|TABLE OF ABBREVIATIONS|
|Centre||The International Centre for the Settlement of Investment Disputes established under the ICSID Convention|
|Counter-memorial||The Claimants' Counter-memorial on Jurisdiction, filed on 23 January 2012|
|Exh C-||The Claimants' Exhibits|
|Exh CLA-||The Claimants' Legal Authorities|
|Exh R-||The Respondent's Exhibits|
|Exh RL-||The Respondent's Legal Authorities|
|ICJ||The International Court of Justice|
|ICSID Convention||Convention on the Settlement of Investment Disputes between States and Nationals of other States, Washington D.C., 1965|
|Memorial||The Respondent's Memorial on Jurisdiction, filed on 24 September 2011|
|MFN clause||Most-Favored Nation clause|
|MPH||Uruguayan Ministry of Public Health|
|RFA||The Claimants' Request for Arbitration, filed on 19 February 2010|
|Rejoinder||The Claimants' Rejoinder on Jurisdiction, filed on 20 July 2012|
|Reply||The Respondent's Reply on Jurisdiction, filed on 20 April 2012|
|VCLT||Vienna Convention on the Law of Treaties, 1969|
|The BIT||Agreement between the Swiss Confederation and the Oriental Republic of Uruguay on the Reciprocal Promotion and Protection of Investments of 7 October 1998, entered into force on 22 April 1991|
|Transcript Day[#], [page:line]||Transcript of the Hearing on Jurisdiction Day One: 5 February 2013 Day Two: 6 February 2013|
- for the Tribunal: Prof. Piero Bernardini, President; Mr. Gary Born and Prof. James Crawford, arbitrators; Mrs. Anneliese Fleckenstein, Secretary of the Tribunal;
- for the Claimants:
Mr. Daniel M. Price Daniel M. Price PLLC
Mr. Stanimir A. Alexandrov Sidley Austin LLP
Mr. James Mendenhall Sidley Austin LLP
Ms. Mika Morse Sidley Austin LLP
Mr. Andrew Blandford Sidley Austin LLP
Mr. Carlos Brandes Guyer & Regules
Mr. JB Simko Philip Morris
Mr. John Fraser Philip Morris
Mr. Matias Cikato Philip Morris
Ms. Anne Edward Philip Morris
Dr. Carlos E. Delpiazzo Expert
- for the Respondent:
Mr. Paul S. Reichler Foley Hoag LLP
Dr. Ronald E.M. Goodman Foley Hoag LLP
Dr. Eduardo Jiménez de Aréchaga Attorney at Law
Mrs. Christina Beharry Foley Hoag LLP
Mr. Yuri Parkhomenko Foley Hoag LLP
Dr. Constantinos Salonidis Foley Hoag LLP
Mr. Yoni Bard Foley Hoag LLP
Mrs. Irene Okais Foley Hoag LLP
Ms. Angelica Villagran Foley Hoag LLP
Dr. Diego Cánepa Baccino Deputy Secretary
Presidency of the Republic of Uruguay
Dr. Carlos Mata Director of Legal Affairs
Ministry of Foreign Affairs
Dr. Daniel Hugo Martins Expert
(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State... and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.
(2) "National of another Contracting State" means:
(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.
(1) The term "investor" refers with regard to either Contracting Party to
(a) natural persons who, according to the law of that Contracting Party, are considered to be its nationals;
(b) legal entities, including companies, corporations, business associations and other organisations, which are constituted or otherwise duly organized under the law of the Contracting Party and have their seat in the territory of that same Contracting Party;
(c) legal entities established under the law of any country which are, directly or indirectly, controlled by nationals of that Contracting Party.
(2) The term "investment" shall include every kind of assets and particularly:
(a) movable and immovable property as well as any other rights in rem, such as charges on real estate, mortgages, liens, pledges;
(b) shares, certificates or other kinds of participation in companies;
(c) money claims and any entitlement of economic value;
(d) copyrights, industrial property rights (such as patents of inventions, utility models, industrial designs or models, trade or service marks, trade names, indications of source or appellation of origin), know-how and good-will;
(e) concessions under public law, including concessions to search for, extract or exploit natural resources as well as all other rights given by law, by contract or by decision of a public entity in accordance with the law.
Judgment of the competent courts in the sense of Article 9, paragraph (8) and Article 10, paragraph (2) means for the Oriental Republic of Uruguay a judicial decision in a one and only instance.
Ad Article 10 of the Protocol to the BIT reads as follows:
In the event of both Contracting Parties having become members of the Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of other States, disputes with respect to investments between a Contracting Party and an investor of the other Contracting Party shall, at the request of the investor, be submitted according to the provisions of the aforementioned Convention to the International Centre for Settlement of Investment Disputes.
