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Award

  TABLE OF APPENDICES
APPENDIX A: Decision on the Objection to Jurisdiction for Lack of Consent, July 3, 2013
APPENDIX B: Dissenting Opinion of Professor Boisson de Chazournes on the Objection to Jurisdiction for Lack of Consent, July 3, 2013

 

TABLE OF ABBREVIATIONS
BIT Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Turkmenistan for the Promotion and Protection of Investments which entered into force on February 9, 1995
C-__ Claimant's Exhibit [number]
C-Mem. Respondent' s Counter-Memorial on the Merits and Memorial on Jurisdiction, dated February 28, 2014
CL-__ Claimant's Legal Authority [number]
Cl. PHB Claimant's Post-Hearing Brief, dated October 14, 2015
Contract Contract between Garanti Koza and TAY, dated March 18, 2008
Decree Decree of the President of Turkmenistan No. 9429, dated January 27, 2008
ER Expert Report
Exh. Exhibit
FET Fair and equitable treatment
Garanti Koza Claimant Garanti Koza LLP
GKI Garanti Koza Insaat, Turkish parent company of Garanti Koza LLP
ICSID International Centre for Settlement of Investment Disputes
ICSID Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, dated March 18, 1965
ICSID Rules ICSID Rules of Procedure for Arbitration Proceedings, effective April 10, 2006
Mem. Claimant's Memorial on the Merits, dated September 24, 2013
MFN Most favored nation
National Plan National Plan for Developing Turkmenistan Economically, Politically, and Culturally

 

R-__ Respondent's Exhibit [number]
Rej. Respondent's Rejoinder on the Merits and Reply on Jurisdiction, dated April 10, 2015
Reply Claimant's Counter-Memorial on Jurisdiction and Reply Memorial on the Merits, dated October 13, 2014
RL-__ Respondent's Legal Authority [number]
Rsp. PHB Respondent's Post-Hearing Brief, dated October 14, 2015
Tribunal's Questions Questions of the Tribunal to the Parties, dated July 30, 2015
TAY State Concern "Turkmenavtoyollary"
Tr. ___, 2015 p. _ Transcript of Hearing on the Merits and on the Respondent' s additional objections to jurisdiction held on June 8 -12, 2015, followed by date and page number
Closing Tr. ___, 2015 p. _ Transcript of Hearing on Closing Arguments held on December 14, 2015, followed by page number
VCLT Vienna Convention on the Law of Treaties
WS-1 First Witness Statement
WS-2 Second Witness Statement

 

I. INTRODUCTION

1.
This arbitration was commenced by a Request for Arbitration dated May 18, 2011 (the "Request"), in accordance with the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, dated March 18, 1965 (the "ICSID Convention"), and the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Turkmenistan for the Promotion and Protection of Investments, which entered into force on February 9, 1995 (the "BIT"). The Secretary-General of ICSID registered the Claimant's Request on July 20, 2011.
2.
The Claimant is Garanti Koza LLP, a limited liability partnership established in the United Kingdom (the "Claimant" or "Garanti Koza").1 The Claimant is partly owned by Garanti Koza Insaat ("GKI"), a Turkish company, and the Claimant's executives working on the project that is the subject of this arbitration were Turkish nationals.2
3.
The Respondent is Turkmenistan (the "Respondent" or "Turkmenistan").
4.
The claims asserted in this arbitration arise out of the interactions between the Claimant and the Respondent in connection with (a) a contract dated March 18, 2008 between Garanti Koza and Turkmenistan's State Concern "Turkmenavtoyollary" ("TAY") for the planning and construction of 28 highway bridges in Turkmenistan, and (b) a Presidential Decree awarding the Claimant the construction project provided for in that contract for the lump sum price of USD 100 million.3
5.
The Claimant asserts that it made an investment in Turkmenistan in connection with its contract with TAY and the execution of its obligations under it, and that Turkmenistan expropriated that investment and otherwise breached its obligations under the BIT.4 As a result, the Claimant argues that it is entitled to an award declaring that Turkmenistan has breached the BIT in multip l e respects and awarding it compensation for the breaches.5
6.
The Respondent argues (a) that the Tribunal does not have jurisdiction to hear the Claimant's claims, (b) that in any event those claims are inadmissible, (c) that the acts complained of cannot be attributed to Turkmenistan, (d) that none of the Claimant's substantive claims has merit, and (e) that the damages requested are unsupported and overstated.6

II. THE TRIBUNAL

7.
On September 26, 2011, the Claimant appointed Mr. George Constantine Lambrou, a Greek national, as an arbitrator in this case.
8.
On October 18, 2011, the Respondent appointed Professor Laurence Boisson de Chazournes, a French and Swiss national, as an arbitrator in this case.
9.
On April 10, 2012, Mr. John M. Townsend, a national of the United States, was appointed as the President of the Tribunal by the Chairman of the ICSID Administrative Council.
10.
Mr. Marco Tulio Montañés-Rumayor, Legal Counsel to ICSID, acted as Secretary to the Tribunal. Mr. Jan Dunin-Wasowicz served for a time as Assistant to the President.
11.
The Tribunal was formally constituted in accordance with Articles 37(2)(b) and 38 of the ICSID Convention on April 13, 2012.

III. PROCEDURAL HISTORY

A. First Session

12.
After postponements made at the request of the Parties, the First Session of the Tribunal with the Parties was held in Washington, D.C. on October 19, 2012. Procedural Order No. 1, dated December 21, 2012, records the agreements reached and directions given during that session.
13.
At the First Session, the Parties confirmed that the Tribunal was properly constituted and that neither Party had any objection to the appointment of any member of the Tribunal.7
14.
Also at the First Session, the Parties agreed, without prejudice to the Respondent' s objections to jurisdiction, that this proceeding would be conducted in accordance with the ICSID Rules of Procedure for Arbitration Proceedings ("IC S ID Rules") in force as of April 10, 2006, at the seat of the Centre in Washington, D.C.8

B. Confidentiality

15.
On November 2, 2012, the Respondent applied to the Tribunal for a confidentiality order. The Claimant opposed that application on November 16, 2012. The Tribunal ruled in Procedural Order No. 2, dated December 21, 2012, that no confidentiality order in the terms applied for was required or justified on the facts as then shown. The Tribunal directed in Procedural Order No. 2, in accordance with Article 3.13 of the IBA Rules on the Taking of Evidence in Internatio na l Arbitration, that any document produced by one Party to the other, not already in the public domain, should be kept confidential by the Party receiving it and should be used only in connection with this arbitration.

C. The Objection to Jurisdiction for Lack of Consent

16.
At the First Session on October 19, 2012, it was agreed pursuant to ICSID Rule 41(4) that the Respondent's first objection to jurisdiction (the "Objection to Jurisdiction for Lack of Consent") would be considered as a preliminary matter on an accelerated schedule, while the Respondent's second objection to jurisdiction (that most of the claims brought by the Claimant are contractual in nature) would be considered together with the merits of the dispute, if the Tribunal were to reach the merits.
17.
Following full written submissions concerning the Objection to Jurisdiction for Lack of Consent, a hearing was held at the seat of the Centre in Washington, D.C. on March 11, 2013, to hear argument on that objection to jurisdiction.
18.
On July 3, 2013, the Tribunal issued its Decision on the Objection to Jurisdiction for Lack of Consent. A copy of that decision, which is incorporated into and forms a part of this Award, is appended to this Award as Appendix A. By a majority, the Tribunal found that the Respondent had consented to jurisdiction under the ICSID Convention and the ICSID Rules.
19.
Professor Boisson de Chazournes wrote a Dissenting Opinion, which is appended to this Award as Appendix B.

D. Proceedings on the Merits and Additional Objections to Jurisdiction

20.
On July 17, 2013, the Tribunal held a telephone conference with the Parties to discuss the merits phase of this proceeding. Procedural Order No. 3, dated July 19, 2013, records the results of that conference, including a schedule for submissions on the merits and on the Respondent' s additional objections to jurisdiction. Procedural Order No. 3 set the date for the hearing on the merits and on the Respondent's additional objections to jurisdiction as November 17-21, 2014.
21.
The Claimant's Memorial on the Merits was submitted, in accordance with the schedule established by Procedural Order No. 3, on September 24, 2013. At the same time, the Claimant submitted the First Witness Statement of Mr. Mustafa Buyuksandalyaci.
22.
On the application of the Respondent, the date for delivery of its counter-memorial on the merits and memorial on jurisdiction, set at January 24, 2014 by Procedural Order No. 3, was extended to February 10, 2014 in Procedural Order No. 4, dated January 22, 2014, and was further extended to February 28, 2014 in Procedural Order No. 5, dated February 10, 2014. Both Procedural Order No. 4 and Procedural Order No. 5 adjusted other dates to reflect these extensions, but preserved the November 17-21, 2014 dates for the hearing on the merits and on the additional objections to jurisdiction.
23.
The Respondent' s Counter-Memorial on the Merits and Memorial on Jurisdiction was submitted on February 28, 2014. At the same time, the Respondent submitted the First Witness Statement of Ashr Alalyk-Ogly Sarybayev, the First Witness Statement of Gochmurat Allamuradov, the first Witness Statement of Murat Ashirovich Nepesov, the First Expert Report (on delay) of Anthony J, Morgan of PwC, and the Expert Report (on valuation) of Irina Novikova and Mark Hannye of PwC.
24.
In the course of exchanging documents, a controversy emerged concerning documents located at the factory and site office established by Garanti Koza in Turkmenistan and later attached and sealed by the Government of Turkmenistan. On April 21, 2014, the Secretary forwarded to the Tribunal Redfern Schedules in which each Party argued its position with respect to those documents. In Procedural Order No. 6, dated April 29, 2014, the Tribunal encouraged the Parties to confer promptly with a view (a) to agreeing on a set of instructions pursuant to which an officer of the Respondent would be authorized to conduct a visit to the site to collect documents; and (b) to agreeing on a timetable for collection and distribution of such documents that would be consistent with the timetable established by Procedural Order No. 5.9
25.
The Parties eventually reported to the Tribunal that they had attempted to reach agreement as directed in Procedural Order No. 6, but had been unable to do so. Each of the Parties consequently submitted proposed instructions to the Tribunal on May 9, 2014, and submitted comments on the instructions proposed by the adverse Party on May 15, 2014. In Procedural Order No. 7, dated May 20, 2014, the Tribunal issued directions for dealing with the documents at the Claimant's factory and site in Turkmenistan.
26.
After the documents in Turkmenistan were collected pursuant to the Tribunal's instructions, the Parties reported to the Tribunal that a further revision of the timetable would be needed. Accordingly, after consultation with the Parties, the Tribunal issued Procedural Order No. 8 on July 18, 2014, revising the timetable and re-scheduling the hearing on the merits and on the Respondent's additional objections to jurisdiction to take place on June 8-12, 2015.
27.
The Claimant submitted its Counter-Memorial on Jurisdiction and Reply Memorial on the Merits on October 13, 2014. At the same time, the Claimant submitted the Second Witness Statement of Mustafa Buyuksandalyaci, the Expert Report (on valuation) of Richard Boulton, and the Expert Report (on delay) of Amit Garg.
28.
The Respondent submitted its Rejoinder on the Merits and Reply on Jurisdiction on April 10, 2015. At the same time, the Respondent submitted the Second Witness Statement of Murat Nepesov, the Second Witness Statement of Gochmurat Allamuradov, the Second Witness Statement of Ashyr Sarybayev, the Witness Statement of Toylymyrat Mammetdurdyev, the Witness Statement of Irina Balakley, the Expert Report (on valuation) of Mr. Sirshar Qureshi of PwC, and the Second Expert Report (on delay) of Mr. Morgan of PwC.
29.
In accordance with the revised schedule established by Procedural Order No. 10, dated March 16, 2015,10 a pre-hearing telephone conference was held between the Tribunal and the Parties on May 5, 2015. The agreements reached and directions given during that conference were recorded in Procedural Order No. 11, dated May 15, 2015.

E. Hearing on the Merits and Additional Objections to Jurisdiction

30.
The hearing on the merits and on the Respondent' s additional objections to jurisdiction was held at the World Bank's offices in Washington, D.C. on June 8 through 12, 2015 (the "Hearing"). On the first day of the Hearing, the Tribunal heard opening statements from counsel for each Party. In addition to the witnesses listed below, the following persons attended:

a. Representing the Claimant:

Mr. John Savage Ms. Elodie Dulac King & Spalding Singapore

Mr. Serkan Yildirim Mr. Bariscan Akin Ms. Gülcin Koker Gür Law Firm Istanbul, Turkey

Mr. Murat Isikustun Mr. Ata Alkis Mr. Turgut Demiroglu Garanti Koza LLP

b. Representing the Respondent:

Ms. Alevtina Yakubova Turkmenistan Ministry of Justice

Mr. Ali R. Gürsel Ms. Jennifer Morrison Ersin Ms. Zeynep Gunday Ms. Svetlana Evliya Ms. Gulnara Kalmbach Curtis, Mallet-Prevost, Colt & Mosle LLP Istanbul, Turkey

Ms. Miriam K. Harwood Ms. Christina Trahanas Ms. Katiria Calderón Curtis, Mallet-Prevost, Colt & Mosle LLP New York, New York, United States of America

Ms. Bahar Charyyeva Curtis, Mallet-Prevost, Colt & Mosle LLP Ashgabat, Turkmenistan

31.
The following fact witnesses appeared and were examined at the Hearing:

a. Mr. Buyuksandalyaci (testifying in Turkish), for Garanti Koza;

b. Mr. Sarybayev (testifying in Russian), for Turkmenistan;

c. Ms. Balakley (testifying in Russian), for Turkmenistan;

d. Mr. Nepesov (testifying in Russian), for Turkmenistan;

e. Mr. Mammetdurdyev (testifying in Turkmen), for Turkmenistan; and

f. Mr. Allamuradov (testifying in Turkmen), for Turkmenistan.

32.
In addition, the following expert witnesses appeared:

a. Mr. Garg (the Claimant's delay expert);

b. Mr. Morgan (the Respondent's delay expert);

c. Mr. Boulton (the Claimant's damages expert); and

d. Mr. Qureshi (the Respondent's damages expert).

33.
Each expert witness first made a presentation to the Tribunal, and then was cross examined by the adverse Party. Following the testimony of each pair of experts, first the delay experts and then the damages experts, the Tribunal examined the two experts in each field together, giving each an opportunity to comment on the testimony of the other, and providing counsel for each Party an opportunity to follow up on the Tribunal ' s questions.

F. Post-Hearing Proceedings

34.
Toward the end of the Hearing, the Parties and the Tribunal conferred and agreed that there would be no closing arguments at that time. Rather, the Parties agreed to submit post-hearing briefs simultaneously, after receiving from the Tribunal a list of questions that the Tribunal asked the Parties to address in their post-hearing submissions ("Post-Hearing Briefs" or "PHBs"). Procedural Order No. 12, dated July 2, 2015, set the date for delivery of these submissions at September 10, 2015, and scheduled a final hearing for oral argument for December 14, 2015.
35.
On July 30, 2015, the Tribunal provided a list of questions to the Parties ("Tribunal ' s Questions"). After receiving the Tribunal's Questions, the Parties requested, and the Tribunal approved, an extension of time to make their post-hearing submissions until October 9, 2015. That date was subsequently extended at the joint request of the Parties to October 14, 2015.
36.
Following the Hearing, the Parties conferred and agreed upon a number of corrections to the transcript of the Hearing and to the translations of both questions and answers. Each of the Parties then addressed correspondence to the Tribunal concerning the points of disagreement. After the Tribunal considered that correspondence, the Secretary issued the following direction to the Parties:

The Tribunal has received: (1) the Respondent's Errata Sheet on the Points of Difference Between Respondent and Claimant, together with the Claimant's Comments on the same; and (2) the Respondent's Corrections to the Turkish, Russian, and Turkmen Translations of Questions Posed in English, together with the Claimant's Comments on those.

All of the corrections proposed by the Respondent and accepted by the Claimant are accepted by the Tribunal.

The Tribunal reserves decision on the points of disagreement until such time as it concludes that any question of substance turns on the parties' differing understandings. In this connection, the Tribunal invites the parties to draw the Tribunal's attention, in their post-hearing submissions, to any disagreement about transcription or translation that could affect a significant point at issue in this arbitration.

37.
The Parties submitted their Post-Hearing Briefs simultaneously on October 14, 2015. No issues concerning the translation at the Hearing were raised in either brief.
38.
On December 14, 2015, as provided in Procedural Order No. 12, the Tribunal held a hearing in Washington, D.C. to hear closing arguments from the Parties ("Hearing on Closing")
39.
On January 8, 2016, the Claimant submitted to the Tribunal comments on new exhibits, numbered R-98 through R-105, introduced by the Respondent at the Hearing on Closing on December 14, 2015. On February 5, 2016, the Respondent sent the Tribunal its response to the Claimant's comments on those exhibits.
43.
In Procedural Order No. 13, dated 13 April 2016, the Tribunal gave the Respondent a choice with regard to the lçkale Award based on its reasoning with respect to the Adem Dogan Award:

The Respondent is requested to advise the Tribunal by 25 April 2016 whether it will voluntarily submit a copy of the Adem Dogan Award. If it agrees to do so, then both the Adem Dogan Award and the lçkale Award will be added to the legal authorities submitted by the parties in this arbitration. If the Respondent does not agree to submit a copy of the Adem Dogan Award by that date, then its application to submit the lçkale Award will be denied.12

The Respondent declined to produce the Adem Dogan Award, so the lçkale Award was not admitted.

