the Committee Of The

Regions, European Energy Security Strategy

Implementation of the Communication on

Security of Energy Supply and International

Cooperation and of the Energy Council

Conclusions

/COM/2013/0638 final/ Report from the

Commission to the European Parliament, the

Council and the European Economic and

Social Committee, Implementation of the

Communication on Security of Energy Supply

and International Cooperation and of the

Energy Council Conclusions of November

2011

On the implementation of the European Energy

Programme for Recovery

/COM/2014/669 final/ Report from the

Commission to the European Parliament and

the Council, On the implementation of the

European Energy Programme for Recovery

Opinion 2/13 Opinion 2/13 of the Court of Justice of the

EU, 18 Dec.2014

Opinion 1/09 Opinion 1/09of the Court of Justice of the EU,

8 March 2011

Renewable Energy Directive (2009/28/EC) Directive 2009/28/EC of the European

Parliament and of the Council of 23 April

2009 on the promotion of the use of energy

from renewable sources and amending and

subsequently repealing Directives

2001/77/EC and 2003/30/EC

Press release No.180/4. Press release of Opinion 2/13 of the ECJ

No.180/4.

xviii

http://curia.europa.eu/jcms/upload/docs/applic

ation/pdf/2014-12/cp140180en.pdf

TFEU Consolidated versions of the Treaty on

European Union and the Treaty on the

Functioning of the European Union,

http://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=celex:12012E/TXT

xix

LIST OF LEGAL SOURCES

Abbreviation Citation

STATUTES AND TREATIES

ILC Articles Draft articles on Responsibility of States for

Internationally Wrongful Acts,

2001

ICSID Convention Convention on the Settlement

of Investment Disputes Between States

and Nationals of Other States,

14 Oct.1966

LCIA Rules The London Court of International Arbitration

Rules,

1 Oct.2014

New York Convention Convention on the Recognition and

Enforcement of Foreign Arbitral Awards,

10 June 1958

VCLT Vienna Convention on the Law of Treaties,

23May 1969

UN Charter Charter of the United Nations and Statute of the

International Court Of Justice, San Francisco,

26June 1945

1

STATEMENT OF FACTS

Parties to the dispute

1. The Claimant, Vasiuki LLC (“Vasiuki” or the “Claimant”), is a company incorporated

under the laws of Cogitatia. Since 2002 Vasiuki has been engaged in the development,

construction and operation of small scale fossil fuel and wind turbine generation facilities

in Cogitatia and elsewhere in the region.

2. The Respondent, the Republic of Barancasia (“Barancasia” or the “Respondent”), has

concluded an Agreement for the Promotion and Reciprocal Protection of Investments with

Cogitatia (the “BIT”). It came into force on 1 August 2002.

3. Since 2007, Barancasia has endeavored to meet EU climate and energy targets, which

have coincided with worries over security of energy supplies.

The BIT

4. On 1 May 2004, Barancasia and Cogitatia joined the European Union (the “EU”). On 15

November 2006, Barancasia announced its intention to complete the terminationof intra-

EU BITs. On 29 June 2007, Barancasia notified Cogitatia about termination of the BIT.

On 28 September 2007, Cogitatia confirmed the receipt of the notification. On 28

November 2008, Barancasia removed the BIT from its Ministry of Finance website, in

particular, the section listing valid and binding international agreements. On 21

November 2010, Barancasia confirmed that it had several times contacted Cogitatia with

no official response from Cogitatia.

Investment

5. In May 2009 Vasiuki purchased the land plots and launched an experimental solar project

“Alfa” (“Alfa”). It became operational on 1 January 2010, yet operated at a loss.

6. In May 2010 Barancasia adopted the Law on Renewable Energy (the “LRE”), a law

designed to encourage renewable energy development in various aspects. It fixed the

right to a special feed-in tariff for renewable energy providers to encourage new projects

inthe renewable energy. The tariff is calculated by the Barancasia Energy Authority (the

“BEA”) under certain criteria.

7. On 1 July 2010,the BEA announced the feed-in tariff at €0.44/kWh. Vasiuki applied for a

license for Alfa, but was denied, because a fixed feed-in tariff is targeted only at new

projects.

8. On 25 August 2010, Vasiuki obtained a license under the LRE with a guaranteed

€0.44/kWh tariff for its new project, Beta. On 30 January 2011, Beta became operational.

2

9. In 2011 new ground-breaking technology for the renewable energy sector dramatically

increased the profitability of investments made under the €0.44/kWh tariff. Consequently,

the BEA received over 7000 applications for licenses. Vasiuki also decided to launch 12

more photovoltaic projects using the new technology.

10. On 1 April 2012, Vasiuki applied for 12 licenses and received them on 1 July 2012. To

develop the projects it bought land plots and paid advances for equipment.

The LRE amendment

11. From the beginning of 2012, it became apparent that the fixed feed-in tariff had created a

“solar bubble’. It was not even physically possible to connect 7000 new users to the

national electricity grid. It required a significant spending from the state budget.

12. In June 2012 outraged teachers of Barancasia organized national strikes demanding an

increase of salaries and educational funding. The protesters’ argument was that the

teachers deserve better treatment than solar panels enjoyed public support. The

government had to promise to review legislation.

13. On 3 January 2013, Barancasia amended the LRE, providing an annual review of the

previously fixed feed-in tariff. On 5 January 2013, the BEA calculated the new fixed

feed-in tariff at €0.15/kWh, applicable from 1 January 2013 to all the previously issued

licenses. The tariff allowed the promised 8% annual average return rate.

14. After the LRE amendment Vasiuki did not apply for licenses for new projects.

15. To address the issue of damages calculation caused by actions of Barancasia the Claimant

nominated Marko Kovič, Ph.D. Barancasia, in turn, appointed Juanita Priemo,

MBA, C.A.

Marko Kovič report

16. According to the report the Claimant was harmed by the Respondent’s actions in three

distinct ways. First, Vasiuki's investment proved to be ineffective as Alfa was denied the

€0.44/kWh tariff set under the LRE, and Beta was allowed the preferential tariff for only

two years of the promised twelve. Second, Vasiuki made investment in land and

equipment that has been made less valuable by the LRE amendment. And third,

Barancasia has caused Vasiuki to lose the profits that it would have earned based on the

€0.44/kWh feed-in tariff, as well as any potential profits on further similar developments.

Juanita Priemo report

17. Based on calculations of Juanita Priemo, the fundamental problem is that Alfa was not

undertaken in response to the LRE, second, Vasiuki’s own documents show that it was

not able to accurately forecast the performance of Alfa or other projects. Further, the right

3

calculation for cash flows to equity is discounting them at cost of equity instead of

weighted average cost of capital (“WACC”). The claim for “wasted investment” in land

is misguiding. Any potential profit from future projects is an unsupported speculation.

LCIA arbitration

18. On 2 November 2014, Vasiuki filed the request for arbitration. The Claimant invoked the

provisions of Article 8 of the BIT (the “Arbitration Clause”).

19. Barancasia denies all claims advanced by Vasiuki in its Response to Request for

Arbitration.

20. Both Cogitatia and Barancasia had ratified the VCLT prior to December 31, 1998 and

they are parties to New York Convention 1958.

4

SUMMARY OF ARGUMENTS

Jurisdiction and admissibility

21. The Tribunal does not have jurisdiction over submitted claims. Firstly, the BIT should be

disregarded. Due to Barancasia and Cogitatia accession to the EU the jurisdiction over

investment disputes is transferred to the EU, or the BIT was terminated under Article 59

of the VCLT, or arbitration clause is inapplicable under Article 30(3) of the VCLT

because of incompatibility with EU law. Alternatively, the BIT was terminated by mutual

consent of the Parties. Secondly, in any event, the claims are inadmissible. The claims

could not affect the rights of non-parties to the proceeding. The claims could not be heard

before a preliminary ruling of the ECJ on interpretation of EU law.

Merits

22. The Respondent acted within the BIT. The Respondent provided fair and equitable

treatment to the Claimant’s investments both by means of the EU legal order and

investment law. The Respondent respected the Claimant’s legitimate expectations, acted

in the transparent and non-arbitrary manner.

23. In any event, no breach of the BIT could be established as the Respondent satisfies the

conditions under Article 11 of the BIT. Firstly, amendment of the LRE was to fulfill the

obligation to maintain international peace and security. Secondly, energy and environment

security and economic stability in the EU were under threat. Thirdly, the LRE amendment

was necessary for the maintenance of international peace and security. Alternatively, all

requirements for invocation of the customary defence of necessity under Article 25 of the

ILC Articles are satisfied.

Damages

24. Juridical restitution or specific performance should not be awarded. Firstly, juridical

restitution is not a primary form of reparation. Secondly, awarding of juridical restitution

or specific performance is an intervention in sovereignty of Barancasia. Thirdly, the

decision would not be enforceable. Finally, conditions set out in Article 35 of the ILC

Articles are not satisfied.

25. The Respondent submits that the Claimant’s compensation calculations are ill-supported

and make false and incorrect legal and factual assumptions. Firstly, to discount future

losses of the Project the net present value of equity should have been calculated.

Secondly, the Claimant’s calculation on the Alfa project’s revenue losses is unreasonable.

Thirdly, the Claimant's investment in land, panels and required equipment is not wasted.

5

Fourthly, the Claimant’s presumptions on future developments are ill-supported. Finally,

WACC or cost of equity is invalid as an interest rate.

6

ARGUMENTS

I. THE TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE DISPUTE

AND THE CLAIMS ARE INADMISSIBLE

26. The Claimant is not entitled to submit the case under Article 8 of the BIT, because [A] the

BIT became obsolete due to the Parties accession to the European Union (the “EU”) or

[B] was terminated under its provisions. The investments were made after Barancasia

withdrew its consent to arbitrate investment disputes and since are subject to EU law

protection. In any event, [C] the claims are inadmissible and the proceedings should be

closed immediately.