Each Contracting Party shall ensure fair and equitable treatment within its territory of the investments of the investors of the other Contracting Party. This treatment shall not be less favourable than that granted by each Contracting Party to investments made within its territory by its own investors, or than that granted by each Contracting Party to the investments made within its territory by investors of the most favoured nation, if the latter treatment is more favourable.
The ordinary meaning of this language confirms that this clause is confined to fair and equitable treatment and does not allow the Claimants to escape the jurisdictional requirements of Article 10(2).
Investment arbitration tribunals have held that an MFN clause cannot incorporate by reference dispute settlement provisions unless the clause clearly and unambiguously indicates that the contracting parties intended this effect.21 The MFN clause of the Uruguay-Switzerland BIT does not "clearly and unambiguously" indicate that it should be interpreted to replace one means of settlement with another.22 Unlike the MFN clause in other cases, the MFN clause of the BIT in the present case does not apply to "all matters governed by the treaty" so that it cannot be extended to dispute resolution.23
According to the Respondent, the fact that the Claimants were not in compliance with the domestic litigation requirement as of the date of registration of the RFA is fatal to the Tribunal's jurisdiction. The Respondent misconstrues the steps in Article 10 as preclusive jurisdictional prerequisites rather than procedural requirements. A lengthy line of jurisprudence supports the Claimants' position that procedural steps, such as notification requirements, waiting periods and domestic litigation requirements, are not conditions for the vesting of jurisdiction. Such procedural steps pertain, not to jurisdiction, but to the admissibility of the dispute, or to procedural conduct related to the claim.31 Given that all procedural prerequisites have been met, dismissal of the claims would serve no purpose as the Claimants could resubmit the dispute to arbitration.
Most decisions have concluded that the six-month consultation period is not a jurisdictional requirement and that in any case it can be rendered moot or dispensed with if pursuit of consultation would be futile. Tribunals have recognized that procedural prerequisites cannot be applied mechanically in situations where dismissing the case would have no effect other than to delay the proceedings and force the parties to incur additional costs.32 Declining jurisdiction in the present case would be an unduly formalistic decision, at odds with the spirit and rationale of the dispute settlement provisions of the BIT.
a) The Claimants failed to litigate their treaty dispute in Uruguayan courts39,
b) Even if they had submitted the dispute to Uruguayan courts, the Claimants were required to litigate for 18 months before initiating arbitration.40
Disputes concerning alleged breaches of the BIT and disputes regarding domestic law claims may well both fall within the scope of the reference in Article 10(1) to "Disputes with respect to investments". A line of investment treaty decisions draws a distinction between the broad meaning of the wording in other bilateral investment treaties that are similar to Article 10 in the BIT,52 and the narrower meaning of the wording in still other treaties, including treaties concluded by Uruguay, referring to "disputes relating to a claim for breach of the treaty" or to "an investment dispute" (defined as including also an alleged breach of rights conferred by the treaty) or similar wording.53
The procedure to be followed shall be that established below:
A) The Tribunales de Apelaciones en lo Civil (Courts of Civil Appeal) shall have the competency to hear these proceedings Article 9 states:
Annulment and reparatory actions of a contentious-administrative nature, which are presented under the Treaties to which the present law refers, shall be subject to the decision of the Tribunal de lo Contencioso Administrativo, following the procedure provided for in the foregoing articles.
The position in international law generally is stated by the ICJ. In Georgia v. Russia, the Court explained the legal character of procedural preconditions as follows:
"To the extent that the procedural requirements of [a dispute settlement clause] may be conditions, they must be conditions precedent to the seisin of the court even when the term is not qualified by a temporal element".95
The Court referred to the "fundamental principle of consent"96 as stated in the Armed Activities case in the following terms:
"[The Court's] jurisdiction is based on the consent of the parties and is confined to the extent accepted by them,When that consent is expressed in a compromissory clause in an international agreement, any conditions to which such consent is subject must be regarded as constituting the limits thereon. The court accordingly considers that the examination of such conditions relates to its jurisdiction and not to the admissibility of the application,".97
"The Contracting Parties recognize each other's right not to allow economic activities for reasons of public security and order, public health or morality, as well as activities which by law are reserved to their own investors".
(1) Each Contracting Party shall in its territory promote as far as possible investments by investors of the other Contracting Party and admit such investments in accordance with its law. The Contracting Parties recognize each other's right not to allow economic activities for reason of public security and order, public health or morality, as well as activities which by law are reserved to their own investors.
(2) When a Contracting Party shall have admitted, according to its law, an investment on its territory, it shall grant the necessary permits in connection with such an investment and with the carrying out of licensing agreements and contracts for technical, commercial or administrative assistance. Each contracting party shall, whenever needed, endeavor to issue the necessary authorizations concerning the activities of consultants and other qualified persons of foreign nationality.
