IN THE MATTER OB AN ARBITRATION
UNDER THE DNOTRAL ARBITRATION RULES
BETWEEN:
WALTER BAU AICKENGESELLSCHAFT (in liquidation)
Claimant
-and-
THE KINGDOM OF THAILAND
Respondent
2 October 2006
White & Case LLP
1L Boulevard de ja Madeleine
75001 Paris, France
Telephone: +33 (0) 1 55 04 15 15
Facsimile: +33 (0) 1550415 16
Counsel far Respondent
[Page I]
[Page 1]
I. The Kingdom of Thailand (“Thailand” or “Respondent”) respectfully submils this Memorial on Jurisdiction and Request for Bifurcation, together with supporting documentation, in accordance with the Procedural Timetable and Article 21(1) of the UNCTTRAL Arbitration Rules (the “UNCTTRAL Rules”).1
2. This arbitration involves the purchase of shares in a Thai company (die Don Milang Toilway Co. (iCDMT'}) by Dyckerhoff & Wldmann AG (“Dyckerhoff & Widmann"), the “predecessor" of Claimant, Walter Ban AG (in liquidation) (“Walter Rail"). Walter Ban is a construction company incorporated under the laws of Germany.
3. In 1989, DMT and Thailand's Department of Highways fTJOH”) entered into a Concession Agreement that granted DMT the right to build, operate and collect tolls from a tollway extending from central Bangkok to past the Don Muang Airport. To build the tollway, DMT engaged a construction consortium that included Dyckerhoff & Widmann.
4. Construction of the tollway took approximately five yearn, with operatioiEE commencing m 1994.2
5. Claimants investment in DMT-its shareholding is trivial (only 9.87%).3 Its relationship with DMT has been richly rewarding nevertheless. Claimant and its predecessor have been paid handsomely by DMT – in fact, tens of millions of dollars (Respondent believes that the figure is over US$15G million) for iheir design and construction services in connection with the tollway.
1 TJNTRAL Arhrt?aticui Rules (1976). Art. 27(1) CTfie arbitral tribunal shaft have the penver to rule on objections that it furs no jurisdiction, jnchtdrog any objections wiih resped to the existence or validity of the arbitration danse or of the septsvle arbitration agreement”) (liespondentɅ Legal Authority (“RA-") 1) ↩
2 See DMT List of Shareholders duted 13 September 2005 (RespondEtirs Exhibit (“R-") 0. ↩
[Page 2]
6. In addition, through a series of other arrangements, tedndkg a ^Financial Advisory Service Agreement' EMD an “Operation Advisory Service Agreement" Claimant and its predecessor have apparently claimed arudfar received from DMT lens of thousands of dollars monthly.3
7. On 29 November 1996, the Concession Agreement was amended by MoA2,* pursuant to which {inter ahd) DMT agreed to build extensions to the existing tollway. Dyckerhoff & Wtdmaim again provided design and construction services.5
8. MoA2 also extinguished all claims arising under the Concession Agreement before MoA2. In addition, DMT expressly waived the right to bring any claims related to the change in use of foe Don Mtiang Airport
9. On 24 June 2002, Thailand and Germany signed foe Agreement between foe Kingdom of Thailand and foe Federal Republic of Germany for foe Encouragement and Reciprocal Protection of Investments (the “DIT" or foe Treaty"). The Treaty entered into force on 20 October 2004.6
10. Roughly one year later, after becoming insolvent, Claimant filed its Request for Arbitration against Respondent, alleging a dispute within the scope of ThailandA agreement Co arbitrate in Article 10 of the Treaty.7
11. Respondent expressly denies Walter Ban's claims-
2 These arrangements are set out in the financial statements of DMT for The years ended 31 Mantfi 1990, note 3(3) £EM) and 13?1, note 6(3) {K-3). ↩
* Tlu& Concession Agreement was first amended by MDAI dated 27 April 5005,
5 Claimant is presently engaged in an arbitration against DMT for the payment of retained snd additional sums for these services, ↩
6 See ClflunanOs Request for Arbitration dated 21 September 2005 ("Request for Arbitration"), Tj 20; Agreement between foe Kingdom of Thailand and the Pedecal Republic of Germany fnr-the Encouragement and Reciprocal Protection Off Investments, done in Bangkok 24 June 2002, entered into force 20 October 2004 (the "BIT¹¹ or foe 'Treaty") (WBI, following Claimant's DVMI annotation of its exhibits). ↩
7 The Request for Arbitration was filed on 21 September 2005. ↩
[Page 3]
12. Claimant complains that numerous ants and omissions by the Respondent during the life of the Concession, including (and in spits of the terms of MoA2) changes in the use of the Don Muang Airport and acts and omissions that occurred before MoA2, allegedly breached obligations owed to DMT (not CMmimt itself} under the Concession Agreement It further complains that as a result of these breaches, DMFs general economic health has deteriorated and there has been a decline in the anticipated return on the investment8 Despite the fact that there are more than fifteen Years left in the Concession, Walter Ban speculates that the value of the investment has been asubstantially and xrr&vsmibly impaired.9
13. The Claimant is obviously aware that the mqjonly of the events about which it complains in the Request occurred well before ratification and entry into force of the Treaty. Nevertheless, there is no discussion in the Request of this aspect of the case; no explanation of how events taking place prior to the Treaty can be the subject of this arbitration, Without acknowledging the elephant in the room, Claimant halfheartedly asserts that the Respondent breached the Treaty's predecessor (the “1961 Treaty").10 However, only the BIThas investor-recourse to arbitration against the state, and hence it is the only treaty relevant to this arbitration.
14. A more fundamental defect of the Request for Arbitration is the absence of any reference to the requirement under both treaties – of Thai approval of the investment before it qualifies for treaty protection, hi feet, the Request is silent on this point
8 See Request for Arbitration, 112. ↩
10 Treaty between the Federal Republic at Germany and the Kingdom of Thailand Condensing tie Promotion and Reciprocal Protection of Investments don& in Bangkok 13 December 1961 (the WI961 Treaty^} (WB2), ↩
[Page 4]
15. Oils requirement is hardly a secret Indeed, in a direct reference to this requirement, one German Government website confirms that the BIT “protects only approved investments' (see t 67).
16. Fatally, Walter Bairs investment has never been the subject of such an approval
17. So, in many respects, the Claimant's Request is more notable for what it does not say, rather than what it does. It does not explain how acts complained of prior to the Treaty can form toe subject of a claim. It does not address the absence of approval for die investment, a fundamental requirement under the Treaty. Nor does the Claimant provide any explanation (other than bold assertion) as to how the events complained of, which it largely characterizes as breaches of contractual obligations owed by Respondent to DMT (not Claimant), constitute breaches of the Treaty.
18. The Tribunal will also note that much of the investment (in the broadest sense of the term) was, im fact, effectuated by Bydcerhoffi & Widmann, not Walter Bam Walter Ban is put to strict proof of its rights fa rely upon any investment of this different entity (which is simply described as a “predecessor” that “mj subsequently merged into Waiter Bau" in the Request for Arbitration).11 This is not an idle debate. The Treaty prefects “Investments by Investors^ and thus requires proof of entitlement by any third party (to the Investment when made) to establish its rights to protection in respect of that Investment. This includes ptroof of how and when Walter Bau acquired rights in respect of toe same.
19. The Claimant's Request suffers from a number of other failings, which arc set out in Section Id subsequent to discussion of the fundamental issues of absence of approval and.
11 Request for Arbitration 4. ↩
12 See, e.g., Treaty, Artidea 2(3) and 4(2) fWBI). ↩
[Page 5]
lack of jurisdiction ralione temporis. As will be seen, this Tribunal has no jurisdiction over any of Claimant's claims (nor, hence, over any relevant counterclaims Respondent might wish to raise).
20. Article 10 of the BIT provides, in relevant part:
“(1) Disputes concerning investments between a Contracting Party and cm investor of the other Contracting Party shouldas far as possible be settled amicably between the parties in dispute.
(2) If the dispute cannot be settled within six months from (he date on which it has been raised by one of the parties to the dispute, it shall, at the request ofeither party to the dispute he submitted for arbitration... "13
21. The consent to arbitration expressed by Thailand in Article 10 of the BIT is conditioned on a claimant's satisfaction of the conditions set Jbrth in the Treaty. For example, the definition of "investor" in Article 1 of the BIT imposes nationality requirements that must be met in order for a claimant to qualify for Treaty protection, hi a similar jashion, only those investments that have been specifically approved by the Thai authorities are accorded treaty protection under Article 2(2) of the Treaty.
22. The BIT, being an international treaty, is an Instrument governed by international law, to be construed in accordance with the rules of interpretation applicable to treaties as embodied in Articles 31-33 of the Vienna Convention on the Law of Treaties (“Vienna Convention").14
14 Sre Vienna Convention on the Law of Treaties, done at Vienna. (23 May 1969) UNTS Yfli 1155, 3313 Art, 2iX&) (treaty new# an international agreement concluded hetecen States in written form and governed by irfternattonal law.**) (RA-2). See also Emilio Agustin Maffestnt ij Kingdom of Spain (Decision 07t Jurisdiction) (25 Jammy 2000) ICSID Cast Ao. AR3/9?!7 % 27, reprinted in £001} 16 ICSID Jtev.- ↩
[Page 6]
23. Although Thailand is not a party to the Vienna Convention, the Yietina Convention's terms are applicable to the extent that it embodies general principles of international faw.15
24. Thus, in order to assess whether Walter Ban has met the conditions specified in the Treaty such that Thailand may be bound to arbitrate to this case, the relevant provisions of the BIT must be interpreted according to ihc rules of interpretation applicable to treaties.
25. In this veto, the Tribunal must have regard to the will of the state parties to the BIT to impose certain restrictions on their protection of investors and investments. As the ICSID Tribunal mAmco Asia Indonesia stated:
"like any other conventions à convention to arbitrate is not to be construed restrictiveiv, ?:orf as a matter of fad, broadly or Itherdly. It is to be construed tn a way which leads to find out and to respect the common will of the parties : such a method of interpretation is but the application of the fundamental principle pacta sunt servanda, a principle common, indeed, to all systems of interned low and to international law."16
15 FILJ 212 ifLfkff ail other provisions of the BIT and in the absence qf other specified applicable ratej of interpretation, Article X fcontaining provisions on Settlement of iTivestment (fispufesj must be interpreted in the mower prescribed hy Article 31 of the [Vienna Convention].**} (RA-3); Grand Hfv&r Enterprises Sir Nations Ltd. et alr y. United States of America (Decision on Objections to Jurisdiction) (20 July 2fl06) NAFTA/UNCTTRAL Arbitration | 34 If NAFTA Is on international agreement, to be construed in accordance hh the ordinary rules of treaty construction os indicated in Articles 31 and 32 of the Vienna Convention art the Law of Treaties,^} (RA-4), Bee Golder y United Kingdom (21 February 1975) ECHR Sftr. A, No. IS || 29 (even though the Vienna Convention was not then in force, relying its rides gf interprctattoii as hey “erntneia?e i& essence generally accepted principles qf international taw*) (S-A-5); Case Concerning KasiBl1/Sedudt Island {Botswana v. Ntuttibiti) 1999 IC1 {Judgnient of 13 December 1999) reprinted in 39 JIM 310 (2000) | 13 (although neither Botswana nor ttaroibiai were pries to the Vienna Convention, the court noted that both considered it applicable.ztInasmuch as it refects customary international (RA-6); De Arechaga, "International h&vi to die Past Third of a Century" (t97S) 359 Recited des COUPS I, 42 f'fsgaf rsle# concerning the interpretation of treaties constitute one of ihe Sections of the Vienna Convention which were adopted without a dissenting vote of the. Conference and consequently may be considered as declaratory &f existing Ian*.**) (RA-7). ↩
16 Aniea Asia Corporation y Indonesia (Award on Jurisdiction) (25 September 1983) ICSID Cass 2to, ARB/B1/1 reprinted in (1934) 23 ILM 351, 359 (original emphasis) (RA-S). ↩
[Page 7]
26. Tfre Tribunal may, of course also consider relevant decisions by other international arbitral tribunals and courts.
27. According to Article 24(1} of the UNCITRAL Rules, "[e]ach patty shall have the burden ofproving the facts relied on to support his claim or defence.17
28. It is a general principle of international law that a claimant must prove that the dements necessary to establish jurisdiction are present18
29. Notably, there is no presumption in favor ofjurisdiction, particularly in a case in which a sovereign state is involved.19 As the ICSID Tribuna! mMihalyv. Sri Lanka noted,
“rite question ofjurisdiction of an international instance involving consent of a sovereign State desemes a special attention at the outset of aizy proceeding agonist a State Forty to an international coiivention creating the jurisdiction!20
18 See Khflberfy-Glark C&rp. v. Bank Markasi Iran (Award No. 45-57-2) (25 May 1983) 2 Iran-US CTR 334, *3 (dismissing claim bseauat *Claimant to* faikd Jo demonstrate thd we have jurisdiction') CKA-9); Lili Tour v. The Oovsrrunent of the Islamic Republic if Iran (Award No. 413-483-2} (1 March 19S9) aval table from West!aw {lLlt was the particular bwdvn of ?fr£ Claimant to inilialfy substantiate hsr Claim wtih adequate supporting. evidence of 01S. nationality uf herself and far children during the relevant periods. The Clahnt therefor fail? for lat& of proof of die jurisdictional requirements... .*) (RA-10)i Creditcorp MermUonbly hue, v. Iran Carton Co. (Award No. 443-965-2) (12 October 1989), | 6 available 6oni Westlaw (dismissing claim because the claimants h&d Ftuled Jwejr the foirtfen of proving that the Claim m this Case [was] a claim of a national of the United States, as requiredjhr the. Tribunal to assume - jutisdtedon"). (RA-11). Ses also Military and Paramilitary Activities in and against Nicaragua (Nicaragua yr United States cfAmerica) (Jurisdiction and Admissibility} (1984) ICJ RepA. 301 (fit is the litigant seeking ta establishafoot whobeers the burden ofproving jtP)(RA-13). ↩
19 Southern Pacific Properties (Middle East) Ltd. (SPP(M£)} v. Arab Republic of Egypt (Decision an Jurisdiction) (14 April 1938) ICSID Care No. ARB/S4/3 | 63 reprinted in (1995) 3 ICSID Pep 131 £RA- Uf ↩
20 Mihafy International Corp, vr Democratic Socialist Republic of Sri Lanka (Award) (15 March 2002) ICK3D Case No. ARMIO/2 [[ 56 reprinted in (2002) 17 ICSID Rsvr-FILJM2 (RA-14). ↩
[Page 8]
30. In defining the tan “investment,” both the BIT and the 1961 Treaty distinguish between “shares of companies” and “business concessions under public Jaw” as different types of investments.21
31. This distinction comports with fee ordinary meaning of fee word “investment,” which BSack's Taw Dictionary defines as "1. an expenditure to acquire property or assets to produce revenue; a capital outlay, 2. the asset acquired or the sum invested.”22
32. Water Ban has made only one investment falling within the treaties' definition of “invartmenf': its purchase of shares in the company DMT.23
33. Accordingly, to fee exteat that Claimant alleges Respondent breached treaty obligations feat were owed to Claimant's “investment' (e.g. Article 4(1) of fee BIT provides feat “[i]nvestments by investors of either Contracting Forty shall erijoy full protection and security ...”24, such obligations must he understood as applying to Walter Ban's shareholding.
34. The obligations tindbr the 1961 Treaty and fee BIT feat Respondent has allegedly breached are summarised in the table below.25
21 BIT, Art 1 (distinguishing between “shares of companieſ'. fted “business concrjsinns under public law”); (WB1); 1961 Treaty, Art. 8 (dUtnguibihg between “shares or other kinds of interest in companies” and “business concessions mdsr public law”) (WB2). ↩
22 BŁack's Law Dicdcnary (&h ed. 2004) (CPA-15). ↩
23 See Request far Abihation, ff 4 (“Walter Ban h Investment in the Todway was through the purchase of shares in X concession company, the Don Muang Tailway Co. (“DMT”) by its predecessor Byckerhoff & Wldmann AO which was subsequently merged bdo Walter Bay.”) and ¶ 109 fWalter Bait offered to sdi its shares to the Governmentfor a purchase price equal to 90% of the nominal investment ...”). ↩
25 This chart is based on ffff 128-130A of the Request for Arbitration. ↩
[Page 9]
| Substantive Description | BIT Provision | 1961 Treaty Provision | (a) Delay Opening Tollfvay |
(b) No cLange to toll rates/broach MoA2/No soft Ioan |
(c) Build competing roads |
(d) Błocking luer&nseg/ reducing tolls |
(e) Moving to new airport |
(f) Non respect cf minority dght/fallure to observe internal systems |
|---|---|---|---|---|---|---|---|---|
| Fair & equitable treatment | 2(3) | Via 1(2) & Dutch /UK/Qmese treaties? | ✓ | ✓ | v" | ✓ | / | v" |
| Mo arbitrary or discriiiimjatoory measures | 2(4) | 2 (no discrirmnation) | ✓ | ✓ | / | ✓ | ✓ | ✓ |
| Full protection and security | 4(1) | 3(1) (most constant) | / | |||||
| No nationalization or expropriation | 4(2) | 3(2) | ✓ | S | ✓ | ✓ | / | |
| Observe obligations | 7(2) | 7 | ✓ | / | ✓ | / | ✓ | S |
| National and most feyored nation C'MFN") treatment | 3(1) & P) | 1(2) | y25 | y26 | y26 | y26 | y26 | y26 |
W While this is in many respects a ramcnent of general application, Claimant dots not plead lAfluat acts and emissions allegedly eonititiitB breath of Articles 3(1) and (2) of the BIT,
[Page 10]
35. As discussed in the section that fellows, tiers is no basis for jurisdiction over any of Walter Ban's claims because Walter Ban failed to seek fee requisite approval Irani Thai authorities for treaty protection. This fact alone condemns the arbitration. Nevertheless out of an abundance of caution, Respondent raises herein additional objections to jurisdiction.
36. Respondent objects to jurisdiction on the grounds that there is –
[Page 11]
37. Respondent further puts Claimant to proof of its entitlement to complain of alleged breaches affecting Dyckerfioff & Widmann, for the reasons set out in K 18 above.
