INTERNATIONAL CENTRE FOR SETTLEMENT
OF INVESTMENT DISPUTES (ICSID)
(ICSID CASE NO. ARB/18/05)
IN THE MATTER OF AN ARBITRATION UNDER
THE UNITED STATES – COLOMBIA TRADE
PROMOTION AGREEMENT, SIGNED ON
NOVEMBER 22, 2006 AND ENTERED
INTO FORCE ON MAY 15, 2012
ASTRIDA BENITA CARRIZOSA
CLAIMANT,
v.
THE REPUBLIC OF COLOMBIA,
RESPONDENT.
CLAIMANT'S MEMORIAL
ON JURISDICTION
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June 13, 2019
Pedro J. Martínez-Fraga
C. Ryan Reetz
Mark Leadlove
Domenico Di Pietro
Joaquín Moreno Pampín
Rachel Chiu
Daniel Jacintho
BRYAN CAVE LLP
200 S. Biscayne Blvd.
Suite 400
Miami, Florida 33131
Tel.: (786) 322-7500
Fax: (786) 322-7501
Counsel for Claimant,
Astrida Benita Carrizosa
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INTRODUCTION
Claimant Astrida Benita Carrizosa, respectfully submits this Memorial on Jurisdiction pursuant to Procedural Order No. 1 dated February 19, 2019, including the procedural calendar contained under its Annex-A.
Claimant is bringing this claim against the Republic of Colombia (Colombia) pursuant to the provisions of the United States-Colombia Trade Promotion Agreement (TPA or the "Treaty"). The TPA entered into force on May 15, 2012. It provides, amongst other features, foreign investment protection and consent to investor-State arbitration.
This Treaty includes tailor-made provisions for foreign investments in the financial services sector under Article 12.1(1) of Chapter 12, and applies to measures adopted or maintained by a Party relating to: (a) financial institutions of another Party; (b) investors of another Party, and investments of such investors, in financial institutions in the Party's territory; and (c) cross-border trade in financial services.
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Claimant and her family invested in the Colombian financial services sector, and more precisely in the savings and loan institution Corporación Grancolombiana de Ahorro y Vivienda (GRANAHORRAR or the “Bank”). The investment in GRANAHORRAR was made through three (3) companies incorporated in Colombia: (i) Asesorias e Inversiones C.G. S.A., (ii) Inversiones Lieja LTDA, (iii) I.C. Interventorias y Construcciones LTDA.
Chapter 12 explicitly incorporates by reference a number of provisions protecting foreign investors and investments from Chapter 10 of the TPA. These provisions include consent to investor-State arbitration.
Chapter 12 contains a broad and unqualified Most Favored Nation (MFN) clause, unlike the MFN clause in Chapter 10 of the TPA, which is expressly limited in scope and reach. The MFN clause in Chapter 12 is deliberately unqualified and is intended to allow the importation of more favorable treatment, of any nature, contained in other treaties entered into by the US and Colombia. Claimant relies on the more favorable provisions contained in the Colombia-Switzerland B.I.T. in this very narrow regard.
Claimant laments the breach of several standards of protection made available to her as a US investor in Colombia, both directly and through
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the application of the MFN provision under Article 12.3 of the TPA.
Because of the limited scope and objectives of the current procedural phase of the proceedings, this Memorial on Jurisdiction addresses the basic requirements to the Tribunal's exercise of jurisdiction under the applicable burden of proof. Claimant forever is mindful that factual and legal issues that are inherent to merits determination might have to be addressed in establishing jurisdiction in bifurcated proceedings.
As a result, a degree of attention shall be allocated to the illustration of the more significant factual and legal aspects of the dispute that concern jurisdiction, but overlap into merits factual premises has proven to be inevitable. In this regard, the Tribunal's understanding and indulgence is much appreciated.
In a nutshell, Colombia's financial regulatory authorities unlawfully expropriated Claimant's investment in that jurisdiction. That unlawful expropriation was characterized by discrimination and a unique catalog of procedural, regulatory, and systemic wrongs.
After a protracted and exhaustive battle before the Colombian administrative courts, as here narrated, the Council of State, the highest judicial authority with jurisdiction over
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administrative disputes, exposed the unlawful conduct of the Colombian financial authorities and awarded Claimant compensation for the wrongful taking. That judgment represented Claimant's investment in a monetary form. It is the res that constitutes the subject matter of this proceeding.
The Judgment that the Council of State rendered was both an embarrassment (as it directly implicated Colombia's two highest ranking regulatory agencies and its Central Bank) and a source of financial loss for the Colombian Government. The matter garnered national media attention at the time. The Colombian authorities could accept neither of those scenarios.
The Superintendency of Banking and FOGAFIN turned to the Constitutional Court to have the Council of State judgment suppressed. The Constitutional Court obliged. However, doing so required: (i) repudiating the most basic principles of due process, (ii) abjuring well-defined principles of allocation of jurisdiction (an explicit encroachment of the Council of State's jurisdiction), (iii) abnegating its own jurisprudence, (iv) committing an arresting denial of justice, and (v) giving rise to an expropriation without compensation.
Even more importantly, and of consequence beyond the subject matter of this particular dispute, the Constitutional Court's ruling caused a
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national judicial institutional crisis that lingers to this day. This crisis has been amply chronicled in academic writings, as well as in the media.
This Memorial on Jurisdiction is composed of the following six sections. Section I provides an overview of Colombia's excessive exercise of sovereignty. Section II sets forth a summary of the facts leading to the June 25, 2014 Constitutional Court Opinion. Section III addresses issues of allocation and scope of the burden of proof. Section IV illustrates how Claimant meets the jurisdictional requirements ratione personae, ratione temporis, ratione voluntatis, and ratione materiae. Section V provides a brief illustration of Respondent's main breaches of treaty obligations. Section VI provides a summary indication of the damages that Claimant suffered.
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1. The claim here presented arising from an extraordinary example of illicit judicial activism and abuse of authority matured on June 25, 2014.1 It was on this date (June 25, 2014) that the last element giving rise to damages stemming from Colombia's violation of the TPA's protection standards took place. As will be more fully explained below, on June 25, 2014 Colombia's Constitutional Court denied the Council of State's Motion to Vacate the Constitutional Court's Opinion depriving Claimant of her monetized
1 This Memorial incorporates by reference the Request for Arbitration ("RFA") and all exhibits to that pleading. The exhibits have kept their original designation in an effort to foster consistency. ↩
The facts giving rise to Claimant's judicial recourse are set forth in pages 1 through 76 of the RFA, ending on paragraph 172. The RFA has been attached as an exhibit (C-0028) to this Memorial to facilitate reference when necessary. This format has been adopted in a genuine effort to mitigate redundancies, some of which regrettably are unavoidable.
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investment in the form of a Council of State Judgment finding in favor of Claimant and against Colombia's two instrumentalities, the Superintendency of Banking and FOGAFIN in the amount of USD 114,183,417.80, exclusive of interests.2
2. The incontrovertible evidence in this case demonstrates that the Council of State's Judgment arose as a consequence of a proceeding that was legitimate, mindful of due process, and in keeping with constitutional safeguards. The judgement rightfully stemmed from that Tribunal's legitimate exercise of jurisdiction.
3. As shall be explained, the Council of State's Judgment transformed the vestiges of Claimant's investment into a legally-binding and unassailable entitlement to a fixed liquidated sum of pecuniary damages. Colombia's Constitutional Court, a Tribunal of hierarchy equal to the Council of State and subject to an equally narrow and specialized jurisdictional purview as that which is incident to the Council of State, engaged in an unprecedented usurpation of the Council of State's jurisdiction on June 25, 2014 upon issuance of an
2 A true and correct copy of Council of State's Judgment in the matter styled: Compto S.A. in Liquidación y Otros, contra Superintendencia Bancaria y Fondo de Garantías de Instituciones Financieras (FOGAFIN), File No. 25000-23-24-000-2000-00521-02-15728, is here attached as C-0022. ↩
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order denying the Council of State's Motion to Vacate the Constitutional Court's Opinion of May 26, 2011 (“Constitutional Court's Opinion) (C-0023) purporting to annul the Council of State's Judgment in favor of Claimant and against Colombia.3
4. The substantive and procedural deficits characterizing the Constitutional Court's Opinion pitted the Constitutional Court against the Council of State, giving rise to a judicial institutional crisis that still lingers having institutional repercussions far exceeding the particular factual configuration of the case there at issue. The magnitude of this institutional crisis is witness to the Constitutional Court's extreme judicial activism, and abuse of authority.
3 A true and correct copy of the Opinion from the Constitutional Court styled: Superintendencia Financiera y Fondo de Garantías de Industrias Financieras Contra el Consejo de Estado, Sección Cuarta, Sentencia de 1 de noviembre de 2007, Proferida en Proceso de Nulidad y Restablecimiento de Derecho Iniciado por la Sociedades Compto S.A. y Otras Contra Superintendencia Bancaria y Fondo de Garantías de Instituciones Financieras, File No. T-2.089.121 and T-2.180.640, here attached as C-0023. ↩
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5. The facts giving rise to the judicial proceedings that culminated with issuance of the Constitutional Court's June 25, 2014 Opinion can be succinctly restated.4 Claimant Astrida Benita Carrizosa(“Claimant” or the “U.S. Shareholder”), a U.S. citizen, invested in one of the Republic of Colombia's leading financial institutions, Corporación Gran Colombiana de Ahorro y Vivienda “GRANAHORRAR” (“GRANAHORRAR” or "The Bank"). The value of her investment was "reduced” to the peppercorn value of COP.5 This "adjustment in value" was based upon discriminatory, irregular, extreme, excessive, and unprecedented treatment on the part of the Central Bank of Colombia (“Banco de la República” or “the Central Bank”), Fondo de Garantías de Industrias Financieras (“FOGAFIN”) and Superintendency of Banking
4 A factual narrative of this background in considerable detail is contained in paragraph 1 of the RFA (C-0028). ↩
5 The acronym "COP" stands for Colombian peso in accordance with the ISO 4217 currency standard. ↩
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(“Superintendencia Bancaria de Colombia" n/k/a Superintendencia Financiera).
6. Consonant with the averments contained in the RFA, FOGAFIN deployed discriminatory methodologies while purportedly discharging statutory obligations to assist qualified financial institutions addressing what it identified as a "temporary liquidity" challenge confronting one of Colombia's two principal savings and loans, GRANAHORRAR.
7. FOGAFIN discriminated against GRANAHORRAR and treated this formerly leading financial institution differently from its peers, without limitation, by enacting the following five financial acts comprising these discriminatory measures:
(i) artificially and deliberately reducing GRANAHORRAR's solvency status below the nine percent legislative threshold,
(ii) reducing the bank's share value to COP 0.01,
(iii) denying GRANAHORRAR'S shareholders due process statutory notice rights,
(iv) unilaterally terminating GRANAHORRAR's CEO without notice to shareholders, and
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(v) unilaterally replacing GRANAHORRAR's Board of Directors.
8. The bank was expropriated but never liquidated. It was sold to Banco Bilbao Vizcaya Argentaria (“BBVA”) for a payment in the amount of USD 423,000,000. These five final acts of regulatory excesses were not accompanied by any compensation or subjected to any iteration of a due process regime. As a predicate to these five regulatory measures, FOGAFIN and the Supertendency of Banking implemented nine regulating premises that materially weakened GRANAHORRAR.
9. First, FOGAFIN denied GRANAHORRAR conventional relief for a temporary liquidity deficit. Instead, FOGAFIN proceeded to cause GRANAHORRAR to pledge to FOGAFIN “A” rated performing assets having one hundred thirty-four percent of the value of a guaranty that FOGAFIN would extend to prospective GRANAHORRAR creditors who would provide GRANAHORRAR with liquidity earmarked loans ("the Guaranty-Restructuring Program").6
10. This Guaranty-Restructuring Program was unprecedented and unresponsive to
6 See RFA (C-0028) ¶¶ 32-57. ↩
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GRANAHORRAR'S liquidity needs. The Guaranty-Restructuring Program, however, did have the effect of materially wresting from GRANAHORRAR a significant percentage of the most productive assets that principally contributed to GRANAHORRAR's historically successful solvency status. This formula also was prejudicial to GRANAHORRAR because it did not address the bank's liquidity needs. The Guaranty-Restructuring Program was not imposed on any of GRANAHORRAR's peers.7
11. Second, pursuant to the Guaranty-Restructuring Program FOGAFIN provided GRANAHORRAR with a 30-60 day maturation timeframes8 that caused hardship and were materially shorter than the terms that FOGAFIN extended to GRANAHORRAR's peer financial institutions during the Colombia economic crisis of 1998-2001. Notably, however, these latter financial institutions were accorded direct funding (unlike GRANAHORRAR) and very generous maturation dates averaging seven (7) years.9
7 See RFA (C-0028) ¶¶ 33-38. ↩
8 See RFA (C-0028) ¶¶ 74, 100, 126. ↩
9 See RFA (C-0028) ¶¶ 96, 100. FOGAFIN partially funded GRANAHORRAR withheld final payment and thus engineered a "cessation of payment" event that FOGAFIN itself identified as the basis for (i) expropriating ↩
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12. Third, within the timeframe of the Guaranty-Restructuring Program, FOGAFIN foisted on GRANAHORRAR interest rates far higher than those extended to GRANAHORRAR'S peer financial institutions that found themselves in significantly more threatening solvency challenges. GRANAHORRAR was required to pay to third-party creditors availing themselves of the benefits of the guaranty that FOGAFIN provided to them pursuant to the Guaranty-Restructuring Program an average interest rate of 44%. The average interest rate, however, that FOGAFIN extended as a direct funding creditor to GRANAHORRAR's banking peers approximately during the same timeframe was 19%. When pressed, FOGAFIN was unable to account for this difference.10
13. This disparity is all the more quizzical because GRANAHORRAR enjoyed greater solvency and economic soundness than its peers at all times material to the facts giving rise to Claimant's recourse to the national judicial tribunals of Colombia.11
GRANAHORRAR, and (ii) appropriating unencumbered ownership of the pledged assets.
10 See RFA (C-0028) ¶ 100. See also Introduction at 3. ↩
11 See JUAN CAMILO RESTREPO AND ANTONIO JOSÉ NUÑEZ, DIÁLOGOS SOBRE LAS CRISIS FINANCIERAS (2nd ed.2009) 295-305. (CL-0128) Juan Camilo Restrepo served as Minister of ↩
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14. Fourth, FOGAFIN caused GRANAHORRAR, upon penalty of complete abandonment, to execute an adhesion contract containing a deliberately vague and Unilateral Clause entitling FOGAFIN to keep for its own purposes and pursuant to unqualified ownership, the assets that GRANAHORRAR pledged to FOGAFIN in furtherance of the Guaranty-Restructuring Program upon FOGAFIN'S subjective determination of a "cessation of payment" event between GRANAHORRAR any third-party credit (irrespective of the amount, quality, cure potential, creditor terms at issue, or position of the third-party payment beneficiary).12
15. Fifth, FOGAFIN refused to fund GRANAHORRAR directly for the entire credit
Finance during the crisis from August 7, 1998 to August 7, 2000.
12 See RFA (C-0028) ¶¶ 58-72. See also Expert Report Professor Luis Fernando López-Roca (an Associate Justice of the Constitutional Court and testifies on financial regulatory practice in Colombia and Colombian administrative law) ¶¶ 84-113. ↩
The expert testimony in this case shall demonstrate that the use of such a Clause was both unresponsive to GRANAHORRAR's liquidity needs and unprecedented under the circumstances based upon FOGAFIN's entire regulatory history. Expert Report Professor Luis Fernando López-Roca ¶¶ 84-113.
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amount.13 This exercise of its lending discretion was contrary to FOGAFIN's practice with respect to GRANAHORRAR's peer banks, particularly those predominantly configured by mortgage-based principal portfolios. This disparity in treatment is even more opaque because the GRANAHORRAR peer financial institutions receiving direct funding from FOGAFIN were not as financially sound as GRANAHORRAR.14
16. Sixth, FOGAFIN's formula for addressing GRANAHORRAR's liquidity challenge consisted in requiring GRANAHORRAR'S principal shareholder block, the U.S. Shareholders, to divest themselves of their respective interests in GRANAHORRAR.15
17. Seventh, FOGAFIN caused a deposit run that FOGAFIN used as a ground for challenging GRANAHORRAR's solvency status. The evidence compellingly teaches that FOGAFIN deliberately notified the media to report confidential events concerning restricting negotiations between FOGAFIN and
13 See RFA (C-0028) ¶¶ 32-33. ↩
14 See RFA (C-0028) ¶¶ 96-100. ↩
15 See RFA (C-0028) ¶¶ 79, 88. ↩
Here too expert testimony establishes that such methodology was not responsive to GRANAHORRAR's temporary liquidity needs.
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GRANAHORRAR. This run, among other matters, made worse GRANAHORRAR's liquidity status.16
18. Eighth, even though the documentary evidence of record demonstrably establishes that GRANAHORRAR's solvency status enjoyed a history of economic soundness surpassing the performance level of most of its peer financial institutions, and only suffered from a temporary liquidity event, FOGAFIN and the Superintendency of Banking based their expropriation of GRANAHORRAR on a purported insolvency crisis that, if at all, only existed during a matter of hours and solely because of FOGAFIN's and the Superintendency of Banking's machinations.17
19. Ninth and finally, the Superintendency of Banking, with FOGAFIN'S blessings, provided GRANAHORRAR with a “Cure Notice" containing a fourteen-hour deadline that was physically and legally impossible to perform.18
16 See RFA (C-0028) ¶¶ 109-110. ↩
17 See RFA (C-0028) ¶ 43. See also C-0007, containing a Central bank authored report titled: Análisis Solicitud Nuevo Plan de Amortización Apoyo Especial de Liquidez C.A.V. GRANAHORRAR. ↩
18 See RFA (C-0028) ¶¶ 115-116. ↩
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20. This "Cure Notice" required GRANAHORRAR's shareholders to meet a capital call in the amount of COP 157,000,000,000. That capitalization was to take place between 1:00 A.M. SATURDAY OCTOBER 3, 1998 AND 3:00 P.M. on that same day.19
21. The “Cure Notice,” presumably earmarked for GRANAHORRAR's shareholders, was never communicated to the GRANAHORRAR shareholders as required by law and in keeping with the provisions of the Administrative Code, Articles 46-48.20
22. Once these nine conditions took place, the Superintendency of Banking and FOGAFIN proceeded to take over the ownership and management of GRANAHORRAR.21
23. Claimant sought judicial recourse before the Colombian tribunals. It is here asserted that Claimant's investment in GRANAHORRAR,
19 See attached as C-0019, correspondence dated October 2, 1998, from Sara Ordoñez Noriega to Dr. Enrique Amaya Pacheco, reference no. 1998050714 (“Cure Notice”). ↩
20 Factual and expert testimony to be presented in this case shall demonstrate that this deadline was not performable or communicated to the GRANAHORRAR shareholders. It also was unresponsive to GRANAHORRAR's needs. ↩
21 See RFA (C-0028) ¶¶ 115-117. ↩
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in part, was liquidated and monetized in the November 1, 2007 Council of State's Judgment.
24. It is this factual background that constitutes the subject matter of the events submitted for adjudication to the Colombian judiciary. It is the actions of the judiciary, primarily the Constitutional Court, that are most relevant to any determination concerning this bifurcated jurisdictional briefing.
II. THE JUDICIAL PROCEEDINGS THAT
CULMINATED IN THE
CONSTITUTIONAL COURT'S JUNE 25,
2014 OPINION
25. It is this evisceration of Claimant's investment that constitutes the core of this dispute.
26. In a stark abandonment of the then-governing law, neither the Superintendency of Banking ("Superintendency") nor FOGAFIN communicated its respective resolutions22 to GRANAHORRAR's shareholders. More than just a disavowance of governing law, the failure to
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communicate these resolutions defies the most basic notions of fairness and due process. Both the October 2, 1998 “Cure Notice”23 and October 3 Resolution No. 002,24 were sent to GRANAHORRAR's CEO, who was then replaced in a matter of just minutes following service of Resolution No. 002.25 Consequently, the U.S.
23 See RFA (C-0028) ¶¶ 114-116. ↩
24 See RFA (C-0028) ¶¶ 116-119, and C-0020. ↩
25 The then determinative provisions of the Administrative Code (Código Contencioso Administrativo an exemplar of “Decreto 01 de 1984' (CL-0099)) were Articles 43-48. Article 46, however, is the broadest and most practical in terms of notice compliance requirements binding on the Superintendency and FOGAFIN. It commands: ↩
When, in the authorities' judgment, their decision directly and immediately affect third parties who have not intervened in the undertaking, they shall publish the dispositive part of the resolution in one publication session in the Official Paper or in an official media outlet earmarked for such notifications, or in a newspaper of wide circulation within the jurisdiction of the agencies that issued the decisions.
Equally relevant is compliance with Article 47 prescribing the publication of legal procedural avenues for challenging the decisions of administrative bodies. This Article provides that "the text of all notifications or publications shall set forth the appropriate legal avenue for challenges of the administrative decisions at issue, which information shall include the authorities before whom any challenge should be filed, as well as the relevant timeframes."
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Shareholders exercised the right to petition and served a demand on FOGAFIN and the Superintendency of Banking requesting, among other things, copies of the October 2, 1998 “Cure Notice,” Resolution No. 002, dated October 3, 1998 and an explanation of the legal methodology pursuant to which the purported COP 157,000,000,000 cure amount had to be tendered.
27. These petitions were served on FOGAFIN and the Superintendency of Banking between March 15 and May 30, 2000 but it was
The legal consequences of these Articles are best enunciated in Article 48, which provides that the failure to notify the interested parties in accordance with the referenced articles shall render the administrative acts as non-binding and without the force of law. The language of Article 48 commands citation in its entirety:
Without compliance of the foregoing requirements the notification will be deemed as not having taken place nor shall the decisions that should have been contained in the notifications have any legal effect, unless the interested party holds herself out as having been sufficiently notified, agrees to have been so informed or otherwise timely avails herself of the appropriate legal recourse.
Neither condition here occurred.
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not until four (4) months later (July 25, 2000) that true and correct copies actually were produced.26
28. On July 28, 2000, Claimant and her family, through the Companies,28 perfected a four (4) count complaint before the Tribunal de lo Contencioso Administrativo de Cundinamarca styled: Acción de Nulidad y Restablecimiento del Derecho de Compto S.A. en Liquidación y Otros, Contra la Superintendencia Bancaria y el Fondo de Garantías de Instituciones Financieras, File No. 200000521. In that proceeding plaintiff alleged that FOGAFIN and the Superintendency
26 Colombian government authorities incorrectly concluded that the affected shareholders, including the U.S. Shareholder, were planning on filing legal recourse in the form of a class action proceeding. They thus delayed tender of the resolutions as a strategic effort aimed at triggering application of the class action limitations period so as to frustrate any action were it to proceed. ↩
27 In the Spanish language denominated "Tribunal Administrativo de Cundinamarca and Consejo de Estado." ↩
28 The "Companies" refers to the following investment vehicles used by Claimant: (i) Asesorias e Inversiones C.G. S.A., (ii) Inversiones Lieja LTDA, and (iii) I.C. Interventorias y Construcciones LTDA. ↩
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of Banking (i) issued resolutions that were void for want of premises establishing the factual phases and grounds supporting the ultimate conclusions and mandates contained in those papers (C-0019 and C-0020), as well as a lack of insolvency that would justify such findings, (ii) lacked due process in connection with any ability to redress or address the concerns stated in C-0019, (iii) violated mandatory laws, specifically Art. 72 of Legislation 45 (1990) (excessive interest rates), Art. 1203 of the Commercial Code (misappropriation akin to expropriation), and (iv) violated Art. 29 of the Constitution (lack of due process).
