In the matter of an arbitration
under the Rules of Arbitration of
the International Centre for
Settlement of Investment Disputes
Case No. ARB/20/44
Video conference
via Zoom
Tuesday, 23rd November 2021
Hearing on the Bifurcated Issue
and Provisional Measures
Before:
MR LAURENCE SHORE
DR STANIMIR ALEXANDROV
MR J WILLIAM ROWLEY QC
| NASIB HASANOV | Claimant |
| -v- | |
| GEORGIA | Respondent |
Secretary to the Tribunal: CELESTE MOWATT
Party-amended transcript produced by Trevor McGowan
Georgina Vaughn and Lisa Gulland
MICHAEL OSTROVE, DLA Piper France
KATE CERVANTES-KNOX, DLA Piper UK
SÉRÉNA SALEM, DLA Piper France
LUCIA BIZIKOVA, DLA Piper UK
ANTHONY SINCLAIR, Quinn Emanuel Urquhart & Sullivan UK
VANO GOGELIA, PwC Georgia
NATIA KOBOSNIDZE, PwC Georgia
TEYMUR TAGHIYEV, Nelgado Limited
TOGHRUL AHMADOV, Neqsol Holding
DR CLAUDIA ANNACKER, Dechert (Paris) LLP
DR EDUARDO SILVA ROMERO, Dechert (Paris) LLP
ERICA STEIN, Dechert (Paris) LLP
DR ENIKO HORVATH, Dechert (Paris) LLP
RUXANDRA ESANU, Dechert (Paris) LLP
HAYK KUPELYANTS, Dechert LLP
PANOS THEODOROPOULOS, Dechert (Paris) LLP
MARIAM GOTSIRIDZE, Ministry of Justice
ANA GOGLIDZE, Ministry of Justice
BEKA DZAMASHVILI, Ministry of Justice
BRYAN CHARLES ROYSTER, World Bank
EKATERINA MININA, ICSID
ALEXANDRU DIACONU, Dechert (Paris) LLP
ROLAND DZOAGBE, Dechert (Paris) LLP
LAUREN BURSEY, ICSID
Discussion re procedural matters ....................2
Submissions on behalf of Claimant ...................3
on the provisional measures
application
By Mr Ostrove .....................................3
By Ms Bizikova ....................................9
By Mr Ostrove ....................................12
Tribunal questions ...............................16
Tribunal questions ...............................21
By Ms Cervantes-Knox .............................24
Tribunal questions ...............................28
By Mr Sinclair ...................................34
Tribunal questions ...............................36
Submissions on behalf of Respondent ................41
on the provisional measures
application
By Dr Annacker ...................................41
Tribunal questions ...............................52
Tribunal questions ...............................59
Tribunal questions ...............................66
Reply submissions on behalf of Claimant ............71
By Mr Ostrove ....................................71
Tribunal questions ...............................77
By Ms Cervantes-Knox .............................87
By Mr Sinclair ...................................89
Tribunal questions ...............................91
Reply submissions on behalf of Respondent ...........93
By Dr Annacker ...................................93
Tribunal questions ..............................100
Submissions on behalf of Respondent .................106
on the jurisdictional objection
Submissions on behalf of Claimant ...................127
on the jurisdictional objection
By Mr Ostrove ....................................127
By Ms Cervantes-Knox .............................138
By Ms Salem ......................................147
By Mr Sinclair ...................................151
Reply submissions on behalf of Respondent ...........156
By Dr Silva Romero ...............................156
Tribunal questions ..............................162
Reply submissions on behalf of Claimant .............169
By Mr Ostrove ....................................169
Tribunal questions ..............................174
[Page 1]
15:00 1 Tuesday, 23rd November 2021
2 (Transcript time is CET)
3 (3.06 pm)
4 THE PRESIDENT: Good morning/good afternoon, everyone. It's
5 nice to see quite a few faces. However, I would ask
6 that apart from main speakers on each side, or main
7 members of counsel team, if everyone else could be on
8 mute and, in order to save bandwidth, also stop video.
9 Thank you.
10 You have the Tribunal and Administrative Secretary.
11 We're grateful for the parties' cooperation in getting
12 to this hearing on provisional measures and the
13 bifurcated jurisdictional issue in Case No. ARB/20/44.
14 The Tribunal has just one housekeeping matter that
15 I'll ask Mr Rowley to address everyone on in a moment.
16 But first, if I can ask Claimant if there's any point
17 that Claimant needs to raise before we get started on
18 the provisional measures application?
19 MR OSTROVE: Nothing, thank you very much, Mr President.
20 THE PRESIDENT: Thank you, Mr Ostrove.
21 Am I right, because I see Mr Ostrove,
22 Ms Cervantes-Knox and Mr Sinclair, that you will be the
23 principal speakers for Claimant on provisional measures?
24 MR OSTROVE: Yes, that's correct, although we will also have
25 Ms Bizikova who will also be addressing you briefly.
[Page 2]
15:07 1 THE PRESIDENT: Thank you.
2 For Respondent, I see Ms Annacker, Ms Stein,
3 Mr Silva Romero. You are the principal speakers; is
4 that right, Ms Annacker?
5 DR ANNACKER: That's correct.
6 THE PRESIDENT: And is there any point that Respondent had
7 that it wished to raise at the outset?
8 DR ANNACKER: No, we don't.
9 THE PRESIDENT: Alright. Thank you very much.
10 Mr Rowley, on the Tribunal's housekeeping matter.
11 MR ROWLEY: Yes, good morning, everybody, or good afternoon,
12 everybody, as the case may be.
13 The Tribunal has had a discussion prior to the
14 meeting about the use of Box, and we have all struggled
15 with it mightily. It just does not provide the kind of
16 platform and support that is optimal for a tribunal or
17 for the parties. What we would like to propose is that,
18 as we move forward, the record be moved on to the Opus 2
19 platform, that that platform be available from here
20 forward to the Tribunal and to the parties, to the
21 extent that -- in numbers the parties wish.
22 I emphasise that because sometimes when we discuss
23 this, parties say, "Oh, it's expensive if we have a lot
24 of people on it because they charge for it by the
25 person". And in the last couple of cases I've been
[Page 3]
15:09 1 doing with them, we've encouraged the parties to have as
2 many as they want on, but it can be as few as one person
3 per party, until you really need it at the hearing.
4 So that's what we're proposing. We'd like to ask
5 Ms Mowatt to get a quote for us. I am working with
6 another tribunal where we moved from the Box to Opus 2
7 last week in ICSID, and it just makes a world of
8 difference in terms of saved time. I won't take you
9 through the troubles that the members of the Tribunal
10 have had with Box over the last two or three days, but
11 we're ready to hear you. But in future hearings, we'd
12 like to think we will be more ready once we get a good
13 platform in place.
14 THE PRESIDENT: Thank you very much, Mr Rowley.
15 So I would ask counsel, after today's hearing, to
16 consider what Mr Rowley, on behalf of the Tribunal, has
17 just explained, and to let us know as soon as you can.
18 It would be very helpful.
19 Thank you very much. We're ready to go. You've got
20 40 minutes on your primary submissions on your
21 provisional measures application, Mr Ostrove.
22 (3.10 pm)
23 Submissions on behalf of Claimant
24 on the provisional measures application
25 MR OSTROVE: Thank you very much, Mr President, members of
[Page 4]
15:10 1 the Tribunal.
2 Claimant is seeking provisional measures to avoid
3 imminent harm, to avoid aggravation of the dispute and
4 to preserve the status quo of the situation on the
5 ground pending resolution of this dispute, and granting
6 these measures would cause no prejudice to Georgia.
7 Despite Georgia's efforts to prejudge the outcome on
8 the ground and act as if Claimant never purchased the
9 share of Caucasus Online indirectly, the legal status on
10 the ground is that Mr Hasanov is the ultimate owner of
11 the investment.
12 Respondent is trying every way it can to force him
13 to reverse the transaction by which he acquired Caucasus
14 Online and to deprive him of his ownership rights. And
15 that started with administrative decisions and fines
16 against Caucasus Online. Then came the imposition of
17 the special manager, an action that was made possible by
18 a targeted piece of legislation that was pushed through
19 on the fast track through the legislature.
20 And as you will see during our presentation shortly,
21 the leading rule-of-law bodies of the Council of Europe
22 have already expressed their strong opinion condemning
23 the imposition of the special manager as violating the
24 rights to property under the European Convention on
25 Human Rights. We will turn to that opinion a little bit
[Page 5]
15:12 1 later; it's Exhibit C-44.
2 Since this case has started, the special manager has
3 blocked attempts by Caucasus Online to carry on its
4 business as it sees fit; and in doing so, she has
5 blocked its ability to show the market that Caucasus
6 Online will grow and will develop into a critical part
7 of regional development. And the special manager
8 continued to do that after Procedural Order No. 3 was
9 issued, flaunting your clear directions.
10 Notwithstanding the urgency of the situation that
11 we've been facing, the parties have agreed twice to
12 postpone this hearing, and we thank all of the members
13 of the Tribunal and everyone involved for their
14 flexibility in that regard.
15 (Slide 2) The first time we requested a suspension,
16 it was because just before the scheduled hearing, the
17 Tbilisi Court of Appeals granted the interim measures
18 essentially that we sought, and suspended the imposition
19 of the special manager. The judgment is at C-45, and we
20 explained that in our letter of 18th March. The Tbilisi
21 Court of Appeals made that decision on the grounds that
22 the future actions by the special manager were likely to
23 cause irreparable harm to Caucasus Online.
24 But Georgia did not accept the rule of law, even
25 when that rule of law was issued by its own Court of
[Page 6]
15:13 1 Appeals. That decision was a non-appealable decision,
2 but Georgia looked for a way around it and brought
3 a revision procedure. A revision procedure there, like
4 in most places, requires newly discovered evidence.
5 (Slide 3) There was no newly discovered evidence.
6 What they raised was these famous MoUs that you've heard
7 about already, which would have helped Caucasus Online
8 participate in the Digital Silk Way; and they claimed
9 that they had also discovered new evidence that,
10 surprise, Mr Hasanov had exercised a call option over
11 the remaining 51% of shares in Nelgado, ultimately
12 controlling Caucasus Online.
13 But there was no newly discovered evidence. The
14 GNCC admits that it knew of the MoUs since
15 December 15th 2020. The exercise of the call option was
16 explained in paragraph 11 of our Request for Arbitration
17 in October 2020. It reflects poorly on the rule of law
18 in Georgia that the state and the GNCC would resort to
19 such abusive manipulation of their judiciary.
20 Sadly, we learnt on 7th April that on 1st April the
21 Court of Appeals had reversed its judgment granting the
22 provisional measures, agreeing that there was newly
23 discovered evidence and therefore putting a little
24 figleaf over this reversal of a non-appealable judgment.
25 It's an embarrassing decision for Georgia, and that's
[Page 7]
15:15 1 where we are.
2 So we came back to you in our letter of April 8th to
3 explain that we needed now to get provisional measures
4 from you. As you'll recall, it was taking a little
5 while to get a hearing date, and we greatly appreciate
6 the Tribunal's issuance of Procedural Order No. 3
7 temporarily granting the relief that we sought, as it
8 says in paragraph 19 for the period from the date of
9 that procedural order until the date "the Tribunal
10 issues its final decision on the Application."
11 Then a second time, on the eve of the next hearing
12 of May 12th, we agreed to postpone again to seek
13 an opportunity to settle the case. We agreed because we
14 did have that interim measure of protection in place,
15 although we were well aware that Georgia had expressed
16 certain scepticism about that procedural order and
17 whether it really was provisional measures.
18 (Slide 4) But we received assurances via email of
19 May 11th -- which is referenced in Claimant's letter
20 C-64, which is on the screen -- that Georgia assured us
21 that no further adverse actions would be taken,
22 including specifically the revocation of the licence to
23 operate.
24 So we would have preferred to continue negotiating
25 without having to come back to you to interrupt that,
[Page 8]
15:16 1 but the deterioration of the situation on the ground has
2 continued. There have been repeated breaches of
3 Procedural Order No. 3, forcing us to come to you to
4 seek a clear and robust provisional measures order, one
5 that will not allow Georgia to quibble about procedural
6 issues with the way the order came down to give them
7 an excuse for non-compliance.
8 Although Respondent and the GNCC have been holding
9 off on the ultimate threat of withdrawal of the
10 authorisation to operate, that still hangs over us as
11 a sword of Damocles and has a tremendous impact on the
12 business.
13 Our Update to you on November 11th filled you in on
14 what's happened over the last few months. In
15 a nutshell, the GNCC has taken steps to preserve its
16 ability to withdraw the authorisation to operate as soon
17 as December. In parallel, the special manager has
18 prevented the local management from freely operating the
19 company and has prevented the shareholders from
20 exercising ownership rights at all. It's been denying
21 access to information. The confidentiality application
22 that you received last Friday was a striking example.
23 The GNCC and the special manager -- and now Georgia
24 itself -- have been taking the position that the
25 shareholders of record are not entitled to any rights.
[Page 9]
15:18 1 They want to deny those rights now, rather than leaving
2 in place the status quo and waiting for you to make your
3 decision. In doing so, they are slowly strangling the
4 company.
5 (Slide 5) So we are back here with a stronger case
6 than ever for provisional measures, and my colleagues
7 and I will run through why you've got every reason to
8 grant provisional measures. Ms Bizikova will cover
9 prima facie jurisdiction. Then I'll come back to you
10 for why the measures are necessary to avoid irreparable
11 harm. Then Kate Cervantes-Knox will address why the
12 measures maintain the status quo. And Anthony Sinclair
13 will end on why the measures meet any requirement for
14 narrow and specific.
15 So with that, I turn the floor over. And I will ask
16 for a tiny bit of understanding: we have to do some
17 adjustment of microphones to avoid feedback, so we might
18 run over by a minute because of manipulations. Thank
19 you.
20 MR ROWLEY: Just one point. You are going to provide us,
21 I assume, with this opening demonstrative by email, will
22 you?
23 MR OSTROVE: The slides have been distributed. (Pause)
24 MS BIZIKOVA: (Slide 6) I will address the first requirement
25 for provisional measures to be granted, which is the
[Page 10]
15:19 1 existence of prima facie jurisdiction.
2 (Slide 7) As explained by the Tribunal in Pey Casado
3 v Chile (CLA-10, paragraph 11), to obtain provisional
4 measures, claimants must show:
5 "... the prima facie existence of [jurisdiction],
6 or, to couch this in negative terms, the absence of
7 a clear lack of jurisdiction."
8 The threshold for a showing of prima facie
9 jurisdiction is extremely low and has been demonstrated
10 in this case, as shown by the Claimant in his Request
11 for Arbitration and in his Response on Provisional
12 Measures.
13 Respondent has argued that there is a lack of
14 prima facie jurisdiction on the basis of its inter-state
15 negotiation objection. The lack of merit of that
16 jurisdictional objection will be addressed later in
17 detail in this hearing and therefore, in the interest of
18 time, I will not address it here.
19 (Slide 8) As for the Respondent's argument that
20 there is no prima facie jurisdiction by virtue of the
21 alleged fork-in-the-road provision in Article 9(2) of
22 the BIT, the objection has no merit because there is no
23 fork-in-the-road provision in the treaty. Article 9(2)
24 of the BIT, which is set out on the left-hand side of
25 the slide, permits an investor to refer the matter to
[Page 11]
15:21 1 the judicial body of the contracting party in whose
2 territory the investment is made, under paragraph (a);
3 or to ICSID arbitration, under paragraph (b); or to
4 UNCITRAL arbitration, under paragraph (c).
5 Such provisions which adopt the either/or
6 formulation have been found to give an investor a choice
7 of remedies; but they do not, by their terms, forbid the
8 investor to resort to both, as has been confirmed by the
9 tribunal in Mabco Constructions v Kosovo (CLA-95,
10 paragraph 433), and I refer the Tribunal to the excerpt
11 of that award on the right-hand side of the slide. This
12 reasoning has also been confirmed in other cases, such
13 as Lundin v Tunisia.
14 (Slide 9) The text of Article 9(2) can be contrasted
15 with the language of an actual fork-in-the-road
16 provision, which makes clear that the claimant must
17 elect one form of dispute resolution or another.
18 I refer the Tribunal to the quote on the slide from the
19 same award from Mabco Constructions, in which the
20 tribunal gave several examples of the standard
21 formulation of fork-in-the-road provisions in other
22 treaties and distinguished them from the either/or
23 formulation. This finding alone is sufficient to
24 dismiss Respondent's objections against the prima facie
25 jurisdiction of the Tribunal.
[Page 12]
15:22 1 Beyond this, of course, the BIT dispute has not been
2 submitted anywhere else and Mr Hasanov has not submitted
3 his [case] anywhere else. So even if there were
4 a fork-in-the-road provision in the BIT, it would not
5 apply here. This is yet a further reason why that prima
6 facie jurisdiction is established.
7 (Slide 10) My colleague Michael Ostrove will now
8 explain why the requested measures are urgently required
9 to avoid irreparable harm.
10 MR OSTROVE: I will also add that of course the dispute
11 itself was never submitted locally anyway, or any place
12 else. So even if there were a fork in the road, it
13 would not apply.
14 (Slide 11) With respect to the requested measures
15 being urgently required to avoid irreparable harm, the
16 first disputed issue before you is: what kind of harm
17 justifies provisional measures?
18 Measures are deemed to be necessary if the harm is
19 substantial or serious, and that's really a widely
20 embraced standard. It was set out relatively clearly in
21 the PNG v Papua New Guinea case (RL-9, paragraph 109)
22 and is described in paragraph 93 of our Response on
23 Provisional Measures. The critical point is that
24 "irreparable" means substantial and serious; it doesn't
25 mean literally something that cannot be repaired by
[Page 13]
15:24 1 money.
2 In reply, of course Respondent tries to set the
3 highest bar possible. They would. They go for the
4 literal approach that: yes, it means that literally it
5 can't be repaired otherwise. And they rely mostly on
6 the Metalclad decision from 1997; a decision that, by
7 the way, doesn't even mention the term "irreparable
8 harm". We submit to you that the more recent cases that
9 we cite present the prevailing view.
10 Respondent then has tried to make an attempt to
11 distinguish our cases, but its attempt fails. Focusing
12 on their core argument, they try to argue that most of
13 the cases we relied on involved claims for specific
14 performance and therefore are inapposite. They say that
15 in their Reply, paragraphs 129 to 131.
16 But that's incorrect. Specific performance is of
17 course exceptionally rare in investment arbitration and
18 provisional measures are not. In none of our cases did
19 a tribunal determine that the standard that we suggest,
20 as laid out in the PNG case, applied only because there
21 was specific performance being sought. And in fact,
22 tribunals have often granted provisional measures when
23 specific performance was not either any of the relief or
24 the main relief, and where damages were sought as
25 an equivalent.
[Page 14]
15:25 1 (Slide 12) Cases that we have cited are on the
2 screen. You have our submissions on them. But as you
3 will see, many of them included damages-only relief
4 claims.
5 (Slide 13) In any event, here Claimant has sought
6 the functional equivalent of specific performance. In
7 our Notice of Dispute on June 22nd 2020, C-26, we
8 indicated that we would be seeking restitutio in
9 integrum. In the end, when we formulated the claim,
10 Claimant asked for a declaration of rights. If the
11 Tribunal declares that Respondent's actions denying the
12 validity of the transaction violate the treaty, then
13 Respondent will be bound to abide by that award,
14 according to Article 53(1) of the ICSID Convention, and
15 we expect that Respondent will abide by that. And that
16 will allow Claimant to operate Caucasus Online in the
17 interests of, frankly, all parties.
18 If Georgia's position is that they won't comply with
19 their international obligations after you have declared
20 them, and that they will only comply if you specifically
21 direct them to take certain actions and cause the GNCC
22 to take certain actions, then of course we can amend our
23 prayer for relief. But that, we submit, would be
24 putting form over substance to the extreme.
25 (Slide 14) The second issue that is really debated
[Page 15]
15:27 1 a little bit between the parties is what level of
2 likelihood of this irreparable harm happening is
3 necessary. There is no requirement that there be
4 an absolute certainty that all of these bad things will
5 happen; the test is satisfied if the harm is probable.
6 We have cited a number of cases for that, put them up on
7 the screen. You have our submissions on it. The
8 jurisprudence we submit is clear, and Respondent has not
9 cited anything that contradicts that.
10 (Slide 15) Finally, the measures have to be
11 "urgently needed". And regarding urgency and what
12 urgency means, the test is satisfied when a question
13 cannot await the outcome of the award on the merits
14 because the harm would arise before you, as a Tribunal,
15 have had an opportunity to issue your final award.
16 We've got CLA-24, the Biwater Gauff case, on the
17 screen for that provision. It itself refers to
18 Professor Schreuer.
19 Respondent quibbles with this a little bit, saying,
20 "No, no, no, it has to be imminent, the harm", and they
21 cite the Rizzani case at CLA-31 for that. But even the
22 Rizzani case just says that "imminent" means that
23 something is not purely hypothetical and speculative; it
24 means it could be happening soon. So if it's happening
25 before you issue your award, that's imminent enough to
[Page 16]
15:28 1 make it necessary to issue provisional measures to
2 protect the situation.
3 Now, in light of the --
4 THE PRESIDENT: Let me ask you -- sorry, Mr Ostrove.
5 (Pause)
6 I wonder, leaving aside the possibility of
7 authorisation being pulled, what I'd like you to speak
8 to is how CO is being damaged right now, and to what
9 degree, by the special manager. Is profitability
10 plummeting? I have seen none of that in the evidence
11 you have presented.
12 I understand the point about the authorisation, and
13 that that's looming, potentially. But what I don't
14 see -- apart from any business obviously doesn't want
15 a third party coming in and telling them things about
16 running their business, but I don't see actual data
17 about how the business is being damaged. Where is that
18 data? Is Mr Kopaladze telling us that this company is
19 suffering serious harm because the special manager is
20 there? They seem to, despite certain conflicts, get
21 along quite well. What's the issue with the special
22 manager?
23 MR OSTROVE: Thank you, Mr President. I'm going to be
24 coming to that in the next section of my presentation.
25 But briefly, and at the highest level, first of all,
[Page 17]
15:31 1 Mr Kopaladze is not going to be able to give evidence
2 because he is currently under instructions not even to
3 be having discussions with the shareholder --
4 THE PRESIDENT: Leave aside Kopaladze giving evidence;
5 someone from CO hasn't given any evidence. Leave aside
6 Kopaladze; I shouldn't have mentioned him. But someone
7 from the company, at a high level, needs to tell us how
8 it's being damaged. I don't see it.
9 MR OSTROVE: Okay. And we'll come to Stuart Evers's email
10 that's on the record shortly --
11 THE PRESIDENT: I've seen that. I've seen that.
12 MR OSTROVE: -- showing that the company is unable to carry
13 out its business plan. And it paid a lot of money for
14 this company not to keep it going at a status quo where
15 it won't be able to long-term manage its finances, but
16 in order to be able to grow it, so that it actually can
17 get a return on investment and survive and long-term
18 finance itself.
19 So what we'll see shortly is the evidence that it's
20 been unable to negotiate properly with Amazon in order
21 to get servers in -- we'll jump right to that right now.
22 (Slide 23) There it is.
23 The shareholders had asked for information about the
24 technical structure of the network because they wanted
25 to be able to put in place a negotiation with Amazon to
[Page 18]
15:32 1 locate virtual servers in Georgia. That would be
2 a major source of profit in order to bring additional
3 funds into the business and to tie it into the Digital
4 Silk Road, which is the entire business plan on which
5 basis Claimant invested the kind of money it invested
6 into this company.
7 But then you have a special manager coming up and
8 saying, "No, I need more information, I need to
9 understand the justification for this". And Respondent
10 has said, "Oh, well, you just have to provide the
11 justifications to the special manager". But you see on
12 the email that Respondent itself cited on the screen
13 (C-54) the frustration of the shareholder, saying, "We
14 cannot continue to be commercially active with
15 Caucasus Online as part of the Digital Silk Way if this
16 is the way we're operated".
17 So they are actually unable to carry out the
18 business plan that they intended to do because the
19 special manager has completely cut off the shareholders
20 and the shareholder bodies, and has specifically said --
21 they asked in their letter to you, when they said, "We
22 don't accept that you really issued provisional
23 measures, but we'll agree to abide by them if Claimant
24 agrees not to do anything to integrate the company with
25 the Digital Silk Way". So what they've been doing is,
[Page 19]
15:33 1 not having received that undertaking from us, they are
2 not following your procedural order and they are
3 stopping us from doing anything to integrate the company
4 into the Digital Silk Way.
5 So the company is floating along. They are allowing
6 it to do minor investments to maintain its cable. There
7 is a major contract that has already been lost with
8 MagtiCom. And the only way that the company long term
9 can have the revenue flow that it needs is by plugging
10 into international revenues.
11 THE PRESIDENT: Thank you. Go ahead, Mr Ostrove. I may
12 come back to that, but go ahead for right now.
13 MR OSTROVE: More than happy to.
14 (Slide 18) You already have our submissions, so
15 I won't go through them again here, about the types of
16 thing that the special manager has already done, from
17 our Response, paragraphs 40 to 49 -- that's on the
18 screen, so we can go right past that -- where she
19 basically is blocking the day-to-day activities of the
20 company.
21 (Slide 19) She did issue a limited power of attorney
22 for minor payments, but not allowing new commercial
23 contracts without her authorisation and not allowing the
24 governing bodies to act. So that again was just putting
25 in a blocker to anything that was going to allow the
[Page 20]
15:35 1 company to go forward with the direction that the
2 current management wanted.
3 (Slide 20) That's just the fact that she actually
4 won't even communicate with the shareholders.
5 (Slide 22) We can skip over that; you've got that in
6 our Update. That's about the netting agreement. Again,
7 it's daily operations about setting off claims, but
8 everything is slowed down and blocked because the
9 special manager doesn't understand the business and
10 everything has to be explained. And that's just no way
11 to run a company.
12 Then the next slide (24), please, which goes on to
13 the legal rights. Even more importantly, what she's
14 doing is she's been blocking the ability of the company
15 even to act and take actions in justice. We've set that
16 out in our Update. But essentially, she refused to
17 grant a power of attorney to allow the company timely to
18 challenge the May 20th 2021 decision ordering again the
19 company to reverse the 51% transaction. So there's
20 actually been a blockage of legal rights by the company
21 by the special manager's roles.
