TABLE OF SELECTED ABBREVIATIONS/DEFINED TERMS | |
ANTEL | National Telecommunications Administration (Administración Nacional de Telecomunicaciones) |
Arbitration Rules | ICSID Rules of Procedure for Arbitration Proceedings 2006 |
c- [#] | Claimant's Exhibit |
Claimant's Memorial | Claimant's Memorial on the Merits dated 16 September 2016 |
Claimant's Post Hearing Brief | Claimant's Post Hearing Brief dated 16 March 2018 |
Claimant's Reply | Claimant's Reply on the Merits and CounterMemorial on Jurisdiction dated 12 May 2017 |
CL- [#] | Claimant's Legal Authority |
DNC | National Communications Authority (Dirección Nacional de Comunicaciones) |
Firm | Ramírez, Xavier de Mello & Abal Firm |
GIE | Economic Interest Group |
Hearing | Hearing on jurisdiction, merits and quantum held from November 13, 2017 to November 20, 2017 |
IBA Rules | IBA Rules on the Taking of Evidence in International Arbitration |
ICSID Convention | Convention on the Settlement of Investment Disputes Between States and Nationals of Other States dated 18 March 1965 |
ICSID or the Centre | International Centre for Settlement of Investment Disputes |
Judgment | Judgment 579/2014 of 23 October 2014 rendered by the "Tribunal de lo Contencioso Administrativo" |
MDN | Uruguay Ministry of National Defense (Ministerio de Defensa Nacional de Uruguay) |
MIEM | Ministry of Industry, Energy and Mining (Ministerio de Industria, Energía y Minería) |
Request | Request for Arbitration dated 16 February 2016. |
R- [#] | Respondent's Exhibit |
Respondent's Counter-Memorial | Respondent's Counter-Memorial on the Merits and Memorial on Jurisdiction dated 30 January 2017 |
Respondent's Post Hearing Brief | Respondent's Post Hearing Brief dated 16 March 2018 |
Respondent's Rejoinder | Respondent's Rejoinder on the Merits and Reply on Jurisdiction dated 11 August 2017 |
RL- [#] | Respondent's Legal Authority |
Tr. Day [#] [Speaker(s)] [page:line] | Transcript of the Hearing |
Treaty | Treaty Between the United States of America and the Oriental Republic of Uruguay Concerning the Encouragement and Reciprocal Protection of Investment, signed on 4 November 2005 and in force on 1 November 2006 |
Tribunal | Arbitral tribunal constituted on 27 May 2016 |
Trigosul | Trigosul S.A., incorporated on 19 December 1994 |
URSEC | Regulatory Unit for Communications Services (Unidad Reguladora de Servicios de Comunicaciones) |
On 13 to 20 November 2017, the Hearing on Jurisdiction, Merits and Quantum was held in Washington, D.C.3 with the following people in attendance:
Tribunal :
Mr. Rodrigo Oreamuno President
Mr. John Beechey Arbitrator
Prof. Zachary Douglas QC Arbitrator
ICSID Secretariat :
Ms. Marisa Planells-Valero Secretary of the Tribunal
Mr. Joao Valerio Assistant to Mr. John Beechey
For the Claimant:
Counsel :
Mr. Alex Yanos Alston & Bird LLP
Mr. Carlos Ramos-Mrosovsky Alston & Bird LLP
Ms. Kristen Bromberek Alston & Bird LLP
Mr. Borja Alvarez Alston & Bird LLP
Ms. Leticia Goni Alston & Bird LLP
Mr. Ryosuke Funakoshi Alston & Bird LLP
Support Staff :
Ms. Kerrie Sekine-Pettite Alston & Bird LLP
Mr. Garett Malter Alston & Bird LLP
Ms. Julia Gewolb Bentham Capital
Witness :
Mr. Luis Herbón Witness for Italba Corporation
Experts :
Mr. Santiago Dellepiane Avellaneda Compass Lexecon
Mr. Ariel Medvedeff Compass Lexecon
Mr. Federico Gonzalez Loray Compass Lexecon
Mr. Luis Lapique Lapique & Santeugini Abogados
For the Respondent :
Counsel :
Mr. Paul Reichler Foley Hoag LLP
Ms. Clara Brillembourg Foley Hoag LLP
Ms. Christina Beharry Foley Hoag LLP
Ms. Patricia Cruz Trabanino Foley Hoag LLP
Ms. Melinda Kuritzky Consultant for Foley Hoag LLP
Mr. Ofilio Mayorga Foley Hoag LLP
Mr. José Rebolledo Foley Hoag LLP
Support Staff :
Ms. Anna Aviles-Alfaro Foley Hoag LLP
Ms. Ana Urgiles Foley Hoag LLP
Ms. Alexandra Coon Foley Hoag LLP
Ms. Nancy Lopez Foley Hoag LLP
Mr. Raymond McLeod DOAR
Mr. Danis Brito DOAR
Parties :
Dr. Miguel Angel Toma Sanchis Office of the Secretary of the Presidency
Dr. Carlos Gianelli Embassy of Uruguay
Dr. Sara Ilha Office of the Secretary of the Presidency
Dr. Marianela Bruno Embassy of Uruguay
Ms. Silvana Sena Office of the Secretary of the Presidency
Witnesses :
Mr. Nicolás Cendoya Witness for Uruguay
Ms. Alicia Fernandez Witness for Uruguay
Mr. Leon Lev Witness for Uruguay
Mr. Juan Piaggio Witness for Uruguay
Ms. Elena Grauert Witness for Uruguay
Dr. Fernando García Witness for Uruguay
Experts :
Mr. Santiago Pereira Rueda Abadi Pereira
Mr. Alejandro Paz Ministerio de Industria, Energía y Minería
Mr. Eugenio Xavier de Mello Estudio Ramírez, Xavier de Mello & Albal
Mr. Louis Conti Holland & Knight
Dr. Daniel Flores Econ One Research, Inc.
