|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings 2006|
|Claimants' 6 September costs submission||Claimants' costs submission filed on 6 September 2019|
|Claimants' 20 September costs submission||Claimants' Submission on Allocation of Costs filed on 20 September 2019|
|Hearing||Hearing on jurisdiction held on 2-3 October 2018|
|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|
|IICJ||International Islamic Court of Justice, established by the Charter of the OIC|
|Iraq-Japan BIT||Agreement between the Republic of Iraq and Japan for the Promotion and Protection of Investment, entered into force on 1 February 2014|
|Iraq-Jordan BIT||Agreement on the Encouragement and Protection of Investment Between the Government of the Republic of Iraq and the Government of the Hashemite Kingdom of Jordan, entered into force in November/December 2016|
|Itisaluna||Itisaluna Iraq LLC, exempted limited liability company incorporated under the laws of Jordan|
|Jordan||Hashemite Kingdom of Jordan|
|Memorial||Claimants' Memorial filed on 6 March 2018|
|MFN Clause||Article 8(1) of the OIC Agreement|
|MSI||Munir Sukhtian Investment LLC, exempted private shareholding organised under the laws of Jordan|
|New York Convention||The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted on 10 June 1958, entered into force on 7 June 1959|
|Notice of Arbitration||Correspondence from the Claimants to the Respondent dated 8 January 2017, described as Notice of Arbitration or "trigger letter"|
|OIC Agreement||Agreement on Promotion and Protection and Guarantee of Investments among Member States of the Organization of the Islamic Conference, which the Claimants aver entered into force for Iraq on 21 July 2015|
|PO No.1||Procedural Order No. 1 dated 21 November 2017|
|Preliminary Objections||Respondent's Preliminary Objections to Jurisdiction Ratione Voluntatis and Request for Bifurcation filed on 25 May 2018|
|Reply||Claimants' Reply to Respondent's Preliminary Objections filed on 16 August 2018|
|Request||Request for Arbitration dated 13 March 2017|
|Respondent's 6 September cost submission||Respondent's Submission on Costs filed on 6 September 2019|
|Transcript, Day [#], [page:line]||Transcript of the Hearing|
|Tribunal||Arbitral tribunal constituted on 16 August 2017|
|The Republic, Iraq or the Respondent||The Republic of Iraq|
|UAE||United Arab Emirates|
|VCLT||Vienna Convention on the Law of Treaties, 1969|
|VTEL MEA and VTLE Holdings||VTEL Middle East and Africa Limited and VTLE Holdings, companies limited by shares incorporated in the Dubai International Financial Center and organised under the laws of Dubai in the UAE|
As we stated in the Republic's letter to the Tribunal of 27 October 2017 and during the First Session, the Republic intends to object, at the least, to the Tribunal's jurisdiction ratione voluntatis and ratione temporis. Based on the Claimants' Notice of Arbitration of 8 January 2017 and Request for Arbitration of 13 March 2017, the Parties agree that the Republic's objection to the Tribunal's jurisdiction ratione voluntatis and any other preliminary objections that turn solely on legal questions should be addressed in a separate preliminary phase.
The Respondent having indicated that it intends to raise objections to jurisdiction and/or admissibility, any such objection that the Respondent contends should be heard as a preliminary matter shall be made as soon as possible following receipt of the Claimants' Memorial and in any event not later than 2 months after receipt of that Memorial. Such objection shall include a reasoned application for the matter to be addressed in a preliminary procedure.
• By the Parties jointly:
o agreed charts indicating ICSID membership by OIC Member States and ISDS and ICSID investor-State commitments assumed by each OIC Member State;
o an agreed document setting out the differences between the Parties on the certified translations of the OIC Agreement;
o agreed reference documents relevant to other reported OIC investor-State arbitration proceedings.
• By each Party separately:
o a proposed Decision Tree;
o a note addressing other reported OIC investor-State arbitration proceedings;
o other relevant authorities cited to the Tribunal during the Hearing.
[The Claimants] qualify as investors under Article 1, Paragraph 6 of the [OIC Agreement].
On June 11, 2006, the Iraq national Communications & Media Commission (the "CMC") and MSI entered into a National Licence Agreement for the provision of telecommunications services in the Republic of Iraq (the "Licence"). Under the terms of the Licence, MSI was entitled to install, construct, operate, manage, and otherwise provide a public network for the purposes of providing telecommunications services in Iraq. MSI was also entitled to establish, operate, or otherwise provide international gateway services as are necessary to transit telecommunications traffic.
Following payment of USD 20 million to acquire the Licence, the Investors expended hundreds of millions of dollars in carrying out the terms of the Licence in Iraq.
The Investors' rights pursuant to the License include (but are not limited to) the right to operate their own international gateways. The Investors repeatedly attempted to exercise this right. However, the General Secretariat of the Council of Ministers prohibited the Investors from operating their own international gateway under the License. This prohibition occurred without any form of compensation, and prevented the Investors from using and benefiting from an essential element of their investment in Iraq.
Further, the Investors held the legitimate expectation that amongst other things, (i) they would be subject to reasonable License and revenue sharing fees, (ii) they could use the appropriate technology to operate their network, and (iii) they would be able to enjoy their License fully, including with regard to the provision of international gateway services. Unfortunately, despite the Investors' repeated pleas to various organs of the Iraqi state, these expectations were not met.
The License having now expired, the Investors' attempts to negotiate in good faith its renewal have been rejected by the CMC, which continues to pressure the Investors into accepting a renewal of the expired License stripped of its key terms. This untenable situation has caused the Investors severe losses, such that ltisaluna Iraq is no longer in a position to sustain its operation financially.
The Investors' rights under the License and their operations in Iraq are entitled to, amongst other international law protections, fair and equitable treatment, and quiet and full use and enjoyment of their investment. The Investors benefit from these guarantees pursuant to, on the one hand, the OIC Agreement and, on the other hand, under the Agreement between Japan and the Republic of Iraq for the Promotion and Protection of Investment (the "Japan-Iraq BIT"), which protections are available to the Investors by operation of Article 8(1) of the OIC Agreement.
The measures that the Government of Iraq has taken against the Investors are directly inconsistent with the standards of protection to which the Investors are entitled under these treaties. The highest State officials, including the Office of His Excellency the Prime Minister, have ignored the Investors' repeated letters seeking redress.
While the Investors remain open to any good faith attempt by the Iraq Government to address the substantial violation of their rights under the OIC Agreement and the Japan-Iraq BIT, the extent of the Investors' resulting losses are such that they must now avail themselves of all the protections accorded to them. Accordingly, the Investors respectfully submit this letter as a formal notice of the existence of an investment dispute under the OIC Agreement and the Japan-Iraq BIT.
The Investors hope and most respectfully expect that the Government will take no steps to further deprive them of their rights following this notification. The Investors' representatives are prepared to meet with the Government of Iraq for immediate consultations under Article 17 of the Japan-Iraq BIT. To that end, and in light of the dire situation of the Investors' Iraqi operations, we would be most grateful if your Excellencies could please contact the undersigned at your earliest convenience.
