[Page 1]
THE INTERNATIONAL CENTRE FOR THE SETTLEMENT OF
INVESTMENT DISPUTES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
In the Matter of Arbitration between: :
:
AMEC FOSTER WHEELER USA CORPORATION (USA) and :
PROCESS CONSULTANTS, INC. and JOINT VENTURE :
FOSTER WHEELER USA CORPORATION and PROCESS :
CONSULTANTS INC. (USA), :
:
Claimants, :
:
and :
:
THE REPUBLIC OF COLOMBIA, :
:
Respondent. :
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VIDEOCONFERENCE: HEARING ON PRELIMINARY OBJECTIONS
ICSID CASE NO. ARB/19/34
Volume 1
Thursday, May 19, 2022
The World Bank Group
The hearing in the above-entitled matter
came on at 9:06 a.m. before:
MR. JOSÉ EMILIO NUNES PINTO, President
MR. JOHN BEECHEY, Arbitrator
PROF. MARCELO G. KOHEN, Arbitrator
[Page 2]
ALSO PRESENT:
ICSID Secretariat:
MS. MARISA PLANELLS VALERO
Secretary to the Tribunal
Court Reporter:
MS. MARGIE R. DAUSTER
Registered Merit Reporter (RMR)
Certified Realtime Reporter (CRR)
B&B Reporting
529 14th Street, SE
Washington, D.C. 20003
United States of America
[Page 3]
APPEARANCES:
Attending on behalf of the Claimants:
MR. ROBERT L. SILLS
MR. DEREK SOLLER
MS. KRISTINA FRIDMAN
MR. MARTIN RUIZ GARCIA
Pillsbury Winthrop Shaw Pittman, LLP
31 West 52nd Street
New York, New York 10019
United States of America
MR. CHARLES C. CONRAD
MR. RICHARD DEUTSCH
MS. ELIZABETH DYE
Pillsbury Winthrop Shaw Pittman, LLP
Two Houston Center
909 Fannin, Suite 2000
Houston, Texas 77010
United States of America
Client Representatives:
MR. TIMOTHY LANGAN
MS. CATALINA NIÑO
[Page 4]
APPEARANCES: (Continued)
On behalf of the Respondent (in-person):
MS. ANA MARÍA ORDOÑEZ
MS. ELIZABETH PRADO
MR. GIOVANNY ANDRÉS VEGA BARBOSA
Agencia Nacional de Defensa Jurídica del
Estado, República de Colombia
DR. CLAUDIA FRUTOS-PETERSON (Partner)
MS. ELISA BOTERO (Partner)
MR. FERNANDO TUPA (Partner)
MS. GABRIELA SADLER (Paralegal)
MS. JACLYN MESSEMER (Paralegal)
Curtis, Mallet-Prevost, Colt & Mosle, LLP
On behalf of the Respondent (remotely):
MS. MARCELA MARIA SILVA ZAMBRANO
MR. CESAR LEONARDO RODRÍGUEZ (Intern)
MS. YADIRA CASTILLO
MR. ANDRÉS REINA
MS. NATALIA FERNANDEZ ALBA
Agencia Nacional de Defensa Jurídica del
Estado, República de Colombia
MR. JUAN JORGE (Associate)
MS. MARIA PAULINA SANTACRUZ SALAZAR (Associate)
MS. SARA DANGÓN (Associate)
Curtis, Mallet-Prevost, Colt & Mosle, LLP
[Page 5]
C O N T E N T S
PAGE
PRELIMINARY MATTERS...................................6
OPENING PRESENTATIONS
ON BEHALF OF THE RESPONDENT:
By Ms. Ordoñez.......................................9
By Dr. Frutos-Peterson..............................15
By Mr. Tupa.........................................59
By Ms. Botero.......................................92
By Dr. Frutos-Peterson.............................133
ON BEHALF OF THE CLAIMANTS:
By Mr. Sills......................................135
By Mr. Conrad.....................................158
By Mr. Sills......................................174
Questions from the Tribunal.......................236
CONFIDENTIAL SESSION
1...................................................72
2..............................................163-166
3..................................................211
4..................................................280
[Page 6]
P R O C E E D I N G S
PRESIDENT NUNES PINTO: Okay. Good morning.
My name is José Emilio Pinto. I am the Tribunal
Chair. Some of you know me by Zoom. But this is--for
us, it's very, very important to be back. We are
extremely happy to be back in person after so many
years using the platforms. I'm not blaming the
platforms. They were extremely useful. But it's much
better when you're sitting in the same room.
So, in the name of my Co-Arbitrators,
Marcelo Kohen and John Beechey, and my own name, I
would like to welcome you to this Hearing, one of the
very first in-person.
Also, I would like to welcome those who are
attending this hearing remotely, especially the
Non-Disputing Party representatives. Marisa confirmed
that they are online.
So, again, it's an enormous pleasure. It's
great to be back. And we have to work. We have lots
of tasks for the day today, for tomorrow.
But first of all, I would like to ask you to
be very kind and introduce your colleagues who are
[Page 7]
attending this Hearing here at the ICSID premises in
D.C.
Claimants first.
MR. SILLS: Thank you, Mr. President.
On behalf of the Claimants, I'm Robert Sills
of Pillsbury Winthrop Shaw Pittman. With me are my
colleagues. On my left, Mr. Richard Deutsch, also
with Pillsbury. To my right, Mr. Charles Conrad of
our firm; Ms. Kristina Fridman, Pillsbury;
Ms. Elizabeth Dye, Mr. Derek Soller, and Mr. Martin
Ruiz Garcia.
PRESIDENT NUNES PINTO: Thank you.
Respondent, please.
MS. FRUTOS-PETERSON: Good morning,
everybody. It's a pleasure being here in person.
This is our first hearing in person, so we're really
happy that--thank you to the Tribunal for making it
happen.
So, I'm Claudia Frutos-Peterson, a partner
with Curtis, Mallet-Prevost, Colt & Mosle, on behalf
of the Republic of Colombia. And I'm here with the
Curtis team and the [Agencia Nacional de Defensa
[Page 8]
Jurídica del Estado, República de Colombia].
To my right is Ana María Ordoñez, the
director. And then to my left I have Fernando Tupa
from Curtis, Elisa Botero from Curtis, Elizabeth Prado
from the Agencia, Giovanny Vega from the Agencia.
And, of course, we have our terrific team of
associates attending online, and they are all--their
names are in the List of Participants.
Thank you so much.
PRESIDENT NUNES PINTO: Thank you very much.
DR. FRUTOS-PETERSON: And I'm sorry,
Mr. President. I forgot to introduce you to my two
colleagues in the back, Jackie Messemer and Gabriela
Sadler.
Thank you.
PRESIDENT NUNES PINTO: Thank you. You are
all mostly welcome.
I would like to remind you that one of--this
was highlighted by Marisa Planells Valero to you--but
I would like to highlight [to] you that should you,
for any reason, have any confidential matters to be
addressed during the Hearing, please let the Tribunal
[Page 9]
know before you start so that we can decide and
disconnect the remote attendants. Okay?
So, unless you have any matters that you
would like to address to the Tribunal, I think we're
ready to start.
Mr. Sills, any matters?
MR. SILLS: We have no housekeeping matters,
Mr. President.
PRESIDENT NUNES PINTO: Thank you.
DR. FRUTOS-PETERSON: We don't have any
matters pending. Thank you, Mr. President.
PRESIDENT NUNES PINTO: So, we start--we
have 90 minutes now, to 10:40--10:30/10:40, for the
Opening Presentation by Respondent.
So, I think we can get started. And the
floor is yours.
OPENING STATEMENT BY COUNSEL FOR RESPONDENT
MS. ORDOÑEZ: Thank you, Mr. President.
Good morning, Mr. Chairman and Members of
the Tribunal. Let me start by making some clear
general remarks that are fundamental for the position
of the Republic of Colombia.
[Page 10]
We signed the Treaty with the United States
of America, convinced of the benefits it would bring
to our bilateral relations. It provides investors
with the exceptional and rare opportunity to sue the
State directly before investment tribunals like this
one.
This exceptional and expensive recourse to
international adjudication should not be taken
lightly. Colombia and the United States consented to
accept claims from investors of the other party only
when requirements of the consent are met.
My mission today is to introduce Colombia's
preliminary objections in the case brought by
Claimants on 6 December 2019. I would kindly ask the
Members of the Tribunal to keep this date in your
minds.
Because Colombia invoked Article 10.20.4 of
the Treaty, the first task of the Tribunal is to
decide whether, as a matter of law, the claim brought
is a claim for which an award in their favor may be
made.
As a matter of law, and accepting all facts
[Page 11]
in the Notice of Arbitration as true, the claim
submitted is not a claim for which an award in favor
of the Claimants may be made under Article 10.20.4
because, first, on 6 December 2019, when the Notice of
Arbitration was submitted, there was no State measure
capable of breaching a substantive obligation of the
Treaty or an investment agreement. Accordingly, there
was no compensable loss or damage Claimant[s] could
have incurred by reason of, or arising out of a breach
that did not exist.
While 6 December 2019, is the critical date
in the assessment of jurisdiction, as of today, there
is still no measure capable of breaching the
substantive obligations of the Treaty or an investment
agreement, and Claimants have incurred no loss or
damage by reason [of], or arising out of, a breach.
The second task of the Tribunal is to decide
on the other five independent objections Colombia has
raised against the jurisdiction of the Tribunal,
including the allegation that there is simply no
protected investment in this case. Some of these
objections were even raised by the State before the
[Page 12]
case was registered.
As the Tribunal can see, our agenda for the
next two days is very busy and concerned with critical
objections against its jurisdiction. This arbitration
is novel for Colombia, since it is the first time it
raises an objection according to Article 10.20.4 of
the Treaty, and very much looks forward to learning
from the decision of the Tribunal in this respect.
Now, Claimants have taken issue with
Colombia's preliminary objections not only in this one
but in its previous cases. Awarding attorneys' fees
and costs is requested by Claimants as the proper way
to discourage Colombia from raising preliminary
objections in the future.
As the Head of the International Litigation
Division of the Republic of Colombia, it is my duty to
address this allegation, which is both unfair and very
inaccurate.
First, I would like to recall my colleagues
that raising preliminary objections is a valid action
under international law, and an expression of respect
for the peaceful settlement of disputes.
[Page 13]
Colombia has consistently appeared before
international investment tribunals to honor its
international obligations, but this does not entail a
duty to refrain from vindicating the limits of its
consent to the international jurisdiction.
As far as investment arbitration is
concerned, during the past five years under my
direction, Colombia's practice has been characterized
by a sincere respect and trust in investment
arbitration. As a State committed to the rule of law,
the terms of our treaties, in their interaction with
other relevant rules of international law, have guided
each and every aspect of our actions.
Precisely because of that, and contrary to
the positions advanced by Claimants, Colombia has been
successful when raising preliminary objections,
including under this Treaty.
The present case is not an exception to
Colombia's professionalism in approaching each step of
the arbitral process. On the contrary, given the
serious and numerous pathologies in the Claimants'
case, it was foreseeable, not to say mandatory, for
[Page 14]
Colombia to raise each and every single one of the
preliminary objections it raised in these proceedings.
As you can see, the time and costs using
these proceedings are not Colombia's fault, but the
result of a Notice of Arbitration that was both
premature, and a reflection of serious breaches to the
conditions of our narrow consent to investor-State
arbitration.
Let me finish with a brief general reference
to the various agreements reached between Colombia and
the United States of America regarding the
interpretation of the TPA.
Claimants have taken serious issue with
Colombia's reliance on non-disputing party
submissions, and have argued that the NDP submission
should be ascribed no legal value. In Claimants'
view, such agreements should be given no weight under
the general rule of interpretation, given a supposed
bias by the non-disputing party.
Apart from the fact that the Vienna
Convention Article 31(3)(a) is explicit to the effect
that subsequent agreements between State Parties to a
[Page 15]
treaty are part of the general rule of interpretation,
Claimants' proposal leads to an unacceptable paradox:
in this case, the more agreement would mean the less
law. No law actually.
In the Claimants' case, despite having the
highest possible degree of agreement regarding certain
provisions in this TPA, such agreement would produce
no law in the relationships between the Parties. We
truly hope the Tribunal does not support this
problematic proposition.
With this, I conclude the introductory
statement of the Republic of Colombia and kindly ask
Mr. Chairman to give the floor to Ms. Claudia
Frutos-Peterson from Curtis to continue with our
presentation.
Thank you for your attention.
DR. FRUTOS-PETERSON: Thank you, Ana.
Good morning, Members of the Tribunal and
everyone else in attendance.
Claimants have put [themselves] in an
untenable position. They decided to launch a claim
against Respondent preemptively, before Colombia has
[Page 16]
taken any measure that could constitute a breach and
having suffered no loss or damage as a result.
Their intentions in bringing a claim
prematurely are plain. They hope that an
international arbitration will dissuade Colombia's
authorities, and specifically the CGR, from exercising
their constitutional and legal powers.
Permitting such an abusive claim to proceed
to the merits would not only undermine the legitimacy
of investor-State arbitration, but directly contravene
principles of law and the express language of the
Treaty.
It is a well-settled principle that damage
is an essential element of a cause of action. In this
case, that principle is even more relevant because the
two Contracting States expressly agreed that a claim
cannot be submitted to arbitration under the Treaty if
the claimant has not suffered a loss or damage.
That is a hurdle that Claimants cannot
escape in this case, with the inevitable consequences
that their claim is doomed from the start and must be
dismissed in its entirety.
[Page 17]
The premature nature of Claimants' claims is
only the first of many reasons why the Tribunal should
dismiss this case.
Respondent will go over each one of those
reasons later in this Opening Presentation. But
before proceeding any further, let us briefly recap
the relevant facts for the preliminary objections
raised by Colombia.
Claimants [sic] FPJVC, which I will refer to
as the "Joint Venture," has a contractual association
form--it is a contractual association formed by the
two other Claimants, Foster Wheeler and Process
Consultants, entered into a contract with Reficar to
provide consulting services in respect of the
management of a project to expand and modernize a
refining complex in Cartagena, Colombia.
Pursuant to that Services Contract, Reficar
reimbursed the Joint Venture for all its costs and
expenses in performing the consultant services, and
paid the Joint Venture a fixed rate for each manhour
worked by the personnel assigned to perform the
services, as well as a fixed profit for manhour.
[Page 18]
The compensation structure set forth in the
Contract ensured that the Joint Venture recovered all
resources it used to provide the service to Reficar
and guaranteed a return linked to the number of hours
worked, not to the success or to the failure of the
refining project.
The works for the expansion and
modernization of the refinery were completed after
years of delays and billions of dollars in cost
overruns, leading the CGR, the Colombian State organ
tasked with overseeing and controlling expenditures of
public funds, to initiate a fiscal liability
proceeding to determine whether there had been an
economic damage to the State and, if so, determine the
amount of such damage and identify those responsible
for causing it.
The CGR's investigation led it to formally
indict Claimants Foster Wheeler and Process
Consultants, as well as other Colombian and foreign
juridical and natural persons and fiscal--with fiscal
liability.
The Indictment Order or, as Claimants call
[Page 19]
it, the "CGR Charges," was an administrative act of
mere procedural character marking the start of one of
the mid-stages of the Fiscal Liability Proceeding.
The Indictment Order charged 14 individuals
and five juridical entities, including Foster Wheeler
and Process Consultants, with joint and several
liability for the economic damage to the State in
connection with the refinery Project.
We must stop the story here. This is the
moment when the Claimants decided to submit their
claim to arbitration despite the fact that the
Indictment Order was not a final act, not even at the
administrative level, and that--and that at that point
in time, Claimants have suffered no loss or damage as
a result of Colombia's supposed breaches.
As we will discuss in more detail later,
this factual snapshot is crucial because determining
the ripeness of Claimants' claim turns on whether
Respondent has breached an obligation and Claimants
had suffered a damage arising out of that supposed
breach by the time Claimants filed their Notice of
Arbitration.
[Page 20]
Claimants' prayer for relief in the Notice
of Arbitration is reflective of the fact that their
claim was not ripe when they brought this case.
Because there was no measure capable of constituting a
breach and Claimants had suffered no damage arising
out of Respondent's supposed breaches, their prayer
for relief is forward-looking and completely
speculative.
They essentially asked the Tribunal for
compensation for supposed reputational damages for an
offsetting award in an amount equivalent to the total
amount of damages established in an eventual ruling
with fiscal liability and for an injunction barring
the CGR from ever seizing the assets.
But under Article 10.26 of the Treaty, the
Tribunal cannot award moral or hypothetical damages or
grant injunctive relief, to say nothing of the fact
that compensating Claimants in an amount equal to the
Ruling with Fiscal Liability will give them a huge
windfall given that they have not paid a single penny
towards satisfying that ruling.
It really is astonishing that not only do
[Page 21]
they not seek compensation for actual damages, but
want to make a profit at the expenses of Colombia.
As the Tribunal is aware, on April 26, 2021,
the CGR ultimately issued a Ruling with Fiscal
Liability finding Claimants, as well as other
14 fiscal--another 14 others fiscally liable for the
damage caused to the Colombian State.
The Ruling, which Claimants refer to as the
"CGR Decision," came out roughly a year and a half
after Claimants submitted their claim to arbitration.
That, however, did not resolve Claimants'
predicament. Even today, two years after bringing
this claim against Colombia, there is still no measure
capable of constituting an international wrongful act
and [no resulting damages] for Claimants.
The truth is, rather than [aid] Claimants'
case, what has happened since they submitted the
Notice of Arbitration helps defeat it. After bringing
their claim, they initiated two acciones de tutela and
filed an appeal against the Ruling with Fiscal
Liability, materially violating the waiver requirement
in Article 10.18.2 of the Treaty.
[Page 22]
The recent initiation of a conciliation
procedure against the CGR is an additional material
violation of the waiver. And if Claimants file an
annulment action against the Ruling with Fiscal
Liability before the court of the administrative
adjudicatory jurisdiction, as they have already said
they will do if the conciliation fails, then that will
constitute a further breach of the waiver for a grand
total of five material violations of the waiver.
At this point, it is obvious that Claimants'
so-called waiver is worthless and has no real effect.
Claimants thought they could fulfill the requirement
in Article 10.18.2 of the Treaty and engage Colombia's
consent to arbitration by playing lip service.
In the Notice of Arbitration, they included
a waiver saying they will waive their right to
initiate or continue local proceedings with respect to
the measures alleged to constitute a breach. But they
also included a reservation that empties that waiver
completely.
And on top of that, they have acted, since
the outset of these proceedings, as if no waiver
[Page 23]
existed at all, with the excuse that they are only
acting defensively. The waiver, under the Treaty, is
categorical and contains no such carve-out.
Realizing that the breach of the waiver is
deadly to their claim and seeking to continue their
participation in local proceedings, in their
observations to the U.S. non-disputing party
submissions, Claimants now argue that the measure
alleged to constitute a breach of the Treaty is the
Indictment Order, and not the Ruling with Fiscal
Liability or the Fiscal Liability Proceedings more
generally.
They believe this distinction saves their
case because the local proceedings they have initiated
and continued refer to the Ruling and the Fiscal
Liability Proceedings and not to the Indictment Order,
meaning that under their flawed logic, there will be
no violation of the waiver.
But this belated distinction doesn't aid
their case. In the course of these proceedings,
Claimants have continuously argued that the action of
the CGR during the Fiscal Liability Proceedings since
[Page 24]
the initiation of the investigation through the
Indictment Order and up to the Ruling with Fiscal
Liability have violated the Treaty.
For example, in their Application for
Provisional Measures, Claimants argued that the CGR
Decision - and the CGR proceeding as a whole - render
Claimants' contractual rights meaningless and violate
Claimants' right to fair and equitable treatment.
Those are, according to the Claimants, the
measure at issue in this case. And so, each one of
those actions they initiate or continue locally with
respect to the Fiscal Liability Proceedings constitute
a violation of the waiver.
The maturity of the claim is another issue
altogether. As we have already explained, when
Claimants initiated this arbitration, which is when
the maturity of the claim must be assessed, the Fiscal
Liability Proceedings had barely just begun. It is
obvious that no breach of an investment treaty, let
alone damages, could exist by the mere commencement of
an administrative proceeding against an alleged
investor.
[Page 25]
Before addressing each of Respondent's
preliminary objections, let us briefly discuss the
scope and significance of the non-disputing party
submission of the United States, commenting on the
meaning of various provisions of the Treaty relevant
to deciding those preliminary objections.
The Tribunal has before it the common and
consistent positions of both Contracting Parties to
the Treaty on the interpretation of the provisions at
issue in this case.
The non-disputing party submission filed by
the United States, coupled with Colombia's pleadings,
is a subsequent agreement between the parties
regarding the interpretation of the treaty or the
application of these provisions under Article 31(3)(a)
of the Vienna Convention of the Law of the Treaties.
Simply put, a subsequent agreement is a
consensus between the parties to a treaty, reached
after they enter into force, about the interpretation
of a treaty--of that treaty or the application of its
provisions.
Since the parties are the masters of the
[Page 26]
treaty, such interpretation is, in the words of the
International Law Commission's commentary on the
Vienna Convention, "an authentic interpretation by the
parties which must be read into the treaty for
purposes of its interpretation."
The International Court of Justice echoed
the ILC, stating that "an agreement as to the
interpretation of a provision reached after the
conclusion of the treaty represents an authentic
interpretation by the parties which must be read into
the treaty for purposes of its interpretation."
As the ILC explained in another report, if
the parties to a bilateral investment treaty agree on
an interpretation, that interpretation prevails and in
itself takes on the nature of a treaty, regardless of
its form.
Such "an agreement collateral to the treaty
[...] must be taken into consideration in interpreting
the treaty."
The literature is consistent in establishing
that a subsequent agreement does not require any
special form or formality, a view that is shared by
[Page 27]
several investment tribunals. No single common act is
required, as Claimants wrongfully allege.
In addition to being a subsequent agreement,
the declarations of the Contracting Parties, in this
case and in other cases, are also subsequent practice
in the application of the Treaty pursuant to
Article 31(3)(b) of the Vienna Convention.
In fact, several investment tribunals have
stated that the submissions of the Contracting Parties
constitute subsequent practice regarding the
interpretation of the provision of a treaty that is
"entitled to be accorded considerable weight."
Colombia and the United States have
consistently maintained the same positions, not only
in this case but also in other cases, interpreting
this very same Treaty or other investment treaties
that are similar or identically-worded.
The Contracting Parties to the Treaty
envision[ed] the participation of the non-disputing
State for good reason. They wanted to make sure that
the interpretation and application of the provisions
of the Treaty by the investment tribunals were
[Page 28]
consistent with the understanding of both Contracting
Parties.
Claimants' sole argument against giving
weight to the submissions of the United States seems
to be that a non-disputing State party is not
impartial because it is concerned it will face
investment claims, and so it will push for a limited
interpretation of the Treaty provisions. That
argument is really nonsensical.
If the Contracting Parties were concerned
about facing investment claims, they would have not
concluded the Treaty in the first place. They also
have the authority to amend or terminate the Treaty if
they--if they so wished.
What the Contracting Parties intended to
achieve by allowing the participation of the
non-disputing State in arbitration under the Treaty
was to avoid interpretations of Treaty provisions that
do not reflect their understanding.
Realizing that the United States'
non-disputing party submission in the case and in
other cases are damaging to their claim, Claimants try
[Page 29]
to undermine the importance by claiming that
Colombia's preliminary objections are almost
exclusively based on those submissions, implicitly
suggesting that they contain interpretative positions
that are isolated. Claimants are clearly wrong.
Respondent's preliminary objections are
based on the plain language of the Treaty, supported
by the U.S. non-disputing party submission on the
interpretation of the Treaty and by more than
300 legal authorities.
In short, as much as Claimant disliked the
submissions of the United States and the consensus
reached by the Contracting Parties regarding the
interpretation of the provisions of the Treaty, they
constitute an authentic interpretation that has
binding force.
Let us now turn to Respondent's objections.
Respondent has put forth two different categories of
preliminary objections.
On the one hand, Respondent has raised an
objection under Article 10.20.4 of the Treaty that, as
a matter of law, the claim submitted by Claimants is
[Page 30]
not a claim for which an award may be made in their
favor.
That is because Claimants failed to comply
with the conditions set forth in Article 10.16.1 of
the Treaty for the submission of a claim to
arbitration and because the relief they seek is not a
relief that the Tribunal can grant under Article 10.26
of the Treaty.
In addition, Respondent raised
five jurisdictional objections that the Tribunal
decided to hear as a preliminary matter in conjunction
with Respondent's 10.20.4 objection.
First, Respondent raised an objection that
the Tribunal lacks jurisdiction ratione materiae
because Claimants do not have a protected investment
under either the Treaty or the ICSID Convention, given
that the contract they entered into is a pure
commercial contract for the provision of services.
Second, Respondent raised an objection that
the Tribunal lacks jurisdiction ratione personae over
Claimant FPJVC, the Joint Venture, because that
Claimant doesn't qualify as a "juridical person" under
[Page 31]
Article 25(2)(b) of the ICSID Convention.
Third, Respondent raised an objection that
the Tribunal lacks jurisdiction ratione voluntatis
with respect to Claimants Foster Wheeler and Process
Consultants because such Claimants did not file a
Notice of Intent as required under Article 10.16(2) of
the Treaty.
Fourth, Respondent raised an objection that
the Tribunal lacks jurisdiction ratione voluntatis
with respect to the claims for breach of the Treaty's
FET obligation because Foster Wheeler and Process
Consultants made allegations to the same effect before
Colombian courts and, pursuant to Annex 10-G of the
Treaty, such an election shall be definite
And finally, Respondent raised an objection
that the Tribunal lacks jurisdiction ratione
voluntatis because Claimants did not submit a valid
and effective waiver pursuant to Article 10.18.2(b) of
the Treaty and because they have acted inconsistently
with that waiver in at least four instances.
As I said, they have filed two acciones de
tutela before Colombian courts, an appeal against the
[Page 32]
Ruling with Fiscal Liability before the Fiscal Chamber
of the CGR, and just recently they initiated a
conciliation procedure before the Procuraduría, which
is a procedural pre-condition for initiating an
annulment action before Colombian courts against the
Ruling with Fiscal Liability.
Members of the Tribunal, drawing a
distinction between the two categories of preliminary
objections raised by Respondent is crucial because the
treatment of the facts and the standard applicable to
each category is entirely different.
To rule on Respondent's 10.20.4 objection,
the Tribunal must look to Claimants' Notice of
Arbitration and decide whether the claim thereby
submitted is a claim for which an award can be made in
Claimants' favor, assuming as true their factual
allegations in that Notice of Arbitration.
To rule on Respondent's other jurisdictional
and admissibility objections, the Tribunal must look
at the facts, make any relevant factual
determinations, and decide each objection, taking into
account that Claimants have the burden of proving all
[Page 33]
facts supporting their case on jurisdiction.
In their written and oral submissions,
Claimants consistently ignore this key distinction and
conflate the two standards. They want this Tribunal
to take them at their word, presuming as true every
single one of their allegations, both factual and
legal. Unfortunately for Claimants, that is not how
things work.
We will discuss each standard separately
later in this Opening Presentation before addressing
each category of preliminary objections. But I want
to leave you with one final thought before we move on.
Claimants have employed a truly questionable strategy
in these proceedings, constantly undermining
Respondent's due process rights and increasing the
cost of defending this case.
First, Claimants have made a habit of
speaking out of turn and out of scope. The record is
full with instances where Claimants exceeded the
bounds of the relevant submissions, trying to
impermissibly include through the back door additional
arguments or responses to Colombia's positions. Most
[Page 34]
noteworthy is Claimants' Request for Provisional
Measures and an Emergency Temporary Relief, a 64-page
document accompanied by four witness statements and 79
exhibits, which was plainly a memorial on the merits
poorly disguised as an application for interim
measures. Just a few weeks ago, Claimants took
advantage of the opportunity to provide comments on
the U.S. submission to come up with new arguments in
an attempt to fix their flawed claim.
Second, Claimants have made arguments that
fly in the face of the language of the Treaty and
continuously shifted their positions as they go along.
Two examples easily come to mind. Claimants filed a
Request for Provisional Measures seeking to enjoin the
application of the same measure alleged to constitute
a breach of this Treaty, directly contradicting
Article 10.20.8 of the Treaty.
In fact, their shifting stance as to the
measures alleged to constitute a breach, which we
discussed earlier, is a prime example of how Claimants
have moved the goalposts at every turn in this case.
Another example is their expropriation
[Page 35]
claim, which has changed significantly since the case
has started. They started out claiming that Colombia
had expropriated two specific clauses of the Services
Contract. After Respondent explained why such an
expropriation claim could not be succeeded, Claimants
now offer a very different formulation.
