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IN THE MATTER OF AN ARBITRATION UNDER THE DOMINICAN
REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE
AGREEMENT, SIGNED ON AUGUST 5, 2004 ("CAFTA-DR")
AND
UNDER THE UNCITRAL ARBITRATION RULES
(AS ADOPTED IN 2013)
(the "UNCITRAL Rules")
-x
| In the Matter of Arbitration Between: MICHAEL BALLANTINE, LISA BALLANTINE, Claimants, and THE DOMINICAN REPUBLIC, Respondent. | PCA Case No. 2016-17 |
-x Volume 5
ORAL HEARING
Friday, September 7, 2018
The World Bank
1818 H Street, N.W.
MC Building
Conference Room 4-800
Washington, D.C.
The hearing in the above-entitled matter came
on, pursuant to notice, at 12:00 p.m. (EDT) before:
PROFESSOR RICARDO RAMÍREZ HERNÁNDEZ,
Presiding Arbitrator
MS. MARNEY L. CHEEK, Co-Arbitrator
PROFESSOR RAÚL EMILIO VINUESA, Co-Arbitrator
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ALSO PRESENT:
MR. JULIAN BORDAÇAHAR
Secretary to the Tribunal
Court Reporters:
MS. MARGIE DAUSTER
Registered Merit Reporter (RMR)
Certified Realtime Reporter (CRR)
B&B Reporters
529 14th Street, S.E.
Washington, D.C. 20003
United States of America
MR. DANTE RINALDI
MR. DIONISIO RINALDI
D.R. Esteno
Colombres 566
Buenos Aires 1218ABE
Republic of Argentina
Interpreters:
MS. SILVIA COLLA
MR. DANIEL GIGLIO
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APPEARANCES:
Attending on behalf of the Claimants:
MR. EDWARD "TEDDY" BALDWIN
MR. MATTHEW ALLISON
MS. LARISSA DIAZ
MS. SHAILA URMI
Baker & McKenzie LLP
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
United States of America
Claimant Representatives:
MS. LISA BALLANTINE
MR. MICHAEL BALLANTINE
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APPEARANCES (Continued)
Attending on behalf of the Respondent:
MR. MARCELO SALAZAR
MS. LEIDYLIN CONTRERAS
MS. RAQUEL DE LA ROSA
Dirección de Administración de Acuerdos y
Tratados Comerciales Internacionales,
Ministerio de Industria y Comercio
MS. PATRICIA ABREU
MR. ENMANUEL ROSARIO
MS. ROSA OTERO
MS. JOHANNA MONTERO
MS. CLAUDIA ADAMES
Ministerio de Medio Ambiente y Recursos
Naturales
MR. PAOLO DI ROSA
MR. RAÚL R. HERRERA
MS. MALLORY SILBERMAN
MS. CLAUDIA TAVERAS
MS. CRISTINA ARIZMENDI
MR. KELBY BALLEΝΑ
MS. KAILA MILLETT
Arnold & Porter, LLP
601 Massachusetts Avenue, N.W.
Washington, D.C. 20001-3743
United States of America
Of Counsel:
MR. JOSÉ ANTONIA RIVAS CAMPO
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CONTENTS
PAGE
CLOSING ARGUMENTS:
ON BEHALF OF CLAIMANTS:
By Mr. Allison ... 1176
ON BEHALF OF RESPONDENT:
QUESTIONS FROM THE TRIBUNAL ... 1307
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PRESIDENT RAMÍREZ HERNÁNDEZ: Good afternoon. So, just to give you how the Tribunal intends to proceed, we will hear from Claimant. We will take the 20-minute break agreed. We will hear from Respondent.
And after that, the Tribunal will pose questions to both Parties, maybe to one so--according to the questions. To let you know how we'll proceed.
So, Claimant, you have the floor.
CLOSING ARGUMENT BY COUNSEL FOR CLAIMANTS
MR. ALLISON: Members of the Tribunal, Counsel.
We started this week asking why we are here. And now we need to ask what do we know.
We know that the Respondent can no longer pick and choose among its many justifications for denying the Jamaca de Dios expansion permit. We finally heard what the real reason is. It's environmental fragility. Respondent has now seized on that phrase as the justification for why Jamaca is the only mountain project within the La Vega Province that cannot develop its property. The only one.
But before we talk about environmental fragility, let's quickly dispose of a few things. Let's talk about what this dispute is no longer about. It's no longer about slopes. Respondent has abandoned its slope argument despite the fact that all four rejection letters from the
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Respondent cited that as the very first reason for why it was denying the Ballantines' application to expand its project.
Respondent cannot rely on that Article anymore. Why not? Because every mountain project in the area has slopes that exceed 60 percent.
The Tribunal has Demonstrative 15. The slope percentages are uncontested. Jarabacoa Mountain Garden, 43 percent slopes above 60 percent. Quintas del Bosque II, 22 percent. Paso Alto, 17 percent.
None of these projects were rejected because a portion of their land had slopes in excess of 60 percent. We heard Mr. Navarro testify yesterday that Article 122 prohibits building on land that is steeper than 60 percent but does not prohibit building on land with slopes of less than 60 percent.
So, Article 122 cannot be the justification why 86 percent of the Ballantines' Phase 2 development could not be developed.
The Tribunal has seen the slope maps for the Jamaca expansion request. Navarro acknowledged that his calculation was 19 percent and Eric Kay's was 14 percent, but the difference was not material to the denial.
This is the map. We've seen it before. We've seen Phase 1 with the steep slopes in the middle. The
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Ballantines did not build on those slopes.
We see Phase 2 with slopes primarily concentrated in two sections up at the top. We see the land where the road was begun to cut before Michael was fined and the project was shut down.
Respondent ran that slope argument as long as it could. It still tries to say that, "The Ballantines didn't let us know that we weren't going to build on those slopes."
But we've heard the statements from the Ballantines. They didn't intend to develop on that land. And if there was any doubt, the June 13th letter affirmatively states, "Nevertheless, according to the aforementioned, the slopes where our project would be located are under such percentage."
And any doubt should have been further erased by Respondent's own August 2013 inspection report where the findings were that a tour was made of the site where various slopes in the area could be seen. They go from steep to very steep.
And so GPS points were taken in the area where it is intended to develop the project, and they were viewed with Google Earth. The same Google Earth technology that Respondent questioned Michael Ballantine using in connection with his first reconsideration request was used
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by the Respondent in response to the fourth reconsideration after they had received inquiries from the U.S. Embassy and from their own Center for Foreign Investment.
Those five Google map slope readings were appended to the report, and the Tribunal saw them. Not one of them showed a slope in excess of 60 percent where it is intended to develop the project.
But it wouldn't have mattered if those readings did. Navarro has now said, in his sworn testimony, that as long as a developer can find 5 percent of a lot that has a slope less than 60 percent, that lot can be developed and a house can be built there. He has to say that to justify the approval of 115 lots in Jarabacoa Mountain Garden.
And so we come to environmental fragility. What does that mean? It's not defined anywhere in Dominican law. And so Mr. Navarro insists that it means several things.
The Tribunal has noted that the August 23rd inspection report had some inconsistent findings and made no recommendations. Claimants invite and encourage the Tribunal to review the multiple inspection reports to see if any of the issues that Navarro now identifies are reflected in those reports or to see if there were any studies that were made with those reports that would support any of the claims that Mr. Navarro now makes.
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There are four separate denial letters that all cite Article 122 as the first basis to deny the expansion request. They're in September 2011, March 2012, December 2012 and, finally, the last denial in January 24 that also included the Baiguate Park.
Mr. Navarro's catalog of issues: Altitude, soil issues, runoff, landslides, rainfall, cloud forest. All those issues combine to make Jamaca de Dios Phase 2 environmentally fragile.
So, let's look at them. First, it's too high. It's the altitude. At the time Jamaca was repeatedly denied, no Dominican law addressed development at a specific altitude.
Even now, Dominican law does not prohibit development below 1300 meters above sea level. Just as with the slope law, you can't develop above 1300 meters, but you can develop below 1300 meters, and Jamaca Phase 2 is below that, as is the recently approved La Montaña.
Altitude is not mentioned once in any of the many inspection reports. Not once. Those reports have meaning, and Respondent cannot now claim that altitude was a critical factor when it didn't rely on altitude in its multiple denials.
As I mentioned, La Montaña has a permit to build to 1300 feet. Paso Alto has a permit to build to
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1190 meters. And Rancho Guaraguao was allowed to build up to 1890 meters above sea level without a permit in a national park.
So, it can't be the altitude. So, it must be they were in the cloud forest. They're a little related; you go high and you're in the cloud forest.
First, this issue does not appear in this case until the Respondent's Rejoinder. The phrase "cloud forest" does not appear in any denial letter, any inspection report, or even the original Statement of Defense. This is all after the fact.
And Mr. Navarro deferred to his former colleague, Professor Martínez, on this point. And Professor Martínez confirms that the cloud forest starts at 800 meters above sea level. He confirms that in both his Witness Statements.
And, indeed, Respondent's expert, Mr. Booth, in his PowerPoint yesterday, confirmed that the cloud forest in the Dominican Republic begins as low as 350 meters above sea level.
But even if we use Martínez' more conservative level, every mountain project at issue here, with the exception of Mirador del Pino, is in the cloud forest. So, it can't be the cloud forest.
But it rains too much. And Navarro first tried to
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argue that it rained more at Jamaca de Dios than at other projects within a few kilometers. But his support for that was a map he put in his report that makes no mention of rainfall, and then he later agreed that it rains in the area 1600 to 1800 meters per year.
Again, none of the inspection reports or rejection letters make any issue of rainfall as a factor that justified refusal of the permit, and Dominican regulations don't address now, and they didn't address then, rainfall as a factor in consideration of mountain projects.
The soil is unstable. We heard this one a lot. And while we don't hear anything about soil stability at the time, the phrase "clayey soil" does appear in one of the inspection reports, and so Respondent pounces.
But what are "clayey soils"? We heard from Mr. Deming at Slide 4. "Residual Soil in a Project 3 Cloud Forest: A cloud forest provides year-round moisture, which accelerates decomposition. Special engineering considerations are needed for stability in the cloud forest horizon because of the more clayey soil type and the higher moisture content."
And so Respondent's own soil stability expert confirms that it's the cloud forest that impacts the soil in Jamaca, and it impacts all cloud forest projects.
And Mr. Navarro also confirms that the MMA never
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did any specific soil test, measurements or diggings at Jamaca as part of its many inspections.
At the end, try as it might, Respondent can point to no evidence in the record to support the notion that the soil at Jamaca de Dios is any different than the soil at any other project, and its experts don't even try.
Navarro confirmed that mountains in and around Jarabacoa have Class VII soils. And no other mountain project has been rejected or even altered on the basis of its soil issues.
Navarro confirmed at 764 and 765: "Just so the record is clear, you didn't see any communications from the MMA to the Ballantines at any point in which they said, 'How do you plan to deal with soil stability at your expansion project'?"
"The letter provides an option to them of relocating the project."
"I understand the letter says you can submit some different property. I'm asking with respect to the property they had submitted, did the MMA ever write to them and say 'What is your plan with respect to soil stability'?"
"I have no knowledge of a letter of that nature."
But with unstable soil, there can be runoff or landslides. Earth movement is an issue that must be
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addressed in mountain developments. That's not an issue. All developers have to deal with the possibility that erosion will occur.
But there is no evidence that erosion issues were considered by the MMA at the time the Ballantines' permit was denied.
And evidence of erosion or concern about runoff was expressly mentioned in the consideration of multiple mountain projects in La Vega that were later permitted for development.
The JMG original denial letter. "Movement of the earth would be needed to carry out the project, which could potentially lead to erosion of the soil and, hence, sedimentation in the water basin."
Indeed, Mr. Navarro himself observed landslides and took pictures of them when he went to visit Jarabacoa Mountain Garden before approving its permit.
The actual permit for Alta Vista, in December of 2012, says: "Given the topical characteristics of the terrain, particularly the phenomena of soil erosion at the project site, plot division work on the land, the design and future construction of the project, while bearing in mind the potential risks of mass landslides and subsidence. Therefore, future houses must have lightweight structures according to the load-bearing capacity of the soil."
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La Montaña, it's now permitted. "The soil has developed on metamorphic igneous rock with high elevations exposed to mass erosions due to the high local precipitation of 1600 millimeters on the range."
Sierra Fría, rejected first and then given Terms of Reference. "The construction of the project would cause soil erosion and acidity."
Navarro confirmed.
"Did you ever see a letter to Jamaca that said, 'How do you plan to address water runoff at your expansion project'?"
"I did not."
"Did you ever see a letter that said exactly specifically, 'Where do you plan to build the road to minimize the earth movement that we're concerned about'?"
"I did not."
Water and biodiversity, these were justifications that Respondent has offered at some point for their denial, and it remains unclear whether it's still an issue when there's a hydrological basis for the denial.
But if we look at the very first inspection team note when they went to visit JDD, they noted there was no active water. "Bodies of water inside the project area or less than 2 kilometers away: None observed."
It's also plain that there's nothing in the record
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to support any contention that the--Jamaca is more ecologically diverse than other mountain projects.
Mr. Booth, who testified about the ecology at Jamaca de Dios, confirmed that he hadn't visited any other projects in the area.
So, Respondent contends, instead of environmentally, that the houses at Phase 1 were just too nice. They say the homes violated the promises made in the Environmental Impact Study presented by Jamaca de Dios that they would build mountain villas or cabins.
We had some debate about what those terms meant. But, again, Respondent can point to no contemporaneous expression of concern to the Ballantines about the style of the homes that were climbing up the hill at Jamaca de Dios. There's no post-permit inspection complaints about the house. No conditions were placed on the renewal of the Phase 1 license when it was granted in 2013, and there was no response to any of the many ICA reports submitted by Claimants every six months.
Ultimately, Navarro is left to insist that the Ballantines could not build their road to the top of Phase 2. This despite the quality of the Phase 1 road of which the Tribunal has seen the video evidence. This is another new argument, although one rejection letter does mention the road and calls it a path.
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But Respondent's expert, Mr. Deming, does not contend that the Phase 2 road was unbuildable. He contends that it would have environmental impact, although his views on that are overstated as he projected a 10-meter wide road and not the 6-meter wide road that the Ballantines planned and had built in Phase 1.
You heard Mr. Kay's testimony that the Phase 1 road could be extended into Phase 2.
Now, the road would have impact. There's no doubt about that. But not any greater impact than any other mountain road. Mr. Navarro himself in his Report states, "In general, mountain projects require a great deal of work to make all the areas accessible."
Mr. Navarro confirms there was no specific plan for the JDD road he was evaluating. But he now says the road must be totally vertical, and by contrast, Mr. Navarro apparently liked what he claimed was the preexisting, non-permitted road at JMG, even though the records reflect that only 25 percent of that road had been built. The Tribunal should review and recall the testimony of Mr. Navarro with respect to the JMG road.
We saw the site plan. The shaded gray areas are where the slopes at Jamaca de Dios exceed 60 percent. Excuse me. Mountain Garden. We see the contours and the approved roads, and we see that the roads cross contour
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lines. Here they are blown up in color for the Tribunal's convenience.
Now, the grade proportions of these roads, which Navarro called "the roads cut by farmers," would have to be astonishing. He says a 7 percent grade is best, and nothing over 15 percent would be safe. Portions of those roads, simple mathematics in that chart, show that these roads would have grades well above 15 percent.
Despite that, Mr. Navarro now claims that no road can be built in Jamaca Phase 2 because, "The only path to get to the upper portion of the mountain is by breaking the contour line." But it's simple physics. You must break and cross contour lines in order to climb a road up a mountain. The road is another new argument.
So, why are we here? Ultimately, Respondent's defense is built on the notion that Jamaca somehow, despite similar projects within a few miles, was so ecologically unique that only its development needed to be completely halted, completely shut down. Not modified, not conditioned, not restricted, not limited; halted, while at the same time, every single other mountain development was permitted or allowed to develop without a permit.
That notion defies common sense, and Respondent's experts were clear. They made no analysis of any other projects other than Jamaca and, thus, couldn't provide an
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opinion as to whether Jamaca was different than any other mountain projects with respect to the road, with respect to the biodiversity, with respect to the ecology recovery analysis. Nothing.
Ultimately, compelling evidence exists in the absence of evidence. The lack of communication and collaboration between the Ballantines and the MMA is stark and unavoidable.
We've seen the evidence of the MMA working cooperatively with other developers to facilitate the issuance of their permits. It did not do so with Michael and Lisa Ballantine.
It did not write letters asking them to submit a redesign of its site plan like it explicitly did for Sierra Fría at A-32, QDB2 at C-116, and Mirador del Pino at R-167. Instead, it told them to buy another site. We heard Mr. Navarro say that several times.
"So, they asked them to move the project. But they didn't say, 'You need to redesign the project within the area you're submitting'; correct?"
"Correct."
The evidence is plain, and I just want to highlight a few documents on this point. La Montaña. After rejection, the developer asked for reconsideration, and it was granted. He has a permit. He states, "I
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modified the Master Plan pursuant to the guidelines and suggestions of the Ministry," Jarabacoa Mountain Garden.
It was rejected. It asked for reconsideration, and it was approved. In that sense, and assuming the execution of the previous suggestions, the commission deems it environmentally viable.
Mirador del Pino, permit approved in 2012. In order to approve the Project Mirador, it is suggested to include the follow dispositions.
This is ultimately where Respondent's efforts to make the Jamaca permit review seem like any other evaluation falls apart. It didn't explain its rejections. It didn't offer suggestions or modifications, and it continues to rely on ambiguous, nontransparent articulations of fragility and risk.
It did not issue Terms of Reference to establish a framework for a dialogue, and yet all the permitted projects, even those that were originally denied, received Terms of Reference.
And so did Sierra Fría, who was rejected for the very same reason as Jamaca. The letter to Sierra Fría: "The project is located in an environmentally fragile area. The project is located on a slope of more than 60 percent." After this denial letter was sent, it's been issued Terms of Reference, and they're under consideration by the MMA.
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We've heard the testimony, unrebutted, of Claimants' witnesses who have said the owner of that project has confirmed that he's going to get his license in 2018.
Now, we received this letter because we asked the Respondent to produce any letter in which they had denied a project for slopes of more than 60 percent. They produced a letter, this letter. It's almost verbatim of the letter that came to the Ballantines the first time. "Environmentally fragile. Slope of more than 60 percent. Look, we've got a letter that shows they're not alone."
So, why are we here? Here are the projects. Here are the comparators. Let's just talk about a few of them.
I do want to say that it's important to know that we're here to talk about all these projects because Respondent wants the Tribunal to consider this issue in a vacuum. They want you to consider their treatment of the Ballantines as if you only have to look at them. They want to say, as we saw in their opening as they marched through the request, the denial, the inspection, the second request, the denial, inspection, four requests, five inspections, four denials, "Look, we did it by the book."
But you can't look at Jamaca de Dios in a vacuum. That's not why we're here.
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We're here to see how Jamaca de Dios was treated as opposed to Dominican-owned projects that are comparators. These are all of them. We've heard evidence about all of them. We've seen documents about all of them. We marched through them with Mr. Navarro. We presented them in the opening. They're in our submissions, but I want to highlight just a few.
La Montaña. Permit was approved for 25 lots earlier this year. Less than four miles from Jamaca with slopes that exceed 60 percent.
We saw how and why the project was originally rejected. Mass erosion due to the rainfall. Slopes between 36 and 60 percent. A series of streams having clear and constant flows.
If the project were to be carried out, it would include construction of an access road running approximately 7 to 8 kilometers from Pinar Quemado to the planned project site, as well as the construction of main roads, internal roads, up to 130 meters above sea level. Therefore, cutting and removing and moving soil material does not guarantee final disposal according to circumstances and operationality that would affect the drains, depressions and natural and nascent undulations of streams that, when there is runoff and infiltration, may be altered and contaminated.
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So, we have soil, we have rains, we have slopes, we have water. We have the road. Sounds environmentally fragile.
The impacts: Loss of a forested area, loss of biodiversity, loss of species' habitat, possible disappearance of the El Rancho stream and the unidentified stream. Should the project be implemented, it would considerably and negatively affect the dynamic of the ecosystems that interact for the conservation of the forest, especially the area's flora and fauna.
The detail contained in the La Montaña inspection report, the identification of the concerns, dwarfs anything we saw with respect to Jamaca de Dios.
We have the minutes of the Technical Committee. Rejected. 23 streams flow from the zone, which are the primary source of the Jarabacoa aqueduct.
But the developer wasn't phased. He appealed. He wrote a letter. He said, "We have the best intentions of sustainably using the areas of that property and, therefore, contributing to the conservation of the mountains of the La Vega Province and the Jarabacoa Municipality.
"I envision the La Montaña ecotourist project as offering a unique vacation option in Jarabacoa with the lowest density in all the national territory and minimal
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impact in order to appreciate the beauty of the area.
"The aforementioned project will protect the entire area that borders and forms part of the buffer zone for the Baiguate Park." And his permit was granted.