29. That action lay fallow for five (5) years. On July 27, 2005 (four (4) years and 364 days after the case had been filed and registered with the Tribunal on July 28, 2000), the Tribunal of Cundinamarca issued a rather inordinate judgment worthy of cross-appeals.
30. The Tribunal ruled that plaintiffs, the GRANAHORRAR shareholders,29 including Claimant, did not state viable causes of action. It also found that defendants', FOGAFIN and the Superintendency, defenses were similarly legally insufficient as a matter of law, fees and costs were not awarded. Dr. Briceño, a former Council of State Magistrate who testifies in the proceeding
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before this Arbitral Tribunal, explains that this odd ruling is likely politically driven.30
31. Claimant, through the Companies, registered an appeal with the Council of State, styled: Compto S.A. in Liquidación y Otros, contra Superintendencia Bancaria y Fondo de Garantías de Instituciones Financieras (FOGAFIN), File No. 25000-23-24-000-2000-00521-02-15728.
31. On November 1, 2007, the Council of State issued a judgment overruling the Judgment dismissing the case and corresponding defendants. The Council of State's Judgment held in favor of appellants the GRANAHORRAR shareholders.
30 See Expert Report Dr. Martha Teresa Briceño de Valencia (former Magistrate who presided in the Fourth Chamber of the Council of State and has contemporaneous personal knowledge arising from her review of and experience with this institutional crisis), here attached (stating “[L]a Corte Constitucional que es un Tribunal donde puede haber mayor injerencia política (pues tres de su nueve magistrados son electos de una terna propuesta por el Presidente de la República), obtuvo de los jueces lo que solicitó el poder ejecutivo, es decir, evitar el pago de la expropiación.”) ¶ 115. ↩
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Two (2) foundational principles stand out in the extensive seventy-five-page Judgment.31
32. First, the Council of State found that the resolutions that FOGAFIN and the Superintendency issued (C-0019 and C-0020) were legally insufficient to cause the entities jointly and severally to expropriate GRANAHORRAR because they lacked the appropriate factual predicates. Therefore, the Council of State concluded that the expropriation was in fact grossly illegal. In furtherance of this holding it observed:
What has here been narrated evinces to this Tribunal that GRANAHORRAR'S supposed insolvency that gave rise to the order to capitalize the bank [C-0019], was generated as a result of losses in the approximate amount of $228,726 million that the Superintendency of Banking had calculated as a result of GRANAHORRAR'S cessation of payment.
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First of all, the capitalization order does not contain any explanation of how this figure was arrived at, nor does it reference any document from which such figure was calculated prior to issuance of the order. For this reason the insolvency reference in the Superintendency of Banking of Cure Notice lacks a necessary factual foundation and is equally wanting in evidentiary premises.
On the other hand, the documents of record lead to the conclusion that as of that date October 2, 1998, GRANAHORRAR was not insolvent but rather had a liquidity issue, these are concepts that are distinguishable both by their nature and effects.
Lack of liquidity is defined as the want of disposable resources necessary to meet obligations as they become due or that make possible the everyday economic concerns of a business. Insolvency, however, is one in which an entity's net assets are below the threshold of necessary capital.
GRANAHORRAR did not have an insolvency challenge, and in order for
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the Central Bank to authorize the temporary liquidity credits, both ordinary and extraordinary, what was required was for the entity not to be solvent.
Indeed, Art. 1 of the Circular Externa No. 25 de 1995, which was in effect during the operative timeframe when the Central Bank issued the temporary liquidity credits [citation omitted], expressly contemplated that 'in no instance shall the liquidity credits be provided to insolvent entities or have as their objective and justification for issuance the cure of an insolvency problem.' For purposes of those liquidity credits, it was deemed that an entity would be entitled to insolvency credit only when 'upon summarizing its financial records what is gleaned are net assets at least 50% below the capital tender.' (italics in original, bold italic supplied)32
33. Second, as noted immediately above, in addition to lacking the requisite factual predicates in order to state legally sustainable resolutions, FOGAFIN and the Superintendency
32 Id., C-0022 at 42-43 (emphasis supplied). ↩
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based the resolutions (C-0019 and C-0020) on erroneous legal and factual claims, i.e., lack of liquidity, rather than an actual state of insolvency that would create jeopardy for account holders, and more overarchingly, the financial sector as a whole.
34. The Council of State's Judgment was even more scathing in passing on FOGAFIN's and the Superintendency's acts and omissions as to GRANAHORRAR.
35. The Council of State, by way of example, expressly found that FOGAFIN and the Superintendency, together during the course of just a mere twelve hours, created an economic crisis for GRANAHORRAR that was artificial and hardly indicative of GRANAHORRAR'S considerable solvency and historical performance record. Therefore, the Council of State reasoned and concluded that there was no justification for reducing GRANAHORRAR's share value to that of a nominal sum. This measure was lacking in due process. It was aberrant, and indicative of an extreme abuse of authority. There is no substitute for the Council of State's own language:
The reduction of GRANAHORRAR'S share value to a nominal amount requires that the entity or entities undertaking such measure [reducing share value to a nominal sum] has
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done so based upon true and accurate information that the Superintendency of Banking can establish as realistically accounting for an institution's value. Nonetheless, if the Superintendency of Banking's report does not reflect the actual net asset value of an entity, and it is similarly established that the losses of capital are not actual or accurate, then there is no basis for the reduction of share value to a nominal amount.
In the case at bar, the actual breach of net assets or the insolvency status that Corporación Granahorrar was purportedly suffering from, were unveiled as non-existent based upon the certified accounting figures that the financial institution itself later posted, which demonstrated that in addition to its fragile substantiation, the order to capitalize GRANAHORRAR was taken without the benefit of any serious foundation or analysis concerning GRANAHORRAR's true net asset status and in the same manner in which the decision to reduce GRANAHORRAR's share value to a nominal amount.
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In this Chamber's judgment, the foregoing issues demonstrate that the events marked by the repeated mail exchanges between FOGAFIN and the Superintendency of Banking, today Financiera, between the night of Friday, October 2 and the afternoon of Saturday, October 3, placed GRANAHORRAR in a purported insolvency status, pursuant to which the bank was provided with the binding obligation to comply with a cure methodology that was impossible to meet. Instead, these exchanges of correspondence were the cause and origin for a chain of decisions on the part of the entities [FOGAFIN and the Superintendency of Banking], where one decision was supported by the other, which were all arising from FOGAFIN's failure to provide to GRANAHORRAR the additional help that GRANAHORRAR petitioned for that second day of October, consonant with what had been agreed to on October 1.
The foregoing, when added to the wrongfully substantiated insolvency claim that the Superintendency of Banking had asserted against
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GRANAHORRAR, together with the Central Bank's decision to undertake the capitalization order, as part of the task to reduce to a nominal value GRANAHORRAR'S shares, demonstrates the illegality of the administrative agencies' actions, and the reason why this Court must vacate the first instance trial court's judgment, which as appellant made clear, did not at all address the material allegations asserted and had not accorded any weight to the probative evidence on which plaintiffs had based their averments.33
36. The Council of State's Judgment reversed the trial court with instructions that, among other things, also included a finding of liability against FOGAFIN and the Superintendency of Banking in favor of GRANAHORRAR's shareholders, in the amount of COP 226,961,237,735.99.34
37. The Council of State saw through the badges of supposed legality that masked the illegal
33 Id. at 51-52. (emphasis supplied) ↩
34 Claimant in this case is not asserting that she would be limited in presenting evidence on damages suffered in excess of this figure. ↩
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substantive content of the Superintendency of Banking's and FOGAFIN's expropriatory resolutions (C-0019 and C-0020). It emphasized the lack of substantive foundation, absence of due process, and extreme abuse of authority, as well as an unsustainable legal analysis defined by what appeared to be shifting and unsubstantiated legal standards that cast a blind eye and a deaf ear toward the most rudimentary universally accepted principles of basic fairness and equity.
38. The Government of Colombia felt that its own Council of State had embarrassed its leading financial agencies (FOGAFIN, the Superintendency, and the Central Bank) and was undermining executive policy and authority.
39. What immediately ensued was a disappointing and unprecedented act of procedural aggression directed at the judicial branch of government. This procedural violence was constituted by the filing of four (4) frivolous proceedings (tutelas) on the part of FOGAFIN and the Superintendency of Banking.
40. FOGAFIN and the Superintendency of Banking each filed two (2) motions with the Council of State seeking re-consideration of the November 1, 2007 Judgment. All four motions were denied. FOGAFIN and the Superintendency of Banking then perfected appeals with the Constitutional Court.
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41. On March 5, 2008 FOGAFIN and the Superintendency of Banking perfected an appeal with the Council of State's decision against FOGAFIN and the Superintendency of Banking and in favor of the GRANAHORRAR shareholders. That appeal generated an extraordinary decision that caused a structural-institutional crisis in Colombia's judicial system. The respective jurisdiction of the Council of State and the Constitutional Court was tested in a manner that remains unprecedented and still lingers. This case, in large measure, arises from this institutional quagmire.
42. The Constitutional Court issued a prolix 203-page Opinion that exemplifies (i) absolute lack of due process, (ii) extreme abuse of authority, (iii) the usurpation of the jurisdiction of a tribunal of equal hierarchy, and (iv) a tribunal's unqualified abandonment of its own precedent.35
43. The Constitutional Court's Opinion presents fundamental due process challenges at multiple levels. It exceeded its jurisdiction and placed itself in the position of a factfinder rather
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than a Constitutional Tribunal charged with reviewing the constitutionality of legislation, regulations, judicial decisions, and executive decrees
44. By way of example, at times the Constitutional Court itself, sua sponte, introduces hearsay evidence in the form of newspaper articles (unofficial publications that are not government- sponsored or legislatively identified as substitutes for due process notice) that the parties, and particularly the GRANAHORRAR shareholders never had an opportunity to review, much less to address with rebuttal evidence.
45. The Constitutional Court's Opinion represents an emblematic denial of justice that, even more importantly, itself gave rise to a constitutional crisis because of the extent of its abuse of regulatory-judicial authority.
46. As more fully set forth in the Expert Opinions of Dr. Martha Teresa Briceño de Valencia,36 Prof. Luis Fernando López-Roca,37 Dr. Alfonso Vargas Rincón38 and Prof. Jack J. Coe,
36 See Expert Report Dr. Martha Teresa Briceño de Valencia. ↩
37 See Expert Report Professor Luis Fernando López-Roca. ↩
38 See Expert Report Dr. Alfonso Vargas Rincón. ↩
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Jr.,39 the Constitutional Court's Opinion represents a paradigmatic abuse of authority and discretion that cannot be reconciled with the most fundamental tenets of due process.
47. Analysis of the Constitutional Court's Opinion establishes, without limitation, that it violated the U.S. shareholder's procedural and substantive due process rights by adopting, condoning, and ratifying, far beyond the ambit of its jurisdictional purview, and contrary to the most fundamental principles of due process, on at least the following sixteen (16) propositions.
48. First, the Constitutional Court disavows the Council of State's decision that the expropriation of GRANAHORRAR on the part of FOGAFIN violated Claimant's due process40 rights because it was based on an artificial government-
39 See Expert Report Professor Jack J. Coe, Jr., here attached (addressing legal principles and standards governing an investor's encounters with national adjudicative systems, alone or in combination with the acts of other government organs and agencies to help acquaint the Tribunal with informative decisional law). ↩
40 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 78-86. ↩
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induced insolvency41 when in fact the bank merely suffered from a temporary liquidity challenge.
49. The Constitutional Court so acted without regard to evidence of record and based upon factual premises and other considerations that Claimant was never able to raise, let alone address, at any procedural juncture.
50. Second, the Constitutional Court's Opinion represents a flagrant denial of due process,42 in part, because in defiance of the Council of State's findings it approves discriminatory treatment directed at the GRANAHORRAR shareholders43 as to FOGAFIN credit maturation dates that caused irreparable injury to GRANAHORRAR and to its shareholders. The Constitutional Court's unqualified approval of this discriminatory treatment constitutes a violation of procedural due process, and also does violence to the GRANAHORRAR shareholders' constitutional rights by exceeding the Constitutional Court's jurisdiction and in this way proscribing the
41 See Expert Report Professor Luis Fernando López-Roca ¶ 98. ↩
42 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 78-86. ↩
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GRANAHORRAR shareholders from presenting their case.
51. Third, the Constitutional Court's Opinion represents an indefensible denial of due process, in part, because in defiance of the Council of State's findings, the Constitutional Court approves discriminatory treatment directed at the GRANAHORRAR shareholders as to FOGAFIN credit interest rates that caused irreparable injury to GRANAHORRAR and its shareholders.44
52. The Constitutional Court's unqualified approval of this discriminatory treatment constitutes a violation of procedural due process, and also does violence to the GRANAHORRAR shareholders' constitutional rights by exceeding the Constitutional Court's jurisdiction and in this way proscribing the GRANAHORRAR shareholders from presenting their case.45
53. Fourth, the Constitutional Court's Opinion further shocks the conscience of any witness to this writing because it approves the discriminatory treatment that FOGAFIN directed at GRANAHORRAR and the GRANAHORRAR
44 Id. ¶¶ 78-86. See also Expert Report Professor Luis Fernando López-Roca ¶ 27, n.4. ↩
45 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 78-86. ↩
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shareholders in the form of the Guaranty- Restructuring Program, which caused FOGAFIN to weaken GRANAHORRAR's solvency and to misappropriate a significant percentage of that institution's “A” rated performing assets, contrary to principles of law, equity, finance, and customary practice.46
54. Fifth, the Constitutional Court's Opinion approves and cloaks with the mantle of legal legitimacy the Superintendency's denial of due process as to GRANAHORRAR arising from the Superintendency's resolution (C-0019), which was devoid of factual premises in support of its findings and mandates and for this reason in part proscribes Claimant from presenting her case.
55. In so doing the Constitutional Court's Opinion also approves having provided GRANAHORRAR with a “Cure Notice” that violates due process because performance under its terms was both physically and legally impossible. In this regard, the Constitutional Court's Opinion is particularly egregious because it usurps the role of the Council of State and of the trial court as factfinders.47 The Opinion condones
46 See Expert Report Professor Luis Fernando López-Roca ¶¶ 84-113. ↩
47 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 29. ↩
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and accepts as legally viable non-compliance with notice requirements generally where no notice was supplied.
56. As the Council of State aptly notes, the purported notice itself was defective because it lacked factual premises in support of its conclusion and in this way further perpetuated multiple denials of due process.48
57. Sixth, the Constitutional Court's Opinion by usurping the Council of State's authority gives rise to a foundational institutional crisis between that State's peer and highest appellate tribunals.49
58. It did so because, among other considerations, the Constitutional Court was instructed and provided with no alternative but to find that FOGAFIN's and the Superintendency of Banking's resolutions, despite their manifest debilities and lack of procedural due process, were legally viable, upon penalty of removal of the actual justices from the Constitutional Court. The
49 Id. ¶¶ 21, 41. See also Expert Report Professor Luis Fernando López-Roca ¶ 136. ↩
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evidence on this point is compelling and determinative.50
59. Seventh, the Constitutional Court's Opinion is an aberration and extreme departure from fundamental legality because it adopts as legally sufficient FOGAFIN's resolution reducing the value of GRANAHORRAR's shares to COP 0.01, notwithstanding the resolution's lack of factual premises and methodological bases.51
60. Eighth, the Constitutional Court's Opinion denies the GRANAHORRAR shareholders due process because it deliberately and in conclusory fashion disregards in its totality the evidence of record that the Council of State explicitly referenced as contrary to both resolutions (C-0019 and C-0020) and probative only of a temporary liquidity challenge, and not a solvency crisis warranting expropriation.52
61. This shortcoming is particularly problematic and outlandish in the extreme because the Council of State is specifically endowed with a Chamber exclusively charged with
50 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 75, 76. ↩
51 See Expert Report Professor Luis Fernando López-Roca ¶¶ 127, 136. ↩
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adjudicating (the “Fourth Chamber") the legality of financial flows attendant to financial institutions. Accordingly, the Council of State is the highest ranking national tribunal53 in the Republic of Colombia charged with adjudication of insolvency and liquidity issues concerning financial institutions.54 Deference as a matter of law is to be accorded to its findings particularly as they concern this subject matter.
53 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 32-33. See also Expert Report Professor Luis Fernando López-Roca ¶¶ 102, 118. ↩
54 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 13. There she testifies as follows: ↩
En el año 2008 fui designada Magistrada de la Sección Cuarta del Consejo de Estado de Colombia. La Sección Cuarta, de acuerdo a la división de competencia de ese alto tribunal, está a cargo de los impuestos y las materias económicas. Además, es donde se ventila aproximadamente el 40% de las tutelas (amparos judiciales) que se presentan ante el Consejo de Estado. El Consejo de Estado es el más alto tribunal y última instancia con competencia en lo contencioso administrativo de Colombia. Es una corte altamente especializada, que goza de gran prestigio. (emphasis supplied)
In f.n. 3 to that paragraph Dr. Briceño de Valencia provides a succinct history of the Council of State.
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62. In turn, the Constitutional Court is not endowed with this expertise, which is fundamentally beyond its constitutional jurisdictional competence. For this reason, it is aberrational and legally improper for the Constitutional Court (i) outright to disregard and substitute diametrically opposed findings to those of the Council of State, specifically when addressing institutional financial matters of this kind, (ii) to engage in its own exegesis of factual premises of record, (iii) unilaterally to supplement the evidentiary record while aware that the parties would be proscribed from addressing or rebutting such “evidence,” (iv) addressing non- constitutional issues, and (v) adopting as legally sufficient resolutions that prima facie and based upon the findings of a tribunal of equal status in pari materia have been held to be legally flawed.
63. These stark departures from fundamental notions of due process are multiplied where, as here, the Constitutional Court has invaded the domain of the Council of State.55
55 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 27-29. In the words of Magistrate Ostau de Lafont "se ha controvertido el concepto de especialidad como criterio de distribución de las competencias entre los órganos que integran la rama judicial." ↩
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64. Ninth, the Constitutional Court's Opinion denies GRANAHORRAR due process56 because it approves the discriminatory targeting that FOGAFIN and the Superintendency of Banking fostered and pursued with respect to the U.S. shareholders.
65. The Constitutional Court sua sponte raised issues that are extraneous to the financial questions that underlie the Council of State's Judgment.
66. A glaring, and for this reason illustrative example, is the Constitutional Court's treatment of a purported minority interest stock sale among GRANAHORRAR investors, which was not a litigated issue, does not give rise to a constitutional question, and yet the Constitutional Court raises and identifies this transaction as the fulcrum of GRANAHORRAR's alleged insolvency concerns. Here too the Constitutional Court engages in the role of a first instance tribunal factfinder and illicitly supplements the record before it, and in so doing, denaturalizes its own role and further invades the Council of State's jurisdiction. This undertaking is extreme in its violation of fundamental due process.57
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67. Tenth, the Constitutional Court flagrantly erred and in this manner also deprived the GRANAHORRAR shareholders of due process because it did not engage in a constitutional review of the Council of State's Judgment, which was the subject matter of the underlying appeal presumably giving rise to the exercise of its jurisdiction.58
68. Eleventh, because it condones discriminatory practices by adopting FOGAFIN'S departure from national mandatory norms requiring that FOGAFIN provide assistance to financial institutions that would maximize the institutional autonomy of such institutions while minimizing government intervention (proportionality doctrine requiring the least interference possible), the Constitutional Court's Opinion represents a radical departure from basic principles of law and due process.59
69. Twelfth, as the Constitutional Court itself is compelled to admit, its opinion constituted an unprecedented departure from governing jurisprudence60 and, so says the argument of the Constitutional Court itself, the Constitutional
59 Id. ¶¶ 94, 95, 97, 100-102. ↩
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Court now fashions new law having retroactive application.
70. This very pronouncement, without more, is exemplary of a denial of due process as Claimant, nor anyone else for that matter, could have travelled on its pleadings based on an illegal formulation that at the time did not exist, according to the very pronouncements of the Constitutional Court itself. The Council of State, as shall be demonstrated infra, seized on this extreme pronouncement that the Constitutional Court refused to disavow.
71. Thirteenth, the Constitutional Court's Opinion is flawed to an extreme because it condones and adopts FOGAFIN's non-responsive liquidity “cure formulas” that allowed FOGAFIN to misappropriate a significant percentage of GRANAHORRAR's “A” rated working assets and in this way adversely compromised GRANAHORRAR's solvency status.61
72. Fourteenth, the Constitutional Court was neither independent nor impartial in rendering its opinion. Instead, it was serving an executory function beyond its jurisdictional competence and for this reason the opinion is
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radically and fundamentally flawed and bereft of any semblance of judicial propriety.62
73. Fifteenth, because the opinion is both internally and externally inconsistent, it constitutes a denial of due process.63
74. Even a surface analysis of the opinion reflects that it conflates liquidity and solvency standards that may trigger the exercise of regulatory sovereignty in the form of a permanent or temporary agency intervention in a financial institution.
75. This misapprehension of the factual record, which exceeds the gross negligence standard of any national law, and the governing legal standard, although extreme and of consequence, is understandable because of the dichotomy between solvency and liquidity that characterizes the underlying record. That record reflected a status of temporary lack of solvency far below the 9% legal threshold.64 Yet, the intervention, expropriation, termination of the
62 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 75-76. See also Expert Report Professor Luis Fernando López-Roca ¶ 125. ↩
63 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 79. ↩
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CEO, and replacement of the Board of Directors all was founded on insolvency concerns and not liquidity issues, as the Council of State correctly emphasized.
76. Sixteenth, the Constitutional Court's Opinion ratifies the use of the “Clause," which is tantamount to sanctioning the use of irregular formulas that overreach and constitute an excessive exercise of regulatory authority that further weakens solvency and liquidity. The “Clause” was not a formula responsive to a temporary liquidity challenge. Instead, it was a non-negotiated adhesion “Clause” that unconstitutionally provided FOGAFIN with the pretext of a right to expropriate based upon unrelated and self-judging default events. This predicament also is unprecedented, contrary to law, and in extreme violation of fundamental notions of due process.65
77. The extreme and draconian nature of the Constitutional Court's Opinion was such that it prompted the participation of the President of the Council of State, Dr. Mauricio Fajardo Gómez,
65 See Expert Report Professor Luis Fernando López-Roca ¶¶ 93, 94, 108-113. ↩
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who filed a motion seeking the annulment of the Constitutional Court's Opinion.66
78. The extreme and aberrant character and nature of the Constitutional Court's Opinion invited the personal appearance and intervention of the President of the Council of State to argue that agency's Motion for Annulment of the Constitutional Court's Opinion.67 The motion asserted that the Constitutional Court engaged in an act of judicial-regulatory abuse of authority by usurping the Council of State's jurisdiction and improperly extending its own. The two-prong argument was framed as requiring annulment of the Constitutional Court's Opinion based upon denial of due process.
