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Lawyers, other representatives, expert(s), tribunal’s secretary

Award

TABLE OF ABBREVIATIONS

ANE Administracão Nacional de Estradas, the national roads administration of Mozambique
BIT Agreement between the Government of the Italian Republic and the Government of the Republic of Mozambique on the Promotion and Reciprocal Protection of Investments dated 14 December 1998
C-[number] Claimants' Exhibit [number]
CL-[number] Claimants' Legal Authority [number]
CM Claimants' Memorial on the Merits, 19 March 2018
CMC or the Claimants The Claimants collectively
CMC Africa Austral Claimant CMC Africa Austral, LDA, a wholly owned subsidiary of CMC Ravenna incorporated under the laws of Mozambique
CMC Maputo Claimant CMC Ravenna S.C.R.L. Maputo Branch, a branch of CMC Ravenna registered in Mozambique
CMC Ravenna Claimant Cooperativa Muratori & Cementisti – CMC Di Ravenna Società Cooperativa, incorporated under the laws of Italy
COA Claimants' Comments to the Respondent's Observations Concerning the Achmea Decision, 18 March 2019
Cotonou Convention Partnership Agreement between the members of the African, Caribbean and Pacific Group of States, of the one part, and the European Community and its Member States, of the other part, signed in Cotonou on 23 June 2000
Cotonou Arbitration Rules Arbitration rules adopted by decision of the Council of Ministers at the first meeting following the signing of the Cotonou Convention
CRB Claimants' Response to Bifurcation, 3 August 2018
CRMJ Claimants' Reply on the Merits and Counter-Memorial on Jurisdiction, 4 February 2019
DEN Direcção de Estradas Nacionais, the Engineer/Supervisor on the Lot 3 Project
ECJ European Court of Justice
EDF European Development Fund
Engineer DEN, the Engineer/Supervisor of the Lot 3 Project
EU European Union
Joint Declaration Declaration of 22 EU Member States of 15 January 2019 on the Legal Consequences of the Achmea Judgment and on Investment Protection
Lot 3 Contract Public Works Contract No 307/DEN/04 for the Lot 3 Project
Lot 3 Project Road Rehabilitation project between Namacurra and the Ligonha River, Lot 3, Section E
Ministry The Ministry of Public Works and Housing of Mozambique
R-[number] Respondent's Exhibit [number]
RA or Amended Request Claimants' Amended Request for Arbitration, 23 June 2017
RCM Respondent's Counter-Memorial on the Merits, 2 November 2018
Revised Cotonou Convention Cotonou Convention as revised on 25 June 2005 and on 22 June 2010
RL-[number] Respondent's Legal Authority [number]
ROA Respondent's Observations Regarding the European Court of Justice's Achmea Decision, 31 January 2019
ROJ Respondent's Objections to Jurisdiction and Memorial in Support Thereof, 20 July 2018
RRA Respondent's Reply on Achmea Observations, 1 April 2019
RRB Respondent's Request for Bifurcation, 20 July 2018
RRJ Respondent's Reply on Jurisdiction, 1 April 2019
RRM Respondent's Rejoinder on the Merits, 1 April 2019
Tr. [date] Transcript of hearing on date given [date]
VCLT Vienna Convention on the Law of Treaties, 23 May 1969

I. INTRODUCTION

1.
This arbitration was commenced by a Request for Arbitration against the Republic of Mozambique dated 8 May 2017 in accordance with the Convention on the Settlement of Investment Disputes between States and Nationals of Other States dated 18 March 1965 (the "ICSID Convention") and the Agreement Between the Government of the Italian Republic and the Government of the Republic of Mozambique on the Promotion and Reciprocal Protection of Investments dated 14 December 1998 (the "BIT"). The International Centre for Settlement of Investment Disputes ("ICSID") registered the Request on 14 July 2017.
2.
The Claimants are three companies (together referred to as the "Claimants" or "CMC")1:

a. Cooperativa Muratori & Cementisti – CMC Di Ravenna Società Cooperativa ("CMC Ravenna"), a company incorporated under the laws of Italy with its head office in Ravenna, Italy;

b. CMC Ravenna S.C.R.L. Maputo Branch ("CMC Maputo"), a branch of CMC Ravenna registered in Mozambique; and

c. CMC Africa Austral, LDA ("CMC Africa Austral"), a wholly owned subsidiary of CMC Ravenna incorporated under the laws of Mozambique with its head office in Maputo, Mozambique.

3.
The Respondent is the Republic of Mozambique (the "Respondent" or "Mozambique").
4.
This dispute arises out of the participation by the Claimants in a project to reconstruct a portion of the principal north-south highway in Mozambique. The Claimants entered into a contract with Mozambique's national roads administration, Administracão Nacional de Estradas ("ANE"), financed by the European Development Fund (the "EDF"), to rehabilitate approximately 106 kilometers of that highway designated as "Lot 3."
5.
The Claimants completed the work on the Lot 3 portion of the highway in 2007, and entered into a period of discussions with ANE and the project engineer (the "Engineer") concerning certain elements of additional compensation they asserted to be due to them for that work.
6.
The Engineer's determination of the amounts due to the Claimants was issued in May of 2009. Unhappy with certain of the Engineer's conclusions, the Claimants entered into discussions with ANE to seek additional compensation. ANE ultimately made an offer on 30 October 2009 to settle the Claimants' claims for EUR 8,220,888, to which the Claimants responded in a letter dated 2 November 2009. The Claimants characterize their 2 November 2009 letter as an acceptance of ANE's offer. The Respondent characterizes that letter as a counteroffer that ANE did not accept, as a result of which ANE's settlement offer expired.
7.
To the extent the amount offered in ANE's letter of 30 October 2009 exceeded the amount awarded by the Engineer, it was never paid to the Claimants, although demands, discussions, and correspondence on the subject continued from 2010 well into 2016.
8.
The Claimants commenced this arbitration in 2017, asserting that the conduct of ANE and the Government of Mozambique with respect to the failure to pay the amount offered by ANE in its letter of 30 October 2009 breached a number of the obligations to investors from Italy that Mozambique agreed to in the BIT. The Respondent contends that this Tribunal lacks jurisdiction to consider those claims, and that the claims are in any event without merit.
9.
This Award first describes the procedural history of this arbitration, and then describes in more detail the factual background out of which the Claimants' claims arise. Next, it considers each of the Respondent's objections to the Tribunal's jurisdiction, and concludes that the Tribunal has jurisdiction to consider those claims. Finally, the Award examines each of the Claimants' claims on the merits, and finds no liability to the Claimants on the part of the Respondent for any of those claimed breaches of the BIT.

II. PROCEDURAL HISTORY

A. Registration of Request

10.
On 10 May 2017, ICSID received a Request for Arbitration dated 8 May 2017 from CMC Maputo and CMC Africa Austral against Mozambique (the "Request").
11.
On 26 May 2017, ICSID sent a letter to CMC Maputo and CMC Africa Austral asking for further information and clarifications (the "First Set of Questions").
12.
By letter of 16 June 2017, CMC Maputo and CMC Africa Austral answered the First Set of Questions and further indicated that they intended to file an Amended Request for Arbitration adding CMC Ravenna as a party.
13.
On 20 June 2017, ICSID sent a letter to CMC Maputo and CMC Africa Austral noting their intention to file an amended request for arbitration and stating that, once the Amended Request for Arbitration was received, the Secretary-General would complete her review and decide whether to register the Request.
14.
On 23 June 2017, ICSID received an Amended Request for Arbitration adding CMC Ravenna as a requesting party and making other changes to the Request.
15.
On 26 June 2017, ICSID sent a letter to the Claimants asking for further information and clarification on CMC's investments and date of consent to arbitration (the "Second Set of Questions"), as well as for a confirmation that the Amended Request was meant to be read in conjunction with their letter of 16 June 2017.
16.
By letter of 28 June 2017, ICSID asked for further information and clarification (the "Third Set of Questions") from the Claimants.
17.
By letter of 6 July 2017, the Claimants answered the Second Set of Questions and confirmed that the Amended Request should be read in conjunction with their letter of 16 June 2017.
18.
By letter of 7 July 2017, the Claimants answered the Third Set of Questions.
19.
On 14 July 2017, the Secretary-General of ICSID registered the Amended Request in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID's Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.

B. Constitution of Tribunal and First Meeting with the Parties

20.
By letter of 17 July 2017, the Claimants appointed Mr. Peter Rees QC, a national of the United Kingdom, as arbitrator in this case.
21.
By letter of 3 August 2017, the Respondent appointed Mr. J. Brian Casey, a national of Canada, as arbitrator in this case and proposed a method of constitution for the arbitral tribunal.
22.
On 9 August 2017, the Claimants agreed to the method of constitution proposed by the Respondent. According to the Parties' agreement, the arbitral tribunal should consist of three arbitrators, one appointed by each party, with the co-arbitrators jointly appointing the President, after consultation with the Parties.
23.
On 1 October 2017, the co-arbitrators, after consulting with the Parties, agreed to appoint Mr. John M. Townsend, a national of the United States, as President of the arbitral tribunal.
24.
On 4 October 2017, the Secretary-General, 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 constituted on that date. Ms. Ella Rosenberg, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.
25.
In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 29 November 2017 by conference call.
26.
Following the first session, on 8 December 2017, the Tribunal issued Procedural Order No. 1 on procedural matters. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules would be the ICSID Arbitration Rules in effect from 10 April 2006, that the procedural language would be English, and that the place of proceeding would be Washington, D.C., USA. Annex A to Procedural Order No. 1 sets out a schedule for the proceeding and includes a briefing schedule, including a schedule for submissions on the Respondent's request for bifurcation.

C. Written Submissions and Bifurcation Request

27.
On 19 March 2018, the Claimants submitted their Memorial on the Merits ("CM"), together with exhibits C-1 through C-49, legal authorities CL-1 through CL-41, as well as the witness statements of Messrs. Claudio Guerra, Fulvio Boiani, Nerio Gridella, Simon Palmer, and Enrico Alicandri.
28.
From March to May 2018, the Parties exchanged requests for documents.
29.
On 2 May 2018, the Respondent submitted to the Tribunal a Redfern Schedule setting forth the Parties' positions, agreements, and disagreements concerning 121 requests for documents made to the Claimants by the Respondent.
30.
On 22 May 2018, the Tribunal issued Procedural Order No. 2, containing its rulings as to each request submitted to it.
31.
On 20 July 2018, the Respondent submitted its Request for Bifurcation ("RRB"), and Objections to Jurisdiction and Memorial in Support Thereof ("ROJ"), together with exhibits R-1 through R-8, legal authorities RL-1 through RL-29, as well as the witness statement of Mr. Fernando Manhica.
32.
On 1 August 2018, the Tribunal made a proposal to appoint Mr. Stijn Winters as an Assistant to the President and invited the Parties to be prepared to discuss the proposal at the hearing on bifurcation scheduled for 10 August 2018.
33.
On 3 August 2018, the Claimants submitted their Response to Bifurcation ("CRB"), together with legal authorities CL-42 through CL-48.
34.
On August 10, 2018, the Tribunal held a hearing on the application for bifurcation at the offices of the World Bank in Washington D.C. The following persons attended the hearing:

Members of the Tribunal :
Mr. John M. Townsend President
Mr. J. Brian Casey Arbitrator
Mr. Peter Rees QC Arbitrator

ICSID Secretariat :
Ms. Ella Rosenberg Secretary of the Tribunal
Ms. Anna Devine Paralegal

For the Claimants :
Mr. Luis Gonzalez Garcia Matrix Chambers
Mr. Alan Del Rio LDR Consultants

For the Respondent :
Mr. Juan Basombrio Dorsey & Whitney LLP
Ms. Erica Chen Dorsey & Whitney LLP

Court Reporter :
Mr. David Kasdan Worldwide Reporting LLP

35.
At the hearing on bifurcation, with the agreement of the Parties, Mr. Stijn Winters was designated to serve as Assistant to the President of the Tribunal.
36.
After hearing oral arguments from both Parties, the Tribunal deliberated and informed the Parties that it had decided not to bifurcate the proceeding. The Tribunal put a short statement of its reasons on the record of the hearing.
37.
After having heard the Tribunal's decision on bifurcation, the Respondent requested that the Tribunal bifurcate only the jurisdictional objection based on the Cotonou Convention. The Claimants opposed the Respondent's request. After deliberating, the Tribunal denied the Respondent's request.
38.
On 15 August 2018, the Tribunal issued Procedural Order No. 3, confirming its decision to deny the application for bifurcation as originally made and as modified by the Respondent at the hearing.

D. Further Written Submissions and Pre-Hearing Conferences

39.
On 2 November 2018, the Respondent submitted its Counter-Memorial on the Merits ("RCM"), together with exhibits R-9 through R-11 and legal authorities RL-30 through RL-35, as well as the witness statements of Ms. Teresa Filomena Muenda and Mr. Cecilio Maria da Conceição Grachane.
40.
On 6 and 7 December 2018, both Parties submitted Redfern Schedules setting forth their positions, agreements and disagreements concerning their respective requests for documents related to the merits.
41.
On 19 December 2018, the Tribunal issued Procedural Order No. 4 containing the Tribunal's rulings as to the Parties' respective document requests on the merits.
42.
On 31 January 2019, the Respondent submitted its Observations Regarding the European Court of Justice's Achmea Decision ("ROA"), together with exhibits R-12 through R-14 and legal authorities RL-36 through RL-42, raising an additional objection to the Tribunal's jurisdiction. The Respondent requested that this submission be accepted into the record and proposed a schedule for the Parties to submit briefs on the issue.
43.
On 3 February 2019, the Tribunal invited the Claimants to submit their views on the Respondent's proposed briefing schedule by 6 February 2019 and informed the Parties that this issue would be discussed during the previously scheduled 8 February 2019 pre-hearing telephone conference.
44.
On 4 February 2019, the Claimants submitted their Reply on the Merits and CounterMemorial on Jurisdiction ("CRMJ"), together with exhibits C-50 through C-56 and legal authorities CL-49 through CL-60, as well as the legal opinion of Mr. Tomás Timbane.
45.
By a letter of 6 February 2019, the Claimants objected to the Respondent's Achmea Observations, arguing that (i) introducing new allegations on issues of jurisdiction/admissibility seven months after the Memorial on Jurisdiction constitutes an abuse of process; (ii) the Respondent must have been aware of the Achmea Decision at the time of the filing of its Memorial on Jurisdiction; and (iii) the Achmea issue has no relevance to the jurisdiction of the Tribunal.
46.
On 8 February 2019, the Tribunal held a pre-hearing organizational meeting with the Parties by telephone conference. It was agreed during the call that a second pre-hearing telephone conference would be held on 11 April 2019.
47.
On 15 February 2019, the Tribunal issued Procedural Order No. 5 concerning the organization of the hearing and addressing Respondent's Achmea Observations. The Tribunal ruled that the Respondent's Achmea Observations should be admitted into the record. It invited the Claimants to respond to these Observations by 18 March 2019, and informed the Respondent that it could reply to the Claimants' response in its previously scheduled 1 April 2019 submission.
48.
On 18 March 2019, the Claimants submitted their Comments to the Respondent's Observations Concerning the Achmea Decision ("COA"), together with legal authorities CL-61 through CL-65.
49.
On 1 April 2019, the Respondent submitted its Rejoinder on the Merits, Reply on Jurisdiction and Reply on Achmea Observations ("RRM," "RRJ," "RRA"), together with legal authorities RL-43 through RL-45, as well as the second witness statements of Ms. Muenda and Mr. Grachane.
50.
On 9 April 2019, the Claimants requested leave to introduce a copy of the award on the merits in RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30 ("Award on the Merits in RREEF v. Spain"). On the same date, the Tribunal invited the Respondent to indicate whether it intended to oppose this request by 10 April 2019, and informed the Parties that, if the Respondent objected to this request, both Parties should be prepared to address the matter during the second pre-hearing telephone conference on 11 April 2019.
51.
By email of 10 April 2019, the Respondent (i) opposed the introduction of the Award on the Merits in RREEF v. Spain into the record; and (ii) requested leave to introduce the Amicus Brief filed by the European Commission in the Micula v. The Government of Romania, U.S. District Court, District of Columbia, Case No. 1:17-cv-02332-APM pending before the United States District Court of Columbia ("Amicus Brief of the European Union in Micula v. Romania").
52.
Later on 10 April 2019, the Tribunal informed the Parties that both applications to submit additional documents would be discussed during the second pre-hearing conference call.
53.
On 11 April 2019, the Claimants submitted fourteen amended translations. The Respondent objected to Claimants' submission of the amended translations on the same date.
54.
Also on 11 April 2019, the Tribunal held a second pre-hearing organizational meeting with the Parties by telephone conference.
55.
During the conference call, the Tribunal granted the Claimants' request for leave to submit into the record a copy of the Award on the Merits in RREEF v. Spain, and the Respondent's request to submit the Amicus Brief of the European Union in Micula v. Romania.
56.
Also during the conference call, the Claimants informed the Tribunal and the Respondent that Mr. Gridella might not be able to appear at the hearing because he had commenced employment with a new employer after giving his witness statement, and had so far been unable to obtain permission from his new employer to attend the hearing. In response to this, the Respondent stated that if Mr. Gridella did not appear, it might apply to strike Mr. Gridella's witness statement. After some discussions, and an inquiry from the Tribunal as to whether the Respondent would be willing to help resolve the difficulty, the Tribunal stated that it would issue further instructions following the conference call.
57.
Also on 11 April 2019, after the conference call, the Claimants sought leave to introduce two new documents into the record: the Declaration of the Representative of the Government of Hungary of 16 January 2019 on the Legal Consequences of the Judgment of the Court of Justice in Achmea and on Investment Protection in the European Union and a similar declaration by five other EU member states. The Respondent requested until 15 April 2019 to provide its observations on the Claimants' request.
58.
On 12 April 2019, the Tribunal issued Procedural Order No. 6, concerning the organization of the hearing. The Tribunal (i) ordered the Claimants to provide the Respondent with red-lined or similar versions of the new translations, showing how they differ from the translations previously submitted; and (ii) granted the Respondent's request to respond to the Claimants' application to submit two additional documents into the record.
59.
On the issue of Mr. Gridella's attendance as a witness at the hearing, the Tribunal directed as follows in Procedural Order No. 6:

a) The Claimants shall inform the Tribunal and the Respondent, no later than April 22, 2019, whether they have been able to arrange for Mr. Gridella to attend the hearing.

b) If Mr. Gridella does not attend the hearing, the Respondent may make an application to the Tribunal concerning what consequence, if any, should follow from Mr. Gridella's failure to attend. Such application is to be made orally, during the time period reserved for Mr. Gridella's testimony in paragraph 7 below, and the Claimants will be given an opportunity to respond to such application at that time. Both parties should expect questions from the Tribunal in this connection.

60.
On 14 April 2019, the Claimants requested permission to add Mr. Enrico Alicandri to its witness list in view of the uncertainty surrounding the attendance of Mr. Gridella at the hearing. By email of the same date the Respondent objected to the Claimants' request.
61.
In a second email of the same date, the Respondent wrote to the Tribunal:

What we have here is an obvious prior failure by the Claimants' counsel to secure Mr. Gridella's commitment to appear at the hearing, not any allegedly "new" concern by Mr. Gridella. […] If Mr. Gridella does not appear to testify at the hearing, both of Mr. Gridella's witness statements, and all references in the memorials to him, must be stricken from the record.

Second, Respondent strongly objects to the request by the Claimants to now call their own witness. The Tribunal will recall that, during the first pre-hearing conference, the Claimants objected when the Respondent sought to call its own witness to testify at the hearing. Claimants said that this was not allowed under the Procedural Orders – that a party cannot call its own witness to testify. As a result, the Respondent did not call its own witness and this agreement was reflected in the list of witnesses jointly provided by the parties. Respondent has not called Mr. Alicandri to testify, he was not included in the jointly-agreed list of witnesses for the hearing agenda, and therefore the Claimants cannot unilaterally call him as a witness because they have previously taken the position that a party cannot call its own witnesses and the Respondent accepted that position to its prejudice.

Mr. Alicandri also has not provided a witness statement on the new issues on which the Claimants now seek to call him, and therefore that also would render his testimony improper, because the Respondent would lack prior knowledge of his testimony which creates a Due Process problem. A witness cannot testify on new matters, and therefore there is nothing that he could say at the hearing, if the Respondent does not want to call him to testify. In addition, he clearly cannot testify about Mr. Gridella's alleged "concerns," because that is inadmissible hearsay.

Further, the Tribunal's most recent procedural order indicates that it will decide the motion to strike Mr. Gridella's witness statements after it hears argument on the motion at the hearing. Therefore, there will be uncertainty when the hearing starts as to whether Mr. Gridella's witness statements will even be considered. If Mr. Gridella's witness statements remain part of the record, that renders the Claimants' current request moot. This alone has introduced sufficient uncertainty into the opening statements – the Respondent does not believe that there can be any reference to Mr. Gridella's witness statements in the opening statement if he is not present to testify, but we will not have a ruling from the Tribunal when the hearing starts. It is very difficult to prepare for a merits hearing not knowing whether the testimony of a key witness like Mr. Gridella will be part of the record or not – this is a very serious problem caused by the Claimants. The preferred approach would have been that the witness statements of Mr. Gridella are stricken prior to the start of the hearing, as they should be.