• "Starting in 2008, and after Claimants had invested heavily in Itisaluna's Network, the CMC and other Iraqi authorities, through various acts and omissions, started stripping the Licence of its value."13
• "In 2008, after Claimants had invested significantly in developing the Itisaluna Network in Iraq, Iraq prohibited Itisaluna from exercising its right to build and operate an international gateway."14
• "Around the same time as the decision to prohibit Itisaluna from operating its own international gateways, the Minister of Communication informed Itisaluna that the only way it could operate an international gateway was to subscribe to a new licence agreement with the [State-owned Iraqi Telecommunications and Post Company ("ITPC")]."15
• "However, shortly after the ITPC Licence was signed and a few months after Itisaluna had installed the relevant switch to operate the gateway, Itisaluna's management was summoned by the Ministry of Communications and special security forces surrounded Itisaluna's offices located at the Baghdad airport at the time. The Iraqi authorities demanded that Itisaluna cease the operation of the gateway and terminate immediately its licensing contracts with the ITPC. Itisaluna complied."16
• "In October 2008, and pursuant to the same Government decision that prohibited Itisaluna from building and operating its own international gateway, the CMC also prohibited Itisaluna from laying optical fiber cables in Iraq."17
• Referencing the increasingly hostile security situation in Iraq from January 2014, that "[t]he security situation rendered Itisaluna unable to operate in many governates",18 and that, "[a]mid the violence, the Government of Iraq also directed an internet shutdown for approximately two months in 2014, which resulted in the loss for Itisaluna of many users."19
• Also in 2014, that the CMC "failed to fulfil its obligations as regulator because it failed to attribute frequencies to Itisaluna"20 and "refused to address its failure to properly attribute frequencies".21
• Contrary to the terms of the Claimants' Licence, the CMC informed Itisaluna in April 2012 that it would be imposing higher fees, fees which Itisaluna, under protest, paid on 17 January 2013.22
• Starting in 2009, the CMC imposed and Itisaluna paid, additional fees for the attribution of microwave frequencies, over and above what was provided for in the Licence.23
• In the period 2014-2016, the CMC refused to negotiate in good faith the renewal of the Claimants' Licence.24
• "Iraq's conduct has frustrated Claimants' legitimate expectations that they would be able to develop and benefit from their investment under the protection of the Iraqi State, and that the Government would seek to encourage the commercial and financial success of the investment – as it committed to do under Article 4 of the OIC – rather than thwart Claimants' efforts to keep their investment afloat."27
• "Iraq undertook to 'protect' Claimants under Article 2 of the OIC Agreement, which entitles Claimants to a minimum standard of protection. By virtue of Article 8(1) of the OIC Agreement, Claimants are entitled to the even more favourable degree of protection offered to Japanese investors through the standard of fair and equitable treatment in Article 5.1 of the Japan-Iraq BIT."28
• "Iraq also breached its legal obligations and specific commitment with respect to Claimants' investment by, inter alia, withdrawing the international gateway rights in violation of Article II.C of the Licence, extending the performance bond beyond its terms in violation of Article IV.C [of the Licence]; refusing to negotiate the renewal of the Licence in violation of Article VI.B; and imposing a high fee for the assignment of numbering blocks in violation of Article XV.A. Such breaches by Iraq of its contractual undertakings constitute a direct violation of the protection laid out in Article 5.3 of the Japan-Iraq BIT, to which Claimants are entitled by virtue of Article 8(1) of the OIC Agreement."29
• "Iraq also breached its national treatment obligation under Article 3 of the Japan-Iraq BIT, owed to Claimants under Article 8(1) of the OIC Agreement, when it treated Itisaluna less favourably than it treated national telecommunications companies."30
• an award of monetary damages for the full measure of the compensation owed to the Claimants as a result of Iraq's expropriation of the Claimants' investment;
• compensation for the direct losses sustained by Claimants as a result of Iraq's violations of the guarantees invoked by the Claimants under the OIC Agreement and the Japan-Iraq BIT; and
• compensation equal to any tax consequences of the award, in order to maintain the award's integrity.
Iraq has engaged in a series of actions, policies, omissions, and abdication of responsibility that progressively eroded the Claimants' investment in Itisaluna. After having gradually crippled Itisaluna's operations and revenue streams, Iraq's acts and omissions culminated in the final deprivation of Itisaluna's core Licence rights, effected through the final decision of the CMC's Board of Appeal of October 7, 2015. The October 7, 2015, forced amendment of the Licence was followed by Iraq's complete refusal to enter into a good faith negotiation for the renewal of the Licence. In a culmination of its unlawful acts and omissions beginning in 2008, Iraq made it clear to the Claimants that any renewal of the Licence would be pursuant to the truncated terms imposed by the October 7, 2015 decision.39
For the reasons set out above, Claimants respectfully request that the Tribunal:
a. Award monetary damages for the full measure of the compensation owed to Claimants as a result of Iraq's expropriation of Claimants' investment;
b. Order Iraq to compensate Claimants for the direct losses sustained as a result of Iraq's violations of the guarantees invoked by Claimants under the OIC Agreement and the Iraq-Japan BIT;
c. Award Claimants the full costs of these proceedings, including arbitrators' fees and costs, reasonable legal fees and experts' costs and fees;
d. Order Iraq to pay pre-Award and post-Award interest at a rate to be fixed by the Tribunal;
e. Order Iraq to pay a sum of compensation equal to any tax consequences of the Award, in order to maintain the Award's integrity; and
f. Order and award such further relief as the Tribunal may deem just and appropriate.41
Any objection by a party to the dispute that that dispute is not within the jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall be considered by the Tribunal which shall determine whether to deal with it as a preliminary question or to join it to the merits of the dispute.
(1) Any objection that the dispute or any ancillary claim is not within the jurisdiction of the Centre or, for other reasons, is not within the competence of the Tribunal shall be made as early as possible. A party shall file the objection with the Secretary-General no later than the expiration of the time limit fixed for the filing of the counter-memorial, or, if the objection relates to an ancillary claim, for the filing of the rejoinder – unless the facts on which the objection is based are unknown to the party at that time.
(2) The Tribunal may on its own initiative consider, at any stage of the proceeding, whether the dispute or any ancillary claim before it is within the jurisdiction of the Centre or within its own competence.
(6) If the Tribunal decides that the dispute is not within the jurisdiction of the Centre or not within its own competence, or that all claims are manifestly without legal merit, it shall render an award to that effect.
The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.
• Articles 50-52 establish a bespoke regime in respect of the interpretation, revision and annulment of ICSID awards, distinct and materially different from post-award arrangements under other arbitration rules.
• Articles 53-55 establish a bespoke regime in respect of the recognition and enforcement of ICSID awards, distinct from arrangements under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") or other regimes and arrangements for the recognition and enforcement of international arbitral awards.