A. THE BIT BECAME OBSOLETE DUE TO PARTIES ACCESSION TO THE EU

27. The Tribunal lacks jurisdiction, because [1] jurisdiction over investment disputes is

transferred to the EU. Moreover, [2] it was terminated under Article 59 of the VCLT or

[3] arbitration clause is inapplicable under Article 30(3) of the VCLT.

1. Jurisdiction over investment disputes is transferred to the EU

28. The Tribunal should disregard the BIT and decline jurisdiction, as intra-EU investment is

a common commercial policy governed by EU law directly.

29. EU law is an integral part of the legal systems of the Member States and has a direct effect

on certain provisions applicable to nationals and Member States.1 Namely, the provisions

towards which states limited their sovereign rights.2Common commercial policy (the

“CCP”) is among such areas.3 The CCP covers regulation of all intra-EU investments4 and

suspends ones previously done by the BITs. Intra-EU BITs thus became “anomaly within

the EU internal market”.5They originally paved the way for outbound investments to the

new markets.6 Today they would overlap with EU law and the CCP and, thus, threat “the

autonomy and the integrity of EU law”.7

1 Costa v. E.N.E.L, ¶593; Opinion 1/09, §66. 2 Ibid. 3 TFEU, Art.207. 4 Ibid. 5 Eureko v. Slovakia, §177. 6 Kleinheisterkamp, ¶96 7 Dimopoulos, ¶67.

7

30. European legal order is highly developed new legal order8 with its own standards and

system of rights protection. EU law precludes any non-EU authority to implement and

assess EU law. For instance, the ECJ confirmed the draft agreement on the EU accession

to the ECHR to be incompatible with EU law due to concurrent jurisdictions.9 The

European Court on Human Rights (the “ECtHR”) in M.&Co. case10 and Bosphorus case11

declined jurisdiction in the view EU law provides an equivalent standard of human rights

protection compared to the ECHR.

31. In the present case parties to the BIT acceded to the EU and, thus, transferred the

jurisdiction over investment issues to the EU. Barancasia submits the Tribunal should

follow the approach of the ECtHR and refrain from excising jurisdiction not to interfere

into the self-contained legal order.

32. If the Tribunal is not persuaded with the argument that the BIT is inapplicable under EU

law, the Tribunal still does not have jurisdiction due to inapplicability of arbitration clause

under the VCLT.

2. The BIT was terminated under Article 59 of the VCLT

33. The Claimant could not bring the dispute under the BIT as it was terminated by the

Parties’ accession to the EU.

34. The BIT was effectively terminated under Article 59 of the VCLT because (i) the Parties

to the BIT concluded successive treaties;12 (ii) all treaties relate to the same subject-

matter;13 (iii) the Parties had an intention to govern the subject-matter by the TEU and the

TFEU (the “EU Treaties”);14 or (iv) the provisions of the BIT and the EU Treaties are

incompatible.15 And (v) formal requirements under Article 65 of the VCLT were

observed.

8 Van Gend & Loos, ¶12. 9 Opinion 2/13, §258; Press release No.180/4. 10 M.&Co. case, ¶138. 11 Bosphorus case, §53. 12 VCLT, Art.59(1). 13 VCLT, Art.59(1). 14 VCLT, Art.59(1)(a). 15 VCLT, Art.59(1)(b).

8

(i) The Parties to the BIT concluded successive treaties

35. The Treaty of Accession by which Barancasia and Cogitatia became member states of the

EU16 was concluded after the conclusion of the BIT17 and came into force on 1 August

2002.18Therefore, the Parties of the successive treaties coincide.

(ii) All treaties relate to the same subject-matter

36. The subject-matter is the same if “two different rules or sets of rules are invoked in regard

to the same matter”.19

37. The nomenclature of the capital movements set out in the Council Directive 88/361/EEC20

covers the type of assets similar to those qualified under the BIT as investments. Also, the

ECJ equates assets invested under the BITs with capitals under the TFEU.21

38. Regulation of the same “subject-matter” does not mean that successive treaties should be

in all aspects coextensive. The EU Treaties do not provide for the same regulation as the

BIT, but they have a significant overlap with the BIT. The

lack of similar provisions in EU law does not negate the fact that EU law provides rules that cover the same aspects of foreign investment activity of EU nationals in another Member State.22

39. Certain provisions of the EU Treaties cover establishment, operation and protection of

investments23and in essence relate to the same matter the BIT does. Thus, the criterion of

the same “subject-matter” is met.

(iii) The Parties had an intention to govern the subject-matter by the EU Treaties

40. The intention to replace regulation may be confirmed by the treaty text itself and in

“variety of means other than the treaty text”.24

41. The evidence of the parties’ intention follows both from the treaty text and Parties’

behavior before and after accession to the EU. In the Eureko case “the necessary intention

[wa]s not established by extraneous evidence”.25 The present case is different.

16 Uncontested Facts, Record, §5, ¶20. 17 Ibid., §1, ¶20. 18 Procedural Order No.2, Record, §1, ¶57. 19 Fragmentation of International Law, ¶18. 20 Council Directive 88/361/EEC of 24 June 1988. 21 Commission v. Italy(2005), §12; Commission v. Netherlands, §19. 22 Dimopoulos, ¶74. 23 TEU, Art.18,49,63. 24 Villiger,¶726. 25 Eureko v. Slovakia, §244.

9

42. Firstly, the BIT was considered as “pre-EU” regulation.26 The BIT was concluded by

Barancasia and came into force not longer before its accession to the EU.27Being just

preliminary and temporary means the BITs should be replaced by next generation

regulation within the accession to the EU.

43. Secondly, the Parties understood and accepted the non-survival of intra-EU agreements as

the TFEU implicitly provided for it. Article 350 of the TFEU addresses the precedence of

EU law over Benelux norms in all cases except regulation towards objectives not attained

by application of the EU Treaties. Article 351 of the TFEU states that provisions of the

TFEU shall not affect previous agreements with third countries, other than member States.

But the TFEU “takes precedence over agreements concluded between Member States

before its entry into force”.28

44. Thirdly, the termination under Article 59 of the VCLT occurs informally and is implied.29

Yet, to make it evident Barancasia has undertaken steps to confirm the termination. It has

announced30 and formally resolved31 to complete the termination of all its intra-EU BITs.

The need to complete intra-EU BITs termination was pointed out by the European

Council. It encouraged Member States to take actions to comply with formal requirements

of termination procedure.32 Thus, the presence of the conditions under Article 59 of the

VCLT was evident even to the third party as the European Council.

45. If the Tribunal does not find the subjective condition to be satisfied, still the BIT was

terminated due to objective condition.

(iv) Provisions of the BIT and the EU Treaties are incompatible

46. Under Article 59 of the VCLT incompatibility exists when two treaties cannot be applied

at the same time. The obligations are in conflict when it is impossible to comply with

obligations simultaneously and when compliance with one treaty may lead to a violation

of another treaty.33 Therefore, for incompatibility to be found a hypothetical violation of

EU law or per contra is enough.

26 Kleinheisterkamp, ¶91, ¶98; Söderlund, ¶455-456. 27 Procedural Order No.2, Record, §1, ¶57. 28 Commission v. Italy, §10; Commission v. Germany, §44. 29 Villiger, ¶726. 30 Annex 5, Record, ¶36. 31 Annex 6, Record, ¶37. 32 Cover note of Council of the EU, §16. 33 Pauwelyn, ¶175-188.

10

47. Article 18 of the TFEU prohibits any discrimination on grounds of nationality, but for

public policy, public security or public health.34 The BIT offers specific rights for

investors of certain EU nationals, namely nationals of the Parties to the BIT, and does not

fall under the listed exceptions. The ECJ confirmed the incompatibility between the BITs

and EU law on several occasions.35 Therefore, different treatment could not be justified by

pure existence of the BIT.

48. The incompatibility between the BIT and EU law could not be cued otherwise. The ECJ

emphasized that all advantages under bilateral agreements should be extended to all EU

nationals.36 However, it is not possible in the present case. Barancasia did not intent to

grant the same rights it provided in reciprocity to any other nationals. Ruling on the

existence of such rights of other EU nationals and encouraging them to claim their equal

rights37 the tribunals in Eastern Sugar case and Eureko case disrespected consistent

behavior of a State and its sovereign power to decide on the matter. Moreover, to initiate

investor-state arbitration written agreement is needed even for making a request for

arbitration in most of the foras.38 But all EU nationals could not demonstrate it through

such extension of rights.

49. Additional right granted under the BIT constitute a permanent violation EU law, therefore

the test of Article 59(1)(b) of the VCLT is satisfied.

(v) Formal requirements under Article 65 of the VCLT were observed

50. The operation of Article 59 of the VCLT is subject to the provisions of Article 65 of the

VCLT. The notification in the form set out in Article 67 of the VCLT should be made to

observe the procedure under Article 65 of the VCLT.

51. Barancasia duly notified Cogiatia about termination of the BIT.39 Notification does not set

the reason for the proposed termination, however, this does not lead to misunderstanding

and the breach of procedure. No doubts could be as to the grounds of termination invoked

by Barancasia, because the circumstances reflect the situation under Article 59 of the

VCLT. The only possible measure than was termination, the EU Treaties are of unlimited

duration and suspension of the BIT would still constitute a possible violation of EU law.

34 TFEU, Art.52(1), Art.65(1)(b). 35 Commission v. Austria, §45; Commission v. Sweden, §45; Commission v. Finland, §50. 36 Gottardo v. INPS, ¶34. 37 Eastern sugar v. Czech Republic, §170; Eureko v. Slovakia, §§266-267. 38 LCIA Rules, Art.1(1.1); ICSID Convention,Art.36(2). 39 Annex 7.1, Record, ¶38.

11

52. Article 65(2) of the VCLT indicates the minimum period for making objections.

Barancasia provided for extended period as to 30 June 2008 in its notification, because of

the complexity of the issue.