38. Respondent reserves the right to raise further issues of jurisdiction if and when new matters, and allegations (if admissible), are brought to its attention.
39. Under customary international law, a foreigner's ability to invest im another country is subject to that country's sovereignty.27 As there is no legal obligation to admit foreign Investment, some countries retain flexibility regarding the commitments they make in an international investment agreement through approval (or screening) requirements.28
40. For example, toe Nigeria–United Kingdom BIT (1990) provides:
**77iij Agreement shall to lie extent tbit a written approval is requiredfor cm investment, only extend to investment, whether made before or after the
27 Jeawdd W. Salaciura, "BIT by BIT: The Growth of Bilateral Investment Treaties sad Theft Impact on Fcreagrt iTtvestniettt In Developing Countries" (1990) 54 The International Lawyer 655, 650 (RA-16). Sse also Ibrahim F.L Shihafta “RcccnC Trends Relating to Efltry of Foreign Direct Investmentf* (1994) 9 ICSID Rev.-FIU 47, 47 CFrom the viewpoint of customary tniernaiicncl law the degree of freedom *Wintry may oHawjhr the entry or admission of foreign itrveattnsM Into its territory jj basically a matter of policy left to the discretion of &aek country without any general legal obligation in this respect.") (RA-17). ↩
28 Sse United Nations Conference on Trade end Development International Investment Agreements: Key h.jzi&, chime I (September 20041 76 (countries may wish to retain some flexibility regarding the commitment they make īm an imsmsEiond investment agreement) and SO (noting that the rijſie to screen has been adopted in a number of B3Ts and in the ASEAN Agreement for the Fryitiodnn arid Protection of Investments) (RA-1£). ↩
[Page 12]
coining into forte of this Agreement, which is specifically approved in writing by the Contracting Party in whose territory the investment has been made or is subject to the laws in force of territory of the Contracting Party concerned and to the conditions, if any, upon which such approval shall have been granted**29
41. Similarly, the STVeden-Makysia BIT (1979) specifies:
“The term “investment' shall comprise every hind of asset., provided that sack asset when invested:
(i) m Malaysia, is invested in a project classified by the appropriate Ministry in Malaysia in accordance with its legislation and administrative practice as an 'approved project'. The classification as an ‘approved project' may, on application, be accordedto investments made prior to the dale of the entry into force of this Agreement on conditions to be stipulated for each individual case; and
(ii) in Sweden, is invested under Iks relevant laws and regulations either before or after coming into force of this Agreement.”30
42. States that include approval requirements in their investment treaties, such as these cited above, agree to be bound by treaty obligations only to the extent that their "domestic" approval requirements are met. An investor's failure to meet these requirements thus constitutes 3. lack of jurisdiction.31
43. As shown below, both the 1961 Treaiy and the BIT require prior approval of an investment in carder for it to be protected Ehorcimder. Claimant-despite the two treaties¹ clear and unambiguous statement of this requirement– never adverts to this fact It does
29 Agmetnent iefrteifH the Government ofthe Federal Republic of Nigeria and the Government of the United Kingdom of Great Britain and Northern Ireland for the Promotion and Protection of ItmstmentsT done in Abuja (11 December 1990X Art 2{2) (RA-19). ↩
30 Agreetfisnf bnlw&en the Govermncnt of Sweden andThe G&verrmenf of Malaysia Cancerrdrtg ike Mntuai Protection of Irwerfmems done in Kuala Lmapur (3 March 1979), Art. 1(1) (RA-201). ↩
31 See, s.g., Fhtfippe Gruslin v. Mafpyxia (Award} (27 November 2000) 5 ICSID Reports 4iO 25.7 (RA-21A In Gmslvt y. Malaysia, the lulergcvarnmisatai Agreement jreqnired that the investment he In an “approved project by the appropriate Ministry in Malaysia, in accordance v/tth the legisltiiion and the administrative piactice, based zAanMTi” Ihe ICSID Ttibunai upheld Malaysians objection to jurisdiction m fee basis that the claimants investment in spsurEdes listed an the Kuala Lumpur Stock Exchange did nat constitute an ''approved* prefect as required by fhe tonus of the Inkrovepupenlai Agreement to meet the definition of AnVBstTnenl** ↩
[Page 13]
not do so for the simple reason that approval was never sought let alone given, in respect of Wafer BaiTs shareholding. The Tribunal has no jurisdiction tinder either treaty.
44. The requirement for prior approval under the 1961 Treaty is set forth in its Protocol, which Thailand and Germany expressly “agreed should be regarded as an Integral part of the said Treaty f32
45. The Protocol states:
(1) To Article I ...
(b) In respect of investments in the territory of the Kingdom of Thailand, the term investment', wherever it is vsed m this Treaty, shall refer to all investments made in projects classified in the certificate of admission by the appropriate authority of the Kingdom of Thailand in accordance with its legislation and administrative practice as art 'approved project”33
46. In other words, a German investment in Thailand earns protection under the 1961 Treaty once-and only once – the investor obtains a “certificate of admission' in respect of such investment. The Protocol gives Thailand hie right to decide, “in accordance with its legislation and administrative practice,” which investments are eligible for a certificate of admission.
47. More pertinent to the current dispute, approval is required for protection under toe BIT.
48. Indeed, correspondence between the German and Thai delegations that negotiated the Treaty (see below) shows that retention of the approval requirement was a sticking point for Thailand in negotiations. Respondent thus provides background regarding the
22 1961 Trent/ FFQEQCGE fWB2), ↩
[Page 14]
Treaty's drafting history before addressing the specific provisions in the BIT that deal with approval.
49. During negotiation of the Treaty, Thailand insisted on retaining the approval requirement in the 1961 Treaty so that it could maintain control over those investments it wished to protect In its letter of IS September 2900, the Thai delegation clearly explained that it wanted to retain the ultimate say as to which investments warrant Treaty protection:
“2. Ad Article I: Prior Approval for Protection of Investment (Certificate of Admission – CA)
The Thai side wishes to confirm our need for numntainmg this principle in view of the fact that our new investment law, recently enacted Foreign Business Law B.E. 2542 (1999) has greatly liberalized our investment regime and has substantially reduced the government's authority to regulate a foreign direct investment (FBI) to serve our development objective. We, therefore, find it essential to maintain this prior approval principle in order to ensure that the FDI-I flows into Thailand will be channeled into the most needed sectors and will assist in our efforts to achieve early economic recovery. In addition, the Thai side is of the view that the CA granted for the protected investment will serve as evidence of the government's commitment to our obligation under the Agreement”34
50. The German side responded as follows:
“2. Prior Approval of Investments, Ari. 1 para l, and Protocol Ad Article I
The German Government regrets that Thailand continues to see the need for prior approval of investments. Investors' confidence in Thailand's economic development and stability would certainly be increased if Thailand were to renounce to this requirement [sic.]. If Germany has to accept prior approval in Thailand we would continue to suggest the wording submitted earlier last year in our proposal as if (sic.] also covers
34 Letter No. 05043539 from Thailand Ministry ofForeign Affairs to the Embassy of the Federal Republic of Germany, Bangkok, dated IS September 2000(3-4; anpfitisis added). ↩
[Page 15]
the situation in Germany where investments are not subject to prior approval The protocol should contain a similar wording.35
51. Thus, although the German side was reluctant to let Thailand keep a prior approval requirement, it proposed language that would cover both the situation in Germany where no prior approval is needed, and the situation in Thailand where it is. That wording was then set out in the agreed draft discussed in May 2002 which reads:
"(2) The Treaty shall apply only to investments that have been specifically approved In writing by the competent authority, if so required by the laws and regulations of that Contracting FartyT36
52. This is the wording that is found in Article 2(2) of the Treaty as ratified.37
53. As the drafting history of Article 2(2) demonstrates, the Thai Government preserved its right under the 1961 Treaty to determine which investments would enjoy treaty protection, and which would not It did so by reserving the right to afford protection only to those investments that are foe subject of a specific, treaty-based approval.
54. Pursuant to Article 2(2) of flic BIT, foe Treaty applies only to investments that have been specifically approved In writing by the competent authority.
55. Em accordance with the principle of nonretroactive application of treaties as embodied in Article 28 of the Vienna Convention (discussed In detail in Section IEJ3.I below), Article 2(2) must be understood as applying to investments made after ihe Treaty's entry into force.
35 Nate Verbals Itfo. 125/2001 ftem the Embassy of the Federal Republic of Gsmi&ny, Bangkok, to lbt Thailand Ministry of Foreign AfMrs dated 23 March 200.1 (R-5; &TCftf1a&5 added). ↩
36 Draft treaty, Annex I to Agreed Minnies of meetings from 13 to 16 May 2002 between Hial and German delegations, 3 (R-£). ↩
37 The Tribunal will have noted Ehuf tbc state parties referred in eoarespondence En a protocol. Ultimately* however, none was produced. ↩
[Page 16]
56. For investments that were made prior to the Treaty's entry into force, such as that of Walter Ban,39 Article 8 applies. Article 8 limits the Treaty's application
Kto approved investments made ... by investors of either Contracting Party in the territory of the other Contracting Party consistent with the latter's laws and regulations.
57. The salient difference between Articles 2(2) and S is that Article 8 does not condition the need for investment approval upon requirements of domestic law.
58. Ihua, in respect of the Treaty, whereas the rule for new investments (under Article 2(2)) is that they must he approved only 'Hf so required* by domestic law, the IUJE 'for all investments made prior to the BIT's entry into foffee (under Article 8) is that they must be approved, irrespective of any domestic law “requirement* for approval.40
59. This interpretation of Article 8 is confirmed by the fact that, of the provisions in the BIT that reference “approval”, only Article S does not contain language indicating feat the need for approval is conditioned on the specifications of domestic law or practice.41
60. It can therefore be seen that, by the express terms of Article 8, Waiter Ban's investment-its shareholding in DMT ~ required approval of the Thai State.
61. As a practical matter, however, the Treaty's different standards for approval of "new" and “old” investments (under Articles 2(2) and 8, respectively) are immaterial, since, as
39 See Request for Arbitration | 6 (“During ife frst years of the Concession, Walter Bau initially hdd 3J343.000 sfe.tw in DMT, Increasing to 54, SI3,60ft shorn by J996, all at a cost ofl 0 Rate per share"). ↩
40 Emphasis abided fWBI). Hence, Article 8 specifies an absolute requirement for approval in respect of ail investmenta made pHor to the Treaty's entry into force, regardless of whether aueft approval is HSreqirijWp domestically (and TOgardless of whether lh Investment is madle in Thailand or in Germany, where no prica: approval requirement emste) ↩
41 In adEtion to Article 2£2), with which thaTribunal is familiar, Article 1 of the Treaty provides îm relevant part, that "[qjny afrcr&tfon of fhe form in which assets are invested shall not affect ihsir classifiarftoft as investment proved suchaltered investment is approved by tfoz relevant Cwtiracihjg Party if so required by f£s taws and regulations.** (Emphasis added) ↩
[Page 17]
discussed below, Thai tew does in fact requite that all investments be approved far treaty protection.
62. Since the entry into force of the 1961 Treaty, many German investors have sought and obtained a "certificate of at/nisshtia from Thailand's Ministry of Foreign Affairs, as contemplated by the Protocol to the 1961 Treaty. This is illustrated by six certificates exhibited hereto, each of which expressly confirms that the relevant investment is:
"art 'approved project' as defined in paragraph 1 (b) of the Protocol to the Treaty ... signed on the 13th day of December ... and that accordingly the said investment' is entitled to Ml protection under the said Treaty as from the date of the present Certificate of Admission and as long as the aforementioned licence remains vdidr42
63. On 22 October 2003, the Ministry of Foreign Affairs issued an Announcement (circulated to ell relevant foreign embassies) Quit modified from that date onwards its approval requirements for investment protection under its investment treaties.43
64. In the Announcement, which represents the Thai Government's exercise of its recognized discretion under the treaties, the Ministry of Foreign Affairs confirmed its practice that it would give treaty' protection only to direct, as distinct from indirect, investments.
65. Hence Clause 4 of the Announcement – enumerating those investments that would be approved automatically – speaks only of “direct investments*. Clause 5 fays down the requirement that “fajll other direct investments which are nor capered by paragraph 4
42 See Ministry of Foreign Affairs Certificate of Admission Mo. 0501/C,A, 2 dated 29 July 1?34 included in representative Certificates of Admission (with similar language) dated between 27 October 1972 and 2) February 1991 issued by the Thailand Ministry of Foreign Affairs (R-7t emphasis added)- ↩
43 Announcement of tile Committee on tee Approval for (he Protection of Divestment between Thailand and Other Comrtries Ho, MFA 0704/1/2003 Comcemrag Foreign Investment Protection under the Agreements on the Promotion and Protection of Investments between tee Government of the Kingdom of Thailand and Foreign Governments dated 22 October BJ3. 2546 (Buddhist calendar equivalent for 2003) (foe AIUIJQ upiaiiaenf'jR-S). ↩
[Page 18]
but seek protection under the agreement, must apply for the [certificate] in order to obtain the protection" (emphasis added). No allowance whatsoever is made for indirect investments.
66. As concerns those direct investments which would be approved automatically, the Announcement declared that effective 22 October 2003, a direct Investment feat was granted (i) a license Sam the Ministry of Commerce, (li) a certificate of promotion from fee Board of Investment (“BOP), or (iii) was in the form of a government concession contract, would be deemed to have a certificate of approval far protection (previously known as a certificate of admission).44
67. Thailand's strict requirement that aU investments be approved for treaty protection, as well as the details of fee approval process outlined above, are recognized and acknowledged in Germany. According to the website for Germany's Foreign Trade and Investment Promotion Scheme, which relates to Germany's insurance program far fbrdgti investment, for a German investment made In Thailand:
*[i]he necessaty prerequisites for legd protection are provided by the Germati-Thai investment support treaty that W-ftf into effect on October 2Qr 2004. Because this treaty protects otih approved investments, a federal guarantee must be available at die time of acceptarice] typically in the form of a so-called Certificate of Approval for Protection (CAP.). Based on information from the federal government, a licence according to the Foreign Business Actf a Certificate of Promotion from the Board of Investment or a government concession as a CAP. approved by the Minister of Trade or by the General Director of the Department of Business Development, should also be obtained'*45
44 The Announcement | 4 (R.-&), ↩
45 See German to English translation of excerpt from Gsrrnsnya websiteibr its Foreign Trade and Investment Promotion Scheme £RA-22; emphasis added]. ↩
[Page 19]
68. It follows that Waiter Ban's shareholding in DMT was entitled to protection under the 1961 Treaty and the BIT only if foe Ministry of Foreign AQair* granted the shareholding a certificate of admission {or certificate of approval for protection).
69. rfaimant has never sought, let alone obtained, a certificate from the Ministry of Foreign Affairs, or equivalent documentation as described aboye, that would entitle its investment to protecting under the 1961 Treaty and the BIT.
70. The reason is easy to understand. Although the Ministry of Foreign Afi&irs made it easier, following its '2003 Announcement, for direct investments to obtain approval for treaty protection, at all times since the Announcement was issued, Claimant's investment has been a 9.87% shareholding in a company which in Mm has rights under a Concession Agreement.46 Under any definition this investment is indirect, and hence not elijable for protection.
71. As discussed below, countries and industries around foe world generally accept that indirect investments in companies, such as shareholdings, can be considered direct investments only if the investor has thereby obtained control over the foreign company. Bloomberg, for example, defines foreign direct investment as:
“The acquisition abroad of physical assets such as plant and equipment, withooerattnfr control residing in the parent corporation.*47
72. Walter Bait cannot reasonably contend that it has control over DMT. Indeed, it repeatedly complains in the Request for Arbitration that it has no control over DMT. For example, Walter Ban says:
46 Sse DMT List af Shareholders dated 13 September 2GQ5 (R-1). ↩
47 Bloomberg.coTE, Financial Glossary Ʌitfp:/jfwwJ^o^ber^Mm/bi^esttfglossaiyrt3fg303fhtifl> (RA-23)- ↩
[Page 20]
"In December 2004, dig Respondent pressured DMT (ogams! the objections of Walter Bau and DMT's other foreign shareholders) ...”48
¥ * £
“/Tfhe Share Purchase Agreement paved the way for the Respondent to exercise a high degree of control over DMT ...”49
***
“By its conduct as shareholder andthroughthe organs of DMT, further or alternatively by the disregarding of Walter Bm's interests as a minority shareholder in DMT ... Respondent is in breach of Us obligations ...”50
73. Moreover, Walter Batiks investment meet the internationally prevalent definition – to which Thailand (and Germany) subscribe – of direct investment. “In order to identify direct investment as a proxy for control, most countries employ a numerical threshold of ownership of ordinary shares or voting stock.
74. In Europe, the threshold ibr defining a direct investment was traditionally 20%:
"The mw European System of Accounts, ESA(95), definitions were introducedfrom the 1997 First Release. The changes were as follows:
0 Prior to 1997 for the measurement of direct_investment, an effective voice in the management of an enterprise was taken as the equivalent of a 20 per cent shareholding. This is now JO percent."51
75. Germany applied this 20% threshold to identify foreign direct investment until at toast 2000 (before 1939 it was 25%).52
48 Rfiquvat for Arbitration, U 14JO. ↩
51 National Statistics, "First Release: Foreign cfirect Investment 2QD4* dated 13 December 20055 5 (RA-24; emphasis added). ↩
52 See Anna M- Fatecm Statistics m Foreign Direct Investment and Multinational Corporations; A Survey51 (15 May 2000), 17()n Germany, afijhe threshold jar shares to fie haid in an enterprise tn order for on Investor io be considered as a direct investor h 22% (before 193? el was 25%).”) (RA-25). See also QECD, OECD Benchmark Definition of Foreign Direct Investment? £3rd ed., 1996) | S3 {"Enterprises resident tn Geimany required to report their atthvwd direct investment assets ore: (a) residents (chiding primes mdtlfhiais) who on the reporting date hold directly or indirectly more thrm 20 per cent cjf the ↩
[Page 21]
76. Thailand follows the approach taken by the International Monetary Fund ITMF”), the Organisation of Economic Cooperation and Development (“OEGD'% and the Untied Nations (“UN”) in using a 10% cut-off to define foreign direct investmont. Respondent cites the IMF jstudy Tareign Direct Investment Statistics – How Countries Measure EDI: 2001o53 and the UN †World Investment Report: 2005* Λ
77. The IMF study advises:
“4.2 According to the [OECD] Benchmark [Definition] and the BPM5 [IMF Balance of Payments Manual, 5th Edition] a direct investment enterprise is an incorporated or unincorporated enterprise in which a direct investor that is a resident of another economy has 10 percent or more of the ordinary shares or voting power (for on incorporated enterprise) or the equivalent (fbran unincorporated enterprise [ The direct investor may be an individual, an incorporated or unincorporated private or public enterprise, a government, or an associated group of individuals or enterprises that has a direct investment enterprise in an economy other than that in which the direct investor resides. The ownership of 10 percent ofordinary shares or voting power is the criterionfor determining the existence of a direct investment relationship.
