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

Decision on Annulment

I. PROCEDURAL HISTORY

1.
On 6 December 2007, Fraport AG Frankfurt Airport Services Worldwide ("Import") filed with the Secretary-General of the International Centre for Settlement of Investment Disputes ("ICSID" or "the Centre") an application in writing requesting the annulment of the Award, dated 16 August 2007 in the arbitration proceeding between Fraport and the Republic of the Philippines ("the Philippines" or "the Respondent"), (ICSID Case No. ARB/03/25). The Award was rendered by the Arbitral Tribunal composed of Mr. L. Yves Fortier, C.C., Q.C. (a national of Canada), Dr. Bernardo M. Cremades (a national of Spain), and Professor W. Michael Reisman (a national of the United States).
2.
The Application was submitted within the time period provided for in Article 52(2) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 18 March 1965 ("the ICSID Convention"). In its application, Fraport seeks annulment of the Award on three of the five grounds set forth in Article 52(1) of the ICSID Convention, specifically claiming that:

1. the Tribunal had manifestly exceeded its powers (Article 52(1)(b));

2. there had been a serious departure from a fundamental rule of procedure (Article 52(1)(d)); and

3. the Award had failed to state the reasons on which it was based (Article 52(1)(e)).

3.

The Acting Secretary-General of ICSID registered the Application on 8 January 2008 and on the same date, in accordance with Rule 50(2) of the ICSID Arbitration Rules, transmitted the Notice of Registration to the parties. A copy of the Application had been sent to the Philippines on 6 December 2007, when the ICSID Secretariat acknowledged receipt of the Application.

4.

By letter of 14 April 2008, in accordance with Rule 52(2) of the Arbitration Rules, the parties were notified by the Acting Secretary-General of ICSID that an ad hoc Committee ("the Committee") had been constituted, composed of Judge Dominique Hascher (a national of France), Professor Campbell McLachlan Q.C. (a national of New Zealand), and Judge Peter Tomka (a national of the Slovak Republic), and that the annulment proceeding was deemed to have begun on that date. The parties were also notified that Ms. Eloise Obadia, Senior Counsel, ICSID, would serve as Secretary of the Committee. By letter of 18 April 2008, the parties were notified that the Members of the Committee had designated Judge Peter Tomka as President of the Committee.

5.
The first session of the Committee was held, with the agreement of the parties, in the Peace Palace at The Hague on 11 June 2008. Several issues of procedure were discussed, agreed upon and decided. The agreements and decisions were recorded in the Minutes.
6.
On 9 July 2008, the Respondent submitted to the Committee an application for an order disqualifying one of the Applicant’s counsel. After providing the parties and the counsel in question with the opportunity to submit their comments and replies on the request and after having deliberated, the Committee issued, on 18 September 2008, the Decision on Application for Disqualification of Counsel. The Committee dismissed the application and reserved all questions concerning the costs and expenses of the Committee and of the parties in connection with that application for subsequent determination, together with the Application for Annulment.
7.
In accordance with the agreed schedule, the Applicant filed its Memorial on 25 September 2008, and the Respondent filed its Counter-Memorial on 15 January 2009. In the second round of the written procedure, the Applicant filed its Reply on 15 April 2009, and the Respondent filed its Rejoinder on 15 July 2009.
8.
On 2 April 2009, Fraport filed an Urgent Request to the Committee for an order of protection in connection with the initiation by the Philippines’ Department of Justice of criminal prosecution of "Fraport’s Philippine arbitration counsel." The Committee, after having provided opportunity to the parties to submit their observations and comments, issued, on 3 June 2009, its Decision on the above request. The Committee decided that "[u]nder the circumstances as they ha[d] been presented to it, the Applicant ha[d] not satisfied the Committee that the requested relief [was] justified. Its request [was] therefore dismissed." The Committee further decided that "[a]ll questions concerning the costs and expenses of the Committee and of the parties, in connection with this Request [were] reserved for subsequent determination, together with the Application for Annulment."
9.
As agreed, a three-day hearing was held at the seat of the Centre in Washington D.C. on 24, 25 and 26 August 2009, at which counsel for both parties presented their arguments and submissions, and responded to questions from the Members of the Committee. Present at the hearing were:

1. The Members of the Committee: Judge Peter Tomka, Judge Dominique Hascher, Professor Campbell McLachlan, Q.C., and the Secretary of the Committee Ms. Eloise Obadia;

2. Fraport’s representatives: Mr. Peter Henkel, Ms. Aletta von Massenbach and Ms. Dorte Ochs of Fraport AG Frankfurt Airport Services Worldwide; Dr. Sabine Konrad of K&L Gates LLP; Mr. Eric Schwartz of King & Spalding LLP; Mr. Michael D. Nolan, Mr. Edward Baldwin, Mrs. Elitza Popova-Talty and Mr. Frederic Sourgens of Milbank, Tweed, Hadley & McCloy, LLP; Ms. Lesley Benn of Shulman, Rogers, Gandal, Pordy & Ecker, PA; Mr. Cesar P. Manalaysay and Mr. Edgardo G. Balois of Siguion Reyna Montecillo and Ongsiako.

3. The representatives of the Republic of the Philippines: Mr. Alfonso Cusi, Former General Manager, Manila International Airport Authority; Ms. Gloria Victoria Yap-Taruc and Ms. Ellaine Rose A. Sanchez-Corro, Assistant Solicitors General, Office of the Solicitor General of the Republic of the Philippines; Justice Florentino P. Feliciano (Ret.) of Sycip Salazar Hernandez & Gatmaitan; Ms. Carolyn B. Lamm, Ms. Abby Cohen Smutny, Ms. Andrea Menaker, Ms. Anne D. Smith, Mr. Stephen Ostrowski, Mr. Hansel Pham, Mr. Rahim Moloo, Mr. Amr Abbas, and Ms. Erin Vaccaro of White & Case, LLP.

10.
On 15 October 2009, the parties submitted their statements of costs.
11.
On 3 August 2010, the Respondent informed the Committee that the Arbitral Tribunal of the International Chamber of Commerce rendered an Award, dated 22 July 2010, in Philippine International Air Terminals Co., Inc. v. Government of the Republic of the Philippines ("ICC Award), and sought the Committee’s leave to submit that Award for the Committee’s consideration. The Applicant, in its letter of 5 August 2010, took issue with certain statements in the Respondent’s request, concluding that "if the ad hoc Committee wishes to include the ICC award in the record, Fraport requests an opportunity briefly to comment on the award and in particular its reliance upon Philippine legal materials not in the record of this [annulment] proceeding." The Committee subsequently invited the parties, on 13 August 2010, to elaborate in writing why the Award of 22 July 2010 would be relevant for the annulment proceeding, as well as to provide the legal basis for admitting this Award into the annulment record. Both parties availed themselves of this opportunity and filed within the prescribed time limits their submissions, the Philippines on 23 August 2010, and Fraport on 31 August 2010. The Committee duly considered their submissions at its meeting on 6 September 2010 and informed them, through a letter from its Secretary, dated 7 September 2010, of the following decision:

"The Committee has decided not to admit the ICC Award into the annulment record in view of the limited nature of the annulment proceeding. The function of the Committee is to review the conduct of the Arbitral Tribunal which rendered the challenged decision and the decision itself. As the ICC Award had not been in front of the ICSID Arbitral Tribunal in the Fraport v. The Philippines case, being non-existent at that moment, it could not have been taken into account by the ICSID Tribunal. The Committee is of the view that its task is to review the Award rendered by the ICSID Tribunal only in light of the original arbitration evidentiary record."

12.

The Committee declared the proceeding closed on 22 October 2010, pursuant to Arbitration Rules 53 and 38(1).

13.
During the course of the proceedings, the Members of the Committee deliberated by various means of communication, including meetings in Washington on 27 August 2009, at The Hague on 3 November 2009, in Washington on 11 April 2010, in Paris on 28 June 2010, and in The Hague on 6 September 2010, and have taken into account all pleadings and documents before them.

II. THE DISPUTE

14.
The dispute has arisen out of an investment made by Fraport, which is a German company, in a Philippine company, Philippine International Air Terminals Co., Inc., later known as PIATCO.
15.
In 1997, the Philippine government conferred upon PIATCO the concession rights for the construction and operation of an international passenger terminal at Manila’s principal airport, known as "Ninoy Aquino International Airport Passenger Terminal III" ("Terminal 3"). The Concession Agreement was entered into on 12 July 1997 between PIATCO and the Philippine government, represented by its Secretary of Transportation and Communication.1
16.
In 1998, the terms of the Concession Agreement were renegotiated in order to allow PIATCO to obtain financing from certain interested lenders. The Amended and Restated Concession Agreement ("ARCA") was signed by PIATCO and the Secretary of the Department of Transportation and Communication on 26 November 1998.2 Three supplements to the ARCA were executed between 1999 and 2001, the first on 27 August 1999, the second on 4 September 2000, and the third one on 22 June 2001.3
17.
Fraport’s investment started in 1999 when, on 6 July, it entered into four agreements (the "1999 Share Purchase Agreements and Share Subscription Agreements") whereby it acquired direct and indirect interest in PIATCO as follows: 25% of PIATCO, 40% of PAGS Terminals, Inc. (¿‘PTC) and 40% of PAGS Terminal Holding, Inc. (¿"PTH")', PTI further acquired 11% of PIATCO.4
18.
The construction of Terminal 3 commenced on 15 June 2000 to be completed in 30 months, by late 2002. As the project under construction required further financial resources and PIATCO’s other shareholders were either unable or unwilling to invest additional money into the Terminal 3 project, Fraport accordingly decided to increase its shareholdings pursuant to two agreements dated 5 May 2000 (the ''2000 Share Purchase Agreements’) and thus it acquired an additional 5% of PIATCO, and PTI acquired another 24% of PIATCO.5
19.
In 2001, Fraport acquired a 40% stake in PAGS, thus having an additional 9.04% indirect interest in PIATCO. The Award notes that, as of that point, Fraport had acquired 61.44% direct and indirect ownership of PIATCO.6
20.
In late 2001 and throughout 2002 PIATCO/Fraport’s representatives were involved in numerous negotiations on the two further supplements to the ARCA. The Fourth Supplement was proposed by PIATCO in order to accommodate the conditions set by the Senior Lenders for a drawdown of the loans,7 the Fifth Supplement was sought by the Philippine government which required, inter alia, that PIATCO surrender the exclusivity of Terminal 3 for international passenger operations at Ninoy Aquino International Airport ("W4L4").8 The Government representative asserted in a communication to PIATCO that the concession agreement required changes which the Government proposed in the draft Fifth Supplement "to address infirmities which [PIATCO’s] concession has sustained."9
21.
Despite the numerous meetings and exchanges between the parties, no agreement was reached on the proposed Fourth and Fifth Supplement to ARCA. In September 2002, the government considered its options. While the Cabinet Review Committee was still recommending negotiations with PIATCO, the Presidential Advisor on Strategic Projects, who held a Cabinet rank, wrote to the President of the Philippines advising "that the Government proceed with obtaining a declaration of nullity" of the concession agreement.10
22.
In the same period, PIATCO’s concession agreement and the circumstances surrounding its conclusion were the subject of the Philippines’ Senate investigation. In her testimony before the Senate Blue Ribbon Committee in August and September 2002, the Presidential Advisor on Strategic Projects opined for the first time, as the Arbitral Tribunal noted, that the concession contracts, which she had been busy renegotiating, should be declared null and void.11 In her memorandum submitted to the Committee, she expressly stated that there would be severe negative financial consequences for both the Government and Philippine Airlines if the Concession Agreement was performed and its invalidation and nullification not obtained. As she explained, "the financial and operational issues of NAIA Terminals 1, 2 and 3 and the proposed international cargo terminal must be rationalized."12 The Report, issued by the Senate Committee on 10 December 2002, concluded that: (1) the PIATCO contracts were intrinsically void because the required six signatures of the Members of the Investment Coordination Committee of the Philippine National Economic Development Authority were not obtained; (2) the contracts were also void because there were substantial deviations from the Bid Documents; (3) the contracts contained onerous and disadvantageous provisions contrary to public policy and to the Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and for Other Purposes (¿‘BOTLaw")', (4) the payment for buying favors from the government was condemned; (5) the contract provides for a direct government guarantee which is prohibited by the BOT Law; and (6) the condition of the terminal facility raised serious security concerns.13
23.
At the end of November 2002, the President of the Philippines declared that her Government would not honor the Terminal 3 contracts as "the Solicitor General and the Justice Department have determined that all five agreements covering the NAIA, most of which were contracted in the previous administration, are null and void."14 The Arbitral Tribunal did not fail to note that the Memorandum of Department of Justice of 28 November 2002, to which the President of the Philippines referred in her statement, was "strikingly different from the Department of Justice’s prior written advice to the President on 21 May 2002 that had identified several provisions of ARCA which ‘may be possible subjects of renegotiation’ but neither stated that the ARCA was null and void nor questioned the validity of the original Concession Agreement."15 The Arbitral Tribunal also noted that the 28 November 2002 memorandum was diametrically different from "Contract Review No. 434," dated 30 September 2002, in which the Office of the Government’s Corporate Counsel concluded that the concession agreements were valid, and added that "[r]ecords attest to the fact that the negotiation, drafting, execution and signing of the Concession Agreement were strictly in accordance with" the BOT Law and its Implementing Rules and Regulations.16
24.
Fraport continued in its efforts to find a solution. In that period the Supreme Court of the Philippines had been considering, since September 2002, several petitions for prohibition against PIATCO and others. The Supreme Court, in its decision of 5 May 2003, determined that serious violations of Philippines law and public policy, in respect of several issues raised by the petitioners, had taken place, and concluded that the concession agreements in the Terminal 3 projects were null and void ab initio. It also concluded that PairCargo was not a qualified bidder and therefore the award of the Terminal 3 concession contract to PairCargo was null and void.17
25.
On 17 September 2003, Fraport initiated arbitral proceedings against the Philippines by submitting its Request for Arbitration to ICSID, pursuant to arbitration provisions contained in the "Agreement between the Federal Republic of Germany and the Republic of the Philippines on the Promotion and Reciprocal Protection of Investments, dated 18 April 1997 and in force since 2 February 2000 (the "BIT" or "Treaty").
26.
While international arbitral proceedings were in progress, the Republic of the Philippines, in December 2004, took possession of Terminal 3 and instituted domestic court expropriation proceedings, also in December 2004.

