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Award

TABLE OF ABBREVIATIONS
1997 Contract Agreement for the Revival of Contract Agreement for the Construction of Islamabad-Peshawar Motorway of 29 March 1997
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings
Award The present award on the merits of the dispute
Bayindir Bayindir Insaat Turizm Ticaret Ve Sanayi A.§.
C-Mem. J. Bayindir‟s Counter-Memorial (on Jurisdiction) dated 31 March 2005
C-Mem. M. Pakistan's Counter-Memorial (on the Merits) dated 25 August 2006
Contract 1993 Contract as revived by the1997 Contract
EOT Extension of time
Exh. [Bay.] B Bayindir's Exhibit filed with its RA
Exh. [Bay.] CX Bayindir‟s Exhibit (Documentary Evidence)
Exh. [Bay.] CLEX Bayindir‟s Exhibit (Legal Materials)
Exh. [Bay.] RP Bayindir's Exhibit filed with its RP
Exh. [Pak.] C Pakistan‟s Exhibit (Principal Contractual Documents) [Volume 2 of Mem. J.]
Exh. [Pak.] CM Pakistan's Exhibit (Documentary exhibits) filed with its C.-Mem. M.
Exh. [Pak.] CM LEX Pakistan's Exhibit (Legal Materials) filed with its C.-Mem. M.
Exh. [Pak.] D Pakistan‟s Exhibit (Documentary exhibits) [Volume 7 of Mem. J.]
Exh. [Pak.] L Pakistan‟s Exhibit (Legal Materials) [Volume 3 to 6 of Mem. J.]
Exh. [Pak.] R Pakistan's Exhibit (Documentary exhibits) filed with its Rej. M.
Exh. [Pak.] RB Pakistan's Exhibit (Documentary exhibits attached to the witness statement of Raymond Bridger) [Volumes 7 to 8 of C.-Mem. M.]
Exh. [Pak.] Resp RP Pakistan's Exhibit filed with its Resp RP
Exh. [Pak.] RL Pakistan‟s Exhibit (Legal Materials) [Volume 3 to Reply J.]
Exh. [Pak.] R LEX Pakistan's Exhibit (Legal Materials) filed with its Rej. M.
FET Fair and equitable treatment
FWO Frontier Works Organization
ICSID International Centre for Settlement of Investment Disputes
ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of other States
IPA Interim Payment Application
IPC Interim Payment Certificate
M-1 Project Pakistan Islamabad-Peshawar Motorway
Mem. J. Pakistan‟s Objections to Jurisdiction dated 31 December 2004
Mem. M. Bayindir's Memorial (on the Merits) dated 25 April 2006
MFN Most favoured nation
NHA National Highway Authority of Pakistan
PHB [Bay.] Bayindir's post-hearing brief (on the Merits) dated 16 July 2008
PHB [Pak.] Pakistan's post-hearing brief (on the Merits) dated 16 July 2008
PMC-JV Pakistani Motorway Contractors Joint Venture
PSDP Public Sector Development Programme
RA or Request Bayindir‟s Request of Arbitration of 15 April 2002
Rejoinder J. Bayindir‟s Rejoinder (on Jurisdiction) dated 17 June 2005
Rej. M. Pakistan's Rejoinder (on the Merits) dated 24 May 2007
Reply J. Pakistan‟s Reply (on Jurisdiction) of 9 May 2005
Reply M. Bayindir's Reply (on the Merits) dated 21 February 2007
RP Bayindir's Request for Provisional Measures of 20 July 2004
Resp RP Pakistan's Response of 27 August 2004 to RP
Tr. P. Transcript of the preliminary hearing
Tr. J. Transcript of the hearing on jurisdiction
Tr. M. Transcript of the hearing on the merits
Treaty Bilateral investment treaty; specifically "Agreement Between the Republic of Turkey and the Islamic Republic of Pakistan Concerning the Reciprocal Promotion and Protection of Investments" of 16 March 1995
VCLT Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969 - UN Treaty Series, vol. 1155, p. 331
WS Witness Statement

I. THE FACTS

1.
This Chapter summarizes the factual background of this arbitration in so far as that is necessary to understand the issues raised in the present case.

A. THE PARTIES

a. The Claimant

2.
The Claimant, Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ç. ("Bayindir") is a company incorporated and existing under the laws of the Republic of Turkey. Its principal office is situated at Tunus Caddesi No. 24, Kavaklidere, Ankara, Turkey.
3.
The Claimant is part of the Bayindir group of companies. It is engaged in the business of construction of motorways and other larger infrastructure projects in Turkey and abroad.
4.
The Claimant has been represented in this arbitration by Mr. Farrukh Karim Qureshi from the law firm of Samdani & Qureshi, Islamabad. The following have acted as cocounsel: Michael Bühler, John F. Crawford, Sigvard Jarvin and Jonathan Eades from the law firm of Jones Day, Paris, France (from 21 January 2004 to 30 June 2005); Emmanuel Gaillard and John Savage from the law firm of Shearman & Sterling LLP (from 1 July 2005 to 14 July 2005); Gavan Griffith from Essex Court Chambers, London (from 18 July 2005 to 6 December 2005); and Sir Michael Wood from 20 Essex Street Chambers, London (from June 2007 to 16 November 2007).
5.
In the last stage of the arbitration concerning the merits, Bayindir was represented by: Farrukh Karim Qureshi and Nudrat Ejaz Piracha, Samdani & Qureshi, Islamabad; Stanimir A. Alexandrov, Marinn Carlson and Jennifer Haworth McCandless, Sidley Austin LLP, Washington D.C; and Judge Stephen M. Schwebel, Washington D.C.

b. The Respondent

6.
The Respondent is the Islamic Republic of Pakistan ("Pakistan").
7.
The Respondent has been represented in this arbitration by: the Hon. Malik Muhammad Qayyum, Attorney General for Pakistan (from 2007 to 2008), and by the former Attorney General for Pakistan Mr. Makdoom Ali Khan during the proceeding on jurisdiction (up until 2007). The following have acted as co-counsel: Christopher Greenwood CMG, QC (up until 5 February 2009), Samuel Wordsworth of Essex Court Chambers, London (since 19 July 2004); V. V. Veeder QC from Essex Court Chambers, London (from 19 July 2004 to 28 November 2007); Umar Atta Bandial from Umar Bandial & Associates, Lahore (from 19 July 2004 to 16 July 2005); Rodman R. Bundy, Loretta Malintoppi and Nicholas Minogue from Eversheds, Paris (since 19 July 2004), and Iftikharuddin Riaz from Bhandari; Naqvi & Riaz, Lahore, Pakistan (since 16 July 2005).

B. SUMMARY OF THE MAIN FACTS

8.
The following summary is meant to give a general overview of the present dispute. It does not claim to include all factual aspects which will later turn out to be of relevance, particularly as they emerged from the extensive testimony of witnesses and experts at the hearing. The latter will be discussed, as far as relevant, in the context of the Tribunal‟s analysis of the disputed issues.

a. The M1 Motorway Project

9.
The National Highway Authority ("NHA") is a public corporation established by the Pakistani Act No XI (National Highway Authority Act) of 1991 to assume responsibility for the planning, development, operation and maintenance of Pakistan‟s national highways and strategic roads. Although controlled by the Government of Pakistan, NHA is a body corporate under Pakistani law with the right to sue and to be sued in its own name (Section 3(2) National Highway Authority Act 1991).
10.
Among other projects, NHA planned the construction of a six-lane motorway and ancillary works known as the "Pakistan Islamabad-Peshawar Motorway" (the "M-1 Project").
11.
In 1993, NHA and Bayindir entered into an agreement for the execution of the M-1 Project (the "1993 Contract") (Exh. [Pak.] C-1). The 1993 Contract was a two page document incorporating, inter alia, Addenda No.1-9 (Exh. [Pak.] C-1), the Conditions of Contract - Part I and II (Exh. [Pak.] C-4), General Specifications, Special Provisions and Addenda to General Specifications, Drawings, Priced Bill of Quantities (BOQ), as well as the Bid and Appendices "A to M." In particular, it bears noting that Part I incorporated the FIDIC General Conditions of Contract for Works of Civil Engineering Construction (1987 edition), and Part II, entitled "Conditions of Particular Applications," incorporated the amendments and supplements to Part I negotiated by the parties.
12.
Disputes arose under the 1993 Contract, which NHA and Bayindir resolved in 1997. As part of this resolution, the parties executed a Memorandum of Agreement on 29 March 1997 "with the objective of reviving the Contract Agreement dated 18 March 1993" (Exh. [Pak.] C-5). Under Clause 8 of the Memorandum of Agreement, the parties agreed "to apply to the arbitration tribunal in the appropriate manner to seek the decision of the tribunal on only the issue of the quantum of expenses incurred by Bayindir as specified in Bayindir's claim for expenses only."1
13.
On 3 July 1997, the parties entered into a new contract, the "Agreement for the Revival of Contract Agreement for the Construction of Islamabad-Peshawar Motorway" (the "1997 Contract") (Exh. [Pak.] C-6). The 1997 Contract incorporated the 1993 Contract "in its entirety" with some "overriding conditions" agreed in the Memorandum of Agreement signed on 29 March 1997.
14.
For the sake of simplicity, the Tribunal will use the terminology "clause" or "sub-clause" of the Contract to mean the relevant clause of the (FIDIC) General Conditions of Contract (Conditions of Contract – Part I incorporated in the 1993 agreement), supplemented by the Conditions of Particular Applications (Conditions of Contract – Part II incorporated in the 1993 agreement), as revived and amended by the 1997 Contract. The Tribunal will refer to the (revived) contractual relationship as the "Contract."
15.
The Contract contains a choice of the laws of Pakistan as the governing law.
16.
It was a term of the Contract that NHA would pay to Bayindir 30% of the Contract price as an advance payment (the "Mobilisation Advance"). Accordingly, NHA paid to Bayindir, as Mobilisation Advance, two separate amounts of USD 96,645,563.50 and PKR 2,523,009,751.70 respectively (RP, ¶ 22; Mem. J., ¶ 2.16).
17.
It was a further term of the Contract that Bayindir would provide a bank guarantee equivalent to the amount of the Mobilisation Advance. On 9 January 1998, a consortium of Turkish banks (comprising Türkiye i§ Bankasi A.Ç., Türkiye Vakiflar Bankasi T.A.O., Türkiye Halk Bankasi A.Ç., Finansbank A.Ç., Denizbankthe A.Ç. and Kentbank A.S., which subrogated its rights to Bayindirbank A.Ç.) issued two guarantees on behalf of Bayindir to secure the Mobilisation Advance in accordance with the Contract (the "Mobilisation Advance Guarantees"). Consistent with the Contract, the Mobilisation Advance Guarantees were payable to NHA "on his first demand without whatsoever right of objection on [the Bank‟s] part and without his first claim[ing] to the Contractor." The amounts of the Mobilisation Advance Guarantees were to decrease, as interim payments were made for work in progress.2
18.
The performance of the Contract was to be supervised by an Engineer. Under the Contract, the Engineer was to be appointed by the Employer (Part I – General Conditions – sub-clause 1.1(iv)) and to obtain the Employer's approval before exercising his authority whenever the terms of his appointment so provided (Part I – General Conditions – sub-clause 2.1(b)). The Engineer was, for instance, required to obtain the prior written approval of the Employer before deciding on a request for an extension of time by the Contractor under clause 44 of the Contract (Part II – Conditions of Particular Applications – sub-clause 2.1(e)).
19.
By contrast, in those cases where the Contract required the Engineer to exercise his discretion, he was to do so "impartially within the terms of the Contract and having regard to all the circumstances" (Part I – General Conditions – sub-clause 2(6)). The issuance of the notices contemplated in sub-clauses 46.1 and 63.1(b)(ii) are examples of cases in which the Engineer was to exercise his discretion and did not need the Employer's prior approval. According to sub-clause 46.1, the Engineer was to notify the Contractor if "in the opinion of the Engineer" the rate of progress of the works in any section was too slow to comply with the agreed time for completion, for any reason other than one which would entitle the Contractor to an extension of time. Similarly, if in the Engineer's opinion the Contractor had failed to proceed with the works without a reasonable excuse, the Engineer was to issue a certificate under sub-clause 63.1(b)(ii).
20.
The Engineer was entitled to appoint a representative, the "Engineer's Representative," who was to carry out the duties and exercise the authority delegated to him (Part I – General Conditions – sub-clause 2.2).
21.
The Contract also set forth a multi-tier mechanism for the settlement of disputes, providing first for an Engineer's decision and then for arbitration as follows:

• Any matter in dispute must first be referred in writing to the Engineer (67.1(1) of the Contract);

• A party dissatisfied with the ensuing decision of the Engineer3 "may give notice to the other party of his intention to commence arbitration" (67.1(3) of the Contract);

• The parties must then attempt to settle the dispute amicably and, unless they agree otherwise, cannot commence arbitration at the earliest 56 days after the notice of intention to commence arbitration;

• The dispute will then be resolved by arbitration "under the rules and provisions of the Arbitration Act [of Pakistan] 1940 as amended or any statutory modification or re-enactment thereof for the time being in force."

22.
Other relevant provisions of the Contract will be referred to later in the context of the consideration of the disputed issues.

b. The origin of the present dispute

23.
On 3 June 1998, the Engineer issued the order to commence construction; the original completion date foreseen was 31 July 2000.4
24.
Between September 1999 and 20 April 2001, Bayindir submitted several claims for payment and four claims for extension of time (EOT) invoking different omissions on the part of Pakistan (in particular delays in handing over the possession of the land5). The first two EOT claims (EOT 01 and EOT 02) were settled by agreement during a meeting held on 18 February 2000. This agreement6 led to the execution of Addendum No. 9 of 17 April 2000, which set out, among other things, that "the revised Contract Completion Date shall be 31st December 2002" and that "NHA will hand over the remaining land as expeditiously as possible but not later than 4 months from the signing" of Addendum No. 9. The detailed schedule attached to Addendum No. 9 provided that two priority sections had to be completed before 23 March 2001 (the Priority Sections).
25.
It is disputed whether, after the revival of the Contract, the performance of Bayindir was satisfactory or not. However, Bayindir has not seriously disputed that before the conclusion of Addendum No. 9 in April 2000, it had almost stopped work on the site. Moreover, as will be discussed later, the evidence on the record shows that even after the conclusion of Addendum No. 9, serious concerns remained over the pace of the work and the quality of the equipment that Bayindir used on the site.
26.
On 2 December 2000, the Engineer's Representative, Mr. Raymond Bridger, issued a notice pursuant to sub-clause 46.1 of the Contract advising Bayindir that "the rate of progress of the works is currently too slow to comply with the Time for Completion of the Contract" and asking it to "submit details as to the actions that [it] propose[s], in order to comply with the Time for Completion of the Contract" (Exh. [Pak.] CM-76).
27.
By letter of 11 December 2000, Bayindir disputed the sub-clause 46.1 notice and referred to a number of reasons why it was entitled to an extension of time (Exh. [Pak.] CM-78). In several letters sent shortly thereafter to Bayindir, Mr. Bridger observed that there were no significant reasons preventing Bayindir from achieving the required targets (Exh. [Pak.] RB-58) and proposed to hold a meeting with Bayindir "to discuss in detail feasible dates for completion of all remaining works in Section-I (Part-I) to ensure overall completion of Part I by March 23, 2001" (Exh. [Pak.] CM-80). By late December 2000, the Engineer's Representative further reminded Bayindir of the need to submit a revised program for the completion of the Priority Sections (Exh. [Pak.] CM-82).
28.
At a contract progress meeting on 4 January 2001, Bayindir's representatives announced that a revised program was under preparation and would be submitted in the following week (Exh. [Pak.] RB-99). A few days later, on 13 January 2001, Bayindir contended however that the sub-clause 46.1 notice was unjustified and announced a detailed claim for extension for the following week. Two days later, it submitted EOT 03 for the completion of the two Priority Sections by October instead of March 2001, asserting primarily that NHA had failed "to hand over the site pursuant to Addendum No. 9" (Exh. [Bay.] B-15). At the same time, Bayindir submitted a revised program for the completion of the works.
29.
At another contract progress meeting on 30 January 2001, Mr. Bridger noted that he was very much concerned about Bayindir's lack of progress, in particular in connection with the productivity levels in the Priority Sections 1 and 5. He further added that "shortage of equipment/machinery available with BCI [was] the obvious cause of delays" and that he had long been reminding this to Bayindir (Exh. [Pak.] RB-100).
30.
On 26 February 2001, the President of Bayindir Construction, Mr. Sadik Can, asked the Turkish Ambassador in Islamabad to arrange an opportunity for him "to explain to H.E. the Minister for Communications and the Chairman of National Highway Authority about our continuing efforts and sincere desire to achieve the completion of this prestigious Project" (Exh. [Pak.] CM-180). The Ambassador proposed a "high level meeting between the Company and National Highway Authority" (Exh. [Pak.] CM-181 and Exh. [Pak.] CM-182), which took place on 19 March 2001. The contents of this meeting are disputed and will be discussed later. It is however established that, following this meeting, Mr. Bridger wrote to Bayindir observing that the list of obstructions referred to by Bayindir at the meeting was "obsolete and in no way indicative of the situation at site" (Exh. [Pak.] RB-67).
31.
In the meantime, Mr. Bridger had again expressed concern about the insufficient progress on the Priority Sections and mentioned that the Contract provided for liquidated damages under such circumstances (Exh. [Pak.] CM-92). Bayindir replied shortly thereafter that the delays were due to the reasons explained in EOT 03 and that the imposition of liquidated damages would be in breach of the Contract (Exh. [Pak.] CM-93).
32.
The draft minutes of the contract progress meeting of 29 March 2001 referred to a joint meeting, held on 21 March 2001 at NHA headquarters, during which Bayindir had informed that "US$ 16 Million worth PIB equipment (including spares) currently on site [wasl all that BCI shall be handling over to NHA upon completion and nothing more" (Exh. [Bay.] CX-153). According to this document "BCI also claimed that they are not contractually obliged to meet the shortfall as stated by PMC/NHA, PMC/NHA is presently reviewing this stand of BCI under the terms of the Contract." A few days later, Mr. Bridger requested Bayindir to revise its position on permanent equipment (Exh. [Pak.] RB-54). Bayindir replied on 7 April 2001 disputing that it was required to import any specific quantity of equipment on a permanent basis (Exh. [Pak.] RB-54).
33.
On 3 April 2001, in response to Bayindir's EOT 03, a limited extension of 27 days for Part I was communicated to Bayindir (Exh. [Pak.] CM-101). Bayindir challenged such extension and referred it to the Engineer for a decision pursuant to Clause 67.1 of the Contract (Exh. [Pak.] R-20).
34.
On 12 April 2001, the Chairman of NHA made a presentation to General Musharraf regarding inter alia the M-1 Project (Exh. [Bay.] CX-221). The content of this meeting is disputed and will be discussed later.
35.
On 14 April 2001, Mr. Bridger wrote to Bayindir stating inter alia that it had failed to comply with the sub-clause 46.1 notice and that it had come to his attention that Bayindir was considerably behind in payments to its subcontractors (Exh. [Pak.] RB-69). Bayindir replied inter alia reiterating its entitlement to a longer extension of time and referring to the pending decision of the Engineer under Clause 67.1 (Exh. [Pak.] CM-107).
36.
On 19 April 2001, the Engineer certified to NHA that "pursuant to Sub-Clause 63.1/b(ii) of the Conditions of Contract in [his] opinion the Contractor without reasonable excuse has failed to proceed with the Works, within 28 days after receiving notice pursuant to Sub-Clause 46.1 of the Conditions of Contract" (Exh. [Pak.] R-22).
37.
On 20 April 2001, NHA informed Bayindir that liquidated damages would be imposed on Bayindir for late completion of the two Priority Sections with effect from 20 April 2001; that is, the end of the limited extension granted on 3 April 2001 (Exh. [Bay.] B-20). On the same day, Bayindir notified NHA that it had been unable to complete the Priority Sections "due to reasons beyond [its] control" and requested that "the procedure [i.e. the submission of EOT 03 to the Engineer for decision under Clause 67.1] be allowed to follow to determine [its] entitlement for time extension" (Exh. [Bay.] B-21). It is therefore undisputed that the two Priority Sections were not completed on the dates set in Addendum No. 9 (23 March 2001) extended under EOT 03.
38.
On 23 April 2001, NHA served a "Notice of Termination of Contract" upon Bayindir requiring the latter to hand over possession of the site within 14 days (Exh. [Bay.] B-26). Thereafter, staff from the Frontier Works Organization ("FWO"), the civil engineering section of the Pakistani army, secured the site and Bayindir‟s personnel were evacuated.
39.
On 23 December 2002, NHA concluded a contract for the "Completion of Balance Works of Islamabad – Peshawar Motorway (M-1) Project" with "M/s Pakistan Motorway Contractors Joint Venture (PMC JV)" providing for a completion period of 1460 days (Exh. [Bay.] CX-29).

c. Related litigation

40.
From January to July 2001, Bayindir served several notices of intention to commence arbitration pursuant to sub-clause 67.1 of the Contract. The arbitration was not pursued, although the matters remained unsettled.7
41.
On 30 April 2001, Bayindir filed a constitutional challenge against the notice of termination served by NHA before the Lahore High Court (Exh. [Pak.] D-15). A few days later, on 7 May 2001, the Lahore High Court dismissed Bayindir‟s constitutional challenge on the ground that the Contract contained an arbitration clause (Exh. [Pak.] D-16, in particular pp. 17-18).8
42.
Between 2001 and early 2003, NHA raised a series of claims against Bayindir and served a notice of arbitration. On 31 March 2003, NHA sought Bayindir‟s concurrence in the appointment of a sole arbitrator. Bayindir replied on 10 April 2003 that it had already submitted the matter to ICSID and requested that the award in the ICSID arbitration be awaited (Exh. [Pak.] D-23).
43.
On 5 January 2004, NHA applied for the appointment of an arbitrator in Pakistan under section 20 of the Arbitration Act 1940. On 28 May 2004, the Court of Civil Judge in Islamabad appointed Mr. Justice (Retd.) Afzal Lone as arbitrator. The court subsequently upheld an objection of NHA (claiming that Mr. Lone was too closely linked with the previous government of Pakistan, that is the government that had decided to revive the Contract in 1997) and appointed Mr. Justice (Retd.) Zahid. Following a request by Pakistan, NHA moved for an extension of time limits in such a manner that the arbitration would not proceed prior to this Tribunal‟s Decision on Jurisdiction. After the Tribunal's Decision on Jurisdiction (14 November 2005), the Claimant requested the Tribunal to recommend, by way of a provisional measure, that the Respondent desist from pursuing the arbitration in Pakistan. By Procedural Order No. 12 of 14 April 2008, the Tribunal rejected Bayindir's application.
44.
In the meantime, on 24 April 2001, NHA had called the Mobilisation Advance Guarantees in an amount of approximately USD 100,000,000. Bayindir obtained an order from the Turkish courts enjoining the Banks from paying. This injunction was lifted on 12 September 2003. Execution proceedings against the Banks, to which Bayindir is not a party, are currently stayed following this Tribunal‟s Procedural Order No. 1 (PO#1) that Pakistan take steps to ensure that NHA does not enforce any final judgment it may obtain from the Turkish courts with regard to the Mobilisation Advance Guarantees.
45.
On 26 April 2006, NHA filed an action against Is Bank for the collection of the interest accrued (and to accrue) on the amount of part of the Mobilisation Advance Guarantees. On 14 March 2007, Is Bank filed an application before the same court requesting that no default interest be deemed to have accrued, since NHA had not sought to enforce the judgment granted in its favour. In its response dated 10 April 2007, NHA disputed Is Bank‟s contentions based in particular on the fact that the first encashment request was made well before the Tribunal‟s first decision and that immediately after the encashment request, Is Bank and Bayindir colluded to obtain an order from this Tribunal.
46.
Pursuant to Procedural Order No. 11 of 14 April 2008 (PO#11), the Claimant was directed to take the steps necessary and use its best endeavours to procure the withdrawal by Is Bank of its application dated 14 March 2007. By letter of 24 July 2008, the Claimant informed the Tribunal and the Respondent that Is Bank was prepared to agree with NHA to suspend the Turkish Court proceedings over NHA's claim for interest until the Tribunal's Award. On 1 August 2008, the Respondent opposed the Claimant's proposal and requested security. The procedure following the Respondent's request is described infra at paragraphs 64-66.

