Administrative Contentious Court: the Second Circuit Administrative Contentious Court of San José de Goicochea.

Arbitration Rules: ICSID Rules of Procedure for Arbitration Proceedings.

Bid or Offer: proposal submitted by the Consortium Riteve SyC before the National Procurement Office of the Ministry of Finance on July 7, 1998, within the International Public Tender Number 002-98.

BIT or Treaty: Bilateral Investment Treaty between the Kingdom of Spain and the Republic of Costa Rica.

Board of Directors: the Board of Directors of the PTC.

Carvajal Firm: the firm Carvajal y Consultores S.A.

Comptroller: Office of the Comptroller General of the Republic of Costa Rica.

Consortium: The Consortium Riteve SyC, integrated by SyC and Transal, S.A.

Contract: Provision of Services Contract for the Creation and Functioning of Stations for the Integrated Vehicle Technical Inspection, entered into by the Public Transportation Council of the Ministry for Public Works and Transportation of Costa Rica and the Consortium Riteve SyC on May 29, 2001.

Contractual Addendum: Contractual Addendum to the Provision of Services Contract for the Creation and Functioning of Stations for the Integrated Vehicle Technical Inspection, entered into by MPWT and Riteve on July 20, 2012.

COSEVI: Road Safety Council of Costa Rica.

Costa Rica or Respondent: the Republic of Costa Rica.

Counter-Memorial: Respondent's counter memorial, submitted on March 1, 2013.

Countersignature Official Notice: Official communicahon No. 7168 (DI-AA-1793) dated June 28, 2001, issued by the Office of the Comptroller General of the Republic of Costa Rica, where the Comptroller granted the counter signature of the Contract.

Direct Agreement: Agreement within the Contract's framework, entered into by and between the MPWT and Riteve on July 20, 2012.

Disqualification Proposal: Proposal to disqualify the Arbitral Tribunal submitted by Claimant under Article 57 of the ICSID Convention.

Executive Order 30185: Executive Order 30185-MPWT, entitled "Regulation on the Proceeding for the Adjustment of the Vehicle Technical Inspection (VTI) Service Rates Handled by the Consortium Riteve SyC", published on March 6, 2002.

Executive Order 30396: Executive Order 30396-MPWT, issued May 7, 2002 and published on July 12, 2002, which establishes the tariffs for readjustment for the initial operations of vehicular technical inspection for Consortium Riteve SyC.

Executive Order 30572: Executive Order 30572-MPWT, entitled "Amendments to the Regulations for the Integrated Technical Inspection of Automotive Vehicles Circulating on Public Roads", issued on July 12, 2002

Executive Order 30573: Executive Order 30573-MPWT, which "Derogates the Executive Order No. 30185 'Regulation on the Proceeding for the Adjustment of the Vehicular Technical Review Service Tariffs (VTR) handled by the Consortium Riteve-SyC' and its amendment Executive Order No. 30396", dated July 12, 2002.

Executive Order 30987: Executive Order 30987-MPT YV, entitled "Regulation of the Procedure for the Readjustment of Rates for the Vehicle Technical Inspection Service (VTI) handled by the Consortium Riteve SyC", issued on February 19, 2003.

First Contract: First Contract entered into by and between the Consortium and the PTC on February 5, 2001.

Hearing: Hearing on Jurisdiction and Merits held on January 13-17, 2014.

ICSID: International Centre for Settlement of Investment Disputes.

ICSID Convention: Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

Increase Agreement: 12.76% increase on VTI rates for 2005, approved on December 16, 2004 by the Board of Directors.

IRES: Institute for Research in Economic Sciences at the University of Costa Rica.

Local Arbitration: Local Arbitration Proceeding initiated by Claimant in Costa Rica, against the Attorney General's Office, as a representative of the State, and the PTC, invoking clause 11.1.3 of the Contract, before the Resolution Center for Conflicts on Property.

Memorial or Claimant's Memorial: Claim Memorial submitted by Claimant on November 7, 2012.

MPWT: Ministry of Public Works and Transportation of Costa Rica.

Non-Countersignature Official Notice: Official communicahon No. 4579 (DI-AA-1159) dated May 3, 2001, issued by the Office of the Comptroller General of the Republic of Costa Rica, where the Comptroller denied the counter signature of the First Contract.

Organic Law: Organic Law of the Office of the Comptroller General of the Republic of Costa Rica.

Parties: Jointly, the Claimant and the Respondent.

Procurement Office: National Procurement Office of the Ministry of Finance.

PSRA: Public Services Regulatory Authority.

PTC: Public Transportation Council of the Ministry for Public Works and Transportation of Costa Rica.

Regulatory Committee: the Regulatory Committee of the PSRA.

Rejoinder: Respondent's Rejoinder submitted on September 6, 2013.

Reply: Claimant's Reply submitted on June 3, 2013.

Request for Arbitration: Request for Arbitration submitted by Supervisión y Control, S.A. on December 21, 2011.

Riteve: Riteve SyC, S.A.

Supreme Court: Supreme Court of Justice of the Republic of Costa Rica.

SyC or Claimant: Supervisión y Control, S.A.

Tender: International Public Tender Number 002-98 for the creation and functioning of stations for the integrated vehicle technical inspection, published in the Official Federal Gazette Number 20 on January 29, 1998.

Terms of the Tender: terms of the International Public Tender Number 002-98 issued by the National Procurement Office of the Ministry of Finance and the Ministry of Public Works and Transportation of Costa Rica for the creation and functioning of stations for the integrated vehicle technical inspection, published in the Official Federal Gazette Number 20 on January 29, 1998.

VTI: Vehicle Technical Inspection.

VTIC: Vehicle Technical Inspection Centers.

Supervisión y Control, S.A., the claimant in this arbitration (hereinafter, "SyC" or the "Claimant"), is a Spanish company incorporated in the city of La Coruna, Kingdom of Spain, on March 20, 1987.¹

George Fowler Luis Enrique Cuervo Fowler, Rodríguez, Valdes-Fauli 1331 Lamar St. Suite 1560 Houston, TX 77010 Tel. (713) 654 1560

Adriana Gonzalez

Ministry of Foreign Trade, Costa Rica

and

Paolo Di Rosa Patricio Grané

Natalia Giraldo Carrillo Arnold & Porter LLP 601 Massachusetts Avenue NW Washington, DC 20001-3743

Tel. (202) 942 5060

"Article XI. Disputes between a Party and investors of the other Party.

1. Notice of any investment-related dispute arising between one of the Parties and an investor of the other Party with respect to matters governed by this Treaty shall be given in writing, including detailed information, by the investor to the Party receiving the investment. To the extent possible, the parties to the dispute shall try to settle such disputes by an amicable agreement.

2. If the dispute cannot be settled in such manner within a period of six months after the date of the written notice referred to in Paragraph 1, the investor may submit the dispute:

a) to the competent courts of the Party in whose territory the investment was made;

b) to an international arbitral tribunal from among those cited below:

i) the International Centre for Settlement of Investment Disputes (ICSID), created by the 'Convention on the Settlement of Investment Disputes between States and Nationals of Other States', opened for signature on March 18, 1965, when each State party to this Treaty adhered to such;..."

"3. Once an investor has submitted the dispute to an arbitral tribunal, the award shall be final, if the investor has submitted the dispute to a competent court of the Party in whose territory the investment was made, it may, in addition, resort to the arbitral tribunals referred to in this article, if such national court has not issued a judgment. In the latter case, the investor shall adopt any measures that are required for the purpose of permanently desisting from the court case then underway."

[Emphasis added]

On September 19, 2012, the Arbitral Tribunal issued Procedural Order No. 1, containing the Arbitral Tribunal's determinations and the Parties' agreements reached during the conference call of July 17, 2012, related to the procedural rules that would govern the arbitration.

"13. 1 The schedule shall be as follows:

13.1.1 The Claimant shall file a Memorial by November 7, 2012;

13.1.2 The Respondent shall file a Counter-Memorial by February 28, 2013;

13.1.3 The Claimant shall file a Reply by May, 9, 2013; and

13.1.4 The Respondent shall file a Rejoinder by July 18, 2013."

"14.1 The schedule for document production shall be as follows:

14.1.1 A request for document production by any disputing party shall be filed on or before November 14, 2012.

14.1.2 Objections to the request for production of specific documents or category of documents shall be filed on or before November 21, 2012.

14.1.3 The reply to objections to the production of specific documents or category of documents shall be filed on or before November 28, 2012.

14.1.4 The production of documents in respect of which there are no objections shall be on or before December 5, 2012.

14.1.5 The decision of the Tribunal (either upholding the objections or ordering the production of the requested documents) shall be on or about December 12, 2012.

14.1.6 The requested documents shall be produced two week from the date of the Tribunal's decision. The Tribunal will specify this date in the respective order."³

On November 7, 2012, Claimant submitted its claim memorial (hereinafter, the "Memorial" or "Claimant's Memorial"), along with the factual exhibits C-l to C-63, witness statements from Amador de Castro, José Luis López, Fernando Mayorga, Eduardo Sancho González, Stephan Brunner, Francisco Jiménez and Rodolfo Méndez Mata, and the expert reports from Nicholas Good with exhibits, Rubén Hernández, Leonel Fonseca Cubillo, Luis Diego Vargas Chinchilla and Laura Cristina Rivera. On February 18, 2013 the Tribunal issued Procedural Order No. 2 on document production.

On March 16, 2013, Respondent submitted its reply to Claimant's letter dated March 14, 2013, requesting the Arbitral Tribunal to deny the 53 (fifty-three) day extension requested by Claimant and addressing the allegations concerning failure to comply with Procedural Order No. 2, among other things. On March 19, 2013, Claimant sent a further communication.

"13. 1 The schedule shall be as follows:

13.1.1 The Claimant shall file a Memorial by November 7, 2012;

13.1.2 The Respondent shall file a Counter-Memorial by February 28, 2013;

13.1.3 The Claimant shall file a Reply by June 3, 2013; and

13.1.4 The Respondent shall file a Rejoinder by August 12, 2013."

From the Arbitral Tribunal :

Dr. Claus von Wobeser President

Mr. Joseph P. Klock Jr. Co-Arbitrator

Dr. Eduardo Silva Romero Co-Arbitrator

From the ICSID Secretariat:

Ms. Ann Catherine Kettlewell Secretary of the Tribunal

From Claimant:

Mr. Fuis E. Cuervo Fowler Rodríguez Valdes Fauli

Mr. George J. Fowler Fowler Rodríguez Valdes Fauli

Mr. Fuis Flamas Fowler Rodríguez Valdes Fauli

Ms. Claudia Finares Fowler Rodríguez Valdes Fauli

From Respondent:

Ms. Adriana González Ministry of Foreign Trade, Costa Rica

Mr. Julián Aguilar Ministry of Foreign Trade, Costa Rica

Ms. Andrea Zumbado Ministry of Foreign Trade, Costa Rica

Mr. Paolo Di Rosa Arnold & Porter FFP

Mr. Patricio Grané Fabat Volterra Fietta

Ms. Natalia Giraldo Carrillo Arnold & Porter FFP

Court Reporter:

Mr. David Kasdan B&B Reporters

From the Arbitral Tribunal :

Dr. Claus von Wobeser President

Mr. Joseph P. Klock Jr. Co-Arbitrator

Dr. Eduardo Silva Romero Co-Arbitrator

From the ICSID Secretary General:

Ms. Ann Catherine Kettlewell Secretary of the Tribunal

From the Claimant:

Mr. Fuis E. Cuervo Fowler Rodriguez Valdes Fauli

Mr. George J. Fowler Fowler Rodriguez Valdes Fauli

Mr. Fuis Flamas Fowler Rodriguez Valdes Fauli

Ms. Claudia Linares Fowler Rodríguez Valdes Fauli

Mr. Jesse Francis XACT Data

Mr. Amador de Castro SyC

Mr. José Luis López SyC

Mr. Fernando Mayorga Riteve

Mr. Stephan Brunner General Superintendent of Securities

From the Respondent:

Ms. Adriana González Ministry of Foreign Trade, Costa Rica

Mr. Luis Adolfo Fernández Ministry of Foreign Trade, Costa Rica

Mr. José Carlos Quirce Ministry of Foreign Trade, Costa Rica

Mr. Alan Thompson Consultant of the Ministry of Foreign

Trade, Costa Rica

Mr. Allan Roberto Ugalde General Comptroller of the Republic

Mr. Hansel Arias General Comptroller of the Republic

Mr. Paolo Di Rosa Arnold & Porter LLP

Mr. Pedro Soto Arnold & Porter LLP

Ms. Natalia Giraldo Carrillo Arnold & Porter LLP

Mr. Kelby Ballena Arnold & Porter LLP

Ms. Ana Martinez Arnold & Porter LLP

Mr. Patricio Grané Labat Volterra Fietta

Court Reporters:

Mr. Clay J. Frazier B&B Reporters

Ms. Liliana Avalos Benetti Reporter

Ms. Miriam Martín Garcia Reporter

Ms. Imperio García Reporter

"... President von Wobeser:...I would like to ask the parties expressly if you feel that you've been able to state your views, if you feel that you've been heard, if you feel you've been able to present your evidence and present your case, following the rules, of course.

