Dr. Gonzalo García-Calderón Moreyra,
Estudio García-Calderón, Ghersi & Asociados
with registered office for purposes of this case at:
Lima 27, Peru
Dr. Juan Carlos Barreiro Perrotta,
Attorney General, Republic of Paraguay,
with registered office for purposes of this case at:
Embassy of Paraguay in Washington, D.C.
2400 Massachusetts Avenue, N.W.
Washington, D.C., 20008
Having the Claimant submitted, as agreed in the first session held April 16, 1999, his memorial with his statements of fact and of law on the merits of the dispute, the Respondent was to submit its counter-memorial, with its statements of fact and of law on the merits of the dispute, within sixty days of the date of receipt of the Tribunal’s decision on the matter of jurisdiction. After that, the Claimant would submit his reply regarding the merits of the dispute within thirty days of the date of receipt of the counter-memorial, and lastly, the Respondent would submit its rejoinder on the merits of the dispute, not later than thirty days following receipt of the Claimant’s reply. Once the exchange of submissions was complete, the Tribunal would set a date for the hearing.
The hearing on the merits of the dispute would begin on Sunday, [March] 11, 2001, at 10:00 a.m.
First, the Claimant’s representative would make an oral presentation lasting 30 minutes, and then the Respondent’s representative would make his presentation for another 30 minutes.
After that, each party would have 15 minutes to present, by way of reply and rejoinder, any further comments that they might have.
Then, each of the witnesses would be examined by the representative of the party requesting their presence, followed by the representative of the other party, each party having two hours in which to question each of the witnesses.
The members of the Tribunal would also be able to ask questions of the representatives of the parties and of the witnesses, and request explanations at any time during the hearing. The time used for questions by the Tribunal and for the replies would not count against the time assigned to each of the parties.
Lastly, the members of the Tribunal would meet on March 13, 2001, in private, to deliberate, and if necessary, on the following day.
Members of the Tribunal:
Mr. Rodrigo Oreamuno, President; Mr. Francisco Rezek, Arbitrator; and Mr. Eduardo Mayora Alvarado, Arbitrator.
Mr. Gonzalo Flores, Secretary of the Tribunal
Mr. Eudoro Armando Olguin
Representing the Claimant:
Dr. Gonzalo García-Calderón Moreyra
Representing the Respondent:
Dr. Juan Carlos Barreiro Perrotta, Attorney General, Republic of Paraguay
Also in attendance at the hearing representing the Respondent:
Dr. Benigno López, Central Bank of Paraguay
Dr. Amelio Calonga Arce, Office of the Attorney General, Republic of Paraguay
Mr. José María Ibáñez, Embassy of Paraguay in Washington, D.C.
III. Summary of Facts
Basically, the letter described the interest rates that that finance company was willing to grant Mr. Olguin on his deposits in United States dollars and in guaranis, which were 11% and 33% per annum, respectively.
"The friend I mentioned to you is Mr. Tomás Rovira, general manager of the finance company, who can be contacted at the phone number that appears on his card."
The following TDIs existed as of July 1995:
i. No. 06361 with a value of Gs 570,000,000, dated August 2, 1994,
ii. No. 2225 with a value of Gs 481,250,000, dated June 23, 1995,
iii. No. 2226 with a value of Gs 481,250,000, dated June 23, 1995,
iv. No. 2227 with a value of Gs 508,200,000, dated June 23, 1995,
v. No. 2231 with a value of Gs 231,000,000, dated July 4, 1995,
vi. No. 2232 with a value of Gs 67,375,000, dated July 4, 1995,
vii. No. 2253 with a value of Gs 67,982,500, dated July 6, 1995.
The first of these securities was issued to Mr. Angel Canziani Zuccarelli and the remainder were made out to Mr. Eudoro Olguin. The latter securities bore the signature of an officer at the Central Bank of Paraguay. The seven securities came to a total of Gs 2,407,057.500.00.
"Once a dissolution decision in the cases provided under this law has been made, the Central Bank of Paraguay shall administer the assets and liabilities of the entity for the sole purpose of its liquidation and shall lend financial support aimed at the payment of holders of savings accounts, with deduction of the legal reserves corresponding to the savings accounts..."
"Once a decision has been made to withdraw a financial institution’s license to operate, the Central Bank of Paraguay shall guarantee payment of the deposits consisting of monetary deposits duly recorded in the entity’s liabilities, in whatever form, in domestic or foreign currency, made by individuals or legal entities, in the banks, finance companies and other credit houses, up to the equivalent of the monthly minimum wage times one hundred per account."
(a) The TDIs were endorsed by the Bank Examiner of the Republic of Paraguay, a Paraguayan State agency.
(b) The Republic of Paraguay and its agencies were negligent in supervising the activities of La Mercantil, and this negligence led to the suspension of operations of that financial institution.
(c) The Republic of Paraguay and its agencies engaged in discriminatory conduct, in violation of the provisions of the BIT, particularly the provisions of Article 4, subparagraph 2 of the treaty.3
(d) The actions of the Republic of Paraguay in respect to Mr. Olguin’s investment were the equivalent of expropriation.
As stated previously, it has been clearly shown that Mr. Olguin made a substantial investment in Paraguay. Freely, and it would seem, on the advice of various people, among them Mr. Olselli and Mr. Rovira, with whom he established a close relationship, to the point of naming them to the Super Snacks Board of Directors, he decided to convert to guaranis the dollars he had brought from another country (which country being of no importance for purposes of the BIT),4 and invest them in La Mercantil, which offered to pay him interest at a rate of 33%, which, at the time, seemed extremely attractive.
During the hearing on the merits of the dispute, held from March 11 to 13, 2001 at the ICSID headquarters in Washington, D.C., the Republic of Paraguay argued that the funds invested by Mr. Olguin in Paraguay came, physically, from the United States (the Claimant’s place of residence), and that therefore, his investment was not protected by the Paraguay-Peru BIT. According to this argument, for an investment to be protected by the Paraguay-Peru BIT, the funds invested must come from the country in which the investor is a national. This requirement is not expressly indicated in the BIT; consequently, the Tribunal rejects that argument
"We noted that the volume of the entity’s deposits as of April 28, 1995 came to a total of G. 20,225 billion, and remained relatively stable through May 30 of that year. However, after May 31, there were substantial increases in deposits, in amounts not recorded in the company’s normal course of business, a situation that was at odds with the official explanatory statements established. It should be noted that this discrepancy was due to an attempt to legalize parallel deposit transactions, by making improper use of the deposit instruments authorized by the Central Bank of Paraguay. This caused a surge in the level of deposits from G. 20,225 billion to G. 98,259 billion..."
"...By means of preferred loans granted to individuals related (with either employment or business ties) and entities related (Dimex S.A., Financiera Corpus SA., Publicity S.A., Laprofarm, Arami S.A., Super Snacks, Distrimport, among others) to La Mercantil S.A. de Finanzas, funds collected by the company were diverted, in violation of the legal principles of Art. 35 f) of Act 417/73 on Banking and Other Financial Entities..."
The file makes no mention of how long Mr. Olselli retained his position as an officer of the BCP, which could be of significance when considering the overall impact of the fact, significant in itself, that it was Mr. Olselli who submitted the "presentation" to the Ministry of the Interior that led the President of the Republic to issue Decree 4,861 (a copy of which is included in the case file), approving the corporate by-laws of Super Snacks and recognizing its legal status.