In fact, Respondent will not be at all
surprised if this afternoon, during their Opening
Statements, Claimants offer a completely new theory of
the case, raising entirely new arguments for the first
time since this arbitration started.
If that were to happen, and Respondent,
unfortunately, thinks that it will happen, Colombia's
due process right will be severely impaired.
Logically, Colombia can only defend against Claimants'
claims as they originally pleaded them. And while
their tactics are disruptive and violate Colombia's
rights of defense, they only reveal that their case is
flawed and bound to fail.
This claim should not have started in the
first place, and has certainly gone far enough.
Colombia requests that the Tribunal uphold
[Page 36]
Respondent's preliminary objections and dismiss this
case in its entirety.
I will now address Colombia's 10.20.4
objection.
Article 10.20.4 of the Treaty provides that
the Tribunal shall address "as a preliminary question
any objection by the respondent that, as a matter of
law, a claim submitted is not a claim for which an
award in favor of the claimant may be made under
Article 10.26."
This preliminary objection is intended to
dismiss, at an early stage of the arbitral
proceedings, legally defective claims such as the one
filed by Claimants. Before we discuss why Claimants'
claim is not a claim for which the Tribunal can make
an award in their favor, let's look into the standard
applicable to deciding on Respondent's 10.20.4
objection.
Article 10.20.4(c) states that "in deciding
an objection under this paragraph, the tribunal shall
assume to be true claimant's factual allegations in
support of any claim in the notice of arbitration."
[Page 37]
The first thing to note about this standard
is that the presumption of truthfulness in
Article 10.20.4(c) only applies to Claimants' factual
allegations. It doesn't apply to Claimants' legal
allegations or conclusions that are unsupported by
factual allegations.
This is a hotly debated issue between the
Parties because Claimants want the Tribunal to take
every single line of argument as a factual allegation.
But not every allegation made by Claimant is a factual
allegation that the Tribunal must accept as true.
Claimants' attempt to unduly expand the
limited scope of this presumption of truthfulness must
fail. Let's look at a couple of examples. Claimants
state, and I quote: "FPJVC was not a fiscal manager
under Law 610, and there is no colorable basis upon
which it could be asserted to be one."
This is not a factual allegation. Whether
FPJVC qualifies as a fiscal manager is a legal
allegation that the Tribunal must not and cannot
accept as true. I will give you another example.
Claimants' state that if the [investigated] party is
[Page 38]
not a fiscal manager, the CGR does not have
jurisdiction to initiate a fiscal liability
proceeding.
That is also not a factual allegation but a
legal allegation. Let us see one example of a true
factual allegation made by Claimants. Claimants state
that "CB&I eventually completed the Project in
July 2016 according to specifications, but at a total
cost of about US$6.1 billion - nearly three years late
and more than double its original estimated cost."
Now, that is a factual allegation. It is an
allegation about a fact, about an event or thing that
may have existed or occurred.
Under Paragraph C, only the factual
allegations in the Notice of Arbitration benefit from
a presumption of truthfulness. As the tribunal in
Pac Rim v. El Salvador correctly pointed out, the
presumption of truthfulness is limited to the factual
allegations raised by Claimants in their Notice of
Arbitration and does not extend to factual allegations
made elsewhere.
Claimants, of course, rally against this
[Page 39]
rule, accusing Respondent of being formalistic and
arguing that it is an "accepted principle that a
tribunal should take account of developments since the
case was commenced."
But Claimants conflate what are clearly two
separate issues. The presumption of truthfulness in
Paragraph C applies only to factual allegations in the
Notice of Arbitration because it is the notice that
Claimants submit their claim and, thus, it is where
the Tribunal must turn to decide, over an objection,
that a claim submitted is not a claim for which an
award in favor of the claimants may be made.
A separate issue is whether developments
after the submission of the claim can be considered by
the Tribunal in deciding the merits. The issue is
currently not before--that issue is currently not
before this Tribunal. In addition, Respondent is not
saying that Claimants may not offer clarifications
after filing the Notice of Arbitration, but those
supplemental facts do not benefit from a presumption
of truthfulness.
Finally, in deciding Respondent's
[Page 40]
Article 10.20.4 objection, the Tribunal may consider
other relevant facts that are not in dispute between
the Parties.
The United States shares this interpretation
of Article 10.20.4(c). In the Rejoinder, Claimants
argue that in order to uphold Respondent's 10.20.4
objection, the Tribunal has to find that Claimants'
claims are certain to fail. But that standard is
nowhere in the text of Article 10.20.4. In fact, the
reality is that the tribunal in Corona vs. Dominican
Republic dismissed a claim involving a factual pattern
very similar to this case where the claimant was
challenging an administrative act that had not yet
been subject to judicial review.
The Corona tribunal dismissed the claim
under a provision identical to Article 10.20.5 of the
Treaty, which is a more limited review mechanism than
Article 10.20.4 due to its expedited nature.
What the Tribunal needs to do here is to
determine whether the claim presented by Claimants in
the Notice of Arbitration is a claim that as a matter
of law can end with an award in their favor.
[Page 41]
The simple answer to that question is no. As a matter of law, Claimants' claim is not a claim for which an award may be made in their favor for two reasons. First, because Claimants failed to comply with the conditions set forth in Article 10.16.1 of the Treaty for the submission of a claim to arbitration and, second, because the relief they seek is not a relief that the Tribunal can grant under Article 10.26 of the Treaty.
We will review each of these reasons separately. Let's start with the first of those reasons. Under Article 10.16.1 of the Treaty, in order for an investor, either on its own or on behalf--on its own behalf or on behalf of an enterprise that [it] owns or controls directly or indirectly to submit a claim to arbitration under the Treaty, two requirements need to be met. (A) that there be a breach of a substantive obligation under the Treaty or an investment authorization or investment agreement; and (B) that the claimant or enterprise has incurred loss or damage by reason of, or arising out of, such breach.
[Page 42]
Failure to comply with these essential requirements affects not only the admissibility of the claim submitted to arbitration, but also the consent itself since Article 10.17.1 of the Treaty--since--since, according to Article 10.17.1 of the Treaty, the Contracting Parties only consent to the submission of a claim to arbitration under Section--under that Section in accordance with this Agreement.
That was expressly acknowledged by the tribunal in UPS vs. Canada, when they were interpreting a very identical provision.
Whether the requirements of Article 10.16.1 of the Treaty for submitting a valid claim to arbitration are met and, by extension, whether a claim is ripe, must be assessed at the time the claim is submitted to arbitration.
That was the holding in Glamis v. the U.S., where the tribunal interpreted a provision of NAFTA that is almost identical to Article 10.16.1 of the Treaty. That is also the position of the United States in various of the non-disputing party
[Page 43]
submissions and, in fact, in the submissions that the United States made in this case. It clearly says so.
I quote: "The breach and loss must have already occurred prior to the submission of a claim to arbitration." And they continue saying: "No claim based solely on speculation as to future breaches or future loss may be submitted."
That is why events or damages that occur after the initiation of the arbitration are not relevant to determine whether the requirements of Article 10.16.1 of the Treaty are met. In their Rejoinder, Claimants argue that the Tribunal should take account of developments since the case was commenced. That is totally incorrect.
As the tribunal in Glamis put it, the issue of ripeness turns on the determination of whether the challenged measure had effected harm by the time Claimants submitted its claim to arbitration. Therefore, in determining the ripeness of Claimants' claim, the Tribunal must look at the facts as they stood at the time Claimants filed their Notice of Arbitration.
[Page 44]
Claimants take issue with the actions of the CGR within the context of the Fiscal Liability Proceedings. So what had happened in the Fiscal Liability Proceedings when Claimants submitted their claim to arbitration? Let's look.
On your screen--on your screen, we are displaying a timeline [of] the main dates and events of the dispute. In the middle is the filing of the Notice of Arbitration on December 6, 2019, which is the key date for purposes of determining whether Claimants complied with the requirement of Article 10.16.1 of the Treaty.
The facts to your right of the screen, which occurred after Claimants filed a Notice of Arbitration, are wholly irrelevant to the question of ripeness.
Assuming as true Claimants' factual allegations in the Notice of Arbitration, the Tribunal must answer two key questions. One, by December 6, 2019, was there a prima facie breach of a substantial obligation under the Treaty or of an investment authorization or investment agreement?
[Page 45]
And, two, by December 6, 2019, had Claimants incurred a prima facie loss or damage by reason of, or arising out, of such a breach?
The answer to both questions is a resounding "no." By the time Claimants submitted the Notice of Arbitration, there was no measure capable of constituting a prima facie breach, and Claimants have suffered no prima facie loss or damage as a result.
Today, more than two years after this case started, the situation is still the same. There is no measure capable of constituting a breach and no associated loss. The claim is still not ripe.
Let's start with the measure under this article. Why do we say that Claimants' claim is premature? Because when Claimants initiated this arbitration, there was no measure capable of constituting a breach of a substantive obligation of the Treaty and causing damage to Claimants.
At the time the Notice of Arbitration was filed, the Fiscal Liability Proceeding was mid-way and the CGR had not made--had made no final determination on Claimants' potential fiscal liability.
[Page 46]
When the Claimants decided to initiate this arbitration, the CGR had merely issued the Indictment Order or the CGR Charges, to take Claimants' terminology.
As Respondent has explained repeatedly, an indictment order is an administrative act whereby the CGR identifies the allegedly fiscally liable parties kicking off an evidentiary period during which the CGR will gather the evidence necessary to rule on the fiscal liability of the parties named in such Indictment Order.
Because the Indictment Order is not an administrative act--it is an administrative act of mere procedural nature that does not define any legal situation, it cannot possibly breach Colombia's international obligation under the Treaty.
The Ruling with Fiscal Liability is also not a measure capable of constituting a breach of Colombia's substantive obligation. It was rendered well after Claimants initiated this arbitration and, thus, cannot be taken into account in deciding whether Claimants' claim was ripe when commenced.
[Page 47]
But even if the Tribunal were to take the Ruling into account, such Ruling cannot constitute a breach of the Treaty because it is also an administrative decision that is subject to judicial review, and such review has yet to take place.
As the United States rightly observes in its submission, and I quote: "It is well-established that the international responsibility of States may not be invoked with respect to non-final judicial acts." "[N]on-final judicial acts cannot be the basis for claims under" the Treaty. Indeed, not every mistake by an authority can [give] rise to an international wrongful act resulting in State responsibility. A State cannot possibly ensure the legality and adequacy of every one of the decisions taken by authorities at every level. But States, including Colombia, have mechanisms in place to correct those mistakes. And until those mechanisms are allowed to operate, and if they ultimately fail, it cannot be said that there has been an act of a State capable of triggering international responsibility.
[Page 48]
In this case, taking Claimants' factual allegations as true, there was not even a final administrative decision rendered by Colombia's authorities at the time that this arbitration was initiated. Thus, it is impossible for a treaty breach to have existed at that time. Even now that there is a Ruling with Fiscal Liability, which is final at the administrative level, there is still no measure capable of constituting a breach of Colombia's obligations under the Treaty because the Ruling with Fiscal Liability is subject to judicial review.
Claimants take issue with Respondent's position alleging that Colombia is reading an exhaustion of local remedies into the Treaty that the Treaty doesn't contain. But Claimants' argument is a red herring. The fact that the Treaty doesn't procedurally require the exhaustion of local remedies before initiating a treaty claim doesn't mean that exhausting local remedies is not [substantively] required in order to find that there is a violation of certain obligations of the Treaty.
It is simply not possible that a State could
[Page 49]
be found internationally liable by an international tribunal when domestic courts have not yet been able to review an administrative decision, let alone when there was no definite administrative ruling when Claimants filed their claim.
As the United States correctly points out in the submission, there has to be a "final act that is sufficiently definite to implicate a state responsibility." In this respect, this case is analogous to Corona v. Dominican Republic where the tribunal found that a treaty breach could not exist before the claimant pursued judicial remedies under domestic law.
As the tribunal held in Corona, "[w]hen a claim is successfully made out international law, it is because the International Court or Tribunal accepts that the Respondent's legal system as a whole has failed to accord justice to the Claimant."
The premature nature of Claimants' claims dooms their case. Arbitral tribunals have consistently rejected [claims] for alleged breaches of treaty obligations when such claims have been raised
[Page 50]
prematurely.
Claimants were not able to distinguish any of the numerous decisions cited by Colombia in these proceedings. As the Tribunal reasoned in Achmea v. Slovakia II, a tribunal should not "engage in a speculative exercise, looking into the future to examine a State conduct that has not yet materialized."
In short, since there was no measure capable of constituting a breach of any of the substantive obligations of the Treaty at the time Claimants filed the Notice of Arbitration, Claimants' claims are premature and could not be brought under Article 10.16.1 of the Treaty.
Let us now turn to the two specific requirements under Article 10.16.1. I want to start with the second one. For an investor to submit a claim to arbitration under the Treaty, Claimants must have incurred loss or damage at the time that the Notice of Arbitration was filed by reason of, or arising out of, the supposed breach of the Treaty or investment agreement.
[Page 51]
This express requirement reflects a well-settled principle of law that damage is a key element of cause of action and standing to bring a claim. This position is shared by the United States, who in this non-disputing party submission in this case has stated that "there can be no claim under Article 10.16.1 until an investor has suffered harm from an alleged breach."
Again, this is--the issue is one of ripeness. The Contracting Parties to the Treaty wanted to make sure that claims that had not yet ripened because no damage had occurred could not proceed to arbitration. Well, on December 6, 2019, when Claimants filed the Notice of Arbitration, Claimants had not incurred a prima facie loss or damage as a result of Colombia's supposed breach of the Treaty.
Let us look again to our timeline. Even taking Claimants' factual allegations as true, none of the actions of the CGR before the Notice of Arbitration has caused harm to Claimants. And how could they, given that the Indictment Order is an
[Page 52]
administrative act of mere procedural character?
That's where the analysis should stop because, as we have stated, the maturity of a claim is assessed at the time Claimants initiated arbitration.
But even if the Tribunal were to look beyond December 6, 2019, the conclusions would be the same. The Ruling with Fiscal Liability has not caused a prima facie harm on Claimants, and any potential harm it may cause is completely hypothetical and speculative. That is because of the joint and several nature of the payment obligation in that Ruling, and the huge difficulties faced by the CGR in attempting to collect payment from fiscally liable persons who, like Claimants, have no assets in Colombia.
Claimants know full well that they have not suffered any damages, and that without damages they have no claim under Article 10.16.1. That is why they have tried desperately to fill in that gap, by arguing that they have suffered reputational damages and by trying to manufacture new categories of damages; that is, their legal fees and costs in defending themselves in the Fiscal Liability Proceedings.
[Page 53]
On the one hand, Claimants assert that they have suffered reputational damages, but have offered no facts in support of the assertion. What is more, Claimants have not shown prima facie that the reputational damages they claim arise out of [Colombia's] supposed breaches of the Treaty.
In fact, Colombia has shown the opposite: that any reputational damages that Claimants may have suffered do not stem from Claimants' involvement in the Fiscal Liability Proceeding, which is not even criminal in nature, but from the more serious investigations of corruptions and bribery that Foster Wheeler and Claimants' parent companies have been involved in in very jurisdictional across --various jurisdictions across the globe.
Claimants themselves admit in the Rejoinder that they were never charged with corruption or fraud in Colombia. Claimants brush aside the investigations to their parent companies calling them irrelevant because the entities implicated in those cases are not parties to this case. That argument cannot be taken seriously since many investigations have named
[Page 54]
specifically branches of Amec Foster Wheeler.
On the other hand, their legal fees and costs in defending themselves in the Fiscal Liability Proceedings are not considered damages. Under Colombian law, attorneys' fees and legal costs are ordinary legal burdens to be borne by Claimants as part of their costs of doing business in Colombia, not compensable damages. If legal fees and costs were considered compensable damages and the State were to be--and the State were to reimburse every person it investigates for the legal fees and costs, the State could never launch an investigation.
Moreover, as explained by the Chevron v. Ecuador tribunal, legal costs incurred in local proceedings would have been incurred in any event, regardless of the alleged breach of the treaty, but, thus, there cannot be a causal link between those legal costs and the alleged breach of the treaty.
In any event, Claimants cannot seriously think that they can comply with the ripeness requirement in Article 10.16.1 by invoking their legal fees and costs in the Fiscal Liability Proceedings as
[Page 55]
damages arising out of Colombia's supposed breaches of the Treaty.
A simple hypothetical reveals that Claimants' characterizations of their legal fees and costs as damages is merely pre-textual, designed to artificially check the box of Article 10.16.1.
Let's imagine a scenario where the CGR has started investigating Claimants, but ultimately decided not to charge them with fiscal liability. Would Claimants start an international arbitration seeking to recover [as] damages the legal fees and costs associated with their involvement in the preliminary investigation or even though--even though they emerged victorious from that investigation? Of course they wouldn't.
Claimants also argue that they satisfied the second requirement in Article 10.16.1 because this is a case of future damages and the tribunal in Mobil v. Canada made clear that future damages come within NAFTA Article 1116, which is essentially similar to Article 10.16.1 of the Treaty.
In its Reply, Respondent extensively
[Page 56]
addressed the discussion in Mobil and show why it doesn't assist Claimants in this case. Essentially, in Mobil, the Mobil tribunal defined future damages as damages crystallizing and becoming payable sometime in the future that result from a breach that began in the past and continued.
We have a totally different scenario in this case. Claimants have no future damages, no breach has occurred, and so no resulting damages have begun. Their damages are purely hypothetical. There is absolutely no certainty that there will be--that they will pay a single cent, either voluntarily or forcibly, in satisfaction of the Ruling with Fiscal Liability.
One final thought on the lack of loss [or] damage in this case. Claimants believe that because Article 10.20.4(c) provides that the Tribunal must assume as true their factual allegations, then, to satisfy the requirements in Article 10.16.1, it is enough for them to simply state that they have suffered loss.
To accept Claimants' position will be
[Page 57]
depriving Article 10.16.1 of meaning because a claimant could simply state--could simply satisfy the requirements set forth in that Article by alleging that there is a breach, there is a damage, and that there is costs--a causal link between the two.
The Tribunal must make its own prima facie determination on whether damages exist, and cannot simply take Claimants' allegations that they have suffered reputational damages as true.
That's not a factual allegation. It's a mere conclusion unsupported by any relevant factual allegations that doesn't benefit from a presumption of truthfulness.
Mr. President, if you consider it appropriate, we can now make a break and then continue with our Opening Presentation.
Thank you very much.
PRESIDENT NUNES PINTO: Okay. Thank you, Mrs. Frutos-Peterson.
We have scheduled a 30-minute break. So we will be back at 10:40. Okay?
(Brief recess.)
[Page 58]
PRESIDENT NUNES PINTO: So, you can start, Ms. Ordoñez.
DR. FRUTOS-PETERSON: Yes, we can--we can start. Thank you.
PRESIDENT NUNES PINTO: Okay. So, you still have one hour and 20 minutes. Oh, sorry.
MR. SILLS: I apologize. Before we begin, we have a small housekeeping matter. Over the break, we noticed that the copy of this presentation provided electronically to us on the ICSID file-sharing platform contains what appears to be a series of notes at the end that are not in the printed copy and are not in what's being displayed on the screen here. I assume those are private.
DR. FRUTOS-PETERSON: They were not intended to be shared.
MR. SILLS: And I wanted to assure you that we have not read them in any way. But I think it would be appropriate if a clean copy were to be provided and substituted.
DR. FRUTOS-PETERSON: Well, Bob, thank you. Thank you so much. We apologize for that. And, of
[Page 59]
course, thank you for letting us know.
So, yes, we will ask our team, probably they are listening to us, to remove that presentation from the box. Or maybe, Marisa, you could--yeah, you can delete it.
THE SECRETARY: I can delete it now.
DR. FRUTOS-PETERSON: Yes. And we can go ahead and upload it. Thank you so much.
Thank you. Appreciate it.
PRESIDENT NUNES PINTO: Thank you.
Well, you still have one hour and 20 minutes to complete your presentation.
DR. FRUTOS-PETERSON: Thank you, Mr. President. Mr. Fernando Tupa will continue with our Opening.
PRESIDENT NUNES PINTO: Okay.
MR. TUPA: Good morning, Members of the Tribunal. I will now address the absence of a prima facie breach in this case, as well as the rest of Respondent's arguments under Article 10.20.4.
I want to go back to the two requirements under Article 10.16.1 of the Treaty. We have covered
[Page 60]
the second requirement. Now let's look at the first.
The first requirement under Article 10.16.1 is that there would be a breach of a substantive obligation of the treaty, an investment authorization, or an investment agreement at the time of submission of the claim.
On the date of the Notice of Arbitration, assuming as true all the factual allegations put forward by Claimants in such notice, there could not have been such a breach. Let's discuss the potential breach of the Treaty's substantive obligations first.
Claimants have failed to establish in their Notice of Arbitration that their claims constitute a prima facie violation of the Treaty's substantive obligations. Claimants complain about Colombia's prima facie analysis as a matter of principle, suggesting that Respondent is asking this Tribunal to evaluate the claims on the merits or turn these objections into a mini trial.
To be clear, Colombia is not asking this Tribunal to evaluate the merits of Claimants' claims or to make any factual determinations about contested
[Page 61]
issues, as they wrongly suggest. Rather, Colombia requests that the Tribunal analyze whether Claimants' claims are legally defective.
Respondent is calling on this Tribunal to determine whether, assuming as true the factual allegations in their Notice of Arbitration, there could potentially be a breach of a substantive obligation of the Treaty at the time Claimants initiated this arbitration.
If the answer is no, then the Tribunal should uphold Respondent's 10.20.4 objection and reject the claim in its entirety due to Claimants' failure to comply with the requirements in Article 10.16.1.
Obviously, in order to determine whether a particular set of facts are capable of constituting a breach of a treaty provision, the Tribunal will first have to analyze the meaning and scope of these provisions. There is nothing impermissible about this type of review. It is an exercise that is perfectly within the scope of review allowed under Article 10.20.4 of the Treaty.
[Page 62]
As the tribunal in Corona v. Dominican Republic observed, an expedited procedure does not preclude a claimant--does not preclude a tribunal--sorry--from considering an issue going to the substance of a case if the tribunal finds that it is appropriate to consider such an issue based on the facts as pleaded by the Claimant, and, in particular, when its task is to interpret legal provisions.
Simply put, Colombia submits that Claimants' claims, even if the factual allegations advanced in their Notice of Arbitration were true, are not capable of constituting a breach of the Treaty.
Besides taking issue with Respondent's prima facie analysis generally, Claimants also dispute Respondent's prima facie analysis of their specific claims. According to Claimants' flawed logic, they have made a prima facie case of breach because they have claimed a breach and Respondent has failed to prove that there was no breach.
But that's not how this works. A claimant has to formulate claims that are legally plausible on first impression, that pass muster on a prima facie
[Page 63]
basis. In other words, the question is: Taking Claimants' factual allegations as true, have they made a case for a breach of the Treaty's obligations?
The answer is no, as we have demonstrated in our submissions and we will show now.
Let's start with their claim of breach of FET. Claimants have not established a prima facie breach of the FET obligation for several reasons.
The first of those reasons is that Article 10.5 of the Treaty only applies to investments, not to investors. And all of Claimants' claims pertain to alleged actions by Colombia that affected investors.
Article 10.5.1 of the Treaty unequivocally provides that: "Each party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security."
The text of this provision is clear and unambiguous. The protection is only granted to covered investments, which is a defined term in the Treaty, not to investors.
[Page 64]
The language of this provision stands in stark contrast with the language contained in the national treatment and MFN obligations under the Treaty, which protect both investors and covered investments.
An interpretation of the FET provision in accordance with Article 31 of the Vienna Convention, namely, pursuant to the ordinary meaning of its terms in their context, does not leave room for any other interpretation.
Respondent submits that to read into the provision terms that it does not contain would be no longer to interpret it but, instead, to rewrite it, which the Tribunal cannot and should not do.
That this provision only protects investments is also the understanding of the United States, the other Contracting Party to the Treaty. In its non-disputing party submissions interpreting the meaning of this very same treaty provision, the U.S. has repeatedly held that "Article 10.5 requires the Parties to accord 'fair and equitable treatment' and 'full protection and security' only to covered
[Page 65]
investments, not to investors."
What's more, the law firm representing Claimants advanced the exact same argument when they were representing Mexico in another investment arbitration case. In Lion v. Mexico, the respondent argued that Article 1105 of NAFTA, which is identical to the provision at issue here, "extends protection to investments, but not to investors."
In certain cases, the difference may be immaterial since the alleged measure could affect both the investment and the investor. However, in this case, none of the allegations made by Claimants in their Notice of Arbitration are related in any way to a Services Contract, what Claimants' claim as their covered investment, but, rather, to actions that could have only affected the investors.
Thus, even if Claimants' factual allegations were true, the FET standard could not have been breached since Colombia's alleged actions could only have affected the investor, not the investment.
Claimants concede that the FET standard under the Treaty is limited to the minimum standard of
[Page 66]
treatment under customary international law.
However, the Parties do not agree on whether the minimum standard has evolved since Neer, and, in particular, on whether the minimum standard includes the concept of legitimate expectations, which clearly it does not, as the International Court of Justice confirmed in the landmark case Bolivia vs. Chile.
But the Tribunal doesn't need to get caught up in this discussion about the standard since Claimants' claim does not even meet their own version of the standard.
For instance, in order to consider whether legitimate expectations exist, those purported expectations must be objectively analyzed at the time of making the investment, must be reasonable, and must be based on specific promises to the investor.
Claimants do not even allege in their Notice of Arbitration that there was a specific promise made by the government official at the time of making their investment upon which they relied in making said investment.
Thus, none of the factual allegations made
[Page 67]
by Claimants could have violated any alleged legitimate expectations.
With the exception of a denial of justice claim, which we will address next, Claimants have not identified any other theory or element of FET that might have been breached in this case.
None of Claimants' factual allegations could arguably constitute a violation of the minimum standard of treatment, in particular when no judicial action has been initiated to challenge the administrative decision of the CGR, which, as indicated, did not even exist at the time this arbitration was commenced.
As to Claimants' denial of justice claim, it cannot be seriously argued that a denial of justice existed when the Notice of Arbitration was filed.
At that time, an administrative adjudicatory judicial proceeding had not even been commenced, and there was merely a procedural administrative act-in an administrative proceeding that was just at its initial stage.
Article 10.5.2(a) of the Treaty expressly
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provides that the FET obligation includes "the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings." The wording of this provision could not be clearer.
The denial of justice protection only applies when there is an "administrative adjudicatory proceeding," which is a proceeding of a judicial nature before courts with administrative adjudicatory jurisdiction.
Thus, the obligation not to deny justice is limited in scope to judicial proceedings and does not extend to administrative proceedings.
The Fiscal Liability Proceeding initiated by the CGR is merely an administrative proceeding, not an administrative adjudicatory proceeding.
In the Rejoinder, Claimants incorrectly allege that the term "administrative adjudicatory proceeding," or "procedimiento contencioso administrativo" in Spanish, includes not only judicial proceedings, but also administrative proceedings.
That argument is, frankly, absurd. The terms "procedimiento contencioso administrativo" in
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Spanish, or "administrative adjudicatory proceeding" in English, encompass judicial proceedings only.
That is precisely why the Treaty uses the terminology "administrative adjudicatory proceeding" or "procedimiento contencioso administrativo" and not simply "administrative proceeding" or "procedimiento administrativo."
Other provisions of the Treaty, which are part of the context in which the ordinary meaning of the terms of this provision have to be interpreted, also confirm this rather straightforward interpretation.
Whenever the Contracting Parties wanted to cover purely administrative proceedings, they used the terms "administrative proceeding" or "administrative process," as they did, for instance, in Articles 10.8.4 and 10.9.3(b)(ii) of the Treaty.
Therefore, if the terms "administrative adjudicatory proceedings" or "procedimiento contencioso administrativo" in Article 10.5.2(a) of the Treaty are construed pursuant to the Vienna Convention, it should be concluded that both the
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English and Spanish versions of the Treaty have the same meaning and do not cover purely administrative proceedings.
As Claimants rightly point out, the Spanish and English versions of the Treaty are equally authoritative. And according to Article 33(3) of the Vienna Convention, both are presumed to have the same meaning.
In any event, we should not get entangled in this linguistical discussion since a denial of justice requires, by definition, a final decision of the judicial branch of the State, and the standard to be met is extremely high.
The fact that there is still multiple judicial remedies available to challenge the Ruling with Fiscal Liability is, by itself, sufficient to show that Claimants have not made a prima facie case of denial of justice.
Claimants also take issue with the fact that Colombia challenges their bold assertion of futility regarding further Colombian proceedings. But the allegation of futility is not a factual allegation.
