180231.pdf

This HTML version is machine-generated. Always consult the original document.

[Page 1]

BEFORE THE INTERNATIONAL CENTRE FOR SETTLEMENT OF
INVESTMENT DISPUTES

ICSID Case No. ARB/19/6

- - - - - - - - - - - - - - - - - - - - -x
In the Matter of Arbitration Between: :
:
ANGEL SAMUEL SEDA AND OTHERS, :
:
Claimants, :
:
and :
:
:
REPUBLIC OF COLOMBIA, :
:
Respondent. :
- - - - - - - - - - - - - - - - - - - - -x Volume 1

HEARING ON NEW EVIDENCE AND ORAL CLOSING SUBMISSIONS

Monday, October 3, 2022

Hotel Le Royal Monceau
Hearing Room: Louis Duhayon,
Andre Junot & Pierre Bermond
37 Avenue Hoche
Paris, France

The Hearing in the above-entitled matter

came on at 9:30 a.m. before:

PROF. DR. KLAUS SACHS
President of the Tribunal

PROF. HUGO PEREZCANO DÍAZ
Co-Arbitrator

DR. CHARLES PONCET
Co-Arbitrator

[Page 2]

ALSO PRESENT:

MS. SARA MARZAL YETANO
Secretary to the Tribunal

Realtime Stenographers:

MR. DAVID A. KASDAN
Registered Merit Reporter (RMR)
Certified Realtime Reporter (CRR)
B&B Reporting/Worldwide Reporting, LLP
529 14th Street, S.E.
Washington, D.C. 20003
United States of America

MR. LEANDRO IEZZI
MR. DIONISIO RINALDI
D.R. Esteno
Colombres 566
Buenos Aires 1218ABE
Argentina

Interpreters:

MS. ANNA SOPHIA CHAPMAN
MS. AMALIA THALER - de KLEMM
MS. ROXANA DAZIN

[Page 3]

APPEARANCES:

On behalf of the Claimants:

MR. RAHIM MOLOO
MS. ANNE CHAMPION
MS. MARRYUM KAHLOON
MR. BEN HARRIS
MS. NIKA MADYOON
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166-0193
United States of America

MR. PEDRO G. SOTO
MS. ANKITA RITWIK
Gibson, Dunn & Crutcher, LLP
1050 Connecticut Ave N.W.
Washington, D.C. 20036
United States of America

MR. ALEJANDRO MEJÍA
MR. JUAN PABLO PANTOJA RUIZ
Cáez Muñoz Mejía Abogados
Cra. 17 ##89-31
Bogotá, Colombia

Party Representatives:

MR. ANGEL SEDA
MR. JUSTIN ENBODY
MR. STEPHEN BOBECK
MR. JUSTIN CARUSO
MR. MONTE ADCOCK
MR. PIERRE AMARIGLIO

[Page 4]

APPEARANCES: (Continued)

On behalf of Respondent:

MS. MARTHA LUCÍA ZAMORA
MS. ANA MARÍA ORDÓÑEZ PUENTES
MR. GIOVANNY VEGA-BARBOSA
MS. ELIZABETH PRADO LÓPEZ
MS. YADIRA CASTILLO MENESES
MR. ANDRES FELIPE REINA ARANGO
MS. MARCELA MARÍA SILVA ZAMBRANO
Agencia Nacional de Defensa
Jurídica del Estado
Carrera 7 No. 75-66 - 2do y 3er piso
Bogotá
Colombia

MR. CARLOS SABOYÁ
Director de Asuntos Jurídicos, Fiscalía
General de la Nación

MS. SANDRA MARTÍNEZ
Asesora de la Dirección de Asuntos
Jurídicos, Fiscalía General de la Nación

MS. SANDRA MONTEZUMA
Asesora en el Despacho del Vicefiscal,
Fiscalía General de la Nación

MR. ALBERTO ACEVEDO QUINTERO
Director del Cuerpo Técnico de
Investigaciones de la Fiscalía General de
la Nación

MS. TATIANA GARCÍA
Directora de Asuntos Internacionales,
Fiscalía General de la Nación

MR. ANDRES FELIPE TINOCO
Asesor en el Despacho del Vicefiscal,
Fiscalía General de la Nación

[Page 5]

APPEARANCES: (Continued)

DR. YAS BANIFATEMI
MS. YAEL RIBCO BORMAN
MS. PILAR ALVAREZ
MS. CAROLINA BARROS
MR. YOUSSEF DAOUD
Gaillard Banifatemi Shelbaya Disputes
22 rue de Londres, 75009 Paris
France

MS. XIMENA HERRERA BERNAL
Gaillard Banifatemi Shelbaya Disputes
165 Fleet Street
London EC4A 2AE
United Kingdom

[Page 6]

APPEARANCES: (Continued)

On behalf of the United States of America:

MS. LISA J. GROSH
Assistant Legal Adviser
MR. ALVARO PERALTA
MR. JOHN DALEY
MS. NICOLE C. THORNTON
MS. JULIA BROWER
MR. MATTHEW HACKELL
MS. MICHELLE KER
Office of the Legal Adviser
United States Department of State
Washington, D.C. 20520
United States of America

MS. CATHERINE (KATE) GIBSON
Office of the U.S. Trade Representative
600 17th Street, N.W.
Washington, D.C. 20006
United States of America

MR. EMMETT WEISS
U.S. Department of Treasury
Washington, D.C.
United States of America

[Page 7]

C O N T E N T S

PAGE

PRELIMINARY MATTERS...................................8

CLOSING ARGUMENTS

ON BEHALF OF THE CLAIMANTS:

By Mr. Moloo.........................................21

By Ms. Champion......................................83

By Mr. Moloo........................................131

By Ms. Kahloon......................................189

By Mr. Moloo........................................197

ON BEHALF OF THE RESPONDENT:

By Ms. Ordóñez......................................201

By Ms. Banifatemi...................................207

By Ms. Herrera......................................284

By Ms. Ribco Borman.................................355

By Ms. Banifatemi...................................371

[Page 8]

P R O C E E D I N G S

PRESIDENT SACHS: Welcome to this Closing Argument Hearing.

We should first see whether the list of participants corresponds to the persons being present here or connected. I will start with the Claimant.

Could you please confirm that all counsel and Party representatives included in the List of Participants are indeed present or connected?

MR. MOLOO: Yes, Mr. President.

PRESIDENT SACHS: Thank you.

And the same for the Respondent?

MS. BANIFATEMI: Yes, Mr. President. I'm happy to introduce the members of our team if the Panel would like to know who is who. I'm in your hands. Everybody is president.

PRESIDENT SACHS: Why not, yes. We have the pressure to see, I think, most of you if not all at the previous hearing.

MS. BANIFATEMI: Thank you. To my right you have already met with Ms. Ana María Ordoñez, who's the Director of Agencia Nacional de Defensa Jurídica del

[Page 9]

Estado. From the same body you have MR. Giovanny Vega-Barbosa.

And maybe people can raise their hand as I give their name.

We also have from the--well, we have the Director del Cuerpo Técnico de Investigaciones de la Fiscalía General de la Nación, Dr. Alberto Quintero.

And we have Ms. Sandra Montezuma, who is the Asesora de la Dirección de Asuntos Jurídicos, Fiscalía General de la Nación, so this is the Prosecutor's team. And also Mr. Andrés Felipe Tinoco, also from the same body.

And we have not in the room Ms. Martha Lucía Zamora, [Redacted]

[Redacted]

On the counsel team you have myself from Gaillard Banifatemi Shelbaya Disputes. You have Ms. Ximena Herrera.

You can raise your hand.

[Page 10]

You know her.

Ms. Pilar Alvarez, Yael Ribco Borman, and Ms. Carolina Barros, and we have also Jad Markbaoui, and Cesar Rodriguez.

Thank you very much.

PRESIDENT SACHS: Thank you very much.

Now I turn again to the Claimant to present your team, please.

MR. MOLOO: Thank you, Mr. President.

Representing the Claimants we have the principal Claimant, Mr. Seda, who you are all familiar with. We may have other Claimants join us at various points in time today, but given the time difference, I don't think they're on quite yet. I think it's 3:00 a.m. where most of them are.

To my right we have Ms. Annie Champion; myself, Rahim Moloo; Ms. Marryum Kahloon; Ms. Ankita Ritwik; and Mr. Pierre Amarilglio from Tenor Capital.

And I do have two of any colleagues in New York, despite the hour in New York, joining us: Ms. Nika Madyoon and Mr. Ben Harris.

PRESIDENT SACHS: As you said, this might be

[Page 11]

the hour, indeed.

SECRETARY MARZAL: Excuse me, Mr. President. Here, the Secretary. Can I confirm that Codian MSE--because there is somebody waiting in the Zoom waiting room--are your associates?

MR. MOLOO: That's our conference room in New York.

SECRETARY MARZAL: Perfect, thank you.

PRESIDENT SACHS: Sara, could you check with the Non-Disputing Party, whether they are connected?

SECRETARY MARZAL: Yes, we have one Non-Disputing Party connected already, Mr. Alvaro Posada; I believe I'm correct.

Alvaro Peralta, sorry. Correction.

PRESIDENT SACHS: Okay. Very good.

Housekeeping. Claimant, any housekeeping matters from your side?

MR. MOLOO: No, Mr. President.

PRESIDENT SACHS: Thank you.

Respondent?

MS. BANIFATEMI: We do, Mr. President.

With permission from the Tribunal, we would

[Page 12]

like to address the issue of the rebuttal evidence that was excluded from the record. We understand, and you have, of course, at email of 26 September where we mentioned that we were proceeding with this Hearing under protest and with/reserve provisional rights. It is a very important and serious matter for the State of Colombia; therefore, Ms. Ordoñez will give you a statement on behalf of Colombia in this regard and put forward our position in this regard, if you allow us.

PRESIDENT SACHS: Okay.

MS. BANIFATEMI: Thank you.

MR. MOLOO: Sorry, Mr. President. I wasn't under the impression that we would be dealing with this Application first thing this morning. I had thought that we would deliver our Closing Submissions and then address the Tribunal on the issue of the evidence, but we're in the Tribunal's hands.

PRESIDENT SACHS: No, let's proceed in that order.

And please, so the floor is yours.

MS. ORDÓÑEZ: Thank you, Mr. President.

Dear Mr. President and Members of the

[Page 13]

Tribunal, as the Director of the International Litigation at the National Agency for the Legal Defense of Colombia, it is my duty to highlight before this Tribunal some crucial considerations regarding the evidence that has been excluded from the file. As a sovereign State's representative, I will address you in Spanish.

(Pause.)

MS. ORDÓÑEZ: After nearly four years since the Arbitration was started, there have been--

THE INTERPRETER: Sorry, interruption. Is there a problem? The English channel is working?

(Pause.)

MS. ORDÓÑEZ: Okay. It's been nearly four years since the receipt of this Request for Arbitration, and there have been several rounds of written submissions and a one-week hearing in Washington, D.C. After that, we had the expectation of submitting to you our Closing Arguments with the whole information that the State of Colombia has made the effort to collect so that all of you, Members of this Tribunal, should have all the evidence necessary

[Page 14]

to adopt a fair decision, taking into consideration all the evidence that we have made available to you.

Tribunal, if something will prove the 99 percent success rate of the Colombian State as Defendant in international investment disputes, it is that Colombia is a State that respects the rights of foreign investors and of investment arbitration as an alternative mechanism, which is exceptional and specialized for the resolution of disputes. It is precisely for this reason that, in compliance with definite Procedural Orders issued by this Tribunal, [Redacted]

[Redacted]

Arbitrators, you have a very big responsibility [Redacted]

[Redacted]

In times of crisis within the settlement system for investor-State disputes, the evidence that

[Page 15]

Colombia has presented for your consideration allows you to prevent the system from being subjected to a new instance of abuse, this time as a consequence of [Redacted]

[Redacted]

[Page 16]

[Redacted]

In order to refute the statement of Fanny Giraldo. Procedural Order 11 recalls that the admission of Mrs. Giraldo's statement was permitted since Colombia would have the possibility to rebut it and should have the last word on merit. And, therefore, we spared no effort to collect evidence that would allow us, in view of this Hearing, to rebut her allegations by Fanny Giraldo. [Redacted]

[Redacted]

[Page 17]

Procedural Order No. 11 explains, and is the raison d'être, and I must say the unprecedented sacrifice made by the Colombian State in making available to the Tribunal and the Applicants information and documentation that compromises its highest interest, including safety and integrity of all members of the delegation of Colombia and also lawyers.

[Redacted]

As an additional show of good faith and in view of the consultation for the Parties for the

[Page 18]

possible reconsideration of Decisions of 22 and 26 September, we are also accompanied today by Mr. Alberto Acevedo, Director of the Technical Investigation Courts of the Attorney General's Office.

Mr. Acevedo has suspended his work in relation to the most important criminal investigations within the State of Colombia with the purpose of resolving any doubts that the Tribunal might have or the counsel of the other Party in relation to [Redacted]

[Redacted]

Thank you very much.

PRESIDENT SACHS: Thank you very much. Any comments at this stage from the Claimant?

MR. MOLOO: At this stage, Mr. President, perhaps I can just make one offer, which is, if this is really all about C-450, which is Ms. Giraldo's

[Page 19]

letter, claimants offer to retract that from the record, if that would deal with all of their concerns.

PRESIDENT SACHS: Okay. That is noted. Do you want immediately to react, or later?

MS. BANIFATEMI: Of course. This is not acceptable because it has been on record, it has been viewed by the Tribunal. The Tribunal has already seen that evidence, to the contrary of our rebuttal evidence which the Tribunal had not seen, so it's very easy now, if they're troubled by that evidence, which actually is really very interesting for us, it's their option, but we cannot accept that our due-process rights which have been breached be resolved by the withdrawal of a belated evidence they put and which triggered all of this and all of this effort that Colombia has gone through, as Ms. Ordoñez has just explained.

PRESIDENT SACHS: Okay. So, your positions are noted. You said this is the comment that--the first comment that you have, but you will be given the floor, of course, to comment in more detail at the appropriate point of time either today or tomorrow.

[Page 20]

And the Tribunal will, in any event, get back to the issue in the course of this Hearing.

So, we now give the floor to the Claimant.

MR. MOLOO: Thank you, Mr. President. If you'll just give us a moment, we'll pass out the hard copies.

(Pause.)

MR. MOLOO: We could mail it to you afterwards.

(Comments often microphone.)

MR. MOLOO: No, understood. Totally understood.

(Pause.)

MS. BANIFATEMI: Before we start, if I may, Mr. President, I just see there are almost 300 slides.

In three hours, I don't know if my friend and colleague will go through this, but if this is--I hope this is not a new submission because we really made the effort following the Tribunal's instruction to hold to the three hours, and to summarize and wrap up our case, and we hope that all of these slides will be addressed by Claimant.

[Page 21]

PRESIDENT SACHS: We will see, having seen and heard counsel from Claimant in action, I would think that they will make it for the three hours.

MR. MOLOO: I hope that's not a comment on how quickly we speak, but we do hope to do get through these slides. I think we now have the screen up. The Tribunal has what they need in front of them? Okay.

CLOSING ARGUMENT BY COUNSEL FOR CLAIMANTS

MR. MOLOO: Thank you very much, Members of the Tribunal, for your time here today.

It's been over two years since we started this Arbitration, and we're here before today to tell you many of the things that you've heard from us before. And the reason why I say that is because our case really hasn't changed since we filed this Arbitration, and so many of the things you'll hear from Ms. Champion and myself today are things that you heard at the Opening in May. And that's because everything that happened in the Hearing confirms the narrative that Claimants have put before you because it's the truth. Because what has happened here is quite clearly a breach of the TPA, and our purpose

[Page 22]

here today is to show you, to walk you through some of that evidence we heard back in May and show how that confirms the case theory that we've advanced right from the outset.

In contrast, I have to admit I'm not really sure what we're going to hear from Respondents this afternoon because we have seen shifting sands over the last couple of years. Initially--and I think still today--their position has been that none of this is about the wrongdoing of Claimants; you'll see statements in the record to that effect. And then, we had a belated Essential Security objection. And even now in the letters that are being exchanged subsequently, you see mentions of illegality. I don't know if there's going to be a new illegality defense this afternoon, I actually am not sure. In preparing for this submission, I asked myself always, well, what are the main arguments so I can help this Tribunal deal with the issues that are before them, and I'm not sure what we're going to hear this afternoon.

It's a rare situation where I'm usually surprised but one thing I have not been surprised

[Page 23]

about is when we say something, usually there's some action that happens shortly thereafter. So, for example, when we said they're investigating Ms. Ardila Polo, they're investigating these certain members, Catalina Noguera, they closed those investigations a few months later.

[Redacted]

[Page 24]

way this case has evolved.

But in preparing for this Closing Submission, I went back to where we started when we were first looking at this case, and when one--as anybody does, and that's the Treaty, and I started from Page 1 of the Treaty. And it struck me--and I know we've seen some of this language, but it really did strike me, when you look at the second, third, and fourth preambulatory clauses and what they say because it's a unique treaty in that sense. The U.S. and Colombia came together to promote broad-based economic development in order to reduce poverty and generate opportunities for sustainable economic alternatives to drug-crop production. Nobody is denying the history of Colombia, but what they wanted to do is they wanted to transition away from that history into a different future that promoted economic development, to reduce poverty, to generate legitimate business opportunities for people of Colombia. They wanted to create new employment opportunities and improve labor conditions and living standards and establish clear and mutually advantageous rules governing their trade.

[Page 25]

And that is precisely what the investors here came into Colombia to do. They came in and this is a situation where they had a successful investment.

They built a hotel that was one of the most successful hotels in Medellín. It created jobs, it brought tourism to Medellín, and they were expanding that property development business to different areas of the country creating jobs, creating job opportunities, and achieving these objectives that Colombia and the U.S. sought to accomplish.

And you guys have all seen--everybody in this room, Members of the Tribunal, you've seen the pictures of the Charlee hotel. I hope that one day, you'll have the opportunity to visit because it is a beautiful hotel, and it is one of the few luxury hotels in Medellín. It has an amazing roof deck that overseas all of Medellín, it, you know, has a gorgeous restaurant on the main floor and on the rooftop, and it is by all measures, and the experts on Colombia's side agree, a resounding success.

And its recognition has gone well beyond Medellín. Worldwide acclaim.

[Page 26]

If we go to the next slide.

2012, Condé Nast, Hot List; 2015, Spotlight in the New York Times: If you're spending 36 hours in Medellín, what do you do? Well, one of the few things they talked about is this hotel, The Charlee Hotel.

In Vogue Travel, 21 reasons the cool kids of Colombia flock to Medellín. I'm not a cool kid and I even stayed at The Charlee Hotel for obvious reasons, but I can tell you, that's where the cool kids do hang out.

It is by all measures a wildly successful investment in the country.

And Mr. Seda and the Royal Property Group expanded on the success, and what you see here on Slide 7 are not renderings. These are actual pictures of the Luxé by Charlee, which is about an hour-and-a-half away from Medellín, where they built several properties, and there was going to be a hotel that was the sort of pivotal project or property in the middle of this Luxé by Charlee development. And that was the next project that they sold out just as quickly, and people live in some of these houses. The problem is, the hotel is in complete disrepair. It's

[Page 27]

75 percent done, but at the time of these Measures, that's when it came to an end, and I'll come on to that and I'll explain that.

And then, next, was obviously the Meritage; and, in 2012, Mr. Seda identified 56 hectares property between the airport and Medellín, and for a variety of reasons, saw that this was going to be a really interesting investment opportunity. It's a perfectly placed land just off the highway, a number of investments are being made in this area, the Avianca headquarters--you may know Avianca, one of the leading airlines in Latin America. Thousands of new employees were coming not too far away from where the Meritage Property is. They were going to need housing. It was going to be a hub--56 hectares. That's like a subdivision of a city. That's what was being developed at the Meritage. That's--and these are renderings here, but that's what it would have looked like if it was going to have been done.

And it was the best-selling project in the Province of Antioquia, and this is not contested. In Mr. Seda's Witness Statement, he talks about the fact

[Page 28]

that in August 2016, they had pre sold--they had already sold Phase 1, 152 units sold, $34.2 million at the time. They expected to start construction on Phases 2 and 3 at the end of August 2016, and at the time that these Measures were adopted, there were 700 people that were benefiting from this investment.

If we go back to the Preamble--you don't need to change slides--but just to remind you, one of the key objectives was to promote broad-based economic development, to create new employment opportunities.

There were 700 people working on the site at the time that these Measures were taken.

I feel bad for the Claimants. I legitimately do for obvious reasons, but I feel bad for the people of Colombia, these people who were working on sight, who lost their job as a result of these Measures. The development that this Treaty sought to engender, to foster, it didn't come to be because of these Measures, and that's why this is such a sad story.

And when we think about what was the reason for this Measure, how did this all come to be? Well,

[Page 29]

it all came to be because of the decision of one Prosecutor. One Prosecutor pushed that first domino that had all--that has us all here before you. And you heard from that Prosecutor, Ms. Ardila Polo, and in her cross-examination, she accepted that it all was her. Ms. Champion asked her: "So, the decisions you made in your cases were your own?"

"My own. My own." She said it twice.

"Just to wrap up the Precautionary Measures, the decision to impose those were entirely yours, to invoke those Precautionary Measures?"

And she said: "Correct. Just mine."

Didn't go before a court. There was no--this was an administrative decision by one Prosecutor.

And Ms. Champion said: "Just to reiterate that last question, the decision to impose the Precautionary Measures was entirely up to you; correct?"

And she says: "And that is correct."

One rogue Prosecutor pushed that first domino and all of the following dominoes that we will talk about today then fell.

[Page 30]

And Mr. López Montoya, who you didn't hear from in May, but I do think it's important to remind you of his testimony. He talks about what happened on August 3rd, 2016, because he was the Representative of Royal Realty, he was the VP of construction, who was on-site when Ms. Ardila Polo showed up on that site.

And if you read his testimony, it is--it reminds you of a classic expropriation. All of the cases that we learn about, you know, back in the Sixties and even earlier, about expropriation, he says the person informed me that several police trucks from the technical investigation team of the Office of the Fiscalía had arrived at the Meritage Lot. That's what you think about; right? The police trucks role in.

He told me something to the effect of the Prosecutors will arrive soon, and you should talk to them and see if you could resolve the situation. Of course, there was no resolving the situation immediately that day, as we now look back in hindsight we see, but Ms. Ardila Polo showed up, and she introduced herself, and she put the padlock on the door. And from that day forward, everyone went home, and that was it.

[Page 31]

August 3rd, 2016.

We didn't know it at the time, but that then crystallized into a breach, we say, in January 2017, when she issued the Determination of Claim. But she put the padlock on the door for the first time on August 3rd, 2016, and then said it's final as of January 2017.

And, unfortunately, you saw the renderings, but this is what the property looks like about three years ago. These pictures are about three years old now, and unfortunately now the conditions are even worse, but you can see the degradation that happens to a site when you just it leave it in disrepair. But you can see there were substantial construction works going on. There were several buildings that were mid-construction when that padlock was put on the door. I've been here. I've seen--and in fact, I think Ms. Champion took these pictures. 700 people working on-site.

And now, when you drive from Medellín's airport to Medellín, everybody drives by this. You can't escape this eyesore, and this sad story is for

[Page 32]

everybody who visits Medellín. All the citizens of Medellín see it on a regular basis. They have a visual reminder because this is what they see.

And immediately thereafter, after August 3rd, you can see on August 4th, August 6th, the leading newspapers, these are the headlines: "Seizure of land plots where an exclusive project is being built in Medellín." The narco property in Antioquia that entangles a model complaint uncovered problems at the Meritage Plot. That's the headlines. "Widely reported, closely watched project." Given its enormous size, it's not surprising, but when these are the headlines, what do you expect is going to happen if you're a property developer? You think everybody is going to run to you and say, "oh, when's your next project happening?" Obviously not. What happens is: That project is dead. The Contractors have to be sent home, the banks come calling--and you can see on the next slide, we have Mr. Seda and Mr. López Montoya's testimony, the banks accelerated the debt. They pulled the additional financing, not just from this project but from other projects. The Unit Buyers come

[Page 33]

knocking and saying, hey, we've put deposits, give us back our money.

They sue Newport, and Newport and Royal Property is entangled in this litigation, in litigation and arbitrations in-country for the next 74 months up until to this day. That's what happens.

That's what happens when someone goes and puts the padlock on the door and says--and there is a sign, nobody--do not buy here. That's the sign. They actually--it's not metaphorical. They put that sign on the property. And at this time--and I showed you a bit of this excerpt, but I think there was some sound difficulties, so we'll try it without sound this time.

And instead of hearing nice music, you'll have to hear my voice. I apologize for that.

But at the time, they had promotional videos of Luxé going because it was nearly done. These are actual--again, not rendering, this is actually Luxé.

Those are actual houses on the Luxé property overlooking the lake in Guatapé. They were four months away from the hotel being complete. They had hired staff, they were already booking events, there's

[Page 34]

a restaurant on the lake. Again, I've, you know, visited it, but it's--you can see, that's the restaurant right there.

And it oversees--it looks at this, the Piedra del Peñol. Sorry, I'm--I apologize to all the Colombians in the room. But they all know that it is a very prominent tourist attraction, that I've been to, in Colombia, and that's the view in Guatapé from the Luxé property. They had hired staff, and it was a truly--going to be a magnificent resort location, but the hotel--and the hotel was 75 percent done. It was four months away from being completed. But what happened was, unfortunately, the financing was pulled because the bank said we can't do business with you.

We're scared to do business with you.

Several other projects in the works: Tierra Bomba, 450 Heights, Santa Fe. In Santa Fe, for example, they had bought the land, they had the City Planning Director's endorsement in writing. There was a--there were dozens of people working at the Royal Property Group on all of these projects. That was what the Royal Property Group did. They had all of

[Page 35]

these property development projects. You can't view this as just the Meritage. It was a stream of projects that they had in their portfolio that were at various different stages of development. Luxé being nearly completed, Meritage as we know, you know, Contractors on-site, pre-sales of Phase 1 done, and all of these different projects were at different stages of development.

But this was a property development company that had several projects in their pipeline that all dried up because you need financing. And as you've heard from Colombia, if there's--if you're tainted, someone--apparently, you're supposed to Google them and you're supposed to find as much information as you can. If this is what people are hearing about why Meritage was pulled, can you imagine any bank, anybody wanting to do business with the Royal Property Group when those are the headlines? Of course not.

And ultimately, it resulted in the taking of a $255 million business that we are here today in front of you. The Claim--I can tell you: The Claimants would much rather have preferred to be doing

[Page 36]

what they do in their daily lives--building projects--but they can't do that anymore, and that's why we're here in front of you asking for compensation.

And so, what are the breaches of the Treaty?

On 19, 20, and 21, you have provisions that I'm sure you've all looked at: 10.7, expropriation; 10.3, national treatment; and 10.5, talking about the minimum standard of treatment, in particular, the fair and equitable treatment and protection--and full protection and security. Those are there for your reference, and we'll obviously go through each one in more detail.

The first one I want to start with is expropriation because whatever this is under Colombian law, and I'm on Slide 24 for your reference, whatever this is under Colombian law, I keep coming back to--as a matter of international law, this is actually a simple expropriation case. This is a taking. They came in to the property and they took the Project.

It's as simple as that. It's an outright taking of the Project. And, of course, this Treaty covers both

[Page 37]

indirect and direct expropriations, but in my mind, this is clearly a taking as a matter of international law.

The question becomes: Are there any exceptions from the obligation to pay compensation for a taking as a matter of international law? And I would suggest that there are very limited exceptions under international law, and that if it was done in the exercise of the police power, so there's a police power--limited "police power" exception. But any public purpose is not a police power, and I'll come on to that.

But I think it's hard to contest the fact that there was a taking and what was taken. Well, there's two main things that were taken in our submissions: The first is the indirect interest that Newport had in the contract rights to develop and profit from the Meritage Project; and the second is the indirect interest that Royal Realty, who is the management company, had in the Contract--in its management contracts. Those were the two things that were taken from the Meritage Claimants.

[Page 38]

And what was the thing that took them?

Well, there's two things that we say effectuated that taking. It began with the Certificate of Real Property Seizure, which was July 22nd, 2016. Now, you'll remember this was signed on July 22nd, 2016.

Ms. Ardila Polo did not show up to the property until August 3rd. Ms. Champion's going to talk to you about the interesting things that happened between July 22nd and August 3rd. Some of the Tribunal members may remember that, but that Certificate of Real Property Seizure was actually signed on July 22nd, 2016.

Ms. Ardila Polo shows up to the property on August 3rd, puts the padlock on the door, and then says, yes, indeed, we are moving forward with this Asset Forfeiture Proceeding on January 25th, 2017.

You can see that date on the Resolution for Determination of the Claims. And that's the date on which this crystalizes. It's--at that point, it's stuck in the court system, and you can't get out.

Before that, there was a chance that the Claimants could have gotten back their property and they tried, they really wanted to. They took all the

[Page 39]

diligence they did and they wanted to get this property back but that was the point of no return, in our submission.

And how--we've heard this question of: How long is long enough to be in expropriation? And there's case law on this, and we took you to some of this in the Opening, but I've given you two examples here: Wena Hotels, one year was enough, it just can't be an ephemeral taking. And in the Azurix Case, they talk about, in Middle East Cement, how there was a suspension for four months. In S.D. Myers, there was a measure that lasted three months but in each of those cases, the question was: Is this long enough where basically you can't go back and do your project?

You've lost your project. And 74 months later, here we sit, still no access to the property.

And by the way, the property is on an early sale list. It's currently for sale, that is a taking.

You can't go back and build this project.

Nobody can go back and build this project today. The financing's not going to be there. The buildings are in disrepair. A taking had been effectuated,

[Page 40]

certainly here if there was an expropriation in Wena Hotels and all of those cases represent--reflected in Azurix, certainly 74 months is long enough.

We've shown you the pictures but I think it's important to note the land was previously authorized for early disposal on 4th December 2018.

It was removed on 2nd July 2019, but as of July 1st, 2021, the land is back on the authorized for early disposal list, and that's, for the record, C-435, reflects that it's on the early sale list, so they're selling the property. So, in our submission, there has been a taking.

And in our submission, it's an unlawful taking and, therefore, a breach of the TPA because it was done in a discriminatory manner, or in an arbitrary way, without due process, and no compensation was paid, and it was not done to protect a legitimate public-welfare objective. We're going to talk about all of those when we talk about the FET breaches, but for purposes of establishing that it was an unlawful expropriation, all I need to confirm for you three gentlemen is that there was no compensation

[Page 41]

paid and there's no dispute about that. And on the next slide, you can see ConocoPhillips versus Venezuela, they confirmed that if there is no compensation paid, that is sufficient for it to be an unlawful expropriation.

And in Colombia's Rejoinder, they say no compensation was or is due to the Claimants, so they don't dispute--nobody disputes that compensation has not been paid for this taking; and, for that reason, we say it's an unlawful expropriation.

So, what, under international law, is the potential excuse that one can give to escape this compensation obligation? Well, the TPA gives us a clue at Annex 10-B. It says: "Except in rare circumstances, non-discriminatory regulatory actions by a party that are designed and applied to protect legitimate public-welfare objectives, such as public health, safety, and environment, do not constitute indirect expropriations."

Now, what does this cover? We've seen contexts in which these types of provisions have been discussed. Generally speaking, they apply obviously

[Page 42]

to a non-discriminatory measure, but when is it non-discriminatory? It's generally a regulation that's adopted for a general regulation, a general application. So, for example, the Methanex versus U.S. Case, where--which I'm sure you will all be familiar with, where it's the banning of a toxic substance, for example, to prevent environmental damage or, you know, a cancer-causing agent, for example, a general application, let's ban the substance. That's the kind of police power that is protected and usually then exempts you from the compensation obligation.

This is not a general application regulatory measure. This is a targeted measure at one particular investment, and for reasons we'll come on to, it's not non-discriminatory; it is discriminatory, in fact.

There's some guidance in the case law on what is a police power. So, for example, in the Magyar versus Hungary Case, a case which Respondent also adopts in defining the police powers, they talk about two different narrow sets of circumstances. The first is Measures of police powers that are aimed at enforcing

[Page 43]

existing regulations against an Investor's own wrongdoing, where the Investor is committing some illegal act or something like that; or the second group, which is abating risks, again, to the public health, environment or public order.

And they concede, Colombia does--and I mentioned this earlier--that it's not the first prong. There is no wrongdoing of the Investor at issue here. They say that in the Rejoinder. They say: "While it is true that the Asset Forfeiture Proceedings were not initiated in connection with any 'wrongdoing' of which Mr. Seda was personally accused and not against any of the Claimants." They accept it. They're saying there is no wrongdoing of Mr. Seda or any of the Claimants.

They talk about several irregularities in the chain of title. They're saying no wrongdoing on behalf of Mr. Seda. We're not accusing Mr. Seda of anything.

Now, that's changed, as we know, but in the Rejoinder, as recently as the Rejoinder, they said no wrongdoing of any of the Claimants here.

[Redacted]

[Page 44]

[Redacted]

But, to exercise your police powers, as a matter of international law, the Measures you take must be proportionate to the public--the threat to the public order and must be taken with due process. That is, as a matter of international law, in the Bahgat versus Egypt Case, that's just one example of cases where they've said it has to be proportionate. If there is a threat to public order, the action you take

[Page 45]

to deal with that threat has to be proportionate.

We would submit that coming in and just seizing the property before even assessing good faith, that is not a proportionate measure to deal with--even assuming that there is a legitimate public order threat here.