II. PROCEDURAL HISTORY

A. INITIAL PHASE

47.

On 15 April 2002, Bayindir submitted a Request for Arbitration (the "Request" or "RA") to the International Centre for the Settlement of Investment Disputes ("ICSID" or the "Centre"), accompanied by 41 exhibits (Exh. [Bay.] B-1 to B-41). In its Request Bayindir sought the following relief:

(i) payment of outstanding Interim Payment Certificates US$62,514,554.00;

(ii) payment of additional financial claims related to the Works completed by Bayindir provisionally quantified as US$27,000,000.00;

(iii) reimbursement of all costs incurred in anticipation of completing the Project by Bayindir US$19,071,449.00;

(iv) payment against all fixed and movable assets expropriated by Pakistan US$43,050,619.00;

(v) compensation for mobilisation and demobilisation costs US$7,444,854.00;

(vi) compensation for profits lost through Pakistan‟s unlawful acts and omissions provisionally quantified as US$107,154,634.00;

(vii) compensation for damage to Bayindir's reputation resulting from Pakistan's unlawful acts and omissions provisionally quantified as US$150,000,000.00;

In addition to the amounts set out in paragraph 39 above Bayindir is entitled to recover compensation and costs on account of the following items:

(i) the reimbursement of all costs incurred by Bayindir in pursuing the resolution of the claims brought in this arbitration, including but not limited to the fees and/or expenses of the arbitrators, ICSID, legal counsel, experts and Bayindir's own experts and staff;

(ii) compounded interest on all amounts awarded at an appropriate rate or rates and over an appropriate period or periods;

(iii) compensation for opportunities lost as a direct result of Pakistan's unlawful acts and omissions;

(iv) compensation for losses and damages suffered by Bayindir in Turkey as a direct consequence of Pakistan's unlawful acts and omissions;

(v) any other relief that the Arbitral Tribunal may deem fit and appropriate in the circumstances of this case.

(RA ¶¶ 39-40)

48.
On 16 April 2002, the Centre, in accordance with Rule 5 of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (the "Institution Rules"), acknowledged receipt and transmitted a copy of the RA to Pakistan and to the Pakistani Embassy in Washington D.C.
49.
After a long and extensive exchange of correspondence between Bayindir,9 Pakistan,10 NHA11 and the Centre, on 1 December 2003, the Secretary-General of the Centre registered Bayindir‟s RA, pursuant to Article 36(3) of the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the "ICSID Convention" or "the Convention"). On the same date, the Secretary-General, in accordance with Institution Rule 7, notified the Parties of the registration of the Request and invited them to proceed, as soon as possible, to constitute an Arbitral Tribunal.
50.
In the absence of agreement between the Parties, on 6 February 2004, Bayindir elected to submit the arbitration to a panel of three arbitrators, as provided in Article 37(2)(b) of the ICSID Convention, and appointed Prof. Karl-Heinz Bôckstiegel, a national of Germany. On 26 February 2004, Pakistan appointed Sir Franklin Berman, a national of the United Kingdom, as arbitrator. On 27 April 2004, the Parties agreed to appoint Prof. Gabrielle Kaufmann-Kohler, a national of Switzerland, as the President of the Tribunal.
51.
On 15 June 2004, the Secretary-General of ICSID, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (Arbitration Rules), notified the parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to be constituted and the proceedings to have begun on that date. The same letter informed the Parties that Mr. José-Antonio Rivas, Counsel, ICSID, would serve as Secretary of the Tribunal.12

B. THE PROCEEDINGS ON PROVISIONAL MEASURES

52.
On 20 July 2004, Bayindir submitted a Request for Provisional Measures (RP), seeking in substance recommendations by the Tribunal that the Respondent stay all proceedings pending before the Courts of Pakistan and Turkey. On 27 August 2004, Pakistan filed its Response to Claimant‟s Request for Provisional Measures (Resp RP).
53.
The Arbitral Tribunal held a session on procedural matters and provisional measures (the "preliminary hearing") on 24 September 2004, at the offices of the World Bank in Paris. At the outset of the preliminary hearing, the Parties expressed agreement that the Tribunal had been properly constituted (Arbitration Rule 6) and stated that they had no objections in this respect. The Parties further agreed on a set of procedural rules to apply to the present proceedings. The preliminary hearing was tape-recorded, a verbatim transcript was taken and later distributed to the Parties (Tr. P.).
54.
During the course of the preliminary hearing, the Parties‟ counsel also presented oral arguments on Bayindir‟s request for provisional measures. At the end of the preliminary hearing, Bayindir withdrew its request seeking a stay of the arbitration pending in Pakistan between NHA and Bayindir before the sole arbitrator, Mr. Justice (Retd.) Zahid,13 as a result of an offer by Pakistan to request NHA to move for an extension of the time limits fixed in the latter in such a manner that the Pakistani arbitration would not proceed before this Tribunal rendered its Decision on Jurisdiction (Tr. P. 153:17-155:25).
55.

On 29 November 2004, the Tribunal rendered its Decision on the RP (PO#1), which provided as follows:

Having reviewed the Claimant’s and the Respondent’s written submissions and having heard oral argument, the Tribunal issues the following order:

(i) The Tribunal acknowledges that Bayindir withdrew the request seeking a stay of the Pakistani arbitration as a result of an offer of Pakistan to request NHA to move for an extension of time limits in such a manner that that arbitration will not proceed prior to this Tribunal’s decision on jurisdiction.

(ii) The Tribunal recommends that Pakistan take whatever steps may be necessary to ensure that NHA does not enforce any final judgment it may obtain from the Turkish courts with regard to the Mobilisation Advance Guarantees. This recommendation remains in effect until: (a) an arbitral award declining jurisdiction is issued; or (b) an arbitral award is rendered on the merits; or (c)•any other order of the Tribunal amending the recommendations is issued; whichever comes first.

(iii) The Tribunal dismisses Pakistan’s request to recommend, as a matter of principle, that Bayindir should provide security for Pakistan’s costs.

(iv) The Tribunal will rule on the costs of this application in its decision on jurisdiction or, if it asserts jurisdiction, in its decision on the merits of the dispute.

(PO#1 ¶ 78)

56.
As a threshold matter in its decision on provisional measures, the Tribunal emphasized that the reasons leading to such decision were "without prejudice to a later decision of this Tribunal on Pakistan’s objection to the jurisdiction of the Tribunal" (PO#1 ¶ 40).
57.
NHA later obtained a final judgment from the Turkish courts with regard to the encashment of the Mobilisation Advance Guarantees. On 26 April 2006, NHA filed an action against Is Bank for the collection of the interest accrued (and to accrue until the date of payment) on the amount of part of these Guarantees. On 14 March 2007, Is Bank filed an application before the same court requesting that no default interest be deemed to have accrued, since NHA had not sought to enforce the judgment granted in its favour.
58.
On 1 November 2007, Pakistan filed a request for provisional measures seeking that Bayindir ensures the withdrawal of Is Bank’s application of 14 March 2007. On 30 November 2007, Bayindir filed a response to Pakistan's request. In accordance with the directions of the Tribunal, the Parties further submitted a reply and a rejoinder, respectively, on 19 December 2007 and on 7 January 2008.
59.

On 14 April 2008, the Tribunal issued Procedural Order No. 11 (PO#11) on the Respondent's request for provisional measures. The operative part of PO#11 provided as follows:

On the basis of the foregoing reasons, having reviewed the parties’ written submissions, the Tribunal issues the following order:

(i) Bayindir shall take whatever steps may be necessary and use its best endeavours to procure the withdrawal by Is Bank of its application dated 14 March 2007;

(ii) In accordance with the rationale of the Tribunal’s decision of 29 November 2004, Pakistan shall take whatever steps may be necessary to ensure that NHA does not enforce any final judgment it may obtain from the Turkish courts with regard to the encashment of interest on the Mobilisation Advance Guarantees;

(iii) The foregoing directions remain in effect until (a) an arbitral award is rendered on the merits; or (b)•they are amended or revoked by order of the Tribunal;

(iv) The Tribunal will rule on the costs of this application in its decision on the merits of the dispute.

(PO#11, 41)

60.
At the same time, on 30 November 2007, Bayindir filed a request for provisional measures seeking in substance the Tribunal’s recommendation that NHA be caused to discontinue the arbitration under way in Pakistan with regard to the Contract. On 19 December 2007, Pakistan submitted a response to Bayindir’s Request seeking its dismissal. In accordance with the directions of the Tribunal, the Parties further submitted a reply and a rejoinder, respectively, on 7 and 16 January 2008.
61.

Also on 14 April 2008, the Tribunal issued Procedural Order No. 12 (PO#12) on the Claimant's request for provisional measures. The operative part of PO#12 provided as follows:

On the basis of the foregoing reasons, the Tribunal:

(i) denies Bayindir’s request "that Respondent should be instructed to ensure that NHA desists from pursuing the arbitration in Pakistan that was suspended under Procedural Order No. 1, which NHA has since restarted, or be caused to suspend such, proceedings pending resolution of this dispute before this Tribunal";

(ii) will rule on the costs of this application in its decision on the merits.

(PO#12, 30)

62.
At the end of the hearing on the merits, the Respondent inquired into the implementation of PO#11 and the Claimant undertook to revert shortly to the Respondent and the Tribunal on this issue.
63.
By letter of 16 June 2008, the Claimant advised that it had again urged Is Bank to act promptly to respect the Tribunal's instructions given in PO#11 and attached a copy of its letter to this effect, dated 13 June 2008, as well as an English translation.
64.
By letter of 24 July 2008, the Claimant informed the Tribunal and the Respondent that Is Bank was prepared to agree with NHA to suspend the Turkish Court proceedings over NHA's claim for interest until the Tribunal's award on the merits. In accordance with the Tribunal's directions, on 1 August 2008, the Respondent filed a response in which it opposed the Claimant's proposal as insufficient and requested the Tribunal, inter alia, to order the Claimant to provide security for the amount of interest that may be forgone by NHA in case Is Bank's application would be successful. In accordance with the directions of the Tribunal, the Parties further submitted a reply and a rejoinder, respectively on 8 and 14 August 2008.
65.
On 19 August 2008, the Tribunal denied the Respondent's request for security, and invited the Parties to revert, if possible jointly, regarding the implementation of the proposal communicated by the Claimant in its letter of 24 July 2008.
66.
By letter of 29 August 2008, the Respondent stated that it could not agree with the Claimant on such implementation. The Claimant responded by letter of 4 September 2008, noting that it had again written to Is Bank in connection with PO#11. On 10 September 2008, the Tribunal invited the Respondent to clarify its position. In accordance with these directions, the Respondent clarified its position by letter of 26 September 2008, and the Claimant replied by letter of 10 October 2008. The issue raised by these submissions is addressed in section IV(E) of this Award.

C. THE JURISDICTIONAL PHASE

67.
In accordance with the timetable agreed during the preliminary hearing, on 31 December 2004, Pakistan submitted its Memorial on jurisdictional objections (Mem. J.) accompanied by one volume of contractual documents (Annexes C-1 to C-13), four volumes of legal materials (Annexes L-1 to L-43) and one volume of Documentary Exhibits (Exhibits 1 to 35). Pakistan did not append any witness statement or expert opinion.
68.
Pursuant to the timetable, Bayindir submitted its Counter-Memorial on jurisdiction on 31 March 2005, (C-Mem. J.) accompanied by one volume of documentary evidence (CX-79 to CX-124) and five volumes of legal materials (Exhibits CLEX-18 to CLEX-55). Bayindir did not append any written witness statement or expert opinion.
69.
On 9 May 2005, still according to the timetable, Pakistan submitted its Reply on jurisdiction (Reply J.) accompanied by one volume of documentary exhibits (Exhibits R-1 to R-74) and one volume of legal materials (Exhibits RL-1 to RL-22).
70.
Within the extension of time allowed by the Tribunal, on 17 June 2005, Bayindir submitted its Rejoinder on jurisdiction (Rejoinder J.) accompanied by one volume of documentary exhibits (Exhibits CX-125 to CX-156)14 and one volume of legal materials (Exhibits CLEX-56 to CLEX-61).
71.
On 5 July 2005, pursuant to Article 19 of the ICSID Arbitration Rules, the Tribunal invited Pakistan to file a written response limited to the new factual allegations contained in paragraphs 101 to 104 of the Rejoinder J. on or before 15 July 2005.
72.
On 7 July 2005, the Tribunal held a preparatory telephone conference to organize the hearing on jurisdiction for which the dates of 25, 26 and 27 July 2005 had previously been retained. None of the Parties having submitted witness statements or expert opinions, it was agreed that the hearing on jurisdiction would be limited to oral arguments.
73.
On 22 July 2005, Counsel for the Respondent informed the Tribunal that Pakistan had ratified the New York Convention and attached the ratification instrument dated 9 June, deposited with the Secretary-General of the United Nations on 14 July. He added that the New York Convention had been enacted in the form of the Recognition of Enforcement of Arbitration Agreements and Foreign Arbitral Awards Ordinance of 2005, which had come into force with retroactive effect on 14 July 2005.15
74.

The Arbitral Tribunal held the hearing on jurisdiction from 25 July 2005, starting at 11:00 am, to 26 July 2005, ending at 4:15 pm, at the Salons des Arts et Métiers, 9 bis avenue d'Iéna, Paris. In addition to the Members of the Tribunal16 and the Secretary, the following persons attended the jurisdictional hearing:

(i) On behalf of Bayindir:

• Mr. Gavan Griffith QC, Essex Court Chambers
• Mr. Farrukh Karim Qureshi; Walker Martineau Saleem
• Mr. Sadik Can; Bayindir Insaat Turizm Ticaret Ve Sanayi AS
• Mr. Zafer Baysal; Bayindir Insaat Turizm Ticaret Ve Sanayi AS
• Ms. Gokce Cicek Blcioglu
• Ms. Nudrat Ejaz Piracha

(ii) On behalf of Pakistan:

• Mr. Aftab Rashid; Ministry of Communications of Pakistan
• Mr. Raja Nowsherwan Sultan; NHA
• Lt. Col. (Ret'd.) Muhammad Azim; Consultant, NHA
• Mr. Iftikharuddin Riaz; Bhandari, Naqvi & Riaz
• Prof. Christopher Greenwood, CMG, QC; Essex Court Chambers
• Mr. V. V. Veeder, QC; Essex Court Chambers
• Mr. Samuel Wordsworth; Essex Court Chambers
• Mr. Rodman R. Bundy; Eversheds
• Ms. Loretta Malintoppi; Eversheds
• Mr. Charles Claypoole; Eversheds
• Ms. Cheryl Dunn; Eversheds
• Ms. Victoria Forman-Hardy; Eversheds
• Mr. Nicholas Minogue; Eversheds

75.
During the jurisdictional hearing, Messrs. Veeder, Greenwood, Wordsworth and Bundy addressed the Tribunal on behalf of Pakistan and Mr. Griffith addressed the Tribunal on behalf of Bayindir. At the outset of the hearing, Mr. Griffith stated on behalf of Bayindir that it was not pursuing any claims on the basis of the Contract and was henceforth only bringing claims based on the Treaty. Pakistan replied that an earlier withdrawal would have saved substantial costs and insisted that its costs incurred to defend the Contract claims be compensated.
76.
The jurisdictional hearing was tape-recorded, a verbatim transcript was taken and later distributed to the Parties (Tr. J.). It ended earlier than scheduled, both Parties having fully presented their arguments and agreeing to such change of schedule.
77.

On 14 November 2005, the Tribunal issued a decision ("Decision on Jurisdiction"), which is attached to this Award, concluding that it had jurisdiction over the claims asserted by Bayindir against Pakistan for breaches of the Treaty, namely for breaches of provisions on national and most favoured nation treatment, fair and equitable treatment and expropriation without compensation (hereinafter generally referred to as "Treaty Claims"). The operative part of the Decision on Jurisdiction stated:

For the reasons set forth above, the Tribunal makes the following decision:

a) The Arbitral Tribunal has jurisdiction over the dispute submitted to it in this arbitration.

b) The Tribunal denies Respondent's application to suspend these proceedings.

c) The Tribunal will, accordingly, make the necessary order for the continuation of the proceedings on the merits.

d) The decision on costs is deferred to the second phase of the arbitration on the merits. (Decision on Jurisdiction, operative part).

D. THE PROCEEDINGS ON THE MERITS

78.
In accordance with the timetable set by the Tribunal in Procedural Order No. 2 of 23 December 2005 (PO#2), on 25 April 2006, Bayindir submitted its Memorial on the merits (Mem. M.) accompanied by one volume of contractual documents (exhibits C-1 to C-18), nine volumes of documentary exhibits (exhibits CX-1 to CX-123), including two witness statements (exhibits CX-7 and CX-68, this latter accompanied by annexures A to Z), and four volumes of legal exhibits (exhibits CLEX-1 to CLEX-47).
79.
On 25 August 2006, pursuant to the same timetable, Pakistan submitted its CounterMemorial on the merits (C-Mem. M.) accompanied by four volumes of documentary evidence (exhibits CM-1 to CM-197), three volumes of witness statements (with five witness statements, the first one being accompanied by exhibits RB-1 to RB-87) and two volumes of legal materials (Exhibits CM LEX-1 to CM LEX-15).
80.
In accordance with PO#2, as amended by Procedural Order No. 5 of 18 January 2007 (PO#5) and the Tribunal's directions of 19 January 2007, on 21 February 2007 Bayindir submitted its Reply on the merits (Reply M.) accompanied by two volumes of witness statements (exhibits CX-124 to CX-127), eight volumes of documentary exhibits (exhibits CX-128 to CX-261) and two volumes of legal materials (exhibits CLEX-48 to CLEX-74).
81.
On 30 April 2007, after considering the views of the Parties, the Tribunal decided to invite Mr. John Wall of the World Bank to appear as a witness to be questioned by the Tribunal on the basis of a list of questions to be submitted to him in advance. Further, in accordance with PO#5, the Parties filed their list of witnesses and experts for direct and cross-examination on 29 May 2007.
82.
On 24 May 2007, according to PO#2, PO#5, and the Tribunal's directions of 4 May 2007, Pakistan submitted its Rejoinder on the merits (Rej. M.) accompanied by three volumes of documentary exhibits (exhibits R-1 to R-79), four volumes of witness statements and expert opinions with annexures and five volumes of legal materials (exhibits R LEX-1 to R LEX-50).
83.
By letter of 3 June 2007, the Claimant requested inter alia that "the Tribunal adopt an appropriate order, in consultation with the parties, for rescheduling of the oral hearing" and that it also reschedule the telephone conference to be held on 5 June 2007.
84.
On the following day, the Tribunal acknowledged receipt of Bayindir’s request for postponement and informed the Parties that it had decided to maintain the telephone conference and to discuss the Claimant’s request for postponement of the hearing at the outset of the telephone conference.
85.
The telephone conference was held as scheduled. During the course of the telephone conference, the Tribunal drew the Parties’ attention to the fact that a postponement of the hearing would lead to a significant delay in the proceedings, since the Tribunal’s next availability for a 10-day hearing was in May 2008. Bayindir nevertheless confirmed its request and Pakistan agreed with it. It was further agreed that the Parties would jointly report to the Tribunal on the status and on the need to resume the proceedings by 10 August 2007.
86.
On this basis, the Tribunal issued Procedural Order No. 8 of 20 June 2007 (PO#8) inter alia postponing the hearing on the merits, inviting the Parties to report on 10 August 2007 and reserving the period from 26 May to 4 June 2008 in case a hearing would be needed.
87.
The Parties reported as scheduled and requested that the proceedings be resumed. They submitted a common position on the duration of the hearing and other procedural matters and separate proposals on the time allocation and the schedule of the hearing.
88.
On 22 August 2007, in accordance with PO#8, the Tribunal held another telephone conference to address issues arising from the Parties' joint report of 10 August 2007. Following this telephone conference, the Tribunal issued Procedural Order No. 9 of 27 September 2007 (PO#9) giving detailed directions for the conduct of the hearing on the merits to be held from 26 May 2008 to 4 June 2008.
89.
Shortly before the hearing, on 12 May 2008, the Tribunal held a preparatory telephone conference to address any outstanding organizational issues after which it issued further directions for the hearing.
90.

The Arbitral Tribunal held the hearing on the merits from 26 May to 4 June 2008 at the International Centre for Dispute Resolution, in London. In addition to the Members of the Tribunal,17 the following persons attended the hearing on the merits:

(i) On behalf of Bayindir:

• Mr. Stanimir Alexandrov; Sidley Austin LLP
• Ms. Marinn Carlson; Sidley Austin LLP
• Ms. Jennifer Haworth McCandless; Sidley Austin LLP
• Mr. Theodore Kill; Sidley Austin LLP
• Ms. Meredith Moroney; Sidley Austin LLP
• Mr. Farrukh Karim Qureshi; Samdani & Qureshi
• Mr. Nudrat Piracha; Walker Martineau Saleem
• Mr. Kamuran Çortük; Bayindir
• Mr. Hasan Mutlu Akpinar; Bayindir
• Mr. Guray Mik; Bayindir
• Mr. Ha§im Bora Ozerman; Bayindir

(ii) On behalf of Pakistan:

• The Hon. Malik Muhammad Qayyum; Attorney General for Pakistan
• Prof. Christopher Greenwood, CMG, QC; Essex Court Chambers
• Mr. Samuel Wordsworth; Essex Court Chambers
• Mr. Rodman R. Bundy; Eversheds
• Ms. Loretta Malintoppi; Eversheds
• Mr. Nicholas Minogue; Eversheds
• Mr. Iftikharuddin Riaz; Bhandari, Naqvi & Riaz

91.
During the hearing, Messrs. Greenwood, Wordsworth and Bundy addressed the Tribunal on behalf of Pakistan and Mr. Alexandrov and Ms. Carlson addressed the Tribunal on behalf of Bayindir.
92.
The hearing on the merits was transcribed and the transcript was distributed to the Parties at the end of each day. The complete version of the verbatim transcript was later distributed to the Parties (Tr. M.), one confidential portion being subject to limited distribution.
93.
At the end of the hearing on merits the Tribunal directed the Parties to submit simultaneous post-hearing briefs on 16 July 2008 and cost statements on 1 September 2008. The deadline for the submission of the Parties' cost statements was later extended to 26 September 2008. Following the hearing the Tribunal confirmed these directions in writing.
94.
Accordingly, the Parties submitted simultaneous post-hearing briefs on 16 July 2008. (PHB [Bay.] and PHB [Pak.]) and cost statements on 26 September 2008.

III. THE PARTIES' POSITIONS

95.
The Tribunal has deliberated and thoroughly considered the Parties’ written submissions on the merits and the oral arguments delivered in the course of the evidentiary hearing. It will now summarize the positions of the Parties (III) and analyze the issues in dispute (IV) before setting out the relief granted (V).

A. BAYINDIR'S POSITION AND REQUEST FOR RELIEF

96.
Bayindir's position is essentially the following:

"[thel Respondent, acting at the highest levels of the Government of Pakistan, exercised its sovereign prerogative to change government policy about the M-1 motorway in the face of budget shortfalls, advice from international organizations, and internal opposition to the M-1 Project. While no one would contest the Government of Pakistan's right to decide that it could no longer afford a 'Mercedes' motorway, such a decision could not be made without consequences. The hearing made clear that Respondent sought to escape those consequences by dressing its policy decision in ill-fitting contractual garb in order to expel Bayindir from the Project. In so doing, Respondent engaged in unfair and inequitable conduct, it expropriated Bayindir's investment in the M-1 Project, and it treated Bayindir less favorably than the Pakistani contractors that replaced Bayindir on the same Project. Respondent's conduct in violation of the Treaty is thus manifested in, but is not limited to, the act of expelling Bayindir from the M-1 Project. Respondent's subsequent conduct - in ensuring that Bayindir was stripped of all prospects of contractual recovery, and in destroying the Bayindir Group with an unjustified call on the mobilization advance guarantees - also gave rise to Treaty breaches."
(PHB [Pak.] ¶ 3)

97.
More specifically, in its written and oral submissions, Bayindir advanced the following main contentions:

(i) The Respondent breached the protections afforded by the Treaty through three series of actions, involving the expulsion of Bayindir, the conduct following Bayindir's expulsion, and the attempted encashment of the Mobilisation Advance Guarantees;

(ii) Pakistan breached the fair and equitable treatment standard to which Bayindir is entitled on the basis of the MFN clause contained in Article II(1) of the Treaty by reason of its expulsion of Bayindir for motives unrelated to Bayindir's performance of the Contract, through its efforts to frustrate and extinguish any rights Bayindir may have retained under the Contract, and through its arbitrary and unfair attempts to encash the Mobilisation Advance Guarantees.

