PCA Case No. 2020-21
In the matter of an arbitration under the Arbitration Rules of the United Nations
Commission on International Trade Law 1976
and
The Agreement between the Government of the Republic of India and the Republic of
Mozambique for the Reciprocal Promotion and Protection of Investment dated
19 February 2009
-between-
PATEL ENGINEERING LIMITED
(INDIA)
Claimant
-and-
THE REPUBLIC OF MOZAMBIQUE
Respondent
PROCEDURAL ORDER NO. 3
Decision on the Motion for Bifurcation
THE ARBITRAL TRIBUNAL
Prof. Guido Santiago Tawil (Arbitrator)
Mr. Hugo Perezcano Díaz (Arbitrator)
Prof. Juan Fernández-Armesto (Presiding Arbitrator)
REGISTRY
Permanent Court of Arbitration
ADMINISTRATIVE SECRETARY
Sofia de Sampaio Jalles
14 December 2020
[Page 2]
1. This arbitration arises between Patel Engineering Limited [“Patel” or “Claimant”]
and The Republic of Mozambique [“Mozambique” or “Respondent”].
Hereinafter, Claimant and Respondent shall be jointly referred to as the “Parties”.
2. On 10 August 2020 the Parties received the consolidated version of the Terms of
Appointment, which were deemed to have been signed by the Parties and the
Arbitrators on 4 August 2020.
3. On 14 October 2020 the Tribunal issued Procedural Order No. 1, on the conduct of
the arbitration and the procedural timetable, after consulting with the Parties.
4. Pursuant to the procedural timetable, on 30 October 2020 Claimant filed its
Statement of Claim. On 20 November 2020 Respondent submitted a Motion for
Bifurcation of the jurisdictional questions from the merits and damages [the
“Motion”]. On 4 December 2020, Claimant presented its Response to Respondent's
Motion [the “Response”].
5. Pursuant to paras. 14 and 15 of Procedural Order No. 1, the Tribunal reserved the
right to ask the Parties for a new round of submissions once it had received
Claimant’s Response; if, on the other hand, the Tribunal found that it was
sufficiently briefed on the issue of bifurcation, it would issue its Decision on
Bifurcation by the date established in Annex I to Procedural Order No. 1.
6. After deliberations, the Tribunal finds that it has been sufficiently briefed. Given
that there is no need for further submissions of the Parties, the Tribunal hereby
issues its Decision on Bifurcation:
[Page 3]
7. The Arbitral Tribunal will start by summarizing the positions of Respondent (1.)
and Claimant (2.) and then adopt its decision (3.).
8. Mozambique submits that the bifurcation of the jurisdictional questions from the
merits and damages is the efficient, economical and a sensible approach to this
case¹.
9. Mozambique explains that under the Arbitration Rules of the United Nations
Commission on International Trade Law 1976 [“UNCITRAL Rules”], the
Tribunal has the power to bifurcate jurisdictional questions. According to
Mozambique, tribunals generally inquire whether the jurisdictional objections²:
- Are "prima facie serious and substantial",
- Can “be examined without prejudging or entering the merits”, and
- "If successful [would] dispose of all or an essential part of the claims made”.
10. According to Mozambique, these factors favor the bifurcation of jurisdiction in the
present proceedings³, given that there are substantial jurisdictional questions:
- Whether Patel made an investment (a.),
- Whether the Parties contractually agreed to ICC arbitration (b.),
- Whether in the 2011 Memorandum of Interest [“MOI”] the Parties chose to
proceed before the ICC in the case of claims arising under the Agreement
between the Government of the Republic of India and the Republic of
Mozambique for the Reciprocal Promotion and Protection of Investment
[“BIT”] (c.),
- Whether this UNCITRAL proceeding should yield to the ICC arbitration (d.),
and
- Whether Patel exhausted its remedies in Mozambique (e.).
¹ Motion, p. 1.
² Motion, p. 7, referring to Doc. RL-2 [Philip Morris Asia Ltd. v. Commonwealth of Australia, PCA Case
No. 2012-12, Procedural Order No 8 on Bifurcation, 14 April 2014, at para. 109].
³ Motion, p. 8.
[Page 4]
11. Mozambique notes that Patel asserts that in 2011 it entered into a MOI with
Mozambique, pursuant to which Patel was allegedly provided a right of first refusal
to enter into a concession to build a railroad/port in Mozambique. Thereafter, a
dispute arose whether Mozambican law required the public tender of the project.