79. The Council of State's President advanced that annulment was not only warranted, but actually necessary. He emphasized that the Constitutional Court violated its own competence (jurisdiction) by acting as the first instance trier of
66 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 24, 85. ↩
67 A true and correct copy of the Council of State's Motion for Annulment is here attached as C-0025. ↩
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fact (“juez natural”), as well as a second instance appellate body charged with adjudicating the legal proprietary of (i) first instance abuse of discretion, (ii) mistake of law, and (iii) error in the application of law to fact.
80. The Motion to Vacate similarly characterizes the Constitutional Court's Opinion as extreme and dangerous. It observes that “even more complex,” questionable, and grave is that the Court [the Constitutional Court] seizes for itself the attribution of a judge and extends its authority to adjudicate the specific merits of a case, which role is reserved for the Council of State."68
81. In this same vein, the President of the Council of State further provides that “even in instances when the parties to a litigation do not allow for the actual judge [propio juez natural], that is to say the Council of State, to adjudicate the question at issue, the arguments and extreme positions raised on appeal limit the appellate jurisdiction of a second instance Tribunal, such that paradoxically and questionably the interested parties [FOGAFIN and the Superintendency of Banking] do not raise the corresponding challenge on appeal but they [FOGAFIN and the Superintendency of Banking] later do raise them in the form of tutela and the Constitutional Court
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address this newly-raised issue even though it was neither raised or considered by the first instance judge."69
82. The President of the Council of State understandably framed the abuse of due process in terms of a complete "absence of reasons [absolutamente ignotas las razones] underlying the Constitutional Court's judgment in Opinion SU-447, 2011, which is the subject matter of the Motion to Vacate, [noting that the Constitutional Court] concludes that entities such as the
69 Id. at 41 (emphasis supplied), the original Spanish language iteration states: ↩
Pero, más complicado, cuestionable y grave aún resulta que la Corte se arrogue la atribución de juez natural y falle el caso concreto en el lugar del Consejo de Estado, cuando las partes en litigio ni siquiera permitieron al propio juez natural, esto es al Consejo de Estado, pronunciarse sobre el problema jurídico en cuestión pues, como es bien sabido, los argumentos y extremos planteados en el recurso de apelación limitan la competencia del juez de segunda instancia, de modo que paradójica y cuestionablemente las partes interesadas no platean el correspondiente problema en el recurso de alzada pero luego sí lo esgrimen en sede de tutela y la Corte Constitucional lo aborda sin que el juez natural del litigio haya sido debidamente llamado por los interesados a hacerlo.
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Superintendency of Finance [f/k/a the Superintendency of Banking] norms are to be applied by cherry-picking from fragmented doctrines and using non-systemic methodologies, from the Administrative Code,70 which norms, to be sure, develop constitutional rights and principles that are well established."71
83. The non-judicial and extremely political and unjustifiable denial of due process that the Constitutional Court's Opinion exemplifies can be gleaned by the extent to which, as the President of the Council of State notes, the Constitutional Court arbitrarily selected truncated doctrinal support, seemingly randomly, from the Statute of the financial system and code of civil
71 C-0025 at 37. The Spanish language original reads: ↩
Resultan absolutamente ignotas las razones por las cuales la Corte Constitucional, en la sentencia SU-447 de 2011, cuya nulidad se reclama, concluye que a entidades como la Superintendencia Financiera y el FOGAFIN le deben ser aplicadas de semejante forma fraccionada y asistemática, las normas del CCA, todas las cuales, por cierto, desarrollan principios y derechos fundamentales constitucionalmente reconocidos.
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procedure72 rather than operative provisions of the Administrative Code.
84. Therefore, the ill effects arising from (i) the usurpation of the trial court's adjudicatory role, and (ii) the similar usurpation of the Council of State's jurisdiction for merits appellate review, is made all the worse because of the (iii) Constitutional Court's haphazard reliance on doctrine that is inapposite but expedient as concerns its mission of implementing a political decision notwithstanding the legally untenable nature of that disposition.
85. On June 25, 2014, the Constitutional Court denied the Council of State's Motion to Vacate the Constitutional Court's Opinion, SU- 447.73
86. The Order Denying the Motion to Vacate was meaningfully qualified by two (2) dissenting opinions that embodied the egregious
72 In the original Spanish language: Estatuto Orgánico del Sistema Financiero and Código de Procedimiento Civil. ↩
73 A true and correct copy of the Constitutional Court's Order denying the Council of State's Motion to Vacate, dated June 25, 2014, is here attached as C-0026. ↩
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and shocking denial of due process because of what one of the dissents characterized as an economic motive to deny due process and to disavow fundamental constitutional protections. Here the concluding sentences comprising Justice Rojas Ríos' dissenting opinion74 are particularly relevant:
Adujo, que en concordancia con la posición adoptada por el Consejo del Estado cuando se pretenda afectar, o en efecto se afecten derechos de terceros, debe surtirse la respectiva notificación pues la misma corresponde a un acto procesal que no puede transgredirse argumentando la ocurrencia de un hecho notorio o de una conducta concluyente supuestamente derivada de comentarios noticiosos en medios de comunicación. A juicio del magistrado Rojas Ríos, la razón de la decisión acogida por el pleno de la Corporación desconoce al debido proceso pues autoriza que la administración pública no efectué notificaciones a terceros, en procesos como el estudiado, cuando las normas financieras no prevean un
74 A true and correct copy of Justice Rojas Ríos' dissenting opinion contained in Comunicado No. 25, June 25/26, 2014, issued by Colombia's Constitutional Court, is here attached as C-0027, also available at www.corteconstitucional.gov.co. ↩
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sistema de notificación, contrariando de manera vehemente la doctrina de la doctrina de la Corte.
Concluyó, exponiendo que no podía desconocerse en el fondo, el caso objeto de estudio estaba otorgando legalidad a una expropiación que había sido debidamente corregida por una sentencia del Consejo de Estado, cuya motivación resulta impecable, por lo cual no existe argumento jurídico aceptable y riguroso para revocarla, máxime si gran parte de su fundamentación obedeció a implicaciones económicas, por la cuales se legitimó el desconocimiento de las garantías constitucionales de los ciudadanos involucrados en el proceso de referencia. (emphasis supplied)75
75 Consonant with the premises that the Council of State asserted with respect to notice provisions that may affect third parties or in effect are material to the rights of third parties, the actual notice must be adhered to as prescribed because such notice concerns a procedural predicate that cannot be modified merely by arguing that it is public knowledge or that notice is not necessary because of media reports. In Justice Rojas Ríos' Opinion, the reasons underlying the Constitutional Court's Opinion are contrary to due process because such reasons would justify government ↩
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87. Central to Justice Rojas Ríos' dissent was the finding that the Constitutional Court deliberately turned a blind eye towards the constitutional and due process rights of the GRANAHORRAR shareholders merely because of the economic incentive incident to expropriating a valuable asset. This dissenting opinion is robust in emphasizing that the Constitutional Court's Opinion defied that very Court's precedent, as well as the normative strictures of the Administrative Code, particularly with respect to the latter's Articles 46-48.76
88. Justice Rojas Ríos' dissenting opinion carefully analyzes how the Constitutional Court, based solely on its own novel exegesis, (i) fashions out of wholecloth a new rule of law that dispenses with codified due process notice provisions replacing them with a doctrine of constructive notice from “vox populi” sources, (ii) without justification or legal authority substituted the due process rights that the GRANAHORRAR
instrumentalities shying from providing legally prescribed notices to third parties under the theory that such notices are not necessary based upon the opinion that they already form part of the awareness of the general public. In cases such as the one at bar, where the governing financial norms do not contain any system for notification in the Constitutional Court's view, such conduct vehemently conflicts with this Court's own precedent and established doctrine.
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shareholders held pursuant to Articles 46-48 of the Administrative Code with reliance on Articles 335(19), and 74 of the Statute of the Financial System, and (iii) in so doing perpetrated violations of constitutional protections.
89. Put simply, Justice Rojas Ríos' dissent asserted that the Council of State's Judgment (C- 0022) actually had corrected a wrongful expropriation that FOGAFIN and the Superintendency of Banking had perpetrated.
90. Notably, on the very same day on which Justice Rojas Ríos announced to the Constitutional Court his dissent and the grounds in support of it, he was discharged from that court.
91. These factors establish direct and explicit violations of the TPA, let alone a prima facie showing of jurisdiction as discussed below. Claimant has averred facts that, if proven, would demonstrate Colombia's violation of the TPA and customary international law, as required from a pleading perspective at this jurisdictional phase. In assessing this prong of a jurisdictional determination, the Tribunal is invited to consult the Expert Reports that Dr. Martha Teresa Briceño de Valencia, Prof. Jack J. Coe, Dr. Alfonso Vargas Rincón, and Prof. and Associate Justice Luis Fernando López-Roca have submitted. Set forth below is analysis of some of their immediately relevant expert observations
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attaching to the material Constitutional Court's rulings before the Arbitral Tribunal at this procedural juncture.
92. The issuance of the Constitutional Court's Order Denying Reconsideration in the form of a Motion to Vacate constitutes (i) the ripening of the conflict brought before this Arbitral Tribunal, and (ii) the end of all judicial labor concerning the subject matter here at issue.77
77 The second dissenting opinion authored by Justice Pretelt Chaljub, attached as C-0026, in every material way coincides with Justice Rojas Ríos' “lack of due process” argument by asserting that the GRANAHORRAR shareholders were deprived of "the right to present a defense." ↩
Prof. Coe observes that “[i]n this connection, [he] again found illuminating the dissent of Magistrate Chaljub." Prof. Coe observes that Magistrate Chaljub "concluded that none of the highly limited grounds that would have let the Constitutional Court nullify the relief given the investors by the [Council of State] was present. Far from it - the [Council of State] had uncovered the 'strange facts' surrounding the measures precipitously imposed on the troubled bank:
In just three days the financial authorities went from describing the financial situation of [the bank] as solvent to declaring its default .... Indeed, [o]nly one day before declaring
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93. The expert opinion of Professor Jack J. Coe, Jr. asserts that the Constitutional Court's judicial activism, as made clear by its Opinion flouting the Council of State's Judgment, is substantively akin to the exercise of judicial sovereignty present in Saipem S.p.A. v. The People's Republic of Bangladesh. On this point he explains:
The parallels between Saipem and the current case seem clear. The Council of State's judgment in this case, the product of legitimate proceedings indisputably within that court's jurisdiction, transformed what was left of the Claimant's investment into an entitlement to money. That ruling could reasonably have been expected to involve the Constitutional Court only if it somehow raised issues properly within the competence of that body. The deus ex machina intervention of that court [Constitutional Court], and its remarkable de novo, first instance, approach finds a strong analogue in
insolvency, FOGAFIN had declared [the bank] solvent and ordered specific forms of aide to improve the strength of the corporation.”
Expert Report Professor Jack J. Coe, Jr. ¶ 81.
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the Bangladeshi court's exorbitant review of the ICC award seen in Saipem. The judicial activism in each case was not to be expected, and in both cases those State actions nullified the investment in its then-monetized form.
Even if fidelity to domestic law were sufficient to satisfy treaty obligations (which, in general, it is not), the current case may well involve more: the use of judicial methods to change (or ignore) existing law so as to accommodate the regulatory entities' troubling departure from seemingly established rules of notice and those entities' abrupt imposition of measures to denature what remained of Claimant' investment.78
94. Along this same line of thought, Professor Coe notes:
84. The Tribunal in Saipem expressly mentioned the abuse of rights doctrine as informing its reasoning. There, ... the local courts purported to revoke the authority of
78 See Expert Report Professor Jack J. Coe, Jr. ¶¶ 85-86. ↩
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an ICC arbitration tribunal in response to certain procedural and evidentiary decisions made by the tribunal; those courts would later reason that the award issued by the tribunal was without effect. As in Metalclad and several other cases, the Tribunal in Saipem looked behind what was ostensibly the undertaking of an official function to consider the substantive quality of the actions taken. In Saipem, the Tribunal's expropriation analysis concluded:
Having carefully reviewed the procedural orders referred to in the Revocation Decision as the cause of the ICC Tribunal's misconduct, the Tribunal did not find the slightest trace of error or wrongdoing. Under these circumstances, the finding of the Court that ... the 'arbitrators' committed misconduct; lacks any justification ... [I]f one carefully studies the Revocation Decision
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of 2 April 2000, one fails to see any reference whatsoever to the law that was allegedly 'manifest[ly] disregard[ed].' By way of consequence, it is unfounded to then infer from such ill-founded finding of misconduct that there is a likelihood of miscarriage of justice.' Equally unfounded is the consequence drawn by the Court when deciding the revocation of the authority of the ICC Tribunal. This declaration can only be viewed as a grossly unfair ruling.
The Tribunal is reinforced in that conclusion by the fact that Bangladesh does not criticize in these proceedings the conduct of the ICC Arbitral Tribunal .... Bangladesh does not even try to show
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that the ICC Arbitrators' conduct was somehow inappropriate, illegitimate or unfair. To the contrary, Bangladesh tries to justify the decision to revoke the authority of the ICC Tribunal exclusively on the ground that the test set forth in Article 5 of the BAA is not stringent leaves the authority free to extrapolate that the arbitrators may be likely to commit a miscarriage of justice. In none of its submissions in the present arbitration did Bangladesh even attempt to show that the ICC Tribunal committed misconduct and that such alleged misconduct could reasonably justify the revocation of the arbitrators. ..[to the extent that] the limited contents of the Revocation Decision allow [the Tribunal] to
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draw any conclusion as to the reasons of the Court, the Tribunal cannot but agree with Saipem that the judges 'simply took as granted what Petrobangla falsely presented' (Tr. II 57:12- 13 158). Finally, the Tribunal notes that there is no indication in the record that the ICC Arbitrators were at any time consulted, let alone heard, by the courts of Bangladesh during the process leading to the decision revoking their authority).79
95. Beyond the uncanny parallels to Saipem, Prof. Coe reasons that "[a]lthough it is repeated that investor-State tribunals do not act as domestic appeals courts, in fact, such tribunals routinely, and of necessity, examine the quality of reasoning adopted by domestic adjudicative bodies."80
79 See Expert Report Professor Jack J. Coe, Jr. ¶ 84, citing to Saipem award, ¶¶ 155-158. ↩
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This statement is articulated and contextualized in illuminating examples:
The many illustrations of this include the awards in: Metalclad ([n]one of the reasons included a reference to any problems associated with the physical construction of the landfill or to any physical defects therein [thus] the construction permit was denied without any consideration of, or specific reference to, construction aspects or clause ....') [citation to Metalclad award, ¶ 93]; Saipem (['to the extent that] the the Revocation Decision [allows the Tribunal] to draw any conclusion as to the [Court's] reasons, the Tribunal cannot but agree with Saipem that the judge 'simply took as granted what Petrolbangla falsely presented') [citing to Saipem award, ¶ 157]; and Cake ([T]he ... seven unjustified obstacles, coupled with the remainder of the liquidator's obligation to proceed with the sale of [the debtor's] assets, ... [is] a manifest sign that the Court simply did not want, for whatever reason, to do what was mandatory) [citing to Cake award, ¶ 142]; not unlike the municipality in Metalclad, in Deutsche Bank it was a cardinal part of the tribunal's analysis that the Central Bank had pursued an investigation and purported to exercise regulatory and remedial powers that were pretextual and in excess of the bank's authority under domestic law. This was so even though the acts of the Central Bank had nevertheless been vindicated by the Supreme Court. De Sabla too involved doubtful interpretations of local law, and there, as here, the tribunal was entitled to look at the
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96. The invitation to the Arbitral Tribunal in this case does not concern second-guessing, even as a matter of pleading practice for jurisdictional purposes, the Constitutional Court's Opinion. Similarly, it does not entail a mere critique of a judicial gloss on settled procedural and substantive authorities that may have been misplaced or just a product of reasonable error. Along this very same vein the procedural recitation and factual narrative here presented does not seek to invite the Arbitral Tribunal to confirm or deny irregularities that may or may not be subject to reasonable qualifications, although indisputably irregular.
97. Instead, in the context of Prof. Coe's Expert Opinion the Arbitral Tribunal is being invited to determine whether the Constitutional Court's Opinion is so extreme in its manifest deficits so as to impress upon a qualified reader that pretextual exercises of judicial sovereignty were employed far beyond the ambit or expectation of any legal rubric so as to warrant the reasonable conclusion that actions far afield from any reasonable expectations were undertaken to the detriment of the investor (Claimant) here at issue.
content of local law, and to explore the reasoning of local authorities both regulatory and judicial that relied on that law.
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98. The best evidence for consideration of this question, certainly from a pleading perspective for jurisdictional purposes, has been generated by the Constitutional Court's own opinion together with the incident dissents. Prof. Coe's Expert Opinion informs its reasoning by judging judicial and regulatory State-conduct through the prism of twelve very relevant cases,81 most of which concern the assessment of unfair treatment stemming from the exercise of judicial and/or regulatory sovereignty.
81 See Dan Cake (Portugal) S.A. v. Hungary, ICSID Case No. ARB/12/9 (August 2015) (decision on jurisdiction and liability); Deutsche Bank A.G. v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. SRB/09/2 (Award) (October 2012); Swisslion Doo Skopje v. Republic of Macedonia (former Yugoslav Republic of Macedonia), ICSID Case No. ARB/09/16 (Award) (July 2012); Yukos Universal Ltd. (Isle of Man) v. Russian Federation, SEC Arbitration No. V (070/205) (Final Award) (September 2010); Sistem Muhendislik v. Kyrgeyz Republic, ICSID Case No. ARB(AF)/06/1 (Award) (September 2009); Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/7, (Award) (June 2009); Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16 (Award) (July 2008); Metalclad v. Mexico, ICSID Case No. ARB(AF)/97/1 (Award) (August 2000); Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3 (October 1998); Marguerite de Goly de Salba (US) v. Panama, 6 Rep. of Int'l Arb. Awards (June 1993); Oil Fields of Texas, Inc. v. Iran, 1 Iran-U.S. Cl. Trib. Rep. 347 (December 1982); and Barcelona Traction, Light and Power Company, Ltd. (Belgium v. Spain) Second Phase Judgment, 1970 ICJ 1. ↩
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99. Significantly, common to the proceeding before this Arbitral Tribunal are all of the excessive regulatory and judicial abuses present in the composite jurisprudence of these twelve cases. A factually analogous paradigm of abusive exercise of regulatory and judicial sovereignty identifiable in these twelve cases collectively can be gleaned from the factual matrix underlying the claims here asserted.
100. Therefore, Prof. Coe's conclusions as stated in the Preliminary Report find ample resonance in decided authority:
This Preliminary Report is intended to provide an initial reaction to the facts presented to me. I have tried to place those facts in a jurisprudential context and to indicate that they are of a character that might well shift relevant burdens to the state to justify its conduct with respect to the investor and its investment.82
Based on the information provided to me considering the applicable rules of international law, I believe that the Claimant in this case is most likely the victim of a breach by Colombia of
82 See Expert Report Professor Jack J. Coe, Jr. ¶ 87. ↩
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the FET standard of protection and of the obligation to provide full compensation when imposing measures equivalent to an expropriation.83
101. Claimant invites the Arbitral Tribunal to consider Prof. Coe's preliminary expert opinion as part of Claimant's prima facie jurisdictional tender.
102. Dr. Martha Teresa Briceño has filed an expert report in this case.84 Her analysis is particularly relevant for two reasons. First, in addition to serving as a university professor of law and having authored eight books on administrative law, in 2008 Dr. Briceño was appointed to serve as a Magistrate of the Council of State's Fourth Chamber.85
83 See Expert Report Professor Jack J. Coe, Jr. ¶ 88. ↩
84 See Expert Report Dr. Martha Teresa Briceño de Valencia. ↩
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103. Second, she has contemporaneously direct and personal experience concerning the Constitutional Court's May 26, 2011 Opinion (C- 23) that pitted the Council of State against the Constitutional Court.86
104. Notably, she characterizes the Constitutional Court's May 26, 2011 Opinion as “a bad judgment," using this term (“bad judgment") euphemistically for a “destructive” judgment.87 In fact, she describes the opinion as “tailor-made for the Executive Branch.” “The judges merely issued a judgment that would not contradict the will of the Executive Branch. It represents an example of the absence of liberty and independence that the Judicial Branch lacks from the executive branch of government."88
105. She qualifies this description by placing a footnote on the word “desquiciada" and
88 The Spanish language original reads: ↩
75. La sentencia SU-447/11 es equivocada. Por no decir salida de quicio. Es una sentencia hecha a la medida del poder ejecutivo. Los jueces simplemente – emitieron una sentencia que no contrariase la voluntad del ejecutivo. Un ejemplo de la ausencia de libertad e independencia del poder judicial. (emphasis supplied)
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noting that "[the word] [d]esquiciado, according to the Dictionary of the Royal Academy of the Spanish language (the most authoritative source for Castilian Spanish), means: to take apart something by removing from it the firmness that kept it together.89
106. Dr. Briceño further comments on the Constitutional Court's lack of independence from the Executive Branch with respect to the Constitutional Court's Opinion.90 She is "[p]ersonally convinced that there was not a real legal analysis [with respect to the tutelas] that FOGAFIN and the Superintendency of Banking perfected with the Constitutional Court in order to appeal the Council of State's November 1, 2007 judgment,91 and of course, there was no independence [on the part of the Constitutional Court] to decide the case. I do not have the slightest doubt concerning the Executive Branch's interference in the matter."92
89 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 75. ↩
90 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 73 ("[E]stoy convencida de que no hubo un real analisis legal."). ↩
92 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 73. ↩
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107. Dr. Briceño identifies two major errors inherent in the Constitutional Court's Opinion. The first of these she identifies as a violation of due process arising from the Constitutional Court's transgression and disavowance of the constitutional principle of “natural judge."93
108. The principle of “natural judge," so she explains, is a constitutionally embedded principle contained in Article 29 of the Colombian Constitution. That stricture commands that "[n]obody shall be judged except in conformance with legislation pre-existing the acts purportedly giving rise to the claim before a judge or tribunal of competent jurisdiction in compliance with the formal requirements of each case."94
109. Dr. Briceño observes that in the underlying case, Compto y Otros contra Fogafin y La Superintendencia Bancaria, the first instance (trial court level) natural judge was the Administrative Tribunal of Cundinamarca. She adds that the only second instance tribunal and final instance tribunal of last resort with respect to that proceeding, was the Council of State.95 From a procedural perspective no other appeal
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would have been possible, expect for one exception that was not there present.96
110. Dr. Briceño informs her opinion by noting that an exception to this single recourse would be an extraordinary appeal to the Constitutional Court “but only where present would be a violation of a constitutional principle, which, in my opinion, was not present."97
111. The second major deficit that Dr. Briceño observes as endemic to the Constitutional Court's ruling of May 26, 2011 (C-0023) concerns a complete disavowance to the principle of res judicata.98 Dr. Briceño illustrates the res judicata violations pursuant to a succinct but factually accurate rhetorical exercise:
82. Only by way of an illustrative exercise, let us count the number of appellate instances: (*) the Superintendency of Banking and FOGAFIN is one such appellate instance, but because of the delay in notification, best not to count it, (i) the Administrative Tribunal of Cundinamarca, (ii) the Council of
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State, (iii) the tutela registered with the First Instance of the Council of State, (iv) the tutela perfected with the Second Instance of the Council of State, (v) the tutela filed with the Constitutional Court, and (vi) the nullification vacatur perfected with the Constitutional Court.99
83. In light of the foregoing, two questions emerge: (i) is it the case that the judicial system in Colombia has six instances? and (ii) was it not enough for the Colombian government to lose on three occasions before the Council of State?100
Paragraphs 82 and 83 in the original Spanish language iteration read:
82. Sólo a manera de ejercicio, contemos las instancias: (*) la Superintendencia y FOGAFIN, pero dada la demora en la notificación no la contaremos, (i) el Tribunal Administrativo de Cundinamarca, (ii) el Consejo de Estado, (iii) la tutela de Primer Instancia en el Consejo de Estado, (iv) la tutela de Segunda Instancia ante el Consejo de Estado, (v) la tutela ante la Corte Constitucional, y (vi) el incidente de nulidad ante la Corte Constitucional.