(iii) Pakistan breached the MFN and national treatment standards contained in Article II(1) and (2) of the Treaty by reason of its expulsion of Bayindir to favour local contractors, its more favourable treatment of both local contractors and other foreign contractors, its actions following Bayindir's expulsion, and its attempts to encash the Mobilisation Advance Guarantees.

(iv) Pakistan breached the guarantee against expropriation without compensation given in Article III(1) of the Treaty by reason of its expulsion of Bayindir, its efforts to complete the deprivation of Bayindir's investment following said expulsion, and its call on the Mobilisation Advance Guarantees.

98.
On the basis of these contentions, Bayindir requested in its Memorial that the Tribunal

"[F]ind the Respondent has violated the Claimant's rights under the Treaty. The acts and omissions of Pakistan and its emanation, the NHA, for which the Respondent is internationally responsible, have denied the Claimant fair and equitable treatment, the most favored nation treatment/national treatment and have expropriated Claimant's investment without compensation. As a result of that conduct, Claimant is entitled to and request that the Tribunal award to the Claimant compensation and damages in the amount of US$ 756,196,108.00 inclusive of compound interest. The conduct of the Respondent has caused irreparable damage to the reputation of the Claimant in respect of which the Claimant reserves its right to submit an additional claim in respect thereof.
In addition the Claimant requests that it be awarded litigation costs and expenses."
(Mem. M., ¶ 287)

99.

In its Reply, the Claimant requested the following relief:

"In view of the above Bayindir respectfully seeks the following relief from the Tribunal:

(i) Declaring that Pakistan has breached its obligations under Article II(2) of the Treaty by failing to observe obligations that it entered into with regard to Bayindir's investment.

(ii) Declaring that Pakistan has breached its obligations under the Treaty by failing to accord to Bayindir fair and equitable treatment.

(iii) Declaring that Pakistan has breached Article III of the Treaty by indirectly expropriating Bayindir's investment without complying with the requirements of the Treaty.

(iv) Ordering Pakistan to pay to Bayindir full compensation and damages in the amounts set forth below:

a) US$ 22,650,834 payable on account of Certified Payment Certificates;

b) US$ 60,234,608 on account of value of Works completed up till the date of Expulsion;

c) US$ 34,188,378 on account of value of Machinery, Plant, Equipment, Spare Parts etc;

d) US$ 4,265,164 on account of Costs of Camp facilities;

e) US$ 3,877,075 on account of value of Custom Guarantee letters;

f) US$ 121,770,030 on account of Loss of Profit;

g) US$ 21,474,234 on account of reimbursement of costs incurred by Bayindir in anticipation of completing the Project;

h) US$ 219,842,618 on account of Loss of opportunity;

i) US$ 96,600,000 on account of Punitive Damages;

j) Plus pre-and post-award compound interest as prayed for in the Memorial;

(v) Ordering Pakistan to return to Bayindir the Performance Bond;

(vi) Ordering Pakistan to return the Letters of Guarantee issued by the consortium of Turkish Banks;

(vii) Ordering Pakistan to pay all costs and expenses of this arbitration proceedings, including the fees and expenses of the Tribunal and the cost of Bayindir's legal representation, plus interest thereon;

(viii) Such other or additional relief as may be appropriate under the Treaty or may otherwise be just and appropriate in the circumstances of this case."

(Reply M., pp. 200-201).

100.
In its post-hearing submission, the Claimant requested the following relief:

"[Alward it compensation in the amount of US $494.6 million plus interest of 8% compounded annually. In addition, Respondent must be permanently barred from enforcing any Turkish court judgments or otherwise seeking to encash the mobilization advance guarantees. Bayindir also respectfully requests an award of its legal fees and other costs incurred in connection with this proceeding." (PHB [Bay.] ¶ 126)

B. PAKISTAN'S POSITION AND REQUEST FOR RELIEF

101.
Pakistan's position is essentially the following:

"Bayindir's claim turns on the allegation that Pakistan treated Bayindir in a way which was not fair and equitable; its allegations of other treaty breaches are little more than window dressing and its claim for expropriation flies in the face of authority and common sense. There is no legal basis on which Bayindir could succeed in its other claims if it fails on fair and equitable treatment.
In an attempt to sustain that case for unfair and inequitable treatment, Bayindir has made numerous wild allegations about conspiracy, improper motivation and bad faith [...] Bayindir bears the burden of proof on those allegations and it has failed to discharge that burden. On the contrary, the record [...] shows that there was no conspiracy and no improper motive and that both NHA and the Government of Pakistan acted in good faith throughout."
(PHB [Pak.] ¶¶ 1.17-1.18)

102.
More specifically, in its written and oral submissions, Pakistan advanced the following main arguments:

(i) Bayindir's claim that it was denied fair and equitable treatment is unfounded as it is not based on any specific fair and equitable treatment clause that could be applied through the MFN clause in the Treaty, and Bayindir has failed to establish that its expulsion as well as Pakistan's acts following said expulsion were anything else than Pakistan's legitimate exercise of its rights under the Contract;

(ii) Bayindir's claims for breach of the MFN and national treatment clauses contained in Article II paragraphs (1) and (2) of the Treaty and discrimination are unfounded to the extent that Bayindir has failed to establish any conduct of Pakistan aimed at favouring local or other foreign contractors over Bayindir;

(iii) Bayindir's claim for breach of the expropriation clause contained in Article III(1) of the Treaty is unfounded, in particular because Bayindir's expulsion was in accordance with the Contract, because Bayindir retained rights under the Contract to a final settlement, and because the plant and equipment left at the site were treated in accordance with the Contract;

(iv) Bayindir's claim for breach of the expropriation clause in connection with the attempts to encash the Mobilisation Advance Guarantees is unfounded, especially because it concerns separate parties, because it is new and the Tribunal has no jurisdiction over it, and because these guarantees are in any event not an investment and have not been expropriated.

103.
In reliance on these arguments, Pakistan set forth the following requests in its Counter Memorial:

"On the basis of the facts and legal considerations set out in this CounterMemorial, and rejecting all contrary submissions made by Bayindir, Pakistan respectfully requests the Tribunal to adjudge and declare:
(i) that the Respondent has not breached the Pakistan-Turkey Treaty with respect to the claims introduced by the Claimant, and that the Claimant's claims are thereby rejected; and
(ii) that the Claimant reimburse the Respondent for the costs and expenses the Respondent has incurred as a result of this arbitration."
(C-Mem. M., p. 175).

104.
In its Rejoinder, Pakistan requested the Tribunal to conclude as follows:

"On the basis of the facts and legal considerations set out in this Rejoinder, and rejecting all contrary submissions made by Bayindir, Pakistan respectfully requests the Tribunal to adjudge and declare:
(i) that the Respondent has not breached the Pakistan-Turkey Treaty with respect to the claims introduced by the Claimant, and that the Claimant's claims are thereby rejected; and
(ii) that the Claimant reimburse the Respondent for the costs and expenses the Respondent has incurred as a result of this arbitration."
(Rej. M., p. 168).

105.

In its post-hearing submission, Pakistan concluded as follows:

"Pakistan's primary submission is that Bayindir's claim fails and that there is no liability in damages at all [...].
On the basis of the above, the maximum sum that may be found as owing to Bayindir is $ US14,612,315, as shown in Table 2 below [...].
It follows from Table 2 that NHA, not Bayindir, is very substantially out of pocket.
If a set-off were appropriate, NHA would recover the amount of US$78,078,592.
As Table 2 shows, this is an exceptional case, as the Claimant has been paid very considerable sums up front. That must not, however, impact on the sums that the Claimant may be awarded in damages. The reality is that Bayindir did not spend a very significant portion of the mobilisation advance on the Project, and it should not be allowed to recover on the basis that it did."
(PHB [Pak.] ¶¶ 7.1,7,126-128).

Pakistan's statement that it may be found to owe at most approximately US$14.6 million reflects an alternative position for the event that the Tribunal would find liability (PHB [Pak.] ¶ 7.1)

106.
While Part I of this Award summarizes the main facts and Part III the main arguments of the Parties, other arguments were made and considered by the Tribunal. They will be referred to in Part IV to the extent that the Tribunal considers necessary.

IV. ANALYSIS

A. PRELIMINARY MATTERS

107.
The Tribunal has reviewed all of the numerous arguments presented by the Parties. The manner in which the Claimant has pleaded its case has not facilitated the Tribunal's task. Although it has considered the entire record, the Tribunal will rely more particularly on the arguments last presented by Claimant and concentrate on those arguments that it itself regards as decisive for the outcome of the dispute.
108.
Before turning to the actual issues raised by the claims, the Tribunal wishes to address certain preliminary matters, i.e., the law applicable to the merits of the present dispute (a), the attribution of NHA's acts to the Respondent under international law (b); the applicability ratione temporis of the Treaty (c); the requirements for establishing a treaty claim in the context of a contractual relationship (d), the allocation of the burden of proof (e), and the relevance of previous ICSID decisions or awards (f).

a. The law applicable to the merits

109.
The present proceedings are based on the "Agreement between the Republic of Turkey and the Islamic Republic of Pakistan Concerning the Reciprocal Promotion and Protection of Investments" of 16 March 1995 (the "Treaty"), which entered into force on 3 September 1997. It is common ground that the Tribunal must decide the merits of the case on the basis of the Treaty. As the Claimant notes, "[treaty claims] are analyzed under the Treaty's legal standards and advanced under the Treaty's procedures, not those of the Contract" (PHB [Bay.] ¶ 2). Similarly, the Respondent states that "... the present case turns on one question: does the conduct of Pakistan amount to a breach of the bilateral investment treaty between Pakistan and Turkey" (PHB [Pak.] ¶ 1.4).
110.

In deciding these questions the Tribunal will take into account the applicable rules of international law.18

b. Attribution of NHA's acts

111.
In their submissions on the merits, both Parties have focused their argumentation on whether the acts of NHA amounted to an exercise of sovereign authority or merely of contractual rights. Before dealing with this distinction, the Tribunal must logically first review whether the acts of NHA allegedly in breach of the Treaty are attributable to Pakistan.
112.
When specifying in its post-hearing brief the acts in breach of the Treaty, the Claimant refers to (i) the expulsion of Bayindir, (ii) following the expulsion, the failure by NHA to proceed to a number of actions under the Contract (such as the evaluation of the works completed, the certification of certain IPAs (Interim Payment Application), the payment of certain IPCs, or the refusal to acknowledge and certify extensions of time granted by the Engineer) and NHA's claim for approximately US$ 1 billion in the Pakistani arbitration, and (iii) the actions taken in connection with the encashment of the Mobilisation Advance Guarantees.
114.
Without clearly distinguishing between each of these three series of acts, the Claimant argues in essence that the Government of Pakistan, in the exercise of its sovereign prerogatives, took the decisions that led to the violation of Bayindir's rights under the Treaty, and that these decisions were subsequently implemented by NHA through contractual means. More specifically, while acknowledging that "[tlhe Contract to construct the M-1 Motorway was entered into between Bayindir and NHA" (PHB [Bay.] ¶ 20), the Claimant argues that

"the key decisions with respect to Bayindir's ongoing involvement in the M-1 Project, including ultimately the decision to expel Bayindir, were repeatedly referred to and taken by others at the highest levels of the Government of Pakistan, including the head of state of the Islamic Republic. The involvement of these government actors, above and outside of NHA, in itself demonstrates that the decision to expel Bayindir was a sovereign and not a contractual act [...] the record is clear that decisions on the M-1 Project were referred to senior government officials and agencies above NHA, and ultimately to General Musharraf himself." (PHB [Bay.] ¶ 20)

115.
Referring to the decision in Wena Hotels,20 Bayindir further contends that even if the Tribunal were to conclude that the Respondent had no involvement in the Treaty-violative acts taken against Bayindir, the record shows that the Respondent "took no steps to prevent the unjustified expropriation of Bayindir's investment or the discriminatory and unfair treatment to which Bayindir was subjected" (PHB [Bay.] ¶ 33). More specifically, it asserts that

"[t]here can be no question that the Government of Pakistan at a minimum was well aware of the expulsion of Bayindir and the attempted encashment of the guarantees. The expulsion was discussed with General Musharraf, and the attempted encashment was coordinated with Pakistan's Foreign Office. At the very least, Respondent stood by and did not act to protect Bayindir or its investment from mistreatment by entities under its control." (PHB [Bay.1 ¶ 33).

116.
Pakistan concedes that there was some government involvement, but insists that the decisions allegedly in breach of the Treaty were taken in the exercise of NHA's contractual rights as opposed to the exercise of sovereign prerogatives, or in the words used in the post-hearing brief:

"the decision to expel was made by NHA, acting on its own following the issuance of a Clause 63.1 Certification by the Engineer, subsequent to 12 April 2001, albeit with the high level approval that – so far as concerns the general diplomatic fallout – it could act in accordance with the terms of the Contract [... ] the case comes down to the exercise by NHA of a contractual right, divorced from interference by the State. The fact that President Musharraf might have, but did not, discourage NHA from exercising its contractual rights because of broader diplomatic reasons in no way constitutes relevant interference." (PHB [Pak.1 ¶¶ 2.76, 2.78)

117.
It is not disputed that it was NHA which exercised the rights under the Contract in a manner allegedly in breach of the Treaty. The debate thus hinges on the following questions: (i) whether NHA is an organ of the State; (ii) whether NHA is an instrumentality acting in the exercise of governmental powers; and (iii) whether NHA acted under the direction or control of the State. These issues were not clearly articulated in the Parties' submissions and pleadings on the merits, but they received attention in earlier phases of the proceedings. The Tribunal considers nevertheless that issues (i) to (iii) are implied in the Parties' arguments and constitute a necessary step in the Tribunal's analysis.
118.

Given NHA's position as Bayindir's contract partner, the logical starting point for the Tribunal's analysis is question (i). In its RP, Bayindir argued that Pakistan was the proper party and that:

"attempts to view NHA as somehow structurally or functionally distinct from the Government of Pakistan are erroneous as can be seen on review of, inter alia, the following:

-NHA's constituting statute, which places the Prime Minister, Minister of Finance and Minister of Communications in control of this entity [...]
-The purposes and duties of NHA are clearly national in scope, as both the name 'National Highway Authority' and the purposes of the NHA Act make plain [...]
-In both the 1993 Contract and 1997 Contract, Bayindir contracted with 'NATIONAL HIGHWAY AUTHORITY, GOVERNMENT OF PAKISTAN' [...]
-The February 9, 2000 Minutes of Meeting which recorded the extensions of time permitted to Bayindir for the one of the Priority Sections, were negotiated with, and then recorded by, the Government of Pakistan [...] After Bayindir had been expelled from Site, it was the Pakistani Ministry of Communications which explained on behalf of the Pakistan Government that it was to the benefit of the Government and local contractors that Bayindir was removed [...]
- Claim concerns BIT breaches, not contractual breaches"
(RP ¶ 129)

126.
This finding is comforted by the fact that the Respondent conceded in its oral and written submissions (see for instance Tr. M., 26 May 2008, 155, 6-23, 4 June 2008, 174, 13-22, 223, 13-16; PHB [Pak.] ¶¶ 2.76, 2.78) that the government was involved to a certain degree in the M-1 Project. So for instance, in the opening statement:

"[O]ne of the refrains you heard this morning repeatedly was, 'The Government of Pakistan, contrary to what the Respondent is trying to tell you, kept intervening in this Contract'. The Government of Pakistan was closely interested in this Contract, as any responsible Government being asked to stump up hundreds of millions of Dollars, is going to be. But there is another reason why the Government of Pakistan was involved, and that is that the Claimant kept asking it to get involved."
(Tr. M., 26 May 2008, 155, 6-17).

127.
Or in the post-hearing brief:

"the decision to expel was made by NHA, acting on its own following the issuance of a Clause 63.1 Certification by the Engineer, subsequent to 12 April 2001, albeit with the high level approval that – so far as concerns the general diplomatic fallout – it could act in accordance with the terms of the Contract."
(PHB [Pak.] ¶ 2.76)

c. Applicability ratione temporis of the Treaty

131.
Another preliminary question concerns the applicability ratione temporis of the Treaty. Pursuant to Article IX(1), the Treaty "shall apply to investments existing at the time of entry into force as well as to investments made or acquired thereafter." It is therefore clear that whether made prior to or after the entry into force of the Treaty on 3 September 1997, an investment benefits from the protections of the Treaty.
132.
However, in accordance with the well-established principle of non-retroactivity of treaties and absent any indication to the contrary in the text of the Treaty itself, the protections accorded by the Treaty can only apply to acts committed after its entry into force.23 In the present case, no issue arises in this respect as the disputes arising out of the events pre-dating the entry into force of the Treaty were settled (see Exh. [Bay.] C-17, C-8). That notwithstanding, the Tribunal considers that acts pre-dating the entry into force can be taken into account to the extent that they may assist in understanding the significance of acts which do fall within the scope of the Treaty ratione temporis.

d. Treaty claim in the context of a contractual relationship

133.
The Parties are at odds on the significance of contract matters in the assessment of treaty claims. Referring to Vivendi I,24SGS v. Pakistan25 and Impregilo v. Pakistan,26 Bayindir argues in substance that

"A breach of the Contract [... ] is not a necessary precondition for this Tribunal to find that Respondent violated its Treaty obligations; these are independent inquiries. What Claimant must establish, and has established here, is one or more violations by Respondent of its Treaty obligations."
(PHB [Bay.] ¶ 7)

134.
In contrast, Pakistan argues that "it is not the role of this Tribunal (as it has rightly reminded the Parties) to substitute itself for the contractual tribunal to which Bayindir could have taken its case against NHA" (PHB [Pak.] ¶ 1.4). However, it asserts that

"a breach of Contract by the NHA is a necessary, but not a sufficient condition of a breach of the BIT. In the absence of a breach of Contract there cannot be a breach of the Treaty in this case [...] It is a well-established proposition that a breach of Contract by the State is not in itself a breach of international law. That is still more true when one looks at a breach of Contract not by a State, but by a State agency such as the NHA [...] They have got to show more than just an ordinary breach of Contract."
(Tr. M., 26 May 2008, 164-166: 18-22, 15-20, 6-7).

137.

These considerations do not imply that the assessment of a treaty breach in the context of a contractual relationship requires a determination that the contract has been breached. Breach of contract and breach of treaty are separate questions giving rise to separate inquiries. Or in the words of the ad hoc Committee in Vivendi v. Argentina :

"whether there has been a breach of the BIT and whether there has been a breach of contract are different questions. Each of these claims will be determined by reference to its own proper or applicable law in the case of the BIT, by international law; in the case of the Concession Contract, by the proper law of the contract."31

And in the same vein, Impregilo v. Pakistan :

"[T]he fact that a breach may give rise to a contract claim does not mean that it cannot also – and separately – give rise to a treaty claim. Even if the two perfectly coincide, they remain analytically distinct, and necessarily require different enquiries."32

Or in the words of the tribunal in Duke Energy :

"[I]n and of itself the violation of a contract does not amount to the violation of a treaty. This is only natural since treaty and contract breaches are different things, responding to different tests, subject to different rules."33

e. Burden of proof

140.
The Parties concur that the burden of proving treaty breaches lies upon Bayindir (PHB [Bay.] ¶ 7, PHB [Pak.] ¶ 1.5). They disagree, however, on the relevant standards.
142.
The Tribunal notes that, in its reference to the Corfu Channel case, the Claimant has omitted to mention that the Court expressly held that "proof may be drawn from inferences of fact, provided that they leave no room for reasonable doubt."37 Hence, the Tribunal will have to assess whether or not the evidence produced by the Claimant is sufficient to exclude any reasonable doubt.

f. The relevance of previous ICSID decisions or awards

144.
In support of their positions, both Parties have relied extensively on previous ICSID decisions and awards, either to conclude that the same solutions should be adopted in the present case or in an effort to explain why this Tribunal should depart from a certain solution.

B. FAIR AND EQUITABLE TREATMENT

a. Importation of FET obligation by operation of MFN clause

1. Bayindir's position

2. Pakistan's position

150.
The Respondent argues that reliance on the MFN clause of the Treaty to import an FET clause from another BIT is only possible if it is not excluded by the intention of the contracting parties at the time of signing the Treaty. In the present case, the intention had clearly been to exclude the FET standard to the extent that Turkey and Pakistan deliberately decided not to include an FET clause in the Treaty "notwithstanding that the preamble acknowledges the importance of fair and equitable treatment and clauses requiring such treatment [... ] were already common by 1995 when the Pakistan-Turkey BIT was signed" (Rej. M., ¶ 4.7).
151.
With respect to the Pakistan-UK BIT to which Claimant makes special reference, the Respondent noted at the hearing that the Claimant's interpretation would mean that the decision of Pakistan and Turkey not to include an FET guarantee, while including an MFN clause, would have had no effect at all, given that the Pakistan-UK BIT was already in force (Tr. M., 26 May 2008, 299, 1-12).

3. Tribunal's determination

b. Identification of the FET obligation

1. Bayindir's position

2. Pakistan's position

162.
As discussed above, Pakistan objects to importing Article II(2) of the Pakistan-UK BIT into the Treaty, arguing that the Pakistan-UK BIT pre-dates the Treaty and, therefore, Turkey and Pakistan could not have intended to include that FET obligation into the Treaty.

3. Tribunal's determination

164.
At the outset, the Tribunal notes that the basis for importing an FET obligation into the Treaty is provided by its MFN clause, from which it follows that the applicable FET standard is a self-standing treaty obligation as opposed to the customary international minimum standard to which the Respondent referred. That being so, whether international customary law and the observations of other tribunals in applying the minimum standard may be relevant here will depend upon the terms of the applicable FET standard.
166.
A comparison between Article II(2) of the Pakistan-UK BIT and Article 4 of the Pakistan-Switzerland BIT suggests that the FET protection offered by these two provisions is very similar. There is a difference, however, between the two treaties in terms of chronology. The Pakistan-UK BIT was concluded before and the Pakistan-Switzerland BIT after the Treaty. This difference matters in connection with the Respondent's objection that, when they concluded the Treaty, Turkey and Pakistan cannot have intended to include an FET clause such as the one in the Pakistan-UK BIT or else they would have inserted an express provision. That argument only applies to clauses that pre-date the conclusion of the Treaty. It does not apply to Article 4 of the Pakistan-Switzerland BIT which was concluded after the Treaty. The fact that the latter entered into force thereafter is irrelevant to ascertain the intention of the State parties at the time of conclusion. As a result, the Tribunal cannot follow Respondent's chronological objection.

c. Content of the FET standard

1. Bayindir's position

168.

It is Bayindir's submission that the applicable FET standard is based on a treaty and is therefore not limited to the minimum standard under customary international law (Reply M., ¶¶ 257-280) :

"Article II(2) of the UK-Pakistan BIT contains no such limitation, either on its face or in substance. Nor do any of the other Pakistan BITs that I have just mentioned [with Lebanon, Sri Lanka, Australia and Denmarkl."
(Tr. M., 26 May 2008, 116, 19-22)

With reference to PSEG v. Turkey,51 it adds that the applicable FET standard is "a freestanding obligation which does not depend for its meaning on the customary international law minimum standard of treatment" (Tr. M., 4 June 2008, 94, 5-8).

