"Settlement of Disputes between a Contracting Party and an Investor
(1) Disputes concerning investments between a Contracting Party and an investor of the other Contracting Party should as far as possible be settled amicably between the parties in dispute.
(2) If the dispute cannot be settled within six months from the date on which It has been raised by one of the parties to the dispute, it shall, at the request of either party to the dispute be submitted for arbitration. Unless the parties to the dispute have agreed otherwise, the provisions of Article 9(3) to (5) shall be applied mutatis mutandis on condition that the appointment of the members of the arbitral tribunal in accordance with Article 9(3) is effected by the parties to the dispute and that, Insofar as the period specified in Article 9(3) are (sic) not observed, either party to the dispute may, in the absence of other arrangements, Invite the President of the Court of International Arbitration of the International Chamber of Commerce in Paris to make the required appointments. The award shall be enforced in accordance with domestic law.
(3) During arbitration proceedings or the enforcement of an award, the Contracting Party Involved in the dispute shall not raise the objection that the investor of the other Contracting Party has received compensation under an Insurance contract in respect of all or part of the damage.
(4) in the event of both Contracting Parties having become Contracting States of the Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of Other States, disputes under this Article between the parties to dispute shall be submitted for arbitration under the aforementioned Convention, unless the parties in dispute agree otherwise; each Contracting Party herewith declares its acceptance of such procedure."
"public international law. Subject to this, where discrete issues of national law arise, the law to be applied or considered shall ordinarily be the law of the Kingdom of Thailand although German law issues may also arise. The Tribunal shall determine the appropriate law or laws to be applied."
"The Tribunal and the Parties agree that the Presiding Arbitrator may make procedural rulings alone provided that:
(i) all correspondence is copied to the coarbitrators;
(ii) the Presiding Arbitrator shall be free to consult, in his discretion, with the other arbitrators or to refer significant or difficult matters to the full Tribunal for decisions; and
(iii) the full Tribunal shall hear and determine any procedural matter if requested by either Party."
"(a) the insolvency administrator's current estimate of the amount that would be available after payment of secured creditors and the costs of the insolvency;
(b) whether, out of this sum, it is possible to 'ring-fence' a discrete amount which would earn interest for the insolvency but which could be available for security for costs. Such sum could only be disbursed on the order of the Tribunal."
"It [had] come to [its] attention during the course of preparing for the March hearing that, many years ago, Dr. Suvarn Valaisathien provided some advice and temporarily held a nominal shareholding in a company connected with this project. The circumstances [were] as follows. In 1984, Dyckerhoff & Widmann AG (Dywidag") and a local Thai engineering company Delta Engineering Construction Company Limited ("Delta") established a Thai company named Dywithai Company Limited ("Dywithai"). For compliance reasons, Dr. Valaisathien held a 2% interest in Dywithai. Under its new name of Dywidag (Thailand) Company Limited ("Dywidag Thailand"), this company was part of the consortium which contracted with DMT for the design and construction of the Don Muang Tollway. Dywidag ceased to have an interest in the company in 1997. Dr. Valaisathien also provided legal advice to Dywidag and Delta on Thai corporate and tax law in connection with Dywidag's and Delta's establishment and incorporation of DMT in 1988 and 1989."
"Dr. Suvarn has a close relationship not only with Claimant but also with an entity closely connected with Claimant by virtue of the facts that: (i) he provided legal advice to Claimant's predecessor, Dyckerhoff & Widmann; and (ii) Dr. Suvarn held a long-term interest in a company that partnered with Claimant's predecessor to construct the very project that is at issue in this arbitration.
The matter is all the more sensitive given the nature and importance of this dispute to the Kingdom of Thailand and the need for all parties, and the Thai people, to have the utmost confidence in the decisions of this Tribunal."
"the hearing should go ahead... and the evidence be taken, with a direction by the tribunal -preferably with the consent of the parties - that there shall be no rehearing if the challenge is upheld. The challenge could then follow that with a minimum impact on procedure.... Should the challenge succeed, the new arbitrator could be appointed and the tribunal could then determine the issue upon the basis of the transcript and written submissions."
"1. The Respondent is to have a new arbitrator appointed and his/her appointment advised to the Tribunal and the Claimant by 6 pm 20 April 2007 (French time).