To resolve the matter, Patel organized a consortium and agreed to participate in a
2013 public tender. In such tender, Patel was provided a point bidding advantage to
account for the MOI. After Patel's consortium did not win, Patel abandoned the
consortium and reverted to insisting on its alleged right of first refusal⁴.
12. Mozambique finds that, before reaching the merits of Patel's claims, the Tribunal
must determine whether the purported right of first refusal, the MOI and/or the
expenditures related to the preparation of a feasibility study, constitute an
"investment" sufficient for there to be jurisdiction ratione materiae. In
Respondent's view, they do not:
13. First, there are doubts as to whether the MOI and a right of first refusal are an
investment. According to various tribunals, a MOI is merely an expression of
interest and does not constitute an investment⁵. Mozambique submits that in the
present case the MOI did not compel Patel or the Mozambican Ministry of
Transport and Communications [“MTC”] to enter into a concession. The MOI
contained several conditions precedent that had to be satisfied before it became a
binding commitment and Patel was free not to exercise its option. Mozambique
finds that the MOI is like a memorandum of understanding, which, according to the
findings of the tribunal in PSEG Global, is not an investment⁶.
14. Second, Mozambique contends that there are also substantial questions as to
whether the expenditures made by Patel in connection with the MOI – including
those incurred in preparation of the feasibility study – constitute an investment⁷.
Mozambique avers that such expenditures are not an investment because the
concession never came to fruition. Mozambique finds that even if Patel were to
have a contract claim under local law (quod non), that type of claim is not protected
under the BIT⁸.
15. Third, Mozambique invokes the Salini factors and points out that an investment
requires a substantial contribution by the investor, for a certain duration, the
existence of an operational risk, a certain regularity of profit for the investor, and a
contribution to the economic development of the host State⁹. According to
Respondent, applying these factors in the present case, one finds that this is a
⁴ Motion, pp. 1 and 5.
⁵ Motion, p. 9, referring to Doc. RL-5 [PSEG Global Inc., The North American Coal Corp., and Konya
Ilgin Elektrik Üretim ve Ticaret Ltd. Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5 Decision on
Jurisdiction, 4 June 2004, para. 176.]
⁶ Motion, pp. 9-10.
⁷ Motion, pp. 10-11, referring to Doc. RL-6 [Mihaly Int’l Corp. v. Democratic Socialist Republic of Sri
Lanka, ICSID Case No. ARB/00/2, Award, 15 March 2002, paras. 48-50].
⁸ Motion, p. 11.
⁹ Motion, p. 11, referring to Doc. RL-7 [Salini Construttori S.p.A. and Italstrade S.p.A. v. Kingdom of
Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 23 July 2001, para. 52].
[Page 5]
pre-concession, pre-investment contractual dispute, involving the validity of the
MOI and Patel's belated claims over a completed public tender¹⁰:
- The preparation of a feasibility study is not a substantial contribution to
Mozambique, lacks sufficient duration and contains no operational risk;
- Likewise, there is no profit arising from the MOI itself and the MOI did not
provide a contribution to Mozambique's economic development.
16. Fourth, there is a question whether the MOI is an investment for the purposes of
Art. 1(b)(iii) of the BIT, given that the MOI is exploratory and conditional, and not
a "right to money”; it also does not have financial value¹¹. Furthermore, Art. 1(b)(v)
of the BIT does not apply either, given that no concession was conferred by
Mozambique to Patel by law or under contract¹².
17. Lastly, Mozambique submits that Patel never registered as a foreign investor in
Mozambique pursuant to Art. 22, Section 1 of the Mozambique Investment Law¹³.
Given that the BIT defines investments as those made "in accordance with the
national laws of the Contracting Party in whose territory the investment is made”,
Patel cannot be considered an investor¹⁴.
18. Mozambique argues that the MOI's arbitration agreement provides for arbitration
under the ICC Rules in Mozambique¹⁵. The agreement is valid, enforceable and
severable from the question of the MOI's validity¹⁶. From Mozambique's
perspective, Patel intentionally violated the MOI's arbitration agreement when it
filed this UNCITRAL arbitration. Mozambique further notes that the ICC Rules are
sufficiently broad to permit arbitration of investment treaty claims¹⁷.