• Beyond these provisions, although there is some symmetry between the ICSID Arbitration Rules and other frequently adopted international arbitration rules, such as the UNCITRAL Arbitration Rules, the ICSID Convention and ICSID Arbitration Rules establish a self-contained and sui generis arbitration regime for the arbitration of investment disputes between Contracting States and the nationals of other Contracting States.
• The opening Preamble of the Agreement.
• Chapter One, which contains only Article 1, setting out definitions.
• Chapter Two, headed "General provisions regarding promotion, protection and guarantee of the capitals and investments and the rules governing them in the territories of the contracting parties". This chapter comprises Articles 2 to 9 of the Agreement. Of material relevance in this phase of these proceedings, Article 8 is situated in Chapter Two.
• Chapter Three, headed "Investment guarantees". This chapter comprises Articles 10 to 17 of the Agreement. Of material relevance in this phase of these proceedings, Articles 16 and 17 are situated in Chapter Three.
• A section headed "General and final provisions". This section comprises Articles 18 to 25 of the Agreement. Of material relevance in this phase of the proceedings, Articles 18 and 20 are situated in this section.
The Governments of the Member States of the Organisation of the Islamic Conference signatory to this Agreement,
Have approved this Agreement,
And have agreed to consider the provisions contained therein as the minimum in dealing with the capitals and investments coming in from the Member States,
And have declared their complete readiness to put the Agreement into effect, in letter and in spirit, and of their sincere wish to extend every effort towards realizing its aims and objectives.
1. The investors of any contracting party shall enjoy, within the context of economic activity in which they have employed their investments in the territories of another contracting party, a treatment not less favourable than the treatment accorded to investors belonging to another State not party to this Agreement, in the context of that activity and in respect of rights and privileges accorded to those investors.
2. Provisions of paragraph 1 above shall not be applied to any better treatment given by a contracting party in the following cases:
a) Rights and privileges given to investors of one contracting party by another contracting party in accordance with an international agreement, law or special preferential arrangement.
b) Rights and privileges arising from an international agreement currently in force or to be concluded in the future and to which any contracting party may become a member and under which an economic union, customs union or mutual tax exemption arrangement is set up.
c) Rights and privileges given by a contracting party for a specific project due to its special importance to that state.
The host state undertakes to allow the investor the right to resort to its national judicial system to complain against a measure adopted by its authorities against him, or to contest the extent of its conformity with the provisions of the regulations and laws in force in its territory, or to complain against the non-adoption by the host state of a certain measure which is in the interest of the investor, and which the state should have adopted, irrespective of whether the complaint is related, or otherwise, to the implementation of the provisions of the Agreement to the relationship between the investor and the host state.
Provided that if the investor chooses to raise the complaint before the national courts or before an arbitral tribunal then having done so before one of the two quarters  he loses the right of recourse to the other.
Article 17 
1. Until an Organ for the settlement of disputes arising under the Agreement is established, disputes that may arise shall be entitled  through conciliation or arbitration in accordance with the following rules and procedures:
a) In case the parties to the dispute agree on conciliation, the agreement shall include a description of the dispute, the claims of the parties to the dispute and the name of the conciliator whom they have chosen. The parties concerned may request the Secretary General to choose the conciliator. The General Secretariat shall forward to the conciliator a copy of the conciliation agreement so that he may assume his duties.
b) The task of the conciliator shall be confined to bringing the different view points closer and making proposals which may lead to a solution that may be acceptable to the parties concerned. The conciliator shall, within the period assigned for the completion of his task, submit a report thereon to be communicated to the parties concerned. This report shall have no legal authority before a court should the dispute be referred to it.
a) If the two parties to the dispute do not reach an agreement as a result of their resort to conciliation, or if the conciliator is unable to issue his report within the prescribed period, or if the two parties do not accept the solutions proposed therein, then each party has the right to resort to the Arbitration Tribunal for a final decision on the dispute.
b) The arbitration procedure begins with a notification by the party requesting the arbitration to the other party to the dispute, clearly explaining the nature of the dispute and the name of the arbitrator he has appointed. The other party must, within sixty days from the date on which such notification was given, inform the party requesting arbitration of the name of the arbitrator appointed by him. The two arbitrators are to choose, within sixty days from the date on which the last of them was appointed arbitrator, an umpire who shall have a casting vote in case of equality of votes. If the second party does not appoint an arbitrator, or if the two arbitrators do not agree on the appointment of an Umpire within the prescribed time, either party may request the Secretary General to complete the composition of the Arbitration Tribunal.
c) The Arbitration Tribunal shall hold its first meeting at the time and place specified by the Umpire. Thereafter the Tribunal will decide on the venue and time of its meetings as well as other matters pertaining to its functions.
d) The decisions of the Arbitration Tribunal shall be final and cannot be contested. They are binding on both parties who must respect and implement them. They shall have the force of judicial decisions. The contracting parties are under an obligation to implement them in their territory, no matter whether it be a party to the dispute or not and irrespective of whether the investor against whom the decision was passed is one of its nationals or residents or not, as if it were a final and enforceable decision of its national courts.
General and final provisions
Two or more contracting parties may enter into an agreement between them that may provide a treatment which is more preferential than that stipulated in this Agreement.
The General Secretariat will follow up the implementation of this Agreement.
Settlement of Investment Disputes between a Contracting Party and an Investor of the Other Contracting Party
1. For the purposes of this Article, an "investment dispute" is a dispute between a Contracting Party and an investor of the other Contracting Party that has incurred loss or damage by reason of, or arising out of, an alleged breach of any obligation of the former Contracting Party under this Agreement with respect to the investor of that other Contracting Party or its investments in the Area of the former Contracting Party.
2. Subject to subparagraph 7(b), nothing in this Article shall be construed so as to prevent an investor who is a party to an investment dispute (hereinafter referred to in this Article as "disputing investor") from seeking administrative or judicial settlement within the Area of the Contracting Party that is a party to the investment dispute (hereinafter referred to in this Article as "disputing Party").
3. Any investment dispute shall, as far as possible, be settled amicably through consultations between the disputing investor and the disputing Party (hereinafter referred to in this Article as "the disputing parties").
4. If the investment dispute cannot be settled through such consultations within three months from the date on which the disputing investor requested in writing the disputing Party for consultations, the disputing investor may, subject to subparagraph 7(a), submit the investment dispute to one of the following international conciliations or arbitrations:
(a) conciliation or arbitration in accordance with the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965 (hereinafter referred to in this Article as "the ICSID Convention"), so long as the ICSID Convention is in force between the Contracting Parties;
(b) conciliation or arbitration under the Additional Facility Rules of the International Centre for Settlement of Investment Disputes, so long as the ICSID Convention is not in force between the Contracting Parties;
(c) arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law, adopted by the United Nations Commission on International Trade Law; and
(d) if agreed with the disputing Party, any arbitration in accordance with other arbitration rules.
5. (a) Except for investment disputes regarding the obligation of the disputing Party under paragraph 3 of Article 5, each Contracting Party hereby consents to the submission of investment disputes by a disputing investor to conciliation or arbitration set forth in paragraph 4 chosen by the disputing investor.