53. Since Cogitatia did not express any objection towards notification on the BIT termination,

all necessary requirements including Article 65 of the VCLT were met and the BIT was

terminated “once the later treaty has been concluded”.40

54. If the Tribunal does not find termination of the BIT under Article 59 of the VCLT, still it

does not have jurisdiction, because Article 8 of the BIT is inapplicable under Article 30(3)

of the VCLT.

3. Arbitration clause is inapplicable under Article 30(3) of the VCLT

55. Article 30 of the VCLT determines the priority in case of partial overlap between the

treaties when certain conditions under Article 59 of the VCLT are present but the test is

not satisfied. Article 30 of the VCLT applies when individual provisions are incompatible.

56. Article 8 of the BIT containing an Arbitration clause is incompatible with the EU Treaties,

because (i) the Parties agreed to a new juridical authority for dispute resolution, (ii) the

decision under Article 8 of the BIT could threaten the integrity of EU law.

(i) The Parties agreed to a new juridical authority for dispute resolution

57. Member States are obliged to bring their claims to the ECJ under Articles 259 and 344 of

the TFEU.

58. The dispute under the BIT is about rights and obligations of the Parties.41 The investor

merely enjoys the procedural rights in order to enforce the substantive rights still

belonging to its host State.42 Therefore, the investor is bound by the rules, governing

dispute resolution mechanism, agreed by its host State.

59. In Commission v. Ireland the ECJ found it had exclusive jurisdiction to resolve a dispute

between Member States that was at least partially covered by EU law.43 In the case at

hand EU law is at stake as far as Barancasia relied on it in its defence.44

60. Therefore, initiation of arbitration under Article 8 of the BIT would be a violation of

Articles 259 and 344 of the TFEU.

40 Villiger, ¶726. 41 Dolzer&Schreuer, ¶13. 42 Hindelang, ¶200. 43 Commission v. Ireland,¶123. 44 Record, ¶11.

12

(ii) The decision under Article 8 of the BIT could threaten the integrity of EU law

61. The ECJ is the arbiter and gate-keeper of EU law.45 For the uniform interpretation and

application of EU law national courts and tribunals of the Member State should apply for

a preliminary ruling of the ECJ in accordance with Article 267 of the TFEU.46

62. The ECJ established a five-element test the body must satisfy to be considered a court or

tribunal of a Member State.47 Arbitral tribunals do not fall within the scope of this notion,

because their jurisdiction depends upon the agreement of the parties and, moreover, the

parties are “under no obligation to refer the dispute to arbitration”.48 The LCIA is an

arbitration tribunal and could not be considered as a tribunal of a Member State.

63. Therefore, the LCIA is not allowed to make reference pursuant to Article 267 of the

TFEU. The ECJ could not exercise its powers through the mechanism put in place to

avoid awards contradicting EU law. Thus, competing obligations may be established. The

threat of EU law violation constitutes the incompatibility of initial provisions that may

lead to such outcome.

64. Moreover, the decision of the tribunal on its jurisdiction could not be reviewed for the

correctness of EU law application by any national court.

65. The seat of arbitration is Dunedin, Caledonia.49 Caledonia is not an EU Member State50

and could not apply EU law. Even if Barancasia exercises its right to apply for a relief

regarding Tribunal’s jurisdiction under Article 23.5 of the LCIA Rules, EU law would not

be applied under procedure.

66. The award of the Tribunal could be enforced throughout the world under the New York

Convention. Even if Barancasia raises its objections in accordance with Article V of the

New York Convention there is no guarantee they would be duly considered in non-EU

States.51 In any event, non-EU States’ courts could not request for a preliminary ruling of

the ECJ necessary in the present case.

67. Therefore, Article 8 of the BIT cannot be reconciled with EU Treaties and is inapplicable

in accordance with Article 30(3) of the VCLT.

45 Electrabel v. Hungrary, §4.197. 46 Hinderlang, ¶197. 47 Olik & Fyrbach, ¶196; Vaassen, p.272. 48 Nordsee, §9,1. 49 Procedural order No.1, Record, ¶17. 50 Procedural order No.2, Record, ¶58. 51 New York Convention, Art.V.

13

68. In the event the Tribunal rejects the arguments of the Respondent owing to the EU law

legal order or based on Article 59 or 30 of the VCLT, still it does not have jurisdiction,

because the BIT was terminated under Article 13 of the BIT.

B. THE BIT WAS TERMINATED UNDER ITS PROVISIONS

69. Article 13 of the BIT contains the provisions for termination of the BIT. Barancasia does

not dispute that Article 13 of the BIT establishes a temporary prohibition on the unilateral

termination of the BIT. However, the BIT may be terminated even within this period by

mutual consent of the Parties.

70. The right of the Parties to terminate a treaty by mutual consent follows from general

international law, namely Article 54(1)(b) of the VCLT. There is no need for any

reference to Article 54(1)(b) of the VCLT to justify its application to the BIT as “it is

always possible for all the parties to agree together to put an end to the treaty”52 and the

parties did not waive its right for termination of the BIT.53

71. The consent of the Parties to terminate a treaty may be reached at any time after

consultations.54 Such consent may be found in a form of a tacit agreement.55 Providing no

response to Barancasia’s actions Cogitatia waived its right enter into consultations.

Therefore, when Barancasia proposed to terminate the BIT56 and Cogitatia acquiesced

hereto the agreement was reached. It clearly appears from the circumstances that Cogitatia

assented to the situation, otherwise it would respond to Barancasia’s formal and informal

contacts towards the BIT termination.57 The BIT was terminated under conditions

proposed by Barancasia since 30 June 2008.

72. The termination of the BIT by mutual consent is not subject to the consent of the investors

as third parties, having rights under the BIT.

73. Firstly, Article 54(b) of the VCLT read together with Article 37(2) of the VCLT is limited

by the consent of a third State. Article 37(2) of the VCLT was drafted as “logical

considerations” rather than “state practice”,58 therefore it does not reflect a customary

rule, which could be applied to all third parties holders. Investors exercising the rights

52 ILC Reports, ¶249. 53 Harrison, ¶941. 54 VCLT, Art.54 (b). 55 Villiger, ¶687. 56 Uncontested Facts, Record, §9, ¶21. 57 Ibid., §24, ¶22; §31 ¶23. 58 Commentary to VCLT, ¶944.

14

under the BIT merely steps into the shoes59of the state in a particular dispute and acquires

derivative rights.60 Therefore, it could not be treated as third party in light of Article 37(2)

of the VCLT.

74. Secondly, the rights of investors is safeguarded through other BIT provisions. Survival

clause in Article 13(3) of the BIT is broad enough to cover all variants of termination.

Therefore, the stability of the framework is provided to the investors through another

mechanism.

75. Therefore, the BIT was terminated by mutual consent since 30 June 2008.

C. THE CLAIMS ARE INADMISSIBLE

76. Admissibility concerns the exercise of the tribunal’s power to examine a case at a

particular point in time in view of possible temporary or permanent defects of the

claim.61The claims asserted by the Claimant are inadmissible because [1] the final award

could affect the rights of non-parties to the proceedings or [2] a preliminary ruling of the

ECJ should be asked for.

1. The final award could affect the rights of non-parties to the proceedings

77. Jurisdiction over any person unless it has consented to is prohibited under international

law.62 This principle was established by the ICJ in the Monetary Gold case63 and is

applicable to investment arbitration.64

78. The Claimant requests to repeal amendment of the LRE as a primary remedy to the

alleged breach.65Juridical restitution once awarded would have a significant effect upon

legal rights and interests of investors, which have obtained other licenses under to the

LRE before 3 January 2013.66

79. Therefore, the claims should be dismissed on the grounds of inadmissibility and the

proceedings should be closed immediately.

2. A preliminary ruling of the ECJ should be asked for

80. A preliminary ruling of the ECJ is necessary to enable a decision.67

59 Archer v. Mexico, §§169,171,173. 60 Schreuer, ¶356; Loewen v. US, §233. 61 Douglas, ¶148. 62 Chevron v. Ecuador, §4.61. 63 Monetary Gold case, ¶32. 64 Chevron v. Ecuador, §4.61; Wintershall v. Argentine,§160(3); DFS v. Argentine, §175; 65 Record, ¶5. 66 Procedural order No.2, §13. 67 TFEU, Art.267

15

81. If the Tribunal has found its jurisdiction and rejected the argument on inability of the

Tribunal to request a preliminary ruling68it assumed its right to make a request to the ECJ.

82. The Respondent relies on EU law as a ground for its excuse from responsibility.69EU law

provides remedies for “wrong” application and/or implementation of EU law.70To resolve

the matter the EU Treaties should be interpreted. Thus, this is the case where preliminary

ruling of the ECJis necessary. Only than the potential violation of EU law would be

excluded. Therefore, the Tribunal should render the claims inadmissible till the

preliminary ruling of the ECJ.

II. THE RESPONDENT ACTED WITHIN THE BIT, IN PARTICULAR,

PROVIDED FAIR AND EQUITABLE TREATMENT

83. The Respondent acted within the BIT when amended its legislation and refused the license

to the Claimant as it [A] provided fair and equitable treatment (FET) to the Claimant’s

investments.

A. THE RESPONDENT HAS ACTED IN ACCORDANCE WITH THE FAIR AND EQUITABLE TREATMENT STANDARD

84. Barancasia acted within FET both as it is specified in the EU legal order and in the

international investment law.

85. The standard of FET “is to some extent a flexible one which must be adapted to the

circumstances of each case”.71 As both Cogitatia and Barancasia are EU Member States,72

EU standard of FET should be applied in the case at hand.

86. Under EU law FET breach should satisfy “manifest”, “fundamental”, “targeted”,

“abusive” criteria.73 Frustration of legitimate expectations must be “subsequent”.74 The

investment law is less strict, thus Barancasia will prove it acted within the latter standard.

The Respondent acted in accordance with the Claimant’s [1] legitimate expectations, [2]

in the transparent, [3] non-arbitrary manner.