44.
On November 25, 2016, the Tribunal declared the proceedings closed in accordance with ICSID Rule 38(1).

IV. FACTUAL BACKGROUND OF THE DISPUTE

A. Turkmenistan's Highway Bridge Project

45.
On May 21, 2007, the President of Turkmenistan issued Presidential Decree No. 8626. That decree directed the then Ministry of Automobile Transportation and Highways to renew certain roads, as well as to build new ones, as part of the "National Plan for Developing Turkmenistan Economically, Politically, and Culturally" (the "National Plan").13
46.
On August 26, 2007, the Ministry of Automobile Transportation and Highways was liquidated by a further Presidential Decree (No. PP-4834) and was replaced by two entities, the Ministry of Road Transport and the State Concern "Turkmenavtoyollary. "14 The latter entity, referred to by the initials TAY, was established on September 10, 2007, to be "responsible for the design, renovation, and construction of the highways connecting the major administrative cities of Turkmenistan. "15 Presidential Decree No. 8941 provides that the implementation of the decree creating TAY was to be supervised by the Vice Chairman of the Cabinet of Ministers.16
47.
One part of the National Plan was to be the improvement of the highway between the cities of Mary and Turkmenabad, in order to "enhance Turkmenistan' s role as a significant Euro-Asian transport corridor."17 That highway is "located on the European route E60 which links the cities of Brest, France and Irkeshtam, Kyrgyzstan."18 The map below illustrates the position of the road between Mary and Turkmenabad.19
48.
In the fall of 2007, TAY conducted a tender process for the construction of 119 highway bridges. Most of the new bridges were to be double spans carrying two lanes in each direction, to replace existing single-span bridges carrying one lane of traffic in each direction. The tender ultimately resulted in the award of three different contracts.20
49.
Mr. Buyuksandalyaci, the General Manager of Garanti Koza, testified that Garanti Koza was established as an English limited liability partnership in April 2007, "for the purpose of undertaking the construction project in dispute in this arbitration, in Turkmenistan."21 As of May 2007, Garanti Koza had three partners: Garanti Koza Insaat Sanayi ve Ticaret S.A. ("GKI"), a major Turkish construction company, which owned 45% of the partnership; IP Consult (International) Limited, which also owned 45%; and Mr. Fuat Turgut Demiroglu, who owned 10%.22 Garanti Koza submitted a bid in response to TAY's tender.23
50.
In an award announced on December 11, 2007, Garanti Koza was awarded a contract to build 28 of the 119 bridges, all of which were along the Mary-Turkmenabad highway.24 At the same time, the Turkish company Net Yapi was awarded a contract to build 90 bridges, and the Ukrainian company Altcom was awarded a contract to build a single, 1.6 kilometer bridge.25
51.
Garanti Koza's initial bid for the 28-bridge project was USD 105.11 million, including VAT. It subsequently revised its bid to an even USD 100 million, including VAT, and TAY accepted that bid.26
52.
The Parties disagree as to why the 119-bridge project was divided into separate projects. Mr. Buyuksandalyaci states that it was because the "Turkmen Government did not have the capacity to complete the necessary prerequisites for such a big project at once."27 Mr. Sarybayev, who was the Chairman of TAY from 2007 until 2012, takes issue with that statement, and states that, "In fact, Garanti Koza had originally submitted a tender for the 118 bridges." During post-tender negotiations, he said, "the Turkish company Net Yapi submitted a revised bid with a lower price proposal than all other bidders for 90 of the bridges."28

B. The Presidential Decree

53.
The award of the contract to Garanti Koza was approved by the President of Turkmenistan in Decree No. 9429 (the "Decree").29 The Decree, in its entirety, reads as follows in translation:

DECREE OF TURKMENISTAN'S PRESIDENT

January 27th, 2008 No. 9429,

Ashgabat city

On concluding contracts on designing and construction of bridges along Turkmenistan's highways, by "Turkmenavtoyollary" state concern

With purpose of implementing the obligations imposed on highway construction industry as foreseen in National Plan "Main Strategy of Developing Turkmenistan Economically, Politically and Culturally until 2020", and implementing the Decree of Turkmenistan's President dated 21st May of 2007 and numbered 8626, I decree as follows:

1. The resolution of "Turkmenavtoyollary" State Concern, stated in 2nd protocol dated 11th December of 2007, on announcing the "Garanti Koza LLP" company (UK) as the winner of the international tender on designing and construction of bridges along Turkmenistan's highways, should be approved.

2. "Turkmenavtoyollary" State Concern should be allowed to conclude contract with total value of 100,000,000 (one hundred million) USD when the tax is included for the added value, with "Garanti Koza LLP" company (UK) on designing and construction of 28 bridges (hereafter bridges) indicated in the annex of this decree, along Mary-Turkmenabad highway. The construction of the bridges must begin in February of 2008 and ready bridges must be delivered in October of 2008.

3. Turkmenistan's Ministry of Economy and Finance must provide the financing of the designing and construction of bridges, at the expense of centralized state investments.

4. Turkmenistan's Central Bank:
should be allowed to conduct the conversion of money amounts of "Turkmenavtoyollary" State Concern in mantas to free convertible foreign currency by official exchange rate, in order to finance the construction of bridges,
should be allowed to pay the 20% of the value of the contract excluding the taxes for the added amount, i.e. 17,391,304 (seventeen million three hundred ninety one thousand three hundred and four) USD advance payment to "Garanti Koza LLP" company (UK) via bank transfer to first degree European bank upon delivery of the return guarantee of the advance payment.
All expenses related with the guarantee letter are paid by UK "Garanti Koza LLP" company.

5. Turkmenistan's Ministry of Energy and Industry must ensure construction and renewal of external conducting lines and structures of electricity provision for illuminating the bridges by its own means.

6. "Turkmenavtoyollary" State Concern, Turkmenistan's Ministry of Water Resources, and other related ministries and state institutions must ensure removal of the bridges that they have currently by its own means.

7. "Turkmenavtoyollary" State Concern must deliver the bridges to Turkmenistan's Ministry of Water Resources in accordance with the annex of this decree after completion of the construction of the bridges.

8. Turkmenistan's Ministry of Economy and Finance, Turkmenistan's State Commodity and Raw Material Exchange, Turkmenistan's Ministry of Construction and Construction Materials Industry and Turkmenistan's State Customs Service must draw up necessary documents for implementing the contract mentioned in 2nd section of this decree.

9. Turkmenistan's Ministry of Construction and Construction Materials Industry must supervise the implementation of regulating requirements for ensuring the reliability and earthquake safety of bridges and separate installation parts, and the quality of the used construction means, and must supervise the implementation of the works foreseen in design documents.

10. The implementation of this decree must be supervised by Vice Chairman of the Cabinet of Ministers of Turkmenistan N. Shagulyyev, Turkmenistan's Minister of Economy and Finance H. Geldimyradov, Turkmenistan's Minister of Water Resources M. Akmammedov, Chairman of "Turkmenavtoyollary" State Concern A. Sarybayev, Chairman of the Directorate of Turkmenistan's Central Bank G. Abilov and Chairman of Turkmenistan's Supreme Supervision Department T. Japarov.

Turkmenistan's President (seal)

Gurbanguly Berdimuhamedov30

54.
Mr. Buyuksandalyaci testified that, following the Decree, he negotiated a contract with Mr. Sarybayev, the Chairman of TAY.31 Mr. Sarybayev confirmed that he led the negotiations on behalf of TAY, but disagreed about the sequence of events.32 Mr. Sarybayev testified that "a Presidential Decree follows the process of the negotiation of the principal terms of a contract between a contractor and a governmental entity, such as the contract price and the completion date, rather than precede it."33
55.
Mr. Sarybayev describes how negotiations between Garanti Koza and TAY led to agreement on a reduction in price from USD 105.11 million to USD 100 million on January 26, 2008, and how the USD 100 million price agreed upon is reflected in the Decree, which is dated the following day, January 27, 2008.34 The contract recites that "This Contract is concluded on the basis of Decree of the President Of Turkmenistan No. 9429 dated on 27th of January, 2008."35 After the Decree was signed, Mr. Sarybayev says, "we negotiated those terms of the Contract that had not already been negotiated."36

C. The Contract Between TAY and Garanti Koza

56.
The contract between TAY and Garanti Koza (the "Contract") is captioned "CONTRACT No. 01/2008" and is dated March 18, 2008.37 Mr. Buyuksandalyaci and Mr. Sarybayev agree that they signed the Contract on that date.38
57.
The Contract is written in two languages, Russian and English, which appear side-by-side in two columns.39 The two parties to the Contract are TAY, identified as "Owner," and Garanti Koza, identified as "Contractor."40 "Owner" is further defined in the Contract as "State Concern ‘Turkmena vtoyollary' acting on behalf of Turkmenistan Government [...]."41
58.
The Contract consists of (a) the Contract proper, consisting of three pages containing six paragraphs, (b) the Contract Conditions, consisting of a further 22 pages containing 21 articles, (c) Schedule A, consisting of Schedules A-1 through A-6, and (d) Schedule B, consisting of Schedules B-1 through B-3.42 Also included in the version of the Contract submitted by the Respondent (Exhib it R-18), but not in the version submitted by the Claimant (Exhibit C-021), are Additional Agreement No. 1, dated May 1, 2008, and Additional Agreement No. 2, dated June 27, 2008.43
59.
The Contract obligates Garanti Koza to design and build "28 highway bridges and overpasses on the reconstructed highway of the 1st technical category ‘Mary-Turkmenabad' in the timeframe and in a way as set forth in the Contract Conditions."44 The Contract Conditions require, among other provisions, that the Contractor comply with Turkmenistan law:

Contractor shall follow all the applicable Laws that are in effect on the territory of Turkmenistan. Owner shall assist Contractor in understanding Turkmenistan laws and regulations.45

60.
According to Article 21 of the Contract Conditions, controversies or arguments between Owner and Contractor are to be submitted to "Arachy Kaziyet of Turkmenistan," an institution referred to by the Parties as the "Arbitration Court" of Turkmenistan, by which is meant the commercial court.46 The same article further specifies that, "if the parties are not satisfied with verdict of Arachy Kaziyet of Turkmenistan, p artie s have a right to turn to Arbitrage tribunal in Hague (Netherlands)."47
61.
The Contract imposes a deadline. The Contract Conditions require the Contractor to begin works and complete them in accordance with Schedule A-5 of the contract.48 They further provide that "All the construction works of bridges and overpasses shall be completed in the month of October of 2008 according to" the Decree.49 In other words, the Contractor is required to complete the process of designing and building the 28 bridges in seven and a half months. The Contractor is required to "report to Owner in written form if there is a possibility that design or progress of works on structure construction slows down or interrupts."50
62.
The terms of payment established by the Contract are central to the Claimant' s claim. The Contract states that the "Total Contract Price" is one hundred million U.S. dollars.51 It further describes the "stated price" as "a lump sum final turn key price," and goes on to say that "variations and additions... shall not affect Total Contract Price and Terms of Payment."52 The "Total Contract Price" of USD 100 million is further divided, however, into the "Contract Price," the amount actually to be paid to the Contractor, which was USD 86,956,521.74, and the Value Added Tax associated with that amount, which was USD 13,043,478.26.53 Most of the operative provisions of the Contract relate to the Contract Price, not the Total Contract Price.
63.
The Contract Conditions provide for progress payments to "be made as the work progresses and after presentation of monthly Progress Payment Certificate according to Schedule B-2 and confirmed by" TAY.54 They further provide that "Monthly Progress payments to Contractor by Owner shall be based on percentage progress amounts," which amounts "shall be taken into consideration as percentage progress criteria as per Schedule B-2."55
64.
Schedule B-2 to the Contract is captioned "Terms of Payment." Both the Contract Conditions and Schedule B-2 provide for an advance payment of 20% of the "Contract Price" (which, as noted above, was USD 86,956,521.74, excluding VAT), which equaled USD 17,391,304.35. The Contract requires that the advance be paid against an "Advance Payment Guarantee," and for further payments to be made against certificates from the contractor that a specified percentage of the work has been completed.56
65.
Schedule B-2 provides that:

100% of the price of the listed works mentioned in Schedule B-1will be paid (taking in account 20% for reimbursement of Advance Payment) proportionally for each bridge to the actually done Construction Works for each month.57

Schedule B-1 contains a breakdown of the Contract Price among the 28 bridges and, for each bridge, the percentage allocated to each stage of completion. The Contract specifies the form of the Monthly Progress Certificate to be prepared by the Contractor and provided to the Owner. That form, Exhibit B-3, requires the Contractor to calculate the percentage of actual progress on each bridge in submitting each invoice.58

66.
Schedule B-2 specifically links the bank guarantee to the progress payments to be made to Garanti Koza:

The amount of the Advance Payment Guarantee shall be diminished proportionally and in the amount of 20% for each payment item, in accordance with all and each of the payment items, listed above, to the CONTRACTOR under the Contract with respect to [sic] with respect to the progress of Works.59

67.
Schedule B-2 further provides that, after the advance payment, against specified documentation:

5.72% of the "Total Contract Price" will be paid for Mobilization Works;

5.72% of the "Total Contract Price" will be paid for Design and Ground Survey Works;

100% of the prices listed in Schedule B-1 will be paid for each bridge "to the actually done Construction Works for each month."60

Schedule B-2 also provides for a 5% retention to be paid following completion of the project.61

68.
Schedule B-1 lists each of the 28 bridges, specifies a "Total Price" for each bridge, and then assigns a percentage to each stage of construction. For example, the total price assigned to bridge number 62, the first one listed on Schedule B-1, is USD 7,765,217.48. Schedule B-1 specifies that 0.32% of that price will be paid for "Excavation works," 0.42% for "Filling and compaction works," 6.62% for "Pile works," etc.62 The sum of the Total Price given in Schedule B-1 for all 28 bridges is the Contract Price of USD 86,956,521.75, not the Total Contract Price of USD 100 million.
69.
The provisions of Schedules B-1 and B-2 summarized in the two preceding paragraphs are difficult to reconcile. "Total Contract Price," the term used in Schedule B-2, is defined as USD 100 million.63 The bridge-by-bridge percentages in Schedule B-1 that are referenced in Schedule B-2, including the 5.72% for Mobilization Works and the 5.72% for Design and Ground Survey, are applied to figures that add up to the "Contract Price" of USD 86,956,521.75.
70.
The Contract provides that it comes into effect upon payment to the contractor of the Advance Payment of USD 17,391,304.00 "against Bank Guarantee Letter."64 The Contract Conditions expand on this provision as follows:

Owner pays Contractor an advance payment in amount of 20% of the total Contract price excluding VAT which is 17,391,304,00 (seventeen million three hundred ninety-one thousands three hundred and four) US Dollars against the Bank Guarantee on advance payment given by a first class European bank in order to reimburse of Advance Payment, acceptable by the Owner's Bank. Due to time frames imposed by exchange conversion procedures Contractor is advised by Owner to submit this Bank Guarantee latest by 20th day of the month, after which payment of the advance amount shall be made available for Contractor on the fifth (5) day of the next month.65

71.
The Contract goes on to specify that:

Advance Payment Guarantee shall be automatically and proportionally reduced by 20% of 100 percent (100%) of the commercial value of executed works upon submission of Progress Payment Certificate signed by the Parties and presented by Contractor.66

72.
Reading the payment terms of the Contract together, they provide for payment by TAY to the Contractor of a 20% advance (presumably calculated on the Contract Price, since the amount specified as the Advance Payment equals 20% of the Contract Price, not the Total Contract Price) against an Advance Payment Guarantee. The 80% balance of the Contract Price, minus a 5% retention, is then to be paid in instalments corresponding to the percentage of the work completed on each bridge and documented by the contractor, and the bank guarantee is to be reduced in proportion to each payment. There is no mention in the Contract of any requirement to document Garanti Koza's costs or profit margins as a condition of payment of any invoice, nor is there any specification of how long the bank guarantee was to remain in effect.

D. Garanti Koza's Initial Mobilization

73.
Garanti Koza states that it "commenced work in preparation for the project before the signature of the Contract, as a gesture of good faith and based on the approval given by the Turkmen President."67 Immediately after the signature of the Contract on March 18, 2008, "Garanti Koza started mobilisation work," including construction of a precast factory in Mary, entry into a know-how agreement with GKI, installation of a concrete plant and a weigh scale, import of equipment from Turkey and elsewhere, and construction of a dormitory for workers and an office in Ashgabat.68
74.
Mr. Buyuksandalyaci explained that "Mobilisation included the following steps:

■ building a 6,000 square meter movable pre-cast factory near the city of Mary. Garanti Koza concluded a contract with Garanti Koza Insaat for the construction of the factory. The factory was used to manufacture the beams and piles to build the bridges. The factory used an advanced steam curing process which allowed Garanti Koza to manufacture piles and beams of stronger quality and more quickly, by improving the drying system;

■ installing a concrete plant, with a computerised mixing system;

■ installing a weight scale for trucks;

■ importing equipment, which included two cranes able to lift 120 tons each, a high- quality cast imported from Germany, excavators, bulldozers, generators, trucks, concrete mixers and pile drivers; and

■ construction of a dormitory and facilities for workers, and the establishment of an office in Ashgabat."69

75.
The Know-How Contract (dated March 24, 2008) that Garanti Koza entered into with GKI was the subject of some controversy.70 The Claimant states that the know-how in question was "advanced technology to produce pre-stressed beams and piles."71 The Respondent points out that there is no mention of any need to acquire know-how in the Contract, or in Garanti Koza's business plan or its financial statements, and that Garanti Koza's possession of the know-how needed to produce beams and piles was implicit in its bid to TAY.72 It adds that the Know-How Contract itself does not specify what the know-how consists of; indeed, the Respondent says, the KnowHow Contract appears to have been downloaded from a model on the internet.73 The Respondent argues that the know-how contract was simply a pretense for transferring USD 12 million, two-thirds of the Advance Payment, to GKI, and that this transfer was the root cause of Garanti Koza's constant complaint that it was short of cash.74
76.
When questioned at the hearing as to whether either of them had seen any documentation of the value of the know-how that was the subject of the Know-How Contract between Garanti Koza and GKI, both the Claimant's and the Respondent's experts answered "I haven't."75 Nor was there any evidence that the know-how was unique or proprietary. When Mr. Buyuksandalyaci was asked at the Hearing whether Net Yapi, Garanti Koza's competitor which was building other bridges in Turkmenistan, was using the same technology as Garanti Koza, Mr. Buyuksandalyaci responded "Yes, of course, they were using the same technology. "76
77.
Although Garanti Koza maintains that it commenced off-site preparations, it did not commence on-site construction immediately after the Contract was signed. The Claimant blames this delay on TAY, which it says "handed over a number of sites with delay and failed completely to hand over four of the 28 sites."77 The Respondent takes issue with that assertion, and argues that:

19 of 28 sites were accepted by a contractor by April 12, 2008, 25 days after the Contract was signed and at least five months before Garanti Koza was in a position to begin bridge construction by drilling piles into the ground. It was not in a position to begin construction not because of any act of TAY but because it did not produce a single pile needed to begin bridge production until July 2008 and did not bring a pile-driving machine to the construction site until September 2008.78

78.
The Claimant also claims to have been delayed in commencing construction of the bridges by TAY's failures to provide technical information and to remove the existing bridges and to clear debris from the bridge sites before handing them over.79 The Respondent, for its part, argues that "there was no delay in the handover of technical data or bridge sites caused by TAY."80

E. The Bank Guarantee and the Advance Payment

79.
On April 8, 2008, three weeks after signing the Contract, Garanti Koza says that it sent TAY a bank guarantee in the amount of USD 17,391,304, corresponding to 20% of the Contract Price (not including VAT) of USD 86,956,521.75.81 Mr. Buyuksandalyaci explained that "We had to give a guarantee in order to get the Advance Payment."82 The C laimant argues, however, that "Turkmenistan, including Turkmen Highways and the Central Bank, required amendments to the bank guarantee, which it had no entitlement to do under the Contract, which resulted in a delay of several weeks in its issuance."83 The Claimant asserts that it "had no choice but to comply," and sent a revised bank guarantee on April 26, 2008, "which in turned delayed the payment of the Advance Payment."84 The Claimant asserts that the Central Bank delayed approval of the guarantee until May 31, 2008, which in turn delayed the payment of the Advance Payment until July 7, 2008, because of the timing restrictions related to exchange conversion procedures.85
80.
The Respondent counters that "Claimant's assertion that the proposed Bank Guarantee was sent to TAY on April 8, 2008 is simply untrue."86 The Respondent argues that the documents "show that Garanti Koza did not submit its proposed Bank Guarantee to the Central Bank of Turkmenistan before April 30, 2008, 43 days after the Contract was signed.87 The Respondent's version of the chronology is as follows:

April 26, 2008: Claimant sent its proposed Bank Guarantee to TAY;

April 30, 2008: Raiffeis en Bank, the issuer of the Bank Guarantee, sent a proposed Bank Guarantee to the Central Bank of Turkmenistan, i.e., "the Owner's Bank;"

May 12, 2008: The Central Bank of Turkmenistan sent its comments on the proposed Bank Guarantee;