169.
Regarding the content of the applicable standard of fair and equitable treatment, the Claimant has submitted that

"Fair and equitable treatment [...] includes a number of component principles, including, the provision of a stable framework for the investment; refraining from arbitrary and discriminatory conduct; providing transparency and due process; acting in good faith; providing security for reasonable investment-backed expectations and refraining from harassment, intimidation and coercion of the investor."
(Mem. M., ¶ 148)

170.
In reliance on Tecmed,52 Bayindir further submits that the FET standard protects the basic expectations taken into account by a foreign investor in making the investment, and requires the State to act in a "consistent and transparent manner so that the investor can adapt to comply with shifts in Government policies" (Tr. M., 26 May 2008, 119, 1-3) and "to maintain a stable framework for investment" (Tr. M., 26 May 2008, 119, 3-5). Tecmed v. Mexico defines the components of FET as follows:

"[t]o provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment. The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations. Any and all State actions conforming to such criteria should relate not only to the guidelines, directives or requirements issued, or the resolutions approved thereunder, but also to the goals underlying such regulations. The foreign investor also expects the host State to act consistently, i.e., without arbitrarily revoking any preexisting decisions or permits issued by the State that were relied upon by the investor to assume its commitments as well as to plan and launch its commercial and business activities. The investor also expects the State to use the legal instruments that govern the actions of the investor or the investment in conformity with the function usually assigned to such instruments, and not to deprive the investor of its investment without the required compensation."53

171.
The Claimant also relies in particular on Saluka v. The Czech Republic,54 Eureko v. Poland,55 and Victor Pey Casado v. Chile56 to submit that the unreasonable frustration of an investor's good faith efforts to solve a problem may amount to a breach of the FET standard, particularly when such frustration involves discriminatory action in favour of host State nationals (Tr. M., 26 May 2008, 119-120, 16-25, 1; 4 June 2008, 96, 4 17).
172.
Finally, Bayindir contends that unfair and inequitable treatment does not need to be identified "on the basis of individual or isolated acts" (Mem. M., ¶ 149), but that the Tribunal must appreciate whether "in all the circumstances the conduct in issue is fair and equitable or unfair and inequitable" (Mem. M., ¶ 149). It refers in this regard to Desert Line v. Yemen57(Tr. M., 26 May 2008, 120, 2-8).

2. Pakistan's position

173.
Pakistan submits that even if the FET provision in the Pakistan-UK BIT were to be applied, the content of such provision is linked to the existing standards of customary international law (Tr. M., 26 May 2008, 300-301, 16-25, 1-3). It refers in particular to Siemens v. Argentina,58 which "says that one has to look for the content of that standard in international law" (Tr. M., 26 May 2008, 303, 20-22).
174.
Moreover, it is Pakistan's submission that the content of the applicable FET standard should be assessed not by reference to the Tecmed case, which is controversial and concerned a different situation, but rather by reference to Thunderbird v. Mexico,59 which stands for the proposition that "the threshold [for a breach of FETl remains a high one" (Tr. M., 26 May 2008, 303, 18-19). It adds that Tecmed does not provide an authoritative statement of the general content of the FET standard and must be regarded as "the high watermark of one particular view of fair and equitable treatment" (Tr. M., 26 May 2008, 302, 23-25). It also challenges its relevance as it concerned a different situation.
175.
Furthermore, Pakistan submits, following Mondev v. United States60 and ADF v. United States,61 that the Tribunal may not adopt its own idiosyncratic standard of what is fair or equitable without reference to established sources of law, as Bayindir seems to imply (Rej. M., ¶¶ 4.44 – 4.46).

3. Tribunal's determination

177.
In its Decision on Jurisdiction, the Tribunal stated by reference to Tecmed v. Mexico that it could not rule out prima facie that Pakistan's fair and equitable treatment obligation comprised an obligation to maintain a stable framework for investments62 and that "a State can breach the 'stability limb' of its [FETl obligation through acts which do not concern the regulatory framework but more generally the State's policy towards investments."63 It must now define the contours of the FET standards for purposes of the merits.
182.
On the basis of the FET standard as defined above, the Tribunal will now examine the disputed conduct of Pakistan before (d) and after the expulsion (e), as well as in connection with the encashment of the Guarantees (f), or when all of the Respondent‟s acts are considered together (g). In doing so, the Tribunal will bear in mind that "a judgment of what is fair and equitable [...l must depend on the facts of the particular case"77 and that the standard "must be adapted to the circumstances of each case."78

d. Conduct leading to the expulsion of Bayindir

183.
The Tribunal will discuss in turn Bayindir's case relating to the frustration of its reasonable expectations (i), the existence of a conspiracy to expel it (ii), undue pressure and coercion (iii), and the lack of due process and procedural fairness (iv).

(i) Were Bayindir's reasonable expectations frustrated?

1. Bayindir's position

184.
The Claimant argues in essence that its reasonable expectations that the legal framework affecting its investment would remain stable and that the Respondent would cooperate in resolving any issues that could arise under the Contract were based "on a clearly perceptible and transparent legal framework and on undertakings and representations made explicitly or implicitly by Pakistan" (Mem. M., ¶ 157), and that these expectations were frustrated particularly after General Musharraf came to power in October 1999.
185.
The Claimant submits that since 1993, its investment was exposed to the "vagaries of changing political winds in Pakistan" experiencing "several drastic changes of direction" (Mem. M., ¶ 145). It explains that when the Project was revived in 1997, the then Prime Minister Nawaz Sharif "repeated assurances of Pakistan's commitment to the project" (Tr. M., 26 May 2008, 14, 20-23). It also puts forward Prime Minister Nawaz Sharif's continued interest and support for the Project in February 1999, at a time when the Respondent was allegedly having financial difficulties in pursuing the Project (Tr. M., 26 May 2008, 20, 4-17).
186.
According to Bayindir, such assurances were frustrated when General Musharraf came to power:

"[A]s soon as General Musharraf came to power, Pakistan seriously considered terminating Bayindir's Contract. The solution the Committee settled upon in November 1999 was to reduce the scope of the Project in view of financial difficulties." (Tr. M., 26 May 2008, 25, 16-21).

187.
Months later, when Bayindir agreed to Addendum No. 9 in April 2000, it was only because it believed that "with the signing of Addendum 9, Pakistan had made a serious commitment to the M-1 Project, commitment that the M-1 Project would move forward unhindered" (Tr. M., 26 May 2008, 30, 15-18). Later, as the Respondent encountered further financial problems, Bayindir claims to have had a legitimate expectation "that Pakistan would continue to support Bayindir's investment, working collaboratively to page [sic] reasonable adjustments" (Tr. M., 26 May 2008, 123, 1-3).

2. Pakistan's position

188.
The Respondent acknowledges that legitimate expectations are protected by the FET standard but refers to the decision of the a d hoc Committee in MTD v. Chile, pursuant to which such expectations "are not a substitute for the language of the Treaty itself" (Tr. M., 26 May 2008, 304, 15-17).
189.
In reliance on Aminoil,79 it also contends that in the context of an investment agreement, it is above all the text of the Contract itself which embodies the legitimate expectations of the Parties and that the Claimant could not reasonably expect that the terms of the Contract would not be enforced (Tr. M., 26 May 2008, 305-305, 4 June 2008, 166, 16-25).

3. Tribunal's determination

194.
In its submissions, the Claimant acknowledges that it was well aware of the potentially adverse impact of a change in government. It specifically refers to the fact that, after Prime Minister Nawaz Sharif was forced to resign in 1993, the new government adopted a position opposed to the Project and decided to terminate it under Clause 74 of the 1993 Contract (Tr. M., 26 May 2008, 14, 1-13; PHB [Bay.] ¶ 37). The Claimant further notes that: "[i]n 1997, winds shifted again, and Nawaz Sharif returned to power. He immediately resurrected the M-1 Project" (Tr. M., 26 May 2008, 14, 14-16). According to the Claimant, Mr. Sharif gave "repeated assurances of Pakistan's commitment to the project" (Tr. M., 26 May 2008, 14, 20-23) based on which the Claimant agreed to enter into the Contract. However, in the light of the foregoing circumstances, the Tribunal considers that Bayindir could not ignore the fact that the future of the Project was linked to the shifts then affecting Pakistan's politics as well as to the position of Mr. Sharif. Bayindir entered into the Contract in full knowledge of these circumstances. It appears difficult to now accept that Bayindir had wider expectations of stability and predictability so as to justify protection under the FET standard.
195.
When in 1999 General Musharraf took power in Pakistan, the political volatility prevailing in Pakistan was again manifest. The Claimant nevertheless chose to conclude Addendum No. 9 on 17 April 2000, although it argues in these proceedings that the government of General Musharraf was hostile to the continuation of the Project. Whether this latter assertion is sufficiently established is a matter that the Tribunal will consider later. For the purposes of the present assessment, the conclusion of Addendum No. 9 is another illustration of the fact that the Claimant elected to pursue its activities in Pakistan despite a degree of political volatility of which it was fully aware.
196.
At the hearing on the merits, the Claimant asserted however that

"Bayindir believed that with the signing of Addendum 9, Pakistan had made a serious commitment to the M-1 Project, commitment that the M-1 Project would move forward unhindered."
(Tr. M., 26 May 2008, 30, 14-18)

198.
This conclusion does not imply that the events which led to the expulsion of the Claimant were necessarily the result of a shift in political priorities. It is reached irrespective of whether such a shift took place as a result of the assessment of the Claimant's expectations as they stood well before the expulsion.
199.
Therefore, the Tribunal is of the opinion that Bayindir's claim relating to the frustration of its legitimate expectations cannot be sustained.

(ii) Bayindir's expulsion

200.
The Claimant has sought to establish, first, that its expulsion was the result of a conspiracy between different branches of the Pakistani government also involving the Engineer and its Representative acting under the Contract (1), and, second, that such expulsion was based on reasons unrelated to Bayindir's performance of the Contract, namely changing political priorities, funding difficulties, a balance of payment crisis, and conduct favouring local contractors (2).
201.
These two contentions overlap to some extent, but not entirely, which is why the Tribunal will deal with them separately.

1. Was there a conspiracy to expel Bayindir?

1.1 Bayindir's position

202.
Bayindir contends that for reasons unrelated to its performance of the Contract (see Reply M., ¶ 119), which will be discussed in the following section, the Respondent conspired to misuse the provisions of the Contract in order to expel Bayindir. The alleged conspiracy involved not only different divisions and officials of NHA and the Pakistani government but also the Engineer and the Engineer's Representative (see Reply M., ¶ 55; Tr. M., 4 June 2008, 61, 12-17). In this respect, the Claimant has particularly invoked the circumstances discussed in the following paragraphs.
203.
First, Bayindir extensively refers to a "discussion paper" (Tr. M., 4 June 2008, 19, 24) prepared by the then Joint Secretary of Communications, Mr. Ashraf Hayat, dated 14 October 2000 (Exh. [Bay.] CX-140). It focuses on the handwritten notes attributed to the then Secretary of Communications, Mr. Nazar Shaikh, and approved by the then Minister of Communications, General Qazi, saying:

"[a]s for M-1 Project, we should wait for any default by the Contractor and then terminate the Project. They are likely to default in Burhan Section. NHA should ensure not to default in any way and also not entertain requests for extension."
(Tr. M., 4 June 2008, 21,3-8)

204.
According to the Claimant, these handwritten notes evidence the existence of a conspiracy to use the provisions of the Contract to expel Bayindir for reasons unrelated to its performance. Based on the oral testimony of Mr. Shaikh, the Claimant submits that the "discussion paper was prepared for the purposes of discussion, and was in fact discussed, at an interministerial meeting held on 7 November 2000, chaired by the Minister of Communications and attended by the Secretaries of Communications, the Finance Division, the Planning and Development Division and including the Chairman of NHA" (Tr. M., 4 June 2008, 22-23, 24-25 and 1-5). Specifically, Bayindir contends that the course of action manifested in the handwritten notes lay beneath the decision taken at that meeting to continue with the Project but to bring any default of Bayindir to the notice of the government (Tr. M., 4 June 2008, 25, 2-12).
205.
As a second circumstance evidencing conspiracy, Bayindir points to the preparation of a milestone review meeting held on 19 March 2001. It notes that one day before the meeting, the Chairman of NHA wrote to the Ministry of Communications and set out

"[E]xactly how the March 19 meeting would proceed. What the Engineer will say about Bayindir, what the Engineer will say about NHA, how the limited Extension of time will be announced, and how that extension will be made contingent upon the extraction of a commitment from Bayindir."
(Tr. M., 4 June 2008, 61,19-20; see also Exh. [Bay.] CX-38).

206.
Third, the Claimant submits that the decision to expel Bayindir was taken by General Musharraf himself at the meeting held on 12 April 2001, specifically organized on the request of General Qazi for this purpose. It considers that the steps followed thereafter by the Chairman of NHA were intended to cover this reality and to suggest that the expulsion decision had been made by the Chairman of NHA, among others, on the basis of a brief legal opinion issued by Mr. Ebrahim on 23 April 2001 (Tr. M., 4 June 2008, 77-81).
207.
As a fourth and related consideration, the Claimant asserts that the Engineer and Engineer's Representative were involved in this conspiracy, and that such involvement is what lies behind the unjustified treatment of requests for extension of time made by Bayindir as well as the issuance of the notices under sub-clauses 46.1 and 63.1(b)(ii) of the Contract.
208.
Regarding the treatment of the requests for extension, Bayindir argues in essence that the Engineer and Engineer's Representative eliminated and added work to Bayindir's schedule in order to cause it to default on its obligations (Reply M., ¶ 56; see also CX-134), that contrary to sub-clause 44.1 of the Contract they did not consult the Contractor in the course of the evaluation of its requests for extension (EOT 01, 02), nor did they share with Bayindir the evaluation report of EOT 03, and that they failed to take into account that progress on the site was being prevented because of the unavailability of land and not for lack of equipment. Bayindir further argues that the evaluation of EOT 03 was orchestrated in preparation for the milestone review meeting held on 19 March 2001 (Tr. M., 4 June 2008, 43, 2-15 and 61, 12-17).
209.
With respect to the issuance of the notice under sub-clause 46.1 of the Contract on 2 December 2000, Bayindir argues that there is no evidence on the record showing that the Engineer formed his opinion in a reasonable, independent and professional manner. Moreover, Bayindir further argues that the Engineer was instructed in a letter of 16 November 200084 to issue a sub-clause 46.1 notice, despite the fact that Bayindir had brought to the attention of the Engineer's Representative that its progress was being obstructed by reasons that were not attributable to it and that a formal request for extension would be submitted. Furthermore, the Claimant contends that as late as September 2000, the Engineer's Representative had reached the conclusion that Bayindir would find it difficult to complete the Priority Section 1 in time, but did not issue a sub-clause 46.1 notice at the time, allegedly in order to make it more difficult for Bayindir to react once the sub-clause 46.1 notice was actually issued in December 2000 (Reply M., ¶¶ 93-94).
210.
Regarding the sub-clause 63.1(b)(ii) notice, the Claimant essentially asserts that such notice was improperly issued on the basis of an invalid sub-clause 46.1 notice. The purpose of this latter notice is to alert the Contractor to the need to take measures to meet the completion date. At the time of issuance of the sub-clause 46.1 notice, Bayindir's construction activities on the site were in full swing (Exh. [Pak.] CM-14). Bayindir argues that it did "proceed with the Works" and that a valid sub-clause 63.1(b)(ii) notice presupposes that the Contractor has stopped the works, as recognized by Mr. Mirza in his letter to the Chairman of NHA (see Exh. [Bay.] CX-138) and further confirmed by Mr. Pickavance, Bayindir's expert witness on construction projects (Reply M., ¶¶ 100-105).
211.
Bayindir further suggests that the consultancy group of the Engineer, Pakistan Motorways Consultants (PMC), was economically dependent upon Pakistan because PMC's lead partner, ECIL, has undertaken 60 out of its 79 road sector projects for the government of Pakistan (Reply M., ¶¶ 116-118). Moreover, in Bayindir's submission, the correspondence between the Engineer and NHA with respect to Bayindir's request EOT 04 suggests subservience of the Engineer to NHA (Reply M., ¶¶ 84-86). In addition, a letter of 11 April 2001 from Mr. Mirza to NHA shows, according to Bayindir, that Mr. Mirza, in his capacity as consultant, was sympathetic towards and privy to the consideration of the various options by which Pakistan might save costs through action adverse to the interests of Bayindir, including the suggestion that the best course of action for Pakistan would be to terminate the Contract under clause 74.1, as invoking 63.1 was difficult to justify (Reply M., ¶¶ 107-111; CX-138).

1.2 Pakistan's position

212.
The Respondent asserts that the allegation of conspiracy is without basis, and that it has been advanced by the Claimant to meet the more demanding requirements of a treaty breach, in what is in fact a contractual dispute:

"In the presentation of its case, Bayindir has always been acutely aware that, even assuming in its favour that the Clause 63.1 notice was incorrectly issued, without more, with NHA acting on the basis of that notice in expelling Bayindir, the remedy for Bayindir lies under the Contract, in a challenge to a decision of the Engineer and ultimately arbitration pursuant to Clause 67. It is only if the notice was issued as part of a conspiracy, with the Engineer acting in bad faith with NHA and the Government of Pakistan, that a claim for breach of the Treaty could have any chance of success."
(PHB [Pak.] ¶ 2.3)

213.
In Pakistan‟s view Bayindir's claim rests upon the allegations that President Musharraf made a decision to expel Bayindir:

"Bayindir's case on conspiracy ultimately turns upon the allegation that a decision to expel Bayindir was taken by the Chief Executive (President Musharraf) on 12 April 2001, and that this decision was then followed by the issue of a Clause 63.1 Certificate, which was allegedly issued in bad faith by the Engineer. That claim is simply inconsistent with the documentary (as well as oral) evidence. Bayindir has a high threshold to meet in terms of establishing the existence of a conspiracy. It has failed to meet that threshold."
(PHB [Pak.] ¶ 2.4)

214.
Pakistan further disputes Bayindir's assertion that the expulsion was decided for reasons unrelated to the performance of the Contract. It claims that the circumstances on which Bayindir relies are insufficient to establish the existence of a conspiracy and are rebutted by the evidence. In particular, the Respondent puts forward the following arguments.
215.
First, Mr. Hayat's discussion paper of 14 October 2000 and the handwritten additions made by Mr. Shaikh only reflect internal discussions and cannot be interpreted as recording a decision or an instruction, and even less one aiming at the rejection of all EOT requests, whether valid or not (PHB [Pak.] ¶¶ 2.14-2.17). Moreover, the minutes of the interministerial meeting held on 7 November 2000 merely reflect the review of "an important national infrastructure project, subject to substantial delays, and also subject to particular criticisms from the World Bank and the Planning Commission" (PHB [Pak.] ¶ 2.20) and, in all events, the decision which ensued was that the project could continue.
216.
Second, the Respondent argues that, contrary to Bayindir's allegations, the minutes of the milestone review of 19 March 2001 accurately reflect Pakistan's concern at Bayindir's poor performance of the Contract, which is further confirmed by the testimonies of General Javed and Mr. Bridger, and by the minutes of the Contract Progress Meeting held ten days later, on 29 March 2001 (PHB [Pak.] ¶¶ 2.35 and 2.39). Pakistan also points to Mr. Bridger's testimony that this meeting was a "turning point" and that it was then that Mr. Bridger "lost patience with Bayindir" (PHB [Pak.] ¶ 2.35).
217.
Third, with respect to the meeting with General Musharraf held on 12 April 2001 at the request of General Qazi, Pakistan argues that "[t]he reason why the involvement of President Musharraf was sought related to the particular sensitivities of Pakistan's diplomatic relations with Turkey" (PHB [Pak.] ¶ 2.48) and not because it was for General Musharraf to take the final decision on the continuation of the Project. Pakistan stresses that it was the Chairman of NHA who took the decision to expel Bayindir. For that, he formed his judgment not only on the basis of the legal opinion issued by Mr. Ebrahim on 23 April 2001, but also of the interim report of 7 April 2008 of the expert group constituted by the Chairman of NHA in coordination with the World Bank, as well as the letter to NHA of 11 April 2001 from Mr. Mirza, acting in his capacity as consultant.
218.
Fourth, regarding Bayindir's allegations of bad faith on the part of the Engineer and the Engineer's Representative, Pakistan advances several arguments.
219.
With respect to the treatment of the requests for extension, Mr. Shaikh explained that, in his handwritten notes on Mr. Hayat's discussion paper, by "requests for extension," he meant negotiated extensions such as the one under Addendum No. 9, and not extensions under the Contract, which were to be decided by the Engineer. Moreover, the fact that in early 2001 both the Engineer and NHA approved an extension of time for Bayindir in response to EOT 03 rules out Bayindir's allegation that a decision had been made to reject any request for extension (Rej. M., ¶ 2.15). As far as EOT 01 and EOT 02 are concerned, Mr. Bridger explained that they were not the subject of a formal determination by the Engineer because all the issues raised by these requests were agreed in Addendum No. 9 (Rej. M., ¶ 2.29). As for EOT 03, Pakistan argues that Bayindir was indeed provided with an opportunity to explain its position at a formal meeting (C-Mem. M., ¶ 2,127) and that the installation of traffic signs was not essential nor did it prevent the completion of the works (Rej. M., ¶¶ 2.34-2.39).
220.
Further, Pakistan disputes having instructed the Engineer to issue a sub-clause 46.1 notice. The letter of 16 November 2000 referred to by Bayindir had nothing to do with sub-clause 46.1. In fact, it demonstrates an instance in which the Engineer had ruled against NHA within the framework of sub-clause 67.1. In addition, Bayindir misinterprets Mr. Bridger's letter of 2 December 2000 allegedly acknowledging that equipment productivity was obstructed by the large proportion of confined working area. Contrary to Bayindir's interpretation, Mr. Bridger not only recommended an increase of 10 to 20% in equipment, but also noted the need for an increase in productivity because Bayindir was relying excessively on locally hired equipment which was sub-standard and unreliable and had even reduced the number of pieces of Bayindir-owned equipment between November 2000 and February 2001 (Rej. M., ¶¶ 2.52-2.55).
221.
With respect to the steps that led to the issuance of the sub-clause 63.1(b)(ii) notice, Pakistan argues that a sub-clause 63.1(b)(ii) notice presupposes the issuance of a subclause 46.1 notice and that Bayindir's interpretation of the words "to proceed with the Works" in clause 63.1(b)(ii) is neither supported by the provisions of the Contract nor by the practical realities of managing a large construction project (Rej. M., ¶ 2.59). As for Mr. Mirza's letter to NHA of 11 April 2001, Pakistan stresses that this letter was written in Mr. Mirza's capacity as lead consultant to NHA rather than as Engineer, that Bayindir was fully aware that the PMC group was acting as consultants to NHA, that such double capacity is not uncommon and does not threaten impartiality, and that at no time did such letter say that proceeding under sub-clause 63.1(b)(ii) would not be justified. In addition, Pakistan refers to Mr. Mirza's supplemental witness statement confirming that the decision to issue a sub-clause 63.1(b)(ii) notice was not taken as a result of any pressure from NHA (Rej. M., ¶ 2.66). Pakistan also notes in relation to request for extension EOT 04, that it was not received until the Engineer issued the sub-clause 63.1(b)(ii) certification, and that such request had therefore no bearing on the Engineer's determination.
222.
Concerning Bayindir's allegation relating to the economic dependence of the Engineer's consultancy group, Pakistan argues in reply that ECIL, PMC's lead partner, does not depend upon any one agency and that employers such as NHA are autonomous. In addition, Pakistan argues that ECIL is involved in a substantial number of international projects and that the independence of the PMC group cannot be assessed solely in the light of ECIL's position, to the extent that the group consists of 5 firms, including an American and an Australian one (Rej. M., ¶¶ 2.71-2.74).

1.3 Tribunal's determination

224.
The Claimant has referred to the award in Waste Management v. Mexico, which defines conspiracy as "a conscious combination of various agencies of government without justification to defeat the purposes of an investment agreement."85 The Tribunal considers that this definition provides good guidance.

Mr. Nazal Shaikh's notes

225.
In support of its allegation of conspiracy, the Claimant first points to the handwritten notes (in particular those in paragraph 9, alternatively numbered as paragraph 273) appearing at the end of Mr. Hayat's document dated 14 October 2000 (Exh. [Bay.] CX-140). At the hearing, Mr. Hayat described this document as a "discussion paper" (Tr. M., 28 May 2008, 148, 4). The "discussion paper" focuses on a critical assessment made by the World Bank of the M-1 Project and discusses the advantages and disadvantages of putting an end to the project. The document then proposes different courses of action. The last page of the document contains handwritten notes attributed to Mr. Nazar Shaikh, the then Secretary of Communications, which read in paragraph 9 (or 273) as follows:

"As for M-1 project, we should wait for any default by the contractor and then terminate the project. They are likely to default in Burhan Section. NHA should ensure not to default in any way and also not entertain requests for extension."
(Exh. [Bay.] CX-140)

226.
While the Claimant's interpretation of these notes is prima facie understandable, the witness testimonies did not support the thesis that the notes evidence a conspiracy. At the hearing, Mr. Hayat recognized that there were internal divergences regarding the desirability of the M-1 Project, which were discussed in his paper:

"I think that some perspective is necessary. This Project is being viewed by many players as not a very good Project to have, and the discussion would not have prolonged for as long as it did if it were being implemented quickly, but it was just ridden with slow movement and difficulties, and was being, therefore, repeatedly questioned. So, my view was that it was worth considering, because some players think that it is a bad Project, to look at how this can be rationalised or reduced or stopped, or whatever. That was my view. It was not a view to – it was nothing more than that, and it was – and this was really a response to the World Bank's assertion that this is not a good Project."
(Tr. M., 28 May 2008, 152-153, 12-25, 1).