68 See Section 3,§61 above. 69 Record, ¶10. 70 Francovich v. Italy, §38. 71 Waste Management v. Mexico, §99. 72 Uncontested facts, Record, §5, ¶20. 73 CETA, Article X.X. 74 Krajewski, ¶12.

16

1. Barancasia has not frustrated the Claimant’s legitimate expectations

87. The Claimant’s legitimate expectations were respected as (i) Barancasia gave no special

commitments to the Claimant (ii) Barancasia provided stability and predictability of the

legal framework (iii) the Claimant failed to evaluate the situation in Barancasia before

investing or its decision to invest is covered by a business risk.

(i) The Respondent has not provided any special commitments

88. The Respondent did not provide any special commitments towards stability and

predictability of the legal framework, which would otherwise constitute the Claimant’s

legitimate expectations as (a) no guarantee was made to the Claimant directly, and

alternatively, (b) such guarantee was not towards stability and predictability, thus could

not be on the level of the BIT protection. With no specific commitment “the foreign

investor ha[d] neither the right nor any legitimate expectation”75 that Article 4 of the LRE

would be the same.

a. A guarantee in the LRE is of a general character

89. The expectations are legitimate when the special representations are specifically addressed

to a particular investor76 in “form of a stabilization clause or otherwise”.77

90. Stabilization clause is a contractual clause, “inserted in state contracts concluded between

foreign investors and host states”.78 The stabilization clause makes investor’s expectations

towards the immutability of the legislation legitimate.79 In the present case no agreement

with the stabilization clause existed between Barancasia and the Claimant. Article 4 of the

LRE, which guaranteed the feed-in tariff for twelve years, is not an agreement but the law

of the state, which is of different nature.

91. “Specific conditions”80 offered to the investor raise investor’s expectations “to the level of

legitimacy and reasonableness in the light of the circumstances”.81 As opposed to the CMS

case, in the present case no specific conditions were offered by the Respondent in the

license, its content does not depend on the precise project or on the figure of renewable

75 EnCana v. Ecuador, §173. 76 Thunderbird v. Mexico, §147; Total v. Argentina, §119; El Paso v. Argentina, §376. 77 Parkerings v. Lithuania, §332. 78 Total v. Argentina, §101. 79 Teco v. Guatemala, §629; EDF v. Romania, §218. 80 Total v. Argentina, §121. 81 Saluka v. Czech Republic, §304.

17

energy producer. Thus, the Respondent gave no special commitments in form of a

stabilization clause to the Claimant.

92. The Respondent did not make any “special commitments directly … to the investor”82 in

any other forms. Article 4 of the LRE provided a guarantee but “this was a matter of

general policy that did not entail a promise made specifically to the Claimant[s]”.83 As the

Tribunals found in the AES case84 and the Ulysseas case85 absence of a specific

commitment means that the Claimant has no legitimate expectations.

93. Thus, the Claimant’s expectations, if any, that Article 4 of the LRE would remain

unchanged are not based on special commitments of the Respondent towards the

Claimant.

b. Even if the LRE can produce special commitments such guarantee was not

towards stability and predictability

94. To be part of special commitments under the FET standard a guarantee should be to

stability of the legal framework.86

95. Good faith87 interpretation of Article 4 of the LRE means it should not emasculate aims of

the LRE. The LRE is a part of Barancasia’s energy policy. Its aim is to attain the level of

20% of the share of electricity generated from renewable sources.88 The tariff is a tool to

“sustainable development … and introduction of innovative technologies”.89 The

Regulation on the support of photovoltaic sector (the “Regulation”) provides method of

the feed-in tariff calculation. It depends on a variety of unalterable factors with a direct

impact on profitability of renewable projects.90 If the conditions of the tariff application

do not serve the LRE purposes, they are supposed to be changed.

96. The only special commitments the LRE, through the Regulation, could potentially provide

is the annual average 8% return on the investment. The condition is satisfied even after the

amendment.91

82 El Paso v. Argentina, §376. 83 PSEG v. Turkey, §243. 84 AES v. Hungary, §9.3.34. 85 Ulysseas v. Ecuador, §254. 86 El Paso v. Argentina, §375,377. 87 Malicorp v. Egypt, §115. 88 Annex No. 2, Record, ¶26,Art.2. 89 Ibid.,¶32, Art.1. 90 Annex No. 3, Record, ¶34, Art.2. 91 Procedural order No.2, Record, § 27, ¶59-60.

18

97. Unlike the LG&E case92 where statutory stabilization provisions resulted in liability under

the umbrella clause,93 Article 4 of the LRE cannot be considered as special commitment

towards stability of the legal framework.

(ii) Amendment of the LRE in the presence of special commitments does not automatically result in breach of Article 2.2 of the BIT

98. Amendment of the LRE even in presence of special commitments does not result in

violation of the FET standard if a host state at all time provided stability and predictability

of the legal framework.

99. Investor’s right to benefit from freezing of legal framework should be balanced with a

state’s right to regulate. The appropriate balance is the possibility of a host state to

regulate without seeking compensation by investors94 providing at all time stability of the

legal framework. The latter is guaranteed in case where legislative changes are made (a)

for public purposes,95 (b) reasonably,96 (c) proportionally.97

a. The Respondent amended the LRE for public purposes

100. In a presence of “legitimate aim in public interest”98 a host state should not be

considered as frustrated the investor’s legitimate expectations.

101. Firstly, Barancasia maintain edits energy policy. To archive the level of 20% of

electricity generated from renewable sources99 the Respondent had to re-established

renewable energy support scheme and level the consequences of the “solar bubble”.

Secondly, due to social policy manifested in decreasing the rate of citizen disorders,100 the

Respondent had to balance a budget by allotting funds for benefit of its

population.101Furthermore, the LRE amendment was for reduction of “excessive

profits”102 made by renewable energy producers103 and was “a perfectly valid and rational

policy objective for a government to address luxury profits”.104

102. Thus, Barancasia did not frustrate the Claimant’s legitimate expectations.

92 LG&E v Argentina, §175. 93 Gehne & Brillo, ¶14. 94 Feldman v. Mexico, §103. 95 Saluka v. Czech Republic, §305. 96 El Paso v. Argentina, §373. 97 Total v. Argentina, §123. 98 EDF v. Romania, §293. 99 Uncontested facts, Record, §15, ¶22. 100 Ibid., §32, ¶24. 101 Ibid., §29, ¶23. 102 AES v. Hungary, §10.3.34. 103 Uncontested facts, Record, §25, ¶23. 104 AES v. Hungary, §10.3.34.

19

b. Barancasia amended the LRE reasonably

103. Barancasia had “reasonable justifications”105 for the LRE amendment.

104. Regulatory measures must be “entirely reasonable and done for appropriate economic

reasons”.106 An investor can expect that “the rules will not be changed without

justification of an economic, social or other nature”.107 Yet, a host state is allowed to react

“as time and needs change”, particularly “in response to unpredictable circumstances that

might arise”.108 Thus, “evolution of the prevalent economic and social conditions” can

limit the fair and equitable treatment standard.109

105. The Respondent amended the LRE as the renewable energy scheme became

unsustainable.110 Barancasia needed to reduce the number of potential renewable energy

producers as it could not maintain the scheme nor physically111 nor

financially.112Amendment of the LRE “re-adapted the circumstances to the prevailing

economic situation”.113

106. Thus, Barancasia did not frustrate any legitimate expectations.

c. The Respondent amended the LRE proportionally

107. Proportionality is respected if measures taken by a host state are in compliance with

principles of “economic equilibrium and business viability”.114The goal of the Tribunal is

to balance the “investor’s expectations against the host state’s need to take action in the

public interest”.115

108. Economic equilibrium is present when a balance between: (1) regulatory interests of a

host state and legitimate expectations of an investor,116 and (2) taken measures and

“circumstances and reasons (importance and urgency of the public need pursued)”117 is

maintained. Proportionality would be lacking if the person involved “bears an individual

and excessive burden”.118

105 Saluka v. Czech Republic, §348. 106 EDF v. Romania, § 275. 107 El Paso v. Argentina, §372,400. 108 Suez v. Argentina, §216. 109 EDF v. Argentina, §1004. 110 Uncontested facts, Record, §29, ¶23. 111 Ibid. 112 Ibid., §30, ¶23. 113 Continental v. Argentina, §258. 114 Total v. Argentina, §168. 115 EDF v. Argentina, §1005. 116 Saluka v. Czech Republic, §306. 117 Total v. Argentina, §123. 118 EDF v. Romania, §293.

20

109. Firstly, the Respondent amended Article 4 of the BIT in the circumstances of unfair

windfall119 and increased profitability120 under the €0.44/kWh tariff. Yet, Barancasia did

not deny supporting investors in photovoltaic sector altogether. It continues to realize

energy policy: only the method of the tariff calculation was amended.

110. Secondly, in the present case the Claimant did not “bear an individual and excessive

burden” as amendment of the LRE covered all renewable energy producers. Furthermore,

the Claimant still could make “a reasonable return”121 under the new feed-in tariff.122

Furthermore, the Respondent’s measures were successful: the economy and energy

situation in Barancasia is stable. As opposed to the CMS case when taken measures did

not achieve their purpose to prevent a crisis.123

111. Thus, the LRE amendment was made for public purposes, reasonably, proportionally.

Under such conditions even if the Tribunal finds there were special commitments under

the LRE, the Respondent still acted in accordance with the Claimant’s legitimate

expectations towards stable and predictable legal framework.