Rancho Guaraguao. Developed without a permit at the same time as Jamaca de Dios. It's in the Valle Nuevo National Park. It's located in Constanza, the second tourism pole created by the Dominican Republic, with 52 homes up to almost 1900 meters. It too is an ecotourism project that received a fine earlier this year after it was identified as a comparator by Claimants in this proceeding.
We've seen pictures of the project. We can see the cloud forest in the pictures. We can see construction in the pictures. We can see a development with a basketball court and a tennis court. We see homes on the mountain.
Indeed, the Ministry of Tourism paved a road to the front gate of Rancho Guaraguao, but now the MMA has come out and said, "You must halt construction."
Jarabacoa Mountain Garden. This contemporaneous comparator and the disparate treatment it received compared to Jamaca is stunning. The MMA didn't care about identified environmental concerns that are in the record. They ignored a change in the pattern of the runoff into the Baiguate River. They ignored property on slopes in excess
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of 60 percent. They ignored the road steepness and direct cuts across contour lines.
They ignored active water on the property. In fact, during the tour, they found ravines with permanent water, and they had pipes in them.
We asked, "What was the objective of the pipes?" But they did not know the explanation. It's unclear whether anyone did get an explanation.
They ignored the ecological destruction that would occur. Intervention on this land means the destruction of the habitat due to the elimination of the vegetation, the migration of the species of fauna associated with such vegetation, and contamination of the water.
It ignored the visual evidence of erosion and landslide that were photographically attached to the inspection reports.
And indeed, it only looked at 5 percent of the project. "It should be noted that the tour took in 5 percent of the total surface area of said land due to the fact that topography is irregular, which is why we decided to leave. As was said before, the land could be impossible--impassable."
But apparently the topography is not too irregular to build a series of roads totaling 4.5 kilometers.
The MMA accepted the promise of this developer too
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to be good. He submitted a descriptive report about his project, and it's from Santiago Duran. And he says: "Taking advantage of the avenues that already exist, the owners of the land has had a vision of dividing the land into lots and bringing sources of revenue into the area by promoting a lot division tourism--a lot division project with ecotourism characteristics."
We heard a lot of confusion from Respondent about "What does this vision mean?" It's apparently the same vision that Jarabacoa Mountain Garden's owner had and the vision that we heard José Roberto Hernández testify to yesterday.
Respondent is still accepting that--excuse me. He made another promise. He said, "Despite its mountainous characteristics, it has a high percentage, 60 percent, of mild slopes, slopes of less than 15 percent. The steeper slopes are intended to be left as areas of protection and beautification of the surroundings."
We've now seen Mr. Navarro's slope map that identifies the slope percentages for Jarabacoa Mountain Garden. We discussed it yesterday, and he confirmed 78 percent of the slopes of Jarabacoa Mountain Garden were in excess of 40 percent.
The developer here is saying 60 percent of my slopes are less than 15 percent. And it appears the
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Respondent is still accepting that promise today.
In Mr. Navarro's report he quotes from this letter and cites to it. "The developers of this project agreed to limit development to areas with soft slopes, about 60 percent of the land, and to maintain areas with stronger slopes as protection areas and beautification of the environment."
Either Mr. Navarro believes that anything less than 60 percent slope is a soft slope, or he was simply parroting the letter that Mr. Canela Duran wrote.
We have it again here. This is the site plan. All of these lots have slopes in excess of 60 percent, and we learned that that doesn't matter. We learned if you can find a small area in any of these lots where you can put a house that takes up 5 percent of that lot, you can build there. It doesn't matter. These slopes don't matter.
They mattered to the MMA when they denied Michael Ballantine.
Let's talk a little bit about comparators. These projects are all comparators. Respondent says there's only one real comparator, it's Aloma Mountain next door.
But as the promoters' descriptions of these projects make plain, as we see in the documents that have been submitted, they're all trying to sell subdivided mountain lots for residences in gated communities for
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vacationers and tourists.
JMG is a perfect example. That same report we saw yesterday describes the facilities that are going to be offered in the project. Lot sizes, 2000 square meters, electricity, water, guarded entry, 24-hour security, common areas for recreation, common green areas, maintenance of the hillsides and erosion control, individualized property deeds; a description of facilities that sounds almost identical to what was offered at Jamaca de Dios.
Aloma Mountain we can be brief on. We had a lot of testimony about whether there was still a development at Aloma Mountain or whether there wasn't development or only three houses or structures built in violation of the permit matter.
As to Aloma Mountain, we have this picture. We have the picture of the mountain in December 2015, and we have the picture of the mountain in September 2017. The mountain has been deforested. Aloma Mountain doesn't have a permit, and it's developing.
We know why. We saw this email. It's a political bout now, as laws can always justify an argument depending on the agenda.
So, why are we here? We're here to look at the comparator projects. Respondent doesn't want to look at the comparator projects. You didn't hear much about them
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in their opening. I expect you're going to hear more about Mr. Ballantine and questions about his vision and intentions than you will about these projects. But that's what this case is about.
Let's talk about the Baiguate National Park. It was enacted in 2009 as part of a--32 protected areas that were created in a one-year span.
Mr. Martínez said it was intended to act as a bridge to connect to other protected areas, although the Baiguate Park connects to no other park.
The decree that establishes the Park is unambiguous. It "Creates the Baiguate National Park, with the aim of preserving the vast carpets of pine trees and beautiful gallery forests, which combine in the middle course of this river, where the walnut tree still appears as a species."
But we know that the Baiguate River, the Baiguate Falls and the beautiful gallery forests that climb up from the river are not protected.
Professor Martínez now insists that the real purpose of the Park is to protect what he's defined as the Mogote System. That's his three-mountain system that includes Loma Mogote, Loma Peña, and a third mountain I won't try to pronounce.
But none of these mountains or the system are
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mentioned anywhere in the text of that decree. The Mogote System does not appear in the decree, and it does not appear in the 2013 survey of the Park that recommended expanding the Park to actually including the namesake Baiguate River and the Falls.
You can search that entire document. The Mogote System doesn't appear. The Mogote System doesn't appear anywhere in the Baiguate Park management plan.
Respondent produced no field notes, no technical dossiers and no maps about how they defined, articulated, created the Park.
Indeed, you saw, on redirect, the single document that supports the creation of the Park was an article from the year 2000 about vegetation and flora on the Mogote Mountain.
So, this is the map. We went over it yesterday. And we see the Baiguate River flowing out of the Park and continuing up to the falls between the Baiguate Park, the Jimenoa monument, and the Ebano Verde Reserve.
But Martínez says he protected the river and the falls with the boundaries he created. He said what's important to protect is that the source of the river is protected. This despite that the last 3 miles of the river don't have protection. Martínez admitted runoff from either side of the Baiguate will end up in the river. And
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the MMA now admits that the Park should be extended to include the river and the falls.
We saw the recommendation. Extending the Park would actually create the ecological corridor described in the Gap Analysis and create the bridge to the Salto Jimenoa National Monument just across the Baiguate River. But nothing has been done in the five years since the recommendation was made to expand the Park.
Most tellingly, Mr. Martínez could not answer why the Salto Jimenoa Monument boundaries exactly trace the borders of Paso Alto. This despite the fact that the ridgeline of Loma Barrero is above Paso Alto and when so many of the Park borders follow the ridgeline of the mountains, except when they come sometimes to projects.
He did say, "I didn't work on that map." And it's true that this map is not his. But the border map is, and the preferential boundaries of Paso Alto are as plain as day.
He insists no property interests were considered when the boundaries were drawn. He didn't know where anybody was. He had never heard of Jamaca de Dios.
But if we look at where the boundaries of La Montaña, Quintas del Bosque, Paso Alto and Jarabacoa Mountain Garden and the influential property owners that abut the river, Mr. Compagniet, Mr. Valerio. That tells a
[Page 1211]
different story. The boundaries of the Park border both La Montaña and QDB. We know that because we've seen the communication between those property owners and the MMA about how close they can get to the buffer zone.
And we saw the map. It's Martínez' own map, and he described the hydrological umbrella created by the Park's borders because the borders are on the ridgeline, and a bowl of protection is created.
But when the Park comes to its northern edge near Loma Peña and Jarabacoa and Jamaca de Dios, it drops down from the ridgeline. That's because we have to protect the Yaque River, the most important river in the country.
We see it in Martínez' map. The boundary cuts across halfway down the mountain, goes directly through Jarabacoa Mountain Garden. Mr. Martínez says, "I was protecting the Yaque River." But if we look, Quintas del Bosque is almost on the Yaque River, and it was left out of the Park.
At the end of it all, it doesn't make sense. The borders of the Park don't match the purported justifications for the Park. Dominican projects are out of the Park, and Jamaca de Dios is in the Park.
And so what does that mean? What does it mean to be in the Park? We still don't know whether development is or is not permitted in the Park or what development is or
[Page 1212]
isn't permitted in the Park.
The week began with the Tribunal asking a question to Respondent during opening. "So, just to make sure I understand the facts correctly, is there a prohibition on all development due to the status of the Baiguate National Park, or, under some circumstances, can you still build in the National Park?"
"That's something I'd like to consult with the team regarding, and it's for the following reason. I know that sounds like a very simple question to answer."
It's not. And the conflicting testimony from Respondent's witnesses and a lack of response from Respondent's counsel still haven't answered the question.
What does it mean to be in the Park?
Well, we do know that the Baiguate Management Plan does not define what ecotourism activities will be allowed in the Park. We do know that no Dominican regulation has been passed defining ecotourism, although Professor Martínez insisted that the country was bound by the U.N. resolution on that issue.
We do know that the Respondent has specifically defined development limitations in other parks, including density restriction, limits as to house size, and permissible construction materials.
And we do know that the Ballantines' property is
[Page 1213]
zoned for ecotourism and was defined by the MMA as an ecotourism project as of 2014. So, counsel was right, it is not a simple answer.
Ultimately we do know that the Ballantines' permit request was rejected for the very first time in January 2014 on the basis that their expansion project was located in the Baiguate Park.
We do know that the Ballantines learned of the Park in September 2010 but had no reason to believe that it would limit their development because it was not mentioned by the Respondent in any communication with the Ballantines over the next 3 1/2 years until January 2014. This included a renewal of the Phase permit in which part is in the Park.
When the Park was used to deny their permit in 2014, the Ballantines first suffered harm from its discriminatory and arbitrary borders. And they suffered an indirect appropriation for which they are entitled to compensation--expropriation for which they are entitled to compensation.
And that's why Respondent calls the issue of the Baiguate Park a red herring, because it knows it's an expropriation, and it doesn't want to pay the Ballantines.
Thank you.
PRESIDENT RAMÍREZ HERNÁNDEZ: Ready? Oh, sorry.
[Page 1214]
MR. BALDWIN: Good morning, Mr. President, Members of the Tribunal. I'm going to talk briefly about the environmental experts and then talk about jurisdiction, and then Mr. Allison will finish up with the damages discussion.
So, I have here what's pulled up from Page 1149 of the transcript, and this is a question that Mr. Herrera asked yesterday to Mr. Booth. And I found this a very striking exchange. And I think this question, not the answer--we'll get to the answer. But this question perfectly summarizes what Respondent is hoping to do in this case and its strategy.
And it also shows the flaw in the strategy because I think Mr. Herrera only asked Mr. Booth one question, and this was the question: "Is it important to have visited other projects to determine the environmental impact of the expansion project?"
Of course, if you're looking at the environmental impact of one property, why look at the others? However, it's not the answer that's wrong, it's the question that's wrong. Because the question here is not whether or not that the development of the Ballantines' property would have some effect on the environment. Any rational person would say yes, of course it would have some effect on the environment.
[Page 1215]
The question is whether that effect is similar, the same, less than the other properties. In particular, with regard to whether or not the decision to deny the Ballantines and allow the others amounts to discrimination, arbitrary, any other of the things we've discussed under the minimum standard. Expropriation also has, of course, a discrimination element to it, and, of course national treatment.
So these other properties are key here. And the fact that the Respondent only suggested to these experts to look at that really makes both Mr. Deming and Mr. Booth's reports irrelevant. But just to make sure, we're just going to talk about them for a moment.
I seem to be having some computer problems here, so just give me a moment. I'm going to put this on Mr. Allison's computer. Hold on. Okay. We'll try this and see how it goes.
So Mr. Deming. As we stated, Mr. Deming did not give any other information about other projects. You could tell from his testimony. He admitted that, you know, he's a U.S. guy. He's talking about what you might do when you build such a road in the United States. Nothing about how one gets built in other places, nothing about the Dominican Republic.
If you look at Mr. Deming's Report, he never
[Page 1216]
viewed possible routes for the road. I mean, that seems to be key. If you're looking at what the road is going to do, why wouldn't you map out some routes to see whether a road is feasible.
He never even saw--he talked about development in slopes over 60 percent. And we've shown that there's--all these other projects have roads. In Mr. Kay's Report, Appendix A to his Second Report, he shows that all these roads had--all these projects had slopes over 60 where they were building.
But Mr. Deming never bothered to find out whether or not such a road could be built on Jamaca Phase 2. And, in fact, it was Mr. Kay's testimony--and, you know, he wasn't asked about this by Respondent--that you could have avoided slopes over 60 percent in building the Phase 2 road. And I want to explain one thing about that. Because you look, and you can see the map of the project, and you can see there's the black that shows the slopes over 60 percent.
But those slopes are based on contours. So within a certain segment of land, let's say 20 meters, a pretty common contour. If you take that 20 meters from top to bottom, it may have a 60-percent slope. But in that 20 meters, you may have flatter portions that are below 60, and then you may have other portions that are above 60.
[Page 1217]
So when you see something has 60-percent slopes, it doesn't state whether or not every piece--every, you know, square meter of that--of that section has a 60-degree slope. Because it's not even. The mountains were not, you know, created that way. Geological forces don't work in perfect harmony. So this is what you have.
Now, I do want to talk about the route he used. Because you can see Phase 2 is pretty big. And Mr. Deming only decided to go where the yellow is. And if you look to the right, we have Demonstrative 01.
You can look that Mr. Deming decided to go and look and basically pretty much follow the areas of the heavy slopes as you see outlined there, or the slopes that are more than the other slopes.
So I would say that, you know, we all know what the slopes are. And I think this shows what--I think this shows what Respondent was doing at Jamaca, in addition to the fact they didn't look at anything else.
Now, let's talk about Mr. Booth's report. He said that-you know, he admitted, too, that he had no information about other properties. Even my own client said "Asked and answered," when I asked about the fifth time about different things. So he didn't have any information about that.
If you look through Mr. Booth's Report--and I
[Page 1218]
didn't spend time with him on this because he didn't have information about other properties. It didn't matter. But if you actually look at the Report, he makes a lot of discussions about development in a wooded area has an effect.
He talks about, "Well, there's loss of bird habitats. There's soil erosion that happens when you cut down trees."
A lot of it had to do with cutting down trees. You know, when you cut down trees, there's a negative effect on the environment. Again, that's true. But, again, that is meaningless in this case unless you look at it compared to the other properties. So, yes, we agree that cutting down trees and developing can have an effect on the environment, which is essentially what Mr. Booth says.
Now, I just pulled this out because this is one example. And Mr. Booth, who I have to admit to having a certain affinity for, he talks a lot about how these projects affect climate change and everything else. Again, all true. But, you know, whether or not it's helpful to the Tribunal is a different question.
But this is one of his opinions where he talks about any forested area creates issues. And he was talking about how chopping down trees affects the bird population.
[Page 1219]
And he says, "Maintaining these bird populations is important not only for their contributions to the ecosystem, but also because unique bird species bring ecotourism dollars to the neighboring region from bird watchers eager to add species to their lifetime list."
Now, anybody that reads this would have to have my affinity for Mr. Booth. Because what he's essentially saying is, you know, "Maybe you should think about not developing any of your wooded areas so that you can take advantage of the lucrative bird-watching industry tourism." So--but it's not relevant to this case.
And then just to put here, he does mention of the 20 bird species identified at Jamaca de Dios by Mr. Richter, none, just for what it's worth, were the ones that are actually threatened. So it's not even an issue with the birds.
I took this one picture from Mr. Booth's Report. It's on Page 55. And he has several pictures. But if you look at his description here in Photo 3, he says, "Panorama looking down-slope and generally to the north showing mosaic of highly disturbed areas with no trees to grassy/pasture areas to the forest," et cetera.
What's interesting is he's on Phase 2 taking this picture. But if you look at what he's talking about where he says "areas with no trees," you can see in the--sort of
[Page 1220]
the upper part to the right of there, you can see an area where there's a lot of trees cut down.
As we've seen from other pictures, that's actually Aloma Mountain. So when he says here that you can see "highly disturbed areas with no trees," he's not talking about Phase 2. He's talking about that area up there, which is Aloma Mountain, which Mr. Richter reports--or states in his Report that when he was there in August of 2017, the cutting down of those trees was occurring at that time.
Now, Respondent didn't--did not cross-examine Mr. Richter or Mr. Potes, both of whom submitted a Report with a Reply. I'm not going to go into those now. But I just--I would ask that the Tribunal look at those. Because both Mr. Richter and Mr. Potes talk about the other projects. They did have some access to the other projects.
So if the Tribunal actually wants an expert opinion that both looked at Phase 2 and looked at those other projects, then I suggest Mr. Richter's. And he makes, you know, observations about Aloma Mountain, Jarabacoa Mountain Garden, Quintas del Bosque, and--all of which are--and Rancho Guaraguao, all of which are highly relevant here.
So let's talk about jurisdiction again. Now, I didn't spend really any time talking about the--just briefly talking about when the nationality issue matters.
[Page 1221]
But there was some questions about it from the Tribunal, so I want to spend more time on it now. I will say, before I get into any of this, that I think the discussion of when is not that important because I think that the evidence shows--and we're going to go through it--that the Ballantines, Michael and Lisa, each were--have always been dominant and effective U.S. nationals. But let's talk about this since Respondent spent a lot of time on it in their opening statement.
First off, there's been discussions of Nottebohm. And, certainly, those things have relevance to the analysis. What they don't have relevance to is the framework. Because Nottebohm, for example, arises in the context of investor--or I'm sorry, in the context of diplomatic protection, a State invoking its sovereign rights on behalf of an investor. Those arise from a set of international law that, you know, has--that has changed since Nottebohm I'm sure, but that arises from international law.
CAFTA, we have to look at the text. The text of CAFTA is what matters. Now, international law has things to say when the text is not clear, but it is the textual analysis that we need to do. So we're going to do that now. We talked about this before. We talk about this is the definition of "investor of a Party." And this is the
[Page 1222]
only place--the only place in CAFTA, in Chapter Ten, where this dual nationally dominant and effective appears, and it relates particularly to this definition.
Now, the CAFTA drafters could have put this definition when they talk about what it means to be a Claimant. They could have put it when it talks about the scope section, when they talk about when you actually have a claim. They could have made it clear in the text that you have to maintain dominant and effective at particular points, but they didn't. They put it in one place, and that's the investor of a Party.
So it's our view that this dual national provision speaks to the definition of "investor of a Party." When you meet that description--in other words, when you are attempting to make an investment, you are making an investment, or you have made an investment--if at that time, your dominant and effective locks in to where you are. So this says to us that that this is what it means.
Now--but what Respondent says is--Respondent--I'll get to the slide in a second. But Respondent does its nesting dolls, and the U.S. submission does the nesting dolls too, the Russian nesting dolls, and basically says, you know, you have to take--you take investor of the Party, and then every time that word "investor of the Party" is in another provision of CAFTA--so if "investor of the Party"
[Page 1223]
is a definition, every time that definition appears somewhere else, what Respondent is essentially saying is you have to do the same nationality test every time.
So every time it appears, you do the same nationality test. Right? Okay.
Now--so I took a look at the CAFTA text, and I said, "Let's take the Respondent's approach of incorporating the entire definition and doing what the requirements of that definition are and let's do it to other portions of Chapter Ten."
So let's look at this. CAFTA's definition of "investment" is--"investment" means "every asset that an investor owns or controls directly or indirectly." "Owns or controls." Okay. So the question is, is--the term "investment" appears all through Chapter Ten, of course. Because, in fact, Chapter Ten is the investment chapter.
So if we take this, this means that to be a Claimant--and as they point out, you only become a Claimant when you submit the arbitration. To be a Claimant, it means an investor of a Party that is a Party to an investment dispute. An investment dispute.
And I think we would all know--I mean, it's sort of so basic, I'm embarrassed to say it, but I think it does need to be recalled. In order to bring an investor-State treaty claim, you have to have an investment. Okay?
[Page 1224]
Now--but if we take this definition of "investment" to mean something owned or controlled and we read it in and we do our--I'm not going to do the nesting doll thing that the Respondent did when they did theirs.
But if we do it, we can say, "Claimant" means "an investor of a Party that is a Party to a dispute over an asset that the investor owns or controls with the other Party." Okay? You can read that in.
Now, what about when the State deprives--what about if you had a case here where you had a Respondent that actually followed expropriation rules and they come in and they take physical title to your property. They take physical dominion, take physical property. As a legal matter, you have no ownership, no control over that investment.
Now, under this nesting doll approach that Respondent and the U.S. has advocated, you couldn't be a Claimant because you don't have an investment dispute. Because at the time you submit the claim to arbitration, you don't have an investment because you don't own or control that asset. Okay?