Mr. Fowler: From my point of view of ourselves, our law firm and Supervisión were very pleased with everything... I felt I've been able to present my case and my witnesses and put forth our point of view.

Mr. Di Rosa:... The Republic of Costa Rica is very pleased with the procedure..,"⁴

After receiving submissions from the Parties, on November 17, 2016, the majority of the Tribunal issued Procedural Order No. 5, deciding as follows:

"1. After carefully analyzing the new evidence submitted by Claimant, the Tribunal by majority has decided not to reopen the proceedings and to dismiss such new evidence, because it does not meet the requirements set forth in Rule 38 of the ICSID Rules.

2. Rule 38 provides that the Tribunal may reopen the proceedings exceptionally when 'new evidence is forthcoming of such nature as to constitute a decisive factor' or when 'there is a vital need for clarification on certain specific points.' In short, the majority of the Tribunal finds that (i) said evidence does not constitute a decisive factor on this case, and (ii) it has no need for clarification on any points.

The detailed reasons for this decision will be included in the final Award.

3. The Tribunal has unanimously decided to extend the period to issue the award by a further 60 days, as allowed under Rule 46 of the ICSID Rules."

a) On September 4, 2014, the Executive Director of COSEVI certified, upon Riteve's prior request, that he was not aware of any sanctions to Riteve as a result of a breach to the Agreement.⁶

b) On November 17, 2014, Riteve submitted a request for the readjustment of rates before the PSRA. On November 24, 2014, the PSRA rejected the request claiming that it lacked the rate adjustment methodology set forth in clause 9.4 of the Contract.⁷

c) On November 10, 2015, the Executive Director of COSEVI certified, upon Riteve's prior request, that he was not aware of any breach to the terms of the Agreement by Riteve.⁸

d) On November 13, 2015, Riteve submitted before the PSRA a request for the readjustment of rates. On November 19, 2015, PSRA rejected the request claiming that it lacked the rate adjustment methodology set forth in clause 9.4 of the Contract.⁹

e) On June 1, 2016, the MPWT sent a letter to Riteve requesting Riteve's collaboration in certain initiatives that intended to promote a healthy environment and to reduce traffic accidents in Costa Rica. In exchange for the disbursements that said collaboration would require from Riteve, and acknowledging the need to establish a rate adjustment methodology for the VTI service, the Rules for the Procedure to Readjust the Rates of the VTI service would be published as of July 16, 2016.¹⁰

f) On June 2, 2016, Riteve replied to the MPWT's June 1st letter, explaining how Riteve could contribute to the aforementioned initiatives. Riteve emphasized that its collaboration was subject to the publication and establishment of the rate adjustment methodology for the VTI service for the duration of the Contract.¹¹

g) On June 27, 2016, the Vice Minister of MPWT issued a statement in the Official Gazette informing the general public that a draft of the decree called "Rules of Procedure for the Rate Readjustment of the Technical Vehicular Revision Service assigned to Riteve SyC S.A" had been drafted. The statement contained a web link where the draft of the decree could be consulted, allowing any interested parties to submit any comments on the project to the MPWT.¹²

h) On July 11, 2016, the PSRA issued its comments on the draft of the decree mentioned above. PSRA noted that clause 9.4 of the Contract was still in force, and said clause provides that the MPWT would issue the methodology to adjust the VTI rates. However, said methodology had not yet been published in the Gazette.¹³

On January 29, 1998, through the National Procurement Office of the Ministry of Finance (hereinafter, the "Procurement Office") and the MPWT, Costa Rica issued an invitation to the International Public Tender Proceeding Number 002-98 for the creation and functioning of stations for the integrated vehicle technical inspection, published in the Official Federal Gazette number 20 on January 29, 1998 (hereinafter, the "Tender").

The purpose of the Tender was to award the concession for the provision of integrated VTI services to an individual operator with exclusive operation rights.¹⁷ The Terms of the Tender (hereinafter, the "Terms of the Tender") provided that:

a) Every prospective bidder should file a technical offer with a rate structure and calculations.¹⁸

b) The rate applicable to the VTI service would be charged directly to users, this rate may not exceed the one specified by the bidder in his offer, and in case the bidder was awarded, the rate would become an integral part of the binding commitments.¹⁹

c) The revenue received by the concession holder would be limited to the rate that could be charged directly to service users, and the offered rate values for each service would be reviewed annually, according to a study prepared by the contractor and approved by the MPWT and the institution responsible for approving those rates, in order to avoid harming the economic and financial balance of the successful bidder.²⁰

d) The term of the contract would be ten years, which may be extended once the performance of obligations, the returns and the efficiency in providing the services, the adequacy of the personnel and other aspects necessary to evaluate the good operation of the different stations had been confirmed by the corresponding technical authority in a written report.²¹

e) It would be a cause for termination of the contract if the contractor were to charge users a rate higher or lower than the approved rates.²²

f) The term for providing the VTI services would be ten years,²³ starting from the date of commencement of operations of the VTIC.²⁴ The successful bidder would have a maximum of eleven months to begin operations from the date the Comptroller countersigned the contract.²⁵

g) Differences between the Administration and the contractor would be settled in an amicable manner, by direct official negotiations and in case of not being able to settle them within thirty days, differences would be submitted to arbitration or to the corresponding court proceeding.²⁶

On July 2, 1998, SyC entered into an agreement with the Costa Rican company Transal S.A., pursuant to which the consortium Riteve SyC (the "Consortium") was formed, in order to submit a bid within the framework of the Tender.²⁷

On November 25, 1998 the Procurement Office awarded the Tender to the Consortium, under the Terms of the Tender and the bid.³²

On February 1, 1999, by Ruling No. FPI2-98 CHG the Procurement Office declared the Consortium a successful bidder.³³ The award of the Tender to the Consortium was questioned by other bidders, who filed an appeal against that decision, and in light of said appeal the Comptroller General of the Republic of Costa Rica (the "Comptroller") annulled the award by resolution RSF-231-99 dated June 7, 1999 and ordered the Administration to make a more comprehensive analysis of the Consortium's proposal.³⁴

a) In clause 9.1, that the contract between the Consortium and the Administration had "...as a fundamental principle the maintenance of the contract's economic and financial balance, so changes in costs or in the formula determined by the parties would generate an obligation to readjust the rates such that the CONTRACTOR could recover the costs of its operation and a reasonable profit..."³⁸

b) In clause 9.4.1, that the rate adjustments would be automatic, based on indexes, excluding the MPWT's faculty to approve the rates readjustments provided in the Tender.³⁹

"...the possibility of extending an administrative contract emerges from the discretion that the Public Administration has... [I]t is the Administration that has, in principle, the power to determine whether or not it is convenient to extend the contract, and to propose [to] the contractor such possibility to see if he agrees... it is not admissible to seek, through this contract, the limitation of the power of the Administration, trying to hold the State upon an eventual extension that, as provided in the document submitted to our knowledge, is mandatory for the Council as long as the contractor meets its obligations. We are facing a wrong interpretation of the national legislation... upon the conclusion of the contractual term, the Council that started it shall evaluate the convenience of extending the current legal business for ten more years, or to implement a new procedure for the selection of a contractor to continue providing this service..,"⁴¹

"...[it] is not legally viable to limit the recognition of the readjustment to the scope of a determinate percentage of inflationary growth"⁴³ because "due to the nature of the service provision, the application of the automatic readjustment formula presented at that moment was not admissible, because it related more to the contracts for good and services by the Administration with private individuals, and not with a relation that would involve a public service like the one [tendered]"⁴⁴

a) The term "fee adjustment" is defined as a "[r]evision of the fees according to the procedure determined by the parties, to adapt [them] to the increase experienced by the contractor in the cost of the service that it provides or to adjust [them] to the economic indices that have previously been defined."⁴⁷

b) The exclusivity rights to provide the integrated VTI services in all the territory of Costa Rica.⁴⁸

c) PTC's obligation to "Approve the fee adjustments for the contractor" according to chapter nine of the Contract.⁴⁹

d) The initial rates, these being the ones provided in the Consortium's offer.⁵⁰

e) PTC's obligation to design and publish a special procedure which provides a methodology for the adjustment of rates before the beginning of operations.⁵¹

f) Regarding the readjustment of rates for the provision of services:

"9.1 ECONOMIC AND FINANCIAL BALANCE UNDER THE CONTRACT.

A fundamental principle of this contracting process is maintaining the economic and financial balance of the contract, and, therefore, if any substantial changes in costs occur, the provisions of Clause 9.4 below shall be applicable..,"⁵²

"9.4 ADJUSTMENT OF FEES. In accordance with the principle established in Clause 9.1 above, the fees shall be adjusted ordinarily once a year or are specially [sic] whenever situations occur that alter the economic-financial balance of the contract."⁵³

g) The extensions to the ten year term of the Contract, setting the agreed conditions under which the extension of the term of the Contract would not occur, consisting of: (i) the preparation of a technical report on the failure of the contractor to fulfill its obligations, submitted before the Board of Directors of the PTC (hereinafter, "Board of Directors") at least six months before the date of the next extension; and (ii) the communication addressed to the contractor on the basis of the above mentioned technical report, no less than six months before the date of extension.⁵⁴

h) Arbitration in Costa Rica under the Law of Alternative Dispute Resolution and Promotion of Social Peace as a mechanism for resolving disputes or disagreements related to the Contract.⁵⁵

On June 28, 2001, the Comptroller countersigned the Contract, by official notice No. DI-AA-1793, referring to its observations on the defects of the First Contract, in which the MPWT became "... a mere verifier of the increases produced in the agreed-upon prices indices included in the proposed mathematical formula, without permitting it to make the technical studies provided in Article 20 of the Traffic Act..", and countersigned the Contract because "...[it] could verify that the Administration actually implemented the observations expressed.. by the Comptroller's Office in its official notice dated May 3, 2001 (the "Countersignature Official Notice"). Also, the Comptroller's Office emphasized the PTC's faculty to design a procedure that includes a rate adjustment mechanism "...which would evaluate all those costs and expenses incurred by the contractor that are directly involved in the provision of the contracted service, and that have actually affected the contract's financial balance,.."⁵⁶

On April 15, 2002, by official notice No. 4163, the Comptroller ruled on a request for the annulment of the Tender, emphasizing on one hand that the power to set VTI service rates "...is exclusive to [MPWT], as indicated by article 20 of the Transit Law" and that the model for rates' readjustment should include the actual costs and expenses incurred by the contractor in providing the service. On the other hand, official notice No. 4163 argued that one of the reasons the first version of the Agreement was rejected was "... the Administration's lack of tools to assure an agreement between the costs incurred by the contractor and the fee it would charge the final users..." and for that purpose quoted the official notice No. 4579 (DI-AA-1159) dated May 3, 2001, which states that "...the entity in charge of price regulation, must verify the suitable correspondence between the real costs of the execution of the service and the components that structure this price..." Also, in that official notice, it is clarified that, regarding the first version of the Contract "...originally the revision pricing system presented in this version of the contract includes a revision mechanism based on automatic increases linked with increases that had taken place in the price indexes selected, which turned out to be of the 'general' type... this caused this Entity Comptroller to make the Administration see the unsuitability of such a mechanism... [in light of] this observation, the model initially used was modified, going from one based on indexes, to a model that would rather comprise the real costs incurred by the contractor, as established by clause 9.4 of the contract endorsed by this General Comptroller's office..."⁶⁰

On May 8, 2002 there was a change in government and Mr. Abel Pacheco de la Espriella became President of the Republic and Mr. Javier Cháves Bolanos became Minister of Public Works and Transportation.⁶⁴

On July 2002, the new Vice Minister of Transportation requested Mr. Stephan Brunner and Mr. Luis Diego Vargas to develop a study related to the rates applicable to the VTI service in order to suggest to the PTC what rates to apply during the Consortium's first year of operations, which would begin on July 15, 2002. According to his statement, Mr. Brunner conducted the study following only the MPWT's instructions, without taking into account the Terms of the Tender, the Contract, or the texts of the Executive Orders 30185-MPWT (Methodology for the readjustment of rates applicable to the VTI service) and 30396-MPWT (Rates applicable to the VTI rates). The rate recommended to the PTC was lower than the readjustment requested by the Consortium.⁶⁷

On July 12, 2002, three days before the initiation of operations of the Consortium, Costa Rica published in the Gazette the Executive Order 30573-MPWT (hereinafter, "Executive Order 30573"). This Executive Order derogated Executive Order 30185, through which the procedure for the readjustment of vehicle technical inspection rates had been issued, and Executive Order 30396, through which the initial rates were established, consequently granting the PTC greater powers to control those rates.⁷³