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112. Upon posing these rhetorical questions, Dr. Briceño reasons that the queries make possible an understanding of the Bank’s underlying expropriation without compensation as a regulatory action that “was not a legal issue but rather a political and economic concern.”101 She adds that “the Council of State applied the rule of law, but that was not the government’s objective.”102
113. Likewise, she concludes that as to the Constitutional Court’s Order Denying the Council of State’s Motion to Vacate the May 26, 2011 Opinion, describing that ruling (C-0026) “as particularly shocking when one understands that in so ruling ‘the Constitutional Court violates its own jurisprudence.’”103 In this connection she explains that
The Motion to Vacate the Constitutional Court’s May 26, 2011 Opinion points to several propositions: (i) the concept of constitutional res
83. Dicho lo anterior, surgen dos preguntas: (i) ¿La justicia en Colombia tiene seis instancias? y (ii) ¿Al gobierno no le basto ser vencido tres veces en el Consejo de Estado?
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judicata is a tenet that must be observed ….,104 (ii) Article 243 of the Constitution provides that:
The judgments that the Court issues in the course of exercising its jurisdiction constitute res judicata. Similarly, Article 46 of Legislation 270 (1996) provides that: In applying Article 241 of the Constitution, the Constitutional Court shall adjudicate all issues before it subject to the totality of constitutional principles contained in the Constitution105
(iii) the Constitutional Court’s disavowance of its own precedent (Judgment C-252 (1994)) that concerned a matter where a rule was declared as unconstitutional in 1994, that is, seventeen years before the Constitutional Court issued the June 25, 2014 Order Denying the Council of
104 Id. ¶ 85 citing to Motion to Vacate filed by Mauricio Fajardo Gómez, President of the Council of State, at 33. ↩
105 Id., also citing to p 32 of the Motion to Vacate filed by Mauricio Fajardo Gómez, President of the Council of State. ↩
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State’s Motion to Vacate the May 26, 2011 Opinion.106
114. Dr. Briceño’s conclusion, after canvassing all of the operative papers and having firsthand knowledge of the proceedings as a Magistrate contemporaneously serving with the Council of State when this matter was aired, provides a succinct conceptual narrative of the proceedings’ aberrant and legally bankrupt nature:
The Council of State, an elite professional tribunal, concluded and determined that the Superintendency of Banking and FOGAFIN violated the law and, therefore, the Council of State found both agencies liable for the expropriation. This fact notwithstanding, the Constitutional Court, which is a very politicized tribunal, had the judges produce what was requested by the executive branch, that is to say, avoiding payment of the expropriation. Hence, four years after issuance of the Council of State’s Judgment, the Constitutional Court issued a ruling [i] contrary to law, [ii] contrary to
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jurisprudence, [iii] contrary to legal reasoning, [iv] even contrary to professional sense of shame, and [v] issued an opinion lacking in foundation, that [vi] set in disarray the entire Colombian rubric of administrative law, but that [vii] released the Colombian State from the obligation to tender compensation to those who were wronged, legal conduct that can be and [viii] defined as a theft. (emphasis in original, bold italics supplied)
Finally, on June 25, 2014, the Constitutional Court put an end to an administrative drama that had commenced on the night of October 2, 1998, arising from the abuse of authority that (i) the Superintendency of Banking, (ii) Fogafin, and (iii) the Central Bank, all had exercised.107
107 Id. ¶¶ 115-116, which in the Spanish language original read: ↩
115. El Consejo de Estado, que es un tribunal altamente profesional, determinó que la ley fue violada por la Superintendencia y Fogafin y luego condenó a ambas agencias a pagar la expropiación. Sin embargo, la Corte Constitucional que es un tribunal donde puede haber mayor injerencia política (pues tres de
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115. Scarcely five days from the May 26, 2011 issuance of the Constitutional Court’s Opinion, the Council of State held a plenary session requiring the presence of all Council of State Magistrates pertaining to the five chambers comprising that judicial authority.
su nueve magistrados son electos de una terna propuesta por el Presidente de la República), obtuvo de los jueces lo que solicitó al poder ejecutivo, es decir, evitar el pago de la expropiación. Así, cuatro años después de la opinión emitida por el Consejo de Estado, el Tribunal Constitucional falló en contra de la ley, la jurisprudencia, la lógica legal e incluso en contra de la vergüenza profesional, y emitió una opinión sin fundamento, que trastornó el derecho administrativo colombiano, pero que liberó al Estado colombiano de pagar una compensación a quienes sufrieron lo que hoy se puede definir como un robo.
116. Finalmente, el 25 de junio de 2014, la Corte Constitucional puso fin a un drama administrativo que comenzó la noche del 2 de octubre de 1998, con el abuso de poder ejecutado por la Superintendencia de Bancos, Fogafin y el Banco de la República.
(emphasis in original)
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116. The minutes of that session titled: “Acta No. 15 Sala Plena de lo Contencioso Administrativo 31 de mayo de 2011” (“the Minutes”) were signed by Magistrate Mauricio Fajardo Gómez (President of the Council of State) and Juan Enrique Bedoya Escobar (Secretary General of the Council of State).108
117. This document represents memorialized testimony contemporaneously authored at the time of case-dispositive material events to this proceeding that establishes the extraordinary character of the Constitutional Court’s May 26, 2011 Opinion.109
118. The Minutes bespeak (i) a profoundly serious institutional crisis concerning the State’s entire judiciary, and (ii) a need to defend the
108 A true and correct copy of the Acta No. 15 Sala Plena de lo Contencioso Administrativo 31 de mayo de 2011, is here attached as C-0029. Dr. Briceño comments on these minutes in her Expert Report, see Expert Report Dr. Martha Teresa Briceño de Valencia ¶¶ 22-41. ↩
109 This document is being introduced at this time for purposes of the Tribunal’s examination of jurisdiction because Claimant asserts that if the factual allegations and premises presented are assumed to be true for purposes of testing the legal sufficiency of the treaty standard validations where alleged as part of a jurisdictional determination, it will follow that Claimant has established, let alone sufficiently alleged as matter of pleading, more than the requisite prima facie showing, as more fully stated below. ↩
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integrity of basic principles of judicial sovereignty. This evidence demonstrates that at issue here before this Arbitral Tribunal is more than an irregular misguided adjudication that by way of consequence deprived Claimant of at least USD 114,183,417.80. More is involved. The Constitutional Court’s actions, commencing with its May 26, 2011 Opinion and culminating with the June 25, 2014 Order Denying the Council of State’s Motion to Vacate, represent an extreme example of judicial activism that manifestly constitutes radical abuse of authority. For this reason it defies all reasonable expectations.
119. Much is revealed in the very succinct first exchange recorded. The first speaker, Dr. Ramirez de Páez, resorting to a colloquialism makes clear that the matter at hand is not only the appropriate subject matter of a plenary session but rather of “the most plenary of plenary sessions.”110
120. At the plenary session that discussion sought reactions and a course of action. Six comments are particularly relevant at this jurisdictional phase for purposes of testing the averments and evidence presented and
110 C-0029 at 6. Dr. Ramirez de Páez is recorded as saying “Dra. Ramirez de Páez piensa que el tema es sala plenísima.” (emphasis supplied) ↩
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consideration of the extent to which, at minimum, a prima facie case has been asserted.
121. First, Dr. Giraldo is represented in the Minutes as having “expressed great concern that the trainwreck is more alive than ever because the agreement among gentlemen has been breached and, therefore, this Chamber must address the issue.” He is also credited with sharing Dr. Ostau de Lafont’s opinion regarding “the need for the Council of State to understand that its constitutional jurisdiction also entails safeguarding the fundamental rights before it.”111
122. Second, Dr. Gil Botero and Dr. Ramirez de Páez are cited as asserting that “an institutional response is necessary.”112 Both of these Magistrates, according to the minutes, share the concern that “the encroachment of the Constitutional Court’s jurisdiction is disconcerting because it delegitimizes the jurisdiction of the Council of State and ignores that the Council of State is a Tribunal of equal hierarchy to the Constitutional Court.”113
123. Third, the understandable concern arising from the Constitutional Court’s
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encroachment on the Council of State’s jurisdiction is emphatically voiced by Dr. Alfonso Vargas Rincón. That entry reads:
Dr. Vargas Rincón considers that, as to the Council of State’s Fourth Chamber, the Constitutional Court is tearing away at the constitutionally based jurisdiction of the Fourth Chamber’s Contencioso Administrativo, and [Dr. Vargas Rincón] opines that a vacatur proceeding directed at the Constitutional Court’s Order should ensue and set forth in that paper the reasons why the Constitutional Court’s Order is completely devoid of legitimate premises.114
124. Fourth, the need to defend the Council of State’s institutional integrity is voiced by Dr. Ortiz de Rodriguez. She is attributed as having
114 Id. The Spanish language original reads: ↩
Dr. Vargas Rincón considera que en el caso de la Sección Cuarta la Corte Constitucional le está arrebatando la competencia que la Constitución le da al Contencioso Administrativo y cree que procesalmente se puede proponer un incidente de nulidad y luego si exponer las razones por las cuales carece de todo efecto la sentencia de la Corte.
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expressly stated the concern that the “Council of State’s institutionality must be defended.” She adds that how to proceed has to be carefully considered “because it is likely that a course of action has to be undertaken so that the Council of State’s Judgment arising from the Contenciosa Administrativa [are respected] [by the Constitutional Court].115
125. Fifth, along the lines of Dr. Ortiz de Rodriguez, the Minutes credit Dr. Gómez Aranguren with the extraordinary and arresting observation that “at stake is the very institutionality of the country and the configuration of a reliable and credible judicial order,” [Dr. Gómez Aranguren] suggests “directly speaking with the members of the Constitutional Court in order to ensure that they are aware of the
The Spanish language original reads:
Dra. Ortiz de Rodriguez considera que hay que defender la institucionalidad del Consejo de Estado pero invita a la reflexión en ese punto, porque seguramente habrá que tomar alguna decisión para que se respeten los fallos en la jurisdicción contenciosa administrativa, pero pone de presente la discusión que se acaba de dar con el proyecto de la Dra. Garcia.
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institutional risk that the Constitutional Court’s ruling implies.”116
126. Sixth and finally, a second intervention is attributed to Dr. Vargas Rincón. This entry states that Dr. Vargas Rincón “insisted that the issue concerning the plenary contentious Administrative Chamber should be addressed by the President of the Council of State by filing a Motion to Vacate [the Constitutional Court’s] Order, based upon lack of jurisdiction.” He is further paraphrased as suggesting that “if the [Motion to Vacate] does not gain traction, [the Council of State] should issue a ruling that the Constitutional Court’s Order is of no moment [void] and [the Council of State] should proceed to secure the file.”
The Spanish language original reads:
Dr. Gómez Aranguren comenta que su posición en la Sección Segunda ha sido la de la posibilidad de que el juez se equivoque y la de que racionalmente sea el mejor argumento el que prevalezca para la justicia. Piensa que está por medio la institucionalidad del país y la configuración del orden jurídico cierto y creíble, sugiere hablar con los miembros de la Corte Constitucional y que ellos sean conscientes de riesgo institucional que esto implica.(emphasis supplied)
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127. The Minutes (see C-0029) as well as Dr. Vargas Rincón’s Witness Statement should be considered by this Tribunal at the jurisdictional phase as part of its analysis concerning the extent to which the allegations that Claimant has advanced, if proven, would give rise to violations of the TPA’s substantive protection standards. The Minutes and Dr. Vargas Rincón’s Expert Report are relevant to that determination particularly in the context of fair and equitable treatment, denial of justice, and expropriation.
128. Magistrate Judge Alfonso Vargas Rincón, the only Magistrate Judge of the Council of State to have been cited twice in the Minutes (C-0029), has issued an Expert Report in this proceeding.117 As such, the Arbitral Tribunal is encouraged to consult it in its totality.
117 Expert Report Dr. Alfonso Vargas Rincón. ↩
See C-0029 at 7. The Spanish language original reads:
Dr. Vargas Rincón insiste en que el tema es de plena contenciosa y que por ahora el Sr. Presidente proponga un incidente de nulidad de esa sentencia, por falta de competencia, y si
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129. Hardly can its subject matter be reduced to only three premises.
130. For present purposes, however, Claimant respectfully requests that the Arbitral Tribunal consider the three following propositions pertaining to Magistrate Judge Vargas Rincón’s Expert Report: (i) the Minutes are but a synthesis of a protracted, extensive, and ongoing discussion that all members of the Council of State are still engaged in. In this connection, the Minutes that represent a comprehensive framework fully setting forth the breadth and depth of the institutional concerns pertaining to the crisis that the Constitutional Court’s May 26, 2011 Opinion precipitated, (ii) the Constitutional Court’s usurpation of the Council of State’s jurisdiction, and (iii) the egregious nature of the Constitutional Court’s Opinion, which ratifies a decision-making regime that is devoid of fundamental due process, and which disavows established positive law, as well as the Constitutional Court’s own binding precedent on rudimentary issues that are both universally and nationally (the Republic of Colombia) accepted and ratified.
no prospera emitir un auto dejando sin efectos el pronunciamiento de la Corte y ordenar el archivo del asunto.
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131. With respect to the first of these three propositions Magistrate Judge Vargas Rincón, without limitation, observes:
Recuerdo de manera especial el ambiente de preocupación en esa sesión. Queda vivo el recuerdo en la memoria por la consternación que produce una decisión que deja sin efectos jurídicos una sentencia del Consejo de Estado. Es importante mencionar que el acta de la reunión es solo un resumen de lo tratado en la sesión, sin embargo, no transmite las emociones y énfasis con que se expresaron los magistrados.118
118 See Expert Report Dr. Alfonso Vargas Rincón ¶ 27. ↩
The English language translation reads:
I particularly remember the atmosphere of concern during that session. The memory remains alive due to the consternation produced by a decision that leaves a judgment of the Council of State without juridical effects. It is important to mention that the meeting minutes are just a summary of what was covered during that particular session. However, the meeting minutes do not relay the emotions and the emphasis with which the magistrate conveyed their message.
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132. Magistrate Judge Vargas Rincón’s testimony in this regard speaks to the national institutional complexities of the challenges stemming from the Constitutional Court’s May 26, 2011 and June 25, 2014 Opinions.
133. As to the second proposition contained in the Expert Report here highlighted, Magistrate Judge Vargas Rincón eloquently expresses the manner in which (i) the Constitutional Court usurped the Council of State’s jurisdiction, in part, by addressing non-constitutional questions and acting as “juez natural,” and (ii) disavowing the Council of State’s status as a tribunal of last resort from which no appeal can be had, on contentious administrative matters.
134. There is no substitute for the Magistrate Judge’s own narrative in this regard:
En cuanto a mi participación y así aparece consignado en el acta, dije que en ‘el caso de la sección cuarta [Granahorrar contra Fogafin] la Corte Constitucional le está arrebatando la competencia que la Constitución le da al contencioso administrativo y… procesalmente se puede proponer un incidente de nulidad y luego sí exponer las razones por las cuales carece de todo efecto la sentencia de la Corte.’ (énfasis añadido)
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Lo anterior, por cuanto (i) la Corte estaba arrebatando la competencia al Consejo de Estado, (ii) competencia que derivaba de la Constitución Política, (iii) por tanto, debía presentarse un incidente de nulidad (que se presentó), y (iv) exponer por qué la opinión de la Corte Constitucional carecía de todo efecto.119
135. This usurpation of authority is of consequence far beyond the merits of the present dispute. It, however, is particularly relevant to this case at this bifurcated jurisdictional juncture
119 See Expert Report Dr. Alfonso Vargas Rincón ¶¶ 30-31. ↩
The English language translation reads:
Regarding my participation and as it appears on the record, I said that in “the case of the fourth section [Granahorrar against Fogafin] the Constitutional Court is taking away the competence that the Constitution gives to the administrative litigation and (...) procedurally it can propose a nullity incident and then state the reasons why the Court’s judgment has no effect.” (Emphasis added)
The foregoing, inasmuch as (i) the Court was seizing jurisdiction from the Council of State, (ii) jurisdiction deriving from the Political Constitution, (iii) therefore, a nullity incident must be presented (which was presented), and (iv) explain why the opinion of the Constitutional Court lacked any effect.
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because it helps to establish that Claimant has far exceeded its pleading requirement of alleging facts that, if true, would establish clear violations of the TPA. Such is the case here with respect to Expropriation, Denial of Justice, as well as Fair and Equitable Treatment.
136. Third, Magistrate Vargas Rincón addresses with considerable particularity the Constitutional Court’s abandonment of due process and disavowance of its own precedent. On this subject he aptly notes:
No era la primera vez que esto sucedía, era la segunda o la tercera oportunidad en que la Corte Constitucional dejaba sin efectos una sentencia del Consejo de Estado. Lo que fue inédito consistió en que la Corte Constitucional llegara al extremo de dejar ‘sin valor y efectos jurídicos’ una sentencia del Consejo de Estado. Esto porque conforme a la tradición jurídica, la Corte Constitucional sólo podía sugerir al Consejo de Estado que procediese a la revisión de la sentencia, pues conforme a la estructura jurídica interna, el Consejo de Estado es el órgano de cierre. La orden en ese sentido implicaba que la Corte
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Constitucional fuera un tribunal de una instancia superior y conforme a nuestro ordenamiento jurídico no era posible. Se trata de dos órganos con el mismo rango constitucional, cada uno con su marco de competencia definido.
El tema sometido a consideración fue especialmente sorpresivo pues con anterioridad la Corte Constitucional no había considerado tutelas de contenido económico financiero.120
120 See Expert Report Dr. Alfonso Vargas Rincón ¶¶ 28-29. ↩
The English language translation reads:
It was not the first time that this happened; it was the second or third opportunity in which the Constitutional Court voided a sentence of the Council of State. This time, however, the Constitutional Court went so far as to leave a judgment of the Council of State “without effect and legal value”. This is because in accordance with legal tradition, the Constitutional Court could only suggest to the Council of State to proceed to review an opinion, because according to the internal legal structure, the Council of State is a judicial closing institution. The order implied that the Constitutional Court was a higher court and according to our legal system that was not true. These are two bodies with the same constitutional rank, each with its defined competence framework.
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137. Magistrate Judge Vargas Rincón’s Expert Report, without more, let alone in the context of the Expert Reports that Dr. Martha Teresa Briceño de Valencia, Professor Loukas Mistelis, and Professor Jack J. Coe, Jr., contributed, demonstrates that the Constitutional Court’s May 26, 2011 and June 25, 2014 pronouncements both violate the TPA and cannot be sustained under any reasonable analysis of fact, law, equity, or reason.
138. Prof. and Associate Justice of the Constitutional Court Luis Fernando López-Roca has presented an Expert Opinion in this case.121 While Professor López-Roca’s Expert Opinion primarily addresses the abusive and excessive nature of FOGAFIN’s and the Superintendency’s
The matter under analysis was especially surprising because previously the Constitutional Court had not considered protections of financial-economic content.
121 See Expert Report Professor Luis Fernando López-Roca ¶ 4. ↩
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regulatory mishaps giving rise to the judicial proceedings that are the subject matter of this case, he too opines as to the Constitutional Court’s usurpation of the Council of State’s jurisdiction that deprived Claimant of a liquidated damages award in the amount of USD 114,183,417.80. Prof. López-Roca specifically notes that the Constitutional Court, of which he is an Associate Justice, engaged in at least two major acts of judicial activism that are indefensible.
139. First, he observes that the Constitutional Court erred with respect to its “Constructive Notice” hypothesis, constituting an abuse of its judicial authority, far beyond just a mere error of law. He specifically notes that:
In this case, the Cure Notice and the reduction of capital to 0.01 COP were never notified to the shareholders and, therefore, (i) was not effective, (ii) could not have triggered the running of applicable limitations periods, and, therefore, (iii) the claims never expired.
These propositions were underscored by the Tribunal Administrativo de Cundinamarca, as well as the Council of State. In fact, only the Constitutional Court turned a blind eye and a deaf ear to these premises.
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It did so, in my opinion, without having jurisdiction at all over the matter because the Council of State’s Judgment represents the highest and final appellate instance with respect to Contencioso Adminitrativo in the country. For this reason, it is not possible to secure an appeal from the Council of State to any other or higher instance.122
140. As Dr. Briceño testified, the Constitutional Court is an extremely political institution.123 It is not separate and distinct in practice from the Executive Branch.124 It,
122 Expert Report Professor Luis Fernando López-Roca ¶ 121. The Spanish language original reads: ↩
En nuestro caso, el acto nunca fue notificado a los accionistas y, por tanto, (i) no fue eficaz, (ii) no comenzaron a correr los plazos y, en consecuencia, (iii) nunca hubo caducidad. Cosa se señalasen, tanto como el Tribunal Administrativo de Cundinamarca como el Consejo del Estado y que solo fue desconocido por la Corte Constitucional, a destiempo, en mi opinión, pues la decisión del Consejo de Estado como máxima autoridad contencioso administrativa del país, no tenía alzada ni recurso alguno. (emphasis in original)
123 See Expert Report Dr. Martha Teresa Briceño de Valencia ¶ 115. ↩
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therefore, follows that they would ratify the excessive exercise of the State’s regulatory sovereignty through the Superintendency and FOGAFIN. Those regulatory abuses cannot be reconciled and legitimized except by a corresponding abuse of the State’s exercise of judicial sovereignty. Prof. López-Roca’s Expert Report clearly underscores this proposition.