4.3 Although the 10 percent equity ownership is specified in the Benchmark and the BPM5, some countries have chosen to permit two types of qualifications to that criterion. First, if a direct investor owns less than 10 percent of an enterprise but has an effective voice in management, the transactions between the investor and the enterprise are included in the FDI statistics. Second, if the investor owns 10 percent or more of the equity ofthe enterprise but does not have an effective voice in
shares or voting rights åa a nonresident enterffise which has a bafanca sheet total gqhveHti to more fhu DM 1 million h (EA-M
53 International Monetary Fund, ‘Foreign Direct Investment Statistics – How Countries Measure FDL 200V (2003) (RA-27). ↩
52 United Nations “World Investment Reportr 2005” (RA-2S). The Report says that foreign direct investment (FDI) is defied as an investmen involving a longterm relationship Jw reflecting a tasting interest and control by a resident entity in ons economy (foreign direct invstor sr parent enterprise) in an enterprise resident in an economy other than that cfjke foreign direct investor” “uAn equity ceculati stake of 16 per_c&u or more of the ordinary jfipres or voting power far an incorporated enterprise, or js eonvivdent for an unincorporated enterprise, is jormafy considered as the threshoUfor the rguiraffjffirif.” ↩
[Page 22]
management, the Enterprise is excluded frvm ihv FDI statistics. The application of these two qualifications is not recommended by the Benchmark or by the BPM5.54
It goes ort to canfimi:
"Use of fkc 10 percent ownership rule for identifying RDI; Ninety percent of the 61 countries use the 10 percent ownership ruh as their Basic criterion for identifying direct investment enterprises in at least part of their inward FDI transactions data, and 82 percent use the mb ns the basic criterion for identifying direct investors in their outward FDI transactions data. (See Tables_4.1 and 4.2 and Tables 16 and 17 of Appendix Iforfurther details./56
Indeed tables to the study confirm that Thailand follows thfe aiittfiaach.57
54 Intcntationfll Mooetaiy Fund, "Foreign Direct Investirtfiait Statistics – How Countries Measure FDI: 2001* {20G3X 23 (JIA-27; emphasis added). ↩
56 Jd. S5-90- SSB also OECD, "OECD Benchmark Definition nfEorsign Direct Investment” (3rd ed,, 1956) -3 (RA-Jd), winch states, inter alia {emphasis added): "7. O&CD recommends that a direct Investment enterprise be defined as fifi incorporated or unincorporated enterprise in which a foreign investor owrar 10 per cent or more of the ordinary shares or voting power of он incorporated enterprise or the equivalent ofc unincorporated enterprise, S. rJjg rntmericoi gamfe/ina nf ownership of 10 par cent of jprdlnnrv shares or voting stock dstermoies the existence of a direct Investment relationship, Aft qffecttvn voice in the management, as evidenced by on ownership of of hast JO per cent, implies that the direct investor is able to influence or participate in the mamgement of cut enterprise; it docs not require absolute control by the foreign Investor. P. Although not recommended by the OECDi some countries may still fed it necessary to treat the JO per cent cut-off point in a flexible manner to fit the circumstances. In some case. the ownership of 10 per cent of the ordinary shares or voting power may nat lead to the exercise of ary significant influence while, art the other hand a direct investor may awn less than 10 per cent but have an effective voice in the management OECD dees not recommend any qualifications to th& JO per cent rule. Consequently countries that choose not to follow the 10 per cent rale in all cusos should identify where ptinsifrfe the aggregate value of transactions iwtfalling under the JO per cent cut-off rule, satisfy facilitate latermtianal comparability" ↩
57 IMF Committee cm Balance of Payments Statistics and OECD Workshop on International Investment Statistics, Direct InvestmentT&dmical Group (DITEG), “Issues Paper (DJTEG) #20: Definition of Forcegn Direct Investment (FDT) TEEHIS (November 2004), Annex Jr attached to "Eighteenth Meeting of die IMF Committee of Balance of Payments Statistic Washington DC., June A'Muiy 1, 2005: Definition ofDirecE Investment Terms" available at (discussing proposed (re)definitkjn v£ foreign direct Itwmtmsri enterprise") (RA00). ↩
[Page 23]
78. Representatives of the Bank of Thailand additionally have confirmed that Thailand follows this approach in a statement made to the United Nations Conference non Trade and Development {“UNCTAl>') in December 2005:
“Direct investment refects the lasting interest of a non-resident of an economy in a resident entity. According to the BPM5 JTMF Balance of Payments Manual, 5th Edition], direct investment can he classified into investment in forms of equity-capital, other capital and reinvested earnings.
L Investment in equity where the direct investor owns 10 percent or more of the ordinary shares or voting power for an incorporated enterprise or the equivalent for an unincorporated enterprise ...”58
79. And enquiries of die Ministry of Foreign Affairs {Departments of Economic Affairs and of Treaties) have demonstrated that Thailand has never granted a certificate of approvai for protection (or its predecessor, a certificate of admission) hi respect of an equity investment of less than 10%.
80. The rationale applied by Thailand in limiting treaty protection to direct investments with reference to a 10% stakeholding can be readily understood; countries do not want investment protection extended to just any foreign entity feat may take a shareholding (however small) in a local company particularly in circumstances such as fee present, where the stale has no control over the identity of such an investor or the sale of ail or part of its interest
81. Indeed, this was made clear to the German delegjation on numerous occasions during negotiation of the Treaty. For example, in its letter dated 1S September 2000 fee Thai delegation stressed:
58 Pusadiefc GtemjflimideCj Bank of Thailand, 'Thailand Balance of Payments Foreign Direct investment Statistics published ån United Nations Conference on Trade and Development, "Expert Meeting on Capaai Building in the Area of FDI: Data Compilation and Policy Formulation in Developing Countries" dated 12-14 December 2005, 2 (RA-29; eraphssts added); see also pp. 5-G concerning Thailand's adherence to this principle. ↩
[Page 24]
“if h essential to maintain this prior approval principle in order to ensure that the FDlflawing into Thailand wfli be channeled into the most needed sectors and will assist in our efforts to achieve early economic recoveryfm59
82. To similar effect, the Announcement advised that relevant considerations in making case-by-oase deteimmations of whether to approve an investment for treaty protection include:
"the benefits in relation to the nation's safety and security, economic and social development, technology transfer and research for development, public order and good moral, art, culture and tradition, of the country, naiured resource conservation, energy and environment protection, and consumer protectio?i,60
83. In die present case, Wafer Ban's shareholding does not meet the 10% threshold required to be considered a direct investment Accordingly, it has never been entitled to protection under the 1961 Treaty or the BIT.
84. Not surprisingly, then, Claimant glaringly avoids any mention of the approval requirement in its pleading.
85. Waiter Bau pleads only that the “Concession” received BOI approval on 16 May 1991.61
86. BOI approval of DMT is a red herring. DMT is not the investment at isstlo-in this arbitration, nor is its Concession Agreement Walter. Ban did not purchase DMT or the concession. Walter Bau purchased shares of DMT. ft is those shares, and those shares alone, that require approval under the treaties.
87. But accepting tor the sake of argument that BOI approval of DMT were relevant to this arbitration (it is not), Walter Bau could not just rest on its assertion that BOI approval was given on 16 May 1991. Walter Ban would have to prove (i) that it continuously
59 Letter Wo. 0504/3533 than Thailand Idimsby of Foreign Affairs to 6k Embassy of the Federal Republic of GennKiy, Bangkok, duted IS September 2000 (R.-4). ↩
60 Tbs ArtncfliUecmeBt, Art. 5 {R-Sj. ↩
61 See Request for Arbitration, 51, ↩
[Page 25]
satisfied the fourteen conditions that the BOI specified in the promotion certificate [see R-9V62 and (ii) that the extension of the tollway was approved for investment promotion.
88. Moreover, even if Walter Bau met its burden of proof on these points, the feet of BOI approval would not mean that the investment was protected under the treaties until the Announcement was issued in October 2003. Only at this point in time did the BOPs certificate of promotion become equivalent to the Ministry of Foreign Affairsf certificate of approval for protection. This is made clear by file Announcement which states;
fCfTTke Certificate of Promotion from the Board of Investment ... shall be considered as the Certificate of Anurova for Protection – C.AP. for the investment Such investment shall be granted protection under the agreement on the promotion and protects of investments between the Government of Kingdom of Thailand and the Government of the country ofthe foreign investors.
The announcement shall he effective as of this dated63
So, even if Walter Bau could piggyback on BOI approval of DMT (It cannot), unless DMT received a certificate of admission prior to the Announcement (it did not), there would be treaty protection only from the date of the Announcement
89. Try as it may, Walter Bau cannot escape that its investment required specific approval for treaty protection, and that whether It obtained such approval is case-tfisposilive. The simple truth is drat Walter Ban's investment was not approved. As a result, this arbitration must be dismissed.64
62 See Board of Investment Certificate oFPmnuciticii issued to DMT dated 16 May 199t (R-9). In ttiis regard while Oldman* asserts that HOF approval was given on 16 May 1991, ii also acknowledges that certain conditions imposed m the time cf BGl qppGVttf" 'were not implemented until MoAl was entetftd into on 27 April 1995, See Request for Arbitration, 59. ↩
63 T33e Announcement, arte. 4 and 5 (R-S)* ↩
64 See 42 and the footnote thereto. ↩
[Page 26]
90. Putting aside the approval requirement (art exercise which involves a courageous or foolhardy ignorance of reality), Walter Ban's claims suffer from other fundamental flaws, Among other things, the Tribunal lacks jurisdiction rations tsmpuris under the BIT to the extent that the alleged dispute and/or Thailand's alleged breaches occurred before the BIT entered into force. Although the Tribunal would have jurisdiction mtiam temporis under the 1961 Treaty {see section Cbelow), foal treaty docs not apply for other reasons that are set forth in this memorial.
91. Under general principles of international law, a state is responsible for breach of an international obligation only if the obligation Is binding at the time of the alleged breach.65
92. A treaty obligation becomes binding only once the treaty has come into force.66
93. This principle of non-retroactive application of treaties is embodied in Article 23 of the Vienna Convention, which states:
"Unless a deferent intention appears from the treaty or is otherwise established, its provisions do not bind a patty in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into fores of the treaty with respect to that party.”67
65 See Intjcmafronal Law Commission, Draft Articles On Merponsibilfty of States far Intermtfondfy WroRgfd Acts (2001ju Art 13 fajn act of a Stats dees not constitute a breach of an irtfemoficnal obligation unless the Stats Is bound by the obligation in question at the time the act occurs") (RAX31). See also Case Concerning the Northern Centeraans (C&neroanv. United Kingdom) (2 December 1963} (1563) iC7 Itep 11. 12? (2 December 1963) (separate npmlfjn of Judge FlEzmauiiee) /\*An act which did not, in relation to the party complaining qf it, copstUvte a wrong nt the time ft took plans, obviously cannot et post facto besoms one, (RA-32). ↩
66 STr Robert Jennings and Sir Arthur Wilts, "OpperehanɅs International Law" (?fb et 39£2) 5 612 (Sir Robert Jemmgs & Sir Arthur Watte eda 9th fid, 1996) (Hfl treaty onfy become# binding upon the contracting states when it ha# came into fared') (RA-33). ↩
67 Vienna Convention, Art 28 (RA-2). ↩
[Page 27]
94. Thus, there fe a presumption that a state is not responsible for any art, feet or situation which ceased to exist before the date of entry into force of the treaty for that state.68
95. As Article 23 of foe Vienna Convention expressly states, such presumption exists unless a different interpretation clearly appeals from the treaty or is otherwise established. In this regard, commentary by the International Law Commission affirms feat:
Ka treaty is vot to be regarded as intended to have retroactive effects tmlcss such an intention is expressed in the treaty or is clearly to be implied from its ferms.69
96. The International Court of Justice ('TCP) applied the non-retroactivity rule in fee Amhatielos Cose.70 The Court rejected fee Greet Government's contention that it was entitled to present a daim for acts that had occurred in 1922 atid 1923 under a treaty feat had entered into force in 1926, stating;
^Tb accept this theory would mean giving retroactive effect to Article 29 of the Treaty of 1926, whereas Article 32 of this Treaty states that the Treaty, which must mean all the provisions of the Treaty, shall came into force immediately upon ratification Such a conclusion might have been rebutted if there had been cmy special clause or any special object necessitating retroactive interpretation There is no suck clause or object
68 Sir Robert JeftnbtfS and Sir Arthur Watts, “Oppcarheam's btemsb&naJ Law¹¹ (5Kh ed.† 1992 ) § G2fl tJTke genial rvte is that o treaty does not bind a party with retroactive effect is in relation to tfrcp oct or fact wMch ftro place or any situation which ceased to exist before the dale of the entry into force of the treaty for that partyf) {RA-33). See also International Law Commission, Draft Articles on Responsibility of States for Jjrternationalfy Wrongful Acts {2001), Ait. 13 ("fqjn act qfa Sttiie does not constitute a breach of an international obligation unless the State is bound by the obligation in question of the time the act occurs.*) (RA-31), ↩
69 International Law Commission Final Draft Articles on the Law of Treaties, Commented to Article 21 (same as Article 2B), reprinted b 2 Sir Arthur Watts, "The International Law Crannussicin 1949-199JT (1999) hf9 {RA-34; emphasis added). See also Efettrottfca Sicuia S.pA. (United States v. Italy) (1939} ICJ Rep 15a 42 (an important principle al customaiy International 3sw should not iLbe held to have been tacitly dispensed with in the absence of any wards making dear an iitferiiwti to do sở" ) (RA-35Ļ ↩
70 AmbaHelos Case (Greece v. United Kingdom) (Judgment on Preliminary Objection) [1 July 1952) ICJ Rep 2S (RA-36). ↩
[Page 28]
in ihe present case. It is therefore impossible to hold that my of its provisions must be deemed to have been in force earlier.71
97. Therefore according to the principle of noivreiroaciivity, absent an unambiguous indication to the contrary, Thailand's Treaty obligation in Article 10 to arbitrate a[djisputes concerning investments* became binding only upon entry into force of foe BIT on 20 October 200472 Therefore, the BIT must have been in force when the alleged dispute arogs.73
98. Similarly, and absent an unambiguous indication to the contrary, the BTT must abo have been in force when the alleged breaches arose.74
99. Unless each of these conditions is met, the Tribunal lacks jurisdiction ratiom temporix.
71 Id The Court also stated that tbs feet that aa eadier treaty cartlaired substantive provisions shnifer to substantive provisions in the treaty in force was not a basis for giving retroactive effect to the Cnsfliy in force: id ↩
72 See Impregiia S.p.A. v. Islamic Republic uf Pakistan, (Decision on Jurisdiction) (22 April 3005) ICSID Case No. ARB/03/3 J 3.10, available at {“[]Jt is to be noted that Article 1(1) of the RTF does not give the substantive provisions of the lYeaiy any retrospective effect. FAMS, the normal principle stated in Article'28 of the Vienna Convention on the Law of Trades applies, and the provisions ofthe BIT: ... do not bind the forty in relation to any act offsets which took place or any situation which ceased to exist before the date of entry into farce of ihe Treaty, **} (RA-37, citing SGS Svcieie G£n&rrie de SurvetlfoncB SA. v. Republic of the Fhilippipes, (Decision qf the Tribunal an Objections to Jurisdiction} (29 January 2004) ICSID Case Ho. ARBf])2/Gp available at ^ 166 and 167 (RA-3B). ↩
73 See Christoph H. Sehreucr; "The ICSID CemYcndoir A Commentary" (2001) 211 (in order for a bilateral investment treaty to provide a basis for junsdretinn, Et must be in farce at the relevant Eifflft) (RA-39); BIT, Art. 10(1) (WB1); 2 Gppenhafriris International Laws Treaties, § G2G at 124? (für Robert joinings & Sir Arthur Watts eds 9th eh 1996) ("The general rule is that a treaty does not bind a party with retroactive effect, ie in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the treaty for that party!*) (RA-33 emphasis added). ↩
74 Sag Schreuer, id, citing Tra&x Hellas S.A. v, Republic of Albania (Decision on Jurisdiction) (24 December 1996} ICSID ARSm^2 reprinted in (JS99) 14 ICSID Rev.-FHJ 161, 173-130 (the Tribunal found feat there was no jurisdiction on the basis of the E3T betWEen Albania sod Greece because both the aliened expropriation and fefc Ropiest for Arbitration occurred before itg entry Into force) (RA-40); MWev International Ltd v. United States of America (Award) (II October 2002) ICSID Case Ho. ARB(AFy99/2 7{3 (the HAFTA Tribunal stated: ^eversts cr conduct prior to the entry into force of on obligation for the respondent Stale may be relevant in determining whether the State has subsequently committed a breach of the obligation. But it must still be possible to pom: fo conduct of the Stale after that pbfe which is itself a hreaohJy) (RA-41; emphasis adefed). ↩
[Page 29]
100. In the following Sections, Respondent shows that the BIT does not apply retroactively to disputes and/or breaches arising prior to entry into force. Accordingly, there is no jurisdiction ratiane temporis because foe alleged dispute arose prior to that dine. Respondent further demonstrates that, even if foe alleged dispute had arisen before foe Treaty entered into force, the Tribunal would not have jurisdiction over foe alleged breaches (with limited exceptions) because they too arose prior to foe Treaty's entry into force.