The same--and you can see the submission of the claim to arbitration. It says, "In the event that a disputing Party considers that an investment dispute cannot be settled." "Investment" appears again.
[Page 1225]
The scope and coverage. So the idea of--the idea of this chapter applying, the scope and coverage of the entire chapter applying, it applies to covered investments.
If the investment is taken away, you don't even have an investment--you may not--I'm going to give an example of this. You may not have an investment even--you may not even have an investment where--at the time that the claim arises.
Now, you say, "Well, how can you not have an investment at the time the claim arises?" Because if the government comes in and they take your property, then when they took the property, the claim arose, and so you have one if the claim arises.
But let me give an expropriation example. Let's say we had a Respondent that respected private property and they come in and they expropriate your property, take title, take possession of that property. Okay? And they give you a judgment that you go--you know, you basically go to court, like in the U.S. You know, when property gets expropriated in the U.S., the government will give you their estimation. You can go to the Court and you can get a proper--if you don't agree, you can get a proper expropriation amount.
Now, let's say that happens in the U.S. and your property gets taken away, you lose it. You don't own or
[Page 1226]
control it anymore.
So what happens? You go to the court. You get a judgment of a certain amount of money. Now, let's say that judgment is prompt, adequate, and effective. So you get the money, but now you have a judgment. You get this judgment. But you can't collect on the judgment. The government you won't pay. It decides not to pay.
CAFTA states that a court judgment is not an investment. So now you're stuck with a court judgment. The claim arises when the government won't pay this court judgment.
But under this nesting doll thing, you can't even bring--you don't even have a claim. Because at the time the claim arose when the government had it, you don't have an investment. Your investment is gone if you incorporate that definition of "investment" in it.
So what the U.S. is suggesting, what Respondent is suggesting is, in essence, ways--that there are many examples if you do this nesting doll approach where you're not going to have an investment. And you can see the Russian word for "disaster" over there, "catastrophe," over on the side. That's what you would have if you followed this type of logic.
Now, as we've stated that the--it's--you know, the--in addition to the--you know, we've seen the CAFTA
[Page 1227]
text says one thing. International law also doesn't require that you have to be a--you know, dual nationality, that you have you to be dominant and effective at the time that you submit the claim to arbitration.
And just to give an example of that, the U.S. Claims Tribunal--what the U.S. Claims Tribunals looked at was--they said okay. You had to be when the--you had to be a dominant and effective when the claim arose, and you had to be dominant and effective on the effective date of the Algiers Accord, which was 19 January 1981.
Now, Parties could bring claims after the Accord. They had until 1982 and sometimes even longer to bring these claims to the U.S. Claims Tribunal. So, if you brought a claim in 1982, that would be okay because they would look back and say, "Were you dominant and effective in 1981?" and not even look at 1982. So it's not as if there's some universal concept of international law that requires this outside the text. Also, this just makes sense.
Okay. Chapter Ten is about investment. The idea is to encourage foreign investment. Okay. And that means that you look at the dominant and effective nationality at the time the investment is made.
Here you have the type of situation where Respondent's formulation and the U.S. formulation would
[Page 1228]
mean that you could have situations where you have a purely domestic investment. I invest in the United States, okay, as a U.S. citizen. Five years later, four years later, whatever, I move to Canada. I become a dominant and effective Canadian, which I've thought about before, and then I sue the U.S. And I sue the U.S. over a domestic investment because that's what it was when it was made.
Now, let's then get to the evidence here. Because I said I don't think it matters very much. I think the evidence of dominant U.S. nationality for both Michael and Lisa is pretty substantial.
So when did they become Dominican citizens? That matters. The Ballantines were in their 40s when they became dual nationals. Lisa was 42. Michael was 45. The first denial--and they became citizens in 2010. Thank you. I knew that. But in 2010.
Now, the first denial--when you're aware the claim arose--happened in 2011. So they spent 45 years in the United States. Okay. They're here for a year. Do they all of a sudden become that? The claim is filed in 2014. Still, four years after they move--or after they become Dominican citizens. In those four years, was that 45-year history and connection and cultural attachment to the U.S. lost for this? No.
You don't destroy a lifetime of attachment in--it
[Page 1229]
should be four years. It says five. But you don't destroy a lifetime of attachment in five years. That's just silly, as we like to say on our side.
Now, why did Lisa Ballantine take Dominican nationality. On rebutted testimony, she says, "I became a citizen of the D.R. to protect our investment. I was concerned our children could lose it." Unlike Michael, Lisa took Dominican citizenship only so that her children would not lose her investment. That was the reason. Nothing about "I just felt this--you know, I felt like I had to be Dominican and didn't want to associate with the United States anymore." She did it for--purely for economic reasons, protection reasons.
Now, why did Michael Ballantine take Dominican nationality? This was in his examination. He says, "I obtained dual nationality because I was concerned about our family and the investment. And in case of my demise or Lisa's, I felt like that would be a better process to leave with my children in terms of probate."
And this is where he differs partly from Lisa. "And I had faced discriminatory treatment prior to that and some people wouldn't buy because I was an American, and I thought that would help for business purposes."
So it was a commercial thing so that the people he was dealing with economically in the Dominican
[Page 1230]
Republic--not government officials--that's not what this testimony says--would do it.
He talked about how, you know, "Nobody wants to buy from a gringo who is not even going to stick around. We want someone that's going to be there."
That's why he did it. Again, no attachment. And they haven't stated any other thing to state there was any attachment.
Now, why does one take another nationality? Mr. President on that second day, you know, was asking Mr. Ballantine a question. And getting a naturalization, it's a--it's, for many people, a big step. It's like having another flag. It has a lot of emotional--you know, it entails an important decision.
Okay. Now, I'm not sure that applies all across the board. And I'll just give an example. Again, Mr. Allison made me promise I wouldn't bring up Haitians. But I do want to bring up immigration law. Because in the U.S., if you're a permanent resident, you can be a permanent resident for 30 years. And if you have a drunk driving accident that ends up hurting somebody, or sometimes even it doesn't, or a low-level battery even, you can be deported for that crime.
Now, does that mean that permanent residents of the United States that take U.S. nationality all do it
[Page 1231]
because it's a big emotional decision? No. They do it because they say, "Look, I have family here. I don't want to risk having some drunk driving issue and then being forced to never see my family again in the United States or being forced to leave the United States personally."
I bring that up just to say there's lots of reasons that people take it. And it's not always--not always an emotional issue.
As far as personal attachment goes, Michael Ballantine testifies that they never assimilated culturally. This is a supplement statement at 4.
"Although we always tried to be respectful of Dominican culture and its people, we did very little to assimilate in the Dominican culture. We never felt like we were Dominicans, never acted like Dominicans, and nobody perceived us at Dominicans."
And there is--I would challenge--you know, say is there anything in the record to contradict this? Now, there's social media posts. There's exuberant statements that are made. But this does not mean that they had assimilated into the culture.
And when Lisa Ballantine says, "I'm a Dominican now," that's not an assimilation statement. That's a statement of fact. But actual assimilation evidence, I don't see any.
[Page 1232]
Now, we're going to--we talked about the social media things that are whimsical and everything else. But there are several letters in the record that are important because--excuse me. They're emails. People don't really write letters anymore. There are several emails in the record. And these are emails where Michael Ballantine is writing to his father. Lisa Ballantine is writing to a close friend.
We would suggest that instead of social media posts, it's these letters--these emails--excuse me--that are relevant. Because they're personal things said to close friends that better--contemporaneously that better express the thing.
So here's Lisa in 2003 (sic). "I haven't really made friends here in the D.R. It is a different culture to connect with, and I am an outsider." This isn't done for the arbitration. This is her talking to a friend. "There's a nice expat community"--so she's dealing with expats--"but they are very transitory. I am pretty lonely. I work a lot, run a lot, knit a lot."
There are other emails to close friends. This one where Michael Ballantine, at C-63, refers to the D.R. as a "foreign country."
In 2002, "Lisa"--I'm sorry. 2012. Thank you. "Lisa Ballantine revealed to a friend that she was dreading
[Page 1233]
her return to the Dominican Republic." That one was in 2013, I think.
And Michael Ballantine, as I mentioned, wrote to his father and told him that he "couldn't wait to get out of this place." And that's in Exhibit C-166. And you see the other exhibit numbers up there.
Now, Mr. Di Rosa asked Mr. Ballantine a couple of questions. And, you know, Mr. Ballantine says, "Oh, we didn't have a Dominican home." Mr. Di Rosa, says, "Well, what do you mean? What's a Dominican home?" You know, I think he probably had a lot of expectation for that question.
Because you go--like you see somebody say, "Dominican home." You're, like, "Oh, they don't--well, there's no Dominican homes. They're just homes."
But this is Mr. Ballantine's answer. "Dominican homes are often designed where there is a separation where there's a maid--separation where there's a maid and servant's area."
And I apologize for this transcript. I don't know if Respondent had the same problem. But the final version on the second day was missing this national--this nationality stuff, but I think they're fixing it.
So I had to use the draft. "Ours is a big American open floor plan. We speak English. We made food.
[Page 1234]
We entertained like Americans. The food we ate. Our home was totally American. And it was an obstacle to sell it because it was constructed differently."
And there's testimony in the record that Lisa Ballantine designed the home. In fact, that testimony is used to show a connection to the Dominican Republic by Respondent in their opening that Lisa Ballantine--in their--in their Rejoinder where, you know, Lisa Ballantine designed that home.
Again, Mr. Ballantine had written in his thing that they didn't act Dominican. We saw that a minute ago.
So Mr. Di Rosa again, "What does it mean to act Dominican? You know, do you"--I mean, he didn't say this, but you can imagine what--you know, what the thinking was there.
Well, this is what Mr. Ballantine said. "Well, on a lot of levels, there's cultural norms and the way people interact with each other. For instance, conflict, how to enter into a conflict, to avoid it, how to resolve it. There are some cultural things, holidays and the way people relate. It's a high-context culture where what's not said is often more of the message. Just acted like an American. I would confront things head on."
Now, all of us in this room deal with international issues. We deal with different--from people
[Page 1235]
of different cultures and backgrounds.
Of course, people--of course, there's a way that different people act. It doesn't mean everyone acts that way, but there's a way--you know, there's particular ways that, you know, Japanese people tend to act versus the way a Turkish, you know, businessperson might act. So this is just common sense.
Let's look at the center of the Ballantines' economic, social, and family life, and let's look at family first.
The children were born in the United States. The children did live for a few years in the Dominican Republic while Michael Ballantine was developing and selling Phase 1 and preparing for Phase 2.
But they left in 2007 and 2010. So the dates that Respondent thinks are relevant here are--the kids weren't even here. They were all in the United States. And they left to go to school. The testimony is that the children left to go to school.
Now, Rachel Ballantine did come back with her husband Wesley because, as we know, they were prepping and sort of getting the stuff that they needed done for the construction operation because Wesley was going to manage the construction operation. So they were in town in 2013 for a short period of--relatively short period of time.
[Page 1236]
But besides that, everybody gone.
And I--you know, we've looked at this slide before. But just, again, it's not only the children. It's everyone else. No connection to the D.R. in terms of family at all.
Now, what about economic connections? Well, the economic connections are to the United States, not to the Dominican Republic. The Ballantines always had U.S. credit cards. They never had Dominican credit cards.
Now, again, people that travel know when you use a credit card--when I go and use a U.S. credit card overseas, it's extra, you know, money that's associated with it. There's transfer issues. You know, it creates an issue. It would be nice to have a credit card from every single place that you go.
Never bothered to get a Dominican credit card. They used their U.S. credit cards. They always had bank accounts in the United States. Always maintained bank accounts in the United States.
Michael Ballantine had an IRA account from 2009 onwards in the U.S. And they had 529 college savings plans, which I would advise to anybody to get if you're in the United States because it allowed their children to leave college debt free which, in this day and age, is quite a miracle.
[Page 1237]
Personal tax returns. They filed personal tax returns in the U.S. every year. Every year. They listed U.S. addresses as their residence. Now, the Respondent takes issue about them, you know, being in an airport hangar. But the fact of the matter is, they didn't--there's lots of expats. There's expats who file U.S. tax returns, and they don't have a U.S. residence. And that--you know, there's ways to do that on a tax form. The Ballantines did not do that. And, also, they haven't filed personal Dominican tax returns.
Lisa Ballantine's economic connections. Let's look at that first. Lisa was involved in a non-profit. Now, Respondent in the--as I mentioned in the opening, in the "no good deed goes unpunished" category, tries to go, "Oh, look, you know, she's got this non-profit. She's in the Dominican Republic. That's a Dominican connection. You know, that's some connection to the Dominican Republic."
Well, that's not entirely true. As you see from Lisa's Reply Statement here at Paragraph 4, the non-profit was actually headquartered in the United States, not in the Dominican Republic.
And she says here, "I had established and was running a non-profit organized in and based out of the United States called FilterPure. In the D.R., I was
[Page 1238]
working and partnering with local NGOs to develop their water programs."
She was working with people, NGOs and others in the D.R. But the entity was in the United States. And she also states here in Paragraph 5--she states, "99 percent of donations came from U.S. donors, so much of my time was spent in the U.S."
So her economic--I mean, first off, there's a question as to whether or not a non-profit is even an economic connection. The Tribunal can make that determination. But let's put that to the side and just hypothetically state that it is, her economic connection in this case is to the United States, even if some of that work is done in the--even if, you know, that work is done--part of that work is done in the Dominican Republic.
Economic connections to the Dominican Republic. Michael Ballantine's economic connections to the Dominican Republic--and we're going to get into some of these in a moment--are loan agreements, contracts, bank accounts.
Now, I think we have to think about different types of investors here. You know, if you're an investor that has shares in a company and you're sitting in your, you know, nice cabana in the United States and never really going to the foreign country because, you know, you're just a shareholder, it's operated and managed by someone else,
[Page 1239]
you're probably not going to have any economic ties other than that investment itself with that host state.
But what happens when you're in the host state managing the investment, totally managing it, and it's the type of investment, a housing project with a restaurant, an HOA, and everything else that you have to be there for?
Well, you're going to have economic ties to that country. So, yes, you're doing to do loan agreements. You're going to do contracts. You're even going to have bank accounts because you need bank accounts to be able to do business there. And because you're living there, you need a bank account just for the sake of living there.
Any managing investor, not a passive investor. Any managing investor would have these same--there is no economic connection that I see in anything that Respondent says. Nothing that is different than any managing investor that had to be on-site for their investment would have. Nothing else besides those things related to this.
So the economic connections with the D.R. should not even be a factor. Why should those factor in to a dominant and effective nationality when he's required to have those economic connections as a result of his investment? Shouldn't be considered.
Social considerations. Let's look here at what Lisa says in her Paragraph 7 here. She says, "Beyond this
[Page 1240]
charitable work, my cultural connection to the D.R. was limited." She had American friends with whom she was part of a Bible study group. This is in the D.R. she's talking about. "And Michael and I had American friends with whom we socialized frequently."
She goes on to say, "I had few Dominican friends." That's what she says. Her friendships and their--and she wasn't called. This is unrebutted testimony. So the friendships she had were mainly with U.S. people and a few Dominicans. And that's nothing--that doesn't say anything about Lisa. It's because there is a cultural divide. It's hard to bridge that cultural divide.
When you're an outsider, as she says she felt, and you go into a foreign country--and it's a--really a lot different culture than you're used to, it is going to be hard to have those kind of close friends and close connections.
The Ballantines attended American church. Lisa says in the same paragraph here--she says, "We attended an American church in Jarabacoa when we were in town."
Now Respondent's counsel on opening day says, "Oh, American church. What is an American church? How do you have an American church in a place?"
Well, let me say that my mother is Lebanese. She's a Maronite. When growing up, we went to Maronite
[Page 1241]
churches in the United States.
So it's not as if you go to a place like the Dominican Republic you can't have an American church. If you have Americans there and they sort of form a church and most of the people are American and they do it in the style of an American church, that's an American church.
Connections with groups. Okay. As far as the Dominican Republic goes, Michael was connected with the U.S. Chamber of Commerce--the American Chamber of Commerce, AmCham. Lisa, none. None in the D.R. And yet she was still involved in the rotary group in the U.S. So her connections with clubs or groups was the U.S.
Nothing--unrebutted testimony--nothing with the Dominican Republic. No clubs. No cultural attachments related to clubs.
What about other attachments? Now, the--you know, I didn't want to put them all here and bore the Tribunal with a long, you know--you know, a long reciting of the different places. But, obviously, they're in the Witness Statements. They're in our papers. So I won't go over them again. But here's two big ones, I thought.
One is maintaining U.S. health insurance. Obviously, an expensive venture, maintaining U.S. health insurance the whole time. Also having a gym membership the whole time. If you were moving to a country permanently,
[Page 1242]
not really having any connection to the former country, why would you, you know, want to have a gym membership? They probably use their gym membership more in the U.S. while being in the D.R. than I do my gym membership here in the United States.
Now, let's talk about use of the U.S. passport for travel. And Respondent admits this too. If you look at Respondent's opening slide, they state that the--that the Ballantines used the Dominican passport for coming into the Dominican Republic.
So--but, as has been testified to, the U.S. passport was used when traveling anywhere outside of the Dominican Republic. That includes the United States, but it also includes the international destination. And the D.R. passport, as Respondent admits, is only used when coming into the Dominican Republic.
Now, you can argue about, you know, different things. But, you know, every time--they made 30 trips in and out of the United States in those years of 2010 to 2014. $10 each. You can do the math. That probably saved them alone the cost of their citizenship just by saving that money and using that passport when they came in.
Now, the Ballantines have stated that they always intended to return to the United States. That it was never their intention--Respondent is going to put up--I'm sure
[Page 1243]
they have it already set to go. They're going to put up a thing where the Ballantines say, "Oh, we're"--not the Ballantines. But there's a report and, you know, other things that are said. And they go, "Oh, we're selling our possessions and going to the Dominican Republic."
What you won't see in that statement--even assuming that the statement--you know, the statements can be interpreted in that manner, what you don't see is another part of that which is "never to return."
"I'm selling my possessions and moving to Hong Kong." Does that mean that I am not going to come back to the United States? No. It's a statement of what you're doing. You're moving to the place.
They don't say in there, "And we're never coming back to the United States because we have this strong cultural connection to the Dominican Republic, a place that we know relatively very little about." That's not what they did.
It was an exciting time. We're moving to a different place. We're going to, you know--you know, start a new venture. You know, we're going to start an investment, an enterprise. That's what those statements are meaning.
And, in fact, they did return. Not into the situation they wanted to, but they did actually end up
[Page 1244]
returning. As soon as the commercial project was over and they could do all the things they needed to unwind and make sure the homeowners were protected, they got out of there.
Let's look at Respondent's evidence for a moment. This is going to, you know, perhaps seem like a little bit of hyperbole. But there's very--when you really get down to it, there's very little evidence in Respondent's evidence that actually has any probative meaningful value to this Tribunal, and certainly in connection with the real questions at issue here. So let's look at it.
Respondent's evidence of the Ballantines' attachment to the Dominican Republic was explained in its opening, and we're going to go through these.
They say: And then, upon arriving in the Dominican Republic, here's what the Ballantines did."
Now, what do you think they did? Do you think--a little bit of anticipation here. Did they become Taíno shaman? Did they do some other thing? What did they do?
Well, they built a house. So people moving to the Dominican Republic built a house. I mean, I guess that's good, because they needed a place to live.
They opened bank accounts. You're in a place where you're going to be staying. You open a bank account. I still don't see any connection--any particular attachment to the Dominican Republic.
[Page 1245]
They met their neighbors. They met their--I mean, what a, you know, Dominican attachment is that, that you met your neighbors? They made friends, a lot of American friends, as Lisa Ballantine testified. But they made friends.
This is overwhelming? Respondent thinks this is overwhelming evidence of Dominican connections. They joined a church, an American church, and they enrolled their children in a local school? I don't--I mean, Lisa did homeschool the children for a while, but I don't know, when your children are there, how you do anything other--if you're not going to homeschool them, then enroll them in a school.
And they created a charitable venture designed to help their new community. So, again sort of implying that, well, Dominican people--such a connection to them, that this charitable thing was designed to help the new community. This is the evidence.
We're going to look at a couple of these.
First, the Ballantines built a house. They did, in fact, build a house. That's a picture of it. But--and this is C-180--they also decided to sell their house in 2012. Not 2014, when they left, but they started the process to sell their house in 2012, you know, evidencing a desire to leave and to cut the connection even as of 2012.
[Page 1246]
They did meet their neighbors. That's, in fact, true. And I give Respondent credit for the truth of this statement. And here's what is said.
The quote--the citation to that on the slide that was used for this was to Michael Ballantine's statement at 13, and he says, "To be good neighbors, we immediately allowed the landowners to our west--members of the Rodriguez family--to use this 2005 Road to access their farms. We let the Rodriguezes use the 2005 Road without issue for six years." This is meeting the neighbors.
They made friends. We've talked about this already. A lot of American friends, a few Dominican friends. They joined a church. It's an "American church," U.S. church, I would say.