22 (Slide 25) In Procedural Order No. 3, you had also
23 said, in order to allow the company to go forward, the
24 GNCC should stop taking adverse decisions. But it did,
25 on May 20th 2021: that's the one I just mentioned that
[Page 21]
15:37 1 we can't appeal locally. And on October 15th 2021:
2 that's the decision where they said, "Hey, we're now
3 giving you until December to comply, else, as already
4 mentioned, the potential for the withdrawal of
5 authorisation".
6 THE PRESIDENT: So there's no appeal of the October
7 decision; is that right?
8 MR OSTROVE: Please?
9 THE PRESIDENT: Sorry, Mr Ostrove. There is no appeal of
10 the October 15th decision: is that because it's simply
11 an updating of the May decision? Or is there
12 an opportunity to appeal the October decision?
13 MR OSTROVE: So, first, the October 15th decision is
14 separate from the May decision and it extends the time
15 period for compliance --
16 THE PRESIDENT: No, I understand that. Is there
17 an opportunity to appeal it? No.
18 MR OSTROVE: No, the special manager refused the power of
19 attorney that would have allowed the company to
20 challenge it.
21 I understand it is possible that just on the eve of
22 this hearing, last Friday, the special manager may have
23 issued an additional power of attorney that would allow
24 an action. But we haven't seen the documentation yet,
25 and it would certainly seem to be an awfully convenient
[Page 22]
15:38 1 time for something to be coming in right before this
2 hearing. But we don't know yet what the scope of the
3 rights are available under that.
4 THE PRESIDENT: But you know, nonetheless, Respondent says
5 that there are a number of challenges, not only from CO,
6 but that other shareholders have been able to take in
7 relation to decisions that would arguably adversely
8 affect CO. Is that not the case?
9 MR OSTROVE: It's right that one of the shareholders, ION,
10 has issued a challenge. But in an exactly parallel
11 circumstance, with Railway Telecom, which is
12 an affiliate, the shareholder had brought an action to
13 challenge the GNCC's decision, and the Tbilisi court
14 said, "The shareholder doesn't have standing to bring
15 that action; only the authorised entity can challenge
16 the GNCC's decision". So there's basically no way that
17 the ION shareholder action can survive; it would have to
18 be the entity itself, Caucasus Online, that brings the
19 challenge.
20 THE PRESIDENT: Alright, thank you. I'm sorry, go ahead.
21 Sorry for interrupting. Go ahead, Mr Ostrove.
22 MR OSTROVE: Please don't apologise for interrupting: your
23 questions are more important than anything else.
24 (Slide 26) So just with respect to the refusal to
25 abide by your Procedural Order No. 3, which could have
[Page 23]
15:40 1 provided perhaps enough protection that we could go on
2 and negotiate in peace, we requested on April 16th
3 an undertaking, as required by your procedural order.
4 And then we got this famous letter back from Georgia on
5 April 19th quibbling that, "No, you couldn't possibly
6 have really directed interim provisional measures. If
7 you really meant to do that, you would have done all
8 these other things, so you couldn't possibly mean that".
9 And they will only abide by that -- and then you have
10 the text at the bottom there -- if we "refrain from any
11 action [other than] ordinary day-to-day operations" and
12 if we don't integrate Caucasus Online into the Digital
13 Silk Way.
14 So Georgia has been clear on this: they will not
15 allow this company to be operated in a way that it can
16 survive and grow: they will only allow it to be operated
17 in a way that it will fizzle along and eventually go out
18 of business.
19 (Slide 27) So what's happening? It's very
20 interesting: the Venice Commission and the Director
21 General on Rule of Law, both from the Council of Europe,
22 highlighted exactly the kind of insidious harm that the
23 special manager can wreak. The harm isn't just
24 imminent: it's already started. And what the Venice
25 Commission said, back on March 22nd 2021 (C-44,
[Page 24]
15:41 1 paragraph 37), is that after reviewing the special
2 manager's powers in light of what the special manager
3 was supposed to do -- reverse the transaction -- it was
4 neither legitimate, nor was it proportional to put in
5 place a special manager, and [it] violated the right to
6 property under Article 1, protocol 1 of the ECHR.
7 So given the situation where the special manager has
8 completely cut off the shareholders, is refusing to
9 allow them to exercise any of their prerogatives -- this
10 goes back to what Iran did in Phelps Dodge: it was
11 considered an expropriation already -- we have her
12 preventing the company from being run in a way that's
13 going to allow it to grow and be profitable, and
14 therefore we're facing really irreparable harm because
15 the company will not be able to survive and develop.
16 Passing on to Kate Cervantes-Knox for status quo.
17 MS CERVANTES-KNOX: (Slide 28) Mr President, members of the
18 Tribunal, I will now explain why provisional measures
19 are necessary to protect the Claimant's procedural right
20 to the non-aggravation of the dispute and to preserve
21 the Claimant's substantive right to ownership and
22 control of Caucasus Online.
23 (Slide 29) The Claimant has a self-standing
24 procedural right to preservation of the status quo and
25 non-aggravation of the dispute. The explanatory notes
[Page 25]
15:43 1 to ICSID Arbitration Rule 39 (CLA-45, paragraph 104)
2 confirm that:
3 "Article 47 of the [ICSID] Convention ... is based
4 on the principle that once a dispute is submitted to
5 arbitration the parties should not take steps that might
6 aggravate or extend their dispute, or prejudice the
7 execution of the award."
8 So it is sufficient for the Claimant to show that
9 provisional measures are necessary to avoid
10 an aggravation of the dispute in order to satisfy this
11 element of the test for provisional measures.
12 (Slide 30) The Quiborax v Bolivia tribunal confirmed
13 that there is this general right to non-aggravation of
14 the dispute. And in that case the tribunal stated
15 (RL-13, paragraph 117) that:
16 "... the rights to be preserved by provisional
17 measures are not limited to those which form the subject
18 matter of the dispute, but may extend to procedural
19 rights, including the general right to the preservation
20 of the status quo and to the non-aggravation of the
21 dispute."
22 (Slide 31) The Claimant also has a right to
23 preservation of his substantive rights, specifically his
24 right to indirect ownership, control and enjoyment of
25 Caucasus Online. Tribunals have also accepted that
[Page 26]
15:44 1 rights of ownership can be protected by provisional
2 measures. This was confirmed in Occidental v Ecuador
3 (RL-6, paragraph 60), amongst other cases, in which the
4 tribunal stated that:
5 "An example of an existing right would be
6 an interest in a piece of property, the ownership of
7 which is in dispute."
8 So it is obvious that if the GNCC and the special
9 manager are permitted to take further steps to damage
10 Caucasus Online's business or to continue blocking
11 Claimant from any management and control of Caucasus
12 Online, this will cause a major escalation of the
13 dispute. This in turn will breach Claimant's right to
14 non-aggravation of the dispute, and will deprive him of
15 his substantive rights to ownership, control and
16 enjoyment of Caucasus Online.
17 (Slide 32) In response, Respondent makes three
18 arguments. The first argument is that if provisional
19 measures are granted, Claimant's position will be
20 impermissibly improved rather than the status quo being
21 preserved. Specifically, the Respondent argues that
22 Claimant is using its request for provisional measures
23 to secure rights it doesn't have, and that the
24 provisional measures would prejudge the issue of the
25 legality of Claimant's investment.
[Page 27]
15:45 1 Yet the question of the legality of Claimant's
2 indirect ownership of Caucasus Online will not be
3 prejudged if the provisional measures are granted.
4 Claimant seeks preservation of the status quo vis-à-vis
5 his current status as an indirect shareholder of
6 Caucasus Online, with the right to participate in the
7 business of the company. Claimant does not seek
8 a ruling from the Tribunal on the issue of the legality
9 of the transaction giving rise to his ownership at this
10 stage. And the Tribunal is not required to decide that
11 issue in determining whether to grant provisional
12 measures.
13 In fact, it is Respondent who seeks to have this
14 issue prejudged, as Respondent relies upon the alleged
15 illegality of the transaction as a basis for opposing
16 the grant of provisional measures. Moreover, if
17 provisional measures are not granted, then this issue
18 will be prejudged, as Claimant will lose his right to
19 participate in the business of Caucasus Online.
20 (Slide 33) In any event, in order for provisional
21 measures to be granted, rights do not need to be proven;
22 they only need to be asserted. This was made clear in
23 the case of Occidental v Ecuador (RL-6, paragraphs 63
24 to 64), where the tribunal stated that:
25 "... [they] wish[ed] to make clear that although
[Page 28]
15:46 1 a right may not yet have been recognized by the
2 Tribunal, such a right may nonetheless be deserving of
3 protection by way of provisional measures."
4 And indeed:
5 "The Respondent's position would have far reaching
6 consequences. It would mean, for example, that
7 a tribunal could never order protection by way of
8 provisional measures in connection with a right whose
9 existence and alleged violation are precisely the
10 subject-matter of the arbitration."
11 As of course is the case here.
12 So the tribunal concluded in that case that:
13 "... the right to be preserved only has to be
14 asserted as a theoretically existing right, as opposed
15 to proven to exist in fact."
16 THE PRESIDENT: Ms Cervantes-Knox, let me ask you: the
17 special manager is initially appointed, as I recall, on
18 1st October. Your Request for Arbitration is
19 19th October. Why isn't the special manager -- as
20 Respondent argued way back when, maybe back in January
21 or December -- why isn't the special manager the
22 status quo? She is in place before the Request for
23 Arbitration. Isn't that the preservation of the
24 status quo, the special manager?
25 MR SINCLAIR: Thank you, Mr President. Your question is
[Page 29]
15:48 1 actually very timely because on the next slide (34),
2 which we've just pulled up, we're addressing this exact
3 point that the Respondent had made.
4 Yes, it's correct that the special manager was in
5 place at the time provisional measures were requested,
6 albeit of course her appointment is, on Claimant's case,
7 invalid, illegal and a breach of the treaty. But
8 notwithstanding that, she was in place, she had been
9 appointed. But it's important to look at the decision
10 of the GNCC which appointed her.
11 That decision (C-34) made very clear -- and it's
12 quoted on this slide -- that her sole purpose was to:
13 "... ensur[e] restoration of the status (the
14 shareholding) [that] existed before the acquisition
15 by ... [Mr] Hasanov of [his shares] ..."
16 So, in effect, she was only required to reverse the
17 transaction by which he acquired his ownership in
18 Caucasus Online.
19 And critically, in paragraph 14 of the GNCC's
20 decision, the GNCC mandated that the special manager:
21 "... exercise the powers vested in her under [the]
22 Decision in good faith and with the belief that each of
23 her actions/omissions will best ensure the fulfillment
24 of the obligation set forth in paragraph 2 ..."
25 Which of course is the reversal of the transaction.
[Page 30]
15:49 1 There is no part of the GNCC's decision which states
2 that the special manager has a mandate to operate
3 Caucasus Online, to operate the company, to interfere in
4 the day-to-day management of the company, to exercise
5 control over the company, to deprive the shareholders of
6 their right to participate in the business of the
7 company. She was given one mandate, and of course that
8 mandate was a mandate that she can't fulfil because it's
9 impossible for her to reverse a transaction between
10 third parties.
11 But the important point is that even if we accept
12 that her appointment was valid -- which of course we
13 don't -- she wasn't appointed to do what she's now doing
14 and what she has done since we made our Request for
15 Provisional Measures.
16 If I could move on now to the next slide (35). [Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Page 31]
15:51 1 [Redacted]
2 [Redacted]
3 [Redacted]
4 [Redacted]
5 [Redacted]
6 [Redacted]
7 [Redacted]
8 [Redacted]
9 [Redacted]
10 [Redacted]
11 [Redacted]
12 [Redacted]
13 So what we're saying is: we need to preserve the
14 status quo where she can't exercise the powers that she
15 purports to exercise and she can't continue to interfere
16 in the business of the company. Because in fact, if she
17 were operating in accordance with the remit under the
18 GNCC decision and within the confines of that decision,
19 recognising paragraph 14 of the decision, which requires
20 her only to do things which will ensure the reversal of
21 the transaction, then she wouldn't be able to do any of
22 the things that she's been doing since she was
23 appointed.
24 THE PRESIDENT: Thank you, Ms Cervantes-Knox. I've
25 interrupted quite a lot. But I think we've got about
[Page 32]
15:52 1 five more minutes, if you want to move on from the
2 special manager. I think there was an intention to have
3 Mr Sinclair speak to us as well. So take five minutes.
4 MS CERVANTES-KNOX: Certainly. I won't be longer than
5 five minutes, thank you.
6 (Slide 36) Moving on to the Respondent's second
7 argument, and that is that the right to non-aggravation
8 must relate to the specific relief sought. That's not
9 actually a requirement that it has to relate to the
10 relief; the requirement is that it has to relate to the
11 dispute. And that's evident even from the case that
12 Respondent has cited, Ipek Investment v Turkey (CLA-30,
13 paragraph 9).
14 In any event, as Mr Ostrove previously said, the
15 Claimant seeks both damages and declarations of breach.
16 So the right to non-aggravation which we seek to protect
17 here relates specifically to the relief that we seek in
18 the form of declarations of breach.
19 (Slide 37) Finally, the third argument that
20 Respondent advances is that the provisional measures
21 sought should not be granted because they are not
22 necessary to prevent actions that would make the
23 resolution of the arbitration by the Tribunal more
24 difficult.
25 Again, this is not a requirement. It is not
[Page 33]
15:53 1 a requirement to show that the provisional measures are
2 necessary to avoid the resolution of the dispute being
3 rendered more difficult. This is a very restrictive
4 view, which was taken by the tribunal in Plama
5 v Bulgaria; it was followed in Nova Group, which
6 Respondent relies upon. But most tribunals have found
7 that in fact provisional measures are justified where
8 the actions to be restrained would cause an aggravation
9 of the dispute more generally, including because they
10 would escalate or extend the dispute.
11 That's clear from the quote on the slide in
12 Tokios Tokelés v Ukraine (CLA-100, paragraph 2), which
13 of course reflects the language in the explanatory note
14 to ICSID Arbitration Rule 39, which I put on the slide
15 earlier. It's key that before "render its decision more
16 difficult", the word "or" appears; it's not conjunctive.
17 In any event, again, declarations of breach are
18 sought. So in fact, if provisional measures are not
19 granted, then the resolution would be rendered more
20 difficult, in the sense that it would be difficult for
21 the Tribunal to grant meaningful declarations of breach
22 if provisional measures are not granted.
23 So, Mr President, members of the Tribunal, that
24 concludes what I wanted to say for now about status quo,
25 and I'll invite my colleague Mr Sinclair to address why
[Page 34]
15:55 1 the relief sought is narrow and specific.
2 THE PRESIDENT: Thank you. Mr Sinclair, I'm afraid we're
3 going to ask you to compress, so please compress.
4 MR SINCLAIR: Thank you, Dr Shore. I will endeavour to
5 cover what I was going to cover in about two minutes.
6 (Slide 39) The first thing I would say is that
7 I don't think really we need to spend long on the legal
8 test with this experienced Tribunal. It's common
9 ground, of course, that provisional measures must be
10 necessary, but the cases do not speak of any requirement
11 that measures be narrow or specific or the minimum
12 necessary in the circumstances. And the relevant
13 authority upon which we rely is the Papua New Guinea
14 Sustainable Development case on your screen (RL-9).
15 Looking at the measures we request, in our
16 submission, they're not overly broad, they're not
17 difficult to understand or police, which are the
18 considerations that have concerned tribunals in the
19 past. They merely seek to protect the status quo, to
20 prevent further aggravation of the dispute, to keep the
21 business alive pending the determination of these
22 proceedings.
23 The business has cash flow challenges, it has debt
24 service challenges, it has the need for debt
25 restructuring. Frankly, members of the Tribunal, the
[Page 35]
15:56 1 business cannot await your final award; that will come
2 too late.
3 I won't spend time troubling you with the detail of
4 the measures but, I think, summarise our submissions in
5 the following terms.
6 Pending the determination of the dispute on the
7 merits, the governing bodies of the company should be
8 free to run the company in its best interests. And more
9 specifically, whilst Mr Hasanov is the indirect owner of
10 the company, he should be able to be free to further
11 invest in the company, to guide its strategic direction
12 in any manner of his choosing, without further
13 interference from Georgia, whether acting by the special
14 manager or otherwise.
15 Just consider that proposition, members of the
16 Tribunal. If he ultimately prevails in the arbitration,
17 his investment will have been preserved by the interim
18 orders we hope you'll grant. If his claim is ultimately
19 dismissed, however, in the interim he will have invested
20 in the company at his own risk. Mr Hasanov is prepared
21 to run that risk provided that you, members of the
22 Tribunal, put in place interim relief now that will
23 preserve his legitimate interests, because it is only
24 with that relief that there is a viable future for this
25 business.
[Page 36]
15:58 1 By contrast, there is no risk of harm to the
2 Respondent if you were to grant the interim relief.
3 Mr Hasanov's investments, his energy, his strategic
4 direction will only enhance the capabilities and
5 standing of the company and indirectly, in the process,
6 benefit Georgia as a telecommunications hub and critical
7 connection between east and west. And if ultimately his
8 claim fails and he must relinquish control of the
9 company, Georgia will only have gained the benefit of
10 his efforts in the meantime.
11 Thank you, members of the Tribunal. We urge the
12 Tribunal to grant the requested relief.
13 DR ALEXANDROV: Can I ask a question, Mr Sinclair, with
14 respect to your last two points.
15 One point you made is that the shareholder must have
16 the right to operate the company and make strategic
17 decisions, et cetera. I am paraphrasing: you said it,
18 of course, much better than I am trying to summarise
19 now. But is the fact that the owner is prevented from
20 running the company properly a reason to -- does it meet
21 the standard for interim measures if the company is not
22 ruined by the special manager by preventing the
23 shareholder from running it? Because the mere fact that
24 he may be prevented from running the company -- well,
25 let me phrase it as a question. Does the mere fact that
[Page 37]
16:00 1 he is prevented from running the company meet the
2 standard for provisional measures?
3 The other point you made is that unless the Claimant
4 continues investing in the company, the company will
5 cease to exist as a viable business, which is why
6 I think you stated that he is prepared to continue
7 investing and take the risk of losing the case in the
8 end. What's the evidence for the statement that the
9 company, unless Mr Hasanov continues investing in it,
10 will cease to exist as a viable business in the end?
11 MR SINCLAIR: Thank you, sir, for the questions, which
12 really are interrelated.
13 The reality, as I said, is that the company must
14 service its debt, it must restructure its debt, and for
15 this it needs cash flow. And we have addressed this in
16 our submissions.
17 For so long as the special manager is in place and
18 for so long as there is the threat that the
19 authorisation to carry out business may be revoked, you
20 will, I think, plainly appreciate that third parties are
21 extremely reluctant to do business with Caucasus Online.
22 The company needs to renew very substantial contracts
23 with its major customers, and in the present
24 circumstances of uncertainty, it cannot do so.
25 Moreover, to generate the cash flows necessary, the
[Page 38]
16:01 1 company must grow. You heard Mr Ostrove, for instance,
2 address you on the matter of partnership investment
3 opportunities with Amazon. For so long as the special
4 manager is in place, is controlling the operations of
5 the company and there is the threat of licence
6 revocation, the company cannot secure the contracts that
7 it needs to generate cash flow and to meet its debt
8 obligations.
9 So, sir, it's the product of the death by a thousand
10 cuts, which I guess you've heard many times. The
11 situation on the ground with the special manager in
12 place is strangling the business and it will lead to the
13 destruction of any value in it.
14 I hope I've addressed you, sir.
15 MR ROWLEY: Mr Sinclair, can you hear me?
16 MR SINCLAIR: Yes, sir.
17 MR ROWLEY: Mr Alexandrov asked you, I think, about where
18 the evidence was to support your statement that without
19 relief there was no viable future for the company or the
20 business. You said you dealt with that in submissions,
21 but he was asking for evidence. And you then went on
22 and said that third parties are "extremely reluctant" to
23 do business with the company in the present
24 circumstances and the company cannot renew its
25 contracts.
[Page 39]
16:03 1 To me, those are submissions; they are not evidence
2 before us. And what you will need to do -- and you
3 don't have to do it right now, you've got the day -- but
4 you do have to do what you can to show us what evidence
5 there is to support the statements that you have made
6 and that have been made before you.
7 MR SINCLAIR: It's noted, Mr Rowley. And we will take that
8 opportunity and come back to you in our rebuttal
9 submissions. Thank you.
10 DR ALEXANDROV: If I may follow up on my earlier question,
11 Mr Sinclair. I think you made two points. One point is
12 that the company cannot properly operate under the
13 threat of revocation of the authorisation to the
14 business, and I understand the point.
15 But I thought -- and maybe I misunderstood
16 Claimant's position -- I thought that the issue of the
17 interference with the management of the company was
18 a separate issue for which you are seeking interim
19 measures. And I think you address that as a separate
20 issue in terms of the special manager preventing the
21 company from growing; for example, the Amazon contract.
22 I wonder to what extent that second issue is ripe
23 for interim measures. On the first point -- well, let
24 me put to you a hypothetical. And obviously we haven't
25 decided anything. But hypothetically, if we deal with
[Page 40]
16:05 1 the issue of the threat of revocation of the
2 authorisation, is there an independent ground for
3 interim measures on the basis solely of the special
4 manager's interference?
5 MR SINCLAIR: Thank you, sir. You are right: they are two
6 separate issues, and they are two distinct grounds upon
7 which we request relief.
8 Focusing as you have on the reality of the special
9 manager in place, we have of course asserted that the
10 loss of control on the part of the investor in respect
11 of his investment, the company, is an expropriatory act,
12 and it is one which is continuing and which we seek to
13 forestall by the requested relief.
14 Secondly, I do hope, sir, that you have appreciated
15 that a relief which is only cast in terms of enjoining
16 Georgia from revoking the licence would not preserve the
17 value of the investment pending your decision because,
18 as we have seen for instance with regard to trying to do
19 business with Amazon -- and we'll come back to you and
20 Mr Rowley on the other evidence on dealing with third
21 parties -- the company needs to renew contracts, it
22 needs to generate cash flow in order to remain viable.
23 And the presence of a special manager who is operating
24 the company on a day-to-day basis, exceeding the purpose
25 for which she was ever installed, is preventing that.
[Page 41]
16:07 1 So in short, sir, yes, they are two distinct
2 grounds; and in our submission, they are both properly
3 necessary and appropriate for the grant of provisional
4 relief.
5 DR ALEXANDROV: Thank you.
6 THE PRESIDENT: Thank you very much, Mr Sinclair.
7 After Respondent's submissions and after a brief
8 break, we'll come back to Claimant's reply.
9 So if I can ask Ms Annacker and Respondent to come
10 on now. And we appreciate that you've been waiting past
11 the scheduled time, Ms Annacker, and you have my promise
12 that there will be equal time, even without
13 interruptions, one way or the other.
14 So please, Ms Annacker, Respondent's opposition,
15 please.
16 (4.08 pm)
17 Submissions on behalf of Respondent
18 on the provisional measures application
19 DR ANNACKER: Thank you, Mr President, members of the
20 Tribunal.
21 Claimant requested provisional measures from the
22 Tribunal more than a year ago. Claimant did so after
23 the Georgian courts had already been seised in 2019 with
24 three requests for a stay of the 2019 GNCC decision, the
25 decision at the heart of this dispute.
[Page 42]
16:09 1 The purpose of Claimant's request has not changed.
2 The provisional measures do not aim to protect the
3 integrity of the arbitration; they also do not aim to
4 preserve the right that Claimant seeks to enforce before
5 the Tribunal, a right to monetary compensation. The
6 only purpose of Claimant's requests is to take control
7 of CO, to use the company as a vehicle to carry out the
8 Azerbaijan Digital Hub project.
9 Claimant has openly confirmed that this is the case.
10 In his letter of May 7th 2021, Claimant vigorously
11 refused to commit to maintain the status quo. Under the
12 guise of interim relief, Claimant instead asserted
13 a right -- and he asserted that right again today -- to
14 decide CO's strategic direction by fiat, to materially
15 change the company's business and supply strategies, and
16 lock it into contractual obligations far beyond the
17 completion of this arbitration.
18 If granted, the provisional measures would
19 effectively accord Claimant the right to control
20 critical infrastructure in Georgia, in plain violation
21 of Georgian law and in plain violation of the
22 regulator's orders. The provisional measures would do
23 so even though Claimant's putative investment was not
24 even admitted in accordance with Georgian law.
25 Claimant's attempted takeover of CO never satisfied
[Page 43]
16:11 1 fundamental admission requirements. The record shows
2 that Claimant was well aware of the mandatory
3 notification and approval requirements under the
4 Communications Law, but he chose to ignore the law and
5 attempt to impose his takeover of CO as a fait accompli.
6 (Slide 2) In January 2019 the Claimant secretly
7 purchased, through Weco, a 100% stake in Nelgado, the
8 BVI company that holds, directly and indirectly, all of
9 CO's shares.
10 (Slide 3) The transaction was structured as follows:
11 Weco formally purchased 49% of Nelgado's shares;
12 Mr Makatsaria would remain the nominal owner of 51% of
13 the shares, but Claimant would become CO's sole
14 beneficial owner through an irrevocable call option and
15 an equitable mortgage over the 51% stake.
16 (Slide 4) To conceal his plan to take over 100% of
17 CO, the parties agree to prepare a version of the share
18 purchase agreement (C-6) reflecting only the purchase of
19 a 49% stake. This version was to be used for the sole
20 purpose of misleading the Georgian authorities and other
21 third parties about Claimant's secret takeover.
22 (Slide 6) In addition, in exchange for $1 million,
23 Mr Makatsaria agreed to use his best efforts to assist
24 Claimant with "government relations", and solely for
25 this purpose to remain the nominal holder of 51% of
[Page 44]
16:13 1 Nelgado's shares.
2 (Slide 7) Weco nevertheless acknowledged that it did
3 not have any specific expectation as to the outcome of
4 Mr Makatsaria's assistance with "government/public
5 institutions of Georgia".
6 (Slide 7) Claimant also had Weco assume full
7 liability "in connection with not seeking and obtaining
8 consent from [the] Georgian National Communications
9 Commission".
10 The terms of the share purchase agreement thus make
11 it abundantly clear that Claimant was aware of the
12 applicable mandatory notification and approval
13 requirements, and deliberately chose not to abide by
14 them.