2. The new arbitrator should make a declaration of impartiality and independence and accept the existing Terms of Reference and Terms of Appointment, subject to any necessary adjustment to the terms relating to the remuneration of the Tribunal.
3. The new arbitrator must be available to consider the jurisdictional challenge in late July/early August 2007 and conduct the substantive hearing (if any) in March/April 2008. Any consequential amendments to the TOR should be considered at the [next] telephone conference..."
"(a) After 1 January 2009 White & Case LLP continue to represent the Respondent with W C & P acting as local counsel; and
(b) W C & P has no involvement in the ICC arbitration."
(a) Contrary to W C & P's letter, the relevant agreement had been before the Tribunal at the principal hearing. It bore the reference number R.139 and was included the agreed volumes of documents.
(b) The Respondent had a copy of this document some five days before it applied to the Tribunal during the jurisdictional hearing on 1 August 2007 for the production of this document. This fact could be deduced from the facsimile identification notification.
(c) The Respondent produced the document R139 with its defence on 1 April 2008.
(a) The letters have not come from the lawyers on the record as representing the Respondent. In all correspondence and appearances, the Tribunal has had no indication that the mandate of those lawyers has been terminated.
(b) Contrary to W C & P's assertion, the document which W C & P claimed should affect the Tribunal's determination was one of the many documents before the Tribunal at the substantive hearing. No reference was made to the document during the hearing. The Tribunal was not asked to examine its terms and no submissions were made about those terms which are now said to be material. There were literally thousands of documents placed before the Tribunal. If any one document had been of significance then the Tribunal considers that counsel would have referred to it either at the hearing or in post-hearing submissions.
(c) The ICC arbitration is res inter alios acta. This Tribunal is not in any position to comment on the issues that will fall to be considered by the ICC arbitrators.
(d) Mr. Sombath, as the leading shareholder in DMT, must have known of this present arbitration. Indeed, the Respondent requested at the jurisdictional hearing, that Mr. Sombath give evidence about the share purchase transaction. Clearly, if his evidence had been considered material for the substantive hearing, the Respondent should have tried to call him.
(e) The hearing of evidence in the arbitration closed on 17 October 2008, save for the Tribunal receiving written submissions and some agreed further information from the traffic experts. Very strong grounds would be needed for the Tribunal even to consider, let alone grant, an application to call further evidence at a stage when the issue of an award is imminent. This is especially so when the evidence sought to be addressed was before the Tribunal at the time of the substantive hearing. Moreover, when the allegedly crucial document, which was before the Tribunal, had not been made the subject of any comment or submission.
(a) upgrading the VRR would require a large investment and there would be difficulty in obtaining the necessary funds from government sources;
(b) the private sector should be allowed to participate in investment on this highway or any other highway in the form of tolls.
"Based on the principle that it should bring benefits to all the parties concerned, the private party would be granted concession right to construct and operate a toll road along the existing route..". "This alternative would ease the burden on the budget fund, eliminate the difficulties of the users, as well as create additional jobs in the construction industry."
(a) the turning of two of the four flyovers;
(b) maintaining the original proposed toll for 4-wheeled vehicles (20 THB for the whole journey) but with 5 THB toll increases in the 9th and 14th year respectively;
(c) an extension of the concession period from 24 to 30 years;
(d) equal treatment with already-agreed Concession Agreements concerning other private toll roads; and
(e) the award of Board of Investment ("Bol") privileges to DMT.
(a) DMT's equity investors (including the Claimant as investor) would inject certain sums of capital each year from 1989 to 1993 on specific dates. In parallel, DMT would draw down on its loans. The joint proceeds of the debt and equity sources of finance would be used to construct the toll road.
(b) The toll road would commence partial operation in late 1992 (in the 1989 projections) or early 1993 (in the 1990 projections), generating revenues from then onwards. Following the full opening of the toll road in 1993, revenues were projected to climb steeply, realising an operating profit for DMT from the date of the full opening of the toll road;
(c) DMT would begin repaying its debt in 1995 and would continue to do so for the next eight or ten years;
(d) Once net profits had been earned for two years or so and its legal reserve built up, DMT would have positive retained earnings and would begin to pay dividends to shareholders, from about 1996 or 1997;
(e) Following the repayment of its loans to the banks, DMT would pay significantly higher dividends to shareholders, from around 2004 to 2010;
(f) From 2010 to 2014, dividends to shareholders would be reduced by the introduction of some revenue sharing with the Respondent.