Now, the President mentioned this the other day. And that is that the steps that were taken to acquire the dual nationality should have no place in the evaluation of whether there's a dominant and effective nationality. Because it is that dual nationality that triggers the examination, but it is not the examination.
In other words, in order to acquire the dual nationality, it's already assumed that you're going to have to take the legal steps to acquire this dual nationality.
So we're going to look at the sites here that Respondent uses. And I didn't even include them all.
[Page 1247]
But their section on dominant and effective nationality is replete with documents and so-called evidence that is just describing the legal steps the Ballantines did to get that nationality. And here it all is.
They renewed their permanent residency, they emailed the attorney about Dominican passport, applied for naturalization, gathered and submitted document. This is all from Respondent's papers in their opening.
Sworn statement of domicile required. They identified Dominican references. They passed a Dominican history exam. They passed a Spanish proficiency exam. They swore an oath. Respondent spends lot of time talking about they swore an oath to be faithful to the Dominican Republic. Yes, dual nationality is assumed before you undertake a dominant and effective nationality test.
Now, here's another thing. So--there was a question too about contracts. And the issue was--this was taken from Respondent's opening, Slide 32. And in that slide, okay, there's a--the quotes--the material in quotes up here is what Respondent said. And they said, "Look at how many times the Ballantines"--not both the Ballantines. And you see when it's both the Ballantines or only Michael. They say, "Look at how the Ballantines used their Dominican nationality."
[Page 1248]
So I just wrote after the quote "in the D.R." Okay? So they voted. Yes, they voted, but they voted in the D.R.
Now, the one where the quote is allowing the whole thing is they do admit that they used the Dominican nationality when they entered the D.R. So if you look at Slide 32, you'll see respondent admitting that when they used the Dominican nationality for passport purposes, it was to enter into the D.R.
They used it to bring legal claims in the D.R. There's no evidence that they brought a legal claim in Chicago and used their Dominican nationality for that legal claim. And they used it to apply for a business license in the D.R. And they used it to enter into contracts and loan agreements in the D.R. And these are all Michael--the last three are Michael only.
And, again, I think these--these things, or the last three particularly, are not relevant. Because they're what needs to happen for Michael to manage his investment. The investment is assumed in a CAFTA dispute.
I'm almost there.
So what about the contracts with the daughter? There was a lot of mention about, well, it wasn't only with the local people in town. He made a contract with his daughter that--also where he said he was a Dominican
[Page 1249]
national.
Now, you'll recall that Michael Ballantine testified that one of the reasons he did, so that he wanted the commercial aspects, the people he was dealing with for the project, to see him as a Dominican. It didn't work. We've seen the gringo video. But that's what he wanted. He wanted that to happen.
So, what is this contract with the daughter that is talked about here? Well, it's a power of attorney where Rachel Ballantine is giving Michael Ballantine power of attorney with respect to Aroma de la Montaña. Okay? And it's to acquire things for the company, obtain, receive. Now, we all know what a power of attorney is used for. Is this some private contract that's used between Rachel and Michael that no one else will see? No. This is what Michael Ballantine needs to bring to vendors, to businesses, to everybody else, to be able to show that he has power to deal with the things.
He's not bringing these to people in the U.S. He's bringing these to Dominicans, to that. So that's why his Dominican nationality is used in here. This isn't a private contract.
Social media postings are not probative. They express whims or satire. And, you know, as the President of--the Prime Minister of Nepal can attest, they are not
[Page 1250]
always entirely serious. And, in any event, Lisa's social media posts show a repeated reference to the U.S. as being her true home.
Respondent's evidence of family ties. Children left in 2007 and 2010. No others.
Habitual residence is discussed in the things, but at all relevant times, according to Respondent's relevant times, they had residences in both the U.S. and the D.R.
And so I will pass it back to my colleague, Mr. Allison, who has a very short presentation on damages, but I can assure you we will be under our time.
MR. ALLISON: Mr. Chairman, Members of the Tribunal, we've had four expert reports and two witnesses who have debated damage. So I will endeavor to be brief.
I simply wanted to discuss a few issues about quantum. We've seen the standard that Metalclad v. Mexico puts forward in which the award in investor-state arbitration should wipe out the consequences of the illegal act.
And, of course, other Tribunals have said there's, of course, uncertainty in projections of future profits. They're inherent, and it's inevitable, but they need to be based on informed estimation. Those citations, of course, are in our pleadings.
So the first element of the Ballantines' damages
[Page 1251]
is the lost profit from the Phase 2 lot sales. We've seen discussions of this. They were going to put 70 lots over 283,000 square meters, which would leave 25 percent of the land for the road, for green space, and for the hotel they planned. Now, we've heard a lot about whether or not the projections that Mr. Farrell made with respect to the Phase 2 lot sales were accurate. But as the documents in evidence before the Tribunal show, the Ballantines had Phase 1 lot sales in Zone C, which is the higher part of the mountain, between $78 and $107 per square meter between 2012 and 2014.
Mr. Farrell, using his altitude analysis, started the Phase 2 lot sales at only $64 per square meter. He then described how he applied an 8 percent altitude adjustment as you went from Zone D to E and Zone E to F, and he had price appreciation over the five years he projected for the sale of those 70 lots. Infrastructure costs, cost of sales, subtracted from that, and he discounted the stream of that revenue back to present value at $12.75 million.
Now, you heard a lot from Mr. Hart about the tax contracts and the real contracts. And I expect we may hear some more about that as we go on today.
But one of the things Mr. Hart didn't like was that the real contracts were presented to the Tribunal as
[Page 1252]
an exhibit to this proceeding as opposed to an exhibit to Mr. Farrell's report. And he and counsel were hoping to play gotcha and claim after all the submissions were in that they had never been submitted in evidence, and thus, there was no proof that the contracts really existed.
But they are in evidence, as is the schedule of the lot sales that Mr. Farrell used to perform the analysis that's comprehensively described in this document and is attached to his expert report. You've seen it. Schedule 1 to his report goes through his analysis.
The Claimants encourage the Tribunal to review Exhibit C-162, which is every contract that's written on that schedule. The schedule is the last three pages of the contract. It identifies a zone analysis undertaken by Mr. Farrell. It identifies the contracts, and shows the contracts for the Phase 1 lot sales, every contract.
Mr. Hart's report and his PowerPoint yesterday, of course, were filled with references to the tax documents. And now it's not disputed that the Ballantines submitted different contracts to the Dominican tax authorities.
The affidavit of Mr. Balbuena spoke to Dominican custom in that regard. We heard the testimony of Michael Ballantine with respect to that. The Respondent chose to withdraw their request to cross-examine Mr. Balbuena.
But Mr. Hart didn't withdraw or change any of his
[Page 1253]
report's calculations when he said he heard the testimony that the higher-priced contracts were, indeed, the real contracts that reflected the consideration that was actually exchanged between the buyer and the seller.
All of his analysis relies almost exclusively on the numbers that are in those tax documents and the Jamaca financial statements that reflect them. The financial statements flow throughout his report, but it's undisputed that the financial statements include the lower tax document numbers.
He continues to make statements about the historical performance of Jamaca de Dios based on the tax numbers that he knows are not the actual cash flows that Jamaca received.
He's right. In accounting, on Page 17, he says, "There can only be one actual transaction and only one real contract." And here, there is only one real contract. And Mr. Farrell used the appropriate contract when he did his analysis, and Mr. Hart used the tax contract when he did his analysis.
Lost profits from the Phase 2 home construction. The testimony is unrebutted. We heard about Wesley Proch coming to the Dominican Republic to act as the construction manager. Jamaca de Dios was going to be the general contractor on the Phase 2 homes. The evidence of their
[Page 1254]
experience is in the record, what they did to create that plan.
Mr. Farrell took those projections, imputed overheard costs, and cited all the inputs that he put into his report using local comparables, discounted that back to present value, $5 million.
Now, Mr. Hart says Jamaca would have needed financing to fund the construction of these homes. And thus, he didn't--Mr. Farrell didn't include any financing in his projections, and thus, they're unreliable and need to be tossed out.
Now, Mr. Hart acknowledges the vast majority of the capital expenditure expenses he uses in his report come--relate to the home construction. And he acknowledges that the buyers would ultimately pay for the construction of these homes, but his analysis inappropriately delays the receipt of those construction cash flows by a year beyond what's already in Mr. Farrell's Report in order to create and magnify the cash flow deficit he projects.
Mr. Farrell's report already delays construction cash flows for 18 months from the date of the lot sale.
Mr. Hart confirms he performed no analysis as to what financing costs may have been, if they were needed. But they weren't needed. The Ballantines had cash from Phase 1 performance. They funded the entirety of Phase 1
[Page 1255]
without financing. They had Phase 2 lots ready to be sold across the street from Phase 1, and they had a waiting list of 100 people.
Paso Alto. We heard the testimony of Michael Ballantine about his intention to buy Paso Alto. We also have the unrebutted Witness Statement of Omar Rodriguez in the record, who made clear that he and his partners were looking forward to co-venture with Michael and the Jamaca brand.
This was an already permitted development. We've seen a lot of testimony about Paso Alto, a beautiful property that spans the ridgeline of Loma Barrero. It has lots on both sides of the mountains, beautiful views, and it had 52 lots available for sale.
Now, because it was not as developed as Jamaca de Dios and didn't have the Jamaca de Dios brand associated with it, Mr. Farrell used much more conservative pricing despite the fact that it was at the top of the mountain. He starts his lot sales at Paso Alto at only $30 per square meter and rising to $60 per square meter.
Again, infrastructure costs and the costs of sales associated with those lot sales are subtracted from his Report. And the evidence is plain that Jamaca did not move forward with that transaction because their Phase 2 permit was denied.
[Page 1256]
We heard about two standalone buildings. The Mountain Lodge, we saw the beautiful pictures from the marketing brochure of the Mountain Lodge. Also in the record are the engineering drawings and the architectural plans that were fully developed for that.
David Almanzar described the soil tests. There was a soil test in this case, but it had to do with the soil at the Mountain Lodge and how they were going to ensure that it was appropriate for the condominium building.
They wanted to build it. It was ready to be built. They couldn't get an approval to the modification of their Phase 1 permit. Phase 1 was already permitted. There were two lots the Mountain Lodge was going to be on that were approved for development. But to get the modification to the permit in order to build a different structure, they went to the MMA and they said, "Can we have our permit?" The evidence of the purgatory that that application fell into is in the record.
Two elements of loss related to these projects: Not only the lost sale revenue of the units, but also lost rental revenues from a rental management program that Jamaca had established, had a contract with HMS, and the revenue from that plan discounted back forward 2.93 million.
[Page 1257]
A few other contentions from Mr. Hart, just briefly.
Mr. Hart, I don't think, has an agreement with the "but for" causation analysis that Mr. Farrell stated in his report that he used and then repeated with Mr. Di Rosa that he used, but he simply has a different view as to what damages flow but for the denial of the permit. That's his opinion. He's entitled to present it.
Mr. Hart believes that damages are speculative, but all defense damages experts do, and his opinions are largely based on his overwhelming reliance on the tax documents. He uses those to apparently now claim that prices don't rise as one goes up the mountain, which, of course, is a counterintuitive assertion and not reflected in the actual documents of the real contracts.
Mr. Hart also believes the Ballantines failed to mitigate damages but confirmed before the Tribunal that he was offering no opinion about certain factual events that he had to assume to make his contentions.
Largely, he wants to contend that the Ballantines didn't have the land that they--shouldn't have bought the land that they had for Phase 2 because the Park was decreed in 2009. We've heard a lot of testimony about when the Ballantines learned of the Park and when the Ballantines should have known that they weren't going to be able to
[Page 1258]
build in the Park. We still don't know whether or not they can build in the Park.
The prejudgment interest and the discount rate disputes between the Parties are modest. The quantum summary is attached to the Report of Mr. Farrell. This is from his Reply Report, with the only change being the prejudgment interest that has been updated as to September 1st, 2018, at $8.722 million. The dispute as to prejudgment interest is a slight dispute as to the appropriate rate and as to how it is compounded. This doesn't include the moral damages or the fees and costs.
The evidence here of discrimination, we believe, is overwhelming. Claimants affirm their application for moral damages based on the evidence of the treaty violations they faced and the emotional toll that they endured as individuals here. They were subject to harassment, mob action, death threats, property destruction, and the loss of reputation. That evidence is in the record and in the Witness Statements, and it's before the Tribunal.
The Claimants affirm their request for attorneys' fees and cost, which will be submitted at the instruction of the Tribunal. And the Claimants would like to thank the Tribunal, opposing counsel, the PCA, and all Parties for their effort and participation this week.
[Page 1259]
Thank you.
PRESIDENT RAMÍREZ HERNÁNDEZ: Thank you, Mr. Allison.
So, let's reconvene at 2:15.
(Brief recess.)
PRESIDENT RAMÍREZ HERNÁNDEZ: So, ready?
MS. SILBERMAN: Thank you, Mr. President.
CLOSING ARGUMENT BY COUNSEL FOR RESPONDENT
MS. SILBERMAN: Good afternoon to you and to the Members of the Tribunal.
Over the course of this proceeding, the Dominican Republic has taken the Ballantines' assertions seriously. It has engaged with their assertions, analyzed their arguments, and it has refuted them carefully, meticulously, and always with evidence.
But no matter what the Dominican Republic establishes, explains, or demonstrates, the Ballantines have refused to adapt their narrative, even when that narrative is demonstrably false.
Just this morning, the Ballantines' attorneys asserted yet again that "Altitude is not mentioned once in any of the main inspection reports. Not once."
You know this is false. I showed you on Monday. And if you want to see--if you have your slide deck from Monday, just turn to Slide 37--137. There's a reference to
[Page 1260]
altitude right there on the page in a quote from Exhibit R-4 which is the very first inspection report that the Dominican Republic submitted to the Ballantines before this Tribunal was even constituted.
Now, the Ballantines' steadfast refusal to accept reality is something that the Ministry of Environment has now had to experience twice over, first in the permit application process and now again in this proceeding. But this has gone on long enough. It has cost the State far too much money. This practice has to end today, here with this Tribunal.
Now, as Mr. Di Rosa will explain in just a little bit, the Ballantines have no real case. All of the hallmarks of a true legal case are missing. And so today, instead of responding to these inconsistencies or the repeated misstatements, we're going to focus on the questions that the Tribunal has been raising over the course of this past week. We'll begin, though, with a few fundamental tenets that govern this proceeding.
The first is that Chapter Ten tribunals are tribunals of limited jurisdiction, and the Ballantines bear the burden of proof. The third is something that the Ballantines' own counsel said in opening, which is that analysis should be based on truth.
Now, the relevant questions on jurisdiction are
[Page 1261]
something that we already discussed on Monday. There are two that you need to focus on. The first is, did the Ballantines qualify as Claimants when they submitted their claim to arbitration; and, second, did the Section A obligations apply toward the Ballantines at the time of the alleged breaches?
I showed you on Monday how these questions derived from Article 10.16.1 of DR-CAFTA and won't be going through that again today. But I did want to respond briefly to the Ballantines' counsel's argument that "It's not as if there's some universal concept of international law¹ that requires this outside the text."
He was referring to the notion that the Ballantines need to meet the nationality requirements of the treaty at the time of submission of the claim to arbitration. And there is, in fact, an international concept that requires this outside of the text of the treaty. And we have explained this in our pleadings.
So, for example, how Respondent's legal authority, Number 19, which is Achmea v. Slovak Republic, in Paragraph 267 states, "It is an accepted principle of international law that jurisdiction must exist on the day of the institution of proceedings."
1 English Audio Day 5 at 02:23:00
[Page 1262]
As stated by the ICJ, "The Court recalls that according to settled jurisprudence, its jurisdiction must be determined at the time of the act instituting proceedings was filed."
Now, these questions ultimately turn, first of all, on dominant nationality as of 11 September 2014, which is the date on which the Ballantines submitted their claims to arbitration. And the second question turns on the Ballantines' dominant nationality between the 12th of September 2011, which was the first alleged treaty violation not barred by the three-year time limitation set forth in Article 10.18.1.
And the second date of March 11, 2014, which, as we've explained multiple times and the Ballantines have never contested, is the latest possible date on which any event giving rise to a claim could have occurred in accordance with Article 10.16.3 of the treaty.
Let's turn briefly to the Ballantines' theories on jurisdiction. You heard some of these again today. For example, they asserted yet again that an assessment of dominant nationality is unnecessary. And their theory is the same one that had been advanced in the pleadings, is that dominant and effective nationality becomes relevant only if the investor has dual nationality at the time that the investor has made an investment in the territory of a
[Page 1263]
Party.
And the Ballantines say that this is relevant because, according to them, the vast majority of the land at issue in this investment dispute was acquired well before the Ballantines became dual citizens.
The problem, though, is that when Mr. Ballantine was testifying the other day, he changed and corrected one of his statements, and ultimately it has a bearing on this assertion here. Now, this assertion is flawed from a legal perspective. The theory cannot be squared with the text of DR-CAFTA. But since we went through that in the opening on Monday, I won't go through it again now unless you have any questions. So I just want to alert you to the portion of the transcript in which Mr. Ballantine addresses this point.
So he says, "I would add as well, we didn't even have titles to this property."
"I'm sorry, say that again?"
"I would add, we did not have titles to this property."
"You didn't have titles?"
"We gained titles actually in August of 2010," which is six months after the Ballantines naturalized in the Dominican Republic.
Mr. Ballantine continues, "Without a title, you
[Page 1264]
don't actually own the property."
So there goes the first theory.
Now, their second theory is that there are no critical dates. You heard this one again today. The Ballantines assert that the Tribunal should examine their entire life, which for some reason is singular despite all of the references to the Ballantines being separate people. And for the record, we agree that the Tribunal needs to evaluate each of the Ballantines' dominant and effective nationalities separately.
The Ballantines say that Tribunals have made it clear that it's important to look at a Claimants' entire life in evaluating its truly dominant nationality.
I mentioned this in the opening and wanted to just show you on a screen. So this is the slide that the Ballantines showed you in their opening. I believe it was Slide 10. And you can see that the sentence sort of starts in the middle there. It says, "this date," "indeed," and there's something else highlighted.
On the next slide, you see the quotes that I read to you the other day, which explain that in this particular case--it was an Iran-U.S. Claims Tribunal case--the Tribunal had confirmed that it only had jurisdiction when the dominant and effective nationality of the Claimant is that of the United States--this was a case against
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Iran--during the relevant period from the date the claim arose until 19 January 1981. Those two dates are determinative of the jurisdiction of the Tribunal.
It continues. "Obviously, to establish what is the dominant and effective nationality at the date the claim arose"--so as of a specific critical date--"it is necessary to scrutinize the events of the Claimant's life proceeding this date."
And then you get to the passage quoted by the Ballantines.
Now, earlier this week, the Tribunal had a question. It stated that at the end of this proceeding, it will need to come up with a test that it will need to apply. And the idea was to help the Tribunal identify what this test would be, first of all, for determining dominant and effective nationality and then dominant nationality itself.
It appears that the Parties agree that dominant and effective nationality are two different concepts and the Ballantines haven't contested that "effective nationality" means "genuine nationality." This is something that the Dominican Republic has stated in its Statement of Defense and also in its Rejoinder, and the Ballantines haven't refuted that.
So the issue then is, what does "dominant
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nationality" mean? And the Parties generally seem to agree on this as well. The issue is, is the dual national foreign enough to render international a dispute with the Respondent State?
I believe the Ballantines put it in their Rejoinder on Jurisdiction as what the Tribunal needs to determine is whether the Ballantines were foreign investors. Were they foreign to the Dominican Republic?
Now, in analyzing this, the primary question to be asked is what nationality is indicated by the applicant's residence or other voluntary associations.
As mentioned, this comes from the U.S. Digest of--it comes from the State Department's Digest of U.S. Practice in International Law.
What we really want to focus on today is merits issues. First on the questions posed by the Ballantines, some of which the Tribunal has asked us over the course of the week, and then questions that must be posed to the Ballantines. But I'll start with the former category.
So the first question is: Why was it not possible for the Ballantines to build a real estate project on their site? There were several reasons for this.
First of all, there were natural limitations. And you heard Engineer Navarro explaining some of these during his testimony this past week. He said, "Jamaca de Dios'
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soil is not consolidated. Because of the elevation, the slope has more pressure from the top. And so the soil has no capacity to withstand a deep and significant intervention. When we combine this with the meteorological conditions, the rainfall, the soil in that area is more fragmented by the chemical action of the water. And because of the physical water action, we see landslides in the area."
He continued, "The vegetation is typical of the rainforest, and that means that the area always has moisture, humidity, regardless of the fact that it is vertical raindrop or not. And in the case of Jamaca, you have a combination of clay and meteorized rock, rock that has been impacted by rainfall, so it's very loose. Clay is unstable. You cannot put any civil works on top of it. So clay absorbs water and it expands. And it also releases water when it dries out. So, this soil cracks and this creates landslides. So, there's a combination there of limestone and clay. The soil in Jamaca is very unstable for civil works to be constructed on it."
Now, in addition to these natural limitations, there are also various legal limitations. These were mentioned to the Ballantines in the--each of the reconsideration responses that they received, but I'll mention just the two principle ones here.