III. THE ARBITRAL AWARD

27.
In the arbitral proceedings, which developed, as the Tribunal itself noted, "in some respects, in a most unusual manner,"18 the Respondent challenged the Tribunal’s jurisdiction ratione materiae, arguing that the Claimant’s investment did not enjoy protection afforded by the BIT. The Respondent argued that the Claimant made its investment in violation of the laws of the Philippines, in particular the Philippine Constitution and Commonwealth Act No. 108, entitled "An Act to Punish Acts of Evasion of the Laws on the Nationalization of Certain Rights, Franchises or Privileges," (the so-called Anti-Dummy Law (the "ADL"))19 In the view of the Respondent, the Claimant’s investment fell outside of the BIT’s expressly limited scope because it was not made in compliance with Philippine law.20 The Tribunal understood the Respondent to be arguing that "the Claimant’s investment was not ‘accepted’ in accordance with the laws of the Philippines, in the words of Article 1(1) of the BIT."21
28.
The Claimant argued that its investment was an investment within the meaning of the term, as defined in Article 1(1) of the BIT, and, therefore, that the Tribunal had jurisdiction to decide the case. The Claimant emphasized that the Respondent knew the details of PIATCO’s shareholding structure and never charged Fraport with any violation of its ADL or nationality laws.22
29.
The Tribunal, at the outset of its analysis, observed that "it is possible that an economic transaction that might qualify factually and financially as an investment... falls, nonetheless, outside the jurisdiction of the Tribunal established under the pertinent BIT, because legally it is not an ‘investment’ within the meaning of the BIT."23 Then it proceeded to consider the factual allegations regarding the Claimant’s investment as it related to the laws of the Philippines, in particular the ADL. It came to the conclusion that, while "Fraport’s equity investment in terms of the statutorily limited percentage in the Terminal 3 project was lawful under Philippine law," its "controlling and managing the investment was not."24 The Tribunal was "persuaded from Fraport’s own internal and contemporaneous documents that it was consistently aware that the way it was structuring its investment in the Philippines was in violation of the ADL and accordingly sought to keep these arrangements secret."25 Having then observed that "[w]hile this factual record is troubling, it does not eo ipso mean that the Tribunal is without jurisdiction ratione materiae to hear the substance of the claim,"26 it proceeded to the determination of its jurisdiction in accordance "with applicable legal standards."27 The Tribunal identified as the legal standards applicable to its jurisdiction Articles 1(1) and 2(1) of the BIT,28 the Protocol to the BIT (ad Article 2)29 and the Philippines’ Instrument of Ratification30 of the BIT. The Tribunal stressed that "[b]ecause the exchange of instruments of ratification puts a treaty into effect in accordance with its terms, the second preambular paragraph...is particularly important in regard to the issue at bar."31
30.
The Tribunal considered that the above-mentioned "provisions [were] manifestly limitations ratione materiae," noting that "their interpretation [was] not simple."32 Then having considered the FAG-PAIRCARGO-PAGS-PTI Shareholders’ Agreement of 6 July 1999, it concluded that it "translates per se into managerial control over a modern corporation"33 by Fraport, with managerial control being in violation of the ADL.34 In the view of the Tribunal, "Fraport knowingly and intentionally circumvented the ADL by means of secret shareholder agreements." Therefore, in its view, Fraport "cannot claim to have made an investment ‘in accordance with law.’"35 The Tribunal concluded that "[b]ecause there is no ‘investment in accordance with law,’ the Tribunal lacks jurisdiction ratione materiae."36 The Tribunal thus, by a majority vote, decided:

" 1. To accept the objection to the jurisdiction of the International Centre for Settlement of Investment Disputes raised by the Republic of the Philippines;

2. To declare that the Centre does not have jurisdiction to hear this dispute and that this Arbitral Tribunal is not competent to resolve it;

3. To dismiss the claim of Fraport AG Frankfurt Airport Services Worldwide; and

4. To order that each party shall bear in full its own legal costs and that the payment of the fees and expenses of the members of the Arbitral Tribunal and of the administrative fees for the use of the Centre shall be paid in equal share by each party."37

31.
Arbitrator Bernardo Cremades attached to the Award a twenty-four page, single-spaced dissenting opinion. He strongly disputed the finding of the majority that there was a breach of the ADL. Even if a violation had occurred it would not have, in his view, stripped Fraport’s investment of all BIT protection. Fraport’s shareholdings in a Philippine corporation are still a kind of asset accepted in accordance with the laws and regulations of the Philippines and therefore, in his view, the Tribunal would not have been deprived of its jurisdiction even if the ADL was breached. He relied on the Philippine Supreme Court decision in Agan v. PIATCO which found that the grant of the Terminal 3 Concession to PIATCO in 1997 was null and void. That decision, in his view, is now res judicata in Philippine Law. He pointed out that the Tribunal is bound to apply Philippine Law in its interpretation of the ADL and that it manifestly exceeds its powers if it does not do so. He further added that the Tribunal is not bound by a decision of a Philippine court - even the Supreme Court - but the Tribunal’s decision on Philippine Law must be premised on Philippine law itself. He considered that it is res judicata in Philippine law that the Terminal 3 Concession is null and void ex tunc and not ex nunc, and that this must be accepted by the Arbitral Tribunal. In his view, the Tribunal should have respected the consequences of the Supreme Court decision. On this basis, he concluded, it is impossible for PIATCO, or FRAPORT, to be guilty of any breach of the ADL. Finally, he addressed the issue of illegality and jurisdiction, which he considered to be a matter of principle. In his view, the legality of the investor’s conduct is an issue for the merits. The inquiry at the jurisdictional phase required by the phrase "in accordance with the laws and regulations of the Host State" is limited to determining whether the type of asset is legal in domestic law. He was of the view that the proper interpretation of Article 1(1) of the Philippines-Germany BIT in accordance with the Vienna Convention produces exactly this result. He concluded that the decision of the majority is not only contrary to the terms of Article 1(1) of the Philippine-Germany BIT, but that it is also fundamentally wrong in its approach to illegality as a matter of principle.

IV. THE GROUNDS FOR ANNULMENT RELIED UPON BY FRAPORT

32.
As noted above (paragraph 2), the Applicant in its request to the Committee for the annulment of the Award relies on three separate grounds provided for in Article 52 of the ICSID Convention; namely that the Tribunal has manifestly exceeded its powers (Article 52(1)(b)), that there has been a serious departure from a fundamental rule of procedure (Article 52(1)(d)), and that the award has failed to state the reasons on which it is based (Article 5l(1)(e)). The Committee will in turn consider whether any of these grounds has been established to its satisfaction in the course of this proceeding, and if so whether it should annul the award. Article 52(3) provides that "the Committee shall have the authority to annul the award or any part thereof."

A. Manifest Excess of Power (Article 52(1)(b) of the ICSID Convention)

a) Introduction

33.
The first ground upon which the Applicant relies in its Application for the annulment of the Award is that which is set forth in Article 52(1)(b) of the ICSID Convention. Article 52(1)(b) reads as follows:

"Either party may request annulment of the award by an application in writing addressed to the Secretary-General [of the ICSID] on...the following ground[]:

(b) that the Tribunal has manifestly exceeded its powers;"

34.
As stated earlier (see paragraph 30 above), the Arbitral Tribunal decided that "the Centre does not have jurisdiction to hear this dispute and that this Arbitral Tribunal is not competent to resolve it."
35.
The Applicant argues that the Tribunal manifestly exceeded its powers when it declined to exercise jurisdiction which, according to Fraport, it possessed under the ICSID Convention and the German-Philippine BIT. The Committee will deal below with the arguments advanced by the parties regarding this alleged excess of powers by the Tribunal.
38.
Several arbitral awards in which Tribunals concluded that they lacked jurisdiction have subsequently been annulled by ad hoc Committees. In those cases, the ad hoc Committees, having duly considered the awards and arguments of the respective parties, reached the conclusion that the Tribunals by failing to exercise jurisdiction manifestly exceeded their powers.40

b) Parties’ Submissions

46.
Fraport contends that the Arbitral Tribunal manifestly exceeded its powers when it wrongly refused to exercise the jurisdiction conferred upon it by the parties’ agreement to arbitrate. Fraport alleges that "the Tribunal refused jurisdiction on the basis of a series of findings of which none are ‘tenable’, let alone ‘clearly’ so."54 Fraport challenges two findings of the tribunal’s majority:

(i) that the BIT required, as a jurisdictional prerequisite, that investments had to be made in accordance with Philippine Law at the time the investment was made; and

(ii) that Fraport’s investments were not in accordance with the Philippine Anti-Dummy law, a criminal statute.55

54.
Fraport argues that "the majority improperly extended the reach of the Philippine Anti-Dummy Law, a criminal statute, to impute a violation to Fraport, where there clearly was none" and "[i]n doing so, the majority declined jurisdiction on a manifestly erroneous basis."72
56.
Fraport argues that it did not possess the necessary quality as perpetrator of the violation of the ADL’s Section 2-A as it did not fulfil the ratione personae conditions of Section 2-A. The Award, Fraport contends, makes no finding that Fraport had in its name or under its control a right, franchise, privilege, property or business subject to nationality restrictions and permitted or allowed any person, corporation or association not possessing the nationality condition to intervene in the management, operation, administration or control of such right, franchise, privilege, property or business.76
57.
Fraport further points to the actus reus under Section 2-A which it interprets as consisting of permitting or allowing a third party to intervene in the management, operation, administration or control of a public utility concession falling within that Section.77 Fraport stresses that the Award fails to establish the existence of the actus reus78
58.
Fraport further submits that it could not have violated Section 2-A as an aidor, assister or abettor as "there can be no crime of aiding, assisting or abetting in the absence of a criminal act committed by a principal."79 It maintains that "[i]f there is no principal, there can be no accessory."80 Fraport points out that the Tribunal’s majority failed to find any wrongful act by a principal. It further adds that in any case the accessory has to be a natural person.81 With reference to the Philippine Supreme Court decision in Agan Case, which held the Terminal 3 concession as null and void ab initio, Fraport draws the conclusion that the ADL was ipso facto inapplicable.82
59.
Fraport finally submits that the Tribunal’s majority extended the scope of the law rather than applied it as written. It quotes a following passage from the award:

"a literal interpretation [of the law] here could produce an absurdity: an alien would violate the ADL if its designated officer intervened to manage and control matters A, B, and C, but the same alien would not violate the ADL if it secretly intervened as a shareholder to manage and control the same matters. The Tribunal construes this part of the ADL as covering intervention by shareholders, if that is the actual means of intervening in ‘the management, operation, administration or control’ of PIATCO."83