Each Contracting Party shall in its territory promote as far as possible investments by investors of the other Contracting Party and admit such investments in accordance with its law. The Contracting Parties recognize each other's right not to allow economic activities for reasons of public security and order, public health or morality, as well as activities which by law are reserved to their own investors.
As indicated by its title, "Promotion, admission",111 Article 2 deals with two different concepts, promotion and admission of investments.
As explained by the tribunal in Biwater Gauff v. Tanzania, the Salini "criteria are not fixed or mandatory as a matter of law".120 They are problematic to the extent they provide for a fixed and inflexible test which may contradict individual agreements, as expressed in bilateral investment treaties. Other decisions have declined to apply the Salini criteria, holding that they should not create a limit which neither the ICSID Convention nor the State parties to a specific treaty intended to create.121 These criteria should not play a role in the Tribunal's analysis of whether an investment exists, much less to serve as a jurisdictional requirement.
"The doctrine generally considers that investment infers: contributions, a certain duration of performance of the contract and a participation in the risks of the transaction. In reading the Convention's preamble, one may add the contribution to the economic development of the host State of the investment as an additional condition".130
"An investment could prove useful or not for a country without losing its quality [as an investment]. It is true that the Preamble to the ICSID Convention mentions contribution to the economic development of the host State. However, this reference is presented as a consequence and not as a condition of the investment: by protecting investments, the Convention facilitates the development of the host State. This does not mean that the development of the host State becomes a constitutive element of the concept of investment".136
"What he is saying here is in cases of denial of justice or delay that is equivalent to denial of justice, this principle in no way means that the foreign investor cannot go to arbitration. In our submission, law 16,110, if you look at the drafting history in the Senate records, the statement of Dr. Eduardo Jimenez de Aréchaga does not preclude the submission to arbitration of a denial of justice claim. It does not require that the denial of justice claim be submitted again to domestic litigation in Uruguay."146
" [i]n the event of going before a Tribunal under law 16,110, in the event there is a negative decision in regard to their allegation or claim under the treaty for denial of justice, then with an unfavourable decision they would also have the right to arbitrate. That is the interpretation of the Government of Uruguay. So there is no futility here".150
Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.
(1) Except as the parties otherwise agree, a party may present an incidental or additional claim or counterclaim arising directly out of the subject-matter of the dispute, provided that such ancillary claim is within the scope of the consent of the parties and is otherwise within the jurisdiction of the Centre.
(2) An incidental or additional claim shall be presented not later than in the reply and a counter-claim no later than in in the counter-memorial, unless the Tribunal, upon justification by the party presenting the ancillary claim and upon considering any objection of the other party, authorizes the presentation of the claim at a later stage in the proceeding.
(3) The Tribunal shall fix a time limit within which the party against which ancillary claim is presented may file its observations thereon.
a) be presented not later than in the reply or, if so authorized by the Tribunal upon justification by the party presenting the claim and consideration of the other party's objections, if any, at a later stage;
b) arise directly out of the subject-matter of the dispute; and
c) be within the scope of the consent of the parties and otherwise within the jurisdiction of the Centre.
"If a dispute as described in Paragraph 1 cannot be settled within the period of six months counted from the date on which one of the interested parties raised it, it shall be submitted at the request of one of the parties to the competent courts of the Contracting Party in whose territory the investment was made. As soon as there has been a decision by the competent courts, either of the parties may resort to an International Court of Arbitration, for the purpose of declaring if the legal decision complies and to what extent it meets the terms of this Treaty. If after a period of 18 (eighteen) months from bringing the legal action there has been no pronouncement, either of the parties may resort to the International Court of Arbitration, which in this case shall have the competence to resolve the dispute in its entirety. This provision shall not affect Article 10".
According to this provision, and apparently unlike Article 10(2) of the BIT, whatever domestic court's decision is rendered within 18 months from bringing legal action, resort to international arbitration is open to the party dissatisfied with such decision. The Claimants seem to have had this provision in mind when denying the requirement to go once again to the competent court in Uruguay for the denial of justice claim.
a. That it has jurisdiction over the claims presented by Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. as far as they are based on alleged breaches of the Agreement on the Reciprocal Promotion and Protection of Investments concluded on 7 October 1988 between the Swiss Confederation and the Oriental Republic of Uruguay;
b. That it has jurisdiction under Article 46 of the ICSID Convention over the Claimants' claim for denial of justice;
c. To make the necessary order for the continuation of the procedure pursuant to Arbitration Rule 41(4); and
d. To reserve all questions concerning the costs and expenses of the arbitral proceedings for subsequent determination.
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