101. In respect of foe scope of foe Treaty's application, Thailand and Germany agreed in Article S of the BIT that
“[tftris Treaty shall also apply to approved investments made prior to its entry into force by investors of either Contracting Forty in the territory of the other Contracting Party consistent with the latter's laws and regulations,"75
102. Pursuant to Article 31 of the Vienna Convention, Article S of foe BIT must be interpreted “in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of Us object and purpose"
103. According to its ordinary meaning, Article 8 of foe BIT does not deviate from the general rule of noil-retroactivity codified in Article 28 of foe Vienna Convention. It merely states that the Treaty applies to investments – not disputes, not breaches – made prior to 2& October 2004, foe date of its entry into force. It does not state that the BIT shall apply to any act or conduct or event which took place prior to Ibis time.
[Page 30]
104. On its face, Article S accordingly provides only that approved investments made prior to the BIT'a entry into force shall benefit from the Treaty's protections in the same way as investments made alter its entry info force, is, with respect to acta or conduct or events or situations occurring after entry info force.
105. If the state parties had intended the Treaty to apply to past conduct or disputes, then they would have stated so explicitly.76
106. Continuous use of the future tense through repeated reference to what the state parties MshdTf do connotes that the parties agreed to he bound by the obligations – i.n, to conform their conduct – in the future.77 Because the obligations undertaken in the Treaty are drafted in a forward-looking way and because the normal rule in international law is that treaties do not apply retroactively, it stands to reason that the state parties to the BIT
76 See, e.g., Agreement Between the United States of Anfsricct anil Albania in th& Sett!?m$nt of Certain Outstanding Claims done in Tirana (ID March 1995) 1261L TIAS, Aft 1 {“The dethm settkd ptersutttf Jo this agreement are: (a) the claims of United Stales nationals (including nah&al and Juridical persons) against Albania arising from any nationaltation, expropriation, fpffcrantfojTv and other taking of or measures affecting property of nationals of the United States prior ta the date of this agreement; and (b) the claims of nationals of Albania (including matured njidjuridical persons) against the United States prior. t# the this of this azreeweniP) (BA-42; emphasis added); United Hattons Stcunty Council ResoEution 687 (1991); UR. Dm £/ftESyG &7 (3 April 1991} 1 16, available at ["Reaffirms that Iran without prejudice to the debts and uhRgatityns of Iraq arising_prior to 2 August_1998, which will be addressed through the normal mechanisms, as liable under imornationoi law for any direst loss, damage, Rn:haling sTivirornientid damage md the depletion of natural resources, or Injury to foreign Governments, nationals and corporations, AS a result tf Iraq's unlawful invasion and occupation of Kuwait) and If IS (“Decider also to create a Jhnd to pay compensation far claims drat fall within paragraph 16 above amd to establish a Commission that writ administer ihefund *") (RA-43; emphasis added). ↩
77 For exanpICp tha BIT provides hAk"[e]xvh Contracting Party shall in its territory promote as Jar as possible investments by investors of the other Contracting Party and adntU such investments in accordance with its laws and regulations" (Art 2{1')) f[n]either CvtUractfng Party shall subject fttvestmenis in its territory owned or controlled by investors of the other Commoting Party to treatment lessfavourable than it accords to investments qf its awn investors or lo investments if Investors of any third Slate* (Art 3(1}); "[fnvestments by westers of either Cortfmcirrtg Party shaft enjoy fill protection and security in the territory of the other Contracting Partf* (Art. 4(1)) (WB1; etflphasis added). ↩
[Page 31]
would have expressly staled any intention that the BIT apply retroactively to past breaches and disputes.78 They did not.
107. Support for the view that the BIT does not apply retroactively, even in respect of approved Investments existing at the time of its entry into force, is found in decisions of various International tribunals feat foccd wife provisions worded similarly to Article 8, held that treaty protection did not extend to breaches or disputes occurring before the treaty in question came info force.
108. In SGS v, Philippines, for example, the ICSID Tribunal interpreting the meaning of Article II of the Switeerland-philippines BIT (which provided that the treaty applies to investments “made in accordance with its laws and regulations ... whether prior to or qfor the entry mto force qf the Agresmenf') concluded that:
“Article Udoes not however, etw the_substantive_provisions of the BIT any retrospective effect. The normal principle stated in Article 28 of the [Vienna Convention] applies: the previsions of the BJT do not Bind a party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the treatyf79
109. Similarly, the ICSJD Tribunal in Salim v. Jordan found that treaty obligations did not have any retrospective effect by virtue of fee treaty's definition of “investment as
78 See Tradex Hellas 5A, K Republic of Albania (Decision on Jurisdiction) (24 December 1996) JCS3D ARB/94/2 reprinted in {1999} 14 ICSID Rev-FIL 161, 179-IBG (considering Article ft of tbe Albania-Greece BIT (1991J* wbicfc iststes that Gfti& BLT applies to mrvestmenis made prior to its entjy into farce, the TrtbunaJ stated: Hlif seems clear that the Contracting Parties had the intention to only submit to TCSE jurisdiction regarding oflvged expropriation end requests for arbitration occurring ip_ffe nditre, even if th&y concerned investment made earlier.") (RAAO; emphasis edded) Teonteas Mudioamb fentafas Teemed 3.A. v. The Untied Mexican Stotts (Award) (29 May 2003}1C3JD Case Wo. ARB(AF}/0G/2 ][ 64 ["Although the Agreement applies to investments existing its of the date of Us entry into farce—which suggests me a logical conclusion that the situations siBTtwndi?ig inpesitnettfs existing at the time da net escape its previstozs the way the provisions an which the Claimant reties are drafted suggests that application thereof isjbrward-IaaJdng*) (FA-44), ↩
79 SGS Saciete Generate dc Surveillance SA. v. Ropiffljc of the Philippines, (Decision of the Tribunal an Objections ta Jurisdiction) (29 January 2004) KSID Case Wb ARB/D2/G 166, avaflabic *t (RA-3B). ↩
[Page 32]
including “QfQ* kind of property invested before or after the entry info force of this Agreement.80
110. NAFTA tribunals have also held that jurisdiction did not extend to acts or omissions that occurred before the treaty's entry into farce, notwithstanding a provision im NAFTA which states that “risrs Chapter covers investments existing on the date of entry into force of this Agreement as well as investments made or acquired hemqft&rfo81
111. For the foregoing reasons, no intention appears from the Treaty or is otherwise established that contrary to foe general rule codified in Article 28 of the Vienna Convention (or indeed, as a matter of simple common sense) – foe state parties to foe BIT intended it to apply retroactively to disputes or breaches.
112. Nevertheless, if the Tribunal were to find that Article 3 is in any way unclear as to whether the BIT applies retroactively to disputes or breaches, Respondent submits that the Tribunal must still find that the BIT does not so apply. This is because foe general principle of treaty interpretation is font, where the meaning of a provision is unclear, the meaning which is ies4 onerous to the state assuming an obligation is to be preferred (fin dubio mithiA')82
80 Salint Costmfiari S.p.A. atjd Ifalsfrade S.p.A. v. The Hashemite Kingdom of Jordan (Decision on Jurisdiction) (29 November 2004) ICSID Case No, AR&T02/H ^66, 177 (RA-45). ↩
81 Sec Notes to North American Free Trade AgFeament, amiable at -3 note 39 (Article 1101 {fnv&xtment - Scope and Coverage) : this Chapter covers Investments existing on the date of entry into force of this Agreement as well os investments made or mqalr&diheftaffar**) {RA46); Marvin Kay Feldman Kcrpav. United Mexican States, (Interim Decision on Preliminary Jurisdictional Issues) (6 December 2000) ICSID Caw No- ARB{AFy99/I % 62 £*Glven that NAFTA came into fores on January 1, 1994, no obligations adopted mder NAFTA existed andike TtUmnnFs jurisdiction does aot Axtsnd before that dote, NAFTA Itself did ?iot purport to hove any retroactive effect. According this Tribunal may nơ deal with acts or otids&on* that occurred before January 1, 1994."} {RA47); Mondev International Lid yr United Stales of America, ICSID Case No. ARBfAF^?^, Amrd, II October 2002468 (ΛΑ-41). ↩
82 Sir Robert Jennings and Sir Arthur Watts, "Oppenhctro's InternaEantiJ Law" (9th cd. 1992) 5 633 (RA-33X ↩
[Page 33]
113. Applying the principle in dubio mitius, the Id's predecessor, the Permanent Court of International Justice (‘TCIJ”), has held that “if the wording of a treaty provision is riot clear, in choosing between severed admissible interpretations, the one which involves the jrtinimum ofobligations for the Parties should be adopted,83
114. Here the meaning of Article 8 which is less onerous to the state is that the BIT does not apply retroactively to disputes or breaches.84
115. Such interpretation is less onerous to the state ibr the additional reason that if the BFT did not apply, investors would have no recourse to arbitration for disputes or breaches occurring prior to the BITs entry into force. (As explained in Section C, although such disputes or breaches could be covered under the 1961 Treaty, that treaty does not provide for any investor-state dispute resolution.)
116. Accordingly, the nan-retroactive interpretation of Article 8 must be preferred.
117. The ICT has defined a dispute as Ka disagreement on a point of law or fact, a conflict of legal views or interests between parties_"85
118. According to Claimant's own words:
“The dispute arises from the matters described m ike summary offacts. ... Walter Ban has raised the dimute with the Respondent, both directlyjtself and through the German Government, since at least October 2001.86
83 The Frontier Between Iraq and Turfey (Advisory Qpfitfoit} $1925) PCIJ SerF B, No. 12*25 (RA-4&). ↩
84 While it is true that such disputes or breaches 'Wtsutd still be subject to obiigjfftiBng undertaken by SIB state in the $961 Treaty fre s&tB's obligations uDdcrtho 1961 Treaty are teas onerous than its obHgsfiona under th BIT in at least one mafcrtal respect; underlie 1961 Treaty, an investor cannot compel arbhnatEon. ↩
85 COSE Concerning Entf Timor (Portugalī Austrattqf (Jtidgtitertf) (1995) ICJ R&p 39% 99 £RA-49). ↩
86 ficqucst for Arbitration 29-30 (emphasis added). ↩
[Page 34]
119. Walter Rsu itself thus pleads that it seeks to arbitrate a dispute that arose no later than October 2001.
120. Pursuant to the principle of nDH-retroactmtyP because the Request for Arbitration alleges a dispute that arose prior to the BfPs entry into force, there is no jurisdiction rations temporis.
121. Support for Respondent's interpretation of he BIT comes &om views expressed by Peruvian delegates concerning the scope cf the bilateral investment treaty between the United Kingdom and Peru, which defines the term "investmenf* as including “all invesitnents whether made before or after the date of entry into force of this Agreement”87
"[A] BIT applies to investments made after it goes into effect, and in some cases to investments made before it went into effect provided the_dispute in question arises after the treaty has entered into force Therefore, if a treaty gees into effect July 7, 1993, and a subsequent dispute arises between an investor and the government involving an investment made prior to the effective treaty date, the conflict resolution clause will apply to the dispute."88
122. Respondent's interpretation is also affirmed by a recent case before (be ICJ in which the Court determined that it did not have jurisdiction over a continuing dispute that had arisen before the effective date of Yugoslavia's consent to jurisdiction.
123. In Yugoslavia v. Belgium Yugoslavia sought to litigate claims based on a bombing campaign by NATO that began on 24 March 1999 and that was “conducted
87 jdgmajtffcflf between the GcrtprmnzTit of the United Kingdom of Grsai Brfiatn miff Northern Ireland tW the GAmrmnt of (he Rzpubfta of Pent }hr thz. Promotion and Protection qf Invetfmzrtfs, dons m London (4 October 1993), Article 1(a) (RA-50), ↩
88 Enrique Miguel Chaves Bardaies, *Tho Secernent of Disputes Under the United KmgdonvFeni Bilateral Investment Treaty" at , s. 23.6 (RA-51; emphasis added). ↩
[Page 35]
continuously” over a period extending beyond 25 April 1999.89 Yugoslavia's declaration accepting compulsory jurisdiction of the Court contained a limitation ratiom tempnrii precluding any retrospective jurisdiction of the Court to disputes arising prior to 25 April 1999, the date ii signed the declaratm.90 In rejecting jurisdiction, the Court held that the dispute concerning the legality of the bombings, “taken as a whole,” had arisen well before 25 April 1999, and found that the bombings had continued and that the “dispute concerning them has persisted sines that dots J not suchas to otter the date on which the dispute arose.91
124. The ICSID Tribunal in Liicchetti u. Pent adopted similar reasoning in finding that it did not have jurisdiction under a treaty between Peru and Chile because the parties' dispute had arisen prior to the treaty's entry into force.92 It was common ground between the parties that, prior to the treaty's entry into force a dispute had arisen im which each side held conflicting views regarding their respective rights and obligations,* but the parties disagreed as to whether the dispute had continued or a new dispute had arisen.93 Finding that the subject matter of the present dispute was foe same as that of the earlier dispute (the municipality's repeated efforts to compel claimants to comply with the rules and regulations applicable to foe construction of their factory), the Lucchetti Tribunal
89 Case Cotiming Legality of Use of Force (Yugoslavia ul Belgium) (Request for ihs JTuFcathn Of Prtyyf şiQ?To Measur&x) (2 June 1999] ICJ Rep 124 | 28 (RA-52)- ↩
92 Empresas Luccheitf, S.A, and Lucchertt PeruY &A m Republic of Pent fAw&rd) (7 Fcbmaiy 2005) ICSID Case No. ARB/G3/4軒 53,59 (RA-53)L ↩
[Page 36]
determined feat there was only one continuing dispute which had “crystallized prior to the treaty's entry Mo force/94 Accordingly, it denied jurisdiction.
125. Here, too, jurisdiction must he denied, Walter Ban seeks to arbitrate a continuing dispute concerning Thailand's obligations to its investment,95 a dispute that arose, according to Claimant's own words, by Kat hast October 2001.96
126. As discussed in Section Ul.B.1 above, in ords for the Tribunal to find jurisdiction rations ternporis, Claimant must establish feat both the dispute and the alleged breaches occurred while the BIT was in force. This is because Thailand's obligation to arbitrate disputes Is separate and distinct from its substantive obligations to afford investors fee protections set forth in the Treaty.97
127. Thus, even if the Tribunal were to find feat it has jurisdiction rations temporis over fee dispute, there is, in any event; no jurisdiction rations temporis over any alleged breaches that occurred before 20 October 2004, the date upon which the BIT entered Into force.
95 Claimant consistently refers to *Ww dispute" (in singular form) in lie Request for Arbitration. See, ftg2 CTtfA d&pttfs arises directly tfsrf of Wdter jStaf 'ī priteftofeH/ in a toflwqy concession lx Bangkok ... and concerns breaches by the Responded of nblig&fi&ns it owed under the Treaty to Walter Baa os an Investor). ↩
96 See Request fnF Arbitration, 30, ↩
97 See Christoph H. Sdireucrj 'Tbe ICSID Convention: A Cwnmecrfary" (2001) 21 I (in order for a bilateral investment treaty to provide a basis foe jurisdiction, it must be in force at the relevant time) (RA.-39) effing Tradex Hellas S.A. w. Republic of Atiania (Decision av JarisdictlQTj) (24 December 1996) ICSID A&B/94# reprint In (1999) 14 IC3ID Rttyr-FIU SSI, 17S-1BG (the Tribunal found that there was iro jmiadi ctton on the basis of the BIT between Albania gnd Greece because both the alleged expropriation aod the Request for Arbitration occurred before Its enlry into force), (RA-40); Sir Robert Jennings Hid Sir Arthur Watts, woppeuhɅitsTa fotematfonai Law" (9th eL, 1992) J] 620 (Sir Robert Jennings & Sir Arthur Wfttts eds., 9th cdl 1996) (fThs general rule fs fhri atreaty does not 4iratf a party wfïA retroactive %ffecf, l& Irt relation to any act or feet which took place or atrj situation which ceased to exist before the date of the entry intoforce of the treaty for that party!"} (RA-33; emphasis added)- ↩
[Page 37]
128. Just as it is necessary to isolate when the cause of action accrued in die contest of establishing whether an action has been brought within a limitation period, Claimant must be able-in order to establish jurisdiction rations temporis— to isolate when the conduct alleged to have breached an obligation occurred.
129. Walter Ban contends that the alleged acts and emissions summarized in ↑ 13QA of the Request for Arbitration constitute, “both cwrmlativsfy and each individually” breaches of the Respondent's Treaty obligations and that Respondent “continuously' breached its obligations.98
130. If the alleged acts and omissions in | BGA are taken amdivldmUy?*, it is apparent on the iace of Claimant's pleading that the Tribunal cannot have jurisdiction raticne temporis over at least the following alleged acts and omissions, since, by Waiter Bau's admission, they occurred before 20 October 2004-
98 Seg Request for Arbitration, ¶ 130. ↩
100 fdt % 14.1 f'completion arwf cpemngeftix ToHway were detayedfrom May 1993 to July 1996). ↩
[Page 3a]
Allegedly Occurred: September 1999;102 September 2001;ina October 2002.rw
Alleged Act/Omission exploiting DMT’s difficulties to procure or effect amendments to the original conditions of the Concession by virtue of MoA2 and the Share Purchase Agreement104
Allegedly Occurred: 29 November 1996 (MoA2); 1997 (Share Purchase Agreement).106
Alleged Act/Omission: failing to arrange the Soft Loan; free floating the Baht.107
Allegedly Occurred: June 1997 (Soft Loan); 2 July 1997 (currency free floating).108
Alleged Breach: failing to observe Thailand’s own internal systems regarding the administration of private concessions.109
Allegedly Occurred: beginning of 1999 and at every 6 month interval thereafter.1^
102 Id, ¶ 100 (“On 16 September 1999 DMT requested the DoH to enter into negotiations to remedy the effects on its financial position under Article 25 of the Concession Agreement and Article 15 of MoA 2/1926 in connection with Appendix F.”).
ina Id., ¶ 105 (“In September 2001 these negotiations [concerning rut Assessment of Financial Damages Report] suddenly ceased before they could come to any conclusion”).
rw M ¶ lOrf (“In an effort to revive negotiations with the DoH, DMT submitted an update of its original Assessment of Financial Damages Report on 31 October 2002”).
MB Id, ¶ 130A(b).
EM Id, ¶ 6 (the parties entered into MoA2 on 29 November 1996, and the Share Purchase Agreement in 1997).