May 16, 2008: Raiffeisen Bank sent Amendment No. 1 to the proposed Bank Guarantee;

May 26, 2008: Raiffeisen Bank sent Amendment No. 2 to the proposed Bank Guarantee;

July 7, 2008: The Advance Payment was made to Claimant.88

81.
The Respondent makes the point that the "Advance Payment was in effect a loan to be used to fund legitimate Project expenses."89 It points out that Turkmen law requires a contractor to furnish a bank guarantee to secure an advance payment.90 The Respondent further stresses that the making of the Advance Payment was conditioned by the Contract "upon the delivery by Claimant of a ‘Bank Guarantee on advance payment given by a first class European bank in order to reimburse the Advance payment acceptable by the Owner's bank.'"91 The "Owner's bank" was the Central Bank of Turkmenistan.92 Any delay, the Respondent argues, was attributable to the Claimant's failure to provide a compliant guarantee.93
82.
Because of currency exchange controls, TAY's bank had to receive the documentation supporting a payment by the 20th of any month in order for payment to be made by the 5th day of the following month.94 Because the final amendment to the bank guarantee was sent after the 20th of May, payment could not be made in June. The advance payment of USD 17,391,304 was made to Garanti Koza on July 7, 2008.95
83.
The Advance Payment of 20% of the value of the Contract was roughly equal to the 21% percentage of the "construction by length" (that is, the percentage of the total length of all the bridges contracted for) which the Claimant's expert testified that the Claimant had completed by the time it stopped work.96 Considerable attention was therefore devoted during the Hearing to what happened to the Advance Payment. The Claimant states that "Half of the Advance Payment Garanti Koza received was blocked as a cash guarantee by Raiffeisen Bank [the bank that provided the bank guarantee] and the rest was used for mobilisation work."97 Mr. Buyuksandalyaci testified that all of the money was "used in relation to the job that needed to be done for the 28 bridges."98 The Claimant explained further:

The Advance Payment was used to finance the Project, for mobilisation at the outset and, after February 2009, when the second half was released, to pay its debts and finance further works until June 2009 (including, without limitation, paying for design works, procurement of equipment and materials, salaries of employees - over 600 of them at the pick [sic] of the Project).99

84.
The Respondent has a very different view. It contends that GKI siphoned away the Advance Payment to meet its own cash needs, leaving Garanti Koza with insufficient cash resources to devote to the project in Turkmenistan:

As the bank statement shows, by July 31, 2008, i.e. 20 days after the Advance Payment was received, the balance of Garanti Koza's bank account was only USD 3,818.20. Thus, nearly all of the USD 17.4 million in Advance Payment funds was entirely gone. Over USD 7 million went to the Turkish parent, Garanti Koza Insaat, within the first 4 days after the Advance Payment was received.100

85.
The Respondent thus argues that GKI's demands were the reason for the "cash squeeze" that the Claimant complained about. It states that "the amount of money Claimant received from TAY was always more than the amount of works Claimant performed." This is confirmed, the Respondent argues, by the Claimant's offer, at the time the bank guarantee expired, to "simply apply the outstanding amount of the Advance Payment to its progress certificates."101

F. The Initial Invoices and the Smeta Problem

86.
On April 30, 2008, six weeks after signature of the Contract, Garanti Koza sent TAY its first invoice for a progress payment, covering work on design, exploration, and mobilization.102 Following the Contract provisions and templates governing progress payments, the invoice sought payment from TAY of a percentage of the Contract Price.
87.
Schedule B-1 of the Contract specified that 5.72% of the price agreed for each of the 28 bridges would be attributed to "mobilization works," and that another 5.72% would be attributable to design and ground survey.103 In its April 30, 2008 invoice, Garanti Koza applied for the full 5.72% of the price of each bridge for "mobilization works," and for 1.89% (out of the allocated 5.72%) of the price of each bridge for "design and ground survey." The invoice thus claimed, in total, 7.61% of the price of each bridge and of the total Contract Price, for a total of USD 6,615,304.33.
88.
TAY rejected Garanti Koza's payment application, not because the work had not been done, and not because the application did not comply with the Contract, but rather because the application was not prepared in accordance with "CMETA," which is pronounced and also sometimes spelled "Smeta."104 Mr. Buyuksandalyaci explained:

In April 2008, Garanti Koza submitted its first progress payment certificate in keeping with the lump sum pricing provided for in the Presidential Decree and the Contract. To my surprise, this was rejected by Turkmenavtoyollary. I was told by the Control Department of Turkmenavtoyollary that the Ministry of Finance and the Central Bank would not approve payment claims unless they were submitted using detailed cost itemisation pricing based on what is known as "CMETA" (also spelled "SMETA"), instead of lump sum pricing.105

Mr. Sarybayev of TAY confirmed at the Hearing that Garanti Koza's payment application was rejected "because there was no SMETA."106

89.
The Tribunal heard extensive testimony about Smeta in the course of this arbitration. The Parties are in broad agreement about what Smeta is, but whether and how Smeta was applicable to the Contract was vigorously disputed. In broad terms, Smeta is a method, developed under the Soviet Union and still in use in some former Soviet republics, for predicting the cost of engineering and construction work and then for assessing the value of such work as it is done. Mr. Buyuksandalyaci gave the following explanation of his understanding of what Smeta means:

CMETA is a Russian standard unit pricing structure under which the work is valued by applying fixed prices or rates to the quantities of work done (for instance labour and material), as well as overheads and the profit margin. This is commonly referred to in the construction industry as a "schedule of rates". The prices or rates to be applied to each unit of each item of work are fixed by the Turkmen Ministry of Construction and State Commodity and Raw Material Exchange. In other words, they are fixed unilaterally by Turkmenistan, without reference to the particular contract or the work involved on a particular project.107

90.
The term Smeta is used in Turkmenistan to describe both a contractor's forecast of the expected costs of materials and labor for a project, and also to describe the process by which a contractor certifies on an invoice what part of the forecast work has been done and what part of the forecast costs have been incurred, so that he can be paid for that work. Mr. Nepesov, the Acting Head of the Central Office of State Expert Review, a subdivision of Turkmenistan' s Ministry of Construction, described how Smeta works in Turkmenistan:108

Submission of a detailed project smeta is required of all local and foreign contractors performing government contracts in Turkmenistan. The contractor initially prepares and obtains approval from the State Expert Review of its detailed smeta, a detailed cost breakdown of the materials and labor that it plans to use, before the contract's signing or a few months after. The owner of the project monitors the contractor's expenses by checking the contractor's subsequent progress payment certificates against its approved smeta. The purpose of this reporting mechanism is to ensure that the contractor's forecasted costs and expenses are reasonable in light of the work to be performed and that the contractor does not exceed its budget. The smeta system allows incremental payments to the contractor based on the percentages of its completed works.109

91.
Thus the Smeta system, as described by Mr. Nepesov, provides a method of holding a contractor to his cost estimate for a project by requiring the contractor to certify how much of a detailed forecast of the work to be performed and expenses to be incurred have been completed or expended in order to get paid. Mr. Buyuksandalyaci described it at the Hearing as "a progress payment system, based on unit prices."110
92.
The difficulty with Smeta, from Garanti Koza's point of view, was that Garanti Koza had contracted for payment based on the percentages completed of a lump sum price, rather than payment in accordance with Smeta. As Mr. Buyuksandalyaci put it:

The imposition of CMETA by Turkmenistan was totally contrary to the Presidential Decree and the Contract, which did not mention CMETA or any schedule or rates pricing. Rather, the Presidential Decree and the Contract provided for a fixed lump sum price payable by progress payments based on percentage of work completed. This is significantly different from CMETA. Under the lump sum pricing, Garanti Koza was assured of progress payments based on the percentage of work completed at the time of each progress claim.111

We know very well how to work with this SMETA [...]. We wanted to work on a percentage-based progress system, and that was our condition with respect to signing a contract. But unfortunately this was not respected.112

93.
The Respondent disagrees that the Contract was inconsistent with the Smeta requirement:

On the contrary, lump sum contracts are standard practice for construction projects in Turkmenistan, yet the smeta requirements are also the standard practice, as all contractors know.

[…]

The fact is that smeta must be prepared for all construction contracts in Turkmenistan and this requirement does indeed coexist with, and is applied every day to, lump sum contracts. Claimant's reference to Article 10.3 of the Contract, which refers to payments based on the percentage of work performed, does not conflict with the smeta system. Progress payment certificates based on smetas are prepared based on the percentage of works completed by contractors. Indeed, Form 2, the certificate of works actually performed that is part of every progress payment certificate, includes an indication of the percentage of works.113

94.
Mr. Nepesov explained his view of how the Contract between TAY and Garanti Koza required the use of Smeta:

If you were to read the Contract thoroughly, it says "based on reports of work performed." A report on work performed implies Form 2, that is how it is known in my country, which is essentially a list of work performed, the unit measurement—the unit of measurement and the price. And that is all in the Contract. I do not remember which schedule to the Contract. Perhaps Schedule Number B-2 […].

The Contractors fill out Form 2, which is a Progress Payment Certificates [sic] and provides to the Owner, the Owner compares it to the Projects, to the SMETA, and in accordance with the SMETA determines the amount that is to be paid.114

95.
Mr. Sarybayev, speaking for the "Owner," agreed:

Form 2 is the monthly work performed by the Contractor. Well, it shows how much they have done and there is a special form for that. They make the calculation, and derive the amount which shows how much has been done within the month. Based on Form 2, then Form 3 is prepared. We take the final amount from Form 2 and enter it into Form 3, which has its own rules of completion.115

96.
The difficulty arose principally because the Smeta reporting system requires a contractor to certify how much he has paid for each item of material or work for which he is submitting an invoice. Such a system could be expected to work reasonably well with a cost-plus contract, in which the owner and the contractor have agreed that the contractor will do the work for his cost plus a fixed margin or percentage. Even with a cost-plus contract, however, the Smeta system applied in Turkmenistan limits the profit margin that may be claimed on any item of work to 6%, plus an additional 8% that may be claimed on account of administrative expenses.116 It thus effectively limits a contractor who reports his costs truthfully to a 14% profit margin (including overhead), regardless of what the owner may have agreed to pay.
97.
It is also more difficult and time consuming to submit invoices that conform to Smeta than invoices calculated simply from the percentage of completion of a task to which the parties have assigned an agreed value. Mr. Nepesov testified that the preparation and submission of a Smeta can take from three to six months, depending on the complexity and size of the project.117 Ms. Balakley, an engineer-economist who worked for Garanti Koza for a few months in 2008, testified that Smetas are normally prepared by a "smeta specialist, " whose duties would normally include the following:

i) preparation of smeta documentation and progress payment certificates; ii) checking the volumes of completed construction works against approved project and smeta documentation, as well as the construction norms and regulations; iii) recording of the completed construction works and providing assistance in drafting of the reporting documentation regarding progress of work as per the schedule; iv) participation in discussions and meetings regarding the changes in project decisions arising in the course of construction works; v) examination of reasons for delays and poor quality of construction works; and vi) revision of smeta documentation in light of changes in volumes of works within the range of project price; etc.118

98.
The Smeta system is administered in Turkmenistan by the State Expert Review.119 Mr. Nepesov, who was in charge of the State Expert Review, explained in his first witness statement that "neither the State Expert Review, nor any other agency has the task of verifying whether the contractor actually pays the prices listed in its foreign currency smeta for its cost items. "120 Contractors "who are experienced in Turkmenistan," he suggests, deal with this artificial limit on profit margin by the way they report costs, because "there is no control mechanism in place in Turkmenistan."121 As Mr. Nepesov explained:

An expense listed on a contractor's invoice may reflect a higher cost than what a contractor actually paid for a certain material. For example, a subsidiary of the contractor may purchase 10 tons of construction steel for 5,000 USD and re-sell it to the contractor for 6,000 USD. The contractor may then report the steel's cost as 6,000 USD to the owner of the project. The State Expert Review's only task is to check that 6,000 USD is within the price range provided in its price indexes, not the check whether the actual cost of this item to the contractor was 6,000 USD.

In this example, the contractor would then add 6% to 6,000 USD and be entitled to a payment of 6,360 USD for an actual cost of 5,000 USD. Therefore, in reality, no contractor is limited to a 6% profit margin.122

99.
Mr. Nepesov explained that a contractor would normally prepare a "less-detailed SMETA" shortly after the signing of a contract, providing "some general breakdown on costs and the budget."123 The Expert Review Board would then review that Smeta, and approve it on the condition that the contractor would submit a detailed Smeta within three to six months.124 He testified that:

In accordance with Turkmen legislation or legislation of any country, no construction can be done without a project document, without project documentation. And a component, an essential component of project documentation would be SMETA. Everybody has to have a SMETA.125

He added: "The function of the State Review Board is the review of project documentation. "126

100.
The Respondent argues that "smeta does not serve the purpose of changing the contract price, it serves the purpose of justifying and then monitoring it. The Presidential Decree allocated the maximum total amount of USD100 million including VAT and USD87 million excluding VAT for Garanti Koza's Project based on the price initially negotiated and agreed between Garanti Koza and TAY. Garanti Koza had to simply prepare a breakdown of that total amount of the contract price, in order to obtain payment based on the volumes of work it had actually carried out as per its smeta."127
101.
At the Hearing, the Tribunal questioned Mr. Nepesov about his explanation of how Smeta can require a contractor to use fixed prices and fixed percentages and still be consistent with an agreement to pay a lump sum price, in instalments, for a project:

PRESIDENT TOWNSEND: Mr. Nepesov, [...] I'm going to ask you to assume that a Government Ministry of Turkmenistan wants a structure built. It doesn't matter what kind of structure, but wants a structure built, and negotiates a contract with a foreign contractor to build that structure for a fixed price of USD 10 million. […] Let's assume that that fixed price is to be paid at the completion of the Project. And let's assume that the Contractor tells the Ministry in the negotiations, that the Contractor tells the Ministry very directly, "We expect to make a 25 percent profit on this Project," and let's assume the Ministry says, "That's okay. We're going to pay you USD 10 million.' And let's assume that the Contractor builds the Project and says, "Here it is. Please pay us our USD 10 million."

Do I understand it correctly--here I'm going to ask you to explain whether I have understood or misunderstood how the law works in Turkmenistan. Do I understand it correctly that the Ministry cannot pay the Contractor the USD 10 million unless the Contractor presents a SMETA which represents that its profit is only 6 percent? Have I understood that correctly?

THE WITNESS: No. I don't think so. […] But if you announce at the [start] it's going to be 20 or 25 percent, I don't think they would give you that profit margin anywhere.

PRESIDENT TOWNSEND: Assume they do. Assume that the Ministry agrees to pay the 10 million knowing that I expect a profit margin of 25 percent, and I succeed and I build the Project, and it only costs me 7 1/2 million to do it. As I understand what you're telling me, I cannot get paid unless I submit what amounts to false data to the Government. Have I understood that correctly?

THE WITNESS: No, it's not quite so, not quite so. Everything is verified. Well, of course, I can buy--I can buy some products with discounts. Of course we cannot verify the factual, the actual price. It's very difficult. It's very challenging to verify the actual price.

PRESIDENT TOWNSEND: Okay. You can't verify it, but you're telling me that I have to falsify it in order to get paid. Do I understand that correctly?

THE WITNESS: Well, I'm having difficulty answering this, Mr. Chairman.

PRESIDENT TOWNSEND: Well, are you having difficulty because you find the answer awkward or because you don't understand the question?

THE WITNESS: The former most likely.128

102.
The Contract, as the Claimant argues vigorously, contains no direct reference to Smeta.129 Indeed, Mr. Nepesov testified that the form of certificate for payment provided for in the Contract was not the form required by the Ministry of Finance of Turkmenistan.130 When Garanti Koza's April 30, 2008 application for payment was rejected for failure to comply with Smeta, Mr. Buyuksandalyaci testified that he "objected to this change of pricing," but that he only did so "verbally in my conversations with the Vice-President and the Chairman of Turkmenavtoyollary," because he "knew that a formal letter stating that Turkmenavtoyollary and the Ministry of Construction were in breach of the Presidential Decree and the Contract would damage the working relationship and would be counterproductive." His objections, he said, were unavailing.131
103.
Turkmenistan argues that the Contract is governed by Turkmen law, and that Smeta is required by Turkmen law, so there was no need to refer specifically to Smeta in the Contract.132 The Respondent argues that Smeta "is a mandatory reporting mechanism that applies to all construction projects in Turkmenistan regardless of whether the corresponding contract is of a lump sum or any other nature. In order to start receiving payments for its performed works, Garanti Koza had no choice but to prepare its smeta, it knew so, and yet failed to do so."133 Mr. Nepesov testified that:

[T]he word "SMETA" does not have to be said as such. It is implied. There is a law. There is a legal rule that must be complied with. You do not have to have a direct reference to a SMETA in the payments - in the terms of payment or any other section of a contract. It is implied.134

Mr. Buyuksandalyaci observed at the Hearing that "seven Ministries approved this Contract. […] So couldn't at least one of these Ministries say that our Contract is against the rules, laws of Turkmenistan? None of them made such a comment. "135

104.
Although it claims that it was "coerced" by Turkmenistan to do so, Garanti Koza revised its first invoice to comply with Smeta.136 This took some time, so that the "Smeta" version of the invoice originally issued on April 30, 2008 was not issued by Garanti Koza to TAY until November 1, 2008. That invoice was paid by TAY on December 17, 2008.137
105.
In addition to delaying its invoicing process, Garanti Koza asserts that the requirement that it use Smeta forced it to reduce the amounts invoiced in the above certificates of payment by about 30%, for a total of USD 4,408,056.138 The Respondent disputes that the use of Smeta has any effect on the price paid for a project.139 However, Mr. Nepesov effectively conceded that there is a relationship between the use of Smeta and the prices that can be charged, when he testified at the Hearing that "before a customer or an owner pays USD 10 for an amount of work that can effectively be done for USD 2, that particular effort as provided for in the SMETA should be subject to review. And, once the SMETA is subject to review, if there is an amount of work in it that's listed that is to be paid for USD 10; whereas, it can be effectively done for USD 2, that particular SMETA will not pass the review."140

G. Performance Delays

106.
Both the Contract and the Presidential Decree called for Garanti Koza to complete its work in October of 2008.141 Work at the bridge sites had been planned to commence on May 1, 2008, but work actually began on July 25, 2008.142 As will emerge below, Garanti Koza never completed all of the work, and significant portions of it had not been completed by October 2008. The Parties agree on those facts, but disagree strenuously about the reasons for them.
107.
Garanti Koza attributes the project delays principally to delays on the part of TAY in making the payments to Garanti Koza called for under the Contract. As explained in the preceding sections, there were initially two elements to the payment delays. First, disagreement concerning the bank guarantee that the Contract required Garanti Koza to provide continued through April and May of 2008, with the result that TAY's Advance Payment to Garanti Koza was not made until July 7, 2008.143 Second, disagreements concerning whether Garanti Koza's progress payment invoices were required to comply with Smeta delayed payment of Garanti Koza's first progress payment invoice, which was initially submitted on April 30, 2008, was revised to comply with Smeta and re-submitted on November 1, 2008, and was paid on December 17, 2008. The Respondent counters that the Advance Payment would have been paid in April if the Claimant had had an acceptable bank guarantee in place at the time of the signing of the Contract, and that the Claimant should have known that its invoice s for progress payments were required to comply with Smeta, and would have been paid months earlier if they had been Smeta-compliant.144
108.
Garanti Koza asserts that, notwithstanding these payment delays, it started work immediately after the signature of the Contract. Specifically, it hired workers and built a dormitory and other facilities for them, built a moveable precast factory in the town of Mary to produce beams and piles to build the bridges, entered into a know-how agreement with GKI, installed a concrete plant and a weight scale, imported heavy equipment and machinery, purchased cement, sand, and stone, and submitted bridge designs to TAY and the Ministry of Construction for approval.145
109.
The Claimant asserts that the Respondent further delayed the project by delaying or failing to hand over to the Claimant the sites on which the bridges were to be built,146 by failing to demolish existing bridges that needed to be removed before new bridges could be built,147 and failing to provide geological, topographical, and other technical information called for by the Contract.148
110.
The Respondent, for its part, denies that there was any delay in the handover of bridge sites or technical data to the Claimant.149 A letter from TAY to Garanti Koza dated July 24, 2008, complaining about the delay in performance, states that:

At present time, the initial data and technical specifications in relation to all bridges, and the act of [land] allocation in relation to 19 bridges have been officially provided by the owner in order to perform the design works for the construction of the aforesaid bridges.