227.

The Tribunal does not see in such divergences, which are not an unusual occurrence among administrations, evidence of a conspiracy. More importantly, the course of action proposed in the handwritten notes cannot be viewed as reflecting either a final decision or an instruction imposed on the Engineer. Indeed, Mr. Hayat testified as follows:

"[I]f I may add, you see, this is an internal note, and it was not a decision, it was my opinion, and it was not communicated to the NHA, I repeat, it was not communicated to the NHA as a decision at all. So this really – it was just for our internal consumption. How it got out and came in the hands of people who were not authorized to look, that is a different question."
(Tr. M., 28 May 2008, 249-250, 21-25, 1-4)

228.
This conclusion is corroborated by the testimony of the former Minister of Communications, General Qazi. The latter acknowledged that there were divergent views among the different divisions of the Pakistani government concerned with the Project. He stressed that Mr. Hayat's discussion paper had no impact on the discussions held during the meeting of 7 November 2000, at which the course of action described in paragraph 9 of the discussion paper would have allegedly been endorsed:

"This report was not discussed, because there were people from finance, there were people from planning, and they were all expressing their views about the Project, and they were asking me to take a decision, and I recorded my decision, and my decision was; we will go ahead with the Project, and we will not take – we will not make use of further loan from the Turkish Exim Bank, which was, extremely expensive, because we would be able to fund the Project with our own money, and I said, 'Make sure that the Project is completed on time and nobody defaults', and I expressed some – also caution about not compromising with the safety [...]."
(Tr. M., 28 May 2008, 298, 7-19).

229.
The minutes of the meeting held on 7 November 2000 further confirm this conclusion. In effect, they record that the Minister of Communications decided inter alia that "[wlork on the project especially the two sections Islamabad-Burhan and Rashakai-Charsadda may continue" (Exh. [Bay.] CX-201, ¶ 5(i)).

Milestone review meeting of 19 March 2001

230.
As a further circumstance, Bayindir claims that the milestone review meeting of 19 March 2001 was pre-orchestrated as part of the conspiracy. It relies on the note signed by the Chairman of NHA dated 18 March 2001 (Exh. [Bay.] CX-38), which discusses the strategy to be followed during the meeting of 19 March 2001 in connection with a request for extension submitted by Bayindir. The note summarizes the strategy by referring to the "slippages in progress," NHA's "stance to abide by our part of the Contract" and its contractual remedies:

"5. [...] the undersigned will work on the following strategy with M/s Bayindir during the meeting scheduled for tomorrow:-
a. The Engineer will highlight the slippages in progress despite provision of all facilities including prompt payments by NHA. This will be in line with our committed stance to abide by our part of the Contract Agreement.
b. The main grounds for Bayindir's extension are based on late availability of construction site which, being untrue, will be strongly contested both by the Engineer and NHA with facts and figures and photographs. The grant of extension of 27 days will not be announced but will be made contingent upon a commitment by M/s Bayindir to put their act together and increase the progress substantially.
c. M/s Bayindir will be appropriately reminded of the rights and remedies available to NHA in the event of non-fulfilment of their contractual obligations, to which I have alluded in para. 3.
(Exh. [Bay.] CX-38, para. 5)

231.
On the basis of the other elements in the record, the Tribunal reaches a different understanding of this note from the Claimant. In reality, the Respondent had serious concerns about Bayindir's performance. Paragraph 1 of the note records that despite "numerous notices and reminders, both verbally and in writing [... ] the pace of work did not pick up despite the scheduled completion date of priority sections by 23rd March 2001 drawing closer" (Exh. [Bay.] CX-38, par. 1). Paragraph 2 adds that "M/s Bayinder, as per their past practice, instead of gearing up their work, approached the Turkish Embassy" (Exh. [Bay.] CX-38, par. 2). These concerns are corroborated by the testimonies of General Javed and Mr. Bridger. At the hearing, General Javed testified in this connection that:

"[...] we were paying them the state-of-the-arts rates, and one expected to see a good quality of equipment. [...], their machine mix was wrong. They didn't have the right equipment to do the job. Also, the sequencing was wrong. They didn't have a good work cycle worked out, which meant that they were wasting their time with their equipment."
(Tr. M., 29 May 2008, 14-16)

232.
Mr. Bridger, the Engineer's Representative, also stressed Bayindir's poor performance:

"I think by and large, the people in this room should understand that delays – there was a very large area of this Project that I think we are talking about, around about 35 kilometres on Part 1, by and large the Contractor was way behind without any cause of delay from external influences."
(Tr. M., 29 May 2008, 189, 6-12)

233.
While the Tribunal found the statements of these witnesses credible, it remained unconvinced by the Claimant‟s representatives. Mr. Jilani, Bayindir's area manager, who was most directly concerned with the development of the M-1 Project stated that after 1999 issues of equipment and mobilisation were reported directly to Mr. Sadiq Can "because he is, by profession, a Mechanical Engineer, so that is how the construction was being managed" (Tr. M., 27 May 2008, 24, 3-7). As for Mr. Can, who was serving at the time as President of the Bayindir Construction Company, his testimony left the overall impression that the project was not being handled professionally:

"Q: Your Project Manager, Mr. Yildirim, would he provide reports back to Ankara and to Bayindir to Head Office about how the progress on the job was going, what resources might be needed, what equipment, staffing levels, issues like that related to a large Project, would he communicate with Head Office, or send periodic reports to that effect?
A: Yes, We used to talk to him periodically. Sometimes it was every week, sometimes I personally went to Pakistan, and I stayed there for a week or ten days, and we were working on site with him. It was not in the form of written reports, but we were in constant contact."
(Tr. M., 27 May 2008, 253-254, 15-25, 1-3)

234.
The same impression arose from the examination of Mr. Jilani, Bayindir's area manager, who was very hesitant when asked about basic aspects of the Project's management, for instance whether he had signed Addendum No. 9 in April 2000, which surprised the Tribunal knowing the importance of that document (Tr. M., 27 May 2008, 60, 9-22).
235.
The existence of real concerns over the performance of Bayindir is reinforced by the minutes of the milestone review meeting (Exh. [Pak.] RB-68) and of the contract progress meeting No. 32 held on 29 March 2001 (Exh. [Bay.] CX-153). For all these reasons, the Tribunal concludes that the evidence adduced by the Claimant does not support the allegation that the milestone review meeting of 19 March 2001 was preorchestrated as part of the conspiracy.

Meeting of 12 April 2001

236.
As an additional element of conspiracy, Bayindir asserts that the decision to terminate the Contract was taken by General Musharraf at the meeting held on 12 April 2001, while presented as having been made by the Chairman of NHA at a later time. It is true that there is evidence of the involvement of high officials of the Pakistani government, including General Musharraf, in the assessment and follow up of the Project. General Qazi, the Minister of Communications, confirmed this fact on crossexamination:

"Q: You said a moment ago, if I am not mistaken, that if Bayindir would default, the National Highway Council would decide whether to follow the contractual terms or not. Do you mean that a decision to terminate the Contract would have to be taken bit (sic) National Highway Council?
A: No, sir. That would be taken by the NHA. NHA is the contracting party. But National Highway Council would only come in with regard to the matter of Turkey being involved, you know, as I said, it weighed very heavily on us, because previously once the Contract was terminated by a previous Government, the Government of Turkey intervened. They did not do so this time, but still, that was on our mind, and in any case, NHA council had to be kept informed about the happenings, because that is the overall policy-making body. So if Bayindir default, the NHA counsel had to be informed. The Chairman of the council had to be told, and then whatever action there to be taken, whether it is termination, whether it is extension, whether it is this, that, that is the job of the National Highway Authority. That is not my job, or the Chief Executive's job, or anybody else's job.
[... ]
(Tr. M., 28 May 2008, 315-319).

237.
This appears unsurprising if not normal for a project of major economic importance for the development of the country. It is certainly not an indication of a conspiracy to put an end to the Contract without justification.
238.
In fact, there is no direct evidence on record demonstrating that it was General Musharraf who took the decision to terminate the Contract. There are no minutes of the meeting of 12 April 2001, no other writings nor witness evidence. To the contrary, General Qazi testified plausibly that General's Musharraf's involvement was limited to the potential diplomatic repercussions of significant actions involving the M-1 Project. This is consistent with the testimony of the then Secretary of Finance of Pakistan, Mr. Afzal (Tr. M., 28 May 2008, 35, 6-11).
239.
At the hearing, Bayindir argued that in the absence of direct evidence of the fact that General Musharraf had taken "the political decision [... ] to get rid of Bayindir" (Tr. M., 4 June 2008, 107, 14-15), such a conclusion could nevertheless be reached on the basis of indirect evidence as "the whole series of facts, linked together, lead logically to that single and inevitable conclusion" (Tr. M., 4 June 2008, 107, 15-17). The Tribunal cannot follow Bayindir. It does not consider that the series of facts identified by the Claimant and just discussed is sufficient to establish conspiracy.

Engineer's role in conspiracy

240.
The Claimant‟s argument necessarily entails, not just that the Engineer and the Engineer‟s Representative failed in their duties under the Contract, but that they were in fact part of the conspiracy, and this is what the Claimant does allege. It questions the conduct of the Engineer and the Engineer's Representative in connection with the treatment of Bayindir's requests for extension, the issuance of a sub-clause 46.1 notice, and the issuance of a sub-clause 63.1(b)(ii) notice. Although these are contractual questions, the Tribunal will review them to the extent relevant for the assessment of a breach of the Treaty.
241.
The Engineer is appointed by the Employer (Part I – General Conditions – sub-clause 1.1(iv)). For certain matters, he must obtain the Employer's specific approval before exercising his authority (Part I – General Conditions – sub-clause 2.1(b)). For others, he is to exercise his discretion. In so doing, he must act "impartially within the terms of the Contract and having regard to all the circumstances" (Part I – General Conditions – sub-clause 2(6)). The "Engineer's Representative" is appointed by and responsible to the Engineer. He carries out the duties and exercises the authority delegated to him by the Engineer (Part I – General Conditions – sub-clause 2.2).
251.
The same considerations hold true for the other acts of the Engineer and the Engineer's Representative which Bayindir challenges. Specifically, the Parties disagreed on a number of issues relating to the issuance of the notices under subclauses 46.1 and 63.1(b)(ii), particularly whether the completion dates for the Priority Sections under Addendum No. 9 were binding; whether expulsion was available as a remedy even after the imposition of liquidated damages under sub-clause 47.3 of the Contract (as amended by Addendum No. 6); whether a sub-clause 46.1 notice could be issued pending a request for extension of time; whether the content of the sub-clause 46.1 notice was specific enough for the Contractor to understand that it referred to the completion dates of the Priority Sections; whether the issuance of a sub-clause 63.1(b)(ii) after a sub-clause 46.1 notice presupposes an almost complete stoppage of the works.
252.
In particular, the Parties have put forward competing interpretations of the meaning of sub-clauses 46.1 and 63.1(b)(ii), which are the main contractual bases for the expulsion of Bayindir. The notice under sub-clause 46.1 is indeed a precursor of the notice under sub-clause 63.1(b)(ii), which in turn provides the basis for the expulsion of the contractor. Yet, the Tribunal finds that the issuance of the notices under these subclauses was based on a reasonable interpretation of the Contract, as evidenced by the written (Bridger's WS, ¶¶ 72-73, 95-102; Bridger's supplemental WS, ¶¶ 48-71, 98-115) and oral testimony of Mr. Bridger (Tr. M., 29 May 2008, 194-201). On crossexamination, Mr. Bridger noted inter alia that:

"Q: Mr. Bridger, is the purpose of Clause 46.1, of a Notice under Clause 46.1 to encourage the Contractor to expedite progress in order to bring the delayed Project back on schedule?
A: That is, strictly speaking, the purpose of it. I think even if it is not absolutely possible to bring it back on schedule, I think a reasonable client would be happy to see efforts being made that would bring it back towards the schedule, and I think the whole idea was to gear this Project up so that it wasn't going to be falling behind the way it was falling behind.
Q: So a reasonable Contractor (sic) [clientl would be happy to see that efforts were being made to bring it behind schedule, and to bring it on schedule?
A: Substantial efforts, and real efforts. Not just bringing in equipment that didn't have the capacity to achieve the production levels, you know, we saw a lot of increases in equipment after that Notice was served, but the productivity fell, despite the increase in numbers of items of equipment."
(Tr. M., 29 May 2008, 192-193, 12-25, 1-8).

253.
Mr. Bridger's understanding of the purpose of a sub-clause 46.1 notice was confirmed by the Claimant's expert witness Mr. Pickavance, according to whom "the purpose of Clause 46.1 is to draw the Contractor's attention to the fact that he is not proceeding quickly enough in order to complete on time, and it is a precursor to the operation of Clause 63(b)(ii) in certain circumstances" (Tr. M., 30 May 2008, 221, 10-16). Mr. Pickavance opined however that the content of the notice was not precise enough, as it did not specify which works needed to be accelerated. According to Mr. Pickavance, "the Contractor has to tell the Engineer what he is going to do to put it right, but he cannot tell him what he's going to do to put it right unless he knows what it is that is wrong" (Tr. M., 30 May 2008, 221, 21-24). The experts produced by the Respondent, Prof. Uff and Mr. Chapman, were not of the same opinion. For them, "[tlhe nature of the thing is to tell the Contractor he's going too slowly. It then requires him to take steps which the Engineer has to approve" (Tr. M., 30 May 2008, 222, 1013) and "[wlhat would normally happen in the circumstance would be there would be a meeting after the receipt of a letter like this, so that the Contractor could be made clear at a meeting of the particular points where he needs to put more effort in" (Tr. M., 30 May 2008, 223, 13-18).
254.
This discussion is particularly relevant when it comes to assessing Bayindir's reaction to the sub-clause 46.1 notice. Mr. Bridger's view was that Bayindir failed to proceed with the works and that the issuance of a sub-clause 63.1(b)(ii) notice was thus justified. Asked in cross-examination why he had not proceeded as in early 2000, when before issuing such a notice he had alerted Bayindir, Mr. Bridger answered that in April 2001 the situation was different:

"A: [... ] We had been through a lot of processes up to that point, including this opportunity for dialogue, and so it was a different situation then.
Q: A different situation where, in your assessment, a dialogue would have been counterproductive?
A: The dialogue had taken place the second time because with extensive dialogue at the time of addendum number 9, and concessions had been made with respect to the Mobilization Advance, retrieval of the Mobilization Advance by incremental monthly payments, quite significant changes had been made to that [...]."
(Tr. M., 29 May 2008, 226-227)

255.
Bayindir's progress following the sub-clause 46.1 notice and whether it justified a subclause 63.1(b)(ii) notice was debated by the experts. Mr. Pickavance stated that the failure to proceed within the meaning of sub-clause 63.1(b)(ii) must be interpreted strictly (Tr. M., 30 May 2008, 160, 16-22) and confirmed the interpretation given in paragraph 7.58 of his report, namely that: "the only way in which a Contractor could be found to not have 'proceeded with the works' in accordance with 63.1(b)(ii) would be if the Contractor substantially reduced its labour to a point where there is either no progress, or the progress is de minimis" (Tr. M., 30 May 2008, 161-162, 18-25, 1-2). The Tribunal is not persuaded by this interpretation, which would not make much sense in practice, or in the words of Prof. Uff:

"I have construed the words of the Contract in order to make what is sometimes called 'Business common sense', which always appeals to English judges and Arbitrators. It seems to me to construe the clause as Mr. Pickavance and the Claimant suggests doesn't make any sense because it would suggest that the sequence of events is that the Contractor is going too slowly, a Clause 46 Notice is served with the intention of speeding him up, but you can only act on that Notice by terminating if he actually stops altogether. That doesn't seem to be a likely sequence of events. It seems obvious to me that the clause is intended to refer to a failure to comply with the Clause 46 Notice, and I believe you can arrive at that conclusion within the words of the clause, but in any event, I suggest that the clause at the very lowest should be construed as failing to proceed with the works in accordance with the general requirements of the Contract, particularly Clause 41.1, that expressly requires the Contractor to proceed with due expedition and without delay, irrespective of whether a Clause 46 Notice has been served."
(Tr. M., 30 May 2008, 167-168)

256.
On the basis of the foregoing considerations, the Tribunal has no hesitation in ruling out a finding of conspiracy. Such a finding can in no circumstances derive solely from a divergence of views on the interpretation of certain provisions of the Contract. As to the other factual allegations made by the Claimant in this connection, as has been shown, they are not sufficient either.
257.
The additional argument advanced by Bayindir that PMC was economically dependent upon Pakistan does not change this conclusion. The fact that ECIL, the lead partner of PMC, may have worked extensively with the Pakistani government does not necessarily entail that the PMC group overall or Mr. Mirza himself were economically dependent upon Pakistan. And even if such dependence were proved, it would be insufficient to establish that the Engineer acted in bad faith. As for the alleged subservience shown in the correspondence, particularly in Mr. Mirza's letters to NHA dated 19 September 2002 (Exh. [Pak.] CM-162) and 11 April 2001 (Exh. [Bay.] CX-138), the Tribunal finds nothing in these letters suggesting bad faith on the part of Mr. Mirza. To the contrary, in his letters, Mr. Mirza specified whether he was acting in his capacity as Engineer or as consultant to NHA, thereby making it clear that he was well aware of the different roles he was playing in the context of the Contract. That the combination of these sometimes conflicting roles in one and the same person can be problematic is well-known to anyone familiar with construction contracts. But that is a different question. What matters here is that there is no concrete evidence of bias which could potentially lead to a finding of treaty breach.
258.
The Tribunal thus concludes that the existence of a conspiracy to expel Bayindir for reasons unrelated to the latter's contract performance is not established. This conclusion does not preclude the possibility of an expulsion for other reasons which in and of themselves might be grounds for a treaty breach.

2. Reasons underlying the expulsion of Bayindir

2.1 Bayindir's position

259.
Bayindir submits in essence that its expulsion was motivated by grounds unrelated to its performance of the Contract and, more specifically, by the following three "sovereign reasons": "to serve Pakistan's changing political imperatives, to save money in a time of acute financial difficulty, and to favour local contractors" (PHB [Bay.] ¶ 34).
260.
First, regarding the changing political priorities, Bayindir argues that the Project was constantly subject to shifts in the political winds, political pressures, and the "tit-for-tat" referred to by Mr. Afzal that came with the changes in the Pakistani government (PHB [Bay.] ¶ 35). More specifically, Bayindir contends that the impact of a change of government must be assessed in light of the precedents before the revival of the Contract in 1997 (Reply M., ¶ 124), in particular the divergent positions of Prime Minister Nawaz Sharif, who was favourable to the Project, and Prime Minister Benazir Bhutto, who opposed it as a tactic to "befool the public" and "gain cheap publicity" (Exh. [Bay.] CX-16; PHB [Bay.] ¶ 37) and terminated the Contract. Moreover, Bayindir also alleges that the government of General Musharraf, which came to power in October 1999, took an aggressive stance against the Project "in the light of Pakistan's financial problems necessitating a change in policy" (Reply M., ¶¶ 129 and 132). Bayindir refers, in particular, to the answer of NHA to a question by the National Assembly of Pakistan, in which it admitted that projects, including M-1, were delayed due to changes in priorities of the subsequent governments and financial constraints (Reply M., ¶ 210; Exh. [Bay.] CX-230).
261.
Second, in connection with Pakistan's financial difficulties, Bayindir alleges, that as a result of the nuclear tests in May 1998 and of General Musharraf's coup in October 1999, financial institutions were unwilling to extend credit to Pakistan (Reply M., ¶ 129; Exh. [Bay.] CX-168; PHB [Bay.] ¶ 42). Moreover, when General Musharraf came to power, he imposed a policy of fiscal discipline (Tr. M., 4 June 2008, 9, 10-5), which led to a reassessment of the Project to take into account the funding problems. To support this allegation, Bayindir relies primarily on a document entitled "Talking Points for the Prime Minister" intended for the meeting with Bayindir's Chairman on 12 October 1999 (Exh. [Bay.] CX-170-B) and to the recommendations of a committee, established by the Musharraf government in November 1999, that the M-1 Project be reduced from six to four lanes (Exh. [Bay.] CX-169). This recommendation was later approved by General Musharraf (Exh. [Bay.] CX-170-A; Tr. M., 28 May 2008, 30, 8-11). In Bayindir's submission, these documents show that with the advent of General Musharraf's government the Project came under increased scrutiny not because of a deficient performance on the part of Bayindir, but because of the financial constraints experienced by Pakistan.
262.
Bayindir further argues that the Respondent's financial situation deteriorated in the year 2000. Referring to the oral testimonies of Mr. Wall, then World Bank country Director for Pakistan, and of Mr. Afzal, then Pakistan's Secretary of Finance, Bayindir points out that in the summer of 2000 Pakistan was facing a balance of payment crisis and actively seeking to conclude a standby agreement with the IMF (PHB [Bay.] ¶ 42). At the same time, Bayindir refers to the "liquidity crunch" that NHA experienced by the fall of 2000 and the lack of funds to cover the promissory notes that were coming due on the M-1 Project, a situation which prompted the Ministry of Communications to seek further funds from the Ministry of Finance (PHB [Bay.] ¶ 41).
263.
Bayindir links the financial difficulties to its expulsion by referring to the following sequence of events. The standby agreement which was eventually reached in November 2000 specified revenue and expenditure targets. Being unable to meet those targets, Pakistan announced in April 2001 a revised budget in which funds available for the Public Sector Development Programme (PSDP) were substantially reduced. This reduction had an adverse impact on NHA's budgetary situation, which Bayindir describes as follows:

"NHA received funding, including the funding for the M-1 Project, through the PSDP, and, as Mr. Afzal stated in no uncertain terms, NHA was expected to live within its PSDP allocation. As of April 11, 2001, the Secretary General of Finance was advised that NHA had Rs. 2.86 billion PSDP funds remaining for all NHA projects. Under the revised PSDP budget, however, NHA was facing a budget reduction of Rs. 3.1 billion, which would effectively place NHA in a deficit situation. However, in addition to NHA's projected remaining funds of Rs. 2.86 billion, NHA anticipated a release of Rs. 1.5 billion which had already been allocated specifically "to meet the liability of M/s Bayindir" [... ] Unless NHA could avoid using the Rs. 1.5 billion release to satisfy Pakistan's obligations to Bayindir, the projected Rs. 3.1 billion PSDP budget cut would exceed NHA's remaining Rs. 2.86 billion PSDP allowance. Bayindir was owed Rs. 1.5 billion and more on account of IPC 20, IPC 21, and IPA 22. But the solution was simple enough [... ] [Pakistan] stopped work on the M-1 Project, a low priority project under the Musharraf Government, and it stopped payments to Bayindir, freeing up the Rs. 1.5 billion for NHA's other PSDP project."
(PHB [Bay.] ¶¶ 43-44)

264.
In Bayindir's contention the M-1 Project was chosen as a target because it had come under severe criticism from the World Bank and the Expert Group convened by the Respondent and financed by a grant from the Japanese government administered by the World Bank (PHB [Bay.] ¶¶ 45-46) to the effect that the M-1 Project was financially unviable and that termination would result in a saving of costs (Reply M., ¶¶ 207-209; Exh. [Bay.] CX-139). It thereby strengthened the internal opposition within the Pakistani government against the continuation of the Project. Further, according to a note prepared by NHA for the Finance Minister on 6 January 2000, the M-1 Project was specified to be a low priority project (Reply M., ¶ 151; Exh. [Bay.] CX-196).
265.
It was allegedly in this context that the then Minister of Communications, General Qazi, requested a meeting with General Musharraf "to get his decision on [thel future of the M-1 project" (PHB [Bay.] ¶ 47), which was held on 12 April 2001. Bayindir emphasizes in this respect that

"It is evident from the face of this memorandum requesting the meeting that the need for General Musharraf's intervention was not driven by contractual concerns or Project delays – the focus, as ever, was on the financial difficulties that Bayindir's M-1 Project posed for Pakistan and NHA."
(PHB [Bay.] ¶ 47)

266.
Bayindir claims that the decision to end the Project and expel it was taken by General Musharraf. It summarizes its general argument with respect to the financial reasons underlying its expulsion as follows:

"with no funding available and an expensive, financially unviable project on its hands, the Government decided to sacrifice Bayindir in the name of sovereign financial discipline."
(PHB [Bay.] ¶ 48)

267.
Third, with respect to the alleged favouritism to the benefit of local contractors, Bayindir contends that its expulsion not only solved Pakistan's funding difficulties but also allowed the M-1 Project to proceed

"because Pakistan could save money and still complete the M-1 motorway by engaging local contractors in Bayindir's stead. Even with the savings that Pakistan would reap, the local contractors stood to benefit from taking over the M-1 Project from Bayindir and were eager to do so. And indeed, local contractors were waiting in the wings, ready to take over the Project."
(PHB [Bay.] ¶ 49)

268.
More specifically, Bayindir points out that the completion of the Project by influential local contractors was recommended by NHA's advisors and was decided prior to the expulsion as evidenced by a number of documents and statements of NHA officials (Reply M., ¶¶ 214, 217, 219; Exh. [Bay.] CX-96, CX-139, CX-206, CX-224). According to Bayindir, Mr. Kamal Nasir Khan, the Deputy Managing Director of Saadullah Khan & Brothers (SKB), and a consortium of local contractors exerted pressure on Mr. Cortük, Bayindir's Chairman, to assign the Project to them (Reply M., ¶ 216; Exh. [Bay.] CX-235). Eventually, the award of the Project to Pakistan Motorway Contractors Joint Venture (PMC-JV), a local consortium led by SKB, was the result of a corrupt tender process, evidencing NHA's real motives for expelling Bayindir, namely saving cost and favouring influential local contractors (Reply M., ¶¶ 218-219). For Bayindir, NHA was in fact directly involved in the creation of PMC-JV, as evidenced by contemporaneous press reports (Exh. [Bay.] CX-106) as well as by a letter from the Vigilance Wing describing PMC-JV as "the Consortium which was constituted by concerned NHA officials through negotiations with concerned firms mainly SKB" (Exh. [Bay.] CX-236-A), and as confirmed by the oral testimony of Mr. Nasir Khan (PHB [Bay.] ¶ 52).
269.
In Bayindir's submission, it is for these three reasons that it was expelled and not because of its performance under the Contract. At the hearing, Bayindir noted that the documents reviewed in this regard make little or no mention of performance problems (Tr. M., 4 June 2008, 6, 12-19).
270.
Bayindir acknowledges that there were delays in the completion of the Project for reasons that are disputed. It adds that even if those delays were attributable to Bayindir, Pakistan's response was "grossly disproportionate to whatever problems existed on the Project" (PHB [Bay.] ¶ 60) and was "all the more egregious when viewed in light of Pakistan’s and NHA's own culpability for the delays on the Project" (PHB [Bay.] ¶ 66) stemming mainly from Pakistan's failure to acquire and properly transfer land to Bayindir and from the assignment of additional work to Bayindir which was not contemplated when the Priority Sections deadlines were set in Addendum No. 9 (PHB [Bay.] ¶ 75).
271.
In any case, Bayindir stresses that any delays or other problems relating to contractual performance were not the reason that moved the Pakistani government to take the decision to expel Bayindir. Such decision was instead the expression of governmental interference with the Contract.

