|Albania||The Republic of Albania|
|Application||Application for Annulment filed by Albania on August 22, 2019|
|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings 2006|
|Award||Award issued by original arbitral Tribunal on April 24, 2019|
|BIT||Agreement between the Government of the Republic of Italy and the Government of the Republic of Albania on the Promotion and Protection of Investment, which entered into force on January 29, 1996|
|C-[#]; CEA-[#]||Hydro's Exhibit|
|CL-[#]; CAA-[#]||Hydro's Legal Authority|
|Committee||Ad hoc Committee constituted on November 6, 2019|
|Counter-Memorial or C-M||Hydro's Counter-Memorial on Annulment dated July 6, 2020|
|Decision on the Stay||Decision on the Republic of Albania's Request for the Continued Stay of Enforcement of the Award dated March 13, 2020|
|Hearing||Hearing on Annulment held on January 25-26, 2021|
|ICSID Convention||dated March 18, 1965|
|ICSID or the Centre||International Centre for Settlement of Investment Disputes|
|Memorial or Mem.||Albania's Memorial on Annulment dated April 15, 2020|
|R-[#]; REA-[#]||Albania's Exhibit|
|Rejoinder or Rej.||Hydro's Rejoinder on Annulment dated September 14, 2020|
|Reply||Albania's Reply on Annulment dated August 10, 2020|
|RL-[#]; RAA-[#]||Albania's Legal Authority|
|Tr. [Day:page:line]||Transcript of the Hearing|
|Tribunal||Arbitral tribunal that rendered the Award|
Albania applied for annulment of the Award on the basis of Article 52(1) of the ICSID Convention, identifying three grounds for annulment (one relating to jurisdiction, one relating to the merits, and one relating to damages), each of which was based on an alleged failure to state reasons (Article 52(1)(e)).
On August 22, 2019, ICSID received the Application for Annulment of the Award of the same date from Albania (the "Application"). The Application also contained a request under Article 52(5) of the ICSID Convention and Rule 54(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the "ICSID Arbitration Rules") for the stay of enforcement of the Award until the Application was decided (the "Request for Stay").
On August 27, 2019, pursuant to Rule 50(2) of the ICSID Arbitration Rules, the Secretary-General of ICSID registered the Application. On the same date, in accordance with Arbitration Rule 54(2), the Secretary-General informed the parties that the enforcement of the Award had been provisionally stayed.
By letter of November 6, 2019, in accordance with Rules 6 and 53 of the ICSID Arbitration Rules, the parties were notified that a Committee composed of Ms. Lucinda A. Low, a national of the United States of America, appointed to the Panel by the Chairman of the Administrative Council, and designated as President of the Committee, Mr. Colm Ó hOisín SC, a national of Ireland, appointed to the Panel by Ireland, and Dr. Jacomijn van Haersolte-van Hof, a national of the Netherlands, appointed to the Panel by the Netherlands, had been constituted. On the same date, the parties were notified that Mr. Francisco Abriani, Legal Counsel, ICSID, would serve as Secretary of the Committee.
By letter of November 25, 2019, the Claimants objected to the contents of Albania's November 20, 2019 letter and asked that the Committee rule on the continuation of the stay of enforcement within 30 days of the constitution of the Committee in accordance with ICSID Arbitration Rule 54.
a) The Claimants shall establish an escrow account as provided in this Decision as soon as is practicable and shall confirm in writing its establishment to the Committee.
b) Upon the Committee's review of the escrow arrangement and a determination that the arrangement is satisfactory in addressing the non-recoupment risk, and a communication of that determination to the Parties, the provisional stay, as extended, shall immediately terminate.
c) The Respondent shall bear 25% of the costs incurred by the Claimants in addressing the stay issue, with the precise monetary amount to be determined by the Committee at a later date on the basis of cost submissions to be made within 30 days of the date of dispatch of this decision, i.e., by April 13, 2020, with the applicable interest rate to be determined subsequently.