However, Garanti Koza LLP falls behind the schedule [...].150

111.
The Respondent asserts that "Claimant was late at each stage of the project, in particular, with starting work on the actual bridges."151 For months, the Respondent argues, "Claimant did nothing but construct a pile and beam production facility that seemed three to four times larger than the needs of Claimant's project."152 That decision, the Respondent argues, "is one of the examples of its gross mismanagement of this project."153
112.
TAY's impatience with the lack of progress was so great that its chairman and other officers met with Turkey's ambassador to Turkmenistan and other officials on August 8, 2008, to express their concern. The minutes of that meeting reflect TAY's statement to the ambassador that "no bridge construction works were carried out or accepted as of this day."154 The minute s also record that: "At the meeting the Ambassador of Turkey to Turkmenistan had a conversation with M. Buyuksandalyaci over the cell phone with the General Director of Garanti Koza LLP and asked him when he would return to Turkmenistan."155 Mr. Sarybayev argues that the fact that Mr. Buyuksandalyaci was "out of the country for nearly two months" during the summer of 2008, returning only in September before leaving Turkmenistan for good at the end of the year, is evidence that "Garanti Koza did not care about completing the project on time."156
113.
Another factor that delayed progress was that at least three of the bridges that Garanti Koza was supposed to build - bridges 63, 68, and 88 - required steel beams that were not available in Turkmenistan and that could not be produced in Garanti Koza's factory there. Neither of the delay experts put forward by the Parties could say at the Hearing where these beams were to have come from.157 The Respondent argues that Garanti Koza "had not taken any steps to source the beams necessary to construct these bridges, much less to actually construct the bridges."158 The Claimant's response to the Tribunal's written question asking where the Claimant would have obtained these beams was that "Garanti Koza was to procure them in Kazakhstan […] and transport them by railway to Turkmenistan."159 Garanti Koza says that it had initiated the procurement process when it had to leave Turkmenistan,160 but that is effectively an admission that it was a long way from having procured those beams when it stopped work.
114.
The Claimant attributes part of the delay in starting work to the transportation difficulties that delayed delivery of the piling rig that was required to drive the piles on which most of the bridges were designed to rest.161 It had been agreed in the Contract that the bridges were to be built on pile s.162 Driving piles required a specialized machine that could not be procured in Turkmenistan, and that Garanti Koza arranged to obtain from Turkey.163
115.
The machine was shipped from Turkey to Turkmenistan via Georgia, where it was delayed in transit by the outbreak of hostilities between Georgia and Russia in the summer of 2008.164 The pile-driving rig finally cleared customs in Turkmenistan on September 19, 2008, and piling work commenced on September 24, 2008.165 The Respondent asserts that Garanti Koza was "late in ordering, transporting, and making operational its piling rig," and that this "delay alone would have made the completion of the project, even with some reasonable delay, impossible."166
116.
On December 18, 2008, Garanti Koza advised TAY that it had completed one-half of 15 bridges, numbers 72 to 86.167 The bridge project contemplated building pairs of bridges at each of the 28 sites, each carrying two lanes of traffic, so that, upon completion of the project, there would be two lanes operating in one direction on one of the bridges and two lanes operating in the other direction on the twin of that bridge. The completion of half of 15 bridges meant that one two-lane bridge was open at each of 15 sites, each carrying one lane of traffic in each direction. Garanti Koza informed TAY, however, that it had ceased piling work on December 4, 2008, asserting that it had been prevented from progressing further by late demolition of pre-existing structures, delayed provision of technical information, and delayed hand-overs of bridge sites.168
117.
Mr. Sarybayev testified that: "Towards the end of 2008, once we realized that Garanti Koza was not going to make it by the completion date stipulated in the Contract, we agreed to extend the project deadline until November 2009. In order for this extension to become valid, we needed to conclude a relevant additional agreement to the Contract and register it with the same agencies that registered the initial version of the Contract. Despite all our attempts, Garanti Koza failed to sign it."169
118.
Mr. Buyuksandalyaci takes issue with Mr. Sarybayev's statement that the deadline was not extended. He testified that "The project deadline was extended until November 1, 2009 further to a Turkemenistan Presidential Decree which extended completion deadlines for several projects, including this one, by one year. I was informed of this Turkmenistan Presidential Decree by Turkmenavtoyollary. "170 Mr. Buyuksandalyaci gave no document reference for this statement, but the Claimant submitted a letter from TAY to Garanti Koza dated November 12, 2009, that stated:

According to the proposal of the competent authority of Turkmenistan, period of construction works actually prolonged till the November 2009, but unfortunately this period have been breached by you.171

Another letter from TAY to Garanti Koza, dated December 31, 2009, stated:

Upon the proposal made by the competent authorities of Turkmenistan, the date of commissioning was actually moved to November 1, 2009, but even this date was not observed by "Garanti Koza LLP".172

Those letters would seem to document that the deadline was in fact extended to November 1, 2009.

119.
The Respondent argues that the "Claimant seems to have dropped its argument that the completion date was extended to November 1, 2009 by consent of the relevant Turkmen authority," and that "Garanti Koza did not accept the offer to extend the completion date of the Project because it was not in its interest."173 Mr. Buyuksandalyaci, for his part, attributes the failure to agree to an amendment to the Contract extending the deadline to TAY's insistence on "wholly unacceptable" wording attributing the delays to Garanti Koza.174

H. Payment of the First Three Invoices

120.
Garanti Koza's first Smeta-compliant invoice was paid by TAY on December 17, 2008. Both the second and the third Smeta-compliant invoices were paid on January 29, 2009. Garanti Koza issued five subsequent certificates of payment drafted to comply with Smeta between January 5, 2009 and April 28, 2009, all of which were approved by TAY, but none of which was paid.175
121.
The record of invoices for progress payments approved by TAY, and payments of three such invoices (after deducting 20% for the Advance Payment), is shown in the table below.176

[TABLE]

The deceleration of progress on the bridges is evident from the declining amounts for which payment was sought.

I. Expiration of the Bank Guarantee

122.
Garanti Koza's fourth certificate of payment, dated January 5, 2009, was not paid by TAY. The reason for non-payment was not that it was not compliant with Smeta, nor that the work certified had not been performed, but rather because the bank guarantee provided by Garanti Koza to TAY expired on February 2, 2009 and was not renewed.177 As of February 2, 2009, the Respondent asserts, the "Claimant had only amortized about 16.9% of the Advance Payment and still owed close to USD15 million to TAY by its own calculations."178
123.
As explained above (Section IV.E), Garanti Koza had provided the bank guarantee in May 2008 to secure repayment of the advance of USD 17,391,304 paid by TAY to Garanti Koza in July 2008.179 The Contract provided for 20% of each progress payment made by TAY to Garanti Koza to be reduced by 20%, which was allocated to repayment of the advance payment.180 Thus, until the advance payment was fully repaid, the bank guarantee provided assurance to TAY that Garanti Koza would not simply pocket the advance and disappear. As shown in the table in paragraph 121, only USD 2,479,347 of the advance payment of USD 17,391,304 had been earned at the time the bank guarantee expired.
124.
When the bank guarantee was originally provided to TAY, in May 2008, Garanti Koza was supposed to complete its work under the Contract by the end of October 2008. If Garanti Koza had done so, it would have been of no consequence that the guarantee expired in February 2009. However, when February 2009 arrived with the work only partially completed, Garanti Koza and TAY took radically different positions. TAY's position, as explained by Mr. Sarybayev, was that it would exert itself (as it did) to pay Garanti Koza's second and third invoices by the end of January, because it knew that it would be unable to pay invoices after the bank guarantee expired on February 2.181 Garanti Koza's position was that it was "under no contractual or other obligation to renew the Guarantee,"182 and that TAY's obligation to pay its invoices was not conditioned on the bank guarantee remaining in effect.183
125.
Mr. Sarybayev conceded at the Hearing that the Contract does not, in so many words, require that the bank guarantee remain in effect in order for progress payments to be made.184 The Respondent nevertheless takes the position that the structure of the Contract, by providing for a deduction of 20% from each progress payment until the advance was repaid, effectively demonstrates that the parties understood that the guarantee would have to remain in effect for the life of the project - which was in any event expected by both parties to be shorter than the life of the guarantee.185
126.
The Claimant gives three reasons why it did not renew the bank guarantee. First, it says that it was under no obligation to do so. Second, it says that "it was reasonable for Garanti Koza to opt not to renew in light of its deteriorating relationship with Turkmenistan. " And third, it says that it "offered Turkmenistan alternatives to the renewal of the Bank Guarantee, such as giving the factory and equipment as collateral."186
127.
In the event, the Claimant says, "Turkmenistan was inflexible. It rejected all alternatives, did not propose any other alternatives and tried to coerce Garanti Koza to renew the Bank Guarantee by refusing to pay for the works done up to the end of March 2009 and approved by it under Certificates No. 4 to 8."187 The Respondent agrees that it insisted that Garanti Koza had to have a valid bank guarantee in place in order to receive progress payments. The Respondent observes that it would have been imprudent to proceed otherwise with "a paper company with no real equity, with no employees and with no activity or transactions conducted by it."188

J. Non-Payment of Five Additional Approved Invoices

128.
The upshot after the expiration of the bank guarantee was that the Claimant's progress payment invoice s after the first three remained unpaid, even though five more progress payments (represented by invoice s 4 through 8) were approved by TAY (see table at paragraph 121). According to Mr. Sarybayev, it was not TAY that was unwilling to pay the approved progress payments, but rather the Central Bank. Mr. Sarybayev testified:

THE WITNESS: The Bank Guarantee in Turkmenistan and under current legislation is required for the period of construction for the entire period. When the Bank Guarantee expires, up to that, the Bank does not conduct any operations. The Advance Payment is then depreciated by the end of the Project, and it will be zero, so the bank -- or by the time of the expiration, it should be zero. So the Bank Guarantee is then null and void.

ARBITRATOR LAMBROU: Was any attempt made by Turkmenautoyollari to make further payments after expiration of the Bank Guarantee?

THE WITNESS: Yes, there was an attempt. We tried to pay them, based on the Progress Payment Certificates, based on promises from Mr. Buyuksandalyaci. I personally tried to convince the Bank that we should go ahead and make the payment, but they would not go ahead and make the payment.189

129.
Nevertheless, the Claimant remained in possession of the Advance Payment, which had been only partially amortized. Twenty percent of the first three progress payments (USD 2,479,347) had been applied to reduce the amount of the Advance Payment,190 but that left USD 14,911,957 of the Advance Payment (USD 17,391,304 - 2,479,347 = USD 14,911,957) in Garanti Koza's hands. Since the approved but unpaid progress payments (invoices 4 through 8) added up only to USD 3,899,179, Garanti Koza was still well ahead as of the date of the last approved invoice, April 28, 2009.191

K. Suspension of Work

130.
By the end of March 2009, according to Mr. Garg, the Claimant's delay expert, the Claimant "had completed 21 bridges in one direction, was progressing Bridge No. 71 in both directions and could start work on Bridge No. 89."192 Around that time, however, the same expert stated that "the progress of the works started to slow down eventually coming to a standstill. Production of piles effectively stopped at the end of March 2009, with production 63% complete."193
131.
After April 2009, some additional work on the bridges was achieved, but progress gradually came to a halt. As Mr. Garg explained:

From April 2009 onwards, the Claimant continued to work on Bridge No. 71, and by 31 May 2009 had also progressed works on the second halves of Bridges No. 72, 73, 74, and 75. The Claimant had also substantially completed piling works for one half of Bridge No. 89 by this date. As of this date, the Claimant had completed approximately 29% of the construction by length of all the bridges excluding Bridge No. 63 & No. 88.194

The Respondent asserts that Garanti Koza had effectively abandoned the project by May of 2009.195 It is clear from the evidence that work had effectively ceased by the middle of 2009.

132.
Overall, the Claimant claims to have "completed the construction of 21 bridges one-way", which TAY has subsequently opened to traffic, and also claims to have completed both directions on one of the large bridges, Number 71.196 Mr. Garg estimates that: "Based on the total length of all bridges [not excluding Bridges Nos. 63 and 88], the Claimant had completed approximately 21% of the construction by length."197
133.
The Claimant also asserts that "Turkmenistan had no complaints about the quality of Garanti Koza's work."198

L. Post-Suspension Invoices

134.
In the eight days between August 5 and August 13, 2009, Garanti Koza issued five additional invoices, totaling USD 10,236,855 (excluding VAT and after subtracting 20% for the Advance Payment), as follows :

Certificate of Payment No.Gross Earned Amount (excl. 15% VAT) (USD)20% Advance Payment Deduction (USD)Payment Due (Net of Advance Payment Deduction) (USD)
No. 9 4,808,282 961,656 3,846,625
No. 10 1,177,781 235,556 942,225
No. 11 5,183,435 1,036,687 4,146,748
No. 12 995,478 796,383 199,096
No. 13 1,377,701 275,540 1,102,161
Total 10,236,855

These invoices were neither approved nor paid by TAY.199

135.
By August 13, 2009, by the Claimant's calculation, TAY owed the Claimant a total (excluding VAT) of USD 13,953,486. At the same time, the C la ima nt continued to hold an unapplied balance of the Advance Payment that it calculates as USD 11,423,586. The net that the Claimant believes it is owed for work done as of August 2009 is thus USD 2,529,900.200
136.
The Respondent's view of the same facts as of the end of 2009 appears in a letter dated December 31, 2009, from TAY to Garanti Koza. In that letter, TAY takes the position that Garanti Koza had by that date performed 18.74% of the work called for by the Contract, corresponding to a value of USD 18,750,301.04. Out of that amount, TAY said, USD 9,917,387.48 was paid to Garanti Koza, and USD 3,259,182.78 was deducted for the Advance Payment. That left, TAY said, an unpaid balance owed to Garanti Koza but held in the Central Bank of Turkmenistan of USD 3,119,343.69 and an unsettled balance of the Advance Payment paid to but not earned by Garanti Koza of USD 14,132,121.22.201

M. Withdrawal of Garanti Koza from Turkmenistan

137.
The Claimant asserts that, beginning in the fall of 2009, "Turkmenistan embarked on a more intensive harassment campaign against Garanti Koza."202 First, the Claimant says, TAY "threatened to terminate the Contract."203 Indeed, on November 12, 2009, TAY sent Garanti Koza a letter complaining that Garanti Koza had not "executed your obligations" and stating that:

Taking into consideration all of the cases, Company "Garanti Koza LLP" over a long period of time do not accept any steps on improvement of the existing situation and there is no any guarantee on continuation of construction works and execution of Contract, therefore State Concern "Turkmenavtoyollary" is obliged to use Article 11 "Legal assets and authorities" and Article 17 "Cancellation of the Contact".204

138.
Then, the Claimant says, the Turkmen tax administration conducted a tax inspection and announced it would fine Garanti Koza for tax infractions.205 The Respondent states, however, that:

[T]he Turkmen tax authorities did not take further steps to recover Garanti Koza's tax indebtedness and fines, revealed during the December 2009 Tax Audit. The amount of approximately USD1.3 million comprising of the unpaid taxes and the accumulated penalties revealed by the Tax Audit in December 2009 still remains unrecovered as of today.206

139.
The end of Garanti Koza's activities in Turkmenistan came early the following year. As narrated by Mr. Buyuksandalyaci:

In the first week of February 2010, I was informed by one of Garanti Koza's employees in Turkmenistan that a committee comprising representatives of Turkmenavtoyollary, the Ministry of Construction and Turkmenistan's Supreme Supervision Agency came to Garanti Koza's factory in Mary, accompanied by police and military forces. This committee told our remaining employees on site not to touch anything or take anything with them. The committee conducted an inventory and valuation of the equipment and material at the factory. It requested that one of our employees on site sign the inventory and valuation. A copy of the committee's minutes, dated February 4, 2010, containing the inventory and valuation, was provided to one of our employees. After completing the inventory, the committee asked our employees to leave the site of the factory and took it over. We arranged for our remaining Turkish employees to fly back to Turkey the next day.207

140.
The Respondent denies that its actions at Garanti Koza's factory on February 4, 2010 amounted to a seizure of Garanti Koza's assets. The Respondent describes the incident as an "inventory of assets" that was conducted as part of an "inspection carried out by the Supreme Control Chamber of Turkmenistan."208 That inspection had nothing to do with the tax dispute, the Respondent says, but "was a consequence of Garanti Koza's failure to perform its obligations under the Contract."209

N. Events After Withdrawal

141.
Shortly after the factory visit and the subsequent departure from the country of Garanti Koza's remaining personnel, TAY "exercised its Article 17 right to unilaterally terminate the Contract" on February 22, 2010.210 According to the Respondent, the termination took effect on March 24, 2010, 30 days after the notice was given.211
142.
On the same day that it sent its notice of termination, February 22, 2010, TAY asked the Prosecutor General of Turkmenistan to commence a lawsuit against Garanti Koza in the "Arbitration Court" of Turkmenistan.212 The next day, on February 23, 2010, the Arbitration Court entered an order attaching Garanti Koza's assets "as a provisional measure granting TAY security for amounts owing to it by Garanti Koza."213 Those assets were valued "by the Forensic Experts of the Ministry of Internal Affairs" at USD 11,610,881,214 a valuation that the Claimant challenges as inaccurate.215
143.
The Arbitration Court wound up the case swiftly. In a decision dated March 12, 2010, the Arbitration Court awarded TAY a "delay penalty" of USD 3 million, amounting to 3% of the value of the Contract, and a judgment for USD 10,999,830.26, which the Respondent describes as "the unutilized advance payment," excluding the amounts owed by TAY to Garanti Koza, plus "state duties."216 The Court further permitted TAY to enforce its judgment against the proceeds from sales of Garanti Koza's assets, although the Respondent states that TAY has so far "elected not to seek the enforcement of the Decision of the Arbitration Court."217
144.
The Respondent states that the Arbitrazh Procedural Code does not require the presence or consent of the defendant when attaching its assets as security for a claim. According to the Respondent, the Arbitrazh Procedural Code stipulates that courts will consider an application for security within five days, without informing the respondent and other participants of the case. The Respondent also stresses that the Arbitrazh and Civil Procedural Codes also do not require any notification relating to enforcement of the decision. Thus, Respondent says, Garanti Koza was not notified of the rulings and orders concerning attachment of its assets as a security measure for TAY's claim until the Decision of the Arbitrazh Court dated March 12, 2010, was communicated to Garanti Koza by letter of the Arbitrazh Court No. 196/1- 33 dated March 15, 2010.218
145.
The Respondent also states that Garanti Koza's production facility was never transferred to Net Yapi or to any other party and the facility remains untouched since Garanti Koza abandoned the Project in May-June 2009. The facility does remain under an attachment order, but TAY has not sought enforcement of the order, first because it was still hopeful that Garanti Koza would return to complete the Project, and later because TAY chose to wait for the determination of the claims in this ICSID Arbitration.219 The Respondent contends that the Claimant has never alleged that Garanti Koza's production facility was transferred to Net Yapi, and that did not in fact occur. At the Hearing, Counsel for the Claimant questioned Mr. Sarybayev as to why the Supreme Control Chamber recommended that the construction works, not the production facility, be handed over to Net Yapi.220 There was no mention of the production facility being transferred to anyone in the Minutes of Inventory created as part of an inspection carried out by the Supreme Control Chamber on February 4, 2010.221 Nevertheless, Mr. Sarybayev testified at the Hearing:

THE WITNESS: For 28 bridges, if we gave the Contract over to Net Yapi, then at the end of the Project, they would give the production base; that is, they - or production facilities to the balance sheet of Turkmen Highways.