What would have been the proportionate measure here? It would have been, let's go after the assets of the people who we say have done something wrong. Let's go after Iván López's assets. That would have been--if you want to protect the society against the illicit activity of Iván López, go after his assets. You don't need to go and prematurely seize this property.

And I thought this was telling. They said, Day 1 of the Transcript, at 269; counsel for Colombia said: "The Colombian courts are seized of the matter, so let the Courts decide. And at the end of the day, it may well be that Newport will be recognized as a bona fide without fault third party, in which case the precautionary measures will be lifted. Newport will be entitled to dispose of the land at that point in

[Page 46]

time." What they're saying is you may get the property back, but is that a proportionate measure to the threat that they've identified, shoot first, ask questions later? No. We say that is not proportionate and, therefore, they don't come within the exception to the compensation obligation as a matter of international law.

And when you see what Dr. Wilson Martínez has said, for example, in his Second Report, he says what would have made sense, what would have been the proportionate thing to do, the proportionate thing to do as a matter of even Colombian law would have been to go after those who were laundering money, those who you know were engaged in criminal activity. That would have been much less infringing on the investor's rights. That would have been, perhaps, a proportionate conduct. But to prematurely go and seize the Meritage Project was not proportionate.

Moving to the second argument:

Discrimination.

The standard for discriminatory conduct, whether it's a breach of national treatment, fair and

[Page 47]

equitable treatment or as a matter of expropriation, you know, not being something that was discriminatory, the standards are largely the same in all of those cases. And Claimants and Colombia generally agree on what that standard is, and that is, when you have similar cases that are treated differently without reasonable justification, you can see that's the standard that both Parties agreed to in their submissions.

And you have to think about the comparators in a fact-specific and contact-specific assessment. There is no rigid test or anything like that. You need to look at the facts of the case, and all that this next slide does is tell you that.

And, in Colombia's opening submission, they tell you what that like circumstances are; what are those similar cases. And in their Opening Submissions--this is from one of their slides--they said at Slide 192, it's assets affected by comparable wrongful conduct. So you're looking at the asset and you're saying, let me look at other cases in which similar wrongful conduct is infecting those assets.

[Page 48]

How are they treated? And similarly at the Transcript, they said the same thing. They're looking at assets that are affected by comparable wrongful conduct.

[Redacted]

[Page 49]

That's the wrongful conduct that they're saying affected this asset and let's see what are the other similar cases that have been affected by that same alleged wrongful conduct.

I do want to make one point--it's on this next slide--[Redacted] That's in their Opening Submissions. [Redacted] They were started because Iván López.

And when we talk about Essential Security we'll come back to this because now all of a sudden [Redacted] And Colombia in its Opening Submissions admits that. [Redacted]

So, who are the relevant comparator groups that have been affected by the same sort of alleged wrongful conduct taking them at their word?

[Page 50]

We would submit there are three: The Sister Property which we've talked a lot about, other López Vanegas properties, and other persons with a prior interest in the Meritage Property, and I will go through each of these briefly.

We've all become very familiar with this diagram. It's only twice in this deck, I promise you, I'm pretty sure. Here is the first time. And I think it's important to start with this point: At the very outset here, in 1994, that first gray hexagon, that is a property that is co-owned--co-owned--by Iván López--by what they say is a front-buyer for Iván López, Sierralta López. Iván López, importantly, was never on title, by the way. Iván López's name was never directly on title. That's an important point. But they're saying Sierralta López is a front-buyer for Iván López. That's their case.

And Entrelagos Orozco is the front-buyer for Jaime Orozco, who is his half-brother. But that property, it's not like it's subdivided into three-fourths and one-fourth. It's co-owned, jointly owned by both of them, and then it gets split into Lot

[Page 51]

A and Lot B. Lot A and Lot B are each--you can see there's a 75 percent and 25 percent. They're both still co-owned. Lot A is co-owned by the front-buyer for Iván López allegedly. And Lot B is 75 percent co-owned by Iván López. So the entire property is allegedly infected by this wrongdoing that they're saying; right?

And everything that goes forward is then a reconsolidation of, and a division of, that property that was co-owned, the entire property, including the Sister Property, which is Lot A2, you can see it on the bottom in the blue, Lot A2 was at one point owned 75 percent by Iván López. It was then owned by the Fruit Seller. It was then owned by the Engineer. All of those things that they talk about in the Provisional Measures application, in the Requerimiento, in the Determination of Claim, they all equally affected both the Meritage Property and Lot A2.

And when asking Ms. Ardila Polo about how does she come to this? What investigation did she do when she was looking at the Meritage Property? And

[Page 52]

she said she had two title studies. And she refers to those two title studies. She said she had one title study from Otero & Palacio. That title study is on the Meritage Property, okay?

And this is important: And they had a title study from Gúzman Monroy. Now, where did they get that title study from? Gúzman Monroy is actually a title study on the Sister Property. Gúzman Monroy must have been given to her by Iván López because our folks didn't have the title study by Gúzman and Monroy, but she has two title studies that she had looked at when reviewing the Meritage and the Sister Property.

And since then we've been able to get a copy of the Gúzman and Monroy title study, and it is at C-30bis. And the Gúzman and Monroy title study on the Sister Property gives a favorable opinion, so she's got one title study on the Sister Property that says favorable opinion, and she has the Otero & Palacio title study. And guess what that--on the Meritage Property--and guess what that gives? A favorable opinion.

[Page 53]

Two title studies, one for the Sister Property, one for the Meritage, both favorable opinions, and she goes after the Meritage Property and leaves the Sister Property, so she assumed that oh well, this favorable property, this favorable opinion, means they must be good-faith buyers. And whatever conclusion she came to, the Meritage was entitled to that same conclusion, if that's what she based her assessment on.

And they've confirmed at the Hearing, if there was any doubt, that [Redacted]

When I asked Mr. Caro on cross-examination about the Sister Property, he said: "With respect to that property, no Asset Forfeiture Proceeding has been initiated in respect of that lot." To this day, whatever--if they're still doing investigations,

[Page 54]

that's great. They're not shooting first and asking questions later. They're making sure that they have a reason to act before they do so. And our clients were entitled to that same treatment.

But this was interesting on cross-examination, Ms. Ardila Polo was asked what justification can you give for this? [Redacted]

[Page 55]

[Redacted]

[Page 56]

[Redacted]

That's the testimony you heard, no evidence, not even minimum evidence that there's any basis to act against that 25 percent and I want to go back to 46. I told you it was only there twice but--

ARBITRATOR PONCET: Sorry, sorry to

[Page 57]

interrupt for a second. You're not questioning as such the fact that a prosecutor may do this in this case and that in that case. The point you're making is that by joining this difference of treatment in your view with regard to the two plots or the two divisions, then it becomes discriminatory under the Treaty, but you're not asking us to review what the Prosecutor did; right? I mean, I'm slightly leading but--

(Overlapping speakers.)

ARBITRATOR PONCET: I just wanted to make sure that I understood your question.

MR. MOLOO: I'm just saying--

ARBITRATOR PONCET: Up to a point my question is a leading one. But I just want to make sure that I understood the point you're making. You're not asking this Tribunal to review or to assess the actions of the Prosecutor as such, but only to the extent that joining them together leads you to the conclusion which we will share or not that this constitutes discriminatory treatment under the Treaty; right?

[Page 58]

MR. MOLOO: For purposes of assessing the discriminatory conduct, that's absolutely right. You do not need to review whether or not they made the right decision. All you need to come to the conclusion of is, were there similarly situated cases that were treated differently, and was there a reasonable justification for that. And we say there were similar situated cases, for the reasons that I've explained, that were treated differently: One, asset forfeiture was commenced. The other one has been left as is and has not been taken to this date. And there is no rational justification for that differential treatment. That's correct. We're not asking you to say should they have acted against the other property or not? That you do not need to come to a conclusion about to assess whether or not there has been discriminatory treatment.

But one important fact here, if you look at the reconsolidation with the Engineer, at that point it is in the hands of José Ignacio Cardona--right?--who is said to be Perra Loca or the front-buyer, sorry, for Perra Loca. It then gets

[Page 59]

divided and is repurchased by Entrelagos Orozco. You can see on the blue, the green square there. So, he rebuys this property from José Ignacio Cardona. So, he acquired A2 from the Engineer. And if anybody knows about this history of title, it's the guy who is the half-brother of the alleged narco-trafficker; right? So, how can you possibly say that we have no evidence that his 25 percent was not infected? He repurchased it from the Engineer who they said was the front-buyer for Perra Loca.

So, I just don't understand that explanation.

[Redacted]

Slide 53 was in the Determination of Claim, January 25th, 2017. That's the document that we say

[Page 60]

crystallizes this breach; right? And in the sworn declaration of José Ignacio Cardona, who is the Engineer, they get a testimony from him. And he says: "Following that meeting from Mr. Jaime Orozco, he contacted me to make a proposal by which he wanted to undertake parceling of the lot. He told me they wanted to avoid being involved in those proceedings. And so he says that I should reconsolidate and all the rest and then I deliver to Ms. Tatiana Gil, under orders from Mr. Jaime Orozco, the 83.9 percent."

That's his testimony, that actually the person orchestrating all of this is Mr. Jaime Orozco. Ms. Ardila Polo knew this at the time of the Determination of Claim, that's actually in the Determination of Claim. She has this testimony. How can she possibly have testified to you what she testified in May? I have no evidence that Mr. Jaime Orozco had done anything wrong, that he was involved in any illicit activity. She was told by the Engineer. She wrote it down. She drafted the Determination of Claim, that Mr. Jaime Orozco was the one who was organizing all of this.

[Page 61]

And now, I'll go back to 52, Ms. Champion asked her about this: "All of that activity is directed by Jaime Orozco; correct?"

And she said, yeah, "based on the information given by the Engineer, José Luis Cardona Rodríguez, yes, that is the information he offered."

It seems like she's giving him a presumption of good faith, that well beyond a presumption of good faith that was certainly not granted to my clients. If there was one of these properties that you should have gone after, it was the Sister Property, not the Meritage.

What other reason did we get for why they haven't gone after the Meritage? Well, if we go to 54, this question was put to counsel for Colombia. Lot A2, which is the Sister Lot--54--oh sorry, for some reason it's in the hard copies but not on the screen.

It says--this is a quote from Colombia's opening:

[Redacted]

[Page 62]

[Redacted]

[Page 63]

[Redacted]

When should you--when do you assess a breach? The time, it's too late--even if they do take it tomorrow, it's too late to say oh, well, we didn't treat them discriminatorily. Because you have to assess that question of was there a breach when the breach crystallized. And you have some sources there.

[Redacted]

[Page 64]

[Redacted]

[Page 65]

[Redacted]

On the next page, we have the Quartier apartments which was under development, because one of the things they said was well, this one was under development so that's what made it unique. The Quartier Property Iván López purchased in the Eighties and then he transferred it in 1994 to none other than Promotora Sierra Alta, which presumably is also a front-buyer for Iván López. And then Promotora Sierra Alta sold it in 1997.

There was property being built on the Quartier developments. Did you go after that one?

No, they didn't go after that one.

[Redacted]

[Page 66]

[Redacted]

[Page 67]

[Redacted] various other banks and fiduciaries did business in that particular property. Personally owned by Iván López in 2007. In early 2009, Scotiabank Colpatria, one of the largest banks acquires a mortgage on that property. They would have done some diligence.

Another fiduciary sold property owned by Mr. López, August 2019. During the pendency of this proceeding, banks, Banco de Bogotá, one of the largest banks in Colombia, is doing business on properties in which Iván López has previously been an owner.

[Redacted]

[Page 68]

[Redacted] That's the third comparator group because Dr. Wilson Martínez and

[Page 69]

others say the right thing to do is to actually go back and trace the history back and figure out who was not a good-faith buyer? That's the person whose assets I'm going to go after, but they haven't gone after anybody else in the chain of title.

And just on the next slide there you have a couple of cases, discriminatory intent is not necessary. We don't need to show why there is a discriminatory conduct. That intention is irrelevant to assessing discriminatory conduct. We have some explanations to offer you in a bit, but it's unnecessary for your finding.

And so Colombia, we submit, has discriminated against the Meritage Claimants as compared to the three comparator groups by applying a different standard for what constitutes an alleged illicit origin, and by failing to consider the Meritage Claimants' good faith prior to seizing the Meritage Property, which appears to be what they are doing with respect to the other comparative groups.

[Redacted]

[Page 70]

[Redacted] But they're assessing perhaps good faith, but we were entitled to that same treatment. And that's a breach of the national treatment protection, that's a breach of the FET protection, and that makes the expropriation unlawful for yet another reason.

So, they say, well, how can this be justified; right? Is one question that this Tribunal might ask. Is there a reasonable justification? And we would submit that there is not, but the two explanations you have been given are we have to prioritize because there is limited resources, and in this case there is some urgency because this is a development in progress. But neither one of those hold any water.

Why? Because no Additional Resources were needed to investigate the Sister Property. They've effectively already done that research because they shared a history of title, so there was no additional investigation that was needed. There was no additional resources. It doesn't explain why no action has been taken since then. It doesn't explain

[Page 71]

why they did not consider Newport's status as a good-faith buyer before they took any action. [Redacted]

So, quite frankly, those excuses don't hold any water. And we've showed you--by the way, it doesn't explain why they haven't gone after other properties that are in development that share the same alleged wrongful conduct.

That differential treatment, that's enough for you to say there's been a breach here, you can find that there's an expropriation and no compensation, and we can all go home. You can find there's been discrimination, we can all go home.

[Page 72]

Well, not all go home, we still need to deal with the issue of damages. But you don't need to deal with any of the other breaches. But there are several other breaches and so, I would be remiss not to go through at least a couple of them.

We submit that Colombia has initiated these Asset Forfeiture Proceedings without due process. You've seen many of these provisions--and I've got them here for your reference--but there are a few provisions that the Assess Forfeiture Law that are really important to assess this due-process standard, a breach of the due-process standard. Good faith is presumed in all legal action or transactions. There is a presumption of good faith.

And when does this good-faith assessment need to be done? Well, Article 118 says that it needs to be done at this initial stage--right?--before a Determination of Claim. One of the purposes of the initial stage you can see on 118 is: "5, search for and collect the proof which makes it possible to reasonably conclude that there is no good faith without fault." That's the first thing you do during

[Page 73]

the initial stage, according to the Asset Forfeiture Law.

The provision on Precautionary Measures, Article 87. The purpose of Precautionary Measures, the very purpose, that last sentence says: "In any case," if you're taking Precautionary Measures, "in any case, the rights of third parties acting in good faith without fault must be safeguarded." When you're taking Precautionary Measures, you must safeguard Parties acting in good faith.

And by the way, if you do take Precautionary Measures, how long can they last before you issue a Determination of Claim? Six months. So, that initial phase has to be done by that point, at which point you must certainly have assessed good faith.

152. Whose burden of proof is it? Who does this investigation? Is it the courts? No, it's not the courts. It's the Office of the Attorney General of Colombia has the burden to identify, locate, gather and file the elements of proof which show the existence of some grounds set forth in the law for the Declaration of Forfeiture and that the affected person

[Page 74]

is not a bona fide owner of rights without fault. That is an obligation on the Attorney General to do, according to the Asset Forfeiture Law.

And Mr. Medellín and Mr. Wilson Martínez confirmed--Doctors, sorry--I'm glad they're not in the room; otherwise they would have corrected me--Dr. Medellín and Dr. Wilson Martínez confirm what I just told you; that before you take Precautionary Measures, you must assess good faith so you don't harm their rights. You didn't hear from Dr. Medellín, unfortunately, but he was a former Minister of Justice. He was the father of the Asset Forfeiture Law, former Ambassador of the UK for Colombia. Highly regarded. He was the legal advisor to the Attorney General, in fact, on issues related to Asset Forfeiture when they were implementing and enforcing the 2014 Asset Forfeiture Law. So, one of the leading expert and, unfortunately, you didn't have the opportunity to hear from him.

(Phone rings.)

MR. MOLOO: No problem.

And even when you hear from--this was a

[Page 75]

little bit misleading, so I just do want to correct this. In Colombia's Post-Hearing Brief, they did say, they said what do you see in Paragraph 175? The Fiscalía was not under an obligation to confirm the existence of bona fide third parties upon the adoption and imposition of the Precautionary Measures. That was their position in the Post-Hearing Brief, despite what I just showed you. And they say: "As acknowledged by the Claimant's Expert during the Hearing, Asset Forfeiture Proceedings are initiated by a finding that the origin of the asset is tainted by illegality." And that 282 footnote, you can see refers to this excerpt of the Transcript. And so, I just wanted to show you that excerpt of the Transcript where Dr. Martínez said: "Indeed, when carrying out asset forfeiture investigation, the first thing we run into are assets. The first thing that's investigated is the origin, and the destination of those assets to determine whether they are tainted by illegality. If that is the case, they can move on with the investigation; but, if not, that asset forfeiture action has come to an end."

[Page 76]

But if you look what he went on to say at Line 12, he made clear: "When the investigator, the operator, finds that the tainted asset is in the hands of a third party, a good-faith third party, clearly, they cannot go after that asset."

And so I asked Dr. Caro: "Did you assess Newport's good faith? Did you at any relevant point in time?" Because, in the Requerimiento that he authored, nowhere in there is there a discussion about Newport's good faith? And I asked him, show me where it is, and he couldn't show me anything.

I said: "But you cannot point me to anywhere in this Decision--right?--that specifically discusses independently Newport's good-faith status."

And he said: "That's right, because Newport was tied to Corficolombiana." So, he's saying we assessed Corficolombiana's good faith, not Newport's because we didn't need to assess Newport's because Corfi and Newport are tied together.

And I said: "But it's not the same standard for everybody. You put yourself in the position of the person who's actually conducting the diligence."

[Page 77]

And he said: "Of course, the standards are different." And of course, Corfi and Newport are different so he should have assessed Newport independently. But irrespective of that, the standard of a fiduciary and of Newport were different.

So, even tying them together, even if you could tie them together, it wouldn't make sense. They just did not assess Newport's good faith at all before they seized the property.

And, in fact, then it went to the Asset Forfeiture Court. The Asset Forfeiture Court said initially: "No recognition of the impacted Party is conferred upon Newport." That's what they initially found in August 2017.

And it was not until April 22nd, 2022, just before the hearing that the Superior Court of Bogota said that it concluded: "Newport is entitled to participate in the case, given that it has a pecuniary right with respect to the affected properties." And so, they effectively found--and they refer to Article 30 here--and Article 30 talks about Affected Persons, and their rights must be assessed. Their

[Page 78]

good faith status must be assessed.

And that's why Colombia has to say the following, and this is the quote, and I come back to it in their Opening. Now, what they say is they accept. Okay, well, the courts have found that they're affected parties, now let the courts do their thing. The Colombian courts are seized of the matter.

And our friends on the other side are not claiming the judicial process in Colombia is wrong. And in fact, they're very happy of the Decision in April, two weeks ago, and let the courts decide. Let the courts take this normal course of what an asset forfeiture proceeding should be and at the end of the day, it may well be that Newport is recognized as a bona fide without-fault third party. The Precautionary Measures will be lifted, and they'll get their asset back. That's what they're saying.

Now--but it's too late, it's too late to give it back. And by the way, from a due process perspective, it's the wrong Order. You don't shoot and ask questions later. You have to assess someone's standing, and their rights, and assess whether or not

[Page 79]

they acted in good faith beforehand, and that's exactly what the case law says. In Siag v. Egypt, they said: "It is important to note"--they're talking about an Egyptian Court Decision--it ruled that "the Decision to issue Resolution No. 83 before the specific date was without any legal basis in all respects. The Tribunal finds that Claimants accordingly suffered a denial of substantive due process." They assessed this context of even court conduct as being potentially a breach of due-process rights.

And when something is not carried out in accordance with the domestic law, it is a breach of the due-process rights, and that's what Quiborax v. Bolivia said. But even more importantly, when you look at ADC v. Hungary, what they say is "an actual and substantive legal procedure for a foreign investor to raise its claims against the depriving actions already taken or about to be taken against it, must come first." You need reasonable advanced notice, a fair hearing, and an unbiased and impartial adjudicator to hear your case as to whether or not you

[Page 80]

are a good-faith purchaser in this case. That must come first before the Measure. That's what ADC v. Hungary found when it was assessing due process.

Similarly in Rumeli v. Kazakhstan. They said in that case, the decision at hand, the Measure that was taken, was made without giving Claimants a real possibility to present their position. They have to be given an opportunity to be heard before the depriving measure takes place. That's due process.

You don't get surprised by someone showing up on your lot and putting the padlock on the door. You should have the opportunity to present your case. I'm a good-faith Party, not 74 months after it's been taken but before the measure is taken. That's what international law requires.

In Deutsche Bank v. Sri Lanka, again, Paragraph 487, CL-87, Deutsche Bank was not informed of the case against it before the Monetary Board issued its stop payment order, and it was not offered the possibility to respond to the investigation report. Again, another case where the Measure was taken before--and before the Claimant had any

[Page 81]

1 opportunity to be heard at all. That is not due

2 process as a matter of international law.

3 And all of those cases confirm that the

4 timing matters. The depriving measure cannot take

5 place before you have an opportunity to be heard, and

6 the Claimants are only now going to be given an

7 opportunity to be heard. They're saying, well,

8 they're going to be given an opportunity to be heard,

9 but it's the order of things. You can't be given an

10 opportunity once you've already been deprived of your

11 rights. And so, that breaches the due-process rights

12 of the Claimants.

13 The last due-process violation that I'm

14 going to address you with, and then perhaps we can

15 take a break, if the Tribunal would see it appropriate

16 to do so, is with respect to conduct that's happened

17 during the course of actually these proceedings as

18 well.

19 [Redacted]

[Redacted]

[Page 82]

1 [Redacted]

[Redacted]

[Page 83]

1 [Redacted]

[Redacted]

[Redacted] That is not due

10 process. And also a breach of the FET provision.

11 Members of the Tribunal, before we go to the

12 next breaches, which my partner Ms. Champion will

13 address, perhaps now is an appropriate time for a

14 break.

15 PRESIDENT SACHS: Yes. We will resume at

16 25.

17 (Recess.)

18 PRESIDENT SACHS: So, here we go,

19 Ms. Champion. The floor is yours.

20 MS. CHAMPION: Thank you. Can you hear me?

21 REALTIME STENOGRAPHER: Yes.

22 MS. CHAMPION: All right. So I will pick up

[Page 84]

1 where Mr. Moloo left off, just finishing up due

2 process.

3 Including the grounds laid out by Mr. Moloo,

4 Colombia's--one of the issues here is Colombia's

5 shifting positions on the basis for the Asset

6 Forfeiture Proceedings. Colombian authorities did not

7 seem to take Mr. López's kidnapping complaint filed in

8 2014 very seriously.

9 Can you go to the slides?

10 (Comment off microphone.)

11 MS. CHAMPION: Oh, okay.

12 It sat on the shelf for two years until it

13 was suddenly revived and used as a basis to seize the

14 Meritage Project.

15 As you will see when Slide 96 is pulled up,

16 Colombia tries to claim here that the Asset Forfeiture

17 Proceedings were never--"never"--that's the word they

18 used--based on the kidnapping story. That's what they

19 say in their Counter-Memorial, their Post-Hearing

20 Brief, [Redacted]

[Redacted]

22 [Redacted]

[Page 85]

1 [Redacted]

2 Could we go to Slide 97.

3 In the Precautionary Measures Resolution,

4 Ms. Ardila writes: "The reasonable grounds are

5 supported by the evidence included in the file and

6 would show that the assets identified with the

7 particular lot numbers were acquired through

8 punishable conduct such as kidnapping, threats, and

9 personal misrepresentations, among others."

10 It further refers to the statements of

11 Mr. López and determining whether they are true or

12 not.

13 The court decisions also talk about the

14 kidnapping, if we go to the next slide--or no, you're

15 right, 98.

16 The Asset Forfeiture Court and the Appellate

17 Decision on Corficolombiana's control of legality

18 petition also talk about the kidnapping and

19 Mr. López's statements. So, to say that the

20 kidnapping story was not a basis for the Asset

21 Forfeiture Proceedings is just not supported by the

22 record.

[Page 86]

1 The problem is that Colombia knows that

2 story is false. In their own Opening, they noted

3 that: "Per the information provided by the FBI,

4 Ms. Ardila was already aware of the divergent

5 narratives behind Sebastian López's alleged

6 kidnapping."

7 A prominent Colombian Prosecutor, Claudia

8 Carasquia (phonetic), the former Director of the

9 Organized Crime Unit in the Attorney General's Office,

10 stated on television that "the kidnapping story was a

11 fraud."

12 [Redacted]

[Redacted]

[Page 87]

1 [Redacted]

[Redacted]

7 But that's not what happened here. As

8 Mr. Moloo has already explained, Claimant's Expert,

9 Dr. Martínez, sets forth what the State can do when

10 the assets it seeks to move against are in the hands

11 of third parties acting in good faith. It can move

12 down the chain of title and attach the assets or

13 equivalent assets or proceeds of the alleged

14 wrongdoers.

15 Colombia sent us this demonstrative

16 yesterday that shows people they allege are the

17 wrongdoers here, [Redacted] You know, we're going

18 to hear a lot about [Redacted] this afternoon, I

19 imagine. But that's not whose assets Colombia went

20 after. They went after those of the Claimants here,

21 not the assets of the alleged wrongdoers.

22 Because Colombia acted arbitrarily by

[Page 88]

1 promising the Asset Forfeiture Proceedings on a known

2 lie and disproportionately by not pursuing the stated

3 public purpose of these measures, they violated the

4 fair-and-equitable-treatment provisions provided in

5 Article 10.5 of the TPA.

6 The Tribunal in EDF v. Romania sets forth

7 factors to consider in determining what is arbitrary.

8 These come from a noted expert on this, Professor

9 Christoph Schreuer, who has identified these factors

10 as: "A measure that inflicts damage on the Investor

11 without serving any apparent legitimate purpose."

12 That's what happened here. Again, the damage was

13 inflicted on the Claimants, on the Investors. It

14 served no purpose to inflict the damage on them. They

15 were not the alleged wrongdoers.

16 "A measure that is not based on legal

17 standards but on discretion, prejudice, or personal

18 preference." Again here, as Mr. Moloo covered,

19 Ms. Ardila's discretion appeared to govern the

20 imposition of the Precautionary Measures entirely.

21 She said it was entirely her decision.

22 "A measure taken for reasons that are

[Page 89]

1 different from those put forward by the

2 decision-maker." We'll get to that. I think there's

3 a strong argument here that this was actually

4 motivated by a corrupt scheme that Ms. Ardila became a

5 part of.

6 And finally, "a measure taken in willful

7 disregard of due process and proper procedure."

8 Mr. Moloo has already identified some of the issues

9 relevant to that.

10 On this slide, you just see some cases that,

11 you know, that talk about the principle of

12 proportionality. What is proportionality? It looks

13 at the State's goal versus the Claimants' interest and

14 the nature of the conduct being censored.

15 Again, Colombia alleges that it's going

16 after illicit assets, assets derived from criminal

17 activity. But that's not what it's actually done

18 here. It could have traced back in the chain of

19 title, gone after the wrongdoer's assets, the payment

20 rights. They haven't done that. Instead, they've

21 gone after the Claimants' investment.

22 And the final due process ground that we

[Page 90]

1 have is that the Asset Forfeiture Proceedings were

2 initiated as part of a corrupt scheme.

3 Notably, Colombia does not dispute, they do

4 not deny that Mr. Seda was extorted. They just say

5 they don't know if it was a negotiation or a

6 shakedown. Well, you don't negotiate to purchase

7 something that you already bought, but that is, in

8 fact, what Mr. Seda was forced to do when he was

9 approached as part of a corrupt scheme.

10 I'm going to revisit the timeline. This

11 will look familiar. We used a similar slide in our

12 Opening. We've added a few things that emerged during

13 the Hearing in this case, but the Tribunal will recall

14 that López filed his kidnapping complaint in 2014 with

15 the Organized Crime Unit, and at that time, he is

16 threatening Mr. Seda just with bad publicity; right?

17 He says, If you don't pay me, don't make a pay-off,

18 I'm going to tell everybody that I actually own the

19 land, and that--you know--they shouldn't buy in your

20 project.

21 The Organized Crime Unit refers the

22 complaint to the Asset Forfeiture Unit. It's assigned

[Page 91]

1 to Prosecutor Number 37; that's Ms. Tovar. Ms. Tovar

2 appears to have requested that the Judicial Police do

3 some investigation, but the case remained dormant for

4 nearly two years. That changes all of a sudden in

5 April of 2016.

6 We submit it's not a coincidence that on the

7 7th of April, Mr. López represented by a new lawyer,

8 Mr. Mosquera, contacts Mr. Seda, claiming that he's

9 the rightful owner, that Mr. López is the rightful

10 owner of the Meritage Property, and demanding a

11 meeting in D.C., of all places, to explore an

12 alternative resolution.

13 Colombia would have you believe it's a

14 coincidence that the very next day, Ms. Malagón, the

15 Head of the Asset Forfeiture Unit, opens a new case

16 based on Mr. López's complaint and assigns it to

17 Prosecutor Number 44, Ms. Ardila.

18 Nowhere in the Resolution opening this new

19 investigation does Malagón acknowledge the

20 pre-existing investigation. It's simply ignored.

21 Even though from the day this investigation is opened

22 and assigned to Ms. Ardila, she has in her hands a

[Page 92]

1 memo that Ms. Tovar had requested as part of her prior

2 investigation. [Redacted]

[Redacted]

9 That's the chart that I extensively

10 cross-examined Ms. Ardila about; and, as you will

11 recall, and as Mr. Moloo did mention, she tied herself

12 in knots trying to explain why she went after the

13 Meritage and not any of the properties in that chart,

14 and every rationale she offered simply did not hold

15 water, whether it was the time period, whether it was

16 the fact that the Lots had undergone consolidation and

17 re-subdivision; whether it was the fact that Lot

18 Numbers became extinct as a result of that process,

19 that's all true for the Meritage Lot as well. None of

20 the explanations she tried to give for why she focused

21 immediately on the Meritage held any water at all.

22 During the same time period that Ms. Ardila

[Page 93]

1 receives this memo, Mr. Mosquera is stepping up his

2 extortion demands. He's asking Mr. Seda to confirm a

3 meeting so that they can reach a "brokered solution,"

4 and he starts to threaten legal proceedings.

5 Mr. Seda is concerned about this threat of

6 legal proceedings. He responds. He offers to meet in

7 Colombia. Mr. Mosquera declines and says, We're

8 proceeding with our defense. That defense turns out

9 to be the tutela that Mr. López filed.

10 And interestingly, in the tutela, Mr. López

11 seeks the same relief that Ms. Ardila ultimately gave

12 him when she imposed Precautionary Measures. He seeks

13 to enjoin construction and sales of the Meritage

14 Project. Well, the Asset Forfeiture Court dismissed

15 the tutela but, as noted, Ms. Ardila later gave him

16 the relief that he wanted.

17 The other concerning thing that happens in

18 this time period is that Mr. Seda is approached by

19 someone claiming to be from the Attorney General's

20 Office.

21 If we go to the next slide.

22 In mid-June. This is before Mr. Seda has

[Page 94]

1 any clue what's going on inside the Fiscalía, and he's

2 approached by a man outside The Charlee Hotel asking

3 him to pay a COP 500 million bribe because the

4 Fiscalía is trying to help him.

5 During the same time period, Mr. Seda meets

6 with Mr. Valderrama, another representative of Mr.

7 López and Mr. Mosquera and Mr. López himself. After

8 Mr. Valderrama shows him pictures of his children in

9 an obviously threatening gesture, Mr. Seda flees the

10 meeting. During these meetings, Mr. López--or, excuse

11 me, Mr. Mosquera brags that he has influence over the

12 Attorney General's Office and specifically the Asset

13 Forfeiture Unit and Ms. Malagón and Ms. Ardila in

14 particular.

15 Again, this is while Mr. Seda has no idea

16 what's going on in the Asset Forfeiture Unit, but

17 Mr. Mosquera is saying, I can influence them, and if

18 you don't pay us about USD 20 million, that's what I'm

19 going to do, and I'll get the Project seized.

20 Mr. Seda flees that meeting. He tells them

21 he's going to report them. Mr. Valderrama immediately

22 sends him conciliatory text messages: I'm so sorry.

[Page 95]

1 Let's restart the exchange.

2 All of this is in the record. It's all

3 corroborated by those text messages.

4 He doesn't hear from them for a while, but

5 then all of a sudden, six weeks later in late July,

6 Mr. Valderrama again texts Mr. Seda. He tells him we

7 need to speak urgently. Mr. Seda replies that he's

8 not interested and tells Mr. Valderrama that if he

9 contacts him again, he's going to call the

10 Authorities.

11 Mr. Valderrama says, I understand. The

12 negotiation Chapter is closed. Unknown to Mr. Seda,

13 but apparently not to Mr. Valderrama, just the prior

14 business day, three days before, the prior business

15 day, Ms. Ardila has signed the Precautionary Measures

16 Resolution, and she also testified at this Hearing

17 that Ms. Malagón was well-aware of that Resolution,

18 too, that it would have been reviewed as part of a

19 regular Committee that they have.

20 So, Ms. Malagón knows about it, Ms. Ardila

21 knows about it, and it seems that Mr. Mosquera,

22 Mr. López and Mr. Valderrama know that it's coming,

[Page 96]

1 too.

2 As Mr. Moloo has already covered in detail,

3 Ms. Ardila shows up at the Lot on August 3rd. She

4 imposes the Precautionary Measures.