The addition of Mr. Alicandri would create further difficulties, and forces the parties to have to argue in the alternative in a totally unworkable way. Again, these problems are all the creation of the Claimants' prior failure to secure Mr. Gridella's attendance at the hearing, and the addition of Mr. Alicandri would simply complicate things further. Any sympathy that the Tribunal may have initially had for the Claimants' own predicament, should be disregarded given the misrepresentations about Mr. Gridella's employment status. At this late stage in the proceedings, and certainly during the hearing, the Respondent cannot be left guessing which Claimants' witness will be considered by the Tribunal. How can the Respondent prepare for a hearing under those circumstances?

Therefore, the Tribunal must stay the course with the decision it has made in the most recent procedural order – it will hear the motion to strike Mr. Gridella's testimony at the hearing, and it must deny the Claimants' request to unilaterally call Mr. Alicandri because that is not allowed as previously argued by the Claimants themselves and because the Respondent cannot be left guessing regarding what new testimony Mr. Alicandri will provide.

In the alternative, if the Tribunal is inclined to depart from the procedural orders and allow the Claimants to unilaterally call Mr. Alicandri (which the Tribunal should not do), then it must be on the strict condition that Mr. Gridella's two witness statements, and all references in the memorials to them, are stricken from the record immediately – that is, now before the hearing. Respondent must have clarity as to what evidence is going to be part of the record at the hearing. Due process demands that.

62.
On 16 April 2019, the Respondent objected to the Claimants' introduction of two additional documents into the record.
63.
On 17 April 2019, the Claimants (i) clarified Mr. Gridella's employment status and explained that, at the time when Mr. Gridella signed his second witness statement, he had just begun his new employment and was not aware of the new employer's concerns; (ii) argued that Mr. Alicandri would only testify on new issues and that there was no suggestion that he would provide testimony on matters already on the record; and (iii) submitted the red-lined versions of the amended translations they had previously submitted.
64.
On 17 April 2019, the Respondent submitted the following response to the Claimants' message of 17 April 2019:

Respondent objects to the entire content of Mr. Del Rio's email referring to Mr. Gridella's asserted reasons for not appearing at the hearing, except for the admission by Claimants' counsel that they misrepresented to the Tribunal during the prehearing conference that Mr. Gridella was unemployed when he signed the two witness statements. The rest of the details are entirely "hearsay." Mr. Gridella has not testified to any of those assertions, including his purported reasons for refusing to testify at the hearing. The hearsay evidence is improperly being presented by the Claimant's counsel.

Respondent will not have an opportunity to cross-examine Mr. Gridella about said hearsay evidence, and therefore it is inadmissible and cannot be included in the record.

With respect to Mr. Alicandri, he would be providing new testimony at the hearing that the Respondent and this Tribunal have never seen in a witness statement. In his initial email, Mr. Del Rio stated that Mr. Alicandri would "speak about the non-attendance of Mr. Gridella." That is new evidence and is also hearsay evidence. Mr. Alicandri also cannot speak to substantive issues that he has not testified about before. He cannot testify about what Mr. Gridella has testified. Claimants' cannot substitute witnesses to cover Mr. Gridella's absence – that is exactly what they want to do with Mr. Alicandri and it would be highly improper. Allowing Mr. Alicandri to testify as to new matters would be a serious violation of the Respondent's due process rights, because the Respondent does not know what he is going to say. There are no surprise witnesses in international arbitration. Claimants' counsel also fails completely to address the point that they are contradicting themselves. Claimants do not dispute that they had previously taken the position that a party cannot call its own witness to testify under the procedural orders. Respondent therefore also did not do so, when the parties agreed on the list of witnesses. Claimants are now estopped from taking a contrary position. Therefore, Mr. Alicandri cannot be called by the Claimants.

Mr. Gridella is the only witness of the Claimants who has asserted that there was a settlement agreement. Therefore, it is critical that the Respondent have the right to cross-examine him. If Mr. Gridella does not appear at the hearing, and his witness statements are stricken as they must be, the Claimants have no witness to dispute the Respondent's position that there was no settlement agreement. In sum, the Claimants cannot prove their case. Claimants should seriously consider whether they want to go forward with this hearing, which will result in significant expense. Claimants will not be the first party that had to abandon a case because it could not secure the cooperation of its key witness. Respondent reminds that Claimants that it has requested that, as part of the Tribunal's award if it finds for the Respondent, that the Tribunal order reimbursement by the Claimants of all fees and costs incurred by the Respondent in these proceedings.

Mr. Gridella has not testified to any of those assertions, including his purported reasons for refusing to testify at the hearing. The hearsay evidence is improperly being presented by the Claimant's counsel. Respondent will not have an opportunity to cross-examine Mr. Gridella about said hearsay evidence, and therefore it is inadmissible and cannot be included in the record.

65.
By email of 17 April 2019, the Claimants objected to the Respondent's allegations and requested leave to submit a second witness statement by Mr. Alicandri.
66.
On the same date, the Respondent objected to the Claimants' request. The Respondent also requested that the new translations submitted by the Claimants be stricken from the record.
67.
The Parties exchanged further observations on these matters by email on 18 April 2019.
68.
On 18 April 2019, the Tribunal issued Procedural Order No. 7 which included the following rulings:

Witness Statement of Mr. Gridella

11) […] Mr. Gridella's two witness statements will remain part of the record, and […] may be discussed by both parties in their opening statements. However, the Tribunal reserves for determination in its award the question of what weight, if any, should be given to Mr. Gridella's witness statements, or any part of them. The parties are free to present their arguments on that subject in their opening statements at the hearing, in their closing arguments at the hearing, or in their post-hearing briefs, as each party may elect.

Testimony of Mr. Alicandri

14) No new witness statement of Mr. Alicandri is needed or will be accepted.

Additional Submissions

16) Upon consideration of the Respondent's objection, the two additional declarations made by E.U. member states are accepted into the record of this arbitration.

Amended Translations

18) The Tribunal prefers accurate translations to inaccurate translations. Based on the Claimants' representation in their email to the Secretary of April 11, 2019 that these are "small amendments," and in the absence of any showing by the Respondent that the amendments would result in the translations being inaccurate or in prejudice to the Respondent, the amended translations are accepted into the record.

69.
On 22 April 2019, the Respondent submitted its Objections to Procedural Order No. 7 and Motion for Reconsideration ("Motion for Reconsideration"), together with exhibits R-15 and R-16 and legal authorities RL-47 through RL-60.
70.
On 23 April 2019, the Claimants and the Respondent commented on the Respondent's Motion for Reconsideration by exchange of emails. The Claimants stated that they would hold off on making comments on the Respondent's Motion for Reconsideration until instructed to do so by the Tribunal. The Respondent noted that the deadline for the Claimants to confirm whether Mr. Gridella would appear to testify was 22 April 2019, and in the absence of such notification, assumed that Mr. Gridella would not appear.
71.
By email of 23 April 2019, the Tribunal informed the Parties that:

1. Having heard nothing from the Claimants about the attendance of Mr. Gridella at the hearing by the April 22 deadline set in P.O. No. 6, the Tribunal assumes that he will not be attending the hearing.

2. The Tribunal has received the Respondent's Objections to P.O. No. 7 and Motion for Reconsideration dated April 22. The Tribunal would like to receive a response from the Claimants, but understands that it may be difficult for the Claimants to provide one before the Hearing commences. We would be grateful if the Claimants would advise us when they will be able to respond.2

72.
On 24 April 2019, the Claimants informed the Tribunal that (i) despite the Claimants' best efforts, Mr. Gridella would not be attending the hearing; (ii) the Claimants would not be in a position to prepare a detailed response to the Respondent's Motion for Reconsideration before the hearing; and (iii) that the Respondent has had every opportunity and has extensively argued its motion to strike Mr. Gridella's evidence. The Claimants requested that the Tribunal deny the Respondent's motion to reconsider Procedural Order No. 7.
73.
By email of the same day, the Respondent commented on the Claimants' response.

E. Ruling on Gridella's Witness Statement

74.
At the outset of the Hearing, the Tribunal heard the Parties' arguments on the Respondent's Motion for Reconsideration of Procedural Order No. 7 and their views as to the consequences that should attach to Mr. Gridella's absence. After a short recess, the Tribunal rendered its decision on the motion orally, stating:

We have considered the arguments heard this morning and presented in writing in the motion itself and the subsequent e-mails. We conclude that we do not change Procedural Order 7. So we will be most interested in the Parties' thoughts as this hearing proceeds concerning what weight, from full weight to none, or any point in between, should be given to Mr. Gridella's witness statement.3

75.
While Mr. Gridella's witness statements were admitted as part of the record, the Tribunal found in the course of deliberations that it was not necessary to rely on those statements as support for any ruling made by the Tribunal. Mr. Gridella's statements are cited as a source for some portions of the Factual Background section of this Award, but no substantive finding on a controverted matter is made solely on the basis of those statements.

F. Hearing on Jurisdiction and the Merits

76.
A hearing on Jurisdiction and the Merits was held at the offices of the World Bank in Washington, D.C. from 29 April 2019 to 1 May 2019 (the "Hearing"). The following people were present at the Hearing:

Members of the Tribunal :
Mr. John M. Townsend President
Mr. J. Brian Casey Arbitrator
Mr. Peter Rees QC Arbitrator

Assistant to the President
Mr. Stijn Winters Assistant to the President

ICSID Secretariat :
Ms. Ella Rosenberg Secretary of the Tribunal
Ms. Maria-Rosa Rinne Paralegal

For the Claimants :
Counsel
Mr. Luis Gonzalez Garcia Matrix Chambers
Mr. Alan Del Rio LDR Consultants
Expert
Mr. Tomás Timbane TTA Advogados
Witness
Mr. Enrico Alicandri CMC
Party representative
Ms. Valentina Casasola CMC

For the Respondent :
Counsel
Mr. Juan Basombrio Dorsey & Whitney LLP
Ms. Erica Chen Dorsey & Whitney LLP
Expert
Ms. Teresa Filomena Muenda Attorney, Mozambique
Witness
Cecilio Maria da Conceição Grachane Former General Director of the National Road Administration (ANE), Mozambique
Party representatives
Angelo Vasco Matusse Deputy Attorney General, Mozambique
Ismael Faruc Nurmahomed National Road Administration (ANE), Mozambique

Court Reporter :
Ms. Laurie Carlisle Carlisle Reporting

77.
The Parties presented opening statements, following which the following witnesses and experts were examined:

On behalf of the Claimants :
Mr. Enrico Alicandri CMC
Mr. Tomás Timbane TTA Advogados

On behalf of the Respondent :
Mr. Cecilio Maria da Conceição Grachane Former General Director of National Road Administration (ANE), Mozambique
Ms. Teresa Filomena Muenda Attorney, Mozambique

G. Post-Hearing Submissions on Jurisdiction and Costs

78.
The Parties agreed at the Hearing that no post-hearing submission on the merits would be needed.
79.
After the Hearing, on 8 May 2019, the Tribunal invited the Parties to comment on the relevance to the Respondent's jurisdictional objections of the Opinion of the European Court of Justice of 30 April 2019 on CETA (Opinion 1/17 of the Court) ("Opinion 1/17")4 and the new decision of the arbitral tribunal in Eskosol S.p.A. in Liquidazione v. the Italian Republic (ICSID Case No. ARB/15/50) on Italy's Request for Immediate Termination and Italy's Jurisdictional Objection based on Inapplicability of the Energy Charter Treaty to Intra-EU Disputes dated 7 May 2019 ("Award in Eskosol v. Italy" or "Eskosol").5
80.
On 22 May 2019, the Claimants submitted their Comments on Opinion 1/17 and the Award in Eskosol v. Italy and Respondent submitted its Observations on Eskosol and Opinion 1/17.
81.
The Parties filed their submissions on costs on 29 May 2019. The Claimants submitted no comment to the Respondent's cost application.
82.
On 7 June 2019, the Respondent submitted to the Secretary a document entitled "Respondent's Opposition to Claimants' Statement of Costs."
83.
On 12 June 2019, the Claimants sent an email to the Secretary asking that the Respondent's Opposition "should not be admitted into the record, because it does not represent an opposition to the claimants' costs, but is instead an attempt by the Respondent to present a post-hearing submission to the Tribunal in relation to its arguments on jurisdiction and merits." On the same day, the Respondent sent a response to the Secretary. By e-mail of 13 June 2019, the Secretary informed the Parties that the Tribunal would consider these objections to the costs submissions in the Award, and that no further submissions concerning costs would be accepted.

H. Closing of the Proceeding

84.
The proceeding was closed pursuant to ICSID Arbitration Rule 38(1) on 24 September 2019.

III. FACTUAL BACKGROUND OF THE DISPUTE

A. The Rehabilitation of Mozambique's Infrastructure

85.
The responsibility for public works and infrastructure in Mozambique falls within the purview of Mozambique's Ministry of Public Works and Housing (the "Ministry"). The Ministry delegates responsibility for the development and maintenance of the road network to ANE. The Director General of ANE is appointed by the Minister of Public Works and Housing. The Claimants argue that, as "an instrumentality, emanation and/or representative of the State," ANE's conduct can be attributed to the Respondent for the purposes of the BIT.6
86.
The Claimants quote a 1992 World Bank report as saying that Mozambique's road network had "deteriorated to the point where nearly 40% is in poor or bad condition, creating major obstacles to the movement of agricultural products to the ports, markets and processing centers."7 They also quote a 2006 European Union report that similarly found the country's transport infrastructure to be in dire need of improvement.8
87.
Mozambique's main road is the Estrada Nacional 1 or "N1," which runs from Maputo in the south to Pemba in the north. At some point before April 2004, the Government decided to rehabilitate the 374.85 km stretch of the N1 between Namacurra and Rio Ligonha, and began to refer to that effort as the "Namacurra – Rio Ligonha Project."9
88.
To make the Namacurra - Rio Ligonha Project more manageable, Mozambique divided it into three "Lots," as follows:10
Lot Section Extension
ANamacurra — Malei 28,153 Km
1B Malei - Mocuba 53,047 Km
CMocuba — Nampevo 70,450 Km
Total Lot 1 151,750 Km
2DNampevo - Alto Molocuè 117,180 km
3EAlto Molocuè - Rio Ligonha106,020 km
Total Lot 3 374.85 km
89.
This dispute arises primarily out of the rehabilitation of Lot 3, Section E, which consisted of a 106,020 km stretch of the N1 between Alto Molocuè and the Ligonha River (the "Lot 3 Project").

B. The Lot 3 Project: Alto Molocuè - Rio Ligonha

90.
The Respondent arranged to receive financing for the Lot 3 Project from the European Development Fund.11 This financing had implications for the legal framework within which Mozambique entered into contracts for the Lot 3 Project, because of a treaty called the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States, of the one part, and the European Community and its Member States, of the other part (the "Cotonou Convention"), signed in Cotonou on 23 June 2000, and amended in 2005 and 2010. According to the Respondent, as will be developed in more detail below, "any disputes related to transnational contracts financed by the European Development Bank must be arbitrated under the Arbitration Rules of the Cotonou Convention."12
91.
ANE awarded the construction contracts for each of the Namacurra – Rio Ligonha Project Lots in a public tender process launched on 10 April 2004. The tendering parties had to submit a bid specifying how they would complete the project and who would be the key people involved in it. Each bid had to include a "Bill of Quantities, Method Statements and other forms setting out the experience of the [bidders], CVs of key personnel, an equipment list, forms showing that the [bidders] were not involved in litigation, their financial capacity, a bid bond and any other forms necessary for completing a compliant tender."13
92.
Several companies tendered for the Lot 3 Project. The tender evaluation committee recommended awarding Lot 3 to the Claimants even though it had received a lower bid from another company, because the lowest bidder was also the lowest bidder on Lot 1 and could not take on both projects. The Lot 3 Project was awarded to the Claimants in January 2005.14

C. The Lot 3 Contract

93.
The contract for Lot 3 – Public Works Contract No 307/DEN/04 for Road Rehabilitation between Namacurra and the Ligonha River, Lot 3 (the "Lot 3 Contract") – was signed on 16 March 2005. The signatories to the Lot 3 Contract are the Ministry, represented by ANE, and "C.M.C. A.A.," a corporation with its address in Maputo, Mozambique. "C.M.C. A.A." would appear to be the Claimant CMC Africa Austral. The Special Conditions of the Lot 3 Contract identify Claimant CMC Maputo as the "Empreiteiro" ("Contractor"), although CMC Maputo is not a signatory to the contract.15
94.
CMC Africa Austral had been formed in 2000 or 2001.16 The Claimants explain that CMC Maputo was often used as a cosigner or backer in order to supplement a bid by CMC Africa Austral, because CMC Africa Austral did not have the experience required to bid for large public works projects on its own.17 This may have been the case with the Lot 3 Project, because the EDF requires bidders to meet certain experience requirements, although only CMC Africa Austral appears as a signatory on the Lot 3 Contract. According to Mr. Gridella, the invoices for the Lot 3 Contract were issued by CMC Africa Austral, but the CMC tenders had been prepared by CMC Maputo.18
95.
The original value of the Lot 3 Contract was EUR 26,201,593.79, including VAT.19 The Lot 3 Contract was "[e]ndorsed for financing by the Chief of the Delegation of the European Commission to Mozambique" on 14 March 2005, two days before the Lot 3 Contract was signed.20
96.
The Lot 3 Contract comprised the contract itself, the "General Conditions for Projects Financed by the EDF (‘General Conditions')," and the Special Conditions.21 Article 2 of the Special Conditions provides that the Lot 3 Contract is governed by Mozambique law. The language of the contract is Portuguese.
97.
Article 48.1 of the General Conditions specifies that, "[u]nless otherwise stipulated in the Special Conditions, and except as provided in Article 48.4, the Contract shall be at fixed prices which shall not be revised." Article 49.1 of the Special Conditions states that "[t]he Contract is a unit price contract." Article 49.1(b)(i) of the General Conditions specifies that "the amount due under the Contract shall be calculated by applying the unit rates to the quantities actually executed for the respective items, in accordance with the Contract." The Respondent asserts that, by agreeing to a "unit price contract," the Parties expressly chose not to enter into a "cost-plus contract."22
98.
Article 1 of the Special Conditions provides that the Engineer/Supervisor on the project would be Direcção de Estradas Nacionais ("DEN" or the "Engineer"). DEN was represented on the Lot 3 Project by Mr. Nicholas O. Dwyer.23 Article 5.1 of the General Conditions states that, "[t]he Supervisor shall carry out the duties specified in the Contract. Except as expressly stated in the Contract, the Supervisor shall not have authority to relieve the Contractor of any of his obligations under the Contract."
99.
Article 55 of the General Conditions, "Claims for Additional Payment," provides that the Contractor shall give the Engineer notice of any claim for additional payment. Article 55.2 provides that:

55.2 When the Supervisor has received the full and detailed particulars of the Contractor's claim that he requires, he shall, without prejudice to Article 21.4 after due consultation with the Contracting Authority and, where appropriate, the Contractor, determine whether the Contractor is entitled to additional payment and notify the parties accordingly.

100.
Article 68 of the General Conditions provides for the "Settlement of Disputes." Article 68.1 requires the Contracting Authority (the Ministry, represented by ANE) and the Contractor (CMC Africa Austral according to the Contract, CMC Maputo according to the Special Conditions) to make an effort to settle amicably "disputes relating to the Contract which may arise between them." Article 68.2 provides that "[t]he Special Conditions shall prescribe: a) the procedure for the amicable settlement of disputes; […]" Article 68.5 then provides that:

68.5 In the absence of an amicable settlement or settlement by conciliation within the maximum Time Limits specified, the dispute shall:

a) in the case of a national contract, be settled in accordance with the national legislation of the State of the Contracting Authority; and

b) in the case of a transnational Contract, be settled, either:

i) if the Parties to the Contract so agree, in accordance with the national legislation of the State of the Contracting Authority or its established international practices; or

ii) by arbitration in accordance with the procedural rules adopted in accordance with the [Cotonou] Convention.24

101.
Article 68 of the Special Conditions elaborates on the procedures for the "Settlement of Disputes." That Article first addresses amicable settlement procedures, and then provides in Article 68.3 that:

68.3 The parties may agree that the procedures for the conciliation referred by article 68.3 of General Conditions of Contract are the same of [sic] the Sub clause 5 of "Procedural Rules on Conciliation and Arbitration of contracts financed by European development Found" [sic] adopted by Decision No 3/90 ACP-CEE Council of Ministers dated 29 March 1990 (Official Journal No L 382/95 on 31.12.90).