106 Id, ¶ UOAfb).
107 Id, U 14.2 (“The Respondent failed to arrange [the Soft Loan] immediately putting DMT wider renewed pressure from its banks and, by June 1997, forcing it to enter into arm’s length commercial loans ... on 2 July 1997, the Respondent decided to float the Baht free of other major currencies ...”)
IN Id, ¶ 65.
109 IdT ¶¶ 101-107. Walter Ban alleges that under the Act on Letting Private Persons Participate in or Undertake Activities of State, the Director General of DoH was required “to report at least every six months to the minister-in-charge” [Id., ¶ 102). Respondent acknowledges that, as pleaded, certain reports would have been due after the BIT’s entry into force. Respondent addresses the issue of reports occurring after this time in ¶¶ 149-150.
[Page 39]
Alleged Act/Omission: blocking or otherwise delaying the toll Increases granted to DMT and its investors.111
Allegedly Occurred: 2 December 1988; 16 June 1999; Id June 2004.112
Alleged Breach: approving and implementing road schemes in competition with the Tollway.313
Allegedly Occurred: 1998.114
131. As most of tile “individual” acts and omissions which Walter Ban alleges are temporally barred under the BIT,113 the question becomes whether there is nevertheless jurisdiction over this conduct because, as Claimant asserts, the Respondent “continuously” breached such obligations, or the alleged acts and omissions “cHBJHZafrveA constitute breaches of Respondents Treaty obligations.116 As discussed below, there is not.
132. The concept of continuing breach is set forth in Article 140) of the Intoraational Law Commission's Articles on State Responsibility, which states that:
“The breach of an international obligation by an act of a State having a continuing character extends over the entire period during which the act
m id. ¶ 130A(d).
ia I&, ¶ 39 (toll increase upon completion of the DOK Ujtonie was postponed until 2 December 1953}; ¶ 93 {iha Northern Extension opening should have resulted in toll increases on 16 June 1999); H¶ E7, 97 (automatic toll increases should have been implemented on 1G June 2004).
ns Id, ¶ 130A(c).
m Id, ¶ 32 (“By the later part of 1998, ... the Respondent implemented road schemes ... In particular, it decided to convert the main carriageways of the VRR step by step into an attractive alternative tollfree expressway, thus creating it into direct competition for the Tollway...”) (emphasis added).
U5 In addition to the acts and omissions set forth lit ¶ 130, the Tribunal prhmjhcie does not have jurisdiction over the “individual” act suid omission of “moving or directing or approving the move of all scheduled air traffic from Don Muang airport to the new Savornabhunu International Airport” since Walter Pan did not plead when the decision to move air traffic to the new airport was allegedly made and thus cannot establish that this occurred after the BIT entered into force. See id, ¶ 93, 330A(e).
its See id. ¶¶ 130, 130A.
[Page 40]
continues and remains not in conformity with the international obligation.117
133. Commentary to file Articles on State Responsibility provides the following examples of continuing wrongful acts:
"the maintenance in effect of legislative provisions incompatible with treaty obligations of the enacting State, unlawful detention of a foreign official or unlawful occupation of embassy premises, maintenance by force of colonial domination, unlawful occupation of part of the territory of another State or stationing armed forces in another State without its consent.118
134. Claimant will presumably argue that the Tribunal could have jurisdiction (in theory) if Gaimant established that there was conduct capable of breaching obligations that continued after the BIT's entry into force (even though, of course, the Claimant could not seek compensation in respect of the earlier conduct).
135. But Claimant's mere assertion that there is continuing breach here does not make it so.
13fi. First, the conduct at issue in the present case cannot be characterized as continuing. As demonstrated by the dates ascribed by the Request for Arbitration to the alleged acts and emissions outlined in ¶ 130, Claimant's Request for Arbitration makes it clear that such acts and omissions constitute discrete, isolated events, not ongoing, enduring ones as exemplified in the Commentary to the Articles on State Responsibility.
137. For example, regarding Respondent's alleged breach of its treaty obligations by causing delay io the opening of the Tollway and to the charging of tolls, Claimant readily admits that the Tollway has been open and that tolls have been charged since July 199G.139 As
in RA-31.
112 Jamas Crawlerd, “Ths International Levr Coraixusskm^s Artides on Stats Responsibility; Introduction Test and Cornj/JBntnris3u (2DB2) 136(ccimrneritnjy (3) to Artkle 14) (11A-54; emphasis added).
119 See Request for Arbitration, ¶ 41.
[Page 41]
such, Respondents allegedly wrongful conduct happened well before the ElTs entry into force.
13S. As another example, in respect of Respondent's alleged breach of its treaty obligations by approving and implementing road schemes in connection with Hie TollwaVjRespondent's so-called wrongful conduct occurred when Respondent approved and implemented the road schema. Claimant pleads that Respondent "implemented* (note past tense) road schemes in 1998.120 Again, this is well before the BIT's entry into force.
139. At best, Claimant pleads that Respondent's alleged acts and omissions had continuing effects on the value of its shares in DMT after the Treaty entered into force. Tellingly, Claimant says:
“As a result of these acts and failures of the Respondent, as well as the economic crisis triggered by the Respondent's free floating of the Baht against world currencies, DMT's financial position continuously and rapidly declined.”121
***
“The cumulative effect of all these measures on Walter Ban's investment has been devastating.”122
140. Assuming that Claimant could prove that wrongful conduct prior to the BIT*s enPy info force continued to effect the value of its investment after the BIT's entry into fotos that would not establish jurisdiction on the basis of continuing breach because the wrongful conduct itself was completed before entry into force.
141. As the Monday Tribunal observed, "there is a distinction between an act of a continuing character and an act already completed, which continues to cause loss or damage.”123
1zo Id, ¶ $2.
lu Id, ¶ U.3.
is Id, ¶ 113.
[Page 42]
142. Tills principle is codified m Article 14(1) of the Articles on State Responsibility: “[t]he breach of on international obligation by on art of a State not having a continuing character occurs at the moment when the act is performed, even if its effects continue.”124
143. Commentary to Article 14 explains:
“An act does not have a continuing character merely because its effects or consequences extend in time. It must be the wrongful act as such which continues. In many cases of internationally wrongful acts, their consequences may be prolonged. The pain and suffering caused by earlier acts of torture or the economic effects of the expropriation of property continue even though the torture Has ceased or title to the property has passed.”125
144. Claimant has die burden here to establish that the alleged acts and omissions occurred at the relevant time. Claimant dearly has not met that burden in its Request for Arbitration.
145. Second Claimant does not point to conduct of die state after entry into force, which, in and of itself, is a breach.
146. In this regard, while the NAFTA Tribunal in Monday v. U.SA. ibund that “events or conduct prior to the entry into force of an obligation for the responded State may he relevant in determining whether the State has subsequently commuted a breach of the obligation It emphasized that “it must still be possible to point to conduct of the State
137 Mondev International Ltd. v. United States of America (Award) (11 October 2002) ICSID Case No. ARB(AF)/99/2 ¶ 58 (RA-41; emphasis added).
U RA-31 (emphasis added).
125 Jaincs CrBwffrd, 'Tbs International Law CMitmJssion'a Artielea on State Responsibility: Introduction, Test and Commentaries¹¹ (2002) 136 (commentary (fi) to Article 14] (RA-54). See also, International Law Commission, Commentary on Article IS of the Draft Articles on State Responsibility Provisionally Adopted by the Commission on First Reading (1996) ¶ 21, available at (“[A] ‘continuingr act qf the State must not be confused with an instantaneous act producing continuing effects, for example an act of confiscation. In this case, the act of the Stats as such ends as soon as the confiscation has taken place, even if its consequences are lasting. In the former event the existence of a breach of an international obligation will be established solely on the basis of an obligation which was in force for the State at the time when the instantaneous ad occurred, and the conclusion reached cannot be altered by the fact that the effects of the act continue after an obligation to refrain from such an act has entered into force.”) (RA-55).
[Page 43]
after that date which is itself a breach.”126 The Tribunal pointed out that one must look at not only die feds but also the obligation said to have been breached.”127
147. In Paragraph 128 of the Request for Arbitration, Claimant lists fee Treaty provisions that Respondent has allegedly breached. Then, in Paragraph 130A, Claimant summarizes Respondent's alleged wrongful ads and omissions and declares (with so explanation} which of the Treaty provisions each net and omission supposedly breached. Thus, Claimant says what Respondent allegedly did, and concludes that Respondent violated the Treaty. Claimant foils, however, to explain how Respondents acts and omissions violated fee Treaty.
148. Assertion cannot replace argument In ¶¶ 171-1SO, Respondent explains that Claimant has a burden in respect of jurisdiction raticne material to particularize its claims, and Respondent feows why Claimant's allegations are not prima facie capable of triggering Respondents treaty obligations. Claimant's failure to particularly the legal basis for its claims, however, is also fetal in respect of jurisdiction rutione temporis. Absent a showing that Respondents alleged conduct is capable of triggering Respondent's treaty obligations, Claimant cannot establish either the duration of fee alleged breaches (i.e., whether there was continuing breach) or that any breaching conduct took place after fee BTTs entry into force.
149. The only acts and omissions that Claimant pleads took place ufer fee Treaty's entry into force are as follows:
13S Mcndzv International Ltd. v. United States of America (Award) (11 October 2002) ICSID Case Ko. AKB(AF)/99/2 ¶ 70 (RA–41; emphasis added). See also Tecnias Medioambientales Tecmed S.A. v. The United Mexican States (Award) (29 May 2003) ICSID Case Ho. ARB(AP)/00/2 ¶ 66 (following Arfbrarfsv) (&A-44).
127 Mandevid ¶ 58 [RA-41; emphasis added).
[Page 44]
Alleged Act/Onusstou: Imposing or otherwise effecting a reduction of the toils.128
Allegedly Occurred: December 20G4.129
Alleged Act/Omission: Disregarding Walter Ban's interests as a minority shareholder in DMT.130
Allegedly Occurred: December 2GQ4 and following.131
Alleged Breach: Failing to observe 'fliailand's own internal systems regarding the administration of private concessions.132
Allegedly Occurred: Every six months.133
150. As discussed hi Section M.D below, Claimant has made no effort to particularize the Treaty obligations supposedly breached by these alleged acts and omissions. S is for Claimant to establish that, by 'Cunprising or otherwise effecting a reduction of the tollsf "disregarding of Whiter Han's interests as a minority shareholder,” and “failure to observe its own internal systems regarding the administration of private concessions”, Respondent could have foiled to comply wlfh the treaty obligations specified in the
128 Request for Arbltrahotij ¶ 130A(d).
129 Ad, p. 14-10 (fin December 2004, the Respondent pressured LMT fagainst the objections of Walter Ban and DMTTs other foreign shareholders) into accepting a supposedly three-month 'trial' of reduced toll fens, against a promise of compensation.”).
130 Id, ¶ 130A(f).
131 See id, ¶ 117 (“BMT sent Intel’s report to the Respondent on 30 November 2004”); ¶ 119 (“Just two weeks after receiving Intel's report, the Respondent forced through a unilateral reduction of the tolls.”); ¶ 120 (“This reduction was made with total disregard to the interests and to the detriment of DMT and in breach of the Respondent's treaty obligation to Walter Ban. The Respondent used its position as director and shareholder of DMT and also its influence on the non-foreign board members and shareholders of DMT to obtain DMT’s consent to this measure against the strong objections of Walter Ban and the other foreign shareholders and without the prior consent of BMT's lenders.”). See also id., ¶¶ 124-25.
132 Id, ¶ 65.
133 See footnote 111.
[Page 45]
Request for Arbitration (at ¶¶ 130A(d) and (f), respectively).134 Because Claimant has failed to do so, there is no jurisdiction raiione temperte on the basis of contmumg breach.
151. In describing Respondent's alleged acts and omissions as “cumulatively* constituting breaches of Respondent's Treaty obligations, Respondent understands Claimant to posit that Respondent breached Treaty obligations through a composite act, i.e., a series of actions and omissions that are wrongful in aggregate.
152. This concept is described in Article 15 of tile International Law Commission's Articles on State Responsibility, which stales:
“(1) The breach of an international obligation by a State through a series of actions or omissions defined in aggregate as wrongful, occurs When the action or omission occurs which, taken with the other actions or omissions, is sufficient to constitute the wrongful act.
(2) in such a case, the breach extends over the entire period storting with the first of the actions or omissions of the series and lasts for as long as these actions or emissions are repeated and remain not in corformity with the international obligation.”135
153. Claimant might well argue that jurisdiction rotione tetnporis could exist if Respondent's alleged conduct cumulatively amounted to a breach of its Treaty obligations, and such conduct occurred, in part, after entry into force.
154. However, not just any series of acts and omissions can, in aggregate, give rise to the breach of an International obligation. To amount to a breach of an international obligation, there must be an accumulation of identical or analogous breaches which are
134 See discussion of Mender (KA-41), ¶ 146.
135 intemadonal Law Ccmmission, Draft Articles on Responsibility cfStales far Internationally V/rongfiit Acts (2001 HRA-31).
[Page 46]
suftickrrtiy numerous and interconnected to constitute a systematic policy or practice, as in the case of genocide and crimes against humanity.136
155. On the face of foe Request for Arbitration, that is not the case here. It is for Claimant to establish otherwise. Because Claimant has foiled to do so, there is no jurisdiction rations temporis on the basis of cumulative breach.
156. In apparent recognition of the tack of temporal jurisdiction over its alleged claims under the BIT, Walter Ban asserts that Respondent's alleged conduct breached the 1961 Treaty. This assertion is unavailing, because the 1961 Treaty does not provide for investor-state arbitration.
157. The 1961 Treaty was terminated upon entry Into force of the BIT.137 And even prior to this event, no mveator had the right to bring suit.
158. Indeed, cot all investment treaties provide recourse to investors for breach of treaty obligations, and this possibility of recourse was in fact foe exception in the early days of these treaties. For example, neither the Gertnany-Paldstoii BIT (1959) nca foe Ecuador-Switzeriand BIT (1971) provide for investor-state arbitration.138 The state parties to each of those treaties instead negotiated that any disputes concerning their interpretation or application would be resolved only at a state-to-staie level. (This is perhaps not surprising given that each of these treaties, including the 1961 Treaty, was signed before
136 See James Crawford, “The InfEmadDcaE Law Commssãon Articles on State Responsibility: Introdiretinn, Text and Commentaries” (2002) 135 (commentary (3) to Article 14) (RA-54).
137 Bir, Ail. UfWBI).
138 Pakistan and Federal Republic of Germ&iy Treaty jar the Promotion and Protection of Ittvesiraenti(with Protocol and exchange of notes), done in Bonn (25 November 1959), Art. U (RA-56); Accord entre la Cotf&d&ation Suisse et la Rspublique de VEquateur rdatff à la protection ct d ſencouragement dts if7Ve£ifssemcnls, done in Berne (2 May 1968), Art. 7 (RA-57).
[Page 47]
the creation of ICSID in 1966.139 Today, advance consents by governments to ICSID arbitration can be found in more than 900 investment treaties)140
159. The only state consent to arbitrate in the entire 1961 Treaty is contained in Article 11, pursuant to which the state parties agreed that "disputes concerning the interpretation or application of foe 1961 Treaty could ho submitted to an arbitral tribunal upon the request of either state party.
160. Heedless to say, Walter Bau is not a state party; nor does it seek to arbitrate a dispute concerning interpretation or application of the 1961 Treaty. Ho consent to arbitrate Walter Ban's claims under the 1961 Treaty tan thus be found therein.
161. And yet, the Claimant would have you believe that this fundamental right- absent from the 1961 Treaty - was somehow crested, without express provision, in the BIT.
162. Claimant appears to contend that Article 10 of the BIT contains state consent to arbitrate claims arising under foe 1961 Treaty.141 In other words, Claimant contends that the Tribunal should override foe unambiguous intent of foe state parties not to provide for mv fon-state arbitration' in foe 1961 Treaty.
163. Pursuant to Article 31 of the Vienna Convention, Article 10 of foe BIT must be interpreted "in accordance with the ordinary meaning to he given to the terms of the treaty in their context and in the light of its object and purpose!«142
139 Ttse World Bank Group, rntemafional Centre for SeHieoicnt of investment Disputes, "Abturt TCISD", ivaikbie at (RA-58).
140 Id
141 Request for Arbitration, ¶ 20 (“Respondent's enment io ihs submission of ths dispute referred to in this Request to the Centre fs contained In Artich W qf the Treaty!”).
142 RA-2.
[Page 48]
164. Interpreted according to its ordinary meaning, the consent to arbitrate expressed in Article 10 does not encompass claims arising under toe 1961 Treaty. Article 10 contains no reference to the 1961 Treaty. Instead, Article 10 refers to "[d]isputes concerning investments' and “investments* is a defined term hi the Treaty. The use of this defined term in Article 10 signifies that the state parties intended that the scope of Article 10's application would be confined to claims in connection with fee BIT.
165. In any event, it stands to reason that, if the signatories had intended that an investor could arbitrate disputes both arising under a separate treaty and in respect of which the investor would otherwise have no right to arbitration, they would have done so in the clearest possible terms.
166. Respondent's interpretation of Article 10 is consistent with die object and purpose of the Treaty. In entering into the BIT, the slate parties intended to replace the obligations undertaken in the 1961 Treaty with new ones. It would be contrary to the object and purpose of the BIT if ua Waiter Ban suggests, its dispute resolution provision could be invoked by an invertor to compel toe arbitration of claims based on treaty obligations that the BTT had replaced.
167. Bven If the Tribunal were to find that the meaning of Article 10 is ambiguous as to whether it envelops claims based on toe 1961 Treaty, toe Tribunal must apply the in dishio mitins principle, which specifies that, if the meaning of a provision is unclear, the meaning which is less onerous to toe state assuming an obligation is to be preferred.143 The less onerous meaning of Article 10 is that it does not apply to disputes arising under separate treaties.
143 SIT Robert Jennings anii Sir Arthur Watts, "OppraheWa EntenjatJonaj Law” (9th ed., 1992) § 633 (RA-33).
[Page 49]
168. Applied in the particular contest of claims arising under the 1961 Treaty, it is apparent that this interpretation of Article 10 is less onerous to the state because it means that investors are not given a right to arbitrate that they otherwise would not have.
169. Accordingly, the interpretation of Article 10 that limits the right of investors to compel arbitration to disputes that are related to the BIT must be preferred.