(a) Clause 31 which required disputes to be settled amicably within 60 days or within any agreed extension of that time. Failing that, there was provision for arbitration in Bangkok under the Thai Arbitration Act with two party-appointed arbitrators and a third appointed by the Thai Chamber of Commerce;
(b) Clause 34 which was a "complete agreement" clause;
(c) Clause 35.3 which permitted amendment to the Concession Agreement only by further written agreement;
(d) Clause 35.5 which provided for Thai law as the law governing the interpretation and execution of the contract;
(e) Dywidag and Delta agreed to hold together not less than 30% of the shares in DMT for the term of the construction period;
(f) there was some profit-sharing with the Respondent should profits exceed a stated level.
"Such more comprehensive approach would certainly also create the opportunity to at the same time deal with the issue of compensations due to DMT having suffered damages caused by the actions or omission of the government or the pending appearance of competing roadways causing vehicle loss to DMT, i.e. by agreeing on appropriate conditions for a concession covering the existing tollway, plus the extensions thereto and thereby solving all pending matters in one go."
"124. MoA2 adapted Clause 25 and Appendix D of the original Concession Agreement by the inclusion of Appendix F, which contained traffic and revenue forecasts on the basis of a particular model created by IFCT in May 1996. These forecasts and model had been based upon assumptions agreed between DMT and the Government, including as to:
4.5 the pattern of current and future tolls; and
4.6 the traffic structures and systems in Bangkok as a whole and the role of the Tollway in them.
On their face, the principal commercial provisions of MoA2 were to:
(a) Extend the Tollway by the addition of the Northern Extension, the purpose of which (and of a further extension to be constructed by the DoH itself as a continuation of the Tollway) was to solve traffic congestion on the VRR in the area of Don Muang Airport (the "airport bottleneck") to provide better access to the airport and to the North of Bangkok. This latter factor was a particular priority for the Respondent in view of the impending Asian Games, which were to be held in Bangkok in December 1998. The cost of this was to be funded by an injection of Baht 3 billion new share capital by the Respondent plus Baht 700,000 cash from operations (clauses 1.2.1, 17.2); and
(b) Solve DMT's "adverse financial condition as a result of the Government's inability to comply with the terms and conditions stipulated in this Tollway Concession Agreement". The principal measures agreed in this respect were:
(i) the arrangement by the Respondent (through its Ministry of Finance) of a "soft" loan of Baht 8,500 million (clause 17.1);
(ii) the injection of Baht 1.5226 billion new share capital by private shareholders to pay outstanding loan principal and interest (clause 17.1);
(iii) restarting the Concession Period (which remained 25 years long) by amending the definition of the "Effective Date" to be the date of MoA2 (29 November 1996); and
(iv) increasing the toll rates from those set out in clause 20 of the Concession Agreement to those set out in clause 12 of MoA2 as follows:
(1) there was to be a new additional 15 Baht toll for the Northern Extension;
(2) the agreed toll fees for the original Tollway were to be increased by 10 Baht upon:
(i) completion by DoH (and not DMT) of the DoH U-turns and then again upon
(ii) completion of the Northern Extension; and
(3) all toll fees for the original Tollway would be increased by 10 Baht every five years (as opposed to increases each of five Baht just on the ninth and fourteenth anniversaries under the original Concession Agreement) and for the Northern Extension by five Baht every five years."
"14.1 All claims arising under the existing Tollway Concession Agreement before the date of signature hereof, whether or not the Concessionaire has lodged such a claim against the government are hereby extinguished whereby the concessionaire shall not have any further claim whatsoever.
14.2 Any change in the use of the Bangkok airport, the construction of u-turns on the Viphavadi-Rangsit Road, the management of traffic in any manner by Rangsit Road shall not be regarded as an act in competition with the Concession highway according to clause 25.2(d) of the existing Tollway Concession Agreement or an act of the government which causes vehicle loss."