[…]

The intervention of the European Communities agency in the amicable settlement may be made by the delegation of the European agency in Mozambique or by the Departments of the Head offices of the European Communities agency, in accordance with the agreements made by the parties and the agency.

102.
Article 68.5 of the Special Conditions then provides that arbitration of a "transnational Contract" pursuant to Article 68.5(b)(ii) of General Conditions will be conducted pursuant to "the abovementioned Procedural Rules on Conciliation and Arbitration."25 Those "Procedural Rules" are the Cotonou Arbitration Rules.
103.
On 1 November 2005, Addendum No. 1 to the Lot 3 Contract was signed to include the construction of a bridge over the Ligonha River. This Addendum was worth EUR 1,603,637.44, including VAT.26
104.
On 23 November 2007, Addendum No. 2 was signed to include changes to the total price of the Lot 3 Contract as a result of variations ordered by the Engineer, additional works, and an extension of the time within which the Lot 3 Contract was to be performed until 8 August 2007. The revised total price of the Lot 3 Contract was EUR 29,769,760.53 including VAT.27

D. Performance of the Lot 3 Contract

105.
The Claimants started work on the Lot 3 Project on 1 May 2005.28 The Claimants state that they invested heavily in the Project.29
106.
On 30 April 2007, the Claimants concluded their original works.30 The additional work on the Lot 3 Project was substantially completed in or around November 2007.31 Some "snags and additional repairs" were completed in 2008.32
107.
On 25 March 2009, CMC Maputo accepted as an additional assignment responsibility for the completion of the Lot 2 Project, undertaking to perform the remaining obligations of the prior contractor. The Claimants state that the Lot 2 Project was transferred to them because they had performed excellently on the Lot 3 Project.33 The Respondent asserts that nothing indicates that the Claimants' performance on the Lot 2 Project was in any way contingent on a particular outcome of disputes about Lot 3 claims.34
108.
On 14 July 2011, ANE issued a Final Acceptance Certificate for Lot 3, in accordance with Article 62 of the General Conditions.35 Article 62 provides that:

62.1 Upon the expiration of the Maintenance Period, or where there is more than one such period, upon the expiration of the latest period, and when all defects or damage have been rectified, the Supervisor shall issue to the Contractor a Final Acceptance Certificate and a copy thereof to the Contracting Authority stating the date on which the Contractor completed his obligations under the Contract to the Supervisor's satisfaction. The Final Acceptance Certificate shall be given by the Supervisor within 30 days after the expiration of the above stated period, or as soon thereafter as any Works as instructed, pursuant to Article 61, have been completed to the satisfaction of the Supervisor.

62.2 The Works shall not be considered as completed until a Final Acceptance Certificate shall have been signed by the Supervisor and delivered to the Contracting Authority, with a copy to the Contractor.

62.3 Notwithstanding the issue of the Final Acceptance Certificate, the Contractor and the Contracting Authority shall remain liable for the fulfillment of any obligation incurred under the Contract prior to the issue of the Final Acceptance Certificate, which remains unperformed at the time such Final Acceptance Certificate is issued. The nature and extent of any such obligation shall be determined by reference to the provisions of the Contract.36

The Final Acceptance Certificate states that "the Engineer certifies that the Contractor, CMC di Ravenna Soc. Coop. Arl, completed his obligations under the Contract, with effect from 24 March 2011."37

109.
Claimants allege that they have a number of claims against ANE that arose out of problems with the Lot 3 Project, involving additional works, delays, and disruption of the work process,38 but they have not quantified those claims except as described below. The Respondent argues that the Claimants have submitted no documentation of these claims, which allegedly arose between 2005 and 2009. In addition, it points out that the Claimants do not seek to establish their entitlement to relief for these alleged contract claims under the Lot 3 Contract.39

E. Compensation negotiations before 2010

1. The Engineer's Determination & IPC 27

110.
On 11 May 2009, ANE sent the Claimants the "Final Decision of the Engineer" pursuant to Article 55.2 of the General Conditions on twenty claims that the Claimants had asserted with regard to Lot 3.40 The Claimants valued those claims at EUR 12,759,498.18.41 The Engineer determined that CMC was entitled to EUR 2,440,925.00.42
111.
In the table attached to his Final Decision as Annex II, the Engineer lists the twenty claims asserted by the Contractor, the amount claimed for each, and the amounts awarded by the Engineer. The table below excerpts from Annex II relevant entries concerning the four claims for which the Engineer awarded an amount, plus a fifth amount accompanied by the "Observation" "CMC/NOD agree."43

Claim No.Subject ofClaimAmountClaimed by theContractorRevision/Recommendation of the Engineer
2 Delayed access for diversion construction 470,512.79 65,295
5 Increase of quantity of cut to spoil 6,783,895.8644 1,432,983
10 Unforeseen days off 45,725.8545 18,033
Unnumbered Unforeseen days off / "CMC/NO D agree" 9,017
14 Additional borrow pits 1,750,570.08 915,597
Totals (all claims) 12,759,498.18 2,440,925

The Engineer awarded nothing for the remaining 16 claims of the Contractor.

112.
The Respondent describes the Engineer's decision as "appropriate."46 The Claimants were not pleased with that decision, however, and on 15 May 2009 sent ANE a letter taking issue with the Engineer's decision. The letter stated:

After a careful analysis of the contents attached to your letter, we regret to inform you that the sponsors offered do not cover the additional costs actually incurred at the time for the execution of the Contract.

We request that your position be reviewed and that the costs and financial charges actually incurred by us be recognized.

We reiterate that it is our firm intention to reach a friendly agreement, but we emphasize that if such agreement is not reached, we intend to initiate the legal procedures established in the Contract and in the law governing it.

We also pointed out that in the negotiations related to the assignment of Lot 2, our Company was always very clear that our availability to complete the work was strictly linked to the satisfactory resolution about Lot 3[…]47

113.
ANE responded on 7 July 2009, stating:

With reference to your above letter.

We draw your attention to the fact that this is a "unit price" contract, not a "cost plus fee" contract. We consider that the amounts included in Engineer's determination represent a correct evaluation of extension of time and additional payments in relation to your claims.

We take note that you reserved your rights in relation with the Engineer's determination; however, we invite you to submit a request of payment for the amounts included in this determination.48

114.
On 24 July 2009, the Claimants replied to the 7 July 2009 letter by sending ANE an interim payment certificate ("IPC 27") for the sum awarded by the Engineer. In their letter, the Claimants stated that:

We herein enclose the interim payment application No.27 of 23 July 2009 according to your letter with Ref:203/DAC/DIPRO/09 of 07.07.09, for your appreciation and approval.

Once again we reiterate that it is our intention to reach a friendly agreement to recognize the costs and financial fees actually borne by us for the execution of the construction Works and, if that does not happen, activate the legal proceedings indicated in the Contract and in the law governing it.49

115.
On 10 August 2009, the Claimants sent ANE an invoice for the "costs of extra work" in the amount of EUR 2,440,925.00 plus VAT, the same amount recommended in the Engineer's decision and requested in IPC 27.50 ANE authorized payment of that amount on 15 October 2009.51
116.
In September of 2009, ANE issued a Final Project Report on Lot 3.52 The Engineer's representative's name, as well as ANE's, appears on the cover page. That report states:

3.7 Claims

The contractor filed claims and measurement items in the amount of 12,498.18 [sic] Euros (that means 53% of the original contract value).

The Engineer found that the contractor was entitled to 2,440,925 Euros for claims and 105,524.09 Euros for measurements (see chapter 6.3 below).53

Sections 6.3.1-6.3.22 of the Final Project Report describe the Claimants' claims and the Engineer's decision on each claim.54

2. CMC's Efforts to Increase the Amount Awarded by the Engineer

117.
Notwithstanding the issuance of IPC 27, the Claimants remained dissatisfied with the Engineer's decision on their claims. At the same time that the Claimants considered themselves undercompensated for their work on Lot 3, ANE had asked the Claimants to undertake the completion of work on Lot 2, on which the original contractor's performance had been unsatisfactory.
118.
On 6 October 2009, the Claimants sent a letter to ANE reiterating their disagreement with the Expert's determination and reminding ANE that the Claimants had agreed to complete Lot 2 on the understanding that their Lot 3 claims would be addressed. The letter stated that "[t]his 'impass' situation in which we are faced with at the moment, rises doubts on the opportunity to continue the works on Lot 2, due to the clear disadvantageous condition linked to the prolonged absence of resolution to the problems referring to Lot 3." The Claimants also asked that "we hereby request that our claim for compensation be assessed in the moulds of our relationship, which for the last 20 years has guaranteed very high levels of mutual loyalty, respect, esteem and consideration."55
119.
Two Annexes were attached to the Claimants' 6 October 2009 letter: Annex 1 was a chronology of preceding events; while Annex 2 (reproduced at the end of this paragraph) contained a summary of six claims for a total amount (including EUR 1,500,000.00 of interest) of EUR 13,315,000.00. Annex 2 (which is not numbered to correspond to the numbering of Annex II to the Engineer's Final Decision) included two items, numbers 2 and 4 (numbers 2 and 5 respectively in the Engineer's decision), for which the Engineer's Final Decision had awarded partial compensation (although the amount requested for an increase in "cut to spoil" was increased on 6 October), and four items, numbers 1, 3, 5 and 6 (numbers 3, 9, 6 and 8 respectively in the Engineer's decision), for which the Engineer had awarded nothing.56 The letter contains no explanation for why the 6 October 2009 letter addressed only six of the 20 claims listed in the Engineer's Final Determination.57

ANNEX 0258

Description Claimed Letter CMC no.
1 Borrow pits demining - increase of borrow pit quantity due to technical reasons 167,000 117L/CMCRL/FB/rl 221L/CMCRL/FB/rl
2 Delay of payment by the Contracting Authority of compensations 470,000 144L/CMCRL/FB/rl
3 Late issuance of documentation required for the importation of materials and parts by the Contracting Authority 1,400,000 210L/CMCRL/FB/rl 318L/CMCRL/FB/rl
4 Exaggerate increase of cut to spoil 9,500,000 267L/CMCRL/FB/rl 465L/CMCRL/FB/rl
5 Chipping rescreening 83,000 269L/CMCRL/FB/rl
6 Disruption due to lack of/ late payment 195,000 314L/CMCRL/FB/rl
7 Interests on the above mentioned amounts 1,500,000 (estimated)
TOTAL 13,315,000

120.
According to the Respondent, the 6 October 2009 letter shows that the Claimants had not identified any substantive error in the Engineer's determination. Instead, the Respondent argues that the Claimants tried to pressure ANE into increasing the price for the completed Lot 3 Project by threatening to stop working on the ongoing Lot 2 Project. The Respondent points out that the Claimants requested that the dispute be resolved in 20 days, failing which they would "have no choice but to act on what has been previously been mentioned, and appeal to the Arbitration Court to solve the issue."59
121.
On 12 October 2009, ANE sent the Claimants "Final Certificate 27," corresponding to IPC 27.60 On 14 October 2009, the Claimants responded, stating:

This letter serves as a confirmation that we are not in agreement with the amounts indicated in the Certificate #27 (Final Account) presented by the supervisor's representative, on the 20 July 2009 and only received by us – see email on the 12 October 2009. There is a discrepancy of approximately 8,257,785.96 € between our amounts and those of the Supervisor´s Representative and this is made up of the measured works as well as the claims that were already presented in November 2005.

[…]

Thus, our acceptance to payment for the indicated amount as being due according to the Certificate #27 shall in no manner be interpreted as an acceptance from our side.61

The Claimants' 14 October 2009 letter does not explain how they calculated the EUR 8,257,785.96 "discrepancy," nor did they do so during the hearing on the merits.62

122.
According to the Respondent, ANE processed IPC 27 for payment to CMC Africa Austral on or about 15 October 2009,63 although payment does not appear to have actually been transmitted until sometime later.64

3. ANE's 30 October 2009 Settlement Offer

123.
The Respondent asserts that the "threats" in the Claimants' 6 October 2009 letter to discontinue work on the Lot 2 Project and their request to consider extra-contractual circumstances, such as the Parties' long working relationship, moved ANE General Director Mr. Nelson Nunes to reassess the Claimants' position.65
124.
On 20 October 2009, Mr. Nunes sent a letter to the Minister of Public Works, stating, in pertinent part:

1. CMC completed in November 2007, the rehabilitation of Lot III between Alto Molocue and Rio Ligonha having initated in may [sic] 2005, integral part of of the Namacurra – Rio Ligonha project funded by the European Union.

10. After various correspondence exchanges, the Contractor with his last letter sent on the 16.10.09 reiterates the respective claims and threatens to lodge an appeal in the arbitration court to manage the resolution of the problem.66

11. The Contractor does not demand immediate payment of the outstanding amounts but accepts that, once the debt is acknowledged by ANE, the disbursement shall be effected throughout the year of 2010.

12. The performance considered during the last 20 years, the revealed capacity to respond whenever it was requested and the quality of the Works executed make CMC one of the best Contractors that have operated (and operate) within the Country.

13. In view of the above and having considered the verifications that were effected in the claims presented, we hereby propose you, the following actions to permanently solve the problem:

a. Negotiate with the contractor a reasonable compensation proposal considering the proposal put forward in annex 2;

b. To advance with the schedule proposal in the payment of the amounts to be reached in the negotiations.67

125.
Annex 2 to Mr. Nunes' letter to the Minister is a table (reproduced following this paragraph) which lists eleven items "Requested by Builder,"68 in addition to interest.
DESCRIPTION Amount (Euros) Requested by Builder Amount assessed (Euros) Recommended by ANE
Work/Claims Approved works
1 Demining of borrow pits, increase of borrow pits due to technical reasons 167,133 167,133 0.00
2 Delay on payment compensations by the Employer 470,513 300,000
3 Employers delay in documentation issue necessary to import materials and parts 1,393,193 550,000
4 Unreasonable increase of cut to spoil 6,783,896 250,000 4,250,000
5 Unforeseen days off 45,726 --
6 Disruption due to lack/ delay in payments 195,396 100,000 --
7 Increase in the number of quarries 1,750,570 700,000 --
8 Revision of price labour costs 584,429 300,000 150,000
9 Hard rock excavation 123,755 -- 123,755
10 Additional cement for stabilization 81,286 -- --
11 Various works after provisional acceptance of Works not certified by the Engineer 2,456,157 1,480,000
SUBTOTAL14,052,0532,997,1335,373,755
12 Interest on amounts above indicated (approximate calculation) 1,750,000 0.00
TOTAL15,802,0532,997,1335,373,755
GENERAL TOTAL EVALUATED FOR THE NEGOTIATIONS8,370,888
126.
Many of the items listed in Annex 2 to Mr. Nunes' letter to the Minister are the same as or similar to one or more of the twenty claims asserted by the Contractor listed in Annex II of the Final Decision of the Engineer (C-28). Indeed, the claim amounts are identical.69 The items listed in Mr. Nunes' letter are also similar to one or more of the six items listed in Annex 2 to the Claimants' letter to ANE of 6 October 2009, as shown in the table below. There is no entry in the Engineer's Final Decision or in the letter of 6 October 2009 corresponding to item 11 in Mr. Nunes' table. This is perhaps understandable in view of the wording of that item: "[v]arious works after provisional acceptance of Works not certified by the Engineer."70

Annex II to Engineer's FinalDecision of 11 May 2009(C-28)Claimants'Letter of 6 October 2009 (C-33)Annex 2 to Mr. Nunes' letter to the Minister of 20 October 2009 (C-12)
Item numbers and amounts claimed Item numbers and amounts awarded Item numbers and amounts claimed Item numbers and amounts claimed Item numbers and amounts recommended
1: 0 1: 0
2: 470,512.79 2: 65,295 2: 470,000 2: 470,513 2: 300,000
3: 167,133 3: 0 1: 167,000 1: 167,133 1: 167,133
4: 21,417.60 4: 0 (See no. 3) (See no. 3)
5: 6,783,895.66 5: 1,432,983 4: 9,500,000 4: 6,783,896 4: 4,500,000
6: 83,366,46 6: 0 5: 83,000
7: 57,311.13 7: 0
8: 195,396 8: 0 6: 195,000 6: 195,396 6: 100,000
9: 1,371,775.50 9: 0 3: 1,400,000 3: 1,393,19371 3: 550,000
10: 45,725.85 10: 18,033 5: 45,726 5: 0
Unnumbered: 9,017
11: 161,408.62 11: 0
12: 190,795.82 12: 0
13: 54,701.3 13: 0
14: 1,750,570.08 14: 915,597 7: 1,750,570 7: 700,000
15: 584,428.95 15: 0 8: 584,429 8: 450,000
16: 123,754.95 16: 0 9: 123,755 9: 123,755
17: 81,285.59 17: 0 10: 81,286 10: 0
18: 19,628.51 18: 0
19: 84,266.92 19: 0
20: 512,123.25 20: 0
11: 2,456,157 11: 1,480,000
Total: 12,759,498.18 Total: 2,440,925 Total: 11,815,000 (without interest) Total: 14,052,053 (without interest) Total: 8,370,888

127.
The last line of Annex 2 to Mr. Nunes' letter to the Minister reads, "general total evaluated for the negotiations 8,370,888."72
128.
The Minister of Public Works made a handwritten endorsement, dated 29 October 2009, on Mr. Nunes' letter of 20 October 2009. That endorsement reads: "dispatch seen I agree with the proposed actions."73 The endorsement was sent back to Mr. Nunes on 2 November 2009 under cover of a letter from the Minister's Head of Office,74 but it must have been communicated informally before that, in view of the offer made by Mr. Nunes to CMC Ravenna on 30 October 2009.75
129.
On 30 October 2009, Mr. Nunes, on behalf of ANE, sent CMC Ravenna a letter making the following offer:

On the basis of what above mentioned, ANE hereby proposes to CMC Ravenna the agreement on Euro 8,220,888 against Euro 15,802,053, covering all the additional costs and financial charges incurred during the execution of the Construction Contract, according to the enclosed table.

In accordance with what agreed and negotiated, the payments of the amount subject of the agreement may be made in installations during the year 2010.

We request to the Contractor CMC Ravenna, in case of agreement on what above mentioned, to provide a written confirmation of the acceptance of the above described conditions within the maximum time limit of 7 days from the receipt of the present letter.76

130.
The table attached to ANE's letter of 30 October 2009 broke down the offer of EUR 8,220,888 as shown in the reproduction of that table following this paragraph. The amounts offered, listed as requested and line by line, are identical to the Annex 2 submitted by Mr. Nunes to the Minister on 20 October 2009 (C-12) except that the 30 October 2009 offer letter omits the EUR 150,000 shown on line 8 of the 20 October 2009 table as one of the figures for "revision of price labour costs" and on line 8 of the 30 October 2009 table as "ROP cost of labour."77

ROAD REHABILITATION NAMACURRA- RIO LIGONHA

LOT 3: ALTO MOLOCUE – RIO LIGONHA

SUMMARY OF SUBMITTED CLAIMS

DescriptionAmount (Euros) requested by theContractorEvaluated amount (Euros) Recommended by ANEapproved work approved
1 Demining of borrow pits. Increase of borrow pits due to technical reason 167,133.00 167,133.00 0.00
2 Delay on payment of compensation to local people by Contracting Authority 470,512.79 0.00 300,000.00
3 Delay on submission of the required documentation by the Contracting Authority for custom clearance material 1,393,193 0.00 550,000.00
4 Increase of quantities of cut to spoil 6,783,895.86 250,000.00 4,250,000.00
5 Unexpected Additional holidays 45,725.85 0.00 0.00
6 Disruption due to delay on payments 195,396.00 100,000.00 0.00
7 Increase of borrow pits 1,750,570.08 700,000.00 0.00
8 ROP cost of labour 584,428.95 300,000.00 0.00
9 Hard excavation 123,754.95 0.00 123,755.00
10 Increase of cement for stabilization 81,285.59 0.00 0.00
11 Extra works post TOC 2,456,157 1,480,000.00
SUB TOTAL 14,052,0532,997,133.005,223,755.00
12 Interest on above amounts (rough calculation) 1,750,000 0.00 0.00
TOTAL 15,802,053782,997,133.005,223,755.00
RECOMMENDED TOTAL AMOUNT8,220,888.00

131.
On 2 November 2009, Claimants responded to the 30 October offer, stating:

We acknowledge receipt of your letter Ref. 036/DG/2009, that we appreciate.