19. Mozambique explains that it submitted a request for arbitration, dated 20 May 2020,
against Patel, pursuant to the MOI's arbitration agreement and the ICC Rules [the
“ICC Arbitration”]¹⁸. Mozambique finds that Patel must bring its BIT claims in
¹⁰ Motion, pp. 1, 5-6 and 11-12.
¹¹ Motion, p. 12, referring to Art. 1(b)(iii) of the BIT, which according to Respondent defines an investment
as "rights to money or to any performance under contract having a financial value”.
¹² Motion, p. 12, referring to Art. 1(b)(v) of the BIT, which according to Respondent provides that
investments include "business concessions conferred by law or under contract".
¹³ According to Respondent, Art. 22, Section 1 of the Mozambique Investment Law requires that a “foreign
investor, within one hundred and twenty (120) days counted from the date of notification of the decision
authorizing the investment project, shall register the undertaking involving direct foreign investment with
the authority responsible for monitoring the inflow of capital, and register subsequently each actual capital
import operation that takes place" [Motion, p. 12].
¹⁴ Motion, p. 12.
¹⁵ Motion, p. 6, referring to Doc. R-1 [MOI, Clause 10].
¹⁶ Motion, p. 13.
¹⁷ Motion, p. 13.
¹⁸ Motion, p. 6.
[Page 6]
the ICC Arbitration and that this Tribunal must respect and give effect to the Parties'
arbitration agreement and selection of Mozambique as the place of arbitration¹⁹.
20. Mozambique further submits that there is a substantial jurisdictional question
whether in the MOI the Parties chose to bring claims under the BIT before the ICC.
21. Mozambique notes that under the BIT the parties may agree to a particular mode of
dispute resolution “in accordance with the law of the Contracting Party which has
admitted the investment to that Contracting Party's competent judicial, arbitral or
administrative bodies"²⁰. According to Respondent, the ICC is an arbitral body
recognized in Mozambique. Mozambique further points out that the MOI provides
that²¹:
"The arbitration will be governed by Mozambique law and the rules of the
International Chamber of Commerce shall be followed."
22. Therefore, it can be argued that the Parties agreed in the MOI to submit their
disputes under the BIT to ICC arbitration²².
23. Mozambique finds that there is a substantial jurisdictional question whether this
UNICTRAL proceeding should be dismissed or stayed in deference to the pending
ICC Arbitration²³.
24. Mozambique contends that this UNCITRAL proceeding is subsumed within the
ICC Arbitration, where Mozambique and the MTC seek a relief which is
substantially broader than the issues raised in this UNCITRAL proceeding, and
which includes investment treaty questions²⁴. Furthermore, Mozambique notes that
Patel is participating in the ICC Arbitration and requesting relief on the merits,
including an award that Mozambique and the MTC “have violated their obligations
under the MOI"²⁵. Therefore, Mozambique submits that the ICC Arbitration can
determine all contract and BIT disputes among all parties, including the MTC.
25. In the alternative, Mozambique finds that the present arbitration should be
suspended until the ICC Arbitration determines the validity of the MOI and
contractual rights thereunder²⁶. In the Fraport case, the tribunal accepted an
objection to ICSID jurisdiction, holding that since the investment was contrary to
local law, there was no investment under the treaty. Mozambique submits that if it
¹⁹ Motion, p. 13.
²⁰ Motion, p. 14, referring to Doc. R-1 [MOI, Clause 10].
²¹ Motion, p. 14, referring to Doc. RL-8 [Art. 9(2)(a) of the BIT].
²² Motion, p. 14.
²³ Motion, p. 14.
²⁴ Motion, p. 15.
²⁵ Motion, p. 18.
²⁶ Motion, p. 18.
[Page 7]
were found that the MOI violated Mozambican procurement law, there would be
no protected investment under the BIT and the Tribunal would lack jurisdiction²⁷.
26. Mozambique argues that, even if the Tribunal were to conclude that the ICC
Arbitration does not encompass BIT claims, the Tribunal should still dismiss or
suspend this arbitration. Pursuant to Art. 39 of Mozambican Law No. 15/2011 on
Public Private Partnerships, disputes must be resolved pursuant to the terms of the
parties' contract; and in the present case, the contract dispute has not yet been
resolved in the ICC Arbitration²⁸.
27. Lastly, Mozambique avers that Patel's bid dispute should have been timely resolved
utilizing the procedures for contesting bids under Mozambican procurement law.
By trying to belatedly turn a procurement dispute into an investment treaty case,
Patel seeks to impermissibly expand the scope of investor-State arbitration²⁹.