15 (Slide 8) In accordance with the terms of the share
16 purchase agreement, no approval was sought for the
17 execution of the January 2019 transaction. This was in
18 plain defiance of the Communications Law, a 2016 GNCC
19 decision which expressly requires prior approval of any
20 change in CO's beneficial ownership in excess of 5%
21 (C-29) and a GNCC communication of July 2018 to the same
22 effect (R-8).
23 (Slide 9) Instead of seeking the GNCC's approval of
24 Claimant's intended takeover of CO, in December 2018 CO
25 sought the GNCC's approval for Mr Makatsaria to become
[Page 45]
16:15 1 CO's sole beneficial owner (R-9 and R-10).
2 (Slide 10) The GNCC granted the approval as
3 requested (R-4 and R-5).
4 (Slide 11) In March 2019 CO confirmed to the GNCC
5 that Mr Makatsaria had become CO's sole beneficial
6 owner, as notified to and approved by the GNCC. To hide
7 from the GNCC his secret takeover of CO in January 2019,
8 Claimant had CO misrepresent that -- and I quote from
9 CO's letter to the GNCC, Exhibit R-7:
10 "... the only beneficiary owner of Caucasus Online
11 is Khvicha Makatsaria."
12 Thereafter, Claimant continued to hide the
13 January 2019 transaction from the GNCC for several
14 months.
15 (Slide 12) Finally, at the end of August 2019, in
16 response to a request by the GNCC to all authorised
17 persons to update the beneficial ownership information,
18 Claimant had CO disclose his beneficial ownership of
19 a 49% stake, but misrepresented to the GNCC that
20 Mr Makatsaria remained the beneficial owner of CO's
21 majority stake (C-35).
22 (Slide 13) Several months after the GNCC held that
23 Claimant's purported acquisition of a beneficial
24 interest of a 49% stake in CO violated the
25 Communications Law, ordered the elimination of this
[Page 46]
16:17 1 violation and imposed fines, Claimant had CO seek the
2 GNCC's ex post facto approval of this purported
3 acquisition. CO did so in February 2020 (R-16), yet
4 again misrepresenting that Mr Makatsaria remained the
5 beneficial owner of CO's majority stake.
6 (Slide 14) In the same vein, having received
7 a $1 million best-efforts assistance fee, Mr Makatsaria
8 acted as a facade for Claimant before the Georgian
9 courts and he misrepresented to the courts that he was
10 the ultimate beneficial owner of CO's majority stake.
11 Indeed, Mr Makatsaria went as far as requesting the
12 Georgian courts to annul the 2019 GNCC decision because
13 "there was no danger of a radical change in the
14 Company's strategic plans or visions" (R-85), in view of
15 the fact that he would remain CO's majority shareholder.
16 (Slide 15) CO's and Weco's submissions to the
17 Georgian courts echoed Mr Makatsaria's misrepresentation
18 (R-59 and R-13).
19 (Slide 16) Claimant eventually exercised the call
20 option in August 2020. Claimant registered 51% of
21 Nelgado's shares in Weco's name on August 31st 2020, in
22 the face of the GNCC's refusal to approve the transfer
23 of his stake less than two weeks earlier. The record
24 thus shows that Claimant sought to impose his takeover
25 of CO through misrepresentations and in plain defiance
[Page 47]
16:19 1 of the Communications Law and the regulator's orders.
2 The purpose of provisional measures is to preserve
3 rights in dispute during the pendency of the
4 arbitration. The requested measures do not preserve the
5 rights asserted by Claimant; they would give him the
6 full benefit and the full enjoyment of the rights that
7 he has attempted to arrogate to himself: the right to
8 invest in CO without the GNCC's approval and the right
9 to control CO and to direct its operations by fiat. In
10 fact, the provisional measures requested would grant
11 Claimant rights that he would not even acquire if he did
12 prevail in this arbitration.
13 (Slide 18) Provisional measure request no. 1 seeks
14 a stay of "the making or execution of any administrative
15 decision by the GNCC in respect of CO"; and request
16 no. 2 seeks to "[prohibit] the Special Manager from
17 exercising any of the powers conferred on her". If
18 granted, requests 1 and 2 would thus place CO, a closely
19 regulated company with a dominant market position that
20 owns critical infrastructure, in a regulatory vacuum,
21 allowing Claimant to control strategic infrastructure in
22 Georgia as he deems fit.
23 (Slide 19) If granted, provisional measure request
24 no. 3 would effectively neutralise the powers of the
25 special manager, given the breadth of the powers that
[Page 48]
16:21 1 would be vested in the management that Claimant
2 installed in CO; in CO's supervisory board, composed of
3 members selected by Claimant; and CO's shareholders'
4 meeting, composed of Nelgado and ION, each controlled by
5 Claimant.
6 If request 3 were granted, Claimant would be allowed
7 to fundamentally change CO's operations, and business
8 and supply strategies, and to lock it into the
9 Azerbaijan Digital Hub project, which aims at
10 transforming Azerbaijan into the region's digital hub.
11 On the Claimant's direction, the management he
12 installed at CO could enter into or terminate any
13 commercial agreement and undertake any obligation
14 vis-à-vis third parties. Claimant could freely dispose
15 of the assets of CO and its subsidiaries, including
16 critical infrastructure assets, CO's submarine cable and
17 Railway Telecom's terrestrial cable. Claimant would be
18 free to entirely reorganise the company and even to
19 amend CO's charter.
20 At the same time, the provisional measures requested
21 by Claimant would preserve none of Respondent's rights.
22 Instead, they would strip Georgia of its regulatory
23 powers over CO, prohibit it from addressing serious and
24 deliberate violations of its laws, and cause it
25 substantial and potentially irreparable harm.
[Page 49]
16:23 1 (Slide 21) Allowing Claimant to control critical
2 telecom infrastructure in Georgia by fiat would have
3 a substantial impact on the Georgian telecommunications
4 market.
5 (Slide 22) CO would be in a position to unfairly
6 compete, to the detriment of other companies competing
7 in the Georgian telecommunications market. This was
8 emphasised by the Georgian courts in their judgments
9 rejecting the request for a stay of the 2019 GNCC
10 decision (R-14 and R-65-GEO).
11 (Slide 23) As the Georgian courts also emphasised,
12 Claimant could change CO's strategy of providing
13 services in a manner that would negatively impact more
14 than 2.5 million retail subscribers and 300 Georgian
15 public agencies whose internet supply depends on CO.
16 For example, Claimant could prioritise internet supply
17 to the Azerbaijani market, or terminate or renegotiate
18 important service contracts.
19 (Slide 24) If granted, the requested provisional
20 measures would also substantially harm Georgia's
21 international competitiveness.
22 The record shows -- and Claimant openly admits --
23 that if he were free to do so, he would transform CO
24 into a vehicle to implement the Azerbaijan Digital Hub
25 project. This project is being implemented by the
[Page 50]
16:25 1 company Bakcell, through AzerTelecom, controlled by
2 Claimant.
3 (Slide 25) As Bakcell states in its 2019 annual
4 sustainability report (R-32, page 50), the aim of the
5 Azerbaijan Digital Hub project is to make Azerbaijan the
6 region's primary digital hub of the Digital Silk Road.
7 In Bakcell's words:
8 "The project is aimed to transfer Azerbaijan into
9 the Digital Hub for the Caucasus, CIS, Central and
10 South Asia, Middle East and neighboring regions
11 [through] ... turning Baku into the Internet Exchange
12 Point ... [and through the] establishment of large
13 regional data center in the country ..."
14 (Slide 26) There is much at stake for Georgia.
15 Georgia is uniquely placed to develop into the region's
16 primary digital hub. Georgia is the only country in the
17 region with a direct internet infrastructure connection
18 to Europe. And Georgia can act as a hub for two
19 important internet corridors: the first from Europe via
20 Georgia to Armenia and then the Middle East, and the
21 second from Europe via Georgia to Azerbaijan and then to
22 South Asia.
23 Among other benefits, Georgia's position as the
24 region's primary digital hub will allow it to attract
25 large internet content providers such as Google,
[Page 51]
16:27 1 Facebook and Amazon to create data centres and make
2 significant investments in Georgia. This will in turn
3 foster the Georgian digital economy and create
4 substantial tax revenues and new employment
5 opportunities.
6 (Slide 27) By contrast, under Claimant's strategic
7 vision, Georgia's role in the Digital Silk Road is that
8 of a mere transit corridor to Azerbaijan. The
9 Azerbaijan Digital Hub programme -- of which CO would
10 form an integral part -- will, in Bakcell's words:
11 "Add[] the city of Baku to the global internet map
12 as a new Internet Exchange Point and attract[] large
13 content providers (Google, Facebook, Netflix, Apple,
14 Alibaba, Amazon, Tencent, etc.) to Azerbaijan ..."
15 Not Georgia. As the Georgian courts have found,
16 Claimant's control of CO therefore risks seriously
17 impairing Georgia's ability to develop into the region's
18 primary digital hub.
19 (Slide 28) In determining whether to recommend
20 provisional measures, the Tribunal must balance the harm
21 caused to Claimant in the absence of the provisional
22 measures and the harm caused to Respondent if the
23 measures are granted. The provisional measures sought
24 by Claimant are wholly disproportionate. Claimant would
25 be granted the right to control CO by fiat without any
[Page 52]
16:29 1 constraint, while Georgia would be prohibited from
2 exercising any of its regulatory powers over CO.
3 The worst case scenario for Claimant would be the
4 compensable loss of a business opportunity. Georgia, by
5 contrast, would suffer substantial irreparable harm.
6 MR ROWLEY: Ms Annacker, if I might ask a question. It's
7 similar to the questions that were posed to Claimant.
8 You've just explained Georgia's ambition to become
9 the region's digital hub, and how it will be thwarted in
10 this by Claimant's plans. Have you referred to evidence
11 of that in your slides or in your submissions? Or will
12 you be doing so?
13 DR ANNACKER: I think the annual sustainability report that
14 we put up on the slides before, the Bakcell report, very
15 clearly shows that the Azerbaijan Digital Hub project
16 will lead to the creation of data centres, attraction of
17 large internet content providers in Azerbaijan, not
18 Georgia. There can't be two digital hubs in two
19 neighbouring countries. The large content providers
20 will place their data centres either in Azerbaijan or in
21 Georgia.
22 DR ALEXANDROV: May I --
23 DR ANNACKER: May I still add -- and we can come back to
24 this point also: what is in the record -- and I'm
25 planning to address it maybe after the break -- is
[Page 53]
16:31 1 Claimant's own applications, the Bakcell applications.
2 These applications refer precisely to the benefits that
3 we discussed of CO's integration into the Digital Silk
4 Road.
5 What the Bakcell applications did not disclose is
6 that the real plan is to turn Azerbaijan into the
7 primary regional hub of the region. That is clear from
8 Bakcell's sustainability reports.
9 DR ALEXANDROV: If I may follow up on this point. I'm not
10 sure I understand; perhaps you can help me.
11 Let me characterise this, perhaps mistakenly, as
12 a strategic rivalry between Georgia and Azerbaijan on
13 who will be the digital hub of the region. How is that
14 relevant to the issue that we have in front of us, which
15 is provisional measures to prevent an irreparable harm
16 to Claimant's business in Georgia? Is it Respondent's
17 position that if this Tribunal orders the measures
18 requested by the Claimant, then Georgia will be --
19 I think your words were "prohibited from exercising any
20 regulatory power over Claimant's business in Georgia"?
21 How is that? Because if the provisional measures --
22 again, just as an example; we haven't decided anything.
23 But if the provisional measures focus on: (1) don't
24 withdraw the authorisation until this Tribunal has
25 rendered the award; and (2) if the provisional measures
[Page 54]
16:33 1 curtail during the course of these proceedings the power
2 of the special manager, how would that prohibit Georgia
3 from exercising regulatory powers over Claimant's
4 business?
5 You mentioned, for example, competitiveness.
6 I assume there are antitrust or competition regulations
7 in Georgia and a regulator who supervises that. Even in
8 the absence of a special manager, those regulations
9 would still apply, and the regulatory agency that
10 supervises competition laws and regulations in Georgia
11 would still be allowed to intervene any time there is
12 an issue of compliance with those regulations. And that
13 would probably be true with respect to any area of law.
14 So how would even the removal of the special
15 manager, let alone curtailing the powers of the special
16 manager, lead to a prohibition from exercising any
17 regulatory power by Georgia over Claimant's investment?
18 DR ANNACKER: So first, if we look back at the wording of
19 the provisional measures requested, Claimant requests
20 that Georgia be ordered that the GNCC refrain from
21 making or executing "any administrative decision". So
22 the wording is clearly much, much broader. And the same
23 is true for request no. 2: exercise of "any ... powers"
24 by the special manager.
25 But addressing your question regarding narrower
[Page 55]
16:35 1 provisional measures, if the special manager is
2 prohibited from exercising her powers, automatically
3 Claimant will be entitled to control the strategic
4 direction of the company. And Claimant has openly told
5 us that the sole purpose of the acquisition of the
6 company and the sole purpose of the provisional measures
7 is to allow him to integrate the company into the
8 Azerbaijan Digital Hub project. That means the Claimant
9 can lock a company that owns critical infrastructure
10 into contracts far beyond the completion of the
11 arbitration. Even if he loses the arbitration, the
12 company would entirely change its strategy of provision
13 of services and would change its strategic directions.
14 As regards supervisory control by the GNCC, the GNCC
15 has full regulatory power under Georgian law over CO.
16 But first, the provisional measures as requested by
17 Claimant would prohibit the GNCC from exercising that
18 power; and second, even if the GNCC were allowed to
19 exercise that regulatory power without a special manager
20 in place, given Claimant's track record of defying the
21 GNCC's order, there can't be any confidence that
22 Claimant would simply abide by any orders issued by the
23 GNCC.
24 Unless there are further questions from the
25 Tribunal, I am now turning to necessity and urgency.
[Page 56]
16:37 1 (Slide 31) Leaving aside the issue that we just
2 discussed, the provisional measures are wholly
3 disproportionate, Claimant has not even demonstrated, as
4 he must, that any of the provisional measures requested
5 are necessary and urgent. The rights requiring
6 protection by provisional measures, including the right
7 to non-aggravation of the dispute invoked by Claimant,
8 are circumscribed by Claimant's request for relief,
9 a damages claim.
10 Several investment tribunals have rejected requests
11 for provisional measures by investors whose local
12 companies were placed under state administration. These
13 requests, like Claimant's, did not satisfy the necessity
14 requirement because any harm that the Claimant may
15 suffer could be remedied by damages.
16 (Slide 32) I refer the Tribunal to Ipek Investment
17 v Turkey, Exhibit CLA-30, which is directly on point.
18 Turkey had subjected the Koza Group, a Turkish
19 conglomerate, to administration by a state agency.
20 Ipek Investment claimed to be the group's ultimate
21 shareholder, and it requested that Turkey be restrained
22 from disposing of the group's assets and from destroying
23 its value, invoking the right to the maintenance of the
24 status quo. The tribunal rejected this request because
25 the measures requested were not necessary to protect the
[Page 57]
16:39 1 rights invoked.
2 (Slide 33) Menzies v Senegal, Exhibit CLA-39, is
3 another case directly on point. Claimant lost control
4 over its local subsidiary when Senegal placed the
5 company under administration. Invoking the right to
6 non-aggravation of the dispute and its economic
7 interests, the claimant requested that Senegal be
8 ordered to terminate or suspend the administration to
9 restore claimant's control over the company. The
10 tribunal rejected this request because the measures
11 requested were not necessary to protect the rights
12 invoked.
13 The tribunal referred to a string of cases that have
14 reached the same conclusion: Plama v Bulgaria,
15 Occidental v Ecuador, Burlington Resources v Ecuador and
16 Metalclad v Mexico. These authorities are in the record
17 as Exhibits RL-3, RL-6, CLA-25 and RL-42. Two cases
18 also in accord should be added: Dawood Rawat
19 v Mauritius, Exhibit RL-14; and Quiborax v Bolivia,
20 Exhibit RL-13.
21 As this long string of cases confirms, the
22 provisional measures requested by Claimant are neither
23 necessary to protect any right to damages, claims he may
24 suffer, nor to maintain the status quo. In fact, if
25 granted, the measures requested would fundamentally
[Page 58]
16:41 1 change the status quo in Claimant's favour and to
2 Respondent's detriment.
3 The status quo is that Claimant's putative
4 investment in CO has not even been admitted. If the
5 provisional measures requested were granted, they would
6 impermissibly alter the status quo in Claimant's favour.
7 Not only would Claimant be treated as if the GNCC had
8 actually approved his attempted takeover, but Claimant
9 could control CO free of any regulatory supervision or
10 constraint. Respondent, by contrast, would be stripped
11 of its regulatory powers over critical infrastructure in
12 Georgia and deprived of its ability to develop into the
13 region's primary digital hub.
14 Claimant attempts to establish necessity by alleging
15 that the GNCC plans to suspend CO's authorisation and
16 the special manager is in the process of destroying CO
17 as a going concern. But even if Claimant could show
18 an imminent threat to CO as a going concern -- which he
19 has not done -- the requested provisional measures would
20 not be necessary.
21 (Slide 34) Plama v Bulgaria (RL-3) is instructive.
22 Bulgaria opened insolvency proceedings against Plama's
23 local subsidiary, Nova Plama, and made arrangements to
24 sell its assets. Plama requested that Bulgaria be
25 ordered to discontinue the proceedings to preserve its
[Page 59]
16:43 1 right to operate its subsidiary and the right to
2 non-aggravation of the dispute. In rejecting Plama's
3 request for provisional measures, the tribunal
4 underscored -- and I quote from paragraph 42:
5 "Even assuming the worst case from Claimant's point
6 of view, i.e., that Nova Plama is liquidated ...
7 Claimant in this arbitration -- which is not
8 Nova Plama -- will still be able to pursue its ECT
9 claims for damages against Bulgaria."
10 Likewise, Mr Hasanov is not CO. Assuming the worst
11 case from Mr Hasanov's point of view, he will still be
12 able to pursue his BIT claims for damages in this
13 arbitration.
14 DR ALEXANDROV: Can I ask you a question on that.
15 Investor-state arbitration is about economic harm, and
16 economic harm presumably can always be remedied by the
17 payment of the fair market value of the asset that was
18 lost. What is, in Respondent's view, irreparable harm
19 that would meet the requirement of imposing provisional
20 measures?
21 DR ANNACKER: The cases that have been cited by tribunals on
22 the very high standard to grant the exceptional remedy
23 of provisional measures clearly support the
24 proposition -- and that is Claimant's position -- that
25 for harm to be irreparable, it must be harm that cannot
[Page 60]
16:45 1 be compensated through an award of damages.
2 There have been situations in investment treaty
3 arbitration where claimants were intimidated, were
4 threatened by the host state; in isolated instances,
5 interference by the host state with the integrity of the
6 arbitration by intimidating witnesses. Those would be
7 situations where irreparable harm could be incurred.
8 But this is clearly not the case where a claimant is
9 free to pursue its claims for damages in the arbitration
10 without any impact if the provisional measures are not
11 granted.
12 I will then now turn --
13 THE PRESIDENT: Ms Annacker, sorry, can I just follow up
14 from one of the questions that Mr Alexandrov asked
15 Claimant, which is -- and your last submission of
16 November 18th dealt with this in the same way. You had
17 a section on the issue of administrative liability and
18 suspension of the authorisation to operate and then the
19 special manager.
20 You say in your brief that there's no indication
21 that GNCC plans to suspend authorisation to operate,
22 it's certainly not imminent, and it would be, I think,
23 counterproductive to Georgia's interest, given
24 2.5 million subscribers.
25 DR ANNACKER: Yes.
[Page 61]
16:47 1 THE PRESIDENT: What would be the harm to Georgia from
2 carving that requested provisional measure and limiting
3 it to during the pendency of the arbitration in order to
4 assess this question of illegality of the investment
5 that the certificate to -- the authorisation to operate
6 would not be suspended? How is Georgia harmed by that?
7 Leaving the special manager, as the special manager
8 has been operating since, I don't know, April, whether
9 that was in compliance with Procedural Order No. 3 or
10 not. In the way that the special manager has been
11 operating, what's the harm to Georgia if the certificate
12 or the authorisation could not be suspended?
13 DR ANNACKER: I was about to turn to --
14 THE PRESIDENT: Sorry.
15 DR ANNACKER: -- the question. But your question is still
16 tied to the earlier part of my pleading, so I will
17 immediately address it.
18 As we have made clear in our written pleadings, and
19 I will emphasise it again today in a few moments, the
20 GNCC has made a firm decision not to revoke CO's or not
21 even to suspend CO's authorisation in light of the harm
22 that you mentioned, very substantial harm that the
23 revocation of CO's authorisation would cause for the
24 Georgian telecommunications market.
25 THE PRESIDENT: Can I stop you there. You say "a firm
[Page 62]
16:49 1 decision". There's no undertaking, there's no
2 obligation that they put on themselves, the GNCC, and we
3 see the 31st December deadline.
4 What's the harm to Georgia, given the interest of
5 Georgia's citizens, what's the harm in GNCC being -- if
6 we were to impose, or try to impose, a measure saying
7 "For the pendency of the arbitration, that
8 administrative liability should not be implemented?"
9 I still don't see the harm.
10 DR ANNACKER: I think it is a basic principle that it is
11 upon Claimant, to obtain any provisional measure, to
12 establish that the provisional measure is necessary and
13 urgent. And as I'm going to address, Claimant simply
14 has not begun to satisfy that burden.
15 THE PRESIDENT: Isn't it the case that --
16 DR ANNACKER: It is not for Georgia to show --
17 THE PRESIDENT: Ms Annacker, isn't it the case that any
18 investor, as a matter of economic reality -- leave aside
19 whether the special manager is intrusive or not
20 intrusive. I take the point that the special manager
21 may or may not be, and we can consider that. But how
22 could any investor not be comforted by -- given the
23 mandate of the special manager initially being to
24 reverse the transaction, how would any investor not be
25 comforted and it not be important to have the assurance
[Page 63]
16:51 1 that this company that the investor may be interested in
2 investing in is not going to be suspended? Isn't that
3 just economic reality?
4 DR ANNACKER: That is certainly economic reality. But it is
5 for Claimant to show, to obtain such a provisional
6 measure, that it is necessary and urgent to prevent
7 irreparable harm.
8 Let's stay on that point for the revocation of the
9 licence. So we have shown in our written pleadings that
10 the GNCC did consider, in the spring of 2020, the
11 revocation -- it was suspension, not revocation. We are
12 talking about the suspension of the --
13 THE PRESIDENT: Suspension, yes.
14 DR ANNACKER: Yes.
15 So the GNCC did consider that. If we could go to
16 the next slide (35), we see the GNCC decision of 2020
17 (C-34).
18 There was a very careful analysis by the GNCC's
19 telecom market regulation department. That analysis
20 showed that the suspension would deprive 40% of the
21 Georgian wholesale internet market of internet access,
22 which would in turn deprive more than 2.5 million
23 internet subscribers and more than 300 public agencies
24 of internet access. In addition, internet transit to
25 neighbouring countries would be severely compromised.
[Page 64]
16:52 1 I refer the Tribunal to Exhibit R-1, which contains the
2 telecom market regulation department's detailed
3 analysis.
4 It was the very purpose -- the very purpose -- of
5 the appointment of the special manager to avoid this
6 harm and to permit Caucasus Online to continue to
7 operate in accordance with Georgian law. There is not
8 the slightest indication, in light of the very
9 substantial harm identified, that the GNCC would be
10 planning to revoke CO's authorisation. Indeed, for more
11 than two years now, Claimant has not been able to
12 provide a shred of evidence to substantiate his
13 allegation that the GNCC plans to revoke CO's
14 authorisation to operate.
15 [Redacted]
16 [Redacted]
17 [Redacted]
18 [Redacted]
19 [Redacted]
20 [Redacted]
21 [Redacted]
22 [Redacted]
23 [Redacted]
24 [Redacted]
25 [Redacted]
[Page 65]
16:54 [Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
21 So Claimant should refrain from accusing Georgia of
22 acting in bad faith and from requesting documents in
23 purported support of his accusation without proffering
24 any evidence whatsoever.
25 (Slide 37) As the Georgian courts have found, there
[Page 66]
16:56 1 is also no evidence that CO's special manager has or
2 would misuse her powers to drive CO into bankruptcy.
3 Indeed, since her appointment in October last year, the
4 special manager and her successors have exercised their
5 powers very conservatively.
6 [Redacted]
7 [Redacted]
8 [Redacted]
9 [Redacted]
10 [Redacted]
11 [Redacted]
12 [Redacted]
13 [Redacted]
14 [Redacted]
15 [Redacted]
16 [Redacted]
17 [Redacted]
18 [Redacted]
19 THE PRESIDENT: Ms Annacker, did you want to address a point
20 that the Claimant made earlier this morning/this
21 afternoon about: the special manager's remit had nothing
22 to do originally with running the business or
23 participating in or approving business measures like
24 you've just described, it was simply to reverse the
25 transaction, and therefore everything that the special
[Page 67]
16:57 1 manager has been doing since the Request for Arbitration
2 is not in accord with that original mandate?
3 DR ANNACKER: I was not planning to address that point in my
4 opening statement.
5 THE PRESIDENT: If you want to wait till after, it's fine.
6 DR ANNACKER: I can address that point if you wish.
7 THE PRESIDENT: No, no, I don't want to take you out of
8 sequence.
9 DR ANNACKER: But I can certainly address it in the
10 rebuttals.
11 THE PRESIDENT: Let's save it for rebuttals.
12 DR ANNACKER: I will then continue with the special manager.
13 I am mindful of the time that's left.
14 THE PRESIDENT: Try to wrap up in like five minutes.
15 DR ANNACKER: Yes, I try to wrap up. I only need like two
16 or three minutes to wrap up, and that question would not
17 fit into the rest of the points I would like to present
18 to the Tribunal in my opening statement.
19 [Redacted]
20 [Redacted]
21 [Redacted]
22 [Redacted]
23 [Redacted]
24 [Redacted]
25 [Redacted]
[Page 68]
16:59 [Redacted]
[Redacted]
3 (Slide 39) The special manager has also granted CO's
4 management residual freedom in the conduct of CO's
5 day-to-day business operations. On June 1st the special
6 manager issued a power of attorney to CO's director
7 (C-47). So CO's director may, without the special
8 manager's consent, carry out various day-to-day
9 transactions. He may further make payments for more
10 than 55 transactions under contracts set forth in
11 annex 1 to the power of attorney. These contracts were
12 jointly identified by the special manager, CO's
13 management and CO's accountants.
