Prior to 1999, Macao was considered a "Chinese territory" over which Portugal exercised administrative power.⁴ After the handover of Macao by Portugal in 1999, the PRC resumed sovereignty over Macao and established it as a special administrative region ("SAR") under Article 31 of the Constitution of the PRC and the Basic Law of the Macao SAR ("Macao SAR Basic Law").⁵

Sanum has made substantial investments [...], including capital investments in its various Lao enterprises and projects exceeding US$85 million. It is a majority shareholder in both Savan Vegas and Paksong Vegas, which have been granted fifty-year land and development concessions and enjoy valuable monopoly gaming rights in five provinces pursuant to several agreements with the Lao Government, including the [PDAs] for each casino project. Sanum has ownership stakes in the Thanaleng, Lao Bao, and Ferry Terminal slot clubs, and is entitled to a share of their revenues. Sanum also brought in highly experienced slot and casino managers to assist in running Savan Vegas, and it has leveraged its extensive knowledge of the gaming industry to introduce new multistation games at Thanaleng, which proved very popular and contributed to the club’s success. Such industry expertise and business know-how has generated considerable returns for Sanum’s businesses, which have operated pursuant to the required licenses issued by the Lao Government.³⁹

The Government of the People’s Republic of China and the Government of the Lao People’s Democratic Republic (hereinafter referred to as Contracting States),

Desiring to encourage, protect and create favorable conditions for investment by investors of one Contracting State in the territory of the other Contracting State based on the principles of mutual respect for sovereignty, equality and mutual benefit and for the purpose of the development of economic cooperation between both States [...]

Article 1(1) of the Treaty provides, in relevant part:

The term "investments" means every kind of asset invested by investors of one Contracting State in accordance with the laws and regulations of the other Contracting State in the territory of the latter, including mainly

(a) movable and immovable property and other property rights;

(b) shares in companies or other forms of interest in such companies;

(c) a claim to money or to any performance having an economic value;

(d) copyrights, industrial property, know-how and technological process;

(e) concessions conferred by law, including concessions to search for or to exploit natural resources.

Article 1(2)(b) of the Treaty provides, in relevant part:

The term "investors" means:

In respect of both Contracting States: [...]

(b) economic entities established in accordance with the laws and regulations of each contracting State.

(1) Investments and activities associated with investments of investors of either Contracting State shall be accorded fair and equitable treatment and shall enjoy protection in the territory of the other Contracting State.

(2) The treatment and protection as mentioned in Paragraph 1 of this Article shall not be less favorable than that accorded to investments and activities associated with such investments of investors of a third State.

Article 4(1) and 4(2) of the Treaty provide:

(1) Neither Contracting State shall expropriate, nationalize or take similar measures (hereinafter referred to as "expropriation") against investments of investors of the other Contracting state in its territory, unless the following conditions are met:

(a) as necessitated by the public interest;

(b) in accordance with domestic legal procedures;

(c) without discrimination;

(d) against appropriate and effective compensation.

(2) The compensation mentioned in paragraph 1(d) of this Article shall be equivalent to the value of the expropriated investments at the time when expropriation is proclaimed, be convertible and freely transferable. The compensation shall be paid without unreasonable delay.

(1) Any dispute between an investor of one Contracting State and the other Contracting State in connection with an investment in the territory of the other Contracting State shall, as far as possible, be settled amicably through negotiation between the parties to the dispute.

(2) If the dispute cannot be settled through negotiation within six months, either party to the dispute shall be entitled to submit the dispute to the competent court of the Contracting State accepting the investment.

(3) If a dispute involving the amount of compensation for expropriation cannot be settled through negotiation within six months as specified in paragraph 1 of this Article, it may be submitted at the request of either party to an ad hoc arbitral tribunal. The provisions of this paragraph shall not apply if the investor concerned has resorted to the procedure specified in the paragraph 2 of this Article.

Unless a different intention appears from the treaty or is otherwise established, a treaty is binding upon each party in respect of its entire territory.

Article 15 of the VCST provides:

When part of the territory of a State, or when any territory for the international relations of which a State is responsible, not being part of the territory of that State, becomes part of the territory of another State:

a) treaties of the predecessor State cease to be in force in respect of the territory to which the succession of States relates from the date of the succession of States; and

b) treaties of the successor State are in force in respect of the territory to which the succession of States relates from the date of the succession of States, unless it appears from the treaty or is otherwise established that the application of the treaty to that territory would be incompatible with the object and purpose of the treaty or would radically change the conditions for its operation.