Mr. Ettore Comi Econ One Research, Inc.
Mr. Ivan Lopez Econ One Research, Inc.
Ms. Eleanor Coates Econ One Research, Inc.
Non-Disputing Party :
Ms. Lisa Grosh U.S. Department of State
Ms. Nicole Thornton U.S. Department of State
Ms. Terra Gearhart-Serna U.S. Department of State
Mr. Matthew Olmsted U.S. Department of State
Ms. Danielle Polebaum U.S. Department of State
Mr. Grayson Orsini U.S. Department of State
Court Reporters :
Ms. Dawn Larson Worldwide Reporting, LLP
Mr. David Kasdan Worldwide Reporting, LLP
Mr. Paul Pelissier DR Esteno
Ms. Luciana Sosa DR Esteno
Interpreters :
Ms. Silvia Colla English-Spanish interpreter
Mr. Daniel Giglio English-Spanish interpreter
Mr. Charles Roberts English-Spanish interpreter
During the Hearing, the following persons were examined:
On behalf of the Claimant :
Mr. Luis Herbón Witness for Italba Corporation
Mr. Santiago Dellepiane Avellaneda Compass Lexecon
Mr. Luis Lapique Lapique & Santeugini Abogados
On behalf of the Respondent :
Mr. Nicolás Cendoya Witness for Uruguay
Ms. Alicia Fernandez Witness for Uruguay
Mr. Leon Lev Witness for Uruguay
Mr. Juan Piaggio Witness for Uruguay
Ms. Elena Grauert Witness for Uruguay
Dr. Fernando García Witness for Uruguay
Mr. Santiago Pereira Rueda Abadi Pereira
Mr. Alejandro Paz Ministerio de Industria, Energía y Minería
Mr. Eugenio Xavier de Mello Estudio Ramírez, Xavier de Mello & Albal
Mr. Louis Conti Holland & Knight
Dr. Daniel Flores Econ One Research, Inc.
Mr. Ettore Comi Econ One Research, Inc.
"The capital consisting of one or more registered common shares with a par value of $U1.00 (one Uruguayan peso) each shall be $U 182,500.00 (one hundred eighty-two thousand five hundred Uruguayan pesos). The stock certificates shall contain the formalities established by Article 300 of Law No. 16,060. The Extraordinary Shareholders Meeting may approve an increase up to the sum of $U 912,500.00 (nine hundred twelve thousand five hundred Uruguayan pesos) on one or more occasions, without the need for an amendment or administrative consent. The Meeting may delegate the time of the issue and the payment method, terms and conditions to the Board of Directors or the Administrator, as the case may be. Share transfers shall be notified to the company and documented as provided in Law No. 16,060."9
Dr. Alberelli represented the following with respect to the dates of the certificates and to the acquisition of Trigosul:
"Certain of Trigosul's corporate records indicate that the company was acquired in 1996, not 1999. Trigosul's Share Certificates (C161), at 1-12; Trigosul's Book of Shareholders and Directors Meetings (C-164), at 3-4. The reason for this disparity is that the original owners of Trigosul required, as a condition of the sale of the company, that the corporate records show that the acquisition took place in 1996, and I agreed to that condition."11
On 4 October 2000, through Resolution 278/2000 issued on the basis of Decree 282/000, the DNC revoked the assignment of the frequencies allocated to Dr. Alberelli of the sub-blocks 1865 - 1870 MHz paired with 1945 - 1950 MHz. and 1895 - 1900 MHz. paired with 1975 - 1980 MHz." That Resolution also provided for the return to Dr. Alberelli of the fees he had paid.18
On 25 March 2003, Decree 115/003 on the Telecommunications Licenses Regulation Decree was also approved. Article 9 thereof reads as follows:
"1. Class A - Telecommunications License: Grants authorization for the operation of a public telecommunications network and the provision through these means of telecommunications services technically and legally feasible according to laws in force, with the exception of cable TV. The license includes the right and obligation to provide interconnection and negotiate reciprocal compensation for switched telephone network access and terminating access services.
2. Class E - Telecommunications License: Grants authorization for the provision of telecommunications services using the network, means or links owned by the holder or third party suppliers as support.
There are three sub-classes within this category:
Class B1 Telecommunications License: Grants authorization for the provision of telecommunications services arising from its technical plan and for the provision of which the licensee needs to access numeration resources, links or other means of the networks of holders of Class A Telecommunications licenses.