ARBITRATOR LAMBROU: Is that the production facility which was originally built by Garanti Koza?

THE WITNESS: Yes.222

146.
Mr. Buyuksandalyaci describes the delay penalty as a "punitive sanction," characterizing TAY's approach to delays as "outrageous," because "[TAY] caused the delays and by its own admission, the completion date had been extended by Turkmen authorities until November 1, 2009."223 He also states that the Arbitration Court summoned Garanti Koza on February 23, 2010, to attend a trial commencing on February 26, 2010, which it "was not possible for Garanti Koza to attend on such short notice." He adds that "no Turkmen lawyer would represent Garanti Koza against the Government," and that Garanti Koza did not receive any information on the outcome of the court proceedings.224 The Claimant argues that it would have been both futile and dangerous for Garanti Koza to appear at the court.225
147.
It was only on January 3, 2011, Mr. Buyuksandalyaci says, that TAY sent a letter to Garanti Koza's London office informing Garanti Koza of the termination of the Contract.226 That letter, the Claimant asserts, claimed that it was Garanti Koza, rather than TAY, which had unilaterally terminated the Contract.227 The Claimant points out that this letter was inconsistent with TAY's letter of February 10, 2010, which stated that TAY was terminating the Contract.228

V. APPLICABLE LAW

148.
It is common ground that the law applicable to the present dispute is contained in the BIT and the ICSID Convention. Where these treaties are silent on a relevant issue, such issue is subject to customary international law, unless the treaties refer to municipal law or the parties agree to do so.
149.

In interpreting the BIT and other treaty language, the applicable rules of interpretation are found in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT). The Tribunal cites to the decisions of other tribunals in other investment treaty cases where such decisions help to explain a point, to clarify a concept of international law, or to illustrate how similar issues have been resolved in other cases, but the Tribunal is not in any way bound by such decisions.229

150.
The interpretation of the Contract is governed by the law of Turkmenistan.230

VI. THE JURISDICTION OF THE TRIBUNAL

151.
As described in Part III.C above, the Respondent agreed at the First Session with the Tribunal to divide its objections to jurisdiction into two parts. The first part, the Respondent's Objection to Jurisdiction for Lack of Consent, was raised as a preliminary matter and was considered in the Tribunal's Decision on the Objection to Jurisdiction for Lack of Consent, dated July 3, 2013, which is attached to and incorporated into this Award as Appendix A. Professor Boisson de Chazourne's dissent from that decision is attached to this Award as Appendix B.
152.
The Tribunal now turns to the Respondent's remaining objections to jurisdiction, which were raised in the context of the proceeding on the merits.

A. The Respondent's Additional Contentions as to Jurisdiction

153.
The Respondent argues that the Claimant bears the burden of proof, by the preponderance of evidence, that this Tribuna l has jurisdiction over the present dispute pursuant to the instruments under which it has brought its claims. Thus, even though it is Turkmenistan that raises the objections to the jurisdiction of this Tribunal, the Respondent argues that the burden of proof still lies with the Claimant to demonstrate that the jurisdictional requirements of both Article 25 of the ICSID Convention and Article 8 of the BIT are satisfied.231

1. The Respondent denies that the Claimant made an investment

154.
The Respondent asserts that, for the Tribuna l to have jurisdiction over the present dispute, the dispute must arise out of an "investment" within the meanings of both Article 25 of the ICSID Convention and Article 1(a) of the BIT. The Respondent considers that this so-called "double keyhole" test has been applied by numerous ICSID tribunals and requires this Tribunal to determine, in order to decide whether the Tribunal has the competence to consider the merits of the claim: (a) whether the dispute arises out of an investment within the meaning of the Convention; and, if so, (b) whether the dispute relates to an investment as defined in the Parties' consent to ICSID arbitration in the BIT, and specifically in the pertinent definitions contained in Article 1 of the BIT.232
155.
The Respondent argues that the Claimant has failed at each step and that the Claimant does not have an "investment" within the meaning of either Article 25 of the ICSID Convention or of Article 1(a) of the BIT. Accordingly, the Respondent asserts, the Tribunal has no jurisdiction over the present case.

a. The Respondent denies that the Claimant had an investment under the ICSID Convention

156.
The Respondent stresses that, when evaluating its competence to entertain a dispute submitted to it, an arbitral tribunal sitting pursuant to the ICSID Convention must first discern whether the case as presented falls within the jurisdictional requirements set out in the Convention.233 Article 25 of the ICSID Convention defines the Centre's jurisdiction as follows:

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

157.
The Respondent argues that, although the term "investment" was left undefined by the drafters of the ICSID Convention, the drafting history leaves no doubt that "it was always clear that ordinary commercial transactions would not be covered by the Centre's jurisdiction no matter how far-reaching the parties' consent might be."234 Referring in particular to the award in Alpha v. Ukraine235 and the annulment committee' s decision in Malaysian Salvors v. Malaysia,236 the Respondent underlines that several arbitral tribunals have also indicated that ICSID jurisdiction does not extend to mere commercial agreements.
158.
The Respondent emphasizes that some ICSID tribunals have identified a number of objective criteria that should each be met before a transaction can be considered an investment. The Respondent considers that these objective criteria form a test - the Salini test - that has become a widely accepted method to determine whether a claimant's activities gave rise to a protected investment under Article 25 of the ICSID Convention.237 These objective factors are: (a) the investor's participation in the risks of the project; (b) a substantial contribution; (c) a certain duration; and (d) a contribution to the host State's economic development.238
159.
According to the Respondent, the Claimant's activities do not satisfy any of these four conditions and are at best a simple commercial transaction falling outside the scope of ICSID jurisdiction. For purposes of argument, the Respondent assumes that the Claimant contends that the assets that it claims constitute an investment under the BIT also constitute an investment under the ICSID Convention. Those are i) claims to money under the Contract; ii) movable property in the form of a factory and equipment; and iii) know-how.239 However, the Respondent contends that none of these alleged assets passes the Salini test and none could possibly be considered an investment under the ICSID Convention. Therefore, the Respondent argues, it is clear that the Claimant's activities in Turkmenistan did not give rise to an investment within the meaning of the ICSID Convention.
160.
First, referring to scholarly commentary and various arbitral awards such as those in Romak v. Uzbekistan240 and in Italy v. Cuba241, the Respondent explains that the Claimant's alleged investment was not characterized by any element of risk. According to the Respondent, "Construction contracts in which the entrepreneur's revenues do not depend on the profitability of the delivered project are not characterized by investment risk."242 The Respondent argues that there are two categories of international construction contracts: (i) "free-standing international civil engineering contracts," such as the contract at issue in the present case; and (ii) contracts which are part of a "network of activities with an entrepreneurial purpose," such as concession or build-operate-transfer ("BOT") contracts. Citing various commentators,243 the Respondent asserts that free-standing construction contracts are not affected by investment risk, because the entrepreneur's compensation is not a function of the financial results of the delivered project. As such, they are best analyzed as contracts of sale, not investments.244
161.
The Respondent concludes that, in the present case, the Contract was a free-standing construction contract which lacked investment risk. It was not part of an economic venture in which the Claimant would derive all or part of its revenues from the operation of the delivered works. The Claimant's compensation under the Contract did not depend upon the commercial success or failure of the bridges it was to construct. Indeed these are not toll bridges and are not and were never intended to be a commercial venture. Rather, the bridges were effectively a product purchased by a party, TAY in this case, that bought bridges from a supplier of that product, Garanti Koza. Thus, Respondent says, the Contract is best analyzed as a sales contract: The Claimant sold materials, designs, and construction services in exchange for a fixed price to be paid by TAY.245
162.
Second, the Respondent contends that the Claimant cannot point to any contribution it made that could possibly give rise to an investment. Rather, the Claimant's activities amounted to nothing more than an allocation of resources needed to perform its obligations under the Contract. In the Respondent's view, the allocation of resources required for the performance of contractual obligations does not amount to an actual contribution to the host State. Furthermore, the Respondent stresses that the Claimant's receipt of an Advance Payment shows that it did not make a contribution.246 Referring to scholars247 and to arbitral jurisprudence,248 the Respondent argues that the structure of the Claimant's compensation under the Contract, which consisted of an Advance Payment and progress payments, shows that the contribution element is absent.
163.
As to movable property, the Respondent argues that this property was equipment employed by Garanti Koza to perform its obligations under the Contract, nothing more, and thus constitutes part of the resources mobilized by Garanti Koza to perform (or not perform) its obligations under the Contract. The equipment, which according to the Respondent does not even appear to have been owned by the Claimant, was brought into Turkmenistan for purposes of performing the project and with the intent of being repatriated at the end of the project.249 Therefore, in the Respondent's view, it cannot be considered a contribution giving rise to an investment.
164.
Similarly, the Respondent argues that the Claimant's contention that it acquired know-how required "to operate the precast plant" only further serves to undermine its claim of investment. The sole purpose of the Contract was the design and construction of bridges and overpasses. To the extent any know-how was required to construct the bridges and operate the plant and thus to perform the Contract, payment for it was included in the price of the Contract. Moreover, under the express terms of the Contract, the C laima nt was required to remove the plant at the end of the Contract. According to the Respondent, no transfer of know-how was contemplated under the Contract or any other agreement between the Claimant and TAY, much less between the Claimant and the Respondent. Thus, the Respondent asserts that TAY was no more a purchaser or a recipient of know-how than anyone who buys a product from a producer is a purchaser of know-how for the manufacture of that product. In sum, the Respondent concludes that the contention that the Claimant had to acquire the know-how to do the exact thing which it was hired to do cannot in any way be construed as a contribution giving rise to an investment under the Convention.250
165.
Third, referring to Salini v. Morocco, the Respondent argues that the minim u m duration of an investment must be "from 2 to 5 years".251 The Respondent argues that, in the present case, it is clear that the duration of the purported investment fell well under the acceptable range. In fact, the construction period provided for in the Contract was less than one year. Thus, the period in which Garanti Koza contractually committed to build and deliver the bridges did not satisfy the duration element. Even taking into account the warranty period in the Contract, the duration of the project remained under two years. Given this short duration, the Respondent asserts that it is clear that the Contract does not satisfy the minimum duration condition necessary to be considered an investment.252
166.
Fourth, and finally, the Respondent argues that various tribunals253 have found a contribution to the host State's development to be a condition for finding an "investment." The Respondent contends that the Claimant did not actually complete any of the bridges and instead left most in a half-finished or completely unfinished state and did not even start five of them.254 The C laima nt thus not only failed to deliver the benefits contemplated under the Contract, in the Respondent's view, but it also disrupted the flow of traffic on one of Turkmenistan's major arteries. According to the Respondent, "it is thus the height of irony for Claimant to argue that it should be credited with satisfying the requirement of contributing to Turkmenistan's development on this dismal record."255
167.
For these reasons, the Respondent concludes that the Claimant's activities under the Contract do not qualify as an "investment" for purposes of Article 25 of the ICSID Convention. Even if they did, however, the Respondent argues that jurisdiction would still be lacking, since the Claimant's activities under the Contract do not qualify as "investments" under the UK-Turkmenistan BIT.

b. The Respondent denies that the Claimant had an investment within the meaning of the UK-Turkmenistan BIT

168.
In the Respondent's view, the term "investment" as used in Article 1(a) of the BIT must be interpreted according to its ordinary meaning, in its context and in light of its object and purpose.256 The Respondent points to the Preamble of the BIT, which states that its purpose is "to create favourable conditions for greater investment by nationals and companies of one Contracting Party into the territory of the other Contracting Party" with the objective of increasing prosperity in both Contracting Parties, i.e. the United Kingdom and Turkmenistan. The requirement that a qualifying investment in Turkmenistan (i.e. "one Contracting Party") be "of" or "by" a national of the United Kingdom (i.e. "the other Contracting Party") is repeated throughout the BIT.257
169.
Thus, the Respondent argues that, in order for jurisdiction to exist under the BIT, it is necessary for the Claimant to prove that there is an "investment" by a "national or company" of the UK. This, the Respondent argues, in turn requires evidence establishing that the claimed investment was actually made by the investors claiming protection under the BIT. The Respondent argues (a) that there was no investment within the meaning of the BIT in this case, and (b) even if one could find that such an investment existed, that investment was not made by Garanti Koza.
170.
The Respondent considers that there has been no investment within the meaning of the BIT, because, as concluded by various arbitral tribunals, in particular in KT Asia v. Kazakhstan258, Romak v. Uzbekistan259 and Italy v. Cuba260, an investment must entail a contribution, duration, and risk. These conditions are identical to the first three conditions set out in the Salini test. The Respondent argues that the Claimant's contentions that it made an investment under the treaty via (a) claims to money under the Contract; (b) movable property in the form of a factory and equipment; and (c) know-how, have no merit and fall far short of meeting the requisite conditions of contribution, duration, and risk.
171.
Moreover, the Respondent argues that, even if the Claimant could somehow show that its activities amounted to an investment, such investment cannot be considered an investment " of " Garanti Koza, the Claimant in this case.261 In the Respondent's view, the BIT relates only to investments by nationals or companies of Contracting Parties. Thus, in order to establish that it has made an investment, the C laima nt would need to show not only that an investment was made, but it would also have to show that it, i.e. Garanti Koza, was the entity who actively made that investment. The Respondent points out that this necessity has been analyzed at length in several recent cases, and in particular, in Standard Chartered Bank v. Tanzania262, KT Asia v. Kazakhstan263 and Caratube v. Kazakhstan.264 It asserts that, in the present case, it is clear (a) that in order to fall within the consent to arbitration contained in the BIT the purported investment must have been made by the claimant-investor, and (b) that no such investment was made by the Claimant.
172.
The Respondent bases its contention that the UK-Turkmenistan BIT requires an active investment by an investor on the dispute resolution clause of the BIT in Article 8(1). That provision reads:

Disputes between a national or company of one Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement in relation to an investment of the former which have not been amicably settled shall, after a period of four [months] from written notification of a claim, be submitted to international arbitration if the national or company concerned so wishes.265

173.
The Respondent argues that it is clear from the text of the BIT that it requires an active link between the purported investor and the purported investment. Where, as in the present case, that link is missing and the purported investor did not play and could not have played an active role in the alleged investment, the Respondent asserts, the BIT does not apply, the Contracting Parties have not consented to arbitration to cover a dispute arising from such an alleged investment, and there is therefore no jurisdiction.266
174.
The Respondent also argues that, if any investment was made in this case, it was not made by Garanti Koza, the only Claimant.267 According to the Respondent, Garanti Koza undertook no actions and made no investments of its own accord; rather, the bid was submitted and the tender was won entirely on the basis of the reputation and track record of Garanti Koza ínsaat (GKI), its Turkish parent company. It was representatives of GKI, the Respondent argues, who found out about the opportunity, visited Turkmenistan to gather information on the tender, and ultimately submitted the bid. They presented themselves not as representatives of Garanti Koza, an unknown English company, but rather as representatives of GKI, an experienced and well-known Turkish construction company.
175.
The Respondent further argues that, other than the Contract itself and the "curious" knowhow agreement, no records or evidence of the existence of employees, assets, or contracts of Garanti Koza have been submitted by the Claimant or can be seen from its limited public filings in the UK. The name of the Claimant's only witne s s, Mr. Buyuksandalyaci, appears nowhere in the public filings of Garanti Koza. Mr. Buyuksandalyaci signed the Contract and its amendments, not in his alleged capacity as the General Manager of Garanti Koza, but rather as its "authorized representative." The Respondent considers that Claimant has presented no evidence that Garanti Koza ever hired or paid any employees. Rather, it argues, most, if not all, of Garanti Koza's purported personnel were paid by and understood themselves to be working for GKI.
176.
The Respondent asserts that no one at Garanti Koza had decision-making power for the company. Rather all decisions for Garanti Koza were taken by the board of directors of GKI. According to the Respondent, "In fact, from the documents available it appears that Garanti Koza is a passive, paper, company and nothing more. The numbers listed on its letterhead are Turkish, not British. The website address listed on its website is the Turkish website of Garanti Koza ínsaat. The physical address, while it is British, curiously happens to be the same as that of the company's accountants."
177.
For these reasons, the Respondent argues that Garanti Koza did not actively make an investment within the meaning of the BIT or of the ICSID Convention. Failure to make an investment within the meaning of either treaty, in the Respondent's view, requires that the Claimant's claims be dismissed for lack of jurisdiction.268

2. The Respondent argues that the Claimant's claims allege a breach of contract rather than a treaty violation

178.
The Respondent's second principal objection to jurisdiction is that the fundame nta l character of the claims asserted in this arbitration is that of a contractual dispute between Garanti Koza and TAY, not a violation by Turkmenistan of its obligations under the BIT.269 In the words of the Respondent, "the litany of complaints asserted by Claimant - alleged failures to handover sites and information; alleged payment delays; alleged changes to payment terms, wrongful termination of contract due to delays, attachment of assets to satisfy amounts owed - all of these are classic by-products of construction projects gone wrong, where each side blames the other for the failure to complete and deliver the final product contemplated by the parties."270
179.
The Respondent contends that the proper forum for determination of these contractual disputes is the Arbitrazh Court of Turkmenistan, which is the forum designated for disputes arising out of the Contract. In disregard of this contractual commitment, the Respondent argues, Garanti Koza brought an ICSID arbitration against Turkmenistan, despite the fact that the State is not a party to the Contract at issue in this case.271 The Respondent asserts that the BIT does not afford jurisdiction over contractual claims. No matter how the Claimant tries to "dress up" its claims with allegations of State action, the Respondent argues, the essential basis of the claims is obviously contractual.272
180.
The Respondent argues that the dispute resolution clause of the BIT limits claims to disputes arising from the BIT, and does not extend to "purely contract" matters. Tribunals have jurisdictio n only over treaty claims, the Respondent continues, and cannot entertain purely contractual claims which do not amount to claims for violations of the BIT.273 Referring to several arbitral precedents,274 and to the Concurring Opinion of Professor Abi-Saab in TSA Spectrum,275 the Respondent contends that this rule is consistent with the generally accepted principle that investor-State arbitration was not intended to "elevate[ ] a multitude of ordinary transactions with public authorities into potential international disputes."276 The Respondent considers that, in the present proceedings, the alleged treaty breaches "necessarily pass by or posit a contract violation as a fundamental element of or premise of its cause of action."277
181.
The Respondent argue s that the Umbrella Clause in the BIT does not transform generic contract claims into treaty claims.278 Contractual claims remain contract claims, the Respondent argues, regardless of the presence of an umbrella clause in the underlying BIT.279 The Respondent points to numerous tribunals that have expressed concern about the negative consequences that would follow from giving umbrella clauses the power to transform a dispute in the manner the Claimant suggests and which for that reason have declined to follow the authorities upon which the Claimant relies.280
182.
Indeed, the Respondent argues, without a determination that the Contract was breached by Turkmenistan, Garanti Koza cannot make out a prima facie showing of a treaty claim.281 It follows, the Respondent argues, that the Claimant can advance no viable treaty claim, because each of its claims necessarily posits that the alleged conduct was in violation of the Contract.282
183.
The Respondent also argues that, where the basis of a claim is contractual, a tribunal must honor a forum selection clause in a contract. Thus, even if the dispute resolution clause of a BIT grants jurisdiction over contract-based claims, forum-selection clauses (and other provisions) of individual agreements remain enforceable. According to the Respondent, "A different solution would run roughshod over the clear text of the contract reflecting the will of the parties, in total disregard of the principles of party autonomy and pacta sunt servanda. It would render ‘inutile' or without effect the contractual stipulation on the choice of forum, giving to a jurisdictional clause in a BIT the effect of superseding all choice of forum contractual stipulations between parties to a dispute, once one of them invokes the jurisdictional clause of the BIT."283

B. The Claimant's Responses to the Additional Jurisdictional Objections

184.
In its Counter-Memorial on Jurisdiction and Reply Memorial on the Merits, the Claimant responds to the two jurisdictional objections raised by the Respondent in conjunction with the merits: (1) that the Claimant did not make an investment in Turkmenistan within the meaning of the ICSID Convention and the BIT; and (2) that the Claimant's claims are contractual, not claims arising under the treaty.284 Garanti Koza asserts that it made an investment within the meaning of both Article 25(1) of the ICSID Convention and the BIT, that its claims arise under the BIT, and that the Tribunal, therefore, has jurisdiction over the present dispute.