60.
In Fraport’s view such expansive interpretation of the ADL violated mandatory norms of public international law. Fraport argues, relying on the Expert Opinion of Professor Antonio Cassese,84 that it is not possible for a tribunal, including an international arbitral tribunal, to interpret and apply national criminal law extensively, even when, as in the case at hand, it is only being applied incidenter tantum.85 In doing so, Fraport contends, the Tribunal’s majority violated the principle nullum crimen sine lege which, in its view, forms part of jus cogens.86
61.
Fraport concludes that the Tribunal’s majority, by disregarding the nullum crimen principle and thus violating international jus cogens, manifestly exceeded its powers87.
62.
The Respondent the Republic of the Philippines, maintains, that "the Tribunal did not manifestly exceed its powers in declining to exercise jurisdiction over Fraport’s claims."88 It argues that "[t]he Tribunal ruled correctly as to its jurisdiction, articulating an interpretation of the parties’ consent to ICSID arbitration in the BIT that fully accords with the principles set forth in the Vienna Convention on the Law of Treaties and certainly was tenable."89
63.
The Respondent denies Fraport’s argument that the Tribunal ignored the word "accepted" in Article 1(1) of the BIT. It emphasizes that the words in a treaty are to be interpreted in their context and recalls the Tribunal’s observation that "Article 31 of the Vienna Convention... enjoins the interpretation of particular provisions in their context, i.e., with reference to the rest of the treaty and in light of its objects and purposes."90
64.
The Respondent contends that "the Tribunal came to the tenable conclusion that the language of both Articles 1 and 2 refer to the temporal requirement that an investment must comply with host State Law at ‘the initiation of the investment’,"91
65.
The Respondent further rejects Fraport’s allegation that the Tribunal manifestly exceeded its powers applying Article 1(1) of the BIT incorrectly. The Respondent maintains that the Tribunal’s application of Article 1(1) was tenable.92 It points to the holding of the Tribunal that Article 1(1) required that economic transactions undertaken by a national of one of the parties to the BIT had to meet certain legal requirements of the host state in order to qualify as an ‘investment’ and fall under the Treaty.93 As the Tribunal considered that an asset accepted in accordance with Philippine law need not only refer to a single asset, but plainly may refer to a bundle of rights, particularly when it is a bundle of inter-related rights acquired in a single transaction, as it was in the case of Fraport which, in the Tribunal’s view, agreed to acquire equity interests on the basis that it would enjoy related rights of control, the Respondent maintains that the Tribunal, when it concluded that the bundle of rights so acquired by Fraport violated requirements under Philippine law and Fraport’s "investment" thus was not covered by the BIT, did not manifestly exceed its powers.94
66.
In reply to Fraport’s contention that the Tribunal manifestly exceeded its powers by failing to consider Fraport’s "other discrete" investments, including additional purchases of equity and loans and guarantees contributed over time to the project, the Respondent argues that "there is no basis to require a tribunal to treat separate elements of an investment in separate categories or on a per unit basis, and then to make separate jurisdictional determinations accordingly."95 The Respondent is of the view that the Tribunal, having found that Fraport’s investment in the project was initiated unlawfully and thus was not accepted in accordance with Philippine law, acted fully consistently with the BIT and the ICSID Convention when it decided not to treat subsequent contributions to the "tainted project" as separate investments.96
67.
The Respondent also rejects Fraport’s view that the Award is based on an untenable interpretation of the Philippine Anti-Dummy Law (ADL), that the majority improperly extended the reach of that Law and thus declined jurisdiction on a manifestly erroneous basis.
68.
The Respondent submits that Article 1(1) of the BIT limits the scope of its consent to arbitrate. The scope of the consent was to be determined as a matter of international law, according to the Respondent. Although Article 1(1) contains, in Respondent’s view, "a renvoi" to Philippine law, that law - it argues - was not directly applicable but rather was to be consulted to assess in good faith what investments were intended to be covered by the BIT’s protection.97
69.
The Respondent further argues that an erroneous application of law, even if manifest, does not provide a ground for annulment. With reference to the travaux préparatoires of the ICSID Convention, it recalls that a proposal to insert a "manifestly incorrect application of the Law" as a ground for annulment was expressly considered and rejected.98
70.
The Respondent stresses that the Tribunal devoted over twenty pages to an analysis of the ADL and to the evidence presented that Fraport’s investment "was in violation" thereof. It takes the view that this "extensive attention... devoted to the ADL and its application in the present case should foreclose any further inquiry as to whether the Tribunal applied the Law."99
71.
The Respondent rejects the arguments of Fraport that it could not have breached Section 2-A of the ADL as a principal, explaining that the Tribunal concluded that Fraport’s investment was made in violation of the ADL’s provision on aiding and abetting the planning, consummation or perpetration of acts prohibited by the ADL.100 Further, it adds that Fraport’s various arguments on issues relating to the ADL "are in the nature of appeals that the Tribunal was mistaken in its application of the ADL."101
72.
The Respondent considers the arguments of Fraport that the Tribunal’s decision violated the rule nullum crimen sine lege, which Fraport considers to be part of jus cogens, as being "without merit".102 In the Respondent’s view, nullum crimen sine lege does not apply to the determination by an international tribunal of the scope of its jurisdiction over an investment dispute.103 Relying on the Expert Opinion of Professor Pocar, it maintains that "this rule is limited to cases when statutes are applied in order to establish the individual criminal responsibility of an accused."104

c) The Committee’s Analysis

73.
The Committee starts its analysis with the observation that this is a case which concerns the interpretation of a treaty, in concreto of the Agreement between the Federal Republic of Germany and the Republic of the Philippines, for the Promotion and Reciprocal Protection of Investments, concluded on 18 April 1997. Whether the Arbitral Tribunal was endowed with jurisdiction to decide the claims brought by Fraport depends on the interpretation of this BIT. The Committee notes that for the proper construction of the BIT, the rules of the Vienna Convention on the Law of Treaties are relevant; they are directly applicable as conventional rules since both Germany and the Philippines had been parties to it at the moment when they concluded the BIT in 1997.105
74.
The relevant Articles of the Vienna Convention for the interpretation of treaties are contained in Articles 31-33. The Committee considers sufficient to quote the text of Article 31. Article 32 concerns supplementary means of interpretation when the interpretation according to Article 31 leaves the meaning ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable. One of the supplementary means specifically mentioned in Article 32, namely the preparatory work of the treaty, has not been brought to the attention of the Arbitral Tribunal. In the course of the annulment proceeding, Fraport submitted three diplomatic notes106 exchanged between Germany and the Philippines in the process of their negotiating the BIT. They had not been submitted to the Tribunal. Even if they were to be deemed as bearing on the interpretation of the BIT, the Committee is of the view that it would not have been appropriate to have recourse to them in the context of the annulment proceeding. The Committee considers that it has to review the Tribunal’s treatment of the BIT in light of the record concerning that Treaty which was available to the Tribunal. Article 33 of the Vienna Convention (Interpretation of treaties authenticated in two or more languages) is of little practical use in the instant case as the parties, which concluded the BIT in the German, Filipino and English languages, all three texts being authentic, expressly agreed that "in case of divergent interpretation of the German and Filipino texts, the English text shall prevail."
75.
Article 31 of the Vienna Convention reads as follows:

General rule of interpretation

1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

3. There shall be taken into account, together with the context;

(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) any relevant rules of international law applicable in the relations between the parties.

4. A special meaning shall be given to a term if it is established that the parties so intended.

76.
Before proceeding further, a word of caution is needed. The Applicant’s criticism of the interpretation of the BIT’s provisions by the Tribunal and its suggestion of a different interpretation cannot be decisive. The task of the Committee is not to pronounce itself on which interpretation is better or more plausible. If the Committee were to proceed in this way, it would have been treating, as the International Court of Justice observed, "the request as an appeal and not as a recours en nullité."107 The role of the Committee is rather to inquire whether the Tribunal manifestly exceeded its powers by failing to exercise its jurisdiction. The International Court of Justice has stated that "[s]uch manifest breach might result from, for example, the failure of the Tribunal properly to apply the relevant rules of interpretation of the Arbitration Agreement which govern its competence."108 In the present case, such arbitration agreement relied upon by Fraport is the BIT.
77.
The BIT, in its Article 9, provides for ICSID jurisdiction. Article 9 reads as follows:

"Settlement of disputes between a Contracting State and an Investor of another Contracting State.

1) All kinds of divergencies between a Contracting State and an investor of the other Contracting State concerning an investment shall be settled amicably through negotiations.

2) If such divergencies cannot be settled according to the provisions of paragraph (1) of this Article within six months from the date of request for settlement, the investor concerned may submit the dispute to:

a) the competent court of the Contracting State for decision;

b) the International Centre for the Settlement of Investment Disputes through conciliation or arbitration, established under the Convention on the Settlement of Investment Disputes between States and Nationals of other States, of March 18, 1965 done in Washington D.C.

3) Neither Contracting State shall pursue through diplomatic channels any matter referred to arbitration until the proceedings have terminated and a Contracting State has failed to abide by or to comply with the award rendered by the International Centre for Settlement of Investment Disputes.

4) The award shall be binding and shall not be subject to any appeal or remedy other than those provided for in the said Convention. The award shall be enforced in accordance with domestic law."109

78.
The Respondent’s objection to the jurisdiction of ICSID, and thus to the competence of the Arbitral Tribunal, was based on the assertion that Fraport’s investment was not an investment within the meaning of that term in the BIT, in other words that Fraport’s investment is not covered by the BIT, as it allegedly was not made in compliance with Philippine law.110
79.
So the critical question for the Tribunal was the determination whether Fraport’s investment was an investment to which the BIT was applicable, whether it was an investment as defined by the BIT.
80.
The Tribunal started its analysis by recalling the terms of Article 1(1) of the BIT which reads as follows:

"Definitions of Terms

For the purpose of this Agreement:

1. The term "investment" shall mean any kind of asset accepted in accordance with the respective laws and regulations of either Contracting State, and more particularly, though not exclusively:

a) movable and immovable property as well as other rights in rem, such as mortgages, liens, pledges, usufructs and similar rights;

b) shares of stocks and debentures of companies or interest in the property of such companies;

c) claims to money utilized for the purpose of creating an economic value or to any performance having an economic value;

d) intellectual property rights, in particular copyrights, patents, utility-model patents, registered designs, trademarks, tradenames, trade and business secrets, technical processes, know-how, and good will;

e) business concessions conferred by law or under contract, including concessions to search for, extract or exploit natural resources;

any alteration of the form in which assets are invested shall not affect their classification as an investment."111

81.
It was not disputed by the Respondent that the assets expended by Fraport in the Terminal 3 Project fall within the categories of assets as exemplified, of course not in an exclusive manner, in Article 1(1) of the BIT. The Respondent argued that Fraport’s assets were not "accepted in accordance with the respective laws and regulations of the [Philippines]". It was for this reason that the Arbitral Tribunal highlighted the quoted formula in the reproduction of the text of Article 1(1) of the BIT in paragraph 300 of its Award. The Tribunal observed "that as a result of the BIT’s wording, the arguments of both parties address at some length the interpretation to be given to the term ‘accepted’ used in the BIT."112
82.
Despite the above observation, the Arbitral Tribunal did not proceed immediately to the interpretation of Article 1(1) of the BIT, and in particular of the words "asset accepted in accordance with the respective laws and regulations of either Contracting State," contained therein.
83.
Instead, the Arbitral Tribunal focused its attention on what it considered were "the pertinent facts"113 of the case. It quoted extensively from a preliminary due diligence report on legal issues prepared for Fraport by the Philippine law firm Quisumbing Torres, from a due diligence report on financial issues prepared for Fraport by KPMG, from Fraport’s final report to its supervisory body, from some of Fraport’s other internal documents, from a confidential shareholders agreement of 6 July 1999 ("Pooling Agreement") and the Addendum to it. Based on the analysis of these documents and other facts it considered pertinent, the Arbitral Tribunal concluded that it was "persuaded from Fraport’s own internal and contemporaneous documents that it was consistently aware that the way it was structuring its investment in the Philippines was in violation of the ADL and accordingly sought to keep those arrangements secret."114
85.
In the arbitration under review, the Tribunal first reached certain conclusions on the facts, being convinced, or to use the language of the Tribunal "persuaded," that Fraport "was consistently aware that the way it was structuring its investment in the Philippines was in violation of the ADL."116 It thus formed its conviction regarding the conduct of Fraport in relation to the Philippines’ statute, the ADL, without first determining whether the ADL itself, and Fraport’s compliance with that statute, have a role to play in determining the Tribunal’s jurisdiction.
86.
Having thus first looked at the facts, the Tribunal proceeded to the determination of its jurisdiction with the following note:

"While this factual record is troubling, it does not eo ipso mean that the Tribunal is without jurisdiction ratione materiae to hear the substance of the claim. The Tribunal’s task is to make this determination in accordance with applicable legal standards."117

Having already been troubled by the factual record, the Tribunal next proceeded to a consideration of these applicable legal standards.

87.
In the section titled "The Applicable Legal Standards,"118 the Tribunal recalled its earlier observation that "the BIT at issue... has a jurisdictional limitation ratione materiae."119 The Tribunal thought that there were "four explicit provisions"120 which limit its jurisdiction ratione materiae, namely Articles 1(1) and 2(1) of the BIT, ad Article 2 of the Protocol to the BIT and a clause in the Philippines’ Instrument of Ratification.
88.
What do these provisions, identified by the Tribunal as the applicable legal standards, say and how did the Tribunal interpret them?
89.
Article 1(1) of the BIT provides that "[t]he term "investment" shall mean any kind of asset accepted in accordance with the respective laws and regulations of either Contracting State". The Tribunal stated that "[t]he qualification ‘accepted in accordance with the respective laws and regulations of either Contracting State’ applies to every form of investment covered by the BIT."121
90.
Article 2, quoted by the Tribunal, reads as follows:

"Each Contracting State shall promote as far as possible investments in its territory by investors of the other Contracting State and admit such investments in accordance with its Constitution, laws and regulations as referred to [in] Article 1, paragraph 1 [...] "122

91.
The next provision, identified by the Tribunal as the applicable legal standard, the provision ad Article 2 of the Protocol to the BIT, states the following:

"As provided for in the Constitution of the Republic of the Philippines, foreign investors are not allowed to own land in the territory of the Republic of the Philippines. However investors are allowed to own up to 40% of the equity of a company which can then acquire ownership of land."123

92.
Finally, the Tribunal felt necessary to quote the text of the Philippines’ Instrument of Ratification and further to highlight its second paragraph.124 The Committee considers that for the present purpose it is sufficient to reproduce just the highlighted paragraph of the Instrument of Ratification which reads as follows:

"Whereas, the Agreement [i.e. the BIT] provides that the investment shall be in the areas allowed by and in accordance with the Constitutions, laws and regulations of each of the Contracting Parties."