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First of all, there was Article 122 of the Environmental Law, which was a law that was promulgated in the year 2000 and predated any investment or any acquisition of ownership or title of this land by the Ballantines.
And it states that "intensive tillage, or any other work which increases soil erosion and sterilization, is prohibited on mountainous soil where slope incline is equal to, or greater than, 60 percent."
Now, the second principle legal limitation is the existence of the Baiguate National Park, which was created by means of Decree Number 571-09 in August of 2009 and Article 14 of that decree states, "That the Baiguate National Park is created and that this conservation unit of the National System of Protected Areas shall be thoroughly studied in order to develop its potential in the areas of culture, recreation, and biodiversity, with a view toward outfitting its bathing sites, and making use of those places with the best conditions for being earmarked for mountain ecotourism and scientific research in addition to other activities that are compatible with its management category"--it's a Category II park, which means that it protects biodiversity--"and the main vocation of its resources."
Now, just a clarification regarding Article 122 of
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the Environmental Law, and this was a question that was put to Engineering Navarro. And the question was: So under Article 122, you are not allowed to build whenever this is a slope that exceeds 60 percent. Does that imply that automatically you can build whenever this is no slope that is above 60 percent?
Here's what he said:
"The answer is no. The environment is analyzed based on several variables. If I have a high level of rainfall, clay soil, and slope, and there the determining factor would be gravity, the more slope you have, the more influence gravity will have. But if I have those conditions, I need to analyze that altogether to be able to determine if an area that has less slope has the same risk as an area that has more slope."
The risk can still exist.
Now, another question we've heard come up a lot is why was the Park, Baiguate National Park, not mentioned in certain correspondence to the Ballantines. The answer is that it didn't need to be. There were all of these other problems that rendered the project not viable. And so just as this Tribunal would not need to go into all of the many flaws in the Ballantines merits case, if it ultimately were to determine that it lacked jurisdiction to hear those merits claims, the Ministry is not required to identify
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every single defect in a project when it communicates its decision to the applicant.
And incidentally, the Ballantines' own witness, Mr. Graviel Peña, explained to you earlier that he wrote the inspection form that was used in the site visit. That was Exhibit R-108. You'll remember and can see on the screen--this is the five-page printed form with handwritten notes by Ministry technicians. It poses 39 separate questions about different environmental issues. And there were some annotations in the Spanish version that may not have registered.
What's interesting about this document is that it goes through in order and it starts with topography of the land. The very first question that it asks is how steep the slopes are. After that, there's a question about how much earth removal will be carried out in the construction phase, the magnitude of the impacts of the construction/facility, and whether the project will contaminate the soil or subsoil.
It's only in Question Numbers 24 and 25 that you get to protected areas. So it seems to be entirely appropriate that the Ministry would consider these issues first before getting to the Park. And, notably, this doesn't say that the Park was not an issue. This just flags it for later, additional consideration.
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Now, the fact that the Park wasn't mentioned in certain correspondence doesn't mean that the Park wouldn't be an obstacle to approval. So if Terms of Reference had been issued, the Park still could become an obstacle to getting a final permit during the course of the Environmental Impact Assessment. Because one of the things that needs to be addressed in an Environmental Impact Assessment is whether or not the area falls within any protected area and, if it does, if it complies with the management plan for that protected area. So not mentioning the Park doesn't mean this would have been okay.
Now, why did the Ministry not propose that the Ballantines change the project? Because it's not the Ministry's job. The Ministry's job is to evaluate the projects that come in. And the presumption is that the project is not going to be approved. The onus is on the applicant to overcome that presumption, which is part of the precautionary principle, and it needs to prove to the Ministry that what the applicant would like to do is environmentally sound.
Remember, the presumption is that there should be no intervention unless the applicant can prove that it's safe. Now, this is explained both in Mr. Navarro's First Statement that the Ministry's decisions relate to the specific project as submitted, and also in Article 40 of
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the Environmental Law, which focuses on the project, not a specific site.
So it says, "Any project, infrastructure construction, industry or any other activity which, due to its characteristics, might affect the environment and natural resources in one way or another shall obtain the environmental permit or license from the Ministry of the Environment."
Now, when the Ministry receives a first request from an applicant that wishes to pursue a project that may have some sort of environmental impact, the first step in the environment permitting process is to request Terms of Reference. The Ministry then conducts a preliminary analysis to determine the category of project that should be assigned or to determine if the project is unviable and will not continue at all in the permitting process. Two days ago, Zacarías Navarro explained that if there's certainty that a project cannot be approved, it's rejected in the prior analysis phase.
Now, in a way, that benefits the applicant because putting together a lengthy Environmental Impact Assessment--as you saw, the one that the Ballantines submitted was 119 pages and took them more than a year to complete--I guess exactly a year to complete--it costs a lot of money.
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So, if the Ministry knows in advance that the project isn't going to be viable, it says the project is not viable at this site, which is what the Ministry did here.
Now, if there is a doubt as to the magnitude of the impact the project will cause, the project moves to the next phase and Terms of Reference are issued for an Environmental Impact Assessment to be conducted and presented to the Ministry. And both Zacarías Navarro and José Roberto Hernández, who was an applicant--he was the developer from Quintas del Bosque--they testified that the Ministry may and sometimes does establish limits on the project.
Further, after the Environmental Impact Assessment is filed with the Ministry, the Ministry may impose additional restrictions to the project that can be developed.
It is testified in Mr. Navarro's First Report at Paragraph 35, "It must be clarified here that the Ministry evaluates and decides in an integral manner on projects submitted to the Ministry. In practice, no partial authorizations are issued. A developer has the possibility to submit a proposal that meets the environmental conditions and the appropriate land use for the area. The Ministry can then establish more explicit restrictions and
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if the developer meets them, then the Terms of Reference can be issued."
So it's not a matter of the Ministry coming up with suggestions for what the project should be. The Ministry is either saying there is no way this entire project can go forward, which is what happened with the Ballantines' Project 3, or it can impose restrictions on what the applicant wants to do and say, "We're willing to hear a bit more about this, but you still need to prove to us that the application can be granted."
Now, the real estate project wasn't viable on this particular site, the proposed Project 3 site. And the president of the Tribunal put this question to Mr. Navarro. He said: "What you're saying is that there was no possibility whatsoever here with this proposal?"
And Mr. Navarro answered: "Yes, with that proposal, there was no possibility for approval."
Now, that doesn't mean that all development possibilities were necessarily out. Ms. Cheek, you asked about this the other day. So on this particular land, there could have been recreational activities, which would include ecotourism or any other activity that can be conducted without endangering biological wealth, the particular type of biological wealth that the park preserves. In addition, there could be activities that do
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not involve intensive tillage or otherwise increase soil erosion. So that would be the issue with Article 122 of the Environmental Law. But, again, the idea of the Ministry is not to go and tell a person what they can do. If someone wants to build a skyscraper in the middle of Central Park and that's not environmentally viable for whatever reason, the Dominican Ministry were deciding on that application, it wouldn't go back and say, "You can open up a food truck." That's not the Ministry's job.
Now, what should the Tribunal make of the Ministry's correspondence with other projects? Well, all of the instances of alleged cooperation between developers in the Ministry that the Ballantines have cited have to do with limitations that are placed on the project as they were advancing in the evaluation process.
And as you look at this correspondence--first of all, you should look at it. You should review it in context. Review it chronologically and bear in mind what the correspondence says. Is there a suggestion that's being made from the developer to the Ministry, as there was, for example, in Quintas del Bosque II? Is there a question to which the Ministry responds? What's the date? Is it after the March 2014 deadline that I mentioned earlier?
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And then as you review it, ask yourself, have the Ballantines told me enough about this that I can conclude (A) that there was differential treatment of like situated projects and (B) that this differential treatment was unjustified?
As the U.S. stated in its non-disputing party submission, the Ballantines bear the burden of proof in both of these respects.
Now, that brings me to the merits questions for the Ballantines. These are things that haven't been asked and that the Ballantines can't really answer.
So, first, why did the Ballantines purchase land before confirming with the Ministry that that land could be used for a real estate project?
You heard from Mr. Hernández yesterday that he had done something like this. He entered into a contingent agreement with the landowner. He said, "I will purchase this land, but I'm going to make this contingent upon receiving a permit from the Ministry. Why spend the money if your project can't be approved? It only seems prudent."
Why did the Ballantines wait for the Ministry to mention the Park? As you'll recall, the Ballantines were informed by their environmental consultants in September of 2010 that the Baiguate National Park could have been an issue.
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You've seen the emails.
"Mr. Ballantine, as agreed, I attached the map of the location of the protected areas in the area surrounding Jamaca de Dios. Lots 67 and 90, as you may observe, are located within the protected area that's called the Baiguate National Park."
Mr. Ballantine then responds asking about the coordinates of the Park. He's given the decree.
"Mr. Ballantine: The boundaries of the Park are provided by Decree Number 571.09 signed by Leonel Fernández." There was no notice issued. The environmental consultants were able to find the decree and determine the coordinates.
And then: "Good afternoon everyone, I have followed attentively the queries that you have concerning the declaration of protected area, Baiguate Park, which affects the Jamaca project."
Why didn't the Ballantines mention this? Why didn't they mention it to the Ministry? They knew that it affected the Park? Their environmental consultants told them so. They just--they didn't raise it. Why did the Ballantines fail to propose an amended project?
You've seen them insist time and again in the pleadings that they were willing to do anything--anything the Ministry said.
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So why not propose an alternate plan? Why insist every single time even after being told about the existence of the Park under the exact same project? Why not ask the Ministry if there was anything that could be approved? You've heard about this Mountain Lodge, for example. But the Ballantines didn't even ask the Ministry for Terms of Reference.
They've stated that they couldn't because supposedly they hadn't gotten the no-objection letter from the Municipality. But that didn't hold them up in connection with Project 2.
For Project 2, they applied to the Ministry first. And as Michael Ballantine explains in his First Witness Statement, it was after that that the no-objection letter came in.
So why didn't they do it? Why did the Ballantines refuse to consider another site? This came up during cross-examination. Mr. Di Rosa put it to Mr. Ballantine that, "You know, you could have bought land somewhere else, right?"
Mr. Ballantine said he was not going to bring the mountain to Mohammed.
But it would seem that he's the mountain in this scenario, the one who was supposed to move. And that's just not correct. No one has a right to a governmental
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permit. Especially an environmental permit. You need to obtain permission and to prove that that permission is warranted. Why did the Ballantines neglect to quote Article 122 of the Environmental Law even once in this proceeding?
It wasn't in any of their pleadings, not even the Notice of Intent. Didn't appear in their opening statement. They haven't quoted it at all. And yet they purported to tell you what it says.
Why did Michael ultimately--only learn of such article when his permit application was rejected? This came out on cross-examination too.
The question was: "At what point did you become seized of Article 122 of the law?"
And he says: "September 12th, 2011."
Which was the date of the rejection letter. Why didn't he know about that before then?
Other local developers were familiar with this law. You heard testimony again from José Roberto Hernández.
He says, "In 2007 we delivered the request for the Environmental Impact Assessment."
And then he was asked by the Ballantines' counsel, "When you built these houses in 2007, were you familiar of the law--the Environmental Law that governs, let's say, for
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example, the slopes?"
"I did. I knew of the law."
Why did the Ballantines fail to proffer testimony from their Dominican environmental lawyer? This too came out on cross-examination.
The question was, "Is there a reason that your lawyer, Freddy González, the one who said that the road would have the biggest environmental impact--was there a reason that he didn't provide a witness testimony in this proceeding?"
"Well, we brought forth 20 witnesses."
"So you thought the headmaster of the school where your children went was the more relevant witness than your environmental lawyer?"
Why did the Ballantines fail to proffer testimony from any of their environmental consultants?
"None of your environmental consultants, either Empaca Redes people or Antilia people, are among the 20 witnesses that you presented?"
"No."
Why was there no testimony from any of the Ballantines' engineers?
"Did you have an engineer involved in the construction of the first road?"
Well, there was a man named Rafael Peralta, who is
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supposedly a licensed engineer recognized by the Dominican Republic, and an American engineer whose name is Chad Wallace. They were the ones who built the road, according to Mr. Ballantine's testimony.
That was the first time we had heard about them. They weren't mentioned in any Witness statement, and they didn't provide any testimony in this proceeding.
There was testimony from Mr. Kay. But Mr. Kay, as you'll recall, revealed that he's not an engineer despite the fact that Mr. Ballantine in his statements and the Claimants in their pleadings referred to him repeatedly as "the Ballantines' engineer."
When asked, "Are you an engineer?" he said, "I am not. I'm a facilitator."
"What sort of academic training do you have?"
"Not all that much."
So have the Ballantines established any of their treaty claims? The answer is no. You need to have evidence to establish treaty claims. You need to have a consistent story. You need to have more than your friends testifying on your behalf creating an echo chamber about any documents or any basis to back it up. And as you consider these issues and try to evaluate what little evidence there is, here's some things that you should bear in mind.
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First of all, in the environmental context, the absence of scientific certainty is not a valid basis for attacking the propriety of a measure intended to prevent environmental harm.
So, you've heard all sorts of arguments, especially through cross-examination of the experts, trying to attack them. Are you sure a landslide is going to happen? How can you be certain that this is different from one project or another?
This is the precautionary principle that we've been explained and emphasizing over and over again. The idea is that the absence of absolute scientific certainty is not enough to say that you cannot take this measure that is intended to prevent environmental harm. We act cautiously. We assume that there is risk unless it can be proven that no risk exists.
Now, another important consideration is that--and I'm quoting from a Stanford law professor--"Many people have an amazing ability to shove their environmental values into a remote corner of their conscience when their economic interests are at stake."
You've heard a lot of sort of "not in my backyard" arguments. These are arguments about: Why do I have to be the one to bear the brunt of environmental protection? Why am I the one that's affected? What possibly could be so
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unique about the Jamaca de Dios site that the government had to step in and say nothing can take place here?
And, again, the government wasn't saying nothing can take place. It was saying that this particular project could not take place.
Now, this argument doesn't work in the environmental context for the following reason, which is it leads to the tragedy of the commons. If everyone says "No, no, no. My property isn't unique. You don't need to do anything here," then we no longer will be able to have any resources to protect.
So I continue quoting the Stanford law professor. "Anyone who has studied the environment for very long understands the tragedy of the commons. The idea is that when a resource is freely available to everyone in common, everyone has an incentive to take as much of that resource as they want, even though the collective result may be the destruction of the resource itself. Society as a whole would be better off restraining consumption and preserving the resource. But the rational action for each individual is to consume to her heart's content. Because no one can bind anyone else's actions, not consuming simply makes one a patsy. To each individual, moreover, her own actions seem insignificant."
And then there is the problem that "holding back
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will lead to a marginal improvement, if any, in the condition of the resource. So there's this sense that the high road leads to nowhere and the cumulative results of reasonable individual choices is a collective disaster."
This is why we have environmental regulation. This is why in the Dominican Constitution natural resources are a constitutional right of every Dominican citizen, including the Ballantines. They're a shared resource that the government protects. And the government is there to say, "No environmental impact unless a person can prove that it's going to be safe."
Now, importantly, despite all of the things that you have heard about the various names that the Ballantines throw out, they cannot establish nationality-based discrimination. I showed you this conclusion on Monday in the opening, and the Ballantines haven't said anything to refute it.
The problem with Project 3 was with the proposed site and the project that the Ballantines wanted to conduct on that site. It did not have anything to do with the Ballantines themselves.
The evidence of this is that the Ministry invited the Ballantines on two different occasions to propose an alternate site for the project. And in addition, in parallel, the Ministry renewed the Project 2 permit.
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On top of that, the Ministry duly conducted five different site inspections, went out whenever the Ballantines asked, and had three different ministers involved in the approval--sorry--the review of this particular permit request and had 21 technicians go out and review.
If there were a problem with the Ballantines, why waste all of those resources? It just doesn't make sense.
Now, I showed you this chart again on Monday. Nothing has changed. When you compare the treatment that was granted to Jamaca de Dios Project 3 and its only genuine comparator, which was Aloma, you see that it's the same.
So for Project 3, the developers were the Ballantines, were dual nationals of the Dominican Republic and the United States. The location of the proposed project site was in the Cordillera Central Mountain Range, right next to Aloma. The altitude was 820 to 1260 meters above sea level. The slope distribution was that 18.7 percent of the land exceeded 60 percent. The soil type: igneous, volcanic and metaformic. The site was inside the Baiguate National Park. A permit was requested. Permit was denied.
For Aloma. Juan José Domínguez, who's a Dominican national, son of the Mayor of Jarabacoa and brother-in-law
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of a former president, had the land right next door. The altitude was 990 to 1220 meters above sea level. Slopes were slightly lower, only 4.89 percent of the land exceeded 60 percent. The soil type was exactly the same. It too was inside the Baiguate National Park. Permit was requested and permit was denied.
Now, Mr. Dominguez had a reconsideration request. It was denied. The Ballantines had three reconsideration requests that were duly evaluated. And in addition to this, when the Aloma permit was requested, the Ministry went out to conduct its site inspection and found that Mr. Dominguez had opened up a road and fined him for this. Fined him--it was either $6,000 or $7,000, and the Ballantines were fined $1,300 for opening a road without a permit.
Now, just to give you a flavor of some of the issues with the other projects that are related to the Park. The Ballantines have a timing problem. They keep directing your attention toward the map. I showed you the other day that they were directing you toward the flat version of the map. And when you look at the version that shows the ridges of the mountains, you can understand why someone seemingly next door to a different project may have been included, may not have been included. It's because they're on one side of the mountain or the other.
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So there are some other problems with this. The Ballantines' maps, their pictures, don't take account of time. So, for example, La Montaña asked for Terms of Reference in the year 2016, which was seven years after the Park was created. And it's only logical that because La Montaña knew of the boundaries of the Park that it would request to go right up to the buffer zone, right up to the permitted edge.
So if you look at La Montaña on a map, you think, "Oh, this is close, and maybe that was included in the Park for some reason or another."
La Montaña came afterwards. You don't see that on their map or their pictures.
Quintas del Bosque I. That's separated from the Park by a road. Mr. Hernández explains that in Paragraph 20 of his Witness Statement. Quintas del Bosque II also asked for Terms of Reference in 2014. So, again, it seems only logical that Quintas would request a permit to create a housing project outside of the Park, and that's why its boundaries would not be comprised within the Park.
And you will find that in the Quintas del Bosque II Request for Terms of Reference, which is dated February 25, 2014. It's Exhibit C-13.
Jarabacoa Mountain Garden asked for Terms of Reference in 2012. Again, seems only logical that it would
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request a permit outside of the National Park. And then Paso Alto is separated from the Monumento Natural Salto Baiguate by a road. And that very road is what is mentioned as a border in the actual text of the decree.
Part of Paso Alto is comprised within the buffer zone of the Monumento Natural Salto Baiguate. But the project existed since 2006. So much like the original Jamaca de Dios project, Project 2, it already received a permit when the monument was created and it's partly included in the monument's buffer zone.
You'll find that on Page 15 of the First Martínez Statement, and there's also a map at Annex B of Mr. Navarro's statement, and Exhibit R-77 is the decree.
Now, the contention regarding Paso Alto would have to be that the Dominican Republic not only created the Parque Nacional Baiguate as part of a conspiracy against the Ballantines, but also modified the borders of the Monumento Natural Salto Baiguate to affect Paso Alto.
Now, Mirador del Pino is in a completely different mountain across the Jarabacoa Valley. It asked for Terms of Reference in 2010. That's Exhibit C-45.
But back to Aloma, which is the only genuine comparator. The Ballantines showed you the same pictures again that they have shown many times before that we have disproven with the Google Earth images, and we also have
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testimony now from the Ballantines' own witness.
So the question was put to Mr. Peña whether there was any real estate development.
"Have new how houses been built in Aloma?"
"There's a house that belongs to the owner of the development."
Then we tried Mr. Kay.
"Mr. Kay, there is only this housing construction in Aloma Mountain; correct?"
"As far as I know, correct."
"And, Mr. Kay, What you have here are basically the same structures taken from different angles; correct?" So they were referencing photos.
"That would be correct."
Now, the fact that there is no nationality-based discrimination is really important. Because it's only nationality-based discrimination claims that are permitted under Chapter Ten of DR-CAFTA. Both the United States and Costa Rica explained this in their non-disputing party submissions, and it is the only reading of the treaty that follows the principles of treaty interpretation.
So the treaty, as you know, has a most-favored nation clause, and it has a national treatment clause. These are two specific types of discriminatory treatment, both of which are based on nationality. And pursuant to
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the principle of expresiones exclusio alterius--sorry, I can't do it with Latin--it means that the listing of certain factors means necessarily the exclusion of others.
So, the identification of a most-favored nation clause or a most-favored nation obligation and of a national treatment obligation means that all other types of discriminatory treatment are excluded from the other obligations set forth in CAFTA.
Now, to continue analyzing the Ballantines' claims, I'm going to pass the microphone over to Mr. Di Rosa who will walk you through the many reasons why these claims fail.