1. The Claimant affirms that it made an investment

185.
Garanti Koza asserts that Turkmenistan's approach - which examines separately against the elements of the so-called Salini test each component of the Claimant's claims, namely (i) claims to money under the Contract, (ii) movable property and (iii) know-how, to conclude that none of the Claimant's activities in Turkmenistan qualify as "investment" under the ICSID Convention - is incorrect.
186.
The Claimant cites prior cases285 to show that investment treaty tribunals have adopted a holistic approach to determine the existence of an investment under the ICSID Convention. The various components of which investments are typically comprised must be viewed collectively. The Claimant concludes that "the Tribunal therefore need not reach a determination on whether each of the components of Garanti Koza's investment would constitute a stand-alone investment. Garanti Koza's investment in Turkmenistan, when viewed holistically, clearly qualifies as an ‘investment.'"286

a. The Claimant affirms that it had an investment under the ICSID Convention

i. The Salini test should not apply

187.
The Claimant questions whether the Salini test should be applied, even in the ICSID context, to determine if an operation qualifies as an "investment" under Article 25(1) of the ICSID Convention.
188.
The C la ima nt relies on the award in Inmaris v. Ukraine to assert that a subjective approach to the definition of "investment" under Article 25(1) of the Convention, with reference to the definition in the BIT, is more consistent with the fact that the drafters of the ICSID Convention intentionally left the term "investment" undefined in Article 25(1) than a more restrictive definition through the imposition of criteria, and is, therefore, preferable.287

ii. Alternatively, the Salini test is satisfied

189.
The Claimant nevertheless argues in the alternative that, if the Tribunal opts to apply the Salini test, it should follow the ICSID cases that view the test as a set of flexible and liberal characteristics, as opposed to imposing jurisdictional conditions all of which have to be met for an asset to qualify as an investment. The Claimant asserts that, in any event, its investment fulfils the criteria of the Salini test.
190.
As a starting point, the Claimant submits that ICSID tribunals have consistently accepted that construction contracts and related operations qualify as "investments" under Article 25(1) of the Convention, meeting the Salini test where required. The Claimant further states that Turkmenistan has not provided any example of an investment treaty decision to the opposite effect, and there is to the Claimant's knowledge no such case. Garanti Koza refers to Pantechniki v. Albania as an example of ICSID tribunals' approach to the application of the Salini test and the definition of investment and to the most recent (2009) edition of Christoph Schreuer's treatise to support the above. The Claimant, therefore, considers that Turkmenistan's submission, that Garanti Koza's investment is a mere contract for the sale of goods and services, is misplaced.
191.
The Claimant further argues that the alleged components of the Salini test, i.e. (a) the investor's participation in the risks of the project, (b) a substantial contribution, (c) a certain duration, and (d) a contribution to the host State's economic development, are all met in this case.
192.
Risk. Garanti Koza relies on case law,288 independent reports on the investment climate in Turkmenistan,289 and academic commentaries290 to support its position that, in the present case, a risk existed and it was multifold. The risk included the poor business environment in Turkmenistan and the fact that, because the lump sum price was fixed, Garanti Koza bore the risk of variations in the works, the risk of a potential increase in the cost of labour and raw material, and the risk of any accident or damage to property during the performance of the work. The fact that Turkmenistan had paid an Advance Payment does not, according to the Claimant, impact the existence of a risk, as noted by the tribunal in Saipem v. Bangladesh.
193.
Contribution . The Claimant submits that it is disputed whether the "contribution" criterion should be included in the Salini test.291 Garanti Koza repeats that investment treaty tribuna l s assessing whether construction contracts met the "contribution" criterion have all answered the question positively. By way of examples in support of this submission, the Claimant refers to Salini v. Morocco, Jan de Nul v. Egypt, Bayindir v. Pakistan, and Saipem v. Bangladesh. The Claimant points out that, in the latter case, the tribunal stressed that the contribution can be in kind and in industry, not only in money, while the origin of the funds is irrelevant.
194.
Garanti Koza submits that it made contributions similar to the ones identified in the case law, namely contributions in money, kind and industry. These included building a production factory, providing the necessary equipment and personnel, providing the necessary know-how relating to the factory, purchasing raw material, paying the workforce, and providing a bank guarantee to Turkmenistan.
195.
The Claimant argues that, in any event, Garanti Koza's investment involved the construction of bridges and overpasses on a Turkmen highway and was part of the implementation of the National Plan launched by the Turkmen government for the renovation of Turkmen infrastructure. Tribunals deciding cases relating to infrastructure projects, such as Salini v. Morocco and Bayindir v. Pakistan, have been prompt to regard such investments as contributing to the host state's development.
196.
Duration . Garanti Koza submits that Turkmenistan's approach is flawed in that it treats the criterion of duration as a jurisdictional one. Even if that criterion was not met, it would not be decisive, as all the other criteria are met. The Claimant calculates the Project's duration, including warranty period, at about two years and seven months. The duration criterion is therefore, to the extent required, met in this case. The Claimant supports the basis of its calculation of the duration of the Project on the findings in Bayindir v. Pakistan and Saipem v. Bangladesh.

b. The Claimant affirms that it had an investment within the meaning of the BIT

i. Garanti Koza made the investment

197.
In response to the Respondent's contention that the Claimant's investment does not qualify as an investment under the BIT, because the investment was not made by Garanti Koza itself, but by its parent company, GKI, Garanti Koza responds, first, by distinguishing this dispute from those in Standard Chartered Bank v. Tanzania, KT Asia v. Kazakhstan, and Caratube v. Kazakhstan, on which Turkmenistan relies to argue that "an investment must be actively invested by the claimant in order to fall within the ambit of the treaty and consequently within the jurisdiction of the tribunal."292 Garanti Koza asserts that Turkmenistan's argument should be rejected because:

a. The Standard Chartered Bank Award (which, the Claimant submits, has limited authoritative value) focused its analysis on the wording of the applicable BIT. That wording is different from that in the UK-Turkmenistan BIT. The latter refers to an investment "of," as opposed to an investment "made," by the investor. The "investment made" wording was at the core of the tribunal's reasoning in Standard Chartered, so the reasoning in that case is not transposable to this one.

b. The facts are distinct: Standard Chartered Bank v. Tanzania involved an indirect investment in Tanzania by a UK company, through several layers of subsidiaries. Garanti Koza instead made a direct investment in Turkmenistan.

c. Unlike the situation presented in the Standard Chartered case, Garanti Koza took all the steps in the life of the investment and was an active, as opposed to a passive investor.

d. The paragraphs of KT Asia v. Kazakhstan and Caratube v. Kazakhstan relied on by Turkmenistan refer to the application of the Salini test and the existence of an investment and are, therefore, irrelevant to the ownership of the investment.

198.
Second, Garanti Koza argues that it was Garanti Koza, and not GKI, that made the investment in Turkmenistan. The facts relied upon by the Claimant are:293

a. None of Turkmenistan's three fact witnesses argued that GKI, as opposed to Garanti Koza, was the investor.

b. The Contract was entered into between Turkmenistan and Garanti Koza and was approved by more than nine Turkmen Government Authorities.

c. The Presidential Decree names Garanti Koza and not GKI.

d. Turkmenistan registered the Project under the name of Garanti Koza, not GKI.

e. All the equipment was either owned or leased by Garanti Koza, showing that Garanti Koza was an active investor.

f. Garanti Koza, not GKI, opened a branch and a bank account in Turkmenistan for the purposes of the Project.

g. Turkmenistan's Central Bank paid the amounts due under Garanti Koza's Certificates of Payment to a bank account in the name of Garanti Koza, not GKI. The location of the bank account in Turkey is irrelevant; Turkmenistan took no issue with this arrangement at the time and even signed Amendment No.1 to the Contract to agree that payment should be made to that bank account.

h. Turkmen Tax Authorities audited Garanti Koza's accounts and never alleged that Garanti Koza was not the actual investor in Turkmenistan.

i. The court proceedings commenced by the Turkmen prosecutor at the request of Turkmen Highways and the resulting decisions were all against Garanti Koza, not GKI.

j. Garanti Koza, not GKI, entered into contracts with subcontractors, such as Net Yapi and Turkmencement.

k. Unpaid creditors of Garanti Koza (which itself was not being paid by Turkmenistan) commenced suits against Garanti Koza, not GKI, before Turkmen courts, as seen in the documents relating to these proceedings produced by Turkmenistan.

l. Unpaid employees commenced suits against Garanti Koza, not GKI, before Turkmen courts, showing that Garanti Koza was their employer.

m. Turkmenistan's submission that "it also appears that no one in Garanti Koza had decision making power for the company" is incorrect. Garanti Koza is a limited liability company, consisting of three partners; Garanti Koza Insaat, which owns 45%, IP (International) Consult Ltd., which also owned 45% until it was replaced by one of its affiliates (Eurasia Motors), and Mr. Turgut, who owns 10%. Important decisions, such as entering into the Contract, the Factory Agreement and the Know-How Agreement, were made after discussion and with the agreement of all three partners.

n. The Know-How Agreement provided for the know-how needed and used for the Project, which included advanced technology not available at that time in Turkmenistan. The Know-How Agreement was approved by all three partners of Garanti Koza. It is severe for Turkmenistan, the Claimant argues, "to basically accuse Garanti Koza of fraud and to state that 'the only other explanation for this curious contract [i.e. the Know-How Agreement] is that it is a mechanism to divert funds to Garanti Koza Insaat.'"

199.
Third, in response to Turkmenistan's submissions on Garanti Koza's public financial statements on file in the UK, the Claimant states that its accountant in the UK had, perhaps inaccurately, advised Garanti Koza that there was no need to file full information about the company's employees, assets, or contracts. Those financial statements are in any event immaterial, in light of the above facts.294
200.
Finally, Garanti Koza asserts that arbitral tribunals have consistently accepted that investments made by special-purpose vehicles qualify for protection under investment treaties, in the absence of language to the contrary in the treaty. The BIT does not contain any language excluding investments by special-purpose vehicles from its scope. To read such language into the text of the treaty would be contrary to Article 31 of the VCLT.295

ii. Garanti Koza's investment within the meaning of the BIT

201.
The Claimant asserts that the application of the Salini test to the definition of "investment" under the BIT has been rejected by the majority of arbitral tribunals and is irreconcilable with Article 31 of the VCLT.296 The Claimant argues that investment treaty tribunals, such as the tribunal in Bayindir v. Pakistan, have generally concluded that construction contracts constitute investments under the applicable BITs.
202.
In line with that case law, Garanti Koza submits that it has made an investment, falling within the definition of "investment" in Article 1 of the BIT. Garanti Koza's activities in Turkmenistan involve: (a) the Contract, i.e. "claims to money or to any performance under contract having a financial value;"297 (b) a factory, which, since it is prefabricated and can be disassembled, is "movable" property;298 (c) equipment, also "movable" property;299 and (d) the Know-How Contract, i.e. "technical processes and know-how;"300 all of which constitute "assets" falling within the non-exhaustive list of assets qualifying as an "investment" in Article 1(a) of the BIT.

2. The Claimant denies that its claims allege a breach of contract ratherthan a treaty violation

203.
The Claimant asserts that Turkmenistan errs in arguing that Garanti Koza's claims are "purely contractual. "301 Garanti Koza's causes of action arise out of provisions of the BIT and not of the Contract.
204.
According to the Claimant, the case law relied upon by Turkmenistan does not support its argument. In each of SGS v. Pakistan, El Paso v. Argentina, Pan American v. Argentina, Hamester v. Ghana, Abaclat v. Argentina and Malicorp v. Egypt, the tribunals found that they had jurisdiction to consider treaty claims where the dispute arose, at least in part, out of an underlying contract. The existence of an underlying Contract, as part of the factual matrix, thus does not preclude the Tribunal' s jurisdiction. To establish the Tribunal's jurisdiction, Garanti Koza argues, it need only make out a prima facie case that the claims stated fall within the purview of the substantive protections of the BIT. The Claimant further relies on Salini v. Morocco and Azurix v. Argentina in support of this position.
205.
Garanti Koza further submits that there is no basis for Turkmenistan to seek to introduce a new condition for the Tribunal to have jurisdiction - that the "treaty claim must be "self-standing. " Such an additional condition appears to have no basis other than the Concurring Opinion of Arbitrator Abi-Saab in TSA v. Argentina ; it lacks any other support in the abundant case law.

3. The Claimant affirms that the Tribuna l has jurisdiction over GarantiKoza's umbrella clause claim

206.
The Claimant takes issue with the Respondent' s argument that an umbrella clause "does not transform generic contract claims into treaty claims" and that the Tribunal therefore has no jurisdiction over the Claimant's umbrella clause claim. The Claimant asserts that the majority of tribunals and commentators have accepted the "elevating" effect of umbrella clauses, applying their ordinary meaning in accordance with Article 31 of the VCLT.

a. Turkmenistan's reading is inconsistent with the origins of the umbrella clause

207.
Garanti Koza asserts that the origins of the umbrella clause make it clear that its effect is precisely what Turkmenistan claims it is not: to elevate contractual breaches into treaty breaches.302 The Claimant relies on analyses on the origins of the umbrella clause by A.C. Sinclair, J. Wong, E. Gaillard, the Shawcross Draft Convention on Investments Abroad, and the OECD Draft Convention on the Protection of Foreign Property.303

b. Turkmenistan's contention is contrary to arbitral jurisprudence

208.
Garanti Koza submits that, contrary to Turkmenistan' s argument that an umbrella clause "does not transform generic contract claims into treaty claims," the vast majority of arbitral tribunals have ruled that the effect of an umbrella clause is precisely to elevate contractual claims into treaty claims.
209.
The SGS v. Pakistan award under the Switzerland-Pakistan BIT, on which Turkmenistan relies, has been widely and heavily criticised, including by the Swiss Government and the tribunals in SGS v. Philippines and Eureko v. Poland.304 Similarly, the few other decisions relied upon by Turkmenistan, i.e. Joy Mining v. Egypt, El Paso, Pan American Energy v. Argentina, and Toto v. Lebanon, depend upon a restrictive interpretation of the umbrella clause.305 Such a restrictive interpretation has been rejected by most tribunals, including those in Noble Ventures v. Romania, LG&E v. Argentina, SGS v. Paraguay, and EDF v. Argentina.306
210.
The Claimant submits that the correct approach is to apply a plain-and-ordinary-meaning interpretation to the BIT that gives effect to the umbrella clause. The plain language of the umbrella clause does not differentiate between undertakings of a commercial nature and those of a sovereign nature. "Any obligation" means just that, and a different reading would require serious justification to be consistent with the VCLT. In any event, the distinction between "commercial" and "sovereign" obligations and breaches is irrelevant in this case, as Turkmenistan breached its obligations through sovereign, not commercial actions.307

c. Authoritative commentators have rejected the restrictive interpretation of umbrella clauses urged by Turkmenistan

211.
The Claimant lists a number of analyses by authoritative commentators that, it argues, confirm its submission that an umbrella clause elevates contractual breaches to treaty claims and, therefore, that the Tribunal has jurisdiction to determine the Claimant' s claims under the umbrella clause of the BIT.308 It quotes Stanimir Alexandrov's statement that: "the very purpose and the effect of an umbrella clause in an investment treaty is to transform breaches of obligations the State has undertaken with respect to the foreign investor and its investment, including contractual obligations, into treaty breaches."309

4. The Claimant affirms that Turkmenistan is a party to the Contract

212.
Turkmenistan argues it is not a party to the Contract and that, "if a foreign investor's contract is not with the central government of the State, then the conduct complained of must meet the traditional tests for internationally wrongful acts in order to incur international responsibility. "310 Garanti Koza argues that Turkmenistan's position is irreconcilable with Article 1.1(a) of the Contract Conditions. That article provides that: "Owner means State Concern ‘Turkmenavtoyollary' acting on behalf of Turkmenistan Government and includes its own representatives and successors."311
213.
In any event, (i) the Claimant argues that its claims are for breaches of BIT provisions, so that whether or not Turkmenistan was a party to the Contract is not determinative of the Tribunal's jurisdiction, and (ii) the Claimant' s claims relate to a multitude of instances of misconduct by various organs of Turkmenistan and are not limited to breaches of the Contract by TAY.312
214.
The Claimant disagrees with Turkmenistan' s submission that Turkmen Highways was acting as a private party in a purely commercial capacity. The Claimant advances the following arguments to rebut that conclusion.313

a. The Contract implemented, in part, the National Plan of Turkmenistan and a Presidential Decree for the renovation of Turkmenistan's infrastructure.

b. In Turkmenistan, the Contract and the Project were considered to create an "administrative law relation" and not to be of a commercial nature. This appears from the law relied upon and the procedure followed by Turkmenistan before the general prosecutor and the Turkmen courts. The procedure Turkmenistan followed for the termination of the Contract, through the involvement of the Supreme Control Chamber (which deals with public funds), indicates that neither Turkmen Highways nor Turkmenistan was acting as a private party in a purely commercial relationship.

c. The Contract was approved by several Turkmen Government Authorities, while the Presidential Decree lists over ten governmental bodies involved in the performance of the Contract.

d. The Presidential Decree states that the Project is to be financed from the State budget. The few invoices of Garanti Koza that were paid were paid by the Central Bank of Turkmenistan.

e. Mr. Nepesov, called by Turkmenistan as a fact witness, referred in his First Witness Statement to "public law works" and "governmental contracts."