5 At this point, Mr. Seda is obviously

6 desperate to save his project. He decides to seek

7 help from the U.S. Embassy; and, as part of that, he

8 wants to obtain the extortion at monetary demand in

9 writing. So, he meets with Mr. Mosquera and Mr. López

10 Vanegas again, in Miami this time. Mr. Mosquera

11 reiterates his demand for around 20--USD 18 million,

12 COP 56 billion, and, you know, he even suggests that

13 Mr. Seda can pay that into a fiduciary offshore

14 account and only release it once the Precautionary

15 Measures are lifted and the Asset Forfeiture

16 Proceeding against the Meritage is dismissed with the

17 finding that Newport is a good-faith buyer.

18 Mr. Mosquera apparently feels comfortable that he has

19 the power to make that happen. Again, he brags about

20 his contacts and his influence over Ms. Malagón and

21 Ms. Ardila, and that's the deal he tries to strike

22 with Mr. Seda. That is not a deal that makes sense if

[Page 97]

1 he's bluffing. Mr. Seda then does obtain the monetary

2 demand in writing and he, again, cuts off contact with

3 these extortionists, and report--ultimately, he does

4 report this to the Colombian Authorities, and the

5 Tribunal heard from Mr. Hernández, who was one of the

6 Prosecutors in charge of the ensuing investigation.

7 Importantly, the asset forfeiture code

8 provides Ms. Ardila with exactly the power that

9 Mr. Mosquera claims she had. In other words, she

10 could have dismissed the Asset Forfeiture Proceeding

11 at any time upon a determination that the assets in

12 question are in the name of third parties acting in

13 good faith without fault. Ms. Ardila could have made

14 that determination at any time, and she admitted that

15 on cross-examination. Perhaps that's the reason she

16 didn't address Newport's good faith. She was waiting

17 to do so until Mr. Seda paid the extortion demand.

18 She could have done so any time before January 25th,

19 and she did--but she didn't because Mr. Seda did not

20 pay.

21 [Redacted]

[Redacted]

[Page 98]

1 [Redacted]

[Redacted]

[Page 99]

1 [Redacted]

[Redacted]

[Redacted] And as

13 Mr. Hernández testified--again, this isn't just

14 speculation--"all of this is taken from what was

15 mentioned in the investigation, be it through

16 wiretapping, statements, interviews, as part of this

17 investigation." Right? They collected all this

18 evidence, and his team prepared this chart to show the

19 scheme that they were investigating and regarding

20 which they had collected significant evidence.

21 Mr. Hernández also affirmed the accuracy of

22 two explosive reports that appeared in the Colombian

[Page 100]

1 newspaper, El Espectador, in October of 2020. As set

2 forth in those Articles, which are C-365 and C-366:

3 "Since December 2016, suspicions on the existence of

4 an alleged cartel made up of the corrupt officials

5 within the Asset Forfeiture Unit of the Prosecutor's

6 Office have been gathering steam."

7 It goes on to describe what this

8 investigation has uncovered thus far, including,

9 again, extortion taking place in asset forfeiture

10 cases involving Ms. Malagón and Ms. Ardila, the Gran

11 Estación case is mentioned as is the Supercundi case.

12 [Redacted]

[Redacted]

[Page 101]

1 [Redacted]

[Redacted]

[Page 102]

1 [Redacted]

[Redacted]

[Page 103]

1 [Redacted]

[Redacted]

5 Colombia's counsel vociferously objected to me

6 questioning her any further about the document, which

7 they said was confidential; she'd never read it. I

8 can't question her on this document.

9 Mr. Caro backed that up. He said she

10 couldn't have seen this. [Redacted]

[Redacted]

[Page 104]

1 [Redacted]

[Redacted]

[Redacted] Ms. Ardila

12 Polo writes him back: "Good morning respected

13 Dr. Mosquera," and explains why she's not going to

14 recognize Mr. López as an affected party, a courtesy

15 that Newport never got.

16 In sum, Colombia acted arbitrarily and

17 disproportionately when it initiated the Asset

18 Forfeiture Proceedings in furtherance of a corrupt

19 scheme in breach of the Fair and Equitable Treatment

20 protection in Article 10.5 of the TPA. Again, I think

21 it's important to take a step back. Why did all of

22 this happen? Ms. Ardila claims--Colombia claims that

[Page 105]

1 her investigation was into the assets of Iván López;

2 that that's what differentiated it from the prior

3 investigation, which was based, they say, on the

4 kidnapping complaint. As we've seen, the Colombian

5 courts and Prosecutors rely on the kidnapping

6 complaint in this Asset Forfeiture Proceeding, too,

7 but that's Colombia's story.

8 So, why is an asset forfeiture investigation

9 that's focused on Iván López's assets? She received a

10 list of 47 of them. Why did she zero in on the

11 Meritage? Why? Why is--why not look at those assets?

12 The assets that actually pertain to Mr. López

13 personally, which the Meritage Lot never did.

14 I would submit that corruption is the most

15 credible explanation that we have. Colombia itself

16 has endorsed what's called the red flags approach.

17 Followed by the Tribunal in Spentex, the Tribunal

18 should adopt a methodology of starting from red flags,

19 individual indicia of corruption and connecting the

20 dots to obtain a larger picture. As Colombia argued

21 there, it's practically impossible to prove

22 corruption, so tribunals should use this time-honored

[Page 106]

1 methodology. That's the Glencore v. Colombia Case.

2 Well, there are a lot of red flags here.

3 Some of them are listed on this slide. Certainly the

4 timing and the speed of the Asset Forfeiture

5 Proceedings against the Meritage that are opened in

6 2016 closely tracks the extortionate demands made on

7 Mr. Seda.

8 Colombia did not even cross Mr. Seda on the

9 fact that he was approached on two occasions by people

10 claiming to be from the Attorney General's Office and

11 telling him to make a payoff and that would make

12 everything go away. They didn't even cross him on

13 that. There is no dispute that Mr. Seda was the

14 attempted victim of an extortion scheme.

15 Mr. Mosquera also made claims--how could he

16 have made these claims? He said I can influence

17 Ms. Malagón, I talk to her every week. She'll do what

18 I ask her to do. He specifically claimed to be able

19 to influence the people in charge of the investigation

20 and Asset Forfeiture Proceeding that resulted in the

21 imposition of Precautionary Measures on the Meritage.

22 He made an offer that could not have worked at all if

[Page 107]

1 he was lying. He said put the money, $20 million, in

2 an offshore account, and you can only release it once

3 I get the Asset Forfeiture Proceeding lifted. Again,

4 this offer makes no sense if he were simply bluffing.

5 [Redacted]

[Redacted]

16 And Ms. Ardila and Colombia cannot explain

17 the discriminatory treatment of the Meritage Project.

18 All of the explanations that they have offered simply

19 do not hold water. Corruption is actually the most

20 likely explanation.

21 I will now cover how the initiation of the

22 Asset Forfeiture Proceedings was unconnected to any

[Page 108]

1 rational policy purpose because of Colombia's failure

2 to target illicit proceeds. I think this has been

3 covered, really, by the content of slides that we've

4 already covered, so I will just quickly go through it.

5 Again, Colombia claims the purpose of these

6 proceedings is to investigate and sanction members of

7 the Oficina de Envigado, which they alleged is a

8 narcotics trafficking cartel. They say that the Asset

9 Forfeiture Laws are used for the pursuit of assets

10 acquired through illicit enrichment.

11 [Redacted]

[Redacted] They could have gone after the alleged wrong

13 doers. They could have gone after Iván López and his

14 assets. The Asset Forfeiture Law even allows you to

15 seize equivalent assets. If you find that an asset

16 has been gained illicitly but it's now in the hands of

17 a good-faith party, you can go after equivalent assets

18 that belong to the person that was alleged to have

19 engaged in the wrongdoing. That's not what they did

20 here. They went after the Meritage.

21 Again, this did not meet Colombia's stated

22 policy objectives.

[Page 109]

1 [Redacted]

[Redacted]

7 If you look at these decisions, tribunals

8 will look at, you know, at factors that Tribunals will

9 consider to determine if a State action is arbitrary,

10 and Tribunals have said that Measures are arbitrary if

11 they're not reasonably related to a rational policy

12 purpose. Again, it's hard to see what rational policy

13 purpose was served by any of this. It's certainly not

14 the one that Colombia identifies.

15 Another way in which Colombia breached the

16 TPA was by failing to assess Newport's good faith.

17 What is the good-faith standard under

18 Colombian law? Well, we have a Constitutional Court

19 Judgment from August 2020, and this Constitutional

20 Court Judgment talks about how, "when someone intends

21 to acquire an asset, it is up to that person to

22 ascertain the legal status of such asset." The asset.

[Page 110]

1 It focuses on the asset. "In order to establish the

2 history and chain of title and tradition, but not to

3 inquire into the history or personal details of the

4 Party that transfers the respective assets to him."

5 So, again, the diligence is into the asset. Is the

6 asset free of encumbrances, liens or claims that

7 someone could make against the asset; right? The

8 statute of limitations for those claims in Colombia is

9 10 years. So, that's why, when people are acquiring

10 property in Colombia, they will do a title study that

11 looks at the asset for the last 10 years.

12 Dr. Carlos Medellín, again former Minister

13 of Justice and an Expert for Claimants in this

14 proceeding, has further explained that what good faith

15 requires is objective and diligent actions aimed at

16 verifying the conditions and possible defects of the

17 asset; right? Objective and diligent actions--not

18 perfection--that's not the standard--or as Colombia

19 seems to require a completely backwards-looking thing

20 that says, well, we found a mistake in your diligence,

21 we think you should have detected this or that,

22 therefore the diligence wasn't sufficient. That seems

[Page 111]

1 to be the standard Colombian is applying. It's not

2 the standard. Perfection is not the standard. It

3 requires objective and diligent actions, not

4 perfection.

5 If we look further at that Constitutional

6 Court judgment, the Court explains why the standard

7 cannot be that you have to exhaustively investigate

8 not just the seller of the asset but everybody

9 backwards in the chain of title, all the other sellers

10 of this asset ever. I mean, as the Court explains,

11 this would make legal trade difficult or impossible.

12 The Court explains here that, in a scenario such as

13 this, people in legal commerce would be obliged not

14 only to study the title to assets but also to perform

15 meticulous investigations into the legal past of the

16 sellers, into any legal disputes they may be involved

17 in different jurisdictions, into the investigations

18 and inquiries carried out by the Prosecutor's Office

19 in which they could be involved, and even into

20 opinions about said sellers in their communicates and

21 on social media. Again, the Court says this is not

22 required. This is not what is required, and it's

[Page 112]

1 commercially impractical, impractical and impossible.

2 I'm going to be very brief on these slides

3 because I think the Tribunal is fully familiar with

4 the steps that were taken here, the steps of diligence

5 that were taken here. Again, Newport hired one of

6 Colombia's largest and most trusted fiduciaries,

7 Corficolombiana. Corficolombiana asked that the

8 purchasers at Newport carry out a title search,

9 recommended a respective law firm to do that title

10 search. That was done. The title search came back

11 with a favorable opinion. No encumbrances, no reason

12 that you cannot purchase this property. The title

13 search also included a search of the OFAC and UN lists

14 for mention of the individuals and legal persons

15 appearing on Certificates of Encumbrance and Transfer

16 History, came up with nothing.

17 One of the lawyers who did that study, Anna

18 Palacio, explains the reason why they do a 10-year

19 search. As I already said, it's because it's tied to

20 the statute of limitations for claims against title.

21 It's 10 years in Colombia. That's why 10 years is the

22 industry standard.

[Page 113]

1 They went further than that, though.

2 Despite what this Colombian Constitutional Court

3 Decision says, they did do KYC on the seller; right?

4 They did a company study of La Palma Argentina, came

5 back favorable.

6 Corficolombiana, as a regulated financial

7 institution, subject to Colombia's SARLAFT procedures,

8 that's a risk management system for money-laundering

9 and terrorism financing; right? So, Corficolombiana

10 has to have a SARLAFT procedure, it has to be approved

11 by the Government. Colombia followed that procedure

12 here. The testimony of their representative, she

13 explains what was done here.

14 SARLAFT was run on, not just on Newport, but

15 La Palma, the Investors. It all came back clean, no

16 reason not to proceed with the Project.

17 Now, Mr. Caro, on cross, expressed basically

18 complete ignorance of Corficolombiana's SARLAFT

19 procedures and just didn't seem to think they were

20 relevant to his inquiry about whether their diligence

21 had been adequate. But in fact, Claimant's Expert,

22 Dr. Martínez, again one of the drafters of the law,

[Page 114]

1 explained that when an entity satisfies the minimum

2 requirements on prudence that the law demands, in this

3 case Corficolombiana complied with the requirements

4 applicable to it, as provided by Article 102 of the

5 EOSF, which details the SARLAFT due-diligence

6 requirements, by undertaking that due-diligence in

7 accordance to the legal system, it can be stated that

8 it has acted in a prudent manner without fault.

9 Colombia satisfied--Corficolombiana satisfied its

10 diligence duties, but it went above and beyond.

11 By the way, that's Paragraph 73 of his First

12 Report.

13 Corficolombiana went even further, though.

14 Their outside counsel, Francisco Sintura, who was,

15 himself, was a former Vice Fiscal, wrote to the

16 Attorney General's Office, wrote to the Asset

17 Forfeiture and Money Laundering Unit, which at that

18 time were a single unit, and he submitted a list of

19 over--you know, this is a 60-page submission--a list

20 of all the names of the owners of the property and the

21 legal representatives of the entities in the chain of

22 title that then appeared in the records plus La Palma

[Page 115]

1 plus the property, submitted that list, told the

2 Attorney General's Office why they were submitting the

3 list because they were going to make an investment,

4 because they were going to acquire this property,

5 asked whether there were any active investigations

6 involving any of these persons or entities. The

7 response came back there's nothing. Again, this went

8 above and beyond.

9 Again, let's look at what Colombia's

10 criticisms are of the diligence that was done here.

11 In their Opening Statement, they criticized the title

12 study for going back only 10 years, not 20. They

13 claimed that had Otero & Palacio conducted a full

14 investigation, they will see, as we have seen before

15 and contrary to what the Claimants say, that, indeed,

16 there was Iván López Vanegas appearing as a

17 representative of Sierralta, and was, indeed, if they

18 had just done a Google search, they would have seen

19 that he's a drug dealer. Well, again, this is exactly

20 what the Constitutional Court has said you do not need

21 to do.

22 But it is also completely backwards-looking.

[Page 116]

1 Colombia doesn't point to any written rules that say

2 your title study has to be 20 years instead of 10.

3 Nothing; right? It's all just based on--again, we

4 think we found a mistake here, since you made this

5 mistake, your diligence must not have been adequate.

6 That's exactly what the Constitutional Court said was

7 commercially unworkable.

8 Indeed, Colombia took the position that, in

9 order for diligence to be adequate, it would have to

10 go all the way back to the origin of the asset.

11 That's what they said. Again, there's no written

12 rule. That's just what they say would have been

13 needed.

14 Now, the question that has arisen in these

15 proceedings as well is, when did this diligence

16 attach; right? When did Newport become someone who

17 would have been an affected party with property rights

18 in the asset that was seized? The Decision of the

19 Superior Court of Bogotá that recognized Newport as an

20 affected party, relied on the Sales-Purchase

21 Agreement, which was executed in November of 2012.

22 Now, that is a--effectively, an option Contract. It

[Page 117]

1 gives Royal Realty, later assigned to Newport, the

2 option to buy the property. One of the requirements

3 is that title come back clean. La Palma has to--you

4 know, title has to come back clean. So, of course,

5 they did as we've already discussed. They did go out

6 and do their title checks, they did all their

7 diligence and then create the rest of the structures

8 that eventually are set up to carry out the

9 development of the Meritage Project. So, when did the

10 good faith attach? When was this diligence done?

11 What is the date? The clearest statement in the

12 record comes from, again, Dr. Medellín, and he says:

13 "The date of the signing of the commercial trust

14 agreement entered into between Newport and

15 Corficolombiana in the Year 2013 is determinant. As

16 of that time, the Parties to said agreement already

17 had a patrimonial interest over the Real Property

18 asset." Again, it's not about title. It's about

19 having a patrimonial, a pecuniary interest in the

20 asset. It's not about having title to the asset.

21 Therefore it cannot be demanded of them that they

22 continue engaging in acts due diligence regarding a

[Page 118]

1 transaction that had already taken place.

2 Dr. Wilson Martínez agrees that the relevant

3 time is October 2013. That's when the trusts are set

4 up. That includes the pre-sales trust and the payment

5 trust. And again, this is done in October 2013.

6 After those trusts are created, they start pre-sales,

7 they start promoting the Project, they start selling

8 units. Now, there is no duty to revisit diligence. I

9 think an exchange between the President of the

10 Tribunal and Colombian's witness make this is very

11 clear. If we just skip ahead to Slide 153.

12 The President of the Tribunal asked

13 Mr. Reyes: "Assume I buy a property in Colombia and

14 there is no problem, nothing turns out, I do a due

15 diligence that you would consider sufficient, and 10

16 years later I learned that a relative of Escobar was

17 involved in the initial--at the origin of the

18 property. Now, does that affect my property rights?"

19 Mr. Reyes's answer is unequivocal:

20 "Absolutely not."

21 The President goes on: "Okay, if I want to

22 resell the property in the year thereafter, so the new

[Page 119]

1 circumstance has arisen, and I want to sell my

2 property, and now it is known that there was at the

3 origin an illicit circumstance, would I be able to

4 sell the property to somebody else? Would that

5 somebody else be a good faith purchaser because he

6 would know, wouldn't he, probably he would know, of

7 the illicit origin."

8 Again, the answer is unequivocal: "Yes, you

9 can sell it."

10 Part of being a good faith buyer is being

11 able to alienate the property; right? You don't

12 have--if you can't sell the property, that's not much

13 of a property right. The two are connected and

14 inherent. There is no duty to revisit diligence, redo

15 it.

16 But Newport and Corficolombiana nonetheless

17 did revisit the diligence when Mr. López first

18 approached Mr. Seda in 2013.

19 As Mr. Seda stated on cross: They

20 rereviewed all the diligence that had been done; he

21 reported the approach to La Palma Argentina, the

22 seller; he reported it to Corficolombiana; he went on

[Page 120]

1 a nationally syndicated radio program to talk about

2 the extortion demand, so that the Unit buyers would

3 know about it and they found nothing. There was no

4 evidence that Mr. López owned the property, that he

5 had any ownership right to the property.

6 Corficolombiana also revisited the

7 diligence, and the testimony of Ms. Betancourt in

8 Slide 151, she sets forth exactly what they did, we

9 verified once again how the business deal had taken

10 place, we verified the title studies, we verified the

11 searches, we looked into La Palma again. We confirmed

12 that there were no issues, none at all. Again, this

13 wasn't required, but it was done anyway.

14 I apologize, I just want to correct the

15 record. I misstated the date when Mr. López

16 approached Mr. Seda. It was 2014, not 2013.

17 Slide 152.

18 Ms. Betancourt explained that all of the

19 Contracts remained in place. There was no grounds to

20 terminate them. After revisiting the diligence, there

21 was no reason to terminate them, and they proceeded

22 with the Project.

[Page 121]

1 But, if that's not enough, again, Mr. Moloo

2 already covered this in detail, but other banks and

3 fiduciaries continued to transact in properties where

4 Mr. López Vanegas is on title. Apparently, he's not

5 triggering an issue with anybody's diligence. This

6 includes: A Government-owned fiduciary; Scotiabank

7 Colpatria, another large bank in Colombia; Acción

8 Sociedad Fiduciaria, again a large fiduciary; and even

9 Banco de Bogotá. Again, they're all buying and

10 selling, developing Mr. López's properties and,

11 apparently, their diligence is not turning up any

12 issues.

13 [Redacted]

[Redacted]

[Page 122]

1 By initiating these Asset Forfeiture

2 Proceedings against the Meritage, arbitrarily and

3 without any rational policy purpose, Colombia breached

4 the Fair and Equitable Treatment protection provided

5 in Article 10.5 of the TPA. We've already talked

6 about the certificate. I'm just going to briefly

7 cover these slides.

8 You know, it created a legitimate

9 investment-backed expectation; right? Mr. Sintura

10 told the Fiscalía exactly why he was requesting this

11 information. Because we're going to conduct a

12 transaction in this property, because we want to avoid

13 acquiring any assets that may be involved in active

14 investigations; right? He told them, this is why

15 we're asking you for this information. The Head of

16 the Unit responded that there were no issues.

17 Mr. Seda testified about the reliance on

18 that certification from the Fiscalía as part of the

19 broader package of diligence that was done.

20 And as--again, a question from the President

21 of the Tribunal to Colombia's witness, Mr. Caro. The

22 President asked: "That's the part of the document

[Page 123]

1 which deals with good-faith, and I would like to start

2 with the individuals that are named on Page 139,"

3 these are individuals identified in Corficolombiana's

4 petition, "when I look at them, Mr. Arboleda--that's

5 the mango vendor--Mr. Cardona Rodríguez--that's the

6 engineer--Ms. Muñoz and Ms. Rendón--the model, these

7 individuals were named in the list that was part of

8 the petition to the Attorney General's Office of

9 August 2013. When you received this petition and you

10 responded to it, those individuals were commented as

11 not listed in the information system. So, in other

12 words, I conclude from this that, at the time, you

13 were not aware that, for example, Mr. Arboleda who

14 was, according to Respondent's position, a front man

15 and a former mango vendor. Do I understand that

16 correctly, you were not in possession of such

17 information in 2013?"

18 Well, Mr. Caro says, I'm not the one to give

19 the answer, but he says the Chief of the Unit at that

20 time is that person, and that's exactly who provided

21 it.

22 Again, Colombia's own Prosecutors confirmed

[Page 124]

1 to Mr. Seda that they had a legitimate expectation

2 based on this certification. That expectation was

3 backed up by investment; and, by frustrating that

4 legitimate expectation, Colombia breached its

5 obligations to provide fair and equitable treatment

6 under Article 10.5 of the TPA.

7 These cases explain that the touchstone of

8 fair and equitable treatment is the frustration of

9 legitimate expectations, expectations backed by

10 investment. That's exactly what happened here.

11 I'll just briefly cover another breach,

12 which is the fact that Colombia's Measures, the

13 Measures taken here, put Claimants' entire portfolio

14 in the line of fire. Colombia knew or should have

15 known this, should have known that all of Royal

16 Realty's business would be put directly in the line of

17 fire.

18 An Asset Forfeiture Proceeding and unfounded

19 criminal investigation taint the reputation of the

20 affected party. It really goes without saying. It

21 signals that the Party is involved in illegal activity

22 or that the Party did not conduct adequate diligence

[Page 125]

1 or both. In either scenario, banks, investors and

2 customers will avoid working with that person.

[Redacted]

10 Colombia submits that we have put in no

11 evidence of this. That's simply not true. There's

12 the publicity. There are multiple letters, text

13 messages, agreements in the record. Testimony that

14 show that one-by-one these projects came to a halt,

15 and they came to a halt because of the proceedings

16 against the Meritage. We have Mr. López Montoya's

17 testimony, Mr. Seda's testimony. We have emails from

18 investors who said we can't--we can't go forward.

19 And there's more in the appendix. We cannot

20 go forward until the Meritage issue is resolved.

21 The Purchase Agreement for the land for the

22 Tierra Bomba project was revoked, and it specifically

[Page 126]

1 states: "Given the difficulties and the scandal

2 related to Meritage Project, we're revoking this."

3 The management contract that Royal Realty

4 was going to enter into with a hotel in Tierra Bomba,

5 also revoked because of the Meritage Project.

6 Mr. Seda sets forth in his Witness Statement

7 how the Meritage seizure affected his other projects.

8 People wouldn't go into business with Royal Realty,

9 they would not buy land with them, they would not

10 enter into deals with them, they could no longer

11 attract investment, all of these projects at various

12 states of development died. They were put into the

13 line of fire by Colombia's actions.

14 Again, Colombia criticizes this evidence,

15 they say, it's based on testimony. It's not just

16 based on testimony. You saw some of the documents

17 there, there's more in the appendix, but again,

18 Colombia had the opportunity to cross-examine these

19 witnesses.

20 Colombia's conduct arbitrarily and

21 unreasonably placed Claimants' investments in the line

22 of fire in breach of the FET protection in

[Page 127]

1 Article 10.5 of the TPA. Colombia also failed to

2 protect Claimants' investments from the arbitrary and

3 irrational conduct of officials within the Attorney

4 General's Office in breach of its obligation to

5 exercise vigilant pursuant to the TPA's protection,

6 also provided in Article 10.5 of the TPA.

7 As set forth in this Case, Rompetrol v.

8 Romania: "In the Tribunal's considered view, it is

9 part of the legitimate expectations of a protected

10 investor--without in any way trenching upon the

11 sovereign right of the host State to prescribe and

12 enforce its criminal law--that, if its interest find

13 themselves caught up in the criminal process either

14 directly or indirectly, means will be sought by the

15 authorities of the host State to avoid any

16 unnecessarily adverse effect on those interests or at

17 least to minimize or mitigate those adverse effects."

18 Colombia simply did not do that here. In fact, its

19 officials took the path that would cause the most

20 damage to Claimants' investment.

21 As the Tribunal explained in AMT v. Zaire:

22 "The obligation on the State is one of vigilance";

[Page 128]

1 right? The State must be vigilant. The obligation

2 incumbent upon Zaire is an obligation of vigilance, in

3 the sense that Zaire is the receiving State of

4 investments made by AMT, an American company, shall

5 take all measures necessary to ensure the full

6 enjoyment and protection and security of its

7 investment and should not be permitted to invoke its

8 own legislation to detract from any such obligation."

9 Colombia cannot simply rely on the fact it has an

10 Asset Forfeiture Code, that--it's purportedly

11 following that code, it has to be vigilant. It has to

12 ensure that the measures it's taking are not

13 unnecessarily inflicting damage. They did not do that

14 here.

15 Finally, and briefly, Colombia has engaged

16 in a sustained and increasingly hostile campaign to

17 tarnish Mr. Seda's reputation. A completely

18 unnecessary campaign. The Asset Forfeiture Proceeding

19 itself did enough damage but they have not stopped

20 there. Although stating in their pleadings before

21 this Tribunal, that Mr. Seda was not personally

22 accused of any wrongdoing, Colombia has pivoted 180

[Page 129]

1 and they've launched a retaliatory campaign.

[Redacted]

[Page 130]

[Redacted]

19 But Mr. Seda and the rest of the Claimants

20 have never been charged with a crime, either in

21 Colombia or the U.S., even though Mr. Seda has been

22 subject to invasive investigations, never been charged

[Page 131]

1 with a crime, never been put on the OFAC List, the UN

2 list, et cetera. There is simply nothing to back up

3 all of this innuendo.

4 This campaign to tarnish Mr. Seda's

5 reputation amounts to a failure to protect Mr. Seda

6 and his investments from--excuse me--in breach of

7 Colombia's obligation to exercise vigilance pursuant

8 to the full protection and security protections

9 provided by Article 10.5 of the TPA.

10 I will turn it back over to my colleague,

11 Mr. Moloo, who will address damages.

12 MR. MOLOO: Thank you, Ms. Champion.

13 Just what you gentlemen want before lunch,

14 the most technical part of my presentation. So, for

15 the next 30 minutes if you'll bear with me, we will go

16 through why we think Colombia's conduct has caused

17 damage to Claimants and the amount of damage that

18 Claimants have suffered.

19 The first thing I want to talk about is

20 causation, and the TPA itself in 10.16 deals with

21 causation. It says that what can be claimed here is

22 loss or damage that, by reason of or arising out of

[Page 132]

1 the breach, can be claimed. By reason of or arising

2 out of. And we would submit that all of the damages

3 that I'm going to talk about are by reason of or

4 arising out of, and in particular there's a question

5 about the non-Meritage Projects, and I think we've

6 given you enough evidence as to why all of those

7 projects--it doesn't make any sense why the Luxé

8 wouldn't have been finished. It's a 75 percent-done

9 hotel, financing is in place. Construction contracts

10 are all in place. Why that gets stopped? It gets

11 stopped because the bank pulls the financing. They

12 shut off the tap that they've already approved. There

13 is no other reason why these projects dry up, but for

14 the Measures that are at issue here.

15 And as Joseph Charles Lemire v. Ukraine

16 says, If it can be proven that in the normal cause of

17 events, a certain cause will produce a certain effect,

18 it can be safely assumed that a rebuttable presumption

19 of causality between both events exists and that the

20 first is the proximate cause of the other.

21 Ms. Champion took you through a lot of this.

22 But here on this slide is some of the evidence that's

[Page 133]

1 in the record, as to, obviously the Meritage project

2 was halted, but why the banks pulled the financing.

3 That's covered by the Witness Statements, but also

4 Documents. Other investors withdraw from the Luxé,

5 one of them Paladin, one of the private equity

6 financiers refused to invest any longer in Luxé and in

7 some of the Development Projects where they basically

8 just said we're not investing with you anymore because

9 we're worried obviously that the same thing is going

10 to happen to your other projects that happened to the

11 Meritage.

12 One of the things that Colombia says, is

13 yeah, but nothing happened to The Charlee. The

14 Charlee is still operating, but The Charlee is

15 obviously in a very different situation because it

16 doesn't need third-party financing anymore; right?

17 There is no third-party financing. It's

18 self-sustaining; right? There's no other business

19 partnerships or anything needed. [Redacted]

[Redacted]

[Page 134]

[Redacted]

15 Now, Dr. Hern says--that's the Respondent's

16 Expert--they say, Claimants should have no issues

17 pursuing these other opportunities because they can

18 just sell the Projects, they can just sell them or

19 they can pursue other projects. But he fundamentally

20 misunderstands the case that Colombia itself is

21 putting forward: He can't sell them. He can't sell

22 these other projects because now he's associated with

[Page 135]

1 this illegality, so people are hesitant to buy from

2 him.

3 It's national news; right? So, on

4 Colombia's case in this proceeding, selling is going

5 to be difficult.

6 But in any event, I asked him in

7 cross-examination, well, you're saying this--you're

8 saying--you know, he can still develop these other

9 projects, what's stopping him, and, you know, he can

10 still sell them. But have you seen any of the

11 evidence? And he said, and I asked him, You haven't

12 seen the evidence; right? I referred to the Paladin

13 statements, these private equity investors. And he

14 says, I haven't. I haven't looked at the evidence

15 behind those. And I said, For example, C-186, we can

16 pull it up. Do you recall seeing this Agreement? It

17 was an Agreement where they had to terminate one of

18 the Contracts because of the Meritage. And he said, I

19 can't recall, honestly, whether I have seen that

20 particular agreement.

21 And then I took him to the statements by the

22 government officials where they're saying, yeah, of

[Page 136]

1 course, you're going to be affected by these things.

2 And he said again, Can you take me to the statement?

3 And I took him to one of the statements and he said, I

4 have not seen this document. And I took him through a

5 number of these documents that you've seen today and

6 he hadn't seen any of them. And then I asked him, And

7 if he was prevented--Mr. Seda and Newport and Royal

8 Property Group--from being able to transact and to

9 sell these projects and do the business that you're

10 saying they could have done, then what would have been

11 your conclusion? And he said, Yes, logically if he is

12 impacted and he can't develop them and he can't also

13 sell them, then I would take a different view that

14 economically those projects must have been impacted

15 then.

16 That's what their expert ultimately said

17 after I took him to all of these documents, and he

18 said, Well, if I would have--if that was--if he

19 couldn't sell and he couldn't develop these projects

20 anymore, then I would have taken a different view.

21 So, what is that compensation? Well, we

22 start with what is the legal standard, and we all know

[Page 137]

1 it's Fair Market Value. No dispute there. Colombia

2 agrees, Fair Market Value captures the full reparation

3 owed to Claimants. And Dr. Hern, their expert, says

4 it's the price that a willing buyer would pay a

5 willing seller in the market, in a liquid market, the

6 hypothetical price. He agrees that that's the

7 approach.

8 And then we talk about well, what is the

9 Fair Market Value? How do you assess Fair Market

10 Value? And there is three ways, I'm sure the Tribunal

11 is familiar with them: Income-based approach,

12 market-based approach, and an asset-based approach.

13 And the starting point, and I think it's well accepted

14 now, is the income-based approach. And why is that

15 the starting point? It's because it properly captures

16 the value of that investment to the owner. And the

17 owner or controller of the entity is likely to have

18 the detailed information needed to give a realistic

19 assessment of those future cash flows. So, that's why

20 you start with an investment-based approach. And

21 that's where all economists in the real world, and I

22 think more so now in investor-State arbitration,

[Page 138]

1 generally start.

2 But especially in the context of real estate

3 development because there aren't a lot of real estate

4 development cases in the investor-State context. So I

5 think it's important to think about in the real estate

6 development context in particular, what do experts do?

7 And so, we went to CBRE, who's again, that's

8 Colombia's expert, CBRE, well-known industry expert,

9 real estate expert, and we found an expert assessment

10 they themselves had done of an undeveloped, completely

11 undeveloped, piece of land. You may recall there was

12 some confusion about whether this piece of land was in

13 California or in Mexico. It's in Mexico.

14 But this piece of land was a valuation,

15 there was a valuation done in March 20--of 2018 by the

16 expert that CBRE put up in this particular

17 arbitration. And their completely undeveloped piece

18 of land, that they used a Discounted Cash Flow

19 approach to assess the value of the land. They said

20 what's the highest and best use? Well, the highest

21 and best use is you're going to develop this land,

22 you're going to subdivide it, and you're going to

[Page 139]

1 build a bunch of units and you're going to sell that

2 finished product. Let's do a Discounted Cash Flow of

3 this land based on that highest and best use of that

4 property.