The Respondent further submits that Article 15 of the VCST is an expression of customary international law.⁵⁶ According to the Respondent, the rule is "commonly understood to have two aspects, one negative (treaties of the predecessor State cease to be in force in the portion of territory in question, except for certain types of treaties or specific circumstances) and one positive (treaties of the successor State become in force in the portion of territory in question, except for certain types of treaties or specific circumstances)."⁵⁷ The Respondent specifies that the "rule formulated in Article 15 of the [VCST] in its negative and positive aspects and the exceptions applicable to the rule in both aspects are well grounded in customary international law."⁵⁸

The Claimant rejects the Respondent’s argument that the Treaty was deposited with the UN Secretary-General and contends that the Respondent is confusing (a) the registration function of the UN Secretariat (pursuant to Article 102 of the UN Charter, which requires all UN members to register treaties to which they are a party with the UN Secretariat), which covers both multilateral and bilateral treaties¹⁶⁵ and (b) the treaty depository function of the UN Secretary-General, which is open only to multilateral and regional treaties but not to bilateral treaties.¹⁶⁶ In other words, "[t]he fact that the Treaty is included in the UNTC is simply a function of the Treaty having been registered with the United Nations, not of the Secretary-General’s depository function."¹⁶⁷ In this case, the 1999 Notification referred only to treaties that were deposited with the Secretary-General, a category that necessarily excludes the Treaty by virtue of it being a bilateral treaty.¹⁶⁸

Second, the Claimant contends that reservations do not apply to bilateral agreements since any valid reservation would necessarily modify the treaty for both parties.¹⁷¹ Thus, the alleged failure by Laos to object to the 1999 Notification is irrelevant.¹⁷² But even if reservations could apply to bilateral agreements, the Claimant notes that the 1999 Notification did not refer to the Treaty it purported to modify, and was not communicated directly to Laos, the other Contracting State.¹⁷³ According to the Claimant, these are fundamental requirements attaching to treaty reservations under international law.¹⁷⁴

The Respondent disagrees with the majority in Tokios Tokeles v. Ukraine which adopted a purposive interpretation of the BIT and meaning of "investor" under Article 1(2) of that treaty.²²⁶ The majority concluded that the treaty "extended its protections to entities incorporated in third countries using the nationality of the individuals who controlled the enterprise (or the management seat of the entity that controlled the enterprise) to determine the nationality of the claimant."²²⁷ The Respondent notes that in construing the BIT preamble of that case, the tribunal found that the BIT was intended to "create and maintain favourable conditions for the investment of investors of one state in the territory of the other,"²²⁸ which shows that the tribunal did not limit its consideration to the place of incorporation.²²⁹ The Respondent argues that considering only the place of incorporation would be even less appropriate in this case, as the "investor" is defined as an "economic entity."²³⁰

Second, the Claimant notes that the BIT does not expressly indicate an origin of capital requirement, and submits that the Respondent has provided neither evidence nor authority for its contention that the Contracting States intended to restrict the definition of protected investors.²³⁹ The Claimant contends that tribunals cannot impose extra-textual limits on the scope of BITs²⁴⁰ but should strictly adhere to the treaty terms.²⁴¹ The Claimant notes that the BIT in this case only requires that an economic entity be established pursuant to the laws of a Contracting State, which means that the inquiry ends once the State of incorporation is ascertained.²⁴²

The Respondent notes that the Claimant has only submitted the articles of association of Savan Vegas and Paksong Vegas (Laos companies in which Sanum has a 60% ownership and Laos has a 20% ownership) as evidence of its investment in Laos.²⁴⁷ The Respondent notes that the contribution of the Claimant for its shares takes the form of loans that are being repaid annually from casino proceeds. It contends that this contribution does not meet the requirement of Article 1(1)(b) of the BIT, which includes "shares in companies or other forms of interest in such companies" in its definition of investment.²⁴⁸

The Respondent argues that the rights arising out of the PDAs cannot be taken as "claims for money or to any performance having an economic value (Article 1(1)(c) of the BIT)," and that the PDAs themselves do not legitimately give rise to expectations regarding financial value because they do not guarantee the formation of a joint venture or the granting of a gaming license.²⁵⁶

Sanum highlights the substantial investments it has made in the various Laotian enterprises and projects, including (a) capital investments exceeding US$ 85 million; (b) being a majority shareholder in Savan Vegas and Paksong Vegas; (c) ownership stakes in the Thanaleng, Lao Bao, and Ferry Terminal slot clubs; and (d) using its industry expertise and business know-how to generate returns and advance its different enterprises.²⁵⁸