(b) For investment disputes regarding the obligation of the disputing Party under paragraph 3 of Article 5, necessary consent for the submission to the conciliation or arbitration will be given by the disputing Party on a case-by-case basis.
6. Notwithstanding paragraph 5, no investment disputes may be submitted to conciliation or arbitration set forth in paragraph 4, if more than five years have elapsed since the date on which the disputing investor acquired or should have first acquired, whichever is the earlier, the knowledge that the disputing investor had incurred loss or damage referred to in paragraph 1.
7. (a) In the event that an investment dispute has been submitted to courts of justice or administrative tribunals or agencies or any other binding dispute settlement mechanism established under the laws and regulations of the disputing Party, any conciliation or arbitration set forth in paragraph 4 can be sought only if the disputing investor withdraws, in accordance with the laws and regulations of the disputing Party, its claim from such domestic remedies before the final decisions are made therein.
(b) In the event that an investment dispute has been submitted for resolution under one of the conciliations or arbitrations set forth in paragraph 4, the same dispute shall not be submitted for resolution under courts of justice, administrative tribunals or agencies or any other binding dispute settlement mechanism established under the laws and regulations of the disputing Party.
8. The disputing Party shall deliver to the other Contracting Party:
(a) written notice of the investment dispute submitted to the arbitration no later than thirty (30) days after the date on which the investment dispute was submitted; and
(b) copies of all pleadings filed in the arbitration.
9. The Contracting Party which is not the disputing Party may, upon written notice to the disputing parties, make submissions to the arbitral tribunal on a question of interpretation of this Agreement.
10. Unless the disputing parties agree otherwise, the arbitration shall be held in a country that is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958.
11. The award rendered by the arbitral tribunal shall be final and binding upon the disputing parties. This award shall be executed by the applicable laws and regulations concerning the execution of award in force in the country where such execution is sought.
1. Each Contracting Party shall in its Area accord to investors of the other Contracting Party and to their investments treatment no less favourable than the treatment it accords in like circumstances to investors of a non-Contracting Party and to their investments with respect to investment activities.
3. It is understood that the treatment referred to in paragraph 1 does not include treatment accorded to investors of a non-Contracting Party and their investments by provisions concerning the settlement of investment disputes such as the mechanism set out in Article 17, that are provided for in other international agreements between a Contracting Party and a non-Contracting Party.
Article 9 Settlement of Disputes between an Investor and a Contracting Party
I. Settlement of any dispute arising from an investment between a Contracting Party and an investor of the other Contracting Party shall be resolved by way of the amicable means of mediation and conciliation.
II. If such a dispute cannot thus be settled in accordance with item (First) above, and means of internal review have been exhausted within (180) one hundred and eighty days after the submission of a written application for resolution, either of the parties to the dispute may submit the dispute to:
a) to the competent courts of the Contracting Party in whose territory the investment was made;
b) the International Centre for Settlement of Investment Disputes (ICSID) (hereinafter referred to as "the Centre"), established pursuant to the Convention on the Settlement of Investment Disputes between States and nationals of other States signed in Washington, D.C., on 18 March 1965 if the Contracting Parties are both parties thereto;
VI. The investor shall not be entitled to file a claim against the host Contracting Party in the manner provided in this Article after the lapse of (5) five years from the date on which the actual or presumed investor becomes aware of the subject of the dispute.
VIII. Most favoured nation status shall not be applicable to the provisions of this Article.
Because (i) ICSID offers an institutional framework that guarantees the parties procedural safeguards that the general terms in which Article 17(2)(b) of the OIC Agreement is worded do not offer; and (ii) because Iraq is a party to the ICSID Convention, but has not yet signed or ratified the 1958 Convention on the Recognition and Enforcement of Arbitral Awards (the "New York Convention"), Article 17 of the Japan-Iraq BIT offers, undisputedly, Japanese investors rights, privileges, and protections that are more favourable than those accorded under Article 17(2)(b) of the OIC Agreement.56
[Claimants' Counsel:] Our position is: here Article 17 [of the OIC Agreement] provides an access to arbitration. We've qualified for that access to arbitration. However, it is a cumbersome and inefficient forum. And we have therefore operated Article 8 [of the OIC Agreement], which we further submit covers dispute settlement, and therefore enables us to read into Article 8 [of the OIC Agreement] Article 17 of the Japan-Iraq BIT.
[Tribunal:] … from what you say now, it's Article 17 [of the OIC Agreement] for purposes of consent [to arbitration] and Article 8 [of the OIC Agreement] for purposes of ICSID. So you need both limbs to get you over the threshold?
[Claimants' counsel:] Our principal case is that we do have to operate Articles 17 and 8 [of the OIC Agreement]. However, it could be argued that 17 [of the OIC Agreement] is unnecessary.
[Tribunal:] … that's because 17 [of the OIC Agreement] would be unnecessary because you would say you would found jurisdiction for ICSID on Article 8 alone, by reference to the Japan-Iraq BIT?
[Claimants' counsel:] Correct.
[Tribunal:] So you have two alternatives, but the alternatives both involve Article 8?
[Claimants' counsel:] Correct.
It's our submission that unless the OIC Agreement itself contains consent to this Tribunal's jurisdiction, the Tribunal doesn't even get to whether the MFN clause applies. Put another way, an MFN clause cannot be used to "import" dispute resolution provisions unless, at a minimum, jurisdiction ratione voluntatis is established in the original agreement.
Now, the Claimants purport to locate consent here in Article 17 of the OIC Agreement. But there are three independently dispositive obstacles, which I identified yesterday, that prevent looking past Article 17 to get to the MFN in Article 8. Specifically, there's no agreement to arbitrate in Article 17, because Article 17 requires a separate agreement to opt into its provisions. Secondly, Article 17 contemplates state-to-state rather than investor-state arbitration. And finally, even assuming that Article 17 could be read as contemplating investor-state arbitration generally, it does not contain any agreement to ICSID arbitration. It doesn't even mention ICSID.
On each of these core aspects of jurisdiction ratione voluntatis, consent must be clear and unequivocal: the existence of an agreement; that the agreement is for investor-state arbitration; and that the agreement is for ICSID arbitration. If the Claimants fail to establish any one of these points, that means they have not established jurisdiction ratione voluntatis, the Tribunal lacks jurisdiction and there's no basis to consider the MFN clause at all.