Class B2 Telecommunications License: Grants authorization for the provision of telecommunications services arising from its technical plan and for the provision of which the licensee does not need to access numeration resources, links or other means of the networks of holders of Class A Telecommunications licenses.
3. Class C - License for the lease of telecommunications links, media and systems: Grants authorization exclusively for the installation of telecommunications links, media and systems for the provision thereof or to be leased to licensees of telecommunications services.
4. Class D - Cable TV License: Grants authorization for the provision of television services through subscription which require the use of wired or wireless transmission media for the broadcast of contents."24
On 17 February 2009, Article 9 of Decree 115/003 (paragraph 91 above) was amended by Executive Order IE 810 in the following terms:
"Article 9 - Classes of license
Telecommunications License - Class A: Authorizes the operation of a public telecommunications system and the provision by those means of telecommunications services that are technically and legally viable according to current legislation, with the exception of the subscriber television service. The license includes the right and the obligation to provide interconnection and to negotiate reciprocal compensation for access services or telephone switched termination.
Telecommunications License - Class B: A uthorizes the provision of all data transmission services that are technically and legally viable according to current legislation, using as support their own network, resources or links or those of another provider, on the conditions freely agreed between the parties.
License for the hire of links, resources and telecommunications systems - Class C : Authorizes on an exclusive basis the installation of links, resources and telecommunications systems for their provision or hire to telecommunications service licensees.
Subscriber Television License - Class D : Authorizes the provision of television services by subscription that require the use of wired or wireless transmission means for broadcast of the contents."34
Regarding its investments, Italba also pointed out that:
"Italba began investing in Uruguay twenty years ago. Since that time, Italba has made substantial contributions of capital, amounting to several million dollars, toward the development and operation of a telecommunications company to provide wireless data services within Uruguay. Around 1999, Italba acquired Trigosul as a subsidiary enterprise. Through Trigosul, Italba purchased equipment, hired personnel, obtained a telecommunications license, and began commercial operation in Uruguay in June 2003. Throughout the period of its development and operation of Trigosul, Italba was exposed to market risks in the telecommunications industry. Therefore, Italba's activities in Uruguay qualify as ‘investments.'"61
In connection with full protection and security, Uruguay asserted that the protection set forth in the Treaty is limited to "...police protection of the investment against any action of a criminal nature."71 It added that "[t]he clear intention of the States Parties regarding the definition of this obligation, which was a fundamental condition of their agreement to the BIT, cannot be annulled by importing a contrary definition in another treaty by mere operation of a most favored nation clause."72
"Now, I'd like to add that the economic interest group is a contract which is entered in the national commercial registry. This economic interest group that I'm part of is entered in the national commercial registry, and the text expressly states that each attorney works separately and that we are not partners. We have no joint and several responsibility. We are not responsible or liable for what the other lawyers do. Therefore, I don't think that I need to be involved in any conflict of interest because of any action that my colleagues in the economic interest group may be involved in."75
The Tribunal considers that, in order to decide this issue, it should examine the rules that lay down the structure of GIE in Uruguay. Article 489 of the Commercial Companies Act provides:
"(Concept). Two or more natural or legal persons may form an economic interest group for the purpose of promoting or developing the economic activity of its members, or else improving or increasing the results thereof. By itself, it shall entitle its associates neither to derive nor to be distributed profits, and it may be organized without a capital. It shall be a legal person." [Tribunal's Translation]88
Professor de Mello stated at the Hearing:
"This economic interest group that I'm part of is entered in the national commercial registry, and the text expressly states that each attorney works separately and that we are not partners. We have no joint and several responsibility. We are not responsible or liable for what the other lawyers do."89
As to Italba's ownership rights under Uruguayan law, Italba stated:
"Under Uruguayan domestic corporate law, a party can demonstrate ownership [the text of Article 305 of the Commercial Companies Act refers to the transmission of shares] in one of three ways: (a) by endorsing a stock certificate with a notation of the transfer, delivering the certificates to the transferee, and/or registering the transfer in the company's stock ledger; (b) in the absence of a formal transfer of shares, by demonstrating that, as a matter of "economic reality," the party owned and acted as the owner of the company; and (c) by making capital contributions to the company."104
On the basis of its expert report, Italba submitted that:
"In the case of Trigosul, Dr. Luis Lapique, an expert in Uruguayan corporate law, concluded that the corporate records are so mutually inconsistent and error-filled that they cannot be relied upon to represent the reality of how Trigosul functioned. Thus, ‘[i]t is imperative to resort to the economic reality behind Trigosul' in determining its ownership and to consider evidence of how the company actually operated, including whether the parent company understood itself to be the owner of the subsidiary, acted in a manner consistent with ownership, and held itself out to third parties as the owner."105
Italba also argued the following:
"...the Tribunal should not ‘pierce any corporate veil' to consider whether control over Trigosul was exercised by Dr. Alberelli in his individual capacity or in his capacity as the President of Italba. The case law does not support looking behind the corporate form of the claimant to its individual shareholders to determine which shareholders control the claimant—indeed, the relevant question for jurisdictional purposes is not who controls the claimant, but whether the claimant controls the subsidiary."118
Article 1 of the Treaty defines the concept of "investor of a Party" as follows:
Investor of a Party means a Party or state enterprise thereof, or a national or an enterprise of a Party, that attempts to make, is making, or has made an investment in the territory of the other Party; provided, however, that a natural person who is a dual citizen shall be deemed to be exclusively a citizen of the State of his or her dominant and effective citizenship."