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It is a mere conclusion that is not supported by any factual allegation, and which does not benefit from the presumption of truthfulness.
Claimants have not explained why the judicial review of an administrative decision would be futile. In fact, in its Memorial, Respondent showed that rulings with fiscal liability have been overturned in the past, both at the administrative and judicial level. It is worth recalling that Claimants have not even filed yet an action challenging the decision of the CGR in Colombian courts.
In sum, even if Claimants' factual allegations were true, there could not have been a denial of justice or any other type of FET breach at the time that they filed their Notice of Arbitration since there was not even a final administrative decision in place, let alone a judicial decision of a Colombian court with administrative adjudicatory jurisdiction.
Claimants have also not established a prima facie expropriation case. In their Notice of Arbitration, Claimants alleged that by initiating the
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Fiscal Liability Proceeding, [Colombia] expropriated two of their rights under the Services Contract--their alleged investment in this case--[Redacted]
As Respondent explained in its pleadings, which is consistent with what many investment tribunals have held, it is not possible to expropriate two discrete rights that are not capable of being economically exploited independently and separately from the purported investment, the Services Contract.
In fact, it is a basic principle that an investment must be viewed as a whole for purposes of determining whether an expropriation occurred.
Article 10.7 of the Treaty expressly provides that "[n]o Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization."
That is why the tribunal in Grand River v.
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the U.S. stated that "[a]n act of expropriation must involve 'the [investment] of an investor, not part of an investment,'" a notion that was also confirmed by one of the cases cited by Claimants, Koch v. Venezuela, where the tribunal graphically held that an "investment 'cannot be sliced off and isolated, like a piece of sausage.'"
Notably, as the original expropriation claim was patently flawed, Claimants have now radically changed their argument in their Rejoinder, and say that they have broadly alleged that Colombia has expropriated its investment, which consists not merely of the Services Contract, and that Colombia indirectly expropriated that investment by imposing a groundless penalty far exceeding the revenues realized.
Well, that was certainly not the claim that Claimants made in their Notice of Arbitration, which is the claim that the Tribunal should consider for purposes of Article 10.20.4--Article 10.20.4 objection.
But it doesn't matter. This new formulation of the expropriation claim still fails.
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First, besides those two purported contractual rights, which, in any event, are still in effect, Claimants did not make any factual allegation in their Notice of Arbitration that the Services Contract was affected as a whole by any action of the CGR or any other Colombian authority, or that any other unspecified investment made by Claimants, different from the Services Contract, was somehow affected.
The Services Contract was performed and Claimants have been paid for the consulting services they provided.
Second, Claimants' allegation that the imposition of a penalty resulted in an indirect expropriation of their investment is an irrelevant argument. The Ruling with Fiscal Liability did not exist at the time that Claimants filed their Notice of Arbitration.
And even if it were to be taken into account, Claimants have never paid a dime of such penalty. So, they could not claim that any revenues were taken from them.
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In any event, the two contractual provisions that Claimants originally alleged were expropriated have nothing to do with the actions of the CGR or Claimants' fiscal liability. Those provisions bind the Joint Venture and Reficar only, as parties to the Services Contract.
In sum, both Claimants' original and their new expropriation claim are not capable of constituting a prima facie breach of the Treaty.
Claimants have also failed to establish a prima facie breach of the national treatment obligation under the Treaty. The Fiscal Liability Proceeding involved both nationals and foreigners, and, thus, there is no action or measure that has prima facie favored nationals over non-nationals.
There seems to be no dispute in this case about the scope of the national treatment obligation, which is set forth in Article 10.3 of the Treaty, and which protects investors of the other Contracting Party against nationality-based discrimination. The dispute lies on the application of this standard.
Claimants' claim for violation of the
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national treatment obligation is entirely based on the fact that the CGR did not charge the members of Ecopetrol's Board of Directors with fiscal liability, while it did charge Foster Wheeler and Process Consultants, despite the fact that both were, according to Claimants, in like circumstances.
Claimants allege that "they were 'in like circumstances' to the Ecopetrol Board of Directors because they were both involved in the Project and indicted in the CGR proceedings."
Likewise, Claimants allege that the CGR treated Claimants less favorably because they dismissed the Ecopetrol Board of Directors as not being fiscal managers, although they had actual decision-making authority over the Project, but refused to dismiss Claimants from the proceedings, though Claimants were not fiscal managers.
The assessment that they were in like circumstances is not a factual allegation benefiting from a presumption of truthfulness, but a legal conclusion.
What are Claimants' true factual allegations
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and the uncontroverted facts related to this standard?
One, the CGR charged both nationals and foreigners, including natural persons such as the members of the Board of Directors and certain administrators of Reficar, and juridical persons, such as CB&I, with fiscal liability.
Two, the CGR dismissed charges against both nationals and foreigners, such as CB&I N.V.
Three, the CGR issued precautionary measures against Colombian nationals but did not issue precautionary measures against Claimants.
Based on those facts, there is no prima facie case of nationality-based discrimination. And so Claimants have failed to establish a prima facie breach of the national treatment obligation under the Treaty.
Claimants have also failed to establish a prima facie breach of the most favored nation treatment obligation under the Treaty.
Claimants are not alleging here that there was another foreign investor that received a better treatment but are merely trying to use the MFN clause
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of the Treaty to import an umbrella clause, which does not exist in the Treaty, from the Switzerland-Colombia BIT.
Claimants attempt to use the Treaty's MFN provision to import an umbrella clause must fail.
First, Article 10.4 of the Treaty, the MFN clause, merely requires a comparison of factual situations of treatment actually granted under similar circumstances.
That was the conclusion arrived by the tribunal in Ickale v. Turkmenistan when it had to interpret a similarly-worded clause, reasoning that "given the limitation of the scope of application of the MFN clause to 'similar situations,' it cannot be read, in good faith, to refer to standards of treatment--standards of investment protection included in other investment treaties between a State party and a third State."
Colombia submits that this is the correct interpretation of Article 10.4 of the Treaty.
In response, Claimants argue that Respondent's interpretation is prohibitively narrow.
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But that is not what the same law firm representing Claimants thought when they were representing Mexico in another investment case in which they cited with approval the Ickale case, and alleged that there was a categorical impossibility of using the MFN clause to import standards of treatment from other treaties.
Obviously, that interpretation does not suit their needs now.
In this case, Claimants do not allege that there was another foreign investor that received a better treatment and, thus, no prima facie breach of the MFN clause could have possibly existed.
Second, even if an importation of an umbrella clause from another investment treaty were to be theoretically allowed through Article 10.4 of the Treaty, there are several reasons why such importation would not be possible in this case, which are explained in detail in our pleadings.
But what is most striking about Claimants' argument is that even if the MFN clause were to be applied in the way Claimants propose, importing from the Colombia-Switzerland BIT a right to submit a claim
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to arbitration for breach of an umbrella clause would be inconceivable due to the fact that such right does not exist in the Colombia-Switzerland BIT.
This was expressly confirmed by the tribunal in Glencore v. Colombia, one of Claimants' favorite cases.
It is quite telling that Claimants barely mentioned the Switzerland-Colombia BIT in their Rejoinder, and now put all their eggs in a different basket, the Japan-Colombia BIT, which, by the way, was not mentioned by Claimants in their Notice of Arbitration.
However, this new argument makes no real difference since none of Colombia's treaties provide consent to arbitrate claims under an umbrella clause.
Claimants are wrong when they state that the Colombia-Japan BIT allows for arbitration of umbrella clause claims. The text of the relevant provision establishes that the Contracting Parties' consent to the submission of investment disputes, except for disputes with regard to the umbrella clause.
Faced with this clear impossibility,
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Claimants say that what they are trying to do is to import a substantive standard of protection without incorporating the dispute resolution provision of the Colombia-Japan BIT.
But that argument overlooks the basic operation of an MFN clause. What Claimants are trying to achieve is contrary to the very definition of the most favored nation obligation.
The MFN obligation contained in Article 10.4 of the Treaty only guarantees that U.S. investors will receive a treatment not less favorable than that accorded, in like circumstances, to Swiss or Japanese investors.
It does not guarantee a more favorable treatment, which is what Claimants want here. Such an application of the MFN clause would be contrary to the nature, content, and spirit of this Treaty obligation.
In sum, no prima facie breach of the MFN obligation under the Treaty could have possibly existed here.
Claimants have not only failed to make a prima facie case of breach of the substantive
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obligations of the Treaty, they also--they have also not raised a valid claim for a prima facie breach of an investment agreement.
Claimants seem to believe that merely alleging that the CGR, through the Fiscal Liability Proceeding, has deprived them of the protections under the Services Contract constitute a prima facie breach of an investment agreement. However, this allegation is fundamentally flawed. As a preliminary matter, there could not have been a breach of an investment agreement in this case because there is no investment agreement at all.
"Investment Agreement" is a defined term in the Treaty, and Article 10.28 states that it corresponds to a "written agreement between a national authority of a Party and a covered investment or an investor of another Party, on which the covered investment or the investor relies in establishing or acquiring a covered investment other than the written agreement itself."
According to Claimants' Notice of Arbitration, the Services Contract is their alleged
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investment. But the Services Contract cannot simultaneously be the written agreement and the covered investment, as the text of the Treaty literally makes clear.
That is also confirmed by Vandevelde in his often-cited treatise where he clarifies that "the investment established in reliance on the written agreement cannot be the written agreement itself."
Claimants do not even attempt to deal with this threshold issue.
Although this by itself should be dispositive of Claimants' claim for breach of an investment agreement, the Services Contract is also not an investment agreement within the meaning of the Treaty because it did not involve a national authority of a Party, as such term is defined in Article 10.28 of the Treaty.
Article 10.28 of the Treaty defines a "national authority" as an "authority at the central level of government." Reficar, which is the party to the Services Contract, is not a national authority of Colombia. Under Colombian law, Reficar is a mixed
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capital company that carries out commercial activities belonging to the decentralized level of the Colombian Government.
Reficar's decentralized character is further confirmed by Annex 9.1 of the Colombia-U.S. TPA on government procurement, which contains a list of central level of government entities that does not include Reficar or its parent company, Ecopetrol.
This decentralized status was recognized by Claimants themselves in the Acción de Tutela 2018 that they initiated before Colombian courts.
Claimants alleged that Reficar is a national authority, and hope that the Tribunal will take that supposed factual allegation as true.
But asserting that Reficar is a national authority of Colombia is not a factual allegation, it is a legal allegation as to the application of--to Reficar of the term "national authority of a Party," which is defined in the Treaty. As a legal allegation, it does not benefit from a presumption of truthfulness.
In any event, even if an investment
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agreement did exist in this case, Claimants' allegation for breach of an investment agreement is confusing and impossible to understand. Claimants have been changing and adjusting their arguments on this issue throughout their pleadings and, to this date, it is not clear what exactly Claimants are claiming with respect to an alleged breach of an investment agreement.
The Fiscal Liability Proceeding concerns Claimants' fiscal liability, not their contractual liability. Thus, no prima facie breach of an investment agreement was advanced by Claimants.
So, to recap, Claimants have failed to satisfy the two requirements set forth in Article 10.16.1 to submit a claim to arbitration and, thus, their claim is premature. At the time of the Notice of Arbitration, there was no prima facie breach of the Treaty or an investment agreement, and no prima facie loss or damage to Claimants resulting from that alleged breach. For that reason, as a matter of law, Claimants' claim is not a claim for which an award may be made in their favor.
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As we mentioned earlier, there is a second reason why, as a matter of law, Claimants' claim is not a claim for which an award can be made in their favor. Let's move on now to that second reason, which is that the Tribunal is not empowered under Article 10.26 of the Treaty to grant any of the forms of relief requested by Claimants.
First, Claimants seek an award of moral damages, but the Tribunal does not--sorry--but the Treaty does not grant the Tribunal authority to award non-monetary or punitive damages.
A tribunal constituted under the Treaty can only issue an award subject to the limitations and exclusions provided in Article 10.26. Article 10.26.1 of the Treaty provides that a tribunal is only empowered to award "monetary damages," or "daños pecuniarios" in the Spanish version, and Article 10.26.3 provides that "[a] tribunal may not award punitive damages."
Moral damages are generally viewed as non-monetary or non-pecuniary damages or as punitive damages. However, the discussion as to whether moral
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damages are punitive damages or non-monetary damages is irrelevant here and purely academic.
The Treaty prohibits the award of both punitive damages and non-monetary damages, making it impossible for the Tribunal to grant moral damages to Claimants however characterized. Thus, the Tribunal does not have the power to grant the moral damages that Claimants request here.
In addition, Claimants requested in its Notice of Arbitration that the Tribunal enjoin any attempt by the CGR or any other Colombian organ to seize any of Colombia's--any of Claimants' assets, in Colombia or elsewhere. Colombia explained that Article 10.26 of the Treaty does not permit the granting of non-monetary orders or injunctions such as those sought by Claimants here.
Moreover, Article 10.20.8 of the Treaty provides that the Tribunal may not enjoin the application of a measure alleged to constitute a breach of the Treaty. In their subsequent pleadings, Claimants were silent on this point, implicitly conceding that the Tribunal does not have the power to
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grant the form of relief originally requested.
The third form of relief requested by Claimants in this case is the issuance of an offsetting award equivalent to the amount of the Ruling with Fiscal Liability, which this Tribunal also does not have the authority to grant since it is not empowered to award hypothetical damages or to make declaratory awards.
Claimants have not made any payment of any amount of the fiscal liability determined in the Ruling with Fiscal Liability, either voluntarily or forcibly, so there is no actual monetary damage that could be offset by the Tribunal in an award. What's more, when this arbitration was initiated, there was not even a ruling with fiscal liability.
In their Provisional Measures Application, Claimants themselves acknowledged that they have not yet suffered any damage. They acknowledge it yet again in their recent letter opposing Respondent's request to include a new document into the record.
The prayer for relief in the Conciliation Request is a further recognition that Claimants'
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damages in the Fiscal Liability Proceeding are purely hypothetical, and that they will only suffer actual damages if they make any payments in satisfaction of the Ruling with Fiscal Liability.
Until Claimants actually make a payment to satisfy the Ruling with Fiscal Liability, their damages will be merely hypothetical for three main reasons.
One, the Ruling establishes the joint and several liability of Foster Wheeler and Process Consultants and the other fiscally liable parties and, thus, it is impossible to know whether Claimants will ever have to make any full or partial payment.
Two, the Ruling with Fiscal Liability is subject to several judicial remedies, and could eventually be declared null and void.
And, three, since the forced collection against Foster Wheeler and Process Consultants faces enormous legal and practical hurdles, it is possible that none of Claimants' assets be identified, seized, and much less auctioned.
Claimants have not even attempted to provide a substantive response to any of these threshold
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arguments raised by Colombia. It is, frankly, astonishing that, not having paid a single penny to satisfy the amount of the Ruling with Fiscal Liability, Claimants are seeking more than 900 million in damages.
Claimants now say that they're only seeking a compensation payment to be made for any assets seized by Colombia, and that they are not seeking a windfall because they are not asking for any recovery in excess of the assets actually seized.
Well, it's undisputed that Colombia has not seized, much less auctioned, any of Claimants' assets and, thus, any offsetting award would be compensating merely hypothetical damages and would be granting Claimants a windfall.
As much as Claimants like to assimilate this case to Glencore vs. Colombia, they are worlds apart. In Glencore, the claimant voluntarily paid the ruling with fiscal liability, a fact which has been acknowledged by Claimants themselves. In this case, Claimants have made no payment whatsoever to satisfy the Ruling with Fiscal Liability.
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Contrary to what Claimants contend, this is not a question reserved for the Hearing on the merits. Claimants are requesting a form of relief that this Tribunal does not have the authority to grant and, thus, their claim is legally defective. It is nonsensical to argue that the claim has to be fully aired when the form of relief requested by Claimants cannot be granted by this Tribunal.
In sum, Claimants' claim is legally defective and, thus, it is not a claim for which an award in favor of Claimants may be made under the Treaty. Claimants did not comply with the requirements of Article 10.16.1 of the Treaty, and the relief they request is not a relief that the Tribunal can award under Article 10.26.
For those reasons, the claim submitted to arbitration by Claimants should be dismissed under Article 10.20.4 of the Treaty.
This concludes our presentation on the preliminary objection under Article 10.20.4 of the Treaty. My colleague, Elisa Botero, will now address Colombia's jurisdictional objections.
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Thank you.
MS. BOTERO: Thank you, Fernando.
Good morning, Members of the Tribunal. In addition to Colombia's objection under Article 10.20.4 of the Treaty, Respondent has raised five jurisdictional objections that should lead the Tribunal to fully dismiss this case.
Before we address each one, let's discuss the standard applicable to deciding those objections.
As we explained earlier in this presentation, Claimants lump all of Colombia's preliminary objections together hoping that the Tribunal will treat them all the same. But, unfortunately for Claimants, the presumption of truthfulness in Subparagraph (c) is only applicable to decide 10.20.4 objections.
In the words of the United States, "[s]ubparagraph (c) does not address, and does not govern, other preliminary objections, such as an objection to competence, which the tribunal may already have authority to consider." Such interpretation was upheld by the tribunal in Kappes v.
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Guatemala, which stated that "[u]nlike objections under Article 10.20.4, jurisdictional objections do not require a tribunal to assume as true all facts alleged in the notice of arbitration."
Rather, as the U.S. observed in its non-disputing party submission in Seo Jin Hae v. Korea, which concerned an identical provision to Article 10.20.4 of the Treaty, the burden is on claimant to prove the necessary and relevant facts to establish that a tribunal is competent to hear a claim.
The fact that the Tribunal is to decide on Respondent's jurisdictional objections as a preliminary question, together with an objection under Article 10.20.4 of the Treaty, does not alter that burden. Claimants attempt to avoid this burden by arguing that they are not required to present evidence at this preliminary stage of the proceeding. In their latest pleading commenting on the U.S. submission, Claimants go as far as to say that the Parties supposedly agreed that all of Respondent's objections, including its jurisdictional objections, "would be
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heard preliminarily without requiring an evidentiary submission."
This is absurd. First, Respondent never agreed to such a thing. Respondent simply requested that its jurisdictional objections be heard and decided as a preliminary question together with its objection under Article 10.20.4 of the Treaty, as the Treaty expressly allows.
But more importantly, hearing jurisdictional objections at a preliminary phase doesn't mean that Claimants are exempt from proving the necessary facts to establish jurisdiction. It just means that this--that the jurisdiction of this Tribunal is established before going into the merits. The evidence on jurisdiction is being heard now. This is what we have been doing for the past two years.
During those two years, Claimants had plenty opportunity to satisfy their burden of proof on jurisdiction. In addition to their Notice of Arbitration, which was accompanied by multiple exhibits and legal authorities, Claimants had two full rounds of written submissions as well as various other
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opportunities to submit additional evidence. Despite that, Claimants have failed to prove the facts on which the jurisdiction of this Tribunal is based.
Let's now analyze each of Claimants' five--sorry--Colombia's five jurisdictional objections that the Tribunal will decide as a preliminary question.
Colombia's first objection is that the Tribunal lacks jurisdiction ratione materiae because the Services Contract does not constitute a protected "investment" under the Treaty and the ICSID Convention.
Article 10.28 of the Treaty defines "investment" generally as every asset that has the characteristics of an investment, including such characteristics as a commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.
Article 10.28 goes on to list several examples of the forms that an investment may take, including, under Subparagraph (e), different types of contracts such as construction, management, and other
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similar contracts.
However, that enumeration of assets is not dispositive. To qualify for protection under the Treaty, an asset, including a construction, management, and other similar contract, must have the characteristics of an investment. Ordinary commercial contracts are excluded from the definition of investment because they do not possess the characteristics of an investment.
This interpretation follows from a plain reading of Article 10.28 and is also the interpretation of both Contracting Parties to the Treaty.
In its non-disputing party submission in this case, the United States made it clear that "[o]rdinary commercial contracts for the sale of goods or services typically do not fall within" the definition of "investment."
Under the so-called double-barrel test, for a tribunal constituted under the ICSID Convention to have jurisdiction ratione materiae over a claim, the asset must not only qualify as an investment under the
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Treaty, but it must also be objectively considered an investment under the terms of the ICSID Convention.
Article 25 of the ICSID Convention provides that the jurisdiction of the Centre only extends to disputes of a legal nature "arising directly out of an investment."
Many ICSID tribunals have held that there is an objective notion of what constitutes an investment under the ICSID Convention. Under the test first developed by Salini v. Morocco, the assumption of risk is one of the essential elements of what constitutes an investment under the Convention. Commentators and tribunals agree that ordinary commercial contracts are outside the scope of the Centre's jurisdiction.
Thus, the assumption of risk--of an investment risk or operational risk is one of the main characteristics of an investment under both the ICSID Convention and the Treaty. It represents the uncertainty faced by an investor regarding the return it will receive on its investment, including whether or not it will recover, in whole or in part, the capital invested. This type of risk must be
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distinguished from generic risks inherent to any economic activity and from simple commercial risks inherent to any contract, including the risk of non-payment.
As the tribunal in Romak v. Uzbekistan reasoned, "all economic activity entails a certain degree of risk. But "an 'investment risk' entails a different kind of alea, a situation in which the investor cannot be sure of a return on his investment, [or] may not know the amount he will end up spending, even if all relevant counterparties discharge their contractual obligations. Where there is 'risk' of this sort, the investor simply cannot predict the outcome of the transaction."
Similarly, the tribunal in Posštová v. Greece explained that an investment risk entails an operational risk and not a commercial risk, a risk inherent in the investment operation in which the profits are not ascertained but depend on the success or failure of the economic venture concerned.
Claimants have two main criticisms to Colombia's position. First, they argue without
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providing any support that the double keyhole approach to ICSID jurisdiction does not apply and that, therefore, they need only comply with the definition in the Treaty to gain access to the Centre. Claimants cannot simply ignore decades of ICSID jurisprudence on this issue.
Claimants' second criticism has to do with the definition of "investment" in Article 10.28 of the Treaty. Claimants insist that the assumption of risk is not a necessary requirement for the existence of a covered investment, emphasizing the word "or" in the chapeau of the definition of "investment" in Article 10.28.
That argument is not only contrary to the express language of the Treaty, but also to the very notion of investment itself. The assumption of an investment risk is the fundamental feature of an investment. It is what distinguishes an investment from an ordinary commercial contract.
If a certain business operation entails a commitment of capital and an expectation of profit, but the party who committed that capital and expected
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a profit is not at risk of losing it and turning no profit, then there is no investment risk. That business operation is likely an ordinary commercial contract but not an investment.
The fact that the Treaty uses the [words] "or" and "including" when listing the characteristics of an investment does not mean that the listed characteristics are not essential characteristics of an investment. It simply means that there are other characteristics in addition to those listed. That reading of the definition of "investment" is shared by the United States.
Let's turn now to the facts. The question before this Tribunal is simple. Is the Services Contract an investment?
The answer to that question is no. The Services Contract between the Joint Venture and Reficar is, on its face, an ordinary commercial contract for the sale of consulting services that did not entail any investment risk. An analysis of the relevant contractual provisions inexorably leads to this conclusion. For one, the stated purpose of the
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contract is to provide "consulting services for the management of the Project," which included, among other services, the supervision and control of the detailed engineering and of materials and equipment procurement for the Project.
The Contract is an agreement for the provision of services, as Claimants themselves have recognized countless times. Claimants insist that the Services Contract is "a management or construction contract" falling within the scope of Subparagraph (e), deceitfully equating management and construction, but the fact that the Services Contract is related to the provision of consulting services in connection with the construction and expansion of an oil refinery does not transform that contract into a construction contract.
And even if it did, a construction contract is also not necessarily an investment. Regardless of how a contract is named, only contracts that have the objective characteristics of an investment qualify for protection under the Treaty. In any event, the discussion about which is the best way to call the
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Services Contract does not have any practical significance.
As the U.S. stated in its submission in this case, "[t]he determination as to whether a particular instrument has the characteristics of an investment is a case-by-case inquiry involving an examination of the nature and extent of any rights conferred under the State's domestic law."
And there is no question in this case that the nature and the extent of the rights conferred under the Services Contract is that of an ordinary contract for the provision of consulting services.
In addition to the purpose of the Services Contract, the provisions concerning compensation also show that Claimants did not bear any investment risk. The remuneration structure in the Services Contract guaranteed Claimants the recovery of all the resources they allocated to the performance of their obligations under the Contract, as well as a profit.
To recap what Colombia explained at length in its Memorial on Objections to Jurisdiction, via the different components of the remuneration structure,
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the Joint Venture recouped salary costs for all personnel assigned to the performance of the services, whether foreign, expat, or local; non-salary costs for all personnel, including administrative overhead, taxes and bonuses; direct costs associated with all personnel, including computer equipment, office leases, domestic and international call charges, office furniture and relocation expenses; the cost of equipment, tools, materials and software the Joint Venture deemed necessary for the correct performance of the services in Colombia, and I could go on.
Besides recouping on all its costs, the Joint Venture charged a fixed fee for each hour worked by its personnel assigned to the Services Contract. In fact, as of the day of Respondent's Memorial, the Joint Venture had received over US$14 million in fixed fees from Reficar. That fee was a 100 percent profit since the Joint Venture recovered its costs through--all its costs through the other components of the remuneration. In addition, by virtue of the tax gross up, the Joint Venture received Reficar's payments in full, without any decrease for tax
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withheld at source.
What's noteworthy is that Claimants recouped their costs and earned a profit regardless of the outcome of the refinery project.
Moreover, the Joint Venture received payment for its services on a month-to-month basis, as it was performing those services and had a right to unilaterally terminate the Services Contract in case of non-payment of invoices.
There was no investment risk and, therefore, no investment, because the remuneration structure provided for in the Services Contract ensured that the Joint Venture was never at risk of losing the resources it was allocating to the performance of that Contract and had no uncertainty about the minimum return it would obtain.
Claimants never disputed Colombia's description of the relevant provisions of the Services Contract. In two rounds of pleading, they outright refused to engage with the text of the Contract because they are fully aware that it supports Respondent's position.
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Unable to deal with the nature and the terms of the Services Contract, Claimants resort to all sort of creative arguments to save their case, none of which assist them.
First, Claimants allege the Services Contract did entail risk, such as the risk of non-payment and termination, among others, and that the fact that there is a dispute here constitutes evidence of risk. However, as we've explained, every economic transaction entails some sort of risk, but not every risk is an investment risk.
In fact, as a paper cited by Claimants themselves explain, not every business dispute is an investment dispute because not every economic activity constitutes an investment.
Second, in their Rejoinder, Claimants assert that they specifically faced an investment risk as set forth in Romak. That argument is, frankly, absurd. Claimants were assured a return on their investment because under the Services Contract they received a profit per manhour.
Maybe they were not sure how much they would
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ultimately end up spending, but they were certainly sure that they would recoup every single penny of those expenditures. Whether they would be paid or not is a quintessential commercial risk, but that commercial risk in this case was practically non-existent because Claimants invoice monthly and had a right to terminate for non-payment of invoices.
There is no such thing here as the "outcome of the transaction." They were hired to provide a consulting service, and for that they recouped their costs and were paid a fee. As simple as that.
In the comments to the U.S. non-disputing party submission, Claimants raised for the first time an additional reason why they believe the Services Contract entailed risk. They point to the bonuses provided in the Services Contract as additional evidence of risk.
However, as Respondent explained in its Memorial, those bonuses were mere commercial incentives that did not alter the remuneration structure which guarantees Claimants their costs plus a profit, as we've just reviewed.
[Page 107]
Third, Claimants argue that the Services Contract is not their only relevant investment in Colombia, pointing to the amounts of time, capital, personnel, and labor they devoted to performing the services. But all those resources are not separate "investments" unrelated to the Services Contract. Rather, those are the resources that the Joint Venture employed to comply with its obligations under the Services Contract.
Four, Claimants argue that they have a long history of investment in Colombia. That fact, whether true or not, is irrelevant. The Tribunal has to decide whether the Services Contract is a covered investment under the Treaty and the ICSID Convention, not whether Claimants' supposed prior investments qualify for protection.
Finally, Claimants contend that their supposed investments should be considered as a whole, looking at the totality of the project. That is wrong. Claimants' purported investment was the Services Contract, not any other contract within the framework of the Project.
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In conclusion, the Services Contract does not qualify as a covered investment under the Treaty and the ICSID Convention because there was no assumption of an investment risk, which is a quintessential characteristic of an investment, and, thus, this Tribunal lacks jurisdiction ratione materiae over the present dispute.