170. This interpretation is moie reasonable in light of the meaningful difference between the dispute resolution provisions in the two treaties. Without question, the state's dispute resolution obligations are more onerous under the SHY hi such circumstances, if the state parties had intended in the BIT to take on more obligatitms tor claims based on the 1961 Treaty than would otherwise exist under that treaty, then they would have said so expressly. They did not, and the Tribunal should accordingly find that It has no jurisdiction over claims based on the 1961 Treaty.
171. As summarized in the tabic on page 9 of this memorial, Walter Bau alleges feat the Respondent has violated obligations tinder fee BIT and the 1961 Treaty to guarantee:
“fair and equitable treatment; not to impair the management, atfe, enjoyment or disposal of the Investment by arbitrary or discriminatory measures; full and most protection and security; compliance with the treaties as regards the standard for expropriation and measures tantamount to expropriation of investments; observance of other obligations the Respondent has assumed with regard to the investment; and national and Most-Favoured-Nation-Treatment.”144
172. The Tribunal must be satisfied that the claims and facts presented are at least capable of establishing a breach of the treaties.145
144 Request &r Arbitration, ¶ 130.
145 See Ethyl Corp v. Government of Canada (Award on Jurisdiction) (34 June 1998] NAFTA/UNCITRAL Arbitration ¶ 61, reprinted in (1999) 3S ILM 708 (finding that the claimant's allegations were sufficient to
[Page 50]
173. As the tribunal in UFS v. Canada stated:
“[The Tribunal] must conduct a prima facie analysis of the NAFTA obligations, which UFS seeks to invoke, and determine whether the facts alleged are capable of constituting a violation of these obligations.”146
174. Following the ruling of the ICJ in the Oil Platforms case, the ICSID Tribunal in SGS v. Philippines held In its decision on jurisdiction that, when assessing whether a tribunal has jurisdiction rations materiae in respect of a dispute alleged to he arising under a treaty, the tribunal "must ascertain whether the violations of the [treaty] pleaded by [Claimant] door do not jail within the provisions of the Treaty and whether, as a consequence, the dispute is one which the [Tribunal] has jurisdiction rations tnaleriae to entertain' pursuant to the treaty's dispute resohiticai provisions.147
175. The Tribunal said: "Is is not enough for the Claimant to assert the existence of a dispute as to fair treatment or expropriation. The test forjurisdiction is an objective one and its resolution may require the definitive interpretation of the treaty provision which is relied on.148
146 establish prima ficie ike requirements of Article 1116 to establish the jurisdiction of this Tribunal”) (8A-59).
147 Utrded Rarcel Service qfAmerica Inc, v. Government qf Canaria (Award an Jurisdiction) (22. November 2002) NAJFTA Chaffer 11 Arbitration, available at ¶ 33 (HA-60) (unitaldci2&d original empha underline emphasis added). Sze oho Pan American Energy LLCt and BP Argentina Exploration Co v. Argentine Republic awl BP America Production Co., et ai u Argentine Republic (Decision art Preliminary Objections) (27 My 2006) ICSID Cuae >tos* ARBA53/13 and ARB/04/8 ¶ 31 ("{The question is [sic] here whether the Cfaiiaanls' chritrts, if well founded a matter to he examined at the fallowing stage, may denote violations of the BIT and therefore fdl within the Centre's jitfisritctton and this Tribunal's Competence inzder the relevant provisions qftli& BIT andArticle 25 qf the ICSID CoT&enfiGflJ*) (RA-61).
148 SGS Satiate GinSrafe de Surveillance SA. v. Republic of the Philippines, (Decision qf the Tribunal an Objections to Jurisdiction} (29 January 2004} ICSID Cast No. AJ3B/D216 ¶ 26 available at (RA-3S, quoting Gsre Cancetrting Oil Platforms (Islamic Republic of Iran V. United Slates) (1996) ICJ Rep 803 ¶ 10 (RA-62), and ailing Cose Concerning Legality of Use qf Farce (Yugoslavia vr Belgium) (Request for the Indication of Provisional Measures) (2 June 1999) ICJ Rep 124 ¶ 137 (RA-52J)..
SGS v. Philippines, Id. ¶ 137 (RA-38).
[Page 51]
176. The Salim Tribunal's decision on jurisdiction supports tie SGS-Philippines Tribunal's conclusion that, in order to assess whether claims fall within the terms of a treaty, it is not sufficient for a claimant merely to say so. The SalM Tribunal held that it did not have jurisdiction over treaty claims where, “after having prtsentpd the contractual claim m detail, the Claimant{] [cited] the articles of the JUT which, in [its] opinion, had been violated without giving any further explanation.149
177. As in Salim, the Claimant here Jails far short of the standard for jurisdiction radons mottriat. (It must also be recalled that Claimant had a second opportunity to remedy tills when invited by the Tribunal to clarify its claims.)
178. First, although Claimant rattles off in its pleading various treaty provisions that Respondent has allegedly violated,150 in Paragraph 130Å of the Request Sir Arbitration-in which Walter Bau links Respondent's alleged acts and omissions to the specific treaty obligations supposedly breached – Claimant neglects to particularize all of its claims. Specifically, Claimant fails to aver any factual basis whatsoever &r claiming violation of Rjespaodcrct's obligations under Articles 3{1) and £2) of file BIT not to treat Claimant's investment less favorably than investments of Thailand's own nationals or companies or investments of nationals or companies of any third state. As Claimant's pleading is
149 Safini Costndtori S.pjL and Italslrade EpA v. The Hashemite Kingdom of Jordan, (Decision on Jurisdiction) (29 November 20G4j ICSID Case No. ARMEZ/13 ¶ 161 (BA-45). See also Ambafizlos Case (Greens v. United Kingdom) (Judgment on the Obligation to Arbitrate) (19 May 1953) ICJ Rep 10, 18 ("Ifte Court must determine whether the arguments advanced by the Hefenlc [sic] Government in respect of the treaty provisions on which the Ambotielos claim is said to be based are of a suffkientfy plausible character to warrant a conchtsion that the claim is based on the TyeatyP} (RA-63); Case Concerning Legality of Use of Force (Yugoslavia v. Belgium) (Request jbr the Indication of Provisional Measures} (2 June 1999) ICJ Rep 124 ¶ 3S) (win order to determine even primafacie, whether a dispute within the mmmng of Article IX of the Genocide Convention ext&M the Court cannot limit itself to noting that one of the Parties maintains that the Convention applies, while the other denies It; [It] must ascertain whether the breaches of the. CoTrvenfton alleged by Yugoslavia HFs capable offaffing within the provisions of that instrument and whether, as a consequence the dispute is one which the Court kps jurisdiction raltcuie material to entertain pursuant to Article DC) (RA-52).
150 See Request for Arbitraifcmj ¶¶ 323-29.
[Page 52]
deficient in this respect, there is no jurisdiction rations materiaa over claims based on Arfcies 3(1) and (2) of the BIT.
179. Second, as concerns Walter Batris other claims, Claimant does nothing more than describe Respondent's alleged acts and omissions and cite tlie treaty provisions that It alleges Respondent violated.151 In abort, Waiter Ban alleges legal conclusions that Respondent breached the treaties without saying how Respondent breached them. The Tribunal need only look to Paragraphs 128-13GA of the Request for Arbitration, in which Claimant specifies Its treaty claims, to confirm that this is the case. Claimant's Mure to particularize the legal basis for its claims constitutes a lack of jurisdiction ration# materiae.
180. Third, the facts pleaded by the Claimant, if proven to be true, arc not capable of triggering Respondent's obligations under the treaties..
181. Although Claimant vaguely alleges that Respondent expropriated its investment through acts and omissions that devalued DMT, as a matter of law, any such acts and omissions would not constitute expropriation unless Walter Bau was substantially deprived of the economic value, use or enjoyment of its investment
182. Walter Ban's complaints of deprivation center around an assertion that as a result of the Respondent's alleged acts and omissions, the anticipated return on Walter Ban's investment has declined.152 With mare than fifteen years left in the life of the
151 Id, ¶¶ 128-130A.
152 See Id, ¶ 12.
[Page 53]
Concession, Walter Bau cannot seriously contend that It has been substantially deprived of the economic value, use or enjoyment of its investment153
183. Since it is dear on the foce of the Request for Arbitration that Walter Ban has not suffered a substantial erosion of the value of its shareholding in DMT, Walter Ban cannot make a case for expropriation.
184. To the extent that, despite Walter Bau's failure to particularize the legal basis for its claims, Respondent can discern from the Request for Arbitration any rational cohnectian between the alleged acts and omissions and Walter Bail's claims, it appears that the alleged treaty breaches stem almost entirely foom DOH's alleged performance or non-perfbmatficc under the Concession Agreement (as amended by MoAİ and MoA2) between DOH and DMT.
185. In foci, Claimant effectively concedes in its Request for Arbitration that alleged contractual breaches are the essence of its complaint. For example, Claimant characterizes attempts to seek redress for Respondents alleged wrongful conduct as a contractual matter, and even characterizes attempts to negotiate settkuusnt as being contract-not treaty - based:
“UDMT has persistently sought to negotiate with the Respondent for remediation of its situation as it is entitled to do under the Concession Agreement. Starting from 2001, Walter Sou sought in parallel and in good faith to seek a commercial solution with the Respondent.”154
186. Claimant describes Respondent's alleged wrongful conduct, first and foremost, in terms of breach of contract:
153 Id, ¶ 63(b)(iii).
154 Id, ¶ 14.9 (emphasis added).
[Page 54]
“As will be seen from Section D below, the Respondent has persistently breached its obligations to DMT under the Concession Agreement and other contracts.”155
187. Claimant contends that every one of Thailand's alleged breaches (summarized in ¶ 13GA of the Request for Arbitration) amounts to a failure by Thailand “to fulfil obligations it has entered into under the Concession Agreement.”156
188. Yet, while Walter Ban attempts to hang its treaty claims upon breaches of contractual obligations, it curiously foils to plead focte sufficient to establish such breaches. In particular, Claimant does not aver how each of Respondent's alleged acts and omissions breached a specific team of foe Concession Agreement. Claimant has not even produced signed copies of the Concession Agreement (WB8), MoAl (WB1G) or MQA2 (WB16). Primajocie, then, Claimant has not pled claims and foots capable of establishing breach of the 1961 Treaty or BIT (Respondent refers to the 1961 Treaty purely to demonstrate that Claimant's case foils on any analysis of jurisdiction).
189. Even if Waiter Ban had properly pleaded the elements of a cause of action for breach of contract, there would still be no jurisdiction. Claimant cannot state a cause of action under the treaties by merely recasting breach of contract claims as treaty violations. It is well-established in investor-state jurisprudence that whether there has been a treaty breach and whether there has been a breach of contract are different questions.157
155 Id (emphasts added).
156 See Id, ¶ 13GA. [Xftiiilj (bXHD/eDOii), (dXIHI (e)(tn), COM {emphasis added).
157 See Compankf de Aguos del Acarqulfc HA and Vhsjtdl Universal v. Argentine Republic (Decision cm Anmdmefit) (3 My 2002) 1CSED Cage No. AP3/97/3 ¶ 76 (“[w]hether there has been a breach of the BIT and whether there has been a breach of contract are different questions. Each of these claims will be determined by reference to its own proper or applicable law-in the case of the BIT, by international law; in the case of the Concession Contract, by the proper law of the contract.”) {RA-6^}; Solftri Costiʼtitton S.p.A. and ftdistrade H.p.A. v. The Hashemite Kingdom qf Jordan, {Decision an Jurisdiction) {29 November
[Page 55]
190. The Tribunal does fiat have jurisdiction over purely contractual claims which do not amount to a treaty violation.158 In ihe words of the Aisnulmenrt Committee îm Vivendi v. Argentina:
'LA treaty cause of action is not the same as a contractual cause of action; it requires a clear showing of conduct which is in the circumstances contrary to the relevant treaty standard.159
191. Accordingly, in order to satisfy the Tribunal 1ha± Claimant's allegations are the sort of allegations capable of triggering Respondents treaty obligations, Walter Ban must establish that the treaties specifically protect investors against contractual breaches by the state, and that Waiter Bail is entitled to any such protection under the treaties.
192. In this regard, Claimant only pleads that Respondent had a duty to observe obligations “stemming from the Concession Agreement* in accordance mth Article 7(2) of the BIT and Article 7 of the 1961 Treaty.160
193. The question thus arises whether Walter Ban can elevate alleged contract claims to the level of treaty claims by virtue of Article 7(2) of the BIT and Article 7 of the 1961 Treaty, Is. whether each of these jtfovJsions is tantamount to a so-called Umbrella" clause that places contracts under the protection of the Treaty.
158 5004) ICSID Case No. ARMIQlfll ¶ 154 ("[N]ot any breach qf an tnvoatment contract could be regarded as a breach of & BIT') (RA-45); SGS Sodete Generate de Surveillance SA. v. Islamic Republic efPakistan (Decision on Objections to Jurisdiction) (6 August 2DW) ICSID Case No, AJ&B/Q1/13 ¶ 1G7 {a violation of a contract entered into by a state with sit investor of another state, is not, by fadf, a violation of international kw) (RA-G5).
159 See Porn American Energy LLQ and BP Argentina Exploration Co. v. Argentine Republic andBP America Production Co., e& at. V. Argentina Republic (Decision on Preliminary Objections} (27 luty 2006) ICSID Case NG5. AKB/G3/13 and ARB/04/8 ¶ 91 ("Tjfie Tribunal has onlyJurisdiction aver treaty claim [sicj, and cannot entertain purely contractual claims which do not amount to a viofaiitm of ihe BIT'') (RA-61).
160 Campania de Agtfas del Aconqmja 3A and Vfventft Unprsal v. Argentine Republic Decision on Annulment) (3 July 2002} ICSID Case No. ARBA>7£ ¶ 113 (RA-54).
See Bequest for Arbftiratlcin, VI J2S(&X 129(d).
[Page 56]
194. Article 7(2) of the BIT provides, in relevant part, that "[e]ack Cottfraeting Party shall observe any other obligation it has assumed with regard to investments in its territory by investors of the other Contracting Party.161 Similarly, Article 7 of the 1961 Treaty specifies, in relevant part, that “*[e]ach Contracting Party shall observe any other obligation it may have entered into with regard to investments within its terrifoiy by nationals or companies of the other Contracting Patty.”162 As there is no substantive difference between these provisions (and because under any view the 1961 Treaty does not apply), Respondent henceforth discusses only Article 7(2) of the BIT.
195. As mentioned above (see ¶ 102), pursuant to Article 31 of the Vienna Convention, Article 7(2) of the BIT must be interpreted “in accordance with the ordinary meaning to be given to the terms ofthe treaty in their context and in the light of its object andpurpose.”
196. Interpreted according to its ordinary meaning, in context and in the light of its object and purpose, it is apparent that Article 7(2} of the BIT does not elevate contractual breaches to treaty breaches.
197. First, Article 7(2) does not refer to"contracts” or “contractual obligations'.
198. Second, Article 7(2) is separated from the substantive obligations undertaken by the state Parties in Articles 2 to 5 of the BIT, concerning admission, protection and treatment of investments, national and most-favoured-nation treatment, protection and compensation, and free transfer. These substantive obligations are grouped together and marked-off by Article 6 (entitled “Subrogation”). The separation of Article 7(2) from those obligations
161 VBL
162 WB2.
[Page 57]
indicates that it w not meant to give rise to a substantive obligation like those set out in Articles 2 to 5 of the BFT.
199. The reasoning of the ICSID Tribunal in SGS-Pakistan, which was confronted with a very simitar structure and sequence of provisions in flic SwIss–PaJdsten BIT is apposite:
"[g]iven the above structure and sequence of the rest of the Treaty, we consider thatt had Switzerland and Pakistan friended Article 11 to embody a substantive "first order* standard obligation, they would logically hove placed Article 11 among the substantive "first order* obligations set out in Articles 3 to 7. The separation of Article 11 fiom those obligations by the subrogation article and the two dispute settlement provisions (Articles 9 and 10), indicates to our mind that Article 11 was not meant to project a substantive obligation like those set out in Articles 3 to 7, let alone one that could, when read as SGS asks tis to read it, supersede and render largely redundant the substantive obligations providedfor in Articles 3 to 7.”163
200. For the foregoing reasons, Article 7(2) of the BIT cannot be construed 35 an "umbrella" clause that elevates contractual breaches to the level of treaty violations.
201. This interpretation of Article 7(2) follows from the provision's plain and ordinary meaning. If however, the Tribunal considers that the provision is undiearj the Tribunal must also reach this interpretation of Article 7(2), in accordance with the in duhto minus principle of treaty interpretation.164
202. In the event that the Tribunal finds that Article 7(2) Is an umbrella clause, the Tribunal would still lack jurisdiction over Walter Baniys asserted breaches because Article 7(2)
163 SGS SocisCe Generate,ds SiirvefUance S.A v. Islamic Republic of Pakistan (De&lsfon on Objections to Jurisdiction} (6 August 2003) EC3ID Caae No. AKB/Q1/13 ¶ J70 (RAH55). See also Joy Mining Machinery Limited v. Ar&b Republic of Egypt (Daoisbn on Jurfocfleibn) (6 August 3004) ICSID Case Ha. ARB/03/11 ¶ 81 (expressing doubt as to whether fli* so-called umbrella clause could elevate contractual breaches to treaty breaches even if there was state interference with the contract, given that the clause was not inserted very prominency in the treaty) (RA-66).
164 Sss ¶¶ 112-113 above.
[Page 58]
applies only to obligations that Thailand assumed “with regard to [the] investment” i.e., with regard to Walter Ban's shares in DMT. Stated simply, Walter Ban cannot overtook feat it is not a party to the contracts it complains have been breached.
203. Because Arttote 7(2) expressly applies only to obligations assumed “with regard to [the] imestment” toe Tribunal must determine the scope of Article 7(2) with reference to the definition of “investment” in Article 1 of the BIT. In defining “investment,” Article 1 distinguishes between “shares of companies and "business concessions tinder public law" as different types of investment.