14 Claimant has not shown -- this is a very important
15 point -- that the approval requirement for payments and
16 transactions not included in this power of attorney
17 somehow poses a threat to CO as a going concern. There
18 is simply no evidence in the record that this is the
19 case. The record shows that the special manager has
20 promptly granted approval for numerous transactions, and
21 that in the instances where she withheld her approval,
22 it was instances where the request was for an approval
23 of a change in the strategic direction of the company.
24 Claimant does complain about a few instances in
25 which the special manager withheld her approval. But
[Page 69]
17:01 1 Claimant cannot show that any of these rejections
2 created any threat to CO's continued existence or
3 suggested the special manager would drive CO into
4 bankruptcy.
5 (Slide 40) I will very briefly turn to urgency.
6 (Slide 41) To obtain provisional measures, Claimant
7 must show an imminent risk of irreparable harm.
8 Claimant has not established any risk of a suspension of
9 CO's authorisation to operate, let alone an imminent
10 one. Weco, CO and Mr Makatsaria already alleged in 2019
11 before the Georgian courts that there was a high risk
12 that the GNCC would revoke CO's authorisation to
13 operate. Now, more than two years later, this allegedly
14 imminent risk has not even begun to materialise.
15 Claimant has also not identified any decision that
16 the special manager would be about to take that would
17 threaten CO's continued existence. The special manager
18 was appointed more than a year ago, but has not taken
19 any decision that could remotely be characterised as
20 creating a risk to CO as a going concern.
21 (Slide 43) In fact, Claimant's requests for interim
22 relief have by now been extensively litigated for more
23 than two years. Six judges, three on first instance and
24 three on appeal, have independently held that a stay of
25 the 2019 GNCC decision is not warranted.
[Page 70]
17:03 1 (Slide 44) Four judges have held independently, two
2 on first instance and two on appeal, that a stay of the
3 decision on the appointment of the special manager is
4 not warranted.
5 (Slide 46) Under the Georgian Administrative
6 Procedure Code (R-63), the courts may suspend
7 an administrative act if there is justified doubt
8 regarding the lawfulness of the individual
9 administrative act or the urgent execution of such
10 an act may significantly damage the party or make the
11 protection of his/her legal rights and interests
12 impossible. Each judge concluded that none of these
13 requirements was satisfied. Claimant has not shown any
14 basis for this Tribunal to come to a different
15 conclusion.
16 Thank you.
17 THE PRESIDENT: Thank you very much, Ms Annacker. A little
18 bit later than scheduled, let's take a 10-minute break,
19 and then we're back for 15 minutes with Claimant's reply
20 and then 15 minutes for Respondent's Rejoinder.
21 So let's reconvene at Central European Time 17.14,
22 11.14 DC time. Thank you very much, everyone.
23 (5.05 pm)
24 (A short break)
25 (5.15 pm)
[Page 71]
17:15 1 THE PRESIDENT: Very well. Let's have Claimant's reply. Is
2 it Mr Ostrove or Ms Cervantes-Knox? Mr Ostrove, I see.
3 MR OSTROVE: I will lead off, and my colleagues may jump in
4 at the end if I have not covered their points off.
5 Reply submissions on behalf of Claimant
6 MR OSTROVE: We just heard a rather remarkable argument.
7 Half of the presentation that we just heard, or close to
8 half, was premised on the idea that this was critical
9 infrastructure in Georgia, some kind of special
10 protected status, and that there's incredible harm to
11 Georgia if an Azeri national owns the company that owns
12 the submarine cable and is allowed to use it to develop
13 its business. This turns the world on its head for
14 a couple of reasons.
15 First of all, there isn't even a legal definition in
16 Georgia of "critical infrastructure". And if you look
17 at C-44, the Venice Commission report, one of its
18 criticisms about the passage of the law imposing the
19 special manager, and then the imposition of the special
20 manager, is that it was allegedly done to protect some
21 kind of critical infrastructure. And they actually
22 recommend to Georgia, "Go back and rethink the way
23 you're doing things, because there is no such thing in
24 your legal system".
25 The second point though is: and then they say,
[Page 72]
17:16 1 "Well, if you grant these provisional measures, and
2 Mr Hasanov can direct the company the way he wants, he
3 could start selling everything off. He could sell these
4 assets off, move them around to other companies, and we
5 lose all control".
6 There's no other company in Georgia or anywhere else
7 that's going to be able to operate this submarine cable,
8 because precisely you have to be an authorised person in
9 Georgia, under the Telecommunications Act, to operate
10 the internet services. So there is no way for him to go
11 in and sort of fleece the company out and move
12 everything into someplace else, because that entity
13 would have to get authorisation to operate in Georgia,
14 which wouldn't be possible. So there's no danger there.
15 And also, this idea that running the company
16 Caucasus Online would cut off all of the Georgians who
17 need access and privilege someone else: there are
18 contracts in place. That's assuming that Mr Hasanov
19 would come in, redirect the company not to build its
20 business but to destroy its business by breaching all of
21 its contracts, getting rid of all of its existing
22 revenue, in order to try to do something else. It's
23 a nonsensical approach.
24 Even more troubling though was this idea that: no,
25 Georgia wants to be a digital hub, Georgia doesn't want
[Page 73]
17:18 1 Azerbaijan to be the digital hub. What you heard was
2 the absolute admission that the reason for all of the
3 attacks on Mr Hasanov's investment are pure
4 discrimination. They don't like an Azeri national
5 running a business that they think might privilege
6 development in Azerbaijan over development in Georgia.
7 They're entitled to feel that way but they're not
8 entitled to act on those feelings, because they signed
9 a bilateral investment treaty with Azerbaijan saying
10 that they wouldn't do that.
11 Even worse though: even if they could get the
12 reversal of the transaction -- and that's not what the
13 provisional measures are about today -- if they could
14 get the reversal of the transaction and things went back
15 to Mr Makatsaria, Mr Makatsaria was not developing
16 a Digital Silk [Way] with Georgia as the data hub; the
17 company was just going along. It's an Azerbaijani
18 national who came in with the idea of developing and
19 building this into a broader network. But what they
20 really want to do is say, "No, we should let the special
21 manager run the company, not the former owner". So what
22 that means is that they want Georgia to run the company.
23 So essentially, the lack of provisional measures
24 would allow a continued takeover by Georgia for Georgia
25 to do something else now with the asset. So that's even
[Page 74]
17:19 1 more insidious than we had realised.
2 But in any case, taking over Caucasus Online will
3 not allow Georgia to become the central hub. The only
4 way Georgia can have a role in the Digital Silk Way
5 project -- including being a hub, because there's no
6 definition exactly of what a hub is; you can have
7 internet servers in multiple places -- is by working
8 together with this project, which is something that our
9 client would warmly welcome.
10 They also express concern about the competitive
11 system in Georgia. All we have ever asked is that the
12 GNCC, if it's concerned -- and they put up the offer for
13 the Bakcell application, which was a way of saying,
14 "Okay, let's just do over. Go ahead and we'll submit
15 for authorisation". And what the GNCC is supposed to do
16 is the GNCC is supposed to regulate competition on the
17 Georgian market.
18 So if the GNCC could actually do its job and do
19 a competitive analysis to see whether there's any danger
20 to competition on the market in Georgia, that's all we
21 had ever asked for at the beginning, and they've refused
22 to do that. Instead, what they're raising is some kind
23 of regional competition issue, which is not a legitimate
24 interest of Georgia or the GNCC; that is a political
25 ambition, as I said before.
[Page 75]
17:21 1 With respect to the standard for provisional
2 measures, you already have our slides with -- if we
3 could quickly put that slide up (slide 12) -- which
4 listed the cases, so it's not even necessary you have it
5 in our slides, the list of cases where provisional
6 measures have been granted in areas which were not
7 involving threatened arrests or other kinds of bodily
8 harm or anything like that. And in fact, the
9 Papua New Guinea case, which is described in our
10 Response at paragraphs 123 to 125, and is RL-9, one of
11 the provisional measures involved the issue of
12 replacement of management and preventing that, so it's
13 actually on all fours.
14 When they tried to compare us to Plama, in Plama
15 there was no request for declaratory relief. And again,
16 at the risk in rebuttal of repeating myself, we're
17 trying to be left in a position where, if we get the
18 declaratory relief, the project can go forward and the
19 interests are maintained. Whereas if we don't get the
20 provisional relief, we will never be able to accomplish
21 the project for which the investment was made, rendering
22 the entire investment worthless.
23 Counsel argued that the GNCC has made a firm
24 decision not to revoke the licence. Without going
25 through the Q&A that went back and forth, there has
[Page 76]
17:22 1 never been any decision, let alone a firm decision.
2 Yes, the GNCC and Georgia have indicated that they would
3 prefer not to withdraw the authorisation. But in the
4 May and October GNCC sessions, it was very clearly
5 stated that that's the only option that is left if they
6 are unable to obtain the reversal through the special
7 manager.
8 So at some point that becomes the only thing left,
9 is they say, "We don't want Mr Hasanov here owning, and
10 we can't get rid of him, and the only thing we can do is
11 take away the authorisation to operate". And that would
12 not permanently cut off all of the millions of people
13 that are involved: the asset would just be put into some
14 other entity. The company would go bankrupt, the state
15 would take it over in bankruptcy, or the banks would
16 take it over, and they would just simply destroy
17 Mr Hasanov's investment.
18 They make a big stink about the fact that we allege
19 that we think that this was also raised again in the
20 July 29th closed hearing. It really doesn't matter
21 because the GNCC had already said it before. We've
22 simply requested that the recording be provided, and
23 that they explain to us how the transcript was done,
24 et cetera, so that we can test whether there might still
25 be a copy of the recording available.
[Page 77]
17:23
1 Then they said, "Well, why didn't CO's director
2 simply record it himself and provide it to the
3 shareholders?" Exhibit C-53 gives you the answer to
4 that question, in which Mr Kopaladze writes to the
5 supervisory board member saying, "No way that I can
6 provide you any information about what happened in there
7 without getting consent from the special manager,
8 because the special manager forbids me from sharing
9 information like that with you".
10 Another concern they raised --
11 MR ROWLEY: I have a question for you, Mr Ostrove, if you
12 can hear me. Can you hear me?
13 MR OSTROVE: Yes.
14 MR ROWLEY: You've just said -- and I'm paraphrasing -- that
15 if you don't get the preliminary relief, your client
16 will never be able to have the project go forward for
17 which the investment was made. And again, we raised the
18 question of evidence earlier. Can you direct us to the
19 evidence for that?
20 MR OSTROVE: There were two points.
21 There was a question of the evidence that the
22 company will go out of business if we don't get the
23 provisionary relief, in terms of the financing. And
24 it's true that in our submissions we had referred to the
25 financial situation of the company and we had not put in
[Page 78]
17:25
1 the audited financial reports or anything like that,
2 which we now have access to. And some of the changes in
3 the revenue stream happened very recently, with the
4 cancellation or the non-renewal of one major contract.
5 So we are certainly happy, if you would like, in
6 a post-hearing submission, to turn over the audited
7 financial reports so you can see the financial condition
8 of the company. We're happy to do that.
9 But the point I was making was a broader one, which
10 was not that the company is going to go out of business
11 on default on its debt, although we're sure that that
12 will happen, but rather that if, for the next two years
13 while this case is going on, or possibly longer --
14 I think we have a June 2023 hearing. So without
15 prejudging how long it might take you to issue your
16 award, we're still a couple of years away from
17 a decision here.
18 For the Digital Silk Road project to go forward, the
19 company needs access to the undersea cable in the
20 Black Sea now. It is a cable that has a certain
21 lifespan, and there is simply no way to wait two and
22 a half years until an award is complied with, and then
23 restart a project where others will come up with
24 competing cables and other things. The moment is now.
25 The deals, the MoUs that we wanted to sign are ready to
[Page 79]
17:26
1 go forward.
2 If we're just told, "No, the special manager is
3 going to run the company for the next two and a half
4 years and Georgia is going to run the company for the
5 next two and a half years, and maybe two and a half
6 years/three years from now, you can do this", then the
7 entire investment is lost: there is no basis for making
8 that investment.
9 MR ROWLEY: I think a final question from me. I think it
10 was the Chairman who asked earlier: why is the status
11 quo not the status that you were in when you initiated
12 the arbitration; that is, with the manager in place?
13 MR OSTROVE: And again, I would refer back respectfully to
14 the point that Ms Cervantes-Knox made, which is: the
15 status quo was that Mr Hasanov was the owner and the
16 ownership bodies, including the supervisory board,
17 et cetera, had access. The special manager was in place
18 with a remit to seek the reversal of the transaction,
19 and not with a remit from the GNCC to take over the
20 management and essentially have the state take over
21 management of the company.
22 So the status quo was not: special manager in place,
23 running the company as she sees fit in what she
24 considers to be the best interests of the company. The
25 status quo was: a special manager in place with a remit
[Page 80]
17:28
1 to reverse the transaction.
2 Again, I would refer you to C-44, the Venice
3 Commission and the Directorate General on the Rule of
4 Law, which specifically found that that was a remit that
5 was impossible, and therefore the Special Manager Law
6 violates the European Convention on Human Rights because
7 it's an illegitimate action because it gives powers that
8 have nothing to do with the purported goal.
9 So the status quo, in our submission, is: ownership
10 of Mr Hasanov, special manager --
11 MR ROWLEY: I have the point. Thank you.
12 THE PRESIDENT: Can I just follow up on that. Maybe it's
13 for Ms Cervantes-Knox.
14 I have had a look at C-34, despite my difficulties
15 with Box. I appreciate that the overarching goal
16 established on 1st October is to reverse the
17 transaction, but there are a whole list of things that
18 nonetheless, in order to support that goal, are part of
19 the mandate for the special manager.
20 [Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Page 81]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
17:29
12 you read C-34 -- there is at least a concern. I take
13 your point, Mr Ostrove: critical infrastructure is not
14 mentioned in terms. But the regional competitiveness of
15 Georgia is certainly is a concern and certainly is
16 expressed here.
17 And how do we know that -- is it Mr Evers is
18 AzerTelecom in -- is it C-54? Yes, Mr Evers. I mean,
19 he expresses a frustration. But how do we know that
20 that frustration is not directed to the competitive
21 advantage of AzerTelecom and Azerbaijan as a hub, as
22 opposed to frustration of what Caucasus Online might
23 create for Georgia? We just don't know what his actual
24 interest is, do we, in order to say: well, it's not to
25 put Azerbaijan first? It's hard to conclude that, at
[Page 82]
17:31
1 least from C-54. You may have other evidence you can
2 take us to.
3 But at least all of this is in play from Georgia's
4 perspective, isn't it: regional competitiveness and the
5 concern that alienation of shares -- illegal, as Georgia
6 believes -- illegal alienation of shares is part of it?
7 Why can't we take that into account?
8 MR OSTROVE: We are just having a debate as to who is
9 answering your question.
10 THE PRESIDENT: Yes, sorry. I've crossed the borders on
11 your division. My apologies.
12 MR OSTROVE: I'll start, and Ms Cervantes-Knox may complete.
13 THE PRESIDENT: Okay.
14 MR OSTROVE: First of all, [Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Page 83]
17:32
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Page 84]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
17:34
12 THE PRESIDENT: Yes, I follow that. But when you read
13 [paragraph] 14 (C-34), it is:
14 "The special manager shall exercise the powers
15 vested in her under this Decision in good faith and with
16 the belief that each of her actions/omissions will best
17 ensure the fulfillment of the obligation set forth in
18 paragraph 2 of the decision."
19 We know what paragraph 2 of the decision is.
20 You could say that by operating in this way -- and
21 she's got a lot of powers under this decision here -- by
22 operating in this way, it's not connected to fulfilling
23 paragraph 2. You could say that. But that's no
24 different than Georgia saying, "Yes, but his investment
25 was illegal to begin with, and therefore we are not
[Page 85]
17:35
1 going to regard it in the same way".
2 She is operating under the decision powers that are
3 given to her in C-34. I don't see where she's operating
4 outside those powers, to reach back to Mr Rowley's point
5 about October 1st. Those powers may not fulfil the
6 reversal of the transaction, but the itemised powers
7 that she's been given certainly go into the management
8 of the company. Whether that's illegal or not, I don't
9 think that's the question before us.
10 MR OSTROVE: It's not a question of whether that's illegal
11 or not; it's a question of what the legal status quo
12 was, without asking you to prejudge either the legality
13 of our Claimant's investment or the legality of her
14 actions right now.
15 The status quo when we filed is that Mr Hasanov was
16 the owner of the shares in a BVI company. Today they're
17 trying to say that's illegitimate, it shouldn't apply.
18 They can't, in Georgia, say the BVI company ownership is
19 wrong; that was the status quo. And the status quo was
20 that she was appointed -- yes, with an incredible set of
21 powers, but she was appointed with one mandate. And
22 we're saying -- again, it's not a question of whether
23 she's acting illegally or not in doing what she's doing;
24 we're not asking you to judge that. We're asking you to
25 find that the status quo should be that she is in place
[Page 86]
17:36
1 with a mandate and what she is doing is, as a factual
2 matter, beyond the mandate.
3 She admits that it's beyond the mandate. And we're
4 not asking you to judge whether that's creating
5 illegality or not; we're simply asking you --
6 THE PRESIDENT: I'm having trouble with that, Mr Ostrove,
7 when I read paragraph 2 (C-34):
8 "The special manager shall be in charge of ensuring
9 the restoration of the status (the shareholding)
10 existing before the acquisition by the individual ...
11 [and] owned by the individual ..."
12 And then:
13 "The special manager shall be appointed until the
14 obligation specified in paragraph 2 is fulfilled."
15 And then: the special manager shall have a whole
16 bunch of powers. And whether they are geared to
17 paragraph 2 or not, those are the powers that the
18 special manager has as of October 1st 2020, right?
19 MR OSTROVE: But with respect, I'm going to do something
20 which I tell all of my students and associates never to
21 do, and I'm going to argue by analogy.
22 The police have all kinds of powers, right? They
23 can arrest you, they can take you downtown and hold you
24 in a cell overnight. But they're only supposed to
25 exercise those powers within the scope of their mission.
[Page 87]
17:38
1 A tribunal has all kinds of powers that are granted
2 to it by law. She's granted all kinds of powers. And
3 the fact even that paragraph 3 says, "She's done when
4 she's accomplished the remit in paragraph 2" means --
5 THE PRESIDENT: But it says that she's "appointed until the
6 obligation specified in paragraph 2". And then in
7 paragraph 5, she "shall be granted the following
8 powers".
9 Again, I'll stop there. I'll just say: there are
10 a bunch of powers she has as of October 1st. Whether
11 they're geared to accomplishing the reversal of the
12 transaction, your point being that's something she could
13 never achieve anyway, that's a question we have in mind.
14 But you've helped me with that. I think
15 I understand the point.
16 MR OSTROVE: Thanks. And I would encourage the Tribunal to
17 look at C-44 as well, because the Venice Commission was
18 troubled by this as well, and went over it in detail.
19 I'm sure you've already read it.
20 THE PRESIDENT: Yes, they're troubled, I get it,
21 I understand. I understand they're troubled. I got it.
22 No, that's very helpful, and I will go back to C-44.
23 MR OSTROVE: I think Ms Cervantes-Knox wanted to add
24 something, as this was, after all, her point.
25 MS CERVANTES-KNOX: Mr President and Mr Rowley, in relation
[Page 88]
17:39
1 to your question, in terms of the status quo at the time
2 this decision was made, just one other observation I'd
3 like to make about C-34 is that the special manager was
4 specifically authorised to specify in writing the list
5 of powers that could be exercised by the governing
6 bodies of Caucasus Online, which includes directors, the
7 supervisory board, the shareholders. So even if we were
8 to accept that she had the power to exercise certain
9 activities, to undertake certain activities to reverse
10 the transaction, it was even envisaged by the GNCC that
11 she would be conferring certain powers on the governing
12 bodies of the company.
13 I think you suggested, Mr President, that she is
14 entitled to take a view that this was an illegal
15 transaction, and therefore she can effectively stop the
16 shareholders and the management of the company from
17 having any involvement in the company, and she can
18 construe her powers in that way. But actually it is
19 obviously envisaged that they will have some powers and
20 they will be authorised to exercise certain powers.
21 So clearly this is not a black-and-white issue where
22 she was supposed to operate the company and they have no
23 powers. And of course, that's one of the aspects of
24 provisional relief that we've sought, and it was given
25 in PO3, was the ability of the supervising bodies to be
[Page 89]
17:40
1 able to exercise powers in the manner envisaged by the
2 GNCC's decision so that they are not constantly unable
3 to access information and have any participation in the
4 company whatsoever.
5 THE PRESIDENT: Thank you. That's very helpful,
6 Ms Cervantes-Knox.
7 We've gone way over. If you want to make a final
8 point on any of the questions in particular that the
9 Tribunal asked, or any of the points that Ms Annacker
10 made, now is the opportunity to take a couple of minutes
11 to do so.
12 MS CERVANTES-KNOX: Thank you. I'd just like to pass over
13 to my colleague Anthony Sinclair, just on the relief
14 sought. Thank you.
15 THE PRESIDENT: Thank you.
16 Mr Sinclair.
17 MR SINCLAIR: Thank you, Dr Shore. I'll be brief again.
18 I think one of the points made by Georgia's counsel
19 was that the way the relief is formulated is over-broad
20 insofar as it refers to "any administrative decision" in
21 the first line. And you see that in respect of the
22 first measure in particular.
23 We do think that they've made too much of this
24 point. The relief plainly is drafted and formulated in
25 the context of the alleged violations of the 2016 and
[Page 90]
17:42
1 2019 GNCC decisions and the sanctions flowing therefrom,
2 and we think that is clear from the relief. But of
3 course it's within your discretion, members of the
4 Tribunal, to formulate the relief in the way that you
5 consider more precise.
6 Secondly, focusing on the relief, there's been a lot
7 of discussion today about revocation of the
8 authorisation to operate; that's one of the first
9 matters. I would say to you, members of the Tribunal,
10 that for all the talk, you did not hear today a formal
11 undertaking from Georgia that they will not cancel the
12 authorisation to operate. If Georgia is making that
13 formal undertaking, I invite them to do so today. But
14 in the absence of them doing so, sir, we do urge you to
15 record that formally in writing.
16 Lastly, with regard to the breadth of the relief in
17 respect of the special manager, measure 2, and the third
18 measure we seek concerning authorising management to
19 carry on the business -- and I'm picking up the
20 discussion you had just a moment ago, sir -- really it
21 cannot be that you would leave the situation, the status
22 quo, as the special manager having these broad powers
23 and having no constraint upon them. I think that is the
24 point that Mr Ostrove was trying to convey to you and
25 Ms Cervantes-Knox was also trying to convey to you.
[Page 91]
17:44
1 There must be a constraint on those powers. And the
2 constraint is evident in paragraph 2, we submit.
3 Otherwise you would be tolerating and perpetuating
4 a situation in which the special manager has the power
5 to strangle the company until the transfer of shares at
6 BVI level is de facto reversed, because it becomes
7 untenable for Mr Hasanov to continue to hold the shares
8 or because the investment is effectively destroyed.
9 Therefore, sir, we urge you to grant the relief
10 articulated in measures 2 or 3 as put to you. Thank
11 you.
12 THE PRESIDENT: Thank you very much, Mr Sinclair.
13 Let me check with Mr Alexandrov, Mr Rowley: any
14 further questions?
15 I just have a quick one, Mr Sinclair. You heard
16 Ms Annacker say that in terms of revocation, it's for
17 you to show that there is an investor out there, or
18 someone who is concerned about this, and that that's
19 imminently a problem. And she rejected the notion that
20 we should just take it as a given that it's a problem;
21 it's for Claimant to show that it is an issue and that
22 they will be imminently harmed, absent a formal
23 constraint from the Tribunal preventing suspension or
24 revocation.
25 What would you say in response to that?
[Page 92]
17:46
1 MR SINCLAIR: Thank you, sir.
2 The GNCC has made it plain that it has no other
3 recourse available to it in order to procure compliance
4 with its decisions than revocation, and thus we must
5 fear that revocation is an imminent possibility. The
6 deadline is 31st December at present, as you know.
7 So I think, sir, that in itself proves the point:
8 there is a serious risk of revocation, and it's neither
9 here nor there whether there's a third party out there
10 who shares our concerns. I think the point is already
11 made.
12 The reality on the ground, as evident from your
13 exchange with Mr Ostrove earlier, is that we have great
14 difficulties in securing the evidence of Georgian
15 nationals, and in those circumstances we have been
16 constrained. But we have been able to refer you at
17 least to exchanges at the supervisory board level
18 between Mr Evers and others concerning Amazon.
19 Lastly, I would invite you, sir, to recall that
20 Ms Annacker could not point to any harm on the Georgian
21 side if you were to formally record the undertaking that
22 they will not cancel the authorisation of the licence.
23 Thank you.
24 THE PRESIDENT: Thank you very much, Mr Sinclair.
25 I think that was very helpful in reply, Mr Ostrove,
[Page 93]
17:47
1 Ms Cervantes-Knox, Mr Sinclair. Thank you very much.
2 Let me see if we can get Ms Annacker on screen.
3 Thank you very much, Ms Annacker.
4 Again, same provision on time, with the
5 qualification, Ms Annacker, that you stand between the
6 45-minute break! But don't worry about that; you have
7 ample time. I know that there were a lot of points put
8 to Claimant and there were a couple of points that you
9 had reserved. So, please, we're in your hands.
10 (5.48 pm)
11
12 DR ANNACKER: Thank you very much, Mr President. I will
13 start with a few words on the legal standard.
14 Of course the parties have discussed extensively
15 already in their written pleadings the standard of
16 irreparable versus serious harm. I would like to again
17 emphasise that the cases on which Claimant relies for
18 the proposition that serious harm is sufficient, each of
19 these cases did involve claims for specific performance,
20 whereas the present case involves solely a claim for
21 damages.
22 That was the case in Perenco v Ecuador, where the
23 claimant requested to be reinstated in its rights under
24 a participation contract; Exhibit RL-16, paragraph 46.