• The Claimants must establish that Iraq provided "clear, unequivocal consent to arbitrate under the ICSID Convention."77
• Consent may not be presumed or inferred, noting in particular that, under Article 25(1) of the ICSID Convention, consent in writing is specifically required to establish ICSID jurisdiction.78
• The Claimants' argument "confuses consent to arbitrate with the scope of arbitration, once agreed to."79
• The fact of an MFN clause "does not eliminate the requirement to prove consent."80
In accordance with this common understanding of the parties to the OIC Agreement, the Secretary-General of the OIC has consistently declined to act as appointing authority in investor-State cases on the ground that Article 17 provides no jurisdiction for such disputes.92
Article 16 shows why Article 17 can't be read as an offer to arbitrate with investors. That provision expressly refers, as I said a moment ago, to the investor's right to resort to national courts. Article 17 could have but did not speak in the same terms in regard to resort to arbitration or conciliation.96
While some arbitral tribunals have allowed the use of an MFN clause to expand the scope of disputes subject to arbitration, no tribunal has ever allowed an MFN clause to create consent to arbitrate where none exists, or to replace the Treaty's dispute resolution mechanism with an entirely new and different one, unless the MFN clause has expressly referred to dispute resolution.101
Tribunals are arguably evenly divided in their views only in cases in the first category: cases where the investors invoked an MFN clause to avoid preconditions to arbitration such as the 18-month local litigation requirements in Argentina BITs. In all other circumstances, in the absence of express language applying the MFN clause to dispute resolution, tribunals have consistently rejected the application of an MFN clause to modify a treaty's arbitration provisions, with only two exceptions: RosInvest v. Russia and Le Chèque v. Hungary. Both of those cases fall within the second category, i.e., use of an MFN clause to submit additional breaches to a tribunal that already had jurisdiction under the basic treaty without the MFN clause. Neither of those cases supports jurisdiction here, where an underlying consent to ICSID arbitration under the OIC Agreement is lacking.104
95. The Tribunal is of the view that an MFN clause can, a priori, apply to dispute settlement.
97. A review of arbitral decisions on the issue of the scope of the MFN clause reveals that, where tribunals have declined to apply the MFN clause to dispute settlement, the ratio decidendi was either that (i) the MFN clause was invoked to override public policy considerations such as a substitution of the consent to arbitrate where none exists in the basic Treaty, and/or (ii) its scope of application was limited by the wording used in the applicable Treaty. This is consistent with the ILC Study Group's conclusion that "dispute settlement provisions by definition are almost always capable of being incorporated into an investment agreement by virtue of an MFN provision."
98. Arbitral rulings draw a distinction between the application of an MFN clause
to a more favourable dispute resolution provision where the investor has the right to arbitrate under the basic treaty, albeit under less favourable conditions, and the substitution of non-existent consent to arbitration by virtue of an MFN clause. While case law confirms that the former is possible, it has almost consistently found that the latter is not.
103. In the present case, it is clear that the Contracting Parties' consent to arbitrate expressed in Article 8 of the Treaty is limited. The Contracting Parties explicitly agreed in this provision that they would consent to arbitrate disputes arising out of a certain and limited number of articles of the Treaty. The Tribunal is therefore of the view that, under the Treaty, the Contracting Parties have not provided their consent to arbitrate disputes arising out of any provisions of the Treaty not explicitly mentioned in Article 8.
104. The arbitral jurisprudence cited above confirms that where there is no consent to arbitrate certain disputes under the basic Treaty, an MFN clause cannot be relied upon to create that consent unless the Contracting Parties clearly and explicitly agreed thereto.
(a) the meaning and effect of the phrase "within the context of economic activity" in Article 8(1) of the OIC Agreement;120
(b) the meaning and effect of the phrase "in the territories" in Article 8(1) of the OIC Agreement;121
(c) the meaning and effect of the terms "treatment" in Article 8(1) of the OIC Agreement;122
(d) the carve-outs in Article 8(2) of the OIC Agreement;123
(e) the "historical context behind the meaning of the MFN standard when the OIC Agreement was negotiated in 1981", which constitutes supplementary means of interpretation that confirms the ordinary meaning of Article 8;124
(f) the object and purpose of the OIC Agreement;125 and
(g) the treaty practice of Contracting States to the OIC Agreement.126
(a) Article 8 was not meant to cover dispute resolution.127 The phrase "within the context of economic activity" cannot be read to mean "related to economic activity" or "related to investments". Dispute resolution is not "within the context of economic activity" in which the Claimants have employed their investments. "Nothing in Article 8 requires that OIC investors be treated as favourably as investors from other countries in the context of dispute resolution; it only imposes that requirement in the context of the economic activity in which they invested."128
Under the ejusdem generis rule, the application of an MFN clause is limited to provisions of the kind that were contemplated in the original agreement. Because the text and context of Article 8 demonstrate that the MFN clause was meant to apply only to substantive protections, Article 8 cannot operate with regard to dispute resolution.129
(b) Article 8 only applies to treatment "in the territories" of the other Contracting Party, which excludes ICSID arbitration, which "takes place in a venue outside of Iraq or that is not linked to any territory."130
(c) The reference to "treatment" in Article 8 is qualified and limited by the requirement that the treatment must be "within the context of economic activity" and "in the territory", and in any event (the Respondent invoking jurisprudence for the proposition) is insufficiently clear to allow investors to invoke dispute settlement provisions through an MFN clause.131 Further, even if the term "treatment" in Article 8 includes dispute resolution, the Claimants "have failed to establish that the OIC Agreement provides 'less favourable' treatment than the Japan-Iraq BIT."132
(d) The exceptions in Article 8(2) relate to substantive investment rights, not to procedural matters. In such circumstances, as the International Law Commission noted in its 2015 Report of the Study Group on the Most Favoured Nation Clause, "[i]f only exceptions relating to substantive treatment are listed, that may imply that the parties did not believe MFN to be relevant to procedural or dispute settlement matters."133 If OIC Contracting Parties had intended to allow ICSID arbitration to be imported into the OIC Agreement "they could have and would have indicated as such" in the Agreement.134
(e) At the point at which the OIC Agreement was being negotiated, "the application of MFN clauses had focused entirely on substantive rights, not [on] matters of arbitral procedure."135 Citing to arbitral jurisprudence, "in the absence of explicit terms to the contrary, MFN clauses referring to more favourable 'treatment' are meant to cover substantive protections only."136
(f) General statements in the OIC Agreement to the effect that it intends to encourage inter-Islamic States investment and cooperation, or develop a favourable climate for investments, "cannot justify an expansive reading of the MFN clause that would override that clause's plain terms and the parties' evident intentions."137
(g) The treaty practice of the Respondent, as well as of other OIC Contracting States, does not support the importation of an ICSID arbitration clause into the OIC Agreement. The OIC Agreement is a multilateral instrument the interpretation of which must be informed by the practice of other Contracting Parties. "[T]o the extent that any trends can be discerned, the Republic's treaty practice and that of other OIC States shows that Claimant's unprecedented use of Article 8 is inconsistent with the wider foreign policy goals of the Republic and the other OIC States, which have striven to limit their exposure to binding investor-State dispute resolution provisions."138
(4) The Al-Warraq Award
• It is implicit in the language of Articles 16 and 17 of the OIC Agreement, and consistent with the Agreement's object and purpose, to conclude that Article 17 provides for investor-State arbitration,140 and "effectively creates an investor-[S]tate arbitration clause."141
• Article 17 of the OIC Agreement does not mandate or even require that conciliation precedes arbitration, even if the possibility of conciliation followed by arbitration is contemplated.142
• The fact that no claim by an investor under the OIC Agreement have ever been registered by the OIC Secretariat does not amount to evidence of subsequent practice by the Contracting Parties to the OIC Agreement.143
• There is nothing in Article 17 of the OIC Agreement that is "inconsistent with the modern practice to interpret [investor-State arbitration clauses] as constituting an open offer by the state parties to investors, that can be accepted and the arbitration initiated, without any separate agreement by the state party." Further, "what is relevant is not the intention of any one or more Members of the OIC, but what the language used in the OIC [Agreement] means on an interpretation of the words used."