141. In this connection he states:
The notification [Cure Notice and notice of the reduction of capital to 0.01 COP] clearly should have been in keeping in with dispositive law on the subject. Therefore, having instead opted to notify the Bank’s Legal Representative as a methodology for notifying the shareholders was a glaring error that first was identified by the Tribunal Administrativo de Cundinamarca, and later by the Council of State. Both of these Tribunals opined that neither the Cure Notice nor the devaluation of shares to a value of 0.01 COP were notified and communicated to the shareholders. Therefore, the judicial action filed on July 28, 2000 in effect was timely filed. To assert the contrary, as the Constitutional Court
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set forth, and to suggest that it was so through constructive notice (“hecho notorio”), and hence notice had been effective since October 3, 1998, with all due respect represents an irrational proposition.125
142. Second, Prof. López-Roca, in addition to agreeing with Justice Rojas Ríos’ dissent,126 also finds that the Constitutional Court’s Opinion (i) is without foundation, (ii) disavows the Constitutional Court’s own precedent, and (iii) is
125 See Prof. López-Roca Expert Report ¶ 125. (emphasis in original) ↩
The Spanish language original reads:
La notificación claramente debía haberse ajustado a la ley. Por tanto, haber optado por la vía de la notificación al Representante Legal para dar por notificados a los accionistas era un error garrafal, como lo reconocieron el Tribunal Administrativo de Cundinamarca, primero, y el Consejo de Estado, más tarde, quienes dijeron que los actos no habían sido notificados a los accionistas. Por tanto, la demanda, incoada el 28 de julio de 2000, fue presentada en tiempo hábil. Decir lo contrario, como la Corte Constitucional sostuvo, y señalar incluso que era un hecho notorio y que el acto era eficaz desde el 3 de octubre de 1998, era, con todo respeto, una sinrazón.
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but a politically-driven tour de force that aspires to protect a windfall to the State arising from what was first an illicit regulatory expropriation that morphed into a judicial taking.127
143. He specifically states:
The Constitutional Court, supporting without any foundation whatsoever the State’s interests, reversed the judgment that a final appellate instance, the Council of State, issued, and changes its own [the Constitutional Court’s] jurisprudential precedent, all probably in order to prevent the government from finding itself [the government] obligated to pay damages to private individuals that, to make matters worse, are foreigners [the U.S. Shareholders].
Even today [as of the time of this writing], the news media reports concerns over having to pay for the expropriation of GRANAHORRAR in order to avoid the State finding itself obligated to pay damages to individuals, which to make matters worse, are foreigners [the U.S.
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Shareholders], or as more aptly stated by Magistrate Rojas Ríos in his dissenting opinion, ‘an expropriation without compensation.’128
144. Commenting on the regulatory expropriation that led to the judicial expropriation by dint of the Constitutional Court’s May 26, 2011 Opinion, Prof. López-Roca identifies three extremely important financial gains redounding to the benefit of Colombia that pressured the Constitutional Court into exercise of an extreme judicial activism impervious to the most rudimentary control precepts such as adherence to the rule of law, respect for fundamental due process, deference to stare decisis in the form of
The Spanish language original reads:
Entonces, la Corte Constitucional, respaldando sin ningún fundamento de los intereses del Estado, revoca la sentencia de última instancia del Consejo del Estado y cambia su propio precedente jurisprudencial, probablemente para evitar que el gobierno se vea obligado a pagar por los daños causados a unos particulares que – para más señas – son extranjeros. Todavía hoy, las noticias se preocupan por lo que habría que pagar por la oficialización de GRANAHORRAR, por aquello que el Magistrado Rojas Ríos denominó una expropiación sin indemnización, en su salvamento de voto. (citation omitted)
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binding legal precedent, deference to a peer judicial authority of equal hierarchy, and respect for the limits on a high court’s jurisdiction.
145. Prof. López-Roca first observes that the expropriation caused the State “to earn” revenues arising from having taken over all of the Bank’s guaranties. He notes that there is no precedent of FOGAFIN and the Central Bank posting gains by virtue of this methodology, or analogous concept.129
146. Third, Colombia earned income from servicing the guaranties (capital and interest).130
147. Fourth and finally, on November 1, 2005 the Government of Colombia sold GRANAHORRAR to BBVA for USD 423,000,000.131
148. When this sum, Prof. López-Roca adds, is compared to the State’s contribution of COP 157 millardos (the equivalent to USD 99,795,000), representing a net gain of USD 323,205,000, he notes that this figure was transformed into a net per annum earning during
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the corresponding seven-year timeframe of USD 46,172,000 (each year).132
149. Prof. López-Roca’s Expert Opinion spills considerable ink throughout 138 paragraphs to establish the proposition that (i) the Guaranty Restructuring Program, (ii) the Clause, (iii) the devaluation of GRANAHORRAR’s share value to 0.01 COP, (iv) the Cure Notice, and (v) the wholesale disavowance of due process on the part of FOGAFIN and the Superintendency, constitute extreme, unforeseeable, and highly-politicized events far beyond that ambit of administrative discretion or applicable law.133
150. These aberrant regulatory actions find no precedent, cannot be justified as existing within the law, and are lacking in internal economic coherence. Prof. López-Roca believes them to be politically-driven.134
151. He opines that the Council of State’s November 1, 2007 Judgment aptly corrected a wrong.135 This “corrective measure,” emanating from a specific jurisdiction judicial authority that is the highest ranking in Colombia, in turn
132 Id. ¶ 138(i)-(iii). See also n.63. ↩
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deprived the government of approximately USD 300,000,000 and placed in high relief the regulatory abuse of authority that FOGAFIN and the Superintendency exemplified.136
152. Hence, Prof. López-Roca reasons, the Executive Branch pressured its political judicial counterpart “to overrule” the Council of State as a way of placing an imprimatur of legitimacy and legality on what otherwise cannot be characterized as anything but an abuse and excessive application of authority.137
153. Prof. López-Roca’s Expert Opinion also should be considered in this jurisdictional phase as testimony and authority in support of Claimant’s allegations, which, if true, would establish violations of the TPA’s substantive protections.
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144. Hardly is there unanimity among arbitral tribunals concerning the burden of proof attaching to a Respondent’s jurisdictional challenge. Basic academic integrity compels underscoring this conceptual state of affairs. Indeed, Arbitral Tribunals have found that even where Respondent has “raised specific jurisdictional objections, it is not for the Respondent to disprove [t]he Tribunal’s jurisdiction.”138
145. These tribunals reasoned that “[u]nder international law, as a matter of legal logic and the application of the principle traditionally expressed by the Latin maxim ‘actori incumbit probatio,’ it is for the Claimant to discharge the
138 National Gas S.A.E. v. Arab Republic of Egypt, ICSID Case No. ARB/11/7, Award, April 3, 2014, ¶ 118. ↩
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burden of proving all essential facts required to establish jurisdiction for its claims.”139
146. They draw absolutely no distinction between (i) actual allegations that are jurisdictional, (ii) a hearing on jurisdiction and one on the merits, (iii) the consequences arising from grant and denial of a jurisdictional challenge, (iv) an allegation seeking affirmative relief and an averment pleading jurisdiction, or (v) the logic attendant to the affirmative assertion of a defense stating that there is no jurisdiction.
147. This approach, which is laced with multiple untested assumptions, leads to the necessary conclusion that “[s]uch jurisdictional facts are not here subject to any ‘prima facie’ evidential test; and, in any event, that test would be inapplicable at this stage of the arbitration proceedings where the Claimant (as with the Respondent) had sufficient opportunity to adduce evidence in support of its case on the bifurcated jurisdictional issues and for the Tribunal to make final decisions on all relevant disputed facts.”140
148. Glossing over foundational distinctions blurs material presumptions endemic
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to procedural and substantive adjudications, among other considerations.
149. Other Tribunals simply hold that for purposes of assessing a jurisdictional challenge neither Claimant nor Respondent bear the burden of proof. Even though “it is undisputable that [a] Tribunal determines its jurisdiction without being bound by the argument of the parties.”141
150. These Tribunals enshrine this principle to the detriment of a more flexible analysis that would seek equipoise between the need to ensure that courts and tribunals are not flooded with claims which have no chance of success or may even be of an abusive nature on the one side, and the necessity ‘to ensure that in considering issues of jurisdiction, courts and tribunals do not go into the merits of cases without sufficient prior debate’ on the other.142
151. Moreover, this methodology rests on the less than clear untested assumption that procedural differences between the parties, i.e.,
141 Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID Case No. ARB/05/7, Decision on Jurisdiction and Recommendation on Provisional Measures, March 21, 2007, ¶ 90. ↩
142 See, e.g., Impregilo S.p.A v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3 (decision on jurisdiction) (April 2005), ¶ 254. ↩
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“Claimant” and “Respondent” does not matter, nor does the distinction between proof, allegations, substantive issues, or procedural queries. The Tribunal’s reasoning in Muhammet Çap v. Turkmenistan143 is emblematic of this approach.
152. In that proceeding the Tribunal addressed the construction and meaning applicable to Art. VII of the BIT between Turkey and Turkmenistan, which at a literal level appeared to command a mandatory obligation to litigate issues arising from the BIT before the appropriate judicial authority in Turkmenistan as a condition precedent to the filing of an arbitral claim.
153. The Tribunal announced that it “does not accept that the burden of proof in respect of jurisdiction is on either Party. Rather, the Tribunal must determine whether it has jurisdiction, and the scope of its jurisdiction, on the basis of all the relevant facts and arguments presented by the Parties.”144
143 Muhammet Çap Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case No. ARB/12/6, Decision on Respondent’s Objection to Jurisdiction under Article VII(2) of the Turkey-Turkmenistan Bilateral Investment Treaty, February 13, 2015. ↩
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154. The Tribunal set forth its methodology, which is bereft of any consideration of (i) the procedural posture of the case, (ii) otherwise applicable burdens and presumptions, and (iii) the relative weight to be accorded to jurisdictional pleadings and actual proof. In this regard, the determination was based in the abstract with the indirect suggestion of the particularity of the actual case before it in a fleeting boilerplate reference to “all the evidence on the record.” Instead, the Tribunal references a balancing test that only contains a basic order of proof. There is no substitute for the Tribunal’s own language:
120. In this respect, in the first instance it is for Claimants to show that the relevant requirements for the Tribunal’s jurisdiction are present, including consent to arbitration.
Consent cannot be presumed and its existence must be established. By corollary, in this case, where Respondent is challenging jurisdiction, it has to adduce evidence to support its objections. Accordingly, the Tribunal has to weigh the evidence and arguments from both Parties to determine on balance whether it has jurisdiction in this matter.
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121. In this case, the Tribunal has to interpret the meaning of a treaty provision in accordance with the rules of interpretation of the Vienna Convention. Accordingly, in reaching its conclusion, and for the reasons given below, the Tribunal has taken into consideration the language used in the authentic texts of Article VII(2), the circumstances under which the BIT was concluded, the opinions expressed by the linguistics and other experts in their reports and at the hearing, and the legal rules of construction. The Tribunal has reached its conclusions on the basis of all the evidence in the record.145
155. A modified iteration of this standard is articulated scarcely one year later by the Tribunal in Spence Int’l v. Costa Rica.146 In that proceeding the Tribunal just added the word “burden” to what otherwise would be an analysis indistinguishable from that applied in Muhammet Çap v. Turkmenistan:
146 Spence International Investments, LLC, Berkowitz, et al. v. Republic of Costa Rica, ICSID Case No. UNCT/13/2, Interim Award, October 25, 2016, ¶ 239. ↩
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239. Two preliminary observations are warranted. First, the Tribunal observes that it is for a party advancing a proposition to adduce evidence in support of its case. This applies to questions of jurisdiction as it applies to the merits of a claim, notably insofar as it applies to the factual basis of an assertion of jurisdiction that must be proved as part-and-parcel of a claimant’s case. The burden is therefore on the Claimants to prove the facts necessary to establish the Tribunal’s jurisdiction. If that can be done, the burden will shift to the Respondent to show why, despite the facts as proved by the Claimants, the Tribunal lacks jurisdiction.147
156. Still, other Tribunals have elected to distinguish between and among “facts that have relevance specifically to the jurisdictional question only and facts that also are relevant for establishing the existence of claims that go to the substance of the dispute.”148 Pursuant to this
147 Muhammet Çap v. Turkmenistan, ¶ 120. ↩
148 Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/20, Award, April 26, 2017, ¶ 65. ↩
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analysis a claimant’s allegations concerning jurisdiction are not accorded any value or presumption of correctness. Under this approach the Tribunal rejects the proposition that Claimant’s jurisdictional allegations are to be taken as true as a predicate to testing whether if in fact they are so jurisdiction would attach. Rather, it “distinguish[es] between …different sets of facts with regard to the burden of proof.”149 The Tribunal in Blue Bank International and Trust (Barbados) Ltd in adopting this methodology stripped Respondent of any burden or presumption incident to a jurisdictional challenge. This methodology is aberrant.
157. The Blue Bank International and Trust (Barbados) Ltd Tribunal’s approach does not take into account any burden on the part of a respondent that advances a jurisdictional challenge. To the contrary, it places the entire burden on the claimant excising at the jurisdictional stage only a Claimant’s obligation to prove from an evidentiary perspective merits related facts:
66. However, in the Tribunal’s view, it is necessary to distinguish between these different sets of facts with regard to the burden of proof. All
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facts that are dispositive for purposes of jurisdiction must be proven at the jurisdictional stage. In this regard, the Claimant bears the burden of proving the facts required to establish jurisdiction, insofar as they are contested by the Respondent. By contrast, facts that are relevant to the merits of the Claimant’s claims, such as whether there has been a Treaty breach, whether liability has been incurred, whether the Claimant has suffered indemnifiable damages and, if so, what is the amount of liability (quantum), are all matters on which the Claimant does not need to discharge a burden of proof at the jurisdictional stage.150
158. The four standards and methodologies identified in (i) National Gas S.A.E. v. The Arab Republic of Egypt, (ii) Muhammet Çap v. Turkmenistan, (iii) Spence International Investments, LLC, Berkowitz, et al. v. Republic of Costa Rica, and (iv) Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, are distinct but profoundly related. They share two common denominators.
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159. First, these analyses do not distinguish between a burden of proof that concerns allegations seeking affirmative relief and a different standard of proof pertaining to allegations asserting legal and factual bases for the exercise of jurisdiction on the part of an arbitral tribunal. These distinctions are material and amply recognized by international law and the vast majority of national legal systems. It should not be ignored, in part, because it is related to the fundamental policy of providing parties with presumptions that would favor access to a merits hearing.
160. Second, the four methodologies and standards turn a blind eye to the disparate consequences arising from the grant or denial of a jurisdictional challenge. To state the obvious proposition that is not considered, grant of a jurisdictional challenge represents an end to the case and forecloses on technical grounds the possibility of airing what otherwise may be meritorious claims. It is for this reason that international law and the law of the overwhelming majority of national systems conceptually provide claimants with an expansive rather than a restrictive presumption of truth with respect to jurisdictional allegations.
161. Only upon a showing that under no rational hypothesis of law or fact can a claimant
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plead the requisite jurisdictional averments, should a jurisdictional challenge be sustained. The majority of Arbitral Tribunals have adopted a methodology and standard that incorporates these concerns.
162. In determining the burden of proof at the jurisdictional stage, the majority of investor-State Arbitral Tribunals have followed the test set forth by Judge Rosalyn Higgins in her separate opinion in the Case Concerning Oil Platforms (Islamic Republic of Iran v. United States of America), before the International Court of Justice.151
151 Case Concerning Oil Platforms (Islamic Republic of Iran v. United States of America), 1996 ICJ 803, 856, ¶¶ 32-34, December 12, 1996 (Separate Opinion of Judge Higgins). ↩
See, e.g., Tidewater Investment SRL and Tidewater Caribe C.A. v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5 (Award) (March 2015), ¶ 84 (noting standard); David Minnotte and Robert Lewis v. Republic of Poland, ICSID Case No. ARB(AF)/10/1 (Award) (May 2014), ¶ 143 (“The Oil Platforms test, applied by tribunals in cases such as Impregilo v. Pakistan, requires the tribunal to ask, not whether the claims do disclose violations of the treaty, but rather whether the claims are capable of amounting to
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violations of the treaty on the basis of the facts alleged by the claimant, so that the tribunal has jurisdiction to entertain those claims.”); Ambiente Ufficio S.P.A. and others (case formerly known as Giordano Alpi and others) v. Argentine Republic, ICSID Case No. ARB/08/9 (decision on jurisdiction and admissibility) (February 2013), ¶¶ 537-540; SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29 (decision on jurisdiction) February 2010), ¶¶ 43-51 (adopting the Higgins test and observing that “[i]t is equally well accepted that, for jurisdictional purposes, it is sufficient that the facts as asserted by Claimant, if proven, could (not would) violate the provisions of the BIT.”) (emphasis in original); The Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/06/3 (decision on respondent’s preliminary objections to jurisdiction and admissibility) (April 2008), ¶ 75 (“The issues of fact are ones which the Respondent bears the burden of proving according to the requisite standard, in order to sustain the claims of law it bases on them.”); Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID Case No. ARB/05/07 (decision on jurisdiction and recommendation on provisional measures)(March 2007), ¶ 85 (“The Tribunal agrees with this test, which is in line with the one proposed by Judge Higgins in her dissenting opinion in Oil Pratforms.”); Telenor Mobile Communications A.S. v. Republic of Hungary, ICSID Case No. ARB/04/15 (Award) (September 2006), ¶ 68 (“The onus is on the Claimant to show what is alleged to constitute expropriation is at least capable of so doing. There must, in other words, be a prima facie case that the BIT applies.”); Pan American Energy, LLC, et al. v. Argentine Republic, ICSID Case No. ARB/03/13, (decision on preliminary objections) (July 27, 2006), ¶ 50 (noting that “a claimant should demonstrate that prima facie its claims fall under the relevant provisions of the BIT for the purposes of jurisdiction of the Centre and competence of the tribunal (but not whether the claims are well founded).”; Jan de Nul N.V., et al. v.
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Egypt, ICSID Case No. ARB/04/13, (decision on jurisdiction) (June 2006), ¶¶ 69-71 (stating that Claimant must present a prima facie case on the merits); Canfor Corporation v. United States; Terminal Forest Products Ltd. v. United States (in the Consolidated Arbitration Pursuant to Article 1126 of the North American Free Trade Agreement (NAFTA) and the UNCITRAL Arbitral Rules), (decision on preliminary questions) (June 6, 2006), ¶ 176 (“However, where a respondent State invokes a provision in the NAFTA which, according to the respondent, bars the tribunal from deciding on the merits of the claims, the respondent has the burden of proof that the provision has the effect which it alleges.”); Bayindir Insaat Turizm Ticaret Ve Sanayai A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, (decision on jurisdiction) (November 14, 2005), ¶¶ 195-196 (citing to the Higgins test and authority applying it); Impregilo S.p.A v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3, (decision on jurisdiction) (April 2005), ¶ 239, n.103 (“In her separate Opinion, Judge Higgins proposed the following approach: 'The only way in which, in the present case, it can be determined whether the claims of [Claimant] are sufficiently plausibly based upon [t]he ... Treaty is to accept pro tem the facts as alleged by [Claimant] to be true and in that light to interpret [the Treaty] for jurisdictional purposes, that is to say, to see if on the basis of [Claimant's] claims of fact there could occur a violation of one or more of them”)(citations omitted); Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, (decision on jurisdiction) (February 8, 2005), ¶¶ 118-119 (observing that “[a]s regards the burden of proof on the Respondent's jurisdictional objection, the Tribunal adopts the test proffered by Judge Higgins in her separate opinion in the Oil Platforms Case.”); Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case No. ARB/03/28, (decision of the ad hoc committee) (March 2011), ¶¶ 117-118.
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163. As stated by the Tribunal in Saipem S.p.A. v. The People’s Republic of Bangladesh, “[t]he test strikes a fair balance between a more demanding standard which would imply examining the merits at the jurisdictional stage, and a lighter standard which would rest entirely on the Claimant’s characterization of its claims.”152
164. In Oil Platforms, Judge Higgins set forth the test as follows:
The only way in which, in the present case, it can be determined whether the claims of [Claimant] are sufficiently plausibly based upon the ... [t]reaty is to accept pro tem the facts as alleged by [Claimant] to be true and in that light to interpret [the relevant Articles of the Treaty] for jurisdictional purposes — that is to say, to see if on the basis of [Claimant’s] claims of fact there could occur a violation of one or more of them.153
165. Further, Judge Higgins explained:
The Court should...see if, on the facts as alleged by [Claimant], the
152 See Saipem v. Bangladesh, ¶ 85. ↩
153 Case Concerning Oil Platforms, ¶32. ↩
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[Respondent’s] actions complained of might violate the Treaty articles. Nothing in this approach puts at risk the obligation of the Court to keep separate the jurisdictional and merits phases... and to protect the integrity of the proceedings on the merits.... What is for the merits — and which remains pristine and untouched by this approach to the jurisdictional issue — is to determine what exactly the facts are, whether as finally determined they do sustain a violation of [the Treaty] and if so, whether there is a defense to that violation.... In short, it is at the merits that one sees ‘whether there really has been a breach.’154
166. The majority of Tribunals in investor-State arbitrations have adopted Judge Higgins’ test. For example in Plama Consortium Limited v. Republic of Bulgaria, the Claimant asserted claims under the Energy Charter Treaty (“ECT”), the Bilateral Investment Treaty between Cyprus and Bulgaria, and the ICSID Convention. The Tribunal in Plama followed the Higgins test to determine who has the burden of proof concerning
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the Respondent’s objections to jurisdictions on various grounds.155
167. The Plama Tribunal also cited other ICSID Tribunals employing the Higgins test in holding that it “was up to the claimant to present its own case as it saw fit; that, in doing so, the claimant must show” that the facts alleged are capable of falling under the relevant portions of the appropriate treaty.156
168. Observing that the Higgins test was not “in any sense controversial,” the Plama Tribunal applied it and held that the Claimant had established prima facie that (i) it was an investor under Article 1(7) of the ECT that had legal identity in Cyprus despite the Respondent’s argument that it was a mere “mailbox company”; (ii) the dispute related to an investment; and (iii) the Respondent’s actions might have violated certain obligations imposed on it by the ECT.157
169. As the Tribunal in Plama observed, numerous other Tribunals had applied the Higgins
155 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24 (decision on jurisdiction) (February 2005), ¶ 118. ↩
157 Id. ¶¶ 31, 126, 128, 131-32,151. ↩
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test before Plama (February 2005).158 Many Tribunals have followed it since.
170. Scarcely decided two months after Plama, the Tribunal in Impregilo S.p.A v. Islamic Republic of Pakistan159 notably adopted Judge Higgins’ approach and observed that “[t]he test for jurisdiction is an objective one, and its resolution may require the definitive interpretation of the treaty provision which is relied on.”160 It further qualified this language reasoning that the tribunal in SGS v. Pakistan “stressed”:
“... it is for the Claimant to formulate its case. Provided that the facts alleged by the Claimant and as appearing from the initial pleadings fairly raise questions of breach of one or more provisions of the BIT, the Tribunal has jurisdiction to determine the claim” [Citation omitted].161
159 Impregilo S.p.A v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3 (decision on jurisdiction) (April 2005). ↩
161 Id. ¶ 243, citing to SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/1 (decision on objections to jurisdiction) (August 2003), 18 ICSID Rev. – FILJ 301 (2003). And, also citing to Salini Costruttori S.p.A. and Italstrade S.p.A. v. The ↩
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171. In commenting on this methodology, the Impregilo Tribunal reasoned that “[i]t reflects two complimentary concerns; to ensure that courts and tribunals are not flooded with claims which have no chance of success, or may even be of an abusive nature; and equally to ensure that, in considering issues of jurisdiction, courts and tribunals do not go into the merits of cases without sufficient prior debate. In conformity with this jurisprudence, the Tribunal has considered whether the facts as alleged by the Claimant in this case, if established, are capable of coming within those provisions of the BIT which have been invoked.”162
172. In this same vein, in Saipem S.p.A. v. The Peoples Republic of Bangladesh163 the Arbitral Tribunal accepted the Higgins test as the relevant standard. As part of its analysis the Tribunal made clear that “[i]n accordance with accepted international practice (and generally also with national practice), a party bears the burden of proving the facts it asserts. For instance, an ICSID tribunal held that the Claimant had to satisfy the burden of proof required at the
Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13 (Award) (November 2004).