28. Mozambique argues that the above jurisdictional questions are not inextricably
intertwined with the merits or damages: they relate to whether the MOI and
expenditures constitute an investment, and whether this Tribunal should respect and
enforce the Parties' arbitration agreement. Such questions are thus distinct from the
merits (such as whether the MOI is valid, what are the substantive rights under the
MOI, whether there was a breach of the MOI, whether there are investment treaty
claims, and whether there are damages)³⁰.
***
29. Therefore, Mozambique requests that the Tribunal bifurcate the jurisdictional
objections, since this is the most efficient and economical solution, which will allow
the Parties and the Tribunal to save resources³¹.
30. Claimant submits that the Motion should be dismissed because procedural
efficiency and fairness militate against the bifurcation of Respondent's
jurisdictional objections in this case³².
31. Claimant argues that the Tribunal's discretion to bifurcate jurisdictional questions
must be exercised with care, particularly where bifurcation could increase the time
²⁷ Motion, pp. 15 and 18, referring to Doc. RL-9 [Fraport AG Frankfurt Airport Services Worldwide v.
Republic of the Philippines, ICSID Case No. ARB/03/25, Award, 23 July 2007, para. 19, 44, 46].
²⁸ Motion, p. 18.
²⁹ Motion, p. 19.
³⁰ Motion, pp. 19-20.
³¹ Motion, p. 20.
³² Response, para. 2.
[Page 8]
and costs of the overall proceedings³³. According to Claimant, fairness and
procedural efficiency are determinant when considering a bifurcation application³⁴.
Procedural efficiency is even more à propos where the arbitration is seated in The
Hague, as is the case here³⁵.
32. As to the factors that the Tribunal should consider when assessing the Motion, Patel
argues that each case turns on its own circumstances, but that the factors identified
in the Glamis case constitute helpful guidance³⁶. Although Claimant does not
disagree with the criteria put forward by Respondent, it argues that they are not
“one-size-fit-all”. Furthermore, Claimant notes that Mozambique relies on a low
threshold to determine whether a jurisdictional objection is substantial; therefore,
the Tribunal should prefer the standard formulated in Glamis³⁷.
33. Patel finds that in the circumstances of this case, bifurcation would not promote
procedural efficiency and economy. It would also be unfair for the Tribunal to grant
Respondent's Motion³⁸.
34. Patel submits that Respondent's objections as to the existence and legality of the
investment are intertwined with the merits and quantum, and require the Tribunal
to consider a substantial amount of evidence at the jurisdictional stage³⁹:
- The objection concerning the existence of an investment requires the Tribunal
to review the vast majority of the documentary and witness evidence
submitted in the Statement of Claim, including expert forensic evidence on
the authenticity of the version of the MOI relied upon by Patel;
- The objection in respect of the legality of the investment requires the
consideration of expert evidence on Mozambican law, that is also relevant to
the merits of Patel's case.
35. As to Respondent's other objections, which essentially revolve around the parallel
ICC Arbitration, they are so frivolous and contrived that it would be a waste of time
and costs to deal with such objections on a preliminary basis. Patel finds that it
would also be unfair for Mozambique to be permitted to benefit from its own
procedural tactics⁴⁰: Respondent and the MTC commenced the ICC Arbitration
three months after this arbitration was commenced and almost two years after
³³ Response, paras. 14-18.
³⁴ Response, para. 18, referring to Doc. CLA-183 [Cairn Energy PLC and Cairn UK Holdings Limited
(CUHL) v. Government of India, PCA Case No. 2016-7, Procedural Order No. 4 – Decision on the
Respondent's Application for Bifurcation, 19 April 2017, para. 78].
³⁵ Response, para. 19, referring to Art. 1036(3) of the Dutch Arbitration Act: “The arbitral tribunal shall
guard against unreasonable delay of the proceedings and, if necessary, at the request of a party or of its own
motion, take measures. The parties shall mutually be obliged to prevent unreasonable delay of the
proceedings."
³⁶ Response, para. 20, referring to Doc. CLA-190 [Glamis Gold, Ltd. v. The United States of America,
UNCITRAL, Procedural Order No. 2 (Revised), 31 May 2005, paras. 10-11].
³⁷ Response, paras. 22-24.
³⁸ Response, para. 38.
³⁹ Response, paras. 3 and 29-33.
⁴⁰ Response, paras. 4 and 34-37.