The Tribunal considers that the language of Article 17 can and should be interpreted from a contemporary perspective and that it constitutes an open offer to arbitrate that can be accepted by an investor, such as the Claimant, without any separate express agreement to arbitrate by the Respondent. The Respondent, in effect, has provided its consent to arbitrate in advance in Article 17 itself.144
• The tribunal further noted "that an interpretation of a treaty that recognises the evolution of international law since the signature of the treaty is recognised in the rule of inter-temporal law, accords with the interpretation provisions of the VCLT, and has also been recognised [by] the International Court of Justice."145
• Addressing the claimant's contention, in Al-Warraq, that, even if Article 17 did not contain the required consent to arbitrate, this could be imported into the OIC Agreement by operation of the MFN clause in Article 8 of the Agreement,146 the tribunal concluded that, since it had established that consent to arbitrate exists under Article 17, no decision was required on the issue of the application of the MFN clause.147
So the tribunal, by implying a right to arbitration by finding jurisdiction, just ignores what I think is the conceded standard to apply here, which is 'clear and unequivocal'. So it seems to me that those are two threshold errors in approach.153
The argument that the OIC Secretary General's arbitrary refusal to perform its duties could have any relevance to the interpretation of Articles 16 and 17 has rightly been dismissed by the Al-Warraq tribunal, precisely because such conduct "does not amount to evidence of 'subsequent practice' by the contracting parties to the OIC Agreement as to the need for State party consent to investor-State arbitration."164
(a) The use of the terms "party" or "parties", rather than "contracting parties", in Articles 16 and 17, in contrast to the use of the latter term elsewhere in the OIC Agreement, points to an absence of intention by the Contracting Parties to the OIC Agreement to limit the application of Articles 16 and 17 to the Contracting Parties only.
(b) Article 17(2)(d) of the OIC Agreement distinguishes between the OIC Agreement Contracting Parties and the parties to the arbitration, and specifically refers to investors as parties to the arbitration.
(c) Article 17(2)(d) of the OIC Agreement "contemplates the possibility that an award be rendered and enforced against an investor."
(d) The Respondent's contention that Article 17(2)(d) refers to diplomatic espousal circumstances is "far-fetched", the OIC Agreement making no mention of diplomatic protection.
(e) Article 17(2)(d) of the OIC Agreement closely tracks Article 54(1) of the ICSID Convention on the enforcement of an investor-State award.
• There is no basis to exclude investor-State arbitration from the scope of Article 17 of the OIC Agreement simply because Article 17 is structured differently from the provisions to this effect in other treaties. "[T]he forum clause in the OIC Agreement must be interpreted in accordance with its own terms and not by making inappropriate comparisons with other agreements."168
• The Respondent's reading of the OIC Agreement dispute resolution provisions relies on irrelevant authorities and a flawed approach to treaty interpretation.
[T]he OIC Agreement contemplates no other arbitral process outside of Article 17(2): Article 17 is the arbitration provision under the Agreement. Moreover, given that the term "Arbitration Tribunal" in Article 17(2) is not defined, there is no basis for the proposition that arbitration as referred to in Article 16 and Article 17 points to distinct categories of processes.169
• Conciliation is not a prerequisite to arbitration under Article 17 of the OIC Agreement:
o the disjunctive conjunction "or" in the Article 17(1) chapeau, in all three official languages, makes it clear that arbitration and conciliation are independent alternatives;170
o Article 17(2)(d) provides that "arbitration may be commenced by simply filing a request for arbitration, no separate arbitration agreement being required";171
o a textual interpretation of Article 17(2)(a) of the OIC Agreement supporters the conclusion that conciliation is not a pre-requisite for arbitration;172
o the Respondent's reliance on the conditional terms "if" and "then" in Article 17(2)(a) to advance the proposition that conciliation is a necessary pre-requisite to arbitration is not assisted by a reading of the equally authentic French version of the OIC Agreement.173 In support of their contention, the Claimants rely on Al-Warraq, which concluded that, "on a correct interpretation of Article 17, conciliation and arbitration are separate forms of dispute resolution which may be used either sequentially or alternatively, and the fact that there is no prior conciliation agreement is not an obstacle to investor-[S]tate arbitration."174
o The Respondent's invocation of its wider investment treaty practice in respect of dispute settlement clauses, which the Respondent contends requires disputing parties to attempt to amicably settle the dispute before resorting to arbitration, is both flawed and, in any event, "should be disregarded in the present case because compliance with it would serve no useful purpose, and would be both futile and unduly burdensome."175
Since the mechanism of ad hoc arbitration under OIC Article 17 has proved to be dysfunctional, due to the OIC Secretary-General's arbitrary refusal to act as appointing authority, Claimants are entitled, by virtue of the MFN clause in Article 8 of the OIC Agreement, to rely on the option for ICSID arbitration contained in Article 17(4) of the Iraq-Japan BIT. This is consistent with Iraq's clear acceptance of ICSID arbitration in having ratified the ICSID Convention and entered into other investment treaties providing for ICSID arbitration. This is equally consistent with the OIC Members States' intent "to provide and develop a favourable climate for investments" among Islamic countries.179
Iraq's consent to ICSID arbitration in the Japan-Iraq BIT constitutes written consent under ICSID Article 25(1) and may be incorporated into the OIC [Agreement] or read into the OIC [Agreement] through Article 8. There is no particular form required for written consent under ICSID Article 25(1), as many decisions have commented on. Form can take any sort of written consent.180
Iraq's offer of arbitration "as made," which Claimants accepted, is formed by Articles 16 and 17 of the OIC Agreement, supplemented by Article 17(4) of the Japan-Iraq BIT, which is applicable through the MFN clause. …
Applying the ICSID arbitration option in the Iraq-Japan BIT does not somehow defy the architecture of investment treaties. Nor does it impermissibly expand the scope of Iraq's consent to ICSID arbitration of investor-state disputes with investors from OIC Member States. … Article 8 [of the OIC Agreement] invites an investor who is a national of an OIC member state to avail itself of "treatment not less favourable than the treatment accorded to investors belonging to another State not party to this Agreement" – i.e., non-OIC Member States.183
are not seeking to replace the entire forum clause in the OIC Agreement. Nor are Claimants invoking the MFN clause to broaden the scope of the forum clause to encompass claims that would otherwise fall outside the Tribunal's jurisdiction, or to avoid mandatory pre-arbitration requirements – given that there are none under the OIC Agreement. Claimants are invoking the MFN clause simply to substitute an efficient procedure for a defective one and an effective appointing authority for a dysfunctional one.184
It does seem to us, therefore, to lead to a dysfunction in the process where the Secretary General would be involved: it would lead to a delay. And parties who have chosen to go the route of the Secretary General have been delayed by sometimes two or three years in their attempt to invoke Article 17.