204. Walter Ban's investment within the meaning of the Treaty was toe purchase of shares in toe company DMT, not the purchase of a business concession.165 To toe extent that Article 7(2) is an umbrella clause (it is not), it follows from he plain wording of Article 7(3) feat Claimant can invoke the clause only to respect of obligations assumed with regard to its shares, such as obligations assumed under a shareholder agreement (although erven here, other fundamental barriers to a treaty claim apply).
205. But as shown in Section 33LD.2, Walter Ban apparently contends that the alleged breaches in the Request for Arbitration constitute breaches of the Concession Agreement (or MoAl or MoA2) between DOH and DMT. Walter Ban tons complains about alleged breaches of contractual obligations assumed wife regard to DMT, not contractual obligations assumed with regard to Walter Ban's shares.
206. Apparently, toon, Walter Ban wants toe Tribunal not only to find that Article7(2) of the BIT confers jurisdiction over contractual claims (it does not), but also that it protects
165 See ¶ 81.
[Page 59]
strangers ID contractual obligations undcrfcakeri by the state from any breach of those obligations.
207. It is unreasonable to assume tbat Thailand would open itself up to contract-based claims by non-parties to those contracts.
208. Tli® recent decision of the ICSID Tribunal in Azurix v. Argentina accords with this view. In that case, the Tribunal rejected the claimant's argument that it could submit claims for breach of a concession agreement under Article Il(2)(c) of the US-Argentina BIT (stating that “[e]ach party shall obxeme any obligation it may have entered into with regard so Investments”}. It did so because the claimant was noE a party to the agreement. In finding that there was no “obligation with regard to an investment," tire Tribunal reasoned as follows
"None of the allegations made by the Claimant refer to breaches of the Province in relation to Axurix itself. The obligations undertaken by the Province in the Concession Agreement were undertaken in favor of ABA not Azitrix. As the Respondent itself has asserted, Argentina is not party to the Concession Agreement, and ABA is not party to these proceedings. Therefore, the underlying premise of Article II(2c) of the BIT – that a party to the BIT has entered into an obligation with regard to an investment – is inexistent. Neither the Respondent nor the Province, as a political subdivision of the Respondent, has entered into a contractual relationship with Amrix itself.”166
209. The Tribunal stated further:
“While Aztirix may submit a claim under the BIT for breaches by Argentina, there is no undertaking to be honored by Argentina to Azurix other than the obligations under the BIT. Even if for argument's sake, it would be possible under Article II(2)(c) to hold Argentina responsible for the alleged breaches of the Concession Agreement by the Province, it was ABA and not Asurix which was the party to this Agreement.”167
166 Anurex Cvrpm v. Argeiftire RepnbHe (Award) (14 July 2006}ICSID CkaeNo. ARBA1/12 ¶ 52 {RA-67).
167 Id, ¶ 311 (RA-67).
[Page 60]
210. Hers, too, Claimant is not party to flic Concession Agreement allegedly breached. Accordingly; jurisdiction over any claims under Article 7(2) based on alleged bleaches of the Concession Agreement should be denied.
211. Even if Article 7(2) were to elevate contractual claims to treaty claims (which is denied), and even if Walter Ban were entitled to sedt redress tor breach of contractual obligations owed to DMT (which is also denied), the Tribunal would still not have jurisdiction over Respondent's alleged contractual breaches to the extent that the alleged breaches are a consequence of the stale acting merely as a contracting party, as opposed to as sovereign authority.168
212. This view has been adopted by various international tribunals in determining whether claimant's breach of contract claims could constitute treaty claims.
213. For example, while the ICSID Tribunal in Joy Machinery* Limited v. Arab Republic of Egypt noted that a discussion of the alleged "umbrella" danse was not necessary for the outcome of the case, it conducted, in principle, that such a clause could not have flic eflfeot of transforming alt contract disputes into treaty disputes "unless of course there
168 See Stephen M. Schwebe^, “On Whether the Breach by a State of a Contract with an Alien is a Breach of International Law" reprinted in "Justice in International Law: Selected Writings of Stephen M. Schwebel" (1994) 425, 431 (“[T]here is more than doctrinal authority in support of the conclusion that while mere breach by a State of a contract with an alien (whose proper law is not International law) is not a violation of international law, a 'non-commercial' act of a Sate contrary to such a contract may be.”) (RA-65); Restatement (Third) of Foreign Relations Law of the United States (1987) § 712 (note 5) (“... international law is not implicated if a state repudiates or breaches a commercial contract with a foreign national for commercial reasons as a private contractor might, e.g., due to inability of the state to pay or otherwise perform or because the performance has became uneconomical ...” (RA-69; emphasis added).
[Page 61]
would be a clear violation of the Treaty rights and obligations or a violation of contract rights of such a magnitude as to trigger the Treaty protection”169
214. The Tribunal clarified: A basic general distinction can be made between commercial aspects of a dispute and other aspects involving the existence of same form of State Interference with the operation of the contract involved”170
215. This view was also taken by the ICSID Tribunals in Salmi v. Jordan and Impreglio S.paL v. Islamic Republic of Pakistan. The Impreglio Tribunal quoted the Salmi Tribunal with approval as follows:
“[i)n order that the alleged breach of contract may constitute a violation of the BIT, it must be the result of behaviour going beyond that which art ordinary* contracting party could adopt. Only the State in the exercise of its sovereign authority ('puissance publique') and not as a contracting party, may breach the obligations assumed under the BTT.”171
216. hi the present cases many of the alleged acts or omissions that make up Walter Barr's claims concern conduct which, on hs face, was merely commercial in character.
217. For example, any other contracting party could have stood in Respondent's place and delayed the opening of the Tollway by failing to procure land needed for flyovers and ramps,172 or rejected requests by DMT tỏ negotiate under the contract. And certainly any other contracting party could have disregarded Walter Ban's interests as a minority
169 Joy Mixing Machinery Limited v. Arab Republic of Egypt (Decision cm Jurisdiction} (6 August 2004) ICSID Case Ho. ARBA13/11 ¶ 81 (RA-G6). Notably, the Jvy Mining Tribunal did not accept dint the so-called umbrella clause could elevate carflractual breaches to treaty breaches, even if there was state interference with the contract. Sae ld., ¶ 81 (observing that the clause was not inserted very prominently in the treaty).
170 Id, ¶ 12 (RA-6A).
171 Impreglio S.p.A. v. Momic Rspvblic of PaHstaĄ {Decision ax Jurixdftribn) (22 April 2005) ICSID Case No. Aft£tf>3/3 ¶ 260, available at (RA-37); Saltt CostrutlariB.pmA. and ItaLstrada S.pA. v. The Ef&sh&nite Kingdom of Jordan (Deetston an Jvrisdkitimi) (29 November 2004) {CS1D Cttse No. AEB/02/13 ¶ 154 (RA-45).
172 See Request for Arbitration, ¶ 130A(a).
[Page 62]
shareholder in DMT by its conduct as shareholder and though the organ of DMT.173
218. It is for Claimant to establish that the facts upon which it relies, if proven, could be capable of triggering Respondent's treaty obligations. Insofar as the Request for Arbitration fails to allege that Respondent committed the alleged wrongful conduct in its capacity as sovereign, the Tribunal lacks jurisdiction rations materiae over at least the following alleged acts and omissions:
acts and omissions causing delay to the opening of the Toilway;174
failing adequately nr at all to respond to DMT's requests to adjust the toll rates to light of changes in the economic situation (in accordance with paragraph 25.2 of the Concession Agreement);175
foiling to enter into negotiations with DMT to remedy negative effects set out in paragraph 25.2 of die Concession Agreement;176
expbiting DMT’s difficulties. to procure or effect amendments to the original conditicfrtf of the Concession by virtue of MoA2 and the Share Purchase Agreement;177
failing to arrange the Soft Loan;178
imposing or otherwise effecting a reduction of foe tolls;179 and
173 See Id, ¶ 113GA(f).
174 Id, ¶ 130A(a).
175 Id, ¶ 1fnOA(b).
176 Id, ¶ nnOA(b).
177 Id, ¶ tnOA£b).
178 Id, ¶ P1130A(b).
179 Id, ¶ 30A{d).
[Page 63]
disregarding Waiter Bmf's interests as a minority shareholder in DMT.180
219. If, despite the above, the Tribunal finds that Waiter Ban is entitled to seek redress under Article 7(2) of the BIT for contractual obligations owed by DQH to DMT, Walter Bau should be bound by the effect of amendments to the Concession Agreement and other relevant agreements entered into by DMT.
220. Claimant pleads, inter ALIOE, that alleged acts and omissions causing delay to the opening of the Toilway and die charging of tolls, which allegedly occurred between May 1993 and July 1996, constituted a breach of obligations that Thailand assumed under the Concession Agreement.181
221. Claimant also pleads that "[b]y its terms, MoA 2 settled all claims arising under the Concession Agreement before die date of MoA 2.”182
222. If Claimant can seek redress under Article 7(2) for the DGH's alleged violations of the Concession Agreement, it should not be permitted to seek redress tor any alleged violations
(a) arising prior to 29 November 1996, the effective date of MoA2, because MoA2 expressly settled any violations of the Concession Agreement pre-dating the MoA2;183 or
180 Id, ¶ 13GACO.
181 Idr ¶ 13QASa)(ii), ¶ 14.1 (compensation and opening of the Tollway was delayed from May 1993 to July 1996).
182 Id., ¶ 64(a).
183 Id.
[Page 64]
(b) based cm “moving or directing or approving the move of all scheduled air traffic from Don Miiong airport to the new Suvarmbbum International Airport and the consequent downgrading of Don Mvang airport," because in MoAZ, DMT expressly wived the right to bring any claims related to the change in use of the Don Mnang Airport.184
223. In addition, Walter Ban should not he permitted to assert any claims that its investment was expropriated by Respondent, because, in 199S, DMT expressjy waived its rights to any guarantee and protection that the "State [would] riot nationalize the activity of the promoted person.”185
224. Article 21{4) of the UMCITRAL Rules states, in part, that “[i]n general, the arbitral tribunal should nde on a plea concerning itsjurisdiction as a preliminary question!186
225. Efficiency, i.e., the cost in time and money to the parties and the practicality of bifurcation, is the primary factor in determining whe&Er a tribunal should nde on jurisdictional objections as a preliminary matter.187
184 Size MoA2, Art. 14.2 (“Any change in the use of the Bangkok Airport ... shall not be regarded as an act in competition to the concession highway according to Clause 25.2 (d) of the Existing Tollway Concession Agreement or on act of the Government which causes Vehicle loss”) (WHltf! See also DMT'S Assessment of Financial Damages Suffered by The Company and Requested Remedies fer Restoring Its Financial Position in Accordance wilh Clause 25.3 of the Taltway Concession Agreement, dated 31 May 2000 (acknowledging tiiat DMT agreed not to use as reasons for compensation claims under the Concession Agreement "the relocation of flight operations front Don Mining Airport to the new airport of NongNguHao”) (RA-70).
185 See Letter from DMT to fho SecjeEsry General of the Board of Investment dated 25 February 1998 (“The Company hereby conjoins the wafver of the rights particularly io the extent of Sections 43-46 if the Investment Promotion Act B.E. 2520 [1977].") {R-10}; Investment Promotion Act B.E 2520 (as amended) § 43 (“The State shall not nationalise the activity of the promoted person”) (RA-70).
186 RA-1.
187 See David D. Caron, Lee M. Capfenp Matfi PeHompUE, The UKdTRAL Arbitration Rutes: A Commentary¹ {2006) 450–51 [efficiency is the primary feeler in determining whether a tribunal ahouidrufe on pteas concerning jurisdiction aa a prdrminary matter) (RA-71); Glamis Gold v. United States of America {Procedural Order No. 2) (31 May 2005) UKCriRAL/NAFTA Chapter 11 Arbitration ¶ 11{'In examining
[Page 65]
326. The rationale of this rule lies in a respondent's right to see that it is not unnecessarily dragged into an international arbitration; it also demonstrates thnt consent is the basis for jurisdiction.188
227. Thus, although the Tribunal has the power to join jurisdictional objections to the merits of a dispute:
“It does not make sense to go through lengthy and costly proceedings dealing with the merits of the case unless the tribunal's jurisdiction has been determined authoritatively. On the other hand, some jurisdictional questions are so intimately linked to the merits of the case that ii is impossible to dispose of them in preliminary form.”189
228. That is not the case here.
188 the drafting history of Article 21(4} of the UNICTRAL [sic] Rules, the Tribunal finds that the primary motive for the creation of a presumption in favor of the preliminary consideration of a Jurisdictional objection was to ensure efficiency in the proceedings,”} (RA-72); Ohaffari v. Islamic Republic of Iran (Order dated 2 February 1998)} (Case No. 963) Case No. 96S% Dissenting Opinion of Judge KhaHEIau (siied 10 February 19S3), reprinted in (1988-1) 18 Iran-DS CTR 79 (“The Tribunal has demonstrated that by following a general rule in international proceedings, namely the necessity of separating preliminary objections from the merits—it serves the parties from making an unnecessary Waste of energy, time and expense.*) (RA-73); Starred Housing Carp, y. Islamic Republic of Iran, (Interlocutor Award No. ·ΙΤΙ 32-24-1) (19 December 1983}, reprinted in (1934-1II) 7 Iran-US CTR 119, 144 at 155 (stating that issue of standing must be considered as a preliminary Issue in accordance with Artiste 21(4), “so as to take a decision as to its lack of jurisdiction before burdening the Parties with any further trouble and expense”) (RA-74); Untied Parcel Service ofAmvrica Inc, v. Government of Canaria (Award on Jurisdiction) (22 November 2002} NAFTA Chapter 31 Arbitration available at ¶ 31 {"This power [undtr Article 21(4}] both supports Jhs efficient and effective administration if the mbitral process and reflects the fad that parties, notably State parties, to arbitration processes are subject to jurisdiction only to the extent they have consented”) (RA-60).
189 See Ghaffari v. Islamic Republic of Iran (Order dated 2 February 1998}) (Case No. 963), Cast No. 968, Dissenting Opinion of Judge KhflHKan (signed 10 February 1998), reprinted in (198S-1) 18 Iran-US CTR 79 (JRA-73), quoting V.S. Maui, "International Adjudication: Procedural Aspects* (1580) 123-24 (“[Although] one party has a right to have its claim recognised by a competent tribunal, the other party has an equal right to see that it is not unnecessarily dragged into an international litigation before a tribunal before which its claim is either non-receivable or otherwise barred. Moreover, a preliminary diction procedure demonstrates that the basis of international jurisdiction is the sovereign consent of States”}) (RA-75).
Christoph H. Sflhreuer, "The ICSID Convention: A Commentary” (2001} 545 (considering Article 41 of Ehe ICSID Convention which provides in relevant part that with respect to a question on jurisdiction a Tribunal "shall determine whether to deaf with it os a preliminary question or to join it to the merits of the dispute.") {RA-3&).
[Page 66]
229. First, Respondent has submitted virtually no additional evidence to substantiate its jurisdictional challenge, relying Instead on the plainly obvious deficiencies in Claimants pleading.
230. Second, Respondent's jurisdictional objections are not dependent on testimony or other evidence that can only be obtained through a full hearing of the merits; rather, they can be resolved largely on the face of the Request for Arbitration and according to legal argument by the parties.
231. Third, a preliminary ruling by the TVibuml on Respondent's jurisdictional objections (ihr example, on the approval requirement) would be case-dispositive.
232. Bifurcation is warranted in these circumstances.190
233. Thailand requests that the Tribunal order Claimant to bear all costs of arbitration.
234. Article 9(5) of the BIT generally provides that each party shall bear athe cnxt of its cwn member and of its representatives in ike arbitration proceedings; the cost of the chairmens and the remaining casts shall b& borne in equal parts [by the parties]f howoveTj the “arbitral tribzmal may make a deferent regulation concerning costs.191
190 Sen Schreuer, ¶ 547 {'The need for a joinder to the merits is apparent where the answer to the jurisdictional questions depends on testimony and other evidence that can only be obtained through a full hearing of the case") (RA-39); id at 345 (treatment of Juriedietional issues as preliminary questions is standard procedure In ICSID practice). See also, e.g, Methanex Corp. v. United States of America (Partial Award on Jurisdiction) (7 August 2002) NAFTA Chapter 11 Arbitration ¶ 160 (concluding that the "exceptional procedure" of joining jurisdictional issues to the merits may be appropriate under Article 21(4) 'where jurisdictional issues are intertwined with the merits, it may be impossible or impractical to decide the former without also hearing argument and evidence on the latter”) (RA-76; emphasis added); Ethyl Corp. v. Government of Canada (Award on Jurisdiction} (24 June 1998) NAFTA/UNCITRAL Arbitration ¶ 54, reprinted in (1999) 38 ILM 708 (determining certain jurisdictional objections as a preliminary question "in adherence to Article 21(4)“} (RA-59).
191 Article 10(2) of the BIT, which pertains to the settlement of disputes between a Contracting Party and an Investor specifies that Article 9(5) of the BIT, which pertains to the settlement of disputes between the Contracting Parties, shall be applied mutatis mutandis (WB1).
[Page 67]
235. fn agreeing to arbitrate their dispute under tie UNdTRAL Rules, the parties agreed to a different allocation of costs than that according to the general principle in Article 9(5) of the BIT. Pursuant to Article 40 of the TJNCJTRAL Rules, Sic default allocation of the "casts of arbifratinn' is that they shall bo home by the unsuccessful party.192
236. The “costs of arbitration are defined in Article 3B of the UNCITRAL Rules as including: (a) flic fees of each arbitrator; (b) the travel and other expenses incurred by the arbitrators; (c) the costs of expert advice and of other assistance required by the Tribunal; (d) the travel and other expenses of witnesses, provided such expenses are approved by the Tribunal; (e) the reasonable costs for legal representation and assistance of the successful pariy; and (f) any fees and expenses of the appointing authority.193 The Tribunal is obliged to fix the costs of arbitration in its award.
237. Thailand has incurred considerable expense defending itself against unmeritoriotts clalm3 brought by a bankrupt company desperate for cash.194 In accordance with Article 40 of the UNCfTRAL Rules, Thailand respectfully requests that the Tribunal issue an award requiring Claimant to compensate Thailand for all costs of arbitration.
192 Article 40 of the TIWCITRAL Rules provides, irt relevant part;
“{!} Except os provided in paragraph 2, th& costs of arbitrate shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case.