[Page 9]
Respondent had been notified of an investment dispute between the Parties under
the BIT⁴¹. According to Patel, proof that the ICC Arbitration is a mere tactical
maneuver aimed at undermining this arbitration is the fact that Mozambique and
the MTC have no genuine claim in the ICC Arbitration, in which they essentially
seek declaratory relief⁴².
36. Patel further finds that Respondent's arguments on procedural efficiency and
reducing unnecessary costs are contradicted by the fact that Respondent refused to
consolidate both the ICC Arbitration and this proceeding in a single arbitration
under either set of arbitration rules, with a seat in a neutral jurisdiction⁴³.
37. Patel finds that Mozambique's First Objection is meritless and intertwined with the
merits, which means that there would be no procedural efficiency in bifurcating it.
38. First, Patel argues that it invested in an economic transaction aimed at developing
a rail corridor and port in Mozambique, valued at USD 3.115 billion [“Project”].
According to Patel, its investment included⁴⁴:
- The direct award of a concession to implement the Project and all the rights
under the MOI associated with the Project (right of first refusal, exclusive
right to develop the Project etc.);
- The value of the information and data transferred to Mozambique;
- The preliminary study conducted by Patel in 2011;
- The detailed prefeasibility study carried out by Patel during 2011-2012.
39. Patel submits that to determine Respondent's objection, the Tribunal must answer
the question of what comprised Patel's investment, including what was agreed
under the MOI. According to Patel, this is not a question that can be resolved on
the face of the MOI, but will require the Tribunal to review extensive factual and
expert evidence (including evidence on the history and implementation of the MOI,
as well as on the authenticity of the English version relied upon by Claimant)⁴⁵.
40. Claimant finds that the question of what was agreed under the MOI is intertwined
with the merits. The Tribunal must determine what was or not promised to Patel to
decide Patel's claims that Respondent breached the Fair and Equitable Treatment
standard and that Respondent indirectly expropriated Patel's contractual rights to a
concession and to exclusivity⁴⁶.
⁴¹ Response, para. 7.
⁴² Response, para. 8.
⁴³ Response, paras. 10-13 and 36.
⁴⁴ Response, para. 42.
⁴⁵ Response, paras. 43-44.
⁴⁶ Response, para. 45.
[Page 10]
41. In any case, Claimant argues that Respondent's objection is meritless as a matter of
law. In the PSEG Global case, on which Respondent relies, the tribunal found that
the concession agreement between PSEG and the Turkish government was a valid
concession agreement, which constituted an investment. As to the decision on the
memorandum of understanding, the circumstances of that case have nothing to do
with the case at hand⁴⁷.
42. Second, Respondent's objection on the basis that expenditure made by Claimant in
connection with the MOI does not constitute an investment is equally meritless.
Claimant does not rely on expenditure in relation to the MOI as its investment. In
any case, this goes to show that the determination of what was agreed between the
Parties under the MOI is key to the determination of whether Claimant has made a
qualifying investment⁴⁸.
43. Third, as to the Salini factors invoked by Respondent, this objection cannot be
decided on the face of the MOI. The determination of what comprised Patel's
investment and what was agreed under the MOI requires the Tribunal to consider
substantial factual and expert evidence; it is also intertwined with the merits and
quantum⁴⁹. Patel notes that there is also considerable debate as to whether the Salini
criteria are compulsory requirements or mere indicators of the possible existence of
an investment. In any event, such criteria are met in the present case⁵⁰.
44. Fourth, Patel submits that its investment clearly falls within the scope of the
definition of “investment” under the BIT, as demonstrated in the Statement of
Claim. Patel further argues that its investment is much broader than Respondent
tries to define it, and includes the information, data, studies, and know-how
provided by Patel to Mozambique, without which Mozambique's largest
infrastructure project to date would have been a non-starter⁵¹.
45. Lastly, Patel argues that it is well-established that failure to register an investment,
even if such registration is required by law, is not sufficient for a finding that an
investment has not been made in accordance with the law⁵².
46. Patel agrees that the ICC Rules may be appropriate to govern a BIT dispute – in
fact, Patel has offered that the two arbitrations be consolidated under the ICC Rules.
However, Respondent conflates the issue of the arbitration rules with that of
jurisdiction, suggesting that the ICC tribunal has jurisdiction to hear this claim⁵³.
Patel submits that this is incorrect:
⁴⁷ Response, para. 47.