93.
The Tribunal attached to this part of the Instrument of Ratification a particular importance. In its view, "[b]ecause the exchange of instruments of ratification puts a treaty into effect in accordance with its terms, the second preambular paragraph emphasized above is particularly important in regard to the issue at bar."125
94.
The "issue at bar" was the determination of the jurisdiction of the Arbitral Tribunal under the BIT; whether Fraport’s investment was an investment within the meaning of the BIT as that term was defined in its Article 1(1); in other words, whether Fraport’s investment falls within the scope ratione materiae of the BIT. If it falls within it, the Tribunal would have jurisdiction over the dispute brought to it by Fraport under Article 9 of the BIT. If Fraport’s investment is not an investment within the meaning of the BIT, falling thus outside its scope ratione materiae, the dispute would not be within the Tribunal’s jurisdiction.
95.
The scope ratione materiae of the BIT, and the Tribunal’s jurisdiction, are governed by the provisions of the BIT itself. The provisions of the BIT are controlling, while a preambular paragraph of the Philippines’ Instrument of Ratification is not.126
96.
An instrument of ratification is a unilateral act by which a State expresses, on the international plane, its consent to be bound by a treaty.127
97.
It is true that through the exchange of the Instruments of Ratification of the Philippines and Germany, respectively, which occurred on 10 July 1997, the BIT entered into force in accordance with its Article 11. But that fact has no bearing on the scope ratione materiae of the BIT, nor does it provide any basis for attaching any particular importance to one of the two instruments of ratification.128
98.
The quoted paragraph of the Philippines’ Instrument of Ratification does not modify the legal effect of the BIT, nor was it established before the Tribunal that such was the intention of the Philippines. It was not formulated as a reservation, something extraordinary in the context of a bilateral treaty, nor as an interpretative declaration intimated to the other Contracting Party to the BIT, Germany, for its acceptance.129
99.
The Tribunal relied heavily on the Philippines’ Instrument of Ratification to determine whether Fraport’s investment fell within the meaning of the BIT.130 The Vienna Convention on the Law of Treaties is directly applicable to the interpretation of the BIT. However, the Tribunal did not provide any explanation based on the Vienna Convention for attaching so much importance to the Instrument, in its determination of the scope ratione materiae of the BIT and its jurisdiction.131
100.
The Tribunal proceeded to the interpretation of the above quoted provisions of Articles 1(1) and 2(1) of the BIT, of the provision of ad Article 2 of the Protocol, and of the second preambular paragraph of the Philippines’ Instrument of Ratification, which it considered as "manifestly limitations ratione materiae", observing that "their interpretation is not simple."132 It referred to Article 31 of the Vienna Convention on the Law of Treaties as "enjoin[ing] interpretation of particular provisions in their context, i.e. with reference to the rest of the treaty and in the light of its objects and purposes."133 The Tribunal observed simply that "there are three explicit references [to the condition] in the total of 16 provisions in the Treaty and Protocol plus an additional reference in the Instrument of Ratification", and concluded that "[t]he parties had in mind explicit constitutional limitations in the Philippines."134 One can understand that the Tribunal, from its perspective of assessing Fraport’s investment in the Philippines, was focused on the "constitutional limitations in the Philippines". However, the provisions of the bilateral treaty operate both ways, unless specifically provided otherwise.135 The BIT uses the formula "in accordance with the respective laws and regulations of either Contracting State." Of the all quoted provisions on which the Tribunal relied, only the one contained in the Protocol, ad Article 2, specifically refers to the Constitution of the Republic of the Philippines and the foreign ownership restrictions contained therein.136
101.
Article 31, paragraph 1, of the Vienna Convention on the Law of Treaties requires that a treaty be interpreted in accordance with the ordinary meaning to be given to the terms of the Treaty in their context and in light of its object and purpose.
102.
Fraport is highly critical of the way the Tribunal interpreted Article 1(1) of the BIT, alleging that the Tribunal disregarded the express language of the BIT, in particular the word "accepted" in the definition of the term "investment".137
103.
It is true that the Tribunal never expressly referred to the ordinary meaning of the terms of the BIT when it construed its provisions in order to determine its jurisdiction which had been challenged by the Respondent.138 Rather, it emphasized the object and purpose of the BIT. On the other hand, the Tribunal was certainly aware of the limits of relying on the object and purpose in the interpretation exercise when it observed that:

"while a treaty should be interpreted in the light of its objects and purposes [encouraging investment], it would be a violation of all the canons of interpretation to pretend to use its objects and purposes, which are, by their nature, a deduction on the part of the interpreter, to nullify four explicit provisions.139

104.
Further, it appears from the Award that the Tribunal did consider the express terms of Article 1(1) of the BIT, including the words "accepted in accordance with the respective laws and regulations of either Contracting State." It pointed to some linguistic differences in the German and English versions of the BIT140 but concluded that they do not appear to indicate an intentional nuance and hence be legally significant.141 Then it offered its analysis of Article 1(1) at two different places.
105.
First, in paragraph 343 of the Award, although the words of Article 1(1) are not expressly used, in particular the word "accepted" emphasized by Fraport in its argument, there is no doubt that the Tribunal considered them in its discussion. It starts paragraph 343 with the observation that "[b]roadly speaking, there are two types of international investments." It explains that "[t]he first is comprised of an investment based on or accompanied by some explicit agreement with or unilateral communication from the host state; the second involves an investment in the market of the host state without an accompanying specific agreement [...] "142 The Tribunal admits that "[t]he English version of the BIT might be read as applying Articles 1(1) and 2(1) only to the first type of investment."143 But it does not accept such reading of the BIT because, in its views, "such a construction would seem unreasonable and even doubtful for a number of reasons."144 It explains:

"First, it is unlikely that state parties would insist on compliance with their respective constitutions, laws and regulations only with respect to the first type of investment, but would, at the same time, discharge potential investors from such compliance with respect to the quite common type of investments in the second category. Second, ad Article 2 of the Protocol, which elaborates Article 2 of the Treaty, relates to purchasing shares in a company which might then acquire land in the territory of the Republic. The acquisition of shares by a foreign investor in a domestic corporation is a legal transaction that does not, by its nature, involve some action by the government involving acceptance or permission.... So it would appear that the material restrictions on investments relate both to investments of the first and second types."145

106.
Second, in another section of its jurisdictional analysis, titled "The Claimant’s Concealment of the Secret Shareholder Agreements,"146 the Tribunal specifically addressed Fraport’s argument that the word "accepted" in Article 1(1) of the BIT implies an acceptance régime for foreign investments to be established by the Contracting States. The Tribunal rejected for several reasons the Claimant’s argument that "the word ‘accepted’ in Article 1(1) of the BIT is critical to the operation of that provision and since the Philippines did not establish an acceptance regime, that provision does not apply."147
107.
Its first reason was that "the word ‘acceptance’ does not appear in the Instrument of Ratification, which simply states that ‘the Agreement provides that the investment shall be in the areas allowed by and in accordance with the Constitutions, laws and regulations of each of the Contracting Parties’."148 As explained above, this reason is not well founded in the rules of interpretation binding upon the Tribunal, as the Philippines’ Instrument of Ratification did not modify the legal effects of the provisions of the BIT which govern the jurisdiction of the Tribunal.149
108.
But the Tribunal also rejected Fraport’s contention on the basis that "without regard to that [i.e., the provision of the Instrument of Ratification], it is,..., unreasonable to assume that state parties would incorporate a reiterated insistence on compliance with their respective constitutions, laws and regulations only not to have them apply."150 In particular, the Tribunal supported its view, as a matter of treaty interpretation, by reference to ad Article 2 of the Protocol to the BIT,151 which elaborates Article 2 of the BIT itself. In accordance with Article 11(5) of the BIT, the Protocol "forms an integral part of this Agreement." Based on its construction of that provision, the Tribunal expressed the view that there is no need for an acceptance procedure for the purchase of shares, the form of putative investment in Fraport’s case, but that nevertheless "it is quite clear from the BIT and the Protocol that accordance with the host state’s law is nonetheless required."152
109.
The point which the Committee understands the Tribunal to be making here is that it would have been unnecessary for the Contracting Parties to add an express qualification to Article 2, recognising that "investors are allowed to own up to 40% of the equity of company which can then acquire ownership of land" (a form of acquisition which required no acceptance procedure), if the limitation in Article 2 vis-à-vis the "Constitution, laws and regulations" of each Contracting State applied only in cases where a specific acceptance regime had been put in place. Rather, the Tribunal considered that the need to add this provision supported a broader construction of the requirement, to include other limitations on the making of investments under the law of the respective Contracting States. Such a construction was applied by the Tribunal equally to the definition of the investments protected by the BIT in Article 1(1), a definition to which Article 2 cross-refers.
110.
An alternative and plausible interpretation of Article 1(1) of the BIT, submitted by Fraport, is that Article 1(1) contemplates the establishment of an acceptance regime. If the investment was accepted by the state under this regime, or, in the absence of an acceptance regime, if it fell within the definition of investment, then, it would constitute an investment for the purposes of the BIT which, being thus applicable to such investment, would provide protection to it (including through arbitration as envisaged in Article 9 of the BIT). On this interpretation, ad Article 2 of the Protocol was required in order to exclude an investment in land from the scope of Article 2 of the BIT. Otherwise such land ownership by foreign investors (being simply prohibited by the Constitution and, thus, not being an investment which could require an acceptance regime) would have been included within the BIT’s protections—the reverse of the objective to which the Philippines was committed under its Constitution. Once this specific exclusion from the scope ratione materiae of the BIT had been added, it was necessary to also add the qualification regarding minority shareholders in land-owning companies, since otherwise the exclusion would be inaccurate. Thus, the qualification found in ad Article 2 is neutral, so far as concerns the construction of the meaning of Articles 1(1) and 2 of the BIT, since ad Article 2 does not otherwise suggest that any investment must comply in all respects with Philippine law to fall within the scope ratione materiae of the BIT.
111.
But the Tribunal rejected Fraport’s interpretation. Instead the Tribunal held that "[p]lainly,..., economic transactions undertaken by a national of one of the parties to the BIT had to meet certain legal requirements of the host state in order to qualify as an ‘investment’ and fall under the Treaty."153
114.
It remains for the Committee to deal, in this part of its decision, with the third prong of Fraport’s criticism, namely the wrong application of the ADL and its "untenable interpretation" by the Tribunal.
115.
The Committee observes that the ADL, known as the Anti-Dummy Law, is a criminal statute of the Philippines as its official title clearly indicates: An Act to Punish Acts of Evasion of the Laws on the Nationalization of Certain Rights, Franchises or Privileges. If the Tribunal had interpreted Article 1(1) of the BIT as encompassing only those laws which admit investments through an acceptance regime by way of explicit agreement by the host state, then, as a criminal law statute, the ADL would not have played any role in the jurisdictional analysis of the Tribunal. Rather, the Tribunal took the view that "economic transactions undertaken by a national of one of the parties to the BIT had to meet certain legal requirements of the host state in order to qualify as an ‘investment’ and fall under the Treaty."154 This conclusion perhaps explains why the Tribunal turned to its interpretation of the ADL, although it nowhere expressly stated the ADL contains "legal requirements" which "an economic transaction...had to meet...in order to qualify as an investment."
116.
The Committee does not consider it appropriate to review, in the context of an annulment procedure, the findings of the Tribunal that Fraport violated the ADL, or whether it was legally possible for Fraport to be a perpetrator of the violations of the ADL’s Section 2-A. Nor does the Committee express a view on Fraport’s argument that in the absence of a principal offender (who can, as Fraport stresses, be only a Philippine national), Fraport cannot be liable as aider or abettor.155
117.
The Tribunal’s Members were not experts in Philippine law. Therefore the interpretation and construction of the Philippine law, to the extent it was relevant, should have been based on the evidence and research as to the actual application of that law by the competent Philippines’ organs. How the Tribunal proceeded on this issue is the subject of the Committee’s analysis in the next section of this Decision.
118.
To conclude this section, devoted to the question of whether the Tribunal manifestly exceeded its powers when it declared the Centre without jurisdiction and itself without competence to hear the dispute and resolve it, the Committee, applying the test for review as outlined above, is of the view that it would trespass the limits of its annulment powers, transforming itself in an organe d’appel, if it were to uphold Fraport’s claim that the Tribunal manifestly exceeded its powers.

B. Serious Departure From a Fundamental Rule of Procedure (Article 52(1)(d) of the ICSID Convention)

119.
The second ground for annulment of the Award relied upon by Fraport in its Application for Annulment is "that there has been a serious departure from a fundamental rule of procedure", the ground provided for in Article 52(1)(d) of the ICSID Convention.

a) Fraport’s Case

120.
Fraport alleges that the Tribunal committed a serious departure from a fundamental rule of procedure in two respects:

(a) In disregarding the principles required to be respected in determining whether a criminal law had been violated, specifically the principles of nullum crimen sine lege and in dubio pro reo156 This ground of complaint relates in particular to the manner in which the Tribunal approached the construction of the ADL;

(b) By relying upon evidence admitted after the close of proceedings in denial of Fraport’s right to be heard.157 This ground relates in particular to the Tribunal’s decision to admit evidence from the investigation leading to the decision of the Philippines Special Prosecutor on the criminal complaint concerning Fraport’s alleged breach of the ADL ("the Prosecutor’s Resolution"158) after the closure of the proceedings, without providing the parties with an opportunity to be heard as to the effect of the material produced to the Tribunal.