(a) four U-turns;
(b) a new four-lane local road 50 metres west of the VRR road; and
(c) a temporary detour road in place during the construction of the Northern Extension was converted to permanent use.
"With Government actions being as unpredictable as they are and completely beyond the control of private investors into Government infrastructure, private investors have little choice other than to place their trust onto that the Government would eventually treat them fairly in cases where the Government deemed it necessary to change conditions negatively affecting the private investment company.
And DMT is prepared to enter into negotiations with the Government for proper remedy of its financial position in relation to the respective provision in its Concession Agreement and the Cashflow Analysis previously prepared by IFCT on instruction of the Ministry of Finance and appended to the MoA of 29 November 1996."
"DMT is on purpose currently requesting postponement of construction and not a deletion of the said Exit Ramp in an effort to avoid that because of this relatively minor issue an agreement of Cabinet must be sought.
Since DMT must in the near future enter into negotiations with the Government (DoH) in respect of the fundamental issue of how to remedy its impaired financial position, and this will invariably lead to the necessity to request the Cabinet for approval of corresponding amendments to DMT's Concession Agreement any submission to the Cabinet in respect of the said Exit Ramp is recommended to be made on the same occasion."
"Whereas the Council of Ministers passed resolutions on April 11, 2006 to acknowledge the agreement on a solution to the loss problem of the Concessionaire between the DoH and the Concessionaire as proposed by the Ministry of Transport, and consigned the principle to the Ministry of Transport to enter into another negotiation with the Concessionaire again for amending of the Tollway Concession Agreement so as to ensure appropriateness and clarity as well as more mutual benefits, which would then be proposed to the Council of Ministers for further consideration, as per the details in Appendix B attached hereto."
"...all claims, law suits filed with courts and/or submissions of disputes to arbitration which have arisen or which may arise from any of the following causes: 6.1 Construction of the Local Road, 6.2 disapproval of increases and toll fees in the past, 6.3 failure to arrange a soft loan at the agreed terms in the past, 6.4 construction of detour lines on the VRR, 6.5 delayed returns of various performance bonds, 6.6 construction of flyovers at the land for Phrao intersection on VRR which is a project of Bangkok Metropolitan Administration, 6.8 relocation of the Bangkok International Airport to Suvarnaphumi Airport and 6.9 Construction of the Exit link from the international passenger terminals of the Don Muang International Airport towards the south (Bangkok inbound) or southbound Exit Ramp (Ramp No.4)".
" Adjustment of Toll Rates and Concession Period
25.1 The Company may request the DOH to adjust the toll rates being in force at the time so that the toll rates are fair to the Company in light of changes to the economic situation.
The Basic Economic Factors as listed in Appendix D have been used for the original financial planning and deviations of comparable economic factors from those listed in Appendix D shall be taken into account by the DOH in considering the requested adjustment to the toll rates. The purpose of such adjustment shall be to restore the financial position of the Company otherwise affected.
25.2 At the request of the Company the DOH shall agree to enter into negotiations with the Company to remedy negative effects on the Company's financial position by means of toll rate adjustment or extension of the Concession Period or the delay of the start of remuneration payable to the DOH according to Clause 26.1 or any other measure deemed appropriate by the parties due to: [...]
"Basic Economic Factors
The below listed Basic Economic Factors have served as a basis for the computation of the Initial Toll Rates and the schedule increases thereof in the ninth and fourteenth year of the Concession Period, respectively, with the objective to always keep the Company in the position to fulfil all its financial obligations entered into for the sole purpose of constructing, operating and maintaining the Tollway.
The Basic Economic Factors consist of:
- Average Daily Traffic (ADT) and estimated growth thereof
- Interest rate for Baht denominated loans
- Escalation of construction, operation, maintenance and repair cost
- Extra of average longtime change of value of Thai Baht to Deutschmark
For certain Basic Economic Factors assumptions in regard to possible changes in time have been made in order to arrive at a realistic forecast of the operational results.
1. Average Daily Traffic and Estimated Traffic Growth Thereof
For the purpose of reference the Average Daily Traffic in accordance with a study made by the Department of Highways for 1988 (Estimated ADT 1988) and the Growth of the Traffic as listed in Section 5.1.2 of the Report on Viphavadi - Rangsit Toll Road Project by the Working Group on Toll Highways, Department of Highways, October 1986 have been selected.