⁴⁸ Response, paras. 49-51.
⁴⁹ Response, paras. 52-53.
⁵⁰ Response, para. 54.
⁵¹ Response, paras. 57-58.
⁵² Response, para. 60, referring to Doc. CLA-87 [Mytilineos Holdings SA v. The State Union of Serbia &
Montenegro and Republic of Serbia, UNCITRAL, Partial Award on Jurisdiction, 8 September 2006,
para. 146].
⁵³ Response, para. 62.
[Page 11]
- Clause 10 of the MOI only covers claims arising out of the MOI, not disputes
arising out of violations of the BIT, which contains a separate dispute
resolution agreement;
- The law applicable to the MOI is Mozambique law, not international law;
- Tribunals appointed under an arbitration clause contained in a contract have
no basis to uphold their jurisdiction under a separate arbitration agreement
contained in an investment treaty; a contrario, treaty tribunals routinely hold
that they have jurisdiction to hear claims arising out of a breach of contractual
obligations where a breach of an umbrella clause is invoked.
47. Accordingly, the only tribunal that has jurisdiction to hear both arguments under
the MOI and under the BIT is this Tribunal⁵⁴.
48. Patel finds that Mozambique's Third Objection is meritless for three reasons:
49. First, the Parties' agreement to submit disputes arising out of the MOI to ICC
arbitration is not an agreement for the purposes of Art. 9(2)(a) of the BIT, which
clearly refers to a dispute under the Treaty, and not to a contractual dispute⁵⁵.
Claimant's claim is for breach of the Treaty, not of the MOI. In contrast, Clause 10
of the MOI only covers disputes “arising out of this Memorandum"⁵⁶.
50. Second, Art. 9(2)(a) of the BIT contemplates that the parties' agreement as to
dispute resolution must be subsequent to their failure to settle the dispute amicably.
In the present case, the negotiation period started seven years after the MOI was
entered into. Therefore, the parties to the MOI could not have contemplated that
their investment dispute, which would arise seven years later, would be covered by
Clause 10 of the MOI⁵⁷.
51. Third, the Parties were aware of the BIT (which had entered into force in 2009) at
the time they executed the MOI in May 2011. Yet, the Parties did not exclude a
resort to the BIT in Clause 10 of the MOI. This shows that Clause 10 of the MOI
only covers disputes “arising out of” the MOI and not investment disputes⁵⁸.
52. Patel argues that "it is difficult to see how [Respondent's Fourth Objection] is a
proper jurisdictional objection”⁵⁹.
⁵⁴ Response, para. 63.
⁵⁵ Response, paras. 65-66.
⁵⁶ Response, para. 66.
⁵⁷ Response, para. 67.
⁵⁸ Response, para. 68.
⁵⁹ Response, paras. 69-71.
[Page 12]
53. Claimant notes that the ICC Arbitration was commenced by Mozambique after
Claimant commenced this arbitration, the request for arbitration in the ICC
Arbitration reads as a response to the arguments raised by Patel in this arbitration,
and Mozambique and the MTC have essentially sought declaratory relief in the ICC
Arbitration, including relief aimed at depriving this Tribunal of jurisdiction over
Claimant's claims⁶⁰.
54. Claimant further observes that Respondent suggests that bifurcation would be
appropriate in that it would allow time for the ICC tribunal to reach a decision. Patel
argues, however, that the purpose of bifurcation is not to have another tribunal
decide issues before this Tribunal⁶¹.
55. Lastly, Patel avers that Respondent should have made the argument that, if the MOI
violated Mozambican law, Claimant had failed to make a protected investment,
with its objection on the existence of the investment. Respondent, however, chose
not to do so, because it knows that the argument on the legality of the MOI is
intertwined with the merits and will require the Tribunal to examine substantial
expert evidence on Mozambican law. In other words: Respondent's objection is not
suited to bifurcation⁶².
56. Patel finds that Mozambique's Fifth Objection is not only hard to follow, but also
does not appear to be a proper jurisdictional objection ⁶³.
57. Patel notes that the BIT does not contain any requirement that an investor exhaust
local remedies before bringing a claim under the BIT⁶⁴.
58. In any event, Patel argues that to the extent Mozambique is suggesting that the
MOI's arbitration agreement somehow precludes Patel from commencing a treaty
claim, the objection is also meritless: it is a well-established principle that an
exclusive jurisdiction clause in a contract does not prevent an investor from
commencing a treaty claim, as the causes of action are different⁶⁵.