MR. Di ROSA: Mr. Chairman and Members of the Tribunal, good afternoon. This morning the Claimants said, "We expect the Respondent will want to talk mainly about the Jamaca project, and they will mainly want to talk about Mr. Ballantine," as if, you know, we're skirting the issue. And that's precisely what I plan to talk about because this case is about their project. It's not about everybody else's project.
Like a magician whose art is the art of misdirection, they say, "Don't look at this--don't look at this project," which is the one that matters, "but look at all these other projects." And that's something that is entirely designed to mislead the Tribunal.
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So we want to walk you through a few broad conclusions that can be drawn from the testimony this week and in general from the evidence in this case. The first conclusion is that the Ballantines are not entitled to a favorable award for the various reasons that I will discuss. But I want to start with this quote from the Maffezini v. Spain Case. And I'm quoting here.
"The Tribunal must emphasize that Bilateral Investment Treaties are not insurance policies against bad business judgments."
And that's exactly what the Ballantines are trying to use this treaty for. It was their own bad judgment that caused them to generate the problem that they now have.
You heard Mr. Ballantine in his testimony say that he had no background whatsoever in real estate business, no background in construction, no background in any sort of project of this nature. His entire experience was in the printing industry, which has absolutely nothing to do with this project. He had never done any business abroad. He had never lived abroad. But he said he went to the Dominican Republic, and he had a vision when he saw this mountain.
And we asked him, "Did you--did you check with anybody whether you could do anything with this property?"
And he happily admitted that he had not done any
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feasibility study, that he had not hired any environmental consultants, that he had not done any commercial feasibility study, that he had not engaged any lawyer, had not--done no legal due diligence or any due diligence of any sort really. He just decided--and he said this.
He said, "I had a vision like Walt Disney. I"--you know, "I thought it would be fun. I thought it would be an adventure. I decided to go for it."
These are all his own expressions.
And in those circumstances, how can he possibly expect the Dominican Republic to now pay for his own business misjudgment, his own lack of due diligence, his own obstinacy due to his vision?
And what he ended up constructing was hardly what one would call ecotourism. Now, he himself ultimately admitted that some of these properties don't really qualify as ecotourism. And this morning opposing counsel said that the Dominican Republic is objecting because they are nice houses.
That's not why the Dominican Republic is objecting. The Dominican Republic is objecting because they were destroying the mountain and they were purporting to construct on a part of the mountain that was going to be extremely dangerous. That's really ultimately what this case is about, is about whether the property was, in fact,
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a property on which--on which they could build the type of project that they had in the lower mountain.
And you heard Mr. Ballantine say that he wanted to put 70 of those houses up on the top of the mountain. And the Ministry decided that simply was not going to be safe for all the reasons that you heard.
So what the testimony this week has exposed is that this is a problem of the Ballantines own making. The case has also exposed that this is really abusive² misuse of an investment treaty. Investment treaties simply are not designed to address this type of situation. We'll come back to this topic, but I'd like to talk a little bit about evidence.
We told you at the beginning of the week that they had a nice story, but they had no evidence. And that became even more evident in the course of this week. They purported to challenge the methodology of the Dominican Republic's experts, which is nothing short of perverse given that they presented an engineering expert who doesn't have more than a high school degree. They presented an environmental consulting expert who is a lawyer and who is on their payroll and who offered money to a Ministry official to testify, which she declined to do.
2 English Audio Day 5 at 03:09:22
[Page 1294]
And you saw Mr. Farrell, their damages expert, who happily conceded that he hadn't looked at anything that's relevant. And they all happily conceded they don't have attachments to their--to their Expert Reports. That's a truly bizarre thing. They have a bunch of Expert Reports and don't have a single exhibit or very few. There are some photographs. We'll come back to that. But they don't have real support. That's like writing an entire Ph.D. thesis without putting a footnote in it. How can that qualify as evidence? Ultimately, their evidence consists of their own testimony and of expert testimony that can't be corroborated or tested.
Today you saw opposing counsel cite to Mr. Farrell in their opening statement. They had quotes from Mr. Farrell on the screen. But Mr. Farrell on cross-examination admitted that he had based his views and his conclusions and his calculations on what Mr. Ballantine had told him. So it's a completely circle--circular type of evidence, and their documentary evidence consists of photographs and maps.
And the photographs you--you saw Mr. Kay, the so-called engineering expert, also admit happily that he had measured some of these slopes using photographs. And the angle of the shadows is sort of like the Egyptian sundial of clinometry. And you can't measure things and
[Page 1295]
purport to come into an arbitration like this with evidence of that nature.
It's completely making a mockery of this proceeding to base so much of their case as they do on the issue of slopes. And they present these photographs, many of which Mr. Kay also happily conceded, you know, he had not taken himself. And they could have been pictures from Cambodia or the Congo as far as one could tell.
In contrast, Mr. Deming, the Dominican Republic's expert, testified that he--he used a topographic map. That's at Exhibit PD-006 in Slide 28 of his presentation yesterday. He said that he had used--that he had measured the slopes with an instrument called a Brunton Pocket Transit. He talked in his Expert Report at Paragraph 17 about the Brunton Pocket Transit device. And he mentioned it also in the -in his testimony. And the Ministry, for its part, used an instrument called a clinometer.
And you can see that at R-105. There's a revised version of R-105 at Page 3 where they talk about the use on-site of a clinometer to measure slopes. And when asked about Exhibit 114 in his testimony this week, Mr. Navarro also mentions that a clinometer had been used to measure the slopes.
So I think that the Tribunal has to ask itself: What evidence can it possibly base this award on?
[Page 1296]
There's no real evidence that the Tribunal could actually point to in an award to justify a decision to rule in their favor. The court issue, in our view, is that there was no impropriety in the Ministry's decision to deny the permit. We'll come back to that. But the--there's also absolutely no evidence that they were able to produce concerning this massive conspiracy that they so fancifully alleged throughout the case. They didn't say much. In fact, they didn't say anything at all about it this morning. So we assume that that's been adequately dispelled.
They have not proven any discrimination, much less discrimination based on their U.S. nationality, which is what the treaty requires, as the U.S. Government has also agreed in its non-disputing party submission.
They haven't proven that there's been more favorable treatment. There's been different treatment, but not more favorable treatment. And the differences are justified for the reasons that my colleague, Ms. Silberman, mentioned today.
They take several--you know, they cherry-pick several issues and they isolate them. And, you know, when you do that, obviously, you can make it look bad. But when you really dig under the surface, you see that there are critical differences of the sort that Ms. Silberman just
[Page 1297]
showed you. And their whole case seems to be based on that sort of strategy. And same thing on nationality.
They say, like, "Oh, well, you know"--they focused on the bank accounts. And, you know, that can't possibly signal that they're dominant and effective--I mean, that their dominant nationality is Dominican.
And, you know, obviously, if you isolate every single factor that you take into account for that determination, then, you know, you can easily disparage the argumentation.
But the whole point of both the nationality--the dominant nationality analysis and the environmental analysis is that it doesn't lend itself to this simplification, these binary constructs that I mentioned in the opening statement. They simply don't.
And they like to say, "Well, it's convenient for them now to invoke the altitude and so forth." And, you know, we--the documents actually show that none of this is an ex post facto invention as they are alleging. But, you know, they say, "Oh, now they focus on altitude and here's"--you know, "here's what they say about altitude." And nobody ever said that it's about one thing.
And that's the point that's been repeated over and over again, is that these environmental determinations are based on a number of factors that interrelate in very complicated
[Page 1298]
ways. And the Claimants simply refuse to accept that. And instead they--they reduce it to a caricature by taking these issues like the slope and so forth and just drawing these facile comparisons.
Now, why else do the--are the Ballantines not entitled to award? They have deceived the Dominican authorities in a number of respects. They deceived the environmental authorities. They deceived the immigration authorities. They deceived the tax authorities. And I'll walk through briefly each of those.
The documents show, and Mr. Ballantine confirmed in the cross-examination, that when they applied for the first permit, the lower road--the lower mountain road permit, they had requested permission for a road for purposes of a reforestation project.
They never mentioned that they planned to do a housing lot project, even though Mr. Ballantine knew that from the beginning. In fact, that was his vision from the get-go. So, essentially, they got the initial permit by false pretenses.
Then they--once the road was already built, they applied for the housing lot project. At that point, the road is already built, so the Ministry can't really do much about it. And what do the Ballantines do? They apply for a--you know, a series of mountain cabins that were going to
[Page 1299]
be built of wood and lightweight materials. That's what they told the Ministry consistently, even as late as the Environmental Impact Assessment.
And then they built these three-story McMansions that we showed you that even Mr. Ballantine was forced to concede was not ecotourism in any way, shape, or form.
They also deceived--ultimately, they also deceived the immigration authorities because they have insisted here and they've testified under oath that the reason they engaged in--the reason that they acquired the Dominican nationality was purely for commercial reasons and purely for business reasons and so forth.
But we showed you in the opening the oath that they took of allegiance to the Dominican Republic where they emphasized that they were embracing the culture of the Dominican Republic and expressing other forms of affinity to the country that they now simply deny, even though when they did that--when they took that oath, presumably, they were supposed to tell the truth, just like they were here. They both can't be--you know, they can't both be the truth. So, you know, there's clearly some deception going on there.
And, finally, with the tax authorities. We mentioned this point in our pleadings, and it's been discussed by Mr. Hart as well. We tried to address it on
[Page 1300]
cross-examination, and we were told that the Tribunal didn't see the relevance. So I want to explain what the relevance is there.
They are claiming in this case, based on what they call the real contracts, the--you know, the prices that they claim they sold the lots for. Now, we're saying--and they say they did that--you know, that the tax contracts--the parallel contracts that were submitted to the tax authorities, they said, "Oh, don't worry about those. Everybody does that. It's a--you know, it's a way, essentially, that people, you know, pay taxes on the assessed value of the--of the property."
And our issue is twofold. First, that they base--they purport to base their claims--their damages claims on these contracts that they call the real contracts, but that doesn't match anything. If you look at all their documents that presumably are true and faithful to what actually happened, which were the contemporaneous documents which they swore under oath were true, like their financial statements, like the--their income tax returns for Jamaca in the Dominican Republic and for Mr. Ballantine in the U.S., they all match the tax contract numbers. That's our problem.
We were trying to show you that it's relevant because at the time they submitted those tax returns, they
[Page 1301]
swore that they were true, and now they're swearing that the other contracts are true. And, again, they can't both be true. That's our problem with that.
So they have engaged, essentially, in deception on the tax front as well because they have--you know, they have told the tax authorities one thing, and they have paid--and this is the issue. You know, the assessed value, you can say--they presented an expert on this business of the--you know, of the practice--what they called the practice of submitting these parallel contracts based on the assessed value.
But if you re-read Mr. Balbuena's Expert Report or Witness Statement, whatever it is, you will see he never says it's legal. He just says it's a common practice.
Now, it's a common practice with respect to the payment of the transfer tax. That's what--that's what you're--you know, you're reducing by submitting the parallel contract that has the lower price.
But in your income tax return, both in the U.S. and in the Dominican Republic and probably in every country in the world, what you report on that income tax is your actual revenues, your real income.
And they swore under oath, both to the Dominican authorities and the U.S. tax authorities, that their income was X, and the X matches more with the tax contract prices
[Page 1302]
than with the up--the higher contract prices.
And when we tested the contract pricing, it's a--you know, it's a house of cards really, because it's not--there's no evidence that that was actually the income they received. They had the contracts, sure. You know, a contract can say anything. But, you know, was the contract actually performed? And, you know, we had slides showing you that the contract prices weren't all actually paid.
But they don't have any systematic, you know, presentation of--you know, of calculations or evidence of any sort that show you what the actual income that they earned from those contracts.
So all the contracts add up to a certain figure. But did they actually collect that? They didn't. And when I tested Mr. Farrell on that, you know, again, he happily admitted that he had not tested it in any way.
You know, "Did you check these contract prices against any bank accounts?
"No."
"Did you check it against any financial statements?"
"No."
So it's not based on anything. You know, it's just documents. I mean, it's just words on a page. It doesn't have any support and any genuine evidence.
[Page 1303]
Another issue and another reason that they are not entitled to a favorable award is because they, again, are abusing the system. And in doing so, they have managed to defame a lot of people. They have managed to insult the entire country of the Dominican Republic. They have misrepresented their own motives for acquiring the Dominican nationality. You know, Claimants' counsel made a big deal today of the fact that the Ballantines were in their mid-40s when they acquired the Dominican nationality. That's--you know, if anything, that's evidence that they truly believed in acquiring the Dominican nationality and embracing it. Nobody in the Dominican Republic asked them to do this. There was no Dominican authority that forced them to do this and no Dominican person at all that forced them to do this.
They voluntarily, in their mid-40s, decided to fully embrace the Dominican nationality. They moved there. They moved all their money there. They started a project there. They moved their kids there. They acquired permanent residency. They then acquired the nationality. Then they acquired their children's nationality. And they loved the Dominican Republic, and you see that in all their declarations. And they loved the Dominican people.
And then what happened? What happened is that he couldn't build his--you know, his Disney World on the
[Page 1304]
mountain.
And, you know, that's--that's something that--you know, it's like a child who all of a sudden isn't allowed to play with a toy anymore. And so he threw the adult equivalent of a tantrum, and he started pressing really hard for his--you know, his pet project to be approved. He didn't want to do it anywhere else. He wanted it exactly where he wanted it because of his vision, and he would not accept--he would not accept no for an answer.
And at that point, he starts to claim that he's not Dominican anymore. But at the relevant times, he had fully embraced the nationality. He voluntarily consciously--you know, his U.S. nationality is something that he inherited at birth. He didn't choose that. And the fact that he chose it late in life, you know, if anything, is more reflective of a true intention to acquire another country's nationality.
The other thing that's incredibly offensive is his assertion that he acquired the Dominican nationality as a souvenir. No country's nationality is a souvenir. I assume Mr. Ballantine knows there are hundreds of people who die every year trying to get into the United States to give their children the U.S. nationality. Nationality is not a joke. It's not a souvenir.
Another reason why the Ballantines are not
[Page 1305]
entitled to an award is because, if anything, they were treated more, rather than less, favorably than other investors and Dominican investors.
And let me explain why. My colleague already mentioned the fact that they had multiple reconsiderations. Probably in large part because they were American, they got these reconsiderations. I cannot image the Environmental Protection Agency or the Ministry of the Interior in the U.S. sending out a team to reinspect, you know, a site--a project site that they had already rejected, much less two or three times and four times with senior people going, as the Dominion Republic did.
If anything, that probably reflects that they were--they were trying to bend over backwards to give Mr. Ballantine due process, precisely because he was American. And that resulted in five different site inspections and three different reconsiderations. And the inspection by the Technical Evaluation Committee, which is a highly unusual event--the whole--you know, the whole senior team from the committee went out personally to inspect the site.
And that, you know, if anything, reflects more favorable treatment. You know, they did do a management plan in the end for their property, even though, you know, the Ministry under normal circumstances would not have done
[Page 1306]
it quite when it did. Again, trying to work with the Ballantines, they did produce a management plan.
They renewed the permit, as Ms. Silberman mentioned. They didn't--you know, this was in 2013. They didn't need to do that. But they did possibly because--precisely because he was American. And, you know, they could have revoked the license at that time, particularly given that they had misrepresented a lot of things. And particularly, as we'll show you, there were serious doubts about--even the lower mountain project in terms of--in terms of safety and such.
Our second conclusion--our second point in conclusion, I should say, is that the Ministry of the Environment is entitled to deference. The Ministry--and let me just show you a quote from the AES v. Hungary Case.
The Tribunal said, "The Tribunal has approached this question on the basis that it is not every process failing or imperfection that will amount to a failure to provide fair and equitable treatment. The standard is not one of perfection."
And that's an important point because environmental regulation by its nature is difficult. It's imperfect. That doesn't mean that it shouldn't be undertaken. And when it does get undertaken, it should not be second-guessed by non-experts and by Tribunals and such
[Page 1307]
unless there's a genuinely compelling reason to do that.
And we had talked about--we had talked about Daniel Kahneman and his book "Thinking Fast & Slow." In that book, he also talks about something called "the hindsight bias." The hindsight bias is a bias where, you know, in retrospect, things like look like they--you know, they should have been done differently. But at the time, you make the best decisions with the information that you have, and you have to weigh different considerations and different--and competing priorities.
And the Ministry in developing countries like the Dominican Republic don't have too many resources. So, you know, these things are challenging. And there are things that don't get done when they need to get done. That's normal in probably every country. And there are certain things that possibly don't get done perfectly. There are mistakes made, sure. That happens in every country. But the point of this quote here is that--precisely that, that the standard can't be one of perfection for States under these treaties. Because if they did, then they would be unable to regulate and to act in the public good.
Now, even Phase 1 posed safety risks. And I'll explain why this is relevant. This is an inspection report from the Ministry that was submitted in March--in March of 2011. Apologies for the duplication of the specific date
[Page 1308]
there. This is Exhibit R-004. And in the conclusion--I'm just going to read the whole thing because all of it is highly relevant.
It says, "Conclusion. Institutional weakness and the voracity of economic interests combine to deliver a heavy blow to nature in the Municipality of Jarabacoa, and currently plans are in place to construct a similar project to the one under construction, without having completed the one for which a permit was granted in an environmentally fragile zone. It is not necessary to be a genius in environmental sciences to see this. This zone of high environmental fragility and of high natural risk should not be inhabited by humans given that it is unstable and highly dangerous."
So here you have a Ministry official expressing a view several months before the permit denial that they really shouldn't have even got the lower mountain permit. And it's not hard to see why. As this report stated, you don't have to be a genius in environmental science to see why that's a problem. And we'll show you some photographs to illustrate. But importantly--and they keep saying, like, "Oh, you know, all of a sudden erosion is a big thing. The soil is a big thing."
3 English Audio Day 5 at 03:34:01
[Page 1309]
It always was a big thing. It was a big thing even for them. In their own Environmental Impact Assessment, they warned not just of the impact of erosion but what they themselves called the high impact erosion for the Phase 2 project.
So you see this--they say, "There are six high-significant impacts, of which two are negative. And those two are change in land use and the increased erosion caused by earthmoving and vegetation removal."
So they themselves flagged erosion as a serious problem.
And then they're own so-called engineer, Mr. Kay, warned of the erosion risks for Phase 2 as well. And he said, "Miss-directed (sic) water has the potential to cause erosion damage and to over-saturate sensitive slopes."
That's exactly what Mr. Navarro was saying. You oversaturate a sensitive slope that has a lot of clay content in the soil and the water gets absorbed, and then it's susceptible to sliding, and that causes landslides. The higher up you are, the more sensitive it is, and the more dangerous it is if a landslide actually happens. You don't have to be an environmental science genius to figure that out.
Now, look at this property, you know, sort of perched on the edge of a fairly steep hill. And this one.
[Page 1310]
It's hard to imagine that this house here is not just one strong hurricane away from blowing down that mountain. Again, you don't have to be--that's just common sense in a country like the Dominican Republic that has frequent hurricanes and increasingly powerful hurricanes, as we all have seen recently. And there's also a lot of seismic activity in the Dominican Republic, as Mr. Navarro testified.
So this cannot possibly be a safe structure, even on the lower mountain, which is what this is. And they want to put these type of structures, you know, far higher up, and not just a few of them, but 70 of them.
There's a few others. This is the Aroma Mountain. It's also perched on the edge.
And the other thing that was alarming that came out in this testimony this week is that Mr. Ballantine is the one who basically built the road himself. He designed it. Remember I asked him about, you know--he decided--he testified in his written testimony that he had decided that 8 percent was the right incline for the road on the mountain.
And then when I asked him how he figured that out, he said that he had researched it. And then when I said, "What, did you Google it?" And he said, happily, "That's exactly what I did."
[Page 1311]
And then Mr. Kay, who also has only a high school degree, was the person who took the rest--you know, the rest of the road project all the way through. And that's not just alarming, that's terrifying.
I thought I should mention that those photographs that I just showed you--you may have seen in the news just in the last couple of days the landslides that took place in Sapporo, Japan, where houses that look very much like this, on a mountain that looks very much like this, basically got washed out down the--due to a landslide, and dozens of people are buried in those houses under a pile of rubble.
And if you haven't seen those photos, I encourage you to look at them because they--they're--you know, they're very similar to these, and they're a very strong reminder of the fact that what we're talking about here is not just legal, it's not just academic, it has very real consequences for real people.
I don't think anybody could really conclude from the evidence that's in the record and from the testimony that you heard this week that the Ministry somehow acted irresponsibly or arbitrarily or capriciously in denying the--you know, the permit for the second phase, for what we
4 English Audio Day 5 at 03:38:49
[Page 1312]
call the Project 3.
It just couldn't be done safely. That was the issue, and that's the core issue that the Claimants seem to be eager to avoid a discussion of instead of drawing your attention to the competing projects.
The other important point that I wish to stress before going on to the next point is that the Claimants are the ones who have a burden of proof here. And that's a key issue because they really haven't produced anything. So even if you have some doubt as to whether there's some basis on which to issue an award in their favor, they simply have not carried their burden of proof. And as a result of that, that's another reason why they are not entitled to an award.