25 That was the case in Burlington v Ecuador, where the
[Page 94]
17:49
1 claimant sought specific performance of two
2 production-sharing contracts; Exhibit CL-25,
3 paragraph 71. And in Micula v Romania, where the
4 claimant requested restitution of investment incentives,
5 Exhibit RL-47.
6 The tribunal in Nova Group v Romania summarised the
7 situation in paragraph 238, Exhibit RL-5:
8 "... tribunals adapting formulations looser than
9 'irreparable' harm tend to do so where on the merits,
10 the applicant is seeking specific performance or some
11 other form of equitable or injunctive relief, and not
12 simply monetary compensation."
13 Claimant has argued this morning and emphasised that
14 they are seeking declaratory relief, and that the
15 declaratory relief should be considered as being
16 sufficient in the absence of a request for specific
17 performance.
18 Claimant's Request for Arbitration seeks actually --
19 it's paragraphs 125, 126 and 127, maybe we can bring it
20 up on the screen -- it seeks three declarations,
21 declarations that Respondent has violated the FET
22 standard, the prohibition against discrimination and the
23 prohibition against unlawful expropriation, with relief
24 in the form of monetary damages for these purported
25 treaty violations. This is their request for relief.
[Page 95]
17:51
1 Claimant has not requested specific performance,
2 restitution. It is clear from the request for relief
3 that the Claimant requests declaratory relief as a mere
4 predicate to the claim for monetary damages. It does
5 not request specific performance or restitution.
6 Let me now turn to the revocation of CO's
7 authorisation. I would emphasise again: the burden is
8 on Claimant. The [Claimant] must show that provisional
9 measures with respect to the revocation of CO's
10 authorisation are urgently needed because of an imminent
11 threat to CO's authorisation to operate.
12 There is nothing in the record that would suggest
13 that there is such a threat. On the contrary, the
14 record suggests that the GNCC has identified substantial
15 harm, has put the special manager in place and will not
16 proceed with the revocation. We have heard today again
17 without any support, in the rebuttal, "The GNCC said
18 this and this". We have no evidence. There is nothing
19 that suggests that the GNCC would withdraw the
20 authorisation of CO.
21 There was another insinuation that: because the
22 GNCC, in its October 15th [2021] decision, the latest
23 decision, issued a warning and extended the deadline for
24 compliance with the May 20th 2021 decision until the end
25 of December 2021.
[Page 96]
17:53
1 It is very clear from the documents in the record,
2 from the minutes and the decisions themselves, that the
3 GNCC resorted to the lenient measure available to it to
4 avoid the expiration of the statute of limitations under
5 Georgian administrative law. It is also clear from the
6 documents in the record, the decisions themselves and
7 the minutes of the hearings for these decisions, that
8 the GNCC extended the deadline in order to allow
9 Claimant and Georgia to engage in meaningful settlement
10 discussions.
11 While the GNCC first set a three-month period for
12 compliance, August 31st 2021, since the negotiations
13 were ongoing by that time, the term was extended until
14 December 31st 2021, as was already discussed at the time
15 when the three-month period for compliance was set.
16 So there is absolutely nothing to support Claimant's
17 insinuation that the GNCC would set such a deadline
18 because it hopes to be free to be able to revoke CO's
19 authorisation as soon as possible after the hearing.
20 Now let me turn to the special manager and CO's
21 financial situation. First, CO's financial situation.
22 Again, the burden is on the Claimant, as the
23 requesting party, to show that there is an imminent
24 threat to CO as a going concern. Nothing in the record
25 suggests that CO is close to bankruptcy.
[Page 97]
17:55
1 Claimant has, I think it was the first time after
2 the written submissions, in the letter of May 7th 2021,
3 alleged without any support that CO will default on its
4 loans unless it participates in the Azerbaijan Digital
5 Hub project. That allegation lacks any evidentiary
6 support.
7 The Caucasus Online group -- it's a group of
8 companies -- has operated for many, many years
9 successfully. And as a company that owns critical
10 infrastructure assets and has a dominant market
11 position, CO certainly has the capacity to generate
12 sufficient cash flow to cover its loan obligations.
13 I refer the Tribunal, for example, to an email from
14 CO's director to the special manager of December 2020,
15 Exhibit R-39, which confirms that much. Just from one
16 contract, CO made a $2.5 million profit, which was
17 sufficient to cover its loan obligations for this year.
18 Let me specifically come back to one point raised by
19 the Claimant in this context: the allegation that the
20 special manager would obstruct CO from being in
21 a position to obtain meaningful new business, and
22 Claimant relied on the example of Amazon.
23 As we have set forth in our updated submission in
24 our response to Claimant's update on provisional
25 measures, it was not even disclosed to the special
[Page 98]
17:57
1 manager that consent was sought to disclose information
2 to Amazon. The special manager was approached with
3 an unspecified request to submit highly confidential
4 information, including about CO's technical
5 infrastructure, without explaining the purpose, without
6 explaining the customer.
7 So the accusation that the special manager would
8 refuse to engage with Amazon or would refuse to contract
9 with Amazon is plainly wrong. It was never disclosed to
10 the special manager that the purpose for the disclosure
11 would be to engage with Amazon.
12 Let me now turn to the question about the special
13 manager's powers, the decision on the appointment of the
14 special manager.
15 As a preliminary point, I want to emphasise that the
16 lawfulness of the decision on the appointment of the
17 special manager is one of the core issues in dispute in
18 this case. That core issue is a core merits issue which
19 has not yet been briefed at this stage of the
20 proceedings. The Tribunal must not prejudge this core
21 issue by adopting Claimant's position that the special
22 manager cannot fulfil her mandate, and ignoring the
23 judgments of the Georgian courts that have held that
24 there is prima facie no doubt about the lawfulness of
25 this decision.
[Page 99]
17:59
1 Despite the Claimant's rhetoric, the appointment of
2 the special manager was necessary to allow the company
3 to continue to operate in accordance with Georgian law.
4 An authorised person is not allowed to operate in
5 an unlawful manner. Given Claimant's defiance to comply
6 with the regulator's orders, the only way to allow the
7 company to continue to operate was to install a special
8 manager and not to suspend CO's authorisation.
9 The powers conferred on the special manager allow
10 the special manager to counteract any unlawful influence
11 by the Claimant on CO's management and operations. So
12 by vesting in the special manager the power to approve
13 the decisions of CO's corporate bodies, and authorising
14 her also to suspend payment of dividends and other
15 distributions, the special manager can ensure that the
16 status quo is de facto restored.
17 It is Respondent's position that Georgian law does
18 not recognise Claimant's indirect beneficial interest in
19 CO, since the January 2019 share purchase agreement
20 violated mandatory statutory requirements under Georgian
21 law. It will be for Claimant to draw the necessary
22 consequences of that, and to cooperate with the special
23 manager. And nothing prevents the Claimant from
24 cooperating with the special manager in finding
25 a solution to reverse the transaction, to cooperate with
[Page 100]
18:01
1 the special manager, to seek approval from the GNCC of
2 his intended takeover of CO.
3 THE PRESIDENT: Can I ask you about that, Ms Annacker.
4 DR ANNACKER: Yes.
5 [Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Page 101]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
18:03
17 DR ANNACKER: Well, the decision on the appointment of the
18 special manager subjects any decision by any corporate
19 body -- CO's director, CO's supervisory board and CO's
20 shareholder meeting -- to approval by the special
21 manager. That is a decision taken by the GNCC.
22 And again, the decision on the appointment of the
23 special manager is a core issue in dispute: it should
24 not be prejudged at this stage.
25 The special manager has the power to release, to
[Page 102]
18:05
1 delegate certain powers to CO's corporate bodies. The
2 special manager has done that. Claimant doesn't like
3 the scope of the delegation. But in accordance with the
4 decision on the appointment of the special manager on
5 June 1st 2021, the special manager has delegated routine
6 transactions, routine transfers and, beyond that -- as
7 identified in the annex -- a substantial amount of
8 transactions that can be performed without her prior
9 consent.
10 But again, there is no showing by Claimant that this
11 approval requirement -- yes, it's an additional
12 administrative step: one needs to obtain approval for
13 transactions and payments that are not included in the
14 power of attorney. But Claimant has not shown that that
15 would drive the company into bankruptcy.
16 And from the documents in the record, one can see
17 that the special manager did not just approve routine,
18 day-to-day operations but that very substantial
19 operations were approved by the special manager,
20 including new business, highly profitable new business,
21 in millions of US dollars.
22 I refer the Tribunal to Exhibit R-39, Exhibit R-40,
23 Exhibit R-71. All these exhibits have shown that the
24 special manager does not just confine the company to
25 doing pure day-to-day operations but cutting it off from
[Page 103]
18:07
1 new business, cutting it off from properly developing
2 its infrastructure. The contrary is the case.
3 One final point. We have discussed in our opening
4 statement and our written pleadings that the provisional
5 measures requested are wholly disproportionate. On the
6 one hand, Claimant would suffer a compensable loss of
7 a business opportunity; on the other hand, in a worst
8 case scenario, Georgia would suffer very substantial
9 economic harm, and potentially irreparable harm.
10 Let me interject here: the Tribunal has asked for
11 evidence of this harm. We will be happy to identify the
12 relevant documents in the record. But I would emphasise
13 again: this is not just the GNCC saying this -- of
14 course the GNCC, in its recent decisions, has stated
15 with full reasoning why there is such harm -- but it is
16 also the Georgian courts. The Georgian courts have
17 identified and have confirmed that there is substantial
18 harm to the Georgian telecommunications market in terms
19 of competition, in terms of the risk of a change of the
20 strategy in a manner that would negatively affect retail
21 subscribers and Georgian public agencies and, third, the
22 harm to international competitiveness.
23 Whereas Claimant has done a wholesale attack at the
24 outset of today's hearing on the Georgian judiciary,
25 again, there is nothing whatsoever in the record that
[Page 104]
18:09
1 would support that wholesale attack.
2 I will just interject that the court decision that
3 was mentioned by Claimant at the outset of his pleading,
4 March 1st 2021 of the Court of Appeal, was reversed, and
5 it wasn't done so because of an application to reargue
6 by the GNCC that had zero basis whatsoever and
7 constituted an attack on the judiciary. I want to
8 emphasise that the GNCC was not participating in the
9 original proceedings, so this was a regular motion to
10 reopen, and it was perfectly legitimate to consider
11 evidence that was not available before the GNCC had the
12 chance to participate as new evidence.
13 In conclusion, since any duty to refrain from
14 aggravating the dispute and to maintain the status quo
15 is clearly a duty of both parties and aims at protecting
16 the rights of both parties, if the Tribunal were minded
17 to grant provisional measures, then equally Respondent
18 must be protected through a requirement on the Claimant,
19 at a minimum, to refrain from taking any strategic
20 decisions that would materially change CO's operations.
21 This would include the sale or encumbrance of assets of
22 CO's subsidiaries and changes in CO's supply or business
23 strategies, including steps to integrate CO into the
24 Azerbaijan Digital Hub project.
25 Thank you.
[Page 105]
18:12
1 THE PRESIDENT: Thank you very much, Ms Annacker.
2 Mr Alexandrov, any questions for Ms Annacker?
3 DR ALEXANDROV: No, I do not. Thank you, Mr President.
4 THE PRESIDENT: Thank you.
5 Mr Rowley?
6 MR ROWLEY: No questions, thank you.
7 THE PRESIDENT: Ms Annacker, thank you very much. I think
8 that concludes the submissions on our first issue for
9 today, and I believe that it is now a 45-minute break,
10 before we go to the bifurcated issue.
11 Any questions before we adjourn for 45 minutes?
12 Mr Ostrove. (Pause)
13 MR OSTROVE: Mr President, we just wanted to check -- if
14 you'll excuse the bad pun -- the appetite of the
15 participants for a slightly shorter break, given that
16 it's getting to be quite late in the day in Tbilisi and
17 in Baku. But of course we do understand that some
18 people may have been counting on the 45-minute break to
19 recover.
20 MR ROWLEY: I'm afraid my appetite is limited.
21 THE PRESIDENT: I didn't hear, Bill. Sorry.
22 MR ROWLEY: I said: my appetite to lessen the break is
23 a limited one.
24 THE PRESIDENT: So with apologies to colleagues in Baku and
25 Tbilisi, it will be a little bit later this evening, but
[Page 106]
18:13
1 counsel are working very hard on each side, and the
2 arbitrators too.
3 So 45 minutes. Let's reconvene at 19.00 CET, which
4 is 1.00 pm DC time.
5 (6.14 pm)
6 (Adjourned until 7.00 pm CET)
7 (7.00 pm)
8 THE PRESIDENT: Very well. We have Respondent's submission
9 on jurisdictional objection for 40 minutes.
10 I can tell everyone, by a Tribunal majority, it is
11 clear that I was deficient in timekeeping, keeping
12 people to time in our first session, so we actually are
13 going to be pretty strict this time round. We didn't
14 have further submissions and we have read before, so
15 I think the Tribunal is clued up. That's not to say
16 that we won't have questions, but it is to say that we
17 will keep to time.
18 So it's 19.00 CET and you have 40 minutes,
19 Mr Silva Romero. (Pause)
20
21
22 DR SILVA ROMERO: Thank you, Mr President, members of the
23 Tribunal. Good evening or good afternoon, depending on
24 the timezone.
25 I should start our submissions on our inter-state
[Page 107]
19:01
1 negotiations objection with some introductory remarks on
2 our reading of the treaty on point.
3 You perfectly know, members of the Tribunal, that
4 states are free to condition their consent to arbitrate
5 as they deem fit. And in our treaty, the
6 Georgia-Azerbaijan BIT, the contracting parties have
7 conditioned their consent on prior inter-state
8 negotiations.
9 (Slide 2) Through its plain wording, Article 9 of
10 the BIT, as you know, requires negotiations by
11 Azerbaijan and Georgia for at least six months before
12 an investor is entitled to refer a dispute to
13 arbitration. Such negotiations, we say, permit
14 Azerbaijan and Georgia to cooperate in resolving
15 investment disputes before they escalate into
16 arbitration; and we also say this is in the interest of
17 both states.
18 Pursuant, more precisely, members of the Tribunal,
19 to paragraph 1 of Article 9, any investor-state dispute:
20 "... will be subject to negotiations between the
21 Contracting Parties in dispute."
22 The term "Contracting Parties", as you also know, is
23 expressly defined in the treaty's preamble to mean:
24 "The Government of Georgia and the Government of the
25 Republic of Azerbaijan ..."
[Page 108]
19:03
1 This defined term does not have more than one
2 ordinary meaning in the circumstances. Regardless of
3 the context and the treaty's object and purpose, we say
4 there is only one ordinary meaning of "The Government of
5 Georgia and the Government of the Republic of
6 Azerbaijan".
7 So, contrary to Claimant's position, members of the
8 Tribunal, we say that the phrase "Contracting Parties in
9 dispute" is far from nonsensical. It is Claimant's
10 view, as you have read, that the investor's home state
11 is a third party to the dispute. But the investor's
12 home state is a contracting party to the treaty and, as
13 such, we say it is directly affected by the other
14 contracting party's conduct.
15 So the reference in Article 9 to "the Contracting
16 Parties in dispute", and the unnecessary confusion, we
17 say, the Claimant has attempted to generate around this
18 phrase, cannot justify replacing Azerbaijan and Georgia
19 with the parties to this arbitration, or to the
20 arbitration.
21 The defined treaty term "Contracting Parties" can
22 and must be given effect. So Claimant, we say, members
23 of the Tribunal, cannot seriously argue that there must
24 be a drafting error based solely on his own view that
25 this phrase is nonsensical.
[Page 109]
19:04
1 (Slide 3) Azerbaijan and Georgia have each
2 concluded, as you read in our papers, at least one
3 investment treaty with other states that requires
4 inter-state negotiations by using this very language
5 that I just read, referring to negotiations by "the
6 Contracting Parties in dispute" (RL-27 and RL-142) and
7 "Contracting Parties involved in the dispute" (RL-23),
8 respectively. You can see that on the screen.
9 (Slide 4) The Republic of Azerbaijan and Georgia
10 have also concluded at least six other investment
11 treaties with inter-state negotiations requirements. So
12 Claimant now admits, as you read, that these six BITs
13 condition resort to arbitration on prior inter-state
14 negotiations, and they did so at paragraph 60.3 of
15 Claimant's April 2021 submission.
16 We have set forth the investor-state arbitration
17 clauses of these six BITs on the screen (RL-22,
18 RL-76-RU, RL-24, RL-29, CLA-60 and RL-25). Each of
19 these provisions, as you can see, requires prior
20 inter-state negotiations in one form or another; as
21 Claimant, as I said, now acknowledges. And the same is
22 true of the Azerbaijan-Georgia BIT of our case.
23 These BITs, members of the Tribunal, also
24 demonstrate that Claimant's invocation of the BIT's
25 object and purpose in support of his position is
[Page 110]
19:06
1 misconceived. The object and purpose of an investment
2 treaty is obviously to promote and protect investments,
3 but it is for the contracting states to decide how best
4 to promote and protect those investments.
5 In Article 9 of the BIT, Georgia and Azerbaijan have
6 chosen to accord the right to arbitration, but they have
7 also explicitly chosen to make that right conditional on
8 the contracting parties having first attempted to
9 resolve their dispute through negotiations for at least
10 six months. This is what the Republic of Azerbaijan and
11 Georgia agreed. And instead of investor-state
12 negotiations, they committed to negotiate inter se to
13 resolve investment disputes.
14 (Slide 5) In the words for instance of the Daimler
15 tribunal on the screen (RL-31, paragraph 164):
16 "The texts of the treaties [that states] conclude
17 are the definitive guide as to how they have chosen to
18 [promote and protect investments]."
19 With these introductory remarks, members of the
20 Tribunal, I will now divide my submissions in three
21 parts. First, I will address the issue of the nature of
22 our inter-state negotiations objection. Second, I will
23 make our submissions on Claimant's invocation of the MFN
24 clause to avoid the inter-state negotiations
25 jurisdictional requirement. And third and last, I will
[Page 111]
19:08
1 respond to what we can call Claimant's factual
2 allegations in relation to our inter-state negotiations
3 jurisdictional objection.
4 (Slide 6) Turning now to the jurisdictional nature
5 of the inter-state negotiations requirement.
6 (Slide 7) Article 9 provides, we say, in plain
7 language that any investor-state dispute will be subject
8 to inter-state negotiations, and an investor is only
9 entitled to refer the dispute to arbitration if it
10 cannot be settled through such negotiations. So
11 Article 9, as you know, is the very source of the
12 Tribunal's jurisdiction, and compliance with the
13 inter-state negotiations requirement therefore
14 constitutes a jurisdictional requirement and not, as
15 Claimant argues, a mere procedural nicety or
16 an admissibility requirement.
17 In his submissions Claimant has continued, we say,
18 to mischaracterise the prevailing view in arbitral case
19 law as allegedly supporting his position. But
20 Respondent has submitted more than 20 cases, including
21 recent cases decided by the ICJ, that expressly qualify
22 the conditions set forth in the dispute resolution
23 clause of a treaty as jurisdictional requirements.
24 The relevant findings are found on slide 9 on the
25 screen. Claimant however, attempts to minimise these
[Page 112]
19:09
1 findings by asserting that many were obiter dicta, but
2 investment tribunals have repeatedly endorsed the
3 findings that Claimant now dismisses.
4 (Slide 10) For example, no less than six investment
5 tribunals have cited approvingly to the Enron tribunal's
6 analysis and conclusion that a requirement for prior
7 negotiations is very much a jurisdictional requirement.
8 (Slide 11) One of these tribunals, the Murphy
9 tribunal, specifically rejected the argument that
10 Claimant has raised here and emphasised that the Enron
11 tribunal made that statement "precisely because of the
12 importance it attributed to the issue" (RL-108,
13 paragraph 153).
14 (Slide 12) Respondent has demonstrated that the ICJ
15 also consistently qualifies prior negotiations as
16 a requirement of a jurisdictional nature. I refer the
17 Tribunal, for example, to the ICJ's judgment in
18 Application of the International Convention on the
19 Elimination of All Forms of Racial Discrimination, which
20 is Exhibit RL-96.
21 In this case, members of the Tribunal, the ICJ
22 dismissed Georgia's claims for lack of jurisdiction
23 because the prior negotiations requirement had not been
24 satisfied. Georgia and Russia had engaged in
25 negotiations concerning Russia's armed activities, but
[Page 113]
19:11
1 not concerning Russia's compliance with the convention
2 invoked as the basis for the court's jurisdiction.
3 (Slide 13) I come now to the second part of my
4 submissions, members of the Tribunal. I will now
5 briefly turn to Claimant's invocation of the most
6 favoured nation clause in Article 4 of the BIT. And
7 I promise I will not bore you too much with this
8 argument that you know pretty well.
9 The Claimant's reliance, we say, on the MFN clause
10 to avoid the inter-state negotiations jurisdictional
11 requirement fails on several grounds.
12 You know perfectly well, members of the Tribunal,
13 that as a matter of principle, an MFN clause does not
14 apply to the conditions of the contracting parties'
15 offer to arbitrate unless the MFN clause leaves no doubt
16 that the contracting parties intended to include dispute
17 settlement within the scope of operation of the MFN
18 clause. And absent such clear language or intention,
19 a tribunal has no power to incorporate more favourable
20 dispute resolution terms into the treaty so as to create
21 or expand the contracting states' consent to arbitrate.
22 Here, the MFN clause in Article 4 of the BIT does
23 not reveal any intention, much less an unambiguous one,
24 to extend MFN treatment to dispute settlement.
25 Article 4 makes no mention of dispute settlement.
[Page 114]
19:13
1 Article 4 does not even refer to "all matters governed
2 by or subject to the treaty". Instead, the BIT's
3 structure and the terms of Article 4 confirm that MFN
4 treatment encompasses only substantive treatment.
5 Let me make three short observations in this regard.
6 First, the BIT's structure clearly distinguishes
7 rights from remedies. Articles 3 to 8 accord
8 substantive rights in relation to investments.
9 Articles 9 and 10 establish procedures for resolving
10 disputes in relation to those rights.
11 (Slide 15) Second point: the MFN treatment to be
12 accorded under Article 4, as you can see in the text, is
13 closely linked to fair and equitable treatment.
14 (Slide 16) Finally, an MFN clause cannot override,
15 we say, carefully crafted conditions precedent to
16 arbitration. These are part and parcel of the
17 contracting parties' integrated offer to arbitrate,
18 which must be accepted by the investor on the terms
19 offered.
20 In short, members of the Tribunal, the inter-state
21 negotiations jurisdictional requirement cannot be
22 avoided.
23 (Slide 17) In the time remaining -- which I hope
24 will be less than the 40 minutes, Mr President -- I must
25 make a few observations, in the third part of my
[Page 115]
19:15
1 submissions, in response to Claimant's arguments that
2 I characterise as "factual" arguments of estoppel,
3 compliance with the inter-state negotiation requirement
4 and futility of those potential negotiations, which we
5 say were never requested, let alone commenced.
6 (Slide 18) First, we say, members of the Tribunal,
7 that Claimant's invocation of estoppel is simply
8 a non-starter. You know also very well that, from
9 a legal perspective, estoppel cannot create jurisdiction
10 where none would otherwise exist. You also know that
11 estoppel cannot apply to representations of law, like
12 the content of the requirements in Article 9(1) of the
13 BIT, but only to representations of fact.
14 You also know that tribunals, including the one in
15 Quiborax v Bolivia on the screen (RL-129, paragraphs 257
16 to 258), have consistently held that participation in
17 discussions to resolve a dispute does not preclude the
18 state from raising or maintaining jurisdictional
19 objections in the context of an eventual arbitration,
20 which I should say is obvious.
21 But in any event, from a factual standpoint, the
22 requirements for invoking estoppel, we say, are not met
23 in this case. As the Chevron tribunal underlined
24 (RL-38, paragraph 351):
25 "... the representation upon which the estoppel is
[Page 116]
19:16
1 based has to be 'clear and unequivocal' and there must
2 be actual, justified reliance by the other party."
3 I must now make three observations on why estoppel
4 does not apply in the circumstances of this case.
5 (Slide 19) First, members of the Tribunal, we say
6 that Georgia never made a clear and unequivocal
7 representation concerning the interpretation of
8 Article 9, let alone that it does not require
9 inter-state negotiations.
10 Claimant, as you have seen, has attempted to
11 manufacture what is, at best, an implied representation
12 on the basis of the GNCC's participation in discussions
13 in July 2020, and an August 25th 2020 letter from the
14 administration of the Government of Georgia to Claimant
15 (C-42) which allegedly implied that the negotiations
16 that were taking place with the GNCC were legitimate and
17 that there is no other requirement for some
18 state-to-state negotiations to take place.
19 We say that no clear and unequivocal representation,
20 in the sense alleged by Claimant, can be drawn from
21 Georgia's behaviour in the circumstances.
22 The GNCC, members of the Tribunal, like the
23 August 25th letter, made perfectly clear the specific
24 context in which discussions were taking place, namely
25 an attempt to resolve Claimant's concerns within "the
[Page 117]
19:18 1 framework of the Georgian legislation". Such
2 an express statement, we say, can hardly amount to
3 an implied, let alone a clear and unequivocal
4 representation by Georgia as to the interpretation of
5 Article 9 of the BIT. And Claimant himself originally
6 framed his dispute with the GNCC as a domestic dispute
7 arising under Georgian law.
8 So please remember, members of the Tribunal, that by
9 the time of his July 2020 meeting with the GNCC,
10 Claimant's companies and affiliates had launched three
11 separate domestic claims against the GNCC -- and, as we
12 discussed previously, have since launched at least
13 another nine domestic claims -- arguing that the GNCC
14 had unlawfully applied Georgian law on telecoms to CO.
15 (Slide 20) Second point: Claimant could also not
16 have reasonably relied on any implied representation by
17 the GNCC as to the content of Article 9 and its
18 pre-arbitral requirements because the GNCC is
19 an independent, specialised regulator of the Georgian
20 telecoms sector. It has neither the authority nor the
21 expertise to opine on matters of international law like,
22 for instance, the content and interpretation of
23 Article 9 of the treaty.
24 (Slide 21) Third and last point on estoppel:
25 Claimant also cannot seriously argue, we say, that it
[Page 118]
19:20 1 was for Respondent, let alone the GNCC, to advise him of
2 the conditions precedent for arbitration under the
3 treaty or to rectify any misunderstanding Claimant could
4 have had as to the requirements of Article 9.
5 As the ICJ confirmed in the ELSI case (RL-141,
6 paragraph 54), estoppel can only arise from failure to
7 say something "when something ought to have been said",
8 which is not the case in the context of a failure to
9 apprise a party of legal requirements under a treaty in
10 the context of exchanges concerning a dispute.
