|TABLE OF ABBREVIATIONS|
|Arbitral Tribunal||Tribunal composed of Dr. Georg von Segesser, The Honourable L. Yves Fortier and Dr. Bernardo M. Cremades|
|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings|
|BIT or Cyprus-Serbia BIT||Bilateral investment treaty; specifically, "Agreement between Serbia and Montenegro and the Republic of Cyprus on Reciprocal Promotion and Protection of Investments" of 21 July 2005 (CL-001)|
|Cyprus||Republic of Cyprus|
|C-CoJ||Claimant's Comments on Respondent's Preliminary Objections to Jurisdiction dated 5 February 2018|
|C-M||Claimant's Memorandum on the Merits dated 31 October 2017|
|C-JCS||Claimant's Statement of Costs dated 8 October 2018|
|C-JPHB||Claimant's Post Hearing Submission dated 26 September 2018|
|C-RJ||Claimant's Reply on Jurisdictional Objections dated 31 July 2018|
|C-RoB||Claimant's Reply to the Request for Bifurcation dated 27 April 2018|
|Claimant||Mera Investment Fund Limited|
|ICSID||International Centre for Settlement of Investment Disputes|
|ICSID Convention||Convention on the Settlement of Investment Disputes between States and Nationals of other States (C-004)|
|ICSID Rules||Rules of Procedure for Arbitration Proceedings (Arbitration Rules)|
|Lease Agreement||Lease agreement dated 31 December 2013 (R-102)|
|Mera Invest||Mera Invest d.o.o|
|PO 1||Procedural Order No. 1 dated 1 August 2017|
|PO 2||Procedural Order No. 2 dated 9 February 2018|
|PO 3||Procedural Order No. 3 dated 14 August 2018|
|PO 4||Procedural Order No. 4 dated 23 August 2018|
|PZP Nis||Preduzece za puteve Nis a.d.|
|R-CM||Respondent's Counter Memorial dated 31 March 2018, including its Request for Bifurcation|
|R-JCS||Respondent's Statement of Costs dated 8 October 2018|
|R-JPHB||Respondent's Post Hearing Brief dated 26 September 2018|
|R-POJ||Respondent's Preliminary Objections to Jurisdiction dated 26 January 2018|
|Respondent||Republic of Serbia|
|RfA||Request for Arbitration dated 28 December 2016, filed 3 January 2017 and registered 23 January 2017|
|Serbia||Republic of Serbia|
|Secretary-General||Secretary-General of ICSID|
|Tr. J. [I/II] [page:line]||Transcript of the hearing on jurisdiction [day I / day II]|
|Vienna Convention||Vienna Convention on the Law of Treaties of 23 May 1969 (RL-006)|
On behalf of the Claimant:
• Mr. Christoph Lindinger, Schonherr Rechtsnwalte GmbH
• Mr. Leon Kopecky, Schonherr Rechtsanwalte GmbH
• Ms. Victoria Pernt, Schonherr Rechtsanwalte GmbH
• Ms. Marina Stanisavljevic, Schonherr Rechtsanwalte GmbH
• Mr. Matija Vojnovic, Moravcevic Vojnovic and Partners
• Mr. Nikola Filipovic, Moravcevic Vojnovic and Partners
• Ms. Hristina Todorovic, Moravcevic Vojnovic and Partners
• Ms. Milica Glavas, Glavas Law Office
On behalf of the Respondent:
• Ms. Senka Mihaj, Mihaj, Ilic & Milanovic
• Mr. Aleksandar Fillen, Mihaj, Ilic & Milanovic
• Ms. Bojana Bilankov, Mihaj, Ilic & Milanovic
• Prof. Dr. Vladimir Pavic, Faculty of Law, University of Belgrade
• Dr. Vladimir Djeric, Mikijelj Jankovic & Bogdanovic
• Ms. Olivera Stanimirovic, State Attorney, Republic of Serbia
• Ms. Milena Babic, State Attorney's Office, Republic of Serbia
In addition to an audio recording of the hearing on jurisdiction deposited in the archives of ICSID, a transcript of the hearing was prepared by the court reporters and shall be cited in the following as Tr. J. [I/II] [page:line].
In its post-hearing submission, the Respondent requests:
"With respect to the present stage of proceedings, Respondent requests the Tribunal to
a. Dismiss all of Claimant's claims for lack of jurisdiction, or,
b. In the alternative
i. dismiss all of Claimant's claims related to investment made prior to its incorporation in Cyprus, and
ii. dismiss all of Claimant's claims related to assets of Mera d.o.o.
c. And order Claimant to reimburse Respondent for all the associated costs."55
R-JPHB, para. 116.
"For the reasons stated above and further to its request for relief in the Memorial, and expressly reserving the right to modify and/or add to this request, Claimant respectfully requests that the Tribunal
(A) DISMISS Serbia's Jurisdictional Objections, and
(B) ORDER Serbia to pay for all the associated costs."56
Article 9 of the BIT provides for ICSID arbitration in the following terms:
"1. Disputes between one Contracting Party and an investor of the other Contracting Party in relation to an investment for the purpose of this Agreement, shall be submitted in written form, with all detailed information, by the investor of the other Contracting Party. Where possible, the parties shall endeavor to settle these disputes amicably.