Let's move on to Respondent's second jurisdictional objection. Respondent has raised an objection that the Tribunal lacks jurisdiction ratione personae over the claims of Claimant FPJVC, a contractual joint venture, because FPJVC is not a juridical person and, therefore, it does not qualify as a "national of another Contracting State" under Article 25 of the ICSID Convention.
This objection is rather straightforward.
In order to qualify as a "national of another Contracting State" under Article 25 of the ICSID Convention, a claimant needs to be a natural or a juridical person.
According to Professor Schreuer, legal personality is a requirement for the application of
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Article 25(2)(b), and a mere association of individuals or of juridical persons does not qualify as a juridical person under the ICSID Convention.
Several ICSID tribunals have held that unincorporated joint ventures are not juridical persons because they lack legal personality. In Impregilo v. Pakistan, the tribunal reasoned that the claimant, a contractual joint venture, was not a juridical person and had "no separate legal personality" because it was "nothing more than a contractual relationship between different entities," holding that it had no jurisdiction ratione personae, because the claimant failed to meet the requirements of Article 25 of the ICSID Convention.
Foster Wheeler and Process Consultants expressly agreed in the Joint Venture Agreement they executed that FPJVC would be an unincorporated entity. Under New York law, the law under which Claimant FPJVC was formed, a contractual joint venture is recognized as a partnership for a limited purpose and, therefore, does not have a legal personality separate and independent from that of its members, Foster Wheeler
[Page 110]
and Process Consultants.
Because FPJVC is not a juridical person under New York law, it is also not a "national of another Contracting State" under Article 25 of the ICSID Convention.
In their Rejoinder, Claimants insist that the Tribunal does have jurisdiction ratione personae over FPJVC, raising three arguments, all flawed.
First, Claimants argue that the Tribunal has jurisdiction because the Treaty expressly references joint ventures within the definition of an "investor of a party."
However, under the double-barrel test, an ICSID Tribunal must be satisfied that a claimant meets both the criteria set forth in the relevant treaty and the ICSID Convention in order to exercise jurisdiction.
Claimants draw the Tribunal's attention to the Treaty but ignore the ICSID Convention altogether, ignoring the multitude of ICSID cases recognizing the existence of the double-barrel test.
The issue here is not whether FPJVC is an
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investor within the meaning of the Treaty, but whether it qualifies as a "national of another Contracting State" for purposes of Article 25 of the ICSID Convention.
As Professor Schreuer stated in his well-known treatise, some bilateral investment treaties include associations without legal personality in their definitions of investor. But for purposes of the ICSID Convention, the quality of legal personality is inherent in the concept of juridical person and is part of the objective requirements for jurisdiction of ICSID.
Second, Claimants allege that contractual joint ventures qualify as juridical persons under New York law. That is simply wrong. Both Parties agree that New York law governs this question and that under New York law, a contractual joint venture is treated as a partnership for limited purposes. However, the Parties disagree on whether a partnership is a juridical person under New York law.
Respondent has shown that, under New York law, a partnership is not a juridical person because
[Page 112]
it does not have a legal personality separate and independent from that of its members.
Claimants argue that a partnership is a juridical person because it can sue and be sued in its own name, hold property, and hold a nationality.
Claimants are wrong in all three respects.
The New York Court of Appeals, the highest court in the State of New York, has stated that although persons conducting a business as a partnership may be sued in the partnership name, unlike a corporation, a partnership is not a separate entity.
Claimants' own legal authority confirms this. And while partnerships can hold property in their name, the members of the partnership maintain a direct interest in that property, which goes to show that the partnership is not a distinct legal entity separate from its members.
As to nationality, the Third Restatement on Foreign Relations defeats Claimants' argument, stating that "under common law systems a partnership is not an entity having nationality."
[Page 113]
Finally, Claimants contend that Colombia considered Claimant FPJVC a sufficient juridical entity capable of entering into the Services Contract. That is irrelevant to the issue of whether FPJVC is a juridical person under the ICSID Convention. In any case, as a matter of Colombian law, a joint venture, or "consorcio" in Spanish, has the capacity to enter into contracts with public entities but is not a legal person.
In short, Claimant FPJVC is merely a contractual joint venture which does not have legal personality separate and independent from that of its members. Because it is not a juridical person under New York law, FPJVC does not qualify as a "national of another Contracting State" under Article 25 of the ICSID Convention, and so this Tribunal does not have jurisdiction ratione personae over the claims of that Claimant.
Colombia's third objection is that the Tribunal lacks jurisdiction ratione voluntatis over the claims of Claimants Foster Wheeler and Process Consultants because they did not send a notice of
[Page 114]
intent before initiating this arbitration, as expressly required by the Treaty.
Article 10.17 of the Treaty provides that "[e]ach Party consents to the submission of a claim to arbitration under this Section in accordance with this [Treaty]," while Article 10.16.2 provides that "[a]t least 90 days before submitting any claim to arbitration under this Section, a claimant shall deliver to the respondent a written notice of its intention to submit the claim to arbitration."
Delivery of a notice of intent by the claimant is, thus, a precondition to the respondent State's consent to international arbitration. Note that the text of Article 10.16.2 refers to "a claimant", in the singular, signaling that each and every claimant must deliver a Notice of Intent before submitting a claim to arbitration.
The United States agrees with this interpretation. In its non-disputing party submission in this case, the U.S. stated that "[p]ursuant to Article 10.17, the Parties to the Treaty did not provide unconditional consent to arbitration under any
[Page 115]
and all circumstances", and that "[a] disputing investor that does not deliver a notice of intent [...] fails to engage the respondent's consent to arbitrate."
Very well. Of the three Claimants in this case, only the Joint Venture sent a Notice of Intent prior to submitting the Notice of Arbitration.
Claimants Foster Wheeler and Process Consultants did not send a Notice of Intent, which means they failed to engage Colombia's consent to arbitration under the Treaty, depriving the Tribunal of jurisdiction ratione voluntatis over their claims.
Claimants argue that the Notice of Intent submitted by the Joint Venture provided notice for all three Claimants, because the Joint Venture comprises Claimants Foster Wheeler and Process Consultants.
They are wrong. The Notice of Intent only identified the Joint Venture as the investor claimant under the Treaty and was submitted by the Joint Venture on its own behalf, not on behalf of Foster Wheeler and Process Consultants.
That position is further confirmed by the
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Notice of Arbitration in this case, which states that each of the Claimants qualified as a separate enterprise and investor under the Treaty, meaning that each should have notified its own intention to submit a claim to arbitration.
The fact that the joint venture is a contractual joint venture comprised by Foster Wheeler and Process Consultants is irrelevant. If the three Claimants want to submit a claim against Colombia under the Treaty, then each Claimant must comply with the requirement of Article 10.16.2. Foster Wheeler and Process Consultants cannot benefit from the Notice of Intent submitted by the Joint Venture on its own behalf.
Claimants' try to lessen the importance of the requirement in Article 10.16.2, arguing that a formal defect in the Notice of Intent is not enough to destroy jurisdiction. Claimants are wrong.
As a precondition to the State's consent to international arbitration, the delivery of a Notice of Intent is a mandatory procedural requirement, the non-compliance of which "a tribunal cannot simply
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overlook."
Several investment tribunals have held that pre-conditions and formalities, such as the Notice of Intent, required under Article 10.16.2 of the Treaty, are not "merely procedural niceties," but perform a substantial function.
These tribunals have noted that such pre-conditions constitute "a fundamental requirement that a Claimant must comply with compulsorily, before submitting a request for arbitration," and that their omission "constitutes a grave noncompliance" that prevents a Tribunal from exercising jurisdiction.
Notably, Claimants' position here is completely at odds with the position that their Counsel put forth in an investment arbitration where they acted on behalf of Mexico.
In that case, Pillsbury argued that the failure by a claimant to comply with the requirement to deliver a Notice of Intent under NAFTA, which is virtually identical to the requirement under this Treaty, meant that the submission was null ab initio and that, therefore, there was no consent under NAFTA.
[Page 118]
Claimants also attempt to minimize their non-compliance with Article 10.16.2, by arguing that Colombia suffered no prejudice as a result of Claimants Foster Wheeler and Process Consultants' failure to deliver a Notice of Intent. Whether Respondent suffer or not a prejudice is beside the point. A claimant must comply with any and all formal requirements and pre-conditions to "perfect" the respondent's State consent to arbitration.
Those pre-conditions have been included in investment treaties for good reason and constitute an important safeguard, especially because we're dealing here with a waiver of the State's sovereignty.
Claimants' attempt to shift the burden of proof to Respondent should fail. There's nothing that Colombia needs to prove. The Treaty is clear as to the requirements to State consent to arbitration, and it's for Claimants to comply with those requirements.
Finally, Claimants contend that Colombia contradicts itself by arguing at the same time that the Joint Venture is not a juridical person separate from its members, and that the Joint Venture delivered
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the Notice of Intent on its own behalf.
There is no such contradiction. Those are two separate and distinct issues. Each individual Claimant, including the Joint Venture, must qualify as a "national of another Contracting State" under Article 25 of the ICSID Convention, and each individual Claimant, including Foster Wheeler and Process Consultants, has to comply with the compulsory requirement in Article 10.16.2 of the Treaty of delivering a Notice of Intent.
It is Claimants' position that it's patently contradictory. Claimants say that the Joint Venture is an investor under the Treaty, that is advancing a claim on its own behalf, but they argue that Foster Wheeler and Process Consultants should benefit from the Notice of Intent sent by the Joint Venture because they are members of that joint venture.
Claimants cannot have it both ways. In conclusion, the Tribunal lacks jurisdiction ratione voluntatis over the claims of the two Claimants, Foster Wheeler and Process Consultants, due to the failure to deliver a Notice of Intent prior to
[Page 120]
submitting their Notice of Arbitration in this case.
Colombia's fourth objection is that this Tribunal lacks jurisdiction over Claimants' claims for breach of FET because Claimants elected to submit their FET claim to Colombian courts when they initiated an acción de tutela alleging such breach.
Paragraph 1 of Annex 10-G of the Treaty states that if an investor of the United States has "alleged" a breach of an obligation under Section A in proceedings before a court or administrative tribunal of Colombia, then such U.S. investor may not "submit" that claim to arbitration under the Treaty.
Notice the verb usage. If the claimant has "alleged" a particular claim of breach before Colombian courts, it cannot "submit" that claim to arbitration.
The ordinary meaning of the word "allege"--in Spanish "alegar"--is clear and leaves no room for ambiguity. The specific terms used in this provision were chosen carefully and are not a mere drafting error. That's evident when one compares Annex 10-G with Article 10.18.4 of the Treaty.
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1 The electa una via provision contained in
2 that Article, which applies to breaches of investment
3 authorizations and investment agreements, uses the
4 verb "submit," while Annex 10-G--which only applies to
5 U.S. investors with respect to breaches of the
6 substantive obligations--uses the verb "alleged."
7 This difference between the two electa una
8 via provisions can also be found in other treaties
9 entered by the United States, such as the Trade
10 Promotion Agreement with Chile, the CAFTA-DR, and the
11 Uruguay-U.S. BIT.
12 In this case, it is undisputed that Foster
13 Wheeler and Process Consultants alleged a violation of
14 the Treaty's FET provision in the Acción de Tutela
15 they initiated in 2018 before Colombian courts.
16 Under Annex 10-G, alleging that violation
17 prevents them from bringing a claim for breach of FET
18 before this Tribunal. Turning a blind eye to the text
19 of the Treaty, Claimants argue that there are no
20 material differences between Article 10.18.4 and
21 Annex 10-G of the Treaty, and that Annex 10-G of the
22 Treaty really means "submit" rather than "allege,"
[Page 122]
1 pointing to Paragraph 2 of Annex 10-G in support of
2 that position.
3 The second paragraph of Annex 10-G only
4 provides a clarification that the election is definite
5 but does not modify or override the language of the
6 operative part of the provision contained in the first
7 paragraph, which is clear and unambiguous. There is
8 no reason to depart from the ordinary meanings of the
9 terms of the provision, which says what it says, and
10 it says "alleged."
11 Claimants' interpretation is contrary to the
12 Vienna Convention. Not only does it ignore the
13 Treaty's express language but also defeats the object
14 and purpose of Annex 10-G, which is to avoid the
15 duplication of claims and proceedings.
16 In conclusion, since Claimants alleged a
17 breach of the Treaty's FET provision in Colombian
18 courts, that election was definite and they cannot
19 make the same claim before this Tribunal.
20 Finally, Colombia objects to the
21 jurisdiction ratione voluntatis of this Tribunal
22 because Claimants have not made a valid waiver, either
[Page 123]
1 formal or material, under Article 10.18.2(b) of the
2 Treaty.
3 Article 10.18.2(b) of the Treaty explicitly
4 provides that in order to submit a claim to
5 arbitration, the notice of arbitration must be
6 accompanied by a written waiver "to initiate or
7 continue before any administrative tribunal or court
8 [...,] or other dispute settlement procedures, any
9 proceeding with respect to any measure alleged to
10 constitute a breach" of the Treaty.
11 Only a waiver pursuant to Article 10.18.2(b)
12 of the Treaty is an effective waiver capable of
13 perfecting the offer of consent made by the
14 Contracting Parties. To be effective, a waiver must
15 comply with both formal and material requirements.
16 As the U.S. observes in its non-disputing
17 party submission, "[i]f all formal and material
18 requirements under Article 10.18.2(b) are not met, the
19 waiver is ineffective and will not engage the
20 respondent State's consent to arbitration [and] the
21 Tribunal's jurisdiction ab initio under the
22 Agreement." In other words, "[a]n effective waiver is
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1 therefore a precondition to the Parties' consent to
2 arbitrate claims."
3 Let's review Claimants' formal waiver in
4 their Notice for Arbitration. As you can see in the
5 slide, Claimants added the text highlighted in yellow
6 to the waiver. This waiver is without prejudice of
7 Claimants' right to defend themselves in the fiscal
8 liability and any related proceedings, including any
9 appeals.
10 Claimants' broad reservation of rights is
11 impermissible under the Treaty because it renders the
12 purported waiver meaningless and ineffective. To be
13 effective, a waiver must be explicit and categorical,
14 leaving no doubt that Claimants will cease pursuing
15 and will not pursue proceedings in a local forum with
16 respect to the measures at issue in this arbitration.
17 In its non-disputing party submission, the
18 United States explained that the waiver provision,
19 which is a "no U-turn provision," requires an investor
20 to definitely and irrevocably waive all rights to
21 pursue claims in another forum once claims are
22 submitted to arbitration with respect to a measure
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1 alleged to have breached the Agreement.
2 Claimants are simply not allowed to qualify
3 their waiver however they like, as they did here. The
4 tribunal in Renco v. Peru explicitly stated that
5 "waivers qualified in any way are impermissible" and
6 that a reservation is not permitted since it
7 "undermines the object and purpose" of the waiver
8 provision and is "incompatible with the 'no U-turn'
9 structure."
10 The U.S. has echoed this view in its
11 submission in this case, stating that a waiver
12 containing any conditions, qualifications, or
13 reservations will not meet the formal requirements and
14 will be ineffective. Leaving aside the formal
15 requirements, Claimants have also failed to materially
16 comply with the waiver requirement.
17 As the Tribunal in Commerce Group v.
18 El Salvador noted, a waiver must be more than just
19 words; it must accomplish its intended effect and
20 assure materially that no other legal proceedings are
21 initiated or continued. Claimants have violated the
22 waiver four times already and they threaten with a
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1 fifth violation.
2 Claimants violated the waiver twice by
3 initiating an acción de tutela on April 23rd, 2021,
4 and another one on April 28 of that same year. The
5 third violation came when Claimants filed an
6 administrative appeal against their ruling with fiscal
7 liability, seeking to reverse it.
8 The fourth violation is more recent.
9 Claimants initiated a conciliation proceeding against
10 the CGR before the Procuraduría or PGN, while also
11 threatening an additional violation: filing an
12 annulment action against the fiscal liability
13 proceeding before the courts of the administrative
14 adjudicatory jurisdiction.
15 As a matter of principle, Claimants contend
16 that reserving the right to defend themselves in the
17 fiscal liability proceedings and other related
18 proceedings is not contrary to the requirements of the
19 waiver, and that the waiver requires Claimants not to
20 act offensively but does not prevent them from
21 mounting a defense.
22 Claimants are wrong on both counts.
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1 Claimants' all too convenient interpretation empties
2 the waiver of any practical effect. In Claimants'
3 view, nothing bars them from continuing to file
4 appeals and judicial remedies to reverse the ruling
5 with fiscal liability while pursuing, at the same
6 time, this arbitration challenging the same measure.
7 Simply put, Claimants are trying to get two
8 bites at the apple. Moreover, Claimants' artificial
9 distinction between defensive and offensive actions is
10 nowhere to be found in the provision itself. The
11 waiver bars Claimants from continuing any local
12 proceedings concerning the same measures alleged to
13 constitute a breach.
14 Let's be clear. To defend is to continue.
15 Because defending continues to give impetus, or in
16 Spanish "impulso procesal," to a proceeding that may
17 otherwise end or wrap up.
18 Let's turn now to the violations of the
19 waiver. Claimants argue that the two acciones de
20 tutelas as well as the appeal are not violations of
21 Article 10.18.2(b) because they fall within the scope
22 of the carve-out set out in Article 10.18.3 of the
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1 Treaty. But that's incorrect. Article 10.18.3
2 provides that a claimant may initiate or continue an
3 action that seeks interim injunctive relief and does
4 not involve the payment of monetary damages before a
5 judicial or administrative tribunal of the respondent,
6 provided that the action is brought for the sole
7 purpose of preserving the claimant's or the
8 enterprise's rights and interests during the pendency
9 of the arbitration.
10 As the U.S. observed in its submission in
11 this case, the exception in Article 10.18.3 applies in
12 very narrow circumstances. It certainly doesn't apply
13 here. None of Claimants' actions sought entering
14 injunctive relief, and none of these actions, if
15 successful, would have the effect of preserving
16 Claimants' rights at stake while this arbitration is
17 ongoing.
18 That is probably why Claimants initially
19 invoked this provision in their Counter-Memorial but
20 abandoned that argument in their Rejoinder. The
21 conciliation request is an additional violation of the
22 waiver. Initiating a conciliation is initiating a
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1 dispute settlement procedure within the meaning of
2 Article 10.18.2(b) with respect to the same measure at
3 issue here.
4 In their May 9th letter, Claimants argue
5 that the reference to dispute settlement procedures in
6 Article 10.18.2(b) encompasses proceedings before a
7 third party with adjudicatory power but excludes
8 dispute settlement mechanisms before a third party
9 without adjudicatory power, like the conciliation
10 initiated by Claimants before the PGN. This
11 distinction Claimants want to draw is artificial.
12 From a policy perspective, the point of the
13 waiver in Article 10.18.2(b) is to prevent the
14 Respondent from having to defend itself in different
15 fora. The conciliation before the PGN defeats that
16 purpose because it opens an additional dispute
17 settlement forum, regardless of the fact that the PGN
18 lacks adjudicatory power.
19 Finally, if Claimants ultimately decide to
20 file an annulment action, they will violate the waiver
21 for a fifth time. Quite ironically, given that this
22 case is based on pure speculation of future breaches
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1 and future losses, Claimants argue that Respondent
2 cannot rely on a future event to support its claim of
3 violation of the waiver because they haven't filed an
4 annulment action yet.
5 The only reason why Colombia is mentioning a
6 potential breach of the waiver is because if and when
7 Claimants file their annulment action, this Hearing
8 will be long past us, and with it Respondent's
9 opportunity to argue before this Tribunal.
10 It is important to highlight at this point
11 that the Treaty does not require Claimants to abandon
12 all their proceedings before administrative and
13 judicial tribunals with respect to the same measure.
14 It only requires Claimants to do so in the event that
15 they wish to submit a claim to arbitration.
16 In other words, what the Treaty's "no
17 U-turn" structure does not allow is for Claimants to
18 continue their proceedings in Colombia and at the same
19 time submitting a claim to arbitration before this
20 Tribunal, [challenging] the same measure alleged to
21 constitute a breach.
22 In their pleading commenting on the U.S.
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1 submission, Claimants tried to save their waiver by
2 arguing that the measures [about] which they complain
3 in the Notice of Arbitration was the Indictment Order,
4 and that the waiver they submitted referred only to
5 that Indictment Order.
6 According to their flawed logic, the
7 tutelas, the appeal, the conciliation request, and an
8 eventual annulment action against a ruling with fiscal
9 liability do not violate the waiver because they do
10 not refer to the Indictment Order but to the fiscal
11 liability proceeding in general and to the ruling.
12 This is a clever argument. But the problem
13 is that it's inconsistent with what Claimants have
14 been arguing in this case since day one.
15 The measure they rally against is the fiscal
16 liability proceeding as a whole, including the ruling.
17 Because they clearly intend to continue with local
18 proceedings, Claimants now argue that they retain
19 their rights to initiate or continue proceedings that
20 challenge the ruling with fiscal liability until that
21 ruling itself becomes the subject of a claim under
22 Article 10.16.
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1 Are they telling us now that the only
2 supposed breaches at issue in this case arise from the
3 Indictment Order and nothing else? Because that would
4 mean that any discussion regarding other aspects of
5 the fiscal liability proceeding and the ruling with
6 fiscal liability would be outside the scope of this
7 Tribunal's jurisdiction. Ironically, this last-minute
8 argument actually shows that Claimants know full well
9 that they violated the waiver.
10 To conclude, Claimants reservation of rights
11 is incompatible with the formal waiver requirement
12 contained in Article 10.18.2(b) of the Treaty.
13 Moreover, Claimants' initiation and continuation of
14 administrative, judicial, and dispute settlement
15 procedures in Colombia, including the recent
16 commencement of the conciliation proceeding, is
17 equally inconsistent with the material waiver
18 requirement of the Treaty.
19 Thus, there is no consent to submit this
20 dispute to arbitration, and the Tribunal lacks
21 jurisdiction ratione voluntatis over Claimants'
22 Claims.
[Page 133]
1 I now turn it over to Dr. Frutos-Peterson to
2 conclude our presentation.
3 DR. FRUTOS-PETERSON: Thank you, Elisa.
4 Dear Members of the Tribunal, as Ms. Ordoñez
5 said during her preliminary remarks, this is a novel
6 case for Colombia since it is the first time it raises
7 an objection according to Article 10.20.4 of the
8 Treaty.
9 But we submit to you, very respectfully,
10 that this is a simple case because we have shown you
11 that there is no breach, no damage--two essential
12 requirements under the Treaty. Thus, Claimants' claim
13 is not ripe, not at the time Claimants submitted a
14 Notice of Arbitration, not even as of today, at this
15 precise moment. What is more, there is no investment
16 and there is no consent to international arbitration.
17 Colombia respectfully requests that you,
18 one, uphold Respondent's preliminary objections under
19 Article 10.20.4 of the Treaty and dismiss the claims
20 submitted by Claimants; two, uphold Respondent's five
21 jurisdictional objections; and, three, order Claimants
22 to pay all costs and expenses in this arbitration,
[Page 134]
1 including Respondent's attorneys' fees together with
2 interest thereon.
3 This concludes, Members of the Tribunal, the
4 presentation of Colombia. Thank you so much for your
5 time and attention.
6 PRESIDENT NUNES PINTO: Thank you very much,
7 Ms. Frutos-Peterson. We are done. You have exceeded
8 ten minutes of your time. No?
9 THE SECRETARY: They have seven minutes left
10 on the time.
11 PRESIDENT NUNES PINTO: Oh, really? I'm
12 sorry.
13 DR. FRUTOS-PETERSON: We were counting.
14 PRESIDENT NUNES PINTO: Problem with my
15 watch. My apologies.
16 So, now we have the break for lunch. One
17 hour. And we will be back at 10 past 1:00. Thank
18 you.
19 (Whereupon, at 12:08 p.m., the Hearing was
20 adjourned until 1:10 p.m. the same day.)
21 AFTERNOON SESSION
22 PRESIDENT NUNES PINTO: Okay. Can we
[Page 135]
1 resume? Both sides?
2 Okay.
3 So, let's get started. Now we have the
4 Opening Presentation of Claimants. We will go through
5 2:30, then we have a break around 2:30, in the
6 vicinity of, and then you'll have an additional
7 60 minutes to go.
8 MR. SILLS: Perfect.
9 PRESIDENT NUNES PINTO: Okay?
10 MR. SILLS: Thank you, Mr. President.
11 PRESIDENT NUNES PINTO: So, the floor is
12 yours.
13 OPENING STATEMENT BY COUNSEL FOR CLAIMANTS
14 MR. SILLS: Thank you, Mr. President.
15 Slide 2, please.
16 Is that better?
17 THE SECRETARY: Yes.
18 MR. SILLS: I was trying not to yell.
19 (Comments off microphone.)
20 MR. SILLS: Now that we've got the technical
21 issues out of the way.
22 So, thank you, Mr. President. The slide
[Page 136]
1 before us describes how we will address the opening
2 issues, addressing the case as pleaded and addressing
3 the issues in the context of the case as pleaded.
4 We begin by discussing the standard of
5 review for this proceeding, in accordance with the
6 rules and in accordance with the agreement of the
7 Parties.
8 We briefly address the question of the
9 non-party submission of the United States. And we
10 will address--and I'll actually ask my colleague,
11 Mr. Conrad, to address the factual background here
12 because that's the necessary context, and I have to
13 say, with all respect, what we didn't hear about this
14 morning for this case and this application.
15 We'll describe the violations of the TPA as
16 pleaded, address the question of our damages, address
17 the various jurisdictional objections that have been
18 made, and then conclude, hopefully on time,
19 Mr. President.
20 So, if we could have Slide 4, please.
21 Mr. Conrad will describe this in more detail, but the
22 procedural history here, very briefly, is this. In
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1 2009, Reficar, a wholly-owned subsidiary of Ecopetrol,
2 which, in turn, is owned by the Ministry of Finance of
3 the Republic of Colombia, and FPJVC, not the
4 individual members, entered into a contract to provide
5 specified services in connection with the upgrading
6 and modernization of a refinery in Cartagena,
7 Colombia.
8 But very shortly after that contract was
9 entered into, Reficar, exercising its rights under an
10 express term of that contract, radically changed the
11 scope of the joint venture's work and, in effect, as
12 we will describe, made FPJVC essentially a provider of
13 personnel to what Reficar referred to as an integrated
14 project management team and critically deprived FPJVC
15 of any authority over the expenditure of public funds
16 either to prevent the expenditure or to authorize the
17 expenditure.
18 FPJVC completed its work under the contract.
19 It invoiced for that work. Each of those invoices was
20 paid by Reficar without objection. Nonetheless, the
21 CGR then went and initiated fiscal liability
22 proceedings against the Claimants and a host of
[Page 138]
1 others, arguing that FPJVC--actually, the members of
2 FPJVC were fiscal managers, which is a specific
3 defined term under the Colombian statute, Law 610,
4 that creates the CGR and under which the CGR operates.
5 And that requires that a fiscal manager have
6 authority, as we have repeatedly pleaded and as we
7 have shown, over the expenditure of public funds, and
8 that it--in order to incur liability, that it must act
9 with, at a minimum, gross negligence. Although the
10 claim, despite its language, essentially asserts a
11 breach of contract at most, against--against the
12 Claimants.
13 The Claimants did give notice. The record
14 shows that Colombia ignored that notice of an intent
15 to bring a claim, refused to engage at all.
16 After the cooling-off period had expired,
17 the Claimants reached out again to Colombia, pointing
18 out that they now were free to bring a claim but,
19 again, inviting Colombia to meet and attempt to
20 resolve this matter.
21 And this time Colombia did respond, and
22 representatives of the Claimants, both counsel and
[Page 139]
1 business personnel, traveled to Bogota and met with
2 ANDJE, the governmental agency represented here today
3 which has authority over investor-State claims in
4 Colombia. Those discussions were fruitless. And
5 after those discussions failed, this arbitration was
6 initiated.
7 Slide 5, please.
8 So, the TPA itself addresses the question of
9 preliminary questions. The language is before us.
10 And I don't think it's seriously disputed
11 that--perhaps not disputed at all, that wasn't
12 entirely clear to me from this morning's
13 presentation--that on preliminary questions, the
14 allegations of the Request for Arbitration are to be
15 taken as true and that preliminary questions are not
16 intended to resolve factual disputes.
17 They're not intended to resolve mixed
18 questions of fact and law, virtually all of the issues
19 that were highlighted this morning, or complex
20 questions of law. It's, in effect, intended to weed
21 out claims that clearly show, on their face, that they
22 don't come within the terms of the Treaty.
[Page 140]
1 Next slide, please.
2 And the Tribunal will recall the discussions
3 leading up to Procedural Order Number 1. I don't
4 think we have to spend a great deal of time talking
5 about who said what about this. The procedural order
6 does speak for itself.