With respect to Executive Order 30573, it is important to mention the following:

a) It invoked, as the grounds to derogate Executive Order 30185, the Comptroller Office's official notice dated May 3, 2001, by which it rejected the First Contract, given that if the rate revision mechanism provided in Executive Order 30185 was approved, PTC's competence would be reduced, and instead of exercising its role as service regulator it would become simply "...mere verifier of the changes in the sources of the indices used and proper application, algebraically, of the mathematical formula..." Quoting the same official notice, the Executive Order 30573 also established that "...price readjustment is an inherent right that assists the contractor... it is not legally feasible to limit the recognition of the readjustment to reaching a certain percentage of inflationary growth..., but that the contractor can gain access to the readjustment from the moment when the costs of providing the service increase, which must be documented and in any case, submitted for approval of the Board of Public Transportation..."⁷⁴

b) It indicated that since it was based on the provisions and methodology of Executive Order 30185, Executive Order 30396 should also be declared null and void.⁷⁵

On February 19, 2003 the Executive Order No. 30987-MPWT entitled "Procedural Regulations for Rate Readjustment of the Technical Vehicle Inspection Service [VTI] Charged to the Consortium of Riteve SyC" was published, and it was corrected by errata and published on February 28, 2003 (hereinafter, "Executive Order 30987"). This Regulation stated that the rates adjustments shall be made with the "...purpose of ensuring the contract's economic and financial balance, in accordance with the valuation of duly confirmed real costs necessary for the performance of the Agreement" so the requests for rate adjustments should include the "...economic and financial study demonstrating the change in the costs... "⁷⁹ This regulation set the guiding principles for VTI rates adjustment, but failed to include any formula.⁸⁰

On July 8, 2003, Riteve submitted a request before the PTC for an extraordinary rates readjustment for the VTI service.⁸¹ Regarding this request it is important to mention the following:

a) Riteve requested an extraordinary rate readjustment of 26.58%, arguing that it was the appropriate increase based on the rate stated in the Offer of July 1998.⁸²

b) When studied by the Board of Directors on July 22, 2003, the PTC executive director noted in the meeting that the request proposed ".. .a formula that was used in regulations that were in force when the Agreement with the company was approved, which is based on the costs of labor, depreciation percentages, maintenance, etc., and then adjusted those parameters according to the inflation indices. Instead of recurring to increases in the company's real costs, what [it] does is adjust them according to general indices."⁸³

c) On September 16, 2003, the Board of Directors responded to the request by increasing the rate established in July 2002—not the one offered by the Consortium in 1998—by 13.13%, basing the increase on changes in price indexes (between July 1, 2002 and September 30, 2003), as well as information from Riteve's financial statements.

d) On October 23, 2003, the Board of Directors reevaluated the formula they had previously approved on September 16, 2003. The figures of the variables (wage indices, exchange rate variation, price indices, construction indices, etc.) in the formula were slightly modified, keeping the rate increase of 13.13%.⁸⁴ This increase, however, was never published by Executive Order nor did it gain legal authority.⁸⁵

On November 18, 2003, Riteve filed an amparo proceeding before the Constitutional Chamber of the Supreme Court of Costa Rica (hereinafter, the "Supreme Court"), against the MPWT and the Chairman of the PTC, requesting (i) that the State answer the request for rate readjustment of July 8, 2003, and (ii) that the State design a methodology for rate readjustment.⁸⁷ Regarding such proceeding:

a) Through judgment number 2004-03741 issued on April 16, 2004, the Supreme Court ordered the MPWT and the Chairman of the PTC to answer and inform the writ submitted on behalf of Riteve on July 8, 2003.⁸⁸

b) Riteve alleged the infringement of the instructions contained in the referred judgment, through a new amparo proceeding; however, the Constitutional Chamber of the Supreme Court, in its judgment No. 2004-13976 dated December 3, 2004, stated that "...the action of disobedience submitted by the protected company is unlawful, since it is clear that the Public Transport Council, as competent entity to rule on the request submitted, issued its ruling and gave notice of it within the period provided...it is seen that such entity ruled on the claims included in the action... in the referred agreement the Council approved the proposed methodology for rate calculation, and ordered that the new rates applicable to the vehicle technical inspection service will govern as of January 1, 2005, upon submission by the protected company of its audited financial statements with rate opinion as of September 2004..,"⁸⁹ The State fulfilled the Supreme Court's order on May 28, 2004, and on the same day the Board of Directors approved the methodology for rate calculation proposed by the firm Despacho Carvajal y Consultores S.A. (hereinafter, the "Carvajal Firm") in its report dated May 19, 2004.⁹⁰

On April 26, 2004, Addendum No. 1 to the Contract was signed, establishing that in the future Riteve would be the contractor and not the Consortium. The Contract remained the same in all other aspects.⁹¹

a) On June 2, 2004, an ad-hoc arbitral tribunal was formed, based in San José, Costa Rica, composed of arbitrators Eduardo Sancho Gonzalez, Rodrigo Montenegro Trejos and Aldo Milano Sánchez.⁹³

b) On June 24, 2004, Riteve filed its claim memorial against the PTC and Costa Rica for the alleged infringement of contractual obligations. The purpose of that claim was, mainly, that the arbitral tribunal: (i) declare that PTC breached the contract by not updating Riteve's rates in a timely manner; (ii) declare the correct methodology that should be applied to the rate's readjustment; and (iii) require the PTC and the MPWT to compensate Riteve for the damages and lost profits caused by the alleged breach of contract.⁹⁴

c) On July 22, 2004, the PTC answered the arbitral claim, filing the motion to dismiss for lack of jurisdiction of the Arbitral Tribunal to rule on matters of imperium, such as the determination of rates for a public service, for considering that it is an exclusive State power entrusted to the MPWT. The Arbitral Tribunal denied the motion to dismiss, and the PTC filed an appeal before the Supreme Court.⁹⁵

d) On October 21, 2004, the First Chamber of the Supreme Court issued judgment 906 A-04, by which it determined that the Arbitral Tribunal lacked jurisdiction to rule on the disputes between Riteve and the PTC, and that the determination of rates is an imperium power that corresponds only to the State of Costa Rica, being a governmental power and not a consensual element of the Contract.⁹⁶ The Court stated that the exercise of that public power is non-transfer able and unwaivable, it cannot be subject of an arbitral proceeding, although, of course, they do not escape the control of the administrative-contentious jurisdiction.., referring to Riteve's possibility to file its claims by means of a contentious-administrative action.⁹⁷

e) On July 18, 2005, the Arbitral Tribunal ended the arbitral proceeding due to lack of jurisdiction.⁹⁸

a) Considered the official notice of October 31, 2003 issued by the Comptroller Office.

b) Considered the provisions referring to the need to "...establish formulas for ensuring the adjustment and financial balance of the [VTI] contract..."

c) Determined that the economic and financial balance of the Contract had been maintained from July 2002 (start of operations) until December 2003, taking into account the 13% return on projected billing by the Consortium in its offer.¹⁰⁰

During the May 28, 2004 ordinary session, the PTC agreed to approve the methodology proposed by Carvajal Firm in its report of May 19, 2004. This adjustment methodology was again approved in an extraordinary session on December 9, 2004.¹⁰¹

a) Riteve opposed the Increase Agreement, filing before the PTC a motion for revocation with appeal, questioning the rate readjustment methodology proposed by the Carvajal Firm. Such motion was dismissed on the basis of lateness and lack of legal grounds.¹⁰⁴

b) On February 28, 2006 Riteve filed an ordinary proceeding before the Administrative Contentious Court against the PTC and the State, requesting the agreement be declared null and an order to pay damages and lost profits.¹⁰⁵

a) Riteve filed a second claim, which was joined to the previous one.

b) In its claims, Riteve requested the Administrative Contentious Court: (i) to declare the nullity of the Executive Order No. 30573; (ii) to declare valid and effective the Executive Orders No. 30185 and 30396; (iii) to annul the Increase Agreement approved by the Board of Directors on December 15, 2004, which increased rates for 2005 based on the methodology proposed by Carvajal Firm; (iv) to command the MPWT to set the technical inspection rates based on the rate model provided in the Terms of the Tender, the Offer and the Contract; and (v) to sentence the State to pay damages and lost profits for an amount of CRC ¢2,850,000.000 (two million eight hundred fifty thousand colons), equivalent to USD $1,400,000.00 (one million four hundred thousand dollars).¹¹²

c) On November 28, 2012, the Administrative Contentious Court issued the judgment No. 2869-2012, rejecting Riteve's claims. The judgment concluded that Riteve failed to prove, in the absence of evidence, that it had suffered an economic and financial imbalance of the Contract.¹¹³

d) The trial court judgment was confirmed by the Appeals Court on August 19, 2013. Against this ruling, Riteve filed a cassation appeal, which the Supreme Court rejected by unanimous vote on December 5, 2013.

a) The report proposed " ...an inflation-neutral model for recovery of nominal costs for the company, that is to say, that the effective inflation adjustment ceiling as such was cancelled out by the real relative costs adjusted by the same inflation parameter and then adjusted for productivity..."¹¹⁹

b) Riteve rejected the methodology proposed in that report, filing a motion for revocation with appeal and nullification of the agreement that had approved such methodology. Riteve requested that in its place, the formula approved by the PTC on October 23, 2003 be applied, despite the fact it never gained legal enforceability.¹²⁰ Based on the IRES technical criteria, the Board of Directors rejected that motion for revocation. Furthermore, because the motion for revocation was accompanied by an appeal, it was forwarded to the MPWT, who admitted the appeal and annulled the agreement reached in ordinary session of December 19, 2006 because it had procedural defects, having been decided without granting a hearing to Riteve. In its ruling, the MPWT urged the PTC to develop a new rate methodology by collaborating with the Public Services Regulatory Authority (hereinafter "PSRA").¹²¹ Consequently, Riteve was granted a hearing and in light of its observations, the IRES upheld its conclusions of previous reports, confirming the validity of the methodology contained in the draft published on January 24, 2006.

c) In view of the above, the Board of Directors approved the IRES rate adjustment model in its session of August 11, 2009.¹²²

On December 17, 2008, a Reform to Act 7331, entitled Act of Transit by Terrestrial Public Roads, was approved by Act 8696. Act 8696 provided in Article 19 that the VTI would be provided in the service centers of the companies to which the Ministry of Works awarded that concession by public tender, promoting the greatest possible number of service providers. It also determined that the PSRA had the authority to review the vehicle inspection rates, regardless of whether under the Contract it had been agreed that the rate approval was a prerogative of the PTC.¹²⁵ Also, under this reform the Minister of Public Works and Transport became competent to decide contractual extension for the VTI service.¹²⁶ It is noteworthy that Riteve remained as the only VTI service provider in Costa Rica, despite the provisions of Act 8696.¹²⁷

a) The Regulatory Committee of the PSRA (hereinafter, the "Regulatory Committee"), created for the function of setting rates for public services and to rule on the motions for revocation filed against the PSRA's actions, rejected the readjustment request on July 2, 2010, stating that it did not meet the admissibility requirement to provide a PTC certification indicating the current methodology for rate adjustment.¹²⁹

b) The Regulatory Committee reconsidered the request, and on December 11, 2012, it decided that since Riteve was the exclusive provider of VTI services, the PSRA was not competent to act as the regulatory authority. Moreover, because the Contract's provision should be enforced, the competent entity to approve the methodology was the MPWT, not PSRA. For the foregoing reasons, the Regulatory Committee decided to reject the request for the adjustment of rates.¹³⁰

On November 12, 2010, Riteve submitted a new request for rate readjustment, based on the rate adjustment methodology proposed by the Carvajal Firm. The Regulatory Committee rejected the request on December 22, 2010, claiming that it did not meet the admissibility requirement to provide a PTC certificate indicating the current methodology for rate adjustment.¹³⁴

On May 26, 2011, Riteve submitted before the MPWT the official notice No. 052501-2011 requesting, in accordance with clause 4.2 of the Contract, that the MPWT deliver COSEVI's Technical Report on which the decision not to extend the Contract was based. Also, Riteve indicated that such decision would imply not enforcing clause 12.6 of the Contract in relation to the contractor's donation of property, facilities and equipment to the Costa Rican State, that the agreement to grant the use of the facilities that Riteve made available to the MPWT would become ineffective in accordance with clause 3.2.13 of the Contract, and that Riteve's obligation to periodically calibrate the Executive Power's inspection line which was donated to the Administration according to clause 3.2.14 of the Contract would also be invalidated. In view of the foregoing, COSEVI's Executive Management proceeded to issue a technical report on the possible extension of the Contract in accordance with clause 4.2 of such Contract. Additionally, the report showed that there had been no breaches in nine years on Riteve's part, and that the continuity of the VTI service is considered of public interest.¹³⁸

a) A direct agreement within the framework of the Contract, which stated that: (i) the government of Costa Rica had decided to extend the term of the Contract from July 16, 2012 to July 15, 2022; (ii) regarding the establishment of the methodology for the applicable rate readjustment between 2012 and 2022, the MPWT prepared in the Ordinary Session 37-2004 of May 27, 2004 and again in the Extraordinary Session 19-2004 of December 9, 2004, an executive order draft entitled "Regulation of the Procedure for the Adjustment of Rates for Vehicle Technical Inspection Service (VTI) handled by Riteve SyC SA ", in order for PSRA to approve the rates for this service for the Contract's extension and to regulate the rate adjustments for the entire term according to the formula resulting from the methodology approved by the PTC when it was competent to do so (hereinafter, "Direct Agreement"). The MPWT committed to publish the methodology before August 10, 2012, including the corresponding rates, and Riteve accepted that upon fulfillment of the above, it would forego any additional rate claim.¹⁴³

b) A contractual addendum to modify clauses 7, 8 and 11 of the Contract, in order to (i) clarify the scope of the reports Riteve must submit; (ii) establish the competence of COSEVI in relation to investigation, and (iii) incorporate international arbitration as the mechanism to resolve any dispute arising between the Parties in relation to the Contract (hereinafter, the "Contractual Addendum").¹⁴⁴

a) That Respondent has breached its obligations under article III of the BIT because:

i. It did not give Claimant's investment fair and equitable treatment at all times. (Memorial, § 513.)