11 In the ELSI case, members of the Tribunal -- you'll
12 recall that -- the United States attempted to invoke
13 estoppel on the basis of Italy's failure to apprise the
14 United States of non-compliance with the exhaustion of
15 the local remedies rule. And the ICJ found that Italy
16 had no such obligation and, as a consequence, rejected
17 the estoppel argument in that very case.
18 Given Claimant's position in this arbitration that
19 Article 9 contains a drafting error, it was rather
20 incumbent on Claimant, we say, and his lawyers to raise
21 this issue with the competent Georgian authorities when
22 they saw Article 9. However, we know -- and this is
23 undisputed -- that they never did so.
24 (Slide 22) I will now turn to Claimant's argument,
25 members of the Tribunal, that the inter-state
[Page 119]
19:22 1 negotiations requirement has somewhat been fulfilled,
2 and we say that it has not been fulfilled.
3 (Slide 23) From a legal perspective, Claimant
4 accepts that the inter-state negotiations requirement in
5 Article 9 creates "an obligation of means" for the
6 investor (Claimant's Submission on the Inter-State
7 Negotiation Objection, paragraph 137). At the same
8 time, however, Claimant relies on the Capital Financial
9 award and adds that nothing in the BIT requires the
10 investor himself to take any action at all to ensure
11 those negotiations actually take place.
12 On that point, I should make now four observations
13 in response.
14 First, the Capital Financial tribunal's reasoning
15 was treaty-specific, and thus not transposable; it
16 couldn't be transposed here. Contrary to Article 9(1)
17 of our treaty, where inter-state negotiations are the
18 sole mandatory pre-arbitral mechanism, Article 10(1) of
19 the relevant treaty in the Capital Financial case
20 provided for two alternative pre-arbitral mechanisms,
21 which were investor-state or inter-state negotiations.
22 Second distinguishing element: the facts of the
23 Capital Financial case are different because Cameroon
24 had simply ignored the investor's attempts to negotiate
25 and had not even acknowledged the investor's claims,
[Page 120]
19:24 1 unlike the Respondent in our case, as I will explain
2 later on, in a moment.
3 Third, and in any case, we say Claimant's position
4 that he does not need to take any action regarding
5 Article 9 is incorrect. It is not sufficient -- and
6 this is a commonsense point, members of the Tribunal --
7 it is not sufficient, it cannot be sufficient for
8 Claimant to simply draw the contracting parties'
9 attention to the existence of an investment dispute and
10 then sit back and relax.
11 In addition to submitting a written claim, thereby
12 informing the respondent state of the dispute,
13 a potential claimant should also explicitly request that
14 the contracting parties engage in inter-state
15 negotiations pursuant to Article 9(1). And there is
16 simply no evidence on record, members of the Tribunal,
17 that Claimant ever made such a request for inter-state
18 negotiations to the contracting parties in the present
19 case.
20 (Slide 24) Lastly, and in any event, it is a fact
21 that Claimant has not properly informed Azerbaijan of
22 this dispute. As a preliminary comment, members of the
23 Tribunal, I must say that Claimant's evolving position
24 regarding the inter-state negotiations requirement lacks
25 any credibility.
[Page 121]
19:25 1 You recall that until February 2021, which was when
2 the Request for Bifurcation was filed, Claimant alleged
3 that Article 9 only contains an investor-state
4 negotiations requirement, and that Respondent's position
5 to the contrary was nonsensical.
6 Claimant then first noted in his March 8th Response
7 to the Request for Bifurcation that he had already
8 approached the Azerbaijani Government for assistance,
9 and that the Azerbaijani Government refused to take any
10 steps. After March 8th, Claimant's counsel identified
11 the Capital Financial award and took at the previous
12 hearing, as you recall, the position that the
13 inter-state negotiations requirement was allegedly
14 satisfied because some inter-state contacts had
15 occurred.
16 All these factual positions contradict themselves.
17 We know that we cannot put before any tribunal
18 alternative factual cases; it doesn't make any sense.
19 Pursuant to this last iteration of Claimant's
20 position anyway, Claimant then submitted a note dated
21 April 1st 2021 and created by the Azerbaijani Ministry
22 of Foreign Affairs for "purposes of protecting the
23 interests of Claimant in the arbitration". This is
24 Exhibit C-43. This note simply, we say, doesn't make
25 it, for the following four reasons.
[Page 122]
19:27 1 First, the Azerbaijani ministry's note was created
2 specifically for Claimant's last submission, and more
3 specifically for the purposes of protecting the interest
4 of Claimant in the arbitration.
5 Second, the note is submitted without any context
6 whatsoever. There is no evidence of how or when
7 Claimant informed Azerbaijan of his dispute with
8 Georgia. There is no evidence on what Claimant said to
9 the Azerbaijani authorities. And there is no clue as to
10 whether Claimant requested them to initiate inter-state
11 negotiations with Georgia under Article 9 of the BIT.
12 Third point: there is no evidence either as to when
13 the Azerbaijani Ministry of Foreign Affairs communicated
14 the matter to the Georgian side.
15 Fourth and last, the type of discussions between
16 Georgian and Azerbaijani officials described in the
17 Azerbaijani ministry's note could not have been
18 inter-state negotiations within the scope of
19 Article 9(1).
20 You recall, members of the Tribunal, that the ICJ
21 has consistently held that for discussions to meet
22 negotiations requirements, they must concern a state's
23 alleged non-compliance with its substantive obligations
24 under the treaty invoked. In, again, Georgia v Russia
25 for instance (RL-96, paragraph 161), the ICJ underlined
[Page 123]
19:29 1 that:
2 "... negotiations must relate to the subject-matter
3 of the treaty containing the compromissory clause. In
4 other words, the subject-matter of the negotiations must
5 relate to the subject-matter of the dispute which, in
6 turn, must concern the substantive obligations contained
7 in the treaty in question."
8 So here, members of the Tribunal, the Azerbaijani
9 ministry's note points to no settlement discussions
10 regarding Georgia's substantive obligations under the
11 BIT. At best, the Azerbaijani ministry's note confirms
12 that the situation of CO was brought up during
13 an unrelated meeting in September 2020 and that the
14 parties exchanged some information about it; nothing
15 more. There is no mention of any request or invitation
16 by Claimant for the states to engage in inter-state
17 negotiations; there is no mention of Georgia's alleged
18 non-compliance with its obligations under the BIT; and
19 there is indeed no mention of the BIT tout court.
20 In the last submission by Claimant on provisional
21 measures, there is an appendix 2, and this appendix 2 is
22 a list which contains reference to a September 2020
23 meeting and several other meetings that have taken place
24 between Azerbaijan and Georgia in the last year or so.
25 As the members of the Tribunal can appreciate,
[Page 124]
19:31 1 officials from these two countries meet regularly to
2 discuss matters of relevance to both states. And the
3 mere fact that Azerbaijani and Georgian representatives
4 have met does not mean that they did so to negotiate
5 a resolution of this dispute before you; and indeed,
6 they did not do so.
7 If you take the table, you will see the first column
8 with some dates, and then a second column with names of
9 officials who participated in those meetings. But there
10 is no evidence whatsoever regarding the subject matter
11 of those meetings. This is all you have. The only
12 evidence you have on record regarding this objection is
13 the note, C-43, and this table, with no supporting
14 documentation establishing the points in it.
15 In practical terms, members of the Tribunal,
16 an investor, we say, must take active steps by
17 approaching the contracting parties and requesting the
18 initiation of inter-state negotiations to attempt to
19 resolve the dispute, as we have explained in our written
20 pleadings.
21 (Slide 28) This brings me to my series of comments
22 on Claimant's third and last fact-related argument,
23 which is that Claimant has not shown that inter-state
24 negotiations would be futile in this case.
25 First, from a legal perspective, the threshold for
[Page 125]
19:33 1 proving the futility of further negotiations, we say, is
2 high. Negotiations can only be futile when a party has
3 openly refused to enter into negotiations or when they
4 were attempted and then a point of deadlock was reached.
5 Again, as the ICJ recently confirmed in the ICAO
6 case (RL-149, paragraph 93):
7 "... a requirement that a dispute cannot be settled
8 through negotiations 'could not be understood as
9 referring to a theoretical impossibility of reaching
10 a settlement. It rather implies that ... "no reasonable
11 probability exists that further negotiations would lead
12 to a settlement"' ..."
13 And a priori, when negotiations have not even been
14 initiated, a claimant cannot simply assume their
15 futility.
16 As the Murphy tribunal put it (RL-108,
17 paragraph 135), to determine whether negotiations would
18 succeed or not, the parties must first initiate them.
19 I'm sorry to make such an obvious point, but that's the
20 job.
21 From a factual standpoint, Claimant cannot presume
22 the futility of inter-state negotiations in this case,
23 members of the Tribunal, given the importance of the
24 project underlying the dispute. As you know -- and this
25 was already discussed -- this dispute is tied to
[Page 126]
19:34 1 a project of great geopolitical significance for the
2 Caucasus region, which is the Digital Silk Road project.
3 Whether and on what terms CO would be integrated into
4 this project and the Azerbaijan Digital Regional Hub
5 project will directly affect whether Georgia or
6 Azerbaijan will become the region's primary digital hub,
7 and hence the competitiveness of both states in the
8 telecoms sector. All of that is at stake.
9 Given the states' competing interests, members of
10 the Tribunal, they certainly should have a say on how
11 these projects develop and the benefits are shared.
12 Even the Azerbaijani ministry note that Claimant
13 relies on, C-43, recorded the contracting parties'
14 commitment to communicate with the concerned authority
15 for the sake of speeding up the process.
16 Georgia remains ready to address the issues raised
17 by Claimant's stake in CO with Azerbaijan, should
18 Claimant ask the contracting parties to seek to resolve
19 the present dispute.
20 With this, members of the Tribunal, Georgia
21 concludes its opening statement on the inter-state
22 negotiation objection. Thank you.
23 THE PRESIDENT: Thank you very much, Mr Silva Romero.
24 Mr Rowley, any questions for Mr Silva Romero?
25 MR ROWLEY: No, I do not. Thank you very much.
[Page 127]
19:36 1 THE PRESIDENT: Thank you, Mr Rowley.
2 Mr Alexandrov?
3 DR ALEXANDROV: No questions either. Thank you.
4 THE PRESIDENT: Thank you, Mr Silva Romero. Very helpful.
5 We'll see you again on reply after the break.
6 Claimant, good to continue now?
7 (Pause to resolve a technical problem)
8 Thank you, Mr Ostrove. Claimant has 40 minutes.
9 (7.37 pm)
10 Submissions on behalf of Claimant
11 on the jurisdictional objection
12 MR OSTROVE: Mr President, members of the Tribunal, the
13 Respondent's inter-state negotiations objection is based
14 on a clearly erroneous interpretation of Article 9 of
15 the bilateral investment treaty, and on that basis
16 alone, this has been a wasteful distraction.
17 Our first reaction when this objection was made was
18 just to point out how wrong Respondent's reading is.
19 But it's actually turned out that that doesn't matter.
20 Even if the BIT did require that states negotiate for
21 six months prior to filing a claim, Mr Hasanov fulfilled
22 every obligation that was incumbent on him before filing
23 his arbitration.
24 We only discovered that after we first raised the
25 interpretation question because we learnt belatedly that
[Page 128]
19:38 1 our client actually had requested the Azerbaijani
2 Government to reach out to Georgia, starting nearly
3 a year before the case was filed; not because of
4 an obligation to do so, but simply because Mr Hasanov
5 was trying all methods available to resolve the dispute.
6 (Slide 2) Then we learnt that there had actually
7 been attempts between the two states to negotiate,
8 including renewed attempts more recently. On the slide
9 you have our appendix 2, recently criticised by the
10 other side. But the fact is that these are the dates of
11 meetings at which this dispute was raised between the
12 parties.
13 These inter-state negotiations have now been, to
14 some extent, going on for over a year, and they have
15 proved absolutely futile, as it was clear from very,
16 very early on with the case.
17 So I will actually address first the issue of
18 compliance with any inter-state obligation that could
19 possibly exist, under any reading of the treaty, before
20 turning over the floor to my colleagues, who will
21 address how wrong Respondent is as a matter of basic
22 treaty interpretation. And there are several other
23 reasons why their argument is wrong.
24 (Slide 3) So if there were an obligation, Claimant
25 complied with any obligation on him because, at most,
[Page 129]
19:40 1 Claimant had an obligation to bring to the state's
2 attention the existence of the dispute, which he did.
3 And this, even taking Respondent's reading, is what
4 comes out of the BIT.
5 (Slide 5) The bilateral investment treaty does not
6 put an obligation on the Claimant to undertake
7 state-to-state negotiation. Rather, it puts
8 an obligation on the state party.
9 This is a treaty between the two state parties, and
10 they -- the state parties, not Claimant -- have agreed,
11 on Respondent's reading, that any investor-state dispute
12 will be subject to negotiation between the contracting
13 parties in dispute. That is an obligation incumbent on
14 the states, not an obligation incumbent on any investor.
15 The treaty does not say that Claimant shall engage in or
16 do any such thing, because how could it?
17 (Slide 6) So what would a claimant have to do if
18 there really were an obligation here to do something in
19 this regard? And while this kind of provision --
20 an actual provision like this -- is exceptionally rare,
21 it's amazing that we have any jurisprudence about it at
22 all, and we have the Capital Financial Holdings
23 v Cameroon case, CLA-90.
24 The Belgium-Luxembourg-Cameroon BIT has itself clear
25 language saying that there has to be an attempt at
[Page 130]
19:42 1 conciliation between the contracting parties through the
2 diplomatic channel. That clearly is, with the reference
3 to "diplomatic channel", a reference to state-to-state
4 dispute.
5 The tribunal there found that:
6 "What is certain [it says] is that ..."
7 It is the beginning of [paragraph] 159 on the screen
8 (slide 8):
9 "... the Treaty does not provide for any obligation
10 incumbent on the investor alone to initiate conciliation
11 through diplomatic channels."
12 And that:
13 "... the Claimant ... took all necessary measures
14 ... reasonably expected ... to inform the authorities of
15 both ... Parties to the Treaty about the existence and
16 ... evolution of the dispute."
17 That reading of what possibly could be imposed on
18 a claimant makes good sense.
19 It is true that in many cases the home state
20 actually will have no way of knowing that its national
21 has a problem with the host state; which actually goes,
22 of course, to the question of who is in dispute here.
23 Very often, home states actually have no reason to know
24 that there is a problem; there is no dispute with them.
25 So in those cases, one can imply an obligation on
[Page 131]
19:43 1 an investor -- as a way of, in good faith, accepting the
2 arbitration offer in the treaty -- to inform his or her
3 home state of the dispute, so that the parties to the
4 treaty can say, "Ah, we have an obligation under the
5 treaty to negotiate: let's fulfil our obligation". Once
6 the claimant has informed the state parties, he is done:
7 the rest is state-to-state obligation, it's on them.
8 (Slide 7) Here the Claimant did inform both
9 contracting parties about the dispute. With respect to
10 Georgia, after months of in-person discussions seeking
11 to resolve the dispute, Claimant wrote several times to
12 Respondent formally seeking an amicable settlement. In
13 May, he provided a pre-notice letter -- that's not on
14 the screen -- at C-25, which was followed a month later
15 by the notice letter, which is on the slide, C-26, and
16 that specifically referenced Article 9(2) as being
17 a notice letter.
18 If Georgia at that point felt, "Okay, Article 9(1)
19 imposes an obligation on me as a state to enter into
20 state-to-state negotiations", then it should have
21 complied with that obligation and launched
22 state-to-state discussions with Azerbaijan, saying, "Hi,
23 we have an investor-state dispute and the two of us need
24 to negotiate to settle it somehow".
25 Claimant also informed the Ministry of Foreign
[Page 132]
19:45 1 Affairs of Azerbaijan, his home state, back in
2 January 2020, five months before sending this notice
3 letter. That's on the right-hand side of this slide:
4 that's the C-43 that you just heard heavily criticised.
5 But frankly, this is a note from the Azerbaijani
6 Government explaining historically what happened. It's
7 hard to know what more we could do, because Azerbaijan
8 of course is not a party to this dispute, so it's not
9 here today.
10 MR ROWLEY: Mr Ostrove, can you hear me?
11 MR OSTROVE: Yes, Mr Rowley.
12 MR ROWLEY: You have referred a few times in your submission
13 to what is on a particular slide, and you say, "It's on
14 slide". That's all very well for us who are looking at
15 it; it's no good for the transcript. And I can't tell
16 by looking at these whether these slides are numbered.
17 They were this morning; on my screen, they don't appear
18 to be this afternoon.
19 Can you do what you are able, when you refer to
20 a slide, to locate it for the transcript purposes,
21 please.
22 MR OSTROVE: Certainly, Mr Rowley. Thank you. This is the
23 slide (7) "Claimant informed both Contracting Parties to
24 the BIT about the dispute", referencing C-43 on the
25 right-hand side that I was referring to.
[Page 133]
19:46 1 Claimant did not inform Azerbaijan because he felt
2 he was obliged to do so under Article 9 of the BIT,
3 which is why we didn't know about it: he didn't think
4 that he was under any such obligation. If he were under
5 such obligation, well, then he complied because he was
6 lucky: he had just done things that way. And so be it.
7 As the famous New York Yankee Lefty Gomez said, it's
8 better to be lucky than good.
9 (Slide 8) But what matters is what he did. And
10 Capital Financial Holdings (CLA-90), the tribunal there
11 held that very similar efforts were sufficient to fulfil
12 the rare requirement of state-to-state negotiations: you
13 can't require more of a claimant.
14 Respondent tries to say, "Well, there's more: you're
15 obliged to ensure that the negotiations actually
16 happen", and they contest the relevance of Capital
17 Financial Holdings. I will come back in rebuttal to
18 some of the detailed arguments that they made a bit
19 earlier. But their main argument to date had been
20 buried in footnote 100 of their 6th April submission,
21 which was an argument that this is just obiter dicta.
22 (Slide 8) That's wrong. The Capital Holdings
23 finding is not obiter dicta. The tribunal expressly
24 found that there was a requirement "for conciliation
25 through diplomatic channels when private conciliation
[Page 134]
19:48 1 has not been successful". That quote is on the slide
2 "The relevance of the Capital Financial Holdings
3 [case]", paragraph 157 (CLA-90).
4 Frankly, even if it were obiter dictum, it doesn't
5 matter in investment treaty arbitration; it's not like
6 there's binding precedent. What matters is that there
7 was a very highly qualified tribunal, Professors
8 Tercier, Alexis Mourre and Professor Pellet, analysing
9 in careful detail the issue and giving persuasive
10 reasoning.
11 (Slide 9) Second, Respondent tries to argue that:
12 well, six months of negotiations must actually have
13 taken place as a precondition to ICSID arbitration. But
14 that's also wrong. The BIT does not say that
15 negotiations must take place, and that arbitration can
16 be filed only if negotiations have taken place. What it
17 says is arbitration can be filed if the two contracting
18 parties -- reading it the way Respondent does -- cannot
19 settle the -- if the case cannot be settled in such
20 a manner. That's in Article 9(2).
21 (Slide 10) The bilateral investment treaty puts one
22 requirement on the investor, which is to submit
23 a written claim to the host state, which he did. And we
24 can imagine the implication in Capital Financial
25 Holdings of an additional requirement, which is to
[Page 135]
19:49 1 inform the home state. It doesn't require more. The
2 actual negotiations are a requirement on the states.
3 That's quite different from all the cases where
4 there is a requirement of investor-state negotiations,
5 because there the investor has some control. Even if
6 the state doesn't respond, the investor can try. Here,
7 the investor has no control over the parties who are
8 supposed to negotiate.
9 The Respondent's suggestion that you actually have
10 to have caused the negotiations to happen would allow
11 Respondent to avoid any proceedings being commenced by
12 simply refusing to negotiate. That would deprive the
13 BIT and the dispute resolution clause of their effect.
14 And it's not surprising that Respondent has cited no
15 jurisprudence in support of that argument.
16 Its reliance on Urbaser (RL-88) is completely
17 misplaced. In Urbaser, either party to the dispute
18 could submit the dispute to the state courts. But the
19 investor was one of the parties to the dispute, and
20 therefore the investor had some control. Here, as
21 Respondent reads the treaty, the investor has no
22 control.
23 So for all of these reasons, if there were
24 an inter-state negotiations requirement, it's been
25 fulfilled by Claimant because he informed the states
[Page 136]
19:50 1 parties; and if there is an obligation to negotiate, it
2 was on them, not on him.
3 (Slide 11) In any event, even if you said, "No, no,
4 he had to do more before he could file arbitration and
5 inform the parties", it's clear that any effort to do
6 more, to wait longer, would be futile.
7 The Foreign Ministry of Azerbaijan explained in
8 C-43 -- next slide (12), please. Thank you. This is
9 the slide "The Respondent showed no interest in settling
10 the dispute with Azerbaijan". The Ministry of Foreign
11 Affairs of Azerbaijan explained that when they raised
12 this dispute several times in 2020, the Georgian side,
13 as they put it, showed no interest in discussing the
14 matter, basically saying they were leaving this to the
15 GNCC to do whatever it wanted.
16 We see over and over again that they didn't even
17 want to raise it with the GNCC. They said, "We are just
18 leaving this to be worked out internally". They refused
19 to accept it as an inter-state issue or as an investment
20 treaty issue; despite the fact that, of course, they
21 were already themselves on notice from Claimant of the
22 existence of an investor-state dispute.
23 So at the time the Claimant filed this arbitration,
24 it was clear that this case was not going to be settled
25 by state-to-state negotiations. Claimant didn't think
[Page 137]
19:52 1 there was any obligation to do so, but it is certainly
2 clear that there was no prospect of that happening.
3 (Slide 13) As I mentioned earlier, there have been
4 four additional inter-state negotiation meetings since
5 the beginning of 2021: in January, July and twice in
6 September. The states parties have found no solution
7 after more than a full year of meetings. So the
8 question is absolutely futile. And to the extent that
9 there were any obligation of ongoing negotiations that
10 should have gone for a full six months, we would submit
11 that that has been cured, even if it were required.
12 But it's no surprise that the states haven't been
13 able to settle the dispute because it's Claimant's
14 claim, it's not Azerbaijan's claim. Azerbaijan has no
15 dispute with Georgia. It's not Azeri state property
16 rights that are at issue here. Only the investor and
17 the state can settle their dispute, and we certainly
18 hope that that remains a possibility.
19 (Slide 14) The finding of futility overcomes any
20 cooling-off period. You have our submissions on that in
21 paragraphs 159 to 161 of our brief on the point. I will
22 just mention the Oxford Handbook on International Law,
23 CLA-91, which covers this point on page 846:
24 "[All that] matters is whether or not there was
25 a promising opportunity for a settlement."
[Page 138]
19:53 1 Here there is no promising opportunity for
2 a settlement in inter-state negotiations, either when we
3 filed for arbitration or, frankly, at any time since
4 then. And for that additional reason, we believe that
5 there really is no basis at all to this argument.
6 So enough on the compliance if there were
7 an obligation. I am going to give Kate Cervantes-Knox
8 the chair back so that she can explain to you or go over
9 with you why there actually is no inter-state
10 obligation. Thank you very much. Unless there are
11 questions for me, in which case I will not give up the
12 seat.
13 THE PRESIDENT: Give up the chair, I would say, Mr Ostrove!
14 MS CERVANTES-KNOX: Thank you.
15 (Slide 15) I will now explain why Respondent's
16 objection is based on an erroneous reading of the BIT
17 which disregards the rules of treaty interpretation.
18 (Slide 16) The Tribunal has already been shown
19 Article 9 and the text there. But of course it refers
20 to "Any dispute ... between an investor of one
21 Contracting Party and the other Contracting Party". So
22 the dispute is an investor-state dispute and it refers
23 to "negotiation between the Contracting Parties in
24 dispute".
25 Of course, the Tribunal will be aware of the content
[Page 139]
19:55 1 of Article 31 of the Vienna Convention (CLA-12) and the
2 rules on treaty interpretation, where we don't just look
3 to the ordinary meaning, we also must look to the
4 ordinary meaning of the terms in their context and in
5 the light of their object and purpose.
6 We have already given oral submissions at the last
7 hearing on interpretation of the treaty, and in our
8 written submissions, and I won't repeat all of them
9 here, in the interest of time. I refer to the
10 Claimant's Response on Provisional Measures,
11 paragraphs 64 to 75, and Claimant's Submission on the
12 Bifurcated Issue, paragraphs 16 to 62. Today I will
13 focus principally on why the Respondent's approach
14 disregards the requirements of Article 31 of the treaty,
15 which both parties agree applies.
16 Essentially, Respondent's position is that the
17 Tribunal should ignore the words "in dispute" which are
18 underlined on the slide, and read Article 9(1) as
19 referring to negotiations between the contracting
20 parties, because "Contracting Parties" is a defined
21 term. This of course requires the Tribunal to
22 effectively delete the critical words underlined on the
23 slide, "in dispute"; and that's because it really isn't
24 possible, in the context of Article 9, to give the words
25 "Contracting Parties in dispute" any sensible meaning.
[Page 140]
19:56 1 (Slide 17) Respondent's attempts to give meaning to
2 this phrase have only served to reinforce the conclusion
3 that this phrase is inherently problematic in the
4 context of Article 9(1). The Tribunal need only look at
5 Respondent's Reply on Provisional Measures,
6 paragraph 85, to see how difficult it is for Respondent
7 to give some sense to these words. They say here that:
8 "A Contracting Party's failure to treat the
9 investments of the other Contracting Party in accordance
10 with [the treaty] ... implicates the treaty rights and
11 economic interests of the latter."
12 And of course, the investments are not investments
13 of the other contracting party: they are investments of
14 the investor.
15 They then, in their Submission on the Bifurcated
16 Issue, slightly tried to retreat from that position and
17 talk about states' shared interest in settling disputes
18 arising under the treaty.
19 Respondent's difficulty in ascribing a sensible
20 meaning to this phrase stems from the fact that they
21 seek incorrectly to interpret the words "Contracting
22 Parties" in isolation and to divorce them from the
23 context of Article 9. And yet of course they must be
24 construed in accordance with context, as required by
25 Article 31 of the Vienna Convention. And when they are
[Page 141]
19:58 1 interpreted in context, it is abundantly clear that this
2 phrase is an oxymoron, and that the drafters of the
3 treaty must have intended to refer to the investor-state
4 disputes being subject to negotiations between the
5 parties in dispute, and not between the contracting
6 parties, who are not in dispute.