7 But this is what Colombia said about how we
8 came to be here, and that is that the Tribunal--the
9 only point at issue is whether the Tribunal will
10 establish a calendar to hear solely Respondent's
11 Article 10.20.4 objection as a preliminary matter or
12 whether it will establish a calendar to hear both
13 Respondent's Article 10.20.4 and Respondent's other
14 jurisdictional and/or admissibility objections as
15 preliminary questions.
16 THE TECHNICIAN: Excuse me. I'm sorry to
17 interrupt. We can't see the slides on the screen.
18 MR. SILLS: Going on. Next slide, please.
19 As reflected in Procedural Order Number 1,
20 that it was without prejudice to its objections to
21 jurisdiction and/or admissibility.
22 On the next slide, Number 8, we highlight
[Page 141]
1 the particular provisions of PO Number 1 that govern
2 this proceeding.
3 And the Tribunal will recall that we had
4 actually proposed--we, the Claimants' counsel, had
5 proposed a jurisdictional phase in which, as in any
6 jurisdictional phase, there would be a full
7 development of the factual record, because
8 jurisdiction typically turns on questions of fact or
9 mixed questions of fact and law.
10 And that was actually objected to by
11 Colombia, saying there was no need for disclosure
12 because these would only be questions of law. And now
13 we're told that there's a burden of proof on facts on
14 Claimants when that is the exact opposite of what was
15 agreed. This was going to be done as a consolidated
16 preliminary matter addressed to questions of law
17 raised by the RFA.
18 And I should say at the outset that all the
19 cases that were referred to this morning about
20 jurisdictional dismissals were in jurisdictional
21 phases of cases. The Tribunal certainly knows that
22 it's not at all uncommon in investor-State claims for
[Page 142]
1 there to be a separate jurisdictional phase in advance
2 of a hearing on the merits, and sometimes those do
3 result in jurisdictional dismissals.
4 What wasn't provided, because so far as I
5 know, it doesn't exist, is a jurisdictional dismissal
6 in effect on briefing an oral argument addressed to a
7 pleading, and certainly none was cited to us this
8 morning.
9 So, it is true that as the Claimants, we
10 bear the burden of proof ultimately to show
11 jurisdiction. We don't--couldn't contradict that.
12 But that is on a full record. The case was not
13 bifurcated into a jurisdictional and a merits phase.
14 The case was not trifurcated into a preliminary
15 objections, jurisdictional, and a merits phase.
16 It was on the request of the Respondent, set
17 up as preliminary questions, and if they failed on
18 those--as they should, as they will--that there would
19 be a merits phase, at which they will be free to raise
20 any and all jurisdictional objections that they choose
21 to raise.
22 But that will be on a full record with the
[Page 143]
1 benefit of disclosure, with the benefit of witness
2 testimony, with the benefit of a full developed
3 record, as should be the case for any attempt to
4 terminate a case.
5 Slide 10, please. And Slide 11. There we
6 are.
7 So, this is the language of the Treaty
8 regarding a hearing on preliminary questions.
9 Claimants' factual allegations in support of any claim
10 in the Notice of Arbitration must be assumed to be
11 true, although we heard repeated challenges this
12 morning to the truth of those various allegations.
13 And I'll turn to some of those later in our
14 presentation. But...
15 Next slide, please.
16 This is not an evidentiary hearing, although
17 Colombia has repeatedly attempted to turn it into one.
18 Here on Slide 12 is an example. Two examples.
19 "Claimants"-we-"have not proved"-proved-
20 "that there is a lack of effective or sufficient means
21 or remedies against the ruling with fiscal liability,
22 or that such remedies are futile, ineffective or
[Page 144]
1 improbable."
2 Well, that's because we haven't had a
3 hearing yet on that. But we pleaded that because-
4 particularly in light of the extraordinary delays, a
5 decade or more, that plagued the Colombian judicial
6 system. And we're not just making this up.
7 As the Tribunal will recall from the Hearing
8 on Interim Measures, the former chief legal officer of
9 the CGR provided a witness statement detailing exactly
10 the difficulties that we would encounter in seeking
11 relief.
12 But the allegation here, it's a well-founded
13 allegation. It is either a question of fact or a
14 mixed question of fact and law. It is not a question
15 of law, as was asserted this morning.
16 Similarly, we hear that Claimants-in
17 Paragraph 204 of the Reply that was filed by
18 Respondent: "Claimants assert they have suffered
19 reputational damage as a result of the alleged
20 violations perpetrated by Colombia"-indeed we do, and
21 indeed we did-"but they have failed to prove, even
22 prima facie, the existence of such damage."
[Page 145]
1 If this were an evidentiary hearing, we
2 would call witnesses precisely to that effect. But
3 that is not how this was set up. That is not how this
4 part of the proceeding is organized. And it is
5 inappropriate to suddenly shift gears and assert that
6 there's an obligation to come forward and prove these
7 allegations on a hearing intended and designed to hear
8 preliminary questions.
9 And so, on the next slide, 13, we cite from
10 the decision in Pac Rim v. El Salvador, a widely cited
11 case in which the Tribunal will recall Mr. Veeder sat
12 as the President of the Tribunal.
13 And he, in turn, citing Professor Schreuer
14 and his commentary on the ICSID Convention, states
15 that-talking about-saying: "No proof is required at
16 this stage. On most points, a mere assertion in the
17 request will suffice, and the information thus given
18 may be developed at a later stage. By assertion, the
19 Tribunal assumes these authors to mean an appropriate
20 statement specifying the factual and legal bases of
21 the claim, without evidential proof."
22 The following slide, Number 14, discussing
[Page 146]
1 CAFTA, which in this respect is materially identical
2 to the Colombia-U.S. TPA, makes the important point,
3 which I think has been alighted by Colombia, that the
4 procedure under 10.20.4 is clearly intended to avoid
5 the time and cost of a trial and not to replicate it.
6 "There can be no evidence from the
7 Respondent contradicting the assumed facts alleged in
8 the Notice of Arbitration, and it should not
9 ordinarily be necessary to address at length complex
10 issues of law, still less legal issues dependent on
11 complex questions of fact, or mixed questions of fact
12 and law."
13 But that sort of mini trial in advance of
14 the development of the record is precisely what
15 Colombia is attempting to create here.
16 From the Kappes case in the next slide,
17 cited this morning by Colombia, it makes it clear that
18 if there were any deficiencies identified, we can, in
19 fact, clarify and submit them. And I should say at
20 the outset, you know, as the case goes forward, we
21 will, of course, amend it because there is now an
22 award of the Tribunal, which we were told at the
[Page 147]
1 hearing on interim measures they intend to enforce and
2 are making efforts to enforce, depending on the
3 exchange rate in effect, somewhere between USD
4 750 million and USD 900 million. So, of course, we
5 will address that as the case moves forward.
6 But the point here is that by making this
7 application on preliminary questions, Colombia, in
8 effect, froze the case in time because that
9 application, as we were told this morning, properly
10 so, is addressed to the RFA as pleaded. And that will
11 withstand this application, as we will show.
12 But that doesn't mean that that is the case
13 that will ultimately be heard by the Tribunal.
14 Everybody knows that as circumstances develop, cases
15 change, claims are amended, supplemented. And,
16 obviously, it's a very significant development.
17 And I should say at the outset there was a
18 lot of discussion about how this is something-somehow
19 a moving target, and there was a quote put on the
20 screen, and that the measure being challenged was the
21 CGR Decision in response to a question asked by the
22 Tribunal at the Interim Measures Hearing.
[Page 148]
1 Well, that was at the Interim Measures
2 Hearing. And the question was what measure were we
3 challenging there. The question-and I answered it, at
4 least as I understood it and as the record shows was
5 the case in context, was not what is the measure being
6 challenged in the RFA.
7 There's no contradiction there. The case is
8 not a moving target. The case is as pleaded, and it's
9 as pleaded precisely because Colombia chose to make
10 this application prematurely.
11 If they wanted to raise these questions,
12 which are questions of fact or mixed questions of fact
13 and law, they should have done it in an appropriate
14 way, either seeking a separate jurisdictional phase,
15 which they expressly disclaimed in the negotiations
16 leading up to-or the discussions leading up to the
17 issuance of PO Number 1, or applied for that. By
18 agreeing to treat everything, in their words, as
19 preliminary questions--whether they are preliminary
20 questions within the meaning of the Treaty or could
21 otherwise be considered on a factual record--the
22 decision was made to put them in that particular
[Page 149]
1 procedural context governed by PO Number 1, and they
2 should be held to the bargain that they made.
3 And along those lines, again, as Pac Rim
4 makes clear in Slide 16 and 17--if we could have--oh,
5 we do have them up.
6 The Tribunal should not take a formalistic
7 view of a pleading. This isn't some 18th century
8 common law court where exact wording is the sine qua
9 non of jurisdiction or on the merits. Particularly in
10 considering preliminary objections, it is not
11 appropriate to take a strictly formal and formalistic
12 view.
13 So, as Slide 18 makes clear, the burden of
14 proof--the Respondent attempts to place the burden of
15 proof at this stage of the case on Claimants, but
16 they're conflating the ultimate burden of proof in the
17 case, which we don't dispute rests on the Claimants.
18 The Claimants, as Claimants, must prove each and every
19 element of their claim.
20 Could we have Slide 19, please.
21 So, 17, 18, and 19 consist of quotes from
22 the papers submitted by Colombia, all attempting to
[Page 150]
1 raise factual issues, all suggesting that there's a
2 burden of proof on the facts at this stage in the case
3 upon Claimants.
4 That's not the law. It's not Procedural
5 Order Number 1. And it would be, I have to say, a
6 miscarriage of justice to suddenly switch ground at
7 this point in these proceedings and assert that
8 Claimants bear some kind of burden, let alone the
9 final and ultimate burden of proof on these factual
10 issues.
11 If we could have Slide 21, please.
12 This is a quote from the Pac Rim decision
13 making it clear that the burden of proof at this stage
14 of the proceedings rests on the Respondent to show
15 clearly and convincingly, to a certainty in the words
16 of some tribunals, that there is no case. And that
17 they cannot show.
18 We also refer to Bridgestone v. Panama where
19 the Tribunal stated: "At all times during the
20 exercise under CAFTA Articles 10.20.4 and 10.20.5, the
21 burden of persuading the Tribunal to grant the
22 preliminary objection must rest on the party making
[Page 151]
1 that objection."
2 And indeed, in our field, in international
3 arbitration, the burden of proof is always on the
4 party asserting a fact, a claim, or a defense. And
5 that is Colombia at this stage.
6 If we could have Slide 22, please.
7 Specifically with respect to the burden of
8 proof on jurisdictional objections about which we
9 heard so much this morning, Colombia cites a line of
10 cases. But all of those cases arose in the context of
11 decisions on jurisdiction in the jurisdictional phase
12 of the case, not on preliminary questions, whether
13 under Article 10.20.4 or under ICSID Rule 41.
14 And as I've already noted, that is not the
15 position that Colombia took in the discussions leading
16 up to Procedural Order Number 1, and it is
17 certainly--had it been the position, we would have
18 objected as strenuously as possible to having a
19 hearing on the merits, some sort of mini trial or
20 preliminary trial before the record was developed.
21 Could we have Slide 23, please.
22 And this, again, is from the Respondent's
[Page 152]
1 saying: "It is worth noting that Respondent's
2 position is that document production"--which, of
3 course, would be necessary to a hearing on the merits,
4 on the facts---"will not be required during the
5 preliminary phase because the issues discussed will
6 turn mostly to legal questions."
7 And if we could have Slide 24, please.
8 This is how the Tribunal resolved that issue
9 and ordered that the case proceed, and those are the
10 paragraphs that bring us here today.
11 And if we could have Slide 26.
12 It's, again, from two decisions, RSM vs.
13 Granada and, again, the Pac Rim decision, both by
14 distinguished tribunals. Under ICSID Rule 41(5), an
15 alternative source--it's already here--a tribunal
16 should only dismiss if it finds that the claimants are
17 certain to fail.
18 ARBITRATOR BEECHEY: Mr. Sills, for the
19 record, you said Slide 26. You mean 25, don't you?
20 MR. SILLS: I did. Thank you. Thank you,
21 Mr. Beechey. I'm getting ahead of myself.
22 ARBITRATOR BEECHEY: Don't worry. I'm
[Page 153]
1 listening.
2 MR. SILLS: Let me turn very briefly to the
3 question of the non-disputing party submission about
4 which we heard so much this morning.
5 First, as it always does when it makes a
6 non-disputing party submission, the United States
7 expressly disclaimed expressing a view on the merits
8 of the case. And it is concerned largely with
9 theoretical and somewhat abstract questions of law,
10 largely referring to the Treaty itself and to the
11 views of the United States on that Treaty.
12 But if we could have Slide 28, please.
13 Colombia takes the view that this
14 non-disputing party submission is arguably more
15 important than other arbitral decisions or
16 jurisprudence and actually claims that it represents
17 subsequent agreement or subsequent practice under
18 Article 31 of the Vienna Convention.
19 This morning's transcript shows that that
20 non-disputing party submission shows, quoting from the
21 transcript, "the highest possible degree of
22 agreement."
[Page 154]
1 One would think that the highest degree of
2 agreement would be an amendment to the Treaty. But
3 the position that Colombia advances here, that the
4 U.S. submission is binding authority here, has been
5 rejected repeatedly by ICSID and other tribunals
6 hearing investor claims.
7 If we could have Slide 30, please.
8 This is a quote from the decision of the
9 Tribunal in Telefónica v. Argentina. They are--these
10 non-disputing party submission are not evidence of
11 subsequent agreement. They don't evidence subsequent
12 practice.
13 They can't be evidence of subsequent
14 agreement because non-party submissions are a
15 unilateral act. A subsequent agreement requires the
16 parties to come to an agreement in a single common
17 act, an amendment to the treaty, for example.
18 And the interpretation being offered this
19 morning would simply blur the distinction under the
20 Vienna Convention under Articles 31(3)(a) and 31(3)(b)
21 of the Convention, and no case has been cited
22 endorsing the notion that a non-party submission
[Page 155]
1 constitutes a subsequent agreement.
2 They're also not evidence of subsequent
3 practice, because subsequent practice depends not on a
4 single instance but on whether and how it's repeated.
5 And a single instance of common conduct, even if a
6 non-disputing party submission was such evidence, is
7 not dispositive for treaty interpretation, although it
8 is asserted to be.
9 But I think more important, this is an
10 amicus submission. It's an amicus submission that's
11 entitled to the weight that its logic and reasoning
12 and authority cited carries. And it's for the
13 Tribunal to decide how much weight to give to a
14 non-disputing party submission.
15 It is not true that simply by filing a
16 statement on an amicus basis to which another party
17 will agree that it suddenly becomes a binding
18 agreement. There is no authority for that. The
19 Vienna Convention, after all, says only that the
20 tribunal should take into account a non-disputing
21 party submission, not that its hands are tied or that
22 it's somehow bound.
[Page 156]
1 Now, some treaties do have a mechanism for
2 the State Parties to the treaty--NAFTA, in its
3 original form, for example, set up a mechanism where
4 the parties, through a formal procedure, could agree
5 on a binding interpretation. But that's simply absent
6 here.
7 And I have to say, with respect to the
8 United States, the submission made here consists
9 largely of a series of ipse dixits, assertions about
10 the law without reference to the decided cases,
11 without reference, for the most part, to significant
12 jurisprudence, and taking a view that the United
13 States, for its own reasons--and as we suggest as a
14 State party, the U.S. has an interest, it's not purely
15 a disinterested party--would take.
16 But it's for the Tribunal. As all the
17 tribunals cited in our papers and in these slides have
18 dealt with non-disputing party submissions, not only
19 by the United States but by other State parties and,
20 for that matter, private parties.
21 Those submissions get the weight they
22 deserve. And it's for the Tribunal, exercising its
[Page 157]
1 discretion and weighing those submissions against the
2 body of decided cases and against the jurisprudence
3 that everyone follows, to decide whether to give any
4 weight to that submission and, if so, how much weight
5 to give to that submission.
6 So, with that--and I do note, finally,
7 Colombia relied heavily this morning--relied heavily
8 on its papers on non-disputing party submissions, but
9 it's a closed loop. And they are presumably relying
10 on those because they cannot find decided authority in
11 their favor, because they cannot find jurisprudence
12 supporting their positions.
13 But those are amicus submissions. And as I
14 say, they are--they have the weight that they deserve,
15 and it's for this Tribunal to decide how much weight
16 to give that submission in this case, as will become
17 clear in a moment from Mr. Conrad's presentation.
18 To the extent that there are assumed facts
19 underlying the submission of the United States, they
20 are based on an incorrect reading of the record here.
21 And, in particular, the statements of the United
22 States regarding the burden of proof took no account
[Page 158]
1 of the procedural order that actually governs here, or
2 the discussions leading up to it, and simply relied on
3 abstract statements about who bears the ultimate
4 burden of proof on jurisdictional issues, a point that
5 I don't believe is actually in dispute here.
6 With that, I'll ask Mr. Conrad to describe
7 the factual background of the dispute.
8 MR. CONRAD: Thank you, Mr. Sills, Members
9 of the Tribunal, opposing counsel.
10 I wanted to start out with a slide here that
11 goes through kind of some of the chronology of
12 Claimants' investment in Colombia.
13 This began in 1975 when Claimants started
14 first beginning--began investing in Colombia. Over
15 those years, almost 30 years--it wasn't until 2004
16 when Ecopetrol began planning this megaproject known
17 as the expansion and revamp of the Cartagena Refinery
18 in 2004.
19 Subsequently, in 2007, Ecopetrol, which
20 Mr. Sills stated earlier, 100 percent owns an entity
21 called "Reficar." And it created Reficar in 2007 for
22 this very purpose, to own this refinery and
[Page 159]
1 subsequently operate this refinery.
2 Ecopetrol is owned by Colombia of
3 88 percent--it's majority owned, 88 percent, and
4 that--those shares are actually owned by the Ministry
5 of Finance of Colombia.
6 Colombia also owns all the hydrocarbons
7 which are managed by the National Hydrocarbons Agency,
8 and Ecopetrol and Reficar carry out many of the
9 National Hydrocarbons Agency's duties.
10 In 2009, Reficar entered into a contract,
11 which we heard about this morning from Colombia's
12 counsel, which I will go into a little bit more detail
13 here during this factual background section--but
14 entered into a contract called "The Project Management
15 Consultancy Agreement or Contract" or the "PMC
16 Agreement."
17 This Contract specifically contemplated
18 project management services for the construction of a
19 megaproject refinery. I mean, this was a
20 multi-billion-dollar project upon which Ecopetrol,
21 through its wholly owned subsidiary, Reficar,
22 contracted with Foster Wheeler to provide these
[Page 160]
1 project management services related to this
2 construction megaproject.
3 In that agreement, it contemplated
4 delegation of authority. Essentially what was
5 contemplated by the agreement, as it was signed and
6 executed back in November of 2009--there was an
7 appendix to that agreement that outlined all of the
8 specific obligations, contractually, that Reficar
9 expected Foster Wheeler to perform.
10 Many of those agreements--many of those
11 duties within that agreement contemplated that Foster
12 Wheeler would effectively serve as the owner's
13 representative, be the face of Reficar vis-à-vis
14 Chicago Bridge & Iron, who had been selected as the
15 engineering, procurement, and construction contractor
16 or, in other words, the general contractor.
17 But it was contemplated that Reficar would
18 hire a PMC. And a PMC is not unusual in megaprojects
19 such as this one, as far as the setup.
20 From 2009, again November, when the PMC
21 Contract was first signed, that agreement lasted for
22 the better part of almost a decade. It went from 2009
[Page 161]
until the end of 2018. It was a long-term agreement upon which Foster Wheeler was performing services.
Next slide, please.
And in our Request for Arbitration, which is excerpted here on Slide 33, there were--it specifically refers to additional investments that Claimants made in Colombia and wasn't limited just to performing this long-term Construction Project Management Services Contract on behalf of Reficar. It also incorporated or included specifically investing significant amounts of time, capital, personnel, and labor in the Colombian territory.
And in that regard--as we all know, there are two entities that comprised the contractual joint venture Amec Foster Wheeler USA and also Process Consultants, Inc. Process Consultants, Inc., formed a local Colombian branch called PCIB which performed the local work, performed the local labor. Amec Foster Wheeler performed the offshore work.
So there was--and Claimants have pled that there was significant amount of investment locally in order to perform that work; not just the work that was
[Page 162]
contemplated within the Contract but, also, in order to do that work, they expended significant time, significant capital, hired personnel, and paid taxes in Colombia.
Before I turn to the next slide, Tribunal, the next slide contains confidential information. I just wanted to advise the Tribunal.
THE SECRETARY: If you can give us one minute.
MR. CONRAD: Of course.
(End of open session. Attorneys' Eyes Only information follows.)
[Page 163]
[Redacted]
[Page 164]
[Redacted]
[Page 165]
[Redacted]
[Page 166]
[Redacted]
(Attorneys' Eyes Only session ends at 2:00 p.m.)
[Page 167]
(Pause in the proceedings.)
THE SECRETARY: Okay. We can proceed.
MR. CONRAD: Thank you, Madam Secretary.
The next slide is just an excerpt of one section of the PMC Contract that specifically contemplates that Reficar here this last--or the second paragraph that's excerpted here says that Reficar may make the decision at anytime whether to continue or not all or any part of the services included in the offer.
Next slide, please.
As I stated earlier in November of 2009, this Contract, as written and as contemplated by the Claimants here who signed it and agreed to perform it as written originally, changed almost within 30 days of after signing it.
At the first kick-off meeting between Reficar and FPJVC, Reficar informed FPJVC that they were no longer going to be serving the role as a traditional PMC. Instead, Reficar decided to create what's called--what they called an "Integrated Project
[Page 168]
Management Team." But really, in reality, it was really just Reficar's project management team with Foster Wheeler providing support.
On Slide 36 here is an excerpt from the Jacobs Report. Jacobs is Jacobs Consultancy. It's a well-known EPC contractor very similar to Foster Wheeler, very similar to CB&I. It's a competitor to both of those companies.
Jacobs was retained by Ecopetrol to serve as its, basically, eyes and ears to report to Ecopetrol, who was the 100 percent owner of Reficar, to basically audit and supervise and check in and report to Ecopetrol about the project's status.
In October of 2015, well after the project had been, you know, started in 2010, basically at the time of the project's construction completion but prior to the pre-commissioning and start-up of the refinery, Jacobs issues a report to Ecopetrol. This is what's shown here.
And specifically in Paragraph 1, Jacobs found that "in an integrated project management team, PMT--the authority and responsibility for
[Page 169]
decision-making must be delegated in specific positions within the organization, and these positions should not be duplicated.
This was not so in the Reficar project, and all of the decisions had to be made by only Reficar managers. [Foster Wheeler]'s team had no authority and became only additional personnel in Reficar's team, and many of the management functions were duplicated.
Without having any authority, [Foster Wheeler]'s personnel could only make suggestions and provide tools for project management." "All of the decisions had to be made by Reficar's managers."
Despite having received, or this report been issued in October of 2015, the Comptroller General, who is the most senior person within the Contraloría, orders a special audit in December of 2015, just a few months later. After that, in May, shockingly, the Comptroller General makes public statements about Foster Wheeler's management control was, quote, shameful and embarrassing.
Thereafter, the final report on the special
[Page 170]
audit was issued in November of 2016. And then on March 10th, 2017, the CGR commences its fiscal liability proceedings based on Law 610.
In this opening resolution, which is March 10 on Page 37 before I move to Page 38, notably the CGR--and I don't think that Colombia mentioned this in their proceeding--their discussion earlier.
They did not charge Ecopetrol. They did not charge Reficar. Who did they charge? They charged certain officers and directors of Reficar. They charged--excuse me. They opened an investigation with respect to the directors and officers of Reficar and the directors of Ecopetrol along with Foster Wheeler and CB&I and several insurance companies.
Next slide on 38.
On February 2018, Claimants Foster Wheeler USA and PCI submitted in English--the translation is free versions. What were these free versions? These were opportunities for the Claimants to explain to the CGR that there is no liability here. We are not fiscal managers.
Claimants attached the Ecopetrol Jacobs
[Page 171]
Report as evidence to the fiscally--to the Contraloría, along with other evidence that the Claimant submitted to the Contraloría.
Despite that fact, on June 5th, Auto 773, the charging document or, as Colombia stated in its papers, the Indictment Order was issued. So despite having all of that evidence and proof conclusively showing that neither the Claimants or none of the Claimants were fiscal managers, they charged them. In that same document, they charged them with $2.43 billion worth of damages.
The entirety of the amount earned, gross revenue, was just shy of $270 million. This project cost total over $8 billion. But the charge here was a multiple of almost ten times what Claimants had been paid on this Contract at the time of June 5th, 2018.
In this same document, Auto 773, the Contraloría also dismissed charges against the Ecopetrol Board members, finding that they didn't have ultimate decision-making authority. They were not fiscal managers, which is exactly the same argument that the Claimants have presented to the Contraloría
[Page 172]
in its free version and that the Colombian Government, through Ecopetrol, had within the Jacobs Report of October of 2015.
That decision to the final--memorializing that dismissal of the Ecopetrol Board members was made on August 5, 2018, as shown here on Slide 38 and Auto 188.
Thereafter, the Claimants filed a tutela with--seeking, basically, whatever they could to try to get--seek dismissal of the Contraloría's proceeding asserting violations of Colombian law only, and it was dismissed thereafter. Claimants submitted their Notice of Intent in December of 2018. And as Mr. Sills stated earlier, between the submitting--the submittal of the Notice of Intent, there were meetings taking place where Claimants sought to potentially resolve pursuant to that notice and the cooling-off period.
Those discussions were unsuccessful and Claimants filed their Request for Arbitration in December of 2019.
The last few slides here are subsequent to
[Page 173]
the Request for Arbitration filing, but they deal with the ongoing defense that are related to Claimants in a proceeding that they didn't begin. It's a proceeding--the Contraloría's Fiscal Liability Proceeding, to be clear, was instituted by the Colombian Government, specifically the Contraloría. This was not a proceeding that the Claimants instituted on their own.
These actions of the tutela were limited to technical issues related to that defense seeking the right to cross-examine technical experts on the first occasion; and the other one, seeking additional time to file their responsive or motion to reconsider of this internal appeal within the CGR. All--again, no external proceedings. No commencement of any new proceedings.
And then ultimately on April 26 of 2021, the CGR issues its decision finding Claimants, along with others except for the Ecopetrol Board members who had been dismissed, jointly and severally liable for, at then, $811 million based on the rate of exchange. And then subsequently on July 6, 2021, the CGR Decision
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became final.
Where are we now? Just most recently after our Provisional Measures Hearing back in November, Colombia has begun its collection efforts. The collection proceeding is now commenced. We received notice of a persuasive collection. As Colombia mentioned earlier, that's an opportunity for the Claimants to voluntarily make a payment. And then after that, as we described at the Provisional Measures Application Hearing, there will be a forced collection proceeding commencing now.
And so, this concludes the section on the factual background. I'll now turn it back to my colleague, Mr. Sills, to discuss Respondent's prima facie violations objections as preliminary questions to the TPA. Thank you.
MR. SILLS: Thank you. If we could have Slide 42.
These are the five claims pleaded to date in the RFA. And I'm going to go briefly through them in turn, beginning with the violation of Article 10.5 of the Treaty, the minimum standard of treatment.
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Slide 44, please.
Slide 44 requires Colombia to provide Claimants with fair and equitable treatment. That specifically includes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment. And it goes on, of course, to provide in Paragraph 2 that FET includes the obligation not to deny justice in civil, criminal, or administrative adjudicatory proceedings, and then makes itself subject to Annex 10-A.
Slide 45, please.
Annex 10-A states that the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the economic rights and interests of aliens.
Slide 46, please.
The RFA pleads at least six particular grounds who are concluding that the treatment of Claimants fell below the minimum standard of treatment.
Those are, first, that the CGR concluded,
[Page 176]
without any possible basis, that Claimants were fiscal managers and asserted jurisdiction in the fiscal liability proceeding on the grounds that they were, in fact, fiscal managers who would engage in gross negligence.
Although, as we have pleaded, as Mr. Conrad has just described, very early in the process, Foster Wheeler, the joint venture, had been reduced to providing personnel to Reficar, which determined to manage its own project. And that joint venture had no authority over the expenditure of funds, no ability to stop the expenditure of public funds, and could not possibly have acted with gross negligence.
Second, the CGR failed to articulate or give proper notice of viable theories of liability, causation, and damages. It was simply asserted in this enormously long charging document that all respondents were jointly and severally liable for all damages. The damages, essentially, the difference between the bid price as estimated by Chicago Bridge & Iron, not by FPJVC, and the amounts that were ultimately incurred in order to complete the project.