2.2 Pakistan's position

272.
As a general matter, it is Pakistan's case that it was truly committed to the Project and that the change of the Project's scope and completion dates was not due to its financial constraints but to Bayindir's failure to arrange a foreign currency loan and to the latter's poor contractual performance (Rej. M., ¶ 3.53).
273.

The Respondent replies to Bayindir's allegations relating to the shifts in political winds that events pre-dating the entry into force of the Treaty on 3 September 1997 are not covered by the protections afforded by the Treaty and lie outside the jurisdiction of the Tribunal (C-Mem. M., ¶ 4.8). Moreover, the Pakistani government which came to power in October 1999 wished to continue the Project and retain Bayindir as the Contractor (Rej. M., ¶ 3.3). More specifically, Pakistan argues that:

"The evidence shows that the decision to expel was made by NHA, acting on its own following the issuance of a Clause 63.1 Certification by the Engineer, subsequent to 12 April 2001, albeit with the high level approval that – so far as concerns the general diplomatic fallout – it could act in accordance with the terms of the Contract. This has two important consequences. First, and most obviously, Bayindir's case of conspiracy fails. Secondly, the case comes down to the exercise by NHA of a contractual right, divorced from interference by the State. The fact that President Musharraf might have, but did not, discourage NHA from exercising its contractual rights because of broader diplomatic reasons in no way constitutes relevant interference."
(PHB [Pak.] ¶¶ 2.76-2.78)

In addition, Pakistan notes that General Musharraf was diplomatically and personally fond of Turkey and appreciated the fact that the Project was in the hands of a Turkish contractor.

274.
In connection with Bayindir's allegations about Pakistan's financial constraints and balance of payment crisis, Pakistan notes that the "Talking Points for the Prime Minister" referred to by Bayindir do not support the Claimant's allegations. Quite to the contrary, this document shows that Bayindir had difficulties sourcing credit in the international market (Rej. M., ¶ 3.26). According to Pakistan, the contemporaneous record shows that it was Bayindir's inability to arrange the foreign exchange component of the loan that caused the financing and the scope of the Project to be revisited. As a result of Bayindir's failure to arrange the foreign currency loan, Pakistan had indeed to finance the Project itself. The position of NHA's legal advisor at the time, Mr. Farrukh Qureshi (now Bayindir's counsel), was that "[Bayindir's] letter dated 23.10.99 tantamounts to a repudiation of contract entitling NHA to accept such repudiation and terminate the contract should it consider to do so" (Exh. [Pak.] CM-52). Instead, NHA and Pakistan opted against termination and for negotiation (Rej. M., ¶ 3.28).
275.
Pakistan further alleges that the very fact that Addendum No. 9 was concluded in early 2000, at a time when Pakistan was facing serious financial concerns, disproves Bayindir's assertion that its expulsion in 2001 was motivated by financial considerations, as Pakistan's financial position at that time was more secure. NHA did not give in to the opposition from Pakistan's Planning Division or to the advice from the World Bank. It rather maintained its view that the Project should be completed by the Contractor, as evidenced by the conclusion of Addendum No. 9, which was highly favourable to Bayindir (Rej. M., ¶¶ 3.55 - 3.65). Nothing in the minutes of the 7 November 2000 meeting chaired by the Minister of Communications in any way supports the proposition that a decision was taken to discontinue the Project owing to financial constraints. In fact, it was decided that the Project might continue (PHB [Pak.] ¶ 3.2). If Pakistan nevertheless remained cautious, this was because of Bayindir's past poor performance. Similarly, General Javed testified that he made no mention of financial constraints in his presentation to the Chief Executive on 23 February 2001, and that his reference in this presentation to Bayindir's high rates was only to illustrate the incentive that Bayindir should have had to make progress swiftly (PHB [Pak.] ¶ 3.2).
276.
In addition, Pakistan stresses that, contrary to Bayindir's contention, the budget available to NHA for the Project was not restricted to the PSDP allocation. NHA could rely upon another budgetary stream, the current budget, which was many times larger than the PSDP and could have been employed for the Project. NHA was provided with funds from the PSDP for the express purpose of meeting its liabilities to Bayindir for the period from April to June 2001. The provision would have covered payments not only in respect of IPCs 20 and 21, but also IPA 22. NHA did not pay IPCs 20 and 21 because, under the Contract, these IPCs were not to be paid until the final accounting at the end of the Project's Defects Liability Period (PHB [Pak.] ¶ 3.2). It took this decision on the basis of legal advice, which was subsequently confirmed by a decision of the Engineer, and, in this arbitration, further supported by the expert testimony of Mr. Chapman.
277.
Pakistan argues that, in any case, Bayindir's allegation that the M-1 Project was not a priority is unsupported by the evidence on record. The note on which Bayindir relies in this regard states that priority should be given to ongoing projects which included M-1. It then concludes that the balance of the Turk-Exim Bank loan was sufficient for the current financial year and that "efforts would be made to remain within the budgetary allocations, as far as the Rupee portion was concerned" (Rej. M., ¶¶ 3.40-3.41).
278.
Further, Pakistan submits that it did not anticipate any savings from the expulsion of Bayindir. Quite on the contrary, it advised NHA that the latter would probably not gain financially from an expulsion and that there was likely to be a substantial windfall to Bayindir at the end of the Defects Liability Period (Rej. M., ¶¶ 3,126 - 3,127 and 3,136 -3,140).
279.
Pakistan also rebuts Bayindir’s third allegation pursuant to which the expulsion was effected to favour local contractors. It replies that neither the government nor NHA had any contacts with SKB before the expulsion (Rej. M., ¶¶ 3,153, 3,171 - 3,173), that it is not established that the decision to complete the works with local contractors preceded the one to expel Bayindir (Rej. M., ¶¶ 3,152, 3,164 - 3,170), that any suggestion of collusion is disproved by the fact that NHA’s attempts to continue parts of the works with local contractors were stopped by the very contractors with whom it is supposed to have colluded (Rej. M., ¶ 3,154). Finally, Pakistan notes that the completion of the works with Bayindir’s subcontractors was in any event a natural course of action expressly permitted under sub-clause 63.1 of the Contract.
280.
More generally, for Pakistan it was Bayindir’s poor performance under the Contract that led to the expulsion (PHB [Pak.] ¶¶ 6.56 – 6.62). Bayindir's progress was slow from the start and the financial resources it invested in the Project were inadequate (Exh. [Pak.] CM-47). General Javed referred in his statement to the minutes of the Contract Progress Meeting No. 18 for December 1999, showing that Bayindir was experiencing a lack of cash flow, which was adversely affecting its progress. Contrary to Bayindir's contention, the delays cannot be explained by the unavailability of the land. Indeed, most of the land had been properly handed over, except for an encumbered stretch of 4 kms that was de minimis given the overall lack of progress of Bayindir (Rej. M., ¶¶ 3.16-3.17). Moreover, the Chairman of Bayindir, Mr. Kamuran Cortük, testified in response to a question from the Turkish Parliamentary Committee investigating the purchase of the television station Genc TV in November 1998, that 30 to 40 million dollars originating from Pakistan had been used for this acquisition (Rej. M., ¶ 3.9). In Pakistan's submission, Bayindir was itself undergoing a "credit crunch" that caused it to be constantly under-resourced, to fail to acquire adequate equipment, and to display a chronic inability to pay its subcontractors in spite of NHA's regular and prompt payment of IPCs.

2.3 Tribunal's determination

281.
To assess the merits of these allegations, the Tribunal will focus on two issues: first, whether the Claimant was expelled for reasons unrelated to its performance (2.3.1); second, whether the Claimant's contractual performance had an impact on the Respondent's acts allegedly in breach of the Treaty (2.3.2).

2.3.1. Expulsion unrelated to Contract performance?

282.
To answer the first issue about the reasons unrelated to performance, the Tribunal will consider whether the evidence supports the existence of political shifts (2.3.1.1), of financial difficulties (2.3.1.2), and of attempts to favour local contractors (2.3.1.3).

2.3.1.1. Political shifts

283.
In its post-hearing brief, the Claimant relied on the oral testimony of Mr. Afzal to claim that it had been the victim of "political pressures" and "tit-for-tat" political dynamics between Prime Minister Nawaz Sharif and, his successor, Prime Minister Benazir Bhutto. Whereas Mr. Sharif had fully supported the Project, Ms. Bhutto had not, irrespective of Bayindir's performance. However, these events occurred prior to the entry into force of the Treaty on 3 September 1997 and the disputes arising from them have been settled (see section IV(A)(c) supra). These events are thus not susceptible of founding a treaty breach in these proceedings. They can merely be taken into account for a better understanding of the relevant facts.
284.
With respect to the period following the entry into force of the Treaty, Bayindir argues that a further political shift occurred in October 1999 with the advent of the government of General Musharraf. The new government is said to have taken an aggressive stance against the Project. The Tribunal is, however, unpersuaded by the evidence put forward by the Claimant. The answer provided by NHA to a question of the National Assembly of Pakistan (Exh. [Bay.] CX-230), upon which the Claimant relies, does not show an "aggressive stance." While it indeed refers to delays due to changes in policy, it also mentions that "with prudent handling" most of the "sick projects" including M-1 "are now on track" (Exh. [Bay.] CX-230).
285.
Asked in cross-examination when Bayindir started to perceive the alleged hostility of the new government, Mr. Jilani, Bayindir's area manager, gave inconclusive answers. He was unable to put a date on some of the assertions he made in his written statement. To a question seeking to elicit what time period he intended to cover when writing that "the correspondence that Bayindir started to receive from the NHA and the Engineer clearly revealed to me that efforts were being made to find an excuse to take the Project away from Bayindir," he replied "a very wide period" from the 1999 takeover of Pakistan by General Musharraf to December 2000 when the sub-clause 46.1 notice was received (Tr. M., 27 May 2008, 31, 19-25).
286.
This answer omits the crucial fact that during that time span Bayindir was confirmed in its position of Contractor by the conclusion of Addendum No. 9. The Addendum No. 9 provided inter alia for a revised completion date, the reduction of the Project from six to four lanes, a rescheduling of the recovery of the Mobilisation Advance, the settlement of foreign currency payments in Pakistani rupees at the conversion rate of the date of payment, the deletion of certain works, the immediate resumption of work by Bayindir, and the handover of remaining land by NHA within a set deadline (Exh. [Bay.] C-18). The conclusion of Addendum No. 9 can hardly be seen as an "attempt to take the Project away from Bayindir" nor as an indication of an adverse political shift constituting a breach of fair and equitable treatment.
287.
In this context, the Tribunal also notes General Qazi's testimony according to which Pakistan's diplomatic relations and General Musharraf's personal contacts with Turkey had a positive rather than an adverse effect on Bayindir's position (Tr. M., 28 May 2008, 313-314).

2.3.1.2. Financial difficulties

288.
The evidence, including the testimony of Mr. Afzal, at the time Pakistan's Secretary of Finance, and of Mr. Wall, at the time World Bank Country Director for Pakistan, shows that Pakistan was indeed undergoing financial difficulties when General Musharraf came to power. Mr. Afzal confirmed that "the ratings suffered a shattering blow after the nuclear tests of May 1998" and "continued to be precarious" (Tr. M., 28 May 2008, 111, 11-13 and 17), and that General Musharraf's accession to power adversely affected Pakistan's access to international institutional lending (Tr. M., 28 May 2008, 56, 17-24). This evidence was corroborated by Mr. Wall, who mentioned that Pakistan faced a balance of payment crisis in the year 2000 (Tr. M., 30 May 2008, 131, 4-5).
289.
In essence, Bayindir argues that these difficulties led to a reduction of the scope of the Project, while Pakistan replies that it was Bayindir's inability to arrange the foreign exchange component of the loan which led to a review of the Project's scope and finance mechanism. It is undisputed that Bayindir was not able to raise a foreign currency loan. It is disputed, however, whether Bayindir was under an obligation to do so or under a mere duty to exert best efforts. In reality, this dispute ultimately does not matter. On the facts, it cannot be denied that financial considerations played an important role in the review of the Project. But the difficulties were resolved and the Project continued.
290.

The content of Addendum No. 9 concluded in 2000 leaves no doubt in this respect. Its preamble emphasizes the reason for the review:

"WHEREAS Bayindir has informed NHA through its letter reference No. IPM/OK/NHA/292 dated October 23, 1999 that Bayindir is unable to arrange further Foreign Currency Credit for the construction of Islamabad – Peshawar Motorway Project in terms of the Agreement for The Revival of Contract Agreement for the Construction of The Islamabad – Peshawar Motorway dated 3 July 1997.
AND WHEREAS NHA has agreed to arrange the remaining funding for the Project and has resultantly reduced the work and extended the Completion Date in view of the non-availability of the said Foreign Currency Credit."
(Exh. [Bay.] C-18).

The Tribunal concludes that the solution reached in the form of Addendum No. 9 evidences the Respondent's willingness to continue with the Project, and not the reverse.

291.
Bayindir’s further argument about the influence of the World Bank's negative assessment of the viability of the Project does not appear better founded. The World Bank’s opinion does not seem to have had much impact on Pakistan’s decision-making processes. As noted at hearing by Mr. Afzal on cross-examination, it was seen as a mere suggestion, and often disregarded:

"You see, look, the point I am making a little different. I am making two points. One is that the World Bank's view on the viability of the Project, even continuation at that stage, was something that they had been consistent with, ever since the inception of the Project, so incidentally was the Planning Commission. Maybe they changed it at the very end. All I am saying is that these were in the form of suggestions, and in my original letter, if I recall, I cited two or three cases, but let me just specify those. There was the Chashma nuclear power programme which we had assisted with the assistance of the Chinese Government in 1991, 1992, and was, you know, consistently opposed by the World Bank, right through, and this was, by the way, in the time of the policy loans. We went ahead with it, and incidentally today everybody thinks, well, we did a good job [...l. Then there was this Lady Health Workers programme, which was started in Ms. Bhutto's Government time [...l Now, when it was started, the World Bank thought, because, unfortunately, Ms. Bhutto's Government had acquired a bad reputation for, you know, giving employment where it was undeserved, even in schools, they thought this was another programme which was just there to recruit people and give jobs. In fact, it is today continuing with about 100,000 workers. We have had several assessments, including that by third parties like the Oxford Policy Management Group, and they think it is one of the most successful public health programmes in the region. So, you know, this sort of advice would come and go, and we would have a healthy exchange."
(Tr. M., 28th May 2008, 64-65, 2-25, 1-18) [testimony of Mr Wall].

292.
Bayindir also seeks to establish that the Respondent's financial situation further deteriorated throughout the year 2000 and that by the fall of 2000 NHA was facing a "liquidity crunch." It argues that the reduction of NHA's PSDP allocation prompted NHA to seek an exit strategy from the M-1 Project, which was draining a large portion of its resources and had come under severe criticism from the World Bank and parts of the Pakistani government. The Claimant thus seeks to establish a causal link between Pakistan's financial difficulties and the decision to expel it.
293.

As the record stands, such a link is not established. Pakistan contends that NHA had at its disposal another budget stream larger than the PSDP. At the hearing, Mr. Afzal confirmed that "the national highways authorities, as I said, would get its budget allocation through two different streams. One is the PSDP, and one is the current budget" (Tr. M., 28 May 2008, 41, 13-16). He restated so in cross-examination:

"Q: Right. What I am trying to understand is whether you are suggesting that the M-1 Project was funded within or outside the PSDP or both?
A: Both."
(Tr. M., 28 May 2008, 44, 5-8).

This testimony is corroborated, as the Respondent pointed out, by a letter from NHA to Bayindir of 17 July 2000 (Exh. [Bay.] CX-251), which suggests the existence of funds in addition to those stemming from the PSDP allocation for the financial year 2000-2001.

294.
To counter this evidence, Bayindir refers to a note for the Finance Minister dated 6 January 2000, which in part reads as follows:

"[o]n the subject of prioritization of NHA's Development Program the Finance Minister observed that first priority should be assigned to the completion of ongoing projects and within ongoing projects higher priority should be assigned to N-5 projects and then to rehabilitation/reconstruction of National Highway Network other than N-5."
(Exh. [Bay.] CX-196).

295.
There is nothing in this note suggesting that the M-1 Project was not a priority. Quite to the contrary, the priority goes to "completion of ongoing projects," which would appear to cover the M-1 Project. The M-1 Project is then discussed in more detail, but the note concludes merely that a decision from the Finance Minister is requested so that the proposals made by Bayindir (including the payment of the foreign exchange portion in cash in equivalent Pakistan rupees) can be turned into an agreement. In this context, one should note that the fact that the Project may have been viewed as a priority is in line with the country’s diplomatic and General Musharraf's personal ties with Turkey (Tr. M., 28 May 2008, 313-314).
296.
For these reasons, the Tribunal comes to the conclusion that the financial situation referred to by the Claimant cannot be considered a decisive cause of Bayindir's expulsion.

2.3.1.3. Local contractors

297.
The same reasoning applies to Bayindir's allegation that the purpose of its expulsion was to save resources and complete the Project at lesser cost with local contractors. While it is plausible that NHA and the government considered ways of cutting costs, it is not established that this consideration triggered the expulsion of Bayindir and the decision to continue the Project with local contractors.
298.
Bayindir refers to a number of documents allegedly demonstrating the intent to favour local contractors. These documents include a letter from the Vigilance Wing, press reports, and a memorandum of understanding signed by NHA with the local contractors before the launch of the tender procedure. Bayindir also relies on the testimony of Mr. Nasir Khan, all to sustain that, prior to the expulsion of Bayindir, NHA had undertaken the constitution of a consortium of local contractors to take over the Project. Bayindir claims that such conduct evidences the real motives underlying its expulsion.
299.
On the basis of the documents to which the Claimant mainly refers (Exh. [Bay.] CX-96, CX-106, CX-139, CX-206, CX-224, CX-235, CX-236-A), the Tribunal agrees that NHA and the government had in mind the possibility of completing the Project with local contractors. However, this conclusion does not necessarily entail that they preferred to do so, or, even if they did, that the decision to expel Bayindir resulted from such preference. Absent any indication on record to these effects, the Tribunal cannot deem these facts established.
300.
In reaching this conclusion, the Tribunal has taken into account that the record does not support Bayindir's allegation of corruption in the tendering process. Moreover, it appears to the Tribunal that any employer facing the unpleasant prospect of having to terminate a construction contract before completion would by necessity seek to identify alternative solutions. Envisaging the use of Bayindir's subcontractors to continue the works was certainly a sensible alternative. Indeed, it goes without saying that it makes more sense to try to retain the subcontractors who have already worked on the project rather than to resort to newcomers. These circumstances cannot be viewed as an indication that Pakistan's motivation for the termination was to favour local contractors and save costs.

2.3.2. Bayindir's performance

301.
The foregoing conclusions are supported by a review of Bayindir's perfomance. In essence, the Claimant submits that the internal documentation of NHA and the government contained no or little mention of deficient performance on its part, while Pakistan‟s financial problems received far more attention. It adds that, even if its performance had not been satisfactory, expulsion was a disproportionate remedy, which is additional proof that the motivation lay elsewhere. In response, the Respondent refers extensively to contemporaneous documentation, mainly monthly progress reports and correspondence, to establish Bayindir's poor contractual performance (Tr. M., 26 May 2008, 189-236, 240-273; see also PHB [Pak.] ¶¶ 3.78 – 3.96, 3.99 – 3,106, 6.56 – 6.62).
302.
As a threshold matter, the Tribunal notes that there can be no objection against relying on monthly progress reports and correspondence issued by the Engineer or its Representative, as the latter were not shown to be biased or acting in collusion with NHA and the government. It also notes that Mr. Sadik Can, President of Bayindir Construction Company, testified that, together with reports on expenses, monthly progress reports were the main written sources regarding Bayindir's project management (Tr. M., 27 May 2009, 254-255, 22-25, 1-2).
303.
The Tribunal stresses that in assessing this evidence it has taken into account the arguments advanced by the Parties in connection with the evidentiary weight of Mr. Mirza's testimony as well as the fact that Mr. Mirza was not available to appear at the hearing for cross-examination. Due to the confidential nature of the reasons alleged for Mr. Mirza's non-appearance, the positions of the Parties cannot be restated in this Award. However, the Tribunal has carefully reviewed all circumstances and concluded that, because the Claimant had no opportunity to cross-examine Mr. Mirza, the latter’s written evidence could only be considered if corroborated by other evidence in the record.
304.
The record substantiates the Respondent's negative assessment of Bayindir's contractual performance. Already immediately after the conclusion of Addendum No. 9, there is evidence that Bayindir's performance, particularly the level of remobilization and funds committed, was insufficient in the opinion of the Engineer's Representative (Exh. [Pak.] CM-65, CM-66). There is further evidence of this fact in the monthly progress reports for September and October 2000 (Exh. [Pak.] CM-8, CM- 9) and in a letter from the Engineer to Bayindir of 7 October 2000 (Exh. [Pak.] CM-73).
305.
It is true that the press release of the site visit of General Qazi on 12 September 2000, to which Bayindir refers (Exh. [Bay.] CX-31), states that the Minister of Communications had "expressed satisfaction over the pace of work." Yet, that press release is insufficient to establish the satisfactory performance of Bayindir or rebut strong evidence to the contrary. Government releases are often couched in prudent or diplomatic terms. More specifically, this release contains another passage to which General Qazi referred in his examination (Tr. M., 28 May 2008, 292, 16-20) and which states that "[the Minister] directed the experts to further gear up the pace of work on the project so that it could be completed at the earliest" (Exh. [Bay.] CX-31). In his oral testimony, General Qazi confirmed that, after his visit to the site, he was not satisfied with Bayindir's pace of work:

"Based on what I had seen before the briefing, because first, we made the visit. We made the round. Then we came to the place which was – they called it, Camp office', and over there the briefing was given on the charts, and all. I had already visited the site. You had seen the work that was going on, and frankly, I was a bit disappointed to see that the number of machines deployed were too less, and the outfieldwork and the carting of the earth was mostly being done by donkeys, so I said, 'How can you meet the targets by such a slow-moving actions that are going on?' And I was told that, 'Well, these are the local subcontractors, and we are – 'we have deployed machines and we will deploy more machines', and they are working on other parts of the roads, that is why you could not see them. So I said, 'But all the same, I am not satisfied, the way the work is going on, because when I drove beyond the road after which I was ruled (sic) [told] to go, then I could see that large portions there was nobody working, and then they said, 'Well, we have divided up the road and people would be working on those portions also', so overall, my impression, as I carried, was not very happy one. I was a bit unhappy with the pace of work that I saw, and the amount of machines deployed that I saw, and then when the briefing was given, I was told by Bayindir that they would be able to meet the target, which was two asks (sic) [weeks] by March 2001, and the complete road by December. So, I had very serious doubts, and then the Engineer gave his assessment, and he pointed out that with the amount of work, the percentage of work they had done so far, there was no way they would be able to meet the target unless they undertook some extraordinary measures and deployed more resources and machines. So, I, at that time, told the Bayindir representative, a gentleman called Jilani, Mr. Jilani, I told him, I said, 'Listen, you better deploy more machines and bring in more resources so that you can meet the targets, because we want to make this motorway, and we want you to finish the work on time', which he promised that he would do."
(Tr. M., 28 May 2008, 289-291).