162 Impregilo v. Pakistan, supra ¶ 254. (emphasis supplied) ↩
163 Saipem v. Bangladesh, decision on jurisdiction and recommendation of provisional measures. ↩
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jurisdictional phase and make a prima facie showing of Treaty breaches.”164
173. Further, in explaining the applicable methodology concerning the various particular determinations of whether the claims in that case fell within the scope of the BIT (i.e., are capable of constituting a violation of the protection standards at issue) the Tribunal articulated in the subjunctive-conditional mood the inquiry to be applied. It made plain that “[i]n other words, the Tribunal should be satisfied that, if the facts alleged by Saipem ultimately prove true, they would be capable of constituting a violation of
164 Id. ¶ 83, citing in fn 14 to a non-exhaustive list of cases, only one of which predates Plama applying the Higgins test: ↩
Impregilo v. Pakistan [citation omitted], ¶ 79.
On the prima facie test for purposes of jurisdiction, see among others UPS v. Canada, Decision on Jurisdiction, 22 November 2002, ¶¶ 33-37; Siemens v. Argentina, Decision on Jurisdiction, 3 August 2004, ¶ 180, [citation to Internet omitted]; Plama v. Bulgaria [Fn. 11], ¶¶ 118-120, 132; Bayindir v. Pakistan [Fn. 11] ¶¶ 185-200; El Paso v. Argentina, Decision on Jurisdiction, 27 April 2006, ¶¶ 40-45, 109, [citation to Internet omitted]; Jan de Nul v. Egypt, Decision on Jurisdiction, 16 June 2006, ¶¶ 69-71, [citation to Internet omitted]; Telenor v. Hungary, Award, 13 September 2006, ¶¶ 34, 53, 68, 80 [citation to Internet omitted].
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Article 5 of the BIT.”165 It further added that “[i]n this respect, the Tribunal agrees with the observation in United Parcel Service v. Government of Canada that “the reference to the facts alleged being ‘capable’ of constituting a violation of the invoked obligations, as opposed to their ‘falling within’ the provisions, may be of little or no consequence.”166
174. The decision in Phoenix Action Ltd. v. The Czech Republic provides greater guidance. The test, stating that “[t]he alleged facts complained of have to be accepted pro tem at the jurisdictional phase.”167
175. The exception is where the respondent sets forth credible evidence of “facts” to contradict the claimant’s allegations with respect to jurisdiction. At that point, the tribunal will have to resolve the factual dispute concerning the jurisdictional issue- or else join the issue to the merits.168 Thus, the Phoenix Action Tribunal stated:
165 Id. ¶ 86 (emphasis supplied). ↩
166 Id., citing to United Parcel Service v. Government of Canada [NAFTA], Decision on Jurisdiction, 22 November 2000, ¶ 36 [citation to Internet omitted]. ↩
167 Phoenix Action Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award, April 15, 2009, ¶ 62. ↩
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If...the alleged facts are facts on which the jurisdiction of the tribunal rests, it seems evident that the tribunal has to decide on those facts, if contested between the parties, and cannot accept the facts as alleged by the claimant. The tribunal must take into account the facts and their interpretation as alleged by the claimant, as well as the facts and their interpretation as alleged by the respondent, and take a decision on their existence and proper interpretation.169
(i) A Succinct Statement of the Proper Test
176. The Phoenix Action Tribunal stated that if a tribunal is unable to ascertain whether “there exists a protected investment” at the jurisdictional phase, then the question “should be joined to the merits.”170
170 Id. ¶ 61; see also, ICSID Convention, Art. 41(2) (stating that tribunals have the discretion to determine a jurisdictional issue “as a preliminary question or to join it to the merits of the dispute.”); C. Schreuer, et al., The ICSID Convention: A commentary, Art. 41, ¶ 80 (“The need for a joinder to the merits is apparent where the answer to the jurisdictional questions depends on testimony and other ↩
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177. The authority adopting Judge Rosalyn Higgins’ methodology set forth five essential elements that are central to its perfect workings.
178. First, the Tribunal is to accept Claimant’s allegations pro tem. The allegations are to be accorded a presumption of correctness absent a specific factual challenge that may place them in actual controversy.171
179. Second, the Claimant need only make a prima facie showing on the pleadings. Hence, the applicable approach requires testing the sufficiency of the averment to determine whether, if true, it would give rise to a cognizable treaty violation.172
180. Third, upon the making of a prima facie case, the burden shifts to the respondent to establish that there is not jurisdiction ratione
evidence that can only be obtained through a full hearing of the case.”)
171 Saipem, supra note 141, ¶ 86 (stating that “[t]he Tribunal must now determine whether the claims ‘fall within the scope of the BIT, assuming pro tem that they may be sustained on the facts.”), citing to Impregilo v. Pakistan, supra note 142, at ¶ 263. ↩
172 See, e.g., Jan de Nul N.V. Dredging International N.V. v. Arab Republic of Egypt, ¶ 69 (applying a prima facie test as the applicable standard), and citing to Impregilo S.p.A. v. Islamic Republic of Pakistan, supra note 142, ¶ 108. ↩
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materiae, ratione personae, ratione temporis or ratione voluntatis. If the respondent carries that burden, the objections may be granted. If the respondent fails to carry that burden, the objections are denied. If the tribunal is unable to make the determination on the evidence that is before it, the issue should be joined to the merits.173
181. Fourth, thus, a claimant at the jurisdictional phase need only set forth a prima facie case that all of the necessary conditions are satisfied (including ratione materiae, ratione personae, ratione temporis and ratione voluntatis) in order for an arbitral tribunal to consider that it has jurisdiction over the claim.
182. A claimant need not prove all factual allegations necessary to establish jurisdiction in the same manner that it would prove its factual allegations at the merits stage.174
173 Phoenix Action, at ¶ 61 (if a tribunal is unable to ascertain whether “there exists a protected investment” at the jurisdictional phase, then the question “should be joined to the merits”). ↩
174 See, e.g., SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, February 12, 2010, ¶ 47 (It is well established that, at the jurisdictional stage, Claimant need not prove the facts that it alleges in order to state a claim over which this Tribunal has jurisdiction. All Claimant needs ↩
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183. Fifth, it follows that the tribunal should be satisfied that, if the facts alleged by claimant ultimately prove true, claimant would be capable of establishing a violation of the Treaty.175
184. For the sake of completeness, “[t]he reference to the facts alleged being ‘capable’ of constituting a violation of the invoked obligations, as opposed to their ‘falling within’ the provisions, may be of little or no consequence.”176
185. Here, Claimant has produced ample evidence not only establishing a prima facie case, but also proving under any reasonable standard that this Arbitral Tribunal has jurisdiction ratione materiae, ratione personae, ratione temporis and ratione voluntatis. Claimant, as part of this submission has incorporated by reference, with only selected citations articulated as relevant, the
to do is to allege facts that, if proven at the merits stage, could constitute a violation of Treaty protections. That is, absent exceptional circumstances, the Tribunal will evaluate whether the acts and omission of Respondent, taken as they are alleged by Claimant, are capable of making out a treaty violation—leaving it to the merits stage for Claimant to prove those allegations.”)
175 See, e.g., Saipem v. Bangladesh, supra note 141, ¶ 86 (In other words, the Tribunal should be satisfied that, if the facts alleged [Claimant] ultimately prove true, they would be capable of constituting a violation of [the Treaty]”). ↩
176 Id. ¶ 86, citing to UPS v. Government of Canada, at ¶ 36. ↩
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Request for Arbitration filed and served on January 24, 2018. That writing is attached to this Memorial as Exhibit C-0028, together with its twenty-seven (27) exhibits. In the sections that follow, the jurisdictional elements each in turn is analyzed.
186. Article 25 of the ICSID Convention provides that jurisdiction of the ICSID Centre shall extend to:
...any legal dispute arising directly out of an investment, between a Contracting State ... and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre...
187. The jurisdictional requirements ratione personae, ratione voluntatis, ratione temporis and ratione materiae are addressed in turn below.
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188. Article 25(2)(a) of the ICSID Convention provides that national of another Contracting State means:
(a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute.177
189. Claimant is a US citizen. Also, Claimant never acquired the citizenship of the Republic of Colombia.
177 Article 12.20 of the TPA contains the following definition of investor of a Party: “investor of a Party means a Party or state enterprise thereof, or a person of a Party, that attempts to make, is making, or has made an investment in the territory of another Party; provided, however, that a natural person who is a dual citizen shall be deemed to be exclusively a citizen of the State of his or her dominant and effective nationality.” ↩
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190. Astrida Benita Carrizosa was born in Riga, Latvia in 1939.178In approximately 1949, when she was only 10 years of age, she and her family moved to the United States.179 She became a U.S. citizen in 1954.
191. Mrs. Carrizosa, in fact, lived in Cleveland, Ohio and attended Hillsdale College in Hillsdale, Michigan from September 1957 to June 1959.180 She then attended Case Western Reserve University in Cleveland, Ohio where she received a Bachelor of Arts degree in languages (Class of 1961).181 Mrs. Carrizosa never abandoned her U.S. citizenship and remains a U.S. citizen as of the date of this writing.182
192. Colombia is a Contracting State to the ICSID Convention. Colombia signed the Convention on May 18, 1993 and deposited its ratification on July 15, 1997. The Convention entered into force for Colombia on August 14, 1997. Respondent remained a Contracting State at all material times.
178 See Witness Statement Astrida Benita Carrizosa ¶ 1. ↩
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193. The case before this Tribunal meets the ratione voluntatis stricture. Indeed, consent is here present as both a matter of pleading and proof. Colombia has consented to arbitrate investor-State disputes under the ICSID Convention and Rules pursuant to Articles 10.16 and 10.17 of the TPA.
194. The qualifications to consent under Chapter 10 of the TPA are enunciated in Article 10.18 (Conditions and Limitations of Each Party).183
183 Citation to Article 10.18 in its entirety is compelled: ↩
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- the claimants consents in writing to arbitration in accordance with the procedures set out in this Agreement; and
- the notice of arbitration is accompanied,
of any right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceeding with respect to any measure alleged to constitute a breach referred to in Article 10.16.
- for claims submitted to arbitration under Article 10.16.1(a), by the claimant’s written waiver and
- for claims submitted to arbitration under Article 10.16.1(b), by the claimant’s and enterprise’s written waivers
- Notwithstanding paragraph 2(b), the claimant (for claims brought under Article 10.16.1(a)) and the claimant or the enterprise (for claims brought under Article 10.16.1(b)) may initiate or continue an action that seeks interim injunctive relief and does not involve the payment of monetary damages before a judicial or administrative tribunal of the respondent, provided that the action is brought for the sole purpose of preserving the claimant’s or the enterprise’s rights and
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interests during the pendency of the arbitration.
- No claim may be submitted to arbitration:
if the claimant (for claims brought under 10.16.1(a) or the claimant or the enterprise (for claims brought under 10.16.1(b) has previously submitted the same alleged breach to administrative tribunal or court of the respondent, or to any other binding dispute settlement procedure.
- for breach of an investment authorization under Article 10.16.1(a)(i)(B) or Article 10.16.1(b)(i)(B), or
- for breach of an investment agreement under Article 10.16.1(a)(i)(C) or Article 10.16.1(b)(i)(C),
- For greater certainty, if a claimant elects to submit a claim of the type described in subparagraph (a) to an administrative tribunal or court of the respondent, or to any other binding dispute settlement procedure, that election shall be definitive, and the claimant may not thereafter submit the claim to arbitration under Section B.
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195. None of the six qualifying factors to consent, as set forth in Article 10.18 of the TPA are here present, as more fully set forth below.
196. Notably, in addition to the tailor-made provisions offered by the contracting-Parties pursuant to Chapter 12 of the TPA (Financial Services), additional basic protections are imported into Chapter 12 from other chapters of the TPA for the specific purpose of according those benefits to investors and investments in the financial services sector, as is here the case. Hence, the Parties to the TPA sought to provide expansive protections to Chapter 12 investments and investors beyond those detailed in that chapter. Article 12.1(2) expands the protection available under Chapter 12 by incorporating certain provisions under Chapter 10 into Chapter 12. Article 12.1(2) provides:
Chapter Ten (Investment) and Eleven (Cross-Border Trade in Services) applied to measures described in paragraph 1 only to the extent that such Chapters or Articles of such Chapters are incorporated into this Chapter.
...
(b) Section B (Investor-State Dispute Settlement) of Chapter Ten
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(Investment) is hereby incorporated into and made a part of this Chapter solely for claims that a Party has breached Articles 10.7 (Expropriation and Compensation), 10.8 (Transfers), 10.12 (Denial of Benefits) or 10.14 (Special Formalities and Information Requirements), as incorporated into this Chapter.
197. Accordingly, Articles 10.5 to Articles 10.7 are incorporated into Chapter 12 of the TPA. Most importantly, however, the contracting-Parties expressly imported into Chapter 12 the consent to arbitrate investor-State disputes available under Chapter 10 of the TPA.
198. It is necessary to underscore that Art. 10.2(1) clarifies the distinct protections available under Chapter 10 and Chapter 12. It states:
In the event of inconsistency between this Chapter and any other Chapter, the other Chapter shall prevail to the extent of the inconsistency.
199. The incorporation by reference of Chapter 10 is significant. This incorporation establishes, among other things, that the contracting-Parties:
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200. This framework makes perfect rational sense because it clearly seeks to vest investors in the financial services sector with an equal panoply of protections as those accorded to other investors.
201. Consequently, the combined application of the relevant provisions of Article 12, Article 10, and customary international law, to treatment made available to investors and investments in the financial services sector, includes, among others, the following protection standards:
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202. Article 12.3 of the TPA grants financial services investors the benefit of most favored nation treatment. Therefore, investors under Chapter 12 of the TPA may import substantive and procedural rights beyond those embodied in Chapters 10 and 12.
203. The TPA has two relevant MFN clauses. Even though Claimant here only relies on the MFN clause contained in Article 12.3, for interpretive purposes reference to the MFN clause set forth in Chapter 10 is helpful.
204. Article 10.4(2) reads:
2. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments in its territory of investors of any other Party or of any non-Party with respect
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to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investment.
205. Significantly, this provision contains a meaningful restrictive qualification at footnote 2. That provision reads:
For greater certainty, ‘with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments’ referred to in paragraphs 1 and 2 of Article 10.4 does not encompass dispute resolution mechanisms, such as those in Section B [of Chapter Ten], that are provided for in international investment treaties or trade agreements.184
206. The plain meaning of the Article 10.4 MFN clause, as qualified by footnote 2, only contemplates the importation of substantive and not procedural rights. Therefore, a claimant whose claims do not concern the financial institutions sector, prosecuting its claims pursuant to Chapter 10 of the TPA is proscribed from availing itself of procedural standards of
184 TPA, Art. 10.4(2) n.2 (CL-0101). ↩
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protection and rights accorded to any non-party pursuant to another investment treaty or trade agreement. The textual language of Article 10.4(2), at n. 2 simply states as much. Its ordinary plain meaning interpretation is unambiguous.
207. Claimant has filed this proceeding under Chapter 12. As set forth in the Request for Arbitration,185 Claimant is a U.S. shareholder who held shares in GRANAHORRAR, a financial institution in Colombia. Neither of these propositions is nor can be contested. The MFN clause in Chapter 12 on which Claimant relies, in part, reads:
1. Each Party shall accord to investors of another Party, financial institutions of another Party, investments of investors in financial institutions, and cross-border financial service suppliers of another Party treatment no less favorable than that it accords to the investors, financial institutions, investment of investors in financial institutions, and cross-border financial service suppliers of any other Party or of a non-Party, in like circumstances.
185 See RFA (C-0028) 1, 2, 4, 5, 176-177, 184-186, 216. ↩
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208. Article 12.3(1) does not contain the qualifying restrictive language that attaches to Art. 10.4(2) in the form of that provision’s footnote 2. The two Articles (Art. 10.4(2) n.2 and 12.3(1)) are eminently reconcilable conceptually and practically. Even if they were not so, however, as previously observed, Art. 10.2 (Relation to Other Chapters) does provide that “[i]n the event of any inconsistency between this Chapter and another Chapter, the other Chapter shall prevail to the extent of the inconsistency.”
209. It is common for investor-State Tribunals to interpret MFN clauses pursuant to the strictures of the Vienna Convention on the Law of Treaties (“VCLT”). By way of example, the Tribunal in National Grid v. Argentina186 in applying the VCLT observed:
As already stated above, the Tribunal will interpret the Treaty [Argentina-U.K. BIT] as required by the Vienna Convention. Article 31 of the Convention requires an international treaty to be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of
186 National Grid, Plc v. The Argentine Republic, UNCITRAL, (jurisdiction) (June 2006), ¶ 80. ↩
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the Treaty in their context and in light of its object and purpose.’ [citation omitted] As regards the intention of the parties, the approach of the Vienna Convention and of the ICJ is that ‘what matters is the intention of the parties as expressed in the text, which is the best guide to the more recent common intention of the parties.’ [citation omitted] The Convention does not establish a different rule of interpretation for different clauses. The same rule of interpretation applies to all provisions of a treaty, be they dispute resolution clauses or MFN clauses.187
210. Further, “[t]he tribunal observes that the MFN clause does not expressly refer to dispute resolution or for that matter to any other standard of treatment provided for specifically in the Treaty. On the other hand, dispute resolution is not included among the exceptions to the application of the clause. As a matter of interpretation, specific mention of an item
Prof. Loukas Mistelis has proffered an Expert Opinion in this case, which is here attached (“Expert Report Professor Loukas Mistelis”). He addresses this practice in paragraphs 42-60. The Tribunal is respectfully invited to consult it.
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excludes others: expressio unius est exclusio alterius.”188
211. Application of these often-cited and well-known canons of the VCLT, Articles 31 and 32, indeed suggest rather compellingly that the MFN clause contained in Art. 12.3(1) is expansive
This interpretation is confirmed by the following statement on the general rules of application of the MFN clause in the Encyclopedia of Public International Law: ‘By its nature, the unconditional clause, unless otherwise agreed, attracts all favors extended on whatever grounds by the Granting State to the third state.’ R. Bernhardt (ed.), 8 ENCYCLOPEDIA OF PUBLIC INTERNATIONAL LAW 411, 415 (1985).
In National Grid the MFN clause was used for the importation of procedural rights to arbitration:
To conclude, the Tribunal considers that, in the context in which the Respondent has consented to arbitration for the resolution of the type of disputes raised by the Claimant, ‘treatment’ under the MFN clause of the Treaty makes it possible for UK investors in Argentina to resort to arbitration without first resorting to Argentine courts as is premised under the US-Argentina Treaty. Therefore, the Tribunal rejects this objection to its jurisdiction.
Id. ¶ 93.
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and not restrictive, particularly with respect to the very qualification that narrows the scope of Art. 10.4(2), i.e., non-application of the MFN clause to procedural rights.
212. This construction of Art. 12.3(1) comports with Articles 31 and 32 of the VCLT, as well as with the Republic of Colombia’s own practice post-Maffezini189 of limiting when it has so elected, the scope of MFN clauses to apply only to substantive and not to procedural rights accorded to the investors and investments of non-parties. Prof. Mistelis points to two illustrative examples:
As the treaties entered into by Colombia after the Maffezini decision, it can be noticed that some of them provide a restriction to the application of the MFN clause:
(a) Agreement between the Republic of Colombia and the Swiss Confederation on the Promotion and Reciprocal Protection of Investments (done at 17 May 2006) Article 4, para. 2
189 Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7 (jurisdiction) (January 2000). ↩
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For greater certainty, it is further understood that the most favourable treatment referred to in the said paragraph does not encompass mechanisms for the settlement of investment disputes provided for in other international agreements related to investments concluded by the Party concerned. [citation omitted]
(b) Bilateral Agreement for the Promotion and Protection of Investments between the Government of the United Kingdom of Great Britain and Northern Ireland and Republic of Colombia (signed 17 March 2010)
Article III
National Treatment and Most Favoured Nation Provisions
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- Each Contracting Party shall grant to the investments of investors of the other Contracting Party made in its territory, a treatment not less favourable than that accorded, in like circumstances, to investments of its own investors or to investments of investors of another third State, whichever is more favourable to the investor.
- The most favourable treatment to be granted in like circumstances referred to in this Agreement does not encompass mechanisms for the settlement of investment disputes, such as those contained in Articles IX and X of this Agreement, which are provided for in treaties or international
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investment agreements. [citation omitted]190
213. Prof. Mistelis further clarifies that “[f]ollowing the case in Maffezini v. Spain some States started to change their MFN clauses and introduced certain restrictions and the UK-Colombia BIT, which was signed in 2010 but entered into force in 2014, is a typical example.”191
214. Therefore, in addition to the “plain meaning” textual interpretation of Art. 12.3(2), Colombia’s own practice demonstrates that when it elects to do so, Respondent in effect qualifies and restricts its MFN clauses by adding specific language, typically proscribing the importation of procedural rights.
215. It did so with respect to Art. 10.4(2) of the TPA, as well as in the two BITs immediately referenced above. The absence of any qualifying restrictive language attaching to the MFN clause contained in Art. 12.3(1) is testimony to this provision’s expansive scope and application. It is to be read as any other provision in a treaty.
216. General and conventional post-Maffezini treaty practice accords similar expansive
190 Expert Report Professor Loukas Mistelis ¶ 33. ↩
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treatment to MFN clauses absent clear and express provisions to the contrary.
217. Here as well Prof. Mistelis’ Expert Opinion is instructive:
There seems to be a critical mass of cases where tribunals state that absent an express exclusion or other policy reasons, dispute settlement provisions are covered by the scope of an MFN clause. In my view, this line of cases suggests the current state of affairs.
It is therefore possible to argue that investors and investments falling within the scope of Chapter XII of US-Colombia FTA [TPA] are entitled to rely on the provisions contained under Article 12.3 of the same Treaty to import the dispute settlement provisions available under other similar treaties entered into by Colombia with third states.192
218. The reasoning provided for the use of MFN practice to import procedural rights, and in particular rights attendant to dispute resolution provisions, is sound. Procedural rights that
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provide investors with the ability to render substantive protections actually viable, and therefore applicable, cannot be meaningfully distinguished from substantive rights the objective of which is to protect investments.
219. The governing principle incident to both sets of rights are the same; namely, the protection of foreign investors and investments. Discriminating between these rights (substantive treaty protection and procedural rights to enforce such substantive treatment) would render the substantive protection meaningless by carving out its enforcement vehicle. This matters.