We agree with your proposal to set the amount of Euro 8,220,888 clarifying that is additional to the amount already certified and processed for the payment with IPC no. 27.79

132.
It is common ground between the Parties that Mr. Nunes' letter of 30 October 2009 constituted an offer of settlement, and both Parties' experts on the law of Mozambique treated it as such.80 The Parties differ vigorously about the nature and effect of the Claimants' 2 November 2009 response to that letter. The Parties' disagreement focuses on whether the phrase "additional to the amount already certified and processed for the payment with IPC no. 27" clarifies the offer or proposes a change to the terms of the offer.
133.
The Claimants argue that the letter of 2 November 2009 accepted the Respondent's settlement offer of 30 October 2009, and thus created a valid and binding contract under Mozambican law.81
134.
The Respondent argues that the Claimants' 2 November 2009 letter varied the terms offered and thus constituted a counteroffer, rather than an acceptance of the offer.82 The Respondent further states that it never agreed to that counteroffer, and thus that no agreement was reached.83 The Respondent also points out that it entered into the Lot 3 Contract with CMC Africa Austral, but that CMC Africa Austral was not a party to the alleged settlement agreement.84

4. Political Developments in Mozambique

135.
On 28 October 2009, presidential, legislative, and provincial assembly elections took place in Mozambique.85 The Claimants assert that the Respondent's conduct towards them changed, especially as regards the dispute over compensation for the Lot 3 Project, as a result of political appointments made following the presidential election.86
136.
In the election, the incumbent President Armando Emílio Guebuza of the FRELIMO party won with more than 75% of the votes. In January 2010, Felicio Zacarias, the Minister of Public Works who on 29 October 2009 had approved the proposal to make a settlement offer to CMC,87 was replaced by Cadmiel Muthemba.88 In March 2010, Mr. Muthemba appointed Elias Paulo to replace Nelson Nunes as the General Director of ANE. Cecilio Grachane succeeded Mr. Paulo as General Director of ANE in 2011.89

F. Compensation negotiations from 2010 to 2016

137.
On 13 January 2010, shortly after the new Minister of Public Works was appointed, the Claimants sent ANE a letter enclosing two invoices for "Approved Additional Works."90 These invoices were expressed in Mozambican Meticais (MT), but each included, under "description," a statement of the amount in euros to which the amount invoiced in MT corresponded. The euro amounts on the two invoices corresponded to the subtotals for "approved work" and "approved claims" shown on the table attached to the letter of 30 October 2009, with EUR 2,997,133.00 shown as the "[a]mount of additional work approved" on Invoice No. E0105-28 and EUR 5,223,755.0091 shown as the "[a]mount of approved claims" on Invoice No. E0105-29. The two sums totaled EUR 8,220,888.92
138.
Mr. Gridella's first witness statement contains the following statements about these invoices:

48. I submitted two invoices to ANE in January 2010. To the best of my recollection invoicing would have been delayed to have it brought into the 2010 financial year.

49. As the Claimant was not in receipt of the agreed settlement monies I requested a meeting with Nelson Nunes [General Director ANE] in the intervening three months. He had by now left ANE and was no longer in a position to help in the matter.

50. I believe Nunes left ANE in approximately March 2010. I was then informed that monies were not available at the moment and that monies were more readily available at the start or end of each year.93

139.
ANE does not appear to have responded to or commented on these two invoices until the summer of 2011. As explained in paragraph 144 below, ANE had obtained an "Opinion" about these invoices from a consultant in June 2011, but did not provide CMC with a copy of that Opinion until November 2011. In the meantime, on 14 July 2011, ANE sent the Claimants a Final Acceptance Certificate in accordance with Article 62 of the General Conditions, stating that CMC Ravenna had "completed his obligations under the Contract, with effect from 24 March 2011," but made no reference to the invoices.94
140.
On 26 July 2011, the Claimants sent a letter to ANE, stating that they had received neither a "formal notification" nor payment of the invoiced amounts, noting that ANE had stated in its letter of 30 October 2009 that payments would be made during the year 2010.95 Claimants further took "the opportunity to inform formally that in case we do not receive the relevant payments within the 20/08/2011, we will be forced to take the proper actions to ensure the regularization of the credits on subject."96
141.
On 8 August 2011, ANE replied in a letter to the Claimants stating:

We acknowledge receipt of your letter on subject - by which you request the payment of an amount equal to Euro eight millions and seven hundred and seventy nine thousand, nine hundred and eight and thirty eight cents (Euro 8,779,908,38), related to the project, and Euro five hundred and thirty thousand (Euro 530,000) for interest due to the overdue payment – which induces us to provide the following considerations:

1) with reference to our letter no. 036 dated 30/10/2009 - which is the ground of your requests and by which we were able to reanalyse the disputed matter - we determine that there are not any grounds to comply with it as far as:

a) our records show that the financial execution of the contract is [quiet], and there is not a balance to paid to you

b) the referred amounts mentioned in your letter could be paid only if you present the reasons and the relevant connections with the contract

c) considering the public administration principles, in particular the legality, the transparency and the justice, the payments without any basis are illegal. [initialed]

Therefore, whatever decision shall comply with the abovementioned principles.

2) It shall be mentioned that on your claim, in the amount of Euro 11,242,898.04, was approved the payment of Euro 2,440,925, as per Engineer's determination (annex 1), which was duly made.

3)We remind you that the amount of Euro 2,440,925 was determined on the basis of the above mentioned determination, as final amount to be paid for your claims (cfr pg. 8/9 and 9/9 of the annex 1) This fact was duly communicated and accepted, as demonstrated by the proofs of payments(annex 2).

In these terms, we transmit the issue to your consideration with the aim to clarify our position; however we are available to provide the required collaboration.97

142.
On 9 August 2011, the Claimants replied to ANE's letter, stating:

We acknowledge receipt you letter ref. 54/AJ/DG/2001, and we comment as follow.

We agree on the fact that no payment shall be made to the Contractor if no records are present in your register and accounts.

We agree on the principles of legality, transparency and justice, which are not just an obligation in our modus operandi, but they are part of Ethics Code of our company in the development of his activities.

However, it seems that there are some missing documents mentioned by ANE in the above letter, meaning correspondence, minutes of meetings and other documents during 2009, which were the basis of the issuance of your letter 036/DG/2009 on 30/10/2009.

Such letter represents the final decision resulting from a process, which at that stage had a different evaluation by ANE.

It does not correspond to the truth that the Engineer's evaluation, NOD (before leaving the Project) can be considered a final determination accepted by us, because the Contract was completed in 2011 (Final acceptance of the Work), therefore the final account can be issued only now.

Together with the issuance of the invoice related to the amounts approved by the Engineer representative and by the Engineer on April 2009, CMC stated clearly its disagreement in relation to such amounts, reserving the right to claim the payment of the residual amounts. This invoice was also used to utilize the outstanding EU funds while awaiting an amicable settlement of the dispute.

We highlight that, on middle 2009, CMC was requested by ANE to complete the Lot 2 Works and our position was duly recorded: we accepted such task only against ANE availability to settle (or attempt to settle) amicably the situation of Lot 3. On the second half of 2009, various meetings took place between CMC (nerio gridella), the general director of ANE, Eng. Nelson Nunes, with the aim to achieve an agreement after a reevaluation of our claim.

We are confident that a further analysis of our documentation used for the transaction will achieve the same result of 2009. For these purposes:

1) we will sent copies of all proper documentation, which can clarify any doubts in relation to the subject, and

2) we request an urgent meeting with ANE, to be held before the 20/08/2011, date mentioned in our letter 14/DAFO/MC/JC dated 26/07/2011, to analyse and discuss the subject.98

143.
By letter of 11 August 2011, the Claimants transmitted to ANE the documentation referred to in their letter of 9 August 2011 and again requested a meeting.99
144.
On 8 November 2011, ANE sent the Claimants a letter stating that, "[w]ith reference to the disputes related to the above subject [Lot 3 Contract – Request of Payment], we hereby transmit the opinion of an independent consultant, showing their position in relation to the said disputes, which remain in respect to the contract."100 Enclosed with that letter was an "Opinion" prepared by the engineering consultancy firm Consultec Consultores

Associados LDA ("Consultec"). Consultec's Opinion is dated June 2011. While ANE's letter of 8 August 2011 appears to have been based largely on the Consultec Opinion, the Respondent offered no explanation of why ANE had obtained the Opinion as early as June 2011 or of why it had not shared the Opinion earlier than November 2011.101

145.
The "Conclusion" of Consultec's Opinion reads as follows:

V – CONCLUSION

40. The present Contract concluded by a public entity for the execution of a public work is an administrative contract (see art. 38 of decree 54/2005 dated 13.12)

41. The contractual principles of stability of contracts and financial equilibrium expressed in the idea of an "honest equivalence of performance" apply to the administrative contracts.

42. These principles are established, in the case sub judice, by various contractual provisions, in GCC and Particular Conditions (see art. 21, 48, 53 and 55). [initialed]

43. On this basis, the reimbursement to the Contractor for additional cost due to extra works, exceptional risk, inter alia, is expression of these principles.

44. However the costs due to extra work, in this case, were considered on the basis of the unit prices without any right of adjustment because such unit prices did not achieve the 15% of the Contract price to allow the right of adjustment of those unit prices.

45. On the other hand, the exceptional risks alleged by the Contractor do not cover neither the errors made by him during the preparation of the tender, which are foreseeable errors, nor the risks due to climatic conditions.

46. The right of compensation of the Contractor, based on the claims submitted to the Engineer, shall have contractual grounds and not vague considerations for compensation due to good business relations.

47. As a matter of fact, the last argumentation provided by the Contractor in his "Request to resolution of pending contractual issues" is based on the follow:

According to what above mentioned and considering the last correspondence received on matter, which we appreciate but disagree, we hereby request that our proposal of compensation will be evaluated according to our relation, which during 20 years ensured high standard of reciprocal trustworthiness, respect, esteem and consideration.

48. These arguments have extra contractual grounds, uncertain and subjective basis, and they can be enforced only on the basis of a superior public interest, which we do not know.

49. If ANE wishes express now his doubts about an amount signed to be paid for the claims, from our point of view, ANE can be always do that, because the main issue is the public interest involved.

50. The powers of ANE in this subject, related to public interest, debilitate strongly the resoluteness of his offer according to the principles regulating the relations between privates. [initialed]

51. However ANE could do that only if he pleads the existence of defect or arising errors or a contractual interpretation but the concept of exceptional risks.

52. It is up to ANE, then, the demonstration that such arising defects or such errors of interpretation, which determined the offer of 8,220,888,00 Euros, will represent an economical advantage of the Contractor, absolutely undue under the Contract, an actual unjust enrichment, with prejudice of a public interest, which should be restored.102

146.
On 14 November 2011, Claimants responded to the Consultec report with a letter stating that "[w]e maintain our position related to the due payment of 8.2 millions of Euros, resulting from the settlement of October 2009," and reiterating their availability to negotiate.103
147.
Several months later – the record contains no explanation of the delay – on 9 May 2012, the Claimants sent another letter to ANE, this time sending copies to the Minister and Vice Minister of Public Works. The letter stated:

We make reference to your letter 036/DG/09 dated 30/10/2009, to our letter 2179/09/CMC/NG dated 2/11/2009 and to our invoices no.E0105-28 and E0105-29.

After about 2 years and half and following several approach to your institution regarding the payment of the due amount of 8,220,888 Euro, we continue to record an incomprehensible position from your side, despite the opinion provided by the independent consultant appointed by you (Consultec LDA), which states "It is up to ANE, then, the demonstration that such arising defects or such errors of interpretation, which determined the offer of 8,220,888, will represent an economical advantage of the Contractor, absolutely undue under the Contract, an actual unjust enrichment, with prejudice of a public interest, which should be restored.

The opinion gives to ANE the onus to proof that such payment is not due and constitutes an unjust enrichment.

Therefore, on the basis that until now there has not been such evidence of arising defects or errors of interpretation which substantiate the lack of payment, and considering that there is no any other possible process to follow in order to solve this dispute, we hereby request the payment of the disputed amount within 30 days from the date of reception of this letter, otherwise we will apply to the competent authorities to be indemnified.104

The Claimants received no formal response to this letter.105 Indeed, nothing more appears to have been communicated between the Claimants and ANE on this subject for more than two years.

148.
In October 2014, Mr. Flipe Nyusi of the FRELIMO party was elected President of Mozambique. Mr. Carlos Bonete became Minister of Public Works early in 2015, and Mr. Marco Alexandre Vaz was appointed Director General of ANE in July 2016.106 The Claimants appear to have seen these changes as offering an opportunity to re-open discussion of the Lot 3 Contract. Mr. Alicandri, who is a member of the Board of Directors of CMC Africa Austral, states in his Witness Statement:

27. I say that every meeting I was involved in with ANE between 2014 to 2016 incorporated negotiations around the three project disputes Lichinga -Litunde and Montepuez -Ruaça road projects as well as the Lot 3 Project. There was never a meeting solely about the Lot 3 Project and it was only discussed as part of a global settlement and never at length.

28. It is my understanding that the Lot 3 Project dispute is quite a sensitive issue to the Government of Mozambique due to the fact that the matter was not resolved under the stewardship of the Director of ANE nor under the stewardship of the Minister of Public Works. This caused the Prime Minister to decide to intervene in an attempt to facilitate the process and lead it to an amicable settlement.

29. There was constant reluctance from ANE to entertain any settlement against the Lot 3 Project. The Claimant was specifically instructed during negotiations to mark the Lot 3 project as zero. ANE also stated to me during meetings that the settlement offer letter for the figure of approximately €8.2 Million was never registered in their offices and related to an already used protocol number. I asked to see the letter to which this protocol number related. This was never shown to me.

30. Sometime in 2015 the President of Mozambique became involved in trying to settle the Claimants' issues. This occurred due to the Claimants' position in Mozambique, which it had acquired from working in the country for such a long period of time.

149.
Mr. Alicandri recalls attending the following meetings concerning the three projects that were the subjects of disputes between CMC and the Government in 2015:

• 18 August 2015: meeting between CMC and "the President of Mozambique at his office. This meeting lasted for approximately 20 minutes. [Claimants] explained to him the difficult position that the Claimants now found themselves in and explained to him about the fifty million euro outstanding to its account."107 Mr. Alicandri further states that "[t]o my surprise, during our meeting the President of Mozambique immediately phoned the Minister of Public Works and tasked him to sort out the issues urgently to allow the Lichinga and Montepuez Projects to proceed. The President told the Minister that all the South African, Portuguese and Italian companies were leaving Mozambique because they were unable to deal with the current Government. The Minister of Public Works was further told that he had better find a solution, unless his intention was to work with Chinese contractors only. No action was required from Claimant's representatives on foot of the meeting."108

• 20 August 2015: meeting between the Claimants and "the Minister for Public Works, Mr. Atanásio Mugunhe, the Director General of ANE, and Mr. Cecilio Grachane, of the Road Fund. All three projects in dispute (Lichinga, Montepuez, and Lot 3) were discussed without any exact amounts been given. The Claimants' representatives explained its proposal but there was no response from the Government. I recall that while waiting to be received by the Minister for that meeting, there was a tense exchange between Mr. Cecilio Grachane and myself. He informed me that CMC was just a problem, that I was a guest in his country and he could chase me out of Mozambique whenever he wanted."109

• 21 August 2015: meeting between the Claimants and "ANE's Director General's assistant Mr. Mahave; ANE's Contract Manager, Mrs. Tânia Comiche; CMC AA's Contract Manager, and Mr. Francisco Pereira."110

• 1 September 2015: meeting between the Claimants and "ANE's Director General, Mr. A. Mugunhe; ANE's Contract Manager, Mrs. Tânia Comiche, ANE's Technical Director, Mr. Adérito Guilamba, Mr. Paolo Porcelli and CMC AA's Contract Manager Mr. Pereira. The subject of this meeting was again to discuss settlement of the Claimants' outstanding issues on its projects in Mozambique. The Lot 3, Montepuez and Lichinga projects were discussed, but no exact amounts were discussed. The Claimants explained their settlement proposal. No response was received from those present at the meeting."111

• 22 September 2015: meeting among "ANE's Director General Mr. A. Mugunhe, ANE's Contract Manager Mrs. Tânia Comiche, ANE's Technical Director, Mr. Adérito Guilamba, ANE's Director General's assistant Mr. Mahave, CMC AA's Contract Manager Mr. Pereira and [Mr. Alicandri]."112

• 26 October 2015: "Mr. Paolo Porcelli and [Mr. Alicandri] met with the Minister of Public Works in Mozambique, Mr. Carlos Bonnete; ANE's Director General, Mr. Atanásio Mugunhe; the Road Funds Chairman, Cecilio Grachane, and ANE's Technical Director Adérito Guilamba. The Minister of Public Works. Mr. Bonnete, tasked Mr. Atanásio Mugunhe with reaching settlement on the outstanding issues on the Claimants' projects in Mozambique. After this meeting the Prime Minister got involved as the Minister of Public Works didn't help to solve the Claimants' issues."113

• 17 December 2015: Mr. Alicandri attended a "meeting to discuss settlement of issues on a number of projects. This meeting was held at the Prime Minister's Cabinet. The persons present at this meeting were the Prime Minister of Mozambique, Mr. Carlos do Rosario; the Minister of Public Works of Mozambique, Mr. Carlos Bonnete; the Director General of ANE, Mr. Atanásio Mugunhe; the Roads Fund Chairman, Cecilio Grachane; ANE's Technical Director Mr. Adérito Guilamba; CMC AA's Contract Manager, Mr. Francisco Pereira and [Mr. Alicandri]."114 About this meeting, Mr. Alicandri stated that "I view this meeting as one of the most important meetings which I attended. The aforementioned meeting was important as not only was it agreed that it was mutually beneficial to find an amicable settlement on the outstanding issues but also because a settlement proposal was requested by the Prime Minister of Mozambique to be provided to the Claimants by ANE and the Minister for Public Works."115

• December 2015 – February 2016: Mr. Alicandri recalls that a number of other meetings occurred after the 17 December 2015 meeting. He states that "[d]uring these meetings the Claimants and ANE were encouraged to reconcile their settlement offers to arrive at a possible joint submission of a settlement amount. I perceived there was constant resistance on behalf of ANE to any settlement of the issues on its projects."116

• February 2016: Mr. Alicandri "attended a meeting in ANE's office. This meeting was also attended by Mr. Adérito Guilamba and Mr. Atanásio Mugunhe. The Government never came back with a counter-proposal." Mr. Alicandri further recalls that from this meeting onwards, "it was my firm opinion that no settlement could be reached in relation to the Lot 3 Project or any other projects involving the Claimants."117

• September/November 2016: Mr. Alicandri recalls that "Mr. Paolo Porcelli and Mr. Roberto Macri, the CEO of CMC Muratori Cementisti CMC Di Ravenna Soc. CMC Coop. had a further meeting with the President of Mozambique. I understand that during this meeting the Claimants' issues on its projects in Mozambique were discussed at a high level, but nothing detailed was discussed."118

150.
On 12 August 2016, the Claimants sent a letter to Mr. Martinho, the Minister of Public Works, in which they asked that discussions be resumed with "a view to a global agreement, as agreed on December 2015."119 The Respondent notes that the Claimants have identified no correspondence between their letter of 9 May 2012 and their letter of 12 August 2016.120
151.
The Claimants offered as evidence of "an acknowledgement of a debt" by ANE a document headed "Subject Bill Book" and marked as Exhibit C-49.121 Exhibit C-49 appears to be a sheet from an electronic ledger with a "run date" of 25 January 2018 listing four invoices by date, number, and amount. Two of the invoices listed are the invoices sent by CMC to ANE on 13 January 2010: Invoice No. E0105-28 for EUR 2,997,133.00 and Invoice No. E0105-29 for EUR 5,223,755.00.122 Across the bottom of the ledger page, the original of which appears to be in Italian, is a handwritten note in Portuguese that reads, in translation: "It is consistent with our balance as of 31/12/17." Under that note is an illegible signature, the date "13/02/18," and the imprint of an equally illegible circular stamp.123
152.
Counsel for the Respondent criticized Exhibit C-49 at the hearing in the following terms:

There are some serious issues with this exhibit, C49. Number 1, there's absolutely no authentication for this exhibit anywhere in the file. […]

There's no witness that authenticates C49. There's no authentication of any kind. The only thing there is is there's a reference in a sentence in the Claimants' Memorial.

[…]

[T]his document was created on January 25, 2018. This document was created by CMC after this arbitration began.

[…]

This document is in Italian. The Government of Mozambique cannot confirm a debt in a foreign language.

[…]

You cannot even read the seal. There's no authentication to who signed it.124

G. CMC's Letter Pursuant to Article 9(3) of the BIT

153.
On 18 August 2016, the Claimants sent ANE a letter which they characterize as putting the

Government on notice of a dispute under Article 9(3) of the BIT.125 That letter stated:

We refer to letter Ref. 1, by means of which you have submitted the proposal for the amount of Euro 8,220,888.00 to resolve amicably the pending claims, and our letter Ref. 2, by means of which we accept such proposal.

The payment of the amount indicated above should have been done next, but V Excias never complied with the agreement, which gave rise to a dispute.126

Since the year 2009 we have tried several times to contact V Excias to resolve the matter without any result, and we intend now to make one more attempt to assert our rights, for which we notify you that we are our desire to initiate a friendly resolution period of 6 months from the receipt of this letter, and this will be the last attempt before advancing with arbitration in the most appropriate forms and terms.