306.
Similar concerns were expressed later by General Javed, the Chairman of NHA, on the occasion of a visit to the site on 25 November 2000. These concerns are recorded in his notes, which the Engineer forwarded to Bayindir on 5 December 2000 (Exh. [Pak.] RB-43). General Javed confirmed his doubts in oral testimony:

"The first remark that I made to the Bayindir people was that I have yet to have a critical analysis of your output, and I haven't seen any of the Engineer's reports, but they said that the critical activity appears to be the earthwork. The earthwork was the most critical activity, and I distinctly remember having told them that, 'Critical activity for you is the earthwork, unless you put your act together you will have no hope in hell to complete this section come 23rd of March'. So, certainly, this is absolutely right. They were far behind the schedule, at that point in time, with respect to the other areas, also, but earthwork, amongst the order of the works is probably the first one [...l."
(Tr. M., 29 May 2008, 112, 5-21).

307.
None of Bayindir's witnesses were examined on these facts, whereas Mr. Bridger's testimony confirmed that Bayindir's performance remained unsatisfactory in the months preceding the issuance of the sub-clause 46.1 notice at the beginning of December 2000 (Bridger's WS, ¶¶ 62 – 73; Tr. M., 29 May 2008, 189, 2-12). Referring to his remarks in the November 2000 monthly progress reports, Mr. Bridger testified that earthwork quantities on Parts 1 and 5 combined were 45% less than the November target and that Part 1 had fallen significantly behind schedule (Bridger's WS, ¶ 71). By the end of November, Messrs. Bridger and Mirza considered that Bayindir's performance was such that they needed to issue the sub-clause 46.1 notice "before it became too late for BCI to have the opportunity to bring the Project back on program" (Bridger's WS, ¶ 72).86
308.
After the issuance of the sub-clause 46.1 notice on 2 December 2000, Bayindir's progress remained unsatisfactory, as is evidenced by a letter from Mr. Bridger to Bayindir of 11 December 2000 (Exh. [Pak.] CM-79), and by the December 2000 monthly progress report (Exh. [Pak.] CM-11). Mr. Finn followed up with several reminders in January 2001 (Exh. [Pak.] CM-83, CM-84, CM-86). The monthly progress reports for January, February and March 2001 also show that Bayindir's progress was insufficient (Exh. [Pak.] CM-12, CM-13, CM-14). Mr. Bridger explained at the hearing that productivity decreased although Bayindir had added equipment (Tr. M., 29 May 2008, 193, 2-8).
309.
Bayindir submits that, in assessing its performance over these months, the Engineer and his Representative improperly disregarded the fact that progress was being hindered by reasons attributable to the Respondent. This issue has been partly addressed in paragraphs 245-250 supra. Asked at the hearing about his assessment of the obstacles allegedly excusing the delays, Mr. Bridger gave the following answer:

"Q: So they invited you to a joint inspection, you and a representative of the Employer. Bayindir witnesses have testified that you never accepted the invitation.
A: That is absolutely right. I didn't.
Q: You did not?
A: I did not, but I inspected this site twice myself, once before the meeting of 19th of March, and once just before I sent out my letter [...] I went through the site with my Resident Engineers, I declined to go through with Bayindir because I didn't want the coercion – I didn't want to be pressured by Bayindir. I believe I knew exactly what Mr. Jilani said on the meeting of the 19th of March, and it was absolutely incorrect. The assertions he was making about what I had seen on site, and I did not want to go on site with them and be pressured in any way. [...]
Q [THE PRESIDENT]: Well, can I just ask; what did you mean by being pressured by Bayindir? Would they otherwise pressure you?
A: I think they held a view that was contrary to what the actual circumstances were. They were obviously not going to back down from it, and to travel with them over 150 kilometres one way, and then back the other way 100 kilometres to my office, that is 250 kilometres, sitting with Bayindir telling me that black is white, I didn't enjoy the thought of that, so I didn't travel with them. [...]
Q [THE PRESIDENT]: So the relationship was a difficult one?
A: At that stage, after the 19th of March meeting it was. Up until then I had had very good relations with Bayindir. I was probably generous in the way I administered the Contract towards Bayindir because I believe that if the Contractor is treated fairly, and he gets his due payments, it is going to expedite the Contract. I had very good relations with all the – all three Project Managers, but after this 19th of March meeting, things became quite acrimonious with Bayindir, and I was going to be absolutely independent of them in every way possible.
Q [THE PRESIDENT]: So the turning point was the 19th of March meeting?
A: Oh, I believe that was a turning point, major turning point, yes."
(Tr. M., 29 May 2008, 215-218)

310.
At that 19 March 2001 meeting, the Employer and the Engineer's Representative had indeed expressed their concerns about Bayindir's unsatisfactory progress (Tr. M, 29 May 2008, 216, 3-8). The minutes of the meeting show that presentations were made by Mr. Bridger (pointing to Bayindir's deficient performance despite several reminders) and by Mr. Jilani (regarding the progress on the site). The minutes record that the Chairman of NHA intervened several times during Mr. Jilani's presentation to express concern about Bayindir's progress (Exh. [Pak.] CM-97).
311.
Bayindir has sought to show that the minutes do not reflect the discussions held at the meeting, but to no avail. Mr. Jilani's testimony on this point at the hearing was unconvincing. Although he confirmed that the 19 March 2001 meeting was regarded as an important meeting, he stated that neither he nor Mr. Can, who attended for Bayindir, took any notes "because [the] Engineer was prepared, taking, I guess, the notes. We were not taking notes" (Tr. M., 27 May 2008, 67, 16-18). Moreover, he was unable to point to any evidence that he had asked Mr. Bridger for the draft minutes (Tr. M., 27 May 2008, 68, 12-16). Mr. Can's testimony was hardly more convincing. Asked whether he was aware of a letter sent by Mr. Bridger to Bayindir's project manager one week after the 19 March meeting, stating that the list of obstructions presented by Mr. Jilani at the meeting was obsolete (Exh. [Pak.] RB-67), Mr. Can was unable to answer whether Bayindir had replied or not, later noting that he was not involved in daily correspondence (Tr. M., 27 May 2008, 260-262).
312.

Pakistan also relies on a letter that Mr. Bridger sent to Bayindir on 16 February 2001, noting that the value of the equipment permanently imported by Bayindir was well below Bayindir's commitment (Exh. [Pak.] CM-91). Mr. Bridger recalled that, at a meeting held on 21 March 2001, Mr. Jilani informed him that Bayindir would "never bring in the rest of that equipment" (Bridger's WS, ¶ 78). In his Supplemental Witness Statement, Mr. Bridger testified that he had found this statement "quite shocking" (Bridger's Supplemental WS, ¶ 110), which he confirmed orally (Tr. M., 29 May 2008, 259, 5-18) :

"Well, I think the very misguided view that Mr. Jilani gave of the obstructions, and the progress, certainly I was very disappointed in, and in fact, so much so that I made a point of convening a meeting with Mr. Jilani and others very soon after that March 19th meeting to discuss the importation of plant to get the Project really moving again, and it was in that meeting, I think it might have been just two days after the presentation on the 19th, that I was absolutely flabbergasted that there was no intention by Bayindir to bring in plant that I understood was due to come in accordance with a 1998 agreement with NHA, and I just thought it was trickery taken to the Nth degree."
(Tr. M., 29 May 2008, 259, 5-18)

The oral testimony of Mr. Jilani appeared to confirm Mr. Bridger's statement that Bayindir did not intend to bring in additional equipment. Asked in redirect examination whether the equipment that Bayindir had on site was insufficient, Mr. Jilani gave a long answer to the effect that Bayindir was not contractually required to bring in more equipment (Tr. M., 27 May 2008, 81-85).

313.
Additional criticism was voiced both by the Engineer's Representative and by the Employer shortly before the issuance of the sub-clause 63.1(b)(ii) notice on 19 April 2001. On 14 April 2001, Mr. Bridger in particular reminded Bayindir that:

"According to any assessment, your rate of progress has remained well below the Contract requirements and you have failed to comply with our notice issued to you under Clause 46.1."
(Exh. [Pak.] RB-69)

314.
Accordingly, the facts are such that NHA's concerns about Bayindir's performance must be deemed founded, with the result that NHA was entitled to consider termination. Under these circumstances, the Tribunal can see no basis for finding a breach of the applicable FET standard.

(iii) Did Pakistan exert illegitimate pressure or coercion on Bayindir?

1. Bayindir's position

316.
It is Bayindir's case that it was expelled from the site under threat by armed soldiers who had surrounded the site on 24 April 2001 and prevented Bayindir's personnel from entering their offices or removing records (Mem. M., ¶ 179). Bayindir emphasizes that the time and manner in which the notice of expulsion was served upon Bayindir was deliberately planned so as to prevent Bayindir from seeking assistance or advice from its head office, or the Turkish Embassy in Islamabad, or legal counsel (Mem. M., ¶ 102). In this regard, Bayindir quotes from Pope & Talbot v. Canada87 and argues that a "confrontational and aggressive" regulatory review may breach fair and equitable treatment:

"The relations between the SLD and the Investment during 1999 were more like combat than cooperative regulation, and the Tribunal finds that the SLD bears the overwhelming responsibility for this state of affairs. It is not for the Tribunal to discern the motivations behind the attitude of the SLD; however the end result for the Investment was being subjected to threats, denied its reasonable requests for pertinent information, required to incur unnecessary expense and disruption in meeting SLD's requests for information, forced to expend legal fees and probably suffer loss of reputation in government circles.[...] In its totality, the SLD's treatment of the Investment during 1999 in relation to the verification review process is nothing less than a denial of the fair treatment required by NAFTA Article 1105, and the Tribunal finds Canada liable to the Investor for the resultant damages."88

317.
Bayindir opposes Pakistan's allegation that the security problems on site were caused by unpaid subcontractors. It asserts that it had paid its subcontractors for the works performed until the end of December 2000 and that non-payment for works performed thereafter was due to NHA's failure to settle outstanding IPCs. According to Bayindir, the Chairman of NHA, in a press conference of 23 April 2001, upon the expulsion of Bayindir, assured Bayindir's subcontractors that their interests would be protected (Exh. [Bay.] CX-93). However, upon a request by Bayindir that its subcontractors be paid by NHA directly out of the certified amounts payable to Bayindir, the Engineer issued an allegedly biased decision under sub-clause 67.1, rejecting direct payment. Thus, Pakistan refused to pay Bayindir's subcontractors and directed the subcontractors to approach Bayindir for payment, which the latter did with the result that Bayindir's personnel was threatened and felt extremely insecure.
318.
Moreover, Bayindir alleges that the Respondent deployed the FWO, a unit of the army, on the site. Thus, as a result of Pakistan's acts and omissions, Bayindir's expatriate personnel was compelled to leave Pakistan without securing its assets and property (Reply M., ¶¶ 242 - 243, Exh. [Pak.] CM-61, Exh. [Bay.] CX-158, CX-159).
319.
Bayindir further claims that it was entitled under the Contract to seek a decision under sub-clause 67.1, followed by final adjudication by an arbitral tribunal. While such remedy was being pursued, the Respondent could not lawfully take over the site (Mem. M., ¶ 104). Bayindir has also mentioned that recourse to arbitration by the Respondent may constitute an act of coercion in breach of the FET standard as characterized in Tecmed(Mem. M., ¶ 183).

2. Pakistan's position

320.
Pakistan's position is that the expulsion was carried out in accordance with the Contract. In particular, there was no intimidation of Bayindir's personnel. Neither was there any contemporaneous complaint by Bayindir, not even with respect to NHA's decision to use FWO personnel to secure the site and protect the equipment left by Bayindir (C.-Mem M., ¶ 4.42). Pakistan further argues that coercion as such, i.e. irrespective of any unlawful conduct, cannot give rise to an actionable breach of the FET standard (C.-Mem. M., ¶ 4.43).
321.
In Pakistan's view, Bayindir's allegation of forcible expulsion comprises two elements (i) alleged coercive acts and threats by Pakistani armed soldiers; and (ii) alleged confiscation of records. In Pakistan's submission, Bayindir has failed to prove these elements. Bayindir relies heavily on Mr. Sadik Can's witness statement, who, as noted by Pakistan, was not in a position to recall what happened at the time of expulsion because he had left the site on 25 April 2001, two days after receipt of the expulsion notice, and therefore was not present when the actual expulsion took place on 7 May 2001. Apart from Mr. Can's testimony, Bayindir has failed to substantiate its allegations. In particular, no complaints were raised at the time by any of Bayindir's representatives about coercion, threats or mistreatment at the hands of Pakistan.
322.
According to Pakistan, security concerns that existed on site after Bayindir's expulsion had nothing to do with Pakistani armed soldiers, but were due to Bayindir's failure to pay its employees and subcontractors (PHB [Pak.] ¶¶ 4.1-4.3). NHA's response in arranging extra police protection and the FWO's presence were necessary to protect the site, including the equipment and Bayindir's personnel during the handing over of the Project to NHA (Rej. M. ¶¶ 3.91 – 3,124). In this connection, Pakistan notes that payment to subcontractors was the sole responsibility of Bayindir, as there was no privity of contract between NHA and Bayindir's subcontractors. In issuing the directions ruling out direct payment by NHA, the Engineer acted in conformity with his duties (Rej. M., ¶¶ 2.68-2.70).
323.
Pakistan also notes that Bayindir points to no authority supporting that a State entity's recourse to an arbitration mechanism agreed in a contract can be considered as an act of coercion (C.-Mem. M., ¶ 4.44).

3. Tribunal's determination

324.
The main evidentiary source of Bayindir's allegation is the witness statement of Mr. Sadik Can, President of Bayindir Construction Company (Exh. [Bay.] CX-65). The Tribunal must therefore assess Mr. Can's testimony and weigh it in the light of the other evidence in the record.
325.
In his written statement, Mr. Can mentioned that in the evening of 23 April 2001, he was handed a letter which required Bayindir to vacate the site within 14 days and was urged to acknowledge receipt of this letter, which he did under protest. He further testified that he "noticed some soldiers of the Pakistani Army who were carrying guns and had taken positions at the gates and were also seen walking on the site" and that "[t]he presence of soldiers resulted in a panic amongst [his] staff who felt that they may be taken into custody or subjected to physical abuse" (Can's WS, ¶¶ 6-7). Mr. Can added that the office site was locked, that the entrance was guarded by an armed soldier, and that he and his staff were only allowed to enter the office by the soldier who had the key, and that they were prevented from removing or copying any files. Mr. Can left Pakistan shortly thereafter reaching Turkey on 25 April 2001 (Can's WS, ¶ 9). At the hearing, he declared that:

"On the evening of the 23rd, once we received the Notice, we were obviously – we found ourselves obviously in a very tight corner. The people at the site and I sat down. We thought about what we could do. Meanwhile, while we were talking, we realised that there were uniformed and armed soldiers on site. When we saw the soldiers we said, 'Okay, this is very serious'. We felt we needed to secure our offices on site. We also felt we needed to secure ourselves. This was something we were not quite familiar with. We had been in Pakistan for four to five years until then, and until then we had our own security forces that maintained security. This is a security force composed of professionals. We saw soldiers, and obviously this caused further unrest. Everyone, including myself, was scared. I was obviously leading the Project so I had to calm my colleagues down. I tried to calm them down. My colleagues and I said that we need to take our personal belongings and important valuables from the offices. We went to our offices but we were unable to access the offices. The soldiers came to us and they said that we cannot take anything out of the offices."
(Tr. M., 27 May 2008, 247-248, 3-25, 1).

326.
This account sounds quite dramatic. The fear and unrest among Bayindir's personnel is easily understandable and cannot be taken lightly. Yet, upon a closer review of the specific facts, the situation loses much of its drama. In reality, there are no indications that Bayindir's staff were threatened or subjected to physical violence by conduct attributable to the Respondent. To the contrary, the Respondent took steps to maintain order on the site and to protect Bayindir's staff from potential harm by the unpaid local workers hired by Bayindir. In fact, the main threat against Bayindir's personnel emanated from unpaid local workers and was handled by means of a non-fighting unit of the Pakistani army, the two, usually deployed for such tasks.
327.
At the hearing, counsel for the Respondent asked Mr. Can several times whether he could point to any specific security complaint by Bayindir's staff in Pakistan. Mr. Can's answer was that he did not know (Tr. M., 27 May 2008, 268, 7-25, 272-273, 24-25, 1 9). Mr. Bridger's testimony reports the absence of security concerns. He had "not heard mention of any violence or rough tactics being used by anyone from NHA or from FWO" in his discussions with local staff (Bridger's WS, ¶ 108). Mr. Bridger further testified that he held a meeting with the Employer and Bayindir after the expulsion notice was served, and advised them of the steps that had to be taken for the orderly expulsion of Bayindir (Bridger's WS, ¶ 104). He then confirmed the main content of this meeting in a letter of 24 April 2001 (Exh. [Pak.] CM-127). As noted by the Respondent, the letter makes no mention of any complaints regarding harassment or coercion by armed forces. With respect to security, it merely states that Bayindir was responsible for the security of the site for a period of two weeks.
328.
Mr. Bridger also recalled that after the issuance of the notice of expulsion

"large gatherings of angry people unpaid by BCI took place at the Burhan Camp and at BCI's offices in Islamabad. These crowds wanted to be paid before BCI left Pakistan. I remember that on one occasion the BCI Project Manager was trapped in his office on site by a mob of people [... ] I understand that he was extricated through the efforts of NHA without being harmed."
(Bridger's WS, ¶ 106).

329.
This view of the situation immediately after expulsion is confirmed by a letter of 26 April 2001 from Askari Guards (PVT) Ltd., the security firm which Bayindir had hired to secure the site. That letter states that "the contractors and employees who have not been paid their dues are likely to react violently" and that the situation may require "special assistance [... ] from law enforcing agencies" (Exh. [Pak.] R-24). This view was reinforced by the oral testimony of General Javed, who declared that:

"The Escri(?) [Askari] Guards were already there, and I have seen it somewhere on the record that the Escri [Askari] Guard had written a letter to Bayindir that, 'Unless you supplement our resources, get outside help, additional help, we cannot guarantee the safety of your people', but before such a letter, I was conscious that here are nearly 70 or 75 plus Turkish staff, and they would be in jeopardy if we didn't try to save their life and property. The reason was that the – there was a lot of restlessness amongst the low level employees and the low level-one-concerns-type people, and most of them happened to be from the turbulent tribal areas of Pakistan, the Burhans who usually get very angry, et cetera, and can resort to any level of violence when their wages for the last six months are not paid, so I thought it was my responsibility to make sure that the process of expulsion and other related post-expulsion and post-termination events take place in a most organized manner."
(Tr. M., 29 May 2008, 142-143, 24-25, 1-18).

330.
At the hearing, Mr. Sadik Can did not offer any alternative explanation (Tr. M., 27 May 2008, 263-265). Asked whether he was aware of the warning contained in the letter from Askari Guards, Mr. Can stated "No. I was not aware of it, and I did not infer from Article 3 that additional support would be needed. I read in paragraph 3 that difficulties may arise because of unpaid salaries" (Tr. M., 27 May 2008, 264, 5-8). Bayindir contends that NHA should have paid its subcontractors out of the certified amounts payable to Bayindir instead of directing these subcontractors to Bayindir. However, the Claimant has not established that NHA actually sought to turn the subcontractors against Bayindir in order to coerce the latter, nor has it demonstrated that NHA was responsible for paying Bayindir's subcontractors.
331.
The expulsion was effected on 7 May 2001, at a time when Mr. Can was no longer in Pakistan. Mr. Bridger was not on site either when the Employer took over. The operation was reportedly performed by FWO on behalf of the Employer. According to the testimonies of Mr. Bridger and General Javed, the FWO is the construction and engineering unit of Pakistan's army and was used to secure and protect the equipment and material left on the site (Bridger's WS, ¶ 107; Tr. M., 29 May 2008, 143, 20-25). General Javed testified that there were approximately twenty to twenty-five men of the FWO, in addition to the guards hired by Bayindir, and that the FWO were deployed "because they are familiar with the job, and they had a number of contracts from NHA also" (Tr. M., 29 May 2008, 143-144, 25-2). General Javed further explained that "when this happened, not one person was even scratched, not a pin was stolen, and there was absolute order when the expulsion process took place" (Tr. M., 29 May 2008, 144, 5-8).
332.
Thereafter, in response to a letter from Mr. Bridger of 7 May 2001, Bayindir identified the personnel which would carry out the joint measurement of the remaining permanent works, temporary works, and preparation of inventories as required by the Contract (Exh. [Pak.] CM-136). On this occasion, Bayindir raised no complaints as to any mistreatment of personnel by NHA's security staff. The letter only stated that "Bayindir Security shall work in parallel with NHA's additional security arrangements until complete handing/taking over of the Project takes place" (Exh. [Pak.] CM-136). The same day, Mr. Bridger answered Bayindir's letter stressing that "[u]nder the Contract it is only appropriate to have Bayindir Security personnel on hand as observers" (Exh. [Pak.] CM-137).
333.
The minutes of the first joint measurement and inventory meeting, held on 10 May 2001, at which three representatives of Bayindir were present, do not record any complaints about harassment or coercion either (Exh. [Pak.] CM-138). At a meeting held the following day, Bayindir expressed the concern that the FWO may have a conflict of interest in the measurement and inventory process and stressed its preference for engaging some other independent organisation with the necessary expertise (Exh. [Pak.] CM-141). No complaints about mistreatment were raised in this context either. By letter of 15 May 2001, Mr. Bridger advised Bayindir that an independent organisation, Jaffer Brothers (Pvt.) Ltd., had been nominated to conduct the joint inventory (Exh. [Pak.] CM-142).
334.
By contrast, Bayindir did raise complaints on 16 May 2001 with respect to the taking over by NHA of the sites, offices, workshops and stores at the Burhan and Bara Banda camps, noting that "[p]olice was mobilized at all end and entry points and thus all the camps and sites were sealed on the same day" (Exh. [Pak.] CM-143). On 21 May 2001, Bayindir also complained about a one day shutdown of electricity that had taken place at its residential block on 17 May 2001; it added that such actions were "contrary to the agreement to speed up the inventorization and other important activities" (Exh. [Pak.] CM-144). Mr. Bridger replied on 24 May 2001 that he did not condone such actions, but that NHA had "the legal right to take over any or all parts of the site that they wish" and that, upon raising the matter, he had been assured that the process would be completed in a "professional manner" (Exh. [Pak.] CM-145). Two days later, Mr. Bridger wrote that access to offices and stores had been restricted for one or two days at the beginning of the inventory period, and that the issue relating to the removal of some of Bayindir's records had been solved amicably (Exh. [Pak.] RB-105).
335.
Regarding Bayindir's access to files more generally, Mr. Bridger testified that records were kept "under a dual lock system requiring attendance for access by both NHA and BCI" (Bridger's supplemental WS, ¶ 122) and that, although there were tensions between the parties, he was generally able to achieve cooperation. He did not recall "ever being made aware of any occasion where BCI had been unable to resolve problems of access to any records at the Project Site Offices, when such access was necessary for the supply of information to NHA" (Bridger's supplemental WS, ¶ 123).
336.
On the basis of the foregoing considerations, the Tribunal concludes that the evidence does not support Bayindir's allegation of coercion. There is no evidence showing that Bayindir was harassed or coerced by conduct of NHA or of its subcontractors attributable to the Respondent. Nor is there any evidence showing that NHA or the Respondent failed to act when it appeared necessary to prevent harm to Bayindir's personnel. Quite to the contrary, the few instances in which Bayindir raised complaints about the treatment of its personnel appear to have been swiftly addressed and would in any event not be capable as such of sustaining a breach of the FET standard.
337.
Finally, the Tribunal is also unpersuaded by the Claimant's allegation that the recourse to arbitration under the Contract constitutes an exercise of coercion or undue pressure. Bayindir has not provided any explanation, nor any authority to this effect. It appears obvious to the Tribunal that, as a rule, a party's initiation of arbitration as provided in a contract cannot constitute a treaty breach.