The Claimant rebuts the Respondent’s contention that the PDAs do not qualify as investments because they do not constitute contractual guarantees and therefore cannot form the basis of legitimate expectations. The Claimant argues that the relevant contracts did in fact contain guarantees, in the form of the Lao Government granting development rights to the respective casino companies and promising to issue the required licenses for their operation.²⁶¹ The Claimant further notes that international tribunals have considered contractual rights to be "assets," just like tangible property, where a bilateral investment treaty has defined "investments" broadly.²⁶²

In reliance on Article 31(1) of the VCLT that requires a treaty to be interpreted according to the ordinary meaning of its terms, the Respondent contends that the Parties have consented to international arbitration only for the quantum of an expropriation, and are required by the BIT to submit all other disputes, including the issue of whether an expropriation has occurred in the first place, to the local courts of the host State.²⁷⁰ The Respondent relies on three arbitral tribunal decisions that have interpreted arbitration clauses in treaties providing for disputes on the "amount of compensation" only to be determined by international arbitration.²⁷¹ The Respondent contends that the Claimant’s argument on this matter requires a departure from and an enlargement of the actual wording of the text.²⁷²

The Claimant relies on Tza Yap Shum, which contains language similar to that of the BIT.²⁹⁰ There, the tribunal found that the phrase "dispute involving the amount of compensation for expropriation" (as set out in Article 8(3) of the Treaty) simply meant that the dispute must include the determination of the amount of compensation but must not necessarily be limited to it.²⁹¹ The tribunal noted that the phrase evinced that the parties had consented to arbitrate all issues pertinent to the determination of the amount of damages, which necessarily includes whether damages must be awarded at all.²⁹²

The Claimant maintains that Article 8(1) and 8(2) of the BIT do not have the effect of designating the local courts as the exclusive forum for the resolution of disputes apart from the quantum of expropriation, as the Respondent claims, because Article 8(1) provides for the amicable settlement of disputes and Article 8(2) gives the parties the option of submitting the dispute to the courts of the host State after the designated waiting period.²⁹⁸

Third, the Claimant contends that the Respondent’s interpretation renders the right to arbitration illusory, which in turn defeats the object of the Treaty to encourage investment.³¹³

First, the Claimant contends that the "protection" that Article 3(1) accords to investments extends to all protections provided in the Treaty—including access to international arbitration— and not merely substantive ones.³³⁷ Moreover, Article 3(2) promises no less favorable treatment and protection for "activities associated with such investments." The Claimant argues that the settlement of disputes is an "activity" associated with an investment.³³⁸ The Claimant further argues that arbitration clauses are highly valued by investors and are considered essential to the range of protection offered in investment treaties.³³⁹

Second, the Claimant contends that tribunals that have considered broad MFN clauses, such as the one at issue here, have authorized the importation of dispute resolution clauses.³⁴² The Claimant rejects the Respondent’s argument that those cases contained broader arbitration clauses than the Treaty. It argues that the principle underlying the decisions of those tribunals applies here, i.e., that the less favorable treatment bestowed on the Claimant by the Respondent has been prejudicial and has effectively foreclosed access to international arbitration.³⁴³

The Claimant contends that the doctrine of lis pendens is inapplicable in this case because there is no identity of parties and claims in the two cases.³⁶⁷ It further submits that lis pendens provides a ground for staying one proceeding until the other has terminated. It argues that there are no grounds to support a stay in this case as the resolution of one case will not resolve the other and, moreover; the simultaneous conduct of both cases actually enhances efficiency.³⁶⁸

Finally, the Claimant contends that the amendment of its Notice to include claims in the Lao Holdings arbitration could not have prejudiced the Respondent in its selection of arbitrators, given that Laos has been able to appoint the same arbitrator in both proceedings.³⁷² The Claimant also points out that the amendment of its Notice was discussed at the first procedural hearing, agreed upon by the Parties, and memorialized by the Tribunal in its Procedural Order No. I.³⁷³

i) The Tribunal decline jurisdiction because Sanum is not a qualified investor under the BIT.

ii) The Tribunal decline jurisdiction because the claims brought are not investment related claims.

iii) The Tribunal decline jurisdiction because the Respondent did not consent to arbitrate Sanum’s claims under the BIT.

iv) In the alternative, the Tribunal dismisses the several claims introduced into this arbitration by the Amended Notice filed 7 June 2013, incorporating the duplicative claims previously made in the Holdings arbitration.

v) The Tribunal issue an award of the Respondent’s costs incurred in connection with this arbitration, including Laos’ legal fees and other costs, and Laos’ share of the fees and expenses of the Tribunal and the Administrative Centre.

i) Dismissing the Respondent’s objections to the Tribunal’s jurisdiction in their entirety;

ii) Awarding Sanum its costs and expenses of this proceeding, including attorneys’ fees, in an amount to be determined in the course of this proceeding by such means as the Tribunal may direct; and

iii) Ordering such other relief as may be just and appropriate in the circumstances.