Regarding the definition of "investment," the same Article of the Treaty reads as follows:
"Investment means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. Forms that an investment may take include:
(a) an enterprise;
(b) shares, stock, and other forms of equity participation in an enterprise;
(c) bonds, debentures, other debt instruments, and loans;
(d) futures, options, and other derivatives;
(e) turnkey, construction, management, production, concession, revenue sharing, and other similar contracts;
(f) intellectual property rights;
(g) licenses, authorizations, permits, and similar rights conferred pursuant to domestic law; and
(h) other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges" (emphasis added).
Article 1(g) of the Treaty includes two footnotes:
"Whether a particular type of license, authorization, permit, or similar instrument (including a concession, to the extent that it has the nature of such an instrument) has the characteristics of an investment depends on such factors as the nature and extent of the rights that the holder has under the law of the Party. Among the licenses, authorizations, permits, and similar instruments that do not have the characteristics of an investment are those that do not create any rights protected under domestic law. For greater certainty, the foregoing is without prejudice to whether any asset associated with the license, authorization, permit, or similar instrument has the characteristics of an investment."
"The term "investment" does not include an order or judgment entered in a judicial or administrative action."
In addition, Article 1 of the Treaty defines the concept of a "covered investment" as follows:
"with respect to a Party, an investment in its territory of an investor of the other Party in existence as of the date of entry into force of this Treaty or established, acquired, or expanded thereafter."
Article 24 of the Treaty entitled "Submission of a Claim to Arbitration" provides the following:
"1. In the event that a disputing party considers that an investment dispute cannot be settled by consultation and negotiation:
the claimant, on its own behalf, may submit to arbitration under this Section a claim:
that the respondent has breached:
an obligation under Articles 3 through 10;
an investment authorization, or
an investment agreement, and
that the claimant has incurred loss or damage by reason of, or arising out of, that breach; and
the claimant, on behalf of an enterprise of the respondent that is a juridical person that the claimant owns or controls directly or indirectly, may submit to arbitration under this Section a claim
that the respondent has breached:
an obligation under Articles 3 through 10;
an investment authorization, or
an investment agreement; and
that the enterprise has incurred loss or damage by reason of, or arising out of, that breach.
provided that a claimant may submit pursuant to subparagraph (a)(i)(C) or (b)(i)(C) a claim for breach of an investment agreement only if the subject matter of the claim and the claimed damages directly relate to the covered investment that was established or acquired, or sought to be established or acquired, in reliance on the relevant investment agreement.
2. At least 90 days before submitting any claim to arbitration under this Section, a claimant shall deliver to the respondent a written notice of its intention to submit the claim to arbitration (‘notice of intent'). The notice shall specify:
(a)...
3. Provided that six months have elapsed since the events giving rise to the claim, a claimant may submit a claim referred to in paragraph 1:
(a) under the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the respondent and the non-disputing Party are parties to the ICSID Convention;
(b) under the ICSID Additional Facility Rules, provided that either the respondent or the non-disputing Party is a party to the ICSID Convention;
(c) under the UNCITRAL Arbitration Rules; or
(d) if the claimant and respondent agree, to any other arbitration institution or under any other arbitration rules.
4. A claim shall be deemed submitted to arbitration under this Section when the claimant's notice of or request for arbitration (‘notice of arbitration'):
(a) referred to in paragraph 1 of Article 36 of the ICSID Convention is received by the Secretary-General;
(b) referred to in Article 2 of Schedule C of the ICSID Additional Facility Rules is received by the Secretary-General;
(c) referred to in Article 3 of the UNCITRAL Arbitration Rules, together with the statement of claim referred to in Article 18 of the UNCITRAL Arbitration Rules, are received by the respondent; or
(d) referred to under any arbitral institution or arbitral rules selected under paragraph 3(d) is received by the respondent..."