5 And Ms. Ritwik asked Mr. Maugeri on

6 cross-examination, Have you ever done a DCF for an

7 undeveloped project, completely undeveloped." And he

8 confirmed, Yes, I have.

9 And when I took Dr. Hern to this because

10 he's not an industry expert, I would submit, I talked

11 to him and I asked him, Are you familiar with the

12 subdivision development approach that CBRE had taken

13 in this valuation report? And he ultimately said he

14 looked at it, he read through it. And he goes, The

15 value of the underlying land is then estimated. I'm

16 asking him, Estimated through a Discounted Cash Flow

17 analysis with revenues based on the achievable sale

18 price of the finished product. And I asked him, Have

19 you ever used this approach to value other assets,

20 undeveloped assets? Have you used this Discounted

21 Cash Flow Approach to do this for a piece of land.

22 And he said, Yes. So, apparently Dr. Hern has done

[Page 140]

1 so, too.

2 And I asked him, Do you disagree with an

3 approach of valuing an undeveloped real estate

4 project, completely undeveloped, nothing on the land

5 whatsoever? Are you okay with basically using a DCF

6 Approach? Do you have any issue with that? And he

7 said, Not as a matter of principle. As a matter of

8 principle would I disagree with the use of a DCF for

9 undeveloped projects? Not necessarily because I think

10 there are some circumstances where one could get quite

11 comfortable with, you know, how that project become

12 evolve.

13 So, both CBRE and Dr. Hern are comfortable

14 with using the DCF Approach for completely undeveloped

15 land. Now, the Meritage and Luxé are obviously not

16 undeveloped pieces of land. We will get to that. But

17 even for a completely undeveloped piece of land,

18 they're okay with using the DCF Approach. They

19 confirmed that at the Hearing.

20 And why are sunk costs not okay? Why does

21 that not make sense, especially, I would say, in the

22 real estate development context? Well, first of all,

[Page 141]

1 because it doesn't value the know-how, the brand

2 value, the track record, the experience of the folks

3 who are coming to build that property, so you don't

4 just, you know, what I paid for that piece of land is

5 not necessarily what it's worth tomorrow. There's

6 appreciation, obviously, but if I'm bringing some

7 added value, some knowledge, some expertise, I get

8 permitting done, et cetera, that all has value that

9 you have to give--that you have to account for, and

10 that's the problem with the sunk-costs approach. It

11 doesn't give any value to these intangibles, the

12 market knowledge, the consumer insight, the vendor

13 relationships, the hotel management experience. All

14 of the things that the Royal Property Group had, not

15 anybody can come in and do this. This requires some

16 sophistication, some knowledge, some knowledge that,

17 by the way, obviously the Royal Property Group had

18 because they had done this before.

19 But Dr. Hern, despite accepting that the DCF

20 Approach would be okay for a completely undeveloped

21 piece of property, he basically confirms that the

22 approach he took was a sunk costs updated at Risk-Free

[Page 142]

1 Rate. I asked, Is that what you've done, you've

2 basically sunk costs updated at a Risk-Free Rate?

3 He said, Essentially.

4 He was resisting the sunk costs terminology

5 and said, You could think of it as a replacement, an

6 estimate of the replacement costs. But he confirmed,

7 It's sunk costs, Risk-Free Rate updated. That's not

8 Fair Market Value. Sunk costs, anybody who owns a

9 house knows what I paid for the house 10 years ago is

10 not what it's worth today. Hopefully it could go up

11 or down, but it's not what I paid. That's not the

12 Fair Market Value, even just for a piece of property.

13 Some more on confirming that that's the

14 approach he's taken, just basically a sunk-costs

15 approach or replacement cost.

16 And the reason why he justified this

17 Replacement Cost Approach, what was the reason? I was

18 trying to figure out how could he justify this as an

19 economist? And he said, Well, in a perfectly

20 competitive environment, where it is perfectly

21 competitive--that's an economic term of art--then it

22 makes sense, your sunk costs updated at a Risk-Free

[Page 143]

1 Rate is going to be what the thing is worth. Because

2 it's a perfectly competitive environment. I can go

3 and buy that replacement. If I buy a widget from one

4 person, I can go and buy a widget from someone else

5 for the same price. And I asked him, But that's your

6 assumption, but nothing is perfectly competitive;

7 right? And he said, Right, right. That's right.

8 But that's his assumption. That's the only

9 way you get to replacement cost theory for Fair Market

10 Value. Is that you're assuming a perfectly

11 competitive environment. But he accepts that nothing

12 is perfectly competitive.

13 And I would suggest especially the real

14 estate development market in Medellín where one of the

15 main reasons why Mr. Seda went there in the first

16 place was because he saw opportunity. He saw that

17 there wasn't a widget on every corner that you could

18 buy. There wasn't a luxury hotel, there was

19 opportunity, and that's exactly what investors do.

20 They find those opportunities and they invest in them.

21 This is not a perfectly competitive environment with

22 no barriers to entry.

[Page 144]

1 So, then the next question is, when using a

2 DCF is, can I say with a sufficient degree of

3 certainty that there would have been some profit

4 obtained here? And real estate is different than like

5 a big mining investment, for example, which I know we

6 see a lot more, for example; right? Where you can

7 sink a bunch of money, and you could lose it if

8 there's no gold in the ground; right? That's not the

9 case with property; right? Property has inherent

10 value. So, to be profitable, that threshold to reach

11 that sufficient certainty that there was going to be

12 profitability in a property development context, is

13 much easier to meet than, for example, mining or

14 something else, and so that's important to appreciate,

15 that that threshold for a sufficient degree of

16 certainty that there would have been profitability is

17 much easier to meet in the property development

18 context, and it was certainly met, I would say, here

19 especially looking at the track record of these

20 investors.

21 And Colombia appears to accept that a DCF

22 valuation is reliable with the correct assumptions and

[Page 145]

1 that's in their Rejoinder. Colombia's Rejoinder said,

2 It is possible to correct some of the assumptions made

3 by BRG to reach a more reasonable DCF value which can

4 be verified by appropriate crosschecks as demonstrated

5 by Dr. Hern.

6 So, they confirmed that with the right

7 assumptions, DCF is the right approach.

8 The question, of course, then is who's got

9 the assumptions; right?

10 But by the way, before I get to those

11 assumptions, one important point is The Charlee Hotel,

12 no dispute that, wildly successful and profitable, I

13 think that was confirmed by the Respondent's Experts

14 as well.

15 With respect to the Meritage, DCF is

16 warranted, it was significantly advanced. This is a

17 situation where you pre-sell; right? So the owners

18 have already committed contractually to buy the

19 property. Sold out in record time, 152 units, I'm

20 going to build them, I already know who the buyers

21 are. I have contracts with them. They have to buy

22 them. They've put down deposits. My costs are known

[Page 146]

1 because I've entered into contracts with my

2 construction contracts. There is--You've reached the

3 point of equilibrium. The banks are giving you money

4 because they know at this point that it's secure.

5 Right? You've reached that point where you know,

6 you've sold the units, everything with the hotel, et

7 cetera, is basically you've mapped it out, you know

8 your costs, et cetera, very far advanced.

9 And Colombia, by the way, did not contest

10 any of that evidence. They didn't challenge

11 Mr. Seda's testimony on any of this at the Hearing.

12 Luxé. The cabanas were already built. Now,

13 what's the income stream that comes from that? Well,

14 someone has to manage them; right? People--the owners

15 have bought these cabanas, and they've contracted with

16 the Royal Property Group to manage these cabanas.

17 Hotel. Financing is in place. The

18 hotels--they're already booking events. It's

19 72.5 percent complete, is what the C-338--the

20 construction folks will tell you that it's

21 72.5 percent complete when there is an audit done on

22 this project.

[Page 147]

1 It was meant to commence operations in

2 January 2017, mere months. This was Meritage August

3 2016, January 2017, the hotel was meant to open. They

4 had already hired staff to work at the front desk.

5 Again, none of this is contested because they didn't

6 challenge Mr. Seda's testimony at the Hearing on any

7 of this.

8 So, let's go to the inputs. What are those

9 inputs? Well, there's three different categories that

10 I'm going to take you through. One is the real estate

11 business. That's basically the part of these projects

12 was that there were houses and apartment units that

13 are being bought and sold. And so you have the

14 revenue side of that and the cost side of that. Then

15 you've got the hospitality business, the hotels.

16 Right? How much does it cost to operate and what are

17 the costs and fees that you're going to earn.

18 And then we'll talk about the risk

19 adjustments. And there's two risk adjustments we'll

20 talk about. We'll talk about the Discount Rate, and

21 then the properties that are in development, 350

22 Heights, et cetera, Santa Fe, BRG, has taken a further

[Page 148]

1 discount on the probability of survival.

2 So, let's start with the real estate

3 business. The formula is fairly straightforward.

4 What are your revenues. Let's start with the revenue

5 side of the equation. It's how much do I get to sell,

6 how many square meters am I selling, and what's the

7 sale price per square meter, and I multiply the two.

8 Right? Here's my average sellable area, and here's

9 how much I get per square meter. I multiply those two

10 and that gives me an output of how much I'm going to

11 sell a particular house for, for example. Right? So,

12 if I say my house is--we use square feet in the United

13 States--so $1,000 per square foot, you figure out how

14 many square feet you have, and you multiply the two,

15 and that's what your price is. That's a proxy that

16 many folks use for sellable--for revenues on the real

17 estate side of things.

18 And here, you have two numbers here. The

19 blue column on this chart is based on the business

20 planning documents, so these are Luxé's projections.

21 Their contemporaneous Business Plans are projecting

22 the sale price per square meter in that blue bar.

[Page 149]

1 And then JLL, who I'm sure this Tribunal

2 knows, is probably the world's leading expert on

3 property as an industry expert, they've corroborated

4 that by market data in Colombia, in other places

5 they're saying. If I look at similar units, how much

6 do they sell for per square meter? If I compare that

7 to the Meritage, for example, they're saying well,

8 actually in that area you can get COP 4.5 million per

9 square meter. So, what you see is BRG's assessment in

10 all of those cases except for Santa Fe, are actually

11 more conservative than JLL's market data in terms of

12 price per square meter. And the equation is as simple

13 as that on the revenue side of things for the real

14 estate business. It's price per square meter times

15 how much land do I get to sell, or how much property,

16 developed property do I sell.

17 So, then you look at the other side of the

18 equation, costs. How much does it cost me to build

19 this thing? And you have construction costs

20 essentially, and then you've got soft costs like

21 marketing and pre-development expenses. And again,

22 you've got the business planning documents and then

[Page 150]

1 you've got market data in terms of costs.

2 I'm sure Tribunal Members love hearing this,

3 when they hear that costs, the cost side of the

4 equation here, is actually not in debate, and that's

5 confirmed by CBRE. They say, According to the

6 Claimants' model, construction costs are pretty much

7 aligned with our professional opinion. So, Colombia's

8 experts accept that the costs side of the equation

9 here on the real estate business is reasonable. And

10 Dr. Hern, when I asked him in cross-examination, you

11 agree that the construction costs in the BRG model are

12 reasonable; correct?

13 And he said, General speaking that's the

14 question. I said, Yes. He said, Because there are

15 obviously many, many thousands of construction costs

16 assumptions. I mean, based on the evidence that I've

17 seen from CBRE, I have no reason to think that they

18 are excessively different from what one would expect,

19 but there's still, I think, a lot of subjectivity to

20 those numbers but I see no real reason to dispute

21 them. That's right.

22 That's just a typical expert example, but

[Page 151]

1 basically what he's saying is, I agree--that he agrees

2 that construction costs are reasonable.

3 So, to get your damages on the real estate

4 side of things, what do you do? And this is exactly

5 what BRG has done, they take the revenues, they

6 subtract the costs and that's your damages on the real

7 estate side of things. Obviously, then they update

8 that as appropriate.

9 Now, to verify that damage, Dr. Hern looks

10 at EBITDA margins to compare, you know, is this a

11 reasonable margin that they're getting. And he says,

12 No, they're not reasonable margins. But the examples

13 that he gives, you can see the red part of these

14 graphs, are social housing examples.

15 Now, the margins you get in social housing

16 projects are completely different than the kinds of

17 luxury projects that we're selling here; right? And

18 that's because the social housing business is a volume

19 business. You get--families get subsidies basically

20 to buy these social housing units and so you have

21 razor thin margins and basically the business is a

22 volume business, that's what JLL tells us. So, when

[Page 152]

1 he's looking at EBITDA margins, you can't compare

2 social housing projects to the luxury apartments and

3 cabanas that you saw pictures of at the outset. Those

4 aren't the same types of margins.

5 And then if you look at Profit Margin

6 comparisons, what did CBRE do? CBRE went and they

7 interviewed people. They did a survey. Their own

8 survey. We don't know what the methodology was, but

9 they went and just asked people. They didn't tell us

10 who they asked, it was just random people--maybe not

11 random respondents, but they didn't identify the

12 Respondents. We can't assess whether or not they're

13 comparable or not.

14 And they just asked them, What are roughly

15 your profit margins? And they were asked on

16 cross-examination, Did you ask for the underlying

17 data, or did you take their word for it? And CBRE

18 said, We took their word for it.

19 And you don't list who these people are in

20 your Report, do you?

21 And he said, No, not explicitly.

22 So, quite frankly, I don't think you can

[Page 153]

1 rely on any of the survey data that you got. They

2 didn't identify the Respondents. It's impossible to

3 verify whether the projects are comparable to the

4 Claimants, and it's really just survey data that was,

5 I mean, very--you know--I mean, you saw the

6 cross-examination and you may recall it's not very

7 reliable.

8 One of the other questions you asked is, How

9 quickly can you sell these things? Because the

10 quicker you sell them, the faster you get money;

11 right? So, you have a higher NPV, Net Present Value,

12 because you get money sooner in the bank account.

13 CBRE acknowledges that the Meritage Project

14 had record sales--this is in their direct

15 presentation, by the way, CBRE, that's their

16 presentation, Colombia's presentation-they say we know

17 that the Meritage at Phase 1 had record sales; we were

18 able to verify this.

19 So, they're confirming, record sales. The

20 Meritage Project.

21 But then what they did was they looked at

22 velocity of sales figures from their survey data.

[Page 154]

1 Now, their survey data, it was really interesting, and

2 I went back and looked at this, and I was really

3 surprised. But even if you look at their survey data,

4 they did it for different reasons. So, they

5 interviewed four different projects from Medellín, for

6 example. Right? And they said, What's your velocity

7 of sales per month? And one Respondent said, Two to

8 three units per month. One said, Three to five.

9 Now, we don't know who these people are so,

10 we don't know if they're selling apartments or houses

11 or where in Medellín, but someone said two to three,

12 and someone said three to five, someone else said four

13 to 15, someone else said five to 15, and then someone

14 else said 1.4 to 2. And guess what number CBRE picked

15 for sales velocity for Medellín? 1.4. The lowest of

16 all of the numbers. They didn't take an average, they

17 didn't do anything like that. They just said, Oh,

18 sales velocity in Medellín should be about 1.4 per

19 month. And you can see that in the cross-examination.

20 And that's not what the numbers we're seeing

21 here, so it can't be right, but they ignored their own

22 survey data.

[Page 155]

1 For Cartagena, same thing happened. They

2 looked at a couple of different developers, two--so

3 again, these are not very reliable results. But one

4 of them said, Oh, our sales absorption is 15 to 20 per

5 month. And another one said, Two per month. And

6 guess what number they picked to put in their Report?

7 Two. So, they're just taking the numbers that are the

8 most convenient.

9 And they had to say on cross-examination.

10 As I said, this was challenging in connection with the

11 sample we were able to collect. That's the only

12 non-highlighted part on the right side there. So,

13 they just said, It was challenging, and we had to pick

14 something. And they just happened to pick the lowest

15 number in all of the datasets. So, it's just not

16 reliable.

17 In terms of the hospitality business. So,

18 we've talked about real estate, you know, they built

19 these projects and they sell them, those are just

20 sales of houses basically; right? And apartment

21 units. But then there's the hospitality side of

22 things.

[Page 156]

1 On the hospitality side of things, there are

2 again revenues and costs, and how do you assess

3 revenues? Well, revenues are their available rooms,

4 and what's called RevPar, it's a term that's used in

5 the hospitality industry. And basically what RevPar

6 is, is the average daily rate times the occupancy

7 rate. So, you take, let's say for a hotel I get $500

8 a night, and let's say on average a hotel room is

9 occupied 200 nights a year, so I multiply $500 a night

10 times 200 nights a year of occupancy and I get my

11 RevPar. And if I've got 100 rooms, I multiply all of

12 those and that gives me my revenues on the hospitality

13 side of the business.

14 And the revenue for available room for each

15 of the Projects, BRG calculates them here in this

16 slide. This is part of their direct presentation at

17 Slide 32. And you can see for the Meritage hotel, for

18 the Luxé, for Cartagena, for 450 Heights, for Santa

19 Fe, this was what was projected. And you can see as a

20 benchmark, The Charlee Hotel, the revenue per

21 available room was about COP 509,000 per night.

22 Other fees that they got, they got a

[Page 157]

1 developer fee, there were certain contractual fees

2 that the Meritage Claimants, the Royal Realty as the

3 Manager and the developer, gets. Those are just

4 contractual development fees that they get. And

5 that's just purely a question of what rights do they

6 have in their contract? And that's reflected in the

7 RR Meritage company agreement at 3.08, and you've got

8 the provision there. They get a developer fee, they

9 get the percentage of gross sales, and they get

10 certain additional fees that are paid.

11 And when I asked Dr. Hern about this, he

12 said, Oh well, I'm not a lawyer, I can't interpret

13 this.

14 But it's all right there, and BRG has

15 assessed how much of these fees would then have

16 accrued to Royal Realty.

17 So, on the hospitality side of things, then

18 we go to the other side of the equation, what's the

19 cost? Well, to build and operate a hotel, there are a

20 number of costs. There's: Operating Revenues,

21 Operating Costs, there's some management brand fees,

22 and there's Profit Sharing Agreement. And that is all

[Page 158]

1 information that BRG has calculated and verified by

2 comparing it to what the market data is, and JLL has

3 assessed what that market data is, and they derived a

4 value per key. So, in the hotel industry, that's a

5 metric that's often used, value per key.

6 And you can see the blue line on Slide 215,

7 that's the value, the average value per key, for the

8 Claimants' hotels. And you can see where that ranks

9 in terms of the comparable hotels, sample of hotels

10 that JLL used. So, the overall average is

11 USD $414,000, and for Claimants' hotels the average is

12 USD $388,000. So, when they're doing this market

13 check, it's a check against the DCF model. They're

14 saying, Yeah, it checks out because they're coming in

15 under the--against what we think are comparable

16 hotels--they're coming in under that overall average.

17 So, it's a reasonability check in terms of

18 the DCF model for revenue--for the value per key from

19 a hospitality industry perspective.

20 So, when Dr. Hern looks at these

21 comparables, what does he do? Well, the way he

22 assesses whether or not these are actually comparable,

[Page 159]

1 he goes to Booking.com, the website that we all--many

2 of us may have gone to, and he just picks a random

3 night of the year. And he goes, Let me see how much

4 each of these hotels cost on that random night that I

5 pick. So, he picked October 28, 2020, which, by the

6 way, is at the height of the pandemic. And he said,

7 Let me check the price for that night and then I can

8 make an assessment as to whether or not they're

9 comparable to the Meritage and all of these other

10 hotels. And I asked him, So, you did this on

11 October 28, you went to Booking.com; is that right?

12 He said, Yes. And I said, I also use that website.

13 And you forecast out, you put in the date June 16th.

14 Why did you pick June 16, out of curiosity? Did you

15 try other dates, or did you just--you just thought

16 June 16th, it's a nice date, let's pick that date?

17 And his answer is, Pretty much. That's why

18 he picked the date. Not a very scientific approach to

19 picking comparables and deciding or criticizing, I

20 would say, JLL, one of the world's leading hotel

21 experts as to what is a comparable hotel.

22 I'm not sure that I actually need to do much

[Page 160]

1 more on why his approach was flawed. But quite

2 frankly, what he was saying were comparables, were

3 just, I mean, you heard it. Were just not comparable

4 options. I mean, you heard from JLL basically saying

5 this demonstrates a complete lack of understanding of

6 the industry.

7 But I do want to spend a bit of time on

8 those Discount Rate, which is at Slide 220.

9 And some of the questions were, well, what's

10 captured by the Discount Rate in this particular case?

11 Does it capture the, you know, likelihood that this

12 project might fail? And he said--and he was asked,

13 But I'm talking about the Project completely failing.

14 Is that impossible?

15 And when they're talking about the Meritage,

16 he says--and the Luxé, he says, That is--is it taken

17 into account by the Discount Rate? Mr. Dellepiane was

18 asked about that, and he said, A hundred percent.

19 That's exactly what it is. It's assessing that for a

20 project that is reasonably likely to succeed, and you

21 know--for the Meritage and Luxé, he's saying that is

22 what the Discount Rate assesses. It's assessing the

[Page 161]

risk of the project failing. That's one of the things that's captured by that.

And I know the President of the Tribunal asked that same--a similar question: How do you capture a risk such as delay in construction and things like that?

And that was answered, again by the experts, they said, In two ways. One is when you project cash flows because you're taking into account those kinds of risks, delays. That's accounted for in when you're projecting when am I likely to get cash flows.

But the second is in the Discount Rate because the beta parameter for the real estate industry, that's one of the things that's incorporated into the Discount Rate. So things like delays of construction work, that is all captured by the Discount Rate.

If we go to 223, Dr. Hern's Discount Rate and his assumptions are just not reasonable, in our view, and why is that? Well, the Discount Rate, as this Tribunal will know is driven partly by the Cost of Debt and the Cost of Equity, so the overall

[Page 162]

Weighted Cost of Capital. And the Cost of Debt that he uses for his Discount Rate is the cost of construction loans. But when you're operating a hotel, that's not the right Discount Rate to use. Because the cost of construction, the loans for construction, is just a different metric than when you're actually operating a hotel because at that point, you're getting--you have cash flows; right?

So, the rate at which you can borrow for an operating hotel or for management of houses or apartasuites is totally different that the Cost of Debt for just construction loans. So his Cost of Debt is not a reasonable proxy for what should be used for an investment like this. And he overestimates the Market Risk Premium by calculating the arithmetic rather than the industry preferred geometric average; and BRG has talked about that, and Damodaran, who I've never actually met but have said his names more times than I can count, prefers the industry preferred geometric averages. And if there's one thing I've learned in arguing damages is when Damodaran says it, it's something you should look at closely, and we would

[Page 163]

urge the Tribunal to do that in this particular instance. Of course, you have to apply it appropriately, but in this particular instance, the industry preferred geometric average, we would say, is preferred.

And in assessing country risk, he uses the Colombia peso-dominated issuances which are thinly traded and just not reliable, because they are thinly traded to assess country risk. When something is not traded robustly, you shouldn't use that as a proxy for assessing country risk. Whereas, BRG uses the EMBI calculated by JPMorgan, which is based on U.S. dollar-denominated issuances, which are much more widely traded to assess country risk.

And then, as I said for these early-stage projects what they do, based on input from JLL on the probability of survival--JLL, what they did was they said, When projects are started, what is the probability at these early stages, that they fail? So let's add an additional, taking a conservative approach, what is the probability of success for projects that aren't as advanced as a Luxé or a

[Page 164]

Meritage where you've already sold units. You know, it's--the Construction Contracts you de-risked it all the way.

And there they've applied a multiplier of 77 percent for the Development Projects and 61 percent for the expansion projects. To give you, sort of taking into account that additional risk.

Now, Members of the Tribunal, it is 1:00. Maybe let me say one more thing and then I think I have about 15 minutes left, but I'm sure I'll be corrected if I'm wrong, but I can do that last bit after the break, if that makes sense.

But let me end on this Slide 227 before I suggest we take a break, which is, based on all of those parameters that I've just discussed, you put that into the Model, and ultimately what BRG comes up with is damages that align with this table. So, $64 million for the Meritage, $44 million for Luxé, for a total of $108 million for those two projects. And then the Projects in development, an additional $80.5 million. With Pre-Award Interest, that's how you get the $255 million.

[Page 165]

Actually, I lied, one more thing I do want to say which is on Pre-Award Interest.

I think at the very least, something that needs to be or should be considered generally by tribunals in general and I hope this Tribunal in particular, it is a disincentive for Respondents to pay when you use a Pre-Award Interest Rate that is lower than their own Cost of Capital. So, when a State can borrow, whatever they borrow money at--right?--and here you have on Slide 229, their Cost of Debt. When you use an interest rate that is lower than that, then they have a disincentive to pay us because this is the cheapest money that they can get--right?--not paying us is cheaper than borrowing money from someone else. So, what we suggest is using a Cost of Debt, the Claimants' Cost of Debt as an appropriate proxy for Pre-Award Interest because that's how much we have to borrow at, which is about 5 percent, and that number is above Colombia's Cost of Debt, which I think incentivizes things appropriately. It doesn't disincentivize them from paying this particular Award.

[Page 166]

The last thing that I would spend my last 10-15 minutes on is the Essential Security Defense.

We will not likely cover the jurisdiction slides today. We may come back to them tomorrow in rebuttal, but Members of the Tribunal, it makes sense to take a brief--our lunch break before I come back after lunch to address you on Essential Security.

MS. BANIFATEMI: Thank you, Mr. President.

It's interesting that we hear that the jurisdiction slide will not be addressed but maybe addressed tomorrow in rebuttal. I do have a due-process issue with this because there is a great number of slides that were just passed over that we didn't hear about. This is not the way that we've done things. It's a full new submission, and I do have an issue with Mr. Moloo just going through or not going through them and just saying, I'm going to come back to it tomorrow in rebuttal. If he has not addressed it, so either he does or he doesn't, and I have a problem with essentially putting all of these slides as a submission and not address them and just keep them in a safe place for tomorrow as a rebuttal.

[Page 167]

That is an issue in terms of due process, I'm afraid.

PRESIDENT SACHS: Yes, Mr. Moloo?

MR. MOLOO: Mr. President, we were expecting not just to have these slides but possibly other slides, if we may burden the Tribunal with additional slides. But for rebuttal, I don't think there was anything in the Procedural Order not allowing us to rely on slides. Obviously when you talk about jurisdictional issues, those are Objections on Jurisdiction that have been raised by the Respondent, so I think some of those may be more appropriately dealt in rebuttal. You know, we're in the Tribunal's hands, but I don't think we should be prevented from using slides in rebuttal tomorrow.

MS. BANIFATEMI: Just to be clear, the rebuttal is expected to address what we will have argued. So, if they're keeping under their sleeve slides that they will address tomorrow, which may or may not be in response to our briefing today, that is inappropriate. Either it's in rebuttal precisely if what Moloo said, or it's not and then they cannot do that. The question is not about having slides or not

[Page 168]

having slides. By the way, we are at a disadvantage here because they will have all of evening to prepare for their rebuttal. We will have very short time after the rebuttal, so there is an imbalance there, so this is even further aggravated by the fact that they are keeping slides just in case, and they may address more than what we will have said as a rebuttal.

So, rebuttal is rebuttal.

MR. MOLOO: Yes, we agree. We will not--if they don't address jurisdiction, for example, at all, we would not address jurisdiction, either. So, I'm not suggesting that we would address arguments that are not in response to arguments that they raise tomorrow--this afternoon, rather. And I'm not sure I understand the disadvantage because we've now given our full openings, and they have more time than we do to respond. I'm not sure I understand that argument. But I can assure the Tribunal Members that we will not deal with anything tomorrow that has not been raised this afternoon.

MS. BANIFATEMI: To be very clear, this is a submission which has not been put fully before the

[Page 169]

Tribunal, so I do take issue with all of the slides that we have not seen and are there that the Tribunal may or may not look at in its own time. But it's an imbalance in the sense that we have tried really to address it. We asked for more than three hours. We were given only three hours. In those three hours, we will address a number of things, but there is so much in this submission that they have not even gone through that the Tribunal will now have in front of it for deliberation purposes, and it will not have our view on those slides because it's way more than what you would expect for three hours. That's Point 1.

Point 2, the imbalance that I discussed about rebuttal is that they will have all evening, all afternoon and all evening to prepare for the rebuttal of what they will hear this afternoon from our side. Whereas, from our rebuttal of 30 minutes tomorrow, we will have, for now, about 15 minutes to listen to what they say and come back and discuss and argue rebuttal. So, the imbalance is between what's going to happen tonight and the 15 minutes we will have tomorrow for that.

[Page 170]

The other imbalance that I'm talking about is the fact that this is a full submission with a lot of slides that have not been explained and the Tribunal has before it, which is much more than what we will have the opportunity to explain to the Tribunal because there's a lot here that you heard, and we are only in a position in the little that we have, which is three hours, where we are trying to address things, but we cannot address everything, and so this is the issue of the imbalance on the slides, which is a different issue of the rebuttal. I hope this clarifies.

PRESIDENT SACHS: Let's go step by step. You said you need 15 more minutes to deal with the Essential Security exception?

MR. MOLOO: Yes, by our calculation, that's about what we have, I may be wrong, but that's about how long I think I'll be.

PRESIDENT SACHS: How much more time do you have?

MR. MOLOO: About 15 minutes. Sara will correct me--Ms. Marzal will correct me.

[Page 171]

SECRETARY MARZAL: I have seven-and-a-half, but--

MR. MOLOO: We're in the Tribunal's hands. I think I have about 15 minutes more of submissions, if that is--

PRESIDENT SACHS: On the security issue?

MR. MOLOO: Correct.

PRESIDENT SACHS: Not on jurisdiction?

MR. MOLOO: Not on jurisdiction. And we made the decision at the break that if we were pushed for time, which I'm in a bit of between a rock and a hard place, which is I want to, obviously, be respectful for the time limit, which is three hours, and I think what makes most sense is for me to address you on Essential Security. And if there was one thing that we would submit that we will just deal with, if it's raised by--to the extent it's raised this afternoon on rebuttal, is the jurisdictional issues.

PRESIDENT SACHS: Okay. I think we would prefer to give you some more minutes also to deal with jurisdiction, so that we cover all what is in the file here. Of course, you would be granted some more time

[Page 172]

as well. And possibly also consider that--I mean, this program was set up by you, so but when I look at it, the break--the break is a bit too short, indeed, in the morning, next morning, so we could consider prolonging it to at least half an hour or to 11:00.

And then we start with the Respondent's rebuttal at 11:00 o'clock. That would lead us to 11:30, then we will have a short break, and then we have the questions and answer. I think this--this was your program, but looking at it, I think the Respondent has a point here.

MR. MOLOO: We're fine with giving them a longer break, Mr. President. That's fine with us.

PRESIDENT SACHS: Okay. So, this afternoon you will deal both with the Essential Security exception and jurisdiction, very shortly?

MR. MOLOO: Yes. I think if we're in that position--so, I think maybe we get instead of 15 minutes, we do 30 minutes and we can deal with--

PRESIDENT SACHS: Obviously, you will get the same 15 minutes more.

MS. BANIFATEMI: Well, there is a

[Page 173]

discrepancy between the understanding from the Claimant about how much they have, which is 15, and ICSID's calculation, which I think is what binds everyone, to seven-and-a-half. So, if they have seven-and-a-half plus the rest, then we should have the equivalent.

PRESIDENT SACHS: Okay, okay.

MR. MOLOO: We're fine.

MS. BANIFATEMI: But it would be helpful to a count when we come back so that we know how much more time we have.

PRESIDENT SACHS: I think that's already said.

MS. BANIFATEMI: Seven-and-a-half, if they have 30 minutes, then we have the rest, 30 minus seven-and-a-half. Thank you.

PRESIDENT SACHS: Very good. So, we will have a break and resume at 2;15. Is that all right?

(Whereupon, at 1:13 p.m., the Hearing was adjourned until 2:15 p.m., the same day.)

AFTERNOON SESSION

PRESIDENT SACHS: All right. Mr. Moloo,

[Page 174]

you're invited to proceed.

MR. MOLOO: Thank you, Mr. President.

Oh, sorry, we'll just need a moment.

(Pause.)

MR. MOLOO: Thank you, Mr. President, and I hope you all enjoyed the lunch as much as I did. I have to say, I don't know if it's a function of being in Paris or this particular hotel, probably a bit of both, but I'm not used to having those types of lunches during my breaks but welcome it, so thank you perhaps to Respondent's counsel for picking the menu.

Let me turn to the Essential Security Defense, and before I do, there's one point that I do want to make, which is, you know, that this is a new submission. I do want to make the point--I do take issue with that for one important reason, which is all of this is in the record. Right? Our submissions are what you hear from Ms. Champion and I, but none of this is new, and I think that's important point, and I said at the outset, it is an important theme for us because none of this has changed. These are the arguments--I hope you're not tired--you may be tired

[Page 175]

of hearing them from us, but they are the same arguments that you will have heard supplemented by additional evidence, but none of this is new submissions.

And likewise, with the Essential Security Submission that I will make, these are all arguments that you will have heard before.

And I think it's actually a fairly straightforward argument in the first instance when we're talking about the Essential Security Defense that was first raised in the Rejoinder.

And I take you to Article 22.2, which is the Essential Security Provision, and it says: "Nothing in this Agreement shall be to construed to preclude a party from applying measures that it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own Essential Security Interests."