One of the main arguments relied upon by the Respondent is that the 1999 Notification to the UN Secretary-General contains the list of treaties that the PRC intended to extend to the Macao SAR. In the Respondent’s Memorial on Jurisdiction, it states:

Similarly, the 1999 Notification regarding the Macao SAR, which the PRC filed on 13 December 1999 and on which Lao PDR has been relying, provides:

"[...] IV. With respect to other treaties that are not listed in the Annexes to this Note, to which the People’s Republic of China is or will become a Party, the Government of the People’s Republic of China will go through separately the necessary formalities for their application to the Macao Special Administrative Region if it so decided."

The BIT is not listed in the two Annexes referred to in the 1999 Notification. Thus, it was not extended to the Macao SAR.³⁸¹

[...] on its face, the Notification did not intend to cover the universe of international agreements to which the PRC is a party. Rather, as is evident from the official record, the Notification applied only to multilateral treaties for which the UN Secretary-General acts as depositary: "By a notification dated 13 December 1999, the Government of the People’s Republic of China informed the Secretary-General of the status of Macao in relation to treaties deposited with the Secretary-General." The PRC-Laos Treaty, however, is not such an instrument: it is a bilateral treaty with regard to which the Secretary-General plays no role. Thus, contrary to what Respondent argues, no conclusion about the territorial scope of the Treaty can be drawn from the fact that it does not appear in the lists, annexed to the Notification, of multilateral PRC treaties that would apply to Macau after the handover. In fact, none of the PRC’s numerous bilateral agreements (or multilateral agreements with other depositaries) is included in those annexes, because there was no reason to notify the Secretary-General of purported territorial limitations for treaties where he plays no role.³⁸²

1. Every treaty and every international agreement entered into by any Member of the United Nations after the present Charter comes into force shall as soon as possible be registered with the Secretariat and published by it.

2. No party to any such treaty or international agreement which has not been registered in accordance with the provisions of paragraph 1 of this Article may invoke that treaty or agreement before any organ of the United Nations.³⁸⁴

The respective roles, if any, of Article 29 of the [VCLT] and Article 15 of the [VCST] in relation to the application or non-application of the PRC/Laos Treaty to the Macau SAR.

Article 29 - Territorial Scope of Treaties

Unless a different intention appears from the treaty or is otherwise established , a treaty is binding upon each party in respect of its entire territory, (emphasis added)

Article 15 of the VCST reads as follows:

Article 15 - Succession In Respect of Part of Territory

When part of the territory of a State, or when any territory for the international relations of which a State is responsible, not being part of the territory of that State, becomes part of the territory of another State:

(a) treaties of the predecessor State cease to be in force in respect of the territory to which the succession of States relates from the date of the succession of States; and

(b) treaties of the successor State are in force in respect of the territory to which the succession of States relates from the date of the succession of States, unless it appears from the treaty or is otherwise established that the application of the treaty to that territory would be incompatible with the object and purpose of the treaty or would radically change the conditions for its operation, (emphasis added)

Respondent submits its analysis on Question I in two parts. The first part establishes that Article 15 of the [VCST] is an expression of customary international law (A). The second part establishes that both Article 29 and Article 15 are applicable to this case as they are both expressions of customary international law and their co-existence is not incompatible (B).³⁸⁵

[...] there can be no doubt that bilateral investment treaties and other commercial treaties concluded by China with third countries do not automatically apply to Macao under the positive aspect of the basic rule but are instead the object of an exception to such rule.³⁸⁶

Article 29 is applicable to the PRC-Laos Treaty both because the PRC and Laos are parties to the VCLT and because Article 29 undeniably represents the applicable rule of customary international law. In contrast, neither the PRC nor Laos has ratified the [VCST], [...] [T]here is no evidence of the requisite consistent State practice or opinio juris to support the notion that its provisions reflect customary international law. In particular, the aspect of Article 15 of the [VCST] that differs from the customary rule reflected in Article 29—its exceptions—cannot be considered to reflect customary international law. [...] Even if the exceptions in Article 15 were somehow deemed to constitute applicable law, the PRC-Laos Treaty does not fall under its exceptions.³⁸⁷