[Page 177]
Those damages not only were joint and several, but they were grossly disproportionate to Claimants' alleged harm, and there was no attempt to establish a causal link between any wrongful act of FPJVC or, for that matter, other defendants, and any damages alleged to have resulted.
And, of course, the Tribunal will recall that in the Glencore case, an irrational damage theory adopted by the CGR was the basis for liability found by the tribunal in that case. And Colombia also took, through other agencies of the Colombian Government, conflicting positions on this.
The Jacobs Report was specifically endorsed by the PGN, and that is the Jacobs Report as commissioned by Ecopetrol, the owner of Reficar, the owner of the project. We pled that we were not afforded an adequate opportunity to defend ourselves.
And, as Mr. Conrad just described, the CGR, supposedly a neutral decision-maker of the Colombian Government, repeatedly made inflammatory statements impugning the integrity of the Claimants here, asserting that their fiscal management, which didn't exist, was
[Page 178]
embarrassing or shameful, publicizing, waging a campaign in the press against the Claimants and resulting, as we plead, in reputational harm.
If we could have Slide 47, please.
This slide puts up in graphic form Colombia's objections regarding the FET claim. And as we'll show in a moment, putting to one side that they're entirely unfounded, they're certainly not appropriate for consideration as preliminary objections.
As I was describing before, preliminary objections deal with straightforward legal questions so that the Tribunal doesn't have to make factual determinations or resolve complex issues of law.
Here, Colombia raises questions about the content of the FET standard. In fact, this morning I believe they made an attempt to resurrect the Neer standard of 1923 as to the minimum standard of treatment. And, thankfully, the minimum standard of treatment has evolved well beyond that.
Mixed questions of law and fact. Choose only one of many examples whether Claimants have
[Page 179]
adequately exhausted local remedies on the denial of justice claim or, for that matter, whether there is a meaningful and effective remedy at all.
But to the extent the Tribunal--and these should not be addressed on preliminary questions because it's simply inappropriate in the procedural posture, which the case is in now, to resolve those questions, even to address them. But to the extent the Tribunal does decide to address any of them, Colombia is wrong on the law.
Slide 48, please.
The first of the objections Colombia has raised that I want to address is the notion that the Treaty protects investments but not investors. Now, as the quoted language on Page--I'm sorry--on Slide 48 makes clear, the FET provision states that--it means the customary international law minimum standard of treatment of aliens as the minimum standard of treatment.
Aliens are investors. Aliens are not investments. And there is no way to construe the term "investments" to include the term "aliens."
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Similarly, Annex 10-A, which is a part of the FET standard, as it's defined by the Treaty, states that it refers to all customary international law principles that protect the economic rights and interests of aliens.
Slide 49, please.
This is an extract from the Decision in Lion v. Mexico. We've heard a great deal this morning about Lion v. Mexico because a colleague of mine, not a member of the team on this case, was counsel for Mexico in that case.
And the case under NAFTA is distinguishable in many ways. But something we didn't hear this morning is that the positions being ascribed to our firm were rejected by the Tribunal in that case. And I understand why an attempt was being made to suggest that we were taking contrary positions. But it's parties that take positions, not law firms. And the fact of the matter is the NAFTA Tribunal in Lions specifically rejected the argument that investors were not protected by, essentially, similar language in NAFTA. The language is here on Slide 49.
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But this is not an anomaly. Other NAFTA tribunals have rejected this precise argument and are cited in our Rejoinder, Paragraph 72, that include GAMI v. Mexico, Chemturra v. Canada, Merrill & Ring v. Canada, and S.D. Myers v. Canada, each of which rejected this argument.
And there is no case, of which I'm aware and no case that's been cited, where an FET--where a claim was rejected based on the notion that the Treaty protects--the Treaty in question protected only investments and not investors.
I have to say it seems like a somewhat artificial distinction in any event. It's, after all, investors who make investments. And the notion that [investments] are protected but not the investors who make those investments, I've always found difficult to follow. Nonetheless, these other tribunals have rejected that claim as well.
Could we have Slide 50, please.
Here on Slide 50 is a quote from the Decision in Bahgat v. Egypt. And the Tribunal did describe why they were rejecting this argument,
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saying: "Measures against an investor or the management"--or "measures deteriorating circumstances"--sorry.
ARBITRATOR BEECHEY: You're reading it right. It's rather strange English, but you're reading it right.
MR. SILLS: That's what gave me pause there, Mr. Beechey.
"Which were favorable for the investment, may equally have a negative impact upon the investment. It would reduce the effectiveness of the system of investment protection system if it would only prohibit limitations to the flow of capital or infringements of property."
It probably read better in the original.
Turning next to the question of the substantive standard itself. There was reference again this morning to Neer. I don't think we need to spend a lot of time on this. I think it's common ground or, at the very least, should be common ground that ever since the Neer case, which was decided just under a hundred years ago, and involved, as I recall,
[Page 183]
the failure to initiate criminal proceedings involving a murder in Mexico--the standard of treatment to be afforded in international law has evolved well past that, in particular through a very dense network of investment treaties, bilateral and multi-lateral, that have come into being since then.
For example, in the Azurix case, cited on Slide 51 here, the minimum requirement to satisfy the standard has evolved, and the Tribunal considers that its content is substantially similar, whether the terms are interpreted in their ordinary meaning as required by the Vienna Convention or in accordance with customary international law.
The next Slide, Page 52, has a quote from Professor Paulsson, a widely-cited article. And, in fact, I don't think that the academic debate over the source of the standard of treatment, whether autonomous or not, really has much meaning here because those have converged.
And looking at Slide 53, to close the loop on this, in the Eco Oro case, one of--another case by an investor against Colombia, the Tribunal said:
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"Colombia correctly accepts that the Tribunal is not rigidly bound by the standard set out in Neer, and it is the Tribunal's view that the standard today is broader than that defined in the Neer case."
And, hopefully, they will stand by that position in this case.
Slide 54, please.
So, on Slide 54 is a quote from the Waste Management decision, widely cited and widely followed in our field. And so, what do they say?
"The minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State"--here the CGR--"and harmful to the Claimant," which is certainly the case. Not only being hauled into this proceeding and the subject of serious reputational harm, both from the filing of the case and then the false publicity surrounding it by the Comptroller General, but now being on the receiving end of an award for hundreds of millions of dollars.
"If the conduct is arbitrary, grossly unfair, unjust, or idiosyncratic"--here it is because
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it was a proceeding seeking billions of dollars when initiated and resulting in an award for hundreds of millions of dollars, based on the notion that a supplier of personnel having no authority over the expenditure of public funds could be held to account by the Comptroller General for allegedly having mismanaged a project that it didn't manage in the first place is discriminatory.
And, as I'll explain in a moment, the Colombian nationals, prominent citizens, all of them make up the Board of Ecopetrol who were let out of the case, who were similarly situated, and had, at a minimum, the same defense that the Claimants have.
Or involves a lack of due process leading to an outcome which offends judicial propriety. And as Mr. Conrad was explaining, there was first an opening resolution--again, a document of enormous length--asserting charges. That was addressed in formal proceedings, the free versions, in which the Claimants explained that they were not fiscal managers and could not be thought to be fiscal managers, and that the Jacobs Report of Ecopetrol had concluded they
[Page 186]
were not fiscal managers.
And, nonetheless, unlike the Colombians who were let go for not having final authority--though as I'll show in a moment they did have significant authority over the expenditure of public funds--the Claimants were held in the case.
And finally, in applying this standard, it is relevant that the treatment is in breach of representations made by the host State which were reasonably relied on.
And those are the representations made in the Contract with Reficar, a public entity.
And, obviously, a limitation on liability for ordinary breach of contract, which is at most what was pleaded here by the CGR, limited to 10 percent of the amount of the revenue derived from the Contract is an extremely valuable incentive to an investor, knowing that liability is capped.
And here that cap, assuming liability could be proven at all, would amount to $25 million, which is a very small fraction of the 750 or 811--the figures vary because of exchange rate fluctuations
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between the Colombian peso and the U.S. dollar. But those are just grossly disproportionate.
In the following Slides, Number 55 quotes from Glamis Gold. Again, addressing the question of the Neer standard and its evolution. I don't think there's any serious dispute that this is a well-pleaded claim of a violation of FET. At the merits, can Colombia on a full record attempt to explain and justify the conduct of the CGR? Of course they can.
At this stage of the proceedings, based on their assertions that they did nothing wrong in the face of these well-pleaded allegations, would it be appropriate to terminate this case before any hearing on the merits? It would not.
Mr. President, this might be an appropriate time for a break.
PRESIDENT NUNES PINTO: Thank you. So, it's 2:30 p.m. So, we have our 30-minute break. We will be back at 3:00 o'clock. Thank you.
(Brief recess.)
PRESIDENT NUNES PINTO: Are we ready to go
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on?
So, Mr. Sills.
MR. SILLS: Thank you, Mr. President. So, continuing with our discussion of fair and equitable treatment. FET does include, contrary to what Colombia has stated, legitimate expectations of the Parties.
And we would refer to Waste Management II, an extremely well-known and widely followed decision, that explicitly includes legitimate expectations in the standard and explains precisely why they should be.
Now, Colombia relies on Bolivia v. Chile for its argument that legitimate expectations do not form part of the standard.
But that was a State-to-State dispute heard at the ICJ. And State-to-State disputes occupy a critical and important part of the public legal order, but they're entirely distinct from the relationships between investors of one State and another.
For one thing, disputes between two states or between two sovereigns and the disparities that
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lead to the treatment under treaty of investors are just entirely different. The case is simply inapposite.
And if we could have Slide 58, please.
And Colombia goes on to argue that even if legitimate expectations are part of the FET standard, as indeed they are, Claimants have not alleged sufficient facts to prove a breach of legitimate expectations.
Once again, this is a mixed question of law and fact, inappropriate for a decision at this stage of the case.
But to the extent there were any burden on Claimants at this point, they have set out an adequate claim of a breach of their legitimate expectations, both specific assurances given in the form of the Contract with its limitation on liability and its other protective clauses, as well as the expectation that Colombia would administer its laws in a fair and even-handed and appropriate manner.
For example, most importantly here, that the regime of fiscal control administered by the CGR would
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be administered only against fiscal managers in a fair and reasonable and impartial way.
And I should note here that the course of conduct here by the CGR, from the opening resolution itself until the decision on the merits, is an almost paradigmatic example both of the frustration of that reasonable expectation of due process as well as a classic denial of justice.
The opening resolution listed 30-some individual acts. The response that was filed in the free version, in addition to pointing out that Claimants were not fiscal managers at all, addressed those acts.
Apparently, thinking better of the position they had taken, the charging document, what's referred to as "the indictment" by Colombia, went on a completely different footing and shows a completely different theory pointing to the change controls, the change orders involved, and a joint and several theory of liability.
Then in order to meet--and I realize this, of course, couldn't have been pleaded in the RFA, but
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it will be adduced in this case.
Faced with the fact that the record was overwhelming that Claimants were not fiscal managers, Colombia actually changed the law and then purported to apply that retroactively, including consultants on a vague aiding and abetting theory.
And then when the final decision came out, it was, yet again, a complete change in legal theory and in its theory of damages, which meant that as a practical matter, Claimants never had an opportunity to defend themselves.
It was like the American carnival game of whack-a-mole. As soon as one of Colombia's claims had been refuted, another one was floated in its place, and that is the basis upon which hundreds of millions of dollars are said to be owed to Colombia.
Now, an arbitrary administrative act can--and this is a separate point or a subheading, I guess, of FET--can itself breach the fair and equitable treatment standard.
Could we have Slide 60, please.
Now, as a general matter, it ought to be the
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case that arbitrary conduct by an administrative agency, surely as arbitrary action by an executive agency or by a Court, can trigger liability. And that is indeed the case.
In the TECO case that we have--thank you--the claimants argued that a tariff--an administrative tariff review--administrative actions breached the fair and equitable treatment standard.
And Guatemala argued in that case, as Colombia does here, because administrative acts were subject to judicial review, it couldn't breach FET. And that was rejected there by the Tribunal.
And I mention again that it is our case that there is no effective remedy in the Colombian courts for administrative misconduct. And it is admitted here that there was no administrative remedy for the bringing of this case, the measure complained of in the RFA.
And in Baghat v. Egypt, in a perhaps better-drafted portion of that--of that award involving a criminal case, but for legal purposes an important precedent--Slide 62, please--the Tribunal
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noted that denial of justice can include the entire criminal process, including the acts of the prosecution before trial, prosecutorial misconduct, or malicious prosecution.
And as surely as bringing an unfounded criminal case can cause damage in advance of a criminal trial, even one in which the defendant is acquitted, let alone one here where administratively our clients have been condemned to pay enormous damages, that single step can trigger a liability.
Finally, if we could have Slide 63.
As one element of the FET standard, Claimants say that--the Claimants have not stated a claim for denial of justice. Colombia argues that denial requires the exhaustion of all local remedies, and that exhaustion of administrative remedies is not enough.
But the disagreement here, and what we heard this morning, it really comes down to the correct understanding of the term "administrative adjudicatory proceeding."
And Colombia argued, and argued this
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morning, that that is a term of art in Spanish that refers to a particular kind of court in Colombia, one charged with the review of administrative action.
Now, it's our position that the words mean what they say, that "administrative adjudicatory proceeding" refers to an administrative proceeding taking place in an adjudicatory manner, because administrative agencies do not always adjudicate.
So, in the United States, for example, the Securities and Exchange Commission both has proceedings before administrative law judges to determine whether or not an individual or a company has violated the anti-fraud provisions of U.S. Securities Law, and, if so, it can impose appropriate penalties, including monetary penalties or bars from the securities industry.
But the SEC also has a rulemaking function, a non-adjudicatory function, in which they might, for example, amend or change or clarify the anti-fraud provisions.
And that's the ordinary meaning of those words in English. There's nothing in the Treaty/the
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notes to the Treaty that indicates that this was meant to indicate this particular kind of Colombian court, and the history of the Treaty makes it clear that it was not.
If we could have Slide 64, please.
This TPA had its origins with the model BIT prepared and utilized by the U.S. State Department. And that's the 2012 model BIT.
And when we look at the language of the BIT, which is up here on the screen, it precisely tracks the language at issue here, "administrative adjudicatory proceedings." That was obviously not drafted with Colombia in mind because it's a model to be used by the United States as the basis for investment treaties, as it clearly was here.
It was not drafted in Spanish. It was drafted only in English. And so, it cannot be said to be referring to a particular type of proceeding in Colombia or countries that have similar legal systems to Colombia, assuming that this would be a term of art there.
It means what it says. It means what it
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says. In English, the language in which it was drafted, it means an administrative proceeding which is adjudicatory as opposed to one which is rulemaking or legislative or another area in which administrative agencies act.
And I'll note that in--Slide 65 in the Corona Materials case, the same claim, that "administrative adjudicatory proceeding" had this special term of art meaning, was rejected by the tribunal.
Following the rules of the Vienna Convention, it is correct that efforts should be made to harmonize treaties that are executed in two authentic languages. The only way in which to do that here is to give these terms their ordinary English meaning. Because this is not a term of art in English. It is not a term of art in American law.
And, finally, I'll note that the construction urged by Colombia would leave a sovereign free to do whatever it wanted, free of the constraints of the Treaty obligations it has before its administrative agencies, so that a $10 civil dispute
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before the Colombian courts would presumably quick trigger liability under the Treaty, whereas a billion-dollar dispute before an administrative agency acting far beyond its bounds, according to Colombia, is subject to no constraints under the Treaty at all.
And, again, as I said earlier with respect to the availability of a judicial remedy in Colombia, that is hotly disputed here. It will have to be heard at the merits phase of the case.
Mr. Torrente's Witness Statement in the interim measures case makes it clear that a nullity action would take, in the first instance, many years, with levels of review beyond that. Colombia is free to contest that, but they are not free here to assert that that's wrong and that the case should be dismissed on that basis.
Let me turn to the question of national treatment, which was also much discussed this morning.
If we could have Slide 71, please.
Now, the pleading here alleges that the Board of Directors--the individuals who made up the Board of Directors of Ecopetrol were treated more
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favorably under like circumstances than were the Claimants, in violation of the guarantee of Article 10.3 of the Treaty.
Could we have Slide 73, please.
The--as we noted, although initially named in the opening resolution, the Directors of Ecopetrol made a free version submission, stating that they lacked ultimate authority over the expenditure of public funds and, hence, were not fiscal managers and, hence, were not proper respondents in the CGR proceeding.
And that was granted by the CGR. And those individuals, all Colombian nationals, all prominent, were dismissed from the case.
Whereas the same assertion, backed up by, among other things, the Jacobs Report commissioned by Ecopetrol itself, were rejected by the CGR. They were in like circumstances.
We're told in Colombia's papers and this morning that, "Well, other Colombians were charged." But that is irrelevant here because they were not in similar circumstances. We're told that precautionary
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measures were not sought against the Claimants as if they had somehow been treated more favorably.
But, again, the test is whether or not in practice--and it can be de jure. It can be de facto. investors are entitled to the same treatment as domestic investors. And that was breached here.
So, the decision in Seda--I'm sorry. The submission of the U.S. in Seda takes that same position, that it may be de jure; it may be de facto.
That's in Slide 76. But here I think it's very instructive to look at the submission made at the free version stage by the directors of Reficar.
So, could we put up Slide 77, please.
Okay. This is the chart that was submitted by counsel for the Ecopetrol directors in the free versions submitted to the CGR in which the prospective respondents had an opportunity to explain why they should not be made actual respondents.
And looking at this chart, it shows the flow of approval for the expenditure of funds on this project. And as you can see, it ends at the Reficar level in this orange box, "Aprobación Control de
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Cambios."
But the step before that, the sort of dark green diamond at the Ecopetrol level, that is the Board of Directors of Ecopetrol. They had the next-to-last step, and they could say yes or no.
Whereas when you look at what Ecopetrol was representing--or the Ecopetrol directors were representing, there is no authority to say yes or no on the part of Foster Wheeler, the gray rectangle that appears at the top. It simply makes recommendations with no power over the expenditure of funds.
And then it tracks through this decision tree, reaching the Board of Directors of Ecopetrol in the penultimate step leading to approval by Reficar, which had assumed the management of its own project, as Mr. Conrad was describing this morning.
This document was submitted by Ecopetrol, and it was included by the CGR in the charging document and adopted by them.
If the directors of Ecopetrol, who had the actual authority to say "si" or "no" under this chart as to the expenditure of funds, were let out because
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they were not fiscal managers because there was one more step in the process, then it is--it cannot be explained how, on a chart adopted by the CGR itself, the Claimants were held in. And the only plausible explanation for that is that they were not Colombian and the directors of Ecopetrol were.
Now, there may be some answer to that, although I don't know what it is. But that is a question for the merits. This is a perfectly well-pleaded, plausible, and, as this chart makes clear, true explanation of the denial of national treatment, which is a part of the FET standard that governs here.
It cannot be resolved at this stage of the proceedings and, as this chart makes clear, in all likelihood, it will be resolved in favor of the Claimants at the merits phase.
Let me turn to the question of most-favored nation treatment under Article 10.4. If we could turn to Slide 80, please.
This is the MFN clause that appears in the TPA, and it's not atypical of such clauses in modern
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treaties.
So, Colombia raises a host of objections here, all of them rather complex and debatable issues of law. First, they say the MFN clause concerns only actual practice in comparison. How was a Swiss investor treated, in fact, in Colombia?
That an MFN clause cannot import new substantive protections. But as I'll discuss in a moment, the TPA does include a limited umbrella clause with its reference to investment agreements.
That umbrella clauses are contrary to public policy in Colombia, but Colombia has ratified at least two treaties that do have umbrella clauses, the Swiss treaty and the Japanese treaty.
That the umbrella clauses in those treaties are not subject to mandatory arbitration, but the Treaty here, the TPA, makes it clear that procedural provisions are not to be imported and, by necessary implication, that substantive provisions are.
And finally, they say that--assuming that the umbrella clauses are imported, that Reficar is not a central--is not an agency of the Colombian
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Government at the national level. As I'll show in a moment, it is, and we have stated a prima facie claim.
So, Slide 82, please.
This is the footnote in the treaty language itself that says: "For greater certainty, treatment with respect to the establishment, acquisition, expansion"--or so on, referring to the MFN clause referred to in Paragraphs 1 and 2--"does not encompass dispute resolution mechanisms that are provided for in international investment treaties or trade agreements."
Well, if the drafters excluded those procedural mechanisms, it necessarily follows that substantive provisions were included, as they--as they generally are in this area of investment law.
On Slide 83, we quote from an article on this point. And we don't dispute that there is a dispute in the literature about the scope of MFN clauses and their incorporation of umbrella clauses.
But, again, this is a highly complex question of law, inappropriate for a decision at this point. If it has to be decided or were to be decided,
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the better view is that they are incorporated because of the overriding principle that investors of varying countries should be treated on an equal footing.
On Slide 84, along those lines, we quote from the award in Sirketi v. Turkmenistan, taking exactly that position.
And on the following slide, Slide 85, we quote from the decision in Bayindir v. Pakistan, a holding exactly that a more favorably substantive standard of treatment is incorporated.
And I'll just stop to note briefly that the suggestion made this morning as to the lack of mandatory arbitration in the Swiss Treaty somehow suggests that Colombia is free to ignore the substantive provisions of the umbrella clause there. I'm fairly sure that's not what they meant to say.
And, again, on 86 we cite from the EDF decision, EDF v. Argentina, where, under the Argentina-France BIT, the umbrella clause was imported. And we cite further decisions there.
And then on Slide 88, we cite the language we rely on from the Colombia-Japan Treaty and the
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Colombia-Switzerland Treaty.
As Siemens holds, now looking at Slide 89, the intended result of an MFN clause is to harmonize benefits agreed with a party with those considered more favorable granted to another party.
The Swiss Treaty grants rights under an umbrella clause to Swiss investors. The Japanese Treaty grants rights under an umbrella clause to Japanese investors. The U.S. investors here should be granted those same rights.
And Siemens goes on to hold that the disadvantages of that treaty, here presumably the lack of mandatory arbitration, don't travel with the substantive right. And there's no reason that they should because those rights are presumably going to be honored by Colombia.
So, what is imported here? An umbrella clause imports a contractual undertaking. Now, the undertaking here is expressed in the Reficar FPJVC Contract.
Bear with me one second, Mr. President.
Well, I'll address the question of Reficar
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as a national authority in the next section of our discussion concerning investment claims. I'm sorry. Investment agreements. Let me turn to that.
Article 10.28, which is cited on Slide 93, defines an investment agreement.
And so, the only point of dispute here, since this was a Contract for a multi-year investment in Colombia on a major project that took years, involving the expenditure of billions of dollars, is whether or not--first, whether or not the investment consisted solely of the Contract. And Colombia keeps saying that. But that is not the Claimants' position, and it is not the position pleaded in the RFA.
As Mr. Conrad was explaining, and as cannot be challenged really at this stage of the proceedings, the investment was time, capital, personnel, facilities, labor, invested in Colombia for years, in keeping with the definition of "investment" in the TPA itself, and there is no other definition of "investment" in the ICSID Convention.
So, Colombia argues next that Reficar is not a national authority of Colombia. Again, a
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fact-specific question and a mixed question of fact and law.
But Colombia, acting through its Ministry of Finance, the owner of Ecopetrol, and, in sequence, Ecopetrol's wholly owned subsidiary, Reficar, gave the right to enter into contracts with the government.
And Ecopetrol and Reficar have the function of concluding contracts for the exploration, exploitation, refinement, transportation, distribution, and commercialization of hydrocarbons by the National Hydrocarbons Agency, as explained in our Counter-Memorial at Paragraphs 108. And in Colombia, all hydrocarbons are the property of the State.
Now, the claim was made before that Reficar is not at the national level, the central level of authority.
Could we put up the slide from their presentation, please.
But in fact--ah, this is the slide that was referred to where Reficar is referred to as a decentralized entity.
"Decentralized entity" is a term of art in
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Colombian law. It does not mean an entity not at the central level of government. And, in fact, when you read along in this slide that they relied on, it is a decentralized entity at the national level.
The Ministry of Finance is--"decentralized" can refer, as I understand it, for example, to an entity not in the Capitol. It can refer to an entity not literally in the center. But it does not mean not at the national level, not at the central level of government.
Because there the distinction would be between a public entity owned, say, by the department or by a municipality, and there were plenty of those. So that an electric company owned by the City of--the Municipality of Bogota would not be at the central level of government.
But as the pleading they rely on makes clear, this is a term of art, "decentralized entity at the national level." It's Colombia's pleading.
PRESIDENT NUNES PINTO: Mr. Sills, you made a reference to this slide--there was this slide. For record purposes, I think it would be important to make
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reference to the slide number. I cannot read from here. 112?
MR. SILLS: Your eyes are better than mine, Mr. Chairman.
PRESIDENT NUNES PINTO: Yeah, 112 from Colombia's today's presentation. Okay. Just for reference because we--in one week we may have forgotten this. Thank you, and my apologies for interrupting.
MR. SILLS: I'm glad to have the chance to clarify. And, obviously, the chain of ownership here is the Ministry of Finance, which is clearly at the central level of government, which owns and has delegated to [Ecopetrol] critical functions here, which, in turn, owns and organized Reficar for the purpose of carrying out this project. So, it is only at the central level of government that these entities exist and, hence, this is a Contract with an entity at the central level of government.
I'll also note that in the ICC proceeding that Reficar has commenced for unspecified contract damages against FPJVC and its members, the--Reficar
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took the position that before--Reficar simply took the position that even for something that would be ordinary in a commercial case as approving the selection, the designation of an arbitrator to the Tribunal, it needed to secure approval as a public authority from the Office of the President of the Republic.
It conducts itself as a public authority. It is a public authority. The Contract with--between Reficar and FPJVC is a Contract with an arm of the Colombian State at the central governmental level.
The next claim that's made is one of indirect expropriation. And Colombia argues that it's not possible to expropriate specific contract provisions.
But the charges as made, and certainly the award which has now been rendered, have destroyed the value of the investment, the very meaning of indirect expropriation.
And what has happened here, Colombia entered into a commercial arrangement. Colombia entered into a commercial arrangement under which it was to
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pay--ended up paying roughly $250 million for--under the Contract.
[Redacted]
Having received the benefits of that Contract and the refinery is up and running, Colombia decided to put on its sovereign hat, if you will, and, exercising its government powers in an entirely arbitrary and unreasonable way, sought to extract and is in the process of attempting to extract hundreds of millions of dollars, three times--three times at least all the revenues paid under the Contract and received by my clients and, if my math is correct, more than a hundred times the profit.
That is an expropriation, to take the benefit--to cause the investment to be made and then to attempt to deprive my clients of the benefit of that investment by the arbitrary exercise of governmental power.
The next question raised by Colombia concerns damages. Could we have Slide 103, please.
So, Colombia has a host of objections on this. First,
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they say Claimants have not incurred any damages at the time of the RFA.
But as you can see on Slide 105, Claimants did allege damage in the RFA. They alleged, from the making of the charge, reputational harm, which is compensable, and the expenditure of attorneys' fees in defending that baseless charge. Now, Colombia cites to Chevron as saying attorneys' fees are unrecoverable. But what the award in Chevron that they quote from actually says is that there had been no proof of the amount of the attorneys' fees. And those were fees incurred as a result of delay.
The claim here is that we never should have been respondents at all. And attorneys' fees are the natural and probable consequence of having--of the Claimants having to defend themselves, separate and apart from the reputational harm.
Now, there is also a claim that moral damages are not permitted.
Slide 106, please.
And moral damages, of course, that's simply a term of art for reputational harm, and they are
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pecuniary damages, they are compensable in money. They are compensable in money for the loss of business that results.
This is not a claim for hurt feelings. It is not a claim for punitive damages. It's not a claim that Colombia should somehow be punished for its unconscionable conduct in waging a campaign in the press when it was supposedly a neutral decision-maker.
Those may all be reprehensible, but that's not what we are seeking here. The claim for reputational harm is one that resulted in the loss of business. And that is a pecuniary loss that can be compensated for here.
Looking at Slide 106, as Professor McLachlan says: "There is no controversy as to whether moral damages can be obtained under classical principles of public international law."
The next slide cites from Desert Line v. Yemen, that moral damages are recoverable. The International Law Commission cited at Page--I'm sorry--at Slide 108. "The injury for which a responsible State is obliged to make full reparations
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embraces any damage, whether material or moral, caused by the intentionally [sic] wrongful act of a State. Material and moral damage resulting from an intentionally wrongful act will normally be financially assessable and hence covered by the remedy of compensation."