Accordingly, we do think it is unreasonable for the Claimants to have to go through such a cumbersome process in order to -- and the Secretary may or may not respond at some point in time.186
(a) The right to arbitration is both a right and a privilege, within the meaning of these terms in Article 8(1) of the OIC Agreement, and the clause therefore applies to arbitration.188
(b) The phrase "within the context of economic activity", in Article 8(1), is simply descriptive of the general context in which an investor is entitled to invoke the more favourable treatment in contemplation. There is nothing in the phrase to suggest that the MFN clause should not apply to the resolution of investment disputes, such as in the present case. This reading is supported by other language in Article 8(1), not addressed by the Respondent, including the phrase "in respect of rights and privileges accorded to those investors", which unequivocally includes dispute settlement.189
(c) Arbitral jurisprudence affirms that the term "treatment", in Article 8(1), is of itself sufficient to include dispute settlement,190 and "there is no meaningful, principled basis to distinguish these cases [including, amongst others, RosInvest and Le Chèque Déjeuner] from the present case, given that they all involved the operation of an MFN clause with no specific reference to dispute resolution."191
(d) There is no basis to distinguish ICSID arbitration from UNCITRAL arbitration by reference to the form of consent that is required as "[b]oth the ICSID Convention and the UNCITRAL Arbitration Rules require written consent."192 As regards the UNCITRAL Arbitration Rules, the Claimants cite to Article 1(1) of the 1976 Arbitration Rules in support of the proposition.193 The Tribunal notes, however, in this regard, that the reference to agreement in writing in the 1976 UNCITRAL Arbitration Rules is omitted from the 2010 revision of these Rules.
(e) Addressing the Respondent's contention that the Claimants have failed to establish that the OIC Agreement provides less favourable treatment to investors than the Iraq-Japan BIT, the Claimants contend:
It cannot seriously be denied that ICSID arbitration is a better option than ad hoc arbitration under the OIC Agreement, if only because ICSID arbitration is administered by the ICSID Secretariat, which is an experienced, professional and reliable appointing authority, while the administration of the ad hoc arbitration under Article 17 [of the OIC Agreement] is left in the hands of the OIC Secretary General, which refuses to perform its duties as an appointing authority under the OIC Agreement. Moreover, as the Garanti Koza tribunal recognised, having a choice is more favourable than not having any other options.194
(f) The phrase "in the territories" in the MFN clause does not impose a territorial limitation on treatment. Rather, it shows that "the investment must be made or employed within the territory of the host [S]tate. However, the MFN treatment is accorded within the context of a claimant's economic activity in which the investment was made, regardless of any territorial limitation."195
(g) Contrary to the Respondent's submissions, the exceptions to MFN set out in Article 8(2) make no distinction between substantive and procedural issues and, in any event, does not expressly exclude dispute settlement.196
(h) The placement of the MFN clause, in Chapter Two of the OIC Agreement, which contains broad provisions regarding investment promotion and protection, supports the conclusion that it applies to dispute settlement. The Respondent's ejusdem generis argument is simply wrong.197
(i) The Respondent's argument that the Claimants are cherry-picking parts of the Iraq- Japan BIT while disregarding others misses the point. The Claimants' case has been brought in a timely manner. Further, the terms of Article 17(1) of the Iraq-Japan BIT do not take the ICSID consent to arbitration provisions beyond the reach of the MFN clause.
Claimants are entitled to the more favourable treatment under the Japan-Iraq BIT not because they qualify as Japanese investors or because their dispute has arisen under the Japan-Iraq BIT, but because they are protected investors under the OIC Agreement and the MFN clause in the OIC Agreement entitles them to treatment no less favourable than that accorded by Iraq to Japanese investors.198
• "Iraq's subsequent practice demonstrates its intent to consent to ICSID arbitration with foreign investors, as evidenced by the terms of its bilateral treaties with other states as well as its domestic legislation."199 In support of this proposition, the Claimants point to six bilateral investment treaties concluded by Iraq since 2010 that include ICSID dispute settlement provisions.200 They note, further, that Iraq ratified the OIC Agreement on 25 June 2015 without reservations and went on to sign and ratify the ICSID Convention shortly thereafter. Iraq also signalled its intention to accede to the New York Convention.201 Additionally, 56 of the 57 OIC Member States have concluded investment treaties that contain ICSID dispute settlement clauses.202
• Iraq's investment treaty practice does not support a conclusion that it is intent on excluding ICSID arbitration or that dispute settlement is excluded from the operation of MFN clauses. On the contrary, in the case of only two of the six bilateral investment treaties concluded by Iraq does the MFN clause exclude dispute settlement.203
[Tribunal:] The Jordanian investor in Iraq cannot rely on the Jordan-Iraq BIT under the OIC MFN clause.
[Claimants' counsel:] … Yes, that's correct.
[Tribunal:] But the Japanese investor in Iraq could rely on the Jordan-Iraq BIT, if it gives a higher standard, by virtue of the MFN clause in the Iraq-Japan BIT. So you're creating a variable geometry between what the Japanese investor can rely upon vis-à-vis Iraq and what the Jordanian investor can rely on vis-à-vis Iraq.
[Claimants' counsel:] Yes, I see your point. Yes.
[Tribunal:] Isn't there a kind of oddity? Isn't this almost counterintuitive to what an MFN clause, you say, is supposed to do?
[Claimants' counsel:] I don't think so, in relation to what these -- there are two tracks. There's clearly the Article 18 track and the Article 8(2)(a) track, on one side, in which the OIC drafters want to create as much economic activity internally as they can and give that encouragement. But I take your point that it does create a variable situation. But the key point for the OIC investor is still the opportunity to avail itself of treatment not less favourable in the non-OIC treaties, to the extent that that's deemed to be advantageous.
So that variable geometry, still, for example, -- taking this specific instance, whether it matches up in terms of what the OIC drafters had in mind for 18 and 8(2)(a) -- it still provides the OIC investor with that non-OIC/OIC advantage; even if, when you look at it from the way that you've looked at it, sir, it is depriving potentially -- it's not depriving; it is putting another non-OIC investor in arguably a favourable position.208
Importantly, an MFN clause cannot change that supplementary condition, which is the condition ratione voluntatis in the basic treaty. So the MFN clause can't change the fundamental conditions of access to arbitration in the basic treaty.
Thus, the Claimant must qualify to go to arbitration under the terms of the basic treaty before the Claimant can seek to avail itself of an arbitration provision in the third-party treaty. And the Claimant can only apply that third-party provision if the intention to incorporate is expressly stated or clearly ascertained in the MFN clause.