ii. It incurred in denial of justice by preventing, through a ruling of the Supreme Court of Justice, that the arbitration mechanism contractually agreed upon be carried out. (Memorial, § 514.)

iii. It treated Claimant in an unfair and discriminatory manner by not responding to the requests for readjustment of rates, thereby preventing the full enjoyment of its investments. (Memorial, § 515.)

iv. It engaged in arbitrary, unilateral and unjust acts through the derogation of Executive Order 30185, which approved the methodology for the readjustment of the rates. (Memorial, § 516.)

v. It engaged in arbitrary and unfair acts by giving Claimant less favorable treatment as compared to the treatment given to other investors in public services. (Memorial, § 517.)

vi. It engaged in arbitrary, unilateral and unfair acts upon the approval of amendments to the Transit Act in 2008 and in 2012, which affected the exclusive rights granted to Claimant under the Contract. (Memorial, § 518.)

vii. It engaged in arbitrary, unilateral and unfair acts by terminating the Contract through Ruling 333. (Memorial, § 519.)

viii. It committed a "serious breach of obligations agreed to in the contract for the provision of technical vehicle inspection." (Memorial, § 520.)

b) That Respondent has breached its obligations under article V of the BIT by adopting measures equivalent to expropriation by terminating the Contract and affecting the exclusive operating rights thereunder. (Memorial, § 521.)

c) That Respondent is liable for the breach of its obligations under the BIT and therefore is obligated to pay lost profits to Claimant in an amount no less than €261,600,000.00 (two hundred sixty-one million six hundred thousand euros), which includes what was not received due to the lack of rate adjustments and damages for the termination of the exclusive right to operate in Costa Rica between 2012 and 2022. (Memorial, § 522.)

d) That Respondent is obligated to pay Claimant all the costs and expenses incurred as a result of this arbitration. (Memorial, § 523.)

a) Declare that it lacks jurisdiction to hear and rule on the dispute brought by the Claimant; or

b) Reject all the claims of Claimant as legally and factually invalid. (Counter-Memorial, § 681.)

A. Jurisdiction and/or Admissibility

a) Opportunity to Present Objections regarding Jurisdiction.

b) Forum Selection Clause contained in Article XI.3 of the Treaty.

c) Requirement of Consultation and Waiting Period established in Article XI.1 and XI.2 of the Treaty.

d) Jurisdiction in the case of claims based on Article III.2 of the Treaty.

B. Questions of Merits

a) Fair and Equitable Treatment.

i. Stability

ii. Legitimate Expectations

iii. Arbitrariness and Discrimination

iv. Denial of Justice

b) Full Protection and Security.

c) National Treatment and Most Favored Nation.

d) Measures Equivalent to Expropriation.

C. Existence of Damages

a) Claimant itself states that it is aware that since it is an arbitral procedure, substance should prevail over strict formality.¹⁵²

b) Costa Rica had already put in evidence the lack of legal grounds for SyC's request that its objections should be considered not presented,¹⁵³ given that the request was not grounded on either the ICSID Arbitration Rules or investment arbitration practice.¹⁵⁴ Additionally, SyC did not elaborate on this matter in subsequent correspondence.

c) The arbitral proceeding is governed by the ICSID Arbitration Rules,¹⁵⁵ as was established in Procedural Order No. 1, and not by the Costa Rican rules of procedure invoked by SyC.

d) Article 41 of the ICSID Arbitration Rules allows the Arbitral Tribunal to consider jurisdictional matters at any stage of the proceeding, and it has the duty to assess its own jurisdiction.¹⁵⁶

e) Various arbitral tribunals, as in the case AIG v. Kazakhstan, have admitted objections to jurisdiction even after the submission of the counter-memorial. Also in Pezold v. Zimbabwe in which the Tribunal exercised its flexibility and discretion under Rule 26 (3) of the ICSID Arbitration Rules and admitted objections that the State did not present until its Rejoinder.

f) The delay incurred by Costa Rica in filing its Counter-Memorial was of only four minutes, and SyC did not prove in any way the detriment that this delay could have caused, since there was none, especially considering that Claimant requested and subsequently obtained a 25 day extension to file its Reply, which resulted in an adjustment of the entire procedural calendar.

g) SyC's request is unprecedented in international arbitration and would result in serious and irreparable harm to Respondent by denying its right to a defense.

a) SyC cannot question that it is not a party in the Contract, since although it was part of the Consortium, it later assigned all its contractual rights to Riteve. Thus, SyC ceased to be a party to the Contract since April 26, 2004, date of the Contractual Addendum by which the assignment of rights was made, and therefore it was not a party to the Contract when filing its request before the ICSID. Furthermore, the contractual relationship between Riteve and the State is subject to Costa Rican law, and SyC has not proved that it can directly exercise the contractual rights that Riteve has under that law.

b) SyC suggests that Riteve is its vehicle or "alter ego" in respect to the obligations that Costa Rica assumed under the Contract, but otherwise denies said relationship regarding its failure to comply the "Fork in the Road Clause" set forth in the BIT, based on the existing formal difference between the two companies.

SyC has never disputed Costa Rica's argument regarding that there should be a direct contractual relationship between the plaintiff investor and the State for the investor to invoke the umbrella clause, but focused its argument on the fact that SyC and its subsidiary Riteve are equivalent for contractual purposes, mainly because of a joint and several liability of SyC regarding Riteve's contractual obligations. Costa Rica asserts, however, that SyC ceased to be a party to the Contract when the Consortium assigned its rights under the Contract to Riteve on April 26, 2004, and as shown by both the Addendum Contract dated April 26, 2004 and the one dated July 20, 2012, the contractor or concessionaire to the State is Riteve, not SyC. Therefore, under the current Contract the State only has obligations with Riteve. Since the State does not have obligations with SyC, there is nothing that can be protected by the umbrella clause, being the joint and severed responsibility of the Claimant an obligation with the State, but not vice versa.¹⁶¹

"3. Once an investor has submitted the dispute to an arbitral tribunal, the award shall be final. If the investor has submitted the dispute to a competent court of the Party in whose territory the investment was made, it may, in addition, resort to the arbitral tribunals referred to in this article, if such national court has not issued a judgment. In the latter case, the investor shall adopt any measures that are required for the purpose of permanently desisting from the court case then underway..."

a) SyC does not deny in its Reply the existence of a "Fork in the Road Clause" in Article XI.3 of the BIT, nor does SyC dispute the fact that a competent national court in Costa Rica issued a judgment on November 28, 2012, without SyC having withdrawn that procedure before the issuance of said judgment.

b) Claimant denies being plaintiff in the lawsuit filed before the local court since it acted through Riteve, and denies having filed identical breach of contract claims in both venues, which consist of the request to declare that Costa Rica did not adjust the rates for VTI service, breaching the Contract and therefore should be sentenced to pay a compensation to cover the difference between the rate that the State authorized Riteve to charge users, and the one that it should have charged them.

c) SyC did not prove that it was another entity that controlled the local proceedings, different from the one that controls the current arbitration. Claimant failed to prove that it was Riteve's minority shareholder (Transal S.A.) who had driven Riteve's acts on the local proceeding, or that said minority shareholder could block SyC's decision to withdraw from the local proceeding.

d) SyC merely highlighted the difference between the names of the claimants in the registration documents of the local proceeding and the parties named in this arbitration, failing to observe the complexity of this issue. In this regard, Costa Rica quotes the case Pantechniki v. Albania to assert that such matters should be evaluated with discernment. In this regard, Respondent states that SyC has recognized on several occasions that it effectively controls Riteve SyC,¹⁷⁷ and therefore it is clear that Riteve is "...a mere vehicle for the Claimant..."¹⁷⁸

e) SyC's arguments are inconsistent. On one hand, Claimant argues that it is not involved in the local proceeding, while at the same time bases its claim of denial of justice on Resolution 000906-A-04 of October 21, 2004 issued by the First Chamber of the Supreme Court, which declared the lack of jurisdichon of the local arbitral tribunal.¹⁷⁹

f) As to the identity of the subject matter, SyC attempts to deny that in both proceedings it seeks the same goal: compensation for alleged breaches of Contract by Costa Rica, related to the adjustment of VTI service's rates, distinguishing between administrative claims (which in SyC's view are not contractual in nature) and claims of breach under the BIT. In this regard, Costa Rica quotes the Pantechniki v. Albania award, which established that it is not sufficient to assert that a claim is based on a Treaty to argue it is different from another claim under local jurisdichon, and instead it must be determined whether the claim has an independent existence beyond the Contract, which Costa Rica denies.

g) Respondent considers that SyC's assertion that in the local trial no economic compensation was requested is false, since in the November 28, 2012 judgment the Judicial Branch notes that Riteve requested that"... the State be ordered to pay present and future damages and losses..." and including as loss of profits "...the amount Riteve failed to earn from July 2002 to December 31, 2005, due to the difference between the established rate and that it would have earned if the [PTC] and the [MPWT] had complied with their contractual and constitutional obligations..."¹⁸⁰

h) SyC is trying to benefit from a formality, considering that on the one hand it intends to consider Riteve an alter ego of SyC for the purposes of the umbrella clause, regarding the obligations Costa Rica assumed with Riteve, but on the other hand, and incongruously, SyC intends to deny that relationship with Riteve with respect to the Fork in the Road Clause.

i) Allowing SyC to use its local corporation Riteve to evade the jurisdictional requirements of the BIT would create the possibility of conflicting rulings between a local court and an international tribunal, which the BIT attempts to avoid.

a) The provision of the Addendum on which SyC relied refers exclusively to the ICSID Additional Facility, and not to ICSID itself. Thus, Costa Rica emphasizes that SyC did not submit its claim before the Additional Facility, nor did it meet the requirements of Article 3.1 of the Arbitration Rules of the Additional Facility.

b) The Contractual Addendum requires the formation of a "Conciliation Committee" prior to arbitration, and not having met this requirement, international arbitration would not be appropriate under the Contractual Addendum.

c) The Contractual Addendum states in its arbitration clause that in the case ICSID's jurisdiction was questioned, as was the case in this arbitration, the Parties agreed to submit any dispute to the International Court of Arbitration of the International Chamber of Commerce. Therefore, under the mentioned clause SyC would have to withdraw its current complaint before ICSID.

In addition, Claimant contends that the Arbitral Tribunal:

a) Has jurisdiction ratione personae because SyC is a Spanish corporation, and had that nationality when submitting its Request for Arbitration before ICSID.¹⁸⁴

b) Has jurisdiction because of the voluntary agreement between Costa Rica and SyC. First, Article XI of the Treaty confirms Costa Rica's consent to submit any dispute arising from the breach of the Treaty before an arbitral tribunal.¹⁸⁵ Indeed, in the Lanco International Inc. v. Argentine Republic case, the tribunal found that signing a treaty in which parties agreed to submit the disputes to an arbitral tribunal constitutes written expression of consent to submit such disputes to international arbitration, being "a generic offer for submission to ICSID arbitration."¹⁸⁶ Second, SyC confirmed its consent to arbitrate by submitting its Request for Arbitration, meeting the requirement provided in Article 25 of the ICSID Convention.¹⁸⁷ Third, the conditions in the Treaty were met, given that the dispute was notified in writing to Costa Rica through a Notice of Intent dated May 31, 2011, and six months passed between that notice and the filing of the Request for Arbitration, in accordance with Article XI of the Treaty.¹⁸⁸

c) Has jurisdiction ratione temporis, given that the execution of the Contract, Riteve's incorporation, the start of operations, and the current dispute took place during the effective term of the Treaty.¹⁸⁹

d) Has jurisdiction ratione materiae since the dispute, legal by nature, arises from Costa Rica's infringement of its obligations to promote and protect SyC's investment under the Treaty.¹⁹⁰ In this regard, Article III.2 of the Treaty requires Costa Rica to "...perform any obligation already incurred in connection with investments by investors..." including investments consisting of "...rights to economic and trade activities granted under a contract..." as well as contractual rights to economic benefits.¹⁹¹