215.
The Claimant argues that the test for resolving a sovereign-or-commercial question, where provisions of a treaty are breached, is whether the Host State reasonably acted as an ordinary contracting party or went beyond that.314 The Claimant submits that Turkmenistan went beyond acting as an ordinary contracting party, with the most indicative example of such conduct being the imposition of the Smeta.
216.
In response to Turkmenistan's further objection to the Tribunal' s jurisdiction on the basis of the forum selection clause in the Contract, the Claimant argues that the forum selection clause in the Contract is not an exclusive one. The Claimant asserts that case law315 supports its position that, even if the forum selection clause in the Contract were exclusive, a cause of action under a treaty is not subject to an exclusive jurisdiction clause in an underlying contract, regardless of whether the treaty claims relate to contractual issues. Garanti Koza argues that the authorities cited by Turkmenistan deal with purely contractual disputes and are thus irrelevant to claims under a BIT. The jurisdiction of the Tribunal is not affected, the Claimant argues, by the forum selection clause in the Contract.316
217.
For these reasons, the Claimant asserts, the Tribunal should conclude that the Claimant actively made an investment within the meaning of the ICSID Convention and the BIT, and that its claims arise under the BIT and are not purely contractual. Garanti Koza therefore invites the Tribunal to reject both of the Respondent's objections to jurisdiction and to confirm its jurisdiction to hear this arbitration.

C. The Tribunal's Analysis Concerning Jurisdiction

218.
For the reasons stated below, the Tribunal rejects the Respondent's additional objections to the Tribunal' s jurisdiction.

1. The Claimant is an investor

219.
The BIT contains no definition of "investor." Rather, its substantive provisions provide various protections to "investments of nationals or companies of the other Contracting Party."317 The meaning of "investments" will be considered in the next section of this Award; we focus first on "companies."
220.
Article 1(d) of the BIT defines "companies" to mean: "in respect of the United Kingdom: corporations, firms and associations incorporated or constituted under the law in force in any part of the United Kingdom The Claimant, Garanti Koza LLP, was registered as a limited liability partnership with the Registrar of Companies for England and Wales on April 24, 2007, with a registered address at 45 Welbeck Street, London W1G 8DZ, U.K.318 The Respondent has not argued that a limited liability partnership is not a corporation, firm, or association within the meaning of Article 1(d) of the BIT. The Claimant is accordingly a "company" of the Unit e d Kingdom within the meaning of that article.
221.
The Respondent argues that, while Garanti Koza may have been an English company, it served merely as a façade for its Turkish parent GKI, which was the entity that actually provided personnel and material for the project in Turkmenistan and which would not qualify as a company of the United Kingdom. This argument finds some support in the Claimant's own papers, which charge, for example, that the investment climate in Turkmenistan "has proved to be particularly unwelcoming, especially for investors of Turkish origin,"319 and that it "has become particularly hostile for Turkish investors."320
222.
However, the BIT requires only that Garanti Koza be incorporated somewhere in the United Kingdom in order to bring its investments within the protection of the treaty. The BIT contains no denial-of-benefits clause that would require that a U.K. investor have actual operations in the U.K. And the weight of the evidence shows that Turkmenistan knew and accepted that it was dealing with an English company.
223.
To begin with, the Contract identifies TAY's counterparty as "‘Garanti Koza LLP' Company (England)."321 The Presidential Decree authorizing TAY to enter into the Contract similarly refers to the winner of the bid as "‘Garanti Koza LLP' company (UK)" and refers to its UK nationality in three places.322 Turkmenistan's Ministry of Economy and Development entered the project on the "Single State Registry of Investment Projects" under the name of: "Contractor: ‘Garanti Koza LLP' company (UK)."323 Contracts with subcontractors were entered into by Garanti Koza, not GKI.324 The Central Bank of Turkmenistan made payments under the Contract to an account in the name of Garanti Koza.325 The tax authorities of Turkmenistan audited the accounts of Garanti Koza, not GKI.326 And court judgments in proceedings commenced by unpaid employees were entered against Garanti Koza, not GKI.327
224.
GKI may well have seconded personnel to Garanti Koza and provided the construction expertise needed to build the bridges called for by the Contract, but that was not concealed from TAY or anyone else in Turkmenistan. Indeed, Garanti Koza emphasized GKI's experience and expertise in bidding for the project. Garanti Koza's marketing brochure described GKI's history since 1948, beginning with "Established in Ankara as Garanti Insaat Ltd., as a subsidiary of Garanti Bankasi."328 Among the prior projects listed in that brochure was "Mary-Uchi Highway Bridges, Turkmenistan, " which must have been a project familiar to the Respondent. In addition, while GKI is often referred to by the Respondent as Garanti Koza's "parent," GKI appears to have owned only 45% of Garanti Koza.329
225.
The Tribunal concludes that: (a) Garanti Koza, as a U.K. company, meets the nationality requirement of the BIT; and (b) Garanti Koza is the investor whose claim to have made an investment in Turkmenistan (out of which the present dispute arises) is to be tested.

2. The Claimant made an investment in Turkmenistan

226.
The Claimant brings this proceeding under Article 8 of the BIT, which permits an investor of one Contracting Party (in this case, the United Kingdom) to refer to arbitration a dispute with the other Contracting Party (in this case, Turkmenistan) "concerning an obligation of the latter under this Agreement in relation to an investment of the former."330
227.
We therefore turn to whether the Claimant made an investment in Turkmenistan. That inquiry will take us, first, to whether Claimant made an investment as that term is defined in Article 1 of the BIT. Second, it will take us to whether the Claimant's claim arises out of an investment as that term is used in Article 25 of the ICSID Convention. The Respondent argues that the Claimant can meet neither standard; the Claimant argues that it meets both. The Claimant, it is well established, "has the burden of demonstrating that its claims fall within the Tribunal's jurisdiction."331

a. The Claimant made an "investment" under the BIT

228.
Article 1(a) of the BIT defines "investment" to mean "every kind of asset," and provides a list, which is stated to be not exclusive, to illustrate what is included in that term. That list includes the following types of assets, all of which, the Claimant argues, are descriptive of some aspect of its investment in Turkmenistan:

• "Moveable and immoveable property and any other property rights such as mortgages, liens, or pledges;"

• "Claims to money or to any performance under contract having a financial value;" and

• "Intellectual property rights, goodwill, technical processes, and know-how."332

229.
Unlike some treaties, the BIT does not specify any particular relationship between the claimant and the investment necessary for the treaty to apply and for jurisdiction to attach. Following VCLT Article 31, the Tribunal therefore considers the "ordinary meaning" of the treaty terms, in their context and in the light of the object and purpose of the BIT.
230.
Although the Respondent argues that, to meet the definition in the BIT, an investment must have been "actively made" by the claimant, that argument finds no support in the ordinary meaning of the words used in Article 1 of the BIT. Rather, the Respondent attempts to tie this requirement to the wording of Article 8 of the BIT, and specifically to its requirement that disputes submitted to arbitration must concern "an obligation of the [state party] under this Agreement in relation to an investment of the [claimant]."333
231.
The Respondent's attempt to read into the language of the BIT a condition that an investment have been "actively made" by the Claimant appears to have been imported from the award in Standard Chartered Bank v. Tanzania.334 In that decision, the tribunal concluded, from what appears to this Tribunal to have been a somewhat strained reading of the words "of," "by," and "made" in the U.K.-Tanzania BIT, that "the text of the BIT reveals that the treaty protects investments ‘made' by an investor in some active way, rather than simple passive ownership." Nothing in the reasoning of that award leads this Tribunal to read into the BIT before us a requirement that an investment must have been "actively made."
232.
In any event, Garanti Koza's investment appears to this Tribunal to have been "actively made" as that term was used in Standard Chartered Bank, in that it was not merely held by a passive investor. While we understand the Respondent's claim that Garanti Koza was merely the façade behind which GKI contracted with Turkmenistan, we have already rejected that characterization of the facts before us. Garanti Koza used personnel, experience, and technology provided by GKI, but it appears to this Tribunal that Garanti Koza negotiated a contract to build bridges for TAY in Turkmenistan, put resources into the country, and actually built a number of bridges.
233.
Garanti Koza's performance came to an end before it completed its assignment, and Garanti Koza is open to criticism for how long even that performance took, but it is clear from the record before this Tribunal that Garanti Koza engaged in the actual building of highway bridges in the territory of one of the Contracting Parties to the BIT. The tribunal in Bayindir v. Pakistan observed that "The construction of a highway is more than construction in the traditional sense;" it "‘imp lie s substantial resources during significant periods of time'" and "‘clearly qualifies as an investment.'"335 The same is true of the construction of bridges. Garanti Koza's performance may have fallen short, but it was not a mere passive investor.
234.
Garanti Koza made an investment of equipment and material resources - moveable property - while carrying out in Turkmenistan at least a portion of the obligations it undertook to perform under a contract having a financial value - USD 100 million in gross value. For what it is worth, Garanti Koza devoted activity to making that investment, for as long as its efforts continued, and it left behind a number of bridges that are being used by the Respondent today. The Tribunal therefore concludes that Garanti Koza made an investment in Turkmenistan within the meaning of Article 1 of the BIT.

b. The claims arise out of an investment as required by Article 25 of the ICSID Convention

235.
Since this arbitration was brought at ICSID under the ICSID Rules,336 the Claimant also has the obligation to show that the present dispute arises "directly out of" its investment, as required by Article 25 of the ICSID Convention.
236.
It is notorious that the drafters of the ICSID Convention chose not to include a definition of the term "investment" in the text of the Convention.337 That term was examined by the tribunal in Fedax v. Venezuela, the first ICSID case in which jurisdiction was objected to on the grounds that the asset held by the claimant (in that case, six promissory notes) did not qualify as an investment. The Fedax tribunal found that the Convention "provided a broad framework for the definition of investment," and contemplated a "very broad meaning" for that term.338
237.
In that context, the Fedax tribunal examined and listed the "basic features of an investment, "339 but it did not hold that all, or indeed any, of these features must be present in every case. Indeed, the Fedax tribunal had little difficulty in concluding that the promissory notes at issue in that case (which hardly manifested all the features on the list) qualified as "investments" for purposes of the ICSID Convention, observing that the notes were intended for international circulation, and, when endorsed to a foreign holder, constituted an investment.340
238.
A number of later decisions in investment treaty arbitrations, following the lead of the decision in Salini v. Morocco, treated the Fedax list of features that may characterize an investment, as the Respondent asks us to do in this case, as a test that a particular claimant's asset must pass to be recognized as an investment within the reach of the ICSID Convention.341 This is commonly referred to, including by both the Claimant and the Respondent, as the Salini test.342
239.
No such test seems to this Tribunal to be called for in this case. Certainly, the term "investment" as used in the ICSID Convention must have some meaning, even if the Convention itself does not define it. But, as the tribunal in Enron v. Argentina explained, "As the ICSID Convention did not attempt to define ‘investment,' this task was left largely to the parties to bilateral investment treaties or other expressions of consent." As the ad hoc annulment committee observed in Malaysia Historical Salvors :

It is those bilateral and multilateral treaties which today are the engine of ICSID's effective jurisdiction. To ignore or depreciate the importance of the jurisdiction they bestow upon ICSID, and rather to embroider upon questionable interpretations of the term "investment" as found in Article 25(1) of the Convention, risks crippling the institution.343

240.
"It would go too far," the tribunal in SGS v. Paraguay suggested, "to suggest that any definition of investment agreed by states in a BIT [...] must constitute an ‘investment' for purposes of Article 25(1)."344 Rather, that tribunal sensibly adopted the approach of the tribunal in BIVAC, by defining the relevant question as whether "the definition [of investment] in the BIT exceed[s] what is permissible under the Convention."345
241.
The Generation Ukraine tribunal observed that, while the ICSID Convention did not define "investment," it permits Contracting Parties to agree on a definition in a separate legal instrument, such as the BIT.346 This Tribunal has determined that Garanti Koza had an investment in Turkmenistan within the meaning of the term "investment" as defined in the BIT. Neither the nature of the Claimant's investment itself nor the definition of "investment" in the BIT "exceed[s] what is permissible under the Convention"347 or is "absurd or patently incompatible with [the] object and purpose" of the ICSID Convention.348 Garanti Koza's investment is accordingly readily recognizable as an investment permissible under the Convention.
242.
The Tribunal therefore concludes that the Claimant's burden of showing that its investment that is the subject of this arbitration falls within the meaning of "investment" as used in the ICSID Convention as well as in the BIT is satisfied by the Tribunal's conclusion that the Claimant's investment comes within the definition of "investment" in the BIT and that nothing about that definition or the Claimant' s investment itself exceeds what is permissible under the ICSID Convention or is incompatible with its purpose. Article 8 of the BIT (as interpreted in the Tribunal' s Decision on the Objection to Jurisdiction for Lack of Consent)349 therefore entitle s the Claimant to demand arbitration of a dispute arising directly out of its investment before an ICSID tribunal.

3. The claims arise under the BIT

243.
The Respondent's final objection to jurisdiction is that the Respondent believes that the Claimant's claims arise under the Contract, rather than under the BIT, and that its claims are therefore subject to the clause in the Contract requiring disputes to be submitted to the Arbitration Court of Turkmenistan. This objection is effectively a challenge to the sufficiency of the Claimant's "umbrella clause" claim under the obligations provision of Article 2(2) of the BIT.
244.
If, indeed, the Claimant' s claims amounted merely to claims for breach of contract, the Tribunal would agree with the Respondent that such claims would be beyond the jurisdiction of an ICSID tribunal and also that they would be subject to the forum-selection clause in the Contract. If, on the other hand, as the Claimant argues, the Claimant's claims are for breaches of the BIT arising out of the Claimant's investment in Turkmenistan, this Tribunal has jurisdiction to hear them. The Bayindir tribunal observed that "the fact that a State may be exercising a contractual right or remedy does not of itself exclude the possibility of a treaty breach."350 Rather, that tribunal explained, "treaty claims are juridically distinct from claims for breach of contract, even where they arise out of the same facts," and "when the investor has a right under both the contract and the treaty, it has a self-standing right to pursue the remedy accorded by the treaty."351
246.
The answer to this objection to the jurisdiction of the Tribunal is that the Claimant has asserted multiple claims under the BIT. In addition to its umbrella clause claim, the Claimant also asserts claims for direct and indirect expropriation, for denial of fair and equitable treatment, for unreasonable and discriminatory measures, and for denial of full protection and security. Whatever merit each of those claims may have, each is stated as a claim arising under the BIT, not under the Contract. This Tribunal has no jurisdiction to adjudicate whatever contract claims the Claimant may have, and will not attempt to do so.
247.
All that is required to confer on this Tribunal jurisdiction to consider the Claimant's treaty claims is for one of the Claimant's claims to arise under the BIT. The Tribunal finds that the Claimant's claims for direct and indirect expropriation, for denial of fair and equitable treatment, for unreasonable and discriminatory measures, and for denial of full protection and security all concern "obligation[s] of [the Respondent] under [the BIT] in relation to an investment of the [Claimant]. "354 The Tribunal also finds that the Claimant has asserted an umbrella clause claim that is pleaded as a breach of the obligation imposed on the Respondent by the BIT to "observe any obligation it may have entered into with regard to investments of nationals or companies of the other Contracting Party."355 These claims are sufficient to invoke the jurisdiction of the Tribunal. The Respondent's additional objections to the Tribunal's jurisdiction are overruled, and the Tribunal now turns to the merits of the claims asserted.

VII. OVERVIEW OF THE CLAIMS AND DEFENSES OF THE PARTIES

A. The Claimant's Claims

248.
The Claimant submits that the law to be applied to the dispute is the BIT, as supplemented by international law. The basis of this argument is Article 42(1) of the ICSID Convention, which directs the Tribunal to look first at any rules of law agreed by the parties in order to determine the governing law in an ICSID arbitration. That agreed choice of law, according to the Claimant, is the BIT.356
249.
The Claimant asserts that Turkmenistan violated its obligations under the BIT in five respects. First, it claims that Turkmenistan unlawfully expropriated the Claimant's investment. Second, it claims that the Respondent failed to treat the Claimant's investment fairly and equitably. Third, it claims that Turkmenistan violated its duty to observe the obligations into which it entered with regard to the Claimant's investment. Fourth, it claims that Turkmenistan' s unreasonable, unjustified, and arbitrary measures impaired the management, maintenance, use, enjoyment, and disposal of the Claimant's investment. And fifth, it claims that the Respondent violated its obligation to provide full protection and security to the Claimant's investment.
250.
The Claimant seeks compensation for losses it claims to have suffered as a result of Turkmenistan's violations of its obligations to the Claimant under the BIT in relation to the Claimant's investments in Turkmenistan.357 Specifically, it seeks lost profits, compound interest, costs, and a declaration from the Tribunal that no refund of the Advance Payment is due to Turkmenistan.

1. The unlawful expropriation claims

251.
The Claimant's expropriation claim relies on Article 5(1) of the BIT, which reads as follows:358

Investments of nationals or companies of either Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as "expropriation") in the territory of the other Contracting Party except for a public purpose related to the internal needs of that Party on a non-discriminatory basis and against prompt, adequate and effective compensation. Such compensation shall amount to the genuine value of the investment expropriated immediately before the expropriation or before the impending expropriation became public knowledge, whichever is the earlier, shall include interest at a normal commercial rate until the date of payment, shall be made without delay, be effectively realisable and be freely transferable.