Ms. Lucinda A. Low President
Mr. Colm Ó hOisín SC Member of the Committee
Dr. Jacomijn van Haersolte-van Hof Member of the Committee
Mr. Francisco Abriani Secretary of the Committee
Mr. David W. Rivkin Debevoise & Plimpton LLP
Ms. Catherine Amirfar Debevoise & Plimpton LLP
Mr. Romain Zamour Debevoise & Plimpton LLP
Ms. Azeezah Goodwin Debevoise & Plimpton LLP
Ms. Moeun Cha Debevoise & Plimpton LLP
Ms. Mary Grace McEvoy Debevoise & Plimpton LLP
Mr. Philippe Pinsolle Quinn Emanuel Urquhart & Sullivan LLP
Mr. Alexander Leventhal Quinn Emanuel Urquhart & Sullivan LLP
Party Representative :
Mr. Francesco Becchetti Party Representative
Mr. Andrew B. Loewenstein Foley Hoag LLP
Mr. Derek C. Smith Foley Hoag LLP
Mr. Kenneth Figueroa Foley Hoag LLP
Mr. Yuri Parkhomenko Foley Hoag LLP
Mr. Nicholas M. Renzler Foley Hoag LLP
Mr. Peter Tzeng Foley Hoag LLP
Ms. Rumbidzai Maweni Foley Hoag LLP
Ms. Paulina Alvarado Medina Foley Hoag LLP
Mr. Siddharth Dhar Essex Court Chambers
Enkelejda Mucaj State Advocate General, Republic of Albania
Ms. Julinda Mansaku Head of Office for Legal Representation in Foreign Courts and International Arbitration Tribunals, State Advocates Office, Republic of Albania
Ms. Boriana Nikolla State Advocate, Office for Legal Representation in Foreign Courts and International Arbitration Tribunals, State Advocates Office, Republic of Albania
Ms. Claire Hill Court Reporter
The Application sets forth three grounds for annulment, one relating to a jurisdictional decision of the Tribunal, one relating to a merits decision, and one relating to damages. Each of the three grounds for annulment advanced by Albania relies on the last of the five grounds set forth in Article 52 of the ICSID Convention, paragraph (1)(e), "that the award has failed to state the reasons upon which it is based".2 The parties have made general submissions on the standard of review with respect to this provision as well as more targeted submissions on the three specific grounds on which Albania's Application for Annulment is based. Accordingly, the Committee will first consider the overall standard of review for applications based on Article 52(1)(e). The Committee will begin with a summary of the submissions of the parties and then turn to its own analysis.
While acknowledging that the ICSID Convention adheres to the principle of finality, the Respondent argues that the principle is not absolute, and that the exceptions set forth in Article 52 of the Convention are essentially designed to protect the fundamental procedural integrity of the ICSID dispute-settlement system.3 The Respondent then points to Article 48(3) of the Convention, requiring that the award "deal with every question submitted to the Tribunal" and "state the reasons upon which it is based", and the comparable provision in Arbitration Rule 47(1)(i).4 It describes Article 52(1)(e) of the Convention as "enforcing" the requirements of Article 48(3).5
The requirement to state reasons for its decisions is therefore, in the submissions of the Respondent, a "core" or "central" duty of the Tribunal.6 Citing to several decisions of ad hoc committees, the Respondent emphasizes that the purpose of a statement of reasons is to explain to readers of the award, and especially the parties, the "how and why" the tribunal was motivated to reach the decisions that it reached.7
The Respondent relies in particular on the so-called "test" articulated by the ad hoc committee in Maritime International Nominees Establishment v. Republic of Guinea ("MINE v. Guinea"),8 and cited with approval by other tribunals,9 to the effect that
The Committee is of the opinion that the requirement that an award has to be motivated implies that it must enable the reader to follow the reasoning of the Tribunal on points of fact and law.... A Committee might be tempted to annul an award because that examination disclosed a manifestly incorrect application of the law, which, however, is not a ground for annulment.