***
59. In view of the above, Patel requests that the Tribunal dismiss Respondent's Motion
and order Respondent to pay all costs incurred by Patel in connection with this
Motion, including interest⁶⁶.
⁶⁰ Response, para. 71.
⁶¹ Response, para. 73.
⁶² Response, paras. 74-76.
⁶³ Response, paras. 78-79.
⁶⁴ Response, para. 80.
⁶⁵ Response, para. 79, referring to Doc. CLA-102 [Compañiá de Aguas del Aconquija S.A. and Vivendi
Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002,
paras. 86-116].
⁶⁶ Response, para. 81.
[Page 13]
60. Both Parties agree⁶⁷ that the Tribunal has discretion to bifurcate jurisdictional
questions, inter alia, pursuant to Art. 15(1) of the UNCITRAL Rules⁶⁸.
61. The case law cited by the Parties shows that arbitral tribunals generally consider the
following three-factor test when deciding whether to grant bifurcation⁶⁹:
- Whether the jurisdictional objections raised are prima facie serious and
substantial;
- Whether any objection to jurisdiction, if granted, will result in a material
reduction of the proceedings at the next phase, or would dispose of all or an
essential part of the claims; and
- Whether bifurcation is impractical, in that the jurisdictional issue is too
intertwined with the merits, making it very unlikely that there will be
substantial savings in time or cost.
62. The Parties agree that the bifurcation of jurisdictional objections from merits and
quantum has one main goal: to increase the procedural efficiency and economy of
the proceeding. Indeed, if a jurisdictional objection is successful, bifurcation will
allow for an early termination of the arbitration, sparing the time and cost required
to adjudicate the merits and quantum.
63. The Parties disagree, however, whether such goal will be attained in the present
case:
- While Respondent finds that bifurcation will maximize procedural efficiency,
given that the jurisdictional objections are serious and substantial, and can be
decided without going into the merits,
- Claimant submits that procedural efficiency militates against bifurcation,
because two of Mozambique's jurisdictional objections are intertwined with
the merits and will require the Tribunal to review substantial evidence; as to
the remaining objections, they are so frivolous that it would be a waste of time
and costs to deal with such objections on a preliminary basis.
⁶⁷ Motion, p. 7; Response, para. 14.
⁶⁸ Art. 15(1) UNCITRAL Rules: "Subject to these Rules, the arbitral tribunal may conduct the arbitration
in such manner as it considers appropriate, provided that the parties are treated with equality and that at any
stage of the proceedings each party is given a full opportunity of presenting his case."
⁶⁹ Doc. CLA-195 [Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41,
Procedural Order No. 2, para. 49]; Doc. CLA-190 [Glamis Gold, Ltd. v. The United States of America,
UNCITRAL, Procedural Order No. 2 (Revised), 31 May 2005, para. 12(c)]; Doc. RL-2 [Philip Morris Asia
Ltd. v. Commonwealth of Australia, PCA Case No. 2012-12, Procedural Order No 8 on Bifurcation, 14
April 2014, para. 109].
[Page 14]
64. After carefully analyzing Mozambique's objections to jurisdiction in light of the
above criteria and in the interests of procedural economy and efficiency, the
Tribunal decides not to bifurcate the proceedings.
65. The Tribunal finds that Respondent's First Objection, on the existence of a
protected investment, is inextricably intertwined with the merits, Claimant and
Respondent holding opposing views as to the occurrence of the relevant facts. To
properly adjudicate the First Objection, the Tribunal cannot simply rely on the facts
as pleaded by Claimant but will have to review and analyze a significant amount of
evidence, including witness and expert evidence, in order to make its own findings.
In these circumstances, the Tribunal finds that a short, bifurcated procedure is not
appropriate for the proper adjudication of the First Objection.
66. Considering the Tribunal's decision on the First Objection, the Tribunal decides to
join the remaining Objections to the merits.
67. In view of the above, the Arbitral Tribunal decides to:
- Dismiss Mozambique's Motion for Bifurcation;
- Join the jurisdictional objections to the merits and quantum; and
- Direct the Parties to follow the procedural timetable set out in Scenario B of
Annex I to Procedural Order No. 1.
Place of Arbitration: The Hague, Netherlands
Date: 14 December 2020
Signature
Juan Fernández-Armesto
President of the Arbitral Tribunal