252.
The Claimant relies on Article 5 with respect to both its claim of direct expropriation and its claim of indirect expropriation. Indirect expropriation, Claimant says, is described by the provision of Article 5 dealing with "measures having effect equivalent to nationalization or expropriation."359 The alleged expropriation (direct and indirect) was unlawful, according to the Claimant, because Article 5 prohibits any measure of expropriation that is: (a) not for a public purpose related to the internal needs of Turkmenistan, (b) not non-discriminatory, and (c) not paid for by prompt, adequate, and effective compensation representing the genuine value of the expropriated investment.360 The Claimant asserts that the Respondent's expropriation was not for a public purpose, and was not compensated. It further asserts that the expropriation was contrary to a specific commitment in the form of the Presidential Decree and the Contract.361

a. The direct expropriation claim

253.
The Claimant claims that Turkmenistan directly expropriated its investment when it "seized" the Claimant's factory and terminated the Contract in February 2010. It refers to Yves Fortier's definition of direct expropriation as "the compulsory transfer of title to property to the State or a third party, or the outright seizure of property by the State."362
254.
Claimant claims direct expropriation of its contractual rights, which it argues that international law and investment treaty tribunals have consistently recognized may be expropriated. It relies for this point on the awards in Vivendi v Argentina,363Starrett Housing,364 Phillips Petroleum Co. v. Iran,365 Wena v. Egypt,366 and Eureko v. Poland.367
255.
The Claimant bases its claim of direct expropriation principally on three events attributed to the Respondent:

a. The "seizure" of the Claimant' s factory, sale of its equipment,368 and the expulsion of its employees from the factory site on February 4, 2010, by a committee comprising representatives of Turkmen Highways, the Ministry of Construction, the Ministry of Internal Affairs, the Turkmen Intelligence Agency, a prosecutor/district attorney and other government personnel.369

b. The termination of the Contract by a letter from TAY dated February 22, 2010, thereby causing the alienation of the Claimant's contractual rights.370

c. The wrongful judgments of the Turkmen courts obtained by the public prosecutor in March and May 2010 at the request of TAY.371

b. The indirect expropriation claim

256.
The Claimant claims that Turkmenistan indirectly expropriated the Claimant's investment by "creeping" expropriation. Such indirect expropriation is, according to the Claimant, widely understood as interference with an investment that "substantially deprives the investor of the use or enjoyment of its investment, even if the legal and beneficial title of the asset remains with the investor. "372 The test, according to the Claimant, is the effect of the measures on the investor's property - whether the effect of the State's measure is to deprive the investor "in whole or in significant part, of the use or reasonably-to-be-expected economic benefit of property."373
257.
Specifically, the Claimant claims that indirect expropriation occurred when Turkmenistan deprived the Claimant of the use, enjoyment, and economic benefits of its investment without paying fair compensation.374 This creeping expropriation is described as a "series of acts and omissions starting in the spring of 2008 which made it increasingly difficult for Garanti Koza to continue work on the Project, ultimately depriving Garanti Koza of its entire investment."375
258.
In this regard, the Claimant makes specific reference to the following acts. Even if each of these acts might not individually be an act of expropriation, taken together, the Claimant argues, they result in a creeping expropriation.376

a. The Respondent's repudiation of the Project's lump sum pricing and the imposition of itemized cost pricing;

b. The Respondent's failure to pay sums due to Garanti Koza;

c. The Respondent's wrongful imposition of a delay penalty;377 and

d. Turkmenistan's failure to notify the Claimant of the measures taken.

c. The indirect MFN/due process expropriation claim

259.
The Claimant also seeks to use Article 3 of the BIT, the MFN clause,378 to import into the BIT elements of the expropriation provisions of two other treaties: Article 5 of the France -Turkmenistan BIT and Article 6 of the United Arab Emirates -Turkmenistan BIT.379
260.
The Claimant argues that Article 5 of the BIT, read together, through the MFN clause, with Article 5 of the France -Turkmenistan BIT and Article 6 of the UAE -Turkmenistan BIT, imposes additional conditions to lawful expropriation: (1) that the expropriation not be contrary to a specific commitment, and (2) that it be in accordance with due process of law.
261.
The Claimant submits that Turkmenistan, by imposing a delay penalty in excess of USD 2 million without involving Garanti Koza in the process, breached both of these conditions.
262.
The Claimant accepts that, if the Tribunal finds that the Respondent breached Article 5 of the BIT, the Tribunal need not examine or determine the Claimant's alternative MFN-based grounds.380

2. The FET claim

263.
The Claimant asserts that Turkmenistan failed to treat the Claimant's investment fairly and equitably in accordance with Article 2(2) of the BIT, which requires that "Investments of nationals or companies of each Contracting Party shall at all times be accorded fair and equitable treatment. "381
264.
The BIT does not define "fair and equitable" treatment ("FET"), so the Claimant invites the Tribunal to determine "whether in all the circumstances the conduct in issue is fair and equitable or unfair and inequitable."382 The Claimant notes that the Vienna Convention requires that the FET provision of Article 2(2) of the BIT be interpreted in good faith, in accordance with ordinary meaning to be given to its terms in their context, and in light of the object and purpose of the treaty.383
265.
The object and purpose of the BIT, in the Claimant's submission, may be inferred from the preamble. The preamble of the BIT refers to the parties' intent "to create favourable conditions for greater investment by nationals and companies of one Contracting Party in the territory of the other Contracting Party" in order to "stimulat[e] individual business initiative and. increase prosperity in the territory of both Contracting Parties."384 According to the Claimant, the FET standard prescribed in the BIT, in light of the preamble, should be understood as treatment that "does at least not deter foreign capital by providing disincentives to foreign investors."385
266.
The Claimant asserts that the FET standard is an objective one:386 an autonomous standard of treatment pursuant to a specific textual formulation in the context of the object and purpose of the BIT, and which is not equivalent or limited to the international minimum standard under customary international law.387 According to the Claimant, this FET standard imposes on the host state the following obligations:

a. An obligation to act in a constant manner, free of ambiguity, to avoid arbitrary action, not to frustrate the investor's legitimate expectations, and to provide a stable and predictable legal and business environment for the investment;388

b. An obligation to "do no harm," to cooperate with the investor, and to act proportionally;389

c. An obligation not to coerce or harass the investment;390

d. An obligation to act transparently;391 and

e. An obligation to act in good faith.392

267.
The Claimant asserts that Turkmenistan violated the FET standard by:

a. Frustrating Garanti Koza's legitimate expectations by changing the price it would receive for the project and thus the return on its investment, which was the most critical element underlying its decision to invest. This was a result of the change from a lump sum price of USD 100 million set out in the Contract and the Presidential Decree, to be paid in percentage instalments as work was completed, to a different pricing and invoicing mechanism using a Smeta-based system requiring costs to be itemized. The Claimant's legitimate expectations were further frustrated by Turkmenistan' s failure to make monthly progress payments. Such actions constituted inconsistent conduct by Turkmenistan and resulted in a lack of stability of the legal framework for the investment.

b. Actively doing harm to the investment and failing to cooperate. The fines for delay and termination of the Contract were disproportionate to any delay, and in any event an extension of the completion date was mandated under the Contract and ordered by the Turkmen President.

c. Turkmenistan coerced Garanti Koza into applying a pricing and invoicing regime different from the lump sum pricing set out in the Presidential Decree and the Contract and pressured Garanti Koza to continue work while not making payments which were owed.

d. Turkmenistan harassed Garanti Koza by: (i) imposing a delay penalty and terminating the Contract in May 2009 and February 2010; (ii) applying to the Chief Prosecutor to start proceedings against Garanti Koza in February 2010; (iii) seizing Garanti Koza's factory in February 2010; (iv) acts by the Chief Prosecutor endorsing Turkmen Highways' February 22, 2010 application and filing suit with the Turkmen courts within a day of that application; and (v) the imposition of a fine in February 2010 by the tax administration.393

268.
The Claimant asserts that its investment was not treated with transparency. Garanti Koza did not receive any information about or notice of (a) the seizure of the factory other than the February 4, 2010 minutes, (b) the status and outcome of the proceedings by the tax administration or the Chief Prosecutor's action before the Turkmen courts, (c) the sale of part of its equipment by Turkmenistan, (d) Smeta being mandatory under Turkmen law, during the parties' negotiations leading to the Contract, and (e) the court proceedings in Turkmenistan brought by employees and subcontractors against Garanti Koza.394
269.
The Claimant asserts that Turkmenistan' s pricing policy in construction contracts was arbitrary, in that it was "without concern for what is fair or right."395 The Claimant further asserts that Turkmenistan did not act in good faith for all of the reasons above,396 and because of the manner in which it terminated the Contract.397
270.
Finally, the Claimant argues that, even if each of the acts described in this section may not individually have resulted in a breach of the fair and equitable treatment provision in the BIT, all of these acts taken together do result in such a breach.398

3. The umbrella clause

271.
The Claimant claims that Turkmenistan breached the so called "umbrella clause" found at Article 2(2) of the BIT, which provides that: "Each Contracting Party shall observe any obligation it may have entered into with regard to investments of nationals or companies of the other Contracting Party." The Claimant says that Turkmenistan's obligations include obligations under the Contract between Claimant and TAY.399 In support of its contention that TAY entered into the Contract on behalf of Turkmenistan, the Claimant makes reference to, among other things, the statement in Article 1.2(a) of the Contract that the Contract is entered into by TAY on behalf of the Government of Turkmenistan.400
272.
The effect of the umbrella clause, according to the Claimant, is to elevate breaches of contracts with the government into treaty breaches.401 Failures to carry out the obligations undertaken in the Presidential Decree also constitute breaches of the Umbrella Clause,402 according to the Claimant, irrespective of whether the Decree was a unilateral undertaking.403 The Decree made specific commitments directed at a specific investor.
273.
The Claimant claims Turkmenistan breached the Umbrella Clause in six ways:

a. First, Turkmenistan failed to pay the Claimant the price of construction works under the Presidential Decree and the Contract in the specified timeframe and manner,404 by:

i. Imposing Smeta in breach of (a) Paragraph 2 of the Presidential Decree; (b) Article 4 of the Contract; (c) Article 10 of the Contract Conditions; and (d) Schedule B-2 (Terms of Payment) of the Contract.

ii. Failing on or after January 29, 2009, to make monthly payments, in breach of (a) Article 10 of the Contract; and (b) Schedule B-2 of the Contract.

b. Second, the delay penalty violated Article 7(4) of the Contract, which requires Turkmenistan to extend the completion date in case it " fails to make payments and fulfil its financial responsibilities... or allows delays in providing land, maps and diagrams." 405 The delay penalty was also contrary to the agreed extension of completion until November 1, 2009.

c. Third, termination of the Contract by Turkmenistan was contrary to Article 17.1 of the Contract, because (i) having repudiated the core provisions on price, the Respondent cannot be allowed to invoke Article 17.1; and (ii) contrary to Article 17.1, Turkmenistan has not paid Garanti Koza "for the amount of completed works including executed work, imported material and equipment and concluded purchases, demobilization of Contractor and repatriation of employees. "406

d. Fourth, Turkmenistan violated Article 3.7 of the Contract by not handing over the sites promptly. Article 3.7 requires Turkmenistan to "acquire and provide legal and physical handing over of the Site to the Contractor. "407

e. Fifth, the Claimant claims that Turkmenistan violated paragraph 6 of the Presidential Decree, which required various ministries to "ensure the removal of various bridges." It also violated Schedule A-3 (14) of the Contract, in which TAY undertook the obligation to arrange with various ministries and departments to demolish existing bridges and clear the sites of debris.408

f. Sixth, Article 3.7 of the Contract states that the "Owner shall provide all necessary technical information and data for designing and construction of bridges from local authorities of Turkmenistan." Schedule A-3(2) of the Contract required that final topographical plans about the sites be provided. The Claimant claims breach of these provisions.409

4. Unreasonable and discriminatory measures and MFN clause

274.
Article 2(2) of the BIT provides that "Neither Contracting Party shall in any way impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of nationals or companies of the other Contracting Party."
275.
The Claimant claims that Turkmenistan breached Article 2(2) and Article 3 (MFN Clause) of the BIT by: (a) imposing S me ta410 and the delay penalty, (b) terminating the Contract,411 (c) actions by the tax authorities, and (d) seizure of Garanti Koza's factory and equipment.412 These actions, the Claimant says, were unreasonable, unjustified and arbitrary.
276.
Further, the Claimant claims that Turkmenistan's acts and omissions separately and cumulatively violated Article 2(3) of the United Arab Emirates-Turkmenistan BIT and Article 4(1) of the Switzerland-Turkmenistan BIT (both imported by the MFN Clause), both of which provisions obligate the Respondent not to impair by unreasonable or arbitrary measure the management maintenance, use, enjoyment or disposal of investments.413

5. Full protection and security

277.
The Claimant also claims that Article 2(2) of the BIT imposes on Turkmenistan an obligation to provide full protection and security, meaning both physical and legal security, to the investments of UK investors. It claims that, by failing to treat the investment fairly and equitably, creating an unstable legal environment, subjecting the investment to "harassment, " and permitting the expropriation of the investment, it failed in that obligation.414 The Claimant does not accept that such protection is limited to protection from actions by third parties, as argued by Turkmenistan.

B. The Respondent's Responses

278.
In its Counter-memorial,415 its Rejoinder,416 and its Post-Hearing Brief,417 the Respondent asks the Tribunal: (a) to the extent that the Tribunal proceeds to examine the merits of the case, to dismiss the Claimant's claims in their entirety; and (b) to the extent that the Tribunal proceeds to examine the issue of quantum, to find that no compensation is due to the Claimant. The Respondent also asks the Tribunal to order the Claimant to pay the totality of the costs relating to this Arbitration.
279.
The Respondent argues that any investment arbitration tribunal is charged with more than figuring out whether the rights of an investor have been violated. The Respondent submits that such tribunals are also charged with protecting the rights of states that sign BITs, particularly from the kind of abuse that Turkmenistan has, in its view, suffered in recent years at the hands of Turkish claimants. The Respondent asks that the Tribunal make a finding that Turkmenistan has not violated the BIT, even if it finds that it has no jurisdiction over the dispute.418

1. Issues of State responsibility and attribution

280.
The Respondent asserts that Turkmenistan is not a party to the Contract upon which all of the Claimant's claims are based. It denies the Claimant's statements suggesting that Turkmenistan had obligations under the Contract.
281.
The Respondent also points to a lack of consistency in the presentation of the Claimant's claims which shows that the Claimant itself is not clear about whether the actions in dispute are attributable to Turkmenistan. In some instances ‘Turkmenistan' and ‘Turkmen Highways' are used interchangeably in the Claimant's Memorial on the Merits. For example:

• The statement "Turkmenistan's Failure to Hand over Sites" is followed by "Under the Contract Turkmen Highways was required to hand over the sites" and "Turkmen Highways failed to comply with its obligation."

• "Turkmenistan's Failure to Demolish Existing Bridges" is followed by "fundamental obligation of Turkmen Highways under the Presidential Decree and the Contract was to remove the existing bridges and clear debris."

• The Claimant argues that, "given Turkmenistan's misconduct towards Garanti Koza and its growing hostility towards Turkish investors more broadly, Garanti Koza had every expectation that if it issued a letter of guarantee again, Turkmen Highways would immediately call on the guarantee."419

The Respondent thus argues that, while the Claimant refrains from alleging that the Respondent is a party to the Contract, the Claimant' s case in fact rests on the assumption that the Respondent is somehow answerable for the contractual obligations of Garanti Koza's contracting partner, TAY.

282.
The Respondent considers that international law differentiates between a State's responsibility for violations of contractual undertakings given to foreign nationals by the State itself and a State's responsibility for interference with contractual undertakings to which it is not a party. The Respondent argues that this distinction is widely recognized in the literature on international responsibility relating to contracts, which generally concludes that, if a foreign investor's contract is not with the central government of the State, the conduct complained of must meet the traditional tests for internationally wrongful acts in order to incur international responsibility.420
283.
The Respondent contends that the Contract in dispute is not with the central government of Turkmenistan. Rather, it is with a State-owned entity acting in its commercial capacity and within Turkmenistan's internal legal order, rather than within the international legal order.421 Accordingly, the Respondent argues, a breach of the Contract concluded by Turkmen Highways cannot per se give rise to the responsibility of the Turkmen State under international law.422
284.
The Respondent argues that, if the true nature of Garanti Koza's claims is that its contractual partner failed to honor its obligations under the Contract, then no question of the State's international responsibility arises and the proper forum for obtaining redress is the Arbitrazh Court of Turkmenistan. If, however, Garanti Koza's complaint is that Turkmenistan, or some organ or agency or the Turkmen government, unjustly or improperly annulled, modified, or otherwise interfered with the Contract, then, the Respondent argues, alleging breach of contract is neither a sufficient nor proper basis for complaint. Rather, the question is whether the State's conduct violates its obligations under the BIT in such a way as to give rise to the State's international responsibility.423
285.
The Respondent asserts that the Claimant has failed to establish that the acts and omissions of which it complains were taken in the exercise of sovereign power, referring to the International Law Commission's Articles on State Responsibility ("ILC Draft Articles on State Responsibility"), specifically Article 8.424 The Respondent argues that the Claimant has not shown direct intervention by the Turkmen State or even any substantial "advice" to TAY with regard to TAY's decisions to make contractual payments, apply penalties, or terminate the Contract. The Respondent argues that accepting the Claimant's version of events would require the Tribunal to believe that every late payment, every delay penalty, every action by the regulatory authorities was choreographed to torment the Claimant, notwithstanding that the State's only interest was in the timely completion of the bridge project, and further to believe that the Claimant's failure to complete the works resulted, not from its own failings, but from acts and omissions attributable to the Respondent State as a Sovereign.425
286.
In order to attribute responsibility to Turkmenistan, the Respondent argues that Garanti Koza must establish that the conduct of TAY was unjustified under the terms of the Contract and applicable law, that such conduct was attributable to the Respondent State, and that the State's conduct violated its obligations under the BIT or constituted internationally wrongful acts under international law. The Respondent submits that the Claimant has failed to discharge its burden to make such a showing.426

2. Issues of applicable law

287.
The Respondent contends that the proper approach to identifying the applicable rules of law, pursuant to Article 42(1) of the ICSID Convention rests upon the principle that different issues can arise in the context of a single investment dispute and that a tribunal has the power to apply different rules of law to those different issues depending upon their proper characterization.427 According to the Respondent, this interpretation is confirmed by both scholarly commentary428 and arbitral precedent.429
288.
In the Respondent's view, if an issue in dispute relates to the existence or scope of a contractual obligation, or a party's performance under a contract, that issue has to be determined by the law governing the contract. In the present dispute, the Contract contains an express choice of law clause, providing that "This Contract obeys the acting legislation of Turkmenistan. "430 Therefore, the Respondent considers that the Law of Turkmenistan should be applied to determine the nature and scope of parties' rights, obligations, and performance under the Contract.431 Since the Claimant asserts a variety of alleged violations of its rights under the Contract, for the Tribunal to assess whether there is a breach of the BIT, it must first establish, with reference to and in accordance with Turkmen law, whether the rights claimed by the Claimant existed under the Contract, and if so, their scope and content.432 In particular, the Respondent argues, the Tribunal must answer the following questions under Turkmen law:433

• Was the Claimant actually entitled to a particular payment?

• Had the Claimant fulfilled its corresponding contractual obligations?

• Was the imposition of a delay penalty appropriate in the circumstances?

• Were there valid grounds for contract termination and were the procedures for termination properly carried out?

3. Issues of liability

289.
The Respondent argues that, even if the Tribunal determines that it has jurisdiction (which the Respondent denies) and even if the Tribunal decides to consider that TAY's acts are attributable to Turkmenistan (which the Respondent also denies), the Tribunal should nevertheless find that all of the Claimant's claims are meritless.434
290.
According to the Respondent, it is universally understood that the party who has the burden of proof is the party alleging the affirmative of an issue, consistent with the established principle: actori incumbit probatio. Thus, the party who submits a claim has the burden of proving the facts it alleges in support of its claim. The ultimate burden of proof never shifts from one party to the other, the Respondent argues, but rests throughout the case with the party asserting claims and can only be discharged once the Tribunal has found that such party has proved its claims.435 In other words, the Claimant has to prove the factual basis of each of its claims and the Tribunal should decide, in consideration of the evidence presented by both Parties, whether the Claimant has discharged its burden of proof.436 The Respondent submits that the evidence clearly shows that the Claimant has failed to meet its burden in this case.

a. The umbrella clause

291.
The Respondent asserts that the Claimant cannot circumvent its own contractual obligations via the umbrella clause; that the Claimant has not identified any commitment owed to it within the meaning of the umbrella clause and therefore Claimant's claims do not fall within the meaning of the umbrella clause; and that in any case neither Turkmenistan nor TAY breached any obligation owed to Garanti Koza.