Concerning the alleged lis pendens, in connection with Costa Rica's assertion that SyC submitted that same dispute concerning its investment before a local court and without taking the necessary steps to permanently withdraw from that judicial instance,¹⁹³ SyC states that:

a) It is not the same claimant, since (i) it is SyC and not Riteve who has the character of investor; (ii) SyC and Riteve are different corporations; and, (iii) 45% of Riteve's shares are owned by the Costa Rican corporation Transal S.A., who has no interest in this arbitration. Therefore, Claimant states that SyC has not filed any proceeding in Costa Rica.¹⁹⁴

b) It is not the same dispute, since the issue submitted before a local court was an action for annulment of administrative acts, so it concerned claims related to annulling, different from the claims for compensation of damages due to breach of contractual obligations by Costa Rica. In addition, MPWT and Riteve, in the Addendum to the Contract, expressly renounced to submit any disputes arising from the Contract or related to it before domestic authorities, since they would be submitted to international arbitration.¹⁹⁵

c) There is no proceeding of which SyC can or should desist from. According to Article XI of the Treaty, for it to be necessary to desist from an action there is a prior condition that the investor has submitted the dispute to the competent court of the contracting party, being understood that the only one that can desist from a proceeding is the one who has the status of party. Given that SyC was not a party in the administrative-law proceeding filed by Riteve and that Transal S.A. is not a party in this arbitration, to claim that Riteve should desist from the action for annulment "...would lead to the absurdity of taking away from an entity that has no claim in the arbitration process a legitimate claim that was raised before the judges of its country in regards to the issuance of an administrative action that it considers null and against the law..,"¹⁹⁶ Claimant also argues that if it abused its majority position in Riteve, it would be liable to Transal S.A. for leaving it without protection. Therefore, the situation Article XI of the Treaty is intended to regulate did not occur in the case at hand.¹⁹⁷

d) No lis pendens exists, since the necessary requirements are not met, and the Costa Rican court itself mentioned in the judgment of November 28, 2012 that (i) the right invoked in this arbitration, based on the Treaty, is not the same as the one heard in the local trial, and (ii) the claims in each of the two proceedings are very different in nature; the claim filed before local courts related to the annulment of public conduct (and incidentally property-related) while the claim in this arbitration exclusively pertaining to property.¹⁹⁸ SyC also points out that the factual background in Pantechniki SA Contractors & Engineers v. Albania was different from the current dispute, given that in both instances the claim was contractual and the same company that filed a lawsuit before the Albanian courts subsequently notified its claim under the bilateral investment treaty.¹⁹⁹

e) SyC claims it does not meet the three requirements set forth in the award of Benvenuti and Bonfant SRL v. The Government of the People's Republic of the Congo, which are (i) identity of parties, (ii) identity of matter and (iii) identity of subject.²⁰⁰ In this regard, SyC states that in both the procedure before the Administrative Contentious Court and the arbitration proceeding before ICSID there is: (i) no identity of parties; (ii) the matter in the local suit is different from the matter in the arbitration proceeding; and (iii) there is no identity in the subject because the local trial was not a contract-related proceeding and was limited to facts occurring between 2002 and 2005, compared to the arbitration damages arising from multiple actions of Costa Rica covering the period 1998-2012 and claiming future damages for period ending in 2022.²⁰¹

f) Moreover, assuming without conceding that SyC had submitted a dispute to the domestic judges of Costa Rica, Claimant alleges that pursuant to Article XI of the Treaty, even if the investor previously went before local courts it may refer the dispute to arbitration "...as long as said national court has not issued judgment...", and both the Request for Arbitration and the memorial were submitted before a judgment was issued in the local trial.²⁰²

Respondent contends that SyC submitted five new claims in its Memorial that are not related in any way with the three claims described in its Notice of Intent dated May 31, 2011 and in its Request for Arbitration. In this regard, Costa Rica claims that the terms of the Treaty do not allow the unilateral expansion of the scope of the dispute.²⁰⁵ Costa Rica summarizes these five new claims in the following points:

"(a) argument under Article III.l of the Treaty (denial of justice) based on Resolution 000906-A-04 of October 21, 2004 of the First Chamber of the Supreme Court of Justice (Saia Primera de la Corte Suprema de Justicia) of Costa Rica, declaring the lack of jurisdiction of the local Arbitral Tribunal;

(b) argument under Articles III.l and III.2 of the Treaty, on the grounds of'the issuance on December 17, 2008, of an amendment to the Traffic Act";

(c) argument under Articles III.l and III.2 of the Treaty, on the grounds of 'the issuance on October 26, 2012, of a New Traffic Act';

(d) argument under articles III.l, III.2 and V, on the grounds of 'having unilaterally and unfairly terminated the contract of services for vehicular inspection though Resolution 333 of May 9, 2011, issued by the Minister of Public Works and Transportation without ordering payment of a prompt and adequate compensation;'

(e) argument under article III.l of the Treaty, on the grounds of not having published a specific methodology before August 10, 2012, after having committed to do so on July 20, 2012."²⁰⁶

a) Costa Rica pointed out in its Counter-Memorial that there are five new claims presented by SyC in its Memorial that were not related to the three claims described in Claimant's Notice, and SyC did not demonstrate in its Reply compliance with the notice requirements in terms of Article XI.l of the Treaty, which requires the investor to notify the State of all its claims and with detailed information.

b) SyC in its Reply does not answer the allegation made by Respondent and instead states that SyC effectively notified the State of the existence of a dispute under the Treaty. Even though SyC's notification to the State is uncontested, the Claimant never proved that it had notified Costa Rica in the

manner required by the Treaty, with detailed information on each of the dispute issues, with respect to these five new claims.

"... [First], it demands that the Tribunal exercise jurisdiction regardless of the non-compliance by the Claimant with the express conditions of consent to the arbitration jurisdiction that the Contracting States of the Treaty expressly agreed to in the Treaty. Secondly, the Claimant invites the Tribunal to ignore the high threshold of the international standards under which it presents its claims and to act as an ex aequo et bono court- which the tribunal is not empowered to do, as there has been no consent from both Parties for this, as required by Article 42(3) of the ICSID Convention. Third, it requests that the Tribunal examine and revoke the conclusions of fact and even of Costa Rican law which competent Costa Rican courts have reached. At the request of the Claimant itself and its subsidiary and alter ego, Riteve SyC, [Costa Rican] courts have already considered and issued a conclusive ruling, with the effects of res judicata, with respect to exactly the same controversy that the Claimant now seeks to submit to ICSID. Fourth, it requests the Tribunal to condemn Costa Rica to pay a spectacular indemnification for totally illusory damages, without having demonstrated a single cent in material losses and much less the multi-million amount in damages it claims..

"...Claimant cannot extrapolate the conclusion of the three awards in CMS, LG&E and Sempra, in the sense that 'the stability of the legal system is an essential element of fair and equitable treatment' and intend to apply the same conclusion to the present case, because the terms of this Agreement are significantly and materially different from the terms of the agreement between Argentina and the United States.''²²⁰

Claimant asserts that the State's failure to comply with the investor's legitimate expectations, those that induced him to make the investment, constitutes a violation of the obligation to give the investor at all times fair and equitable treatment. For this reason, the analysis of fair and equitable treatment involves the necessary consideration of investor expectations when investing, relying on the protections provided by the host State. SyC also states that the obligation of fair and equitable treatment is violated if the State's conduct is characterized as arbitrary.²²¹

a) Preventing that the contractually agreed arbitration mechanism could be processed through a Resolution of the Supreme Court.

b) Repeatedly breaching its obligations in an unfair and discriminatory manner by failing to respect the rates submitted by the contractor in its offer, failing to approve the methodology for rate readjustment, failing to publish, and rejecting various requests for rate readjustment for more than seven years.

c) Breaching contractual obligations by repealing decrees and approving amendments to traffic laws, in the exercise of the State's exclusive powers, that eliminated already granted rights to SyC.

d) Abstaining from readjusting the applicable rates and ending the exclusive rights granted under the Contract.

a) Said principle is expressed in Article 5 of Law 7593 of 1995 (amended by Law No. 8660 of August 8, 2008), which does not mention the VTI service. Also, for a public service to be understood as regulated and under the regulatory authority "... it is indispensable to have an express statement by the law..." The relevant regulatory authority in this case, the PSRA, does not include the VTI service in its list of public services regulated.²²⁴

b) According to Carlos Arguedas' report, there is no reference to the Contract being subject to the principle of service at cost in any official notice from the Comptroller, nor was this mentioned during the tender proceeding.²²⁵

c) The same PSRA expert used by Costa Rica reaches the conclusion that in view of the rate regulation established in the Contract, the PSRA cannot apply to the Contract the same regulation that it applies to the rest of the services it regulates, from which SyC infers that the rules of the Law 7593, which is where the principle of service at cost is found, do not apply to the Contract.²²⁶

d) The regulation is a limitation on the free market and on free enterprise, and therefore "...it must be enshrined expressly and cannot be applied by analogy or extension,.."²²⁷

e) Because VTI is not a public service, the principle of service at cost should not apply. SyC cites several official rulings of the PSRA and the Attorney General in which they postulated that the VTI service is not a public service.

f) The contract did not provide specific provisions regarding public services regulation, establishing that everything related to VTI corresponded to the PTC, the contracting entity.

g) PSRA's rejection of the readjustment requests confirms that VTI service is not a public service subject to its regulation.

a) The Contract does not limit the profitability of the company, and if so, Costa Rica has the burden of proof to establish a contractual limitation to that profitability, given that it is the Respondent who claims the above.

b) According to Mr. Carlos Arguedas' report, the Comptroller did not mention limitations to profitability in the framework of the implementation of the adjustment mechanisms provided in the Contract, in any of its pronouncements.²²⁹

c) The methodology for the rate readjustment in the Contract provides that all costs and expenses must be taken into account, but nothing is mentioned regarding the issue of profitability.

d) The Terms of the Tender do not mention anything regarding a possible limitation of the contractor's profitability.²³⁰

e) None of the methodologies referred to for the rate readjustment implies said limitation on profitability, including (i) the methodology in Executive Order 30185; (ii) the methodology from the Carvajal Firm; (iii) the October 21, 2003 formula; and (iv) the methodology used by Mr. Brunner and Mr. Vargas in 2002.

In connection with Costa Rica's statement that the Consortium submitted in its Offer a rate of return of 13.28%, SyC counters that this statement is false²³¹ for two reasons: (i) there was never a complementary offering, and (ii) the document Costa Rica claims as a supposed original complementary offer to the Consortium's July 7, 1998 Bid does not correspond to what was announced since it is "... a document that was informally provided in the meetings held in the [Comptroller General Office] after it notified the government of its decision to not endorse the contract."²³² Furthermore, clause 1.2 of the Contract sets forth the documents that govern it (the Terms of the Tender and the bid of the contractor), without mentioning any supplement to the offer.

a) Said expectations arise from (i) the Terms of the Tender; (ii) the offer; (iii) the award of the Tender; and (iv) the Contract, countersigned by the Comptroller's Office.

b) The content of the official notices from the Comptroller cannot produce the effects intended by Costa Rica, since (i) they are internal acts of the State, between the Comptroller and the MPWT, without the Consortium being notified of such documents; (ii) it is questionable whether the constitutional counter signature was appropriate, given that the Contract does not provide for public funds payment; and (iii) even if the counter signature was appropriate, the Comptroller's prerogative is whether to validate a Contract, not to modify its contents.

c) SyC does not seek the enforcement of the provisions of the First Contract, which has no binding effect, but requests the enforcement of the obligations clearly stipulated in the Contract, which had the Comptroller's countersignature.

a) Costa Rica's own expert, Timothy Hart, asserts that in the two times Costa Rica readjusted rates in 2002 and 2005, such adjustments were due to Riteve's rising costs.²³⁵

b) The Contract, defining what is meant by rate adjustment, states that it would include both costs increase and the necessary adjustments based on economic indicators.²³⁶

c) According to Nicholas Good's report, Riteve's labor costs have increased in direct proportion to inflation, stating that since 2003 operating costs have increased by 148%.