(i) Nullum crimen sine lege/ in dubio pro reo

121.
In its Memorial, Fraport submits, with the support of an expert Opinion of Professor Cassese dated 9 September 20 08,159 that the general principle of due process includes the requirement to apply the principles of nullum crimen sine lege and in dubio pro reo in the construction of the ADL.160 The ADL is a criminal statute and these principles are applicable, even where such a statute is applied only incidentally in the context of international arbitral proceedings. Failure to do so amounts to the breach of a fundamental rule of procedure.161
122.
In its Reply, Fraport submits that in dubio is a fundamental procedural rule "necessitated by the application of criminal law in the arbitration".162 It relies upon a further Opinion of Professor Cassese dated 14 February 2009.163 Professor Cassese opines that international tribunals may need to determine issues relating to the criminal liability of individuals when they apply national criminal law for the purpose of ruling on an issue preliminary and incidental to the public international law dispute. International tribunals are bound to apply national law as interpreted and applied by national courts, unless the national interpretation is manifestly unreasonable. Compliance with the nullum crimen principle is required in the Philippines both by the Constitution and by treaties to which the Philippines is party. Fraport submits that such a principle has a jus cogens character and binds international tribunals.
123.
Responding to the argument that in dubio cannot apply in international arbitration because it would be contrary to the principle of equality,164 Professor Cassese expresses the view that this distinction is merely semantic, since:

"[t]he notion of ‘presumption of innocence’ is intended to convey the idea that nobody can be held to be responsible for any misconduct, whether civil (a tort) or criminal (a penal offence), without his being first heard..."165

124.
At the hearing, Fraport developed the application of these principles in the context of the approach of the Tribunal in the present case, in the light of Article 52(1)(d).166 It submitted that nullum crimen and in dubio are expressions of the right to a fair trial in any case where a court or a tribunal is applying criminal law.167 It relied, inter alia, upon Orr v. Norway168 for the proposition that the criminal presumption of innocence is still applicable in the context of civil proceedings where criminal law features are apparent in the civil court’s reasoning.169
125.
Fraport emphasises that the ADL is a criminal statute.170 It submits that the protections of Article 52(1)(d) are not to be reduced to merely technical rules of procedure, but rather include those emanations of the right to a fair trial and those principles of natural justice that govern any kind of legal procedure, including arbitral procedure.171
126.
Fraport submits that the Award shows on its face that the Tribunal did not approach the evidence as to Fraport’s breach of Section 2-A of the ADL applying such a presumption. The Tribunal expressly accepted that a literal interpretation of the ADL would not cover Fraport’s conduct,172 but nevertheless proceeded to find that Fraport had infringed the law by applying the Tribunal’s own view of the proscribed conduct, which found no support in the text of the ADL itself.173 Fraport submits that the Tribunal proceeded on the basis of a ‘preconviction’ against Fraport, and did not entertain the possibility of doubt, in violation of the principle in dubio.174

(ii) The right to be heard

127.
The second basis on which Fraport alleges that there had been a failure to observe a fundamental rule of procedure is that the Tribunal failed to hear it by way of rebuttal on the significance of new evidence admitted after the closure of proceedings, in breach of its right to be heard.
128.
The Philippines does not dispute that a failure to accord a right to be heard could constitute a breach of a fundamental rule of procedure,175 thus opening the way to annulment under Article 52(1)(d). The issues under this heading relate to the application of the principle in the context of the procedures in fact adopted by the Tribunal. The essential facts as to these procedures are not in dispute, being a matter of record in the arbitration.
129.
In its Application for Annulment, Fraport submits that the Tribunal breached this principle in admitting evidence and substantively relying upon it after the close of proceedings without giving Fraport an opportunity to address the new material.176
130.
This submission was developed in its Memorial by reference to the documents from the file in the arbitration proceedings.177 Fraport contends, on the basis of this record, that its right of rebuttal in relation to the admission of this evidence has been violated in three respects:

(a) The majority of the Tribunal concluded that Fraport’s transaction counsel, Dr Stiller, had testified falsely in the Philippines without allowing Fraport or the witness to be heard on that serious but untenable ruling;178

(b) The majority made an outcome-determinative, but incorrect, factual characterisation of the record before the Philippine Prosecutor. The majority held that the critical factual question in relation to the Prosecutor’s Resolution was whether the secret shareholder agreements had been part of the record and considered by the Prosecutor.179 This question was not disclosed to the parties, who thus did not have an opportunity to confront the evidence upon which the Tribunal relied.180 Fraport argues that the Tribunal’s conclusion that the two such agreements which were dispositive could not have been disclosed to the Prosecutor because of confidentiality agreements in the arbitration was incorrect; and

(c) The majority acknowledged that, if the facts concerning these materials had been different, its decision on jurisdiction would have been different, since it would have accorded effect to an estoppel created by the Prosecutor’s decision that the ADL had not been breached.181

131.
In its Reply,182 Fraport submits that the right to be heard includes the right to confront primary facts.183 Its application on this ground relates to primary facts, and not simply to inferences which the Tribunal might decide to draw from them. The material in question is the decision of the Special Prosecutor and his documentary record.184
132.
As to waiver, Fraport submits that the Tribunal had informed the parties that the procedure was used merely to complete the record rather than consider it in substance:

"[T]he Majority changed the purpose for receiving the underlying materials without informing the parties. The change in purpose was not communicated to Fraport, which is why Fraport could not respond and - as a consequence -was denied the right to be heard."185

133.
At the hearing before the ad hoc Committee, Fraport did not further develop its submissions on this issue in opening, resting its case on the written pleadings.186 In reply to the Respondent’s arguments, Fraport addressed the extent of the disclosure as to the shareholder agreements in the record in the arbitration, and before the Philippine Prosecutor.187 It submitted that the Tribunal should have afforded Fraport an opportunity to be heard about the legal question of whether a finding by the Philippine Prosecutor bound the Tribunal and about the factual question of whether the shareholder agreements (including the Pooling Agreement) had in fact been produced to the Prosecutor.188 These questions implicate both the equality of arms between the parties and the opportunity to confront the particular questions of concern to the Tribunal. Each of these are related, but distinct, aspects of the right to be heard.189

b) The Philippines’ Response

(i) Nullum crimen sine lege/ in dubio pro reo

134.
The Philippines, in its Counter-Memorial, supported by expert Opinions filed by Professors Pellet, Pocar and Schreuer, submits that the Tribunal did not seriously depart from a fundamental rule of procedure in this respect, since nullum crimen sine lege and in dubio pro reo are not rules of procedure. Rather nullum crimen is a substantive rule, and in dubio establishes a standard of evidential proof applicable only to criminal cases.190 In any event, the Philippines contends that the Tribunal had not infringed either principle.
135.
In its Rejoinder,191 which was accompanied by a further round of supplemental expert opinions, the Philippines develops its submission that in dubio and nullum crimen are not rules of procedure. Professor Pellet accepts that such principles are general principles of law, but disagrees with the proposition advanced by Professor Cassese that they have a jus cogens character.192 He opines that to apply the principles in the context of the issue before the Tribunal would be to mistake the nature of its task, which was not to sentence Fraport for a criminal offence, but to determine the conformity of Fraport’s investment with the relevant provisions of Philippine law.193
136.
This question would have been the same, whether or not the ADL were a criminal statute, since, even if it were not, there would still be "a legal prescription which needs to be given effect, whatever the sanction of its non-compliance might have been under Philippine law".194Nullum crimen as a general principle of law applies only to criminal proceedings. It finds no recognition in international instruments outside that context.195 When international tribunals have applied it, they have done so in order to assess the conformity of a municipal law or the decision of a municipal court with the international obligations of the state, not to apply the principle to the underlying municipal law case.196
137.
Professor Pocar adds that the reason why the principle of legality has become a norm of customary international law is in order to protect persons accused of criminal acts from the abuse of state power by judges and prosecutors. He explains:

Where, outside of criminal proceedings, the values protected by the principle of legality are not in jeopardy, its application is unjustifiable as it would end up protecting one side - the beneficiary of the more restrictive interpretation that this principle entails - over the other without a proper ground for such more favourable treatment.197

138.
Even if the principle of nullum crimen were applicable, this did not necessarily mandate a literal interpretation, since fidelity to the law requires interpretation in the light of the context and purpose of the particular provision.198
139.
At the hearing before the ad hoc Committee, the Philippines developed these points.199 It submitted that Article 52(1)(d) was designed to ensure that parties were accorded "basic guarantees of due process".200 It argued that Fraport’s submissions in relation to nullum crimen and in dubio failed for three reasons:

(a) Because both principles only apply in a criminal context, they cannot be considered a fundamental rule of procedure for ICSID purposes;

(b) Even in the criminal context, they can not properly be considered procedural rules; and,

(c) The Tribunal did not in any event contravene either principle, even if they were applicable.201

140.
The Philippines points out that the in dubio principle applies in criminal proceedings, as a reflection of the fact that the state has many advantages at its disposal in such proceedings, including compulsory powers to obtain evidence and the right to indict. Moreover, the interest at stake in criminal proceedings is the liberty of the person.202 Neither of these factors is present in international arbitration, and the application of the principles would therefore serve to distort the equality of the parties. It would lead to absurd results if, in order to determine admission in accordance with host state law, the Tribunal were bound to apply a higher standard of proof to more serious violations of the criminal law than to less serious violations of the civil law.203
141.
A procedural rule is one which governs the work of the tribunal and the conduct of the proceedings, and not the manner in which it interprets the applicable law or assesses the evidence.204
142.
In the view of the Philippines, the approach of the Tribunal in this case could not be criticized on the ground that it had failed fairly to assess the evidence, since it has been widely held by annulment committees that an arbitral tribunal is its own judge of the admissibility of any evidence, and of its probative value.205 An alleged defect in the Tribunal’s approach to the evidence could not therefore amount to the breach of a fundamental rule of procedure.206
143.
The Philippines stresses that the fundamental question is simply whether the parties had been treated fairly by the Tribunal.207 It accepts that a failure to accord a fair hearing would constitute a breach of Article 52(1)(d), but submits that this right has not been violated in any respect in the present case.

(ii) The right to be heard

144.
The Philippines submits in its Counter-Memorial208 that Fraport did not choose to present detailed submissions on the ADL during the course of the hearing, despite the fact that it was on notice of the importance that the Tribunal attached to the construction of the ADL in the light of the shareholder agreements.209 Then, in its post-hearing written submissions, Fraport did in fact address in some detail the proper construction of the ADL.210
145.

Turning to the position following disclosure of the Prosecutor’s Resolution, the Philippines submits that:

(a) Fraport was heard on the completeness of the record before the Philippine Prosecutor. Fraport pointed out the incompleteness of the record by letter to the Tribunal.211 In response, the Tribunal invited Fraport to supplement the record by providing the Tribunal with copies of the documents listed in its letter.212 Fraport continued thereafter to make submissions by letter to the Tribunal as to the completeness of the record;213

(b) Fraport was heard on the explanation for the statements made to the Philippines Department of Justice by Dr Stiller, since he had in fact given evidence before the Tribunal as to the construction of the Pooling Agreement, which the Tribunal considered and expressly rejected;214

(c) The factual findings about the Department of Justice’s access to evidence that Fraport claimed were incorrect were not outcome-determinative. Fraport had in fact submitted at the oral hearing that the Philippines had access to the shareholder agreements.215 In any event, the Tribunal expressly pointed out that the knowledge of the Prosecutor many years later was not relevant to the question of whether the Philippines knew of the agreements in 1999, when the investment was admitted.216 Further, the Tribunal did not consider the municipal decision binding upon it;217 and

(d) Finally, the Philippines submits, relying on ICSID Arbitration Rule 27, that Fraport had waived the right to challenge the irregularity of the Tribunal’s proceeding in this regard, not having made such an objection to the Tribunal at the time.218

146.
In its Rejoinder, the Philippines contends that the Tribunal had respected Fraport’s right to be heard in addition because:

(a) The interpretation of the ADL was within the legal framework of the dispute, since it had been raised in the pleadings and at the hearing;219 and

(b) Fraport had the opportunity to be heard on the evidentiary record before the Philippine Department of Justice:

(i) The Tribunal’s request for production of documents after closure of the arbitral proceedings was proper under Article 43 of the ICSID Convention, even after the closure of proceedings;220

(ii) Fraport had the opportunity to address the completeness of the record. In fact it did so in its correspondence with the Tribunal. The Tribunal’s direction limiting further submissions was fair because it applied to both parties;221 and

(iii) Fraport had waived its right to object. Its correspondence in response to the Tribunal’s request demonstrated that it was well aware of the importance of demonstrating the extent to which the Prosecutor had knowledge of the shareholder agreements.222

147.
At the hearing before the ad hoc Committee, the Philippines submitted that:223

(a) The Philippines had argued that Fraport had violated the ADL in its posthearing submissions, to which Fraport had had an opportunity to reply.224 At the hearing itself and in its post-hearing briefs, counsel for Fraport had, to the contrary, declined to take the allegations in relation to breach of the ADL seriously and to confront them,225 even when the point was put to it expressly by the Tribunal;226 and

(b) As far as the later introduction of the Prosecutor’s Resolution and file was concerned, the Philippines notes that Fraport had not alleged in the annulment proceedings that the Prosecutor had had access to the Pooling Agreement; merely that he had had access to documents which referred to it. Thus the Tribunal was well entitled to reach the conclusion that this would not be sufficient to persuade the Prosecutor that there was proof of a violation of the ADL.227 The issue was not in any event outcome-determinative, since the Tribunal held that, for an estoppel to arise, the Philippines would have had to have been aware of the Pooling Agreement at the time the investment was made.228

148.
In the course of the oral submissions by way of rejoinder, the Philippines responded to two specific questions raised by the ad hoc Committee in relation to the ADL prosecution in the Philippines:

(a) First, it accepted (subject to its checking) that the only underlying evidence of law as to the construction of the ADL (as opposed to the statute itself or contemporaneous evidence of fact) relied upon before the Tribunal was two Department of Justice Opinions (Nos 141 and 165229) and the decision of the Supreme Court in Luzon.230 The Philippines submits that these Opinions went to the question of the construction of the shareholding restriction under the Foreign Investment Act and not to other means of control proscribed by the ADL;231 and

(b) Second, the Philippines informed the Committee that the Department of Justice proceedings in the Philippines were still pending. Since the decisions of the Prosecutors which had been disclosed in the arbitration proceedings, there were pending motions for reconsideration and petitions for review. The DOJ had completed its investigation, but no Criminal Information had been filed.232

c) The Arbitral Tribunal’s Approach

149.
In the light of these submissions, it is therefore in the first place important for the Committee to consider carefully (i) the manner in which the Tribunal proceeded in relation to the new evidence produced after the oral hearing, and some of it even after the closure of the arbitral proceeding, relating to the Prosecutor’s Resolution; and (ii) its significance in the light of the issues found to be dispositive by the Tribunal in its Award.

(i) Procedural treatment of new evidence on the ADL

150.
The Tribunal had closed the arbitral proceedings pursuant to ICSID Arbitration Rule 38 on 25 October 2006 in the following terms:233

Having deliberated the Tribunal, unanimously, denies Claimant’s request of 4 October 2006 for leave to file a further written submission.