2. Interest Rate for Thai Baht Denominated Loans
For the financial forecasts during the Concession interest rates for loans raised on the Thai capital market have been assumed as follows:
Bank of Thailand (BOT) interest rate for interbank overnight borrowings : 8% p.a.
Additional fixed charge on top of this BOT interbank loan rate for longterm loans to private parties : 4% p.a.
Total interest rate for longterm financing: 12% p.a.
(The official overnight interbank loan rate of the Bank of Thailand is daily published in the papers and therefore taken as reference rate.)
3. Escalation of Construction, Operation, Maintenance and Repair Cost
The escalation of the construction, operation, maintenance and repair costs has been estimated to rise in conformity with the officially published "Consumer Price Inde"x and for the purpose of the financial forecasts during the Concession has been assumed to amount to 3% p.a.
4. Change of Exchange Rate Deutschmark/Baht
For the purpose of the financial forecasts during the Concession an average long time annual loss of value of the Thai Baht against the Deutschmark has been assumed to amount to 3.0% p.a.
For the purposes of the financial forecast during the Concession fixed tax rates have been assumed as follows :
- Service Tax plus Municipal Tax on amount of Construction Contracts : 3.3%
- Company Income Tax on Taxable Income:35.0%
- Dividend Tax on Dividends to Foreign
- Shareholders : 16.0%
No property tax for and Tollway for any service/business tax on the toll revenues has been considered."
"DMT is legally entitled to have the toll rates adjusted in accordance with the measurable deviation from the listed factors used to determine the initial rates and scheduled increases. Upon receipt of notification by DMT of such changes, the DoH is under an obligation to give effect to the requested adjustment of the toll rates in order to restore the financial position of DMT to its original viable status."
"At the request of DMT, the DoH is under an explicit contractual obligation to negotiate in good faith with the DMT in order to adopt one of the remedial measures available, including fair toll rate adjustments or extension of the Concession period or the delay of the start of the remuneration payable to the DoH, or any other appropriate measure mutually agreed upon between DMT and the DoH."
"Clause 25.1 states that DMT 'may request the DoH to adjust the toll rates being in force at the time so that the toll rates are fair to the Company in the light of changes to the economic situation'. This contractual provision provides DMT, not with a right to compensation, but a right for fair consideration by DoH of any request for adjustment falling under this clause."
"Under the terms of Clause 25.2, DoH must, at DMT's request, "agree to enter into negotiations with the Company to remedy negative effects on the Company's financial position by means of toll rate adjustment or extension of the Concession Period or the delay of the start of remuneration payable to the DoH according to Clause 26.1 or any other measure deemed appropriate by the parties due to [...]"
(a) The evidence clearly shows that Mr. Kramer, the Claimant's representative in Bangkok was closely involved with and was principal spokesman for DMT in negotiating MoA2.
(b) MoA2, whilst possibly not ideal from the point of view of either DMT or the Claimant, included benefits for both DMT and the Claimant, as was acknowledged by Mr. Kramer at the time.
(c) The 1961 Treaty, in force at the time of MoA2, dealt with expropriation but had no reference to "Fair and Equitable Treatment" from which requirement the concept of legitimate expectations is derived. Any "legitimate expectations" the Claimant might have had changed after MoA2. The Claimant's "legitimate expectations" thereafter were that MoA2 would be fulfilled.
(d) The Claimant received valuable benefits by having an "easy ride" into the contract to construct the Northern Extension for which it was paid.
"151. The first general observation is that the fact that a party is objectively under financial pressure does not necessarily mean that any agreement reached with such a party is vulnerable to invalidation for duress. Such a notion might in fact compound the vulnerability of such a party by making it difficult if not impossible for it to make reliable commercial arrangements. A contractual excuse of duress requires some element of abuse by the other contracting party. The commentary to the well-known Harvard Draft of 1961, L. SOHN & R. BAXTER, CONVENTION ON THE INTERNATIONAL RESPONSIBILITY OF STATES FOR INJURIES TO ALIENS, p. 191, contains a passage which well describes the assessment Arbitral Tribunal must make:
Since economic duress of a sort may be present in virtually any settlement, it must rest with judicial decision to draw the line between, on the one hand, economic compulsion exercised by the respondent State over the claimant in order to force him to settle, and on the other hand, the normal operation of economic forces.