I'm sorry. I misread it. "Resulting from an internationally wrongful act." Yes. Thank you. As this one--as this one was, as we have shown.
And to close on this section, on Slide 109 is a quote from Colombia's recent submission in Seda.
And what do they say? "In sum, while it is undisputed that the Tribunal has discretion to determine whether the Claimants are entitled to moral damages and in what amount, the Respondent respectfully submits that the Claimants have not shown that the exceptional circumstances to award"--and it goes on to say moral damages are present here.
Well, they're telling here Colombia--not Colombia's lawyers, but Colombia has taken the position that moral damages cannot be recovered in investment arbitration under any circumstances. We
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heard that this morning.
But in the Seda case, they said, "Well, they're available but hard to get."
If they're available but hard to get, that can only be determined at the merits phase. It is not a basis for striking the pleaded request at this preliminary stage of the proceedings because there has to be a showing. There is no showing here because this is not a trial or a mini trial. No witnesses are being called.
So, Colombia also argues that there cannot be an offsetting award here. But that's a remedial question for the end of the case, not a preliminary question for the beginning of the case.
Of course, in Glencore an offsetting award was granted against Colombia for the misconduct of the CGR in assessing damages against Glencore on what the tribunal concluded was an irrational and unsupportable theory. Now, Colombia distinguishes that by saying, "Well, they paid the money, and then they sued to get it back."
That's true, but it's a distinction without
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a difference because that has to do with the form of the award. And now in the RFA, we stated that the outcome of the case was predetermined, that there would be a substantial award. Indeed, that has come to pass.
As the case progresses, the events since the RFA will be brought into the case. But could the Tribunal craft an award that compensated an offsetting award, that compensated the Claimants for the wrong done to them and avoiding the kind of windfall we heard about this morning? Of course it could.
An award could be entered and stayed subject to the stay being vacated only if Colombia, as it apparently intends to do, finds and seizes assets and sells them or converts financial assets to its own use.
If they don't do that, then no harm to them. If they do that, it would be fine. Would that have to be crafted or could that be crafted as a partial final award so that the Tribunal would have continuing power to police it? Yes.
At some point Colombia will run up against
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its own statute of limitations and the award will no longer be collectible. I believe, though, subject to correction, that that period is five years.
But these are premature questions. I mean, the scope of the relief to be granted/the precise form of the decree will depend upon all the facts shown at the hearing on the merits. Is this a form of relief that cannot be granted? I don't think so.
Is it a form of relief that would be crafted to avoid an imbalance between the Parties? It would. It could. And I'm confident--we're confident that the Tribunal could readily do that.
But dismissing the claim at this point, when the claims will be amended, the facts will be supplemented--we will show, as the case progresses, that an offsetting award, as in Glencore, is an appropriate remedy.
But the notion that the case should be dismissed with finality at this point in time because the scope of relief has not been precisely determined is just wrong.
And in any event, there is a present live
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claim for damages for the reputational harm suffered from the bringing of the claim. I don't think it's a leap of imagination to appreciate that for a company engaged in the construction of projects like this throughout South America and elsewhere in the world, that the bringing of this charge and its publicity and the publication of these defamatory statements by the CGR had the capacity to and did materially harm the company's business and its ability to garner similar projects elsewhere.
Let me turn to the question raised of a qualifying investment. "Investment" is broadly defined under the TPA.
Could we have Slide 115, please.
And it includes turnkey construction, management, production, and similar contracts. It's interesting that Colombia now seeks to minimize the Contract when the whole basis of the CGR proceeding was that the Claimant somehow managed and mismanaged this project. The two cannot both be true. But there is no definition of investment in the ICSID Convention. There is a broad definition in the Treaty
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itself.
As Mr. Conrad explained, significant assets were committed--were committed on the ground in Colombia over a period of many years involving a contract, not worth billions but worth to the Claimants hundreds of millions of dollars in revenues. That is the classic definition of an investment. With regard to the claims regarding risks that were made, there is risk. There was risk, as Mr. Conrad explained.
In any event, as some tribunals have held--if I could have Slide 120--and appropriately held the existence of a dispute like this shows there was risk. There was risk not only of non-payment, there was risk of penalties. And the mere fact of investing in a country--committing resources has happened here--is itself evidence of investment and investment risk.
May I have Slide 121, please.
So, here is a quote from the Salini award. A construction that stretches out for many years for which the total cost cannot be established with
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certainty creates an obvious risk for the contractor.
In the AMF case, cited at Slide 122, the long duration of the operation meant that a great number of events and contingencies could have happened to the asset while being utilized in another country, including governmental actions, which is, of course, what brings us here today.
Due to the location of the asset and duration of the operation, Claimants' risk was not limited to non-payment or general business risk. And that is exactly the situation here.
And whether or not this was an investment under the broad definition in the Treaty, whether or not there was risk, is, again, a mixed question of law and fact that cannot be decided at this stage of the case. It should be heard and decided on a full record.
Do we have the burden of proving that there was an investment? Of course we do, because that's an element of our claim under the Treaty.
Do we have the burden to prove it at this point with witnesses, with documents, on a full record
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after disclosure? We do not.
This is--Colombia has jumped the gun on this, as it has on virtually every other question that it raises. This is not the appropriate procedural setting to resolve these questions. When they are resolved, they will be resolved, we are confident, in our favor, because the facts will support us. But this is not a factual contest. This is not a hearing on the facts.
Let me turn, because time is running short, Mr. Chairman, to the question of the waiver about which we heard so much this morning.
And on Slide 124 is the language of the Treaty calling for a waiver. So--and on Slide 125 is the language of the RFA which tracks exactly the language of the Treaty. What is called a reservation just says for the avoidance of doubt that the waiver is without prejudice of Claimants' right to defend--Claimants' right to defend themselves in the Fiscal Liability Proceeding.
Colombia actually has gone so far in its papers, and as they clarified in their argument this
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morning, to suggest that in order to meet the condition of the waiver, the Claimants were obligated to stop defending themselves in the CGR proceeding brought by Colombia and seeking at that point to recover more than $2 billion from the Claimants.
It cannot be that simply defending oneself against a legal assault by the State violates the waiver. No case has ever suggested that. No award is cited for this extraordinary proposition.
This is simply noting a right that Claimants had and still have. That is the right to defend themselves.
It is not a reservation. It's not a condition. It's not an exclusion and, hence, is readily distinguishable from the cases that Colombia cites and relies on.
If we look at Slide 126, the RDC case that they cite there, there was language going beyond the exact words of the CAFTA Treaty, which is substantially identical here. But, nonetheless, that was held to be an effective waiver. And if Claimants have the right, as they do, to defend themselves, then
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noting that they maintain that right can't by the waiver. Clients can only be required to waive the rights that the TPA requires, and that is to initiate or continue. And the only fair way to read that is to initiate or to initiate and continue.
It is meant to--as Colombia points out, it's meant to prevent the bringing of a second proceeding, a second bite at the apple, the possibility of a contradictory result. Defending oneself against Colombia cannot possibly do that.
Now, the Renco case on which Colombia relies so heavily was entirely different. That was a true reservation of the right to initiate proceedings following the waiver. That is not this case. There's no reservation of the right to bring a proceeding by the Claimants here.
So, what does Colombia point to? Colombia points to the various tutelas. There were two tutelas brought after the RFA was filed. As Mr. Conrad explained, neither of them implicates the waiver because both were on narrow, technical points having to do with the proceeding--the CGR proceeding itself.
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The first was seeking the right to cross-examine an expert witness. The second sought more time to respond to a filing of thousands of pages by the CGR. Both were denied. Neither of them implicated the waiver because neither of them sought to challenge the measures complained of.
Now--and the Thunderbird case, which is cited at Slide 131, makes it clear--I'm sorry. Let me back up, if I could.
Could we have Slide 128.
In the RFA, it is the bringing of the fiscal liability proceeding. That is the measure complained of. Neither of these tutelas challenged or otherwise implicated that.
In Claimants'--Respondent also point to what they call "the appeal." But that was all part of the CGR proceeding. The CGR issued, in effect, a tentative decision by the Deputy Controller. Comments were allowed to be made on that. Comments were filed by the Claimants. They were rejected.
But that was simply part of the ongoing defense of the CGR proceeding. All part of the same
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proceeding, all before the same body, all part of responding to Colombia's legal assault. It was not a separate proceeding. It was not a proceeding initiated by the Claimants. It was not a proceeding continued by the Claimants except in the extraordinary sense in which Colombia insists that the Claimants were obligated to stop defending themselves before the CGR in the CGR proceeding that the CGR had initiated.
Could we have Slide 132, please.
Now, here, Colombia addressed the purpose of the "no U-turn" provision. And the clear purpose, they say, of the condition is to prevent the same claim from being heard simultaneously by several local and international tribunals. But the claim is not being heard simultaneously there.
And so, they turn to the conciliation request filed by the Claimants, which was recently admitted into the record. The conciliation request doesn't violate the waiver because it is not a proceeding. It is not for--it is not another dispute settlement procedure. It is exactly what its name suggests. It is a voluntary effort to resolve a case.
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It is a mediation being conducted under State auspices. The mediator/the conciliator has no coercive power. No decision can be made other than by consent of the parties. And the notion that an effort to resolve a case by consent voluntarily--although the CGR has rebuffed all those efforts--it somehow violates the waiver provision makes absolutely no sense.
Colombian policy and international policy favor the voluntary resolution of disputes.
It's as if I were to write a letter to Ms. Frutos-Peterson suggesting that we have lunch and discuss a possible resolution of the case, and then we would hear that we had violated the waiver provision because that would be a settlement discussion, which would be a procedure in violation of the waiver provision.
It simply cannot be. And as for the claim that a nullity action will follow, that is simply unfounded. What the conciliation request actually says is not that an application to nullify will follow. It says it could follow. It's an available
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remedy. There's certainly no assurance that the Claimants will file such an action.
And the notion that a prediction about what Claimants might do somehow triggers the waiver--a violation of the waiver clause is just unfounded.
There is no nullity action. There may never be a nullity action. If such an action were to be filed, Colombia would be free to make its arguments. But there is none. There may well be none.
What there is now is an effort to conciliate the case, a good-faith effort to resolve this dispute by consent, which is an outcome that will be favored by Colombian policy and by the policy of the Treaty and by international policy in general. And Colombia's attempt to construct a violation of the waiver clause out of that act of good faith, I think, shows the extent to which they will go in attempting to rid themselves of this case. It is entirely unfounded and cannot possibly be the basis for seeking dismissal.
If we could go to Slide 139, please.
There was a lot of discussion this morning
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about FPJVC as a national of another State. It is a contractual joint venture. It is organized under New York law. It is undisputed here that under New York law, a joint venture can sue and be sued in its open name. It can own and possess property, both real and personal. It can employ individuals.
What they have done is they have conflated the fact that under New York law a joint venture is not an organization with limited liability, with the notion that it is not an entity at all. And I should note, by the way, the case that is cited to the Tribunal as coming from the New York Court of Appeals, which is the court of last resort in New York, was mis-described.
That is actually a decision of the Appellate Division, which is the Intermediate Appellate Court in New York for the Fourth Judicial Department which sits in Rochester, New York, and from which an appeal can be taken to the Court of Appeals by permission. It is not a decision of a court of last resort.
But, again, this is a question of New York law. It is much debated here. The Treaty itself
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describes a joint venture as an enterprise. And an enterprise, in turn, can be an investor. The ICSID Convention does not define a juridical person. And, rather strikingly, it was with FPJVC that Reficar, a public company of Colombia, contracted.
So, they seem to be suggesting now that they contracted with a non-existent entity. FPJVC is a juridical person. There is no basis for FPJVC to be dismissed from the case. It appears to be Colombia's hope that they could prevail on this issue and then make their argument, turn around and say, "Well, the FPJVC is only its members, but because the Notice of Intent was made in the name of FPJVC"--a question I'll turn to in just a moment--"that that too is a nullity." And they both cannot be true.
And the cases are cited in our papers. The New York cases, they are described at Slide 145. And we can skip Slide 146, which shows the signature on the Contract of FPJVC, not the two Claimants.
At an absolute minimum, that claim, like all of Colombia's other claims, is premature at this point, and it is, in fact, simply wrong as a matter of
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New York law.
There was a fair amount of talk this morning and in the papers, and as was pointed out before, indeed, in opposing registration of this claim that the notice given was somehow ineffective.
The notice, which appears at Slide 149, clearly describes the dispute, clearly describes FPJVC as consisting of--as being a contractual joint venture of its two members. This cannot have been a mystery to Colombia, because Colombia named the two members of the joint venture as respondents in the CGR case.
And the only fair construction of the notice is that it refers to FPJVC but correctly identifies all three of the Claimants. And, in fact, the point of the notice is to afford an opportunity for conciliation. As I described a little while ago, Colombia never responded. And the notion that Colombia would have responded if there had been a change in the Parties identified in the "Re" line of that letter, I have to say, is fanciful.
In any event, as the cases cited in our papers and described in Slides 152--I'm sorry, in
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Slide 152 made clear, minor discrepancies or deficiencies in a Notice of Intent cannot destroy jurisdiction.
There is--as everyone on the Tribunal knows, a view that Notices of Intent are themselves precatory, and that the failure to comply with them, at least in technical ways, is not jurisdictional.
Colombia got adequate notice. They were not prejudiced. Their insistence upon strict procedural formality, assuming that it was violated at all, has no place in a case like this.
Let me return, in the time I have remaining, to the fork-in-the-road question addressed by Colombia this morning.
Could we have Slide 135, please.
The fork-in-the-road claim that Colombia makes concerns the First Tutela, which was made before the RFA was filed and hence, obviously, cannot implicate the waiver clause.
And as explained in our papers, that tutela was expressly limited to claims under Colombian law. It is true that it refers to rights under the Treaty
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but reserves those rights for this proceeding. No relief was sought under the Treaty in Colombian law--I'm sorry--in the Colombian court, assuming that the Colombian court even had jurisdiction. Consider that.
And, again, the objection made here is not substantive but technical or, I think more properly, hyper-technical. The claim is that because there is a non-operative reference to the rights under the Treaty, in the context of a claim which by its terms is limited to Colombian law. And we heard a lot about the word "allege." So, the mere mention somehow transforms that into a violation of the fork-in-the-road claim--okay, I'm sorry--requirement cannot be sustained.
The fork-in-the-road provision is meant to prevent submitting the claims that are before the Tribunal to a national court. This was the exact opposite. These were claims under Colombian law submitted to a Colombian court. And the fact that the pleading there makes a reference to the existence of international rights does not transform it into a
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violation of the fork-in-the-road provision because it disclaims seeking relief under such rights.
The rights that were invoked were Colombian rights. There is a reservation of rights in that pleading as to international rights. And the effort to turn something that is in the pleading, at most, for informational purposes into a waiver should be rejected.
So, where we are is that Colombia, having received the benefits of the Claimants' work, having received the benefits of the Contract it entered into, then turned on the Claimants and, marshaling all the powers of the State, began a proceeding against the Claimants seeking many times in damages the amount of revenue derived by the Claimants from doing their work in accordance with the Contract, as I say, which was performed without objection by Reficar.
And that proceeding was marked by gross irregularities. It is an outrage to due process. It is an outrage to international law. It was a shifting series of claims, all without any factual assertions that would link the Claimants in any way to fiscal
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management, on a shifting series of theories and assessing liability on a joint and several basis without even an attempt to ascribe any wrongful act to any claimed item of damage, for which my client's entire business is now at risk.
And the fact that Colombia has so far not succeeded in its efforts to seize and sell the assets of the Claimants is very cold comfort indeed to my clients. This is a well-pleaded, sustainable, well-supported claim of wrongdoing under the Treaty, in violation of the terms that Colombia entered into to protect investors from the United States. And the claim should be allowed to proceed to the merits phase where it can be heard on a full factual record as the Parties contemplated, as the Treaty requires.
Thank you, Mr. President.
PRESIDENT NUNES PINTO: Thank you, Mr. Sills. It's 4:20. We have provided for a slot here of one hour--I'm sorry--for 30 minutes for the U.S. to submit oral--its oral arguments. But it was confirmed to us yesterday that the U.S. will not submit such argument.
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So, the next activity we have is the questions from the Tribunal.
And I would like to consult with you if you would like--would be willing to have a 15/20-minute break so that we can relax a bit. Especially, Claimant has just finished making a long presentation.
Can we come back at 4:40? Is that okay?
MR. SILLS: Mr. President, I'm always in favor of relaxation.
DR. FRUTOS-PETERSON: I am not opposed to that, Mr. President. But just one minor point, but important point. I mean, we were happy to see that Counsel finished with their presentation, but there was an excess of time. I just would like to have the same rule applied in case that we go over a little bit on our Closing because there was a lot--
PRESIDENT NUNES PINTO: I was relying on Marisa's computation of time. And I think they did not exceed, did they?
THE SECRETARY: Two minutes.
DR. FRUTOS-PETERSON: Yes.
PRESIDENT NUNES PINTO: Two minutes.
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DR. FRUTOS-PETERSON: Yeah, because our accounting is different. But anyway, if it is two minutes, it's two minutes.
PRESIDENT NUNES PINTO: Give them five.
Okay. Thank you. We will be here at 4:40.
(Brief recess.)
PRESIDENT NUNES PINTO: You are back, and we will resume the session.
Okay. Now, we will have this slot for questions by the Tribunal, and we'll start with Mr. Beechey, who will address the questions to the Parties.
ARBITRATOR BEECHEY: Thank you, Mr. President.
Just a couple of things from me, if I may.
And the first is perhaps a bit of a sidebar, but it may be relevant to us.
At Paragraphs 72 to 74 of the Request for Arbitration, there's a reference to the ICC Arbitration brought by Reficar against CB&I for damages for over $2.4 billion.
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We were told that that was an arbitration from which FPJVC had been excluded as a respondent, and we were also told, tantalizingly, that the hearing on the merits is presently scheduled to take place in April 2020.
If that's a matter within the knowledge of the Parties, might we be told how that matter now stands?
MR. CONRAD: Mr. Beechey, this is Charles Conrad on behalf of the Claimants. I can address that question to the best of my abilities just because we are--you're correct. Claimants are not part of that proceeding. It's our understanding that that hearing has concluded and is awaiting a final award.
ARBITRATOR BEECHEY: It's nice to know that my old shop still moves to the degree of celerity.
So, as yet no award essentially? All right.
The second point is this: Picking up on the discussion this morning, it was put to us that we should be considering the claims as the position stood at the 8th of December 2009. 2009--yeah. '19. I'm sorry. I'm wishing away ten years of my life.
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And taking that as my starting point, I'm looking at the Request for Arbitration. I quite see the argument that matters that occur some years down the track are matters which are simply the subject of speculative inquiry, as at that time, might properly be said to be the subject of some objection.
But for this reason, I have some difficulty. Because if you look at the Request for Arbitration, there's a number of matters there which are clearly said to be crystallized; in other words, there are wrongs which are said already to be apparent as at that time.
It's true to say that the--it's true to say that the relief sought goes, among other things, but principally to reputational damage and the like. And it's also true to say that matters are not quantified.
But is it right to say that on the basis of the request, the Claimants have not already put forward, as at December 2019, matters which are now in front of us and which then we might properly be in a position to debate, because they're not matters which have occurred--we're not being asked now to consider
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matters which will have arisen later beyond the ambit of the Request for Arbitration.
I'm sorry. It's a 50-page Request for Arbitration. I'm not expecting you to read it straightaway now. But it seems to me you were taking a very narrow view of what had actually crystallized as at that time, and I'm just inquiring of you whether--given what is the content of that document and the way in which the arguments have been developed, are you saying to us that we shouldn't have regard to any of the substantive wrongs which is said to have already occurred at that point?
DR. FRUTOS-PETERSON: I will answer your question, Mr. Beechey. But, of course, tomorrow we will elaborate more on this point precisely in our Closing Statements.
What I can tell you--I don't have the Request for Arbitration in front of me, but I do recall the relief that they were asking for. If I'm correct, they include reputational --yes.
What I want to say at this point, Mr. Beechey, is that the problem that we have here is
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that--well, not our problem; I think we submit that is Claimants' problem--is the language of Article 10.20.4. Because that Article, of course, will take you back to Article 10.16.1.
And if you read 10.16.1, you need to establish the breach, and you need to establish harm that arises from that breach. And that's why, when you go back--when you go back to Article 10.20.4, it gives you the standard to assess that breach under Article 10.16.1.
And that standard is in Article 20--I'm sorry--and that is, of course at [10.20.4], Paragraph C, you know, where it gives you the standard to assess, you know, the facts as of the time of the Notice of Arbitration.
ARBITRATOR BEECHEY: I agree. There's a difference, isn't there, between saying that as at December 2019, and there is a positive case being put forward on a particular ground, or particular grounds, which give rise to particular relief.
And you're right to say that at that time, there was a request for an order for damages for
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economic and reputational harm suffered, including an offsetting award and costs and attorneys' fees, but also there's a declaration that there has been a breach of obligations under the TPA.
And I think my point to you is that the Request for Arbitration is not a bare document. It does actually set out what is said to be breaches of obligations which have already occurred as at that time.
And then we get into an issue about the merits, which is why I don't want to get into a debate with you, because that--if it were right--if it were right, would be the subject necessarily related to a later date, but--an argument at a later date.
But on the face of it, I'm just pushing back on the suggestion, that if you take a very narrow view, are you entitled to, in fact, take such a narrow view of what is said to be the position as at December 2019?
DR. FRUTOS-PETERSON: And I think we are because, as we explained in our submissions--
ARBITRATOR BEECHEY: Yes.
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DR. FRUTOS-PETERSON: --and during the Hearing, at that time, that moment of the Notice of Arbitration, the only--
ARBITRATOR BEECHEY: Request for Arbitration.
DR. FRUTOS-PETERSON: --Request for Arbitration--or Notice of Arbitration, I think it's called under the Treaty--the Request for Arbitration--what you had is an indictment order.
And it is Colombia's submission. And we submit to you that we have proven that, that under Colombian law, an Indictment Order is a mere administrative act by the authority.
So, if you were to agree with us, that is an administrative--it's a mere administrative act, then there is nothing there because--you know, so you will--the ruling--even the ruling--the fiscal liability proceedings hasn't even started at that point, not even the ruling, of course, as a natural consequence.
So, if you take that particular date, as we show you in our timeline, nothing had happened yet.
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So, the requirements made by the Treaty are important to respect because, of course, that's the intention of the Contracting States.
And if you don't have that breach that arises out of the harm at that time, you actually do not have the consent by the Contracting State, you know, to submit the dispute to arbitration.
So, that is why we explain in our submissions and during this Hearing, you know, the importance and the up-to-date, but also for you to understand what is the act that you had at that time.
And at that time, the only thing is the Indictment Order, or what the Claimants call "the CGR charges."
ARBITRATOR BEECHEY: All right. Thank you.
DR. FRUTOS-PETERSON: You're welcome.
ARBITRATOR BEECHEY: Would you like to comment on that?
MR. SILLS: I would, Mr. Beechey. Thank you.
We are where we are because Colombia elected to move on preliminary objections. In effect, they froze the case in time. If the case had proceeded in
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the ordinary course, we would have amended with all these subsequent events, and hope to do so eventually.
But I think the question makes it clear that at that time the RFA was filed, there was--and it pleads--a crystallized actionable wrong.
Now, I don't want to address the merits of this claim about it being an unreviewable administrative act. But as we explained in the course of today's proceedings and as we explained throughout, this charging document didn't come from nowhere.
There was the opening resolution, in effect the proposed charges, albeit on a completely different theory, to which our clients submitted, in effect, their opposition; that is, that they were not fiscal managers and, hence, could not be brought into this proceeding.
The same submission was made by the Ecopetrol directors.
The charging document, what Colombia calls "the indictment," followed there. So, there were proceedings before that leading up to the charging document. And the charging document, it is an act of
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the State.
And the fact that as a matter of Colombian law it's referred to as an administrative act, I have to say, with respect, is meaningless for international law purposes. It's an act of the Colombian State through its instrumentality, the CGR, and it caused real--I think the word is exactly right--crystallized damages, as we plead here, and, particularly coupled with the campaign of publicity being improperly waged by the CGR around that charging document, caused reputational harm.
And the RFA goes, in some detail, into that.
The fact that it hadn't been quantified at the point of the RFA is something one would expect in any case because quantum is dealt with later.
But there was real harm traceable to a decision that Colombia has told us there was no recourse on. There was no administrative remedy, they say, for the filing of what they call a mere administrative act.
There was that First Tutela that sought relief under Colombian law, leaving our clients with
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essentially no choice.
So, as at December 8th, 2019, it was a real harm and, as pleaded, arising from a violation of Colombia's treaty obligations to investors of the United States.
Now, as the CGR matter has progressed, have other wrongs occurred and have further and more substantial damages been incurred? The answer is yes.
And at some point those will be put before the Tribunal and, but-for the stay of proceedings that resulted from the making of this application, would already be before the Tribunal.
But I think your question highlights the fact that the measure complained of the issuance of what they call the indictment, and the publicity caused real actionable harm, and that's before the Tribunal. It's for the Tribunal to resolve on the merits.
But the notion that no harm was pleaded is just wrong, and it's belied by the record.
DR. FRUTOS-PETERSON: Mr. Beechey, I just want to add to this exchange, because I think they
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are--they are starting with the wrong premises.
When we talk about that Indictment Order, you know, we describe it as an administrative procedure in the whole process, and it doesn't--it's not a decision. It doesn't have that nature to be obligatory, because it is the initial step that will actually push, you know, the process to start.
So, the fact is, as we demonstrated in our submissions, it's not even something that you could appeal, you know.
So, after the Indictment Order, the process about an evidentiary stage starts, you know. So--and then you have the following one, which is the proceeding, the--well, the proceeding and then the ruling.
And when you have a ruling, then you have a right to appeal that ruling. You know, you saw our big diagram. You know that now, because we also have explained that process in the Hearing during provisional measures.
But at this stage, we show you in our timeline, we continue to be at the administrative
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level. So, that is why there is a misunderstanding in the conception that the Claimants are putting the case forward because what we have here is not a judicial decision by the State. There is no final act.
So, you need to wait to that to have, you know, a measure, a breach, that arises--a harm arises out of that breach.
So, as we pled in our case, you have to give the opportunity to the State to correct itself if--you know, if they can do that vis-à-vis that--or they will correct themselves or not, you know. They might decide what the CGR did, it was not proper, and then they annul the whole process.
So, this is the--this is the situation that we have.
ARBITRATOR BEECHEY: All right. I think we better leave it there before we do start walking down the line towards the merits.
PRESIDENT NUNES PINTO: I'll ask you if you'll help me to understand. I think I'm going to get lost. So, if you could walk me through the administrative procedure in Colombia or correct my
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understanding.
Let's take the indictment. And you use this expression, but perhaps it may mean that it is admissibility of the administrative procedure against the Parties. Is that the spirit? Is that the admissibility process or not?
DR. FRUTOS-PETERSON: I think it's the spirit, but I will let my colleague from Colombia answer that directly, because she is a Colombian lawyer, and she will clarify that for you.
PRESIDENT NUNES PINTO: Okay. And I have more questions.
MS. BOTERO: Thank you, Mr. President. Can you hear me?
PRESIDENT NUNES PINTO: Yeah. Sure.
MS. BOTERO: All right. So, just stepping back a little bit to describe what happened. The fiscal liability proceeding is a proceeding of an administrative nature. It means it happens before an administrative authority, which is the CGR. Right?
So, it starts with an initiation order. And that simply means that the CGR is going to look into a
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situation that perhaps may have caused the damage to the state. There is a preliminary investigation that happens.
Then the next big step or milestone in the process is the Indictment Order or, as the Claimants called it, "the CGR Charges." That's still an administrative act of procedural character.
What does it mean that it has procedural character? It means that it gives impetus to the process. But because it doesn't define a legal situation of the Parties involved, it's just, you know, a next step in the process. It's an administrative act that doesn't admit any recourse.
It just--it's--nothing has really happened.
It's just the moment where the CGR decides that there's enough to proceed to an evidentiary period to gather more information to ultimately decide, in a ruling, whether there is or not fiscal liability.
So, those three are the--like, the main milestones of the process: the initiation, the indictment, and then the ruling.
When Claimants initiated this claim, we
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were--after the Indictment Order during the evidentiary period. So, the only real act at that point was the Indictment Order, which, as we've explained, is a mere procedural act. It's not defining any legal situation.
It's--in Spanish it's "un acto de procedimiento." A procedural act or a merely procedural act. That's the Spanish terminology versus "un acto administrativo definitivo," which would be the ruling.
And then just to finalize, the ruling can then--because it's a definite administrative act--can then be annulled in the courts. It's only the ruling can go to the courts.