(iii) The Claimant failed to evaluate the situation in Barancasia before investing or its decision to invest is covered by a business risk

112. Legitimate expectations are “circumscribed by the notion of the ‘investor conduct’”.124

Expectations cannot be legitimate to the extent that (1) investor does not take in

consideration a political, economic and social situation in a host country125 or (2)

consequences of its decision to invest is covered by normal business risk.126 These two

factors limit the content of legitimate expectations.127

113. Firstly, Barancasia calculated and publically announced128 the tariff based on precise

percentage of the average annual return on investment.129 Thus with regard to the Beta

project and 12 other projects the Claimant should expect the possible increase in tariff if

the profitability of investment under the €0.44/kWh tariff dramatically exceeded planned

119 Uncontested facts, Record, §29, ¶23. 120 Ibid.,§25, ¶23. 121 AES v. Hungary, § 10.3.37. 122 Procedural order No. 2, Record, § 27, ¶59-60. 123 CMS v. Argentina, §248. 124 Maniruzzaman, ¶149; Duke v. Ecuador, § 340. 125 Suez v. Argentina, § 209. 126 LG&E v. Argentina, § 130; MTD v. Chile, § 178; National grid v. Argentina, §175. 127 Duke v. Ecuador, § 340. 128 Procedural order No. 3, Record, § 23, ¶63. 129 Uncontested facts, Record, § 21, ¶22.

21

annual return on investment, as it was in 2011.130 Each normal businessman considers that

the state has to react in the changed circumstances, which have been taken as a basis for

regulation.131

114. Secondly, the Claimant made decision to invest in 12 projects with the “substantial

reduction of development costs” and increased profitability of potential investment.132 It

was a crucial factor. However, the Claimant should consider not only potential

profitability, but the whole situation in Barancasia including the “solar bubble” and social

unrest due to the green subsidies scheme abuse. From the beginning of 2012 local mass

media started to highlight that renewable energy support scheme was unsustainable.133

Shortly after it was admitted by Barancasian public officials.134 The Claimant failed to

demonstrate that “any investor or at least a qualified law firm was unable to get the

information about the amendment process”.135 In these circumstances the Claimant could

expect that the Respondent would take measures to adapt its legislation to changed

circumstances.

115. If the Claimant evaluated the situation but yet made a decision to invest, a decision to

invest – is a business risk. As stated in the Maffezini case BITs “are not insurance policies

against bad business judgments”.136 As the Claimant invested in Barancasia in the given

circumstances, the Claimant “should bear the consequences of [its] own actions as

experienced businessmen”.137 The Parkerings Tribunal adds that “an investor must

anticipate that the circumstances could change, and thus structure its investment in order

to adapt it to the potential changes of legal environment”.138

116. As Barancasia gave no explicit or implicit promise that the legal framework would

remain unchanged,139the Claimant had no legitimate expectations that the LRE would not

be changed. Anyway, the Respondent provided stability and predictability of the legal

framework. Thus, regardless of any special commitments, Barancasia did not frustrate the

Claimant’s legitimate expectations.

130 Uncontested facts, Record, § 25, ¶23. 131 AES v. Hungary, § 9.3.34. 132 Uncontested facts, Record, § 25, ¶23. 133 Uncontested facts, Record, §28, ¶23. 134 Ibid., §29, ¶23. 135 Parkerings v. Lithuania , §342. 136 Maffezini v. Spain, §69. 137 MTD v. Chile, §178. 138 Parkerings v. Lithuania, §333. 139 Ibid., §334.

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2. The Respondent has acted with transparency

117. Refusal of the license for the Alpha project and amendment of the LRE were in a

transparent manner.

118. Not every action of a state which creates certain confusion can rise to the level of a

FET breach.140 The FET standard is breached if the host state acts with a complete lack of

transparency towards the investor.141 As stated in the Cargill case the “lack” must be

“gross,” “manifest,” “complete,” or such as to “offend judicial propriety”.142

119. Barancasia represented the grounds why the Alfa could not operate under the fixed

feed-in tariff provided by the LRE.143 Thus, the Claimant was not totally denied

transparency. Refusal to disclose specific criteria used144 is of no legal relevance here.

FET does not “require a duty of disclosure of all documents in the possession of the state

relating to the investment”.145

120. Barancasia did its best to ensure transparency of the LRE amendment. Barancasia

publicly announced its intention to review the LRE.146 The significant share of the local

market of renewable energy took part in the consultation prior to the amendment.147 As

Vasiuki’s share in the Barancasia’s renewable energy market is very small,148 its presence

would not in any event change the result of the consultation.

121. Furthermore, Barancasia had no duty to specifically inform the Claimant about the

LRE amendment. States do not have “an obligation to provide foreign investors with an

opportunity to comment on changes to state regulation before changes are

implemented”.149

122. In the absence of the total lack of transparency the Respondent acted within Article 2.2

of the BIT.

140 Micula v. Argentina, §871. 141 Waste Management II v. Mexico, §98. 142 Cargill v. Mexico, §285. 143 Uncontested facts, Record, §22, ¶21. 144 Procedural order No. 2, Record, §16, ¶58-59. 145 Newcombe&Paradell, ¶293. 146 Uncontested facts, Record, §32, ¶23. 147 Procedural order No. 3, Record, §5, ¶62. 148 Ibid., §18, ¶63. 149 Newcombe&Paradell, ¶291.

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3. The Respondent has acted in non-arbitrary manner

123. The Claimant’s assertions that Barancasia arbitrary denied the license for the Alpha150

are unsustainable.

124. Firstly, arbitrariness is founded “on caprice, prejudice or personal preference”,151 on

“qualified violation of the requirement to act in accordance with domestic law”.152

Arbitrariness is an “act which shocks, or at least surprises a sense of judicial propriety”.153

125. The Respondent had reason to deny the license, grounds in domestic law. Despite the

criteria were under “confidentiality obligations” the Respondent’s authorities refused the

license to the Claimant due to non-compliance with qualifying standards.154 The purpose

of the LRE is to provide incentives for subsequent photovoltaic development, not as a

subsidy for pre-existing projects.155Additionally, the LRE does not contain any provision

guarantying each renewable energy producer the license approval.

126. Secondly, arbitrariness “is willful disregard of due process of law”.156

127. Any investor is able to file claims in domestic administrative courts of Barancasia.157

However since the day of denial the license for the Alfa on 25 August 2010 till the day of

the present proceeding the Claimant has failed to take any steps towards that.158

128. Thus, the Respondent denied the license to the Claimant for the Alpha project in non-

arbitrary manner.

129. To sum up, the Respondent acted within Article 2.2 of the BIT.

III. RESPONDENT’S ACTIONS ARE EXEMPTED BOTH UNDER “ESSENTIAL

SECURITY” CLAUSE IN THE BIT AND UNDER CUSTOMARY DEFENCE OF

NECESSITY

130. A breach of Article 2(2) of the BIT is excluded159 by emergency exception under

Article 11 of the BIT. Article 11 of the BIT constitutes an explicit treaty-based exception

150 Claims, Record, ¶4. 151 Plarna v. Bulgaria, §184; Lauder v. Czech Republic, §221. 152 Shill, ¶167. 153 ELSI v. Italy, §76; Loewen v. US, §131; Genin v. Estonia, §371. 154 Procedural order No. 2, Record, §16, ¶58-59. 155 Kovic Report, Record, §7, ¶50. 156 Ibid. 157 Procedural order No. 2, Record, §23, ¶59. 158 Ibid. 159 Iran v. US, §34; CMS v. Argentina (Annulment), §130;Sempra v. Argentina (Annulment), §200.

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to the substantive protections of the BIT.160Alternatively, necessity under Article 25 of the

ILC Articles precludes liability for the BIT breach.161

131. Barancasia satisfies conditions for a successful plea of necessity both [A] under

Article 11 of the BIT and [B] under Article 25 of the ILC Articles.162

A. THE BIT “ESSENTIAL SECURITY” CLAUSE EXCLUDES LIABILITY OF BARANCASIA

132. Barancasia does not dispute the non-self judging nature of Article 11 of the BIT. Yet,

the Respondent can invoke “essential security” clause under Article 11 of the BIT as [1]

amendment was to fulfill the obligation to maintain international peace and security, [2]

energy and environment security and economic stability in the EU were under threat,

[3]the LRE amendment was necessary for the maintenance of international peace and

security.

1. The LRE amendment was to fulfill the obligation to maintain international peace and security

133. “International peace” requires “a positive state of affairs characterized by harmonious

and tension-free cooperation of the international community”.163 The “international

security” is “encompassing the activity, which is necessary for maintaining the conditions

of peace”.164

134. Instability “in the economic … and ecological fields have become threats to

[international] peace and security”165 as well as excessive dependency of international

community on fossil fuels.166 Obligation to maintain such peace and security by each UN

Member State itself is derived from the preamble to the UN Charter that states: “all

Members of the UN shall unite their strength to maintain international peace and

security”.167

135. The energy, environment and economic destruction of a single state – moreover a

whole region as the EU – could create international instability.168 Failure to ensure energy

and environment security in the EU causes a real threat to international peace and security.

160 Burke-White&Slaughter (Witness statement in El Paso v. Argentina), §65; CMS v. Argentina (Annulment), §129. 161 CMS v. Argentina (Annulment), §134. 162 Gabcikovo-Nagymaros, §§51-52. 163 Cede, ¶14. 164 Commentary to the UN Charter, ¶2011. 165 Note by the President of the Security Council. See also Repertoire, ¶21. 166 A more secure world: Our shared responsibility, ¶30. 167 UN Charter, Preamble. 168 Manwaring & Corr, ¶29.

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136. Under the TFEU the Respondent has to preserve, protect and improve the quality of

the environment,169promote the development of renewable forms ofenergy.170The

Respondent had an explicit obligation to develop renewable energy sector for the

maintenance of EU energy and environment security.171 Development of renewable

energy has the twin goal of improving energy security and reducing emissions, which as a

result, improves environment security.172 Moreover, the obligation to promote a renewable

energy as strengthening energy and environment security is under the Kyoto Protocol to

the UN Framework Convention on Climate Change.173

137. In the present case, Barancasia’s task to archive a 20 % share of energy from

renewable sources is an obligation with respect to the maintenance of international peace

or security. The LRE amendment was designed to prevent Barancasia’s renewable energy

program from collapse. In the situation of “solar bubble”174 the task to achieve 20% share

of energy from renewable sources would be impossible without certain reaction from the

state to protect its economy.