152. The second general observation is that a party may fail to make payments expected by another party without necessarily exposing itself to a claim of duress. Settlement agreements are routinely concluded by parties who believe that their co-contractant owes them more, but nevertheless accept a lesser amount because they wish, or indeed acutely need, to receive quicker payment. If all such agreements were voidable for duress, commercial relations would be chaotic.
153. One party may be able to endure very long delays of payment of vast sums because of the abundance of its general resources, while another may be seriously affected by a contractual dispute due to weaknesses on other business fronts which have nothing to do with the non-paying cocontractant. The claim of duress requires clear proof.
154. Counsel for the Respondent observed reasonably that settlements frequently involve the relinquishment of a perceived right. One of the parties may accept such an agreement even though it has a judgment in its favour. It may believe that the other party's obstreperousness in creating enforcement difficulties, or in pursuing frustrating appeals, is in bad faith. Still, such settlement agreements are not automatically considered susceptible to annulment by virtue of coercion. To the contrary, such settlements are routinely not only upheld, but encouraged.
155. The difficulty with this argument is that it fails to perceive the line between the ordinary economic pressure created by delay in the payment of debt (which may be acute, and nevertheless amenable to legally cognizable settlement), on the one hand, and, on the other, the kind of compulsion that can be created by a superior force in a hostile environment, where the scales of justice have been manifestly compromised. As Professor Detlev Vagts put it, in "Coercion and Foreign Investment Rearrangements," 72 AM. J. INT. L. 17, at 30 (1978):
"Fear - like fraud, undue influence, infancy, or insanity - vitiates the informed, intelligent, and adult consent which contract theory in its classical forms demanded almost everywhere. Force is also illegitimate in terms of any theory that leaves the settling of trade terms to the operation of a market; violence is the antithesis of the ordinary market."
156. These words were written in the days before the advent of modern generation of BITs; but they could hardly have been more apposite if they had also described coercion and fear as the "antithesis" of the promotion and protection of foreign investment.
"Settlement agreements should not be lightly disregarded and the circumstances of this case go egregiously far beyond the bounds of ordinary relations, let alone those of "every settlement ever reached". The Tribunal finds that the settlement agreement was imposed on to the Claimant under physical and financial duress. It is not the result of fair and sincere negotiation among the parties".
"Article 8 -
This Treaty shall also apply to approved investments made prior to its entry into force by investors of either Contracting Party in the territory of the other Contracting Party consistent with the latter's laws and regulations."
(a) The 1961 Treaty did not give investors the right to make investor-state claims but provided only for state-state claims in its Article 11.
(b) Article 14(3) of the 1961 Treaty provides "in respect of investments made prior to the date of termination of the present Treaty, the provisions of Articles 1 to 13 shall continue to be effective for a further period of ten years from the date of termination of the present Treaty." The 1961 Treaty was terminated upon the date of the entry into force of the 2002 Treaty (see Article 11(2) of the 2002 Treaty).
(c) Accordingly, because of (b) above, it is still possible for a state-state claim to be made under the 1961 Treaty until October 2014.
(d) There is no express restriction in Article 10(1) of the 2002 Treaty against claims which arose before the date of commencement of the Treaty.
(e) The reference to "disputes" in Article 9 of the 2002 Treaty (which deals with disputes between the Contracting Parties) is not expressed as broadly as Article 10 which refers to "disputes concerning investments". Article 9 refers to "disputes concerning the interpretation or application of this Treaty".
(f) Article 9 of the 1961 Treaty applies to "approved investments made prior to its entry into force (i.e. 10 April 1965) but not earlier than 26 October I960". Presumably, the latter date is that when Treaty negotiations commenced or agreement to the Treaty had been reached in principle.
(a) There is nothing in the ordinary meaning of the phrase "Disputes concerning investments" in Article 10(1) of the 2002 Treaty to limit the scope of the Tribunal's jurisdiction to disputes arising after the date of commencement of the 2002 Treaty involving an "investor" qualified as such under Article 8 of that Treaty.