On the record there are also copies of thirteen folios of the Shareholders' Meeting and Board of Directors' Minutes Book,149 that express the following:
(a) minutes numbered 1 are dated 2 October 1996; on it, there appears a call for an Extraordinary General Shareholders' Meeting, with an illegible signature;
(b) on the following folio, there appear other minutes (unnumbered) of a Shareholders' Meeting held on 10 October in that same year, which was chaired by Mr. Daniel Pérez (a founding partner of the company, see paragraph 76 above). In those minutes, Mr. Luis Herbón was appointed Chairman of the first "Board of Directors of the Company" [Tribunal's Translation]; at the end of the minutes, it is stated that shareholders Ms. Caravetta and Dr. Alberelli were in attendance;
(c) on folio 4 of the aforementioned Shareholders' Meeting and Board of Directors' Minutes Book, there appear other minutes dated 10 October 1996, likewise not numbered, in which Mr. Herbón accepted his appointment;
(d) on folio 5 there appears a text, handwritten and partially illegible, that apparently refers to the Board of Directors' Minutes of 2001; at the end, it states the authorized share capital and, once again, it mentions Ms. Caravetta and Dr. Alberelli as shareholders of the company;
(e) on folios 5 and 6, there appear the minutes of the Extraordinary Shareholders' Meeting held on 31 October 2001, which refers to a capital increase. They also cite Dr. Alberelli and Ms. Caravetta as shareholders of the company;
(f) on folio 7, there appear the Board of Directors' Minutes dated 30 September 2002, which refer to a call for an extraordinary shareholders' meeting. On that folio, there also appear the Minutes of the Extraordinary Shareholders' Meeting held on 10 October 2002; once again it is mentioned that the shareholders are Dr. Alberelli and Ms. Caravetta;
(g) on folio 8, there appear the Board of Directors' Minutes dated 11 October 2002 in which a new Chairman was appointed (in the minutes, his name is illegible). On that folio, there also appears the Board of Directors' Minutes dated 30 October 2002 that refer to a call for a shareholders' meeting;
(h) on folio 9, there appear the Minutes of the Extraordinary Shareholders' Meeting held on 1 November 2002, in which shareholders Dr. Alberelli and Ms. Caravetta once again appoint Mr. Herbón as Chairman;
(i) on folio 10, there appear the minutes of a session of the Board of Directors held on 2 November 2002 in which Mr. Herbón's acceptance of his appointment is included;
(j) on folio 11, there appear the minutes of a Board of Directors' meeting held on 4 February 2011 to call for a Shareholders' Meeting;
(k) on folio 12, there appear the Minutes of the Extraordinary Shareholders' Meeting held on 4 February 2011, in which Dr. Alberelli was appointed as the Board of Directors' Chairman; and
(l) on folio 13, there appear the Minutes of a Board of Directors' meeting of 4 February 2011, in which Mr. Herbón resigned his office and Dr. Alberelli accepted appointment in his place.
Article 305 of the Uruguayan Commercial Companies Act provides as follows:
"(Transferability). Shares shall be freely transferable.
Articles of incorporation may set restrictions to the transferability of registered shares, or book entry shares, provided that no such restriction may amount to a prohibition on transfer. Any restriction shall be stated in the certificate or in the Book-Entry Stock Register, as applicable
The corporation shall be given written notice of the transfer of a registered share or a book entry share or of the creation or transfer of rights in rem over any such shares, and an entry shall be made in the relevant stock register. These actions shall be enforceable against the corporation and third parties from the time of said registration.
Endorsable shares shall be transferred by an uninterrupted chain of endorsements, and endorsees shall request the register to exercise their rights."154 (Emphasis added).
Law No. 14,701, which governs securities ("títulos valores") in Uruguay (the "Securities Law"), sets forth in Article 1 that "títulos valores" are "the documents necessary to exercise the literal and autonomous right contained in them." [Tribunal's Translation]159 In addition, Article 32 of the aforementioned law provides the following for registered securities:
"Registered securities shall be issued in the name of an ascertained person, whose name shall be stated both in the body of the document and in the entry made in the name of the securities issuer. Only a person whose name appears both in the document and in the register shall be recognized as a lawful holder.
The obligation to keep a non-bearer securities register shall not apply in the case of bills of exchange, registered promissory notes and checks.
The securities shall be presumed transferable unless the certificate itself or the law provides that they must be recorded in the register entry of issuance." (Emphasis added)
Italba asserted, on the basis of the opinion of its expert, Dr. Lapique, that formalities in closely held corporations may be more "relaxed" and, because of this, the reality should be considered: "...whether the parent company understood itself to be the owner of the subsidiary, acted in a manner consistent with ownership, and held itself out to third parties as the owner."162 According to the Claimant, Italba made all of Trigosul's business decisions, developed its business plan, commissioned studies on potential negotiations, sought out partners, "contributed the overwhelming majority of Trigosul's share capital," funded Trigosul's operations, issued checks on a regular basis to cover Trigosul's expenses and, in addition, routinely represented to third parties that it owned Trigosul.163
Italba's expert, Dr. Lapique further asserted:
"Application of the predominance of reality over form is expressly provided for in corporate matters in Article 189 of the LSC, which enshrines the theory of disregard. Although that theory is for piercing the corporate veil to reach the shareholders behind it in cases of fraudulent evasion of the law, violation of public order, etc. which would not be applicable in this case, it establishes that reality prevails over form."164
Uruguay's expert, Professor de Mello, stated: "...this principle [referring to the theory of disregard mentioned by Dr. Lapique] governs in commercial law, Lapique cites the provisions of the [Commercial Companies Act] on the principle of the ‘disregard of the legal personality' of commercial companies, without taking into account that it is applied only to reject the legal personality of corporations (not to recognize the status of shareholder), in cases of fraud committed through said personality, and that it has limited scope."165
Article 189 of the Commercial Companies Act, found in section XV entitled "On the Unenforceability of the Legal Personality", sets forth the following:
"(Admissibility). A company's status as a legal person may be rendered unenforceable where it is used in evasion of the law to violate public order, or to defraud and to the detriment of the rights of members, shareholders or third parties.