7 (Slide 18) Respondent then argues that Claimant's
8 position flies in the face of investment treaty
9 practice, and they point to other BITs which they say
10 make provision for inter-state negotiation. But again,
11 there's no requirement in Articles 31 to 33 of the
12 Vienna Convention that we must have regard to investment
13 treaty practice as an aid to interpretation.
14 In any event, the treaties that Respondent seeks to
15 call in aid represent a tiny minority of the investment
16 treaties in existence: less than 0.5% of those treaties.
17 And in the rare cases where inter-state negotiation is
18 referred to in the treaties in relation to
19 an investor-state dispute, this very unusual requirement
20 is, as one would expect, clear and unambiguous, in stark
21 contrast to the language of the Georgia-Azerbaijan BIT.
22 (Slide 18) I've put on this slide the six BITs which
23 Respondent refers to which talk about "diplomatic
24 channels" and diplomatic protection (RL-74-FR, RL-75,
25 RL-72, RL-29, RL-73 and RL-30).
[Page 142]
19:59 1 It's very different to the language in the BIT at
2 issue here. It's also worth noting that in a number of
3 those treaties, there's only a requirement for
4 inter-state negotiation where investor-state
5 negotiations have already failed. And this is the case
6 for the BLEU BITs listed on this slide.
7 (Slide 19) So the BITs that don't use "diplomatic
8 channels"/"diplomatic protection" language refer instead
9 to negotiations between the two contracting states, with
10 no conflicting and nonsensical reference to the
11 contracting states being in dispute. And exceptions to
12 that are the two BITs that the Respondent has identified
13 which contain similar language to the BIT at issue here,
14 and those are the Georgia-Ukraine BIT and the
15 Azerbaijan-Kazakhstan BIT, which also refer to
16 "Contracting Parties in dispute".
17 (Slide 20) It must be assumed that these two
18 anomalous treaties, which were signed at approximately
19 the same time as the Georgia-Azerbaijan BIT, contain the
20 same drafting error that's been repeated in these
21 treaties to which Georgia and Azerbaijan are a party.
22 If Georgia had intended to subject an investor's
23 recourse to arbitration to inter-state negotiations, it
24 certainly knew how to do so and provide clearly for
25 this, as it did in the Georgia-BLEU BIT (CLA-60,
[Page 143]
20:01 1 Article 10), which was signed around two years prior to
2 the Georgia-Azerbaijan BIT.
3 In conclusion, therefore, Respondent's whole
4 approach to the interpretation of Article 9(1) is wrong.
5 It's only possible to arrive at Respondent's erroneous
6 interpretation of Article 9(1) if applicable rules of
7 treaty interpretation are simply disregarded.
8 (Slide 21) The Claimant also submits that the
9 Respondent is precluded from relying upon the alleged
10 failure by the Claimant to comply with the purported
11 requirements of Article 9 in order to challenge the
12 Tribunal's jurisdiction by the principle of estoppel and
13 the duty of good faith.
14 In short, the position is that during many months of
15 negotiations which took place between the Claimant and
16 the Respondent, which were instigated by the Claimant
17 explicitly on the basis that they were required by
18 Article 9(1) of the bilateral investment treaty, the
19 Respondent didn't at any time indicate or communicate to
20 the Claimant that such negotiations did not in fact, in
21 its view, comply with Article 9.
22 (Slide 22) On the contrary, the Respondent --
23 through its instrumentality, the GNCC -- participated in
24 investor-state discussions from March to September 2020.
25 The meetings were followed by a letter from the head of
[Page 144]
20:02 1 the administration of the Government of Georgia dated
2 25th August 2020; that's C-42. It's on this slide. It
3 refers to the issue between Mr Hasanov and the GNCC, and
4 then goes on to talk about that:
5 "... Georgia remained hopeful the parties will be
6 able to resolve all outstanding matters amicably ...
7 and, if need be, [would] use its best endeavours to
8 facilitate peaceful resolution of any controversy
9 between the parties concerned."
10 There is no reference in that letter to a need for
11 inter-state negotiations.
12 A number of points were made by Mr Silva Romero in
13 relation to estoppel, and I won't have time to address
14 them all now; we may address some in reply. But I would
15 here point out that the letter which was quoted on
16 slide 19 of the Respondent's presentation -- and it's
17 R-57, a GNCC letter to DLA Piper dated 13th July 2020 --
18 you may recall that it was relied upon to support
19 a proposition that that letter, which referred to
20 negotiations within the framework of the Georgian
21 legislation, was actually referring to negotiations of
22 domestic disputes before the Georgian courts. But that
23 letter refers to letters from DLA Piper or from the
24 Claimant dated 22nd May 2020 and 9th July 2020.
25 The 22nd May 2020 letter which Exhibit R-57 is the
[Page 145]
20:04 1 response to -- and that's Exhibit C-25 -- explicitly
2 refers to Article 9 of the BIT. It describes the
3 dispute as being a dispute under this investment treaty.
4 It makes no reference to Georgian domestic court
5 proceedings. So it's clearly not the case that when the
6 GNCC wrote to DLA Piper on 13th July -- Exhibit R-57 --
7 that they were referring to negotiations or settlement
8 of Georgian court disputes.
9 One other point that I will address now in relation
10 to estoppel is the argument that it must be a factual
11 representation. But of course, what was effectively
12 being represented by Georgia was that the negotiations
13 that were taking place were in compliance with the
14 treaty. It was a factual representation that they were
15 in compliance and an acceptance that they were being
16 conducted in accordance with Article 9.
17 (Slide 23) In Fraport v Philippines (RL-87,
18 paragraph 346), the tribunal referred to the question of
19 estoppel and indicated that:
20 "Principles of fairness should require a tribunal to
21 hold a government estopped from raising violations of
22 its own law as a jurisdictional defense when it
23 knowingly overlooked them and endorsed an investment
24 which was not in compliance with its law."
25 On the facts of that case, the tribunal found that
[Page 146]
20:05 1 the claimant had concealed the illegality from the
2 respondent. But in this case, it's beyond doubt that
3 the Respondent was aware of the alleged failure to
4 comply with Article 9 of the BIT and endorsed the
5 Claimant's approach in instigating investor-state
6 negotiations; and in so doing, they represented that
7 Claimant's conduct was in compliance with Article 9.
8 In the Desert Line Projects v Yemen case (RL-132,
9 paragraph 99), the tribunal cited the Fraport tribunal's
10 conclusion regarding estoppel, and they stated that:
11 "The objection to the effect that the Claimant's
12 investment was never 'accepted by [the Respondent] as
13 an investment according to its laws and regulations' is
14 as unpersuasive as it is unattractive."
15 Similarly here, Respondent's objection to the effect
16 that the investor-state negotiations which took place
17 did not comply with Article 9 is as unpersuasive as it
18 is unattractive, in view of the Respondent's
19 contradictory conduct.
20 (Slide 24) Respondent's conduct is also contrary to
21 Respondent's duty to perform the treaty in good faith
22 enshrined in Articles 26 and 31(1) of the Vienna
23 Convention (CLA-112). A cynical and deliberate failure
24 to draw Claimant's attention to Respondent's differing
25 interpretation of Article 9 of the BIT would clearly
[Page 147]
20:07 1 breach the principle of good faith.
2 (Slide 25) I will now pass over to my colleague
3 Séréna Salem to address the effect of the most favoured
4 nation clause in the treaty, unless the Tribunal has any
5 questions on interpretation of the treaty and estoppel.
6 THE PRESIDENT: No. I just would say, Ms Salem, you have
7 ten minutes: it will be a hard stop.
8 MS SALEM: Thank you very much, Mr President, members of the
9 Tribunal.
10 (Slide 26) There is yet another reason why the
11 Respondent cannot prevail on this jurisdictional
12 objection. Even if an inter-state negotiations
13 requirement existed in this BIT, Claimant is entitled to
14 avoid it based on the most favoured nation clause at
15 Article 4 of the treaty that you can see on the slide.
16 It's slide 26.
17 If we adopt Respondent's interpretation, Azerbaijani
18 investors do not have access to arbitration unless there
19 are prior inter-state negotiations. Yet Respondent
20 offered direct access to arbitration, with no
21 requirement for prior inter-state negotiation, to other
22 investors. That's the case for the investors from the
23 Netherlands, for example. This is slide 27, where you
24 can see Article 9 of the Georgia-Netherlands BIT
25 (CLA-102). As a consequence, by application of the MFN
[Page 148]
20:08 1 clause, Claimant should be granted access to arbitration
2 with no requirement for prior negotiation.
3 Now we have just heard Respondent argue that the MFN
4 clause does not extend to dispute settlement clauses.
5 And if we can move on to the next slide, please, which
6 is slide 28. As acknowledged by the tribunal in the
7 Gas Natural v Argentina case (CLA-63, paragraph 49):
8 "The Tribunal understands that the issue of applying
9 a general [MFN] clause to the dispute resolution
10 provisions of bilateral investment treaties is not free
11 from doubt, and that different tribunals faced with
12 different facts and negotiating background may reach
13 different results."
14 Yet -- and this is at the very bottom of the
15 slide -- as this tribunal helpfully clarified:
16 "Unless it appears clearly that the state parties to
17 a BIT or the parties to a particular investment
18 agreement settled on a different method for resolution
19 of disputes that may arise, [MFN] provisions in BITs
20 should be understood to be applicable to dispute
21 settlement."
22 The tribunal therefore allowed Gas Natural to import
23 a more favourable dispute settlement provision on the
24 basis of the MFN clause. The applicable BIT in that
25 case the Argentina-Spain BIT, required the investor to
[Page 149]
20:09 1 negotiate for 6 months, then bring judicial proceedings
2 in the local courts, and then wait for a further period
3 of 18 months in the local courts before having recourse
4 to arbitration. Gas Natural was able to rely on the
5 dispute settlement provision from the France-Argentina
6 BIT, which allowed it to have recourse to arbitration
7 after a period of 6 months only of negotiation. That is
8 the important part.
9 The rationale is that most favoured nation clauses
10 can be used to invoke a procedural advantage accorded to
11 more favoured investors in another treaty. They just
12 should not be used to import jurisdiction where that
13 jurisdiction was not already contemplated in the
14 underlying treaty.
15 The extract on the next slide, slide 29, which is
16 taken from one of Respondent's authorities, RL-150
17 (paragraph 7.342), confirmed this reasoning:
18 "Provided the tribunal is properly endowed with the
19 jurisdiction according to the scope of the arbitration
20 agreement in the basic treaty ... it may be possible for
21 the claimant to invoke the MFN clause in order to invoke
22 procedural advantages accorded to more favoured
23 investors by reference to other treaties ..."
24 In the present case, Claimant is invoking the MFN
25 clause precisely to import a procedural advantage that
[Page 150]
20:11 1 allows it to have direct access to arbitration, as
2 opposed to having to fulfil a requirement for prior
3 negotiation. It does not seek to create ICSID
4 jurisdiction where such jurisdiction would not have
5 existed in the first place.
6 It is true that in the Plama case referred to by
7 Respondent earlier today, the tribunal did not agree
8 that an MFN clause should apply to the dispute
9 resolution provision. But it was precisely in
10 a scenario where the investor was seeking, through the
11 MFN clause, to replace one means of dispute settlement,
12 ad hoc arbitration in that case, with another, ICSID
13 arbitration. It's therefore completely irrelevant here.
14 Finally, we have heard today Respondent mention that
15 the MFN clause in our treaty cannot apply because it
16 does not expressly state all matters and because it does
17 not expressly include MFN.
18 I will, on this, refer the Tribunal to our April
19 submission at paragraph 68, and in particular to the
20 Suez v Argentina case, which is CLA-61, to support our
21 contention to the contrary: that the wording of
22 Article 4(1) is broad enough, and that Georgia should
23 have expressly excluded the application of the MFN to
24 dispute resolution matters if this was its intent. It
25 did not do it. It actually excluded other matters, as
[Page 151]
20:12 1 you can see in Article 4(3) of the treaty.
2 For all these reasons, Claimant is at liberty to use
3 the MFN clause to circumvent any inter-state negotiation
4 requirement.
5 (Slide 31) I will pass now to my colleague
6 Anthony Sinclair for our last point, unless the Tribunal
7 has any questions.
8 THE PRESIDENT: No, thank you very much, Ms Salem.
9 Mr Sinclair, four minutes.
10 MR SINCLAIR: Thank you, Dr Shore.
11 THE PRESIDENT: More time than you usually have!
12 MR SINCLAIR: (Slide 31) In this closing part of our
13 presentation, I'll address why Georgia's objection is
14 not an impediment to your jurisdiction for three
15 reasons: as a matter of textual interpretation, doctrine
16 and principle.
17 (Slide 32) First, a close look at the text reveals
18 that Georgia has overstated the extent to which the
19 language of Article 9 supports its interpretation that
20 this alleged negotiations requirement is
21 a jurisdictional condition precedent. As I will show in
22 a moment, prior arbitral tribunals have agreed with our
23 interpretation, although of course we recognise that you
24 need to look at every treaty specifically.
25 What Article 9(1) does is to define "any dispute"
[Page 152]
20:14 1 which may be referred to arbitration, and it does so by
2 reference to two conditions only, and I've annotated the
3 text there. That is, it must be "between an investor of
4 one Contracting Party and the other Contracting Party",
5 and it must be "[concerned] with an investment in the
6 territory of the latter". Those are the two conditions
7 that alone provide the jurisdictional definition of what
8 disputes may be referred to arbitration.
9 What then follows in Article 9(1) and then
10 Article 9(2) is a statement of intent and desire that
11 such disputes will be subject to negotiations. "Subject
12 to" may mean amenable to negotiation, or it may mean
13 that negotiations ought to take place. But one cannot
14 put it any higher since it cannot have been the
15 contracting parties' intent that a respondent state
16 might prevent arbitration by declining to participate in
17 negotiations. This is a statement of desirability that
18 inter-state negotiations should occur.
19 Now, we contrast the language of Article 9 with
20 other cases, and we will see that these words do not
21 properly qualify the concept of any dispute which the
22 contracting parties have agreed may be referred to
23 arbitration.
24 Contrast, for instance, with the language of the
25 UK-Bolivia BIT, which is discussed in the Guaracachi
[Page 153]
20:15 1 v Bolivia case (RL-100) on which the Respondent relies.
2 If you look closely at the language of that treaty, you
3 will see that the term "disputes" has a quality, it is
4 defined: "which have not been ... settled". The word
5 "which" qualifies the word "dispute", and you don't see
6 that sort of language in our treaty.
7 As I mentioned, our interpretation is supported by
8 prior arbitral practice, whereas the cases upon which
9 Georgia relies are each properly distinguishable or
10 truly obiter, as explained at paragraph 95 of our
11 submissions of 23rd April.
12 (Slide 33) I'll give you three examples of
13 authorities that support our position. First, in SGS
14 v Pakistan (CLA-53), the Switzerland-Pakistan BIT said
15 that "consultations will take place", and:
16 "If [those] consultations do not result in
17 a solution ... the dispute [may] be [referred] to ...
18 arbitration ..."
19 That language is not dissimilar to the words at
20 issue here. And the SGS v Pakistan tribunal noted that
21 these conditions are generally treated to be "directory
22 and procedural", and non-compliance is not seen as
23 amounting to an obstacle to jurisdiction. These are not
24 conditions precedent for the vesting of jurisdiction.
25 Secondly, Westwater Resources v Turkey (CLA-55). In
[Page 154]
20:17 1 that case, the clause in issue said that disputes "shall
2 initially" be referred to "consultations [or]
3 negotiations in good faith". And if the dispute is not
4 resolved in that way, the dispute shall be submitted to
5 arbitration. Again, not dissimilar to our formulation.
6 And the Westwater tribunal again didn't find that
7 sort of language determinative of the existence of
8 a jurisdictional condition. Rather, the tribunal found
9 this to be a procedural rule which permitted relief
10 against non-compliance in circumstances such as
11 demonstration that further negotiations would have been
12 futile.
13 (Slide 34) Then a final example -- if more were
14 required -- is Içkale Insaat v Turkmenistan (CLA-69).
15 That BIT (CLA-106) allowed for arbitration provided that
16 the investor had sought to exhaust local remedies. And
17 the tribunal there held that:
18 "The provision does not concern the issue of whether
19 the [States] have given their consent to arbitrate ...
20 but rather the issue of how that consent is to be
21 invoked by [an] ... investor; as an issue of 'how'
22 rather than 'whether', it must be considered [to be]
23 a matter of procedure and not ... [a condition to]
24 consent."
25 (Slide 35) Secondly, at the level of doctrine,
[Page 155]
20:18 1 commentators you might have heard of, like Paulsson,
2 Born and Schreuer, all agree as a general matter that,
3 properly analysed, these conditions -- like those that
4 exist in Article 9, allegedly -- are not matters of
5 jurisdiction and that they do not restrict the authority
6 of the tribunal, but they are rather focused on the
7 claim.
8 So in his famous article on admissibility (CLA-68),
9 Paulsson had no difficulty in accepting that objections
10 about adherence to a prior negotiation requirement is
11 a matter that seeks to impede determination of the claim
12 and not the tribunal, and hence it's not a matter of
13 jurisdiction.
14 Born referred to these conditions as "non-mandatory
15 and aspirational" (CLA-72).
16 Schreuer went on to say (CLA-73) that it would make
17 no sense to decline jurisdiction if, for instance,
18 a waiting period has elapsed; or, in the event of
19 non-compliance, it can or has been cured; or if
20 negotiations, for instance, have proceeded in the
21 interim.
22 What these three commentators all agree upon is that
23 these conditions of this nature are not conditions to
24 jurisdiction, and their breach would not ordinarily
25 preclude resort to arbitration.
[Page 156]
20:19 1 Lastly --
2 THE PRESIDENT: It should be your last submission,
3 Mr Sinclair.
4 MR SINCLAIR: Yes, sir. I was just going to point out that
5 it is accepted between the parties before you that any
6 breach could be excused by evidence of futility or
7 subsequently cured by reference to substantial
8 compliance (slide 36).
9 Thank you, sir.
10 THE PRESIDENT: Mr Sinclair, sorry to cut you off. Thank
11 you, but I know that you have a chance for rejoinder.
12 So let's take a 10-minute break, and then we're back
13 for 15 minutes each.
14 Thank you all very much. Celeste, if you can put us
15 in the breakout room.
16 (8.20 pm)
17 (A short break)
18 (8.31 pm)