138. Economy of the EU is integrated. Under Article 126 of the TFEU Barancasia is

obliged to avoid excessive government deficits.175 Otherwise, a Member State has to take

measures for a deficit reduction. Excess of borrowing limits just by one Member State can

lead to the economic crisis in the EU and, as a result, threaten the EU existence as the

Greece example shows. In the present case, Barancasia was under threat to exceed such

limits had it not reacted to the “solar bubble” situation in the state. Failure to take such

measures results in sanctions from the European Council.176 That in turn would trigger the

need to accumulate additional state revenues to comply with sanctions and, as a result,

lead to economic and social collapse in Barancasia that could affect the EU as a whole.

139. The LRE amendment was designed to prevent excess of the borrowing limits and

abolishment of the renewable energy program and, as a result, to prevent economic

instability in the EU. Thus, the LRE amendment was to fulfill Barancasia’s obligations

with respect to the maintenance of international peace and security.

169 TFEU, Art.191. 170 TFEU, Art.194. 171 Renewable Energy Directive (2009/28/EC), Art.1; Energy 2020. A strategy for competitive, sustainable and secure energy. 172 20 20 by 2020. Europe's climate change opportunity. 173 Renewable Energy Directive (2009/28/EC). 174 Uncontested facts, Record, §28, ¶23. 175 TFEU, Art.126, §1. 176 Ibid., §11.

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2. Energy and environment security and economic stability in the EU are under threat

140. Being under threat does not mean that “total collapse” of the country or “catastrophic

situation” have already occurred.177 The invocation of the “essential security” clause does

not require that the situation have already degenerated into one that calls for the

suspension of constitutional guarantees and fundamental liberties.178 To invoke “essential

security” clause the risk run by maintenance of international peace and security should be

reasonable.179

141. The situation in Barancasia “called for immediate, decisive action”180 as (i) energy and

environment security in the EU were under threat and (ii) economic stability in the EU

was under threat. The Respondent had “no choice but to act”.181

142. Energy and environment security in the EU was under threat. Decisions on energy

policy taken by one Member State inevitably have an impact on other Member States.182

Thus energy instability in Barancasia is a threat to EU energy security.

143. A 20% share of renewable energy in the EU energy consumption by 2020 is a key

target set by the European Council.183Development of renewable energy in the EU is a

multistaged program184 with half of the additional effort shared equally between Member

States.185The successful result of the program in 2020/2030 depends on the planned

implementation of each stage. One stage failure is a threat to the energy program as a

whole. Dependence of the EU on imports of oil and gas is extensive.186 The price of

failure to promote renewable energy sector “is too high”.187 The situation with South

Stream is illustrative: most of the Central and Eastern European Member States were

already left without gas.188 Failure to achieve the goals of the Climate and Energy Package

of 2009189 is a threat to energy and environment security of the EU.

177 Continental v. Argentina, §180. 178 Ibid., §180,181. 179 Nicaragua v. US, §224. 180 LG&E v. Argentina, §239, 240. 181 Ibid. 182 Energy 2020. A strategy for competitive, sustainable and secure energy. 183 20 20 by 2020 Europe's climate change opportunity. 184 A policy framework for climate and energy in the period from 2020 up to 2030. 185 20 20 by 2020 Europe's climate change opportunity. 186 Renewable Energy Directive (2009/28/EC); Implementation of the Communication on Security of Energy Supply and International Cooperation and of the Energy Council Conclusions, Report. 187 Energy 2020. A strategy for competitive, sustainable and secure energy. 188 On the implementation of the European Energy Programme for Recovery. 189 Climate and Energy Package of 2009.

27

144. Barancasia was at risk not to meet EU energy targets by 2020 as its energy supportive

system led to “solar bubble”.190 If the Respondent failed to support energy security by

state measures, it would risk the EU do not reach the goal of its energy and environment

security program.

145. Economic stability in EU was under threat. Barancasia’s borrowing limits has already

been calculated for the relevant years.191To comply with sanctions for exceeding

borrowing limits the state would have to involve all its economic resources designated for

other purposes. While national strikes against bad budget judgment already took place in

Barancasia.192 If Barancasia continued to finance solar feed-in tariffs separatist sentiments

would be within the state. That is a threat to economic stability and consolidation of the

EU.

3. The LRE amendment was necessary

146. Respondent’s actions were necessary to adhere to its EU obligations.

147. The Tribunal should analyze “both the aim of the measure challenged and its

‘necessity’”.193To satisfy “necessity” requirement

the measures taken must not merely be such as tend to protect the essential security interests of the party taking them, but must be ‘necessary’ for that purpose.194

148. “Necessary” means the nexus between state actions and a set of permissible objectives

— international peace and security in the present case.195

149. Achievement of a 20% share of energy from renewable sources is a mandatory

national target.196 Member States should “control the effect and costs of their national

support schemes”197 to succeed. Barancasia’s renewable energy support scheme became

unsustainable.198 Thus it had to take measures to increase the share of energy from

renewable sources.199

190Uncontested facts, Record, §28,¶23. 191Uncontested facts, Record, §30, ¶23. 192Ibid.,§32, ¶24. 193Handyside v. UK, §48. 194Nicaragua v. US, §159. 195Burke-White, Slaughter, Witness statement (El Paso v. Argentina), § 66. 196Renewable Energy Directive (2009/28/EC). 197Ibid. 198Uncontested facts, Record, §29,¶23. 199Renewable Energy Directive (2009/28/EC).

28

150. Two major means to achieve a 20% share of energy are public support200 and

sufficient investment in renewable energy sector.201 The LRE amendment met the twin

goals of diminishing the social unrest regarding the renewable energy sector and

providing renewable energy producers with means for making a reasonable profit.202 The

investment environment in Barancasia is still attractive for foreign and national investors:

there is no evidence that Barancasia lost its points on attracting required investment.

151. Effectiveness of taken measures says for their “necessity” nature. The Respondent got

control over its energy security program, disproportion between investment profitability

and state’s financial obligation for supporting the renewable energy sector was

precluded.203 More than 6000 licenses were approved204 and projects under those licenses

could be joined to the grid. The Respondent did not breach its obligation to avoid

excessive government deficits under Article 126 of TFEU.

152. Amendment of the LRE results in economic stability in Barancasia and the EU

correspondingly. Thus, the Respondent’s invocation of the Article 11 of the BIT is

completely justified.

B. THE RESPONDENT IS NOT LIABLE FOR THE BIT BREACH UNDER CUSTOMARY DEFENCE OF NECESSITY

153. All requirements for customary defence of necessity invocation are satisfied as [1] the

Respondent’s essential interests were seriously impaired,205[2] Barancasia faced up with

grave and imminent peril to its essential interests,206 [3] the LRE amendment was the only

way for Barancasia to safeguard its essential interests,207[4] Barancasia’s measures did not

seriously impair essential interests of the EU,208[5] Barancasia did not contribute to the

state of necessity.209

200 Ibid. 201 20 20 by 2020 Europe's climate change opportunity. 202 Procedural order No.2, Record, §27,¶59-60. 203 Procedural order No. 2, Record, §27,¶59-60. 204 Ibid., §13,¶58. 205 ILC Articles, Art.25(1)(a). 206 Ibid. 207 Ibid. 208 ILC Articles, Art.25(1)(b). 209 Ibid.,Art.25(2)(b).

29

1. The Respondent’s essential interests were seriously impaired

154. The interest concerned has to be essential, and is not limited to the “existence” of the

State.210 To apply Article 25 of the ILC Articles “essential interest” needs to involve a

“serious and imminent danger”.211

155. Amendment of the LRE was to (i) restore economic and social stability, (ii) save

Barancasia’s attractiveness for investment and develop renewable energy, and as a result,

(iii) to comply with EU energy security obligations.

156. Energy security in Barancasia was seriously impaired. Energy security is an essential

interest of Barancasia both at the EU level and at the national level.212 Despite certain

renewable energy projects had already been launched, Barancasia did not reach a 20 % of

renewable energy.213 Application of the €0.44/kWh feed-in tariff in conditions of non-

economic214 and non-physical opportunity215 to maintain renewable energy support

scheme seriously impairs energy security in Barancasia. Economic and social stability in

Barancasia was under threat as well.216

2. The Respondent faced up with grave and imminent peril to its essential interests

157. The threat of economic and energy crisisis a grave and imminent peril.

158. The peril has to be objectively established and not merely apprehended as possible.217

The peril must be just clearly established on the basis of the evidence reasonably available

at the time.218 “Imminent” does not mean absolutely proximate, but “in the sense that it

will soon occur”.219

159. The situation in Barancasia was “out of control and unmanageable”.220 Barancasia had

a risk not to pay for external debts if it exceeds the borrowing limits. Absence of available

economic and technologic resources221 led to a real threat of energy crisis due to non-

compliance with national222 and EU energy security program.223

210 Crawford, §281; LG&E v. Argentina, §251. 211 LG&E v. Argentina, §251-254. 212 Uncontested facts, Record, §7,¶20. See also European Energy Security Strategy. 213 Procedural order No.2, Record, §10,¶58. 214 Uncontested facts, Record, §29,30,¶23. 215 Uncontested facts, Record, §29,¶23. 216 See Section III(A)(2) above. 217 Crawford, §284; LG&E v. Argentina, §253. 218 Gabcíkovo-Nagymaros, §51. 219 LG&E v. Argentina, §253. 220 Enron v. Argentina, §307. 221 Uncontested facts, Record, §29-30, ¶23. 222 Annex No. 2, Record, ¶32, Art.3.