Reliable proof of the actual use of the business company as a legal instrument to achieve said purposes shall be required.
Where the unenforceability of the company's legal status is sought through a legal action, ordinary proceedings shall be followed."166
Article 319 of the Commercial Companies Act sets out the "fundamental" and "essential" rights of shareholders:
"(1) To participate in and vote at shareholders' meetings.
(2) To share in corporate profits and the balance of liquidation, in the event of dissolution of the company.
(3) To oversee the management of corporate business.
(4) To have a preemptive right to subscribe for shares of stock, convertible profit shares, and convertible debentures.
(5) To reassign as provided by law.
These rights may only be qualified, limited or rendered of no effect when expressly authorized by law." [Tribunal's Translation]
Indeed, Dr. Lapique admitted acting on the basis of the information provided by Italba relating to the contributions it claimed to have made to Trigosul. He stated:
"According to the instructions received:
a) All funds received by Trigosul were contributed by Italba Corp.
b) Italba Corp. delivered funds to Trigosul's directors so that the directors would deliver them to Trigosul.
c) The Company and its directors recognize Italba Corp. as shareholder.
According to the instructions received, the Contributions for future paid-in capital were made by Italba Corp., who is the one that has financed Trigosul's operations from its inception to date."174 (Emphasis added)
In Tanner v. Robinson, the District Court of Appeal of Florida stated: "As such, we hold that an inter vivos transfer by gift of any interest in securities is accomplished by either actual or constructive delivery of the same, where donative intent is also present, and where acceptance by the donee may be presumed or is proven directly..."182
In its Post-Hearing Brief, Italba referred to a case appended to Mr. Conti's Report (Estate of Maxcy v. Commissioner of Internal Revenue), and assert that the U.S. Court of Appeals for the Fifth Circuit "... upheld the validity under Florida law of a gift of shares in a close corporation notwithstanding the U.S. Internal Revenue Service's argument that the gift had not been perfected by physical delivery.Where the government could raise no alternative theory of the donor's intent, the Court dismissed insistence on physical delivery as ‘tokenism in which we do not think the courts of Florida would indulge' and found ‘constructive' delivery sufficient."185
The Claimant submitted several documents in support of its assertion that it made business decisions for Trigosul. The Tribunal addresses each of them and states its conclusion once it has reviewed them all:
(a) Proposal for a Banking Communication Network of 6 January 1999.187 This document makes no reference to Trigosul; moreover, it is a proposal made by ETS and Italba Telecom S.A., and not by Italba Corporation.
(b) "Site Survey Report: Uruguay, Prime Wave Communication" of 15 October 2001.188 The Report makes no reference to Trigosul or Italba.
(c) Agreement with WorldStar Communications Corp. for the purpose of creating a Joint Venture for a Telecommunications Project in Uruguay of July 2009.189 This document makes no reference to Trigosul; it concerns a company referred to as Sumitel, which appears to have licenses in Uruguay.
(d) Co-Investment Agreement Among Eastern Pacific Trust and Italba Corporation of 14 June 2002.190 It refers to Trigosul as a "strategic partner," not as Italba's subsidiary; in addition, it makes reference to a project in Ecuador.
(e) Joint Venture Terms Sheet between Phinder Technologies Inc. and Italba Corporation of 14 February 2007.191 It is a document concerning Latin America, Europe (Spain and Portugal) and Africa. It makes no reference to Trigosul or Uruguay.
Italba also claimed to have sought out potential joint ventures "...that would allow it to realize the full value of its investment in Trigosul"; Italba "... acted as the negotiating and contracting party, and its contribution to the joint venture partnerships included the use of Trigosul's license—which Italba was able to contribute because it owned Trigosul."192 To such effect, Italba made reference to the following businesses:
(a) Negotiations with Eastern Pacific Trust: letter of intent of 3 February 2002 and Co-Investment Agreement of 14 June 2002 (cited in paragraph 256 (d) above).193 Regarding the letter of intent, the Tribunal notes that it is not signed and mentions Trigosul only once. Furthermore, it is addressed to Italba Telecommunications Group, not Italba Corporation. The Claimant also submitted the statement of Mr. Alan Cherp, director of InterAmerican Telco Systems. He told the Tribunal that he had met Dr. Alberelli in 2002, at a telecommunications event where they discussed business in Uruguay through Trigosul, Italba's subsidiary.194
(b) Negotiations with a representative of Brasil Telecom on the possibility of creating a joint venture involving a U.S.-based investment group named Starborn.195 There is no evidence of this negotiation in the case record.
(c) Potential deal with ANTEL (Uruguay's state-owned telecommunications company). The only evidence of this "potential deal" is to be found in the statements of Messrs. Alberelli and Herbón.196 The Tribunal cannot, based on these statements alone, deem the alleged control of Italba over Trigosul to be proven.