In the Committee's view, the requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A. to Point B., and eventually to its conclusion, even if it made an error of fact or of law. This minimum requirement is in particular not satisfied by either contradictory or frivolous reasons.10
The Claimants characterize the Respondent's application as an impermissible appeal rather than a true annulment. They also argue that Albania mischaracterizes and misapplies the standard under Article 52(1)(e) of the Convention.17
The Claimants do not disagree that the purpose of annulment is to protect the fundamental procedural integrity of the ICSID dispute-resolution process. They emphasize, however, that annulment under Article 52 of the ICSID Convention is an "extraordinary and limited" exception to the general principle of finality,18 that it is a remedy reserved for "egregious violations of certain basic principles",19 and that the bar for annulment is very high.20 They also argue that ad hoc committees have recognized discretion not to annul even when a basis for such action is found under Article 52(1) (without distinction among the various sub-grounds).21
Further, they criticize the Respondent's framing of the decisions at issue as requiring "reasons for reasons" rather than "reasons for decisions".26 They emphasize that ad hoc committees should not look at the adequacy or correctness of a tribunal's reasoning under Article 52(1)(e), but simply its intelligibility.27 Finally, they submit that there is no prescribed manner in which a tribunal need articulate its reasons, and that ad hoc committees can review not only the award or decision of the tribunal in question as a whole, but also the record on which it was based, in order to understand the tribunal's decision.28
In this section of its decision, the ad hoc Committee will deal only with the overarching question of the standard of interpretation of Article 52(1)(e), and will leave to subsequent sections of this Decision the application of the standard to the specific aspects of the Award that have been cited by the Respondent as deficient. The Committee has carefully considered the submissions of the parties, both in their written memorials and at the hearing, regarding the scope and interpretation of Article 52(1)(e), whether or not explicitly set forth in this decision.
There is no dispute regarding the basic framework for the application. Article 52(1) of the ICSID Convention permits a party to request annulment on five grounds, the last of which, in subparagraph (e), is "that the award has failed to state the reasons on which it is based".30 This provision corresponds to the second part of Article 48(3) of the Convention, paragraph (3) of which requires that "the award shall deal with every question submitted to the Tribunal, and shall state the reasons on which it is based".31 The Arbitration Rules implement the requirement of Article 48(3), stating that "[t]he award...shall contain (1)...the decision of the Tribunal on every question submitted to it, together with the reasons upon which the decision is based".32
annulment of an award for failure to state reasons can only occur when a tribunal has failed to set out the considerations which underpinned its decision in a manner that can be understood and followed by a reader. Article 52(1)(e) may not be used so as to obtain the reversal on the merits of an award for allegedly providing incorrect or unconvincing reasons.35
"Intelligibility"—i.e., the ability to understand and follow the reasoning of the Tribunal— is thus a key touchstone.36
At the same time, it is clear ad hoc committees should not impose a particular mode of expression on tribunals, but should defer to their chosen way of expressing the motivation for their decisions. Wena Hotels v. Egypt, a case frequently cited in annulment decisions, including the TECO v. Guatemala decision on which the Respondent relies, stated as follows:
Neither Article 48(3) nor Article 52(1)(e) specify the manner in which the Tribunal's reasons are to be stated. The object of both provisions is to ensure that the Parties will be able to understand the Tribunal's reasoning. This goal does not require that each reason be stated expressly. The Tribunal's reasons may be implicit in the considerations and conclusions contained in the award, provided they can be reasonably inferred from the terms used in the decision.37
Article 52(1)(e) concerns a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons. It bears reiterating that an ad hoc committee is not a court of appeal. Provided that the reasons given by a tribunal can be followed and relate to the issues that were before the tribunal, their correctness is beside the point in terms of Article 52(1)(e). Moreover, reasons may be stated succinctly or at length, and different legal traditions differ in their modes of expressing reasons. Tribunals must be allowed a degree of discretion as to the way in which they express their reasoning.39
The Respondent has argued, both in its written submissions and at the hearing, that anything outcome-determinative, even "sub-issues" such as the components of a damages calculation which have a material impact on the damages awarded, must be accompanied by reasons.43 The Claimants, in contrast, have pointed to authorities indicating that the "reasons" requirement applies only to the ultimate decisions of a tribunal,44 criticizing the Respondent for seeking to require that there be "reasons for reasons" and even "reasons for reasons for reasons".45
(3) The award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based [emphasis added].
But while thus requiring the award to "deal with" (notably, a term different from "decide") every question, the Convention does not make it an annullable error for an award not to state reasons for every question that is before a tribunal. Article 52(1)(e) of the Convention is to some extent the analogue to Article 48(3), as the MINE v. Guinea committee has pointed out.47 But Article 52(1)(e) only provides for a right to seek annulment in relation to the second clause of Article 48(3), the requirement for the award to state reasons, and not in relation to the first part, the requirement for it to deal with "every question". This would seem to indicate that a failure to deal with every "question" is not annullable error,48 and further, that the "reasons" requirement does not attach to every question. Indeed, a close textual reading of both Articles 48(3) and 52(1)(e) indicates that the requirement to state reasons and the right to seek annulment for a failure to state reasons, both relate back to the award.49 The components of the award would seem to be the questions submitted for decision, as distinct from every issue or argument raised by the parties in the proceedings.