So the test is: an MFN clause can't alter the requirements ratione personae, ratione materiae, ratione temporis and ratione voluntatis under the basic treaty. That means for voluntatis that the Claimant must be able to go to arbitration under the terms of the basic treaty.211
If the two parties to the dispute do not reach an agreement as a result of their resort to conciliation, or if the conciliator is unable to issue his report within the prescribed period, or if the two parties do not accept the solutions proposed therein, then each party has the right to resort to the Arbitration Tribunal for a final decision on the dispute. [Emphasis added]
|Claimants' Certified Translation||Respondent's Certified Translation|
|If the two parties to the dispute do not reach an agreement by virtue of their resort to conciliation... or if the conciliator is unable to issue his report within the prescribed period, or if the two parties do not agree on accepting the solutions proposed therein, then each party can resort to the Arbitration Tribunal to issue the final decision in the dispute.||If the two parties to the dispute do not reach an agreement through conciliation, if the conciliator is unable to issue his report within the prescribed period, or if the two parties do not accept the solutions proposed therein, then each party shall have the right to resort to the arbitral tribunal for a final settlement of the dispute.|
It is understood that the treatment referred to in paragraph 1 does not include treatment accorded to investors of a non-Contracting Party and their investments by provisions concerning the settlement of investment disputes such as the mechanism set out in Article 17, that are provided for in other international agreement between a Contracting Party and a non-Contracting Party.
Notwithstanding the fact that the application of the most favored nation clause to dispute settlement arrangements in the context of investment treaties might result in the harmonization and enlargement of the scope of such arrangements, there are some important limits that ought to be kept in mind. As a matter of principle, the beneficiary of the clause should not be able to override public policy considerations that the contracting parties might have envisaged as fundamental conditions for their acceptance of the agreement in question, particularly if the beneficiary is a private investor, as will often be the case. The scope of the clause might thus be narrower than it appears at first sight.
Here it is possible to envisage a number of situations not present in the instant case. First, if one contracting party has conditioned its consent to arbitration on the exhaustion of local remedies, which the ICSID Convention allows, this requirement could not be bypassed by invoking the most favored nation clause in relation to a third-party agreement that does not contain this element since the stipulated condition reflects a fundamental rule of international law. Second, if the parties have agreed to a dispute settlement arrangement which includes the so-called fork in the road, that is, a choice between submission to domestic courts or to international arbitration, and where the choice once made becomes final and irreversible, this stipulation cannot be bypassed by invoking the clause. This conclusion is compelled by the consideration that it would upset the finality of arrangements that many countries deem important as a matter of public policy. Third, if the agreement provides for a particular arbitration forum, such as ICSID, for example, this option cannot be changed by invoking the clause, in order to refer the dispute to a different system of arbitration. Finally, if the parties have agreed to a highly institutionalized system of arbitration that incorporates precise rules of procedure, which is the case, for example, with regard to the North America Free Trade Agreement and similar arrangements, it is clear that neither of these mechanisms could be altered by the operation of the clause because these very specific provisions reflect the precise will of the contracting parties. Other elements of public policy limiting the operation of the clause will no doubt be identified by the parties or tribunals. It is clear, in any event, that a distinction has to be made between the legitimate extension of rights and benefits by means of the operation of the clause, on the one hand, and disruptive treaty-shopping that would play havoc with the policy objectives of underlying specific treaty provisions, on the other hand.223
From a contemporary perspective, the Tribunal finds that Article 17 constitutes an investor-state arbitration provision, and there is nothing in this Article inconsistent with the modern practice to interpret these clauses as constituting an open offer by the state parties to investors, that can be accepted and the arbitration initiated, without any separate agreement by the state party.226
on a correct interpretation of Article 17, conciliation and arbitration are separate forms of dispute resolution which may be used either sequentially or alternatively, and the fact that there is no prior conciliation agreement is not an obstacle to an investor-state arbitration.227
32. For the reasons set out above, and if the Tribunal upholds its jurisdiction ratione
voluntatis, Claimants respectively request that the Tribunal:
32.1 Order Respondent to bear Claimants' share of their fees and costs associated with the phase on Respondent's objections to the Tribunal's ratione voluntatis jurisdiction as identified in Claimants' Statement of Costs (a total of $439,244.87); and
32.2 Postpone its determination of the allocation of the parties' fees and costs associated with all other procedural phases to date, until a final award is rendered in this Arbitration.
33. If the Tribunal finds in favour of Respondent in this phase, Claimants' respectively request that the Tribunal:
33.1 Dismiss Respondent's request that their fees and costs be borne by Claimants, and order that each of Claimants and Respondent bear its costs.
33.2 Reduce significantly Respondent's share of the fees and costs to be borne by Claimants; and
33.3 Order that Respondent bear Claimant's share of their fees and costs associated with the Provisional Measures phase.
17. The Republic requests that, if it prevails on its jurisdictional objections, the Tribunal include the following provisions in its Award dismissing the proceedings:
a. Ordering Claimants to bear the costs of the arbitration in full, including reimbursing the Republic in the amount of $325,000 that the Republic previously advanced to ICSID in connection with the arbitration, with interest at an appropriate rate from the date of the Award to the date of payment;
b. Awarding the Republic its expenses, including attorneys' fees, incurred in connection with the arbitration in the amount of $1,173,330.24, with interest at an appropriate rate from the date of the Award to the date of payment;
c. In the alternative, awarding such other amount as the Tribunal determines to be justified.
18. In the event that the Republic does not prevail on its jurisdictional objections, the Republic requests that the Tribunal's consideration of costs await the Final Award on the merits.
(a) If the Claimants prevail at the jurisdictional stage, they should be awarded their costs and fees on the grounds of the conduct of the Respondent in the proceedings, which caused unnecessary costs and delay.242
(b) If the Respondent prevails, the circumstances of the case do not justify cost-shifting in the Respondent's favour.243
(c) At a minimum, the Respondent should bear its own costs and fees, were it to prevail, on the grounds, inter alia, that the Claimants' position on jurisdiction is well-founded and far from unprecedented, and the Respondent's conduct in the arbitration does not justify an award of costs in its favour.244
(i) There is ample precedent to support the Claimants' jurisdictional case.245
(ii) The Respondent should not recover costs and fees associated with the provisional measures phase of the case, which was only initiated after failed attempts by the Claimants "to reach a party-agreed status quo".246
(iii) The Respondent was responsible for significantly and unnecessarily expanding the scope of the preliminary objections phase.247
(d) The Respondent's fees and costs are in any event unreasonable.248
(a) The usual rule in international arbitration, "which has regularly been applied in ICSID proceedings", is that the prevailing party is entitled to recover its costs.249
(b) The Claimant's jurisdictional position was unsupported and unprecedented.250
(c) The Respondent's costs are reasonable.251
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.
Arbitrators' fees and expenses
Sir Daniel Bethlehem Q.C. US$197,812.50
Dr Wolfgang Peter US$111,139.15
Professor Brigitte Stern US$83,366.21
Dr Kate Parlett's fees and expenses US$19,766.86
ICSID's administrative fees US$116,000.00
Direct expenses US$31,243.22
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