Nothing precludes a party from applying measures that it considers necessary to do that. And the reason why this is important, this language, is

[Page 176]

the language, the ordinary meaning of it, makes it clear that they must adopt the Measures for the purposes of achieving that Essential Security Interest, which means they must know the Essential Security Interest at the time they're applying the Measures. That's the language in 22.2. They're not precluded from applying measures that they consider necessary to protect their Essential Security Interest, but you can't apply measures, not know what that Essential Security Interest is come six years later and say, Oh, I now have an Essential Security Interest for which I can justify measures that I applied six years ago. That's not the way it works. You must know at the time that you're applying the Measures what the Essential Security Interest is.

And what's exactly what the International Court of Justice said in the Nicaragua versus USA case, where the Treaty there was dealing with non-precluded measures clause: "The present treaty shall not preclude the application of measures." In that case, if you look at the "necessary to fulfill the obligations of a party for the maintenance,

[Page 177]

restoration of the international peace and security or necessary to protect its Essential Security Interests," whether this is self-judging or not is totally irrelevant, by the way, to the question--this temporal question that I'm--or issue that I'm raising, which is at what point in time must the Essential Security be identified or known.

And the Court there said--they specifically said was to bear in mind the chronological sequence of events. They must have been at the time they were taken Measures necessary to protect its Essential Security Interest, and the same is, of course, true here.

[Redacted]

[Page 178]

[Redacted]

[Page 179]

[Redacted]

You can end the analysis right there, but if

[Page 180]

you feel the need to go on, Members of the Tribunal, there is another important point, which is this is not a jurisdictional clause, and you've heard the change in--you know, in order to introduce this late, they raise it as a jurisdictional defense, and then you start to hear the vocabulary change to, justiciability, which is different from jurisdiction? Right? So this is not a jurisdictional defense? It's an affirmative defense to, we would say, a remedy.

It specifically says that nothing in this Agreement shall be construed to preclude a party from applying measures. That's what it is. It says--it allows them to apply measures. It does not exempt them from the obligation to comply with the treaty or to pay compensation for a breach of the treaty.

They're just entitle to keep their Measures in place assuming it was done in a timely way, et cetera. And that's exactly what "prevent" means, the ordinary meaning, to prevent from taking place.

And that makes sense in the context of International Investment Treaty Law and International Trade Law, and this is important because the exception

[Page 181]

applies equally to the "Investment" chapter as well as the "Trade" chapter. It applies equally to Chapter 10 and 21. And it's important to note in that context why--you know, when I say it just goes to the remedy, why is that relevant? Why is that important? Because in the trade context, the primary remedy is the removal of a non-conforming measure. Right? If someone is--they apply a quantitative restriction or something like that, in the trade context, the primary remedy under international law is you have to remove that quantitative restriction, and they're saying, well, you're not--you don't have to remove the Measure if it's done to protect your Essential Security Interest.

And likewise in the investment-treaty context, 10.26 specifically contemplates the possibility of restitution of property. But here this provision says you can keep the Measure in place if it's to protect your Essential Security Interest, but it does not exclude the possibility of monetary damages, and that's exactly the issue that was before the Eco Oro versus Colombia tribunal under the

[Page 182]

Canada-Colombia BIT. And again, this has nothing to do with whether it's self-judging or not. It's a question of what is the remedy? What does this get you? Whether--if it is properly invoked, whether self-judging or not, what does it get you?

And the Eco Oro versus Colombia case dealt exactly with this question. When they were interpreting language that was similar, nothing in this agreement shall be construed to prevent a party from adopting or enforcing measures necessary to do various things.

And they said Colombia also provided no justification as to why it was necessary for protection of the environment, in that case, not to offer compensation to an investor for any loss suffered as a result of the Measures taken by Colombia to protect the environment, nor explained how such construction would support the protection of investment in addition to the protection of the environment.

And they said--and Canada came in with Colombia there, and they said it can't--the Tribunal

[Page 183]

there did not accept Canada's Non-disputing Party submission, that in such circumstances, payment of compensation is not required.

So very similar to here. They said it just says you could adopt the Measure, not that you're precluded from the compensation obligation, so Eco Oro is very much on point, we would say; and there again was a situation where you had Canada and Colombia both coming in, making submissions to that effect, and the Tribunal said, no, that's not what it says. That's not the ordinary meaning. It doesn't comport with the purpose of this Treaty, either. And it doesn't comport with the purpose of the Treaty in this case either. I've already taken you to the Preamble, but it also needs to be interpreted in a way that is the consistent with the purpose and object of this Treaty which includes, you know, promoting broad-based economic development in order to reduce poverty and generate opportunities for sustainable economic alternatives to drug-crop production, to promote new employment opportunities and increase the living standards. That's the kind of things that this

[Page 184]

investment was doing.

They've relied on travaux, and they put in hundreds of pages of travaux. But if the ordinary meaning is clear and unambiguous, then one needs not go to the travaux. And we would submit, and Colombia has even said, that the Article 22.b is unambiguous, so there is no need to go to the travaux. But if you do go to the travaux, the travaux is not very clear on this, and this is why travaux--you have to look at very carefully because one of the things we would submit the travaux makes absolutely clear is that this obligation of compensation for a breach of the Treaty was of critical importance in particular for the United States. They said the other point is that this chapter establishes that it is possible to expropriate for social interest. You can expropriate for social interest, but you still have to pay compensation.

The U.S. also said, But we feel it is legally necessary that investors have the opportunity to receive compensation for damages caused to them. We seek to give you that in a way that does not fundamentally harm the Investors. They wanted to give

[Page 185]

them what they were looking for, what Colombia was looking for while not harming, fundamentally, investors and their right to receive compensation.

At one point in the negotiations, they're saying we continue with the underlying problem, we want it to be compensated immediately after the Measures invoked. That is fundamental. Immediate compensation was fundamental. So, at various points in the negotiating rounds, the U.S. was saying you can expropriate for social interest, but you're not going to exempt the compensation obligation. In their words, that obligation was fundamental.

There is some talk about subsequent agreement, and I think this is important. In Infinito Gold, what the Tribunal there said was that even if you have non-Parties submissions in the middle of an Arbitration, that cannot be used to form a subsequent agreement. Why is that? The Tribunal said: Even if the Tribunal confer an agreement from the Contracting State's submissions during the proceedings, quad non, this agreement would post-date the commencement of this Arbitration, and the Tribunal could not take into

[Page 186]

consideration in favor of one litigant to the detriment of the other without incurring the risk of breaching the latter's due-process rights.

So, you can't take into account a subsequent agreement during the course of the proceedings and use it against one of the litigating Parties. That's what the Infinito Gold v. Costa Rica Award found.

And in any event, even if there was a subsequent agreement here between the Parties, it cannot be used to modify the treaty obligations. You can't use a subsequent agreement to modify treaty rights, and the Sempra Tribunal says, more or less, the same thing.

I will briefly touch upon the last couple of arguments with respect to Essential Security. You have our submission that we think it's late. The Tribunal in Procedural Order No. 9 only allowed the submission insofar as it was--for purposes--it was a jurisdictional objection. I don't think it is a valid jurisdictional objection. We've explained to you why.

Arbitrator Perezcano asked the question of counsel for Respondent during the Hearing, noting

[Page 187]

that, in the footnote, it says the Tribunal or panel hearing the matter shall find, suggesting that the Tribunal has the authority to make a finding, and we would say that that confirms in our submission, at least, that there is jurisdiction, it's not a jurisdictional question, in our view. It's a merits defense. It's an affirmative defense. And as a merits defense, it is out of time. According to Procedural Order No. 1, they were only allowed to raise defenses that were in response--were responsive in the Reply and the Rejoinder submissions. That's in Procedural Order No. 1. And in Rule 26 of the ICSID Arbitration Rules, it says any step taken after expiration of the applicable time limit shall be disregarded unless there are special circumstances, and there are no special circumstances here, in our submission, because there can be no new facts because otherwise it's out of time for different reasons. The fact must have been known at the time the Measure was taken in order to come within the protection of the provision.

There is also a good-faith defense. We

[Page 188]

don't think this is a defense that's raised in good faith for two reasons: One, it's simply a recasting of arguments they made in the Counter-Memorial and the Rejoinder. You can see that at Slide 255. It's more or less the same reasons, it's to fight organized crime, but they just recast that as all of a sudden an Essential Security Interest in the Rejoinder.

But more than that, as I think is accepted by both Parties, one of the questions when you're assessing good faith is whether or not the Measure is plausibly connected to the Essential Security Interest that's been identified. And for the reasons Ms. Champion has already mentioned and I've discussed earlier, there is no connection here between the Measure and whether you call it a "police purpose," a "public purpose" or an "Essential Security Interest," there is no rational connection between the Measure adopted here and that Essential Security Interest.

Colombia accepts that the Claimants' wrongdoing is not the subject of the Measures, and if they were actually concerned with the Essential Security Interest of fighting organized crime, they

[Page 189]

would have gone after the assets of those individuals who--whose actions are actually, they say, criminal, and they haven't done that.

And, lastly we rely--as certainly we don't think you need to get this far down this chain, but the most-favored-nation treatment standard is one that we think applies if the Tribunal were to find that this were to preclude us from bringing our claims because there are other treaties that don't preclude investors from those States from bringing claims in similar circumstances. And just one example is the Colombia-Swiss BIT.

I will turn it over to my colleague, Ms. Kahloon, to deal with the jurisdictional issues.

MS. KAHLOON: Good afternoon Mr. President and Members of the Tribunal. Thank you for the opportunity to address you again on behalf of the Claimants.

I will be providing the Tribunal with a summation of the jurisdictional issues in dispute between the Parties.

As a threshold matter, since the Parties

[Page 190]

Opening Submission at the May Hearing, the only movement in jurisdictional objections between the Parties has been the addition of overwhelming evidence to the record through the testimony of Mr. Seda and Claimant's Experts that reaffirms Claimants' status as protected investors who have made a protected investment in Colombia and who have standing to adjudicate Colombia's unlawful conduct before this Tribunal.

Turning first to Claimants' status as protected investors under the TPA. It's agreed between the Parties that in order for an ICSID tribunal to exercise jurisdiction over a claimant, the ratione personae requirements in both the ICSID Convention and the TPA, extracted on this slide, must be met. It's uncontested between the Parties that each of the seven individual Claimants and JTE International Investments qualify as protected investors under the TPA and the ICSID Convention.

It is also uncontested that Boston Enterprises Trust is a protected investor under the ΤΡΑ. The only remaining issue in dispute between the

[Page 191]

Parties is whether Boston Enterprises Trust qualifies as a protected investor under the ICSID Convention.

In the TPA, the Contracting Parties expressly agreed that a trust is a type of enterprise that has legal personality and standing to initiate international arbitration. The ICSID Convention in turn extends standing to any juridical entity. This is not a limited class and it extends to any juridical entity.

Moreover, to the extent that there is any ambiguity in the ordinary meaning of this phrase, the travaux préparatoires, Colombia's favorite tool of treaty interpretation, confirm that the drafters wanted to keep the definition as neutral as possible in order to take into account differing national law.

Colombia, after having agreed to include trusts as a type of enterprise within the TPA, cannot retroactively seek to add conditions of corporate liability when the clear terms of the Treaty contemplated in corporation of trust within the concept of an investor who could initiate ICSID Arbitration. Accordingly the Boston Enterprises Trust should be held to be a covered investor with standing

[Page 192]

to act as a claimant.

Turning next to Claimants' ownerships of a protected investment under the TPA. Article 10.28 of the TPA incorporates a very broad definition of what constitutes an investment, to include every asset that an investor owns or controls which has the characteristics of an "investment." The TPA, thereafter, sets non-cumulative and non-exhaustive examples of what such characteristics could include.

As highlighted in Claimants' Opening, there are a number of decisions that support adopting a broad interpretation of Article 10.28 of the ТРА.

Now, Claimants' investment in Colombia are comprised of a bundle of rights, including shares earned by each of the investors in Newport, Luxé and/or Royal Realty, management contracts that were in place between Royal Realty and Newport as well as Royal Realty and Luxé, as well as equity in enterprises through investment vehicles that were set up for Development Projects, such as RDP Interpalmas, RDP Cartagena, and Revmarketing.

Accordingly, it's clear that the Claimants

[Page 193]

are in a broad range of investments in Colombia. Each of which display the characteristics of an "investment." However, the Parties disagree on whether the ICSID Convention creates a separate jurisdictional hurdle that investors must discharge in order to gain access to ICSID Arbitration. The ICSID Convention does not include a definition for the term "investment" or the so-called "cumulative criteria" that Colombia is attempting to read into the Convention. And a number of tribunals, including those on the slide, have rejected a so-called "double keyhole test." However, in any event, and has only been reinforced since the Hearing, Claimants meet each of the criteria advanced by Colombia.

First, Claimants have made a commitment of capital or other resources as protected investments. Thusly, there is no minimum contribution that needs to be made in order for an investment to qualify as protected, and Colombia itself has conceded on numerous occasions that Claimants have made a contribution. However, they disagree as to whether this contribution was allegedly large enough. But it

[Page 194]

became apparent at the Hearing that Colombia had ignored evidence of contributions that were put on to the record by Claimants of contributions in both Luxé and Newport. That be found in Exhibits C-358 and C-359.

Moreover, as this Tribunal has now heard straight from the source himself, Mr. Seda contributed significantly know-now and brand value to create a highly successful portfolio of projects that had great potential within the Colombian tourism market.

Second, Claimants have assumed significant investment risk through their Investments. Claimants assumed the risk that they would lose their invested capital, and concomitantly they held an expectation of gain or profit. Accordingly, even applying Colombia's test, there is no question that the Claimants made an investment in the State.

Moving to the next objection. Now, as Mr. Moloo and Ms. Champion have already covered extensively, the claims advanced in this Arbitration by Claimants are directly related to the Measures in dispute and are not limited to the Meritage Project.

[Page 195]

As Claimants have established in their submissions to date, all that is required at the jurisdictional stage with respect to this objection is a relationship of apparent proximity between the challenged measure and the Claimant or its investment. Any further analysis is more suitably reserved for a consideration on the merits of the Claim. Now, Mr. Moloo and Ms. Champion have gone far beyond establishing a relationship of apparent proximity between the Measures and the impact that these Measures have had on Luxé, as well as the development projects and Royal Realty's--

REALTIME STENOGRAPHER: Just a moment. I need you to slow down. It is making it very difficult for the interpretation as well.

MS. KAHLOON: My apologies.

REALTIME STENOGRAPHER: Start with that sentence again.

MS. KAHLOON: As Mr. Moloo and Ms. Champion have already covered extensively in their submissions, the Measures at issue in this Arbitration severely affected not only the Meritage Project, but also Luxé and Royal Realty's pipeline of Development Projects.

[Page 196]

The impact on these Measures, which was widely publicized, should have been foreseeable to Colombia before it wrongfully initiated Asset Forfeiture Proceedings against the Meritage Project.

Moving to the final objection. Both Boston Enterprises Trust and Brian Hass have standing in this Arbitration.

First, addressing Boston Enterprises Trust, the settlor Trustee and beneficiary of Boston Enterprises Trust is a U.S. national that has maintained continuous ownership of an investment in Newport since 30 March 2016, and in Luxé since 14 February 2012. The change in ownership structure through affiliated entities of the same nationality was purely to maintain anonymity as established in Claimants' Opening Submissions, as opposed to an effort to gain access to ICSID Arbitration. It is not appropriate to draw parallels between this corporate restructuring and a situation where there has been an abuse of process, because at all points Boston Enterprises Trust would have been entitled to have recourse to ICSID Arbitration, and tribunals have

[Page 197]

recognized that internal corporate organizations of this kind are committed.

With respect to Mr. Hass, Colombia contends that Mr. Hass does not have standing in this Arbitration because he's drafted his investment in Luxé through a Family Trust. However, the record shows that Mr. Hass made his investment through Haystack Holdings, which in turn was controlled by a family trust, which Mr. Hass and his wife are the settlers and sole beneficiaries. As can be seen in C-222. As Mr. Hass is the ultimate beneficial owner of the Shares, he has standing to claim relief before this Tribunal, pursuant to the principle in international law that grants standing and relief to the owner of the beneficial interest.

Mr. Moloo will now conclude Claimants' Opening Statement.

MR. MOLOO: I asked Ms. Kahloom to leave me with three minutes, so I apologize if she was rushing. It was because I had asked you to leave me three minutes, which I think I do have.

What we want to end is with our request for

[Page 198]

relief. You can see on Slide 278, and again, this is the same request we've asked from the outset that the Tribunal declare that there have been breaches that the Claimants be awarded $255.8 million plus interest, and we're also claiming moral damages. And I want to say one note on moral damages.

This is the first case in which I have ever claimed moral damages, so we didn't take the Decision lightly to make a claim for moral damages, and I know we've covered a lot of uncomfortable topics over the last several years, including the alleged extortion scheme and corruption issues, and we don't think you need to find any of that in order to find that Claimants have prevailed in this case, and for that reason we thought is this something--we want to go there because they are uncomfortable topics. But we thought we had to because these--this is an important part of what happened in this case, and we had to tell that story to show how egregious the conduct was.

Mr. Seda has been subject to, and his investments and the Investors in this case, have been subject to rather egregious conduct, and we think it

[Page 199]

is a case where moral damages would be appropriate to show that this is not acceptable. It's important to show that to other investors, and it's important to show that to the Treaty Parties.

And I want to end where Mr. Seda ended in his testimony, and it's up on the screen. I asked him, why did you go back to Colombia? You went back to Colombia. With all of this happening, why did you go back to Colombia, and why are you pursuing all of this? There's the threat of potential investigations and all of this is coming out because you're pursuing this claim. Wouldn't you just want to put this all to an end?

And he said because I'm defending my name, and because this is going to follow me no matter where I go. It's true. It's going to. It has for the last several months, and it's going to continue to follow him. And he wants it to come to an end, and he wants to put an end to this. And putting an end to this is hopefully this Tribunal saying that the type of conduct that happened in this case is not acceptable.

It's not what Colombia and the U.S. wanted when they

[Page 200]

signed this Treaty. It's not meant--if this type of conduct is not what this Treaty is meant to protect then I don't know what is. It's not what the Claimants deserved. It's not what the people of Colombia deserved. But in order to put an end to this, the Claimants must be compensated for the wrongful conduct that happened in this case.

Those are our submissions.

PRESIDENT SACHS: Thank you very much, Mr. Moloo.

We will have a short break, a few minutes?

MS. BANIFATEMI: Just a few, yes.

PRESIDENT SACHS: Do you want to stay in the room or do you leave?

MS. BANIFATEMI: We are in your hands. We can leave, come back.

PRESIDENT SACHS: No, no, no. How long does it take you to get prepared?

MS. BANIFATEMI: To switch computers and do some switching of the team here, so, five minutes should be fine. 10, if the Tribunal wishes to have more. We're in your hands.

[Page 201]

PRESIDENT SACHS: I'd say 10 minutes, yeah.

MS. BANIFATEMI: 10 minutes?

(Comment off microphone.)

MS. BANIFATEMI: Yes, it will be sent right away.

(Recess.)

PRESIDENT SACHS: I think everyone is ready to resume, and the floor goes to Ms. Banifatemi.

MS. BANIFATEMI: Thank you, Mr. President. Ms. Ordoñez will start for Colombia, with your permission.

PRESIDENT SACHS: Okay.

Yes, please.

MS. ORDÓÑEZ: I will be addressing you in Spanish as well.

CLOSING ARGUMENT BY COUNSEL FOR RESPONDENT

MS. ORDÓÑEZ: Mr. President and co-Arbitrators, before I give the floor to our colleagues from GBS Disputes, I would, first of all, like to make a few observations related to major issues.

First of all, I'd like to refer to the

[Page 202]

expectations that explain and inform our consent to investor-State arbitration. These include the exceptional nature of both this mechanism and the foreign investor's powers and rights under Section 10 of the Treaty with the United States of America.

Then, secondly, I will refer to some of the basic content of the Law on Asset Forfeiture, which, almost after four years of litigation before you, should now be clear to everyone.

Further, I must, first of all, refer to these basic points because, as we've heard this morning, it seems the Claimants are suggesting that those points are either unclear or are being misrepresented.

Regarding Colombia's consent to investor-State arbitration, I would like to refer to the three main premises that we in Colombia feel are important. On the one hand, the International Foreign Investment Law that we understand is a law of minimum protections which does not seek to put the foreign investor in a more favorable position than that of a domestic investor. This is how we understand the

[Page 203]

rights of foreign investors and their investments in relation to the minimum standard of treatment, but also in relation to the standards of expropriation, national treatment, and full protection and security.

We find it also important to recall this understanding, because we can't help but to identify in the position of our colleagues from the counterparty questionings that, far from being supported by a strict understanding of International Foreign Investment Law, they would seem to reject certain types of situations, which, although not comfortable, are typical of asset forfeiture actions in Colombia and are equally borne by all domestic and foreign investors in our country who invest in illicit property.

-Further, we understand that investor-state dispute settlement is an exceptional mechanism, where the investor exclusively has the rights that the State Parties have provided. Despite the sophistication of investor-state arbitration and the agreement to litigate in equal conditions, the rights of the investor in this kind of proceedings arise from the

[Page 204]

consent provided by the States. That's why the State of Colombia--

PRESIDENT SACHS: Can you slow down a little bit, the translators.

MS. ORDÓÑEZ: Thirdly, we understand that the jurisdiction of the tribunals is subject to the implicit condition of legality, and this is why the Colombian State, has the burden, and the Tribunal the obligation, to, as far as it possibly can and with all diligences, make sure that the investment does not go against any of the legal systems of the State. This is why this allegation of illegality or unlawfulness is so severe that it can have an effect on transnational public order.

I'd finally like to conclude by clarifying some specific aspects of asset forfeiture that should, as I say, be clear to everyone now after almost four years of consideration but don't seem clear on Claimants' side, this apparent misunderstanding, which we have described as a convenient misrepresentation, explains how part--or to a great extent their claims are unfounded.

[Page 205]

Firstly, the asset forfeiture procedure comprises two stages. One which is completely reserved, including for those who may be affected. So, after almost four years, it should be clear to everyone that these publicity claims are not admissible in relation to the activities that take place during this first phase, and that includes the introduction of Precautionary Measures. This is why it is not correct to say that the imposition of Precautionary Measures should have been preceded by consultation with the affected Party in order to understand whether they were third Parties in good faith and free of fault.

For the same reason, it's absurd to say that the response to a right of Request for Information is just a mechanism, even the moderately diligent mechanism to understand if a piece of land or a group of people are subject to this asset forfeiture proceeding. Even if they were, and if the proceeding were in its initial stage, response to the right of petition could never have given an account of those proceedings.

[Page 206]

Secondly, the Asset Forfeiture Procedure is a progressive one aimed at establishing the origin of the grounds for asset forfeiture and the existence of any third party in good faith without fault, the latter being the only instance accepted by Colombian law in order to generate property rights over assets of illicit origin.

This progressive character implies that the establishment of these above situations goes to a first stage, initial phase, led by the Prosecutor's Office, but then it goes on to a following phase, and it has to go before the Asset Forfeiture Court, and it's up to the Prosecutor's Office to take such measures such as Precautionary Measures or to file an asset forfeiture suit that would have to be defended before a court. This defense includes the existence of the causes of action and the existence or not of third parties in good faith without fault.

This simple description, which should be familiar to all, completely rules out any argument suggesting that if a certain piece of information was not known and was invoked during the initial phase it

[Page 207]

can no longer be the subject of analysis and debate in the trial stage. The same Asset Forfeiture Procedure allows for supervening evidence to be invoked, and that evidence can be passed from one proceeding to another, if it's necessary in the context of the forfeiture.

This is--this now brings me, having given these clarifications, to the end of the State's opening allegations. Thank you.

PRESIDENT SACHS: Thank you very much.

MS. BANIFATEMI: Mr. President, Members of the Tribunal, thank you very much. And following from Ms. Ordoñez's comments, I will now address a number of points.

You will see on Slide 2, which is my Table of Contents, we will address the Essential Security exception, issues of jurisdiction, and the premature and abusive nature of this proceeding. I will address all three first points. Following that, Ms. Herrera will address issues of liability and the fact that the Respondent has not breached its international obligations under the TPA.

[Page 208]

And, finally, Ms. Ribco Borman will address the issue of damages or the fact that the Claimants are not entitled to damages in this case.

Before I start, Mr. President and Members of the Tribunal, I would like to make a few opening comments for which I do not have slides but which I would like to address based on what I heard this morning, and these are important points.

The first point I would like to make is, as you know, it's always important for Tribunal Members to go back to the record and to double-check the record and to not make a decision or deliberate based on misrepresentations by parties and out-of-context quotes.

We saw a lot of out-of-context quotes this morning in the presentation by the Claimants. I would urge the Tribunal to go back to the record and truly to double-check everything in the context in which questions were posed and answered, and the actual arguments that were made.

It is in that context also that I make the previous comment that had we had the same notion as

[Page 209]

our friends on the other side, we could put a lot of slides and not argue them, but the point that I was making is that in some arbitrations I've been where simply slides not argued have been excluded from the record because these are submissions that are not put before the Tribunal, so we were not asking for that.

I just ask for the Tribunal to be indulgent in the way that it will, indeed, look at the Parties' submissions. And we have been selective because we were trying to accommodate the Tribunal's directions of arguing in three hours. And by definition, we will not have time to address everything, so we will refer the Tribunal back to our submissions with respect, and we will do our best to address the rest today.

The second point I would like to make is, again, going to your experience as arbitrators, you have sat in many, many, many arbitrations and you know that by definition there's always ships in the night. You have one story narrative and you have another story narrative, and the two almost never reach each other.

In this case, it feels like this is also the

[Page 210]

same. You hear one narrative on the other side, which is an investor mistreated by Colombia, a good-faith investor having done everything he can to invest in Colombia has been mistreated at every point in time, at every turn, and Colombia has been this horrible State and taking action against him, being retaliating against every single action, and moral damages and so on and so forth. A lot of theatrics. You will have heard that.

We will not engage in theatrics because that's not what this is about, but we will address the gravity of the situation. This is a very serious case. We heard a lot of personal comments by Mr. Moloo and his colleague about going to Colombia and taking pictures and having seen how The Charlee is wonderful. The only comment I will make is that, in my over 25 years of practice, I have never been in a situation--representing Claimants and investors or representing States--I have never been in a situation with this level of gravity, and I'm not saying this lightly.

We are in a case, and this is what you

[Page 211]

really have to realize, and I will address it in the few moments to come--we are in a case where Colombia is trying to put some order in its country in relation to narco-trafficking, which is a very extremely serious situation not only for Colombia but for the world, because these are violent, organised groups, and they have a--and as you will have seen from--and you will see from also the U.S.' perspective, they have--they go much beyond Colombia in what they do in their actions.

So, this is what you have in front of you.

This is Colombia taking action through Asset Forfeiture Proceedings, and you will have heard a lot of misrepresentation about what these are. An Asset Forfeiture Proceeding is, by definition, as its name says, relating to an asset. The asset is the Meritage Lot. It's not about Mr. Seda as such, so it's not that Colombia has discriminated Mr. Seda or looked at Mr. Seda. It has looked at Meritage. And if Mr. Seda is taken and captured in those Measures, it's his own doing. It was his own obligation to go through due diligence. When you allegedly invest in Colombia and

[Page 212]

to ensure that he was investing in a framework that he knows, because this is Medellín, we are talking about-

[Redacted]

so he had a duty of due diligence, and anything that might happen including asset forfeiture procedures, it's his own doing.

Now, we heard from Mr. Moloo that they have not shifted. We have shifted constantly. No, they have frozen their case at one particular point in time which is when the Measure of Asset Forfeiture Proceeding was taken at the beginning. We're not shifting position. By nature, Asset Forfeiture Proceeding, as Ms. Ordoñez just explained, is that it's evolutive. It is an ongoing proceeding. It starts, and it continues. There is proceedings before the courts. That's why we say it's premature. You still have a process that will continue going on. So, this is, by nature evolutive. So, by definition, the facts will evolve. The other reason--and so we're not shifting at all, so this is the nature of Asset Forfeiture Proceedings.

[Page 213]

The other point I want to make is that there is a tension from Mr. Moloo to say that, oh, their case is shifting all the time, but when it comes to Essential Security, they say, oh, it's all a recast of what they said at the beginning. It's either a recast and we've said all along, and it's the same thing and we're recasting or it's not the same thing, so you cannot have it both ways.

The reality is that the case has evolved (1) because Asset Forfeiture Proceedings evolve, and (2) because in relation to legality questions, we have come, we, Colombia, and you will have heard Ms. Ordoñez this morning about the prosecution of Colombia, having gone through the very taxing, burdensome exercise of looking at the investigations in relation to the Meritage and responding, and this is the Claimants' own doing. They asked for this. They asked for Document Production. It all started because Colombia went through that process to produce, follow the Tribunal's Order, investigation proceedings, and that is when all of these illegalities started to come out, and that's when

[Page 214]

Colombia started to connect the dots between what it was seeing in the Asset Forfeiture Proceedings, in relation to the Meritage, and it was seeing in this Arbitration, in relation to Mr. Seda, Mr. López Vanegas, [Redacted], who has come out because of this evolving situation.

Likewise, the fact the rebuttal evidence that was not admitted, this was rebuttal evidence to Ms. Giraldo's statement that was belatedly put by the Respondent, and I'm not going to rehash our letters.

[Redacted]

because of the nature of the Asset Forfeiture Proceedings and simply because everything that has been uncovered, it's because we were responding to requests in Document Production by the Claimants or rebutting to statements made by Ms. Giraldo--I will come back to that. So, that again is extremely serious and you have to take that into account. Our

[Page 215]

case is not shifting, our case is addressing very precisely what this Tribunal is confronted with.

And, finally, maybe one point on Mr. Moloo's comment at the end about moral damages, and I will finish here with where you started. This is not a case of an investor being treated poorly, a good-faith investor, this is a case about Colombia being dragged unfairly, abusively into an arbitration through an instrumentalization of arbitration when Colombia is trying to address wrongdoing by the Oficina de Envigado, this is what we're talking about. And now, I'm going to address that more precisely.

Starting with the Essential Security because--and you've heard that I will try to--of course, I'm not going to rehash what you heard in the Opening, but I will address some of the important points that you have in front of you.

I'm at Slide 4 now with the first point, which is that, given that Colombia's invoking that exception under Article 22.2(b) of the TPA, any determination by you would seriously undermine Colombia's Essential Security Interests.

[Page 216]

[Redacted]

[Page 217]

[Redacted]

[Page 218]

[Redacted]

[Page 219]

[Redacted]

[Page 220]

[Redacted]

so, these were just factual circumstances and the context for you to understand why Essential Security is such an important matter here for Colombia. Dealing with the Treaty itself. Before I do that, I would like to address two points that were made by Mr. Moloo about the timing issue. So, he says that you should just look at the period of time when the Measures were taken so--and then, you don't want to look at the rest of the period, and he--I think he refers to the Nicaragua Case. Well, our response to that is that--and, of course, we made this point in the

[Page 221]

Opening but it is as if we had not said anything, so they rehashed the same thing, but, again, we need to respond that. The Treaties are not the same thing. The Treaty here does not have the same elements as the one that was in the case of Russia trafficking transit, where the Treaty addressed Measures taken during a certain period of time. It's not the case here in the TPA.

The second point is that the evidence at the beginning was based on the Oficina being the previous owner of the Meritage Lot, and Mr. López Vanegas is also related to Oficina. But as you know, the Arbitration revealed that the Asset Forfeiture Proceedings are protective of something much more serious [Redacted]

[Redacted]

So, again, you have to take into account the evolution of the facts, the Measures are taking into account that evolution, but importantly Article 22.2(b) doesn't make any--it doesn't bring any

[Page 222]

limitation as to the timing of the Measures. And here, the Measures complained of having a continuous nature, and you have to take into account the fact that they have because the Asset Forfeiture Proceedings are ongoing and also because of this Arbitration simply. Because of this Arbitration, we came to connect the dots between this case and [Redacted]

[Redacted]

So, it's neither here nor there. The Nicaragua Case cannot be raised because, simply, the Treaties are different--written differently, and the language has nothing to do with this case.

On the MFN, I will say just one word. MFN Clause cannot apply because you have the language of the TPA, which says nothing in this Treaty and excludes pretty much everything, so it goes to the fundamental--and Ms. Ordoñez talked about it--is the fundamental consent of Colombia to accept arbitration under certain circumstances. So, it's not enough that we--you have--so, what they say is that, oh, forget Article 22.2(b), just go to a treaty that doesn't have that exclusion. But that exclusion is fundamental to

[Page 223]

U.S. and to Colombia, and you could just not forget that because that's the very substance of the consent of Colombia to this case.

Now, if I may go to Article 22.2(b), at Slide 10, you see that well, the language is pretty clear; right? So, you have the nature of the Essential Security itself, which is the Colombian sovereign power to take measures against the worst type of organized crime that has historically been known in Colombia. That's what I just mentioned, and the language shows that the implication of the Essential Security Exception renders the matter non-justiciable. Non-justiciable means what? It means that it cannot be reviewed by a court, simply.

So, this what you have in the text. It says "nothing in this Agreement", so this is essentially an entire exclusion, "nothing in this Agreement shall be construed to preclude a party from applying measures". This means that a party can apply measures, notwithstanding anything that is in the Treaty and, therefore, that can be done without any legal assessment.

[Page 224]

I will come back later to the footnote because our friends on the other side would like to forget the footnote, but it's very much there. But non-justiciability--and I will come back to the Parties' joint interpretation of the Treaty in that regard--this is what this means.