30

3. Amendment of the LRE was the only way to safeguard essential interests

160. The LRE amendment was a specific measure “needed to be taken and no alternatives

existed”.224Alternative means must not only be present, but be “effective in alleviating the

grave and imminent peril to the state”.225 The taken measures should be analyzed in light

of “adequacy and proportionality”.226 Presence of other available measures should not

prevent a state from invoking necessity defence. Otherwise, strict interpretation of the

“only way” requirement “would seem to defeat any defence”.227

161. The Respondent had no other alternatives to continue promote photovoltaic sector as

to amend the LRE. Investment is the main source for promoting renewable energy.228

Maintaining reasonable level of profitability for renewable energy producers by state

measures was the only way to improve the energy security program and promote

investment.

162. The Respondent had no financial resources to promote €0.44/kWh tariff. To finance

up to 15 % of state revenues on solar feed-in tariffs means to unbalance the budget. To

borrow the necessary amounts means to excess Barancasia’s EU-mandated borrowing

limits and to be under sanctions of fiscal nature.229 Thus, the LRE amendment was the

only way to safeguard essential interests of Barancasia.

4. Respondent’s actions did not seriously impair essential interests of the EU

163. Amendment of the LRE did not seriously impair essential interests of the EU as it

aimed to safeguard both essential interest of the Respondent and essential security

interests of the EU.

164. As to essential interests of the Claimant, even if the Tribunal finds that the Claimant’s

investment was treated unfair and inequitable, economic interests of a particular investor

do not outweigh the interests of the state in safeguarding its essential interests.230

5. The Respondent did not contribute to the state of necessity

165. A host state should not be able to take “legal advantage of its own fault”.231 The

contribution must be “sufficiently substantial and not merely incidental or peripheral”.232

223 Climate and Energy Package of 2009. 224 Newcombe&Paradell, ¶518. 225 Burke-White&Slaughter, Witness statement (Sempra v. Argentina), §48. 226 Reinisch, ¶201. 227 Bjorklund, ¶485. 228 20 20 by 2020 Europe's climate change opportunity. 229 TFEU, Article 126, §11. 230 Suez v. Argentina, §239.

31

166. Barancasia is not at fault of state of necessity. The financial resources for energy

security and the LRE fulfillment are included in the budget. Barancasia acted in a good

faith when calculated the €0.44/kWh tariff taking into account the multistage energy

security program and a deadline to achieve a 20% share of energy from renewable sources

by 2020. Barancasia did not plan to achieve a 20% share of renewable energy in 2011 due

to limited financial resources and physical inability to connect users to the national

electricity grid.233 Thus, Barancasia did not plan to approve 6000 licenses in one year.

Moreover, the Respondent could not predict dramatical increase of applicants and, as a

result, consider that increase in tariff calculation.

167. The Respondent’s actions were incidental. Hence, no contribution occurred. The main

reason for the state of necessity was the skyrocketing amount of applications for licenses

because of the “solar bubble” but not actions of the Respondent itself and its promotion of

investment in renewable energy policy. Contrary to the Gabcikovo-Nagymaros case, when

a host state contributed to the state of necessity by entering into a treaty, Barancasia did

not help “by act or omission, to bring [the state of necessity] about”.234 The situation also

differs from the CMS case – the “solar bubble” problem has not been “mounting for over a

decade”.235 Barancasia’s reaction was prompt and, as a result, did not contribute to the

state of necessity.

168. To sum up, the Respondent satisfied the conditions for the necessity defence under

Article 11 of the BIT. Alternatively, wrongfulness of the Respondent’s action is precluded

under Article 25 of the ILC Articles.

IV. JURIDICAL RESTITUTION OR SPECIFIC PERFORMANCE SHOULD NOT

BE AWARDED TO THE CLAIMANT

169. Barancasia submits that the Claimant's request for juridical restitution and specific

performance should be denied by the Tribunal, because (1) juridical restitution is not a

primary form of reparation, (2) awarding juridical restitution or specific performance will

constitute intervention in sovereignty of Barancasia, (3) such remedies are not

enforceable, (4) conditions of Article 35 of the ILC Articles are not satisfied.

231 Sempra v. Argentina, §353. 232 Commentaries to ILC Articles, Art.25, §20; CMS v. Argentina, §§328-329. 233 Uncontested facts, Record, §29,¶23. 234 Gabcikovo-Nagymaros, §45. 235 Enron v. Argentina, §354.

32

A. JURIDICAL RESTITUTION IS NOT A PRIMARY FORM OF REPARATION

170. The Claimant may submit that in accordance with Chorzów Factory case and ILC

Articles, restitution is the primary form of reparation for an internationally wrongful

act.236 However, the ILC Articles are applied to state-to-state relations, but not to relations

between host state and person.237

171. Moreover, it is explicitly accentuated that investment arbitration tribunal less

frequently award restitution than compensation.238

172. Thus, the priority of one or another form of reparation should be decided on a case-by-

case basis.

B. AWARDING OF JURIDICAL RESTITUTION OR SPECIFIC PERFORMANCE WILL CONSTITUTE INTERVENTION IN SOVEREIGNTY OF BARANCASIA

173. Juridical restitution and specific performance are the most strong form of remedies,

which affect the sovereignty of a state. Therefore, non-pecuniary remedies can be awarded

with the explicit consent of wrong doing State contained in the BIT239 or at the host

State’s choice between restitution and compensation.240

174. The Claimant may argue that the parties have not explicitly excluded juridical

restitution or specific performance and thus have agreed to their application. The fact that

certain states have excluded the possibility of juridical restitution or specific performance

awarding is not of itself indicative of unlimited application of such remedies in all others

cases. Absence of special provisions merely means that the customary international law

and, in particular, the principle of State sovereignty should “apply as background elements

that (should) guide the application and interpretation of investment agreements”.241

175. Limitation of investment tribunals' authority to award juridical restitution or specific

performance “in deference to a state’s sovereignty”242 is the prime example of the state

sovereignty manifestation.

236 ILC Articles, Art.36; ILC Commentary(2001), Art.35, §1; Chorzów Factory, §§47–48, ADC v. Hungary, §§494,495, Arif v. Moldova, §269 237 ILC Articles, Art.33, §2, ILC Commentary (2001), Art.33, §4 238 Schreuer (2004), ¶329; Texaco v. Libya, §§505-507, Sabahi, ¶70. 239 LIAMCO v. Libya, ¶125, BP v. Libya, ¶353, AGIP v. Congo, §§86-88; Amoco v. Iran, §178, De Luca, §6, §16. 240 ILC Commentary (2001), Art.43, §570, Arif v. Moldova, §633. 241 De Luca, ¶7, §27. 242 Occidental v. Ecuador, A2.

33

176. Therefore, whether to repeal the LRE amendment or to pay the €0.44/kWt tariff for 12

years wholly depend on the discretion of the wrongdoing State243 that “will prevent

specific performance (including restitution) from being granted against”244 the

Respondent. Otherwise such measures will constitute “an intolerable interference in the

internal sovereignty of a State”.245

C. JURIDICAL RESTITUTION OR SPECIFIC PERFORMANCE ARE NOT ENFORCEABLE

177. Barancasia asserts that impossibility to enforce a non-pecuniary relief prevents the

Tribunal to order juridical restitution or specific performance.

178. The Tribunal should follow the reasoning in the LIAMCO case,246 where the tribunal

awarded compensation because restitution “in any case, faced with the same practical

impossibility of enforcement”.247 The present case is different from the Al-Bahloul case

where rights of third parties were not affected by the Tribunal’s decision.248

179. Thus, the Tribunal should award compensation.

D. ALTERNATIVELY, CONDITIONS UNDER ARTICLE 35 OF THE ILC ARTICLES ARE NOT SATISFIED

180. In the event that the Tribunal denied the first argument, application of the restitution

under Article 35 of the ILC Articles two conditions should be satisfied: (i) restitution

should not be materially impossible,249and (ii) restitution should not be disproportionate to

the benefit deriving from restitution instead of compensation.250 In the present case both

are absent.

181. In accordance with the Forests of Central Rhodopia case and the Al-Bahloul case

broad interpretation of ‘material impossibility’ includes situations when the tribunal's

decision affects the rights of the third parties251. Juridical restitution and specific

performance in present case would affect the rights of 6000 investors, which have

243 Brownlie, ¶309, LIAMCO v. Libya (1981), ¶125, BP v. Libya (1979), ¶353, AGIP v. Congo, §§86-88; Amoco v. Iran, §178. 244 Higgins, ¶338. 245 LIAMCO v. Libya, ¶125. 246 Ibid., ¶196. 247 Ibid., ¶128. 248 Al-Bahloul v. Tajikistan, §50. 249 ILC Articles, Art.35(a). 250 Ibid., Art.35(b). 251 Forests of Central Rhodopia, ¶1432, ILC Commentary (2001), Art.35. §9-10, ¶98, Al-Bahloul v. Tajikistan, §§55-56,62.

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obtained the licenses according to the LRE on 3 January 2013252, who are not parties to

the present proceedings. Besides, awarding of specific performance also affects the third

parties because it will create unjustified discrimination between Vasiuki and other 6000

investors that breach Article 18 of the TFEU.

182. In the present case the awarding to the Claimant of juridical restitution "involve a

burden out of all proportion to the benefit deriving from restitution instead of

compensation"253, because an amount of all tariffs for 6000 investors will be a lot more

than the compensation to Vasiuku. The awarding of specific performance also will be

much more than the sum of compensation.

183. It makes the application of Article 35 of the ILC Articles impossible254.

184. To summarize, juridical restitution and specific performance should be denied by the

Tribunal because they are inadmissible in the present case. The Respondent submits that

compensation is a single justifiable remedy that this Tribunal may award to the Claimant.

V. THE CLAIMANT’S BASIS FOR CLAIMING AND QUANTIFYING

COMPENSATION IS NOT APPROPRIATE

185. The Respondent submits that the Claimant’s compensation calculations are ill-

supported and make false and incorrect legal and factual assumptions.255 In this regard, the

Respondent requests the Tribunal to rely on the Mrs. Priemo’s calculations.