In contrast to the Convention provisions, Rule 47(1)(i) refers to "the decision of the Tribunal on every question submitted to it, together with the reasons on which the decision is based". This indicates that the "questions" are the key unit to which the "reasons" requirement pertains.
Article 48(3), on the other hand, refers to the tribunal's obligation to "deal with" "every question" submitted to it when rendering an "award". It is the ad hoc Committee's view that Article 48(3) of the ICSID Convention refers to the tribunal's obligation to deal with, either directly or indirectly, the parties' heads of claim within its award.50
Nevertheless, Article 48(3) requires only that a tribunal decide every question submitted to it. A "question" within the meaning of Article 48(3) is an issue which must be decided in order to determine all aspects of the rights and liabilities of the parties relevant to the case at hand.51
In making its case in relation to such a question, a party may advance several distinct arguments and refer to one or more items of evidence and legal authorities in support thereof. A tribunal is not required to rule separately on each argument of law or point of fact on which the parties are in disagreement, so long as it decides the question to which those arguments relate. What does, or does not, constitute a question that has to be decided is an objective matter and not one which can be shaped by the way in which a party chooses to put its case or the emphasis which it places on any particular point.52
It thus emphasized that what is a "question" is not simply a matter of pleading but an objective one.
This set of reasoning steps...very well explains how the Tribunal got from point A (the question for determination) to point B (its conclusion on the point). The Committee accepts that the Tribunal does not cite legal authorities or passages from the expert evidence in support of its reasons. But, as the Soufraki Committee pointed out, ‘a tribunal may give reasons for its award without elaborating the factual or legal basis for such reasons.'53
Multiple ad hoc committees have disclaimed a need for tribunals to express reasons for reasons.54 This also strongly implies to this Committee that the unit of analysis does not mean every sub-issue that may be raised by the parties' arguments as matters of either fact or law, as other ad hoc committees have concluded.
For example, the ad hoc committee in Tza Yap Shum v. Peru negated any need for a tribunal to address every argument or piece of evidence, although it did highlight the issue of "outcome-determinative" evidence:
Article 52(1)(e) of the ICSID Convention does not require than an arbitral tribunal explains itself in respect of each piece of evidence adduced by either party which is not outcome determinative or to give reasons for preferring some evidence over other evidence. Rather, the award has to enable the reader to see the reasons upon which the award itself is based.
[T]he obligation to provide reasons does not require that a detailed answer be given to each of the parties' arguments [emphasis added].55
Having considered the overall standard of review under Article 52(1)(e) of the Convention, the Committee now turns to an application of this standard to the three grounds for annulment put forward by Albania in its Application.
In its decision dealing with this jurisdictional question (in Section VI.B. of the Award), the Tribunal first set out the positions of each of the parties. Following those summaries of positions came a section entitled "The Tribunal's Analysis", comprising three paragraphs, the full text of which is set out below:
495. The Tribunal accepts the Claimants' analysis of the language of the BIT and agrees with the Claimants that there are no material reasons to distinguish the present case from that before the tribunals in Mobil, Kardassopolous and Noble, all of which reached the same conclusion.
496. The Tribunal also accepts, with the tribunals in Noble and Enron, that concerns may arise if minority shareholders seek to claim for harm alleged to have been done to the company at the end of a corporate chain. However, that is not a concern that arises on the present facts. The Claimants are right to point out that the present investments come within the "two intermediate layers" said to be permissible by the tribunal in Noble. More importantly, the corporate structure through which the indirect investments were made in this case was established for the purpose of the Claimants investing in Albania (as described in section II.A above and discussed further in section VI.A(2) below).
497. For these reasons, this objection to jurisdiction also fails [footnotes omitted].
The resolution of this first ground for annulment, in the Committee's view, turns on the sufficiency of the Tribunal's approach to the indirect investor question reflected in paragraphs 495-497 of the Award, and in particular paragraph 495, as a statement of reasons. In these paragraphs, and particularly in paragraphs 495 and 496, the Tribunal dealt with several arguments that had been made in relation to the indirect investor issue by the Respondent.
