Rule 41(5) opens the way - in the absence of agreement between the parties on another expedited procedure - to either party1 to apply to the tribunal at a very early stage in the arbitral proceedings to rule that "a claim is manifestly without legal merit." This is, to the Tribunal’s knowledge, only the third occasion on which a decision has had to be taken on an objection under Rule 41(5). The Tribunal is thus particularly conscious of its responsibility to contribute to shaping both an understanding of the Rule itself and of the procedure which ought to be followed under it.
On that question, the Tribunal has come to the clear view that, in principle, it would not be right to non-suit a claimant under the ICSID system without having allowed the claimant (and therefore the respondent as well) a proper opportunity to be heard, both in writing and orally. That may raise organizational problems, in the face of the requirement that the Tribunal is to rule on the objection "at its first session or shortly thereafter" (see paragraph 32 above), but the Tribunal was able to resolve them in the present case, given the delays that had been introduced into the proceedings for extraneous reasons, by allowing two rounds of short and focussed written argument, complemented by two rounds of well-focussed oral argument completed within one single day at the end of the first formal session. The cooperation of both parties in making this possible was greatly appreciated. The cost has been a slight delay (which the parties accepted was reasonable) between the hearing and the rendering of this Award. But the Tribunal views that as both inevitable and still within the spirit of the Rules. There may be cases in which a tribunal can come to a clear conclusion on a Rule 41(5) objection, simply on the written submissions, but they will be rare, and the assumption must be that, even then, the decision will be one not to uphold the objection, rather than the converse. That is because, if an objection is not upheld at the Rule 41(5) stage, the rights of the objecting party5 remain intact, as the last sentence of the Rule makes plain: the rejection of an objection under Rule 41(5) at the pre-preliminary stage does not stand in the way of its resurrection later in the normal way as if Rule 41(5) did not exist. The fact that a claim is not ‘manifestly’ without legal merit does not, self-evidently, mean that it may not subsequently be found without sufficient legal merit for a tribunal to uphold it after full argument.
Article I of the Treaty13 defines "investment" as "every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts," including "(iii) a claim to money or a claim to performance having economic value and associated with an investment " and "(v) any right conferred by law or contract, and any licenses and permits pursuant to law." The Request for Arbitration sought to enforce "the right to be paid for performance of the contractual obligations"14 and was premised mainly upon Article I(l)(a(v).
The essence of the Rule 41(5) objection raised by the Respondent is that the Claimants’ claims, as formulated in the Request for Arbitration and subsequently in the pleadings, represent nothing more than claims to payment under trading contracts, and do not therefore amount, in law, to ‘investments.’ More specifically, Ukraine says that claims arising from trade transactions, involving only the cross-border sale of goods, were deliberately excluded by the Contracting Parties from the definition of "investment" set out in Article I of the U.S.-Ukraine BIT, as supporting evidence for which the Respondent invokes the terms in which the BIT was submitted to the US Congress for approval.15 The Respondent asserts also that these represent purely commercial transactions of a type which falls outside the scope of Article 25(1) of the ICSID Convention defining the jurisdiction of ICSID itself, and thus outside the limits of the jurisdiction of any tribunal set up under the ICSID system.
Although, no doubt, in the overwhelming majority of cases what the States Parties settled as the definition of ‘investment’ in their bilateral treaty is unarguably inside the boundaries set by the Convention - so that the two-fold test melts, in effect, into one - the generous margin of freedom left under the Convention is not absolute. It does not extend to allowing States Parties (or indeed others) to deem an activity to be an ‘investment’ without regard to whether it meets the meaning of that term as used within the ICSID Convention, and specifically Article 25(1) thereof, properly interpreted according to the applicable rules of international law. Had the drafters of the Convention wished to accord an absolute freedom of that kind, they would have said so, not simply left Article 25 without a formal definition for the term ‘investment.’
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