(b) There is no question of the application of the principle of non-retroactivity to Article 10, since the 2002 Treaty was in force when the arbitration process was commenced by the Claimant. Article 10 is to be interpreted in the context of there being successive BITs.
(c) Article 7(2) of the 2002 Treaty extends investor-state arbitration within the meaning of Article 10 of the 2002 Treaty.
(d) Under international law, absent any specific provision to the contrary, the Tribunal has jurisdiction where wrongful acts giving rise to a dispute, have their origins in earlier events. They are within the temporal jurisdiction of the Tribunal if consummated after the critical date. This proposition is relevant to allegations of "creeping expropriation" and to the claim that the Respondent failed to fulfil the Claimant's legitimate expectations, thereby breaching the 2002 Treaty requirement of "fair and equitable treatment" of the Claimant.
(e) Alternatively, the Tribunal can consider conduct preceding the date of implementation of the Treaty in order to establish a factual basis for breaches after the implementation or to provide evidence of intent in respect of any such later breach.
Parties' Detailed Contentions:
"The fact of a dispute having arisen at a given moment between two States is a sufficient basis for determining whether as regards tests of time jurisdiction exists, whereas any definition of the events leading up to a dispute is in many cases inextricably bound up with the actual merits of the dispute".
"This agreement shall apply to all investments whether made before or after the entry into force of this agreement. But the provision of this agreement shall not apply to any dispute or difference which arose before its entry into force."
(a) it concerned the relationship of two successive domestic laws of Albania and not of two successive treaties; and
(b) there being no Treaty involved, the Vienna Convention had no application, the Claimant replied as set out in the next three paragraphs.
"The prospective application of Article 2 is easily reconcilable with the application of Article 8 to earlier disputes because it occurs frequently that Courts and Arbitral Tribunals have to apply certain substantive rules of law which were in force during the relevant period, though they have been replaced by new rules as from a certain date. Accepting ICSID jurisdiction of the present dispute under Article 8 therefore, by no means implies that the substantive protection rules and 1993 law would be applicable in the consideration of the merits of the case."
"If the legislation of either Contracting Party or international obligations existing at present or established hereafter between the Contracting Parties in addition to the present Treaty, result in a position entitling investments by nationals or companies of the other Contracting Party to a treatment more favourable than is provided for by the present Treaty, such position shall not be affected by the present Treaty. Each Contracting Party shall observe any other obligation it may have entered into with regard to investments within its territory by nationals or companies of the other Contracting Party."
"Conduct, acts or omissions of the Respondent which, though they happened before the entry into force [of the BIT] may be considered as constituting part, concurrent factor or aggravating or mitigating element of conduct or acts or omissions of the Respondent which took place after such date do fall within the scope of this Arbitral Tribunal's jurisdiction.
This is so, provided such conduct or acts, upon consummation or completion of their consummation after the entry into force of the Agreement constitute a breach of the Agreement, and particularly if the conduct, acts or omissions prior to December 18, 1996, could not reasonably have been fully assessed by the Claimant in their significance and effects when they took place, either because as the Agreement was not in force they could not be considered within the framework of a possible claim under its provisions or because it was not possible to assess them within the general context of conduct attributable to the Respondent in connection with the investment, the key point of which led to violations of the Agreement following its entry into force.."
"The Tribunal accordingly concludes that to the extent that on the consideration of the merits an act is proved to have originated before the critical date but continues as such to be in existence after that date, amounting to a breach of a Treaty obligation in force at the time it occurs, it will come within the Tribunal's jurisdiction. This will also be the case if the series of acts results in the aggregate that such a breach of an obligation in force at the time the accumulation culminates after the critical date."22
"The Arbitral Tribunal considers that this provision of the Agreement, in light of the good faith principle established by international law, requires the Contracting Parties to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment. The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations.(...)" "The Arbitral Tribunal considers that this provision of the Agreement (the fair and equitable treatment standard) in light of the good faith principle established by international law requires the contracting parties to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment"24.