The Committee agrees with the Claimants' observation at the hearing78 that paragraph 497 provides evidence that the Tribunal believed it was setting forth reasons in the two paragraphs that preceded it. That subjective view is entitled to some weight, as it demonstrates that the Tribunal was at least attempting to satisfy the requirement for stating reasons. It should cause this Committee to be searching in its efforts to identify those reasons in recognition of the fact that tribunals have discretion in how they express themselves. At the end of the day, however, the standard cannot be purely a subjective one. Rather, the touchstone of fundamental procedural integrity requires that the standard be objectively discernible.
Paragraph 496 of the Award, dealing with the issue originally characterized as a "policy" issue, but perhaps more usefully described as a "remoteness" issue, has been accepted by the Respondent as sufficiently reasoned. And indeed, assuming arguendo the "reasons" requirement applies to this point (a point to which the Committee will return later in this section), this appears to the Committee to be the case. The Tribunal starts by identifying a potential concern that has been raised by the Respondent about claims by minority shareholders, but goes on to explain, including by reference to legal authority, that that concern does not arise on the present facts, because of the degree of proximity of the indirect investors' holdings to the investment and because the intermediate holding structure was established for the purposes of the investment in question. The reader can readily follow the logical flow of the Tribunal's conclusion on this point and perceive the justification for the Tribunal's conclusion that remoteness is not a concern in this case.
This takes the Committee to paragraph 495 as the next focus of inquiry. The full text of this paragraph bears repeating:
The Tribunal accepts the Claimants' analysis of the language of the BIT and agrees with the Claimants that there are no material reasons to distinguish the present case from that before the tribunals in Mobil, Kardasspoulos, and Noble, all of which reached the same conclusion.
The Respondent has made several arguments as this proceeding has progressed in relation to its allegation that the Tribunal failed to state reasons for its decision on the merits in the Award. In its Memorial, it argued that the Tribunal's analysis was contradictory in that Agonset Sh.p.k., an Albanian entity (hereinafter referred to as "Agonset Albania" or "Agonset Sh.p.k.") and its affiliate Agonset.it, an Italian entity (hereinafter referred to as "Agonset Italy" or "Agonset.it") were considered to be a single integrated operation for purposes of both jurisdiction and damages,83 but when it came to a determination on the merits of the expropriation claim, applying a "substantial deprivation" test, the Tribunal only focused on Agonset Albania, without explaining why it did so.84 This approach, according to the Respondent, failed the MINE v. Guinea test, because it made it impossible to understand how the Tribunal got from "Point A" (that the two entities were an integrated whole) to "Point B" (that to see if the investment was destroyed, only Agonset Albania was considered).85 The converse "Point A to Point B" flaw in the merits to damages analysis was also posited.86
In their Rejoinder, the Claimants reiterate the position that the bar for contradictory reasons constituting a failure to state reasons is very high—basically involving the contradictions cancelling each other out. They argue that given the finding of an integrated whole, if there was an expropriation of Agonset Albania, it necessarily entailed the expropriation of Agonset Italy.103 They assert that the Respondent's efforts to deny it is arguing contradictory reasons failed, and repeat their earlier position that ad hoc committees should seek to construe awards wherever possible in a manner that leads to consistency.104
After reviewing the relationship between the two Agonset entities, and discussing the line of cases that had addressed this issue, the Tribunal found that the two companies "were, from the outset, conceived as an integrated whole"—the delocalized production model involving production in Albania of programming to be broadcast in the more lucrative Italian market.110 It noted that both parties' quantum experts had considered the two entities to be "inextricably linked".111
Ultimately, the Tribunal found that the substantive integration of the two companies, not simply their economic interdependence, was what made them constitute a single investment. Paragraph 579 of the Award reflects that key conclusion on jurisdiction:
The Tribunal also disagrees with the Respondent's claim that finding the two companies here form an indivisible single investment would lead to "wide-ranging" or chaotic results. Simple economic dependence combined with a bare contractual relationship is insufficient to show two entities are one investment for the purposes of the BIT. It is only due to the substantive integration of these two companies in the particular business model they implemented that the Tribunal finds they constitute a single investment [footnotes omitted].