2. If these disputes cannot be settled by negotiations within six months from the written notification under paragraph 1 of this Article, they may be submitted, by the choice of the investor, to:
- a competent court of the Contracting Party in whose territory the investment is made;
- an ad hoc tribunal of arbitration, in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL);
- arbitration court of the International Chamber of Commerce in Paris; or
- International Centre for the Settlement of Investment Disputes (ICSID) set up by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, from 18th March 1965."
Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, dated 29 April 2004, para. 27 (CL-066) citing Mondev Int'l Ltd v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, dated 11 October 2002, para. 43 (C-026); Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Decision on Jurisdiction, dated 25 January 2000, para. 27; Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/98/2, Award, dated 2 June 2000, n. 9.
In the following, the Arbitral Tribunal will review and analyze the Respondent's specific objections to jurisdiction over the Claimant's claim in the following order:
(1) Whether the Claimant is an "investor" as defined by Article 1(3)(b) of the BIT (jurisdiction ratione personae)?
(2) Whether the Claimant meets the jurisdictional requirements of "investment" as defined by Article 1(1) of the BIT (jurisdiction ratione materiae)?
(3) Whether granting jurisdiction would defeat the object and purpose of the BIT?
(4) Whether granting jurisdiction would go against the object and purpose of the ICSID Convention?
According to the Claimant, the present arbitration concerns the direct and indirect investments made by the Claimant in Serbia. Specifically, the Claimant submits that "the present dispute arises out of:
- Claimant's 100% share in Mera Invest, i.e. direct investments, and
- Reinvestment of proceeds from the sale of PZP Shares, done in the form of Mera Invest, i.e. indirect investments, in particular:
o the factoring business;
o equity stakes in Craford and Mercuren;
o special purpose fixed-term deposits including the term deposit in Univerzal bank Beograd: RSD 220,324,674 and EUR 7,500; and interest proceeds on the amount of RSD 199,924,674 from the deposit account in Univerzal bank Beograd;
o shares in Serbian banks;
o debt investments into related and non-related entities in Serbia; and
o various projects developed by Mera Invest, such as the Hotel Project, movie studio, call centre and a construction of five small hydropower plans [sic]."179
C-RJ, para. 673 (emphasis and citations omitted).
The BIT determines the question of protected investments. According to Article 9 of the BIT, only "[d]isputes that may arise between one of the Contracting Parties and an investor of the other Contracting Party with regard to an investment in the sense of the present Agreement" are protected.187 Pursuant to Article 1(1) of the governing BIT, the term investment shall mean:
"every kind of asset invested by an investor of one Contracting Party in the territory of the other Contracting Party in accordance with the laws and regulations of the latter and in particular, though not exclusively, shall include:
a) movable and immovable property and any other rights in rem such as mortgages, liens or pledges;
b) shares, bonds and other kinds of securities;
c) claims to money or other claims under contract having an economic value;
A change in the form in which assets are invested or reinvested shall not affect their character as investments, provided that such a change does not contradict the laws and regulations of the Contracting Party in the territory of which the investments were made."188
In the von Pezold v. Zimbabwe case, the tribunal recognized that "[t]his principle - that where a company is controlled, legally or factually, by a certain shareholder or group of shareholders, the latter may be entitled to a direct claim in respect of the assets of the former - has, as the von Pezold Claimants submit, since gained currency in investment treaty arbitration," and that there may be instances where an individual who makes his investments through a company might be regarded as a de facto investor.204
In Abaclat v. Argentina, the tribunal clarified that the criteria developed by a number of arbitral tribunals with regard to Article 25 of the ICSID Convention and the definitions of investment contained in bilateral investment treaties often do not coincide because "they can be said to focus each on a different aspect of the investment, i.e., they each look at the investment from a different perspective."269 The Abaclat tribunal went on to state that "[t]he two perspectives can be viewed to be complementary, and to merely reflect a two-folded approach of the [bilateral investment treaty] and the ICSID Convention towards investment: At first, it is about encouraging investments, i.e., creating the frame conditions to encourage foreign investors to make certain contributions, and once such contributions are made, it is about protecting the fruits and value generated by these contributions."270
Article 25 of the ICSID Convention is silent on definitions of several key terms - including what is to be understood by investor and investment. Indeed, contracting parties are given the widest possible latitude to determine the extent of their consent to ICSID jurisdiction. Undeniably, the "[c]onsent of the parties is the cornerstone of the jurisdiction of the Center".271
ICSID Convention, Regulations and Rules, Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, para. 23 (CL-004).
The Respondent submits that its costs for these arbitration proceedings so far total EUR 451'389.41 and USD 350'000, which it breaks down into the following categories of costs:282
Legal fees of the Counsel for the Respondent EUR 362'346.78
Expert Witness' fees EUR 77'971.55
Translation and Administrative expenses EUR 1'660.52
Travel, accommodation and related expenses EUR 9'410.56
Costs of proceedings USD 350'000.00
R-JCS, para. 4.