And even if the Ministry did make some mistakes, they certainly would not rise to the level of a violation of international law. It was the Ministry doing its job, and perhaps certain mistakes were made. But on the core issues, there's really nothing that you can seriously challenge.
It certainly does not reach the level of impropriety that you would need to find a violation of the minimum standard of treatment, for example. It's a very high threshold for a fair and equitable treatment violation, even under the autonomous standard, let alone
[Page 1313]
under the minimum standard of treatment under customary international law.
Now, a third point. The Tribunal should err on the side of the protection of the environment. This is what the Parties to the DR-CAFTA want you to do, expect you to do.
And you see this in a number of provisions of DR-CAFTA. You have DR-CAFTA Article 10.11, which is investment and5 environment. "Nothing in this chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns."
And that's exactly what we're talking about here. It's a measure that the Ministry took to make sure that this investment that Mr. Ballantine wanted to make on the mountain was undertaken in the manner that was sensitive to environmental concerns. That's exactly what the Ministry was doing. And this clause and other clauses in this treaty, like this one from Annex 10--did I skip one? No. Annex 10-C of Paragraph 4 (b), it should say at the top. Apologies for that error.
5 English Audio Day 5 at 03:43:07
[Page 1314]
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 the environment, do not constitute indirect expropriations."
This is another signal from the treaty negotiators telling you you can't find indirect expropriations unless it's in rare circumstances. In other words, they were signaling the treaty should show a certain measure of deference to governments in their regulation of certain areas including the environment. It's another way that the treaty negotiators were saying to tribunals such as this one, "Look, you know, we really want you to pay attention to these issues and to protect our right to regulate on environmental issues."
Again, the DR-CAFTA Article 17.1, a third provision, levels of protection. "Recognizing the right of each Party to establish its own levels of domestic environmental protection and environmental development policies and priorities, and to adopt or modify accordingly its environmental laws and policies, each Party shall ensure that its laws and policies provide for and encourage high levels of environmental protection, and shall strive to continue to improve those laws and policies."
Now, what do these clauses say collectively? At a
[Page 1315]
minimum, these clauses have to mean that this Tribunal has to err on the side of protecting the environment rather than take--adopting a decision that ultimately would have an adverse effect on the environment.
If you were to--if you were to rule in favor of the Claimants in this case, what kind of message would that send to environmental regulators, not only in the Dominican Republic but in all of the DR-CAFTA countries? What kind of chilling effect would it have on their measures?
Why does Mr. Navarro and Mr.--why do Mr. Navarro and Mr. Martínez have to be--have to be brought here and raked over the coals for five, six hours in a row? Why should these people's technical decisions be second-guessed. You saw Mr. Navarro. You saw Mr. Martínez and how--how knowledgeable they are about these issues. They should be deferred to on these technical issues.
Just a few words by way of conclusion, Mr. Chairman and the members of the Tribunal. While we're on the subject of Mr. Navarro and Mr. Martínez, public servants everywhere are generally underpaid, undervalued, underappreciated, but they often make enormous contributions.
Take Mr. Navarro and Mr. Martínez. You saw them testify this week. You saw their Expert Reports and Witness Statement. And you saw how well prepared they are,
[Page 1316]
how well educated, how well trained, how experienced, how knowledgeable, how thoughtful, how articulate they were.
The Minister described--Minister Fernández Mirabal described them as glorious. And opposing counsel mocked that description, but I think it's quite apt.
These are the people who are genuinely doing God's work by protecting the environment, devoting their lives to protecting nature. It is their works that the Tribunal should be protecting rather than the work of a bored millionaire from the United States who is searching for an adventure and has a vision.
The world is seeing a lot of perturbing changes and perhaps none more perturbing than climate change, and climate change will bring with it--is bringing with it significant and acute new environmental challenges. And it is precisely public servants like Mr. Navarro and Mr. Martínez who will help us face those challenges going forward.
So, Mr. Chairman and Members of the Tribunal, they say that the cure for an obsession is to get a different one. Allow Mr. Ballantine to go find a different adventure, and let Mr. Navarro and Mr. Martinez do their job. We all need that right now.
Thank you.
PRESIDENT RAMÍREZ HERNÁNDEZ: Thank you very much.
[Page 1317]
Could we take a five-minute break before we start questions, please. So, five minutes.
(Brief recess.)
QUESTIONS FROM THE TRIBUNAL
PRESIDENT RAMÍREZ HERNÁNDEZ: So, we're ready.
ARBITRATOR VINUESA: Thank you, Mr. President. I will formulate a few questions. What I will do is I will give the opportunity--if I go to Claimants with a question, I will leave just a few minutes to the other party to have some sort of comment, and the other way around, just to be fair and have a chance to listen to both sides.
I have a first question directing to Claimants' counsel, and we hear, during this week, Mr. Ballantine's reasons why he became a Dominican national. And, of course, today we--also again Claimant was referring to that.
My question to counsel is if you could put those reasons, which it sounds very subjective to me, within an objective legal context. Just to make me--to make me, myself, clear, could you discriminate amongst subjective from objective criteria. You mentioned both, but just to have a--
MR. BALDWIN: Yes. Thank you, Professor Vinuesa. I think that we discussed this a little bit on the first day, and I think this is a good opportunity for me to
[Page 1318]
clarify a little bit because I think that when I looked back on that answer, it wasn't as clear as I would have liked it to be.
If you look at the--I'm going to go to the Iran Claims Tribunal because this is where we have the biggest body of these cases. If you go and you look at the Iran Claims Tribunal cases, and also if you look at Judge Brower's, you know, very famous book on the Iran Claims Tribunal, you see that the test is essentially an objective one, except that the subjective elements are present and form part of that analysis.
So, I think they're both essentially related. I think that when I was talking on Monday about objectivity, I think what I really meant to say was that a sub--you know, that the Tribunal, when they're looking at a subjective statement, should put that in the objective framework of looking at the test.
But certainly because this has to do with attachments, I think, you know--just for example, to step back for a moment. Habitual residence is a pretty easy objective standard. Here are the facts.
I think in terms of some of the other things--attachments, I think that the view of the Claimant, or Claimants in this case, is, in part, going to be subjective. So, I think--and this is confirmed by
[Page 1319]
Judge Brower in his Iran Claims Tribunal book, that it's essentially an objective test but with subjective elements to those--to that test.
ARBITRATOR VINUESA: Okay. Thank you very much. Would you like to have a very brief comment? Very brief.
MS. SILBERMAN: Yes, please.
So, I understood your question slightly differently. I understood your question to be asking if the Claimants could be providing any basis for making objective the subjective reasons for which someone would seek Dominican nationality.
And the Ballantines have asserted that there were business reasons why they had obtained Dominican nationality and there was succession planning, and the Dominican Republic has pointed to the objective fact of the Ballantines' statement in the naturalization application that they were seeking Dominican nationality because they identified closely with Dominican culture.
Choosing one's nationality, of course, is a subjective event, but it can be corroborated through objective evidence. And here there's no evidence whatsoever of--apart from testimony, of this succession planning theory. There's no citation to any law.
The business reasons argument doesn't really make
[Page 1320]
sense because the Ballantines thereafter went on to obtain Dominican nationality for two of their children, and the Ballantines' daughter, Rachel, is the owner of the Aroma Restaurant and she didn't obtain Dominican nationality.
So, if there was a business reason for Jamaca de Dios, it would seem to follow there would be a business reason for Aroma.
So, the subjective reasons that have been offered to the Tribunal, out of those three, only one is really corroborated, and that is the identification with Dominican culture.
The Ballantines also state on their website that they spent a transformative year in the Dominican Republic and that they--they love Dominican culture. So, that's the way that the Ballantines are putting themselves out.
ARBITRATOR VINUESA: I have a second question for counsel for Claimants. And this refers to the applicable law to define the test of dominant and effective nationality.
And the question is: Could you isolate dominant and effective nationality from applying custom international law?
MR. BALDWIN: Can you say a--I got the--all up until the very last part.
ARBITRATOR VINUESA: I'm asking you if you can
[Page 1321]
isolate defining or determining dominant and effective nationality from applying international law--custom international law. I mean, your test will be different from custom international law, or are you applying something else?
MR. BALDWIN: I think that there's two sides--there's two parts to that, Professor Vinuesa. I think the first thing is the timing issue that we've talked about is textual because that's the agreement.
I think when you get to the test itself, because CAFTA is silent as to the test, it's at that point that I think you look to customary international law and other sources of law, some soft law sources as well, to see how that test should be conducted.
I think that the Parties and the Respondent will correct me if I'm not right about this, but I think the parties have generally agreed that the factors that the Iran Claims Tribunal looked at, which also were sourced essentially from the earlier cases, it wasn't an invention of--it wasn't an invention of the A/18 Tribunal. It came--it was there previously.
I think we agree generally on the framework. But I think that framework--I think that you could maybe, you know--you could maybe make some distinctions between customary international law and other sources of
[Page 1322]
international law.
But I think that the--that certainly the factors you use aren't in CAFTA, and so I think you have to go to customary international law to find those factors.
ARBITRATOR VINUESA: Any brief comment?
MS. SILBERMAN: Yes. This, of course, is a customary international law concept that has been developed over the course of many years. The notion of dominant and effective nationality grew out of diplomatic protection, which is a customary international law issue.
And to look to customary international law, it seems to be consistent with Article 10.22 of DR-CAFTA on governing law, which instructs the Tribunal to decide issues in dispute in accordance with DR-CAFTA itself and applicable rules of international law.
ARBITRATOR VINUESA: All right. Thank you very much.
Now, I have a question to both Parties. I would like to hear comments from both Parties in reference to Environmental Law 64-00. In relation to interpretation of application of Article 122, we think the general structure and objectives of that law, if the Precautionary Principle is within or is not over there.
And sort of second question is: Is it possible to isolate the application of Article 122 in Chapter 2, which
[Page 1323]
is de los suelos in Spanish, from Chapter 1 of the same Title IV, which is named the de la norma comunes?
Should I repeat it? Because I wrote it down. It sounds rather tricky. It's tricky, actually.
Is it possible to isolate the application of Article 122 in Chapter 2, de los suelos, from Chapter 1 of the same Title, which is on de norma comunes? It's like a chapeau from Chapter 2.
And the first part was the general context of Article 122 in applying and interpreting Article 122 on the general objectives of the Environmental Law.
Whoever wants to start. No one?
MR. ALLISON: I'd be happy to start.
ARBITRATOR VINUESA: All right. Fine.
MR. ALLISON: Thank you.
ARBITRATOR VINUESA: Thank you.
MR. ALLISON: The way I believe the Article 122 is both written and has been interpreted by the witness who testified today is that the text of the law does not prohibit development on slopes below 60 percent, but it does prohibit development on slopes in excess of 60 percent.
I also believe the witness testified that simply because there are slopes less than 60 percent, Article 122 does not authorize construction.
[Page 1324]
But Article 122 is not a barrier to construction.
ARBITRATOR VINUESA: Claimant--sorry. Counsel. Sorry. What I mean to ask you is how you interpret Article 122 within the context of the whole Environmental Law. This is chapeau previous to Chapter 2, which is Chapter 1 in Title IV. That's what I mean.
MR. ALLISON: Sure. Well, Article 122 is applicable, but it is not to the exclusion of Article 1.
ARBITRATOR VINUESA: Okay. Thank you.
Do you have any comments?
MS. SILBERMAN: Yes. During your question, you also mentioned that the Precautionary Principle wasn't stated expressly in Article 122. It is, however, stated expressly in Article 8 of the law, and Article 8 is in--underneath the chapeau of Title 1, Chapter 1, "Basic Principles."
So, Article 122 would be interpreted in accordance with these basic principles, which would include the Precautionary Principle.
ARBITRATOR VINUESA: All right. Thank you.
I have a very last question. And it's for both. And I think it's--I would like to hear first Respondent. But whatever wants to start.
And the question is: Has the creation of the Park diminish and/or destroy an owner's right to their property
[Page 1325]
within the Park?
And then the second question: What development building rights have the Ballantines at the time of the Park creation, taking into account the compatibility of an Environmental Law application vis-à-vis the decree of creation of the Baiguate Park.
Should I repeat it?
MR. BALDWIN: Yes, if you could. Sorry, Professor.
ARBITRATOR VINUESA: Yes. Has the creation of the Park diminish and/or destroy owner's right to the property within the Park?
And then what development building rights have the Ballantines at the time of the Park creation, taking into account the compatibility or the application for Environmental Law vis-à-vis the decree creating Baiguate Park?
MR. ALLISON: We'll let the Respondent.
ARBITRATOR VINUESA: All right. That's what I meant. You can take two seconds off--two minutes.
MR. Di ROSA: Mr. Vinuesa, we're having a little bit of trouble parsing the question grammatically. I don't know if you can reform--
ARBITRATOR VINUESA: In Spanish?
MR. Di ROSA: Perhaps, or just reformulate it in
[Page 1326]
English, or whatever is comfortable for you. I apologize.
ARBITRATOR VINUESA: I won't feel insulted actually. I thought it was quite clear. I would presume that you don't want to understand the question. But I will not go into that.
What I'm asking here is whether the creation of the Park itself diminished or altered the rights of those who had property inside the Park.
This is the second portion. It's a little bit more complicated. It would also be in Spanish. And my question is: What would be the rights for the developments that the Ballantines would have at the time of creation of the Park? And this is linked to the application of the law on environment vis-à-vis the creation of the Park.
MR. Di ROSA: Mr. Chairman, we're going to have our Dominican lawyer answer the questions since she's well equipped to do so.
ARBITRATOR VINUESA: All right. Sure.
MS. TAVERAS: Professor Vinuesa, with regard to the last question, property rights over the--whatever area is included in the Park remain. Under Dominican law, if there is no decree of declaratoria pública, property is not lost. And that hasn't occurred in this case.
The only thing that's limited is the use, but property rights remain.
[Page 1327]
As to what rights the Ballantines had at the time of the creation of the Park, in 2009, at least from the evidence that we've seen the Claimants submit, C-31, more than half of the real estate that they are claiming was going to be developed in what they call Phase 2, we call Project 3, was not even acquired. And they did not have a permit to develop. So, they had no expectation that they would be allowed to develop there.
ARBITRATOR VINUESA: All right. Fair enough. Thank you. But I think it was clear in English. I was frightened. I do understand it.
Do you need clarification?
MR. BALDWIN: No, I don't think so. I've had three opportunities now to hear it and read it.
The creation of the Park by itself caused--did not diminish the value of the Ballantines' land at all because the creation of the Park--although the creation, as we argue, was discriminatory and arbitrary, the Park itself, when it was created, didn't do that, no more than when Law 122 was passed did it--I mean, the Ballantines bought after the law--but no more than that, you know, would have diminished there.
But the issue is, is that it's the application of that National Park law, the law that created the protected areas. It's that application to the permit request of the
[Page 1328]
Ballantines that caused the loss.
Now, there's various reasons for that. And I think the first one counsel for Respondent has stated is that there are uses for those properties. And, in addition to the official sanctioned uses for those properties, we've seen, with Rancho Guaraguao and with the development activities going on on Aloma Mountain, that the--that, you know, there's opportunities that are given to others to develop in these National Parks, even without a permit.
So, it becomes a--it diminishes--it diminished the value of the Ballantines' land when, in that fourth denial, the National Park was used as a basis to deny that. And that's when the discriminatory and the arbitrary nature of the Park sort of sprung into play.
Because as the Respondent itself admits, ecotourism is allowed in the Park. So--and the Ballantines, as you'll recall, when the Empaca Redes people told them--told Mr. Ballantine about the creation of the Park, it says, you know, ecotourism project "such as yours" are allowed in the Park.
And just one other point to that is that another thing that the Empaca Redes people told them, and Respondent has admitted as well, is that the defined uses of the area in the Park--in other words, ecotourism is allowed in the law.
[Page 1329]
There are then--there is then a Park Management Plan that gives a little more granularity as to what you can do. And we've seen that map that shows that ecotourism is allowed. It actually shows the area where you can do the ecotourism.
The issue here for the purposes of the Ballantines' legal claim is that Park Management Plan didn't come out until just very shortly before, I think, the Statement of Defense. And so it was well after the 2014 time period when the Ballantines brought their claim.
So, at the time in 2014 when the Ballantines had brought their claim, their property had been denied on the basis of National Park, and you were already five years into it with no guidance as to what can be allowed.
But the critical point is the diminution of the value of the property did not occur until the permit was rejected.
ARBITRATOR VINUESA: Thank you very much.
MR. Di ROSA: Mr. Vinuesa, would we be able to respond very briefly to that?
ARBITRATOR VINUESA: Yes.
MR. Di ROSA: They raised a number of points. First of all, when the Park was created, they did not have any permits certainly, and they didn't even have a lot of the land. Some of the land was purchased afterwards.
[Page 1330]
And they--
ARBITRATOR VINUESA: Sorry. If we can review whatever so it's just--
MR. Di ROSA: My point is simply that they assumed the risk because they were aware of the existence of the Park. They were told by their environmental consultant. You see that at Exhibit R-269 and Exhibit R-270. In September 2010, they were already aware of the Park's creation and of its limitations. So, you know, they can't be heard to complain about it if they subsequently, you know, were inclined to put up a project there.
They also assumed the risk that the permit would be denied.
ARBITRATOR VINUESA: I'm sorry. That's out of what I was asking. So, thank you very much. But we have lots of material. Do you want to comment on that?
MR. ALLISON: No. Other than I disagree with his characterization of the evidence.
ARBITRATOR CHEEK: Thank you.
So, if I could follow up on this line of questioning but perhaps ask, hopefully, a slightly different question, which is that it sounds like both Parties are in agreement that once the Park was created, that the property rights remained and so the property still had value.
[Page 1331]
Let's assume for the sake of argument that through bona fide environmental regulatory activity, the Dominican Republic decides that no activity can take place on this land.
Once the Dominican Republic decides that no activity can take place on the land, at that point is there a diminution in value? And if so, is there any obligation to compensate for that diminution in value?
MR. BALDWIN: We're happy to answer for the Claimants' side. Oh, you want to wait.
MR. Di ROSA: Ms. Cheek, our position would be, and certainly in this particular case, they would not be--there--they would not be entitled to any compensation under the treaty simply by virtue of the operation of the three-year statute of limitations under Article 10.18 in DR-CAFTA.
Whether they would have a right to compensation under Dominican law is a separate issue on which we would have to get back to you, unfortunately. You know, we're not in a position right now--since neither of the partners on the team here are Dominican lawyers, we can't really opine without consulting.
If you wish, we could consult with the environment lawyers who are here, and we can try to revert to--a little later in the session, if that would be helpful. Thank you.
[Page 1332]
ARBITRATOR CHEEK: Okay. Thank you. I think that's sufficient for now.
And did Claimant wish to comment?
MR. ALLISON: No, other than our answers to your question are yes and yes.
ARBITRATOR CHEEK: Okay.
MR. ALLISON: Thank you.
ARBITRATOR CHEEK: So, I did have a second question that goes to the regulatory criteria used to make a decision that I believe--and I apologize for not using the exact words of Respondent--but that there is no way that the Ballantines' project for what they call Phase 2 could move forward.
And when the Ministry decided that there was no way that the project could move forward--well, let me state one more premise, which is that also, let's accept for the sake of argument that there was an obligation on the Ballantines' part to know what the criteria was that would be applied so that they could put forward a project that, in their view at least, might meet the criteria.
And so my question is: Where does one look to find the criteria? Where does the Ministry of the Environment look to to identify the criteria that they will apply to decide that a project cannot go forward because the risk to the environment is too great?
[Page 1333]
And perhaps that's Article 122. Perhaps that is something else.
MS. TAVERAS: The main criteria that the environmental agency applies in the application of Law 64-00 is Article 8, which is the Precautionary Principle.
And obviously on the basis of technical considerations, then they would adopt whatever they believe is the appropriate decision. There are also guidelines and regulations. Right now the guidelines in force were adopted in 2014.
ARBITRATOR CHEEK: And are part of those technical requirements, guidelines and regulations, Article 122 also of Law 64-00?
MS. TAVERAS: Of course.
ARBITRATOR CHEEK: And what else?
MS. TAVERAS: Article 110, which prohibits human settlements in areas of risk.
ARBITRATOR CHEEK: So, I don't want to cut you off, Ms. Taveras. But would one look, then, to the Environmental Law as a whole to be able to identify the requirements?
MS. TAVERAS: Yes.
ARBITRATOR CHEEK: Did Claimant have any comment?
MR. ALLISON: Claimant just notes that the
[Page 1334]
guidelines referenced by the Respondent were enacted in 2014, and, thus, couldn't have been the technical guidelines used in 2011 at the time when the Ballantines' permit was first denied.
MS. TAVERAS: May I respond to that?
ARBITRATOR CHEEK: Please.
MS. TAVERAS: At the time of the evaluation of the project, there were guidelines. Then, the version of 2011 would have been in force.
And in addition to that, the law of protected areas would also be applied. Zacarías, in his Report, explains the applicable guidelines. Zacarías Navarro.
ARBITRATOR CHEEK: Okay. Thank you.