This rule [Article 15] is but an application, in a given succession process, namely the transfer of a portion of territory between two States which remain in existence, of the general principle on the territorial application of treaties or, in other words, of the rules on the distribution of competences among States.³⁹⁷

As to the rationale of the rule, it is sufficient to refer to the principle embodied in article 29 of the [VCLT] under which, unless a different intention is established, a treaty is binding upon each party in respect of its entire territory. This means generally that at any given time a State is bound by a treaty in respect of any territory of which it is sovereign, but is equally not bound in respect of territory which it no longer holds.³⁹⁸

Moreover, the response to a question raised by a member of the Tribunal during the Hearing on Jurisdiction did not clarify the matter. The question was the following:

So, my question is: Has there been any negotiation, any list of bilateral treaties? I’m very surprised that this does not exist [...]³⁹⁹

Now, as to your question of the lists of treaties that, on the one hand, have been entered into by China, there is, to my knowledge, no list, no official list [,..]⁴⁰⁰

There is no evidence in the record that any similar Notification in any way, shape, or form was made by China in respect of the category of bilateral investment treaties. It’s not in the record. It didn’t happen.⁴⁰¹

The object and purpose of the BIT is stated in the Preamble in the following terms:

[The two Contracting States] desiring to encourage, protect, and create favorable conditions for investment by investors [...] based on the principles of mutual respect for sovereignty, equality and mutual benefit and for the purpose of the development of economic cooperation between both States, [h]ave agreed as follows [...]⁴⁰³

[...] political treaties constitute a specific category of treaties concluded intuitu personae, according to the characteristics of a specific State, such as treaties of alliance, or certain commercial treaties concluded between States with a planned economy. Their extinction in case of succession is, again, an application of a general principle of international law which is the fundamental change of circumstances."⁴⁰⁵

"Les traités politiques constituent une catégorie spécifique de traités conclus intuitu personae, en fonction des caractéristiques d’un Etat précis, tels que des traités d’alliance, ou certains traités commerciaux conclus entre Etats à économie planifiée. Leur extinction en cas de succession apparaît, encore une fois, comme une mise en oeuvre d’un principe général du droit international qui est le changement fondamental de circonstances."] (emphasis added)

VIII

Subject to the principle that foreign affairs are the responsibility of the Central People’s Government, the Macao [SAR] may on it’s own, using the name "Macao, China", maintain and develop relations and conclude and implement agreements with states, regions and relevant international or regional organizations in the appropriate fields, such as the economy, trade, finance, shipping, communications, tourism, culture, science and technology and sports. [...]

The application to the Macao [SAR] of international agreements to which the [PRC] is a member or becomes a party shall be decided by the Central People’s Government, in accordance with the circumstances and needs of the [SAR], and after seeking the views of the government of the [SAR].

To my knowledge, neither in Macao nor in Hong Kong has the local government been consulted over a possible extension of an International Treaty upon the request of the Central Government. Beijing has never consulted or has never asked the Government, either the executive body or the legislative body, over the potential application in Macao of treaties to which China has entered into [..,]⁴¹²

What Laos has said is that this means that you don’t apply the customary rule until the PRC actually consults with the Macao SAR. But, in fact, the more consistent reading with respect to the customary rule is—and supported by the text here, is that, in fact, the customary rule applies until such time if and when the PRC decides to actually make explicit a contrary intention, and at that juncture should take the step of consultation.⁴¹³

But the Respondent’s analysis, although coherent with the wording of the text, does not bring about the result sought by the Respondent. This is so because of the legal nature of the Joint Declaration, which can be considered as a devolution treaty.⁴¹⁴

Bien entendu, cette règle signifie simplement que les traités de dévolution s’ils donnent des solutions différentes de celles qui sont prévues par les règles de la succession d’Etats ne s’imposent pas aux Etats tiers ; si ces traités mettent en œuvre les solutions résultant du droit coutumier, la manière dont la succession d’Etats est réglée s’impose aux Etats tiers, parce qu’ils sont tenus au respect du droit international. Là encore la règle n’apparaît que comme une transposition, dans le domaine de la succession d’Etats, d’une des règles de base du droit des traités, qui est la règle de l’effet relatif des traités, codifiée à l’article 57 de la Convention de Vienne sur le droit des traités.⁴¹⁵