Likewise, SyC asserts that the minutes of the PTC session held on November 11, 2003²³⁹ show that the Comptroller opposed the formula applied by Mr. Vargas and Mr. Brunner. However, SyC considers that having lowered the rates, the opinion of the Comptroller was not considered binding.²⁴⁰

Based on the opinion of various arbitral tribunals,²⁴³ Respondent argues that there are three requirements in order for the investor's expectations to be protected under the independent standard of fair and equitable treatment: first, ".. .they have to be legitimate and reasonable; second, they must be based on conditions offered or commitments assumed by the State; and third, they have to have been taken into account by the investor when deciding whether or not to make the investment."²⁴⁴ Considering the above, and based on LG&E v. Argentina, the only investor's expectations subject to protection are the ones based on the terms offered by the receiving State at the time of investment, must have real existence, and be legally enforceable. The investor cannot unilaterally establish expectations.²⁴⁵

According to Respondent, this proves that at the time of signing the Contract, the Consortium did not expect to get "... an internal rate of return of more than 20% [o]r even 35%, for providing that service. That is ultimately a profitability that is vastly superior to what the company projected before it began operations."²⁶⁸ SyC did not refute in its Reply having obtained a return of 644% (21.6% annually) on its capital contribution, between September 30, 2001 and December 31, 2011.²⁶⁹ Therefore, Costa Rica claims that not only has SyC not established a financial economic imbalance of the Contract to its detriment, but it also failed to refute that the Consortium's profits were much higher than originally projected. Thus, if there is an imbalance it is in detriment of the State, not of the contractor.²⁷⁰

a) Issued the Executive Order 30573-MPWT, three days before the start of operations, repealing the Executive Orders that had established the methodology for rate readjustment and the rates applicable for the first year of operations.

b) Issued Ruling 333, unilaterally terminating the Contract, making the decision not to extend the Contract for political reasons.

c) Approved reforms to Transit Laws that abolished the exclusivity rights granted to Riteve under the Contract.

d) Breached its obligation to publish the methodology agreed under the agreement of July 20, 2012.²⁷²

a) The Comptroller's memorandums regarding the counter signature were not directed to the Consortium, but only to the Deputy Chairman of PTC. Therefore, the Consortium never knew the Comptroller's position, situation it expressed in the letter of July 5, 2002 addressed to the MPWT.²⁷⁴

b) The statements of the Comptroller were known by the MPWT more than eight months before the publication of the Executive Order 30185, and therefore invoking those statements to repeal said Executive Order is arbitrary and unfair.

c) The purpose of the Comptroller's powers, provided in Article 11 of its Organic Law (hereinafter, the "Organic Law") is to "...ensure the legality and effectiveness of internal controls and management of public funds in entities over which it has jurisdiction..." Likewise, the Constitution of Costa Rica states in Article 184 that the main faculty of the Comptroller is the supervision and scrutiny of the public treasury, which is constituted by public funds.²⁷⁵ In this regard, the Contract (i) does not provide for payment of the rates with public funds; (ii) does not provide for administration of public funds by the contractor; and, (iii) does not require the Comptroller's countersignature.

d) The Comptroller has no power to co-manage, modify or exercise powers corresponding to the administration of the Contract. The Constitutional Chamber analyzing whether the Comptroller could or not intervene in the issue of price adjustments, expressed through vote 6432-98 that "It is not constitutionally possible that the proper Comptroller defines what, how and when payment by concept of readjustment is made, and that it's this institution which elaborate formulas and publish general opinions corresponding to the active administration"²⁷⁶ as Ms. Laura Rivera mentions in her witness statement. SyC also states that the Comptroller acknowledged that it did not have the authority to establish rates, because that power was reserved for the Administration.²⁷⁷

e) The Comptroller has the authority to intervene in the tender proceedings, authority it used in this case, and if it found that the Terms of the Tender (particularly on the issue of rates) were contrary to Costa Rican law it could have intervened to ensure the tender was not awarded and declared void, but it did not. SyC alleges that by intervening in this case, the Comptroller "...was able to exercise its constitutional and legal powers in this case, it intervened and it concluded that the basis of the tender presented a problem because it did not establish an automatic system for adjustment."²⁷⁸ Likewise, SyC quotes the Comptroller's Ruling 231 of 1999, deciding the appeals filed by other tender participants, which provides that "...the main conclusion of the [Comptroller General] was [that] the notice is simply disregarded when referring to the mechanism but it is clear that the periodicity is annual and the initiative provenes from the concessionaire."²⁷⁹ Also, SyC quotes the Comptroller's Ruling 120-2000 of March 30, 2000, which concludes that "With respect to the accurate rates, the tender rules themselves establish mechanisms and procedures for its establishment and adjustments as shown on pages 103 and 156... "²⁸⁰ Said pages provide that "The rates will be adjusted annually according to studies conducted by the contractor duly approved by the MPWT' and that "The offered rate values for each of the services will be reviewed annually according to a study conducted by the contractor and approved by the MPWT and the entity responsible for approving those tariffs in order to avoid damaging the economic and financial balance of the successful bidder."²⁸¹ SyC considers it arbitrary and unfair that the Comptroller first issued an opinion without finding any defect, and later changed its criterion and abused its powers when it is doubtful that it had the authority.²⁸²

a) The counter signature may be required, according to the Constitution, only when a payment from public funds is contemplated since the controlling, auditing, and monitoring functions conferred to the Comptroller General refer exclusively to public funds in accordance with the opinion of the expert Ruben Hernandez. Therefore, the Administration had no obligation to seek such counter signature in this case.²⁸³

b) Clause 12.5 of the Contract conditions the Comptroller's countersignature to approve an amendment "... if so required by law... ", but it does not provide that any amendment to the Contract requires the Comptroller's countersignature.²⁸⁴

c) In conclusion, the Comptroller's countersignature of the Contract confirms its content conformed to the existing law. However, in determining the rights and obligations of the Parties, what governs is what the parties expressly agreed upon and established in the Contract.²⁸⁵

In relation to the provisions of the Comptroller's pronouncements, SyC states that:²⁸⁶

a) The Comptroller's Non-Counter signature Official Notice dated May 3, 2001, through which the countersignature of the First Contract was denied, was based on the opposition to apply its own formula previously published on December 2, 1982, because said mechanism was not intended for public services provided by the private sector on behalf of the State. SyC also alleges that in said official notice the use of indexes to calculate the rate readjustment was not objected to, and that by arguing that said readjustment is not limited to the changes in the indexes used " ...the [Comptroller] acknowledges that part of the work that corresponds to the [PTC], as the entity responsible to set the tariff and regulate the service, consists of verifying the changes in the sources of the indexes utilized and the correct application of the mathematical formula in algebraic terms",²⁸⁷ and that the Comptroller's Office accepted that it should produce an ordinary rate adjustment every year, which it subsequently confirmed in its official notice dated June 28, 2001. On the other hand, SyC mentions that in the official notice dated May 3, 2001 the Comptroller's Office recognized that the PTC should verify the changes in the sources of the indexes used and the rightful application of the mathematical formula in algebraic terms, for which SyC asserts that "If an important part of the [Comptroller's] duties functions (sic) is to verify the compliance of the Government's obligations, and if the endorsement had the importance that Costa Rica intends, it is not understandable for the [Comptroller Office] to not have done anything to verify that the [Comptroller] complied with the obligations mentioned by [the Comptroller] in its official memorandum."²⁸⁸

b) SyC invokes the constitutional right to property intangibility as a source of the right to readjust rates, and in this regard states that:²⁸⁹

i. The right to economic and financial balance is part of and derives from the right to property intangibility protected in Article 45 of the Constitution of Costa Rica, and in accordance with the decisions of the Constitutional Chamber, price adjustments in order to keep the originally agreed economic level intact are part of the right to property intangibility.

ii. Price adjustments are a right of the contractor and an obligation (not a power) of the State in any contract entered into with it, according to various precedents of the Constitutional Chamber.

iii. SyC asserts, based on Article 31 of the Administrative Contracting Law, that the price adjustments are not contractual. Instead, SyC claims that in any contract with the State price adjustment is recognized as a right that is granted at the moment the offer is submitted. According to Claimant the purpose is to obtain compensation for the higher costs incurred in implementing the agreed subject of the Contract; assertion that SyC supports in the Judgments 785-90 and 1801-90 issued by the Constitutional Chamber.

iv. The Constitutional Chamber has explained that price adjustments are made "... through the application of mathematical equations based on the official price and cost indices prepared by the Executive Power."²⁹⁰

c) The economic and financial balance in Costa Rica is a constitutional right of the contractor to rate readjustment. The expert opinion of Timothy Hart is wrong because it considers it a balance of the contract and applies "... factors designed by him..,"²⁹¹

d) Profitability is not a factor in the calculation of the adjustments, and the need to limit profitability is not envisaged, either in the Contract or in the laws that govern it. The only scenario for the admissibility of adjustments are those agreed by the Parties, i.e. increases in costs or changes in economic indicators.

e) The Comptroller General referred to the financial balance as a right of the contractor to respect what was agreed to contractually.²⁹²

a) The State's failure to fulfill its obligation to annually readjust the rate applicable to the VTI service. Between July 2002 and July 2012, two readjustments were made out of ten that should have been implemented, because the PTC has not issued a methodology for said readjustment, despite being one of its obligations according to the Contract.

b) The government unilaterally revoked Executive Orders 30185 and 30396, even though Executive Order 30185 was issued and published by the MPWT nine months after the Comptroller's official notices in which the decision to revoke them is allegedly based on. According to SyC this confirms that"... political motives were determinant,.."²⁹⁴

c) That the First Chamber of the Supreme Court prevented the arbitral mechanism agreed in the Contract from operating, even though (i) said mechanism was provided for in the Contract; (ii) it was also provided for in each one of the drafts of the Contract; and (iii) the report in which the Legal Affairs Director of the PTC concluded that the rate issue could not be the subject of an arbitral tribunal's decision was issued three years after the Contract was signed.

d) Costa Rica approved on December 17, 2008 a law contrary to the exclusive rights granted to SyC under the Contract, by giving the PSRA faculties related to rates for the VTI service, even though that faculty belongs to the PTC under the Contract. Similarly, through Ruling 333 Costa Rica decided not to extend the Contract in order to expand the market to several operators, and if that ruling was later overturned it was not to respect the contractor's rights but to ensure the continued provision of the VTI service.

e) Costa Rica issued a Transit Law on October 26, 2012 that ended the exclusivity awarded by contract to SyC.

f) Costa Rica failed to comply with its obligation to adopt and publish the methodology for rate readjustment during the first ten years of the Contract.

g) The MPWT signed a Direct Agreement under which it was bound to publish a methodology for rate readjustment.

a) The Treaty provides that fair and equitable treatment in no case may be less favorable than what is required by international law. Costa Rica is part of the Tree Trade Agreement among the Dominican Republic, Central America and the United States, which provides a comprehensive mechanism for the protection of foreign investment under the obligation to give fair and equitable treatment. In this regard, SyC argues that the obligation of fair and equitable treatment must be interpreted in light of this treaty, in case it is found to be more favorable.²⁹⁵

b) Costa Rica repeatedly argues in its Counter-Memorial that the power to establish the rates for VTI and the methodology for their adjustment is a power of imperium, and therefore only the government of Costa Rica could issue said methodology and establish the rates. Although Riteve submitted documents proving the increase in its costs, the government has failed to fulfill its obligation to adopt and publish the methodology, and to establish the rates based on said methodology.²⁹⁶

c) SyC requests the Arbitral Tribunal, in its assessment of what is fair and equitable, to take into account the following facts:²⁹⁷

i. SyC submitted various rates with its Offer in 1998, whose values should have been updated to the equivalent figures when signing the Contract in 2001.

ii. The PTC, the appointed authority responsible for approving and publishing the methodology for rate readjustment, did not fulfill its obligations.

iii. Despite having twice reached an agreement on the methodology applicable to rate readjustment (the first in the Contract and reflected in Executive Order 30185, the second through the Direct Agreement of July 2012), the government of Costa Rica did not comply with the obligations undertaken and ignored the decisions it reached in those agreements.

iv. Costa Rica invokes in its defense the actions of agencies that are not involved in the Contract, such as the Comptroller.

v. The Treaty in its preamble mentions the importance of creating favorable conditions for investment, and mentions the importance of enhancing economic cooperation between the two countries.²⁹⁸

vi. Regarding the award of Suez Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. Argentine Republic, Claimant argues that the purpose of economic cooperation reaffirms and reinforces the importance of fair and equitable treatment in the structure of the treaty created by the contracting parties.²⁹⁹

vii. When citing the award issued in Enron Corporation Ponderosa Assets v. Republic of Argentina, Costa Rica omitted that the tribunal concludes that a stable legal system for investment is an essential element of fair and equitable treatment, that the protection of the investor's expectations when making the investment is an aspect of the standard, and that these expectations derived from conditions offered by the State to the investor at the time of investment, defining those expectations as those based on the conditions offered by the State at the time of the investment, which cannot be established unilaterally by one party, and that in said case the source of such legitimate expectations was the contract and the law applicable to it, conclusions which could be reached in this case.³⁰⁰

viii. Costa Rica seeks to limit the profitability of SyC, without having any express provision in the Contract or permitted by law, which is contrary to the conditions necessary to promote investment.³⁰¹

ix. All the facts recognized by Costa Rica constitute arbitrary measures contrary to foreign investment.³⁰²

Claimant states that in order to determine whether the State breached its obligation not to take discriminatory measures pursuant to Article III.2 of the Treaty, the State's action must be analyzed for reasonableness, in the sense that it follows a rational policy.³⁰³

Also, SyC argues that the fair and equitable treatment to which Costa Rica was bound allowed Claimant to expect Respondent not to act in a contradictory manner, that is, "...without reversing decisions arbitrarily or previous or existing approvals issued by the State in which the investor relied and based the assumption of commitments and the planning and implementation of economic and commercial operation..,"³⁰⁴

a) Engaged in contradictory and arbitrary behavior by overturning Executive Orders 30185 and 30396 three days before operations began.³⁰⁶

b) By enacting Ruling 333 Respondent decided not to extend the Contract and urged COSEVI to promote a tender to award the concession for the provision of the VTI service to the largest possible number of companies.