A party can take measures, can apply measures, protecting its own Essential Security Interests without--notwithstanding anything in this Treaty, including the investor-State dispute resolution. Now, if you look at my next slide, this is not new. We said it in our Rejoinder at Slide 11, we had said it in our Rejoinder of 16 February 2022, so now, they say, ah, it's all new, because the U.S. said it, you said it now. We said it from our Rejoinder 16 February 2022, not surprisingly because this was actually discussed between Colombia and the U.S. during the travaux préparatoires and you see that the U.S. on the 3 May Hearing, actually said and I quote from the U.S., "once a State Party to the TPA raises the exception, its invocation is not justiciable, and the Chapter 10 Tribunal must find

[Page 225]

that the exception only applies to the dispute before it." And you--on the left side, you see that we had said that the dispute is not justiciable under grounds of Article 22.2 of the U.S.-Colombia TPA. So, it's not new, we said it at the outset as soon as we invoked the exception.

On my next slide, they argued, the Claimant argued that this is belated, and in any event, it's meritless. And you see on the left side, we put an excerpt of the Rebuttal. They say that it's time-barred, and they said during the Hearing, they change position--I just addressed that. And they say that under ICSID Article 41(2), the Tribunal has discretion to consider jurisdiction or competence at any stage of the proceeding, but cannot do that for matters of justiciability. With respect, this is wrong, for the five following reasons:

First of all, ICSID's Procedural Rules cannot trump the mandatory language of the Treaty. It's not only the mandatory language of the Treaty, but I will come back to that. It's also the authentic interpretation of the Treaty, which is binding on this

[Page 226]

Tribunal. That's the first point.

The second point is that Article 41(2) essentially--and the Claimants' interpretation of that is incorrect because the Tribunal has the power and duty to satisfy itself at the time it has jurisdiction. What does that mean? That means that you have the power, at any point in time, to raise ex officio, your jurisdiction, because it's your duty to ensure that you cannot proceed without having jurisdiction. So, it's because that is--can be done at any point in time, a fortiori, it also is something you can and should do in terms of justiciability, which is even beyond jurisdiction because it means that you do not have the power to exercise jurisdiction.

They say, also, that this is belated . With respect, we have raised the exception based on newly discovered facts that reveal the seriousness of the circumstances of this case. I explained earlier this is because of everything that was uncovered after the document production, and the investigations that we had to submit following and complying with the

[Page 227]

Tribunal's Order.

And following that, the Claimants had ample opportunity to address the point and to present their case in that regard, so they cannot blame--complain about any due-process issue.

In the alternative, what we say is that, if you look and seek to ensure, even if you're not with us on justiciability, which we say you should be because, essentially, as soon as we say it applies, it applies, and Colombia is entitled to take measures without any assessment by a court--you still have--you still lack jurisdiction, and that's my point C, to decide the dispute.

On my Slide 14, we have put the chart of essentially how you should look at this from the point of view of international general law as codified under the Vienna Convention on the Law of Treaties. I will address each of them with more or less detail and rebutting--you don't have everything on slide because I had not planned on saying it, but, again, having heard my colleagues, I have to respond to some of these points.

[Page 228]

First of all, of course, you have to look at ordinary meaning of Article 22.2(b). I will come back to this and I won't talk about it now.

Context of the Article 22.2(b), I had not planned on discussing it, but I will rebut briefly the context. We discussed this during the Opening. You have to take into account that it's at the end of the Treaty, and you know that it says "nothing in this Agreement", so the fact it is at the end of the Treaty shows that it encapsulates the entirety of the Treaty, including investor-State arbitration and including compensation.

There was a point made by Mr. Moloo about the U.S. actually having had a very strong desire to allow compensation for investors. With respect, this is wrong. You just need to go back to what the U.S. actually said during the Hearing of May, and if I may refer you to Page 390 of the Hearing of May. That's 3 May 2022, Lines 9 to 21, which I will read for the record. So Page 390, Lines 9 to 21.

I quote from the U.S. Government: "I would like it address an argument we heard from Claimants

[Page 229]

yesterday that Article 22.2(b) merely allows the State to apply or continue to apply Measures that it considers necessary for the protection of its own Essential Security Interest but that Article 22.2(b) does not address the question of liability of compensation. The United States disagrees. Once the Essential Security Interest exception is invoked, a Tribunal may not, thereafter, find the relevant Measure in breach of the Chapter 10 obligation and may not consequently order the payment of any compensation in connection with that Measure."

It's very clear what the U.S. says, and here, again, there is an agreement between the U.S. and Colombia, which dates back to the travaux préparatoires, and I will come back to this. So, if you look at the context, the fact that it's at the end and the language together mean that everything is excluded, including investor-State arbitration and compensation as the U.S. has clarified in its submission.

Object and purpose of the TPA, you saw there was a slide, I don't have it with me, but there was

[Page 230]

this very interesting slide about the preamble of the Treaty, which is essentially about allowing, promoting, broad-based economic development in order to reduce poverty. My friends forget some other--and with permission, I don't have it in my Slide, so I will respectfully refer you back to the actual Hearing. Yes, so they have quoted from the three--no, WHEREASES 2, 3, and 4 in their Slide 4. So, promote broad-based economic development in order to reduce poverty and generate opportunities for sustainable economic alternatives to drug-crop production. So, we see that drugs is, indeed, very much in the State's mind when they entered into this Treaty.

But look also at what they do not address--or if you look at the Preamble, in your time because I don't have it handy, four WHEREASES before the end, I quote: "Promote transparency and prevent and combat corruption, including bribery and international trade and investment."

And the last whereas--no, sorry. It's not whereas--it's on the first page, so it's first page, fourth before last, and the last on the first page of

[Page 231]

the Preamble, I quote: "Preserved their ability to safeguard the public welfare."

So, these are important object and purpose of the Treaty, but they do not mention on the other side of the table but, of course, fighting against corruption, including bribery, international trade/investment, that is also part of what the Treaty--the States had in mind.

On effet utile, going back to my chart, I will respectfully refer you back to our submissions, that this has to be a purposeful provision.

Otherwise, if you don't give effect to it, you're simply not giving effect to a very important provision in the Treaty. And now I'll come to the rest, which is authentic interpretation and travaux, but saying one word about the ordinary meaning at Slide 15.

So, you have, of course, on the left side, the actual text. "Nothing in this Agreement"--and that, of course, again, exclude ISDS and exclude compensation, shall be construed to preclude a Party from applying measure, that it considers necessary for the protection of its own Essential Security. What

[Page 232]

you see is that it says, it considers necessary, "measures it considers necessary." This means that it's a subjective determination by the State who invokes the exception. It's not an objective criterion; it's a subjective one.

This has been consistently interpreted--you have that--the references on the right side--by every court or tribunal that has had to deal with similar language on the self-judging nature of this sort of language, meaning it considers necessary. They have always interpreted this as a carve-out of jurisdiction.

And if you look at the footnote, which is not discussed by the other side, you see that it says "for greater certainty". So, it's just for the evidence of doubt. It doesn't mean the text is not clear, the text is very clear, but to even clarify more, they say for greater certainty. If a party invokes the provision, the Tribunal or panel hearing the matter shall find that the exception applies.

And I'll come back to this, the U.S. and Colombia took a position on this in the travaux

[Page 233]

préparatoires and in otherwise.

I want to say here one word here about Eco Oro because our friends have said--had said a number of things in that relation. I just want to make sure that you go back to actually what Eco Oro says. The provision under Eco Oro, which was Article 2201(3) of the Canada-Colombia FTA, is a general exception related to environmental matters, not Essential Security, so not the same thing we're talking about. And that provision is fundamentally different from the provision you have in front of you because it does not have the self-judging elements that are expressly provided in this provision. So, these are two main reasons why Eco Oro cannot apply.

And you have to look at the chapeau of Eco Oro, which is--which essentially talks about measures adopted by the State that are not applied in a manner that would constitute a means of arbitral unjustifiable discrimination, that's what they refer to. That is not found in Article 22.2(b), so, again, the provisions are completely different.

And the Eco Oro also applies to provisions

[Page 234]

contained in Chapter 8, which is the "Investment" chapter of that FTA whereas Article 22.2(b) applies to the entirety of the Treaty because it says "nothing in this Agreement".

And, of course, as we discussed, that means that it includes investor-State arbitration and compensation, so for these reasons Eco Oro simply is neither here nor there, and it cannot apply, and it's not binding on this Tribunal for one, but in any event, it is a completely different finding.

Now, if you're not with us at all on that, we--and I'll come back to this, the exception has been fully invoked by Colombia in good faith, and I will show that. But before I do that, on my next Slide 16, I want to discuss the interpretation by the Parties.

So, you see here on the left side, Colombia's positions, on the right side, the U.S. submission. On the left side, you have Colombia's Rejoinder of 16 February, and you see that Colombia--and you see what the arrows and the boxes, red boxes--you see that we have referenced what was exactly the same wording used by both States. So, in

[Page 235]

Colombia's Rejoinder, we argued and submitted that this renders the case non-justiciable. The U.S. in the Hearing of 3 May said exactly the same thing. They said it's not justiciable.

We argued also the self-judging nature of the provision, and you see on the right side, that the U.S. also has said the same thing. The fact that both States are saying the same thing about the interpretation means that there is an authentic interpretation of the Treaty by both Contracting Parties that binds this Tribunal. You cannot escape the fact that both States are saying the same thing.

And the U.S., who are present today, are listening to this, the U.S. have--probably, when they come and argue interpretation, they have at heart the correct interpretation of the Treaty and ensuring that the Tribunal understands what the U.S. had in mind when it entered into this Treaty, just as Colombia had the same thing in mind at the time.

And you see that, during our oral submission, which happened the day before the U.S., and for that matter, we had no clue what the U.S.

[Page 236]

would say. So, on the 2nd of May, we argued the subsequent agreement under the Vienna Convention on the Law of Treaties, the fact that the same things would be found in the submissions of the U.S. and Colombia. That makes it, under Article 31(3)(a) of the Vienna Convention on the Law of Treaties, a subsequent agreement between the Parties, that makes it an authentic interpretation.

And you see that the next day, the U.S., relying on the same provision, said that is the Parties', the TPA Parties' common understanding. So, that, if anything, confirms that the Parties, the two Parties have the same interpretation, they viewed this as non-justiciable, meaning that the States cannot assess--the Tribunal--I'm sorry, cannot assess any or determine the actions of Colombia, as soon as Colombia addresses--invokes the exception, and that it is self-judging in the sense that it's a subjective determination by Colombia, and that it is a joint interpretation by the two States.

ARBITRATOR PONCET: I'm sorry to interrupt you, Professor Banifatemi. I was just asking the

[Page 237]

Chairman if I should ask the question tomorrow when we have time for the questions and I've been told to ask it right away.

Just assume for the sake of argument, assume the United States is invoking the Treaty, and it's invoking it in bad faith, does the Arbitral Tribunal, in front of which the United States would invoke the Treaty, have to step back and say this is it, or does the Arbitral Tribunal have any power to assess whether or not the implication is made in good faith? I am not saying by this, let me emphasize that, in our case, there is any issue about that. I'm just asking for my understanding of the provisions, so I'm taking the other example, for ease of reference, assuming a Colombian investor in the United States, let's say it's the Trump administration and it's invoked in a totally crazy manner, does the Arbitral Tribunal sitting under the Treaty have the power to adjudicate that?

MS. BANIFATEMI: I will start with the end, which is that, as you will have understood from our submission, we have a series of alternatives: One,

[Page 238]

it's not justiciable; two, you do not have jurisdiction. In the event that you decide against us that you do have jurisdiction, we are--we have invoked this in good faith and I will address that later on.

So, I--just to give the Tribunal comfort that, even if you were to go there, which we say is wrong because this is not the sense of the Treaty, you should feel comfort in the fact that this is an extremely important, serious matter for which Colombia has raised the exception in good faith.

Going to the first question, I am not authorized by the U.S. to speak for the U.S., so I cannot say anything for the U.S. The U.S. are hearing us, if they have anything to say, they probably will. All I can say is that, based on the interpretation that you have seen from both States, from Colombia and from the U.S.--and I'll come now to the travaux préparatoires, but from what you've heard at the Hearing, self-judging means self-judging. When the U.S. says it's not justiciable, meaning that it cannot be submitted to a determination by a court or tribunal, that's what it means.

[Page 239]

So, it's that--in other words, it's intrinsic to the concept of Essential Security. If a State says, the Measures that I've taken go to my Essential Security, nobody other than that State can determine what that Essential Security is, and that's enough. That's what self-judging means, and that's what the subjective determination means.

And it's only for--and that's when I say it's a purposeful meaning. You have to give effect-- effet utile, you have to give effect to this, otherwise you just are overlooking an essential provision in the Treaty. There's a reason why the State--the two States put that text in the Treaty.

Colombia, by the way, if I recall correctly, there are 17 BITS and TPAs in which Colombia has this in its Treaties. And again, there's a reason why, because Colombia is engaged in one of the worst efforts worldwide in relation to narco trafficking and armed and bloody crime. These are some of the worst organizations worldwide, now having relationship with the Hezbollah. I mean, we're talking about extremely serious wrongdoing around the world.

[Page 240]

So, if Colombia says this is my Essential Security, that should be enough.

Now, if you would like to look at jurisdiction, you have to say, okay, I look at jurisdiction, I look at--it's not justiciability, but it's jurisdictional. So, you need to look at that and determine that Colombia is right when it says "nothing in the Agreement can be construed". It's still self-judging, and you say, I do not have jurisdiction because Colombia is saying that it's Essential Security. So, you can either say I do not have the power to decide and assess, or you say I do not have the jurisdiction. And, as far as I'm concerned, there is a level, its power comes before jurisdiction but the end result would be the same. I, as the Tribunal cannot make a determination based on law in relation to this point.

ARBITRATOR PONCET: And the Measure under Article 22 is the overall fight against a particularly dangerous form of organized crime--

MS. BANIFATEMI: Yes.

ARBITRATOR PONCET: --that is active in the

[Page 241]

drug trade?

MS. BANIFATEMI: Yes. And the Meritage was

targeted--Ms. Herrera will come back to this because

there was a huge number of misrepresentations about

Asset Forfeiture Proceedings and she will explain what

exactly this is. It follows the assets, so Colombia

looks at the Meritage in the first instance.

Meritage, at the time, we saw that there was in the

tracing of the asset, there was--

ARBITRATOR PONCET: Yeah, I got that.

MS. BANIFATEMI: Okay. So--but then, as the

facts uncover and as the facts keep growing, and

that's when we invoked Essential Security, we saw more

and more--

ARBITRATOR PONCET: I got your point.

MS. BANIFATEMI: Okay. So--

ARBITRATOR PONCET: I got your point, but

what you're saying is that measure is, not contrary to

what we heard this morning, something specifically

adopted, for instance, it would be a determination of

some kind in an international environment where

Colombia would have said, well, we--rightly we regard

[Page 242]

the fight against organized crime as an Essential

Interest of our State due to the vast experiences

we've had, et cetera, et cetera. It's not that. It's

the simple existence of this undoubtedly extremely

important and extremely difficult crime against--the

fight against form of organized crime, in which so

many people have lost their lives.

MS. BANIFATEMI: Yes.

ARBITRATOR PONCET: It's just the fact that

it exists, is what you're saying?

MS. BANIFATEMI: The continuum--

ARBITRATOR PONCET: That's the Measure?

MS. BANIFATEMI: The continuum of all of the

Measures that--and, indeed, the existence of the Asset

Forfeiture Proceedings in relation to the Meritage,

because this is the subject of the case that's before

you. What's the case before you is not the entirety

of the fight against narco trafficking. What's before

you is Colombia's fight against narco trafficking.

[Redacted]

[Redacted] I will

[Page 243]

address that very briefly, but the Measures taken in

relation to Meritage, all of the Measures--the

continuum of those Measures and how they're unfolding

because, as we go more and more, the Asset Forfeiture

Proceedings are developing and more and more facts are

being uncovered, all of those Measures, in relation to

the Meritage, given the fight against narco

trafficking and money-laundering.

ARBITRATOR PONCET: Thank you. Sorry for

the interruption.

MS. BANIFATEMI: Not at all, Mr. Arbitrator.

Thank you.

[Redacted]

[Page 244]

[Redacted]

[Redacted] So, nothing new, both

Contracting Parties to the Treaty have maintained

consistently the same view of how this should be

interpreted, and it's a very specific determination.

And as you see, consistent.

Now, if I may--

SECRETARY MARZAL: Excuse me, Ms.

Banifatemi, the Interpreters are asking if you could

please slow down a little bit.

ARBITRATOR PONCET: And she keeps being

interrupted. I'm sorry.

SECRETARY MARZAL: Sorry.

MS. BANIFATEMI: I will try to slow down for

sure. Apologies.

So, I'm coming to the further alternative,

which is that in any event, this has been raised by

Colombia in good faith. And the Measures complained

of are designed to protect Colombia's Essential

Security Interest and, therefore, there is no universe

in which the Tribunal could find that Colombia has

[Page 245]

breached its obligations under the TPA.

On my Slide 19 you see that there is--so you

have again the provision itself, and there's three

requirements that we have highlighted. The first that

there has to be measures that were adopted. That's

not contested by the other side. That's--those

Measures are considered to be necessary for the State

who invokes that exception, and that's not contested.

The only requirement that's challenged by the

Claimants, as you see on my slide, is the protection

of the own security interests, and the criterion which

is not contested is that the Measures must plausibly

be expected to protect the State's Essential Security

Interest.

Now, my next slide, I will try to, in my

next slides, plural, I will try to explain what we are

now really confronted with.

[Redacted]

[Page 246]

[Redacted]

[Page 247]

[Redacted]

[Page 248]

[Redacted]

[Page 249]

[Redacted]

[Page 250]

[Redacted]

[Page 251]

[Redacted]

[Page 252]

[Redacted]

[Page 253]

[Redacted]

[Page 254]

[Redacted]

[Page 255]

[Redacted]

[Page 256]

[Redacted]

[Page 257]

[Redacted]

[Page 258]

[Redacted]

[Page 259]

[Redacted]

[Page 260]

[Redacted]

[Page 261]

[Redacted]

[Page 262]

[Redacted]

One final word, and that's my Point 2, at

Slides 33 and 34, that's the consequences of that

[Page 263]

implication is that the Tribunal cannot find liability

and/or compensation, there is also three reasons for

that, so first of all, as you know, the Essential

Security Exception is a derogation to the entirety of

the TPA--I've explained that--so no breaches and no

compensation.

Importantly, this is my second bullet, in

order to award compensation to the Claimant, the

Tribunal would be taking a premature measure because

the Asset Forfeiture Proceedings are still ongoing.

They're evolving. The Meritage Lot has not yet been

forfeited. And there has been no determination by the

Colombian court as to whether or not Newport is a bona

fide without-fault third party. So, this is ongoing,

so therefore it's completely premature for this

Tribunal to decide that there has been any breach of

the Treaty because the Colombian Courts have not made

any determination in that regard.

And finally, any determination by the

Tribunal of Colombia's actions in the circumstances

poses the risk of interfering with Colombia's

Essential Security Interest and would be essentially

[Page 264]

allowing the instrumentalization of international

arbitration by Mr. Seda and his acolytes to the

benefit of criminal organization, and would be

contrary to international public policy and we said

that the Tribunal should be extremely cautious before

doing that.

I will say a few words about jurisdiction,

if I may. And I'm in your hands as to when you wish

to have a break.

The first point is that the Claimants have

not made a protected investment under the TPA and the

ICSID Convention. The Claimants have first--so, on

Slide 37, you see that the Claimants have failed to

show that they provided any significant contribution

of capital or other resources into the Project. As

you now know, pursuant to the Financial Statements of

Newport, less than $2 million were paid by the

Shareholders, including Newport. This is anything but

substantial.

Interestingly, it's through the Unit Buyers

that the Meritage Project has been financed mostly,

and as Vestey v. Venezuela said, any capital resources

[Page 265]

committed by the Claimants are incapable because of

their insignificance of contributing any meaningful

way to the objective of the, in that case, or in this

case, the U.S.-Colombia TPA.

Because there is no significant contribution

and no real contribution in fact, there cannot be any

risk and Mr. Seda cannot complain of being mistreated

or legitimate expectation. And one word here about

that and the risk. If anything, when he allegedly

invested in the Medellín Region and dealing with

cartel individuals, he should have had the expectation

that the Asset Forfeiture Proceedings might be

initiated against the asset that was the subject of

his alleged investment, and that in that sense there

cannot be any legitimate expectation, there is only a

real risk in that sense. But in any event, we say

that, as the definition, he didn't really take a risk

as such because the contribution was nowhere.

However, we said that there is an

expectation of gain and profit, which is not

sufficient to establish a protected investment was

made. And on profit, I just want for you to remember

[Page 266]

the very interesting--when did they talk about

proportionality but look at they invested even less

than 2 million. It's actually the Unit Buyers who

invested, but against that 2 million, they're asking

for 255 million. This is better than the casino.

They win at every step. So, if you please look at the

cross-examination of Mr. Seda during the Hearing of

3 May, and, for example, Page 444, Lines 15 to 22, I

asked him that he had identified land in previously

dangerous regions and the perception of danger causes

prices to be fixed at the bargain, and he said yes.

And likewise, at Page 447, I asked him

again, "this is what I call being a good businessman.

You buy pieces of land in regions that are either

perceived as previously dangerous or are still

dangerous and you expect to make a very high profit

out of it--right?--and you talk about profit of

1000 percent," and he accepts, he agrees. And he says

later on at Page 448 on Lines 17 and 18, "my job is to

give returns to my Investor. That's the way I can do

what I love." So, what is interesting for Mr. Seda is

that he barely makes any investment, and he expects a

[Page 267]

1000 percent profit, and even more, $255 million in

this case. Again, it's better than the casino.

On my next slide, I will be very fast

[Redacted]

Now, on illegality, that's Point B, you have

under Rule 41(2) of ICSID Rules, again, this is a

question of jurisdiction. So, at any point in time

you have to raise matters of jurisdiction, and that

includes the legality of the Investment that was made,

which goes to jurisdiction. And you have the example

here of Infinito versus Costa Rica: "The Tribunal had

the duty to assess ex officio in accordance with ICSID

Rule 41(2). As a result, the Tribunal cannot merely

[Page 268]

rely on the Parties' assessment and must engage in its

own inquiry on the basis of the evidence on the

record. This is particularly true when there are

allegations of corruption, which is a matter of

international public policy."

So, you do have the duty when you're

confronted with illegality of the scale that we're

talking about, even if we had not raised the

illegality of the investment, it would be your duty to

raise that and to address that.

And you have case law in that regard on my

next slide, it's Phoenix, Oxus, Mamidoil. And you

look at Phoenix, for example, illegal investments

according to national law and the host-State cannot be

protected through an ICSID arbitral process, you're

familiar with the case law.

And going to doctrine, of course, I wanted

to pay tribute to Professor Gaillard, late Professor

Gaillard's writings on corruption matter, in that the

investment has to be made in conditions of legality

but don't take only Professor Gaillard's words for it,

take Mr. Moloo's word for it. This is an article

[Page 269]

written in 2010, at Slide 43, where he says that, I

quote: "The consent of a host-State to resolve

disputes with investors is governed by certain

overarching principles, including transnational public

policy." And further down he says that the applicable

law includes transnational public policy against fraud

and corruption.

And again, he says, I quote: "Breaches of

transnational public policy may also prevent the

admissibility of any claim that relates to an

investment that involved fraud and corruption by the

Investor." So, in 2010 when he's not representing

Mr. Seda, he agrees with me.

Next Slide 44, just to wrap up, that the

Claimants' alleged investment are tainted by

illegality and money-laundering. First as regards

Meritage, illicit origin, it has been in the

possession and control of members of the Oficina, as

we've shown. It has experienced several

transformations and has been the subject of fake sales

via front men currently investigated for

money-laundering. And it's currently owned by La

[Page 270]

Palma Argentina, [Redacted]

[Redacted]

These facts alone should be the end of this

matter. You should say "we cannot judge this. This

is, indeed, good-faith invocation by Colombia." If

you were on the merits only and not on the principle,

which is that you should not assess at all. If you

decided to assess the good-faith invocation by

Colombia, these facts should show you enough that, and

given the circumstances we've shown, that this has

been, indeed, invoked by Colombia in utter good faith.

And also in regards to Luxé, [Redacted]

[Redacted]

So, this also shows that again this is not the

representation of the alleged investment as Mr. Seda

would have it.

[Redacted]

[Page 271]

[Redacted]

[Redacted] Two-thirds of the Claimants' claim concerned

projects unrelated to the Meritage Project, actually

Mr. Moloo showed this to you. It's only 31 percent of

the Claims of 64 million that relates to the Meritage

that is part of the quantum that they are asking.

If I may, I can finish before we have--

SECRETARY MARZAL: The Court Reporters are

[Page 272]

asking for a break.

MS. BANIFATEMI: Okay, I'll stop.

PRESIDENT SACHS: Thank you for your

endurance both Court Reporters, that was quite

something.

Let's see, it's 4:25. Let's say 4:40.

(Recess.)

PRESIDENT SACHS: Mr. Moloo, can we resume?

There are still members of your team missing but in

the interest of time?

MR. MOLOO: Yes, we can resume.

PRESIDENT SACHS: Very good. Please.

MR. MOLOO: May I point out one correction,

if I may, Mr. President.

PRESIDENT SACHS: If it's short, yes.

[Redacted]

[Page 273]

[Redacted]

PRESIDENT SACHS: That's for the rebuttal,

okay?

(Pause.)

PRESIDENT SACHS: All right. Let's

continue.

MS. BANIFATEMI: Thank you, Mr. President.

I just would like, as a housekeeping matter,

to remind everyone, both present here and remotely,

that this is a confidential matter, and anything that

is discussed here should be submitted to the Parties

before it's divulged. So just as a matter of--

PRESIDENT SACHS: That is noted, and

obviously addressed to everyone.

MS. BANIFATEMI: Thank you, Mr. President.

(Pause.)

MS. BANIFATEMI: Slide 49, and this is

really, as a reminder, I don't think it deserves

anything more than that, I've heard nothing that

changes that, we're talking about, Mr. Hass who

[Page 274]

indirectly holds shares in Luxé through his Family

Trust which is a discretionary trust. If you look at

the excerpt, you see that the Trust is at the

discretion--I'm in the second box--to completely

withhold distributions from any one beneficiary and

you also see that they have the power to exclude the

beneficiaries. So, to the extent that this is a

discretionary trust, the true Claimant should have

been the Trustee, who is the owner and not Mr. Hass,

who, therefore, cannot have standing to be here before

you.

[Redacted]

[Page 275]

[Redacted]

Just as a reminder, in any event, on my next

slide, you see that they focused on the TPA and say

that the TPA allows trust as being investors, but

since you're an ICSID Tribunal, the cumulative

conditions must be met. So, for the purpose of the

ICSID Convention, that's Article 25, which requires

that there be a national of another Contracting State,

which means legal personality, and this is reference

to the commentary by Professor Schreuer, and the Trust

not having a legal personality, again, cannot have

standing before this Tribunal, and the Tribunal does

not have jurisdiction over it.

This completes my second part on the lack of

jurisdiction over the Claimants and their claim.

I would like to say one word which I forgot

in my introductory remarks, and I think it is the

appropriate time to say it. And it's important. [Redacted]

[Redacted]

[Page 276]

[Redacted]

You heard Mr. Moloo say earlier that he was

scared that Mr. Seda somehow is scared about

initiating anything because there will be some type of

retaliation. We take serious issue with that. There

has been nothing done by Colombia that was

retaliation. [Redacted]

[Redacted], so

this is something that she has done, and that's her

own decision in relation to the slander that she

considers she has been the subject of.

[Redacted]

[Redacted] So, it's not

retaliation by Colombia. It's what Mr. Seda is doing

and the reaction that he should expect as a result.

[Redacted]

[Page 277]

So, his action goes to that, and again that's entirely

legitimate.

[Redacted]

[Page 278]

[Redacted]

So, Colombia, in its traditional--and you

remember that that's part of the--also the

judicial--and that same letter refers to the U.N.

Convention Against Elicit Traffic in Narcotic Drugs

and Psychotropic Substances. That's part of that

cooperation between the FBI and the Colombian

Authorities.

PRESIDENT SACHS: Forgive me, but we

discussed all this in May, didn't we?

MS. BANIFATEMI: We did, but it's--I'm

answering Mr. Moloo when he says that he's scared and

if there's a retaliation against Mr. Seda, explaining

that there's no retaliation. [Redacted]

[Redacted]

[Page 279]

[Redacted]

[Redacted] And finally I want to refer you back to the

cross-examination Day 3 of Mr. Seda, Pages 639 to 653,

which is the entire discussion between me and Mr. Seda

[Page 280]

of these exact actions and, of course, on the other

side we didn't hear anything about that.

So, if anything, Mr. Seda is not scared. [Redacted]

[Redacted]

[Redacted] If anybody is scared, it would be

the prosecutors who with courage in Colombia are

actually going after these drug lords, and even my

colleague sitting here and I do recall that we have

the equivalent of the Head of the FBI in Colombia, the

Head of the CTI, sitting with us. If the Tribunal has

any questions on this issue, he's here to answer.

So, I finish with the third part which is

the premature and abusive nature of this arbitration.

Point A, Slide 55 is simply that the asset

forfeitures are still before the Colombian courts.

You have a timeline. I will not go through it. You

remember that in May there was a discussion about

whether Newport is afectado or it's not afectado.

You will recall that the prosecutors treated Newport

as afectado, so it had access to the file. Then, in

2017, there was the Requerimiento, and that was

appealed. As a result of the appeal, the process was

[Page 281]

suspended until in 22 April 2022, the Appeal Court reinstated Newport as an afectado for the trial stage, which will now start, and this is all ongoing. So, and, of course, Newport will have access to the full case and the trial stage.

So, as a result of that, there is no final determination as to whether or not Newport is a bona fide third party without fault and the merits of the Attorney General's asset forfeiture petition.

Further, the court decision is further subject to appeal as a matter of Colombian law. And finally, as you remember from the U.S. submission in May, the responsibility of a State cannot be invoked until a final judicial act has been decided and, in this case, there is no final judicial act because this is all ongoing and Newport has to make its claim to the Colombian courts who will decide whether or not Newport is a bona fide third party without fault.

Point B, the remedies and mechanisms allowed under Colombian law. It's a reminder. You heard this in May. Article 34 of the Colombian Constitution, which says that there is a right to a judicial

[Page 282]

decision for the forfeiture assets acquired by means of illicit enrichment.

Article 90 of the Colombian Constitution also provides that there shall be financial liability of States for unlawful damages attributable to it. In the event that Mr. Seda has any issue with damages, the appropriate measure should be taken to the Colombian courts and, therefore, you see that Colombian law allows for full remedies under Colombian law for any damages caused for the wrongful or alleged wrongful conduct attributable to the State.

And the reality, and that's my last point under C, not only these are premature claims but they're also abusive because what Mr. Seda and his acolytes are trying to do is to be compensated multiple times, with my Slide 59.

Mr. Seda and his acolytes are effectively trying to have four bites at the Apple, so it's to have the cake and eat it four times.

First, they want compensation from this Tribunal--$255 million. It's again better than a casino.

[Page 283]

Then they want to be able to seek compensation from the Colombian court, which is still open to them during the process and throughout and at the end of the process.

There is a legal action by Newport against La Palma Argentina. We know that but we don't have much information about it, so we don't know, but we know that it exists.

And, finally and importantly-this is something you need to bear in mind-Mr. Seda is feeding domestic proceedings brought by the Unit buyers against the State of Colombia by feeding them-and this is uncontested-by feeding them the process and reports from this Arbitration, and these are reports by Mr. Martínez, reports by Mr. Medellín, the confidential report prepared by investigator Paula Espinosa and addressed to Ms. Noguera, and finally the Transcripts of Mr. Seda's improper recordings.

This has been feeding the proceedings in Colombia, the Unit buyers, and rather than be responsive to the potential actions that may be brought by Unit Buyers against Newport, Mr. Seda is

[Page 284]

trying to avoid responsibility by saying, "hey, go against Colombia, don't come after me." And so he's feeding them this.

So, Colombia is, as a result, exposed more than one time. It's exposed to in the country by the actions of Mr. Seda, by the actions of Unit buyers, and also in this Tribunal for $255 million.

This is abusive. It's nothing short of abusive, and this should not be allowed by this Tribunal, who we say should be safeguarding the integrity of international arbitration as a mechanism and the integrity of this process, and, frankly the integrity of treaty protection of international law.

With this, and with my thanks to the Tribunal for its patience and the interpreters, I pass on to Ms. Herrera.

PRESIDENT SACHS: Thank you very much.

Ms. Herrera.

MS. HERRERA: Thank you very much, Mr. President and Members of the Tribunal.

I will address now the allegations on the merits, both in fact and, later on, on law.

[Page 285]

I will echo Ms. Banifatemi's point made about the series of misrepresentations made that we heard from our friends on the other side earlier this morning regarding the law, the testimonies and, in fact--and the facts. So, again, I'm not sure that we will be able to respond to all of them and correct all of them, and again, ask the Tribunal to please refer back to the documents and don't take the word of the Claimants as the real text or the real facts.

Anyway, one point that it's quite important here, and I'm sorry, I know we walked you through this, the Asset Forfeiture Law in May but, again, I think that it's important to remember one thing, and that is: What is the purpose? And the purpose is to forfeit an asset. The imperative word is the "asset." And that's important here because, as you have heard, the case of the Claimants is: Mr. Seda was target? No, Mr. Seda wasn't target. It was the Meritage Lot. And in fact, the Meritage Lot is not even owned by Mr. Seda.