PRESIDENT NUNES PINTO: Let me ask you something else. Which is the word you use in Spanish for indictment?
MS. BOTERO: It's "auto de imputación."
PRESIDENT NUNES PINTO: Okay.
DR. FRUTOS-PETERSON: That's why I said it's kind of like--
MS. BOTERO: "Imputa."
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(Overlapping speakers.)
PRESIDENT NUNES PINTO: Okay. As they say, charging.
MS. BOTERO: It's charging. Charging, yes.
PRESIDENT NUNES PINTO: Okay.
DR. FRUTOS-PETERSON: That's why I said to your question originally, yes, it's kind of like the admissibility kind of thing. That, yes, let's look into that.
PRESIDENT NUNES PINTO: Yeah. It's a mix of everything.
MS. BOTERO: So, I think your question is pertinent. Let me use the words in Spanish.
It's "auto de apertura," is what we call the opening order, initiation order. "Auto de imputación" would be what we call the Indictment Order; they call the CGR Charges.
And then "fallo con responsabilidad fiscal" is what we call the Ruling with Fiscal Liability and they call the CGR Decision. Those are the three main.
PRESIDENT NUNES PINTO: Yeah. We are neighbors, so there is not much difference between
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your system and ours in Brazil.
Okay.
MR. SILLS: Mr. President, could we comment on that?
PRESIDENT NUNES PINTO: Yeah. Absolutely.
MR. SILLS: Thank you. So, the description we've just heard of Colombian administrative process, assuming it's accurate, is not the relevant inquiry here.
For one thing, there was a decision, as was just described. There was the opening resolution. There was the submission of the free versions, and there was a decision.
The decision was that the Ecopetrol directors, who were named in the opening resolution, were dismissed from the proceeding based on their claim that they were not fiscal managers.
My clients were not, although they had at least an equally strong claim for that and made that same submission.
So, there was a decision. The fact that Colombian law characterizes this as a non-final
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administrative decision doesn't mean it wasn't an act of the Colombian State that caused real harm and real damage to our clients. And that's the essence here.
The fact--and the fact that there was--as we were just told, no recourse, only highlights the fact that it was an act causing damage that could not be remediated.
And the discussion about waiting for the ultimate award and then pursuing this remedy, which we say is illusory in the Colombian courts because it would take so very long, as Mr. Torrente explained, really has to do only with a denial of justice claim because that's where that kind of exhaustion requirement applies.
But here it's the--it's the issuance of this groundless claim and then the publicity around it by a supposedly neutral decision-maker that caused the real damage.
And that's not damage that could have been remediated by going on for years and seeking what we were just told was the possible favorable decision of the CGR--which, of course, never happened--or then
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spending years in the Colombian courts pursuing an illusory remedy.
The harm, as Mr. Beechey's first question to the Respondent, I think, brought out, was that there was a real, definite, crystallized act at that time in a well-pleaded--and I don't mean to suggest that Mr. Beechey said it was well-pleaded--but a pleaded claim, and I would say a well-pleaded claim, of damage from that act of the State at that time, in violation of its treaty obligations.
Now, they can dispute that on the merits, but that is not an appropriate preliminary objection, and it's not an appropriate objection to raise in any context at this stage of these proceedings.
PRESIDENT NUNES PINTO: Thank you. Okay. Five minutes.
DR. FRUTOS-PETERSON: No, less than that. If we are switching, then, the case to that, you know, to that point, to the Indictment Order, I mean, we would just--we were all here. We heard their case. And they are, of course--all their--all their claims and explanations are based on the Proceeding on Fiscal
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Liability and the Ruling.
So, are they telling us now that that's not their case and we should not focus in on that?
Because then, to me, it's a real problem under the Treaty then.
PRESIDENT NUNES PINTO: Mr. Sills.
MR. SILLS: If I understand the question correctly, we aren't switching anything. The pleading that was submitted on December 8 spoke to the CGR proceeding as it was then.
Colombia elected to challenge that proceeding and obtain a stay of all other proceedings while these preliminary objections, and I guess we could call them--well, where all of their objections would be heard on a preliminary basis. So, the case did not move forward.
Everybody in the room knows that the case did move forward, that there was a Ruling, that the Ruling, we say--and I think with complete justification--suffers from extremely grave legal problems and caused further damage to our client. And in the ordinary course, there would have been an
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amendment to the pleading at this stage.
Once we're past these objections, there will be an amendment, and the case will consider additional facts. The record will expand. The measures being challenged will be added to.
I think that's hard to dispute. But, yes it is--and we've been consistent on this since this was filed. There is no switch. We challenged what had happened at the time. The RFA does speak as of December 8th, 2019. And that's what was challenged by Colombia.
But will there--you know, will this be the shape of the case for all time? No, because the case--the CGR case has moved on with what I have to say is this absurd decision imposing $750 million in damage jointly and severally, without even purporting to link any act or omission of my clients to any item of damage, and then hanging the label "gross negligence" on it when what they're talking about might be generously construed as a simple breach of contract. But that's all for the future.
I think that the key point is Colombia
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jumped the gun. They've chosen to attack the pleading as it was then, and we are defending it as it was then.
And once we're past this, of course, we'll amend the case. We're not going to go forward on a pleading--I wouldn't say it's been overtaken by the event because the reputational harm remains, and it will remain an element of our claim, but there will be other elements of the claim.
And it's hardly a surprise to anyone in this room that claims are expanded and amended and supplemented as time moves on and as the case moves forward.
PRESIDENT NUNES PINTO: Thank you. Can we move on? So I'll turn now to Professor Kohen, his questions.
ARBITRATOR KOHEN: Thank you, Mr. President. Allow me to make a linguistic comment first.
Because in the first Procedural Order, it was mentioned that English and Spanish are the procedural languages of the arbitration and have equal dignity.
Nevertheless, the same Procedural Order indicated that
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the hearings would be mainly occurring in English. So this is the reason why I'm prevented from using my mother tongue.
I have, I believe, very, very concrete and specific questions, some are more related to Claimants and others to Respondent, but obviously both I expect comments from both sides for all the questions.
I would like to start with the submission by the non-disputed party and the attitude adopted by both sides on this. I think we noticed that both Colombia and the United States are adopting similar interpretations of the Treaty now. My question is--my first question with regard to this is, when Colombia and the U.S. concluded the Treaty, did they have another interpretation in mind? Did they have a different intention when they concluded the Treaty of that they invoke today?
Yes, please.
MR. SILLS: Professor Kohen, and I should preface this by saying the linguistic provisions of the Procedural Order were the subject of extensive discussions among the Parties and, of course, with the
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Tribunal.
Everyone would, of course, prefer the language in which he is most comfortable. I can tell you, as a native English speaker, your English suffers from no disabilities.
But I--that was the deal the Parties made, that written submissions could be made in Spanish and these proceedings would be in English in part because everyone in the room speaks English and not everyone in the room speaks Spanish.
But no disrespect was meant to Spanish in any sense. And I know you know that, but it's worth saying.
ARBITRATOR KOHEN: It's just an invitation to improve language skills. That's all.
MR. SILLS: I heard a rumor that Americans are lagging in that regard.
But, Professor Kohen, with respect to the question you pose, I don't think we can get into the minds of the drafters of the Treaty. And what the Vienna Convention teaches us is that the best indication of what the drafters meant is the language
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they used. I think that's common ground.
And sometimes the drafters of any instrument, a treaty, a contract, come to regret what they said, think there was a drafting gap, hadn't considered a particular issue, and they would wish to change it.
The mechanism for changing the Treaty is to amend it. But I don't think there is any reason to believe that a submission--and not really on the merits because the submission of the U.S. is highly abstract--somehow tells us that the Treaty means something that its plain words don't indicate.
I mean, if the United States were to submit a non-disputing party submission tomorrow that said, "In our view, requests for arbitration are valid only if they're printed on blue paper," and Colombia said, "Yes, we agree with that," we would be subject to dismissal because ours is printed on white paper.
The language of the Treaty sets the bounds of what it means.
And not only that, but the way in which that language has been interpreted over the years by
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scholars, by other tribunals, how language in similar treaties has been construed and none of that is in the U.S. submission.
I have to say, with respect to the U.S., the submission is largely either a recitation of what's in the Treaty itself or a series of ipse dixits. And the Tribunal, I suppose, could be persuaded by what the U.S. submits. But it's up to the Tribunal to weigh that. And the Vienna Convention doesn't say if a non-disputing party/State party to a treaty makes a submission, that binds the Tribunal or it binds the world or it's authoritative. It says it shall be taken into account. And when something is taken into account, it gets the weight it deserves.
So can we get into the minds of the drafters of the treaty and, in effect, interview them and say, "What do you mean by this?" Or would you have taken a position, for example, that denial of justice means a different thing in an administrative and a judicial context because that inquiry can't be done now.
But I think we can look at how that language in this Treaty and other treaties has been
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interpreted, and I think that's the appropriate inquiry. So, that's a very long answer to your simple question. I don't think we can get into their minds.
And I don't think--and, with respect, I don't think that's a useful inquiry. It's what they said, not what they thought, that's the relevant inquiry here.
ARBITRATOR KOHEN: Yeah. I know the content of the Vienna Convention treaties.
My question was concretely whether you believe that there was a change in the position. But you answered my question. Maybe Respondents are wanting to make a comment.
DR. FRUTOS-PETERSON: Thank you, Professor Kohen. I just want to tell you that I keep pushing to argue in Spanish. Sometimes I win the battle; sometimes I don't. But it's a well point taken.
Thank you.
Regarding your question, no changes--I mean, no. That's the intention of both Parties. I mean, it is clear. And the United States, you know, came here under the possibility that they have under the Treaty confirming what they agreed with Colombia. And, you
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know--and this is perfectly fine to do it, not only under the Treaty but also under the Vienna Convention.
Thank you.
ARBITRATOR KOHEN: Okay. Thanks, both Parties.
Yes, indeed, it is very important to distinguish between interpretation of treaties and modification of treaties. That's a very important point that one has to take into account.
The Parties have, in their written comments, discussed about subsequent--I can't pronounce this word--practice and subsequent agreement--that's better. Obviously, you have opposite views with this one thing and the other.
My question is: In order to have a subsequent agreement, is it indispensable to have a single text in which the Parties say, "Our right interpretation of this, the provision, is like that"?
Is it absolutely indispensable for a subsequent agreement to be concluded in a single instrument?
MR. SILLS: With regard to a subsequent
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agreement, I believe the authorities do say yes. So, for example, the ILC Report of 2013 says this: The use in Article 31(3)(a) of the VCLT of the word "agreement" presupposes a single common act by the Parties by which they manifest their common understanding regarding the interpretation of the Treaty.
Now, does it have to be in a single document? Could it be a simultaneous exchange of documents that constitute or purport to constitute an agreement?
I think that's a--given the practical emphasis of the Vienna Convention, I suppose it could be an exchange of documents. In other public law areas, for example, the exchange of diplomatic notes can constitute an agreement as to the meaning of the treaty.
Again, I know this is a particular area of expertise of yours, Professor Kohen.
But the exchange of diplomatic notes is a recognized way in which some treaties can be clarified or interpreted. But I think there is no case
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suggesting that the submission, in effect an amicus brief, can constitute a subsequent agreement.
And there as the International Law Commission quote that I just read suggests, there is--there's no authority for the notion that an agreement can be extracted from those--you know, from a submission like this.
Does it all have to be on one piece of paper? I think the answer is no.
Can a contract consist of an exchange of documents? Yes, it can. But this is very far afield from that. So I think the abstract question is: Does it have to be a single document? No.
But does it have to be a single transaction, a single occurrence intended to definitively interpret the Treaty? Yes, it does.
ARBITRATOR KOHEN: Thank you.
Any comment from the other side?
DR. FRUTOS-PETERSON: The answer is no. We indicated that in our pleadings, and we supported it with the authorities, and the explanation is there, Professor.
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Oh, I'm sorry. I was just saying that the answer is no from our perspective. We pled that--precisely that point because Claimants are arguing the contrary. And all the explanation and supporting authorities are in our submissions.
ARBITRATOR KOHEN: Okay. Thank you.
So in this same vein, do you consider that the Parties of the TPA follow a distinct practice from that that they invoke today?
Is it clear, my question? I can...
MR. SILLS: With apologies. I'm not quite sure.
ARBITRATOR KOHEN: Okay. I will try to explain myself better.
So, you have a treaty concluded by the USA and Colombia, the Treaty entered into force. Was there any change in the practice? Because my prior question was with regard to the interpretation. Okay?
But my next question is with regard to the practice.
Did the practice of the Parties to the treaty change through the years? Is it better?
MR. SILLS: Thank you.
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I think the only evidence of that would be claims--claims brought under the Treaty by investors here. Because there is no occasion for proceedings between the U.S. and Colombia. Although, you know, the Treaty does have State-to-State provisions in it.
And so, if either Colombia or the U.S. sought a definitive interpretation of the Treaty, they could invoke that proceeding, that procedure, and they have not done so.
And I think just as some treaties have a very specific mechanism for States to secure interpretation, as NAFTA at least did, which could be invoked. But I think writing opinions is not practice. Submitting amicus briefs or making amicus submissions is not a practice. "Practice" refers to the real-world experience of the Treaty being applied to concrete situations. And--which is why I think the best guide to what the Treaty means, following its language, which has to be the starting point, is: How have tribunals interpreted and applied the Treaty in practice?
And here there isn't--I mean, although
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Colombia has a robust docket of investor-State claims, only a few of them involve this particular Treaty.
There are other treaties with a common origin or a common language. The U.S.--as we discussed this afternoon, one of the provisions in dispute here has its origins in the United States model BIT. And so, it's appropriate, I think, to look to that to see what light it can shed on the meaning of the treaty language there, administrative, adjudicatory, and--but the fact--but a practice, I think, common understanding, means: How has the Treaty been dealt with in actual concrete practices, disputes? And then, secondarily, how have similar or identical treaties been dealt with?
In addition, all the non-disputing submissions here that Colombia points to--some of which have been rejected by the tribunals that heard them--were submissions by the U.S. in cases against Colombia. There's nothing ever been submitted by a Colombian investor or by Colombia in a claim by a Colombian investor against the United States. Insofar as I'm aware, there have been no such cases.
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So, I think when we think of a common practice, the raw material of a common practice just isn't here.
But, again, I mean, we discussed at some length the decisions of tribunals either rejecting essentially identical submissions by the U.S. on a non-disputing party basis or accepting parts of them.
But the notion that that would somehow establish a common practice, I think, is not correct under the Vienna Convention or under the common understanding of what a practice is.
ARBITRATOR KOHEN: Thank you. Any comment from the Respondent?
DR. FRUTOS-PETERSON: Thank you, Professor Kohen.
We submit that there is a common practice. That practice hasn't changed. You know, we explain it in our submissions, and also today you heard our position in that regard.
So, yes, the Contracting States have been consistent, you know, with the practice on these provisions. No change. Thanks.
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ARBITRATOR KOHEN: Okay. Now, I have another question which probably would be better to be answered by the Respondent first.
Is there a possibility to cure jurisdictional deficiencies of the Notice of Arbitration later on? Is it clear, my question?
DR. FRUTOS-PETERSON: The categorical answer is no. I mean that you have to have the Notice of Arbitration at the time that--going back to the requirements of the Treaty, under that Notice of Arbitration, you will have to establish, you know, the breach and the harm that arises out of that breach.
And that is why this Treaty--as some other treaties of the United States with other countries, you know, such as NAFTA, they have those requirements, you know, that you need to demonstrate the breach and the harm that arises out of the breach by the time that you submit the Notice of Arbitration.
ARBITRATOR KOHEN: Claimants, maybe any comments?
MR. SILLS: I put to one side the fact that we believe that the RFA does not require--it's on.
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Assuming for the moment, Professor Kohen, that there is a jurisdictional defect here, there is ample authority that a jurisdictional defect can be cured, and we discussed some of those cases in our presentation this afternoon.
So, for example, in the Kappes case, which is actually cited by Colombia here--the Tribunal actually said nothing in the DR-CAFTA, which I think it's common ground, is a very similar treaty to the U.S.-Colombia TPA, that jurisdictional allegations could be supplemented and amended. The same was--the same was true of the statements of the Tribunal in Pac Rim.
So, the answer is it's not categorical. And it depends upon the particular pleading. It depends on what cure might be--might be suggested. It depends on whether or not there's really any point.
So, for example, dismissing a claim just so that it could be refiled with a cured jurisdictional objection would make no sense.
So, I think there is ample precedent for taking a practical and not hyper-technical and
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formalistic view and allowing clarification. The quotes from decisions--and, again, I--that we had earlier--and I apologize. I don't have the particular quotations before me.
But I know in our presentation this afternoon, we discussed a number of those cases, some from very distinguished tribunals and leading authorities in our field, making it clear that there could be--that jurisdictional objections that were determined--jurisdictional allegations that were determined to be defective could be corrected, supplemented, or amended.
And I do recall that one of those was authored by Mr. Veeder. And I apologize. It's been a long day, and I don't have the name of the case in mind.
ARBITRATOR KOHEN: Thank you very much, Mr. President. I wouldn't like to abuse my time, but I have--yes, I can?
PRESIDENT NUNES PINTO: Yes.
ARBITRATOR KOHEN: With your permission, okay. Go ahead.
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When did the alleged investment by Claimants terminated, if it finished at one moment in time? At one moment in time, it finished.
MR. SILLS: The work on--under the Contract, the investment, that work terminated in about 2018 when the refinery was up and running, as it is today.
Reficar has still not delivered the contractual close-out documents that are required by the Contract, but there is no ongoing work by the Claimants on.
But it is--I mean, the Contract is still open. And since the Contract is an element of the investment--I think there's no simple answer. I mean, if the question is when did the actual work--the compensated work stop, the answer would be 2018, or perhaps early in 2019.
ARBITRATOR KOHEN: Any comment from the Respondent's side?
DR. FRUTOS-PETERSON: No. We don't have any further comments. Thanks.
ARBITRATOR KOHEN: Thank you. My last question, Mr. President, will be--
PRESIDENT NUNES PINTO: Go on.
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ARBITRATOR KOHEN: What is the concrete difference--I would like to know the concrete difference of the rights invoked by Claimants within the Colombian procedures and the rights invoked here.
Concretely, which are the rights that are defended within Colombian procedures, and the difference with this--with the rights that are invoked here before this arbitral tribunal?
MR. SILLS: Well, it's a difficult question to answer briefly. But to begin with the source of the rights is different. So, the Treaty, for example, doesn't say due process under the Colombian Constitution. One of the rights that was invoked in the proceedings before the RFA was filed before--and before the CGR itself.
So, fair and equitable treatment is just different from due process under the Colombian Constitution. There we referred to Colombian cases, to Colombian jurisprudence, to--and, for that matter, Colombian procedures.
So, the source of the right is different and the contours of the rights are different.
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You know, is there--does the--can the same conduct violate both Colombian law and international law? Of course.
But it's certainly the case that in the First Tutela, it invoked Colombian law and rights under Colombian law that are distinct from the rights under international law. Does Colombian law, for example, guarantee national treatment? So far as I know--I'm not a Colombian lawyer--it does not.
There's no guarantee in Colombian law that investors from other countries will be treated no less well than Colombian investors, whereas that comes from a bedrock principle of investment law, a guarantee of national treatment.
And it's a--it's a broad question, Professor Kohen. And we would have to lay the record and the CGR Proceeding alongside the record here. But I think there is a concrete example of rights that are invoked in this proceeding; that is, the right to national treatment that, so far as I'm aware, has no place in Colombian law.
Colombia does not have a provision that
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guarantees to investors from the United States or any other country, so far as I'm aware, rights--the right to national treatment.
And the Claimants were scrupulous on the limited--in the limited instances where they resorted to the Colombian courts to reserve their rights to seek relief under international law in this proceeding.
Is some of the conduct complained of here conduct that was or could have been complained of in Colombia? The answer is yes, because--but I don't think it's a startling proposition to say that similar wrong acts can give rise to rights under different legal regimes. And that's--but some of the wrongful acts are entirely distinct. And the national treatment point that I just made, I think, is a good example of that.
They're different. Are they--I don't think they're at--they are different. Their sources are different. The acts that create liability are different. The remedies are different.
So, for example, could Colombia--could the
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Colombian courts conceivably grant relief as a matter of Colombian law for violation of Colombian law that would go beyond the relief that the Treaty allows?
The answer is yes. So, the elements of a claim, the proof of the claim, the relief that can be granted for violation of a particular right under these two different legal regimes, they are distinct.
ARBITRATOR KOHEN: Thank you.
MR. CONRAD: Professor Kohen, I'm sorry for the interruption, but there's one clarification that I'd like to offer on your previous question, if I may.
ARBITRATOR KOHEN: Of course, yes.
MR. CONRAD: I think your question--and just to remind the Parties here present what the question was that I'll be addressing on the supplementation, is your question about when the investment ended or terminated. I wanted to make sure that we were clear.
Mr. Sills was discussing the scope of work of when the work on the Contract ended in 2018.
However, the investment that the Claimants have continues.
And so, the investment that they made
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regarding the office, the employees, and the investment generally that they had in Colombia, the local Colombian branch, if you will, that we discussed in our presentation papers still exist. PCIB. I mean, it's--that investment continues, and I just wanted to make sure the record was clear on that point, You Honor. Or--Your Honor, excuse me. Professor Kohen.
ARBITRATOR KOHEN: Okay. So, if I understand, your proposition is that it continues.
MR. CONRAD: Correct.
ARBITRATOR KOHEN: It's an ongoing investment, according to you?
MR. CONRAD: That's correct.
ARBITRATOR KOHEN: Okay. I wonder whether the Respondent is waiting to make a comment.
DR. FRUTOS-PETERSON: Well, thank you, Professor Kohen. There are not assets in Colombia, and they finished working under the Contract. Of course, we say that that Contract is not an investment. So--but in any event, the execution of the Contract has ended, and there are not assets--the
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services--I'm sorry--the performance of the services have ended, and there are not assets in Colombia.
ARBITRATOR KOHEN: Okay.
MR. SILLS: And I should say this is yet another disputed issue of fact that cannot be resolved now. But I should note, as we mentioned earlier, [Redacted] So, I think it's--the work has finished, the refinery is there. The Contract has not been--the closing documents have not been delivered by Reficar as they're obligated to under the Contract, and they have, in fact, commenced proceedings.
So, I think it's fair to say it's a mixed question of law and fact whether the investment still continues. We say it does. They say it doesn't. But it's yet another question that can't be resolved in this procedural context.
ARBITRATOR KOHEN: Okay. Thank you very much. No further questions, Mr. President.
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PRESIDENT NUNES PINTO: Before we close the session, I have just one question. And I would like to make a reference first to Claimants' Slide Number 33 and also Respondent's 153. 1-5-3.
Basically, what we have here, it's along the lines of your clarification. Respondent claims that there was no investment risk and, therefore, no investment. Okay? I do not want to go into the details. This is something we'll decide later.
But in your Slide 33, the highlighted portion says Claimants contracted with Reficar, a Colombian-owned enterprise, to provide project management services in connection with the construction expansion of an oil refinery owned by Colombia to supply environmentally clean motor fuels to meet Colombian demand.
This portion is part of my question now. In doing so, Claimants invested significant amounts of time, capital, personnel and labor in Colombian territory. This Slide is also Slide 96 in your presentation, but that's the same.
Then I go to Slide Number 3 of Respondent,
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which says it's a summary of the Services Contract and says remuneration structure: Full reimbursement of costs plus profit. Okay.
And the question is, how do I draw the line to segregate what is investment and what is reimbursement of a services contract? How? Because you have just clarified that the Contract is still open, it was not closed. [Redacted] and you have personnel there. The investment--you told us the investment is there. And then Respondent says, "No, you don't have anything. You don't have assets."
This is something that we will decide at a proper time.
But my question is: If you've got under the service contract the reimbursement of amounts plus profit, or costs plus profit, how do you draw the line to say that there is a portion which is investment made by me? That's what you are saying.
And this Slide 33, which is Paragraph 29 of the Request for Arbitration.
Do you understand my point?
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MR. SILLS: We do. And I put to one side, Mr. President, the notion that what Colombia describes as investment risk is a necessary element of an investment when the Treaty lists it disjunctively and common practice lists it disjunctively.
You know, if I build a factory in Colombia to provide a particular good to Colombia, and the Government is the only consumer of that good, and I build the factory and I hire labor and I buy raw materials and I sell them to the Colombian Government at an agreed price, I don't think anyone wouldn't say I haven't made an investment in Colombia. Even though Colombia would now say, "Well, you took no risk. You know, you agreed to do this on a cost-plus basis."
But I think what your question highlights is how fact-intensive this decision is.
PRESIDENT NUNES PINTO: Let me just add something. I'm not looking, with this question, the situation--the current situation today. As it was in the past, you'll have reimbursement and investment. I'm looking to that point. Yeah.
MR. SILLS: And I understand. But I think
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at the one extreme, you have a simple contract to sell goods or services. Is that an investment? I think its common ground that it's not.
And at the other extreme, you acquire real estate, put in an elaborate manufacturing facility and hire workers and pay taxes. And everyone would agree that is an investment. And there's a spectrum. And I think your question asks: Where does one draw the line along that spectrum?
And I think the answer is--and as the--actually, as the explanatory notes to the Treaty make clear, it's a complex question of law and fact, where to draw that line. And you have to draw it with reference to the particular investment.
But I have to say that as per Slide--was this the confidential Slide--as our Slide 34 made clear--
PRESIDENT NUNES PINTO: I did not mention it for obvious reasons.
MR. SILLS: But we do not at all agree with or endorse Colombia's graphic on Page 153 of the Contract. There was--even in the terms they set out,
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there was investment risk here.
And as you know, the Czech case that we cited and discussed makes clear, it's somewhat remarkable that Colombia--Reficar's parent, Colombia, is now trying to extract from our clients 300 percent of the revenues that were recognized there. To say, "Well, you face no risk."
And any long-term investment in a foreign country is an investment within the meaning of the Treaty. But I think this is yet another issue because where one draws the line with respect to any particular investment or claimed investment is going to depend on the particular facts of the investment, the particular context in which it's made, the agreements that govern it, the real-world experience of how that investment was treated. And, it's, again, a question of fact.
And our Slide 34--and I thank you for leaving it as it is. But that Slide makes it clear that there was risk.
We say it's more than ample risk to satisfy that condition, assuming that risk is required for an
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investment as opposed to being one of the elements listed in the Treaty for an investment. Investment is drafted in a very broad sense in the TPA, and that has to be taken account of.
But it's simply Colombia's challenge to the investment status of our investment is not one that can be resolved at this point.
PRESIDENT NUNES PINTO: Thank you.
Any comments?
DR. FRUTOS-PETERSON: Well, Mr. President, we submit to you that this is precisely the question that this Tribunal is to decide right now. You know, it's a jurisdictional question, so it is before you. You can decide that question just by looking at the Contract.
The Contract is an exhibit in the case. We went through those Slides. We have explained the formulation of payments, you know, to all their services that they rendered under the Contract, and we still don't see the investment. They got every penny they charged, they got it back, and we move on.
So, the--anyway...
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PRESIDENT NUNES PINTO: Yeah. I know that this is something that we have to decide. But it's also useful to have the Parties' views on certain aspects, especially this one. Because I'm moving from today's date to the past, what happened when everything was active in the Contract and the joint venture. That's it.
Okay. I have the information. I thank you very much.
Well, this was just some questions. Any more questions?
Any matters you would like to address before we adjourn, or we can go home?
MR. SILLS: Nothing. Nothing for the Claimants, Mr. President.
PRESIDENT NUNES PINTO: Okay.
DR. FRUTOS-PETERSON: Nothing from the Respondent. Thank you.
PRESIDENT NUNES PINTO: Again, I would like to thank you very, very much for this long day. It was excellent to be back and be here in this room sharing your views, our questions, your presentations
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with those who, unfortunately, for sanitary reasons, could not be here but followed us by the platform.
So, I thank you very, very much. I'm delighted to be here. And tomorrow at 10:30 we start, an hour and a half later than today, and we should be closing by 1:00 o'clock. Okay.
(Whereupon, at 5:58 p.m. the Hearing was adjourned until 10:30 a.m. the following day.)
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I, Margie R. Dauster, RMR-CRR, Court Reporter, do hereby certify that the foregoing proceedings were stenographically recorded by me and thereafter reduced to typewritten form by computer-assisted transcription under my direction and supervision; and that the foregoing transcript is a true and accurate record of the proceedings.
I further certify that I am neither counsel for, related to, nor employed by any of the parties to this action in this proceeding, nor financially or otherwise interested in the outcome of this litigation.
Signature
MARGIE R. DAUSTER