c) Ended the exclusive rights granted under the Contract in an arbitrary and discriminatory manner.³⁰⁷

a) Clause 4 of the Contract provides the agreements on extensions, which state that the decision not to extend was only considered a "...possible decision..." Consequently, SyC could expect the extension with only a possibility of nonextension in which case the decision should be based on a technical report communicated to Riteve six months prior to the date of extension. However, said report was never prepared, and the MPWT based its decision not to extend the contract on its intention to award the VTI service to a larger number of bidders.

b) If said decision was reversed, it was not to honor the obligations contracted with the Consortium, but in order to ensure continuity in the provision of VTI service.

a) On the subject of SyC's expectations (the annual rate adjustments for the VTI service, the automatic extension of the Contract in case of the absence of a "technical breach report" and the exclusive right to provide the VTI service), Claimant does not meet the requirements established by case-law to be considered legitimate.³¹²

b) SyC's expectation that the Contract and the legal system granted it the right to automatic and annual rate increases is not legitimate, given that:

i. Before investing, the Comptroller explained to Claimant that".. .a rate adjustment methodology based on general indexes, which as a result gave automatic adjustments, would be improper because it is opposite to Costa Rican law."³¹³ Moreover, expectations that are contrary to the law or the Contract cannot be considered legitimate; consequently, the First Contract did not get the Comptroller's countersignature and therefore never had legal force under the Costa Rican legal system, since "...automatic rate readjustment was notin conformity with the economic and financial balance of the Agreement and, also, that it undermined the supervision power of the [PTC], which would remain limited only to 'verifying' the increases that would take place, without having the possibility of conducting the technical studies necessary to determine if such increases were actually justified..."³¹⁴ Therefore, SyC knew that rate adjustments could not depend on a formula based on overall indexes that result in automatic increases.³¹⁵

ii. The Comptroller countersigned the Contract precisely because the rate adjustment clause had been amended, eliminating any reference to automaticity and general indexes included in the First Contract.³¹⁶ Therefore, the rate adjustment clause in the final version of the Contract does not contemplate a formula based on general indexes that produces automatic increases.

c) Regarding the alleged lack of approval and publication of the methodology for rate readjustment, Costa Rica claims that several methodologies for rate readjustment were approved, also approving the respective increases under the current methodology. Although some of them were later invalidated because they were not in line with the Contract, in the cases that were in line with the Contract, both the methodology and the increase were opposed by Riteve through various actions.³¹⁷ Additionally, any error by the PTC in its attempts to adopt and implement a methodology for rate adjustment is not an infringement of the minimum standard of treatment under customary international law invoked by the Claimant.³¹⁸

d) Regarding the Claimant's requests to readjust rates, Costa Rica argues that (i) SyC did not prove that Costa Rica had not approve them having the contractual obligation to do so;³¹⁹(ii) SyC did not prove that the failure to authorize increases constitutes a violation of the obligation to provide fair and equitable treatment under the Treaty; (iii) SyC was not entitled to readjustment, given that readjustments are not automatic, but "...must be authorized only when there has been a consequence on the 'economic and financial balance' of the Agreement; that is to say, when there have been 'substantial changes in costs' that affect the conditions originally agreed, 'including the reasonable recovery of the investments or the earnings' on the part of the contractor..,"³²⁰ Also, Costa Rica states that "... neither in the ordinary proceedings, nor in this international arbitration, has the Claimant been able to demonstrate the existence of an economic imbalance in the Agreement, in such a way that rate increases would turn out to be justifiable."³²¹

As for SyC's challenge of the constitutional and legal authority of the Comptroller to countersign the Contract, Costa Rica asserts the following:³²⁹

a) SyC attacks the Comptroller's authority to countersign for the first time in its Reply, and in no previous process that power had been challenged.

b) The Parties, including the company Riteve controlled by Claimant, recognized the Comptroller's authority, as well as the necessity to obtain its counter signature, and followed the opinion and guidelines of said entity voluntarily.

c) Clauses 4.1, 9.4 and 12.5 of the Contract, which refer to the counter signature requirement, prove false SyC's assertions that the countersignature was not included as a requirement in the Contract. These clauses mention that the counter signature is the starting point and prior step to the contractor's operations, using the countersignature as the date from which the term for the publication of the rate adjustment methodology must be counted. Respondent also argues that any amendment or extension of the Contract required the Comptroller's countersignature. This implies that the counter signature is required for the entry into force of the Contract, because if the Contract did not require countersignature it would make no sense to submit its amendments of extensions to countersignature.

d) As to SyC's claim that the Comptroller had no authority to countersign the Contract because the Contract does not provide for payments with public funds, given that the Contract expressly refers to the requirement of counter signature, Costa Rica argues that it is not necessary to answer this statement. However, Respondent mentions that according to Article 8 of the Organic Law, the term "Public Treasury" is not limited only to public fundraising, but also covers issues such as "administrative contracts", being bound to ensure the legal integrity of the administrative contracts in the light of the applicable law. Moreover, the very concept of "public funds" is wide, and includes obligations under administrative contracts, according to Article 9 of the Organic Law. Active payment of funds by the State is not required for a contract to necessitate countersignature. Instead if the Contract is subject to the rules of government contracting and under the legal concept of public treasury and public funds, both concepts being broad, a contract will require countersignature.

e) Regarding the official notice through which the Comptroller decided not to countersign the First Contract, for not being in line with the law, SyC made several observations. Respondent explains that the reason why the Comptroller opposed its own formula (published on December 2, 1982) was that said formula had to do only with continued supply contracts, services contracts and leases not related to buildings or premises, in which an automatic adjustment formula was acceptable, but that formula was not applicable to the VTI service as clarified by the Comptroller, because it is a public service provided by the private sector on behalf of the State and paid directly by users, rather than a service provided by the private sector directly to the State, in which case the aforementioned formula would apply.

f) SyC argues that the Comptroller's decision not to countersign the Contract did not challenge the Consortium's right to economic and financial balance, nor the power to make rate adjustments. Costa Rica states that it does not deny that right of SyC, but claims that such adjustments apply only in certain circumstances described in the Contract and in the official notice issued by the Comptroller.

g) SyC asserts that the Non-Countersignature Official Notice recognized that rate readjustment should not be limited only to the component of inflation, but failed to mention that said official notice confirms this by stating that "... the contractor may qualify for a readjustment from the moment an increase occurs in the service provision costs, which must be documented and, on every occasion, submitted for approval by the Public Transport Council..."³³⁰

h) SyC argues that the Non-Countersignature Official Notice does not conclude on the inadmissibility of a methodology based on mathematical formulas using objective indexes. However, this does not mean that said methodology was appropriate, especially if it is considered that in the same official notice the Comptroller stated that the economic and financial balance of the Contract will be maintained when the PTC, during the rate revisions, "... makes the respective rate studies based on the financial information submitted by the contractor as has already been established in the request for proposals."³³¹

i) SyC argues that the Comptroller agreed that an ordinary rate readjustment should occur every year; nevertheless, Respondent states that the Comptroller did do no more than refer to the rate review mechanism of the First Contract, which was a mere description of a contractual clause, not something that the Comptroller had accepted.

j) As to SyC's argument that the counter signature, as a simple act of approval of a contract to be effective, cannot define the content thereof, Costa Rica states that in the case of not being able to countersign a contract for being contrary to the law, the Comptroller should issue a reasoned decision that specifies the errors that should be corrected in order to remedy the deficiency that prevents the countersignature. Furthermore, this decision does not imply any substitution of the agreement of the parties, and may be challenged. Therefore, the Comptroller's aim when issuing its Non-Countersignature Official Notice was to point out to the parties the legal flaws that prevented the First Contract from being approved.

"(i) rate adjustment formula approved by the [PTC] Board of Directors on 16 September 2003, agreeing to a 13.13% rate increase;

(ii) rate adjustment formula approved by the [PTC] Board of Directors on 23 October 2003, which maintained the 13.13%, increase approved on 16 September 2003, but considered minor changes to the figures;

(iii) rate calculation methodology proposed by Despacho Carvajal and approved by the [PTC] Board of Directors on 28 May 2004;

(iv) rate adjustment formula approved by the [PTC] Board of Directors on 16 December 2005; and

(v) rate adjustment formula approved by the [PTC] Board of Directors on 19 December 2006. "³³⁸

"(i) application for partial revocation with subsidiary appeal filed by Riteve SyC on 19 January 2005 against the [PTC] Board of Directors' decision approving the 12.76%, [VTI] rate increase for 2005, approved on 16 December 2004;

(ii) local ordinary proceeding initiated by Riteve SyC on 20 February 2006 against

[PTC] and the State (File: 06-000159-0163-CA), requesting annulment of the [PTC] Board agreement to approve a 12.76%, increase of [VTI] rates for 2005, approved on 16 December 2004;

(iii) application for partial revocation with a subsidiary appeal lodged by Riteve SyC on 15 January 2007 against the agreement adopted by the [PTC] Board of Directors on 19 December 2006, approving a new rate methodology proposed by the Instituto de Investigaciones en Ciencias Económicas of the Universidad de Costa Rica (IICE");

(iv) application for review, clarification and addition lodged by Riteve SyC against the Resolution of the [MPWT] of 12 March 2009, in which the [MPWT] had accepted the appeal lodged by Riteve SyC on 15 January 2007; and

(v) the rejection of the IICE methodology presented by Riteve SyC on 6 July 2009."³³⁹

"...in the event the Agreement is deemed to be unclear, the Costa Rican legal system provides an interpretation canon that must be respected, as follows: in the event of a vague Administration contract clause, 'public interest shall prevail', as provided by the PGR in its Legal Opinion OJ-190-2001 of 5 December 2001. The RFP bid documents establish the mechanisms to select the bid that best suits public interest, and public interest continue to be the guiding principle throughout the contract execution phase.

Another fundamental principle to consider regarding contract interpretation is the principle of efficiency, provided in Article 10 of the General Law of Public Administration. This Article provides that 'administrative norms shall be interpreted in the manner that best guarantees achievement of the public goal pursued, fully respectful of the relevant rights and interests.' The norm also provides that administrative norms should be 'interpreted and integrated considering other related norms, and the value and nature of the conduct and facts to which it refers.' Therefore, the administrative norm must be interpreted in the best manner possible to guarantee achieving the public goal pursued, with full respect for the relevant rights and interests..."³⁴⁶

"...that [Executive Order 30573] which the Claimant calls 'unfair' and 'arbitrary', has a rational base, is consistent and coherent with previous pronouncements of the comptroller entity of the State (the Comptroller's Office), is in conformity with the clause of the Agreement regarding rate adjustments (Clause 9.4), is neither arbitrary nor discriminatory, did not alter the legal frame that existed when the Claimant made its investment, and keeps a rational relation with the principles of service at cost and economic financial balance that govern the privity of contract with Riteve SyC. Consequently, it is not possible to conclude in any way that, by adopting [Executive Order 30573], Costa Rica has violated its obligation to give fair and equitable treatment."³⁵²

Claimant asserts that a denial of justice arises when a court with competence and jurisdiction issues a ruling in violation of due process and where a court's decision is clearly inappropriate, causing unfair treatment to the investor.³⁷²

a) There was an arbitration agreement;

b) Arbitration was valid under the law according to which it was agreed upon; and

c) The State subsequently invoked the incompetence of the arbitral tribunal based on aspects of its own domestic law.³⁷⁵

Respondent states that international courts agree that the legal standard of full protection and security does not impose strict liability on the States; therefore, it does not protect the investor from any possible decline in the investment's value,³⁸⁷ and it is primarily an obligation of vigilance, a "...due diligence...",³⁸⁸ that "...is nothing but reasonable prevention measures that can be expected from a well-managed government under similar circumstances..,",³⁸⁹ which must be determined on a case-by-case basis.