We make the dispute for a purpose which, in the event that this attempt proves to be unsuccessful, we intend to submit the dispute for resolution by ICSID, considering that the Governments of Italy and Mozambique have signed the ICSID Convention and Bilateral Investment ICSID will have jurisdiction over the dispute.127

154.
ANE replied to CMC's letter on 22 August 2016, stating:

In accordance with the letter dated 18 August 2016 in epigraph, we

have to mention the following:

1. We note that the issuer does not have the name of the person who represents it.

2. We note the insistence in claiming the value of 8,220,888,00 Euro.

3. According to points 4 and 5 of our letter No. 568 / DAC / DIPRO / 15 dated September 9, 2015, we must inform you that we have not received any additional information that might be subject to analysis.128

155.
The next correspondence in the record is the Claimants' initial Request for Arbitration dated 10 May 2017.

IV. JURISDICTION

156.
The Respondent raises six objections to the jurisdiction of the Tribunal. Those objections are:

a. That the Claimants are not "investors" as defined in the BIT;

b. That the Claimants do not have an "investment" in Mozambique as required by the BIT;

c. That the present dispute does not arise out of an "investment" made by a "National of another Contracting State" as required by Article 25 of the ICSID Convention;

d. That the Claimants' claims are purely contractual;

e. That, to the extent that the Claimants have a claim, that claim must be submitted to arbitration under the rules adopted pursuant to the Cotonou Convention, to the exclusion of an ICSID tribunal; and

f. That, to the extent that Mozambique may have consented to ICSID arbitration, that consent was nullified by the decision of the European Court of Justice in Slovak Republic v. Achmea.

The Tribunal takes up each of these objections in the paragraphs that follow, taking the first two objections together.

A. The Requirement of Article 1 of the BIT that the Claimants Be Investors with an Investment in Mozambique

1. The Respondent's Objections

a. The Claimants are not "investors"

157.
Respondent preliminarily objects that the Claimants have failed to prove that each of them has made an investment, and thus that each of them is an "investor" as defined by the BIT.129 It states that the Claimants, despite repeated document requests, have not produced evidence showing that each individual Claimant made an investment in Mozambique.130

b. The Claimants have no "investment" in Mozambique

158.
The Respondent asserts that the settlement agreement that the Claimants identify as their investment in Mozambique does not fall within any of the categories of "investment" listed in Article 1(1)(a-f) of the BIT.131 Article 1(1) of the BIT states:

The term 'investment' shall be construed to mean any investment effected by a legal or a natural person of a Contracting Party in the territory of the other Contracting Party, in conformity with the laws and regulations of the Contracting Parties.

The term "Investment" comprises in particular, but not exclusively:

a) movable and immovable property and the ownership rights in rem ;

b) shares, debentures, equity holdings or any other instruments of credit, as well as Government and public securities;

c) credits for sums of money or any performance having economic value connected with an investment, as well as reinvested incomes and capital gains;

d) copyrights, commercial trade marks, patents, industrial designs, intellectual and industrial property rights, know-how, trade names and goodwill connected with an investment;

e) capital expenditures effectively made under licence and franchising in accordance with the law, including those expenditures connected with the right to search for, extract and exploit natural resources;

f) any increases in value of the original investment.

Any modification in the form of the investment does not imply a change in the nature of the investment thereof.132

The Respondent argues that the phrase "any investment" used in Article 1(1) is more restrictive than the more common "every kind of asset."133

159.
The Respondent asserts that the Claimants did not "effect" the alleged settlement agreement, which – at most – merely memorializes the Parties' agreement.134 In response to the Claimants' argument that the Italian "effetuato" should be translated as "made," rather than "effected,"135 the Respondent argues that, in case of a divergence between the authentic texts, the Treaty provides that the English text shall prevail.136
160.
In response to the Claimants' argument that the settlement agreement is connected to the Lot 3 Contract, which they claim is undoubtedly an "investment," the Respondent points out that the Claimants have "unequivocally waived the Contract as a basis for jurisdiction in these proceedings."137 The Respondent refers to the statement in the Claimants' Memorial that "[t]he Claimants do not invoke a provision of the Contract to assert its treaty claims, is [sic] not asking the Tribunal to exercise jurisdiction based on the Contract and does [sic] not submit this claim based on questions of contract law under Mozambique law."138

2. The Claimants' Response

a. All of the Claimants are "investors"

161.
In response to the Respondent's argument that the Claimants failed to prove that each of them has made an investment, the Claimants point out that the Respondent has not denied that either the Lot 3 Contract or the associated road construction works would qualify as a covered investment. They argue that both CMC Africa Austral and CMC Maputo invested in this project and are therefore investors. CMC Ravenna also made an investment, and is thus also an investor, because CMC Maputo is a branch of CMC Ravenna, and because CMC Ravenna owns 99.99% of the shares in CMC Africa Austral.139

b. The Claimants had an "investment" in Mozambique

162.
The Claimants argue that the term "any investment effected" in Article 1(1) of the BIT is very broad and includes rights and claims associated with road construction and rehabilitation works. They argue that legal rights connected with the underlying investment qualify as an investment even after the original investment has ceased to exist. The definition of "investment" is further expanded, in the Claimants' view, by Article 1 of the Protocol to the BIT, which provides that the BIT applies equally to a wide range of "associated activities."140
163.
The Claimants assert that the settlement agreement "cannot be viewed in isolation from the investment."141 They argue that their investments consist of "[t]he Lot 3 Project construction works, the additional works, connected activities (such as know-how), the rights and claims associated with the works (including the settlement agreement) taken together as a whole."142
164.
The Claimants argue that their investment falls into at least the categories (b) ("shares"), (c) ("credits for sums of money or any performance having economic value connected with an investment" and "invested incomes"), and (d) ("know-how, trade names and goodwill") of Article 1(1) of the BIT.143 The Claimants focus on Article 1(1)(c), arguing that "[t]here can be no question that ANE's commitment to pay 8.22 million euros to CMC, which creates a claim to money, is connected with an 'investment' expressly covered by Article 1(c) of the Treaty and is an 'associated activity' under within [sic] the terms of Article 1 of the Protocol."144
165.
The Claimants argue that they "effected" the settlement agreement within the meaning of Article 1(1) of the BIT because the word "effetuato" in the authentic Italian version of the BIT, should be translated as "made," not "effected."145 In response to the Respondent's argument that the BIT provides that, in case of divergence between the authentic texts, the English text must prevail, the Claimants argue that a dictionary definition of "effect" is "to cause to come into being," and that they have clearly caused their investment—the Lot 3 Project—to come into being.146

3. The Tribunal's Decision

a. The Claimants were "investors" within the meaning of the BIT

166.
Article 1(2) of the BIT defines an "investor" to mean:

any natural or legal person of a Contracting Party investing in the territory of the other Contracting Party as well as the foreign subsidiaries, affiliates and branches controlled by the above natural and legal persons.

167.
Article 1(4) of the BIT specifies that the "term 'legal person', in reference to either Contracting Party, shall mean any entity having its head office in the territory of such Contracting Party and recognised by it, such as public institutions, corporations, partnerships, foundations and associations, regardless of whether their liability is limited or otherwise."
168.
It is not disputed that CMC Ravenna is a corporation incorporated under the laws of Italy, with its head office in Ravenna, Italy. CMC Ravenna is thus an Italian legal person within the meaning of Article 1(4) of the BIT, and qualifies as an investor if it is investing in Mozambique.
169.
It is equally not disputed that CMC Maputo is a branch of CMC Ravenna with its place of business in Mozambique. It is accordingly a foreign branch of CMC Ravenna within the meaning of Article 1(2) of the BIT, controlled by and treated legally as part of the principal corporation.
170.
CMC Africa Austral is a wholly owned subsidiary of CMC Ravenna incorporated under the laws of Mozambique. It is thus a foreign subsidiary of CMC Ravenna, controlled by that company, and is also an investor under Article 1(2) of the BIT.
171.
Since all of the Claimants qualify as "investors," if they had an investment in Mozambique, we turn next to whether they had such an investment.

b. The Claimants had an "investment" within the meaning of the BIT

172.
The Claimants argue (inter alia) that the settlement agreement was either itself an investment in Mozambique, or that it was at the least a "credit for sums of money or any performance having economic value connected with an investment," within the meaning of Article 1(1)(c) of the BIT.
173.
The Tribunal does not, for purposes of ruling on the Respondent's objection to the Tribunal's jurisdiction, need to decide whether the Claimants and the Respondent actually reached a binding agreement to settle the Claimants' claims for compensation for their work on Lot 3. That question goes to the heart of the dispute between the Parties, and is addressed in the Tribunal's discussion of the merits. For purposes of jurisdiction, it is sufficient that the Claimants have advanced a prima facie case that satisfies the jurisdictional requirements of the BIT and the ICSID Convention.147 The Tribunal concludes that it has done so.
174.
It is beyond dispute that the Claimants' (and specifically CMC Ravenna's) participation in the Lot 3 Project constituted an investment in Mozambique. The present dispute does not arise out of that investment, however, but out of the settlement agreement. The settlement agreement, if actually agreed to, would represent a "credit for sums of money […] connected with an investment," in that the settlement agreement purported to resolve the Claimants' claims for additional payments for their work on the Lot 3 Project.
175.
The Claimants' claims for money allegedly due under the settlement agreement therefore come within the definition of "investment" in Article 1(1)(c) of the BIT. Having reached this conclusion, the Tribunal need not consider the Claimants' alternative arguments as to why they had an investment in Mozambique.

B. The requirements of Article 25 ICSID Convention

176.
Article 25(1) of the ICSID Convention provides:

The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.

1. The Respondent's Objections

177.
The Respondent argues that the Tribunal does not have jurisdiction, because a settlement agreement is merely a "legal act" that cannot qualify as an "investment" within the meaning of Article 25 of the ICSID Convention.148 Nor can the Claimants assert any claim based on an alleged investment in the underlying Lot 3 Contract, according to the Respondent, because such claims have ceased to exist by virtue of the alleged settlement agreement.149
178.
In other words, the Respondent argues that, if a settlement agreement was in fact concluded, then the Tribunal has no jurisdiction because (a) settlement agreements are not "investments," and (b) any claims based on the underlying Lot 3 Contract have been extinguished. If no settlement agreement was reached, then the Tribunal might have jurisdiction of a claim based on the Claimants' investment in the Lot 3 Contract, but that is not the claim the Claimants are making. The Claimants' entire case, according to the Respondent, rests on the alleged non-performance of the alleged settlement agreement.150
179.
In arguing that the weight of authority establishes that a settlement agreement cannot qualify as an "investment" under Article 25 of the ICSID Convention, the Respondent points in particular to the following decisions:

a. GEA Group Aktiengesellschaft v. Ukraine, in which the Tribunal stated:

The Tribunal agrees with Respondent that neither the Settlement Agreement nor the Repayment Agreement – in and of themselves – constitute 'investments' under Article 1 of the BIT or (if needed) Article 25 of the ICSID Convention. As legal acts they are not the same as the investment in Ukraine itself. In particular, (a) the Settlement Agreement merely established an inventory of undelivered goods and recorded the difference as a debt owed by Oriana to KCH; and (b) the Repayment Agreement merely establishes a means for the repayment by Oriana to KCH of Oriana's debts.151

The Respondent argues that the GEA Group tribunal "further explained that the Settlement Agreement and the Repayment Agreement were not 'investments' because they involved 'no contribution to, or relevant economic activity within, Ukraine.' Id. at ¶ 162. […] To paraphrase the GEA Group tribunal, this settlement agreement involved no contribution to, or relevant economic activity within, Mozambique."152

b. Orascom TMT Investments S.à r.l. v. Algeria, in which the tribunal stated:

In these circumstances, the Claimant cannot bring claims in this arbitration that OTH decided to settle, as the settlement clearly resolved the dispute that the Claimant has brought before this Tribunal.153

The Respondent argues that: "[f]or the reasons discussed in Orascom, because the alleged settlement agreement herein also is allegedly binding, the Claimants can no longer bring any investment treaty claims pursuant to the underlying Contract or project, because the settlement extinguished such claims. Thus, even if the Claimants had made investments in terms of the Contract or project, those claims have ceased to exist and are inadmissible."154

c. Azpetrol International Holdings B.V., et al. v. Republic of Azerbaijan.155 The Respondent argues, in reliance on Azpetrol, that "[b]ecause the parties concluded a binding settlement agreement through the exchange of emails, the tribunal held that there was no jurisdiction to hear the claim under the ECT and the ICSID Convention. Id. at ¶ 2. The tribunal reasoned that there was no 'legal dispute' between the claimants and the respondent as required by Article 25(1) of the ICSID Convention or 'dispute' as required by Article 26(1) of the ECT and, consequently, no jurisdiction to hear the claim. Id. at ¶ 105."156

180.
The Respondent argues that the second reason that the Claimants do not have an "investment" within the meaning of Article 25 of the ICSID Convention is because the Claimants' alleged investment does not meet the requirements of the Salini case and other similar tests.157 The Respondent argues that merely fitting within one of the categories of investments in Article 1(1) of the BIT is insufficient for an asset to qualify as a protected "investment" for the purposes of Article 25 of the ICSID Convention.158
181.
The Respondent argues that the Claimants' alleged investment falls short of the Salini criteria in the following respects:

a. Contribution of money or other assets of economic value. The Respondent argues that the Claimants have not contributed anything. On the contrary, they are claiming approximately 8.2 million euros.159

b. Duration. The Respondent argues that, as nothing has been contributed, there has also not been a contribution with a certain duration.160

c. Risk. The Respondent argues that the type of risk associated with the alleged settlement agreement was purely commercial, citing: Poštová Banka, a.s., ISTROKAPITÁL SE v. The Hellenic Republic ("A commercial risk covers […] the risk that one of the parties might default on its obligations, which risk exists in any economic relationship");161 and Romak S.A. v. The Republic of Uzbekistan, ("All economic activity entails a certain degree of risk. As such, all contracts – including contracts that do not constitute an investment – carry the risk of nonperformance. However, this kind of risk is pure commercial, counterparty risk, or, otherwise stated, the risk of doing business generally").162 The Respondent asserts that the risk of possible non-payment of a settlement agreement is an ordinary commercial risk, not an investment risk.163

d. Contribution to Mozambique's economic development. The Respondent argues that the settlement agreement did not require the Claimants to perform any functions or construct any projects in Mozambique.164

2. The Claimants' Response

182.
In response to the Respondent's argument that settlement agreements cannot be "investments," the Claimants state that it is not their "position that the settlement agreement—in and of itself—constitutes a separate investment in Mozambique. It is connected to the Lot 3 Project under the Contract."165 The settlement agreement is an "investment" according to the Claimants, because it is connected to and arises from the Lot 3 Project, making it both an "associated activity" under Article 1 of the Protocol of the BIT and also "any performance having economic value connected with an investment" under Article 1(1)(c) of the BIT.166
183.
The Claimants further argue that their claim is broader than "just non-payment under the settlement agreement; it also encompasses more than the conduct of ANE: it involves the unfair treatment by the highest authorities in the Government against CMC; it engages the international responsibility of Mozambique under the Treaty."167
184.
In response to the Respondent's argument that the settlement agreement, if actually concluded, would have extinguished any claims based on the underlying Lot 3 Contract, the Claimants argue that the settlement agreement did not extinguish the underlying claims, because Mozambique failed to honor and repudiated that agreement. Therefore, the Orascom v. Algeria and Azpetrol v. Azerbaijan awards cited by the Respondent are inapposite.168
185.
In response to the Respondent's argument that the Claimants do not have an "investment" within the meaning of Article 25 of the ICSID Convention, because the Claimants' alleged investment does not meet the requirements of Salini and other related tests, the Claimants argue that the Salini criteria do not apply and, alternatively, that they meet the Salini criteria. The Claimants further point out that the Respondent's argument in this regard is only focused on the settlement agreement and that it does not dispute that the Lot 3 Project is an investment within the meaning of Article 25 of the ICSID Convention.169 It is for the Claimants to categorize their claim, they say, and that claim extends far beyond the issue of mere non-payment by Mozambique.170
186.
The Claimants point out that the Salini criteria have been criticized in Malaysian Historical Salvors v Malaysia and Inmaris Perestroika Sailing Maritime Services v Ukraine.171 They also argue that the Salini criteria were derived from the first edition of Professor Schreuer's Commentary on the ICSID Convention, and that the second edition states:172

The development in practice from a descriptive list of typical features towards a set of mandatory legal requirements is unfortunate. The First Edition of the Commentary cannot serve as authority for this development.

[…]

To the extent that the "Salini test" is applied to determine the existence of an investment, its criteria should not be seen as distinct jurisdictional requirements each of which must be met separately. In fact, tribunals have pointed out repeatedly that the criteria that they applied were interrelated and should be looked at not in isolation but in conjunction.173

187.
Alternatively, the Claimants argue that they meet the Salini criteria in the following respects:

a. Contribution of money or other assets of economic value. The Claimants argue that they made contributions during the Lot 3 Project in the form of know-how, money, equipment and qualified personnel.174

b. Duration. The Claimants point out that the Lot 3 Contract had a duration of 2 years and that the project was concluded in 2007.175

c. Risk. The Claimants argue that an element of risk is inherent in construction projects like the Lot 3 Project, such as delays resulting from weather conditions, the expropriation of land, and customs barriers of imported materials.176

d. Contribution to Mozambique's economic development. The Claimants argue that a contribution to the economy and development of the host country is inherent in public infrastructure works such as the Lot 3 Project. Because it substantially improving the Rio Ligonha road, the Lot 3 Project had a positive impact on the economy of Mozambique by, inter alia, improving the efficient transport of goods and persons.177

188.
As to the issue of whether CMC Maputo and CMC Africa Austral each qualify as a "National of another Contracting State" within the meaning of Article 25(2)(b) of the ICSID Convention (which the Respondent does not dispute), the Claimants argue that both companies are owned, managed, and controlled by the Italian company CMC Ravenna.178 Furthermore, the General Director of CMC Africa Austral is an Italian national who was seconded from CMC Ravenna and the board of CMC Africa Austral is comprised of Italian nationals who are also directors of CMC Ravenna. CMC Maputo does not have a separate board, but instead reports directly to the board of CMC Ravenna, and CMC Maputo and CMC Africa Austral share the same head office in Maputo.179

3. The Tribunal's Decision

a. The Claimants had an "investment" within the meaning of the ICSID Convention

189.
In order for the Tribunal to accept jurisdiction over the Claimants' claim, the burden is on the Claimants to satisfy the Tribunal, not only that each of them is an "investor" as determined in the preceding section of this Award, but also that they made an "investment," both (a) within the meaning given to those terms in the BIT, which defines the framework of the consent given by the Respondent; and also (b) within the meaning given to those terms in the ICSID Convention.
190.
Article 25 of the ICSID Convention makes the facilities of ICSID available only to resolve disputes arising out of a protected investment. As instructed by Article 31 of the VCLT, Article 25 is to be interpreted according to the "ordinary meaning" of the terms "in their context and in the light of its object and purpose." Article 25(1) provides:

The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State […] and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.

The drafters of the ICSID Convention left the term "investment" undefined. One widely (but not universally) applied analysis of the term "investment" is derived from Salini v. Morocco, which identified a series of elements that constitute an investment:

The doctrine generally considers that investment infers: contributions, a certain duration of performance of the contract and a participation in the risks of the transaction […] In reading the Convention's preamble, one may add the contribution to the economic development of the host State of the investment as an additional condition.

In reality, these various elements may be interdependent. Thus, the risks of the transaction may depend on the contributions and the duration of performance of the contract. As a result, these various criteria should be assessed globally even if, for the sake of reasoning, the Tribunal considers them individually here.180

191.
The Joy Mining tribunal emphasized the pre-eminence of the ICSID Convention over the terms of the BIT in jurisdictional terms:

The parties to a dispute cannot by contract or treaty define as investment, for the purpose of ICSID jurisdiction, something which does not satisfy the objective requirements of Article 25 of the Convention.181

This so-called "double-keyhole" test, explicitly endorsed by other ICSID tribunals, requires a claimant to meet the requirements of both the Convention and the BIT in order for the Tribunal to have jurisdiction over its claim.