Accordingly, the two Agonset companies were found to constitute a single "investment" for purposes of the BIT. Its reasoning was clear, although even in this section, the Committee notes some inconsistent usage of terminology in relation to the Agonset companies. Of particular note in relation to the discussion of expropriation that follows, it appears to the Committee that the term "Agonset" in the header to this section was intended to encompass both the Albanian and Italian entities. The Tribunal therefore decided that, due to the substantive integration of these two companies in the particular business model they implemented, they constitute a single investment in the territory of Albania.112
At the beginning of the discussion of whether "Agonset" had been expropriated in Section VII.E of the Award, the Tribunal quoted Article 5 of the BIT dealing with expropriation, paragraphs 1 and 2 of which both use the term "investments".114 Because of its finding that the Claimants' investment was "completely and permanently destroyed", however, it appears that the Tribunal only applied what it considered to be the "more onerous" standard of Article 5(2).115
In discussing the takings issue in paragraphs 686 et seq. of the Award, the Tribunal referred to "Agonset" in a context that indicated it was discussing the Albanian entity, and at other times referred to "Agonset Albania".116 This is further illustrated in this section by the reference to Agonset.it as "Agonset Italy"117, clearly to distinguish it from Agonset Albania referred to in the previous subparagraph.118
But it also used the term "investment" or "investments" in key places, including in relation to the "substantial deprivation" test it applied to determine whether a violation of Article 5 had occurred. For example, in paragraph 692 of the Award, the Tribunal stated as follows:
When considering these matters, a tribunal must focus on the substance of the effect of the impugned measures on the protected investments. As Dolzer and Schreuer point out, "In recent jurisprudence, the formula most often found is that an expropriation will be assumed in the event of a ‘substantial deprivation' of an investment". If the Tribunal accepts the Claimants' contention that the practical effect of the measures of which they complain was to deprive them of the substantive value of their investments, this will be sufficient [emphasis added; footnote omitted].
Paragraph 697 of the Award, a section emphasized by the Respondent, and the concluding paragraph of the Tribunal's takings analysis, used the term "Agonset" but also used the term "investments":
The Tribunal therefore finds that there was a permanent deprivation of the substantial value of Mr. De Renzis', Mr. Becchetti's, Ms. Grigolon's and Hydro's investment in Agonset. The deprivation developed over a period of time and crystallised on or around 5 June 2015 with the Seizure Decisions. At that point, access to finance was effectively cut off and so continuation of the investment became effectively impossible. This expropriation occurred as the culmination of a series of actions by the State which harmed the investment directly or indirectly by targeting its supporting shareholders that are described in section IV.J above [emphasis added].
The Tribunal has found in section VII.E above that through a culmination of various actions the Respondent has completely destroyed the value of the Agonset companies. In the Tribunal's view, where a tribunal finds that there has been an expropriation or total destruction of an investment, it is unnecessary to consider the causal link between each specific act and claimed loss, rather it is merely a matter of compensating the claimant for the market value of its investment [footnotes omitted].126
In these circumstances, and given that the Claimants' only claim is for the value of Agonset, the Tribunal considers that the causal link between the aggregate actions of the Respondent and the destruction of the Agonset companies is clear, as explained in paragraphs 695 to 697 above. The only question that therefore remains is how the fair market value of the destroyed investments is to be quantified.127
This cannot be dismissed, as the Respondent seeks to have the Committee do, simply because these references appear in the section on damages and are made in the context of causation, which is a separate element. The description of the expropriation finding in paragraph 839 sets up the causation issue, but the description stands on its own as a confirmation of the decision on expropriation in the previous Section of the Award.
To be sure, the Tribunal could have been clearer and more consistent in its usage of terminology and more explicit about its findings in the expropriation section (and elsewhere in the Award). But there is no gap in the logic. Once there was a finding that the two companies constituted an indivisible whole and therefore represented "the investment" in the territory of Albania, a finding of a substantial deprivation of Agonset Albania would, as was pointed out at the hearing, necessarily imply the destruction of Agonset Italy as an integral part of that investment. Thus, to the extent the expropriation decision is not as explicit as it could have been on that point, the Committee considers that that finding would at least be implicit and logically follows from the earlier finding. And it may well be that the Tribunal considered that it was being explicit, including through the reference to Hydro in paragraph 697, as well as the bookending of the expropriation section with references to the "investments". In either event, the decision of the Tribunal on expropriation is the same: both companies, which together constituted but a single "investment", were effectively expropriated. Whether the finding was implicit or explicit is therefore ultimately a distinction without a difference for present purposes.