"Claimant does not analyze any of these measures in light of the legal standard of full protection and security under the Treaty. It does not explain how they constitute an omission by Costa Rica regarding its due diligence duty that consists in taking reasonable measures to protect the investment. Consequently, and just and with its other claims, the Claimant has not met its burden of proof to establish that the actions of Costa Rica were contrary to its obligation to grant full protection and security to the Claimant's investment..,"³⁹³

a) Regarding Executive Order 30573, the State exercised due diligence under the circumstances, taking reasonable measures to protect the investment. In case the automatic rate increase had been approved according to the methodology established in Executive Order 30185, "...those increases would have had to be reverted and the tariff increase would have had to be reimbursed to the user.., and that it"... could have been a damage to Riteve SyC... "³⁹⁴

b) With respect to the decision to open the market, this measure was not unfair, arbitrary or discriminatory. Despite the provisions of the Transit Law of 2008, Costa Rica has always respected SyC's right to contractual exclusivity, since to date it remains the only provider of VTI service.³⁹⁵

c) The decision not to extend the Contract was reasonable and rational, in addition to the fact that this decision was reversed.³⁹⁶

d) Respondent claims it is false that Costa Rica was obligated to publish a particular methodology for rate readjustment before August 20, 2012, since that date was only mentioned in relation to Riteve waiving any additional rate claims if Costa Rica published this methodology before that date. Therefore, such obligation tied only Riteve, and did not require anything from Costa Rica.³⁹⁷

a) The termination or arbitrary suppression of a right previously awarded by contract is a measure tantamount to expropriation.

b) The Contract granted SyC the exclusive right to provide the VTI service as sole contractor during the term of the Contract and its extensions.

c) Act 8696 of 2008, which reformed Act 7331, affected Riteve's exclusive rights granted under the Contract to provide the VTI service.

d) Ruling 333:

i. Terminated the Contract by deciding to prevent its automatic extension.

ii. Modified the exclusive right granted to SyC by ordering COSEVI to promote the greatest possible number of service providers through public tender.

iii. Was openly discriminatory, infringing the exclusive rights granted to SyC under the Contract in favor of any third party interested in the provision of VTI services.

iv. Did not order the payment of a prompt, adequate, and effective compensation.

v. Was issued unfairly and arbitrarily, given that it did not comply with the report referred to in clause 4.2 of the Contract.⁴⁰⁶

SyC also notes that the compensation due to the Claimant amounts to €297.9 million euros. Applying Executive Order 30185, the damages are calculated as follows: (i) €85.7 million euros for SyC's loss for not receiving the rate readjustment during the initial term of the Contract; (ii) €41.5 million euros for SyC's loss due to the lack of rate readjustment between July 15, 2012 and July 14, 2014; and (iii) €170.7 million euros for SyC's loss due to the lack of rate readjustment between July 15, 2014 and July 14, 2022.⁴¹⁰

Furthermore, Costa Rica points out the inconsistency between the amount of damages estimated by Riteve in the local court proceeding of USD $16,279,269 for damages allegedly suffered between July 2002 and December 2005, and the amount claimed in this arbitration, equivalent to about USD $320 million.⁴¹⁷

"1.1 These proceedings are conducted in accordance with the ICSID Arbitration Rules in force as of April 10, 2006..

a) There is greater procedural flexibility if the tribunal has jurisdiction.

b) There are possible waivers of objections to admissibility.

c) The tribunal is able to consider questions of jurisdiction proprio motus.

d) Questions of admissibility are more likely to be addressed with the merits.

e) Issues of admissibility generally cannot be reviewed.

f) A finding of inadmissibility does not become res judicata.

"...two States may include in a bilateral investment treaty a provision to the effect that, in the interest of achieving the objects and goals of the treaty, the host State may incur international responsibility by reason of a breach of its contractual obligations towards the private investor of the other Party, the breach of contract being thus 'internationalized', i.e. assimilated to a breach of the treaty..."⁴²⁶

"..,[A]n umbrella clause cannot transform any contract claim into a treaty claim, as this would necessarily imply that any commitments of the State in respect to investments, even the most minor ones, would be transformed into treaty claims...It would be strange indeed if the acceptance of a BIT entailed an international liability of the State going far beyond the obligation to respect the standards of protection of foreign investments embodied in the Treaty and rendered it liable for any violation of any commitment in national or international law 'with regard to investments'..."⁴²⁷

[Emphasis added]

a) To declare the nullity of Executive Order No. 30573-MOPT of July 10, 2002, as contrary to law.

b) As a consequence of this declaration, to declare valid and effective Executive Orders No. 30185-MOPT, published in the Official Gazette No. 46 on March 6, 2002, and No. 30396-MOPT, published in the Supplement No. 51 of the Gazette No. 134 on July 12, 2002.

c) To order the State to pay the damages and lost profits, present and future, caused as a consequence of the issuance of the challenged act and its subsequent applications, itemized as follows:

i. Lost Profits: "...The amount Riteve failed to receive from July 2002 to December 31, 2005, as the difference between the established rate and that which it would have received if the PTC and [MPWT] had complied with their contractual and constitutional obligations [of}: a) set[ing] in a timely manner the method for updating rates, pursuant to Clause 9.4 (within three months following the contract countersignature); b) updat[ing] the rates from the service startup (July 15, 2002); c) updat[ing] the rates annually, at least, pursuant to the provisions of the contract in Clause 9.4 (January 2003 and January 2004); d) set[ting] the rates for 2005 at a real time pursuant to the indicated method. Said amount is estimated at FIVE THOUSAND FIVE HUNDRED EIGHTEEN MILLION FIVE HUNDRED TWENTY-ONE THOUSAND ONE HUNDRED FORTY-NINE AND 00/100 COLONES (¢5,518,521.149.00)..."⁴³³

ii. Damages:"... The amount corresponding to the financial costs deriving from the receiving of amounts less than what should have been received, pursuant to the financial and economic balance the contract must have. At April 30, 2004, these costs reached TWO THOUSAND THREE HUNDRED SEVENTY MILLION SIX HUNDRED SIXTY-ONE THOUSAND NINE HUNDRED TEN AND 00/100 COLONES (¢2,370,661.910.00)....The damage sustained from the loss of new business opportunities stemming from the noncompliance of the PTC and the State, related as well to the deterioration of its corporate image, a damage estimated at one hundred million and 00/100 colones (¢100,000,000.00).... The objective moral damage, estimated at THREE HUNDRED MILLION AND 00/100 COLONES (¢300,000,000.00), which shall be set in a timely manner by a mathematical actuary..."⁴³⁴

d) To declare that the State must pay the future damages and lost profits caused over time.

e) To declare that the State shall pay legal interest on the amounts claimed, from the date the final ruling is issued until the time of actual payment to Riteve.

f) To declare that hereinafter MPWT shall set the rates of the VTI service based on the conditions and the rate model established in the Terms of the Tender, the Consortium's Offer and the Contract signed by the parties.

a) To declare the nullity of the resolution contained in article 2.1 "Setting of Technical Vehicle Inspection Rates for the 2005 Period", adopted in the ordinary meeting number 19-2004 of the Board of Directors of the PTC on December 15, 2004, and consider unlawful other acts both preparatory and final, documents, reports and opinions attached and related that served as a basis.

b) To order the State to pay the present and future damages and lost profits caused as a result of the issuance of the challenged act and the subsequent applications thereof. Such claim was itemized by Riteve as follows:

i. Lost Profits: "... The amount Riteve failed to receive from January 1, 2005 to December 31, 2005, as the difference between the established rate and that which it would have received if the PTC and the [MPWT] had complied with their contractual and constitutional obligations and had agreed to an increase that would really guarantee the maintaining of the financial balance of the contract; such as the one we requested by means of the petition dated November 23, 2004. Said amount is estimated at two thousand two hundred ninety-seven million four hundred twenty-nine thousand eight hundred seventy-one and 00/100 colones (¢2,297,429.871.00)..."⁴³⁵

ii. Material damages: "...The amount corresponding to the financial costs (interest and exchange rate difference) deriving from the receipt of amounts less than what it should have received during the period from January 1 to December 31, 2005, according to the financial and economic balance the contract must have. These costs add up to three hundred seventeen million five hundred forty-three thousand sixty-four and 00/100 colones (¢7317.543,064.00)..."⁴³⁶

iii. Non-pecuniary damages: "... estimated at two hundred thirty-five million twenty-seven thousand [sixty]-five and 00/100 colones ((7253.027,065.00) [sic] which shall be set in a timely manner by a mathematical actuary..,"⁴³⁷

c) Order the State to pay legal interest on the amounts claimed, from the date on which the final ruling is issued until the time of actual payment.

d) Declare that hereinafter the MPWT shall set the rates of the VTI service based on the conditions and the rate model established in the Terms of the Tender, the Consortium's offer, and the Contract signed by the parties.

In relation to the timing, it is important to have in mind that the claim before the local courts was filed on February 28, 2006, while the Notice of Intent was not notified until June 10, 2011 and the Request for Arbitration was filed on December 21, 2011. However, in the judicial proceedings, damages and lost profits were claimed not only for those generated up to the filing of the claim, but also for all those generated in the future. Therefore, the coincidence of the claims is not just limited to the date of filing of the claim, but also to all the subsequent claims that substantially share the same cause.

a) In the Notification of Dispute made by Claimant to Costa Rica, SyC expressly recognized that " ...corporation SUPERVISION Y CONTROL S.A. is the owner of 55%, of the stock in corporation RITEVE S.A. and effectively controls it..." and that "...ownership of 55% of the stock in corporation RITEVE, S.A. confirms as well the control of the majority of stock by Supervision y Control that is its condition as shareholder that controls the corporation...",⁴⁴¹

b) In its Memorial, SyC stated that "Riteve, SyC... S.A. is effectively controlled by society Supervision y Control S.A. because it still owns fifty-five percent (55%o) of the shares comprising its share capital."⁴⁴²

c) According to article 26 of the Corporate Bylaws of Riteve, "...the Board of Directors will be composed of five members, who may or may not be partners of the company and who will hold the positions of Chairman, Vice Chairman, Treasurer, Secretary and Member. According to the current shareholding proportion, it will correspond to SUPERVISION Y CONTROL, S.A. to elect three positions of the board (Chairman, Treasurer and Member) and to TRANSAL, S.A. to elect the two remaining positions (Vice Chairman and Secretary)."⁴⁴³

d) No element was provided during the proceeding to show that the minority shareholder, Transal, S.A., exercises control over Riteve.

a) Denial of justice for impeding, through a Ruling of the Supreme Court, that the arbitration mechanisms agreed to in the Contract may be processed.⁴⁴⁴

b) Giving a less favorable treatment to the investment of the Claimant in relation to other investors in public services.

c) Reforming of the Transit Law in 2008 and 2012, affecting the exclusivity rights granted to Claimant under the Contract, constituting in the opinion of Claimant a measure tantamount to expropriation.⁴⁴⁵

d) Terminating the Contract through Ruling 333 of May 9, 2011, constituting in the opinion of Claimant a measure tantamount to expropriation.⁴⁴⁶

"a. Failure to give to the investment performed by Supervision y Control a fair and equitable treatment guaranteeing its full protection.

b. Arbitrarily breaching its obligations with an investor and through which it was obliged to approve tariff readjustments under the service contract for [V]ehicle [T]echnical [I]nspections executed with corporation Riteve.

c. Abrogating through Executive Decree from the Ministry of Transportation the tariffs readjusted which the Council for Public Transportation had approved to make payments under the service contract for Vehicle [T]echnical [I]nspection with corporation Riteve.

d. Failing to approve and publish in the Official Gazette, arbitrarily and unfairly over more than eight years a procedure for tariff readjustment and the tariff readjustments when it should have done so within a three month term.

e. Amend through a Resolution and against a contract the terms and conditions agreed with the investor which precisely led it to perform significant capital investments..."⁴⁴⁹

a) Not granting at all times to SyC's investment fair and equitable treatment by seriously breaching obligations undertaken in the Contract.

b) Giving unjust and discriminatory treatment by not issuing a decision on the request for rate readjustments, preventing SyC from fully enjoying its investments.

c) Violation of the obligation of granting at all times fair and equitable treatment and full protection and security to SyC's investment by repealing Executive Order 30185-MOPT through which the methodology for the readjustment of rates had been approved and published.

a) Denial of Justice in view of the fact that Ruling 000906-A-04 issued by the Supreme Court on October 21, 2004, prevented the arbitration mechanism agreed to in the Contract from being processed.

b) Measures tantamount to expropriation consisting of reforms to the Transit law of 2008 and 2012, affecting the exclusivity rights granted to the Claimant under the Contract.

c) Measures tantamount to expropriation consisting of having unilaterally terminated the Contract through Ruling 333 of May 9, 2011, without ordering the payment of prompt and adequate compensation.

d) Violation of the obligation to grant national treatment or most favored nation treatment with respect to what is granted to other investments in public services.

"...the deplorable conduct of the Claimant during the Hearing would by clearly justify ordering payment of all costs and legal fees and expenses incurred by Costa Rica in this arbitration. Costa Rica invites the Tribunal to consider, for example, the reckless accusations and statements of the Claimant during the Hearing; the abuse by the Claimant of the witnesses and experts of Costa Rica during the Hearing; the fact that - on the few occasions it quoted a legal standard to support general claims - the Claimant quoted the incorrect standard, only to then take it back; the fact that the Claimant quoted portions of awards from other cases as if they were judgments of the arbitral tribunal when in fact they were simply narrations by the relevant tribunal [of] the allegations of the contending parties; the fact that Claimant outright stated that there are no precedents to dismiss the case on the grounds of given jurisdictional objections, when they do exist. These are only some of examples; there are many more that will not be identified due to lack of space."⁴⁵⁰

a) The Tribunal has jurisdiction over the dispute submitted before it in this arbitration.

b) The Tribunal rejects all of the claims raised by Claimant on the basis of inadmissibility, in accordance with Articles XI.l and XI.3 of the Treaty.

c) Each Party shall cover its own costs.

d) The costs of the Tribunal will be paid in equal parts by the Parties.

e) In accordance with Article 48(2) of the ICSID Convention and ICSID Arbitration Rule 47(2), the Award is signed by President Claus von Wobeser and Arbitrator Eduardo Silva Romero, the arbitrators who voted for it. Arbitrator Joseph P. Klock Jr. dissents without appending reasons.

Signed in Spanish and in English, both versions being authentic.