220. Here too Prof. Mistelis’ Expert Opinion is helpful. He notes that “dispute settlement provisions by their very nature belong to the same category as substantive protections for foreign investors. In other words, the way a right is procedurally exercised is part and parcel of substantive protection.”193
221. This reasoning finds ample resonance in investor-State awards.
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222. In Siemens A.G. v. The Argentine Republic194 Claimant brought an action based upon the BIT between the then Federal Republic of Germany and the Republic of Argentina, which contained the jurisdictional predicate of submission of the dispute to local courts during an eighteen-month timeframe. In an effort to avoid this predicate, Claimant sought to import the procedural right of directly filing an arbitral claim without the condition precedent of applying for judicial recourse in local courts, pursuant to the BIT between Argentina and Chile.
223. There the Tribunal dismissed the jurisdictional objection that the MFN clause in the underlying BIT, which lacked any explicit qualifications, did not provide for the importation of procedural rights.195 Respondent further bolstered this assertion by arguing that Claimant’s reliance on Maffezini was inapposite because the MFN clause in that case was uniquely broad where the treaty at issue merely mentioned the word “treatment,” without more.
194 Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8 (jurisdiction) (August 2004). ↩
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224. The Tribunal rejected Respondent’s jurisdictional objection on this ground and in so doing observed:
The Respondent has argued that, in Ambatielos, administration of justice refers to substantive procedural rights like just and equitable treatment and not to purely jurisdictional matters. The tribunal does not find any basis in the reasoning of the Commission to justify such distinction. On the other hand, the tribunal finds that the Treaty itself, together with so many other treaties of investment protection has a distinctive feature special dispute mechanisms not normally opened to investors. Access to these mechanisms is part of the protection offered under the Treaty. It is part of the treatment of foreign investors and investments and of the advantages accessible through an MFN clause.196
225. The Tribunal further noted that its findings on this issue comports with Maffezini notwithstanding the broad “all matters subject to this Agreement” MFN clause in the Maffezini-Spain-Argentina BIT, and the “treatment” only
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scope contained in the Federal German Republic-Argentina BIT.197 In this regard it held “that the formulation is narrower but, as concluded above, it considers that the term “treatment” and the phrase “activities related to the investment” are sufficiently wide to include settlement disputes.198
226. Similarly, in AWG v. The Argentine Republic,199 the Tribunal found that Claimant, relying on Article IV of the Argentina-Spain BIT and a second Claimant placing reliance on Article III of the Argentina-UK BIT, were able to invoke more favorable procedural rights that Argentina afforded to France in the Argentina-France BIT, and allowed to perfect a claim without first meeting the condition precedent of having sought recourse to the local courts of Argentina.200
227. In explaining its holding the Tribunal reasoned that it found “no rule and no reason for interpreting the most-favored-nation treatment clause any differently from any other clause in the two BITs.”201 It was further explained that “[t]he
199 AWG Group Ltd. v. The Argentine Republic, ICSID Case No. ARB/03/19 (jurisdiction) (August 2006). ↩
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language of the two treaties is clear. Applying the normal interpretational methodology to Article IV of the Argentina-Spain BIT, the tribunal finds that the ordinary meaning of that provision is that matters relating to dispute settlement are included within the term ‘all matters’ and that therefore [claimant] may take advantage of the more favorable treatment provided to investors in the Argentina-France BIT with respect to dispute settlement. Similarly, in the case of the Argentina-U.K. BIT, rights with respect to dispute settlement ‘regard’ the management, maintenance, use, enjoyment and disposal of an investment as stated in Article III of the Treaty; consequently, [different claimant] may also take advantage of the more favorable treatment in the Argentina-France BIT accords to French investors.”202
228. More specifically on the narrow issue of drawing differences without distinctions concerning substantive and procedural rights within the ambit of an unqualified MFN clause, the Tribunal observed:
After the analysis of the substantive provisions of the BITs in question, the Tribunal finds no basis for distinguishing dispute settlement matters from any other matters
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covered by bilateral treaties. From the point of view of the promotion and protection of investments, the stated purposes of both the Argentina-Spain BIT and the Argentina-U.K. BIT, dispute settlement is as important as other matters governed by the BITs and is an integral part of the investment protection regime that the respective sovereign states have agreed upon. In this context, the Respondent further argues that this Tribunal should apply the principle of ejusdem generis in interpreting the BITs so as to exclude dispute settlement matters from the scope of the most-favored-nation clause, because the category ‘dispute settlement’ is not of the same genus as the matters addressed in the clause. The Tribunal finds no basis for applying the ejusdem generis principle to arrive at that result.203
229. The absence of any restrictive or qualifying language in the TPA invites a reasonable and expansive interpretation of the MFN clause to include procedural rights to arbitrate, as well as substantive rights under the
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theory that an intellectually rigorous analysis necessarily leads to the conclusion that the procedural rights to arbitrate are endemic to and cannot be severed from substantive protection and themselves are paradigmatically principles of investment protection of the highest order.
230. The Tribunals in Siemens, AWG, and National Grid are not emblematic of outlier awards that memorialize an aprioristic view of an issue. To the contrary, in holding that procedural rights protect investments as do “substantive” protection standards, these Tribunals are adhering to the appropriate historicity attaching to the origins, formation, and transformation of MFN clauses.
231. That history, as alluded to in Prof. Mistelis’ Expert Opinion,204 suggests that the formation (origins) transformation, and contemporary development of MFN practice is one that seeks to create parity between claimants and host States pursuant to the inclusion of basic principles that contracting parties are familiar with and have agreed to as binding because they have extended these protections (both procedural and substantive) to non-parties in other instruments.
204 See Expert Report Professor Loukas Mistelis ¶¶ 11-23. ↩
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232. Tribunals finding that MFN clauses understandably reach both procedural and substantive protection tenets, absent express limitations in the underlying treaty, have provided the international community with well-reasoned premises that the Arbitral Tribunal here is encouraged to consider and to adopt.
233. The Tribunal’s analysis in Suez, Sociedad General de Aguas de Barcelona S.A. and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic205 also is helpful. In that case in holding that the Argentina-Spain MFN clause served to import procedural rights from the Argentina-France BIT, the Tribunal informed its reasoning by subscribing to the foundational principle that it found “no rule and no reason for interpreting the most-favored-nation treatment clause any differently from any other clause in the two BITs.”206 It further noted that “[t]he language of the two treaties is clear. Applying the normal interpretational methodology to Article IV of the Argentina-Spain BIT, the Tribunal finds that the ordinary meaning of that provision is that matters relating to dispute settlement are included within
205 Suez, Sociedad General de Aguas de Barcelona S.A. and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17 (jurisdiction) (May 2006). ↩
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the term ‘all matters’ and that therefore [Claimant] may take advantage of the more favorable treatment provided to investors in the Argentina-France BIT with respect to dispute settlement.”207
234. While the MFN clause in Suez was textually of the broadest kind because of the qualifying expansive language “in all matters,” and accompanied by a listing of particular exceptions, the Tribunal’s reasoning and holding in that case here applies. To find otherwise would be to construe the word “treatment” in Article 12.2 and Article 12.3 other than in keeping with its “ordinary meaning” to suggest that according specific procedural rights in a treaty does not constitute a “treatment” or that somehow the grant of procedural rights does not constitute part of “[t]he process or manner of behaving towards or dealing with a person or thing [in this case a State].”208
235. The word “treatment” in MFN clauses providing for that scope directly was addressed by the Tribunal in Impreglio.209 In that case, as in
208 OXFORD ENGLISH DICTIONARY (Fifth Edition), first entry for the noun “treatment.” ↩
209 Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17 (Award) (June 2011). ↩
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Suez, the underlying Argentina-Italy BIT contained a very broad “all other matters” scope in its MFN clause, and allowed the Claimant (MFN clause-beneficiary) to import the more generous procedural rights provided for in the Argentine-U.S. BIT.210
236. The Tribunal found that the broad “all matters” scope MFN clause rightfully vested Claimant with the right to the more favorable procedural treatment contained in the Argentine-U.S. BIT. This holding rested on three pivotal premises, all of which represent helpful considerations in determining the issues in the case at hand.
237. First, and understandably, considerable emphasis was placed on the body of authority addressing MFN clauses having the “all matters” scope. Here the Tribunal observed “that there is a massive volume of case-law which indicates that, at least when there is an MFN clause applying to ‘all matters’ regulated in the BIT, more favorable dispute settlement clauses in other BITs will be incorporated. Relevant cases
The Argentine-U.S. BIT provided the investor with a range of options for the submission of dispute resolution ranging from domestic courts, and administrative tribunals, to perfection the claim directly in the context of international arbitration.
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are Maffezini, Gas Natural, Suez [I and II], and Camuzzi.”211
238. It further qualified this statement by underscoring that “at least one case in which the tribunal, despite the fact that the MFN clause covered ‘all matters,’ found this insufficient to make the clause applicable to the settlement. The case is Berschader, but it should be noted that one of the arbitrators strongly dissented on this point and that there were also some special elements which contributed to the outcome.”212
211 Id. ¶ 104. (citations omitted) ↩
212 Id. ¶ 29, also citing to Separate Opinion of Prof. Todd Weiler, ¶¶ 15-25; Berschader, award, ¶¶ 185-208: ↩
Notably, the MFN clause at issue in Berschader stated that it would apply ‘particularly to Articles 4, 5 and 6,’ i.e., fair and equitable treatment, non-expropriation and free transfer of funds, but did not include within this list Article 10 of the BIT, which addressed dispute resolution, and accordingly, the tribunal concluded that the ordinary meaning of ‘all matters covered by the present Treaty’ was not really that the MFN provision extends to all matters covered by the treaty. Id. ¶ 194. In addition, the tribunal noted that there had been no clarity in the jurisprudence at the time the BIT had been concluded as to whether arbitration clauses could be encompassed by MFN clauses, and thus, the Parties simply may not have contemplated
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239. Second, the Tribunal took pains to analyze the term “treatment” as a self-contained standard separate and distinct from the “all matters” and rejected Respondent’s restrictive application of the ejusdem generis principle:
The Arbitral Tribunal is of the opinion that the term ‘treatment’ is in itself wide enough to be applicable also to procedural matters such as dispute settlement. Moreover, the wording ‘all other matters regulated by this Agreement’ is certainly also wide enough to cover the dispute settlement rules. The argument that the ejusdem generis principle would limit its application to matters similar to ‘investments’ and ‘income and activities related to such investments’ is not convincing, since the wording does not allow ‘all other matters’ to be
this outcome. Id. ¶ 202. Finally, the tribunal considered evidence of BIT practice from the Soviet Union which demonstrated that it pursued a policy of never consenting to arbitration and BITs concerning questions whether an act of expropriation had occurred, which stemmed from that State’s particular views on sovereignty. In the tribunal’s view this ‘strongly suggest[ed]’ that the Soviet Union did not intend for the MFN clause to extend to dispute resolution issues. Id. ¶ 204.
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read as ‘all similar matters’ or ‘all other matters of the same kind.’ Nor is the argument that an-embracing concept like ‘all other matters’ would make the previously mentioned terms ‘investments’ and ‘income and activities related to such investments’ superfluous, since it is indeed not unusual in legal drafting to indicate typical examples even in provisions which are intended to be of general application.213
240. Along this same line of reasoning, now limited only to “treatment” scope MFN clauses, the Tribunal noted that “[e]ven in some – but not all – cases where the MFN clauses were less comprehensive [than the ‘all matters’ MFN scope clauses] and only provided for MFN treatment of investors and investments, the tribunals found this to be sufficient to cover dispute settlement. Cases in point are Siemens, National Grid and RosInvest.”214
241. As it disclosed with respect to the “all matters” MFN clauses, the Tribunal identified
213 Id. ¶ 99. (emphasis supplied) ↩
214 Id. ¶ 105. (citations omitted) (emphasis supplied) ↩
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Salini, Plama, Telenor, and Wintershall,215 as cases addressing the “treatment” MFN scope holding that the importation of procedural rights were proscribed.216 Hence, it cautioned that “[i]t appears from these awards that some tribunals have had rather strong reservations about the general development of the case law in this area. It is therefore clear that these cases remain controversial and that the predominating jurisprudence which has developed is in no way universally accepted.”217
242. Third, the Tribunal candidly and rightfully expressed concern that questions so consequential as presumably the right of an investor to receive the procedural protection that a contracting State accords to a third State by virtue of an investment protection treaty, “would in each case be dependent on the personal opinions of individual arbitrators.”218 Indeed, it characterized this possible state of affairs as “unfortunate.”219
215 Wintershall Aktiengesellschaft v Argentine Republic, ICSID Case No. ARB/04/14 (Award) (December 2008). ↩
216 Impregilo v. Argentine Republic, ¶ 107. ↩
218 Id. ¶ 108. (emphasis supplied) ↩
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243. The majority of the Impregilo Arbitral Tribunal’s descriptive constructive comments were accompanied by the commonsensical exhortation to avoid aprioristic opinion-based adjudications by “mak[ing] the determination on the basis of case law whenever a clear case law can be discerned” and in the context of each particular case.220
244. Review of the cases holding that a “treatment” scope MFN clause does not extend to procedural rights to arbitrate are materially different from the case before this Arbitral Tribunal. Indeed, Claimant urges the Tribunal to consult this authority.
245. The Tribunal in Salini faced an issue foundationally different from the one that here concerns the Tribunal. In Salini the Italy-Jordan BIT did not provide for ICSID arbitration. In an effort to circumvent this provision Claimant sought to import ICSID jurisdiction from the Jordan-U.S. BIT and the Jordan-U.K. BIT. No such effort is here at issue.
246. In addition, the Salini Tribunal noted that Claimant did not offer any authority or
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practice suggesting that the “treatment” scope of the Italy-Jordan BIT was expansive so as to reach dispute settlement procedural rights that Jordan had extended to non-parties in similar trade or investment treaties.221 In the case before this Arbitral Tribunal the very qualification to the MFN clause contained in Art. 10.4 was meant to limit that clause as to its reach with respect to procedural rights. As noted, no such qualification attaches to the Article 12.3(1) MFN clause. When both provisions are read in pari materia, it follows that both the plain language and the parties’ intent is for the clause in Art. 12.3 to be sufficiently broad to include procedural rights to arbitrate. This distinction is material and dispositive as to this point. It found no place in the Salini record.
247. Lastly, the Tribunal in Salini adopted an aprioristic jurisprudentially determined approach. Without engaging in any analysis, it determined that an MFN “treatment” scope clause simply cannot be construed to reach procedural rights to arbitrate contained in another treaty.
In this connection, the Arbitral Tribunal noted “[l]astly, Claimants have not cited any practice in Jordan or Italy in support of their claims.”
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248. Underlying this conceptual conviction is the untested assumption that somehow procedural rights do not protect investments, or otherwise do so in ways that are theoretically and practically different from the manner in which treaty protection standards safeguard investments. This approach, by definition, carves out the possibility of engaging in a case-by-case adjudication based on the totality of all available evidence. It is fundamentally flawed.
249. Telenor v. Hungary is equally inapposite.222 The Tribunal in that case premised its denial of extension of a “treatment” scope MFN (Norway-Hugary BIT Art. IV) to reach procedural rights. The Tribunal’s analysis is, in large measure, based upon the Plama v. Bulgaria analysis. Plama, however, was decided based upon material factual issues that are not present in the case before this Arbitral Tribunal. Indeed, the Suez case distinguishes Plama. Those very same distinguishing factors, except for the scope of the MFN clause (the least important as underscored by the very Suez Tribunal), apply to the case at hand and for this reason neither Plama nor Telenor are reliable.
222 Telenor Mobile Communications A.S. v. Republic of Hungary, ICSID Case No. ARB/04/15 (Award) (September 2006), ¶ 90. ↩
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250. Specifically, the Suez Tribunal noted as a “more important” [than the difference in scope of the MFN clause contained in the Spain-Argentina BIT] that the Plama Tribunal “was guided by the actual intent of the Contracting States. Indeed, subsequent negotiations between Bulgaria and Cyprus showed the ‘two Contracting Parties to the BIT themselves did not consider that the MFN provision extends to the dispute settlement provisions in other BITs.”223 With respect to this observation, the Suez Tribunal in addition stated that the Parties’ intent in Plama to limit the reach of MFN clauses “was in line with the fact that, at the time of the conclusion of the BIT, ‘Bulgaria was under a communist regime, which favored bilateral investment treaties and limited protection for foreign investors and very limited international dispute resolution provisions.”224 Moreover, in Plama the Suez Tribunal further comments, “Claimant attempted to replace the dispute settlement provisions in the applicable Bulgaria-Cyprus BIT in toto by dispute resolution mechanisms ‘incorporated’ from another treaty.”225
251. Accordingly, the Telenor Tribunal’s considerable reliance on Plama renders its
224 Id. (emphasis in original) ↩
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analysis both internally suspect and inapplicable to this case.226
252. In addition, the analysis in Telenor suffers from the same methodological interpretive deficit as does the approach in Salini. In Telenor as well the Tribunal applies an aprioristic approach to the issue that is evident in the following proposition from that case that merits reading and re-reading:
It is one thing to stipulate that the investor is to have the benefit of MFN investment but quite another to use an MFN clause in a bid to bypass a limitation in the very BIT when the parties have not chosen language in the MFN clause showing an intention to do this, as has been done in some BITS.227
253. The objective of an MFN clause is precisely to import a more favorable treatment than that contained in the base treaty. As such, any practical exercise of an MFN clause, whether substantive or procedural, can always be
226 The Telenor Tribunal in pertinent part states: “[t]his Tribunal wholeheartedly endorses the analysis and statement of principle furnished by the Plama tribunal.” ↩
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characterized as an effort by one party “to bypass a limitation in the very same BIT when the parties have not chosen language in the MFN clause showing an intention to do this, as has been done in some BITs.” The untested assumption in this statement is that the term “treatment” somehow is inherently limited and cannot be used to extend to a more favorable premise contained in another treaty. The proposition is tautological.228
254. An orthodox ordinary plain meaning interpretation of the term “treatment” is rendered all the more imperative where, as here, a claim is asserted pursuant to Chapter 12 of the TPA concerning the financial services sector. Mr. Olin Wethington has submitted an Expert Witness
228 Significantly, in Wintershall Aktiengesellschaft v. Agrentine Republic, CSID Case No. ARB/04/14 (Award) (December 2008) (holding that the term “treatment” on a plain meaning approach cannot be construed to import procedural rights because it is “not mention[ed] that the most-favoured-nation ‘treatment’ as to investments, and investment related activities, is to be in respect of ‘all relations’ or that it extends to ‘all aspects’ or covers ‘all matters in the treaty”’) ¶162. The Tribunal applies so narrow a scope to the term “treatment” that it simply cannot even satisfy the rudimentary definition of the noun as contained in the Oxford English Dictionary. See supra note 208. ↩
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Statement (Report) in this case and directly speaks to this issue.229
255. Mr. Wethington, as more fully set forth in his Expert Witness Statement,230 explains his role as the lead negotiator of the Financial Services Chapter of the North American Free Trade Agreement’s (“NAFTA”) Financial Services Chapter 14 (NAFTA Chapter 14), after which Chapter 12 of the TPA is patterned.
256. In this connection he explains that he “assumed the role of lead negotiator of the Financial Services Chapter of the NAFTA, Chapter 14, covering the full scope of trade and investment in financial services, but with particular focus on the banking, securities, and insurance subsectors. Investment in non-financial sectors was negotiated within Chapter 11, the Investment Chapter. The lead negotiator on the Investment Chapter was one of my deputies.”231
257. He further explains that his “primary responsibility as lead negotiator of the Financial Services Chapter was to formulate and achieve U.S. negotiating objectives. As such, [he] directed the NAFTA negotiations relating to the Financial
229 Expert Report Mr. Olin L. Wethingon. ↩
230 Expert Report Mr. Olin L. Wethingon ¶¶ 19-25. ↩
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Services Chapter sector, including the provision governing banking, securities and insurance. This extended to the provisions related to investment and operation within these sectors, including the provisions on national treatment and most-favored-nation (MFN) protection in dispute resolution in the financial services.”232
258. Mr. Wethington confirms the importance of MFN clauses and the practical workings of these clauses in favor of investors and investments in the financial services sector. He opines that:
Much attention during the negotiation of the NAFTA Financial Services Chapter was focused on broadening the definition of ‘financial services’ to include all financial services sectors, not simply major financial sectors such as banking and securities. In addition, the U.S. negotiating team believed that certain guarantees were essential to the agreement – most importantly, the obligations to provide national treatment and most-favored-nation protection.233
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259. In this connection he details the pivotal contributions of national treatment and MFN in this sector and illustrates the perception of U.S. negotiators concerning the scope and reach of MFN clauses as follows:
NAFTA’s inclusion of both substantive and dispute resolution rights within the scope of the Chapter 14 MFN provision reflects the desire of the Parties to increase investment opportunities and protections. At the time, these broad MFN protections for financial services investors were viewed as critical in the aftermath of the sovereign debt crisis that had engulfed the Latin American region. Where the United States intends to limit the scope of MFN provision it expressly does so.234
260. In particular he explains that “[n]o such exclusions applicable to financial sectors are found in the NAFTA. For example, the MFN clause in the Albania-U.S. BIT provides an express exclusion for certain procedures for multi-lateral deals concerning World Intellectual Property Organization (“WIPO”) actions. In this same vein, the United States signed (but did not ratify) the
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Trans-Pacific Partnership, which included an MFN clause with an explicit limitation against the inclusion of investor-State dispute settlement procedural rights.”235
261. As to the MFN clause here at issue in Art. 12.3(1) of the TPA he explains:
The MFN provision in the financial services chapter of the Colombia-U.S. TPA should likewise be broadly construed to include both substantive and dispute resolution rights. The language in TPA Article 12.3(1) is identical to NAFTA Article 1406, except that it uses the term ‘suppliers’ instead of ‘providers’:
- Each Party shall accord to investors of another Party, financial institutions of another Party, investments of investors in financial institutions, and cross-border financial service suppliers of another Party treatment no less favorable than that it accords to the investors, financial institutions, investments of investors in
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financial institutions, and cross-border financial service suppliers of any other Party or of a non-Party, in like circumstances.
Just as with NAFTA Article 1406, Article 12.3 of the TPA does not include any express limitations on the scope of the MFN provision. If the United States and Colombia had wanted to limit the scope of the MFN provision in the financial services chapter, they would have done so.
Indeed, this is the approach the United States and Colombia took in the TPA. Footnote 1 of the MFN clause in Article 10.4 of the TPA governing protections for non-financial services investments does expressly exclude certain dispute resolution rights as follows:
For greater certainty, treatment ‘with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments’ referred to in paragraphs 1 and 2 of Article
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10.4 does not encompass dispute resolution mechanisms, such as those in Section B, that are provided for in international investment treaties or trade agreements (emphasis supplied).
U.S. financial services investors covered by the limitation-free MFN provisions in Chapter 12 of the TPA and its counterpart Chapter 14 of NAFTA are not subject to the limitation found in Article 10.4 of the TPA.