(2) With repeat to the costs of legal representation and assistance referred to im article M paragraph (e), ths arbitral tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between ths parties if it determines that apportionment is reasonable.”
Article 33{$) Ffiftors fl> the “costs fur legal representation and assistance qf the successful party if such costs were claimed during the arbitral proceedtngs, and only to the extent that the arbitral tribunal determines that the amount of such costs Һreasonable" (RA-1; empfrasSs added).
193 Id, Arikde 3S (RA-1).
194 See Respondent's Application for Security for Costs dated 30 June 2006, ¶¶ 34-29.
[Page 68]
238. Claimant reserves the right to make submissions quantifying the costs of arbitration at a later stage of these proceedings.
239. For all the reasons set forth above, the Tribunal should resolve Thailand's jurisdictional objections as a preliminary issue, Walter Ban's claims should be dismissed in their entirety and Walter Ban should bear all costs of arbitration.
Respectfully submitted on 2 October 2006
WHITE & CASE LLP
Signature
Michael A. Polkinghorne
Leon Ioannou
Counsel for Respondent
The Kingdom of Thailand
[Page 69]
| Exhibit No. | DESCRIPTION | LOCATION (PARAGRAPH(S)) |
|---|---|---|
| Exhibit R-7 | Representative Certificates of Admission dated between 27 October 1972 and 20 February 1991 issued by the Thailand Ministry of Foreign Affairs | RMoJ (62) |
| Exhibit R-8 | Announcement of the Committee on the Approval for the Protection of Investment between Thailand and Other Countries No. MFA 0704/1/2003 Concerning Foreign Investment Protection under the Agreements on the Promotion and Protection of Investments between the Government of the Kingdom of Thailand and Foreign Governments dated 22 October B.E. 2546 (Buddhist calendar equivalent for 2003) (the “Announcement”) | RMoJ (O, 66, 82, 8S) |
| Exhibit R-9 | Board of Investment Certificate of Promotion issued to DMT dated 16 May 1991 | RMoJ (87) |
| Exhibit R-10 | Letter from DMT to the Secretary General of the Board of Investment dated 25 February 1993 | RMoJ (223) |
[Page 70]
IN A MATTER OF AN ARBITRATION
UNDER THE UNCITRAL ARBITRATION RULES
BETWEEN:
WALTER BAU AKTIENGESELLSCHAFT (in liquidation)
Claimant
- and -
THE KINGDOM OF THAILAND
Respondent
LIST OF RESPONDENT'S LEGAL AUTHORITIES
(AS AT 2 OCTOBER 2006)
| AUTHORITY | DESCRIPTION | LOCATION PARAGRAPH(S) |
|---|---|---|
| Authority RA-1 | UNCITRAL Arbitration Rules (1976) | RMoJ (O, 27, 236) |
| Authority RA-2 | Vienna Convention on the Law of Treaties, done at Vienna (23 May 1969) UNTS Vol. 1155, 331 | RMoJ (22, 33) |
| Authority RA-3 | Emilio Agustin Maffezini v. Kingdom of Spain (Decision on Jurisdiction) (25 January 2000) ICSID Case No. ARB/97/7 reprinted in (2001) L6 ICSID Rev.-FILJ 21.2 | RMoJ (22) |
| Authority RA-4 | Grand River Enterprises Six Nations, Ltd. et al. v. United States of America (Decision on Objections to Jurisdiction) (20 July 2906) NAFTA/UNCITRAL Arbitration (excerpt) | RMbJ (22) |
| Authority RA-5 | Golder v. United Kingdom (21 February 1975) ECHR Ser. A, No. 13 | RMQJ (23) |
| Authority RA-6 | Case Concerning Kasikili/Sedudu Island (Botswana v. Namibia) 1999 ICJ (Judgment of 13 December 1999) reprinted hi 39 IZM 310 (2000) (excerpt) | RMOJ (23) |
| Authority RA-7 | Da Arechaga, "International Law in the Past Third of a Century" (1975) 159 Recueil des Cours I (excerpt) | RMOJ (23) |
[Page 71]
| AUTHORITY | DESCRIPTION | LOCATION PARAGRAPH(S) |
|---|---|---|
| Authority RA-8 | Amco Asia Corporation v. Indonesia (Award on Jurisdiction) (25 September 1983) ICSID Case No. ARB/81/1 reprinted in (1984) 23 ILM 351 | RMoJ (35) |
| Authority RA-9 | Jafarian v. Iran (Award No. 46-57-2) (25 May 1983) 2 Iran-U.S. C.T.R. 334 | RMoJ (23) |
| Authority RA-10 | Lili Tour v. The Government of the Islamic Republic of Iran (Award No. 415-483-2) (1 March 1989) available from Vfotlaw | RMoJ (23) |
| Authority RA-11 | Creditcorp International Inc. v. Iran Carton Co. (Award No. 443-965-2) (12 October 1989) available from Wesdaw | RMoJ (2S) |
| Authority RA-12 | Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America) (Jurisdiction and Admissibility) (1984) ICJ Rep 4 (excerpt) | RMOJ (2S) |
| Authority RA-13 | Southern Pacific Properties (Middle East) Ltd. (SPP(ME)) v. Arab Republic of Egypt (Decision on Jurisdiction) (14 April 1988) ICSID Case No. ARB/84/3 reprinted in (1995) 3 ICSID Rep. | RMOJ (29) |
| Authority RA-14 | Mihaly International Corp. v. Democratic Socialist Republic of Sri Lanka (Award) (15 March 2002) ICSID Case No. ARB/00/2 reprinted in (2002) 17 ICSID Rev.-FILJ 142 | RMOJ (29) |
| Authority RA-15 | Black's Law Dictionary (8th ed. 2004) (excerpt) | RMOJ (31) |
| Authority RA-16 | Jeswald W. Salacuse, “BIT by BIT: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries” (1990) 24 The International Lawyer 655 | RM0J (39) |
| Authority RA-17 | Ibrahim F.I. Shihata, “Recent Trends Relating to Entry of Foreign Direct Investment” (1994) 9 ICSID Rev.-FILJ 47 | RMOJ (39) |
| Authority RA-18 | United Nations Conference on Trade and Development, International Investment Agreements: Key Issues, Volume I (September 2004) (excerpt) | RMOJ (39) |
| Authority RA-19 | Agreement between the Government of the Federal Republic of Nigeria and the Government of the United Kingdom of Great Britain and Northern Ireland for the Promotion and Protection of Investments, done in Abuja (11 December 1990) | RM0J (40) |
[Page 72]
| AUTHORITY | DESCRIPTION | LOCATION PARAGRAPH(S) |
|---|---|---|
| Authority RA-20 | Agreement between the Government of Sweden and the Government of Malaysia Concerning the Mutual Protection of Investments, done in Kuala Lumpur (3 March 1979) | RMoJ (41) |
| Authority RA-21 | Philippe Grudin v. Malaysia (Award) (27 November 2000) 5 ICSID Reports 483 | RMOJ (42) |
| Authority RA-22 | German to English translation of excerpt from Germany’s website for its Foreign Trade and Investment Promotion Scheme http://agaportal.de | RMOJ (67) |
| Authority RA-23 | Bloomberg.Com, Financial Glossary | RMOJ (71) |
| Authority RA-24 | National Statistics, “First Release: Foreign direct investment 2004” dated 13 December 2005 | RMoJ (74) |
| Authority RA-25 | Anna M. Falzoni, “Statistics on Foreign Direct Investment and Multinational Corporations: A Survey” (15 May 2000) | RMDJ (75) |
| Authority RA-26 | OECD, “OECD Benchmark Definition of Foreign Direct Investment” (3rd ed., 1996) | RMOJ (75, 77) |
| Authority RA-27 | International Monetary Fund, “Foreign Direct Investment Statistics – How Countries Measure FDI: 2001” (2003) (excerpt) | RMOJ (76, 77) |
| Authority RA-28 | United Nations “World Investment Report: 2005” (excerpt) | RMOJ (76) |
| Authority RA-29 | Pusadee Ganjarexndee, Bank of Thailand, “Thailand’s Balance of Payments Foreign Direct Investment Statistics”, published in United Nations Conference on Trade and Development “Expert Meeting on Capacity Building in the Area of FDI: Data Compilation and Policy Formulation in Developing Countries” dated 12-14 December 2005 | RMOJ (7S) |
| Authority RA-30 | IMF Committee on Balance of Payments Statistics and OECD Workshop on International Investment Statistics, Direct Investment Technical Group (DITEG), “Issues Paper (DITEG) #20: Definition of Foreign Direct Investment (FDI) Terms” (November 2004), Annex I, attached to “Eighteenth Meeting of the IMF Committee on Balance of Payments Statistics, Washington D.C., June 27–July 1, 2005: Definition of Direct Investment Terms,” available at (excerpt) | RMoJ (77) |
[Page 73]
| AUTHORITY | DESCRIPTION | LOCATION PARAGRAPH(S) |
|---|---|---|
| Authority RA-31 | International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts (2001) | RMoJ (91, 94, 132, 152) |
| Authority RA-32 | Case Concerning the Northern Cameroons (Cameroon v. United Kingdom) (2 December 1963) (1963) ICJ Rep 15 (excerpt) | RMoJ (91) |
| Authority RA-33 | Sir Robert Jennings and Sir Arthur Watts, “Oppenheim’s International Law” (9th ed., 1992) (excerpt | RMoJ (92, 94, 97, 112, 126, 167) |
| Authority RA-34 | International Law Commission, Final Draft Articles on the Law of Treaties, Commentary to Article 24, reprinted in 2 Sir Arthur Watts, “The International Law Commission 1949-1998” (1999) (excerpt) | RMOJ (95) |
| Authority RA-35 | Elettronica Sicula S.p.A. (United States v. Italy) (1989) ICJ Rep 15 (excerpt) | RMOJ (95) |
| Authority RA-36 | Ambatielos Case (Greece v. United Kingdom) (Judgment on Preliminary Objection) (1 July 1952) ICJ Rep 28 | RMoJ (96) |
| Authority RA-37 | Impreglio S.p.A. v. Islamic Republic of Pakistan (Decision on Jurisdiction) (22 April 2005) ICSID Case No. ARB/03/3 available at | RMoJ (97, 215) |
| Authority RA-38 | SGS Société Générale de Surveillance S.A. v. Republic of the Philippine (Decision of the Tribunal on Objections to Jurisdiction) (29 January 2004) ICSID Case No. ARB/02/6, available at | RM0J (97, MS, 174, 175) |
| Authority RA-39 | Christoph H. Schreuer, “The ICSID Convention: A Commentary” (2001) | RMoJ (97, 98, 126, 227, 231) |
| Authority RA-40 | Tradex Hellas S.A. v. Republic of Albania (Decision on Jurisdiction) (24 December 1996) ICSID ARE/94/2 reprinted in (1999) 14 ICSID Rev.-FHJ 161 | RMOJ (98, 106, 126) |
| Authority RA-41 | Mandev International Ltd. v. United States of America (Award) (11 October 2002) ICSID Case No. ARB(AFY99/2 | RMOJ (98, 110, 141, 146, 150) |
| Authority RA-42 | Agreement Between the United States of America and Albania on the Settlement of Certain Outstanding Claims, done in Tirana (10 March 1995) 12611 HAS | RMoJ (195) |
[Page 74]
| AUTHORITY | DESCRIPTION | LOCATION PARAGRAPH(S) |
|---|---|---|
| Authority RA-43 | United Nations Security Council Resolution 687 (1991) U.N. Doc. S/RES/687 (8 April 1991) available at | RMOJ (105) |
| Authority RA-44 | Tecnicas Medioambientales Tecmed S.A v. The United Mexican States (Award) (29 May 2003) ICSID Cm No. ARB(AF)/00/2 | RMoJ (106, 146) |
| Authority RA-45 | Salini Costruttori S.L.p.A and Italtrade SpA. v. The Hashemite Kingdom of Jordan (Decision on Jurisdiction) (29 November 2004) ICSID Cm No. ARB/02/13 | RMoJ (109, 176, 189, 215) |
| Authority RA-46 | Notes to North American Free Trade Agreement, available at | RMOJ (110) |
| Authority RA-47 | Marvin Roy Feldman Karpa v. United Mexican States (Interim Decision on Preliminary Jurisdictional Issues) (6 December 2000) ICSID Case No. ARB(AF)/99/1 | RMoJ (110) |
| Authority RA-48 | The Frontier Between Iraq and Turkey (Advisory Opinion) (1925) PCIJ Ser. B, No. 12 | RMOJ (111) |
| Authority RA-49 | Case Concerning East Timor (Portugal v. Australia) (Judgment) (1995) ICJ Rep 89 (excerpt) | RMol (117) |
| Authority RA-50 | Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Peru for the Promotion and Protection of Investments, done in London (4 October 1993) | RMoJ (121) |
| Authority RA-51 | Enrique Miguel Chavez Bardales, “The Settlement of Disputes Under the United Kingdom-Peru Bilateral Investment Treaty” at | RMOJ (121) |
| Authority RA-52 | Case Concerning Legality of Use of Force (Yugoslavia v. Belgium) (Request for the Indication of Provisional Measures) (2 June 1999) ICJ Rep 124 | RMoJ (123, 174, 176) |
| Authority RA-53 | Empresas Lucchetti, S.A. and Luachetti Peru, S.A. v. Republic of Peru (Award) (7 February 2005) ICSID Case No. ARB/03/4 | RMOJ (124) |
| Authority RA-54 | James Crawford, 'The International Law Commission's Articles on State Responsibility; Introduction, Text and Commentaries” (2002) (excerpt) | RMoJ (133, 143, 154) |
[Page 75]
| AUTHORITY | DESCRIPTION | LOCATION (PARAGRAPH(S)) |
|---|---|---|
| AuEhorlty RA-55 | International Law Commission, Commentary on Article 18 of the Draft Articles on State Responsibility Provisionally Adopted by the Commission on First Reading (1996) available at (excerpt) | RMoJ (143) |
| Authority RA-56 | Pakistan and Federal Republic of Germany Treaty for the Promotion and Protection of Investments (with Protocol and exchange of notes), done in Bonn (25 November 1959) | RMOJ (158) |
| Authority RA-57 | Accord entre la Confédération Suisse et la République de l'Equateur relatif a la protection et à l'encouragement des investissements, done in Berne (2 May 1968) (w/o translation) | RMOJ (158) |
| Authority RA-58 | The World Bank Group, International Centre for Settlement of Investment Disputes, “About ICSID,” available at | RMoJ (158) |
| Authority RA-59 | Ethyl Corp v. Government of Canada (Award on Jurisdiction) (24 June 1998) NAFTA/UNdTRAL Arbitration, reprinted in (1999) 38 ILM 708 | RMoJ (172, 231) |
| Authority RA-60 | United Parcel Service of America, Inc. v. Government of Canada (Award on Jurisdiction) (22 November 2002) NAFTA Chapter 11 Arbitration, available at | RMOJ (173, 225) |
| Authority RA-61 | Pan American Energy LLC and BP Argentina Exploration Co. v. Argentine Republic and BP America Production Co., et. al. v. Argentine Republic (Decision on Preliminary Objections) (27 July 2006) ICSID Case Nos. ARB/03/13 and ARB/04/8 | RMoJ (173, 190) |
| Authority RA-62 | Case Concerning Oil Platforms (Islamic Republic of Iran v. United States) (1996) ICJ Rep 803 (excerpt) | RMOJ (174) |
| Authority RA-63 | Ambatielos Case (Greece v. United Kingdom) (Judgment on the Obligation to Arbitrate) (19 May 1953) ICJ Rep 10 | RMoJ (176) |
| Authority RA-64 | Compañia de Aguas del Aconquija SA and Vivendi Universal v. Argentine Republic (Decision on Annulment) (3 July 2002) ICSID Case No. ARB/97/3 | RM0J (189, 190) |
[Page 76]
| AUTHORITY | DESCRIPTION | LOCATION (PARAGRAPH(S)) |
|---|---|---|
| Authority RA-65 | SGS Somite Generate & Surveillance S.A. v. Islamic Republic of Pakistan (Decision on Objections to Jurisdiction) (6 August 2003) ICSID Case No. ARB/Oi/13. | RMoJ (139, 199) |
| Authority RA-66 | Joy Mining Machinery Limited v. Arab Republic of Egypt (Decision on Jurisdiction) (6 August 2004) ICSID Case No. ARB/03/11 | RMOJ (199, 213, 214) |
| Authority RA-67 | Azurix Corp. v. Argentine Republic (Award) (14 July 2006) ICSID Case No. ARB/01/12 | RMoJ (208) |
| Authority RA-68 | Stephen M. Schwebel, “On Whether the Breach by a State of a Contract with an Alien is a Breach of International Law” reprinted in “Justice in International Law: Selected Writings of Stephen M. Schwebel” (1994) (excerpt) | RMDJ (211) |
| Authority RA-69 | Restatement (Third) of Foreign Relations Law of the United States (1987) | RM0J (211) |
| Authority RA-70 | Investment Promotion Act B.E. 2520 (as amended) (excerpt) | RMOJ (223) |
| Authority RA-71 | David D. Caron, Lee M. Caplan, Matti Fehonpaa, “The UNCITRAL Arbitration Rules: A Commentary” (2006) (excerpt) | RMoJ (225) |
| Authority RA-72 | Glamis Gold v. United States of America (Procedural Order No. 2) (31 May 2005) UNCITRAL/NAFTA Chapter 11 Arbitration | RMoJ (225) |
| Authority RA-73 | Ghaffari v. Islamic Republic of Iran (Order dated 2 February 1998)) (Case No. 968), Cass No. 968, Dissenting Opinion of Judge Khalilum (signed 10 February 1988), reprinted in (1988-1) 18 Iran-US C.T.R. 79 | RMQJ (225) |
| Authority RA-74 | Starrett Housing Corp. v. Islamic Republic of Iran, (Interlocutory AWARD, VOL. FTL 32-24-1) (19 December 1983), reprinted in (1984-III) 7 Iran-US CTR 119 | RMOJ (225) |
| Authority RA-75 | V.S. Maui, “International Adjudication: Procedural Aspects” (1980) | RM0J (226) |
| Authority RA-76 | Methanex Corp. v. United States of America, (Partial Award on Jurisdiction) (7 August 2002) NAFTA Chapter 11 Arbitration | RMoJ (231) |