19 THE PRESIDENT: Thank you very much.
20 Mr Silva Romero, you have 15 minutes for reply.
21 Reply submissions on behalf of Respondent
22 DR SILVA ROMERO: Thank you, Mr President and members of the
23 Tribunal.
24 I will organise my rebuttal submissions in two
25 parts. First, I'll come back to some points regarding
[Page 157]
| 20:31 | 1 | the interpretation of Article 9(1) of the treaty, if we |
| 2 | can please have it on the screen. And secondly, I will | |
| 3 | come back to some of the factual issues that were | |
| 4 | mentioned by our friends opposite. | |
| 5 | Regarding the interpretation of Article 9, | |
| 6 | paragraph 1 and 2, I want to make three points in | |
| 7 | rebuttal. | |
| 8 | The first point is this: if you look at | |
| 9 | Article 9(1), you will see the expression which is | |
| 10 | an object of controversy here, "Contracting Parties in | |
| 11 | dispute". And I will try to simplify for you the | |
| 12 | debate. | |
| 13 | You have two different interpretations before you. | |
| 14 | Our interpretation relies on the defined term in the | |
| 15 | preamble of the treaty, "Contracting Parties", and gives | |
| 16 | effect to the expression "Contracting Parties" pursuant | |
| 17 | to the principle of effet utile, and provides | |
| 18 | an interpretation of the expression "in dispute" which | |
| 19 | is unclear. Pursuant to our interpretation, "in | |
| 20 | dispute" refers to the affectation that a dispute | |
| 21 | between a contracting state and an investor of the other | |
| 22 | contracting state may have in relation to the home state | |
| 23 | of the relevant investor. | |
| 24 | You saw some different languages in other treaties. | |
| 25 | You saw the language "concerned", "Contracting Parties |
[Page 158]
| 20:33 | 1 | concerned". "In dispute", in our interpretation, |
| 2 | means -- or is close to -- that expression "concerned" | |
| 3 | in other treaties. | |
| 4 | What is, members of the Tribunal, the other | |
| 5 | interpretation that you have before you of this | |
| 6 | expression "Contracting Parties in dispute"? It is one | |
| 7 | interpretation which removes from Article 9(1) the | |
| 8 | expression defined expressly in the preamble of the | |
| 9 | treaty, "Contracting Parties". | |
| 10 | So we say, members of the Tribunal, that our | |
| 11 | interpretation is not only the one in accordance with | |
| 12 | the relevant rules of the Vienna Convention, but also | |
| 13 | the most reasonable and commonsense-oriented one. | |
| 14 | The second point on the interpretation of this | |
| 15 | provision, members of the Tribunal, concerns one of the | |
| 16 | arguments made by our friends opposite. They say: on | |
| 17 | the basis of this Article 9(1) and (2), the investor | |
| 18 | doesn't know what the investor has to do. There is no | |
| 19 | specific language as to how, they say, the investor | |
| 20 | should trigger the inter-state negotiations. | |
| 21 | I would propose to you, for the sake of rebuttal, to | |
| 22 | make a very simple exercise. Let's assume for a moment | |
| 23 | that you, members of the Tribunal, and if you accept | |
| 24 | that you include myself in that group for a moment, we | |
| 25 | are counsel for the investor and we have a dispute with |
[Page 159]
| 20:35 | 1 | Georgia, and we are asked by our client, the investor, |
| 2 | to consider different options to sue the state because | |
| 3 | of some measures taken by the state. | |
| 4 | We obviously will analyse the relevant treaty, and | |
| 5 | specifically Article 9 of the treaty. Let's look first | |
| 6 | at Article 9(2), which is the one referring to | |
| 7 | arbitration. It says that the investor can resort to | |
| 8 | arbitration after six months within which the dispute | |
| 9 | could not be settled in the manner described in | |
| 10 | paragraph 1 of Article 9 of the treaty. | |
| 11 | Then we go to paragraph 1 of Article 9 of the | |
| 12 | treaty. What do we see? We see that it says that: | |
| 13 | "Any dispute ... will be subject to negotiations | |
| 14 | between the Contracting Parties in dispute." | |
| 15 | So here counsel will have different alternatives or | |
| 16 | considerations to make. The first one would be: I don't | |
| 17 | understand what this means. So what do you do, as | |
| 18 | counsel? You ask. Who do you ask? You ask Azerbaijan; | |
| 19 | you ask Georgia. Do we have evidence on record that the | |
| 20 | investor asked that question? We don't. | |
| 21 | Or we consider that the interpretation of this | |
| 22 | expression is the one proposed by Georgia. So what | |
| 23 | should we do in the circumstances? We would send | |
| 24 | a letter to both states invoking Article 9(1), asking | |
| 25 | them to undertake negotiations, and we would keep that |
[Page 160]
| 20:37 | 1 | letter in our dossier, just in case that after the |
| 2 | six months, when we commence the arbitration, Georgia | |
| 3 | raises the inter-state negotiations objection. | |
| 4 | Either counsel in this case or the investor in this | |
| 5 | case understood "Contracting Parties in dispute" as the | |
| 6 | dispute between the investor and the contracting state | |
| 7 | or simply removed from its analysis the expression | |
| 8 | defined in the preamble, "Contracting Parties". | |
| 9 | But the point is this: any diligent investor, | |
| 10 | members of the Tribunal, would have done something in | |
| 11 | connection with Article 9(1), and the record shows to us | |
| 12 | that the investor of our case did simply nothing. As | |
| 13 | you know, international investors are deemed to be | |
| 14 | competent professionals: they are deemed to know what | |
| 15 | they do in the international plane. | |
| 16 | The third point I wanted to make on the | |
| 17 | interpretation of this provision, and the last one, is | |
| 18 | simply that this inter-state negotiation requirement is | |
| 19 | not something unique in our treaty. And this is | |
| 20 | an important point to have in mind. We showed to you -- | |
| 21 | and this is undisputed -- that both Georgia and | |
| 22 | Azerbaijan have included similar wording in various | |
| 23 | treaties. So this is something that these two states | |
| 24 | are willing to accept. | |
| 25 | Coming now to the second part of my submissions very |
[Page 161]
| 20:39 | 1 | rapidly, on the facts. |
| 2 | First of all, I wanted to say a word in connection | |
| 3 | with C-43 -- you remember the note from Azerbaijan -- | |
| 4 | and I wanted to make two points on this. | |
| 5 | First of all, we produced a translation of the cover | |
| 6 | letter of the note, which is R-73, and it is in this | |
| 7 | cover letter where it is stated that note was prepared | |
| 8 | to protect the interest of the investor in the | |
| 9 | arbitration. | |
| 10 | And second point: in that note by Azerbaijan, there | |
| 11 | is no mention whatsoever of that request that the | |
| 12 | investor should have sent to both governments for them | |
| 13 | to undertake inter-state negotiations pursuant to | |
| 14 | Article 9(1). | |
| 15 | Second point on the facts: you saw our friends | |
| 16 | referring again to appendix 2. I already mentioned that | |
| 17 | appendix 2 to the last submission on provisional | |
| 18 | measures simply contains a list of dates and then some | |
| 19 | people who participated in those meetings. | |
| 20 | The first exercise that I wanted to make is that | |
| 21 | there is not a third column on the subject matter of the | |
| 22 | meetings; there is not a fourth column with reference to | |
| 23 | specific evidence on record supporting what is in this | |
| 24 | table. | |
| 25 | And the last point I wanted to make is that, if you |
[Page 162]
| 20:40 | 1 | recall, the Request for Arbitration was filed on |
| 2 | 19th October 2020. So on their own case, all meetings | |
| 3 | after that simply don't make it. We may discuss about | |
| 4 | the meetings before, but the meetings after the Request | |
| 5 | for Arbitration are not obviously in compliance with | |
| 6 | a pre-arbitral requirement. And the two others we can | |
| 7 | discuss, but we should come, obviously, to the same | |
| 8 | conclusion. | |
| 9 | The third point is that our friends referred again | |
| 10 | to some letters exchanged between the GNCC and CO. But | |
| 11 | obviously this correspondence is irrelevant because it | |
| 12 | doesn't pertain to the very requirement we are speaking | |
| 13 | [of] here, which is the inter-state negotiations in | |
| 14 | Article 9(1). | |
| 15 | And last point, Mr President, is that they refer | |
| 16 | again to futility; but as I said during our submission, | |
| 17 | the futility cannot make it here because the inter-state | |
| 18 | negotiations were never commenced. | |
| 19 | Thank you. | |
| 20 | DR ALEXANDROV: Dr Silva Romero, can I ask you a question, | |
| 21 | and it relates to your earlier point about the | |
| 22 | interpretation of Article 9. It may help if you can put | |
| 23 | on the screen your slide 7, which is the text of | |
| 24 | Article 9. | |
| 25 | DR SILVA ROMERO: Yes, will do, Dr Alexandrov. |
[Page 163]
| 20:42 | 1 | DR ALEXANDROV: Thank you. |
| 2 | Paragraph 2 says: | |
| 3 | "If [a] dispute between an investor ... and the | |
| 4 | other Contracting Party cannot be settled in such | |
| 5 | a manner ..." | |
| 6 | "Such a manner" relates to paragraph 1: | |
| 7 | "... [then] the investor shall be entitled to refer | |
| 8 | the matter [to arbitration]." | |
| 9 | Applying the rules of treaty interpretation of the | |
| 10 | Vienna Convention, is there an argument that all we need | |
| 11 | to decide is whether the dispute could be settled in the | |
| 12 | manner provided for in paragraph 1; and if it couldn't, | |
| 13 | within six months, then the investor is entitled to | |
| 14 | submit the matter to arbitration? | |
| 15 | It doesn't say: if the parties -- "the parties" | |
| 16 | meaning Georgia and Azerbaijan -- never negotiated, or | |
| 17 | they negotiated but failed to reach an agreement, or one | |
| 18 | party wanted to negotiate but the other didn't. It | |
| 19 | doesn't specify any particular result other than the | |
| 20 | dispute could not be settled through negotiations | |
| 21 | between Georgia and Azerbaijan; and it doesn't seem | |
| 22 | controversial here that the dispute could not be settled | |
| 23 | in such a manner, meaning through negotiations between | |
| 24 | the contracting parties, within six months. | |
| 25 | Why is that not the proper interpretation of |
[Page 164]
| 20:43 | 1 | paragraph 2? |
| 2 | DR SILVA ROMERO: I think there are two different points in | |
| 3 | your question, Dr Alexandrov, if I may, and let me start | |
| 4 | with the factual point. | |
| 5 | It is not undisputed that the dispute between the | |
| 6 | investor and Georgia could not be settled by way of | |
| 7 | inter-state negotiations. As I said at the end of the | |
| 8 | opening submissions, Georgia is open to discuss with | |
| 9 | Azerbaijan a possible settlement of the dispute before | |
| 10 | you. The point here is that the investor never gave the | |
| 11 | opportunity, before filing the arbitration, to the two | |
| 12 | states to undertake those negotiations. | |
| 13 | Coming now to the interpretation point, I think that | |
| 14 | what Article 9 says is what we find in many other | |
| 15 | different treaties, which is that if there is a dispute, | |
| 16 | there shall be negotiations -- in this case, | |
| 17 | negotiations between the contracting parties, pursuant | |
| 18 | to our interpretation -- and then if, within six months, | |
| 19 | those negotiations do not end with a settlement, then | |
| 20 | the investor can file for arbitration. | |
| 21 | DR ALEXANDROV: Thank you. | |
| 22 | MR ROWLEY: If I may add to that. I'm looking at 9(2), | |
| 23 | second line: | |
| 24 | "... cannot be settled in such a manner within | |
| 25 | 6 months from the day on which a written claim was |
[Page 165]
| 20:45 | 1 | submitted ..." |
| 2 | And we're referring to "such a manner" being the | |
| 3 | negotiations between the contracting parties. | |
| 4 | The words "written claim was submitted" presumably | |
| 5 | are a reference to the need for the submission of | |
| 6 | a written claim by either the investor or the | |
| 7 | contracting party in which the investor is resident to | |
| 8 | the recipient contracting party of the investment. | |
| 9 | I'm not sure: have you dealt with that in your | |
| 10 | submissions, Mr Silva Romero? | |
| 11 | DR SILVA ROMERO: Thank you for your question, Mr Rowley. | |
| 12 | I think we read this sentence as you do: the investor | |
| 13 | has indeed to file a written claim and, in our | |
| 14 | submission, at the same time has to send a communication | |
| 15 | to both states asking them to undertake these | |
| 16 | inter-state negotiations. But I don't have any other | |
| 17 | point to add on this. | |
| 18 | MR ROWLEY: The next thing that one might worry about, as we | |
| 19 | all worry about all these things, is whether or not the | |
| 20 | claim was submitted in writing may or may not make that | |
| 21 | much of a difference if the contracting party that was | |
| 22 | the host of the investment was -- it was made known that | |
| 23 | there was a dispute. | |
| 24 | DR SILVA ROMERO: Correct. And I think it's undisputed on | |
| 25 | the record of this case, Mr Rowley, that there was no |
[Page 166]
| 20:47 | 1 | letter sent to either Azerbaijan or Georgia referring |
| 2 | specifically to Article 9(1) and asking both states to | |
| 3 | undertake inter-state negotiations. | |
| 4 | MR ROWLEY: Alright. Well, we can look at the record. | |
| 5 | Good. I don't have any further questions, thank you. | |
| 6 | DR ALEXANDROV: May I follow up on this point. | |
| 7 | Dr Silva Romero, assuming that the written claim is | |
| 8 | a claim by the investor notifying Georgia of the | |
| 9 | dispute, on that reading, you added an element in your | |
| 10 | response to Mr Rowley saying, "and the investor must | |
| 11 | invite the parties to negotiate". I'm not sure whether | |
| 12 | those were your precise words. | |
| 13 | Where do you see in the text of Article 9 this | |
| 14 | second element of the obligation? | |
| 15 | DR SILVA ROMERO: That's the only reading, we say, | |
| 16 | Dr Alexandrov, that one can give to this provision to | |
| 17 | give it effect, because the question is how this | |
| 18 | pre-arbitral requirement could be fulfilled. And our | |
| 19 | submission is that for these negotiations between the | |
| 20 | contracting parties to commence, someone has to inform | |
| 21 | the contracting parties that there is a dispute and | |
| 22 | someone should ask them to undertake these settlement | |
| 23 | negotiations. | |
| 24 | So we see, if you will, implied in Article 9(1) | |
| 25 | an obligation on the investor to send this letter that |
[Page 167]
| 20:49 | 1 | I have referred to to the contracting parties for them |
| 2 | to undertake these negotiations. (Pause) | |
| 3 | MR ROWLEY: I think I have one further question. | |
| 4 | Let us assume that there is an obligation, for the | |
| 5 | purposes of this question, for there to be some sort of | |
| 6 | notification and negotiation period. Your application | |
| 7 | is one for bifurcation, to determine whether we have | |
| 8 | jurisdiction; is that a fair summary? And one of the | |
| 9 | matters to be considered in bifurcation is whether the | |
| 10 | claim could be made much simpler or reduced or disposed | |
| 11 | of with finality, and money could be saved and so on. | |
| 12 | Claimant makes the argument that the majority of the | |
| 13 | tribunals that have considered whether this kind of | |
| 14 | question goes to jurisdiction conclude that it really | |
| 15 | goes to admissibility; and that in any event, if there | |
| 16 | is an obligation and we were to find one after | |
| 17 | a bifurcation, they would say, "Well, alright, let's | |
| 18 | suspend these proceedings and we'll have our six months | |
| 19 | of negotiations", which are, in their view, almost bound | |
| 20 | to fail; and if they do, this will be a terrible waste | |
| 21 | of time. | |
| 22 | Could we just hear you on that for a moment, please. | |
| 23 | DR SILVA ROMERO: Yes. And I'll make two points, Mr Rowley. | |
| 24 | First, your question pertains to the legal | |
| 25 | characterisation of the objection: is it |
[Page 168]
| 20:52 | 1 | a jurisdictional objection or an admissibility |
| 2 | objection? If it is an admissibility objection, it | |
| 3 | could theoretically be cured in the course of the | |
| 4 | arbitration, for instance in the way you mentioned: by | |
| 5 | suspending the proceedings for six months and asking the | |
| 6 | parties to tell their states to undertake inter-state | |
| 7 | negotiations. | |
| 8 | But we say, for all the reasons that we have put in | |
| 9 | our papers and I mentioned today, that this is | |
| 10 | a jurisdictional objection. And if this is | |
| 11 | a jurisdictional objection, it cannot be cured in the | |
| 12 | course of the arbitration. If you come to the | |
| 13 | conclusion that this is a jurisdictional objection, you | |
| 14 | need to declare that you don't have jurisdiction over | |
| 15 | the claim, and that's it. You cannot cure the problem | |
| 16 | now. | |
| 17 | The second point is you mentioned saving costs, | |
| 18 | saving time: let's say the pragmatic standpoint from | |
| 19 | which too often, in my view, this type of clauses are | |
| 20 | looked at. And here, this is one of those cases where | |
| 21 | I truly believe, because of all the stakes that we have | |
| 22 | mentioned, that sending the parties to ask the states to | |
| 23 | undertake negotiations goes in the interests of both | |
| 24 | parties, and in my submission it would be a very good | |
| 25 | decision for anyone here. |
[Page 169]
| 20:53 | 1 | MR ROWLEY: Well, I suppose if you were right that we don't |
| 2 | have jurisdiction, we wouldn't be in a position to do | |
| 3 | that, would we? | |
| 4 | DR SILVA ROMERO: Well, if you say that you don't have | |
| 5 | jurisdiction, they can file the letter that they never | |
| 6 | filed. | |
| 7 | MR ROWLEY: Thank you. I understand the situation, I think, | |
| 8 | better now. Thank you. | |
| 9 | DR SILVA ROMERO: Thank you. | |
| 10 | THE PRESIDENT: Thank you very much, Mr Silva Romero. | |
| 11 | Let's move to Claimant for Rejoinder. Is it | |
| 12 | Mr Ostrove? | |
| 13 | MR OSTROVE: Yes, thank you, Mr President. (Pause) | |
| 14 | (8.55 pm) | |
| 15 | Reply submissions on behalf of Claimant | |
| 16 | MR OSTROVE: Just picking up on a few points that have just | |
| 17 | been made. | |
| 18 | We are slightly amazed to hear this hypothetical | |
| 19 | scenario of: if you were advising an investor, what | |
| 20 | would you do, faced with this clause? No matter how you | |
| 21 | look at this treaty, there is a trigger letter that's | |
| 22 | required, a written claim to be submitted. A written | |
| 23 | claim. And then what you heard opposing counsel argue | |
| 24 | is that: well, faced with this, you should write, | |
| 25 | Georgia, and say, "We'd like some negotiations to go on |
[Page 170]
| 20:55 | 1 | here, or we'd like something to happen here, so please |
| 2 | tell us if this is going to be state to state or what is | |
| 3 | this". And then we were told we did nothing. | |
| 4 | I've put on the screen Exhibit C-25, 22nd May 2020. | |
| 5 | This was not a trigger letter and it wasn't intended as | |
| 6 | a trigger letter, but it put Georgia on notice that, in | |
| 7 | the third paragraph: | |
| 8 | "We are ... advising our client on claims that he | |
| 9 | may bring ... under the [Treaty] ..." | |
| 10 | That there have already been: | |
| 11 | "... meetings [with] the Georgian Prime Minister's | |
| 12 | office and our client's representatives ... where ... | |
| 13 | there has not been any meaningful progress. | |
| 14 | "Our client's preference is to resolve [this] | |
| 15 | dispute ... without recourse to international | |
| 16 | arbitration proceedings pursuant to Article 9 of the | |
| 17 | Treaty." | |
| 18 | And: | |
| 19 | "... therefore invite Georgia to engage in amicable | |
| 20 | discussions ... [in order] to avoid the need ... to | |
| 21 | serve a formal Notice of Dispute as the first step | |
| 22 | towards the commencement of international arbitration | |
| 23 | pursuant to the Treaty." | |
| 24 | So already in May we're referencing the dispute | |
| 25 | resolution provisions under Article 9 and seeking to |
[Page 171]
| 20:57 | 1 | engage in amicable discussions between the parties that |
| 2 | are in dispute there. Certainly, even under opposing | |
| 3 | counsel's point of view, if I'm advising my client, | |
| 4 | a state, and I receive something and I think that this | |
| 5 | triggers if there's a dispute between the parties, and | |
| 6 | then I think there has to be inter-state dispute | |
| 7 | settlement, then I'm going to say something or contact | |
| 8 | Azerbaijan. | |
| 9 | But even more, C-26, which I've now put on the | |
| 10 | screen, which is a month later, on 22nd June, is now | |
| 11 | absolutely undoubtedly saying, "Since we've received no | |
| 12 | response to our invitation in May to engage in amicable | |
| 13 | discussions, we are therefore" -- in paragraph 4 -- | |
| 14 | "providing a letter that constitutes our written claim | |
| 15 | within the meaning of Article 9(2)". It puts Georgia on | |
| 16 | notice that, "unless amicable settlement can promptly be | |
| 17 | agreed between the investor and Georgia ..." | |
| 18 | So to say that we did nothing is simply to ignore | |
| 19 | the hard facts of the trigger letter that was sent. | |
| 20 | Obviously our main submission is that this fulfils the | |
| 21 | provision because the only way to read the provision | |
| 22 | about "Contracting Parties in dispute" is an erroneous | |
| 23 | use of the defined term, because otherwise the words "in | |
| 24 | dispute" have absolutely no meaning; whereas, under our | |
| 25 | submission, the words "Contracting Party" still have |
[Page 172]
| 20:58 | 1 | meaning, it's just been miswritten and it's referring to |
| 2 | the parties' dispute. But to say that we did nothing, | |
| 3 | and didn't notify them of the dispute in a way that, if | |
| 4 | they are correct, puts them on notice that they should | |
| 5 | be negotiating with Azerbaijan, is simply wrong. | |
| 6 | The next point I'd like to move to is: there is | |
| 7 | a complaint, both during the main submissions and again | |
| 8 | in rebuttal, that C-43 -- which was the note from the | |
| 9 | Azerbaijani Foreign Ministry -- was a note, according to | |
| 10 | the cover letter in R-73, to protect the investor, and | |
| 11 | therefore it should be sort of discounted because this | |
| 12 | was written to protect the investor. | |
| 13 | That is not what R-73 says. And this is | |
| 14 | Respondent's translation: | |
| 15 | "Dear Mr Yusif, | |
| 16 | "In response to your request, we offer to your | |
| 17 | attention information prepared by the Ministry ..." | |
| 18 | Not "to protect you": | |
| 19 | "... on the protection of the interests of [the] | |
| 20 | Azerbaijani investor in the International Arbitration | |
| 21 | Court." | |
| 22 | This is about protection of investor rights that is | |
| 23 | a dispute in international arbitration. So to claim | |
| 24 | that there's no evidence that when the Azeri Ministry of | |
| 25 | Foreign Affairs wrote this letter, that they were |
[Page 173]
| 21:00 | 1 | actually referring to negotiations and discussions |
| 2 | relating to an investment dispute, when the cover | |
| 3 | letter -- which thank you very much to Georgia for | |
| 4 | submitting it -- specifically refers to the fact that | |
| 5 | this is in relation to investor protection dispute | |
| 6 | that's going on, really lacks any grounding in reality. | |
| 7 | Finally, just looking over to the treaty again and | |
| 8 | the language of Article 9, which is back up on the | |
| 9 | screen, this goes to the point that Dr Alexandrov was | |
| 10 | raising about saying: what does that mean when it says | |
| 11 | that the dispute "cannot be settled in such a manner | |
| 12 | within 6 months from the day [of the] written claim"? | |
| 13 | The treaty could have been drafted differently. The | |
| 14 | treaty could have said, "After six months have expired | |
| 15 | from the filing of a written claim, if the dispute has | |
| 16 | not been settled, then you could go file your claim". | |
| 17 | It does not say, "You have to wait a fixed period of | |
| 18 | time of six months". It says: if it cannot be settled | |
| 19 | during a six-month time period. | |
| 20 | That clearly, under the plain meaning of the treaty, | |
| 21 | opens the door to any kind of futility argument that | |
| 22 | says, "Come on, we've had discussions going on for | |
| 23 | nearly a year, we've had formal requests to both | |
| 24 | parties -- to both states to get involved; again, not | |
| 25 | because we thought it was required under the treaty but |
[Page 174]
| 21:01 | 1 | just as a matter of good practice". And there is no |
| 2 | requirement that you wait six months: there is | |
| 3 | a requirement that you can only go to arbitration if the | |
| 4 | dispute cannot be settled within six months. | |
| 5 | Clearly the dispute could not be settled within | |
| 6 | six months by inter-state negotiations, it couldn't be | |
| 7 | settled in a year, it couldn't be settled probably in | |
| 8 | ten years with inter-state negotiations. | |
| 9 | Thank you very much. Nothing further. | |
| 10 | THE PRESIDENT: Thank you, Mr Ostrove. | |
| 11 | Just before I turn to Mr Alexandrov and Mr Rowley | |
| 12 | for questions, I just wanted to make sure I understood | |
| 13 | your first submission. | |
| 14 | When you were talking about 9(2) and the submission | |
| 15 | of a written claim, are you also proposing as one | |
| 16 | possible interpretation that, once the claim is | |
| 17 | submitted to Georgia, Georgia is in a position -- under | |
| 18 | 9(2), properly interpreted -- to initiate inter-state | |
| 19 | negotiations with Azerbaijan, if you take the point that | |
| 20 | it's got to be the two contracting parties? Did I hear | |
| 21 | you correctly that that's what you were suggesting? | |
| 22 | MR OSTROVE: Absolutely. My submission was that under | |
| 23 | Article 9(1), read even as Respondent reads it, the | |
| 24 | contracting parties have taken on an obligation | |
| 25 | vis-à-vis each other. So once one of them is aware of |
[Page 175]
| 21:03 | 1 | a claim, they have agreed to negotiate, and that's what |
| 2 | they're supposed to do. That's their obligation, not | |
| 3 | Claimant's. | |
| 4 | THE PRESIDENT: Understood. Thank you very much. | |
| 5 | Mr Alexandrov. | |
| 6 | DR ALEXANDROV: Thank you, Mr President. | |
| 7 | Mr Ostrove, a question that relates to your | |
| 8 | submission in chief, and it's the other side of the | |
| 9 | coin, the coin being the question that I asked | |
| 10 | Dr Silva Romero. | |
| 11 | I thought you made an argument that the right of the | |
| 12 | investor to go to arbitration cannot be conditioned upon | |
| 13 | something that is not in the investor's hands. Because | |
| 14 | paragraph 1 of Article 9 talks about the obligation of | |
| 15 | the contracting states -- meaning Georgia and | |
| 16 | Azerbaijan -- to negotiate, and it's not in the | |
| 17 | investor's hands to in any way affect that obligation, | |
| 18 | whether they comply with it or not, therefore the | |
| 19 | investor's right to go to arbitration cannot be | |
| 20 | conditioned on the contracting states' failure to comply | |
| 21 | with their obligation. | |
| 22 | My question is: why is that right? The two | |
| 23 | contracting states can condition the investor's right on | |
| 24 | anything they want. They can say -- to take an extreme | |
| 25 | example, just to make the point -- they can say, "The |
[Page 176]
| 21:05 | 1 | investor shall not be entitled to submit the dispute to |
| 2 | arbitration unless lightning strikes Mount Elbrus", for | |
| 3 | example. And they are free to do that: they are free to | |
| 4 | impose conditions that are outside the powers of the | |
| 5 | investor to do anything about. Why couldn't they do | |
| 6 | that? | |
| 7 | MR OSTROVE: Thank you, Dr Alexandrov. And you did | |
| 8 | correctly summarise what was our first submission on | |
| 9 | this, which is: you cannot argue that a claimant has | |
| 10 | failed to fulfil a jurisdiction requirement when it is | |
| 11 | something that is beyond the claimant's control. So, | |
| 12 | yes. | |
| 13 | But that goes hand in glove with our argument that | |
| 14 | I just was discussing with the Chairman: that once | |
| 15 | you've submitted your claim and notified the other | |
| 16 | party, there is nothing else that you can do; it is out | |
| 17 | of your hands, and to say that you must have caused the | |
| 18 | negotiations to happen cannot help. And if the state | |
| 19 | parties don't negotiate, then there's no requirement to | |
| 20 | go forward. | |
| 21 | It could be viewed a bit as the flipside of the | |
| 22 | coin: if it cannot be settled within six months, it's | |
| 23 | outside of your control. If the state parties aren't | |
| 24 | going to do anything about it, well, then there's no way | |
| 25 | that the dispute can be settled in six months and you're |
[Page 177]
| 21:06 | 1 | free to go ahead. |
| 2 | THE PRESIDENT: Mr Rowley? | |
| 3 | MR ROWLEY: No, I don't have any further questions. Thank | |
| 4 | you very much. | |
| 5 | THE PRESIDENT: Thank you both. | |
| 6 | Thank you, counsel. I think we've come to the end | |
| 7 | of the scheduled proceedings. This has been extremely | |
| 8 | helpful for the Tribunal and we're grateful. | |
| 9 | Let me just say something about timing, before I ask | |
| 10 | counsel if they have any concluding procedural matters | |
| 11 | that they wish to raise. | |
| 12 | The Tribunal intends to work assiduously on the | |
| 13 | issues presented, but it may not be before Christmas | |
| 14 | that you would get a decision; in fact, it's quite | |
| 15 | likely -- as in almost 100% sure -- that you won't. | |
| 16 | In light of that -- and I think it was raised | |
| 17 | earlier in the afternoon -- there is paragraph 19 of | |
| 18 | Procedural Order No. 3, and that is in place until there | |
| 19 | is a decision on the application. We have now had | |
| 20 | a hearing and we will work on that decision; but until | |
| 21 | we issue it, Procedural Order No. 3, with its | |
| 22 | provisions, remains in effect. | |
| 23 | We will, however -- as I said, not before Christmas, | |
| 24 | but we are hoping pretty quickly thereafter. We know | |
| 25 | that you're waiting for a decision on both issues, and |
[Page 178]
| 21:08 | 1 | the Tribunal will be quick in getting it to you; it's |
| 2 | just that it won't be before December 31st. | |
| 3 | Any questions about timing or any other issues that | |
| 4 | Claimant wished to raise right now? Mr Ostrove? | |
| 5 | MR OSTROVE: Yes, thank you, Mr President. | |
| 6 | Earlier in the procedure, I forget where it's been | |
| 7 | exchanged, but I believe there is an agreement that the | |
| 8 | Tribunal -- or the Tribunal accepted that it would issue | |
| 9 | its ruling in an initial form of being unmotivated, with | |
| 10 | motivation to follow, in order to shorten the period of | |
| 11 | time for decision-making. I just wanted to ensure that | |
| 12 | that was taken into account in your reference to the | |
| 13 | timeframe: that you're unlikely to be in a position to | |
| 14 | make a decision, at least on the jurisdictional | |
| 15 | objection, even in an unmotivated form, before | |
| 16 | Christmas. | |
| 17 | THE PRESIDENT: Well, I want to talk to Mr Alexandrov and | |
| 18 | Mr Rowley about that. I would have said we're pretty | |
| 19 | far down the road from the time in which we initially | |
| 20 | discussed that. So I'm not sure of the usefulness, and | |
| 21 | it may slow us down in getting a determination on | |
| 22 | provisional measures. But let me confer with them and | |
| 23 | we'll come back to you on that. | |
| 24 | MR OSTROVE: Thank you. And -- | |
| 25 | THE PRESIDENT: And point taken. Thank you for raising |
[Page 179]
| 21:10 | 1 | that, Mr Ostrove, and we will come back to you on the |
| 2 | format in which we'll get decisions out to the parties. | |
| 3 | MR OSTROVE: Thank you very much. | |
| 4 | And if I may, there is the thing that you requested | |
| 5 | of the parties, which was to try on agree on a revised | |
| 6 | procedural calendar. I believe that we are very close, | |
| 7 | and we thank, as always, our colleagues at Dechert for | |
| 8 | the really excellent cooperation between counsel teams. | |
| 9 | So we are very close, subject to client review, to | |
| 10 | a procedural calendar. But of course, the earlier we | |
| 11 | know just yes or no on jurisdiction makes a major | |
| 12 | difference, obviously, on costs and other issues that | |
| 13 | will be incurred. That's my reason for raising it. | |
| 14 | Thank you. | |
| 15 | THE PRESIDENT: Understood. Understood. Thank you very | |
| 16 | much. | |
| 17 | Ms Annacker, Mr Silva Romero, any points to raise | |
| 18 | from Respondent's side at this time? (Pause) | |
| 19 | DR ANNACKER: We have no issues to raise at this point. We | |
| 20 | also thank our colleagues for their cooperation and hope | |
| 21 | to have a procedural calendar agreed by both parties. | |
| 22 | THE PRESIDENT: Thank you very much, Ms Annacker. | |
| 23 | Let me ask Mr Alexandrov, Mr Rowley: anything to | |
| 24 | raise, before we go into breakout room? | |
| 25 | MR ROWLEY: Nothing from me, thank you. |
[Page 180]
| 21:12 | 1 | THE PRESIDENT: I see Stanimir also shaking his head. |
| 2 | Thank you all, counsel and party representatives. | |
| 3 | I will repeat: extremely helpful for the Tribunal. Have | |
| 4 | a good very little left of the evening in Baku and | |
| 5 | Tbilisi, and more of the evening in other places. So | |
| 6 | thank you very much. And the Tribunal will give you | |
| 7 | an indication on the point that Mr Ostrove raised about | |
| 8 | the jurisdictional objection and format of a decision. | |
| 9 | So thank you all. | |
| 10 | MR OSTROVE: Thank you very much. | |
| 11 | DR ANNACKER: Thank you. | |
| 12 | THE PRESIDENT: We are adjourned. | |
| 13 | (9.13 pm) | |
| 14 | (The hearing concluded) | |
| 15 | ||
| 16 | ||
| 17 | ||
| 18 | ||
| 19 | ||
| 20 | ||
| 21 | ||
| 22 | ||
| 23 | ||
| 24 | ||
| 25 |