(iv) Was Bayindir deprived of due process and/or procedural fairness?

1. Bayindir's position

338.
It is Bayindir's claim that it was denied its right to be heard and was treated in a non transparent manner because all the decisions affecting its investment were taken at the highest level without it being heard (Mem. M., ¶ 190; Reply M., ¶ 297). Bayindir relies on Metalclad v. Mexico,89Middle East Cement v. Egypt,90Tecmed v. Mexico,91 and Waste Management v. Mexico.92 In Bayindir's submission, these awards hold that the absence of a fair procedure or the existence of serious procedural shortcomings may constitute violations of fair and equitable treatment.
339.
In Bayindir's submission, delays and disputes are common in large construction projects. Thus, Pakistan should have worked in good faith towards a resolution as required by the FET standard and held in Saluka v. Czech Republic.93 Instead, Pakistan "exercised a destructive option to which it was not even contractually entitled – expulsion" (PHB [Bay.] ¶ 65).
340.
In any case, Bayindir emphasizes that the dispute resolution provisions of the Contract are irrelevant, as the present claims are brought under the Treaty and are therefore distinct from contract claims.

2. Pakistan's position

341.
For Pakistan, Bayindir's contentions assume some form of administrative or analogous proceedings where due process requirements apply. However, this case does not involve any such proceedings. Rather, Bayindir failed to perform under the Contract, which resulted in discussions at various levels as to the consequences of that breach (C.-Mem. M., ¶ 4.45).
342.
Moreover, Bayindir had the opportunity and did in fact meet and make representations to high level governmental officials at the main junctures when the Project was in crisis. Such representations were taken into account in NHA's final decision to expel Bayindir (C.-Mem. M., ¶¶ 4.47 – 4.48).

3. Tribunal's determination

343.
The Tribunal must determine whether the due process requirements that could be derived from the applicable FET standard cover situations such as the present one, in which procedural fairness was allegedly denied because the Claimant was not part of the internal decision-making of the administration concerning the management of the Contract. If so, the Tribunal must then assess whether the Claimant was in fact denied procedural fairness.
344.
The Tribunal agrees with the arbitral decisions holding that a denial of due process or procedural fairness may amount to a breach of the FET standard.94 This does not mean, however, that such guarantees are available in any given situation. As noted in Waste Management, to which the Claimant refers, whilst the fair and equitable treatment standard may be infringed by conduct amounting to "a complete lack of transparency and candour in an administrative process," such standard largely depends upon and must be adapted to the circumstances of each specific case.95 The decisions which address this issue, generally do so in the context of judicial or administrative proceedings. Such was, for instance, the case in Metalclad and Tecmed. As for Middle East Cement, the procedural fairness requirement was applied to seizure and auction procedures, which can also be deemed administrative in nature.
345.
The nature of the present issue is different. It deals with the internal decisions of NHA and the government regarding the management of the Contract. Public administrations are regularly involved in managing different types of contracts and act, in this regard, in a manner which is not fundamentally different from that in which a private corporation handles its contractual relationships. Such internal processes may include decisions required to perform contractual obligations, such as planning and releasing budgetary allocations or carrying out performance reviews. The Tribunal is aware that, in certain respects, public and private contracting are not subject to the same requirements. A typical example is the tendering processes related to public procurement contracts.
346.
This said, the Tribunal considers that, under the present circumstances, the decision of NHA, in consultation with the government, to resort to certain contractual remedies and the related preparatory discussions and assessments were not as such subject to procedural requirements other than those contractually agreed. In this connection, the Tribunal has concluded, in paragraphs 240-258 and 281-314 supra, that the main contractual mechanisms which eventually led to the expulsion of Bayindir (particularly the issuance of notices under sub-clauses 46.1 and 63.1(b)(ii)) had not been used in a manner that amounts to a breach of the Treaty. In particular, there is no evidence that the Engineer or the Engineer's Representative were biased and deprived Bayindir of procedural safeguards.
347.
More importantly, even assuming for the sake of the analysis that due process and procedural fairness govern the internal processes underlying the exercise of contractual rights, the record shows that Bayindir was indeed given the opportunity to present its position on numerous occasions throughout the relevant period. In this regard, the Respondent has pointed to the following instances: representations to a committee formed by the Ministry of Communications (14/12/99) (Exh. [Pak.] CM-174) ; representations to a meeting chaired by the Secretary of Communications (19/01/00) (Exh. [Pak.] CM-175) ; discussions among Bayindir's President and the Chairman of NHA, the Secretary General of Finance, the Secretary of Communications, and the Engineer (09/02/00) (Exh. [Pak.] CM-176) ; letter from Bayindir's Chairman to President Musharraf acknowledging that several meetings had taken place between Bayindir and NHA, the Ministry of Communications, and the Ministry of Finance (26/02/00) (Exh. [Pak.] CM-177) ; shortly thereafter invitation of the Turkish Ambassador to Pakistan by the Chairman of NHA to participate in a meeting between the parties, which later led to the signature of Addendum No. 9 (Exh. [Pak.] CM-178) ; meeting between the Turkish Ambassador and the Chairman of NHA (19//12/00) (Exh. [Pak.] CM-182, CM-183) ; letter from the Minister of Communications to the Turkish Ambassador to inform him of Bayindir's defective performance (20/02/01) (Exh. [Pak.] CM-179) ; letters from the President of Bayindir to the Turkish Ambassador referring to a previous meeting with the Chairman of NHA and Minister of Communications and requesting him to arrange another meeting (26/02/01) (Exh. [Pak.] CM-180), which was done (Exh. [Pak.] CM-181, CM-182) ; meeting attended by representatives of the Ministries of Communications, of Finance, and Foreign affairs, as well as by a Senior Diplomat from the Turkish Embassy, the parties and the Engineer (19/03/01) (Exh. [Pak.] CM-97).
348.
In summary, the Tribunal concludes that Bayindir was not denied due process or procedural fairness primarily because these requirements did not apply in the present context. Secondarily, assuming – quod non – that they applied, the record shows that Bayindir was in fact afforded a number of opportunities to present its position during the relevant time period.

e. Conduct following the expulsion

1. Bayindir's position

349.
Bayindir alleges that after the expulsion Pakistan failed to proceed to the evaluation of the works completed pursuant to sub-clause 63.2 of the Contract or to certify IPAs 22 and 23. In Bayindir's submission, Pakistan slashed IPAs 22 and 23 to a fraction of their original value and failed to pay IPCs 20 and 21, which had been certified by the Engineer and were due and payable to the Claimant in March 2001, namely before its expulsion. Moreover, the Respondent refused to certify an extension of time granted by the Engineer (EOT 04) and claimed some US$ 1 billion in the Pakistani arbitration.

2. Pakistan's position

350.
It is Pakistan's argument that Bayindir retains residual rights under clause 63 of the Contract (Tr. M., 4 June 2008, 128, 6-10). In particular, NHA did not pay IPCs 20 and 21 because these IPCs were not payable under the Contract until the final accounting at the end of the Project's Defects Liability Period (PHB [Pak.] ¶ 3.2). NHA's participation in the measuring up exercise following Bayindir's expulsion evidences its intention to comply with the final accounting provision. In any case, Bayindir has not established that NHA did not intend to apply sub-clause 63.3 at the end of the Defects Liability Period (Rej. M., ¶ 3,128).

3. Tribunal's determination

351.
It was not until its post-hearing submission that the Claimant clearly identified that the "conduct following the expulsion" allegedly in breach of the FET standard consisted of "unfair and inequitable" actions in connection with the handling of IPA 23 (PHB [Bay.] ¶ 86), the lack of certification and payment of IPA 22 (PHB [Bay.] ¶ 87), and "Pakistan's self-serving and litigation-motivated reductions to the values of both IPA 22 and IPA 23" (PHB [Bay.] ¶ 88). These acts are said to be unfair and inequitable because they do not comply with the Contract and, more fundamentally, because they reflect the intention of the Respondent not to abide by clause 63 and therefore deprive Bayindir of any remaining contractual rights.
352.
It is recalled that the task of the Tribunal is not to exercise jurisdiction over contractual matters but to assess whether the alleged conduct is established and, if so, whether it amounts to a breach of the Treaty.
353.
It is undisputed that NHA did not pay IPCs 20 and 21. It also arises from the record that IPAs 22 and 23 have not been certified, that they have been reduced over time, and that NHA has not approved the extension of time calculated by the Engineer in response to EOT 04 (Exh. [Pak.] RB-84). The Claimant has further stressed that the Engineer and its Representative did not certify the works as required under sub-clause 63.2 of the Contract within the context of the final settlement of accounts contemplated under sub-clause 63.3 of the Contract. In his oral testimony, Mr. Bridger stated that he did not recall whether he or the Engineer had issued such certification (Tr. M., 29 May 2008, 237, 7-14).
354.
The Parties provide conflicting interpretations of whether or not such conduct was in breach of the Contract. The Respondent notes, inter alia, that:

"once it was established that there was no immediate right to payment due to the issuance of the expulsion notice, the urgency of preparing the IPCs was removed, i.e. the question of what sums were owing to Bayindir was postponed until the time of the final measure up pursuant to Clause 63.3 of the Contract."
(PHB [Pak.] ¶ 7.25)

355.
The Claimant argues that a number of steps had to be followed for the process of final settlement of accounts to be completed, and that NHA and the Engineer or the Engineer's Representative failed to take some of these steps, which amounted to a breach of the Contract. It seeks to infer from these facts the existence of an intent to deprive it in an unfair and inequitable manner of any residual rights it may have under sub-clause 63.3 of the Contract.
357.
Second, the evidence discussed in paragraphs 332-335 supra shows that NHA did in fact engage in a measurement and inventory process as required by sub-clause 63.2 of the Contract. In that context, it took account of Bayindir's concerns about FWO's bias (Exh. [Pak.] CM-141) with the result that an independent organization was put in charge of the joint inventory (Exh. [Pak.] CM-142). That organization reportedly completed its task on 13 May 2003 (Exh. [Pak.] R-68).
358.
Third, Mr. Bridger has testified that, despite some tensions, a good level of cooperation was generally achieved, and that he did not recall "ever being made aware of any occasion where BCI had been unable to resolve problems of access to any records at the Project Site Offices, when such access was necessary for the supply of information to NHA" (Bridger's supplemental WS, ¶ 123).
359.
In these circumstances, the Tribunal cannot conclude that the acts identified by Bayindir amount to a breach of the Treaty.

f. Attempted encashment of the Mobilisation Advance Guarantees

1. Bayindir's position

360.
Bayindir submits that Pakistan inequitably and unfairly ruined the Bayindir Group by calling the Mobilisation Advance Guarantees without a contractual basis, the contractual justifications put forward by Pakistan (analogy with sub-clause 60.8 of the Contract as well as paragraph 3 of sub-clause 60.8 in Addendum No. 6) being ill-founded. Indeed, according to Bayindir, sub-clause 60.8 had been contractually superseded twice.96
361.
Bayindir also stresses that the Respondent's alleged contractual justifications are new, as the argument that the Mobilisation Advance was only allowed to be used for the purchase of permanently imported equipment, implying that Pakistan was entitled to recover any amounts spent on mobilization with temporarily imported equipment, was advanced for the first time at the hearing. Furthermore, this argument was said not to take into account that sub-clause 60.8 in Addendum No. 6 provides that there would be no bank guarantee for the 20% Mobilisation Advance which was to be utilized for the purchase of plant and equipment. In addition, the link between plant and equipment and the Mobilisation Advance was later superseded. The Over-Riding Conditions of Contract provided that the Mobilisation Advance – increased to 30% – would be secured by letters of guarantee from a bank and from Bayindir. This provision was then further modified by NHA's Letter of Acceptance, which confirmed that the Mobilisation Advance would amount to 30%, the full amount being secured by a bank guarantee (PHB [Bay.] ¶¶ 95-106).
362.
It is Bayindir's further submission that the attempt to encash the guarantees not only lacked a contractual basis but was also unfair, if not even in bad faith. In support, Bayindir refers to NHA's request of 7 April 2001 that Bayindir renew the Mobilisation Advance Guarantees expiring on 9 May 2001. This request came shortly before Bayindir's expulsion and only days after the Ministries of Communications and Finance had decided, unbeknownst to Bayindir, to halt all payments for the Project and to request a decision on the future of the Project from General Musharraf.
363.
In addition, Bayindir asserts that the encashment would unjustly enrich Pakistan to the extent that Bayindir left behind the product of the Mobilisation Advance on the site, and brought about the complete collapse of the Bayindir Group given the circumstances surrounding the attempted encashment, the magnitude of the bank guarantees and the fact that these were provided by a consortium consisting of all of the major Turkish banks, thus cutting off Bayindir's access to credit and financing.
364.
Finally, Bayindir notes that Pakistan sought to encash the guarantees at their full face value, without first deducting the value of repayments due under IPCs 20 and 21.

2. Pakistan's position

365.
In substance, Pakistan asserts that the call on the Mobilisation Advance Guarantees was made in accordance with the Contract. The position of the Respondent is supported by the expert testimony of Mr. Chapman (Chapman's WS, ¶ 50; Chapman's Supplemental WS, ¶¶ 60-64). According to the latter's evidence, the call complied with sub-clause 60.8 and any benefits accruing to the Employer from it would be taken into account in the final accounts. As a result, any allegation of bad faith would be doomed to fail.
366.
The Respondent also contends that Bayindir did not spend the Mobilisation Advance as contractually required. It refers to Bayindir's financial difficulties and argues that a substantial part of the Mobilisation Advance Guarantee (US$ 35 million) was likely used for purposes unrelated to the M-1 Project, as suggested by the testimony of Mr. Cortük, Chairman of Bayindir Holding Company, before a Turkish Parliamentary Committee set up to investigate the sale of Turkbank (PHB [Pak.] ¶¶ 3,107 – 3,121).

3. Tribunal's determination

367.
It is common ground that NHA sought to encash the Mobilisation Advance Guarantees. As discussed in section IV(A)(b) supra, this conduct can be attributed to the Respondent, which the latter did not dispute. The Tribunal must thus determine whether the attempted encashment of the Mobilisation Advance Guarantees constitutes a breach of FET.
368.
The Parties disagree on whether the attempted encashment of the Mobilisation Advance Guarantees was in conformity with the Contract. The main point of disagreement is whether sub-clause 60.8 of the Contract provides a basis for the encashment.
369.
Sub-clause 60.8 entitles the Employer to call the guarantees to the extent the amount due by Bayindir as reimbursement of the Mobilisation Advance exceeds the amount due to Bayindir for work done. The mechanism for the recovery of advance payments was amended twice. First, on 24 June 1999 (Exh. [Bay.] C-16) to the effect that "[t]he recovery/deduction of the advance payment shall be made from every IPC irrespective of its value beginning from the IPC of May 1999 onward. In the event that the value of any monthly deduction/recovery exceeds the amount of any particular IPC, the difference in amount will be carried forward and adjusted from the next IPC and so on" (Exh. [Bay.] C-16). Second, in Article 3 of Addendum No. 9, which replaced the fixed repayment schedule with a percentage deduction from each IPC (Exh. [Bay.] C-18).
370.
Bayindir submits that, as a result of these two amendments, the content of sub-clause 60.8 became inoperative and that the repayment of the Mobilisation Advance should in any event have been frozen until final settlement (PHB [Bay.] ¶ 102 ). Pakistan responds by reference to the first expert report of Mr. Chapman according to whom:

"In the situation where a contractor is expelled before the advance payments have been recovered in full (and thus the APG is extant) I would expect the Employer to make a call on the bond in order to recover as much of the advance payment as possible. Clause 60.8 of the Contract provides that the Contractor is obliged to repay amounts of mobilisation payments in excess of monies certified within seven days of demand and if not paid the Employer shall be empowered to call in sufficient of the APG to cover this balance. The APG is security for a loan and once the Contractor is expelled, no further payments from which the loan repayments are to be deducted will be made. Accordingly, I believe the right under Clause 60.8 to demand recovery of the loan crystallises once expulsion occurs."
(Chapman's WS, ¶ 50)

371.

In his additional report, Mr. Chapman added the following:

"The Mobilisation Bond is 'on demand' and its execution is not dependent upon proof of fault by the Contractor nor is the operation of this bond deferred until the time of the Final Statement. The provision of on demand bonds is an onerous obligation placed on a contractor but one that has been found necessary within the construction industry to avoid the bondsman (or an arbitrator or the court) being required to determine liability for breach of performance by the Contractor which, with a resistant contractor, could take a considerable time. However, it is accepted that the Employer is not to use its right to demand payment without due cause and an implied term to this effect is recognised. That said, as long as the Employer has a genuine belief that the advance payment is not to be repaid in accordance with the terms of the Contract and that the Contractor is unable to complete its obligations under the Contract, I consider that a call on the Mobilisation Bond is justified."
(Chapman's Supplemental WS, ¶ 63)

The Claimant's expert Mr. Pickavance offered no specific alternative interpretation of the Contract to counter this.

372.
The Respondent further argues that Bayindir improperly spent the Mobilisation Advance on temporarily imported equipment as well as on matters unrelated to the M-1 Project. In this latter regard, it referred to a statement of Mr. Cortük, Chairman of Bayindir Holding Company, before a Turkish Parliamentary Committee set up to investigate the sale of Turkbank. In response to a question regarding the source of the funds used by Bayindir to acquire a TV station, Genc TV station, Mr. Cortük stated:

"We are a group (of Companies) having a monthly turnover of 70-80 million dollars. Namely if we obtain the loans or resources from other places, for instance in those days – if I remember this correctly exactly-we, in fact, obtained the money amounted to 30-40,000,000 dollars from Pakistan."
(Annex 24 to WS of Dr. Birsel, submitted with Resp RP).

373.
Under these circumstances, the Tribunal can see no Treaty breach. The Parties have divergent views about the interpretation and application of subclause 60.8 of the Contract. Pakistan puts forward an interpretation that is reasonable and is supported by expert evidence. Even if such interpretation were not to prevail in a contract arbitration, the related conduct would not rise to the level of a violation of the Treaty standards.
375.
The Claimant seeks to infer bad faith from its reading of the chronology. There is, however, no evidence showing bad faith. Even if it were established that Pakistan requested the renewal for the sole purpose of calling the guarantees shortly thereafter, this fact would not suffice in and of itself to demonstrate bad faith. Indeed, as a general matter, it would rather appear as good contract management to renew guarantees when they are about to expire and the liabilities secured by such guarantees are still likely to materialize. This was precisely so here. The Respondent contends that it tried to collect on the Mobilisation Advance Guarantees in order to recover as much of the advance payment as possible, Bayindir having failed to mobilize the contractually required equipment on site. The discussion of the evidence in paragraphs 308-314 supra, shows that, even after the issuance of the sub-clause 46.1 notice in December 2000, Bayindir did not bring the adequate equipment to the site. This point was in particular stressed by Mr. Bridger at the hearing.

"Q: So a reasonable Contractor (sic) [client] would be happy to see that efforts were being made to bring it behind schedule, and to bring it on schedule?
A: Substantial efforts, and real efforts. Not just bringing in equipment that didn't have the capacity to achieve the production levels, you know, we saw a lot of increases in equipment after that Notice was served, but the productivity fell, despite the increase in numbers of items of equipment."
(Tr. M., 29th May 2008, 192-193, 24-25, 1-8).

376.
On these facts, Bayindir has not met its burden of proving bad faith. This is the more so as the standard of proof is a demanding one for this purpose.
378.
Finally, the arguments about the impact of the attempted encashment on the viability of the Bayindir Group and Pakistan's unjust enrichment do not change the earlier conclusions. First, the monies have not been cashed and thus the proposition of an enrichment is difficult to follow. Second, any adverse consequences of the attempted encashment on Bayindir's standing and viability, however unfortunate, are part of the business risk that any contractor assumes when entering into a contract for a major project with substantial financial exposure. This would only be different if the host state had breached a treaty protection, which is not the case here.
379.
In view of the foregoing considerations, the Tribunal concludes that the applicable FET standard has not been breached.

g. Respondent's acts taken together

380.
It remains for the Tribunal to review whether the Respondent's acts taken together constitute a breach of the FET standard. It is true that Bayindir does not specifically claim that a breach of treaty could arise from the overall effect of all of Pakistan‟s actions. Yet, the Tribunal deems it appropriate to examine this issue as well.
381.
On the basis of the evidence discussed in the preceding sections, the Tribunal has denied the existence of treaty breaches with respect to each of the Respondent's acts taken separately. Assuming for the sake of this analysis that a cumulation of nonbreaches can in theory result in a breach, this is certainly not the position here. Even added up, the conduct of the Respondent does not amount to a Treaty breach. It might give rise to contract liability, but that is a different issue on which this Tribunal makes no assessment.

C. NATIONAL TREATMENT AND MFN STANDARDS

382.
Bayindir claims a violation of the national treatment and most favoured nation (MFN) standards embodied in Article II(2) of the Treaty. It incriminates specific acts. The Tribunal will thus organize its discussion by reference to each of those acts first with respect to national treatment (b) and then to MFN (c). Before doing so, it will identify the applicable standards (a). At the end, it will consider whether all the acts of the Respondent taken together could amount to Treaty breaches (d).

a. Applicable standards

1. Bayindir's position

383.
The Claimant invokes Article II(2) of the Treaty as the basis for its claim. It refers to SD Myers,97Feldman v. Mexico,98Occidental v. Ecuador99 and Lauder v. Czech Republic100 to support the argument that the test of discrimination is an objective one, which focuses on a measure's practical effect rather than on the Respondent's intent to discriminate. It also relies on these authorities to assert that there is no requirement that the differential treatment be motivated by foreign nationality and that the sole facts of discrimination and foreign nationality are sufficient (Mem. M., ¶ 206).
384.
As to the facts relevant to a finding of discrimination, the Claimant recalls the Tribunal's Decision on Jurisdiction:

"The fact remains that, taken together, Bayindir‟s allegations in respect of the selective tender, and that the expulsion was due to Pakistan‟s decision to favour a local contractor, and that the local contractor was awarded longer completion time-limits, if proven, are clearly capable of founding a MFN claim."101

2. Pakistan's position

385.
Pakistan submits that Bayindir's claim under Article II(2) requires a showing of intent, since Bayindir alleges that its expulsion from the Project was designed to benefit a predetermined group of local contractors, which "design" necessarily comprises intent. In Pakistan's view, Bayindir's reliance on the decision in SD Myers is therefore irrelevant, as that case "merely suggests that protectionist intent on its own (i.e. without a practical effect) is insufficient for a finding of breach of Article 1102 NAFTA" (C.-Mem. M., ¶ 4.58).

3. Tribunal's determination

386.
It is common ground that Bayindir's claim must be assessed under Article II(2) of the Treaty, which reads as follows:

"Each Party shall accord to these invest