So, that's the first point. Very quickly, I just want to remind the Tribunal, again, that there

[Page 286]

are two phases in the Asset Forfeiture Procedure: The Initial Phase before the Prosecutors and the Trial Stage before the Court. Again, why is this important?

And I know that that seems pretty basic because the Claimants through all the presentations, what they have done is apply the level of proof, the level of evidence, the level of determination that is to be applied and determined by the Judge, at the final stage, and bring it back to the beginning and say, no, no, no, it's the Prosecutors who should have done basically what the Judge has to determine, and I will again refer to this.

The two quick last points to recall. The Asset Forfeiture Proceedings are not criminal in nature, and finally, to recall again, they're not subject to statute of limitations, and this is important, again, regarding the so-called "due diligence" performed by Newport.

As you will see in Page 64, we're trying to address the main allegations regarding--the Claimants have made regarding the asset forfeiture--and why they say that they were wrong, in fact, they are not wrong.

[Page 287]

And the first one--and we heard again about this, this morning, is that the Attorney General's Office has initiated the Asset Forfeiture Proceedings and imposed Precautionary Measures based solely on a false kidnapping story. They refer again--we went through this in May. They refer again to the fact that it seems that there was no--or there was no kidnapping story, at least there was no kidnapping as such when Sebastian López was coerced to transfer the property. He was coerced, whether there was kidnapping or not, that doesn't matter. That's the way that the Oficina de Envigado functions: They coerce payments of any debt.

But this is just wrong. This is wrong. It's not based on the false kidnapping. And I'm going to go through this, and this is important, again, because the--the Claimants have said--you have to have perfect certainty of everything at the beginning, the Prosecutor have had perfect certainty all the evidence of everything covered at the initiation of the proceedings. This is not true. And again, here we have the Claimants wrongly attempting to apply to the

[Page 288]

initiation of the proceedings and imposition of the Precautionary Measures, the standard of proof that applies at later stages of proceedings.

Ms. Banifatemi referred how the Asset Forfeiture Proceedings are a continuum, are ongoing, and, in fact, is almost a crescendo, as is normal in any procedure that becomes a contentious proceeding, where more evidence is being brought into the forum.

So, first thing, what is--what does the Prosecutors, what do they have to do at the initiation of the proceedings? What's the standard? They can initiate proceedings if there are serious and reasonable basis to infer the probable existence of assets that could be subject to Asset Forfeiture. As you see, that's not a certainty, it's a reasonable basis to infer.

Now, as I have said, this continues, so it escalates, and then for the Determination of Claim, that is when the Prosecutor asks the Court, please do forfeit or if--or not forfeit, but please do forfeit, in regards on indication that there are grounds, so again, there are grounds for forfeiture. And you see

[Page 289]

this very clearly in Mr. Caro's---Prosecutor Caro's Requerimiento or Determination of Claim.

And again, at the stage of the Asset Forfeiture before the Courts at the Trial Stage, that's a completely different standard. Its demonstration--yes, there has to be a certainty at demonstration. So, you cannot just--because it's convenient, I take the standard at the end that the Judge--in which the Judge will make the recommendation and I bring it back at the initiation of the proceeding. It just doesn't work that way.

Now, we hear about--we hear our friends of opposing counsel saying Ms. Ardila, again, it were just under study, it was just on a--the word of a convicted drug trafficker that she seized Meritage, it was based on a lie. And, in fact, in their PHB, they say the following. They misrepresent what Prosecutor Ardila said, and I read. That's from the PHB of the Claimants. They say: "At the Hearing, Ms. Ardila testified that she relied, almost entirely, on the word of a convicted drug trafficker to seize the Meritage property."

[Page 290]

And then, you have what Ms. Ardila really said at the Hearing, and that goes--again, it's important to read the actual documents and the actual transcripts, and it's--she says "when the case was admitted and opened before the Asset Forfeiture Unit, it was based on a detailed report of the real estate recordation documents in connection with those pieces of property in particular. When it was submitted to me, it was accompanied by a very detailed study.

Amongst the evidence--amongst the evidence--was the tutela action submitted by Iván López together with other documents. Among those documents, so the ones accompanying the tutela, were other title studies.

And let's look at what Ms. Ardila had at the moment that she initiated Asset Forfeiture Proceedings and Precautionary Measures.

So, she knew--and we know that--that Iván López had been extradited on counts of drug trafficking, that he had connections with the Oficina, that he had owned the Meritage, that was shown in the title deeds for the property despite what our friends on the other side have said, and I will go

[Page 291]

back to that, although we went extensively on that in May.

Two, that there were several irregularities in the deeds, which included suspicions of forgery, and this was based on a study of the Superintendency of notaries which had gone and done 55 types of deeds in the chain of transfer.

There was also an interview of Mr. Arboleda, where, it has demonstrated that he didn't have the financial capacity, et cetera, and, there was evidence that the Meritage Lot had been the object of several transformations, physical and legal, in a relatively--excuse me, relatively short period of time. As we know now, we are all always saying Mr. Arboleda was the mango seller. Anyway, these are all clear hallmarks of money-laundering.

One point that I want to clarify here is, we heard this morning that, in fact, Ms. Ardila, when she started, she had very little, and, curiously, she started on the basis of a Report that didn't mention the Meritage. There are two different moments in terms of the collection of evidence that was carried

[Page 292]

out in this process. I mean, there are several, but in that initial phase.

So, when the procedure--when the case is opened, this case is opened by the Asset Forfeiture Unit--sorry, I'm going to give the whole timeline because I think it's important. So, we have Mr. López Vanegas going in 2004 before--excuse me, 2014, before the Unit, the Criminal Unit, not the Asset Forfeiture Unit, in Medellín, the Prosecutor is Ms. Correa, and that's--she specialized in the Oficina de Envigado. What happened? She looks at that and she says, I'm going to send it to money-laundering and also to the different places where there are investigations of Oficina de Envigado.

Then, after going through money-laundering, there is another case--you know how they send copies, we referred several times about the "compulsa de copias" (in Spanish)--in May, they said the money-laundering, well, there must be here also. It seems that this is the case where Asset Forfeiture should be investigated.

At that point, and before it's opened, by

[Page 293]

Ms. Ardila, before it's assigned to her, really, and she opens the case, the Superintendency of Notaries had this study that it had conducted, so there was a lot already.

It's given to Ms. Ardila. Ms. Ardila will start the Precautionary Measures, but it's important to say she requires, then, another study. And that's the other study--I mean, she receives this information, she looks at López Vanegas, and she says, I'm going to ask for another study on the other properties of Mr. Vanegas, and that's the second study that the Claimants have referred to, saying 47 properties--and I will go back to that when we talk about discrimination, but 47 properties and the Meritage was not there. Well, the Meritage was not there because there had been already a previous study before the case started on the Meritage, so surprise, it wasn't there. It was just supplemental and looking into López Vanegas. So, that was one first point that I wanted to make clear.

Then, a second contention of the Claimants is that there was insufficient evidence of the illicit

[Page 294]

origin and change of transfer of the Meritage Lot, and that's not true. Again, the collection of evidence continued, and it keeps corroborating the illicit origin and involvement of the Oficina de Envigado with the Meritage Lot. [Redacted]

[Redacted]

[Page 295]

[Redacted]

[Page 296]

[Redacted]

[Page 297]

[Redacted]

The Claimants say the Attorney General's Office failed to evaluate Newport's good faith before imposing the Precautionary Measures. And here, again, what are they doing, the Claimants? So, they conflate, or as the Director was saying this morning, well, maybe she--they don't understand, but I doubt it--what's the standard of proof in--that is required in the application--sorry, what's the standard proof but also what is the level of scrutiny that the prosecution has to have on the good faith, or lack of good faith, of the possible affected Parties at the

[Page 298]

initiation of the proceedings and what is the one that is applied by the Judges?

And again, here we know--and this is Article 117 and 89 of the Asset Forfeiture Law--when you're dealing with anticipated Provisional Measures, which is an exception but it applies when there's a necessity, when there's urgency, as it was the case here, where there were being sales and everything was going to be dissipated and third bona fide party buyers will be affected, there's not really a necessity. The law doesn't provide exactly you have to conduct an analysis existing of bona fide third parties as required by law. You have to include them and notify them of the Measure when imposed as affected. And Prosecutor Ardila did so. Now, when--

PRESIDENT SACHS: Excuse me, just to help us.

MS. HERRERA: Yes.

PRESIDENT SACHS: Just to help us, the Claimant referred to an article and I don't find--

MS. HERRERA: 117?

PRESIDENT SACHS: Yes, which applies in the

[Page 299]

initial phase, which states in my recollection that also during this initial phase, it has to be ascertained whether the buyer has purchased the property in good faith.

MS. HERRERA: In the initial phase, and that's Article 152--no, the initial phase. Sorry.

So, we have--and that's Article 118, and that's in the Requerimiento phase, and the standard is "search and collect for evidence that allows to reasonably infer the absence of good faith." So, that's the standard at this stage of the Requerimiento. That's the formal forfeiture petition, not the Precautionary Measure. So, you're right, yes, there is the standard, they have to look, but the standard is really low, I mean, the standard is low, and it's "infer the absence".

Now, at the trial stage, both Parties, and that's provided in Article 145, will present proof, and there has to be a determination, really, who is in the better position to prove? And that's provided in the law, it's usually the--in this case the Claimants or the ones that are having--the affected parties that have the assets being forfeited, but, of course, the

[Page 300]

Prosecutor has the obligation to present proof to try to rebut, et cetera.

Now, I move to--

PRESIDENT SACHS: I have another question, I'm sorry.

MS. HERRERA: No, no.

PRESIDENT SACHS: Would you go back to Slide 66.

MS. HERRERA: Um-hmm. 66.

Yes.

PRESIDENT SACHS: Did you say that at this moment in time, Ms. Ardila already had in hand the legal opinions as to the title research?

MS. HERRERA: At the time of the Precautionary Measures?

PRESIDENT SACHS: Uh-huh.

MS. HERRERA: No.

PRESIDENT SACHS: Okay. Thank you.

MS. HERRERA: Had internal studies of the register but not the opinions of the Experts.

Sorry, one problem.

So, okay. Now, moving--I continue on the

[Page 301]

point of the bona fide under stages, and the Claimants will say, look, you have to look at Article 87 of the Asset Forfeiture Law, and, that's a word they say, "there is an affirmative obligation to safeguard the good-faith third Parties who might be affected by the actions_". Yes, but look at the language of Article 87--it refers--this Article 87 refers to the normal Precautionary Measures, that is when there is not that much urgency, which is not the case here, and so there is a different level.

In any event, because for the exceptional you will see Article 89 does not make reference to this--it's not really affirmative to this obligation. It only says you impose them as long as this--the reason why you're imposing it is for any of the purposes provided in 87. That's the reference.

Now, in any event, I'm not saying that you don't have to protect, but they are protected, the possible affected parties, they are protected because they're notified, obviously there is no point of notifying before you cannot put exceptional Precautionary Measures because that defeats the

[Page 302]

purpose, but they are notified as they were here. I mean, we heard through--I mean, we have heard in May and the Claimants were quite surprised that actually they were included as afectados, and even with that designation in the initial phase of this proceedings. And they were given the possibility to file documentation, including not the opinions obviously of Medellín and Martínez, but opinions and briefs both Newport and La Palma .

But anyway, further, their imposition of Precautionary Measures here were studied twice by the courts in the control of legality, and they were approved. And what is interesting, further interesting, is--I mean, the Claimants take issue and say, oh, well, you know, but how come, oh, they violated--they said before the courts--they say violated the level of scrutiny they had had because they had to go further. And you see at the end of Slide 74, it says what is the scope of the legality of the Asset Forfeiture Proceedings? Because what happened was that the Claimants were making their argument you have--before you applied the

[Page 303]

Precautionary Measures, you have to find that actually we're bona fide third-party Buyers. And the Courts and the Appellate Courts says no, this is clearly--there is no showing the lack of minimally sufficient evidence based on Precautionary Measures. Instead, what the appellant is seeking is a premature lifting of the restriction, recognition of a status, that's the bona fide third party which is only for the courts' final determination, has no basis.

Now, the Claimants also rely on Article 152 of the Asset Forfeiture Law to argue that the Attorney General's Office did not bother to identify, locate, gather and file elements of proof regarding Newport's good-faith status. And this is wrong because Article 152 does not refer to the initial phase. This referred to the trial stage of the Asset Forfeiture Proceedings. And, of course, we know for a fact that the Prosecutors are--have gathered and are presenting-proof of that.

One of the other arguments that we hear from the Claimants is, oh, well, but, in fact, Mr. Caro--and Mr. Moloo cross-examined Mr. Caro and is

[Page 304]

actually like you're conflating the due diligence that was made by--between Corficolombiana and Newport, and you didn't analyze the good faith of Newport. This is interesting. This is interesting because you may recall that Newport always relies--and we will go back to that for purpose of how stringent its due diligence was in Corficolombiana, but leave that alone. The truth is that if you look at Mr. Caro's provisional--in the Requerimiento, you will see at Pages 732 that, in fact, he did look at what was the due diligence that has been conducted by Newport. So, did he not analyze? I don't think so.

And further, and that's one of the things that is important to recall, who is the one that is the spokesperson for the property at this stage? It is Corficolombiana. And Corficolombiana, the good faith or not, and the due diligence of Corficolombiana, was also examined quite thoroughly by the Prosecutor Caro in its Requerimiento.

Finally, and it has been confirmed by the courts, and Prosecutor Caro also made it very clear, again, it is for the Judge in the trial phase to

[Page 305]

determine whether Newport is a bona fide third party without fault or not. And I have these two quotes, one from the Decision in which the Judge, the first instance judge, accepts the request for commencing Asset Forfeiture Proceedings, and then we have an answer to Arbitrator Poncet of Mr. Caro explaining this point. So again, you cannot apply the standard of the end to the beginning, in procedures that are supposed to be evolving and with their level of evidence that's mounting.

Other of the arguments that the Claimants made is the Attorney General's Office should not have imposed Precautionary Measures since they're not reasonable nor proportional, and they do not target illicit proceeds. Okay. Again, this is a complete misconception and it's an ex post facto created position of the Experts and I will come back to this, but let's see.

First of all, the Precautionary Measures were legitimately adopted by the Attorney General's Office, considering the urgency of the situation. So, what was Prosecutor Ardila saying? And I said

[Page 306]

already, López Vanegas, the Oficina in the chain of transfer, the irregularities in the deeds including possible forgery of documents, participation of front men, physical and legal transformations. So, if you told me that there were no basis and they were being sold.

And Precautionary Measures are always imposed. And the question is do you impose it earlier on, the exceptional anticipated or a bit later, but they're imposed because that's the only way to make sure that the assets are not dissipated when--through--before there is a determination by the courts.

Again, just to recall, the legality of the Measures was twice confirmed, and what is more, not only was the legality of the Measures confirmed twice by the Colombian courts, but because the way that the Asset Forfeiture Law is construed and the logic that enforcement--there is participation not only of the courts but also of the Minister of Justice, of the Inspector General's Office, the one that looks that the State-the administrative entities and the State

[Page 307]

are complying with their functions. And you have the legality of Precautionary Measures was confirmed by the Prosecutor, by the specialized judge of first instance, by three superior judges of the Superior Court of Bogotá, the Minister of Justice and the Inspector General. Seven public officials of different branches of the State.

So, unlike what Mr. Moloo had represented this morning, it wasn't Ms. Ardila going and saying, oh, I put the padlock and I finished this and because I feel like. Or because theoretically I have an interest, a further interest--and I will go back to--I will address that later on--in paralyzing this project. What she did was fully in accordance with the law.

Now, we have now an ex post facto argument that, you know, what the Attorney General's Office should have done was target illicit proceedings instead of the Meritage Lot. Well, I mean, the asset is the Meritage Lot. You cannot target illicit proceedings or credits that are of a personal nature. You have to go for the asset. But also what the

[Page 308]

Claimants had done is again, misrepresent how this works. Under the Asset Forfeiture Law, you have 16 different grounds for Asset Forfeiture. The first nine of them, with some variations, concerned illicit assets for--given their origin or destination. And the ones, the remaining ones, which are the 10 and 11 of Article 16 of the Asset Forfeiture Law, are equivalent, and that's--and they may refer to the Decision of the Constitutional Court--I will go back to that in a moment. But this is a different reason, this is a different ground. You don't go and simply because there is an illicit--I'm pursuing an illicit asset and then I change to the other ground, and what I go is to the proceedings of the--doesn't work that way. If what you're saying is, the origin of this asset is illicit--I go to that asset.

And this situation, what they're referring, are conflating, the Article 16.10 and 16.11 is another scenario. That's when what happens if as a prosecutor or asset of the Court, I go and I cannot forfeit an asset. Well, that it's illicit in its origin. I go and forfeit an asset that is of licit nature, but it's

[Page 309]

in the hands of the same person that committed the illicit act. I will go back to that. So, it doesn't work that way. You just cannot--

And interestingly, there was something that Mr. Martínez had not referred to at all in the First Opinion that he gave to Corficolombiana, you may recall that Mr. Martínez appeared, gave an opinion before the--to Corficolombiana and then what happened is he comes here, he's actually supposedly an independent expert, and he himself, had to say, I have it somewhere during the Hearing saying, well, no, actually, yes, in a way I cannot be completely impartial.

Other of the arguments. Had the Attorney General's Office evaluated Newport's due diligence, then they would have found that it was bona fide without fault. Again, we're going through the same kind of thinking. And, this is important, because let's look at what's a required standard of due diligence applicable under the Asset Forfeiture Law.

So, what is the standard for--that the Constitutional Court has said to find whether there

[Page 310]

is-if--a person claiming to be a bona fide without fault Party, has to fulfill. And it says the Constitutional Court basically states that in order to qualify as a bona fide without fault, the Party--that Party needs to establish that it would have been impossible, impossible, that's for any prudent and diligent person to discover the process of error of an apparent right of situation. So, that's what the Constitution--that's the level, and that has not changed actually with the Decision of 2020. And again, I will address that later.

In fact, as you can see that this was prompted by a question Mr. Martínez, Arbitrator Perezcano asked him about this standard. And he had to agree, he had to say yes, I have to agree you're right, that's the standard.

Furthermore, what happens, and this is important, as Ms. Banifatemi was saying before, when you're investing in an area affected by violence and civil unrest, and recall we know that for years Medellín had the reputation as being a bad-ass town, violence reigned, civil society had been destroyed.

[Page 311]

No one seems to know how to put Medellín back together. And we see, and I'm going to Page 85, what the land restitution Civil Division of the High Court of Antioquia district said in a decision of 2014. It says, when you're dealing--title studies do not suffice to infer good faith without fault to acquire premises, and that there should be extremely diligent inquiries regarding social and political context and the effects caused by the internal armed conflict. It cannot be clearer.

And why? Because this situation has impacts in both the grounds of the Asset Forfeiture or, in fact, it can be and that doesn't concern us here but the victims of land restitution. It concerns us to the extent that we know that the drug-dealing through the paramilitary and the paramilitaries displace a lot of the population. In fact, I think at one point, Colombia was the third country with having the higher number of refugees and it was its own internal displacement.

And let's see what happened. So Ms. Banifatemi asked--reads from the brochure of

[Page 312]

Mr. Seda in which he is advertising his model of business. We heard before saying you find these nice regions, previously dangerous, you get a bargain and that's it, and Mr. Seda said yeah, that's my strategy. So, Mr. Seda knows where he's investing, that's the strategy, yet he doesn't want to have the--comply with the level of due diligence that he should.

So, as we said, but we heard, and we heard a lot of that during the cross-examination and had been repeated, I would say, ad nauseam, that Newport has transacted in good faith. It had an extensive due diligence that had been done on the property. It included four types of title studies, a certification of the fiscal year. Again, we have said that that certification is just an answer to ratification.

But let's look during the cross-examination of Mr. Seda. Four titles. So Mr. Seda said the four titles, the first one is Otero & Palacio of 7 March 2013 commissioned by Royal Property. Then we have one that's the title of Osorio & Moreno 17 May 2016, which was commissioned by Colpatria to give a loan for the project. And then he said, this is not the title

[Page 313]

study, and we hired Corficolombiana, and according to Mr. Seda the mere hiring of federally regulated financial institutions which had impacted--financial institutions would have impacted guidelines and regulations.

But we heard today, I don't remember opposing counsel saying SARLAFT, the SARLAFT has been approved of Corficolombiana had been approved by the Government. That's not true. The Government established some guidelines, and then it's up to the institution, the financial institutions to follow, but they had the liberty of structuring it, so it's not it had been approved.

PRESIDENT SACHS: Forgive me, the Court Reporter asked for a short break.

(Brief recess.)

PRESIDENT SACHS: Ms. Herrera. Back to due diligence. And you were on Slide 88?

MS. HERRERA: Oh, yeah. Thank you. 88. Thank you, Mr. President.

So, let's talk about the studies, the title studies. These are civil title studies, and these

[Page 314]

are patently insufficient under Colombian law to asses the risk of asset forfeiture given their limited material scope and the temporal too, and I will go to that.

And this was clearly put by Dr. Reyes, civil title studies are patently insufficient and he says the main objectives of these studies is to verify there are no problems civil nature in the chain of the tradition of property, to the purpose of the studies are temporarily limited to ten years, and we heard again today of opposing counsel saying they were clean title studies and interestingly the way they were described were again there were not liens, they were not encumbrances--yeah, that's what you do when selling a property, but that has nothing to do with due diligence that is required to show that you have bona fide without-fault party, and moreover in an area where Mr. Seda and Claimants were investing.

So, this is limited. This is not the purpose for what they created, Parties held everything and, in fact, we see in the words of Ms. Ana María Palacio of Otero Palacio, which is the firm that

[Page 315]

performed the civil title study for Royal Property. It says when she's asked if--and this is taken from Pinturas Prime arbitration that involved claims also regarding to the Asset Forfeiture Procedure regarding Meritage, obviously, it says, well, when she's asked about the investigation, so I'm not sure that for my title studies which does not include an analysis of the people who appear there as such, or who would have affect my study, because I'm issuing an opinion of legal civil matters of the possible defects that the property may have; or that it has any affectation or it has liens but nothing in matters of investigation because that's not my scope. So, we go to the material scope.

And then again, you see when Corficolombiana listed among the due-diligence procedures that have been carried, says study of the company La Palma Argentina company carried out by Otero & Palacio determine legal viability from a commercial point of view. So, it's clear this is patently insufficient.

Then moving to 89, let's look again at the Osorio & Moreno, and again this is interesting--and

[Page 316]

again, I'm sorry, we went through this, but it seems Claimants keep hammering on that, so I'm obliged to address it again. So, we looked at the Osorio & Moreno title, which is the second one that Mr. Seda said of the four title studies. Osorio & Moreno was the one commissioned by Scotiabank Colpatria for a loan for the Project. And you see, again, what's the--what they say, they said the real estate subject of study is free from all liens or limitations upon ownership rights of asset forfeiture..

And it says also a disclaimer that says we're not liable for information that may appear thereafter, that up to this day is not known by the lawyer's office, such as information regarding Asset Forfeiture Processes where such change has not been recorded within the registration pages reviewed. Of course. If that is unentered-that there has been a measure and that it's in the registration of the Asset Forfeiture Proceeding, that's a different thing, but as explained before, if there are Asset Forfeiture Proceedings that are ongoing, there is the initiation of the investigation, well, they're not going to find

[Page 317]

it. Definitely you're not going to find it in a civil law-civil-title study.

And then again there is another aspect, and as I recall earlier on, the Asset Forfeiture action is not subject to statute of limitations, and that's why also a title study of 10 years is clearly insufficient.

And we saw this before. We saw that the title study of Otero & Palacio was 10 years, and they say-and when they ask again in the same arbitration to Ms. Palacio, is, oh, why did you do a title study for 10 years? She said, "that was just a proposal, if the client says no I want you to do the entire change of recordation of titles, it can be done so it covers the entire change."

And during the cross-examination, Mr. Seda acknowledged Newport's failure to diligently commission the title study, and Ms. Banifatemi asked him, so what this shows is the title study can carry shorter or longer terms, depending on what the client asks. That's what it says. Yes, to be clear on the title study and every title study we have ever

[Page 318]

performed, we have never, ever directed, suggested or made reference to a firm to perform a title study in one way or another. I mean, if I'm investing, and the quantities that supposedly I'm investing in this project, I will make sure that this is carried out in a proper manner.

But moreover, you may recall that also the Osorio & Moreno title study extended to 20 years; and, here during cross-examination, so Mr. Seda says, so when we talked to Osorio & Moreno--I think that's her name--I only talked to her once. She said, well, the thing is because I asked the same question, meaning the duration. She says the thing is we're only required to do 10 years' title search, but banks are particular about reputational damage. And she says you know we go about 20 years because the banks ask us to go back 20 years because they don't want to suffer any reputational damage.

And President Sachs asked, when you learned this, basically, this didn't give you the idea to go back to your lawyer and to ask them, well, the bank said it would be more prudent to go back 20 years,

[Page 319]

could you do that for me also?

And Mr. Seda said, plainly: "Well, no."

Also, during the cross-examination, Mr. Seda had to admit that, if they had done a more prudent test starting of 20 years, they will probably as, in fact, Osorio & Moreno would had, find the deed where Sierralta López & Company (in Spanish) represented by Iván López and in the case of (in Spanish), I don't know how you say the "Managing Shareholder," is the legal representative, and obviously a shareholder, appear.

PRESIDENT SACHS: May I interject a question?

MS. HERRERA: Yes.

PRESIDENT SACHS: At this point in time, if I understood correctly, Mr. López was not on the OFAC List?

MS. HERRERA: No.

PRESIDENT SACHS: So, had she detected this indication, what is your position should have been made further? I mean, I presume the lawyer would have checked with the OFAC List, López was not on the OFAC

[Page 320]

List, undisputedly, so what would the shortcoming then be?

MS. HERRERA: Open searches, Google. In fact, that's the case that Mr. Seda recognizes it. "In fact, when in 2014, Mr. López appears and says well the Meritage lot is mine I asked my lawyer Mr. Lopera to conduct a search And Lopera, my lawyer, found indeed López Vanegas is a convicted drug-trafficker."

Thank you.

Quick two points: We were told today that the due diligence conducted by Osorio & Moreno went 60 years back, but, in fact, there are a couple of things. It didn't go 60 years back. They took the 10 years, what was there; and, in the scope of these 10 years, they listed the persons, and particularly with regard--regarding the legal representatives, they only listed the legal representatives at the date of that search.

So, of course, that's limited, and, in fact, Moreno Osorio, or Osorio Moreno--sorry--didn't find Ivan López Vanegas, so you were told, oh yeah,--but you know, many banks find Ozorio Vanegas and Ivan Lopez

[Page 321]

and nothing happens Nothing happened? Nothing happened, but there are different--you didn't know what kind of transactions--different due diligence are made. It's different if I'm buying this for investing this; that if I'm giving a loan in which I basically have a much more restricted due diligence, et cetera. So, you cannot meet those sweeping affirmations.

Moving again to Page 92, then the Claimants rely in what they call and again the certification title, again, that doesn't exist under Colombian law. There is just rights of petition.

And importantly, they say-with--Mr. Reyes' idea is actually if you really know how Asset Forfeiture works and we will expect that the lawyers at least of the Claimant, or the Claimant will know given the magnitude, supposed magnitude, of this investment, then you don't ask. I mean, you cannot rely on solely the Fiscalía, oh, can you tell me? Please tell me if anybody is here and that's it. That is a certification. The Fiscalía gave you information that's public that's not confidential that it can provide at that point, but that's it.

[Page 322]

And also, what did they respond? They respond on the basis of the list that is presented to them. If you present the list and that's incomplete, also the response of the Fiscalía is going to be incomplete. The Fiscalía is not charged for doing the due diligence that the Claimants should have done.

And again, in the Osorio & Moreno title study in the disclaimer, you see this disclaimer, same type of disclaimer.

Just a quick note, you may recall that I refer, and I asked Mr. Martínez during the cross-examination about whether really asking a certification from the Fiscalía is a proof of good faith, and I put to him an example of something that happened in the Nineties where these so-called "certifications" were used to evade the law and to make mockery of the law, and he says I don't remember, but yeah, that happened. And at that time, the Attorney General was Mr. Sintura, the same person, and he was the one who had this problem. The same person that is making this petition.

So, it doesn't matter how you title it. You

[Page 323]

[Redacted]

bring me third parties that are going to appear as the owners so that they can appear as if having good faith. This is a ruse that had been--

PRESIDENT SACHS: Is this part of the new evidence?

MS. HERRERA: No. It's in the record. That's in the record. It's R-121.

Okay. Moving to 93--and we go here to the particular, to not use another term, view of the Decision of the Constitutional Court of Colombia, C-327. The first thing that I have to recall again--and I had referred to this--what was the decision of constitutionality? The Claimants at one point said this is not the case. No, it's a case on the decision of the constitutionality of a norm. What is the norm? Article 16 of the Asset Forfeiture Law. What is being analyzed? The two last paragraphs,

[Page 324]

meaning 10 and 11.

And why, whatever the quote says, doesn't apply to the rest? Because the Court, the Constitutional Court, has already decided on the constitutionality of all the previous articles and it's constitutional res judicata, and that's important. If they want to go back, they have to do so under Colombian Law on a specific decision reversing a decision. This is not the case. And it's crystal-clear that the Decision refers to assets of legal courts.

So, of course, the Claimants take this and say, oh, and you see, no, the levels of due diligence is only the assets. But they're talking--the Court is talking here to the assets of legal origin.

And I want to call your attention to one thing, and it is when the Constitutional Court decides on these two Articles 10 and 11, decide they are conditionally constitutionally--constitutional. And what does the Court says in terms of how do you have to read this conditionality?

One minute.

[Page 325]

Yes. So, in the C-27 of 2020, it's Exhibit CMB-014 at Paragraph 7.5, when the Court says how are you to understand these two provisions for purposes of applying them and them being constitutional? It says the Court will condition the constitutionality of Paragraphs 10 and 11 of Article 16--that again is not the cases, the scenario that we are analyzing here, which is an asset of illicit origin.

Paragraphs 10 and 11, Article 16 of Law 1708/2004, to specify on the one hand that, in this hypothesis, the Asset Forfeiture shall operate only when the holder of the right is the same person who has carried out the underlying illegal activity, the holder of the right of some licit assets who have collected legal activities but the Prosecutors cannot forfeiture assets, legal assets, and they have to go for the equivalent of licit origin.

It says carry out the legal activities that support the prosecutor powers of the state. And on the other hand to point out that the aforementioned restriction is applicable without prejudice of the rights of third parties acting in good faith without

[Page 326]

fault, in whose favor in rem titles have been constituted over the legal property subject to asset forfeiture.

And that's the case for instance, what happens if there is a mortgage? The property is in the hands of the person that committed the illegal act, but whose licit assets are being forfeited in lieu of the illicit ones, and they have a mortgage. So, a third party could have a mortgage. You have to make sure there is protection, but that's a complete different scenario.

So, it doesn't matter the legal contortions that you saw Mr. Martínez doing, and the Claimants doing, to apply this. That just simply does not follow. Whatever the Court said does not apply on the level of due diligence which we saw is quite high, doesn't apply to this scenario of illegal assets. Illegal assets is stringent. You have to look at the assets; you have to look at the change of title.

Now, moving to--why don't I have the number of the page here?

Four. This is particular--I really find

[Page 327]

this interesting the way that the Claimants have tried to say they conducted a due diligence because it's completely circular. You have Newport and Corficolombiana trying to attempt to discharge the due diligence by allocating the responsibilities to each other, and making really mock of why are their anti money-laundering and the "know your client" obligations, et cetera, so you say during the cross-examination, Mr. Seda was adamant that, for him, having hired a federally regulated financial institution, i.e. CORFI, which had guidelines and regulations was kind of the summum of the due diligence, was evidence of the seriousness of Newport's due diligence.

And he put it here. He says--during the Hearing, he says, "Mr. Seda, so I think we know, we didn't--we were under Contract to purchase property, but the acquirer of the property is Corficolombiana, so they are doing the due diligence that's required by them and I'm relying on them doing that due diligence, so I have reliance on that they are going to do that work right. They're going to acquire the property;

[Page 328]

that property's going to be deposited in a trust, so they have to do it. They have to do it."

And then it's quite interesting because--we saw this in May, but Mr. Seda writes a letter to Corficolombiana at one point saying can you please send me the communication of the approvals of the structuring of this business, and Corficolombiana says, yeah, remember, it's important to note that it is not the fiduciary but the Trustor, Newport, which directly negotiated the acquisition of the Project's plot with the Company La Palma, and they basically said it's up to you to do the due diligence.

And moving forward to the following page, when we address this with Mr. Martínez, this was quite interesting because Mr. Martínez said during the Hearing says--so Mr. Martínez at the Hearing, basically what he's saying Corficolombiana didn't have to do an enhanced due diligence regarding third parties from which it didn't hold contractual relationships as clients or counterparts. In view of the Claimants' own experts, Corficolombiana was not responsible for the due diligence in the chain of

[Page 329]

transfer of Meritage. Who was responsible then?

He says, Mr. Martínez, my position after looking at the documents in the case, is that the only obligated party I have found in this case was the fiduciary, Corficolombiana, but he says in the end, in my opinion Corficolombiana did not have to do an enhanced due diligence regarding third parties with whom it did not hold a contractual relationship as client or counterparts. Who are the clients of the counterparts? Newport? La Palma? That's it; it stops.