"In cases where the relevant obligation did not exist at the beginning of the course of conduct that came into being thereafter the first of the actions or omissions of the series for the purpose of the state responsibility will be the first occurring after the obligation came into existence."27
As to Tecmed28, the Respondent submitted that the Claimant had neglected to point out that the Tecmed Tribunal was clear that the conduct in question, before and after the treaty obligation came into force, belonged to one and the same course of conduct. The event causing loss had occurred after the entry into effect of the Treaty, even if scrutiny of earlier events allowed the Tribunal to characterise the Respondent's conduct in the way it did.
" When a jurisdictional clause is attached to the substantive clauses of a treaty as a means of securing their due application, the non-retroactivitv principle may operate to limit ratione temporis the application of the jurisdictional clause. Thus in numerous cases under the European Convention for the Protection of Human Rights and Fundamental Freedom, the European Commission of Human Rights has held that it is incompetent to entertain complaints regarding alleged violations of human rights said to have occurred prior to the entry into force of the Convention with respect to the State in Question."32 [emphasis added]
"87. The Tribunal is persuaded, however, that there might be situations in which the continuing nature of the acts and events questioned could result in a breach as a result of acts commencing before the critical date but which only become legally characterized as a wrongful act in violation of an international obligation when such an obligation had come into existence after the effective date of the treaty. The tribunals in MCI, Feldman and Mondev, while not accepting jurisdiction over acts and events preceding the date of entry into force of the treaty, nevertheless did not exclude the consideration of prior acts for "purposes of understanding the background, the causes, or scope of the violations of the BIT that occurred after the entry into force" or the relevance of prior events to breaches taking place after the treaty's entry into force."
"90. It follows that the Tribunal must be satisfied that there could be a breach of obligations under the Treaty for jurisdiction over treaty violations to be established, and this again can only happen once the obligation has come into force. The actual determination of which acts specifically meet the continuing requirement is a matter for the merits because it is only then that it can be decided which acts amount to breaches and when this took place. At the jurisdictional stage only the principle can be identified."
"91. The same reasoning applies to composite acts.
While normally acts will take place at a given point in time independently of their continuing effects, and they might at that point be wrongful or not, it is conceivable also that there might be situations in which each act considered in isolation will not result in a breach of a treaty obligation, but if considered as a part of a series of acts leading in the same direction they could result in a breach at the end of the process of aggregation, when the treaty obligation will have come into force. This is what normally will happen in situations in which creeping or indirect expropriation is found, and could also be the case with a denial of justice as a result of undue delays in judging a case by a municipal court. As noted in Article 15 of the Articles on State Responsibility, the series of actions or omissions must be defined in the aggregate as wrongful and when taken together it "is sufficient to constitute the wrongful act". But of course the latter determination can only be made when the obligation is in force." [Emphasis added]
"92. In situations of this kind, the preceding acts might be relevant as factual background to the violation that takes place after the critical date, and this is the meaning that the cases discussed above will have in considering that factual background and its relevance to explain later breaches. As the Respondent has rightly recalled, this explains why in Tecmed, while often believed to have assumed jurisdiction over acts preceding the treaty, this was only to the effect that such acts represented "converging action towards the same result". in such a situation, the obligations of the treaty will not be applied retroactively but only to acts that will be the final result of that convergence and which take place when the treaty has come into force." [Emphasis added]
"even supposing that it were admitted as essential that the act alleged by the Applicant should have taken place at a period when the Mandate was in force, the Court believes that this condition is fulfilled in the present case. If the grant of the Rutenberg Concessions, in so far as they may be regarded as incompatible, at least in part, with those of Mavrommatis, constitutes the alleged breach of the terms of the Mandate, this breach, no matter on what date it was first committed, still subsists, and the provisions of the Mandate are therefore applicable to it."35 [Emphasis added].
"the State must be bound by the international obligation for the period during which the series of acts making up the breach is committed. in cases where the relevant obligation did not exist at the beginning of the course of conduct but came into being thereafter, the "first" of the actions or omissions of the series for the purposes of State responsibility will be the first occurring after the obligation came into existence." [Emphasis added]
"[...]to the extent that on the consideration of the merits an act is proved to have originated before the critical date but continues as such to be in existence after that date, amounting to a breach of Treaty obligation in force at the time it occurs, it will come within the Tribunal's jurisdiction. This will also be the case if a series of acts results in the aggregate in such breach of an obligation in force at the time the accumulation culminates after the critical date. "36 [Emphasis added].