192.
However, the approach taken by the tribunal in Joy Mining has not been universally accepted. Some tribunals have ruled that, as the ICSID Convention did not attempt to define "investment," this task is left to the parties to delineate in their instruments of consent, including treaties. The ad hoc annulment committee in Malaysia Historical Salvors expounded the wisdom of looking primarily to the text of the relevant BIT:

It is those bilateral and multilateral treaties which today are the engine of ICSID's effective jurisdiction. To ignore or depreciate the importance of the jurisdiction they bestow upon ICSID, and rather to embroider upon questionable interpretations of the term "investment" as found in Article 25(1) of the Convention, risks crippling the institution.182

193.
A middle ground between these two approaches has developed. While many tribunals have felt that "[i]t would go too far," in the words of the tribunal in SGS v. Paraguay, "to suggest that any definition of investment agreed by states in a BIT […] must constitute an 'investment' for purposes of Article 25(1),"183 many tribunals have adopted the approach of defining the relevant question as whether the definition of "investment" in the BIT "exceeds what is permissible" under the ICSID Convention.184
194.
In the opinion of the Tribunal, the definition of "investment" in the BIT does not exceed what is permissible under the ICSID Convention. The Claimants' claims "for sums of money or any performance having an economic value" within the meaning of Article 1(c) of the BIT arise directly out of their investment in the Lot 3 Project. In the view of the Tribunal, that is sufficient to bring the Claimants' claims within the jurisdiction of the Tribunal under both the BIT and the ICSID Convention.
195.
Moreover, to the extent to which it may be necessary or useful to apply the Salini test, that contribution clearly exposed the Claimants, as foreign investors, to risks posed by the sovereign power and otherwise as described in Salini itself:

With regard to the risks incurred by the Italian companies, these flow from the nature of the contract at issue. The Claimants, in their reply memorial on jurisdiction, gave an exhaustive list of the risks taken in the performance of the said contract. Notably, among others, the risk associated with the prerogatives of the Owner permitting him to prematurely put an end to the contract, to impose variations within certain limits without changing the manner of fixing prices; the risk consisting of the potential increase in the cost of labour in case of modification of Moroccan law; any accident or damage caused to property during the performance of the works; those risks relating to problems of coordination possibly arising from the simultaneous performance of other projects; any unforeseeable incident that could not be considered as force majeure and which, therefore, would not give rise to a right to compensation; and finally those risks related to the absence of any compensation in case of increase or decrease in volume of the work load not exceeding 20% of the total contract price. It does not matter in this respect that these risks were freely taken. It also does not matter that the remuneration of the Contractor was not linked to the exploitation of the completed work. A construction that stretches out over many years, for which the total cost cannot be established with certainty in advance, creates an obvious risk for the Contractor.185

196.
In summary, the Tribunal has no difficulty in concluding that the Claimants made an investment in Mozambique that qualified for protection under Article 25(1) of the ICSID Convention as well as under Article 1(1) of the BIT.

b. The Claimants were "Nationals of another Contracting State" within the meaning of the ICSID Convention

197.
All of the Claimants qualify as a "National of another Contracting State" within the meaning of Article 25(2)(b) of the ICSID Convention.
198.
Article 25(2)(b) of the ICSID Convention provides that the definition of "National of another Contracting State" includes:

[A]ny juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention. (emphasis added)

199.
As noted above (at para. 166), Italy and Mozambique agreed in Article 1(2) of the BIT that the term "investor" would include "any natural or legal person of a Contracting Party investing in the territory of the other Contracting Party as well as the foreign subsidiaries, affiliates and branches controlled by the above natural and legal persons."
200.
It is uncontested that CMC Ravenna is a "juridical person which had the nationality of a Contracting State other than the State party to the dispute," namely Italy. It is equally uncontested that CMC Africa Austral is a Mozambique subsidiary of CMC Ravenna, and that CMC Maputo is a branch of CMC Ravenna entirely under its control.
201.
The Tribunal accordingly concludes that CMC Africa Austral (as a subsidiary of CMC Ravenna) is a juridical person under foreign control (within the meaning of the ICSID Convention) and that it and CMC Maputo (as a branch of CMC Ravenna) are both entities that Mozambique and Italy agreed in Article 2 of the BIT should be treated as nationals of Italy. That condition was accepted by the Claimants when they asserted a claim under the BIT. All three Claimants are accordingly Italian investors in Mozambique within the meaning of both the ICSID Convention and the BIT.

C. Have the Claimants made treaty claims or purely contractual claims?

1. The Respondent's Objections

202.
The Respondent argues that the Claimants' claim is purely contractual, and that purely contractual claims are outside ICSID jurisdiction.186 It states that "at the core of this dispute is the purely contractual dispute of whether the Claimants (because the Contract was for unitary pricing), the EDF (as admitted by Mr. Guerra), or the Respondent must incur the cost of the alleged additional works."187
203.
The Respondent relies on the following authorities for the proposition that there can be no ICSID jurisdiction over contractual claims:

a. Toto Costruzioni Generali S.P.A. v. Republic of Lebanon ("Toto Costruzioni Generali").188 In this arbitration, the Respondent says, Toto "request[ed] the Tribunal to award US$3,834,454.78 for damages suffered for extra works and charges due to wrong instructions, misleading information and erroneous design."189 The tribunal held that: "Toto's claims appear to relate to the standard duties in a construction contract, i.e., an alleged failure by an employer to comply with his obligations towards the contractor. It does not involve the use of sovereign authority or 'puissance publique.' […] Consequently, such a claim does not fall within the scope of Article 2, paragraph 3 of the Treaty."190

b. Abaclat and Others. v. Argentine Republic ("Abaclat v. Argentina"),191 in which the tribunal stated:

[A]n arbitral tribunal has no jurisdiction where the claim at stake is a pure contract claim. […] A claim is to be considered a pure contract claim where the Host State, party to a specific contract, breaches obligations arising by the sole virtue of such contract. This is not the case where the equilibrium of the contract and the provisions contained therein are unilaterally altered by a sovereign act of the Host State. This applies where the circumstances and/or the behaviour of the Host State appear to derive from its exercise of sovereign State power. Whilst the exercise of such power may have an impact on the contract and its equilibrium, its origin and nature are totally foreign to the contract.192

c. Bureau Veritas, Inspection, Valuation, Assessment and Control BIVAC BV v. Republic of Paraguay.193 The Respondent asserts that this case is similar to the present dispute in that it concerned the nonpayment of an allegedly admitted debt. According to the Respondent, the Bureau Veritas tribunal "conclude[d] that the conduct that lies at the heart of the dispute, and which has been repeated over time […] is the refusal on the part of Paraguay to pay an outstanding debt that is owed under the Contract."194 The Bureau Veritas tribunal also observed that: "It is important to recognize that beyond the refusal to pay there are no other acts that the Claimant really seeks to remedy. Whilst Paraguay has not paid a contractual debt that it has recognized […] as being owed, the Claimant has not argued that it has interfered in any other way with the Claimant's rights under the Contract."195 The Bureau Veritas tribunal went on to say that:

There is nothing inherent in the fact that such conduct is undertaken by a State in its capacity as a contracting party that might as such endow them with the quality of sovereign acts such as to catalyse responsibility under an international treaty obligation relating to fair and equitable treatment. There has been no reliance by Paraguay on the powers of a public authority that might not - by analogous means - also be available to a private person or corporation. Attempts to mislead, distort, conceal or otherwise confuse a contractual partner are strategies open to and used by both public and private persons.196

In the Tribunal's view the facts show 'mere breach by a State of a contract with an alien (whose proper law is not international law)' and that accordingly no violation of […] the BIT arises.197

The Respondent asserts that this case is similar to Bureau Veritas, in that the Respondent did not use its sovereign authority to alter the contractual relationship unilaterally. The Respondent acted as a private party and acted upon the determination of an independent consulting firm when it decided that there were no grounds for additional payments to the Claimants.198

d. Tulip Real Estate B.V. v. Republic of Turkey,199 where the tribunal said that "the determination of whether a claim arises under a BIT involves an inquiry into the 'essential basis' or 'normative source' of that particular claim. In order to amount to a treaty claim, the conduct said to amount to a BIT violation must be capable of characterisation as sovereign conduct, involving the invocation of puissance publique. This principle has been affirmed by numerous previous investment tribunals."200

204.
The Respondent argues that "'[w]hy' the Respondent did not pay under the alleged settlement agreement is not an 'act' – instead, it is the 'motive' for the act of nonpayment. However, the motive must be distinguished from the act or behavior of the State."201
205.
In response to the Claimants' argument that puissance publique is present here as a result of the conduct of Mozambican officials in connection with the settlement negotiations, the Respondent argues that the "Claimants fail to identify what these sovereign acts are and what specific conduct of Respondent's government officials amount to a breach of the BIT."202
206.
In response to the Claimants' reliance on the decision of the Vivendi annulment committee to argue that their claims are investment treaty claims regardless of whether they also amount to contractual claims,203 the Respondent argues that Vivendi is distinguishable, because, in that case, the tribunal identified clear international law claims arising out of a series of allegations as to the conduct of the state. Since the state's conduct allegedly involved measures taken in bad faith, the claims were not mere breach of contract claims. The Claimants in this case, Respondent says, did not point to sovereign acts that amount to violations of the BIT.204 Similarly, the Respondent argues that the SGS v. Paraguay arbitration is distinguishable, because unlike this case, that arbitration involved breaches of a treaty.205
207.
In response to the Claimants' argument that this dispute cannot be purely contractual, because not all parties to this dispute are also parties to either the settlement agreement or the Lot 3 Contract, the Respondent argues:

Claimants have asserted that each of them has standing to bring the instant claims that seek to enforce the alleged payment obligations under the alleged settlement agreement. They cannot now argue that they do not have privity with the settlement agreement. And second, the Claimants assert that the case does not deal with the same matters because the Claimants' claims do not involve issues of performance under the Contract. […] That argument is also incorrect. The claims overlap because the gravamen of the BIT claims and contract claims is exactly the same—the alleged nonpayment under the alleged settlement agreement.206

208.
In response to the Claimants' argument that this dispute cannot have been extinguished by the settlement agreement because the Respondent failed to comply with that agreement, the Respondent points out that, if there was a settlement agreement, then it would have settled the underlying dispute, even if the Respondent had not complied with it. The Claimants would merely have a breach of contract claim.207

2. The Claimants' Response

209.
The Claimants argue that none of their claims is purely contractual, but that each is a treaty claim which requires the Tribunal to consider and decide contractual issues.208 The Claimants argue that Mozambique has:

• breached the just and fair treatment standard under Article 2(3) of the Treaty;

• violated its obligation under Article 2(3) of the Treaty not to impair investments by unjustified or discretionary [sic] measures;

• breached its obligation under Article 2(4) of the Treaty by failing to observe in good faith specific undertakings entered into with the Claimants; and

• failed to afford the Claimants no less favourable treatment than afforded to investors and investments of third countries as required by the Most Favoured Nation clause in Article 3 of the Treaty.209

210.
The Claimants assert that these claims fall within the scope of the BIT and are not limited to the mere issue of non-payment. They argue that "the violations asserted entail inter alia the inconsistent, contradictory; arbitrary; lack of transparency and bad faith; unjustified delays; coercion; a wilful disregard of due process; and unjustified conduct."210
211.
The Claimants concede that a "mere breach of contract—without more—is not sufficient to trigger the jurisdiction of an international tribunal. The conduct of the host State in breaching the contract must amount to a violation of a Treaty provision, or in relation to a mere breach of contract, there must be an element of puissance publique."211 The Claimants accepted that they "must show that the Respondent's conduct was unjust or unfair in breach of Article 2(3) or 2(4) of the Treaty. A breach of either provision is not subject to showing a breach of contract and something more (according to the Respondent something 'beyond the refusal to pay'). However, breaches of contract and even the mere refusal to pay may well constitute a breach of the Treaty."212
212.
The Claimants rely on the decision of the Vivendi annulment committee, which held:

95. […] A state may breach a treaty without breaching a contract, and vice versa, and this is certainly true of these provisions of the BIT. The point is made clear in Article 3 of the ILC Articles, which is entitled 'Characterization of an act of a State as internationally wrongful':

The characterization of an act of a State as internationally wrongful is governed by international law. Such characterization is not affected by the characterization of the same act as lawful by internal law.

96. In accordance with this general principle (which is undoubtedly declaratory of general international law), 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, in other words, the law of Tucumán. […]213

213.
For a definition of a "purely contractual" claim, the Claimants rely on the same passage from Abaclat v. Argentina quoted by the Respondent.214
214.
The Claimants also rely on the award in SGS v. Paraguay :

Of course, it is apparent that several of Claimants' claims under the Treaty will stem from Respondent's alleged failure to pay for SGS's services under the Contract. That is an action that may (or may not) also constitute a contractual breach, but we are not called upon to decide that question as such. We are called upon to decide whether Respondent's actions, such as its alleged non-payment, breach the aforementioned Articles of the Treaty. In doing so, we are in concert with the well-established jurisprudence regarding the distinction between contract claims and treaty claims.215

215.
From these authorities, the Claimants distill the following three categories of events over which this Tribunal could exercise jurisdiction:

• An act/omission of the host State which in and of itself amounts to a violation of the Treaty.

• An act/omission of the host State which arises out of a contract, which amounts to a breach of contract, and in addition amounts to a violation of the Treaty.

• An act/omission of the host State which is purely a breach of contract, but in breaching the contract the host State has unilaterally altered the equilibrium of the contract by way of a sovereign act (puissance publique).216

216.
The Claimants contend that all their claims fall within the scope of these three categories. As an example, they say that "Mozambique's failure to comply with its undertaking to CMC—which became legally binding on 2 November 2009—amounts in and of itself to a breach of Article 2(4) of the BIT. While this conduct may amount to a breach of contract, in the Claimants' view, it is also a violation of the Treaty. In addition, the Claimants assert that the Respondent has, by the conduct of its officials and government entities, unilaterally altered the equilibrium of the contract by way of sovereign acts."217
217.
Alternatively, the Claimants argue that this cannot be a purely contractual dispute arising out of either the settlement agreement or the Lot 3 Contract, because not all of the parties to this dispute are named parties to those agreements. The Claimants cite the award in Aguas del Tunari v. Bolivia, where the tribunal held that "in order for the separate document raised by the Respondent to be in conflict with this Tribunal's exercise of jurisdiction, that document must both deal with the same matters and parties and contain mandatory conflicting obligations." The Claimants further assert that the fact that their claim relies on the conduct of several parties that are not signatory parties to the contract, such as the Prime Minister and the Minister of Public Works, clearly shows that their claim has extra-contractual elements to it.218
218.
The Claimants disagree that this case is similar to the Bureau Veritas v. Paraguay arbitration, arguing that the tribunal in that case did exercise jurisdiction over a purely contractual claim at an early stage of the proceedings. That tribunal only found that Paraguay's failure to pay the investor was merely a breach of contract claim without the exercise of puissance publique by the host state after written and oral submissions on the merits were made. The Claimants state that the Bureau Veritas tribunal found that Paraguay's decision to discontinue a contract, which was the only basis for the investor's claim, "was not a repudiation of any rights under the [c]ontract."219 The Claimants argue that the Bureau Veritas arbitration is distinguishable because, "there was no issue of contradictory, non-transparent, bad faith and inconsistent conduct by the host State."220

3. The Tribunal's Decision

219.
The Tribunal agrees with the Respondent that the Tribunal's jurisdiction, which derives from the BIT, does not extend to purely contractual disputes. Article 9 of the BIT provides for arbitration of disputes "which may arise between either Contracting Party and the investors of the other Contracting Party on investments." The question presented by this objection is whether the claims asserted give rise to such a dispute.
220.
If, on the other hand, as the Claimants argue, the Claimants' claims are for breaches of the BIT arising out of the Claimants' investment in Mozambique, this Tribunal has jurisdiction to hear them. The Bayindir tribunal observed that "treaty claims are juridically distinct from claims for breach of contract, even where they arise out of the same facts," and "when the investor has a right under both the contract and the treaty, it has a self-standing right to pursue the remedy accorded by the treaty."221
221.
The Claimants have asserted multiple claims under the BIT. The Claimants assert claims for denial of fair and just treatment, for unjustified and discriminatory measures, for failure to observe specific undertakings in good faith, and for treatment of their investment that is less favorable than that afforded by the Respondent to investments of nationals of third countries.222 Whatever merit each of those claims may have, each is stated as a claim arising under the BIT, not under the settlement agreement or any other contract.
222.
The Tribunal finds that the Claimants' claims all concern disputes "which may arise between either Contracting Party and the investors of the other Contracting Party on investments."223

D. Cotonou Convention Arbitration

223.
Mozambique and Italy are both parties to the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States, of the one part, and the European Community and its Member States, of the other part, commonly known as the Cotonou Convention.224 The Cotonou Convention was signed in Cotonou, Benin on 24 June 2000 as the successor treaty to the earlier Fourth Lomé Convention, and entered into force on 1 April 2003.225 It was amended in 2005 and 2010.226 It is not disputed that the Cotonou Convention, as revised, is currently in force.227

1. The Respondent's Objections

224.
The Respondent argues that the dispute resolution clause in the Lot 3 Contract, described below, requires that any dispute between the parties to that contract that is submitted to international arbitration be conducted pursuant to the arbitration rules referenced in the Cotonou Convention. Under the Cotonou Convention, according to the Respondent, both treaty claims and pure contract claims are arbitrable, but the use of other arbitration rules is excluded. According to the Respondent, the present dispute must therefore be arbitrated pursuant to the rules specified in the Cotonou Convention, to the exclusion of arbitration under the ICSID Convention and the ICSID Arbitration Rules.228
225.
The Respondent also argues that the Cotonou Convention itself requires that the present dispute be submitted to arbitration under its rules. The Respondent relies on Article 30 of Annex IV of the Cotonou Convention, which states:

Any dispute arising between the authorities of an ACP State and a contractor, supplier or provider of services during the performance of a contract financed by the Fund shall:

a) in the case of a national contract, be settled in accordance with the national legislation of the ACP State concerned; and

b) in the case of a transnational contract be settled either:

i) if the Parties to the contract so agree, in accordance with the national legislation of the ACP State concerned or its established international practices; or

ii) by arbitration in accordance with the procedural rules which will be adopted by decision of the Council of Ministers at the first meeting following the signing of this Agreement, upon the recommendation of the ACP-EC Development Finance Cooperation Committee.229

226.
The Respondent asserts furthermore that Article 91 of the Original Cotonou Convention explicitly provides that the Cotonou Convention supersedes the BIT.230 Article 91 states:

No treaty, convention, agreement or arrangement of any kind between one or more Member States of the Community and one or more ACP States may impede the implementation of this Agreement.231

227.
The resolution of disputes specifically relating to the Lot 3 Contract is governed by Article 68 of the General Conditions. Article 68.1 of the General Conditions states:

The Contracting Authority and the Contractor shall make every effort to amicably settle disputes relating to the Contract which may arise between them, or between the Supervisor and the Contractor.232

228.
The Respondent argues that the Claimants' claims "relate to" the Lot 3 Contract within the meaning of Article 68.1 of the General Conditions, because the Claimants are effectively seeking approximately 8.2 million Euros as compensation for additional work that they claim they were required to perform on the Lot 3 Project.233
229.
The terms of Article 30 of Annex IV of the Cotonou Convention concerning the resolution of disputes between States and contractors working on projects governed by the Cotonou Convention are closely tracked by Article 68.5 of the General Conditions, which similarly provides for two alternative methods of resolving disputes relating to the Lot 3 Contract that cannot be amicably settled. One method applies to "national contracts" (68.5(a)) and the other to "transnational contracts" (68.5(b)), as follows:

68.5 In the absence of an amicable settlement or the settlement by conciliation within the maximum Time Limit specified, the dispute shall:

a) in the case of a national contract, be settled in accordance with the national legislation of the State of the Contracting Authority; and

b) in the case of a transnational Contract, be settled, either:

i) if the parties to the Contract so agree, in accordance with the national legislation of the State of the Contracting Authority or its established international practices; or

ii) by arbitration in accordance with the procedural rules adopted in accordance with the Convention.234

230.
The procedural rules adopted in accordance with the Cotonou Convention are the Procedural Rules on Conciliation and Arbitration of contracts financed by the European Development Fund as adopted by Decision No L382/95 on 29 March 1990 (the "Cotonou Arbitration Rules").235
231.
The terms "national" and "transnational" are not defined in the Cotonou Convention or in the General Conditions. The Respondent argues that the Lot 3 Contract is a transnational contract, on the basis that "transnational" should be read to mean the same thing as "international."236 The Respondent further asserts that the Claimants have acknowledged that the Lot 3 Contract is an international contract.237
232.
Even if the Claimants were to allege that the Lot 3 Contract were a "national contract," the Respondent argues, the Tribunal would not have jurisdiction, because disputes about "national contracts" must be settled "in accordance with the national legislation of the State of the Contracting Authority."238 In any event, the Respondent contends that the Claimants cannot argue that the Lot 3 Contract is a "national" contract, because they brought a claim under a BIT which requires that investors be foreign entities. The Respondent also points to the Claimants' concessions that the Lot 3 Contract was awarded after an "international tender" and that equipment that was used during the Lot 3 Project came from Europe.239
233.
The Respondent argues that interpreting "transnational," as used in Article 68.5 of the General Conditions, to mean "international" would be consistent with Article 28(2)(c) of the Revised Cotonou Convention, which states that EU cooperation shall "promote the management of sustainable development challenges with a transnational dimension."240
234.
Since the Lot 3 Contract was a transnational contract, the Respondent argues, the only dispute resolution option is Cotonou Convention arbitration as provided in Section 68.5(b)(ii) of the General Conditions. This is because the only alternative – dispute resolution "in accordance with the national legislation of the State of the Contracting Authority or its established international practices" under Article 68.5(b)(i) – requires the agreement of the Parties, and there was no such agreement.241
235.
In support of its argument for applying the Cotonou Arbitration Rules, the Respondent relies on the 2008 EU General Court decision in Centro di educazione sanitaria e tecnologie appropriate sanitarie (Cestas) v. Commission of the European Communities. In that case, the General Court stated that "contracts concluded by the applicant within the framework of projects financed by EDF funds are covered, in case of dispute, by the procedure laid down in [the Cotonou Arbitration Rules] […]"242
236.
Sending the Parties to arbitration pursuant to the Cotonou Arbitration Rules would be consistent with the BIT, the Respondent argues, because Article 9(3)(d) of the BIT permits a dispute under the BIT to be submitted to "other international arbitration arrangements, mechanisms, or instruments," as an alternative to the ICSID Rules.243 While Article 9 of the BIT states that investors may elect among those alternatives "at their choice,"244 the Respondent contends that the Claimants gave up the right to elect any other dispute resolution mechanism under Article 9(3) of the BIT when they agreed in the Lot 3 Contract to arbitrate under the Cotonou Arbitration Rules.245 The Respondent bases this argument in large part on Article 9(2) of the BIT, which provides:

In case an investor or entity of one of the Contracting Parties have stipulated an investment agreement in accordance with the relevant applicable laws in force, the procedure foreseen in such investment agreements shall apply.246

237.
The Respondent contends that the Lot 3 Contract is such an investment agreement. Article 68 of the General Conditions is not a mere "forum selection" clause, the Respondent argues, because it provides that disputes arising out of the Lot 3 Contract are within the exclusive and compulsory jurisdiction of a tribunal constituted pursuant to the Cotonou Convention Arbitration Rules.247 In addition, the Respondent argues that Article 68 is not a mere forum selection clause, because "recourse to Cotonou Convention arbitration has been mandated by treaty, and it is acknowledged in the parties' Contract. Article 30 of [Annex IV of] the Cotonou Convention requires that disputes be settled under its ADR scheme."248
238.
The Respondent also points out that Article 68 of the General Conditions, unlike an ordinary forum selection clause, does not require litigation before national or municipal courts.249 This distinction differentiates this case, in the Respondent's view, from Salini v. Jordan, in which a BIT provision similar to Article 9(2) of the BIT was at issue. The Respondent argues that Salini is inapposite because, unlike this case, it concerned what amounted to a "local" forum selection clause requiring that disputes be resolved by a national court.250
239.
The Respondent further argues that the Claimants waived any right they may have had to ICSID arbitration by agreeing to the terms of the Lot 3 Contract. The Respondent cites the Decision on Jurisdiction in Aguas del Tunari v. Bolivia, which found that "a clear waiver of ICSID jurisdiction" would be effective.251 In the Respondent's view, "[a]n obligation deriving from a formal requirement imposed by an international treaty is enough to constitute a waiver by an investor of its rights to invoke ICSID jurisdiction."252
240.
The Respondent points out that a finding that the Claimants waived ICSID jurisdiction would not leave them without a forum: "the Cotonou Convention and the Arbitration Rules promulgated under it are broad enough to encompass the treaty claims that the Claimants purport to assert under the Italy-MZ BIT."253
241.
The Respondent disagrees with the Claimants that the present dispute arises under the settlement agreement rather than the Lot 3 Contract. The Respondent argues that, "[e]ven if the settlement agreement superseded the Contract, the international arbitration clause in the Contract survives and remains part of the settlement agreement, because arbitration agreements are independent and severable under accepted international law principles."254 The Respondent cites Duke Energy International Peru Investments No. 1, Ltd. v. Republic of Peru for the proposition that "[t]he separability of an arbitration agreement from the contract of which it forms part is a general principle of international arbitration law today."255
242.
In response to the Claimants' argument that the Respondent failed to assert that the doctrine of separability exists under Mozambican law, the Respondent cites to the witness statement of Ms. Muenda and to various arbitral awards in support of its position that arbitral agreements are separable as a matter of both international and Mozambican law. The Respondent maintains that "any dispute under a settlement agreement must be resolved under the alternative dispute settlement mechanism of the Contract by virtue of incorporation of the arbitration clause."256
243.
The Respondent argues that Italy and Mozambique agreed that investors must arbitrate pursuant to the Arbitration Rules of the Cotonou Convention when the contract is financed by the EDF.257 Article 30 of Annex IV of the Original Cotonou Convention states that it applies to "any dispute arising between the authorities of an ACP State and a contractor, supplier or provider of services during the performance of a contract financed by the Fund [EDF],"258 and that those disputes "shall" be settled pursuant to the Cotonou Convention dispute resolution mechanism.259 The Respondent argues that all these requirements are met here.260
244.
The Respondent bases two arguments on Article 30 of Annex IV of the Cotonou Convention. The first is that the dispute resolution provision in the Cotonou Convention applies to this dispute. The second is that the Cotonou Convention supersedes and precludes application of the BIT. Because of the similarity between Article 30 of the Cotonou Convention and Article 68 of the General Conditions, most arguments concerning the scope of the arbitration provision in the Lot 3 Contract apply mutatis mutandis to the arbitration provision in the Cotonou Convention.
245.
The Respondent contends that this dispute arose "during the performance" of the Lot 3 Contract, as that phrase is used in Article 30 of Annex IV of the Cotonou Convention, because the 30 October 2009 settlement offer specifies that the proposed payment "cover[s] all the additional costs and financial charges incurred during the execution of the Construction Contract."261 In addition, the Respondent continues, this dispute arose during the performance of the Lot 3 Project, because it arose while the Parties were negotiating payment and, in the context of construction contracts, "payment" is part of "performance."262
246.
The Respondent further argues that the Claimants have failed to cite to a provision in the Lot 3 Contract that limits the scope of the arbitration clause in the Cotonou Convention to disputes arising during the performance of that Contract. Also, nothing in the Arbitration Rules of the Cotonou Convention limits its scope to disputes arising during performance. Instead, Article 1 of the Arbitration Rules refers to disputes "relating to a contract." The Respondent asserts that this dispute "relates" to the Lot 3 Contract, because the alleged settlement agreement relates back to the Lot 3 Contract.263
247.
In response to the Claimants' argument that this dispute does not arise out of a contract that was financed by the EDF, because the settlement agreement was to be paid by Mozambique, the Respondent argues that the dispute ultimately arises out of the Lot 3 Contract, which is clearly "financed" by the EDF.264 In addition, the Respondent argues that the Claimants have conceded that the EDF would have paid the settlement agreement. It points out that the Claimants' CFO in Mozambique, Mr. Guerra, testified that the EDF is responsible for invoices whereas Mozambique is responsible for taxes.265
248.
In response to the Claimants' argument that the Cotonou Convention does not supersede the BIT, because the Cotonou Convention is not a "successive treat[y] relating to the same subject-matter" for the purposes of Article 30 of the Vienna Convention,266 the Respondent argues that the Cotonou Convention and the BIT do relate to the same subject-matter, because the Cotonou Convention deals with investor protection, and the investorprotection terms of the Cotonou Convention and the Cotonou Arbitration Rules are broad enough to encompass the Claimants' BIT claims.267
249.
The Respondent further points out that the Cotonou Arbitration Rules were originally adopted pursuant to the Lomé Convention, the predecessor of the Cotonou Convention. In 2002, the ACP-EC Council of Ministers adopted Decision No. 2/2002 to extend the application of the arbitration rules to the Cotonou Convention.268 The Preamble to that decision states, inter alia,

(3) Article 30 of Annex IV of the Cotonou Agreement provides that any dispute arising between the authorities of an ACP State and a contractor, supplier or provider of services during the performance of a transnational contract financed by the European Development Fund shall be settled by arbitration in accordance with the procedural rules to be adopted by decision of the ACP-EC Council of Ministers upon the recommendation of the ACP-EC Development Finance Cooperation Committee.

(4) Provision should be made for applying the general regulations, the general conditions and the rules governing the conciliation and arbitration procedure referred to in the previous recitals to contracts financed from the resources of the ninth European Development Fund and any future Fund.269

250.
Article 4 of Decision No. 2/2002 states:

Disputes regarding contracts financed from the resources of the European Development Fund which, under the general regulations and general conditions governing such contracts, must be settled in accordance with the conciliation and arbitration procedure for the said contracts, shall be settled in accordance with the procedure adopted by Decision No 3/90 of the ACP-EC Council of Ministers of 29 March 1990.270

251.
The Respondent argues that this Tribunal cannot simply become a Cotonou Convention tribunal, because i) ICSID cannot administer a dispute under the Cotonou Arbitration Rules, and ii) this Tribunal does not and cannot comply with the Cotonou Arbitration Rules, which require that all arbitrators be citizens of a member state.271
252.
In response to the Claimants' reliance on Article 12(1) of the BIT, which provides that, where a matter is governed by multiple international agreements, the most favorable provision shall be applied, the Respondent replies that an MFN provision like Article 12(1) "cannot apply to procedural obligations or override the intent of the parties."272 The Respondent cites Salini v. Jordan,273 where, it says, the tribunal held that the MFN clause of the Italy-Jordan BIT did not apply to dispute settlement clauses: "[i]n the event that, as in this case, the dispute is between a foreign investor and an entity of the Jordanian State, the contractual disputes between them must, in accordance with Article 9(2), be settled under the procedure set forth in the investment agreement. The Tribunal has no jurisdiction to entertain them."274

2. The Claimants' Response

253.
The Claimants argue that the Lot 3 Contract merely contains a forum selection clause and that no forum selection clause can deprive an investor of its right under a BIT to resolve a treaty claim.275
254.
The Claimants argue that, even if Article 68 of the General Conditions contained an exclusive jurisdiction clause, that provision would be a forum selection clause which could not prevent them from bringing a BIT claim under the ICSID Convention.276 The Claimants rely on the following authorities for the proposition that forum selection clauses do not preclude ICSID jurisdiction:

a. Lanco International Inc. v. Argentine Republic.277 The Claimants state that in the Lanco case, "the respondent relied on an exclusive jurisdiction clause in a concession agreement and argued that 'as regard any dispute that may arise under that contract recourse must be had to the Federal Contentious-Administrative Tribunals of the City of Buenos Aires, which is the jurisdiction freely agreed upon by the parties after the entry into force of the ARGENTINA-U.S. Treaty.' The tribunal rejected this objection and upheld the investor's right under the BIT to opt for ICSID arbitration."278

b. Garanti Koza v Turkmenistan,279 in which the tribunal stated that "[t]he fact that the Contract provides for resolution of disputes arising under the Contract in the Arbitration Court of Turkmenistan does not deprive this Tribunal of jurisdiction over claims pleaded and arising under the BIT."280

c. Companiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic,281 in which the tribunal stated that, "[w]here 'the fundamental basis of the claim' is a treaty laying down an independent standard by which the conduct of the parties is to be judged, the existence of an exclusive jurisdiction clause in a contract between the claimant and the respondent state or one of its subdivisions cannot operate as a bar to the application of the treaty standard."282

d. Siemens AG v Republic of Argentina.283 The Claimants argue that "[t]he tribunal in Siemens v Argentina agreed with the Vivendi ad-hoc Committee that an exclusive jurisdiction clause in a contract 'does not preclude an international tribunal' from considering the merits of a treaty cause of action."284

e. SGS Société Générale de Surveillance S.A v Paraguay.285 The Claimants assert that "in SGS v. Paraguay, in answer to the question of whether a contractual forum selection clause could divest an ICSID tribunal of jurisdiction over claims for breach of treaty, the tribunal held that the answer was 'undoubtedly negative' and that the contractual clause could be 'readily disposed of.'"286

255.
In response to the Respondent's argument that the Lot 3 Contract is a "transnational" contract within the meaning of Article 68.5 of the General Conditions, the Claimants argue that it is not clear what "national" and "transnational" mean within the context of the Lot 3 Contract and the Cotonou Convention. They point out that the Lot 3 Contract was signed by CMC Africa Austral, a Mozambican corporation, and that "it is difficult to see how the Respondent can conclude so easily that the Contract is 'transnational.'" However, the Claimants do not go so far as to take the position that the contract is "national" within the meaning of the Lot 3 Contract and the Cotonou Convention.287
256.
The Claimants argue that Article 68 of the General Conditions only applies to contractual disputes arising during the performance of a contract that is financed by the EDF. Article 68 of the General Conditions would not apply to this dispute, the Claimants argue, because (a) it is not a contractual dispute, but rather an investment dispute governed by international law; (b) the dispute did not arise out of the performance of the Lot 3 Contract; and (c) the settlement agreement was not financed by the EDF.288

a. Contractual. The Claimants point out that Article 68.1 of the General Conditions provides that Article 68 only applies to "disputes relating to the contract." This contractual dispute settlement mechanism would therefore not be applicable to these BIT claims.289

b. Performance. The Claimants argue that the express terms of the Lot 3 Contract clearly show that disputes only fall under the Cotonou Convention when they arise out of the performance of a contract financed by the EDF. They point to Article 30 of Annex IV of the Revised Cotonou Convention which states "Any dispute arising […] during the performance of as contract financed by the multi-annual financial framework of cooperation under this Agreement."290 The Claimants state that the performance of the Contract was completed in November 2007 and that, by March 2009, the Engineer confirmed that he was working on the issuance of the final certificate. This means that the performance of the Lot 3 contract was completed before the events that gave rise to this dispute occurred, i.e. the 30 November 2009 settlement offer and the non-transparent and arbitrary conduct that crystalized in August 2011.291

c. Financed. The Claimants argue that the settlement does not arise out of works that were financed by the EDF, because the settled claims were for additional works that were to be paid for by Mozambique, not the EDF.292

257.
In response to the Respondent's contention that the arbitration provision survived the contract to become part of the settlement agreement because it is separable, the Claimants argue that that the separability of an arbitration clause is to be decided by domestic law, not international law, and that the Respondent has failed to establish the existence of the principle of separability under Mozambican law.293
258.
In response to the Respondent's argument that the arbitral procedure in the Cotonou Convention applies pursuant to Article 9(2) of the BIT, because the Parties stipulated as much in the Lot 3 Contract, the Claimants argue that "this provision means that merely contractual breaches of contract or good faith technical discussions regarding the scope of contractual obligations are to be settled in conformity with the dispute resolution clause of the 'investment agreement.' But it does not mean that a dispute settlement clause under a contract will affect the jurisdiction of an international tribunal to consider breaches of the Treaty and international law."294 For this proposition, the Claimants rely on Salini v. Jordan, where the tribunal, in applying a BIT provision very similar to Article 9(2) of the Italy-Mozambique BIT, held that "the dispute settlement procedures provided for in the Contract could only cover claims based on breaches of the Contract. Those procedures cannot cover claims based on breaches of the BIT (including breaches of those provisions of the BIT guaranteeing fulfilment of contracts signed with foreign investors)."295
259.
The Claimants respond to the Respondent's assertion that they waived ICSID jurisdiction by pointing out that Article 68 of the General Conditions is a boilerplate provision that does not evidence the "specific intention" to effect a "clear waiver of ICSID jurisdiction" that the award cited by the Respondent requires.296
260.
The Claimants disagree with the Respondent's argument that Article 30 of Annex IV of the Cotonou Convention itself requires that this dispute be arbitrated pursuant to the Cotonou Arbitration Rules. They argue that their claims do not involve the performance of a contract financed by the EDF, because the settlement agreement was entered into two years after the conclusion of the construction works in November 2007.297
261.
The Claimants further argue that the Cotonou Convention allows the Parties to settle disputes "in accordance with the national legislation of the ACP State concerned or its established international practices."298 This includes the arbitration procedures set out in BITs.299 The Claimants assert that the Respondent conceded that "Article 30 provides two choices to the investor and the Contracting State between: (a) if the investor and the Contracting State so agree, by recourse to national legislation, or to the Contracting States' 'established international practices,' which could include the procedures in any existing BITs."300
262.
The Claimants point out that the Cotonou Arbitration Rules provide that an arbitral tribunal is to apply municipal law and require that all domestic administrative procedures be exhausted before a claim is submitted. They take the position that this is further evidence that the Parties could not have agreed to settle BIT claims pursuant to the Cotonou Arbitration Rules.301
263.
The Claimants disagree with the Respondent's reading of the EU General Court decision in Centro di educazione sanitaria e tecnologie appropriate sanitarie (Cestas) v. Commission of the European Communities. They argue that the EU Court does not hold that the Cotonou Convention precludes a non-Cotonou Convention tribunal from exercising jurisdiction and that, in any case, the arbitration procedures in the Cotonou Convention only apply to contractual disputes.302
264.
In response to the Respondent's argument that the Cotonou Convention supersedes the BIT, the Claimants argue that the Cotonou Convention cannot require that BIT claims be resolved pursuant to its arbitration rules, because it is not an investor protection treaty and does not contain substantive investor protections.303 They argue that the BIT is clearly lex specialis in relation to the much broader Cotonou Convention, and that the two treaties do not relate to the same subject matter within the meaning of Article 30 VCLT.304
265.
The Claimants argue that Article 91 of the Cotonou Convention is irrelevant.305 They rely on Article 12 of the BIT to argue that, in case of a treaty conflict, the most favorable dispute settlement provision should apply.306 Article 12 of the BIT states:

If a matter is governed both by this Agreement and by another international agreement to which both Contracting Parties are signatories, or by general international law provisions, the most favourable provisions shall be applied in either Contracting Party to the investors of the other Contracting Party.307

3. The Tribunal's Decision

266.
The determination of whether, as the Respondent contends, the Cotonou Convention operates to cut off the access to ICSID arbitration to which the BIT would otherwise entitle the Claimants requires, first, an analysis at the level of international treaty law on the effects of the interplay among the Cotonou Convention, the ICSID Convention, and the BIT regarding the treaty obligations of the Respondent. It also requires an analysis at the level of municipal contract law on whether and to what extent the rights of the Claimants, who are not parties to any of the foregoing treaties, may be constrained by the terms of those treaties.

a. The Cotonou Convention does not supersede the BIT

267.
The Cotonou Convention was signed on 23 June 2000 and entered into force on 1 April 2003. The BIT was signed on 14 December 1998, and entered into force on 17 November 2003.308 The dates of the two treaties are important because of the rule of treaty construction stated in Article 30 of the VCLT, which provides that, "[a]s between States parties" to "successive treaties relating to the same subject-matter," "the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty."309 In determining which treaty is the earlier and which is the later, commentators generally refer to the date of signature of each treaty.310
268.
The Cotonou Convention would therefore appear to be the later treaty, but the history of the Cotonou Convention leaves room for dispute. The Cotonou Convention was not written on a blank slate, but was the last (and current) version of a series of treaties. As the European Investment Bank explained in a 2003 press release:

Cotonou follows a long tradition of trade and development aid partnerships between Europe and its former dependent countries, now grouped in the ACP group of states, under the Yaoundé and later Lomé Conventions. From 1963 until the beginning of this year when the Lomé IV convention was replaced with the Cotonou Agreement, the EIB has channeled over EUR 9 billion into investment in the ACP countries.311

269.
For present purposes, it is unnecessary to look further back than the Lomé Conventions, the first of which was signed in 1975. It was succeeded by conventions referred to as Lomé II in 1979, Lomé III in 1984, and Lomé IV in 1989.312 Lomé IV expired on 29 February 2000. Shortly before that date, the European Commission submitted to the Council of Ministers a "[p]roposal for a Council Decision regarding the position to be taken by the Community within the ACP-EC Committee of Ambassadors with a view to producing a decision on transitional measures to cover the period between the expiry of the revised fourth ACP-EC Convention [Lomé IV] and the entry into force of the fifth ACP-EC Convention."313 The "fifth ACP-EC Convention" became known as the Cotonou Convention after it was signed at Cotonou, Benin on 23 June 2000.
270.
On the date the Cotonou Convention entered into effect 1 April 2003, the European Commission confirmed the Cotonou Convention's status as a successor to the Lomé Conventions and the measures taken to bridge the gap between the two in a press release that stated:

The successor to the Lomé Conventions, the Cotonou Agreement has been partly implemented on a provisional basis since August 2000. One important dimension – the financial implementation provisions – had to be delayed pending ratification by the fifteen EU Member States. This is now done. The Cotonou philosophy, based on a more effective political dimension and a higher degree of flexibility in the provision of aid in order to reward performance and results, can now be fully implemented.314