Although the TPA contains a three-year statute of limitations for general investor-State arbitration claims, the Republic of Colombia has granted a more favorable five-year limitations period to all Swiss investors pursuant to the Colombia-Switzerland bilateral investment treaty. Thus, pursuant to the provisions of TPA Article 12.3, U.S. investors are entitled to enjoy the five-year statute of limitations term for any investment disputes against Colombia under the TPA.236
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262. Mr. Wethington’s testimony is significant because the NAFTA, as he points out, has been used as a model for subsequent Free Trade Agreements. The U.S.-Colombia TPA is no exception. The TPA not only draws structures and provisions from the NAFTA but also similar, if not altogether identical, actual wording as well.
263. Significantly, Colombia’s treaty practice is much in line with the well-established treaty drafting approach that Mr. Wethington references. Its treaty practice is eloquent enough. By way of example, in instances where Colombia deems necessary to limit the scope of application of MFN clauses can be found beyond Chapter 10 of the TPA. Illustrative is the Protocol attached to the Colombia-Switzerland BIT which provides:
Ad Article 4 paragraph 2
(2) For greater certainty, it is further understood that the most-favourable treatment referred to in the said paragraph does not encompass mechanisms for the settlement of investment disputes provided for in other international agreements related to investments concluded by the party concerned.237
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264. An ordinary plain meaning VCLT approach establishes that the United States and Colombia expressly agreed to arbitrate investor-State disputes arising out of the TPA. Indeed, Article 12.1(2)(a)(b) incorporates substantive protections standards (Art. 12.1(2)(a)) and dispute settlement procedural rights (Art. 12.1(2)(b)) from Chapter 10.
265. For the sake of completeness only, and in an abundance of caution, Claimant also asserts that consent itself, and not just more favorable dispute resolution treatment, can be imported by operation of the MFN clause pursuant to Article 12.3(1) of the TPA. As Mr. Wethington points out, in the agreement between the Republic of Colombia and the Swiss Confederation on the Promotion and Reciprocal Protection of Investments, Colombia in Art. 11(5) agreed that “[a]n investor may not submit a dispute for resolution according to this Article if more than five years have elapsed from the date the investor first acquired or should have acquired knowledge of the events giving rise to the dispute.”
266. The incorporation of the five-year limitation period pursuant to Art. 12.3(1) of the
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TPA further provides a cognizable independent additional basis for consent.238
267. Ratione Temporis is not an issue in this case.
268. Claimant Astrida Benita Carrizosa acquired her US citizenship in 1954 ( specifically, on November 11, 1954).239 She has never lost her citizenship since then.
269. The claim asserted in the present proceeding matured on June 25, 2014 when the Constitutional Court denied the Council of State’s
238 See, e.g., RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. V079/2005 (jurisdiction) (October 2007), ¶¶ 131-135; Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20 (jurisdiction) (July 2013), ¶¶ 22-23; Austrian Airlines v. The Slovak Republic, UNCITRAL Case (Award) (October 2009), ¶¶ 22-23, citing to Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objections, Judgment of December 12, 1996, Separate Opinion of Judge Higgins (I.C.J. REPORTS, 1996), ¶ 35; National Grid plc v. Argentine Republic, UNCITRAL Case (jurisdiction) (June 2006), ¶ 80; Prof. Mistelis Expert Report ¶¶ 97-99; and C. SCHREUER ET AL., THE ICSID CONVENTION—A COMMENTARY 248 (Cambridge University Press, 2nd ed.). ↩
239 Witness Statement Astrida Benita Carrizosa ¶¶ 2. ↩
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Motion to Vacate the Constitutional Court’s Opinion (C-0026).240 That date represents the exhaustion and end to all judicial labor giving rise to this action.
270. The TPA was signed on November 22, 2006. It entered into force on May 15, 2012. Therefore, the dispute before this Arbitral Tribunal became ripe and accrued approximately two years after the subject treaty became a legally binding obligation on the contracting Parties. The common ratione temporis violation pursuant to which a claim accrues prior to the time at which the purported operative treaty comes into force and becomes a binding obligation on the contracting States is not here present.
271. The testimony of Claimant, Astrida Benita Carrizosa provides that by October 2, 1998 (the date of the Cure Notice) [she] owned and controlled a 2.3307% equity interest in GRANAHORRAR.241 Mrs. Carrizosa has annexed
240 See Constitutional Court’s Opinion dated June 25, 2014 (C-0026). The Constitutional Court in paragraph 2.2.1 and 2.2.2 establish that Council of State’s Motion for Annulment filing was a day late. However, the arguments on which the Council of State based its appeal, coincided with those formulated by GRANAHORRAR’s shareholders. Therefore, they will be analyzed by the Constitutional Court. ↩
241 Witness Statement Astrida Benita Carrizosa ¶ 25. ↩
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Composite Shareholders Registry filed with the Chamber of Commerce of Bogotá, Colombia.242
272. More importantly, however, for purposes of a ratione temporis determination, on November 1, 2007 the Council of State issued its judgment in favor of Claimant and against Colombia.243 That Judgment represents Claimant’s investment in its then monetized form.244 The Constitutional Court reversed the Council of State’s Judgment on May 26, 2011. As stated immediately above, that ruling became final on June 25, 2014.
273. The Request for Arbitration in this proceeding was filed on January 24, 2018, i.e., 3 years 7 months (213 days) from the maturation of the last element rendering these claims ripe. Consonant with the analysis set forth in the ratione voluntatis section of this Memorial, Claimant has exercised her right pursuant to Art. 12.3(1) of the TPA to invoke the five-year limitations provision contained in the agreement between the Republic of Colombia and the Swiss Confederation on the Promotion and Reciprocal
242 Asesorias e Inversiones C.G. S.A., Inversiones Lieja LTDA, and I.C. Interventorias y Construcciones LTDA Shareholder Registries C-0030. ↩
243 See RFA (C-0028) ¶ 133, C-0022. ↩
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Protection of Investments in Art. 11 paragraph 5 of that treaty.
274. The ratione temporis stricture is here met.
275. The ICSID Convention contains no definition of the term “investment”. As is well-known, the absence of such a definition was a deliberate decision by the Convention’s drafters, who preferred to leave it to the Contracting Parties to agree upon what constitutes an investment on a case-by-case basis.
276. Article 12.20 of the TPA defines financial institution as “any financial intermediary or other enterprise that is authorized to do business and regulated or supervised as a financial institution under the law of the Party in whose territory it is located.” That same Article further defines “financial institution of another Party” as “financial institution, including a branch, located in the territory of a Party that is controlled by persons of another Party.”
277. Similarly, Art. 12.20 in defining investment explicitly references the Article 10.28 definitions with the exception of “loans” and “debt
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instruments.” Neither exception is here applicable. In turn, Article 10.28 provides a fairly standardized broad definition of investment as follows:
investment it means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. Forms that an investment may take include (emphasis added):
(a) an enterprise;
(b) shares, stock, and other forms of equity participation in an enterprise;
(c) bonds, debentures, other debt instruments, and loans [citation omitted];
(d) futures, options, and other derivatives;
(e) turnkey, construction, management, production,
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concession, revenue-sharing, and other similar contracts;
(f) intellectual property rights;
(g) licenses, authorizations, permits, and similar rights conferred pursuant to domestic law; [citations omitted] and
(h) other tangibles or intangibles, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges.
278. As designated by the word “include” this listing is not intended to be exhaustive.
279. Claimant, as set forth in the Request for Arbitration245 and elsewhere246 owned shares in GRANAHORRAR.
280. Claimant owned and controlled a 2.3307% equity interest in GRANAHORRAR, through the following companies:247
245 See RFA (C-0028) ¶¶ 8, 16-40. ↩
246 See, supra ¶ 271, infra ¶¶ 280-282. ↩
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281. Here below is a visual summary of Claimant’s participation in GRANAHORRAR through the above-mentioned corporations.
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282. The total number of shares of GRANAHORRAR, on October 3, 1998, was 36,427,121,681.248 Claimant’s family’s six companies owned a 58.76861% of GRANAHORRAR as follows:
| Company | No. of shares | Percentage in GRANAHORRAR |
|---|---|---|
| Asesorías e Inversiones C.G. LTDA | 6.511.830.512 | 17.87632 |
| Exultar S.A. | 4.676.795.978 | 12.83877 |
| Compto S.A. | 4.465.586.371 | 12.25896 |
| Inversiones Lieja | 3.717.567.931 | 10.20549 |
| Fultiplex Ltda. | 1.859.220.529 | 5.10394 |
| Interventorías y Construcciones Ltda. | 176.720.030 | 0.48513 |
283. Notwithstanding the drafting history of Article 25, and the absence of a textual basis for doing so, some ICSID Tribunals have supported the view that investments, in order to fall within the scope of the ICSID Convention, should possess a number of characteristics such as a certain duration of the investment, the existence of risk for the investor and a potential contribution to the host State’s development.
284. Claimant respectfully disagrees with such practice because it imports into the Convention requirements that were discarded by the Convention drafters. However, out of an abundance of caution, it is submitted that Claimant’s investment would comply even with the strictest application of the above-mentioned unwritten requirements. Indeed, Claimant’s investment in GRANAHORRAR was carried out
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over an extremely long period of time. Like most investments in the volatile financial services sector, Claimant’s investment entailed an element of risk. Also, because of the sector in which GRANAHORRAR operated and the innovative policies implemented by GRANAHORRAR to give access to financing to the highest number of customers, there is no doubt that Claimant’s investment contributed to the host State’s development in many respects.
285. As a direct and proximate consequence of the actions and omissions that the Central Bank of the Republic of Colombia, the Superintendency and FOGAFIN undertook, as detailed in paragraphs 1 through 72 of the Request for Arbitration and also, in part, described in paragraphs 5 through 24 of this Memorial, on November 1, 2007 the Council of State issued a Judgment in favor of Claimant and against Colombia (C-0022).
286. On May 26, 2011 the Constitutional Court, as more fully detail in the Request for Arbitration, paragraphs 141 through 167, and elsewhere in this Memorial, pages 40 through 53, issued an Order Revoking the Council of State’s Judgment.
287. On June 25, 2014 the Constitutional Court issued an Order Denying Claimant’s Motion to Vacate the Constitutional Court’s Order of May
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26, 2011.249 Claimant’s ownership of shares in GRANAHORRAR, as set forth in paragraphs 280-282 above, meets the Art. 10.28(b) definition of an investment. More importantly, however, for purposes of pleading and/or proof of ratione materiae, the Council of State’s November 1, 2007 Judgment represents and constitutes Claimant’s investment as alleged and demonstrated in this proceeding.
288. Claimant’s claims against Colombia fall under the concept of a “legal dispute,” falling within the scope of the ICSID Convention. It is widely accepted that a legal dispute is a disagreement about legal rights and obligations. In the present case, Claimant bases her case on legal rights conferred to her as a US investor in Colombia under the TPA and the Colombia-Swiss B.I.T. Also, Claimant has consistemntly presented her case in legal terms and as a legal dispute with Colombia.
289. As illustrated in the RFA as well as under Sections II and V of this Memorial on Jurisdiction, this dispute involves Colombia’s violations of the TPA, customary international law, conventional international law, and Colombian law.
249 See RFA (C-0028) ¶¶ 167-172. ↩
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290. The acts and omissions of Colombia, inter alia, violate a number of standards of legal protection such as Fair and Equitable Treatment, Denial of Justice, Expropriation, Most-Favored Nation and National Treatment provisions, as well as Colombia’s obligations to conform to International Minimum Standards of treatment.
291. The ratione materiae stricture is here amply met.
292. Under Section II of this Memorial on Jurisdiction, Claimant has made a number of allegations against the Republic of Colombia.
293. Those allegations are confirmed and supported by the evidence, legal authorities, witness statements, and expert reports that Claimant has offered. As a matter of fact and pleading there is much more than just prima facie evidence that the Republic of Colombia is responsible, through the actions and omissions of its executive and judicial authorities, for the breach of a number of treaty obligations contained
250 This section of the Memorial on Jurisdiction should be read in conjunction with ¶¶ 173-213 of the Request for Arbitration in this case (C-0028). ↩
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in the TPA and the Colombia-Switzerland BIT some of which are indicated below.
294. Colombia was under an obligation to treat US investors and investments in compliance with the customary international law minimum standard of treatment. That obligation arises (i) out of customary international law principles binding upon all States and (ii) through the express provision under Article 10.5 of the TPA that is referenced by Article 10.7 addressing expropriation. As expressly recognized in Article 10.5 of the TPA, the minimum standard of treatment includes fair and equitable treatment and full protection and security. As a result of the expansive scope of the MFN provision in Article 12.3 of the TPA, Claimant also is entitled to rely on the Fair and Equitable Treatment provisions contained in Article 4(2) of the Colombia-Switzerland BIT.
295. As illustrated under Section II of this Memorial on Jurisdiction, Claimant is the victim
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of wrongful judiciary activism in Colombia in breach of international law. The Constitutional Court in its 2011 and 2014 Opinions committed serious abuses of jurisdiction and authority, and radically renounced universal principles of justice and due process.
296. Any reasonable and impartial person exposed to the facts of the present case and their outcome would sense an arresting lack of due process and an absence of judicial propriety. The June 25, 2014 Constitutional Court Opinion was founded on economic interests and a political agenda. It manifestly and seriously was in breach of basic principles of due process and fundamental justice.
297. The Constitutional Court’s actions described in Section II were arbitrary, grossly unfair, unjust, and damaging of Claimant’s legitimate expectations to rely on a fair, independent, impartial and stable judicial system in Colombia. This rudimentary expectation was not met.
298. Irrespective of a finding that Colombia committed a denial of justice, it is Claimant’s contention that the judicial conduct and mistreatment attributable to the Republic of
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Colombia also amounts to an independent breach of the Fair and Equitable Treatment and Full Protection and Security obligations binding on Respondent.
299. Article 12.1 of the TPA imports for the benefit of investors and investments in the financial services sector the expropriation provisions contained in Article 10.7 of the TPA. Claimant also is entitled to rely on the provisions on expropriation under Article 6 of the Colombia-Switzerland BIT.
300. The 2014 Constitutional Court’s Opinion had the effect of finally removing without compensation Claimant’s entitlement to the value of her investment in GRANAHORRAR that had been embodied in the 2007 Judgment that the Council of State had rendered.
301. The 2014 Constitutional Court Opinion deprived Claimant of her property and rights, which at that point had taken the form of a final and binding judgment issued by the Council of State in 2007.
302. The Constitutional Court’s Opinion amply meets the type of judicial action that treaty
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based investor-State arbitral tribunals have identified as an actionable taking of property in violation of public international law.
303. Article 12.2 of the TPA purports to guarantee to investors of another Party treatment no different from that which is accorded to similarly placed investors of its own nationality. According to this Article investors of another Party can be treated no less favorably than Colombia’s own investors.
304. The entire record of the present dispute is characterized by a marked connotation of discrimination against Claimant. Throughout the course of this unfortunate misadventure Claimant received treatment decisively less favorable than the treatment received by Colombian investors in like circumstances.
305. The discrimination persisted during the judicial proceedings before the Constitutional Court. No Colombian investors in like circumstances were the target of such a discriminatory campaign of political pressure and procedural mistreatment.
306. The unprecedented misapplication of basic principles of due process and justice, the
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creation of new rules devoid of any factual and legal foundation, as well as a number of instances proving political pressure on, and personal influence within, the Constitutional Court, are all but a small catalog of the judicial mistreatments that Claimant, unlike Colombian nationals, received at the hands of Colombian executive and judicial authorities.
307. As demonstrated in Section II of this Memorial on Jurisdiction, both the regulatory and the judicial treatments imposed by the Republic of Colombia on Claimant were discriminatory and in breach of the provisions under Article 12.2 of the TPA. The judicial treatment was emphatically so because in addition to its own failures, it validated the mistreatment that had been committed against Claimant.
308. The quantum-damages analysis in this case is very simple. The Arbitral Tribunal is presented with four theoretical possibilities. Of these four scenarios two are the most relevant and appropriate pursuant to settled assessment methodologies. They are here explained.
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309. In this remarkable case the Republic of Colombia itself has calculated a base set of damages. In fact, it has done so pursuant to its highest ranking Judicial Authority with jurisdiction over administrative contentious matters, the Republic of Colombia’s Council of State. Within the Council of State it was the Fourth Chamber, the most specialized and best qualified unit of magistrates that calculated these damages. It did so on November 1, 2007 in its Judgment entered in the case styled: Compto S.A. en Liquidación y Otros, contra Superintendencia Bancaria y Fondo de Garantías de Instituciones Financieras (FOGAFIN), File No. 25000-23-24-000-2000-00521-02-15728.251
310. The damages number contained in that Judgment is COP 226,961,237,735.99, which was (in November 1, 2007) the USD equivalent at the time, exclusive of any interest rate, of USD 114,183,417.80. This base number provides the Tribunal with a foundational figure from which to work that is plausible and reasonable. While Claimant here asserts that this figure undervalues, based on objective metrics, her
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respective shareholder-equity interest in the Bank, the number still represents a useful figure from which to work for several reasons.
311. First, the number is proffered in a public records document that Colombia itself generated and held out to be true and correct. Second, and quite notably, the Council of State did set forth the methodology pursuant to which it arrived at this figure. Therefore, any adjustment to the figure can be made on an objective basis. By way of example, the Council of State’s analysis uses an approximately (with a less than 1% margin of error) 5.96 per share valuation figure.
312. From this valuation methodology two foundational questions arise. The first of these queries is whether the Council of State’s general methodology is appropriate. Claimant believes it is with the following qualification. Assessing the damages in terms of the valuation of shareholder interest is eminently appropriate. How the Council of State arrived at this valuation does invite analysis. Thus, the analytical question becomes whether the Council of State in reaching a 5.96 per share figure considered the appropriate market factors. Claimant asserts that it did not, based upon the Council of State’s own analysis which is anemic on this point.
313. The second factor in the Council of State’s analysis concerns the extent to which it
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valued the sale of the Bank adjusting for the particular circumstances attaching to that sale. As to this point several qualifying factors are in order. The first important factor to note is that the Council of State did not take into account the sale of the Bank in November 2005 to BBVA in the amount of USD 423,000,000. This matters.
314. Significantly none of the banks, peer banks, were sold. Understandably, they were liquidated. The reason is both simple and important. They were liquidated because, very much unlike the Bank, the peer banks were insolvent. They did not have liquidity issues. They truly, therefore, needed to be liquidated.
315. The Government of the Republic of Colombia, through the Council of State observed, underscored, emphasized, and made clear that the Bank merely had a fleeting liquidity challenge. Its solvency was well within the 9% statutory mark at all times material to any valuation of this asset, based upon the Republic of Colombia’s own admission through the Council of State. Because the Bank was financially solvent and vibrant, it was not liquidated. Quite reasonably and understandably, it was sold as all performing assets are sold.
316. Because, however, it was sold under the circumstances providing for material predicates from which it may be inferred that the
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sale took place in a “distress sale” scenario, any objective and professionally sound valuation of the asset must adjust for this factor as well.
317. Using the Council of State’s own figure suggests that the valuation had to have been undertaken as of the October 2, 1998 date, which is the last date that the bank existed as such prior to the Superintendency’s and FOGAFIN’s artificial devaluation of the shares to the amount of 0.01 COP. Therefore, this valuation raises the question of whether the October 2, 1998 date should be the appropriate date for undertaking this task. Claimant respectfully submits to this Tribunal that it is not.
318. As here recounted, on May 26, 2011 the Constitutional Court, for all of the reasons, premises, and authorities already presented, “vacated” the Council of State’s November 1, 2007 Judgment. The Constitutional Court’s Opinion is here attached as C-0023.
319. The Arbitral Tribunal is invited to consider this date as one of two more plausible, reasonable, and industry appraisal appropriate date of valuation. Under one theory this was the date of the taking, albeit not the date giving rise to
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accrual of a claim pursuant to the TPA. An appraisal of the shares as of this date, as more fully demonstrated below, would yield a materially different and more accurate valuation of the damages suffered. This mathematical adjustment would assume the same approach that the Council of State exercised, with minor but important qualifications on the market methodology implemented. Also, it would invite the appropriate corresponding adjustment to provide for the correct time value of money, i.e., interest rate.
320. Claimant respectfully invites the Arbitral Tribunal to consider June 25, 2014 as the appropriate damages valuation date. The reason is clear. On this date the last element of the factors giving rise to a treaty violation under the TPA matured, and, therefore, it is the most appropriate date on which to conduct a valuation of the shares. This date also has the added benefit that it provides the Arbitral Tribunal with objective performance standards of the asset (the Bank) over time; that being from the date of the sale (November 2005) until June 25, 2014 (the date that the cause of action accrued by dint of the end of all judicial labor).
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321. Because this Arbitral Tribunal has bifurcated the proceeding, at this jurisdictional stage Claimant, in support of her damages analysis, has retained a world-renown and pre-eminent accounting firm Morrison, Brown, Argiz & Farra, LLC (“MBAF”).
322. This firm has authored a Preliminary Damages Report here attached as Expert Report Antonio L. Argiz. For purposes of facilitating further the Arbitral Tribunal’s assessment of Claimant’s damages at this jurisdictional phase and, therefore, consonant with the applicable burden and standard of proof as discussed in Section IV of this writing, set forth below is a chart identifying the damages that Claimant based upon the applicable respective shareholder interest suffered using four dates, each supplying the Arbitral Tribunal with an option.
Calculation of Damages for Claimant for each relevant date
| Relevant dates | @10/03/98 | @11/01/07 | @05/26/11 | @06/25/14 |
|---|---|---|---|---|
| Astrida Benita Carrizosa | ||||
| Fair Market Value of Claimant's Interest before prejudgment interest (amounts in millions) | COP 7,471 | COP 22,022 | COP 30,571 | COP 38,731 |
| Fair Market Value of Claimant's Interest at 04/30/19 including interest (amounts in millions) | COP 55,096 | COP 96,837 | COP 104,028 | COP 95,878 |
| Claimant's Damages at each relevant date (amounts in millions) | USD 16.96 | USD 29.82 | USD 32.03 | USD 29.52 |
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323. In keeping with universally accepted appraisal methodology, the change in the Republic of Colombia’s Gross Domestic Product has been considered in arriving at a share value for each of the possibly operative dates. This analysis, however, does not take into consideration necessary adjustments arising from the November 2005 sale of the Bank. It also omits further adjustments that are necessary based upon the two-year asset performance history between the sale of the Bank and issuance of the Council of State’s Judgment on November 1, 2007.
324. Claimant, however, in the context of this bifurcated hearing on jurisdiction invites the Tribunal to consider the following value for the shares on three material dates:
- (i) November 1, 2007 (USD 25.94 per share) (date of the issuance of the Council of State’s Judgment;
- (ii) May 26, 2011 (USD 36.01 per share) (the date of the Constitutional Court’s “vacatur” of the Council of State’s Judgment); and
- (iii) June 25, 2014 (USD 45.62 per share) (the date of the Constitutional Court’s Denial of the Council of State’s Motion to Vacate).
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325. Claimant respectfully submits that she has advanced more than just a prima facie case at this jurisdictional juncture for purposes of the governing damages prayer for relief.
For the foregoing reasons, authority, premises, and evidence, Claimant Astrida Benita Carrizosa respectfully requests that this Arbitral Tribunal deny Respondent’s, the Republic of Colombia, objections as to jurisdiction, and proceed to a merits hearing in furtherance of the equitable administration of justice.
Dated: June 13, 2019
[signed]