As pointed out by the Claimant during the Hearing on Jurisdiction, no element has been submitted to the Tribunal to indicate that Laos was informed of such an internal procedure or whether such procedure was ever enforced:

[...] there is actually no evidence in the record about the actual practice of the PRC with respect to this consultation, internal procedure, none. So, we actually have no evidence about when it has been invoked, in what circumstance it has been invoked, whether it’s a law on the books and doesn’t reflect practice—nothing. We have nothing on that.⁴¹⁷

And the principle reads as follows: "Treaties are binding upon the entire territory, unless it’s provided otherwise in the Treaty and intention appears in the Treaty or is otherwise established." We have been through the Treaty together. It does not provide for a definition of the territory. So, the principle would be, under Article 29, that unless it is otherwise intended by the Parties or by—here, by China, then it should apply to the entire territory of China.⁴²⁰

Now, you heard Ms. Willems this morning, I think confirm this when she stated, "There is no provision as to restriction of territory." On this we agree.⁴²¹

A general presumption is established that, when a State concludes a treaty, the latter applies to the entire territory of the State, and individual areas and territories need only be mentioned where there is a special reason for doing so, in particular to exclude them from the treaty’s application. [...] If there are territorial changes, the treaty continues, in principle, to apply to the entire territory; different intentions would have to be renegotiated with, or at least be tacitly approved by, the other parties."⁴²²

On the other hand, the return of Macao to Chinese sovereignty was not a unforeseen event; it had been negotiated for a relatively long period of time. The first step was the establishment of diplomatic relations between the PRC and Portugal on 8 February 1979, which permitted the launching of negotiations between the two countries on the future of Macao. Official negotiations began in June 1986 in Beijing and gave birth to the Joint Declaration of 1987 which entered into force on 15 January 1988. The Joint Declaration states that Macao will return to the PRC’s sovereignty on 20 December 1999, and organizes the transitory period.⁴²³ Thus, at the moment of the conclusion of the PRC/Laos BIT, it was already common knowledge that in a few years’ time, Macao would be under the PRC’s sovereignty.

[I]t has been brought to our attention [...] that there are two—in the case of Portugal and the Netherlands, there are actually treaties entered into by Macao with these countries and also with China. [...] [I]t would be helpful to us if you could analyze the text of these four treaties in terms of any relationship between the two and how they [work] or don’t together.⁴²⁴

An initial remark must be made by the Tribunal. The four treaties—the PRC/Portugal, PRC/Netherlands, Macao/Portugal, Macao/Netherlands treaties—were concluded after the handover of Macao to the PRC in 1999. As such, they do not call for the application of Article 15 of the VCST, but only of Article 29 of the VCLT. Interestingly, in the case of Portugal, the Macao/Portugal BIT preceded the PRC/Portugal BIT by five years, while in the case of the Netherlands, the PRC/Netherlands BIT was concluded seven years prior to the Macao/Netherlands BIT.

In the PRC/Portugal BIT signed in 2005, the territorial scope is as follows:

Article 1(2)b)

For the Macao Special Administrative Region of the People’s Republic of China, the territory comprised by the Macao peninsula and the islands of Taipa and Coloane.

Article 1(4)

The term "territory" means the territory in which the Parties have, in accordance with international law and their national laws, sovereign rights or jurisdiction, including land territory, territorial sea and air space above them, as well as those maritime areas adjacent to the outer limits of the territorial sea, including seabed and subsoil thereof [...]

Article 1 (4)

For the purpose of this Agreement, the term "territory" means respectively:

- For the People’s Republic of China, the territory of the People’s Republic of China, the People’s Republic of China, the People’s Republic of China, the People’s Republic of China (including the territorial sea and air space above it) as well as any area beyond its territorial sea within which the People’s Republic of China has sovereign rights of exploration of and exploitation of resources of the seabed and its sub-soil and superjacent water resources in accordance with Chinese law and international law.

Article 1(c) (ii)

- in respect of the Macao Special Administrative Region of the People’s Republic of China, the territory is peninsula of Macau and the islands of Taipa and Coloane.