The Tribunal is of the view that the presentation of their case by both parties is now completed and the instant proceedings are hereby declared closed.

Nevertheless, the Tribunal’s Procedural Order of 18 July 2006, as it pertains to the ongoing expropriation proceedings in the Philippines, remains in effect and Respondent is accordingly directed to keep the Tribunal (and Claimant) informed of the status of those proceedings.234

151.
Then, on 5 January 2007, the Philippines submitted to the Tribunal the Prosecutor’s Resolution dismissing the criminal complaint under the ADL.235 The Philippines stated in its letter that the Prosecutor’s dismissal had been made on the basis of only two publicly available documents, namely Fraport’s Request for ICSID Arbitration and the Report of the Senate Blue Ribbon Committee.
152.
Fraport responded on 8 January 2007 by submitting evidence to show that this statement was incorrect.236 The Prosecutor, Fraport claimed, had in fact had access to extensive witness and documentary evidence, some of which Fraport referred to in its letter.
153.
The Tribunal requested Fraport, on 9 January 2007, to produce two documents referred to in its letter of 8 January (and offered to the Tribunal if it so requested) as establishing that the Philippines’ assertion that only two documents have been available to the Prosecutor was incorrect.237 Fraport provided these on 10 January 2007, adding:

"Please understand that we do not have a full record of the DOJ proceeding.... We do not know the extent to which the DOJ’s decision was premised on other documents and investigative materials in addition to those indicated in the exhibits to this letter."238

154.
The Philippines replied on 11 January 2007 asserting that: "[t]he Philippine DOJ, by contrast, has never had the central evidence proving Fraport’s violations of the Anti-Dummy Law," including, inter alia, the secret shareholder agreements.239 The Philippines claimed that these had been kept from the Prosecutor by reason of the confidentiality order in the arbitration, and Fraport’s own blocking application in the German courts. The letter accepted that further documents in addition to the two original mentioned in its letter of 5 January 2007 had been available to the DOJ. Fraport replied on 12 January 2007, reiterating: "we do not have a full record of the DOJ proceeding and thus do not know all the documents that were before it."240
155.

In these circumstances, on 14 February 2007, the Tribunal directed the Philippines to submit to it additional evidence submitted to the Prosecutor, together with relevant Philippines legislation. The request included "all documents, transcripts, statements or other evidence received by the DOJ Prosecutor in the course of his investigation." The Tribunal expressly stated:

"The present request is not a decision by the Tribunal to reopen the proceeding under ICSID Arbitration Rule 38. The Tribunal merely seeks to complete the evidentiary record which the Parties have constituted with their attachments to Respondent’s letter of 5 January and Claimant’s letter of 10 January.

Until further notice, the Tribunal does not wish to receive any submissions with respect to this material from either Party.

After considering the documents which it has requested, the Tribunal will determine whether it requires additional clarification from the Parties. In the meantime, it continues its deliberations."241

156.
When the Philippines requested an extension of time to submit these documents, which was opposed by Fraport,242 the Tribunal on 28 February 2007 granted the extension, noting that the documents "were pertinent to its continuing deliberations" and that, nevertheless, "its Decision/Award will be issued within as short a time as possible after submission of these documents."243
157.
In response to the Tribunal’s order, on 14 March 2007, the Philippines submitted a documentary record of more than 1900 pages, stating that this included "the entirety of the Department of Justice’s Chief State Prosecutor’s file in the Philippine antidummy cases."244 The letter continued:

"The DOJ file does not include the confidential Fraport due diligence documents, final holding report, or the shareholder and loan agreements of PIATCO and Fraport that were presented to the Tribunal in this arbitration and relied upon by Respondent in its submissions."

158.
Further, on 19 March 2007, the Philippines produced the Prosecutor’s Resolution of 15 March 2007 on Reconsideration of his earlier decision.245
159.
Fraport responded on 26 March 2007, referencing a number of documents (comprising evidence given by Fraport officials in the DOJ investigation) which the Philippines had not produced in compliance with the Tribunal’s order.246 Fraport stated:

"We would be happy immediately to provide copies of the above documents should the Tribunal wish to have them. Most bear stamps indicating receipt by the Philippines Department of Justice. We of course do not know whether there may have been other documents received by the DOJ that the Tribunal also has not received from Respondent."

160.
On the same day, the Tribunal invited Fraport to produce copies of the documents listed in its letter "in order to complete the evidentiary record."247 This Fraport did by return.248
161.
The Philippines responded to Fraport’s letter on 30 March 2007. It produced further documents and gave the following explanation of the omissions in its previous production of documents:

"The Respondent’s production of documents on 14 March 2007 was the product of an extensive search by lawyers in the OSG [Office of the Solicitor-General] of the DOJ Prosecutor’s files relating to the anti-dummy investigations. The OSG is not a party to the DOJ proceedings and relies on the DOJ for access to these documents. Respondent was informed that its production to the Tribunal was complete. As is the case with government agencies in many developing countries, the Philippine DOJ Prosecutor’s Office is overworked and understaffed, and its recordkeeping can be imperfect. This is the circumstance that Respondent described during the discovery process in this proceeding that necessitated the lengthy and repeated efforts to locate documents in various agencies. Any omission in Respondent’s production was unintentional and inadvertent....

Respondent will supplement its production if any additional responsive documents are located."249

162.
Following further correspondence from the parties, dealing inter alia with allegations as to the extent to which the Prosecutor’s Reconsideration had been procured by the Philippines in order to assist its defence in the arbitration,250 the President of the Tribunal wrote to the parties on 19 April 2007 to curtail the need for further correspondence.251 The Tribunal repeated and enlarged this direction on 23 April 2007 in the following terms:

"Until further notice, the Tribunal directs the Parties to cease and desist from sending any further letter to the Tribunal. This also applies to any further update by the Respondent in respect of the ongoing expropriation proceedings in the Philippines."252

163.

The Tribunal did not communicate further with the parties until, on 13 June 2007, it wrote:

"[T]he Tribunal is now of the view that the presentation of their case by both parties is completed and accordingly, pursuant to Arbitration Rule 38, the proceeding is now declared closed in its entirety."253

(ii) Consideration of the ADL in the Award

164.
The Tribunal referred to two categories of evidence relating to the construction of the ADL in its Award: first, factual evidence from Fraport’s contemporaneous documents relating to legal advice which it had received and its reactions to it; and, second, the evidence from the Prosecutor’s file as to the ADL proceedings.
165.
As to the contemporaneous evidence of fact, the Tribunal referred to the following:254

(a) A due diligence report from Fraport’s Philippine lawyers, Quisumbing Torres ("QTj dated 11 January 1999;255

(b) A provisional due diligence report from KPMG of 20 January 1999;256

(c) Fraport’s final report to its supervisory body dated 26 February 1999;257

(d) The PIATCO Master Concession Concept Brief of 19 January 1999, which referred to the need to conclude a shareholders’ agreement in accordance with Philippine law;258

(e) The comments by Dr Schmidt recorded in the minutes of a meeting of Fraport’s Supervisory Board;259 a letter dated 18 December 1998 from the Chairman and President of FRAPORT to the Asian Development Bank, one of the Senior Lenders;260 and a letter from Jesse Ang, CFO of PIATCO, to John Archer of Fraport261 which attached the Concept Brief referred to at (d) above;262

(f) The Pooling Agreement dated 6 July 1999 itself263 and the Addendum to that Agreement;264

(g) Questions raised by Mr Vogel of Fraport to QT on 14 December 1999;265

(h) A letter from Mr Struck to QT that followed the SyCip report,266 which indicated concern at the content of QT’s prior advice; and

(i) A further letter from QT dated 21 December 1999.267

166.
The evidence as to the ADL proceedings to which the Tribunal referred was as follows:268

(a) In 2003, two Philippine lawyers, Messrs. Balayan and Bernas complained to the National Bureau of Investigation ("NBI") that the officers and directors of Fraport and PIATCO had violated the ADL based on Fraport’s ownership of 61.44% of PIATCO’s shares. The Complaint was based solely and expressly on statements made by Fraport in the Request for ICSID arbitration;269

(b) The NBI Report, issued on 10 June 2004,270 found that the Supreme Court’s annulment of the PIATCO concession occurred before Fraport could exercise any managerial control it could have acquired in violation of the ADL. The 10 June 2004 report was followed by Reports dated 13 February 2006,271 13 June 2006272 and 16 June 2006273 and Evaluation Comments dated 28 July 2006;274and

(c) On 27 December 2006, the Prosecutor’s Resolution rejected the NBI’s recommendation to prosecute the officers and directors of Fraport and PIATCO for their "intent" to breach the ADL.275

167.
Against that background, the Tribunal turned, in Part V Section D of its Award, to a consideration of its interpretation of the ADL. The Tribunal held that Fraport had not infringed the level of equity investment permitted to a foreign investor in a Philippine public utility.276 But it found that an ADL violation might alternatively be established by

"an actual demonstration of managerial control, in which case the quantum of equity in the company is irrelevant."277 The Tribunal accepted that managerial control by means of a shareholder meeting did not infringe a literal interpretation of the ADL. But it decided:

"[A] literal interpretation here could produce an absurdity.... The Tribunal construes this part of the ADL as covering intervention by shareholders, if that is the actual means of intervening in "the management, operation, administration or control" of PIATCO."278

168.
The Tribunal then considered, in Section E of the Award, the ADL Proceedings in the Philippines. Noting that the Prosecutor had, by his Report of 27 December 2006, rejected the recommendation of the NBI that Fraport and its officers be prosecuted for their intent to violate the ADL, the Tribunal repeatedly observed that the Report did not give "any indication of awareness of the actual secret shareholder agreements by which the management and control prohibited by the ADL was effectively assigned to Fraport."279
169.
The Tribunal then stated that it had decided:

"to review the full record of evidence regarding the ADL proceedings which resulted in the Department of Justice’s Chief State Prosecutor’s Resolution of 27 December 2006 (the "Prosecutor’s Resolution") dismissing the Bernas and Balayan complaints. Accordingly... it requested all of those documents from the Respondent, and the Claimant supplemented the record with other documents."280

170.
The Tribunal continued by citing an extensive extract from the letter from the Philippines to it dated 11 January 2007 in which the latter submitted that its Department of Justice had never had the central evidence as to the secret shareholder agreements. The Tribunal conducted its own review of the Prosecutor’s Report and those documents in his file which had been produced to and inspected by the Tribunal. It concluded from that review that, although there were references to Fraport’s control of PIATCO and some shareholder agreements, there was no evidence that the Prosecutor had seen the critical secret shareholder agreement, namely the Pooling Agreement.281
171.
The Tribunal then cited from evidence filed by Dr. Stiller in the ADL Proceedings on 8 December 2006 and 19 January 2007, contrasting it with Dr. Schmidt’s advice to the Fraport Board of 7 March 1999.282
172.
The Tribunal pointed out that the Complainants may have suspected that there was a conspiracy on the part of Fraport to control PIATCO, but found that they had not had access to the secret shareholder agreements. Thus the Tribunal observed:

"Not surprisingly, the theories put forward by Bernas and Balayan, without the benefit of the secret shareholder agreements, could not and did not persuade the DOJ Prosecutor. As every lawyer knows, to bring an indictment and initiate a criminal prosecution, one needs evidence and not theories. The evidence was to be had in the secret shareholder agreements. The ADL charges were accordingly dismissed."283

173.
Finally, in this section, the Tribunal referred to Fraport’s letter to it of 16 March 2007, but observed that Fraport was not able to point to the Prosecutor having had access to any of the secret shareholder agreements.284
174.
Section F of the Award considers the effect of "[t]he Claimant’s Concealment of the Secret Shareholder Agreements." The Tribunal rejected the submission that the issue was not dealt with by the Philippines’ experts on the basis that most of the evidence in relation to it was produced either immediately before or at the hearing itself.285 It held that the Philippines could not be estopped from making the point, as Fraport had concealed the relevant agreements.
175.
As a matter of law, the Prosecutor’s decision could not bind the Tribunal, since there was not sufficient identity of parties and claim. The proper extent of the Tribunal’s jurisdiction was a matter for it and it could not be bound as to that question by the decision of a municipal legal institution.286
176.
But in any event, Fraport’s submissions were rejected by the Tribunal as a matter of fact. The Tribunal considered that, irrespective of the standard of proof which was applied, "this is a case in which res ipsa loquitur. The relevant facts, all of which are found in Fraport’s own documents, are incontrovertible."287
177.
Thus, the Tribunal concluded:

"Fraport knowingly and intentionally circumvented the ADL, by means of secret shareholder agreements. As a consequence, it cannot claim to have made an investment "in accordance with law."... Because there is no

"investment in accordance with law", the Tribunal lacks jurisdiction ratione materiae.288

d) The Committee’s Analysis

(i) Construction of Article 52(1)(d) of the ICSID Convention

(ii) Nullum crimen sine lege/in dubio pro reo

(iii) The content of the right to be heard

(iv) The issue raised by the Tribunal’s treatment of new evidence on the ADL

e) Conclusions on the Right to Be Heard Before the Arbitral Tribunal

(i) As to the factual record before the Philippine Prosecutor

(ii) As to the implications of the Prosecutor’s Resolution on Section 2-A of the ADL

C. Failure to State the Reasons

a) Introduction

248.
The third ground for annulment of the Award raised by Fraport is "that the award has failed to state the reasons on which it is based": Article 52(1)(e) of the ICSID Convention. The ad hoc Committee in CDC v. Seychelles observed:

"Annulment under Article 52(1)(e) is permissible where a tribunal fails to state the reasons on which its award is based. This ground for annulment has been a cause of great concern to commentators since, unlike (b) and (d), it does not include any limiting terms such as ‘manifest’, ‘serious’ or ‘fundamental’. Early on, ad hoc Committees interpreted this clause in such a way that it appeared to allow inquiry into the sufficiency or substance of the reasons offered."377