271.
Since predecessors of many of the provisions of the Cotonou Convention on which the Respondent relies, such as the provision for arbitrating claims arising out of the performance of contracts for projects financed by the EDF, occur in the predecessor treaties to the Cotonou Convention, which were signed before the BIT was signed, there is room for argument as to which should be considered the later treaty. The Parties did not address that question, however, and the Tribunal does not need to resolve it, because the issue arises only if the BIT and the Cotonou Convention relate to "the same subject-matter" and their provisions are not compatible in that they cannot be applied simultaneously.315 We therefore turn to those two questions.
272.
It appears to the Tribunal that the overlap between the subject matters of the BIT and the Cotonou Convention is very small. The BIT deals entirely with the encouragement and protections offered by Italy and Mozambique to investors and investments from the other country. The Cotonou Convention states that it was concluded between "the European Community, on the one hand," and "the Group of African, Caribbean and Pacific States (ACP), on the other,"316 "in order to promote and expedite the economic, cultural and social development of the ACP States, with a view to contributing to peace and security and to promoting a stable and democratic political environment."317
273.
Both treaties thus seem to include economic development among their objectives, but the scale and scope of the two is significantly different. The BIT consists of 15 articles on nine pages, plus a three-page protocol. The Revised Cotonou Convention consists of 100 articles, on 106 pages, plus seven annexes on an additional 67 pages and three protocols on an additional 12 pages. The table of contents of the Cotonou Convention lists provisions dealing with the political dimension, institutional provisions, cooperation strategies, development strategies, economic and trade cooperation, development finance cooperation, financial cooperation, procedures and management systems, and provisions for the least developed, landlocked and island states. These topics cover a far wider range than the investment protection provisions of the BIT.
274.
It is notable in this connection that the Cotonou Convention contains a provision explicitly encouraging the parties to that convention to enter into bilateral investment treaties. Article 78 of the Cotonou Convention, entitled "Investment Protection," provides that:

The ACP States and the Community and its Member States, within the scope of their respective competencies, affirm the need to promote and protect either Party's investments on their respective territories, and in this context affirm the importance of concluding, in their mutual interest, investment promotion and protection agreements which could also provide the basis for insurance and guarantee schemes.318

275.
Article 15(2) of Annex II of the Cotonou Convention similarly provides that "[w]ith a view to facilitating the negotiation of bilateral agreements on investment promotion and protection, the Contracting Parties agree to study the main clauses of a model protection agreement."319
276.
It would seem evident that a treaty that affirms the need for and importance of investment promotion and protection agreements, and in which the Parties undertake to study the main clauses of such an agreement, is not itself an investment promotion and protection agreement. The Cotonou Convention and the BIT thus appear to the Tribunal not to deal with "the same subject-matter."
277.
Moreover, the provisions of the Cotonou Convention and the BIT are entirely compatible. The Cotonou Convention affirms the importance of investment promotion and protection agreements, and the BIT is such an investment promotion and investment agreement. There is no need to reconcile the two, or to give one prominence over the other, unless there is some specific conflict between their respective terms.

b. The Cotonou Convention's arbitration provisions do not conflict with those of the BIT

278.
The Respondent argues that the arbitration provisions of the Cotonou Convention are in direct contradiction to those of the BIT. While both provide for arbitration of disputes, the Cotonou Convention calls for "arbitration in accordance with the procedural rules which will be adopted by decision of the Council of Ministers at the first meeting following the signing of this Agreement",320 while the BIT offers an investor the choice among ad hoc arbitration under the UNCITRAL Arbitration Rules, ICSID arbitration, and "other international arbitration arrangements, mechanisms or instruments adhered to and ratified by both Contracting Parties."321
279.
The Tribunal notes, first, that the terms of the BIT do not preclude arbitration under the Cotonou Arbitration Rules. Those rules would qualify as "other international arbitration arrangements, mechanisms, or instruments adhered to and ratified by both Contracting Parties" under Article 9(3)(d) of the BIT, and both Italy and Mozambique are parties to both treaties.
280.
Similarly, the Cotonou Convention provides that a dispute arising out of a "transnational contract" may be submitted to arbitration under either the Cotonou Arbitration Rules or "if the Parties to the contract so agree, in accordance with the national legislation of the ACP State concerned or its established international practices."322 It would hardly do violence to the words of the Cotonou Convention to consider arbitration under the terms of the BIT to be one of Mozambique's "established international practices," and the Respondent concedes as much.323
281.
In addition, the Tribunal finds no conflict in the subject matters for which each treaty provides for arbitration. The BIT provides for arbitration of disputes "which may arise between either Contracting Party and the investors of the other Contracting Party on investments."324 The Cotonou Convention provides for arbitration of:

Any dispute arising between the authorities of an ACP State or the relevant organization or body at regional or intra-ACP level and a contractor, supplier or provider of services during the performance of a contract financed by the multiannual financial framework of cooperation under this Agreement […]325

282.
The present dispute is a dispute between a Contracting Party to the BIT and an investor of the other Contracting Party having to do with an investment, and thus falls within the arbitration provisions of the BIT. It is also a dispute between the authorities of an ACP State and a contractor, as specified in the Cotonou Convention. But these provisions would conflict only if this dispute arose "during the performance" of a contract financed under the framework of the Cotonou Convention.
283.
The Claimants argue that the present dispute did not arise "during the performance" of the Lot 3 Contract. They assert that work under that contract was effectively completed in or around November 2007,326 and that the Engineer submitted his final decision on the work done on 11 May 2009, showing that performance was complete by that date at the latest.327 The documentation concerning performance thus seems to have become complete with CMC Ravenna's interim payment application of 24 July 2009 seeking payment of the amount awarded, although the Final Acceptance Certificate was not issued until 14 July 2011, and that certificate stated that the contractor had completed its obligations under the contract "with effect from 24 March 2011."328 CMC Ravenna and ANE continued after 14 July 2011 to argue about what compensation CMC was due for the work done before that date, but the Tribunal has seen no suggestion that any work on Lot 3 was performed after May of 2009.
284.
The current dispute cannot have arisen before 30 October 2009, the date of ANE's offer letter to CMC Ravenna, by which time performance was completed.329 Given the correspondence after that date, the Tribunal concludes that the dispute should be considered to have arisen on or after 8 August 2011, when ANE sent its letter refusing to make any further payment for the work on Lot 3.330
285.
While the Tribunal agrees with the Respondent that the Claimants' claims "relate to" the Lot 3 Contract, in that the Claimants are, in effect, seeking additional compensation for their work on Lot 3, the dispute did not arise "during the performance" of that contract.
286.
The present dispute arose out of the inability of CMC and ANE to agree on whether any additional amount was due for CMC's completed work on the Lot 3 Project. The Tribunal is unpersuaded by the Respondent's argument that disputes about payment constitute performance of a contract.331 Even if payment itself were considered an element of performance, payment of the amounts authorized by ANE had been made by July 2011,332 before the dispute arose on or after 8 August 2011.
287.
Since the dispute did not arise during the performance of the Lot 3 Contract, the Cotonou Convention does not, by its terms, require this dispute to be submitted to arbitration under the Cotonou Arbitration Rules.

c. The Lot 3 Contract does not require arbitration of this dispute under the Cotonou Arbitration Rules

288.
Even if the Tribunal found the Cotonou Convention to require Mozambique to submit the present dispute to arbitration under the Cotonou Arbitration Rules – and the preceding section explains that it does not – that Convention would not have any direct application to the Claimants, who are private parties. The Respondent argues that the Claimants are required to submit the present dispute to arbitration under the Cotonou Arbitration Rules, because the Claimants, or at least CMC Africa Austral, agreed in the Lot 3 Contract to do so.
289.
Article 68 of the General Conditions of the Lot 3 Contract requires the Parties to "make every effort to amicably settle disputes relating to the Contract which may arise between them."333 In the absence of such an amicable settlement, a dispute concerning a "national contract" is to be settled according to Mozambique's "national legislation," and a dispute concerning a "transnational contract" is to be settled either in accordance with that legislation, or in accordance with Mozambique's "established international practices," or by arbitration under the Cotonou Arbitration Rules.334
290.
This Tribunal is not called upon to decide whether the contract to which the present dispute relates is a "national" or a "transnational" contract, because no aspect of this dispute turns on the difference.
291.
The Respondent argues that the Claimants' claims really arise out of the Lot 3 Contract, and that Article 68 of the General Conditions therefore requires those claims to be asserted in a different forum. If the Tribunal agreed that the present claims were merely claims for breach of contract, the Tribunal would agree with the Respondent's conclusion. But the Tribunal does not agree that the claims asserted are contract claims, for the reasons explained above at paragraphs 219-222.
292.
The fact that the Lot 3 Contract provides for resolution of disputes arising under that contract in either the courts of Mozambique or under the Cotonou Arbitration Rules does not deprive this Tribunal of jurisdiction over claims pleaded and arising under the BIT. As the ad hoc committee in Vivendi observed: "A state cannot rely on an exclusive jurisdiction clause in a contract to avoid the characterisation of its conduct as internationally unlawful under a treaty."335
293.
For the same reason, the Respondent's argument under Article 9(2) of the BIT is unavailing. Article 9(2) provides that, "[i]n case an investor or entity of one of the Contracting Parties have stipulated an investment agreement in accordance with the relevant applicable laws in force, the procedure foreseen in such investment agreement shall apply." Assuming for the moment that the Lot 3 Contract is such an "investment agreement," the Tribunal has found that the Lot 3 Contract does not by its terms require the submission of the Claimants' BIT claims to arbitration under the Cotonou Convention. There is thus no "procedure foreseen" in that agreement to apply to those claims.
294.
The Claimants in this case have asserted multiple claims that the Respondent has breached its obligations under the BIT. Specifically, they allege that the Respondent has failed to treat their investment justly and fairly, in breach of Article 2(3) of the BIT, that they have been subjected to unjustified or discriminatory measures in breach of the same Article, that the Respondent has failed to create and maintain a legal framework apt to guarantee legal treatment to investors in breach of Article 2(4), and that it has failed to provide most-favored-nation treatment in breach of Article 3.336 The Tribunal does not need to decide that the Claimants can prove those claims in order to find that it has jurisdiction to consider them; it is sufficient for present purposes for the Tribunal to conclude that, if the claims can be proven, they fall within its jurisdiction. The Tribunal so concludes.
295.
The Tribunal thus does not consider that the Claimants were obligated to assert their claims under the BIT in an arbitration conducted under the Cotonou Arbitration Rules, either as a matter of treaty interpretation or as a matter of contract. Neither the Cotonou Convention nor the Lot 3 Contract, in the Tribunal's view, deprive the Claimants of their right under the BIT to submit the present dispute to ICSID arbitration.

E. The ECJ's Achmea Judgment

1. The Respondent's Objection

296.
The Respondent argues that the decision of the European Court of Justice ("ECJ") in Slovak Republic v. Achmea337 has in any event rendered the arbitration clause in the Italy-Mozambique BIT invalid.338 The Achmea decision addresses whether treaties between EU member states that provide for investor-state arbitration are compatible with EU law, when: (a) the tribunal is not a part of the EU's judicial system; (b) that tribunal may resolve disputes concerning the application or interpretation of EU law; (c) that tribunal cannot submit preliminary questions to the ECJ; and (d) its decisions are not sufficiently reviewable by EU courts.339
297.
In response to the Claimants' objection that this issue was not raised in a timely manner, with its first pleading, the Respondent explains that the Joint Declaration of 22 EU member states, including Italy, on the effects of Achmea was only issued on 15 January 2019 (the "Joint Declaration").340 The Respondent asserts that, according to that Declaration, the reasoning of Achmea also applies to the Energy Charter Treaty, which includes non-EU member states.341 The Joint Declaration states:

Furthermore, international agreements concluded by the Union, including the Energy Charter Treaty, are an integral part of the EU legal order and must therefore be compatible with the Treaties. Arbitral tribunals have interpreted the Energy Charter Treaty as also containing an investor-State arbitration clause applicable between Member States. Interpreted in such a manner, that clause would be incompatible with the Treaties and thus would have to be disapplied.342

298.
The Respondent asserts that, applying the reasoning of the Joint Declaration, the Achmea decision must also apply to BITs between member states (in this case Italy) and nonmember states (in this case Mozambique).343 It contends that two propositions necessarily follow:

a. As the Cotonou Convention (to which the EU itself is a party) is an integral part of EU law, and as Achmea has affirmed the supremacy of EU law over investor-state arbitration agreements, the arbitration clause in the Italy-Mozambique BIT is void to the extent that it conflicts with the Cotonou Convention.344 In addition, the arbitration provision in the BIT is void because Italy's interpretation of Achmea terminates, because of reciprocity, Mozambique's obligations.345

b. The Claimants cannot invoke the arbitration clause in the BIT, according to the Respondent, because doing so would require an international tribunal to decide on the application of EU law (specifically, the Cotonou Convention) and render an award which cannot be reviewed by EU courts, neither of which is permitted by Achmea.346

299.
The Respondent argues that UP and C.D Holding Internationale v. Hungary ("UP and C.D Holding"), an ICSID arbitration brought under the France-Hungary BIT, was wrongly decided.347 In that case, the respondent argued on the basis of the Achmea decision that the ICSID tribunal lacked jurisdiction.348 The tribunal rejected that argument and found that the Achmea decision had no application to an arbitration under the ICSID Convention. The tribunal reasoned that:

The Achmea Decision contains no reference to the ICSID Convention or to ICSID Arbitration. Therefore, and in view of the above mentioned determinative differences between the Achmea case and the present one, the Achmea Decision cannot be understood or interpreted as creating or supporting an argument that, by its accession to the EU, Hungary was no longer bound by the ICSID Convention.349

300.
The Respondent argues that the Achmea decision did reference the ICSID Convention.350 The Respondent argues that the BIT in this case is unenforceable, because Achmea prevents Italy from being bound by the BIT "and, consequently, neither can the Republic of Mozambique based on lack of reciprocity."351 For the proposition that reciprocity mandates that treaty provisions are applicable only to the extent that and as long as they are acceptable to both Parties, the Respondent relies on the award in Daimler Financial Services AG v. Argentine Republic, which stated:

BITs are reciprocal bilateral treaties negotiated between two sovereign State parties. The general purpose of BITs is of course primarily to protect and promote foreign investment; but it is to do so within the framework acceptable to both of the State parties. These two aspects must always be held in tension. They are the yin and yang of bilateral investment treaties and cannot be separated without doing violence to the will of the states that conclude such352 treaties.

301.
In support of its argument that the Achmea decision applies to bilateral investment treaties between EU member states and non-member states like the BIT, the Respondent relies on the following authorities:

a. An article by John I. Blanck (Attorney Advisor at the United States Department of State) entitled "Slovak Republic v. Achmea BV: The Death Knell for Intra-EU BITs?"353 That article states:

More broadly, the issue raised by the CJEU, that an investment arbitration might result in the lack of effectiveness and uniformity of EU law, might occur when an EU member state is a respondent in any BIT arbitration, not just pursuant to intra-EU BIT ones. The United States has nine BITs with EU member states, and if U.S. investors were to bring claims before an arbitral tribunal pursuant to any of these BITs, the potential for EU law to be interpreted or applied also exists.

b. An article by Laurens Ankersmit entitled "Achmea: The Beginning of the End for ISDS in and with Europe?"354 That article states:

More complex is the question of the future of extra-EU BITs—those concluded between EU member states and nonmember states. The thrust of the ECJ's reasoning makes it clear that arbitration clauses contained in such agreements are not immune from challenge. Indeed, tribunals under such treaties may very well potentially remove disputes involving questions of EU law and EU remedies from EU member state courts. As a result, EU member states may be required to terminate these agreements, and the enforceability of awards before EU member state courts is in doubt.

302.
In response to the authorities cited by the Claimants in support of the proposition that the Achmea decision is not relevant to an international tribunal that is asked to apply international law, the Respondent argues:

a. Regarding Vattenfall AB and others v. Federal Republic of Germany :355

In the Joint Declaration, Italy has stated that the Achmea decision does apply to a treaty involving non-EU Member States. Vattenfall is outdated and cannot be used to interpret the Joint Declaration because it predates the Joint Declaration. Further, for purposes of reciprocity what the tribunal concluded in Vattenfall is irrelevant. What matters is the view of the Republic of Italy. […] Vattenfall is also inapposite because it did not involve two competing international treaties between the same parties with arbitration provisions. In contrast, this dispute involves the Cotonou Convention and Italy-MZ BIT with competing arbitration provisions and this Tribunal must decide which treaty prevails. […] Further, nothing in Vattenfall contradicts the conclusion that while Cotonou Convention arbitration is consistent with the Achmea decision because a Cotonou Convention tribunal is formed under EU law, an ICSID tribunal offends Achmea because it is not formed under EU law […].356

b. Regarding Opinion 1/17 of the Advocate General:357

The arguments of the Advocate General do nothing to change the result in these proceedings. The Advocate General is not the ECJ. The ECJ opinion prevails on its own terms. But relevant for purposes of reciprocity, Italy, the other Contracting State to the Italy-MZ BIT, has declared in the Joint Declaration that the Achmea decision does apply to an international agreement which includes non-EU States […] Thus, the Joint Declaration of Italy and twenty-two EU Member States disputes the Advocate General's view. The Advocate General is not a party to the Italy-MZ BIT, and cannot force Italy to afford reciprocity to Mozambique under the Italy-MZ BIT.358

c. Regarding Greentech Energy Systems A/S, GWM Renewable Energy I S.P.A., GWM Renewable Energy II S.P.A. v. The Kingdom of Spain :359

Greentech, like Vattenfall, predates the Joint Declaration, and thus is not useful in evaluating the effect of the Joint Declaration. […] Italy, and twenty-two other EU Member States, declared that the Achmea decision applies to treaties with non-EU Member States despite the Greentech and Vattenfall, therefore rejecting those decisions.360

d. Regarding Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain;361 and UP and C.D Holding :362

Claimants also cite to Masdar v. Spain and UP and C.D v. Hungary to argue that the Achmea judgment does not apply to multilateral treaties such as the ECT. […] Claimants argue that the considerations are different between relationships involving EU Member States and those involving a non-EU Member State and EU Member State. […] [T]he Joint Declaration indicates that the Achmea decision may be applied more broadly to multilateral treaties such as the ECT, and thus the reasoning of the cited decisions is outdated after the Joint Declaration.363

303.
The Respondent further argues that this Tribunal does not have jurisdiction because it is called upon to decide a question of EU law. It states that:

The Achmea decision held that an EU Member State cannot enter into an investment treaty whereby issues of EU law are referred for decision to an international tribunal, instead of an EU court. That is because EU courts have exclusive jurisdiction to decide issues of EU law. Before this Tribunal is the issue of whether the arbitration provisions of the Cotonou Convention govern this dispute. The EU itself is a party to the Cotonou Convention, and thus the Cotonou Convention is part of EU law. International agreements entered into by the EU itself are a part of EU law. […] Thus, this Tribunal must determine whether, as a matter of EU law—that is, under the Cotonou Convention—this dispute must be decided in a Cotonou Convention arbitration, instead of an ICSID Convention arbitration. Application of the Italy-MZ BIT in these proceedings does involve EU law.364

304.
At a minimum, the Respondent argues, the decision in Achmea confirms that the Claimants' claims must be arbitrated under the Cotonou Arbitration Rules. In this connection, the Respondent points to Article 91 of the original Cotonou Convention, which states:

No treaty, convention, agreement or arrangement of any kind between one or more Member States of the Community and one or more ACP States may impede the implementation of this Agreement.365

305.
The Respondent argues that this Article has the effect that the arbitration clause in the BIT cannot impede the application of the arbitration clause in the Cotonou Convention.366 The Respondent concludes that "the Achmea decision mandates, or at least makes preferable, the conclusion that the arbitration provisions of the Cotonou Convention are exclusive or take precedence over the arbitration provisions of the Italy-Mozambique BIT. As a result, the reasoning in the Achmea decision further confirms the supremacy of Article 9[(1)] of the Cotonou Convention and, thus, that this Tribunal lacks jurisdiction under the Italy-Mozambique BIT."367
306.
The Tribunal asked the Parties to give their views on the implications of the 7 May 2019 interim decision in the Eskosol v. Italy arbitration and the 30 April 2019 Opinion 1/17 of the European Court of Justice, both of which became available after the Hearing. The Eskosol decision held that the Achmea decision did not affect arbitral jurisdiction over an intra-EU Energy Charter Treaty arbitration. In Opinion 1/17, the ECJ held that the investorstate dispute resolution clause in the Comprehensive Economic and Trade Agreement between Canada and the European Union is compatible with EU law. The Respondent submitted the following observations:

a. Regarding Eskosol v. Italy, the Respondent stated:

4. The Eskosol […] tribunal derived its jurisdiction from the ICSID Convention, and there was nothing in the ECT Treaty, applicable BIT or Achmea decision that 'deprived' that tribunal of ICSID Convention jurisdiction. In sharp contrast, in the case before this Tribunal, the situation is completely different. […]

5. Under Article 91, the arbitration provisions of the Cotonou Convention expressly preempt application of the arbitration provisions of the Italy-Mozambique BIT […]. Therefore, this Tribunal lacks any preexisting international law-based jurisdiction under the ICSID Convention. Here, Eskosol 's holding that t