186. Barancasia does not dispute that the discount cash flow (DCF) method is the proper

method in the given circumstances. Yet, [A] to discount future losses of the Project the net

present value of equity should have been calculated. Furthermore, [B] the Claimant’s

calculation on the Alfa project’s revenue losses is unreasonable; [C] the Claimant's

investment in land, panels and required equipment is not wasted; [D] the Claimant’s

presumptions on future developments are ill-supported, [E] WACC or cost of equity is

invalid as an interest rate.

A. NET PRESENT VALUE OF EQUITY IS A FUTURE LOSSES EQUIVALENT

187. The net present value (NPV) of the Claimant’s share in the particular projects is

discounted in the case at hand. The Claimant’s investment activity in Barancasia is not

252 Procedural Order No 2, Record,¶58. 253 Ibid., Art.35(b). 254 Al-Bahloul v.Tajikistan , §§55-56,62, Forests of Central Rhodopia, ¶1432. 255 Prayer for relief, Record, ¶11.

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limited to the projects which were damaged by the breach of the BIT. To the contrary, the

Claimant owns other projects in non-photovoltaic sector as Vasiuki LLC Dataset

demonstrates.256 There is no need for discounting the debts as it is not a firm that is

measured, but potential shares.

188. The free cash flow to equity is a real cash flow that can be traced and analyzed in a

firm.257 The value of an enterprise is determined on the basis of its ability to generate cash

flows to equity holders.258 Cost of equity is applicable to a specific project,259 whereas

WACC is a measure for valuation of the impact to a business as a whole.260

189. In the present case Vasiuki’s potential shares in photovoltaic projects should be valued

and then be equated with damages from the BIT breach. As the cash flows discounted are

the cash flows to equity, then the cost of equity is an appropriate discount rate instead of

WACC.261

B. THE CLAIMANT’S CALCULATION ON THE ALFA PROJECT’S REVENUE LOSSES IS UNREASONABLE

190. The Alfa project has been placed in operation in May 2009,262 before the adoption of

the LRE.263 In accordance with Article 1 of the LRE,

The aim of this Law... shall be ensure sustainable development of the use of renewable energy sources, promote further development and introduction of innovative technologies.264

191. It shows that the measures provided by the LRE are “incentives for subsequent

photovoltaic development”,265 in other words, for new projects. Thus, Vasuiki had no

right to obtain a license for the Alfa project.

192. The Claimant’s calculations on revenue losses in respect of the Alfa project are

unreasonable; the Claimant’s documentation is ill-supported.

193. Failure to provide a sufficient history to quantify future profits with any precision266

means failure to demonstrate reasonable assumptions for awarding revenue loses.

256 Annex No. 9, Record, ¶41-45. 257 Damodaran, ¶387. 258 Dugan &Wallace Jr & Rubins & Sabahi, ¶587. 259 Ashford, ¶341. 260 Ibid. 261 Walter Bau v. Thailand, §14.35; Damodaran, ¶382. 262 Uncontested facts, Record, §12.¶21 263 Ibid.,§14. 264 Annex 2, Record, ¶32. 265 Priemo Report, Record, §7, ¶53.

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194. Vasiuki was a new developer in the area of electricity, which had only recently begun

its own projects.267 Specializing mostly on gas turbines and wind projects,268 Vasiuki

made its first attempt to develop solar energy projects269 which was failed in the first year

of the Alfa project’s operation. Vasuiki LLC Dataset clearly demonstrates that

construction costs of the Alfa project exceeded more than 50 % the projected cost.270 Due

to that fact the Alfa project operated at a loss for certain years. Furthermore, the Claimant

was not able to accurately forecast the performance of the Alfa Project,271 as substantial

differences between projected and design capacity existed. Taking into account the

Claimant’s unsupported forecasts, the Claimant’s calculation regarding the Alfa’s revenue

loses is unreasonable.

195. In any event, the calculation of Pr. Kovic272 should not be taken into account because

“where it has failed to make a profit, future profits cannot be used to determine going

concern or fair market value”273 and any future losses award would be speculative.274

C. THE CLAIMANT'S INVESTMENT IN LAND, PANELS AND REQUIRED EQUIPMENT IS NOT WASTED

196. The Claimant’s investment in land, panels and equipment was not wasted. Investment

is considered to be wasted only in case of expropriation when investor losses control over

its investment.275 In the case at hand, the Claimant still can operate the land plots and use

the land for other projects not only for the photovoltaic projects.276 The bought equipment

can be used for another solar venture or be sold.277 The land still has value.278

197. Thus, even if the Tribunal finds that Barancasia is to compensate the wasted

expenditure to Vasiuki, it should take into account that “the quantification of lost profits

must result in a lower amount to avoid double counting”.279The final Pr. Kovic's

266 PSEG v. Turkey,§§310–15;Aucoven v. Venezuela, §351;Metalclad v. Mexico, §120-122;Am. Mfg. & Trading v. Zaire, §7.14; UNCC GC Decision 9, UNCC GC, Resumed 4th Sess. 267 Priemo Report, Record, §5,¶52. 268 Annex 9, Record, ¶¶1-3;Uncontested facts, Record, §4, ¶20, §12, ¶21. 269 Priemo Report, Record, ¶52, §5. 270 Ibid., §7, ¶53. 271 Annex 9, Record, tab. 4, ¶47. 272 Annexes to the Kovic report, Record, Annex 1(A). 273 Metalclad v. Mexico, §120. 274 Metalclad v. Mexico, §121. 275 LG&E v. Argentina, §188; CMS v. Argentina, §262, 263. 276 Procedural order No. 2, Record, §29, ¶60. 277 Priemo Report, Record, §11, ¶54. 278 Procedural order No. 2, Record, §29, ¶60. 279 Himpurna v. Pt. PLN, §446.

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calculation of the wasted expenditure280 is ill supported as the value of land, panels and

equipment has never become a zero as Pr. Kovic insists on.281 The price of the land is now

10% higher than when it was bought.282

198. Thereby, amount of compensation for wasted expenditures by all means should be less

than it is demonstrated in Annex 2 of the Pr. Kovic Report.283

D. THE CLAIMANT’S PRESUMPTIONS ON FUTURE DEVELOPMENTS WERE UNREASONABLE

199. The Claimant failed to demonstrate the proper basis for quantifying future loses on

future developments. In accordance with Annex 4 to Pr. Kovic Report,284 there is no

evidence of costs for additional lands, feasibility studies, required equipment that could

form a damnum emergens caused to the potential future developments. In absence of any

property titles, concluded contracts and given licenses no opportunity is considered to be

lost.285 Projects that were never operative could not constitute any future profits and any

award in respect of future loses would be wholly speculative.286 Arbitral tribunals do not

award a remote and speculative profit287 as the one presented by the Claimant.

200. Whereas the Claimant did not provide any documentation to support its future plans,

future loses should be excluded from the calculation, with only costs of investment-related

expenditure288 remaining. In the case at hand none of these costs are present.

E. WACC OR COST OF EQUITY IS INVALID AS AN INTEREST RATE

201. Neither the BIT nor international law provide the interest rate to be applied in all

circumstances.289 Article 5 of the BIT refers to the LIBOR as the interest rate in respect of

lawful expropriation.290 However the BIT is silent on the unlawful expropriation and

breach of FET.

280 Annexes to the Kovic report. Record. Annex 2. 281 Kovic Report, Record, §9, ¶49, Annexes to the Kovic report, Record, Annex2. 282 Procedural order No. 2, Record, §29, ¶60. 283Annexes to the Kovic report, Record, Annex 2. 284 Ibid., Record, Annex 4. 285 LG&E v. Argentina, §91. 286 Metalclad v. Mexico, §121. 287 LG&E v. Argentina, §89. 288 PSEG v. Turkey,§§310–15;Aucoven v. Venezuela, §351;Metalclad v. Mexico, §120-122;Am. Mfg. & Trading v. Zaire, §7.14; UNCC GC Decision 9, UNCC GC, Resumed 4th Sess. 289 CME v. Czech Republic, § 637. 290 Annex No. 1, Record, ¶27-28.

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202. WACC is invalid as an interest rate since it should not be used for discounting future

loses in the present case.291 However, the possibility of the cost of equity to be an interest

rate is under dispute.

203. The Respondent submits that statutory interest rate under Barancasian law or model

commercial interest rate should be awarded. Due to the Model Law on UNCITRAL

interest rate of the country of the currency in which payment is to be made is

applicable.292 The currency is euro in the case at hand. Under International accounting

standards (IFRS/US-GAAP/FRS) the Euro area (ECB) interest rate is 0,05 %.

204. The award, ordering statutory or model commercial interest rate, would be recognized

and enforced by the parties to the New York Convention, in particular by Barancasia.

Then the interest rate would not exceed the rate allowed under municipal law and, as a

result, would not be contrary to the public policy of the country.293

291 See Section V(A) above. 292 Gotanda, ¶56. 293 Ibid., ¶62.

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PRAYER FOR RELIEF

The Respondent respectfully requests the LCIA to find that:

(1) The Tribunal does not have jurisdiction over this dispute.

(2) The Tribunal cannot proceed with the merits because the claims are inadmissible.

(3) In the event that the Tribunal does not grant first or second prayer for relief, the

Respondent has not breached the FET guaranteed under Article 2(2) of the BIT.

(4) Alternatively, the Respondent‘s breach of the FET is excused by state of necessity.

(5) In the event that the Tribunal does not grant third or fourth prayer for relief, the Tribunal

should deny the Claimant’s request to repeal the amendment to Article 4 of the LRE or

continue to pay Vasiuki the €0.44 feed-in tariff for 12 years.

(6) Alternatively, the Claimant’s calculations for damages are ill-supported and based on false

and incorrect legal and factual assumptions.

(7) Barancasia is entitled to restitution by the Claimant of all costs related to these

proceedings.

Respectfully submitted on 26 September 2015.

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Team FORSTER

On Behalf of the Respondent,

The Republic of Barancasia

team forster london court of … · the respondent has acted in accordance with the fair and...

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