And one final question. Perhaps Claimant can respond--oh, I'm sorry, did you--
MR. ALLISON: No, no, no, that's--
ARBITRATOR CHEEK: One further question--perhaps Claimant can respond to this first--which is that there's been a lot of talk about comparators and relevant comparators.
I was wondering if you could speak to how you think we should evaluate the criteria of being on Category 2 National Park land as part of a relevant
6 English Audio Day 5 at 04:24:15
[Page 1335]
criteria for determining whether projects are in like circumstances or not.
MR. BALDWIN: I think with regard to the Category 2 National Parks, I think you would have to--it's the Dominican Republic that establishes the categories of the park. And they've decided that Category 2 is a particular type of park, meaning that the characteristics or the manner of protection is the same.
So, I think once you have that framework with regard to the--then you have to find somebody operating in one or developing in one. And then you look, and I think in this case you would look and say whether they're operating with a permit--with impunity or granted a permit, I think you would look at the type of operation, and you would do it.
It would be our argument that even Ocoa Bay is a comparator because this is tourism, this is buildings being put up, anything that people--just like with the hotel and the rental properties that the Ballantines were going to do that they're doing.
We think even Ocoa Bay, even though it's in a flatter land, it's near the water. But it's a Category 2 National Park. It permitted, and it was permitted for hotels and structures and houses and pools and everything else.
[Page 1336]
Now, the obvious--the more easier one then would be Rancho Guaraguao because in this case, it's ecotourism. The Ballantines' project is ecotourism. They're both in National Parks. Rancho Guaraguao is in a higher thing, but they're doing the same thing, they're selling houses. And we've seen some of those houses at Rancho Guaraguao as part of an overall development project. So, to those, those would be a competitor.
But I think the process, Ms. Cheek, to answer your question, would be, the relevant legal framework is Category 2, and then you would look at whether the businesses have similarity in the type of activities that they do.
My colleague wants me to mention that projects that aren't in parks are comparators. I think, you know, your question was about the parks. Obviously, we have lots of other comparators that aren't in parks, but I understood your question just to be limited to the parks themselves. Is that correct?
ARBITRATOR CHEEK: My particular question was about the parks. And I do understand Claimants maintain their position that for like circumstances, we should look at a broader range of comparators, not just those within Category 2 Parks.
MR. BALDWIN: Yes, because one of the denials was
[Page 1337]
also on the basis of Law 122 and the slopes that were mentioned there as well.
So, projects that aren't in national--because the first three denials were on that basis. So projects, you know, Quintas del Bosque and La Montaña and these other ones also are comparators but of a different legal framework.
So, those are comparators, essentially to the legal framework that's established under Article 122. Then when you're under that legal framework, you look at businesses that have similarities, and our comparators are ones that would have those similarities.
ARBITRATOR CHEEK: Thank you.
Did Respondent have any comment?
MS. SILBERMAN: Yes, just to clarify that as Professor Martínez explains in his First Statement in Paragraph 44, the designation of Category 2 comes from the International Standards. The International Union for the Conservation of Nature.
There is an exhibit, Exhibit R-52, which states that the purpose of a Category 2 or National Park is "to protect natural biodiversity, along with its underlying ecological structure and supporting environmental processes and to promote education and recreation."
And it's because of that that the difference
[Page 1338]
between Ocoa Bay, which is not a mountain project and, for example, a project within Baiguate National Park wouldn't necessarily be the right comparators because there are two different areas that are protected for two different reasons and have two different ecological structures behind them.
ARBITRATOR CHEEK: Thank you. That's all the questions I have, Mr. President.
PRESIDENT RAMÍREZ HERNÁNDEZ: Okay. I have three questions. One for Claimants, one for Respondents, and one for both.
So, let me go first to the Claimants, and I will allow Respondent to make a comment, as well as Claimants to the questions I make to Respondent.
Let's assume, for the sake of my hypothetical, that there's a Mexico Dominican Republic free trade7 agreement which has the same provision about nationality that we are discussing in this case.
I'm about to become 50, so let's say that I have a middle age crisis. And among the many things that I don't know how to do, many things in life, is I don't know how to dance merengue, and I don't know how to play baseball.
So, I decide to go to the Dominican Republic
7 English Audio Day 5 at 04:30:23
[Page 1339]
because I want to be like Sammy Sosa or Manny Ramirez, and I want to be like Wilfredo Castro, and so I want to learn how to dance and I want to learn how to play baseball at this time in my life.
So, I go there. I leave everything behind. I go there to live. I want to--let's say that in order to become or take classes in an instruction facility in the Dominican Republic, I need to become--I need to be a national of the Dominican Republic. So, I mail the documents and become a national of the Dominican Republic so that I can play--get this instruction from a very famous Dominican manager in baseball.
And throughout this process, I buy some land in the Dominican Republic that at the end, sometimes--at some point, the Dominican Republic authorities say, "Well, your land is in a National Park and you cannot build."
How is that different, this hypothetical, to a scenario where I go and I state that, "My only reason is to invest and that I will do it because I will not want to lose the entire investment"?
The point is--and in one of your slides, the Claimants say, "Economical consideration related solely to investment should not be a factor."
So--and you also mention in your presentation, is--the idea of a chapter is to encourage foreign
[Page 1340]
1 investment, not domestic investment.
2
So, how does the fact that you became an investor
3 or became a national have--an investor will not be a very
4 relevant factor in determining whether you have a dominant
5 Dominican Republic nationality?
6
ARBITRATOR VINUESA: Because we already talked about
7 objective criteria. But wouldn't this be different from
8 the example where I took a nationality because I wanted to
9 learn Spanish and learn how to dance, as opposed to I did
10 everything to invest, I did everything related to
11 investment, so how come a chapter related to investment
12 that talks about protection of investment not be relevant,
13 the fact that I obtained nationality because I wanted to
14 invest?
15
MR. BALDWIN: I think my first response,
16 Mr. President, would be that under your hypothetical
17 scenario, you would definitely not be dominantly and
18 effectively Dominican. So, let me say that.
19
I think there's a real basis--basis for this, and
20 it goes precisely to Professor Vinuesa's, I think, first
21 question. And that is the--although the--we look for the
22 analysis of the dominant and effective nationality based
23 upon customary international law and some other sources of
24 law, and that's where we get the factors that arise from
25 that test.
[Page 1341]
1
But in CAFTA, dominant and effective nationality
2 arises differently than it does in Nottebohm and other
3
cases where it arises as a matter of diplomatic
4 protection. And this is precisely--precisely because
5 Nottebohm--is sorry, not Nottebohm. Because CAFTA--when
6 dominant and effective nationality is in the CAFTA, that's
7 put in the context of an investment regime. It presupposes
8 an investment in CAFTA.
9
So, when you're looking at CAFTA--and you don't
10 look at CAFTA dominant and effective nationality the same
11 way even though the same factors that are pulled from
12 customary international law are relevant. When you look at
13 it, you weigh the probative value of those factors, you
14 don't look at that.
15
And the reason that's our position is, again, if
16 you separate--native investor who just lives there, never
17 goes into the company. Let's do that. Every managing
18 investor, every investor that's working some project or
19 investment in that host country will have these economic
20 ties.
21
So, we're not suggesting that, you know, they
22 shouldn't be discussed. It's fine for Respondent to
23 discuss it. I understand why they're trying to make that
24 seem like some big connection.
25
I think the point that was made this morning was
[Page 1342]
1 that the probative value of that are slim. Because it is
2 precisely for the reasons that CAFTA presupposes, which is
3 an investment in the country, as to why these economic
4 things are made.
5
And the thing I would ask the Tribunal is--and
6 this is where the Tribunal will decide how it views the
7 positions put forward between the parties.
8
Because if--if the Tribunal views some
9 economic connection as something as necessary for the
10 management of the investment, then I think the Tribunal
11 would be right to consider--I think it would be a very
12 minor consideration, but I think the Tribunal may say,
13 "Look, here's an economic connection, but one that's not
14 tied to the actual presupposition of the CAFTA investment.
15
Here I think the economic conditions that we--that
16 I talked about earlier and that we've talked about in the
17 papers are things that necessarily arise only from the
18 investment, and that's precisely what CAFTA talks about.
19
So, in the framework of CAFTA, differently than how
20 you might do it in a diplomatic protection thing, this sort
21 of economic connections presuppose; therefore, it makes it,
22 you know, a very--of low weight.
23
So--when it--I don't agree with me, it certainly
24 lessens the relevancy of it when Mr. Ballantine has to open
25 up a bank account to do it. He has to buy--he may not have
[Page 1343]
1 to buy a house, but he has to live somewhere because he's
2 down there managing the project.
3
So, these sort of economic connections are a
4 necessity tied to that. So that's the framework that we
5 would put that in.
6
PRESIDENT RAMÍREZ HERNÁNDEZ: Respondent.
7
MR. DI ROSA: Mr. Chairman, when an investor such
8 as Mr. Ballantine goes to a different country, and amongst
9 the many things that he does, he decides that while he's
10 to be a Dominican investor, then it seems to us that's highly
11 relevant by definition, right?
12
He has testified extensively that they acquired
13 the Dominican nationality for business and commercial
14 purposes. That's been their main argument all week long.
15 And certainly that would seem to be one of the factors that
16 has to be taken into account.
17
Under the DR-CAFTA nationality provisions, you
18 have to be dominant and effective national of the other
19 state at two critical times, when the claim arose, when the
20 claim was filed.
21
That means that as of 2011, they had to be
22 dominant U.S. nationals, and they weren't. At that time
23 they had--all their--you know, all their lives essentially
24 centered in the Dominican Republic.
25
They say they traveled a lot to the U.S., and
[Page 1344]
1 that's fine. That happens fairly frequently with people
2 who are dual nationals. But they were permanent residents
3 in the Dominican Republic, and there are objective criteria
4 that have to be assessed as of that point in time of the
5 two critical dates.
6
And as of those two points in time, they had--they
7 had moved all their activities, so to speak. You know,
8 their finances were centered in the Dominican Republic.
9 Their lives were centered in the Dominican Republic, and
10 then they took other steps like acquiring permanent
11 residency, and then, finally, acquiring the nationality
12 voluntarily.
13
And if their reason was precisely to become
14 Dominican investors, then surely that's relevant.
15
PRESIDENT RAMÍREZ HERNÁNDEZ: Okay. Now I have a
16 second question, and this goes to the national treatment
17 claim, and I go to Respondent.
18
Let me go to your Statement of Defense in
19 Paragraph 203. And this is a paragraph where I think both
20 Parties agree--and correct me if I'm not being
21 truthful--agree with what is the standard to be applied on
22 the national treatment.
23
And the first element is whether the domestic
24 investor is an appropriate comparator. The second element
25 is whether the disputing investor was, in fact, accorded a
[Page 1345]
1 less favorable treatment than its domestic. And the third
2 element is whether any preferential treatment that may have
3 existed was justified on the basis of legitimate policy or
4 legal reasons.
5
So that's the standard.
6
Claimant claims that all of these projects are in
7 like circumstances, and based on that, they are arguing
8 that the treatment was less favorable because all the
9 projects were able to get the permit as opposed to
10 Claimants.
11
Now, I go to your presentation today, Page 66,
12 where you say elements that differentiate the treatment
13 before these. And my question is: Weren't you required,
14 in order to prove that these projects were not in like
15 circumstances, or the third element, which is that they
16 were--the differential treatment was justified, and you
17 have raised the environmental reasons as a reason to
18 justify a legitimate policy, the different treatment.
19
Weren't you required to put evidence why these
20 other projects were not in like circumstances, one; and,
21 second, whether there was--these projects had a legitimate
22 policy reason, which you have reiterated throughout this
23 hearing, which is the environment.
24
MS. SILBERMAN: So, Mr. Chairman, as the United
25 States stated in its non-disputing party submission,
[Page 1346]
1 because a Claimant bears the burden of proving its claims,
2 that includes the burden of proof on national treatment.
3
And I can direct you toward the exact paragraph,
4 if that would be helpful.
5
PRESIDENT RAMÍREZ HERNÁNDEZ: And I know that,
6 because I thought that that was going to be your answer.
7
So you--the Claimant comes forward--and I'm trying
8 to understand how the burden of proof plays here, and
9 that's where the question is going.
10
The Claimant says, well, the reasons they gave me
11 was the slopes, the environmental fragility, the natural
12 risk. They put forward and say, well, these are the
13 projects that are within--that reduce--and how can the
14 Claimant know that there were different conditions on the
15 other project? They come forward with evidence, saying,
16 "Well, this is how it plays."
17
So, in the sense, haven't they discharged the
18 burden of saying, "Well, these are all these projects. The
19 United States are the same. All of them--all the
20 projects talk about environmental fragility, all of them
21 talk about natural risk."
22
So the Claimants have said, "Well, all of them are
23 in like circumstances."
24
So wasn't your burden to say, "Well, they were
25 not," for all the reasons you have stated, which was the
[Page 1347]
1 environmental conditions in Jamaca were very different from
2 the other ones.
3
And the other--the only environmental conditions
4 that are similar or that are like are the Aloma. So even
5 to--even to prove that Aloma has the same circumstances,
6 wouldn't you have needed to put in evidence and say, "Well,
7 this is because"--and talk about soil. Wouldn't you need
8 also to have put evidence to say, "Well, the soil is the
9 same"?
10
So that's why--I mean, you are raising as a
11 difference the comparators on the environmental elements.
12 So wouldn't you be required to prove that all these
13 environmental elements were similar here and different in the
14 other projects?
15
MS. SILBERMAN: So as the United States explains,
16 the Claimant is required to establish that there is
17 unjustified differential treatment between investors who
18 are in like circumstances.
19
So the burden is not on the Respondent to provide
20 justification. The Claimant has to establish with evidence
21 that there was--that there were two investors in like
22 circumstances that were treated differently, and that the
23 treatment--that the difference in treatment was
24 unjustified.
25
Now, to the extent that there's a question about
[Page 1348]
1 whether there's any evidence that the Dominican Republic
2 has put in, the big chart that Mr. Di Rosa showed on the
3 first day, Appendix A, was an appendix that was provided
4 with the Dominican Republic's Rejoinder in its proceeding,
5 and it included documents that supported the items that
6 were in this very large table. They were all of the
7 A documents, and many of them were used in both Parties'
8 cross-examinations and in some of the openings and closing
9 statements. So there is evidence supporting all of these
10 items in the chart.
11
What we've explained is that mere differential
12 treatment isn't sufficient to establish that there has been
13 a violation of national treatment. And the Ballantines, to
14 the extent that they have even identified differential
15 treatment--it's not really clear because they sort of
16 jumble everything together--they certainly haven't proven
17 unjustified treatment on the basis of nationality.
18
MR. BALDWIN: Of course, the ultimate burden of
19 proof on the claim lies with the Claimant. But, the--with
20 regard to the particular national treatment issue, you
21 know, the Claimant has to show the comparators, has to show
22 the differential treatment.
23
And at that point, to the extent that the State is
24 going to argue that there's justified reasons for that,
25 that's where the State has to do it. Because even though
[Page 1349]
1 the Claimant ultimately carries the burden of proof for its
2 claim, here the State is asserting that there was a
3 justification.
4
That's different. And when the State asserts that
5 justification, the State has to prove it. Because in
6 addition to the fact that the Claimant ultimately carries
7 the burden for its claim, a party offering up a position or
8 a piece of evidence has the burden to prove that position
9 or that piece of evidence.
10
And so to the extent that the Respondent says,
11 "Well, no, there were justifications for treating one
12 different than the other," that's an allegation. That's a
13 position taken by the Respondent. And the burden for that
14 position--not for the overall claim, but the burden for
15 that position comes from them.
16
PRESIDENT RAMÍREZ HERNÁNDEZ: Thank you.
17
And my last question--that one is easier--is more
18 out of trying to understand.
19
You talk about the fine that was put to the
20 Ballantines. And I will start with the Claimants and then
21 the Respondent comment.
22
Why was it reduced to 50 percent? There's no
23 place I have found that there are reasons why you
24 reduce--why the Government reduced 50 percent--why not 80?
25 Why not 70?--the fine.
[Page 1350]
1
PRESIDENT RAMÍREZ HERNÁNDEZ: Claimant, please.
2
MR. BALDWIN: The issue you raised with regard to
3 the fine, Mr. President, is something that sort of we do
4 aegises. We don't--we can't tell you why it's reduced
5 50 percent, why it's reduced sometimes a lot more. There's
6 instances in the record of fines being reduced more than
7 50 percent for people, more in the neighborhood of the
8 80 percent that you're talking about.
9
And as far as we know, there are no guidelines at
10 all for when a fine is reduced, what the factors are for
11 the fine being reduced, and how much the fine is reduced.
12 And we understand that to be a purely discretionary thing.
13
So the Ballantines requested that the fine be
14 reduced. They were reduced by 50. We don't know why 50.
15 We don't know why it was reduced. We don't know why others
16 are reduced more than 50.
17
So, as far as we can tell, it's a pure
18 discretionary issue.
19
PRESIDENT RAMÍREZ HERNÁNDEZ: Just to be clear,
20 you did not contest the 50. You pay, at the end, that
21 fine.
22
MR. BALDWIN: It was under--certainly under
23 protest, because we were told that the--or Mr. Ballantine.
24 I wasn't told. Mr. Ballantine was told that the--that his
25 environmental permit would not be considered unless he paid
[Page 1351]
1 the fine. So he paid it under protest, because he wanted
2 the environmental permit considered.
3
And we're not aware of another situation where an
4 environmental permit was held up based on the waiting for
5 the payment of a fine.
6
MS. SILBERMAN: Just a couple of comments,
7 Mr. President.
8
First of all, the fine was imposed in November of
9 2009 and was paid, I believe, sometime in 2010, which would
10 be before the three-year cutoff for purposes of
11 Article 10.18.1 of DR-CAFTA. So I haven't seen at least
12 recently any claim by the Ballantines in respect to this
13 particular fine.
14
As Ms. Taveras mentioned the other day, the fine
15 was calculated initially by reference to a statutory
16 formula that took into account the amount of the investment
17 that the Ballantines alleged to have made in this
18 particular project.
19
The Ballantines have made a big show of alleging
20 that the Dominican Republic supposedly hasn't collected on
21 fines. And it can be difficult to collect on fines. I'm
22 sure people have outstanding parking tickets.
23
And what the Ministry did in this situation by
24 saying "If you have an outstanding fine, we won't talk to
25 you in respect to the permit" is similar to the way you
[Page 1352]
1 can't get a driver's license in some places if you haven't
2 paid your parking tickets.
3
PRESIDENT RAMÍREZ HERNÁNDEZ: Okay. Any other
4 questions?
5
ARBITRATOR CHEEK: No, nothing further.
6
ARBITRATOR VINUESA: No.
7
PRESIDENT RAMÍREZ HERNÁNDEZ: Any other comment by
8 Claimants or Respondent, or anything that they want to
9 raise?
10
MR. Di ROSA: Just a procedural point, I guess,
11 Mr. Chairman, to confirm that the Dominican Republic has
12 wired the funds, that $150,000 that were required for
13 purposes of this phase of the proceeding.
14
And I just wanted to thank the Tribunal and
15 everyone present here for what has been a productive
16 session.
17
Thank you.
18
PRESIDENT RAMÍREZ HERNÁNDEZ: Claimant.
19
MR. ALLISON: We join Mr. Di Rosa and his kind
20 words to us back to him and thank the Tribunal as well.
21 And I'd also like to specifically thank our assistants here
22 today, Larissa Díaz, who has worked tirelessly all week,
23 and also Leslie Gil, who is here from the Dominican
24 Republic.
25
Thank you.
[Page 1353]
1
PRESIDENT RAMÍREZ HERNÁNDEZ: I would like to
2 thank everyone for being present here today.
3
Something else I don't know how to do is to put a
4 PDF file on the screen, and both Parties have shown me how
5 to do it. That's one of the many abilities I do not have.
6
I would like to thank everyone, the stenographers,
7 the interpreters, and, of course, Julian. He has been very
8 helpful to the Tribunal. And, of course, Marney, Raúl. I
9 would like to thank all of you.
10
One always learns things in these cases, and
11 oftentimes you learn things that you did not want to know;
12 for example, the difference between percentage and degree
13 of a certain slope.
14
But I learned two things, and I leave here with
15 those things. Of course, deliberations are going to start
16 tomorrow for the Tribunal, and we're going to make a
17 decision in connection with post-hearing briefs.
18
At any rate, I want both Parties to be assured
19 that we don't think that we're going to ask for long or
20 lengthy, rather, post-hearing briefs. We're going to
21 discuss this.
22
So you take two things from these experiences, and
23 I take two things out of this hearing. Michael and Lisa, a
24 very nice couple, hard-working couple. And, also, I did
25 not know that the Dominican Republic had such spectacular
[Page 1354]
1 forests.
2
So I would like to thank everyone. And you're
3 going to hear from us soon. I don't know how soon, but you
4 will hear from us.
5
Thank you very much.
6
(Whereupon, at 4:46 p.m., the Hearing was
7 concluded.)
[Page 1355]
CERTIFICATE OF REPORTER
I, Margie Dauster, RMR-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
MARGIE R. DAUSTER