I have already said about the connection of Mr. Martínez and Mr. Sintura, the lawyer of Corficolombiana, and the impartiality of Mr. Martínez, to put it that way, the questions.

Now, because you're in the discussions--and this is quite important--a lot of the time was spent during the evidentiary hearing in May regarding what's the relevant time to conduct due diligence, and this generated a lot of questions. And so, the first thing is, as acknowledged by the Claimants' own expert, the relevant time to conduct due diligence--and that

[Page 330]

expert is Mr. Martínez--is when, with transfer of property, and Arbitrator Perezcano says, you said that good faith is evaluated based on information available at the moment of entry into the transaction. And you, my question to you, what is the Transaction, what is the relevant transaction, when does this arise. And he says the moment the act by which the properly transfer is perfected. And then the Claimants said the Sale Promise Agreement did not provide for transfer of title. That's undisputed. President Sachs asked this question again regarding the "promesa de compraventa" (in Spanish), and Mr. Moloo confirmed: "Correct. That did not provide transfer of title."

And then we got to why there is an ongoing obligation, and this all arises because even if you say, okay, it was extremely difficult, it was impossible because we have seen it was impossible, extremely difficult for the Claimants to find Mr. Iván López when I have a drug dealer coming and saying "that's mine," that raises a question, and there is no contention that that happened in early 2014. So, we talk about the continuous obligation to refresh its

[Page 331]

due diligence.

And what Mr. Reyes clearly explains is, look, it's a very different proposition if you're talking of a one-off -transaction that is perfected just with the sale; that when you're looking at the whole complex project, that involves several phases. And that the question of Arbitrator Poncet, rightly so, what does it mean? I have to be doing the exercise of due diligence all the time and given the Claimants also asked what does it mean ad infinitum? Mr. Reyes says no. It is if you receive information that changes the perception regarding good faith, then you're under the obligation to review your opinion regarding good faith.

Now, we have heard today the Claimants saying, oh, no, no, no, no, no, but the moment of the transfer, and they cite Mr. Medellín, was when the transfer of the property was made to the trust, and that Trust is the Meritage-La Palma Trust referred as the "Parqueo". Curiously enough, "Parqueo" means parking because that's going to move, the whole structure. And whose bona fide are we analyzing?

[Page 332]

We're analyzing Newport. Newport is not there.

Anyway, in this--under this complex project, there is an ongoing obligation, if you hear something new that changes that, to do something. During the Hearing, cross-examination, again I said this before, it was clear that Mr. Seda had done or his lawyer had done a Google search and had found that Mr. Iván López was extradited and--had been extradited and was a recognized drug-trafficker, and you have the reference here, and this was before they started the construction of the project, they say, my God they stopped all the project, that many people working, this is going, whatever we had managed to construct is going to ruin. Well, you assumed the risk.

In cross-examination, Mr. Seda recognized Newport refused to do the due diligence after learning of Mr. Lopez' claim. Ms. Banifatemi asked

"Ms. Banifatemi: You did not deem necessary given the situation and that you have a claim by someone who says I'm the rightful owner to restart maybe a due diligence, not a Google one, to have an attorney maybe look at the chain of title to go as far

[Page 333]

as possible? You did not do that; right?"

Mr. Seda said: "We did not redo the diligence."

Again, it was a conscious choice. I would say that's reckless behavior, reckless choice, but you assumed the risk.

And the question from Mr. Poncet--actually, Dr. Reyes gave an even more clear answer saying--well, Arbitrator Poncet was asking, saying--how many times do you have to renew the due diligence, with what frequency, and Dr. Reyes says "every time a drug dealer tells you that a criminal office has dispossessed you of an illicit asset, and that this fact will be informed to the Office of the Attorney General." There is no mention of the Claimants going to the Attorney General's Office.

Now, the issues with the pages.

Now, because of this discussion, the submission was like, oh, you know, and we hear it again, yeah, but you know, after we knew that Iván López was claiming property, we responded to his interview on the radio; we spoke to the Unit Buyers,

[Page 334]

well you spoke to the unit buyers, you tried to assure that everything is fine ,they will continue buying.

Okay. And then, they submit, the Claimants wrongfully claim, they say that Corficolombiana thoroughly refreshed its due diligence, so that's the contention in the Post-Hearing Brief.

Now, if you look just make a perfunctory analysis of the statement of the Legal Director of Corficolombiana, Ms. Guzman, who we referred to today and this was in another procedure that has been encountered here, what is it that Ms. Betancourt says that she did? She said -well, that actually she did not refresh. It says I verify once again how the business deals with La Palma had taken place, we verified the title studies, the ones that had been conducted and we know they were insufficient. We verified the searches that Mr. Sintura--we already talked about the searches and the petition and the limitations on the searches and the list and the petition--had performed, and once again the tool we have is to search for the list of people whose name appear in the title of transfer property, what really

[Page 335]

showed that was incomplete. And those that appear, particularly for La Palma, that were generated.

So, clearly, rechecking patently insufficient titles, verifying incomplete lists, and particularly doing enquiries about La Palma, it's just looking at all the information. I don't see any refreshing as they want, and conspicuously absent from the alleged refreshed due diligence are searches regarding López Vanegas and they know, Corficolombiana knows, because Mr. Seda said I told Corficolombiana about the call.

We move now to the Claims of the--Claimants' allegations regarding violation of due process. So, the Claimants had submitted they were denied the opportunity properly to participate in the proceedings that led to the seizure of the Meritage Project.

That's not true.

We have shown--and again to the surprise, apparently, of the Claimants--that both Prosecutor Ardila and Prosecutor Caro, and you have the evidence here, even in the Requerimiento Mr. Caro says, "identificacion y lugar de los afectados" , and is

[Page 336]

listed the lawyer of Newport, and you see how before that Prosecutor Ardila had also included Newport in the afectados. So, I don't know what this idea that they were not included comes from.

In cross-examination, and you know Mr. Seda admitted, Ms. Banifatemi asked:

"Ms. Banifatemi: My question is simple. Not getting to legalese. Are you aware that in April 2017 the Prosecutor recommended that Newport be admitted as an affected party?

Mr. Seda: No, no one told me that. That the Fiscalía recommended us to be an affected party, never."

I submit, starting an investment arbitration and claiming that--they had been deprived of--there had been a violation of due process when the facts demonstrate the opposite, is to say the least questionable. Anyway.

Now, at the trial stage, we have the decision of the second judge of the section of Asset Forfeitures, and we know that the Second Judge of the Circuit of Medellin said no I don't consider Newport

[Page 337]

as an afectado. Why ? Because in my reading of the law, it only will be afectado if it has in rem rights, which it doesn't. And this is not contested. We have seen already that Mr. Moloo answering to President Sachs that there had been transfer of title.

And you will see also that, during the cross-examination, when I asked Mr. Martínez, I said

"So, that is, the Judge's explanation that there need to be Real Property rights that they would be--for it to be--basically you need Real Property, it's upper cap, and that's not correct. We're not referring to Real Property, the Company. There need to be Real Property rights and they would be the affected parties. That is feasible, at least it coincides with your own view in the First Opinion" and then in the cross-examination

he said

"The general rule is that the affected parties are the holders of Real Property rights, rights in rem. That's the general rule."

So, at least, this was reasonable. And in

[Page 338]

any event, this was revoked by the Court of Appeals, and we know that part of the guarantees that the Claimants have and we know now that Claimants are fully participating, or we expect so, in the trial phase. We have again the--you have again here the chart, and another.

And another point I wanted to make very quickly is, in fact, because the procedures were--with the appeal of the Decision of not being considered affected parties in the trial phase, there has been no movements in terms of-The procedure was actually suspended, so it's not that there had been a violation of the due process of the Claimants, who now can present all evidence.

PRESIDENT SACHS: May I ask, what is the time perspective of the proceedings that now start to deal with the good-faith issue, if I understand it correctly?

MS. HERRERA: I had been told that one year. Whether that's really feasible, I don't know. I want to refer now and address that point in the following slide of why it takes so long and also another point,

[Page 339]

which is, you know, of course, they take the issue with the--Claimants take the issue with, yeah, according to Caro's testimony, it's one year; but the Claimants take issue with the duration of the proceedings.

But there are--Considering the aggregate circumstances, there are reasons that explain why this had happened and what's reasonable. First of all, as acknowledged by Mr. Seda in the cross-examination, the file is thousands and thousands and thousands and thousands of documents. Yes, indeed. Just the part that had been submitted is 8,500 pages.

The appeal was filed by Newport against the Decision of the Second Judge which, of course, delayed things. As explained by Prosecutor Caro, Prosecutors and the judges specialized in asset forfeiture are each in charge of around 120 cases, and there is only one Court of Appeals specialized in Asset Forfeiture.

The activity of the Colombian Judicial Branch was suspended during the COVID pandemic.

And this is interesting, because in an exchange between Mr. Mosquera and Mr. Seda on

[Page 340]

September 11, 2016, Mr. Seda says, "and if we don't pay and we have the land taken, well, we lose a lot less considering that in any case it will be impossible to continue with the other phases. This means that the necessary proof to take away this land is almost impossible. The process could take years, of course, it could be."

So, this is interesting because this is September 2016, so shortly after the Requerimiento, and Mr. Seda is well aware of the long duration of the Asset Forfeiture Proceedings. There is no mistake, they're now saying in this Arbitration, oh it was awful. They knew the duration.

[Redacted]

[Page 341]

[Redacted]

[Page 342]

[Redacted]

One quick point on that, and there was on Ms. Ardila again, the Claimants had Ms. Ardila for hours, I think, and that's the issue of-they're saying she lied. I'm going to address first the point of whether she knew or not. That we don't know. I cannot testify for her. Again, I just want to point out that the Claimants had the documents; they could have confronted it with her complaint against Mr. Seda. They chose not to do so and put it to Mr. Caro.

In any event, and the second point on this is on the credibility of Ms. Ardila. It is not true that she lied when she said that she had no personal relationship or professional relationship with Mr. Mosquera. I mean, if you look at the Spanish, it's very clear. When you say personal or professional relations that you're working with or you have the personal, but they write to you as he did requesting that you include Mr. López Vanegas, and in

[Page 343]

fact she said I'm not going to include López Vanegas as afectado--that's a different thing--but look at the Spanish because it's a misrepresentation. She did not lie.

Going now to discrimination, several important things here. The Claimants have gone and said, oh, it's discrimination, they target Mr. Seda because he was a foreigner. Well, no, the lot is an asset, and for that, who are the ones who are really the owners of this asset? We knew that it was La Palma. And, in fact, La Palma is the trustor, and La Palma is the beneficiary, has the beneficiary rights under the Trust. La Palma is what nationality? It's incorporated in Colombia. All the Shareholders are Colombian--or as far as we know. Again, there are always surprises behind, so as far as we know they're just Colombians.

In any event, that's what the similar situation, so Colombia has, indeed, conducted and proceeded with forfeitures of other properties belonging to nationals, Colombian nationals, which have comparable connections to criminal activities.

[Page 344]

[Redacted]

And again, this is the "like circumstances".

And you heard the Claimants this morning "there are 47 properties, of Ivan Lopez, that have not been targeted." Again, you have to look for these 47 properties, what had happened. A lot of them were acquired in '85-'86, so before there is any presumption that he was involved in drug-dealing.

And also they referred to one project "oh, but the Quartier Project. The Quartier Project was in a similar situation, you know, because López Vanegas was the owner and yet there was no Asset Forfeiture, then they completed that development, and they're selling their units." Again, this was acquired by López Vanegas in '86. So, you cannot just make swift generalizations; you have to look at what happened

[Page 345]

with each of them. And some of these properties had, as I said, they had been--the Registration Number disappeared or whatever; it requires a lot of work.

And I remind you that what Colombia has done is, okay, if I miss anything, if I miss anything, we're looking again.

We're looking again--sorry.

Let's talk briefly about the--not so briefly, about the so-called "Sister Property", and the Claimants are unhappy with any of the answers that were given of what was the process of thinking of Ms. Ardila. They say it is the Meritage that was target, and it was Ms. Ardila who only herself decided to do it.

The first thing, that assertion that, Ms. Ardila, in the record, saying "I took the decision myself" was in the context that she was pressed to say, "oh but Ms. Malagón did it, and nobody told you to do something that goes to corruption." You should say "no, I--that was my own decision. Nobody forced me to do it. I studied the thing and decided to request Asset Forfeiture."

[Page 346]

In any event, why the Sister Property is not in identical circumstances? Because the defects are not the same. First, if you look from 2006 onwards, the Meritage Lot, the so-called "Sister Property," had a different change of transfer, and a lot of transfers and connections with the Oficina that were only present in the Meritage Lot, including the one of Gurú, the Model, [Redacted] but anyway there is much more elements in that property pointing out to money-laundering.

Also--and this is what Ms. Ardila explained--is the Attorney General's Office considered it lacked sufficient evidence as to the illicit origin of the Sister Property, and remember this goes back to in August 1994, Jaime Orozco and Iván López buy a property from La Granja divided in two lots but each one has--jointly a certain percentage. Orozco, 25 percent--and that's the surface- 25 percent on one lot and 25 percent on the other lot, and the other one 75 percent and 75 percent. And the surface of the 25 percent is 188,558 square meter. They are consolidated afterwards, but then, in 2016, again they

[Page 347]

are divided and what Orozco Vanegas keeps is exactly the 25 percent that you have before.

So, I can understand-and this information about the percentages was from the beginning, it appeared and Ms. Ardila had it, since the beginning-I mean, you can look at her provisional determination that will appear there, how she knew there was 25, 75, et cetera. So, I can understand she looked and said 25 percent. I don't know if there is any illicit activity of Orozco, I see at the end he goes with 25 percent. Can I proceed to impose measures and here there is not being sale, there is no units being sold? Well, Probably, no. I have to look further.

And what does she do? Precisely that. She imposed Precautionary Measures on the Meritage, and the others she doesn't have the urgency and say but I'm opening another investigation on the Sister Property and other properties.

Now, we had been told that it was because Ms. Ardila was corrupt, was in collusion with Iván López, that she targeted the Meritage. But she targeted the Meritage, but she opens--how is it this

[Page 348]

go? Opens investigations into the so-called "Sister Property," and it's not her who then decides in that second investigation that actually let's prioritize other assets [Redacted]

[Redacted]

We have shown--and I refer you to what was 114, our timeline, showing why the so-called "coincidences" are not coincidences. And, in particular, as we said in the Post-Hearing Brief, in fact, the reason that you see that-the Claimants rely on the alleged "suspicious coincidence in time" and the speed of the Asset Forfeiture proceedings to support the corruption theory. But, what they omit to say is during this period López Vanegas filed a number of petitions before the Attorney General to reactivate the proceedings.

And, in fact, the Asset Forfeiture Proceedings had started by the time that López Vanegas said "please commence Asset Forfeiture." Why would I

[Page 349]

ask for something if I know something that is already happening? So, it just doesn't hold water.

You have here, you have heard, 114, a lot of arguments saying that Mr. Mosquera was bragging about his influence, et cetera. Well, we don't know about that. Whatever he said, the Treaty referred to Mr. Seda in the recordings that he made of the meeting with the Attorney General's Office, saying, I don't have anything, you know, where I can say really, Ardila asking me or anything specific, it's all hearsay. The people of the Fiscalía that supposedly appear and say "give us money," no idea. We don't know.

[Redacted]

[Page 350]

[Redacted]

Now, finally, I will say that on this, again, that the Claimants made a lot of accusations, bring a lot of papers on press on the supposed corruption, Mr. Hernández, Mr. Hernández who came here, despite all the cases he had, whose father was killed, being another officer of the Fiscalía, they didn't ask him. And we had to produce thousands of files just to rebut press, which is innuendo. Anyway, nothing of that. They were--neither Ms. Ardila or Mr. Hernández were confronted.

[Redacted]

[Page 351]

[Redacted]

[Page 352]

[Redacted]

You know--I don't have time. You know very well all the parameters and the requirements under each of the standards of protection in the TPΑ. Very quickly, you have an expropriatory--you have permanent impact--this is no permanent impact here. This is a measure that is ongoing. There had been no determination--we will see if there is an impact or not, and I said again that's redress if that's the case. Interference with reasonable backed expectations, the Claimants accepted framework of the Colombian Asset Forfeiture Law, and would say that-- what I hear this morning is that the Claimants find the Asset Forfeiture Law, the Colombian, odious. They could find it that way. They even say, oh okay, it doesn't follow international law-Well, the Asset Forfeiture Law had been followed by other countries. In any event, that's irrelevant. The point is that's part of the framework when Mr. Seda and Claimants decided to invest.

The character of the government actions, the government action is not final, there are still no

[Page 353]

final decisions, it is based on the existing framework. Legitimate expectations, again, we don't believe that, we say legitimate public welfare. We hear that there was no legitimate public welfare I have to tell you, fighting against criminal or organized crime, [Redacted] I'm sure that everybody that is here from Colombia will agree with me it's quite a legitimate one. I don't think there is a single Colombian family that had not lost a person due precisely to the Oficina and the violence created by the drug-dealing, so that's combating organized crime.

Compliance with due process of law, I show you how it has been interpreted in the law and no discrimination here, and this is bona fide application of the Asset Forfeiture Law.

We move quickly to national treatment. We see that one of the elements is that the measure has to be applied to the foreign investment. Again, this is a measure applied to the asset. It's not applied to Mr. Seda. And again, the asset is owned by Colombian nationals.

[Page 354]

There has been less favorable treatment.

That's not the case, and that's evaluated in like circumstances I already touched on this. There is no reasonable justification. Even if there was a different treatment with Meritage Lot, that treatment and the imposition of the Precautionary Measures was urgent for the reasons I already explained.

On fair and equitable treatment, where the standard is not arbitrary and reasonable, I have touched upon this already. [Redacted], the illicit origin of the asset. It was in accordance with procedural protection, I talk about the protections, the possibility to intervene, legality control, again it was not discriminatory. And also, to recall, the standard under the TPA doesn't include legitimate expectation, but even if there were, again the Claimants could not have legitimate expectations that Asset Forfeiture Law would not apply when they have not complied with--would have to do in due diligence or at least appear so far.

And, finally, with the other projects, and

[Page 355]

there is no evidence of sufficient causal nexus between the Measures and the damages claimed on the other projects.

As to full protection and security, remember here, and the same in regards to minimum standard of treatment, the protection is predicated of the Investment and not of the investor, and we have seen the Measures of, very quickly, that were taken to protect not only the Claimants' investment, I mean investment whatever it is-it's not, the investment has not been--the Measure has been not against investment, but also Mr. Seda as investor himself.

Thank you.

So, my colleague, Ms. Ribco, will address damages now.

PRESIDENT SACHS: Damages.

How much time is left?

SECRETARY MARZAL: 23 minutes.

MS. RIBCO: Thank you very much.

Good afternoon, and I know everyone wants to go home, and indeed Mr. Moloo mentioned this morning that we should not get to damages and we should go

[Page 356]

home, and we should, indeed, because as shown in this roadmap that you have there, we have shown already that the Measures were adopted in the protection of Essential Security of Colombia. We have shown that this Tribunal does not have jurisdiction. We have shown that the claims are premature and abusive. And we have shown that Colombia has not breached its international obligations under the TPΑ.

But still I need to address damages, in case you reach to it, and because there has been a lot of misrepresentations and things to correct this afternoon already from our friends on the other side.

We had originally prepared more slides but we had to reduce them to fit them into the three-and-a-bit more hours. I will need to rush through anyway the few slides that were left, so I respectfully request the Tribunal to refer back to the PHB where all the damages cases are very clearly explained.

So, it is undisputed that only the damages incurred by reason of or arising out of the State's unlawful conduct are compensable, and this has been

[Page 357]

confirmed this morning by Mr. Moloo.

Now, only one-third of the damages claimed by the Claimants concern the Meritage Project. This is undisputed, as is also undisputed that the Asset Forfeiture Proceedings also targeted the Meritage Lot, not even the Meritage Project because, as we said, it's an action that targets only assets and not the Investors, as such. So, only 31 percent, if any, of the claims should be claimed before this Tribunal.

We see in the following slide that there is also no legal connection between the Meritage Project and any of the Claimants' other projects. Indeed, if you see all the Claims--and we have seen already at the Opening, but if you see again all the Claimants that are in yellow have absolutely no connection to the Meritage. But even the ones--and also the projects that you see--Luxé, the 450 Heights and Santa Fe and Tierra Bomba--are developed by SPVs that are totally unconnected to Newport.

So, there is no legal connection at all between this and the Meritage Project, assuming that the Meritage was the target of the Measures which

[Page 358]

again it was not.

So, now if we look, for example, at the Luxé Project, for which the Claimants claim 44 million, which is 22 percent of the full damages claim. This morning the Claimants made the allegation that the banks accelerated debt and that, therefore, the Luxé, at least the construction of the hotel, had to stop because financing dried up.

We searched really carefully the record, and there is absolutely no evidence, first, that Colpatria agreed to provide this financing; second, that Colpatria ever decided to withdraw the financing due to the Asset Forfeiture Proceedings.

And in fact, if you compare Exhibit C-168, which is the letter that refers to the Decision of Banco de Bogotá, which was the bank that was financing construction of the Meritage. in that letter, for example, the Banco de Bogotá really informed that it was accelerating payment--the credit due to the Asset Forfeiture Proceedings or actually to the Preliminary Measures that had been adopted by them, and it referred to provision of the Promissory Note which

[Page 359]

allowed acceleration of those payments.

Then no such provision, if you look at C-135, which is the loan approval letter for Colpatria, no such provision is included, so there is nothing that will allow, for example, Colpatria to accelerate the payment in case of Asset Forfeiture Proceedings against Luxé, let alone against a totally unrelated project, which is Newport.

Now, as I said, the loan was granted to Luxé by The Charlee, so it was not granted to Newport. Newport does not appear anywhere in that loan approval. And that, as I said, there is no ground.

Now, assuming that Colpatria did decide to withdraw financing, there's absolutely no documentary evidence that the Claimants ever claimed that Colpatria--to give that financing back because they did not have any grounds to accelerate payment.

That's what a diligent businessman would have done.

Now, they also--and a lot was said this morning that the hotel was 70 percent completed. There's, however, no evidence that construction was halted because Colpatria allegedly decided to withdraw

[Page 360]

financing.

Actually, they said it was only four months away from being completed, so it's quite incredible that they did not have by then financing, especially when they say they are investors and there is absolutely no evidence that they ever even attempted to provide old funds to complete this almost completed hotel that they claim as well would have been very profitable.

So, all this looks very unreasonable, and there's absolutely no evidence to show any of these steps that I'm going through.

They also say, for example, that they tried to sell the Project to alternative investors but that they couldn't because of the Measures. However, if you look at Exhibit C-381, it shows that actually by November 2016, that's three months after the Preliminary Measures were imposed, Royal Paladin were still interested in negotiating the potential investment in Luxé, and we don't know if that ever went forward or not because we don't know who is at the moment operating the Luxé Cabanas, which are

[Page 361]

operating as the Claimant stated this morning.

Now, if we look what the evidence shows, and we saw this in the Opening Statement, it shows that, by the time the Precautionary Measures were adopted, the Luxé Project was already significantly delayed. It had experienced severe cost overruns and financing had dried up.

Now, even assuming that there is a causal link, the loss is suffered in connection with the Luxé Project, is still highly exaggerated, as we will see later, and the maximum compensation should be 3.7 million and not 44 million as claimed by the Claimants.

A similar situation is with the other project. I will move a bit faster in the interest of time. So, with Tierra Bomba, we saw already the evidence in the record. What does it show? That there's absolutely no causation because the Claimants did not own the land where they intended hopefully to develop the Tierra Bomba project. They did not have any approval by the indigenous population that was required to develop those projects.

[Page 362]

And indeed, what they had were promises to purchase three lots but, as these were made with prospective sellers that did not have legal title over that land, those contracts were terminated some years later, and what the termination contract says that they were terminated by mutual consent of permitted seller and buyers.

What there is no evidence of is that the projects were viable or that, for example, the Claimants tried to find other lots in Tierra Bomba, which would have been the reasonable thing to do again if the Project was so profitable as they claim they were.

Now, there is a developing project which is interesting because, in fact, this is little more than ideas and brochures. Still, they claim $54.5 million in connection with this. This is their 450 Heights and Santa Fe de Antioquia project. And there's again no evidence that these were viable, that they had financing or that the projects were halted due to the Asset Forfeiture Proceedings.

What the evidence shows is that investors that were

[Page 363]

seeking to divest from Mr. Seda's other projects actually accepted interest in the Santa Fe de Antioquia project.

Even more interesting is the Claim for 15 million in connection with what we called the "future hypothetical projects," that 7 percent of the claim in connection with projects that were not even ideas, so we said the developing projects were little more than ideas. These were not even ideas. Still, the Claimants are claiming 15 million in connection to this.

There is no evidence against that they were viable, that there was financing, that they were impossible to develop due to the Asset Forfeiture Proceedings. What the evidence shows is that Mr. Seda was still operating The Charlee Hotel, and that he kept receiving offers to operate other projects.

Moving to the next issue, and it's assuming that you find that there's causation and you actually need to assess damages, there is a dispute between the Parties as to which method to apply.

It is undisputed that the criteria for

[Page 364]

Rusoro applies to determine whether DCF method is appropriate in case of not-going concerns. We saw a very similar slide during the Opening, and all we did at the Hearing was to confirm. For example, one of the criteria is that there should be an established historical record of financial performance.

The Claimants' only operating hotel which is The Charlee Hotel is very different in nature from the other hotels that they would have developed. None of them were developed.

So, just to recall, The Charlee Hotel had 42 rooms. It was in central Medellín and, as Mr. Seda confirmed during his cross-examination, it was known for its relation to "prepagos," which is "prostitutes" in Spanish. All other projects were more family oriented.

Also, they referred constantly to the Meritage that was sold. Actually, phase one of the Meritage Project is the only phase of the project that had reached the equilibrium point, and as demonstrated by Dr. Hern, it was sold at a loss. So, really the track record of the Claimants speaks for itself.

[Page 365]

The second issue, for example, reliable protections of future cash flow. It's undisputed that the business planning on which BRG relied had not been verified by third Parties and, as confirmed by Mr. Seda, they're highly unreliable because he said, when faced with one that it was not possible to determine whether it was the last version of the document or just some undated draft of a brochure of one of the projects.

Now, just in the interest of time, Dr. Hern does, and we--our position is that a Cost Approach should be followed, but even if the Tribunal decides to go for a DCF, Dr. Hern explained that, because the Claimants had invested in a competitive market, that result of going for the Cost Approach or for a reasonable DCF Approach or a DCF Approach based on reasonable assumptions is very much consistent.

Now, the Claimants seem to question that the hospitality and real estate market is a competitive market. It has been shown that there is no barriers in principle to entry, so it is, in principle--a competitive market. If there is any barrier that

[Page 366]

applies in the particular region where the Claimants have invested is that most of the land in Antioquia, where Medellín is, is largely in the hands of narcos, and, and their blessing, to put it in a way, is needed in order to do business there. So, if there is any barrier to entry the market, that is the one.

Otherwise, it's fully, and not perfectly because there is no perfectly competitive market as explained by Dr. Hern, but it is competitive.

An important point on this is that the Claimants have, other than contesting the Cost Approach, they did not contest the cost valuation made by Dr. Hern. So, if the Tribunal decides to adopt a Cost Approach, then Dr. Hern's cost valuation is uncontested.

But let's see because for the sake of exercise and completeness, Dr. Hern also performed a DCF valuation on the basis of reasonable or supported assumptions. And for the hotel which are 80 percent of the damages claims, despite the fact that they mentioned that there's no operating hotel other than The Charlee, the Claimants are claiming $77 million,

[Page 367]

only 25.5 concerned the Meritage, and that's on the basis of what we call "the exaggerated assumptions."

Now, if we go to the adjusted assumptions, let's see, for example, the EBITDA margin, the Claimants--or BRG has applied a 38 to 56 percent margin without any support.

Now, if we see, for example, if--Dr. Hern adopted a 19 to 22 percent margin, which is in line with The Charlee Hotel that the Claimants operate and that they claim is a very successful hotel, and the impact on the valuation is huge. It's between 51 and 61 percent, which equals 66 to 79 percent.

Now, just in--each one of these key drivers has such a significant impact. So, if you just follow Dr. Hern's approach on EBITDA margins, then the valuation needs to be reduced by between 66 and 79 percent. If we go to the Discount Rate, BRG applied a rate of 7.9 Discount Rate, which, as explained by Dr. Hern, is highly unrealistic because the Claimants themselves have offered investment as an internal rate of return of between 25 and 28 percent.

Again, if only adjusting this driver, it has an impact

[Page 368]

on the valuation of between 72 and 105 percent.

Failure rate. Again, this was highly--or properly discussed because BRG decided to apply a zero percent failure risk for Meritage and Luxé only at 23 percent for projects that are little more than ideas, as we mentioned, and for which they didn't have the land or permits. So this is fully developed in the PHB and, in the interest of time, I respectfully refer you to the PHB.

Similar impact applies to the real estate operations, and I will only--the real estate claims amount to 20 percent, 21 million. Only if I may correct only or comment on the speed of sales, BRG applied speed of sale of up to 14.4 units per month for the 450 Heights. This is up to more than three times fast--I mean, selling, that they assumed that the 450 Heights Project would have sold up to three times faster than the Meritage Phase 1 sold. The Meritage Phase 1 sold at four units per month during the first month in which it was in the market.

Again, it was sold at a loss, so it's not such a great comparator, but even taking it as a

[Page 369]

comparator, the ones that BRG--on which BRG relied, 14.4 is highly, highly unreliable. And if we adjust that, then the difference is around 3 percent which is 15--around 3 million, sorry, which is 15 percent.

Similarly unsubstantiated and exaggerated is the Claimants' claim for lost fees, which amounts to 85.9 million, only 28.2 million concerned the Meritage Project. There is no evidence that the Claimants would have operated the yet-to-be-built hotels. As I mentioned before, there is also not evidence, for example, that they operated the Luxé Cabanas. There's no evidence that Royal Realty lost the opportunity to generate these fees because they could have provided management and operating services to other third parties. They are, indeed, still operating The Charlee Hotel and their know-how that was mentioned by the Claimants today, Claimants still have it, so they could put it to use, instead of claiming in this Arbitration. The claims are so exaggerated because they're highly based on the exaggerated assumptions that we mentioned before.

Then there is also a claim of 15.6 million

[Page 370]

for future hypothetical projects. This is absolutely and entirely speculative because there is no evidence at all of any such future hypothetical project that it would exist, that it would succeed, and even if, then the valuation is exaggerated because again it's based on the exaggerated assumptions that were considered for the Claimants' valuation and real estate business.

Now, just to conclude, the DCF valuation in this is a very helpful table because it compares Dr. Hern's Cost Approach, and his correct DCF Approach that you will see is largely consistent, as expected because, as we said, this is a competitive margin and it's ridiculously lower than BRG's exaggerated DCF valuation.

Just to finish, the Claimants are also claiming moral damages. It has been demonstrated at the Opening, and it's also explained in the PHB, that moral damages are only applicable or may only be granted on exceptional circumstances such as physical threat, illegal detention, kidnapping, forced disappearance. None of this has happened here.

So--not even close to it.

[Page 371]

And we saw also, if I may refer to a table that we had in our Opening, comparing the amounts granted in other cases where human rights had been breached, including, as I said, forced disappearance and assassination, and the amounts granted were far, far lower than the amount claimed by the Claimants or by Mr. Seda in this case.

I don't know if we have any time left.

SECRETARY MARZAL: One minute.

MS. BANIFATEMI: Thank you. Again I'll just finish by the reverse order of what Ms. Ribco said, that, as you will have seen, that there is no case on damages. It's all inflated, and again it's Mr. Seda playing the casino.

As Ms. Herrera has explained, there is simply no breach of the Treaty. The only legitimate expectation, obviously, Mr. Seda and his acolytes should have been that by allegedly investing in Colombia, they are investing in one of the worst regions and the most dangerous regions, and then the due diligence was on their burden and they didn't do that, and I'm not going to reargue what Ms. Herrera

[Page 372]

explained.

But, really, what you should decide is that this case is a case where you do not have jurisdiction, and as you know, you do not have the power to decide the invocation by Colombia of its Essential Security Interest exception in relation to an extremely grave and serious set of circumstances and [Redacted]

We thank you, the Tribunal, for its patience, and if there is any questions to be addressed tomorrow, we're happy to take those; if not, then we'll just proceed with rebuttal.

PRESIDENT SACHS: No, as agreed we will ask our questions tomorrow. So this is the end of today's pleadings. We will then start tomorrow with the rebuttal, and then with the rejoinder rebuttal.

And we wish you a good evening. Marcus and I will have a drink because today is a German national holiday, and we are celebrating our reunification, and so you can see how serious we take your case that we sit tomorrow on a national holiday. So, thank you.

Good evening.

[Page 373]

MR. MOLOO: Thank you. Thank you, David.

And the Interpreters.

(Whereupon, at 7:09 p.m., the Hearing was adjourned until 9:30 a.m. the following day.)

[Page 374]

CERTIFICATE OF REPORTER

I, David A. Kasdan, RDR-CRR, Court Reporter, do hereby certify that the foregoing proceedings were stenographically recorded by me and thereafter reduced to typewritten form by computer-assisted transcription under my direction and supervision; and that the foregoing transcript is a true and accurate record of the proceedings.

I further certify that I am neither counsel for, related to, nor employed by any of the parties to this action in this proceeding, nor financially or otherwise interested in the outcome of this litigation.

Signature

DAVID A. KASDAN