The territorial definition in the BITs clearly indicates that the Macao [SAR] [has] the power to enter into BITs to cover [its] own territory notwithstanding the fact that China has also entered into BITs with these same third states. This indicates that the territorial limit of the Chinese BITs [is] confined to Mainland China.⁴²⁶

If one takes the example of the two BITs with Portugal, it is apparent that Article 9 of the PRC-BIT and Article 8 of the Macao-BIT are very similar, with a difference being that the PRC-BIT gives a further option to the investor—in addition to the choice of the competent national courts and an ad hoc arbitration tribunal under the rules of UNCITRAL—to resort to ICSID arbitration:

[...] the object and purpose is not served by denying Macanese investors the protection of the 130 BITs concluded by the PRC—in circumstances where there is no statement or convincing evidence mandating the contrary conclusion from either the PRC or the Macau SAR - and leaving them to avail themselves of only two bilateral treaties that Macau has concluded on its own behalf.⁴³¹

The Parties disagree as to whether the reference to "the laws and regulations of each contracting State" in Article 1(2)(b) of the Treaty should be understood in the sense of covering the full territorial extension of each State or, in the case of the PRC, of excluding the Macao SAR and the Hong Kong SAR.

The Respondent’s argument for excluding the SARs is based on the existence of three different legal regimes in the State of China: one for Mainland China and one for each of the SARs. These regimes include different company laws and the company law of Mainland China does not apply to the SARs. For the Tribunal, the issue is not how many laws or legal regimes there are in the PRC and whether the investor has been established under one or the other, but whether an economic entity established under any one of such legal regimes is an economic entity established in accordance with the laws and regulations of the PRC. In other words, should the Tribunal include a territorial limitation in interpreting the scope of Article 1(2)(b)?

Therefore, the Tribunal concludes that the Claimant is an economic entity established in accordance with the laws and regulations of the PRC as required by Article 1(2)(b) of the Treaty.

It is not uncommon in practice, and—absent a particular limitation—not illegal to locate one’s operations in a jurisdiction perceived to provide a beneficial regulatory and legal environment in terms, for example, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.⁴³²

International investors can of course structure upstream their investments, which meet the requirement of participating in the economy of the host State, in a manner that best fits their need for international protection, in choosing freely the vehicle through which they perform their investment.⁴³³

[A]n international investor cannot modify downstream the protection granted to its investment by the host State, once the acts which the investor considers are causing damages to its investment have already been committed.⁴³⁴

For ease of reference the Tribunal reproduces here Article 1(1) of the BIT. It reads as follows:

The term ‘investments’ means every kind of asset invested by investors of one contracting State in accordance with the laws and regulations of the other Contracting State in the territory of the Latter, including mainly,

(a) movable and immovable property and other property rights;

(b) shares in companies or other forms of interest in such companies;

(c) a claim to money or to any performance having an economic value;

(d) copyrights, industrial property, know-how and technological process;

(e) concessions conferred by law, including concessions to search for or to exploit natural resources.

1. Any dispute between an investor of one Contracting State and the other Contracting State in connection with an investment in the territory of the other Contracting State shall, as far as possible, be settled amicably through negotiation between the parties to the dispute.

2. If the dispute cannot be settled through negotiation within six months, either party to the dispute shall be entitled to submit the dispute to the competent court of the Contracting State accepting the investment.

3. If a dispute involving the amount of compensation for expropriation cannot be settled through negotiation within six months as specified in paragraph 1 of this Article 1, it may be submitted at the request of either party to an ad hoc arbitral tribunal. The provision of this paragraph shall not apply if the investor concerned has resorted to the procedure specified in the paragraph 2 of this Article.

The relevant paragraphs of Article 4 read as follows:

1. Neither Contracting State shall expropriate, nationalize or take similar measures (hereinafter referred to as "expropriation") against investments of investors of the other Contracting State in its territory, unless the following conditions are met:

a. as necessitated by the public interest;

b. in accordance with domestic legal procedures;

c. without discrimination;

d. against appropriate and effective compensation.

2. The compensation mentioned in paragraph 1 (d) of this Article shall be equivalent to the value of the expropriated investments at the time when expropriation is proclaimed, be convertible and freely transferable. The compensation shall be paid without unreasonable delay.

To illustrate how the principle has been applied, the Tribunal refers to the decision of the ICSID tribunal in Asian Agricultural Products Ltd. v. Republic of Sri Lanka, which explained:

Nothing is better settled, as a canon of interpretation in all systems of law than that a clause must be so interpreted as to give it a meaning rather than so as to deprive it of meaning⁴⁴⁴.