249.
The ground for annulment under Article 52(1)(e) relates to the requirement expressed in Article 48(3) of the Washington Convention that "[t]he award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based." The rationale for a reasoned award as required by Article 48(3) of the Washington Convention is that the parties will want to assure themselves that the Tribunal properly understood the questions before it as stated by the ad hoc Committee in MINE:

"The Committee is of the opinion that the requirement that an award has to be motivated implies that it must enable the reader to follow the reasoning of the Tribunal on points of fact and law. It implies that, and only that. [...] In the Committee's view, the requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A. to Point B. and eventually to its conclusion, even if it made an error of fact or of law. This minimum requirement is in particular not satisfied by either contradictory or frivolous reasons."378

250.
Reasons are important to the legitimacy of the decision. The obligation to give a reasoned award is a guarantee that the Tribunal has not decided in an arbitrary manner. The parties will want to assure themselves as to how the Tribunal reached its conclusions and whether such conclusions can be challenged before an ad hoc committee. Such a challenge, nevertheless, can only take place in the very limited setting of Article 52 of the ICSID Convention of reviewing the legality of the award without retrial of the factual and legal issues dealt with by the tribunal.

b) Parties’ Submissions

251.
First, Fraport contends that the Tribunal failed to give reasons for its finding that it violated the ADL.379 It submits that there are no reasons with regard to its alleged breach as principal or accessory. The fact that the parties are unclear about the meaning of the reasons set forth in paragraph 356 of the Award, according to which "[t]he Tribunal construes this part of the ADL as covering intervention by shareholders, if that is the actual means of intervening in ‘the management, operation, administration or control’ of PIATCO," shows that the Award fails to give an understandable decision.380 There cannot be violation by an accessory in the absence of a violation by a principal and there was no finding of a violation by PIATCO as a principal.381 The Tribunal would have to find with regard to the criminal act of the principal that a company holding a reserved interest such as a public utility concession permitted or allowed a non-Philippine party to intervene in the management, operation, administration or control of the company holding the reserved interest, and that the manner of intervention, which the company holding the interest permitted, was "as an officer, employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice." With regard to accessory, the Tribunal would have to find that a person (not a corporation) carried out an act objectively aiding, assisting or abetting the act of the principal and did so knowingly, i.e., in full knowledge of the acts of the principal and that its own action was aiding, assisting or abetting.382 Fraport contends that the Award is devoid of any factual finding of the existence of a constitutionally defined category of public utility with respect to which the ADL could be applicable, and asserts that the Tribunal did not state reasons as to how a public utility can be said to exist because the date of nullification of the Terminal Concession was prior to the Terminal becoming operational.383 Fraport criticizes the Award further for providing no reason as to why the QT Report and letters should have given Fraport knowledge that the Pooling Agreement could result in intervention in PIATCO management in violation of Philippine law nor as to why, having received advice that the employment of aliens by PIATCO was restricted by the terms of the ADL, Fraport knew or should have known that participation as a shareholder in a preliminary meeting could violate the ADL. According to Fraport, the Award also fails to state reasons with regard to the mens rea.384
252.
Second, Fraport says that the Award does not give reasons for its conclusion that it violated the ADL. Fraport cites paragraph 395 as a "prime example" of reasons that do not enable one to follow how the tribunal proceeded from point A to point B and eventually to its conclusion.385 The Applicant says that paragraph 395 contradicts the majority’s hypothesis of a reference to Philippine law in Article 1 of the BIT and is even in itself contradictory. The majority of the Tribunal argues that, despite a reference to Philippine law, the commission of the actus reus in Section 2-A of the ADL, consisting in "permitting or allowing" a third party to intervene in the "management, operation or control" of a public utility concession falling within Section 2-A, is unnecessary for finding a breach of Philippine law as "the relevance of compliance with national law for jurisdiction ratione materiae purposes is at the moment of the investment",386 i.e., before any actus reus can be performed. The majority of the Tribunal also cites the part of Section 2-A of the ADL which allows for the act of assistance to be performed during the planning phase. Fraport alleges that the reader cannot determine whether what the majority had in mind was something describing an attempt to commit a breach of Section 2-A by a principal or attempted aiding and abetting. There is no guidance in the Award which of the two alternatives was on the majority’s mind, as the majority’s reasoning fails to explain whether Fraport qualifies as principal or accessory.387
253.
Third, Fraport alleges that the Award next fails to give reasons for the failure to apply the principle of nullum crimen sine lege. The application of the ADL in paragraphs 356 and 395 of the Award violated this principle. The Applicant argues that, because there is no trace that the nullum crimen principle was considered by the Tribunal, the Award has an important lacuna which makes it impossible for the reader to follow the reasoning on this point.388 The Applicant also contends that the Award fails to give reasons enabling the Committee to assess the fairness of the weighing of evidence. It says that the majority did not approach the evidence with an open mind admitting the possibility of doubt. Instead, the Tribunal in paragraph 399 of the Award speaks of "a case in which res ipsa loquitur". The reasons dealing with the applicable standard of evidence given by the majority and the conclusions are contradictory and do not enable the ad hoc Committee to verify that the Tribunal acted in accordance with the principles of fair trial and in dubio pro reo.389
254.
Fourth, Fraport contends that the Award fails to give reasons for its failure to apply the BIT separately to each of Fraport’s discrete investments.390 There are no reasons provided in the Award for treating all of Fraport’s various equity and debt investments -all of which the majority found to be legal - as a single illegal investment; for treating the entire investment as unlawful on account of the Pooling Agreement and the Addendum to the PIATCO Shareholders Agreement, which were entirely severable and independent of Fraport’s investments; and finally for dismissing Fraport’s investments made during 2001 after the allegedly offending provisions of the Pooling Agreement and Addendum had been amended, even though the Respondent itself accepted that following the amendments Fraport’s shareholding structure was fully in accordance with Philippine law.391 The Award does not address the question of Fraport’s debt investment in the project although these non-equity investments amounted to more than US$340 million or 80% of the overall value of Fraport’s investment in the Philippines and were not governed by any of the Shareholder Agreements. Similarly, the Award does not address clearly identified equity investments with a monetary value of more than US$25 million which were made after the allegedly offending provisions of the Shareholder Agreements had been amended.392
255.
The Republic of the Philippines replies that the Award is supported by both explicit and implicit reasons sufficient to satisfy Article 52(1)(e) of the ICSID Convention.393 The Philippines recalls that neither disagreement with the reasoning of an award nor the persuasiveness of the reasons provide grounds for annulment.394 According to the Respondent, it is possible to follow the reasons that led the Tribunal to the conclusions that Fraport’s investment as a whole fell outside the protections of the BIT.395 Fraport’s contention that the Tribunal failed to state reasons of its conclusion that its investment ran afoul of the ADL is without merit, as each of its arguments stems from its substantial disagreement with the Tribunal's conclusions.396 In the Respondent’s view, the Tribunal made all the key findings necessary to conclude that Fraport violated the aiding or abetting provision of the ADL.397
256.
According to the Philippines, the Tribunal’s conclusion that there was a principal violator is plainly evident from the face of the Award and is in any event implicit in the Tribunal’s analysis.398 The ADL indicates that the principal violator is the Philippine citizen holding the public utility concession that permits or allows a foreign entity to intervene and control and the aider or abettor is the entity which intervenes to exercise that control.399 The Tribunal identified the actus reus as Fraport’s knowing and intentional circumvention of the ADL by means of secret shareholder agreements which provided unlawful control over PIATCO. It was by planning and then entering into the Secret Shareholder Agreements that Fraport was permitted or allowed to exercise control over PIATCO, thereby committing the necessary actus reus as an aider or abettor. The Tribunal referred to Fraport’s intent because the ADL requires an aider or abettor to knowingly act. Since this violation of Philippine law knowingly occurred at the outset of its investment, that investment did not qualify for protection under the BIT.400 In the Respondent’s view, the nullity of the Concession Contract does not mean that retroactively there is no possible relevance to the constitutional limitations and ADL. The Terminal is the public service.401
257.
The Respondent maintains that the Tribunal did not fail to state reasons for not citing the principle of nullum crimen sine lege because this principle is not applicable to an international tribunal’s determination of its jurisdiction in an investment dispute and was not invoked by Fraport in the arbitration.402 Article 52(1)(e) has no role in ensuring that tribunals comply with fundamental rules of procedure. In any event, the Tribunal devoted a substantial portion of its award to consideration of the Secret Shareholder Agreements and Fraport had a full opportunity to comment in written and oral submissions.403 The Republic of the Philippines declares that the Tribunal did not fail to consider Fraport’s entire investment in NAIA Terminal 3 Project but concluded that it was not entitled to protection because it was not accepted in accordance with Philippine law. Fraport’s decision to continue to pour money into its ill-conceived and unlawfully structured investment obviously did not provide a basis for the Tribunal to consider those late additions to be lawful stand-alone investments.404 In the Respondent’s view, the Tribunal considered the composite of the investments which were characterized by Fraport as a unitary investment.405 The Award is amply supported, the Republic of the Philippines argues, by explicit and implicit reasoning sufficient to satisfy the requirements of the Washington Convention.406

c) The Committee’s Analysis

258.
As early as in the Klôckner I annulment decision in 1985, it was made clear that "the Committee can only take the award as it is."407 The disputed subject matter is not submitted once again for adjudication to an ad hoc committee. It is only the award as made by the Tribunal which is scrutinized under the limited number of grounds of Article 52 of the ICSID Convention. The above mentioned declaration of the Klôckner I Committee has the following implications in the context of Article 52(1)(e).

(i) The Award as actually decided by the Tribunal is controlled under Article 52(1)(e)

259.
A first implication of the holding in Klôckner I is that an ad hoc committee controls the award for what has been actually decided by the Tribunal and not for what the applicant would have wished the award to be. This point has particular implication for Fraport’s first, third and fourth objections under this ground.

1) Discrete investments

260.
Fraport explains that its equity investment did not take place at one time. After its initial investment in PIATCO in 1999, Fraport stresses that it increased its shareholding in PIATCO and in cascade companies (PTI, PTH,....) in 2000 and 2001 and that it also made non-equity investments in the form of loans and guarantees during 2000 and 2001 which accounted for the largest part of its investments by exceeding 80% of its overall claim of US$425 million.408
261.
The Award describes Fraport’s investment in the Terminal 3 Project as one "made in a Philippine company, Philippine International Air Terminals Co., Inc., later known as PIATCO. Fraport’s investment in PIATCO, both as a shareholder and lender, was influenced by the fact that the Respondent had, prior to the investment at issue, conferred upon PIATCO the concession rights for the construction and operation of a new international passenger airport terminal in Manila, otherwise known as Ninoy Aquino International Airport Passenger Terminal III or Terminal 3.409 At paragraph 116 which is cited by Fraport,410 the Award reports that "Fraport’s Investment as a financial participant in the Terminal 3 project spans a period of several years, starting in 1999 and ending in 2002-2003, when, as the evidence discloses, Fraport progressively wrote off its investment. Fraport’s investment was both directly in PIATCO and, indirectly, in a cascade of Philippine companies that have ownership interests in PIATCO. In addition to its equity investments, Fraport has extended loans and loan payment guarantees to PIATCO, the cascade companies and PIATCO’s lenders and contractors".
262.
The Applicant has in the annulment proceeding atomized its investment as a financial participant in the Terminal 3 Project into several investments which, it claims, should have been considered individually by the Tribunal for admission under Article 1 of the BIT. However, at the time of the arbitration, the Republic of the Philippines rightly observes, Fraport characterized its investment exceeding US$425 million which funded the design and construction of a state-of-the-art international passenger terminal at Manila’s airport as one global investment in share acquisition in PIATCO and in the cascade companies in PIATCO in addition to the loans and loan and payment guarantees.411 Reasons are obligatory under Article 48(3) of the ICSID Convention to the extent a question was put to the Tribunal. However, Fraport here is attempting to open before the Committee a question which has not been presented to the Tribunal. The Award cannot be criticized for neglecting a question which was not addressed to the Tribunal and for not giving reasons thereof.