In light of the above, the Tribunal considers that the Claimants must prove the existence of the fact of damage with sufficient certainty and then provide a reasonable basis for the Tribunal to determine the amount of loss. The Tribunal considers this a fair outcome considering that any difficulty that the Claimants may face in proving the amount of loss will have flowed from the Respondent's wrongdoing.146
The Tribunal sees some limitations in the application of the DCF method to value Agonset, namely that the 2012 Business Plan is not particularly detailed and both businesses have only been operating for a short period of time. Mr. MacGregor, a chartered accountant, says there is insufficient evidence to undertake a valuation using the DCF Method. However, the Tribunal has a mandate, having found breach of the BIT, to arrive at a valuation on such evidence as it has. The tribunal in Kardassopoulos drew a similar conclusion stating that "The Tribunal's duty is to make the best estimate that it can of the amount of the loss, on the basis of the available evidence. That must be done even if there is no absolute documentary proof of the precise amount lost". Further, discarding the DCF method for lack of sufficient evidence in this case would, in effect, reward a State for expropriating promising businesses shortly after their founding.147
b. Audience share
859.Mr. Rathbone projected that the audience share, under the ex-post valuation, would grow from 0.1% in 2015 to 4.0% in 2020. Mr. Rathbone based this calculation on the 2012 Business Plan and then adjusted it with appropriate public information as a reasonableness cross-check. Mr. Pasquale considered this audience share was reasonable "in light of Agon Italia's programming strategy and in comparison to other channels". La7, which Mr. Pasquale considers is the most appropriate comparator to Agonset.it, was relaunched in 2002 achieving an audience share of 1.8% that year and went on to obtain an audience share of 3.2% in 2014.
860.Mr. MacGregor points out that Mr. Rathbone has not relied on Agonset's actual audience share figures in 2015 and states that extrapolating Agonset's income in 2015 over 12 months would only result in an audience share of 0.03%. Similarly, Mr. Borrell considered that an initial audience share of between 0.3 to 0.6% would be more reasonable given the estimated actual revenue by the end of 2015.
861.On balance, the Tribunal considers that a starting 0.1% audience share is reasonable. While the estimated actual revenue based on historical results for 2015 is lower, the Tribunal considers that the record shows that new channels have significant growth potential (the average audience share of Nove, Cielo and TV8 grew 0.74% audience between August 2015 and August 2016) that might not be reflected by historical results.
862.Given that the Tribunal has already found that La7 is the most appropriate comparator to Agonset, La7 only obtained an average audience share of 3.2%, and the Tribunal has concerns regarding the likely success of Agonset's programming strategy in the competitive Italian market, the Tribunal is not convinced that Agonset could achieve an audience share of 4% by 2020. The Tribunal decides that a projected audience share of 3% by 2020 should instead be used when assessing the value of Agonset.
In the case of arbitration proceedings the Tribunal shall, except as the parties otherwise agree, assess the expenses incurred by the parties in connection with the proceedings, and shall decide how and by whom those expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre shall be paid. Such decision shall form part of the award.
In this Decision, the Committee regards the "costs follow the event" approach as an appropriate starting point in relation to the costs of representation. However, there may also be additional factors which the Committee may need to take into account and which may require some adjustment to a pure "costs follow the event" approach, in order to make an appropriate determination. The Committee acknowledges the view expressed by some other ad hoc committees that the costs of representation should turn on whether an application for annulment is "manifestly without merit".157
In this case, although the Committee has rejected the Application in its entirety, it does not consider that the Application as a whole was manifestly without merit. The Application was not a broad-gauged attack on the Award, but a more targeted set of claims that raised important legal and policy issues about the application of Article 52(1)(e) of the Convention. Moreover, as the Committee has noted in several places in this Decision, the Award, particularly in relation to the jurisdictional and merits grounds for the Application, was not as fully developed or consistent in its use of terminology as it ideally might have been, requiring the Committee to engage in detailed review and consideration of the issues presented.
|Committee Members' fees and expenses|
|Ms. Lucinda A. Low||68,812.50|
|Mr. Colm Ó hOisín||54,001.32|
|Dr. Jacomijn van Haersolte-van Hof||60,787.50|
|ICSID's administrative fees||84,000|
(1) The Application is rejected;
(2) The escrow account established by the Claimants following the Decision on the Provisional Stay may be terminated and the funds therein distributed to the Claimants; and
(3) The Respondent is directed to pay to the Claimants the principal sum of USD $1,701,258.71, together with interest at LIBOR (or the SOFR as its successor reference rate in the event LIBOR ceases to exist before full payment is made) + 3% from the date hereof, compounded quarterly.
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