[...] cardinal rule of the interpretation of treaties that each and every operative clause of a treaty is to be interpreted as meaningful rather than meaningless. It is equally well established in the jurisprudence of international law, particularly that of the Permanent Court of International Justice and the International Court of Justice, that treaties, and hence their clauses, are to be interpreted so as to render them effective rather than ineffective.⁴⁴⁵

When applied—how do we apply the principle of respect of sovereignty to international arbitration and international investment arbitration? Well, those principles, when applied to international investment law, and in particular dispute resolution, should and—when applied to international arbitration, foreign investor-State arbitration, push the Tribunal, oblige the Tribunal to respect the choice of domestic jurisdiction clause that is inserted in the Contract.⁴⁴⁶

Most importantly, I will note at the outset that none of them [of the cases relied on by the Respondent] involve—have fork-in-the-road clauses in their dispute-resolution clauses, and that makes an enormous difference because, as I’ve shown, having the fork-in-the-road clause makes it impossible for an investor to do what Laos says they want the Treaty says it ought to do, which is first bring a claim for expropriation to the Laos courts and then wholly bring the question of compensation/quantum to a Tribunal.⁴⁴⁸

In the opinion of the Tribunal to rule otherwise would eviscerate the provision relating to ICSID arbitration since, in accordance with the final sentence of Article 8(3), to have recourse to tribunals of the State recipient of the investment would definitely preclude the possibility to accede to arbitration under the ICSID Convention.⁴⁴⁹

The treatment and protection as mentioned in Paragraph 1 of this Article shall not be less favorable than that accorded to investments and activities associated with such investments of investors of a third State.

Investments and activities associated with investments of investors of either Contracting State shall be accorded fair and equitable treatment and shall enjoy protection in the territory of the other Contracting State.

[...] without entering into the much more general question whether MFN-clauses can be used to transfer arbitration clauses from one treaty to another, the Tribunal concludes that, for the specific wording of Article 3(1) of the UK-Soviet BIT, and for the specific purpose of arbitration with regard to expropriation, the wide wording of Article 8 of the Denmark-Russia BIT is not applicable.⁴⁵⁵

The tribunal reached this conclusion on the effect of an expropriation on the treatment of an investment and then continued to analyze a separate provision on the treatment of the investor and stated: "Again limiting its considerations to the possible application of the MFN-clause to arbitration regarding expropriation, the terms ‘use’ and ‘enjoyment’ in paragraph (2) lead the Tribunal to different conclusions from those reached with regard to paragraph (1)."⁴⁵⁶

[...] to receive treatment no less favorable than the Respondent has accorded to the investors of third States, such as the Netherlands, the Republic of Korea, France, Sweden, Switzerland, Denmark, the United Kingdom, Germany and Australia, in respect of its right to seek compensation for a breach of either the autonomous treaty standard of fair and equitable treatment or alternative standards of treatment no less favorable, such as Article 8 of the Laos-Germany BIT. Article 2(3) of the Laos-Sweden-BIT, or Article 6 of the Laos-Japan BIT, through recourse to binding, independent, international arbitration.

In addition, and in the alternative, should Article 8(3) of the instant Treaty be construed in such a manner as to in any way curtail or limit the access that a Chinese investor would otherwise enjoy (had it been a national of the Netherlands, the Republic of Korea, France, Switzerland, the United Kingdom, Sweden, Denmark, Australia or Germany), including the availability of access to arbitration under the Treaty itself, Sanum hereby invokes its right to receive treatment no less favorable than the Respondent has accorded to these third country investors, under Article 3(2) of the Treaty, as well.⁴⁵⁹

[...] the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case. The arbitral tribunal, in exercising its discretion, shall conduct the proceedings so as to avoid unnecessary delay and expense and to provide a fair and efficient process for resolving the parties’ dispute.

During the course of the arbitral proceedings, a party may amend or supplement its claim or defense, including a counterclaim or a claim for the purpose of a set-off, unless the arbitral tribunal considers it inappropriate to allow such amendment or supplement having regard to the delay in making it or prejudice to other parties or any other circumstances. However, a claim or defense, including a counterclaim or a claim for the purpose of a set-off, may not be amended or supplemented in such a manner that the amended or supplemented claim or defense falls outside the jurisdiction of the arbitral tribunal.

i) That the PRC/Laos BIT does apply to the Macao SAR.

ii) That Sanum is a protected investor under the BIT and its claims are investment-related.

iii) That the Tribunal has jurisdiction to arbitrate only the expropriation claims of Sanum under Article 8(3) of the BIT.

iv) That it has no jurisdiction to arbitrate Sanum’s other claims by application of Article 3(2) of the BIT.

v) To reject the Respondent’s request to dismiss claims introduced by the Amended Notice which allegedly duplicate claims made in the Laos Holdings Arbitration.

vi) To consider and decide the Parties’ requests in respect of costs together with the merits of the dispute.