(d) Negotiations with Phinder Technologies Inc. (a Canadian telecommunications company), in order to execute a Joint Venture for the creation of Zupintra Panamá S.A.197 Italba submitted several documents: (i) Italba Corporation's "Project Structure" of 21 January 2007,198 whereby the scope of the project includes Central America, South America, and parts of Europe and Africa. The Tribunal finds no reference to Trigosul's license in Uruguay there; (ii) "Joint Venture Terms Sheet between Phinder Technologies Inc. and Italba Corporation" of February 2007.199 The document indicates that Italba shall contribute the telecom licenses in the target countries (located in Latin America, Europe (Spain and Portugal) and Africa); based on the contents of the document, the Tribunal cannot conclude that it would include Trigosul's license; (iii) "Shareholders' Agreement" between Phinder Technologies Inc. and Italba Corporation of March 2007.200 The document is a draft with handwritten notes, which is not signed and makes no reference to Trigosul; (iv) "Joint Venture Terms Sheet between Phinder Technologies Inc. and Italba Corporation" dated 14 February 2007201 (discussed in paragraph 256 (e) above); (v) Certificate of Incorporation of Zupintra dated 8 March 2007.202 This document indicates that Dr. Alberelli appeared before a public notary in order to constitute such corporation in his individual capacity; the document makes no reference to Italba or Trigosul; (vi) Press release entitled "Zupintra Communications Inc. forms Joint Venture with Italba Corporation" of 19 March (year not specified).203 It refers to telecommunications opportunities in Latin America and the Caribbean, but says nothing about Trigosul; (vii) News report entitled "Zupintra, Italba create telecoms JV" of 19 March 2007.204 This news report deals with the association of the two companies mentioned to do business in Latin America and the Caribbean; it makes no reference to Trigosul; (viii) E-mails of 3, 4, 5, 8, 9 and 10 May 2007, and 6, 7, 11 and 12 June 2007.205 Such communications mostly refer to business in Argentina, while some of them deal with the expansion to Uruguay; nonetheless, they make no reference to Trigosul. In their statements, Mr. Christopher G. Hall, Chief Operating Officer of Phinder Technologies Inc., and Mr. John Alexander van Arem, President and Chief Executive Officer thereof, asserted that Trigosul was Italba's subsidiary.206 The Tribunal considers that such statements do not correspond to the contents of the documents submitted and analyzed in this paragraph.
(e) Negotiations with Telmex Uruguay (Telstar S.A.).207 Italba submitted the following documents: Intention and Confidentiality Agreement of 21 June 2007;208 and five e-mails exchanged in December 2007, March 2008, and March and November 2009.209 Both the Agreement and the communications refer to Trigosul only; none of them mentions Italba, which is why it cannot be inferred that Italba was negotiating for Trigosul.
(f) Negotiations with Dr. Fernando García:210 Italba submitted a letter from Dr. García to Dr. Alberelli of 4 October 2010, and the Data Transmission and Computer Equipment Trial Loan Contract of December 2010.211 Regardless of the authenticity of Dr. García's signature, which was questioned, neither of the documents indicates that the negotiation was conducted by Italba or that Italba acted for Trigosul.
(g) Negotiations with DirecTV: The Claimant submitted two e-mails exchanged by Mr. Martín Colombo and Dr. Alberelli on 17 March 2011.212 These communications make no reference to Italba such that it would permit an inference to be drawn that Dr. Alberelli was acting for Italba or that Italba was owned or controlled Trigosul.
(h) Negotiation with Grupo Afinidad Mary in order to offer various services to the community of 2,100 retirees: The Claimant submitted a document entitled "Projection of Income, Investments, and Costs" (undated and unsigned),213 and a letter from Mr. Richard G. Weber to Dr. Alberelli of 1 May 2012.214 These documents only make reference to Trigosul, not Italba, so that it is impossible to determine who started the alleged negotiation.
As to Italba's alleged capital contributions to Trigosul, the Claimant submitted the following documents:
(a) Italba's Commercial Checking Bank Account Statement (from 1 to 28 February 2001).215 By means of this document, Italba purported to prove that it wired USD 35,000 to Trigosul as a reimbursement of expenses. The Tribunal notes that the transfer was made by the Claimant to Mr. Luis Herbón, and that, in footnote 159 of its Reply Memorial, Italba stated: "The wire transfer was made to Luis Herbón's account at Indumex, a Uruguayan financial services company that facilitates international money transfers." The purpose of such transfer is not mentioned in the case record, and the Claimant has submitted no evidence that it was actually a capital contribution from Italba to Trigosul.
(b) Contribution of 632,674 Uruguayan pesos that Trigosul paid to DNC as an advance on the first two years of fees for Trigosul's operation in the spectrum.216 The Tribunal has confirmed that Trigosul's accounting book called "Diary" makes reference to such amount, but there is no record whatsoever of the source of the contribution necessary to enable Trigosul to make the relevant payment to DNC.