2) Public utility

263.
In its discussion regarding the interpretation of the ADL, the Tribunal states that "[e]ach interpretation must be made in the light of the Constitution and the ensemble of legislation of which a particular statute is a part."412 At paragraph 309, the Award also underlines in the QT Report of 11 January 1999 the provisions of the Constitution of the Philippines which require that the participation of foreign investors in the governing body of a public utility enterprise shall be limited to their proportionate share in its capital, and that all the executive and managing officers of such corporation or association be citizens of the Philippines. The Award notes that the QT Report of 11 January 1999 states that, although the term public utility is not defined with exactitude in Philippine law and is subject to broad interpretation, "[g]enerally, the operations of the Project fall within the meaning of a public utility."413

3) Principal/accessory

267.
The Award declares that there are two alternative ways of establishing an ADL violation under Philippine law, a quantitative test or an actual demonstration of managerial control. In the latter case, the quantum of equity in the company is irrelevant.416 The Tribunal stresses that its concern is not with Fraport’s quantitative equity but with the shareholder agreements417 and then holds:

"[i]t is correct that Fraport’s real modality of intervention in ‘the management, operation, administration or control’ of PIATCO for the items specified in the FAG-PAIRCARGO-PAGS-PTI Shareholders’ Agreement is as a shareholder in the confidential but binding preliminary meeting described at Article 2.02 thereof. Fraport does not, as the ADL specifies, intervene, as an officer, employee or laborer in the subsequent formal board meeting that rubber-stamps the result of the confidential but binding meeting. To be sure, the formal validity of unlawful intervention would still be accomplished by Fraport’s designated officer in PIATCO; indeed the real control decision would always have to be implemented, wherever it may have been made, by ‘an officer, employee or laborer’ within PIATCO; that would satisfy a literal interpretation. But a literal interpretation here could produce an absurdity: an alien would violate the ADL if its designated officer intervened to manage and control matters A, B and C, but the same would not violate the ADL if it secretly intervened as a shareholder to manage and control those same matters. The Tribunal construes this part of the ADL as covering intervention by shareholders, if that is the actual means of intervention in the management, operation, administration or control of PIATCO. Nor does this interpretation impose a retroactive burden on Fraport, for its own documents, which the Tribunal reviewed above, indicate that Fraport was well aware that the arrangements it was making were not in accordance with the ADL."418

268.
According to the Klôckner I decision:

"[t]he text of [Article 52(1)(e)] requires a statement of reasons on which the award is based. This does not mean just any reasons, purely formal or apparent, but rather reasons having some substance, allowing the reader to follow the arbitral tribunal's reasoning, on facts and on law. [...] [T]here would be a ‘failure to state reasons’ in the absence of a statement of reasons that are ‘sufficiently relevant’, that is, reasonably sustainable and capable of providing a basis for the decision."419

The above passage of the Award makes clear that, according to the Tribunal, Fraport did not intervene "as an officer, employee or laborer" as mentioned in Section 2-A of the ADL, but notwithstanding, it would still violate the ADL if it secretly intervened as shareholder to manage and control PIATCO. The Applicant nonetheless claims that there is a failure to state reasons for the violation of the ADL as a principal or accessory which is material to the solution. Fraport is correct in contending that a finding of its criminal liability or that of its officers or employees would have required a declaration as to whether the accused was a principal or an accessory. The construction of a criminal statute such as the ADL by an ICSID tribunal, however, does not turn the arbitration proceeding into a criminal proceeding. The question before the Tribunal was not that of the criminal liability of Fraport or of its officers or employees, but that of the Tribunal’s jurisdiction ratione materiae under the Agreement between the Federal Republic of Germany and the Republic of the Philippines for the Promotion and Reciprocal Protection of Investments of 18 April 1997.

269.
The Award stresses that "whatever standard of proof is required under Philippine law to prove a criminal act, the jurisdictional question before this Tribunal, which is seized of an international investment dispute, is not a determination of a crime, but whether an economic transaction by a German company was made ‘in accordance’ with Philippine law and thus qualifies as an ‘investment’ under the German-Philippine BIT "420 Determining the Tribunal’s jurisdiction, in view of the preliminary objection raised by the Respondent, required the Tribunal to interpret Article 1 of the BIT which reads: "the term ‘investment’ shall mean any kind of asset accepted in accordance with the respective laws and regulations of either Contracting State."421 The Tribunal considered the ADL in the course of its examination of whether Fraport’s investment was protected by the BIT,422 not in the context of criminal charges against Fraport or its officers or employees. The Tribunal resolved the question of its jurisdiction ratione materiae with a negative answer, holding that "Fraport knowingly and intentionally circumvented the ADL by means of secret shareholder agreements. As a consequence, it cannot claim to have made an investment ‘in accordance with law’ [....] Because there is no ‘investment in accordance with law’, the Tribunal lacks jurisdiction ratione materiae,"423 In reaching this conclusion, the Tribunal did not have to give reasons for the criminal liability as principal or accessory of Fraport, its officers or employees, or to the existence of a guilty mind on their part, a question of interest to a criminal court, but which was not within the remit of the Tribunal. Fraport fails to prove a defect of the Award under Article 52(1)(e).

4) Nullum crimen sine lege/ in dubio pro reo

270.
In the context of criminal proceedings, nullum crimen sine lege is a substantive principle for the protection of the accused which holds that criminal law may not be extensively construed, for instance by analogy.424 It is common ground that Fraport, its officers or employees were never charged before the Tribunal for violation of the ADL and did not have to defend against an accusation of penal nature in the ICSID arbitration proceeding. It bears reiterating that the question submitted to the Tribunal was solely that of the legality of Fraport’s investment for jurisdictional purposes under the German-Philippines BIT of 18 April 1997. As a consequence, the Tribunal cannot be criticized for not providing in its Award reasons why it did not apply a substantive principle of criminal law. This did not come within its mission. The Committee further observes that Fraport did not invoke said principle in the arbitration proceeding. Failure to deal with questions submitted to the Tribunal may amount to a failure to state reasons where this results in a failure in the intelligibility of the reasoning in the Award itself,425 but this is a different situation from the present case. Fraport’s criticism of the Award for giving no reasons to arguments which the Applicant introduces for the first time in the annulment proceeding is groundless. Accordingly, there is no lacuna in the Award.
271.
Commenting on the evidentiary standards, the Tribunal emphasized that the issue before it was not whether a crime under Philippine law was committed, but whether an economic transaction by Fraport was made "in accordance" with Philippine law and thus qualifies as an "investment" under the German-Philippine BIT. Then the Tribunal observed: "[e]ven assuming, however, that the ‘preponderance of evidence’ test which applies in civil law must yield in the instant case to a ‘beyond a reasonable doubt’ test because the subject of the ‘in accordance’ inquiry is a Philippine criminal statute, this is a case in which res ipsa loquitur. The relevant facts, all of which are found in Fraport’s own documents, are incontrovertible."426 The Applicant’s arguments regarding the failure of the Tribunal to abide by the presumption of in dubio pro reo cannot be considered in the context of Article 52(1)(e). There are instances where the absence of reasons may impact upon other issues, for example, if the motivation of an award is so aberrant that it would violate a fundamental rule of procedure.427 Such grievance must then be examined under Article 52(1)(b) or Article 52(1)(d) and not under Article 52(1)(e). Accordingly, the Committee decides that the essential interest protected by the in dubio principle is the right to be heard and answers Fraport’s arguments in the context of the serious departure from a fundamental rule of procedure.

(ii) The scrutiny of the Award by the ad hoc Committee under Article 52(1)(e) cannot cause a reopening of the case

273.
In the present case, the parties discussed the violation of the ADL by Fraport at some length in their post-hearing submissions, including whether an attempt constitutes an offense.431 Fraport denounces what it alleges are two main contradictions in the reasoning of the Tribunal. First, Fraport argues that the Tribunal dispenses with the requirement of actus reus defined in Section 2-A of the ADL but nonetheless decides that a breach of Philippine law has been committed. Next, Fraport claims that the Tribunal invented a crime of attempt in Section 2-A and held that Fraport committed such crime without finding an act of assistance or abetment or without the identification of a principal.
275.
Having declared that "the acquisition of shares by a foreign investor in a domestic corporation is a legal transaction that does not, by its nature, require some action by the government involving acceptance or permission, yet it is quite clear from the BIT and the Protocol that accordance with the host state's law is nonetheless required,"435 the Tribunal could without any contradiction hold that "the relevance of compliance with national law for jurisdiction ratione materiae purposes is at the moment of the investment, as explained in the analysis of the BIT’s terms. That is a limitation which actually works in favour of both the foreign investor and international jurisdiction."436 The Tribunal principally relied on the fact that, in its final report of 26 February 1999 to its Supervisory Board, Fraport disregarded the requirements of Philippine law which had been expressed by QT in its due diligence report on legal issues, in particular with respect to the ADL.437 According to the Tribunal, Fraport’s Supervisory Board was fully aware of the inconsistency of the proposed arrangements with Philippine law, but decided to proceed with the project.438 The Tribunal held that Fraport implemented its strategy by means of secret shareholding agreements that circumvented Philippine law.439 The Tribunal explained that Fraport structured its investment in a way that "consciously, intentionally and covertly" violated the ADL440 and held: "[i]n summary, Fraport had been fully advised and was fully aware of the ADL and the incompatibility with the ADL of the structure of its investment which it planned and ultimately put into place with the secret shareholder agreements."441 In light of the view which the Tribunal took as to the relevant date for the purpose of deciding the question of jurisdiction ratione materiae, it could reasonably deduce that the investment could not qualify for the German-Philippine BIT protection regardless of whether the Pooling Agreement was amended in 2001 to provide with a shareholder structure which complied with Philippine law.442 The first criticism of a contradiction of reasons is accordingly inaccurate.
276.
The parties expressed different views before the Tribunal as to whether the ADL criminalizes attempted violations.443 In Fraport’s view, which it elaborated upon in its Observations regarding the Respondent’s second post-hearing submission of 15 September 2006, the ADL does not define "attempt" as a punishable offense because no such language is present in the ADL. At any rate, Fraport further alleged that the acquisition of the ability to commit an offense does not constitute an attempt to commit such offense and added that there is no evidence that it intended to exercise any alleged rights under the 1999 Shareholder Agreements to intervene in PIATCO management. It said all that the Republic of the Philippines could demonstrate is an intent of Fraport to achieve such ability to intervene.444 Clearly, the Applicant disagrees both with the factual finding by the Tribunal of its awareness that its arrangements were not in accordance with the ADL as stated in the above cited paragraph 356 of the Award as well as with the consequences which the Tribunal made thereof.
278.
The same applies to Fraport’s further criticism that the ADL could be applicable to Terminal 3 as a public utility notwithstanding the nullification ab initio of the Terminal Concession by the Philippine Supreme Court. Such allegation is only an affirmation inspired by the Dissenting Opinion.449 While such a view was expressed in the Dissenting Opinion,450 the point formed no part of the reasoning of the Tribunal whose award cannot therefore be criticized on this ground.
279.
Fraport’s criticism of the meaning of the QT Report and letter of 21 December 1999 in the Award and of the consequences which the Tribunal drew from it cannot be reviewed by the Committee without engaging in a discussion on the merits of the case. There is a long and consistent line of decisions of ad hoc committees to the effect that this does not square with the limited scope of review permitted under Article 52(1)(e). The Tribunal considered the disregard by Fraport’s supervisory board of the QT report’s warnings as incontrovertible evidence that Fraport’s investment was knowingly made not in accordance with Philippine law. The expression "this is a case in which res ipsa loquitur" in paragraph 399 means that without possible contradiction, under all standards of proof which had been alluded to by the Tribunal, "preponderance of evidence" or "beyond a reasonable doubt,"451 the conclusion that Fraport’s investment did not meet the requirements of Article 1 of the BIT was inescapable. Fraport deplores the conclusion of the Tribunal but its argument that the Tribunal’s reasoning was contradictory and incomplete is merely a criticism of the solution, a criticism which cannot be admitted by the Committee under this ground.
280.
The Committee concludes that there was no lack of reasoning or contradictions in the reasoning of the Tribunal. Accordingly, the conditions for annulment of the Award under Article 52(1)(e) of the Convention are not present in the case at hand.

V. COSTS

281.
The parties have submitted their claims for costs upon the invitation of the Committee. Fraport’s costs for its legal representation and expenses total US$ 2,378,902.75 and EUR 1,003,652.67, respectively. In addition, Fraport as the Applicant on Annulment, made, in accordance with Regulation l4(3)(e) of the Administrative and Financial Regulations, the whole advance payment to ICSID for the costs referred to in Regulation 14(2) of the said Regulations. The Respondent claims that it incurred in total legal fees and expenses in this annulment proceeding amounting to US$ 5,672,667.05. It requests the Committee to order the Applicant to reimburse the Respondent the costs of the latter’s representation and assistance.452
282.

Under Article 61(2) of the ICSID Convention and ICSID Arbitration Rule 47(1)(j), read together with Article 52(4) of the ICSID Convention and ICSID Arbitration Rule 53, the Committee has the discretion to decide how and by whom the expenses incurred by the parties in connection with the proceeding ("the parties’ costs"), the fees and expenses of the members of the Committee and the charges for the use of the facilities of the Centre (together "the ICSID costs") shall be borne.

283.
The Committee is of the view that, in the circumstances of the present case, and having regard to its decision to annul the Award, it would not be reasonable and fair if it were to accede to the request of the Respondent and order the Applicant to reimburse the former the party costs of the Respondent’s legal representation and assistance. Accordingly, the request of the Respondent on this point is denied.
284.
With respect to the costs of Fraport for its legal representation and assistance the Committee notes that the Applicant in none of its submissions to the Committee, neither written nor oral, requested that it be reimbursed for such costs by the Respondent. But in any case, having regard to the Committee’s conclusion that the Award is to be annulled on the ground that it was the Tribunal which seriously departed from a fundamental rule of procedure it would not be fair and reasonable, in the view of the Committee, if it were to decide that the Respondent would have to reimburse Fraport for the costs of its legal representation and assistance.
285.
Accordingly, each Party shall bear the costs of its legal representation. This decision applies equally to the costs, which were previously reserved, of the two interlocutory applications made to the ad hoc Committee.453
286.
With respect to the costs of the annulment proceeding itself, i.e., the costs incurred by ICSID, including the fees and expenses of the members of the Committee, the Committee first recalls that it reserved its decision on the allocation of costs relating to each Party’s one request for incidental decision (see paragraphs 6 and 8 above) to the final stage of this annulment proceeding. Having regard to the circumstances of the case at hand, the Committee is of the view that it is appropriate and fair in the present case that ICSID costs be borne equally by both parties. Accordingly, the Respondent shall reimburse the Applicant half of the ICSID costs (including the costs of the interlocutory applications).454

VI. DECISION

[287].

For the foregoing reasons, the Committee unanimously decides:

— (1) To annul the Award of 16 August 2007 in Fraport AG Frankfurt Airport Services Worldwide v. The Republic of the Philippines (ICSID Case No. ARB/03/25);

— (2) Each Party shall bear one half of the ICSID costs incurred in connection with this annulment proceeding; and

— (3) Each Party shall bear its own party costs and expenses incurred with respect to this annulment proceeding.

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