Italba's third argument is that it funded Trigosul's operations. Accordingly, Italba submitted the following documents on three issues: purchase of equipment, drawing checks, and purchase of bonds:
(a) Equipment: fax to Italba Group (to the attention of Mr. Albert Jansenson) from Mr. Daniel V. de los Santos of L-3 Communications of 8 May 2001; Quotation No. 2501 from Wavelynx International Inc. of 11 January 2000; "Seller's Agreement" between Italba Corporation and Wavelynx International Inc. of 27 February 2000; and Invoice No. 107 from StarMesh Technologies to Italba of 12 June 2007217 (according to Italba, the equipment was approved by URSEC).218 The fax includes a Memorandum of Understanding (MOU) which mentions Trigosul as a subsidiary of Italba, but neither the fax nor the MOU were signed. The quotation refers to equipment for Italba, but it was not shown that Italba purchased such equipment for Trigosul. The "Seller's Agreement" makes no reference to Trigosul. Invoice No. 107 indicates that the equipment would be shipped to Miami; there is no evidence of its subsequent shipping to Trigosul. Although Italba stated that such equipment was later approved by URSEC, the Tribunal reviewed the approval submitted, which includes neither a list, nor a description of the equipment, and, thus, does not confirm that it is the same equipment as that mentioned by the Claimant. Italba also cited UMDN-URSEC Resolution of 10 September 2002, which approved the payment for Trigosul's equipment, purchased by Italba.219 Such resolution concerns a settlement agreement reached before the "Juzgado de Conciliación del 2do Turno", between Trigosul, the Uruguay Ministry of Defense and URSEC (due to the change of frequencies by means of Decree 282/2000 (see paragraphs 85 and 88 above)). As explained above, Trigosul alleged that, in view of the frequencies it had been allocated prior to such Decree, it purchased equipment it would not be able to use with the new frequencies. A line of the Resolution reads "ITALBA invoice for the purchase of radios: US $25,964." The Tribunal cannot interpret this mere reference to Italba as evidence of a contribution from Italba to Trigosul through delivery of equipment.
(b) Writing of checks: Italba alleges that it regularly drew checks to cover Trigosul's expenses; in support of such assertion, it submitted two checks (dated 7 June 2005 and 13 May 2006 respectively).220 It also made reference to the accounting books of Trigosul where the cash allegedly contributed by Italba would be recorded as "contribution by directors."221 One of the checks mentioned by Italba was drawn to "Cash", while the other was drawn in favor of Dr. Alberelli. No relationship between Italba and Trigosul may be derived from such evidence. As to accounting records, the Tribunal cannot construe the expression "contribution by directors" as a contribution made by Italba; that would be an unfounded and forced interpretation of the text.
(c) Bonds: Italba contends that, in April 2004, it gave Mr. Herbón approximately USD 25,000 to purchase Uruguayan bonds,222 and that, two years later, on Italba's instructions, Mr. Herbón sold those bonds and used the money to cover Trigosul's expenses. The Tribunal notes that the two checks mentioned by Italba were written in favor of persons other than Trigosul, and that the only relevant note in Trigosul's Breakdown of Transactions reads "contribution by directors" but does not state that the contributions were made by Italba. Therefore, the Tribunal cannot accept that the Claimant has proven that the money related to the checks and bonds was a contribution from Italba to Trigosul. Rather, the evidence mentioned in this paragraph establishes that Dr. Alberelli covered Trigosul's expenses.
Italba retained Dr. Luis Lapique, who issued a report admitting that a detailed analysis of Trigosul's different corporate books and the content of their records, as well as the shares issued by Trigosul," evidenced that "[s]ome records have not been kept and certain shares have not been issued," and..[r]ecords have been kept incorrectly and shares have been issued incorrectly." Nevertheless, Dr. Lapique, in support of the hypothesis that Italba owned Trigosul, contended that, in "...closely held corporations, there are cases in which the corporate books and records are relegated to second place and formalities are not observed."223
The costs of the arbitration, including the fees and expenses of the Tribunal, ICSID's administrative fees and direct expenses, amount to (in USD):237
Arbitrators' fees and expenses
Mr. Rodrigo Oreamuno USD 227,392.65
Mr. John Beechey USD 84,515.74
Prof. Zachary Douglas USD 73,090.67
ICSID's administrative fees USD 106,000.00
Direct expenses USD 174,015.77
Total USD 665,014.83
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.
For the foregoing reasons, the Tribunal decides:
(a) To uphold the objection to the Tribunal's jurisdiction raised by the Oriental Republic of Uruguay on the grounds that Italba Corporation neither owns nor controls Trigosul S.A., such that Italba Corporation is not an investor for the purposes of Articles 1 and 24 of the Treaty between the United States of America and the Oriental Republic of Uruguay Concerning the Encouragement and Reciprocal Protection of Investment and Article 25 of the ICSID Convention.
(b) To declare that the Tribunal has no jurisdiction to settle the dispute.
(c) To reject the Claimant's request that the Tribunal disregard the expert report of Professor Eugenio Xavier de Mello Ferrand.
(d) To order the Claimant to pay to the Respondent the entirety of the costs of this arbitration, including the fees and expenses of the Tribunal, ICSID's administrative fees and direct expenses, as well as the Respondent's legal and expert fees and expenses incurred in connection with this arbitration, assessed in the amount of USD 5,885,344.17.
(e) All other requests for relief are dismissed.
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